0001069157us-gaap:FinancingReceivables60To89DaysPastDueMemberus-gaap:ConsumerPortfolioSegmentMember2021-12-31



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

FORM 10-Q


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


For the quarterly period ended September 30, 20172022

or

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

For the transition period from to

Commission file number 000-24939


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


Delaware
Delaware
(State or other jurisdiction of incorporation or organization)
95-4703316
(I.R.S. Employer Identification No.)
135 North Los Robles Ave., 7th Floor, Pasadena, California 91101
 (Address of principal executive offices)(Zip Code)


95-4703316
(I.R.S. Employer Identification No.)

135 North Los Robles Ave., 7th Floor, Pasadena, California 91101
(Address of principal executive offices) (Zip Code)

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

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

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes x☒ No ¨☐

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


Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filerx☒Accelerated filer¨☐
Non-accelerated filer¨☐(Do not check if a smaller reporting company)Smaller reporting company¨☐
Emerging growth company¨☐


If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨☐


Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes ¨☐ No x☒

Number of shares outstanding of the issuer’s common stock on the latest practicable date: 144,542,911140,946,569 shares as of October 31, 2017.

2022.




TABLE OF CONTENTS
Page
3
Page
PART I — FINANCIAL INFORMATION
Item 1.
53
Consolidated Balance SheetsSheet (Unaudited)
53
Consolidated StatementsStatement of Income (Unaudited)
64
Consolidated StatementsStatement of Comprehensive Income (Unaudited)
75
Consolidated StatementsStatement of Changes in Stockholders’ Equity (Unaudited)
86
Consolidated StatementsStatement of Cash Flows (Unaudited)
97
119
1 — Basis of Presentation
119
2 — Current Accounting Developments and Summary of Significant Accounting Policies
1110
3 — Dispositions
14
4 — Fair Value Measurement and Fair Value of Financial Instruments
1511
54 — SecuritiesAssets Purchased under Resale Agreements and Sold under Repurchase Agreements
2421
5 — Securities
23
6 — SecuritiesDerivatives
2729
7 — Derivatives
30
8 — Loans Receivable and Allowance for Credit Losses
3536
98 — Investments in Qualified Affordable Housing Partnerships, Tax Credit and Other Investments, Net and Variable Interest Entities
4850
109 — Goodwill and Other Intangible Assets
4952
1110 — Commitments and Contingencies
5052
1211 — Stock Compensation Plans
5153
1312 — Stockholders’ Equity and Earnings Per Share
5255
1413 — Accumulated Other Comprehensive Income (Loss)
5356
1514 — Business Segments
5458
16 — Subsequent Events
56
5761
Overview
57
Results of Operations
59
Balance Sheet Analysis
72
Off-Balance Sheet Arrangements
86
Asset Liability and Market Risk Management
87
Critical Accounting Policies and Estimates
91
92106
92106
93107
93107
93107
93107
93108
94109
95110
EXHIBIT INDEX
96

2

Forward-Looking Statements

Certain matters discussed in this Quarterly Report on Form 10-Q (“Form 10-Q”) contain or incorporate statements that East West Bancorp, Inc. (referred to herein on an unconsolidated basis as “East West” and on a consolidated basis as the “Company”) believes are “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Rule 175 promulgated thereunder, and Section 21E of the Securities Exchange Act of 1934, as amended, and Rule 3b-6 promulgated thereunder. These statements relate to the Company’s financial condition, results of operations, plans, objectives, future performance or business. They usually can be identified by the use of forward-looking language, such as “likely result in,” “expects,” “anticipates,” “estimates,” “forecasts,” “projects,” “intends to,” or may include other similar words or phrases, such as “believes,” “plans,” “trend,” “objective,” “continues,” “remains,” or similar expressions, or future or conditional verbs, such as “will,” “would,” “should,” “could,” “may,” “might,” “can,” or similar verbs. You should not place undue reliance on these statements, as they are subject to risks and uncertainties, including, but not limited to, those described in the documents incorporated by reference. When considering these forward-looking statements, you should keep in mind these risks and uncertainties, as well as any cautionary statements the Company may make. Moreover, you should treat these statements as speaking only as of the date they are made and based only on information then actually known to the Company. 
There are a number of important factors that could cause future results to differ materially from historical performance and these forward-looking statements. Factors that might cause such differences, some of which are beyond the Company’s control, include, but are not limited to:

the Company’s ability to compete effectively against other financial institutions in its banking markets;
changes in the commercial and consumer real estate markets;
changes in the Company’s costs of operation, compliance and expansion;
changes in the United States (“U.S.”) economy, including inflation, employment levels, rate of growth and general business conditions;
changes in government interest rate policies;
changes in laws or the regulatory environment including regulatory reform initiatives and policies of the U.S. Department of Treasury, the Board of Governors of the Federal Reserve Board System, the Federal Deposit Insurance Corporation, the U.S. Securities and Exchange Commission, the Consumer Financial Protection Bureau and the California Department of Business Oversight — Division of Financial Institutions;
heightened regulatory and governmental oversight and scrutiny of the Company’s business practices, including dealings with consumers;
changes in the economy of and monetary policy in the People’s Republic of China;
changes in income tax laws and regulations;
changes in accounting standards as may be required by the Financial Accounting Standards Board (“FASB”) or other regulatory agencies and their impact on critical accounting policies and assumptions;
changes in the equity and debt securities markets;
future credit quality and performance, including the Company’s expectations regarding future credit losses and allowance levels;
fluctuations in the Company’s stock price;
fluctuations in foreign currency exchange rates;
success and timing of the Company’s business strategies;
ability of the Company to adopt and successfully integrate new technologies into its business in a strategic manner;
impact of reputational risk from negative publicity, fines and penalties and other negative consequences from regulatory violations and legal actions;
impact of potential federal tax changes and spending cuts;
impact of adverse judgments or settlements in litigation;
impact of regulatory enforcement actions;
changes in the Company’s ability to receive dividends from its subsidiaries;
impact of political developments, wars or other hostilities that may disrupt or increase volatility in securities or otherwise affect economic conditions;
impact of natural or man-made disasters or calamities or conflicts or other events that may directly or indirectly result in a negative impact on the Company’s financial performance;
continuing consolidation in the financial services industry;
the Company’s capital requirements and its ability to generate capital internally or raise capital on favorable terms;
impact of the Dodd-Frank Wall Street Reform and Consumer Protection Act on the Company’s business, business practices and cost of operations;
impact of adverse changes to the Company’s credit ratings from the major credit rating agencies;


impact of failure in, or breach of, the Company’s operational or security systems or infrastructure, or those of third parties with whom the Company does business, including as a result of cyber attacks; and other similar matters which could result in, among other things, confidential and/or proprietary information being disclosed or misused;
adequacy of the Company’s risk management framework, disclosure controls and procedures and internal control over financial reporting;
the effect of the current low interest rate environment or changes in interest rates on the Company’s net interest income and net interest margin;
the effect of changes in the level of checking or savings account deposits on the Company’s funding costs and net interest margin; and
a recurrence of significant turbulence or disruption in the capital or financial markets, which could result in, among other things, a reduction in the availability of funding or increased funding costs, reduced investor demand for mortgage loans and declines in asset values and/or recognition of other-than-temporary impairment (“OTTI”) on securities held in the Company’s available-for-sale investment securities portfolio.

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, 2016, filed with the U.S. Securities and Exchange Commission on February 27, 2017 (the “Company’s 2016 Form 10-K”), under the heading “ITEM 1A. RISK FACTORS” and the information set forth under “ITEM 1A. RISK FACTORS” in this Form 10-Q. The Company does not undertake, and specifically disclaims any obligation to update 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 SHEETSSHEET
($ in thousands, except shares)

(Unaudited)
September 30,
2022		December 31,
2021
(Unaudited)
ASSETS
Cash and due from banks$554,260 $527,317 
Interest-bearing cash with banks1,609,093 3,385,618 
Cash and cash equivalents2,163,353 3,912,935 
Interest-bearing deposits with banks630,543 736,492 
Assets purchased under resale agreements (“resale agreements”)892,986 2,353,503 
Securities:
Available-for-sale (“AFS”) debt securities, at fair value (amortized cost of $6,771,354 and $10,087,179)5,906,090 9,965,353 
Held-to-maturity (“HTM”) debt securities, at amortized cost (fair value of $2,459,135)3,012,667 — 
Loans held-for-sale14,500 635 
Loans held-for-investment (net of allowance for loan losses of $582,517 and $541,579)46,859,738 41,152,202 
Investments in qualified affordable housing partnerships, tax credit and other investments, net725,254 628,263 
Premises and equipment (net of accumulated depreciation of $146,073 and $139,358)91,587 97,302 
Goodwill465,697 465,697 
Operating lease right-of-use assets105,411 98,632 
Other assets1,708,235 1,459,687 
TOTAL$62,576,061 $60,870,701 
LIABILITIES
Deposits:
Noninterest-bearing$21,645,394 $22,845,464 
Interest-bearing32,211,968 30,505,068 
Total deposits53,857,362 53,350,532 
Federal funds purchased200,000 — 
Federal Home Loan Bank (“FHLB”) advances324,920 249,331 
Assets sold under repurchase agreements (“repurchase agreements”)611,785 300,000 
Long-term debt and finance lease liabilities152,610 151,997 
Operating lease liabilities113,477 105,534 
Accrued expenses and other liabilities1,655,239 876,089 
Total liabilities56,915,393 55,033,483 
COMMITMENTS AND CONTINGENCIES (Note 10)
STOCKHOLDERS’ EQUITY
Common stock, $0.001 par value, 200,000,000 shares authorized; 168,427,227 and 167,790,645 shares issued168 168 
Additional paid-in capital1,926,393 1,893,557 
Retained earnings5,302,897 4,683,659 
Treasury stock, at cost 27,509,715 and 25,882,691 shares(768,758)(649,785)
Accumulated other comprehensive loss (“AOCI”), net of tax(800,032)(90,381)
Total stockholders’ equity5,660,668 5,837,218 
TOTAL$62,576,061 $60,870,701 
 
  September 30,
2017		 December 31,
2016
  (Unaudited)  
ASSETS    
Cash and due from banks $364,328
 $460,559
Interest-bearing cash with banks 1,372,421
 1,417,944
Cash and cash equivalents 1,736,749
 1,878,503
Interest-bearing deposits with banks 404,946
 323,148
Securities purchased under resale agreements (“resale agreements”) 1,250,000
 2,000,000
Securities :    
Available-for-sale investment securities, at fair value (includes assets pledged as collateral of $584,907 in 2017 and $767,437 in 2016) 2,956,776
 3,335,795
Held-to-maturity investment security, at cost (fair value of $144,593 in 2016) —
 143,971
Restricted equity securities, at cost 73,322
 72,775
Loans held-for-sale 178
 23,076
Loans held-for-investment (net of allowance for loan losses of $285,926 in 2017 and $260,520 in 2016; includes assets pledged as collateral of $18,182,265 in 2017 and $16,441,068 in 2016) 28,239,431
 25,242,619
Investments in qualified affordable housing partnerships, net 178,344
 183,917
Investments in tax credit and other investments, net 203,758
 173,280
Premises and equipment (net of accumulated depreciation of $109,296 in 2017 and $114,890 in 2016) 131,311
 159,923
Goodwill 469,433
 469,433
Other assets 663,718
 782,400
TOTAL $36,307,966
 $34,788,840
LIABILITIES  
  
Customer deposits:  
  
Noninterest-bearing $10,992,674
 $10,183,946
Interest-bearing 20,318,988
 19,707,037
Total deposits 31,311,662
 29,890,983
Short-term borrowings 24,813
 60,050
Federal Home Loan Bank (“FHLB”) advances 323,323
 321,643
Securities sold under repurchase agreements (“repurchase agreements”) 50,000
 350,000
Long-term debt 176,513
 186,327
Accrued expenses and other liabilities 639,759
 552,096
Total liabilities 32,526,070
 31,361,099
COMMITMENTS AND CONTINGENCIES (Note 11) 

 

STOCKHOLDERS’ EQUITY    
Common stock, $0.001 par value, 200,000,000 shares authorized; 165,178,075 and 164,604,072 shares issued in 2017 and 2016, respectively 165
 164
Additional paid-in capital 1,745,181
 1,727,434
Retained earnings 2,520,817
 2,187,676
Treasury stock at cost — 20,667,132 shares in 2017 and 20,436,621 shares in 2016 (452,050) (439,387)
Accumulated other comprehensive loss, net of tax (32,217) (48,146)
Total stockholders’ equity 3,781,896
 3,427,741
TOTAL $36,307,966
 $34,788,840
 



See accompanying Notes to Consolidated Financial Statements.


53



EAST WEST BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTSSTATEMENT OF INCOME
($ and shares in thousands, except per share data)
(Unaudited)
 Three Months Ended
September 30,		 Nine Months Ended
September 30,		Three Months Ended
September 30,		Nine Months Ended
September 30,
 2017 2016 2017 20162022202120222021
INTEREST AND DIVIDEND INCOME      
  
INTEREST AND DIVIDEND INCOME
Loans receivable, including fees $306,939
 $255,316
 $872,039
 $763,189
Loans receivable, including fees$560,452 $363,503 $1,376,978 $1,057,964 
Investment securities 14,828
 13,388
 43,936
 37,433
Debt securitiesDebt securities51,092 37,826 139,935 101,616 
Resale agreements 7,901
 7,834
 25,222
 22,479
Resale agreements6,769 8,957 23,705 23,077 
Restricted equity securities 612
 611
 1,859
 2,008
Restricted equity securities843 500 2,274 1,588 
Interest-bearing cash and deposits with banks 9,630
 3,168
 22,298
 10,245
Interest-bearing cash and deposits with banks9,080 4,521 17,127 11,781 
Total interest and dividend income 339,910
 280,317
 965,354
 835,354
Total interest and dividend income628,236 415,307 1,560,019 1,196,026 
INTEREST EXPENSE      
  
INTEREST EXPENSE
Customer deposits 31,086
 21,049
 81,803
 60,708
DepositsDeposits68,894 15,970 104,371 55,790 
Federal funds purchased and other short-term borrowings 212
 212
 877
 390
Federal funds purchased and other short-term borrowings1,177 — 1,427 42 
FHLB advances 1,947
 1,361
 5,738
 4,153
FHLB advances392 857 1,529 6,025 
Repurchase agreements 2,122
 2,319
 7,538
 6,441
Repurchase agreements4,421 2,012 8,855 5,981 
Long-term debt 1,388
 1,228
 4,030
 3,726
Long-term debt and finance lease liabilitiesLong-term debt and finance lease liabilities1,543 762 3,463 2,314 
Total interest expense 36,755
 26,169
 99,986
 75,418
Total interest expense76,427 19,601 119,645 70,152 
Net interest income before provision for credit losses
303,155
 254,148
 865,368
 759,936
Provision for credit losses 12,996
 9,525
 30,749
 17,018
Net interest income after provision for credit losses 290,159
 244,623
 834,619
 742,918
Net interest income before provision for (reversal of) credit lossesNet interest income before provision for (reversal of) credit losses551,809 395,706 1,440,374 1,125,874 
Provision for (reversal of) credit lossesProvision for (reversal of) credit losses27,000 (10,000)48,500 (25,000)
Net interest income after provision for (reversal of) credit lossesNet interest income after provision for (reversal of) credit losses524,809 405,706 1,391,874 1,150,874 
NONINTEREST INCOME      
  
NONINTEREST INCOME
Branch fees 10,803
 10,408
 31,799
 30,983
Letters of credit fees and foreign exchange income 10,154
 10,908
 33,209
 31,404
Ancillary loan fees and other income 5,987
 6,135
 16,876
 13,997
Lending feesLending fees20,289 17,516 59,869 56,965 
Deposit account feesDeposit account fees23,636 18,508 66,323 51,233 
Interest rate contracts and other derivative incomeInterest rate contracts and other derivative income8,761 7,156 29,695 20,981 
Foreign exchange incomeForeign exchange income10,083 13,101 34,143 35,634 
Wealth management fees 3,615
 4,033
 11,682
 9,862
Wealth management fees8,903 5,598 21,494 20,460 
Derivative fees and other income 6,663
 5,791
 12,934
 9,778
Net gains on sales of loans 2,361
 2,158
 6,660
 6,965
Net gains on sales of loans2,129 3,329 5,968 6,601 
Net gains on sales of available-for-sale investment securities 1,539
 1,790
 6,733
 8,468
Net gains on sales of fixed assets 1,043
 486
 74,092
 2,916
Net gain on sale of business 3,807
 —
 3,807
 —
Other fees and operating income 3,652
 7,632
 15,255
 19,745
Gains on sales of AFS debt securitiesGains on sales of AFS debt securities— 354 1,306 1,178 
Other investment (loss) incomeOther investment (loss) income(580)5,349 5,910 13,870 
Other incomeOther income2,331 2,198 9,031 7,484 
Total noninterest income 49,624
 49,341
 213,047
 134,118
Total noninterest income75,552 73,109 233,739 214,406 
NONINTEREST EXPENSE      
  
NONINTEREST EXPENSE
Compensation and employee benefits 79,583
 75,042
 244,930
 220,166
Compensation and employee benefits127,580 105,751 357,213 318,985 
Occupancy and equipment expense 16,635
 15,456
 47,829
 45,619
Occupancy and equipment expense15,920 15,851 46,853 47,150 
Deposit insurance premiums and regulatory assessments 5,676
 6,450
 17,384
 17,341
Deposit insurance premiums and regulatory assessments4,875 4,641 14,519 12,791 
Deposit account expenseDeposit account expense6,707 4,136 17,071 11,845 
Data processingData processing3,725 3,575 10,876 12,088 
Computer software expenseComputer software expense6,889 8,426 20,755 23,106 
Consulting expenseConsulting expense1,620 1,635 5,474 4,978 
Legal expense 3,316
 5,361
 8,930
 12,714
Legal expense689 2,363 2,454 5,840 
Data processing 3,004
 2,729
 9,009
 8,712
Consulting expense 4,087
 4,594
 10,775
 19,027
Deposit related expense 2,413
 3,082
 7,283
 7,675
Computer software expense 4,393
 3,331
 13,823
 9,267
Other operating expense 19,830
 19,814
 55,357
 58,508
Other operating expense28,094 20,998 78,315 58,544 
Amortization of tax credit and other investments 23,827
 32,618
 66,059
 60,779
Amortization of tax credit and other investments19,874 38,008 48,753 90,657 
Amortization of core deposit intangibles 1,735
 2,023
 5,314
 6,177
Total noninterest expense 164,499
 170,500
 486,693
 465,985
Total noninterest expense215,973 205,384 602,283 585,984 
INCOME BEFORE INCOME TAXES 175,284
 123,464
 560,973
 411,051
INCOME BEFORE INCOME TAXES384,388 273,431 1,023,330 779,296 
INCOME TAX EXPENSE 42,624
 13,321
 140,247
 90,108
INCOME TAX EXPENSE89,049 47,982 232,010 124,111 
NET INCOME $132,660
 $110,143
 $420,726
 $320,943
NET INCOME$295,339 $225,449 $791,320 $655,185 
EARNINGS PER SHARE (“EPS”)        EARNINGS PER SHARE (“EPS”)
BASIC $0.92
 $0.76
 $2.91
 $2.23
BASIC$2.10 $1.59 $5.59 $4.62 
DILUTED $0.91
 $0.76
 $2.88
 $2.21
DILUTED$2.08 $1.57 $5.55 $4.58 
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING        
WEIGHTED-AVERAGE NUMBER OF SHARES OUTSTANDINGWEIGHTED-AVERAGE NUMBER OF SHARES OUTSTANDING
BASIC 144,498
 144,122
 144,412
 144,061
BASIC140,917 141,880 141,453 141,799 
DILUTED 145,882
 145,238
 145,849
 145,086
DILUTED142,011 143,143 142,601 143,051 
DIVIDENDS DECLARED PER COMMON SHARE $0.20
 $0.20
 $0.60
 $0.60



See accompanying Notes to Consolidated Financial Statements.


64



EAST WEST BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTSSTATEMENT OF COMPREHENSIVE INCOME
($ in thousands)
(Unaudited)
Three Months Ended
September 30,		Nine Months Ended
September 30,
2022202120222021
Net income$295,339 $225,449 $791,320 $655,185 
Other comprehensive loss, net of tax:
Net changes in unrealized losses on AFS debt securities(161,445)(41,178)(523,593)(101,577)
Net changes in unrealized gains (losses) on securities transferred from AFS to HTM3,256 — (103,674)— 
Net changes in unrealized (losses) gains on cash flow hedges(33,269)51 (64,372)551 
Foreign currency translation adjustments(7,926)(1,752)(18,012)(867)
Other comprehensive loss(199,384)(42,879)(709,651)(101,893)
COMPREHENSIVE INCOME$95,955 $182,570 $81,669 $553,292 
 
  Three Months Ended
September 30,		 Nine Months Ended
September 30,
  2017 2016 2017 2016
Net income $132,660
 $110,143
 $420,726
 $320,943
Other comprehensive income (loss), net of tax:        
Net change in unrealized (losses) gains on available-for-sale investment securities (1,906) (4,907) 7,916
 12,993
Foreign currency translation adjustments 3,870
 (555) 8,013
 (5,226)
Other comprehensive income (loss) 1,964
 (5,462) 15,929
 7,767
COMPREHENSIVE INCOME $134,624
 $104,681
 $436,655
 $328,710
 



See accompanying Notes to Consolidated Financial Statements.


75



EAST WEST BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTSSTATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY
($ in thousands, except share data)shares)
(Unaudited)
 
  Common Stock and Additional Paid-in Capital 
Retained
Earnings
 
Treasury
Stock
 Accumulated Other Comprehensive Loss, Net of Tax 
Total
Stockholders’
Equity
  Shares Amount    
BALANCE, JANUARY 1, 2016 143,909,233
 $1,701,459
 $1,872,594
 $(436,162) $(14,941) $3,122,950
Net income —
 —
 320,943
 —
 —
 320,943
Other comprehensive income —
 —
 —
 —
 7,767
 7,767
Stock compensation costs —
 13,973
 —
 —
 —
 13,973
Net activity of common stock pursuant to various stock compensation plans and agreements, and related tax benefits 224,071
 2,981
 —
 (3,144) —
 (163)
Cash dividends on common stock —
 —
 (87,416) —
 —
 (87,416)
BALANCE, SEPTEMBER 30, 2016 144,133,304
 $1,718,413
 $2,106,121
 $(439,306) $(7,174) $3,378,054
BALANCE, JANUARY 1, 2017 144,167,451
 $1,727,598
 $2,187,676
 $(439,387) $(48,146) $3,427,741
Net income —
 —
 420,726
 —
 —
 420,726
Other comprehensive income —
 —
 —
 —
 15,929
 15,929
Stock compensation costs —
 15,780
 —
 —
 —
 15,780
Net activity of common stock pursuant to various stock compensation plans and agreements 343,492
 1,968
 —
 (12,663) —
 (10,695)
Cash dividends on common stock —
 —
 (87,585) —
 —
 (87,585)
BALANCE, SEPTEMBER 30, 2017 144,510,943
 $1,745,346
 $2,520,817
 $(452,050) $(32,217) $3,781,896
 


Common Stock and
Additional Paid-in Capital		Retained EarningsTreasury StockAOCI,
Net of Tax		Total
Stockholders’ Equity
SharesAmount
BALANCE, JULY 1, 2021141,877,505 $1,876,247 $4,335,327 $(649,337)$(14,689)$5,547,548 
Net income— — 225,449 — — 225,449 
Other comprehensive loss— — — — (42,879)(42,879)
Issuance of common stock pursuant to various stock compensation plans and agreements9,643 7,792 — — — 7,792 
Repurchase of common stock pursuant to various stock compensation plans and agreements(3,417)— — (254)— (254)
Cash dividends on common stock ($0.33 per share)— — (47,455)— — (47,455)
BALANCE, SEPTEMBER 30, 2021141,883,731 $1,884,039 $4,513,321 $(649,591)$(57,568)$5,690,201 
BALANCE, JULY 1, 2022140,917,389 $1,914,232 $5,064,650 $(768,752)$(600,648)$5,609,482 
Net income— — 295,339 — — 295,339 
Other comprehensive loss— — — — (199,384)(199,384)
Issuance of common stock pursuant to various stock compensation plans and agreements206 12,329 — — — 12,329 
Repurchase of common stock pursuant to various stock compensation plans and agreements(83)— — (6)— (6)
Cash dividends on common stock ($0.40 per share)— — (57,092)— — (57,092)
BALANCE, SEPTEMBER 30, 2022140,917,512 $1,926,561 $5,302,897 $(768,758)$(800,032)$5,660,668 

Common Stock and
Additional Paid-in Capital		Retained EarningsTreasury StockAOCI,
Net of Tax		Total
Stockholders’ Equity
SharesAmount
BALANCE, JANUARY 1, 2021141,565,229 $1,858,519 $4,000,414 $(634,083)$44,325 $5,269,175 
Net income— — 655,185 — — 655,185 
Other comprehensive loss— — — — (101,893)(101,893)
Issuance of common stock pursuant to various stock compensation plans and agreements523,449 25,520 — — — 25,520 
Repurchase of common stock pursuant to various stock compensation plans and agreements(204,947)— — (15,508)— (15,508)
Cash dividends on common stock ($0.99 per share)— — (142,278)— — (142,278)
BALANCE, SEPTEMBER 30, 2021141,883,731 $1,884,039 $4,513,321 $(649,591)$(57,568)$5,690,201 
BALANCE, JANUARY 1, 2022141,907,954 $1,893,725 $4,683,659 $(649,785)$(90,381)$5,837,218 
Net income— — 791,320 — — 791,320 
Other comprehensive loss— — — — (709,651)(709,651)
Issuance of common stock pursuant to various stock compensation plans and agreements640,053 32,836 — — — 32,836 
Repurchase of common stock pursuant to various stock compensation plans and agreements(244,978)— — (18,983)— (18,983)
Repurchase of common stock pursuant to the Stock Repurchase Plan(1,385,517)— — (99,990)— (99,990)
Cash dividends on common stock ($1.20 per share)— — (172,082)— — (172,082)
BALANCE, SEPTEMBER 30, 2022140,917,512 $1,926,561 $5,302,897 $(768,758)$(800,032)$5,660,668 


See accompanying Notes to Consolidated Financial Statements.


86



EAST WEST BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTSSTATEMENT OF CASH FLOWS
($ in thousands)
(Unaudited)
Nine Months Ended September 30,
20222021
CASH FLOWS FROM OPERATING ACTIVITIES
Net income$791,320 $655,185 
Adjustments to reconcile net income to net cash provided by operating activities:  
Depreciation and amortization81,980 116,371 
Amortization of premiums and accretion of discount, net26,336 17,392 
Stock compensation costs29,338 24,047 
Deferred income tax (benefit) expense(6,107)787 
Provision for (reversal of) credit losses48,500 (25,000)
Net gains on sales of loans(5,968)(6,601)
Gains on sales of AFS debt securities(1,306)(1,178)
Loans held-for-sale:
Originations and purchases(447)(9,323)
Proceeds from sales and paydowns/payoffs of loans originally classified as held-for-sale461 11,337 
Proceeds from distributions received from equity method investees5,642 7,624 
Net change in accrued interest receivable and other assets56,958 (78,649)
Net change in accrued expenses and other liabilities584,655 30,179 
Other operating activities, net5,057 3,660 
Total adjustments825,099 90,646 
Net cash provided by operating activities1,616,419 745,831 
CASH FLOWS FROM INVESTING ACTIVITIES  
Net change in:  
Investments in qualified affordable housing partnerships, tax credit and other investments(91,710)(141,882)
Interest-bearing deposits with banks105,479 4,576 
Resale agreements:
Proceeds from paydowns and maturities1,719,076 698,274 
Purchases(258,559)(1,834,416)
AFS debt securities:
Proceeds from sales129,181 236,967 
Proceeds from repayments, maturities and redemptions711,950 1,346,839 
Purchases(769,007)(5,884,389)
HTM debt securities:
Proceeds from repayments, maturities and redemptions60,140 — 
Purchases(50,000)— 
Loans held-for-investment:
Proceeds from sales of loans originally classified as held-for-investment453,315 416,426 
Purchases(599,660)(746,395)
Other changes in loans held-for-investment, net(5,675,012)(1,798,011)
Proceeds from sales of OREO— 28,560 
Purchase of bank-owned life insurance— (150,000)
Proceeds from distributions received from equity method investees13,557 5,626 
Other investing activities, net920 (61)
Net cash used in investing activities(4,250,330)(7,817,886)
 
  Nine Months Ended September 30,
  2017 2016
CASH FLOWS FROM OPERATING ACTIVITIES  
  
Net income $420,726
 $320,943
Adjustments to reconcile net income to net cash provided by operating activities:  
  
Depreciation and amortization 123,008
 98,561
Accretion of discount and amortization of premiums, net (19,237) (37,881)
Stock compensation costs 15,780
 13,973
Deferred income tax (benefit) expense (14,500) 3,730
Provision for credit losses 30,749
 17,018
Net gains on sales of loans (6,660) (6,965)
Net gains on sales of available-for-sale investment securities (6,733) (8,468)
Net gains on sales of premises and equipment (74,092) (2,916)
Net gain on sale of business (3,807) —
Originations and purchases of loans held-for-sale (15,069) (10,901)
Proceeds from sales and paydowns/payoffs in loans held-for-sale 15,792
 15,065
Net change in accrued interest receivable and other assets 105,729
 (2,591)
Net change in accrued expenses and other liabilities 95,432
 19,217
Other net operating activities (2,135) (1,181)
Total adjustments 244,257
 96,661
Net cash provided by operating activities 664,983
 417,604
CASH FLOWS FROM INVESTING ACTIVITIES  
  
Net increase in:  
  
Loans held-for-investment (2,967,873) (776,277)
Interest-bearing deposits with banks (74,254) (13,469)
Investments in qualified affordable housing partnerships, tax credit and other investments, net (121,590) (57,742)
Purchases of:  
  
Resale agreements (550,000) (1,150,000)
Available-for-sale investment securities (501,669) (1,330,724)
Loans held-for-investment (441,141) (1,038,083)
Premises and equipment (11,598) (10,412)
Proceeds from sale of:  
  
Available-for-sale investment securities 676,776
 1,008,256
Loans held-for-investment 448,679
 545,256
Other real estate owned (“OREO”) 5,431
 3,271
Premises and equipment 116,021
 8,163
Business, net of cash transferred 3,633
 —
Paydowns and maturities of resale agreements 1,000,000
 1,450,000
Repayments, maturities and redemptions of available-for-sale investment securities 323,463
 870,965
Other net investing activities 27,914
 17,527
Net cash used in investing activities (2,066,208) (473,269)
CASH FLOWS FROM FINANCING ACTIVITIES  
  
Net increase (decrease) in:  
  
Customer deposits 1,385,625
 1,130,022
Short-term borrowings (36,604) 37,699
Proceeds from:    
Issuance of common stock pursuant to various stock compensation plans and agreements 1,008
 1,962
Payments for:  
  
Repayment of FHLB advances —
 (700,000)
Repayment of long-term debt (10,000) (15,000)
Repurchase of vested shares due to employee tax liability (12,663) (3,144)
Cash dividends on common stock (87,880) (86,984)
Other net financing activities —
 1,019
Net cash provided by financing activities 1,239,486
 365,574
Effect of exchange rate changes on cash and cash equivalents 19,985
 (3,964)
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS (141,754) 305,945
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 1,878,503
 1,360,887
CASH AND CASH EQUIVALENTS, END OF PERIOD $1,736,749
 $1,666,832
 

See accompanying Notes to Consolidated Financial Statements.


97



EAST WEST BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTSSTATEMENT OF CASH FLOWS
($ in thousands)
(Unaudited)
(Continued)
 
  Nine Months Ended September 30,
  2017 2016
SUPPLEMENTAL CASH FLOW INFORMATION:    
Cash paid during the period for:  
  
Interest paid $98,409
 $76,750
Income taxes paid $11,800
 $20,652
Noncash investing and financing activities:  
  
Loans transferred from held-for-investment to held-for-sale $418,489
 $720,670
Investment security transferred from held-to-maturity to available-for-sale $115,615
 $—
Held-to-maturity investment security retained from securitization of loans $—
 $160,135
Loans transferred to OREO $456
 $6,086
     


Nine Months Ended September 30,
20222021
CASH FLOWS FROM FINANCING ACTIVITIES  
Net change in deposits623,025 8,486,734 
Net change in federal funds purchased and short-term borrowings200,006 (21,143)
FHLB advances:
Proceeds4,600,200 — 
Repayment(4,525,200)(405,000)
Repurchase agreements:
Proceeds from repurchase agreements311,785 — 
Long-term debt and lease liabilities:
Repayment of long-term debt and lease liabilities(710)(909)
Common stock:
Repurchase of common stocks pursuant to the Stock Repurchase Program(99,990)— 
Proceeds from issuance pursuant to various stock compensation plans and agreements1,444 1,180 
Stocks tendered for payment of withholding taxes(18,983)(15,508)
Cash dividends paid(171,991)(141,911)
Net cash provided by financing activities919,586 7,903,443 
Effect of exchange rate changes on cash and cash equivalents(35,257)3,542 
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS(1,749,582)834,930 
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD3,912,935 4,017,971 
CASH AND CASH EQUIVALENTS, END OF PERIOD$2,163,353 $4,852,901 
SUPPLEMENTAL CASH FLOW INFORMATION
Cash paid during the period for:
Interest$107,146 $70,833 
Income taxes, net$233,082 $137,452 
Noncash investing and financing activities:
Securities transferred from AFS to HTM debt securities$3,010,003 $— 
Loans transferred from held-for-investment to held-for-sale$463,769 $411,416 
Loans transferred to other real estate owned (“OREO”) and other foreclosed assets$— $49,122 



See accompanying Notes to Consolidated Financial Statements.


108



EAST WEST BANCORP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

Note 1—Basis of Presentation

East West Bancorp, Inc. (referred to herein on an unconsolidated basis as “East West” and on a consolidated basis as the “Company”) is a registered bank holding company that offers a full range of banking services to individuals and businesses through its subsidiary bank, East West Bank and its subsidiaries (“East West Bank” or the “Bank”). The unaudited interim Consolidated Financial Statements in this Quarterly Report on Form 10-Q (“this Form 10-Q”) include the accounts of East West, East West Bank and East West’s various subsidiaries. Intercompany transactions and accounts have been eliminated in consolidation. As of September 30, 2017,2022, East West also has six wholly-owned subsidiaries that are statutory business trusts (the “Trusts”). In accordance with FASBFinancial Accounting Standards Board Accounting Standards Codification (“ASC”) Topic 810,Consolidation, the Trusts are not included on the Consolidated Financial Statements.


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


The preparation of the Consolidated Financial Statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the Consolidated Financial Statements, income and expenses during the reporting periods, and the related disclosures. Although our current estimates contemplate current conditions and how we expect them to change in the future, it is reasonably possible that actual results could be materially different from those estimates. Hence, the current period’s results of operations are not necessarily indicative of results that may be expected for any otherfuture interim period or for the year as a whole. Events subsequent to the Consolidated Balance Sheet date have been evaluated through the date the Consolidated Financial Statements are issued for inclusion in the accompanying Consolidated Financial Statements. The unaudited interim Consolidated Financial Statements should be read in conjunction with the audited Consolidated Financial Statements and notes thereto, included in the Company’s 2016 Form 10-K.



9

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

New Accounting Pronouncements Adopted

In March 2016, the FASB issued Accounting Standards Update (“ASU”) 2016-05, Derivatives and Hedging (Topic 815): Effect of Derivative Contract Novations on Existing Hedge Accounting Relationships, to clarify that a change in the counterparty to a derivative instrument that has been designated as the hedging instrument in an existing hedging relationship would not be considered a termination of the derivative instrument or a change in a critical term of the hedging relationship provided that all other hedge accounting criteria in ASC 815 continue to be met. This clarification applies to both cash flow and fair value hedging relationships. The Company adopted this guidance prospectively in the first quarter of 2017. The adoption of this guidance did not have an impact on the Company’s Consolidated Financial Statements.

In March 2016, the FASB issued ASU 2016-06, Derivatives and Hedging (Topic 815): Contingent Put and Call Options in Debt Instruments, which requires an entity to use a four-step decision model when assessing contingent call (put) options that can accelerate the payment of principal on debt instruments to determine whether they are clearly and closely related to their debt hosts. The Company adopted this guidance on a modified retrospective basis in the first quarter of 2017. The adoption of this guidance did not have an impact on the Company’s Consolidated Financial Statements.

In March 2016, the FASB issued ASU 2016-07, Investments — Equity Method and Joint Ventures (Topic 323):Simplifying the Transition to the Equity Method of Accounting, to eliminate the requirement for an investor to retroactively apply the equity method when its increase in ownership interest (or degree of influence) in an investee triggers equity method accounting. The amendments in ASU 2016-07 also require that an entity that has an available-for-sale equity security that becomes qualified for the equity method of accounting recognize through earnings the unrealized holding gain or loss in accumulated other comprehensive income (loss) (“AOCI”) at the date the investment becomes qualified for use of the equity method. The Company adopted this guidance prospectively in the first quarter of 2017. The adoption of this guidance did not have an impact on the Company’s Consolidated Financial Statements.



In March 2016, the FASB issued ASU 2016-09, Compensation — Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting, to simplify several aspects of the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities and classification in the statements of cash flows. The Company adopted this guidance in the first quarter of 2017. The changes that impacted the Company included a requirement that excess tax benefits and deficiencies be recognized as a component of Income tax expense on the Consolidated Statements of Income rather than Additional paid-in capital on the Consolidated Statements of Changes in Stockholders’ Equity as required in the previous guidance. The adoption of this guidance results in increased volatility to the Company’s income tax expense, but does not have a material impact on the Consolidated Balance Sheets or the Consolidated Statements of Changes in Stockholders’ Equity. The income tax expense volatility is dependent on the Company’s stock price on the dates the restricted stock units (“RSUs”) vest, which occur primarily in the first quarter of each year. Net excess tax benefits for RSUs of $4.6 million have been recognized by the Company as a component of Income tax expense on the Consolidated Statements of Income during the nine months ended September 30, 2017. The guidance also removes the impact of the excess tax benefits and deficiencies from the calculation of diluted EPS. In addition, ASU 2016-09 no longer requires a presentation of excess tax benefits and deficiencies as both an operating outflow and a financing inflow on the Consolidated Statements of Cash Flows. Instead, excess tax benefits and deficiencies are recorded along with other income tax cash flows as an operating activity. These changes to the guidance were applied on a prospective basis. The Company has also elected to retain its existing accounting policy election to estimate award forfeitures.

Recent Accounting Pronouncements
StandardRequired Date of AdoptionDescriptionEffect on Financial Statements
Standards Not Yet Adopted
Accounting Standards Update (“ASU”) 2022-02, Financial Instruments - Credit Losses(Topic 326): Troubled Debt Restructurings and the Vintage Disclosures

January 1, 2023
ASU 2022-02 eliminates the troubled debt restructuring (“TDRs”) accounting model for creditors and instead requires companies to apply the loan refinancing and restructuring guidance to determine whether a modification made to a borrower results in a new loan or a continuation of an existing loan. In addition, companies are no longer required to use a discounted cash flow method to measure the allowance for credit losses for certain TDRs and instead allows for the use of an expected loss approach for all loans. The guidance also introduces new disclosure requirements related to restructuring of financing receivables made to borrowers experiencing financial difficulty, and amends vintage disclosures to require current-period gross write-off by year of origination.

