0001069157us-gaap:~~ExtendedMaturityAndInterestRateReductionMember2023-01-012023-06-30~~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 ~~June~~September 30, 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: ~~141,483,668~~140,930,142 shares as of ~~July~~October 31, 2023.

TABLE OF CONTENTS


			Page
FORWARD-LOOKING STATEMENTS			3
PART I — FINANCIAL INFORMATION			5

	Item 1.	Consolidated Financial Statements	5
		Consolidated Balance Sheet (Unaudited)	5
		Consolidated Statement of Income (Unaudited)	6
		Consolidated Statement of Comprehensive Income (Loss) (Unaudited)	7
		Consolidated Statement of Changes in Stockholders’ Equity (Unaudited)	8
		Consolidated Statement of Cash Flows (Unaudited)	9
		Notes to Consolidated Financial Statements (Unaudited)	11
		1 — Basis of Presentation	11
		2 — Current Accounting Developments and Summary of Significant Accounting Policies	12
		3 — Fair Value Measurement and Fair Value of Financial Instruments	1314
		4 — Assets Purchased under Resale Agreements and Sold under Repurchase Agreements	2324
		5 — Securities	2526
		6 — Derivatives	3132
		7 — Loans Receivable and Allowance for Credit Losses	3839
		8 — Investments in Qualified Affordable Housing Partnerships, Tax Credit and Other Investments, Net and Variable Interest Entities	5254
		9 — Goodwill	5355
		10 — Short-Term Borrowings and Long-Term Debt	5455
		1 1 — Commitments and Contingencies	5456


		1 2 — Stock Compensation Plans	5658
		1 3 — Stockholders’ Equity and Earnings Per Share	5759
		1 4 — Accumulated Other Comprehensive Income (Loss)	5759
		1 5 — Business Segments	5961


	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	6264










	Item 3.	Quantitative and Qualitative Disclosures About Market Risk	~~101~~108

	Item 4.	Controls and Procedures	~~101~~108


PART II — OTHER INFORMATION			~~102~~109

	Item 1.	Legal Proceedings	~~102~~109
	Item 1A.	Risk Factors	~~102~~109
	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	~~102~~110


	Item 5.	Other Information	~~103~~110
	Item 6.	Exhibits	~~103~~111

GLOSSARY OF ACRONYMS			~~104~~112

SIGNATURE			~~105~~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 ~~Russia’s invasion~~political unrest, wars and acts of ~~Ukraine;~~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, ~~the~~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)


		June 30, 2023		December 31, 2022			September 30, 2023		December 31, 2022

ASSETS	ASSETS					ASSETS
Cash and due from banks	Cash and due from banks	$	614,053	$	534,980	Cash and due from banks	$	495,976	$	534,980
Interest-bearing cash with banks	Interest-bearing cash with banks	5,763,834		2,946,804		Interest-bearing cash with banks	4,065,202		2,946,804
Cash and cash equivalents	Cash and cash equivalents	6,377,887		3,481,784		Cash and cash equivalents	4,561,178		3,481,784
Interest-bearing deposits with banks	Interest-bearing deposits with banks	17,169		139,021		Interest-bearing deposits with banks	17,213		139,021
Assets purchased under resale agreements (“resale agreements”)	Assets purchased under resale agreements (“resale agreements”)	635,000		792,192		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 $6,820,569 and $6,879,225)		5,987,258		6,034,993
Held-to-maturity (“HTM”) debt securities, at amortized cost (fair value of $2,440,484 and $2,455,171)		2,975,933		3,001,868
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	2,830		25,644		Loans held-for-sale	4,762		25,644
Loans held-for-investment (net of allowance for loan losses of $635,400 and $595,645)		49,192,964		47,606,785
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	815,471		763,256		Investments in qualified affordable housing partnerships, tax credit and other investments, net	901,559		763,256

Premises and equipment (net of accumulated depreciation of $153,079 and $148,126)		88,966		89,191
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	100,500		103,681		Operating lease right-of-use assets	97,782		103,681
Other assets	Other assets	1,873,006		1,608,038		Other assets	2,112,646		1,608,038
TOTAL	TOTAL	$	68,532,681	$	64,112,150	TOTAL	$	68,289,458	$	64,112,150
LIABILITIES	LIABILITIES					LIABILITIES
Deposits:	Deposits:					Deposits:
Noninterest-bearing	Noninterest-bearing	$	16,741,099	$	21,051,090	Noninterest-bearing	$	16,169,072	$	21,051,090
Interest-bearing	Interest-bearing	38,917,687		34,916,759		Interest-bearing	38,917,959		34,916,759
Total deposits	Total deposits	55,658,786		55,967,849		Total deposits	55,087,031		55,967,849
Short-term borrowings	Short-term borrowings	4,500,000		—		Short-term borrowings	4,500,000		—

Assets sold under repurchase agreements (“repurchase agreements”)	Assets sold under repurchase agreements (“repurchase agreements”)	—		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	152,951		152,400		Long-term debt and finance lease liabilities	153,087		152,400
Operating lease liabilities	Operating lease liabilities	110,383		111,931		Operating lease liabilities	107,695		111,931
Accrued expenses and other liabilities	Accrued expenses and other liabilities	1,648,864		1,595,358		Accrued expenses and other liabilities	1,844,939		1,595,358
Total liabilities	Total liabilities	62,070,984		58,127,538		Total liabilities	61,692,752		58,127,538
COMMITMENTS AND CONTINGENCIES (Note 11)	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; 169,310,864 and 168,459,045 shares issued		169		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	1,959,615		1,936,389		Additional paid-in capital	1,969,239		1,936,389
Retained earnings	Retained earnings	6,075,735		5,582,546		Retained earnings	6,294,751		5,582,546
Treasury stock, at cost 27,827,196 and 27,511,199 shares		(791,890)		(768,862)
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	(781,932)		(765,629)		Accumulated other comprehensive loss (“AOCI”), net of tax	(875,377)		(765,629)
Total stockholders’ equity	Total stockholders’ equity	6,461,697		5,984,612		Total stockholders’ equity	6,596,706		5,984,612
TOTAL	TOTAL	$	68,532,681	$	64,112,150	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 June 30,				Six Months Ended June 30,				Three Months Ended September 30,				Nine Months Ended September 30,
		2023		2022		2023		2022				2023		2022		2023		2022
INTEREST AND DIVIDEND INCOME	INTEREST AND DIVIDEND INCOME										INTEREST AND DIVIDEND INCOME
Loans receivable, including fees	Loans receivable, including fees	$	771,264	$	439,416	$	1,499,650	$	816,526		Loans receivable, including fees	$	818,719	$	560,452	$	2,318,369	$	1,376,978
Debt securities	Debt securities	68,970		46,176		134,901		88,843			Debt securities	69,778		51,092		204,679		139,935

Resale agreements	Resale agreements	3,969		8,553		8,472		16,936			Resale agreements	4,460		6,769		12,932		23,705
Restricted equity securities	Restricted equity securities	936		822		1,975		1,431			Restricted equity securities	1,079		843		3,054		2,274
Interest-bearing cash and deposits with banks	Interest-bearing cash and deposits with banks	60,995		4,787		96,642		8,047			Interest-bearing cash and deposits with banks	67,751		9,080		164,393		17,127
Total interest and dividend income	Total interest and dividend income	906,134		499,754		1,741,640		931,783			Total interest and dividend income	961,787		628,236		2,703,427		1,560,019
INTEREST EXPENSE	INTEREST EXPENSE										INTEREST EXPENSE
Deposits	Deposits	287,477		22,488		504,271		35,477			Deposits	338,296		68,894		842,567		104,371
Federal funds purchased and other short-term borrowings	Federal funds purchased and other short-term borrowings	49,032		241		57,857		250			Federal funds purchased and other short-term borrowings	49,575		1,177		107,432		1,427
Federal Home Loan Bank (“FHLB”) advances	Federal Home Loan Bank (“FHLB”) advances	—		559		6,430		1,137			Federal Home Loan Bank (“FHLB”) advances	—		392		6,430		1,529
Repurchase agreements	Repurchase agreements	211		2,418		1,263		4,434			Repurchase agreements	193		4,421		1,456		8,855
Long-term debt and finance lease liabilities	Long-term debt and finance lease liabilities	2,668		1,096		5,212		1,920			Long-term debt and finance lease liabilities	2,910		1,543		8,122		3,463
Total interest expense	Total interest expense	339,388		26,802		575,033		43,218			Total interest expense	390,974		76,427		966,007		119,645
Net interest income before provision for credit losses	Net interest income before provision for credit losses	566,746		472,952		1,166,607		888,565			Net interest income before provision for credit losses	570,813		551,809		1,737,420		1,440,374
Provision for credit losses	Provision for credit losses	26,000		13,500		46,000		21,500			Provision for credit losses	42,000		27,000		88,000		48,500
Net interest income after provision for credit losses	Net interest income after provision for credit losses	540,746		459,452		1,120,607		867,065			Net interest income after provision for credit losses	528,813		524,809		1,649,420		1,391,874
NONINTEREST INCOME	NONINTEREST INCOME										NONINTEREST INCOME
Lending fees	Lending fees	20,901		20,142		41,487		39,580			Lending fees	20,312		20,289		61,799		59,869
Deposit account fees	Deposit account fees	22,285		22,372		43,988		42,687			Deposit account fees	22,622		23,636		66,610		66,323
Interest rate contracts and other derivative income	Interest rate contracts and other derivative income	7,373		9,801		9,937		20,934			Interest rate contracts and other derivative income	11,208		8,761		21,145		29,695
Foreign exchange income	Foreign exchange income	13,251		11,361		25,911		24,060			Foreign exchange income	12,334		10,083		38,245		34,143
Wealth management fees	Wealth management fees	6,889		6,539		13,193		12,591			Wealth management fees	5,877		8,903		19,070		21,494
Net (losses) gains on sales of loans	Net (losses) gains on sales of loans	(7)		917		(29)		3,839			Net (losses) gains on sales of loans	(12)		2,129		(41)		5,968
Net gains (losses) on AFS debt securities		—		28		(10,000)		1,306
Net (losses) gains on AFS debt securities											Net (losses) gains on AFS debt securities	—		—		(10,000)		1,306

Other investment income		4,003		4,863		5,924		6,490
Other investment income (loss)											Other investment income (loss)	1,751		(580)		7,675		5,910
Other income	Other income	3,936		2,421		8,198		6,700			Other income	2,660		2,331		10,858		9,031
Total noninterest income	Total noninterest income	78,631		78,444		138,609		158,187			Total noninterest income	76,752		75,552		215,361		233,739
NONINTEREST EXPENSE	NONINTEREST EXPENSE										NONINTEREST EXPENSE
Compensation and employee benefits	Compensation and employee benefits	124,937		113,364		254,591		229,633			Compensation and employee benefits	123,153		127,580		377,744		357,213
Occupancy and equipment expense	Occupancy and equipment expense	16,088		15,469		31,675		30,933			Occupancy and equipment expense	15,353		15,920		47,028		46,853
Deposit insurance premiums and regulatory assessments	Deposit insurance premiums and regulatory assessments	8,262		4,927		16,172		9,644			Deposit insurance premiums and regulatory assessments	8,583		4,875		24,755		14,519
Deposit account expense	Deposit account expense	10,559		5,671		20,168		10,364			Deposit account expense	11,585		6,707		31,753		17,071
Data processing	Data processing	3,213		3,486		6,560		7,151			Data processing	3,645		3,725		10,205		10,876
Computer software expense	Computer software expense	7,479		6,572		14,839		13,866			Computer software expense	8,116		6,889		22,955		20,755

Other operating expense	Other operating expense	35,337		32,392		70,207		55,840			Other operating expense	31,885		30,403		102,092		86,243
Amortization of tax credit and other investments	Amortization of tax credit and other investments	55,914		14,979		66,024		28,879			Amortization of tax credit and other investments	49,694		19,874		115,718		48,753

Total noninterest expense	Total noninterest expense	261,789		196,860		480,236		386,310			Total noninterest expense	252,014		215,973		732,250		602,283
INCOME BEFORE INCOME TAXES	INCOME BEFORE INCOME TAXES	357,588		341,036		778,980		638,942			INCOME BEFORE INCOME TAXES	353,551		384,388		1,132,531		1,023,330
INCOME TAX EXPENSE	INCOME TAX EXPENSE	45,557		82,707		144,510		142,961			INCOME TAX EXPENSE	65,813		89,049		210,323		232,010
NET INCOME	NET INCOME	$	312,031	$	258,329	$	634,470	$	495,981		NET INCOME	$	287,738	$	295,339	$	922,208	$	791,320
EARNINGS PER SHARE (“EPS”)	EARNINGS PER SHARE (“EPS”)										EARNINGS PER SHARE (“EPS”)
BASIC	BASIC	$	2.21	$	1.83	$	4.49	$	3.50		BASIC	$	2.03	$	2.10	$	6.52	$	5.59
DILUTED	DILUTED	$	2.20	$	1.81	$	4.47	$	3.47		DILUTED	$	2.02	$	2.08	$	6.49	$	5.55
WEIGHTED-AVERAGE NUMBER OF SHARES OUTSTANDING	WEIGHTED-AVERAGE NUMBER OF SHARES OUTSTANDING										WEIGHTED-AVERAGE NUMBER OF SHARES OUTSTANDING
BASIC	BASIC	141,468		141,429		141,291		141,725			BASIC	141,485		140,917		141,356		141,453
DILUTED	DILUTED	141,876		142,372		141,910		142,838			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 COMPREHENSIVE INCOME (LOSS)

($ in thousands)

(Unaudited)


		Three Months Ended June 30,				Six Months Ended June 30,				Three Months Ended September 30,		Nine Months Ended September 30,
		2023		2022		2023		2022				2023		2022		2023		2022
Net income	Net income	$	312,031	$	258,329	$	634,470	$	495,981		Net income	$	287,738	$	295,339	$	922,208	$	791,320
Other comprehensive loss, net of tax:	Other comprehensive loss, net of tax:										Other comprehensive loss, net of tax:
Net changes in unrealized (losses) gains on AFS debt securities		(43,618)		(192,878)		7,701		(362,148)
Net changes in unrealized losses on AFS debt securities											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	Reclassification of unrealized losses on debt securities transferred from AFS to HTM	—		—		—		(112,991)			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	Amortization of unrealized losses on debt securities transferred from AFS to HTM	2,816		3,750		5,578		6,061			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	Net changes in unrealized losses on cash flow hedges	(53,887)		(6,380)		(25,274)		(31,103)			Net changes in unrealized losses on cash flow hedges	(27,334)		(33,269)		(52,608)		(64,372)
Foreign currency translation adjustments	Foreign currency translation adjustments	(7,249)		(10,215)		(4,308)		(10,086)			Foreign currency translation adjustments	3,710		(7,926)		(598)		(18,012)
Other comprehensive loss	Other comprehensive loss	(101,938)		(205,723)		(16,303)		(510,267)			Other comprehensive loss	(93,445)		(199,384)		(109,748)		(709,651)
COMPREHENSIVE INCOME (LOSS)		$	210,093	$	52,606	$	618,167	$	(14,286)
COMPREHENSIVE INCOME											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					Common Stock and Additional Paid-in Capital				Retained Earnings			Treasury Stock			AOCI, Net of Tax			Total Stockholders’ Equity
		Shares	Amount											Shares					Amount
BALANCE, APRIL 1, 2022		142,256,520	$	1,903,042			$	4,863,721					$	(668,382)			$	(394,925)		$	5,703,456
BALANCE, JULY 1, 2022																		BALANCE, JULY 1, 2022		140,917,389		$	1,914,232		$	5,064,650		$	(768,752)		$	(600,648)		$	5,609,482
Net income	Net income	—	—		258,329				—		—				258,329			Net income		—		—		295,339			—			—			295,339
Other comprehensive loss	Other comprehensive loss	—	—		—				—		(205,723)				(205,723)			Other comprehensive loss		—		—		—			—			(199,384)			(199,384)
Issuance of common stock pursuant to various stock compensation plans and agreements	Issuance of common stock pursuant to various stock compensation plans and agreements	51,733	11,190		—				—		—				11,190			Issuance of common stock pursuant to various stock compensation plans and agreements		206		12,329		—			—			—			12,329
Repurchase of common stock pursuant to various stock compensation plans and agreements	Repurchase of common stock pursuant to various stock compensation plans and agreements	(5,347)	—		—				(380)		—				(380)			Repurchase of common stock pursuant to various stock compensation plans and agreements		(83)		—		—			(6)			—			(6)
Repurchase of common stock pursuant to the Stock Repurchase Program		(1,385,517)	—		—				(99,990)		—				(99,990)

Cash dividends on common stock ($0.40 per share)	Cash dividends on common stock ($0.40 per share)	—	—		(57,400)				—		—				(57,400)			Cash dividends on common stock ($0.40 per share)		—		—		(57,092)			—			—			(57,092)
BALANCE, JUNE 30, 2022		140,917,389	$	1,914,232	$	5,064,650			$	(768,752)	$	(600,648)			$	5,609,482
BALANCE, APRIL 1, 2023		141,395,800	$	1,947,687	$	5,832,291			$	(790,653)	$	(679,994)			$	6,309,331
BALANCE, SEPTEMBER 30, 2022																		BALANCE, SEPTEMBER 30, 2022		140,917,512		$	1,926,561	$	5,302,897		$	(768,758)		$	(800,032)		$	5,660,668
BALANCE, JULY 1, 2023																		BALANCE, JULY 1, 2023		141,483,668		$	1,959,784	$	6,075,735		$	(791,890)		$	(781,932)		$	6,461,697

Net income	Net income	—	—		312,031				—		—				312,031			Net income		—		—		287,738			—			—			287,738
Other comprehensive loss	Other comprehensive loss	—	—		—				—		(101,938)				(101,938)			Other comprehensive loss		—		—		—			—			(93,445)			(93,445)
Issuance of common stock pursuant to various stock compensation plans and agreements	Issuance of common stock pursuant to various stock compensation plans and agreements	111,097	12,097		—				—		—				12,097			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	Repurchase of common stock pursuant to various stock compensation plans and agreements	(23,229)	—		—				(1,237)		—				(1,237)			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)	Cash dividends on common stock ($0.48 per share)	—	—		(68,587)				—		—				(68,587)			Cash dividends on common stock ($0.48 per share)		—		—		(68,722)			—			—			(68,722)
BALANCE, JUNE 30, 2023		141,483,668	$	1,959,784	$	6,075,735			$	(791,890)	$	(781,932)			$	6,461,697
BALANCE, SEPTEMBER 30, 2023																		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					Common Stock and Additional Paid-in Capital						Retained Earnings				Treasury Stock				AOCI, Net of Tax				Total Stockholders’ Equity
		Shares	Amount											Shares					Amount
BALANCE, JANUARY 1, 2022	BALANCE, JANUARY 1, 2022	141,907,954	$	1,893,725			$	4,683,659					$	(649,785)			$	(90,381)		$	5,837,218	BALANCE, JANUARY 1, 2022			141,907,954			$	1,893,725			$	4,683,659			$	(649,785)			$	(90,381)	$	5,837,218

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

Issuance of common stock pursuant to various stock compensation plans and agreements	Issuance of common stock pursuant to various stock compensation plans and agreements	639,847	20,507		—				—		—				20,507			Issuance of common stock pursuant to various stock compensation plans and agreements		640,053			32,836			—				—				—				32,836
Repurchase of common stock pursuant to various stock compensation plans and agreements	Repurchase of common stock pursuant to various stock compensation plans and agreements	(244,895)	—		—				(18,977)		—				(18,977)			Repurchase of common stock pursuant to various stock compensation plans and agreements		(244,978)			—			—				(18,983)				—				(18,983)
Repurchase of common stock pursuant to the Stock Repurchase Program		(1,385,517)	—		—				(99,990)		—				(99,990)
Cash dividends on common stock ($0.80 per share)		—	—		(114,990)				—		—				(114,990)
BALANCE, JUNE 30, 2022		140,917,389	$	1,914,232	$	5,064,650			$	(768,752)	$	(600,648)			$	5,609,482
Repurchase of common stock pursuant to the stock repurchase program																		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)																		Cash dividends on common stock ($1.20 per share)		—			—			(172,082)				—				—				(172,082)
BALANCE, SEPTEMBER 30, 2022																		BALANCE, SEPTEMBER 30, 2022		140,917,512			$	1,926,561		$	5,302,897			$	(768,758)			$	(800,032)			$	5,660,668
BALANCE, JANUARY 1, 2023	BALANCE, JANUARY 1, 2023	140,947,846	$	1,936,557	$	5,582,546			$	(768,862)	$	(765,629)			$	5,984,612		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)	Cumulative-effect of a change in accounting principle (1)	—	—		(4,262)				—		—				(4,262)			Cumulative-effect of a change in accounting principle (1)		—			—			(4,262)				—				—				(4,262)

Net income	Net income	—	—		634,470				—		—				634,470			Net income		—			—			922,208				—				—				922,208
Other comprehensive loss	Other comprehensive loss	—	—		—				—		(16,303)				(16,303)			Other comprehensive loss		—			—			—				—				(109,748)				(109,748)

Issuance of common stock pursuant to various stock compensation plans and agreements	Issuance of common stock pursuant to various stock compensation plans and agreements	851,819	23,227		—				—		—				23,227			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	Repurchase of common stock pursuant to various stock compensation plans and agreements	(315,997)	—		—				(23,028)		—				(23,028)			Repurchase of common stock pursuant to various stock compensation plans and agreements		(319,398)			—			—				(23,214)				—				(23,214)

Cash dividends on common stock ($0.96 per share)		—	—		(137,019)				—		—				(137,019)
BALANCE, JUNE 30, 2023		141,483,668	$	1,959,784	$	6,075,735			$	(791,890)	$	(781,932)			$	6,461,697
Cash dividends on common stock ($1.44 per share)																		Cash dividends on common stock ($1.44 per share)		—			—			(205,741)				—				—				(205,741)
BALANCE, SEPTEMBER 30, 2023																		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)


		Six Months Ended June 30,					Nine Months Ended September 30,
		2023		2022			2023		2022
CASH FLOWS FROM OPERATING ACTIVITIES	CASH FLOWS FROM OPERATING ACTIVITIES					CASH FLOWS FROM OPERATING ACTIVITIES
Net income	Net income	$	634,470	$	495,981	Net income	$	922,208	$	791,320
Adjustments to reconcile net income to net cash provided by operating activities:	Adjustments to reconcile net income to net cash provided by operating activities:					Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	Depreciation and amortization	106,579		48,911		Depreciation and amortization	174,856		81,980
Amortization of premiums and accretion of discount, net	Amortization of premiums and accretion of discount, net	(10,489)		21,519		Amortization of premiums and accretion of discount, net	(15,740)		26,336
Stock compensation costs	Stock compensation costs	20,439		17,009		Stock compensation costs	29,934		29,338
Deferred income tax expense (benefit)	Deferred income tax expense (benefit)	1,098		(7,554)		Deferred income tax expense (benefit)	1,083		(6,107)
Provision for credit losses	Provision for credit losses	46,000		21,500		Provision for credit losses	88,000		48,500
Net losses (gains) on sales of loans	Net losses (gains) on sales of loans	29		(3,839)		Net losses (gains) on sales of loans	41		(5,968)
Net losses (gains) on AFS debt securities	Net losses (gains) on AFS debt securities	10,000		(1,306)		Net losses (gains) on AFS debt securities	10,000		(1,306)

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

Proceeds from distributions received from equity method investees	Proceeds from distributions received from equity method investees	2,696		4,412		Proceeds from distributions received from equity method investees	3,727		5,642
Net change in accrued interest receivable and other assets	Net change in accrued interest receivable and other assets	(273,537)		(128,071)		Net change in accrued interest receivable and other assets	(361,324)		56,958
Net change in accrued expenses and other liabilities	Net change in accrued expenses and other liabilities	(55,634)		457,296		Net change in accrued expenses and other liabilities	11,641		584,655
Other operating activities, net	Other operating activities, net	(283)		3,182		Other operating activities, net	(1,204)		5,057
Total adjustments	Total adjustments	(153,102)		433,073		Total adjustments	(58,986)		825,099
Net cash provided by operating activities	Net cash provided by operating activities	481,368		929,054		Net cash provided by operating activities	863,222		1,616,419
CASH FLOWS FROM INVESTING ACTIVITIES	CASH FLOWS FROM INVESTING ACTIVITIES					CASH FLOWS FROM INVESTING ACTIVITIES
Net change in:	Net change in:					Net change in:
Investments in qualified affordable housing partnerships, tax credit and other investments	Investments in qualified affordable housing partnerships, tax credit and other investments	(69,946)		(49,545)		Investments in qualified affordable housing partnerships, tax credit and other investments	(154,309)		(91,710)
Interest-bearing deposits with banks	Interest-bearing deposits with banks	121,774		23,442		Interest-bearing deposits with banks	121,730		105,479
Resale agreements:	Resale agreements:					Resale agreements:
Proceeds from paydowns and maturities	Proceeds from paydowns and maturities	169,917		1,162,172		Proceeds from paydowns and maturities	219,917		1,719,076
Purchases	Purchases	(12,725)		(231,463)		Purchases	(212,725)		(258,559)
AFS debt securities:	AFS debt securities:					AFS debt securities:
Proceeds from sales	Proceeds from sales	—		129,181		Proceeds from sales	—		129,181
Proceeds from repayments, maturities and redemptions	Proceeds from repayments, maturities and redemptions	623,108		613,244		Proceeds from repayments, maturities and redemptions	877,377		711,950
Purchases	Purchases	(594,214)		(767,015)		Purchases	(1,011,326)		(769,007)
HTM debt securities:	HTM debt securities:					HTM debt securities:
Proceeds from repayments, maturities and redemptions	Proceeds from repayments, maturities and redemptions	33,882		40,072		Proceeds from repayments, maturities and redemptions	49,649		60,140
Purchases	Purchases	—		(50,000)		Purchases	—		(50,000)
Loans held-for-investment:	Loans held-for-investment:					Loans held-for-investment:
Proceeds from sales of loans originally classified as held-for-investment	Proceeds from sales of loans originally classified as held-for-investment	302,811		325,813		Proceeds from sales of loans originally classified as held-for-investment	528,056		453,315
Purchases	Purchases	(272,637)		(541,997)		Purchases	(433,228)		(599,660)
Other changes in loans held-for-investment, net	Other changes in loans held-for-investment, net	(1,649,160)		(4,639,384)		Other changes in loans held-for-investment, net	(2,794,119)		(5,675,012)

Proceeds from distributions received from equity method investees	Proceeds from distributions received from equity method investees	13,113		8,717		Proceeds from distributions received from equity method investees	16,614		13,557

Other investing activities, net	Other investing activities, net	(6,170)		1,354		Other investing activities, net	(105,258)		920
Net cash used in investing activities	Net cash used in investing activities	(1,340,247)		(3,975,409)		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)


		Six Months Ended June 30,					Nine Months Ended September 30,
		2023		2022			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	(262,287)		1,046,046		Net change in deposits	(840,367)		623,025
Net change in short-term borrowings	Net change in short-term borrowings	4,500,017		(49)		Net change in short-term borrowings	4,500,017		200,006

FHLB advances:	FHLB advances:					FHLB advances:
Proceeds	Proceeds	6,000,000		3,950,000		Proceeds	6,000,000		4,600,200
Repayment	Repayment	(6,000,000)		(4,025,000)		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)		—		Repayment of repurchase agreements	(300,000)		—
Repurchase agreements’ extinguishment cost	Repurchase agreements’ extinguishment cost	(3,872)		—		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	(421)		(457)		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		Proceeds from issuance pursuant to various stock compensation plans and agreements	1,563		1,444
Stock tendered for payment of withholding taxes	Stock tendered for payment of withholding taxes	(23,028)		(18,977)		Stock tendered for payment of withholding taxes	(23,214)		(18,983)
Cash dividends paid	Cash dividends paid	(138,914)		(115,623)		Cash dividends paid	(206,848)		(171,991)
Net cash provided by financing activities	Net cash provided by financing activities	3,771,495		1,049,179		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	(16,513)		(13,706)		Effect of exchange rate changes on cash and cash equivalents	(12,848)		(35,257)
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS	NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS	2,896,103		(2,010,882)		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	3,481,784		3,912,935		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	$	6,377,887	$	1,902,053	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	$	504,774	$	45,057	Interest	$	852,315	$	107,146
Income taxes, net	Income taxes, net	$	255,432	$	188,510	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	$	280,026	$	351,406	Loans transferred from held-for-investment to held-for-sale	$	507,215	$	463,769
Loans transferred from held-for-sale to held-for-investment		$	—	$	631

See accompanying Notes to Consolidated Financial Statements.

EAST WEST BANCORP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 1 — Basis of Presentation

East West Bancorp, Inc. is a registered bank holding company that offers a full range of banking services to individuals and businesses through its subsidiary bank, East West Bank and its subsidiaries (“East West Bank” or the “Bank”). The unaudited interim Consolidated Financial Statements in this Form 10-Q include the accounts of East West, East West Bank and East West’s subsidiaries. Intercompany transactions and accounts have been eliminated in consolidation. As of ~~June~~September 30, 2023, East West also has six wholly-owned subsidiaries that are statutory business trusts (the “Trusts”). In accordance with 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 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 2022 Form 10-K.

The preparation of the Consolidated Financial Statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the Consolidated Financial Statements, income and expenses during the reporting periods, and the related disclosures. Although our estimates ~~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 ~~June~~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
ASU 2023-01, Leases (Topic 842): Common Control Arrangements	January 1, 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 2023-02 expands the 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 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 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 Initial Measurement	January 1, 2025 Early adoption is permitted	ASU 2023-05 requires a joint venture to recognize and initially measure assets contributed to 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 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 business in its stand-alone financial statements, and measure its contributed total net assets upon formation as the fair value of 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 apply the measurement period guidance, which is largely consistent with the acquisition method for business combination in ASC 805-10. The guidance also introduces new disclosure requirements related to the nature and financial effect of the joint venture. The amendments in this guidance are effective prospectively for all joint venture formations with a formation date on or after January 1, 2025. Additionally, joint ventures that were formed before January 1, 2025 may elect to apply the amendments 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 2023-05 on January 1, 2025.

1213

Significant Accounting Policies Update

Loan Modifications — Certain loans are modified in the normal course of business for competitive reasons or in conjunction with the Company’s loss mitigation activities. Upon the adoption of ASU 2022-02, the Company applies the general loan modification guidance provided in ASC 310-20 to all loan modifications, including modifications made to borrowers experiencing financial difficulty. Under the general loan modification guidance, a modification is treated as a new loan only if the following two conditions are met: (1) the terms of the new loan are at least as favorable to the Company as the terms for comparable loans to other customers with similar collection risks; and (2) modifications to the terms of the original 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 repossession of collateral. The Company applies the same credit loss methodology it uses for similar loans that were not modified. For the Company’s accounting policy related to the loan modifications’ allowance for loan losses, see Note 7 — Loans Receivable and Allowance for Credit Losses — Allowance for Credit Losses to the Consolidated Financial Statements in this Form 10-Q.

Note 3 — Fair Value Measurement and Fair Value of Financial Instruments

Under applicable accounting standards, the Company measures a portion of its assets and liabilities at fair value. These assets and liabilities are 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 established fair value 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 for additional information.~~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 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 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.

1314

When a quoted price in an active market exists for the identical security, this price is used to determine the fair value and the AFS debt 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 ~~June~~September 30, 2023 and December 31, 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 — Interest rate contracts consist of interest rate swaps and 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 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 ~~June~~September 30, 2023 and December 31, 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 — Credit contracts utilized by the Company are comprised of credit risk participation agreements (“RPAs”) entered into by the Company 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. Due to the observable nature of all other significant inputs used in deriving the estimated fair value, credit contracts are classified as Level 2.

1415

Equity Contracts — Equity contracts ~~consisted~~consist of warrants to purchase common or preferred stock of public and private companies, asand any liability-classified contingent issuable shares of ~~both June 30, 2023 and December 31, 2022.~~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 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 — Commodity contracts consist of swaps and options referencing commodity products. The fair value of the commodity option contracts is determined using the Black-Scholes model and assumptions that include expectations of future commodity price and volatility. The future commodity contract price is derived from observable inputs such as the market price of the commodity. Commodity swaps are structured as an exchange of fixed cash flows for floating cash flows. The fair value of the commodity swaps is determined using the market standard methodology of netting the discounted future fixed cash payments (or receipts) and the discounted expected variable cash receipts (or payments) based on the market prices of the commodity. The fixed cash flows are predetermined based on the known volumes and fixed price as specified in the swap agreement. The floating cash flows are correlated with the change of forward commodity prices, which is derived from market corroborated futures settlement prices. As a result, the Company classifies these derivative instruments as Level 2 due to the observable nature of the significant inputs utilized.

1516

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


		Assets and Liabilities Measured at Fair Value on a Recurring Basis as of June 30, 2023									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:	AFS debt securities:									AFS debt securities:
U.S. Treasury securities	U.S. Treasury securities	$	711,706	$	—	$	—	$	711,706	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	—		460,084		—		460,084		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	—		478,777		—		478,777		Commercial mortgage-backed securities	—		462,332		—		462,332
Residential mortgage-backed securities	Residential mortgage-backed securities	—		1,721,237		—		1,721,237		Residential mortgage-backed securities	—		1,694,342		—		1,694,342
Municipal securities	Municipal securities	—		263,873		—		263,873		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	—		384,051		—		384,051		Commercial mortgage-backed securities	—		365,320		—		365,320
Residential mortgage-backed securities	Residential mortgage-backed securities	—		608,574		—		608,574		Residential mortgage-backed securities	—		570,787		—		570,787
Corporate debt securities	Corporate debt securities	—		485,750		—		485,750		Corporate debt securities	—		475,434		—		475,434
Foreign government bonds	Foreign government bonds	—		224,766		—		224,766		Foreign government bonds	—		222,790		—		222,790
Asset-backed securities	Asset-backed securities	—		44,875		—		44,875		Asset-backed securities	—		43,757		—		43,757
Collateralized loan obligations (“CLOs”)	Collateralized loan obligations (“CLOs”)	—		603,565		—		603,565		Collateralized loan obligations (“CLOs”)	—		609,954		—		609,954
Total AFS debt securities	Total AFS debt securities	$	711,706	$	5,275,552	$	—	$	5,987,258	Total AFS debt securities	$	904,101	$	5,135,736	$	—	$	6,039,837

Investments in qualified affordable housing partnerships, tax credit and other investments, net:	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	$	19,991	$	4,168	$	—	$	24,159	Equity securities	$	19,447	$	4,154	$	—	$	23,601
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	$	19,991	$	4,168	$	—	$	24,159	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	$	—	$	530,235	$	—	$	530,235	Interest rate contracts	$	—	$	624,087	$	—	$	624,087
Foreign exchange contracts	Foreign exchange contracts	—		95,582		—		95,582		Foreign exchange contracts	—		100,377		—		100,377

Equity contracts	Equity contracts	—		—		263		263		Equity contracts	—		—		352		352
Commodity contracts	Commodity contracts	—		139,081		—		139,081		Commodity contracts	—		137,500		—		137,500
Gross derivative assets	Gross derivative assets	$	—	$	764,898	$	263	$	765,161	Gross derivative assets	$	—	$	861,964	$	352	$	862,316
Netting adjustments (1)	Netting adjustments (1)	$	—	$	(472,428)	$	—	$	(472,428)	Netting adjustments (1)	$	—	$	(530,331)	$	—	$	(530,331)
Net derivative assets	Net derivative assets	$	—	$	292,470	$	263	$	292,733	Net derivative assets	$	—	$	331,633	$	352	$	331,985

Derivative liabilities:	Derivative liabilities:									Derivative liabilities:
Interest rate contracts	Interest rate contracts	$	—	$	591,447	$	—	$	591,447	Interest rate contracts	$	—	$	712,302	$	—	$	712,302
Foreign exchange contracts	Foreign exchange contracts	—		72,342		—		72,342		Foreign exchange contracts	—		77,099		—		77,099
Equity contracts (2)										Equity contracts (2)	—		—		15,119		15,119
Credit contracts	Credit contracts	—		16		—		16		Credit contracts	—		12		—		12
Commodity contracts	Commodity contracts	—		147,920		—		147,920		Commodity contracts	—		143,855		—		143,855
Gross derivative liabilities	Gross derivative liabilities	$	—	$	811,725	$	—	$	811,725	Gross derivative liabilities	$	—	$	933,268	$	15,119	$	948,387
Netting adjustments (1)	Netting adjustments (1)	$	—	$	(208,183)	$	—	$	(208,183)	Netting adjustments (1)	$	—	$	(262,873)	$	—	$	(262,873)
Net derivative liabilities	Net derivative liabilities	$	—	$	603,542	$	—	$	603,542	Net derivative liabilities	$	—	$	670,395	$	15,119	$	685,514

1617



	Assets and Liabilities Measured at Fair Value on a Recurring Basis as of December 31, 2022
($ 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	$	606,203	$	—	$	—	$	606,203
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:
Commercial mortgage-backed securities	—		500,269		—		500,269
Residential mortgage-backed securities	—		1,762,195		—		1,762,195
Municipal securities	—		257,099		—		257,099
Non-agency mortgage-backed securities:
Commercial mortgage-backed securities	—		398,329		—		398,329
Residential mortgage-backed securities	—		649,224		—		649,224
Corporate debt securities	—		526,274		—		526,274
Foreign government bonds	—		227,053		—		227,053
Asset-backed securities	—		49,076		—		49,076
CLOs	—		597,664		—		597,664
Total AFS debt securities	$	606,203	$	5,428,790	$	—	$	6,034,993

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

Derivative assets:
Interest rate contracts	$	—	$	440,283	$	—	$	440,283
Foreign exchange contracts	—		53,109		—		53,109

Equity contracts	—		—		323		323
Commodity contracts	—		261,613		—		261,613
Gross derivative assets	$	—	$	755,005	$	323	$	755,328
Netting adjustments (1)	$	—	$	(614,783)	$	—	$	(614,783)
Net derivative assets	$	—	$	140,222	$	323	$	140,545

Derivative liabilities:
Interest rate contracts	$	—	$	584,516	$	—	$	584,516
Foreign exchange contracts	—		44,117		—		44,117
Credit contracts	—		23		—		23
Commodity contracts	—		258,608		—		258,608
Gross derivative liabilities	$	—	$	887,264	$	—	$	887,264
Netting adjustments (1)	$	—	$	(242,745)	$	—	$	(242,745)
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.

