0001069157us-gaap:~~RealEstateLoanMemberus-gaap:~~FinancingReceivables60To89DaysPastDueMemberus-gaap:~~ConsumerPortfolioSegmentMembersrt:SingleFamilyMember2021-12-31~~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 ~~June~~September 30, 2022

☐ 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: ~~140,917,512~~140,946,569 shares as of ~~July~~October 31, 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	9
		2 — Current Accounting Developments and Summary of Significant Accounting Policies	910
		3 — Fair Value Measurement and Fair Value of Financial Instruments	1011
		4 — Assets Purchased under Resale Agreements and Sold under Repurchase Agreements	2021
		5 — Securities	2223
		6 — Derivatives	2829
		7 — Loans Receivable and Allowance for Credit Losses	3536
		8 — Investments in Qualified Affordable Housing Partnerships, Tax Credit and Other Investments, Net and Variable Interest Entities	4750
		9 — Goodwill	4952
		10 — Commitments and Contingencies	4952


		11 — Stock Compensation Plans	5053
		12 — Stockholders’ Equity and Earnings Per Share	5255
		13 — Accumulated Other Comprehensive Income (Loss)	5356
		14 — Business Segments	5558


	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	5861










	Item 3.	Quantitative and Qualitative Disclosures About Market Risk	~~102~~106

	Item 4.	Controls and Procedures	~~102~~106


PART II — OTHER INFORMATION			~~103~~107

	Item 1.	Legal Proceedings	~~103~~107
	Item 1A.	Risk Factors	~~103~~107
	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	~~103~~107



	Item 6.	Exhibits	~~104~~108

GLOSSARY OF ACRONYMS			~~105~~109

SIGNATURE			~~106~~110

PART I — FINANCIAL INFORMATION

ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS

EAST WEST BANCORP, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEET

($ in thousands, except shares)

(Unaudited)


		June 30, 2022		December 31, 2021			September 30, 2022		December 31, 2021
		(Unaudited)					(Unaudited)
ASSETS	ASSETS					ASSETS
Cash and due from banks	Cash and due from banks	$	688,936	$	527,317	Cash and due from banks	$	554,260	$	527,317
Interest-bearing cash with banks	Interest-bearing cash with banks	1,213,117		3,385,618		Interest-bearing cash with banks	1,609,093		3,385,618
Cash and cash equivalents	Cash and cash equivalents	1,902,053		3,912,935		Cash and cash equivalents	2,163,353		3,912,935
Interest-bearing deposits with banks	Interest-bearing deposits with banks	712,709		736,492		Interest-bearing deposits with banks	630,543		736,492
Assets purchased under resale agreements (“resale agreements”)	Assets purchased under resale agreements (“resale agreements”)	1,422,794		2,353,503		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 $6,891,522 and $10,087,179)		6,255,504		9,965,353
Held-to-maturity (“HTM”) debt securities, at amortized cost (fair value of $2,656,549)		3,028,302		—
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	28,464		635		Loans held-for-sale	14,500		635
Loans held-for-investment (net of allowance for loan losses of $563,270 and $541,579)		45,938,806		41,152,202
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	634,304		628,263		Investments in qualified affordable housing partnerships, tax credit and other investments, net	725,254		628,263

Premises and equipment (net of accumulated depreciation of $143,708 and $139,358)		93,911		97,302
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	107,588		98,632		Operating lease right-of-use assets	105,411		98,632
Other assets	Other assets	1,804,151		1,459,687		Other assets	1,708,235		1,459,687
TOTAL	TOTAL	$	62,394,283	$	60,870,701	TOTAL	$	62,576,061	$	60,870,701
LIABILITIES	LIABILITIES					LIABILITIES
Deposits:	Deposits:					Deposits:
Noninterest-bearing	Noninterest-bearing	$	23,028,831	$	22,845,464	Noninterest-bearing	$	21,645,394	$	22,845,464
Interest-bearing	Interest-bearing	31,314,523		30,505,068		Interest-bearing	32,211,968		30,505,068
Total deposits	Total deposits	54,343,354		53,350,532		Total deposits	53,857,362		53,350,532

Federal funds purchased						Federal funds purchased	200,000		—
Federal Home Loan Bank (“FHLB”) advances	Federal Home Loan Bank (“FHLB”) advances	174,776		249,331		Federal Home Loan Bank (“FHLB”) advances	324,920		249,331
Assets sold under repurchase agreements (“repurchase agreements”)	Assets sold under repurchase agreements (“repurchase agreements”)	611,785		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	152,663		151,997		Long-term debt and finance lease liabilities	152,610		151,997
Operating lease liabilities	Operating lease liabilities	115,387		105,534		Operating lease liabilities	113,477		105,534
Accrued expenses and other liabilities	Accrued expenses and other liabilities	1,386,836		876,089		Accrued expenses and other liabilities	1,655,239		876,089
Total liabilities	Total liabilities	56,784,801		55,033,483		Total liabilities	56,915,393		55,033,483
COMMITMENTS AND CONTINGENCIES (Note 10)	COMMITMENTS AND CONTINGENCIES (Note 10)	0		0		COMMITMENTS AND CONTINGENCIES (Note 10)
STOCKHOLDERS’ EQUITY	STOCKHOLDERS’ EQUITY					STOCKHOLDERS’ EQUITY
Common stock, $0.001 par value, 200,000,000 shares authorized; 168,427,021 and 167,790,645 shares issued		168		168
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	1,914,064		1,893,557		Additional paid-in capital	1,926,393		1,893,557
Retained earnings	Retained earnings	5,064,650		4,683,659		Retained earnings	5,302,897		4,683,659
Treasury stock, at cost 27,509,632 and 25,882,691 shares		(768,752)		(649,785)
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	(600,648)		(90,381)		Accumulated other comprehensive loss (“AOCI”), net of tax	(800,032)		(90,381)
Total stockholders’ equity	Total stockholders’ equity	5,609,482		5,837,218		Total stockholders’ equity	5,660,668		5,837,218
TOTAL	TOTAL	$	62,394,283	$	60,870,701	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 June 30,				Six Months Ended June 30,				Three Months Ended September 30,				Nine Months Ended September 30,
		2022		2021		2022		2021				2022		2021		2022		2021
INTEREST AND DIVIDEND INCOME	INTEREST AND DIVIDEND INCOME										INTEREST AND DIVIDEND INCOME
Loans receivable, including fees	Loans receivable, including fees	$	439,416	$	352,453	$	816,526	$	694,461		Loans receivable, including fees	$	560,452	$	363,503	$	1,376,978	$	1,057,964
Debt securities	Debt securities	46,176		34,690		88,843		63,790			Debt securities	51,092		37,826		139,935		101,616

Resale agreements	Resale agreements	8,553		8,021		16,936		14,120			Resale agreements	6,769		8,957		23,705		23,077
Restricted equity securities	Restricted equity securities	822		541		1,431		1,088			Restricted equity securities	843		500		2,274		1,588
Interest-bearing cash and deposits with banks	Interest-bearing cash and deposits with banks	4,787		3,628		8,047		7,260			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	499,754		399,333		931,783		780,719			Total interest and dividend income	628,236		415,307		1,560,019		1,196,026
INTEREST EXPENSE	INTEREST EXPENSE										INTEREST EXPENSE
Deposits	Deposits	22,488		17,998		35,477		39,820			Deposits	68,894		15,970		104,371		55,790
Short-term borrowings		241		—		250		42
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	559		2,099		1,137		5,168			FHLB advances	392		857		1,529		6,025
Repurchase agreements	Repurchase agreements	2,418		1,991		4,434		3,969			Repurchase agreements	4,421		2,012		8,855		5,981
Long-term debt and finance lease liabilities	Long-term debt and finance lease liabilities	1,096		772		1,920		1,552			Long-term debt and finance lease liabilities	1,543		762		3,463		2,314
Total interest expense	Total interest expense	26,802		22,860		43,218		50,551			Total interest expense	76,427		19,601		119,645		70,152
Net interest income before provision for (reversal of) credit losses	Net interest income before provision for (reversal of) credit losses	472,952		376,473		888,565		730,168			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	13,500		(15,000)		21,500		(15,000)			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	459,452		391,473		867,065		745,168			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	20,142		21,092		39,580		39,449			Lending fees	20,289		17,516		59,869		56,965
Deposit account fees	Deposit account fees	22,372		17,342		42,687		32,725			Deposit account fees	23,636		18,508		66,323		51,233
Interest rate contracts and other derivative income (loss)		9,801		(3,172)		20,934		13,825
Interest rate contracts and other derivative income											Interest rate contracts and other derivative income	8,761		7,156		29,695		20,981
Foreign exchange income	Foreign exchange income	11,361		13,007		24,060		22,533			Foreign exchange income	10,083		13,101		34,143		35,634
Wealth management fees	Wealth management fees	6,539		7,951		12,591		14,862			Wealth management fees	8,903		5,598		21,494		20,460
Net gains on sales of loans	Net gains on sales of loans	917		1,491		3,839		3,272			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	28		632		1,306		824			Gains on sales of AFS debt securities	—		354		1,306		1,178

Other investment income		4,863		7,596		6,490		8,521
Other investment (loss) income											Other investment (loss) income	(580)		5,349		5,910		13,870
Other income	Other income	2,421		2,492		6,700		5,286			Other income	2,331		2,198		9,031		7,484
Total noninterest income	Total noninterest income	78,444		68,431		158,187		141,297			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	113,364		105,426		229,633		213,234			Compensation and employee benefits	127,580		105,751		357,213		318,985
Occupancy and equipment expense	Occupancy and equipment expense	15,469		15,377		30,933		31,299			Occupancy and equipment expense	15,920		15,851		46,853		47,150
Deposit insurance premiums and regulatory assessments	Deposit insurance premiums and regulatory assessments	4,927		4,274		9,644		8,150			Deposit insurance premiums and regulatory assessments	4,875		4,641		14,519		12,791
Deposit account expense	Deposit account expense	5,671		3,817		10,364		7,709			Deposit account expense	6,707		4,136		17,071		11,845
Data processing	Data processing	3,486		4,035		7,151		8,513			Data processing	3,725		3,575		10,876		12,088
Computer software expense	Computer software expense	6,572		7,521		13,866		14,680			Computer software expense	6,889		8,426		20,755		23,106
Consulting expense	Consulting expense	2,021		1,868		3,854		3,343			Consulting expense	1,620		1,635		5,474		4,978
Legal expense	Legal expense	1,047		1,975		1,765		3,477			Legal expense	689		2,363		2,454		5,840
Other operating expense	Other operating expense	29,324		17,939		50,221		37,546			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	14,979		27,291		28,879		52,649			Amortization of tax credit and other investments	19,874		38,008		48,753		90,657

Total noninterest expense	Total noninterest expense	196,860		189,523		386,310		380,600			Total noninterest expense	215,973		205,384		602,283		585,984
INCOME BEFORE INCOME TAXES	INCOME BEFORE INCOME TAXES	341,036		270,381		638,942		505,865			INCOME BEFORE INCOME TAXES	384,388		273,431		1,023,330		779,296
INCOME TAX EXPENSE	INCOME TAX EXPENSE	82,707		45,639		142,961		76,129			INCOME TAX EXPENSE	89,049		47,982		232,010		124,111
NET INCOME	NET INCOME	$	258,329	$	224,742	$	495,981	$	429,736		NET INCOME	$	295,339	$	225,449	$	791,320	$	655,185
EARNINGS PER SHARE (“EPS”)	EARNINGS PER SHARE (“EPS”)										EARNINGS PER SHARE (“EPS”)
BASIC	BASIC	$	1.83	$	1.58	$	3.50	$	3.03		BASIC	$	2.10	$	1.59	$	5.59	$	4.62
DILUTED	DILUTED	$	1.81	$	1.57	$	3.47	$	3.01		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	141,429		141,868		141,725		141,758			BASIC	140,917		141,880		141,453		141,799
DILUTED	DILUTED	142,372		143,040		142,838		142,963			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 June 30,				Six Months Ended June 30,				Three Months Ended September 30,				Nine Months Ended September 30,
		2022		2021		2022		2021				2022		2021		2022		2021
Net income	Net income	$	258,329	$	224,742	$	495,981	$	429,736		Net income	$	295,339	$	225,449	$	791,320	$	655,185
Other comprehensive (loss) income, net of tax:
Net changes in unrealized (losses) gains on AFS debt securities		(192,878)		73,049		(362,148)		(60,399)
Other comprehensive loss, net of tax:											Other comprehensive loss, net of tax:
Net changes in unrealized losses on AFS debt securities											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	Net changes in unrealized gains (losses) on securities transferred from AFS to HTM	3,750		—		(106,930)		—			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	Net changes in unrealized (losses) gains on cash flow hedges	(6,380)		68		(31,103)		500			Net changes in unrealized (losses) gains on cash flow hedges	(33,269)		51		(64,372)		551
Foreign currency translation adjustments	Foreign currency translation adjustments	(10,215)		2,234		(10,086)		885			Foreign currency translation adjustments	(7,926)		(1,752)		(18,012)		(867)
Other comprehensive (loss) income		(205,723)		75,351		(510,267)		(59,014)
COMPREHENSIVE INCOME (LOSS)		$	52,606	$	300,093	$	(14,286)	$	370,722
Other comprehensive loss											Other comprehensive loss	(199,384)		(42,879)		(709,651)		(101,893)
COMPREHENSIVE INCOME											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
Shares Amount
BALANCE, APRIL 1, 2021 141,843,036 $ 1,866,101 $ 4,158,032 $ (649,066) $ (90,040) $ 5,285,027
Net Income — — 224,742 — — 224,742
Other comprehensive income — — — — 75,351 75,351
Issuance of common stock pursuant to various stock compensation plans and agreements 38,073 10,146 — — — 10,146
Repurchase of common stock pursuant to various stock compensation plans and agreements (3,604) — — (271) — (271)
Cash dividends on common stock ($0.33 per share) — — (47,447) — — (47,447)
BALANCE, JUNE 30, 2021 141,877,505 $ 1,876,247 $ 4,335,327 $ (649,337) $ (14,689) $ 5,547,548
BALANCE, APRIL 1, 2022 142,256,520 $ 1,903,042 $ 4,863,721 $ (668,382) $ (394,925) $ 5,703,456
Net Income — — 258,329 — — 258,329
Other comprehensive loss — — — — (205,723) (205,723)
Issuance of common stock pursuant to various stock compensation plans and agreements 51,733 11,190 — — — 11,190
Repurchase of common stock pursuant to various stock compensation plans and agreements (5,347) — — (380) — (380)
Repurchase of common stock pursuant to the Stock Repurchase Plan (1,385,517) — — (99,990) — (99,990)
Cash dividends on common stock ($0.40 per share) — — (57,400) — — (57,400)
BALANCE, JUNE 30, 2022 140,917,389 $ 1,914,232 $ 5,064,650 $ (768,752) $ (600,648) $ 5,609,482



	Common Stock and Additional Paid-in Capital			Retained Earnings		Treasury Stock		AOCI, Net of Tax		Total Stockholders’ Equity
	Shares	Amount
BALANCE, JULY 1, 2021	141,877,505	$	1,876,247	$	4,335,327	$	(649,337)	$	(14,689)	$	5,547,548
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 ($0.33 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
BALANCE, JULY 1, 2022	140,917,389	$	1,914,232	$	5,064,650	$	(768,752)	$	(600,648)	$	5,609,482
Net income	—	—		295,339		—		—		295,339
Other comprehensive loss	—	—		—		—		(199,384)		(199,384)
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	(83)	—		—		(6)		—		(6)

Cash dividends on common stock ($0.40 per share)	—	—		(57,092)		—		—		(57,092)
BALANCE, SEPTEMBER 30, 2022	140,917,512	$	1,926,561	$	5,302,897	$	(768,758)	$	(800,032)	$	5,660,668


		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, JANUARY 1, 2021	BALANCE, JANUARY 1, 2021	141,565,229	$	1,858,519			$	4,000,414					$	(634,083)			$	44,325		$	5,269,175	BALANCE, JANUARY 1, 2021			141,565,229			$	1,858,519			$	4,000,414			$	(634,083)			$	44,325	$	5,269,175

Net income	Net income	—	—		429,736				—		—				429,736			Net income		—			—				655,185				—				—				655,185
Other comprehensive loss	Other comprehensive loss	—	—		—				—		(59,014)				(59,014)			Other comprehensive loss		—			—			—				—				(101,893)				(101,893)

Issuance of common stock pursuant to various stock compensation plans and agreements	Issuance of common stock pursuant to various stock compensation plans and agreements	513,806	17,728		—				—		—				17,728			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	Repurchase of common stock pursuant to various stock compensation plans and agreements	(201,530)	—		—				(15,254)		—				(15,254)			Repurchase of common stock pursuant to various stock compensation plans and agreements		(204,947)			—			—				(15,508)				—				(15,508)

Cash dividends on common stock ($0.66 per share)		—	—		(94,823)				—		—				(94,823)
BALANCE, JUNE 30, 2021		141,877,505	$	1,876,247	$	4,335,327			$	(649,337)	$	(14,689)			$	5,547,548
Cash dividends on common stock ($0.99 per share)																		Cash dividends on common stock ($0.99 per share)		—			—			(142,278)				—				—				(142,278)
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, JANUARY 1, 2022	BALANCE, JANUARY 1, 2022	141,907,954	$	1,893,725	$	4,683,659			$	(649,785)	$	(90,381)			$	5,837,218		BALANCE, JANUARY 1, 2022		141,907,954			$	1,893,725		$	4,683,659			$	(649,785)			$	(90,381)			$	5,837,218

Net income	Net income	—	—		495,981				—		—				495,981			Net income		—			—			791,320				—				—				791,320
Other comprehensive loss	Other comprehensive loss	—	—		—				—		(510,267)				(510,267)			Other comprehensive loss		—			—			—				—				(709,651)				(709,651)

Issuance of common stock pursuant to various stock compensation plans and agreements	Issuance of common stock pursuant to various stock compensation plans and agreements	639,847	20,507		—				—		—				20,507			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	Repurchase of common stock pursuant to various stock compensation plans and agreements	(244,895)	—		—				(18,977)		—				(18,977)			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	Repurchase of common stock pursuant to the Stock Repurchase Plan	(1,385,517)	—		—				(99,990)		—				(99,990)			Repurchase of common stock pursuant to the Stock Repurchase Plan		(1,385,517)			—			—				(99,990)				—				(99,990)
Cash dividends on common stock ($0.80 per share)		—	—		(114,990)				—		—				(114,990)
BALANCE, JUNE 30, 2022		140,917,389	$	1,914,232	$	5,064,650			$	(768,752)	$	(600,648)			$	5,609,482
Cash dividends on common stock ($1.20 per share)																		Cash dividends on common stock ($1.20 per share)		—			—			(172,082)				—				—				(172,082)
BALANCE, SEPTEMBER 30, 2022																		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)


		Six Months Ended June 30,					Nine Months Ended September 30,
		2022		2021			2022		2021
CASH FLOWS FROM OPERATING ACTIVITIES	CASH FLOWS FROM OPERATING ACTIVITIES					CASH FLOWS FROM OPERATING ACTIVITIES
Net income	Net income	$	495,981	$	429,736	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	48,911		70,402		Depreciation and amortization	81,980		116,371
Amortization of premiums and accretion of discount, net	Amortization of premiums and accretion of discount, net	21,519		11,310		Amortization of premiums and accretion of discount, net	26,336		17,392
Stock compensation costs	Stock compensation costs	17,009		16,025		Stock compensation costs	29,338		24,047
Deferred income tax (expense) benefit		(7,554)		2,571
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	21,500		(15,000)		Provision for (reversal of) credit losses	48,500		(25,000)
Net gains on sales of loans	Net gains on sales of loans	(3,839)		(3,272)		Net gains on sales of loans	(5,968)		(6,601)
Gains on sales of AFS debt securities	Gains on sales of AFS debt securities	(1,306)		(824)		Gains on sales of AFS debt securities	(1,306)		(1,178)

Loans held-for-sale:	Loans held-for-sale:					Loans held-for-sale:
Originations and purchases	Originations and purchases	(447)		(8,703)		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	461		10,353		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	4,412		3,564		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	(128,071)		(73,809)		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	457,296		(44,113)		Net change in accrued expenses and other liabilities	584,655		30,179
Other net operating activities		3,182		5,571
Other operating activities, net						Other operating activities, net	5,057		3,660
Total adjustments	Total adjustments	433,073		(25,925)		Total adjustments	825,099		90,646
Net cash provided by operating activities	Net cash provided by operating activities	929,054		403,811		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	(49,545)		(92,780)		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	23,442		(20,534)		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	1,162,172		506,353		Proceeds from paydowns and maturities	1,719,076		698,274
Purchases	Purchases	(231,463)		(1,345,537)		Purchases	(258,559)		(1,834,416)
AFS debt securities:	AFS debt securities:					AFS debt securities:
Proceeds from sales	Proceeds from sales	129,181		164,898		Proceeds from sales	129,181		236,967
Proceeds from repayments, maturities and redemptions	Proceeds from repayments, maturities and redemptions	613,244		877,123		Proceeds from repayments, maturities and redemptions	711,950		1,346,839
Purchases	Purchases	(767,015)		(4,015,212)		Purchases	(769,007)		(5,884,389)
HTM debt securities:	HTM debt securities:					HTM debt securities:
Proceeds from repayments, maturities and redemptions	Proceeds from repayments, maturities and redemptions	40,072		—		Proceeds from repayments, maturities and redemptions	60,140		—
Purchases	Purchases	(50,000)		—		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	325,813		248,540		Proceeds from sales of loans originally classified as held-for-investment	453,315		416,426
Purchases	Purchases	(541,997)		(542,839)		Purchases	(599,660)		(746,395)
Other changes in loans held-for-investment, net	Other changes in loans held-for-investment, net	(4,639,384)		(1,389,832)		Other changes in loans held-for-investment, net	(5,675,012)		(1,798,011)

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)
Proceeds from distributions received from equity method investees	Proceeds from distributions received from equity method investees	8,717		4,983		Proceeds from distributions received from equity method investees	13,557		5,626

Other net investing activities		1,354		2,388
Other investing activities, net						Other investing activities, net	920		(61)
Net cash used in investing activities	Net cash used in investing activities	(3,975,409)		(5,602,449)		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)


		Six Months Ended June 30,					Nine Months Ended September 30,
		2022		2021			2022		2021

CASH FLOWS FROM FINANCING ACTIVITIES	CASH FLOWS FROM FINANCING ACTIVITIES					CASH FLOWS FROM FINANCING ACTIVITIES
Net increase in deposits		1,046,046		7,708,661
Net decrease in short-term borrowings		(49)		(21,143)
Net change in deposits						Net change in deposits	623,025		8,486,734
Net change in federal funds purchased and short-term borrowings						Net change in federal funds purchased and short-term borrowings	200,006		(21,143)

FHLB advances:	FHLB advances:					FHLB advances:
Proceeds	Proceeds	3,950,000		—		Proceeds	4,600,200		—
Repayment	Repayment	(4,025,000)		(405,000)		Repayment	(4,525,200)		(405,000)
Repurchase agreements:	Repurchase agreements:					Repurchase agreements:
Proceeds from repurchase agreements	Proceeds from repurchase agreements	311,785		—		Proceeds from repurchase agreements	311,785		—

Long-term debt and lease liabilities:	Long-term debt and lease liabilities:					Long-term debt and lease liabilities:

Repayment of long-term debt and lease liabilities	Repayment of long-term debt and lease liabilities	(457)		(613)		Repayment of long-term debt and lease liabilities	(710)		(909)
Common stock:	Common stock:					Common stock:
Repurchase of common stocks pursuant to the Stock Repurchase Program	Repurchase of common stocks pursuant to the Stock Repurchase Program	(99,990)		—		Repurchase of common stocks pursuant to the Stock Repurchase Program	(99,990)		—
Proceeds from issuance pursuant to various stock compensation plans and agreements	Proceeds from issuance pursuant to various stock compensation plans and agreements	1,444		1,180		Proceeds from issuance pursuant to various stock compensation plans and agreements	1,444		1,180
Stocks tendered for payment of withholding taxes	Stocks tendered for payment of withholding taxes	(18,977)		(15,254)		Stocks tendered for payment of withholding taxes	(18,983)		(15,508)
Cash dividends paid	Cash dividends paid	(115,623)		(95,060)		Cash dividends paid	(171,991)		(141,911)
Net cash provided by financing activities	Net cash provided by financing activities	1,049,179		7,172,771		Net cash provided by financing activities	919,586		7,903,443
Effect of exchange rate changes on cash and cash equivalents	Effect of exchange rate changes on cash and cash equivalents	(13,706)		5,701		Effect of exchange rate changes on cash and cash equivalents	(35,257)		3,542
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS	NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS	(2,010,882)		1,979,834		NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS	(1,749,582)		834,930
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD	CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD	3,912,935		4,017,971		CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD	3,912,935		4,017,971
CASH AND CASH EQUIVALENTS, END OF PERIOD	CASH AND CASH EQUIVALENTS, END OF PERIOD	$	1,902,053	$	5,997,805	CASH AND CASH EQUIVALENTS, END OF PERIOD	$	2,163,353	$	4,852,901

SUPPLEMENTAL CASH FLOW INFORMATION	SUPPLEMENTAL CASH FLOW INFORMATION					SUPPLEMENTAL CASH FLOW INFORMATION
Cash paid during the period for:	Cash paid during the period for:					Cash paid during the period for:
Interest	Interest	$	45,057	$	52,228	Interest	$	107,146	$	70,833
Income taxes, net	Income taxes, net	$	188,510	$	114,202	Income taxes, net	$	233,082	$	137,452
Noncash investing and financing activities:	Noncash investing and financing activities:					Noncash investing and financing activities:

Securities transferred from AFS to HTM debt securities	Securities transferred from AFS to HTM debt securities	$	3,010,003	$	—	Securities transferred from AFS to HTM debt securities	$	3,010,003	$	—
Loans transferred from held-for-investment to held-for-sale	Loans transferred from held-for-investment to held-for-sale	$	351,406	$	247,636	Loans transferred from held-for-investment to held-for-sale	$	463,769	$	411,416
Loans transferred from held-for-sale to held-for-investment		$	631	$	—

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

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

The unaudited interim Consolidated Financial Statements are presented in accordance with United States (“U.S.”) Generally Accepted Accounting Principles (“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, 2021, filed with the U.S. Securities and Exchange Commission on February 28, 2022 (the “Company’s 2021 Form 10-K”). In addition, certain items on the Consolidated Financial Statements and notes for the prior periods have been reclassified to conform to the current period presentation.

The preparation of the Consolidated Financial Statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the Consolidated Financial Statements, income and expenses during the reporting ~~period,~~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.

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
Accounting Standards Update (“ASU”) 2022-02, Financial Instruments - Credit Losses (Topic 326): ~~Trouble~~Troubled Debt Restructurings and the Vintage Disclosures	January 1, 2023	ASU 2022-02 eliminates the troubled debt restructuring (“TDRs”) accounting model for creditors and instead requires companies to apply the loan refinancing and restructuring guidance to determine whether a modification made to a borrower results in a new loan or a continuation of an existing loan. In addition, companies are no longer required to use a discounted cash flow method to measure the allowance for credit losses for certain TDRs and instead allows for the use of an expected loss approach for all loans. The guidance also introduces new disclosure requirements related to restructuring of financing receivables made to borrowers experiencing financial difficulty, and amends vintage disclosures to require current-period gross write-off by year of origination. The guidance should be applied on a prospective basis except for amendments related to recognition and measurement of TDRs, where a modified retrospective transition method is optional.	The Company does not expect the adoption of this guidance to have a material impact on the Company’s Consolidated Financial Statements. The Company expects to adopt ASU 2022-02 on January 1, 2023.
ASU 2022-03, Fair Value Measurement (Topic 820): Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions	January 1, 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. The guidance should be applied on a prospective basis with any adjustments from the adoption of the amendment recognized in earnings and disclosed on the date of adoption.	The Company does not expect the adoption of this guidance to have 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 ~~are generally placed~~ on nonaccrual ~~status using factors~~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. ~~Examples of securities for which the~~The Company applies a zero credit loss assumption ~~include~~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, ~~so that the balance sheet reflects~~reflecting the net amount the Company expects to collect.

Note 3 — 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 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 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 evaluates the fair values of securities by comparing the fair values provided by the third-party pricing service providers to prices from other available independent sources for the same securities. When significant variances in prices are identified, the Company further compares inputs used by different sources to ascertain the reliability of these sources. On a quarterly basis, the Company reviews the valuation inputs and methodology for each security category 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 ~~June~~September 30, 2022 and December 31, 2021. The Company invested in these mutual funds for Community Reinvestment Act (“CRA”) purposes. The Company uses net asset value (“NAV”) information to determine the fair value of 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 and variable interest rate loans. These interest rate contracts with institutional counterparties are designated as cash flow hedges. The fair value of the interest rate swaps is determined using the market standard methodology of netting the discounted future fixed cash payments (or receipts) and the discounted expected variable cash receipts (or payments). The 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 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 is classified as Level 2. As of ~~June~~September 30, 2022 and December 31, 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. Since the majority of the inputs used to value the RPAs are observable, RPAs are classified as Level 2.

Equity Contracts — As part of the loan origination process, the Company may obtain warrants to purchase preferred and/or common stock of the borrowers, which are mainly in the technology and life sciences sectors. As of ~~June~~September 30, 2022 and December 31, 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 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 consisting of swaps and options with its oil and gas loan customers, which allow them to hedge against the risk of fluctuation in energy commodity prices. The fair value 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 ~~June~~September 30, 2022 and December 31, 2021:


($ in thousands)	($ in thousands)	Assets and Liabilities Measured at Fair Value on a Recurring Basis as of June 30, 2022								($ 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	$	624,686	$	—	$	—	$	624,686	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	—		285,245		—		285,245		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	—		563,832		—		563,832		Commercial mortgage-backed securities	—		521,885		—		521,885
Residential mortgage-backed securities	Residential mortgage-backed securities	—		1,910,240		—		1,910,240		Residential mortgage-backed securities	—		1,793,429		—		1,793,429
Municipal securities	Municipal securities	—		266,733		—		266,733		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	—		411,768		—		411,768		Commercial mortgage-backed securities	—		397,975		—		397,975
Residential mortgage-backed securities	Residential mortgage-backed securities	—		726,989		—		726,989		Residential mortgage-backed securities	—		671,538		—		671,538
Corporate debt securities	Corporate debt securities	—		559,293		—		559,293		Corporate debt securities	—		529,565		—		529,565
Foreign government bonds	Foreign government bonds	—		242,997		—		242,997		Foreign government bonds	—		225,810		—		225,810
Asset-backed securities	Asset-backed securities	—		67,350		—		67,350		Asset-backed securities	—		64,870		—		64,870
Collateralized loan obligations (“CLOs”)	Collateralized loan obligations (“CLOs”)	—		596,371		—		596,371		Collateralized loan obligations (“CLOs”)	—		590,415		—		590,415
Total AFS debt securities	Total AFS debt securities	$	624,686	$	5,630,818	$	—	$	6,255,504	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	Equity securities	$	20,463	$	4,312	$	—	$	24,775	Equity securities	$	19,637	$	4,200	$	—	$	23,837
Total investments in tax credit and other investments	Total investments in tax credit and other investments	$	20,463	$	4,312	$	—	$	24,775	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	$	—	$	261,326	$	—	$	261,326	Interest rate contracts	$	—	$	430,038	$	—	$	430,038
Foreign exchange contracts	Foreign exchange contracts	—		42,324		—		42,324		Foreign exchange contracts	—		81,874		—		81,874

Equity contracts	Equity contracts	—		2		357		359		Equity contracts	—		1		345		346
Commodity contracts	Commodity contracts	—		404,275		—		404,275		Commodity contracts	—		369,146		—		369,146
Gross derivative assets	Gross derivative assets	$	—	$	707,927	$	357	$	708,284	Gross derivative assets	$	—	$	881,059	$	345	$	881,404
Netting adjustments (1)	Netting adjustments (1)	$	—	$	(251,718)	$	—	$	(251,718)	Netting adjustments (1)	$	—	$	(605,957)	$	—	$	(605,957)
Net derivative assets	Net derivative assets	$	—	$	456,209	$	357	$	456,566	Net derivative assets	$	—	$	275,102	$	345	$	275,447

Derivative liabilities:	Derivative liabilities:									Derivative liabilities:
Interest rate contracts	Interest rate contracts	$	—	$	359,674	$	—	$	359,674	Interest rate contracts	$	—	$	615,327	$	—	$	615,327
Foreign exchange contracts	Foreign exchange contracts	—		29,144		—		29,144		Foreign exchange contracts	—		64,049		—		64,049
Credit contracts	Credit contracts	—		76		—		76		Credit contracts	—		27		—		27
Commodity contracts	Commodity contracts	—		373,675		—		373,675		Commodity contracts	—		350,198		—		350,198
Gross derivative liabilities	Gross derivative liabilities	$	—	$	762,569	$	—	$	762,569	Gross derivative liabilities	$	—	$	1,029,601	$	—	$	1,029,601
Netting adjustments (1)	Netting adjustments (1)	$	—	$	(126,414)	$	—	$	(126,414)	Netting adjustments (1)	$	—	$	(239,206)	$	—	$	(239,206)
Net derivative liabilities	Net derivative liabilities	$	—	$	636,155	$	—	$	636,155	Net derivative liabilities	$	—	$	790,395	$	—	$	790,395

1314



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

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

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

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

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

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

1415

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


($ in thousands)	($ in thousands)	Three Months Ended June 30,				Six Months Ended June 30,				($ in thousands)	Three Months Ended September 30,				Nine Months Ended September 30,
		2022		2021		2022		2021			2022		2021		2022		2021
Equity contracts	Equity contracts									Equity contracts
Beginning balance	Beginning balance	$	309	$	272	$	215	$	273	Beginning balance	$	357	$	223	$	215	$	273

Total gains included in earnings (1)		48		47		51		46
Total (losses) gains included in earnings (1)										Total (losses) gains included in earnings (1)	(12)		(9)		39		37

Issuances	Issuances	—		—		91		—		Issuances	—		12		91		12

Settlements	Settlements	—		(96)		—		(96)		Settlements	—		—		—		(96)

Transfers out of Level 3 (2)										Transfers out of Level 3 (2)	—		(6)		—		(6)
Ending balance	Ending balance	$	357	$	223	$	357	$	223	Ending balance	$	345	$	220	$	345	$	220

(1)Includes unrealized (losses) gains ~~(losses)~~ of ~~$48~~$(12) thousand and ~~$(27)~~$(9) thousand for the three months ended ~~June~~September 30, 2022 and 2021, respectively, and ~~$51~~$39 thousand and ~~$(29)~~$(38) thousand for the ~~six~~nine months ended ~~June~~September 30, 2022 and 2021, respectively. The realized/unrealized gains (losses) of equity contracts are recorded in Lending fees on 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.

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

($ in thousands)

Fair Value
Measurements
(Level 3)

Valuation
Technique

Unobservable
Inputs

Range of Inputs

Weighted-

Average of Inputs (1)

($ in thousands)

Fair Value
Measurements
(Level 3)

Valuation
Technique

Unobservable
Inputs

Range of Inputs

Weighted-

Average of Inputs (1)

June 30, 2022

September 30, 2022

Derivative assets:

Equity contracts

357

Black-Scholes option pricing model

Equity volatility

46% — 70%.

61%

Equity contracts

345

Black-Scholes option pricing model

Equity volatility

49% — 70%

59%

Liquidity discount

47%

Liquidity discount

47%

December 31, 2021

Derivative assets:

Equity contracts

215

Black-Scholes option pricing model

Equity volatility

44% — 54%

49%

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 ~~June~~September 30, 2022 and December 31, 2021.

Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis

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

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

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

1516

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

1617

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


($ in thousands)	($ in thousands)	Assets Measured at Fair Value on a Nonrecurring Basis as of June 30, 2022								($ 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”)	$	—	$	—	$	55,015	$	55,015	Commercial and industrial (“C&I”)	$	—	$	—	$	57,696	$	57,696
Commercial real estate (“CRE”):	Commercial real estate (“CRE”):									Commercial real estate (“CRE”):
CRE	CRE	—		—		30,716		30,716		CRE	—		—		30,359		30,359
Multifamily residential	Multifamily residential	—		—		1,055		1,055		Multifamily residential	—		—		1,008		1,008

Total commercial	Total commercial	—		—		86,786		86,786		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”)	—		—		1,167		1,167		Home equity lines of credit (“HELOCs”)	—		—		1,235		1,235

Total consumer	Total consumer	—		—		1,167		1,167		Total consumer	—		—		1,235		1,235
Total loans held-for-investment	Total loans held-for-investment	$	—	$	—	$	87,953	$	87,953	Total loans held-for-investment	$	—	$	—	$	90,298	$	90,298



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



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

HELOCs	—		—		2,744		2,744


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

Other nonperforming assets	$	391	$	—	$	—	$	391

1718

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


($ in thousands)	($ in thousands)	Three Months Ended June 30,				Six Months Ended June 30,				($ in thousands)	Three Months Ended September 30,				Nine Months Ended September 30,
		2022		2021		2022		2021			2022		2021		2022		2021
Loans held-for-investment:	Loans held-for-investment:									Loans held-for-investment:
Commercial:	Commercial:									Commercial:
C&I	C&I	$	(6,054)	$	(6,462)	$	(14,740)	$	(15,530)	C&I	$	(15,265)	$	(4,977)	$	(30,011)	$	(13,590)
CRE:	CRE:									CRE:
CRE	CRE	(533)		(275)		2,330		(7,336)		CRE	(118)		(106)		2,212		(7,186)
Multifamily residential	Multifamily residential	(8)		2		(8)		(6)		Multifamily residential	(5,931)		16		(5,939)		—
Construction and land		—		(209)		—		(280)

Total commercial	Total commercial	(6,595)		(6,944)		(12,418)		(23,152)		Total commercial	(21,314)		(5,067)		(33,738)		(20,776)
Consumer:	Consumer:									Consumer:
Residential mortgage:	Residential mortgage:									Residential mortgage:
Single-family residential		—		—		—		(8)

HELOCs	HELOCs	82		3		85		(23)		HELOCs	81		3		166		(6)

Other consumer	Other consumer	—		(2,491)		—		(2,491)		Other consumer	—		—		—		(2,491)
Total consumer	Total consumer	82		(2,488)		85		(2,522)		Total consumer	81		3		166		(2,497)
Total loans held-for-investment	Total loans held-for-investment	$	(6,513)	$	(9,432)	$	(12,333)	$	(25,674)	Total loans held-for-investment	$	(21,233)	$	(5,064)	$	(33,572)	$	(23,273)

Investments in tax credit and other investments, net	Investments in tax credit and other investments, net	$	—	$	877	$	—	$	877	Investments in tax credit and other investments, net	$	—	$	—	$	—	$	877
OREO		$	—	$	(910)	$	—	$	(910)

Other nonperforming assets	Other nonperforming assets	$	(6,861)	$	—	$	(6,861)	$	(3,890)	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 ~~June~~September 30, 2022 and December 31, 2021:


($ in thousands)	($ in thousands)	Fair Value Measurements (Level 3)		Valuation Techniques	Unobservable Inputs	Range of Inputs	Weighted- Average of Inputs (1)	($ in thousands)	Fair Value Measurements (Level 3)		Valuation Techniques	Unobservable Inputs	Range of Inputs	Weighted- Average of Inputs (1)
June 30, 2022
September 30, 2022								September 30, 2022
Loans held-for-investment	Loans held-for-investment	$	36,889	Discounted cash flows	Discount	4% — 6%	4%	Loans held-for-investment	$	40,559	Discounted cash flows	Discount	4% — 6%	4%
		$	19,293	Fair value of collateral	Discount	15% — 77%	37%		$	18,372	Fair value of collateral	Discount	40% — 94%	52%

		$	31,771	Fair value of property	Selling cost	8%	8%		$	31,367	Fair value of property	Selling cost	8%	8%

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

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

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

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

1819

Disclosures about Fair Value of Financial Instruments

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


($ in thousands)	($ in thousands)	June 30, 2022										($ 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	$	1,902,053	$	1,902,053	$	—	$	—	$	1,902,053	Cash and cash equivalents	$	2,163,353	$	2,163,353	$	—	$	—	$	2,163,353
Interest-bearing deposits with banks	Interest-bearing deposits with banks	$	712,709	$	—	$	712,709	$	—	$	712,709	Interest-bearing deposits with banks	$	630,543	$	—	$	630,543	$	—	$	630,543
Resale agreements	Resale agreements	$	1,422,794	$	—	$	1,348,036	$	—	$	1,348,036	Resale agreements	$	892,986	$	—	$	790,239	$	—	$	790,239
HTM debt securities	HTM debt securities	$	3,028,302	$	486,521	$	2,170,028	$	—	$	2,656,549	HTM debt securities	$	3,012,667	$	466,085	$	1,993,050	$	—	$	2,459,135
Restricted equity securities, at cost	Restricted equity securities, at cost	$	77,962	$	—	$	77,962	$	—	$	77,962	Restricted equity securities, at cost	$	78,254	$	—	$	78,254	$	—	$	78,254
Loans held-for-sale	Loans held-for-sale	$	28,464	$	—	$	28,464	$	—	$	28,464	Loans held-for-sale	$	14,500	$	—	$	14,500	$	—	$	14,500
Loans held-for-investment, net	Loans held-for-investment, net	$	45,938,806	$	—	$	—	$	45,860,749	$	45,860,749	Loans held-for-investment, net	$	46,859,738	$	—	$	—	$	46,147,082	$	46,147,082
Mortgage servicing rights	Mortgage servicing rights	$	5,909	$	—	$	—	$	10,349	$	10,349	Mortgage servicing rights	$	6,523	$	—	$	—	$	10,532	$	10,532
Accrued interest receivable	Accrued interest receivable	$	172,008	$	—	$	172,008	$	—	$	172,008	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	$	44,965,778	$	—	$	44,965,778	$	—	$	44,965,778	Demand, checking, savings and money market deposits	$	43,498,799	$	—	$	43,498,799	$	—	$	43,498,799
Time deposits	Time deposits	$	9,377,576	$	—	$	9,318,992	$	—	$	9,318,992	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	$	174,776	$	—	$	175,207	$	—	$	175,207	FHLB advances	$	324,920	$	—	$	325,000	$	—	$	325,000
Repurchase agreements	Repurchase agreements	$	611,785	$	—	$	619,280	$	—	$	619,280	Repurchase agreements	$	611,785	$	—	$	617,513	$	—	$	617,513
Long-term debt	Long-term debt	$	147,801	$	—	$	139,206	$	—	$	139,206	Long-term debt	$	147,875	$	—	$	140,902	$	—	$	140,902
Accrued interest payable	Accrued interest payable	$	9,596	$	—	$	9,596	$	—	$	9,596	Accrued interest payable	$	23,934	$	—	$	23,934	$	—	$	23,934



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

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

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

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

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

1920

Note 4 — Assets Purchased under Resale Agreements and Sold under Repurchase Agreements

Assets Purchased under Resale Agreements

~~In the~~With 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 ~~June~~September 30, 2022 and December 31, 2021.

Securities Purchased under Resale Agreements — Total securities purchased under resale agreements were ~~$1.13 billion~~$885.0 million as of ~~June~~September 30, 2022, and $1.33 billion as of December 31, 2021. The weighted-average yields were ~~1.96%~~2.41% and ~~1.54%~~1.50% for the three months ended ~~June~~September 30, 2022 and 2021, respectively; and ~~1.79%~~1.96% and ~~1.55%~~1.53% for the ~~six~~nine months ended ~~June~~September 30, 2022 and 2021, respectively.

Loans Purchased under Resale Agreements — Total loans purchased under resale agreements were $~~289.8~~8.0 million as of ~~June~~September 30, 2022, and $1.02 billion as of December 31, 2021. The weighted-average yields were ~~2.47%~~3.87% and ~~1.47%~~1.48% for the three months ended ~~June~~September 30, 2022 and 2021, respectively; and ~~1.91%~~2.10% and ~~1.64%~~1.57% for the ~~six~~nine months ended ~~June~~September 30, 2022 and 2021, respectively.

Assets Sold under Repurchase Agreements — As of ~~June~~September 30, 2022, securities sold under ~~the~~ repurchase agreements consisted of 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 ~~June~~September 30, 2022, and $300.0 million as of December 31, 2021. The weighted-average interest rates were ~~2.70%~~2.81% and ~~2.63%~~2.57% for the three months ended ~~June~~September 30, 2022 and 2021, respectively; and ~~2.66%~~2.73% and ~~2.65%~~2.62% for the ~~six~~nine months ended ~~June~~September 30, 2022 and 2021, respectively. As of ~~June~~September 30, 2022, $311.8 million and $300.0 million of the securities sold under repurchase agreements will mature in 2022 and 2023, respectively.

Balance Sheet Offsetting

The Company’s resale and repurchase agreements are transacted under legally enforceable master repurchase agreements that, 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 ~~June~~September 30, 2022 and December 31, 2021:


($ in thousands)	($ in thousands)	June 30, 2022														($ 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			$	1,422,794					$	—		$	1,422,794						$	(1,336,962)		(1)		$	85,832		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	$	611,785				$	—					$	611,785		$	(611,785)	(2)		$	—		Repurchase agreements				$	611,785		$	—		$	611,785		$	(606,766)	(2)	$	5,019

2021


($ in thousands)	($ in thousands)	December 31, 2021																($ 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							$	2,353,503	$	—		$	2,353,503		$	(2,327,687)	(1)	$	25,816							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 assets the Company has received under resale agreements, limited for table presentation purposes to the amount of the recognized asset due from each counterparty. The application of collateral cannot reduce the net position below zero. Therefore, excess collateral, if any, is not reflected above.

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

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

2122

Note 5 — 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 ~~June~~September 30, 2022 and December 31, 2021:


($ in thousands)	($ in thousands)	June 30, 2022						($ 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	$	676,320	$	—	$	(51,634)		$	624,686		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	324,463		—		(39,218)			285,245			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	614,135		125		(50,428)			563,832			Commercial mortgage-backed securities	595,342		—		(73,457)		521,885
Residential mortgage-backed securities	Residential mortgage-backed securities	2,097,339		193		(187,292)			1,910,240			Residential mortgage-backed securities	2,043,791		58		(250,420)		1,793,429
Municipal securities	Municipal securities	306,419		22		(39,708)			266,733			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	451,200		247		(39,679)			411,768			Commercial mortgage-backed securities	448,790		173		(50,988)		397,975
Residential mortgage-backed securities	Residential mortgage-backed securities	808,012		—		(81,023)			726,989			Residential mortgage-backed securities	784,700		—		(113,162)		671,538
Corporate debt securities	Corporate debt securities	673,502		105		(114,314)			559,293			Corporate debt securities	673,502		—		(143,937)		529,565
Foreign government bonds	Foreign government bonds	253,118		648		(10,769)			242,997			Foreign government bonds	238,720		528		(13,438)		225,810
Asset-backed securities	Asset-backed securities	69,764		—		(2,414)			67,350			Asset-backed securities	66,793		—		(1,923)		64,870
CLOs	CLOs	617,250		—		(20,879)			596,371			CLOs	617,250		—		(26,835)		590,415
Total AFS debt securities	Total AFS debt securities	6,891,522		1,340		(637,358)			6,255,504			Total AFS debt securities	6,771,354		759		(866,023)		5,906,090
HTM debt securities:	HTM debt securities:											HTM debt securities:
U.S. Treasury securities	U.S. Treasury securities	521,352		—		(34,831)			486,521			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	997,369		—		(144,291)			853,078			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:											U.S. government agency and U.S. government-sponsored enterprise mortgage-backed securities:
Commercial mortgage-backed securities	Commercial mortgage-backed securities	512,391		—		(62,563)			449,828			Commercial mortgage-backed securities	509,139		—		(92,507)		416,632
Residential mortgage-backed securities	Residential mortgage-backed securities	807,111		—		(96,637)			710,474			Residential mortgage-backed securities	792,685		—		(142,978)		649,707
Municipal securities	Municipal securities	190,079		—		(33,431)			156,648			Municipal securities	189,897		—		(45,803)		144,094
Total HTM debt securities	Total HTM debt securities	3,028,302		—		(371,753)			2,656,549			Total HTM debt securities	3,012,667		—		(553,532)		2,459,135
Total debt securities	Total debt securities	$	9,919,824	$	1,340	$	(1,009,111)		$	8,912,053		Total debt securities	$	9,784,021	$	759	$	(1,419,555)	$	8,365,225

2223



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

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

As of ~~June~~September 30, 2022 and December 31, 2021, the amortized cost of debt securities excluded accrued interest receivables of ~~$34.9~~$33.8 million and $33.1 million, respectively, which are included in Other assets on the Consolidated Balance Sheet. For the Company’s accounting policy related to debt securities’ accrued interest receivable, see Note 1 — Summary of Significant Accounting Policies — Significant Accounting Policies — Allowance for Credit Losses on Available-for-Sale Debt Securities to the Consolidated Financial Statements in the Company’s 2021 Form 10-K and Note 2 — Current Accounting Developments and Summary of Significant Accounting Policies to the Consolidated Financial Statements in this Form 10-Q.

Unrealized Losses of Available-for-Sale Debt Securities

The following tables present the fair value and the associated gross unrealized losses 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 ~~June~~September 30, 2022 and December 31, 2021.


($ in thousands)	($ in thousands)	June 30, 2022												($ 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	$	466,095	$	(32,524)	$	158,591	$	(19,110)	$	624,686	$	(51,634)	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	U.S. government agency and U.S. government sponsored enterprise debt securities	249,274		(35,689)		35,971		(3,529)		285,245		(39,218)		U.S. government agency and U.S. government sponsored enterprise 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	440,235		(34,101)		110,670		(16,327)		550,905		(50,428)		Commercial mortgage-backed securities	334,460		(39,330)		187,425		(34,127)		521,885		(73,457)
Residential mortgage-backed securities	Residential mortgage-backed securities	1,433,558		(122,567)		463,552		(64,725)		1,897,110		(187,292)		Residential mortgage-backed securities	700,318		(72,088)		1,085,253		(178,332)		1,785,571		(250,420)
Municipal securities	Municipal securities	265,197		(39,708)		—		—		265,197		(39,708)		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	335,199		(28,436)		65,175		(11,243)		400,374		(39,679)		Commercial mortgage-backed securities	170,101		(8,351)		218,124		(42,637)		388,225		(50,988)
Residential mortgage-backed securities	Residential mortgage-backed securities	616,819		(67,098)		110,170		(13,925)		726,989		(81,023)		Residential mortgage-backed securities	188,584		(23,168)		482,954		(89,994)		671,538		(113,162)
Corporate debt securities	Corporate debt securities	295,000		(35,503)		236,189		(78,811)		531,189		(114,314)		Corporate debt securities	247,533		(24,969)		282,032		(118,968)		529,565		(143,937)
Foreign government bonds	Foreign government bonds	18,887		(165)		67,798		(10,604)		86,685		(10,769)		Foreign government bonds	68,733		(336)		36,899		(13,102)		105,632		(13,438)
Asset-backed securities	Asset-backed securities	57,469		(1,888)		9,881		(526)		67,350		(2,414)		Asset-backed securities	54,811		(1,579)		10,059		(344)		64,870		(1,923)
CLOs	CLOs	312,368		(10,882)		284,003		(9,997)		596,371		(20,879)		CLOs	190,370		(8,730)		400,045		(18,105)		590,415		(26,835)
Total AFS debt securities	Total AFS debt securities	$	4,490,101	$	(408,561)	$	1,542,000	$	(228,797)	$	6,032,101	$	(637,358)	Total AFS debt securities	$	2,510,007	$	(266,455)	$	3,258,297	$	(599,568)	$	5,768,304	$	(866,023)



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

2425

As of ~~June~~September 30, 2022, the Company had a total of ~~531~~557 AFS debt securities in a gross unrealized loss position with no credit impairment, consisting primarily of ~~244~~262 U.S. government agency and U.S. government-sponsored enterprise mortgage-backed securities, 100 non-agency mortgage-backed securities, and 6368 corporate debt securities. In comparison, as of December 31, 2021, the Company had a total of 431 AFS debt securities in a gross unrealized loss position with no credit impairment, consisting primarily of 180 U.S. government agency and U.S. government-sponsored enterprise mortgage-backed securities, 50 U.S. government agency and U.S. government-sponsored agency debt securities, 21 U.S. Treasury securities, and 30 corporate debt securities.

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

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 Securities to the Consolidated Financial Statements in the Company’s 2021 Form 10-K.

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

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

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

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

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

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

The Company monitors the credit quality of the HTM debt securities using external credit ratings. As of ~~June~~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 ~~June~~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 ~~six~~nine months ended ~~June~~September 30, 2022 and 2021:


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

Gross realized gains	Gross realized gains	$	28	$	632	$	1,306	$	824				Gross realized gains		$	—		$	354		$	1,306		$	1,178
Related tax expense	Related tax expense	$	8	$	187	$	386	$	244				Related tax expense		$	—		$	104		$	386		$	348

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

2627

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 ~~June~~September 30, 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)	($ in thousands)	Within One Year			After One Year through Five Years			After Five Years through Ten Years			After Ten Years			Total			($ in thousands)	Within One Year			After One Year through Five Years			After Five Years through Ten Years			After Ten Years			Total
AFS debt securities:	AFS debt securities:																AFS debt securities:
U.S. Treasury securities	U.S. Treasury securities																U.S. Treasury securities
Amortized cost	Amortized cost	$	—		$	576,626		$	99,694		$	—		$	676,320		Amortized cost	$	—		$	576,605		$	99,707		$	—		$	676,312
Fair value	Fair value	—			536,698			87,988			—			624,686			Fair value	—			516,595			84,082			—			600,677
Weighted-average yield (1)	Weighted-average yield (1)	—		%	1.28		%	0.74		%	—		%	1.20		%	Weighted-average yield (1)	—		%	1.28		%	0.74		%	—		%	1.20		%
U.S. government agency and U.S. government-sponsored enterprise debt securities	U.S. government agency and U.S. government-sponsored enterprise debt securities																U.S. government agency and U.S. government-sponsored enterprise debt securities
Amortized cost	Amortized cost	—			29,193			125,001			170,269			324,463			Amortized cost	—			24,775			125,000			169,295			319,070
Fair value	Fair value	—			27,700			110,199			147,346			285,245			Fair value	—			22,787			102,540			135,097			260,424
Weighted-average yield (1)	Weighted-average yield (1)	—		%	1.62		%	1.16		%	2.09		%	1.69		%	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:
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
Amortized cost	Amortized cost	—			13,289			192,287			2,505,898			2,711,474			Amortized cost	—			24,417			173,899			2,440,817			2,639,133
Fair value	Fair value	—			13,205			182,832			2,278,035			2,474,072			Fair value	—			23,529			157,827			2,133,958			2,315,314
Weighted-average yield (1)	Weighted-average yield (1)	—		%	3.11		%	2.69		%	2.11		%	2.15		%	Weighted-average yield (1)	—		%	3.26		%	2.71		%	2.70		%	2.71		%
Municipal securities	Municipal securities																Municipal securities
Amortized cost	Amortized cost	—			39,712			6,498			260,209			306,419			Amortized cost	1,511			38,079			6,855			260,639			307,084
Fair value	Fair value	—			37,800			5,758			223,175			266,733			Fair value	1,510			35,025			5,753			207,214			249,502
Weighted-average yield (1) (2)	Weighted-average yield (1) (2)	—		%	2.47		%	1.79		%	2.23		%	2.25		%	Weighted-average yield (1) (2)	3.13		%	2.44		%	1.85		%	2.24		%	2.26		%
Non-agency mortgage-backed securities	Non-agency mortgage-backed securities																Non-agency mortgage-backed securities
Amortized cost	Amortized cost	10,019			196,136			40,404			1,012,653			1,259,212			Amortized cost	28,574			187,564			25,832			991,520			1,233,490
Fair value	Fair value	9,894			189,963			39,224			899,676			1,138,757			Fair value	28,195			179,900			24,897			836,521			1,069,513
Weighted-average yield (1)	Weighted-average yield (1)	4.47		%	3.56		%	1.19		%	2.23		%	2.42		%	Weighted-average yield (1)	4.84		%	3.87		%	0.84		%	2.37		%	2.62		%
Corporate debt securities	Corporate debt securities																Corporate debt securities
Amortized cost	Amortized cost	10,000			—			334,502			329,000			673,502			Amortized cost	10,000			—			334,502			329,000			673,502
Fair value	Fair value	9,847			—			309,395			240,051			559,293			Fair value	9,857			—			296,184			223,524			529,565
Weighted average yield (1)	Weighted average yield (1)	3.26		%	—		%	3.59		%	1.98		%	2.80		%	Weighted average yield (1)	3.95		%	—		%	3.59		%	1.98		%	2.81		%
Foreign government bonds	Foreign government bonds																Foreign government bonds
Amortized cost	Amortized cost	108,712			44,406			50,000			50,000			253,118			Amortized cost	138,720			—			50,000			50,000			238,720
Fair value	Fair value	108,660			44,832			50,081			39,424			242,997			Fair value	139,060			—			49,851			36,899			225,810
Weighted-average yield (1)	Weighted-average yield (1)	1.82		%	3.01		%	0.55		%	1.50		%	1.71		%	Weighted-average yield (1)	2.15		%	—		%	2.66		%	1.50		%	2.12		%
Asset-backed securities:
Asset-backed securities																	Asset-backed securities
Amortized cost	Amortized cost	—			—			—			69,764			69,764			Amortized cost	—			—			—			66,793			66,793
Fair value	Fair value	—			—			—			67,350			67,350			Fair value	—			—			—			64,870			64,870
Weighted-average yield (1)	Weighted-average yield (1)	—		%	—		%	—		%	2.74		%	2.74		%	Weighted-average yield (1)	—		%	—		%	—		%	4.15		%	4.15		%
CLOs	CLOs																CLOs
Amortized cost	Amortized cost	—			—			—			617,250			617,250			Amortized cost	—			—			25,000			592,250			617,250
Fair value	Fair value	—			—			—			596,371			596,371			Fair value	—			—			24,168			566,247			590,415
Weighted average yield (1)	Weighted average yield (1)	—		%	—		%	—		%	2.22		%	2.22		%	Weighted average yield (1)	—		%	—		%	3.66		%	3.86		%	3.85		%
Total AFS debt securities	Total AFS debt securities																Total AFS debt securities
Amortized cost	Amortized cost	$	128,731		$	899,362		$	848,386		$	5,015,043		$	6,891,522		Amortized cost	$	178,805		$	851,440		$	840,795		$	4,900,314		$	6,771,354
Fair value	Fair value	$	128,401		$	850,198		$	785,477		$	4,491,428		$	6,255,504		Fair value	$	178,622		$	777,836		$	745,302		$	4,204,330		$	5,906,090
Weighted-average yield (1)	Weighted-average yield (1)	2.14		%	1.95		%	2.39		%	2.15		%	2.15		%	Weighted-average yield (1)	2.69		%	1.96		%	2.56		%	2.69		%	2.58		%

2728


($ in thousands)	($ in thousands)	Within One Year			After One Year through Five Years			After Five Years through Ten Years			After Ten Years			Total			($ in thousands)	Within One Year			After One Year through Five Years			After Five Years through Ten Years			After Ten Years			Total
HTM debt securities:	HTM debt securities:																HTM debt securities:
U.S. Treasury securities	U.S. Treasury securities																U.S. Treasury securities
Amortized cost	Amortized cost	$	—		$	166,856		$	354,496		$	—		$	521,352		Amortized cost	$	—		$	285,325		$	237,388		$	—		$	522,713
Fair value	Fair value	—			156,200			330,321			—			486,521			Fair value	—			255,365			210,720			—			466,085
Weighted-average yield (1)	Weighted-average yield (1)	—		%	0.90		%	1.12		%	—		%	1.05		%	Weighted-average yield (1)	—		%	0.96		%	1.14		%	—		%	1.05		%
U.S. government agency and U.S. government-sponsored enterprise debt securities	U.S. government agency and U.S. government-sponsored enterprise debt securities																U.S. government agency and U.S. government-sponsored enterprise debt securities
Amortized cost	Amortized cost	—			—			213,101			784,268			997,369			Amortized cost	—			—			255,708			742,525			998,233
Fair value	Fair value	—			—			193,357			659,721			853,078			Fair value	—			—			215,684			566,933			782,617
Weighted-average yield (1)	Weighted-average yield (1)	—		%	—		%	2.03		%	1.86		%	1.90		%	Weighted-average yield (1)	—		%	—		%	1.94		%	1.88		%	1.90		%
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
Amortized cost	Amortized cost	—			—			87,264			1,232,238			1,319,502			Amortized cost	—			—			96,433			1,205,391			1,301,824
Fair value	Fair value	—			—			78,993			1,081,309			1,160,302			Fair value	—			—			81,526			984,813			1,066,339
Weighted-average yield (1)	Weighted-average yield (1)	—		%	—		%	1.60		%	1.59		%	1.59		%	Weighted-average yield (1)	—		%	—		%	1.56		%	1.63		%	1.63		%
Municipal securities	Municipal securities																Municipal securities
Amortized cost	Amortized cost	—			—			—			190,079			190,079			Amortized cost	—			—			—			189,897			189,897
Fair value	Fair value	—			—			—			156,648			156,648			Fair value	—			—			—			144,094			144,094
Weighted-average yield (1) (2)	Weighted-average yield (1) (2)	—		%	—		%	—		%	1.97		%	1.97		%	Weighted-average yield (1) (2)	—		%	—		%	—		%	1.97		%	1.97		%
Total HTM debt securities	Total HTM debt securities																Total HTM debt securities
Amortized cost	Amortized cost	$	—		$	166,856		$	654,861		$	2,206,585		$	3,028,302		Amortized cost	$	—		$	285,325		$	589,529		$	2,137,813		$	3,012,667
Fair value	Fair value	$	—		$	156,200		$	602,671		$	1,897,678		$	2,656,549		Fair value	$	—		$	255,365		$	507,930		$	1,695,840		$	2,459,135
Weighted-average yield (1)	Weighted-average yield (1)	—		%	0.90		%	1.48		%	1.72		%	1.62		%	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 ~~June~~September 30, 2022 and December 31, 2021, AFS and HTM debt securities with carrying values of ~~$1.29~~$1.22 billion and $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 ~~June~~September 30, 2022 and December 31, 2021:


($ in thousands)	($ in thousands)	June 30, 2022		December 31, 2021		($ in thousands)	September 30, 2022		December 31, 2021
Federal Reserve Bank of San Francisco (“FRBSF”) stock	Federal Reserve Bank of San Francisco (“FRBSF”) stock	$	60,712	$	60,184	Federal Reserve Bank of San Francisco (“FRBSF”) stock	$	61,004	$	60,184
FHLB stock	FHLB stock	17,250		17,250		FHLB stock	17,250		17,250
Total restricted equity securities	Total restricted equity securities	$	77,962	$	77,434	Total restricted equity securities	$	78,254	$	77,434

Note 6 — Derivatives

The Company uses derivatives to manage exposure to market risk, primarily interest rate 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 to mitigate the effect of interest ~~rate~~rates 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 2021 Form 10-K.

2829

The following table presents the 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 ~~June~~September 30, 2022 and December 31, 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 ~~applicable~~the application of variation margin payments as settlements with central clearing ~~organizations have been applied as settlement.~~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 ~~June~~September 30, 2022 and December 31, 2021. The resulting net derivative asset and liability fair values are included in Other assets and Accrued expenses and other liabilities, respectively, on the Consolidated Balance Sheet.


($ in thousands)	($ in thousands)	June 30, 2022								December 31, 2021								($ 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	$	1,525,000		$	586		$	96	$	275,000		$	—		$	57	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	84,832			2,765			—		86,531			—			225		Foreign exchange contracts		84,832			7,107		—			86,531			—		225
Total derivatives designated as hedging instruments	Total derivatives designated as hedging instruments	$	1,609,832		$	3,351		$	96	$	361,531		$	—		$	282	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	$	17,570,112		$	260,740		$	359,578	$	17,575,420		$	240,222		$	179,905	Interest rate contracts		$	17,261,862		$	429,505	$	590,648		$	17,575,420		$	240,222	$	179,905
Foreign exchange contracts	Foreign exchange contracts	2,654,194			39,559			29,144		1,874,681			21,033			15,276		Foreign exchange contracts		2,762,150			74,767		64,049			1,874,681			21,033		15,276
Credit contracts	Credit contracts	121,784			—			76		72,560			—			141		Credit contracts		141,549			—		27			72,560			—		141
Equity contracts	Equity contracts	—		(1)	359			—		—		(1)	220			—		Equity contracts		—		(1)	346		—			—		(1)	220		—
Commodity contracts	Commodity contracts	—		(2)	404,275			373,675		—		(2)	222,709			194,567		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	$	20,346,090		$	704,933		$	762,473	$	19,522,661		$	484,184		$	389,889	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				$	708,284		$	762,569				$	484,184		$	390,171	Gross derivative assets/liabilities					$	881,404	$	1,029,601					$	484,184	$	390,171
Less: Master netting agreements	Less: Master netting agreements				(126,414)			(126,414)					(58,679)			(58,679)		Less: Master netting agreements					(238,606)		(238,606)						(58,679)		(58,679)
Less: Cash collateral received/paid	Less: Cash collateral received/paid				(125,304)			—					(42,274)			(174,048)		Less: Cash collateral received/paid					(367,351)		(600)						(42,274)		(174,048)
Net derivative assets/liabilities	Net derivative assets/liabilities				$	456,566		$	636,155				$	383,231		$	157,444	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 ~~June~~September 30, 2022. In comparison, the Company held equity contracts in 1one public company and 12 private companies as of December 31, 2021.

(2)The notional amount of the Company’s commodity contracts entered with its customers totaled ~~8,211~~8,199 thousand barrels of crude oil and ~~83,113~~113,574 thousand units of natural gas, measured in million British thermal units (“MMBTUs”) as of ~~June~~September 30, 2022. In comparison, the notional amount of the Company’s commodity contracts entered with its customers totaled 7,519 thousand barrels of crude oil and 83,274 thousand MMBTUs of natural gas as of December 31, 2021. The Company simultaneously entered into the offsetting commodity contracts with mirrored terms with third-party financial institutions.

Derivatives Designated as Hedging Instruments

Cash Flow Hedges — ~~In 2020,~~The Company hedges the ~~Company entered into~~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 ~~total~~ notional amounts of interest rate ~~swaps that~~contracts were designated as cash flow hedges to ~~limit~~modify the ~~exposure to the variability in interest payments on certain floating rate borrowings. During the six months ended June 30, 2022, the Company entered into $1.00 billion in notional amounts of~~ interest rate ~~swaps~~characteristics of certain commercial loans and ~~$250.0 million~~borrowings, respectively, from variable to fixed. This will reduce the impact of changes in ~~notional amounts of~~future cash flows due to changes in market interest ~~rate collars. These derivative instruments were designated as cash flow hedges to limit the exposure to the variability in interest receipts on certain variable-rate CRE loans.~~ rates.Changes in the fair values of cash flow hedges are recognized in AOCI and reclassified to earnings in the same period when the hedged cash flows impact earnings. ~~Reclassified gains and losses on these interest rate contracts are recorded either in the same line item as the interest payments of the hedged long-term borrowings within~~ ~~Interest expense,~~ ~~or in the same line items as the interest receipts of the hedged variable-rate CRE loans within~~ ~~Interest and dividend income~~ ~~in the Consolidated Statements of Income.~~ Considering the interest rates, yield curve and notional amounts as of ~~June~~September 30, 2022, the Company ~~expected~~expects to reclassify an estimated ~~$11.3~~$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.

2930

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


($ in thousands)	($ in thousands)	Three Months Ended June 30,				Six Months Ended June 30,				($ in thousands)		Three Months Ended September 30,						Nine Months Ended September 30,
		2022		2021		2022		2021			($ in thousands)			2022			2021			2022			2021
(Losses) gains recognized in AOCI:	(Losses) gains recognized in AOCI:
Interest rate contracts	Interest rate contracts	$	(7,837)	$	(106)	$	(40,446)	$	320				Interest rate contracts		$	(48,325)		$	(170)		$	(88,771)		$	150

Gains (losses) reclassified from AOCI into earnings:
Interest expense		$	308	$	(201)	$	135	$	(378)
Interest income		812		—		3,085		—
(Losses) gains reclassified from AOCI into earnings:													(Losses) gains reclassified from AOCI into earnings:
Interest expense (for cash flow hedges on borrowings)													Interest expense (for cash flow hedges on borrowings)		$	1,251		$	(241)		$	1,385		$	(619)
Interest and dividend income (for cash flow hedges on loans)													Interest and dividend income (for cash flow hedges on loans)		(2,870)			—			216			—
Total	Total	$	1,120	$	(201)	$	3,220	$	(378)				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) recognized in AOCI on net investment hedges for the three and ~~six~~nine months ended ~~June~~September 30, 2022 and 2021:


($ in thousands)	($ in thousands)	Three Months Ended June 30,				Six Months Ended June 30,				($ in thousands)		Three Months Ended September 30,					Nine Months Ended September 30,
		2022		2021		2022		2021			($ in thousands)		2022		2021			2022		2021
Gains (losses) recognized in AOCI	Gains (losses) recognized in AOCI	$	2,319	$	(1,643)	$	1,200	$	(1,543)				$	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 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 ~~June~~September 30, 2022 and December 31, 2021:


($ in thousands)	($ in thousands)	June 30, 2022																						($ 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	$	1,513,842		$	20,933				$	—		Purchased options			$	—				$	—		$	—		Purchased options		$	1,581,174			$	33,745	$	—
Written options	Written options	1,481,552				—				19,760				Written options		32,290			—			1,076		Written options		1,548,884					—						32,253			Written options	32,290			—				1,346
Sold collars and corridors	Sold collars and corridors	187,168				9				5,040			Collars and corridors			187,168			5,071			9		Sold collars and corridors		221,287					—				8,661			Collars and corridors			221,287			8,706				—
Swaps	Swaps	7,069,901				8,482				326,853			Swaps			7,098,191			226,245			6,840		Swaps		6,814,564					159				547,728			Swaps			6,842,376			386,895				660
Total	Total	$	8,738,621			$	8,491			$	351,653		Total			$	8,831,491		$	252,249		$	7,925	Total		$	8,584,735				$	159			$	588,642		Total			$	8,677,127		$	429,346			$	2,006

3031



($ in thousands)	December 31, 2021
	Customer Counterparty						($ in thousands)	Financial Counterparty
	Notional Amount		Fair Value					Notional Amount		Fair Value
			Assets		Liabilities					Assets		Liabilities
Written options	$	1,118,074	$	—	$	2,148	Purchased options	$	1,118,074	$	2,159	$	—
Sold collars and corridors	194,181		1,272		642		Collars and corridors	194,181		646		1,275
Swaps	7,460,836		211,727		39,650		Swaps	7,490,074		24,418		136,190
Total	$	8,773,091	$	212,999	$	42,440	Total	$	8,802,329	$	27,223	$	137,465

Included in the total notional amount of ~~$8.83~~$8.68 billion of interest rate contracts entered into with financial counterparties as of ~~June~~September 30, 2022, was a notional amount of ~~$2.24~~$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 ~~$113.2~~$178.4 million and a reduction in the derivative liability ~~fair value~~ of ~~$2.2 million~~a nominal amount as of ~~June~~September 30, 2022. In comparison, included in the total notional amount of $8.80 billion of interest rate contracts entered into with financial counterparties as of December 31, 2021, was a notional amount of $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 $18.1 million and a reduction in the derivative liability ~~fair values~~ of $79.9 million as of December 31, 2021.

Foreign Exchange Contracts — The Company enters into foreign exchange contracts with its customers, consisting of 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, 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 ~~June~~September 30, 2022 and December 31, 2021.