The guidance should be applied on a prospective basis except for amendments related to recognition and measurement of TDRs, where a modified retrospective transition method is optional.
The Company does not expect the adoption of this guidance to have a material impact on the Company’s Consolidated Financial Statements. The Company expects to adopt ASU 2022-02 on January 1, 2023.


ASU 2022-03, Fair Value Measurement (Topic 820): Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions
January 1, 2024ASU 2022-03 clarifies that a contractual restriction on the sale of an equity security is not considered part of the unit of account of the equity security and, therefore, is not considered in measuring fair value. This ASU also requires the following disclosures for equity securities that are subject to contractual restrictions: the fair value of equity securities subject to contractual sale restrictions; nature and remaining duration of the restrictions; and circumstances that could cause a lapse in the restrictions.

The guidance should be applied on a prospective basis with any adjustments from the adoption of the amendment recognized in earnings and disclosed on the date of adoption.		The Company does not expect the adoption of this guidance to have an impact on the Company’s Consolidated Financial Statements. The Company expects to adopt ASU 2022-03 on January 1, 2024.
In May 2014,
Significant Accounting Policies Update

During the FASB issued ASU 2014-09, Revenuefirst quarter of 2022, the Company transferred $3.01 billion in fair value of debt securities from ContractsAFS to HTM.

Transfer between Categories of Debt Securities— Upon transfer of a debt security from the AFS to HTM category, the security’s new amortized cost is reset to fair value, reduced by any previous write-offs but excluding any allowance for credit losses. Unrealized gains or losses at the date of transfer of these securities continue to be reported in AOCI and are amortized into interest income over the remaining life of the securities as effective yield adjustments, in a manner consistent with Customers (Topic 606), which clarifies the principlesamortization or accretion of the original purchase premium or discount on the associated security. For transfers of securities from the AFS to HTM category, any allowance for recognizing revenuecredit losses that was previously recorded under the AFS model is reversed and an allowance for contracts to provide goods or services to customerscredit losses is subsequently recorded under the HTM debt security model. The reversal and will replace most existing revenue recognition guidancere-establishment of the allowance for credit losses are recorded in the U.S. GAAP when it becomes effective. Quantitative and qualitative disclosures regardingprovision for credit losses.

10

Held-to-Maturity Debt Securities— Debt securities that the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers are also required. ASU 2014-09 is effective on January 1, 2018. The guidance should be applied on either a modified retrospective or full retrospective basis. The Company’s revenue is mainly comprised of net interest income and noninterest income. The scope of the guidance explicitly excludes net interest income, as well as other revenues from financial instruments such as loans, leases, securities and derivatives. The Company has completed a comprehensive scoping exercisethe intent and ability to determine the revenue streams thathold until maturity are in the scopeclassified as HTM and are carried at amortized cost, net of the guidance and the review of its contractsallowance for credit losses. The criteria used to ascertain whether certain noninterest income revenue itemsplace HTM debt securities on nonaccrual are within the scope of the new guidance. Based on the completed contract reviews thus far, the adoption of this guidance is not expectedlargely similar to have a material impact on its Consolidated Balance Sheets or Consolidated Statements of Income.those described for loans. The next phaseamortized cost of the Company’s implementation work will be to evaluate any changes that may be required to its applicable disclosures.
In January 2016, the FASB issued ASU 2016-01, Financial Instruments — Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities,HTM debt securities excludes accrued interest, which requires equity investments, except those accounted for under the equity method of accounting or consolidated, to be measured at fair value with changes recognizedis included in net income, thus eliminating eligibility for the current available-for-sale category. If there is no readily determinable fair value, the guidance allows entities to measure equity investments at cost less impairment, whereby impairment is based on a qualitative assessment. Furthermore, investments in Federal Reserve Bank and FHLB stock are not subject to this guidance and will continue to be presented at cost. The guidance eliminates the requirement to disclose the methods and significant assumptions used to estimate the fair value of financial instruments measured at amortized cost and changes the presentation of financialOther assets and financial liabilities on the Consolidated Balance Sheets or in the footnotes. If an entity has elected the fair value option to measure liabilities, the guidance requires the portion of the change in the fair value of a liability resulting from credit risk to be presented in Other comprehensive income. ASU 2016-01 is effective on January 1, 2018. Early adoption is not permitted except for certain specific changes under the fair value option guidance. The amendments related to equity securities without readily determinable fair values (including disclosure requirements) should be applied prospectively to equity investments that exist as of the adoption date.Sheet. The Company does not have a significant amount of equity securities classified as available-for-sale. Additionally, the Company does not have any financial liabilities accounted for under the fair value option. For the guidance that is applicable to us, thehas made an accounting will be implemented on a modified retrospective basis through a cumulative-effect adjustment to the Consolidated Balance Sheets as of January 1, 2018, except for the guidance related to equity securities without readily determinable fair values, which should be applied on a prospective basis. The adoption of this guidance is not expected to have a material impact on the Company’s Consolidated Balance Sheets or Consolidated Statements of Income.



In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842), which is intended to increase transparency and comparability in the accounting for lease transactions. The guidance requires lessees to recognize right-of-use assets and related lease liabilities for all leases with lease terms of more than 12 months on the Consolidated Balance Sheets, and provide quantitative and qualitative disclosures regarding key information about the leasing arrangements. For short-term leases with a term of 12 months or less, lessees can make a policy election not to recognize lease assets and lease liabilities. Lessor accounting is largely unchanged. ASU 2016-02 is effectivean allowance for credit losses for accrued interest receivables on January 1, 2019, with early adoption permitted. The guidance should be applied using a modified retrospective transition method through a cumulative-effect adjustment. The Company is currently evaluating the potential impact on its Consolidated Financial Statements by reviewing its existing lease contracts and service contracts that may include embedded leases. The Company expects the adoption of ASU 2016-02 to result in additional assets and liabilities,HTM debt securities, as the Company will be requiredreverses any accrued interest against interest income if a debt security is placed on nonaccrual status. Any cash collected on nonaccrual HTM securities is applied to recognize operating leases on its Consolidated Balance Sheets. Thereduce the security’s amortized cost basis and not as interest income. Generally, the Company does not expect a material impactreturns an HTM security to its recognition of operating lease expense on its Consolidated Statements of Income. Upon completionaccrual status when all delinquent interest and principal become current under the contractual terms of the contract reviewssecurity, and considerationthe collectability of system requirements, the Company will evaluate the impacts of adopting the new accounting guidance on its disclosures.remaining principal and interest is no longer doubtful.


In June 2016, the FASB issued ASU 2016-13, Financial Instruments — Credit Losses (Topic 326): Measurement ofAllowance for Credit Losses on Financial Instruments, to introduce a new approach based on expected losses to estimate credit losses on certain types of financial instruments, which modifies the impairment model for available-for-saleHeld-to-Maturity Debt Securities—For each major HTM debt securities and provides for a simplified accounting model for purchased financial assets with credit deterioration since their origination. The new “expected credit loss” impairment model will apply to most financial assets measured at amortized cost and certain other instruments, including trade and other receivables, loan receivables, available-for-sale and held-to-maturity debt securities, net investments in leases and off-balance sheet credit exposures. For available-for-sale debt securities with unrealized losses, ASU 2016-13 does not change the measurement method of credit losses, except that the losses will be recognized as allowances rather than reductions in the amortized cost of the securities. ASU 2016-13 also expands the disclosure requirements regarding an entity’s assumptions, models and methods for estimating the allowance for loan and lease losses, and requires disclosure of the amortized cost balance for each class of financial asset by credit quality indicator, disaggregated by the year of origination (i.e., by vintage year). ASU 2016-13 is effective on January 1, 2020, with early adoption permitted on January 1, 2019. The guidance should be applied using a modified retrospective approach through a cumulative-effect adjustment to retained earnings as of the beginning of the reporting period of adoption. While the Company is still evaluating the impact on its Consolidated Financial Statements, the Company expects that ASU 2016-13 may result in an increase insecurity type, the allowance for credit losses dueis estimated collectively for groups of securities with similar risk characteristics. For securities that do not share similar risk characteristics, the losses are estimated individually. The Company applies a zero credit loss assumption to certain HTM debt securities, including debt securities that are either guaranteed or issued by the following factors: 1)U.S. government or government-sponsored enterprises, are highly rated by nationally recognized statistical rating organizations (“NRSROs”), and have a long history of no credit losses. Any expected credit loss is recorded through the allowance for credit losses provides for expected credit losses overon HTM debt securities and deducted from the remaining expected lifeamortized cost basis of the loan portfolio, and will consider expected future changes in macroeconomic conditions; 2)security, reflecting the nonaccretable difference on the purchased credit impaired (“PCI”) loans will be recognized as an allowance, offset by an increase in the carrying value of the PCI loans; and 3) an allowance may be established for estimated credit losses on available-for-sale and held-to-maturity debt securities. Thenet amount of the increase will be impacted by the portfolio composition and quality, as well as the economic conditions and forecasts as of the adoption date. The Company has begun its implementation efforts by identifying key interpretive issues, assessing its processes and identifying the system requirements against the new guidance to determine what modifications may be required.

In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments, to provide guidance on eight specific issues related to classification on the Consolidated Statements of Cash Flows in order to reduce diversity in practice. The specific issues cover cash payments for debt prepayment or debt extinguishment costs; cash outflows for settlement of zero-coupon debt instruments or other debt instruments with coupon interest rates that are insignificant in relation to the effective interest rate of the borrowing; contingent consideration payments that are not made soon after a business combination; proceeds from the settlement of insurance claims; proceeds from the settlement of corporate-owned life insurance policies, including bank-owned life insurance policies; distributions received from equity method investees; beneficial interests received in securitization transactions; and clarification regarding when no specific U.S. GAAP guidance exists and the sources of the cash flows are not separately identifiable, the classification should be based on the activity that is likely to be the predominant source or use of the cash flows. ASU 2016-15 is effective on January 1, 2018, with early adoption permitted. The guidance should be applied using a retrospective transition method. The Company does not expect the adoption of this guidance to have a material impact on its Consolidated Financial Statements.

In November 2016, the FASB issued ASU 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash, whichrequires the Company expects to include those amounts that are deemed to be restricted cash and restricted cash equivalents in its cash and cash equivalent balances on the Consolidated Statements of Cash Flows. In addition, the Company is required to explain the changes in the combined total of restricted and unrestricted balances on the Consolidated Statements of Cash Flows. ASU 2016-18 is effective on January 1, 2018, with early adoption permitted. The guidance should be applied using a retrospective transition method to each period presented. The Company does not expect the adoption of this guidance to have a material impact on its Consolidated Financial Statements.collect.




In January 2017, the FASB issued ASU 2017-04, Intangibles — Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment, to simplify the accounting for goodwill impairment. An entity will no longer perform a hypothetical purchase price allocation to measure goodwill impairment. Instead, impairment will be measured using the difference between the carrying amount and the fair value of the reporting unit. The guidance also eliminates the requirements for any reporting units with a zero or negative carrying amount to perform a qualitative assessment. ASU 2017-04 is effective on January 1, 2020 and should be applied prospectively. Early adoption is permitted for interim or annual goodwill impairment tests with measurement dates after January 1, 2017. The Company does not expect the adoption of this guidance to have a material impact on the Consolidated Financial Statements.

In March 2017, the FASB issued ASU 2017-08, Receivables — Nonrefundable Fees and Other Costs (Subtopic 310-20): Premium Amortization on Purchased Callable Debt Securities, which amends the amortization period for certain purchased callable debt securities held at a premium, shortening such period to the earliest call date. The guidance does not require any accounting changes for debt securities held at a discount; the discount continues to be amortized as an adjustment of yield over the contractual life (to maturity) of the instrument. ASU 2017-08 is effective on January 1, 2019, with early adoption permitted. The guidance should be applied using a modified retrospective transition method, with the cumulative-effect adjustment recognized to retained earnings as of the beginning of the period of adoption. The Company is currently evaluating the impact on its Consolidated Financial Statements.

In May 2017, the FASB issued ASU 2017-09, Compensation — Stock Compensation (Topic 718): Scope of Modification Accounting, which amends the scope of modification accounting for share-based payment arrangements. Specifically, an entity would not apply modification accounting if the fair value, vesting conditions and classification of the awards are the same immediately before and after the modification. ASU 2017-09 is effective on January 1, 2018, with early adoption permitted. The guidance should be applied prospectively to awards modified on or after the adoption date. The Company plans to adopt this guidance in the first quarter of 2018 prospectively.

In August 2017, the FASB issued ASU 2017-12, Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities, which better aligns the Company’s risk management activities and financial reporting for hedging relationships through changes to both the description and measurement guidance for qualifying hedging relationships and the presentation of hedge results, expands and refines hedge accounting for both nonfinancial and financial risk components, and aligns the recognition and presentation of the effects of the hedging instrument and the hedged item on the Consolidated Financial Statements. ASU 2017-12 is effective on January 1, 2019, with early adoption permitted. Upon adoption, the guidance should be applied using a retrospective transition method to any existing cash flows or net investment hedges through a cumulative-effect adjustment to AOCI to eliminate the separate measurement of ineffectiveness. The amended presentation and disclosure guidance is applied prospectively. The Company is currently evaluating the impact on its Consolidated Financial Statements.


Note 3 — Dispositions

In the first quarter of 2017, the Company completed the sale and leaseback of a commercial property in San Francisco, California for cash consideration of $120.6 million and entered into a leaseback with the buyer for part of the property, consisting of a retail branch and office facilities. The property had a net book value of $31.6 million at the time of sale, resulting in a pre-tax gain of $85.4 million after considering $3.6 million in selling costs. As the leaseback is an operating lease, $71.7 million of the gain was recognized on the closing date, and $13.7 million was deferred and will be recognized over the term of the lease agreement. The first quarter 2017 diluted EPS impact from the sale of the commercial property was $0.28 per share, net of tax.

In the third quarter of 2017, the Company sold its insurance brokerage business, East West Insurance Services, Inc., for $4.3 million, and recorded a pre-tax gain of $3.8 million. The third quarter 2017 diluted EPS impact from the sale of the Company’s insurance brokerage business was $0.02 per share, net of tax.



Note 4 —Fair Value Measurement and Fair Value of Financial Instruments

Fair Value Determination

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

•Level 1—Valuation is based on quoted prices for identical instruments traded in active markets.
•Level 2—Valuation is based on quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations whose inputs are observable and can be corroborated by market data.
•Level 3—•Level 1 — Valuation is based on quoted prices for identical instruments traded in active markets.
•Level 2 — Valuation is based on quoted prices for similar instruments traded in active markets; quoted prices for identical or similar instruments traded in markets that are not active; and model-derived valuations whose inputs are observable and can be corroborated by market data.
•Level 3 — Valuation is based on significant unobservable inputs for determining the fair value of assets or liabilities. These significant unobservable inputs reflect assumptions that market participants may use in pricing the assets or liabilities.

In determining the appropriate hierarchy levels,fair value of assets or liabilities. These significant unobservable inputs reflect assumptions that market participants may use in pricing the Company performs an analysisassets or liabilities.

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



Assets and Liabilities Measured at Fair Value on a Recurring Basis


The following tables present financial assets and liabilities that are measured at fair value on a recurring basis as of September 30, 2017 and December 31, 2016:
          
  Assets (Liabilities) Measured at Fair Value on a Recurring Basis
as of September 30, 2017
($ in thousands) 
Fair Value
Measurements
 
Quoted Prices in
Active Markets
for Identical
Assets
(Level 1)
 
Significant
Other
Observable
Inputs
(Level 2)
 
Significant
Unobservable
Inputs
(Level 3)
Available-for-sale investment securities:  
  
  
  
 
U.S. Treasury securities $526,332
 $526,332
 $—
 $—
 
U.S. government agency and U.S. government sponsored enterprise debt securities 189,185
 —
 189,185
 —
 
U.S. government agency and U.S. government sponsored enterprise mortgage-backed securities:  
  
  
  
 
Commercial mortgage-backed securities 315,172
 —
 315,172
 —
 
Residential mortgage-backed securities 1,150,934
 —
 1,150,934
 —
 
Municipal securities 117,242
 —
 117,242
 —
 
Non-agency residential mortgage-backed securities:  
  
  
  
 
Investment grade 9,694
 —
 9,694
 —
 
Corporate debt securities:  
  
  
  
 
Investment grade 2,327
 —
 2,327
 —
 
Non-investment grade 9,615
 —
 9,615
 —
 
Foreign bonds:         
Investment grade 489,140
 —
 489,140
 —
 
Other securities 147,135
 31,418
 102
 115,615
(1) 
Total available-for-sale investment securities $2,956,776
 $557,750
 $2,283,411
 $115,615
 
          
Derivative assets:         
Interest rate swaps and options $64,822
 $—
 $64,822
 $—
 
Foreign exchange contracts 14,187
 —
 14,187
 —
 
Credit risk participation agreements (“RPAs”) 2
 —
 2
 —
 
Warrants 1,455
 —
 856
 599
 
Total derivative assets $80,466
 $—
 $79,867
 $599
 
          
Derivative liabilities:         
Interest rate swaps on certificates of deposit $(6,648) $—
 $(6,648) $—
 
Interest rate swaps and options (64,212) —
 (64,212) —
 
Foreign exchange contracts (20,054) —
 (20,054) —
 
RPAs (1) —
 (1) —
 
Total derivative liabilities $(90,915) $—
 $(90,915) $—
 
          
(1)During the third quarter of 2017, the Company transferred a non-agency commercial mortgage-backed security with a net carrying amount of $115.6 million from held- to-maturity to available-for-sale.



 
  Assets (Liabilities) Measured at Fair Value on a Recurring Basis
as of December 31, 2016
($ in thousands) 
Fair Value
Measurements
 Quoted Prices in
Active Markets
for Identical
Assets
(Level 1)		 Significant
Other
Observable
Inputs
(Level 2)		 
Significant
Unobservable
Inputs
(Level 3)
Available-for-sale investment securities:  
  
  
  
U.S. Treasury securities $720,479
 $720,479
 $—
 $—
U.S. government agency and U.S. government sponsored enterprise debt securities 274,866
 —
 274,866
 —
U.S. government agency and U.S. government sponsored enterprise mortgage-backed securities:  
  
  
  
Commercial mortgage-backed securities 266,799
 —
 266,799
 —
Residential mortgage-backed securities 1,258,747
 —
 1,258,747
 —
Municipal securities 147,654
 —
 147,654
 —
Non-agency residential mortgage-backed securities:  
  
  
  
Investment grade 11,477
 —
 11,477
 —
Corporate debt securities:  
  
  
  
Investment grade 222,377
 —
 222,377
 —
Non-investment grade 9,173
 —
 9,173
 —
Foreign bonds:        
Investment grade 383,894
 —
 383,894
 —
Other securities 40,329
 30,991
 9,338
 —
Total available-for-sale investment securities $3,335,795
 $751,470
 $2,584,325
 $—
         
Derivative assets:        
Foreign currency forward contracts $4,325
 $—
 $4,325
 $—
Interest rate swaps and options 67,578
 —
 67,578
 —
Foreign exchange contracts 11,874
 —
 11,874
 —
RPAs 3
 —
 3
 —
Total derivative assets $83,780
 $—
 $83,780
 $—
         
Derivative liabilities:        
Interest rate swaps on certificates of deposit $(5,976) $—
 $(5,976) $—
Interest rate swaps and options (65,131) —
 (65,131) —
Foreign exchange contracts (11,213) —
 (11,213) —
RPAs (3) —
 (3) —
Total derivative liabilities $(82,323) $—
 $(82,323) $—
         



At each reporting period, all assets and liabilities for which the fair value measurement is based on significant unobservable inputs are classified as Level 3. There were no assets or liabilities measured using significant unobservable inputs (Level 3) on a recurring basis as of December 31, 2016, and during the three and nine months ended September 30, 2016. The following table presents a reconciliation of the beginning and ending balances for other securities and warrants measured at fair value on a recurring basis using significant unobservable inputs (Level 3) for the three and nine months ended September 30, 2017:
  Three Months Ended September 30, 2017 Nine Months Ended September 30, 2017
($ in thousands) Other securities Warrants Other securities Warrants
Beginning balance $—
 $—
 $—
 $—
Issuances —
 599
 —
 599
Transfer from held-to-maturity investment security to available-for-sale investment security 115,615
 —
 115,615
 —
Ending balance $115,615

$599

$115,615

$599
         

Transfers into or out of fair value hierarchy classifications are made if the significant inputs used in the financial models measuring the fair values of the assets and liabilities become unobservable or observable in the current marketplace. The Company’s policy, with respect to transfers between levels of the fair value hierarchy, is to recognize transfers into and out of each level as of the end of the reporting period. There were no transfers of assets and liabilities measured on a recurring basis into and out of Level 1, Level 2 and Level 3 during the three and nine months ended September 30, 2017 and 2016. During the three and nine months ended September 30, 2017, the Company transferred a non-agency commercial mortgage-backed security with a net carrying amount of $115.6 million from held-to-maturity to available-for-sale to reflect the Company’s intent to sell the security under active liquidity management.

The following table presents quantitative information about significant unobservable inputs used in the valuation of assets measured on a recurring basis classified as Level 3 as of September 30, 2017. Significant unobservable inputs presented in the table below are those that the Company considers significant to the fair value of the Level 3 assets or liabilities. The Company considers unobservable inputs to be significant if, by their exclusion, the fair value of the Level 3 assets or liabilities would be impacted by a predetermined percentage change.
         
($ in thousands) 
Fair Value
Measurements
(Level 3)
 
Valuation
Technique
 
Unobservable
Input(s)
 
Weighted
 Average
Available-for-sale investment securities:

        
Other securities $115,615
 Discounted cash flows Discount margin 191 Basis points
         
Derivative assets:        
Warrants $599
 Black-Scholes option pricing model Volatility 44%
      Liquidity discount 47%
         

Assets measured at fair value on a nonrecurring basis include certain non-purchased credit impaired (“non-PCI”) loans that were impaired, OREO and loans held-for-sale.  These fair value adjustments result from impairments recognized during the period on certain non-PCI impaired loans, application of fair value less cost to sell on OREO and application of the lower of cost or fair value on loans held-for-sale.



The following tables present the carrying amounts of assets included on the Consolidated Balance Sheets that had fair value changes measured on a nonrecurring basis as of September 30, 2017 and December 31, 2016:
         
  Assets Measured at Fair Value on a Nonrecurring Basis
as of September 30, 2017
($ in thousands) 
Fair Value
Measurements
 Quoted Prices in
Active Markets
for Identical
Assets
(Level 1)		 Significant
Other
Observable
Inputs
(Level 2)		 
Significant
Unobservable
Inputs
(Level 3)
Non-PCI impaired loans:  
  
  
  
Commercial real estate (“CRE”) $9,172
 $—
 $—
 $9,172
Commercial and industrial (“C&I”) 32,053
 —
 —
 32,053
Residential 6,079
 —
 —
 6,079
Consumer 633
 —
 —
 633
Total non-PCI impaired loans $47,937
 $—
 $—
 $47,937
OREO $1,789
 $—
 $—
 $1,789
         
         
  Assets Measured at Fair Value on a Nonrecurring Basis
as of December 31, 2016
($ in thousands) 
Fair Value
Measurements
 Quoted Prices in
Active Markets
for Identical
Assets
(Level 1)		 Significant
Other
Observable
Inputs
(Level 2)		 
Significant
Unobservable
Inputs
(Level 3)
Non-PCI impaired loans:  
  
  
  
CRE $14,908
 $—
 $—
 $14,908
C&I 52,172
 —
 —
 52,172
Residential 2,464
 —
 —
 2,464
Consumer 610
 —
 —
 610
Total non-PCI impaired loans $70,154
 $—
 $—
 $70,154
OREO $345
 $—
 $—
 $345
Loans held-for-sale $22,703
 $—
 $22,703
 $—
         

The following table presents the fair value adjustments of assets measured on a nonrecurring basis recognized during the three and nine months ended and which were included on the Consolidated Balance Sheets as of September 30, 2017 and 2016:
         
  Three Months Ended September 30, Nine Months Ended September 30,
($ in thousands) 2017 2016 2017 2016
Non-PCI impaired loans:      
  
CRE $6
 $(282) $(66) $1,741
C&I (16,954) 77
 (17,648) (5,497)
Residential (3) (14) 49
 (14)
Consumer —
 —
 25
 17
Total non-PCI impaired loans $(16,951) $(219) $(17,640) $(3,753)
OREO $(285) $(41) $(286) $(994)
Loans held-for-sale $—
 $—
 $—
 $(2,351)
         



The following table presents the quantitative information about the significant unobservable inputs used in the valuation of assets measured on a nonrecurring basis classified as Level 3 as of September 30, 2017 and December 31, 2016:
 
($ in thousands) Fair Value
Measurements
(Level 3)		 Valuation
Technique(s)		 
Unobservable
Input(s)
 
Range of 
Input(s)
 Weighted 
Average
September 30, 2017  
        
Non-PCI impaired loans $30,563
 Discounted cash flows Discount 0% — 82% 19%
  $17,374
 Market comparables 
Discount (1)
 0% — 100% 40%
OREO $1,789
 Appraisal Selling cost 8% 8%
December 31, 2016          
Non-PCI impaired loans $31,835
 Discounted cash flows Discount 0% — 62% 7%
  $38,319
 Market comparables 
Discount (1)
 0% — 100% 18%
OREO $345
 Appraisal Selling cost 8% 8%
           
(1)Discount is adjusted for factors such as liquidation cost of collateral and selling cost.

The following tables present the carrying and fair values per the fair value hierarchy of certain financial instruments, excluding those measured at fair value on a recurring basis, as of September 30, 2017 and December 31, 2016:
 
($ in thousands) September 30, 2017
 
Carrying
Amount
 Level 1 Level 2 Level 3 
Estimated
Fair Value
Financial assets:          
Cash and cash equivalents $1,736,749
 $1,736,749
 $—
 $—
 $1,736,749
Interest-bearing deposits with banks $404,946
 $—
 $404,946
 $—
 $404,946
Resale agreements (1)
 $1,250,000
 $—
 $1,236,413
 $—
 $1,236,413
Restricted equity securities $73,322
 $—
 $73,322
 $—
 $73,322
Loans held-for-sale $178
 $—
 $178
 $—
 $178
Loans held-for-investment, net $28,239,431
 $—
 $—
 $27,635,961
 $27,635,961
Accrued interest receivable $111,710
 $—
 $111,710
 $—
 $111,710
Financial liabilities:  
  
  
  
  
Customer deposits:  
  
  
  
  
Demand, checking, savings and money market deposits $25,517,121
 $—
 $25,517,121
 $—
 $25,517,121
Time deposits $5,794,541
 $—
 $5,787,188
 $—
 $5,787,188
Short-term borrowings $24,813
 $—
 $24,813
 $—
 $24,813
FHLB advances $323,323
 $—
 $336,741
 $—
 $336,741
Repurchase agreements (1)
 $50,000
 $—
 $105,269
 $—
 $105,269
Long-term debt $176,513
 $—
 $139,649
 $—
 $139,649
Accrued interest payable $11,017
 $—
 $11,017
 $—
 $11,017
 
(1)
Resale and repurchase agreements are reported net pursuant to ASC 210-20-45, Balance Sheet Offsetting. As of September 30, 2017, $400.0 millionout of $450.0 millionof repurchase agreements were eligible for netting against resale agreements.



 
($ in thousands) December 31, 2016
 Carrying
Amount		 Level 1 Level 2 Level 3 Estimated
Fair Value
Financial assets:  
  
  
  
  
Cash and cash equivalents $1,878,503
 $1,878,503
 $—
 $—
 $1,878,503
Interest-bearing deposits with banks $323,148
 $—
 $323,148
 $—
 $323,148
Resale agreements (1)
 $2,000,000
 $—
 $1,980,457
 $—
 $1,980,457
Held-to-maturity investment security $143,971
 $—
 $—
 $144,593
 $144,593
Restricted equity securities $72,775
 $—
 $72,775
 $—
 $72,775
Loans held-for-sale $23,076
 $—
 $23,076
 $—
 $23,076
Loans held-for-investment, net $25,242,619
 $—
 $—
 $24,915,143
 $24,915,143
Accrued interest receivable $100,524
 $—
 $100,524
 $—
 $100,524
Financial liabilities:  
  
  
  
  
Customer deposits:  
  
  
  
  
Demand, checking, savings and money market deposits $24,275,714
 $—
 $24,275,714
 $—
 $24,275,714
Time deposits $5,615,269
 $—
 $5,611,746
 $—
 $5,611,746
Short-term borrowings $60,050
 $—
 $60,050
 $—
 $60,050
FHLB advances $321,643
 $—
 $334,859
 $—
 $334,859
Repurchase agreements (1)
 $350,000
 $—
 $411,368
 $—
 $411,368
Long-term debt $186,327
 $—
 $186,670
 $—
 $186,670
Accrued interest payable $9,440
 $—
 $9,440
 $—
 $9,440
 
(1)
Resale and repurchase agreements are reported net pursuant to ASC 210-20-45, Balance Sheet Offsetting. As of December 31, 2016, $100.0 millionout of $450.0 millionof repurchase agreements were eligible for netting against resale agreements.

The following is a description ofsection describes the valuation methodologies and significant assumptions used by the Company to measure financial assets and liabilities at fair value, andon a recurring basis, as well as the general classification of these instruments pursuant to estimate fair value for certain financial instruments not recorded at fair value. The description also includes the level of the fair value hierarchy in which the assets or liabilities are classified.hierarchy.

Cash and Cash Equivalents
11

Available-for-SaleDebt Securities — The carrying amount approximates fair value due to the short-term nature of these instruments. As such, the estimated fair value is classified as Level 1.
Interest-bearing Deposits with Banks — The fair value of interest-bearing deposits with banks generally approximates their book value due to their short maturities.  In addition, due to the observable nature of the inputs used in deriving the estimated fair value, these instruments are classified as Level 2.
Resale Agreements — The fair value of resale agreementsAFS debt securities is estimated by discounting the cash flows based on expected maturities or repricing dates utilizing estimated market discount rates.  In addition, due to the observable nature of the inputs used in deriving the estimated fair value, these instruments are classified as Level 2.

Held-to-Maturity Investment Security — The held-to-maturity investment security as of December 31, 2016 was comprised of a floating rate non-agency commercial mortgage-backed security that was subsequently transferred from held-to-maturity to available-for-sale during the three months ended September 30, 2017. This security was categorized under Available-for-sale investment securities — other securities as of September 30, 2017.The fair value of this security is estimated by discounting the future expected cash flows utilizing the underlying index and a discount margin. Other unobservable inputs include conditional prepayment rate, constant default rate and loss severity. Due to the significant unobservable inputs used in estimating the fair value, this security is classified as Level 3.
Available-for-SaleInvestment Securities — When available, the Company uses quoted market prices to determine the fair value of available-for-sale investment securities, which are classified as Level 1.  Level 1 available-for-sale investment securities are primarily comprised of U.S. Treasury securities.  Other than the non-agency commercial mortgage-backed security, the fair value of which is described above, the fair value of other available-for-sale investment securities are generally determined by independent external pricing service providers who have experience in valuing these securities or by taking the average quoted market prices obtained from independent external brokers. The valuations provided by the third-party pricing service providers are based on observable market inputs, which include benchmark yields, reported trades, issuer spreads, benchmark securities, bids, offers, prepayment expectations and reference data obtained from market research publications. Inputs used by the third-party pricing service providers in valuing collateralized mortgage obligations and other securitization structures also include new issue data, monthly payment information, whole loan collateral performance, tranche evaluation and “To Be Announced” prices. In obtaining such valuation information from third parties,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 reviewedvalidates the methodologiesvaluations provided by third-party pricing service providers to ensure that the fair value determination is consistent with the applicable accounting guidance and the financial instruments are properly classified in the fair value hierarchy. To perform this validation, the Company evaluates the fair values of securities by comparing the fair values provided by the third-party pricing service providers to prices from other available independent sources for the same securities. When significant variances in prices are identified, the Company further compares inputs used by different sources to developascertain the resultingreliability of these sources. On a quarterly basis, the Company reviews the valuation inputs and methodology for each security category furnished by third-party pricing service providers.

When available, the Company uses quoted market prices to determine the fair values.  The available-for-sale investmentvalue of AFS debt securities valued using such methodsthat are classified as Level 2.


Loans Held-for-Sale — The Company’s loans held-for-sale1. 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 carried atbased on observable inputs in the lower of cost or fair value. Loans held-for-sale were comprised of single-family residential loans as of September 30, 2017, and were primarily comprised of consumer loans as of December 31, 2016. The fair value of loans held-for-sale is derived from current market prices and comparative current sales. The Company records any fair value adjustments on a nonrecurring basis. Loans held-for-salemarketplace, 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.

Non-PCI Impaired LoansEquity Securities — Equity securities consisted of mutual funds as of both September 30, 2022 and December 31, 2021. The Company invested in these mutual funds for Community Reinvestment Act (“CRA”) purposes. The Company uses net asset value (“NAV”) information to determine the fair value of non-PCI impaired loansthese equity securities. When NAV is measured usingavailable periodically and the market comparables or discounted cash flow techniques. For CRE and C&I loans,equity securities can be put back to the fair value is based on each loan’s observable market price ortransfer agents at the publicly available NAV, the fair value of the collateral less cost to sell, if the loan is collateral dependent. The fair value of collateral is generally based on third party appraisals (or internal evaluation if third party appraisal is not required by regulations) which utilize one or more valuation techniques (income, market and/or cost approaches). All third party appraisals and evaluations are reviewed and validated by independent appraisers or the Company’s appraisal department staffed by licensed appraisers and/or experienced real estate reviewers. The third party appraisals are ordered through the appraisal department (except for one-to-four unit residential appraisals which are typically ordered through an approved appraisal management company or an approved residential appraiser) at the inception, renewal or, for all real estate related loans, upon the occurrence of any events causing a downgrade to an adverse grade (i.e., “substandard” or “doubtful”). Updated appraisals and evaluations are generally obtained within the last 12 months. The Company increases the frequency of obtaining updated appraisals for adversely graded credits when declining market conditions exist. All appraisals include an “as is” market value without conditions as of the effective date of the appraisal. For certain impaired loans, the Company utilizes the discounted cash flow approach and applies a discount derived from historical data. The significant unobservable inputs used in the fair value measurement of non-PCI impaired loans are discounts applied based on the liquidation cost of collateral and selling cost. On a quarterly basis, all nonperforming assets are reviewed to assess whether the current carrying value is supported by the collateral or cash flow and to ensure that the current carrying value is appropriate. Non-PCI impaired loans are classified as Level 3.
Loans Held-for-Investment, net — The fair value of loans held-for-investment other than non-PCI impaired loans is determined based on a discounted cash flow approach considered for an exit price value. The discount rate is derived from the associated yield curve plus spreads that reflect the rates in the market for loans with similar financial characteristics. No adjustments have been made for changes in credit within any of the loan portfolios. It is management’s opinion that the allowance for loan losses pertaining to performing and nonperforming loans results in a fair value adjustment of credit for such loans. Due to the unobservable nature of the inputs used in deriving the estimated fair value, these instruments are classified as Level 3.
Other Real Estate Owned — The Company’s OREO represents properties acquired through foreclosure, or through full or partial satisfaction of loans held-for-investment, which are recorded at estimated fair value less cost to sell at the time of foreclosure and at the lower of cost or estimated fair value less the cost to sell subsequent to acquisition. The fair values of OREO properties are based on third party appraisals or accepted written offers. Refer to the Non-PCI Impaired Loans section above for a detailed discussion on the Company’s policies and procedures related to appraisals and evaluations. On a monthly basis, the current fair market value of each OREO property is reviewed to ensure that the current carrying value is appropriate. The significant unobservable input used is the selling cost. OREO properties are classified as Level 3.

Restricted Equity Securities — Restricted equity securities are comprised of Federal Reserve Bank stock and FHLB stock. Ownership of these securities is restricted to member banks and these securities do not have a readily determinable fair value.  Purchases and sales of these securities are at par value. The carrying amounts of the Company’s restricted equity securities approximate fair value. The valuation of these investments is classified as Level 2.
Accrued Interest Receivable — The carrying amount approximates1. When NAV is available periodically, but the equity securities may not be readily marketable at its periodic NAV in the secondary market, the fair value due to the short-term nature of these instruments. Considering the observable nature of the inputs used in deriving the estimated fair value, these instruments areequity securities is classified as Level 2.




Interest Rate Swaps and OptionsContracts— The Company enters into interest rate swap and option contracts that are not designated as hedging instruments with institutional counterparties to hedge against interest rate swap and option products offered to bank customers. These products allowits borrowers to lock in attractive intermediate and long-term interest rates, by entering into an interest rate swap or option contract with the Company, resulting in the customer obtaining a synthetic fixedfixed-rate loan. To economically hedge against the interest rate loan.risks in the products offered to its customers, the Company enters into mirrored offsetting interest rate contracts with third-party financial institutions. The Company also enters into interest rate swap or interest rate collar contracts with institutional counterparties to hedge against certificates of deposit issued. This product allows the Company to lock in attractive floatingcertain variable interest rate funding.borrowings and variable interest rate loans. These interest rate contracts with institutional counterparties are designated as cash flow hedges. The fair value of the interest rate swaps is determined using the market standard methodology of netting the discounted future fixed cash payments (or receipts) and the discounted expected variable cash receipts (or payments). The variable cash receipts (or payments) are based on the expectation of future interest rates (forward curves) derived from observed market interest rate curves.  The fair value of the interest rate options, consistingwhich consist of floors and caps, is determined using the market standard methodology of discounting the future expected cash receipts that would occur if variable interest rates fellfall below (rise above) the strike rate of the floors (caps). The variable interest rates used in the calculation of projected receipts on the floor (cap) are based on an expectation of future interest rates derived from observable market interest rate curves and volatilities. In addition, to comply with the provisions of ASC 820,Fair Value Measurement, the Company incorporates credit valuation adjustments to appropriately reflect both its own nonperformance risk and the respective counterparty’s nonperformance risk in the fair value measurements of its derivatives. The credit valuation adjustments associated with the Company’s derivatives utilize model-derived credit spreads, which are Level 3 inputs. Considering the observable nature of all other significant inputs model-derived credit spreads. As of September 30, 2017, the Company has assessed the significance of the impact of the credit valuation adjustments on the overall valuation of these interest rate contracts and has determined that the credit valuation adjustments are not significant to the overall valuation of its derivative portfolios. As a result,utilized, the Company classifies these derivative instruments as Level 2 of the fair value hierarchy due to the observable nature of the significant inputs utilized.2.

12

Foreign Exchange Contracts— The Company enters into short-term foreign exchange contracts to purchase/sell foreign currencies at set rates inaccommodate the future.  These contracts economically hedge againstbusiness needs of its customers. For a majority of the foreign exchange rate fluctuations.contracts entered with its customers, the Company entered into offsetting foreign exchange contracts with third-party financial institutions to manage its exposure. The Company also enters into contracts with institutional counterparties to hedge againstutilizes foreign exchange products offeredcontracts that are not designated as hedging instruments to bankmitigate the economic effect of fluctuations in certain foreign currency on-balance sheet assets and liabilities, primarily foreign currency denominated deposits that it offers to its customers. These products allow customers to hedge theThe fair value of foreign exchange risk of their deposits and loans denominated in foreign currencies. The Company assumes minimal foreign exchange rate risk because the contracts with the customer and the institutional party mirror each other. The fair value is determined at each reporting period based on changes in the foreign exchange rate.rates. These are over-the-counter contracts where quoted market prices are not readily available. Valuation is measured using conventional valuation methodologies with observable market data. Valuation depends on the type of derivative, and the nature of the underlying rate and contractual terms including period of maturity, price and index upon which the derivative’s value is based. Key inputs include foreign exchange rates (spot and/or forward rates), volatility of currencies and the correlation of such inputs. Due to the short-term nature of the majority of these contracts, the counterparties’ credit risks are considered nominal and resultedresult in no adjustments to the valuation of the foreign exchange contracts. Due to the observable nature of the inputs used in deriving the fair value of these contracts, the valuation of foreign exchange contracts is classified as Level 2. As of September 30, 2017, foreign exchange forward contracts used to economically hedge the Company’s net investment in East West Bank (China) Limited, a non-U.S. Dollar (“USD”) functional currency subsidiary in China, are included in this caption. See Foreign Currency Forward Contracts in the section below for details on valuation methodologies2022 and significant assumptions.
Customer Deposits — The fair value of deposits with no stated maturity, such as noninterest-bearing demand deposits, interest-bearing checking, savings and money market deposits, approximates the carrying amount as these deposits are payable on demand at the measurement date. Due to the observable nature of the inputs used in deriving the estimated fair value, these instruments are classified as Level 2. For time deposits, the fair value is based on the discounted value of contractual cash flows using current market rates for instruments with similar maturities. Due to the observable nature of the inputs used in deriving the estimated fair value, time deposits are classified as Level 2.