1718

For the three and ~~six~~nine months ended ~~June~~September 30, 2023 and 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 ~~six~~nine months ended ~~June~~September 30, 2023 and 2022:


		Three Months Ended June 30,				Six Months Ended June 30,				Three Months Ended September 30,				Nine Months Ended September 30,
($ in thousands)	($ in thousands)	2023		2022		2023		2022			($ in thousands)	2023		2022		2023		2022
Derivative assets:											Derivative assets:
Equity contracts	Equity contracts										Equity contracts
Beginning balance	Beginning balance	$	277	$	309	$	323	$	215		Beginning balance	$	263	$	357	$	323	$	215

Total (losses) gains included in earnings (1)	Total (losses) gains included in earnings (1)	(14)		48		(60)		51			Total (losses) gains included in earnings (1)	(3)		(12)		(63)		39

Issuances	Issuances	—		—		—		91			Issuances	92		—		92		91

Ending balance	Ending balance	$	263	$	357	$	263	$	357		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	$	15,119	$	—	$	15,119	$	—

(1)Includes unrealized (losses) gains recorded in Lending fees on the Consolidated Statement of Income.

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

The following table presents quantitative information about the significant unobservable inputs used in the valuation of Level 3 fair value measurements as of ~~June~~September 30, 2023 and December 31, 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
June 30, 2023
September 30, 2023								September 30, 2023
Derivative assets:	Derivative assets:							Derivative assets:
Equity contracts	Equity contracts	$	263	Black-Scholes option pricing model	Equity volatility	41% — 50%	44%	Equity contracts	$	352	Black-Scholes option pricing model	Equity volatility	41% — 51%	46	%	(1)
					Liquidity discount	47%	47%					Liquidity discount	47%	47	%
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							December 31, 2022
Derivative assets:	Derivative assets:							Derivative assets:
Equity contracts	Equity contracts	$	323	Black-Scholes option pricing model	Equity volatility	42% — 60%	54%	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 ~~June~~September 30, 2023 and December 31, 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, 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 financial statements and annual tax returns, the annual 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 the investment was made. The Company assesses its tax credit and other investments for possible other-than-temporary impairment on an annual basis or when events or circumstances suggest that the carrying amount of the investments may not be realizable. These circumstances can include, but are not limited to the following factors:

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

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

•the potential for tax credit recapture; and

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

All available information is considered in assessing whether a decline in value is other-than-temporary. Generally, none of the aforementioned factors are individually conclusive and the relative importance placed on individual facts may vary depending on the situation. In accordance with ASC 323-10-35-32, Investments — Equity Method and Joint Ventures, an impairment charge would 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 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 ~~June~~September 30, 2023 and December 31, 2022:


		Assets Measured at Fair Value on a Nonrecurring Basis as of June 30, 2023									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:	Loans held-for-investment:									Loans held-for-investment:
Commercial:	Commercial:									Commercial:
Commercial and industrial (“C&I”)	Commercial and industrial (“C&I”)	$	—	$	—	$	31,323	$	31,323	Commercial and industrial (“C&I”)	$	—	$	—	$	22,788	$	22,788
Commercial real estate (“CRE”):	Commercial real estate (“CRE”):									Commercial real estate (“CRE”):
CRE		—		—		4,398		4,398

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

Total commercial	Total commercial	—		—		35,721		35,721		Total commercial	—		—		33,929		33,929
Consumer:										Consumer:
Residential mortgage:										Residential mortgage:

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

Total consumer										Total consumer	—		—		1,204		1,204
Total loans held-for-investment	Total loans held-for-investment	$	—	$	—	$	35,721	$	35,721	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	$	—	$	—	$	868	$	868	Investments in qualified affordable housing partnerships, tax credit and other investments, net	$	—	$	—	$	1,038	$	1,038


		Assets Measured at Fair Value on a Nonrecurring Basis as of December 31, 2022									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:	Loans held-for-investment:									Loans held-for-investment:
Commercial:	Commercial:									Commercial:
C&I	C&I	$	—	$	—	$	40,011	$	40,011	C&I	$	—	$	—	$	40,011	$	40,011
CRE:	CRE:									CRE:
CRE	CRE	—		—		31,380		31,380		CRE	—		—		31,380		31,380

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

Home equity lines of credit (“HELOCs”)		—		—		1,223		1,223
HELOCs										HELOCs	—		—		1,223		1,223

Total consumer	Total consumer	—		—		1,223		1,223		Total consumer	—		—		1,223		1,223
Total loans held-for-investment	Total loans held-for-investment	$	—	$	—	$	72,614	$	72,614	Total loans held-for-investment	$	—	$	—	$	72,614	$	72,614

2021

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 ~~six~~nine months ended ~~June~~September 30, 2023 and 2022:


		Three Months Ended June 30,				Six Months Ended June 30,				Three Months Ended September 30,				Nine Months Ended September 30,
($ in thousands)	($ in thousands)	2023		2022		2023		2022			($ in thousands)	2023		2022		2023		2022
Loans held-for-investment:	Loans held-for-investment:										Loans held-for-investment:
Commercial:	Commercial:										Commercial:
C&I	C&I	$	(10,419)	$	(6,054)	$	(11,674)	$	(14,740)		C&I	$	366	$	(15,265)	$	(4,437)	$	(30,011)
CRE:	CRE:										CRE:
CRE	CRE	(2,252)		(533)		(2,252)		2,330			CRE	—		(118)		—		2,212
Multifamily residential	Multifamily residential	—		(8)		—		(8)			Multifamily residential	—		(5,931)		—		(5,939)

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

Total commercial	Total commercial	(12,671)		(6,595)		(13,926)		(12,418)			Total commercial	(10,047)		(21,314)		(14,850)		(33,738)
Consumer:	Consumer:										Consumer:
Residential mortgage:	Residential mortgage:										Residential mortgage:

HELOCs	HELOCs	—		82		—		85			HELOCs	(41)		81		(41)		166

Total consumer	Total consumer	—		82		—		85			Total consumer	(41)		81		(41)		166
Total loans held-for-investment	Total loans held-for-investment	$	(12,671)	$	(6,513)	$	(13,926)	$	(12,333)		Total loans held-for-investment	$	(10,088)	$	(21,233)	$	(14,891)	$	(33,572)

Investments in qualified affordable housing partnerships, tax credit and other investments, net	Investments in qualified affordable housing partnerships, tax credit and other investments, net	$	(961)	$	—	$	(787)	$	—		Investments in qualified affordable housing partnerships, tax credit and other investments, net	$	(790)	$	—	$	(1,577)	$	—

Other nonperforming assets	Other nonperforming assets	$	—	$	(6,861)	$	—	$	(6,861)		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 ~~June~~September 30, 2023 and December 31, 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)
June 30, 2023
September 30, 2023								September 30, 2023

Loans held-for-investment	Loans held-for-investment	$	4,989	Discounted cash flows	Discount	15%	15%	Loans held-for-investment	$	13,955	Fair value of collateral	Discount	15% — 75%	48	%	(1)
		$	17,501	Fair value of collateral	Discount	15% — 81%	43%
		$	6,134	Fair value of collateral	Contract value	NM	NM		$	6,134	Fair value of collateral	Contract value	NM	NM
		$	7,097	Fair value of property	Selling cost	8%	8%		$	15,044	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	$	868	Individual analysis of each investment	Expected future tax benefits and distributions	NM	NM	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, 2022	December 31, 2022							December 31, 2022
Loans held-for-investment	Loans held-for-investment	$	23,322	Discounted cash flows	Discount	4% — 6%	4%	Loans held-for-investment	$	23,322	Discounted cash flows	Discount	4% — 6%	4	%	(1)

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

		$	31,380	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 ~~June~~September 30, 2023 and December 31, 2022.

2122

Disclosures about the Fair Value of Financial Instruments

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


		June 30, 2023											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:	Financial assets:											Financial assets:
Cash and cash equivalents	Cash and cash equivalents	$	6,377,887	$	6,377,887	$	—	$	—	$	6,377,887	Cash and cash equivalents	$	4,561,178	$	4,561,178	$	—	$	—	$	4,561,178
Interest-bearing deposits with banks	Interest-bearing deposits with banks	$	17,169	$	—	$	17,169	$	—	$	17,169	Interest-bearing deposits with banks	$	17,213	$	—	$	17,213	$	—	$	17,213
Resale agreements	Resale agreements	$	635,000	$	—	$	541,441	$	—	$	541,441	Resale agreements	$	785,000	$	—	$	672,250	$	—	$	672,250
HTM debt securities	HTM debt securities	$	2,975,933	$	474,137	$	1,966,347	$	—	$	2,440,484	HTM debt securities	$	2,964,235	$	470,618	$	1,837,430	$	—	$	2,308,048
Restricted equity securities, at cost	Restricted equity securities, at cost	$	79,206	$	—	$	79,206	$	—	$	79,206	Restricted equity securities, at cost	$	79,522	$	—	$	79,522	$	—	$	79,522
Loans held-for-sale	Loans held-for-sale	$	2,830	$	—	$	2,830	$	—	$	2,830	Loans held-for-sale	$	4,762	$	—	$	4,762	$	—	$	4,762
Loans held-for-investment, net	Loans held-for-investment, net	$	49,192,964	$	—	$	—	$	48,197,217	$	48,197,217	Loans held-for-investment, net	$	50,251,661	$	—	$	—	$	48,992,846	$	48,992,846
Mortgage servicing rights	Mortgage servicing rights	$	5,537	$	—	$	—	$	10,078	$	10,078	Mortgage servicing rights	$	5,208	$	—	$	—	$	9,821	$	9,821
Accrued interest receivable	Accrued interest receivable	$	288,526	$	—	$	288,526	$	—	$	288,526	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	$	38,679,009	$	—	$	38,679,009	$	—	$	38,679,009	Demand, checking, savings and money market deposits	$	38,435,954	$	—	$	38,435,954	$	—	$	38,435,954
Time deposits	Time deposits	$	16,979,777	$	—	$	16,866,296	$	—	$	16,866,296	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	Short-term borrowings	$	4,500,000	$	—	$	4,500,000	$	—	$	4,500,000

Long-term debt	Long-term debt	$	148,097	$	—	$	141,990	$	—	$	141,990	Long-term debt	$	148,173	$	—	$	144,214	$	—	$	144,214
Accrued interest payable	Accrued interest payable	$	107,457	$	—	$	107,457	$	—	$	107,457	Accrued interest payable	$	150,890	$	—	$	150,890	$	—	$	150,890



	December 31, 2022
($ in thousands)	Carrying Amount		Level 1		Level 2		Level 3		Estimated Fair Value
Financial assets:
Cash and cash equivalents	$	3,481,784	$	3,481,784	$	—	$	—	$	3,481,784
Interest-bearing deposits with banks	$	139,021	$	—	$	139,021	$	—	$	139,021
Resale agreements	$	792,192	$	—	$	693,656	$	—	$	693,656
HTM debt securities	$	3,001,868	$	471,469	$	1,983,702	$	—	$	2,455,171
Restricted equity securities, at cost	$	78,624	$	—	$	78,624	$	—	$	78,624
Loans held-for-sale	$	25,644	$	—	$	25,644	$	—	$	25,644
Loans held-for-investment, net	$	47,606,785	$	—	$	—	$	46,670,690	$	46,670,690

Mortgage servicing rights	$	6,235	$	—	$	—	$	10,917	$	10,917
Accrued interest receivable	$	263,430	$	—	$	263,430	$	—	$	263,430
Financial liabilities:

Demand, checking, savings and money market deposits	$	42,637,316	$	—	$	42,637,316	$	—	$	42,637,316
Time deposits	$	13,330,533	$	—	$	13,228,777	$	—	$	13,228,777


Repurchase agreements	$	300,000	$	—	$	304,097	$	—	$	304,097
Long-term debt	$	147,950	$	—	$	143,483	$	—	$	143,483
Accrued interest payable	$	37,198	$	—	$	37,198	$	—	$	37,198

2223

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 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 ~~June~~September 30, 2023 and December 31, 2022.

Securities Purchased under Resale Agreements — Total securities purchased under resale agreements were ~~$635.0~~$785.0 million as of ~~June~~September 30, 2023, and $760.0 million as of December 31, 2022. The weighted-average yields were ~~2.42%~~2.73% and ~~1.96%~~2.41% for the three months ended ~~June~~September 30, 2023 and 2022, respectively; and ~~2.46%~~2.55% and ~~1.79%~~1.96% for the ~~six~~nine months ended ~~June~~September 30, 2023 and 2022, respectively.

Loans Purchased under Resale Agreements — Loans purchased under resale agreements were $32.2 million as of December 31, 2022. During the first ~~six months~~half of 2023, all of the loans purchased under resale agreements matured and the Company had no loans purchased under resale agreements as of ~~June~~September 30, 2023. The weighted-average yield was 7.27% for the nine months ended September 30, 2023. In comparison, the weighted-average yields ~~were 7.75% and 2.47%~~ for the three and nine months ended ~~June~~September 30, ~~2023~~2022 were 3.87% and ~~2022, respectively; and 7.27% and 1.91% for the six months ended June 30, 2023 and 2022,~~2.10%, respectively.

Assets Sold under Repurchase Agreements — Gross repurchase agreements were $300.0 million as of December 31, 2022. The Company ~~recorded $3.9 million of charges related to the extinguishment of~~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 ~~six~~nine months ended ~~June~~September 30, 2022. The weighted-average interest rates were ~~5.43%~~5.51% and ~~2.70%~~2.81% for the three months ended ~~June~~September 30, 2023 and 2022, respectively; and ~~4.18%~~4.32% and ~~2.66%~~2.73% for the ~~six~~nine months ended ~~June~~September 30, 2023 and 2022, respectively. These weighted-average interest rates also reflect the impact of short-term repurchase agreements entered and 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 ~~June~~September 30, 2023 and December 31, 2022:

($ in thousands) June 30, 2023
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 Collateral Received
Resale agreements $ 635,000 $ — $ 635,000 $ (550,872) (1) $ 84,128
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 Collateral Pledged
Repurchase agreements $ — $ — $ — $ — $ —



($ in thousands)	September 30, 2023

	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							Collateral Received
Resale agreements	$	785,000	$	—	$	785,000	$	(687,327)	(1)	$	97,673

	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							Collateral Pledged
Repurchase agreements	$	—	$	—	$	—	$	—		$	—



($ 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
Assets										Net Amount
							Collateral Received
Resale agreements	$	792,192	$	—	$	792,192	$	(701,790)	(1)	$	90,402

Liabilities	Gross Amounts of Recognized Liabilities		Gross Amounts Offset on the Consolidated Balance Sheet		Net Amounts of Liabilities Presented on the Consolidated Balance Sheet		Gross Amounts Not Offset on the Consolidated Balance Sheet
										Net Amount
							Collateral Pledged
Repurchase agreements	$	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.

2425

Note 5 — Securities

The following tables present the amortized cost, gross unrealized gains and losses and fair value by major categories of AFS and HTM debt securities as of ~~June~~September 30, 2023 and December 31, 2022:


		June 30, 2023								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:	AFS debt securities:										AFS debt securities:
U.S. Treasury securities	U.S. Treasury securities	$	779,973	$	15	$	(68,282)	$	711,706		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	514,594		—		(54,510)		460,084			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	552,859		—		(74,082)		478,777			Commercial mortgage-backed securities	545,086		—		(82,754)		462,332
Residential mortgage-backed securities	Residential mortgage-backed securities	1,966,906		15		(245,684)		1,721,237			Residential mortgage-backed securities	1,983,284		15		(288,957)		1,694,342
Municipal securities	Municipal securities	304,204		28		(40,359)		263,873			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	432,782		2		(48,733)		384,051			Commercial mortgage-backed securities	418,451		—		(53,131)		365,320
Residential mortgage-backed securities	Residential mortgage-backed securities	715,775		—		(107,201)		608,574			Residential mortgage-backed securities	687,674		—		(116,887)		570,787
Corporate debt securities	Corporate debt securities	653,502		—		(167,752)		485,750			Corporate debt securities	653,501		—		(178,067)		475,434
Foreign government bonds	Foreign government bonds	236,392		152		(11,778)		224,766			Foreign government bonds	237,531		75		(14,816)		222,790
Asset-backed securities	Asset-backed securities	46,332		—		(1,457)		44,875			Asset-backed securities	44,819		—		(1,062)		43,757
CLOs	CLOs	617,250		—		(13,685)		603,565			CLOs	617,250		—		(7,296)		609,954
Total AFS debt securities	Total AFS debt securities	6,820,569		212		(833,523)		5,987,258			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	526,794		—		(52,657)		474,137			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	1,000,415		—		(202,544)		797,871			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	496,852		—		(93,114)		403,738			Commercial mortgage-backed securities	494,787		—		(112,623)		382,164
Residential mortgage-backed securities	Residential mortgage-backed securities	762,573		—		(147,285)		615,288			Residential mortgage-backed securities	750,888		—		(183,488)		567,400
Municipal securities	Municipal securities	189,299		—		(39,849)		149,450			Municipal securities	189,093		—		(53,518)		135,575
Total HTM debt securities	Total HTM debt securities	2,975,933		—		(535,449)		2,440,484			Total HTM debt securities	2,964,235		—		(656,187)		2,308,048
Total debt securities	Total debt securities	$	9,796,502	$	212	$	(1,368,972)	$	8,427,742		Total debt securities	$	9,940,566	$	138	$	(1,592,819)	$	8,347,885

2526



	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 ~~June~~September 30, 2023 and December 31, 2022, the amortized cost of debt securities excluded accrued interest receivables of ~~$41.0~~$42.6 million and $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 Securities and Allowance for Credit Losses on Held-to-Maturity Debt Securities to the Consolidated Financial Statements in the Company’s 2022 Form 10-K.

2627

Unrealized Losses of Available-for-Sale Debt Securities

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


		June 30, 2023													September 30, 2023
		Less Than 12 Months				12 Months or More				Total					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:	AFS debt securities:													AFS debt securities:
U.S. Treasury securities	U.S. Treasury securities	$	—	$	—	$	608,012	$	(68,282)	$	608,012	$	(68,282)	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	206,807		(1,696)		253,277		(52,814)		460,084		(54,510)		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	20,690		(1,580)		458,087		(72,502)		478,777		(74,082)		Commercial mortgage-backed securities	4,434		(96)		457,898		(82,658)		462,332		(82,754)
Residential mortgage-backed securities	Residential mortgage-backed securities	26,838		(1,074)		1,692,202		(244,610)		1,719,040		(245,684)		Residential mortgage-backed securities	63,660		(517)		1,627,451		(288,440)		1,691,111		(288,957)
Municipal securities	Municipal securities	7,651		(111)		254,201		(40,248)		261,852		(40,359)		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	—		—		381,043		(48,733)		381,043		(48,733)		Commercial mortgage-backed securities	—		—		365,320		(53,131)		365,320		(53,131)
Residential mortgage-backed securities	Residential mortgage-backed securities	—		—		608,574		(107,201)		608,574		(107,201)		Residential mortgage-backed securities	—		—		570,787		(116,887)		570,787		(116,887)
Corporate debt securities	Corporate debt securities	29,702		(4,299)		456,048		(163,453)		485,750		(167,752)		Corporate debt securities	—		—		475,434		(178,067)		475,434		(178,067)
Foreign government bonds	Foreign government bonds	68,206		(516)		38,738		(11,262)		106,944		(11,778)		Foreign government bonds	109,413		(249)		85,433		(14,567)		194,846		(14,816)
Asset-backed securities	Asset-backed securities	—		—		44,875		(1,457)		44,875		(1,457)		Asset-backed securities	—		—		43,757		(1,062)		43,757		(1,062)
CLOs	CLOs	—		—		603,565		(13,685)		603,565		(13,685)		CLOs	—		—		609,954		(7,296)		609,954		(7,296)
Total AFS debt securities	Total AFS debt securities	$	359,894	$	(9,276)	$	5,398,622	$	(824,247)	$	5,758,516	$	(833,523)	Total AFS debt securities	$	382,537	$	(2,011)	$	5,327,754	$	(934,621)	$	5,710,291	$	(936,632)



	December 31, 2022
	Less Than 12 Months				12 Months or More				Total
($ in thousands)	Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses
AFS debt securities:
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	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:
Commercial mortgage-backed securities	252,144		(30,029)		248,125		(47,094)		500,269		(77,123)
Residential mortgage-backed securities	307,536		(20,346)		1,448,658		(228,554)		1,756,194		(248,900)
Municipal securities	95,655		(10,194)		159,439		(36,594)		255,094		(46,788)
Non-agency mortgage-backed securities:
Commercial mortgage-backed securities	106,184		(3,309)		282,301		(46,087)		388,485		(49,396)
Residential mortgage-backed securities	22,715		(1,546)		626,509		(111,432)		649,224		(112,978)
Corporate debt securities	173,595		(17,907)		352,679		(129,321)		526,274		(147,228)
Foreign government bonds	107,576		(429)		36,143		(13,857)		143,719		(14,286)
Asset-backed securities	12,450		(524)		36,626		(1,552)		49,076		(2,076)
CLOs	144,365		(4,735)		453,299		(14,851)		597,664		(19,586)
Total AFS debt securities	$	1,451,466	$	(104,682)	$	4,332,275	$	(740,048)	$	5,783,741	$	(844,730)

2728

As of ~~June~~September 30, 2023, the Company had ~~564~~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, and 15 U.S. Treasury~~ 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 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, and 15 U.S. Treasury~~ securities.

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

The Company evaluates each AFS debt security where the fair value declines below amortized cost. For a discussion of the factors and criteria the Company uses in analyzing securities for 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 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 remaining securities that were in an unrealized loss position as of ~~June~~September 30, 2023 were mainly comprised of the following:

•Non-agency mortgage-backed securities — The market value decline as of ~~June~~September 30, 2023, was primarily due to interest rate movement and spread widening. Since these securities are rated investment grade by 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 ~~June~~September 30, 2023 was primarily due to interest rate movement and spread widening. A portion of the corporate debt securities is comprised of subordinated debt securities issued by U.S. banks. Despite the reduction of the market value of these securities after the banking sector disruption in the first ~~half~~nine months of 2023, these securities are nearly all rated investment grade by NRSROs or issued by well-capitalized financial institutions with strong profitability. The contractual payments from these corporate debt securities have been and are expected to be received on time. The Company will continue to monitor the market developments in the banking sector and the credit performance of these securities.

As of both ~~June~~September 30, 2023 and December 31, 2022, the Company intended to hold the AFS debt securities with unrealized losses through the anticipated recovery period and it was more-likely-than-not that the Company would not have to sell these securities before the recovery of their amortized cost. The issuers of these securities have not, to the Company’s knowledge, established any cause for default on these securities. 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 ~~June~~September 30, 2023 and December 31, 2022. In addition, there was no provision for credit losses recognized for the three and ~~six~~nine months ended ~~June~~September 30, 2023 and 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. For additional information on the Company’s credit loss methodology, refer to Note 1 — Summary of Significant Accounting Policies — Significant Accounting Policies — Allowance for Credit Losses on Held-to-Maturity Debt Securities to the Consolidated Financial Statements in the Company’s 2022 Form 10-K.

The Company monitors the credit quality of the HTM debt securities using external credit ratings. As of ~~June~~September 30, 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 ~~June~~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.

2829

Realized Gains and Losses

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


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

Gross realized gains from sales	Gross realized gains from sales	$	—	$	28	$	—	$	1,306		Gross realized gains from sales	$	—	$	—	$	—	$	1,306
Impairment write-off (1)	Impairment write-off (1)	$	—	$	—	$	10,000	$	—		Impairment write-off (1)	$	—	$	—	$	10,000	$	—
Related tax expense (benefit)	Related tax expense (benefit)	$	—	$	8	$	(2,956)	$	386		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 ~~six~~nine months ended ~~June~~September 30, 2023 and 2022:


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

Taxable interest	Taxable interest	$	64,139	$	41,250	$	125,188	$	79,454		Taxable interest	$	63,877	$	46,172	$	189,065	$	125,626
Nontaxable interest	Nontaxable interest	4,831		4,926		9,713		9,389			Nontaxable interest	5,901		4,920		15,614		14,309
Total interest income on debt securities	Total interest income on debt securities	$	68,970	$	46,176	$	134,901	$	88,843		Total interest income on debt securities	$	69,778	$	51,092	$	204,679	$	139,935

2930

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

The following tables present the contractual maturities, amortized cost, fair value and weighted-average yields of AFS and HTM debt securities as of ~~June~~September 30, 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	$	103,679		$	676,294		$	—		$	—		$	779,973		Amortized cost	$	298,323		$	676,292		$	—		$	—		$	974,615
Fair value	Fair value	103,694			608,012			—			—			711,706			Fair value	298,371			605,730			—			—			904,101
Weighted-average yield (1)	Weighted-average yield (1)	4.82		%	1.20		%	—		%	—		%	1.68		%	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	150,000			98,133			100,000			166,461			514,594			Amortized cost	150,000			96,472			103,171			163,069			512,712
Fair value	Fair value	149,305			93,146			82,433			135,200			460,084			Fair value	149,616			91,343			82,252			124,253			447,464
Weighted-average yield (1)	Weighted-average yield (1)	4.98		%	3.07		%	1.26		%	2.09		%	2.96		%	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	—			38,030			151,754			2,329,981			2,519,765			Amortized cost	—			42,260			144,846			2,341,264			2,528,370
Fair value	Fair value	—			35,886			137,852			2,026,276			2,200,014			Fair value	—			39,718			128,933			1,988,023			2,156,674
Weighted-average yield (1) (2)	Weighted-average yield (1) (2)	—		%	3.20		%	2.71		%	3.48		%	3.43		%	Weighted-average yield (1) (2)	—		%	3.16		%	2.73		%	3.68		%	3.62		%
Municipal securities	Municipal securities																Municipal securities
Amortized cost	Amortized cost	2,301			37,167			10,777			253,959			304,204			Amortized cost	2,400			36,850			9,007			253,151			301,408
Fair value	Fair value	2,288			34,380			9,454			217,751			263,873			Fair value	2,383			33,794			7,596			199,783			243,556
Weighted-average yield (1) (2)	Weighted-average yield (1) (2)	2.21		%	2.46		%	2.73		%	2.24		%	2.28		%	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	102,877			105,584			12,946			927,150			1,148,557			Amortized cost	99,830			92,328			11,056			902,911			1,106,125
Fair value	Fair value	101,397			101,371			12,525			777,332			992,625			Fair value	98,420			89,370			10,793			737,524			936,107
Weighted-average yield (1)	Weighted-average yield (1)	6.86		%	4.18		%	0.80		%	2.57		%	3.08		%	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	—			—			349,502			304,000			653,502			Amortized cost	—			—			349,501			304,000			653,501
Fair value	Fair value	—			—			279,402			206,348			485,750			Fair value	—			—			280,812			194,622			475,434
Weighted-average yield (1)	Weighted-average yield (1)	—		%	—		%	3.48		%	1.97		%	2.78		%	Weighted-average yield (1)	—		%	—		%	3.48		%	1.97		%	2.78		%
Foreign government bonds	Foreign government bonds																Foreign government bonds
Amortized cost	Amortized cost	74,140			62,252			50,000			50,000			236,392			Amortized cost	32,875			104,656			50,000			50,000			237,531
Fair value	Fair value	74,116			62,364			49,548			38,738			224,766			Fair value	32,810			104,546			49,609			35,825			222,790
Weighted-average yield (1)	Weighted-average yield (1)	3.02		%	2.33		%	5.46		%	1.50		%	3.03		%	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	—			—			—			46,332			46,332			Amortized cost	—			—			—			44,819			44,819
Fair value	Fair value	—			—			—			44,875			44,875			Fair value	—			—			—			43,757			43,757
Weighted-average yield (1)	Weighted-average yield (1)	—		%	—		%	—		%	5.75		%	5.75		%	Weighted-average yield (1)	—		%	—		%	—		%	6.01		%	6.01		%
CLOs	CLOs																CLOs
Amortized cost	Amortized cost	—			—			319,000			298,250			617,250			Amortized cost	—			—			319,000			298,250			617,250
Fair value	Fair value	—			—			311,589			291,976			603,565			Fair value	—			—			314,219			295,735			609,954
Weighted-average yield (1)	Weighted-average yield (1)	—		%	—		%	6.38		%	6.43		%	6.40		%	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	$	432,997		$	1,017,460		$	993,979		$	4,376,133		$	6,820,569		Amortized cost	$	583,428		$	1,048,858		$	986,581		$	4,357,464		$	6,976,331
Fair value	Fair value	$	430,800		$	935,159		$	882,803		$	3,738,496		$	5,987,258		Fair value	$	581,600		$	964,501		$	874,214		$	3,619,522		$	6,039,837
Weighted-average yield (1)	Weighted-average yield (1)	5.04		%	1.88		%	4.12		%	3.26		%	3.29		%	Weighted-average yield (1)	5.32		%	1.86		%	4.27		%	3.40		%	3.45		%

3031


($ 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	$	—		$	526,794		$	—		$	—		$	526,794		Amortized cost	$	—		$	528,169		$	—		$	—		$	528,169
Fair value	Fair value	—			474,137			—			—			474,137			Fair value	—			470,618			—			—			470,618
Weighted-average yield (1)	Weighted-average yield (1)	—		%	1.05		%	—		%	—		%	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	—			—			280,571			719,844			1,000,415			Amortized cost	—			—			328,870			672,428			1,001,298
Fair value	Fair value	—			—			237,713			560,158			797,871			Fair value	—			—			265,107			487,184			752,291
Weighted-average yield (1)	Weighted-average yield (1)	—		%	—		%	1.92		%	1.89		%	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	—			—			95,527			1,163,898			1,259,425			Amortized cost	—			—			94,992			1,150,683			1,245,675
Fair value	Fair value	—			—			80,230			938,796			1,019,026			Fair value	—			—			76,426			873,138			949,564
Weighted-average yield (1) (2)	Weighted-average yield (1) (2)	—		%	—		%	1.56		%	1.68		%	1.67		%	Weighted-average yield (1) (2)	—		%	—		%	1.56		%	1.68		%	1.67		%
Municipal securities	Municipal securities																Municipal securities
Amortized cost	Amortized cost	—			—			—			189,299			189,299			Amortized cost	—			—			—			189,093			189,093
Fair value	Fair value	—			—			—			149,450			149,450			Fair value	—			—			—			135,575			135,575
Weighted-average yield (1) (2)	Weighted-average yield (1) (2)	—		%	—		%	—		%	1.98		%	1.98		%	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	$	—		$	526,794		$	376,098		$	2,073,041		$	2,975,933		Amortized cost	$	—		$	528,169		$	423,862		$	2,012,204		$	2,964,235
Fair value	Fair value	$	—		$	474,137		$	317,943		$	1,648,404		$	2,440,484		Fair value	$	—		$	470,618		$	341,533		$	1,495,897		$	2,308,048
Weighted-average yield (1)	Weighted-average yield (1)	—		%	1.05		%	1.83		%	1.78		%	1.66		%	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 ~~June~~September 30, 2023 and December 31, 2022, AFS and HTM debt securities with carrying values of ~~$7.21~~$7.04 billion and $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 ~~June~~September 30, 2023 and December 31, 2022:


($ in thousands)	($ in thousands)	June 30, 2023		December 31, 2022		($ in thousands)	September 30, 2023		December 31, 2022
Federal Reserve Bank of San Francisco (“FRBSF”) stock	Federal Reserve Bank of San Francisco (“FRBSF”) stock	$	61,956	$	61,374	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	$	79,206	$	78,624	Total restricted equity securities	$	79,522	$	78,624

Note 6 — Derivatives

The Company uses derivative instruments to manage exposure to market risk, primarily interest rate and foreign currency 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 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 2022 Form 10-K.

3132

The following table presents the notional amounts and fair values of the Company’s derivatives as of ~~June~~September 30, 2023 and December 31, 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 fair values are presented on a gross basis prior to the application of bilateral collateral and master netting agreements, but after the application of variation margin payments as settlement to fair values of contracts cleared through central clearing organizations. Applying variation margin payments as settlement to the fair values of derivative contracts cleared through the London Clearing House (“LCH”) and the Chicago Mercantile Exchange (“CME”) resulted in reductions in the derivative asset and liability fair values by ~~$24.6~~$16.0 million and $~~63.5~~65.7 million, respectively, as of ~~June~~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 reflect the effects of legally enforceable master netting agreements and cash collateral received or paid. The resulting net derivative asset and liability fair values are included in Other assets and Accrued expenses and other liabilities, respectively, on the Consolidated Balance Sheet.


		June 30, 2023						December 31, 2022							September 30, 2023								December 31, 2022
				Fair Value						Fair Value							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:	Derivatives designated as hedging instruments:													Derivatives designated as hedging instruments:

Cash flow hedges:	Cash flow hedges:													Cash flow hedges:
Interest rate contracts	Interest rate contracts	$	5,250,000	$	2,430	$	51,862	$	3,450,000	$	13,455	$	19,687	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	81,480		3,646		—		84,832		5,590		—		Foreign exchange contracts	81,480		3,709			—			84,832		5,590			—
Total derivatives designated as hedging instruments	Total derivatives designated as hedging instruments	$	5,331,480	$	6,076	$	51,862	$	3,534,832	$	19,045	$	19,687	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	$	17,885,894	$	527,805	$	539,585	$	16,932,414	$	426,828	$	564,829	Interest rate contracts	$	17,456,102	$	622,799		$	615,920		$	16,932,414	$	426,828		$	564,829
Commodity contracts (1)	Commodity contracts (1)	—		139,081		147,920		—		261,613		258,608		Commodity contracts (1)	—		137,500			143,855			—		261,613			258,608
Foreign exchange contracts	Foreign exchange contracts	4,724,615		91,936		72,342		2,982,891		47,519		44,117		Foreign exchange contracts	5,205,007		96,668			77,099			2,982,891		47,519			44,117
Credit contracts (2)	Credit contracts (2)	109,370		—		16		140,950		—		23		Credit contracts (2)	143,703		—			12			140,950		—			23
Equity contracts ~~(3)~~	Equity contracts ~~(3)~~	—		263		—		—		323		—		Equity contracts ~~(3)~~	—		352		(3)	15,119		(4)	—		323		(3)	—
Total derivatives not designated as hedging instruments	Total derivatives not designated as hedging instruments	$	22,719,879	$	759,085	$	759,863	$	20,056,255	$	736,283	$	867,577	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			$	765,161	$	811,725			$	755,328	$	887,264	Gross derivative assets/liabilities			$	862,316		$	948,387				$	755,328		$	887,264
Less: Master netting agreements	Less: Master netting agreements			(208,183)		(208,183)				(242,745)		(242,745)		Less: Master netting agreements			(260,648)			(260,648)					(242,745)			(242,745)
Less: Cash collateral received	Less: Cash collateral received			(264,245)		—				(372,038)		—		Less: Cash collateral received			(269,683)			(2,225)					(372,038)			—
Net derivative assets/liabilities	Net derivative assets/liabilities			$	292,733	$	603,542			$	140,545	$	644,519	Net derivative assets/liabilities			$	331,985		$	685,514				$	140,545		$	644,519

(1)The notional amount of the Company’s commodity contracts totaled ~~16,446~~20,672 thousand barrels of crude oil and ~~306,161~~363,020 thousand units of natural gas, measured in million British thermal units (“MMBTUs”) as of ~~June~~September 30, 2023. In comparison, the notional amount of the Company’s commodity contracts totaled 12,005 thousand barrels of crude oil and 247,704 thousand MMBTUs of natural gas as of December 31, 2022.

