0001069157us-gaap:~~FinancingReceivables60To89DaysPastDueMemberus-gaap:ConsumerPortfolioSegmentMember2021-12-31~~PaymentDeferralMemberus-gaap:ConsumerPortfolioSegmentMemberus-gaap:HomeEquityMember2023-01-012023-09-30

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, ~~2022~~2023

☐ 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: ~~140,946,569~~140,930,142 shares as of October 31, ~~2022~~2023.

TABLE OF CONTENTS


			Page
FORWARD-LOOKING STATEMENTS			3
PART I — FINANCIAL INFORMATION			35

	Item 1.	Consolidated Financial Statements	35
		Consolidated Balance Sheet (Unaudited)	35
		Consolidated Statement of Income (Unaudited)	46
		Consolidated Statement of Comprehensive Income (Loss) (Unaudited)	57
		Consolidated Statement of Changes in Stockholders’ Equity (Unaudited)	68
		Consolidated Statement of Cash Flows (Unaudited)	79
		Notes to Consolidated Financial Statements (Unaudited)	911
		1 — Basis of Presentation	911
		2 — Current Accounting Developments and Summary of Significant Accounting Policies	1012
		3 — Fair Value Measurement and Fair Value of Financial Instruments	1114
		4 — Assets Purchased under Resale Agreements and Sold under Repurchase Agreements	2124
		5 — Securities	2326
		6 — Derivatives	2932
		7 — Loans Receivable and Allowance for Credit Losses	3639
		8 — Investments in Qualified Affordable Housing Partnerships, Tax Credit and Other Investments, Net and Variable Interest Entities	5054
		9 — Goodwill	5255
		10 — Short-Term Borrowings and Long-Term Debt	55
		1 1 — Commitments and Contingencies	5256


		111 2 — Stock Compensation Plans	5358
		121 3 — Stockholders’ Equity and Earnings Per Share	5559
		131 4 — Accumulated Other Comprehensive Income (Loss)	5659
		141 5 — Business Segments	5861


	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	6164










	Item 3.	Quantitative and Qualitative Disclosures About Market Risk	~~106~~108

	Item 4.	Controls and Procedures	~~106~~108


PART II — OTHER INFORMATION			~~107~~109

	Item 1.	Legal Proceedings	~~107~~109
	Item 1A.	Risk Factors	~~107~~109
	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	~~107~~110



	Item 5.	Other Information	110
	Item 6.	Exhibits	~~108~~111

GLOSSARY OF ACRONYMS			~~109~~112

SIGNATURE			~~110~~113

Forward-Looking Statements

Certain matters discussed in this Quarterly Report on Form 10-Q (this “Form 10-Q”) contain forward-looking statements that are intended to be covered by the safe harbor provisions 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 assumptions, beliefs, estimates, expectations and projections, many of which, by their nature, are inherently uncertain and beyond the Company’s control. Forward-looking statements may relate to various matters, including the Company’s financial condition, results of operations, plans, objectives, future performance, business or industry, and usually can be identified by the use of forward-looking words, such as “anticipates,” “assumes,” “believes,” “can,” “continues,” “could,” “estimates,” “expects,” “forecasts,” “goal,” “intends,” “likely,” “may,” “might,” “objective,” “plans,” “potential,” “projects,” “remains,” “should,” “target,” “trend,” “will,” “would,” or similar expressions or variations thereof, and the negative thereof, but these terms are not the exclusive means of identifying such statements. You should not place undue reliance on forward-looking 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.

There are various 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, capital or financial market disruption, supply chain disruption, level of inflation, interest rate environment, housing prices, employment levels, rate of growth and general business conditions, which could result in, among other things, reduced demand for loans, reduced availability of funding or increased funding costs, declines in asset values and/or recognition of allowance for credit losses;

•changes in local, regional and global business, economic and political conditions and geopolitical events, such as political unrest, wars and acts of terrorism;

•the soundness of other financial institutions and the impacts related to or resulting from recent bank failures and other economic and industry volatility, including potential increased regulatory requirements, Federal Deposit Insurance Corporation (“FDIC”) insurance premiums and assessments, losses in the value of our investment portfolio, deposit withdrawals, or other adverse consequences of negative market perceptions of the banking industry or the Company;

•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 FDIC, the SEC, the Consumer Financial Protection Bureau (“CFPB”), the California Department of Financial Protection and Innovation — Division of Financial Institutions, China’s National Administration of Financial Regulation, the Hong Kong Monetary Authority, the Hong Kong Securities and Futures Commission, and the Monetary Authority of Singapore;

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

•changes in the commercial and consumer real estate markets;

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

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

•the impact of any future U.S. federal government shutdown and uncertainty regarding the U.S. federal government’s debt limit and credit rating;

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

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

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

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

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

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

•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;

•the impact of adverse judgments or settlements in litigation;

•the impact of political developments, pandemics, wars, civil unrest, terrorism or other hostilities that may disrupt or increase volatility in securities or otherwise affect business and economic conditions on the Company and its customers;

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

•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 (“FASB”) or other regulatory agencies and their impact on the Company’s 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 strategic acquisitions or divestitures;

•changes in the equity and debt securities markets;

•fluctuations in the Company’s stock price;

•fluctuations in foreign currency exchange rates;

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

•the impact of climate change, natural or man-made disasters or calamities, such as wildfires, droughts, hurricanes, flooding and earthquakes or other events that may directly or indirectly result in a negative impact on the financial performance of the Company and its customers.

For a more detailed discussion of some of the factors that might cause such differences, see the Company’s Annual Report on Form 10-K for the year ended December 31, 2022, filed with the SEC on February 27, 2023 (the “Company’s 2022 Form 10-K”) under the heading Item 1A. Risk Factors, and Item 1A. Risk Factors of this Form 10-Q. You should treat forward-looking statements as speaking only as of the date they are made and based only on information then actually known to the Company. The Company does not undertake, and specifically disclaims, any obligation to update or revise any forward-looking statements to reflect the occurrence of events or circumstances after the date of such statements except as required by law.

PART I — FINANCIAL INFORMATION

ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS

EAST WEST BANCORP, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEET

($ in thousands, except shares)

(Unaudited)


		September 30, 2022		December 31, 2021			September 30, 2023		December 31, 2022
		(Unaudited)
ASSETS	ASSETS					ASSETS
Cash and due from banks	Cash and due from banks	$	554,260	$	527,317	Cash and due from banks	$	495,976	$	534,980
Interest-bearing cash with banks	Interest-bearing cash with banks	1,609,093		3,385,618		Interest-bearing cash with banks	4,065,202		2,946,804
Cash and cash equivalents	Cash and cash equivalents	2,163,353		3,912,935		Cash and cash equivalents	4,561,178		3,481,784
Interest-bearing deposits with banks	Interest-bearing deposits with banks	630,543		736,492		Interest-bearing deposits with banks	17,213		139,021
Assets purchased under resale agreements (“resale agreements”)	Assets purchased under resale agreements (“resale agreements”)	892,986		2,353,503		Assets purchased under resale agreements (“resale agreements”)	785,000		792,192
Securities:	Securities:					Securities:
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)		3,012,667		—
Available-for-sale (“AFS”) debt securities, at fair value (amortized cost of $6,976,331 and $6,879,225)						Available-for-sale (“AFS”) debt securities, at fair value (amortized cost of $6,976,331 and $6,879,225)	6,039,837		6,034,993
Held-to-maturity (“HTM”) debt securities, at amortized cost (fair value of $2,308,048 and $2,455,171)						Held-to-maturity (“HTM”) debt securities, at amortized cost (fair value of $2,308,048 and $2,455,171)	2,964,235		3,001,868

Loans held-for-sale	Loans held-for-sale	14,500		635		Loans held-for-sale	4,762		25,644
Loans held-for-investment (net of allowance for loan losses of $582,517 and $541,579)		46,859,738		41,152,202
Loans held-for-investment (net of allowance for loan losses of $655,523 and $595,645)						Loans held-for-investment (net of allowance for loan losses of $655,523 and $595,645)	50,251,661		47,606,785
Investments in qualified affordable housing partnerships, tax credit and other investments, net	Investments in qualified affordable housing partnerships, tax credit and other investments, net	725,254		628,263		Investments in qualified affordable housing partnerships, tax credit and other investments, net	901,559		763,256

Premises and equipment (net of accumulated depreciation of $146,073 and $139,358)		91,587		97,302
Premises and equipment (net of accumulated depreciation of $155,043 and $148,126)						Premises and equipment (net of accumulated depreciation of $155,043 and $148,126)	87,888		89,191
Goodwill	Goodwill	465,697		465,697		Goodwill	465,697		465,697
Operating lease right-of-use assets	Operating lease right-of-use assets	105,411		98,632		Operating lease right-of-use assets	97,782		103,681
Other assets	Other assets	1,708,235		1,459,687		Other assets	2,112,646		1,608,038
TOTAL	TOTAL	$	62,576,061	$	60,870,701	TOTAL	$	68,289,458	$	64,112,150
LIABILITIES	LIABILITIES					LIABILITIES
Deposits:	Deposits:					Deposits:
Noninterest-bearing	Noninterest-bearing	$	21,645,394	$	22,845,464	Noninterest-bearing	$	16,169,072	$	21,051,090
Interest-bearing	Interest-bearing	32,211,968		30,505,068		Interest-bearing	38,917,959		34,916,759
Total deposits	Total deposits	53,857,362		53,350,532		Total deposits	55,087,031		55,967,849
Short-term borrowings						Short-term borrowings	4,500,000		—

Federal funds purchased		200,000		—
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”)	—		300,000
Long-term debt and finance lease liabilities	Long-term debt and finance lease liabilities	152,610		151,997		Long-term debt and finance lease liabilities	153,087		152,400
Operating lease liabilities	Operating lease liabilities	113,477		105,534		Operating lease liabilities	107,695		111,931
Accrued expenses and other liabilities	Accrued expenses and other liabilities	1,655,239		876,089		Accrued expenses and other liabilities	1,844,939		1,595,358
Total liabilities	Total liabilities	56,915,393		55,033,483		Total liabilities	61,692,752		58,127,538
COMMITMENTS AND CONTINGENCIES (Note 10)
COMMITMENTS AND CONTINGENCIES (Note 11)						COMMITMENTS AND CONTINGENCIES (Note 11)
STOCKHOLDERS’ EQUITY	STOCKHOLDERS’ EQUITY					STOCKHOLDERS’ EQUITY
Common stock, $0.001 par value, 200,000,000 shares authorized; 168,427,227 and 167,790,645 shares issued		168		168
Common stock, $0.001 par value, 200,000,000 shares authorized; 169,316,546 and 168,459,045 shares issued						Common stock, $0.001 par value, 200,000,000 shares authorized; 169,316,546 and 168,459,045 shares issued	169		168
Additional paid-in capital	Additional paid-in capital	1,926,393		1,893,557		Additional paid-in capital	1,969,239		1,936,389
Retained earnings	Retained earnings	5,302,897		4,683,659		Retained earnings	6,294,751		5,582,546
Treasury stock, at cost 27,509,715 and 25,882,691 shares		(768,758)		(649,785)
Treasury stock, at cost 27,830,597 and 27,511,199 shares						Treasury stock, at cost 27,830,597 and 27,511,199 shares	(792,076)		(768,862)
Accumulated other comprehensive loss (“AOCI”), net of tax	Accumulated other comprehensive loss (“AOCI”), net of tax	(800,032)		(90,381)		Accumulated other comprehensive loss (“AOCI”), net of tax	(875,377)		(765,629)
Total stockholders’ equity	Total stockholders’ equity	5,660,668		5,837,218		Total stockholders’ equity	6,596,706		5,984,612
TOTAL	TOTAL	$	62,576,061	$	60,870,701	TOTAL	$	68,289,458	$	64,112,150

See accompanying Notes to Consolidated Financial Statements.

EAST WEST BANCORP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF INCOME

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

(Unaudited)

Three Months Ended
September 30, Nine Months Ended
September 30,
2022 2021 2022 2021
INTEREST AND DIVIDEND INCOME
Loans receivable, including fees $ 560,452 $ 363,503 $ 1,376,978 $ 1,057,964
Debt securities 51,092 37,826 139,935 101,616
Resale agreements 6,769 8,957 23,705 23,077
Restricted equity securities 843 500 2,274 1,588
Interest-bearing cash and deposits with banks 9,080 4,521 17,127 11,781
Total interest and dividend income 628,236 415,307 1,560,019 1,196,026
INTEREST EXPENSE
Deposits 68,894 15,970 104,371 55,790
Federal funds purchased and other short-term borrowings 1,177 — 1,427 42
FHLB advances 392 857 1,529 6,025
Repurchase agreements 4,421 2,012 8,855 5,981
Long-term debt and finance lease liabilities 1,543 762 3,463 2,314
Total interest expense 76,427 19,601 119,645 70,152
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 27,000 (10,000) 48,500 (25,000)
Net interest income after provision for (reversal of) credit losses 524,809 405,706 1,391,874 1,150,874
NONINTEREST INCOME
Lending fees 20,289 17,516 59,869 56,965
Deposit account fees 23,636 18,508 66,323 51,233
Interest rate contracts and other derivative income 8,761 7,156 29,695 20,981
Foreign exchange income 10,083 13,101 34,143 35,634
Wealth management fees 8,903 5,598 21,494 20,460
Net gains on sales of loans 2,129 3,329 5,968 6,601
Gains on sales of AFS debt securities — 354 1,306 1,178
Other investment (loss) income (580) 5,349 5,910 13,870
Other income 2,331 2,198 9,031 7,484
Total noninterest income 75,552 73,109 233,739 214,406
NONINTEREST EXPENSE
Compensation and employee benefits 127,580 105,751 357,213 318,985
Occupancy and equipment expense 15,920 15,851 46,853 47,150
Deposit insurance premiums and regulatory assessments 4,875 4,641 14,519 12,791
Deposit account expense 6,707 4,136 17,071 11,845
Data processing 3,725 3,575 10,876 12,088
Computer software expense 6,889 8,426 20,755 23,106
Consulting expense 1,620 1,635 5,474 4,978
Legal expense 689 2,363 2,454 5,840
Other operating expense 28,094 20,998 78,315 58,544
Amortization of tax credit and other investments 19,874 38,008 48,753 90,657
Total 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
EARNINGS PER SHARE (“EPS”)
BASIC $ 2.10 $ 1.59 $ 5.59 $ 4.62
DILUTED $ 2.08 $ 1.57 $ 5.55 $ 4.58
WEIGHTED-AVERAGE NUMBER OF SHARES OUTSTANDING
BASIC 140,917 141,880 141,453 141,799
DILUTED 142,011 143,143 142,601 143,051

~~See accompanying Notes to Consolidated Financial Statements.~~

~~EAST WEST BANCORP, INC. AND SUBSIDIARIES~~

~~CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME~~

~~($ in thousands)~~

~~(Unaudited)~~

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

~~See accompanying Notes to Consolidated Financial Statements.~~

~~EAST WEST BANCORP, INC. AND SUBSIDIARIES~~

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

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

~~(Unaudited)~~

Common Stock and
Additional Paid-in Capital Retained Earnings Treasury Stock AOCI,
Net of Tax Total
Stockholders’ Equity
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
Shares Amount
BALANCE, JANUARY 1, 2021 141,565,229 $ 1,858,519 $ 4,000,414 $ (634,083) $ 44,325 $ 5,269,175
Net income — — 655,185 — — 655,185
Other comprehensive loss — — — — (101,893) (101,893)
Issuance of common stock pursuant to various stock compensation plans and agreements 523,449 25,520 — — — 25,520
Repurchase of common stock pursuant to various stock compensation plans and agreements (204,947) — — (15,508) — (15,508)
Cash dividends on common stock ($0.99 per share) — — (142,278) — — (142,278)
BALANCE, SEPTEMBER 30, 2021 141,883,731 $ 1,884,039 $ 4,513,321 $ (649,591) $ (57,568) $ 5,690,201
BALANCE, JANUARY 1, 2022 141,907,954 $ 1,893,725 $ 4,683,659 $ (649,785) $ (90,381) $ 5,837,218
Net income — — 791,320 — — 791,320
Other comprehensive loss — — — — (709,651) (709,651)
Issuance of common stock pursuant to various stock compensation plans and agreements 640,053 32,836 — — — 32,836
Repurchase of common stock pursuant to various stock compensation plans and agreements (244,978) — — (18,983) — (18,983)
Repurchase of common stock pursuant to the Stock Repurchase Plan (1,385,517) — — (99,990) — (99,990)
Cash dividends on common stock ($1.20 per share) — — (172,082) — — (172,082)
BALANCE, SEPTEMBER 30, 2022 140,917,512 $ 1,926,561 $ 5,302,897 $ (768,758) $ (800,032) $ 5,660,668



	Three Months Ended September 30,				Nine Months Ended September 30,
	2023		2022		2023		2022
INTEREST AND DIVIDEND INCOME
Loans receivable, including fees	$	818,719	$	560,452	$	2,318,369	$	1,376,978
Debt securities	69,778		51,092		204,679		139,935

Resale agreements	4,460		6,769		12,932		23,705
Restricted equity securities	1,079		843		3,054		2,274
Interest-bearing cash and deposits with banks	67,751		9,080		164,393		17,127
Total interest and dividend income	961,787		628,236		2,703,427		1,560,019
INTEREST EXPENSE
Deposits	338,296		68,894		842,567		104,371
Federal funds purchased and other short-term borrowings	49,575		1,177		107,432		1,427
Federal Home Loan Bank (“FHLB”) advances	—		392		6,430		1,529
Repurchase agreements	193		4,421		1,456		8,855
Long-term debt and finance lease liabilities	2,910		1,543		8,122		3,463
Total interest expense	390,974		76,427		966,007		119,645
Net interest income before provision for credit losses	570,813		551,809		1,737,420		1,440,374
Provision for credit losses	42,000		27,000		88,000		48,500
Net interest income after provision for credit losses	528,813		524,809		1,649,420		1,391,874
NONINTEREST INCOME
Lending fees	20,312		20,289		61,799		59,869
Deposit account fees	22,622		23,636		66,610		66,323
Interest rate contracts and other derivative income	11,208		8,761		21,145		29,695
Foreign exchange income	12,334		10,083		38,245		34,143
Wealth management fees	5,877		8,903		19,070		21,494
Net (losses) gains on sales of loans	(12)		2,129		(41)		5,968
Net (losses) gains on AFS debt securities	—		—		(10,000)		1,306



Other investment income (loss)	1,751		(580)		7,675		5,910
Other income	2,660		2,331		10,858		9,031
Total noninterest income	76,752		75,552		215,361		233,739
NONINTEREST EXPENSE
Compensation and employee benefits	123,153		127,580		377,744		357,213
Occupancy and equipment expense	15,353		15,920		47,028		46,853
Deposit insurance premiums and regulatory assessments	8,583		4,875		24,755		14,519
Deposit account expense	11,585		6,707		31,753		17,071
Data processing	3,645		3,725		10,205		10,876
Computer software expense	8,116		6,889		22,955		20,755


Other operating expense	31,885		30,403		102,092		86,243
Amortization of tax credit and other investments	49,694		19,874		115,718		48,753

Total noninterest expense	252,014		215,973		732,250		602,283
INCOME BEFORE INCOME TAXES	353,551		384,388		1,132,531		1,023,330
INCOME TAX EXPENSE	65,813		89,049		210,323		232,010
NET INCOME	$	287,738	$	295,339	$	922,208	$	791,320
EARNINGS PER SHARE (“EPS”)
BASIC	$	2.03	$	2.10	$	6.52	$	5.59
DILUTED	$	2.02	$	2.08	$	6.49	$	5.55
WEIGHTED-AVERAGE NUMBER OF SHARES OUTSTANDING
BASIC	141,485		140,917		141,356		141,453
DILUTED	142,122		142,011		142,044		142,601

See accompanying Notes to Consolidated Financial Statements.

EAST WEST BANCORP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF ~~CASH FLOWS~~COMPREHENSIVE INCOME (LOSS)

($ in thousands)

(Unaudited)

Nine Months Ended September 30,
2022 2021
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 791,320 $ 655,185
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 81,980 116,371
Amortization of premiums and accretion of discount, net 26,336 17,392
Stock compensation costs 29,338 24,047
Deferred income tax (benefit) expense (6,107) 787
Provision for (reversal of) credit losses 48,500 (25,000)
Net gains on sales of loans (5,968) (6,601)
Gains on sales of AFS debt securities (1,306) (1,178)
Loans held-for-sale:
Originations and purchases (447) (9,323)
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 5,642 7,624
Net change in accrued interest receivable and other assets 56,958 (78,649)
Net change in accrued expenses and other liabilities 584,655 30,179
Other operating activities, net 5,057 3,660
Total adjustments 825,099 90,646
Net cash provided by operating activities 1,616,419 745,831
CASH FLOWS FROM INVESTING ACTIVITIES
Net change in:
Investments in qualified affordable housing partnerships, tax credit and other investments (91,710) (141,882)
Interest-bearing deposits with banks 105,479 4,576
Resale agreements:
Proceeds from paydowns and maturities 1,719,076 698,274
Purchases (258,559) (1,834,416)
AFS debt securities:
Proceeds from sales 129,181 236,967
Proceeds from repayments, maturities and redemptions 711,950 1,346,839
Purchases (769,007) (5,884,389)
HTM debt securities:
Proceeds from repayments, maturities and redemptions 60,140 —
Purchases (50,000) —
Loans held-for-investment:
Proceeds from sales of loans originally classified as held-for-investment 453,315 416,426
Purchases (599,660) (746,395)
Other changes in loans held-for-investment, net (5,675,012) (1,798,011)
Proceeds from sales of OREO — 28,560
Purchase of bank-owned life insurance — (150,000)
Proceeds from distributions received from equity method investees 13,557 5,626
Other investing activities, net 920 (61)
Net cash used in investing activities (4,250,330) (7,817,886)



	Three Months Ended September 30,				Nine Months Ended September 30,
	2023		2022		2023		2022
Net income	$	287,738	$	295,339	$	922,208	$	791,320
Other comprehensive loss, net of tax:
Net changes in unrealized losses on AFS debt securities	(72,691)		(161,445)		(64,990)		(523,593)
Reclassification of unrealized losses on debt securities transferred from AFS to HTM	—		—		—		(112,991)
Amortization of unrealized losses on debt securities transferred from AFS to HTM	2,870		3,256		8,448		9,317
Net changes in unrealized losses on cash flow hedges	(27,334)		(33,269)		(52,608)		(64,372)
Foreign currency translation adjustments	3,710		(7,926)		(598)		(18,012)
Other comprehensive loss	(93,445)		(199,384)		(109,748)		(709,651)
COMPREHENSIVE INCOME	$	194,293	$	95,955	$	812,460	$	81,669

See accompanying Notes to Consolidated Financial Statements.

EAST WEST BANCORP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY

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

(Unaudited)



	Common Stock and Additional Paid-in Capital			Retained Earnings		Treasury Stock		AOCI, Net of Tax		Total Stockholders’ Equity
	Shares	Amount
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
BALANCE, JULY 1, 2023	141,483,668	$	1,959,784	$	6,075,735	$	(791,890)	$	(781,932)	$	6,461,697

Net income	—	—		287,738		—		—		287,738
Other comprehensive loss	—	—		—		—		(93,445)		(93,445)
Issuance of common stock pursuant to various stock compensation plans and agreements	5,682	9,624		—		—		—		9,624
Repurchase of common stock pursuant to various stock compensation plans and agreements	(3,401)	—		—		(186)		—		(186)

Cash dividends on common stock ($0.48 per share)	—	—		(68,722)		—		—		(68,722)
BALANCE, SEPTEMBER 30, 2023	141,485,949	$	1,969,408	$	6,294,751	$	(792,076)	$	(875,377)	$	6,596,706



	Common Stock and Additional Paid-in Capital			Retained Earnings		Treasury Stock		AOCI, Net of Tax		Total Stockholders’ Equity
	Shares	Amount
BALANCE, JANUARY 1, 2022	141,907,954	$	1,893,725	$	4,683,659	$	(649,785)	$	(90,381)	$	5,837,218

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



Issuance of common stock pursuant to various stock compensation plans and agreements	640,053	32,836		—		—		—		32,836
Repurchase of common stock pursuant to various stock compensation plans and agreements	(244,978)	—		—		(18,983)		—		(18,983)
Repurchase of common stock pursuant to the stock repurchase program	(1,385,517)	—		—		(99,990)		—		(99,990)
Cash dividends on common stock ($1.20 per share)	—	—		(172,082)		—		—		(172,082)
BALANCE, SEPTEMBER 30, 2022	140,917,512	$	1,926,561	$	5,302,897	$	(768,758)	$	(800,032)	$	5,660,668
BALANCE, JANUARY 1, 2023	140,947,846	$	1,936,557	$	5,582,546	$	(768,862)	$	(765,629)	$	5,984,612

Cumulative-effect of a change in accounting principle (1)	—	—		(4,262)		—		—		(4,262)

Net income	—	—		922,208		—		—		922,208
Other comprehensive loss	—	—		—		—		(109,748)		(109,748)



Issuance of common stock pursuant to various stock compensation plans and agreements	857,501	32,851		—		—		—		32,851
Repurchase of common stock pursuant to various stock compensation plans and agreements	(319,398)	—		—		(23,214)		—		(23,214)


Cash dividends on common stock ($1.44 per share)	—	—		(205,741)		—		—		(205,741)
BALANCE, SEPTEMBER 30, 2023	141,485,949	$	1,969,408	$	6,294,751	$	(792,076)	$	(875,377)	$	6,596,706

(1)Represents the change in the Company’s allowance for loan losses as a result of the adoption of Accounting Standards Update (“ASU”) 2022-02, Financial Instruments - Credit Losses (Topic 326): Troubled Debt Restructurings and the Vintage Disclosures on January 1, 2023. Refer to Note 2 — Current Accounting Developments and Summary of Significant Accounting Policies in this Form 10-Q for additional information.

See accompanying Notes to Consolidated Financial Statements.

EAST WEST BANCORP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF CASH FLOWS

($ in thousands)

(Unaudited)



	Nine Months Ended September 30,
	2023		2022
CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$	922,208	$	791,320
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	174,856		81,980
Amortization of premiums and accretion of discount, net	(15,740)		26,336
Stock compensation costs	29,934		29,338
Deferred income tax expense (benefit)	1,083		(6,107)
Provision for credit losses	88,000		48,500
Net losses (gains) on sales of loans	41		(5,968)
Net losses (gains) on AFS debt securities	10,000		(1,306)




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


Proceeds from distributions received from equity method investees	3,727		5,642
Net change in accrued interest receivable and other assets	(361,324)		56,958
Net change in accrued expenses and other liabilities	11,641		584,655
Other operating activities, net	(1,204)		5,057
Total adjustments	(58,986)		825,099
Net cash provided by operating activities	863,222		1,616,419
CASH FLOWS FROM INVESTING ACTIVITIES
Net change in:
Investments in qualified affordable housing partnerships, tax credit and other investments	(154,309)		(91,710)
Interest-bearing deposits with banks	121,730		105,479
Resale agreements:
Proceeds from paydowns and maturities	219,917		1,719,076
Purchases	(212,725)		(258,559)
AFS debt securities:
Proceeds from sales	—		129,181
Proceeds from repayments, maturities and redemptions	877,377		711,950
Purchases	(1,011,326)		(769,007)
HTM debt securities:
Proceeds from repayments, maturities and redemptions	49,649		60,140
Purchases	—		(50,000)
Loans held-for-investment:
Proceeds from sales of loans originally classified as held-for-investment	528,056		453,315
Purchases	(433,228)		(599,660)
Other changes in loans held-for-investment, net	(2,794,119)		(5,675,012)







Proceeds from distributions received from equity method investees	16,614		13,557

Other investing activities, net	(105,258)		920
Net cash used in investing activities	(2,897,622)		(4,250,330)

See accompanying Notes to Consolidated Financial Statements.

EAST WEST BANCORP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF CASH FLOWS

($ in thousands)

(Unaudited)

(Continued)


		Nine Months Ended September 30,					Nine Months Ended September 30,
		2022		2021			2023		2022

CASH FLOWS FROM FINANCING ACTIVITIES	CASH FLOWS FROM FINANCING ACTIVITIES					CASH FLOWS FROM FINANCING ACTIVITIES
Net change in deposits	Net change in deposits	623,025		8,486,734		Net change in deposits	(840,367)		623,025
Net change in federal funds purchased and short-term borrowings		200,006		(21,143)
Net change in short-term borrowings						Net change in short-term borrowings	4,500,017		200,006

FHLB advances:	FHLB advances:					FHLB advances:
Proceeds	Proceeds	4,600,200		—		Proceeds	6,000,000		4,600,200
Repayment	Repayment	(4,525,200)		(405,000)		Repayment	(6,000,000)		(4,525,200)
Repurchase agreements:	Repurchase agreements:					Repurchase agreements:
Proceeds from repurchase agreements	Proceeds from repurchase agreements	311,785		—		Proceeds from repurchase agreements	—		311,785

Repayment of repurchase agreements						Repayment of repurchase agreements	(300,000)		—
Repurchase agreements’ extinguishment cost						Repurchase agreements’ extinguishment cost	(3,872)		—
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	(710)		(909)		Repayment of long-term debt and lease liabilities	(637)		(710)
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	1,563		1,444
Stocks tendered for payment of withholding taxes		(18,983)		(15,508)
Stock tendered for payment of withholding taxes						Stock tendered for payment of withholding taxes	(23,214)		(18,983)
Cash dividends paid	Cash dividends paid	(171,991)		(141,911)		Cash dividends paid	(206,848)		(171,991)
Net cash provided by financing activities	Net cash provided by financing activities	919,586		7,903,443		Net cash provided by financing activities	3,126,642		919,586
Effect of exchange rate changes on cash and cash equivalents	Effect of exchange rate changes on cash and cash equivalents	(35,257)		3,542		Effect of exchange rate changes on cash and cash equivalents	(12,848)		(35,257)
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS		(1,749,582)		834,930
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS						NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS	1,079,394		(1,749,582)
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	3,481,784		3,912,935
CASH AND CASH EQUIVALENTS, END OF PERIOD	CASH AND CASH EQUIVALENTS, END OF PERIOD	$	2,163,353	$	4,852,901	CASH AND CASH EQUIVALENTS, END OF PERIOD	$	4,561,178	$	2,163,353

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	$	107,146	$	70,833	Interest	$	852,315	$	107,146
Income taxes, net	Income taxes, net	$	233,082	$	137,452	Income taxes, net	$	284,347	$	233,082
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	$	463,769	$	411,416	Loans transferred from held-for-investment to held-for-sale	$	507,215	$	463,769

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

See accompanying Notes to Consolidated Financial Statements.

810

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 September 30, ~~2022,~~2023, East West also has six wholly-owned subsidiaries that are statutory business trusts (the “Trusts”). In accordance with ~~Financial Accounting Standards Board~~FASB Accounting Standards Codification (“ASC”) Topic 810, Consolidation, the Trusts are not included on the Consolidated Financial Statements.

The unaudited interim Consolidated Financial Statements are presented in accordance with ~~United States (“~~U.S.”) Generally Accepted Accounting Principles (“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~~2022 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.10-K.

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

Risk and Uncertainties

The failures of Silicon Valley Bank, Signature Bank and First Republic Bank earlier in the year have resulted in significant disruption in the financial services industry, which has adversely impacted the volatility and market prices of the securities of financial institutions. In addition, these bank failures have caused concern and uncertainty regarding the liquidity of the banking sector as a whole and resulted in some regional bank customers choosing to maintain deposits with larger financial institutions. Further, competition for deposits has increased in recent periods, and the cost of funding has similarly increased, putting pressure on our net interest margin. These events have adversely impacted, and could continue to adversely affect, our business, results of operations, and financial condition, as well as the market price and volatility of our common stock.

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

Accounting Pronouncements Adopted in 2023


Standard	Required Date of Adoption	Description	Effect on Financial Statements
ASU 2022-02, Financial Instruments —Credit Losses (Topic 326): Troubled Debt Restructurings and the Vintage Disclosures	January 1, 2023 Early adoption is permitted	ASU 2022-02 eliminates the •accounting guidance for troubled debt restructurings (“TDR”), and requires the Company to apply the loan refinancing and restructuring guidance to determine whether a modification made to a loan results in a new loan or a continuation of an existing loan; and •requirement to use a discounted cash flow method to measure receivables. The guidance also requires •enhanced disclosures for certain loan refinancings and restructurings by creditors when the borrower is experiencing financial difficulty; and •vintage disclosures of current period gross charge-offs (on a current year-to-date basis) by year of loan origination for financing receivables and net investments in leases within the scope of ASC 326-20: Financial Instruments — Credit Losses — Measured at Amortized Cost.	The Company adopted ASU 2022-02 on January 1, 2023 on a prospective basis, except for the guidance related to the elimination of TDR recognition and measurement, which was adopted on a modified retrospective approach. This adoption increased the allowance for loan losses on TDRs as of December 31, 2022 by $6.0 million and decreased opening retained earnings on January 1, 2023 by $4.3 million after-tax. Disclosures as of September 30, 2023 are presented in accordance with this guidance while prior year amounts are reported in accordance with previously applicable GAAP.

Recent Accounting Pronouncements Yet to be Adopted


Standard	Required Date of Adoption	Description	Effect on Financial Statements
Standards Not Yet Adopted
~~Accounting Standards Update (“ASU”) 2022-02,~~ASU 2023-01, ~~Financial Instruments - Credit Losses~~Leases (Topic 842): ~~(Topic 326): Troubled Debt Restructurings and the Vintage Disclosures~~ Common Control Arrangements	January 1, ~~2023~~2024 Early adoption is permitted	ASU 2023-01 amends the accounting for leasehold improvements for leases between entities under common control arrangements. The guidance requires leasehold improvements associated with leases between companies under common control to be amortized by a lessee over the economic life of the leasehold improvements, regardless of the lease term or, until the lessee ceases to control the use of the underlying asset through a lease, at which time the remaining value of the leasehold improvement would be accounted for as a transfer between companies under common control through an adjustment to equity. The amendments in this guidance may be applied retrospectively to the beginning of the period in which the entity first applied Topic 842 or prospectively (1) to all new leasehold improvements recognized on or after the date the entity first applies the amendments, or (2) to all new and existing leasehold improvements recognized on or after the date the entity first applies the amendments.	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 2023-01 on January 1, 2024 on a prospective basis.
ASU 2023-02, Investments — Equity Method and Joint Ventures(Topic 323): Accounting for Investments in Tax Credit Structures Using the Proportional Amortization Method	January 1, 2024 Early adoption is permitted	ASU ~~2022-02 eliminates~~2023-02 expands the ~~troubled debt restructuring (“TDRs”) accounting model~~scope of the proportional amortization method to equity tax credit investment programs if certain conditions are met. Previously, the proportional amortization method could only be used for ~~creditors and instead requires~~investments in low-income housing tax credit structures. Under this guidance, companies are able to elect, on a tax credit program-by-tax credit program basis, to apply the ~~loan refinancing~~proportional amortization method to all equity investments meeting the criteria in ASC 323-740-25-1. The amendments in this guidance must be applied on a modified retrospective or a retrospective basis.	The Company is currently evaluating the impact of this guidance on the Company’s Consolidated Financial Statements.
ASU 2023-05, Business Combinations — Joint Venture Formations (Subtopic 805-60): Recognition and ~~restructuring guidance~~Initial Measurement	January 1, 2025 Early adoption is permitted	ASU 2023-05 requires a joint venture to ~~determine whether a modification made~~recognize and initially measure assets contributed to ~~a borrower results~~the joint venture in a formation transaction to be measured at fair value. Under this guidance, the initial formation of the joint venture would trigger a new ~~loan or~~basis of accounting and recognize contributed net assets generally at fair value as of the joint venture’s formation date. The excess of the fair value of the joint venture’s outstanding equity interests over the fair value of its identifiable assets and liabilities is recognized as goodwill, regardless of whether the joint venture meets the definition of a ~~continuation~~business in its stand-alone financial statements, and measure its contributed total net assets upon formation as the fair value of ~~an existing loan. In addition, companies are no longer required~~the joint venture as a whole, which would equal the fair value of 100% of the joint venture’s outstanding equity interests. The guidance also allows a joint venture to ~~use a discounted cash flow~~apply the measurement period guidance, which is largely consistent with the acquisition 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.~~business combination in ASC 805-10. The guidance also introduces new disclosure requirements related to ~~restructuring~~the nature and financial effect 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 joint venture. The amendments in this guidance ~~should be applied~~are effective prospectively for all joint venture formations with a formation date on ~~a prospective basis except for~~or after January 1, 2025. Additionally, joint ventures that were formed before January 1, 2025 may elect to apply the amendments ~~related to recognition and measurement of TDRs, where a modified retrospective transition method is optional.~~retrospectively if sufficient information exists.	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~~2023-05 on January 1, ~~2023.~~ 2025.
~~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~~Loan Modifications — Certain loans are modified in the ~~first quarter~~normal course of ~~2022,~~business for competitive reasons or in conjunction with the Company’s loss mitigation activities. Upon the adoption of ASU 2022-02, the Company ~~transferred $3.01 billion~~applies the general loan modification guidance provided in ~~fair value of debt securities from AFS~~ASC 310-20 to ~~HTM.~~

~~Transfer between Categories of Debt Securities~~— ~~Upon transfer of~~all loan modifications, including modifications made to borrowers experiencing financial difficulty. Under the general loan modification guidance, a ~~debt security from~~modification is treated as a new loan only if the ~~AFS to HTM category,~~following two conditions are met: (1) 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 lifeterms of the ~~securities~~new loan are at least as ~~effective yield adjustments, in a manner consistent~~favorable to the Company as the terms for comparable loans to other customers with similar collection risks; and (2) modifications to the ~~amortization or accretion~~terms of the original ~~purchase premium~~loan are more than minor. If either condition is not met, the modification is accounted for as a continuation of the existing loan with any effect of the modification treated as a prospective adjustment to the loan’s effective interest rate. A modification made to borrowers experiencing financial difficulty may vary by program and by borrower-specific characteristics, and may include rate reductions, principal forgiveness, term extensions, and payment delays, and is intended to minimize the Company’s economic loss and to avoid foreclosure or ~~discount on~~repossession of collateral. The Company applies the ~~associated security.~~same credit loss methodology it uses for similar loans that were not modified. For ~~transfers of securities from~~ the ~~AFS~~Company’s accounting policy related to ~~HTM category, any~~the loan modifications’ allowance for ~~credit~~loan losses, ~~that was previously recorded under the AFS model is reversed~~see Note 7 — Loans Receivable and an allowance for credit losses is subsequently recorded under the HTM debt security model. The reversal and re-establishment of the allowance for credit losses are recorded in the provision for credit losses.

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

Allowance for Credit Losses ~~on Held-to-Maturity Debt Securities~~— Allowance for Credit Losses —~~For each major HTM debt security type,~~to the allowance for credit losses is estimated collectively for groups of securities with similar risk characteristics. For securities that do not share similar risk characteristics, the losses are estimated individually. The Company applies a zero credit loss assumption to certain HTM debt securities, including debt securities that are either guaranteed or issued by the U.S. government or government-sponsored enterprises, are highly rated by nationally recognized statistical rating organizations (“NRSROs”), and have a long history of no credit losses. Any expected credit loss is recorded through the allowance for credit losses on HTM debt securities and deducted from the amortized cost basis of the security, reflecting the net amount the Company expects to collect.Consolidated Financial Statements in this Form 10-Q.

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,Under applicable accounting standards, the Company ~~uses various methods including market and income approaches. Based on these approaches, the Company utilizes certain assumptions that market participants would use in pricing an asset or~~measures a ~~liability. These inputs can be readily observable, market corroborated or generally unobservable. The Company utilizes valuation techniques that maximize the use~~portion 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’sits assets and liabilities ~~is classified and disclosed in one of the following three categories:~~

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

•Level 2 — Valuation is based on quoted prices for similar instruments 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~~at fair ~~value of assets or liabilities.~~value. 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~~predominantly recorded at fair value on a recurring basis. From time to time, certain assets and liabilities are measured at fair value on a nonrecurring basis; that is, they are subject to fair value adjustments only as required through the application of an accounting method such as lower of cost or fair value or write-down of individual assets. The Company categorizes its assets and liabilities into three levels based on the ~~lowest level of input that is significant to their~~established fair value ~~measurements.~~hierarchy and conducts a review of fair value hierarchy classifications on a quarterly basis. For more information regarding the fair value hierarchy and how the Company measures fair value, see Note 1 — Summary of Significant Accounting Policies — Significant Accounting Policies — Fair Value to the Consolidated Financial Statements in the Company’s 2022 Form 10-K.

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~~within 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~~newly issued 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.~~providers for each security category.

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

Equity Securities — Equity securities consisted of mutual funds as of both September 30, ~~2022~~2023 and December 31, ~~2021.~~2022. 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 contracts consist of interest rate ~~swap~~swaps 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.options. The fair value of the interest rate swaps is determined using the market standard methodology of netting the discounted future fixed cash payments (or receipts) and the discounted expected variable cash receipts (or payments). The 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 both September 30, ~~2022~~2023 and December 31, ~~2021,~~2022, 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 the 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~~Credit contracts utilized by the Company ~~may periodically enter into~~are comprised of credit risk participation agreements (“RPAs”) ~~to manage~~entered into by 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 the RPAs is calculated by determining the total expected asset or liability exposure of the derivatives to the borrowers and applying the borrowers’ credit spread to that exposure. Total expected exposure incorporates both the current and potential future exposure of the derivatives, derived from using observable inputs, such as yield curves and volatilities. ~~Since~~Due to the ~~majority~~observable nature of ~~the~~all other significant inputs used toin deriving the estimated fair value, ~~the RPAs are observable, RPAs~~credit contracts are classified as Level 2.

Equity Contracts — ~~As part~~Equity contracts consist of ~~the loan origination process, the Company may obtain~~ warrants to purchase ~~preferred and/~~common or ~~common~~preferred stock of the borrowers, which are mainly in the technology and life sciences sectors. As of September 30, 2022 and December 31, 2021, the warrants included on the Consolidated Financial Statements were from both public and private ~~companies.~~companies, and any liability-classified contingent issuable shares of the Company. The ~~Company values these~~fair value of the warrants is based on the Black-Scholes option pricing model. For warrants from public companies, the model uses the underlying stock price, stated strike price, warrant expiration date, risk-free interest rate based on a duration-matched U.S. Treasury rate, and market-observable company-specific ~~option~~equity 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.

In connection with the Company’s acquisition of a 49.99% equity interest in Rayliant Global Advisors Limited (“Rayliant”) during the third quarter of 2023, the Company granted performance restricted stock units (“PRSUs”) as part of its consideration. The vesting of these equity contracts is contingent on Rayliant meeting certain financial performance targets, and they are accounted for as a derivative liability. The fair value of these liability-classified equity contracts varies based on the operating revenue and operating EBITDA of Rayliant to be achieved during the future performance period. Due to the unobservable nature of the input assumptions, these equity contracts are classified as Level 3. For additional information on the equity contracts, refer to Note 6— Derivatives and 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.

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

1316

The following tables present financial assets and liabilities that are measured at fair value on a recurring basis as of September 30, ~~2022~~2023 and December 31, ~~2021:~~2022:


($ in thousands)		Assets and Liabilities Measured at Fair Value on a Recurring Basis as of September 30, 2022
											Assets and Liabilities Measured at Fair Value on a Recurring Basis as of September 30, 2023
($ in thousands)	($ in thousands)	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total Fair Value		($ in thousands)	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	U.S. Treasury securities	$	600,677	$	—	$	—	$	600,677	U.S. Treasury securities	$	904,101	$	—	$	—	$	904,101
U.S. government agency and U.S. government-sponsored enterprise debt securities	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 debt securities	—		447,464		—		447,464
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	—		521,885		—		521,885		Commercial mortgage-backed securities	—		462,332		—		462,332
Residential mortgage-backed securities	Residential mortgage-backed securities	—		1,793,429		—		1,793,429		Residential mortgage-backed securities	—		1,694,342		—		1,694,342
Municipal securities	Municipal securities	—		249,502		—		249,502		Municipal securities	—		243,556		—		243,556
Non-agency mortgage-backed securities:	Non-agency mortgage-backed securities:									Non-agency mortgage-backed securities:
Commercial mortgage-backed securities	Commercial mortgage-backed securities	—		397,975		—		397,975		Commercial mortgage-backed securities	—		365,320		—		365,320
Residential mortgage-backed securities	Residential mortgage-backed securities	—		671,538		—		671,538		Residential mortgage-backed securities	—		570,787		—		570,787
Corporate debt securities	Corporate debt securities	—		529,565		—		529,565		Corporate debt securities	—		475,434		—		475,434
Foreign government bonds	Foreign government bonds	—		225,810		—		225,810		Foreign government bonds	—		222,790		—		222,790
Asset-backed securities	Asset-backed securities	—		64,870		—		64,870		Asset-backed securities	—		43,757		—		43,757
Collateralized loan obligations (“CLOs”)	Collateralized loan obligations (“CLOs”)	—		590,415		—		590,415		Collateralized loan obligations (“CLOs”)	—		609,954		—		609,954
Total AFS debt securities	Total AFS debt securities	$	600,677	$	5,305,413	$	—	$	5,906,090	Total AFS debt securities	$	904,101	$	5,135,736	$	—	$	6,039,837

Investments in tax credit and other investments:
Investments in qualified affordable housing partnerships, tax credit and other investments, net:										Investments in qualified affordable housing partnerships, tax credit and other investments, net:
Equity securities	Equity securities	$	19,637	$	4,200	$	—	$	23,837	Equity securities	$	19,447	$	4,154	$	—	$	23,601
Total investments in tax credit and other investments		$	19,637	$	4,200	$	—	$	23,837
Total investments in qualified affordable housing partnerships, tax credit and other investments, net										Total investments in qualified affordable housing partnerships, tax credit and other investments, net	$	19,447	$	4,154	$	—	$	23,601

Derivative assets:	Derivative assets:									Derivative assets:
Interest rate contracts	Interest rate contracts	$	—	$	430,038	$	—	$	430,038	Interest rate contracts	$	—	$	624,087	$	—	$	624,087
Foreign exchange contracts	Foreign exchange contracts	—		81,874		—		81,874		Foreign exchange contracts	—		100,377		—		100,377

Equity contracts	Equity contracts	—		1		345		346		Equity contracts	—		—		352		352
Commodity contracts	Commodity contracts	—		369,146		—		369,146		Commodity contracts	—		137,500		—		137,500
Gross derivative assets	Gross derivative assets	$	—	$	881,059	$	345	$	881,404	Gross derivative assets	$	—	$	861,964	$	352	$	862,316
Netting adjustments (1)	Netting adjustments (1)	$	—	$	(605,957)	$	—	$	(605,957)	Netting adjustments (1)	$	—	$	(530,331)	$	—	$	(530,331)
Net derivative assets	Net derivative assets	$	—	$	275,102	$	345	$	275,447	Net derivative assets	$	—	$	331,633	$	352	$	331,985

Derivative liabilities:	Derivative liabilities:									Derivative liabilities:
Interest rate contracts	Interest rate contracts	$	—	$	615,327	$	—	$	615,327	Interest rate contracts	$	—	$	712,302	$	—	$	712,302
Foreign exchange contracts	Foreign exchange contracts	—		64,049		—		64,049		Foreign exchange contracts	—		77,099		—		77,099
Equity contracts (2)										Equity contracts (2)	—		—		15,119		15,119
Credit contracts	Credit contracts	—		27		—		27		Credit contracts	—		12		—		12
Commodity contracts	Commodity contracts	—		350,198		—		350,198		Commodity contracts	—		143,855		—		143,855
Gross derivative liabilities	Gross derivative liabilities	$	—	$	1,029,601	$	—	$	1,029,601	Gross derivative liabilities	$	—	$	933,268	$	15,119	$	948,387
Netting adjustments (1)	Netting adjustments (1)	$	—	$	(239,206)	$	—	$	(239,206)	Netting adjustments (1)	$	—	$	(262,873)	$	—	$	(262,873)
Net derivative liabilities	Net derivative liabilities	$	—	$	790,395	$	—	$	790,395	Net derivative liabilities	$	—	$	670,395	$	15,119	$	685,514

1417


($ in thousands)		Assets and Liabilities Measured at Fair Value on a Recurring Basis as of December 31, 2021
											Assets and Liabilities Measured at Fair Value on a Recurring Basis as of December 31, 2022
($ in thousands)	($ in thousands)	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total Fair Value		($ in thousands)	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	U.S. Treasury securities	$	1,032,681	$	—	$	—	$	1,032,681	U.S. Treasury securities	$	606,203	$	—	$	—	$	606,203
U.S. government agency and U.S. government-sponsored enterprise debt securities	U.S. government agency and U.S. government-sponsored enterprise debt securities	—		1,301,971		—		1,301,971		U.S. government agency and U.S. government-sponsored enterprise debt securities	—		461,607		—		461,607
U.S. government agency and U.S. government-sponsored enterprise mortgage-backed securities:	U.S. government agency and U.S. government-sponsored enterprise mortgage-backed securities:									U.S. government agency and U.S. government-sponsored enterprise mortgage-backed securities:
Commercial mortgage-backed securities	Commercial mortgage-backed securities	—		1,228,980		—		1,228,980		Commercial mortgage-backed securities	—		500,269		—		500,269
Residential mortgage-backed securities	Residential mortgage-backed securities	—		2,928,283		—		2,928,283		Residential mortgage-backed securities	—		1,762,195		—		1,762,195
Municipal securities	Municipal securities	—		523,158		—		523,158		Municipal securities	—		257,099		—		257,099
Non-agency mortgage-backed securities:	Non-agency mortgage-backed securities:									Non-agency mortgage-backed securities:
Commercial mortgage-backed securities	Commercial mortgage-backed securities	—		496,443		—		496,443		Commercial mortgage-backed securities	—		398,329		—		398,329
Residential mortgage-backed securities	Residential mortgage-backed securities	—		881,931		—		881,931		Residential mortgage-backed securities	—		649,224		—		649,224
Corporate debt securities	Corporate debt securities	—		649,665		—		649,665		Corporate debt securities	—		526,274		—		526,274
Foreign government bonds	Foreign government bonds	—		257,733		—		257,733		Foreign government bonds	—		227,053		—		227,053
Asset-backed securities	Asset-backed securities	—		74,558		—		74,558		Asset-backed securities	—		49,076		—		49,076
CLOs	CLOs	—		589,950		—		589,950		CLOs	—		597,664		—		597,664
Total AFS debt securities	Total AFS debt securities	$	1,032,681	$	8,932,672	$	—	$	9,965,353	Total AFS debt securities	$	606,203	$	5,428,790	$	—	$	6,034,993

Investments in tax credit and other investments:
Investments in qualified affordable housing partnerships, tax credit and other investments, net:										Investments in qualified affordable housing partnerships, tax credit and other investments, net:
Equity securities	Equity securities	$	22,130	$	4,474	$	—	$	26,604	Equity securities	$	19,777	$	4,177	$	—	$	23,954
Total investments in tax credit and other investments		$	22,130	$	4,474	$	—	$	26,604
Total investments in qualified affordable housing partnerships, tax credit and other investments, net										Total investments in qualified affordable housing partnerships, tax credit and other investments, net	$	19,777	$	4,177	$	—	$	23,954

Derivative assets:	Derivative assets:									Derivative assets:
Interest rate contracts	Interest rate contracts	$	—	$	240,222	$	—	$	240,222	Interest rate contracts	$	—	$	440,283	$	—	$	440,283
Foreign exchange contracts	Foreign exchange contracts	—		21,033		—		21,033		Foreign exchange contracts	—		53,109		—		53,109

Equity contracts	Equity contracts	—		5		215		220		Equity contracts	—		—		323		323
Commodity contracts	Commodity contracts	—		222,709		—		222,709		Commodity contracts	—		261,613		—		261,613
Gross derivative assets	Gross derivative assets	$	—	$	483,969	$	215	$	484,184	Gross derivative assets	$	—	$	755,005	$	323	$	755,328
Netting adjustments (1)	Netting adjustments (1)	$	—	$	(100,953)	$	—	$	(100,953)	Netting adjustments (1)	$	—	$	(614,783)	$	—	$	(614,783)
Net derivative assets	Net derivative assets	$	—	$	383,016	$	215	$	383,231	Net derivative assets	$	—	$	140,222	$	323	$	140,545

Derivative liabilities:	Derivative liabilities:									Derivative liabilities:
Interest rate contracts	Interest rate contracts	$	—	$	179,962	$	—	$	179,962	Interest rate contracts	$	—	$	584,516	$	—	$	584,516
Foreign exchange contracts	Foreign exchange contracts	—		15,501		—		15,501		Foreign exchange contracts	—		44,117		—		44,117
Credit contracts	Credit contracts	—		141		—		141		Credit contracts	—		23		—		23
Commodity contracts	Commodity contracts	—		194,567		—		194,567		Commodity contracts	—		258,608		—		258,608
Gross derivative liabilities	Gross derivative liabilities	$	—	$	390,171	$	—	$	390,171	Gross derivative liabilities	$	—	$	887,264	$	—	$	887,264
Netting adjustments (1)	Netting adjustments (1)	$	—	$	(232,727)	$	—	$	(232,727)	Netting adjustments (1)	$	—	$	(242,745)	$	—	$	(242,745)
Net derivative liabilities	Net derivative liabilities	$	—	$	157,444	$	—	$	157,444	Net derivative liabilities	$	—	$	644,519	$	—	$	644,519

(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.