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


($ in thousands)	($ in thousands)	June 30, 2022																						($ 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 spots	Forwards and spots			$	954,101			$	13,188					$	19,119			Forwards and spots	$	310,784		$	10,139				$	2,014		Forwards and spots			$	1,048,541				$	24,645		$	39,173		Forwards and spots		$	220,663			$	4,260	$	2,408
Swaps	Swaps	175,373				648				864				Swaps		1,163,410			15,061			6,624		Swaps		127,381					897						2,606			Swaps	1,257,039			42,100				16,997
Written options		20,000				170				312			Purchased options			20,000			312			170
Purchased options																								Purchased options		49,000					2,533				—			Written options			49,000			—				2,533
Collars	Collars	5,263				—				41			Collars			5,263			41			—		Collars		5,263					—				332			Collars			5,263			332				—
Total	Total	$	1,154,737			$	14,006			$	20,336		Total			$	1,499,457		$	25,553		$	8,808	Total		$	1,230,185				$	28,075			$	42,111		Total			$	1,531,965		$	46,692			$	21,938


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

Total	Total	$	987,051			$	14,723			$	9,463		Total			$	887,630		$	6,310		$	5,813	Total		$	987,051				$	14,724			$	9,463		Total			$	887,630		$	6,309			$	5,813

3132

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 the borrowers and the institutional counterparties, which is part of the normal credit review and monitoring process. The majority of the ~~reference~~referenced entities of the protection sold RPAs were investment grade as of both ~~June~~September 30, 2022 and December 31, 2021. Assuming the underlying borrowers referenced in the interest rate contracts defaulted in the protection sold RPAs, there would be no maximum exposure as of ~~June~~September 30, 2022 and $3.2 million of maximum exposure as of December 31, ~~2021, the maximum exposure of protection sold RPAs would be $38 thousand and $3.2 million, respectively. As of June 30, 2022 and December 31, 2021, the~~2021. The weighted-average remaining maturities of the outstanding protection sold RPAs were ~~2.6~~2.7 years and 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 outstanding as of ~~June~~September 30, 2022 and December 31, 2021:


($ in thousands)	($ in thousands)	June 30, 2022								December 31, 2021						($ in thousands)			September 30, 2022							December 31, 2021
		Notional Amount			Fair Value					Notional Amount			Fair Value						Notional Amount		Fair Value					Notional Amount		Fair Value
			Assets			Liabilities					Assets			Liabilities				Assets			Liabilities				Assets			Liabilities
RPAs — protection sold	RPAs — protection sold		$	121,784		$	—	$	76		$	72,560		$	—		$	141		RPAs — protection sold	$	141,549	$	—		$	27	$	72,560	$	—	$	141

Equity Contracts — 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 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 ~~June~~September 30, 2022, and held warrants in 1one public company and 12 private companies as of December 31, 2021. The total fair value of the warrants held was ~~$359~~$346 thousand and $220 thousand as of ~~June~~September 30, 2022 and December 31, 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.~~institutions, including central clearing organizations.

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


($ and units in thousands)	($ and units in thousands)	June 30, 2022																		($ 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	1,205	Barrels		$	1,330		$	—	Purchased options		1,205	Barrels					$	1,154	Written options			841			Barrels		$	1,593		$	—		Purchased options		841			Barrels				$	1,451
Collars	Collars	3,218	Barrels		70,802			817		Collars		3,223	Barrels				288			65,988		Collars			2,898		Barrels			22,072			7,148		Collars		2,903		Barrels			2,179			20,503
Swaps	Swaps	3,788	Barrels		105,189			2,658		Swaps		5,935	Barrels		43,075			133,723		Swaps			4,460			Barrels		54,906			22,314			Swaps		3,425		Barrels		15,052			41,978
Total	Total	8,211			$	177,321		$	3,475	Total		10,363			$	43,363		$	200,865	Total			8,199					$	78,571		$	29,462		Total		7,169				$	17,231		$	63,932

Natural gas:	Natural gas:									Natural gas:										Natural gas:														Natural gas:

Collars	Collars	28,206	MMBTUs		29,062			3,815		Collars		30,122	MMBTUs		2,999			28,390		Collars			26,363			MMBTUs		$	28,318		$	3,684		Collars		26,839		MMBTUs		$	2,320		$	24,916
Swaps	Swaps	54,907	MMBTUs		98,480			6,478		Swaps		91,869	MMBTUs		53,050			130,652		Swaps			87,211			MMBTUs		216,050			73,012			Swaps		70,817		MMBTUs		26,656			155,192
Total	Total	83,113			$	127,542		$	10,293	Total		121,991			$	56,049		$	159,042	Total			113,574					$	244,368		$	76,696		Total		97,656				$	28,976		$	180,108

Total	Total				$	304,863		$	13,768	Total					$	99,412		$	359,907	Total								$	322,939		$	106,158		Total						$	46,207		$	244,040

3233



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

Natural gas:							Natural gas:

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

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

As of ~~June~~September 30, 2022, the notional amounts that cleared through the Chicago Mercantile Exchange (“CME”) totaled ~~1,100~~773 thousand barrels of crude oil and ~~14,625~~5,530 thousand MMBTUs of natural gas. 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 ~~$2.1~~$6.7 million and a reduction to the liability fair value of ~~$28.9~~$21.4 million ~~respectively,~~ as of ~~June~~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 ~~respectively,~~ as of December 31, 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 ~~six~~nine months ended ~~June~~September 30, 2022 and 2021:


($ in thousands)	($ in thousands)	Classification on Consolidated Statement of Income		Three Months Ended June 30,						Six Months Ended June 30,					($ in thousands)		Classification on Consolidated Statement of Income		Three Months Ended September 30,				Nine Months Ended September 30,
			2022			2021			2022			2021				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 (loss)		$	5,984		$	(5,338)		$	13,569		$	8,563	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		(4,557)			11,972			2,765			22,215		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 (loss)		(9)			150			65			195		Credit contracts		Interest rate contracts and other derivative income (loss)		50		(20)		114		175
Equity contracts	Equity contracts	Lending fees		93			74			187			385		Equity contracts		Lending fees		(13)		3		175		388
Commodity contracts	Commodity contracts	Interest rate contracts and other derivative income (loss)		344			(188)			295			(19)		Commodity contracts		Interest rate contracts and other derivative income (loss)		(156)		32		139		13
Net gains	Net gains			$	1,855		$	6,670		$	16,881		$	31,339	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 ~~June~~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 ~~$31.6~~$9.8 million, in which ~~$28.3~~$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 $66.8 million, in which $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, minimal additional collateral would have been required to be posted as of ~~June~~September 30, 2022 and December 31, 2021.

3334

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, 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 June 30, 2022															($ 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		$	708,284		$	(126,414)	$	(125,304)		$	456,566		$	—				$	456,566		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		$	762,569		$	(126,414)	$	—		$	636,155		$	(118,694)				$	517,461		Derivative liabilities	$	1,029,601	$	(238,606)		$	(600)	$	790,395	$	(151,535)	$	638,860



($ in thousands)	As of December 31, 2021

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

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

(2)Includes ~~$517 thousand~~$1.8 million and $666 thousand of gross fair value liabilities with counterparties that were not subject to enforceable master netting arrangements or similar agreements as of ~~June~~September 30, 2022 and December 31, 2021, respectively.

(3)Gross cash collateral received under master netting arrangements or similar agreements ~~were $141.9~~was $369.7 million and $47.0 million as of ~~June~~September 30, 2022 and December 31, 2021, respectively. Of the gross cash collateral received, ~~$125.3~~$367.4 million and $42.3 million were used to offset against derivative ~~assets~~asset fair values as of ~~June~~September 30, 2022 and December 31, 2021, respectively.

(4)NoGross cash collateral ~~was~~ pledged under master netting arrangements or similar agreements was $600 thousand, of which $600 thousand was used to offset against derivative liability fair value as of ~~June~~September 30, 2022. In comparison, gross cash collateral pledged under master netting arrangements or similar agreements was $176.5 million, ~~as of December 31, 2021,~~ of which $174.0 million were used to offset against derivative ~~liabilities~~liability fair value as of December 31, 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. GAAP does not permit the netting of noncash collateral on the consolidated balance sheet but requires the disclosure of such amounts.

In addition to the amounts included in the tables above, the Company also has balance sheet netting related to ~~the~~ resale and repurchase agreements. Refer to Note 4 — 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 3 — Fair Value Measurement and Fair Value of Financial Instruments to the Consolidated Financial Statements in this Form 10-Q for fair value measurement disclosures on derivatives.

3435

Note 7 — Loans Receivable and Allowance for Credit Losses

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


($ in thousands)	($ in thousands)	June 30, 2022		December 31, 2021		($ in thousands)	September 30, 2022		December 31, 2021
Commercial:	Commercial:					Commercial:
C&I (1)	C&I (1)	$	15,377,117	$	14,150,608	C&I (1)	$	15,625,072	$	14,150,608
CRE:	CRE:					CRE:
CRE	CRE	13,566,748		12,155,047		CRE	13,573,157		12,155,047
Multifamily residential	Multifamily residential	4,443,704		3,675,605		Multifamily residential	4,559,302		3,675,605
Construction and land	Construction and land	515,857		346,486		Construction and land	556,894		346,486
Total CRE	Total CRE	18,526,309		16,177,138		Total CRE	18,689,353		16,177,138
Total commercial	Total commercial	33,903,426		30,327,746		Total commercial	34,314,425		30,327,746
Consumer:	Consumer:					Consumer:
Residential mortgage:	Residential mortgage:					Residential mortgage:
Single-family residential	Single-family residential	10,234,473		9,093,702		Single-family residential	10,855,345		9,093,702
HELOCs	HELOCs	2,280,080		2,144,821		HELOCs	2,184,924		2,144,821
Total residential mortgage	Total residential mortgage	12,514,553		11,238,523		Total residential mortgage	13,040,269		11,238,523
Other consumer	Other consumer	84,097		127,512		Other consumer	87,561		127,512
Total consumer	Total consumer	12,598,650		11,366,035		Total consumer	13,127,830		11,366,035
Total loans held-for-investment (2)	Total loans held-for-investment (2)	$	46,502,076	$	41,693,781	Total loans held-for-investment (2)	$	47,442,255	$	41,693,781
Allowance for loan losses	Allowance for loan losses	(563,270)		(541,579)		Allowance for loan losses	(582,517)		(541,579)
Loans held-for-investment, net (2)	Loans held-for-investment, net (2)	$	45,938,806	$	41,152,202	Loans held-for-investment, net (2)	$	46,859,738	$	41,152,202

(1)Includes Paycheck Protection Program loans of ~~$153.3~~$110.9 million and $534.2 million as of ~~June~~September 30, 2022 and December 31, 2021, respectively.

(2)Includes ~~$(56.2)~~$(60.3) million and $(50.7) million of net deferred loan fees and net unamortized premiums as of ~~June~~September 30, 2022 and December 31, 2021, respectively.

Loans held-for-investment accrued interest receivable was ~~$132.3~~$165.5 million and $107.4 million as of ~~June~~September 30, 2022 and December 31, 2021, respectively, and iswas included in Other assets on the Consolidated Balance Sheet. ~~Interest~~The interest income reversed was insignificant for the three and ~~six~~nine months ended ~~June~~September 30, 2022 and ~~2021 was insignificant.~~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 2021 Form 10-K.

The Company’s FRBSF and FHLB borrowings are primarily secured by loans held-for-investment. Loans held-for-investment totaling $~~26.78~~25.01 billion and $27.67 billion, respectively, were pledged to secure borrowings and provide additional borrowing capacity as of ~~June~~September 30, 2022 and 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 the consumer loan portfolio, payment performance or delinquency is typically the driving indicator for risk ratings.

The Company utilizes internal credit risk ratings to assign each individual loan a risk rating of 1 through 10:

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

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

•Substandard — loans assigned a risk rating of 7 or 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.”

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

•Loss — loans assigned a risk rating of 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.”

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 by loan portfolio segments, internal risk ratings and vintage year as of ~~June~~September 30, 2022 and December 31, 2021. The vintage year is the year of origination, renewal or major modification. Revolving loans that are converted to term loans presented in the tables below are excluded from term loans by vintage year columns.


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

																									Revolving Loans					Revolving Loans Converted to Term Loans				Total						($ in thousands)																															Revolving Loans	Revolving Loans Converted to Term Loans (1)			Total
														2022					2021																							2018														Prior								2022					2021											2020						2019		2018	Prior
		Commercial:	Commercial:																																																					Commercial:
C&I:	C&I:																										C&I:
Pass	Pass			$	1,632,575	$	2,948,526		$	170,119		$	270,405				$	8,656,225		$	28,475			$			15,000,523		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)	Criticized (accrual)			64,608		43,748		50,746			32,574				24,206					19,222						101,437					—							336,541					Criticized (accrual)				38,538					51,206					62,356					45,068					21,776						17,115					97,464					—				333,523
Criticized (nonaccrual)	Criticized (nonaccrual)			3,242		4,129		15,356			—					5,630						11,660						36						—				40,053					Criticized (nonaccrual)				16,039					3,250					11,174					—					5,622					11,903				—					—				47,988

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

Pass	Pass			2,638,027		2,565,665		1,815,298			1,907,721					1,598,242						2,358,965					150,983				14,498				13,049,399			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)	Criticized (accrual)			5,023		109,974		69,751			99,541					101,188						102,333					1,455				16,808				506,073			Criticized (accrual)					1,324					111,024					124,132					38,478					91,981					33,005					1,455				16,761					418,160
Criticized (nonaccrual)	Criticized (nonaccrual)			—		4,201		—			—					—						7,075					—				—				11,276			Criticized (nonaccrual)					—					4,126					—					—					—					6,909					—				—					11,035

Subtotal CRE	Subtotal CRE			2,643,050		2,679,840		1,885,049			2,007,262					1,699,430						2,468,373					152,438				31,306				13,566,748			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:	Multifamily residential:																																					Multifamily residential:
Pass	Pass			1,091,403		967,791		687,577			591,961					371,378						661,082					13,301				—				4,384,493			Pass					1,365,406					933,013					659,063					555,270					364,552					635,396					10,417				—					4,523,117
Criticized (accrual)	Criticized (accrual)			—		—		0			714					20,454						36,577					—				—				57,745			Criticized (accrual)					—					—					—					711					—					35,300					—				—					36,011
Criticized (nonaccrual)	Criticized (nonaccrual)			—		—		—			—					—						1,466					—				—				1,466			Criticized (nonaccrual)					—					—					—					—					—					174					—				—					174

Subtotal multifamily residential	Subtotal multifamily residential			1,091,403		967,791		687,577			592,675					391,832						699,125					13,301				—				4,443,704			Subtotal multifamily residential					1,365,406					933,013					659,063					555,981					364,552					670,870					10,417				—					4,559,302
Construction and land:	Construction and land:																																					Construction and land:
Pass	Pass			94,071		232,421		98,608			60,928					3,332						236					—				—				489,596			Pass					151,429					254,059					61,231					60,919					2,784					233					—				—					530,655
Criticized (accrual)	Criticized (accrual)			—		0		4,405			—					21,856						—					—				—				26,261			Criticized (accrual)					—					—					4,477					—					21,762					—					—				—					26,239
Criticized (nonaccrual)	Criticized (nonaccrual)			—		—		—			—					—						—					—				—				—			Criticized (nonaccrual)					—					—					—					—					—					—					—				—					—
Subtotal construction and land	Subtotal construction and land			94,071		232,421		103,013			60,928					25,188						236					—				—				515,857			Subtotal construction and land					151,429					254,059					65,708					60,919					24,546					233					—				—					556,894
Total CRE	Total CRE			3,828,524		3,880,052		2,675,639			2,660,865					2,116,450						3,167,734					165,739				31,306				18,526,309			Total 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	Total commercial			5,528,949		6,876,455		3,511,628			3,217,750					2,316,405						3,469,021					8,923,437				59,781				33,903,426			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:	Consumer:																																					Consumer:
Residential mortgage:	Residential mortgage:																																					Residential mortgage:
Single-family residential:	Single-family residential:																																					Single-family residential:
Pass ~~(1)~~(2)	Pass ~~(1)~~(2)			1,983,527		2,565,374		1,903,821			1,194,265					898,768						1,655,824					—				—				10,201,579			Pass ~~(1)~~(2)					2,989,092					2,487,082					1,824,666					1,134,087					841,743					1,559,127					—				—					10,835,797
Criticized (accrual)	Criticized (accrual)			—		—		2,146			1,087					2,159						1,301					—				—				6,693			Criticized (accrual)					142					1,568					394					1,784					2,888					1,247					—				—					8,023
Criticized (nonaccrual) ~~(1)~~(2)	Criticized (nonaccrual) ~~(1)~~(2)			—		—		753			2,778					8,504						14,166					—				—				26,201			Criticized (nonaccrual) ~~(1)~~(2)					—					—					203					2,327					3,639					5,356					—				—					11,525
Total single-family residential mortgage				1,983,527		2,565,374		1,906,720			1,198,130					909,431						1,671,291					—				—				10,234,473
Subtotal single-family residential mortgage																																						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:	HELOCs:																																					HELOCs:
Pass	Pass			929		6,114		6,859			1,253					2,088						13,340					2,081,521				157,658				2,269,762			Pass					—					1,735					2,278					1,778					748					9,683					2,012,190				144,021					2,172,433
Criticized (accrual)	Criticized (accrual)			—		—		—			—					—						0					2				613				615			Criticized (accrual)					—					—					—					—					—					774					230				919					1,923
Criticized (nonaccrual)	Criticized (nonaccrual)			—		1,008		815			220					463						1,640					1,692				3,865				9,703			Criticized (nonaccrual)					—					—					2,910					—					1,017					3,011					300				3,330					10,568
Total HELOCs				929		7,122		7,674			1,473					2,551						14,980					2,083,215				162,136				2,280,080
Subtotal HELOCs																																						Subtotal HELOCs					—					1,735					5,188					1,778					1,765					13,468					2,012,720				148,270					2,184,924
Total residential mortgage	Total residential mortgage			1,984,456		2,572,496		1,914,394			1,199,603					911,982						1,686,271					2,083,215				162,136				12,514,553			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:	Other consumer:																																					Other consumer:
Pass	Pass			1,211		13,072		5,258			—					—						15,173					49,369				—				84,083			Pass					15,613					57					5,259					—					—					15,170					51,425				—					87,524
Criticized (accrual)	Criticized (accrual)			3		—		—			—					—						—					—				—				3			Criticized (accrual)					—					—					—					—					—					—					—				—					—
Criticized (nonaccrual)	Criticized (nonaccrual)			—		—		—			—					—						—					11				—				11			Criticized (nonaccrual)					—					—					—					—					—					—					37				—					37
Total other consumer	Total other consumer			1,214		13,072		5,258			—					—						15,173					49,380				—				84,097			Total other consumer					15,613					57					5,259					—					—					15,170					51,462				—					87,561
Total consumer	Total consumer			1,985,670		2,585,568		1,919,652			1,199,603					911,982						1,701,444					2,132,595				162,136				12,598,650			Total 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:	Total by Risk Rating:																																					Total by Risk Rating:
Pass	Pass			7,441,743		9,298,963		5,287,308			4,280,439					3,043,927						4,975,025					10,951,399				200,631				45,479,435			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)	Criticized (accrual)			69,634		153,722		127,048			133,916					169,863						159,433					102,894				17,421				933,931			Criticized (accrual)					40,004					163,798					191,359					86,041					138,407					87,441					99,149				17,680					823,879
Criticized (nonaccrual)	Criticized (nonaccrual)			3,242		9,338		16,924			2,998					14,597						36,007					1,739				3,865				88,710			Criticized (nonaccrual)					16,039					7,376					14,287					2,327					10,278					27,353					337				3,330					81,327

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

3638


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

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

Total C&I	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				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:	CRE:																																						CRE:
Pass	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			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)	Criticized (accrual)			71,055		3,200		9,176			21,077					24,851						55,892					—				—				185,251			Criticized (accrual)					71,055					3,200					9,176					21,077					24,851					55,892					—				—					185,251
Criticized (nonaccrual)	Criticized (nonaccrual)			4,350		—		—			—					4,752						396					—				—				9,498			Criticized (nonaccrual)					4,350					—					—					—					4,752					396					—				—					9,498

Subtotal CRE	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			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:	Multifamily residential:																																					Multifamily residential:
Pass	Pass			1,026,295		726,772		688,453			419,319					308,087						424,947					20,524				—				3,614,397			Pass					1,026,295					726,772					688,453					419,319					308,087					424,947					20,524				—					3,614,397
Criticized (accrual)	Criticized (accrual)			—		—		721			22,344					7,033						30,666					—				—				60,764			Criticized (accrual)					—					—					721					22,344					7,033					30,666					—				—					60,764
Criticized (nonaccrual)	Criticized (nonaccrual)			—		—		—			—					—						444					—				—				444			Criticized (nonaccrual)					—					—					—					—					—					444					—				—					444

Subtotal multifamily residential	Subtotal multifamily residential			1,026,295		726,772		689,174			441,663					315,120						456,057					20,524				—				3,675,605			Subtotal multifamily residential					1,026,295					726,772					689,174					441,663					315,120					456,057					20,524				—					3,675,605
Construction and land:	Construction and land:																																					Construction and land:
Pass	Pass			122,983		103,743		90,544			3,412					—						391					—				—				321,073			Pass					122,983					103,743					90,544					3,412					—					391					—				—					321,073
Criticized (accrual)	Criticized (accrual)			3,355		—		—			22,058					—						—					—				—				25,413			Criticized (accrual)					3,355					—					—					22,058					—					—					—				—					25,413
Criticized (nonaccrual)	Criticized (nonaccrual)			—		—		—			—					—						—					—				—				—			Criticized (nonaccrual)					—					—					—					—					—					—					—				—					—
Subtotal construction and land	Subtotal construction and land			126,338		103,743		90,544			25,470					—						391					—				—				346,486			Subtotal construction and land					126,338					103,743					90,544					25,470					—					391					—				—					346,486
Total CRE	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 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	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			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:	Consumer:																																					Consumer:
Residential mortgage:	Residential mortgage:																																					Residential mortgage:
Single-family residential:	Single-family residential:																																					Single-family residential:
Pass ~~(1)~~(2)	Pass ~~(1)~~(2)			2,616,958		2,108,370		1,375,929			1,079,030					763,351						1,127,516					—				—				9,071,154			Pass ~~(1)~~(2)					2,616,958					2,108,370					1,375,929					1,079,030					763,351					1,127,516					—				—					9,071,154
Criticized (accrual)	Criticized (accrual)			—		—		458			2,813					1,899						3,212					—				—				8,382			Criticized (accrual)					—					—					458					2,813					1,899					3,212					—				—					8,382
Criticized (nonaccrual) ~~(1)~~(2)	Criticized (nonaccrual) ~~(1)~~(2)			—		—		1,751			3,889					4,295						4,231					—				—				14,166			Criticized (nonaccrual) ~~(1)~~(2)					—					—					1,751					3,889					4,295					4,231					—				—					14,166
Total single-family residential mortgage				2,616,958		2,108,370		1,378,138			1,085,732					769,545						1,134,959					—				—				9,093,702
Subtotal single-family residential mortgage																																						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:	HELOCs:																																					HELOCs:
Pass	Pass			648		3,277		4,644			1,347					3,268						11,215					1,913,478				197,414				2,135,291			Pass					648					3,277					4,644					1,347					3,268					11,215					1,913,478				197,414					2,135,291
Criticized (accrual)	Criticized (accrual)			—		—		—			—					—						371					7				708				1,086			Criticized (accrual)					—					—					—					—					—					371					7				708					1,086
Criticized (nonaccrual)	Criticized (nonaccrual)			—		—		52			188					3,543						973					—				3,688				8,444			Criticized (nonaccrual)					—					—					52					188					3,543					973					—				3,688					8,444
Total HELOCs				648		3,277		4,696			1,535					6,811						12,559					1,913,485				201,810				2,144,821
Total residential mortgage				2,617,606		2,111,647		1,382,834			1,087,267					776,356						1,147,518					1,913,485				201,810				11,238,523
Subtotal HELOCs																																						Subtotal HELOCs					648					3,277					4,696					1,535					6,811					12,559					1,913,485				201,810					2,144,821
Subtotal residential mortgage																																						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:	Other consumer:																																					Other consumer:
Pass	Pass			16,831		5,258		—			—					1,741						52,147					51,481				—				127,458			Pass					16,831					5,258					—					—					1,741					52,147					51,481				—					127,458
Criticized (accrual)	Criticized (accrual)			2		—		—			—					—						—					—				—				2			Criticized (accrual)					2					—					—					—					—					—					—				—					2
Criticized (nonaccrual)	Criticized (nonaccrual)			—		—		—			—					—						—					52				—				52			Criticized (nonaccrual)					—					—					—					—					—					—					52				—					52
Total other consumer	Total other consumer			16,833		5,258		—			—					1,741						52,147					51,533				—				127,512			Total other consumer					16,833					5,258					—					—					1,741					52,147					51,533				—					127,512
Total consumer	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 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:	Total by Risk Rating:																																					Total by Risk Rating:
Pass	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			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)	Criticized (accrual)			159,448		120,557		82,632			119,845					48,919						94,146					115,174				708				741,429			Criticized (accrual)					159,448					120,557					82,632					119,845					48,919					94,146					115,174				708					741,429
Criticized (nonaccrual)	Criticized (nonaccrual)			33,806		2,792		2,316			4,594					21,891						22,488					52				3,688				91,627			Criticized (nonaccrual)					33,806					2,792					2,316					4,594					21,891					22,488					52				3,688					91,627

Total	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		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, were converted to term loans during the three and nine months ended September 30, 2022. In comparison, $4.1 million and $62.7 million of total consumer loans, comprised of HELOCs, were converted to term loans during the three and nine months ended September 30, 2021, respectively.

(2)As of ~~June~~September 30, 2022 and December 31, 2021, $1.2 million and $1.6 million, respectively, of nonaccrual loans whose payments are guaranteed by the Federal Housing Administration were classified with a “Pass” rating.

3739

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

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. The following tables present the aging analysis of total loans held-for-investment as of ~~June~~September 30, 2022 and December 31, 2021:


($ in thousands)	($ in thousands)	June 30, 2022								($ 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	$	15,326,934	$	10,097	$	33	$	10,130			$	40,053	$	15,377,117	C&I	$	15,556,124	$	20,877	$	83	$	20,960	$	47,988	$	15,625,072
CRE:	CRE:															CRE:
CRE	CRE	13,554,820		451		201		652				11,276		13,566,748		CRE	13,561,499		489		134		623		11,035		13,573,157
Multifamily residential	Multifamily residential	4,441,408		830		—		830				1,466		4,443,704		Multifamily residential	4,558,333		795		—		795		174		4,559,302
Construction and land	Construction and land	515,857		—		—		—				—		515,857		Construction and land	556,894		—		—		—		—		556,894
Total CRE	Total CRE	18,512,085		1,281		201		1,482				12,742		18,526,309		Total CRE	18,676,726		1,284		134		1,418		11,209		18,689,353
Total commercial	Total commercial	33,839,019		11,378		234		11,612				52,795		33,903,426		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	10,186,333		13,718		6,996		20,714				27,426		10,234,473		Single-family residential	10,820,365		13,914		8,325		22,239		12,741		10,855,345
HELOCs	HELOCs	2,263,510		6,254		613		6,867				9,703		2,280,080		HELOCs	2,169,440		2,992		1,924		4,916		10,568		2,184,924
Total residential mortgage	Total residential mortgage	12,449,843		19,972		7,609		27,581				37,129		12,514,553		Total residential mortgage	12,989,805		16,906		10,249		27,155		23,309		13,040,269
Other consumer	Other consumer	83,988		92		6		98				11		84,097		Other consumer	87,444		43		37		80		37		87,561
Total consumer	Total consumer	12,533,831		20,064		7,615		27,679				37,140		12,598,650		Total consumer	13,077,249		16,949		10,286		27,235		23,346		13,127,830
Total	Total	$	46,372,850	$	31,442	$	7,849	$	39,291			$	89,935	$	46,502,076	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

3840

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

~~(1)~~As of both June 30, 2022 and December 31, 2021, loans in payment deferral programs offered in response to the Coronavirus Disease 2019 (“COVID-19”) pandemic that are performing according to their modified terms are generally not considered delinquent, and are included in the “Current Accruing Loans” column.

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


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

Commercial:	Commercial:					Commercial:
C&I	C&I	$	18,251	$	22,967	C&I	$	4,368	$	22,967

CRE	CRE	10,956		9,102		CRE	10,725		9,102
Multifamily residential		1,055		—

Total commercial	Total commercial	30,262		32,069		Total commercial	15,093		32,069
Consumer:	Consumer:					Consumer:

Single-family residential	Single-family residential	12,952		5,785		Single-family residential	2,909		5,785
HELOCs	HELOCs	5,351		5,033		HELOCs	7,609		5,033

Total consumer	Total consumer	18,303		10,818		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	$	48,565	$	42,887	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 no foreclosed assets as of ~~June~~September 30, 2022, compared with $10.3 million as of December 31, 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 ~~$12.9~~$7.6 million and $7.3 million as of ~~June~~September 30, 2022 and December 31, 2021, respectively.

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

Troubled Debt Restructurings

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. The COVID-related modifications 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, as amended by the Consolidated Appropriations Act, 2021, and the Interagency Statement on Loan Modifications and Reporting for Financial Institutions Working with Customers Affected by the Coronavirus (Revised), and therefore are not included in the discussion below. See Note 1 — Summary of Significant Accounting Policies — Significant Accounting Policies — Troubled Debt Restructurings to the Consolidated Financial Statements in the Company’s 2021 Form 10-K for additional information.

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


($ in thousands)	($ in thousands)	Loans Modified as TDRs During the Three Months Ended June 30,														($ in thousands)	Loans Modified as TDRs During the Three Months Ended September 30,
		2022							2021								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	2	$	12,955	$	12,245	$	2,111	4	$	20,375	$	20,084	$	2,162	C&I	1	$	499	$	496	$	98	7	$	26,248	$	27,111	$	5,688
CRE:																CRE:

Multifamily residential																Multifamily residential	—	—		—		—		1	1,101		1,118		—

Total CRE																Total CRE	—	—		—		—		1	1,101		1,118		—
Total commercial																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	2	$	12,955	$	12,245	$	2,111	4	$	20,375	$	20,084	$	2,162	Total	2	$	561	$	565	$	100	8	$	27,349	$	28,229	$	5,688


($ in thousands)	($ in thousands)	Loans Modified as TDRs During the Six Months Ended June 30,														($ in thousands)	Loans Modified as TDRs During the Nine Months Ended September 30,
		2022							2021								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	3	$	30,134	$	21,428	$	10,157	5	$	20,818	$	20,499	$	2,318	C&I	4	$	30,633	$	17,802	$	16,729	11	$	46,144	$	45,954	$	7,662
CRE:																CRE:

Multifamily residential																Multifamily residential	—	—		—		—		1	1,101		1,118		—

Total CRE																Total CRE	—	—		—		—		1	1,101		1,118		—
Total commercial																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	3	$	30,134	$	21,428	$	10,157	5	$	20,818	$	20,499	$	2,318	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 ~~June~~September 30, 2022 and 2021.

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

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


($ in thousands)	($ in thousands)	Modification Type During the Three Months Ended June 30,										($ in thousands)	Modification Type During the Three Months Ended September 30,
		2022				2021							2022									2021
		Principal (1)		Interest Rate Reduction		Other (2)		Total		Principal (1)					Interest Rate Reduction			Other		Total			($ in thousands)	Principal (1)				Interest Rate Reduction			Other			Total		Principal (1)					Interest Rate Reduction		Other		Total
Commercial:	Commercial:
C&I	C&I	$	—	$	—	$	12,245	$	12,245	$	3,373				$	16,711		$	—	$	20,084			$	496			$	—		$	—		$	496	$	27,111				$	—	$	—	$	27,111
CRE:														CRE:

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

Total CRE														Total CRE			—										—			—			1,118					—	—	1,118
Total commercial														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	$	—	$	—	$	12,245	$	12,245	$	3,373				$	16,711		$	—	$	20,084		Total	$	565			$	—		$	—		$	565	$	28,229				$	—	$	—	$	28,229


($ in thousands)	($ in thousands)	Modification Type During the Six Months Ended June 30,										($ in thousands)	Modification Type During the Nine Months Ended September 30,
		2022		2021									2022									2021
		Principal (1)		Interest Rate Reduction		Other (2)		Total		Principal (1)					Interest Rate Reduction			Other		Total			($ in thousands)	Principal (1)					Interest Rate Reduction			Other (2)		Total		Principal (1)					Interest Rate Reduction		Other		Total
Commercial:	Commercial:
C&I	C&I	$	9,183	$	—	$	12,245	$	21,428	$	3,788				$	16,711		$	—	$	20,499			$	9,609				$	—		$	8,193	$	17,802	$	28,780				$	17,174	$	—	$	45,954
CRE:														CRE:

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

Total CRE														Total CRE			—									—	—	—			1,118							—	—	1,118
Total commercial														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	$	9,183	$	—	$	12,245	$	21,428	$	3,788				$	16,711		$	—	$	20,499		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)Includes increase in new commitment.

After a loan is modified as 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 ~~tables present~~table presents information on loans that entered into default during the three and ~~six~~nine months ended ~~June~~September 30, 2022 and 2021, that were modified as TDRs during the 12 months preceding payment default:

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


($ in thousands)	($ in thousands)	Loans Modified as TDRs that Subsequently Defaulted During the Six Months Ended June 30,						($ in thousands)	Loans Modified as TDRs that Subsequently Defaulted
		2022			2021					($ in thousands)			Three Months Ended September 30,														Nine Months Ended September 30,
		Number of Loans	Recorded Investment		Number of Loans	Recorded Investment							2022							2021							2022							2021
($ in thousands)												Number of Loans			Recorded Investment				Number of Loans			Recorded Investment				Number of Loans			Recorded Investment				Number of Loans			Recorded Investment
	Commercial:
	C&I	2	$	4,305	1	$	11,431					C&I		—				$	—		—				$	—		2				$	13,901		1				$	11,431
											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	2	$	4,305	1	$	11,431			Total			—			$	—			—			$	—			3			$	14,909			1			$	11,431

As of ~~June~~September 30, 2022 and December 31, 2021, the remaining commitments to lend to borrowers whose terms of their outstanding owed balances were modified as TDRs were ~~$1.9~~$6.4 million and $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, and periodic evaluation of the loan portfolio, lending-related commitments, and other relevant factors.

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

The allowance for credit losses estimation involves procedures to consider the unique risk characteristics of the portfolio segments. The majority of the Company’s credit exposures that share risk characteristics with other similar exposures are collectively evaluated. The collectively evaluated loans 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 Company applies quantitative methods to estimate loan losses by considering a variety of factors such as historical loss experience, the current credit quality of the portfolio, and an economic outlook over the life of the loan. The Company incorporates forward-looking information using macroeconomic scenarios, which include variables that are considered 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, combined with downside or upside scenarios reflecting possible worsening or improving economic conditions. The quantitative models incorporate a probability-weighted calculation of these macroeconomic scenarios over a reasonable and supportable forecast period. If the life of loans extends beyond the reasonable and supportable forecast period, the Company will consider historical experience or long-run macroeconomic trends over the remaining lives of the loans to estimate the allowance for loan losses.

During the third quarter of 2021, the reasonable and supportable forecast period, key credit risk characteristics and macroeconomic variables to estimate the expected credit losses of the C&I segment were modified due to model enhancement. There were no changes to the overall model methodology. For the three and ~~six~~nine months ended ~~June~~September 30, 2022, there were no changes to the reasonable and supportable forecast period and reversion to the historical loss experience method.

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

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

Allowance for Loan Losses for the Commercial Loan Portfolio

The Company’s C&I 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 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 probabilities of default (“PDs”) and loss given defaults (“LGDs”) are applied to the estimated exposure at default, considering the term and payment structure of the ~~loan, to generate estimates of expected loss at the loan level.~~loan. The forecast of future economic conditions returns to long-run historical economic trends 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 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 volume and severity of past due financial assets, and the volume and severity of adversely classified financial assets;

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

–— knowledge of a borrower’s operations;

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

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

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

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

–— risk factors in certain industry sectors not captured by the quantitative models.

The magnitude of the impact of these factors on the Company’s qualitative assessment of the allowance for credit losses changes from period to period according to changes made by management in its assessment of these factors. The extent to which these factors change may be 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 ~~June~~September 30, 2022, collateral-dependent commercial and consumer loans totaled ~~$38.9~~$36.4 million and ~~$19.0~~$13.6 million, respectively. In comparison, collateral-dependent commercial and consumer loans totaled $37.0 million and $14.0 million, respectively, as of December 31, 2021. The Company's ~~commercial~~ collateral-dependent loans were secured by real ~~estate, and its consumer collateral-dependent loans were all residential mortgage loans, secured by the underlying real~~ estate. As of both ~~June~~September 30, 2022 and December 31, 2021,, the collateral value of the properties securing the collateral-dependent loans, net of selling costs, exceeded thethe recorded value of the loans.