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

(3)The Company held ~~equity contracts in one public company and 10 private companies as of June 30, 2023. In comparison, the Company held~~warrant equity contracts in one public company and 13 private companies as of both September 30, 2023 and December 31, 2022.

(4)

~~In anticipation~~Equity contracts classified as derivative liabilities consist of LIBOR’s cessation date on June 30, 2023, certain LIBOR-indexed interest-rate swap contracts with LCH were subject to a conversion process, where the original LIBOR swap contract was exchanged for a SOFR forward-starting swap contract, along with one or more overlap swap contracts replicating the final LIBOR cash flows349,138 PRSUs granted as part of the original LIBOR swap contract. The swap contracts exchanged were substantially economically equivalent. The SOFR replacement and overlap LIBOR swaps are considered separate contracts, and the overlay LIBOR swaps will resultEWBC’s consideration in a gross-up of the notional amounts presented, until these swaps mature upon settlement of the final LIBOR payment. The interest rate contracts included as cash flow and economic hedges reflect notional gross-ups of $1.00 billion and $161.9 million. These overlay LIBOR swaps are expected to matureits investment in ~~the third quarter of 2023.~~Rayliant.

Derivatives Designated as Hedging Instruments

Cash Flow Hedges — The Company uses interest rate swaps to hedge the variability in interest received on certain floating-rate commercial loans, or paid on certain floating-rate borrowings due to changes in contractually specified interest rates. As of ~~June~~September 30, 2023, interest rate contracts in notional amounts of ~~$5.25~~$5.00 billion were designated as cash flow hedges to convert certain variable-rate loans from floating-rate payments to fixed-rate payments. Gains and losses on the hedging derivative instruments are recognized in AOCI and reclassified to earnings in the same period the hedged cash flows impact earnings and within the same income statement line item as the hedged cash flows. Considering the interest rates, yield curve and notional amount as of ~~June~~September 30, 2023, the Company expects to reclassify an estimated ~~$65.5~~$66.2 million of after-tax net losses on derivative instruments designated as cash flow hedges from AOCI into earnings during the next 12 months.

The following table presents the pre-tax changes in AOCI from cash flow hedges for the three and ~~six~~nine months ended ~~June~~September 30, 2023 and 2022. The after-tax impact of cash flow hedges on AOCI is shown in Note 14 — Accumulated Other Comprehensive Income (Loss) to the Consolidated Financial Statements in this Form-10-Q.


		Three Months Ended June 30,				Six Months Ended June 30,						Three Months Ended September 30,				Nine Months Ended September 30,
($ in thousands)	($ in thousands)	2023		2022		2023			2022		($ in thousands)	2023		2022		2023			2022
Losses recognized in AOCI:	Losses recognized in AOCI:										Losses recognized in AOCI:
Interest rate contracts	Interest rate contracts	$	(96,457)	$	(7,837)	$	(66,614)		$	(40,446)	Interest rate contracts	$	(62,715)	$	(48,325)	$	(129,329)		$	(88,771)

Gains (losses) 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)	—		308		696			135		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)	(20,252)		812		(33,206)			3,085		Interest and dividend income (for cash flow hedges on loans)	(24,059)		(2,870)		(57,265)			216
Noninterest income	Noninterest income	—		—		1,614		(1)	—		Noninterest income	—		—		1,614		(1)	—
Total	Total	$	(20,252)	$	1,120	$	(30,896)		$	3,220	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 — 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 were used to hedge against the risk of adverse changes in the foreign currency exchange rate of the Chinese Renminbi (“RMB”). The following table presents the pre-tax gains recognized in AOCI on net investment hedges for the three and ~~six~~nine months ended ~~June~~September 30, 2023 and 2022:


		Three Months Ended June 30,				Six Months Ended June 30,					Three Months Ended September 30,				Nine Months Ended September 30,
($ in thousands)	($ in thousands)	2023		2022		2023		2022		($ in thousands)	2023		2022		2023		2022
Gains recognized in AOCI	Gains recognized in AOCI	$	3,899	$	3,255	$	2,823	$	1,684	Gains recognized in AOCI	$	63	$	4,343	$	2,886	$	6,027

Derivatives Not Designated as Hedging Instruments

Customer-Related Positions and ~~other~~ Economic Hedge Derivatives — The Company enters into interest rate, commodity, and foreign exchange derivatives at the request of its customers and generally enters into offsetting derivative contracts with third-party financial institutions to mitigate the inherent market risk. The Company also utilizes foreign exchange contracts to mitigate the effect of currency fluctuations on certain foreign currency-denominated on-balance sheet assets and liabilities, primarily foreign currency denominated deposits that it offers to its customers. A majority of the foreign exchange contracts had original maturities of one year or less as of both ~~June~~September 30, 2023 and December 31, 2022.

3334

The following table presents the notional amounts and the gross fair values of the interest rate and foreign exchange derivatives entered into ~~for customer-related positions~~with customers and with third-party financial institutions ~~labeled~~ as ~~“other~~ economic ~~hedges”,~~hedges to customers’ positions as of ~~June~~September 30, 2023 and December 31, 2022:


		June 30, 2023						December 31, 2022							September 30, 2023						December 31, 2022
				Fair Value						Fair Value							Fair Value						Fair Value
($ in thousands)	($ in thousands)	Notional Amount		Assets		Liabilities		Notional Amount		Assets		Liabilities		($ in thousands)	Notional Amount		Assets		Liabilities		Notional Amount		Assets		Liabilities
Customer-related positions:	Customer-related positions:													Customer-related positions:
Interest rate contracts:	Interest rate contracts:													Interest rate contracts:
Swaps	Swaps	$	6,900,309	$	2,117	$	503,261	$	6,656,491	$	1,438	$	521,719	Swaps	$	6,890,450	$	691	$	584,962	$	6,656,491	$	1,438	$	521,719
Written options	Written options	1,621,207		—		24,166		1,548,158		—		30,904		Written options	1,486,958		—		21,864		1,548,158		—		30,904
Collars and corridors	Collars and corridors	296,585		12		8,743		215,773		—		8,924		Collars and corridors	306,996		—		7,619		215,773		—		8,924
Subtotal	Subtotal	8,818,101		2,129		536,170		8,420,422		1,438		561,547		Subtotal	8,684,404		691		614,445		8,420,422		1,438		561,547
Foreign exchange contracts:	Foreign exchange contracts:													Foreign exchange contracts:
Forwards and spot	Forwards and spot	1,410,862		23,596		31,829		993,588		17,009		18,090		Forwards and spot	62,237		11,376		24,484		993,588		17,009		18,090
Swaps	Swaps	888,018		17,862		4,767		623,143		6,629		12,178		Swaps	2,494,517		16,282		23,687		623,143		6,629		12,178
Other	Other	129,000		5,939		—		121,631		2,070		245		Other	142,000		5,630		—		121,631		2,070		245
Subtotal	Subtotal	2,427,880		47,397		36,596		1,738,362		25,708		30,513		Subtotal	2,698,754		33,288		48,171		1,738,362		25,708		30,513
Total	Total	$	11,245,981	$	49,526	$	572,766	$	10,158,784	$	27,146	$	592,060	Total	$	11,383,158	$	33,979	$	662,616	$	10,158,784	$	27,146	$	592,060
Other economic hedges:
Economic hedges:														Economic hedges:
Interest rate contracts:	Interest rate contracts:													Interest rate contracts:
Swaps	Swaps	$	7,088,622	$	491,972	$	2,707	$	6,683,828	$	384,201	$	2,047	Swaps	$	6,916,364	$	592,177	$	1,119	$	6,683,828	$	384,201	$	2,047
Purchased options	Purchased options	1,651,896		24,927		—		1,580,275		32,233		—		Purchased options	1,517,648		22,285		—		1,580,275		32,233		—
Written options	Written options	30,690		—		696		32,117		—		1,235		Written options	30,690		—		356		32,117		—		1,235
Collars and corridors	Collars and corridors	296,585		8,777		12		215,772		8,956		—		Collars and corridors	306,996		7,646		—		215,772		8,956		—
Subtotal	Subtotal	9,067,793		525,676		3,415		8,511,992		425,390		3,282		Subtotal	8,771,698		622,108		1,475		8,511,992		425,390		3,282
Foreign exchange contracts:	Foreign exchange contracts:													Foreign exchange contracts:
Forwards and spot	Forwards and spot	24,935		88		155		77,998		3,050		87		Forwards and spot	1,060,498		452		313		77,998		3,050		87
Swaps	Swaps	2,142,800		44,451		29,652		1,044,900		18,516		11,447		Swaps	1,303,755		62,928		22,985		1,044,900		18,516		11,447
Other	Other	129,000		—		5,939		121,631		245		2,070		Other	142,000		—		5,630		121,631		245		2,070
Subtotal	Subtotal	2,296,735		44,539		35,746		1,244,529		21,811		13,604		Subtotal	2,506,253		63,380		28,928		1,244,529		21,811		13,604
Total	Total	$	11,364,528	$	570,215	$	39,161	$	9,756,521	$	447,201	$	16,886	Total	$	11,277,951	$	685,488	$	30,403	$	9,756,521	$	447,201	$	16,886

3435

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 ~~labeled below~~are used as ~~“other~~ economic ~~hedges” are used~~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 ~~other~~ economic hedges as of ~~June~~September 30, 2023 and December 31, 2022:


		June 30, 2023						December 31, 2022							September 30, 2023						December 31, 2022
				Fair Value						Fair Value							Fair Value						Fair Value
($ and unit in thousands)	($ and unit in thousands)	Notional Units		Assets		Liabilities		Notional Units		Assets		Liabilities		($ and unit in thousands)	Notional Units		Assets		Liabilities		Notional Units		Assets		Liabilities
Customer-related positions:	Customer-related positions:													Customer-related positions:
Commodity contracts:	Commodity contracts:													Commodity contracts:
Crude oil:	Crude oil:													Crude oil:
Swaps	Swaps	2,717	Barrels	$	9,106	$	14,142	2,465	Barrels	$	39,955	$	6,178	Swaps	3,958	Barrels	$	27,543	$	1,717	2,465	Barrels	$	39,955	$	6,178
Collars	Collars	5,474	Barrels	1,824		7,375		3,011	Barrels	16,038		2,630		Collars	6,362	Barrels	24,552		119		3,011	Barrels	16,038		2,630
Written options	Written options	—	Barrels	—		—		—	Barrels	558		—		Written options	—	Barrels	—		—		—	Barrels	558		—
Subtotal	Subtotal	8,191	Barrels	10,930		21,517		5,476	Barrels	56,551		8,808		Subtotal	10,320	Barrels	52,095		1,836		5,476	Barrels	56,551		8,808
Natural gas:	Natural gas:													Natural gas:
Swaps	Swaps	115,608	MMBTUs	39,171		59,359		92,590	MMBTUs	112,314		73,208		Swaps	129,940	MMBTUs	32,428		55,387		92,590	MMBTUs	112,314		73,208
Collars	Collars	36,161	MMBTUs	524		17,545		32,072	MMBTUs	2,217		18,317		Collars	50,763	MMBTUs	865		11,535		32,072	MMBTUs	2,217		18,317
Written options	Written options	1,559	MMBTUs	—		179		—	MMBTUs	—		—		Written options	1,955	MMBTUs	—		206		—	MMBTUs	—		—
Subtotal	Subtotal	153,328	MMBTUs	39,695		77,083		124,662	MMBTUs	114,531		91,525		Subtotal	182,658	MMBTUs	33,293		67,128		124,662	MMBTUs	114,531		91,525
Total	Total			$	50,625	$	98,600			$	171,082	$	100,333	Total			$	85,388	$	68,964			$	171,082	$	100,333
Other economic hedges:
Economic hedges:														Economic hedges:
Commodity contracts:	Commodity contracts:													Commodity contracts:
Crude oil:	Crude oil:													Crude oil:
Swaps	Swaps	2,781	Barrels	$	14,787	$	8,770	2,587	Barrels	$	6,935	$	36,060	Swaps	3,990	Barrels	$	2,165	$	24,403	2,587	Barrels	$	6,935	$	36,060
Collars	Collars	5,474	Barrels	6,580		1,700		3,942	Barrels	1,378		12,856		Collars	6,362	Barrels	—		18,781		3,942	Barrels	1,378		12,856
Purchased options	Purchased options	—	Barrels	—		—		—	Barrels	—		516		Purchased options	—	Barrels	—		—		—	Barrels	—		516
Subtotal	Subtotal	8,255	Barrels	21,367		10,470		6,529	Barrels	8,313		49,432		Subtotal	10,352	Barrels	2,165		43,184		6,529	Barrels	8,313		49,432
Natural gas:	Natural gas:													Natural gas:
Swaps	Swaps	115,453	MMBTUs	50,828		38,326		91,900	MMBTUs	69,767		106,883		Swaps	129,405	MMBTUs	42,804		31,289		91,900	MMBTUs	69,767		106,883
Collars	Collars	35,821	MMBTUs	16,082		524		31,142	MMBTUs	12,451		1,960		Collars	49,003	MMBTUs	6,937		418		31,142	MMBTUs	12,451		1,960
Purchased options	Purchased options	1,559	MMBTUs	179		—		—	MMBTUs	—		—		Purchased options	1,955	MMBTUs	206		—		—	MMBTUs	—		—
Subtotal	Subtotal	152,833	MMBTUs	67,089		38,850		123,042	MMBTUs	82,218		108,843		Subtotal	180,363	MMBTUs	49,947		31,707		123,042	MMBTUs	82,218		108,843
Total	Total			$	88,456	$	49,320			$	90,531	$	158,275	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. Under the RPAs, a portion of the credit 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. 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 ~~June~~September 30, 2023 and December 31, 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 as of both ~~June~~September 30, 2023 and December 31, 2022. ~~The~~

As of September 30, 2023, the Company had outstanding protection purchased RPAs with notional amount of $25.0 million and minimal fair value. In comparison, the Company did not have any outstanding protection purchased RPAs as of ~~both June 30, 2023 and~~ December 31, 2022.

Equity Contracts — As part of the loan origination process, the Company may obtain warrants to purchase the preferred and/or common stock of the borrowers’ companies, which are mainly in the technology and life sciences sectors. Warrants grant the Company the right to buy a certain class of the underlying company’s equity at a certain price before expiration. In connection with the Company’s investment in Rayliant during the third quarter of 2023, the Company granted PRSUs as part of its consideration. The vesting of these equity contracts is contingent on Rayliant meeting certain financial performance targets during the future performance period. For additional information on these equity contracts, refer to Note 3— Fair Value Measurement and Fair Value of Financial Instruments 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.

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


		Classification on Consolidated Statement of Income		Three Months Ended June 30,						Six Months Ended June 30,							Classification on Consolidated Statement of Income		Three Months Ended September 30,						Nine Months Ended September 30,
($ in thousands)	($ in thousands)		2023			2022			2023			2022	($ in thousands)					2023			2022			2023			2022
Derivatives not designated as hedging instruments:	Derivatives not designated as hedging instruments:															Derivatives not designated as hedging instruments:
Interest rate contracts	Interest rate contracts	Interest rate contracts and other derivative income		$	1,222		$	5,984		$	(1,261)		$	13,569	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		19,898			(4,557)			30,340			2,765		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		12			(9)			7			65		Credit contracts		Interest rate contracts and other derivative income		4			50			11			114
Equity contracts		Lending fees		(14)			93			(60)			187
Equity contracts - warrants															Equity contracts - warrants		Lending fees		89			(13)			29			175

Commodity contracts	Commodity contracts	Interest rate contracts and other derivative income		160			344			166			295		Commodity contracts		Interest rate contracts and other derivative income		27			(156)			193			139
Net gains	Net gains			$	21,278		$	1,855		$	29,192		$	16,881	Net gains				$	12,670		$	8,582		$	41,862		$	25,463

Credit-Risk-Related Contingent Features — Certain of the Company’s over-the-counter derivative contracts contain early termination provisions that require the Company to settle any outstanding balances upon the occurrence of a specified credit-risk-related event. Such an event primarily relates to a downgrade of the credit rating of East West Bank to below investment grade. As of ~~June~~September 30, 2023, the aggregate fair value amounts of all derivative instruments with credit-risk-related contingent features that were in a net liability position totaled ~~$13 thousand,~~$2.2 million, and no$2.2 million collateral was posted to cover these positions. In comparison, as of December 31, 2022, the aggregate fair value amounts of all derivative instruments with credit-risk-related contingent features that were in a net liability position totaled $2.6 million, of which $1.1 million of collateral was posted to cover these positions. If the credit rating of East West Bank had been downgraded to below investment grade, the Company would have been required to post minimal additional collateral as of both ~~June~~September 30, 2023 and December 31, 2022.

Offsetting of Derivatives

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

($ in thousands) As of June 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
Master Netting Arrangements
Cash Collateral Received (3)
Security Collateral
Received (5)
Derivative assets $ 765,161 $ (208,183) $ (264,245) $ 292,733 $ (258,757) $ 33,976
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 $ 811,725 $ (208,183) $ — $ 603,542 $ — $ 603,542



($ 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
			Master Netting Arrangements		Cash Collateral Received (3)				Security Collateral Received (5)
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)
Derivative liabilities	$	948,387	$	(260,648)	$	(2,225)	$	685,514	$	—	$	685,514



($ 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
			Master Netting Arrangements		Cash Collateral Received (3)				Security Collateral Received (5)
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)
Derivative liabilities	$	887,264	$	(242,745)	$	—	$	644,519	$	(38,438)	$	606,081

(1)Includes ~~$287 thousand~~$1.8 million and $2.1 million of gross fair value assets with counterparties that were not subject to enforceable master netting arrangements or similar agreements as of ~~June~~September 30, 2023 and December 31, 2022, respectively.

(2)Includes ~~$12 thousand~~$16.2 million and $566 thousand of gross fair value liabilities with counterparties that were not subject to enforceable master netting arrangements or similar agreements as of ~~June~~September 30, 2023 and December 31, 2022, respectively.

(3)Gross cash collateral received under master netting arrangements or similar agreements was $275.7 million and $384.9 million as of ~~June~~September 30, 2023 and December 31, 2022, respectively. Of the gross cash collateral received, ~~$264.2~~$269.7 million and $372.0 million were used to offset against derivative assets as of ~~June~~September 30, 2023 and December 31, 2022, respectively.

(4)Gross cash collateral pledged under master netting arrangements or similar agreements was ~~zero~~$3.1 million and $490 thousand as of ~~June~~September 30, 2023 and December 31, 2022, respectively. NoOf the gross cash collateral pledged, $2.2 million was used to offset against derivative liabilities as of September 30, 2023. In comparison, no cash collateral was used to offset against derivative liabilities as of ~~both June 30, 2023 and~~ December 31, 2022.

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

In addition to the amounts included in the tables above, the Company 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.

3738

Note 7 — Loans Receivable and Allowance for Credit Losses

The following table presents the composition of the Company’s loans held-for-investment outstanding as of ~~June~~September 30, 2023 and December 31, 2022:


($ in thousands)	($ in thousands)	June 30, 2023		December 31, 2022		($ in thousands)	September 30, 2023		December 31, 2022
Commercial:	Commercial:					Commercial:
C&I	C&I	$	15,670,084	$	15,711,095	C&I	$	15,864,042	$	15,711,095
CRE:	CRE:					CRE:
CRE	CRE	14,373,385		13,857,870		CRE	14,667,378		13,857,870
Multifamily residential	Multifamily residential	4,764,180		4,573,068		Multifamily residential	4,900,097		4,573,068
Construction and land	Construction and land	781,068		638,420		Construction and land	798,190		638,420
Total CRE	Total CRE	19,918,633		19,069,358		Total CRE	20,365,665		19,069,358
Total commercial	Total commercial	35,588,717		34,780,453		Total commercial	36,229,707		34,780,453
Consumer:	Consumer:					Consumer:
Residential mortgage:	Residential mortgage:					Residential mortgage:
Single-family residential	Single-family residential	12,308,613		11,223,027		Single-family residential	12,836,558		11,223,027
HELOCs	HELOCs	1,862,928		2,122,655		HELOCs	1,776,665		2,122,655
Total residential mortgage	Total residential mortgage	14,171,541		13,345,682		Total residential mortgage	14,613,223		13,345,682
Other consumer	Other consumer	68,106		76,295		Other consumer	64,254		76,295
Total consumer	Total consumer	14,239,647		13,421,977		Total consumer	14,677,477		13,421,977
Total loans held-for-investment (1)	Total loans held-for-investment (1)	$	49,828,364	$	48,202,430	Total loans held-for-investment (1)	$	50,907,184	$	48,202,430
Allowance for loan losses	Allowance for loan losses	(635,400)		(595,645)		Allowance for loan losses	(655,523)		(595,645)
Loans held-for-investment, net (1)	Loans held-for-investment, net (1)	$	49,192,964	$	47,606,785	Loans held-for-investment, net (1)	$	50,251,661	$	47,606,785

(1)Includes ~~$74.0~~$72.0 million and $70.4 million comprising unamortized deferred and unearned fees, net of premiums as of ~~June~~September 30, 2023 and December 31, 2022, respectively.

Accrued interest receivable on loans held-for-investment was ~~$229.7~~$249.3 million and $208.4 million as of ~~June~~September 30, 2023 and December 31, 2022, respectively, and was included in Other assets on the Consolidated Balance Sheet. The interest income reversed was insignificant for both the three and ~~six~~nine months ended ~~June~~September 30, 2023 and 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 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 $~~34.19~~35.18 billion and $28.30 billion, respectively, were pledged to secure borrowings and provide additional borrowing capacity as of ~~June~~September 30, 2023 and December 31, 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.”

3839

•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 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.

June 30, 2023
Term Loans by Origination Year
($ in thousands) 2023 2022 2021 2020 2019 Prior Revolving Loans
Revolving Loans Converted to Term Loans (1)
Total
Commercial:
C&I:
Pass $ 1,427,799 $ 2,285,112 $ 1,610,248 $ 415,562 $ 267,164 $ 217,673 $ 9,016,889 $ 20,345 $ 15,260,792
Criticized (accrual) 18,452 93,118 81,361 26,033 26,027 22,837 79,585 — 347,413
Criticized (nonaccrual) 2,657 22,800 1,773 8,987 7,798 12,697 5,167 — 61,879
Total C&I 1,448,908 2,401,030 1,693,382 450,582 300,989 253,207 9,101,641 20,345 15,670,084
YTD gross write-offs (3)
185 1,996 95 15 4,930 1,683 — — 8,904
CRE:
Pass 1,358,049 4,119,439 2,323,453 1,481,659 1,689,335 2,936,955 111,043 53,747 14,073,680
Criticized (accrual) 36,966 2,757 23,746 68,936 37,981 111,969 1,455 — 283,810
Criticized (nonaccrual) — 171 15,099 — 460 165 — — 15,895
Subtotal CRE 1,395,015 4,122,367 2,362,298 1,550,595 1,727,776 3,049,089 112,498 53,747 14,373,385
YTD gross write-offs — — 2,253 — — 119 — — 2,372
Multifamily residential:
Pass 289,218 1,497,280 875,986 625,489 507,401 926,253 9,425 1,295 4,732,347
Criticized (accrual) — — — — 700 26,430 — — 27,130
Criticized (nonaccrual) — — — — — 4,703 — — 4,703
Subtotal multifamily residential 289,218 1,497,280 875,986 625,489 508,101 957,386 9,425 1,295 4,764,180
Construction and land:
Pass 85,733 355,949 259,113 34,103 816 2,986 14,952 — 753,652
Criticized (accrual) 5,865 — — — — 21,551 — — 27,416
Subtotal construction and land 91,598 355,949 259,113 34,103 816 24,537 14,952 — 781,068
Total CRE 1,775,831 5,975,596 3,497,397 2,210,187 2,236,693 4,031,012 136,875 55,042 19,918,633
YTD gross write-offs
— — 2,253 — — 119 — — 2,372
Total commercial $ 3,224,739 $ 8,376,626 $ 5,190,779 $ 2,660,769 $ 2,537,682 $ 4,284,219 $ 9,238,516 $ 75,387 $ 35,588,717
YTD total commercial gross write-offs (3)
$ 185 $ 1,996 $ 2,348 $ 15 $ 4,930 $ 1,802 $ — $ — $ 11,276

June 30, 2023
Term Loans by Origination Year
($ in thousands) 2023 2022 2021 2020 2019 Prior Revolving Loans
Revolving Loans Converted to Term Loans (1)
Total
Consumer:
Residential mortgage:
Single-family residential:
Pass (2)
$ 1,585,454 $ 3,445,517 $ 2,369,777 $ 1,680,587 $ 1,044,089 $ 2,152,061 $ — $ — $ 12,277,485
Criticized (accrual) 547 574 934 1,708 471 5,647 — — 9,881
Criticized (nonaccrual) (2)
1,470 138 1,103 2,432 3,581 12,523 — — 21,247
Subtotal single-family residential mortgage 1,587,471 3,446,229 2,371,814 1,684,727 1,048,141 2,170,231 — — 12,308,613
HELOCs:
Pass 978 751 1,793 6,004 2,033 12,007 1,711,411 115,557 1,850,534
Criticized (accrual) — 801 208 — — — 232 102 1,343
Criticized (nonaccrual) — — 223 835 — 5,022 704 4,267 11,051
Subtotal HELOCs 978 1,552 2,224 6,839 2,033 17,029 1,712,347 119,926 1,862,928
YTD gross write-offs (3)
— — — — — — — 6 6
Total residential mortgage 1,588,449 3,447,781 2,374,038 1,691,566 1,050,174 2,187,260 1,712,347 119,926 14,171,541
YTD gross write-offs (3)
— — — — — — — 6 6
Other consumer:
Pass 885 16,824 136 5,356 — 11,810 33,071 — 68,082
Criticized (nonaccrual) — — — — — — 24 — 24
Total other consumer 885 16,824 136 5,356 — 11,810 33,095 — 68,106
YTD gross write-offs — — — — — — 88 — 88
Total consumer $ 1,589,334 $ 3,464,605 $ 2,374,174 $ 1,696,922 $ 1,050,174 $ 2,199,070 $ 1,745,442 $ 119,926 $ 14,239,647
YTD total consumer gross write-offs (3)
$ — $ — $ — $ — $ — $ — $ 88 $ 6 $ 94
Total loans held-for-investment:
Pass $ 4,748,116 $ 11,720,872 $ 7,440,506 $ 4,248,760 $ 3,510,838 $ 6,259,745 $ 10,896,791 $ 190,944 $ 49,016,572
Criticized (accrual) 61,830 97,250 106,249 96,677 65,179 188,434 81,272 102 696,993
Criticized (nonaccrual) 4,127 23,109 18,198 12,254 11,839 35,110 5,895 4,267 114,799
Total $ 4,814,073 $ 11,841,231 $ 7,564,953 $ 4,357,691 $ 3,587,856 $ 6,483,289 $ 10,983,958 $ 195,313 $ 49,828,364
YTD total loans held-for-investment gross write-offs (3)
$ 185 $ 1,996 $ 2,348 $ 15 $ 4,930 $ 1,802 $ 88 $ 6 $ 11,370



	September 30, 2023


	Term Loans by Origination Year

($ in thousands)	2023		2022		2021		2020		2019		Prior		Revolving Loans		Revolving Loans Converted to Term Loans (1)		Total
Commercial:
C&I:
Pass	$	1,858,749	$	1,942,241	$	1,470,818	$	354,650	$	259,342	$	164,149	$	9,254,852	$	20,248	$	15,325,049
Criticized (accrual)	88,542		110,918		91,272		45,069		25,603		23,640		104,802		—		489,846
Criticized (nonaccrual)	2,084		10,480		13		8,694		6,134		21,709		33		—		49,147


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)	350		28		161		15		6,606		1,684		—		—		8,844

CRE:

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)	36,899		14,717		20,307		100,871		24,544		129,658		—		—		326,996
Criticized (nonaccrual)	—		—		—		—		451		159		—		—		610


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)	—		—		—		—		—		119		—		—		119

Multifamily residential:
Pass	478,895		1,495,620		814,391		620,117		503,791		893,282		7,658		1,288		4,815,042
Criticized (accrual)	—		—		53,555		—		696		26,124		—		—		80,375
Criticized (nonaccrual)	—		—		—		—		—		4,680		—		—		4,680


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	151,175		354,415		222,474		37,732		812		5,475		14,966		—		787,049

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

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

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)	—		—		—		—		—		10,532		—		—		10,532

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)	$	350	$	28	$	161	$	15	$	6,606	$	12,216	$	—	$	—	$	19,376


		December 31, 2022
																						September 30, 2023

		Term Loans by Origination Year
												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:
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:	Consumer:																				Consumer:
Residential mortgage:	Residential mortgage:																				Residential mortgage:
Single-family residential:	Single-family residential:																				Single-family residential:
Pass (2)		$	3,548,894	$	2,453,717	$	1,775,696	$	1,101,965	$	817,164		$	1,500,359	$	—	$	—	$	11,197,795
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)	—		1,275		785		1,463		4,352			3,935		—		—		11,810		Criticized (accrual)	844		1,983		844		1,499		964		9,060		—		—		15,194
Criticized (nonaccrual) (2)		141		—		204		3,202		1,721			8,154		—		—		13,422
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	3,549,035		2,454,992		1,776,685		1,106,630		823,237			1,512,448		—		—		11,223,027		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	520		3,583		7,336		3,203		525			8,960		1,958,692		127,401		2,110,220		Pass	182		1,828		5,736		4,318		1,963		13,821		1,611,319		118,088		1,757,255
Criticized (accrual)	Criticized (accrual)	—		6		—		—		—			—		4		1,079		1,089		Criticized (accrual)	741		401		62		—		353		1,649		2,039		963		6,208
Criticized (nonaccrual)	Criticized (nonaccrual)	—		—		483		231		1,017			4,844		1,001		3,770		11,346		Criticized (nonaccrual)	—		517		—		1,359		68		5,396		1,751		4,111		13,202
Subtotal HELOCs	Subtotal HELOCs	520		3,589		7,819		3,434		1,542			13,804		1,959,697		132,250		2,122,655		Subtotal HELOCs	923		2,746		5,798		5,677		2,384		20,866		1,615,109		123,162		1,776,665
YTD gross write-offs (2)																					YTD gross write-offs (2)	—		—		—		—		—		41		—		6		47

Total residential mortgage	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		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	17,088		137		5,356		—		—			15,808		37,804		—		76,193		Pass	3,555		18,138		135		—		—		12,315		29,971		—		64,114
Criticized (accrual)	Criticized (accrual)	3		—		—		—		—			—		—		—		3		Criticized (accrual)	4		—		—		—		—		—		—		—		4
Criticized (nonaccrual)	Criticized (nonaccrual)	—		—		—		—		—			—		99		—		99		Criticized (nonaccrual)	—		—		—		—		—		—		136		—		136
Total other consumer	Total other consumer	17,091		137		5,356		—		—			15,808		37,903		—		76,295		Total other consumer	3,559		18,138		135		—		—		12,315		30,107		—		64,254

Total consumer	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 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	$	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	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)	80,235		96,150		208,970		76,486		142,072			76,117		99,447		17,795		797,272		Criticized (accrual)	127,030		128,019		166,040		147,439		52,160		190,131		106,841		963		918,623
Criticized (nonaccrual)	Criticized (nonaccrual)	18,863		23,841		11,420		3,676		8,356			27,682		1,100		3,770		98,708		Criticized (nonaccrual)	4,000		13,863		4,715		12,749		9,521		52,183		1,920		4,111		103,062

Total	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	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)$~~1.4~~11.2 million and ~~$13.5~~$24.6 million of total commercial loans, primarily comprised of CRE revolving loans, converted to term loans during the three and ~~six~~nine months ended ~~June~~September 30, 2023, respectively. In comparison, $0 and $26.4 million of total commercial loans, primarily comprised of CRE revolving loans, converted to term loans during ~~both~~ the three and ~~six~~nine months ended ~~June~~September 30, 2022. ~~$9.7~~$20.6 million and ~~$14.5~~$27.7 million of total consumer loans, comprised of HELOCs, were converted to term loans during three and ~~six~~nine months ended ~~June~~September 30, 2023, respectively. In comparison, ~~there were~~ $375 thousand of totalno consumer loans, comprised of HELOCs, converted to term loans during both the three and ~~six~~nine months ended ~~June~~September 30, 2022.

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

(3)As of ~~June~~September 30, 2023 and December 31, 2022, ~~$734~~$638 thousand and $818 thousand, respectively, of nonaccrual loans whose payments ~~are~~were guaranteed by the Federal Housing Administration were classified with a “Pass” rating.

~~(3)Excludes gross write-offs associated with loans the Company sold or settled.~~

4142

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 loans held-for-investment as of ~~June~~September 30, 2023 and December 31, 2022:


		June 30, 2023								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:	Commercial:														Commercial:
C&I	C&I	$	15,602,567	$	3,247	$	2,391	$	5,638		$	61,879	$	15,670,084	C&I	$	15,781,468	$	33,195	$	232	$	33,427	$	49,147	$	15,864,042
CRE:	CRE:														CRE:
CRE	CRE	14,342,301		15,189		—		15,189			15,895		14,373,385		CRE	14,664,230		2,015		523		2,538		610		14,667,378
Multifamily residential	Multifamily residential	4,758,515		962		—		962			4,703		4,764,180		Multifamily residential	4,894,334		1,083		—		1,083		4,680		4,900,097
Construction and land	Construction and land	759,516		21,552		—		21,552			—		781,068		Construction and land	787,049		—		—		—		11,141		798,190
Total CRE	Total CRE	19,860,332		37,703		—		37,703			20,598		19,918,633		Total CRE	20,345,613		3,098		523		3,621		16,431		20,365,665
Total commercial	Total commercial	35,462,899		40,950		2,391		43,341			82,477		35,588,717		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	12,254,680		21,752		10,200		31,952			21,981		12,308,613		Single-family residential	12,771,661		24,141		15,972		40,113		24,784		12,836,558
HELOCs	HELOCs	1,840,064		10,471		1,342		11,813			11,051		1,862,928		HELOCs	1,746,841		10,416		6,206		16,622		13,202		1,776,665
Total residential mortgage	Total residential mortgage	14,094,744		32,223		11,542		43,765			33,032		14,171,541		Total residential mortgage	14,518,502		34,557		22,178		56,735		37,986		14,613,223
Other consumer	Other consumer	67,099		142		841		983			24		68,106		Other consumer	63,992		109		17		126		136		64,254
Total consumer	Total consumer	14,161,843		32,365		12,383		44,748			33,056		14,239,647		Total consumer	14,582,494		34,666		22,195		56,861		38,122		14,677,477
Total	Total	$	49,624,742	$	73,315	$	14,774	$	88,089		$	115,533	$	49,828,364	Total	$	50,709,575	$	70,959	$	22,950	$	93,909	$	103,700	$	50,907,184



	December 31, 2022
($ 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	$	15,651,312	$	6,482	$	2,873	$	9,355	$	50,428	$	15,711,095
CRE:
CRE	13,820,441		14,185		—		14,185		23,244		13,857,870
Multifamily residential	4,571,899		678		322		1,000		169		4,573,068
Construction and land	638,420		—		—		—		—		638,420
Total CRE	19,030,760		14,863		322		15,185		23,413		19,069,358
Total commercial	34,682,072		21,345		3,195		24,540		73,841		34,780,453
Consumer:
Residential mortgage:
Single-family residential	11,183,134		13,523		12,130		25,653		14,240		11,223,027
HELOCs	2,102,523		7,700		1,086		8,786		11,346		2,122,655
Total residential mortgage	13,285,657		21,223		13,216		34,439		25,586		13,345,682
Other consumer	73,004		109		3,083		3,192		99		76,295
Total consumer	13,358,661		21,332		16,299		37,631		25,685		13,421,977
Total	$	48,040,733	$	42,677	$	19,494	$	62,171	$	99,526	$	48,202,430

4243

The following table presents the amortized cost of loans on nonaccrual status for which there was no related allowance for loan losses as of both ~~June~~September 30, 2023 and December 31, 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)	June 30, 2023		December 31, 2022		($ in thousands)	September 30, 2023		December 31, 2022

Commercial:	Commercial:					Commercial:
C&I	C&I	$	27,690	$	11,398	C&I	$	29,336	$	11,398

CRE	CRE	15,100		22,944		CRE	—		22,944
Multifamily residential	Multifamily residential	4,235		—		Multifamily residential	4,235		—

Construction and land						Construction and land	11,141		—

Total commercial	Total commercial	47,025		34,342		Total commercial	44,712		34,342
Consumer:	Consumer:					Consumer:

Single-family residential	Single-family residential	6,077		2,998		Single-family residential	6,681		2,998
HELOCs	HELOCs	5,076		7,245		HELOCs	8,483		7,245

Total consumer	Total consumer	11,153		10,243		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	$	58,178	$	44,585	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 ~~June~~September 30, 2023, compared with $270 thousand as of December 31, 2022. The Company commences the foreclosure process on consumer mortgage loans after a borrower becomes more than 120 days delinquent in accordance with the CFPB guidelines. The carrying value of the consumer real estate loans that were in an active or suspended foreclosure process was ~~$7.1~~$9.9 million and $7.5 million as of ~~June~~September 30, 2023 and December 31, 2022, respectively.