(2)Equity contracts classified as derivative liabilities consist of PRSUs granted as part of EWBC’s consideration in its investment in Rayliant.

1518

For the three and nine months ended September 30, ~~2022~~2023 and ~~2021,~~2022, Level 3 fair value measurements that were measured on a recurring basis consisted of warrant equity contracts issued by private ~~companies.~~companies and liability-classified contingent issuable shares of the Company. The following table provides a reconciliation of the beginning and ending balances of these equity contracts for the three and nine months ended September 30, ~~2022~~2023 and ~~2021:~~2022:


											Three Months Ended September 30,				Nine Months Ended September 30,
($ in thousands)	($ in thousands)	Three Months Ended September 30,				Nine Months Ended September 30,				($ in thousands)	2023		2022		2023		2022
		2022		2021		2022		2021
Derivative assets:										Derivative assets:
Equity contracts	Equity contracts									Equity contracts
Beginning balance	Beginning balance	$	357	$	223	$	215	$	273	Beginning balance	$	263	$	357	$	323	$	215

Total (losses) gains included in earnings (1)	Total (losses) gains included in earnings (1)	(12)		(9)		39		37		Total (losses) gains included in earnings (1)	(3)		(12)		(63)		39

Issuances	Issuances	—		12		91		12		Issuances	92		—		92		91

Settlements		—		—		—		(96)

Transfers out of Level 3 (2)		—		(6)		—		(6)

Ending balance										Ending balance	$	352	$	345	$	352	$	345
Derivative liabilities:										Derivative liabilities:
Equity contracts (2)										Equity contracts (2)
Beginning balance										Beginning balance	$	—	$	—	$	—	$	—

Issuances										Issuances	15,119		—		15,119		—
Ending balance	Ending balance	$	345	$	220	$	345	$	220	Ending balance	$	15,119	$	—	$	15,119	$	—

(1)Includes unrealized (losses) gains ~~of $(12) thousand and $(9) thousand for the three months ended September 30, 2022 and 2021, respectively, and $39 thousand and $(38) thousand for the nine months ended 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~~Equity contracts classified as derivative liabilities consist of ~~equity contracts measured on a recurring basis out~~PRSUs granted as part of ~~Level 3 into Level 2 after the corresponding issuer of the equity contracts, which was previously a private company completed~~EWBC’s consideration in its ~~initial public offering and became a public company.~~investment in Rayliant.

The following table presents quantitative information about the significant unobservable inputs used in the valuation of Level 3 fair value measurements as of September 30, ~~2022~~2023 and December 31, ~~2021.~~2022. 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)	($ 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
September 30, 2022
September 30, 2023								September 30, 2023
Derivative assets:	Derivative assets:							Derivative assets:
Equity contracts	Equity contracts	$	345	Black-Scholes option pricing model	Equity volatility	49% — 70%	59%	Equity contracts	$	352	Black-Scholes option pricing model	Equity volatility	41% — 51%	46	%	(1)
					Liquidity discount	47%	47%					Liquidity discount	47%	47	%
December 31, 2021
Derivative liabilities:								Derivative liabilities:
Equity contracts (2)								Equity contracts (2)	$	15,119	Internal model	Payout % designated based on operating revenue and operating EBITDA of investee	84%	84	%
December 31, 2022								December 31, 2022
Derivative assets:	Derivative assets:							Derivative assets:
Equity contracts	Equity contracts	$	215	Black-Scholes option pricing model	Equity volatility	44% — 54%	49%	Equity contracts	$	323	Black-Scholes option pricing model	Equity volatility	42% — 60%	54	%	(1)
					Liquidity discount	47%	47%					Liquidity discount	47%	47	%

(1)~~Weighted-average~~The calculation for the weighted-average of inputs for the derivative asset equity contracts is ~~calculated~~ based on the fair value of equity contracts as of both September 30, ~~2022~~2023 and December 31, ~~2021.~~2022.

(2)Equity contracts classified as derivative liabilities consist of PRSUs granted as part of EWBC’s consideration in its investment in Rayliant.

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,~~other real estate owned (“OREO”), loans held-for-sale, and other nonperforming assets. Nonrecurring fair value adjustments result from the impairment on certain individually evaluated loans held-for-investment and investments in qualified affordable housing partnerships, tax credit and other investments, from write-downs of OREO and other nonperforming assets, or from the application of lower of cost or fair value on loans held-for-sale.

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

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

•When the repayment of an individually evaluated loan is dependent on the sale of the collateral, the fair value of the loan is determined based on the fair value of the underlying collateral, which may take the form of real estate, inventory, equipment, contracts or guarantees. The fair value of the underlying collateral is generally based on third-party appraisals, or an internal valuation if a third-party appraisal is not required by regulations, or is 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 reviewing the investment entity’s quarterly ~~review of the~~ financial statements ~~the~~and 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;

•the potential for tax credit recapture; and

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

All available information is considered in assessing whether a decline in value is other-than-temporary. Generally, none of the aforementioned factors are individually conclusive and the relative importance placed on individual facts may vary depending on the situation. In accordance with ASC 323-10-35-32, Investments — Equity Method and Joint Ventures, an impairment charge would 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~~or at the lower of cost or estimated fair value less the costs to sell subsequent to acquisition. On a monthly basis, the current fair market value of each OREO property is reviewed to ensure that the current carrying value is appropriate. OREO properties are classified as Level 3.

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

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

The following tables present the carrying amounts of assets that were still held and had fair value adjustments measured on a nonrecurring basis as of September 30, ~~2022~~2023 and December 31, ~~2021:~~2022:


($ in thousands)		Assets Measured at Fair Value on a Nonrecurring Basis as of September 30, 2022
											Assets Measured at Fair Value on a Nonrecurring Basis as of September 30, 2023
($ in thousands)	($ in thousands)	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Fair Value Measurements		($ in thousands)	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Fair Value Measurements
										Loans held-for-investment:
Commercial:	Commercial:									Commercial:
Commercial and industrial (“C&I”)	Commercial and industrial (“C&I”)	$	—	$	—	$	57,696	$	57,696	Commercial and industrial (“C&I”)	$	—	$	—	$	22,788	$	22,788
Commercial real estate (“CRE”):	Commercial real estate (“CRE”):									Commercial real estate (“CRE”):
CRE		—		—		30,359		30,359
Multifamily residential		—		—		1,008		1,008

Construction and land										Construction and land	—		—		11,141		11,141

Total commercial	Total commercial	—		—		89,063		89,063		Total commercial	—		—		33,929		33,929
Consumer:	Consumer:									Consumer:
Residential mortgage:	Residential mortgage:									Residential mortgage:

Home equity lines of credit (“HELOCs”)	Home equity lines of credit (“HELOCs”)	—		—		1,235		1,235		Home equity lines of credit (“HELOCs”)	—		—		1,204		1,204

Total consumer	Total consumer	—		—		1,235		1,235		Total consumer	—		—		1,204		1,204
Total loans held-for-investment	Total loans held-for-investment	$	—	$	—	$	90,298	$	90,298	Total loans held-for-investment	$	—	$	—	$	35,133	$	35,133
Investments in qualified affordable housing partnerships, tax credit and other investments, net										Investments in qualified affordable housing partnerships, tax credit and other investments, net	$	—	$	—	$	1,038	$	1,038


($ in thousands)		Assets Measured at Fair Value on a Nonrecurring Basis as of December 31, 2021
											Assets Measured at Fair Value on a Nonrecurring Basis as of December 31, 2022
($ in thousands)	($ in thousands)	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Fair Value Measurements		($ in thousands)	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Fair Value Measurements
										Loans held-for-investment:
Commercial:	Commercial:									Commercial:
C&I	C&I	$	—	$	—	$	102,349	$	102,349	C&I	$	—	$	—	$	40,011	$	40,011
CRE:	CRE:									CRE:
CRE	CRE	—		—		21,891		21,891		CRE	—		—		31,380		31,380

Total commercial	Total commercial	—		—		124,240		124,240		Total commercial	—		—		71,391		71,391
Consumer:	Consumer:									Consumer:
Residential mortgage:	Residential mortgage:									Residential mortgage:

HELOCs	HELOCs	—		—		2,744		2,744		HELOCs	—		—		1,223		1,223

Total consumer	Total consumer	—		—		2,744		2,744		Total consumer	—		—		1,223		1,223
Total loans held-for-investment	Total loans held-for-investment	$	—	$	—	$	126,984	$	126,984	Total loans held-for-investment	$	—	$	—	$	72,614	$	72,614

Other nonperforming assets		$	391	$	—	$	—	$	391

1821

The following table presents the increase (decrease) in the fair value of certain assets held at the end of the respective reporting periods, for which a nonrecurring fair value adjustment was recognized for the three and nine months ended September 30, ~~2022~~2023 and ~~2021:~~2022:


($ in thousands)		Three Months Ended September 30,				Nine Months Ended September 30,
											Three Months Ended September 30,				Nine Months Ended September 30,
($ in thousands)	($ in thousands)	2022		2021		2022		2021		($ in thousands)	2023		2022		2023		2022
										Loans held-for-investment:
Commercial:	Commercial:									Commercial:
C&I	C&I	$	(15,265)	$	(4,977)	$	(30,011)	$	(13,590)	C&I	$	366	$	(15,265)	$	(4,437)	$	(30,011)
CRE:	CRE:									CRE:
CRE	CRE	(118)		(106)		2,212		(7,186)		CRE	—		(118)		—		2,212
Multifamily residential	Multifamily residential	(5,931)		16		(5,939)		—		Multifamily residential	—		(5,931)		—		(5,939)

Construction and land										Construction and land	(10,413)		—		(10,413)		—

Total commercial	Total commercial	(21,314)		(5,067)		(33,738)		(20,776)		Total commercial	(10,047)		(21,314)		(14,850)		(33,738)
Consumer:	Consumer:									Consumer:
Residential mortgage:	Residential mortgage:									Residential mortgage:

HELOCs	HELOCs	81		3		166		(6)		HELOCs	(41)		81		(41)		166

Other consumer		—		—		—		(2,491)

Total consumer	Total consumer	81		3		166		(2,497)		Total consumer	(41)		81		(41)		166
Total loans held-for-investment	Total loans held-for-investment	$	(21,233)	$	(5,064)	$	(33,572)	$	(23,273)	Total loans held-for-investment	$	(10,088)	$	(21,233)	$	(14,891)	$	(33,572)

Investments in tax credit and other investments, net		$	—	$	—	$	—	$	877
Investments in qualified affordable housing partnerships, tax credit and other investments, net										Investments in qualified affordable housing partnerships, tax credit and other investments, net	$	(790)	$	—	$	(1,577)	$	—

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

The following table presents the quantitative information about the significant unobservable inputs used in the valuation of Level 3 fair value measurements that are measured on a nonrecurring basis as of September 30, ~~2022~~2023 and December 31, ~~2021:~~2022:


($ 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)
September 30, 2022
September 30, 2023								September 30, 2023

Loans held-for-investment	Loans held-for-investment	$	40,559	Discounted cash flows	Discount	4% — 6%	4%	Loans held-for-investment	$	13,955	Fair value of collateral	Discount	15% — 75%	48	%	(1)
		$	18,372	Fair value of collateral	Discount	40% — 94%	52%		$	6,134	Fair value of collateral	Contract value	NM	NM
									$	15,044	Fair value of property	Selling cost	8%	8	%
		$	31,367	Fair value of property	Selling cost	8%	8%

Investments in qualified affordable housing partnerships, tax credit and other investments, net								Investments in qualified affordable housing partnerships, tax credit and other investments, net	$	1,038	Individual analysis of each investment	Expected future tax benefits and distributions	NM	NM

December 31, 2021
December 31, 2022								December 31, 2022
Loans held-for-investment	Loans held-for-investment	$	64,919	Discounted cash flows	Discount	4% — 15%	7%	Loans held-for-investment	$	23,322	Discounted cash flows	Discount	4% — 6%	4	%	(1)

		$	38,537	Fair value of collateral	Discount	15% — 75%	41%		$	17,912	Fair value of collateral	Discount	15% — 75%	37	%	(1)

		$	23,528	Fair value of property	Selling cost	8%	8%		$	31,380	Fair value of property	Selling cost	8%	8	%

NM — Not meaningful.

(1)~~Weighted-average~~The calculation for the weighted-average of inputs is based on the relative fair value of the respective assets as of September 30, ~~2022~~2023 and December 31, ~~2021.~~2022.

1922

Disclosures about the Fair Value of Financial Instruments

The following tables present the fair value estimates for financial instruments as of September 30, ~~2022~~2023 and December 31, ~~2021,~~2022, 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~~instruments are measured on an amortized cost basis on the Company’s Consolidated Balance Sheet.


($ in thousands)		September 30, 2022
													September 30, 2023
($ in thousands)	($ in thousands)	Carrying Amount		Level 1		Level 2		Level 3		Estimated Fair Value		($ in thousands)	Carrying Amount		Level 1		Level 2		Level 3		Estimated Fair Value
												Financial assets:
Cash and cash equivalents	Cash and cash equivalents	$	2,163,353	$	2,163,353	$	—	$	—	$	2,163,353	Cash and cash equivalents	$	4,561,178	$	4,561,178	$	—	$	—	$	4,561,178
Interest-bearing deposits with banks	Interest-bearing deposits with banks	$	630,543	$	—	$	630,543	$	—	$	630,543	Interest-bearing deposits with banks	$	17,213	$	—	$	17,213	$	—	$	17,213
Resale agreements	Resale agreements	$	892,986	$	—	$	790,239	$	—	$	790,239	Resale agreements	$	785,000	$	—	$	672,250	$	—	$	672,250
HTM debt securities	HTM debt securities	$	3,012,667	$	466,085	$	1,993,050	$	—	$	2,459,135	HTM debt securities	$	2,964,235	$	470,618	$	1,837,430	$	—	$	2,308,048
Restricted equity securities, at cost	Restricted equity securities, at cost	$	78,254	$	—	$	78,254	$	—	$	78,254	Restricted equity securities, at cost	$	79,522	$	—	$	79,522	$	—	$	79,522
Loans held-for-sale	Loans held-for-sale	$	14,500	$	—	$	14,500	$	—	$	14,500	Loans held-for-sale	$	4,762	$	—	$	4,762	$	—	$	4,762
Loans held-for-investment, net	Loans held-for-investment, net	$	46,859,738	$	—	$	—	$	46,147,082	$	46,147,082	Loans held-for-investment, net	$	50,251,661	$	—	$	—	$	48,992,846	$	48,992,846
Mortgage servicing rights	Mortgage servicing rights	$	6,523	$	—	$	—	$	10,532	$	10,532	Mortgage servicing rights	$	5,208	$	—	$	—	$	9,821	$	9,821
Accrued interest receivable	Accrued interest receivable	$	208,520	$	—	$	208,520	$	—	$	208,520	Accrued interest receivable	$	317,881	$	—	$	317,881	$	—	$	317,881
Financial liabilities:	Financial liabilities:											Financial liabilities:
Demand, checking, savings and money market deposits	Demand, checking, savings and money market deposits	$	43,498,799	$	—	$	43,498,799	$	—	$	43,498,799	Demand, checking, savings and money market deposits	$	38,435,954	$	—	$	38,435,954	$	—	$	38,435,954
Time deposits	Time deposits	$	10,358,563	$	—	$	10,256,100	$	—	$	10,256,100	Time deposits	$	16,651,077	$	—	$	16,547,883	$	—	$	16,547,883
Short-term borrowings												Short-term borrowings	$	4,500,000	$	—	$	4,500,000	$	—	$	4,500,000

Federal funds purchased		$	200,000	$	—	$	200,000	$	—	$	200,000
FHLB advances		$	324,920	$	—	$	325,000	$	—	$	325,000
Repurchase agreements		$	611,785	$	—	$	617,513	$	—	$	617,513

Long-term debt	Long-term debt	$	147,875	$	—	$	140,902	$	—	$	140,902	Long-term debt	$	148,173	$	—	$	144,214	$	—	$	144,214
Accrued interest payable	Accrued interest payable	$	23,934	$	—	$	23,934	$	—	$	23,934	Accrued interest payable	$	150,890	$	—	$	150,890	$	—	$	150,890


($ in thousands)		December 31, 2021
													December 31, 2022
($ in thousands)	($ in thousands)	Carrying Amount		Level 1		Level 2		Level 3		Estimated Fair Value		($ in thousands)	Carrying Amount		Level 1		Level 2		Level 3		Estimated Fair Value
												Financial assets:
Cash and cash equivalents	Cash and cash equivalents	$	3,912,935	$	3,912,935	$	—	$	—	$	3,912,935	Cash and cash equivalents	$	3,481,784	$	3,481,784	$	—	$	—	$	3,481,784
Interest-bearing deposits with banks	Interest-bearing deposits with banks	$	736,492	$	—	$	736,492	$	—	$	736,492	Interest-bearing deposits with banks	$	139,021	$	—	$	139,021	$	—	$	139,021
Resale agreements	Resale agreements	$	2,353,503	$	—	$	2,335,901	$	—	$	2,335,901	Resale agreements	$	792,192	$	—	$	693,656	$	—	$	693,656

HTM debt securities												HTM debt securities	$	3,001,868	$	471,469	$	1,983,702	$	—	$	2,455,171
Restricted equity securities, at cost	Restricted equity securities, at cost	$	77,434	$	—	$	77,434	$	—	$	77,434	Restricted equity securities, at cost	$	78,624	$	—	$	78,624	$	—	$	78,624
Loans held-for-sale	Loans held-for-sale	$	635	$	—	$	635	$	—	$	635	Loans held-for-sale	$	25,644	$	—	$	25,644	$	—	$	25,644
Loans held-for-investment, net	Loans held-for-investment, net	$	41,152,202	$	—	$	—	$	41,199,599	$	41,199,599	Loans held-for-investment, net	$	47,606,785	$	—	$	—	$	46,670,690	$	46,670,690

Mortgage servicing rights	Mortgage servicing rights	$	5,706	$	—	$	—	$	9,104	$	9,104	Mortgage servicing rights	$	6,235	$	—	$	—	$	10,917	$	10,917
Accrued interest receivable	Accrued interest receivable	$	159,833	$	—	$	159,833	$	—	$	159,833	Accrued interest receivable	$	263,430	$	—	$	263,430	$	—	$	263,430
Financial liabilities:	Financial liabilities:											Financial liabilities:

Demand, checking, savings and money market deposits	Demand, checking, savings and money market deposits	$	45,388,550	$	—	$	45,388,550	$	—	$	45,388,550	Demand, checking, savings and money market deposits	$	42,637,316	$	—	$	42,637,316	$	—	$	42,637,316
Time deposits	Time deposits	$	7,961,982	$	—	$	7,966,116	$	—	$	7,966,116	Time deposits	$	13,330,533	$	—	$	13,228,777	$	—	$	13,228,777

FHLB advances		$	249,331	$	—	$	250,372	$	—	$	250,372

Repurchase agreements	Repurchase agreements	$	300,000	$	—	$	310,525	$	—	$	310,525	Repurchase agreements	$	300,000	$	—	$	304,097	$	—	$	304,097
Long-term debt	Long-term debt	$	147,658	$	—	$	151,020	$	—	$	151,020	Long-term debt	$	147,950	$	—	$	143,483	$	—	$	143,483
Accrued interest payable	Accrued interest payable	$	11,435	$	—	$	11,435	$	—	$	11,435	Accrued interest payable	$	37,198	$	—	$	37,198	$	—	$	37,198

2023

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

Assets Purchased under Resale Agreements

~~With~~The Company’s resale agreements ~~the Company is exposed~~exposes it 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~~an efficient closeout of the transaction, liquidation and set-off of collateral against the net amount owed by the counterparty following a default. It is also the Company’s policy to take possession, where possible, of the assets underlying resale agreements. As a result of the Company’s credit risk mitigation practices with respect to resale agreements as described above, the Company did not hold any reserves for credit impairment with respect to these agreements as of both September 30, ~~2022~~2023 and December 31, ~~2021.~~2022.

Securities Purchased under Resale Agreements — Total securities purchased under resale agreements were ~~$885.0~~$785.0 million as of September 30, ~~2022,~~2023, and ~~$1.33 billion~~$760.0 million as of December 31, ~~2021.~~2022. The weighted-average yields were ~~2.41%~~2.73% and ~~1.50%~~2.41% for the three months ended September 30, ~~2022~~2023 and ~~2021,~~2022, respectively; and ~~1.96%~~2.55% and ~~1.53%~~1.96% for the nine months ended September 30, ~~2022~~2023 and ~~2021,~~2022, respectively.

Loans Purchased under Resale Agreements — ~~Total loans~~Loans purchased under resale agreements were $~~8.0~~32.2 million as of December 31, 2022. During the first half of 2023, all of the loans purchased under resale agreements matured and the Company had no loans purchased under resale agreements as of September 30, ~~2022, and $1.02 billion as of December 31, 2021.~~2023. The weighted-average ~~yields were 3.87% and 1.48% for the three months ended September 30, 2022 and 2021, respectively; and 2.10% and 1.57%~~yield was 7.27% for the nine months ended September 30, 2023. In comparison, the weighted-average yields for the three and nine months ended September 30, 2022 were 3.87% and ~~2021,~~2.10%, respectively.

Assets Sold under Repurchase Agreements —As of September 30, 2022, securities sold under 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 September 30, 2022, and~~ $300.0 million as of December 31, ~~2021.~~2022. The Company extinguished $300.0 million of repurchase agreements during the first quarter of 2023. The Company recorded $3.9 million of extinguishment charges during the nine months ended September 30, 2023. In comparison, no extinguishment charges were recorded for the three and nine months ended September 30, 2022. The weighted-average interest rates were ~~2.81%~~5.51% and ~~2.57%~~2.81% for the three months ended September 30, ~~2022~~2023 and ~~2021,~~2022, respectively; and ~~2.73%~~4.32% and ~~2.62%~~2.73% for the nine months ended September 30, 2023 and 2022, ~~and 2021,~~ respectively. AsThese weighted-average interest rates also reflect the impact of ~~September 30, 2022, $311.8 million and $300.0 million of the securities sold under~~short-term repurchase agreements ~~will mature in 2022~~entered and ~~2023, respectively.~~repaid during the periods presented.

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 September 30, ~~2022~~2023 and December 31, ~~2021:~~2022:

($ in thousands)

September 30, 2022

($ in thousands)

September 30, 2023

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

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

Collateral Received

Net
Amount

Assets

Collateral Received

(810,574)

(1)

Resale agreements

785,000

—

785,000

(687,327)

(1)

97,673

Liabilities

Gross
Amounts
of Recognized
Liabilities

Gross Amounts
Offset on the
Consolidated
Balance Sheet

Net Amounts of
Liabilities Presented
on the Consolidated
Balance Sheet

Gross Amounts Not Offset on the
Consolidated Balance Sheet

Net
Amount

Gross
Amounts
of Recognized
Liabilities

Gross Amounts
Offset on the
Consolidated
Balance 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

Collateral Pledged

Net
Amount

Liabilities

Collateral Pledged

(606,766)

(2)

Repurchase agreements

—


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

		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				$	792,192							$	—		$	792,192		$	(701,790)		(1)			$	90,402

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.

2225

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 September 30, ~~2022~~2023 and December 31, ~~2021:~~2022:


($ in thousands)		September 30, 2022
											September 30, 2023
($ in thousands)	($ in thousands)	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:
U.S. Treasury securities	U.S. Treasury securities	$	676,312	$	—	$	(75,635)	$	600,677	U.S. Treasury securities	$	974,615	$	48	$	(70,562)	$	904,101
U.S. government agency and U.S. government-sponsored enterprise debt securities	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 debt securities	512,712		—		(65,248)		447,464
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	595,342		—		(73,457)		521,885		Commercial mortgage-backed securities	545,086		—		(82,754)		462,332
Residential mortgage-backed securities	Residential mortgage-backed securities	2,043,791		58		(250,420)		1,793,429		Residential mortgage-backed securities	1,983,284		15		(288,957)		1,694,342
Municipal securities	Municipal securities	307,084		—		(57,582)		249,502		Municipal securities	301,408		—		(57,852)		243,556
Non-agency mortgage-backed securities:	Non-agency mortgage-backed securities:									Non-agency mortgage-backed securities:
Commercial mortgage-backed securities	Commercial mortgage-backed securities	448,790		173		(50,988)		397,975		Commercial mortgage-backed securities	418,451		—		(53,131)		365,320
Residential mortgage-backed securities	Residential mortgage-backed securities	784,700		—		(113,162)		671,538		Residential mortgage-backed securities	687,674		—		(116,887)		570,787
Corporate debt securities	Corporate debt securities	673,502		—		(143,937)		529,565		Corporate debt securities	653,501		—		(178,067)		475,434
Foreign government bonds	Foreign government bonds	238,720		528		(13,438)		225,810		Foreign government bonds	237,531		75		(14,816)		222,790
Asset-backed securities	Asset-backed securities	66,793		—		(1,923)		64,870		Asset-backed securities	44,819		—		(1,062)		43,757
CLOs	CLOs	617,250		—		(26,835)		590,415		CLOs	617,250		—		(7,296)		609,954
Total AFS debt securities	Total AFS debt securities	6,771,354		759		(866,023)		5,906,090		Total AFS debt securities	6,976,331		138		(936,632)		6,039,837
HTM debt securities:	HTM debt securities:									HTM debt securities:
U.S. Treasury securities	U.S. Treasury securities	522,713		—		(56,628)		466,085		U.S. Treasury securities	528,169		—		(57,551)		470,618
U.S. government agency and U.S. government-sponsored enterprise debt securities	U.S. government agency and U.S. government-sponsored enterprise debt securities	998,233		—		(215,616)		782,617		U.S. government agency and U.S. government-sponsored enterprise debt securities	1,001,298		—		(249,007)		752,291
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	509,139		—		(92,507)		416,632		Commercial mortgage-backed securities	494,787		—		(112,623)		382,164
Residential mortgage-backed securities	Residential mortgage-backed securities	792,685		—		(142,978)		649,707		Residential mortgage-backed securities	750,888		—		(183,488)		567,400
Municipal securities	Municipal securities	189,897		—		(45,803)		144,094		Municipal securities	189,093		—		(53,518)		135,575
Total HTM debt securities	Total HTM debt securities	3,012,667		—		(553,532)		2,459,135		Total HTM debt securities	2,964,235		—		(656,187)		2,308,048
Total debt securities	Total debt securities	$	9,784,021	$	759	$	(1,419,555)	$	8,365,225	Total debt securities	$	9,940,566	$	138	$	(1,592,819)	$	8,347,885

2326

($ 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.



	December 31, 2022
($ in thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
AFS debt securities:
U.S. Treasury securities	$	676,306	$	—	$	(70,103)	$	606,203
U.S. government agency and U.S. government-sponsored enterprise debt securities	517,806		67		(56,266)		461,607
U.S. government agency and U.S. government-sponsored enterprise mortgage-backed securities:
Commercial mortgage-backed securities	577,392		—		(77,123)		500,269
Residential mortgage-backed securities	2,011,054		41		(248,900)		1,762,195
Municipal securities	303,884		3		(46,788)		257,099
Non-agency mortgage-backed securities:
Commercial mortgage-backed securities	447,512		213		(49,396)		398,329
Residential mortgage-backed securities	762,202		—		(112,978)		649,224
Corporate debt securities	673,502		—		(147,228)		526,274
Foreign government bonds	241,165		174		(14,286)		227,053
Asset-backed securities	51,152		—		(2,076)		49,076
CLOs	617,250		—		(19,586)		597,664
Total AFS debt securities	6,879,225		498		(844,730)		6,034,993
HTM debt securities:
U.S. Treasury securities	524,081		—		(52,612)		471,469
U.S. government agency and U.S. government-sponsored enterprise debt securities	998,972		—		(209,560)		789,412
U.S. government agency and U.S. government-sponsored enterprise mortgage-backed securities:
Commercial mortgage-backed securities	506,965		—		(98,566)		408,399
Residential mortgage-backed securities	782,141		—		(148,230)		633,911
Municipal securities	189,709		—		(37,729)		151,980
Total HTM debt securities	3,001,868		—		(546,697)		2,455,171
Total debt securities	$	9,881,093	$	498	$	(1,391,427)	$	8,490,164

As of September 30, ~~2022~~2023 and December 31, ~~2021,~~2022, the amortized cost of debt securities excluded accrued interest receivables of ~~$33.8~~$42.6 million and ~~$33.1~~$41.8 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 Securitiesand Allowance for Credit Losses on Held-to-Maturity Debt Securities to the Consolidated Financial Statements in the Company’s ~~2021~~2022 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.~~10-K.

2427

Unrealized Losses of Available-for-Sale Debt Securities

The following tables present the fair value and the associated gross unrealized losses of the Company’s AFS debt securities, aggregated by investment category and the length of time that the securities have been in a continuous unrealized loss position as of September 30, ~~2022~~2023 and December 31, ~~2021.~~2022.


($ in thousands)		September 30, 2022
		Less Than 12 Months				12 Months or More				Total
															September 30, 2023
															Less Than 12 Months				12 Months or More				Total
($ in thousands)	($ in thousands)	Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses		($ in thousands)	Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses
														AFS debt securities:
		$	263,772	$	(25,232)	$	336,905	$	(50,403)	$	600,677	$	(75,635)	U.S. Treasury securities	$	—	$	—	$	605,730	$	(70,562)	$	605,730	$	(70,562)
U.S. government agency and U.S. government sponsored enterprise debt securities	U.S. government agency and U.S. government sponsored enterprise debt securities	88,168		(16,401)		172,256		(42,245)		260,424		(58,646)		U.S. government agency and U.S. government sponsored enterprise debt securities	199,139		(861)		248,325		(64,387)		447,464		(65,248)
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	334,460		(39,330)		187,425		(34,127)		521,885		(73,457)		Commercial mortgage-backed securities	4,434		(96)		457,898		(82,658)		462,332		(82,754)
Residential mortgage-backed securities	Residential mortgage-backed securities	700,318		(72,088)		1,085,253		(178,332)		1,785,571		(250,420)		Residential mortgage-backed securities	63,660		(517)		1,627,451		(288,440)		1,691,111		(288,957)
Municipal securities	Municipal securities	203,157		(46,271)		46,345		(11,311)		249,502		(57,582)		Municipal securities	5,891		(288)		237,665		(57,564)		243,556		(57,852)
Non-agency mortgage-backed securities:	Non-agency mortgage-backed securities:													Non-agency mortgage-backed securities:
Commercial mortgage-backed securities	Commercial mortgage-backed securities	170,101		(8,351)		218,124		(42,637)		388,225		(50,988)		Commercial mortgage-backed securities	—		—		365,320		(53,131)		365,320		(53,131)
Residential mortgage-backed securities	Residential mortgage-backed securities	188,584		(23,168)		482,954		(89,994)		671,538		(113,162)		Residential mortgage-backed securities	—		—		570,787		(116,887)		570,787		(116,887)
Corporate debt securities	Corporate debt securities	247,533		(24,969)		282,032		(118,968)		529,565		(143,937)		Corporate debt securities	—		—		475,434		(178,067)		475,434		(178,067)
Foreign government bonds	Foreign government bonds	68,733		(336)		36,899		(13,102)		105,632		(13,438)		Foreign government bonds	109,413		(249)		85,433		(14,567)		194,846		(14,816)
Asset-backed securities	Asset-backed securities	54,811		(1,579)		10,059		(344)		64,870		(1,923)		Asset-backed securities	—		—		43,757		(1,062)		43,757		(1,062)
CLOs	CLOs	190,370		(8,730)		400,045		(18,105)		590,415		(26,835)		CLOs	—		—		609,954		(7,296)		609,954		(7,296)
Total AFS debt securities	Total AFS debt securities	$	2,510,007	$	(266,455)	$	3,258,297	$	(599,568)	$	5,768,304	$	(866,023)	Total AFS debt securities	$	382,537	$	(2,011)	$	5,327,754	$	(934,621)	$	5,710,291	$	(936,632)


($ in thousands)		December 31, 2021
		Less Than 12 Months				12 Months or More				Total
															December 31, 2022
															Less Than 12 Months				12 Months or More				Total
($ in thousands)	($ in thousands)	Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses		($ in thousands)	Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses
														AFS debt securities:
		$	935,776	$	(14,689)	$	47,881	$	(1,998)	$	983,657	$	(16,687)	U.S. Treasury securities	$	131,843	$	(8,761)	$	474,360	$	(61,342)	$	606,203	$	(70,103)
U.S. government agency and U.S. government-sponsored enterprise debt securities	U.S. government agency and U.S. government-sponsored enterprise debt securities	773,647		(18,000)		402,907		(16,710)		1,176,554		(34,710)		U.S. government agency and U.S. government-sponsored enterprise debt securities	97,403		(6,902)		214,136		(49,364)		311,539		(56,266)
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	440,734		(13,589)		257,745		(15,265)		698,479		(28,854)		Commercial mortgage-backed securities	252,144		(30,029)		248,125		(47,094)		500,269		(77,123)
Residential mortgage-backed securities	Residential mortgage-backed securities	2,138,542		(37,691)		330,522		(11,444)		2,469,064		(49,135)		Residential mortgage-backed securities	307,536		(20,346)		1,448,658		(228,554)		1,756,194		(248,900)
Municipal securities	Municipal securities	177,065		(5,682)		17,003		(606)		194,068		(6,288)		Municipal securities	95,655		(10,194)		159,439		(36,594)		255,094		(46,788)
Non-agency mortgage-backed securities:	Non-agency mortgage-backed securities:													Non-agency mortgage-backed securities:
Commercial mortgage-backed securities	Commercial mortgage-backed securities	301,925		(4,158)		40,013		(1,319)		341,938		(5,477)		Commercial mortgage-backed securities	106,184		(3,309)		282,301		(46,087)		388,485		(49,396)
Residential mortgage-backed securities	Residential mortgage-backed securities	707,792		(8,966)		6,431		(11)		714,223		(8,977)		Residential mortgage-backed securities	22,715		(1,546)		626,509		(111,432)		649,224		(112,978)
Corporate debt securities	Corporate debt securities	183,916		(3,084)		251,494		(13,505)		435,410		(16,589)		Corporate debt securities	173,595		(17,907)		352,679		(129,321)		526,274		(147,228)
Foreign government bonds	Foreign government bonds	27,097		(5)		133,279		(3,476)		160,376		(3,481)		Foreign government bonds	107,576		(429)		36,143		(13,857)		143,719		(14,286)
Asset-backed securities	Asset-backed securities	24,885		(301)		—		—		24,885		(301)		Asset-backed securities	12,450		(524)		36,626		(1,552)		49,076		(2,076)
CLOs	CLOs	221,586		(64)		291,712		(2,288)		513,298		(2,352)		CLOs	144,365		(4,735)		453,299		(14,851)		597,664		(19,586)
Total AFS debt securities	Total AFS debt securities	$	5,932,965	$	(106,229)	$	1,778,987	$	(66,622)	$	7,711,952	$	(172,851)	Total AFS debt securities	$	1,451,466	$	(104,682)	$	4,332,275	$	(740,048)	$	5,783,741	$	(844,730)

2528

As of September 30, ~~2022,~~2023, the Company had ~~a total of 557~~567 AFS debt securities in a gross unrealized loss position with no credit impairment, primarily consisting of 269 U.S. government agency and U.S. government-sponsored enterprise mortgage-backed securities, 66 corporate debt securities, and 99 non-agency mortgage-backed securities. In comparison, as of December 31, 2022, the Company had 559 AFS debt securities in a gross unrealized loss position with no credit impairment, primarily consisting of ~~262~~263 U.S. government agency and U.S. government-sponsored enterprise mortgage-backed securities, 100 non-agency mortgage-backed securities, and 68 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~~The Company ~~assesses~~evaluates each AFS debt security ~~that is in an unrealized loss position to determine whether~~where the ~~decline in~~ fair value declines below ~~the~~ amortized ~~cost basis resulted from a credit loss or other factors.~~cost. 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~~2022 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 debt and mortgage-backed securities are issued, guaranteed, or otherwise supported by the U.S. government and have a zero credit loss assumption. The ~~other~~remaining securities that were in an unrealized loss position as of September 30, ~~2022~~2023 were mainly comprised of the following:

•Non-agency mortgage-backed securities —— The market value decline as of September 30, ~~2022,~~2023, was primarily due to interest rate movement and spread widening. Since these securities are rated investment grade by ~~NRSROs,~~nationally recognized statistical rating organizations (“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 September 30, ~~2022~~2023 was primarily due to interest rate movement and spread widening. ~~Since~~A portion of the corporate debt securities is comprised of subordinated debt securities issued by U.S. banks. Despite the reduction of the market value of these securities after the banking sector disruption in the first nine months of 2023, these securities are nearly all rated investment grade by NRSROs or ~~if not, the issuer is a~~issued by well-capitalized financial ~~institution~~institutions with strong ~~profitability, and the~~profitability. The contractual payments from these ~~bonds~~corporate debt securities have been and are expected to be received on ~~time,~~time. The Company will continue to monitor the ~~Company believes that~~market developments in the ~~risk~~banking sector and the credit performance of ~~credit losses on~~ these ~~securities is low.~~securities.

As of both September 30, ~~2022~~2023 and December 31, ~~2021,~~2022, the Company ~~had the intent~~intended to hold the AFS debt securities with unrealized losses through the anticipated recovery period and it was more-likely-than-not that the Company ~~will~~would not have to sell these securities before the recovery of their amortized cost. The issuers of these securities have not, to the Company’s knowledge, established any cause for default on these securities. As a result, the Company expects to recover the entire amortized cost basis of these securities. Accordingly, there was no allowance for credit losses provided against these securities as of both September 30, ~~2022~~2023 and December 31, ~~2021 provided against these securities.~~2022. In addition, there was no provision for credit losses recognized for the three and nine months ended September 30, ~~2022~~2023 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.~~2022.

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~~For additional information on the Company’s credit loss ~~is recorded through the allowance~~methodology, refer to Note 1 — Summary of Significant Accounting Policies — Significant Accounting Policies — Allowance for ~~credit losses and is deducted from the amortized cost basis. The net amount the Company expects~~Credit Losses on Held-to-Maturity Debt Securities to ~~collect is reflected on~~ the Consolidated ~~Balance Sheet.~~Financial Statements in the Company’s 2022 Form 10-K.

The Company monitors the credit quality of the HTM debt securities using external credit ratings. As of September 30, ~~2022,~~2023, all HTM securities were rated investment grade by NRSROs and issued, guaranteed, or supported by U.S. government entities and agencies. Accordingly, the Company applied a zero credit loss assumption and no allowance for credit losses was recorded as of both September 30, 2023 and December 31, 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.~~

2629

Realized Gains and Losses

The following table presents the gross realized gains ~~and tax expense related to~~from the sales and impairment write-off of AFS debt securities and the related tax expense (benefit) included in earnings for the three and nine months ended September 30, ~~2022~~2023 and ~~2021:~~2022:

($ in thousands) Three Months Ended September 30, Nine Months Ended September 30,
2022 2021 2022 2021
Gross realized gains $ — $ 354 $ 1,306 $ 1,178
Related tax expense $ — $ 104 $ 386 $ 348



	Three Months Ended September 30,				Nine Months Ended September 30,
($ in thousands)	2023		2022		2023		2022

Gross realized gains from sales	$	—	$	—	$	—	$	1,306
Impairment write-off (1)	$	—	$	—	$	10,000	$	—
Related tax expense (benefit)	$	—	$	—	$	(2,956)	$	386

(1)During the first quarter of 2023, the Company fully wrote down a subordinated debt security and recorded the impairment loss as a component of noninterest income in the Company’s Consolidated Statement of Income.

Interest Income

The following table presents the composition of interest income on debt securities for the three and nine months ended September 30, ~~2022~~2023 and ~~2021:~~2022:


($ in thousands)		Three Months Ended September 30,				Nine Months Ended September 30,
											Three Months Ended September 30,				Nine Months Ended September 30,
($ in thousands)	($ in thousands)	2022		2021		2022		2021		($ in thousands)	2023		2022		2023		2022

Taxable interest	Taxable interest	$	46,172	$	34,755	$	125,626	$	92,909	Taxable interest	$	63,877	$	46,172	$	189,065	$	125,626
Nontaxable interest	Nontaxable interest	4,920		3,071		14,309		8,707		Nontaxable interest	5,901		4,920		15,614		14,309
Total interest income on debt securities	Total interest income on debt securities	$	51,092	$	37,826	$	139,935	$	101,616	Total interest income on debt securities	$	69,778	$	51,092	$	204,679	$	139,935

2730

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~~weighted-average yields of AFS and HTM debt securities as of September 30, ~~2022.~~2023. 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	$	—		$	576,605		$	99,707		$	—		$	676,312		Amortized cost	$	298,323		$	676,292		$	—		$	—		$	974,615
Fair value	Fair value	—			516,595			84,082			—			600,677			Fair value	298,371			605,730			—			—			904,101
Weighted-average yield (1)	Weighted-average yield (1)	—		%	1.28		%	0.74		%	—		%	1.20		%	Weighted-average yield (1)	5.44		%	1.20		%	—		%	—		%	2.50		%
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	—			24,775			125,000			169,295			319,070			Amortized cost	150,000			96,472			103,171			163,069			512,712
Fair value	Fair value	—			22,787			102,540			135,097			260,424			Fair value	149,616			91,343			82,252			124,253			447,464
Weighted-average yield (1)	Weighted-average yield (1)	—		%	1.47		%	1.16		%	2.10		%	1.69		%	Weighted-average yield (1)	4.98		%	3.08		%	1.39		%	2.18		%	3.01		%
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	—			24,417			173,899			2,440,817			2,639,133			Amortized cost	—			42,260			144,846			2,341,264			2,528,370
Fair value	Fair value	—			23,529			157,827			2,133,958			2,315,314			Fair value	—			39,718			128,933			1,988,023			2,156,674
Weighted-average yield (1)		—		%	3.26		%	2.71		%	2.70		%	2.71		%
Weighted-average yield (1) (2)																	Weighted-average yield (1) (2)	—		%	3.16		%	2.73		%	3.68		%	3.62		%
Municipal securities	Municipal securities																Municipal securities
Amortized cost	Amortized cost	1,511			38,079			6,855			260,639			307,084			Amortized cost	2,400			36,850			9,007			253,151			301,408
Fair value	Fair value	1,510			35,025			5,753			207,214			249,502			Fair value	2,383			33,794			7,596			199,783			243,556
Weighted-average yield (1) (2)	Weighted-average yield (1) (2)	3.13		%	2.44		%	1.85		%	2.24		%	2.26		%	Weighted-average yield (1) (2)	3.13		%	2.34		%	2.87		%	2.24		%	2.28		%
Non-agency mortgage-backed securities	Non-agency mortgage-backed securities																Non-agency mortgage-backed securities
Amortized cost	Amortized cost	28,574			187,564			25,832			991,520			1,233,490			Amortized cost	99,830			92,328			11,056			902,911			1,106,125
Fair value	Fair value	28,195			179,900			24,897			836,521			1,069,513			Fair value	98,420			89,370			10,793			737,524			936,107
Weighted-average yield (1)	Weighted-average yield (1)	4.84		%	3.87		%	0.84		%	2.37		%	2.62		%	Weighted-average yield (1)	6.27		%	4.16		%	0.80		%	2.58		%	3.02		%
Corporate debt securities	Corporate debt securities																Corporate debt securities
Amortized cost	Amortized cost	10,000			—			334,502			329,000			673,502			Amortized cost	—			—			349,501			304,000			653,501
Fair value	Fair value	9,857			—			296,184			223,524			529,565			Fair value	—			—			280,812			194,622			475,434
Weighted average yield (1)		3.95		%	—		%	3.59		%	1.98		%	2.81		%
Weighted-average yield (1)																	Weighted-average yield (1)	—		%	—		%	3.48		%	1.97		%	2.78		%
Foreign government bonds	Foreign government bonds																Foreign government bonds
Amortized cost	Amortized cost	138,720			—			50,000			50,000			238,720			Amortized cost	32,875			104,656			50,000			50,000			237,531
Fair value	Fair value	139,060			—			49,851			36,899			225,810			Fair value	32,810			104,546			49,609			35,825			222,790
Weighted-average yield (1)	Weighted-average yield (1)	2.15		%	—		%	2.66		%	1.50		%	2.12		%	Weighted-average yield (1)	3.02		%	2.28		%	5.71		%	1.50		%	2.94		%
Asset-backed securities	Asset-backed securities																Asset-backed securities
Amortized cost	Amortized cost	—			—			—			66,793			66,793			Amortized cost	—			—			—			44,819			44,819
Fair value	Fair value	—			—			—			64,870			64,870			Fair value	—			—			—			43,757			43,757
Weighted-average yield (1)	Weighted-average yield (1)	—		%	—		%	—		%	4.15		%	4.15		%	Weighted-average yield (1)	—		%	—		%	—		%	6.01		%	6.01		%
CLOs	CLOs																CLOs
Amortized cost	Amortized cost	—			—			25,000			592,250			617,250			Amortized cost	—			—			319,000			298,250			617,250
Fair value	Fair value	—			—			24,168			566,247			590,415			Fair value	—			—			314,219			295,735			609,954
Weighted average yield (1)		—		%	—		%	3.66		%	3.86		%	3.85		%
Weighted-average yield (1)																	Weighted-average yield (1)	—		%	—		%	6.71		%	6.76		%	6.73		%
Total AFS debt securities	Total AFS debt securities																Total AFS debt securities
Amortized cost	Amortized cost	$	178,805		$	851,440		$	840,795		$	4,900,314		$	6,771,354		Amortized cost	$	583,428		$	1,048,858		$	986,581		$	4,357,464		$	6,976,331
Fair value	Fair value	$	178,622		$	777,836		$	745,302		$	4,204,330		$	5,906,090		Fair value	$	581,600		$	964,501		$	874,214		$	3,619,522		$	6,039,837
Weighted-average yield (1)	Weighted-average yield (1)	2.69		%	1.96		%	2.56		%	2.69		%	2.58		%	Weighted-average yield (1)	5.32		%	1.86		%	4.27		%	3.40		%	3.45		%

2831


($ 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	$	—		$	285,325		$	237,388		$	—		$	522,713		Amortized cost	$	—		$	528,169		$	—		$	—		$	528,169
Fair value	Fair value	—			255,365			210,720			—			466,085			Fair value	—			470,618			—			—			470,618
Weighted-average yield (1)	Weighted-average yield (1)	—		%	0.96		%	1.14		%	—		%	1.05		%	Weighted-average yield (1)	—		%	1.05		%	—		%	—		%	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	—			—			255,708			742,525			998,233			Amortized cost	—			—			328,870			672,428			1,001,298
Fair value	Fair value	—			—			215,684			566,933			782,617			Fair value	—			—			265,107			487,184			752,291
Weighted-average yield (1)	Weighted-average yield (1)	—		%	—		%	1.94		%	1.88		%	1.90		%	Weighted-average yield (1)	—		%	—		%	1.92		%	1.89		%	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	—			—			96,433			1,205,391			1,301,824			Amortized cost	—			—			94,992			1,150,683			1,245,675
Fair value	Fair value	—			—			81,526			984,813			1,066,339			Fair value	—			—			76,426			873,138			949,564
Weighted-average yield (1)		—		%	—		%	1.56		%	1.63		%	1.63		%
Weighted-average yield (1) (2)																	Weighted-average yield (1) (2)	—		%	—		%	1.56		%	1.68		%	1.67		%
Municipal securities	Municipal securities																Municipal securities
Amortized cost	Amortized cost	—			—			—			189,897			189,897			Amortized cost	—			—			—			189,093			189,093
Fair value	Fair value	—			—			—			144,094			144,094			Fair value	—			—			—			135,575			135,575
Weighted-average yield (1) (2)	Weighted-average yield (1) (2)	—		%	—		%	—		%	1.97		%	1.97		%	Weighted-average yield (1) (2)	—		%	—		%	—		%	1.99		%	1.99		%
Total HTM debt securities	Total HTM debt securities																Total HTM debt securities
Amortized cost	Amortized cost	$	—		$	285,325		$	589,529		$	2,137,813		$	3,012,667		Amortized cost	$	—		$	528,169		$	423,862		$	2,012,204		$	2,964,235
Fair value	Fair value	$	—		$	255,365		$	507,930		$	1,695,840		$	2,459,135		Fair value	$	—		$	470,618		$	341,533		$	1,495,897		$	2,308,048
Weighted-average yield (1)	Weighted-average yield (1)	—		%	0.96		%	1.55		%	1.75		%	1.64		%	Weighted-average yield (1)	—		%	1.05		%	1.84		%	1.78		%	1.66		%

(1)Weighted-average yields are computed based on amortized cost balances.

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

As of September 30, ~~2022~~2023 and December 31, ~~2021,~~2022, AFS and HTM debt securities with carrying values of ~~$1.22~~$7.04 billion and ~~$803.9~~$794.2 million, respectively, were pledged to secure borrowings, public deposits, repurchase agreements and for other purposes required or permitted by law.

Restricted Equity Securities

The following table presents the restricted equity securities included in Other assets on the Consolidated Balance Sheet as of September 30, ~~2022~~2023 and December 31, ~~2021:~~2022:


($ in thousands)	($ in thousands)	September 30, 2022		December 31, 2021		($ in thousands)	September 30, 2023		December 31, 2022
Federal Reserve Bank of San Francisco (“FRBSF”) stock	Federal Reserve Bank of San Francisco (“FRBSF”) stock	$	61,004	$	60,184	Federal Reserve Bank of San Francisco (“FRBSF”) stock	$	62,272	$	61,374
FHLB stock	FHLB stock	17,250		17,250		FHLB stock	17,250		17,250
Total restricted equity securities	Total restricted equity securities	$	78,254	$	77,434	Total restricted equity securities	$	79,522	$	78,624

Note 6 — Derivatives

The Company uses ~~derivatives~~derivative instruments to manage exposure to market risk, primarily interest rate orand foreign currency ~~risk,~~risks, 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 ~~rates~~rate changes on earnings or capital. The Company also uses foreign exchange contracts to manage the foreign exchange rate risk associated with certain foreign currency-denominated assets and liabilities, as well as the 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~~2022 Form 10-K.

2932

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 September 30, ~~2022~~2023 and December 31, ~~2021.~~2022. Certain derivative contracts are cleared though central clearing organizations where variation margin is applied daily as settlement to the fair values of the contracts. The ~~derivative asset and liability~~ fair values are presented on a gross basis prior to the application of bilateral collateral and master netting agreements, but after the application of variation margin payments as ~~settlements with~~settlement to fair values of contracts cleared through central clearing organizations. Applying variation margin payments as settlement to the fair values of derivative contracts cleared through the London Clearing House (“LCH”) and the Chicago Mercantile Exchange (“CME”) resulted in reductions in the derivative asset and liability fair values by $16.0 million and $65.7 million, respectively, as of September 30, 2023. In comparison, applying variation margin payments as settlement to LCH- and CME-cleared derivative transactions resulted in reductions in the derivative asset and liability fair values by $167.2 million and $81.3 million, respectively, as of December 31, 2022. Total derivative asset and liability fair values are adjusted to ~~take into consideration~~reflect the effects of legally enforceable master netting agreements and cash collateral received or ~~paid as of September 30, 2022 and December 31, 2021.~~paid. The resulting net derivative asset and liability fair values are included in Other assets and Accrued expenses and other liabilities, respectively, on the Consolidated Balance Sheet.