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


($ in thousands)	($ in thousands)		Three Months Ended June 30, 2022																														($ in thousands)				Three Months Ended September 30, 2022
			Commercial																Consumer												Total						Commercial								Consumer						Total
			C&I				CRE												Residential Mortgage								Other Consumer										C&I		CRE						Residential Mortgage				Other Consumer
					CRE				Multifamily Residential				Construction and Land				Single- Family Residential				HELOCs													CRE					Multifamily Residential		Construction and Land		Single- Family Residential		HELOCs
Allowance for loan losses, beginning of period	Allowance for loan losses, beginning of period				$	339,446			$	147,104			$	24,176			$	11,016			$	18,210			$	3,748			$	1,985					$	545,685		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 (reversal of) credit losses on loans		(a)	19,030				(6,819)				1,976				(4,338)				3,461				(339)				(502)				12,469
Provision for credit losses on loans																																	Provision for credit losses on loans	(a)			9,575		5,299		5,047		817		6,182		99		255		27,274
Gross charge-offs	Gross charge-offs		(240)				(671)				(8)				—				—				(193)				(34)				(1,146)		Gross charge-offs				(6,894)		(288)		(5,938)		—		(775)		—		(10)		(13,905)
Gross recoveries	Gross recoveries		6,514				631				408				4				169				4				—				7,730		Gross recoveries				7,172		45		19		7		16		5		—		7,264
Total net recoveries (charge-offs)	Total net recoveries (charge-offs)		6,274				(40)				400				4				169				(189)				(34)				6,584		Total net recoveries (charge-offs)				278		(243)		(5,919)		7		(759)		5		(10)		(6,641)
Foreign currency translation adjustment	Foreign currency translation adjustment		(1,468)				—				—				—				—				—				—				(1,468)		Foreign currency translation adjustment				(1,386)		—		—		—		—		—		—		(1,386)
Allowance for loan losses, end of period	Allowance for loan losses, end of period		$	363,282			$	140,245			$	26,552			$	6,682			$	21,840			$	3,220			$	1,449			$	563,270	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)	($ in thousands)		Three Months Ended June 30, 2021																														($ in thousands)				Three Months Ended September 30, 2021
			Commercial																Consumer												Total						Commercial								Consumer						Total
			C&I				CRE												Residential Mortgage								Other Consumer										C&I		CRE						Residential Mortgage				Other Consumer
					CRE				Multifamily Residential				Construction and Land				Single- Family Residential				HELOCs													CRE					Multifamily Residential		Construction and Land		Single- Family Residential		HELOCs
Allowance for loan losses, beginning of period	Allowance for loan losses, beginning of period				$	394,084			$	146,399			$	27,407			$	19,089			$	15,839			$	2,670			$	2,018					$	607,506		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	(Reversal of) provision for credit losses on loans	(a)	(22,605)				19,375				(5,385)				(3,243)				609				250				2,209				(8,790)		(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	Gross charge-offs		(10,572)				(4,134)				(113)				(209)				—				—				(32)				(15,060)		Gross charge-offs				(1,154)		(14,229)		—		(2,674)		(912)		—		(10)		(18,979)
Gross recoveries	Gross recoveries		1,338				322				16				6				82				18				3				1,785		Gross recoveries				4,203		187		652		267		137		19		—		5,465
Total net (charge-offs) recoveries			(9,234)				(3,812)				(97)				(203)				82				18				(29)				(13,275)
Total net recoveries (charge-offs)																																	Total net recoveries (charge-offs)				3,049		(14,042)		652		(2,407)		(775)		19		(10)		(13,514)
Foreign currency translation adjustment	Foreign currency translation adjustment		283				—				—				—				—				—				—				283		Foreign currency translation adjustment				(71)		—		—		—		—		—		—		(71)
Allowance for loan losses, end of period	Allowance for loan losses, end of period		$	362,528			$	161,962			$	21,925			$	15,643			$	16,530			$	2,938			$	4,198			$	585,724	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)	($ in thousands)		Six Months Ended June 30, 2022																														($ in thousands)				Nine Months Ended September 30, 2022
			Commercial																Consumer												Total						Commercial								Consumer						Total
			C&I				CRE												Residential Mortgage								Other Consumer										C&I		CRE						Residential Mortgage				Other Consumer
					CRE				Multifamily Residential				Construction and Land				Single- Family Residential				HELOCs													CRE					Multifamily Residential		Construction and Land		Single- Family Residential		HELOCs
Allowance for loan losses, beginning of period	Allowance for loan losses, beginning of period				$	338,252			$	150,940			$	14,400			$	15,468			$	17,160			$	3,435			$	1,924					$	541,579		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	Provision for (reversal of) credit losses on loans	(a)	28,292				(10,312)				11,633				(8,844)				4,387				(40)				(395)				24,721		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	Gross charge-offs		(11,428)				(1,069)				(9)				—				—				(193)				(80)				(12,779)		Gross charge-offs				(18,322)		(1,357)		(5,947)		—		(775)		(193)		(90)		(26,684)
Gross recoveries	Gross recoveries		9,516				686				528				58				293				18				—				11,099		Gross recoveries				16,688		731		547		65		309		23		—		18,363
Total net (charge-offs) recoveries	Total net (charge-offs) recoveries		(1,912)				(383)				519				58				293				(175)				(80)				(1,680)		Total net (charge-offs) recoveries				(1,634)		(626)		(5,400)		65		(466)		(170)		(90)		(8,321)
Foreign currency translation adjustment	Foreign currency translation adjustment		(1,350)				—				—				—				—				—				—				(1,350)		Foreign currency translation adjustment				(2,736)		—		—		—		—		—		—		(2,736)
Allowance for loan losses, end of period	Allowance for loan losses, end of period		$	363,282			$	140,245			$	26,552			$	6,682			$	21,840			$	3,220			$	1,449			$	563,270	Allowance for loan losses, end of period				$	371,749	$	145,301	$	25,680	$	7,506	$	27,263	$	3,324	$	1,694	$	582,517

4447


($ in thousands)	($ in thousands)		Six Months Ended June 30, 2021																														($ in thousands)				Nine Months Ended September 30, 2021
			Commercial																Consumer												Total						Commercial								Consumer						Total
			C&I				CRE												Residential Mortgage								Other Consumer										C&I		CRE						Residential Mortgage				Other Consumer
					CRE				Multifamily Residential				Construction and Land				Single- Family Residential				HELOCs													CRE					Multifamily Residential		Construction and Land		Single- Family Residential		HELOCs
Allowance for loan losses, beginning of period	Allowance for loan losses, beginning of period				$	398,040			$	163,791			$	27,573			$	10,239			$	15,520			$	2,690			$	2,130					$	619,983		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	(Reversal of) provision for credit losses on loans	(a)	(18,763)				9,098				(6,776)				5,349				985				272				2,096				(7,739)		(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	Gross charge-offs		(19,008)				(11,329)				(130)				(280)				(134)				(45)				(33)				(30,959)		Gross charge-offs				(20,162)		(25,558)		(130)		(2,954)		(1,046)		(45)		(43)		(49,938)
Gross recoveries	Gross recoveries		2,098				402				1,258				335				159				21				5				4,278		Gross recoveries				6,301		589		1,910		602		296		40		5		9,743
Total net (charge-offs) recoveries	Total net (charge-offs) recoveries		(16,910)				(10,927)				1,128				55				25				(24)				(28)				(26,681)		Total net (charge-offs) recoveries				(13,861)		(24,969)		1,780		(2,352)		(750)		(5)		(38)		(40,195)
Foreign currency translation adjustment	Foreign currency translation adjustment		161				—				—				—				—				—				—				161		Foreign currency translation adjustment				90		—		—		—		—		—		—		90
Allowance for loan losses, end of period	Allowance for loan losses, end of period		$	362,528			$	161,962			$	21,925			$	15,643			$	16,530			$	2,938			$	4,198			$	585,724	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 10 — 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 ~~six~~nine months ended ~~June~~September 30, 2022 and 2021:


($ in thousands)	($ in thousands)		Three Months Ended June 30,				Six Months Ended June 30,				($ in thousands)		Three Months Ended September 30,							Nine Months Ended September 30,
			2022		2021		2022		2021			($ in thousands)				2022			2021			2022			2021
Unfunded credit facilities	Unfunded credit facilities
Allowance for unfunded credit commitments, beginning of period	Allowance for unfunded credit commitments, beginning of period		$	23,262	$	32,529	$	27,514	$	33,577				Allowance for unfunded credit commitments, beginning of period			$	24,304		$	26,300		$	27,514		$	33,577

Provision for (reversal of) credit losses on unfunded credit commitments		(b)	1,031		(6,210)		(3,221)		(7,261)
(Reversal of) provision for credit losses on unfunded credit commitments														(Reversal of) provision for credit losses on unfunded credit commitments	(b)		(274)			1,735			(3,495)			(5,526)
Foreign currency translation adjustment	Foreign currency translation adjustment		11		(19)		11		(16)					Foreign currency translation adjustment			11			1			22			(15)
Allowance for unfunded credit commitments, end of period	Allowance for unfunded credit commitments, end of period		24,304		26,300		24,304		26,300					Allowance for unfunded credit commitments, end of period			24,041			28,036			24,041			28,036

Provision for (reversal of) credit losses	Provision for (reversal of) credit losses	(a) + (b)	$	13,500	$	(15,000)	$	21,500	$	(15,000)				Provision for (reversal of) credit losses	(a) + (b)		$	27,000		$	(10,000)		$	48,500		$	(25,000)

The allowance for credit losses was ~~$587.6~~$606.6 million as of ~~June~~September 30, 2022, an increase of ~~$18.5~~$37.5 million, compared with $569.1 million as of December 31, 2021. The increase in the allowance for credit losses was primarily ~~due to an increase in provision for credit losses,~~ driven by ~~loan growth across~~ the ~~segments and a weakening~~current economic outlook, ~~partially offset by lower net charge-offs in 2022 year-to-date.~~which reflected ongoing concerns with inflation, global supply chain disruptions and rising interest rates, as well as loan growth.

Loans Held-for-Sale

Loans held-for-sale consisted of ~~$28.5~~a $14.5 million ~~C&I loans~~multifamily residential loan and $635 thousand in single-family residential loans as of ~~June~~September 30, 2022 and December 31, 2021, respectively. Refer to Note 1 — Summary of Significant Accounting Policies — Significant Accounting Policies — Loans Held-for-Sale to the Consolidated Financial Statements in the Company’s 2021 Form 10-K for additional details.

4548

Loan Transfers, Sales and Purchases

The Company’s primary business focus is on directly originated loans. The Company also purchases loans and participates in loans with other banks. In the normal course of doing business, the Company also provides other financial institutions with the ability to participate in commercial loans that it originates, ~~and sells~~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 on the carrying value of loans transferred, loans sold and purchased for the held-for-investment portfolio, during the three and ~~six~~nine months ended ~~June~~September 30, 2022 and 2021:


($ in thousands)	($ in thousands)	Three Months Ended June 30, 2022																($ in thousands)				Three Months Ended September 30, 2022
		Commercial												Consumer									Total	($ in thousands)		Commercial												Consumer									Total
		C&I				CRE										Residential Mortgage									($ in thousands)				C&I				CRE											Residential Mortgage				Total
				CRE				Multifamily Residential							Single-Family Residential						Total									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)			$	208,335			$	9,854			$	—						$	—										$	218,189			$	59,069			$	33,616			$	14,500						$	5,178				$	112,363
Loans transferred from held-for-sale to held-for-investment		$	—			$	—			$	—					$	631										$	631

Sales (2)(3)(4)	Sales (2)(3)(4)	$	180,029			$	9,854			$	—					$	—									$	189,883		Sales (2)(3)(4)			$	87,597			$	33,616			$	—				$		5,952						$	127,165
Purchases (5)	Purchases (5)	$	194,066			$	—			$	—					$	122,723									$	316,789		Purchases (5)			$	56,507			$	—			$	—				$	1,155					$	57,662


($ in thousands)	($ in thousands)	Three Months Ended June 30, 2021																($ 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
				CRE				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)			$	84,745			$	17,019			$	—						$	—																$	117,196			$	24,120						$	17,226			$	5,238				$	163,780

Sales (2)(3)(4)	Sales (2)(3)(4)	$	84,503			$	17,019			$	—					$	2,658											Sales (2)(3)(4)			$	118,851			$	24,120							$	19,900		$	6,959						$	169,830
Purchases (5)	Purchases (5)	$	66,415			$	—			$	—					$	165,163									$	231,578		Purchases (5)			$	65,354			$	—							$	—		$	137,937						$	203,291


($ in thousands)	($ in thousands)	Six Months Ended June 30, 2022																($ in thousands)				Nine Months Ended September 30, 2022
		Commercial												Consumer									Total	($ in thousands)		Commercial																Consumer								Total
		C&I				CRE										Residential Mortgage									($ in thousands)				C&I				CRE											Residential Mortgage							Total
				CRE				Multifamily Residential							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)			$	319,772			$	31,634			$	—						$	—										$	351,406			$	378,841			$	65,250			$	14,500					$	5,178
Loans transferred from held-for-sale to held-for-investment	Loans transferred from held-for-sale to held-for-investment	$	—			$	—			$	—					$	631										$	631			$	—			$	—			$	—					$	631						$	631

Sales (2)(3)(4)	Sales (2)(3)(4)	$	287,503			$	31,634			$	—					$	451									$	319,588		Sales (2)(3)(4)			$	375,100			$	65,250			$	—					$	6,403						$	446,753
Purchases (5)	Purchases (5)	$	304,662			$	—			$	—					$	237,098									$	541,760		Purchases (5)			$	361,169			$	—			$	—					$	238,253						$	599,422

4649


($ in thousands)	($ in thousands)	Six Months Ended June 30, 2021																($ in thousands)				Nine 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
				CRE				Multifamily Residential							Single-Family Residential						Total										CRE						Multifamily Residential						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)			$	210,585			$	37,051			$	—						$	—											$	247,636					$	327,781					$	61,171					$	—					$	17,226					$	5,238

Sales (2)(3)(4)	Sales (2)(3)(4)	$	210,382			$	37,051			$	—					$	10,164											$	257,597	Sales (2)(3)(4)					$	329,233					$	61,171					$	—					$	19,900					$	17,123							$	427,427
Purchases (5)	Purchases (5)	$	245,093			$	—			$	370					$	296,963									$	542,426		Purchases (5)				$	310,447					$	—					$	370					$	—					$	434,900							$	745,717

(1)Includes write-downs of ~~$158 thousand~~$8.7 million and ~~$217 thousand~~$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 ~~six~~nine months ended ~~June~~September 30, 2022, respectively, and ~~$1.3~~$3.6 million and $4.9 million for the three and ~~six~~nine months ended ~~June~~September 30, ~~2021.~~2021, respectively.

(2)Includes originated loans sold of ~~$55.4~~$86.2 million and ~~$167.7~~$253.9 million for the three and ~~six~~nine months ended ~~June~~September 30, 2022, respectively, and ~~$67.6~~$143.3 million and ~~$198.6~~$341.9 million for the three and ~~six~~nine months ended ~~June~~September 30, 2021, respectively. Originated loans sold consisted primarily of C&I and CRE loans for each of the three and ~~six~~nine months ended ~~June~~September 30, 2022 and 2021.

(3)Includes ~~$134.5~~$40.9 million and ~~$151.9~~$192.9 million of purchased loans sold in the secondary market for the three and ~~six~~nine months ended ~~June~~September 30, 2022, respectively and ~~$36.6~~$26.5 million and ~~$59.0~~$85.5 million for the three and ~~six~~nine months ended ~~June~~September 30, 2021, respectively.

(4)Net gains on sales of loans were ~~$917 thousand~~$2.1 million and ~~$3.8~~$6.0 million for the three and ~~six~~nine months ended ~~June~~September 30, 2022, respectively, and ~~$1.5~~$3.3 million and ~~$3.3~~$6.6 million for the three and ~~six~~nine months ended ~~June~~September 30, 2021, respectively.

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

Note 8 — 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 certain criteria are met. Under the proportional amortization method, the Company amortizes the initial cost of the investment in proportion to the tax credits and other tax benefits received and recognizes the amortization in Income tax expense on the Consolidated Statement of Income.

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

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

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

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

Investments in Tax Credit and Other Investments, Net

~~Depending on the Company’s ownership percentage in~~For investments in tax credit and other investments, the Company applies the equity or 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 ~~values.~~

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

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

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

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

The Company held equity securities without readily determinable fair values totaling $35.0 million and $33.1 million as of June 30, 2022 and December 31, 2021, 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 six months ended June 30, 2022 and 2021, there were no adjustments made to these securities. Equity securities without readily determinable fair values were included in~~ ~~Investments in qualified affordable housing partnerships, tax~~Tax credit and other ~~investments, net~~ ~~and~~ ~~Other assets~~ ~~on the Consolidated Balance Sheet.~~

~~Tax credit~~ investments are evaluated for possible OTTI on an annual basis or when events or changes in circumstances suggest that the carrying amount of the tax credit investments may not be realizable. OTTI charges and impairment recoveries are recorded within Amortization of tax credit and other investments on the Consolidated Statement of Income. Refer to Note 3 — 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 ~~six~~nine months ended ~~June~~September 30, 2022 and 2021, there were no adjustments 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, net and Other assets on the ~~Company recorded no impairment recoveries and no OTTI charges. In comparison, the Company recorded impairment recoveries of $877 thousand~~Consolidated Balance Sheet.

The following table presents additional information related to ~~2 energy~~the investments in qualified affordable housing partnerships, tax credit ~~investments~~ and ~~no OTTI charges~~other investments for the three and nine months ended ~~June~~September 30, ~~2021.~~ 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 ~~six~~nine months ended ~~June~~September 30, 2021, ~~the Company recorded $1.3 million of~~ impairment recoveries were related to 1one historic tax credit and 2two energy tax ~~credits and no OTTI charges.~~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 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.

4851

Special purpose entities formed in connection with securitization transactions are generally considered VIEs. A CLO is a VIE that purchases a pool of assets consisting primarily of non-investment grade corporate loans, and issues multiple tranches of notes to investors to fund the asset purchases and pay upfront expenses associated with forming the CLO. The Company served as the collateral manager of a CLO that closed in 2019 and subsequently reassigned its portfolio manager responsibilities in 2020. The Company retained the top three investment grade-rated tranches issued by the CLO, for which the total carrying amount was ~~$284.0~~$281.2 million and $291.7 million as of ~~June~~September 30, 2022 and December 31, 2021, respectively.

Note 9 — Goodwill

Total goodwill was $465.7 million as of both ~~June~~September 30, 2022 and December 31, 2021. The Company’s goodwill impairment test is performed annually, as of December 31, or more frequently if 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 Assets to the Consolidated Financial Statements in the Company’s 2021 Form 10-K. As of ~~June~~September 30, 2022, the Company reviewed recent market movements, as well as its business performance and market capitalization, and concluded that goodwill was not impaired.

Note 10 — Commitments and Contingencies

Commitments to Extend Credit — In the normal course of doing business, the Company provides ~~customers~~ 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 from these transactions, commitments to extend credit are included in determining the appropriate level of 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 ~~June~~September 30, 2022 and December 31, 2021:


		June 30, 2022										December 31, 2021			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	$	3,642,119	$	2,880,229	$	963,277	$	139,623	$	7,625,248	$	6,911,398	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	1,080,377		342,243		111,182		732,561		2,266,363		2,221,699		Commercial letters of credit and SBLCs	689,949		438,336		55,015		1,085,513		2,268,813		2,221,699
Total	Total	$	4,722,496	$	3,222,472	$	1,074,459	$	872,184	$	9,891,611	$	9,133,097	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 ~~June~~September 30, 2022, total letters of credit of $2.27 billion consisted of SBLCs of $2.23 billion and commercial letters of credit of ~~$33.6~~$39.4 million. As of December 31, 2021, total letters of credit of $2.22 billion consisted of SBLCs of $2.14 billion and commercial letters of credit of $78.9 million. As of both ~~June~~September 30, 2022 and December 31, 2021, substantially all SBLCs were rated as “Pass” by the Bank’s internal credit risk rating system.

4952

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 real estate property.

Estimated exposure to loss from these commitments is included in the allowance for unfunded credit commitments and amounted to ~~$24.3~~$24.0 million and $27.5 million as of ~~June~~September 30, 2022 and December 31, 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 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 ~~June~~September 30, 2022 and December 31, 2021:


($ in thousands)	($ in thousands)	Maximum Potential Future Payments										Carrying Value				($ in thousands)			Maximum Potential Future Payments										Carrying Value
		June 30, 2022								December 31, 2021		June 30, 2022		December 31, 2021					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			($ 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
Single-family residential loans sold or securitized with recourse	Single-family residential loans sold or securitized with recourse	$	12	$	174	$	32	$	6,897	$	7,115	$	7,926	$	7,115		$	7,926			$	25	$	126	$	31	$	6,752	$	6,934	$	7,926	$	6,934	$	7,926
Multifamily residential loans sold or securitized with recourse	Multifamily residential loans sold or securitized with recourse	—		—		—		14,996		14,996		14,996		22,089			23,169				—		—		—		14,996		14,996		14,996		21,624		23,169
Total	Total	$	12	$	174	$	32	$	21,893	$	22,111	$	22,922	$	29,204		$	31,095		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 ~~$37~~$36 thousand and $29 thousand as of ~~June~~September 30, 2022 and December 31, 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 8 — 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 ~~June~~September 30, 2022 and December 31, 2021, these commitments were ~~$323.0~~$408.5 million and $309.6 million, respectively. These commitments are included in Accrued expenses and other liabilities on the Consolidated Balance Sheet.

Note 11 — Stock Compensation Plans

Pursuant to the Company’s 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. There were no outstanding awards other than RSUs as of both ~~June~~September 30, 2022 and December 31, 2021.

5053

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


($ in thousands)	($ in thousands)	Three Months Ended June 30,				Six Months Ended June 30,				($ in thousands)	Three Months Ended September 30,				Nine Months Ended September 30,
		2022		2021		2022		2021			2022		2021		2022		2021
Stock compensation costs	Stock compensation costs	$	8,576	$	8,208	$	17,009	$	16,025	Stock compensation costs	$	12,329	$	8,022	$	29,338	$	24,047
Related net tax benefits for stock compensation plans	Related net tax benefits for stock compensation plans	$	109	$	37	$	5,268	$	1,657	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 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 2021 Form 10-K for additional information.

During the ~~six~~nine months ended ~~June~~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 ~~six~~nine months ended ~~June~~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 ~~six~~nine months ended ~~June~~September 30, 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, 2022	Outstanding, January 1, 2022		1,329,946	$	52.65	369,731	$	54.28				1,329,946	$	52.65	369,731	$	54.28
Modified from cash-settled RSUs	Modified from cash-settled RSUs		31,523	77.28		—	—		Modified from cash-settled RSUs			31,523	77.28		—	—
Granted	Granted		409,065	52.97		91,874	77.91		Granted			430,815	78.42		91,874	77.91
Vested	Vested		(370,018)	53.11		(125,213)	54.64		Vested			(371,032)	53.12		(125,213)	54.64
Forfeited	Forfeited		(68,084)	61.50		—	—		Forfeited			(106,562)	61.76		—	—
Outstanding, June 30, 2022			1,332,432	$	52.76	336,392	$	60.60
Outstanding, September 30, 2022									Outstanding, September 30, 2022			1,314,690	$	60.81	336,392	$	60.60

5154

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




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

As of ~~June~~September 30, 2022, there were ~~$38.1~~$28.5 million and ~~$20.3~~$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 ~~2.13~~1.92 years and ~~2.11~~1.93 years, respectively.

Note 12 — Stockholders’ Equity and Earnings Per Share

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


($ and shares in thousands, except per share data)	($ and shares in thousands, except per share data)	Three Months Ended June 30,				Six Months Ended June 30,				($ and shares in thousands, except per share data)		Three Months Ended September 30,						Nine Months Ended September 30,
		2022		2021		2022		2021			($ and shares in thousands, except per share data)			2022			2021			2022			2021
Basic:	Basic:
Net income	Net income	$	258,329	$	224,742	$	495,981	$	429,736				Net income		$	295,339		$	225,449		$	791,320		$	655,185
Weighted-average number of shares outstanding	Weighted-average number of shares outstanding	141,429		141,868		141,725		141,758					Weighted-average number of shares outstanding		140,917			141,880			141,453			141,799
Basic EPS	Basic EPS	$	1.83	$	1.58	$	3.50	$	3.03				Basic EPS		$	2.10		$	1.59		$	5.59		$	4.62
Diluted:	Diluted:												Diluted:
Net income	Net income	$	258,329	$	224,742	$	495,981	$	429,736				Net income		$	295,339		$	225,449		$	791,320		$	655,185
Weighted-average number of shares outstanding	Weighted-average number of shares outstanding	141,429		141,868		141,725		141,758					Weighted-average number of shares outstanding		140,917			141,880			141,453			141,799
Add: Dilutive impact of unvested RSUs	Add: Dilutive impact of unvested RSUs	943		1,172		1,113		1,205					Add: Dilutive impact of unvested RSUs		1,094			1,263			1,148			1,252
Diluted weighted-average number of shares outstanding	Diluted weighted-average number of shares outstanding	142,372		143,040		142,838		142,963					Diluted weighted-average number of shares outstanding		142,011			143,143			142,601			143,051
Diluted EPS	Diluted EPS	$	1.81	$	1.57	$	3.47	$	3.01				Diluted EPS		$	2.08		$	1.57		$	5.55		$	4.58

For the three and ~~six~~nine months ended ~~June~~September 30, 2022, approximately ~~381~~61 thousand and 7058 thousand weighted-average shares of anti-dilutive RSUs, respectively, were excluded from the diluted EPS computations. In comparison, ~~2000~~two thousand and ~~4000~~six thousand weighted-average shares of anti-dilutive RSUs were excluded from the diluted EPS computations for the three and ~~six~~nine months ended ~~June~~September 30, 2021, respectively.

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

5255

Note 13 — Accumulated Other Comprehensive Income (Loss)

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


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

Balance, April 1, 2022		$	(365,653)	(2)	$	(24,466)	$	(4,806)	$	(394,925)
Balance, July 1, 2021											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	(192,858)			(5,582)		(10,215)		(208,655)		Net unrealized losses arising during the period	(40,928)			(121)		(1,752)		(42,801)
Amounts reclassified from AOCI	Amounts reclassified from AOCI	3,730			(798)		—		2,932		Amounts reclassified from AOCI	(250)			172		—		(78)
Changes, net of tax	Changes, net of tax	(189,128)			(6,380)		(10,215)		(205,723)		Changes, net of tax	(41,178)			51		(1,752)		(42,879)
Balance, June 30, 2022		$	(554,781)		$	(30,846)	$	(15,021)	$	(600,648)
Balance, September 30, 2021											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)	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, 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	(59,819)			229		885		(58,705)		Net unrealized (losses) gains arising during the period	(100,747)			108		(867)		(101,506)
Amounts reclassified from AOCI	Amounts reclassified from AOCI	(580)			271		—		(309)		Amounts reclassified from AOCI	(830)			443		—		(387)
Changes, net of tax	Changes, net of tax	(60,399)			500		885		(59,014)		Changes, net of tax	(101,577)			551		(867)		(101,893)
Balance, June 30, 2021		$	(8,152)		$	(730)	$	(5,807)	$	(14,689)
Balance, September 30, 2021											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)	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	(474,219)			(28,809)		(10,086)		(513,114)		Net unrealized losses arising during the period	(635,664)			(63,232)		(18,012)		(716,908)
Amounts reclassified from AOCI	Amounts reclassified from AOCI	5,141			(2,294)		—		2,847		Amounts reclassified from AOCI	8,397			(1,140)		—		7,257
Changes, net of tax	Changes, net of tax	(469,078)			(31,103)		(10,086)		(510,267)		Changes, net of tax	(627,267)			(64,372)		(18,012)		(709,651)
Balance, June 30, 2022		$	(554,781)	(2)	$	(30,846)	$	(15,021)	$	(600,648)
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.

5356

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


($ in thousands)	($ in thousands)	Three Months Ended June 30,												($ in thousands)	Three Months Ended September 30,
		2022						2021							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
Debt securities:	Debt securities:													Debt securities:
Net unrealized (losses) gains arising during the period		$	(273,840)	$	80,982	$	(192,858)	$	104,283	$	(30,789)	$	73,494
Net unrealized losses arising during the period														Net unrealized losses arising during the period	$	(229,246)	$	67,801	$	(161,445)	$	(58,138)	$	17,210	$	(40,928)
Reclassification adjustments:	Reclassification adjustments:													Reclassification adjustments:
Net realized (gains) reclassified into net income (1)		(28)		8		(20)		(632)		187		(445)
Net realized gains reclassified into net income (1)														Net realized gains reclassified into net income (1)	—		—		—		(354)		104		(250)
Amortization of unrealized losses on transferred securities (2)	Amortization of unrealized losses on transferred securities (2)	5,324		(1,574)		3,750		—		—		—		Amortization of unrealized losses on transferred securities (2)	4,623		(1,367)		3,256		—		—		—
Net change	Net change	(268,544)		79,416		(189,128)		103,651		(30,602)		73,049		Net change	(224,623)		66,434		(158,189)		(58,492)		17,314		(41,178)
Cash flow hedges:	Cash flow hedges:													Cash flow hedges:
Net unrealized (losses) gains arising during the period		(7,837)		2,255		(5,582)		(106)		30		(76)
Net realized (gains) losses reclassified into net income (3)		(1,120)		322		(798)		201		(57)		144
Net unrealized losses arising during the period														Net unrealized losses arising during the period	(48,325)		13,902		(34,423)		(170)		49		(121)
Net realized losses reclassified into net income (3)														Net realized losses reclassified into net income (3)	1,619		(465)		1,154		241		(69)		172
Net change	Net change	(8,957)		2,577		(6,380)		95		(27)		68		Net change	(46,706)		13,437		(33,269)		71		(20)		51
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		(9,278)		(937)		(10,215)		1,584		650		2,234
Net unrealized losses arising during the period														Net unrealized losses arising during the period	(6,676)		(1,250)		(7,926)		(1,878)		126		(1,752)
Net change	Net change	(9,278)		(937)		(10,215)		1,584		650		2,234		Net change	(6,676)		(1,250)		(7,926)		(1,878)		126		(1,752)
Other comprehensive (loss) income		$	(286,779)	$	81,056	$	(205,723)	$	105,330	$	(29,979)	$	75,351
Other comprehensive loss														Other comprehensive loss	$	(278,005)	$	78,621	$	(199,384)	$	(60,299)	$	17,420	$	(42,879)


($ in thousands)	($ in thousands)	Six Months Ended June 30,												($ in thousands)	Nine Months Ended September 30,
		2022						2021							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
Debt securities:	Debt securities:													Debt securities:
Net unrealized losses arising during the period	Net unrealized losses arising during the period	$	(673,302)	$	199,083	$	(474,219)	$	(84,993)	$	25,174	$	(59,819)	Net unrealized losses arising during the period	$	(902,548)	$	266,884	$	(635,664)	$	(143,131)	$	42,384	$	(100,747)
Reclassification adjustments:	Reclassification adjustments:													Reclassification adjustments:
Net realized (gains) reclassified into net income (1)		(1,306)		386		(920)		(824)		244		(580)
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)	8,605		(2,544)		6,061		—		—		—		Amortization of unrealized losses on transferred securities (2)	13,228		(3,911)		9,317		—		—		—
Net change	Net change	(666,003)		196,925		(469,078)		(85,817)		25,418		(60,399)		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 (losses) gains arising during the period	Net unrealized (losses) gains arising during the period	(40,446)		11,637		(28,809)		320		(91)		229		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)	(3,220)		926		(2,294)		378		(107)		271		Net realized (gains) losses reclassified into net income (3)	(1,601)		461		(1,140)		619		(176)		443
Net change	Net change	(43,666)		12,563		(31,103)		698		(198)		500		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		(9,600)		(486)		(10,086)		275		610		885
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	(9,600)		(486)		(10,086)		275		610		885		Net change	(16,276)		(1,736)		(18,012)		(1,603)		736		(867)
Other comprehensive loss	Other comprehensive loss	$	(719,269)	$	209,002	$	(510,267)	$	(84,844)	$	25,830	$	(59,014)	Other comprehensive loss	$	(997,274)	$	287,623	$	(709,651)	$	(145,143)	$	43,250	$	(101,893)

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

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

(3)~~For the three~~Pre-tax amounts related to cash flow hedges on CRE loans and ~~six months ended June 30, 2022 and 2021, pre-tax amounts~~long-term borrowings were reported in Interest and dividend income andin Interest expense,respectively, on the Consolidated Statement of Income.

5457

Note 14 — 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 loan and deposit products. Commercial loan products include CRE lending, construction finance, working capital lines of credit, trade finance, letters of credit, commercial business lending, affordable housing lending, asset-based lending, asset-backed finance, project finance and equipment financing. Commercial deposit products and other financial services include treasury management, foreign exchange services and interest rate and commodity risk hedging.

The remaining centralized functions, including the corporate treasury activities of the Company and eliminations of inter-segment amounts, have been aggregated and included in the Other segment, which provides broad administrative 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.

5558

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


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

Net interest income (loss) before provision for credit losses		$	284,373	$	230,964	$	(42,385)	$	472,952
Net interest income before provision for credit losses										Net interest income before provision for credit losses	$	326,411	$	222,996	$	2,402	$	551,809
Provision for credit losses	Provision for credit losses	2,898		10,602		—		13,500		Provision for credit losses	8,974		18,026		—		27,000
Noninterest income		28,384		48,032		2,028		78,444
Noninterest income (loss)										Noninterest income (loss)	30,819		48,641		(3,908)		75,552
Noninterest expense	Noninterest expense	94,295		81,023		21,542		196,860		Noninterest expense	104,005		81,386		30,582		215,973
Segment income (loss) before income taxes	Segment income (loss) before income taxes	215,564		187,371		(61,899)		341,036		Segment income (loss) before income taxes	244,251		172,225		(32,088)		384,388

Segment net income (loss)	Segment net income (loss)	$	153,549	$	133,861	$	(29,081)	$	258,329	Segment net income (loss)	$	173,982	$	122,869	$	(1,512)	$	295,339
As of June 30, 2022
As of September 30, 2022										As of September 30, 2022

Segment assets	Segment assets	$	16,472,373	$	32,256,044	$	13,665,866	$	62,394,283	Segment assets	$	17,002,000	$	32,836,381	$	12,737,680	$	62,576,061


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

Net interest income before provision for (reversal of) credit losses	Net interest income before provision for (reversal of) credit losses	$	173,775	$	192,696	$	10,002	$	376,473	Net interest income before provision for (reversal of) credit losses	$	176,678	$	189,791	$	29,237	$	395,706
Provision for (reversal of) credit losses	Provision for (reversal of) credit losses	2,358		(17,358)		—		(15,000)		Provision for (reversal of) credit losses	1,293		(11,293)		—		(10,000)
Noninterest income (1)	Noninterest income (1)	24,332		32,674		11,425		68,431		Noninterest income (1)	22,099		43,272		7,738		73,109
Noninterest expense	Noninterest expense	87,650		64,164		37,709		189,523		Noninterest expense	90,575		66,731		48,078		205,384
Segment income (loss) before income taxes (1)	Segment income (loss) before income taxes (1)	108,099		178,564		(16,282)		270,381		Segment income (loss) before income taxes (1)	106,909		177,625		(11,103)		273,431

Segment net income (1)	Segment net income (1)	$	77,429	$	127,873	$	19,440	$	224,742	Segment net income (1)	$	76,577	$	126,984	$	21,888	$	225,449
As of June 30, 2021
As of September 30, 2021										As of September 30, 2021

Segment assets	Segment assets	$	14,594,087	$	27,354,253	$	17,906,536	$	59,854,876	Segment assets	$	14,687,023	$	27,861,690	$	18,410,397	$	60,959,110


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

Net interest income (loss) before provision for credit losses	Net interest income (loss) before provision for credit losses	$	497,587	$	439,041	$	(48,063)	$	888,565	Net interest income (loss) before provision for credit losses	$	823,998	$	662,037	$	(45,661)	$	1,440,374
Provision for credit losses	Provision for credit losses	6,002		15,498		—		21,500		Provision for credit losses	14,976		33,524		—		48,500
Noninterest income	Noninterest income	53,583		97,109		7,495		158,187		Noninterest income	84,402		145,750		3,587		233,739
Noninterest expense	Noninterest expense	190,390		154,418		41,502		386,310		Noninterest expense	294,395		235,804		72,084		602,283
Segment income (loss) before income taxes	Segment income (loss) before income taxes	354,778		366,234		(82,070)		638,942		Segment income (loss) before income taxes	599,029		538,459		(114,158)		1,023,330

Segment net income (loss)	Segment net income (loss)	$	252,713	$	261,368	$	(18,100)	$	495,981	Segment net income (loss)	$	426,695	$	384,237	$	(19,612)	$	791,320
As of June 30, 2022
As of September 30, 2022										As of September 30, 2022

Segment assets	Segment assets	$	16,472,373	$	32,256,044	$	13,665,866	$	62,394,283	Segment assets	$	17,002,000	$	32,836,381	$	12,737,680	$	62,576,061

5659


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

Net interest income before reversal of credit losses	Net interest income before reversal of credit losses	$	323,674	$	369,788	$	36,706	$	730,168	Net interest income before reversal of credit losses	$	500,352	$	559,579	$	65,943	$	1,125,874
Reversal of credit losses	Reversal of credit losses	(1,891)		(13,109)		—		(15,000)		Reversal of credit losses	(598)		(24,402)		—		(25,000)
Noninterest income (1)	Noninterest income (1)	47,774		80,070		13,453		141,297		Noninterest income (1)	69,873		123,342		21,191		214,406
Noninterest expense	Noninterest expense	176,936		133,421		70,243		380,600		Noninterest expense	267,511		204,042		114,431		585,984
Segment income (loss) before income taxes (1)	Segment income (loss) before income taxes (1)	196,403		329,546		(20,084)		505,865		Segment income (loss) before income taxes (1)	303,312		503,281		(27,297)		779,296

Segment net income (1)	Segment net income (1)	$	140,680	$	236,080	$	52,976	$	429,736	Segment net income (1)	$	217,257	$	360,275	$	77,653	$	655,185
As of June 30, 2021
As of September 30, 2021										As of September 30, 2021

Segment assets	Segment assets	$	14,594,087	$	27,354,253	$	17,906,536	$	59,854,876	Segment assets	$	14,687,023	$	27,861,690	$	18,410,397	$	60,959,110

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

5760

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

5861

Forward-Looking Statements

Certain matters discussed in this Quarterly Report on Form 10-Q ~~(“this Form~~(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, ~~to,~~” “likely,” “may,” “might,” “objective,” “plans,” “potential,” “projects,” “remains,” “should,” “target,” “trend,” “will,” “would,” or similar expressions, and the negative thereof. You should not place undue reliance on these statements, as they are subject to risks and uncertainties, including, but not limited to, those described below. When considering these forward-looking statements, you should keep in mind these risks and uncertainties, as well as any cautionary statements the Company may make. Moreover, you should treat these statements as speaking only as of the date they are made and based only on information then actually known to the Company.