Loan Modifications to Borrowers Experiencing Financial Difficulty

Effective January 1, 2023, the Company adopted ASU 2022-02, which in part eliminated the accounting for TDR and enhanced disclosures requirements for loan modifications to borrowers experiencing financial difficulty. See Note 2 — Current Accounting Developments and Summary of Significant Accounting Policies — Significant Accounting Policies Update — Loan Modifications to the Consolidated Financial Statements in this Form 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.

4344

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


		Three Months Ended June 30, 2023														Three Months Ended September 30, 2023
		Modification Type															Modification Type
($ in thousands)	($ in thousands)	Term Extension		Payment Delay		Combo- Term Extension/ Payment Delay		Combo- Rate Reduction/ Term Extension		Combo- Principal Forgiveness Rate Reduction/ Term Extension		Total		Modification as a % of Loan Class				($ 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:	Commercial:																	Commercial:
C&I	C&I	$	13,475	$	12,788	$	—	$	—	$	298	$	26,561	0.17	%			C&I	$	1,682	$	11,603	$	—	$	—	$	—	$	13,285	0.08	%
CRE:	CRE:																	CRE:
CRE	CRE	—		—		—		32,791		—		32,791		0.16	%			CRE	13,469		—		—		—		—		13,469		0.07	%

Total commercial	Total commercial	13,475		12,788		—		32,791		298		59,352						Total commercial	15,151		11,603		—		—		—		26,754
Consumer:	Consumer:																	Consumer:
Residential mortgage:	Residential mortgage:																	Residential mortgage:
Single-family residential:	Single-family residential:	—		5,085		551		—		—		5,636		0.05	%			Single-family residential:	—		2,944		1,260		—		—		4,204		0.03	%
HELOCs	HELOCs	—		978		—		—		—		978		0.05	%			HELOCs	—		—		334		—		183		517		0.03	%

Total consumer	Total consumer	—		6,063		551		—		—		6,614						Total consumer	—		2,944		1,594		—		183		4,721
Total	Total	$	13,475	$	18,851	$	551	$	32,791	$	298	$	65,966					Total	$	15,151	$	14,547	$	1,594	$	—	$	183	$	31,475


		Six Months Ended June 30, 2023														Nine Months Ended September 30, 2023
		Modification Type															Modification Type
($ in thousands)	($ in thousands)	Term Extension		Payment Delay		Combo- Term Extension/ Payment Delay		Combo- Rate Reduction/ Term Extension		Combo- Principal Forgiveness Rate Reduction/ Term Extension		Total		Modification as a % of Loan Class				($ 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:	Commercial:																	Commercial:
C&I	C&I	$	33,098	$	26,799	$	—	$	—	$	298	$	60,195	0.38	%			C&I	$	44,120	$	20,793	$	—	$	—	$	—	$	64,913	0.41	%
CRE:	CRE:																	CRE:
CRE	CRE	526		—		—		32,791		—		33,317		0.17	%			CRE	13,979		—		—		32,724		—		46,703		0.23	%

Total commercial	Total commercial	33,624		26,799		—		32,791		298		93,512						Total commercial	58,099		20,793		—		32,724		—		111,616
Consumer:	Consumer:																	Consumer:
Residential mortgage:	Residential mortgage:																	Residential mortgage:
Single-family residential:	Single-family residential:	—		5,085		551		—		—		5,636		0.05	%			Single-family residential:	—		7,276		1,809		—		—		9,085		0.07	%
HELOCs	HELOCs	—		978		726		—		—		1,704		0.09	%			HELOCs	—		741		1,053		—		183		1,977		0.11	%

Total consumer	Total consumer	—		6,063		1,277		—		—		7,340						Total consumer	—		8,017		2,862		—		183		11,062
Total	Total	$	33,624	$	32,862	$	1,277	$	32,791	$	298	$	100,852					Total	$	58,099	$	28,810	$	2,862	$	32,724	$	183	$	122,678

4445

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


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

($ in thousands)	($ in thousands)	Principal Forgiveness			Weighted-Average Interest Rate Reduction			Weighted-Average Term Extension (in years)	Weighted-Average Payment Delay (in years)	($ in thousands)	Principal Forgiveness		Weighted-Average Interest Rate Reduction		Weighted-Average Term Extension (in years)	Weighted-Average Payment Delay (in years)
Commercial:	Commercial:									Commercial:
C&I	C&I	$	345	(1)	8.50	%	(1)	1.71	0.63	C&I	$	26	—	%	3.00	1.54

CRE	CRE	—			3.00	%		2.50	—	CRE	—		—	%	1.08	—

Consumer:	Consumer:									Consumer:

Single-family residential	Single-family residential	—			—			9.70	0.89	Single-family residential	—		—	%	10.00	0.96
HELOCs	HELOCs	—			—			—	0.64	HELOCs	—		0.50	%	16.68	0.71

Total	Total	$	345							Total	$	26

Financial Effects of Loan Modifications
Six months ended June 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 $ 345 (1) 8.50 % (1) 1.47 0.82
CRE — 3.00 % 2.49 —
Consumer:
Single-family residential — — 9.70 0.89
HELOCs — — 14.75 0.51
Total $ 345



		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 a C&I ~~loan~~loans modified during the ~~three and six~~nine months ended ~~June~~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 ~~six~~nine months ended ~~June~~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 ~~June~~September 30, 2023 since the adoption of ASU 2022-02 on January 1, 2023.


		Payment Performance as of June 30, 2023			Payment Performance as of September 30, 2023
($ in thousands)	($ in thousands)		Current			30 - 89 Days Past Due		90+ Days Past Due		Total		($ in thousands)	Current		30 - 89 Days Past Due		90+ Days Past Due		Total
Commercial:	Commercial:											Commercial:
C&I	C&I		$	48,206		$	7,000	$	4,989	$	60,195	C&I	$	58,481	$	—	$	6,432	$	64,913
CRE:	CRE:											CRE:
CRE	CRE		33,317			—		—		33,317		CRE	46,703		—		—		46,703

Total commercial	Total commercial		81,523			7,000		4,989		93,512		Total commercial	105,184		—		6,432		111,616
Consumer:	Consumer:											Consumer:
Residential mortgage:	Residential mortgage:											Residential mortgage:
Single-family residential	Single-family residential		5,045			591		—		5,636		Single-family residential	7,430		1,190		465		9,085
HELOCs	HELOCs		1,704			—		—		1,704		HELOCs	1,236		741		—		1,977

Total consumer	Total consumer		6,749			591		—		7,340		Total consumer	8,666		1,931		465		11,062
Total	Total		$	88,272		$	7,591	$	4,989	$	100,852	Total	$	113,850	$	1,931	$	6,897	$	122,678

4546

As of ~~June~~September 30, 2023, commitments to lend additional funds to borrowers whose loans were modified were ~~$15.1~~$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 ~~six~~nine months ended ~~June~~September 30, 2022:


		Loans Modified as TDRs															Loans Modified as TDRs
		Three Months Ended June 30, 2022							Six Months Ended June 30, 2022								Three Months Ended September 30, 2022							Nine Months Ended September 30, 2022
($ in thousands)	($ 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)		($ 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)
Commercial:	Commercial:															Commercial:
C&I	C&I	2	$	12,955	$	12,245	$	2,111	3	$	30,134	$	21,428	$	10,157	C&I	1	$	499	$	496	$	98	4	$	30,633	$	17,802	$	16,729

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

HELOCs																HELOCs	1	62		69		2		1	62		69		2
Total residential mortgage																Total residential mortgage	1	62		69		2		1	62		69		2
Total consumer																Total consumer	1	62		69		2		1	62		69		2
Total	Total	2	$	12,955	$	12,245	$	2,111	3	$	30,134	$	21,428	$	10,157	Total	2	$	561	$	565	$	100	5	$	30,695	$	17,871	$	16,731

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

(2)Includes charge-offs since the modification date.

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


		Modification Type							Modification Type
		Three Months Ended June 30, 2022		Six Months Ended June 30, 2022					Three Months Ended September 30, 2022			Nine Months Ended September 30, 2022
($ in thousands)	($ in thousands)	Principal			Other (1)		Total			Principal (2)					Other (1)		Total		($ in thousands)	Principal					Other		Total		Principal (1)				Other (2)		Total
Commercial:	Commercial:																		Commercial:
C&I	C&I	$	—		$	12,245	$	12,245		$	9,183				$	12,245	$	21,428	C&I	$	496				$	—	$	496	$	9,609			$	8,193	$	17,802

Total commercial													Total commercial	496								—	496	9,609							8,193	17,802
Consumer:													Consumer:
Residential mortgage:													Residential mortgage:

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

Total consumer													Total consumer	69								—	69	69							—	69
Total	Total	$	—		$	12,245	$	12,245		$	9,183				$	12,245	$	21,428	Total	$	565				$	—	$	565	$	9,678			$	8,193	$	17,871

(1)~~Includes increase in new commitment.~~

~~(2)~~Includes principal deferments that modify the terms of the loan from principal and interest payments to interest payments only.

(2)Includes increase in new commitments.

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 ~~six~~nine months ended ~~June~~September 30, 2022 that were modified as TDRs during the 12 months preceding payment default:


		Loan Modified as TDRs that Subsequently Defaulted							Loan Modified as TDRs that Subsequently Defaulted
		Three Months Ended June 30, 2022			Six Months Ended June 30, 2022				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		($ in thousands)	Number of Loans	Recorded Investment		Number of Loans	Recorded Investment
Commercial:	Commercial:							Commercial:
C&I	C&I	1	$	1,055	2	$	4,305	C&I	—	$	—	2	$	13,901
CRE:								CRE:

Multifamily residential								Multifamily residential	—	—		1	1,008

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

Total	Total	1	$	1,055	2	$	4,305	Total	—	$	—	3	$	14,909

As of December 31, 2022, the remaining lending commitments to borrowers whose terms of their outstanding owed balances were modified as TDRs was $16.2 million.

Allowance for Credit Losses

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

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 or the~~ reasonable and supportable forecast period, except to the C&I segment, and no changes to the reversion to the historical loss experience method for the three and ~~six~~nine months ended ~~June~~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

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 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 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; 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 ~~June~~September 30, 2023, collateral-dependent commercial and consumer loans totaled ~~$22.0~~$18.1 million and ~~$11.2~~$15.2 million, respectively. In comparison, collateral-dependent commercial and consumer loans totaled $47.4 million and $13.4 million, respectively, as of December 31, 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 ~~June~~September 30, 2023 and December 31, 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 activity in the allowance for loan losses by portfolio segments for the three and ~~six~~nine months ended ~~June~~September 30, 2023 and 2022:

Three Months Ended June 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, beginning of period $ 376,325 $ 155,067 $ 24,526 $ 9,322 $ 48,007 $ 4,971 $ 1,675 $ 619,893
Provision for (reversal of) credit losses on loans (a) 5,259 15,685 (1,604) 1,995 3,501 (444) (367) 24,025
Gross charge-offs (7,335) (2,366) — — — (6) (48) (9,755)
Gross recoveries 2,065 119 16 8 5 5 — 2,218
Total net (charge-offs) recoveries (5,270) (2,247) 16 8 5 (1) (48) (7,537)
Foreign currency translation adjustment (981) — — — — — — (981)
Allowance for loan losses, end of period $ 375,333 $ 168,505 $ 22,938 $ 11,325 $ 51,513 $ 4,526 $ 1,260 $ 635,400


			Three Months Ended June 30, 2022																		Three Months Ended September 30, 2023
			Commercial								Consumer										Commercial								Consumer
					CRE						Residential Mortgage												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
Allowance for loan losses, beginning of period	Allowance for loan losses, beginning of period		$	339,446	$	147,104	$	24,176	$	11,016	$	18,210	$	3,748	$	1,985	$	545,685	Allowance for loan losses, beginning of period		$	375,333	$	168,505	$	22,938	$	11,325	$	51,513	$	4,526	$	1,260	$	635,400
Provision for (reversal of) credit losses on loans	Provision for (reversal of) credit losses on loans	(a)	19,030		(6,819)		1,976		(4,338)		3,461		(339)		(502)		12,469		Provision for (reversal of) credit losses on loans	(a)	13,006		12,952		772		8,302		3,353		(705)		456		38,136
Gross charge-offs	Gross charge-offs		(240)		(671)		(8)		—		—		(193)		(34)		(1,146)		Gross charge-offs		(7,074)		(3,466)		—		(10,413)		—		(41)		(13)		(21,007)
Gross recoveries	Gross recoveries		6,514		631		408		4		169		4		—		7,730		Gross recoveries		2,279		49		452		2		64		15		—		2,861
Total net recoveries (charge-offs)			6,274		(40)		400		4		169		(189)		(34)		6,584
Total net (charge-offs) recoveries																			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		(1,468)		—		—		—		—		—		—		(1,468)		Foreign currency translation adjustment		133		—		—		—		—		—		—		133
Allowance for loan losses, end of period	Allowance for loan losses, end of period		$	363,282	$	140,245	$	26,552	$	6,682	$	21,840	$	3,220	$	1,449	$	563,270	Allowance for loan losses, end of period		$	383,677	$	178,040	$	24,162	$	9,216	$	54,930	$	3,795	$	1,703	$	655,523

4950


			Six Months Ended June 30, 2023																		Three Months Ended September 30, 2022
			Commercial								Consumer										Commercial								Consumer
					CRE						Residential Mortgage												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
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	Allowance for loan losses, beginning of period		377,383		150,201		23,379		9,109		35,565		4,476		1,560		601,673		Allowance for loan losses, beginning of period		$	363,282	$	140,245	$	26,552	$	6,682	$	21,840	$	3,220	$	1,449	$	563,270
Provision for (reversal of) credit losses on loans		(a)	4,581		20,361		(469)		2,205		15,943		136		(212)		42,545
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		(9,235)		(2,372)		—		—		—		(97)		(88)		(11,792)		Gross charge-offs		(6,894)		(288)		(5,938)		—		(775)		—		(10)		(13,905)
Gross recoveries	Gross recoveries		3,276		315		28		11		5		11		—		3,646		Gross recoveries		7,172		45		19		7		16		5		—		7,264
Total net (charge-offs) recoveries			(5,959)		(2,057)		28		11		5		(86)		(88)		(8,146)
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		(672)		—		—		—		—		—		—		(672)		Foreign currency translation adjustment		(1,386)		—		—		—		—		—		—		(1,386)
Allowance for loan losses, end of period	Allowance for loan losses, end of period		$	375,333	$	168,505	$	22,938	$	11,325	$	51,513	$	4,526	$	1,260	$	635,400	Allowance for loan losses, end of period		$	371,749	$	145,301	$	25,680	$	7,506	$	27,263	$	3,324	$	1,694	$	582,517


			Six Months Ended June 30, 2022																		Nine Months Ended September 30, 2023
			Commercial								Consumer										Commercial								Consumer
					CRE						Residential Mortgage												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
Allowance for loan losses, December 31, 2022																			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																			Impact of ASU 2022-02 adoption		5,683		337		6		—		1		1		—		6,028
Allowance for loan losses, beginning of period	Allowance for loan losses, beginning of period		$	338,252	$	150,940	$	14,400	$	15,468	$	17,160	$	3,435	$	1,924	$	541,579	Allowance for loan losses, beginning of period		377,383		150,201		23,379		9,109		35,565		4,476		1,560		601,673
Provision for (reversal of) credit losses on loans	Provision for (reversal of) credit losses on loans	(a)	28,292		(10,312)		11,633		(8,844)		4,387		(40)		(395)		24,721		Provision for (reversal of) credit losses on loans	(a)	17,587		33,313		303		10,507		19,296		(569)		244		80,681
Gross charge-offs	Gross charge-offs		(11,428)		(1,069)		(9)		—		—		(193)		(80)		(12,779)		Gross charge-offs		(16,309)		(5,838)		—		(10,413)		—		(138)		(101)		(32,799)
Gross recoveries	Gross recoveries		9,516		686		528		58		293		18		—		11,099		Gross recoveries		5,555		364		480		13		69		26		—		6,507
Total net (charge-offs) recoveries	Total net (charge-offs) recoveries		(1,912)		(383)		519		58		293		(175)		(80)		(1,680)		Total net (charge-offs) recoveries		(10,754)		(5,474)		480		(10,400)		69		(112)		(101)		(26,292)
Foreign currency translation adjustment	Foreign currency translation adjustment		(1,350)		—		—		—		—		—		—		(1,350)		Foreign currency translation adjustment		(539)		—		—		—		—		—		—		(539)
Allowance for loan losses, end of period	Allowance for loan losses, end of period		$	363,282	$	140,245	$	26,552	$	6,682	$	21,840	$	3,220	$	1,449	$	563,270	Allowance for loan losses, end of period		$	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 11 — Commitments and Contingencies to the Consolidated Financial Statements in this Form 10-Q for additional information related to unfunded credit commitments. The following table summarizes the activities in the allowance for unfunded credit commitments for the three and ~~six~~nine months ended ~~June~~September 30, 2023 and 2022:


			Three Months Ended June 30,				Six Months Ended June 30,				Three Months Ended September 30,					Nine Months Ended September 30,
($ in thousands)	($ in thousands)		2023		2022		2023		2022			($ in thousands)		2023		2022		2023		2022
Unfunded credit facilities	Unfunded credit facilities											Unfunded credit facilities
Allowance for unfunded credit commitments, beginning of period	Allowance for unfunded credit commitments, beginning of period		$	27,741	$	23,262	$	26,264	$	27,514		Allowance for unfunded credit commitments, beginning of period		$	29,728	$	24,304	$	26,264	$	27,514

Provision for (reversal of) credit losses on unfunded credit commitments	Provision for (reversal of) credit losses on unfunded credit commitments	(b)	1,975		1,031		3,455		(3,221)			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		12		11		9		11			Foreign currency translation adjustment		(3)		11		6		22
Allowance for unfunded credit commitments, end of period	Allowance for unfunded credit commitments, end of period		$	29,728	$	24,304	$	29,728	$	24,304		Allowance for unfunded credit commitments, end of period		$	33,589	$	24,041	$	33,589	$	24,041

Provision for credit losses	Provision for credit losses	(a) + (b)	$	26,000	$	13,500	$	46,000	$	21,500		Provision for credit losses	(a) + (b)	$	42,000	$	27,000	$	88,000	$	48,500

The allowance for credit losses was ~~$665.1~~$689.1 million as of ~~June~~September 30, 2023, an increase of ~~$43.2~~$67.2 million, compared with $621.9 million as of December 31, 2022. The increase in the allowance for credit losses was primarily driven by ~~the current~~net loan growth and economic ~~outlook as well as loan growth. The current economic outlook reflected ongoing concerns with~~forecasts that reflect continued caution given persistent high inflation, ~~global supply chain disruptions and~~the high interest ~~rates.~~rate environment and the CRE market outlook.

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,~~outcome; downside and ~~downside or~~ upside scenarios that reflect possible worsening or improving economic conditions, respectively. ~~As of June 30, 2023, the~~The Company ~~did not assign a weighting to its upside scenario. Instead, it~~ assigned ~~a slightly higher weighting to its downside scenario, while maintaining~~ the same ~~weighting~~weightings to its baseline, ~~scenario, compared with the weightings assigned~~upside and downside scenarios as of September 30, 2023 and December 31, 2022. Management remains cautious regarding the economic outlook, given the ~~persistently~~ high level of inflation, high interest rates, ~~the~~ recent strain to the financial system, ~~and continued~~ concerns on global oil prices, and ~~supply-chain issues.~~ongoing global conflicts. The 2023 full year U.S. baseline GDP growth forecast ~~for the second half~~as of September 30, 2023, has ~~been lowered~~improved, compared with that as of December 31, 2022. However the ~~December 2022 forecast. The~~2024 full year U.S. baseline GDP growth forecast ~~for the full year 2024, was lowered to~~remained at 1.4% ~~from the previous~~, compared with 2.0% forecasted as of December 31, 2022, ~~reflecting an expected GDP slow-down~~ as interest-sensitive spending weakens amid the elevated interest rate environment. ~~Average~~The 2023 full year U.S. unemployment ~~rates in the U.S. are expected~~rate is forecasted to ~~remain stable~~be at ~~3.6% for the second half~~3.7%, which improved from that forecasted as of ~~2023. However, job market softening is expected in 2024 and 2025.~~December 31, 2022. Compared with the baseline scenario, the downside scenario assumes ~~that~~a recession in the fourth quarter of 2023 due to a combination of increasing supply shortages, ~~political~~geopolitical tensions, ~~between China and Taiwan, recent bank failures, still-elevated~~high inflation, and high interest rates. The upside scenario assumes the ~~Federal Reserve’s decision to keep the federal funds rate elevated will lead to a recession~~economy experiences full employment in the ~~third quarter of 2023.~~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 loan financing with other banks. In the normal course of 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, sold and purchased for the held-for-investment portfolio, during the three and ~~six~~nine months ended ~~June~~September 30, 2023 and 2022:

Three Months Ended June 30, 2023
Commercial Consumer
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)
$ 111,396 $ — $ 8,154 $ — $ 119,550
Sales (2)(3)
$ 115,735 $ — $ 8,154 $ — $ 123,889
Purchases (4)
$ 38,279 $ — $ — $ 79,137 $ 117,416


		Three Months Ended June 30, 2022							Three Months Ended September 30, 2023
		Commercial				Consumer							Commercial						Consumer
						Residential Mortgage										CRE			Residential Mortgage
($ in thousands)	($ in thousands)	C&I		CRE			Single-Family Residential			Total		($ in thousands)		C&I			CRE			Construction and Land		Single-Family Residential		Total
Loans transferred from held-for-investment to held-for-sale (1)	Loans transferred from held-for-investment to held-for-sale (1)	$	208,335	$	9,854		$	—		$	218,189	Loans transferred from held-for-investment to held-for-sale (1)		$	201,299		$	25,890		$	—	$	—	$	227,189
Loans transferred from held-for-sale to held-for-investment		$	—	$	—		$	631		$	631

Sales (2)(3)	Sales (2)(3)	$	180,029	$	9,854		$	—		$	189,883	Sales (2)(3)		$	199,511		$	29,357		$	—	$	—	$	228,868
Purchases (4)	Purchases (4)	$	194,066	$	—		$	122,723		$	316,789	Purchases (4)		$	19,588		$	—		$	—	$	140,771	$	160,359

5152


		Six Months Ended June 30, 2023									Three Months Ended September 30, 2022
		Commercial						Consumer							Commercial								Consumer
								Residential Mortgage										CRE					Residential Mortgage
($ in thousands)	($ in thousands)	C&I		CRE		Construction and Land			Single-Family Residential			Total		($ in thousands)		C&I			CRE		Multifamily Residential			Single-Family Residential		Total
Loans transferred from held-for-investment to held-for-sale (1)	Loans transferred from held-for-investment to held-for-sale (1)	$	268,272	$	3,600	$	8,154		$	—		$	280,026	Loans transferred from held-for-investment to held-for-sale (1)		$	59,069		$	33,616	$	14,500		$	5,178	$	112,363

Sales (2)(3)	Sales (2)(3)	$	291,667	$	3,600	$	8,154		$	—		$	303,421	Sales (2)(3)		$	87,597		$	33,616	$	—		$	5,952	$	127,165
Purchases (4)	Purchases (4)	$	60,962	$	—	$	—		$	211,136		$	272,098	Purchases (4)		$	56,507		$	—	$	—		$	1,155	$	57,662


		Six Months Ended June 30, 2022							Nine Months Ended September 30, 2023
		Commercial				Consumer				Commercial							Consumer
						Residential Mortgage							CRE				Residential Mortgage
($ in thousands)	($ in thousands)	C&I		CRE			Single-Family Residential				Total			($ in thousands)	C&I		CRE		Construction and Land		Single-Family Residential		Total
Loans transferred from held-for-investment to held-for-sale (1)	Loans transferred from held-for-investment to held-for-sale (1)	$	319,772	$	31,634		$	—			$	351,406		Loans transferred from held-for-investment to held-for-sale (1)	$	469,571	$	29,490	$	8,154	$	—	$	507,215
Loans transferred from held-for-sale to held-for-investment		$	—	$	—		$	631			$	631

Sales (2)(3)	Sales (2)(3)	$	287,503	$	31,634		$	451			$	319,588		Sales (2)(3)	$	491,178	$	32,957	$	8,154	$	—	$	532,289
Purchases (4)	Purchases (4)	$	304,662	$	—		$	237,098			$	541,760		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 ~~$308 thousand~~$3.6 million and ~~$581 thousand~~$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 ~~six~~nine months ended ~~June~~September 30, 2023, respectively, and ~~$158 thousand~~$8.7 million and ~~$217 thousand~~$8.9 million for the three and ~~six~~nine months ended ~~June~~September 30, 2022, respectively.

(2)Includes originated loans sold of ~~$92.2~~$204.1 million and ~~$203.2~~$407.3 million for the three and ~~six~~nine months ended ~~June~~September 30, 2023, respectively, and ~~$55.4~~$86.2 million and ~~$167.7~~$253.9 million for the three and ~~six~~nine months ended ~~June~~September 30, 2022, respectively. Originated loans sold consisted primarily of C&I loans for each of the three and ~~six~~nine months ended ~~June~~September 30, 2023, and C&I and CRE loans for each of the three and nine months ended September 30, 2022.

(3)Includes ~~$31.7~~$24.7 million and ~~$100.3~~$125.0 million of purchased loans sold in the secondary market for the three and ~~six~~nine months ended ~~June~~September 30, 2023, respectively, and ~~$134.5~~$40.9 million and ~~$151.9~~$192.9 million for the three and ~~six~~nine months ended ~~June~~September 30, 2022, respectively.

(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 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 — Securitiesand ~~and~~ Investments in Qualified Affordable Housing Partnerships, Tax Credit and Other Investments, Net to the Consolidated Financial Statements in the Company’s 2022 Form ~~10-K for additional details.~~10-K. For a discussion on the Company’s impairment evaluation and monitoring process of tax credit investments, refer to Note 3 — Fair Value Measurement and Fair Value of Financial Instruments — Investments in Qualified Affordable Housing Partnerships, Tax Credit and Other Investments, Net to the Consolidated Financial Statements in this Form 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 ~~June~~September 30, 2023 and December 31, 2022:


		June 30, 2023				December 31, 2022					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	$	422,331	$	255,066	$	413,253	$	266,654	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	393,140		278,915		350,003		185,797		Investments in tax credit and other investments, net	489,555		345,072		350,003		185,797
Total	Total	$	815,471	$	533,981	$	763,256	$	452,451	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 ~~$24.2~~$23.6 million and $24.0 million as of ~~June~~September 30, 2023 and December 31, 2022, respectively. The Company invests in these mutual funds for CRA purposes. ~~The Company also held equity securities without readily determinable fair values totaling $37.0 million and $36.5 million as of June 30, 2023 and December 31, 2022, respectively.~~

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


		Three Months Ended June 30,				Six Months Ended June 30,				Three Months Ended September 30,				Nine Months Ended September 30,
($ in thousands)	($ in thousands)	2023		2022		2023		2022			($ in thousands)	2023			2022		2023		2022
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	$	15,304	$	12,754	$	31,398	$	25,584		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	$	10,506	$	10,042	$	23,172	$	20,067		Amortization expense included in income tax expense	$	11,587		$	10,431	$	34,759	$	30,498

Investments in tax credit and other investments, net:	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)	$	55,914	$	14,979	$	66,024	$	28,879		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	$	(369)	$	(783)	$	(8)	$	(1,944)		Unrealized losses on equity securities with readily determinable values	$	(674)		$	(1,014)	$	(682)	$	(2,958)

(1)Includes net impairment ~~recoveries~~losses of ~~$1.4 million and $1.6 million~~$790 thousand for the three ~~and six~~ months ended ~~June~~September 30, 2023, ~~respectively,~~and net impairment recoveries of $831 thousand for the nine months ended September 30, 2023. The activity for both periods was primarily related to historic tax credits. In comparison, there were no impairment recoveries or losses for three or ~~six~~nine months ended ~~June~~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 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 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.

Other Investments

The Company acquired a 49.99% equity interest in Rayliant during the 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 accounting and is included in Other assets on the Consolidated Balance Sheet. The Company 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 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 in Rayliant was $110.9 million as of September 30, 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, 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 ~~June~~September 30, 2023 and December 31, 2022. The Company’s goodwill impairment test is performed annually, as of December 31, or more frequently as 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 test as of December 31, 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 to the Consolidated Financial Statements in the Company’s 2022 Form 10-K. ~~Given the recent volatility in the banking industry, the~~The Company performed an analysis of goodwill during the ~~second~~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 ~~June~~September 30, 2023.

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

Short-Term Borrowings — Bank Term Funding Program

As of ~~June~~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 following table presents details of the Company’s short-term borrowings as of June 30, 2023.~~

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 ~~June~~September 30, 2023, the carrying amount of the Company’s pledged securities to the BTFP totaled ~~$4.46~~$4.34 billion with a remaining borrowing capacity of ~~$299.4~~$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.

June 30, 2023

September 30, 2023

($ in thousands)

Interest Rate

Maturity Date

Amount

($ in thousands)

Interest Rate

Maturity Date

Amount

Short-term borrowings

4.37%

3/19/2024

4,500,000

Short-term borrowings

4.37%

3/19/2024

4,500,000

Long-Term Debt — Junior Subordinated Debt

Long-term debt totaled ~~$148.1~~$148.2 million as of ~~June~~September 30, 2023 and $148.0 million as of December 31, 2022. ~~The interest rates on~~During the third quarter of 2023, all junior subordinated debt ~~were based on~~that referenced London Interbank Offered Rate have transitioned to a Secured Overnight Financing Rate-based replacement rate plus the applicable stated ~~margin through June 30, 2023. The junior subordinated debt will be based on the Secured Overnight Financing Rate at the next scheduled repricing date, subsequent to June 30, 2023.~~margin. The junior subordinated debt had coupon interest rates ranging from ~~6.90%~~7.02% to ~~7.45%~~7.57% as of ~~June~~September 30, 2023 and 6.12% to 6.67% as of December 31, 2022. The junior subordinated debt had remaining maturities ranging between ~~11.4~~11.1 years and ~~14.2~~14.0 years as of ~~June~~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 Form 10-K.

Note 11 — Commitments and Contingencies

Commitments to Extend Credit — In the normal course of 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 ~~June~~September 30, 2023 and December 31, 2022:


		June 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		($ 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	$	4,583,179	$	3,734,399	$	993,345	$	125,704	$	9,436,627	$	8,211,571	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	717,105		513,359		90,696		1,094,248		2,415,408		2,291,966		Commercial letters of credit and SBLCs	875,757		405,377		122,255		1,124,405		2,527,794		2,291,966
Total	Total	$	5,300,284	$	4,247,758	$	1,084,041	$	1,219,952	$	11,852,035	$	10,503,537	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 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 ~~June~~September 30, 2023, total letters of credit of ~~$2.42~~$2.53 billion consisted of SBLCs of ~~$2.38~~$2.50 billion and commercial letters of credit of ~~$33.5~~$32.7 million. In comparison, as of December 31, 2022, total letters of credit of $2.29 billion consisted of SBLCs of $2.27 billion and commercial letters of credit of $21.6 million. As of both ~~June~~September 30, 2023 and December 31, 2022, substantially all SBLCs were graded as “Pass” utilizing the Bank’s internal credit risk rating system.

The Company applies the same credit underwriting criteria to extend loans, commitments, and conditional obligations to customers. Each customer’s creditworthiness is evaluated on a case-by-case basis. Collateral and financial guarantees may be obtained based on management’s assessment of a customer’s credit risk. Collateral may include cash, accounts receivable, inventory, 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 ~~$29.7~~$33.6 million and $26.2 million as of ~~June~~September 30, 2023 and December 31, 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 ~~June~~September 30, 2023 and December 31, 2022:


		Maximum Potential Future Payments										Carrying Value						Maximum Potential Future Payments										Carrying Value
		June 30, 2023								December 31, 2022		June 30, 2023		December 31, 2022				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
Single-family residential loans sold or securitized with recourse	Single-family residential loans sold or securitized with recourse	$	35	$	39	$	30	$	6,258	$	6,362	$	6,781	$	6,362	$	6,781		Single-family residential loans sold or securitized with recourse	$	28	$	23	$	28	$	6,013	$	6,092	$	6,781	$	6,092	$	6,781
Multifamily residential loans sold or securitized with recourse	Multifamily residential loans sold or securitized with recourse	—		—		—		14,996		14,996		14,996		20,726		21,320			Multifamily residential loans sold or securitized with recourse	—		—		66		14,930		14,996		14,996		19,887		21,320
Total	Total	$	35	$	39	$	30	$	21,254	$	21,358	$	21,777	$	27,088	$	28,101		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 $37 thousand as of ~~June~~September 30, 2023 and December 31, 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.

While it is impossible to ascertain the ultimate resolution or range of financial liability, based on information known to the Company as of ~~June~~September 30, 2023, the Company does not believe there is any pending legal proceeding to which the Company is a party that, individually or in the aggregate, would reasonably be expected to have a material adverse effect on the Company’s financial condition. In light of the inherent uncertainty in legal proceedings, however, there can be no assurance that the ultimate resolution will not exceed established reserves and it is possible that the outcome of a particular matter, or a combination of matters, may be material to the Company’s financial condition for a particular period, depending upon the size of the loss and the Company’s income for that particular period.

Note 12 — Stock Compensation Plans

Pursuant to the Company’s 2021 Stock Incentive Plan, as amended, the Company may issue 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 ~~June~~September 30, 2023 and December 31, 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 ~~six~~nine months ended ~~June~~September 30, 2023 and 2022:


		Three Months Ended June 30,				Six Months Ended June 30,					Three Months Ended September 30,				Nine Months Ended September 30,
($ in thousands)	($ in thousands)	2023		2022		2023		2022		($ in thousands)	2023		2022		2023		2022
Stock compensation costs	Stock compensation costs	$	9,364	$	8,576	$	20,439	$	17,009	Stock compensation costs	$	9,495	$	12,329	$	29,934	$	29,338
Related net tax benefits for stock compensation plans		$	525	$	109	$	8,815	$	5,268
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 in shares of the Company’s common stock. 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. For information on accounting on stock-based compensation plans, see Note 1 — Summary of Significant Accounting Policies — Significant Accounting Policies — Stock-Based Compensation to the Consolidated Financial Statements of the Company’s 2022 Form 10-K.

The following table presents a summary of the activities for the Company’s time-based and performance-based RSUs that will be settled in shares for the ~~six~~nine months ended ~~June~~September 30, 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							Time-Based RSUs	Performance-Based RSUs
			Shares	Weighted-Average Grant Date Fair Value		Shares	Weighted-Average Grant Date Fair Value					Shares	Weighted-Average Grant Date Fair Value		Shares	Weighted-Average Grant Date Fair Value
Outstanding, January 1, 2023	Outstanding, January 1, 2023		1,296,866	$	60.77	332,510	$	60.40	Outstanding, January 1, 2023			1,296,866	$	60.77	332,510	$	60.40

Granted	Granted		483,906	74.32		96,271	57.50		Granted			500,180	73.73		96,271	57.50
Vested	Vested		(518,628)	40.56		(152,558)	39.39		Vested			(522,029)	40.79		(152,558)	39.39
Forfeited	Forfeited		(33,925)	73.98		—	—		Forfeited			(53,379)	74.00		—	—
Outstanding, June 30, 2023			1,228,219	$	74.28	276,223	$	70.99
Outstanding, September 30, 2023									Outstanding, September 30, 2023			1,221,638	$	74.04	276,223	$	70.99

As of ~~June~~September 30, 2023, there were ~~$36.7~~$32.2 million of unrecognized compensation costs related to unvested time-based RSUs expected to be recognized over a weighted-average period of ~~2.1~~1.9 years, and ~~$21.0~~$17.9 million of unrecognized compensation costs related to unvested performance-based RSUs expected to be recognized over a weighted-average period of ~~2.1~~1.9 years.