Federal Home Loan Bank Advances — The fair value of FHLB advances is estimated based on the discounted value of contractual cash flows, using rates currently offered by the FHLB of San Francisco for advances with similar remaining maturities at each reporting date. Due to the observable nature of the inputs used in deriving the estimated fair value, these instruments are classified as Level 2.

Repurchase Agreements — The fair value of the repurchase agreements is calculated by discounting future cash flows based on expected maturities or repricing dates, utilizing estimated market discount rates and taking into consideration the call features of each instrument. Due to the observable nature of the inputs used in deriving the estimated fair value, these instruments are classified as Level 2.
Accrued Interest Payable — The carrying amount approximates fair value due to the short-term nature of these instruments. Due to the observable nature of the inputs used in deriving the estimated fair value, these instruments are classified as Level 2.


Long-Term Debt — The fair value of long-term debt is estimated by discounting the cash flows through maturity based on current market rates the Company would pay for new issuances. Due to the observable nature of the inputs used in deriving the estimated fair value, long-term debt is classified as Level 2.
Foreign Currency Forward Contracts — During the three months ended December 31, 2015,2021, the Company began entering intoBank held foreign currency non-deliverable forward contracts to hedge its net investment in its China subsidiary, East West Bank (China) Limited. Previously, theLimited, a non-U.S. dollar (“USD”) functional currency subsidiary in China. These foreign currency non-deliverable forward contracts were eligible for hedge accounting. During the nine months ended September 30, 2017, the foreign currency forward contracts were dedesignated when the hedge relationship ceased to be highly effective. The Company continues to economically hedge its foreign currency exposure resulting from East West Bank (China) Limited and the foreign currency forward contracts are includeddesignated as part of the “Foreign Exchange Contracts” caption as of September 30, 2017.net investment hedges. The fair value of foreign currency non-deliverable forward contracts is valueddetermined by comparing the contracted foreign exchange rate to the current market foreign exchange rate. InputsKey inputs of the current market exchange rate include spot rates and forward rates and the interest rate curves of the domestic and foreign currency. Interest ratecontractual currencies. Foreign exchange forward curves are used to determine which forward rate pertains to a specific maturity. Due to the observable nature of the inputs used in deriving the estimated fair value, these instruments are classified as Level 2.


Credit Risk Participation Agreements Contracts — The Company entersmay periodically enter into RPAs, under which the Company assumes its pro-rata share ofcredit risk participation agreements (“RPAs”) to manage the credit exposure on interest rate contracts associated with the borrower’s performance related to interest rate derivative contracts.syndicated loans. The Company may enter into protection sold or protection purchased RPAs with institutional counterparties. The fair value of RPAs is calculated by determining the total expected asset or liability exposure of the derivatives to the borrowers and applying the borrowers’ credit spread to that exposure. Total expected exposure incorporates both the current and potential future exposure of the derivatives, derived from using observable inputs, such as yield curves and volatilities. The credit spreads of the borrowers used in the calculation are estimated by the Company based on current market conditions, including consideration of current borrowing spreads for similar customers and transactions, review of existing collateralization or other credit enhancements, and changes in credit sector and entity-specific credit information. The Company has determined thatSince the majority of the inputs used to value the RPAs are observable. Accordingly,observable, RPAs fall withinare classified as Level 2 of the fair value hierarchy.2.


Warrants Equity Contracts — The Company obtained warrants to purchase preferred and common stock of technology and life sciences companies as As part of the loan origination process.process, the Company may obtain warrants to purchase preferred and/or common stock of the borrowers, which are mainly in the technology and life sciences sectors. As of September 30, 2017,2022 and December 31, 2021, the warrants included on the Consolidated Financial Statements were from both public and private companies. The Company valuedvalues these warrants based on the Black-Scholes option pricing model. For warrants from public companies, the model uses the underlying stock price, stated strike price, warrant expiration date, risk-free interest rate based on a duration-matched U.S. Treasury rate, and market-observable company-specific option volatility as inputs to value the warrants. Due to the observable nature of the inputs used in deriving the estimated fair value, warrants from public companies are classified as Level 2. For warrants from private companies, the model uses inputs such as the offering price observed in the most recent round of funding, stated strike price, warrant expiration date, risk-free interest rate based on duration-matched U.S. Treasury rate and option volatility. The option volatility assumption wasCompany applies proxy volatilities based on public market indices that include members that operate in similar industries as the companies in ourindustry sectors of the private company portfolio.companies. The model values were furtherare then adjusted for a general lack of liquidity due to the private nature of the underlying companies. Since both 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. There is a direct correlation between changes in the volatility assumption and the fair value measurement of warrants from private companies, while there is an inverse correlation between changes in the liquidity discount assumption and the fair value measurement of warrants from private companies. On a quarterly basis, the changes in the fair value of warrants from private companies are reviewed for reasonableness, and a sensitivitymeasurement of uncertainty analysis on the option volatility and liquidity discount assumptions is performed.


Commodity Contracts — The Company enters into energy commodity contracts consisting of swaps and options with its oil and gas loan customers, which allow them to hedge against the risk of fluctuation in energy commodity prices. The fair value estimates presented hereinof 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 pertinent information availablethe 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 managementthe observable nature of the significant inputs utilized.

13

The following tables present financial assets and liabilities that are measured at fair value on a recurring basis as of each reporting date. AlthoughSeptember 30, 2022 and December 31, 2021:
($ in thousands)Assets and Liabilities Measured at Fair Value on a Recurring Basis
as of September 30, 2022
Quoted Prices in
Active Markets
for Identical
Assets
(Level 1)		Significant
Other
Observable
Inputs
(Level 2)		Significant
Unobservable
Inputs
(Level 3)		Total
Fair Value
AFS debt securities:
U.S. Treasury securities$600,677 $— $— $600,677 
U.S. government agency and U.S. government-sponsored enterprise debt securities— 260,424 — 260,424 
U.S. government agency and U.S. government-sponsored enterprise mortgage-backed securities:
Commercial mortgage-backed securities— 521,885 — 521,885 
Residential mortgage-backed securities— 1,793,429 — 1,793,429 
Municipal securities— 249,502 — 249,502 
Non-agency mortgage-backed securities:
Commercial mortgage-backed securities— 397,975 — 397,975 
Residential mortgage-backed securities— 671,538 — 671,538 
Corporate debt securities— 529,565 — 529,565 
Foreign government bonds— 225,810 — 225,810 
Asset-backed securities— 64,870 — 64,870 
Collateralized loan obligations (“CLOs”)— 590,415 — 590,415 
Total AFS debt securities$600,677 $5,305,413 $— $5,906,090 
Investments in tax credit and other investments:
Equity securities$19,637 $4,200 $— $23,837 
Total investments in tax credit and other investments$19,637 $4,200 $— $23,837 
Derivative assets:
Interest rate contracts$— $430,038 $— $430,038 
Foreign exchange contracts— 81,874 — 81,874 
Equity contracts— 1 345 346 
Commodity contracts— 369,146 — 369,146 
Gross derivative assets$— $881,059 $345 $881,404 
Netting adjustments (1)
$— $(605,957)$— $(605,957)
Net derivative assets$— $275,102 $345 $275,447 
Derivative liabilities:
Interest rate contracts$— $615,327 $— $615,327 
Foreign exchange contracts— 64,049 — 64,049 
Credit contracts— 27 — 27 
Commodity contracts— 350,198 — 350,198 
Gross derivative liabilities$— $1,029,601 $— $1,029,601 
Netting adjustments (1)
$— $(239,206)$— $(239,206)
Net derivative liabilities$— $790,395 $— $790,395 
14

($ in thousands)Assets and Liabilities Measured at Fair Value on a Recurring Basis
as of December 31, 2021
Quoted Prices in
Active Markets
for Identical
Assets
(Level 1)		Significant
Other
Observable
Inputs
(Level 2)		Significant
Unobservable
Inputs
(Level 3)		Total
Fair Value
AFS debt securities:
U.S. Treasury securities$1,032,681 $— $— $1,032,681 
U.S. government agency and U.S. government-sponsored enterprise debt securities— 1,301,971 — 1,301,971 
U.S. government agency and U.S. government-sponsored enterprise mortgage-backed securities:
Commercial mortgage-backed securities— 1,228,980 — 1,228,980 
Residential mortgage-backed securities— 2,928,283 — 2,928,283 
Municipal securities— 523,158 — 523,158 
Non-agency mortgage-backed securities:
Commercial mortgage-backed securities— 496,443 — 496,443 
Residential mortgage-backed securities— 881,931 — 881,931 
Corporate debt securities— 649,665 — 649,665 
Foreign government bonds— 257,733 — 257,733 
Asset-backed securities— 74,558 — 74,558 
CLOs— 589,950 — 589,950 
Total AFS debt securities$1,032,681 $8,932,672 $— $9,965,353 
Investments in tax credit and other investments:
Equity securities$22,130 $4,474 $— $26,604 
Total investments in tax credit and other investments$22,130 $4,474 $— $26,604 
Derivative assets:
Interest rate contracts$— $240,222 $— $240,222 
Foreign exchange contracts— 21,033 — 21,033 
Equity contracts— 5 215 220 
Commodity contracts— 222,709 — 222,709 
Gross derivative assets$— $483,969 $215 $484,184 
Netting adjustments (1)
$— $(100,953)$— $(100,953)
Net derivative assets$— $383,016 $215 $383,231 
Derivative liabilities:
Interest rate contracts$— $179,962 $— $179,962 
Foreign exchange contracts— 15,501 — 15,501 
Credit contracts— 141 — 141 
Commodity contracts— 194,567 — 194,567 
Gross derivative liabilities$— $390,171 $— $390,171 
Netting adjustments (1)
$— $(232,727)$— $(232,727)
Net derivative liabilities$— $157,444 $— $157,444 
(1)Represents balance sheet netting of derivative assets and liabilities and related cash collateral under master netting agreements or similar agreements. See Note 6 — Derivatives to the Consolidated Financial Statements in this Form 10-Q for additional information.

15

For the three and nine months ended September 30, 2022 and 2021, Level 3 fair value measurements that were measured on a recurring basis consisted of equity contracts issued by private companies. The following table provides a reconciliation of the beginning and ending balances of these equity contracts for the three and nine months ended September 30, 2022 and 2021:
($ in thousands)Three Months Ended September 30,Nine Months Ended September 30,
2022202120222021
Equity contracts
Beginning balance$357 $223 $215 $273 
Total (losses) gains included in earnings (1)
(12)(9)39 37 
Issuances— 12 91 12 
Settlements— — — (96)
Transfers out of Level 3 (2)
— (6)— (6)
Ending balance$345 $220 $345 $220 
(1)Includes unrealized (losses) gains of $(12) thousand and $(9) thousand for the three months ended September 30, 2022 and 2021, respectively, and $39 thousand and $(38) thousand for the nine months ended September 30, 2022 and 2021, respectively. The realized/unrealized gains (losses) of equity contracts are recorded in Lending feeson the Consolidated Statement of Income.
(2)During the three and nine months ended September 30, 2021, the Company transferred $6 thousand of equity contracts measured on a recurring basis out of Level 3 into Level 2 after the corresponding issuer of the equity contracts, which was previously a private company completed its initial public offering and became a public company.

The following table presents quantitative information about the significant unobservable inputs used in the valuation of Level 3 fair value measurements as of September 30, 2022 and December 31, 2021. The significant unobservable inputs presented in the table below are those that the Company considers significant to the fair value of the Level 3 assets. The Company considers unobservable inputs to be significant if, by their exclusion, the fair value of the Level 3 assets would be impacted by a predetermined percentage change.
($ in thousands)Fair Value
Measurements
(Level 3)		Valuation
Technique		Unobservable
Inputs		Range of Inputs
Weighted-
Average of Inputs (1)
September 30, 2022
Derivative assets:
Equity contracts$345 Black-Scholes option pricing modelEquity volatility49% — 70%59%
Liquidity discount47%47%
December 31, 2021
Derivative assets:
Equity contracts$215 Black-Scholes option pricing modelEquity volatility44% — 54%49%
Liquidity discount47%47%
(1)Weighted-average of inputs is calculated based on the fair value of equity contracts as of September 30, 2022 and December 31, 2021.

Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis

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

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

•Discounted cash flow valuation techniques that consist of developing an expected stream of cash flows over the life of the loans, and then calculating the present value of the loans by discounting the expected cash flows at a designated discount rate.
16

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

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

•expected future cash flows that are less than the carrying amount of the investment;
•changes in the economic, market or technological environment that could adversely affect the investee’s operations; and
•other factors that raise doubt about the investee’s ability to continue as a going concern, such as negative cash flows from operations and the continuing prospects of the underlying operations of the investment.

All available information is considered in assessing whether a decline in value is other-than-temporary. Generally, none of the aforementioned factors are individually conclusive and the relative importance placed on individual facts may vary depending on the situation. In accordance with ASC 323-10-35-32, Investments — Equity Method and Joint Ventures, an impairment charge would significantly affect theonly be recognized in earnings for a decline in value that is determined to be other-than-temporary.

Other Real Estate Owned — The Company’s OREO represents properties acquired through foreclosure, or through full or partial satisfaction of loans held-for-investment. These OREO properties are recorded at estimated fair value amounts, such amounts have not been comprehensively revaluedless the costs to sell at the time of foreclosure and at the lower of cost or estimated fair value less the costs to sell subsequent to acquisition. On a monthly basis, the current fair market value of each OREO property is reviewed to ensure that the current carrying value is appropriate. OREO properties are classified as Level 3.

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

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

17

The following tables present the carrying amounts of assets that were still held and had fair value adjustments measured on a nonrecurring basis as of September 30, 2022 and December 31, 2021:
($ in thousands)Assets Measured at Fair Value on a Nonrecurring Basis
as of September 30, 2022
Quoted Prices in
Active Markets
for Identical
Assets
(Level 1)		Significant
Other
Observable
Inputs
(Level 2)		Significant
Unobservable
Inputs
(Level 3)		Fair Value
Measurements
Loans held-for-investment:
Commercial:
Commercial and industrial (“C&I”)$— $— $57,696 $57,696 
Commercial real estate (“CRE”):
CRE— — 30,359 30,359 
Multifamily residential— — 1,008 1,008 
Total commercial— — 89,063 89,063 
Consumer:
Residential mortgage:
Home equity lines of credit (“HELOCs”)— — 1,235 1,235 
Total consumer— — 1,235 1,235 
Total loans held-for-investment$— $— $90,298 $90,298 
($ in thousands)Assets Measured at Fair Value on a Nonrecurring Basis
as of December 31, 2021
Quoted Prices in
Active Markets
for Identical
Assets
(Level 1)		Significant
Other
Observable
Inputs
(Level 2)		Significant
Unobservable
Inputs
(Level 3)		Fair Value
Measurements
Loans held-for-investment:
Commercial:
C&I$— $— $102,349 $102,349 
CRE:
CRE— — 21,891 21,891 
Total commercial— — 124,240 124,240 
Consumer:
Residential mortgage:
HELOCs— — 2,744 2,744 
Total consumer— — 2,744 2,744 
Total loans held-for-investment$— $— $126,984 $126,984 
Other nonperforming assets$391 $— $— $391 

18

The following table presents the increase (decrease) in fair value of certain assets held at the end of the respective reporting periods, for which a nonrecurring fair value adjustment was recognized for the three and nine months ended September 30, 2022 and 2021:
($ in thousands)Three Months Ended September 30,Nine Months Ended September 30,
2022202120222021
Loans held-for-investment:
Commercial:
C&I$(15,265)$(4,977)$(30,011)$(13,590)
CRE:
CRE(118)(106)2,212 (7,186)
Multifamily residential(5,931)16 (5,939)— 
Total commercial(21,314)(5,067)(33,738)(20,776)
Consumer:
Residential mortgage:
HELOCs81 3 166 (6)
Other consumer— — — (2,491)
Total consumer81 3 166 (2,497)
Total loans held-for-investment$(21,233)$(5,064)$(33,572)$(23,273)
Investments in tax credit and other investments, net$— $— $— $877 
Other nonperforming assets$— $(43)$(6,861)$(3,933)

The following table presents the quantitative information about the significant unobservable inputs used in the valuation of Level 3 fair value measurements that are measured on a nonrecurring basis as of September 30, 2022 and December 31, 2021:
($ in thousands)Fair Value
Measurements
(Level 3)		Valuation
Techniques		Unobservable
Inputs		Range of 
Inputs
Weighted-
Average of Inputs (1)
September 30, 2022
Loans held-for-investment$40,559 Discounted cash flowsDiscount4% — 6%4%
$18,372 Fair value of collateralDiscount40% — 94%52%
$31,367 Fair value of propertySelling cost8%8%
December 31, 2021
Loans held-for-investment$64,919 Discounted cash flowsDiscount4% — 15%7%
$38,537 Fair value of collateralDiscount15% — 75%41%
$23,528 Fair value of propertySelling cost8%8%
(1)Weighted-average of inputs is based on the relative fair value of the respective assets as of September 30, 2022 and December 31, 2021.

19

Disclosures about Fair Value of Financial Instruments

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

($ in thousands)September 30, 2022
Carrying
Amount		Level 1Level 2Level 3Estimated
Fair Value
Financial assets:
Cash and cash equivalents$2,163,353 $2,163,353 $— $— $2,163,353 
Interest-bearing deposits with banks$630,543 $— $630,543 $— $630,543 
Resale agreements$892,986 $— $790,239 $— $790,239 
HTM debt securities$3,012,667 $466,085 $1,993,050 $— $2,459,135 
Restricted equity securities, at cost$78,254 $— $78,254 $— $78,254 
Loans held-for-sale$14,500 $— $14,500 $— $14,500 
Loans held-for-investment, net$46,859,738 $— $— $46,147,082 $46,147,082 
Mortgage servicing rights$6,523 $— $— $10,532 $10,532 
Accrued interest receivable$208,520 $— $208,520 $— $208,520 
Financial liabilities:
Demand, checking, savings and money market deposits$43,498,799 $— $43,498,799 $— $43,498,799 
Time deposits$10,358,563 $— $10,256,100 $— $10,256,100 
Federal funds purchased$200,000 $— $200,000 $— $200,000 
FHLB advances$324,920 $— $325,000 $— $325,000 
Repurchase agreements$611,785 $— $617,513 $— $617,513 
Long-term debt$147,875 $— $140,902 $— $140,902 
Accrued interest payable$23,934 $— $23,934 $— $23,934 

($ in thousands)December 31, 2021
Carrying
Amount		Level 1Level 2Level 3Estimated
Fair Value
Financial assets:
Cash and cash equivalents$3,912,935 $3,912,935 $— $— $3,912,935 
Interest-bearing deposits with banks$736,492 $— $736,492 $— $736,492 
Resale agreements$2,353,503 $— $2,335,901 $— $2,335,901 
Restricted equity securities, at cost$77,434 $— $77,434 $— $77,434 
Loans held-for-sale$635 $— $635 $— $635 
Loans held-for-investment, net$41,152,202 $— $— $41,199,599 $41,199,599 
Mortgage servicing rights$5,706 $— $— $9,104 $9,104 
Accrued interest receivable$159,833 $— $159,833 $— $159,833 
Financial liabilities:
Demand, checking, savings and money market deposits$45,388,550 $— $45,388,550 $— $45,388,550 
Time deposits$7,961,982 $— $7,966,116 $— $7,966,116 
FHLB advances$249,331 $— $250,372 $— $250,372 
Repurchase agreements$300,000 $— $310,525 $— $310,525 
Long-term debt$147,658 $— $151,020 $— $151,020 
Accrued interest payable$11,435 $— $11,435 $— $11,435 

20

Note 54 —SecuritiesAssets Purchased under Resale Agreements and Sold under Repurchase Agreements


Assets Purchased under Resale Agreements


ResaleWith resale agreements, are recorded at the balances at whichCompany is exposed to credit risk for both the securities were acquired.counterparties and the underlying collateral. The market valuesCompany manages credit exposure from certain transactions by entering into master netting agreements and collateral arrangements with the counterparties. The relevant agreements allow for the efficient closeout of the underlying securities collateralizingtransaction, liquidation and set-off of collateral against the related receivablenet 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 including accrued interest, are monitored. Additional collateral may be requested byas described above, the Company from the counterparty when deemed appropriate. Grossdid not hold any reserves for credit impairment with respect to these agreements as of both September 30, 2022 and December 31, 2021.

Securities Purchased under Resale Agreements — Total securities purchased under resale agreements were $1.65 billion and $2.10 billion$885.0 million as of September 30, 20172022, and $1.33 billion as of December 31, 2016,2021. The weighted-average yields were 2.41% and 1.50% for the three months ended September 30, 2022 and 2021, respectively; and 1.96% and 1.53% for the nine months ended September 30, 2022 and 2021, respectively. The weighted average interest rates

Loans Purchased under Resale Agreements — Total loans purchased under resale agreements were 2.30% and 1.84%$8.0 million as of September 30, 20172022, and $1.02 billion as of December 31, 2016,2021. The weighted-average yields were 3.87% and 1.48% for the three months ended September 30, 2022 and 2021, respectively; and 2.10% and 1.57% for the nine months ended September 30, 2022 and 2021, respectively.



Assets Sold under Repurchase Agreements

Long-term — As of September 30, 2022, securities sold under repurchase agreements are accounted for as collateralized financing transactions and recorded at the balances at which the securities were sold. The collateral for the repurchase agreements is primarily comprisedconsisted of U.S. Treasury securities, U.S. government agency and U.S. government sponsoredgovernment-sponsored enterprise mortgage-backed securities, and U.S. government agency and U.S. government sponsored enterprise debtTreasury securities. The Company may have to provide additional collateral for the repurchase agreements, as necessary. Gross repurchase agreements were $450.0$611.8 million as of each of September 30, 2017 and December 31, 2016. The weighted average interest rates were 3.56% and 3.15% as of September 30, 20172022, and $300.0 million as of December 31, 2016,2021. The weighted-average interest rates were 2.81% and 2.57% for the three months ended September 30, 2022 and 2021, respectively; and 2.73% and 2.62% for the nine months ended September 30, 2022 and 2021, respectively. As of September 30, 2022, $311.8 million and $300.0 million of the securities sold under repurchase agreements will mature in 2022 and 2023, respectively.


Balance Sheet Offsetting

The Company’s resale and repurchase agreements are transacted under legally enforceable master repurchase agreements that, provide the Company, in the event of default by the counterparty, provide the Company the right to liquidate securities held and to offset receivables and payables with the same counterparty. The Company nets resale and repurchase transactions with the same counterparty on the Consolidated Balance SheetsSheet when it has a legally enforceable master netting agreement and the transactions are eligible for netting under ASC 210-20-45.210-20-45-11, Balance Sheet Offsetting Repurchase and Reverse Repurchase Agreements. Collateral acceptedreceived includes securities and loans that are not recognized on the Consolidated Balance Sheets.Sheet. Collateral pledged consists of securities that are not netted on the Consolidated Balance SheetsSheet against the related collateralized liability. Collateral acceptedSecurities received or pledged as collateral in resale and repurchase agreements with other financial institutions may also be sold or re-pledged by the secured party, but isand are usually delivered to and held by the third partythird-party trustees. The collateral amounts received/posted are limited for presentation purposes to the related recognized asset/liability balance for each counterparty, and accordingly, do not include excess collateral received/pledged.




The following tables present the resale and repurchase agreements included on the Consolidated Balance SheetsSheet as of September 30, 20172022 and December 31, 2016:2021:
($ in thousands)September 30, 2022
AssetsGross
Amounts
of Recognized
Assets		Gross Amounts
Offset on the
Consolidated
Balance Sheet		Net Amounts of
Assets Presented
on the Consolidated
Balance Sheet		Gross Amounts  Not Offset on the
Consolidated  Balance Sheet		Net
Amount
Collateral Received
Resale agreements$892,986 $— $892,986 $(810,574)(1)$82,412 
LiabilitiesGross
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$611,785 $— $611,785 $(606,766)(2)$5,019 
21

($ in thousands) As of September 30, 2017($ in thousands)December 31, 2021
 
Gross
Amounts
of Recognized
Assets
 Gross Amounts
Offset on the
Consolidated
Balance Sheets		 Net Amounts of
Assets Presented
on the
Consolidated
Balance Sheets		 Gross Amounts Not Offset on the
Consolidated Balance Sheets		  
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
AssetsAssetsNet
Amount
 
Gross
Amounts
of Recognized
Assets
 Gross Amounts
Offset on the
Consolidated
Balance Sheets		 Net Amounts of
Assets Presented
on the
Consolidated
Balance Sheets		 Financial
Instruments		 Collateral
Pledged		 Net AmountGross
Amounts
of Recognized
Assets		Gross Amounts
Offset on the
Consolidated
Balance Sheet		Net Amounts of
Assets Presented
on the Consolidated
Balance Sheet		Collateral Received
Resale agreements $—
 $(1,240,568)
(2) 
$9,432
Resale agreements$2,353,503 $— $2,353,503 $(2,327,687)(1)$25,816 
            
 
Gross
Amounts
of Recognized
Liabilities
 Gross Amounts
Offset on the
Consolidated
Balance Sheets		 
Net Amounts of
Liabilities
Presented
on the
Consolidated
Balance Sheets
 Gross Amounts Not Offset on the
Consolidated Balance Sheets		  
LiabilitiesLiabilitiesGross
Amounts
of Recognized
Liabilities		Gross Amounts
Offset on the
Consolidated
Balance Sheet		Net Amounts of
Liabilities Presented
on the Consolidated
Balance Sheet		Gross Amounts Not Offset on the
Consolidated Balance Sheet
Net
Amount
 
Gross
Amounts
of Recognized
Liabilities
 Gross Amounts
Offset on the
Consolidated
Balance Sheets		 
Net Amounts of
Liabilities
Presented
on the
Consolidated
Balance Sheets
 Financial
Instruments		 Collateral 
Posted		 Net AmountCollateral Pledged
Repurchase agreements $—
 $(50,000)
(3) 
$—
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.
 
($ in thousands) As of December 31, 2016
  
Gross
Amounts
of Recognized
Assets
 Gross Amounts
Offset on the
Consolidated
Balance Sheets		 Net Amounts of
Assets Presented
on the
Consolidated
Balance Sheets		 Gross Amounts Not Offset on the
Consolidated Balance Sheets		  
Assets    Financial
Instruments		 Collateral
Pledged		 Net Amount
Resale agreements $2,100,000
 $(100,000) $2,000,000
 $(150,000)
(1) 
$(1,839,120)
(2) 
$10,880
             
  
Gross
Amounts
of Recognized
Liabilities
 Gross Amounts
Offset on the
Consolidated
Balance Sheets		 Net Amounts of
Liabilities
Presented
on the
Consolidated
Balance Sheets		 Gross Amounts Not Offset on the
Consolidated Balance Sheets		  
Liabilities    Financial
Instruments		 Collateral 
Posted		 Net Amount
Repurchase agreements $450,000
 $(100,000) $350,000
 $(150,000)
(1) 
$(200,000)
(3) 
$—
 
(1)Represents financial instruments subject to enforceable master netting arrangements that are not eligible to be offset under ASC 210-20-45 but would be eligible for offsetting to the extent that an event of default has occurred.
(2)Represents the fair value of securities the Company has received under resale agreements, limited for table presentation purposes to the amount of the recognized asset due from each counterparty.
(3)Represents the fair value of securities the Company has pledged under repurchase agreements, limited for table presentation purposes to the amount of the recognized liability owed to each counterparty.

(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, referderivatives. Refer to Note 7 6 — Derivatives to the Consolidated Financial Statements in this Form 10-Q for additional information.



22



Note 65 — Securities


The following tables present the amortized cost, gross unrealized gains and losses and fair value by major categories of available-for-sale investmentAFS and HTM debt securities which are carried at fair value, and the held-to-maturity investment security, which is carried at amortized cost, as of September 30, 20172022 and December 31, 2016:2021:
($ in thousands)September 30, 2022
Amortized
Cost		Gross
Unrealized
Gains		Gross
Unrealized
Losses		Fair
Value
AFS debt securities:
U.S. Treasury securities$676,312 $— $(75,635)$600,677 
U.S. government agency and U.S. government-sponsored enterprise debt securities319,070 — (58,646)260,424 
U.S. government agency and U.S. government-sponsored enterprise mortgage-backed securities:
Commercial mortgage-backed securities595,342 — (73,457)521,885 
Residential mortgage-backed securities2,043,791 58 (250,420)1,793,429 
Municipal securities307,084 — (57,582)249,502 
Non-agency mortgage-backed securities:
Commercial mortgage-backed securities448,790 173 (50,988)397,975 
Residential mortgage-backed securities784,700 — (113,162)671,538 
Corporate debt securities673,502 — (143,937)529,565 
Foreign government bonds238,720 528 (13,438)225,810 
Asset-backed securities66,793 — (1,923)64,870 
CLOs617,250 — (26,835)590,415 
Total AFS debt securities6,771,354 759 (866,023)5,906,090 
HTM debt securities:
U.S. Treasury securities522,713 — (56,628)466,085 
U.S. government agency and U.S. government-sponsored enterprise debt securities998,233 — (215,616)782,617 
U.S. government agency and U.S. government-sponsored enterprise mortgage-backed securities:
Commercial mortgage-backed securities509,139 — (92,507)416,632 
Residential mortgage-backed securities792,685 — (142,978)649,707 
Municipal securities189,897 — (45,803)144,094 
Total HTM debt securities3,012,667 — (553,532)2,459,135 
Total debt securities$9,784,021 $759 $(1,419,555)$8,365,225 
23

 
  As of September 30, 2017
($ in thousands) Amortized
Cost		 Gross
Unrealized
Gains		 Gross
Unrealized
Losses		 Fair
Value
Available-for-sale investment securities:  
  
  
  
U.S. Treasury securities $533,035
 $—
 $(6,703) $526,332
U.S. government agency and U.S. government sponsored enterprise debt securities 191,727
 81
 (2,623) 189,185
U.S. government agency and U.S. government sponsored enterprise mortgage-backed securities:  
  
  
  
Commercial mortgage-backed securities 321,943
 326
 (7,097) 315,172
Residential mortgage-backed securities 1,154,026
 4,790
 (7,882) 1,150,934
Municipal securities 116,798
 900
 (456) 117,242
Non-agency residential mortgage-backed securities:        
Investment grade (1)
 9,680
 21
 (7) 9,694
Corporate debt securities:        
Investment grade (1)
 2,464
 —
 (137) 2,327
Non-investment grade (1)
 10,191
 —
 (576) 9,615
Foreign bonds:       

Investment grade (1) (2)
 505,395
 229
 (16,484) 489,140
Other securities  (3)
 147,504
 3
 (372) 147,135
Total available-for-sale investment securities $2,992,763
 $6,350
 $(42,337) $2,956,776
Held-to-maturity investment security:        
Non-agency commercial mortgage-backed security $—
 $—
 $—
 $—
Total investment securities $2,992,763
 $6,350
 $(42,337) $2,956,776
         
         
  As of December 31, 2016
($ in thousands) Amortized
Cost		 Gross
Unrealized
Gains		 Gross
Unrealized
Losses		 Fair
Value
Available-for-sale investment securities:  
  
  
  
U.S. Treasury securities $730,287
 $21
 $(9,829) $720,479
U.S. government agency and U.S. government sponsored enterprise debt securities 277,891
 224
 (3,249) 274,866
U.S. government agency and U.S. government sponsored enterprise mortgage-backed securities:  
  
  
  
Commercial mortgage-backed securities 272,672
 345
 (6,218) 266,799
Residential mortgage-backed securities 1,266,372
 3,924
 (11,549) 1,258,747
Municipal securities 148,302
 1,252
 (1,900) 147,654
Non-agency residential mortgage-backed securities:        
Investment grade (1)
 11,592
 —
 (115) 11,477
Corporate debt securities:        
Investment grade (1)
 222,190
 562
 (375) 222,377
Non-investment grade (1)
 10,191
 —
 (1,018) 9,173
Foreign bonds:        
Investment grade (1) (2)
 405,443
 30
 (21,579) 383,894
Other securities 40,501
 337
 (509) 40,329
Total available-for-sale investment securities $3,385,441
 $6,695
 $(56,341) $3,335,795
Held-to-maturity investment security:        
Non-agency commercial mortgage-backed security (3)
 $143,971
 $622
 $—
 $144,593
Total investment securities $3,529,412
 $7,317
 $(56,341) $3,480,388
         
(1)Available-for-sale investment securities rated BBB- or higher by Standard &Poor’s (“S&P”) or Baa3 or higher by Moody’s are considered investment grade.  Conversely, available-for-sale investment securities rated lower than BBB- by S&P or lower than Baa3 by Moody’s are considered non-investment grade. Classifications are based on the lower of the credit ratings by S&P or Moody’s.
(2)Fair values of foreign bonds include $458.9 million and $353.6 million of multilateral development bank bonds as of September 30, 2017 and December 31, 2016, respectively.
(3)During the third quarter of 2017, the Company transferred a non-agency commercial mortgage-backed security with a net carrying amount of $115.6 million from held-to-maturity to available-for-sale.

($ in thousands)December 31, 2021
Amortized
Cost		Gross
Unrealized
Gains		Gross
Unrealized
Losses		Fair
Value
AFS debt securities:
U.S. Treasury securities$1,049,238 $130 $(16,687)$1,032,681 
U.S. government agency and U.S. government-sponsored enterprise debt securities1,333,984 2,697 (34,710)1,301,971 
U.S. government agency and U.S. government-sponsored enterprise mortgage-backed securities:
Commercial mortgage-backed securities1,242,043 15,791 (28,854)1,228,980 
Residential mortgage-backed securities2,968,789 8,629 (49,135)2,928,283 
Municipal securities519,381 10,065 (6,288)523,158 
Non-agency mortgage-backed securities:
Commercial mortgage-backed securities498,920 3,000 (5,477)496,443 
Residential mortgage-backed securities889,937 971 (8,977)881,931 
Corporate debt securities657,516 8,738 (16,589)649,665 
Foreign government bonds260,447 767 (3,481)257,733 
Asset-backed securities74,674 185 (301)74,558 
CLOs592,250 52 (2,352)589,950 
Total AFS debt securities$10,087,179 $51,025 $(172,851)$9,965,353 



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

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

24

Unrealized Losses of Available-for-Sale Debt Securities


The following tables present the fair value and the associated gross unrealized losses and related fair values of the Company’s investment portfolio,AFS debt securities, aggregated by investment category and the length of time that individualthe securities have been in a continuous unrealized loss position as of September 30, 20172022 and December 31, 2016:2021.
($ in thousands)September 30, 2022
Less Than 12 Months12 Months or MoreTotal
Fair
Value		Gross
Unrealized
Losses		Fair
Value		Gross
Unrealized
Losses		Fair
Value		Gross
Unrealized
Losses
AFS debt securities:
U.S. Treasury securities$263,772 $(25,232)$336,905 $(50,403)$600,677 $(75,635)
U.S. government agency and U.S. government sponsored enterprise debt securities88,168 (16,401)172,256 (42,245)260,424 (58,646)
U.S. government agency and U.S. government-sponsored enterprise mortgage-backed securities:
Commercial mortgage-backed securities334,460 (39,330)187,425 (34,127)521,885 (73,457)
Residential mortgage-backed securities700,318 (72,088)1,085,253 (178,332)1,785,571 (250,420)
Municipal securities203,157 (46,271)46,345 (11,311)249,502 (57,582)
Non-agency mortgage-backed securities:
Commercial mortgage-backed securities170,101 (8,351)218,124 (42,637)388,225 (50,988)
Residential mortgage-backed securities188,584 (23,168)482,954 (89,994)671,538 (113,162)
Corporate debt securities247,533 (24,969)282,032 (118,968)529,565 (143,937)
Foreign government bonds68,733 (336)36,899 (13,102)105,632 (13,438)
Asset-backed securities54,811 (1,579)10,059 (344)64,870 (1,923)
CLOs190,370 (8,730)400,045 (18,105)590,415 (26,835)
Total AFS debt securities$2,510,007 $(266,455)$3,258,297 $(599,568)$5,768,304 $(866,023)
($ in thousands)December 31, 2021
Less Than 12 Months12 Months or MoreTotal
Fair
Value		Gross
Unrealized
Losses		Fair
Value		Gross
Unrealized
Losses		Fair
Value		Gross
Unrealized
Losses
AFS debt securities:
U.S. Treasury securities$935,776 $(14,689)$47,881 $(1,998)$983,657 $(16,687)
U.S. government agency and U.S. government-sponsored enterprise debt securities773,647 (18,000)402,907 (16,710)1,176,554 (34,710)
U.S. government agency and U.S. government-sponsored enterprise mortgage-backed securities:
Commercial mortgage-backed securities440,734 (13,589)257,745 (15,265)698,479 (28,854)
Residential mortgage-backed securities2,138,542 (37,691)330,522 (11,444)2,469,064 (49,135)
Municipal securities177,065 (5,682)17,003 (606)194,068 (6,288)
Non-agency mortgage-backed securities:
Commercial mortgage-backed securities301,925 (4,158)40,013 (1,319)341,938 (5,477)
Residential mortgage-backed securities707,792 (8,966)6,431 (11)714,223 (8,977)
Corporate debt securities183,916 (3,084)251,494 (13,505)435,410 (16,589)
Foreign government bonds27,097 (5)133,279 (3,476)160,376 (3,481)
Asset-backed securities24,885 (301)— — 24,885 (301)
CLOs221,586 (64)291,712 (2,288)513,298 (2,352)
Total AFS debt securities$5,932,965 $(106,229)$1,778,987 $(66,622)$7,711,952 $(172,851)

25

 
  As of September 30, 2017
($ in thousands) Less Than 12 Months 12 Months or More Total
 
Fair
Value
 
Gross
Unrealized
Losses
 
Fair
Value
 
Gross
Unrealized
Losses
 
Fair
Value
 
Gross
Unrealized
Losses
Available-for-sale investment securities:  
  
  
  
  
  
U.S. Treasury securities $415,507
 $(4,615) $110,825
 $(2,088) $526,332
 $(6,703)
U.S. government agency and U.S. government sponsored enterprise debt securities 96,681
 (367) 54,512
 (2,256) 151,193
 (2,623)
U.S. government agency and U.S. government sponsored enterprise mortgage-backed securities:  
  
  
  
  
  
Commercial mortgage-backed securities 120,070
 (1,721) 155,128
 (5,376) 275,198
 (7,097)
Residential mortgage-backed securities 365,038
 (2,344) 288,768
 (5,538) 653,806
 (7,882)
Municipal securities 22,010
 (222) 11,256
 (234) 33,266
 (456)
Non-agency residential mortgage-backed securities:  
  
  
  
  
  
Investment grade 4,715
 (7) —
 —
 4,715
 (7)
Corporate debt securities:  
  
  
  
  
  
Investment grade —
 —
 2,327
 (137) 2,327
 (137)
Non-investment grade —
 —
 9,615
 (576) 9,615
 (576)
Foreign bonds:            
Investment grade 73,619
 (873) 344,298
 (15,611) 417,917
 (16,484)
Other securities 31,223
 (372) —
 —
 31,223
 (372)
Total available-for-sale investment securities $1,128,863
 $(10,521) $976,729
 $(31,816) $2,105,592
 $(42,337)
Held-to-maturity investment security:            
Non-agency commercial mortgage-backed security $—
 $—
 $—
 $—
 $—
 $—
Total investment securities $1,128,863
 $(10,521) $976,729
 $(31,816) $2,105,592
 $(42,337)
             
             
  As of December 31, 2016
($ in thousands) Less Than 12 Months 12 Months or More Total
 
Fair
Value
 
Gross
Unrealized
Losses
 
Fair
Value
 
Gross
Unrealized
Losses
 
Fair
Value
 
Gross
Unrealized
Losses
Available-for-sale investment securities:  
  
  
  
  
  
U.S. Treasury securities $670,268
 $(9,829) $—
 $—
 $670,268
 $(9,829)
U.S. government agency and U.S. government sponsored enterprise debt securities 203,901
 (3,249) —
 —
 203,901
 (3,249)
U.S. government agency and U.S. government sponsored enterprise mortgage-backed securities:          
  
Commercial mortgage-backed securities 202,106
 (5,452) 29,201
 (766) 231,307
 (6,218)
Residential mortgage-backed securities 629,324
 (9,594) 119,603
 (1,955) 748,927
 (11,549)
Municipal securities 57,655
 (1,699) 2,692
 (201) 60,347
 (1,900)
Non-agency residential mortgage-backed securities:          
  
Investment grade 5,033
 (101) 6,444
 (14) 11,477
 (115)
Corporate debt securities:          
  
Investment grade —
 —
 71,667
 (375) 71,667
 (375)
Non-investment grade —
 —
 9,173
 (1,018) 9,173
 (1,018)
Foreign bonds:            
Investment grade 363,618
 (21,327) 14,258
 (252) 377,876
 (21,579)
Other securities 30,991
 (509) —
 —
 30,991
 (509)
Total available-for-sale investment securities $2,162,896
 $(51,760) $253,038
 $(4,581) $2,415,934
 $(56,341)
Held-to-maturity investment security:            
Non-agency commercial mortgage-backed security $—
 $—
 $—
 $—
 $—
 $—
Total investment securities $2,162,896
 $(51,760) $253,038
 $(4,581) $2,415,934
 $(56,341)
 
As of September 30, 2022, the Company had a total of 557 AFS debt securities in a gross unrealized loss position with no credit impairment, consisting primarily of 262 U.S. government agency and U.S. government-sponsored enterprise mortgage-backed securities, 100 non-agency mortgage-backed securities, and 68 corporate debt securities. In comparison, as of December 31, 2021, the Company had a total of 431 AFS debt securities in a gross unrealized loss position with no credit impairment, consisting primarily of 180 U.S. government agency and U.S. government-sponsored enterprise mortgage-backed securities, 50 U.S. government agency and U.S. government-sponsored agency debt securities, 21 U.S. Treasury securities, and 30 corporate debt securities.