($ in thousands)		September 30, 2022									December 31, 2021
		Notional Amount			Fair Value						Notional Amount			Fair Value
																		September 30, 2023								December 31, 2022
																							Fair Value								Fair Value
($ in thousands)	($ in thousands)			Notional Amount			Derivative Assets			Derivative Liabilities				Notional Amount		Derivative Assets				Derivative Liabilities		($ in thousands)	Notional Amount			Derivative Assets			Derivative Liabilities		Notional Amount			Derivative Assets		Derivative Liabilities
																			Derivatives designated as hedging instruments:

Cash flow hedges:	Cash flow hedges:																		Cash flow hedges:
Interest rate contracts	Interest rate contracts	$	2,525,000		$	533		$	24,679		$	275,000		$	—	$	57		Interest rate contracts		$	5,000,000	$	1,288		$	96,382		$	3,450,000	$	13,455		$	19,687
Net investment hedges:	Net investment hedges:																		Net investment hedges:
Foreign exchange contracts	Foreign exchange contracts	84,832			7,107			—			86,531			—		225			Foreign exchange contracts		81,480		3,709			—			84,832		5,590			—
Total derivatives designated as hedging instruments	Total derivatives designated as hedging instruments	$	2,609,832		$	7,640		$	24,679		$	361,531		$	—	$	282		Total derivatives designated as hedging instruments		$	5,081,480	$	4,997		$	96,382		$	3,534,832	$	19,045		$	19,687
Derivatives not designated as hedging instruments:	Derivatives not designated as hedging instruments:																		Derivatives not designated as hedging instruments:
Interest rate contracts	Interest rate contracts	$	17,261,862		$	429,505		$	590,648		$	17,575,420		$	240,222	$	179,905		Interest rate contracts		$	17,456,102	$	622,799		$	615,920		$	16,932,414	$	426,828		$	564,829
Commodity contracts (1)																			Commodity contracts (1)		—		137,500			143,855			—		261,613			258,608
Foreign exchange contracts	Foreign exchange contracts	2,762,150			74,767			64,049			1,874,681			21,033		15,276			Foreign exchange contracts		5,205,007		96,668			77,099			2,982,891		47,519			44,117
Credit contracts		141,549			—			27			72,560			—		141
Credit contracts (2)																			Credit contracts (2)		143,703		—			12			140,950		—			23
Equity contracts	Equity contracts	—		(1)	346			—			—		(1)	220		—			Equity contracts		—		352		(3)	15,119		(4)	—		323		(3)	—
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	$	20,165,561		$	873,764		$	1,004,922		$	19,522,661		$	484,184	$	389,889		Total derivatives not designated as hedging instruments		$	22,804,812	$	857,319		$	852,005		$	20,056,255	$	736,283		$	867,577
Gross derivative assets/liabilities	Gross derivative assets/liabilities				$	881,404		$	1,029,601					$	484,184	$	390,171		Gross derivative assets/liabilities				$	862,316		$	948,387				$	755,328		$	887,264
Less: Master netting agreements	Less: Master netting agreements				(238,606)			(238,606)						(58,679)		(58,679)			Less: Master netting agreements				(260,648)			(260,648)					(242,745)			(242,745)
Less: Cash collateral received/paid					(367,351)			(600)						(42,274)		(174,048)
Less: Cash collateral received																			Less: Cash collateral received				(269,683)			(2,225)					(372,038)			—
Net derivative assets/liabilities	Net derivative assets/liabilities				$	275,447		$	790,395					$	383,231	$	157,444		Net derivative assets/liabilities				$	331,985		$	685,514				$	140,545		$	644,519

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

~~(2)~~The notional amount of the Company’s commodity contracts ~~entered with its customers~~ totaled ~~8,199~~20,672 thousand barrels of crude oil and ~~113,574~~363,020 thousand units of natural gas, measured in million British thermal units (“MMBTUs”) as of September 30, ~~2022.~~2023. In comparison, the notional amount of the Company’s commodity contracts ~~entered with its customers~~ totaled ~~7,519~~12,005 thousand barrels of crude oil and ~~83,274~~247,704 thousand MMBTUs of natural gas as of December 31, ~~2021.~~ 2022.

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

(3)The Company ~~simultaneously entered into the offsetting commodity~~held warrant equity contracts ~~with mirrored terms with third-party financial institutions.~~in one public company and 13 private companies as of both September 30, 2023 and December 31, 2022.

(4)Equity contracts classified as derivative liabilities consist of 349,138 PRSUs granted as part of EWBC’s consideration in its investment in Rayliant.

Derivatives Designated as Hedging Instruments

Cash Flow Hedges — The Company ~~hedges~~uses interest rate swaps to hedge the variability ~~of forecasted cash flows~~in interest received on certain floating-rate commercial loans, or paid on certain floating-rate borrowings due to changes in contractually specified interest ~~rates associated with floating-rate assets/liabilities and other forecasted transactions.~~rates. As of September 30, ~~2022, $2.25 billion and $275.0 million~~2023, interest rate contracts in notional amounts of ~~interest rate contracts~~$5.00 billion were designated as cash flow hedges to ~~modify~~convert certain variable-rate loans from floating-rate payments to fixed-rate payments. Gains and losses on the interest rate characteristics of certain commercial loans and borrowings, respectively, from variable to fixed. This will reduce the impact of changes in future cash flows due to changes in market interest rates.~~Changes in the fair values of cash flow hedges~~hedging derivative instruments are recognized in AOCI and reclassified to earnings in the same period ~~when~~ the hedged cash flows impact ~~earnings.~~earnings and within the same income statement line item as the hedged cash flows. Considering the interest rates, yield curve and notional ~~amounts~~amount as of September 30, ~~2022,~~2023, the Company expects to reclassify an estimated ~~$26.5~~$66.2 million of after-tax net losses ~~related to~~on derivative instruments designated as cash flow hedges from AOCI into earnings during the next 12 months.

3033

The following table presents the pre-tax changes in AOCI from cash flow hedges for the three and nine months ended September 30, ~~2022~~2023 and ~~2021.~~2022. The after-tax impact of cash flow hedges on AOCI is ~~discussed~~shown in Note 1314 — Accumulated Other Comprehensive Income (Loss) to the Consolidated Financial Statements in this Form-10-Q.


										Three Months Ended September 30,				Nine Months Ended September 30,
($ in thousands)	($ in thousands)	Three Months Ended September 30,				Nine Months Ended September 30,					($ in thousands)	2023		2022		2023		2022
		2022		2021		2022		2021
(Losses) gains recognized in AOCI:
Losses recognized in AOCI:													Losses recognized in AOCI:
Interest rate contracts	Interest rate contracts	$	(48,325)	$	(170)	$	(88,771)	$	150				Interest rate contracts	$	(62,715)	$	(48,325)	$	(129,329)		$	(88,771)

(Losses) gains reclassified from AOCI into earnings:
Gains (losses) reclassified from AOCI into earnings:													Gains (losses) 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 expense (for cash flow hedges on borrowings)	$	—	$	1,251	$	696		$	1,385
Interest and dividend income (for cash flow hedges on loans)	Interest and dividend income (for cash flow hedges on loans)	(2,870)		—		216		—					Interest and dividend income (for cash flow hedges on loans)	(24,059)		(2,870)		(57,265)			216
Noninterest income													Noninterest income	—		—		1,614		(1)	—
Total	Total	$	(1,619)	$	(241)	$	1,601	$	(619)				Total	$	(24,059)	$	(1,619)	$	(54,955)		$	1,601

(1)Represents the amounts in AOCI reclassified into earnings as a result that the forecasted cash flows were no longer probable to occur.

Net Investment Hedges — ~~ASC 830-20,~~ ~~Foreign Currency Matters — Foreign Currency Transactions~~ ~~and ASC 815,~~ ~~Derivatives and Hedging, 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,~~were used to hedge 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~~pre-tax gains ~~(losses)~~ recognized in AOCI on net investment hedges for the three and nine months ended September 30, ~~2022~~2023 and ~~2021:~~2022:


										Three Months Ended September 30,		Nine Months Ended September 30,
($ in thousands)	($ in thousands)	Three Months Ended September 30,				Nine Months Ended September 30,					($ in thousands)	2023		2022		2023		2022
		2022		2021		2022		2021
Gains (losses) recognized in AOCI		$	3,093	$	(318)	$	4,293	$	(1,860)
Gains recognized in AOCI													Gains recognized in AOCI	$	63	$	4,343	$	2,886	$	6,027

Derivatives Not Designated as Hedging Instruments

~~Interest Rate Contracts~~Customer-Related Positions and Economic Hedge Derivatives — The Company enters into interest rate, ~~contracts, which include interest rate swaps~~commodity, and ~~options with~~foreign exchange derivatives at the request of 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 September 30, 2022 and December 31, 2021:~~

($ in thousands) September 30, 2022
Customer Counterparty ($ in thousands) Financial Counterparty
Notional
Amount Fair Value Notional
Amount Fair Value
Assets Liabilities Assets Liabilities
Purchased options $ — $ — $ — Purchased options $ 1,581,174 $ 33,745 $ —
Written options 1,548,884 — 32,253 Written options 32,290 — 1,346
Sold collars and corridors 221,287 — 8,661 Collars and corridors 221,287 8,706 —
Swaps 6,814,564 159 547,728 Swaps 6,842,376 386,895 660
Total $ 8,584,735 $ 159 $ 588,642 Total $ 8,677,127 $ 429,346 $ 2,006

($ 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 $8.68 billion of interest rate contracts entered into with financial counterparties as of September 30, 2022, was a notional amount of $2.10 billion of interest rate swaps that cleared through London Clearing House (“LCH”). Applying variation margin payments as settlement to LCH-cleared derivative transactions resulted in a reduction in the derivative asset of $178.4 million and a reduction in the derivative liability of a nominal amount as of 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 of $18.1 million and a reduction in the derivative liability 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~~generally enters into offsetting ~~foreign exchange~~derivative 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.~~mitigate the inherent market risk. 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~~currency denominated deposits ~~offered~~that it offers to its customers. A majority of the foreign exchange contracts had original maturities of one year or less as of both September 30, ~~2022~~2023 and December 31, ~~2021.~~2022.

The following ~~tables present~~table presents the notional amounts and the gross fair values of the interest rate and foreign exchange ~~derivative contracts outstanding~~derivatives entered into with customers and with third-party financial institutions as economic hedges to customers’ positions as of September 30, ~~2022~~2023 and December 31, ~~2021:~~2022:

($ in thousands) September 30, 2022
Customer Counterparty ($ in thousands) Financial Counterparty
Notional
Amount Fair Value Notional
Amount Fair Value
Assets Liabilities Assets Liabilities
Forwards and spots $ 1,048,541 $ 24,645 $ 39,173 Forwards and spots $ 220,663 $ 4,260 $ 2,408
Swaps 127,381 897 2,606 Swaps 1,257,039 42,100 16,997
Purchased options 49,000 2,533 — Written options 49,000 — 2,533
Collars 5,263 — 332 Collars 5,263 332 —
Total $ 1,230,185 $ 28,075 $ 42,111 Total $ 1,531,965 $ 46,692 $ 21,938


																											September 30, 2023												December 31, 2022
																															Fair Value												Fair Value
($ in thousands)	($ in thousands)	December 31, 2021																						($ in thousands)			Notional Amount				Assets				Liabilities				Notional Amount				Assets				Liabilities
		Customer Counterparty											($ in thousands)			Financial Counterparty
		Notional Amount				Fair Value								Notional Amount				Fair Value
				Assets				Liabilities				($ in thousands)						Assets			Liabilities
Forwards and spots				$	900,290			$	13,688					$	9,446			Forwards and spots	$	267,689		$	1,564		$	2,695
Customer-related positions:																						Customer-related positions:
Interest rate contracts:																								Interest rate contracts:
Swaps	Swaps	66,474				1,034				17				Swaps				599,654			4,745			3,116	Swaps				$	6,890,450			$	691			$	584,962			$	6,656,491			$	1,438			$	521,719
Purchase options		20,287				2				—			Written options			20,287			—			2

Written options																								Written options			1,486,958				—				21,864				1,548,158				—				30,904
Collars and corridors																								Collars and corridors			306,996				—				7,619				215,773				—				8,924
Subtotal																								Subtotal			8,684,404				691				614,445				8,420,422				1,438				561,547
Foreign exchange contracts:																								Foreign exchange contracts:
Forwards and spot																								Forwards and spot			62,237				11,376				24,484				993,588				17,009				18,090
Swaps																								Swaps			2,494,517				16,282				23,687				623,143				6,629				12,178
Other																								Other			142,000				5,630				—				121,631				2,070				245
Subtotal																								Subtotal			2,698,754				33,288				48,171				1,738,362				25,708				30,513
Total																								Total			$	11,383,158			$	33,979			$	662,616			$	10,158,784			$	27,146			$	592,060
Economic hedges:																								Economic hedges:
Interest rate contracts:																								Interest rate contracts:
Swaps																								Swaps			$	6,916,364			$	592,177			$	1,119			$	6,683,828			$	384,201			$	2,047
Purchased options																								Purchased options			1,517,648				22,285				—				1,580,275				32,233				—
Written options																								Written options			30,690				—				356				32,117				—				1,235
Collars and corridors																								Collars and corridors			306,996				7,646				—				215,772				8,956				—
Subtotal																								Subtotal			8,771,698				622,108				1,475				8,511,992				425,390				3,282
Foreign exchange contracts:																								Foreign exchange contracts:
Forwards and spot																								Forwards and spot			1,060,498				452				313				77,998				3,050				87
Swaps																								Swaps			1,303,755				62,928				22,985				1,044,900				18,516				11,447
Other																								Other			142,000				—				5,630				121,631				245				2,070
Subtotal																								Subtotal			2,506,253				63,380				28,928				1,244,529				21,811				13,604
Total	Total	$	987,051			$	14,724			$	9,463		Total			$	887,630		$	6,309		$	5,813	Total			$	11,277,951			$	685,488			$	30,403			$	9,756,521			$	447,201			$	16,886

3235

The Company enters into energy commodity contracts with its customers in the oil and gas sector, which allow them to hedge against the risk of fluctuation in energy commodity prices. Offsetting contracts entered with third-party financial institutions are used as economic hedges to manage the Company’s exposure on its customer-related positions. The following table presents the notional amounts in units and the gross fair values of the commodity derivatives issued for customer-related positions and economic hedges as of September 30, 2023 and December 31, 2022:



	September 30, 2023						December 31, 2022
			Fair Value						Fair Value
($ and unit in thousands)	Notional Units		Assets		Liabilities		Notional Units		Assets		Liabilities
Customer-related positions:
Commodity contracts:
Crude oil:
Swaps	3,958	Barrels	$	27,543	$	1,717	2,465	Barrels	$	39,955	$	6,178
Collars	6,362	Barrels	24,552		119		3,011	Barrels	16,038		2,630
Written options	—	Barrels	—		—		—	Barrels	558		—
Subtotal	10,320	Barrels	52,095		1,836		5,476	Barrels	56,551		8,808
Natural gas:
Swaps	129,940	MMBTUs	32,428		55,387		92,590	MMBTUs	112,314		73,208
Collars	50,763	MMBTUs	865		11,535		32,072	MMBTUs	2,217		18,317
Written options	1,955	MMBTUs	—		206		—	MMBTUs	—		—
Subtotal	182,658	MMBTUs	33,293		67,128		124,662	MMBTUs	114,531		91,525
Total			$	85,388	$	68,964			$	171,082	$	100,333
Economic hedges:
Commodity contracts:
Crude oil:
Swaps	3,990	Barrels	$	2,165	$	24,403	2,587	Barrels	$	6,935	$	36,060
Collars	6,362	Barrels	—		18,781		3,942	Barrels	1,378		12,856
Purchased options	—	Barrels	—		—		—	Barrels	—		516
Subtotal	10,352	Barrels	2,165		43,184		6,529	Barrels	8,313		49,432
Natural gas:
Swaps	129,405	MMBTUs	42,804		31,289		91,900	MMBTUs	69,767		106,883
Collars	49,003	MMBTUs	6,937		418		31,142	MMBTUs	12,451		1,960
Purchased options	1,955	MMBTUs	206		—		—	MMBTUs	—		—
Subtotal	180,363	MMBTUs	49,947		31,707		123,042	MMBTUs	82,218		108,843
Total			$	52,112	$	74,891			$	90,531	$	158,275

Credit Contracts — The Company periodically enters into credit RPAs with institutional counterparties to manage the credit exposure of the interest rate contracts associated with syndication loans. ~~The Company may enter into protection sold or protection purchased RPAs. A purchaser of credit protection that enters into an interest rate contract with~~Under 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~~RPAs, a portion of the credit ~~risk.~~exposure is transferred from one party (the purchaser of credit protection) to another party (the seller of credit protection). The seller of credit protection is required to make payments to the purchaser of credit protection if the underlying borrower defaults on the related interest rate contract. The Company may enter into protection sold or protection purchased RPAs.Credit risk on RPAs is managed by monitoring the credit worthiness of the borrowers and the institutional counterparties, which is a part of the Company’s normal credit review and monitoring process. ~~The majority of the~~All referenced entities of the protection sold RPAs were investment grade and the weighted-average remaining maturity was 2.5 years and 2.4 years as of ~~both~~ September 30, ~~2022~~2023 and December 31, ~~2021.~~2022, respectively. Assuming that the underlying borrowers referenced in the interest rate contracts defaulted, the Company would not have any current exposure in the protection sold RPAs ~~there would be no maximum exposure~~ as of both September 30, 2023 and December 31, 2022.

As of September 30, ~~2022~~2023, the Company had outstanding protection purchased RPAs with notional amount of $25.0 million and ~~$3.2 million of maximum exposure~~minimal fair value. In comparison, the Company did not have any outstanding protection purchased RPAs as of December 31, ~~2021. The weighted-average remaining maturities of the outstanding protection sold RPAs were 2.7 years and 3.2 years as of September 30, 2022 and December 31, 2021, respectively.~~2022.

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 September 30, 2022 and December 31, 2021:

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

Equity Contracts — ~~From time to time, as~~As part of the ~~Company’s~~ loan origination process, the Company ~~obtains~~may obtain warrants to purchase the preferred and/or common stock of the borrowers’ companies, which are mainly in the technology and life ~~science companies to which it provides loans.~~sciences sectors. Warrants grant the Company the right to buy a certain class of the underlying company’s equity at a certain price before expiration. ~~The Company held warrants~~In connection with the Company’s investment in ~~one public company and 13 private companies as~~Rayliant during the third quarter of September 30, 2022, and held warrants in one public company and 12 private companies as of December 31, 2021. The total fair value of the warrants held was $346 thousand and $220 thousand as of 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,2023, the Company ~~enters into offsetting commodity~~granted PRSUs as part of its consideration. The vesting of these equity contracts ~~with third-party~~is contingent on Rayliant meeting certain financial ~~institutions, including central clearing organizations.~~

~~The following tables present~~performance targets during the ~~notional amounts~~future performance period. For additional information on these equity contracts, refer to Note 3— Fair Value Measurement and ~~fair values~~Fair Value of ~~the commodity derivative positions outstanding as of September 30, 2022~~Financial Instruments and Note 8— Investments in Qualified Affordable Housing Partnerships, Tax Credit and ~~December 31, 2021:~~

($ and units in thousands) September 30, 2022
Customer Counterparty ($ and units in thousands) Financial Counterparty
Notional
Unit Fair Value Notional
Unit Fair Value
Assets Liabilities Assets Liabilities
Crude oil: Crude oil:
Written options 841 Barrels $ 1,593 $ — Purchased options 841 Barrels $ — $ 1,451
Collars 2,898 Barrels 22,072 7,148 Collars 2,903 Barrels 2,179 20,503
Swaps 4,460 Barrels 54,906 22,314 Swaps 3,425 Barrels 15,052 41,978
Total 8,199 $ 78,571 $ 29,462 Total 7,169 $ 17,231 $ 63,932
Natural gas: Natural gas:
Collars 26,363 MMBTUs $ 28,318 $ 3,684 Collars 26,839 MMBTUs $ 2,320 $ 24,916
Swaps 87,211 MMBTUs 216,050 73,012 Swaps 70,817 MMBTUs 26,656 155,192
Total 113,574 $ 244,368 $ 76,696 Total 97,656 $ 28,976 $ 180,108
Total $ 322,939 $ 106,158 Total $ 46,207 $ 244,040

($ 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 September 30, 2022, the notional amounts that cleared through the Chicago Mercantile Exchange (“CME”) totaled 773 thousand barrels of crude oil~~Other Investments, Net and ~~5,530 thousand MMBTUs of natural gas. Applying the variation margin payments as settlement~~ Variable Interest Entities to the ~~CME-cleared derivative transactions resulted~~Consolidated Financial Statements in a reduction to the gross derivative asset fair value of $6.7 million and a reduction to the liability fair value of $21.4 million as of September 30, 2022. In comparison, the notional amounts that cleared through CME totaled 1,036 thousand barrels of crude oil and 11,490 thousand MMBTUs of natural gas as of December 31, 2021. Applying the variation margin payments as settlement to the CME-cleared derivative transactions resulted in a reduction to the gross derivative asset fair value of $2.2 million and a reduction to the liability fair value of $25.8 million as of December 31, 2021.this Form 10-Q.

The following table presents the net gains (losses) recognized on the Company’s Consolidated Statement of Income related to derivatives not designated as hedging instruments for the three and nine months ended September 30, ~~2022~~2023 and ~~2021:~~2022:


($ in thousands)		Classification on Consolidated Statement of Income		Three Months Ended September 30,						Nine Months Ended September 30,
																Classification on Consolidated Statement of Income		Three Months Ended September 30,							Nine Months Ended September 30,
($ in thousands)	($ in thousands)		Classification on Consolidated Statement of Income			2022			2021			2022			2021		($ in thousands)				2023			2022				2023			2022
															Derivatives not designated as hedging instruments:
Interest rate contracts	Interest rate contracts	Interest rate contracts and other derivative income		$	4,870		$	2,467		$	18,439		$	11,030	Interest rate contracts		Interest rate contracts and other derivative income		$	5,283		$	4,870			$	4,022		$	18,439
Foreign exchange contracts	Foreign exchange contracts	Foreign exchange income		3,831			11,820			6,596			34,035		Foreign exchange contracts		Foreign exchange income		7,267			3,831				37,607			6,596
Credit contracts	Credit contracts	Interest rate contracts and other derivative income (loss)		50			(20)			114			175		Credit contracts		Interest rate contracts and other derivative income		4			50				11			114
Equity contracts		Lending fees		(13)			3			175			388
Equity contracts - warrants															Equity contracts - warrants		Lending fees		89			(13)				29			175

Commodity contracts	Commodity contracts	Interest rate contracts and other derivative income (loss)		(156)			32			139			13		Commodity contracts		Interest rate contracts and other derivative income		27			(156)				193			139
Net gains	Net gains			$	8,582		$	14,302		$	25,463		$	45,641	Net gains				$	12,670		$	8,582			$	41,862		$	25,463

~~Credit Risk-Related~~Credit-Risk-Related Contingent Features — ~~The~~Certain of the Company’s over-the-counter derivative contracts ~~may~~ contain early termination provisions that require the Company to settle any outstanding balances upon the occurrence of a specified ~~credit risk-related~~credit-risk-related event. Such an event primarily relates to a downgrade inof the credit rating of East West Bank to below investment grade. As of September 30, ~~2022,~~2023, the aggregate fair value amounts of all derivative instruments with ~~credit risk-related~~credit-risk-related contingent features that were in a net liability position totaled ~~$9.8~~$2.2 million ~~in which $8.4~~, and $2.2 million of collateral was posted to cover these positions. In comparison, as of December 31, ~~2021,~~2022, the aggregate fair value amounts of all derivative instruments with ~~credit risk-related~~credit-risk-related contingent features that were in a net liability position totaled ~~$66.8~~$2.6 million, inof which ~~$66.6~~$1.1 million of collateral was posted to cover these positions. ~~In the event that~~If the credit rating of East West Bank had been downgraded to below investment grade, ~~minimal additional collateral~~the Company would have been required to ~~be posted~~post minimal additional collateral as of both September 30, ~~2022~~2023 and December 31, ~~2021.~~2022.

3437

Offsetting of Derivatives

The following tables present the gross derivative ~~asset and liability~~ fair values, the balance sheet netting adjustments, and the resulting net fair values recorded on the ~~consolidated balance sheet,~~Consolidated Balance Sheet, as well as the cash and noncash collateral associated with master netting arrangements. The gross amounts of derivative ~~asset~~assets and ~~liability fair values~~liabilities are presented after the application of variation margin payments as settlements ~~with~~to the fair values of contracts cleared through central ~~counterparties,~~clearing organizations, 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,~~liability. Therefore, instances of ~~overcollateralization~~over-collateralization are not shown:


($ in thousands)	($ in thousands)	As of September 30, 2022															($ in thousands)				As of September 30, 2023

		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		$	881,404		$	(238,606)	$	(367,351)		$	275,447		$	(64,703)				$	210,744		Derivative assets		$	862,316		$	(260,648)		$	(269,683)			$	331,985		$	(280,043)		$	51,942
		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)						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	Derivative liabilities		$	1,029,601		$	(238,606)	$	(600)		$	790,395		$	(151,535)			$	638,860		Derivative liabilities		$	948,387		$	(260,648)				$	(2,225)			$	685,514		$	—		$	685,514


($ in thousands)	($ in thousands)	As of December 31, 2021															($ in thousands)				As of December 31, 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		$	484,184		$	(58,679)	$	(42,274)		$	383,231		$	—				$	383,231		Derivative assets		$	755,328		$	(242,745)		$	(372,038)			$	140,545		$	(60,567)		$	79,978
		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)						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	Derivative liabilities		$	390,171		$	(58,679)	$	(174,048)		$	157,444		$	(106,598)			$	50,846		Derivative liabilities		$	887,264		$	(242,745)				$	—			$	644,519		$	(38,438)		$	606,081

(1)Includes ~~$4.6~~$1.8 million and ~~$587 thousand~~$2.1 million of gross fair value assets with counterparties that were not subject to enforceable master netting arrangements or similar agreements as of September 30, ~~2022~~2023 and December 31, ~~2021,~~2022, respectively.

(2)Includes ~~$1.8~~$16.2 million and ~~$666~~$566 thousand of gross fair value liabilities with counterparties that were not subject to enforceable master netting arrangements or similar agreements as of September 30, ~~2022~~2023 and December 31, ~~2021,~~2022, respectively.

(3)Gross cash collateral received under master netting arrangements or similar agreements was ~~$369.7~~$275.7 million and ~~$47.0~~$384.9 million as of September 30, ~~2022~~2023 and December 31, ~~2021,~~2022, respectively. Of the gross cash collateral received, ~~$367.4~~$269.7 million and ~~$42.3~~$372.0 million were used to offset against derivative ~~asset fair values~~assets as of September 30, ~~2022~~2023 and December 31, ~~2021,~~2022, respectively.

(4)Gross cash collateral pledged under master netting arrangements or similar agreements was ~~$600~~$3.1 million and $490 thousand as of ~~which $600 thousand~~September 30, 2023 and December 31, 2022, respectively. Of the gross cash collateral pledged, $2.2 million was used to offset against derivative ~~liability fair value~~liabilities as of September 30, ~~2022.~~2023. In comparison, ~~gross~~no cash collateral ~~pledged under master netting arrangements or similar agreements~~ was ~~$176.5 million, of which $174.0 million were~~ used to offset against derivative ~~liability fair value~~liabilities as of December 31, ~~2021.~~2022.

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

In addition to the amounts included in the tables above, the Company ~~also~~ has balance sheet netting related to resale and repurchase agreements. Refer to Note 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.

3538

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 September 30, ~~2022~~2023 and December 31, ~~2021:~~2022:


($ in thousands)	($ in thousands)	September 30, 2022		December 31, 2021		($ in thousands)	September 30, 2023		December 31, 2022
Commercial:	Commercial:					Commercial:
C&I ~~(1)~~	C&I ~~(1)~~	$	15,625,072	$	14,150,608	C&I ~~(1)~~	$	15,864,042	$	15,711,095
CRE:	CRE:					CRE:
CRE	CRE	13,573,157		12,155,047		CRE	14,667,378		13,857,870
Multifamily residential	Multifamily residential	4,559,302		3,675,605		Multifamily residential	4,900,097		4,573,068
Construction and land	Construction and land	556,894		346,486		Construction and land	798,190		638,420
Total CRE	Total CRE	18,689,353		16,177,138		Total CRE	20,365,665		19,069,358
Total commercial	Total commercial	34,314,425		30,327,746		Total commercial	36,229,707		34,780,453
Consumer:	Consumer:					Consumer:
Residential mortgage:	Residential mortgage:					Residential mortgage:
Single-family residential	Single-family residential	10,855,345		9,093,702		Single-family residential	12,836,558		11,223,027
HELOCs	HELOCs	2,184,924		2,144,821		HELOCs	1,776,665		2,122,655
Total residential mortgage	Total residential mortgage	13,040,269		11,238,523		Total residential mortgage	14,613,223		13,345,682
Other consumer	Other consumer	87,561		127,512		Other consumer	64,254		76,295
Total consumer	Total consumer	13,127,830		11,366,035		Total consumer	14,677,477		13,421,977
Total loans held-for-investment ~~(2)~~(1)	Total loans held-for-investment ~~(2)~~(1)	$	47,442,255	$	41,693,781	Total loans held-for-investment ~~(2)~~(1)	$	50,907,184	$	48,202,430
Allowance for loan losses	Allowance for loan losses	(582,517)		(541,579)		Allowance for loan losses	(655,523)		(595,645)
Loans held-for-investment, net ~~(2)~~(1)	Loans held-for-investment, net ~~(2)~~(1)	$	46,859,738	$	41,152,202	Loans held-for-investment, net ~~(2)~~(1)	$	50,251,661	$	47,606,785

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

~~(2)Includes $(60.3)~~$72.0 million and ~~$(50.7)~~$70.4 million ofcomprising unamortized deferred and unearned fees, net ~~deferred loan fees and net unamortized~~of premiums as of September 30, ~~2022~~2023 and December 31, ~~2021,~~2022, respectively.

L~~oans held-for-investment accrued~~Accrued interest receivable on loans held-for-investment was ~~$165.5~~$249.3 million and ~~$107.4~~$208.4 million as of September 30, ~~2022~~2023 and December 31, ~~2021,~~2022, respectively, and was included in Other assets on the Consolidated Balance Sheet. The interest income reversed was insignificant for both the three and nine months ended September 30, ~~2022~~2023 and ~~2021.~~2022. For the Company’s accounting policy on accrued interest receivable related to loans held-for-investment, see Note 1 — Summary of Significant Accounting Policies — Significant Accounting Policies — Loans Held-for-Investment to the Consolidated Financial Statements of the Company’s ~~2021~~2022 Form 10-K. The Company also has loans held-for-sale. For the Company’s accounting policy on loans held-for-sale, refer to Note 1 — Summary of Significant Accounting Policies— Significant Accounting Policies — Loans Held-for-Sale to the Consolidated Financial Statements in the Company’s 2022 Form 10-K.

The Company’s FRBSF and FHLB borrowings are primarily secured by loans held-for-investment. Loans held-for-investment totaling $~~25.01~~35.18 billion and ~~$27.67~~$28.30 billion, respectively, were pledged to secure borrowings and provide additional borrowing capacity as of September 30, ~~2022~~2023 and December 31, ~~2021.~~2022.

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


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

														Revolving Loans			Revolving Loans Converted to Term Loans (1)			Total
																												September 30, 2023

																												Term Loans by Origination Year

($ in thousands)	($ in thousands)																								2022				2021			2020				2019			2018			Prior			Revolving Loans			Revolving Loans Converted to Term Loans (1)				Total	($ in thousands)				2023		2022		2021	2020	2019	Prior	Revolving Loans	Revolving Loans Converted to Term Loans (1)	Total
																																		Commercial:
																		C&I:
		$	2,620,973	$	2,422,523	$	683,312	$	414,503	$	158,867	$	118,118							Pass				$	1,858,749			$	1,942,241		$	1,470,818			$	354,650		$	259,342		$	164,149		$		9,254,852			$	20,248					$	15,325,049
		38,538		51,206		62,356		45,068		21,776		17,115						Criticized (accrual)			88,542					110,918				91,272			45,069				25,603			23,640			104,802			—							489,846
		16,039		3,250		11,174		—		5,622		11,903			—					—					47,988		Criticized (nonaccrual)			2,084			10,480				13			8,694			6,134			21,709							33					—		49,147

Total C&I	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			Total C&I			1,949,375			2,063,639				1,562,103			408,413			291,079			209,498				9,359,687				20,248			15,864,042

YTD gross write-offs (2)																									YTD gross write-offs (2)			350			28				161			15			6,606			1,684			—				—			8,844

CRE:	CRE:																								CRE:

Pass	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			Pass			2,066,361			4,080,810				2,259,761			1,396,114			1,649,168			2,722,697			101,811				63,050			14,339,772
Criticized (accrual)	Criticized (accrual)	1,324		111,024		124,132		38,478		91,981		33,005			1,455			16,761				418,160			Criticized (accrual)			36,899			14,717				20,307			100,871			24,544			129,658			—				—			326,996
Criticized (nonaccrual)	Criticized (nonaccrual)	—		4,126		—		—		—		6,909			—			—				11,035			Criticized (nonaccrual)			—			—				—			—			451			159			—				—			610

Subtotal CRE	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			Subtotal CRE			2,103,260			4,095,527				2,280,068			1,496,985			1,674,163			2,852,514			101,811				63,050			14,667,378

YTD gross write-offs (2)																									YTD gross write-offs (2)			—			—				—			—			—			119			—				—			119

Multifamily residential:	Multifamily residential:																								Multifamily residential:
Pass	Pass	1,365,406		933,013		659,063		555,270		364,552		635,396			10,417			—				4,523,117			Pass			478,895			1,495,620				814,391			620,117			503,791			893,282			7,658				1,288			4,815,042
Criticized (accrual)	Criticized (accrual)	—		—		—		711		—		35,300			—			—				36,011			Criticized (accrual)			—			—				53,555			—			696			26,124			—				—			80,375
Criticized (nonaccrual)	Criticized (nonaccrual)	—		—		—		—		—		174			—			—				174			Criticized (nonaccrual)			—			—				—			—			—			4,680			—				—			4,680

Subtotal multifamily residential	Subtotal multifamily residential	1,365,406		933,013		659,063		555,981		364,552		670,870			10,417			—				4,559,302			Subtotal multifamily residential			478,895			1,495,620				867,946			620,117			504,487			924,086			7,658				1,288			4,900,097
Construction and land:
Pass		151,429		254,059		61,231		60,919		2,784		233			—			—				530,655
Criticized (accrual)		—		—		4,477		—		21,762		—			—			—				26,239
Criticized (nonaccrual)		—		—		—		—		—		—			—			—				—
Subtotal construction and land		151,429		254,059		65,708		60,919		24,546		233			—			—				556,894
Total CRE		4,949,198		3,749,775		2,489,722		2,512,051		1,986,213		2,809,434			161,774			31,186				18,689,353
Total commercial		7,624,748		6,226,754		3,246,564		2,971,622		2,172,478		2,956,570			9,056,171			59,518				34,314,425
Consumer:
Residential mortgage:
Single-family residential:
Pass (2)		2,989,092		2,487,082		1,824,666		1,134,087		841,743		1,559,127			—			—				10,835,797
Criticized (accrual)		142		1,568		394		1,784		2,888		1,247			—			—				8,023
Criticized (nonaccrual) (2)		—		—		203		2,327		3,639		5,356			—			—				11,525
Subtotal single-family residential mortgage		2,989,234		2,488,650		1,825,263		1,138,198		848,270		1,565,730			—			—				10,855,345
HELOCs:
Pass		—		1,735		2,278		1,778		748		9,683			2,012,190			144,021				2,172,433
Criticized (accrual)		—		—		—		—		—		774			230			919				1,923
Criticized (nonaccrual)		—		—		2,910		—		1,017		3,011			300			3,330				10,568
Subtotal HELOCs		—		1,735		5,188		1,778		1,765		13,468			2,012,720			148,270				2,184,924
Total residential mortgage		2,989,234		2,490,385		1,830,451		1,139,976		850,035		1,579,198			2,012,720			148,270				13,040,269
Other consumer:
Pass		15,613		57		5,259		—		—		15,170			51,425			—				87,524
Criticized (accrual)		—		—		—		—		—		—			—			—				—
Criticized (nonaccrual)		—		—		—		—		—		—			37			—				37
Total other consumer		15,613		57		5,259		—		—		15,170			51,462			—				87,561
Total consumer		3,004,847		2,490,442		1,835,710		1,139,976		850,035		1,594,368			2,064,182			148,270				13,127,830
Total by Risk Rating:
Pass		10,573,552		8,546,022		4,876,628		4,023,230		2,873,828		4,436,144			11,020,867			186,778				46,537,049
Criticized (accrual)		40,004		163,798		191,359		86,041		138,407		87,441			99,149			17,680				823,879
Criticized (nonaccrual)		16,039		7,376		14,287		2,327		10,278		27,353			337			3,330				81,327

Total		$	10,629,595	$	8,717,196	$	5,082,274	$	4,111,598	$	3,022,513	$	4,550,938		$	11,120,353		$	207,788			$	47,442,255
Construction and land:																									Construction and land:
Pass																									Pass			151,175			354,415				222,474			37,732			812			5,475			14,966				—			787,049

Criticized (nonaccrual)																									Criticized (nonaccrual)			—			—				—			—			—			11,141			—				—			11,141
Subtotal construction and land																									Subtotal construction and land			151,175			354,415				222,474			37,732			812			16,616			14,966				—			798,190

YTD gross write-offs																									YTD gross write-offs			—			—				—			—			—			10,413			—				—			10,413

Total CRE																									Total CRE			2,733,330			5,945,562				3,370,488			2,154,834			2,179,462			3,793,216			124,435				64,338			20,365,665

YTD gross write-offs (2)																									YTD gross write-offs (2)			—			—				—			—			—			10,532			—				—			10,532

Total commercial																									Total commercial			$	4,682,705		$	8,009,201			$	4,932,591		$	2,563,247		$	2,470,541		$	4,002,714		$	9,484,122			$	84,586		$	36,229,707

YTD total commercial gross write-offs (2)																									YTD total commercial gross write-offs (2)			$	350		$	28			$	161		$	15		$	6,606		$	12,216		$	—			$	—		$	19,376

3840


																																	September 30, 2023

																																	Term Loans by Origination Year
($ in thousands)	($ in thousands)		December 31, 2021																											($ in thousands)			2023		2022			2021			2020		2019		Prior		Revolving Loans		Revolving Loans Converted to Term Loans (1)		Total
			Term Loans by Origination Year																			Revolving Loans			Revolving Loans Converted to Term Loans (1)			Total

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

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

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

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

Subtotal multifamily residential			1,026,295		726,772		689,174				441,663				315,120				456,057			20,524			—			3,675,605
Construction and land:
Pass			122,983		103,743		90,544				3,412				—				391			—			—			321,073
Criticized (accrual)			3,355		—		—				22,058				—				—			—			—			25,413
Criticized (nonaccrual)			—		—		—				—				—				—			—			—			—
Subtotal construction and land			126,338		103,743		90,544				25,470				—				391			—			—			346,486
Total CRE			4,020,231		2,924,218		3,019,414				2,351,691				1,465,405				2,240,598			149,192			6,389			16,177,138
Total commercial			8,046,445		4,177,452		3,721,211				2,590,956				1,622,234				2,486,373			7,647,844			35,231			30,327,746
Consumer:	Consumer:																													Consumer:
Residential mortgage:	Residential mortgage:																													Residential mortgage:
Single-family residential:	Single-family residential:																													Single-family residential:
Pass (2)			2,616,958		2,108,370		1,375,929				1,079,030				763,351				1,127,516			—			—			9,071,154
Pass (3)																														Pass (3)			$	2,400,448	$	3,390,708		$	2,321,209		$	1,633,316	$	1,010,859	$	2,040,678	$	—	$	—	$	12,797,218
Criticized (accrual)	Criticized (accrual)		—		—		458				2,813				1,899				3,212			—			—			8,382		Criticized (accrual)			844		1,983			844			1,499		964		9,060		—		—		15,194
Criticized (nonaccrual) (2)			—		—		1,751				3,889				4,295				4,231			—			—			14,166
Criticized (nonaccrual) (3)																														Criticized (nonaccrual) (3)			1,916		2,866			4,702			2,696		2,868		9,098		—		—		24,146
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		Subtotal single-family residential mortgage			2,403,208		3,395,557			2,326,755			1,637,511		1,014,691		2,058,836		—		—		12,836,558

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			182		1,828			5,736			4,318		1,963		13,821		1,611,319		118,088		1,757,255
Criticized (accrual)	Criticized (accrual)		—		—		—				—				—				371			7			708			1,086		Criticized (accrual)			741		401			62			—		353		1,649		2,039		963		6,208
Criticized (nonaccrual)	Criticized (nonaccrual)		—		—		52				188				3,543				973			—			3,688			8,444		Criticized (nonaccrual)			—		517			—			1,359		68		5,396		1,751		4,111		13,202
Subtotal HELOCs	Subtotal HELOCs		648		3,277		4,696				1,535				6,811				12,559			1,913,485			201,810			2,144,821		Subtotal HELOCs			923		2,746			5,798			5,677		2,384		20,866		1,615,109		123,162		1,776,665
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
YTD gross write-offs (2)																														YTD gross write-offs (2)			—		—			—			—		—		41		—		6		47

Total residential mortgage																														Total residential mortgage			2,404,131		3,398,303			2,332,553			1,643,188		1,017,075		2,079,702		1,615,109		123,162		14,613,223
YTD gross write-offs (2)																														YTD gross write-offs (2)			—		—			—			—		—		41		—		6		47

Other consumer:	Other consumer:																													Other consumer:
Pass	Pass		16,831		5,258		—				—				1,741				52,147			51,481			—			127,458		Pass			3,555		18,138			135			—		—		12,315		29,971		—		64,114
Criticized (accrual)	Criticized (accrual)		2		—		—				—				—				—			—			—			2		Criticized (accrual)			4		—			—			—		—		—		—		—		4
Criticized (nonaccrual)	Criticized (nonaccrual)		—		—		—				—				—				—			52			—			52		Criticized (nonaccrual)			—		—			—			—		—		—		136		—		136
Total other consumer	Total other consumer		16,833		5,258		—				—				1,741				52,147			51,533			—			127,512		Total other consumer			3,559		18,138			135			—		—		12,315		30,107		—		64,254

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			$	2,407,690	$	3,416,441		$	2,332,688		$	1,643,188	$	1,017,075	$	2,092,017	$	1,645,216	$	123,162	$	14,677,477
Total by Risk Rating:
YTD total consumer gross write-offs (2)																														YTD total consumer gross write-offs (2)			$	—	$	—		$	—		$	—	$	—	$	41	$	—	$	6	$	47

Total loans held-for-investment:																														Total loans held-for-investment:
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			$	6,959,365	$	11,283,760		$	7,094,524		$	4,046,247	$	3,425,935	$	5,852,417	$	11,020,577	$	202,674	$	49,885,499
Criticized (accrual)	Criticized (accrual)		159,448		120,557		82,632				119,845				48,919				94,146			115,174			708			741,429		Criticized (accrual)			127,030		128,019			166,040			147,439		52,160		190,131		106,841		963		918,623
Criticized (nonaccrual)	Criticized (nonaccrual)		33,806		2,792		2,316				4,594				21,891				22,488			52			3,688			91,627		Criticized (nonaccrual)			4,000		13,863			4,715			12,749		9,521		52,183		1,920		4,111		103,062

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			$	7,090,395	$	11,425,642		$	7,265,279		$	4,206,435	$	3,487,616	$	6,094,731	$	11,129,338	$	207,748	$	50,907,184
YTD total loans held-for-investment gross write-offs (2)																														YTD total loans held-for-investment gross write-offs (2)			$	350	$	28		$	161		$	15	$	6,606	$	12,257	$	—	$	6	$	19,423



	December 31, 2022


	Term Loans by Origination Year

($ in thousands)	2022		2021		2020		2019		2018		Prior		Revolving Loans		Revolving Loans Converted to Term Loans (1)		Total
Commercial:
C&I:
Pass	$	2,831,834	$	2,053,215	$	623,026	$	392,013	$	143,970	$	97,605	$	9,177,401	$	20,548	$	15,339,612
Criticized (accrual)	72,210		34,296		48,761		34,221		20,646		12,933		97,988		—		321,055
Criticized (nonaccrual)	18,722		4,797		10,733		243		5,618		10,315		—		—		50,428


Total C&I	2,922,766		2,092,308		682,520		426,477		170,234		120,853		9,275,389		20,548		15,711,095

CRE:
Pass	4,178,780		2,404,634		1,505,150		1,771,679		1,471,710		1,909,925		165,653		22,009		13,429,540
Criticized (accrual)	3,518		60,573		159,424		40,095		91,132		32,173		1,455		16,716		405,086
Criticized (nonaccrual)	—		19,044		—		—		—		4,200		—		—		23,244


Subtotal CRE	4,182,298		2,484,251		1,664,574		1,811,774		1,562,842		1,946,298		167,108		38,725		13,857,870
Multifamily residential:
Pass	1,500,289		892,598		641,677		519,614		350,044		625,293		11,325		—		4,540,840
Criticized (accrual)	—		—		—		707		4,276		27,076		—		—		32,059
Criticized (nonaccrual)	—		—		—		—		—		169		—		—		169


Subtotal multifamily residential	1,500,289		892,598		641,677		520,321		354,320		652,538		11,325		—		4,573,068
Construction and land:
Pass	288,394		276,839		31,804		3,104		2,805		231		9,073		—		612,250
Criticized (accrual)	4,504		—		—		—		21,666		—		—		—		26,170

Subtotal construction and land	292,898		276,839		31,804		3,104		24,471		231		9,073		—		638,420
Total CRE	5,975,485		3,653,688		2,338,055		2,335,199		1,941,633		2,599,067		187,506		38,725		19,069,358
Total commercial	$	8,898,251	$	5,745,996	$	3,020,575	$	2,761,676	$	2,111,867	$	2,719,920	$	9,462,895	$	59,273	$	34,780,453
Consumer:
Residential mortgage:
Single-family residential:
Pass (3)	$	3,548,894	$	2,453,717	$	1,775,696	$	1,101,965	$	817,164	$	1,500,359	$	—	$	—	$	11,197,795
Criticized (accrual)	—		1,275		785		1,463		4,352		3,935		—		—		11,810
Criticized (nonaccrual) (3)	141		—		204		3,202		1,721		8,154		—		—		13,422
Subtotal single-family residential mortgage	3,549,035		2,454,992		1,776,685		1,106,630		823,237		1,512,448		—		—		11,223,027
HELOCs:
Pass	520		3,583		7,336		3,203		525		8,960		1,958,692		127,401		2,110,220
Criticized (accrual)	—		6		—		—		—		—		4		1,079		1,089
Criticized (nonaccrual)	—		—		483		231		1,017		4,844		1,001		3,770		11,346
Subtotal HELOCs	520		3,589		7,819		3,434		1,542		13,804		1,959,697		132,250		2,122,655
Total residential mortgage	3,549,555		2,458,581		1,784,504		1,110,064		824,779		1,526,252		1,959,697		132,250		13,345,682
Other consumer:
Pass	17,088		137		5,356		—		—		15,808		37,804		—		76,193
Criticized (accrual)	3		—		—		—		—		—		—		—		3
Criticized (nonaccrual)	—		—		—		—		—		—		99		—		99
Total other consumer	17,091		137		5,356		—		—		15,808		37,903		—		76,295
Total consumer	$	3,566,646	$	2,458,718	$	1,789,860	$	1,110,064	$	824,779	$	1,542,060	$	1,997,600	$	132,250	$	13,421,977
Total by Risk Rating:
Pass	$	12,365,799	$	8,084,723	$	4,590,045	$	3,791,578	$	2,786,218	$	4,158,181	$	11,359,948	$	169,958	$	47,306,450
Criticized (accrual)	80,235		96,150		208,970		76,486		142,072		76,117		99,447		17,795		797,272
Criticized (nonaccrual)	18,863		23,841		11,420		3,676		8,356		27,682		1,100		3,770		98,708



Total	$	12,464,897	$	8,204,714	$	4,810,435	$	3,871,740	$	2,936,646	$	4,261,980	$	11,460,495	$	191,523	$	48,202,430

(1)$011.2 million and ~~$26.4~~$24.6 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,~~2023, respectively. In comparison, ~~$1.5 million~~$0 and ~~$6.5~~$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, 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~~$20.6 million and ~~$62.7~~$27.7 million of total consumer loans, comprised of HELOCs, were converted to term loans during three and nine months ended September 30, 2023, respectively. In comparison, $375 thousand of total consumer loans, comprised of HELOCs, converted to term loans during both the three and nine months ended September 30, ~~2021, respectively.~~2022.

(2)Excludes gross write-offs associated with loans the Company sold or settled.

(3)As of September 30, ~~2022~~2023 and December 31, ~~2021, $1.2 million~~2022, $638 thousand and ~~$1.6 million,~~$818 thousand, respectively, of nonaccrual loans whose payments ~~are~~were guaranteed by the Federal Housing Administration were classified with a “Pass” rating.

Nonaccrual and Past Due Loans

Loans that are 90 or more days past due are generally placed on nonaccrual status unless the loan is well-collateralized and in the process of collection. Loans that are less than 90 days past due but have identified deficiencies, such as when the full collection of principal or interest becomes uncertain, are also placed on nonaccrual status. The following tables present the aging analysis of ~~total~~ loans held-for-investment as of September 30, ~~2022~~2023 and December 31, ~~2021:~~2022:


($ in thousands)		September 30, 2022
															September 30, 2023
($ in thousands)	($ 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		($ 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:
C&I	C&I	$	15,556,124	$	20,877	$	83	$	20,960	$	47,988	$	15,625,072	C&I	$	15,781,468	$	33,195	$	232	$	33,427	$	49,147	$	15,864,042
CRE:	CRE:													CRE:
CRE	CRE	13,561,499		489		134		623		11,035		13,573,157		CRE	14,664,230		2,015		523		2,538		610		14,667,378
Multifamily residential	Multifamily residential	4,558,333		795		—		795		174		4,559,302		Multifamily residential	4,894,334		1,083		—		1,083		4,680		4,900,097
Construction and land	Construction and land	556,894		—		—		—		—		556,894		Construction and land	787,049		—		—		—		11,141		798,190
Total CRE	Total CRE	18,676,726		1,284		134		1,418		11,209		18,689,353		Total CRE	20,345,613		3,098		523		3,621		16,431		20,365,665
Total commercial	Total commercial	34,232,850		22,161		217		22,378		59,197		34,314,425		Total commercial	36,127,081		36,293		755		37,048		65,578		36,229,707
Consumer:	Consumer:													Consumer:
Residential mortgage:	Residential mortgage:													Residential mortgage:
Single-family residential	Single-family residential	10,820,365		13,914		8,325		22,239		12,741		10,855,345		Single-family residential	12,771,661		24,141		15,972		40,113		24,784		12,836,558
HELOCs	HELOCs	2,169,440		2,992		1,924		4,916		10,568		2,184,924		HELOCs	1,746,841		10,416		6,206		16,622		13,202		1,776,665
Total residential mortgage	Total residential mortgage	12,989,805		16,906		10,249		27,155		23,309		13,040,269		Total residential mortgage	14,518,502		34,557		22,178		56,735		37,986		14,613,223
Other consumer	Other consumer	87,444		43		37		80		37		87,561		Other consumer	63,992		109		17		126		136		64,254
Total consumer	Total consumer	13,077,249		16,949		10,286		27,235		23,346		13,127,830		Total consumer	14,582,494		34,666		22,195		56,861		38,122		14,677,477
Total	Total	$	47,310,099	$	39,110	$	10,503	$	49,613	$	82,543	$	47,442,255	Total	$	50,709,575	$	70,959	$	22,950	$	93,909	$	103,700	$	50,907,184


($ in thousands)		December 31, 2021
															December 31, 2022
($ in thousands)	($ 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		($ 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:
C&I	C&I	$	14,080,516	$	6,983	$	4,086	$	11,069	$	59,023	$	14,150,608	C&I	$	15,651,312	$	6,482	$	2,873	$	9,355	$	50,428	$	15,711,095
CRE:	CRE:													CRE:
CRE	CRE	12,141,827		3,722		—		3,722		9,498		12,155,047		CRE	13,820,441		14,185		—		14,185		23,244		13,857,870
Multifamily residential	Multifamily residential	3,669,819		5,320		22		5,342		444		3,675,605		Multifamily residential	4,571,899		678		322		1,000		169		4,573,068
Construction and land	Construction and land	346,486		—		—		—		—		346,486		Construction and land	638,420		—		—		—		—		638,420
Total CRE	Total CRE	16,158,132		9,042		22		9,064		9,942		16,177,138		Total CRE	19,030,760		14,863		322		15,185		23,413		19,069,358
Total commercial	Total commercial	30,238,648		16,025		4,108		20,133		68,965		30,327,746		Total commercial	34,682,072		21,345		3,195		24,540		73,841		34,780,453
Consumer:	Consumer:													Consumer:
Residential mortgage:	Residential mortgage:													Residential mortgage:
Single-family residential	Single-family residential	9,059,222		10,191		8,569		18,760		15,720		9,093,702		Single-family residential	11,183,134		13,523		12,130		25,653		14,240		11,223,027
HELOCs	HELOCs	2,130,523		4,776		1,078		5,854		8,444		2,144,821		HELOCs	2,102,523		7,700		1,086		8,786		11,346		2,122,655
Total residential mortgage	Total residential mortgage	11,189,745		14,967		9,647		24,614		24,164		11,238,523		Total residential mortgage	13,285,657		21,223		13,216		34,439		25,586		13,345,682
Other consumer	Other consumer	127,352		99		9		108		52		127,512		Other consumer	73,004		109		3,083		3,192		99		76,295
Total consumer	Total consumer	11,317,097		15,066		9,656		24,722		24,216		11,366,035		Total consumer	13,358,661		21,332		16,299		37,631		25,685		13,421,977
Total	Total	$	41,555,745	$	31,091	$	13,764	$	44,855	$	93,181	$	41,693,781	Total	$	48,040,733	$	42,677	$	19,494	$	62,171	$	99,526	$	48,202,430

4043

The following table presents the amortized cost of loans on nonaccrual status for which there was no related allowance for loan losses as of both September 30, ~~2022~~2023 and December 31, ~~2021.~~2022. Nonaccrual loans may not have an allowance for credit losses if the loan balances are well-secured by the collateral value and there is no loss expectation.