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

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

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

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

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

•changes in laws or the regulatory environment, including regulatory reform initiatives and policies of the U.S. Department of the Treasury, the Board of Governors of the Federal Reserve System (“Federal Reserve”), the Federal Deposit Insurance Corporation (“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;

5962

•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.

6063

Overview

The following discussion provides information about the results of operations, financial condition, liquidity and capital resources of the 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 2021 Form 10-K.

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 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 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. We are committed to enhancing long-term 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. We expect our relationship-focused business model to continue to generate organic growth from existing customers and to expand our targeted customer bases. As of ~~June~~September 30, 2022, the Company had ~~$62.39~~$62.58 billion in assets and approximately 3,200 full-time equivalent employees. For additional information on our strategy, and the products and services provided by the Bank, see Item 1. Business — Strategy and Banking Services in the Company’s 2021 Form 10-K.

Developments

~~The COVID-19 Pandemic~~Economic Developments

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

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

LIBOR Transition

LIBOR is a widely referenced benchmark rate that is intended to reflect the ~~average interbank interest~~ rate at which ~~a large number of~~ banks ~~are prepared to lend one another~~can borrow wholesale funds from other banks on an unsecured ~~funds.~~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 ~~will be~~has been extended through June 30, 2023, which will provide additional time to wind down or renegotiate existing contracts that reference these LIBOR ~~settings, and will cease or become non-representative after June 30, 2023.~~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 ~~facilitate the~~ transition of legacy LIBOR-based contracts that either ~~(a) lack LIBOR~~contain insufficient contractual fallback provisions ~~entirely or (b) contain inadequate~~addressing the LIBOR ~~fallback provisions. The LIBOR Act includes different statutory provisions that may apply~~cessation and its transition to ~~LIBOR-based contracts, depending on the type of fallback provisions included in the contract, if any. One statutory provision automatically replaces LIBOR with~~ a benchmark selected by the Federal Reserve ~~(the “Board-selected benchmark replacement”) by operation of law in certain circumstances, including when the contract has no~~or lack contractual fallback ~~provisions. Another statutory provision applies to contracts that allow a designated person to select a benchmark replacement rate and provides~~provisions entirely. The LIBOR Act also establishes a safe harbor ~~should that individual select~~for lenders, shielding lenders from potential litigation resulting from their choice of a replacement rate, under certain situations including the ~~Board-selected benchmark replacement. Any~~use of a Federal ~~Reserve-identified~~Reserve-selected replacement ~~benchmark will be~~rate based on the Secured Overnight Financing Rate (“SOFR”)~~, a rate~~. The Federal Reserve published byits proposed rulemaking that implements the LIBOR Act in the Federal ~~Reserve Bank of New York.~~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 ~~began~~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 ~~also adopted industry best practice guidelines for fallback language for new transactions and distributed communications related~~continues to ~~the transition to certain impacted internal and external stakeholders. The Company has begun dialogue~~engage with customers to proactively modify LIBOR-based product contracts and transition to a benchmark replacement prior to June 30, 2023. The Company ~~is assessing and planning to~~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

~~On June 21,~~In October 2022, the FDIC ~~issued~~adopted a ~~proposed~~final rule to increase the initial base deposit insurance assessment ~~rates~~rate schedules uniformly for insured depository institutions by two basis points (“bps”), beginning ~~with~~in the first quarterly assessment period of 2023. The ~~proposed~~increase in the assessment rate schedules ~~would~~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 ~~of the Deposit Insurance Fund~~ meets or exceeds ~~two~~2 percent. IfAs a result of the ~~proposed rule is finalized as proposed,~~adoption of the assessment rate schedules, the FDIC insurance costs of ~~insured depository institutions, including~~ the Bank ~~would generally increase.~~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.

Financial Review

($ and shares in thousands, except per share, and ratio data) Three Months Ended June 30, Six Months Ended June 30,
2022 2021 2022 2021
Summary of operations:
Net interest income before provision for (reversal of) credit losses (1)
$ 472,952 $ 376,473 $ 888,565 $ 730,168
Noninterest income 78,444 68,431 158,187 141,297
Total revenue 551,396 444,904 1,046,752 871,465
Provision for (reversal of) credit losses 13,500 (15,000) 21,500 (15,000)
Noninterest expense 196,860 189,523 386,310 380,600
Income before income taxes 341,036 270,381 638,942 505,865
Income tax expense 82,707 45,639 142,961 76,129
Net income $ 258,329 $ 224,742 $ 495,981 $ 429,736
Per common share:
Basic earnings $ 1.83 $ 1.58 $ 3.50 $ 3.03
Diluted earnings $ 1.81 $ 1.57 $ 3.47 $ 3.01
Dividends declared $ 0.40 $ 0.33 $ 0.80 $ 0.66
Weighted-average number of shares outstanding:
Basic 141,429 141,868 141,725 141,758
Diluted 142,372 143,040 142,838 142,963
Performance metrics:
Return on average assets (“ROA”) 1.66 % 1.56 % 1.61 % 1.53 %
Return on average equity (“ROE”) 18.23 % 16.61 % 17.36 % 16.10 %
Tangible return on average tangible equity (2)
19.94 % 18.28 % 18.96 % 17.73 %
Common dividend payout ratio 22.22 % 21.11 % 23.18 % 22.07 %
Net interest margin 3.23 % 2.75 % 3.05 % 2.73 %
Efficiency ratio (3)
35.70 % 42.60 % 36.91 % 43.67 %
Adjusted efficiency ratio (2)
32.90 % 36.30 % 34.05 % 37.47 %

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



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

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

~~(3)~~(2)Efficiency ratio is calculated as noninterest expense divided by total revenue.

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

The Company’s ~~second~~third quarter 2022 net income was ~~$258.3~~$295.3 million, an increase of ~~$33.6~~$69.9 million or ~~15%~~31%, compared with ~~second~~third quarter 2021 net income of ~~$224.7~~$225.4 million. Net income for the first ~~half~~nine months of 2022 was ~~$496.0~~$791.3 million, an increase of ~~$66.2~~$136.1 million or ~~15%~~21%, compared with the first ~~half~~nine months of 2021 net income of ~~$429.7~~$655.2 million. The year-over-year increases in both periods were primarily due to higher net interest income, partially offset by higher income tax expense and provision for credit losses. Noteworthy items about the Company’s ~~second~~third quarter and first ~~half~~nine months of 2022 performance included:

•~~Expanding profitability.~~ Second quarter 2022 ROA, ROE and the tangible return on average tangible equity of 1.66%, 18.23% and 19.94%, respectively, all expanded compared with second quarter 2021. Likewise, for the first half of 2022, ROA, ROE and the tangible return on average tangible equity of 1.61%, 17.36% and 18.96%, respectively, all expanded year-over-year. 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.~~

•Net interest income growth and net interest margin expansion. ~~Second~~Third quarter 2022 net interest income before provision for (reversal of) credit losses was ~~$473.0~~$551.8 million, an increase of ~~$96.5~~$156.1 million or ~~26%,~~39% from the ~~second~~third quarter ~~2021 Second~~of 2021. Third quarter 2022 net interest margin of ~~3.23%~~3.68% expanded ~~by 48~~98 bps year-over-year. For the first ~~half~~nine months of 2022, net interest income before provision for (reversal of) credit losses was ~~$888.6 million,~~$1.44 billion, an increase of ~~$158.4~~$314.5 million or ~~22% year-over-year; first half of 2022~~28% year-over-year. The net interest margin for the first nine months of 2022 was ~~3.05%~~3.27%, up ~~by 32~~55 bps year-over-year.

•Improved efficiency. Efficiency ratios of ~~35.70%~~34.43% and ~~36.91%~~35.98% for the ~~second~~third quarter and first ~~half~~nine months of 2022, respectively, both improved year-over-year. The adjusted efficiency ratios of ~~32.90%~~31.18% and ~~34.05%~~32.98% for the ~~second~~third quarter and first ~~half~~nine months of 2022, respectively, both improved year-over-year. For additional details, see the reconciliation of non-GAAP measures presented under Item 2. MD&A — Reconciliation of GAAP to Non-GAAP Financial Measures in this Form 10-Q.

•~~The Company recorded a provision for credit losses~~Expanding profitability. Third quarter 2022 ROA, ROE and the tangible return on average tangible equity of ~~$13.5 million~~1.86%, 20.30% and ~~$21.5 million~~22.16%, respectively, all expanded compared with third quarter 2021. Likewise, for the ~~second quarter and~~ first ~~half~~nine months of 2022, ROA, ROE and the tangible return on average tangible equity of 1.70%, 18.35% and 20.04%, respectively, ~~compared with a reversal~~all expanded year-over-year. For additional details, see the reconciliation of ~~provision for credit losses~~non-GAAP measures presented under Item 2. MD&A — Reconciliation of ~~$15.0 million during both the second quarter and first half of 2021.~~GAAP to Non-GAAP Financial Measures in this Form 10-Q.

•Total assets reached ~~$62.39~~$62.58 billion, growing by ~~$1.52~~$1.71 billion or 3% from December 31, 2021, primarily driven by loan growth.

•Total loans were ~~$46.53~~$47.46 billion as of ~~June~~September 30, 2022, an increase of ~~$4.84~~$5.76 billion or ~~12%~~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 ~~$54.34~~$53.86 billion as of ~~June~~September 30, 2022, an increase of ~~$992.8~~$506.8 million or ~~2%,~~1% from $53.35 billion as of December 31, 2021. Growth was primarily driven by increased time ~~and interest-bearing checking~~ deposits, partially offset by ~~a decrease~~decreases in noninterest-bearing demand and money market accounts. Noninterest-bearing demand deposit balances were $23.03 billion as of June 30, 2022, an increase of $183.4 million or 1% year-to-date. Noninterest-bearing demand deposits comprised 42% of total deposits as of June 30, 2022.

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.

~~Second~~

Third quarter 2022 net interest income before provision for credit losses was ~~$473.0~~$551.8 million, an increase of ~~$96.5~~$156.1 million or ~~26%~~39%, compared with ~~$376.5~~$395.7 million for the ~~second~~third quarter 2021. For the first ~~half~~nine months of 2022, net interest income was ~~$888.6 million,~~$1.44 billion, an increase of ~~$158.4~~$314.5 million or ~~22%~~28%, compared with ~~$730.2 million~~$1.13 billion for the first ~~half~~nine months of 2021. ~~Second~~Third quarter 2022 net interest margin was ~~3.23%~~3.68%, an increase of 4898 bps from ~~2.75%~~2.70% for the ~~second~~third quarter ~~of 2021. For the first half of 2022, net interest margin was 3.05%, an increase of 32 bps from 2.73% for the first half~~ of 2021. The year-over-year changes in net interest income and net interest margin primarily reflected higher loan yields, strong loan growth ~~higher loan yields,~~ and higher debt securities ~~yield~~yields. For the first nine months of 2022, net interest margin was 3.27%, an increase of 55 bps from 2.72% for the first nine months of 2021. The year-over-year changes in net interest income and ~~volume. Yields expanded year-over-year due to~~net interest margin primarily reflected higher loan yields, strong loan growth and higher debt securities volume and yields. The changes in yields and rates reflected rising benchmark interest rates.

Average interest-earning assets were ~~$58.67~~$59.48 billion for the ~~second~~third quarter of 2022, an increase of ~~$3.77~~$1.24 billion or 7%2% from ~~$54.90~~$58.24 billion for the ~~second~~third quarter of 2021. For the first ~~half~~nine months of 2022, the average interest-earning assets were ~~$58.68~~$58.95 billion, an increase of ~~$4.80~~$3.60 billion or 9%7% from ~~$53.88~~$55.35 billion for the first ~~half~~nine months of 2021. The increases in average interest-earning assets in both periods primarily reflected growth in loans and debt securities, partially offset by a decrease in interest-bearing cash and deposits with banks.

The yield on average interest-earning assets for the ~~second~~third quarter of 2022 was ~~3.42%~~4.19%, an increase of 50136 bps from ~~2.92%~~2.83% for the ~~second~~third quarter of 2021. The yield on average interest-earning assets for the first ~~half~~nine months of 2022 was ~~3.20%~~3.54%, an increase of 2865 bps from ~~2.92%~~2.89% for the first ~~half~~nine months of 2021. The year-over-year changes in the yield on average interest-bearing assets primarily resulted from rising benchmark interest rates and a changed earning asset mix in favor of higher-yielding assets.

The average loan yield for the ~~second~~third quarter of 2022 was ~~3.95%~~4.75%, an increase of 38114 bps from ~~3.57%~~3.61% for the ~~second~~third quarter of 2021. The average loan yield for the first ~~half~~nine months of 2022 was ~~3.80%~~4.13%, an increase of 2354 bps from ~~3.57%~~3.59% for the first ~~half~~nine months of 2021. The year-over-year changes in the average loan yield reflect the loan portfolio’s sensitivity to rising benchmark interest rates. Approximately ~~63%~~62% and ~~64%~~65% of loans held-for-investment were variable-rate or hybrid loans in their adjustable-rate period asas of ~~June~~September 30, 2022 and 2021, respectively.

Deposits are an important source of funds and impact both net interest income and net interest margin. Average deposits were ~~$54.13~~$54.05 billion for the ~~second~~third quarter of 2022, an increase of ~~$3.95 billion~~$554.9 million or 8%1% from ~~$50.18~~$53.50 billion for the ~~second~~third quarter of 2021. For the first ~~half~~nine months of 2022, average deposits were ~~$54.08~~$54.07 billion, an increase of ~~$5.06~~$3.54 billion or ~~10%~~7% from ~~$49.02~~$50.53 billion for the first ~~half~~nine months of 2021. Average noninterest-bearing deposits were ~~$23.89~~$22.42 billion for the ~~second~~third quarter of 2022, ~~an increase~~a decrease of ~~$4.17 billion~~$745.7 million or ~~21%~~3% from ~~$19.72~~$23.17 billion for the ~~second~~third quarter of 2021. For the first ~~half~~nine months of 2022, average noninterest-bearing deposits were ~~$23.66~~$23.24 billion, an increase of ~~$4.75~~$2.90 billion or ~~25%~~14% from ~~$18.91~~$20.35 billion for the first ~~half~~nine months of 2021. Average noninterest-bearing deposits made up ~~44%~~41% and 43% of average deposits for ~~both~~ the ~~second quarter and first half~~third quarters of 2022 ~~compared with 39% in~~and 2021, respectively, and 43% and 40% for the ~~year-ago periods.~~first nine months of 2022 and 2021, respectively.

The average cost of deposits was ~~0.17%~~0.51% for the ~~second~~third quarter of 2022, a ~~three bp~~39 bps increase from ~~0.14%~~0.12% for the ~~second~~third quarter of 2021. The average cost of interest-bearing deposits was ~~0.30%~~0.86% for the ~~second~~third quarter of 2022, ana 65 bps increase ~~of six bps,~~ from ~~0.24%~~0.21% for the ~~second~~third quarter of 2021. ~~The year-over-year increases were primarily due to higher rates paid on money market accounts.~~

The average cost of deposits was ~~0.13%~~0.26% for the first ~~half~~nine months of 2022, ~~a three bp decrease~~an increase of 11 bps from ~~0.16%~~0.15% for the first ~~half~~nine months of 2021. The average cost of interest-bearing deposits was ~~0.24%~~0.45% for the first ~~half~~nine months of 2022, a ~~three bp decrease~~20 bps increase from ~~0.27%~~0.25% for the first ~~half~~nine months of 2021. The year-over-year ~~decreases~~increases primarily reflected ~~lower~~higher rates ~~paid on checking and time deposits, and the run-off of higher-cost time deposits, partially offset by higher interest~~ paid on money market 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 ~~second~~third quarter of 2022, the average cost of funds was ~~0.20%~~0.55%, a ~~two bp~~41 bps increase from ~~0.18%~~0.14% for the ~~second~~third quarter of 2021. For the first ~~half~~nine months of 2022, the average cost of funds was ~~0.16%~~0.29%, ~~a four bp decrease~~an 11 bps increase from ~~0.20%~~0.18% for the first ~~half~~nine months of 2021. The year-over-year changes in the average cost of funds were driven by the changes in the cost of deposits as discussed ~~above, and the maturity of higher cost FHLB advances. $405.0 million and $175.0 million in FHLB advances matured during the second quarter of 2021 and first quarter of 2022, respectively.~~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.

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


($ in thousands)	($ in thousands)	Three Months Ended June 30,												($ in thousands)	Three Months Ended September 30,
		2022						2021							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	$	2,797,711	$	4,787	0.69	%	$	5,072,225	$	3,628	0.29	%	Interest-bearing cash and deposits with banks	$	2,287,010	$	9,080	1.58	%	$	7,036,823	$	4,521	0.25	%
Resale agreements	Resale agreements	1,641,723		8,553		2.09	%	2,129,567		8,021		1.51	%	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)	6,503,677		33,438		2.06	%	7,997,005		34,690		1.74	%	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)	3,021,239		12,738		1.69	%	—		—		—	%	Held-to-maturity (“HTM”) debt securities (2)(4)	3,017,063		12,709		1.67	%	—		—		—	%
Loans (5)(6)	Loans (5)(6)	44,626,488		439,416		3.95	%	39,622,270		352,453		3.57	%	Loans (5)(6)	46,854,541		560,452		4.75	%	39,960,151		363,503		3.61	%

Restricted equity securities	Restricted equity securities	77,839		822		4.24	%	80,142		541		2.71	%	Restricted equity securities	78,054		843		4.28	%	77,083		500		2.57	%
Total interest-earning assets	Total interest-earning assets	$	58,668,677	$	499,754	3.42	%	$	54,901,209	$	399,333	2.92	%	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	712,884						600,053						Cash and due from banks	615,836						627,640
Allowance for loan losses	Allowance for loan losses	(545,489)						(607,523)						Allowance for loan losses	(566,369)						(584,827)
Other assets	Other assets	3,396,769						2,878,098						Other assets	3,551,288						3,077,240
Total assets	Total assets	$	62,232,841					$	57,771,837					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	$	6,712,890	$	3,178	0.19	%	$	6,671,358	$	3,777	0.23	%	Checking deposits	$	6,879,632	$	8,493	0.49	%	$	6,646,515	$	3,186	0.19	%
Money market deposits	Money market deposits	12,319,930		8,892		0.29	%	12,596,515		3,712		0.12	%	Money market deposits	12,351,571		33,101		1.06	%	12,604,827		3,446		0.11	%
Savings deposits	Savings deposits	2,970,007		1,864		0.25	%	2,676,865		2,078		0.31	%	Savings deposits	2,961,634		2,268		0.30	%	2,792,702		1,943		0.28	%
Time deposits	Time deposits	8,239,571		8,554		0.42	%	8,518,936		8,431		0.40	%	Time deposits	9,435,063		25,032		1.05	%	8,283,265		7,395		0.35	%
Short-term borrowings		64,145		241		1.51	%	336		—		—	%
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	138,960		559		1.61	%	474,887		2,099		1.77	%	FHLB advances	86,243		392		1.80	%	248,614		857		1.37	%
Repurchase agreements	Repurchase agreements	359,778		2,418		2.70	%	303,118		1,991		2.63	%	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	152,194		1,096		2.89	%	152,099		772		2.04	%	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	$	30,957,475	$	26,802	0.35	%	$	31,394,114	$	22,860	0.29	%	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	23,887,452						19,717,315						Demand deposits	22,423,633						23,169,323
Accrued expenses and other liabilities	Accrued expenses and other liabilities	1,705,487						1,234,456						Accrued expenses and other liabilities	2,179,850						1,470,494
Stockholders’ equity	Stockholders’ equity	5,682,427						5,425,952						Stockholders’ equity	5,772,638						5,680,306
Total liabilities and stockholders’ equity	Total liabilities and stockholders’ equity	$	62,232,841					$	57,771,837					Total liabilities and stockholders’ equity	$	63,079,444					$	61,359,533
Interest rate spread	Interest rate spread					3.07	%					2.63	%	Interest rate spread					3.26	%					2.58	%
Net interest income and net interest margin	Net interest income and net interest margin			$	472,952	3.23	%			$	376,473	2.75	%	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 ~~$20.3~~$16.5 million and ~~$21.0~~$22.6 million for the ~~second~~third quarters of 2022 and 2021, respectively.

(4)Includes the amortization of premiums on HTM debt securities of ~~$100~~$189 thousand for the ~~second~~third quarter of 2022.

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

(6)Loans include the accretion of net deferred loan fees and amortization of net premiums, which totaled ~~$11.4~~$12.5 million and ~~$15.8~~$17.0 million for the ~~second~~third quarters of 2022 and 2021, respectively.

6771


($ in thousands)	($ in thousands)	Six Months Ended June 30,												($ in thousands)	Nine Months Ended September 30,
		2022						2021							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	$	3,627,253	$	8,047	0.45	%	$	5,592,124	$	7,260	0.26	%	Interest-bearing cash and deposits with banks	$	3,175,596	$	17,127	0.72	%	$	6,078,982	$	11,781	0.26	%
Resale agreements	Resale agreements	1,868,600		16,936		1.83	%	1,797,578		14,120		1.58	%	Resale agreements	1,588,452		23,705		2.00	%	1,994,776		23,077		1.55	%
AFS debt securities (2)(3)	AFS debt securities (2)(3)	7,232,686		67,907		1.89	%	7,232,686		63,790		1.78	%	AFS debt securities (2)(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)	2,497,811		20,936		1.69	%	—		—		—	%	HTM debt securities (2)(4)	2,672,797		33,645		1.68	%	—		—		—	%
Loans (5)(6)	Loans (5)(6)	43,376,398		816,526		3.80	%	39,178,255		694,461		3.57	%	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	77,708		1,431		3.71	%	81,645		1,088		2.69	%	Restricted equity securities	77,824		2,274		3.91	%	80,107		1,588		2.65	%
Total interest-earning assets	Total interest-earning assets	$	58,680,456	$	931,783	3.20	%	$	53,882,288	$	780,719	2.92	%	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	677,579						590,219						Cash and due from banks	656,772						602,830
Allowance for loan losses	Allowance for loan losses	(544,423)						(613,026)						Allowance for loan losses	(551,818)						(603,523)
Other assets	Other assets	3,183,144						2,829,594						Other assets	3,307,207						2,913,050
Total assets	Total assets	$	61,996,756					$	56,689,075					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	$	6,680,657	$	4,580	0.14	%	$	6,532,965	$	7,991	0.25	%	Checking deposits	$	6,747,711	$	13,073	0.26	%	$	6,571,231	$	11,177	0.23	%
Money market deposits	Money market deposits	12,614,994		12,095		0.19	%	12,088,006		8,423		0.14	%	Money market deposits	12,526,222		45,196		0.48	%	12,262,173		11,869		0.13	%
Savings deposits	Savings deposits	2,950,268		3,568		0.24	%	2,675,677		3,819		0.29	%	Savings deposits	2,954,098		5,836		0.26	%	2,715,114		5,762		0.28	%
Time deposits	Time deposits	8,170,613		15,234		0.38	%	8,814,159		19,587		0.45	%	Time deposits	8,596,728		40,266		0.63	%	8,635,250		26,982		0.42	%
Short-term borrowings		33,177		250		1.52	%	2,508		42		3.38	%
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	149,431		1,137		1.53	%	563,331		5,168		1.85	%	FHLB advances	128,137		1,529		1.60	%	457,273		6,025		1.76	%
Repurchase agreements	Repurchase agreements	336,013		4,434		2.66	%	301,567		3,969		2.65	%	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	152,103		1,920		2.55	%	152,094		1,552		2.06	%	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	$	31,087,256	$	43,218	0.28	%	$	31,130,307	$	50,551	0.33	%	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	23,661,355						18,909,991						Demand deposits	23,244,247						20,345,370
Accrued expenses and other liabilities	Accrued expenses and other liabilities	1,486,067						1,266,510						Accrued expenses and other liabilities	1,719,869						1,335,252
Stockholders’ equity	Stockholders’ equity	5,762,078						5,382,267						Stockholders’ equity	5,765,637						5,482,705
Total liabilities and stockholders’ equity	Total liabilities and stockholders’ equity	$	61,996,756					$	56,689,075					Total liabilities and stockholders’ equity	$	62,361,618					$	58,263,002
Interest rate spread	Interest rate spread					2.92	%					2.59	%	Interest rate spread					3.03	%					2.59	%
Net interest income and net interest margin	Net interest income and net interest margin			$	888,565	3.05	%			$	730,168	2.73	%	Net interest income and net interest margin			$	1,440,374	3.27	%			$	1,125,874	2.72	%

(1)Annualized.

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

(3)Includes the amortization of premiums on AFS debt securities of ~~$43.8~~$60.3 million and ~~$40.1~~$62.7 million for the first ~~halves~~nine months of 2022 and 2021, respectively.

(4)Includes the amortization of premiums on HTM debt securities of ~~$234~~$423 thousand for the first ~~half~~nine months of 2022.

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

(6)Loans include the accretion of net deferred loan fees and amortization of net premiums, which totaled ~~$23.8~~$36.3 million and ~~$29.8~~$46.8 million for the first ~~halves~~nine months of 2022 and 2021, respectively.

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


($ in thousands)	($ in thousands)	Three Months Ended June 30,								Six Months Ended June 30,										($ in thousands)		Three Months Ended September 30,									Nine Months Ended September 30,
		2022 vs. 2021								2022 vs. 2021								($ 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	$	1,159		$	(2,179)		$	3,338	$	787		$	(3,150)		$	3,937									Interest-bearing cash and deposits with banks		$	4,559			$	(4,874)			$	9,433			$	5,346			$	(7,746)		$	13,092
Resale agreements	Resale agreements	532			(2,101)			2,633		2,816			575			2,241										Resale agreements		(2,188)			(6,674)				4,486				628				(5,263)			5,891
AFS debt securities	AFS debt securities	(1,252)			(7,080)			5,828		4,117			—			4,117										AFS debt securities		557			(13,051)				13,608				4,674				(12,166)			16,840
HTM debt securities	HTM debt securities	12,738			12,738			—		20,936			20,936			—										HTM debt securities		12,709			12,709				—				33,645				33,645			—
Loans	Loans	86,963			47,092			39,871		122,065			77,337			44,728										Loans		196,949			69,707				127,242				319,014				146,568			172,446
Restricted equity securities	Restricted equity securities	281			(16)			297		343			(55)			398										Restricted equity securities		343			6				337				686				(46)			732
Total interest and dividend income	Total interest and dividend income	$	100,421		$	48,454		$	51,967	$	151,064		$	95,643		$	55,421									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	$	(599)		$	23		$	(622)	$	(3,411)		$	177		$	(3,588)									Checking deposits		$	5,307		$	116			$	5,191			$	1,896			$	307		$	1,589
Money market deposits	Money market deposits	5,180			(83)			5,263		3,672			382			3,290										Money market deposits		29,655			(71)				29,726				33,327				261			33,066
Savings deposits	Savings deposits	(214)			212			(426)		(251)			368			(619)										Savings deposits		325			122				203				74				488			(414)
Time deposits	Time deposits	123			(282)			405		(4,353)			(1,358)			(2,995)										Time deposits		17,637			1,162				16,475				13,284				(121)			13,405
Short-term borrowings		241			—			241		208			243			(35)
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	(1,540)			(1,366)			(174)		(4,031)			(3,271)			(760)										FHLB advances		(465)			(680)				215				(4,496)				(3,975)			(521)
Repurchase agreements	Repurchase agreements	427			380			47		465			455			10										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	324			—			324		368			—			368										Long-term debt and finance lease liabilities		781			4				777				1,149				4			1,145
Total interest expense	Total interest expense	$	3,942		$	(1,116)		$	5,058	$	(7,333)		$	(3,004)		$	(4,329)									Total interest expense		$	56,826		$	2,857			$	53,969			$	49,493			$	986		$	48,507
Change in net interest income	Change in net interest income	$	96,479		$	49,570		$	46,909	$	158,397		$	98,647		$	59,750									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 ~~second~~third quarters and first ~~halves~~nine months of 2022 and 2021:

($ in thousands) Three Months Ended June 30, Six Months Ended June 30,
2022 2021 % Change 2022 2021 % Change
Lending fees $ 20,142 $ 21,092 (5) % $ 39,580 $ 39,449 0 %
Deposit account fees 22,372 17,342 29 % 42,687 32,725 30 %
Interest rate contracts and other derivative income (loss) 9,801 (3,172) 409 % 20,934 13,825 51 %
Foreign exchange income 11,361 13,007 (13) % 24,060 22,533 7 %
Wealth management fees 6,539 7,951 (18) % 12,591 14,862 (15) %
Net gains on sales of loans 917 1,491 (38) % 3,839 3,272 17 %
Gains on sales of AFS debt securities 28 632 (96) % 1,306 824 58 %
Other investment income 4,863 7,596 (36) % 6,490 8,521 (24) %
Other income 2,421 2,492 (3) % 6,700 5,286 27 %
Total noninterest income $ 78,444 $ 68,431 15 % $ 158,187 $ 141,297 12 %



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

	2022		2021		% Change	2022		2021		% Change
Lending fees	$	20,289	$	17,516	16%	$	59,869	$	56,965	5%
Deposit account fees	23,636		18,508		28%	66,323		51,233		29%
Interest rate contracts and other derivative income	8,761		7,156		22%	29,695		20,981		42%
Foreign exchange income	10,083		13,101		(23)%	34,143		35,634		(4)%
Wealth management fees	8,903		5,598		59%	21,494		20,460		5%
Net gains on sales of loans	2,129		3,329		(36)%	5,968		6,601		(10)%
Gains on sales of AFS debt securities	—		354		(100)%	1,306		1,178		11%


Other investment (loss) income	(580)		5,349		(111)%	5,910		13,870		(57)%
Other income	2,331		2,198		6%	9,031		7,484		21%
Total noninterest income	$	75,552	$	73,109	3%	$	233,739	$	214,406	9%

6973

Noninterest income comprised ~~14%~~12% and ~~15%~~14% of total revenue for the ~~second~~third quarter and the first ~~half~~nine months of 2022, respectively, compared with ~~15% and~~ 16% for both the ~~second~~third quarter and ~~the~~ first ~~half~~nine months of 2021, respectively. ~~Second~~Third quarter 2022 noninterest income was ~~$78.4~~$75.6 million, an increase of ~~$10.0~~$2.4 million or ~~15%~~3%, compared with ~~$68.4~~$73.1 million for the same period in 2021. This increase was primarily due to increases in ~~interest rate contracts~~deposit account fees, wealth management fees and ~~other derivative income, and deposit account~~lending fees, partially offset by ~~decreases in~~ other investment ~~income,~~loss and a decrease in foreign exchange ~~income and wealth management fees.~~income. Noninterest income for the first ~~half~~nine months of 2022 was ~~$158.2~~$233.7 million, an increase of ~~$16.9~~$19.3 million or ~~12%~~9%, compared with ~~$141.3~~$214.4 million for the same period in 2021. This increase was primarily due to increases in deposit account fees, interest rate contracts and other derivative ~~income,~~income; and ~~foreign exchange income,~~lending fees, partially offset by lower ~~wealth management~~other investment 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 other ~~investment income.~~loan fees. For the first nine months of 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 syndication fees.

Deposit account fees were ~~$22.4~~$23.6 million for the ~~second~~third quarter of 2022, an increase of ~~$5.0~~$5.1 million or ~~29%~~28%, compared with ~~$17.3~~$18.5 million for the same period in 2021. For the first ~~half~~nine months of 2022, deposit account fees were ~~$42.7~~$66.3 million, an increase of ~~$10.0~~$15.1 million or ~~30%~~29%, compared with ~~$32.7~~$51.2 million for the same period in 2021. These increases were primarily driven by growth in treasury management fees from commercial ~~deposit account growth.~~deposits.

Interest rate contracts and other derivative income was ~~$9.8~~$8.8 million for the ~~second~~third quarter of 2022, an increase of $1.6 million or 22%, compared with ~~a loss of $3.2~~$7.2 million for the same period in 2021. For the first ~~half~~nine months of 2022, interest rate contracts and other derivative income was ~~$20.9~~$29.7 million, an increase of ~~$7.1~~$8.7 million or ~~51%~~42%, compared with ~~$13.8~~$21.0 million for the same period in 2021. These increases were primarily due to higher favorable credit valuation adjustments during the ~~second~~third quarter and first ~~half~~nine months of 2022, compared towith the same ~~year-ago periods.~~periods in 2021.

Foreign exchange income was ~~$11.4~~$10.1 million for the ~~second~~third quarter of 2022, a decrease of ~~$1.6~~$3.0 million or ~~13%~~23%, compared with ~~$13.0~~$13.1 million for the same period in 2021. For the first ~~half~~nine months of 2022, foreign exchange income was ~~$24.1~~$34.1 million, ~~an increase~~a decrease of $1.5 million or 7%4%, compared with ~~$22.5~~$35.6 million for the first ~~half~~nine months of 2021. The decreases for the third quarter and first nine months of 2022, compared with the prior year periods, primarily reflected increased losses on foreign exchange trades, partially offset by the favorable valuation of certain foreign currency denominated balance sheet items.

Wealth management fees were ~~$6.5~~$8.9 million for the ~~second~~third quarter of 2022, ~~a decrease~~an increase of ~~$1.4~~$3.3 million or ~~18%~~59%, compared with ~~$8.0~~$5.6 million for the same period in 2021. For the first ~~half~~nine months of 2022, wealth management fees were ~~$12.6~~$21.5 million, ~~a decrease~~an increase of ~~$2.3~~$1.0 million or ~~15%~~5%, compared with ~~$14.9~~$20.5 million for the first ~~half~~nine months of 2021. These increases were primarily due to a higher volume of customer activity.