Allowance for Credit Losses on Available-for-Sale Debt Securities
For each
Each reporting period, the Company examines all individual securitiesassesses each AFS debt security that areis in an unrealized loss position for OTTI.to determine whether the decline in fair value below the amortized cost basis resulted from a credit loss or other factors. For a discussion of the factors and criteria the Company uses in analyzing securities for OTTI,impairment related to credit losses, see Note 1 — Summary of Significant Accounting Policies — Significant Accounting Policies — Allowance for Credit Losses on Available-for-Sale InvestmentDebt Securitiesto to the Consolidated Financial Statements ofin the Company’s 20162021 Form 10-K.


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

•Non-agency mortgage-backed securities — The market value decline as of September 30, 2022, was primarily due to interest rate movement and spread widening. Since these securities are rated investment grade by NRSROs, or have high priority in the cash flow waterfall within the securitization structure, and the contractual payments have historically been on time, the Company believes the risk of credit losses on these securities is low.
•Corporate debt securities — The market value decline as of September 30, 2022 was primarily due to interest rate movement and spread widening. Since these securities are nearly all rated investment grade by NRSROs or, if not, the issuer is a well-capitalized financial institution with strong profitability, and the contractual payments from these bonds have been, and are expected to be, received on time, the Company believes that the risk of credit losses on these securities is low.

As of September 30, 2022 and December 31, 2021, the Company had the intent to hold the AFS debt securities with unrealized losses through the anticipated recovery period and it was more-likely-than-not that the Company will not have to sell these securities before the recovery of their amortized cost. The issuers of these securities have not, to the Company’s knowledge, established any cause for default on these securities. These securities have fluctuated in value since their purchase dates as market interest rates have fluctuated. The Company believes that the gross unrealized losses detailed in the previous tables are temporary and not due to reasons of credit quality. As a result, the Company expects to recover the entire amortized cost basis of these securities. Accordingly, there was no impairment loss was recorded on the Company’s Consolidated Statements of Incomeallowance for the three and nine months ended September 30, 2017 and 2016. Ascredit losses as of September 30, 2017, the Company had 146 available-for-sale investment securities in an unrealized loss position with no credit impairment, primarily comprised of 79 U.S. government agency2022 and U.S. government sponsored enterprise mortgage-backed securities, 22 U.S. Treasury securities and 14 investment grade foreign bonds. In comparison, as of December 31, 2016, the Company had 170 available-for-sale investment securities in an unrealized loss position with2021 provided against these securities. In addition, there was no credit impairment, primarily comprised of 82 U.S. government agency and U.S. government sponsored enterprise mortgage-backed securities, 26 U.S. Treasury securities and 13 investment grade foreign bonds.

During the first quarter of 2016, the Company obtained a non-agency commercial mortgage-backed security, through the securitization of multifamily real estate loans, which was classified as held-to-maturity and recorded at amortized cost. During the third quarter of 2017, the Company transferred this non-agency commercial mortgage-backed security with a net carrying amount of $115.6 million from held-to-maturity to available-for-sale. The transfer reflects the Company’s intent to sell the security under active liquidity management.

Other-Than-Temporary Impairment

No OTTIprovision for credit losses were recognized for the three and nine months ended September 30, 20172022 and 2016.2021. If a credit loss had been identified, the Company would record an impairment through the allowance for credit losses with a corresponding Provision for credit losses on the Consolidated Statement of Income.


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

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

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

26

Realized Gains and Losses


The following table presents the proceeds, gross realized gains and losses, and tax expense related to the sales of available-for-sale investmentAFS debt securities for the three and nine months ended September 30, 20172022 and 2016:2021:
($ in thousands)Three Months Ended September 30,Nine Months Ended September 30,
2022202120222021
Gross realized gains$— $354 $1,306 $1,178 
Related tax expense$— $104 $386 $348 
 
($ in thousands) Three Months Ended September 30, Nine Months Ended September 30,
 2017 2016 2017 2016
Proceeds from sales $124,887
 $143,513
 $676,776
 $1,008,256
Gross realized gains $1,539
 $1,790
 $6,733
 $8,593
Gross realized losses $—
 $—
 $—
 $(125)
Related tax expense $647
 $752
 $2,831
 $3,560
 


Interest Income
Scheduled Maturities of Investment Securities

The following table presents the scheduledcomposition of interest income on debt securities for the three and nine months ended September 30, 2022 and 2021:
($ in thousands)Three Months Ended September 30,Nine Months Ended September 30,
2022202120222021
Taxable interest$46,172 $34,755 $125,626 $92,909 
Nontaxable interest4,920 3,071 14,309 8,707 
Total interest income on debt securities$51,092 $37,826 $139,935 $101,616 

27

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

The following tables present the contractual maturities, amortized cost, fair value and weighted average yields of available-for-sale investmentAFS and HTM debt securities as of September 30, 2017:
 
($ in thousands) 
Amortized
Cost
 
Estimated
Fair Value
Due within one year $638,257
 $621,343
Due after one year through five years 629,892
 623,058
Due after five years through ten years 176,117
 172,902
Due after ten years 1,548,497
 1,539,473
Total available-for-sale investment securities $2,992,763
 $2,956,776
 



Actual2022. Expected maturities of mortgage-backed securities canwill differ from contractual maturities becauseon certain securities as the issuers and borrowers of the underlying collateral may have the right to call or prepay obligations. In addition, factors such as prepayments and interest rates may affect theobligations with or without prepayment penalties.
($ in thousands)Within One Year
After One Year through Five Years
After Five Years through Ten YearsAfter Ten YearsTotal
AFS debt securities:
U.S. Treasury securities
Amortized cost$— $576,605 $99,707 $— $676,312 
Fair value— 516,595 84,082 — 600,677 
Weighted-average yield (1)
— %1.28 %0.74 %— %1.20 %
U.S. government agency and U.S. government-sponsored enterprise debt securities
Amortized cost— 24,775 125,000 169,295 319,070 
Fair value— 22,787 102,540 135,097 260,424 
Weighted-average yield (1)
— %1.47 %1.16 %2.10 %1.69 %
U.S. government agency and U.S. government-sponsored enterprise mortgage-backed securities
Amortized cost— 24,417 173,899 2,440,817 2,639,133 
Fair value— 23,529 157,827 2,133,958 2,315,314 
Weighted-average yield (1)
— %3.26 %2.71 %2.70 %2.71 %
Municipal securities
Amortized cost1,511 38,079 6,855 260,639 307,084 
Fair value1,510 35,025 5,753 207,214 249,502 
Weighted-average yield (1) (2)
3.13 %2.44 %1.85 %2.24 %2.26 %
Non-agency mortgage-backed securities
Amortized cost28,574 187,564 25,832 991,520 1,233,490 
Fair value28,195 179,900 24,897 836,521 1,069,513 
Weighted-average yield (1)
4.84 %3.87 %0.84 %2.37 %2.62 %
Corporate debt securities
Amortized cost10,000 — 334,502 329,000 673,502 
Fair value9,857 — 296,184 223,524 529,565 
Weighted average yield (1)
3.95 %— %3.59 %1.98 %2.81 %
Foreign government bonds
Amortized cost138,720 — 50,000 50,000 238,720 
Fair value139,060 — 49,851 36,899 225,810 
Weighted-average yield (1)
2.15 %— %2.66 %1.50 %2.12 %
Asset-backed securities
Amortized cost— — — 66,793 66,793 
Fair value— — — 64,870 64,870 
Weighted-average yield (1)
— %— %— %4.15 %4.15 %
CLOs
Amortized cost— — 25,000 592,250 617,250 
Fair value— — 24,168 566,247 590,415 
Weighted average yield (1)
— %— %3.66 %3.86 %3.85 %
Total AFS debt securities
Amortized cost$178,805 $851,440 $840,795 $4,900,314 $6,771,354 
Fair value$178,622 $777,836 $745,302 $4,204,330 $5,906,090 
Weighted-average yield (1)
2.69 %1.96 %2.56 %2.69 %2.58 %
28

($ in thousands)Within One Year
After One Year through Five Years
After Five Years through Ten YearsAfter Ten YearsTotal
HTM debt securities:
U.S. Treasury securities
Amortized cost$—$285,325$237,388$—$522,713
Fair value—255,365210,720—466,085
Weighted-average yield (1)
— %0.96 %1.14 %— %1.05 %
U.S. government agency and U.S. government-sponsored enterprise debt securities
Amortized cost——255,708742,525998,233
Fair value——215,684566,933782,617
Weighted-average yield (1)
— %— %1.94 %1.88 %1.90 %
U.S. government agency and U.S. government-sponsored enterprise mortgage-backed securities
Amortized cost——96,4331,205,3911,301,824
Fair value——81,526984,8131,066,339
Weighted-average yield (1)
— %— %1.56 %1.63 %1.63 %
Municipal securities
Amortized cost———189,897189,897
Fair value———144,094144,094
Weighted-average yield (1) (2)
— %— %— %1.97 %1.97 %
Total HTM debt securities
Amortized cost$—$285,325$589,529$2,137,813$3,012,667
Fair value$—$255,365$507,930$1,695,840$2,459,135
Weighted-average yield (1)
— %0.96 %1.55 %1.75 %1.64 %
(1)Weighted-average yields are computed based on the carrying values of mortgage-backed securities.amortized cost balances.

(2)Yields on tax-exempt securities are not presented on a tax-equivalent basis.
Available-for-sale investment securities with fair values of $584.9 million and $767.4 million as
As of September 30, 20172022 and December 31, 2016, 2021, AFS and HTM debt securities with carrying values of $1.22 billion and $803.9 million, respectively, were pledged to secure public deposits, repurchase agreements the Federal Reserve Bank’s discount window and for other purposes required or permitted by law.


Restricted Equity Securities


Restricted equity securities include stock of the Federal Reserve Bank and of the FHLB. Restricted equity securities are carried at cost as these securities do not have a readily determinable fair value. The following table presents the restricted equity securities included in Other assets on the Consolidated Balance Sheet as of September 30, 20172022 and December 31, 2016:2021:
($ in thousands)September 30, 2022December 31, 2021
Federal Reserve Bank of San Francisco (“FRBSF”) stock$61,004 $60,184 
FHLB stock17,250 17,250 
Total restricted equity securities$78,254 $77,434 

     
($ in thousands) September 30, 2017 December 31, 2016
Federal Reserve Bank stock $56,072
 $55,525
FHLB stock 17,250
 17,250
Total $73,322
 $72,775
     


Note 76 — Derivatives

The Company uses derivatives to manage exposure to market risk, primarily including interest rate risk andor foreign currency risk, andas well as to assist customers with their risk management objectives. The Company’s goal is to manage interest rate sensitivity and volatility so that movements into mitigate the effect of interest rates are not significant tochanges on earnings or capital. The Company also uses foreign exchange contracts to manage the foreign exchange rate risk associated with certain foreign currency-denominated assets and liabilities, as well as the Company’sBank’s investment in its China subsidiary, East West Bank (China) Limited. The Company recognizes all derivatives on the Consolidated Balance SheetsSheet at fair value. While the Company designates certain derivatives as hedging instruments in a qualifying hedge accounting relationship, other derivatives consist ofserve as economic hedges. For additional information on the Company’s derivatives and hedging activities, seeNote 1 — Summary of Significant Accounting Policies — Significant Accounting Policies — Derivativesto the Consolidated Financial Statements of the Company’s 20162021 Form 10-K.


29

The following table presents the total notional amounts and gross fair valuevalues of the Company’s derivatives, as well as the balance sheet netting adjustments on an aggregate basis as of September 30, 20172022 and December 31, 2016:2021. The derivative asset and liability fair values are presented on a gross basis prior to the application of bilateral collateral and master netting agreements, but after the application of variation margin payments as settlements with central clearing organizations. Total derivative asset and liability fair values are adjusted to take into consideration the effects of legally enforceable master netting agreements and cash collateral received or paid as of September 30, 2022 and December 31, 2021. The resulting net derivative asset and liability fair values are included in Other assets and Accrued expenses and other liabilities, respectively, on the Consolidated Balance Sheet.
($ in thousands)September 30, 2022December 31, 2021
Notional
Amount		Fair ValueNotional
Amount		Fair Value
Derivative
Assets 		Derivative
 Liabilities 		Derivative
Assets 		Derivative
 Liabilities 
Derivatives designated as hedging instruments:
Cash flow hedges:
Interest rate contracts$2,525,000 $533 $24,679 $275,000 $— $57 
Net investment hedges:
Foreign exchange contracts84,832 7,107 — 86,531 — 225 
Total derivatives designated as hedging instruments$2,609,832 $7,640 $24,679 $361,531 $— $282 
Derivatives not designated as hedging instruments:
Interest rate contracts$17,261,862 $429,505 $590,648 $17,575,420 $240,222 $179,905 
Foreign exchange contracts2,762,150 74,767 64,049 1,874,681 21,033 15,276 
Credit contracts141,549 — 27 72,560 — 141 
Equity contracts— (1)346 — — (1)220 — 
Commodity contracts— (2)369,146 350,198 — (2)222,709 194,567 
Total derivatives not designated as hedging instruments$20,165,561 $873,764 $1,004,922 $19,522,661 $484,184 $389,889 
Gross derivative assets/liabilities$881,404 $1,029,601 $484,184 $390,171 
Less: Master netting agreements(238,606)(238,606)(58,679)(58,679)
Less: Cash collateral received/paid(367,351)(600)(42,274)(174,048)
Net derivative assets/liabilities$275,447 $790,395 $383,231 $157,444 
 
($ in thousands) September 30, 2017 December 31, 2016
 
Notional
Amount
 Fair Value 
Notional
Amount
 Fair Value
  
Derivative
Assets (1)
 
Derivative
 Liabilities (1)
  
Derivative
Assets (1)
 
Derivative
 Liabilities (1)
Derivatives designated as hedging instruments:            
Interest rate swaps on certificates of deposit $42,566
 $—
 $6,648
 $48,365
 $—
 $5,976
Foreign currency forward contracts —
 —
 —
 83,026
 4,325
 —
Total derivatives designated as hedging instruments $42,566
 $—
 $6,648
 $131,391
 $4,325
 $5,976
Derivatives not designated as hedging instruments:            
Interest rate swaps and options $8,742,980
 $64,822
 $64,212
 $7,668,482
 $67,578
 $65,131
Foreign exchange contracts 1,131,414
 14,187
 20,054
 767,764
 11,874
 11,213
RPAs 68,387
 2
 1
 71,414
 3
 3
Warrants —
(2) 
1,455
 —
 —
 —
 —
Total derivatives not designated as hedging instruments $9,942,781
 $80,466
 $84,267
 $8,507,660
 $79,455
 $76,347
 
(1)
Derivative assets and derivative liabilities are included in Other assets and Accrued expenses and other liabilities, respectively,on the Consolidated Balance Sheets.
(2)The Company held four warrants in public companies and 32 warrants in private companies as of September 30, 2017.

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

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


Derivatives Designated as Hedging Instruments


Interest Rate Swaps on Certificates of Deposit Cash Flow Hedges— The Company is exposed to changes inhedges the fair valuevariability of certain fixed rate certificates of depositforecasted cash flows due to changes in the benchmarkcontractually specified interest rate, London Interbank Offered Rate. Interest rate swaps designated as fair value hedges involve the receipt of fixed rate amounts from a counterparty in exchange for the Company making variable rate payments over the life of the agreements without the exchange of the underlying notional amount.

rates associated with floating-rate assets/liabilities and other forecasted transactions. As of September 30, 20172022, $2.25 billion and December 31, 2016, the total$275.0 million in notional amounts of interest rate contracts were designated as cash flow hedges to modify the interest rate swaps on certificatescharacteristics of deposit were $42.6 millioncertain commercial loans and $48.4 million, respectively. Theborrowings, respectively, from variable to fixed. This will reduce the impact of changes in future cash flows due to changes in market interest rates.Changes in the fair value liabilitiesvalues of cash flow hedges are recognized in AOCI and reclassified to earnings in the same period when the hedged cash flows impact earnings. Considering the interest rate swaps were $6.6 millionrates, yield curve and $6.0 millionnotional amounts as of September 30, 2017 and December 31, 2016, respectively.2022, the Company expects to reclassify an estimated $26.5 million of after-tax net losses related to cash flow hedges from AOCI into earnings during the next 12 months.


30

The following table presents the net gains (losses) recognized on the Consolidated Statements of Income related to the derivatives designated as fair valuepre-tax changes in AOCI from cash flow hedges for the three and nine months ended September 30, 20172022 and 2016:2021. The after-tax impact of cash flow hedges on AOCI is discussed in Note 13 — Accumulated Other Comprehensive Income (Loss) to the Consolidated Financial Statements in this Form-10-Q.
($ in thousands)Three Months Ended September 30,Nine Months Ended September 30,
2022202120222021
 (Losses) gains recognized in AOCI:
Interest rate contracts$(48,325)$(170)$(88,771)$150 
 (Losses) gains reclassified from AOCI into earnings:
Interest expense (for cash flow hedges on borrowings)$1,251 $(241)$1,385 $(619)
Interest and dividend income (for cash flow hedges on loans)(2,870)— 216 — 
Total$(1,619)$(241)$1,601 $(619)
 
($ in thousands) Three Months Ended
September 30,		 Nine Months Ended
September 30,
 2017 2016 2017 2016
Gains (losses) recorded in interest expense:        
  Recognized on interest rate swaps $37
 $(1,327) $(1,486) $3,044
  Recognized on certificates of deposit $(116) $674
 $1,236
 $(2,688)
 


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


As of September 30, 2017, there were no derivative contracts designated as net investment hedges. As of December 31, 2016, the total notional amount and fair value of the foreign currency forward contracts designated as net investment hedges were $83.0 million and a $4.3 million asset, respectively. The following table presents the after-tax gains (losses) recordedrecognized in the Foreign currency translation adjustment account within AOCI related to the effective portion of theon net investment hedges and the ineffective portion recorded on the Consolidated Statements of Income for the three and nine months ended September 30, 20172022 and 2016:2021:
($ in thousands)Three Months Ended September 30,Nine Months Ended September 30,
2022202120222021
Gains (losses) recognized in AOCI$3,093 $(318)$4,293 $(1,860)
 
($ in thousands) Three Months Ended
September 30,		 Nine Months Ended
September 30,
 2017 2016 2017 2016
Gains (losses) recognized in AOCI on net investment hedges (effective portion) $—
 $69
 $(648) $296
Losses recognized in foreign exchange income (ineffective portion) $—
 $(236) $(1,953) $(667)
 




Derivatives Not Designated as Hedging Instruments


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

The following tables present the notional amounts and the gross fair values of interest rate derivative contracts outstanding as of September 30, 2017,2022 and December 31, 2021:
($ in thousands)September 30, 2022
Customer Counterparty($ in thousands)Financial Counterparty
Notional
Amount		Fair ValueNotional
Amount		Fair Value
AssetsLiabilitiesAssetsLiabilities
Purchased options$— $— $— Purchased options$1,581,174 $33,745 $— 
Written options1,548,884 — 32,253 Written options32,290 — 1,346 
Sold collars and corridors221,287 — 8,661 Collars and corridors221,287 8,706 — 
Swaps6,814,564 159 547,728 Swaps6,842,376 386,895 660 
Total$8,584,735 $159 $588,642 Total$8,677,127 $429,346 $2,006 
31

($ in thousands)December 31, 2021
Customer Counterparty($ in thousands)Financial Counterparty
Notional
Amount		Fair ValueNotional
Amount		Fair Value
AssetsLiabilitiesAssetsLiabilities
Written options$1,118,074 $— $2,148 Purchased options$1,118,074 $2,159 $— 
Sold collars and corridors194,181 1,272 642 Collars and corridors194,181 646 1,275 
Swaps7,460,836 211,727 39,650 Swaps7,490,074 24,418 136,190 
Total$8,773,091 $212,999 $42,440 Total$8,802,329 $27,223 $137,465 

Included in the total notional amountsamount of $8.68 billion of interest rate contracts entered into with financial counterparties as of September 30, 2022, was a notional amount of $2.10 billion of interest rate swaps and options, including mirroredthat cleared through London Clearing House (“LCH”). Applying variation margin payments as settlement to LCH-cleared derivative transactions with institutional counterparties and the Company’s customers, totaled $4.37 billion for derivatives that were in an asset valuation position and $4.37 billion for derivatives that wereresulted in a reduction in the derivative asset of $178.4 million and a reduction in the derivative liability valuation position. Asof a nominal amount as of September 30, 2022. In comparison, included in the total notional amount of $8.80 billion of interest rate contracts entered into with financial counterparties as of December 31, 2016, the total2021, was a notional amountsamount of $2.79 billion of interest rate swaps and options, including mirroredthat cleared through LCH. Applying variation margin payments as settlement to LCH cleared derivative transactions with institutional counterparties and the Company’s customers, totaled $3.86 billion for derivatives that were in an asset valuation position and $3.81 billion for derivatives that wereresulted in a liability valuation position. The fair valuereduction in the derivative asset of interest rate swap and option contracts with institutional counterparties and the Company’s customers amounted to a $64.8$18.1 million asset and a $64.2reduction in the derivative liability of $79.9 million liability as of September 30, 2017. The fair value of interest rate swap and option contracts with institutional counterparties and the Company’s customers amounted to a $67.6 million asset and a $65.1 million liability as of December 31, 2016.2021.

Foreign Exchange Contracts — The Company enters into foreign exchange contracts with its customers, primarily comprisedconsisting of forward, spot, swap and spotoption contracts to enableaccommodate the business needs of its customers to hedge their transactions in foreign currencies against fluctuations in foreign exchange rates, and also to allow the Company to economically hedge against foreign currency fluctuations in certain foreign currency denominated deposits that it offers to its customers, as well as the Company’s investment in its China subsidiary, East West Bank (China) Limited. For a majority of the foreign exchange transactions entered with its customers, thecustomers. The Company enters into offsetting foreign exchange contracts with institutionalthird-party financial institutions to manage its foreign exchange exposure with its customers, or enters into bilateral collateral and master netting agreements with certain customer counterparties to manage its credit exposure. The Company also utilizes foreign exchange contracts, which are not designated as hedging instruments, to mitigate the economic effect of currency fluctuations on certain foreign exchange risk.currency-denominated on-balance sheet assets and liabilities, primarily foreign currency-denominated deposits offered to its customers. A majority of thesethe foreign exchange contracts havehad original maturities of one year or less. Asless as of both September 30, 20172022 and December 31, 2016,2021.

The following tables present the total notional amounts ofand the foreign exchange contracts were $1.13 billion and $767.8 million, respectively.  Thegross fair values of the foreign exchange derivative contracts recorded were a $14.2 million asset and a $20.1 million liabilityoutstanding as of September 30, 2017.2022 and December 31, 2021:
($ in thousands)September 30, 2022
Customer Counterparty($ in thousands)Financial Counterparty
Notional
Amount		Fair ValueNotional
Amount		Fair Value
AssetsLiabilitiesAssetsLiabilities
Forwards and spots$1,048,541 $24,645 $39,173 Forwards and spots$220,663 $4,260 $2,408 
Swaps127,381 897 2,606 Swaps1,257,039 42,100 16,997 
Purchased options49,000 2,533 — Written options49,000 — 2,533 
Collars5,263 — 332 Collars5,263 332 — 
Total$1,230,185 $28,075 $42,111 Total$1,531,965 $46,692 $21,938 
($ in thousands)December 31, 2021
Customer Counterparty($ in thousands)Financial Counterparty
Notional
Amount		Fair ValueNotional
Amount		Fair Value
AssetsLiabilitiesAssetsLiabilities
Forwards and spots$900,290 $13,688 $9,446 Forwards and spots$267,689 $1,564 $2,695 
Swaps66,474 1,034 17 Swaps599,654 4,745 3,116 
Purchase options20,287 2 — Written options20,287 — 2 
Total$987,051 $14,724 $9,463 Total$887,630 $6,309 $5,813 

32

Credit Contracts — The fair valuesCompany periodically enters into credit RPAs with institutional counterparties to manage the credit exposure of the foreign exchangeinterest rate contracts recorded were an $11.9 million asset and an $11.2 million liability as of December 31, 2016.

Credit Risk Participation Agreements —associated with syndication loans. The Company has enteredmay enter into RPAsprotection sold or protection purchased RPAs. A purchaser of credit protection that enters into an interest rate contract with the borrower, may in turn enter into an RPA with a seller of protection, under which the Company assumed its pro-rata shareseller of protection receives a fee to accept a portion of the credit exposure associated with the borrower’s performance relatedrisk. The seller of credit protection is required to interest rate derivative contracts. The Company may or may not be a partymake payments to the interest rate derivative contract and enters into such RPAs in instances wherepurchaser if the Company is a party to the related loan participation agreement with the borrower. The Company will make or receive payments under the RPAs if theunderlying borrower defaults on its obligation to perform under the related interest rate derivative contract. The Company manages its creditCredit risk on the RPAs is managed by monitoring the credit worthiness of the borrowers and the institutional counterparties, which is based onpart of the normal credit review and monitoring process. The majority of the referenced entities of the protection sold RPAs were investment grade as of both September 30, 2022 and December 31, 2021. Assuming the underlying borrowers referenced in the interest rate contracts defaulted in the protection sold RPAs, there would be no maximum exposure as of September 30, 2022 and $3.2 million of maximum exposure as of December 31, 2021. The weighted-average remaining maturities of the outstanding protection sold RPAs were 2.7 years and 3.2 years as of September 30, 2022 and December 31, 2021, respectively.

The notional amount of the RPAs reflectreflects the Company’s pro-rata share of the derivative instrument. As of September 30, 2017,The following table presents the notional amountamounts and the gross fair valuevalues of the RPAs purchased were $47.8 million and a $1 thousand liability, respectively. As of September 30, 2017, the notional amount and fair value of the RPAs sold were $20.6 million and a $2 thousand asset, respectively. As of December 31, 2016, the notional amount and fair value of the RPAs purchased were $48.3 million and a $3 thousand liability, respectively. As of December 31, 2016, the notional amount and fair value of the RPAs sold were $23.1 million and a $3 thousand asset, respectively. Assuming all underlying borrowers referenced in the interest rate derivative contracts defaultedoutstanding as of September 30, 20172022 and December 31, 2016, the exposures from the RPAs purchased would be $92 thousand and $179 thousand, respectively.  As of September 30, 2017 and December 31, 2016, the weighted average remaining maturities2021:
($ in thousands)September 30, 2022December 31, 2021
Notional
Amount		Fair ValueNotional
Amount		Fair Value
AssetsLiabilitiesAssetsLiabilities
RPAs — protection sold
$141,549 $— $27 $72,560 $— $141 

Equity Contracts — From time to time, as part of the outstanding RPAs were 3.0 years and 3.7 years, respectively.

Warrants — TheCompany’s loan origination process, the Company obtainedobtains warrants to purchase preferred andand/or common stock of technology and life sciencesscience companies to which it provides loans. Warrants grant the Company the right to buy a certain class of the underlying company’s equity at a certain price before expiration. The Company held warrants in one public company and 13 private companies as partof September 30, 2022, and held warrants in one public company and 12 private companies as of December 31, 2021. The total fair value of the warrants held was $346 thousand and $220 thousand as of September 30, 2022 and December 31, 2021, respectively.

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

The following tables present the notional amounts and fair values of the commodity derivative positions outstanding as of September 30, 2022 and December 31, 2021:
($ and units in thousands)September 30, 2022
Customer Counterparty($ and units in thousands)Financial Counterparty
Notional
Unit		Fair ValueNotional
Unit		Fair Value
AssetsLiabilitiesAssetsLiabilities
Crude oil:Crude oil:
Written options841 Barrels$1,593 $— Purchased options841 Barrels$— $1,451 
Collars2,898 Barrels22,072 7,148 Collars2,903 Barrels2,179 20,503 
Swaps4,460 Barrels54,906 22,314 Swaps3,425 Barrels15,052 41,978 
Total8,199 $78,571 $29,462 Total7,169 $17,231 $63,932 
Natural gas:Natural gas:
Collars26,363 MMBTUs$28,318 $3,684 Collars26,839 MMBTUs$2,320 $24,916 
Swaps87,211 MMBTUs216,050 73,012 Swaps70,817 MMBTUs26,656 155,192 
Total113,574 $244,368 $76,696 Total97,656 $28,976 $180,108 
Total$322,939 $106,158 Total$46,207 $244,040 
33

($ and units in thousands)December 31, 2021
Customer Counterparty($ and units in thousands)Financial Counterparty
Notional
Unit		Fair ValueNotional
Unit		Fair Value
AssetsLiabilitiesAssetsLiabilities
Crude oil:Crude oil:
Written options— Barrels$87 $— Purchased options— Barrels$— $81 
Collars2,837 Barrels33,826 106 Collars2,888 Barrels— 33,399 
Swaps4,682 Barrels71,242 60 Swaps7,517 Barrels27,524 82,723 
Total7,519 $105,155 $166 Total10,405 $27,524 $116,203 
Natural gas:Natural gas:
Collars24,315 MMBTUs$10,903 $458 Collars25,929 MMBTUs$1,136 $10,936 
Swaps58,959 MMBTUs49,188 3,775 Swaps109,567 MMBTUs28,803 63,029 
Total83,274 $60,091 $4,233 Total135,496 $29,939 $73,965 
Total$165,246 $4,399 Total$57,463 $190,168 

As of September 30, 2017,2022, the Company held four warrantsnotional amounts that cleared through the Chicago Mercantile Exchange (“CME”) totaled 773 thousand barrels of crude oil and 5,530 thousand MMBTUs of natural gas. Applying the variation margin payments as settlement to the CME-cleared derivative transactions resulted in public companies and 32 warrants in private companies. Thea reduction to the gross derivative asset fair valuesvalue of the warrants for public and private companies were an $856 thousand asset$6.7 million and a $599 thousand asset, respectively, totaling $1.5reduction to the liability fair value of $21.4 million as of September 30, 2017.2022. In comparison, the notional amounts that cleared through CME totaled 1,036 thousand barrels of crude oil and 11,490 thousand MMBTUs of natural gas as of December 31, 2021. Applying the variation margin payments as settlement to the CME-cleared derivative transactions resulted in a reduction to the gross derivative asset fair value of $2.2 million and a reduction to the liability fair value of $25.8 million as of December 31, 2021.




The following table presents the net gains (losses) recognized on the Company’s Consolidated StatementsStatement of Income related to derivatives not designated as hedging instruments for the three and nine months ended September 30, 20172022 and 2016:2021:
($ in thousands)Classification on
Consolidated
Statement of Income		Three Months Ended September 30,Nine Months Ended September 30,
2022202120222021
Derivatives not designated as hedging instruments:
Interest rate contractsInterest rate contracts and other derivative income$4,870 $2,467 $18,439 $11,030 
Foreign exchange contractsForeign exchange income3,831 11,820 6,596 34,035 
Credit contractsInterest rate contracts and other derivative income (loss)50 (20)114 175 
Equity contractsLending fees(13)3 175 388 
Commodity contractsInterest rate contracts and other derivative income (loss)(156)32 139 13 
Net gains$8,582 $14,302 $25,463 $45,641 
 
($ in thousands) 
Location in
Consolidated
Statements of Income
 Three Months Ended
September 30,		 Nine Months Ended
September 30,
  2017 2016 2017 2016
Derivatives not designated as hedging instruments:          
Interest rate swaps and options Derivative fees and other income $(94) $411
 $(1,838) $(2,220)
Foreign exchange contracts Foreign exchange income 3,720
 3,787
 17,936
 10,982
RPAs Derivative fees and other income —
 4
 1
 (7)
Warrants Ancillary loan fees and other income 669
 —
 1,455
 —
Net gains   $4,295
 $4,202
 $17,554
 $8,755
 


Credit-Risk-RelatedCredit Risk-Related Contingent Features— Certain The Company’s over-the-counter derivative contracts of the Companymay contain early termination provisions that may require the Company to settle any outstanding balances upon the occurrence of a specified credit-risk-relatedcredit risk-related event. These events, which are defined by the existing derivative contracts,Such event primarily relaterelates to a downgrade in the credit rating of East West Bank to below investment grade.grade. As of September 30, 2022, the aggregate fair value amounts of all derivative instruments with credit risk-related contingent features that were in a net liability position totaled $9.8 million, in which $8.4 million of collateral was posted to cover these positions. In comparison, as of December 31, 2021, the aggregate fair value amounts of all derivative instruments with credit risk-related contingent features that were in a net liability position totaled $66.8 million, in which $66.6 million of collateral was posted to cover these positions. In the event that the credit rating of East West Bank’s credit rating isBank had been downgraded to below investment grade, nominimal additional collateral would behave been required to be posted since the liabilities related to such contracts were fully collateralized as of September 30, 20172022 and December 31, 2016.2021.



34


Offsetting of Derivatives


The Company has entered into agreements with certain counterparty financial institutions, which include master netting agreements.  However, the Company has elected to account for all derivatives with counterparty institutions on a gross basis. The following tables present the gross derivativesderivative asset and liability fair values, the balance sheet netting adjustments and the resulting net fair values recorded on the Consolidated Balance Sheetsconsolidated balance sheet, as well as the cash and noncash collateral associated with master netting arrangements. The gross amounts of derivative asset and liability fair values are presented after the respective collateral received or pledged in the formapplication of other financial instruments, which are generally marketable securities and/or cash.variation margin payments as settlements with central counterparties, where applicable. The collateral amounts in thesethe following tables are limited to the outstanding balances of the related asset or liability, (after netting is applied); thusafter the application of netting; therefore, instances of overcollateralization are not shown:
($ in thousands)As of September 30, 2022
Gross
Amounts
Recognized (1)
Gross Amounts Offset on the
Consolidated Balance Sheet		Net Amounts
Presented
on the
Consolidated
Balance Sheet		Gross Amounts Not Offset on the
Consolidated Balance Sheet		Net Amount
Master Netting Arrangements
Cash Collateral Received (3)
Security Collateral
Received (5)
Derivative assets$881,404 $(238,606)$(367,351)$275,447 $(64,703)$210,744 
 Gross
Amounts
Recognized (2)
Gross Amounts Offset on the
Consolidated Balance Sheet		Net Amounts
Presented
on the
Consolidated
Balance Sheet		Gross Amounts Not Offset on the
Consolidated Balance Sheet		Net Amount
Master Netting Arrangements
Cash Collateral Pledged (4)
Security Collateral
Pledged (5)
Derivative liabilities$1,029,601 $(238,606)$(600)$790,395 $(151,535)$638,860 
 
  As of September 30, 2017
($ in thousands) Total Contracts Not Subject to Master Netting Arrangements Contracts Subject to Master Netting Arrangements
  
 Gross
Amounts Recognized
 
 Gross
Amounts Recognized
 
 Gross
Amounts Recognized
 Gross Amounts
Offset on the
Consolidated
Balance Sheets		 Net Amounts
Presented
on the
Consolidated
Balance Sheets		 Gross Amounts Not Offset on the
Consolidated Balance Sheets		  
       
Derivative
Amount
 Collateral
Received		 Net Amount
Derivatives Assets $80,466
 $57,720
 $22,746
 $—
 $22,746
 $(20,240)
(1) 
$(2,230)
(2) 
$276
                 
  
 Gross
Amounts Recognized
 
 Gross
Amounts Recognized
 
 Gross
Amounts Recognized
 Gross Amounts
Offset on the
Consolidated
Balance Sheets		 Net Amounts
Presented
on the
Consolidated
Balance Sheets		 Gross Amounts Not Offset on the
Consolidated Balance Sheets		  
       
Derivative
Amount
 Collateral 
Posted		 Net Amount
Derivatives Liabilities $90,915
 $17,814
 $73,101
 $—
 $73,101
 $(20,240)
(1) 
$(52,851)
(3) 
$10
 
($ in thousands)As of December 31, 2021
 Gross
Amounts
Recognized (1)
Gross Amounts Offset on the
Consolidated Balance Sheet		Net Amounts
Presented
on the
Consolidated
Balance Sheet		Gross Amounts Not Offset on the
Consolidated Balance Sheet		Net
Amount
Master Netting Arrangements
Cash Collateral Received (3)
Security Collateral
Received (5)
Derivative assets$484,184 $(58,679)$(42,274)$383,231 $— $383,231 
 Gross
Amounts
Recognized (2)
Gross Amounts Offset on the Consolidated Balance SheetNet Amounts
Presented
on the
Consolidated
Balance Sheet		Gross Amounts Not Offset on the
Consolidated Balance Sheet		Net
Amount
Master Netting Arrangements
Cash Collateral Pledged (4)
Security Collateral
Pledged (5)
Derivative liabilities$390,171 $(58,679)$(174,048)$157,444 $(106,598)$50,846 
(1)Includes $4.6 million and $587 thousand of gross fair value assets with counterparties that were not subject to enforceable master netting arrangements or similar agreements as of September 30, 2022 and December 31, 2021, respectively.
 