($ in thousands)	($ in thousands)	September 30, 2022		December 31, 2021		($ in thousands)	September 30, 2023		December 31, 2022

Commercial:	Commercial:					Commercial:
C&I	C&I	$	4,368	$	22,967	C&I	$	29,336	$	11,398

CRE	CRE	10,725		9,102		CRE	—		22,944

Multifamily residential						Multifamily residential	4,235		—
Construction and land						Construction and land	11,141		—

Total commercial	Total commercial	15,093		32,069		Total commercial	44,712		34,342
Consumer:	Consumer:					Consumer:

Single-family residential	Single-family residential	2,909		5,785		Single-family residential	6,681		2,998
HELOCs	HELOCs	7,609		5,033		HELOCs	8,483		7,245

Total consumer	Total consumer	10,518		10,818		Total consumer	15,164		10,243
Total nonaccrual loans with no related allowance for loan losses	Total nonaccrual loans with no related allowance for loan losses	$	25,611	$	42,887	Total nonaccrual loans with no related allowance for loan losses	$	59,876	$	44,585

Foreclosed Assets

The Company acquires assets from borrowers through loan restructurings, workouts, ~~and~~or 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 September 30, ~~2022,~~2023, compared with ~~$10.3 million~~$270 thousand as of December 31, ~~2021.~~2022. 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~~CFPB guidelines. The carrying value of the consumer real estate loans that were in an active or suspended foreclosure process was ~~$7.6~~$9.9 million and ~~$7.3~~$7.5 million as of September 30, ~~2022~~2023 and December 31, ~~2021,~~2022, respectively.

~~Troubled Debt Restructurings~~Loan Modifications to Borrowers Experiencing Financial Difficulty

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 whenEffective January 1, 2023, the Company adopted ASU 2022-02, which in part eliminated the accounting for ~~economic or legal reasons related~~TDR and enhanced disclosures requirements for loan modifications to ~~the borrower’s~~borrowers experiencing 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.difficulty. See Note 12 — Current Accounting Developments and Summary of Significant Accounting Policies — Significant Accounting Policies Update — ~~Troubled Debt Restructurings~~Loan Modifications to the Consolidated Financial Statements in ~~the Company’s 2021~~this Form ~~10-K~~10-Q for additional information. As part of the Company’s loss mitigation efforts, the Company may agree to modify the contractual terms of a loan to assist borrowers experiencing financial difficulty. The Company negotiates loan modifications on a case-by-case basis to achieve mutually agreeable terms that maximize loan collectability and meet the borrower’s financial needs. The Company considers various factors to identify borrowers experiencing financial difficulty. The primary factor for consumer borrowers is delinquency status. For commercial loan borrowers, these factors include credit risk ratings, the probability of loan risk rating downgrades, and overall risk profile changes. The modification may include, but is not limited to, payment deferrals, interest rate reductions, term extensions, principal forgiveness, or a combination of such modifications. Commercial loan borrowers that require immaterial modifications such as insignificant interest rate changes, short-term extensions (90 days or less) from the original maturity date, or temporary waivers or extensions of financial covenants which would not constitute material credit actions, are generally not considered to be experiencing financial difficulty and are not included in the disclosure. Insignificant payment deferrals (three months or less in the last 12 months) are also not included in the disclosure.

4144

The following tables present the amortized cost of loans that were modified during the three and nine months ended September 30, 2023 by loan class and modification type:



	Three Months Ended September 30, 2023
	Modification Type
($ in thousands)	Term Extension		Payment Delay		Combination: Term Extension/ Payment Delay		Combination: Rate Reduction/ Term Extension		Combination: Rate Reduction/ Payment Delay		Total		Modification as a % of Loan Class
Commercial:
C&I	$	1,682	$	11,603	$	—	$	—	$	—	$	13,285	0.08	%
CRE:
CRE	13,469		—		—		—		—		13,469		0.07	%



Total commercial	15,151		11,603		—		—		—		26,754
Consumer:
Residential mortgage:
Single-family residential:	—		2,944		1,260		—		—		4,204		0.03	%
HELOCs	—		—		334		—		183		517		0.03	%




Total consumer	—		2,944		1,594		—		183		4,721
Total	$	15,151	$	14,547	$	1,594	$	—	$	183	$	31,475



	Nine Months Ended September 30, 2023
	Modification Type
($ in thousands)	Term Extension		Payment Delay		Combination: Term Extension/ Payment Delay		Combination: Rate Reduction/ Term Extension		Combination: Rate Reduction/ Payment Delay		Total		Modification as a % of Loan Class
Commercial:
C&I	$	44,120	$	20,793	$	—	$	—	$	—	$	64,913	0.41	%
CRE:
CRE	13,979		—		—		32,724		—		46,703		0.23	%



Total commercial	58,099		20,793		—		32,724		—		111,616
Consumer:
Residential mortgage:
Single-family residential:	—		7,276		1,809		—		—		9,085		0.07	%
HELOCs	—		741		1,053		—		183		1,977		0.11	%




Total consumer	—		8,017		2,862		—		183		11,062
Total	$	58,099	$	28,810	$	2,862	$	32,724	$	183	$	122,678

The following tables present the financial effects of the loan modifications for the three and nine months ended September 30, 2023 by loan class and modification type:



	Financial Effects of Loan Modifications
	Three Months Ended September 30, 2023

($ in thousands)	Principal Forgiveness		Weighted-Average Interest Rate Reduction		Weighted-Average Term Extension (in years)	Weighted-Average Payment Delay (in years)
Commercial:
C&I	$	26	—	%	3.00	1.54

CRE	—		—	%	1.08	—




Consumer:

Single-family residential	—		—	%	10.00	0.96
HELOCs	—		0.50	%	16.68	0.71





Total	$	26



		Financial Effects of Loan Modifications
Nine months ended September 30, 2023

	($ in thousands)	Principal Forgiveness			Weighted-Average Interest Rate Reduction			Weighted-Average Term Extension (in years)	Weighted-Average Payment Delay (in years)
	Commercial:
	C&I	$	371	(1)	—	%	(1)	1.41	1.15

	CRE	—			3.00	%		2.09	—




	Consumer:

	Single-family residential	—			—	%		9.91	0.95
	HELOCs	—			0.50	%		15.36	0.52





	Total	$	371

(1)Comprised of C&I loans modified during the nine months ended September 30, 2023 where the interest rate is waived in addition to principal forgiveness. No recorded investment was outstanding as of September 30, 2023.

A modified loan may become delinquent and may result in a payment default (generally 90 days past due) subsequent to modification. There were no loans that received modifications which subsequently defaulted during the three and nine months ended September 30, 2023.

The Company closely monitors the performance of modified loans to borrowers experiencing financial difficulty to understand the effectiveness of its modification efforts. The following table presents the performance of loans that were modified as of September 30, 2023 since the adoption of ASU 2022-02 on January 1, 2023.



	Payment Performance as of September 30, 2023
($ in thousands)		Current		30 - 89 Days Past Due		90+ Days Past Due		Total
Commercial:
C&I		$	58,481	$	—	$	6,432	$	64,913
CRE:
CRE		46,703		—		—		46,703



Total commercial		105,184		—		6,432		111,616
Consumer:
Residential mortgage:
Single-family residential		7,430		1,190		465		9,085
HELOCs		1,236		741		—		1,977


Total consumer		8,666		1,931		465		11,062
Total		$	113,850	$	1,931	$	6,897	$	122,678

As of September 30, 2023, commitments to lend additional funds to borrowers whose loans were modified were $5.8 million.

Troubled Debt Restructurings Prior to the Adoption of ASU 2022-02

Prior to the adoption of ASU 2022-02, the Company accounted for a modification to the contractual terms of a loan that resulted in granting a concession to a borrower experiencing financial difficulties as a TDR. ASU 2022-02 eliminated TDR accounting prospectively for all restructurings occurring on or after January 1, 2023.

The following table presents the additions to TDRs for the three and nine months ended September 30, ~~2022 and 2021:~~2022:

($ in thousands) Loans Modified as TDRs During the Three Months Ended September 30,
2022 2021
Number
of
Loans Pre-
Modification
Outstanding
Recorded
Investment
Post-
Modification
Outstanding
Recorded
Investment (1)
Financial
Impact (2)
Number
of
Loans Pre-
Modification
Outstanding
Recorded
Investment
Post-
Modification
Outstanding
Recorded
Investment (1)
Financial
Impact (2)
Commercial:
C&I 1 $ 499 $ 496 $ 98 7 $ 26,248 $ 27,111 $ 5,688
CRE:
Multifamily residential — — — — 1 1,101 1,118 —
Total CRE — — — — 1 1,101 1,118 —
Total commercial 1 499 496 98 8 27,349 28,229 5,688
Consumer:
Residential mortgage:
HELOCs 1 62 69 2 — — — —
Total residential mortgage 1 62 69 2 — — — —
Total consumer 1 62 69 2 — — — —
Total 2 $ 561 $ 565 $ 100 8 $ 27,349 $ 28,229 $ 5,688


																	Loans Modified as TDRs
																	Three Months Ended September 30, 2022							Nine Months Ended September 30, 2022
($ in thousands)	($ in thousands)	Loans Modified as TDRs During the Nine Months Ended September 30,														($ in thousands)	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)
		2022							2021
		Number of Loans	Pre- Modification Outstanding Recorded Investment		Post- Modification Outstanding Recorded Investment (1)		Financial Impact (2)		Number of Loans	Pre- Modification Outstanding Recorded Investment		Post- Modification Outstanding Recorded Investment (1)		Financial Impact (2)
Commercial:	Commercial:															Commercial:
C&I	C&I	4	$	30,633	$	17,802	$	16,729	11	$	46,144	$	45,954	$	7,662	C&I	1	$	499	$	496	$	98	4	$	30,633	$	17,802	$	16,729
CRE:

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

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		Total commercial	1	499		496		98		4	30,633		17,802		16,729
Consumer:	Consumer:															Consumer:
Residential mortgage:	Residential mortgage:															Residential mortgage:

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

Total consumer	Total consumer	1	62		69		2		—	—		—		—		Total consumer	1	62		69		2		1	62		69		2
Total	Total	5	$	30,695	$	17,871	$	16,731	12	$	47,245	$	47,072	$	7,662	Total	2	$	561	$	565	$	100	5	$	30,695	$	17,871	$	16,731

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

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

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

($ in thousands) Modification Type During the Three Months Ended September 30,
2022 2021
Principal (1)
Interest Rate Reduction Other Total
Principal (1)
Interest Rate Reduction Other Total
Commercial:
C&I $ 496 $ — $ — $ 496 $ 27,111 $ — $ — $ 27,111
CRE:
Multifamily residential — — — — 1,118 — — 1,118
Total CRE — — — 1,118 — — 1,118
Total commercial 496 — — 496 28,229 — — 28,229
Consumer:
Residential mortgage:
HELOCs 69 — — 69 — — — —
Total residential mortgage 69 — — 69 — — — —
Total consumer 69 — — 69 — — — —
Total $ 565 $ — $ — $ 565 $ 28,229 $ — $ — $ 28,229


																						Modification Type
													Three Months Ended September 30, 2022					Nine Months Ended September 30, 2022
($ in thousands)	($ in thousands)	Modification Type During the Nine Months Ended September 30,										($ in thousands)	Principal									Other		Total	Principal (1)					Other (2)		Total
		2022		2021
		Principal (1)		Interest Rate Reduction		Other (2)		Total		Principal (1)				Interest Rate Reduction		Other			Total
Commercial:	Commercial:																				Commercial:
C&I	C&I	$	9,609	$	—	$	8,193	$	17,802	$	28,780			$	17,174	$	—		$	45,954	C&I	$	496			$	—	$	496	$	9,609		$	8,193	$	17,802
CRE:

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

Total CRE		—		—		—		—		1,118				—		—			1,118

Total commercial	Total commercial	9,609		—		8,193		17,802		29,898				17,174		—			47,072		Total commercial	496				—		496		9,609			8,193		17,802
Consumer:	Consumer:																				Consumer:
Residential mortgage:	Residential mortgage:																				Residential mortgage:

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

Total consumer	Total consumer	69		—		—		69		—				—		—			—		Total consumer	69				—		69		69			—		69
Total	Total	$	9,678	$	—	$	8,193	$	17,871	$	29,898			$	17,174	$	—		$	47,072	Total	$	565			$	—	$	565	$	9,678		$	8,193	$	17,871

(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.~~commitments.

4347

After a loan is modified as a TDR, the Company continues to monitor its performance under its most recent restructured terms. A TDR may become delinquent and result in payment default (generally 90 days past due) subsequent to restructuring. The following table presents information on loans that entered into default during the three and nine months ended 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
		Three Months Ended September 30,						Nine Months Ended September 30,
		2022			2021			2022			2021
															Loan Modified as TDRs that Subsequently Defaulted
															Three Months Ended September 30, 2022			Nine Months Ended September 30, 2022
($ in thousands)	($ in thousands)	Number of Loans	Recorded Investment		Number of Loans	Recorded Investment		Number of Loans	Recorded Investment		Number of Loans	Recorded Investment		($ in thousands)	Number of Loans	Recorded Investment		Number of Loans	Recorded Investment
														Commercial:
		—	$	—	—	$	—	2	$	13,901	1	$	11,431	C&I	—	$	—	2	$	13,901
														CRE:

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

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

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

As of ~~September 30, 2022 and~~ December 31, ~~2021,~~2022, the remaining lending commitments ~~to lend~~ to borrowers whose terms of their outstanding owed balances were modified as TDRs ~~were $6.4 million and $5.0 million, respectively.~~was $16.2 million.

Allowance for Credit Losses

The Company has ~~an allowance~~a current expected credit losses 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 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 the loans extends beyond the reasonable and supportable forecast period, the Company will consider historical experience or long-run macroeconomic trends over the remaining ~~lives~~life of the loans to estimate the allowance for loan losses.

There ~~were no changes to the overall model methodology. For the three and nine months ended September 30, 2022, there~~ were no changes to the reasonable and supportable forecast period, except to the C&I segment, and no changes to the reversion to the historical loss experience ~~method.~~method for the three and nine months ended September 30, 2023 and 2022. The reasonable and supportable forecast period for the C&I segment changed from 11 quarters to eight quarters due to model redevelopment during the third quarter of 2023.

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 percentage, size ~~and spread~~ at origination, delinquency status, sector and risk rating

~~Volatility Index~~

Unemployment rate, Gross Domestic Product (“GDP”), and ~~BBB yield to 10-year U.S. Treasury~~Two-Ten treasury 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”),~~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~~Loss rate approach

Immaterial ~~(1)~~(2)

(1)Macroeconomic variables were updated due to model redevelopment.

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

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

The Company’s C&I lifetime loss rate model estimates ~~credit losses by estimating a~~the loss rate expected over the life of a loan. This loss rate is applied to the amortized cost basis, excluding accrued interest receivable, to determine expected credit losses. The lifetime loss rate model’s reasonable and supportable period spans 11eight quarters, thereafter, immediately reverting to the historical average loss rate, expressed through the loan-level lifetime loss rate.

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

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

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

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

Qualitative Component — The Company 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 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 and associates;

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

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

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

The magnitude of the impact of these factors on the Company’s qualitative assessment of the allowance for credit losses changes from period to period according to changes made by management in its assessment of these factors. The extent to which these factors change may be 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~~or (3) the loan's observable market price. If an individually evaluated loan is determined to be collateral dependent, the Company applies the fair value of the collateral less costs to sell method. If an individually evaluated loan is determined not to be collateral dependent, the Company uses the present value of future cash flows or the observable market value of the loan.

•Collateral-Dependent Loans — The allowance of a collateral-dependent loan is limited to the difference between the recorded value and fair value of the collateral less cost of disposal or sale. As of September 30, ~~2022,~~2023, collateral-dependent commercial and consumer loans totaled ~~$36.4~~$18.1 million and ~~$13.6~~$15.2 million, respectively. In comparison, collateral-dependent commercial and consumer loans totaled ~~$37.0~~$47.4 million and ~~$14.0~~$13.4 million, respectively, as of December 31, ~~2021.~~2022. The collateral-dependent loans decreased from December 31, 2022, predominantly driven by the adoption of ASU 2022-02 related to the elimination of TDR guidance. The Company's collateral-dependent loans were secured by real estate. As of both September 30, ~~2022~~2023 and December 31, ~~2021,~~2022, the collateral value of the properties securing the collateral-dependent loans, net of selling costs, exceeded the recorded value of the loans.

The following tables summarize the ~~activities~~activity in the allowance for loan losses by portfolio segments for the three and nine months ended September 30, ~~2022~~2023 and ~~2021:~~2022:

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

($ in thousands) Three Months Ended September 30, 2021
Commercial Consumer Total
C&I CRE Residential Mortgage Other
Consumer
CRE Multifamily
Residential Construction
and Land Single-
Family
Residential HELOCs
Allowance for loan losses, beginning of period $ 362,528 $ 161,962 $ 21,925 $ 15,643 $ 16,530 $ 2,938 $ 4,198 $ 585,724
(Reversal of) provision for credit losses on loans (a) (23,364) 2,129 (2,660) 9,058 2,537 435 130 (11,735)
Gross charge-offs (1,154) (14,229) — (2,674) (912) — (10) (18,979)
Gross recoveries 4,203 187 652 267 137 19 — 5,465
Total net recoveries (charge-offs) 3,049 (14,042) 652 (2,407) (775) 19 (10) (13,514)
Foreign currency translation adjustment (71) — — — — — — (71)
Allowance for loan losses, end of period $ 342,142 $ 150,049 $ 19,917 $ 22,294 $ 18,292 $ 3,392 $ 4,318 $ 560,404


($ in thousands)			Nine Months Ended September 30, 2022
			Commercial												Consumer									Total
			C&I			CRE									Residential Mortgage						Other Consumer
																											Three Months Ended September 30, 2023
																													Commercial												Consumer
																																CRE									Residential Mortgage
($ in thousands)	($ in thousands)				C&I			CRE			Multifamily Residential			Construction and Land			Single- Family Residential			HELOCs			Other Consumer					Total	($ in thousands)		C&I			CRE			Multifamily Residential			Construction and Land			Single-Family Residential			HELOCs			Other Consumer			Total
						$	150,940		$	14,400		$	15,468		$	17,160		$	3,435					Allowance for loan losses, beginning of period					$	375,333		$	168,505		$	22,938		$	11,325		$	51,513		$	4,526		$	1,260		$	635,400
		(a)	37,867			(5,013)			16,680			(8,027)			10,569			59			(140)			Provision for (reversal of) credit losses on loans		(a)			13,006			12,952			772			8,302			3,353			(705)			456			38,136
			(18,322)			(1,357)			(5,947)			—			(775)			(193)			(90)			(26,684)			Gross charge-offs		(7,074)			(3,466)			—			(10,413)			—			(41)			(13)			(21,007)
Gross recoveries	Gross recoveries		16,688			731			547			65			309			23			—			18,363			Gross recoveries		2,279			49			452			2			64			15			—			2,861
Total net (charge-offs) recoveries	Total net (charge-offs) recoveries		(1,634)			(626)			(5,400)			65			(466)			(170)			(90)			(8,321)			Total net (charge-offs) recoveries		(4,795)			(3,417)			452			(10,411)			64			(26)			(13)			(18,146)
Foreign currency translation adjustment	Foreign currency translation adjustment		(2,736)			—			—			—			—			—			—			(2,736)			Foreign currency translation adjustment		133			—			—			—			—			—			—			133
Allowance for loan losses, end of period	Allowance for loan losses, end of period		$	371,749		$	145,301		$	25,680		$	7,506		$	27,263		$	3,324		$	1,694		$	582,517		Allowance for loan losses, end of period		$	383,677		$	178,040		$	24,162		$	9,216		$	54,930		$	3,795		$	1,703		$	655,523

4750


																																					Three Months Ended September 30, 2022
																																					Commercial								Consumer
																																							CRE						Residential Mortgage
($ in thousands)	($ in thousands)		Nine Months Ended September 30, 2021																														($ in thousands)				C&I		CRE		Multifamily Residential		Construction and Land		Single-Family Residential		HELOCs		Other Consumer		Total
			Commercial																Consumer												Total
			C&I				CRE												Residential Mortgage								Other Consumer
					CRE				Multifamily Residential				Construction and Land				Single- Family Residential				HELOCs
Allowance for loan losses, beginning of period	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	$	363,282	$	140,245	$	26,552	$	6,682	$	21,840	$	3,220	$	1,449	$	563,270
(Reversal of) provision for credit losses on loans		(a)	(42,127)				11,227				(9,436)				14,407				3,522				707				2,226				(19,474)
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		(20,162)				(25,558)				(130)				(2,954)				(1,046)				(45)				(43)				(49,938)		Gross charge-offs				(6,894)		(288)		(5,938)		—		(775)		—		(10)		(13,905)
Gross recoveries	Gross recoveries		6,301				589				1,910				602				296				40				5				9,743		Gross recoveries				7,172		45		19		7		16		5		—		7,264
Total net (charge-offs) recoveries			(13,861)				(24,969)				1,780				(2,352)				(750)				(5)				(38)				(40,195)
Total net recoveries (charge-offs)																																	Total net recoveries (charge-offs)				278		(243)		(5,919)		7		(759)		5		(10)		(6,641)
Foreign currency translation adjustment	Foreign currency translation adjustment		90				—				—				—				—				—				—				90		Foreign currency translation adjustment				(1,386)		—		—		—		—		—		—		(1,386)
Allowance for loan losses, end of period	Allowance for loan losses, end of period		$	342,142			$	150,049			$	19,917			$	22,294			$	18,292			$	3,392			$	4,318			$	560,404	Allowance for loan losses, end of period				$	371,749	$	145,301	$	25,680	$	7,506	$	27,263	$	3,324	$	1,694	$	582,517



		Nine Months Ended September 30, 2023
		Commercial								Consumer
				CRE						Residential Mortgage
($ in thousands)		C&I		CRE		Multifamily Residential		Construction and Land		Single-Family Residential		HELOCs		Other Consumer		Total
Allowance for loan losses, December 31, 2022		$	371,700	$	149,864	$	23,373	$	9,109	$	35,564	$	4,475	$	1,560	$	595,645
Impact of ASU 2022-02 adoption		5,683		337		6		—		1		1		—		6,028
Allowance for loan losses, beginning of period		377,383		150,201		23,379		9,109		35,565		4,476		1,560		601,673
Provision for (reversal of) credit losses on loans	(a)	17,587		33,313		303		10,507		19,296		(569)		244		80,681
Gross charge-offs		(16,309)		(5,838)		—		(10,413)		—		(138)		(101)		(32,799)
Gross recoveries		5,555		364		480		13		69		26		—		6,507
Total net (charge-offs) recoveries		(10,754)		(5,474)		480		(10,400)		69		(112)		(101)		(26,292)
Foreign currency translation adjustment		(539)		—		—		—		—		—		—		(539)
Allowance for loan losses, end of period		$	383,677	$	178,040	$	24,162	$	9,216	$	54,930	$	3,795	$	1,703	$	655,523



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

In addition to the allowance for loan losses, the Company maintains an allowance for unfunded credit commitments. The Company has three general areas for which it provides the allowance for unfunded credit commitments: (1) recourse obligations for loans sold, (2) letters of credit, and (3) unfunded lending commitments. The 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 1011 — Commitments and Contingencies to the Consolidated Financial Statements in this Form 10-Q for additional information related to unfunded credit commitments. The following table summarizes the activities in the allowance for unfunded credit commitments for the three and nine months ended September 30, ~~2022~~ 2023 and ~~2021~~:2022:


($ in thousands)			Three Months Ended September 30,				Nine Months Ended September 30,
													Three Months Ended September 30,				Nine Months Ended September 30,
($ in thousands)	($ in thousands)		2022		2021		2022		2021		($ in thousands)		2023		2022		2023		2022
											Unfunded credit facilities
Allowance for unfunded credit commitments, beginning of period	Allowance for unfunded credit commitments, beginning of period		$	24,304	$	26,300	$	27,514	$	33,577	Allowance for unfunded credit commitments, beginning of period		$	29,728	$	24,304	$	26,264	$	27,514

(Reversal of) provision for credit losses on unfunded credit commitments		(b)	(274)		1,735		(3,495)		(5,526)
Provision for (reversal of) credit losses on unfunded credit commitments											Provision for (reversal of) credit losses on unfunded credit commitments	(b)	3,864		(274)		7,319		(3,495)
Foreign currency translation adjustment	Foreign currency translation adjustment		11		1		22		(15)		Foreign currency translation adjustment		(3)		11		6		22
Allowance for unfunded credit commitments, end of period	Allowance for unfunded credit commitments, end of period		24,041		28,036		24,041		28,036		Allowance for unfunded credit commitments, end of period		$	33,589	$	24,041	$	33,589	$	24,041

Provision for (reversal of) credit losses		(a) + (b)	$	27,000	$	(10,000)	$	48,500	$	(25,000)
Provision for credit losses											Provision for credit losses	(a) + (b)	$	42,000	$	27,000	$	88,000	$	48,500

The allowance for credit losses was ~~$606.6~~$689.1 million as of September 30, ~~2022,~~2023, an increase of ~~$37.5~~$67.2 million, compared with ~~$569.1~~$621.9 million as of December 31, ~~2021.~~2022. The increase in the allowance for credit losses was primarily driven by net loan growth and economic forecasts that reflect continued caution given persistent high inflation, the ~~current economic outlook, which reflected ongoing concerns with inflation, global supply chain disruptions~~high interest rate environment and ~~rising interest rates, as well as loan growth.~~the CRE market outlook.

~~Loans Held-for-Sale~~

~~Loans held-for-sale consisted~~The Company considers multiple economic scenarios to develop the estimate of the allowance for loan losses. The scenarios may consist of a ~~$14.5 million multifamily residential loan~~baseline forecast representing management's view of the most likely outcome; downside and ~~$635 thousand in single-family residential loans~~upside scenarios that reflect possible worsening or improving economic conditions, respectively. The Company assigned the same weightings to its baseline, upside and downside scenarios as of September 30, ~~2022~~2023 and December 31, ~~2021, respectively. Refer to~~ ~~Note 1 — Summary~~2022. Management remains cautious regarding the economic outlook, given the high level of ~~Significant Accounting Policies— Significant Accounting Policies — Loans Held-for-Sale~~inflation, high interest rates, recent strain to the ~~Consolidated Financial Statements~~financial system, concerns on global oil prices, and ongoing global conflicts. The 2023 full year U.S. baseline GDP growth forecast as of September 30, 2023, has improved, compared with that as of December 31, 2022. However the 2024 full year U.S. baseline GDP growth forecast remained at 1.4%, compared with 2.0% forecasted as of December 31, 2022, as interest-sensitive spending weakens amid the elevated interest rate environment. The 2023 full year U.S. unemployment rate is forecasted to be at 3.7%, which improved from that forecasted as of December 31, 2022. Compared with the baseline scenario, the downside scenario assumes a recession in the ~~Company’s 2021 Form 10-K for additional details.~~fourth quarter of 2023 due to a combination of increasing supply shortages, geopolitical tensions, high inflation, and high interest rates. The upside scenario assumes the economy experiences full employment in the near-term, and stable financial markets boosting consumer confidence.

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~~loan financing 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, 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 nine months ended September 30, ~~2022~~2023 and ~~2021:~~2022:

($ in thousands) Three Months Ended September 30, 2022
Commercial Consumer Total
C&I CRE Residential Mortgage
CRE Multifamily
Residential Single-Family
Residential
Loans transferred from held-for-investment to held-for-sale (1)
$ 59,069 $ 33,616 $ 14,500 $ 5,178 $ 112,363
Sales (2)(3)(4)
$ 87,597 $ 33,616 $ — $ 5,952 $ 127,165
Purchases (5)
$ 56,507 $ — $ — $ 1,155 $ 57,662

($ in thousands) Three Months Ended September 30, 2021
Commercial Consumer Total
C&I CRE Residential Mortgage
CRE Construction
and Land Single-Family
Residential
Loans transferred from held-for-investment to held-for-sale (1)
$ 117,196 $ 24,120 $ 17,226 $ 5,238 $ 163,780
Sales (2)(3)(4)
$ 118,851 $ 24,120 $ 19,900 $ 6,959 $ 169,830
Purchases (5)
$ 65,354 $ — $ — $ 137,937 $ 203,291

($ in thousands) Nine Months Ended September 30, 2022
Commercial Consumer Total
C&I CRE Residential Mortgage
CRE Multifamily
Residential Single-Family
Residential
Loans transferred from held-for-investment to held-for-sale (1)
$ 378,841 $ 65,250 $ 14,500 $ 5,178 $ 463,769
Loans transferred from held-for-sale to held-for-investment $ — $ — $ — $ 631 $ 631
Sales (2)(3)(4)
$ 375,100 $ 65,250 $ — $ 6,403 $ 446,753
Purchases (5)
$ 361,169 $ — $ — $ 238,253 $ 599,422



	Three Months Ended September 30, 2023
	Commercial				Consumer
			CRE		Residential Mortgage
($ in thousands)	C&I		CRE		Construction and Land		Single-Family Residential		Total
Loans transferred from held-for-investment to held-for-sale (1)	$	201,299	$	25,890	$	—	$	—	$	227,189

Sales (2)(3)	$	199,511	$	29,357	$	—	$	—	$	228,868
Purchases (4)	$	19,588	$	—	$	—	$	140,771	$	160,359

4952


($ in thousands)		Nine Months Ended September 30, 2021
		Commercial												Consumer			Total
		C&I			CRE									Residential Mortgage
																				Three Months Ended September 30, 2022
																							Commercial														Consumer
																												CRE									Residential Mortgage
($ in thousands)	($ in thousands)			C&I			CRE			Multifamily Residential			Construction and Land			Single-Family Residential				Total		($ in thousands)				C&I					CRE				Multifamily Residential					Single-Family Residential				Total
					$	61,171		$	—		$	17,226		$	5,238				Loans transferred from held-for-investment to held-for-sale (1)					$	59,069				$	33,616			$	14,500				$	5,178			$	112,363

		$	329,233		$	61,171		$	—		$	19,900		$	17,123		$	427,427				Sales ~~(4)~~(3)				$	87,597				$	33,616			$	—				$	5,952			$	127,165
Purchases ~~(5)~~(4)	Purchases ~~(5)~~(4)	$	310,447		$	—		$	370		$	—		$	434,900		$	745,717			Purchases ~~(5)~~(4)			$	56,507				$	—			$	—				$	1,155			$	57,662



	Nine Months Ended September 30, 2023
	Commercial						Consumer
			CRE				Residential Mortgage
($ in thousands)	C&I		CRE		Construction and Land			Single-Family Residential		Total
Loans transferred from held-for-investment to held-for-sale (1)	$	469,571	$	29,490	$	8,154		$	—	$	507,215

Sales (2)(3)	$	491,178	$	32,957	$	8,154		$	—	$	532,289
Purchases (4)	$	80,550	$	—	$	—		$	351,880	$	432,430



	Nine Months Ended September 30, 2022
	Commercial						Consumer
			CRE				Residential Mortgage
($ in thousands)	C&I		CRE		Multifamily Residential			Single-Family Residential		Total
Loans transferred from held-for-investment to held-for-sale (1)	$	378,841	$	65,250	$	14,500		$	5,178	$	463,769
Loans transferred from held-for-sale to held-for-investment	$	—	$	—	$	—		$	631	$	631
Sales (2)(3)	$	375,100	$	65,250	$	—		$	6,403	$	446,753
Purchases (4)	$	361,169	$	—	$	—		$	238,253	$	599,422

(1)Includes write-downs of ~~$8.7~~$3.6 million and ~~$8.9~~$4.2 million to the allowance for loan losses related to loans transferred from held-for-investment to held-for-sale for the three and nine months ended September 30, ~~2022,~~2023, respectively, and ~~$3.6~~$8.7 million and ~~$4.9~~$8.9 million for the three and nine months ended September 30, ~~2021,~~2022, respectively.

(2)Includes originated loans sold of $204.1 million and $407.3 million for the three and nine months ended September 30, 2023, respectively, and $86.2 million and $253.9 million for the three and nine months ended September 30, 2022, ~~respectively, and $143.3 million and $341.9 million~~respectively. Originated loans sold consisted primarily of C&I loans for each of the three and nine months ended September 30, ~~2021, respectively. Originated loans sold consisted primarily of~~2023, and C&I and CRE loans for each of the three and nine months ended September 30, ~~2022 and 2021.~~2022.

(3)Includes ~~$40.9~~$24.7 million and ~~$192.9~~$125.0 million of purchased loans sold in the secondary market for the three and nine months ended September 30, ~~2022,~~2023, respectively, and ~~$26.5~~$40.9 million and ~~$85.5 million for the three and nine months ended September 30, 2021, respectively.~~

~~(4)Net gains on sales of loans were $2.1 million and $6.0~~$192.9 million for the three and nine months ended September 30, 2022, ~~respectively, and $3.3 million and $6.6 million for the three and nine months ended September 30, 2021,~~ respectively.

~~(5)~~(4)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 15-year minimum ~~15-year~~ compliance period. In addition to affordable housing projects, the Company 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 investments in historic tax credits promote the rehabilitation of historic buildings and economic revitalization of the surrounding areas.

For the Company’s accounting policies on tax credit investments, see
Note 1

— Summary of Significant Accounting Policies — Significant Accounting Policies — Securities andInvestments 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.~~

~~Investments in~~ Tax Credit and Other Investments, Net

to the Consolidated Financial Statements in the Company’s 2022 Form 10-K. For ~~investments in tax credit and other investments, the Company applies the equity or fair value method of accounting depending~~a discussion on the Company’s ~~ownership percentage. For equity investments without readily determinable fair values, the Company elected the measurement alternative under ASU 2016-01 valuing them at cost less~~ impairment ~~adjusted for observable price changes. Tax credit~~evaluation and ~~other investments are evaluated for possible OTTI on an annual basis or when events or changes in circumstances suggest that the carrying amount~~monitoring process 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~~refer to Note 3 — Fair Value Measurement and Fair Value of Financial Instruments — Investments in Qualified Affordable Housing Partnerships, Tax Credit and Other Investments, Net 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.~~10-Q.

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~~2023 and December 31, ~~2021:~~2022:


		September 30, 2022				December 31, 2021					September 30, 2023				December 31, 2022
($ in thousands)	($ in thousands)	Assets		Liabilities - Unfunded Commitments (1)		Assets		Liabilities - Unfunded Commitments (1)		($ in thousands)	Assets		Liabilities - Unfunded Commitments (1)		Assets		Liabilities - Unfunded Commitments (1)

Investments in qualified affordable housing partnerships, net	Investments in qualified affordable housing partnerships, net	$	400,871	$	254,700	$	289,741	$	146,152	Investments in qualified affordable housing partnerships, net	$	412,004	$	252,552	$	413,253	$	266,654
Investments in tax credit and other investments, net	Investments in tax credit and other investments, net	324,383		153,840		338,522		163,464		Investments in tax credit and other investments, net	489,555		345,072		350,003		185,797
Total	Total	$	725,254	$	408,540	$	628,263	$	309,616	Total	$	901,559	$	597,624	$	763,256	$	452,451

(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~~$23.6 million and ~~$26.6~~$24.0 million as of September 30, ~~2022~~2023 and December 31, ~~2021,~~2022, respectively. The Company invests in these mutual funds for CRA purposes. ~~These equity securities were measured at fair value with changes in fair value recorded in~~ ~~Other investment income~~ ~~on the Consolidated Statement of Income. Equity securities with readily determinable fair values were included in~~ ~~Investments in qualified affordable housing partnerships, tax credit and other investments, net~~ ~~on the Consolidated Balance Sheet.~~

The Company also held equity securities without readily determinable fair values totaling $34.6 million and $33.1 million as of September 30, 2022 and December 31, 2021, respectively, which were measured using the measurement alternative of cost less impairment and adjusted for observable price changes. For the three and nine months ended September 30, 2022 and 2021, 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 Consolidated Balance Sheet.~~

The following table presents additional information related to the investments in qualified affordable housing partnerships, tax credit and other investments for the three and nine months ended September 30, ~~2022~~2023 and ~~2021:~~2022:


											Three Months Ended September 30,				Nine Months Ended September 30,
($ in thousands)	($ in thousands)	Three Months Ended September 30,				Nine Months Ended September 30,				($ in thousands)		2023		2022			2023			2022
		2022		2021		2022		2021
Investments in qualified housing partnerships, net
Investments in qualified housing partnerships, net:													Investments in qualified housing partnerships, net:
Tax credits and other tax benefits recognized	Tax credits and other tax benefits recognized	$	13,180	$	11,361	$	38,764	$	34,083				Tax credits and other tax benefits recognized		$	15,660		$	13,180		$	47,058	$	38,764
Amortization expense included in income tax expense	Amortization expense included in income tax expense	$	10,431	$	9,147	$	30,498	$	25,595				Amortization expense included in income tax expense		$	11,587		$	10,431		$	34,759	$	30,498
Investments in tax credit and other investments, net
Amortization of tax credit and other investments		$	19,874	$	38,008	$	48,753	$	90,657

Investments in tax credit and other investments, net:													Investments in tax credit and other investments, net:

Amortization of tax credit and other investments (1)													Amortization of tax credit and other investments (1)		$	49,694		$	19,874		$	115,718	$	48,753
Unrealized losses on equity securities with readily determinable values	Unrealized losses on equity securities with readily determinable values	$	(1,014)	$	(88)	$	(2,958)	$	(515)				Unrealized losses on equity securities with readily determinable values		$	(674)		$	(1,014)		$	(682)	$	(2,958)
Impairment recoveries (1)		$	—	$	—	$	—	$	1,250

(1)~~For~~Includes net impairment losses of $790 thousand for the three months ended September 30, 2023, and net impairment recoveries of $831 thousand for the nine months ended September 30, ~~2021,~~2023. The activity for both periods was primarily related to historic tax credits. In comparison, there were no impairment recoveries ~~were related to one historic tax credit and two energy tax credits.~~or losses for three or nine months ended September 30, 2022.

Variable Interest Entities

The majority of both the investments in affordable housing partnerships and tax credit and other investments discussed above are variable interest entities ~~(“VIEs”)~~ where the Company is a limited partner in these partnerships, and an unrelated third party is typically the general partner or managing member who has control over the significant activities of these investments. While the Company’s interest in some of the investments may exceed 50% of the outstanding equity interests, the Company does not consolidate these ~~structures~~investments due to the general partner’s or managing member’s ability to manage the entity, which is indicative of the general partner’s or managing member’s power over the entity. The Company’s maximum exposure to loss in connection with these partnerships consists of the unamortized investment balance and any tax credits claimed that may become subject to recapture.

51Other Investments

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~~acquired a 49.99% equity interest in Rayliant during the ~~collateral~~third quarter of 2023. Rayliant is an asset manager specializing in asset allocation and investment in developed and emerging markets. This investment will expand the Bank’s wealth management business and provide its customers with additional access to institutional-quality investment management products and services. The investment in Rayliant is accounted for under the equity method of ~~a CLO that closed~~accounting and is included in ~~2019 and subsequently reassigned its portfolio manager responsibilities in 2020.~~Other assets on the Consolidated Balance Sheet. The Company ~~retained~~paid $94.7 million in cash and granted PRSUs that are contingently issuable at vesting. The PRSUs vest on September 1, 2028 into a variable number of the ~~top three~~Company’s shares of common stock, ranging from 20% to 200% of the 349,138 shares initially underlying such PRSUs, based on Rayliant’s achievement of certain financial performance targets during the future performance period. For additional information related to these equity contracts accounted for as derivative liability, refer to 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. The carrying value of the Company's investment ~~grade-rated tranches issued by the CLO, for which the total carrying amount~~in Rayliant was ~~$281.2 million and $291.7~~$110.9 million as of September 30, ~~2022~~2023, in which $100.7 million comprised of equity method goodwill.

The Company also held equity securities without readily determinable fair values totaling $148.0 million and $36.5 million as of September 30, 2023 and December 31, ~~2021,~~2022, respectively. These equity securities without readily determinable fair values are included in Other Assets on the Consolidated Balance Sheet.

Note 9 — Goodwill

Total goodwill was $465.7 million as of both September 30, ~~2022~~2023 and December 31, ~~2021.~~2022. The Company’s goodwill impairment test is performed annually, as of December 31, or more frequently ifas 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~~test as of December 31, ~~2021,~~2022, 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~~2022 Form 10-K. The Company performed an analysis of goodwill during the third quarter of 2023 that consisted of a qualitative assessment to determine if it is more likely than not that the carrying values of each reporting unit exceeded their estimated fair values. The results of this analysis indicated that no impairment of goodwill existed as of September 30, 2023.

Note 10 — Short-Term Borrowings and Long-Term Debt

Short-Term Borrowings — Bank Term Funding Program

As of September 30, 2023, the Company’s short-term borrowings consisted of funds from the Bank Term Funding Program (“BTFP”). In March 2023, the Federal Reserve announced the creation of the BTFP, which was designed to provide additional liquidity to U.S. depository institutions. The advances will be limited to the par value of eligible collateral pledged by the borrower, for a term of up to one year. U.S. federally insured depository institutions can request advances under the BTFP until at least March 11, 2024.

The Company pledged eligible U.S. government agency and U.S. government-sponsored enterprise debt and mortgage-backed securities, and U.S. Treasury securities as collateral for the borrowings under the BTFP. As of September 30, 2023, the carrying amount of the Company’s pledged securities to the BTFP totaled $4.34 billion with a remaining borrowing capacity of $238.3 million. In comparison, there were no short-term borrowings as of December 31, 2022. The following table presents details of the Company’s short-term borrowings as of September 30, 2023.

September 30, 2023

($ in thousands)

Interest Rate

Maturity Date

Amount

Short-term borrowings

4.37%

3/19/2024

4,500,000

Long-Term Debt — Junior Subordinated Debt

Long-term debt totaled $148.2 million as of September 30, 2023 and $148.0 million as of December 31, 2022. During the third quarter of 2023, all junior subordinated debt that referenced London Interbank Offered Rate have transitioned to a Secured Overnight Financing Rate-based replacement rate plus the applicable stated margin. The junior subordinated debt had coupon interest rates ranging from 7.02% to 7.57% as of September 30, 2023 and 6.12% to 6.67% as of December 31, 2022. The junior subordinated debt had remaining maturities ranging between 11.1 years and 14.0 years as of September 30, 2023. For additional information on the junior subordinated debt, refer to Note 10— Federal Home Loan Bank Advances and Long-Term Debt to the Consolidated Financial Statements in the Company’s 2022 ~~the Company reviewed recent market movements, as well as its business performance and market capitalization, and concluded that goodwill was not impaired.~~Form 10-K.

Note 1011 — Commitments and Contingencies

Commitments to Extend Credit — In the normal course of ~~doing~~ business, the Company provides 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 September 30, ~~2022~~2023 and December 31, ~~2021:~~2022:


		September 30, 2022										December 31, 2021			September 30, 2023										December 31, 2022
($ 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	$	2,961,900	$	2,103,347	$	1,130,044	$	1,614,124	$	7,809,415	$	6,911,398	Loan commitments	$	4,650,619	$	3,689,245	$	1,037,254	$	139,325	$	9,516,443	$	8,211,571
Commercial letters of credit and SBLCs	Commercial letters of credit and SBLCs	689,949		438,336		55,015		1,085,513		2,268,813		2,221,699		Commercial letters of credit and SBLCs	875,757		405,377		122,255		1,124,405		2,527,794		2,291,966
Total	Total	$	3,651,849	$	2,541,683	$	1,185,059	$	2,699,637	$	10,078,228	$	9,133,097	Total	$	5,526,376	$	4,094,622	$	1,159,509	$	1,263,730	$	12,044,237	$	10,503,537

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.~~commitment fees. Since many of the commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future funding requirements.

Commercial letters of credit are issued to facilitate domestic and foreign trade transactions, while SBLCs are generally contingent upon the failure of the customers to perform according to the terms of the underlying contract with the third party. As a result, the total contractual amounts do not necessarily represent future funding requirements. The Company’s historical experience is that SBLCs typically expire without being funded. Additionally, in many cases, the Company holds collateral in various forms against these SBLCs. As part of its risk management activities, the Company monitors the creditworthiness of customers in conjunction with its SBLC exposure. Customers are obligated to reimburse the Company for any payment made on the customers’ behalf. If the customers fail to pay, the Company would, as applicable, liquidate the collateral and/or offset existing accounts. As of September 30, ~~2022,~~2023, total letters of credit of ~~$2.27~~$2.53 billion consisted of SBLCs of ~~$2.23~~$2.50 billion and commercial letters of credit of ~~$39.4~~$32.7 million. AsIn comparison, as of December 31, ~~2021,~~2022, total letters of credit of ~~$2.22~~$2.29 billion consisted of SBLCs of ~~$2.14~~$2.27 billion and commercial letters of credit of ~~$78.9~~$21.6 million. As of both September 30, ~~2022~~2023 and December 31, ~~2021,~~2022, substantially all SBLCs were ~~rated~~graded as “Pass” byutilizing the Bank’s internal credit risk rating system.

5256

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, personal 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 ~~$24.0~~$33.6 million and ~~$27.5~~$26.2 million as of September 30, ~~2022~~2023 and December 31, ~~2021,~~2022, 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 September 30, ~~2022~~2023 and December 31, ~~2021:~~2022:


($ in thousands)		Maximum Potential Future Payments										Carrying Value
		September 30, 2022								December 31, 2021		September 30, 2022		December 31, 2021
																			Maximum Potential Future Payments										Carrying Value
																			September 30, 2023								December 31, 2022		September 30, 2023		December 31, 2022
($ in thousands)	($ in thousands)	Expire in One Year or Less		Expire After One Year Through Three Years		Expire After Three Years Through Five Years		Expire After Five Years		Total		Total		Total		Total		($ in thousands)	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
		$	25	$	126	$	31	$	6,752	$	6,934	$	7,926	$	6,934	$	7,926	Single-family residential loans sold or securitized with recourse	$	28	$	23	$	28	$	6,013	$	6,092	$	6,781	$	6,092	$	6,781
		—		—		—		14,996		14,996		14,996		21,624		23,169		Multifamily residential loans sold or securitized with recourse	—		—		66		14,930		14,996		14,996		19,887		21,320
Total	Total	$	25	$	126	$	31	$	21,748	$	21,930	$	22,922	$	28,558	$	31,095	Total	$	28	$	23	$	94	$	20,943	$	21,088	$	21,777	$	25,979	$	28,101

The Company’s recourse reserve related to these guarantees is included in the allowance for unfunded credit commitments and totaled ~~$36~~$35 thousand and ~~$29~~$37 thousand as of September 30, ~~2022~~2023 and December 31, ~~2021,~~2022, 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~~While it is impossible 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~~ascertain the ultimate resolution or range of financial liability, based on information known to the ~~Consolidated Financial Statements in this Form 10-Q. As~~Company as of September 30, ~~2022 and December 31, 2021, these commitments were $408.5 million and $309.6 million, respectively. These commitments are included~~2023, the Company does not believe there is any pending legal proceeding to which the Company is a party that, individually or in ~~Accrued expenses and other liabilities~~the aggregate, would reasonably be expected to have a material adverse effect on the ~~Consolidated Balance Sheet.~~Company’s financial condition. In light of the inherent uncertainty in legal proceedings, however, there can be no assurance that the ultimate resolution will not exceed established reserves and it is possible that the outcome of a particular matter, or a combination of matters, may be material to the Company’s financial condition for a particular period, depending upon the size of the loss and the Company’s income for that particular period.

Note 1112 — Stock Compensation Plans

Pursuant to the Company’s 2021 Stock Incentive Plan, as amended, the Company may issue ~~stocks,~~stock, stock options, restricted stock, restricted stock units (“RSUs”) including performance-based RSUs, stock purchase warrants, stock appreciation rights, phantom stock and dividend equivalents to eligible employees, non-employee directors, consultants, and other service providers of the Company and its subsidiaries. The Company has granted RSUs as its primary incentive awards. There were no outstanding awards other than RSUs as of both September 30, ~~2022~~2023 and December 31, ~~2021.~~2022.

The following table presents a summary of the total share-based compensation expense and the related net tax (deficiencies) benefits associated with the Company’s various employee share-based compensation plans for the three and nine months ended September 30, ~~2022~~2023 and ~~2021:~~2022:


											Three Months Ended September 30,				Nine Months Ended September 30,
($ in thousands)	($ in thousands)	Three Months Ended September 30,				Nine Months Ended September 30,				($ in thousands)	2023		2022		2023		2022
		2022		2021		2022		2021
Stock compensation costs	Stock compensation costs	$	12,329	$	8,022	$	29,338	$	24,047	Stock compensation costs	$	9,495	$	12,329	$	29,934	$	29,338
Related net tax benefits for stock compensation plans		$	1	$	42	$	5,269	$	1,699
Related net tax (deficiencies) benefits for stock compensation plans										Related net tax (deficiencies) benefits for stock compensation plans	$	(18)	$	1	$	8,797	$	5,269

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 percent to a maximum of 200% of the granted number of awards based on the Company’s achievement of specified performance criteria over a performance period of three years.

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 For information 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~~2022 Form ~~10-K for additional information.~~10-K.

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

The following table presents a summary of the activities for the Company’s time-based and performance-based RSUs that will be settled in shares for the nine months ended September 30, ~~2022.~~2023. The number of performance-based RSUs stated below reflects the number of awards granted on the grant date.

Time-Based RSUs Performance-Based RSUs
Shares Weighted-
Average
Grant Date
Fair Value Shares Weighted-
Average
Grant Date
Fair Value
Outstanding, January 1, 2022 1,329,946 $ 52.65 369,731 $ 54.28
Modified from cash-settled RSUs 31,523 77.28 — —
Granted 430,815 78.42 91,874 77.91
Vested (371,032) 53.12 (125,213) 54.64
Forfeited (106,562) 61.76 — —
Outstanding, September 30, 2022 1,314,690 $ 60.81 336,392 $ 60.60

The following table presents a summary of the activities for the Company’s time-based RSUs that are cash-settled for the nine months ended September 30, 2022. During the nine months ended 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, September 30, 2022~~

—





	Time-Based RSUs	Performance-Based RSUs
		Shares	Weighted-Average Grant Date Fair Value		Shares	Weighted-Average Grant Date Fair Value
Outstanding, January 1, 2023		1,296,866	$	60.77	332,510	$	60.40

Granted		500,180	73.73		96,271	57.50
Vested		(522,029)	40.79		(152,558)	39.39
Forfeited		(53,379)	74.00		—	—
Outstanding, September 30, 2023		1,221,638	$	74.04	276,223	$	70.99

As of September 30, ~~2022,~~2023, there were ~~$28.5~~$32.2 million ~~and $17.0 million~~ of ~~total~~ unrecognized compensation costs related to unvested time-based ~~and performance-based~~ RSUs ~~respectively. Both of these costs are~~ expected to be recognized over a weighted-average period of ~~1.92~~1.9 years, and ~~1.93 years, respectively.~~$17.9 million of unrecognized compensation costs related to unvested performance-based RSUs expected to be recognized over a weighted-average period of 1.9 years.

Note 1213 — Stockholders’ Equity and Earnings Per Share

The following table presents the basic and diluted EPS calculations for the three and nine months ended September 30, ~~2022~~2023 and ~~2021.~~2022. 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 ofin the Company’s ~~2021~~2022 Form 10-K.


($ and shares in thousands, except per share data)	($ and shares in thousands, except per share data)	Three Months Ended September 30,				Nine Months Ended September 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)			2023			2022			2023			2022
Basic:	Basic:
Net income	Net income	$	295,339	$	225,449	$	791,320	$	655,185				Net income		$	287,738		$	295,339		$	922,208		$	791,320
Weighted-average number of shares outstanding	Weighted-average number of shares outstanding	140,917		141,880		141,453		141,799					Weighted-average number of shares outstanding		141,485			140,917			141,356			141,453
Basic EPS	Basic EPS	$	2.10	$	1.59	$	5.59	$	4.62				Basic EPS		$	2.03		$	2.10		$	6.52		$	5.59
Diluted:	Diluted:												Diluted:
Net income	Net income	$	295,339	$	225,449	$	791,320	$	655,185				Net income		$	287,738		$	295,339		$	922,208		$	791,320

Weighted-average number of shares outstanding	Weighted-average number of shares outstanding	140,917		141,880		141,453		141,799					Weighted-average number of shares outstanding		141,485			140,917			141,356			141,453
Add: Dilutive impact of unvested RSUs	Add: Dilutive impact of unvested RSUs	1,094		1,263		1,148		1,252					Add: Dilutive impact of unvested RSUs		637			1,094			688			1,148
Diluted weighted-average number of shares outstanding	Diluted weighted-average number of shares outstanding	142,011		143,143		142,601		143,051					Diluted weighted-average number of shares outstanding		142,122			142,011			142,044			142,601
Diluted EPS	Diluted EPS	$	2.08	$	1.57	$	5.55	$	4.58				Diluted EPS		$	2.02		$	2.08		$	6.49		$	5.55

For the three and nine months ended September 30, ~~2022,~~2023, approximately 61575 thousand and 58350 thousand weighted-average shares of anti-dilutive RSUs, respectively, were excluded from the diluted EPS computations. In comparison, ~~two~~approximately 61 thousand and ~~six~~58 thousand weighted-average shares of anti-dilutive RSUs were excluded from the diluted EPS computations for the three and nine months ended September 30, ~~2021,~~2022, 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. For the three months ended 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.