5658

Note 13 — Stockholders’ Equity and Earnings Per Share

The following table presents the basic and diluted EPS calculations for the three and ~~six~~nine months ended ~~June~~September 30, 2023 and 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 2022 Form 10-K.


($ and shares in thousands, except per share data)	($ and shares in thousands, except per share data)	Three Months Ended June 30,				Six Months Ended June 30,				($ and shares in thousands, except per share data)	Three Months Ended September 30,				Nine Months Ended September 30,
		2023		2022		2023		2022				($ and shares in thousands, except per share data)		2023			2022			2023			2022
Basic:	Basic:
Net income	Net income	$	312,031	$	258,329	$	634,470	$	495,981				Net income		$	287,738		$	295,339		$	922,208		$	791,320
Weighted-average number of shares outstanding	Weighted-average number of shares outstanding	141,468		141,429		141,291		141,725					Weighted-average number of shares outstanding		141,485			140,917			141,356			141,453
Basic EPS	Basic EPS	$	2.21	$	1.83	$	4.49	$	3.50				Basic EPS		$	2.03		$	2.10		$	6.52		$	5.59
Diluted:	Diluted:												Diluted:
Net income	Net income	$	312,031	$	258,329	$	634,470	$	495,981				Net income		$	287,738		$	295,339		$	922,208		$	791,320

Weighted-average number of shares outstanding	Weighted-average number of shares outstanding	141,468		141,429		141,291		141,725					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	408		943		619		1,113					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	141,876		142,372		141,910		142,838					Diluted weighted-average number of shares outstanding		142,122			142,011			142,044			142,601
Diluted EPS	Diluted EPS	$	2.20	$	1.81	$	4.47	$	3.47				Diluted EPS		$	2.02		$	2.08		$	6.49		$	5.55

For the three and ~~six~~nine months ended ~~June~~September 30, 2023, approximately ~~690~~575 thousand and ~~439~~350 thousand weighted-average shares of anti-dilutive RSUs, respectively, were excluded from the diluted EPS computations. In comparison, ~~381~~approximately 61 thousand and 7058 thousand weighted-average shares of anti-dilutive RSUs were excluded from the diluted EPS computations for the three and ~~six~~nine months ended ~~June~~September 30, 2022, respectively.

Note 14 — Accumulated Other Comprehensive Income (Loss)

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


($ in thousands)	($ in thousands)	Debt Securities (1)		Cash Flow Hedges		Foreign Currency Translation Adjustments (2)		Total		($ in thousands)	Debt Securities (1)		Cash Flow Hedges		Foreign Currency Translation Adjustments (2)		Total
Balance, April 1, 2022		$	(365,653)	$	(24,466)	$	(4,806)	$	(394,925)
Balance, July 1, 2022										Balance, July 1, 2022	$	(554,781)	$	(30,846)	$	(15,021)	$	(600,648)
Net unrealized losses arising during the period	Net unrealized losses arising during the period	(192,858)		(5,582)		(10,215)		(208,655)		Net unrealized losses arising during the period	(161,445)		(34,423)		(7,926)		(203,794)
Amounts reclassified from AOCI	Amounts reclassified from AOCI	3,730		(798)		—		2,932		Amounts reclassified from AOCI	3,256		1,154		—		4,410
Changes, net of tax	Changes, net of tax	(189,128)		(6,380)		(10,215)		(205,723)		Changes, net of tax	(158,189)		(33,269)		(7,926)		(199,384)
Balance, June 30, 2022		$	(554,781)	$	(30,846)	$	(15,021)	$	(600,648)
Balance, September 30, 2022										Balance, September 30, 2022	$	(712,970)	$	(64,115)	$	(22,947)	$	(800,032)

Balance, April 1, 2023		$	(640,734)	$	(20,918)	$	(18,342)	$	(679,994)
Net unrealized losses arising during the period		(43,618)		(68,207)		(7,249)		(119,074)
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	2,816		14,320		—		17,136		Amounts reclassified from AOCI	2,870		17,013		—		19,883
Changes, net of tax	Changes, net of tax	(40,802)		(53,887)		(7,249)		(101,938)		Changes, net of tax	(69,821)		(27,334)		3,710		(93,445)
Balance, June 30, 2023		$	(681,536)	$	(74,805)	$	(25,591)	$	(781,932)
Balance, September 30, 2023										Balance, September 30, 2023	$	(751,357)	$	(102,139)	$	(21,881)	$	(875,377)

5759


($ in thousands)	($ in thousands)	Debt Securities (1)		Cash Flow Hedges		Foreign Currency Translation Adjustments (2)		Total		($ in thousands)	Debt Securities (1)		Cash Flow Hedges		Foreign Currency Translation Adjustments (2)		Total
Balance, January 1, 2022	Balance, January 1, 2022	$	(85,703)	$	257	$	(4,935)	$	(90,381)	Balance, January 1, 2022	$	(85,703)	$	257	$	(4,935)	$	(90,381)
Net unrealized losses arising during the period	Net unrealized losses arising during the period	(474,219)		(28,809)		(10,086)		(513,114)		Net unrealized losses arising during the period	(635,664)		(63,232)		(18,012)		(716,908)
Amounts reclassified from AOCI	Amounts reclassified from AOCI	5,141		(2,294)		—		2,847		Amounts reclassified from AOCI	8,397		(1,140)		—		7,257
Changes, net of tax	Changes, net of tax	(469,078)		(31,103)		(10,086)		(510,267)		Changes, net of tax	(627,267)		(64,372)		(18,012)		(709,651)
Balance, June 30, 2022		$	(554,781)	$	(30,846)	$	(15,021)	$	(600,648)
Balance, September 30, 2022										Balance, September 30, 2022	$	(712,970)	$	(64,115)	$	(22,947)	$	(800,032)

Balance, January 1, 2023	Balance, January 1, 2023	$	(694,815)	$	(49,531)	$	(21,283)	$	(765,629)	Balance, January 1, 2023	$	(694,815)	$	(49,531)	$	(21,283)	$	(765,629)
Net unrealized gains (losses) arising during the period		657		(47,121)		(4,308)		(50,772)
Net unrealized losses arising during the period										Net unrealized losses arising during the period	(72,034)		(91,468)		(598)		(164,100)
Amounts reclassified from AOCI	Amounts reclassified from AOCI	12,622		21,847		—		34,469		Amounts reclassified from AOCI	15,492		38,860		—		54,352
Changes, net of tax	Changes, net of tax	13,279		(25,274)		(4,308)		(16,303)		Changes, net of tax	(56,542)		(52,608)		(598)		(109,748)
Balance, June 30, 2023		$	(681,536)	$	(74,805)	$	(25,591)	$	(781,932)
Balance, September 30, 2023										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.

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


		Three Months Ended June 30,													Three Months Ended September 30,
		2023						2022							2023						2022
($ in thousands)	($ in thousands)	Before-Tax		Tax Effect		Net-of-Tax		Before-Tax		Tax Effect		Net-of-Tax		($ in thousands)	Before-Tax		Tax Effect		Net-of-Tax		Before-Tax		Tax Effect		Net-of-Tax
Debt securities:	Debt securities:													Debt securities:
Net unrealized losses on AFS debt securities arising during the period	Net unrealized losses on AFS debt securities arising during the period	$	(61,939)	$	18,321	$	(43,618)	$	(273,840)	$	80,982	$	(192,858)	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 on AFS debt securities reclassified into net income (1)		—		—		—		(28)		8		(20)

Amortization of unrealized losses on transferred debt securities ~~(2)~~(1)	Amortization of unrealized losses on transferred debt securities ~~(2)~~(1)	3,998		(1,182)		2,816		5,324		(1,574)		3,750		Amortization of unrealized losses on transferred debt securities ~~(2)~~(1)	4,075		(1,205)		2,870		4,623		(1,367)		3,256
Net change	Net change	(57,941)		17,139		(40,802)		(268,544)		79,416		(189,128)		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	(96,457)		28,250		(68,207)		(7,837)		2,255		(5,582)		Net unrealized losses arising during the period	(62,715)		18,368		(44,347)		(48,325)		13,902		(34,423)
Net realized losses (gains) reclassified into net income (3)		20,252		(5,932)		14,320		(1,120)		322		(798)
Net realized losses reclassified into net income (2)														Net realized losses reclassified into net income (2)	24,059		(7,046)		17,013		1,619		(465)		1,154
Net change	Net change	(76,205)		22,318		(53,887)		(8,957)		2,577		(6,380)		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		(6,107)		(1,142)		(7,249)		(9,278)		(937)		(10,215)
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	(6,107)		(1,142)		(7,249)		(9,278)		(937)		(10,215)		Net change	3,728		(18)		3,710		(6,676)		(1,250)		(7,926)
Other comprehensive loss	Other comprehensive loss	$	(140,253)	$	38,315	$	(101,938)	$	(286,779)	$	81,056	$	(205,723)	Other comprehensive loss	$	(134,036)	$	40,591	$	(93,445)	$	(278,005)	$	78,621	$	(199,384)

5860


		Six Months Ended June 30,														Nine Months Ended September 30,
		2023							2022							2023							2022
($ in thousands)	($ in thousands)	Before-Tax			Tax Effect		Net-of-Tax		Before-Tax		Tax Effect		Net-of-Tax		($ in thousands)	Before-Tax			Tax Effect		Net-of-Tax		Before-Tax		Tax Effect		Net-of-Tax
Debt securities:	Debt securities:														Debt securities:
Net unrealized gains (losses) on AFS debt securities arising during the period		$	921		$	(264)	$	657	$	(512,886)	$	151,658	$	(361,228)
Net unrealized losses on AFS debt securities arising during the period															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	Unrealized losses on debt securities transferred from AFS to HTM	—			—		—		(160,416)		47,425		(112,991)		Unrealized losses on debt securities transferred from AFS to HTM	—			—		—		(160,416)		47,425		(112,991)
Reclassification adjustments:	Reclassification adjustments:														Reclassification adjustments:
Net realized losses (gains) on AFS debt securities reclassified into net income ~~(1)~~(3)	Net realized losses (gains) on AFS debt securities reclassified into net income ~~(1)~~(3)	10,000		(4)	(2,956)		7,044		(1,306)		386		(920)		Net realized losses (gains) on AFS debt securities reclassified into net income ~~(1)~~(3)	10,000		(4)	(2,956)		7,044		(1,306)		386		(920)
Amortization of unrealized losses on transferred debt securities ~~(2)~~(1)	Amortization of unrealized losses on transferred debt securities ~~(2)~~(1)	7,919			(2,341)		5,578		8,605		(2,544)		6,061		Amortization of unrealized losses on transferred debt securities ~~(2)~~(1)	11,994			(3,546)		8,448		13,228		(3,911)		9,317
Net change	Net change	18,840			(5,561)		13,279		(666,003)		196,925		(469,078)		Net change	(80,268)			23,726		(56,542)		(890,626)		263,359		(627,267)
Cash flow hedges:	Cash flow hedges:														Cash flow hedges:
Net unrealized losses arising during the period	Net unrealized losses arising during the period	(66,614)			19,493		(47,121)		(40,446)		11,637		(28,809)		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 ~~(3)~~(2)	Net realized losses (gains) reclassified into net income ~~(3)~~(2)	30,896			(9,049)		21,847		(3,220)		926		(2,294)		Net realized losses (gains) reclassified into net income ~~(3)~~(2)	54,955			(16,095)		38,860		(1,601)		461		(1,140)
Net change	Net change	(35,718)			10,444		(25,274)		(43,666)		12,563		(31,103)		Net change	(74,374)			21,766		(52,608)		(90,372)		26,000		(64,372)
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		(3,481)			(827)		(4,308)		(9,600)		(486)		(10,086)
Net unrealized gains (losses) arising during the period															Net unrealized gains (losses) arising during the period	247			(845)		(598)		(16,276)		(1,736)		(18,012)
Net change	Net change	(3,481)			(827)		(4,308)		(9,600)		(486)		(10,086)		Net change	247			(845)		(598)		(16,276)		(1,736)		(18,012)
Other comprehensive loss	Other comprehensive loss	$	(20,359)		$	4,056	$	(16,303)	$	(719,269)	$	209,002	$	(510,267)	Other comprehensive loss	$	(154,395)		$	44,647	$	(109,748)	$	(997,274)	$	287,623	$	(709,651)

(1)~~Pre-tax amounts were reported in~~ ~~Net gains (losses) on 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 in 2022.

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

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

Note 15 — 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.

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

The remaining centralized functions, including the corporate treasury activities of the Company and eliminations of inter-segment amounts, have been aggregated and included in the Other segment, which provides broad administrative support to the two core segments, namely the Consumer and Business Banking and the Commercial Banking segments.

5961

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 and the internal FTP 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 ~~six~~nine months ended ~~June~~September 30, 2023 and 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 June 30, 2023
Three Months Ended September 30, 2023										Three Months Ended September 30, 2023

Net interest income (loss) before provision for credit losses		$	307,522	$	263,040	$	(3,816)	$	566,746
Net interest income before provision for credit losses										Net interest income before provision for credit losses	$	315,409	$	242,345	$	13,059	$	570,813
Provision for credit losses	Provision for credit losses	5,524		20,476		—		26,000		Provision for credit losses	1,633		40,367		—		42,000
Noninterest income	Noninterest income	27,120		42,538		8,973		78,631		Noninterest income	25,132		43,672		7,948		76,752
Noninterest expense	Noninterest expense	107,027		88,333		66,429		261,789		Noninterest expense	106,626		87,556		57,832		252,014
Segment income (loss) before income taxes	Segment income (loss) before income taxes	222,091		196,769		(61,272)		357,588		Segment income (loss) before income taxes	232,282		158,094		(36,825)		353,551

Segment net income	Segment net income	$	156,853	$	139,030	$	16,148	$	312,031	Segment net income	$	164,051	$	110,182	$	13,505	$	287,738
As of June 30, 2023
As of September 30, 2023										As of September 30, 2023

Segment assets	Segment assets	$	18,411,209	$	33,754,957	$	16,366,515	$	68,532,681	Segment assets	$	18,935,452	$	34,438,787	$	14,915,219	$	68,289,458


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

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

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

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

6062


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

Net interest income before provision for credit losses	Net interest income before provision for credit losses	$	611,764	$	499,763	$	55,080	$	1,166,607	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	20,536		25,464		—		46,000		Provision for credit losses	22,169		65,831		—		88,000
Noninterest income (loss)		53,122		86,137		(650)		138,609
Noninterest income										Noninterest income	78,254		129,809		7,298		215,361
Noninterest expense	Noninterest expense	220,850		175,581		83,805		480,236		Noninterest expense	327,476		263,137		141,637		732,250
Segment income (loss) before income taxes	Segment income (loss) before income taxes	423,500		384,855		(29,375)		778,980		Segment income (loss) before income taxes	655,782		542,949		(66,200)		1,132,531

Segment net income	Segment net income	$	299,100	$	273,487	$	61,883	$	634,470	Segment net income	$	463,151	$	383,669	$	75,388	$	922,208
As of June 30, 2023
As of September 30, 2023										As of September 30, 2023

Segment assets	Segment assets	$	18,411,209	$	33,754,957	$	16,366,515	$	68,532,681	Segment assets	$	18,935,452	$	34,438,787	$	14,915,219	$	68,289,458


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

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

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

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

6163

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

6264

Overview

The following discussion provides information about the results of operations, financial condition, liquidity and capital resources of East West Bancorp, Inc. (referred to herein on an unconsolidated basis as “East West” and on a consolidated basis as the “Company,” “we” or “EWBC”) and its subsidiaries, including its subsidiary bank, East West Bank and its subsidiaries (referred to herein as “East West Bank” or the “Bank”). This information is intended to facilitate the understanding and assessment of significant changes and trends related to the Company’s results of operations and financial condition. This discussion and analysis should be read in conjunction with the Consolidated Financial Statements and the accompanying notes presented elsewhere in this report, and the Company’s Annual Report on Form 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 U.S. and Asia. Through over 120 locations in the U.S. and 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 customer loyalty and engagement, understanding our customers’ financial goals, and meeting our customers’ financial needs through our diverse products and services. We expect our relationship-focused business model to continue generating organic growth from existing customers and to expand our targeted customer bases. As of ~~June~~September 30, 2023, the Company had ~~$68.53~~$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 2022 Form 10-K.

Current Developments

Economic Developments

Recent external data indicate that the pace of inflation has ~~moderated in recent months~~slowed steadily and the volatility in the banking industry earlier in the year ~~appears to have~~has abated. However, inflation remains above the Board of Governors of the Federal Reserve System’s (“Federal Reserve”) 2% target, ~~and further~~which could signal a potential interest rate ~~hikes are anticipated~~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 tighter credit conditions and decreased demand. These factors have adversely affected economic activity and the banking sector. Despite these concerns, fears of a potential recession in 2023 ~~have diminished slightly due~~are falling, bolstered by the Federal Reserve’s commitment to steering the ~~continuing strength~~economy towards a “soft landing”, a scenario in which inflation retreats without a sharp uptick in unemployment. However, factors such as the ~~job market.~~economic impacts of unrest, wars, and acts of terrorism could lead to higher oil prices and increased inflationary pressures, along with the possibility that the Federal Reserve will maintain high interest rates longer than anticipated. It is also uncertain whether there will be a U.S. government shutdown in November 2023 or subsequently, which could negatively impact the economy and inflation domestically. The Company is actively monitoring changes in economic and industry conditions and their impacts on 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 2022 Form 10-K.

~~LIBOR Transition~~Recent Bank Failures and ~~Phase Out~~

The London Interbank Offered Rate (“LIBOR”), a benchmark rate that was widely referenced in the past, ceased publication on July 1, 2023. In preparation for this phase out, beginning January 1, 2022, the Company ceased offering new loans or loan renewals based on LIBOR, and began offering loans based on alternative reference rates (“ARRs”) such as Term Secured Overnight Financing Rate (“SOFR”) and the Bloomberg Short-Term Bank Yield Index. The Company’s LIBOR exposures were predominantly comprised of commercial loans and derivative contracts, which have been remediated (i.e., amended to reference an ARR either on or before June 30, 2023 or at the instrument’s next reset date after June 30, 2023), or already contained appropriate fallback provisions to transition to an ARR. As of July 3, 2023, the remaining small portion of the Company’s LIBOR-based assets and liabilities have all been amended to use the Adjustable Interest Rate (LIBOR) Act and other relevant legislation and regulation.

~~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 2022 Form 10-K. For additional background information on the LIBOR transition, see~~ ~~Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) — Overview~~ ~~in the Company’s 2022 Form 10-K.~~

Potential Regulatory Reforms ~~in Response to Recent Bank Failures~~

Following the bank failures ofin March 2023, Congress and federal regulatory agencies are considering potential changes to the laws and regulations that apply to banks. On April 28, 2023, the Federal Reserve and the Federal Deposit Insurance Corporation ~~(the “FDIC”~~(“FDIC”) issued reports on the failures of Silicon Valley Bank and Signature Bank, respectively, identifying potential causes that the federal banking agencies may seek to address through changes to their supervisory and regulatory policies.

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 ~~a notice of proposed rulemaking that~~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. ByIn 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 is evaluating the impact of this proposal.

On August 29, 2023, the Agencies jointly released a proposed rule that would require bank holding companies and non-consolidated banks with total assets of $100 billion or more to issue and 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, ~~the proposal~~these rule proposals could reduce the benefits of growth beyond that size for a banking organization that has less than $100 billion in total consolidated assets. The extent of any further actions to be taken by these agencies or Congress in response to the bank failures, and potential causes highlighted in the Federal Reserve and FDIC reports, and the impact of any such actions on institutions with less than $100 billion in total consolidated assets, such as the ~~Company, remains unclear.~~Company.

FDIC Special Assessment and Uninsured Deposits

On May 11, 2023, the FDIC ~~published~~released a proposed rule that would impose a special deposit insurance assessment on banks in order to recover losses that the FDIC's Deposit Insurance Fund (“DIF”) has incurred in the receiverships of failed ~~institutions.~~institutions in 2023. The proposed rule would impose the special assessment for 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 ~~(0.0313%~~(“bps”), 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 ~~clarifies~~clarified the reporting of an insured depository institution’s estimated uninsured deposits in the Call Report Schedule RC-O, Memorandum item 2 (“RC-OM item 2”). This FIL ~~specifies~~specified that uninsured deposits reported in RC-OM item 2 should include the deposit balances in excess of the 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 FIL during the third quarter of 2023.

Community Reinvestment Act Reform

On October 24, 2023, the Agencies issued a final rule revising their framework for evaluating banks’ records of community reinvestment under the Community Reinvestment 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 ~~evaluate previously filed call reports based~~be subject to periodic evaluation. Depending on ~~this recent FIL~~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 ~~revise as needed.~~the remaining provisions will apply beginning January 1, 2027. The Company is evaluating the impact of the 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 June 30,			Six Months Ended June 30,									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)	2023			2022			2023			2022				($ and shares in thousands, except per share, and ratio data)	2023			2022			2023			2022
Summary of operations:	Summary of operations:														Summary of operations:
Net interest income before provision for credit losses	Net interest income before provision for credit losses	$	566,746		$	472,952		$	1,166,607		$	888,565			Net interest income before provision for credit losses	$	570,813		$	551,809		$	1,737,420		$	1,440,374
Noninterest income	Noninterest income	78,631			78,444			138,609			158,187				Noninterest income	76,752			75,552			215,361			233,739
Total revenue	Total revenue	645,377			551,396			1,305,216			1,046,752				Total revenue	647,565			627,361			1,952,781			1,674,113
Provision for credit losses	Provision for credit losses	26,000			13,500			46,000			21,500				Provision for credit losses	42,000			27,000			88,000			48,500

Noninterest expense	Noninterest expense	261,789			196,860			480,236			386,310				Noninterest expense	252,014			215,973			732,250			602,283
Income before income taxes	Income before income taxes	357,588			341,036			778,980			638,942				Income before income taxes	353,551			384,388			1,132,531			1,023,330
Income tax expense	Income tax expense	45,557			82,707			144,510			142,961				Income tax expense	65,813			89,049			210,323			232,010

Net income	Net income	$	312,031		$	258,329		$	634,470		$	495,981			Net income	$	287,738		$	295,339		$	922,208		$	791,320

Per share:	Per share:														Per share:
Basic earnings	Basic earnings	$	2.21		$	1.83		$	4.49		$	3.50			Basic earnings	$	2.03		$	2.10		$	6.52		$	5.59
Diluted earnings	Diluted earnings	$	2.20		$	1.81		$	4.47		$	3.47			Diluted earnings	$	2.02		$	2.08		$	6.49		$	5.55
Dividends declared	Dividends declared	$	0.48		$	0.40		$	0.96		$	0.80			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	141,468			141,429			141,291			141,725				Basic	141,485			140,917			141,356			141,453
Diluted	Diluted	141,876			142,372			141,910			142,838				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”)	1.85		%	1.66		%	1.93		%	1.61		%		Return on average assets (“ROA”)	1.66		%	1.86		%	1.83		%	1.70		%
Return on average common equity (“ROE”)	Return on average common equity (“ROE”)	19.43		%	18.23		%	20.27		%	17.36		%		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)	21.01		%	19.94		%	21.95		%	18.96		%		Return on average tangible common equity (“TCE”) (1)	18.65		%	22.16		%	20.80		%	20.04		%

Common dividend payout ratio	Common dividend payout ratio	21.98		%	22.22		%	21.60		%	23.18		%		Common dividend payout ratio	23.88		%	19.33		%	22.31		%	21.75		%
Net interest margin	Net interest margin	3.55		%	3.23		%	3.75		%	3.05		%		Net interest margin	3.48		%	3.68		%	3.66		%	3.27		%
Efficiency ratio (2)	Efficiency ratio (2)	40.56		%	35.70		%	36.79		%	36.91		%		Efficiency ratio (2)	38.92		%	34.43		%	37.50		%	35.98		%
Adjusted efficiency ratio (1)	Adjusted efficiency ratio (1)	31.83		%	32.90		%	31.13		%	34.05		%		Adjusted efficiency ratio (1)	31.18		%	31.18		%	31.15		%	32.98		%


At period end:	At period end:	June 30, 2023		December 31, 2022		At period end:	September 30, 2023		December 31, 2022
Total assets	Total assets	$	68,532,681	$	64,112,150	Total assets	$	68,289,458	$	64,112,150
Total loans	Total loans	$	49,831,194	$	48,228,074	Total loans	$	50,911,946	$	48,228,074
Total deposits	Total deposits	$	55,658,786	$	55,967,849	Total deposits	$	55,087,031	$	55,967,849
Common shares outstanding at period-end	Common shares outstanding at period-end	141,484		140,948		Common shares outstanding at period-end	141,486		140,948
Book value per share	Book value per share	$	45.67	$	42.46	Book value per share	$	46.62	$	42.46
Tangible book value per share (1)	Tangible book value per share (1)	$	42.33	$	39.10	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 Operations (“MD&A&A”) — Reconciliation of GAAP to Non-GAAP Financial Measures in this Quarterly Report on Form 10-Q (this “Form 10-Q”).

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

The Company’s ~~second~~third quarter 2023 net income was ~~$312.0~~$287.7 million, ~~an increase~~a decrease of ~~$53.7~~$7.6 million or ~~21%~~3%, compared with ~~second~~third quarter 2022 net income of ~~$258.3~~$295.3 million. The ~~increase~~decrease was primarily due to ~~higher net interest income and lower income tax expense, partially offset by~~ higher noninterest expense and provision for credit ~~losses.~~losses, partially offset by lower income tax expense and higher net interest income during the quarter. Net income for the first ~~half~~nine months of 2023 was ~~$634.5~~$922.2 million, an increase of ~~$138.5~~$130.9 million or ~~28%~~17% compared with first ~~half~~nine months of 2022 net income of ~~$496.0~~$791.3 million. The increase was primarily due to higher net interest income, partially offset by higher noninterest expense and provision for credit ~~losses, and a decrease in noninterest income.~~losses. Noteworthy items about the Company’s ~~second~~performance for the third quarter and first ~~half~~nine months of 2023 ~~performance~~ included:

•Net interest income growth and net interest margin ~~expansion~~. ~~Second~~Third quarter 2023 net interest income before provision for credit losses was ~~$566.7~~$570.8 million, an increase of ~~$93.8~~$19.0 million or ~~20%~~ 3% from the ~~second~~third quarter of 2022. ~~Second~~Third quarter 2023 net interest margin of ~~3.55% expanded by 32 basis points (“bps”)~~3.48% was down 20 bps year-over-year. For the first ~~half~~nine months of 2023, net interest income before provision for credit losses was ~~$1.17~~$1.74 billion, an increase of ~~$278.0~~$297.0 million or ~~31%~~21% year-over-year. The net interest margin for the first ~~half~~nine months of 2023 was ~~3.75%~~3.66%, up 7039 bps year-over-year.

•~~Expanding profitability.~~Profitability ratios. ~~Second~~Third quarter 2023 ROA, ROE and the return on average TCE of ~~1.85%~~1.66%, ~~19.43%~~17.28% and ~~21.01%~~18.65%, respectively, ~~all expanded~~were down year-over-year by 1920 bps, ~~120~~302 bps and ~~107~~351 bps, respectively. ~~Likewise, for~~For the first ~~half~~nine months of 2023, ROA, ROE and the return on average TCE of ~~1.93%~~1.83%, ~~20.27%~~19.23% and ~~21.95%~~20.80%, respectively, all expanded year-over-year by 3213 bps, ~~291~~88 bps and ~~299~~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.

•Asset growth. Total assets reached ~~$68.53~~$68.29 billion, an increase of ~~$4.42~~$4.18 billion or 7% from December 31, 2022, primarily driven by a ~~$2.90~~$2.68 billion or ~~83%~~6% increase in total loans, and a $1.08 billion or 31% increase in cash and cash ~~equivalents and a $1.60 billion or 3% increase in total loans.~~equivalents. The increase in cash and cash equivalents was primarily funded with borrowings from the Bank Term Funding Program (“BTFP”).

•Loan growth. Total loans were ~~$49.83~~$50.91 billion as of ~~June~~September 30, 2023, an increase of ~~$1.60~~$2.68 billion or 3%6% from $48.23 billion as of December 31, 2022. This was primarily driven by growth in ~~the commercial real estate (“CRE”)~~CRE and residential mortgage loan segments.

•Strong capital levels. Stockholders’ equity was ~~$6.46~~$6.60 billion or ~~$45.67~~$46.62 per share as of ~~June~~September 30, 2023, both up 8%10% from $5.98 billion or $42.46 per share as of December 31, 2022. Tangible book value per share of ~~$42.33~~$43.29 as of ~~June~~September 30, 2023, increased ~~$3.23~~$4.19 or 8%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 Financial Measures in this Form 10-Q.

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.

The increases in net interest income ~~and net interest margin~~ in the ~~second~~third quarter and the first ~~half~~nine months of 2023, and the increase in net interest margin for the first nine months of 2023, compared with the same prior year periods primarily reflected higher ~~interest-earning asset~~loan yields and ~~strong~~increased loan ~~growth,~~volume, partially offset by a higher ~~average~~ cost of interest-bearing deposits. The decrease in net interest margin for the third quarter of 2023, compared with the same prior year period was primarily driven by a higher rate of increase in the cost of interest-bearing deposits, which has more than offset expanding interest-earning asset yields. The changes in yield and rate reflected rising benchmark interest rates.

Average interest-earning assets were ~~$64.06~~$65.05 billion for the ~~second~~third quarter of 2023, an increase of ~~$5.39~~$5.57 billion or 9% from ~~$58.67~~$59.48 billion for the ~~second~~third quarter of 2022. For the first ~~half~~nine months of 2023, the average interest-earning assets were ~~$62.78~~$63.55 billion, an increase of ~~$4.10~~$4.60 billion or 7%8% from ~~$58.68~~$58.95 billion for the first ~~half~~nine months of 2022. The increases in average interest-earning assets in both periods primarily reflected loan growth, and higher interest-bearing cash and deposits with banks, partially offset by decreases in assets purchased under resale agreements and available-for-sale (“~~resale agreements”~~AFS”). debt securities.

The yield on average interest-earning assets for the ~~second~~third quarter of 2023 was ~~5.67%~~5.87%, an increase of ~~225~~168 bps from ~~3.42%~~4.19% for the ~~second~~third quarter of 2022. The yield on average interest-earning assets for the first ~~half~~nine months of 2023 was ~~5.59%~~5.69%, an increase of ~~239~~215 bps from ~~3.20%~~3.54% for the first ~~half~~nine months of 2022. The year-over-year increases in the yield on average interest-earning assets primarily resulted from rising benchmark interest rates.

The average loan yield for the ~~second~~third quarter of 2023 was ~~6.33%~~6.51%, an increase of ~~238~~176 bps from ~~3.95%~~4.75% for the ~~second~~third quarter of 2022. The average loan yield for the first ~~half~~nine months of 2022 was ~~6.24%~~6.33%, an increase of ~~244~~220 bps from ~~3.80%~~4.13% for the first ~~half~~nine months of 2022. The changes in the average loan yield reflected the loan portfolio’s sensitivity to rising benchmark interest rates. Approximately ~~61%~~59% and ~~63%~~62% of loans held-for-investment were variable-rate as of ~~June~~September 30, 2023 and 2022, respectively.

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Deposits are an important source of funds and impact both net interest income and net interest margin. Average deposits were ~~$54.28~~$55.20 billion for the ~~second~~third quarter of 2023, which increased ~~$155.0 million~~$1.15 billion or 2% from ~~$54.13~~$54.05 billion for the ~~second~~third quarter of 2022. For the first ~~half~~nine months of 2023, average deposits were ~~$54.62~~$54.81 billion, an increase of ~~$539.7~~$744.2 million or 1% from ~~$54.08~~$54.07 billion for the first ~~half~~nine months of 2022. Average noninterest-bearing deposits were ~~$16.93~~$16.30 billion for the ~~second~~third quarter of 2023, a decrease of ~~$6.96~~$6.12 billion or ~~29%~~27% from ~~$23.89~~$22.42 billion for the ~~second~~third quarter of 2022. For the first ~~half~~nine months of 2023, average noninterest-bearing deposits were ~~$18.31~~$17.63 billion, a decrease of ~~$5.35~~$5.61 billion or ~~23%~~24% from ~~$23.66~~$23.24 billion for the first ~~half~~nine months of 2022. Average noninterest-bearing deposits made up ~~31%~~30% and ~~44%~~41% of average deposits for the ~~second~~third quarters of 2023 and 2022, respectively, and ~~34%~~32% and ~~44%~~43% for the first ~~halves~~nine months of 2023 and 2022, respectively.

The average cost of deposits was ~~2.12%~~2.43% for the ~~second~~third quarter of 2023, a ~~195~~192 bps increase from ~~0.17%~~0.51% for the ~~second~~third quarter of 2022. The average cost of interest-bearing deposits was ~~3.09%~~3.45% for the ~~second~~third quarter of 2023, a ~~279~~259 bps increase from ~~0.30%~~0.86% for the ~~second~~third quarter of 2022. The average cost of deposits was ~~1.86%~~2.06% for the first ~~half~~nine months of 2023, a ~~173~~180 bps increase from ~~0.13%~~0.26% for the first ~~half~~nine months of 2022. The average cost of interest-bearing deposits was ~~2.80%~~3.03% for the first ~~half~~nine months of 2023, a ~~256~~258 bps increase from ~~0.24%~~0.45% for the first ~~half~~nine months of 2022. The year-over-year increases primarily reflected higher rates paid on time deposits, money market and 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. For the ~~second~~third quarter of 2023, the average cost of funds was ~~2.31%~~2.59%, a ~~211~~204 bps increase from ~~0.20%~~0.55% for the ~~second~~third quarter of 2022. For the first ~~half~~nine months of 2023, the average cost of funds was ~~2.01%~~2.21%, a ~~185~~192 bps increase from ~~0.16%~~0.29% for the first ~~half~~nine months of 2022. The increases in both periods were mainly driven by 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.

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The following table presents the interest spread, net interest margin, average balances, interest income and expense, and the average yield/rate by asset and liability component for the ~~second~~third quarters of 2023 and 2022:


		Three Months Ended June 30,													Three Months Ended September 30,
		2023						2022							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	ASSETS													ASSETS
Interest-earning assets:	Interest-earning assets:													Interest-earning assets:
Interest-bearing cash and deposits with banks	Interest-bearing cash and deposits with banks	$	5,247,755	$	60,995	4.66	%	$	2,797,711	$	4,787	0.69	%	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	641,939		3,969		2.48	%	1,641,723		8,553		2.09	%	Resale agreements	648,587		4,460		2.73	%	1,037,292		6,769		2.59	%
Available-for-sale (“AFS”) debt securities (2)(3)		6,257,397		56,292		3.61	%	6,503,677		33,438		2.06	%
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 (2)	Held-to-maturity (“HTM”) debt securities (2)	2,983,780		12,678		1.70	%	3,021,239		12,738		1.69	%	Held-to-maturity (“HTM”) debt securities (2)	2,967,703		12,601		1.68	%	3,017,063		12,709		1.67	%
Loans (4)(5)	Loans (4)(5)	48,851,720		771,264		6.33	%	44,626,488		439,416		3.95	%	Loans (4)(5)	49,888,862		818,719		6.51	%	46,854,541		560,452		4.75	%

Restricted equity securities	Restricted equity securities	78,978		936		4.75	%	77,839		822		4.24	%	Restricted equity securities	79,395		1,079		5.39	%	78,054		843		4.28	%
Total interest-earning assets	Total interest-earning assets	$	64,061,569	$	906,134	5.67	%	$	58,668,677	$	499,754	3.42	%	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	569,227						712,884						Cash and due from banks	544,939						615,836
Allowance for loan losses	Allowance for loan losses	(619,868)						(545,489)						Allowance for loan losses	(629,229)						(566,369)
Other assets	Other assets	3,486,439						3,396,769						Other assets	3,969,615						3,551,288
Total assets	Total assets	$	67,497,367					$	62,232,841					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	$	8,434,655	$	49,571	2.36	%	$	6,712,890	$	3,178	0.19	%	Checking deposits	$	8,080,025	$	54,285	2.67	%	$	6,879,632	$	8,493	0.49	%
Money market deposits	Money market deposits	10,433,839		86,419		3.32	%	12,319,930		8,892		0.29	%	Money market deposits	12,180,806		113,217		3.69	%	12,351,571		33,101		1.06	%
Savings deposits	Savings deposits	2,200,124		3,963		0.72	%	2,970,007		1,864		0.25	%	Savings deposits	2,013,246		4,047		0.80	%	2,961,634		2,268		0.30	%
Time deposits	Time deposits	16,289,320		147,524		3.63	%	8,239,571		8,554		0.42	%	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	4,500,566		49,032		4.37	%	64,145		241		1.51	%	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	1		—		—	%	138,960		559		1.61	%	FHLB advances	1		—		—	%	86,243		392		1.80	%
Repurchase agreements	Repurchase agreements	15,579		211		5.43	%	359,778		2,418		2.70	%	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	152,760		2,668		7.01	%	152,194		1,096		2.89	%	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	$	42,026,844	$	339,388	3.24	%	$	30,957,475	$	26,802	0.35	%	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	16,926,937						23,887,452						Demand deposits	16,302,296						22,423,633
Accrued expenses and other liabilities	Accrued expenses and other liabilities	2,102,590						1,705,487						Accrued expenses and other liabilities	2,465,745						2,179,850
Stockholders’ equity	Stockholders’ equity	6,440,996						5,682,427						Stockholders’ equity	6,604,798						5,772,638
Total liabilities and stockholders’ equity	Total liabilities and stockholders’ equity	$	67,497,367					$	62,232,841					Total liabilities and stockholders’ equity	$	68,936,786					$	63,079,444
Interest rate spread	Interest rate spread					2.43	%					3.07	%	Interest rate spread					2.31	%					3.26	%
Net interest income and net interest margin	Net interest income and net interest margin			$	566,746	3.55	%			$	472,952	3.23	%	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 ~~$7.3~~$7.8 million and ~~$20.3~~$16.5 million for the ~~second~~third quarters of 2023 and 2022, respectively.