Other investment ~~income~~loss was ~~$4.9 million~~$580 thousand for the ~~second~~third quarter of 2022, ~~a decrease of $2.7 million or 36%,~~ compared with ~~$7.6~~income of $5.3 million for the same period in 2021. For the first ~~half~~nine months of 2022, other investment income was ~~$6.5~~$5.9 million, a decrease of ~~$2.0~~$8.0 million or ~~24%, compared with $8.5~~57% from $13.9 million for the first ~~half~~nine months of 2021. ~~The~~These decreases primarily reflected ~~a decrease in~~unfavorable equity ~~pick-up and a smaller amount of~~ valuation adjustments in the Company’s CRA investments in 2022, compared with the same year-ago periods.

Noninterest Expense

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


($ in thousands)	($ in thousands)	Three Months Ended June 30,						Six Months Ended June 30,						($ in thousands)	Three Months Ended September 30,									Nine Months Ended September 30,
		2022		2021		%		2022		2021		%				($ in thousands)		2022				2021				%			2022				2021				%
Compensation and employee benefits	Compensation and employee benefits	$	113,364	$	105,426	8	%	$	229,633	$	213,234	8	%					$	127,580			$	105,751			21	%		$	357,213			$	318,985			12	%
Occupancy and equipment expense	Occupancy and equipment expense	15,469		15,377		1	%	30,933		31,299		(1)	%				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	4,927		4,274		15	%	9,644		8,150		18	%				Deposit insurance premiums and regulatory assessments			4,875				4,641			5	%			14,519				12,791			14	%
Deposit account expense	Deposit account expense	5,671		3,817		49	%	10,364		7,709		34	%				Deposit account expense			6,707				4,136			62	%			17,071				11,845			44	%
Data processing	Data processing	3,486		4,035		(14)	%	7,151		8,513		(16)	%				Data processing			3,725				3,575			4	%			10,876				12,088			(10)	%
Computer software expense	Computer software expense	6,572		7,521		(13)	%	13,866		14,680		(6)	%				Computer software expense			6,889				8,426			(18)	%			20,755				23,106			(10)	%
Consulting expense	Consulting expense	2,021		1,868		8	%	3,854		3,343		15	%				Consulting expense			1,620				1,635			(1)	%			5,474				4,978			10	%
Legal expense	Legal expense	1,047		1,975		(47)	%	1,765		3,477		(49)	%				Legal expense			689				2,363			(71)	%			2,454				5,840			(58)	%
Other operating expense	Other operating expense	29,324		17,939		63	%	50,221		37,546		34	%				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	14,979		27,291		(45)	%	28,879		52,649		(45)	%				Amortization of tax credit and other investments			19,874				38,008			(48)	%			48,753				90,657			(46)	%

Total noninterest expense	Total noninterest expense	$	196,860	$	189,523	4	%	$	386,310	$	380,600	2	%				Total noninterest expense			$	215,973			$	205,384		5	%			$	602,283			$	585,984		3	%

~~Second~~Third quarter 2022 noninterest expense was ~~$196.9~~$216.0 million, an increase of ~~$7.3~~$10.6 million or 4%5%, compared with ~~$189.5~~$205.4 million for the same period in 2021. First ~~half~~nine months of 2022 noninterest expense was ~~$386.3~~$602.3 million, an increase of ~~$5.7~~$16.3 million or 2%3%, compared with ~~$380.6~~$586.0 million for the same period in 2021. ~~The~~These increases ~~in both the second quarter and the first half of 2022,~~ were primarily due to ~~increases in other operating expense and~~higher compensation and employee benefits and other operating expense, partially offset by a decrease in the amortization of tax credit and other investments.

Compensation and employee benefits ~~was $113.4~~were $127.6 million for the ~~second~~third quarter of 2022, an increase of ~~$7.9~~$21.8 million or 8%21%, compared with ~~$105.4~~$105.8 million for the same period in ~~2021, primarily due to headcount growth and higher bonus accrual. First half~~2021. For the first nine months of 2022, compensation and employee benefits ~~was $229.6~~were $357.2 million, an increase of ~~$16.4~~$38.2 million or 8%12%, compared with ~~$213.2~~$319.0 million for the ~~first half of 2021,~~same period in 2021. These increases were primarily due to headcount growth and the year-over-year change in deferred loan costs.

Other operating expense was ~~$29.3~~$28.1 million for the ~~second~~third quarter of 2022, an increase of ~~$11.4~~$7.1 million or ~~63%~~34%, compared with ~~$17.9~~$21.0 million for the same period in 2021, primarily due to ~~the write-downs of other foreclosed assets~~a reduction in foreclosure related gains and ~~miscellaneous operational losses.~~interest expense paid on cash collateral. For the first ~~half~~nine months of 2022, other operating expense was ~~$50.2~~$78.3 million, an increase of ~~$12.7~~$19.8 million or 34%, compared with ~~$37.5~~$58.5 million for the same period in 2021, primarily due to increased charitable contributions, foreclosure expenses, miscellaneous operational losses ~~increased charitable contributions, travel~~ and ~~loan related~~travel-related expenses.

Amortization of tax credit and other investments was ~~$15.0~~$19.9 million for the ~~second~~third quarter of 2022, a decrease of ~~$12.3~~$18.1 million or ~~45%~~48%, compared with ~~$27.3~~$38.0 million for the same period in 2021. For the first ~~half~~nine months of 2022, amortization of tax credit and other investments was ~~$28.9~~$48.8 million, a decrease of ~~$23.8~~$41.9 million or ~~45%~~46%, compared with ~~$52.6~~$90.7 million for the same period in 2021. The year-over-year change reflects the mix of tax credits being recognized, which have differing amortization periods, as well as the impact of investments that close in a given period.

Income Taxes


($ in thousands)	($ in thousands)	Three Months Ended June 30,								Six Months Ended June 30,								($ in thousands)	Three Months Ended September 30,		Nine Months Ended September 30,
		2022			2021			% Change		2022			2021			% Change				($ in thousands)			2022					2021					% Change			2022					2021					% Change
Income before income taxes	Income before income taxes	$	341,036		$	270,381		26	%	$	638,942		$	505,865		26	%						$	384,388				$	273,431				41	%		$	1,023,330				$	779,296				31	%
Income tax expense	Income tax expense	$	82,707		$	45,639		81	%	$	142,961		$	76,129		88	%					Income tax expense			$	89,049				$	47,982			86	%			$	232,010				$	124,111			87	%
Effective tax rate	Effective tax rate	24.3		%	16.9		%			22.4		%	15.0		%							Effective tax rate			23.2		%			17.5		%						22.7		%			15.9		%

~~Second~~Third quarter 2022 income tax expense was ~~$82.7~~$89.0 million and the effective tax rate was ~~24.3%~~23.2%, compared with ~~second~~third quarter 2021 income tax expense of ~~$45.6~~$48.0 million and an effective tax rate of ~~16.9%~~17.5%. For the first ~~half~~nine months of 2022, income tax expense was ~~$143.0~~$232.0 million and the effective tax rate was ~~22.4%~~22.7%, compared with income tax expense of ~~$76.1~~$124.1 million and an effective tax rate of ~~15.0%~~15.9% for the same period in 2021. The year-over-year increases in the income tax expense and the effective tax rate reflected a higher level of income before income taxes and a decrease in tax credits recognized in 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 14 — Business Segments to the Consolidated Financial Statements in this Form 10-Q.

Segment net interest income represents the difference between actual interest earned on assets and interest incurred on liabilities of the 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 June 30,												($ in thousands)	Three Months Ended September 30,
		Consumer and Business Banking				Commercial Banking				Other					Consumer and Business Banking				Commercial Banking				Other
		2022		2021		2022		2021		2022		2021			2022		2021		2022		2021		2022		2021
Total revenue (loss) (1)	Total revenue (loss) (1)	$	312,757	$	198,107	$	278,996	$	225,370	$	(40,357)	$	21,427	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	2,898		2,358		10,602		(17,358)		—		—		Provision for (reversal of) credit losses	8,974		1,293		18,026		(11,293)		—		—

Noninterest expense	Noninterest expense	94,295		87,650		81,023		64,164		21,542		37,709		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)	215,564		108,099		187,371		178,564		(61,899)		(16,282)		Segment income (loss) before income taxes (1)	244,251		106,909		172,225		177,625		(32,088)		(11,103)

Segment net income (loss) (1)	Segment net income (loss) (1)	$	153,549	$	77,429	$	133,861	$	127,873	$	(29,081)	$	19,440	Segment net income (loss) (1)	$	173,982	$	76,577	$	122,869	$	126,984	$	(1,512)	$	21,888


($ in thousands)	($ in thousands)	Six Months Ended June 30,												($ in thousands)	Nine Months Ended September 30,
		Consumer and Business Banking				Commercial Banking				Other					Consumer and Business Banking				Commercial Banking				Other
		2022		2021		2022		2021		2022		2021			2022		2021		2022		2021		2022		2021
Total revenue (loss) (1)	Total revenue (loss) (1)	$	551,170	$	371,448	$	536,150	$	449,858	$	(40,568)	$	50,159	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	6,002		(1,891)		15,498		(13,109)		—		—		Provision for (reversal of) credit losses	14,976		(598)		33,524		(24,402)		—		—

Noninterest expense	Noninterest expense	190,390		176,936		154,418		133,421		41,502		70,243		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)	354,778		196,403		366,234		329,546		(82,070)		(20,084)		Segment income (loss) before income taxes (1)	599,029		303,312		538,459		503,281		(114,158)		(27,297)

Segment net income (loss) (1)	Segment net income (loss) (1)	$	252,713	$	140,680	$	261,368	$	236,080	$	(18,100)	$	52,976	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 ~~second~~third quarter and ~~first half~~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. 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 June 30,
Change from 2021
2022 2021 $ %
Net interest income before provision for credit losses $ 284,373 $ 173,775 $ 110,598 64 %
Noninterest income (1)
28,384 24,332 4,052 17 %
Total revenue (1)
312,757 198,107 114,650 58 %
Provision for credit losses 2,898 2,358 540 23 %
Noninterest expense 94,295 87,650 6,645 8 %
Segment income before income taxes (1)
215,564 108,099 107,465 99 %
Income tax expense 62,015 30,670 31,345 102 %
Segment net income (1)
$ 153,549 $ 77,429 $ 76,120 98 %
Average loans $ 15,314,974 $ 13,866,502 $ 1,448,472 10 %
Average deposits $ 33,429,541 $ 31,146,296 $ 2,283,245 7 %

($ in thousands) Six Months Ended June 30,
Change from 2021
2022 2021 $ %
Net interest income before provision for (reversal of) credit losses $ 497,587 $ 323,674 $ 173,913 54 %
Noninterest income (1)
53,583 47,774 5,809 12 %
Total revenue (1)
551,170 371,448 179,722 48 %
Provision for (reversal of) credit losses 6,002 (1,891) 7,893 417 %
Noninterest expense 190,390 176,936 13,454 8 %
Segment income before income taxes (1)
354,778 196,403 158,375 81 %
Income tax expense 102,065 55,723 46,342 83 %
Segment net income (1)
$ 252,713 $ 140,680 $ 112,033 80 %
Average loans $ 14,962,667 $ 13,584,892 $ 1,377,775 10 %
Average deposits $ 33,272,553 $ 30,688,116 $ 2,584,437 8 %



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

Consumer and Business Banking segment net income increased ~~$76.1~~$97.4 million or ~~98%~~127% year-over-year to ~~$153.5~~$174.0 million for the ~~second~~third quarter of 2022, and ~~$112.0~~$209.4 million or ~~80%~~96% year-over-year to ~~$252.7~~$426.7 million for the first ~~half~~nine months of 2022. The increases in both periods reflected revenue growth, partially offset by higher income tax expense and noninterest expense. Net interest income before provision for credit losses increased ~~$110.6~~$149.7 million or ~~64%~~85% year-over-year to ~~$284.4~~$326.4 million for the ~~second~~third quarter of 2022, and ~~$173.9~~$323.6 million or ~~54%~~65% year-over-year to ~~$497.6~~$824.0 million for the first ~~half~~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 from growth in residential mortgage loans. Noninterest expense increased ~~$6.6~~$13.4 million or 8%15% year-over-year to ~~$94.3~~$104.0 million for the ~~second~~third quarter of 2022, and ~~$13.5~~$26.9 million or 8%10% year-over-year to ~~$190.4~~$294.4 million for the first ~~half~~nine months of 2022. The increases in both periods primarily reflected higher compensation and employee benefits ~~expense, and higher allocated corporate overhead.~~expense.

Commercial Banking

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


($ in thousands)	($ in thousands)	Three Months Ended June 30,								($ in thousands)	Three Months Ended September 30,
						Change from 2021									Change from 2021
		2022		2021		$		%			2022		2021		$		%
Net interest income before provision for (reversal of) credit losses	Net interest income before provision for (reversal of) credit losses	$	230,964	$	192,696	$	38,268	20	%	Net interest income before provision for (reversal of) credit losses	$	222,996	$	189,791	$	33,205	17	%
Noninterest income (1)	Noninterest income (1)	48,032		32,674		15,358		47	%	Noninterest income (1)	48,641		43,272		5,369		12	%
Total revenue (1)	Total revenue (1)	278,996		225,370		53,626		24	%	Total revenue (1)	271,637		233,063		38,574		17	%
Provision for (reversal of) credit losses	Provision for (reversal of) credit losses	10,602		(17,358)		27,960		161	%	Provision for (reversal of) credit losses	18,026		(11,293)		29,319		260	%
Noninterest expense	Noninterest expense	81,023		64,164		16,859		26	%	Noninterest expense	81,386		66,731		14,655		22	%
Segment income before income taxes (1)	Segment income before income taxes (1)	187,371		178,564		8,807		5	%	Segment income before income taxes (1)	172,225		177,625		(5,400)		(3)	%
Income tax expense	Income tax expense	53,510		50,691		2,819		6	%	Income tax expense	49,356		50,641		(1,285)		(3)	%
Segment net income (1)	Segment net income (1)	$	133,861	$	127,873	$	5,988	5	%	Segment net income (1)	$	122,869	$	126,984	$	(4,115)	(3)	%
Average loans	Average loans	$	29,311,514	$	25,755,768	$	3,555,746	14	%	Average loans	$	30,449,108	$	25,773,521	$	4,675,587	18	%
Average deposits	Average deposits	$	17,539,067	$	16,429,188	$	1,109,879	7	%	Average deposits	$	16,627,353	$	18,275,884	$	(1,648,531)	(9)	%


($ in thousands)	($ in thousands)	Six Months Ended June 30,								($ in thousands)	Nine Months Ended September 30,
						Change from 2021									Change from 2021
		2022		2021		$		%			2022		2021		$		%
Net interest income before provision for (reversal of) credit losses	Net interest income before provision for (reversal of) credit losses	$	439,041	$	369,788	$	69,253	19	%	Net interest income before provision for (reversal of) credit losses	$	662,037	$	559,579	$	102,458	18	%
Noninterest income (1)	Noninterest income (1)	97,109		80,070		17,039		21	%	Noninterest income (1)	145,750		123,342		22,408		18	%
Total revenue (1)	Total revenue (1)	536,150		449,858		86,292		19	%	Total revenue (1)	807,787		682,921		124,866		18	%
Provision for (reversal of) credit losses	Provision for (reversal of) credit losses	15,498		(13,109)		28,607		218	%	Provision for (reversal of) credit losses	33,524		(24,402)		57,926		237	%
Noninterest expense	Noninterest expense	154,418		133,421		20,997		16	%	Noninterest expense	235,804		204,042		31,762		16	%
Segment income before income taxes (1)	Segment income before income taxes (1)	366,234		329,546		36,688		11	%	Segment income before income taxes (1)	538,459		503,281		35,178		7	%
Income tax expense	Income tax expense	104,866		93,466		11,400		12	%	Income tax expense	154,222		143,006		11,216		8	%
Segment net income (1)	Segment net income (1)	$	261,368	$	236,080	$	25,288	11	%	Segment net income (1)	$	384,237	$	360,275	$	23,962	7	%
Average loans	Average loans	$	28,413,731	$	25,593,363	$	2,820,368	11	%	Average loans	$	29,099,646	$	25,654,076	$	3,445,570	13	%
Average deposits	Average deposits	$	17,637,251	$	15,766,127	$	1,871,124	12	%	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 ~~second~~third quarter and ~~first half~~nine months of 2021 have been reclassified to reflect these allocation changes for comparability.

Commercial Banking segment net income ~~increased $6.0~~decreased $4.1 million or 5%3%, year-over-year to ~~$133.9~~$122.9 million for the ~~second~~third quarter of 2022, due to increases in provision for credit losses and ~~$25.3~~noninterest expense, partially offset by revenue growth. For the first nine months of 2022, this segment’s net income increased $24.0 million or ~~11%~~7% year-over-year to ~~$261.4 million for the first half of 2022. The increases in both periods~~$384.2 million. This increase reflected revenue growth, partially offset by higher provision for credit losses and noninterest expense. Net interest income before provision for credit losses increased ~~$38.3~~$33.2 million or ~~20%~~17% year-over-year to ~~$231.0~~$223.0 million for the ~~second~~third quarter of 2022, and ~~$69.3~~$102.5 million or ~~19%~~18% year-over-year to ~~$439.0~~$662.0 million for the first ~~half~~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 ~~$28.0~~$29.3 million or ~~161%~~260% year-over-year to ~~$10.6~~$18.0 million for the ~~second~~third quarter of 2022, and ~~$28.6~~$57.9 million or ~~218%~~237% year-over-year to ~~$15.5~~$33.5 million for the first ~~half~~nine months of 2022, primarily driven by the current macroeconomic outlook and commercial loan ~~growth and a~~ ~~weakening~~ ~~economic outlook, partially offset by lower net charge-offs.~~growth. Noninterest expense increased ~~$16.9~~$14.7 million or ~~26%~~22% year-over-year to ~~$81.0~~$81.4 million for the ~~second~~third quarter of 2022, primarily due to higher compensation and employee benefits and higher corporate overhead allocations. For the first nine months of 2022, this segment’s noninterest expense increased ~~$21.0~~$31.8 million or 16% year-over-year to ~~$154.4~~$235.8 million, ~~for the first half of 2022. The increases in both periods were~~ driven by ~~higher~~increases in compensation and employee benefits, ~~miscellaneous operational losses and write-downs on other foreclosed assets, and higher~~ corporate overhead ~~allocations.~~allocations and 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.

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


($ in thousands)	($ in thousands)	Three Months Ended June 30,								($ in thousands)	Three Months Ended September 30,
						Change from 2021									Change from 2021
		2022		2021		$		%			2022		2021		$		%
Net interest (loss) income before provision for credit losses		$	(42,385)	$	10,002	$	(52,387)	(524)	%
Noninterest income		2,028		11,425		(9,397)		(82)	%
Net interest income before provision for credit losses										Net interest income before provision for credit losses	$	2,402	$	29,237	$	(26,835)	(92)	%
Noninterest (loss) income										Noninterest (loss) income	(3,908)		7,738		(11,646)		(151)	%
Total (loss) revenue	Total (loss) revenue	(40,357)		21,427		(61,784)		(288)	%	Total (loss) revenue	(1,506)		36,975		(38,481)		(104)	%

Noninterest expense	Noninterest expense	21,542		37,709		(16,167)		(43)	%	Noninterest expense	30,582		48,078		(17,496)		(36)	%
Segment loss before income taxes	Segment loss before income taxes	(61,899)		(16,282)		(45,617)		280	%	Segment loss before income taxes	(32,088)		(11,103)		(20,985)		189	%
Income tax (benefit) expense		(32,818)		(35,722)		2,904		(8)	%
Income tax benefit										Income tax benefit	(30,576)		(32,991)		2,415		(7)	%
Segment net (loss) income	Segment net (loss) income	$	(29,081)	$	19,440	$	(48,521)	(250)	%	Segment net (loss) income	$	(1,512)	$	21,888	$	(23,400)	(107)	%

Average deposits	Average deposits	$	3,161,242	$	2,605,505	$	555,737	21	%	Average deposits	$	4,152,463	$	2,704,070	$	1,448,393	54	%


($ in thousands)	($ in thousands)	Six Months Ended June 30,								($ in thousands)	Nine Months Ended September 30,
						Change from 2021									Change from 2021
		2022		2021		$		%			2022		2021		$		%
Net interest (loss) income before provision for credit losses	Net interest (loss) income before provision for credit losses	$	(48,063)	$	36,706	$	(84,769)	(231)	%	Net interest (loss) income before provision for credit losses	$	(45,661)	$	65,943	$	(111,604)	(169)	%
Noninterest income	Noninterest income	7,495		13,453		(5,958)		(44)	%	Noninterest income	3,587		21,191		(17,604)		(83)	%
Total (loss) revenue	Total (loss) revenue	(40,568)		50,159		(90,727)		(181)	%	Total (loss) revenue	(42,074)		87,134		(129,208)		(148)	%

Noninterest expense	Noninterest expense	41,502		70,243		(28,741)		(41)	%	Noninterest expense	72,084		114,431		(42,347)		(37)	%
Segment loss before income taxes	Segment loss before income taxes	(82,070)		(20,084)		(61,986)		309	%	Segment loss before income taxes	(114,158)		(27,297)		(86,861)		318	%
Income tax (benefit) expense		(63,970)		(73,060)		9,090		(12)	%
Income tax benefit										Income tax benefit	(94,546)		(104,950)		10,404		(10)	%
Segment net (loss) income	Segment net (loss) income	$	(18,100)	$	52,976	$	(71,076)	(134)	%	Segment net (loss) income	$	(19,612)	$	77,653	$	(97,265)	(125)	%

Average deposits	Average deposits	$	3,168,083	$	2,566,555	$	601,528	23	%	Average deposits	$	3,499,816	$	2,612,897	$	886,919	34	%

The Other segment reported segment loss before income taxes of $32.1 million and segment net loss ~~was $29.1~~of $1.5 million for the ~~second~~third quarter of 2022, ~~a decrease~~reflecting an income tax benefit of ~~$48.5 million from net income of $19.4 million for the same period in 2021.~~$30.6 million. For the first ~~half~~nine months of 2022, the Other segment reported segment loss before income taxes of $114.2 million and segment net loss ~~was $18.1~~of $19.6 million, ~~a decrease~~reflecting an income tax benefit of ~~$71.1 million from net~~$94.5 million. The increases in segment losses before income ~~of $53.0 million~~taxes for ~~the same period in 2021. The decreases in~~ both periods were primarily driven by lower revenue, partially offset by ~~lower~~decreases in noninterest expense. ~~For the second quarter of 2022, the Other segment recorded a net interest loss before provision for credit losses of $42.4~~The $26.8 million ~~a $52.4~~and $111.6 million ~~decrease from $10.0 million of~~decreases in net interest income before provision for credit losses infor the ~~second~~third quarter ~~of 2021. For the~~and first ~~half~~nine months of 2022, respectively, compared to the Other segment recorded a net interest loss before provision for credit losses of $48.1 million, an $84.8 million decrease from $36.7 million of net interest income before provision for credit losses in the first half of 2021. The decreases in bothsame prior year periods, were primarily driven by lower FTP spread income absorbed by the Other segment, partially offset by an increase in interest income from investments due to a higher ~~volume of~~yield on debt ~~securities. Noninterest expense decreased $16.2 million year-over-year to $21.5 million~~securities for the ~~second~~third quarter of 2022, and ~~$28.7~~a higher volume of debt securities for the first nine months of 2022. Noninterest expense decreased $17.5 million year-over-year to ~~$41.5~~$30.6 million for the third quarter of 2022, and $42.3 million year-over-year to $72.1 million for the first ~~half~~nine months of 2022, primarily due to lower amortization of tax credits and other investments.

The income tax expense or benefit in the Other segment 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 applying statutory income tax rates to 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 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.

While the Company intends to hold its debt securities indefinitely, it may sell AFS securities in response to changes in the 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 as of ~~June~~September 30, 2022 and December 31, 2021, and by credit ratings as of ~~June~~September 30, 2022:


($ in thousands)	($ in thousands)	June 30, 2022						December 31, 2021							Ratings as of June 30, 2022 (1)							($ in thousands)	September 30, 2022						December 31, 2021								Ratings as of September 30, 2022 (1)
		Amortized Cost		Fair Value		% of Fair Value			Amortized Cost		Fair Value		% of Fair Value			AAA/AA		A		BBB				No Rating (2)		($ 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	$	676,320	$	624,686	10	%		$	1,049,238	$	1,032,681	10	%		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	324,463		285,245		5	%		1,333,984		1,301,971		13	%		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	2,711,474		2,474,072		40	%		4,210,832		4,157,263		42	%		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	Municipal securities	306,419		266,733		4	%		519,381		523,158		5	%		91	%	5	%	—	%			4	%	Municipal securities	307,084		249,502		4	%	519,381		523,158		5	%	91	%	5	%	—	%	—	%	4	%
Non-agency mortgage-backed securities	Non-agency mortgage-backed securities	1,259,212		1,138,757		18	%		1,388,857		1,378,374		14	%		83	%	—	%	—	%			17	%	Non-agency mortgage-backed securities	1,233,490		1,069,513		18	%	1,388,857		1,378,374		14	%	82	%	—	%	—	%	—	%	18	%
Corporate debt securities	Corporate debt securities	673,502		559,293		9	%		657,516		649,665		6	%		—	%	31	%	69	%			—	%	Corporate debt securities	673,502		529,565		9	%	657,516		649,665		6	%	—	%	31	%	67	%	2	%	—	%
Foreign government bonds	Foreign government bonds	253,118		242,997		4	%		260,447		257,733		3	%		45	%	55	%	—	%			—	%	Foreign government bonds	238,720		225,810		4	%	260,447		257,733		3	%	47	%	53	%	—	%	—	%	—	%
Asset-backed securities	Asset-backed securities	69,764		67,350		1	%		74,674		74,558		1	%		100	%	—	%	—	%			—	%	Asset-backed securities	66,793		64,870		1	%	74,674		74,558		1	%	100	%	—	%	—	%	—	%	—	%
Collateralized loan obligations (“CLOs”)	Collateralized loan obligations (“CLOs”)	617,250		596,371		9	%		592,250		589,950		6	%		96	%	4	%	—	%			—	%	Collateralized loan obligations (“CLOs”)	617,250		590,415		10	%	592,250		589,950		6	%	96	%	4	%	—	%	—	%	—	%
Total AFS debt securities	Total AFS debt securities	$	6,891,522	$	6,255,504	100	%		$	10,087,179	$	9,965,353	100	%		85	%	6	%	6	%			3	%	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:																									HTM debt securities:
U.S. Treasury securities	U.S. Treasury securities	$	521,352	$	486,521	18	%		$	—	$	—	—	%		100	%	—	%	—	%			—	%	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	997,369		853,078		32	%		—		—		—	%		100	%	—	%	—	%			—	%	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	1,319,502		1,160,302		44	%		—		—		—	%		100	%	—	%	—	%			—	%	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	190,079		156,648		6	%		—		—		—	%		100	%	—	%	—	%			—	%	Municipal securities	189,897		144,094		6	%	—		—		—	%	100	%	—	%	—	%	—	%	—	%
Total HTM debt securities	Total HTM debt securities	$	3,028,302	$	2,656,549	100	%		$	—	$	—	—	%		100	%	—	%	—	%			—	%	Total HTM debt securities	$	3,012,667	$	2,459,135	100	%	$	—	$	—	—	%	100	%	—	%	—	%	—	%	—	%
Total debt securities	Total debt securities	$	9,919,824	$	8,912,053				$	10,087,179	$	9,965,353														Total debt securities	$	9,784,021	$	8,365,225			$	10,087,179	$	9,965,353

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

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

The Company’s AFS and HTM debt securities portfolios had an effective duration, defined as the sensitivity of the value of the portfolio to interest rate changes, of ~~5.5~~5.3 as of ~~June~~September 30, 2022. This increased from 5.0 as of December 31, 2021, primarily due to both the upshifting and steepening of the yield curve.

Available-for-Sale Debt Securities

The fair value of the AFS debt securities portfolio totaled ~~$6.26~~$5.91 billion as of ~~June~~September 30, 2022, a decrease of ~~$3.71~~$4.06 billion or ~~37%~~41% from $9.97 billion as of December 31, 2021. The decrease was primarily due to the Company’s transfer of $3.01 billion of AFS securities to HTM securities during the first quarter of 2022 and a decline in the portfolio valuation within the 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 noncredit-related unrealized gains and losses, net of tax, reported in Other comprehensive (loss) income on the Consolidated Statement of Comprehensive Income. Pre-tax net unrealized losses on AFS debt securities were ~~$636.0~~$865.3 million as of ~~June~~September 30, 2022, compared with $121.8 million as of December 31, 2021.

7680

As of ~~June~~September 30, 2022, ~~97%~~96% of the carrying value of the AFS debt securities portfolio was rated investment grade by NRSROs, compared with 98% as of December 31, 2021. Of the AFS debt securities with gross unrealized losses, substantially all were rated investment grade as of ~~June~~September 30, 2022 and December 31, 2021. There was no allowance for credit losses as of ~~June~~September 30, 2022 and December 31, 2021, provided against the AFS debt securities. Additionally, there were no credit losses recognized in earnings for both the ~~second~~third quarters and first ~~halves~~nine months of 2022 and 2021. For additional discussion on the allowance for credit losses, see Note 5 — Securities — Allowance for Credit Losses on Available-for-Sale Debt Securities to the Consolidated Financial Statements in this Form 10-Q.

Held-to-Maturity Debt Securities

During the first quarter of 2022, the Company transferred $3.01 billion in aggregate fair value of U.S. Treasury, government agency and government-sponsored enterprise debt and mortgage-back securities, and municipal securities from AFS to HTM. In comparison, there were no 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 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 ~~June~~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-Q.

For additional information on AFS and HTM securities, see Note 1 — Summary of Significant Accounting Policies to the Consolidated Financial Statements in the Company’s 2021 Form 10-K and Note 2 — Current Accounting Developments and Summary of Significant Accounting Policies, 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.

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, construction and land loans, and consumer loans, which consist of single-family residential, home equity lines of credit (“HELOCs”), and other consumer loans. Total net loans were ~~$45.97~~$46.87 billion as of ~~June~~September 30, 2022, an increase of ~~$4.81~~$5.72 billion or ~~12%~~14% from $41.15 billion as of December 31, 2021. This increase was primarily driven by well-diversified growth throughout our major loan categories including increases of ~~$2.35~~$2.53 billion or ~~15%~~16% in total CRE loans, ~~$1.28~~$1.80 billion or ~~11%~~16% in residential mortgage loans, and ~~$1.25~~$1.47 billion or 9%10% in C&I loans. The composition of the loan portfolio as of ~~June~~September 30, 2022 was similar to the composition as of December 31, 2021.

7781

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


($ in thousands)	($ in thousands)	June 30, 2022				December 31, 2021				($ in thousands)		September 30, 2022						December 31, 2021
		Amount		%		Amount		%			($ in thousands)			Amount			%			Amount			%
Commercial:	Commercial:
C&I (1)	C&I (1)	$	15,377,117	33	%	$	14,150,608	34	%				C&I (1)		$	15,625,072		33	%		$	14,150,608		34	%
CRE:	CRE:												CRE:
CRE	CRE	13,566,748		29	%	12,155,047		29	%				CRE		13,573,157			28	%		12,155,047			29	%
Multifamily residential	Multifamily residential	4,443,704		10	%	3,675,605		9	%				Multifamily residential		4,559,302			10	%		3,675,605			9	%
Construction and land	Construction and land	515,857		1	%	346,486		1	%				Construction and land		556,894			1	%		346,486			1	%
Total CRE	Total CRE	18,526,309		40	%	16,177,138		39	%				Total CRE		18,689,353			39	%		16,177,138			39	%
Total commercial	Total commercial	33,903,426		73	%	30,327,746		73	%				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	10,234,473		22	%	9,093,702		22	%				Single-family residential		10,855,345			23	%		9,093,702			22	%
HELOCs	HELOCs	2,280,080		5	%	2,144,821		5	%				HELOCs		2,184,924			5	%		2,144,821			5	%
Total residential mortgage	Total residential mortgage	12,514,553		27	%	11,238,523		27	%				Total residential mortgage		13,040,269			28	%		11,238,523			27	%
Other consumer	Other consumer	84,097		0	%	127,512		0	%				Other consumer		87,561			0	%		127,512			0	%
Total consumer	Total consumer	12,598,650		27	%	11,366,035		27	%				Total consumer		13,127,830			28	%		11,366,035			27	%
Total loans held-for-investment (2)	Total loans held-for-investment (2)	46,502,076		100	%	41,693,781		100	%				Total loans held-for-investment (2)		47,442,255			100	%		41,693,781			100	%
Allowance for loan losses	Allowance for loan losses	(563,270)				(541,579)							Allowance for loan losses		(582,517)						(541,579)
Loans held-for-sale (3)	Loans held-for-sale (3)	28,464				635							Loans held-for-sale (3)		14,500						635
Total loans, net	Total loans, net	$	45,967,270			$	41,152,837						Total loans, net		$	46,874,238					$	41,152,837

(1)Includes ~~$153.3~~$110.9 million and $534.2 million of ~~PPP~~Paycheck Protection Program (“PPP”) loans as of ~~June~~September 30, 2022 and December 31, 2021, respectively.

(2)Includes ~~$(56.2)~~$(60.3) million and $(50.7) million of net deferred loan fees and net unamortized premiums as of ~~June~~September 30, 2022 and December 31, 2021, respectively.

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

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

In response to the COVID-19 pandemic, the Company assisted customers by offering Small Business Administration (“SBA”) PPP loans to help struggling businesses in our communities pay their employees and sustain their businesses. The SBA stopped accepting new loan applications on May 31, 2021. As of June 30, 2022, the Company had PPP loans outstanding totaling $153.3 million, which were recorded in the C&I portfolio. During the first half of 2022, the Company submitted and received SBA approval for the forgiveness of PPP loans totaling $356.4 million. For more information on PPP loans, refer to ~~Note 1 — Summary of Significant Accounting Policies — Significant Accounting Policies — Paycheck Protection Program~~ ~~to the Consolidated Financial Statements in the Company’s 2021 Form 10-K.~~

~~In addition, the Company provided payment relief through various loan modification programs, which expired on January 1, 2022. Refer to~~ ~~Item 2. MD&A — Risk Management — Credit Risk Management~~ ~~in this Form 10-Q for details.~~

Commercial

The commercial loan portfolio comprised 72% and 73% of total loans as of ~~both June~~September 30, 2022 and December 31, ~~2021.~~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 ~~$22.04~~$22.21 billion as of ~~June~~September 30, 2022, an increase of ~~$1.75~~$1.92 billion or 9% from $20.29 billion as of December 31, 2021. Total C&I loans were ~~$15.38~~$15.63 billion as of ~~June~~September 30, 2022, an increase of ~~$1.23~~$1.47 billion or 9%10% from $14.15 billion. Total C&I loans made up 33% and 34% of total loans held-for-investment as of ~~June~~September 30, 2022 and December 31, 2021, respectively. The C&I loan portfolio includes loans and financing for businesses in a wide spectrum of industries, comprised of working capital lines of credit, trade finance, letters of credit, affordable housing lending, asset-based lending, asset-backed finance, project finance and equipment financing. The C&I loan portfolio also includes PPP loans. Additionally, the Company has a portfolio of broadly syndicated C&I loans, which represent revolving or term loan facilities that are marketed and sold primarily to institutional investors. This portfolio totaled ~~$936.4~~$948.2 million and $939.4 million as of ~~June~~September 30, 2022 and December 31, 2021, respectively. The majority of the C&I loans had variable interest rates as of both ~~June~~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 ~~June~~September 30, 2022 and December 31, 2021.

Commercial — Total Commercial Real Estate Loans. Total CRE loans outstanding were ~~$18.53~~$18.69 billion as of ~~June~~September 30, 2022, which grew by ~~$2.35~~$2.51 billion or ~~15%,~~16% from $16.18 billion as of December 31, 2021, and accounted for ~~40% and~~ 39% of total loans held-for-investment as of ~~June~~both September 30, 2022 and December 31, ~~2021, respectively.~~2021. The total CRE loan portfolio consists of CRE, multifamily residential, and construction and land loans. The year-to-date growth in total CRE loans was primarily driven by multifamily and industrial property types.