Note 1314 — Accumulated Other Comprehensive Income (Loss)

The following tables present the changes in the components of AOCI balances for the three and nine months ended September 30, ~~2022~~2023 and ~~2021:~~2022:


($ in thousands)	($ in thousands)	Debt Securities			Cash Flow Hedges		Foreign Currency Translation Adjustments (1)		Total		($ in thousands)	Debt Securities (1)		Cash Flow Hedges		Foreign Currency Translation Adjustments (2)		Total
Balance, July 1, 2021		$	(8,152)		$	(730)	$	(5,807)	$	(14,689)
Net unrealized losses arising during the period		(40,928)			(121)		(1,752)		(42,801)
Amounts reclassified from AOCI		(250)			172		—		(78)
Changes, net of tax		(41,178)			51		(1,752)		(42,879)
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)	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)		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		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)		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)	Balance, September 30, 2022	$	(712,970)	$	(64,115)	$	(22,947)	$	(800,032)

Balance, July 1, 2023											Balance, July 1, 2023	$	(681,536)	$	(74,805)	$	(25,591)	$	(781,932)
Net unrealized (losses) gains arising during the period											Net unrealized (losses) gains arising during the period	(72,691)		(44,347)		3,710		(113,328)
Amounts reclassified from AOCI											Amounts reclassified from AOCI	2,870		17,013		—		19,883
Changes, net of tax											Changes, net of tax	(69,821)		(27,334)		3,710		(93,445)
Balance, September 30, 2023											Balance, September 30, 2023	$	(751,357)	$	(102,139)	$	(21,881)	$	(875,377)

($ in thousands)
Debt
Securities Cash
Flow
Hedges
Foreign
Currency
Translation
Adjustments (1)
Total
Balance, January 1, 2021 $ 52,247 $ (1,230) $ (6,692) $ 44,325
Net unrealized (losses) gains arising during the period (100,747) 108 (867) (101,506)
Amounts reclassified from AOCI (830) 443 — (387)
Changes, net of tax (101,577) 551 (867) (101,893)
Balance, September 30, 2021 $ (49,330) $ (679) $ (7,559) $ (57,568)
Balance, January 1, 2022 $ (85,703) $ 257 $ (4,935) $ (90,381)
Net unrealized losses arising during the period (635,664) (63,232) (18,012) (716,908)
Amounts reclassified from AOCI 8,397 (1,140) — 7,257
Changes, net of tax (627,267) (64,372) (18,012) (709,651)
Balance, September 30, 2022 $ (712,970) (2) $ (64,115) $ (22,947) $ (800,032)



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

Balance, January 1, 2023	$	(694,815)	$	(49,531)	$	(21,283)	$	(765,629)
Net unrealized losses arising during the period	(72,034)		(91,468)		(598)		(164,100)
Amounts reclassified from AOCI	15,492		38,860		—		54,352
Changes, net of tax	(56,542)		(52,608)		(598)		(109,748)
Balance, September 30, 2023	$	(751,357)	$	(102,139)	$	(21,881)	$	(875,377)

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

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

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

The following tables present the components of other comprehensive income (loss), reclassifications to net income and the related tax effects for the three and nine months ended September 30, ~~2022~~2023 and ~~2021:~~2022:


															Three Months Ended September 30,
															2023						2022
($ in thousands)	($ in thousands)	Three Months Ended September 30,												($ in thousands)	Before-Tax		Tax Effect		Net-of-Tax		Before-Tax		Tax Effect		Net-of-Tax
		2022						2021
		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		$	(229,246)	$	67,801	$	(161,445)	$	(58,138)	$	17,210	$	(40,928)
Net unrealized losses on AFS debt securities arising during the period														Net unrealized losses on AFS debt securities arising during the period	$	(103,183)	$	30,492	$	(72,691)	$	(229,246)	$	67,801	$	(161,445)
Reclassification adjustments:	Reclassification adjustments:													Reclassification adjustments:
Net realized gains reclassified into net income (1)		—		—		—		(354)		104		(250)
Amortization of unrealized losses on transferred securities (2)		4,623		(1,367)		3,256		—		—		—

Amortization of unrealized losses on transferred debt securities (1)														Amortization of unrealized losses on transferred debt securities (1)	4,075		(1,205)		2,870		4,623		(1,367)		3,256
Net change	Net change	(224,623)		66,434		(158,189)		(58,492)		17,314		(41,178)		Net change	(99,108)		29,287		(69,821)		(224,623)		66,434		(158,189)
Cash flow hedges:	Cash flow hedges:													Cash flow hedges:
Net unrealized losses arising during the period	Net unrealized losses arising during the period	(48,325)		13,902		(34,423)		(170)		49		(121)		Net unrealized losses arising during the period	(62,715)		18,368		(44,347)		(48,325)		13,902		(34,423)
Net realized losses reclassified into net income ~~(3)~~(2)	Net realized losses reclassified into net income ~~(3)~~(2)	1,619		(465)		1,154		241		(69)		172		Net realized losses reclassified into net income ~~(3)~~(2)	24,059		(7,046)		17,013		1,619		(465)		1,154
Net change	Net change	(46,706)		13,437		(33,269)		71		(20)		51		Net change	(38,656)		11,322		(27,334)		(46,706)		13,437		(33,269)
Foreign currency translation adjustments, net of hedges:	Foreign currency translation adjustments, net of hedges:													Foreign currency translation adjustments, net of hedges:
Net unrealized losses arising during the period		(6,676)		(1,250)		(7,926)		(1,878)		126		(1,752)
Net unrealized gains (losses) arising during the period														Net unrealized gains (losses) arising during the period	3,728		(18)		3,710		(6,676)		(1,250)		(7,926)
Net change	Net change	(6,676)		(1,250)		(7,926)		(1,878)		126		(1,752)		Net change	3,728		(18)		3,710		(6,676)		(1,250)		(7,926)
Other comprehensive loss	Other comprehensive loss	$	(278,005)	$	78,621	$	(199,384)	$	(60,299)	$	17,420	$	(42,879)	Other comprehensive loss	$	(134,036)	$	40,591	$	(93,445)	$	(278,005)	$	78,621	$	(199,384)

($ in thousands) Nine Months Ended September 30,
2022 2021
Before-Tax Tax Effect Net-of-Tax Before-Tax Tax Effect Net-of-Tax
Debt securities:
Net unrealized losses arising during the period $ (902,548) $ 266,884 $ (635,664) $ (143,131) $ 42,384 $ (100,747)
Reclassification adjustments:
Net realized gains reclassified into net income (1)
(1,306) 386 (920) (1,178) 348 (830)
Amortization of unrealized losses on transferred securities (2)
13,228 (3,911) 9,317 — — —
Net change (890,626) 263,359 (627,267) (144,309) 42,732 (101,577)
Cash flow hedges:
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)
(1,601) 461 (1,140) 619 (176) 443
Net change (90,372) 26,000 (64,372) 769 (218) 551
Foreign currency translation adjustments, net of hedges:
Net unrealized losses arising during the period (16,276) (1,736) (18,012) (1,603) 736 (867)
Net change (16,276) (1,736) (18,012) (1,603) 736 (867)
Other comprehensive loss $ (997,274) $ 287,623 $ (709,651) $ (145,143) $ 43,250 $ (101,893)



	Nine Months Ended September 30,
	2023							2022
($ in thousands)	Before-Tax			Tax Effect		Net-of-Tax		Before-Tax		Tax Effect		Net-of-Tax
Debt securities:
Net unrealized losses on AFS debt securities arising during the period	$	(102,262)		$	30,228	$	(72,034)	$	(742,132)	$	219,459	$	(522,673)
Unrealized losses on debt securities transferred from AFS to HTM	—			—		—		(160,416)		47,425		(112,991)
Reclassification adjustments:
Net realized losses (gains) on AFS debt securities reclassified into net income (3)	10,000		(4)	(2,956)		7,044		(1,306)		386		(920)
Amortization of unrealized losses on transferred debt securities (1)	11,994			(3,546)		8,448		13,228		(3,911)		9,317
Net change	(80,268)			23,726		(56,542)		(890,626)		263,359		(627,267)
Cash flow hedges:
Net unrealized losses arising during the period	(129,329)			37,861		(91,468)		(88,771)		25,539		(63,232)
Net realized losses (gains) reclassified into net income (2)	54,955			(16,095)		38,860		(1,601)		461		(1,140)
Net change	(74,374)			21,766		(52,608)		(90,372)		26,000		(64,372)
Foreign currency translation adjustments, net of hedges:
Net unrealized gains (losses) arising during the period	247			(845)		(598)		(16,276)		(1,736)		(18,012)
Net change	247			(845)		(598)		(16,276)		(1,736)		(18,012)
Other comprehensive loss	$	(154,395)		$	44,647	$	(109,748)	$	(997,274)	$	287,623	$	(709,651)

(1)~~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.~~portfolio in 2022.

~~(3)~~(2)Pre-tax amounts related to cash flow hedges on ~~CRE~~variable rate loans and long-term borrowings, where applicable, were reported in Interest and dividend income and in Interest expense, respectively, on the Consolidated Statement of Income.

(3)Pre-tax amounts were reported in Net (losses) gains on AFS debt securities on the Consolidated Statement of Income.

57(4)Represents the full write-off of an impaired subordinated debt security during the first quarter of 2023.

Note 1415 — Business Segments

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. 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.~~entities.

The Consumer and Business Banking segment primarily provides financial products and services to consumer and commercial customers through the Company’s domestic branch network and digital banking 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,~~financing, commercial business lending, 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 two 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 three 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~~management and the internal FTP ~~process is also managed by the corporate treasury function within the Other segment.~~process. The FTP 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~~providing a reasonable and consistent basis for the measurement of its business segments’ net interest margins and profitability. The FTP process charges a cost to fund loans (“FTP charges for loans”) and allocates credits for funds provided from deposits (“FTP credits for deposits”) using internal FTP rates. FTP charges for loans are determined based on a matched cost of funds, which is tied to the pricing and term characteristics of the loans. FTP credits for deposits are based on matched funding credit rates, which are tied to the implied or stated maturity of the deposits. FTP credits for deposits reflect the long-term value generated by the deposits. The net spread between the total internal FTP charges and credits is recorded as part of net interest income in the Other segment. The FTP process transfers the corporate interest rate risk exposure to the treasury function within the Other segment, where such exposures are centrally managed. The Company’s internal FTP assumptions and methodologies are reviewed at least annually to ensure that the process is reflective of current market conditions.

The following tables present the operating results and other key financial measures for the individual operating segments as of and for the three and nine months ended September 30, ~~2022~~2023 and ~~2021:~~2022:


($ 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 September 30, 2022
Three Months Ended September 30, 2023										Three Months Ended September 30, 2023

Net interest income before provision for credit losses	Net interest income before provision for credit losses	$	326,411	$	222,996	$	2,402	$	551,809	Net interest income before provision for credit losses	$	315,409	$	242,345	$	13,059	$	570,813
Provision for credit losses	Provision for credit losses	8,974		18,026		—		27,000		Provision for credit losses	1,633		40,367		—		42,000
Noninterest income (loss)		30,819		48,641		(3,908)		75,552
Noninterest income										Noninterest income	25,132		43,672		7,948		76,752
Noninterest expense	Noninterest expense	104,005		81,386		30,582		215,973		Noninterest expense	106,626		87,556		57,832		252,014
Segment income (loss) before income taxes	Segment income (loss) before income taxes	244,251		172,225		(32,088)		384,388		Segment income (loss) before income taxes	232,282		158,094		(36,825)		353,551

Segment net income (loss)		$	173,982	$	122,869	$	(1,512)	$	295,339
As of September 30, 2022
Segment net income										Segment net income	$	164,051	$	110,182	$	13,505	$	287,738
As of September 30, 2023										As of September 30, 2023

Segment assets	Segment assets	$	17,002,000	$	32,836,381	$	12,737,680	$	62,576,061	Segment assets	$	18,935,452	$	34,438,787	$	14,915,219	$	68,289,458

($ in thousands) Consumer and
Business
Banking Commercial
Banking Other Total
Three Months Ended September 30, 2021
Net interest income before provision for (reversal of) credit losses $ 176,678 $ 189,791 $ 29,237 $ 395,706
Provision for (reversal of) credit losses 1,293 (11,293) — (10,000)
Noninterest income (1)
22,099 43,272 7,738 73,109
Noninterest expense 90,575 66,731 48,078 205,384
Segment income (loss) before income taxes (1)
106,909 177,625 (11,103) 273,431
Segment net income (1)
$ 76,577 $ 126,984 $ 21,888 $ 225,449
As of September 30, 2021
Segment assets $ 14,687,023 $ 27,861,690 $ 18,410,397 $ 60,959,110


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

Net interest income (loss) before provision for credit losses		$	823,998	$	662,037	$	(45,661)	$	1,440,374
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	14,976		33,524		—		48,500		Provision for credit losses	8,974		18,026		—		27,000
Noninterest income		84,402		145,750		3,587		233,739
Noninterest income (loss)										Noninterest income (loss)	30,819		48,641		(3,908)		75,552
Noninterest expense	Noninterest expense	294,395		235,804		72,084		602,283		Noninterest expense	104,005		81,386		30,582		215,973
Segment income (loss) before income taxes	Segment income (loss) before income taxes	599,029		538,459		(114,158)		1,023,330		Segment income (loss) before income taxes	244,251		172,225		(32,088)		384,388

Segment net income (loss)	Segment net income (loss)	$	426,695	$	384,237	$	(19,612)	$	791,320	Segment net income (loss)	$	173,982	$	122,869	$	(1,512)	$	295,339
As of September 30, 2022	As of September 30, 2022									As of September 30, 2022

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

5962


($ in thousands)	($ in thousands)	Consumer and Business Banking		Commercial Banking		Other		Total		($ in thousands)	Consumer and Business Banking		Commercial Banking		Other		Total
Nine Months Ended September 30, 2021
Nine Months Ended September 30, 2023										Nine Months Ended September 30, 2023

Net interest income before reversal of credit losses		$	500,352	$	559,579	$	65,943	$	1,125,874
Reversal of credit losses		(598)		(24,402)		—		(25,000)
Net interest income before provision for credit losses										Net interest income before provision for credit losses	$	927,173	$	742,108	$	68,139	$	1,737,420
Provision for credit losses										Provision for credit losses	22,169		65,831		—		88,000
Noninterest income ~~(1)~~	Noninterest income ~~(1)~~	69,873		123,342		21,191		214,406		Noninterest income ~~(1)~~	78,254		129,809		7,298		215,361
Noninterest expense	Noninterest expense	267,511		204,042		114,431		585,984		Noninterest expense	327,476		263,137		141,637		732,250
Segment income (loss) before income taxes ~~(1)~~	Segment income (loss) before income taxes ~~(1)~~	303,312		503,281		(27,297)		779,296		Segment income (loss) before income taxes ~~(1)~~	655,782		542,949		(66,200)		1,132,531

Segment net income ~~(1)~~	Segment net income ~~(1)~~	$	217,257	$	360,275	$	77,653	$	655,185	Segment net income ~~(1)~~	$	463,151	$	383,669	$	75,388	$	922,208
As of September 30, 2021
As of September 30, 2023										As of September 30, 2023

Segment assets	Segment assets	$	14,687,023	$	27,861,690	$	18,410,397	$	60,959,110	Segment assets	$	18,935,452	$	34,438,787	$	14,915,219	$	68,289,458

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


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






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

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

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

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

~~Forward-Looking Statements~~

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

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

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

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

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

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

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

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

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

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

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

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

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

•~~the soundness of other financial institutions;~~

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

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

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

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

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

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

•~~the 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 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.

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Overview

The following discussion provides information about the results of operations, financial condition, liquidity and capital resources of East West Bancorp, Inc. (referred to herein on an unconsolidated basis as “East West” and on a consolidated basis as the ~~Company~~“Company,” “we” or “EWBC”) and its 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~~Annual Report on Form ~~10-K.~~10-K for the year ended December 31, 2022, filed with the United States (“U.S.”) Securities and Exchange Commission (“SEC”) on February 27, 2023 (the “Company’s 2022 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 individuals and businesses that operate in both the ~~Asian-American community.~~U.S. and Asia. Through over 120 locations in the U.S. and ~~China,~~Asia, 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 ~~their~~our customers’ financial needs through our diverse products and services. We expect our relationship-focused business model to continue ~~to generate~~generating organic growth from existing customers and to expand our targeted customer bases. As of September 30, ~~2022,~~2023, the Company had ~~$62.58~~$68.29 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~~2022 Form 10-K.

Current Developments

Economic Developments

~~Heightened inflationary pressures caused by rising oil~~Recent external data indicate that the pace of inflation has slowed steadily and ~~other commodity prices~~the volatility in the banking industry earlier in the year has abated. However, inflation remains above the Board of Governors of the Federal Reserve System’s (“Federal Reserve”) 2% target, which could signal a potential interest rate hike later this year. The higher interest rate environment continues to negatively impact the market value of bank-held securities. Additionally, the commercial real estate (“CRE”) market is under pressure due to ~~Russia’s invasion of Ukraine,~~tighter credit conditions and ~~global supply chain disruptions related to~~decreased demand. These factors have adversely affected economic activity and the ~~COVID-19 pandemic continue to weigh on the economy. Concerns~~banking sector. Despite these concerns, fears of a potential recession ~~have increased~~in 2023 are falling, bolstered by the Federal Reserve’s commitment to steering the economy towards a “soft landing”, a scenario in which inflation retreats without a sharp uptick in unemployment. However, factors such as the ~~federal government continues~~economic impacts of unrest, wars, and acts of terrorism could lead to ~~hike~~higher oil prices and increased inflationary pressures, along with the possibility that the Federal Reserve will maintain high interest rates ~~to slow down inflation. Although~~longer than anticipated. It is also uncertain whether there will be a U.S. ~~economic conditions have continued to recover from the COVID-19 pandemic, the ongoing effects of its~~government shutdown in November 2023 or subsequently, which could negatively impact ~~on the macroeconomic environment may persist for some time. The Company continues to closely monitor~~ the economy and ~~its effects~~inflation domestically. The Company is actively monitoring changes in economic and industry conditions and their impacts on ~~its~~the Company’s business, customers, employees, communities and markets.

Further discussion of the potential impacts on the Company’s business due to interest rate hikes ~~have~~has been provided in Item 1A. — Risk Factors — Risks Related to Financial Matters in the Company’s ~~2021~~2022 Form 10-K.

~~LIBOR Transition~~Recent Bank Failures and Potential Regulatory Reforms

~~LIBOR is a widely referenced benchmark rate~~Following the bank failures in March 2023, Congress and federal regulatory agencies are considering potential changes to the laws and regulations that ~~is intended~~apply to reflect the rate at which banks can borrow wholesale funds from other banks on an unsecured and short-term basis. In March 2021, the United Kingdom’s Financial Conduct Authority and Intercontinental Exchange Benchmark Administration announced that the one-week and two-month USD LIBOR settings and non-USD LIBOR settings would cease to be published after December 31, 2021. The publication of the overnight, one-, three-, six- and 12-month USD LIBOR settings has been extended through June 30,banks. On April 28, 2023, ~~which will provide additional time to wind down or renegotiate existing contracts that reference these LIBOR settings.~~

In March 2022, President Biden signed into law the Adjustable Interest Rate (LIBOR) Act (the “LIBOR Act”). The LIBOR Act provides a clear and uniform federal solution to transition legacy LIBOR-based contracts that either contain insufficient contractual fallback provisions addressing the LIBOR cessation and its transition to a benchmark selected by the Federal Reserve or lack contractual fallback provisions entirely. The LIBOR Act also establishes a safe harbor for lenders, shielding lenders from potential litigation resulting from their choice of a replacement rate, under certain situations includingand the ~~use of a~~ Federal ~~Reserve-selected replacement rate based~~Deposit Insurance Corporation (“FDIC”) issued reports on the ~~Secured Overnight Financing Rate (“SOFR”). The Federal Reserve published its proposed rulemaking~~failures of Silicon Valley Bank and Signature Bank, respectively, identifying potential causes that ~~implements~~ the ~~LIBOR Act in the Federal Register in July 2022, which establishes benchmark replacement recommendations for various product types.~~federal banking agencies may seek to address through changes to their supervisory and regulatory policies.

6465

On July 27, 2023, the Federal Reserve, FDIC, and Office of the Comptroller of the Currency (together, the “Agencies”) jointly released a proposed rule to implement the international capital standards issued by the Basel Committee on Banking Supervision and known as “Basel III Endgame.” The Basel III Endgame proposal would revise the capital framework applicable to large banking organizations with $100 billion or more in total consolidated assets or with significant trading activity and, if finalized, would likely result in meaningfully increased capital requirements for those organizations. In addition, on August 29, 2023, the FDIC released a proposed rule that would require covered insured depository institutions (“IDIs”) to develop and submit detailed plans demonstrating how they could be resolved in an orderly and timely manner in the event of receivership. IDIs with total assets of $100 billion or more would be required to submit full resolution plans, and IDIs with total assets between $50 billion and $100 billion, including the Bank, would be required to submit more limited informational filings. Under the proposal, if the FDIC deemed a resolution plan or informational filing not credible and the IDI fails to resubmit a credible plan, the IDI could become subject to an enforcement action.The Company ~~holds~~is evaluating the impact of this proposal.

On August 29, 2023, the Agencies jointly released a ~~significant volume~~proposed rule that would require bank holding companies and non-consolidated banks with total assets of ~~LIBOR-based products, including loans, derivatives, debt securities, assets purchased under resale agreements (“resale agreements”), junior subordinated debt,~~$100 billion or more to issue and ~~assets sold under repurchase agreements (“repurchase agreements”) that are indexed to LIBOR tenors that will cease to be published after June 30, 2023.~~maintain minimum amounts of long-term debt. The Company has total consolidated assets of less than $100 billion and does not have significant trading activity, and therefore would not be subject to the Basel III Endgame requirements or the long-term debt requirements if they are finalized as proposed. However, by imposing additional costs on banking organizations with $100 billion or more in total consolidated assets, these rule proposals could reduce the benefits of growth beyond that size for a ~~cross-functional team to manage~~banking organization that has less than $100 billion in total consolidated assets, such as 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.Company.

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

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

~~Deposit Insurance Assessment Rates~~

~~In October 2022,~~On May 11, 2023, the FDIC ~~adopted~~released a ~~final~~proposed rule ~~to increase the initial base~~that would impose a special deposit insurance assessment ~~rate schedules uniformly~~on banks in order to recover losses that the FDIC's Deposit Insurance Fund (“DIF”) has incurred in the receiverships of failed institutions in 2023. The proposed rule would impose the special assessment for ~~insured depository institutions by two~~eight quarterly assessment periods beginning with the first quarter of 2024 assessment period, subject to adjustments if the total amount collected is insufficient to cover the DIF’s costs. Each quarterly special assessment would be equal to 3.13 basis points (“bps”), ~~beginning~~or 0.0313% of a bank’s estimated uninsured deposits that exceeded $5 billion as of December 31, 2022. The estimated impact of the special assessment is not expected to be material to the Company.

On July 24, 2023, the FDIC issued Financial Institution Letter (“FIL”) 37-2023 — Estimated Uninsured Deposits Reporting Expectations, which clarified the reporting of an insured depository institution’s estimated uninsured deposits in the ~~first quarterly assessment period of 2023. The increase~~Call Report Schedule RC-O, Memorandum item 2 (“RC-OM item 2”). This FIL specified that uninsured deposits reported in RC-OM item 2 should include the ~~assessment rate schedules is intended to: (1) increase the likelihood that the reserve ratio~~deposit balances in excess of the ~~Deposit Insurance Fund (“DIF”) will reach at least 1.35 percent~~FDIC limit that have been collateralized by pledged assets, and include all deposits of subsidiaries. The Company revised its calculation of RC-OM item 2 and resubmitted its December 31, 2022 and March 31, 2023 Call Reports to comply with the ~~statutory deadline~~FIL during the third quarter of September 30, 2028; (2) reduce the FDIC’s need to consider a potentially pro-cyclical assessment rate increase, and (3) support growth in the DIF in progressing towards the FDIC’s long-term goal of a 2 percent Designated Reserve Ratio. The new assessment rate schedules will remain in effect unless and until the reserve ratio meets or exceeds 2 percent. As a result of the adoption of the assessment rate schedules, the FDIC insurance costs of the Bank will likely increase but not have a material impact on its consolidated financial statements.2023.

Community Reinvestment Act Reform

On ~~May 5, 2022,~~October 24, 2023, the ~~federal banking agencies~~Agencies issued a ~~proposed~~final rule ~~that would substantially revise how they evaluate an insured depository institution’s record~~revising their framework for evaluating banks’ records of ~~satisfying the credit needs of its entire communities, including low- and moderate-income individuals and neighborhoods,~~community reinvestment under the Community Reinvestment ~~Act (“CRA”). We~~Act. Under the revised framework, banks with assets of at least $2 billion, such as the Bank, are considered large banks and their retail lending, retail services and products, community development financing, and community development services will be subject to periodic evaluation. Depending on a large bank’s geographic distribution of lending, the evaluation of retail lending may include assessment areas in which the bank extends loans but does not operate any deposit-taking facilities, in addition to assessment areas in which the bank has deposit-taking facilities. Certain provisions of the final rule will apply beginning January 1, 2026, and the remaining provisions will apply beginning January 1, 2027. The Company is 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.final rule.

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Climate Accountability

In October 2023, California Governor Gavin Newsom signed into law Senate Bill 253, the Climate Corporate Data Accountability Act (“CCDAA”) and Senate Bill 261, the Climate-Related Financial Risk Act (“CRFRA”). The CCDAA is applicable to U.S.-organized entities that do business in California with annual revenue in excess of $1 billion. Subject to the adoption of implementing regulations by the California Air Resources Board, these entities will need to file annual reports publicly disclosing their direct greenhouse gas (“GHG”) emissions from operations (“Scope 1 emissions”), indirect GHG emissions from energy use (“Scope 2 emissions”) and indirect upstream and downstream supply-chain GHG emissions (“Scope 3 emissions”). The reporting requirements related to Scope 1 and 2 emissions will begin in 2026, while the reporting requirements of Scope 3 emissions will begin in 2027. The CRFRA requires U.S.-organized entities that do business in California, with annual revenues over $500 million to prepare biennial reports disclosing climate-related financial risk and the measures they have adopted to reduce and adapt to that risk. The initial round of the climate risk disclosure reports will be due by January 1, 2026. The Company is a reporting entity under both laws and is reviewing them in preparation for compliance.

Financial Review


																Three Months Ended September 30,					Nine Months Ended September 30,
($ and shares in thousands, except per share, and ratio data)	($ and shares in thousands, except per share, and ratio data)	Three Months Ended September 30,			Nine Months Ended September 30,									($ and shares in thousands, except per share, and ratio data)	2023			2022			2023	2022
		2022			2021			2022			2021
Summary of operations:	Summary of operations:																Summary of operations:
Net interest income before provision for (reversal of) credit losses		$	551,809		$	395,706		$	1,440,374		$	1,125,874
Net interest income before provision for credit losses																	Net interest income before provision for credit losses	$	570,813			$	551,809		$	1,737,420		$	1,440,374
Noninterest income	Noninterest income	75,552			73,109			233,739			214,406						Noninterest income	76,752				75,552			215,361			233,739
Total revenue	Total revenue	627,361			468,815			1,674,113			1,340,280						Total revenue	647,565				627,361			1,952,781			1,674,113
Provision for (reversal of) credit losses		27,000			(10,000)			48,500			(25,000)
Provision for credit losses																	Provision for credit losses	42,000				27,000			88,000			48,500

Noninterest expense	Noninterest expense	215,973			205,384			602,283			585,984						Noninterest expense	252,014				215,973			732,250			602,283
Income before income taxes	Income before income taxes	384,388			273,431			1,023,330			779,296						Income before income taxes	353,551				384,388			1,132,531			1,023,330
Income tax expense	Income tax expense	89,049			47,982			232,010			124,111						Income tax expense	65,813				89,049			210,323			232,010

Net income	Net income	$	295,339		$	225,449		$	791,320		$	655,185					Net income	$	287,738			$	295,339		$	922,208		$	791,320

Per common share:
Per share:																	Per share:
Basic earnings	Basic earnings	$	2.10		$	1.59		$	5.59		$	4.62					Basic earnings	$	2.03			$	2.10		$	6.52		$	5.59
Diluted earnings	Diluted earnings	$	2.08		$	1.57		$	5.55		$	4.58					Diluted earnings	$	2.02			$	2.08		$	6.49		$	5.55
Dividends declared	Dividends declared	$	0.40		$	0.33		$	1.20		$	0.99					Dividends declared	$	0.48			$	0.40		$	1.44		$	1.20

Weighted-average number of shares outstanding:	Weighted-average number of shares outstanding:																Weighted-average number of shares outstanding:
Basic	Basic	140,917			141,880			141,453			141,799						Basic	141,485				140,917			141,356			141,453
Diluted	Diluted	142,011			143,143			142,601			143,051						Diluted	142,122				142,011			142,044			142,601

Performance metrics:	Performance metrics:																Performance metrics:
Return on average assets (“ROA”)	Return on average assets (“ROA”)	1.86		%	1.46		%	1.70		%	1.50		%				Return on average assets (“ROA”)	1.66		%		1.86		%	1.83		%	1.70		%
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		%
Return on average common equity (“ROE”)																	Return on average common equity (“ROE”)	17.28		%		20.30		%	19.23		%	18.35		%
Return on average tangible common equity (“TCE”) (1)																	Return on average tangible common equity (“TCE”) (1)	18.65		%		22.16		%	20.80		%	20.04		%

Common dividend payout ratio	Common dividend payout ratio	19.33		%	21.05		%	21.75		%	21.72		%				Common dividend payout ratio	23.88		%		19.33		%	22.31		%	21.75		%
Net interest margin	Net interest margin	3.68		%	2.70		%	3.27		%	2.72		%				Net interest margin	3.48		%		3.68		%	3.66		%	3.27		%
Efficiency ratio (2)	Efficiency ratio (2)	34.43		%	43.81		%	35.98		%	43.72		%				Efficiency ratio (2)	38.92		%		34.43		%	37.50		%	35.98		%
Adjusted efficiency ratio (1)	Adjusted efficiency ratio (1)	31.18		%	35.55		%	32.98		%	36.80		%				Adjusted efficiency ratio (1)	31.18		%		31.18		%	31.15		%	32.98		%


At period end:	At period end:	September 30, 2022		December 31, 2021		At period end:	September 30, 2023		December 31, 2022
Total assets	Total assets	$	62,576,061	$	60,870,701	Total assets	$	68,289,458	$	64,112,150
Total loans	Total loans	$	47,456,755	$	41,694,416	Total loans	$	50,911,946	$	48,228,074
Total deposits	Total deposits	$	53,857,362	$	53,350,532	Total deposits	$	55,087,031	$	55,967,849
Common shares outstanding at period-end	Common shares outstanding at period-end	140,918		141,908		Common shares outstanding at period-end	141,486		140,948
Book value per common share		$	40.17	$	41.13
Tangible equity per common share (1)		$	36.80	$	37.79
Book value per share						Book value per share	$	46.62	$	42.46
Tangible book value per share (1)						Tangible book value per share (1)	$	43.29	$	39.10

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

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

The Company’s third quarter ~~2022~~2023 net income was ~~$295.3~~$287.7 million, ~~an increase~~a decrease of ~~$69.9~~$7.6 million or ~~31%~~3%, compared with third quarter ~~2021~~2022 net income of ~~$225.4~~$295.3 million. The decrease was primarily due to higher noninterest expense and provision for credit losses, partially offset by lower income tax expense and higher net interest income during the quarter. Net income for the first nine months of ~~2022~~2023 was ~~$791.3~~$922.2 million, an increase of ~~$136.1~~$130.9 million or ~~21%,~~17% compared with ~~the~~ first nine months of ~~2021~~2022 net income of ~~$655.2~~$791.3 million. The ~~year-over-year increases in both periods were~~increase was primarily due to higher net interest income, partially offset by higher ~~income tax~~noninterest expense and provision for credit losses. Noteworthy items about the Company’s performance for the third quarter and first nine months of ~~2022 performance~~2023 included:

•Net interest income growth and net interest margin ~~expansion.~~. Third quarter ~~2022~~2023 net interest income before provision for ~~(reversal of)~~ credit losses was ~~$551.8~~$570.8 million, an increase of ~~$156.1~~$19.0 million or ~~39%~~ 3% from the third quarter of ~~2021.~~2022. Third quarter ~~2022~~2023 net interest margin of ~~3.68% expanded 98~~ 3.48% was down 20 bps year-over-year. For the first nine months of ~~2022,~~2023, net interest income before provision for ~~(reversal of)~~ credit losses was ~~$1.44~~$1.74 billion, an increase of ~~$314.5~~$297.0 million or ~~28%~~21% year-over-year. The net interest margin for the first nine months of ~~2022~~2023 was ~~3.27%~~3.66%, up 5539 bps year-over-year.

•~~Improved efficiency.~~Profitability ratios. ~~Efficiency ratios~~Third quarter 2023 ROA, ROE and the return on average TCE of ~~34.43%~~1.66%, 17.28% and ~~35.98% for~~18.65%, respectively, were down year-over-year by 20 bps, 302 bps and 351 bps, respectively. For the ~~third quarter and~~ first nine months of ~~2022,~~2023, ROA, ROE and the return on average TCE of 1.83%, 19.23% and 20.80%, respectively, ~~both improved year-over-year. The adjusted efficiency ratios of 31.18%~~all expanded year-over-year by 13 bps, 88 bps and ~~32.98% for the third quarter and first nine months of 2022, respectively, both improved year-over-year.~~76 bps, respectively. Return on average TCE is a non-GAAP financial measure. For additional details, see the reconciliation of non-GAAP financial measures presented under Item 2. MD&A — Reconciliation of GAAP to Non-GAAP Financial Measures in this Form 10-Q.

•~~Expanding profitability.~~Asset growth. ~~Third quarter~~Total assets reached $68.29 billion, an increase of $4.18 billion or 7% from December 31, 2022, ~~ROA, ROE~~primarily driven by a $2.68 billion or 6% increase in total loans, and a $1.08 billion or 31% increase in cash and cash equivalents. The increase in cash and cash equivalents was primarily funded with borrowings from the ~~tangible return on average tangible~~Bank Term Funding Program (“BTFP”).

•Loan growth. Total loans were $50.91 billion as of September 30, 2023, an increase of $2.68 billion or 6% from $48.23 billion as of December 31, 2022. This was primarily driven by growth in CRE and residential mortgage loan segments.

•Strong capital levels. Stockholders’ equity was $6.60 billion or $46.62 per share as of ~~1.86%, 20.30% and 22.16%, respectively, all expanded compared with third quarter 2021. Likewise, for the first nine months~~September 30, 2023, both up 10% from $5.98 billion or $42.46 per share as of ~~2022, ROA, ROE and the tangible return on average tangible equity~~December 31, 2022. Tangible book value per share of ~~1.70%, 18.35% and 20.04%, respectively, all expanded year-over-year.~~$43.29 as of September 30, 2023, increased $4.19 or 11% from $39.10 as of December 31, 2022. Tangible book value per share is a non-GAAP financial measure. For additional details, see the reconciliation of non-GAAP financial measures presented under Item 2. MD&A —- Reconciliation of GAAP to ~~Non-GAAP~~non-GAAP Financial Measures in this Form 10-Q.

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

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

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

Results of Operations

Net Interest Income

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

6768

~~Third quarter 2022~~ 727

The increases in net interest income ~~before provision for credit losses was $551.8 million, an increase of $156.1 million or 39%, compared with $395.7 million for~~in the third quarter ~~2021. For~~and the first nine months of ~~2022,~~2023, and the increase in net interest ~~income was $1.44 billion, an increase of $314.5 million or 28%, compared with $1.13 billion~~margin for the first nine months of ~~2021. Third quarter 2022~~2023, compared with the same prior year periods primarily reflected higher loan yields and increased loan volume, partially offset by a higher cost of interest-bearing deposits. The decrease in net interest margin ~~was 3.68%, an increase of 98 bps from 2.70%~~ for the third quarter of ~~2021. The year-over-year changes~~2023, compared with the same prior year period was primarily driven by a higher rate of increase in ~~net interest income and net interest margin primarily reflected higher loan yields, strong loan growth and higher debt securities yields. For~~ the ~~first nine months~~cost 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 net interest margin primarily reflected higher loan yields, strong loan growth and higher debt securities volume andinterest-bearing deposits, which has more than offset expanding interest-earning asset yields. The changes in ~~yields~~yield and ~~rates~~rate reflected rising benchmark interest rates.

Average interest-earning assets were $65.05 billion for the third quarter of 2023, an increase of $5.57 billion or 9% from $59.48 billion for the third quarter of ~~2022, an increase of $1.24 billion or 2% from $58.24 billion for the third quarter of 2021.~~2022. For the first nine months of ~~2022,~~2023, the average interest-earning assets were ~~$58.95~~$63.55 billion, an increase of ~~$3.60~~$4.60 billion or 7%8% from ~~$55.35~~$58.95 billion for the first nine months of ~~2021.~~2022. The increases in average interest-earning assets in both periods primarily reflected loan growth, ~~in loans~~ and ~~debt securities, partially offset by a decrease in~~higher interest-bearing cash and deposits with ~~banks.~~banks, partially offset by decreases in assets purchased under resale agreements and available-for-sale (“AFS”) debt securities.

The yield on average interest-earning assets for the third quarter of ~~2022~~2023 was ~~4.19%~~5.87%, an increase of ~~136~~168 bps from ~~2.83%~~4.19% for the third quarter of ~~2021.~~2022. The yield on average interest-earning assets for the first nine months of ~~2022~~2023 was ~~3.54%~~5.69%, an increase of 65215 bps from ~~2.89%~~3.54% for the first nine months of ~~2021.~~2022. The year-over-year ~~changes~~increases in the yield on average ~~interest-bearing~~interest-earning assets primarily resulted from rising benchmark interest ~~rates and a changed earning asset mix in favor of higher-yielding assets.~~

rates.

6869

The average loan yield for the third quarter of ~~2022~~2023 was ~~4.75%~~6.51%, an increase of ~~114~~176 bps from ~~3.61%~~4.75% for the third quarter of ~~2021.~~2022. The average loan yield for the first nine months of 2022 was ~~4.13%~~6.33%, an increase of 54220 bps from ~~3.59%~~4.13% for the first nine months of ~~2021.~~2022. The ~~year-over-year~~ changes in the average loan yield ~~reflect~~reflected the loan portfolio’s sensitivity to rising benchmark interest rates. Approximately ~~62%~~59% and ~~65%~~62% of loans held-for-investment were variable-rate ~~or hybrid loans in their adjustable-rate period~~ as of September 30, ~~2022~~2023 and ~~2021,~~2022, respectively.

Deposits are an important source of funds and impact both net interest income and net interest margin. Average deposits were $55.20 billion for the third quarter of 2023, which increased $1.15 billion or 2% from $54.05 billion for the third quarter of ~~2022, an increase of $554.9 million or 1% from $53.50 billion for the third quarter of 2021.~~2022. For the first nine months of ~~2022,~~2023, average deposits were ~~$54.07~~$54.81 billion, an increase of ~~$3.54 billion~~$744.2 million or 7%1% from ~~$50.53~~$54.07 billion for the first nine months of ~~2021.~~2022. Average noninterest-bearing deposits were $16.30 billion for the third quarter of 2023, a decrease of $6.12 billion or 27% from $22.42 billion for the third quarter of ~~2022, a decrease of $745.7 million or 3% from $23.17 billion for the third quarter of 2021.~~2022. For the first nine months of ~~2022,~~2023, average noninterest-bearing deposits were ~~$23.24~~$17.63 billion, ~~an increase~~a decrease of ~~$2.90~~$5.61 billion or ~~14%~~24% from ~~$20.35~~$23.24 billion for the first nine months of ~~2021.~~2022. Average noninterest-bearing deposits made up ~~41%~~30% and ~~43%~~41% of average deposits for the third quarters of ~~2022~~2023 and ~~2021,~~2022, respectively, and ~~43%~~32% and ~~40%~~43% for the first nine months of ~~2022~~2023 and ~~2021,~~2022, respectively.

The average cost of deposits was 2.43% for the third quarter of 2023, a 192 bps increase from 0.51% for the third quarter of ~~2022, a 39 bps increase from 0.12% for the third quarter of 2021.~~2022. The average cost of interest-bearing deposits was 3.45% for the third quarter of 2023, a 259 bps increase from 0.86% for the third quarter of ~~2022, a 65 bps increase from 0.21% for the third quarter of 2021.~~2022. The average cost of deposits was 2.06% for the first nine months of 2023, a 180 bps increase from 0.26% for the first nine months of ~~2022, an increase of 11 bps from 0.15% for the first nine months of 2021.~~2022. The average cost of interest-bearing deposits was 3.03% for the first nine months of 2023, a 258 bps increase from 0.45% for the first nine months of ~~2022, a 20 bps increase from 0.25% for the first nine months of 2021.~~2022. The year-over-year increases primarily reflected higher rates paid on time deposits, money market ~~accounts~~ and ~~time deposits.~~checking deposits in response to the rising interest rate environment.

The average cost of funds calculation includes deposits, short-term borrowings, Federal Home Loan Bank (“FHLB”) advances, assets sold under repurchase agreements (“repurchase agreements”), and long-term ~~debt and short-term borrowings.~~debt. For the third quarter of ~~2022,~~2023, the average cost of funds was ~~0.55%~~2.59%, a 41204 bps increase from ~~0.14%~~0.55% for the third quarter of ~~2021.~~2022. For the first nine months of ~~2022,~~2023, the average cost of funds was ~~0.29%~~2.21%, ~~an 11~~a 192 bps increase from ~~0.18%~~0.29% for the first nine months of ~~2021.~~2022. The ~~year-over-year changes~~increases in ~~the average cost of funds~~both periods were mainly driven by the ~~changes in the~~increased cost of deposits discussed above.

The Company utilizes various tools to manage interest rate risk. Refer to the Interest Rate Risk Management section of Item 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 third quarters of ~~2022~~2023 and ~~2021:~~2022:


($ in thousands)		Three Months Ended September 30,
		2022						2021
															Three Months Ended September 30,
															2023						2022
($ in thousands)	($ in thousands)	Average Balance		Interest		Average Yield/ Rate (1)		Average Balance		Interest		Average Yield/ Rate (1)		($ in thousands)	Average Balance		Interest		Average Yield/ Rate (1)		Average Balance		Interest		Average Yield/ Rate (1)
														ASSETS
														Interest-earning assets:
Interest-bearing cash and deposits with banks	Interest-bearing cash and deposits with banks	$	2,287,010	$	9,080	1.58	%	$	7,036,823	$	4,521	0.25	%	Interest-bearing cash and deposits with banks	$	5,392,795	$	67,751	4.98	%	$	2,287,010	$	9,080	1.58	%
Resale agreements	Resale agreements	1,037,292		6,769		2.59	%	2,382,741		8,957		1.49	%	Resale agreements	648,587		4,460		2.73	%	1,037,292		6,769		2.59	%
Available-for-sale (“AFS”) debt securities (2)(3)		6,204,729		38,383		2.45	%	8,782,682		37,826		1.71	%
AFS debt securities (2)(3)														AFS debt securities (2)(3)	6,074,119		57,177		3.73	%	6,204,729		38,383		2.45	%
Held-to-maturity (“HTM”) debt securities ~~(4)~~(2)	Held-to-maturity (“HTM”) debt securities ~~(4)~~(2)	3,017,063		12,709		1.67	%	—		—		—	%	Held-to-maturity (“HTM”) debt securities ~~(4)~~(2)	2,967,703		12,601		1.68	%	3,017,063		12,709		1.67	%
Loans ~~(6)~~(5)	Loans ~~(6)~~(5)	46,854,541		560,452		4.75	%	39,960,151		363,503		3.61	%	Loans ~~(6)~~(5)	49,888,862		818,719		6.51	%	46,854,541		560,452		4.75	%

Restricted equity securities	Restricted equity securities	78,054		843		4.28	%	77,083		500		2.57	%	Restricted equity securities	79,395		1,079		5.39	%	78,054		843		4.28	%
Total interest-earning assets	Total interest-earning assets	$	59,478,689	$	628,236	4.19	%	$	58,239,480	$	415,307	2.83	%	Total interest-earning assets	$	65,051,461	$	961,787	5.87	%	$	59,478,689	$	628,236	4.19	%
Noninterest-earning assets:	Noninterest-earning assets:													Noninterest-earning assets:
Cash and due from banks	Cash and due from banks	615,836						627,640						Cash and due from banks	544,939						615,836
Allowance for loan losses	Allowance for loan losses	(566,369)						(584,827)						Allowance for loan losses	(629,229)						(566,369)
Other assets	Other assets	3,551,288						3,077,240						Other assets	3,969,615						3,551,288
Total assets	Total assets	$	63,079,444					$	61,359,533					Total assets	$	68,936,786					$	63,079,444
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	$	6,879,632	$	8,493	0.49	%	$	6,646,515	$	3,186	0.19	%	Checking deposits	$	8,080,025	$	54,285	2.67	%	$	6,879,632	$	8,493	0.49	%
Money market deposits	Money market deposits	12,351,571		33,101		1.06	%	12,604,827		3,446		0.11	%	Money market deposits	12,180,806		113,217		3.69	%	12,351,571		33,101		1.06	%
Savings deposits	Savings deposits	2,961,634		2,268		0.30	%	2,792,702		1,943		0.28	%	Savings deposits	2,013,246		4,047		0.80	%	2,961,634		2,268		0.30	%
Time deposits	Time deposits	9,435,063		25,032		1.05	%	8,283,265		7,395		0.35	%	Time deposits	16,621,683		166,747		3.98	%	9,435,063		25,032		1.05	%
Federal funds purchased and other short-term borrowings	Federal funds purchased and other short-term borrowings	211,794		1,177		2.20	%	620		—		—	%	Federal funds purchased and other short-term borrowings	4,501,327		49,575		4.37	%	211,794		1,177		2.20	%
FHLB advances	FHLB advances	86,243		392		1.80	%	248,614		857		1.37	%	FHLB advances	1		—		—	%	86,243		392		1.80	%
Repurchase agreements	Repurchase agreements	624,821		4,421		2.81	%	310,997		2,012		2.57	%	Repurchase agreements	13,897		193		5.51	%	624,821		4,421		2.81	%
Long-term debt and finance lease liabilities	Long-term debt and finance lease liabilities	152,565		1,543		4.01	%	151,870		762		1.99	%	Long-term debt and finance lease liabilities	152,962		2,910		7.55	%	152,565		1,543		4.01	%
Total interest-bearing liabilities	Total interest-bearing liabilities	$	32,703,323	$	76,427	0.93	%	$	31,039,410	$	19,601	0.25	%	Total interest-bearing liabilities	$	43,563,947	$	390,974	3.56	%	$	32,703,323	$	76,427	0.93	%
Noninterest-bearing liabilities and stockholders’ equity:	Noninterest-bearing liabilities and stockholders’ equity:													Noninterest-bearing liabilities and stockholders’ equity:
Demand deposits	Demand deposits	22,423,633						23,169,323						Demand deposits	16,302,296						22,423,633
Accrued expenses and other liabilities	Accrued expenses and other liabilities	2,179,850						1,470,494						Accrued expenses and other liabilities	2,465,745						2,179,850
Stockholders’ equity	Stockholders’ equity	5,772,638						5,680,306						Stockholders’ equity	6,604,798						5,772,638
Total liabilities and stockholders’ equity	Total liabilities and stockholders’ equity	$	63,079,444					$	61,359,533					Total liabilities and stockholders’ equity	$	68,936,786					$	63,079,444
Interest rate spread	Interest rate spread					3.26	%					2.58	%	Interest rate spread					2.31	%					3.26	%
Net interest income and net interest margin	Net interest income and net interest margin			$	551,809	3.68	%			$	395,706	2.70	%	Net interest income and net interest margin			$	570,813	3.48	%			$	551,809	3.68	%

(1)Annualized.

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

(3)Includes the amortization of net premiums on AFS debt securities of ~~$16.5~~$7.8 million and ~~$22.6~~$16.5 million for the third quarters of ~~2022~~2023 and ~~2021,~~2022, respectively.

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

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

~~(6)~~(5)Loans include the accretion of net deferred loan fees and amortization of net premiums, which totaled ~~$12.5~~$13.1 million and ~~$17.0~~$12.5 million for the third quarters of ~~2022~~2023 and ~~2021,~~2022, respectively.

7172


($ in thousands)		Nine Months Ended September 30,
		2022						2021
															Nine Months Ended September 30,
															2023						2022
($ in thousands)	($ in thousands)	Average Balance		Interest		Average Yield/ Rate (1)		Average Balance		Interest		Average Yield/ Rate (1)		($ in thousands)	Average Balance		Interest		Average Yield/ Rate (1)		Average Balance		Interest		Average Yield/ Rate (1)
														ASSETS
														Interest-earning assets:
Interest-bearing cash and deposits with banks	Interest-bearing cash and deposits with banks	$	3,175,596	$	17,127	0.72	%	$	6,078,982	$	11,781	0.26	%	Interest-bearing cash and deposits with banks	$	4,703,843	$	164,393	4.67	%	$	3,175,596	$	17,127	0.72	%
Resale agreements	Resale agreements	1,588,452		23,705		2.00	%	1,994,776		23,077		1.55	%	Resale agreements	659,621		12,932		2.62	%	1,588,452		23,705		2.00	%
AFS debt securities (2)(3)	AFS debt securities (2)(3)	6,886,268		106,290		2.06	%	7,755,029		101,616		1.75	%	AFS debt securities (2)(3)	6,146,653		166,666		3.63	%	6,886,268		106,290		2.06	%
HTM debt securities ~~(4)~~(2)	HTM debt securities ~~(4)~~(2)	2,672,797		33,645		1.68	%	—		—		—	%	HTM debt securities ~~(4)~~(2)	2,982,284		38,013		1.70	%	2,672,797		33,645		1.68	%
Loans ~~(6)~~(5)	Loans ~~(6)~~(5)	44,548,520		1,376,978		4.13	%	39,441,751		1,057,964		3.59	%	Loans ~~(6)~~(5)	48,969,843		2,318,369		6.33	%	44,548,520		1,376,978		4.13	%

Restricted equity securities	Restricted equity securities	77,824		2,274		3.91	%	80,107		1,588		2.65	%	Restricted equity securities	83,013		3,054		4.92	%	77,824		2,274		3.91	%
Total interest-earning assets	Total interest-earning assets	$	58,949,457	$	1,560,019	3.54	%	$	55,350,645	$	1,196,026	2.89	%	Total interest-earning assets	$	63,545,257	$	2,703,427	5.69	%	$	58,949,457	$	1,560,019	3.54	%
Noninterest-earning assets:	Noninterest-earning assets:													Noninterest-earning assets:
Cash and due from banks	Cash and due from banks	656,772						602,830						Cash and due from banks	578,144						656,772
Allowance for loan losses	Allowance for loan losses	(551,818)						(603,523)						Allowance for loan losses	(617,381)						(551,818)
Other assets	Other assets	3,307,207						2,913,050						Other assets	3,690,570						3,307,207
Total assets	Total assets	$	62,361,618					$	58,263,002					Total assets	$	67,196,590					$	62,361,618
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	$	6,747,711	$	13,073	0.26	%	$	6,571,231	$	11,177	0.23	%	Checking deposits	$	7,675,325	$	127,030	2.21	%	$	6,747,711	$	13,073	0.26	%
Money market deposits	Money market deposits	12,526,222		45,196		0.48	%	12,262,173		11,869		0.13	%	Money market deposits	11,295,157		275,738		3.26	%	12,526,222		45,196		0.48	%
Savings deposits	Savings deposits	2,954,098		5,836		0.26	%	2,715,114		5,762		0.28	%	Savings deposits	2,215,102		11,679		0.70	%	2,954,098		5,836		0.26	%
Time deposits	Time deposits	8,596,728		40,266		0.63	%	8,635,250		26,982		0.42	%	Time deposits	15,993,669		428,120		3.58	%	8,596,728		40,266		0.63	%
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	%	Federal funds purchased and other short-term borrowings	3,284,663		107,432		4.37	%	93,370		1,427		2.04	%
FHLB advances	FHLB advances	128,137		1,529		1.60	%	457,273		6,025		1.76	%	FHLB advances	164,836		6,430		5.22	%	128,137		1,529		1.60	%
Repurchase agreements	Repurchase agreements	433,340		8,855		2.73	%	304,745		5,981		2.62	%	Repurchase agreements	45,080		1,456		4.32	%	433,340		8,855		2.73	%
Long-term debt and finance lease liabilities	Long-term debt and finance lease liabilities	152,259		3,463		3.04	%	152,018		2,314		2.04	%	Long-term debt and finance lease liabilities	152,716		8,122		7.11	%	152,259		3,463		3.04	%
Total interest-bearing liabilities	Total interest-bearing liabilities	$	31,631,865	$	119,645	0.51	%	$	31,099,675	$	70,152	0.30	%	Total interest-bearing liabilities	$	40,826,548	$	966,007	3.16	%	$	31,631,865	$	119,645	0.51	%
Noninterest-bearing liabilities and stockholders’ equity:	Noninterest-bearing liabilities and stockholders’ equity:													Noninterest-bearing liabilities and stockholders’ equity:
Demand deposits	Demand deposits	23,244,247						20,345,370						Demand deposits	17,633,922						23,244,247
Accrued expenses and other liabilities	Accrued expenses and other liabilities	1,719,869						1,335,252						Accrued expenses and other liabilities	2,324,870						1,719,869
Stockholders’ equity	Stockholders’ equity	5,765,637						5,482,705						Stockholders’ equity	6,411,250						5,765,637
Total liabilities and stockholders’ equity	Total liabilities and stockholders’ equity	$	62,361,618					$	58,263,002					Total liabilities and stockholders’ equity	$	67,196,590					$	62,361,618
Interest rate spread	Interest rate spread					3.03	%					2.59	%	Interest rate spread					2.53	%					3.03	%
Net interest income and net interest margin	Net interest income and net interest margin			$	1,440,374	3.27	%			$	1,125,874	2.72	%	Net interest income and net interest margin			$	1,737,420	3.66	%			$	1,440,374	3.27	%

(1)Annualized.