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

(5)Loans include the accretion of net deferred loan fees and amortization of net premiums, which totaled ~~$13.3~~$13.1 million and ~~$11.4~~$12.5 million for the ~~second~~third quarters of 2023 and 2022, respectively.

6972


		Six Months Ended June 30,													Nine Months Ended September 30,
		2023						2022							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	ASSETS													ASSETS
Interest-earning assets:	Interest-earning assets:													Interest-earning assets:
Interest-bearing cash and deposits with banks	Interest-bearing cash and deposits with banks	$	4,353,658	$	96,642	4.48	%	$	3,627,253	$	8,047	0.45	%	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	665,229		8,472		2.57	%	1,868,600		16,936		1.83	%	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)	6,183,522		109,489		3.57	%	7,232,686		67,907		1.89	%	AFS debt securities (2)(3)	6,146,653		166,666		3.63	%	6,886,268		106,290		2.06	%
HTM debt securities (2)	HTM debt securities (2)	2,989,695		25,412		1.71	%	2,497,811		20,936		1.69	%	HTM debt securities (2)	2,982,284		38,013		1.70	%	2,672,797		33,645		1.68	%
Loans (4)(5)	Loans (4)(5)	48,502,717		1,499,650		6.24	%	43,376,398		816,526		3.80	%	Loans (4)(5)	48,969,843		2,318,369		6.33	%	44,548,520		1,376,978		4.13	%

Restricted equity securities	Restricted equity securities	84,852		1,975		4.69	%	77,708		1,431		3.71	%	Restricted equity securities	83,013		3,054		4.92	%	77,824		2,274		3.91	%
Total interest-earning assets	Total interest-earning assets	$	62,779,673	$	1,741,640	5.59	%	$	58,680,456	$	931,783	3.20	%	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	595,022						677,579						Cash and due from banks	578,144						656,772
Allowance for loan losses	Allowance for loan losses	(611,358)						(544,423)						Allowance for loan losses	(617,381)						(551,818)
Other assets	Other assets	3,548,733						3,183,144						Other assets	3,690,570						3,307,207
Total assets	Total assets	$	66,312,070					$	61,996,756					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	$	7,469,621	$	72,745	1.96	%	$	6,680,657	$	4,580	0.14	%	Checking deposits	$	7,675,325	$	127,030	2.21	%	$	6,747,711	$	13,073	0.26	%
Money market deposits	Money market deposits	10,844,992		162,521		3.02	%	12,614,994		12,095		0.19	%	Money market deposits	11,295,157		275,738		3.26	%	12,526,222		45,196		0.48	%
Savings deposits	Savings deposits	2,317,702		7,632		0.66	%	2,950,268		3,568		0.24	%	Savings deposits	2,215,102		11,679		0.70	%	2,954,098		5,836		0.26	%
Time deposits	Time deposits	15,674,457		261,373		3.36	%	8,170,613		15,234		0.38	%	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	2,666,249		57,857		4.38	%	33,177		250		1.52	%	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	248,619		6,430		5.22	%	149,431		1,137		1.53	%	FHLB advances	164,836		6,430		5.22	%	128,137		1,529		1.60	%
Repurchase agreements	Repurchase agreements	60,931		1,263		4.18	%	336,013		4,434		2.66	%	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	152,591		5,212		6.89	%	152,103		1,920		2.55	%	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	$	39,435,162	$	575,033	2.94	%	$	31,087,256	$	43,218	0.28	%	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	18,310,770						23,661,355						Demand deposits	17,633,922						23,244,247
Accrued expenses and other liabilities	Accrued expenses and other liabilities	2,253,266						1,486,067						Accrued expenses and other liabilities	2,324,870						1,719,869
Stockholders’ equity	Stockholders’ equity	6,312,872						5,762,078						Stockholders’ equity	6,411,250						5,765,637
Total liabilities and stockholders’ equity	Total liabilities and stockholders’ equity	$	66,312,070					$	61,996,756					Total liabilities and stockholders’ equity	$	67,196,590					$	62,361,618
Interest rate spread	Interest rate spread					2.65	%					2.92	%	Interest rate spread					2.53	%					3.03	%
Net interest income and net interest margin	Net interest income and net interest margin			$	1,166,607	3.75	%			$	888,565	3.05	%	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 ~~$16.4~~$24.2 million and ~~$43.8~~$60.3 million for the first ~~halves~~nine months of 2023 and 2022, respectively.

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

(5)Include the accretion of net deferred loan fees and amortization of net premiums, which totaled ~~$27.0~~$40.1 million and ~~$23.8~~$36.3 million for the first ~~halves~~nine months of 2023 and 2022, respectively.

7073

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 June 30,								Six Months Ended June 30,										($ in thousands)		Three Months Ended September 30,								Nine Months Ended September 30,
		2023 vs. 2022								2023 vs. 2022								($ 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	$	56,208		$	7,381		$	48,827	$	88,595		$	1,927		$	86,668									Interest-bearing cash and deposits with banks	$	58,671			$	22,620			$	36,051		$	147,266		$	11,889		$	135,377
Resale agreements	Resale agreements	(4,584)			(5,953)			1,369		(8,464)			(13,619)			5,155										Resale agreements	(2,309)			(2,656)				347			(10,773)			(16,691)			5,918
AFS debt securities	AFS debt securities	22,854			(1,312)			24,166		41,582			(11,078)			52,660										AFS debt securities	18,794			(824)				19,618			60,376			(12,490)			72,866
HTM debt securities	HTM debt securities	(60)			(158)			98		4,476			4,177			299										HTM debt securities	(108)			(209)				101			4,368			3,940			428
Loans	Loans	331,848			45,009			286,839		683,124			106,131			576,993										Loans	258,267			38,297				219,970			941,391			148,091			793,300
Restricted equity securities	Restricted equity securities	114			12			102		544			141			403										Restricted equity securities	236			15				221			780			160			620
Total interest and dividend income	Total interest and dividend income	$	406,380		$	44,979		$	361,401	$	809,857		$	87,679		$	722,178									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	$	46,393		$	1,020		$	45,373	$	68,165		$	604		$	67,561									Checking deposits	$	45,792		$	1,731			$	44,061		$	113,957		$	2,040		$	111,917
Money market deposits	Money market deposits	77,527			(1,567)			79,094		150,426			(1,933)			152,359										Money market deposits	80,116			(464)				80,580			230,542			(4,871)			235,413
Savings deposits	Savings deposits	2,099			(593)			2,692		4,064			(911)			4,975										Savings deposits	1,779			(921)				2,700			5,843			(1,778)			7,621
Time deposits	Time deposits	138,970			15,605			123,365		246,139			25,508			220,631										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	48,791			47,487			1,304		57,607			56,274			1,333										Federal funds purchased and other short-term borrowings	48,398			46,160				2,238			106,005			102,583			3,422
FHLB advances	FHLB advances	(559)			(279)			(280)		5,293			1,147			4,146										FHLB advances	(392)			(196)				(196)			4,901			549			4,352
Repurchase agreements	Repurchase agreements	(2,207)			(3,453)			1,246		(3,171)			(4,851)			1,680										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	1,572			4			1,568		3,292			6			3,286										Long-term debt and finance lease liabilities	1,367			4				1,363			4,659			10			4,649
Total interest expense	Total interest expense	$	312,586		$	58,224		$	254,362	$	531,815		$	75,844		$	455,971									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	$	93,794		$	(13,245)		$	107,039	$	278,042		$	11,835		$	266,207									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 ~~second~~third quarters and first ~~halves~~nine months of 2023 and 2022:


		Three Months Ended June 30,				Six Months Ended June 30,						Three Months Ended September 30,		Nine Months Ended September 30,

($ in thousands)	($ in thousands)	2023		2022		% Change	2023		2022		% Change		($ in thousands)	2023		2022		% Change	2023		2022		% Change
Lending fees	Lending fees	$	20,901	$	20,142	4%	$	41,487	$	39,580	5%		Lending fees	$	20,312	$	20,289	0%	$	61,799	$	59,869	3%
Deposit account fees	Deposit account fees	22,285		22,372		(0)%	43,988		42,687		3%		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	7,373		9,801		(25)%	9,937		20,934		(53)%		Interest rate contracts and other derivative income	11,208		8,761		28%	21,145		29,695		(29)%
Foreign exchange income	Foreign exchange income	13,251		11,361		17%	25,911		24,060		8%		Foreign exchange income	12,334		10,083		22%	38,245		34,143		12%
Wealth management fees	Wealth management fees	6,889		6,539		5%	13,193		12,591		5%		Wealth management fees	5,877		8,903		(34)%	19,070		21,494		(11)%
Net (losses) gains on sales of loans	Net (losses) gains on sales of loans	(7)		917		NM	(29)		3,839		NM		Net (losses) gains on sales of loans	(12)		2,129		NM	(41)		5,968		NM
Net realized gains (losses) on AFS debt securities		—		28		NM	(10,000)		1,306		NM
Net (losses) gains on AFS debt securities													Net (losses) gains on AFS debt securities	—		—		—%	(10,000)		1,306		NM

Other investment income	Other investment income	4,003		4,863		(18)%	5,924		6,490		(9)%		Other investment income	1,751		(580)		NM	7,675		5,910		30%
Other income	Other income	3,936		2,421		63%	8,198		6,700		22%		Other income	2,660		2,331		14%	10,858		9,031		20%
Total noninterest income	Total noninterest income	$	78,631	$	78,444	0%	$	138,609	$	158,187	(12)%		Total noninterest income	$	76,752	$	75,552	2%	$	215,361	$	233,739	(8)%

NM — Not meaningful.

7174

Noninterest income comprised 12% and 11% of total revenue for the ~~second~~third quarter and the first ~~half~~nine months of 2023, respectively, compared with ~~14%~~12% and ~~15%~~14% for the ~~second~~third quarter and the first ~~half~~nine months of 2022, respectively. ~~Second~~Third quarter 2023 noninterest income of $76.8 million was ~~$78.6 million,~~relatively flat compared with ~~$78.4~~$75.6 million for the same period in 2022. Noninterest income for the first ~~half~~nine months of 2023 was ~~$138.6~~$215.4 million, a decrease of ~~$19.6~~$18.4 million or ~~12%~~8%, compared with ~~$158.2~~$233.7 million for the same period in 2022. This decrease was primarily due to net ~~realized~~ losses on AFS debt securities, ~~and~~ a decrease in interest rate contracts and other derivative income, and net losses on sales of loans, partially offset by an increase in foreign exchange income during the first ~~half~~nine months of 2023.

Interest rate contracts and other derivative income was ~~$7.4~~$11.2 million for the ~~second~~third quarter of 2023, ~~a decrease~~an increase of $2.4 million or ~~25%~~28%, compared with ~~$9.8~~$8.8 million for the same period in 2022. The increase was primarily due to increases in transaction volume and interest received on derivative collateral posted. For the first ~~half~~nine months of 2023, interest rate contracts and other derivative income was ~~$9.9~~$21.1 million, a decrease of ~~$11.0~~$8.6 million or ~~53%~~29%, compared with ~~$20.9~~$29.7 million for the same period in 2022. The ~~decreases were~~decrease was primarily due to ~~less~~lower favorable credit valuation adjustments, partially offset by ~~an increase~~increases in transaction volume ~~during~~ and interest received on derivative collateral posted.

Foreign exchange income was $12.3 million forthe ~~second~~third quarter ~~and~~of 2023, an increase of $2.3 million or 22%, compared with $10.1 million for the same period in 2022. This increase was primarily due to higher losses on foreign exchange trades in the prior-year period. For the first ~~half~~nine months of ~~2023.~~2023, foreign exchange income was $38.2 million, an increase of $4.1 million or 12% compared with $34.1 million for the same period in 2022. This increase was primarily due to a higher level of gains on foreign exchange trades, partially offset by the unfavorable valuation of certain foreign currency denominated balance sheet items.

Net ~~realized~~losses on sales of loans were $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 and first nine months of 2022, respectively. The year-over-year decreases were primarily due to a higher level of Small Business Administration loan sales in the prior periods.

Net losses on AFS debt securities of $10.0 million for the first ~~half~~nine months of 2023 were due to the write-off of an impaired subordinated debt security during the first quarter of 2023. In comparison, net ~~realized~~ gains on AFS debt securities were ~~$917 thousand~~zero and $1.3 million for the ~~second~~third quarter and first ~~half~~nine months of 2022, respectively.

Noninterest Expense

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


		Three Months Ended June 30,				Six Months Ended June 30,								Three Months Ended September 30,		Nine Months Ended September 30,

($ in thousands)	($ in thousands)	2023		2022		% Change		2023		2022		% Change			($ in thousands)	2023		2022		% Change		2023		2022		% Change
Compensation and employee benefits	Compensation and employee benefits	$	124,937	$	113,364	10	%	$	254,591	$	229,633	11	%		Compensation and employee benefits	$	123,153	$	127,580	(3)	%	$	377,744	$	357,213	6	%
Occupancy and equipment expense	Occupancy and equipment expense	16,088		15,469		4	%	31,675		30,933		2	%		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	8,262		4,927		68	%	16,172		9,644		68	%		Deposit insurance premiums and regulatory assessments	8,583		4,875		76	%	24,755		14,519		71	%
Deposit account expense	Deposit account expense	10,559		5,671		86	%	20,168		10,364		95	%		Deposit account expense	11,585		6,707		73	%	31,753		17,071		86	%
Data processing	Data processing	3,213		3,486		(8)	%	6,560		7,151		(8)	%		Data processing	3,645		3,725		(2)	%	10,205		10,876		(6)	%
Computer software expense	Computer software expense	7,479		6,572		14	%	14,839		13,866		7	%		Computer software expense	8,116		6,889		18	%	22,955		20,755		11	%

Other operating expense	Other operating expense	35,337		32,392		9	%	70,207		55,840		26	%		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	55,914		14,979		273	%	66,024		28,879		129	%		Amortization of tax credit and other investments	49,694		19,874		150	%	115,718		48,753		137	%

Total noninterest expense	Total noninterest expense	$	261,789	$	196,860	33	%	$	480,236	$	386,310	24	%		Total noninterest expense	$	252,014	$	215,973	17	%	$	732,250	$	602,283	22	%

~~Second~~Third quarter 2023 noninterest expense was ~~$261.8~~$252.0 million, an increase of ~~$64.9~~$36.0 million or ~~33%~~17%, compared with ~~$196.9 million for the same period in 2022. For the first half of 2023, noninterest expense was $480.2 million, an increase of $93.9 million or 24%, compared with $386.3~~$216.0 million for the same period in 2022. The increase in the third quarter of 2023 was primarily due to increases in ~~both the second quarter~~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 ~~half~~nine months of 2023, ~~were~~noninterest expense was $732.3 million, an increase of $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 ~~$124.9~~$123.2 million for the ~~second~~third quarter of 2023, ~~an increase~~a decrease of ~~$11.6~~$4.4 million or ~~10%~~3%, compared with ~~$113.4~~$127.6 million for the same period in 2022. The decrease was primarily due to a decrease in temporary staffing and bonus accrual, partially offset by staffing growth. For the first ~~half~~nine months of 2023, compensation and employee benefits were ~~$254.6~~$377.7 million, an increase of ~~$25.0~~$20.5 million or ~~11%~~6%, compared with ~~$229.6~~$357.2 million for the first ~~half~~nine months of 2022. ~~These increases were~~This increase was primarily ~~due to~~driven by staffing ~~growth and the year-over-year change in deferred loan costs.~~growth.

Deposit insurance premiums and regulatory assessments were ~~$8.3~~$8.6 million for the ~~second~~third quarter of 2023, an increase of ~~$3.3~~$3.7 million or ~~68%~~76%, compared with $4.9 million for the same period in 2022. For the first ~~half~~nine months of 2023, deposit insurance premiums and regulatory assessments were ~~$16.2~~$24.8 million, an increase of ~~$6.5~~$10.2 million or ~~68%~~71%, compared with ~~$9.6~~$14.5 million for the same period in 2022. These increases were primarily due to a two bps increase in the base deposit insurance assessment rate under the FDIC’s Amended Restoration Plan.

Deposit account expense was ~~$10.6~~$11.6 million for the ~~second~~third quarter of 2023, an increase of $4.9 million or ~~86%~~73%, compared with ~~$5.7~~$6.7 million for the same period in 2022. For the first ~~half~~nine months of 2023, deposit account expense was ~~$20.2~~$31.8 million, an increase of ~~$9.8~~$14.7 million or ~~95%~~86%, compared with ~~$10.4~~$17.1 million for the same period in 2022. These increases were primarily due to an increase in deposit referral fees which were driven by higher interest ~~rates.~~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 Bank’s deposit balances.

Other operating expense ~~was $35.3~~of $31.9 million for the ~~second~~third quarter of 2023, ~~an increase of $2.9 million or 9%,~~was essentially flat, compared with ~~$32.4~~$30.4 million for the same period in 2022. For the first ~~half~~nine months of 2023, other operating expense was ~~$70.2~~$102.1 million, an increase of ~~$14.4~~$15.8 million or ~~26%~~18%, compared with ~~$55.8~~$86.2 million for the same period in 2022. ~~These increases were~~The increase in the first nine months of 2023 compared with the same period in 2022 was primarily due to higher interest expense paid on cash collateral and an increase in corporate expenses, partially offset by a reduction in foreclosure expenses.

Amortization of tax credit and other investments was ~~$55.9~~$49.7 million for the ~~second~~third quarter of 2023, an increase of ~~$40.9~~$29.8 million or ~~273%~~150%, compared with ~~$15.0~~$19.9 million for the same period in 2022. For the first ~~half~~nine months of 2023, amortization of tax credit and other investments was ~~$66.0~~$115.7 million, an increase of ~~$37.1~~$67.0 million or ~~129%~~137%, compared with ~~$28.9~~$48.8 million for the same period in 2022. The year-over-year ~~changes~~increases were largely due to the timing of renewable energy tax credit investments that closed.

Income Taxes


		Three Months Ended June 30,								Six Months Ended June 30,	Three Months Ended September 30,													Nine Months Ended September 30,
($ in thousands)	($ in thousands)	2023			2022			% Change				2023			2022			% Change		($ in thousands)	2023			2022			% Change		2023			2022			% Change
Income before income taxes	Income before income taxes	$	357,588		$	341,036		5	%			$	778,980		$	638,942		22	%	Income before income taxes	$	353,551		$	384,388		(8)	%	$	1,132,531		$	1,023,330		11	%
Income tax expense	Income tax expense	$	45,557		$	82,707		(45)	%			$	144,510		$	142,961		1	%	Income tax expense	$	65,813		$	89,049		(26)	%	$	210,323		$	232,010		(9)	%
Effective tax rate	Effective tax rate	12.7		%	24.3		%					18.6		%	22.4		%			Effective tax rate	18.6		%	23.2		%			18.6		%	22.7		%

~~Second~~Third quarter 2023 income tax expense was ~~$45.6~~$65.8 million and the effective tax rate was ~~12.7%~~18.6%, compared with ~~second~~third quarter 2022 income tax expense of ~~$82.7~~$89.0 million and an effective tax rate of ~~24.3%~~23.2%. For the first ~~half~~nine months of 2023, income tax expense was ~~$144.5~~$210.3 million and the effective tax rate was 18.6%, compared with income tax expense of ~~$143.0~~$232.0 million and an effective tax rate of ~~22.4%~~22.7% for the same period in 2022. The decrease in income tax expense for the ~~second~~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 first nine months of 2023 compared with the first nine months of 2022 was primarily due to higher tax credits. The increases in tax credits in both periods were primarily due to renewable energy tax credit investments that closed during the quarter. The increase in income tax expense for the first half of 2023 compared with the first half of 2022 was primarily due to a higher level of pretax income in the first half of 2023. The year-over-year decreases in the effective tax rate were primarily due to the aforementioned tax credit investments that closed during the second quarter of 2023.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 a description of the Company’s internal management reporting process, including the segment cost allocation methodology, see Note 15 — Business Segments to the Consolidated Financial Statements in this Form 10-Q.

Segment net interest income represents the difference between actual interest earned on assets and interest incurred on liabilities of the 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 June 30,													Three Months Ended September 30,
		Consumer and Business Banking				Commercial Banking				Other					Consumer and Business Banking				Commercial Banking				Other
($ in thousands)	($ in thousands)	2023		2022		2023		2022		2023		2022		($ in thousands)	2023		2022		2023		2022		2023		2022
Total revenue (loss)	Total revenue (loss)	$	334,642	$	312,757	$	305,578	$	278,996	$	5,157	$	(40,357)	Total revenue (loss)	$	340,541	$	357,230	$	286,017	$	271,637	$	21,007	$	(1,506)
Provision for credit losses	Provision for credit losses	5,524		2,898		20,476		10,602		—		—		Provision for credit losses	1,633		8,974		40,367		18,026		—		—

Noninterest expense	Noninterest expense	107,027		94,295		88,333		81,023		66,429		21,542		Noninterest expense	106,626		104,005		87,556		81,386		57,832		30,582
Segment income (loss) before income taxes	Segment income (loss) before income taxes	222,091		215,564		196,769		187,371		(61,272)		(61,899)		Segment income (loss) before income taxes	232,282		244,251		158,094		172,225		(36,825)		(32,088)

Segment net income (loss)	Segment net income (loss)	$	156,853	$	153,549	$	139,030	$	133,861	$	16,148	$	(29,081)	Segment net income (loss)	$	164,051	$	173,982	$	110,182	$	122,869	$	13,505	$	(1,512)


($ in thousands)	($ in thousands)	Six Months Ended June 30,												($ in thousands)	Nine Months Ended September 30,
		Consumer and Business Banking				Commercial Banking				Other					Consumer and Business Banking				Commercial Banking				Other
		2023		2022		2023		2022		2023		2022			2023		2022		2023		2022		2023		2022
Total revenue (loss)	Total revenue (loss)	$	664,886	$	551,170	$	585,900	$	536,150	$	54,430	$	(40,568)	Total revenue (loss)	$	1,005,427	$	908,400	$	871,917	$	807,787	$	75,437	$	(42,074)
Provision for credit losses	Provision for credit losses	20,536		6,002		25,464		15,498		—		—		Provision for credit losses	22,169		14,976		65,831		33,524		—		—

Noninterest expense	Noninterest expense	220,850		190,390		175,581		154,418		83,805		41,502		Noninterest expense	327,476		294,395		263,137		235,804		141,637		72,084
Segment income (loss) before income taxes	Segment income (loss) before income taxes	423,500		354,778		384,855		366,234		(29,375)		(82,070)		Segment income (loss) before income taxes	655,782		599,029		542,949		538,459		(66,200)		(114,158)

Segment net income (loss)	Segment net income (loss)	$	299,100	$	252,713	$	273,487	$	261,368	$	61,883	$	(18,100)	Segment net income (loss)	$	463,151	$	426,695	$	383,669	$	384,237	$	75,388	$	(19,612)

Consumer and Business Banking

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

Three Months Ended June 30,
Change from 2022
($ in thousands) 2023 2022 $ %
Net interest income before provision for credit losses $ 307,522 $ 284,373 $ 23,149 8 %
Noninterest income 27,120 28,384 (1,264) (4) %
Total revenue 334,642 312,757 21,885 7 %
Provision for credit losses 5,524 2,898 2,626 91 %
Noninterest expense 107,027 94,295 12,732 14 %
Segment income before income taxes 222,091 215,564 6,527 3 %
Income tax expense 65,238 62,015 3,223 5 %
Segment net income $ 156,853 $ 153,549 $ 3,304 2 %
Average loans $ 17,622,260 $ 15,314,974 $ 2,307,286 15 %
Average deposits $ 33,265,827 $ 33,429,541 $ (163,714) (0) %

($ in thousands) Six Months Ended June 30,
Change from 2022
2023 2022 $ %
Net interest income before provision for credit losses $ 611,764 $ 497,587 $ 114,177 23 %
Noninterest income 53,122 53,583 (461) (1) %
Total revenue 664,886 551,170 113,716 21 %
Provision for credit losses 20,536 6,002 14,534 242 %
Noninterest expense 220,850 190,390 30,460 16 %
Segment income before income taxes 423,500 354,778 68,722 19 %
Income tax expense 124,400 102,065 22,335 22 %
Segment net income $ 299,100 $ 252,713 $ 46,387 18 %
Average loans $ 17,368,001 $ 14,962,667 $ 2,405,334 16 %
Average deposits $ 33,555,330 $ 33,272,553 $ 282,777 1 %



	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	%

7477



($ 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 $3.3~~decreased by $9.9 million or 2%6% year-over-year to ~~$156.9~~$164.1 million for the ~~second~~third quarter of 2023. This decrease was primarily driven by decreases in net interest income and 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 3% year-over-year to $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 ~~$46.4~~deposit account fees.

Net income in this segment increased by $36.5 million or ~~18%~~9% year-over-year to ~~$299.1~~$463.2 million for the first ~~half~~nine months of 2023. ~~The increases in both periods were~~This increase was primarily driven by an increase in net interest income, partially offset by higher noninterest expense and income tax ~~and provision for credit losses.~~expense. Net interest income before provision for credit losses increased ~~$23.1~~by $103.2 million or 8%13% year-over-year to ~~$307.5 million for the second quarter of 2023, and $114.2 million or 23% year-over-year to $611.8~~$927.2 million for the first ~~half~~nine months of 2023. ~~The increases in both periods were~~This increase was primarily driven by higher deposit FTP credits due to the year-over-year increase in market rates. ~~Provision for credit losses~~Noninterest expense increased ~~$2.6~~by $33.1 million or ~~91%~~11% year-over-year to ~~$5.5 million for the second quarter of 2023, and $14.5 million or 242% year-over-year to $20.5~~$327.5 million for the first half of 2023. These increases in both periods were primarily due to the current economic outlook as well as residential mortgage loan growth. Noninterest expense increased $12.7 million or 14% year-over-year to $107.0 million for the second quarternine months of 2023, ~~and $30.5 million or 16% year-over-year to $220.9 million for the first half of 2023. The increases in both periods primarily reflected~~reflecting higher allocated corporate overhead expenses, compensation and employee benefits expense, deposit insurance premium and ~~allocated corporate overhead expenses.~~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, affordable housing lending, asset-based lending, asset-backed finance, project finance and equipment financing. Commercial deposit products and other financial services include treasury management, foreign exchange services, and interest rate and commodity risk hedging.

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


		Three Months Ended June 30,									Three Months Ended September 30,
						Change from 2022									Change from 2022
($ in thousands)	($ in thousands)	2023		2022		$		%		($ in thousands)	2023		2022		$		%
Net interest income before provision for credit losses	Net interest income before provision for credit losses	$	263,040	$	230,964	$	32,076	14	%	Net interest income before provision for credit losses	$	242,345	$	222,996	$	19,349	9	%
Noninterest income	Noninterest income	42,538		48,032		(5,494)		(11)	%	Noninterest income	43,672		48,641		(4,969)		(10)	%
Total revenue	Total revenue	305,578		278,996		26,582		10	%	Total revenue	286,017		271,637		14,380		5	%
Provision for credit losses	Provision for credit losses	20,476		10,602		9,874		93	%	Provision for credit losses	40,367		18,026		22,341		124	%
Noninterest expense	Noninterest expense	88,333		81,023		7,310		9	%	Noninterest expense	87,556		81,386		6,170		8	%
Segment income before income taxes	Segment income before income taxes	196,769		187,371		9,398		5	%	Segment income before income taxes	158,094		172,225		(14,131)		(8)	%
Income tax expense	Income tax expense	57,739		53,510		4,229		8	%	Income tax expense	47,912		49,356		(1,444)		(3)	%
Segment net income	Segment net income	$	139,030	$	133,861	$	5,169	4	%	Segment net income	$	110,182	$	122,869	$	(12,687)	(10)	%
Average loans	Average loans	$	31,229,460	$	29,311,514	$	1,917,946	7	%	Average loans	$	31,673,847	$	30,449,108	$	1,224,739	4	%
Average deposits	Average deposits	$	16,788,456	$	17,539,067	$	(750,611)	(4)	%	Average deposits	$	18,176,331	$	16,627,353	$	1,548,978	9	%


($ in thousands)	($ in thousands)	Six Months Ended June 30,								($ in thousands)	Nine Months Ended September 30,
						Change from 2022									Change from 2022
		2023		2022		$		%			2023		2022		$		%
Net interest income before provision for credit losses	Net interest income before provision for credit losses	$	499,763	$	439,041	$	60,722	14	%	Net interest income before provision for credit losses	$	742,108	$	662,037	$	80,071	12	%
Noninterest income	Noninterest income	86,137		97,109		(10,972)		(11)	%	Noninterest income	129,809		145,750		(15,941)		(11)	%
Total revenue	Total revenue	585,900		536,150		49,750		9	%	Total revenue	871,917		807,787		64,130		8	%
Provision for credit losses	Provision for credit losses	25,464		15,498		9,966		64	%	Provision for credit losses	65,831		33,524		32,307		96	%
Noninterest expense	Noninterest expense	175,581		154,418		21,163		14	%	Noninterest expense	263,137		235,804		27,333		12	%
Segment income before income taxes	Segment income before income taxes	384,855		366,234		18,621		5	%	Segment income before income taxes	542,949		538,459		4,490		1	%
Income tax expense	Income tax expense	111,368		104,866		6,502		6	%	Income tax expense	159,280		154,222		5,058		3	%
Segment net income	Segment net income	$	273,487	$	261,368	$	12,119	5	%	Segment net income	$	383,669	$	384,237	$	(568)	0	%
Average loans	Average loans	$	31,134,716	$	28,413,731	$	2,720,985	10	%	Average loans	$	31,316,401	$	29,099,646	$	2,216,755	8	%
Average deposits	Average deposits	$	17,034,343	$	17,637,251	$	(602,908)	(3)	%	Average deposits	$	17,419,190	$	17,296,919	$	122,271	1	%

Commercial Banking segment net income ~~increased $5.2~~decreased by $12.7 million or 4%10% year-over-year to ~~$139.0~~$110.2 million for the ~~second~~third quarter of ~~2023, and $12.1 million or 5% year-over-year~~2023. This decrease was due to ~~$273.5 million for the first half of 2023. The increases in both periods reflected a growth in net interest income, partially offset by~~ 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 ~~$32.1~~$19.4 million or ~~14%~~9% year-over-year to ~~$263.0~~$242.3 million for the ~~second~~third quarter of ~~2023, and $60.7 million or 14% year-over-year to $499.8 million for the first half of~~ 2023. ~~The increases were~~This increase was primarily due to higher loan interest income from commercial loan growth, ~~and~~partially offset by higher ~~deposit FTP credits~~interest expense due to ~~the year-over-year increase in market rates.~~interest-bearing deposit growth. Noninterest income decreased ~~$5.5~~by $5.0 million or ~~11%~~10% year-over-year to ~~$42.5~~$43.7 million for the ~~second~~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 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. Noninterest income decreased ~~$11.0~~by $15.9 million or 11% year-over-year to ~~$86.1~~$129.8 million for the first ~~half~~nine months of 2023, mainly due to ~~a decrease~~decreases in interest rate contracts and other derivative income, net gains on sales of loans, and foreign exchange income. Provision for credit losses increased ~~$9.9~~$32.3 million or ~~93%~~96% year-over-year to ~~$20.5 million for the second quarter of 2023, and $10.0 million or 64% year-over-year to $25.5~~$65.8 million for the first ~~half~~nine months of 2023, primarily driven by commercial loan growth as well as the current economic ~~outlook as well as commercial loan growth.~~outlook. Noninterest expense increased ~~$7.3~~$27.3 million or 9%12% year-over-year to ~~$88.3 million for the second quarter of 2023, and $21.2 million or 14% year-over-year to $175.6~~$263.1 million for the first ~~half~~nine months of 2023, primarily due to higher deposit account expense, allocated corporate overhead expenses and compensation and employee ~~benefits, deposit account expense and allocated corporate overhead 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 June 30,									Three Months Ended September 30,
						Change from 2022									Change from 2022
($ in thousands)	($ in thousands)	2023		2022		$		%		($ in thousands)	2023		2022		$		%
Net interest loss before provision for credit losses		$	(3,816)	$	(42,385)	$	38,569	91	%
Noninterest income		8,973		2,028		6,945		342	%
Net interest income before provision for credit losses										Net interest income before provision for credit losses	$	13,059	$	2,402	$	10,657	444	%
Noninterest income (loss)										Noninterest income (loss)	7,948		(3,908)		11,856		303	%
Total revenue (loss)	Total revenue (loss)	5,157		(40,357)		45,514		113	%	Total revenue (loss)	21,007		(1,506)		22,513		NM

Noninterest expense	Noninterest expense	66,429		21,542		44,887		208	%	Noninterest expense	57,832		30,582		27,250		89	%
Segment loss before income taxes	Segment loss before income taxes	(61,272)		(61,899)		627		1	%	Segment loss before income taxes	(36,825)		(32,088)		(4,737)		(15)	%
Income tax benefit	Income tax benefit	(77,420)		(32,818)		(44,602)		136	%	Income tax benefit	(50,330)		(30,576)		(19,754)		65	%
Segment net income (loss)	Segment net income (loss)	$	16,148	$	(29,081)	$	45,229	156	%	Segment net income (loss)	$	13,505	$	(1,512)	$	15,017	NM

Average deposits	Average deposits	$	4,230,592	$	3,161,242	$	1,069,350	34	%	Average deposits	$	3,266,316	$	4,152,463	$	(886,147)	(21)	%


($ in thousands)	($ in thousands)	Six Months Ended June 30,								($ in thousands)	Nine Months Ended September 30,
						Change from 2022									Change from 2022
		2023		2022		$		%			2023		2022		$		%
Net interest income (loss) before provision for credit losses	Net interest income (loss) before provision for credit losses	$	55,080	$	(48,063)	$	103,143	215	%	Net interest income (loss) before provision for credit losses	$	68,139	$	(45,661)	$	113,800	249	%
Noninterest (loss) income		(650)		7,495		(8,145)		(109)	%
Noninterest income										Noninterest income	7,298		3,587		3,711		103	%
Total revenue (loss)	Total revenue (loss)	54,430		(40,568)		94,998		234	%	Total revenue (loss)	75,437		(42,074)		117,511		279	%

Noninterest expense	Noninterest expense	83,805		41,502		42,303		102	%	Noninterest expense	141,637		72,084		69,553		96	%
Segment loss before income taxes	Segment loss before income taxes	(29,375)		(82,070)		52,695		64	%	Segment loss before income taxes	(66,200)		(114,158)		47,958		42	%
Income tax benefit	Income tax benefit	(91,258)		(63,970)		(27,288)		43	%	Income tax benefit	(141,588)		(94,546)		(47,042)		50	%
Segment net income (loss)	Segment net income (loss)	$	61,883	$	(18,100)	$	79,983	442	%	Segment net income (loss)	$	75,388	$	(19,612)	$	95,000	484	%

Average deposits	Average deposits	$	4,027,869	$	3,168,083	$	859,786	27	%	Average deposits	$	3,771,229	$	3,499,816	$	271,413	8	%

The Other segment reported segment loss before income taxes of ~~$61.3~~$36.8 million and segment net income of ~~$16.1~~$13.5 million, reflecting an income tax benefit of ~~$77.4~~$50.3 million, for the ~~second~~third quarter of 2023. The increase in segment loss before income taxes was primarily driven by higher noninterest expense, partially offset by increases in noninterest income and net interest income. The $10.7 million 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 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 ~~lower~~higher net interest ~~loss and higher noninterest~~ income, partially offset by higher noninterest expense. ~~For the first half of 2023, the Other segment reported segment loss before income taxes of $29.4 million and segment net income of $61.9 million, reflecting an income tax benefit of $91.3 million.~~ The decrease in segment loss before income taxes was primarily driven by higher net interest income, partially offset by an increase in noninterest expense. The $38.6 million decrease in net interest loss before provision for credit losses for the second quarter of 2023 and $103.1$113.8 million increase in net interest income before provision for credit losses for the first ~~half~~nine months of 2023 ~~were~~was primarily driven by ~~an increase in~~higher investment interest income ~~from investments~~ due to a higher ~~yield~~yields on interest-bearing cash and deposits with banks, and debt ~~securities.~~securities, and a higher FTP spread income absorbed by the Other segment, partially offset by higher costs of interest-bearing deposits and borrowings. Noninterest ~~income~~expense increased ~~$6.9 million for the second quarter of 2023, mainly due to an increase in foreign exchange income, and decreased $8.1~~$69.6 million for the first ~~half~~nine months of 2023, ~~primarily due to a write-off~~reflecting the timing of an impaired subordinated debt security in the first quarter of 2023. Noninterest expense increased $44.9 million for the second quarter of 2023, and $42.3 million for the first half of 2023, primarily due to higher amortization of tax credits and other investments ~~as a result of tax credit investments closed in the second quarter of 2023. This also contributed to higher income tax benefit in both the second quarter and first half of 2023.~~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, 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 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 does not intend to sell its debt securities, 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.