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


($ in thousands)	($ in thousands)	June 30, 2022				December 31, 2021				($ in thousands)	September 30, 2022				December 31, 2021
		Amount		%		Amount		%			Amount		%		Amount		%
Property types:	Property types:									Property types:
Retail (1)	Retail (1)	$	4,015,944	22	%	$	3,685,900	23	%	Retail (1)	$	3,991,541	21	%	$	3,685,900	23	%
Multifamily	Multifamily	4,443,704		24	%	3,675,605		23	%	Multifamily	4,559,302		24	%	3,675,605		23	%
Office (1)	Office (1)	3,050,073		17	%	2,804,006		17	%	Office (1)	2,943,391		16	%	2,804,006		17	%
Industrial (1)	Industrial (1)	3,375,663		18	%	2,807,325		18	%	Industrial (1)	3,474,909		19	%	2,807,325		18	%
Hospitality (1)	Hospitality (1)	2,115,184		11	%	1,993,995		12	%	Hospitality (1)	2,099,226		11	%	1,993,995		12	%
Construction and land	Construction and land	515,857		3	%	346,486		2	%	Construction and land	556,894		3	%	346,486		2	%
Other (1)	Other (1)	1,009,884		5	%	863,821		5	%	Other (1)	1,064,090		6	%	863,821		5	%
Total CRE loans	Total CRE loans	$	18,526,309	100	%	$	16,177,138	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 ~~52% and~~ 51% as of ~~June~~both September 30, 2022 and December 31, ~~2021, respectively.~~2021. The low weighted-average LTV ratio was consistent across CRE property types. Approximately ~~90%~~87% and 89% of total CRE loans had an LTV ratio of 65% or lower as of ~~June~~September 30, 2022 and December 31, 2021, respectively. The consistency of the Company’s low LTV underwriting standards has historically resulted in lower credit losses for CRE and multifamily residential loans.

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


($ in thousands)	($ in thousands)	June 30, 2022																($ 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	$	7,008,837			$	2,210,717			$	172,168			$	9,391,722			Southern California	$	7,022,529			$	2,257,999			$	203,939			$	9,484,467
Northern California	Northern California	2,796,688				828,553				195,423				3,820,664				Northern California	2,802,337				871,497				209,083				3,882,917
California	California	9,805,525		72	%	3,039,270		68	%	367,591		71	%	13,212,386		72	%	California	9,824,866		72	%	3,129,496		69	%	413,022		74	%	13,367,384		72	%
Texas	Texas	1,159,905		9	%	414,697		9	%	3,868		1	%	1,578,470		9	%	Texas	1,140,975		8	%	412,316		9	%	3,037		1	%	1,556,328		8	%
New York	New York	696,957		5	%	218,493		5	%	95,248		18	%	1,010,698		5	%	New York	684,810		5	%	214,032		5	%	82,135		15	%	980,977		5	%
Washington	Washington	452,341		3	%	171,769		4	%	11,356		2	%	635,466		3	%	Washington	467,321		4	%	170,864		4	%	13,132		2	%	651,317		3	%
Nevada	Nevada	170,745		1	%	110,717		3	%	19,852		4	%	301,314		2	%	Nevada	160,055		1	%	110,203		2	%	23,693		4	%	293,951		2	%
Arizona	Arizona	196,250		2	%	81,628		2	%	—		—	%	277,878		1	%	Arizona	226,931		2	%	99,367		2	%	407		0	%	326,705		2	%
Other markets	Other markets	1,085,025		8	%	407,130		9	%	17,942		4	%	1,510,097		8	%	Other markets	1,068,199		8	%	423,024		9	%	21,468		4	%	1,512,691		8	%
Total loans	Total loans	$	13,566,748	100	%	$	4,443,704	100	%	$	515,857	100	%	$	18,526,309	100	%	Total loans	$	13,573,157	100	%	$	4,559,302	100	%	$	556,894	100	%	$	18,689,353	100	%



($ in thousands)	December 31, 2021
	CRE		%		Multifamily Residential		%		Construction and Land		%		Total CRE		%
Geographic markets:
Southern California	$	6,406,609			$	2,030,938			$	138,953			$	8,576,500
Northern California	2,622,398				748,631				109,483				3,480,512
California	9,029,007		75	%	2,779,569		77	%	248,436		70	%	12,057,012		75	%
Texas	1,005,455		8	%	308,652		8	%	1,896		1	%	1,316,003		8	%
New York	630,442		5	%	157,099		4	%	78,368		23	%	865,909		5	%
Washington	408,913		3	%	116,047		3	%	9,865		3	%	534,825		3	%
Nevada	128,395		1	%	115,163		3	%	5,775		2	%	249,333		2	%
Arizona	122,164		1	%	49,836		1	%	—		—	%	172,000		1	%
Other markets	830,671		7	%	149,239		4	%	2,146		1	%	982,056		6	%
Total loans	$	12,155,047	100	%	$	3,675,605	100	%	$	346,486	100	%	$	16,177,138	100	%

Because 72% and 75% of total CRE loans were concentrated in California as of ~~June~~September 30, 2022 and December 31, 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 from a downturn in the California real estate market, see Item 1A. Risk Factors — Risks Related to Geopolitical Uncertainties to the Company’s 2021 Form 10-K.

Commercial — Commercial Real Estate Loans. The Company focuses on providing financing to experienced real estate investors and developers who have moderate levels of leverage, many of whom are long-time customers of the Bank. CRE loans totaled $13.57 billion as of ~~June~~September 30, 2022, compared with $12.16 billion as of December 31, ~~2021,~~2021. CRE loans made up 28% and ~~accounted for~~ 29% of total loans held-for-investment as of ~~both periods.~~September 30, 2022 and December 31, 2021, respectively. Interest rates on CRE loans may be fixed, variable or hybrid. As of ~~June~~September 30, 2022, 66% of our CRE portfolio was variable rate, of which ~~49%~~48% had customer-level interest rate derivative contracts in place. These are hedging contracts offered by ~~EWB~~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 CRE loans as of ~~June~~September 30, 2022 and December 31, 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 comprised of loans secured by residential properties with five or more units. Multifamily residential loans totaled ~~$4.44~~$4.56 billion as of ~~June~~September 30, 2022, compared with $3.68 billion as of December 31, 2021, and accounted for 10% and 9% of total loans held-for-investment as of ~~June~~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 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. Construction and land loans totaled ~~$515.9~~$556.9 million as of ~~June~~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 both dates. Construction ~~loans~~loan exposure was made up of ~~$417.2~~$452.2 million in loans outstanding, plus ~~$424.9~~$613.8 million in unfunded commitments as of ~~June~~September 30, 2022, compared with $297.9 million in loans outstanding, plus $361.2 million in unfunded commitments as of December 31, 2021. Land loans totaled ~~$98.7~~$104.7 million as of ~~June~~September 30, 2022, compared with $48.6 million as of December 31, 2021.

Consumer

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


($ in thousands)	($ in thousands)	June 30, 2022												($ in thousands)	September 30, 2022
		Single-Family Residential		%		HELOCs		%		Total Residential Mortgage		%			Single-Family Residential		%		HELOCs		%		Total Residential Mortgage		%
Geographic markets:	Geographic markets:													Geographic markets:
Southern California	Southern California	$	3,893,421			$	1,026,617			$	4,920,038			Southern California	$	4,021,598			$	974,763			$	4,996,361
Northern California	Northern California	1,155,502				525,676				1,681,178				Northern California	1,252,150				512,356				1,764,506
California	California	5,048,923		48	%	1,552,293		69	%	6,601,216		53	%	California	5,273,748		48	%	1,487,119		68	%	6,760,867		52	%
New York	New York	3,581,285		35	%	307,075		13	%	3,888,360		31	%	New York	3,849,305		35	%	295,946		14	%	4,145,251		32	%
Washington	Washington	570,950		6	%	261,383		11	%	832,333		7	%	Washington	621,347		6	%	247,570		11	%	868,917		7	%
Massachusetts	Massachusetts	277,068		3	%	89,026		4	%	366,094		3	%	Massachusetts	291,154		3	%	90,052		4	%	381,206		3	%
Georgia	Georgia	275,454		3	%	25,440		1	%	300,894		2	%	Georgia	282,611		3	%	24,212		1	%	306,823		2	%
Texas	Texas	281,683		3	%	—		—	%	281,683		2	%	Texas	300,007		3	%	—		—	%	300,007		2	%
Other markets	Other markets	199,110		2	%	44,863		2	%	243,973		2	%	Other markets	237,173		2	%	40,025		2	%	277,198		2	%
Total	Total	$	10,234,473	100	%	$	2,280,080	100	%	$	12,514,553	100	%	Total	$	10,855,345	100	%	$	2,184,924	100	%	$	13,040,269	100	%
Lien priority:	Lien priority:													Lien priority:
First mortgage	First mortgage	$	10,234,473	100	%	$	1,964,856	86	%	$	12,199,329	97	%	First mortgage	$	10,855,345	100	%	$	1,855,057	85	%	$	12,710,402	97	%
Junior lien mortgage	Junior lien mortgage	—		—	%	315,224		14	%	315,224		3	%	Junior lien mortgage	—		—	%	329,867		15	%	329,867		3	%
Total	Total	$	10,234,473	100	%	$	2,280,080	100	%	$	12,514,553	100	%	Total	$	10,855,345	100	%	$	2,184,924	100	%	$	13,040,269	100	%

8185



($ in thousands)	December 31, 2021
	Single-Family Residential		%		HELOCs		%		Total Residential Mortgage		%
Geographic markets:
Southern California	$	3,520,010			$	971,731			$	4,491,741
Northern California	1,024,564				506,310				1,530,874
California	4,544,574		49	%	1,478,041		68	%	6,022,615		54	%
New York	3,102,129		34	%	292,540		14	%	3,394,669		30	%
Washington	526,721		6	%	230,294		11	%	757,015		7	%
Massachusetts	258,372		3	%	75,815		4	%	334,187		3	%
Georgia	279,328		3	%	25,208		1	%	304,536		3	%
Texas	230,402		3	%	—		—	%	230,402		2	%
Other markets	152,176		2	%	42,923		2	%	195,099		1	%
Total	$	9,093,702	100	%	$	2,144,821	100	%	$	11,238,523	100	%
Lien priority:
First mortgage	$	9,093,702	100	%	$	1,872,440	87	%	$	10,966,142	98	%
Junior lien mortgage	—		—	%	272,381		13	%	272,381		2	%
Total	$	9,093,702	100	%	$	2,144,821	100	%	$	11,238,523	100	%

Consumer — Single-Family Residential Mortgages. Single-family residential loans totaled ~~$10.23~~$10.86 billion or 23% of total loans held-for-investment as of ~~June~~September 30, 2022, compared with $9.09 billion ~~as of December 31, 2021, and accounted for~~or 22% of total loans held-for-investment as of ~~both dates.~~December 31, 2021. Year-to-date, single-family residential mortgages increased ~~$1.14~~$1.76 billion or ~~13%~~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 ~~June~~September 30, 2022 and December 31, 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 on a regular basis, typically each year, after an initial fixed rate period.

Consumer — Home Equity Lines of Credit. Total HELOC commitments were ~~$2.91~~$3.27 billion as of ~~June~~September 30, 2022, which grew by ~~$411.7~~$775.2 million or ~~17%~~31% from $2.49 billion as of December 31, 2021. Unfunded HELOC commitments are unconditionally cancellable. HELOCs outstanding totaled ~~$2.28~~$2.18 billion as of ~~June~~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 both dates. Year-to-date, HELOCs increased ~~$135.3~~$40.1 million or 6%2%, primarily driven by growth in ~~California~~Washington, Massachusetts, and ~~Washington.~~California. The Company was in a first lien position for ~~86%~~85% and 87% of total outstanding HELOCs as of ~~June~~September 30, 2022 and December 31, 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 65% or less. These loans have historically experienced low delinquency and loss rates. Substantially all of the Company’s HELOCs were variable-rate loans as of both ~~June~~September 30, 2022 and December 31, 2021.

All originated commercial and consumer loans 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 in compliance with these requirements.

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, 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 following table presents the major financial assets held in the Company’s overseas offices as of ~~June~~September 30, 2022 and December 31, 2021:


($ in thousands)	($ in thousands)	June 30, 2022				December 31, 2021				($ 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	$	813,263	1	%	$	831,283	1	%	Cash and cash equivalents	$	871,196	1	%	$	831,283	1	%
Interest-bearing deposits with banks	Interest-bearing deposits with banks	$	50,000	0	%	$	—	—	%	Interest-bearing deposits with banks	$	72,245	0	%	$	—	—	%
AFS debt securities (1)	AFS debt securities (1)	$	290,747	0	%	$	242,926	0	%	AFS debt securities (1)	$	280,817	0	%	$	242,926	0	%
Loans held-for-investment (2)	Loans held-for-investment (2)	$	1,028,028	2	%	$	849,573	1	%	Loans held-for-investment (2)	$	907,153	1	%	$	849,573	1	%
Total assets	Total assets	$	2,194,940	4	%	$	1,933,164	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	$	504,764	1	%	$	543,134	1	%	Cash and cash equivalents	$	539,133	1	%	$	543,134	1	%
Interest-bearing deposits with banks	Interest-bearing deposits with banks	$	17,460	0	%	$	51,243	0	%	Interest-bearing deposits with banks	$	13,049	0	%	$	51,243	0	%
AFS debt securities (3)	AFS debt securities (3)	$	134,605	0	%	$	141,404	0	%	AFS debt securities (3)	$	120,178	0	%	$	141,404	0	%
Loans held-for-investment (2)	Loans held-for-investment (2)	$	1,138,011	2	%	$	984,591	2	%	Loans held-for-investment (2)	$	1,192,883	2	%	$	984,591	2	%
Total assets	Total assets	$	1,780,396	3	%	$	1,709,640	3	%	Total assets	$	1,850,531	3	%	$	1,709,640	3	%

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

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

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

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


($ in thousands)	($ in thousands)	Three Months Ended June 30,								Six Months Ended June 30,								($ in thousands)	Three Months Ended September 30,								Nine Months Ended September 30,
		2022				2021				2022				2021					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	$	10,768	2	%	$	6,873	2	%	$	18,109	2	%	$	12,340	1	%	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	$	11,236	2	%	$	6,158	1	%	$	19,036	2	%	$	12,679	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 all regulatory capital guidelines. The Company engages in regular capital planning processes on at least an annual basis to optimize the use of available capital and to appropriately plan for future capital needs, allocating capital to existing and future business activities. Furthermore, the Company conducts capital stress tests as part of 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.

On March 3, 2020, the Company’s Board of Directors authorized the repurchase of $500.0 million of the Company’s common stock, of which ~~$354.0~~$254.0 million ~~was available as of March 31, 2022.~~remains available. During the second quarter of 2022, the Company repurchased $100.0 million of common stock or 1,385,517 shares, at an average price of $72.17 per share. AsThe Company did not repurchase shares during the third quarter of ~~June 30, 2022, the total remaining available capital authorized for repurchase was $254.0 million.~~2022. For additional information about the share repurchases, see Part II, Item 2. — Unregistered Sales of Equity Securities and Use of Proceeds in this Form 10-Q.

8387

The Company’s stockholders’ equity was ~~$5.61~~$5.66 billion as of ~~June~~September 30, 2022, a decrease of ~~$227.7~~$176.6 million or 4%3% from $5.84 billion as of December 31, 2021. The year-to-date decrease in the Company’s stockholders’ equity was primarily due to a negative change in AOCI of ~~$510.3~~$709.7 million, ~~$115.0~~$172.1 million in common dividends declared, and $100.0 million in common stock repurchases, partially offset by ~~$496.0~~$791.3 million in 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 ~~$39.81~~$40.17 per common share as of ~~June~~September 30, 2022, a decrease of 3%2% from $41.13 per common share as of December 31, 2021, primarily as a result of the factors described above. Tangible equity per common share was ~~$36.44~~$36.80 as of ~~June~~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 dividend of $0.40 and $0.33 per common share during the ~~second~~third quarters of 2022 and 2021, respectively. In ~~July~~October 2022, the Company’s Board of Directors declared ~~third~~fourth quarter 2022 cash dividend of $0.40 per common share. The dividend is payable on ~~August~~November 15, 2022, to stockholders of record as of ~~August~~November 1, 2022.

Deposits and Other Sources of Funding

Deposits are the Company’s primary source of funding, the cost of which has a significant impact on the Company’s net interest income and net interest margin. Additional funding is provided by short- and long-term borrowings, and long-term debt. See Item 2. MD&A — Risk Management — Liquidity Risk Management — Liquidity in this Form 10-Q for a discussion of the Company’s liquidity management. The following table summarizes the Company’s sources of funds as of ~~June~~September 30, 2022 and December 31, 2021:


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

Noninterest-bearing demand	Noninterest-bearing demand	$	23,028,831	42	%	$	22,845,464	43	%	$	183,367	1	%	Noninterest-bearing demand	$	21,645,394	40	%	$	22,845,464	43	%	$	(1,200,070)	(5)	%
Interest-bearing checking	Interest-bearing checking	7,094,726		13	%	6,524,721		12	%	570,005		9	%	Interest-bearing checking	6,822,343		13	%	6,524,721		12	%	297,622		5	%
Money market	Money market	11,814,402		22	%	13,130,300		25	%	(1,315,898)		(10)	%	Money market	12,113,292		23	%	13,130,300		25	%	(1,017,008)		(8)	%
Savings	Savings	3,027,819		6	%	2,888,065		5	%	139,754		5	%	Savings	2,917,770		5	%	2,888,065		5	%	29,705		1	%

Time deposits	Time deposits	9,377,576		17	%	7,961,982		15	%	1,415,594		18	%	Time deposits	10,358,563		19	%	7,961,982		15	%	2,396,581		30	%
Total deposits	Total deposits	$	54,343,354	100	%	$	53,350,532	100	%	$	992,822	2	%	Total deposits	$	53,857,362	100	%	$	53,350,532	100	%	$	506,830	1	%
Other Funds
Other Funds:														Other Funds:

Federal funds purchased														Federal funds purchased	$	200,000			$	—			$	200,000	100	%
FHLB advances	FHLB advances	$	174,776			$	249,331			$	(74,555)	(30)	%	FHLB advances	324,920				249,331				75,589		30	%
Repurchase agreements	Repurchase agreements	611,785				300,000				311,785		104	%	Repurchase agreements	611,785				300,000				311,785		104	%
Long-term debt	Long-term debt	147,801				147,658				143		0	%	Long-term debt	147,875				147,658				217		0	%
Total other funds	Total other funds	$	934,362			$	696,989			$	237,373	34	%	Total other funds	$	1,284,580			$	696,989			$	587,591	84	%
Total sources of funds	Total sources of funds	$	55,277,716			$	54,047,521			$	1,230,195	2	%	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 ~~$54.34~~$53.86 billion as of ~~June~~September 30, 2022, an increase of ~~$992.8~~$506.8 million or 2%1% from $53.35 billion as of December 31, 2021. The increase in deposits was primarily ~~driven by~~due to growth in time ~~and interest-bearing checking~~ deposits, partially offset by ~~a decrease~~decreases in noninterest-bearing demand and money market deposits. This move from noninterest-bearing and lower paying non-maturity deposits to time deposits was largely driven by continued increases in benchmark rates. Noninterest-bearing demand deposits comprised 40% and 43% of total deposits as of September 30, 2022 and December 31, 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

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, 2022. There was no outstanding overnight federal funds purchase as of December 31, 2021.

As of ~~June~~September 30, 2022, the Company had FHLB advances of ~~$174.8~~$324.9 million, compared with advances totaling $249.3 million as of December 31, 2021. As of ~~June~~September 30, 2022, the FHLB advances were comprised of an overnight advance of ~~$100.0~~$250.0 million with a fixed interest rate of ~~1.66%~~3.22% and a term advance of ~~$74.8~~$74.9 million with a floating interest rate of ~~1.76% and maturity~~3.25% that matures in ~~four months.~~November 2022.

Gross repurchase agreements totaled $611.8 million and $300.0 million as of ~~June~~September 30, 2022 and December 31, 2021, respectively. Resale and repurchase agreements are reported net, pursuant to Accounting Standards Codification (“ASC”) 210-20-45-11, Balance Sheet Offsetting: Repurchase and Reverse Repurchase Agreements. As of both ~~June~~September 30, 2022 and December 31, 2021, the Company did not have any gross resale agreements that were eligible for netting pursuant to ASC 210-20-45-11. The weighted-average interest rates were ~~2.70%~~2.81% and ~~2.63%~~2.57% for the ~~second~~third quarters of ~~June 30,~~ 2022 and 2021, respectively; and ~~2.66%~~2.73% and ~~2.65%~~2.62% for the first ~~half~~nine months of 2022 and 2021, respectively. As of ~~June~~September 30, 2022, gross repurchase agreements had original terms between six months and ~~10.0~~nine years and remaining maturities between ~~six~~three months and ~~1.2 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 ~~June~~September 30, 2022, the collateral for the repurchase agreements was comprised of 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 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 4 — 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 ~~$147.8~~$147.9 million and $147.7 million as of ~~June~~September 30, 2022 and December 31, 2021, respectively. Long-term debt consists of junior subordinated debt, which qualifies as Tier 2 capital for regulatory 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 weighted-average interest rates of ~~2.34%~~2.86% and ~~1.76%~~1.74% for the first ~~halves~~nine months of 2022 and 2021, respectively, with remaining maturities ranging between ~~12.4~~12.2 years and ~~15.2~~15.0 years as of ~~June~~September 30, 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 their operations. The Company and the Bank are each subject to these regulatory capital adequacy requirements. See Item 1. Business — Supervision and Regulation — Regulatory Capital Requirements and Regulatory Capital-Related Development in the Company’s 2021 Form 10-K for additional details.

The Company adopted Accounting Standards Update (“ASU”) 2016-13 on January 1, 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 current expected credit losses methodology (“CECL”) effect on regulatory capital for two years and phases in the impact over three years. The 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 three-year phase-out period in which the aggregate benefit is reduced by 25% in 2022, 50% in 2023 and 75% in 2024. Under the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”), loans originated by a banking organization under the PPP will be risk-weighted at zero percent for regulatory capital purposes. Accordingly, the capital ratios as of ~~June~~September 30, 2022 delayed 75% of the estimated impact of CECL on regulatory capital through the year ~~2021, and PPP loans are risk-weighted at 0%.~~

2021.

8589

The following table presents the Company’s and the Bank’s capital ratios as of ~~June~~September 30, 2022 and December 31, 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
		June 30, 2022				December 31, 2021				Minimum Regulatory Requirements		Minimum Regulatory Requirements including Capital Conservation Buffer		Well- Capitalized Requirements					September 30, 2022				December 31, 2021					Minimum Regulatory Requirements			Minimum Regulatory Requirements including Capital Conservation Buffer		Well- Capitalized Requirements
		Company		Bank		Company		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:
Common Equity Tier 1 capital	Common Equity Tier 1 capital	12.0	%	11.8	%	12.8	%	12.3	%	4.5	%	7.0	%	6.5	%		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)	12.0	%	11.8	%	12.8	%	12.3	%	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	13.2	%	12.8	%	14.1	%	13.2	%	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)	9.3	%	9.2	%	9.0	%	8.6	%	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 Tier 1 leverage well-capitalized requirement applies only to the Bank since there is no Tier 1 leverage ratio component in the definition of a well-capitalized bank holding company. ~~In addition, the~~The minimum Tier 1 risk-based capital ratio requirement for the Company to be considered well-capitalized is 6.0%.

The Company is committed to maintaining strong capital levels to assure its investors, customers and regulators that the Company and the Bank are financially sound. As of both ~~June~~September 30, 2022 and December 31, 2021, the Company and the Bank continued to exceed all “well-capitalized” capital requirements and the required minimum capital requirements under the Basel III Capital Rules. Total risk-weighted assets were ~~$48.50~~$49.27 billion as of ~~June~~September 30, 2022, an increase of ~~$4.91~~$5.68 billion or ~~11%,~~13% from $43.59 billion as of December 31, 2021. The increase in the risk-weighted assets was primarily due to loan growth.

Risk Management

Overview

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

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

The Company’s ERM program is executed along the three lines of defense model, which provides for a consistent and standardized risk management control environment across the enterprise. The first line of defense is comprised of production, operational, and support units. The second line of defense is comprised of various risk management and control functions charged with monitoring and managing specific major risk categories and/or risk subcategories. The third line of defense is comprised of the Internal Audit function and Independent Asset ~~Review.~~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 the primary risk areas are detailed in the following subsections of Risk Management.

8690

Credit Risk Management

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

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

Credit Quality

The Company utilizes a credit risk rating system to assist in monitoring credit quality. Loans are evaluated using the Company’s internal credit risk rating of 1 through 10. For more information on the Company’s credit quality indicators and internal credit risk ratings, refer to Note 7 — Loans Receivable and Allowance for Credit Losses to the Consolidated Financial Statements in this Form 10-Q.

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


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

Special mention loans	Special mention loans	$	590,227		$	384,694		$	205,533	53	%	Special mention loans	$	470,964		$	384,694		$	86,270	22	%
Classified loans	Classified loans	432,414			448,362			(15,948)		(4)	%	Classified loans	434,242			448,362			(14,120)		(3)	%
Total criticized loans(1)	Total criticized loans(1)	$	1,022,641		$	833,056		$	189,585	23	%	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	1.27		%	0.92		%					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	0.93		%	1.08		%					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	2.20		%	2.00		%					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 ~~$89.9~~$97.0 million or ~~0.14%~~0.16% of total assets as of ~~June~~September 30, 2022, a decrease of ~~$13.5~~$6.4 million or ~~13%~~6%, compared with $103.5 million or 0.17% of total assets as of December 31, 2021.

8791

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


($ in thousands)	($ in thousands)							Change				($ in thousands)							Change
		June 30, 2022			December 31, 2021			$		%			September 30, 2022			December 31, 2021			$		%
Commercial:	Commercial:											Commercial:
C&I	C&I	$	40,053		$	59,023		$	(18,970)	(32)	%	C&I	$	47,988		$	59,023		$	(11,035)	(19)	%
CRE:	CRE:											CRE:
CRE	CRE	11,276			9,498			1,778		19	%	CRE	11,035			9,498			1,537		16	%
Multifamily residential	Multifamily residential	1,466			444			1,022		230	%	Multifamily residential	174			444			(270)		(61)	%

Total CRE	Total CRE	12,742			9,942			2,800		28	%	Total CRE	11,209			9,942			1,267		13	%
Consumer:	Consumer:											Consumer:
Residential mortgage:	Residential mortgage:											Residential mortgage:
Single-family residential	Single-family residential	27,426			15,720			11,706		74	%	Single-family residential	12,741			15,720			(2,979)		(19)	%
HELOCs	HELOCs	9,703			8,444			1,259		15	%	HELOCs	10,568			8,444			2,124		25	%
Total residential mortgage	Total residential mortgage	37,129			24,164			12,965		54	%	Total residential mortgage	23,309			24,164			(855)		(4)	%
Other consumer	Other consumer	11			52			(41)		(79)	%	Other consumer	37			52			(15)		(29)	%
Total nonaccrual loans	Total nonaccrual loans	89,935			93,181			(3,246)		(3)	%	Total nonaccrual loans	82,543			93,181			(10,638)		(11)	%
OREO, net	OREO, net	—			363			(363)		(100)	%	OREO, net	—			363			(363)		(100)	%
Other nonperforming assets	Other nonperforming assets	—			9,938			(9,938)		(100)	%	Other nonperforming assets	—			9,938			(9,938)		(100)	%
Nonperforming loans HFS												Nonperforming loans HFS	14,500			—			14,500		100	%
Total nonperforming assets	Total nonperforming assets	$	89,935		$	103,482		$	(13,547)	(13)	%	Total nonperforming assets	$	97,043		$	103,482		$	(6,439)	(6)	%
Nonperforming assets to total assets	Nonperforming assets to total assets	0.14		%	0.17		%					Nonperforming assets to total assets	0.16		%	0.17		%
Nonaccrual loans to loans held-for-investment	Nonaccrual loans to loans held-for-investment	0.19		%	0.22		%					Nonaccrual loans to loans held-for-investment	0.17		%	0.22		%
Allowance for loan losses to nonaccrual loans	Allowance for loan losses to nonaccrual loans	626.31		%	581.21		%					Allowance for loan losses to nonaccrual loans	705.71		%	581.21		%

TDRs included in nonperforming loans	TDRs included in nonperforming loans	$	41,314		$	30,383						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 in the Company’s 2021 Form 10-K.

Nonaccrual loans were ~~$89.9~~$82.5 million as of ~~June~~September 30, 2022, a decrease of ~~$3.2~~$10.6 million or 3%11% from $93.2 million as of December 31, 2021. This decrease was predominantly the result of charge-offs and paydowns of commercial ~~loans, partially offset by increases in single-family residential nonaccrual~~ loans. As of ~~June~~September 30, 2022, ~~$44.3~~$54.4 million or ~~49%~~66% of nonaccrual loans were less than 90 days delinquent. In comparison, $54.2 million or 58%, of nonaccrual loans were less than 90 days delinquent as of December 31, 2021.

8892

The following table presents the accruing loans past due by portfolio segment as of ~~June~~September 30, 2022 and December 31, 2021:


($ in thousands)	($ in thousands)	Total Accruing Past Due Loans (1)				Change				Percentage of Total Loans Outstanding				($ in thousands)	Total Accruing Past Due Loans (1)				Change				Percentage of Total Loans Outstanding
		June 30, 2022		December 31, 2021		$		%		June 30, 2022		December 31, 2021			September 30, 2022		December 31, 2021		$		%		September 30, 2022		December 31, 2021
Commercial:	Commercial:													Commercial:
C&I	C&I	$	10,130	$	11,069	$	(939)	(8)	%	0.07	%	0.08	%	C&I	$	20,960	$	11,069	$	9,891	89	%	0.13	%	0.08	%
CRE:	CRE:													CRE:
CRE	CRE	652		3,722		(3,070)		(82)	%	0.00	%	0.03	%	CRE	623		3,722		(3,099)		(83)	%	0.00	%	0.03	%
Multifamily residential	Multifamily residential	830		5,342		(4,512)		(84)	%	0.02	%	0.15	%	Multifamily residential	795		5,342		(4,547)		(85)	%	0.02	%	0.15	%

Total CRE	Total CRE	1,482		9,064		(7,582)		(84)	%	0.01	%	0.06	%	Total CRE	1,418		9,064		(7,646)		(84)	%	0.01	%	0.06	%
Total commercial	Total commercial	11,612		20,133		(8,521)		(42)	%	0.03	%	0.07	%	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	20,714		18,760		1,954		10	%	0.20	%	0.21	%	Single-family residential	22,239		18,760		3,479		19	%	0.20	%	0.21	%
HELOCs	HELOCs	6,867		5,854		1,013		17	%	0.30	%	0.27	%	HELOCs	4,916		5,854		(938)		(16)	%	0.22	%	0.27	%
Total residential mortgage	Total residential mortgage	27,581		24,614		2,967		12	%	0.22	%	0.22	%	Total residential mortgage	27,155		24,614		2,541		10	%	0.21	%	0.22	%
Other consumer	Other consumer	98		108		(10)		(9)	%	0.12	%	0.08	%	Other consumer	80		108		(28)		(26)	%	0.09	%	0.08	%
Total consumer	Total consumer	27,679		24,722		2,957		12	%	0.22	%	0.22	%	Total consumer	27,235		24,722		2,513		10	%	0.21	%	0.22	%
Total	Total	$	39,291	$	44,855	$	(5,564)	(12)	%	0.08	%	0.11	%	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 ~~June~~September 30, 2022 and December 31, 2021.

Troubled Debt Restructurings

TDRs are loans for which contractual terms have been modified by the Company for economic or legal reasons related to a borrower’s financial difficulties, and for which a concession to the borrower was granted that the Company would not otherwise consider. The Company’s loan modifications are handled on a case-by-case basis and are negotiated to achieve mutually agreeable terms that maximize loan collectability and meet the borrower’s financial needs. The following table presents the performing and nonperforming TDRs by portfolio segment as of ~~June~~September 30, 2022 and December 31, 2021. The allowance for loan losses for TDRs was $~~12.6~~16.9 million as of ~~June~~September 30, 2022 and $4.8 million as of December 31, 2021.


($ in thousands)	($ in thousands)	June 30, 2022						December 31, 2021						($ 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	$	65,402	$	36,012	$	101,414	$	77,256	$	28,239	$	105,495	C&I	$	58,273	$	32,121	$	90,394	$	77,256	$	28,239	$	105,495
CRE:	CRE:													CRE:
CRE	CRE	22,937		—		22,937		23,379		—		23,379		CRE	22,768		—		22,768		23,379		—		23,379
Multifamily residential	Multifamily residential	2,903		1,238		4,141		4,042		197		4,239		Multifamily residential	3,876		174		4,050		4,042		197		4,239

Total CRE	Total CRE	25,840		1,238		27,078		27,421		197		27,618		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	3,018		3,604		6,622		6,585		1,102		7,687		Single-family residential	4,786		68		4,854		6,585		1,102		7,687
HELOCs	HELOCs	2,060		460		2,520		2,553		845		3,398		HELOCs	2,244		325		2,569		2,553		845		3,398
Total residential mortgage	Total residential mortgage	5,078		4,064		9,142		9,138		1,947		11,085		Total residential mortgage	7,030		393		7,423		9,138		1,947		11,085

Total TDRs	Total TDRs	$	96,320	$	41,314	$	137,634	$	113,815	$	30,383	$	144,198	Total TDRs	$	91,947	$	32,688	$	124,635	$	113,815	$	30,383	$	144,198

8993

Performing TDRs were ~~$96.3~~$91.9 million as of ~~June~~September 30, 2022, a decrease of ~~$17.5~~$21.9 million or ~~15%~~19% from $113.8 million as of December 31, 2021. This decrease primarily reflected the payoffs and paydowns of performing C&I and single-family residential TDR ~~loans and transfers of single-family and multifamily residential loans to nonperforming status.~~loans. Approximately ~~97% and~~ 94% of the performing TDRs were current as of ~~June~~both September 30, 2022 and December 31, 2021, respectively. Nonperforming TDRs were ~~$41.3~~$32.7 million as of ~~June~~September 30, 2022, an increase of ~~$10.9~~$2.3 million or ~~36%~~8% from $30.4 million as of December 31, 2021. This increase primarily reflected newly designated nonperforming C&I TDR loans~~and transfers of~~ ~~single-family and~~ ~~multifamily residential loans from performing to nonperforming TDR status,~~, partially offset by payoffs and paydowns of C&I and single-family residential nonperforming TDR loans.

Existing TDRs that were subsequently modified in response to the COVID-19 pandemic continue to be classified as TDRs. Customers who require further assistance upon exiting from the COVID-19 ~~deferred~~deferral programs may receive further modifications which may be classified as TDRs. As of ~~June~~September 30, 2022, there were no TDRs that were provided modifications related to the COVID-19 pandemic, and the amount of TDRs that were provided modification related to the COVID-19 pandemic were insignificant as of December 31, 2021.

Loan Modifications Due to COVID-19 Pandemic

The Company has granted a range of commercial and consumer loan accommodations, predominantly in the form of payment deferrals, to provide relief to borrowers experiencing financial hardship due to the COVID-19 pandemic. For COVID-19 related loan modifications, which occurred between March 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, or under the Interagency Statement on Loan Modifications and Reporting for Financial Institutions Working with Customers Affected by the Coronavirus (Revised), the Company elected to temporarily suspend TDR accounting under ASC Subtopic 310-40. Accordingly, the delinquency aging of loans modified related to the COVID-19 pandemic were frozen at the time of the modification during the relief period which expired on January 1, 2022. Interest income continues to be recognized over the accommodation periods. See additional information in 310-40,~~Note 1 — Summary of Significant Accounting Policies — Significant Accounting Policies~~ Receivables — Troubled Debt Restructurings by Creditors. ~~to the Consolidated Financial Statements in the Company’s 2021 Form 10-K.~~ As of ~~June~~September 30, 2022, COVID-19 loans under payment deferral and forbearance programs totaled ~~$49.8~~$42.4 million, or 0.1% of total loans, compared with $363.1 million, or 0.9% of total loans as of December 31, ~~2021.~~2021. Loans that have exited the modification program were ~~predominantly~~substantially all current as of ~~June~~September 30, 2022.

Allowance for Credit Losses

ASU 2016-13, Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments requires the measurement of the allowance for credit losses to be based on management’s best estimate of lifetime expected credit losses inherent in the Company’s relevant financial assets. The allowance for credit losses estimate uses various models and estimation techniques based on historical loss experience, current borrower characteristics, current conditions, reasonable and supportable forecasts, and other relevant factors.