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

(3)Includes the amortization of net premiums on AFS debt securities of ~~$60.3~~$24.2 million and ~~$62.7~~$60.3 million for the first nine months of ~~2022~~2023 and ~~2021,~~2022, respectively.

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

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

~~(6)~~(5)~~Loans include~~Include the accretion of net deferred loan fees and amortization of net premiums, which totaled ~~$36.3~~$40.1 million and ~~$46.8~~$36.3 million for the first nine months of ~~2022~~2023 and ~~2021,~~2022, respectively.

7273

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


($ in thousands)	($ in thousands)	Three Months Ended September 30,								Nine Months Ended September 30,										($ in thousands)		Three Months Ended September 30,								Nine Months Ended September 30,
		2022 vs. 2021								2022 vs. 2021								($ in thousands)	2023 vs. 2022					2023 vs. 2022
		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	$	4,559		$	(4,874)		$	9,433	$	5,346		$	(7,746)		$	13,092									Interest-bearing cash and deposits with banks	$	58,671			$	22,620			$	36,051		$	147,266		$	11,889		$	135,377
Resale agreements	Resale agreements	(2,188)			(6,674)			4,486		628			(5,263)			5,891										Resale agreements	(2,309)			(2,656)				347			(10,773)			(16,691)			5,918
AFS debt securities	AFS debt securities	557			(13,051)			13,608		4,674			(12,166)			16,840										AFS debt securities	18,794			(824)				19,618			60,376			(12,490)			72,866
HTM debt securities	HTM debt securities	12,709			12,709			—		33,645			33,645			—										HTM debt securities	(108)			(209)				101			4,368			3,940			428
Loans	Loans	196,949			69,707			127,242		319,014			146,568			172,446										Loans	258,267			38,297				219,970			941,391			148,091			793,300
Restricted equity securities	Restricted equity securities	343			6			337		686			(46)			732										Restricted equity securities	236			15				221			780			160			620
Total interest and dividend income	Total interest and dividend income	$	212,929		$	57,823		$	155,106	$	363,993		$	154,992		$	209,001									Total interest and dividend income	$	333,551		$	57,243			$	276,308		$	1,143,408		$	134,899		$	1,008,509
Interest-bearing liabilities:	Interest-bearing liabilities:																									Interest-bearing liabilities:
Checking deposits	Checking deposits	$	5,307		$	116		$	5,191	$	1,896		$	307		$	1,589									Checking deposits	$	45,792		$	1,731			$	44,061		$	113,957		$	2,040		$	111,917
Money market deposits	Money market deposits	29,655			(71)			29,726		33,327			261			33,066										Money market deposits	80,116			(464)				80,580			230,542			(4,871)			235,413
Savings deposits	Savings deposits	325			122			203		74			488			(414)										Savings deposits	1,779			(921)				2,700			5,843			(1,778)			7,621
Time deposits	Time deposits	17,637			1,162			16,475		13,284			(121)			13,405										Time deposits	141,715			30,467				111,248			387,854			59,857			327,997
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)										Federal funds purchased and other short-term borrowings	48,398			46,160				2,238			106,005			102,583			3,422
FHLB advances	FHLB advances	(465)			(680)			215		(4,496)			(3,975)			(521)										FHLB advances	(392)			(196)				(196)			4,901			549			4,352
Repurchase agreements	Repurchase agreements	2,409			2,204			205		2,874			2,619			255										Repurchase agreements	(4,228)			(6,420)				2,192			(7,399)			(10,729)			3,330
Long-term debt and finance lease liabilities	Long-term debt and finance lease liabilities	781			4			777		1,149			4			1,145										Long-term debt and finance lease liabilities	1,367			4				1,363			4,659			10			4,649
Total interest expense	Total interest expense	$	56,826		$	2,857		$	53,969	$	49,493		$	986		$	48,507									Total interest expense	$	314,547		$	70,361			$	244,186		$	846,362		$	147,661		$	698,701
Change in net interest income	Change in net interest income	$	156,103		$	54,966		$	101,137	$	314,500		$	154,006		$	160,494									Change in net interest income	$	19,004		$	(13,118)			$	32,122		$	297,046		$	(12,762)		$	309,808

Noninterest Income

The following table presents the components of noninterest income for the third quarters and first nine months of ~~2022~~2023 and ~~2021:~~2022:


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

													Three Months Ended September 30,				Nine Months Ended September 30,

($ in thousands)	($ in thousands)	2022		2021		% Change	2022		2021		% Change	($ in thousands)	2023		2022		% Change	2023		2022		% Change
		$	20,289	$	17,516	16%	$	59,869	$	56,965	5%	Lending fees	$	20,312	$	20,289	0%	$	61,799	$	59,869	3%
		23,636		18,508		28%	66,323		51,233		29%	Deposit account fees	22,622		23,636		(4)%	66,610		66,323		0%
Interest rate contracts and other derivative income	Interest rate contracts and other derivative income	8,761		7,156		22%	29,695		20,981		42%	Interest rate contracts and other derivative income	11,208		8,761		28%	21,145		29,695		(29)%
Foreign exchange income	Foreign exchange income	10,083		13,101		(23)%	34,143		35,634		(4)%	Foreign exchange income	12,334		10,083		22%	38,245		34,143		12%
Wealth management fees	Wealth management fees	8,903		5,598		59%	21,494		20,460		5%	Wealth management fees	5,877		8,903		(34)%	19,070		21,494		(11)%
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%
Net (losses) gains on sales of loans												Net (losses) gains on sales of loans	(12)		2,129		NM	(41)		5,968		NM
Net (losses) gains on AFS debt securities												Net (losses) gains on AFS debt securities	—		—		—%	(10,000)		1,306		NM

Other investment (loss) income		(580)		5,349		(111)%	5,910		13,870		(57)%
Other investment income												Other investment income	1,751		(580)		NM	7,675		5,910		30%
Other income	Other income	2,331		2,198		6%	9,031		7,484		21%	Other income	2,660		2,331		14%	10,858		9,031		20%
Total noninterest income	Total noninterest income	$	75,552	$	73,109	3%	$	233,739	$	214,406	9%	Total noninterest income	$	76,752	$	75,552	2%	$	215,361	$	233,739	(8)%

NM — Not meaningful.

7374

Noninterest income comprised 12% and ~~14%~~11% of total revenue for the third quarter and the first nine months of ~~2022,~~2023, respectively, compared with ~~16%~~12% and 14% for ~~both~~ the third quarter and the first nine months of ~~2021,~~2022, respectively. Third quarter ~~2022~~2023 noninterest income of $76.8 million was ~~$75.6 million, an increase of $2.4 million or 3%,~~relatively flat compared with ~~$73.1~~$75.6 million for the same period in 2021. This increase was primarily due to increases in deposit account fees, wealth management fees and lending fees, partially offset by other investment loss and a decrease in foreign exchange income.2022. Noninterest income for the first nine months of ~~2022~~2023 was ~~$233.7~~$215.4 million, ~~an increase~~a decrease of ~~$19.3~~$18.4 million or 9%8%, compared with ~~$214.4~~$233.7 million for the same period in ~~2021.~~2022. This ~~increase~~decrease was primarily due to ~~increases~~net losses on AFS debt securities, a decrease in ~~deposit account fees,~~ interest rate contracts and other derivative ~~income;~~income, and ~~lending fees,~~net losses on sales of loans, partially offset by ~~lower 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 loan fees. For~~foreign exchange income during 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 $23.6 million for the third quarter of 2022, an increase of $5.1 million or 28%, compared with $18.5 million for the same period in 2021. For the first nine months of 2022, deposit account fees were $66.3 million, an increase of $15.1 million or 29%, compared with $51.2 million for the same period in 2021. These increases were primarily driven by growth in treasury management fees from commercial deposits.2023.

Interest rate contracts and other derivative income was ~~$8.8~~$11.2 million for the third quarter of ~~2022,~~2023, an increase of ~~$1.6~~$2.4 million or ~~22%~~28%, compared with ~~$7.2~~$8.8 million for the same period in ~~2021.~~2022. The increase was primarily due to increases in transaction volume and interest received on derivative collateral posted. For the first nine months of ~~2022,~~2023, interest rate contracts and other derivative income was ~~$29.7~~$21.1 million, ~~an increase~~a decrease of ~~$8.7~~$8.6 million or ~~42%~~29%, compared with ~~$21.0~~$29.7 million for the same period in ~~2021. These increases were~~2022. The decrease was primarily due to ~~higher~~lower favorable credit valuation adjustments, ~~during the third quarter~~partially offset by increases in transaction volume and ~~first nine months of 2022, compared with the same periods in 2021.~~interest received on derivative collateral posted.

Foreign exchange income was ~~$10.1~~$12.3 million for the third quarter of ~~2022, a decrease~~2023, an increase of ~~$3.0~~$2.3 million or ~~23%~~22%, compared with ~~$13.1~~$10.1 million for the same period in ~~2021.~~2022. This increase was primarily due to higher losses on foreign exchange trades in the prior-year period. For the first nine months of ~~2022,~~2023, foreign exchange income was ~~$34.1~~$38.2 million, ~~a decrease~~an increase of ~~$1.5~~$4.1 million or ~~4%,~~12% compared with ~~$35.6~~$34.1 million for the ~~first nine months~~same period in 2022. This increase was primarily due to a higher level of ~~2021. The decreases for the third quarter and first nine months of 2022, compared with the prior year periods, primarily reflected increased losses~~gains on foreign exchange trades, partially offset by the ~~favorable~~unfavorable valuation of certain foreign currency denominated balance sheet items.

~~Wealth management fees~~Net losses on sales of loans were ~~$8.9~~$12 thousand and $41 thousand forthe third quarter and first nine months of 2023, respectively. In comparison, net gains on sales of loans were $2.1 million and $6.0 million for the third quarter ~~of 2022, an increase of $3.3 million or 59%, compared with $5.6 million for the same period in 2021. For the~~and first nine months of 2022, ~~wealth management fees were $21.5 million, an increase of $1.0 million or 5%, compared with $20.5 million for the first nine months of 2021. These increases~~respectively. The year-over-year decreases were primarily due to a higher ~~volume~~level of ~~customer activity.~~Small Business Administration loan sales in the prior periods.

~~Other investment loss was $580 thousand for the third quarter~~Net losses on AFS debt securities of ~~2022, compared with income of $5.3~~$10.0 million for ~~the same period in 2021. For~~ the first nine months of ~~2022, other investment income was $5.9 million, a decrease~~2023 were due to the write-off of ~~$8.0 million or 57% from $13.9~~an impaired subordinated debt security during the first quarter of 2023. In comparison, net gains on AFS debt securities were zero and $1.3 million for the third quarter and first nine months of ~~2021. These decreases primarily reflected unfavorable equity valuation adjustments in the Company’s CRA investments in~~ 2022, ~~compared with the same year-ago periods.~~respectively.

Noninterest Expense

The following table presents the components of noninterest expense for the third quarters and first nine months of ~~2022~~2023 and ~~2021:~~2022:


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

($ in thousands)	($ in thousands)	2022		2021		%		2022		2021		%		($ in thousands)	2023		2022		% Change		2023		2022		% Change
		$	127,580	$	105,751	21	%	$	357,213	$	318,985	12	%	Compensation and employee benefits	$	123,153	$	127,580	(3)	%	$	377,744	$	357,213	6	%
Occupancy and equipment expense	Occupancy and equipment expense	15,920		15,851		0	%	46,853		47,150		(1)	%	Occupancy and equipment expense	15,353		15,920		(4)	%	47,028		46,853		0	%
Deposit insurance premiums and regulatory assessments	Deposit insurance premiums and regulatory assessments	4,875		4,641		5	%	14,519		12,791		14	%	Deposit insurance premiums and regulatory assessments	8,583		4,875		76	%	24,755		14,519		71	%
Deposit account expense	Deposit account expense	6,707		4,136		62	%	17,071		11,845		44	%	Deposit account expense	11,585		6,707		73	%	31,753		17,071		86	%
Data processing	Data processing	3,725		3,575		4	%	10,876		12,088		(10)	%	Data processing	3,645		3,725		(2)	%	10,205		10,876		(6)	%
Computer software expense	Computer software expense	6,889		8,426		(18)	%	20,755		23,106		(10)	%	Computer software expense	8,116		6,889		18	%	22,955		20,755		11	%
Consulting expense		1,620		1,635		(1)	%	5,474		4,978		10	%
Legal expense		689		2,363		(71)	%	2,454		5,840		(58)	%

Other operating expense	Other operating expense	28,094		20,998		34	%	78,315		58,544		34	%	Other operating expense	31,885		30,403		5	%	102,092		86,243		18	%
Amortization of tax credit and other investments	Amortization of tax credit and other investments	19,874		38,008		(48)	%	48,753		90,657		(46)	%	Amortization of tax credit and other investments	49,694		19,874		150	%	115,718		48,753		137	%

Total noninterest expense	Total noninterest expense	$	215,973	$	205,384	5	%	$	602,283	$	585,984	3	%	Total noninterest expense	$	252,014	$	215,973	17	%	$	732,250	$	602,283	22	%

Third quarter ~~2022~~2023 noninterest expense was ~~$216.0~~$252.0 million, an increase of ~~$10.6~~$36.0 million or 5%17%, compared with ~~$205.4~~$216.0 million for the same period in ~~2021. First~~2022. The increase in the third quarter of 2023 was primarily due to increases in amortization of tax credit and other investments, deposit account expense, and deposit insurance premiums and regulatory assessments, partially offset by a decrease in compensation and employee benefits. For the first nine months of ~~2022~~2023, noninterest expense was ~~$602.3~~$732.3 million, an increase of ~~$16.3~~$130.0 million or 22%, compared with $602.3 million for the same period in 2022. The increase in the first nine months of 2023 was primarily due to higher amortization of tax credit and other investments, compensation and employee benefits, other operating expense, deposit account expense and deposit insurance premiums and regulatory assessments.

Compensation and employee benefits were $123.2 million for the third quarter of 2023, a decrease of $4.4 million or 3%, compared with ~~$586.0~~$127.6 million for the same period in ~~2021.~~2022. The decrease was primarily due to a decrease in temporary staffing and bonus accrual, partially offset by staffing growth. For the first nine months of 2023, compensation and employee benefits were $377.7 million, an increase of $20.5 million or 6%, compared with $357.2 million for the first nine months of 2022. This increase was primarily driven by staffing growth.

Deposit insurance premiums and regulatory assessments were $8.6 million for the third quarter of 2023, an increase of $3.7 million or 76%, compared with $4.9 million for the same period in 2022. For the first nine months of 2023, deposit insurance premiums and regulatory assessments were $24.8 million, an increase of $10.2 million or 71%, compared with $14.5 million for the same period in 2022. These increases were primarily due to ~~higher compensation and employee benefits and other operating expense, partially offset by~~ a ~~decrease~~two bps increase in the ~~amortization of tax credit and other investments.~~base deposit insurance assessment rate under the FDIC’s Amended Restoration Plan.

~~Compensation and employee benefits were $127.6~~Deposit account expense was $11.6 million for the third quarter of ~~2022,~~2023, an increase of ~~$21.8~~$4.9 million or ~~21%~~73%, compared with ~~$105.8~~$6.7 million for the same period in ~~2021.~~2022. For the first nine months of ~~2022, compensation and employee benefits were $357.2~~2023, deposit account expense was $31.8 million, an increase of ~~$38.2~~$14.7 million or ~~12%~~86%, compared with ~~$319.0~~$17.1 million for the same period in ~~2021.~~2022. These increases were primarily due to ~~headcount growth~~an increase in deposit referral fees which were driven by higher interest rates and an increase in insured cash sweep (“ICS”) product fees due to higher deposit balances. Such deposit referral fees are variable fees, sensitive to market rates and paid in lieu of interest on a small portion of the ~~year-over-year change in deferred loan costs.~~Bank’s deposit balances.

Other operating expense ~~was $28.1~~of $31.9 million for the third quarter of ~~2022, an increase of $7.1 million or 34%,~~2023, was essentially flat, compared with ~~$21.0~~$30.4 million for the same period in ~~2021, primarily due to a reduction in foreclosure related gains and interest expense paid on cash collateral.~~2022. For the first nine months of ~~2022,~~2023, other operating expense was ~~$78.3~~$102.1 million, an increase of ~~$19.8~~$15.8 million or ~~34%~~18%, compared with ~~$58.5~~$86.2 million for the same period in ~~2021,~~2022. The increase in the first nine months of 2023 compared with the same period in 2022 was primarily due to ~~increased charitable contributions,~~higher interest expense paid on cash collateral and an increase in corporate expenses, partially offset by a reduction in foreclosure ~~expenses, miscellaneous operational losses and travel-related~~ expenses.

Amortization of tax credit and other investments was ~~$19.9~~$49.7 million for the third quarter of ~~2022, a decrease~~2023, an increase of ~~$18.1~~$29.8 million or ~~48%~~150%, compared with ~~$38.0~~$19.9 million for the same period in ~~2021.~~2022. For the first nine months of ~~2022,~~2023, amortization of tax credit and other investments was ~~$48.8~~$115.7 million, ~~a decrease~~an increase of ~~$41.9~~$67.0 million or ~~46%~~137%, compared with ~~$90.7~~$48.8 million for the same period in ~~2021.~~2022. The year-over-year ~~change reflects~~increases were largely due to the ~~mix~~timing of renewable energy tax ~~credits being recognized, which have differing amortization periods, as well as the impact of~~credit investments that ~~close in a given period.~~closed.

Income Taxes


($ in thousands)		Three Months Ended September 30,								Nine Months Ended September 30,
																		Three Months Ended September 30,										Nine Months Ended September 30,
($ in thousands)	($ in thousands)	2022			2021			% Change		2022			2021			% Change			($ in thousands)	2023			2022			% Change			2023			2022			% Change
		$	384,388		$	273,431		41	%	$	1,023,330		$	779,296		31	%		Income before income taxes	$	353,551		$	384,388		(8)	%		$	1,132,531		$	1,023,330		11	%
Income tax expense	Income tax expense	$	89,049		$	47,982		86	%	$	232,010		$	124,111		87	%		Income tax expense	$	65,813		$	89,049		(26)	%		$	210,323		$	232,010		(9)	%
Effective tax rate	Effective tax rate	23.2		%	17.5		%			22.7		%	15.9		%				Effective tax rate	18.6		%	23.2		%				18.6		%	22.7		%

Third quarter ~~2022~~2023 income tax expense was ~~$89.0~~$65.8 million and the effective tax rate was ~~23.2%~~18.6%, compared with third quarter ~~2021~~2022 income tax expense of ~~$48.0~~$89.0 million and an effective tax rate of ~~17.5%~~23.2%. For the first nine months of ~~2022,~~2023, income tax expense was ~~$232.0~~$210.3 million and the effective tax rate was ~~22.7%~~18.6%, compared with income tax expense of ~~$124.1~~$232.0 million and an effective tax rate of ~~15.9%~~22.7% for the same period in ~~2021.~~2022. The ~~year-over-year increases~~decrease in ~~the~~ income tax expense for the third quarter of 2023 compared with the year-ago same period was primarily due to lower pre-tax income and higher tax credits. The decrease in income tax expense for the ~~effective~~first nine months of 2023 compared with the first nine months of 2022 was primarily due to higher tax ~~rate reflected a higher level of income before income taxes and a decrease~~credits. The increases in tax credits ~~recognized~~ in ~~2022.~~both periods were primarily due to renewable energy tax credit investments.

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~~a description of the Company’s internal management reporting process, including the segment cost allocation methodology, see Note 1415 — 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:


															Three Months Ended September 30,
															Consumer and Business Banking				Commercial Banking				Other
($ in thousands)	($ in thousands)	Three Months Ended September 30,												($ in thousands)	2023		2022		2023		2022		2023		2022
		Consumer and Business Banking				Commercial Banking				Other
		2022		2021		2022		2021		2022		2021
Total revenue (loss) ~~(1)~~	Total revenue (loss) ~~(1)~~	$	357,230	$	198,777	$	271,637	$	233,063	$	(1,506)	$	36,975	Total revenue (loss) ~~(1)~~	$	340,541	$	357,230	$	286,017	$	271,637	$	21,007	$	(1,506)
Provision for (reversal of) credit losses		8,974		1,293		18,026		(11,293)		—		—
Provision for credit losses														Provision for credit losses	1,633		8,974		40,367		18,026		—		—

Noninterest expense	Noninterest expense	104,005		90,575		81,386		66,731		30,582		48,078		Noninterest expense	106,626		104,005		87,556		81,386		57,832		30,582
Segment income (loss) before income taxes ~~(1)~~	Segment income (loss) before income taxes ~~(1)~~	244,251		106,909		172,225		177,625		(32,088)		(11,103)		Segment income (loss) before income taxes ~~(1)~~	232,282		244,251		158,094		172,225		(36,825)		(32,088)

Segment net income (loss) ~~(1)~~	Segment net income (loss) ~~(1)~~	$	173,982	$	76,577	$	122,869	$	126,984	$	(1,512)	$	21,888	Segment net income (loss) ~~(1)~~	$	164,051	$	173,982	$	110,182	$	122,869	$	13,505	$	(1,512)

($ in thousands) Nine Months Ended September 30,
Consumer and Business Banking Commercial
Banking Other
2022 2021 2022 2021 2022 2021
Total revenue (loss) (1)
$ 908,400 $ 570,225 $ 807,787 $ 682,921 $ (42,074) $ 87,134
Provision for (reversal of) credit losses 14,976 (598) 33,524 (24,402) — —
Noninterest expense 294,395 267,511 235,804 204,042 72,084 114,431
Segment income (loss) before income taxes (1)
599,029 303,312 538,459 503,281 (114,158) (27,297)
Segment net income (loss) (1)
$ 426,695 $ 217,257 $ 384,237 $ 360,275 $ (19,612) $ 77,653

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



($ in thousands)	Nine Months Ended September 30,
	Consumer and Business Banking				Commercial Banking				Other
	2023		2022		2023		2022		2023		2022
Total revenue (loss)	$	1,005,427	$	908,400	$	871,917	$	807,787	$	75,437	$	(42,074)
Provision for credit losses	22,169		14,976		65,831		33,524		—		—























Noninterest expense	327,476		294,395		263,137		235,804		141,637		72,084
Segment income (loss) before income taxes	655,782		599,029		542,949		538,459		(66,200)		(114,158)

Segment net income (loss)	$	463,151	$	426,695	$	383,669	$	384,237	$	75,388	$	(19,612)

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

($ in thousands) Three Months Ended September 30,
Change from 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 %



	Three Months Ended September 30,
					Change from 2022
($ in thousands)	2023		2022		$		%
Net interest income before provision for credit losses	$	315,409	$	326,411	$	(11,002)	(3)	%
Noninterest income	25,132		30,819		(5,687)		(18)	%
Total revenue	340,541		357,230		(16,689)		(5)	%
Provision for credit losses	1,633		8,974		(7,341)		(82)	%
Noninterest expense	106,626		104,005		2,621		3	%
Segment income before income taxes	232,282		244,251		(11,969)		(5)	%
Income tax expense	68,231		70,269		(2,038)		(3)	%
Segment net income	$	164,051	$	173,982	$	(9,931)	(6)	%
Average loans	$	18,215,015	$	16,405,433	$	1,809,582	11	%
Average deposits	$	33,755,409	$	33,271,717	$	483,692	1	%

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



($ in thousands)	Nine Months Ended September 30,
					Change from 2022
	2023		2022		$		%
Net interest income before provision for credit losses	$	927,173	$	823,998	$	103,175	13	%
Noninterest income	78,254		84,402		(6,148)		(7)	%
Total revenue	1,005,427		908,400		97,027		11	%
Provision for credit losses	22,169		14,976		7,193		48	%
Noninterest expense	327,476		294,395		33,081		11	%
Segment income before income taxes	655,782		599,029		56,753		9	%
Income tax expense	192,631		172,334		20,297		12	%
Segment net income	$	463,151	$	426,695	$	36,456	9	%
Average loans	$	17,653,442	$	15,448,874	$	2,204,568	14	%
Average deposits	$	33,622,756	$	33,272,271	$	350,485	1	%

Consumer and Business Banking segment net income ~~increased $97.4~~decreased by $9.9 million or ~~127%~~6% year-over-year to ~~$174.0~~$164.1 million for the third quarter of ~~2022,~~2023. This decrease was primarily driven by decreases in net interest income and ~~$209.4~~noninterest income, partially offset by a decrease in provision for credit losses. Net interest income before provision for credit losses decreased by $11.0 million or ~~96%~~3% year-over-year to ~~$426.7~~$315.4 million for the third quarter of 2023. This decrease was primarily driven by an increase in loan FTP charges due to the year-over-year increase in market rates. Noninterest income decreased by $5.7 million or 18% to $25.1 million for the third quarter of 2023, mainly due to decreases in wealth management fees and deposit account fees.

Net income in this segment increased by $36.5 million or 9% year-over-year to $463.2 million for the first nine months of ~~2022. The increases~~2023. This increase was primarily driven by an increase in ~~both periods reflected revenue growth,~~net interest income, partially offset by higher ~~income tax~~noninterest expense and ~~noninterest~~income tax expense. Net interest income before provision for credit losses increased ~~$149.7~~by $103.2 million or ~~85%~~13% year-over-year to ~~$326.4 million for the third quarter of 2022, and $323.6 million or 65% year-over-year to $824.0~~$927.2 million for the first nine months of ~~2022. The increases in both periods were~~2023. This increase was primarily driven by higher deposit ~~fund transfer pricing~~FTP credits due to ~~noninterest-bearing deposit growth, and higher loan interest income, primarily from growth~~the year-over-year increase in ~~residential mortgage loans.~~market rates. Noninterest expense increased ~~$13.4~~by $33.1 million or ~~15%~~11% year-over-year to ~~$104.0 million for the third quarter of 2022, and $26.9 million or 10% year-over-year to $294.4~~$327.5 million for the first nine months of ~~2022. The increases in both periods primarily reflected~~2023, reflecting higher allocated corporate overhead expenses, compensation and employee benefits expense, deposit insurance premium and regulatory assessments, and deposit account expense.

Commercial Banking

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

7778

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


											Three Months Ended September 30,
															Change from 2022
($ in thousands)	($ in thousands)	Three Months Ended September 30,								($ in thousands)	2023		2022		$		%
						Change from 2021
		2022		2021		$		%
Net interest income before provision for (reversal of) credit losses		$	222,996	$	189,791	$	33,205	17	%
Net interest income before provision for credit losses										Net interest income before provision for credit losses	$	242,345	$	222,996	$	19,349	9	%
Noninterest income ~~(1)~~	Noninterest income ~~(1)~~	48,641		43,272		5,369		12	%	Noninterest income ~~(1)~~	43,672		48,641		(4,969)		(10)	%
Total revenue ~~(1)~~	Total revenue ~~(1)~~	271,637		233,063		38,574		17	%	Total revenue ~~(1)~~	286,017		271,637		14,380		5	%
Provision for (reversal of) credit losses		18,026		(11,293)		29,319		260	%
Provision for credit losses										Provision for credit losses	40,367		18,026		22,341		124	%
Noninterest expense	Noninterest expense	81,386		66,731		14,655		22	%	Noninterest expense	87,556		81,386		6,170		8	%
Segment income before income taxes ~~(1)~~	Segment income before income taxes ~~(1)~~	172,225		177,625		(5,400)		(3)	%	Segment income before income taxes ~~(1)~~	158,094		172,225		(14,131)		(8)	%
Income tax expense	Income tax expense	49,356		50,641		(1,285)		(3)	%	Income tax expense	47,912		49,356		(1,444)		(3)	%
Segment net income (1)		$	122,869	$	126,984	$	(4,115)	(3)	%
Segment net income										Segment net income	$	110,182	$	122,869	$	(12,687)	(10)	%
Average loans	Average loans	$	30,449,108	$	25,773,521	$	4,675,587	18	%	Average loans	$	31,673,847	$	30,449,108	$	1,224,739	4	%
Average deposits	Average deposits	$	16,627,353	$	18,275,884	$	(1,648,531)	(9)	%	Average deposits	$	18,176,331	$	16,627,353	$	1,548,978	9	%

($ in thousands) Nine Months Ended September 30,
Change from 2021
2022 2021 $ %
Net interest income before provision for (reversal of) credit losses $ 662,037 $ 559,579 $ 102,458 18 %
Noninterest income (1)
145,750 123,342 22,408 18 %
Total revenue (1)
807,787 682,921 124,866 18 %
Provision for (reversal of) credit losses 33,524 (24,402) 57,926 237 %
Noninterest expense 235,804 204,042 31,762 16 %
Segment income before income taxes (1)
538,459 503,281 35,178 7 %
Income tax expense 154,222 143,006 11,216 8 %
Segment net income (1)
$ 384,237 $ 360,275 $ 23,962 7 %
Average loans $ 29,099,646 $ 25,654,076 $ 3,445,570 13 %
Average deposits $ 17,296,919 $ 16,611,906 $ 685,013 4 %

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



($ in thousands)	Nine Months Ended September 30,
					Change from 2022
	2023		2022		$		%
Net interest income before provision for credit losses	$	742,108	$	662,037	$	80,071	12	%
Noninterest income	129,809		145,750		(15,941)		(11)	%
Total revenue	871,917		807,787		64,130		8	%
Provision for credit losses	65,831		33,524		32,307		96	%
Noninterest expense	263,137		235,804		27,333		12	%
Segment income before income taxes	542,949		538,459		4,490		1	%
Income tax expense	159,280		154,222		5,058		3	%
Segment net income	$	383,669	$	384,237	$	(568)	0	%
Average loans	$	31,316,401	$	29,099,646	$	2,216,755	8	%
Average deposits	$	17,419,190	$	17,296,919	$	122,271	1	%

Commercial Banking segment net income decreased ~~$4.1~~by $12.7 million or ~~3%,~~10% year-over-year to ~~$122.9~~$110.2 million for the third quarter of ~~2022,~~2023. This decrease was due to ~~increases in~~higher provision for credit losses and noninterest expense ~~partially offset by revenue growth. For the first nine months of 2022, this segment’s net~~and lower noninterest income, ~~increased $24.0 million or 7% year-over-year to $384.2 million. This increase reflected revenue growth,~~ partially offset by higher ~~provision for credit losses and noninterest expense.~~net interest income. Net interest income before provision for credit losses increased ~~$33.2~~$19.4 million or ~~17%~~9% year-over-year to ~~$223.0~~$242.3 million for the third quarter of ~~2022, and $102.5~~2023. This increase was primarily due to higher loan interest income from commercial loan growth, partially offset by higher interest expense due to interest-bearing deposit growth. Noninterest income decreased by $5.0 million or ~~18%~~10% year-over-year to ~~$662.0~~$43.7 million for the third quarter of 2023, mainly due to a decrease in foreign exchange income. Provision for credit losses increased $22.3 million or 124% year-over-year to $40.4 million for the third quarter of 2023, primarily driven by commercial loan growth as well as the current economic outlook. Noninterest expense increased $6.2 million or 8% year-over-year to $87.6 million for the third quarter of 2023, primarily due to higher deposit account expense.

Net income in this segment decreased by $568 thousand to $383.7 million for the first nine months of ~~2022. The increases in both periods were~~2023. This decrease reflected higher provision for credit losses and noninterest expense and lower noninterest income, partially offset by higher net interest income. Net interest income before provision for credit losses increased $80.1 million or 12% year-over-year to $742.1 million for the first nine months of 2023. This increase was primarily due to higher loan interest income from commercial loan growth. ~~Provision for credit losses increased $29.3~~Noninterest income decreased by $15.9 million or ~~260%~~11% year-over-year to ~~$18.0 million for the third quarter of 2022, and $57.9 million or 237% year-over-year to $33.5~~$129.8 million for the first nine months of ~~2022, primarily driven by the current macroeconomic outlook~~2023, mainly due to decreases in interest rate contracts and ~~commercial loan growth. Noninterest expense~~other derivative income, net gains on sales of loans, and foreign exchange income. Provision for credit losses increased ~~$14.7~~$32.3 million or ~~22%~~96% year-over-year to ~~$81.4~~$65.8 million for ~~the 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~~2023, primarily driven by commercial loan growth as well as the current economic outlook. Noninterest expense increased ~~$31.8~~$27.3 million or ~~16%~~12% year-over-year to ~~$235.8~~$263.1 million ~~driven by increases in~~for the first nine months of 2023, primarily due to higher deposit account expense, allocated corporate overhead expenses and compensation and employee ~~benefits, corporate overhead allocations and other operating expenses.~~benefits.

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:


											Three Months Ended September 30,
															Change from 2022
($ in thousands)	($ in thousands)	Three Months Ended September 30,								($ in thousands)	2023		2022		$		%
						Change from 2021
		2022		2021		$		%
Net interest income before provision for credit losses	Net interest income before provision for credit losses	$	2,402	$	29,237	$	(26,835)	(92)	%	Net interest income before provision for credit losses	$	13,059	$	2,402	$	10,657	444	%
Noninterest (loss) income		(3,908)		7,738		(11,646)		(151)	%
Total (loss) revenue		(1,506)		36,975		(38,481)		(104)	%
Noninterest income (loss)										Noninterest income (loss)	7,948		(3,908)		11,856		303	%
Total revenue (loss)										Total revenue (loss)	21,007		(1,506)		22,513		NM

Noninterest expense	Noninterest expense	30,582		48,078		(17,496)		(36)	%	Noninterest expense	57,832		30,582		27,250		89	%
Segment loss before income taxes	Segment loss before income taxes	(32,088)		(11,103)		(20,985)		189	%	Segment loss before income taxes	(36,825)		(32,088)		(4,737)		(15)	%
Income tax benefit	Income tax benefit	(30,576)		(32,991)		2,415		(7)	%	Income tax benefit	(50,330)		(30,576)		(19,754)		65	%
Segment net (loss) income		$	(1,512)	$	21,888	$	(23,400)	(107)	%
Segment net income (loss)										Segment net income (loss)	$	13,505	$	(1,512)	$	15,017	NM

Average deposits	Average deposits	$	4,152,463	$	2,704,070	$	1,448,393	54	%	Average deposits	$	3,266,316	$	4,152,463	$	(886,147)	(21)	%


($ in thousands)	($ in thousands)	Nine Months Ended September 30,								($ in thousands)	Nine Months Ended September 30,
						Change from 2021									Change from 2022
		2022		2021		$		%			2023		2022		$		%
Net interest (loss) income before provision for credit losses		$	(45,661)	$	65,943	$	(111,604)	(169)	%
Net interest income (loss) before provision for credit losses										Net interest income (loss) before provision for credit losses	$	68,139	$	(45,661)	$	113,800	249	%
Noninterest income	Noninterest income	3,587		21,191		(17,604)		(83)	%	Noninterest income	7,298		3,587		3,711		103	%
Total (loss) revenue		(42,074)		87,134		(129,208)		(148)	%
Total revenue (loss)										Total revenue (loss)	75,437		(42,074)		117,511		279	%

Noninterest expense	Noninterest expense	72,084		114,431		(42,347)		(37)	%	Noninterest expense	141,637		72,084		69,553		96	%
Segment loss before income taxes	Segment loss before income taxes	(114,158)		(27,297)		(86,861)		318	%	Segment loss before income taxes	(66,200)		(114,158)		47,958		42	%
Income tax benefit	Income tax benefit	(94,546)		(104,950)		10,404		(10)	%	Income tax benefit	(141,588)		(94,546)		(47,042)		50	%
Segment net (loss) income		$	(19,612)	$	77,653	$	(97,265)	(125)	%
Segment net income (loss)										Segment net income (loss)	$	75,388	$	(19,612)	$	95,000	484	%

Average deposits	Average deposits	$	3,499,816	$	2,612,897	$	886,919	34	%	Average deposits	$	3,771,229	$	3,499,816	$	271,413	8	%

The Other segment reported segment loss before income taxes of ~~$32.1~~$36.8 million and segment net ~~loss~~income of $1.5 million for the third quarter of 2022, reflecting an income tax benefit of $30.6 million. For the first nine months of 2022, the Other segment reported segment loss before income taxes of $114.2 million and segment net loss of $19.6$13.5 million, reflecting an income tax benefit of ~~$94.5 million.~~$50.3 million, for the third quarter of 2023. The ~~increases~~increase in segment ~~losses~~loss before income taxes ~~for both periods were~~was primarily driven by ~~lower revenue,~~higher noninterest expense, partially offset by ~~decreases~~increases in noninterest ~~expense.~~income and net interest income. The ~~$26.8~~$10.7 million ~~and $111.6 million decreases~~increase in net interest income before provision for credit losses for the third quarter of 2023 was primarily driven by higher investment interest income due to a balance increase in interest-bearing cash and deposits with banks and higher yields on debt securities and interest-bearing cash and deposits with banks, partially offset by higher costs of interest-bearing deposits and borrowings. Noninterest income increased by $11.9 million for the third quarter of 2023, mainly due to an increase in foreign exchange income. Noninterest expense increased $27.3 million for the third quarter of 2023, primarily due to the timing of investments that closed.

For the first nine months of ~~2022, respectively, compared~~2023, the Other segment reported segment loss before income taxes of $66.2 million and segment net income of $75.4 million, reflecting an income tax benefit of $141.6 million. The decrease in segment loss before income taxes was primarily due to higher net interest income, partially offset by higher noninterest expense. The $113.8 million increase in net interest income before provision for credit losses for the ~~same prior year periods, were~~first nine months of 2023 was primarily driven by ~~lower~~higher investment interest income due to higher yields on interest-bearing cash and deposits with banks, and debt securities, and a higher FTP spread income absorbed by the Other segment, partially offset by ~~an increase in interest income from investments due to a~~ higher ~~yield on debt securities for the third quarter~~costs of ~~2022,~~interest-bearing deposits and ~~a higher volume of debt securities for the first nine months of 2022.~~borrowings. Noninterest expense ~~decreased $17.5 million year-over-year to $30.6 million for the third quarter of 2022, and $42.3 million year-over-year to $72.1~~increased $69.6 million for the first nine months of ~~2022, primarily due to lower amortization~~2023, reflecting the timing of ~~tax credits and other investments.~~investments that closed.

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.~~segments, and reflects the impact of tax credit investment activity. 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.

Tax credit investment amortization is allocated to the Other segment.

Balance Sheet Analysis

Debt Securities

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

•interest income for earnings and yield enhancement;

•funding availability for ~~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~~does not intend to ~~hold~~sell 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 September 30, ~~2022~~2023 and December 31, ~~2021,~~2022, and by credit ratings as of September 30, ~~2022:~~2023:


($ in thousands)		September 30, 2022						December 31, 2021							Ratings as of September 30, 2022 (1)
																						September 30, 2023									December 31, 2022													Ratings as of September 30, 2023 (1)
($ in thousands)	($ 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)				($ 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:
U.S. Treasury securities	U.S. Treasury securities	$	676,312	$	600,677	10	%		$	1,049,238	$	1,032,681	10	%		100	%		—	%		—	%		—	%	—		%		U.S. Treasury securities		$	974,615		$	904,101			15	%	$	676,306		$	606,203				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	319,070		260,424		5	%		1,333,984		1,301,971		13	%		100	%		—	%		—	%		—	%	—		%		U.S. government agency and U.S. government-sponsored enterprise debt securities		512,712			447,464				7	%	517,806			461,607					8		%						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	2,639,133		2,315,314		39	%		4,210,832		4,157,263		42	%		100	%		—	%		—	%		—	%	—		%		U.S. government agency and U.S. government-sponsored enterprise mortgage-backed securities		2,528,370			2,156,674				36	%	2,588,446			2,262,464					37		%						100		%	—	%	—	%	—	%	—	%
Municipal securities	Municipal securities	307,084		249,502		4	%		519,381		523,158		5	%		91	%		5	%		—	%		—	%	4		%		Municipal securities		301,408			243,556				4	%	303,884			257,099					4		%						97		%	—	%	—	%	—	%	3	%
Non-agency mortgage-backed securities	Non-agency mortgage-backed securities	1,233,490		1,069,513		18	%		1,388,857		1,378,374		14	%		82	%		—	%		—	%		—	%	18		%		Non-agency mortgage-backed securities		1,106,125			936,107				15	%	1,209,714			1,047,553					17		%						81		%	—	%	—	%	—	%	19	%
Corporate debt securities	Corporate debt securities	673,502		529,565		9	%		657,516		649,665		6	%		—	%		31	%		67	%		2	%	—		%		Corporate debt securities		653,501			475,434				8	%	673,502			526,274					9		%						—		%	31	%	65	%	4	%	—	%
Foreign government bonds	Foreign government bonds	238,720		225,810		4	%		260,447		257,733		3	%		47	%		53	%		—	%		—	%	—		%		Foreign government bonds		237,531			222,790				4	%	241,165			227,053					4		%						47		%	53	%	—	%	—	%	—	%
Asset-backed securities	Asset-backed securities	66,793		64,870		1	%		74,674		74,558		1	%		100	%		—	%		—	%		—	%	—		%		Asset-backed securities		44,819			43,757				1	%	51,152			49,076					1		%						100		%	—	%	—	%	—	%	—	%
Collateralized loan obligations (“CLOs”)		617,250		590,415		10	%		592,250		589,950		6	%		96	%		4	%		—	%		—	%	—		%
Collateralized loan obligations																		Collateralized loan obligations			617,250			609,954				10		%		617,250			597,664			10	%								96	%	4		%		—	%	—	%	—		%
Total AFS debt securities	Total AFS debt securities	$	6,771,354	$	5,906,090	100	%		$	10,087,179	$	9,965,353	100	%		85	%		5	%		6	%		0	%	4		%		Total AFS debt securities		$	6,976,331		$	6,039,837			100	%	$	6,879,225		$	6,034,993				100		%						87		%	5	%	5	%	—	%	3	%

HTM debt securities:	HTM debt securities:																														HTM debt securities:
U.S. Treasury securities	U.S. Treasury securities	$	522,713	$	466,085	19	%		$	—	$	—	—	%		100	%		—	%		—	%		—	%	—		%		U.S. Treasury securities		$	528,169		$	470,618			20	%	$	524,081		$	471,469				19		%						100		%	—	%	—	%	—	%	—	%
U.S. government agency and U.S. government-sponsored enterprise debt securities	U.S. government agency and U.S. government-sponsored enterprise debt securities	998,233		782,617		32	%		—		—		—	%		100	%		—	%		—	%		—	%	—		%		U.S. government agency and U.S. government-sponsored enterprise debt securities		1,001,298			752,291				33	%	998,972			789,412					32		%						100		%	—	%	—	%	—	%	—	%
U.S. government agency and U.S. government-sponsored enterprise mortgage-backed securities	U.S. government agency and U.S. government-sponsored enterprise mortgage-backed securities	1,301,824		1,066,339		43	%		—		—		—	%		100	%		—	%		—	%		—	%	—		%		U.S. government agency and U.S. government-sponsored enterprise mortgage-backed securities		1,245,675			949,564				41	%	1,289,106			1,042,310					43		%						100		%	—	%	—	%	—	%	—	%
Municipal securities	Municipal securities	189,897		144,094		6	%		—		—		—	%		100	%		—	%		—	%		—	%	—		%		Municipal securities		189,093			135,575				6	%	189,709			151,980					6		%						100		%	—	%	—	%	—	%	—	%
Total HTM debt securities	Total HTM debt securities	$	3,012,667	$	2,459,135	100	%		$	—	$	—	—	%		100	%		—	%		—	%		—	%	—		%		Total HTM debt securities		$	2,964,235		$	2,308,048			100	%	$	3,001,868		$	2,455,171				100		%						100		%	—	%	—	%	—	%	—	%
Total debt securities	Total debt securities	$	9,784,021	$	8,365,225				$	10,087,179	$	9,965,353																			Total debt securities		$	9,940,566		$	8,347,885					$	9,881,093		$	8,490,164

(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~~As of September 30, 2023, the Company’s AFS and HTM debt securities portfolios had an effective duration ~~defined~~(defined as the sensitivity of the value of the portfolio to interest rate ~~changes,~~changes) of ~~5.3 as of September 30, 2022. This increased from 5.0~~3.8 and 7.7, respectively, compared with 4.1 and 8.0, respectively, as of December 31, ~~2021, primarily~~2022. The modest decreases in both the AFS and HTM effective durations were due to ~~both~~ the ~~upshifting~~portfolio seasoning and ~~steepening~~reduced variation of optionality under the ~~yield curve.~~current interest rate environment.

Available-for-Sale Debt Securities

~~The~~As of September 30, 2023, the fair value of the AFS debt securities portfolio ~~totaled $5.91~~was relatively unchanged at $6.04 billion ~~as of September 30, 2022, a decrease of $4.06 billion or 41%~~ from ~~$9.97 billion as of~~ December 31, 2021. The decrease was primarily due to the 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.~~2022. 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 income (loss) ~~income~~ on the Consolidated Statement of Comprehensive Income. Pre-tax net unrealized losses on AFS debt securities were ~~$865.3~~$936.5 million as of September 30, ~~2022,~~2023, compared with ~~$121.8~~$844.2 million as of December 31, ~~2021.~~2022.

8082

As of both September 30, 2023 and December 31, 2022, ~~96%~~97% of the carrying value of the AFS debt securities portfolio was rated investment grade by ~~NRSROs, compared with 98% as of December 31, 2021.~~NRSROs. Of the AFS debt securities with gross unrealized losses, substantially all were rated investment grade as of both September 30, ~~2022~~2023 and December 31, ~~2021.~~2022. There was no allowance for credit losses ~~as of September 30, 2022 and December 31, 2021,~~ provided against the AFS debt ~~securities.~~securities as of each of September 30, 2023 and December 31, 2022. Additionally, there were no credit losses recognized in earnings for both the third ~~quarters~~quarter and first nine months of ~~2022~~2023 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.~~2022.

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 both September 30, 2023 and December 31, 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~~2022 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 commercial and industrial (“C~~&I,~~&I”), CRE, multifamily residential, and construction and land loans, ~~and~~as well as consumer loans, which consist of single-family residential, home equity lines of credit (“HELOCs”), and other consumer loans. ~~Total net loans were $46.87~~Loans held-for-investment totaled $50.91 billion as of September 30, ~~2022,~~2023, an increase of ~~$5.72~~$2.70 billion or ~~14%~~6% from ~~$41.15~~$48.20 billion as of December 31, ~~2021.~~2022. This ~~increase~~growth was primarily driven by ~~well-diversified growth throughout our major loan categories including~~ increases of ~~$2.53~~$1.30 billion or ~~16%~~7% in total CRE loans ~~$1.80~~and $1.27 billion or ~~16%~~9% in total residential mortgage ~~loans, and $1.47 billion or 10% in C&I~~ loans. The composition of the loan portfolio as of September 30, ~~2022~~2023 was similar to the composition as of December 31, ~~2021.~~2022.

The following table presents the composition of the Company’s total loan portfolio by loan type as of September 30, ~~2022~~2023 and December 31, ~~2021:~~2022:


($ in thousands)		September 30, 2022				December 31, 2021
											September 30, 2023				December 31, 2022
($ in thousands)	($ in thousands)	Amount		%		Amount		%		($ in thousands)	Amount		%		Amount		%
										Commercial:
C&I ~~(1)~~	C&I ~~(1)~~	$	15,625,072	33	%	$	14,150,608	34	%	C&I ~~(1)~~	$	15,864,042	31	%	$	15,711,095	33	%
CRE:	CRE:									CRE:
CRE	CRE	13,573,157		28	%	12,155,047		29	%	CRE	14,667,378		29	%	13,857,870		29	%
Multifamily residential	Multifamily residential	4,559,302		10	%	3,675,605		9	%	Multifamily residential	4,900,097		10	%	4,573,068		9	%
Construction and land	Construction and land	556,894		1	%	346,486		1	%	Construction and land	798,190		2	%	638,420		1	%
Total CRE	Total CRE	18,689,353		39	%	16,177,138		39	%	Total CRE	20,365,665		41	%	19,069,358		39	%
Total commercial	Total commercial	34,314,425		72	%	30,327,746		73	%	Total commercial	36,229,707		72	%	34,780,453		72	%
Consumer:	Consumer:									Consumer:
Residential mortgage:	Residential mortgage:									Residential mortgage:
Single-family residential	Single-family residential	10,855,345		23	%	9,093,702		22	%	Single-family residential	12,836,558		25	%	11,223,027		23	%
HELOCs	HELOCs	2,184,924		5	%	2,144,821		5	%	HELOCs	1,776,665		3	%	2,122,655		5	%
Total residential mortgage	Total residential mortgage	13,040,269		28	%	11,238,523		27	%	Total residential mortgage	14,613,223		28	%	13,345,682		28	%
Other consumer	Other consumer	87,561		0	%	127,512		0	%	Other consumer	64,254		0	%	76,295		0	%
Total consumer	Total consumer	13,127,830		28	%	11,366,035		27	%	Total consumer	14,677,477		28	%	13,421,977		28	%
Total loans held-for-investment ~~(2)~~(1)	Total loans held-for-investment ~~(2)~~(1)	47,442,255		100	%	41,693,781		100	%	Total loans held-for-investment ~~(2)~~(1)	50,907,184		100	%	48,202,430		100	%
Allowance for loan losses	Allowance for loan losses	(582,517)				(541,579)				Allowance for loan losses	(655,523)				(595,645)
Loans held-for-sale ~~(3)~~(2)	Loans held-for-sale ~~(3)~~(2)	14,500				635				Loans held-for-sale ~~(3)~~(2)	4,762				25,644
Total loans, net	Total loans, net	$	46,874,238			$	41,152,837			Total loans, net	$	50,256,423			$	47,632,429

(1)Includes ~~$110.9~~$72.0 million and ~~$534.2~~$70.4 million ~~of Paycheck Protection Program (“PPP”) loans as of September 30, 2022~~comprising unamortized deferred and ~~December 31, 2021, respectively.~~

~~(2)Includes $(60.3) million and $(50.7) million~~unearned fees, net of ~~net deferred loan fees and net unamortized~~ premiums as of September 30, ~~2022~~2023 and December 31, ~~2021,~~2022, respectively.

~~(3)~~(2)Consists of ~~a multi-family residential loan as of September 30, 2022 and single-family residential~~C&I loans as of both September 30, 2023 and December 31, ~~2021.~~2022.