  As of December 31, 2016
($ in thousands) Total Contracts Not Subject to Master Netting Arrangements Contracts Subject to Master Netting Arrangements
  
 Gross
Amounts Recognized
 
 Gross
Amounts Recognized
 
 Gross
Amounts Recognized
 
Gross Amounts
Offset on the
Consolidated
Balance Sheets
 Net Amounts
Presented
on the
Consolidated
Balance Sheets		 Gross Amounts Not Offset on the
Consolidated Balance Sheets		  
       Derivative
Amounts		 Collateral
Received		 Net Amount
Derivatives Assets $83,780
 $51,218
 $32,562
 $—
 $32,562
 $(20,991)
(1) 
$(10,687)
(2) 
$884
                 
  
 Gross
Amounts Recognized
 
 Gross
Amounts Recognized
 
 Gross
Amounts Recognized
 
Gross Amounts
Offset on the
Consolidated
Balance Sheets
 Net Amounts
Presented
on the
Consolidated
Balance Sheets		 Gross Amounts Not Offset on the
Consolidated Balance Sheets		  
       Derivative
Amounts		 Collateral 
Posted		 Net Amount
Derivatives Liabilities $82,323
 $24,097
 $58,226
 $—
 $58,226
 $(20,991)
(1) 
$(36,349)
(3) 
$886
 
(1)Represents the netting of derivative receivable and payable balances for the same counterparty under enforceable master netting arrangements if the Company has elected to net.
(2)Represents cash and securities received against derivative assets with the same counterparty that are subject to enforceable master netting arrangements. No cash collateral was received as of September 30, 2017. Includes $8.1 million of cash collateral received as of December 31, 2016.
(3)Represents cash and securities pledged against derivative liabilities with the same counterparty that are subject to enforceable master netting arrangements. Includes $18.0 million and $170 thousand of cash collateral posted as of September 30, 2017 and December 31, 2016, respectively.

(2)Includes $1.8 million and $666 thousand of gross fair value liabilities with counterparties that were not subject to enforceable master netting arrangements or similar agreements as of September 30, 2022 and December 31, 2021, respectively.
(3)Gross cash collateral received under master netting arrangements or similar agreements was $369.7 million and $47.0 million as of September 30, 2022 and December 31, 2021, respectively. Of the gross cash collateral received, $367.4 million and $42.3 million were used to offset against derivative asset fair values as of September 30, 2022 and December 31, 2021, respectively.
(4)Gross cash collateral pledged under master netting arrangements or similar agreements was $600 thousand, of which $600 thousand was used to offset against derivative liability fair value as of September 30, 2022. In comparison, gross cash collateral pledged under master netting arrangements or similar agreements was $176.5 million, of which $174.0 million were used to offset against derivative liability fair value as of December 31, 2021.
(5)Represents the fair value of security collateral received and pledged limited to derivative asset and liability fair values that are subject to enforceable master netting arrangements or similar agreements. GAAP does not permit the netting of noncash collateral on the consolidated balance sheet but requires the disclosure of such amounts.

In addition to the amounts included in the tables above, the Company also has balance sheet netting related to resale and repurchase agreements, referagreements. Refer to Note 54 — SecuritiesAssets Purchased under Resale Agreements and Sold under Repurchase Agreements to the Consolidated Financial Statements in this Form 10-Q for additional information. Refer toNote 4 3— Fair Value Measurement and Fair Value of Financial Instruments to the Consolidated Financial Statements in this Form 10-Q for fair value measurement disclosures on derivatives.



35



Note 87 — Loans Receivable and Allowance for Credit Losses


The Company’s held-for-investment loan portfolio includes originated and purchased loans. Originated and purchased loans with no evidence of credit deterioration at their acquisition date are referred to collectively as non-PCI loans. PCI loans are loans acquired with evidence of credit deterioration since their origination and it is probable at the acquisition date that the Company would be unable to collect all contractually required payments. PCI loans are accounted for under ASC Subtopic 310-30, Loans and Debt Securities Acquired with Deteriorated Credit Quality. The Company has elected to account for PCI loans on a pool level basis under ASC 310-30 at the time of acquisition.

The following table presents the composition of the Company’s non-PCI and PCI loans held-for-investment outstanding as of September 30, 20172022 and December 31, 2016:2021:
($ in thousands)September 30, 2022December 31, 2021
Commercial:
C&I (1)
$15,625,072 $14,150,608 
CRE:
CRE13,573,157 12,155,047 
Multifamily residential4,559,302 3,675,605 
Construction and land556,894 346,486 
Total CRE18,689,353 16,177,138 
Total commercial34,314,425 30,327,746 
Consumer:
Residential mortgage:
Single-family residential10,855,345 9,093,702 
HELOCs2,184,924 2,144,821 
Total residential mortgage13,040,269 11,238,523 
Other consumer87,561 127,512 
Total consumer13,127,830 11,366,035 
Total loans held-for-investment (2)
$47,442,255 $41,693,781 
Allowance for loan losses(582,517)(541,579)
Loans held-for-investment, net (2)
$46,859,738 $41,152,202 
 
($ in thousands) September 30, 2017 December 31, 2016
 
Non-PCI
Loans (1) 
 
PCI
    Loans (2)
 
Total (1)(2)
 
Non-PCI
Loans (1)
 
PCI
    Loans (2)
 
Total (1)(2)
CRE:            
Income producing $8,530,519
 $313,257
 $8,843,776
 $7,667,661
 $348,448
 $8,016,109
Construction 572,027
 —
 572,027
 551,560
 —
 551,560
Land 111,006
 371
 111,377
 121,276
 1,918
 123,194
Total CRE 9,213,552
 313,628
 9,527,180
 8,340,497
 350,366
 8,690,863
C&I:            
Commercial business 9,763,688
 12,566
 9,776,254
 8,921,246
 38,387
 8,959,633
Trade finance 868,902
 —
 868,902
 680,930
 —
 680,930
Total C&I 10,632,590
 12,566
 10,645,156
 9,602,176
 38,387
 9,640,563
Residential:            
Single-family 4,234,017
 121,992
 4,356,009
 3,370,669
 139,110
 3,509,779
Multifamily 1,808,311
 68,645
 1,876,956
 1,490,285
 95,654
 1,585,939
Total residential 6,042,328
 190,637
 6,232,965
 4,860,954
 234,764
 5,095,718
Consumer 2,104,614
 15,442
 2,120,056
 2,057,067
 18,928
 2,075,995
Total loans held-for-investment $27,993,084
 $532,273
 $28,525,357
 $24,860,694
 $642,445
 $25,503,139
Allowance for loan losses (285,858) (68) (285,926) (260,402) (118) (260,520)
Loans held-for-investment, net $27,707,226
 $532,205
 $28,239,431
 $24,600,292
 $642,327
 $25,242,619
 
(1)Includes $(29.2) million and $1.2(1)Includes Paycheck Protection Program loans of $110.9 million and $534.2 million as of September 30, 2017 and December 31, 2016, respectively, of net deferred loan fees, unearned income, unamortized premiums and unaccreted discounts.
(2)Loans net of ASC 310-30 discount.

CRE loans include income producing real estate, construction and land loans where the interest rates may be fixed, variable or hybrid. Included in CRE loans are owner occupied and non-owner occupied loans where the borrowers rely on income from tenants to service the loan. Commercial business and trade finance in the C&I segment provide financing to businesses in a wide spectrum of industries.
Residential loans are comprised of single-family and multifamily loans. The Company offers first lien mortgage loans secured by one-to-four unit residential properties located in its primary lending areas. The Company offers a variety of first lien mortgage loan programs, including fixed rate conforming loans and adjustable rate mortgage loans with initial fixed periods of one to seven years, which adjust annually thereafter.

Consumer loans are comprised of home equity lines of credit (“HELOCs”), insurance premium financing loans, credit card and auto loans. As of September 30, 20172022 and December 31, 2016, the Company’s HELOCs were the largest component2021, respectively.
(2)Includes $(60.3) million and $(50.7) million of the consumernet deferred loan portfolio,fees and were secured by one-to-four unit residential properties located in its primary lending areas. The HELOCs loan portfolio is largely comprised of loans originated through a reduced documentation loan program, where a substantial down payment is required, resulting in a low loan-to-value ratio, typically 60% or less at origination. The Company is in a first lien position for many of these reduced documentation HELOCs. These loans have historically experienced low delinquency and default rates.



All loans originated are subject to the Company’s underwriting guidelines and loan origination standards. Management believes that the Company’s underwriting criteria and procedures adequately consider the unique risks associated with these products. The Company conducts a variety of quality control procedures and periodic audits, including the review of lending and legal requirements to ensure that it is in compliance with these requirements.

Asnet unamortized premiums as of September 30, 20172022 and December 31, 2016,2021, respectively.

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

The Company’s FRBSF and FHLB borrowings are primarily secured by loans held-for-investment. Loans held-for-investment totaling $18.18$25.01 billion and $16.44$27.67 billion, respectively, were pledged to secure borrowings and to provide additional borrowing capacity from the Federal Reserve Bankas of September 30, 2022 and the FHLB.December 31, 2021.


Credit Quality Indicators


All loans are subject to the Company’s internal and external credit review and monitoring. Loansmonitoring process. For the commercial loan portfolio, loans are risk rated based on an analysis of the current state of the borrower’s credit quality. The analysis of credit quality includes a review of all repayment sources, the borrower’s current payment performance/performance or delinquency, currentrepayment sources, financial and liquidity statusfactors, including industry and all other relevant information.geographic considerations. For single-family residential loans,the consumer loan portfolio, payment performance/performance or delinquency is typically the driving indicator for the risk ratings.  Risk ratings are the overall credit quality indicator for the Company and the credit quality indicator utilized for estimating the appropriate allowance for loan losses.

The Company utilizes internal credit risk ratings to assign each individual loan a risk rating system, which can be classified within the following categories:of 1 through 10:
•Pass — loans risk rated 1 through 5 are assigned an internal risk rating category of “Pass.” Loans risk rated 1 are typically loans fully secured by cash. Pass Watch, Special Mention, Substandard, Doubtful and Loss. The risk ratings reflect the relative strength of the repayment sources.

Pass and Watch loans are generally considered to have sufficient sources of repayment in order to repay the loan in full, in accordance with all terms and conditions.
•Special Mentionmention — loans are considered toassigned a risk rating of 6 have potential weaknesses that warrant closer attention by management. Special Mention is consideredmanagement; these are assigned an internal risk rating category of “Special Mention.”
•Substandard — loans assigned a transitory grade. If potential weaknesses are resolved, the loan is upgraded to a Passrisk rating of 7 or Watch grade. If negative trends in the borrower’s financial status or other information indicate that the repayment sources may become inadequate, the loan is downgraded to a Substandard grade. Substandard loans are considered to8 have well-defined weaknesses that may jeopardize the full and timely repayment of the loan. Substandardloan; these are assigned an internal risk rating category of “Substandard.”
•Doubtful — loans haveassigned a distinct possibilityrisk rating of loss, if the deficiencies are not corrected. Additionally, when management has assessed a potential for loss but a distinct possibility of loss is not recognizable, the loan is still classified as Substandard. Doubtful loans9 have insufficient sources of repayment and a high probability of loss. loss; these are assigned an internal risk rating category of “Doubtful.”
36

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

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



37


The following tables presentsummarize the creditCompany’s loans held-for-investment by loan portfolio segments, internal risk ratings for non-PCI loans by portfolio segmentand vintage year as of September 30, 20172022 and December 31, 2016:
 
($ in thousands) September 30, 2017
 Pass/Watch 
Special
Mention
 Substandard Doubtful Loss Total
Non-PCI
Loans
CRE:  
  
  
  
    
Income producing $8,341,970
 $74,028
 $114,521
 $—
 $—
 $8,530,519
Construction 540,851
 22,176
 9,000
 —
 —
 572,027
Land 96,160
 —
 14,846
 —
 —
 111,006
C&I:        
    
Commercial business 9,447,163
 142,531
 152,975
 21,019
 —
 9,763,688
Trade finance 830,268
 18,631
 20,003
 —
 —
 868,902
Residential:        
    
Single-family 4,199,554
 11,501
 22,962
 —
 —
 4,234,017
Multifamily 1,789,351
 —
 18,960
 —
 —
 1,808,311
Consumer 2,080,056
 9,683
 14,875
 —
 —
 2,104,614
Total $27,325,373
 $278,550
 $368,142
 $21,019
 $—
 $27,993,084
 
 
($ in thousands) December 31, 2016
 Pass/Watch 
Special
Mention
 Substandard Doubtful Loss 
Total
Non-PCI
Loans
CRE:  
  
  
  
    
Income producing $7,476,804
 $29,005
 $161,852
 $—
 $—
 $7,667,661
Construction 551,560
 —
 —
 —
 —
 551,560
Land 107,976
 —
 13,290
 10
 —
 121,276
C&I:  
  
  
  
    
Commercial business 8,559,674
 155,276
 201,139
 5,157
 —
 8,921,246
Trade finance 635,027
 9,435
 36,460
 —
 8
 680,930
Residential:  
  
  
  
    
Single-family 3,341,015
 10,179
 19,475
 —
 —
 3,370,669
Multifamily 1,462,522
 2,268
 25,495
 —
 —
 1,490,285
Consumer 2,043,405
 6,764
 6,898
 —
 —
 2,057,067
Total $24,177,983
 $212,927
 $464,609
 $5,167
 $8
 $24,860,694
 



2021. The followingvintage year is the year of origination, renewal or major modification. Revolving loans that are converted to term loans presented in the tables present the credit risk ratings for PCIbelow are excluded from term loans by portfolio segment asvintage year columns.
($ in thousands)September 30, 2022
Term Loans by Origination YearRevolving Loans
Revolving Loans Converted to Term Loans (1)
Total
20222021202020192018Prior
Commercial:
C&I:
Pass$2,620,973 $2,422,523 $683,312 $414,503 $158,867 $118,118 $8,796,933 $28,332 $15,243,561 
Criticized (accrual)38,538 51,206 62,356 45,068 21,776 17,115 97,464 — 333,523 
Criticized (nonaccrual)16,039 3,250 11,174 — 5,622 11,903 — — 47,988 
Total C&I2,675,550 2,476,979 756,842 459,571 186,265 147,136 8,894,397 28,332 15,625,072 
CRE:
Pass3,431,039 2,447,553 1,640,819 1,856,673 1,505,134 2,098,417 149,902 14,425 13,143,962 
Criticized (accrual)1,324 111,024 124,132 38,478 91,981 33,005 1,455 16,761 418,160 
Criticized (nonaccrual)— 4,126 — — — 6,909 — — 11,035 
Subtotal CRE3,432,363 2,562,703 1,764,951 1,895,151 1,597,115 2,138,331 151,357 31,186 13,573,157 
Multifamily residential:
Pass1,365,406 933,013 659,063 555,270 364,552 635,396 10,417 — 4,523,117 
Criticized (accrual)— — — 711 — 35,300 — — 36,011 
Criticized (nonaccrual)— — — — — 174 — — 174 
Subtotal multifamily residential1,365,406 933,013 659,063 555,981 364,552 670,870 10,417 — 4,559,302 
Construction and land:
Pass151,429 254,059 61,231 60,919 2,784 233 — — 530,655 
Criticized (accrual)— — 4,477 — 21,762 — — — 26,239 
Criticized (nonaccrual)— — — — — — — — — 
Subtotal construction and land151,429 254,059 65,708 60,919 24,546 233 — — 556,894 
Total CRE4,949,198 3,749,775 2,489,722 2,512,051 1,986,213 2,809,434 161,774 31,186 18,689,353 
Total commercial7,624,748 6,226,754 3,246,564 2,971,622 2,172,478 2,956,570 9,056,171 59,518 34,314,425 
Consumer:
Residential mortgage:
Single-family residential:
Pass (2)
2,989,092 2,487,082 1,824,666 1,134,087 841,743 1,559,127 — — 10,835,797 
Criticized (accrual)142 1,568 394 1,784 2,888 1,247 — — 8,023 
Criticized (nonaccrual) (2)
— — 203 2,327 3,639 5,356 — — 11,525 
Subtotal single-family residential mortgage2,989,234 2,488,650 1,825,263 1,138,198 848,270 1,565,730 — — 10,855,345 
HELOCs:
Pass— 1,735 2,278 1,778 748 9,683 2,012,190 144,021 2,172,433 
Criticized (accrual)— — — — — 774 230 919 1,923 
Criticized (nonaccrual)— — 2,910 — 1,017 3,011 300 3,330 10,568 
Subtotal HELOCs— 1,735 5,188 1,778 1,765 13,468 2,012,720 148,270 2,184,924 
Total residential mortgage2,989,234 2,490,385 1,830,451 1,139,976 850,035 1,579,198 2,012,720 148,270 13,040,269 
Other consumer:
Pass15,613 57 5,259 — — 15,170 51,425 — 87,524 
Criticized (accrual)— — — — — — — — — 
Criticized (nonaccrual)— — — — — — 37 — 37 
Total other consumer15,613 57 5,259 — — 15,170 51,462 — 87,561 
Total consumer3,004,847 2,490,442 1,835,710 1,139,976 850,035 1,594,368 2,064,182 148,270 13,127,830 
Total by Risk Rating:
Pass10,573,552 8,546,022 4,876,628 4,023,230 2,873,828 4,436,144 11,020,867 186,778 46,537,049 
Criticized (accrual)40,004 163,798 191,359 86,041 138,407 87,441 99,149 17,680 823,879 
Criticized (nonaccrual)16,039 7,376 14,287 2,327 10,278 27,353 337 3,330 81,327 
Total$10,629,595 $8,717,196 $5,082,274 $4,111,598 $3,022,513 $4,550,938 $11,120,353 $207,788 $47,442,255 
38

($ in thousands)December 31, 2021
Term Loans by Origination YearRevolving Loans
Revolving Loans Converted to Term Loans (1)
Total
20212020201920182017Prior
Commercial:
C&I:
Pass$3,911,722 $1,133,085 $629,007 $187,195 $132,392 $225,326 $7,383,485 $28,842 $13,631,054 
Criticized (accrual)85,036 117,357 72,277 51,553 15,136 4,005 115,167 — 460,531 
Criticized (nonaccrual)29,456 2,792 513 517 9,301 16,444 — — 59,023 
Total C&I4,026,214 1,253,234 701,797 239,265 156,829 245,775 7,498,652 28,842 14,150,608 
CRE:
Pass2,792,193 2,090,503 2,230,520 1,863,481 1,120,682 1,727,862 128,668 6,389 11,960,298 
Criticized (accrual)71,055 3,200 9,176 21,077 24,851 55,892 — — 185,251 
Criticized (nonaccrual)4,350 — — — 4,752 396 — — 9,498 
Subtotal CRE2,867,598 2,093,703 2,239,696 1,884,558 1,150,285 1,784,150 128,668 6,389 12,155,047 
Multifamily residential:
Pass1,026,295 726,772 688,453 419,319 308,087 424,947 20,524 — 3,614,397 
Criticized (accrual)— — 721 22,344 7,033 30,666 — — 60,764 
Criticized (nonaccrual)— — — — — 444 — — 444 
Subtotal multifamily residential1,026,295 726,772 689,174 441,663 315,120 456,057 20,524 — 3,675,605 
Construction and land:
Pass122,983 103,743 90,544 3,412 — 391 — — 321,073 
Criticized (accrual)3,355 — — 22,058 — — — — 25,413 
Criticized (nonaccrual)— — — — — — — — — 
Subtotal construction and land126,338 103,743 90,544 25,470 — 391 — — 346,486 
Total CRE4,020,231 2,924,218 3,019,414 2,351,691 1,465,405 2,240,598 149,192 6,389 16,177,138 
Total commercial8,046,445 4,177,452 3,721,211 2,590,956 1,622,234 2,486,373 7,647,844 35,231 30,327,746 
Consumer:
Residential mortgage:
Single-family residential:
Pass (2)
2,616,958 2,108,370 1,375,929 1,079,030 763,351 1,127,516 — — 9,071,154 
Criticized (accrual)— — 458 2,813 1,899 3,212 — — 8,382 
Criticized (nonaccrual) (2)
— — 1,751 3,889 4,295 4,231 — — 14,166 
Subtotal single-family residential mortgage2,616,958 2,108,370 1,378,138 1,085,732 769,545 1,134,959 — — 9,093,702 
HELOCs:
Pass648 3,277 4,644 1,347 3,268 11,215 1,913,478 197,414 2,135,291 
Criticized (accrual)— — — — — 371 7 708 1,086 
Criticized (nonaccrual)— — 52 188 3,543 973 — 3,688 8,444 
Subtotal HELOCs648 3,277 4,696 1,535 6,811 12,559 1,913,485 201,810 2,144,821 
Subtotal residential mortgage2,617,606 2,111,647 1,382,834 1,087,267 776,356 1,147,518 1,913,485 201,810 11,238,523 
Other consumer:
Pass16,831 5,258 — — 1,741 52,147 51,481 — 127,458 
Criticized (accrual)2 — — — — — — — 2 
Criticized (nonaccrual)— — — — — — 52 — 52 
Total other consumer16,833 5,258 — — 1,741 52,147 51,533 — 127,512 
Total consumer2,634,439 2,116,905 1,382,834 1,087,267 778,097 1,199,665 1,965,018 201,810 11,366,035 
Total by Risk Rating:
Pass10,487,630 6,171,008 5,019,097 3,553,784 2,329,521 3,569,404 9,497,636 232,645 40,860,725 
Criticized (accrual)159,448 120,557 82,632 119,845 48,919 94,146 115,174 708 741,429 
Criticized (nonaccrual)33,806 2,792 2,316 4,594 21,891 22,488 52 3,688 91,627 
Total$10,680,884 $6,294,357 $5,104,045 $3,678,223 $2,400,331 $3,686,038 $9,612,862 $237,041 $41,693,781 
(1)$0 and $26.4 million of total commercial loans, primarily comprised of CRE revolving loans, converted to term loans during the three and nine months ended September 30, 2022, respectively. In comparison, $1.5 million and $6.5 million of total commercial loans, primarily comprised of CRE revolving loans, converted to term loans during the three and nine months ended September 30, 2021, respectively. $375 thousand of total consumer loans, comprised of HELOCs, were converted to term loans during the three and nine months ended September 30, 2022. In comparison, $4.1 million and $62.7 million of total consumer loans, comprised of HELOCs, were converted to term loans during the three and nine months ended September 30, 2021, respectively.
(2)As of September 30, 20172022 and December 31, 2016:2021, $1.2 million and $1.6 million, respectively, of nonaccrual loans whose payments are guaranteed by the Federal Housing Administration were classified with a “Pass” rating.
39
 
($ in thousands) September 30, 2017
 Pass/Watch 
Special
Mention
 Substandard Doubtful Loss 
Total
PCI Loans
CRE:  
  
  
      
Income producing $261,907
 $—
 $51,350
 $—
 $—
 $313,257
Land 44
 —
 327
 —
 —
 371
C&I:            
Commercial business 11,205
 90
 1,271
 —
 —
 12,566
Residential:            
Single-family 118,281
 1,769
 1,942
 —
 —
 121,992
Multifamily 64,455
 —
 4,190
 —
 —
 68,645
Consumer 13,962
 364
 1,116
 —
 —
 15,442
Total (1)
 $469,854
 $2,223
 $60,196
 $—
 $—
 $532,273
 

 
($ in thousands) December 31, 2016
 Pass/Watch 
Special
Mention
 Substandard Doubtful Loss 
Total
PCI Loans
CRE:  
  
  
      
Income producing $293,529
 $3,239
 $51,680
 $—
 $—
 $348,448
Land 1,562
 —
 356
 —
 —
 1,918
C&I:  
  
  
  
    
Commercial business 33,885
 772
 3,730
 —
 —
 38,387
Residential:  
  
  
      
Single-family 136,245
 1,239
 1,626
 —
 —
 139,110
Multifamily 86,190
 —
 9,464
 —
 —
 95,654
Consumer 17,433
 316
 1,179
 —
 —
 18,928
Total (1)
 $568,844
 $5,566
 $68,035
 $—
 $—
 $642,445
 
(1)Loans net of ASC 310-30 discount.



Nonaccrual and Past Due Loans


Non-PCI loansLoans that are 90 or more days past due are generally placed on nonaccrual status. Additionally, non-PCI loansstatus unless the loan is well-collateralized and in the process of collection. Loans that are less than 90 days past due but have identified deficiencies, such as when the full collection of principal or interest becomes uncertain, are also placed on nonaccrual status. The following tables present the aging analysis on non-PCIof total loans held-for-investment as of September 30, 20172022 and December 31, 2016:2021:
($ in thousands)September 30, 2022
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$15,556,124 $20,877 $83 $20,960 $47,988 $15,625,072 
CRE:
CRE13,561,499 489 134 623 11,035 13,573,157 
Multifamily residential4,558,333 795 — 795 174 4,559,302 
Construction and land556,894 — — — — 556,894 
Total CRE18,676,726 1,284 134 1,418 11,209 18,689,353 
Total commercial34,232,850 22,161 217 22,378 59,197 34,314,425 
Consumer:
Residential mortgage:
Single-family residential10,820,365 13,914 8,325 22,239 12,741 10,855,345 
HELOCs2,169,440 2,992 1,924 4,916 10,568 2,184,924 
Total residential mortgage12,989,805 16,906 10,249 27,155 23,309 13,040,269 
Other consumer87,444 43 37 80 37 87,561 
Total consumer13,077,249 16,949 10,286 27,235 23,346 13,127,830 
Total$47,310,099 $39,110 $10,503 $49,613 $82,543 $47,442,255 
($ in thousands)December 31, 2021
Current
Accruing
Loans		Accruing
Loans
30-59 Days
Past Due		Accruing
Loans
60-89 Days
Past Due		Total
Accruing
Past Due
Loans		Total
Nonaccrual
Loans		Total
Loans
Commercial:
C&I$14,080,516 $6,983 $4,086 $11,069 $59,023 $14,150,608 
CRE:
CRE12,141,827 3,722 — 3,722 9,498 12,155,047 
Multifamily residential3,669,819 5,320 22 5,342 444 3,675,605 
Construction and land346,486 — — — — 346,486 
Total CRE16,158,132 9,042 22 9,064 9,942 16,177,138 
Total commercial30,238,648 16,025 4,108 20,133 68,965 30,327,746 
Consumer:
Residential mortgage:
Single-family residential9,059,222 10,191 8,569 18,760 15,720 9,093,702 
HELOCs2,130,523 4,776 1,078 5,854 8,444 2,144,821 
Total residential mortgage11,189,745 14,967 9,647 24,614 24,164 11,238,523 
Other consumer127,352 99 9 108 52 127,512 
Total consumer11,317,097 15,066 9,656 24,722 24,216 11,366,035 
Total$41,555,745 $31,091 $13,764 $44,855 $93,181 $41,693,781 

40

 
($ in thousands) September 30, 2017
 
Accruing
Loans
30-59 Days
Past Due
 
Accruing
Loans
60-89 Days
Past Due
 
Total
Accruing
Past Due
Loans
 
Nonaccrual
Loans Less
Than 90 
Days
Past Due
 
Nonaccrual
Loans
90 or More
Days 
Past Due
 
Total
Nonaccrual
Loans
 
Current
Accruing
Loans
 
Total
Non-PCI
Loans
CRE:  
  
  
  
  
  
  
  
Income producing $5,211
 $1,924
 $7,135
 $4,853
 $19,949
 $24,802
 $8,498,582
 $8,530,519
Construction 9,000
 —
 9,000
 —
 —
 —
 563,027
 572,027
Land —
 —
 —
 10
 4,173
 4,183
 106,823
 111,006
C&I:  
  
  
  
  
  
  
  
Commercial business 16,315
 108
 16,423
 34,844
 38,540
 73,384
 9,673,881
 9,763,688
Trade finance —
 —
 —
 —
 —
 —
 868,902
 868,902
Residential:  
  
  
  
  
  
  
  
Single-family 16,765
 1,560
 18,325
 —
 6,639
 6,639
 4,209,053
 4,234,017
Multifamily 7,476
 664
 8,140
 1,456
 1,164
 2,620
 1,797,551
 1,808,311
Consumer 8,837
 5,346
 14,183
 93
 3,004
 3,097
 2,087,334
 2,104,614
Total $63,604
 $9,602
 $73,206
 $41,256
 $73,469
 $114,725
 $27,805,153
 $27,993,084
 
 
($ in thousands) December 31, 2016
 
Accruing
Loans
30-59 Days
Past Due
 
Accruing
Loans
60-89 Days
Past Due
 
Total
Accruing
Past Due
Loans
 
Nonaccrual
Loans Less
Than 90 
Days
Past Due
 
Nonaccrual
Loans
90 or More
Days 
Past Due
 
Total
Nonaccrual
Loans
 
Current
Accruing
Loans
 Total
Non-PCI
Loans
CRE:  
  
  
  
  
  
  
  
Income producing $6,233
 $14,080
 $20,313
 $14,872
 $12,035
 $26,907
 $7,620,441
 $7,667,661
Construction 4,994
 —
 4,994
 —
 —
 —
 546,566
 551,560
Land —
 —
 —
 433
 4,893
 5,326
 115,950
 121,276
C&I:  
  
  
  
  
  
  
  
Commercial business 45,052
 2,279
 47,331
 60,511
 20,737
 81,248
 8,792,667
 8,921,246
Trade finance —
 —
 —
 8
 —
 8
 680,922
 680,930
Residential:  
  
  
    
  
  
  
Single-family 9,595
 8,076
 17,671
 —
 4,214
 4,214
 3,348,784
 3,370,669
Multifamily 3,951
 374
 4,325
 2,790
 194
 2,984
 1,482,976
 1,490,285
Consumer 3,327
 3,228
 6,555
 165
 1,965
 2,130
 2,048,382
 2,057,067
Total $73,152
 $28,037
 $101,189
 $78,779
 $44,038
 $122,817
 $24,636,688
 $24,860,694
                 

For information onThe following table presents the policy for recording payments received and resuming accrualamortized cost of interest on non-PCI loans that are placed on nonaccrual status, see Note 1 — Summary of Significant Accounting Policies to the Consolidated Financial Statements of the Company’s 2016 Form 10-K.

PCI loans are excluded from the above aging analysis tables as the Company has elected to account for these loans on a pool level basis under ASC 310-30 at the time of acquisition. Refer to the discussion on PCI loans within this note for additional details on interest income recognition. As of September 30, 2017 and December 31, 2016, PCI loans on nonaccrual status totaled $5.7 millionfor which there was no related allowance for loan losses as of both September 30, 2022 and $11.7 million, respectively.December 31, 2021. 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)September 30, 2022December 31, 2021
Commercial:
C&I$4,368 $22,967 
CRE10,725 9,102 
Total commercial15,093 32,069 
Consumer:
Single-family residential2,909 5,785 
HELOCs7,609 5,033 
Total consumer10,518 10,818 
Total nonaccrual loans with no related allowance for loan losses$25,611 $42,887 



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


AsForeclosed assets, consisting of OREO and other nonperforming assets, are included in Other assets on the Consolidated Balance Sheet. The Company had no foreclosed assets as of September 30, 2017 and2022, compared with $10.3 million as of December 31, 2016,2021. The Company commences the Company had $6.3 million and $3.1 million, respectively, of recorded investments in residential andforeclosure process on consumer mortgage loans secured by residentialafter a borrower becomes more than 120 days delinquent in accordance with the Consumer Financial Protection Bureau guidelines. The carrying value of consumer real estate properties, for which formal foreclosure proceedingsloans that were in an active or suspended foreclosure process according to local requirements of the applicable jurisdictions, which were not included in OREO. A foreclosed residential real estate property with a carrying amount of $391 thousand was included in total net OREO of $2.3$7.6 million and $7.3 million as of September 30, 2017. In comparison, foreclosed residential real estate properties with a carrying amount of $401 thousand were included in total net OREO of $6.7 million as of2022 and December 31, 2016.2021, respectively.


Troubled Debt Restructurings


Potential troubled debt restructurings (“TDRs”)TDRs are individually evaluated, and the type of restructuring is selected based on the loan type and the circumstances of the borrower’s financial difficulty in order to maximize the Company’s recovery.difficulties. A TDR is a modification of the terms of a loan when the Company, for economic or legal reasons related to the borrower’s financial difficulties, grants a concession to the borrower that it would not have otherwise considered. The COVID-related modifications that occurred between March 1, 2020 and January 1, 2022, were generally not classified as TDRs due to the relief under the Coronavirus Aid, Relief, and Economic Security Act, as amended by the Consolidated Appropriations Act, 2021, and the Interagency Statement on Loan Modifications and Reporting for Financial Institutions Working with Customers Affected by the Coronavirus (Revised), and therefore are not included in the discussion below. See Note 1 — Summary of Significant Accounting Policies — Significant Accounting Policies — Troubled Debt Restructurings to the Consolidated Financial Statements in the Company’s 2021 Form 10-K for additional information.


41

The following tables present the additions to non-PCI TDRs for the three and nine months ended September 30, 20172022 and 2016:2021:
($ in thousands)Loans Modified as TDRs During the Three Months Ended September 30,
20222021
Number
of
Loans		Pre-
Modification
Outstanding
Recorded
Investment
Post-
Modification
Outstanding
Recorded
 Investment (1)
Financial
 Impact (2)
Number
of
Loans		Pre-
Modification
Outstanding
Recorded
Investment
Post-
Modification
Outstanding
Recorded
 Investment (1)
Financial
 Impact (2)
Commercial:
C&I1$499 $496 $98 7$26,248 $27,111 $5,688 
CRE:
Multifamily residential—— — — 11,101 1,118 — 
Total CRE—— — — 11,101 1,118 — 
Total commercial1499 496 98 827,349 28,229 5,688 
Consumer:
Residential mortgage:
HELOCs162 69 2 —— — — 
Total residential mortgage162 69 2 —— — — 
Total consumer162 69 2 —— — — 
Total2$561 $565 $100 8$27,349 $28,229 $5,688 
($ in thousands)Loans Modified as TDRs During the Nine Months Ended September 30,
20222021
Number
of
Loans		Pre-
Modification
Outstanding
Recorded
Investment
Post-
Modification
Outstanding
Recorded
 Investment (1)
Financial
 Impact (2)
Number
of
Loans		Pre-
Modification
Outstanding
Recorded
Investment
Post-
Modification
Outstanding
Recorded
 Investment (1)
Financial
 Impact (2)
Commercial:
C&I4$30,633 $17,802 $16,729 11$46,144 $45,954 $7,662 
CRE:
Multifamily residential—— — — 11,101 1,118 — 
Total CRE—— — — 11,101 1,118 — 
Total commercial430,633 17,802 16,729 1247,245 47,072 7,662 
Consumer:
Residential mortgage:
HELOCs162 69 2 —— — — 
Total residential mortgage162 69 2 —— — — 
Total consumer162 69 2 —— — — 
Total5$30,695 $17,871 $16,731 12$47,245 $47,072 $7,662 
(1)Includes subsequent payments after modification and reflects the balance as of September 30, 2022 and 2021.
(2)Includes charge-offs and specific reserves recorded since the modification date.

42
 
  Loans Modified as TDRs During the Three Months Ended September 30,
($ in thousands) 2017 2016
 Number
of
Loans		 
Pre-
Modification
Outstanding
Recorded
Investment
 
Post-
Modification
Outstanding
Recorded
Investment (1)
 
Financial
Impact (2)
 Number
of
Loans		 
Pre-
Modification
Outstanding
Recorded
Investment
 
Post-
Modification
Outstanding
Recorded
Investment (1)
 
Financial
Impact (2)
CRE:   ��
  
  
        
Income producing 1 $172
 $172
 $8
 — $—
 $—
 $—
C&I:                
Commercial business 10 $15,143
 $14,927
 $65
 3 $493
 $475
 $93
 

 
  Loans Modified as TDRs During the Nine Months Ended September 30,
($ in thousands) 2017 2016
 Number
of
Loans		 
Pre-
Modification
Outstanding
Recorded
Investment
 
Post-
Modification
Outstanding
Recorded
Investment (1)
 
Financial
Impact (2)
 Number
of
Loans		 
Pre-
Modification
Outstanding
Recorded
Investment
 
Post-
Modification
Outstanding
Recorded
Investment (1)
 
Financial
Impact (2)
CRE:    
  
  
        
Income producing 2 $1,699
 $1,648
 $8
 3 $15,899
 $15,730
 $43
Land — $—
 $—
 $—
 1 $5,522
 $5,233
 $—
C&I:                
Commercial business 15 $29,541
 $28,796
 $10,365
 8 $22,182
 $9,113
 $2,711
Trade finance — $—
 $—
 $—
 2 $7,901
 $3,025
 $—
Residential:                
Single-family — $—
 $—
 $—
 2 $1,071
 $1,065
 $—
Multifamily 1 $3,655
 $3,620
 $112
 — $—
 $—
 $—
Consumer — $—
 $—
 $—
 1 $344
 $337
 $1
 
(1)Includes subsequent payments after modification and reflects the balance as of September 30, 2017 and 2016.
(2)The financial impact includes charge-offs and specific reserves recorded at the modification date.



The following tables present the non-PCI TDR modificationspost-modification outstanding balances by the primary modification type for the three and nine months ended September 30, 20172022 and 2016 by modification type:2021:
($ in thousands)Modification Type During the Three Months Ended September 30,
20222021
Principal (1)
Interest Rate ReductionOtherTotal
Principal (1)
Interest Rate ReductionOtherTotal
Commercial:
C&I$496 $— $— $496 $27,111 $— $— $27,111 
CRE:
Multifamily residential— — — — 1,118 — — 1,118 
Total CRE— — — 1,118 — — 1,118 
Total commercial496 — — 496 28,229 — — 28,229 
Consumer:
Residential mortgage:
HELOCs69 — — 69 — — — — 
Total residential mortgage69 — — 69 — — — — 
Total consumer69 — — 69 — — — — 
Total$565 $— $— $565 $28,229 $— $— $28,229 
($ in thousands)Modification Type During the Nine Months Ended September 30,
20222021
Principal (1)
Interest Rate Reduction
Other (2)
Total
Principal (1)
Interest Rate ReductionOtherTotal
Commercial:
C&I$9,609 $— $8,193 $17,802 $28,780 $17,174 $— $45,954 
CRE:
Multifamily residential— — — — 1,118 — — 1,118 
Total CRE— — — — 1,118 — — 1,118 
Total commercial9,609 — 8,193 17,802 29,898 17,174 — 47,072 
Consumer:
Residential mortgage:
HELOCs69 — — 69 — — — — 
Total residential mortgage69 — — 69 — — — — 
Total consumer69 — — 69 — — — — 
Total$9,678 $— $8,193 $17,871 $29,898 $17,174 $— $47,072 
(1)Includes forbearance payments, term extensions and principal deferments that modify the terms of the loan from principal and interest payments to interest payments only.
(2)Includes increase in new commitment.