In addition to the allowance for loan losses, the Company maintains an allowance for unfunded credit commitments. The Company has three general areas for which it provides the allowance for unfunded credit commitments: 1)(1) recourse obligations for loans sold, 2)(2) letters of credit, and 3)(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.

The Company is committed to ~~maintain~~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 ~~June~~September 30, 2022 was appropriate to absorb losses inherent in the loan portfolio and in unfunded credit commitments based on the information available, future allowance levels may increase or decrease based on a variety of factors, including but not limited to, accounting standard and regulatory changes, loan growth, portfolio performance and general economic conditions. This evaluation is inherently subjective as it requires numerous estimates and judgements. For a description of the policies, methodologies and judgments used to determine the allowance for credit losses, see Item 7. MD&A — Critical Accounting Estimates and Note 1 — Summary of Significant Accounting Policies to the Consolidated Financial Statements in the Company’s 2021 Form 10-K, and Note 7 — Loans Receivable and Allowance for Credit Losses to the Consolidated Financial Statements in this Form 10-Q.

The following table presents an allocation of the allowance for loan losses by loan portfolio segments and unfunded credit commitments as of ~~June~~September 30, 2022 and December 31, 2021:


($ in thousands)	($ in thousands)	June 30, 2022						December 31, 2021						($ 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	$	363,282		33		%	$	338,252		34		%	C&I	$	371,749		33		%	$	338,252		34		%
CRE:	CRE:													CRE:
CRE	CRE	140,245			29		%	150,940			29		%	CRE	145,301			29		%	150,940			29		%
Multifamily residential	Multifamily residential	26,552			10		%	14,400			9		%	Multifamily residential	25,680			10		%	14,400			9		%
Construction and land	Construction and land	6,682			1		%	15,468			1		%	Construction and land	7,506			1		%	15,468			1		%
Total CRE	Total CRE	173,479			40		%	180,808			39		%	Total CRE	178,487			40		%	180,808			39		%
Total commercial	Total commercial	536,761			73		%	519,060			73		%	Total commercial	550,236			73		%	519,060			73		%
Consumer:	Consumer:													Consumer:
Residential mortgage:	Residential mortgage:													Residential mortgage:
Single-family residential	Single-family residential	21,840			22		%	17,160			22		%	Single-family residential	27,263			23		%	17,160			22		%
HELOCs	HELOCs	3,220			5		%	3,435			5		%	HELOCs	3,324			4		%	3,435			5		%
Total residential mortgage	Total residential mortgage	25,060			27		%	20,595			27		%	Total residential mortgage	30,587			27		%	20,595			27		%
Other consumer	Other consumer	1,449			0		%	1,924			0		%	Other consumer	1,694			0		%	1,924			0		%
Total consumer	Total consumer	26,509			27		%	22,519			27		%	Total consumer	32,281			27		%	22,519			27		%
Total allowance for loan losses	Total allowance for loan losses	$	563,270		100		%	$	541,579		100		%	Total allowance for loan losses	$	582,517		100		%	$	541,579		100		%
Allowance for unfunded credit commitments	Allowance for unfunded credit commitments	$	24,304					$	27,514					Allowance for unfunded credit commitments	$	24,041					$	27,514
Total allowance for credit losses	Total allowance for credit losses	$	587,574					$	569,093					Total allowance for credit losses	$	606,558					$	569,093

Loans held-for-investment	Loans held-for-investment	$	46,502,076					$	41,693,781					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	1.21		%				1.30		%				Allowance for loan losses to loans held-for-investment	1.23		%				1.30		%

		Three Months Ended June 30,						Six Months Ended June 30,							Three Months Ended September 30,						Nine Months Ended September 30,
		2022			2021			2022			2021				2022			2021			2022			2021
Average loans held-for-investment	Average loans held-for-investment	$	44,625,760		$	39,622,090		$	43,375,718		$	39,177,831		Average loans held-for-investment	$	46,845,030		$	39,959,972		$	44,544,863		$	39,441,410

Annualized net (recoveries) charge-offs to average loans held-for-investment		(0.06)		%	0.13		%	0.01		%	0.14		%
Annualized net charge-offs to average loans held-for-investment														Annualized net charge-offs to average loans held-for-investment	0.06		%	0.13		%	0.02		%	0.14		%

The allowance for loan losses was ~~$563.3~~$582.5 million as of ~~June~~September 30, 2022, an increase of ~~$21.7~~$40.9 million from $541.6 million as of December 31, 2021, primarily reflecting of our current macroeconomic outlook and loan growth. ~~Second~~Third quarter 2022 net ~~recoveries~~charge-offs were $6.6 million, or annualized 0.06% of average loans held-for-investment, compared with net charge-offs of ~~$13.3~~$13.5 million, or annualized 0.13% of average loans held-for-investment, for the ~~second~~third quarter of 2021. ~~First half~~The decrease in net charge-offs for the third quarter of 2022 compared with the same period in 2021 was primarily due to a decrease in CRE charge-offs, partially offset by increases in multifamily residential and C&I charge-offs. In the first nine months of 2022, net charge-offs were ~~$1.7~~$8.3 million, or annualized ~~0.01%~~0.02% of average loans held-for investment, compared with ~~$26.7~~$40.2 million or annualized 0.14% of average loans held-for-investment for the first ~~half~~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 ~~primarily~~mainly due to ~~decreases~~a decrease in CRE charge-offs and an increase in C&I ~~and CRE charge-offs.~~recoveries.

9195

The Company considers multiple economic scenarios to develop the estimate of the allowance for loan losses. The scenarios may consist of a baseline forecast representing management's view of the most likely outcome, and downside or upside scenarios reflecting possible worsening or improving economic ~~conditions, respectively.~~conditions. As of ~~June~~September 30, 2022, the Company assigned a lower weighting to its downside scenario and higher ~~weighting~~weightings to the 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 ~~rising~~high inflation, ~~on the economy, supply chain constraints compounded by the continuing Russia-Ukraine war, and the~~ lower than previously expected annual Gross Domestic Product (“GDP”) ~~growth. Although economic~~ growth, ~~has slowed,~~rising interest rates, and continued global oil and supply chain issues caused by the ~~labor market has remained strong.~~Russian invasion of Ukraine. Macroeconomic assumptions underlying the baseline forecast ~~include: (1)~~include annual GDP growth of ~~2.7%~~1.6% and 1.4% for ~~2022; (2) 3.3%~~2022 and 2023, respectively, and the unemployment rate ~~by the end of 2022;~~to average 3.7% and ~~(3) rising interest rates.~~3.9% for 2022 and 2023, respectively. The downside scenario assumed annual GDP growth of 1.5% in 2022 dropping to a 2.0% decline for 2023, and anthe unemployment rate ~~that was expected~~ to rise from ~~3.6%~~a 4.2% average for 2022 to ~~6.4% by the end of 2022.~~a 7.3% average for 2023. The upside scenario assumed an annual GDP growth of ~~3.2% in~~1.9% and 4.1% for 2022 and an2023, respectively, and the unemployment rate ~~that was expected~~ to ~~decline~~improve from an average of 3.6% for 2022 to ~~2.9% by the end of 2022.~~3.3% for 2023.

As of ~~June~~September 30, 2022 and December 31, 2021, PPP loans outstanding were ~~$153.3~~$110.9 million and $534.2 million, respectively. Because these loans are fully guaranteed by the ~~SBA,~~Small Business Administration, there was no allowance for loan losses established for these loans as of ~~June~~September 30, 2022 and December 31, 2021.

The allowance for unfunded credit commitments was ~~$24.3~~$24.0 million as of ~~June~~September 30, 2022, compared with $27.5 million as of December 31, 2021.

Liquidity Risk Management

Liquidity

Liquidity is a financial institution’s capacity to meet its deposit and obligations to other counterparties as they come due, or to obtain adequate funding at a reasonable cost to meet those obligations. The objective of liquidity management is to manage the potential mismatch of asset and liability cash flows. Maintaining an adequate level of liquidity depends on the institution’s ability to efficiently meet both expected and unexpected cash flows, and collateral needs without adversely affecting daily operations or the financial condition of the institution. To achieve this objective, the Company analyzes its liquidity risk, maintains readily available liquid assets, and utilizes diverse funding sources including its stable core deposit base.

The Board of Directors’ Risk Oversight Committee has primary oversight responsibility over liquidity risk management. At the management level, the Company’s 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 ~~for~~ East West on a stand-alone basis to ensure that the Company can serve as a source of strength for its subsidiaries. The ALCO regularly monitors the Company’s liquidity status and related management processes, providing regular reports to the Board of Directors. The Company’s liquidity management practices have been effective under normal operating and stressed market conditions.

Liquidity Risk — Liquidity Sources. The Company’s primary source of funding is from deposits generated by its banking business, which are relatively stable and low-cost. Total deposits amounted to ~~$54.34~~$53.86 billion as of ~~June~~September 30, 2022, compared with $53.35 billion as of December 31, 2021. The Company’s loan-to-deposit ratio was ~~86%~~88% as of ~~June~~September 30, 2022, compared with 78% as of December 31, 2021.

9296

In addition to deposits, the Company has access to various sources of wholesale financing, including borrowing capacity with the FHLB and Federal Reserve Bank of San Francisco (“FRBSF”), unsecured federal funds lines of credit with various correspondent banks, and several master repurchase agreements with major brokerage companies to sustain an adequate liquid asset portfolio, meet daily cash demands and allow management flexibility to execute its business strategy. 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. As of ~~June~~September 30, 2022, the Company had available borrowing capacity of ~~$22.62 billion, including $12.60~~$20.51 billion. The available borrowing capacity included $10.88 billion with the FHLB, ~~and $1.96~~$2.17 billion with the ~~FRBSF. The Company believes that its liquidity sources are sufficient to meet all reasonably foreseeable short-term needs.~~FRBSF, unsecured federal funds lines of credit with correspondent banks of $936.0 million, and borrowing capacity from unpledged debt securities of $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 of credit with correspondent banks, subject~~Company believes that its liquidity sources are sufficient to ~~availability, totaled $1.04 billion as of June 30, 2022. Estimated borrowing capacity from unpledged debt securities totaled $7.03 billion as of June 30, 2022.~~meet all reasonably foreseeable short-term needs. See Item 2 — MD&A — Balance Sheet Analysis — Deposits and Other Sources of 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 banks, short-term resale agreements and unencumbered high-quality and liquid AFS debt securities. The following table presents the Company’s liquid assets as of ~~June~~September 30, 2022 and December 31, 2021:


($ in thousands)	($ in thousands)	June 30, 2022						December 31, 2021						($ in thousands)	September 30, 2022						December 31, 2021
		Encumbered		Unencumbered		Total		Encumbered		Unencumbered		Total			Encumbered		Unencumbered		Total		Encumbered		Unencumbered		Total
Cash and cash equivalents	Cash and cash equivalents	$	—	$	1,902,053	$	1,902,053	$	—	$	3,912,935	$	3,912,935	Cash and cash equivalents	$	—	$	2,163,353	$	2,163,353	$	—	$	3,912,935	$	3,912,935
Interest-bearing deposits with banks	Interest-bearing deposits with banks	—		712,709		712,709		—		736,492		736,492		Interest-bearing deposits with banks	—		630,543		630,543		—		736,492		736,492
Resale agreements due to mature in one year	Resale agreements due to mature in one year	—		598,000		598,000		—		1,818,503		1,818,503		Resale agreements due to mature in one year	—		407,986		407,986		—		1,818,503		1,818,503
AFS debt securities:	AFS debt securities:													AFS debt securities:
U.S. Treasury, and U.S. government agency and U.S. government-sponsored enterprise debt securities	U.S. Treasury, and U.S. government agency and U.S. government-sponsored enterprise debt securities	159,113		750,818		909,931		384,895		1,949,757		2,334,652		U.S. 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	U.S. government agency and U.S. government-sponsored enterprise mortgage-backed securities	230,754		2,243,318		2,474,072		418,761		3,738,502		4,157,263		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	Foreign government bonds	—		242,997		242,997		—		257,733		257,733		Foreign government bonds	—		225,810		225,810		—		257,733		257,733
Municipal securities	Municipal securities	—		266,733		266,733		—		523,158		523,158		Municipal securities	—		249,502		249,502		—		523,158		523,158
Non-agency mortgage-backed securities, asset-backed securities and CLOs	Non-agency mortgage-backed securities, asset-backed securities and CLOs	193		1,802,285		1,802,478		240		2,042,642		2,042,882		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	Corporate debt securities	—		559,293		559,293		—		649,665		649,665		Corporate debt securities	—		529,565		529,565		—		649,665		649,665
Total	Total	$	390,060	$	9,078,206	$	9,468,266	$	803,896	$	15,629,387	$	16,433,283	Total	$	463,638	$	8,644,334	$	9,107,972	$	803,896	$	15,629,387	$	16,433,283

Unencumbered liquid assets totaled ~~$9.08~~$8.64 billion as of ~~June~~September 30, 2022, compared with $15.63 billion as of December 31, 2021. AFS debt securities, included as part of liquidity sources, consist of high quality and liquid securities with moderate durations to minimize overall interest rate and liquidity risks. The Company believes these AFS debt securities provide quick sources of liquidity to obtain financing, regardless of market conditions, through sale or pledging. The ~~year-to-date~~ decrease in liquid assets was primarily related to the transfer of $3.01 billion of debt securities from AFS to HTM during the first quarter of 2022, a ~~$2.01 billion~~ decrease in cash and cash equivalents ~~primarily to fund loans, and~~driven by loan funding activities, a ~~$1.22 billion~~ decrease in resale agreements primarily due to ~~repayments.~~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.

9397

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 ~~(i)~~(1) commitments to extend credit, such as loan commitments, commercial letters of credit for foreign and domestic trade, standby letters of credit (“SBLCs”), and financial guarantees, to meet the financing needs of its customers, ~~(ii)~~(2) future interest obligations related to customer deposits and the Company’s borrowings, and ~~(iii)~~(3) transactions with unconsolidated entities that provide financing, liquidity, market risk or credit risk support to the Company, or ~~engages~~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 infor the first ~~halves~~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 2021 Form 10-K. East West held ~~$231.6~~$226.5 million and $345.0 million in cash and cash equivalents as of ~~June~~September 30, 2022 and December 31, 2021, respectively. Management believes that East West has sufficient cash and cash equivalents to meet the projected cash obligations for the current year.

Liquidity Risk — Liquidity Stress Testing. The Company utilizes liquidity stress analysis to determine the appropriate amounts of liquidity to maintain at the Company, foreign subsidiary and foreign branch levels needed to meet contractual and contingent cash outflows under a range of scenarios. Scenario analyses include assumptions about significant changes in key funding sources, market triggers, potential uses of funding 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 ~~June~~September 30, 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, the Company will continue to actively evaluate the impact on its business and financial position. For more information on how economic conditions may impact our liquidity, see Item 1A. Risk Factors of the Company’s 2021 Form 10-K.

Market Risk Management

Market risk is the risk that the Company’s financial condition may change resulting from adverse movements in market rates or prices, including interest rates, foreign exchange rates, interest rate contracts 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.

9498

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 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 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 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~~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 material changes in interest rate 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 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.

In March 2022, the Federal Reserve raised the target range for the fed funds rate to 0.25% to 0.50% to address concerns about inflation, which reflected supply and demand imbalances due to the pandemic, higher energy prices, and broader price pressures. ~~In June 2022, the~~The Federal Reserve has continued its aggressive approach in responding to inflation ~~raising~~and raised the target range for the fed funds rate to ~~1.50%~~3.75% to ~~1.75%. In July 2022, the Federal Reserve further raised the benchmark rate to 2.25% to 2.50% and the~~4.00% on November 2, 2022. The market estimates that interest rates are likely to continue ~~rising,~~to rise, potentially reaching ~~3.50% or higher~~4.25% to 4.5% by the end of 2022.

9599

Twelve-Month Net Interest Income Simulation

Net interest income simulation modeling measures interest rate risk through earnings volatility. The simulation projects the cash flow changes in interest rate sensitive assets and liabilities, expressed in terms of net interest income, over a specified time horizon for defined interest rate scenarios. Net interest income simulations ~~generate~~provide insight into the impact of market rates changes on earnings, which help guide risk management decisions. The Company assesses interest rate risk by comparing the ~~impacts~~changes of net interest income in different interest rate scenarios.

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 as of ~~June~~September 30, 2022 and December 31, 2021, based on a static balance sheet as of the date of the analysis.


Change in Interest Rates (in bps)	Change in Interest Rates (in bps)	Net Interest Income Volatility (1)				Change in Interest Rates (in bps)		Net Interest Income Volatility (1)
		June 30, 2022		December 31, 2021			Change in Interest Rates (in bps)			September 30, 2022			December 31, 2021
+200	+200	13.8	%	19.5	%					11.7	%		19.5	%
+100	+100	7.0	%	9.4	%				+100		6.0	%		9.4	%
-100	-100	(7.0)	%	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 ~~imbalance between the~~ faster repricing of the floating-rate loan portfolio ~~versus~~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;~~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 ~~June~~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 ~~paragraphs,~~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 ofin the balance sheet.


Change in Interest Rates (in bps)	Change in Interest Rates (in bps)	Net Interest Income Volatility				Change in Interest Rates (in bps)	Net Interest Income Volatility
		June 30, 2022		December 31, 2021			September 30, 2022		December 31, 2021
+200 Rate Ramp	+200 Rate Ramp	6.3	%	9.2	%	+200 Rate Ramp	5.2	%	9.2	%
+100 Rate Ramp	+100 Rate Ramp	3.0	%	4.1	%	+100 Rate Ramp	2.6	%	4.1	%
-100 Rate Ramp	-100 Rate Ramp	(2.8)	%	NM		-100 Rate Ramp	(2.2)	%	NM
-200 Rate Ramp	-200 Rate Ramp	NM		NM		-200 Rate Ramp	(4.9)	%	NM

NM — Not meaningful.

As of ~~June~~September 30, 2022, the Company’s net interest income profile reflects an asset sensitive position. Net interest income is expected to increase when interest rates rise, as the Company has a large share of variable rate loans in its loan portfolio, primarily linked to Prime or LIBOR indices. The Company’s interest income is sensitive to changes in short-term interest rates. The Company’s deposit portfolio is primarily composed of non-maturity deposits, which are not directly tied to short-term interest rate indices, but are, nevertheless, sensitive to changes in short-term interest rates. The modeled results are highly sensitive to reinvestment yield and deposit beta assumptions. Actual results in terms of net interest income growth during a period of rising interest rates will also reflect earning asset growth and deposit mix changes based on customer preferences relative to the interest rate environment.

96100

Economic Value of Equity at Risk

Economic value of equity (“EVE”) is a cash flow calculation that takes the present value of all asset cash flows and subtracts the present value of all liability cash flows. This calculation is used for asset/liability management and measures changes in the economic value of the bank. ~~The fair market values of a bank's assets and liabilities are directly linked to interest rates.~~ The economic value approach provides a comparatively broader scope than the net interest income volatility approach since it captures all anticipated cash flows.

The EVE simulation reflects the sensitivity of the EVE to interest rate changes across the full maturity spectrum of the Company’s assets and liabilities. It identifies risks arising from repricing, prepayment and maturity gaps between assets and liabilities on the balance sheet, as well as from derivative exposures that are off-balance ~~sheet derivative exposure.~~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 as of ~~June~~September 30, 2022 and December 31, 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)
		June 30, 2022		December 31, 2021			September 30, 2022		December 31, 2021
+200	+200	2.7	%	7.1	%	+200	1.0	%	7.1	%
+100	+100	1.4	%	3.5	%	+100	1.0	%	3.5	%
-100	-100	(1.1)	%	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 ~~June~~September 30, 2022, compared with the results as of December 31, 2021. The changes in EVE sensitivity were primarily due to faster deposit decay ~~speed~~and higher deposit beta assumptions used in the model, changes in the level and shape of the yield curve, and lower cash balances as of ~~June~~September 30, 2022.

The Company’s EVE profile as of ~~June~~September 30, 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.

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 periodically 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 or against risk in specific transactions. Hedging transactions may be implemented using a variety of derivative instruments such as swaps, forwards, options, and collars. Prior to entering into any hedging activities, the Company analyzes the costs and benefits of the hedge in comparison to alternative strategies. In addition, the Company enters into derivative transactions in order to assist customers with their risk management objectives, such as managing exposure to fluctuations in interest rates, foreign currencies and energy commodity prices. To economically hedge against the derivative contracts entered with the Company’s customers, the Company enters into mirrored derivative contracts with third-party financial institutions. The exposures from derivative transactions are collateralized by cash and/or eligible securities based on limits as set forth in the respective agreements entered between the Company and counterparty financial institutions.

97101

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 to interest rate swaps to third-party financial institutions through the use of credit risk participation agreements. Certain derivative contracts are required to be centrally cleared through clearinghouses, towhich further ~~mitigate~~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 derivative financial instruments utilized by the Company in its management of interest rate risk and foreign currency risk as of ~~June~~September 30, 2022 and December 31, 2021:


		June 30, 2022				December 31, 2021					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	Notional amounts	$	1,525,000	$	84,832	$	275,000	$	86,531	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	586		2,765		—		—		Recognized as an asset	533		7,107		—		—
Recognized as a liability	Recognized as a liability	96		—		57		225		Recognized as a liability	24,679		—		57		225
Net fair value	Net fair value	$	490	$	2,765	$	(57)	$	(225)	Net fair value	$	(24,146)	$	7,107	$	(57)	$	(225)
Weighted-average interest rates:	Weighted-average interest rates:									Weighted-average interest rates:
Variable-rate borrowings — Pay fixed (receive floating)	Variable-rate borrowings — Pay fixed (receive floating)	0.483% (3-month USD-LIBOR)		NM		0.483% (3-month USD-LIBOR)		NM		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)	1.787% (1-month USD-LIBOR)		NM		NA		NM		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)		NM		NA		NM		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):	29.2		8.7		13.9		2.7		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	Notional amounts	$	17,570,112	$	2,654,194	$	17,575,420	$	1,874,681	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	260,740		39,559		240,222		21,033		Recognized as an asset	429,505		74,767		240,222		21,033
Recognized as a liability	Recognized as a liability	359,578		29,144		179,905		15,276		Recognized as a liability	590,648		64,049		179,905		15,276
Net fair value	Net fair value	$	(98,838)	$	10,415	$	60,317	$	5,757	Net fair value	$	(161,143)	$	10,718	$	60,317	$	5,757

NMNA — Not ~~meaningful.~~applicable.

Derivatives Designated as Hedging Instruments — Interest rate and foreign exchange derivative contracts are utilized in 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. The Company uses interest rate derivatives to hedge the risk of variable cash flows in its variable interest rate borrowings, which ~~includes~~includes repurchase agreements and FHLB 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 changes in the fair value of the hedging instruments are recognized in AOCI, net of tax, on the Consolidated Balance Sheet.

The fluctuation in foreign currency translation of the hedged exposure is expected to be offset by changes in the fair value of the forward contracts. As of ~~June~~September 30, 2022, the outstanding foreign currency forwards effectively hedged approximately 44% of the net Chinese Renminbi exposure from East West Bank (China) Limited.

98102

Changes to the composition of the Company’s derivatives designated as hedging instruments during the first ~~half~~nine months of 2022 reflect actions taken for interest rate risk and foreign exchange rate risk management. The Company repositions its hedging derivatives portfolio 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 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 or 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 ~~June~~September 30, 2022, the Company anticipates performance by all counterparties and has not experienced nonperformance by any of its counterparties, and therefore did not incur any related losses. The Company also utilizes foreign exchange contracts that are not designated as hedging instruments to mitigate the economic effect of fluctuations in certain foreign ~~currency~~currency-denominated on-balance sheet 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 energy commodity price fluctuations. To economically hedge against the risk of fluctuation in energy commodity prices in the products offered to its customers, the Company enters into offsetting energy commodity contracts with third-party financial institutions, orincluding 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.

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 in the Company’s 2021 Form 10-K, and Note 3 — Fair Value Measurement and Fair Value of Financial Instruments and Note 6 — Derivatives to the Consolidated Financial Statements in this Form 10-Q.

99103

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 in the Company’s 2021 Form 10-K. Certain of these policies include critical accounting estimates, which are subject to valuation assumptions, subjective or complex judgments about matters that are inherently uncertain, and it is likely that materially different amounts could be reported under different assumptions and conditions. The Company has procedures and processes in place to facilitate making these judgments. The following accounting policies are critical to the Company’s Consolidated Financial Statements:

•allowance for credit losses;

•fair value estimates;

•goodwill impairment; and

•income taxes.

For additional information on the Company’s critical accounting estimates involving significant judgments, see Item 7. MD&A — Critical Accounting Estimates in the Company’s 2021 Form 10-K.

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.

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)	($ in thousands)		Three Months Ended June 30,			Six Months Ended June 30,						($ in thousands)					Three Months Ended September 30,				Nine Months Ended September 30,
			2022			2021			2022						2021	($ in thousands)		2022				2021			2022			2021
Net income	Net income	(a)	$	258,329		$	224,742		$	495,981			$	429,736				$	295,339			$	225,449		$	791,320		$	655,185
Add: Amortization of core deposit intangibles	Add: Amortization of core deposit intangibles		488			710			999				1,442			Add: Amortization of core deposit intangibles		485				705			1,484			2,147
Amortization of mortgage servicing assets	Amortization of mortgage servicing assets		364			420			756				834			Amortization of mortgage servicing assets		340				430			1,096			1,264
Tax effect of amortization adjustments (1)	Tax effect of amortization adjustments (1)		(245)			(321)			(505)				(646)			Tax effect of amortization adjustments (1)		(237)				(322)			(742)			(968)
Tangible net income	Tangible net income	(b)	$	258,936		$	225,551		$	497,231			$	431,366		Tangible net income	(b)	$	295,927			$	226,262		$	793,158		$	657,628

Average stockholders’ equity	Average stockholders’ equity	(c)	$	5,682,427		$	5,425,952		$	5,762,078			$	5,382,267		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)			Less: Average goodwill		(465,697)				(465,697)			(465,697)			(465,697)
Average other intangible assets (2)	Average other intangible assets (2)		(8,827)			(10,827)			(9,016)				(11,209)			Average other intangible assets (2)		(8,379)				(10,135)			(8,801)			(10,847)
Average tangible equity	Average tangible equity	(d)	$	5,207,903		$	4,949,428		$	5,287,365			$	4,905,361		Average tangible equity	(d)	$	5,298,562			$	5,204,474		$	5,291,139		$	5,006,161

Return on average equity (3)	Return on average equity (3)	(a)/(c)	18.23		%	16.61		%	17.36		%		16.10		%	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)	19.94		%	18.28		%	18.96		%		17.73		%	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 ~~second~~third quarter and first ~~half~~nine months of 2022. Applied statutory tax rate of 28.37% for the ~~second~~third quarter and first ~~half~~nine months of 2021.

(2)Includes core deposit intangibles and mortgage servicing assets.

(3)Annualized.

~~100~~104


($ in thousands)	($ in thousands)		Three Months Ended June 30,			Six Months Ended June 30,									($ in thousands)		Three Months Ended September 30,					Nine Months Ended September 30,
			2022			2021			2022			2021				($ in thousands)				2022					2021			2022			2021
Net interest income before provision for (reversal of) credit losses	Net interest income before provision for (reversal of) credit losses		$	472,952		$	376,473		$	888,565		$	730,168							$	551,809				$	395,706		$	1,440,374		$	1,125,874
Total noninterest income	Total noninterest income		78,444			68,431			158,187			141,297						Total noninterest income				75,552					73,109			233,739			214,406
Total revenue	Total revenue	(a)	$	551,396		$	444,904		$	1,046,752		$	871,465					Total revenue	(a)			$	627,361				$	468,815		$	1,674,113		$	1,340,280

Total noninterest expense	Total noninterest expense	(b)	$	196,860		$	189,523		$	386,310		$	380,600					Total noninterest expense	(b)			$	215,973				$	205,384		$	602,283		$	585,984
Less: Amortization of tax credit and other investments	Less: Amortization of tax credit and other investments		(14,979)			(27,291)			(28,879)			(52,649)						Less: Amortization of tax credit and other investments				(19,874)					(38,008)			(48,753)			(90,657)
Amortization of core deposit intangibles	Amortization of core deposit intangibles		(488)			(710)			(999)			(1,442)						Amortization of core deposit intangibles				(485)					(705)			(1,484)			(2,147)

Adjusted noninterest expense	Adjusted noninterest expense	(c)	$	181,393		$	161,522		$	356,432		$	326,509					Adjusted noninterest expense	(c)			$	195,614				$	166,671		$	552,046		$	493,180

Efficiency ratio	Efficiency ratio	(b)/(a)	35.70		%	42.60		%	36.91		%	43.67		%				Efficiency ratio	(b)/(a)			34.43		%			43.81		%	35.98		%	43.72		%
Adjusted efficiency ratio	Adjusted efficiency ratio	(c)/(a)	32.90		%	36.30		%	34.05		%	37.47		%				Adjusted efficiency ratio	(c)/(a)			31.18		%			35.55		%	32.98		%	36.80		%


($ and shares in thousands, except per share data)	($ and shares in thousands, except per share data)		June 30, 2022		December 31, 2021		($ and shares in thousands, except per share data)		September 30, 2022		December 31, 2021
Stockholders’ equity	Stockholders’ equity	(a)	$	5,609,482	$	5,837,218	Stockholders’ equity	(a)	$	5,660,668	$	5,837,218
Less: Goodwill	Less: Goodwill		(465,697)		(465,697)		Less: Goodwill		(465,697)		(465,697)
Other intangible assets (1)	Other intangible assets (1)		(8,537)		(9,334)		Other intangible assets (1)		(8,667)		(9,334)
Tangible equity	Tangible equity	(b)	$	5,135,248	$	5,362,187	Tangible equity	(b)	$	5,186,304	$	5,362,187

Number of common shares at period-end	Number of common shares at period-end	(c)	140,917		141,908		Number of common shares at period-end	(c)	140,918		141,908
Book value per common share	Book value per common share	(a)/(c)	$	39.81	$	41.13	Book value per common share	(a)/(c)	$	40.17	$	41.13
Tangible equity per common share	Tangible equity per common share	(b)/(c)	$	36.44	$	37.79	Tangible equity per common share	(b)/(c)	$	36.80	$	37.79

(1)Includes core deposit intangibles and mortgage servicing assets.

~~101~~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 6 — 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 ~~June~~September 30, 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 ~~June~~September 30, 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 ~~June~~September 30, 2022, that have materially affected or are reasonably likely to materially affect the Company’s internal control over financial reporting.

~~102~~106

PART II — OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

See Note 10 — 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 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 2021 Form 10-K.

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

~~The following table summarizes common stock repurchased by~~There were no unregistered sales of equity securities or repurchase activities during the ~~Company under the Company’s common stock repurchase program for the second~~third quarter of ~~2022:~~

Calendar Month
Total Number of
Shares Purchased (1)
Average Price
Paid per Share of Common Stock Total Number of Shares Purchased as Part of Publicly Announced
Plans or Programs
Approximate
Dollar Value of Shares that May Yet Be Purchased
Under the Plans or Programs
(in millions) (2)
April 370,000 $ 72.91 370,000 $ 327.1
May 1,015,517 71.90 1,015,517 254.0
June — — — 254.0
Total 1,385,517 $ 72.17 1,385,517 $ 254.0

~~(1)Excludes the repurchase of common stock pursuant to various stock compensation plans and agreements totaling $380 thousand during the second quarter of~~ 2022.

~~(2)~~On March 3, 2020, the Company’s Board of Directors authorized, and the Company announced, the repurchase of up to $500.0 million of the Company’s common stock. This $500.0 million repurchase authorization is inclusive of the Company’s $100.0 million stock repurchase authorization that is previously outstanding. The share repurchase authorization has no expiration date.

~~103~~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 filed with the Commission on ~~September~~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 Registrant’s Definitive Proxy Statement on Schedule 14A filed with the Commission on April 23, 2008 (File No. 000-24939).]

3.1.4						Certificate of Designations of 8.00% Non-Cumulative Perpetual Convertible Preferred Stock, Series A of the Registrant [Incorporated by reference to Exhibit 3.1 from Registrant’s Current Report on Form 8-K, filed with the Commission on April 30, 2008 (File No. 000-24939).]

3.1.5						Certificate of Designations of Fixed Rate Cumulative Perpetual Preferred Stock, Series B of the Registrant [Incorporated by reference to Exhibit 3.1, 4.1 from Registrant’s Current Report on Form 8-K filed with the Commission on December 9, 2008 (File No. 000-24939).]

3.1.6						Certificate of Designations of Mandatorily Convertible Cumulative Non-Voting Perpetual Preferred Stock, Series C of the Registrant [Incorporated by reference to Exhibit 3.1, 4.1 from Registrant’s Current Report on Form 8-K filed with the Commission on November 12, 2009 (File No. 000-24939).]

3.2						Amended and Restated Bylaws of the Registrant dated May 26, 2022 [Incorporated by reference to Exhibit 3.1 from Registrant’s Current Report on Form 8-K filed with the Commission on May 27, 2022 (File No. 000-24939).]







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.

~~104~~108

GLOSSARY OF ACRONYMS


AFS	Available-for-sale	LCH	London Clearing House
ALCO	Asset/Liability Committee	LGD	Loss given default
AOCI	Accumulated other comprehensive (loss) income	LIBOR	London Interbank Offered Rate
~~ALCO~~ASC	~~Asset/Liability Committee~~Accounting Standards Codification	LIBOR Act	Adjustable Interest Rate (LIBOR) Act
~~AOCI~~ASU	~~Accumulated other comprehensive (loss) income~~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~~	~~NAV~~	~~Net asset value~~
CARES Act	Coronavirus Aid, Relief, and Economic Security Act	~~NRSRO~~MMBTU	~~Nationally recognized statistical rating organizations~~Million British thermal unit
CECL	Current expected credit losses	~~OREO~~NAV	~~Other real estate owned~~Net asset value
CLO	Collateralized loan obligations	~~OTTI~~NRSRO	~~Other-than-temporary impairment~~Nationally recognized statistical rating organizations
CME	Chicago Mercantile Exchange	PDOREO	~~Probability of default~~Other real estate owned
COVID-19	Coronavirus Disease 2019	~~PPP~~OTTI	~~Paycheck Protection Program~~Other-than-temporary impairment
CRA	Community Reinvestment Act	~~RMB~~PD	~~Chinese Renminbi~~Probability of default
CRE	Commercial real estate	PPP	Paycheck Protection Program
DIF	Deposit Insurance Fund	RMB	Chinese Renminbi
EPS	Earnings per share	ROA	Return on average assets
~~EPS~~ERM	~~Earnings per share~~Enterprise risk management	ROE	Return on average equity
~~ERM~~EVE	~~Enterprise risk management~~Economic value of equity	RPA	Credit risk participation agreement
~~EVE~~FDIC	~~Economic value of equity~~Federal Deposit Insurance Corporation	RSU	Restricted stock unit
FHLB	Federal Home Loan Bank	~~SBA~~SBLC	~~Small Business Administration~~Standby letters of credit
FRBSF	Federal Reserve Bank of San Francisco	~~SBLC~~SEC	~~Standby letters of credit~~U.S. Securities and Exchange Commission
FTP	Funds transfer pricing	~~SEC~~SOFR	~~U.S. Securities and Exchange Commission~~Secured Overnight Financing Rate
GAAP	Generally Accepted Accounting Principles	~~SOFR~~TDR	~~Secured Overnight Financing Rate~~Troubled debt restructuring
GDP	Gross Domestic Product	~~TDR~~U.S.	~~Troubled debt restructuring~~United States
HELOC	Home equity lines of credit	~~U.S.~~	~~United States~~
~~HTM~~	~~Held-to-maturity~~	USD	U.S. dollar
~~LCH~~HTM	~~London Clearing House~~Held-to-maturity	VIE	Variable interest entity
~~LGD~~	~~Loss given default~~

~~105~~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:

~~August~~November 8, 2022

EAST WEST BANCORP, INC.
(Registrant)

/s/ IRENE H. OH

Irene H. Oh

Executive Vice President and
Chief Financial Officer

~~106~~110



Calendar Month	Total Number of Shares Purchased (1)	Average Price Paid per Share of Common Stock		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs (in millions) (2)
April	370,000	$	72.91	370,000	$	327.1
May	1,015,517	71.90		1,015,517	254.0
June	—	—		—	254.0
Total	1,385,517	$	72.17	1,385,517	$	254.0