Commercial

The commercial loan portfolio comprised 72% ~~and 73%~~ of total loans as of both September 30, ~~2022~~2023 and December 31, ~~2021, respectively.~~2022. The Company actively monitors 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 ~~$22.21~~$24.30 billion as of September 30, ~~2022,~~2023, an increase of ~~$1.92~~$1.52 billion or 9%7% from ~~$20.29~~$22.78 billion as of December 31, ~~2021.~~2022. Total C&I loans were ~~$15.63~~$15.86 billion as of September 30, ~~2022,~~2023, an increase of ~~$1.47~~$152.9 million or 1% from $15.71 billion ~~or 10% from $14.15 billion.~~as of December 31, 2022, with a utilization rate of 65% as of September 30, 2023, compared with 69% as of December 31, 2022. Total C&I loans made up ~~33%~~31% and ~~34%~~33% of total loans held-for-investment as of September 30, ~~2022~~2023 and December 31, ~~2021,~~2022, respectively. The C&I loan portfolio includes loans and financing for businesses inacross a wide spectrum of ~~industries, comprised~~industries. The Company offers a variety of C&I products, including commercial business lending, working capital lines of credit, trade finance, letters of credit, ~~affordable housing lending,~~ asset-based lending, asset-backed finance, project finance and equipment financing. ~~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 ~~$948.2~~$768.3 million and ~~$939.4~~$855.9 million as of September 30, ~~2022~~2023 and December 31, ~~2021,~~2022, respectively. The majority of the C&I loans had variable interest rates as of both September 30, ~~2022~~2023 and December 31, ~~2021.~~2022.

The C&I portfolio is well-diversified by industry. The Company monitors concentrations within the C&I loan portfolio by industry and customer exposure, and ~~industry classification, setting diversification targets and~~has exposure limits by industry orand loan product. The following ~~charts illustrate~~table presents the industry mix within ~~our~~the Company’s C&I loan portfolio as of September 30, ~~2022~~2023 and December 31, ~~2021.~~2022.



	September 30, 2023					December 31, 2022
($ in thousands)	Amount		%		($ in thousands)	Amount		%
Industry:					Industry:
Private equity	$	2,422,674	15	%	Private equity	$	2,238,723	14	%
Media & entertainment	1,794,897		11	%	Media & entertainment	1,841,719		12	%
Real estate investment & management	1,383,773		9	%	Real estate investment & management	1,272,169		8	%
Manufacturing & wholesale	900,674		6	%	Manufacturing & wholesale	1,091,933		7	%
Infrastructure & clean energy	878,025		6	%	Infrastructure & clean energy	820,095		5	%
Tech & telecom	668,514		4	%	Food production & distribution	738,636		5	%
Food production & distribution	648,224		4	%	Tech & telecom	618,719		4	%
Hospitality & leisure	597,753		4	%	Hospitality & leisure	562,234		4	%
Oil & gas	574,966		4	%	Oil & gas	519,784		3	%
Healthcare services	377,434		2	%	Consumer goods	425,214		3	%
All other C&I	5,617,108		35	%	All other C&I	5,581,869		35	%
Total C&I	$	15,864,042	100	%	Total C&I	$	15,711,095	100	%

Commercial — Total Commercial Real Estate Loans. Total CRE loans ~~outstanding were $18.69~~totaled $20.37 billion as of September 30, ~~2022,~~2023, which grew ~~by $2.51~~$1.30 billion or ~~16%~~7% from ~~$16.18~~$19.07 billion as of December 31, ~~2021,~~2022, and accounted for ~~39%~~41% of total loans held-for-investment as of ~~both~~ September 30, ~~2022 and~~2023, compared with 39% as of December 31, ~~2021.~~2022. The total CRE ~~loan~~ portfolio consists of CRE, multifamily residential, and construction and land ~~loans.~~loans, and affordable housing lending. The ~~year-to-date growth~~increase in total CRE loans was ~~primarily~~ driven by ~~multifamily~~well-diversified growth across our major property types, partially offset by a decrease in office CRE loans. The Company’s underwriting parameters for CRE loans are established in compliance with supervisory guidance, including: property type, geography and ~~industrial property types.~~loan-to-value (“LTV”). The consistency of the Company’s low LTV underwriting standards has historically resulted in lower credit losses.

The Company’s total CRE loan portfolio is ~~diversified~~well-diversified by property type with an average CRE loan size of ~~$2.7 million and $2.5~~$3.0 million as of September 30, ~~2022 and~~2023, compared with $2.8 million as of December 31, ~~2021, respectively.~~2022. The following table summarizes the Company’s total CRE loans by property type as of September 30, ~~2022~~2023 and December 31, ~~2021:~~2022:


											September 30, 2023				December 31, 2022
($ in thousands)	($ in thousands)	September 30, 2022				December 31, 2021				($ in thousands)	Amount		%		Amount		%
		Amount		%		Amount		%
Property types:	Property types:									Property types:
Multifamily										Multifamily	$	4,900,097	24	%	$	4,573,068	24	%
Retail (1)	Retail (1)	$	3,991,541	21	%	$	3,685,900	23	%	Retail (1)	4,250,593		21	%	4,075,768		22	%
Multifamily		4,559,302		24	%	3,675,605		23	%
Industrial (1)										Industrial (1)	3,947,570		19	%	3,617,086		19	%
Hotel (1)										Hotel (1)	2,339,435		12	%	2,085,910		11	%
Office (1)	Office (1)	2,943,391		16	%	2,804,006		17	%	Office (1)	2,285,846		11	%	2,522,554		13	%
Industrial (1)		3,474,909		19	%	2,807,325		18	%
Hospitality (1)		2,099,226		11	%	1,993,995		12	%
Healthcare (1)										Healthcare (1)	836,882		4	%	796,577		4	%
Construction and land	Construction and land	556,894		3	%	346,486		2	%	Construction and land	798,190		4	%	638,420		3	%
Other (1)	Other (1)	1,064,090		6	%	863,821		5	%	Other (1)	1,007,052		5	%	759,975		4	%
Total CRE loans	Total CRE loans	$	18,689,353	100	%	$	16,177,138	100	%	Total CRE loans	$	20,365,665	100	%	$	19,069,358	100	%

(1)Included in CRE ~~loan category.~~loans, which is a subset of Total CRE loans.

The weighted-average ~~loan-to-value (“LTV”)~~LTV ratio of the total CRE loan portfolio was 51% as of both September 30, ~~2022~~2023 and December 31, ~~2021. The low weighted-average~~2022. Weighted average LTV ~~ratio was consistent across CRE property types.~~is based on the most recent LTV, which is based on the latest available appraisal and current loan commitment. Approximately ~~87% and 89%~~91% of total CRE loans had an LTV ratio of 65% or lower as of September 30, ~~2022 and~~2023, compared with 90% as of 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.~~2022.

The following tables provide a summary of the Company’s CRE, multifamily residential, and construction and land loans by geography as of September 30, ~~2022~~2023 and December 31, ~~2021.~~2022. The distribution of the total CRE loan portfolio reflects the Company’s ~~geographic~~geographical branch footprint, which is primarily concentrated in California:


($ in thousands)		September 30, 2022
																			September 30, 2023
($ in thousands)	($ in thousands)	CRE		%		Multifamily Residential		%		Construction and Land		%		Total CRE		%		($ in thousands)	CRE		%		Multifamily Residential		%		Construction and Land		%		Total CRE		%
																		Geographic markets:
Southern California	Southern California	$	7,022,529			$	2,257,999			$	203,939			$	9,484,467			Southern California	$	7,552,830	51	%	$	2,296,539	47	%	$	297,311	37	%	$	10,146,680	50	%
Northern California	Northern California	2,802,337				871,497				209,083				3,882,917				Northern California	2,729,784		19	%	988,375		20	%	246,404		31	%	3,964,563		19	%
California	California	9,824,866		72	%	3,129,496		69	%	413,022		74	%	13,367,384		72	%	California	10,282,614		70	%	3,284,914		67	%	543,715		68	%	14,111,243		69	%
Texas	Texas	1,140,975		8	%	412,316		9	%	3,037		1	%	1,556,328		8	%	Texas	1,111,775		8	%	445,144		9	%	20,720		3	%	1,577,639		8	%
New York	New York	684,810		5	%	214,032		5	%	82,135		15	%	980,977		5	%	New York	696,583		5	%	261,433		5	%	76,786		10	%	1,034,802		5	%
Washington	Washington	467,321		4	%	170,864		4	%	13,132		2	%	651,317		3	%	Washington	488,814		3	%	165,257		4	%	18,592		2	%	672,663		3	%
Arizona																		Arizona	357,997		2	%	149,327		3	%	28,496		3	%	535,820		3	%
Nevada	Nevada	160,055		1	%	110,203		2	%	23,693		4	%	293,951		2	%	Nevada	237,442		2	%	106,843		2	%	32,213		4	%	376,498		2	%
Arizona		226,931		2	%	99,367		2	%	407		0	%	326,705		2	%
Other markets	Other markets	1,068,199		8	%	423,024		9	%	21,468		4	%	1,512,691		8	%	Other markets	1,492,153		10	%	487,179		10	%	77,668		10	%	2,057,000		10	%
Total loans	Total loans	$	13,573,157	100	%	$	4,559,302	100	%	$	556,894	100	%	$	18,689,353	100	%	Total loans	$	14,667,378	100	%	$	4,900,097	100	%	$	798,190	100	%	$	20,365,665	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 %



	December 31, 2022
($ in thousands)	CRE		%		Multifamily Residential		%		Construction and Land		%		Total CRE		%
Geographic markets:
Southern California	$	7,233,902	52	%	$	2,215,632	48	%	$	222,425	35	%	$	9,671,959	51	%
Northern California	2,798,840		20	%	890,002		20	%	235,732		37	%	3,924,574		20	%
California	10,032,742		72	%	3,105,634		68	%	458,157		72	%	13,596,533		71	%
Texas	1,150,401		8	%	410,872		9	%	2,153		0	%	1,563,426		8	%
New York	682,096		5	%	221,253		5	%	99,595		16	%	1,002,944		5	%
Washington	449,423		3	%	173,611		4	%	15,557		2	%	638,591		3	%
Arizona	291,114		2	%	95,460		2	%	297		0	%	386,871		2	%
Nevada	159,092		1	%	108,060		2	%	30,673		5	%	297,825		2	%
Other markets	1,093,002		9	%	458,178		10	%	31,988		5	%	1,583,168		9	%
Total loans	$	13,857,870	100	%	$	4,573,068	100	%	$	638,420	100	%	$	19,069,358	100	%

~~Because 72%~~As 69% and ~~75%~~71% of total CRE loans were concentrated in California as of September 30, ~~2022~~2023 and December 31, ~~2021,~~2022, 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,~~markets, see Item 1A. Risk Factors — Risks Related to Geopolitical Uncertainties to the Company’s ~~2021~~2022 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~~$14.67 billion as of September 30, ~~2022,~~2023, compared with ~~$12.16~~$13.86 billion as of December 31, ~~2021. CRE loans made up 28%~~2022, and accounted for 29% of total loans held-for-investment as of ~~September 30, 2022 and December 31, 2021, respectively.~~both dates. Interest rates on CRE loans may be fixed, variable or hybrid. As of September 30, ~~2022, 66%~~2023, 60% of our CRE portfolio was variable rate, of which ~~48%~~50% 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, 2022, 65% of our CRE portfolio was variable rate, of which 47% 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 20% of the CRE loans as of both September 30, 2023 and December 31, 2022. 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 $4.90 billion as of September 30, 2023, compared with $4.57 billion as of December 31, 2022, and accounted for 10% and 9% of total loans held-for-investment as of September 30, 2023 and December 31, 2022, 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, 2023, 54% of our multifamily residential loan portfolio was variable rate, of which 39% had customer-level interest rate derivative contracts in place. These are hedging contracts offered by the Company to help our customers manage their interest rate risk while the Bank's own exposure remained variable rate. In comparison, as of December 31, ~~2021, 75%~~2022, 57% of our ~~CRE~~multifamily residential loan 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 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 $4.56 billion as of 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 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%~~34% 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 ~~$556.9~~$798.2 million as of September 30, ~~2022,~~2023, compared with ~~$346.5~~$638.4 million as of December 31, ~~2021,~~2022, and accounted for 2% and 1% of total loans held-for-investment as of ~~both dates.~~September 30, 2023 and December 31, 2022, respectively. Construction loan exposure was made up of ~~$452.2~~$655.2 million in loans outstanding, plus ~~$613.8~~$699.0 million in unfunded commitments as of September 30, ~~2022,~~2023, compared with ~~$297.9~~$536.8 million in loans outstanding, plus ~~$361.2~~$611.4 million in unfunded commitments as of December 31, ~~2021.~~2022. Land loans totaled ~~$104.7~~$143.0 million as of September 30, ~~2022,~~2023, compared with ~~$48.6~~$101.7 million as of December 31, ~~2021.~~2022.

Consumer

Residential mortgage loans are primarily originated through the Bank’s branch network. The following tables summarize the Company’s single-family residential and HELOC loan portfolios by geography as of September 30, ~~2022~~2023 and December 31, ~~2021:~~2022. The average total residential loan size was $436 thousand and $434 thousand as of September 30, 2023 and December 31, 2022, respectively:


($ in thousands)		September 30, 2022
															September 30, 2023
($ in thousands)	($ in thousands)	Single-Family Residential		%		HELOCs		%		Total Residential Mortgage		%		($ in thousands)	Single-Family Residential		%		HELOCs		%		Total Residential Mortgage		%
														Geographic markets:
Southern California	Southern California	$	4,021,598			$	974,763			$	4,996,361			Southern California	$	4,750,136	37	%	$	819,560	46	%	$	5,569,696	38	%
Northern California	Northern California	1,252,150				512,356				1,764,506				Northern California	1,560,454		12	%	387,532		22	%	1,947,986		13	%
California	California	5,273,748		48	%	1,487,119		68	%	6,760,867		52	%	California	6,310,590		49	%	1,207,092		68	%	7,517,682		51	%
New York	New York	3,849,305		35	%	295,946		14	%	4,145,251		32	%	New York	4,274,703		33	%	252,036		14	%	4,526,739		31	%
Washington	Washington	621,347		6	%	247,570		11	%	868,917		7	%	Washington	688,842		6	%	195,881		11	%	884,723		6	%
Massachusetts	Massachusetts	291,154		3	%	90,052		4	%	381,206		3	%	Massachusetts	366,793		3	%	70,672		4	%	437,465		3	%
Georgia	Georgia	282,611		3	%	24,212		1	%	306,823		2	%	Georgia	401,471		3	%	16,822		1	%	418,293		3	%
Nevada														Nevada	377,730		3	%	32,665		2	%	410,395		3	%
Texas	Texas	300,007		3	%	—		—	%	300,007		2	%	Texas	400,214		3	%	—		—	%	400,214		3	%
Other markets	Other markets	237,173		2	%	40,025		2	%	277,198		2	%	Other markets	16,215		0	%	1,497		0	%	17,712		0	%
Total	Total	$	10,855,345	100	%	$	2,184,924	100	%	$	13,040,269	100	%	Total	$	12,836,558	100	%	$	1,776,665	100	%	$	14,613,223	100	%
Lien priority:	Lien priority:													Lien priority:
First mortgage	First mortgage	$	10,855,345	100	%	$	1,855,057	85	%	$	12,710,402	97	%	First mortgage	$	12,836,558	100	%	$	1,412,482	80	%	$	14,249,040	98	%
Junior lien mortgage	Junior lien mortgage	—		—	%	329,867		15	%	329,867		3	%	Junior lien mortgage	—		—	%	364,183		20	%	364,183		2	%
Total	Total	$	10,855,345	100	%	$	2,184,924	100	%	$	13,040,269	100	%	Total	$	12,836,558	100	%	$	1,776,665	100	%	$	14,613,223	100	%



	December 31, 2022
($ in thousands)	Single-Family Residential		%		HELOCs		%		Total Residential Mortgage		%
Geographic markets:
Southern California	$	4,142,623	37	%	$	959,632	45	%	$	5,102,255	38	%
Northern California	1,294,721		11	%	492,921		23	%	1,787,642		14	%
California	5,437,344		48	%	1,452,553		68	%	6,889,897		52	%
New York	3,964,779		35	%	286,285		14	%	4,251,064		32	%
Washington	632,892		6	%	236,434		11	%	869,326		7	%
Massachusetts	299,051		3	%	85,590		4	%	384,641		3	%
Georgia	303,615		3	%	21,493		1	%	325,108		2	%
Texas	316,771		3	%	—		—	%	316,771		2	%
Nevada	253,702		2	%	40,300		2	%	294,002		2	%
Other markets	14,873		0	%	—		—	%	14,873		0	%
Total	$	11,223,027	100	%	$	2,122,655	100	%	$	13,345,682	100	%
Lien priority:
First mortgage	$	11,223,027	100	%	$	1,770,741	83	%	$	12,993,768	97	%
Junior lien mortgage	—		—	%	351,914		17	%	351,914		3	%
Total	$	11,223,027	100	%	$	2,122,655	100	%	$	13,345,682	100	%

8587

($ 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.~~Loans. Single-family residential loans totaled ~~$10.86~~$12.84 billion or 25% of total loans held-for-investment as of September 30, 2023, compared with $11.22 billion or 23% of total loans held-for-investment as of ~~September 30, 2022, compared with $9.09~~December 31, 2022. Single-family residential loans increased $1.61 billion or ~~22% of total loans held-for-investment as of~~14% from December 31, ~~2021. Year-to-date, single-family residential mortgages increased $1.76 billion or 19%,~~2022, primarily driven by ~~net~~organic growth in mortgages and residential properties in California and New York. The Company was in a first lien position for all of its single-family residential loans as of both September 30, ~~2022~~2023 and December 31, ~~2021.~~2022. Many of these loans are reduced documentation loans, for which a substantial down payment is required, resulting in a low LTV ratio at origination, typically 65% or less. The weighted-average LTV ratio was 53% as of both dates. 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,~~annually, after an initial fixed rate period.

Consumer — Home Equity Lines of Credit. Total HELOC commitments were ~~$3.27~~$5.31 billion as of September 30, ~~2022, which grew by $775.2~~2023, a decrease of $190.5 million or ~~31%~~3% from ~~$2.49~~$5.50 billion as of December 31, ~~2021. Unfunded~~2022, with a utilization rate of 33% as of September 30, 2023, compared with 39% as of December 31, 2022. A majority of unfunded HELOC commitments are unconditionally cancellable. HELOCs outstanding totaled ~~$2.18~~$1.78 billion or 3% of total loans held-for-investment as of September 30, ~~2022,~~2023, compared with ~~$2.14~~$2.12 billion ~~as of December 31, 2021, and accounted for~~or 5% of total loans held-for-investment as of ~~both dates. Year-to-date,~~December 31, 2022. HELOCs ~~increased $40.1~~outstanding decreased $346.0 million or ~~2%, primarily driven by growth in Washington, Massachusetts, and California.~~16% from December 31, 2022. The Company was in a first lien position for ~~85%~~80% and ~~87%~~83% of total outstanding HELOCs as of September 30, ~~2022~~2023 and December 31, ~~2021,~~2022, respectively. The weighted-average LTV ratio was 48% on HELOC commitments as of September 30, 2023, compared with 49% as of December 31, 2022. Weighted-average LTV ratio represents the loan’s balance divided by the estimated current property value. For junior lien home equity loans, combined LTV ratios are used for junior lien home equity products. 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~~As a result, these loans have historically experienced low delinquency and loss rates. Substantially all of the Company’s HELOCs were variable-rate loans as of both September 30, ~~2022~~2023 and December 31, ~~2021.~~2022.

All originated commercial and consumer loans are subject to the Company’s conservative underwriting guidelines and loan origination standards. Management believes that the Company’s underwriting criteria and procedures adequately consider the unique risks associated with these products. The Company conducts 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.

8688

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 September 30, ~~2022~~2023 and December 31, ~~2021:~~2022:


($ in thousands)		September 30, 2022				December 31, 2021
											September 30, 2023				December 31, 2022
($ in thousands)	($ in thousands)	Amount		% of Total Consolidated Assets		Amount		% of Total Consolidated Assets		($ in thousands)	Amount		% of Total Consolidated Assets		Amount		% of Total Consolidated Assets
										Hong Kong branch:
Cash and cash equivalents	Cash and cash equivalents	$	871,196	1	%	$	831,283	1	%	Cash and cash equivalents	$	543,497	1	%	$	911,784	1	%
Interest-bearing deposits with banks	Interest-bearing deposits with banks	$	72,245	0	%	$	—	—	%	Interest-bearing deposits with banks	$	—	—	%	$	28,772	0	%
AFS debt securities (1)	AFS debt securities (1)	$	280,817	0	%	$	242,926	0	%	AFS debt securities (1)	$	579,226	1	%	$	281,804	0	%
Loans held-for-investment (2)	Loans held-for-investment (2)	$	907,153	1	%	$	849,573	1	%	Loans held-for-investment (2)	$	862,116	1	%	$	968,450	2	%
Total assets	Total assets	$	2,152,110	3	%	$	1,933,164	3	%	Total assets	$	1,995,583	3	%	$	2,212,606	3	%
Subsidiary bank in China:	Subsidiary bank in China:									Subsidiary bank in China:
Cash and cash equivalents	Cash and cash equivalents	$	539,133	1	%	$	543,134	1	%	Cash and cash equivalents	$	603,667	1	%	$	556,656	1	%
Interest-bearing deposits with banks		$	13,049	0	%	$	51,243	0	%

AFS debt securities (3)	AFS debt securities (3)	$	120,178	0	%	$	141,404	0	%	AFS debt securities (3)	$	118,523	0	%	$	122,053	0	%
Loans held-for-investment (2)	Loans held-for-investment (2)	$	1,192,883	2	%	$	984,591	2	%	Loans held-for-investment (2)	$	1,301,045	2	%	$	1,170,437	2	%
Total assets	Total assets	$	1,850,531	3	%	$	1,709,640	3	%	Total assets	$	2,016,267	3	%	$	1,836,811	3	%

(1)Comprised of U.S. Treasury securities and foreign government bonds as of both September 30, ~~2022~~2023 and December 31, ~~2021.~~2022.

(2)Primarily comprised of C&I loans as of both September 30, ~~2022~~2023 and December 31, ~~2021.~~2022.

(3)Comprised of foreign government bonds as of both September 30, ~~2022~~2023 and December 31, ~~2021.~~2022.

The following table presents the total revenue generated by the Company’s overseas offices for the third ~~quarter~~quarters and first nine months of ~~2022~~2023 and ~~2021:~~2022:


($ in thousands)	($ in thousands)	Three Months Ended September 30,								Nine Months Ended September 30,								($ in thousands)	Three Months Ended September 30,								Nine Months Ended September 30,
		2022				2021				2022				2021					2023				2022				2023				2022
		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	$	14,296	2	%	$	5,912	1	%	$	32,405	2	%	$	18,252	1	%	Total revenue	$	13,906	2	%	$	14,296	2	%	$	41,479	2	%	$	32,405	2	%
Subsidiary Bank in China:	Subsidiary Bank in China:																	Subsidiary Bank in China:
Total revenue	Total revenue	$	11,616	2	%	$	7,592	2	%	$	30,652	2	%	$	20,271	2	%	Total revenue	$	6,788	1	%	$	11,616	2	%	$	26,098	1	%	$	30,652	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 $254.0 million 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. The Company did not repurchase shares during the third quarter of 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.~~

The Company’s stockholders’ equity was ~~$5.66~~$6.60 billion as of September 30, ~~2022, a decrease~~2023, an increase of ~~$176.6~~$612.1 million or 3%10% from ~~$5.84~~$5.98 billion as of December 31, ~~2021.~~2022. The ~~year-to-date decrease~~increase in the Company’s stockholders’ equity was primarily due to ~~a negative change in AOCI~~$922.2 million of ~~$709.7~~net income, partially offset by $205.7 million ~~$172.1 million in~~of common dividends declared and ~~$100.0~~$109.7 million ~~in common stock repurchases, partially offset by $791.3 million in net income. The negative change in AOCI was primarily due to increased unrealized losses in AFS debt securities.~~of other comprehensive loss. 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 per share was ~~$40.17 per common share~~$46.62 as of September 30, ~~2022, a decrease~~2023, an increase of 2%10% from ~~$41.13~~$42.46 per ~~common~~ share as of December 31, ~~2021,~~2022, primarily as a result of the factors described above. Tangible ~~equity~~book value per ~~common~~ share was ~~$36.80~~$43.29 as of September 30, ~~2022,~~2023, compared with ~~$37.79~~$39.10 as of December 31, ~~2021.~~2022. 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 common stock cash dividend of $0.48 and $0.40 ~~and $0.33~~ per ~~common~~ share during the third quarters of ~~2022~~2023 and ~~2021,~~2022, respectively. In October ~~2022,~~2023, the Company’s Board of Directors declared fourth quarter ~~2022~~2023 cash dividend of ~~$0.40~~$0.48 per ~~common~~ share. The dividend is payable on November 15, ~~2022,~~2023, to stockholders of record as of November 1, ~~2022.~~2023. In addition, the Company publicly announced in October 2023, that the Board approved the resumption of share repurchases under the previously authorized stock repurchase plan of $500.0 million of the Company’s common stock, of which $254.0 million was available as of September 30, 2023.

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~~funding as of September 30, ~~2022~~2023 and December 31, ~~2021:~~2022:


($ in thousands)		September 30, 2022				December 31, 2021				Change
															September 30, 2023				December 31, 2022				Change
($ in thousands)	($ in thousands)	Amount		%		Amount		%		$		%		($ in thousands)	Amount		%		Amount		%		$		%
														Deposits:

Noninterest-bearing demand	Noninterest-bearing demand	$	21,645,394	40	%	$	22,845,464	43	%	$	(1,200,070)	(5)	%	Noninterest-bearing demand	$	16,169,072	29	%	$	21,051,090	38	%	$	(4,882,018)	(23)	%
Interest-bearing checking	Interest-bearing checking	6,822,343		13	%	6,524,721		12	%	297,622		5	%	Interest-bearing checking	7,689,289		14	%	6,672,165		12	%	1,017,124		15	%
Money market	Money market	12,113,292		23	%	13,130,300		25	%	(1,017,008)		(8)	%	Money market	12,613,827		23	%	12,265,024		22	%	348,803		3	%
Savings	Savings	2,917,770		5	%	2,888,065		5	%	29,705		1	%	Savings	1,963,766		4	%	2,649,037		4	%	(685,271)		(26)	%

Time deposits	Time deposits	10,358,563		19	%	7,961,982		15	%	2,396,581		30	%	Time deposits	16,651,077		30	%	13,330,533		24	%	3,320,544		25	%
Total deposits	Total deposits	$	53,857,362	100	%	$	53,350,532	100	%	$	506,830	1	%	Total deposits	$	55,087,031	100	%	$	55,967,849	100	%	$	(880,818)	(2)	%

Other Funds:	Other Funds:													Other Funds:
Short-term borrowings														Short-term borrowings	$	4,500,000	97	%	$	—	—	%	$	4,500,000	100	%

Federal funds purchased		$	200,000			$	—			$	200,000	100	%
FHLB advances		324,920				249,331				75,589		30	%

Repurchase agreements	Repurchase agreements	611,785				300,000				311,785		104	%	Repurchase agreements	—		—	%	300,000		67	%	(300,000)		(100)	%
Long-term debt	Long-term debt	147,875				147,658				217		0	%	Long-term debt	148,173		3	%	147,950		33	%	223		0	%
Total other funds	Total other funds	$	1,284,580			$	696,989			$	587,591	84	%	Total other funds	$	4,648,173	100	%	$	447,950	100	%	$	4,200,223	NM
Total sources of funds	Total sources of funds	$	55,141,942			$	54,047,521			$	1,094,421	2	%	Total sources of funds	$	59,735,204			$	56,415,799			$	3,319,405	6	%

NM — Not meaningful.

Deposits

The Company’s strategy is to grow and retain relationship-based deposits to provide a stable and low-cost source of funding and liquidity. Accordingly, the Company offers a wide variety of deposit products to meet the needs of its consumer and commercial customers. ~~To provide~~As a result, the Company’s deposit base is seasoned, stable and ~~low-cost source of funding and liquidity,~~well-diversified. The following chart presents the Company’s ~~strategy is to grow~~deposits by customer segment as of September 30, 2023 and ~~retain relationship-based deposits.~~ December 31, 2022.

Total deposits were ~~$53.86~~$55.09 billion as of September 30, ~~2022, an increase~~2023, a decrease of ~~$506.8~~$880.8 million or 1%2% from ~~$53.35~~$55.97 billion as of December 31, ~~2021.~~2022. The ~~increase~~decrease in deposits was primarily ~~due to growth in time~~driven by lower brokered deposits, partially offset by ~~decreases~~an increase in ~~noninterest-bearing demand and money market~~customer deposits. ~~This move from noninterest-bearing and lower paying non-maturity~~The Company paid down a portion of its brokered deposits as of September 30, 2023, which decreased the percentage of brokered deposits to ~~time~~total deposits ~~was largely driven by continued increases in benchmark rates.~~to 4% from 6% as of December 31, 2022. Noninterest-bearing demand deposits comprised ~~40%~~29% and ~~43%~~38% of total deposits as of September 30, ~~2022~~2023 and December 31, ~~2021,~~2022, respectively.

Uninsured deposits represent the portion of deposit accounts in U.S. offices that exceed the FDIC insurance limit. The Company calculates its uninsured deposits based on the methodologies and assumptions used for regulatory reporting. Total uninsured deposit balances reported on Schedule RC-OM item 2 of the Bank’s Call report were $26.46 billion and $31.04 billion as of September 30, 2023 and December 31, 2022, respectively.

The following table summarizes the Company’s uninsured deposits information as of September 30, 2023 and December 31, 2022, after certain adjustments:



($ in thousands)		September 30, 2023			December 31, 2022
Uninsured deposits, per regulatory reporting requirements		$	26,464,794		$	31,036,308
Less: Collateralized deposits		(3,826,088)			(3,780,329)
Affiliate deposits		(318,804)			(352,977)
Uninsured deposits, excluding collateralized and affiliate deposits	(a)	$	22,319,902		$	26,903,002

Total domestic deposits	(b)	$	52,602,805		$	53,225,764
Uninsured deposits, excluding collateralized and affiliate deposits ratio	(a) / (b)	42		%	51		%

Management believes that presenting uninsured deposits excluding collateralized and affiliate deposits provides a more accurate view of the deposits at risk, given that the collateralized deposits are secured, and the affiliate deposits are not customer-facing and are eliminated in consolidation. The Company’s domestic uninsured deposits, excluding collateralized and affiliate deposits ratio improved to 42% as of September 30, 2023, compared with 51% as of December 31, 2022. The Company offers an ICS product that allows customers to insure deposits above FDIC insurance limits. Increasing customer demand for the ICS product has contributed to the improvement in the uninsured deposits, excluding collateralized and affiliate deposits ratio.

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$4.50 billion of short-term borrowings outstanding ~~overnight federal funds purchase of $200.0 million, with a fixed interest rate of 3.11%~~ as of September 30, ~~2022.~~2023, consisting of funds borrowed from the BTFP in March 2023. These borrowings were more cost effective than other borrowing sources and have a positive carry as cash placed at the Federal Reserve Bank. There ~~was~~were no short-term borrowings outstanding ~~overnight federal funds purchase~~ as of December 31, ~~2021.~~

2022. Refer to
Note 10

~~As of September 30, 2022,~~—Short-Term Borrowings and Long-Term Debt to the ~~Company had FHLB advances of $324.9 million, compared with advances totaling $249.3 million as of December 31, 2021. As of September 30, 2022,~~Consolidated Financial Statements in this Form 10-Q for additional information on the ~~FHLB advances were comprised of an overnight advance of $250.0 million with a fixed interest rate of 3.22%~~BTFP and ~~a term advance of $74.9 million with a floating interest rate of 3.25% that matures in November 2022.~~

Gross repurchase agreements totaled $611.8 million and $300.0 million as of 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 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 2.81% and 2.57% for the third quarters of 2022 and 2021, respectively; and 2.73% and 2.62% for the first nine months of 2022 and 2021, respectively. As of September 30, 2022, gross repurchase agreements had original terms between six months and nine years and remaining maturities between three months and 11 months.Company’s related borrowings.

Repurchase agreements ~~are accounted for~~were $300.0 million as ~~collateralized financing transactions and recorded as liabilities based on the values at which the assets are sold. As~~ of ~~September 30, 2022, the collateral for the~~December 31, 2022. The Company extinguished $300.0 million of repurchase agreements ~~was comprised~~during the first quarter 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.2023. The Company ~~manages liquidity risks~~recorded $3.9 million of charges related to the extinguishment of repurchase agreements ~~by sourcing funds from a diverse group~~during the first nine months of ~~counterparties, and entering into repurchase agreements with longer durations, when appropriate.~~2023. 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 $147.9 million and $147.7 million as of September 30, 2022 and December 31, 2021, respectively. Long-term debt~~ consists of junior subordinated debt, which qualifies as Tier 2 capital for regulatory capital purposes. ~~The~~Refer to Note 10—Short-Term Borrowings and Long-Term Debt to the Consolidated Financial Statements in this Form 10-Q for additional information on the junior subordinated debt 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 2.86% and 1.74% for the first nine months of 2022 and 2021, respectively, with remaining maturities ranging between 12.2 years and 15.0 years as of September 30, 2022.debt.

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~~2022 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. Accordingly, ~~the~~our capital ratios as of September 30, ~~2022 delayed 75%~~2023 reflect a delay of 50% of the estimated impact of CECL on regulatory ~~capital through the year 2021.~~capital.

8992

The following table presents the Company’s and the Bank’s capital ratios as of September 30, ~~2022~~2023 and December 31, ~~2021,~~2022 under the Basel III Capital Rules, and those required by regulatory agencies for capital adequacy and well-capitalized classification purposes:


		Basel III Capital Rules																	Basel III Capital Rules
		September 30, 2022				December 31, 2021				Minimum Regulatory Requirements		Minimum Regulatory Requirements including Capital Conservation Buffer		Well- Capitalized Requirements					September 30, 2023				December 31, 2022
		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(1)	Common Equity Tier 1 capital(1)	12.3	%	12.1	%	12.8	%	12.3	%	4.5	%	7.0	%	6.5	%		Common Equity Tier 1 capital(1)		13.3	%	12.9	%	12.7	%	12.5	%	4.5	%	7.0	%	6.5	%
Tier 1 capital (1)	Tier 1 capital (1)	12.3	%	12.1	%	12.8	%	12.3	%	6.0	%	8.5	%	8.0	%		Tier 1 capital (1)		13.3	%	12.9	%	12.7	%	12.5	%	6.0	%	8.5	%	8.0	%
Total capital	Total capital	13.6	%	13.1	%	14.1	%	13.2	%	8.0	%	10.5	%	10.0	%		Total capital		14.7	%	14.1	%	14.0	%	13.5	%	8.0	%	10.5	%	10.0	%
Tier 1 leverage (1)	Tier 1 leverage (1)	9.6	%	9.4	%	9.0	%	8.6	%	4.0	%	4.0	%	5.0	%		Tier 1 leverage (1)		10.2	%	9.8	%	9.8	%	9.7	%	4.0	%	4.0	%	5.0	%

(1)The Common Equity Tier 1 capital and Tier 1 leverage well-capitalized ~~requirement applies~~requirements apply only to the Bank since there is no Common Equity Tier 1 capital component or Tier 1 leverage ratio component in the definition of a well-capitalized bank holding company. The ~~minimum~~well-capitalized Tier 1 ~~risk-based~~ capital ratio ~~requirement~~requirements for the Company ~~to be considered well-capitalized is~~and the Bank are 6.0%. and 8.0%, respectively.

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 September 30, ~~2022~~2023 and December 31, ~~2021,~~2022, 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 ~~$49.27~~$52.95 billion as of September 30, ~~2022,~~2023, an increase of ~~$5.68~~$2.91 billion ~~or 13%~~ from ~~$43.59~~$50.04 billion as of December 31, ~~2021.~~2022. The increase in the risk-weighted assets was ~~primarily~~ due to growth across all major loan ~~growth.~~portfolios.

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.~~business. The Company operates under a Board-approved enterprise risk management (“ERM”) framework, which outlines the company-wide approach to risk management and oversight, and describes the structures and practices employed to manage the current and emerging risks inherent to the Company. The Company’s ERM program incorporates risk management throughout the organization in identifying, managing, monitoring, and reporting risks. It identifies the Company’s major risk categories asas: credit, ~~risk,~~ liquidity, ~~risk,~~ capital, ~~risk,~~ market, ~~risk,~~ operational, ~~risk,~~ compliance, legal, strategic, technology and ~~regulatory risks, legal risks, strategic risks, and reputational risks.~~reputational.

The Risk Oversight Committee of the Board of Directors monitors the ERM program through ~~established~~such identified 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~~manage 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 (“IAR”)., Internal Audit ~~and IAR~~reports to the Chief Audit Executive (“CAE”) who reports to the Board’s Audit Committee. Internal Audit provides assurance and evaluates the effectiveness of risk management, control, and governance processes as established by the Company. ~~Reporting directly~~IAR serves as an internal loan review and independent credit risk monitoring function within the Bank that works under the direction of the CAE and reports to the Board’s ~~Audit~~Risk Oversight Committee ~~Internal Audit maintains organizational independence~~(“ROC”). IAR provides management and ~~objectivity.~~the ROC with an objective and independent assessment of the Bank’s credit profile and credit risk management process. Further discussion and analysis of ~~the~~selected primary risk areas are ~~detailed~~discussed in the following subsections of Risk Management.

9093

Credit Risk Management

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

The 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,~~liquidity, all of which enable management to control credit risk. At the management level, the Credit Risk Management Committee has primary oversight responsibility for credit risk. The Senior Credit Supervision function manages credit policy for the line of business transactional credit risk, assuring that all exposure is risk-rated according to the requirements of 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. Reporting directly to the Board’s Risk Oversight Committee, the ~~Independent Asset Review~~IAR function provides additional support to the Company’s strong credit risk management culture by ~~providing~~performing an independent and objective assessment of underwriting and documentation quality. A key focus of our credit risk management is adherence to a well-controlled underwriting and audit monitoring process.

The Company assesses the overall credit quality performance of the loans held-for-investment portfolio through an integrated analysis of specific performance ratios. This approach forms the basis of the discussion in the sections immediately following: Credit Quality, Nonperforming Assets ~~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 September 30, ~~2022~~2023 and December 31, ~~2021:~~2022:


($ in thousands)								Change
																			Change
($ in thousands)	($ in thousands)	September 30, 2022			December 31, 2021			$		%		($ in thousands)	September 30, 2023			December 31, 2022			$		%
												Criticized loans:

Special mention loans	Special mention loans	$	470,964		$	384,694		$	86,270	22	%	Special mention loans	$	483,428		$	468,471		$	14,957	3	%
Classified loans(1)	Classified loans(1)	434,242			448,362			(14,120)		(3)	%	Classified loans(1)	538,258			427,509			110,749		26	%
Total criticized loans ~~(1)~~(2)	Total criticized loans ~~(1)~~(2)	$	905,206		$	833,056		$	72,150	9	%	Total criticized loans ~~(1)~~(2)	$	1,021,686		$	895,980		$	125,706	14	%

Special mention loans to loans held-for-investment	Special mention loans to loans held-for-investment	0.99		%	0.92		%					Special mention loans to loans held-for-investment	0.95		%	0.97		%
Classified loans to loans held-for-investment	Classified loans to loans held-for-investment	0.92		%	1.08		%					Classified loans to loans held-for-investment	1.06		%	0.89		%
Criticized loans to loans held-for-investment	Criticized loans to loans held-for-investment	1.91		%	2.00		%					Criticized loans to loans held-for-investment	2.01		%	1.86		%

(1)Consists of substandard, doubtful and loss categories.

(2)Excludes loans held-for-sale.

Nonperforming Assets

Nonperforming assets are comprised of nonaccrual loans, other real estate owned (“OREO”) and other nonperforming assets. Other nonperforming assets and OREO are repossessed assets and properties, respectively, acquired through foreclosure, or through full or partial satisfaction of loans held-for-investment. Nonperforming assets were ~~$97.0~~$103.7 million or 0.15% of total assets as of September 30, 2023, an increase of $3.9 million or 4%, compared with $99.8 million or 0.16% of total assets as of ~~September 30, 2022, a decrease of $6.4 million or 6%, compared with $103.5 million or 0.17% of total assets as of~~ December 31, ~~2021.~~2022.

9194

The following table presents nonperforming assets information as of September 30, ~~2022~~2023 and December 31, ~~2021:~~2022:


($ in thousands)								Change
																			Change
($ in thousands)	($ in thousands)	September 30, 2022			December 31, 2021			$		%		($ in thousands)	September 30, 2023			December 31, 2022			$		%
												Commercial:
C&I	C&I	$	47,988		$	59,023		$	(11,035)	(19)	%	C&I	$	49,147		$	50,428		$	(1,281)	(3)	%
CRE:	CRE:											CRE:
CRE	CRE	11,035			9,498			1,537		16	%	CRE	610			23,244			(22,634)		(97)	%
Multifamily residential	Multifamily residential	174			444			(270)		(61)	%	Multifamily residential	4,680			169			4,511		NM

Construction and land												Construction and land	11,141			—			11,141		100	%
Total CRE	Total CRE	11,209			9,942			1,267		13	%	Total CRE	16,431			23,413			(6,982)		(30)	%
Consumer:	Consumer:											Consumer:
Residential mortgage:	Residential mortgage:											Residential mortgage:
Single-family residential	Single-family residential	12,741			15,720			(2,979)		(19)	%	Single-family residential	24,784			14,240			10,544		74	%
HELOCs	HELOCs	10,568			8,444			2,124		25	%	HELOCs	13,202			11,346			1,856		16	%
Total residential mortgage	Total residential mortgage	23,309			24,164			(855)		(4)	%	Total residential mortgage	37,986			25,586			12,400		48	%
Other consumer	Other consumer	37			52			(15)		(29)	%	Other consumer	136			99			37		37	%
Total nonaccrual loans	Total nonaccrual loans	82,543			93,181			(10,638)		(11)	%	Total nonaccrual loans	103,700			99,526			4,174		4	%
OREO, net	OREO, net	—			363			(363)		(100)	%	OREO, net	—			270			(270)		(100)	%
Other nonperforming assets		—			9,938			(9,938)		(100)	%
Nonperforming loans HFS		14,500			—			14,500		100	%

Total nonperforming assets	Total nonperforming assets	$	97,043		$	103,482		$	(6,439)	(6)	%	Total nonperforming assets	$	103,700		$	99,796		$	3,904	4	%
Nonperforming assets to total assets	Nonperforming assets to total assets	0.16		%	0.17		%					Nonperforming assets to total assets	0.15		%	0.16		%
Nonaccrual loans to loans held-for-investment	Nonaccrual loans to loans held-for-investment	0.17		%	0.22		%					Nonaccrual loans to loans held-for-investment	0.20		%	0.21		%
Allowance for loan losses to nonaccrual loans	Allowance for loan losses to nonaccrual loans	705.71		%	581.21		%					Allowance for loan losses to nonaccrual loans	632.13		%	598.48		%

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

NM — Not meaningful.

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~~2022 Form 10-K.

Nonaccrual loans were ~~$82.5~~$103.7 million as of September 30, ~~2022, a decrease of $10.6 million or 11% from $93.2~~2023, compared with $99.8 million as of December 31, ~~2021. This decrease was~~2022. Increases in construction, multifamily and single-family residential nonaccrual loans were predominantly ~~the result~~offset by sales of ~~charge-offs and paydowns of commercial~~CRE nonaccrual loans. As of September 30, ~~2022, $54.4~~2023, $40.6 million or ~~66%~~39% of nonaccrual loans were less than 90 days delinquent. In comparison, ~~$54.2~~$68.3 million or ~~58%,~~69% of nonaccrual loans were less than 90 days delinquent as of December 31, ~~2021.~~2022.

9295

The following table presents the accruing loans past due by portfolio segment as of September 30, ~~2022~~2023 and December 31, ~~2021:~~2022:


($ in thousands)		Total Accruing Past Due Loans (1)				Change				Percentage of Total Loans Outstanding
															Total Accruing Past Due Loans (1)				Change				Percentage of Total Loans Outstanding
($ in thousands)	($ in thousands)	September 30, 2022		December 31, 2021		$		%		September 30, 2022		December 31, 2021		($ in thousands)	September 30, 2023		December 31, 2022		$		%		September 30, 2023		December 31, 2022
														Commercial:
C&I	C&I	$	20,960	$	11,069	$	9,891	89	%	0.13	%	0.08	%	C&I	$	33,427	$	9,355	$	24,072	257	%	0.21	%	0.06	%
CRE:	CRE:													CRE:
CRE	CRE	623		3,722		(3,099)		(83)	%	0.00	%	0.03	%	CRE	2,538		14,185		(11,647)		(82)	%	0.02	%	0.10	%
Multifamily residential	Multifamily residential	795		5,342		(4,547)		(85)	%	0.02	%	0.15	%	Multifamily residential	1,083		1,000		83		8	%	0.02	%	0.02	%

Total CRE	Total CRE	1,418		9,064		(7,646)		(84)	%	0.01	%	0.06	%	Total CRE	3,621		15,185		(11,564)		(76)	%	0.02	%	0.08	%
Total commercial	Total commercial	22,378		20,133		2,245		11	%	0.07	%	0.07	%	Total commercial	37,048		24,540		12,508		51	%	0.10	%	0.07	%
Consumer:	Consumer:													Consumer:
Residential mortgage:	Residential mortgage:													Residential mortgage:
Single-family residential	Single-family residential	22,239		18,760		3,479		19	%	0.20	%	0.21	%	Single-family residential	40,113		25,653		14,460		56	%	0.31	%	0.23	%
HELOCs	HELOCs	4,916		5,854		(938)		(16)	%	0.22	%	0.27	%	HELOCs	16,622		8,786		7,836		89	%	0.94	%	0.41	%
Total residential mortgage	Total residential mortgage	27,155		24,614		2,541		10	%	0.21	%	0.22	%	Total residential mortgage	56,735		34,439		22,296		65	%	0.39	%	0.26	%
Other consumer	Other consumer	80		108		(28)		(26)	%	0.09	%	0.08	%	Other consumer	126		3,192		(3,066)		(96)	%	0.20	%	4.18	%
Total consumer	Total consumer	27,235		24,722		2,513		10	%	0.21	%	0.22	%	Total consumer	56,861		37,631		19,230		51	%	0.39	%	0.28	%
Total	Total	$	49,613	$	44,855	$	4,758	11	%	0.10	%	0.11	%	Total	$	93,909	$	62,171	$	31,738	51	%	0.18	%	0.13	%

(1)There were no accruing loans past due 90 days or more as of both September 30, ~~2022~~2023 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 September 30, 2022 and December 31, 2021. ~~The allowance for loan losses for TDRs was~~ ~~$16.9 million~~ ~~as of September 30, 2022 and~~ ~~$4.8 million~~ ~~as of December 31, 2021.~~

($ in thousands) September 30, 2022 December 31, 2021
Performing
TDRs Nonperforming
TDRs Total Performing
TDRs Nonperforming
TDRs Total
Commercial:
C&I $ 58,273 $ 32,121 $ 90,394 $ 77,256 $ 28,239 $ 105,495
CRE:
CRE 22,768 — 22,768 23,379 — 23,379
Multifamily residential 3,876 174 4,050 4,042 197 4,239
Total CRE 26,644 174 26,818 27,421 197 27,618
Consumer:
Residential mortgage:
Single-family residential 4,786 68 4,854 6,585 1,102 7,687
HELOCs 2,244 325 2,569 2,553 845 3,398
Total residential mortgage 7,030 393 7,423 9,138 1,947 11,085
Total TDRs $ 91,947 $ 32,688 $ 124,635 $ 113,815 $ 30,383 $ 144,198

~~Performing TDRs were $91.9 million as of September 30, 2022, a decrease of $21.9 million or~~ ~~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. Approximately~~ ~~94% of the performing TDRs were current as of both September 30, 2022 and December 31, 2021, respectively.~~ ~~Nonperforming TDRs were $32.7 million as of September 30, 2022, an increase of $2.3 million or 8% from $30.4 million as of December 31, 2021. This~~ ~~increase~~ ~~primarily reflected newly designated nonperforming C&I TDR loans, 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 deferral programs may receive further modifications which may be classified as TDRs. As of 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, ~~Receivables — Troubled Debt Restructurings by Creditors.~~ ~~As of September 30, 2022, COVID-19 loans under payment deferral and forbearance programs totaled $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. Loans that have exited the modification program were substantially all current as of 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) recourse obligations for loans sold, (2) letters of credit, and (3) unfunded lending commitments. The Company’s methodology for determining the allowance calculation for unfunded lending commitments uses the lifetime loss rates of the on-balance sheet commitment. Recourse obligations for loans sold and letters of credit use the weighted loss rates for the applicable segment of the individual credit.

In the case of loans and securities, allowance for credit losses are contra-asset valuation accounts that are deducted from the amortized cost basis of these assets to present the net amount expected to be collected. In the case of unfunded credit commitments, the allowance for credit losses is a liability account that is reported as a component of ~~Accrued expenses and other liabilities~~ ~~in our Consolidated Balance Sheet.~~

~~The Company is committed to maintaining~~ the allowance for credit losses at a level ~~that is commensurate with the~~sufficient to provide appropriate reserves to absorb estimated ~~inherent~~future credit losses in the loan portfolio, including unfunded credit facilities. While the Company believes that the allowance for credit losses as of September 30, 2022 was appropriate to absorb losses inherent in the loan portfolio and in unfunded credit commitments basedaccordance with GAAP. For additional information 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 Item 8. Financial Statements — Note 1 — Summary of Significant Accounting Policies to the Consolidated Financial Statements in the Company’s ~~2021~~2022 Form 10-K, and Note 7—Loans Receivable and Allowance for Credit Losses to the Consolidated Financial Statements in this Form 10-Q.

9496

The following table presents an allocation of the allowance for loan losses by loan portfolio segments and unfunded credit commitments as of September 30, ~~2022~~2023 and December 31, ~~2021~~:2022:


($ in thousands)		September 30, 2022						December 31, 2021
															September 30, 2023						December 31, 2022
($ in thousands)	($ in thousands)	Allowance Allocation			% of Loan Type to Total Loans			Allowance Allocation			% of Loan Type to Total Loans			($ in thousands)	Allowance Allocation			% of Loan Type to Total Loans			Allowance Allocation			% of Loan Type to Total Loans
														Allowance for loan losses
Commercial:	Commercial:													Commercial:
C&I	C&I	$	371,749		33		%	$	338,252		34		%	C&I	$	383,677		31		%	$	371,700		33		%
CRE:	CRE:													CRE:
CRE	CRE	145,301			29		%	150,940			29		%	CRE	178,040			29		%	149,864			29		%
Multifamily residential	Multifamily residential	25,680			10		%	14,400			9		%	Multifamily residential	24,162			10		%	23,373			10		%
Construction and land	Construction and land	7,506			1		%	15,468			1		%	Construction and land	9,216			2		%	9,109			1		%
Total CRE	Total CRE	178,487			40		%	180,808			39		%	Total CRE	211,418			41		%	182,346			40		%
Total commercial	Total commercial	550,236			73		%	519,060			73		%	Total commercial	595,095			72		%	554,046			73		%
Consumer:	Consumer:													Consumer:
Residential mortgage:	Residential mortgage:													Residential mortgage:
Single-family residential	Single-family residential	27,263			23		%	17,160			22		%	Single-family residential	54,930			25		%	35,564			23		%
HELOCs	HELOCs	3,324			4		%	3,435			5		%	HELOCs	3,795			3		%	4,475			4		%
Total residential mortgage	Total residential mortgage	30,587			27		%	20,595			27		%	Total residential mortgage	58,725			28		%	40,039			27		%
Other consumer	Other consumer	1,694			0		%	1,924			0		%	Other consumer	1,703			0		%	1,560			0		%
Total consumer	Total consumer	32,281			27		%	22,519			27		%	Total consumer	60,428			28		%	41,599			27		%
Total allowance for loan losses	Total allowance for loan losses	$	582,517		100		%	$	541,579		100		%	Total allowance for loan losses	$	655,523		100		%	$	595,645		100		%
Allowance for unfunded credit commitments	Allowance for unfunded credit commitments	$	24,041					$	27,514					Allowance for unfunded credit commitments	$	33,589					$	26,264
Total allowance for credit losses	Total allowance for credit losses	$	606,558					$	569,093					Total allowance for credit losses	$	689,112					$	621,909

Loans held-for-investment	Loans held-for-investment	$	47,442,255					$	41,693,781					Loans held-for-investment	$	50,907,184					$	48,202,430
Allowance for loan losses to loans held-for-investment	Allowance for loan losses to loans held-for-investment	1.23		%				1.30		%				Allowance for loan losses to loans held-for-investment	1.29		%				1.24		%

		Three Months Ended September 30,						Nine Months Ended September 30,							Three Months Ended September 30,						Nine Months Ended September 30,
		2022			2021			2022			2021				2023			2022			2023			2022
Average loans held-for-investment	Average loans held-for-investment	$	46,845,030		$	39,959,972		$	44,544,863		$	39,441,410		Average loans held-for-investment	$	49,888,205		$	46,845,030		$	48,966,981		$	44,544,863

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		%	Annualized net charge-offs to average loans held-for-investment	0.14		%	0.06		%	0.07		%	0.02		%

~~The allowance for loan losses was $582.5 million as of September 30, 2022, an increase of $40.9 million from $541.6 million as of~~ ~~December 31, 2021, primarily~~ ~~reflecting of our current macroeconomic outlook and loan growth.~~ Third quarter ~~2022~~of 2023 net charge-offs were $18.1 million, or annualized 0.14% of average loans held-for-investment, compared with net charge-offs of $6.6 million, or annualized 0.06% of average loans held-for-investment ~~compared with net charge-offs of $13.5 million, or annualized 0.13% of average loans held-for-investment,~~ for the third quarter of ~~2021. The decrease~~2022. Net charge-offs 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~~2023 were $26.3 million or annualized 0.07% of average loans held-for-investment, compared with $8.3 million or annualized 0.02% ~~of average loans held-for investment, compared with $40.2 million or annualized 0.14%~~ of average loans held-for-investment for the first nine months of ~~2021.~~2022. The ~~decrease~~increases in net charge-offs ~~for~~in both periods were primarily driven by higher losses in the ~~first nine months of 2022, compared with the same period in 2021, was mainly due to a decrease in CRE charge-offs~~construction and ~~an increase in C&I recoveries.~~

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. As of September 30, 2022, the Company assigned a lower weighting to its downside scenario and higher 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 high inflation, lower than previously expected annual Gross Domestic Product (“GDP”) growth, rising interest rates, and continued global oil and supply chain issues caused by the Russian invasion of Ukraine. Macroeconomic assumptions underlying the baseline forecast include annual GDP growth of 1.6% and 1.4% for 2022 and 2023, respectively,land portfolio and the ~~unemployment rate to average 3.7% and 3.9% for 2022 and 2023, respectively. The downside scenario assumed annual GDP growth of 1.5%~~CRE portfolio, as well as lower recoveries in ~~2022 dropping to a 2.0% decline for 2023, and~~ the ~~unemployment rate to rise from a 4.2% average for 2022 to a 7.3% average for 2023. The upside scenario assumed annual GDP growth of 1.9% and 4.1% for 2022 and 2023, respectively, and~~C&I portfolio. These increases were partially offset by lower charge-offs in the ~~unemployment rate to improve from an average of 3.6% for 2022 to 3.3% for 2023.~~

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

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

Liquidity Risk Management

Liquidity

Liquidity ~~is a financial institution’s capacity~~risk arises from the Company’s inability to meet its customer deposit withdrawals and obligations to other counterparties as they come due, or to obtain adequate funding at a reasonable cost to meet those obligations. Liquidity risk also considers the stability of deposits. 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,~~flow and collateral needs without adversely affecting daily operations or the financial condition of the institution. To achieve this objective, the Company analyzes its liquidity risk, maintains readily available liquid assets, and utilizes diverse funding sources including its stable core deposit base.