43

 
($ in thousands) Modification Type During the Three Months Ended September 30, 2017
 
Principal (1)
 
Principal
and
Interest (2)
 
Interest
Rate
Reduction
 
Interest
Deferments
 Other Total
CRE $172
 $—
 $—
 $—
 $—
 $172
C&I 14,903
 24
 —
 —
 —
 14,927
Total $15,075
 $24
 $—
 $—
 $—
 $15,099
  
 
($ in thousands) Modification Type During the Three Months Ended September 30, 2016
 
Principal (1)
 
Principal
and
Interest (2)
 Interest
Rate
Reduction		 Interest
Deferments		 Other Total
C&I $444
 $—
 $—
 $31
 $—
 $475
Total $444
 $—
 $—
 $31
 $—
 $475
  
 
($ in thousands) Modification Type During the Nine Months Ended September 30, 2017
 
Principal (1)
 
Principal
and
Interest (2)
 Interest
Rate
Reduction		 Interest
Deferments		 Other Total
CRE $1,648
 $—
 $—
 $—
 $—
 $1,648
C&I 18,289
 10,507
 —
 —
 —
 28,796
Residential 3,620
 —
 —
 —
 —
 3,620
Total $23,557
 $10,507
 $—
 $—
 $—
 $34,064
  
 
($ in thousands) Modification Type During the Nine Months Ended September 30, 2016
 
Principal (1)
 
Principal
and
Interest (2)
 Interest
Rate
Reduction		 Interest
Deferments		 Other Total
CRE $19,812
 $—
 $—
 $—
 $1,151
 $20,963
C&I 10,218
 —
 1,288
 32
 600
 12,138
Residential 266
 —
 799
 —
 —
 1,065
Consumer 337
 —
 —
 —
 —
 337
Total $30,633
 $—
 $2,087
 $32
 $1,751
 $34,503
            
(1)Includes forbearance payments, term extensions and principal deferments that modify the terms of the loan from principal and interest payments to interest payments only.
(2)Includes principal and interest deferments or reductions.



SubsequentAfter a loan is modified as TDR, the Company continues to restructuring, amonitor its performance under its most recent restructured terms. A TDR that becomesmay become delinquent generally beyondand result in payment default (generally 90 days is consideredpast due) subsequent to have defaulted. As TDRs are individually evaluated for impairment under the specific reserve methodology, subsequent defaults do not generally have a significant additional impact on the allowance for loan losses.restructuring. The following tables presenttable presents information foron loans modified as TDRs within the previous 12 months that have subsequently defaultedentered into default during the three and nine months ended September 30, 20172022 and 2016,2021, that were modified as TDRs during the 12 months preceding payment default:
($ in thousands)Loans Modified as TDRs that Subsequently Defaulted
Three Months Ended September 30,Nine Months Ended September 30,
2022202120222021
Number of
Loans		Recorded
Investment		Number of
Loans		Recorded
Investment		Number of
Loans		Recorded
Investment		Number of
Loans		Recorded
Investment
Commercial:
C&I— $— — $— 2 $13,901 1 $11,431 
CRE:
Multifamily residential— — — — 1 1,008 — — 
Total CRE— — — — 1 1,008 — — 
Total commercial— — — — 3 14,909 1 11,431 
Total— $— — $— 3 $14,909 1 $11,431 

As of September 30, 2022 and were still in default atDecember 31, 2021, the respective period end:
 
($ in thousands) Loans Modified as TDRs that Subsequently Defaulted During the Three Months Ended September 30,
 2017 2016
 Number of
Loans		 Recorded
Investment		 Number of
Loans		 Recorded
Investment
CRE:  
  
  
  
Income producing —
 $—
 1
 $1,000
C&I:        
Commercial business 1
 $9,386
 —
 $—
 
 
($ in thousands) Loans Modified as TDRs that Subsequently Defaulted During the Nine Months Ended September 30,
 2017 2016
 Number of
Loans		 Recorded
Investment		 Number of
Loans		 Recorded
Investment
CRE:  
  
  
  
Income producing —
 $—
 1
 $1,000
C&I:  
  
  
  
Commercial business 1
 $9,386
 2
 $119
Consumer 1
 $48
 —
 $—
 

The amount of additional funds committedremaining commitments to lend to borrowers whose terms have beenof their outstanding owed balances were modified was $612 thousandas TDRs were $6.4 million and $9.9$5.0 million, as of September 30, 2017 and December 31, 2016, respectively.


Impaired LoansAllowance for Credit Losses


The Company has an allowance framework under ASU 2016-13 for all financial assets measured at amortized cost and certain off-balance sheet credit exposures. The Company’s allowance for credit losses, which includes both the allowance for loan losses and the allowance for unfunded credit commitments, is calculated with the objective of maintaining a reserve sufficient to absorb losses inherent in our credit portfolios. The measurement of the allowance for credit losses is based on management’s best estimate of lifetime expected credit losses, and periodic evaluation of the loan portfolio, lending-related commitments, and other relevant factors.

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

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

Allowance for Collectively Evaluated Loans

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

44

Quantitative Component — The Company applies quantitative methods to estimate loan islosses by considering a variety of factors such as historical loss experience, the current credit quality of the portfolio, and an economic outlook over the life of the loan. The Company incorporates forward-looking information using macroeconomic scenarios, which include variables that are considered impaired when, based on current informationkey drivers of increases and events, it is probabledecreases in credit losses. The Company utilizes a probability-weighted, multiple-scenario forecast approach. These scenarios may consist of a base forecast representing management's view of the most likely outcome, combined with downside or upside scenarios reflecting possible worsening or improving economic conditions. The quantitative models incorporate a probability-weighted calculation of these macroeconomic scenarios over a reasonable and supportable forecast period. If the life of loans extends beyond the reasonable and supportable forecast period, the Company will consider historical experience or long-run macroeconomic trends over the remaining lives of the loans to estimate the allowance for loan losses.

There were no changes to the overall model methodology. For the three and nine months ended September 30, 2022, there were no changes to the reasonable and supportable forecast period and reversion to the historical loss experience method.

The following table provides key credit risk characteristics and macroeconomic variables that the Company willuses to estimate the expected credit losses by portfolio segment:
Portfolio SegmentRisk CharacteristicsMacroeconomic Variables
C&IAge, size and spread at origination, and risk ratingVolatility Index and BBB yield to 10-year U.S. Treasury spread
CRE, Multifamily residential, and Construction and landDelinquency status, maturity date, collateral value, property type, and geographic locationUnemployment rate, Gross Domestic Product (“GDP”), and U.S. Treasury rates
Single-family residential and HELOCsFICO score, delinquency status, maturity date, collateral value, and geographic locationUnemployment rate, GDP, and home price index
Other consumerHistorical loss experience
Immaterial (1)
(1)Macroeconomic variables are included in the qualitative estimate.

Allowance for Loan Losses for the Commercial Loan Portfolio

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

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

Allowance for Loan Losses for the Consumer Loan Portfolio

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

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

—     loan growth trends;
—    the volume and severity of past due financial assets, and the volume and severity of adversely classified financial assets;
45

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

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

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

Allowance for Individually Evaluated Loans

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

•Collateral-Dependent Loans — The allowance of a collateral-dependent loan is less thanlimited to the difference between the recorded investmentvalue and fair value of the loan is classifiedcollateral less cost of disposal or sale. As of September 30, 2022, collateral-dependent commercial and consumer loans totaled $36.4 million and $13.6 million, respectively. In comparison, collateral-dependent commercial and consumer loans totaled $37.0 million and $14.0 million, respectively, as nonperformingof December 31, 2021. The Company's collateral-dependent loans were secured by real estate. As of both September 30, 2022 and uncollectible,December 31, 2021, the deficiency is charged-off againstcollateral value of the properties securing the collateral-dependent loans, net of selling costs, exceeded the recorded value of the loans.

46

The following tables summarize the activities in the allowance for loan losses. Impaired loans exclude the homogeneous consumer loanlosses by portfolio which is evaluated collectively for impairment. The Company’s impaired loans include predominantly non-PCI loans held-for-investment on nonaccrual status and any non-PCI loans modified in a TDR, which may be on accrual or nonaccrual status.



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



The following table presents the average recorded investment and interest income recognized on non-PCI impaired loanssegments for the three and nine months ended September 30, 2017 2022 and 2016:2021:
($ in thousands)Three Months Ended September 30, 2022
CommercialConsumerTotal
C&ICREResidential MortgageOther
Consumer
CREMultifamily
Residential		Construction
and Land		Single-
Family
Residential		HELOCs
Allowance for loan losses, beginning of period$363,282 $140,245 $26,552 $6,682 $21,840 $3,220 $1,449 $563,270 
Provision for credit losses on loans(a)9,575 5,299 5,047 817 6,182 99 255 27,274 
Gross charge-offs(6,894)(288)(5,938)— (775)— (10)(13,905)
Gross recoveries7,172 45 19 7 16 5 — 7,264 
Total net recoveries (charge-offs)278 (243)(5,919)7 (759)5 (10)(6,641)
Foreign currency translation adjustment(1,386)— — — — — — (1,386)
Allowance for loan losses, end of period$371,749 $145,301 $25,680 $7,506 $27,263 $3,324 $1,694 $582,517 
($ in thousands)Three Months Ended September 30, 2021
CommercialConsumerTotal
C&ICREResidential MortgageOther
Consumer
CREMultifamily
Residential		Construction
and Land		Single-
Family
Residential		HELOCs
Allowance for loan losses, beginning of period$362,528 $161,962 $21,925 $15,643 $16,530 $2,938 $4,198 $585,724 
(Reversal of) provision for credit losses on loans(a)(23,364)2,129 (2,660)9,058 2,537 435 130 (11,735)
Gross charge-offs(1,154)(14,229)— (2,674)(912)— (10)(18,979)
Gross recoveries4,203 187 652 267 137 19 — 5,465 
Total net recoveries (charge-offs)3,049 (14,042)652 (2,407)(775)19 (10)(13,514)
Foreign currency translation adjustment(71)— — — — — — (71)
Allowance for loan losses, end of period$342,142 $150,049 $19,917 $22,294 $18,292 $3,392 $4,318 $560,404 
($ in thousands)Nine Months Ended September 30, 2022
CommercialConsumerTotal
C&ICREResidential MortgageOther
Consumer
CREMultifamily
Residential		Construction
and Land		Single-
Family
Residential		HELOCs
Allowance for loan losses, beginning of period$338,252 $150,940 $14,400 $15,468 $17,160 $3,435 $1,924 $541,579 
Provision for (reversal of) credit losses on loans(a)37,867 (5,013)16,680 (8,027)10,569 59 (140)51,995 
Gross charge-offs(18,322)(1,357)(5,947)— (775)(193)(90)(26,684)
Gross recoveries16,688 731 547 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 
47

 
($ in thousands) Three Months Ended September 30, Nine Months Ended September 30,
 2017 2016 2017 2016
 Average
Recorded
Investment		 
Recognized
Interest
   Income (1)
 Average
Recorded
Investment		 
Recognized
Interest
   Income (1)
 
Average
Recorded
Investment
 
Recognized
Interest
   Income (1)
 Average
Recorded
Investment		 
Recognized
Interest
   Income (1)
CRE:                
Income producing $37,489
 $179
 $52,116
 $464
 $37,238
 $535
 $52,221
 $1,368
Land 4,337
 —
 6,622
 9
 4,484
 —
 6,777
 26
C&I:                
Commercial business 93,278
 242
 91,290
 258
 94,709
 799
 92,805
 648
Trade finance 4,216
 53
 9,005
 33
 4,444
 122
 10,028
 166
Residential:                
Single-family 16,124
 111
 13,438
 72
 16,141
 325
 13,517
 220
Multifamily 12,532
 108
 20,585
 77
 12,540
 324
 20,646
 231
Consumer 4,492
 14
 1,571
 16
 4,455
 41
 1,575
 48
Total non-PCI impaired loans $172,468
 $707
 $194,627
 $929
 $174,011
 $2,146
 $197,569
 $2,707
 
(1)Includes interest recognized on accruing non-PCI TDRs. Interest payments received on nonaccrual non-PCI loans are reflected as a reduction to principal and not as interest income.

($ in thousands)Nine Months Ended September 30, 2021
CommercialConsumerTotal
C&ICREResidential MortgageOther
Consumer
CREMultifamily
Residential		Construction
and Land		Single-
Family
Residential		HELOCs
Allowance for loan losses, beginning of period$398,040 $163,791 $27,573 $10,239 $15,520 $2,690 $2,130 $619,983 
(Reversal of) provision for credit losses on loans(a)(42,127)11,227 (9,436)14,407 3,522 707 2,226 (19,474)
Gross charge-offs(20,162)(25,558)(130)(2,954)(1,046)(45)(43)(49,938)
Gross recoveries6,301 589 1,910 602 296 40 5 9,743 
Total net (charge-offs) recoveries(13,861)(24,969)1,780 (2,352)(750)(5)(38)(40,195)
Foreign currency translation adjustment90 — — — — — — 90 
Allowance for loan losses, end of period$342,142 $150,049 $19,917 $22,294 $18,292 $3,392 $4,318 $560,404 



AllowanceThe allowance for Credit Losses

unfunded credit commitments is maintained at a level that management believes to be sufficient to absorb estimated expected credit losses related to unfunded credit facilities. See Note 10 — Commitments and Contingencies to the Consolidated Financial Statements in this Form 10-Q for additional information related to unfunded credit commitments. The following tables present a summary oftable summarizes the activities in the allowance for loan losses by portfolio segmentunfunded credit commitments for the three and nine months ended September 30, 2017 2022 and 2016:2021:
($ in thousands)Three Months Ended September 30,Nine Months Ended September 30,
2022202120222021
Unfunded credit facilities
Allowance for unfunded credit commitments, beginning of period$24,304 $26,300 $27,514 $33,577 
(Reversal of) provision for credit losses on unfunded credit commitments(b)(274)1,735 (3,495)(5,526)
Foreign currency translation adjustment11 1 22 (15)
Allowance for unfunded credit commitments, end of period24,041 28,036 24,041 28,036 
Provision for (reversal of) credit losses(a) + (b)$27,000 $(10,000)$48,500 $(25,000)

 
($ in thousands) Three Months Ended September 30, 2017
 Non-PCI Loans PCI Loans Total
 CRE C&I Residential Consumer Total  
Beginning balance $73,985
 $150,136
 $43,679
 $8,438
 $276,238
 $78
 $276,316
(Reversal of) provision for loan losses (346) 15,656
 (583) (1,269) 13,458
 (10) 13,448
Charge-offs —
 (7,359) —
 (65) (7,424) —
 (7,424)
Recoveries 610
 2,165
 809
 2
 3,586
 —
 3,586
Net recoveries (charge-offs) 610
 (5,194) 809
 (63) (3,838) —
 (3,838)
Ending balance $74,249
 $160,598
 $43,905
 $7,106
 $285,858
 $68
 $285,926
 
 
($ in thousands) Three Months Ended September 30, 2016
 Non-PCI Loans PCI Loans Total
 CRE C&I Residential Consumer Total  
Beginning balance $78,102
 $148,427
 $31,561
 $8,421
 $266,511
 $257
 $266,768
(Reversal of) provision for loan losses (6,598) 18,548
 309
 (644) 11,615
 (101) 11,514
Charge-offs (309) (23,696) (29) (13) (24,047) —
 (24,047)
Recoveries 634
 165
 654
 124
 1,577
 —
 1,577
Net recoveries (charge-offs) 325
 (23,531) 625
 111
 (22,470) —
 (22,470)
Ending balance $71,829
 $143,444
 $32,495
 $7,888
 $255,656
 $156
 $255,812
 
 
($ in thousands) Nine Months Ended September 30, 2017
 Non-PCI Loans PCI Loans Total
 CRE C&I Residential Consumer Total  
Beginning balance $72,804
 $142,166
 $37,333
 $8,099
 $260,402
 $118
 $260,520
(Reversal of) provision for loan losses (120) 28,576
 4,815
 (1,087) 32,184
 (50) 32,134
Charge-offs (149) (19,802) (1) (72) (20,024) —
 (20,024)
Recoveries 1,714
 9,658
 1,758
 166
 13,296
 —
 13,296
Net recoveries (charge-offs) 1,565
 (10,144) 1,757
 94
 (6,728) —
 (6,728)
Ending balance $74,249
 $160,598
 $43,905
 $7,106
 $285,858
 $68
 $285,926
 
 
($ in thousands) Nine Months Ended September 30, 2016
 Non-PCI Loans PCI Loans Total
 CRE C&I Residential Consumer Total  
Beginning balance $81,191
 $134,597
 $39,292
 $9,520
 $264,600
 $359
 $264,959
(Reversal of) provision for loan losses (9,731) 38,549
 (7,679) (1,887) 19,252
 (203) 19,049
Charge-offs (504) (31,770) (166) (17) (32,457) —
 (32,457)
Recoveries 873
 2,068
 1,048
 272
 4,261
 —
 4,261
Net recoveries (charge-offs) 369
 (29,702) 882
 255
 (28,196) —
 (28,196)
Ending balance $71,829
 $143,444
 $32,495
 $7,888
 $255,656
 $156
 $255,812
 

For further information on accounting policies and the methodologies used to estimateThe allowance for credit losses was $606.6 million as of September 30, 2022, an increase of $37.5 million, compared with $569.1 million as of December 31, 2021. The increase in the allowance for credit losses was primarily driven by the current economic outlook, which reflected ongoing concerns with inflation, global supply chain disruptions and rising interest rates, as well as loan charge-offs, see growth.

Loans Held-for-Sale

Loans held-for-sale consisted of a $14.5 million multifamily residential loan and $635 thousand in single-family residential loans as of September 30, 2022 and December 31, 2021, respectively. Refer to Note 1 — Summary of Significant Accounting Policies— Significant Accounting Policies — Loans Held-for-Sale to the Consolidated Financial Statements ofin the Company’s 20162021 Form 10-K.10-K for additional details.



48


Loan Transfers, Sales and Purchases

The following table presents a summaryCompany’s primary business focus is on directly originated loans. The Company also purchases loans and participates in loans with other banks. In the normal course of activitiesdoing business, the Company also provides other financial institutions with the ability to participate in the allowance for unfunded credit reserves for the three and nine months ended September 30, 2017 and 2016:
         
($ in thousands) Three Months Ended
September 30,		 Nine Months Ended
September 30,
 2017 2016 2017 2016
Beginning balance $15,188
 $20,318
 $16,121
 $20,360
Reversal of unfunded credit reserves (452) (1,989) (1,385) (2,031)
Ending balance $14,736
 $18,329
 $14,736
 $18,329
         

The allowance for unfunded credit reserves is maintained at a level management believes to be sufficient to absorb estimated probable losses related to unfunded credit facilities. The allowance for unfunded credit reserves is included in Accrued expense and other liabilities on the Consolidated Balance Sheets. See Note 11 — Commitments and Contingencies to the Consolidated Financial Statements for additional information related to unfunded credit reserves.

The following tables present the Company’s allowance for loan losses and recorded investmentscommercial loans that it originates, by portfolio segment and impairment methodology as of September 30, 2017 and December 31, 2016:
 
($ in thousands) September 30, 2017
 CRE C&I Residential Consumer Total
Allowance for loan losses          
Individually evaluated for impairment $1,012
 $18,969
 $766
 $4
 $20,751
Collectively evaluated for impairment 73,237
 141,629
 43,139
 7,102
 265,107
Acquired with deteriorated credit quality 
 68
 —
 —
 —
 68
Ending balance $74,317
 $160,598
 $43,905
 $7,106
 $285,926
           
Recorded investment in loans          
Individually evaluated for impairment $39,332
 $93,800
 $28,131
 $4,301
 $165,564
Collectively evaluated for impairment 9,174,220
 10,538,790
 6,014,197
 2,100,313
 27,827,520
Acquired with deteriorated credit quality (1)
 313,628
 12,566
 190,637
 15,442
 532,273
Ending balance (1)
 $9,527,180
 $10,645,156
 $6,232,965
 $2,120,056
 $28,525,357
 
 
($ in thousands) December 31, 2016
 CRE C&I Residential Consumer Total
Allowance for loan losses          
Individually evaluated for impairment $1,326
 $10,477
 $867
 $31
 $12,701
Collectively evaluated for impairment 71,478
 131,689
 36,466
 8,068
 247,701
Acquired with deteriorated credit quality 112
 1
 5
 —
 118
Ending balance $72,916
 $142,167
 $37,338
 $8,099
 $260,520
           
Recorded investment in loans          
Individually evaluated for impairment $52,378
 $125,619
 $24,376
 $3,682
 $206,055
Collectively evaluated for impairment 8,288,119
 9,476,557
 4,836,578
 2,053,385
 24,654,639
Acquired with deteriorated credit quality (1)
 350,366
 38,387
 234,764
 18,928
 642,445
Ending balance (1)
 $8,690,863
 $9,640,563
 $5,095,718
 $2,075,995
 $25,503,139
 
(1)Loans net of ASC 310-30 discount.



Purchased Credit Impaired Loans

At the date of acquisition, PCI loans are pooled and accounted for at fair value, which represents the discounted value of the expected cash flows of the loan portfolio. A pool is accounted for as a single asset with a single interest rate, cumulative loss rate and cash flow expectation. The cash flows expected over the life of the pools are estimated by an internal cash flow model that projects cash flows and calculates the carrying values of the pools, book yields, effective interest income and impairment, if any, based on pool level events. Assumptions as to cumulative loss rates, loss curves and prepayment speeds are utilized to calculate the expected cash flows. The amount of expected cash flows over the initial investment in the loan represents the “accretable yield,” which is recognized as interest income on a level yield basis over the life of the loan. Prepayments affect the estimated life of PCI loans, which may change the amount of interest income, and possibly principal, expected to be collected. The excess of total contractual cash flows over the cash flows expected to be received at origination is deemed to be the “nonaccretable difference.”

The following table presents the changes in accretable yield for PCI loans for the three and nine months ended September 30, 2017 and 2016:
 
($ in thousands) Three Months Ended September 30, Nine Months Ended September 30,
 2017 2016 2017 2016
Beginning balance $118,625
 $166,777
 $136,247
 $214,907
Accretion (10,747) (14,827) (32,108) (53,510)
Changes in expected cash flows 2,078
 311
 5,817
 (9,136)
Ending balance $109,956
 $152,261
 $109,956
 $152,261
 

Loans Held-for-Sale
Loans held-for-sale are carried at the lower of cost or fair value. When a determination is made at the time of commitment to originate or purchase loans as held-for-investment, it is the Company’s intent to hold theseselling loans to maturity or for the “foreseeable future,” subject to periodic reviews under the Company’s management evaluation processes, including asset/liability management. When the Company subsequently changes its intent to hold certainsuch institutions. Purchased loans the loans aremay be transferred from held-for-investment to held-for-sale, atand write-downs to allowance for loan losses are recorded, when appropriate. The following tables provide information on the lowercarrying value of cost or fair value.

As of September 30, 2017, loans held-for-sale amounted to $178 thousand, which were comprised of single-family residential loans. In comparison, as of December 31, 2016,transferred, loans held-for-sale amounted to $23.1 million, which were primarily comprised of consumer loans. Loans transferred fromsold and purchased for the held-for-investment to held-for-sale were $74.5 million and $418.5 millionportfolio, during the three and nine months ended September 30, 2017, respectively. These loan transfers were primarily comprised2022 and 2021:
($ in thousands)Three Months Ended September 30, 2022
CommercialConsumerTotal
C&ICREResidential Mortgage
CREMultifamily
Residential		Single-Family
Residential
Loans transferred from held-for-investment to held-for-sale (1)
$59,069 $33,616 $14,500 $5,178 $112,363 
Sales (2)(3)(4)
$87,597 $33,616 $— $5,952 $127,165 
Purchases (5)
$56,507 $— $— $1,155 $57,662 
($ in thousands)Three Months Ended September 30, 2021
CommercialConsumerTotal
C&ICREResidential Mortgage
CREConstruction
and Land		Single-Family
Residential
Loans transferred from held-for-investment to held-for-sale (1)
$117,196 $24,120 $17,226 $5,238 $163,780 
Sales (2)(3)(4)
$118,851 $24,120 $19,900 $6,959 $169,830 
Purchases (5)
$65,354 $— $— $137,937 $203,291 
($ in thousands)Nine Months Ended September 30, 2022
CommercialConsumerTotal
C&ICREResidential Mortgage
CREMultifamily
Residential		Single-Family
Residential
Loans transferred from held-for-investment to held-for-sale (1)
$378,841 $65,250 $14,500 $5,178 $463,769 
Loans transferred from held-for-sale to held-for-investment$— $— $— $631 $631 
Sales (2)(3)(4)
$375,100 $65,250 $— $6,403 $446,753 
Purchases (5)
$361,169 $— $— $238,253 $599,422 
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($ in thousands)Nine Months Ended September 30, 2021
CommercialConsumerTotal
C&ICREResidential Mortgage
CREMultifamily
Residential		Construction
and Land		Single-Family
Residential
Loans transferred from held-for-investment to held-for-sale (1)
$327,781 $61,171 $— $17,226 $5,238 $411,416 
Sales (2)(3)(4)
$329,233 $61,171 $— $19,900 $17,123 $427,427 
Purchases (5)
$310,447 $— $370 $— $434,900 $745,717 
(1)Includes write-downs of C&I loans for both periods. In comparison, $144.9$8.7 million and $720.7$8.9 million of loans were transferred from held-for-investment to held-for-sale during the three and nine months ended September 30, 2016, respectively. These loan transfers were primarily comprised of C&I, multifamily residential and CRE loans for both periods. The Company recorded $232 thousand and $441 thousand in write-downs to the allowance for loan losses related to loans transferred from held-for-investment to held-for-sale for the three and nine months ended September 30, 2017, respectively. In comparison, there were no write-downs2022, respectively, and $1.9$3.6 million of write-downs recorded to the allowance for loan losses related to loans transferred from held-for-investment to held-for-saleand $4.9 million for the three and nine months ended September 30, 2016,2021, respectively.

During(2)Includes originated loans sold of $86.2 million and $253.9 million for the three and nine months ended September 30, 2017, the Company sold $33.82022, respectively, and $143.3 million and $101.4$341.9 million respectively, in originated loans, resulting in net gains of $2.3 million and $5.5 million, respectively. Originated loans sold during these periods were primarily comprised of C&I and CRE loans. In comparison, the Company sold $107.3 million in originated loans during the three months ended September 30, 2016, resulting in net gains of $2.2 million. Originated loans sold during this period were primarily comprised of C&I and CRE loans. During the nine months ended September 30, 2016, the Company sold or securitized $529.5 million in originated loans, resulting in net gains of $9.3 million. Included in these amounts were $201.7 million of multifamily residential loans securitized during the first quarter of 2016, which resulted in net gains of $1.1 million, $641 thousand in mortgage servicing rights and $160.1 million of held-to-maturity investment security that were recorded. The remaining $327.8 million of originated loans sold during the nine months ended September 30, 2016, primarily comprising of CRE and C&I loans, resulted in net gains of $8.2 million.



Duringfor the three and nine months ended September 30, 2017, the Company purchased $72.4 million2021, respectively. Originated loans sold consisted primarily of C&I and $441.1 million loans, respectively, compared to $256.2 million and $1.04 billion during the three and nine months ended September 30, 2016, respectively. PurchasedCRE loans for each of the three and nine months ended September 30, 2017 were primarily comprised2022 and 2021.
(3)Includes $40.9 million and $192.9 million of C&I syndication loans. Purchasedpurchased loans for each ofsold in the three and nine months ended September 30, 2016 were primarily comprised of C&I syndication loans and single-family residential loans. The higher loans purchasedsecondary market for the three and nine months ended September 30, 2016, primarily included $165.82022, respectively and $26.5 million and $488.3 million, respectively, of single-family residential loans purchased for Community Reinvestment Act (“CRA”) purposes.

From time to time, the Company purchases and sells loans in the secondary market. Certain purchased loans are transferred from held-for-investment to held-for-sale and write-downs to allowance for loan losses are recorded, when appropriate. During the three and nine months ended September 30, 2017, the Company sold loans of $57.4 million and $354.5 million, respectively, in the secondary market at net gains of $19 thousand and $1.2 million, respectively. In comparison, the Company sold loans of $45.8 million and $179.4$85.5 million for the three and nine months ended September 30, 2016, respectively, in the secondary market. Loan2021, respectively.
(4)Net gains on sales in the secondary market resulted in no gains or lossesof loans were $2.1 million and $69 thousand in net gains recorded$6.0 million for the three and nine months ended September 30, 2016, respectively.

The Company records valuation adjustments in Net gains on sales of loans on the Consolidated Statements of Income to carry the loans held-for-sale portfolio at the lower of cost or fair value. For each of2022, respectively, and $3.3 million and $6.6 million for the three months ended September 30, 2017 and 2016, no valuation adjustments were recorded. For the nine months ended September 30, 2017 and 2016, the Company recorded $61 thousand and $2.4 million, respectively, in valuation adjustments.2021, respectively.

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


Note 98 — 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, for housingparticularly low- and other purposes, particularly in neighborhoods with low or moderate income.moderate-income individuals and neighborhoods. The Company invests in certain affordable housing projects in the form of ownership interests in limited partnerships or limited liability companies that qualify for CRA consideration and tax credits. Such limited partnershipsThese entities are formed to develop and operate apartment complexes designed as high-quality affordable housing for lower income tenants throughout the U.S. EachTo fully utilize the available tax credits, each of the partnershipsthese entities must meet the regulatory requirements for affordable housing requirements for a minimum 15-year compliance period to fully utilize the tax credits.period. In addition to affordable housing limited partnerships,projects, the Company invests in small business investment companies and new market tax credit projects that qualify for CRA credits andconsideration, 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, while theand investments in historic tax credits promote the rehabilitation of historic buildings and economic revitalization of the surrounding areas.


Investments in Qualified Affordable Housing Partnerships, Net


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


Investments in Tax Credit and Other Investments, Net

For investments in tax credit and other investments, the Company applies the equity or fair value method of accounting depending on the Company’s ownership percentage. For equity investments without readily determinable fair values, the Company elected the measurement alternative under ASU 2016-01 valuing them at cost less impairment adjusted for observable price changes. Tax credit and other investments are evaluated for possible OTTI on an annual basis or when events or changes in circumstances suggest that the carrying amount of the tax credit investments may not be realizable. OTTI charges and impairment recoveries are recorded within Amortization of tax credit and other investments on the Consolidated Statement of Income. Refer to Note 3 — Fair Value Measurement and Fair Value of Financial Instruments to the Consolidated Financial Statements in this Form 10-Q for a discussion on the Company’s impairment evaluation and monitoring process of tax credit investments.

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The following table presents the balancesinvestments and unfunded commitments of the Company’s qualified affordable housing partnerships, tax credit, and other investments as of September 30, 2022 and December 31, 2021:
September 30, 2022December 31, 2021
($ in thousands)Assets
Liabilities - Unfunded Commitments (1)
Assets
Liabilities - Unfunded Commitments (1)
Investments in qualified affordable housing partnerships, net$400,871 $254,700 $289,741 $146,152 
Investments in tax credit and other investments, net324,383 153,840 338,522 163,464 
Total$725,254 $408,540 $628,263 $309,616 
(1)Included in Accrued expenses and other liabilities on the Consolidated Balance Sheet.

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

The Company also held equity securities without readily determinable fair values totaling $34.6 million and related unfunded commitments$33.1 million as of September 30, 2022 and December 31, 2021, respectively, which were measured using the periods indicated:measurement alternative of cost less impairment and adjusted for observable price changes. For the three and nine months ended September 30, 2022 and 2021, there were no adjustments made to these securities. Equity securities without readily determinable fair values were included in Investments in qualified affordable housing partnerships, tax credit and other investments, net and Other assets on the Consolidated Balance Sheet.
 
($ in thousands) September 30, 2017 December 31, 2016
Investments in qualified affordable housing partnerships, net $178,344
 $183,917
Accrued expenses and other liabilities — Unfunded commitments $63,607
 $57,243
 


The following table presents additional information related to the Company’s investments in qualified affordable housing partnerships, net, for the periods indicated:
         
($ in thousands) Three Months Ended
September 30,		 Nine Months Ended
September 30,
 2017 2016 2017 2016
Tax credits and other tax benefits recognized $15,840
 $8,591
 $35,027
 $26,561
Amortization expense included in income tax expense $8,944
 $6,612
 $22,945
 $20,923
         



Investments in Tax Credit and Other Investments, Net

Investments in tax credit and other investments net, were $203.8 million and $173.3 million as of September 30, 2017 and December 31, 2016, respectively. The Company is not the primary beneficiary in these partnerships and, therefore, is not required to consolidate its investments in tax credit and other investments on the Consolidated Financial Statements. Depending on the ownership percentage and the influence the Company has on the limited partnership, the Company applies either the equity or cost method of accounting.

Total unfunded commitments for these investments were $103.0 million and $117.0 million as of September 30, 2017 and December 31, 2016, respectively, and are included in Accrued expenses and other liabilities on the Consolidated Balance Sheets. Amortization of tax credit and other investments was $23.8 million and $32.6 million for the three and nine months ended September 30, 20172022 and 2016, respectively. Amortization of tax credit and other investments was $66.1 million and $60.8 million for2021:
($ in thousands)Three Months Ended September 30,Nine Months Ended September 30,
2022202120222021
Investments in qualified housing partnerships, net
Tax credits and other tax benefits recognized$13,180 $11,361 $38,764 $34,083 
Amortization expense included in income tax expense$10,431 $9,147 $30,498 $25,595 
Investments in tax credit and other investments, net
Amortization of tax credit and other investments$19,874 $38,008 $48,753 $90,657 
Unrealized losses on equity securities with readily determinable values$(1,014)$(88)$(2,958)$(515)
Impairment recoveries (1)
$— $— $— $1,250 
(1)For the nine months ended September 30, 20172021, impairment recoveries were related to one historic tax credit and 2016, respectively.two energy tax credits.



Variable Interest Entities

Note 10—GoodwillThe majority of both the investments in affordable housing partnerships and Other Intangible Assetstax credit and other investments discussed above are variable interest entities (“VIEs”) where the Company is a limited partner in these partnerships, and an unrelated third party is typically the general partner or managing member who has control over the significant activities of these investments. While the Company’s interest in some of the investments may exceed 50% of the outstanding equity interests, the Company does not consolidate these structures 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.


Goodwill
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Total goodwillSpecial purpose entities formed in connection with securitization transactions are generally considered VIEs. A CLO is a VIE that purchases a pool of $469.4assets consisting primarily of non-investment grade corporate loans, and issues multiple tranches of notes to investors to fund the asset purchases and pay upfront expenses associated with forming the CLO. The Company served as the collateral manager of a CLO that closed in 2019 and subsequently reassigned its portfolio manager responsibilities in 2020. The Company retained the top three investment grade-rated tranches issued by the CLO, for which the total carrying amount was $281.2 million remained unchangedand $291.7 million as of September 30, 2017 compared to2022 and December 31, 2016. 2021, respectively.

Note 9—Goodwill

Total goodwill was $465.7 million as of both September 30, 2022 and December 31, 2021. The Company’s goodwill impairment test is tested for impairment on an annual basisperformed annually, as of December 31,st, or more frequently asif events occur or circumstances change that would more likely than notmore-likely-than-not reduce the fair value of a reporting unit below its carrying amount. The Company’s three operating segments, Retail Banking, Commercial Banking and Other, are equivalent tovalue. Based on the Company’s reporting units. For complete discussion and disclosure, see Note 15 — Business Segments to the Consolidated Financial Statements.

Impairment Analysis

The Company performed its annual goodwill impairment analysistesting as of December 31, 2016 and concluded that2021, there was no impairment. Additional information pertaining to the Company’s accounting policy for goodwill impairment as the fair valuesis summarized in Note 1 — Summary of all reporting units exceeded the carrying amounts of goodwill. There were no triggering events during the nine months ended September 30, 2017, and therefore, no additional goodwill impairment analysis was performed. No assurance can be given that goodwill will not be written down in future periods. Refer to Note 9 Significant Accounting Policies — Significant Accounting Policies — Goodwill and Other Intangible Assetsto the Consolidated Financial Statements ofin the Company’s 20162021 Form 10-K for additional details related to the Company’s annual goodwill impairment analysis.
Core Deposit Intangibles

Core deposit intangibles represent the intangible value of depositor relationships resulting from deposit liabilities assumed in various acquisitions and were included in Other assets on the Consolidated Balance Sheets. These intangibles are tested for impairment on an annual basis, or more frequently as events occur, or as current circumstances and conditions warrant. There were no impairment write-downs on core deposit intangibles for the nine months ended September 30, 2017 and 2016.

The following table presents the gross carrying value of intangible assets and accumulated amortization as10-K. As of September 30, 20172022, the Company reviewed recent market movements, as well as its business performance and December 31, 2016:market capitalization, and concluded that goodwill was not impaired.

 
($ in thousands) September 30, 2017 December 31, 2016
Gross balance $108,814
 $108,814
Accumulated amortization (86,140) (80,825)
Net carrying balance $22,674
 $27,989
 

Amortization Expense

The Company amortizes the core deposit intangibles based on the projected useful lives of the related deposits. The amortization expense related to the intangible assets was $1.7 million and $2.0 million for the three months ended September 30, 2017 and 2016, respectively, and $5.3 million and $6.2 million for the nine months ended September 30, 2017 and 2016, respectively.



The following table presents the estimated future amortization expense of core deposit intangibles:
 
Year Ended December 31, 
Amount
($ in thousands)
Remainder of 2017 $1,620
2018 5,883
2019 4,864
2020 3,846
2021 2,833
Thereafter 3,628
Total $22,674
 


Note 1110—Commitments and Contingencies

Commitments to Extend Credit Extensions — In the normal course of doing business, the Company has variousprovides loan commitments to customers on predetermined terms. These outstanding commitments to extend credit that are not reflected in the accompanying Consolidated Financial Statements. While the Company does not anticipate losses as a result offrom these transactions, commitments to extend credit are included in determining the appropriate level of the allowance for unfunded 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 the periods indicated:September 30, 2022 and December 31, 2021:
September 30, 2022December 31, 2021
($ in thousands)Expire in One Year or LessExpire After One Year Through Three YearsExpire After Three Years Through Five YearsExpire After Five YearsTotalTotal
Loan commitments$2,961,900 $2,103,347 $1,130,044 $1,614,124 $7,809,415 $6,911,398 
Commercial letters of credit and SBLCs689,949 438,336 55,015 1,085,513 2,268,813 2,221,699 
Total$3,651,849 $2,541,683 $1,185,059 $2,699,637 $10,078,228 $9,133,097 
 
($ in thousands) September 30, 2017 December 31, 2016
Loan commitments $4,956,515
 $5,077,869
Commercial letters of credit and SBLCs $1,757,648
 $1,525,613
 


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


Commercial letters of credit are issued to facilitate domestic and foreign trade transactions, while SBLCs are generally contingent upon the failure of the customers to perform according to the terms of the underlying contract with the third party. As a result, the total contractual amounts do not necessarily represent future funding requirements. The Company’s historical experience is that SBLCs typically expire without being funded. Additionally, in many cases, the Company holds collateral in various forms against these SBLCs. As a part of its risk management activities, the Company monitors the creditworthiness of customers in conjunction with its SBLC exposure. Customers are obligated to reimburse the Company for any payment made on the customers’ behalf. If the customers fail to pay, the Company would, as applicable, liquidate the collateral and/or offset existing accounts. As of September 30, 2017,2022, total letters of credit which amounted to $1.76of $2.27 billion were comprisedconsisted of SBLCs of $1.70$2.23 billion and commercial letters of credit of $59.1$39.4 million. As of December 31, 2021, total letters of credit of $2.22 billion consisted of SBLCs of $2.14 billion and commercial letters of credit of $78.9 million. As of both September 30, 2022 and December 31, 2021, substantially all SBLCs were rated as “Pass” by the Bank’s internal credit risk rating system.


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

Estimated exposure to loss from these commitments is included in the allowance for unfunded credit reserves,commitments and amounted to $14.0$24.0 million and $27.5 million as of September 30, 20172022 and $15.7 million as of December 31, 2016. These amounts are included in Accrued expenses2021, respectively.