7781

The following table presents the distribution of the Company’s AFS and HTM debt securities portfolio as of ~~June~~September 30, 2023 and December 31, 2022, and by credit ratings as of ~~June~~September 30, 2023:


		June 30, 2023						December 31, 2022							Ratings as of June 30, 2023 (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:	AFS debt securities:																										AFS debt securities:
U.S. Treasury securities	U.S. Treasury securities	$	779,973	$	711,706	12	%		$	676,306	$	606,203	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	514,594		460,084		8	%		517,806		461,607		8	%		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	2,519,765		2,200,014		37	%		2,588,446		2,262,464		37	%		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	304,204		263,873		4	%		303,884		257,099		4	%		97	%	—	%	—	%	—	%	3	%		Municipal securities	301,408		243,556			4	%	303,884		257,099		4	%		97	%	—	%	—	%	—	%	3	%
Non-agency mortgage-backed securities	Non-agency mortgage-backed securities	1,148,557		992,625		17	%		1,209,714		1,047,553		17	%		81	%	—	%	—	%	—	%	19	%		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	653,502		485,750		7	%		673,502		526,274		9	%		—	%	32	%	65	%	3	%	—	%		Corporate debt securities	653,501		475,434			8	%	673,502		526,274		9	%		—	%	31	%	65	%	4	%	—	%
Foreign government bonds	Foreign government bonds	236,392		224,766		4	%		241,165		227,053		4	%		48	%	52	%	—	%	—	%	—	%		Foreign government bonds	237,531		222,790			4	%	241,165		227,053		4	%		47	%	53	%	—	%	—	%	—	%
Asset-backed securities	Asset-backed securities	46,332		44,875		1	%		51,152		49,076		1	%		100	%	—	%	—	%	—	%	—	%		Asset-backed securities	44,819		43,757			1	%	51,152		49,076		1	%		100	%	—	%	—	%	—	%	—	%
Collateralized loan obligations	Collateralized loan obligations	617,250		603,565		10	%		617,250		597,664		10	%		96	%	4	%	—	%	—	%	—	%		Collateralized loan obligations	617,250		609,954			10	%	617,250		597,664		10	%		96	%	4	%	—	%	—	%	—	%
Total AFS debt securities	Total AFS debt securities	$	6,820,569	$	5,987,258	100	%		$	6,879,225	$	6,034,993	100	%		86	%	5	%	5	%	—	%	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	$	526,794	$	474,137	19	%		$	524,081	$	471,469	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	1,000,415		797,871		33	%		998,972		789,412		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	1,259,425		1,019,026		42	%		1,289,106		1,042,310		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	189,299		149,450		6	%		189,709		151,980		6	%		100	%	—	%	—	%	—	%	—	%		Municipal securities	189,093		135,575			6	%	189,709		151,980		6	%		100	%	—	%	—	%	—	%	—	%
Total HTM debt securities	Total HTM debt securities	$	2,975,933	$	2,440,484	100	%		$	3,001,868	$	2,455,171	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	$	9,796,502	$	8,427,742				$	9,881,093	$	8,490,164															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.

As of ~~June~~September 30, 2023, the Company’s AFS and HTM debt securities portfolios had an effective duration (defined as the sensitivity of the value of the portfolio to interest rate changes) of ~~3.9~~3.8 and 7.7, respectively, compared with 4.1 and 8.0, respectively, as of December 31, 2022. The modest decreases in both the AFS and HTM effective durations were due to the ~~reduction in~~portfolio seasoning and reduced variation of optionality under the 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 $5.99~~was relatively unchanged at $6.04 billion ~~as of June 30, 2023, a decrease of $47.7 million or 1%~~ from ~~$6.03 billion as of~~ December 31, 2022. ~~The decrease was primarily due to maturities and paydowns, partially offset by purchases of U.S. Treasury securities.~~ 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) on the Consolidated Statement of Comprehensive Income. Pre-tax net unrealized losses on AFS debt securities were ~~$833.3~~$936.5 million as of ~~June~~September 30, 2023, compared with $844.2 million as of December 31, 2022.

7882

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

Held-to-Maturity Debt Securities

All HTM debt securities were issued, guaranteed, or supported by the U.S. government or government-sponsored enterprises. Accordingly, the Company applied a zero credit loss assumption for these securities and no allowance for credit loss was recorded as of both ~~June~~September 30, 2023 and December 31, 2022.

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 2022 Form 10-K and 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”), CRE, multifamily residential, and construction and land loans, as well as consumer loans, which consist of single-family residential, home equity lines of credit (“HELOCs”) and other consumer loans. Loans held-for-investment totaled ~~$49.83~~$50.91 billion as of ~~June~~September 30, 2023, an increase of ~~$1.63~~$2.70 billion or 3%6% from $48.20 billion as of December 31, 2022. This growth was primarily driven by increases of ~~$849.3 million~~$1.30 billion or 4%7% in total CRE loans and ~~$825.9 million~~$1.27 billion or 6%9% in total residential mortgage loans. The composition of the loan portfolio as of ~~June~~September 30, 2023 was similar to the composition as of December 31, 2022.

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


		June 30, 2023				December 31, 2022				September 30, 2023				December 31, 2022
($ in thousands)	($ in thousands)	Amount		%		Amount		%			($ in thousands)	Amount		%		Amount		%
Commercial:	Commercial:										Commercial:
C&I	C&I	$	15,670,084	31	%	$	15,711,095	33	%		C&I	$	15,864,042	31	%	$	15,711,095	33	%
CRE:	CRE:										CRE:
CRE	CRE	14,373,385		29	%	13,857,870		29	%		CRE	14,667,378		29	%	13,857,870		29	%
Multifamily residential	Multifamily residential	4,764,180		9	%	4,573,068		9	%		Multifamily residential	4,900,097		10	%	4,573,068		9	%
Construction and land	Construction and land	781,068		2	%	638,420		1	%		Construction and land	798,190		2	%	638,420		1	%
Total CRE	Total CRE	19,918,633		40	%	19,069,358		39	%		Total CRE	20,365,665		41	%	19,069,358		39	%
Total commercial	Total commercial	35,588,717		71	%	34,780,453		72	%		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	12,308,613		25	%	11,223,027		23	%		Single-family residential	12,836,558		25	%	11,223,027		23	%
HELOCs	HELOCs	1,862,928		4	%	2,122,655		5	%		HELOCs	1,776,665		3	%	2,122,655		5	%
Total residential mortgage	Total residential mortgage	14,171,541		29	%	13,345,682		28	%		Total residential mortgage	14,613,223		28	%	13,345,682		28	%
Other consumer	Other consumer	68,106		0	%	76,295		0	%		Other consumer	64,254		0	%	76,295		0	%
Total consumer	Total consumer	14,239,647		29	%	13,421,977		28	%		Total consumer	14,677,477		28	%	13,421,977		28	%
Total loans held-for-investment (1)	Total loans held-for-investment (1)	49,828,364		100	%	48,202,430		100	%		Total loans held-for-investment (1)	50,907,184		100	%	48,202,430		100	%
Allowance for loan losses	Allowance for loan losses	(635,400)				(595,645)					Allowance for loan losses	(655,523)				(595,645)
Loans held-for-sale (2)	Loans held-for-sale (2)	2,830				25,644					Loans held-for-sale (2)	4,762				25,644
Total loans, net	Total loans, net	$	49,195,794			$	47,632,429				Total loans, net	$	50,256,423			$	47,632,429

(1)Includes ~~$74.0~~$72.0 million and $70.4 million comprising unamortized deferred and unearned fees, net of premiums as of ~~June~~September 30, 2023 and December 31, 2022, respectively.

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

7983

Commercial

The commercial loan portfolio comprised ~~71%~~72% of total loans as of ~~June~~both September 30, 2023 ~~compared with 72% as of~~and December 31, 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 were ~~$23.91~~$24.30 billion as of ~~June~~September 30, 2023, an increase of ~~$1.13~~$1.52 billion or 5%7% from $22.78 billion as of December 31, 2022. Total C&I loans were ~~$15.67~~$15.86 billion as of ~~June~~September 30, 2023, ~~a decrease~~an increase of ~~$41.0~~$152.9 million or ~~0.3%~~1% from $15.71 billion as of December 31, 2022, with a utilization rate of ~~66%~~65% as of ~~June~~September 30, 2023, compared with 69% as of December 31, 2022. Total C&I loans made up 31% and 33% of total loans held-for-investment as of ~~June~~September 30, 2023 and December 31, 2022, respectively. The C&I loan portfolio includes loans and financing for businesses across a wide spectrum of industries. The Company offers a variety of C&I products, including commercial business lending, working capital lines of credit, trade finance, letters of credit, asset-based lending, asset-backed finance, project finance and equipment financing. Additionally, the Company has a portfolio of broadly syndicated C&I loans, which represent revolving or term loan facilities that are marketed and sold primarily to institutional investors. This portfolio totaled ~~$788.6~~$768.3 million and $855.9 million as of ~~June~~September 30, 2023 and December 31, 2022, respectively. The majority of the C&I loans had variable interest rates as of both ~~June~~September 30, 2023 and December 31, 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 has exposure limits by industry and loan product. The following table presents the industry mix within the Company’s C&I loan portfolio as of ~~June~~September 30, 2023 and December 31, 2022.


		June 30, 2023					December 31, 2022					September 30, 2023					December 31, 2022
($ in thousands)	($ in thousands)	Amount		%		($ in thousands)	Amount		%		($ in thousands)	Amount		%		($ in thousands)	Amount		%
Industry:	Industry:					Industry:					Industry:					Industry:
Private equity	Private equity	$	2,450,919	16	%	Private equity	$	2,238,723	14	%	Private equity	$	2,422,674	15	%	Private equity	$	2,238,723	14	%
Media & entertainment	Media & entertainment	1,848,479		12	%	Media & entertainment	1,841,719		12	%	Media & entertainment	1,794,897		11	%	Media & entertainment	1,841,719		12	%
Real estate investment & management	Real estate investment & management	1,331,558		8	%	Real estate investment & management	1,272,169		8	%	Real estate investment & management	1,383,773		9	%	Real estate investment & management	1,272,169		8	%
General manufacturing & wholesale		993,604		6	%	General manufacturing & wholesale	1,091,933		7	%
Manufacturing & wholesale											Manufacturing & wholesale	900,674		6	%	Manufacturing & wholesale	1,091,933		7	%
Infrastructure & clean energy	Infrastructure & clean energy	873,828		6	%	Infrastructure & clean energy	820,095		5	%	Infrastructure & clean energy	878,025		6	%	Infrastructure & clean energy	820,095		5	%
Tech & telecom	Tech & telecom	614,839		4	%	Food production & distribution	738,636		5	%	Tech & telecom	668,514		4	%	Food production & distribution	738,636		5	%
Food production & distribution											Food production & distribution	648,224		4	%	Tech & telecom	618,719		4	%
Hospitality & leisure	Hospitality & leisure	594,313		4	%	Tech & telecom	618,719		4	%	Hospitality & leisure	597,753		4	%	Hospitality & leisure	562,234		4	%
Food production & distribution		594,213		4	%	Hospitality & leisure	562,234		4	%
Oil & gas	Oil & gas	534,951		3	%	Oil & gas	519,784		3	%	Oil & gas	574,966		4	%	Oil & gas	519,784		3	%
Healthcare services	Healthcare services	423,734		3	%	Consumer goods	425,214		3	%	Healthcare services	377,434		2	%	Consumer goods	425,214		3	%
All other C&I	All other C&I	5,409,646		34	%	All other C&I	5,581,869		35	%	All other C&I	5,617,108		35	%	All other C&I	5,581,869		35	%
Total C&I	Total C&I	$	15,670,084	100	%	Total C&I	$	15,711,095	100	%	Total C&I	$	15,864,042	100	%	Total C&I	$	15,711,095	100	%

Commercial — Total Commercial Real Estate Loans. Total CRE loans totaled ~~$19.92~~$20.37 billion as of ~~June~~September 30, 2023, which grew ~~$849.3 million~~$1.30 billion or 4%7% from $19.07 billion as of December 31, 2022, and accounted for ~~40%~~41% of total loans held-for-investment as of ~~June~~September 30, 2023, compared with 39% as of December 31, 2022. The total CRE portfolio consists of CRE, multifamily residential, and construction and land loans, and affordable housing lending. The increase in total CRE loans was driven by 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 loan-to-value (“LTV”). The consistency of the Company’s low LTV underwriting standards has historically resulted in lower credit losses.

8084

The Company’s total CRE loan portfolio is well-diversified by property type with an average CRE loan size of ~~$2.9~~$3.0 million as of ~~June~~September 30, 2023, compared with $2.8 million as of December 31, 2022. The following table summarizes the Company’s total CRE loans by property type as of ~~June~~September 30, 2023 and December 31, 2022:


		June 30, 2023				December 31, 2022					September 30, 2023				December 31, 2022
($ in thousands)	($ in thousands)	Amount		%		Amount		%		($ in thousands)	Amount		%		Amount		%
Property types:	Property types:									Property types:
Multifamily	Multifamily	$	4,764,180	24	%	$	4,573,067	24	%	Multifamily	$	4,900,097	24	%	$	4,573,068	24	%
Retail (1)	Retail (1)	4,203,130		21	%	4,075,769		22	%	Retail (1)	4,250,593		21	%	4,075,768		22	%
Industrial (1)	Industrial (1)	3,798,162		19	%	3,617,086		19	%	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)	2,353,550		12	%	2,522,554		13	%	Office (1)	2,285,846		11	%	2,522,554		13	%
Hotel (1)		2,249,020		11	%	2,085,910		11	%
Healthcare (1)	Healthcare (1)	843,825		4	%	796,577		4	%	Healthcare (1)	836,882		4	%	796,577		4	%
Construction and land	Construction and land	781,068		4	%	638,420		3	%	Construction and land	798,190		4	%	638,420		3	%
Other (1)	Other (1)	925,698		5	%	759,975		4	%	Other (1)	1,007,052		5	%	759,975		4	%
Total CRE loans	Total CRE loans	$	19,918,633	100	%	$	19,069,358	100	%	Total CRE loans	$	20,365,665	100	%	$	19,069,358	100	%

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

The weighted-average LTV ratio of the total CRE loan portfolio was 51% as of both ~~June~~September 30, 2023 and December 31, 2022. Weighted average LTV is based on the most recent LTV, which is based on the latest available appraisal and current loan commitment. Approximately ~~90%~~91% of total CRE loans had an LTV ratio of 65% or lower as of ~~both June~~September 30, 2023, ~~and~~compared with 90% as of December 31, 2022.

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


		June 30, 2023																	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:	Geographic markets:																	Geographic markets:
Southern California	Southern California	$	7,372,267	51	%	$	2,290,962	48	%	$	280,881	36	%	$	9,944,110	50	%	Southern California	$	7,552,830	51	%	$	2,296,539	47	%	$	297,311	37	%	$	10,146,680	50	%
Northern California	Northern California	2,712,476		19	%	933,360		20	%	266,151		34	%	3,911,987		20	%	Northern California	2,729,784		19	%	988,375		20	%	246,404		31	%	3,964,563		19	%
California	California	10,084,743		70	%	3,224,322		68	%	547,032		70	%	13,856,097		70	%	California	10,282,614		70	%	3,284,914		67	%	543,715		68	%	14,111,243		69	%
Texas	Texas	1,158,735		8	%	443,373		9	%	16,693		2	%	1,618,801		8	%	Texas	1,111,775		8	%	445,144		9	%	20,720		3	%	1,577,639		8	%
New York	New York	702,765		5	%	224,769		5	%	87,468		11	%	1,015,002		5	%	New York	696,583		5	%	261,433		5	%	76,786		10	%	1,034,802		5	%
Washington	Washington	467,229		3	%	170,163		4	%	18,188		2	%	655,580		3	%	Washington	488,814		3	%	165,257		4	%	18,592		2	%	672,663		3	%
Arizona	Arizona	345,760		2	%	107,549		2	%	18,705		3	%	472,014		2	%	Arizona	357,997		2	%	149,327		3	%	28,496		3	%	535,820		3	%
Nevada	Nevada	205,742		2	%	108,331		2	%	29,516		4	%	343,589		2	%	Nevada	237,442		2	%	106,843		2	%	32,213		4	%	376,498		2	%
Other markets	Other markets	1,408,411		10	%	485,673		10	%	63,466		8	%	1,957,550		10	%	Other markets	1,492,153		10	%	487,179		10	%	77,668		10	%	2,057,000		10	%
Total loans	Total loans	$	14,373,385	100	%	$	4,764,180	100	%	$	781,068	100	%	$	19,918,633	100	%	Total loans	$	14,667,378	100	%	$	4,900,097	100	%	$	798,190	100	%	$	20,365,665	100	%

8185



	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	%

As ~~70%~~69% and 71% of total CRE loans were concentrated in California as of ~~June~~September 30, 2023 and December 31, 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 markets, see Item 1A. Risk Factors — Risks Related to Geopolitical Uncertainties to the Company’s 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 ~~$14.37~~$14.67 billion as of ~~June~~September 30, 2023, compared with $13.86 billion as of December 31, 2022, and accounted for 29% of total loans held-for-investment as of both dates. Interest rates on CRE loans may be fixed, variable or hybrid. As of ~~June~~September 30, 2023, ~~63%~~60% of our CRE portfolio was variable rate, of which ~~49%~~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 ~~June~~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 ~~$4.76~~$4.90 billion as of ~~June~~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 ~~both dates.~~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 ~~June~~September 30, 2023, ~~56%~~54% of our multifamily residential loan portfolio was variable rate, of which ~~37%~~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, 2022, 57% of our multifamily residential loan portfolio was variable rate, of which 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 ~~$781.1~~$798.2 million as of ~~June~~September 30, 2023, compared with $638.4 million as of December 31, 2022, and accounted for 2% and 1% of total loans held-for-investment as of ~~June~~September 30, 2023 and December 31, 2022, respectively. Construction loan exposure was made up of ~~$652.5~~$655.2 million in loans outstanding, plus ~~$753.5~~$699.0 million in unfunded commitments as of ~~June~~September 30, 2023, compared with $536.8 million in loans outstanding, plus $611.4 million in unfunded commitments as of December 31, 2022. Land loans totaled ~~$128.6~~$143.0 million as of ~~June~~September 30, 2023, compared with $101.7 million as of December 31, 2022.

8286

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 ~~June~~September 30, 2023 and December 31, 2022. The average total residential loan size was ~~$435~~$436 thousand and $434 thousand as of ~~June~~September 30, 2023 and December 31, 2022, respectively:


		June 30, 2023													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:	Geographic markets:													Geographic markets:
Southern California	Southern California	$	4,530,084	37	%	$	857,601	46	%	$	5,387,685	38	%	Southern California	$	4,750,136	37	%	$	819,560	46	%	$	5,569,696	38	%
Northern California	Northern California	1,477,224		12	%	411,340		22	%	1,888,564		13	%	Northern California	1,560,454		12	%	387,532		22	%	1,947,986		13	%
California	California	6,007,308		49	%	1,268,941		68	%	7,276,249		51	%	California	6,310,590		49	%	1,207,092		68	%	7,517,682		51	%
New York	New York	4,175,125		34	%	256,468		14	%	4,431,593		31	%	New York	4,274,703		33	%	252,036		14	%	4,526,739		31	%
Washington	Washington	676,043		5	%	205,021		11	%	881,064		6	%	Washington	688,842		6	%	195,881		11	%	884,723		6	%
Massachusetts	Massachusetts	340,553		3	%	78,281		4	%	418,834		3	%	Massachusetts	366,793		3	%	70,672		4	%	437,465		3	%
Georgia	Georgia	371,723		3	%	18,692		1	%	390,415		3	%	Georgia	401,471		3	%	16,822		1	%	418,293		3	%
Nevada														Nevada	377,730		3	%	32,665		2	%	410,395		3	%
Texas	Texas	383,937		3	%	—		—	%	383,937		3	%	Texas	400,214		3	%	—		—	%	400,214		3	%
Nevada		337,639		3	%	34,029		2	%	371,668		3	%
Other markets	Other markets	16,285		0	%	1,496		0	%	17,781		0	%	Other markets	16,215		0	%	1,497		0	%	17,712		0	%
Total	Total	$	12,308,613	100	%	$	1,862,928	100	%	$	14,171,541	100	%	Total	$	12,836,558	100	%	$	1,776,665	100	%	$	14,613,223	100	%
Lien priority:	Lien priority:													Lien priority:
First mortgage	First mortgage	$	12,308,613	100	%	$	1,497,050	80	%	$	13,805,663	97	%	First mortgage	$	12,836,558	100	%	$	1,412,482	80	%	$	14,249,040	98	%
Junior lien mortgage	Junior lien mortgage	—		—	%	365,878		20	%	365,878		3	%	Junior lien mortgage	—		—	%	364,183		20	%	364,183		2	%
Total	Total	$	12,308,613	100	%	$	1,862,928	100	%	$	14,171,541	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	%

8387

Consumer — Single-Family Residential Loans. Single-family residential loans totaled ~~$12.31~~$12.84 billion or 25% of total loans held-for-investment as of ~~June~~September 30, 2023, compared with $11.22 billion or 23% of total loans held-for-investment as of December 31, 2022. Single-family residential loans increased ~~$1.09~~$1.61 billion or ~~10%~~14% from December 31, 2022, primarily driven by 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 ~~June~~September 30, 2023 and December 31, 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 annually, after an initial fixed rate period.

Consumer — Home Equity Lines of Credit. Total HELOC commitments were ~~$5.39~~$5.31 billion as of ~~June~~September 30, 2023, a decrease of ~~$108.0~~$190.5 million or 2%3% from $5.50 billion as of December 31, 2022, with a utilization rate of ~~35%~~33% as of ~~June~~September 30, 2023, compared with 39% as of December 31, 2022. A majority of unfunded HELOC commitments are unconditionally cancellable. HELOCs outstanding totaled ~~$1.86~~$1.78 billion or 4%3% of total loans held-for-investment as of ~~June~~September 30, 2023, compared with $2.12 billion or 5% of total loans held-for-investment as of December 31, 2022. HELOCs outstanding decreased ~~$259.7~~$346.0 million or ~~12%~~16% from December 31, 2022. The Company was in a first lien position for 80% and 83% of total outstanding HELOCs as of ~~June~~September 30, 2023 and December 31, 2022, respectively. The weighted-average LTV ratio was 48% on HELOC commitments as of ~~June~~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. 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 ~~June~~September 30, 2023 and December 31, 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.

8488

Foreign Outstandings

The Company’s overseas offices, which include the branch in Hong Kong and the subsidiary bank in China, are subject to the general risks inherent in conducting business in foreign countries, such as regulatory, economic and political uncertainties. As such, the Company’s international operation risk exposure is largely concentrated in China and Hong Kong. In addition, the Company’s financial assets held in the Hong Kong branch and the subsidiary bank in China may be affected by fluctuations in currency exchange rates or other factors. The following table presents the major financial assets held in the Company’s overseas offices as of ~~June~~September 30, 2023 and December 31, 2022:


		June 30, 2023				December 31, 2022					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:	Hong Kong branch:									Hong Kong branch:
Cash and cash equivalents	Cash and cash equivalents	$	594,333	1	%	$	911,784	1	%	Cash and cash equivalents	$	543,497	1	%	$	911,784	1	%
Interest-bearing deposits with banks	Interest-bearing deposits with banks	$	—	—	%	$	28,772	0	%	Interest-bearing deposits with banks	$	—	—	%	$	28,772	0	%
AFS debt securities (1)	AFS debt securities (1)	$	388,170	1	%	$	281,804	0	%	AFS debt securities (1)	$	579,226	1	%	$	281,804	0	%
Loans held-for-investment (2)	Loans held-for-investment (2)	$	890,249	1	%	$	968,450	2	%	Loans held-for-investment (2)	$	862,116	1	%	$	968,450	2	%
Total assets	Total assets	$	1,887,598	3	%	$	2,212,606	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	$	677,828	1	%	$	556,656	1	%	Cash and cash equivalents	$	603,667	1	%	$	556,656	1	%

AFS debt securities (3)	AFS debt securities (3)	$	117,821	0	%	$	122,053	0	%	AFS debt securities (3)	$	118,523	0	%	$	122,053	0	%
Loans held-for-investment (2)	Loans held-for-investment (2)	$	1,216,970	2	%	$	1,170,437	2	%	Loans held-for-investment (2)	$	1,301,045	2	%	$	1,170,437	2	%
Total assets	Total assets	$	2,006,969	3	%	$	1,836,811	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 ~~June~~September 30, 2023 and December 31, 2022.

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

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

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


($ in thousands)	($ in thousands)	Three Months Ended June 30,								Six Months Ended June 30,								($ in thousands)	Three Months Ended September 30,								Nine Months Ended September 30,
		2023				2022				2023				2022					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	$	12,255	2	%	$	10,768	2	%	$	27,573	2	%	$	18,109	2	%	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	$	11,425	2	%	$	11,236	2	%	$	19,310	1	%	$	19,036	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.

The Company’s stockholders’ equity was ~~$6.46~~$6.60 billion as of ~~June~~September 30, 2023, an increase of ~~$477.1~~$612.1 million or 8%10% from $5.98 billion as of December 31, 2022. The increase in the Company’s stockholders’ equity was primarily due to ~~$634.5~~$922.2 million of net income, partially offset by ~~$137.0~~$205.7 million of common dividends ~~declared.~~declared and $109.7 million 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.

8589

Book value per share was ~~$45.67~~$46.62 as of ~~June~~September 30, 2023, an increase of 8%10% from $42.46 per share as of December 31, 2022, primarily as a result of the factors described above. Tangible book value per share was ~~$42.33~~$43.29 as of ~~June~~September 30, 2023, compared with $39.10 as of December 31, 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 per share during the ~~second~~third quarters of 2023 and 2022, respectively. In ~~July~~October 2023, the Company’s Board of Directors declared ~~third~~fourth quarter 2023 cash dividend of $0.48 per share. The dividend is payable on ~~August~~November 15, 2023, to stockholders of record as of ~~August~~November 1, 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 funding as of ~~June~~September 30, 2023 and December 31, 2022:


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

Noninterest-bearing demand	Noninterest-bearing demand	$	16,741,099	30	%	$	21,051,090	38	%	$	(4,309,991)	(20)	%	Noninterest-bearing demand	$	16,169,072	29	%	$	21,051,090	38	%	$	(4,882,018)	(23)	%
Interest-bearing checking	Interest-bearing checking	8,348,587		15	%	6,672,165		12	%	1,676,422		25	%	Interest-bearing checking	7,689,289		14	%	6,672,165		12	%	1,017,124		15	%
Money market	Money market	11,486,473		21	%	12,265,024		22	%	(778,551)		(6)	%	Money market	12,613,827		23	%	12,265,024		22	%	348,803		3	%
Savings	Savings	2,102,850		4	%	2,649,037		4	%	(546,187)		(21)	%	Savings	1,963,766		4	%	2,649,037		4	%	(685,271)		(26)	%

Time deposits	Time deposits	16,979,777		30	%	13,330,533		24	%	3,649,244		27	%	Time deposits	16,651,077		30	%	13,330,533		24	%	3,320,544		25	%
Total deposits	Total deposits	$	55,658,786	100	%	$	55,967,849	100	%	$	(309,063)	(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	%	Short-term borrowings	$	4,500,000	97	%	$	—	—	%	$	4,500,000	100	%

Repurchase agreements	Repurchase agreements	—		—	%	300,000		67	%	(300,000)		(100)	%	Repurchase agreements	—		—	%	300,000		67	%	(300,000)		(100)	%
Long-term debt	Long-term debt	148,097		3	%	147,950		33	%	147		0	%	Long-term debt	148,173		3	%	147,950		33	%	223		0	%
Total other funds	Total other funds	$	4,648,097	100	%	$	447,950	100	%	$	4,200,147	NM		Total other funds	$	4,648,173	100	%	$	447,950	100	%	$	4,200,223	NM
Total sources of funds	Total sources of funds	$	60,306,883			$	56,415,799			$	3,891,084	7	%	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 ~~$55.66~~$55.09 billion as of ~~June~~September 30, 2023, a decrease of ~~$309.1~~$880.8 million or 1%2% from $55.97 billion as of December 31, 2022. The decrease in deposits was primarily ~~due to a decrease in noninterest-bearing demand accounts, which was~~driven by lower brokered deposits, partially offset by ~~increases~~an increase in ~~time~~customer deposits. The Company paid down a portion of its brokered deposits ~~and interest-bearing checking. The growth in time~~as of September 30, 2023, which decreased the percentage of brokered deposits ~~and interest-bearing checking reflected customers seeking higher yields in a rising interest rate environment.~~to total deposits to 4% from 6% as of December 31, 2022. Noninterest-bearing demand deposits comprised ~~30%~~29% and 38% of total deposits as of ~~June~~September 30, 2023 and December 31, 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 ~~$25.74~~$26.46 billion and $31.04 billion as of ~~June~~September 30, 2023 and December 31, 2022, respectively.

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


($ in thousands)	($ in thousands)		June 30, 2023			December 31, 2022			($ in thousands)		September 30, 2023			December 31, 2022
Uninsured deposits, per regulatory reporting requirements	Uninsured deposits, per regulatory reporting requirements		$	25,738,814		$	31,036,311		Uninsured deposits, per regulatory reporting requirements		$	26,464,794		$	31,036,308
Less: Collateralized deposits	Less: Collateralized deposits		(3,866,970)			(3,776,344)			Less: Collateralized deposits		(3,826,088)			(3,780,329)
Affiliate deposits	Affiliate deposits		(400,340)			(351,181)			Affiliate deposits		(318,804)			(352,977)
Uninsured deposits, excluding collateralized and affiliate deposits	Uninsured deposits, excluding collateralized and affiliate deposits	(a)	$	21,471,504		$	26,908,786		Uninsured deposits, excluding collateralized and affiliate deposits	(a)	$	22,319,902		$	26,903,002

Total domestic deposits	Total domestic deposits	(b)	$	53,153,055		$	53,225,764		Total domestic deposits	(b)	$	52,602,805		$	53,225,764
Uninsured deposits, excluding collateralized and affiliate deposits ratio	Uninsured deposits, excluding collateralized and affiliate deposits ratio	(a) / (b)	40		%	51		%	Uninsured deposits, excluding collateralized and affiliate deposits ratio	(a) / (b)	42		%	51		%

Our deposit base is seasoned, stable and well-diversified. We offer our customers an insured cash sweep (“ICS”) product that allows customers to insure deposits above FDIC insurance limits. During the first half of 2023, we have seen an increase in the demand for the ICS product by our customers. The Company’s domestic uninsured deposits, excluding collateralized and affiliate deposits ratio improved to 40% as of June 30, 2023, compared with 51% as of December 31, 2022. 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 ~~eliminate~~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 $4.50 billion of short-term borrowings outstanding as of ~~June~~September 30, 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 were no short-term borrowings outstanding as of December 31, 2022. 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 BTFP and the Company’s related borrowings.

Repurchase agreements were $300.0 million as of December 31, 2022. ~~During~~The Company extinguished $300.0 million of repurchase agreements during the first ~~half~~quarter of ~~2023, the~~2023. The Company recorded $3.9 million of charges related to the extinguishment of repurchase agreements during the ~~$300.0 million~~first nine months of ~~repurchase agreements.~~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 consists of junior subordinated debt, which qualifies as Tier 2 capital for regulatory capital purposes. Refer to Note 10 — Short-Term Borrowings and Long-Term Debt to the Consolidated Financial Statements in this Form 10-Q for additional information on the junior subordinated debt.

Regulatory Capital and Ratios

The federal banking agencies have risk-based capital adequacy 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 2022 Form 10-K for additional details.

The Company adopted Accounting Standards Update 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 (“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, our capital ratios as of ~~June~~September 30, 2023 reflect a delay of 50% of the estimated impact of CECL on regulatory capital.

The following table presents the Company’s and the Bank’s capital ratios as of ~~June~~September 30, 2023 and December 31, 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
		June 30, 2023				December 31, 2022											September 30, 2023				December 31, 2022
		Company		Bank		Company		Bank		Minimum Regulatory Requirements		Minimum Regulatory Requirements including Capital Conservation Buffer		Well-Capitalized Requirements			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)	13.2	%	12.9	%	12.7	%	12.5	%	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)	13.2	%	12.9	%	12.7	%	12.5	%	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	14.6	%	14.1	%	14.0	%	13.5	%	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)	10.0	%	9.9	%	9.8	%	9.7	%	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 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 well-capitalized Tier 1 capital ratio requirements for the Company 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 ~~June~~September 30, 2023 and December 31, 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 ~~$51.70~~$52.95 billion as of ~~June~~September 30, 2023, an increase of ~~$1.66~~$2.91 billion from $50.04 billion as of December 31, 2022. The increase in the risk-weighted assets was ~~primarily~~ due to ~~residential mortgage and CRE~~growth across all major loan ~~growth.~~portfolios.

Risk Management

Overview

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

The Risk Oversight Committee of the Board of Directors monitors the ERM program through 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 manage ~~and reduce~~ the risks to which the Company’s operations are exposed.

The Company’s ERM program is executed along the three lines of defense model, which provides for a consistent and standardized risk management control environment across the enterprise. The first line of defense is comprised of production, operational and support units. The second line of defense is comprised of various risk management and control functions charged with monitoring and managing specific major risk categories and/or risk subcategories. The third line of defense is comprised of ~~the~~ Internal Audit ~~function~~ and Independent Asset Review (“IAR”)., Internal Audit ~~and IAR provide~~reports to the Chief Audit Executive (“CAE”) who reports to the Board’s Audit Committee. Internal Audit provides assurance and ~~evaluate~~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 ~~certain~~selected primary risk areas are ~~detailed~~discussed in the following subsections of Risk Management.

Credit Risk Management

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

The 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 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 and Allowance for Credit Losses.

Credit Quality

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

The following table presents the Company’s criticized loans as of ~~June~~September 30, 2023 and December 31, 2022:


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

Special mention loans	Special mention loans	$	330,741		$	468,471			$	(137,730)	(29)	%	Special mention loans	$	483,428		$	468,471		$	14,957	3	%
Classified loans (1)	Classified loans (1)	481,051			427,509				53,542		13	%	Classified loans (1)	538,258			427,509			110,749		26	%
Total criticized loans(2)	Total criticized loans(2)	$	811,792		$	895,980		(2)	$	(84,188)	(9)	%	Total criticized loans(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	0.66		%	0.97		%						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	0.97		%	0.89		%						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	1.63		%	1.86		%						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 ~~$115.5~~$103.7 million or ~~0.17%~~0.15% of total assets as of ~~June~~September 30, 2023, an increase of ~~$15.7~~$3.9 million or ~~16%~~4%, compared with $99.8 million or 0.16% of total assets as of December 31, 2022.