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

The Company also maintains a Liquidity Contingency Plan to detect early-warning indicators of liquidity problems and provide timely response. The Liquidity Contingency Plan describes the procedures, roles and responsibilities, and communication protocols for managing any identified liquidity problem. Management monitors the early-warning indicators defined in the Liquidity Contingency Plan, which are categorized according to their relevance to liquidity, ratings, market conditions, credit performance, or financial performance. Other indicators can include company specific or systemic events, as well as market speculation, rumors about the Company, or the banking industry in general. When early-warning signals are detected, the ALCO is informed, and the problem is evaluated for severity. The ALCO will determine the course of action and appropriate contingency funding sources, if any, that are needed.

Liquidity Risk — Liquidity Sources. The Company’s primary source of funding is from deposits generated by its banking business, which ~~are~~we believe is a relatively stable and ~~low-cost. Total~~low-cost source of funding. Our loans are funded by deposits, which amounted to ~~$53.86~~$55.09 billion as of September 30, ~~2022,~~2023, compared with ~~$53.35~~$55.97 billion as of December 31, ~~2021.~~2022. The Company’s loan-to-deposit ratio was ~~88%~~92% as of September 30, ~~2022,~~2023, compared with ~~78%~~86% as of December 31, ~~2021.~~2022.

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”), such as under the BTFP, 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~~However, general financial market and economic conditions ~~and the stability of capital markets~~could impact ~~the Company’s~~our access to and ~~the~~ cost of ~~wholesale financing. The~~external funding. Additionally, the Company’s access to capital markets is ~~also~~ affected by the ratings received from various credit rating agencies. As of September 30, 2022, the Company had available borrowing capacity of $20.51 billion. The available borrowing capacity included $10.88 billion with the FHLB, $2.17 billion with the 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, and the FRBSF BTFP 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 Company believes that its liquidity sources are sufficient to meet all reasonably foreseeable short-term needs.~~ See Item 2 — MD&A — Balance Sheet Analysis — Deposits and Other Sources of Funding in this Form 10-Q for further ~~detail~~details related to the Company’s funding sources. The Company believes its cash and cash equivalents and available borrowing capacity described below provide sufficient liquidity above its expected cash needs.

The Company maintains ~~a certain level~~its source of ~~liquid assets~~liquidity in the form of cash and cash equivalents ~~interest-bearing deposits~~and borrowing capacity with ~~banks, short-term resale agreements~~its eligible loans and ~~unencumbered high-quality and liquid AFS~~ debt ~~securities.~~securities as collateral. The following table presents the Company’s ~~liquid assets~~total cash and cash equivalents and borrowing capacity as of September 30, ~~2022~~2023 and December 31, ~~2021:~~2022:

($ in thousands) September 30, 2022 December 31, 2021
Encumbered Unencumbered Total Encumbered Unencumbered Total
Cash and cash equivalents $ — $ 2,163,353 $ 2,163,353 $ — $ 3,912,935 $ 3,912,935
Interest-bearing deposits with banks — 630,543 630,543 — 736,492 736,492
Resale agreements due to mature in one year — 407,986 407,986 — 1,818,503 1,818,503
AFS debt securities:
U.S. Treasury, and U.S. government agency and U.S. government-sponsored enterprise debt securities 273,735 587,366 861,101 384,895 1,949,757 2,334,652
U.S. government agency and U.S. government-sponsored enterprise mortgage-backed securities 189,722 2,125,592 2,315,314 418,761 3,738,502 4,157,263
Foreign government bonds — 225,810 225,810 — 257,733 257,733
Municipal securities — 249,502 249,502 — 523,158 523,158
Non-agency mortgage-backed securities, asset-backed securities and CLOs 181 1,724,617 1,724,798 240 2,042,642 2,042,882
Corporate debt securities — 529,565 529,565 — 649,665 649,665
Total $ 463,638 $ 8,644,334 $ 9,107,972 $ 803,896 $ 15,629,387 $ 16,433,283



					Change
($ in thousands)	September 30, 2023		December 31, 2022		$		%
Cash and cash equivalents	$	4,561,178	$	3,481,784	$	1,079,394	31	%
Interest-bearing deposits with banks	17,213		139,021		(121,808)		(88)	%

Borrowing capacity:
FHLB	13,715,609		12,773,996		941,613		7	%
FRBSF	8,480,896		2,049,048		6,431,848		314	%
Unpledged available securities	1,806,702		6,939,591		(5,132,889)		(74)	%
Federal funds facility	946,000		1,136,000		(190,000)		(17)	%











Total	$	29,527,598	$	26,519,440	$	3,008,158	11	%

~~Unencumbered liquid assets~~

The Company’s total cash and cash equivalents and borrowing capacity totaled ~~$8.64~~$29.53 billion as of September 30, ~~2022,~~2023, compared with ~~$15.63~~$26.52 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.~~2022. The ~~Company believes these AFS debt securities provide quick sources of liquidity to obtain financing, regardless of market conditions, through sale or pledging. The decrease in liquid assets~~increase was primarily related to an increase in collateral available at the ~~transfer of $3.01 billion of debt securities from AFS to HTM during the first quarter of 2022, a decrease~~FRBSF and an increase in cash and cash equivalents, ~~driven~~which was funded by ~~loan funding activities, a decrease~~borrowings from the BTFP in ~~resale agreements primarily due~~the first quarter of 2023. The BTFP borrowings were secured by pledged securities and reflected the Company’s conservative liquidity management practices in response to ~~repayments, and a decrease~~the volatility in ~~fair value of AFS debt securities primarily due to interest rate increases.~~the banking industry earlier in the year.

Management believes that the Company’s excess cash, unencumbered AFS debt securities, borrowing capacity and access to sufficient sources of capital are adequate to meet its short- and long-term liquidity needs in the foreseeable future. In addition, the Company may use debt and equity issuances when costs are deemed attractive, should longer term needs arise.

Liquidity Risk — Cash Requirements. In the ordinary course of ~~the Company’s~~ business, the Company enters ~~into~~ contractual obligations that require future cash payments, including funding for customer deposit withdrawals, repayments for short- and long-term borrowings, ~~leases obligations~~ and other cash commitments. For additional information on these obligations, see Note 9 — Deposits to the Consolidated Financial Statements in the Company’s 2022 Form 10-K, and Note 4 — Assets Purchased under Resale Agreements and Sold under Repurchase Agreements, Note 8 — Investments in Qualified Affordable Housing Partnerships, Tax Credit and Other Investments, Net and Variable Interest Entities and Note 10— Short-Term Borrowings and Long-Term Debt to the Consolidated Financial Statements in this Form 10-Q.

The Company also has off-balance sheet arrangements which represent transactions that are not recorded on the Consolidated Balance Sheet. The Company’s off-balance sheet arrangements include (1) commitments to extend credit, such as loan commitments, commercial letters of credit for foreign and domestic trade, standby letters of credit (“SBLCs”), and financial guarantees, to meet the financing needs of its customers, (2) future interest obligations related to customer deposits and the Company’s borrowings, and (3) transactions with unconsolidated entities that provide financing, liquidity, market risk or credit risk support to the Company, or engage in leasing, hedging or research and development services with the Company. ~~Since~~Because many of these commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future funding requirements. The Company does not expect the total commitment amounts as of September 30, 2023 to have a material current or future impact on the Company’s financial conditions or results of operations. Information about the Company’s loan commitments, commercial letters of credit and SBLCs is provided in Note 1011 — 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~~activity for the ~~first~~ nine months ~~of 2022~~ended September 30, 2023 and ~~2021.~~2022. 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 ofin the Company’s ~~2021~~2022 Form 10-K. East West held ~~$226.5~~$263.2 million and ~~$345.0~~$228.5 million in cash and cash equivalents as of September 30, ~~2022~~2023 and December 31, ~~2021,~~2022, respectively. Management believes that East West has sufficient cash and cash equivalents to meet the projected cash obligations for the ~~current~~coming year.

Liquidity Risk — Liquidity Stress Testing. The Company utilizes liquidity stress analysis to determine the appropriate amounts of liquidity to maintain at the Company, foreign subsidiary and foreign branch ~~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~~Company-specific events are incorporated into the stress testing. For example, based on the Company’s analysis of the banking industry disruption earlier in 2023, deposit runoffs were assumed to be more front-loaded to trigger earlier remediation actions. Liquidity stress tests are conducted to ascertain potential mismatches between liquidity sources and uses over a variety of time horizons, both immediate and longer term, and over a variety of stressed conditions. Given the range of potential stresses, the Company maintains contingency funding plans on a consolidated basis and for individual entities.

As of September 30, ~~2022,~~2023, 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.~~business, and is not aware of any events that are reasonably likely to have a material adverse effect on its liquidity, capital resources or operations. Given the ~~uncertainty~~uncertain 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~~details on how economic conditions may impact our liquidity, see Item 1A. Risk Factors ofin the Company’s ~~2021~~2022 Form 10-K.

Market Risk Management

Market risk isrefers to the risk ~~that the Company’s financial condition may change resulting from~~of potential loss due to adverse movements in market ~~rates or prices,~~risk factors, including interest rates, foreign exchange rates, commodity prices, and credit spreads. The Company is primarily exposed to interest rate ~~contracts prices, investment securities prices, credit spreads,~~risk through its core business activities of extending loans and ~~related~~acquiring deposits. There have been no significant changes in our risk ~~due to mismatches~~management practices as described in ~~rate sensitive assets and liabilities. In the event of market stress, the risk could have a material impact on~~Item 7. MD&A — Market Risk Management in the Company’s ~~results of operations and financial condition.~~2022 Form 10-K.

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.

Interest Rate Risk Management

Interest rate risk ~~results primarily from~~is the ~~Company’s traditional banking activities of gathering deposits and extending loans, which are the primary areas of~~risk that 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, changesfluctuations in interest rates can ~~influence~~have a negative impact on the Company’s earnings and capital stemming from mismatches in the Company’s asset and liability cash flows primarily arising from customer-related activities such as lending and deposit-taking. The Company is subject to interest rate ~~of principal prepayments on loans~~risk because:

•Assets and liabilities may mature or reprice at different times. If assets reprice faster than liabilities and interest rates are generally rising, earnings will initially increase;

•Assets and liabilities may reprice at the ~~speed of deposit withdrawals. Due to the pricing term mismatches~~same time but by different amounts;

•Short- and ~~the embedded options inherent in certain products, changes in~~long-term market interest rates may change by different amounts. For example, the shape of the yield curve may affect ~~not only~~ the ~~expected near-term earnings, but also~~yield of new loans and funding costs differently;

•The remaining maturity of various assets or liabilities may shorten or lengthen as interest rates change. For example, if long-term mortgage interest rates increase sharply, mortgage-related products may pay down at a slower rate than anticipated, which could impact portfolio income and valuation; or

•Interest rates may have a direct or indirect effect on loan demand, collateral values, mortgage origination volume, and the ~~economic~~fair value of these interest-earning assets and interest-bearing liabilities. Other market risks include foreign currency exchange risk and equity price risk. These risks are not considered significant to the Company and no separate quantitative information concerning these risks is presented herein.other financial instruments.

~~Under the oversight of the Company’s Board of Directors, the~~The ALCO coordinates the overall management of the Company’s interest rate ~~risk. The ALCO~~risk, meets regularly ~~and is responsible for reviewing~~to review the Company’s open market positions and ~~establishing~~establishes policies to monitor and limit ~~exposures~~exposure to market risk. ~~Management of interest~~Interest rate risk management is carried out primarily through strategies involving the Company’s loan portfolio, 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~~We measure and monitor interest rate risk exposure ~~is measured and monitored~~ through various risk management tools, which include a simulation model that performs interest rate sensitivity analyses under ~~various~~multiple interest rate ~~scenarios.~~scenarios against a baseline. The simulation model incorporates the ~~Company’s cash instruments, loans, debt securities, resale agreements, deposits, borrowings~~market’s forward rate expectations and ~~repurchase agreements, as well as financial instruments from~~ the Company’s ~~foreign operations.~~earning assets and liabilities. The Company uses both a static balance sheet and a forward growth balance sheet to perform the interest rate sensitivity analyses. The simulated interest rate scenarios include an instantaneous non-parallel shift in the yield curve and a gradual non-parallel shift in the yield curve (“rate ramp”) ~~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~~The Company uses the results of these ~~various~~ simulations ~~are used~~ to formulate and gauge strategies to achieve a desired risk profile within ~~the Company’s~~its 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~~interest rate sensitive assets, liabilities, and related derivative contracts. ItThis model also incorporates various assumptions, which management believes to be reasonable but that may have a significant impact on the results. These key assumptions include ~~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~~we derive from a regression analysis of the Company’s historical deposit data. The Company used full- through-the-economic-cycle betas with each incremental rate increase in the rate ramp scenarios, and did not assume lags in repricing. Deposit beta commonly refers to the correlation of the changes in interest rates paid on deposits to changes in the benchmark interest rates. The model is also sensitive to the loan and investment prepayment assumptions that are based on an independent model and the Company’s historical prepayment data, which consider anticipated prepayments under different interest rate environments.

Simulation results are highly dependent on modeled behaviors and input assumptions. To the extent ~~the~~that actual ~~behavior is~~behaviors are different from the assumptions used in the models, there could be material changes into the interest rate sensitivity results. The key behavioral models impacting interest rate sensitivity simulations include deposit repricing, deposit balance forecasts, and mortgage prepayments. These models and assumptions ~~applied in the model~~ are documented, supported, and periodically back-tested to assess the reasonableness and effectiveness. The Company also regularly monitors the sensitivity of the other important modeling assumptions, such as loan and security prepayments and early withdrawal on fixed-rate customer liabilities. 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. The simulation does not represent a forecast of the Company’s net interest income but is a tool utilized to assess the risk of the impact of changing market interest rates across a range of interest rate environments.

100

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

The Company recalibrated its deposit repricing models and betas in December 2022, and qualitatively increased the long run (through the cycle) betas in March, June, and September of 2023 to better reflect increased competition and higher terminal fed funds rates than previously observed in the historical data. Overall, the Company observed a weighted average increase of the deposit beta for total deposits of approximately 5% in March 2023 (taking total deposit beta to 39% as of March 31, 2023), an additional 5% in June 2023 (taking total deposit beta to 44% as of June 30, 2023), and an additional 2% in September 2023 (taking total deposit beta to 46% as of September 30, 2023). These increases reflected the Company’s forward-looking views of deposit rates given the expected EFFR at the time. The Company also modified deposit balance runoff models in December 2022, to better capture behavioral differences across product and customer types and carved out stable and non-stable balances to reflect the volatility and interest rate sensitivity of such deposit balances. The assumptions used for the identification of stable balances were updated in June and September 2023 to reflect a larger portion of potential non-stable balances.

Additionally, to reflect changes in interest expense due to the shift from noninterest-bearing to interest-bearing accounts in the deposit mix, the Company utilized a qualitative assumption in March 2023. This assumption considered the amount of surplus noninterest-bearing deposits assumed to be rate sensitive and migrated them to interest-bearing deposits. This assumption was included in the net interest income volatility simulations to reflect more realistic net interest income volatility in rising rate scenarios. The qualitative assumption was enhanced in June 2023 with a more robust quantitative approach. This updated approach incorporated internally observed historical data reflecting the evolution of noninterest-bearing deposits as a percent of total deposits, based on the historical behavior observed during the prior rising interest rate cycle. The assumption forecasts that a portion of noninterest-bearing deposits would migrate to interest-bearing certificates of deposits as the 12-month moving average of the overnight indexed swap rate increases.

In ~~March 2022,~~ the ~~Federal Reserve raised~~net interest income simulations, the ~~target range for~~Company also makes assumptions on the ~~fed funds rate to 0.25% to 0.50% to address concerns about inflation, which reflected supply and demand imbalances due~~yield related to the ~~pandemic, higher energy prices,~~re-investment of investment securities and ~~broader price pressures. The Federal Reserve has continued its aggressive approach in responding~~the yields on new loan originations. These assumptions are updated quarterly to ~~inflation~~reflect recent market conditions as well as forward-looking expectations. In March 2023, loans and ~~raised the target range for the fed funds rate~~deposits with cash flows indexed to ~~3.75% to 4.00% on November 2, 2022. The market estimates that~~China related benchmark interest rates were removed from the interest rate scenario shocks, which reduced net interest income sensitivity by approximately 0.4%.

As loan and security prepayment assumptions are ~~likely~~key components of the Company’s model, the Company incorporates third-party vendor models to ~~continue~~forecast prepayment behavior on mortgage loans and securities which have mortgage loans as underlying collateral. These third-party vendor models have access to ~~rise, potentially reaching 4.25%~~more comprehensive industry-level data which can capture specific borrower and collateral characteristics over a variety of interest rate cycles. The Company will periodically assess and adjust the vendor models when appropriate to ~~4.5% by~~include its own available observations and expectations. In March 2023, the ~~end~~Company updated its version of ~~2022.~~the asset liability management simulation tool and vendor prepayment model. This change updated the calibration of the vendor model to better fit recent data and better supported the transition from London Interbank Offered Rate (“LIBOR”) to Secured Overnight Financing Rate (“SOFR”) indexed loans. Overall, the update had minimal impact on forecasted prepayments. During the third quarter 2023, the Company updated the vendor prepayment model tuning factors to slow down prepayment speeds on single-family residential mortgages so that it better aligned with actual and expected prepayments.

During the third quarter 2023, the Company replaced the U.S. dollar (“USD”) LIBOR Swap curve and rates with the respective SOFR Swap and SOFR reference rates. This change had a minimal impact on the overall results of net interest income and economic value of equity (“EVE”) simulations as the overall yields and discount rates were not impacted.

99101

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 provide insight into the impact of market ~~rates~~rate changes on earnings, which help guide risk management decisions. The Company assesses interest rate risk by comparing the changes of net interest income in different interest rate scenarios.

The following table presents the Company’s net interest income sensitivity related to an instantaneous and sustained non-parallel shift in market interest rates by 100 and 200 bps as of September 30, ~~2022~~2023 and December 31, ~~2021, based~~2022, on a ~~static~~ balance sheet ~~as of~~assuming flat forward rates and flat loan and deposit growth on the date of analysis. The non-parallel shift scenarios were calibrated internally based on historical analysis. As of December 31, 2022, the ~~analysis.~~up 100 and 200 bps scenarios reflected parallel shifts due to the significant inversion of the yield curve while the down 100 and 200 bps scenarios reflected a bull steepening yield curve.

Change in Interest Rates
(in bps)
Net Interest Income Volatility (1)
September 30, 2022 December 31, 2021
+200 11.7 % 19.5 %
+100 6.0 % 9.4 %
-100 (5.2) % NM
-200 (10.2) % NM

~~NM — Not meaningful.~~



	Net Interest Income Volatility (1)
Change in Interest Rates (in bps)	September 30, 2023		December 31, 2022
+200	2.5	%	11.6	%
+100	1.6	%	5.9	%
-100	(2.3)	%	(5.3)	%
-200	(4.0)	%	(8.6)	%

(1)The percentage change represents net interest income change over ~~12 month~~a 12-month period in a stable interest rate environment versus in the various interest rate scenarios.

The composition of the Company’s loan portfolio creates sensitivity to interest rate movements due to ~~the faster~~a mismatch of repricing ofbehavior between the floating-rate loan portfolio ~~than the~~and deposit products. Growth and/or contraction in the Company’s loans, other earning assets, deposits, and borrowings may lead to changes in the sensitivity to interest rate movements. Year-to-date decreases in cash and cash equivalents, resale agreements, and short-term investments, together with growth in fixed-rate loans, as well as the interest rate hedging activities and changes in the funding mix have decreased the Company’s asset sensitivity. In the table above, net interest income volatility is expressed in relation to ~~the~~ base-case net interest income ~~which increased between~~decreased as of September 30, ~~2022~~2023. This decrease reflected updates to the deposit repricing assumptions and ~~December 31, 2021, due~~deposit product mix. Noninterest-bearing deposit account balances are assumed to ~~balance sheet growth~~be sensitive to interest rate levels and ~~an expanded base-case net interest margin.~~migrate to interest-bearing deposit accounts.

~~While an instantaneous and sustained non-parallel shift in market interest rates was used in the simulation model described in the preceding paragraph, the~~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~~flat balance sheet as of the date of the analysis. ~~Actual results will vary based on the timing and pace of interest rate changes, as well as changes in the balance sheet.~~

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

~~NM — Not meaningful.~~



	Net Interest Income Volatility
Change in Interest Rates (in bps)	September 30, 2023		December 31, 2022
+200 Rate Ramp	1.8	%	6.3	%
+100 Rate Ramp	1.2	%	3.4	%
-100 Rate Ramp	(0.6)	%	(2.4)	%
-200 Rate Ramp	(1.7)	%	(4.9)	%

As of September 30, ~~2022,~~2023, the Company’s net interest income profile reflects an asset sensitive ~~position.~~position, where assets reprice faster or more significantly than liabilities. Net interest income is expected to increase when interest rates rise as the Company has a large ~~share~~population of variable rate loans, ~~in its loan portfolio,~~ primarily ~~linked~~tied to Prime ~~or LIBOR~~and Term SOFR indices. The Company’s interest income is sensitive to changes in short-term interest rates. As of September 30, 2023, the Company designated interest rate contracts with a notional amount of $4.75 billion as cash flow hedges, which reduced net interest income volatility by approximately 2.73% of the base net interest income for every 100 bps change in interest rate.

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

~~100~~102

Economic Value of Equity at Risk

~~Economic value of equity (“EVE”)~~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.~~ bank’s assets and liabilities due to changes in interest rates.

The economic value approach provides a comparatively broader scope than the net interest income volatility approach since it ~~captures all anticipated~~represents the discounted present value of cash ~~flows.~~

~~The EVE simulation reflects~~flows over the ~~sensitivity~~expected life of the instruments. Due to this longer horizon, EVE is useful to ~~interest rate changes across the full maturity spectrum of the Company’s assets and liabilities. It identifies~~identify risks arising from repricing, prepayment and maturity gaps between assets and liabilities on the balance sheet, as well as from off-balance sheet derivative exposures, ~~that are off-balance sheet. The simulation provides~~over their lifetime. This long-term economic perspective into the ~~Bank’s~~Company’s interest rate risk profile ~~which~~ allows the ~~Bank~~Company to ~~manage~~identify anticipated negative effects of interest rate fluctuations.However, the difference in time horizons can cause the EVE analysis to diverge from the shorter-term net interest income analysis presented above. Given the uncertainty of the magnitude, timing and direction of future interest rate movements, the shape of the yield curve, and potential changes to the balance sheet, actual results may vary from those predicted by the Company’s model.

The following table presents the Company’s EVE sensitivity related to an instantaneous ~~and sustained~~ non-parallel shift in market interest rates by 100 and 200 bps as of September 30, ~~2022~~2023 and December 31, ~~2021:~~2022. The non-parallel shift scenarios were calibrated internally based on historical analysis. As of December 31, 2022, the up 100 and 200 bps scenarios reflect parallel shifts due to the significant inversion of the yield curve while the down 100 and 200 bps scenarios reflect a bull steepening of the yield curve.

Change in Interest Rates
(in bps)
EVE Volatility (1)
September 30, 2022 December 31, 2021
+200 1.0 % 7.1 %
+100 1.0 % 3.5 %
-100 0.0 % NM
-200 (0.3) % NM

~~NM — Not meaningful.~~



	EVE Volatility (1)
Change in Interest Rates (in bps)	September 30, 2023		December 31, 2022
+200	(12.3)	%	(6.0)	%
+100	(6.1)	%	(2.9)	%
-100	2.6	%	1.1	%
-200	5.5	%	2.3	%

(1)The percentage change represents net portfolio value change of the Company in a stable interest rate environment versus in the various interest rate scenarios.

~~The Company’s EVE sensitivity for the upward interest rate scenarios decreased as~~As of September 30, ~~2022, compared with~~2023, the ~~results as of December 31, 2021.~~Company’s EVE is expected to decrease when interest rates rise. The ~~changes~~change in EVE sensitivity ~~were primarily~~was due to ~~faster~~shorter deposit ~~decay~~durations as a result of deposit modeling assumptions, slower prepayments on fixed-rate mortgages and ~~higher deposit beta assumptions used in the model, changes in the level~~mortgage-backed securities, and ~~shape of the yield curve, and lower~~additional cash ~~balances as of September 30, 2022.~~

~~The Company’s EVE profile as of September 30, 2022 reflects an asset sensitive EVE position under the higher~~flow hedges to reduce net interest rate scenarios. Given the uncertainty of the magnitude, timing and direction of future interest rate movements, as well as the shape of the yield curve, actual results may vary from those predicted by the Company’s model.income volatility.

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~~manage its exposure to market ~~risks,~~risk, primarily interest rate risk and foreign currency risk. The Company believes ~~that~~ these derivative transactions, when properly structured and managed, ~~provides~~provide 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. The Company uses interest rate swaps to hedge the variability in interest received on certain floating-rate commercial loans and interest paid on certain floating-rate borrowings. Foreign exchange derivatives are used in net investment hedging strategies to mitigate the risk of changes in the USD equivalent value of a designated monetary amount of the Company’s net investment in East West Bank (China) Limited. Prior to entering into any ~~hedging~~accounting hedge activities, the Company analyzes the costs and benefits of the hedge in comparison to alternative strategies. The Company also 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.

103

In addition, the Company enters into derivative transactions in order to accommodate its customers with their business needs or to assist customers with their risk management objectives, such as managing exposure to fluctuations in interest rates, foreign currencies and ~~energy~~ commodity prices. To economically hedge against the derivative contracts entered into with the Company’s customers, the Company enters into ~~mirrored~~offsetting derivative contracts with third-party financial ~~institutions.~~institutions, some of which are cleared through central clearing organizations. 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. The fair value changes of the derivative contracts traded with third-party financial institutions are expected to be largely comparable to the fair value changes of the derivative transactions executed with customers throughout the terms of these contracts, except for the credit valuation adjustment component in the contracts and the spread variances between the customer derivatives and the offsetting financial counterparty positions. 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 offered to its customers.

~~101~~

The Company is subject to credit risk associated with the counterparties to the derivative contracts. This counterparty credit risk is a multi-dimensional form of risk, affected by both the exposure and credit quality of the counterparty, both of which are sensitive to market-induced changes. The Company’s Credit Risk Management Committee provides oversight of credit ~~risks~~risk and the Company has guidelines in place to manage counterparty concentration, tenor limits, and collateral. The Company manages the credit risk of its derivative ~~exposures~~positions by diversifying its positions among various counterparties, by entering into legally enforceable master netting ~~arrangements,~~agreements, and by requiring collateral arrangements, where possible. The Company may also transfer counterparty credit risk related to interest rate swaps to ~~third-party financial institutions~~institutional third-parties through the use of credit risk participation agreements. Certain derivative contracts are required to be ~~centrally~~ cleared through central clearinghouses, ~~which~~to further ~~mitigates~~mitigate counterparty credit ~~risk. The~~risk, where variation margin is applied daily as settlement to the fair value of the derivative contracts. In addition, the Company incorporates credit value adjustments and other market standard methodologies to appropriately reflect ~~its own nonperformance risk~~the counterparty’s and the ~~respective counterparty’s~~Company’s own nonperformance risk in the fair value ~~measurements~~measurement of its derivatives. As of September 30, 2023, the Company anticipates performance by its counterparties and has not incurred any related credit losses.

The following table summarizes certain information ~~about~~on derivative ~~financial~~ instruments designated as accounting hedges and utilized by the Company in its management of interest rate ~~risk~~ and foreign currency risk as of September 30, ~~2022~~2023 and December 31, ~~2021:~~2022:

September 30, 2022 December 31, 2021
($ in thousands) Interest Rate Contracts Foreign Exchange Contracts Interest Rate Contracts Foreign Exchange Contracts
Derivatives designated as hedging instruments: Cash Flow
Hedges Net Investment Hedges Cash Flow
Hedges Net Investment Hedges
Notional amounts $ 2,525,000 $ 84,832 $ 275,000 $ 86,531
Fair value:
Recognized as an asset 533 7,107 — —
Recognized as a liability 24,679 — 57 225
Net fair value $ (24,146) $ 7,107 $ (57) $ (225)
Weighted-average interest rates:
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) 1.09%
(1-month USD-LIBOR) NA NA NA
Variable-rate loans — Receive fixed (pay floating) 6.475%
(USD-PRIME) NA NA NA
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): 39.6 5.7 13.9 2.7
Derivatives not designated as hedging instruments: Interest Rate Contracts Foreign Exchange Contracts Interest Rate Contracts Foreign Exchange Contracts
Notional amounts $ 17,261,862 $ 2,762,150 $ 17,575,420 $ 1,874,681
Fair value:
Recognized as an asset 429,505 74,767 240,222 21,033
Recognized as a liability 590,648 64,049 179,905 15,276
Net fair value $ (161,143) $ 10,718 $ 60,317 $ 5,757



	September 30, 2023						December 31, 2022
($ in thousands)	Interest Rate Contracts Hedging Loans (1)				Interest Rate Contracts Hedging Borrowings (2)		Interest Rate Contracts Hedging Loans (1)				Interest Rate Contracts Hedging Borrowings (2)
Cash flow hedges
Notional amount	$	4,000,000		(3)(4)	$	—	$	3,000,000		(3)	$	200,000
Weighted average:
Receive rate	4.95		%		NA		4.91		%		3.83		%
Pay rate	7.31		%		NA		6.23		%		0.48		%
Remaining term (in months)	38.8				NA		46.6				3.2


($ in thousands)	Foreign Exchange Contracts						Foreign Exchange Contracts
Net investment hedges
Notional amount	$	81,480					$	84,832
Hedged percentage (5)	44		%				44		%
Remaining term (in months)	5.7						2.6

NA — Not applicable.

(1)Represents receive-fixed/pay-floating interest rate swaps and excludes interest rate collars. Floating rates paid are based on SOFR, or Prime.

~~Derivatives Designated~~(2)Represents receive-floating/pay-fixed interest rate swaps. Floating rate received was based on three-month LIBOR. The hedge was terminated during the first quarter of 2023.

(3)Excludes interest rate collars in total notional amount of $250.0 million as ~~Hedging Instruments~~ of both September 30, 2023 and December 31, 2022.

(4)~~— Interest rate and~~Excludes forward-starting swaps in total notional amount of $750.0 million not effective as of September 30, 2023.

(5)Represents percentage between the notional of outstanding 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 includ~~es 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 September 30, 2022, the outstanding foreign currency forwards effectively hedged approximately 44% of the net Chinese RenminbiRMB exposure from East West Bank (China) Limited.

~~102~~104

Changes to the composition of the Company’s derivatives designated as hedging instruments during the first nine months of 2022 reflect actions taken for interest rate risk and foreign exchange rate risk management. The 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. Derivative contracts entered with central clearing organizations are settled-to-market daily to the extent the central clearing organizations’ rulebook legally characterize daily payments of variation margin as a settlement.

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 to accommodate their business 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 with its customers, the Company enters into offsetting foreign exchange contracts with third-party financial institutions and/or enters into bilateral collateral and master netting agreements with certain customer counterparties. The changes in the fair values of contracts entered with third-party financial institutions are expected to be largely comparable to the changes in fair values of the foreign exchange transactions executed with the customers throughout the terms of these contracts. As of September 30, 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-denominated on-balance sheet assets and liabilities, primarily foreign 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, including central clearing organizations. 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~~2022 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.

~~103~~

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~~2022 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~~2022 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, or is subject to adjustments that have such an effect, that are not normally excluded or included in the most directly comparable financial measure that is calculated and presented in accordance with U.S. GAAP. AThe non-GAAP financial ~~measure may~~measures discussed in this Form 10-Q are return on average TCE, adjusted efficiency ratio, and tangible book value per share. Certain additional non-GAAP financial measures that are components of the foregoing non-GAAP financial measures are also ~~be a financial metric that is not required by U.S. GAAP or other applicable requirements.~~set forth and reconciled in the table below. The Company believes these non-GAAP financial measures, when taken together with the corresponding U.S. GAAP financial measures, provide meaningful supplemental information regarding its performance, and allow comparability to prior periods. These non-GAAP financial measures may be different from non-GAAP financial measures used by other companies, limiting their usefulness for comparison purposes.

105

The following tables present the reconciliations of U.S. GAAP to non-GAAP financial measures for the periods presented:



		Three Months Ended September 30,						Nine Months Ended September 30,
($ in thousands)		2023			2022			2023			2022
Net income	(a)	$	287,738		$	295,339		$	922,208		$	791,320
Add: Amortization of core deposit intangibles		441			485			1,322			1,484
Amortization of mortgage servicing assets		328			340			1,026			1,096
Tax effect of amortization adjustments (1)		(225)			(237)			(688)			(742)
Tangible net income (non-GAAP)	(b)	$	288,282		$	295,927		$	923,868		$	793,158

Average stockholders’ equity	(c)	$	6,604,798		$	5,772,638		$	6,411,250		$	5,765,637
Less: Average goodwill		(465,697)			(465,697)			(465,697)			(465,697)
Average other intangible assets (2)		(6,148)			(8,379)			(6,916)			(8,801)
Average tangible book value (non-GAAP)	(d)	$	6,132,953		$	5,298,562		$	5,938,637		$	5,291,139

Return on average common equity (3)	(a)/(c)	17.28		%	20.30		%	19.23		%	18.35		%
Return on average TCE (3) (non-GAAP)	(b)/(d)	18.65		%	22.16		%	20.80		%	20.04		%

(1)Applied statutory tax rate of 29.29% for the third ~~quarters~~quarter and first nine months of ~~2022 and 2021:~~

($ in thousands) Three Months Ended September 30, Nine Months Ended September 30,
2022 2021 2022 2021
Net income (a) $ 295,339 $ 225,449 $ 791,320 $ 655,185
Add: Amortization of core deposit intangibles 485 705 1,484 2,147
Amortization of mortgage servicing assets 340 430 1,096 1,264
Tax effect of amortization adjustments (1)
(237) (322) (742) (968)
Tangible net income (b) $ 295,927 $ 226,262 $ 793,158 $ 657,628
Average stockholders’ equity (c) $ 5,772,638 $ 5,680,306 $ 5,765,637 $ 5,482,705
Less: Average goodwill (465,697) (465,697) (465,697) (465,697)
Average other intangible assets (2)
(8,379) (10,135) (8,801) (10,847)
Average tangible equity (d) $ 5,298,562 $ 5,204,474 $ 5,291,139 $ 5,006,161
Return on average equity (3)
(a)/(c) 20.30 % 15.75 % 18.35 % 15.98 %
Tangible return on average tangible equity (3)
(b)/(d) 22.16 % 17.25 % 20.04 % 17.56 %

~~(1)~~2023. Applied statutory tax rate of 28.77% for the third quarter and first nine months of 2022. ~~Applied statutory tax rate of 28.37% for the third quarter and first nine months of 2021.~~

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

(3)Annualized.



		Three Months Ended September 30,						Nine Months Ended September 30,
($ in thousands)		2023			2022			2023			2022
Net interest income before provision for credit losses	(a)	$	570,813		$	551,809		$	1,737,420		$	1,440,374
Total noninterest income		76,752			75,552			215,361			233,739
Total revenue	(b)	$	647,565		$	627,361		$	1,952,781		$	1,674,113
Noninterest income		76,752			75,552			215,361			233,739
Add: Write-off of AFS debt security (1)		—			—			10,000			—
Adjusted noninterest income (non-GAAP)	(c)	76,752			75,552			225,361			233,739
Adjusted revenue (non-GAAP)	(a)+(c)=(d)	$	647,565		$	627,361		$	1,962,781		$	1,674,113

Total noninterest expense	(e)	$	252,014		$	215,973		$	732,250		$	602,283
Less: Amortization of tax credit and other investments		(49,694)			(19,874)			(115,718)			(48,753)
Amortization of core deposit intangibles		(441)			(485)			(1,322)			(1,484)
Repurchase agreements’ extinguishment cost (1)		—			—			(3,872)			—
Adjusted noninterest expense (non-GAAP)	(f)	$	201,879		$	195,614		$	611,338		$	552,046

Efficiency ratio	(e)/(b)	38.92		%	34.43		%	37.50		%	35.98		%
Adjusted efficiency ratio (non-GAAP)	(f)/(d)	31.18		%	31.18		%	31.15		%	32.98		%

(1)During the first quarter of 2023, the Company recorded a $10.0 million pre-tax impairment write-off of an AFS debt security. In addition, the Company prepaid $300.0 million of repurchase agreements and incurred a debt extinguishment cost of $3.9 million.

~~104~~

106

($ in thousands) Three Months Ended September 30, Nine Months Ended September 30,
2022 2021 2022 2021
Net interest income before provision for (reversal of) credit losses $ 551,809 $ 395,706 $ 1,440,374 $ 1,125,874
Total noninterest income 75,552 73,109 233,739 214,406
Total revenue (a) $ 627,361 $ 468,815 $ 1,674,113 $ 1,340,280
Total noninterest expense
(b) $ 215,973 $ 205,384 $ 602,283 $ 585,984
Less: Amortization of tax credit and other investments (19,874) (38,008) (48,753) (90,657)
Amortization of core deposit intangibles (485) (705) (1,484) (2,147)
Adjusted noninterest expense (c) $ 195,614 $ 166,671 $ 552,046 $ 493,180
Efficiency ratio (b)/(a) 34.43 % 43.81 % 35.98 % 43.72 %
Adjusted efficiency ratio (c)/(a) 31.18 % 35.55 % 32.98 % 36.80 %


($ and shares in thousands, except per share data)	($ and shares in thousands, except per share data)		September 30, 2022		December 31, 2021		($ and shares in thousands, except per share data)		September 30, 2023		December 31, 2022
Stockholders’ equity	Stockholders’ equity	(a)	$	5,660,668	$	5,837,218	Stockholders’ equity	(a)	$	6,596,706	$	5,984,612
Less: Goodwill	Less: Goodwill		(465,697)		(465,697)		Less: Goodwill		(465,697)		(465,697)
Other intangible assets (1)	Other intangible assets (1)		(8,667)		(9,334)		Other intangible assets (1)		(5,649)		(7,998)
Tangible equity		(b)	$	5,186,304	$	5,362,187
Tangible book value (non-GAAP)							Tangible book value (non-GAAP)	(b)	$	6,125,360	$	5,510,917

Number of common shares at period-end	Number of common shares at period-end	(c)	140,918		141,908		Number of common shares at period-end	(c)	141,486		140,948
Book value per common share		(a)/(c)	$	40.17	$	41.13
Tangible equity per common share		(b)/(c)	$	36.80	$	37.79
Book value per share							Book value per share	(a)/(c)	$	46.62	$	42.46
Tangible book value per share (non-GAAP)							Tangible book value per share (non-GAAP)	(b)/(c)	$	43.29	$	39.10

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

~~105~~107

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 September 30, ~~2022,~~2023, pursuant to Rule 13a-15(b) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), the Company conducted an evaluation, under the supervision and with the participation of the Company’s management, including the Chief Executive Officer and Chief Financial Officer, of the effectiveness of the Company’s disclosure controls and procedures (as defined in Rule 13a-15(e) of the Exchange Act). Based upon that evaluation, the Company’s Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures were effective as of September 30, ~~2022.~~2023.

The Company’s disclosure controls and procedures are designed to ensure that information required to be disclosed by the Company in the reports that the Company files or submits under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the rules and forms of the SEC. The Company’s disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by the Company in the reports that the Company files under the Exchange Act is accumulated and communicated to the Company’s management, including the Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

Change in Internal Control over Financial Reporting

There were no changes in the Company’s internal control over financial reporting (as defined in Rule 13a-15(f) of the Exchange Act) during the quarter ended September 30, ~~2022,~~2023, that have materially affected or are reasonably likely to materially affect the Company’s internal control over financial reporting.

~~106~~108

PART II — OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

See Note 1011 — 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~~2022 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~~have been no material ~~change~~changes to the Company’s risk factors as presented in the Company’s ~~2021~~2022 Form ~~10-K.~~10-K, except as described below:

Risks Related to Our Operations

We may be impacted by the actions, soundness or creditworthiness of other financial institutions, which can cause disruption within the industry and increase expenses.

Financial services institutions are interrelated as a result of trading, clearing, counterparty, or other relationships. We execute transactions with various counterparties in the financial industry, including broker-dealers, commercial banks, and investment banks. Defaults or failures of financial services institutions and instability in the financial services industry in general can lead to market-wide liquidity problems, increased credit risk and withdrawals of uninsured deposits. The failures of Silicon Valley Bank, Signature Bank, and First Republic Bank in the first half of 2023 resulted in significant disruption in the financial services industry and negative media attention, which has also adversely impacted the volatility and market prices of the securities of financial institutions and resulted in outflows of deposits for us and many other financial institutions. These events have adversely impacted and could continue to adversely affect our business, results of operations, and financial condition, as well as the market price and volatility of our common stock.

The cost of resolving the recent bank failures is expected to lead to special assessments by the FDIC to replenish the DIF, pursuant to a rule the FDIC proposed on May 11, 2023. Such events may also increase the risk of a recession or lead to regulatory changes and initiatives that could adversely impact the Company. Changes to laws or regulations, or the impositions of additional restrictions through supervisory or enforcement activities, could have a material impact on our business. Regulatory changes could also adversely impact our ability to access funding, increase the cost of funding, limit our access to capital markets, and negatively impact our overall financial condition.

The proportion of our deposit account balances that exceed FDIC insurance limits may expose us to enhanced liquidity risk.

A significant factor in the bank failures in the first half of 2023 appears to have been the proportion of the deposits held by each institution that exceeded applicable FDIC insurance limits, and the withdrawal of such deposits over a short period of time. The ease and speed of the electronic withdrawals may accelerate this process. If a significant portion of our deposits were to be withdrawn within a short period of time such that additional sources of funding would be required to meet withdrawal demands, we may be unable to obtain funding on favorable terms, which may have an adverse effect on our net interest margin. Moreover, obtaining adequate funding to meet our deposit obligations may be more challenging during periods of elevated interest rates and financial industry instability. Our ability to attract depositors during a time of actual or perceived distress or instability in the marketplace may be limited. Further, interest rates paid for borrowing generally exceed the interest rates paid on deposits. This spread may be exacerbated by higher prevailing interest rates. In addition, because our AFS debt securities lose value when interest rates rise, our ability to cover liquidity needs from sale or pledging of these securities may be negatively impacted during periods of elevated interest rates. Under these circumstances, we may be required to access additional funding from other sources in order to manage our liquidity risk.

109

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

~~There were no unregistered sales~~Unregistered Issuances of Equity Securities

On July 3, 2023, the Company acquired a 49.99% equity ~~securities or repurchase activities~~interest in Rayliant Global Advisors Limited (“Rayliant”). As consideration for this purchase, the Company paid $94.7 million in cash and granted 349,138 (target) performance restricted stock units (“PRSUs”) to the sellers of the Rayliant shares, each of whom was an “accredited investor” as such term is defined in Rule 501(a) of Regulation D (“Regulation D”) promulgated under the Securities Act of 1933, as amended (the “Securities Act”). The PRSUs vest on September 1, 2028 into a variable number of shares of the Company’s common stock, ranging from 20% to 200% of the target PRSUs granted based on certain financial performance targets achieved by Rayliant during the ~~third quarter~~future performance period. The Company issued the PRSUs in reliance upon the exemptions from registration available under Section 4(a)(2) of ~~2022.~~the Securities Act and Rule 506(b) of Regulation D.

ITEM 5. OTHER INFORMATION

During the three months ended September 30, 2023, none of the Company’s directors or Section 16 reporting officers adopted or terminated any Rule 10b5-1 trading arrangement or non-Rule 10b5-1 trading arrangement (as such terms are defined in Item 408 of the SEC’s Regulation S-K).

~~107~~110

ITEM 6. EXHIBITS

The following exhibit index lists Exhibits filed, or in the case of Exhibits 32.1 and 32.2 furnished, with this report:


Exhibit No.						Exhibit Description

3.1						Certificate of Incorporation of the Registrant [Incorporated by reference to Exhibit 3(i) from Registrant’s Registration Statement on Form S-4 filed with the Commission on September 17, 1998 (File No. 333-63605).]

3.1.1						Certificate of Amendment to Certificate of Incorporation of the Registrant [Incorporated by reference to Exhibit 3(i).1 from Registrant’s Annual Report on Form 10-K for the year ended December 31, 2002 filed with the Commission on March 28, 2003 (File No. 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~~March 14, 2023 [Incorporated by reference to Exhibit 3.1 from Registrant’s Current Report on Form 8-K filed with the Commission on ~~May 27, 2022~~Ma rch 1 7, 202 3 (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.

~~108~~111

GLOSSARY OF ACRONYMS


AFS	Available-for-sale	~~LCH~~HELOC	~~London Clearing House~~Home equity lines of credit
ALCO	Asset/Liability Committee	~~LGD~~HTM	~~Loss given default~~Held-to-maturity
AOCI	Accumulated other comprehensive (loss) income	~~LIBOR~~IAR	~~London Interbank Offered Rate~~Independent Asset Review
ASC	Accounting Standards Codification	~~LIBOR Act~~ICS	~~Adjustable Interest Rate (LIBOR) Act~~Insured cash sweep
ASU	Accounting Standards Update	IDI	Insured deposit institution
~~LTV~~BTFP	~~Loan-to-value~~Bank Term Funding Program	LCH	London Clearing House
C&I	Commercial and industrial	LGD	Loss given default
CCDAA	Climate Corporate Data Accountability Act	LIBOR	London Interbank Offered Rate
CECL	Current expected credit losses	LTV	Loan-to-value
CFPB	Consumer Financial Protection Bureau	MD&A	Management’s Discussion and Analysis of Financial Condition and Results of Operations
~~CARES Act~~CLO	~~Coronavirus Aid, Relief, and Economic Security Act~~Collateralized loan obligations	MMBTU	Million British thermal unit
~~CECL~~CME	~~Current expected credit losses~~Chicago Mercantile Exchange	NAV	Net asset value
~~CLO~~CRA	~~Collateralized loan obligations~~Community Reinvestment Act	NRSRO	Nationally recognized statistical rating organizations
~~CME~~CRE	~~Chicago Mercantile Exchange~~Commercial real estate	OREO	Other real estate owned
~~COVID-19~~CRFRA	~~Coronavirus Disease 2019~~	~~OTTI~~	~~Other-than-temporary impairment~~
~~CRA~~	~~Community Reinvestment~~Climate-Related Financial Risk Act	PD	Probability of default
~~CRE~~	~~Commercial real estate~~	~~PPP~~	~~Paycheck Protection Program~~
DIF	Deposit Insurance Fund	PRSU	Performance restricted stock unit
EFFR	Effective Federal Funds Rate	RMB	Chinese Renminbi
EPS	Earnings per share	ROA	Return on average assets
ERM	Enterprise risk management	ROC	Risk Oversight Committee
EVE	Economic value of equity	ROE	Return on average equity
~~EVE~~FASB	~~Economic value of equity~~Financial Accounting Standards Board	RPA	Credit risk participation agreement
FDIC	Federal Deposit Insurance Corporation	RSU	Restricted stock unit
FHLB	Federal Home Loan Bank	SBLC	Standby letters of credit
~~FRBSF~~FIL	~~Federal Reserve Bank of San Francisco~~Financial Institution Letter	SEC	U.S. Securities and Exchange Commission
~~FTP~~FRBSF	~~Funds transfer pricing~~Federal Reserve Bank of San Francisco	SOFR	Secured Overnight Financing Rate
FTP	Funds transfer pricing	TCE	Tangible Common Equity
GAAP	Generally Accepted Accounting Principles	TDR	Troubled debt restructuring
GDP	Gross Domestic Product	U.S.	United States
~~HELOC~~GHG	~~Home equity lines of credit~~Greenhouse gas	USD	U.S. dollar
~~HTM~~	~~Held-to-maturity~~	~~VIE~~	~~Variable interest entity~~

~~109~~112

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

Dated:

November 8, ~~2022~~2023

EAST WEST BANCORP, INC.
(Registrant)

/s/ ~~IRENE H. OH~~Christopher J. Del Moral-Niles

~~Irene H. Oh~~Christopher J. Del Moral-Niles

Executive Vice President and
Chief Financial Officer

~~110~~113



($ and units in thousands)	September 30, 2022
	Customer Counterparty						($ and units in thousands)	Financial Counterparty
	Notional Unit		Fair Value					Notional Unit		Fair Value
			Assets		Liabilities					Assets		Liabilities
Crude oil:							Crude oil:
Written options	841	Barrels	$	1,593	$	—	Purchased options	841	Barrels	$	—	$	1,451
Collars	2,898	Barrels	22,072		7,148		Collars	2,903	Barrels	2,179		20,503
Swaps	4,460	Barrels	54,906		22,314		Swaps	3,425	Barrels	15,052		41,978
Total	8,199		$	78,571	$	29,462	Total	7,169		$	17,231	$	63,932

Natural gas:							Natural gas:

Collars	26,363	MMBTUs	$	28,318	$	3,684	Collars	26,839	MMBTUs	$	2,320	$	24,916
Swaps	87,211	MMBTUs	216,050		73,012		Swaps	70,817	MMBTUs	26,656		155,192
Total	113,574		$	244,368	$	76,696	Total	97,656		$	28,976	$	180,108

Total			$	322,939	$	106,158	Total			$	46,207	$	244,040



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

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

Total CRE	—	—		—		—		1	1,101		1,118		—
Total commercial	1	499		496		98		8	27,349		28,229		5,688
Consumer:
Residential mortgage:

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

Total consumer	1	62		69		2		—	—		—		—
Total	2	$	561	$	565	$	100	8	$	27,349	$	28,229	$	5,688



($ in thousands)	Modification Type During the Three Months Ended September 30,
	2022				2021
	Principal (1)		Interest Rate Reduction		Other		Total		Principal (1)		Interest Rate Reduction		Other		Total
Commercial:
C&I	$	496	$	—	$	—	$	496	$	27,111	$	—	$	—	$	27,111
CRE:

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

Total CRE	—				—		—		1,118		—		—		1,118
Total commercial	496		—		—		496		28,229		—		—		28,229
Consumer:
Residential mortgage:

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

Total consumer	69		—		—		69		—		—		—		—
Total	$	565	$	—	$	—	$	565	$	28,229	$	—	$	—	$	28,229



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

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

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



Change in Interest Rates (in bps)	Net Interest Income Volatility (1)
	September 30, 2022		December 31, 2021
+200	11.7	%	19.5	%
+100	6.0	%	9.4	%
-100	(5.2)	%	NM
-200	(10.2)	%	NM