Guarantees — From time to time, the Company sells or securitizes single-family and other liabilities on the Consolidated Balance Sheets.


Guarantees — The Company has sold or securitizedmultifamily residential loans with recourse in the ordinary course of business. The Company is obligated to repurchase up to the recourse component inof the loans if the loans default. The following table presents the carrying amounts of loans sold or securitized with recourse is considered a guarantee. Asand the guarantor, the Company is obligated to makemaximum potential future payments when the loans default. Asas of September 30, 20172022 and December 31, 2016, the unpaid principal balance of total single-family and multifamily residential loans sold or securitized with recourse amounted to $121.2 million and $150.5 million, respectively. 2021:
($ in thousands)Maximum Potential Future PaymentsCarrying Value
September 30,
2022		December 31,
2021		September 30,
2022		December 31,
2021
Expire in One Year or LessExpire
After
One Year
Through
Three
Years		Expire
After
Three
Years
Through
Five
Years		Expire After Five YearsTotalTotalTotalTotal
Single-family residential loans sold or securitized with recourse$25 $126 $31 $6,752 $6,934 $7,926 $6,934 $7,926 
Multifamily residential loans sold or securitized with recourse— — — 14,996 14,996 14,996 21,624 23,169 
Total$25 $126 $31 $21,748 $21,930 $22,922 $28,558 $31,095 

The Company’s recourse reserve related to these guarantees is included in the allowance for unfunded credit reserves,commitments and totaled $256$36 thousand and $373$29 thousand as of September 30, 20172022 and December 31, 2016,2021, respectively. The allowance for unfunded credit reservescommitments is included inAccrued expenses and other liabilities on the Consolidated Balance Sheets.Sheet. The Company continues to experience minimal losses from the single-family and multifamily residential loan portfolios sold or securitized with recourse.


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


Other Commitments — The Company has commitments to invest in qualified affordable housing partnerships, tax credit and other investments as discussed in Note 9 8 — Investments in Qualified Affordable Housing Partnerships, Tax Credit and Other Investments, Net and Variable Interest Entitiesto the Consolidated Financial Statements. These commitments are payable on demand.Statements in this Form 10-Q. As of September 30, 20172022 and December 31, 2016,2021, these commitments were $166.6$408.5 million and $174.3$309.6 million, respectively. These commitments are included in Accrued expenses and other liabilities on the Consolidated Balance Sheets.Sheet.



Note 1211—Stock Compensation Plans


Pursuant to the Company’s 20162021 Stock Incentive Plan, as amended, the Company may issue stocks, stock options, restricted stock, awardsrestricted stock units (“RSAs”RSUs”), including performance-based RSUs, stock purchase warrants, stock appreciation rights, stock purchase warrants, phantom stock and dividend equivalents to certaineligible employees, and non-employee directors, consultants, and other service providers of the Company and its subsidiaries. There were no outstanding stock options or unvested RSAsawards other than RSUs as of both September 30, 20172022 and 2016.December 31, 2021.


RSUs are granted under the Company’s long-term incentive plan at no cost to the recipient. RSUs vest ratably over three years or cliff vest after three or five years of continued employment from the date of the grant. RSUs entitle the recipient to receive cash dividends equivalent to any dividends paid on the underlying common stock during the period the RSUs are outstanding. RSU dividends are accrued during the vesting period and are paid at the time of vesting. While a portion of RSUs are time-vesting awards, others vest subject to the attainment of specified performance goals referred to as “Performance-based RSUs.” All RSUs are subject to forfeiture until vested.
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Performance-based RSUs are granted at the target amount of awards. Based on the Company’s attainment of specified performance goals and consideration of market conditions, the number of shares that vest can be adjusted to a minimum of zero and to a maximum of 200% of the target. The amount of performance-based RSUs that are eligible to vest is determined at the end of each performance period and is then added together to determine the total number of performance shares that are eligible to vest. Performance-based RSUs cliff vest three years from the date of grant.

Compensation costs for the time-based awards are based on the quoted market price of the Company’s stock at the grant date. Compensation costs associated with performance-based RSUs are based on grant date fair value which considers both market and performance conditions, and is subject to subsequent adjustments based on the changes in the Company’s stock price and the projected outcome of the performance criteria. Compensation costs of both time-based and performance-based awards are recognized on a straight-line basis from the grant date until the vesting date of each grant.



The following table presents a summary of the total share-based compensation expense and the related net tax benefitbenefits associated with the Company’s various employee share-based compensation plans for the three and nine months ended September 30, 20172022 and 2016:2021:
($ in thousands)Three Months Ended September 30,Nine Months Ended September 30,
2022202120222021
Stock compensation costs$12,329 $8,022 $29,338 $24,047 
Related net tax benefits for stock compensation plans$1 $42 $5,269 $1,699 
 
($ in thousands) Three Months Ended
September 30,		 Nine Months Ended
September 30,
 2017 2016 2017 2016
Stock compensation costs $5,665
 $4,763
 $15,780
 $13,973
Related net tax benefits for stock compensation plans $151
 $14
 $4,614
 $1,019
 


Restricted Stock Units — RSUs are granted under the Company’s long-term incentive plan at no cost to the recipient. RSUs generally cliff vest after three years of continued employment from the date of the grant, and are authorized to settle predominantly in shares of the Company’s common stock. Certain RSUs are settled in cash. Dividends are accrued during the vesting period and paid at the time of vesting. While a portion of RSUs are time-based vesting awards, others vest subject to the attainment of specified performance goals, referred to as “performance-based RSUs.” Performance-based RSUs are granted annually upon approval by the Company’s Compensation Committee based on the performance in the year prior to the grant date of the award. The number of awards that vest can range from zero to a maximum of 200% of the granted number of awards based on the Company’s achievement of specified performance criteria over a performance period of three years.
Effective January
Compensation costs are calculated using the quoted market price of the Company’s common stock at the grant date. Compensation costs for certain time-based awards that will be settled in cash are adjusted to fair value based on changes in the share price of the Company’s common stock up to the settlement date. For performance-based RSUs, the compensation costs are based on grant date fair value which considers both performance and market conditions, and is subject to subsequent adjustments based on the Company’s outcome in meeting the performance criteria at the end of the performance period. Compensation costs of both time and performance-based awards are estimated based on awards ultimately expected to vest, and are recognized net of estimated forfeitures on a straight-line basis from the grant date until the vesting date of each grant. For accounting on stock-based compensation plans, see Note 1 2017,— Summary of Significant Accounting Policies — Significant Accounting Policies — Stock-Based Compensation to the Consolidated Financial Statements of the Company’s 2021 Form 10-K for additional information.

During the nine months ended September 30, 2022, the Company adopted ASU 2016-09, Compensation — Stock Compensation (Topic 718): Improvementsmodified 31,523 time-based RSUs held by 119 foreign employees from vesting in cash to Employee Share-Based Payment Accounting. Asvesting in shares without changing any of the other terms. There was no incremental compensation expense recognized as a result of the adoption of this new guidance, all excess tax benefits and deficiencies on share-based payment awards were recognized within Income tax expense on the Consolidated Statements of Incomemodification for the three and nine months ended September 30, 2017. For the three and nine months ended September 30, 2016, these tax benefits were recorded as increases to Additional paid-in capital on the Consolidated Statements of Changes in Stockholders’ Equity.2022.


The following table presents a summary of the activityactivities for the Company’s time-based and performance-based RSUs that will be settled in shares for the nine months ended September 30, 2017 based2022. The number of performance-based RSUs stated below reflects the number of awards granted on the targetgrant date.
Time-Based RSUsPerformance-Based RSUs
SharesWeighted-
Average
Grant Date
Fair Value		SharesWeighted-
Average
Grant Date
Fair Value
Outstanding, January 1, 20221,329,946 $52.65 369,731 $54.28 
Modified from cash-settled RSUs31,523 77.28 — — 
Granted430,815 78.42 91,874 77.91 
Vested(371,032)53.12 (125,213)54.64 
Forfeited(106,562)61.76 — — 
Outstanding, September 30, 20221,314,690 $60.81 336,392 $60.60 

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The following table presents a summary of the activities for the Company’s time-based RSUs that are cash-settled for the nine months ended September 30, 2022. During the nine months ended September 30, 2022, the amount of awards:cash paid to settle the RSUs that vested was $318 thousand.
Shares
Outstanding, January 1, 202232,647 
Modified to share-settled RSUs(31,523)
Granted2,668 
Vested(3,471)
Forfeited(321)
Outstanding, September 30, 2022—
 
  Nine Months Ended September 30, 2017
 Time-Based RSUs Performance-Based RSUs
 Shares 
Weighted
Average
Grant-Date
Fair Value
 Shares 
Weighted
Average
Grant-Date
Fair Value
Outstanding, beginning of period 1,218,714
 $35.92
 410,746
 $35.27
Granted 370,514
 54.71
 131,597
 56.59
Vested (299,164) 36.68
 (118,044) 36.85
Forfeited (131,472) 40.05
 —
 —
Outstanding, end of period 1,158,592
 $41.26
 424,299
 $41.44
 


As of September 30, 2017,2022, there were $28.5 million and $17.0 million of total unrecognized compensation costs related to unvested time-based and performance-based RSUs, amounted to $28.2 million and $15.3 million, respectively. TheseBoth of these costs are expected to be recognized over a weighted averageweighted-average period of 2.001.92 years and 2.021.93 years, respectively.



Note 1312 — Stockholders’ Equity and Earnings Per Share


Warrant — The Company acquired MetroCorp Bancshares, Inc., (“MetroCorp”) on January 17, 2014. Prior to the acquisition, MetroCorp had an outstanding warrant to purchase 771,429 shares of its common stock. Upon the acquisition, the rights of the warrant holder were converted into the right to acquire 230,282 shares of East West’s common stock until January 16, 2019. The warrant has not been exercised as of September 30, 2017.

Earnings Per Share— Basic EPS is computed by dividing net income available to common stockholders by the weighted average number of common shares outstanding during each period. Diluted EPS is computed by dividing net income available to common stockholders by the weighted average number of common shares outstanding during each period, plus common share equivalents calculated for warrants and RSUs outstanding using the treasury stock method. With the adoption of ASU 2016-09 during the first quarter of 2017, the impact of excess tax benefits and deficiencies is no longer included in the calculation of diluted EPS. As a result of applying ASU 2016-09, the Company recorded income tax benefits of $151 thousand or $0 per common share, and $4.6 million or $0.03 per common share for the three and nine months ended September 30, 2017, respectively, related to the vesting of the RSUs. See Note 2 — Current Accounting Developments to the Consolidated Financial Statements for additional information.



The following table presents the basic and diluted EPS calculations for the three and nine months ended September 30, 20172022 and 2016:2021. For more information on the calculation of EPS, see Note 1 — Summary of Significant Accounting Policies— Significant Accounting Policies —Earnings Per Share to the Consolidated Financial Statements of the Company’s 2021 Form 10-K.
($ and shares in thousands, except per share data)Three Months Ended September 30,Nine Months Ended September 30,
2022202120222021
Basic:
Net income$295,339 $225,449 $791,320 $655,185 
Weighted-average number of shares outstanding140,917 141,880 141,453 141,799 
Basic EPS$2.10 $1.59 $5.59 $4.62 
Diluted:
Net income$295,339 $225,449 $791,320 $655,185 
Weighted-average number of shares outstanding140,917 141,880 141,453 141,799 
Add: Dilutive impact of unvested RSUs1,094 1,263 1,148 1,252 
Diluted weighted-average number of shares outstanding142,011 143,143 142,601 143,051 
Diluted EPS$2.08 $1.57 $5.55 $4.58 
 
  Three Months Ended
September 30,		 Nine Months Ended
September 30,
($ and shares in thousands, except per share data) 2017 2016 2017 2016
Basic        
Net income $132,660
 $110,143
 $420,726
 $320,943
         
Basic weighted average number of shares outstanding 144,498
 144,122
 144,412
 144,061
Basic EPS $0.92
 $0.76
 $2.91
 $2.23
         
Diluted        
Net income $132,660
 $110,143
 $420,726
 $320,943
         
Basic weighted average number of shares outstanding 144,498
 144,122
 144,412
 144,061
Diluted potential common shares (1)
 1,384
 1,116
 1,437
 1,025
Diluted weighted average number of shares outstanding 145,882
 145,238
 145,849
 145,086
Diluted EPS $0.91
 $0.76
 $2.88
 $2.21
 
(1)Includes dilutive shares from RSUs and warrants for the three and nine months ended September 30, 2017 and 2016.


For the three and nine months ended September 30, 2017, 42022, approximately 61 thousand and 658 thousand weighted averageweighted-average shares of anti-dilutive shares from RSUs, respectively, were excluded from the diluted EPS computation. Forcomputations. In comparison, two thousand and six thousand weighted-average shares of anti-dilutive RSUs were excluded from the diluted EPS computations for the three and nine months ended September 30, 2016, 2 thousand2021, respectively.

Stock Repurchase Program — In 2020, the Company’s Board of Directors authorized a stock repurchase program to buy back up to $500.0 million of the Company’s common stock. For the three months ended September 30, 2022, there were no share repurchases. For the nine months ended September 30, 2022, the Company repurchased 1,385,517 shares at an average price of $72.17 per share at a total cost of $100.0 million. The Company did not repurchase any shares during the three and 7 thousand weighted average anti-dilutive shares from RSUs, respectively, were excluded from the diluted EPS computation.nine months ended September 30, 2021.



55

Note 1413 — Accumulated Other Comprehensive Income (Loss)


The following tables present the changes in the components of AOCI balances for the three and nine months ended September 30, 20172022 and 2016:2021:
($ in thousands)
Debt
Securities		Cash
Flow
Hedges
Foreign
Currency
Translation
Adjustments (1)
Total
Balance, July 1, 2021$(8,152)$(730)$(5,807)$(14,689)
Net unrealized losses arising during the period(40,928)(121)(1,752)(42,801)
Amounts reclassified from AOCI(250)172 — (78)
Changes, net of tax(41,178)51 (1,752)(42,879)
Balance, September 30, 2021$(49,330)$(679)$(7,559)$(57,568)
Balance, July 1, 2022$(554,781)$(30,846)$(15,021)$(600,648)
Net unrealized losses arising during the period(161,445)(34,423)(7,926)(203,794)
Amounts reclassified from AOCI3,256 1,154 — 4,410 
Changes, net of tax(158,189)(33,269)(7,926)(199,384)
Balance, September 30, 2022$(712,970)(2)$(64,115)$(22,947)$(800,032)
($ in thousands)
Debt
Securities		Cash
Flow
Hedges
Foreign
Currency
Translation
Adjustments (1)
Total
Balance, January 1, 2021$52,247 $(1,230)$(6,692)$44,325 
Net unrealized (losses) gains arising during the period(100,747)108 (867)(101,506)
Amounts reclassified from AOCI(830)443 — (387)
Changes, net of tax(101,577)551 (867)(101,893)
Balance, September 30, 2021$(49,330)$(679)$(7,559)$(57,568)
Balance, January 1, 2022$(85,703)$257 $(4,935)$(90,381)
Net unrealized losses arising during the period(635,664)(63,232)(18,012)(716,908)
Amounts reclassified from AOCI8,397 (1,140)— 7,257 
Changes, net of tax(627,267)(64,372)(18,012)(709,651)
Balance, September 30, 2022$(712,970)(2)$(64,115)$(22,947)$(800,032)
(1)Represents foreign currency translation adjustments related to the Company’s net investment in non-U.S. operations, including related hedges. The functional currency and reporting currency of the Company’s foreign subsidiary is RMB and USD, respectively.
(2)Includes after-tax unamortized losses of $113.0 million related to AFS debt securities that were transferred to HTM. For further information, refer to Note 5 — Securities to the Consolidated Financial Statements in this Form 10-Q.

 
($ in thousands) Three Months Ended September 30,
 2017 2016
 Available-
for-Sale
Investment
Securities		 
Foreign
Currency
Translation
Adjustments (1)
 Total Available-
for-Sale
Investment
Securities		 
Foreign
Currency
Translation
Adjustments (1)
 Total
Beginning balance $(18,950) $(15,231) $(34,181) $11,756
 $(13,468) $(1,712)
Net unrealized (losses) gains arising during the period (1,014) 3,870
 2,856
 (3,869) (555) (4,424)
Amounts reclassified from AOCI (892) —
 (892) (1,038) —
 (1,038)
Changes, net of taxes (1,906) 3,870
 1,964
 (4,907) (555) (5,462)
Ending balance $(20,856) $(11,361) $(32,217) $6,849
 $(14,023) $(7,174)
 
 
($ in thousands) Nine Months Ended September 30,
 2017 2016
 Available-
for-Sale
Investment
Securities		 
Foreign
Currency
Translation
Adjustments (1)
 Total Available-
for-Sale
Investment
Securities		 
Foreign
Currency
Translation
Adjustments (1)
 Total
Beginning balance $(28,772) $(19,374) $(48,146) $(6,144) $(8,797) $(14,941)
Net unrealized gains (losses) arising during the period 11,818
 8,013
 19,831
 17,901
 (5,226) 12,675
Amounts reclassified from AOCI (3,902) —
 (3,902) (4,908) —
 (4,908)
Changes, net of taxes 7,916
 8,013
 15,929
 12,993
 (5,226) 7,767
Ending balance $(20,856) $(11,361) $(32,217) $6,849
 $(14,023) $(7,174)
             
56
(1)Represents foreign currency translation adjustments related to the Company’s net investment in non-U.S. operations, including related hedges. The functional currency and reporting currency of the Company’s foreign subsidiary was Chinese Renminbi and USD, respectively.




The following tables present the components of other comprehensive income (loss), reclassifications to net income and the related tax effects for the three and nine months ended September 30, 20172022 and 2016:2021:
($ in thousands)Three Months Ended September 30,
20222021
Before-TaxTax EffectNet-of-TaxBefore-TaxTax EffectNet-of-Tax
Debt securities:
Net unrealized losses arising during the period$(229,246)$67,801 $(161,445)$(58,138)$17,210 $(40,928)
Reclassification adjustments:
Net realized gains reclassified into net income (1)
— — — (354)104 (250)
Amortization of unrealized losses on transferred securities (2)
4,623 (1,367)3,256 — — — 
Net change(224,623)66,434 (158,189)(58,492)17,314 (41,178)
Cash flow hedges:
Net unrealized losses arising during the period(48,325)13,902 (34,423)(170)49 (121)
Net realized losses reclassified into net income (3)
1,619 (465)1,154 241 (69)172 
Net change(46,706)13,437 (33,269)71 (20)51 
Foreign currency translation adjustments, net of hedges:
Net unrealized losses arising during the period(6,676)(1,250)(7,926)(1,878)126 (1,752)
Net change(6,676)(1,250)(7,926)(1,878)126 (1,752)
Other comprehensive loss$(278,005)$78,621 $(199,384)$(60,299)$17,420 $(42,879)
($ in thousands)Nine Months Ended September 30,
20222021
Before-TaxTax EffectNet-of-TaxBefore-TaxTax EffectNet-of-Tax
Debt securities:
Net unrealized losses arising during the period$(902,548)$266,884 $(635,664)$(143,131)$42,384 $(100,747)
Reclassification adjustments:
Net realized gains reclassified into net income (1)
(1,306)386 (920)(1,178)348 (830)
Amortization of unrealized losses on transferred securities (2)
13,228 (3,911)9,317 — — — 
Net change(890,626)263,359 (627,267)(144,309)42,732 (101,577)
Cash flow hedges:
Net unrealized (losses) gains arising during the period(88,771)25,539 (63,232)150 (42)108 
Net realized (gains) losses reclassified into net income (3)
(1,601)461 (1,140)619 (176)443 
Net change(90,372)26,000 (64,372)769 (218)551 
Foreign currency translation adjustments, net of hedges:
Net unrealized losses arising during the period(16,276)(1,736)(18,012)(1,603)736 (867)
Net change(16,276)(1,736)(18,012)(1,603)736 (867)
Other comprehensive loss$(997,274)$287,623 $(709,651)$(145,143)$43,250 $(101,893)
(1)Pre-tax amounts were reported in Gains on sales of AFS debt securities on the Consolidated Statement of Income.
(2)Represents unrealized losses amortized over the remaining lives of securities that were transferred from the AFS to HTM portfolio.
(3)Pre-tax amounts related to cash flow hedges on CRE loans and long-term borrowings were reported in Interest and dividend income andin Interest expense, respectively, on the Consolidated Statement of Income.

57
 
($ in thousands) Three Months Ended September 30,
 2017 2016
 Before-Tax Tax Effect Net-of-Tax Before-Tax Tax Effect Net-of-Tax
Available-for-sale investment securities:  
  
  
  
  
  
Net unrealized losses arising during the period $(1,749) $735
 $(1,014) $(6,677) $2,808
 $(3,869)
Net realized gains reclassified into net income (1)
 (1,539) 647
 (892) (1,790) 752
 (1,038)
Net change (3,288) 1,382
 (1,906) (8,467) 3,560
 (4,907)
             
Foreign currency translation adjustments:            
Net unrealized gains (losses) arising during period 3,870
 —
 3,870
 (555) —
 (555)
Net change 3,870
 —
 3,870
 (555) —
 (555)
Other comprehensive income (loss) $582
 $1,382
 $1,964
 $(9,022) $3,560
 $(5,462)
 

 
($ in thousands) Nine Months Ended September 30,
 2017 2016
 Before-Tax Tax Effect Net-of-Tax Before-Tax Tax Effect Net-of-Tax
Available-for-sale investment securities:  
  
  
  
  
  
Net unrealized gains arising during the period $20,392
 $(8,574) $11,818
 $30,888
 $(12,987) $17,901
Net realized gains reclassified into net income (1)
 (6,733) 2,831
 (3,902) (8,468) 3,560
 (4,908)
Net change 13,659
 (5,743) 7,916
 22,420
 (9,427) 12,993
             
Foreign currency translation adjustments:            
Net unrealized gains (losses) arising during period 8,013
 —
 8,013
 (5,226) —
 (5,226)
Net change 8,013
 —
 8,013
 (5,226) —
 (5,226)
Other comprehensive income $21,672
 $(5,743) $15,929
 $17,194
 $(9,427) $7,767
 
(1)
For the three and nine months ended September 30, 2017 and 2016, pre-tax amounts were reported in Net gains on sales of available-for-sale investment securities on the Consolidated Statements of Income.


Note 1514 —Business Segments

The Company utilizes an internal reporting system to measure the performance of variousorganizes its operations into three reportable operating segments within the Banksegments: (1) Consumer and the Company. The Company has identified three operating segments for purposes of management reporting: (1) RetailBusiness Banking; (2) Commercial Banking; and (3) Other. These three business segments meet the criteria of an operating segment: the segment engages in business activities from which it earns revenues and incurs expenses; its operating results are regularly revieweddefined by the Company’s chief operating decision-maker to render decisions about resources to be allocated totype of customers served, and the related products and services provided. The segments and assess its performance; and discretereflect how financial information is available.
The Retail Banking segment focuses primarily on retail operations through the Bank’s branch network. The Commercial Banking segment, which includes C&I and CRE operations, primarily generates commercial loans and deposits through the bank’s commercial lending offices. Furthermore, the Company’s Commercial Banking segment offers a wide variety of international finance, trade finance, and cash management services and products. The remaining centralized functions, including treasury activities and eliminations of inter-segment amounts, have been aggregated and included in the “Other” segment, which provides broad administrative support to the two core segments.
currently evaluated by management. Operating segment results are based on the Company’s internal management reporting process, which reflects assignments and allocations of certain operatingbalance sheet and income statement items. The information presented is not indicative of how the segments would perform if they operated as independent entities due to the interrelationships among the segments.

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

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

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

The Company utilizes an internal reporting process to measure the performance of the three operating segments within the Company. The internal reporting process derives operating segment results by utilizing allocation methodologies for credit losses.revenues and expenses. Net interest income is allocated basedof each segment represents the difference between actual interest earned on assets and interest incurred on liabilities of the segment, adjusted for funding charges or credits through the Company’s internal funds transfer pricing system, which assigns a cost of funds or a credit for funds to assets or liabilities based on their type, maturity or repricing characteristics.(“FTP”) process. Noninterest income and noninterest expense including depreciation and amortization, directly attributable to a business segment are assigned to the related businessthat segment. Indirect costs, including technology-related costs and corporate overhead, expense, are allocated to the segments based on severala segment’s estimated usage using factors including but not limited to, full-time equivalent employees, net interest income, and loan volume and deposit volume. TheCharge-offs are recorded to the segment directly associated with the respective loans charged off, and provision for credit losses is allocatedrecorded to the segments based on actual charge-offsthe related loans for the period as well as average loan balances for each segment during the period. The Company evaluates overall performance based on profit or loss from operations before income taxes excluding nonrecurring gains and losses.



which allowances are evaluated. The Company’s internal funds transfer pricing assumptionsreporting process utilizes a full-allocation methodology. Under this methodology, corporate and indirect expenses incurred by the Other segment are intendedallocated to promote core deposit growththe Consumer and to reflectBusiness Banking and the current risk profiles of various loan categoriesCommercial Banking segments, except certain corporate treasury-related expenses and insignificant unallocated expenses.

The corporate treasury function within the credit portfolio. Internal funds transfer pricing assumptions and methodologies are reviewed at least annually to ensure thatOther segment is responsible for the Company’s liquidity and interest rate management. The Company’s internal FTP process is reflective of current market conditions.also managed by the corporate treasury function within the Other segment. The internal funds transfer pricing process is formulated with the goal of encouraging loan and deposit growth that is consistent with the Company’s overall profitability objectives, as well as to provide a reasonable and consistent basis for the measurement of the Company’sits business segments and productsegments’ net interest margins.

Changesmargins and profitability. The FTP process charges a cost to fund loans (“FTP charges for loans”) and allocates credits for funds provided from deposits (“FTP credits for deposits”) using internal FTP rates. FTP charges for loans are determined based on a matched cost of funds, which is tied to the pricing and term characteristics of the loans. FTP credits for deposits are based on matched funding credit rates, which are tied to the implied or stated maturity of the deposits. FTP credits for deposits reflect the long-term value generated by the deposits. The net spread between the total internal FTP charges and credits is recorded as part of net interest income in the Other segment. The FTP process transfers the corporate interest rate risk exposure to the treasury function within the Other segment, where such exposures are centrally managed. The Company’s management structure or reportinginternal FTP assumptions and methodologies may result in changes inare reviewed at least annually to ensure that the measurementprocess is reflective of operating segment results. Results for prior year periods are generally restated for comparability for changes in management structure or reporting methodologies unless it is deemed not practicable to do so.current market conditions.

58

The following tables present the operating results and other key financial measures for the individual operating segments as of and for the three and nine months ended September 30, 20172022 and 2016:2021:
($ in thousands)Consumer and
Business
Banking		Commercial
Banking		OtherTotal
Three Months Ended September 30, 2022
Net interest income before provision for credit losses$326,411 $222,996 $2,402 $551,809 
Provision for credit losses8,974 18,026 — 27,000 
Noninterest income (loss)30,819 48,641 (3,908)75,552 
Noninterest expense104,005 81,386 30,582 215,973 
Segment income (loss) before income taxes244,251 172,225 (32,088)384,388 
Segment net income (loss)$173,982 $122,869 $(1,512)$295,339 
As of September 30, 2022
Segment assets$17,002,000 $32,836,381 $12,737,680 $62,576,061 
($ in thousands)Consumer and
Business
Banking		Commercial
Banking		OtherTotal
Three Months Ended September 30, 2021
Net interest income before provision for (reversal of) credit losses$176,678 $189,791 $29,237 $395,706 
Provision for (reversal of) credit losses1,293 (11,293)— (10,000)
Noninterest income (1)
22,099 43,272 7,738 73,109 
Noninterest expense90,575 66,731 48,078 205,384 
Segment income (loss) before income taxes (1)
106,909 177,625 (11,103)273,431 
Segment net income (1)
$76,577 $126,984 $21,888 $225,449 
As of September 30, 2021
Segment assets$14,687,023 $27,861,690 $18,410,397 $60,959,110 
($ in thousands)Consumer and
Business
Banking		Commercial
Banking		OtherTotal
Nine Months Ended September 30, 2022
Net interest income (loss) before provision for credit losses$823,998 $662,037 $(45,661)$1,440,374 
Provision for credit losses14,976 33,524 — 48,500 
Noninterest income84,402 145,750 3,587 233,739 
Noninterest expense294,395 235,804 72,084 602,283 
Segment income (loss) before income taxes599,029 538,459 (114,158)1,023,330 
Segment net income (loss)$426,695 $384,237 $(19,612)$791,320 
As of September 30, 2022
Segment assets$17,002,000 $32,836,381 $12,737,680 $62,576,061 
59

 
($ in thousands) Three Months Ended September 30, 2017
 
Retail
Banking
 
Commercial
Banking
 Other Total
Interest income $93,714
 $218,397
 $27,799
 $339,910
Charge for funds used (37,979) (87,071) (7,589) (132,639)
Interest spread on funds used 55,735
 131,326
 20,210
 207,271
Interest expense (20,090) (5,943) (10,722) (36,755)
Credit on funds provided 111,812
 12,770
 8,057
 132,639
Interest spread on funds provided (used) 91,722
 6,827
 (2,665) 95,884
Net interest income before provision for credit losses $147,457
 $138,153
 $17,545
 $303,155
Provision for credit losses $2,058
 $10,938
 $—
 $12,996
Depreciation, amortization and (accretion), net $3,401
 $(5,449) $40,001
 $37,953
Segment income before income taxes $68,554
 $99,025
 $7,705
 $175,284
As of September 30, 2017:       

Goodwill $357,207
 $112,226
 $—
 $469,433
Segment assets $8,877,186
 $21,216,848
 $6,213,932
 $36,307,966
 
($ in thousands)Consumer and
Business
Banking		Commercial
Banking		OtherTotal
Nine Months Ended September 30, 2021
Net interest income before reversal of credit losses$500,352 $559,579 $65,943 $1,125,874 
Reversal of credit losses(598)(24,402)— (25,000)
Noninterest income (1)
69,873 123,342 21,191 214,406 
Noninterest expense267,511 204,042 114,431 585,984 
Segment income (loss) before income taxes (1)
303,312 503,281 (27,297)779,296 
Segment net income (1)
$217,257 $360,275 $77,653 $655,185 
As of September 30, 2021
Segment assets$14,687,023 $27,861,690 $18,410,397 $60,959,110 
 
($ in thousands) Three Months Ended September 30, 2016
 Retail
Banking		 Commercial
Banking		 Other Total
Interest income $77,186
 $180,095
 $23,036
 $280,317
Charge for funds used (24,320) (53,262) (3,858) (81,440)
Interest spread on funds used 52,866
 126,833
 19,178
 198,877
Interest expense (14,855) (3,699) (7,615) (26,169)
Credit on funds provided 68,622
 8,206
 4,612
 81,440
Interest spread on funds provided (used) 53,767
 4,507
 (3,003) 55,271
Net interest income before (reversal of) provision for credit losses $106,633
 $131,340
 $16,175
 $254,148
(Reversal of) provision for credit losses $(3,709) $13,234
 $—
 $9,525
Depreciation, amortization, and (accretion), net $782
 $(5,875) $40,541
 $35,448
Segment income before income taxes $32,304
 $80,393
 $10,767
 $123,464
As of September 30, 2016:       

Goodwill $357,207
 $112,226
 $—
 $469,433
Segment assets $7,606,611
 $18,549,562
 $7,099,102
 $33,255,275
 



 
($ in thousands) Nine Months Ended September 30, 2017
 
Retail
Banking
 
Commercial
Banking
 Other Total
Interest income $263,491
 $616,689
 $85,174
 $965,354
Charge for funds used (98,856) (229,330) (50,273) (378,459)
Interest spread on funds used 164,635
 387,359
 34,901
 586,895
Interest expense (54,650) (16,225) (29,111) (99,986)
Credit on funds provided 320,452
 37,436
 20,571
 378,459
Interest spread on funds provided (used) 265,802
 21,211
 (8,540) 278,473
Net interest income before provision for credit losses $430,437
 $408,570
 $26,361
 $865,368
Provision for credit losses $1,772
 $28,977
 $—
 $30,749
Depreciation, amortization and (accretion), net $6,741
 $(14,609) $111,639
 $103,771
Segment income before income taxes $204,601
 $284,195
 $72,177
 $560,973
As of September 30, 2017:        
Goodwill $357,207
 $112,226
 $—
 $469,433
Segment assets $8,877,186
 $21,216,848
 $6,213,932
 $36,307,966
 
 
($ in thousands) Nine Months Ended September 30, 2016
 Retail
Banking		 Commercial
Banking		 Other Total
Interest income $233,192
 $534,603
 $67,559
 $835,354
Charge for funds used (70,770) (159,734) (22,465) (252,969)
Interest spread on funds used 162,422
 374,869
 45,094
 582,385
Interest expense (44,133) (11,965) (19,320) (75,418)
Credit on funds provided 210,831
 26,655
 15,483
 252,969
Interest spread on funds provided (used) 166,698
 14,690
 (3,837) 177,551
Net interest income before (reversal of) provision for credit losses $329,120
 $389,559
 $41,257
 $759,936
(Reversal of) provision for credit losses $(2,846) $19,864
 $—
 $17,018
Depreciation, amortization and (accretion), net $279
 $(25,915) $86,316
 $60,680
Segment income before income taxes $114,513
 $268,401
 $28,137
 $411,051
As of September 30, 2016:        
Goodwill $357,207
 $112,226
 $—
 $469,433
Segment assets $7,606,611
 $18,549,562
 $7,099,102
 $33,255,275
 


Note 16 — Subsequent Events
On October 19, 2017,(1)During the Company’s Board of Directors declared fourth quarter 2017 cash dividendsof 2021, the Company enhanced its segment allocation methodology related to the fair values of interest rate and commodity derivative contracts, which are included in noninterest income. These fair values, which were previously allocated to the “Commercial Banking” segment prior to the fourth quarter of 2021, have since been reclassified between “Consumer and Business Banking” and “Commercial Banking”. Balances for the Company’s common stock. The common stock cash dividendthird quarter and nine months of $0.20 is payable on November 15, 20172021 have been reclassified to stockholders of record as of November 1, 2017.




reflect these allocation changes for comparability.
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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
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ITEM 2.MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
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The following discussion provides information about
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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 resultssafe harbor for such statements provided by the Private Securities Litigation Reform Act of operations, financial condition, liquidity, and capital resources of1995. In addition, East West Bancorp, Inc. (referred to herein on an unconsolidated basis as “East West” and on a consolidated basis as the “Company”“Company,” “we” or “EWBC”) may make forward-looking statements in other documents that it files with, or furnishes to, the United States (“U.S.”) Securities and Exchange Commission (“SEC”) and management may make forward-looking statements to analysts, investors, media members and others. Forward-looking statements are those that do not relate to historical facts, and that are based on current expectations, estimates and projections about the Company’s industry, management’s beliefs and certain assumptions made by management, many of which, by their nature, are inherently uncertain and beyond the Company’s control. These statements may relate to the Company’s financial condition, results of operations, plans, objectives, future performance and/or business and usually can be identified by the use of forward-looking language, such as “anticipates,” “assumes,” “believes,” “can,” “continues,” “could,” “estimates,” “expects,” “forecasts,” “goal,” “intends,” “likely,” “may,” “might,” “objective,” “plans,” “potential,” “projects,” “remains,” “should,” “target,” “trend,” “will,” “would,” or similar expressions, and the negative thereof. You should not place undue reliance on these statements, as they are subject to risks and uncertainties, including, but not limited to, those described below. When considering these forward-looking statements, you should keep in mind these risks and uncertainties, as well as any cautionary statements the Company may make. Moreover, you should treat these statements as speaking only as of the date they are made and based only on information then actually known to the Company.

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

•changes in the global economy, including an economic slowdown, market or supply chain disruption, level of inflation, interest rate environment, housing prices, employment levels, rate of growth and general business conditions;
•the impact of any future federal government shutdown and uncertainty regarding the federal government’s debt limit;
•changes in local, regional and global business, economic and political conditions and geopolitical events;
•the economic, financial, reputational and other impacts of the ongoing Coronavirus Disease 2019 (“COVID-19”) pandemic, including variants thereof, and any other pandemic, epidemic or health-related crisis, as well as a deterioration of asset quality and an increase in credit losses due to the COVID-19 pandemic;
•changes in laws or the regulatory environment, including regulatory reform initiatives and policies of the U.S. Department of the Treasury, the Board of Governors of the Federal Reserve System (“Federal Reserve”), the Federal Deposit Insurance Corporation (“FDIC”), the Office of the Comptroller of the Currency, the SEC, the Consumer Financial Protection Bureau, and the California Department of Financial Protection and Innovation - Division of Financial Institutions;
•changes and effects thereof in trade, monetary and fiscal policies and laws, including the ongoing economic and political disputes between the U.S. and the People’s Republic of China and the monetary policies of the Federal Reserve;
•changes in the commercial and consumer real estate markets;
•changes in consumer or commercial spending, savings and borrowing habits, and patterns and behaviors;
•fluctuations in the Company’s stock price;
•the impact from potential changes to income tax laws and regulations, federal spending and economic stimulus programs;
•the Company’s ability to compete effectively against financial institutions in its banking markets and other entities, including as a result of emerging technologies;
•the soundness of other financial institutions;
•the success and timing of the Company’s business strategies;
•the Company’s ability to retain key officers and employees;
•impact on the Company’s funding costs, net interest income and net interest margin from changes in key variable market interest rates, competition, regulatory requirements and the Company’s product mix;
•changes in the Company’s costs of operation, compliance and expansion;
•the Company’s ability to adopt and successfully integrate new technologies into its business in a strategic manner;
•the impact of the benchmark interest rate reform in the U.S. including the transition away from the U.S. dollar (“USD”) London Interbank Offered Rate (“LIBOR”) to alternative reference rates;
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•the impact of communications or technology disruption, failure in, or breach of, the Company’s operational or security systems or infrastructure, or those of third party vendors with which the Company does business, including as a result of cyber-attacks; and other similar matters which could result in, among other things, confidential and/or proprietary information being disclosed or misused, and materially impact the Company’s ability to provide services to its clients;
•the adequacy of the Company’s risk management framework, disclosure controls and procedures and internal control over financial reporting;
•future credit quality and performance, including the Company’s expectations regarding future credit losses and allowance levels;
•the impact of adverse changes to the Company’s credit ratings from major credit rating agencies;
•impact of adverse judgments or settlements in litigation;
•the impact on the Company’s operations due to political developments, pandemics, wars, civil unrest, terrorism or other hostilities that may disrupt or increase volatility in securities or otherwise affect business and economic conditions;
•heightened regulatory and governmental oversight and scrutiny of the Company’s business practices, including dealings with consumers;
•the impact of reputational risk from negative publicity, fines, penalties and other negative consequences from regulatory violations, legal actions and the Company’s interactions with business partners, counterparties, service providers and other third parties;
•the impact of regulatory investigations and enforcement actions;
•changes in accounting standards as may be required by the Financial Accounting Standards Board or other regulatory agencies and their impact on critical accounting policies and assumptions;
•the Company’s capital requirements and its variousability to generate capital internally or raise capital on favorable terms;
•the impact on the Company’s liquidity due to changes in the Company’s ability to receive dividends from its subsidiaries;
•any future strategic acquisitions or divestitures;
•changes in the equity and debt securities markets;
•fluctuations in foreign currency exchange rates;
•the impact of increased focus on social, environmental and sustainability matters, which may affect the Company’s operations as well as those of its customers and the economy more broadly;
•significant turbulence or disruption in the capital or financial markets, which could result in, among other things, reduced investor demand for loans, a reduction in the availability of funding or increases in funding costs, declines in asset values and/or recognition of allowance for credit losses on securities held in the Company’s debt securities and equity securities portfolio; and
•the impact of climate change, natural or man-made disasters or calamities, such as wildfires, droughts and earthquakes, all of which are particularly common in California, or other events that may directly or indirectly result in a negative impact on the Company’s financial performance.