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


								Change											Change
($ in thousands)	($ in thousands)	June 30, 2023			December 31, 2022			$		%		($ in thousands)	September 30, 2023			December 31, 2022			$		%
Commercial:	Commercial:											Commercial:
C&I	C&I	$	61,879		$	50,428		$	11,451	23	%	C&I	$	49,147		$	50,428		$	(1,281)	(3)	%
CRE:	CRE:											CRE:
CRE	CRE	15,895			23,244			(7,349)		(32)	%	CRE	610			23,244			(22,634)		(97)	%
Multifamily residential	Multifamily residential	4,703			169			4,534		NM		Multifamily residential	4,680			169			4,511		NM

Construction and land												Construction and land	11,141			—			11,141		100	%
Total CRE	Total CRE	20,598			23,413			(2,815)		(12)	%	Total CRE	16,431			23,413			(6,982)		(30)	%
Consumer:	Consumer:											Consumer:
Residential mortgage:	Residential mortgage:											Residential mortgage:
Single-family residential	Single-family residential	21,981			14,240			7,741		54	%	Single-family residential	24,784			14,240			10,544		74	%
HELOCs	HELOCs	11,051			11,346			(295)		(3)	%	HELOCs	13,202			11,346			1,856		16	%
Total residential mortgage	Total residential mortgage	33,032			25,586			7,446		29	%	Total residential mortgage	37,986			25,586			12,400		48	%
Other consumer	Other consumer	24			99			(75)		(76)	%	Other consumer	136			99			37		37	%
Total nonaccrual loans	Total nonaccrual loans	115,533			99,526			16,007		16	%	Total nonaccrual loans	103,700			99,526			4,174		4	%
OREO, net	OREO, net	—			270			(270)		(100)	%	OREO, net	—			270			(270)		(100)	%

Total nonperforming assets	Total nonperforming assets	$	115,533		$	99,796		$	15,737	16	%	Total nonperforming assets	$	103,700		$	99,796		$	3,904	4	%
Nonperforming assets to total assets	Nonperforming assets to total assets	0.17		%	0.16		%					Nonperforming assets to total assets	0.15		%	0.16		%
Nonaccrual loans to loans held-for-investment	Nonaccrual loans to loans held-for-investment	0.23		%	0.21		%					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	549.97		%	598.48		%					Allowance for loan losses to nonaccrual loans	632.13		%	598.48		%

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 2022 Form 10-K.

Nonaccrual loans were ~~$115.5~~$103.7 million as of ~~June~~September 30, 2023, ~~an increase of $16.0 million or 16% from $99.5~~compared with $99.8 million as of December 31, 2022. ~~This increase was predominantly due to an increase~~Increases in ~~commercial~~construction, multifamily and single-family residential nonaccrual loans ~~partially~~were predominantly offset by ~~charge-offs~~sales of ~~commercial~~CRE nonaccrual loans. As of ~~June~~September 30, 2023, ~~$68.1~~$40.6 million or ~~59%~~39% of nonaccrual loans were less than 90 days delinquent. In comparison, $68.3 million or 69% of nonaccrual loans were less than 90 days delinquent as of December 31, 2022.

9095

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


		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)	June 30, 2023		December 31, 2022		$		%		June 30, 2023		December 31, 2022		($ in thousands)	September 30, 2023		December 31, 2022		$		%		September 30, 2023		December 31, 2022
Commercial:	Commercial:													Commercial:
C&I	C&I	$	5,638	$	9,355	$	(3,717)	(40)	%	0.04	%	0.06	%	C&I	$	33,427	$	9,355	$	24,072	257	%	0.21	%	0.06	%
CRE:	CRE:													CRE:
CRE	CRE	15,189		14,185		1,004		7	%	0.11	%	0.10	%	CRE	2,538		14,185		(11,647)		(82)	%	0.02	%	0.10	%
Multifamily residential	Multifamily residential	962		1,000		(38)		(4)	%	0.02	%	0.02	%	Multifamily residential	1,083		1,000		83		8	%	0.02	%	0.02	%
Construction and land		21,552		—		21,552		100	%	2.76	%	—	%

Total CRE	Total CRE	37,703		15,185		22,518		148	%	0.19	%	0.08	%	Total CRE	3,621		15,185		(11,564)		(76)	%	0.02	%	0.08	%
Total commercial	Total commercial	43,341		24,540		18,801		77	%	0.12	%	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	31,952		25,653		6,299		25	%	0.26	%	0.23	%	Single-family residential	40,113		25,653		14,460		56	%	0.31	%	0.23	%
HELOCs	HELOCs	11,813		8,786		3,027		34	%	0.63	%	0.41	%	HELOCs	16,622		8,786		7,836		89	%	0.94	%	0.41	%
Total residential mortgage	Total residential mortgage	43,765		34,439		9,326		27	%	0.31	%	0.26	%	Total residential mortgage	56,735		34,439		22,296		65	%	0.39	%	0.26	%
Other consumer	Other consumer	983		3,192		(2,209)		(69)	%	1.44	%	4.18	%	Other consumer	126		3,192		(3,066)		(96)	%	0.20	%	4.18	%
Total consumer	Total consumer	44,748		37,631		7,117		19	%	0.31	%	0.28	%	Total consumer	56,861		37,631		19,230		51	%	0.39	%	0.28	%
Total	Total	$	88,089	$	62,171	$	25,918	42	%	0.18	%	0.13	%	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 ~~June~~September 30, 2023 and December 31, 2022.

Allowance for Credit Losses

The Company maintains the allowance for credit losses at a level sufficient to provide appropriate reserves to absorb estimated future credit losses in accordance with GAAP. For additional information on the policies, methodologies and judgments used to determine the allowance for credit losses, see Item 7. MD&A — Critical Accounting Estimates and Item 8. Financial Statements — Note 1 — Summary of Significant Accounting Policies to the Consolidated Financial Statements in the Company’s 2022 Form 10-K, and Note 7 — Loans Receivable and Allowance for Credit Losses to the Consolidated Financial Statements in this Form 10-Q.

9196

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


		June 30, 2023						December 31, 2022							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	Allowance for loan losses													Allowance for loan losses
Commercial:	Commercial:													Commercial:
C&I	C&I	$	375,333		31		%	$	371,700		33		%	C&I	$	383,677		31		%	$	371,700		33		%
CRE:	CRE:													CRE:
CRE	CRE	168,505			29		%	149,864			29		%	CRE	178,040			29		%	149,864			29		%
Multifamily residential	Multifamily residential	22,938			9		%	23,373			10		%	Multifamily residential	24,162			10		%	23,373			10		%
Construction and land	Construction and land	11,325			2		%	9,109			1		%	Construction and land	9,216			2		%	9,109			1		%
Total CRE	Total CRE	202,768			40		%	182,346			40		%	Total CRE	211,418			41		%	182,346			40		%
Total commercial	Total commercial	578,101			71		%	554,046			73		%	Total commercial	595,095			72		%	554,046			73		%
Consumer:	Consumer:													Consumer:
Residential mortgage:	Residential mortgage:													Residential mortgage:
Single-family residential	Single-family residential	51,513			25		%	35,564			23		%	Single-family residential	54,930			25		%	35,564			23		%
HELOCs	HELOCs	4,526			4		%	4,475			4		%	HELOCs	3,795			3		%	4,475			4		%
Total residential mortgage	Total residential mortgage	56,039			29		%	40,039			27		%	Total residential mortgage	58,725			28		%	40,039			27		%
Other consumer	Other consumer	1,260			0		%	1,560			0		%	Other consumer	1,703			0		%	1,560			0		%
Total consumer	Total consumer	57,299			29		%	41,599			27		%	Total consumer	60,428			28		%	41,599			27		%
Total allowance for loan losses	Total allowance for loan losses	$	635,400		100		%	$	595,645		100		%	Total allowance for loan losses	$	655,523		100		%	$	595,645		100		%
Allowance for unfunded credit commitments	Allowance for unfunded credit commitments	$	29,728					$	26,264					Allowance for unfunded credit commitments	$	33,589					$	26,264
Total allowance for credit losses	Total allowance for credit losses	$	665,128					$	621,909					Total allowance for credit losses	$	689,112					$	621,909

Loans held-for-investment	Loans held-for-investment	$	49,828,364					$	48,202,430					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	1.28		%				1.24		%				Allowance for loan losses to loans held-for-investment	1.29		%				1.24		%

		Three Months Ended June 30,						Six Months Ended June 30,							Three Months Ended September 30,						Nine Months Ended September 30,
		2023			2022			2023			2022				2023			2022			2023			2022
Average loans held-for-investment	Average loans held-for-investment	$	48,849,453		$	44,625,760		$	48,498,735		$	43,375,718		Average loans held-for-investment	$	49,888,205		$	46,845,030		$	48,966,981		$	44,544,863

Annualized net charge-offs (recoveries) to average loans held-for-investment		0.06		%	(0.06)		%	0.03		%	0.01		%
Annualized net charge-offs to average loans held-for-investment														Annualized net charge-offs to average loans held-for-investment	0.14		%	0.06		%	0.07		%	0.02		%

~~Second~~Third quarter of 2023 net charge-offs were ~~$7.5~~$18.1 million, or annualized ~~0.06%~~0.14% of average loans held-for-investment, compared with net ~~recoveries~~charge-offs of $6.6 million, or annualized 0.06% of average loans held-for-investment for the ~~second~~third quarter of 2022. ~~First half~~Net charge-offs in the first nine months of 2023 ~~net charge-offs~~ were ~~$8.1~~$26.3 million or annualized ~~0.03%~~0.07% of average loans held-for-investment, compared with ~~$1.7~~$8.3 million or annualized ~~0.01%~~0.02% of average loans held-for-investment for the first ~~half~~nine months of 2022. The ~~increase~~increases in net charge-offs in ~~the second quarter of 2023 was~~both periods were primarily driven by higher losses in ~~our~~the construction and land portfolio and the CRE portfolio, as well as lower recoveries in the C&I portfolio. ~~The increase in net~~These increases were partially offset by lower charge-offs in the ~~first half of 2023 was primarily driven by lower recoveries in our C&I~~multifamily residential portfolio.

Liquidity Risk Management

Liquidity

Liquidity 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 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.

9297

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, 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 we believe is a relatively stable and low-cost source of funding. Our loans are funded by deposits, which amounted to ~~$55.66~~$55.09 billion as of ~~June~~September 30, 2023, compared with $55.97 billion as of December 31, 2022. The Company’s loan-to-deposit ratio was ~~90%~~92% as of ~~June~~September 30, 2023, compared with 86% as of December 31, 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. However, general financial market and economic conditions could impact our access and cost of external funding. Additionally, the Company’s access to capital markets is affected by the ratings received from various credit rating agencies.

Unencumbered loans and/or debt securities were pledged to the FHLB, 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. See Item 2 — MD&A — Balance Sheet Analysis — Deposits and Other Sources of Funding in this Form 10-Q for further details related to the Company’s funding sources. The Company believes its cash and cash equivalents and available borrowing capacity described below provide sufficient liquidity above its expected cash needs.

The Company maintains its source of liquidity in the form of cash and cash equivalents and borrowing capacity with its eligible loans and debt securities as collateral. The following table presents the Company’s total cash and cash equivalents and borrowing capacity as of ~~June~~September 30, 2023 and December 31, 2022:


						Change									Change
($ in thousands)	($ in thousands)	June 30, 2023		December 31, 2022		$		%		($ in thousands)	September 30, 2023		December 31, 2022		$		%
Cash and cash equivalents	Cash and cash equivalents	$	6,377,887	$	3,481,784	$	2,896,103	83	%	Cash and cash equivalents	$	4,561,178	$	3,481,784	$	1,079,394	31	%
Interest-bearing deposits with banks	Interest-bearing deposits with banks	17,169		139,021		(121,852)		(88)	%	Interest-bearing deposits with banks	17,213		139,021		(121,808)		(88)	%

Borrowing capacity:	Borrowing capacity:									Borrowing capacity:
FHLB	FHLB	12,846,387		12,773,996		72,391		1	%	FHLB	13,715,609		12,773,996		941,613		7	%
FRBSF	FRBSF	8,370,223		2,049,048		6,321,175		308	%	FRBSF	8,480,896		2,049,048		6,431,848		314	%
Unpledged available securities	Unpledged available securities	1,611,319		6,939,591		(5,328,272)		(77)	%	Unpledged available securities	1,806,702		6,939,591		(5,132,889)		(74)	%
Federal funds facility	Federal funds facility	941,000		1,136,000		(195,000)		(17)	%	Federal funds facility	946,000		1,136,000		(190,000)		(17)	%

Total	Total	$	30,163,985	$	26,519,440	$	3,644,545	14	%	Total	$	29,527,598	$	26,519,440	$	3,008,158	11	%

The Company’s total cash and cash equivalents and borrowing capacity totaled ~~$30.16~~$29.53 billion as of ~~June~~September 30, 2023, compared with $26.52 billion as of December 31, 2022. The increase was primarily related to an increase in collateral available at the FRBSF and an increase in cash and cash equivalents, which was funded by borrowings from the BTFP in the first quarter of 2023. The BTFP ~~was~~borrowings were secured by pledged ~~securities. The BTFP borrowings~~securities and reflected the Company’s conservative liquidity management practices ~~and were a cautionary measure~~ in response to the volatility in the banking industry earlier in the year.

Liquidity Risk — Cash Requirements. In the ordinary course of business, the Company enters contractual obligations that require future cash payments, including funding for customer deposit withdrawals, repayments for short- and long-term borrowings, and other cash commitments. For additional information on these obligations, see Note 9 — Deposits to 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. 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 ~~June~~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 11 — Commitments and Contingencies to the Consolidated Financial Statements in this Form 10-Q.

The Consolidated Statement of Cash Flows summarizes the Company’s sources and uses of cash by type of activity for the ~~six~~nine months ended ~~June~~September 30, 2023 and 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 in the Company’s 2022 Form 10-K. East West held ~~$253.9~~$263.2 million and $228.5 million in cash and cash equivalents as of ~~June~~September 30, 2023 and December 31, 2022, respectively. Management believes that East West has sufficient cash and cash equivalents to meet the projected cash obligations for the coming year.

Liquidity Risk — Liquidity Stress Testing. The Company utilizes liquidity stress analysis to determine the appropriate amounts of liquidity to maintain at the Company, foreign subsidiary and foreign branch to meet contractual and contingent cash outflows under a range of scenarios. Scenario analyses include assumptions about significant changes in key funding sources, market triggers, potential uses of funding and economic conditions in certain countries. In addition, Company-specific events are incorporated into the stress testing. For example, based on the Company’s analysis of the banking industry disruption earlier in ~~the first half of~~ 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 ~~June~~September 30, 2023, the Company believes it has adequate liquidity resources to conduct operations and meet other needs in the ordinary course of business, and is not aware of any events that are reasonably likely to have a material adverse effect on its liquidity, capital resources or operations. Given the uncertain and rapidly changing market and economic conditions, the Company will continue to actively evaluate the impact on its business and financial position. For more details on how economic conditions may impact our liquidity, see Item 1A. Risk Factors in the Company’s 2022 Form 10-K.

Market Risk Management

Market risk refers to the risk of potential loss due to adverse movements in market risk factors, including interest rates, foreign exchange rates, commodity prices, and credit spreads. The Company is primarily exposed to interest rate risk through its core business activities of extending loans and acquiring deposits. There have been no significant changes in our risk management practices as described in Item 7. MD&A — Market Risk Management in the Company’s 2022 Form 10-K.

Interest Rate Risk Management

Interest rate risk is the risk that market fluctuations in interest rates can 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 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 same time but by different amounts;

•Short- and long-term market interest rates may change by different amounts. For example, the shape of the yield curve may affect the 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 fair value of other financial instruments.

The ALCO coordinates the overall management of the Company’s interest rate risk, meets regularly to review the Company’s open market positions and establishes policies to monitor and limit exposure to market risk. Interest rate risk management is carried out primarily through strategies involving the Company’s loan portfolio, debt securities 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.

~~Interest~~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 multiple interest rate scenarios against a baseline. The simulation model incorporates the market’s forward rate expectations and the Company’s 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”). In addition, the Company also performs simulations using other alternative interest rate scenarios, including various permutations of the yield curve flattening, steepening or inverting. The Company uses the results of these simulations to formulate and gauge strategies to achieve a desired risk profile within 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 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 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 we derive from a regression analysis of the Company’s historical deposit data.

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. ~~For~~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 ~~more detailed discussion~~forecast of the Company’s net interest income ~~simulation model, refer~~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

~~Item 7. MD&A — Market Risk Management~~

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 ~~Company’s 2022 Form 10-K.~~Effective Fed Funds Rate (“EFFR”).

The ~~Federal Reserve continued~~Company recalibrated its ~~aggressive response~~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 ~~inflation by incrementally raising~~better reflect increased competition and higher terminal fed funds rates than previously observed in the ~~target range~~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 ~~fed funds~~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 ~~first half~~prior rising interest rate cycle. The assumption forecasts that a portion of ~~2023. On July 26,~~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 the net interest income simulations, the Company also makes assumptions on the yield related to the re-investment of investment securities and the yields on new loan originations. These assumptions are updated quarterly to reflect recent market conditions as well as forward-looking expectations. In March 2023, loans and deposits with cash flows indexed to China related benchmark interest rates were removed from the ~~Federal Reserve raised the target~~interest rate ~~range to 5.25% to 5.50%~~scenario shocks, which reduced net interest income sensitivity by approximately 0.4%.

As loan and security prepayment assumptions are key components of the Company’s model, the Company incorporates third-party vendor models to forecast prepayment behavior on mortgage loans and securities which have mortgage loans as underlying collateral. These third-party vendor models have access to more comprehensive industry-level data which can capture specific borrower and collateral characteristics over a variety of interest rate cycles. The Company will periodically assess and adjust the vendor models when appropriate to include its own available observations and expectations. In March 2023, the Company updated its version of 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.

101

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 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 ~~June~~September 30, 2023 and December 31, 2022, ~~based~~ 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.


		Net Interest Income Volatility (1)				Net Interest Income Volatility (1)
Change in Interest Rates (in bps)	Change in Interest Rates (in bps)	June 30, 2023		December 31, 2022			Change in Interest Rates (in bps)	September 30, 2023		December 31, 2022
+200	+200	3.9	%	11.6	%		+200	2.5	%	11.6	%
+100	+100	2.3	%	5.9	%		+100	1.6	%	5.9	%
-100	-100	(3.0)	%	(5.3)	%		-100	(2.3)	%	(5.3)	%
-200	-200	(6.3)	%	(8.6)	%		-200	(4.0)	%	(8.6)	%

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

The composition of the Company’s loan portfolio creates sensitivity to interest rate movements due to a mismatch of repricing behavior between the floating-rate loan portfolio and deposit products. In the table above, net interest income volatility expressed in relation to base-case net interest income decreased as of ~~June~~September 30, 2023. This decrease reflected updates to the deposit repricing assumptions and deposit product mix. Noninterest-bearing deposit account balances are assumed to be sensitive to interest rate levels and migrate to interest-bearing deposit accounts.

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 flat balance sheet as of the date of the analysis.


		Net Interest Income Volatility					Net Interest Income Volatility
Change in Interest Rates (in bps)	Change in Interest Rates (in bps)	June 30, 2023		December 31, 2022		Change in Interest Rates (in bps)	September 30, 2023		December 31, 2022
+200 Rate Ramp	+200 Rate Ramp	1.7	%	6.3	%	+200 Rate Ramp	1.8	%	6.3	%
+100 Rate Ramp	+100 Rate Ramp	0.9	%	3.4	%	+100 Rate Ramp	1.2	%	3.4	%
-100 Rate Ramp	-100 Rate Ramp	(1.1)	%	(2.4)	%	-100 Rate Ramp	(0.6)	%	(2.4)	%
-200 Rate Ramp	-200 Rate Ramp	(2.3)	%	(4.9)	%	-200 Rate Ramp	(1.7)	%	(4.9)	%

As of ~~June~~September 30, 2023, the Company’s net interest income profile reflects an asset sensitive position, where assets reprice faster or more significantly than liabilities. Net interest income is expected to increase when interest rates rise as the Company has a large population of variable rate loans, primarily tied to Prime and Term SOFR indices. The Company’s interest income is sensitive to changes in short-term interest rates. As of ~~June~~September 30, 2023, the Company designated interest rate contracts with a notional amount of ~~$5.25~~$4.75 billion as cash flow hedges, which reduced net interest income volatility by approximately ~~1.6%~~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 ~~deposit durations, beta, deposit mix~~modeled behavior and ~~other behavioral assumptions, which were derived using a combination of quantitative and qualitative approaches.~~assumptions. Actual net interest income results may deviate from the ~~model results in terms of~~model’s net interest 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.

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 represents the discounted present value of cash flows over the expected life of the instruments. Due to this longer horizon, EVE is useful to identify risks arising from repricing, prepayment and maturity gaps between assets and liabilities on the balance sheet, as well as from off-balance sheet derivative ~~exposure,~~exposures, over their lifetime. This long-term economic perspective into the Company’s interest rate risk profile allows the Company to identify anticipated negative effects of interest rate fluctuations. However, the difference in time horizons can cause the EVE analysis to diverge from the ~~shorter term~~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 non-parallel shift in market interest rates by 100 and 200 bps as of ~~June~~September 30, 2023 and December 31, ~~2022:~~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.


		EVE Volatility (1)					EVE Volatility (1)
Change in Interest Rates (in bps)	Change in Interest Rates (in bps)	June 30, 2023		December 31, 2022		Change in Interest Rates (in bps)	September 30, 2023		December 31, 2022
+200	+200	(8.1)	%	(6.0)	%	+200	(12.3)	%	(6.0)	%
+100	+100	(3.5)	%	(2.9)	%	+100	(6.1)	%	(2.9)	%
-100	-100	1.5	%	1.1	%	-100	2.6	%	1.1	%
-200	-200	3.0	%	2.3	%	-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.

As of ~~June~~September 30, 2023, the Company’s EVE is expected to decrease when interest rates rise. The change in EVE sensitivity was ~~primarily~~ due to ~~updated~~shorter deposit durations as a result of deposit modeling assumptions, ~~which decreased the duration of the non-maturity deposit portfolio.~~slower prepayments on fixed-rate mortgages and mortgage-backed securities, and additional cash flow hedges to reduce net interest income volatility.

Derivatives

It is the Company’s policy not to speculate on the future direction of interest rates, foreign currency exchange rates and commodity prices. However, the Company periodically enters into derivative transactions in order to manage its exposure to market risk, primarily interest rate risk and foreign currency risk. The Company believes these derivative transactions, when properly structured and managed, 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 ~~U.S. dollar~~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 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 commodity prices. To economically hedge against the derivative contracts entered into with the Company’s customers, the Company enters into offsetting derivative contracts with third-party financial 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 between the Company and counterparty financial institutions. The ~~changes in~~ fair ~~values~~value changes of the derivative contracts traded with third-party financial institutions are expected to be largely comparable to the ~~changes in~~ fair ~~values~~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.

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 risk and the Company has guidelines in place to manage counterparty concentration, tenor limits, and collateral. The Company manages the credit risk of its derivative positions by diversifying its positions among various counterparties, by entering into legally enforceable master netting agreements, and by requiring collateral arrangements, where possible. The Company may also transfer counterparty credit risk related to interest rate swaps to institutional third-parties through the use of credit risk participation agreements. Certain derivative contracts are required to be cleared through central clearinghouses, to further mitigate counterparty credit 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 the counterparty’s and the Company’s own nonperformance risk in the fair value measurement of its derivatives. As of ~~June~~September 30, 2023, the Company anticipates performance by its counterparties and has not incurred any related credit losses.

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


		June 30, 2023						December 31, 2022								September 30, 2023						December 31, 2022
($ in thousands)	($ 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)			($ 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	Cash flow hedges														Cash flow hedges
Notional amount	Notional amount	$	5,000,000		(3)	$	—	$	3,000,000		(3)	$	200,000		Notional amount	$	4,000,000		(3)(4)	$	—	$	3,000,000		(3)	$	200,000
Weighted average:	Weighted average:														Weighted average:
Receive rate	Receive rate	4.95		%		NA		4.91		%		3.83		%	Receive rate	4.95		%		NA		4.91		%		3.83		%
Pay rate	Pay rate	7.10		%		NA		6.23		%		0.48		%	Pay rate	7.31		%		NA		6.23		%		0.48		%
Remaining term (in months)	Remaining term (in months)	41.9				NA		46.6				3.2			Remaining term (in months)	38.8				NA		46.6				3.2

($ in thousands)	($ in thousands)	Foreign Exchange Contracts						Foreign Exchange Contracts							($ in thousands)	Foreign Exchange Contracts						Foreign Exchange Contracts
Net investment hedges	Net investment hedges														Net investment hedges
Notional amount	Notional amount	$	81,480					$	84,832						Notional amount	$	81,480					$	84,832
Hedged percentage ~~(4)~~(5)	Hedged percentage ~~(4)~~(5)	43		%				44		%					Hedged percentage ~~(4)~~(5)	44		%				44		%
Remaining term (in months)	Remaining term (in months)	8.7						2.6							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 ~~one-month LIBOR,~~ SOFR, or Prime.

(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)~~Interest~~Excludes interest rate collars in total notional amount of $250.0 million ~~designated to hedge loans were not included~~ as of both ~~June~~September 30, 2023 and December 31, 2022.

(4)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 contracts and the net RMB exposure from East West Bank (China) Limited.

104

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 2022 Form 10-K, 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.

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 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 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. The non-GAAP financial 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 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 June 30,						Six Months Ended June 30,								Three Months Ended September 30,						Nine Months Ended September 30,
($ in thousands)	($ in thousands)		2023			2022			2023			2022			($ in thousands)		2023			2022			2023			2022
Net income	Net income	(a)	$	312,031		$	258,329		$	634,470		$	495,981		Net income	(a)	$	287,738		$	295,339		$	922,208		$	791,320
Add: Amortization of core deposit intangibles	Add: Amortization of core deposit intangibles		440			488			881			999			Add: Amortization of core deposit intangibles		441			485			1,322			1,484
Amortization of mortgage servicing assets	Amortization of mortgage servicing assets		342			364			698			756			Amortization of mortgage servicing assets		328			340			1,026			1,096
Tax effect of amortization adjustments (1)	Tax effect of amortization adjustments (1)		(230)			(245)			(463)			(505)			Tax effect of amortization adjustments (1)		(225)			(237)			(688)			(742)
Tangible net income (non-GAAP)	Tangible net income (non-GAAP)	(b)	$	312,583		$	258,936		$	635,586		$	497,231		Tangible net income (non-GAAP)	(b)	$	288,282		$	295,927		$	923,868		$	793,158

Average stockholders’ equity	Average stockholders’ equity	(c)	$	6,440,996		$	5,682,427		$	6,312,872		$	5,762,078		Average stockholders’ equity	(c)	$	6,604,798		$	5,772,638		$	6,411,250		$	5,765,637
Less: Average goodwill	Less: Average goodwill		(465,697)			(465,697)			(465,697)			(465,697)			Less: Average goodwill		(465,697)			(465,697)			(465,697)			(465,697)
Average other intangible assets (2)	Average other intangible assets (2)		(6,921)			(8,827)			(7,306)			(9,016)			Average other intangible assets (2)		(6,148)			(8,379)			(6,916)			(8,801)
Average tangible book value (non-GAAP)	Average tangible book value (non-GAAP)	(d)	$	5,968,378		$	5,207,903		$	5,839,869		$	5,287,365		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)	Return on average common equity (3)	(a)/(c)	19.43		%	18.23		%	20.27		%	17.36		%	Return on average common equity (3)	(a)/(c)	17.28		%	20.30		%	19.23		%	18.35		%
Return on average TCE (3) (non-GAAP)	Return on average TCE (3) (non-GAAP)	(b)/(d)	21.01		%	19.94		%	21.95		%	18.96		%	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 ~~second~~third quarter and first ~~half~~nine months of 2023. Applied statutory tax rate of 28.77% for the ~~second~~third quarter and first ~~half~~nine months of 2022.

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

(3)Annualized.


			Three Months Ended June 30,						Six Months Ended June 30,								Three Months Ended September 30,						Nine Months Ended September 30,
($ in thousands)	($ in thousands)		2023			2022			2023			2022			($ in thousands)		2023			2022			2023			2022
Net interest income before provision for credit losses	Net interest income before provision for credit losses	(a)	$	566,746		$	472,952		$	1,166,607		$	888,565		Net interest income before provision for credit losses	(a)	$	570,813		$	551,809		$	1,737,420		$	1,440,374
Total noninterest income	Total noninterest income		78,631			78,444			138,609			158,187			Total noninterest income		76,752			75,552			215,361			233,739
Total revenue	Total revenue	(b)	$	645,377		$	551,396		$	1,305,216		$	1,046,752		Total revenue	(b)	$	647,565		$	627,361		$	1,952,781		$	1,674,113
Noninterest income	Noninterest income		78,631			78,444			138,609			158,187			Noninterest income		76,752			75,552			215,361			233,739
Add: Write-off of AFS debt security (1)	Add: Write-off of AFS debt security (1)		—			—			10,000			—			Add: Write-off of AFS debt security (1)		—			—			10,000			—
Adjusted noninterest income (non-GAAP)	Adjusted noninterest income (non-GAAP)	(c)	78,631			78,444			148,609			158,187			Adjusted noninterest income (non-GAAP)	(c)	76,752			75,552			225,361			233,739
Adjusted revenue (non-GAAP)	Adjusted revenue (non-GAAP)	(a)+(c)=(d)	$	645,377		$	551,396		$	1,315,216		$	1,046,752		Adjusted revenue (non-GAAP)	(a)+(c)=(d)	$	647,565		$	627,361		$	1,962,781		$	1,674,113

Total noninterest expense	Total noninterest expense	(e)	$	261,789		$	196,860		$	480,236		$	386,310		Total noninterest expense	(e)	$	252,014		$	215,973		$	732,250		$	602,283
Less: Amortization of tax credit and other investments	Less: Amortization of tax credit and other investments		(55,914)			(14,979)			(66,024)			(28,879)			Less: Amortization of tax credit and other investments		(49,694)			(19,874)			(115,718)			(48,753)
Amortization of core deposit intangibles	Amortization of core deposit intangibles		(440)			(488)			(881)			(999)			Amortization of core deposit intangibles		(441)			(485)			(1,322)			(1,484)
Repurchase agreements’ extinguishment cost (1)	Repurchase agreements’ extinguishment cost (1)		—			—			(3,872)			—			Repurchase agreements’ extinguishment cost (1)		—			—			(3,872)			—
Adjusted noninterest expense (non-GAAP)	Adjusted noninterest expense (non-GAAP)	(f)	$	205,435		$	181,393		$	409,459		$	356,432		Adjusted noninterest expense (non-GAAP)	(f)	$	201,879		$	195,614		$	611,338		$	552,046

Efficiency ratio	Efficiency ratio	(e)/(b)	40.56		%	35.70		%	36.79		%	36.91		%	Efficiency ratio	(e)/(b)	38.92		%	34.43		%	37.50		%	35.98		%
Adjusted efficiency ratio (non-GAAP)	Adjusted efficiency ratio (non-GAAP)	(f)/(d)	31.83		%	32.90		%	31.13		%	34.05		%	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.

($ and shares in thousands, except per share data) June 30, 2023 December 31, 2022
Stockholders’ equity (a) $ 6,461,697 $ 5,984,612
Less: Goodwill (465,697) (465,697)
Other intangible assets (1)
(6,418) (7,998)
Tangible book value (non-GAAP) (b) $ 5,989,582 $ 5,510,917
Number of common shares at period-end (c) 141,484 140,948
Book value per share (a)/(c) $ 45.67 $ 42.46
Tangible book value per share (non-GAAP) (b)/(c) $ 42.33 $ 39.10

106



($ and shares in thousands, except per share data)		September 30, 2023		December 31, 2022
Stockholders’ equity	(a)	$	6,596,706	$	5,984,612
Less: Goodwill		(465,697)		(465,697)
Other intangible assets (1)		(5,649)		(7,998)
Tangible book value (non-GAAP)	(b)	$	6,125,360	$	5,510,917









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

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

~~100~~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 ~~June~~September 30, 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 ~~June~~September 30, 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 ~~June~~September 30, 2023, that have materially affected or are reasonably likely to materially affect the Company’s internal control over financial reporting.

~~101~~108

PART II — OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

See Note 11 — Commitments and Contingencies — Litigation to the Consolidated Financial Statements in Part I of this Form 10-Q, incorporated herein by reference.

ITEM 1A. RISK FACTORS

The Company’s 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 have been no material changes to the Company’s risk factors as presented in the Company’s 2022 Form 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.~~(1)~~

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 aton 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 or repurchase activities during the three months ended June 30, 2023.~~Equity Securities

~~(1)~~ ~~Represents~~On July 3, 2023, the Company acquired a 49.99% equity 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 ~~update to Item 1A. Risk Factors~~“accredited investor” as such term is defined in ~~the Company's 2022 Form 10-K~~Rule 501(a) of Regulation D (“Regulation D”) promulgated under the ~~heading,~~ "Securities Act of 1933, as amended (the “Securities Act”). The ~~actions~~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 future performance period. The Company issued the PRSUs in reliance upon the exemptions from registration available under Section 4(a)(2) of the Securities Act and ~~soundness~~Rule 506(b) of ~~other financial institutions could affect us."~~Regulation D.

~~102~~

ITEM 5. OTHER INFORMATION

During the three months ended ~~June~~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).

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 March 14, 2023 [Incorporated by reference to Exhibit 3.1 from Registrant’s Current Report on Form 8-K filed with the Commission on Ma rch 1 7, 202 3 (File No. 000-24939).]















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.

~~103~~111

GLOSSARY OF ACRONYMS


AFS	Available-for-sale	HELOC	Home equity lines of credit
ALCO	Asset/Liability Committee	HTM	Held-to-maturity
AOCI	Accumulated other comprehensive (loss) income	~~ICS~~IAR	~~Insured cash sweep~~
~~ARR~~	~~Alternative reference rate~~	~~LCH~~	~~London Clearing House~~Independent Asset Review
ASC	Accounting Standards Codification	~~LGD~~ICS	~~Loss given default~~Insured cash sweep
ASU	Accounting Standards Update	~~LIBOR~~IDI	~~London Interbank Offered Rate~~Insured deposit institution
BTFP	Bank Term Funding Program	~~LTV~~LCH	~~Loan-to-value~~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
~~CECL~~CLO	~~Current expected credit losses~~Collateralized loan obligations	MMBTU	Million British thermal unit
~~CFPB~~CME	~~Consumer Financial Protection Bureau~~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
~~CRA~~CRFRA	~~Community Reinvestment~~Climate-Related Financial Risk Act	PD	Probability of default
~~CRE~~DIF	~~Commercial real estate~~Deposit Insurance Fund	PRSU	Performance restricted stock unit
EFFR	Effective Federal Funds Rate	RMB	Chinese Renminbi
~~DIF~~EPS	~~Deposit Insurance Fund~~Earnings per share	ROA	Return on average assets
~~EPS~~ERM	~~Earnings per share~~Enterprise risk management	ROC	Risk Oversight Committee
EVE	Economic value of equity	ROE	Return on average equity
~~ERM~~FASB	~~Enterprise risk management~~Financial Accounting Standards Board	RPA	Credit risk participation agreement
~~EVE~~FDIC	~~Economic value of equity~~Federal Deposit Insurance Corporation	RSU	Restricted stock unit
~~FASB~~FHLB	~~Financial Accounting Standards Board~~Federal Home Loan Bank	SBLC	Standby letters of credit
~~FDIC~~FIL	~~Federal Deposit Insurance Corporation~~Financial Institution Letter	SEC	U.S. Securities and Exchange Commission
~~FHLB~~	~~Federal Home Loan Bank~~	~~SOFR~~	~~Secured Overnight Financing Rate~~
~~FIL~~	~~Financial Institution Letter~~	~~TCE~~	~~Tangible Common Equity~~
FRBSF	Federal Reserve Bank of San Francisco	~~TDR~~SOFR	~~Troubled debt restructuring~~Secured Overnight Financing Rate
FTP	Funds transfer pricing	~~U.S.~~TCE	~~United States~~Tangible Common Equity
GAAP	Generally Accepted Accounting Principles	~~USD~~TDR	~~U.S. dollar~~Troubled debt restructuring
GDP	Gross Domestic Product	U.S.	United States
GHG	Greenhouse gas	USD	U.S. dollar

~~104~~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:

~~August~~November 8, 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

~~105~~113


		Page
Overview		6365
Financial Review		6567
Results of Operations		6668
	Net Interest Income	6668
	Noninterest Income	7174
	Noninterest Expense	7275
	Income Taxes	7376
	Operating Segment Results	7376
Balance Sheet Analysis		7781
	Debt Securities	7781
	Loan Portfolio	7983
	Foreign Outstandings	8589
	Capital	8589
	Deposits and Other Sources of Funding	8690
	Regulatory Capital and Ratios	8792
Risk Management		8893
	Credit Risk Management	8994
	Liquidity Risk Management	9297
	Market Risk Management	94100
Critical Accounting Policies and Estimates		99105
Reconciliation of GAAP to Non-GAAP Financial Measures		99105