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

The following discussion provides information about the results of operations, financial condition, liquidity and capital resources of the Company and its subsidiaries, including theits subsidiary bank, East West Bank and its subsidiaries (referred to herein as “East West Bank” or the “Bank”). This information is intended to facilitate the understanding and assessment of significant changes and trends related to the Company’s results of operations and financial condition. This discussion and analysis should be read in conjunction with the Consolidated Financial Statements and the accompanying notes presented elsewhere in this report, and the Company’s annual report on2021 Form 10-K for the year ended December 31, 2016 filed with the U.S. Securities10-K.

Organization and Exchange Commission on February 27, 2017 (the “Company’s 2016 Form 10-K”).Strategy

Overview
East West is a bank holding company incorporated in Delaware on August 26, 1998 and is registered under the Bank Holding Company Act of 1956, as amended. The Company commenced business on December 30, 1998 when, pursuant to a reorganization, it acquired all of the voting stock of the Bank, which became its principal asset. The Bank is an independent commercial bank headquartered in California and is the largest bank in the United States (“U.S.”) that has a strong focusfocuses on the financial service needs of the Chinese AmericanAsian-American community. The Bank operates both in the U.S. and Greater China.

The Company’s vision is to serve as the financial bridge between the U.S. and Greater China. The Company’s primary strategy to achieve this vision is to expand the Company’s global network of contacts and resources to better meet its customers’ diverse financial needs in and between the world’s two largest markets. WithThrough over 130120 locations in the U.S. and Greater China, andthe Company provides a full range of cross-borderconsumer and commercial products and services through the Company continuesfollowing three business segments: (1) Consumer and Business Banking, and (2) Commercial Banking, with the remaining operations recorded in (3) Other. The Company’s principal activity is lending to seek attractive opportunities for growth in pursuing its cross-border business banking strategy.

In executing our strategic vision, we remain focused on the fundamentals ofand accepting deposits from businesses and individuals. We are committed to enhancing long-term stockholder value by growing loans, deposits and revenue, and improving profitability, whileand investing for the future andwhile managing risk,risks, expenses and capital. Our business model is built on promoting customer loyalty and engagement, understanding our customers’ financial goals, and meeting their financial needs through our offering of diverse products and services. We expect our relationship-focused business model to continue to generate organic growth from existing customers and to expand our targeted customer bases. As of September 30, 2022, the Company had $62.58 billion in assets and approximately 3,200 full-time equivalent employees. For additional information on our strategy, and the products and services provided by the Bank, see Item 1. Business — Strategy and Banking Services in the Company’s 2021 Form 10-K.

Developments

Economic Developments

Heightened inflationary pressures caused by rising oil and other commodity prices due to Russia’s invasion of Ukraine, and global supply chain disruptions related to the COVID-19 pandemic continue to weigh on the economy. Concerns of a potential recession have increased as the federal government continues to hike interest rates to slow down inflation. Although U.S. economic conditions have continued to recover from the COVID-19 pandemic, the ongoing effects of its impact on the macroeconomic environment may persist for some time. The Company continues to closely monitor the economy and its effects on its business, customers, employees, communities and markets.

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

LIBOR Transition

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


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

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

The Company started offering loans based on alternative reference rates, including SOFR and the Bloomberg Short-Term Bank Yield Index during the fourth quarter of 2017 across key measures of2021, and ceased offering new LIBOR loans and LIBOR loan growth, revenuerenewals beginning January 1, 2022. The Company continues to engage with customers to proactively modify LIBOR-based product contracts and net income growth,transition to a benchmark replacement prior to June 30, 2023. The Company will leverage relevant contractual and credit quality. Itstatutory solutions, if necessary, including the LIBOR Act and other relevant legislation, to transition any residual LIBOR-based product exposures maturing after June 2023 to appropriate benchmark replacements. The Company’s LIBOR transition is anticipated to continue through June 30, 2023.

The Company will continue to monitor potential risks and impacts associated with the Company’s prioritytransition. For additional information related to focus on strengthening its risk management infrastructure and compliance in order to meet increasing regulatory expectations, while still providing strong returns to stockholders.



Financial Performance

Noteworthy itemsthe potential impact surrounding the transition from LIBOR on the Company’s performance included:business, see Item 1A. Risk Factors — Risks Related to Financial Matters in the Company’s 2021 Form 10-K.


Net income totaled $132.7 millionDeposit Insurance Assessment Rates

In October 2022, the FDIC adopted a final rule to increase the initial base deposit insurance assessment rate schedules uniformly for insured depository institutions by two basis points (“bps”), beginning in the three months endedfirst quarterly assessment period of 2023. The increase in the assessment rate schedules is intended to: (1) increase the likelihood that the reserve ratio of the Deposit Insurance Fund (“DIF”) will reach at least 1.35 percent by the statutory deadline of September 30, 2017,2028; (2) reduce the FDIC’s need to consider a potentially pro-cyclical assessment rate increase, and (3) support growth in the DIF in progressing towards the FDIC’s long-term goal of a 2 percent Designated Reserve Ratio. The new assessment rate schedules will remain in effect unless and until the reserve ratio meets or exceeds 2 percent. As a result of the adoption of the assessment rate schedules, the FDIC insurance costs of the Bank will likely increase but not have a material impact on its consolidated financial statements.

Community Reinvestment Act

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

Inflation Reduction Act

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

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Financial Review

($ and shares in thousands, except per share, and ratio data)Three Months Ended September 30,Nine Months Ended September 30,
2022202120222021
Summary of operations:
Net interest income before provision for (reversal of) credit losses$551,809 $395,706 $1,440,374 $1,125,874 
Noninterest income75,552 73,109 233,739 214,406 
Total revenue627,361 468,815 1,674,113 1,340,280 
Provision for (reversal of) credit losses27,000 (10,000)48,500 (25,000)
Noninterest expense215,973 205,384 602,283 585,984 
Income before income taxes384,388 273,431 1,023,330 779,296 
Income tax expense89,049 47,982 232,010 124,111 
Net income$295,339 $225,449 $791,320 $655,185 
Per common share:
Basic earnings$2.10 $1.59 $5.59 $4.62 
Diluted earnings$2.08 $1.57 $5.55 $4.58 
Dividends declared$0.40 $0.33 $1.20 $0.99 
Weighted-average number of shares outstanding:
Basic140,917 141,880 141,453 141,799 
Diluted142,011 143,143 142,601 143,051 
Performance metrics:
Return on average assets (“ROA”)1.86 %1.46 %1.70 %1.50 %
Return on average equity (“ROE”)20.30 %15.75 %18.35 %15.98 %
Tangible return on average tangible equity (1)
22.16 %17.25 %20.04 %17.56 %
Common dividend payout ratio19.33 %21.05 %21.75 %21.72 %
Net interest margin3.68 %2.70 %3.27 %2.72 %
Efficiency ratio (2)
34.43 %43.81 %35.98 %43.72 %
Adjusted efficiency ratio (1)
31.18 %35.55 %32.98 %36.80 %
At period end:September 30, 2022December 31, 2021
Total assets$62,576,061 $60,870,701 
Total loans$47,456,755 $41,694,416 
Total deposits$53,857,362 $53,350,532 
Common shares outstanding at period-end140,918 141,908 
Book value per common share$40.17 $41.13 
Tangible equity per common share (1)
$36.80 $37.79 
(1)For additional information regarding the reconciliation of these non-U.S. Generally Accepted Accounting Principles (“GAAP”) financial measures, refer to Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operation (“MD&A”) — Reconciliation of GAAP to Non-GAAP Financial Measures in this Form 10-Q.
(2)Efficiency ratio is calculated as noninterest expense divided by total revenue.

The Company’s third quarter 2022 net income was $295.3 million, an increase of $22.5$69.9 million or 20%31%, from $110.1 millioncompared with third quarter 2021 net income of $225.4 million. Net income for the same periodfirst nine months of 2022 was $791.3 million, an increase of $136.1 million or 21%, compared with the first nine months of 2021 net income of $655.2 million. The year-over-year increases in 2016. This increase wasboth periods were primarily due to higher net interest income, partially offset by higher income tax expense reflecting a higher effective tax rate. Net income totaled $420.7 millionand provision for credit losses. Noteworthy items about the Company’s third quarter and first nine months ended September 30, 2017, an increase of $99.8 million or 31%, from $320.9 million for the same period in 2016. This increase was primarily due to higher2022 performance included:

•Net interest income growth and net interest income and noninterest income, partially offset by higher income tax expense due to a higher effective tax rate. The higher net interest income during the three and nine months ended September 30, 2017 was primarily due to growth in the loan portfolio and higher yields. The higher noninterest income during the nine months ended September 30, 2017 was primarily due to a $41.5 million after-tax net gain recognized from the sale of a commercial property in San Francisco, California during the firstmargin expansion. Third quarter of 2017 and a $2.2 million after-tax net gain recognized from the sale of East West Insurance Services, Inc.’s (“EWIS”) business during the third quarter of 2017.
Diluted earnings per share (“EPS”) was $0.91 and $0.76 for the three months ended September 30, 2017 and 2016, respectively, which reflected an increase of $0.15 or 20%. Diluted EPS was $2.88 and $2.21 for the nine months ended September 30, 2017 and 2016, respectively, an increase of $0.67 or 30%. The diluted EPS impact from the sale of EWIS’s business in the third quarter of 2017 was $0.02, and the diluted EPS impact from the commercial property sale in the first quarter of 2017 was $0.28.
Revenue, or the sum of2022 net interest income before provision for (reversal of) credit losses and noninterest income, increased $49.3was $551.8 million, an increase of $156.1 million or 16% to $352.839% from the third quarter of 2021. Third quarter 2022 net interest margin of 3.68% expanded 98 bps year-over-year. For the first nine months of 2022, net interest income before provision for (reversal of) credit losses was $1.44 billion, an increase of $314.5 million or 28% year-over-year. The net interest margin for the threefirst nine months ended September 30, 2017, compared to the same period in 2016,of 2022 was 3.27%, up 55 bps year-over-year.

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•Improved efficiency. Efficiency ratios of 34.43% and increased $184.4 million or 21% to $1.08 billion35.98% for the third quarter and first nine months ended September 30, 2017, compared to the same period in 2016.
Noninterest expense decreased $6.0 million or 4% to $164.5 millionof 2022, respectively, both improved year-over-year. The adjusted efficiency ratios of 31.18% and 32.98% for the three months ended September 30, 2017, compared to the same period in 2016. For thethird quarter and first nine months ended September 30, 2017, noninterest expense increased $20.7 million or 4%of 2022, respectively, both improved year-over-year. For additional details, see the reconciliation of non-GAAP measures presented under Item 2. MD&A — Reconciliation of GAAP to $486.7 million,Non-GAAP Financial Measures in this Form 10-Q.

•Expanding profitability. Third quarter 2022 ROA, ROE and the tangible return on average tangible equity of 1.86%, 20.30% and 22.16%, respectively, all expanded compared to the same period in 2016.
The Company’s effective tax ratewith third quarter 2021. Likewise, for the three andfirst nine months ended September 30, 2017 was 24.3%of 2022, ROA, ROE and 25.0%the tangible return on average tangible equity of 1.70%, 18.35% and 20.04%, respectively, comparedall expanded year-over-year. For additional details, see the reconciliation of non-GAAP measures presented under Item 2. MD&A — Reconciliation of GAAP to 10.8% and 21.9%, respectively, for the same periodsNon-GAAP Financial Measures in 2016.this Form 10-Q.
Return on average
•Total assets increased 13 and 28 basis points to 1.46% and 1.59% for the three and nine months ended September 30, 2017, respectively, compared to 1.33% and 1.31%, respectively, for the same periods in 2016. Return on average equity increased 93 and 238 basis points to 14.01% and 15.50% for the three and nine months ended September 30, 2017, respectively, compared to 13.08% and 13.12%, respectively, for the same periods in 2016.

Balance Sheet and Liquidity

The Company experienced growth of $1.52reached $62.58 billion, growing by $1.71 billion or 4% in total assets3% from December 31, 2021, primarily driven by loan growth.

•Total loans were $47.46 billion as of September 30, 2017 compared to2022, an increase of $5.76 billion or 14% from $41.69 billion as of December 31, 2016.2021. This was primarily driven by well-diversified growth across the commercial real estate (“CRE”), residential mortgage, and commercial and industrial (“C&I”) loan segments.

•Total deposits were $53.86 billion as of September 30, 2022, an increase of $506.8 million or 1% from $53.35 billion as of December 31, 2021. Growth was largely attributable to loan growth,primarily driven by increased time deposits, partially offset by decreases in securities purchased under resale agreements (“resale agreements”)noninterest-bearing demand and available-for-sale investment securities.money market accounts.


Gross loans held-for-investment increased $3.02 billion or 12% to $28.53 billion as of September 30, 2017, compared to $25.50 billion as of December 31, 2016, while the allowance for loan losses to loans held-for-investment ratio slightly declined by two basis points to 1.00% as of September 30, 2017, compared to 1.02% as of December 31, 2016. Deposits increased $1.42 billion or 5% to $31.31 billion as of September 30, 2017, compared to $29.89 billion as of December 31, 2016, consisting of a $1.24 billion or 5% increase in core deposits and a $179.3 million or 3% increase in time deposits. Core deposits comprised 81% of total deposits as of each of September 30, 2017 and December 31, 2016.



Capital

Our financial performance in the nine months ended September 30, 2017 resulted in strong capital generation, which increased total stockholders’ equity by $354.2 million or 10% to $3.78 billion as of September 30, 2017, compared to December 31, 2016. We returned $29.2 million and $87.6 million in cash dividends to our stockholders during the three and nine months ended September 30, 2017, respectively. Book value per common share increased 10% to $26.17 as of September 30, 2017, compared to $23.78 as of December 31, 2016.

From a capital management perspective, the Company continued to maintain a strong capital position with its Common Equity Tier 1 (“CET1”) capital ratio at 11.4% as of September 30, 2017, compared to 10.9% as of December 31, 2016. The total risk-based capital ratio was 12.9% and 12.4% as of September 30, 2017 and December 31, 2016, respectively. The Tier 1 leverage capital ratio was 9.4% as of September 30, 2017, compared to 8.7% as of December 31, 2016.

Results of Operations

Components of Net Income
 
($ in thousands, except per share data and ratios) Three Months Ended September 30, Nine Months Ended September 30,
 2017 2016 % Change / Basis Point (“BP”) Change 2017 2016 
% Change / BP
Change
Interest and dividend income $339,910
 $280,317
 21 % $965,354
 $835,354
 16%
Interest expense 36,755
 26,169
 40 % 99,986
 75,418
 33%
Net interest income before provision for credit losses 303,155
 254,148
 19 % 865,368
 759,936
 14%
Provision for credit losses 12,996
 9,525
 36 % 30,749
 17,018
 81%
Noninterest income 49,624
 49,341
 1 % 213,047
 134,118
 59%
Noninterest expense 164,499
 170,500
 (4)% 486,693
 465,985
 4%
Income tax expense 42,624
 13,321
 220 % 140,247
 90,108
 56%
Net income $132,660
 $110,143
 20 % $420,726
 $320,943
 31%
Diluted EPS $0.91
 $0.76
 20 % $2.88
 $2.21
 30%
Annualized return on average assets 1.46% 1.33% 13  bps 1.59% 1.31% 28 bps
Annualized return on average equity 14.01% 13.08% 93  bps 15.50% 13.12% 238 bps
 



Net income increased $22.5 million or 20% to $132.7 million for the three months ended September 30, 2017, from $110.1 million for the same period in 2016. Diluted EPS was $0.91 for the three months ended September 30, 2017, an increase of $0.15 or 20% from the prior year period. Net income increased $99.8 million or 31% to $420.7 million for the nine months ended September 30, 2017, from $320.9 million for the same period in 2016. Diluted EPS was $2.88 for the nine months ended September 30, 2017, an increase of $0.67 or 30% from the prior year period. As discussed in Note 3 — Dispositions to the Consolidated Financial Statements, the Company completed the sale and leaseback of a commercial property, which resulted in an after-tax net gain of $41.5 million recorded during the first quarter of 2017. Additionally, the Company sold its insurance brokerage business, EWIS, and recorded an after-tax net gain of $2.2 million during the third quarter of 2017. Excluding the net gains on the sales of the commercial property and EWIS’s business during the nine months ended September 30, 2017, non-Generally Accepted Accounting Principles (“non-GAAP”) net income of $377.0 million and non-GAAP diluted EPS of $2.58 increased $56.1 million and $0.37 per share, respectively, from the same prior year period (see reconciliations of non-GAAP measures used below under “Use of Non-GAAP Financial Measures”).

Revenue, or the sum of net interest income before provision for credit losses and noninterest income, increased $49.3 million or 16% to $352.8 million during the three months ended September 30, 2017, from $303.5 million during the same period in 2016. This increase was primarily due to a $49.0 million increase in net interest income, reflecting the growth in the loan portfolio and the positive impact of short-term interest rate increases in 2017. Revenue increased $184.4 million or 21% to $1.08 billion during the nine months ended September 30, 2017, from $894.1 million during the same period in 2016. This increase was due to a $105.4 million increase in net interest income, reflecting the growth in the loan portfolio and the positive impact of short-term interest rate increases in 2017; and a $78.9 million increase in noninterest income, primarily due to the $71.7 million pre-tax gain recognized from the sale of the commercial property during the first quarter of 2017 and the $3.8 million pre-tax gain recognized from the sale of EWIS’s business.

Noninterest expense was $164.5 million for the three months ended September 30, 2017, a decrease of $6.0 million or 4% from $170.5 million for the same period in 2016. This decrease was largely driven by lower amortization expense of tax credits and other investments and lower legal expense, partially offset by an increase in compensation and employee benefits. Noninterest expense was $486.7 million for the nine months ended September 30, 2017, an increase of $20.7 million or 4% from $466.0 million for the same period in 2016. This increase was largely driven by higher compensation and employee benefits and amortization expense of tax credit and other investments, partially offset by lower consulting and legal expenses.

Strong returns on average assets and average equity during the three and nine months ended September 30, 2017 reflected the Company’s ability to achieve higher profitability while expanding the loan and deposit base. The return on average assets increased 13 basis points to 1.46% while the return on average equity increased 93 basis points to 14.01% for the three months ended September 30, 2017, compared to the same period in 2016. The return on average assets increased 28 basis points to 1.59% while the return on average equity increased 238 basis points to 15.50% for the nine months ended September 30, 2017, compared to the same period in 2016. Excluding the impact of the after-tax gains on the sales of the commercial property and EWIS’s business that were recognized in the first and third quarters of 2017, respectively, non-GAAP return on average assets was 1.43% for the nine months ended September 30, 2017, a 12 basis point increase from the same prior year period, while non-GAAP return on average equity was 13.89% for the nine months ended September 30, 2017, a 77 basis point increase from the same prior year period. (See reconciliations of non-GAAP measures used below under “Use of Non-GAAP Financial Measures”.)

Use of Non-GAAP Financial Measures

To supplement the Company’s unaudited interim Consolidated Financial Statements presented in accordance with Generally Accepted Accounting Principles (“GAAP”), the Company uses certain non-GAAP measures of financial performance. Non-GAAP financial measures are not in accordance with, or an alternative for, GAAP. Generally, a non-GAAP financial measure is a numerical measure of a company’s performance that either excludes or includes amounts that are not normally excluded or included in the most directly comparable measure calculated and presented in accordance with GAAP. A non-GAAP financial measure may also be a financial metric that is not required by GAAP or other applicable requirement.

The Company believes these non-GAAP financial measures, when taken together with the corresponding GAAP financial measures, provide meaningful supplemental information regarding its performance. Management believes that excluding the non-recurring after-tax effect of the gains on sales of the commercial property and EWIS’s business from net income, diluted EPS, and returns on average assets and average equity, will make it easier to analyze the results by presenting them on a more comparable basis. However, note that these non-GAAP financial measures should be considered in addition to, not as a substitute for or preferable to, financial measures prepared in accordance with GAAP.



The following table presents a reconciliation of GAAP to non-GAAP financial measures for the nine months ended September 30, 2017 and 2016:
 
    Nine Months Ended September 30,
($ and shares in thousands, except per share data)   2017 2016
Net income (a) $420,726
 $320,943
Less: Gain on sale of the commercial property, net of tax (1)
 (b) (41,526) —
         Gain on sale of business, net of tax (1)
   (2,206) —
Non-GAAP net income (c) $376,994

$320,943
       
Diluted weighted average number of shares outstanding (d) 145,849
 145,086
       
Diluted EPS (a)/(d) $2.88
 $2.21
Diluted EPS impact of the gain on sale of the commercial property, net of tax (b)/(d) (0.28) —
Diluted EPS impact of the gain on sale of business, net of tax   (0.02) —
Non-GAAP diluted EPS (c)/(d) $2.58

$2.21
       
Average total assets (e) $35,290,542
 $32,662,445
Average stockholders’ equity (f) $3,630,062
 $3,266,485
Return on average assets (2)
 (a)/(e) 1.59% 1.31%
Non-GAAP return on average assets (2)
  (c)/(e) 1.43% 1.31%
Return on average equity (2)
 (a)/(f) 15.50% 13.12%
Non-GAAP return on average equity (2)
  (c)/(f) 13.89% 13.12%
       
(1)Applied statutory tax rate of 42.05%.
(2)Annualized.

A discussion of net interest income, noninterest income, noninterest expense, income taxes and operating segment results are presented below.

Net Interest Income

The Company’s primary source of revenue is net interest income, which is the difference between interest income earned on loans, investment securities, resale agreements and other interest-earning assets less interest expense paid on customer deposits, securities sold under repurchase agreements (“repurchase agreements”), borrowings and other interest-bearing liabilities. Net interest margin is calculated by dividing the annualizedratio of net interest income byto average interest-earning assets. Net interest income and net interest margin are affectedimpacted by several factors, including changes in average balances and the composition of interest-earning assets and funding sources, market interest rate fluctuations and the slope of the yield curve, repricing characteristics and maturity of interest-earning assets and interest-bearing liabilities, the volume of noninterest-bearing sources of funds, and asset quality.


Netewbc-20220930_g1.jpg

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Third quarter 2022 net interest income before provision for the three months ended September 30, 2017credit losses was $303.2$551.8 million, an increase of $49.0$156.1 million or 19%39%, compared to $254.1with $395.7 million for the same period in 2016. Netthird quarter 2021. For the first nine months of 2022, net interest income for the nine months ended September 30, 2017 was $865.4 million,$1.44 billion, an increase of $105.4$314.5 million or 14%28%, compared to $759.9 millionwith $1.13 billion for the same period in 2016.first nine months of 2021. Third quarter 2022 net interest margin was 3.68%, an increase of 98 bps from 2.70% for the third quarter of 2021. The notable increasesyear-over-year changes in net interest income for the three and nine months ended September 30, 2017, compared to the same periods in 2016, werenet interest margin primarily due to increased interest income resulting fromreflected higher loan yields, strong loan growth and higher debt securities yields. For the first nine months of 2022, net interest margin was 3.27%, an increase of 55 bps from 2.72% for the first nine months of 2021. The year-over-year changes in net interest income and net interest margin primarily reflected higher loan yields, onstrong loan growth and higher debt securities volume and yields. The changes in yields and rates reflected rising benchmark interest rates.

ewbc-20220930_g2.jpg

Average interest-earning assets were $59.48 billion for the third quarter of 2022, an increase of $1.24 billion or 2% from $58.24 billion for the third quarter of 2021. For the first nine months of 2022, the average interest-earning assets were $58.95 billion, an increase of $3.60 billion or 7% from $55.35 billion for the first nine months of 2021. The increases in average interest-earning assets in both periods primarily reflected growth in loans and debt securities, partially offset by a 16 and 12 basis point increasedecrease in the cost of interest-bearing deposits during the three and nine months ended September 30, 2017, respectively. The cost of interest-bearing deposits was 0.60% and 0.55% for the three and nine months ended September 30, 2017, respectively, compared to 0.44% and 0.43% for the three and nine months ended September 30, 2016.



For the three months ended September 30, 2017, net interest margin increased to 3.52%, compared to 3.26% for the same period in 2016. For the nine months ended September 30, 2017, net interest margin increased to 3.45%, compared to 3.29% for the same period in 2016. The increases in net interest margin for the three and nine months ended September 30, 2017 were due to higher yields from interest-earning assets (primarily due to an increase in loan yields for the three months ended September 30, 2017 compared to the same prior year period, and primarily due to increases in yields of loans, interest-bearing cash and deposits with banks and investment securities during the nine months ended September 30, 2017), as a result of the short-term interest rate increases in 2017. banks.

The higher loan yields for the three and nine months ended September 30, 2017 were partially offset by lower accretion income from the purchased credit impaired (“PCI”) loans accounted for under Accounting Standard Codification (“ASC”) 310-30, Loans and Debt Securities Acquired with Deteriorated Credit Quality. During the three and nine months ended September 30, 2017, total accretion income from loans accounted for under ASC 310-30 was $4.5 million and $14.0 million, respectively, compared to $7.1 million and $33.8 million, respectively, for the same periods in 2016.

For the three months ended September 30, 2017,yield on average interest-earning assets increased $3.15 billion or 10% to $34.21 billion from $31.06 billion for the same period in 2016. Thisthird quarter of 2022 was 4.19%, an increase was primarily due to increases of $3.22 billion or 13% in average loans, and $751.0 million or 47% in average interest-bearing cash and deposits with banks, partially offset by decreases136 bps from 2.83% for the third quarter of $508.2 million or 28% in average resale agreements and $310.7 million or 9% in average investment securities. For the nine months ended September 30, 2017,2021. The yield on average interest-earning assets increased $2.73 billion or 9% to $33.54 billion from $30.81 billion for the same periodfirst nine months of 2022 was 3.54%, an increase of 65 bps from 2.89% for the first nine months of 2021. The year-over-year changes in 2016. This increase was primarily due to increases of $2.78 billion or 12% in average loans, and $305.1 million or 17% inthe yield on average interest-bearing cashassets primarily resulted from rising benchmark interest rates and deposits with banks, partially offset by a $228.3 millionchanged earning asset mix in favor of higher-yielding assets.

ewbc-20220930_g3.jpg

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The average loan yield for the third quarter of 2022 was 4.75%, an increase of 114 bps from 3.61% for the third quarter of 2021. The average loan yield for the first nine months of 2022 was 4.13%, an increase of 54 bps from 3.59% for the first nine months of 2021. The year-over-year changes in the average loan yield reflect the loan portfolio’s sensitivity to rising benchmark interest rates. Approximately 62% and 65% of loans held-for-investment were variable-rate or 7% decreasehybrid loans in average investment securities.their adjustable-rate periodas of September 30, 2022 and 2021, respectively.


Customer depositsewbc-20220930_g4.jpg

ewbc-20220930_g5.jpg

Deposits are an important source of fundingfunds and affectimpact both net interest income and net interest margin. Deposits are comprised of noninterest-bearing demand, interest-bearing checking, money market, savings and time deposits. Average deposits increased $2.79 billion or 10% to $31.07were $54.05 billion for the three months ended September 30, 2017, compared to $28.28third quarter of 2022, an increase of $554.9 million or 1% from $53.50 billion for the same period in 2016. The ratiothird quarter of 2021. For the first nine months of 2022, average noninterest-bearing demand deposits to total deposits increased to 34% for the three months ended September 30, 2017, from 33% for the three months ended September 30, 2016. Average deposits increased $2.27were $54.07 billion, an increase of $3.54 billion or 8% to $30.337% from $50.53 billion for the first nine months ended September 30, 2017, compared to $28.06of 2021. Average noninterest-bearing deposits were $22.42 billion for the same period in 2016. The ratiothird quarter of 2022, a decrease of $745.7 million or 3% from $23.17 billion for the third quarter of 2021. For the first nine months of 2022, average noninterest-bearing deposits were $23.24 billion, an increase of $2.90 billion or 14% from $20.35 billion for the first nine months of 2021. Average noninterest-bearing deposits made up 41% and 43% of average noninterest-bearing demand deposits to total deposits increased to 34% for the third quarters of 2022 and 2021, respectively, and 43% and 40% for the first nine months ended September 30, 2017, from 32%of 2022 and 2021, respectively.

The average cost of deposits was 0.51% for the third quarter of 2022, a 39 bps increase from 0.12% for the third quarter of 2021. The average cost of interest-bearing deposits was 0.86% for the third quarter of 2022, a 65 bps increase from 0.21% for the third quarter of 2021. The average cost of deposits was 0.26% for the first nine months ended September 30, 2016.of 2022, an increase of 11 bps from 0.15% for the first nine months of 2021. The average loans to averagecost of interest-bearing deposits ratio increased to 89%was 0.45% for the threefirst nine months ended September 30, 2017,of 2022, a 20 bps increase from 86%0.25% for the three months ended September 30, 2016. The average loans to average deposits ratio increased to 88% for thefirst nine months ended September 30, 2017, from 86% for the nine months ended September 30, 2016. In addition,of 2021. The year-over-year increases primarily reflected higher rates paid on money market accounts and time deposits.

69

The average cost of funds increased 10 basis points to 0.46%calculation includes deposits, Federal Home Loan Bank (“FHLB”) advances, repurchase agreements, long-term debt and short-term borrowings. For the third quarter of 2022, the average cost of funds was 0.55%, a 41 bps increase from 0.14% for the threethird quarter of 2021. For the first nine months ended September 30, 2017of 2022, the average cost of funds was 0.29%, an 11 bps increase from 0.36%0.18% for the same periodfirst nine months of 2021. The year-over-year changes in 2016. Costthe average cost of funds increased eight basis points to 0.43% forwere driven by the nine months ended September 30, 2017 from 0.35% forchanges in the same period in 2016.cost of deposits discussed above.


The Company utilizes various tools to manage interest rate risk. Refer to the “InterestInterest Rate Risk Management”Management section of Management’s Discussion and Analysis of Financial Condition and Results of Operations (“Item 2. MD&A”) &A — Asset Liability and Risk Management —Market Risk Management for details.in this Form 10-Q.



70

The following table presents the interest spread, net interest margin, average balances, interest income and expense, and the average yield/rate by asset and liability component for the three months ended September 30, 2017third quarters of 2022 and 2016:2021:
($ in thousands)Three Months Ended September 30,
20222021
Average
Balance		Interest
Average
Yield/
Rate (1)
Average
Balance		Interest
Average
Yield/
Rate (1)
ASSETS
Interest-earning assets:
Interest-bearing cash and deposits with banks$2,287,010 $9,080 1.58 %$7,036,823 $4,521 0.25 %
Resale agreements1,037,292 6,769 2.59 %2,382,741 8,957 1.49 %
Available-for-sale (“AFS”) debt securities (2)(3)
6,204,729 38,383 2.45 %8,782,682 37,826 1.71 %
Held-to-maturity (“HTM”) debt securities (2)(4)
3,017,063 12,709 1.67 %— — — %
Loans (5)(6)
46,854,541 560,452 4.75 %39,960,151 363,503 3.61 %
Restricted equity securities78,054 843 4.28 %77,083 500 2.57 %
Total interest-earning assets$59,478,689 $628,236 4.19 %$58,239,480 $415,307 2.83 %
Noninterest-earning assets:
Cash and due from banks615,836 627,640 
Allowance for loan losses(566,369)(584,827)
Other assets3,551,288 3,077,240 
Total assets$63,079,444 $61,359,533 
LIABILITIES AND STOCKHOLDERS’ EQUITY
Interest-bearing liabilities:
Checking deposits$6,879,632 $8,493 0.49 %$6,646,515 $3,186 0.19 %
Money market deposits12,351,571 33,101 1.06 %12,604,827 3,446 0.11 %
Savings deposits2,961,634 2,268 0.30 %2,792,702 1,943 0.28 %
Time deposits9,435,063 25,032 1.05 %8,283,265 7,395 0.35 %
Federal funds purchased and other short-term borrowings211,794 1,177 2.20 %620 — — %
FHLB advances86,243 392 1.80 %248,614 857 1.37 %
Repurchase agreements624,821 4,421 2.81 %310,997 2,012 2.57 %
Long-term debt and finance lease liabilities152,565 1,543 4.01 %151,870 762 1.99 %
Total interest-bearing liabilities$32,703,323 $76,427 0.93 %$31,039,410 $19,601 0.25 %
Noninterest-bearing liabilities and stockholders’ equity:
Demand deposits22,423,633 23,169,323 
Accrued expenses and other liabilities2,179,850 1,470,494 
Stockholders’ equity5,772,638 5,680,306 
Total liabilities and stockholders’ equity$63,079,444 $61,359,533 
Interest rate spread3.26 %2.58 %
Net interest income and net interest margin$551,809 3.68 %$395,706 2.70 %
(1)Annualized.
(2)Yields on tax-exempt securities are not presented on a tax-equivalent basis.
(3)Includes the amortization of premiums on AFS debt securities of $16.5 million and $22.6 million for the third quarters of 2022 and 2021, respectively.
(4)Includes the amortization of premiums on HTM debt securities of $189 thousand for the third quarter of 2022.
(5)Average balances include nonperforming loans and loans held-for-sale.
(6)Loans include the accretion of net deferred loan fees and amortization of net premiums, which totaled $12.5 million and $17.0 million for the third quarters of 2022 and 2021, respectively.

71
 
($ in thousands) Three Months Ended September 30,
 2017 2016
 
Average
Balance
 Interest 
Average
Yield/
Rate(1)
 Average
Balance		 Interest 
Average
Yield/
Rate(1)
ASSETS            
Interest-earning assets:            
Interest-bearing cash and deposits with banks $2,344,561
 $9,630
 1.63% $1,593,577
 $3,168
 0.79%
Resale agreements (2)
 1,297,826
 7,901
 2.42% 1,805,978
 7,834
 1.73%
Investment securities (3)
 2,963,122
 14,828
(4) 
1.99% 3,273,861
 13,388
(4) 
1.63%
Loans (5)
 27,529,779
 306,939
(6) 
4.42% 24,309,313
 255,316
(6) 
4.18%
Restricted equity securities 73,245
 612
 3.31% 72,625
 611
 3.35%
Total interest-earning assets 34,208,533
 339,910
 3.94% 31,055,354
 280,317
 3.59%
Noninterest-earning assets:            
Cash and due from banks 387,705
     354,053
    
Allowance for loan losses (276,467)     (266,763)    
Other assets 1,617,796
     1,763,889
    
Total assets $35,937,567
     $32,906,533
    
LIABILITIES AND STOCKHOLDERS’ EQUITY        
Interest-bearing liabilities:          
Checking deposits $4,014,290
 $4,768
 0.47% $3,553,477
 $3,253
 0.36%
Money market deposits 7,997,648
 11,828
 0.59% 7,548,835
 6,663
 0.35%
Savings deposits 2,423,312
 1,810
 0.30% 2,133,036
 1,160
 0.22%
Time deposits 5,974,793
 12,680
 0.84% 5,627,084
 9,973
 0.71%
Federal funds purchased and other short-term borrowings 29,661
 212
 2.84% 32,137
 212
 2.62%
Federal Home Loan Bank (“FHLB”) advances 322,973
 1,947
 2.39% 320,743
 1,361
 1.69%
Repurchase agreements (2)
 50,000
 2,122
 16.84% 200,000
 2,319
 4.61%
Long-term debt 176,472
 1,388
 3.12% 196,170
 1,228
 2.49%
Total interest-bearing liabilities 20,989,149
 36,755
 0.69% 19,611,482
 26,169
 0.53%
Noninterest-bearing liabilities and stockholders’ equity:          
Demand deposits 10,655,860
     9,413,031
    
Accrued expenses and other liabilities 536,351
     532,779
    
Stockholders’ equity 3,756,207
     3,349,241
    
Total liabilities and stockholders’ equity $35,937,567
     $32,906,533
    
Interest rate spread  
   3.25%     3.06%
Net interest income and net interest margin  
 $303,155
 3.52%   $254,148
 3.26%
 
(1)Annualized.
(2)
Average balances of resale and repurchase agreements are reported net, pursuant to ASC 210-20-45, Balance Sheet Offsetting.

(3)Yields on tax-exempt securities are not presented on a tax-equivalent basis.
(4)Includes the amortization of net premiums on investment securities of $5.2 million and $5.4 million for the three months ended September 30, 2017 and 2016, respectively.
(5)Average balance includes nonperforming loans.
(6)Interest income on loans includes net deferred loan fees, accretion of ASC 310-30 discounts and amortization of premiums, which totaled $6.5 million and $8.5 million for the three months ended September 30, 2017 and 2016, respectively.



The following table presents the interest spread, net interest margin, average balances, interest income and expense, and the average yield/ratesrate by asset and liability component for the first nine months ended September 30, 2017of 2022 and 2016:2021:
($ in thousands)Nine Months Ended September 30,
20222021
Average
Balance		Interest
Average
Yield/
Rate (1)
Average
Balance		Interest
Average
Yield/
Rate (1)
ASSETS
Interest-earning assets:
Interest-bearing cash and deposits with banks$3,175,596 $17,127 0.72 %$6,078,982 $11,781 0.26 %
Resale agreements1,588,452 23,705 2.00 %1,994,776 23,077 1.55 %
AFS debt securities (2)(3)
6,886,268 106,290 2.06 %7,755,029 101,616 1.75 %
HTM debt securities (2)(4)
2,672,797 33,645 1.68 %— — — %
Loans (5)(6)
44,548,520 1,376,978 4.13 %39,441,751 1,057,964 3.59 %
Restricted equity securities77,824 2,274 3.91 %80,107 1,588 2.65 %
Total interest-earning assets$58,949,457 $1,560,019 3.54 %$55,350,645 $1,196,026 2.89 %
Noninterest-earning assets:
Cash and due from banks656,772 602,830 
Allowance for loan losses(551,818)(603,523)
Other assets3,307,207 2,913,050 
Total assets$62,361,618 $58,263,002 
LIABILITIES AND STOCKHOLDERS’ EQUITY
Interest-bearing liabilities:
Checking deposits$6,747,711 $13,073 0.26 %$6,571,231 $11,177 0.23 %
Money market deposits12,526,222 45,196 0.48 %12,262,173 11,869 0.13 %
Savings deposits2,954,098 5,836 0.26 %2,715,114 5,762 0.28 %
Time deposits8,596,728 40,266 0.63 %8,635,250 26,982 0.42 %
Federal funds purchased and other short-term borrowings93,370 1,427 2.04 %1,871 42 3.00 %
FHLB advances128,137 1,529 1.60 %457,273 6,025 1.76 %
Repurchase agreements433,340 8,855 2.73 %304,745 5,981 2.62 %
Long-term debt and finance lease liabilities152,259 3,463 3.04 %152,018 2,314 2.04 %
Total interest-bearing liabilities$31,631,865 $119,645 0.51 %$31,099,675 $70,152 0.30 %
Noninterest-bearing liabilities and stockholders’ equity:
Demand deposits23,244,247 20,345,370 
Accrued expenses and other liabilities1,719,869 1,335,252 
Stockholders’ equity5,765,637 5,482,705 
Total liabilities and stockholders’ equity$62,361,618 $58,263,002 
Interest rate spread3.03 %2.59 %
Net interest income and net interest margin$1,440,374 3.27 %$1,125,874 2.72 %
(1)Annualized.
(2)Yields on tax-exempt securities are not presented on a tax-equivalent basis.
(3)Includes the amortization of premiums on AFS debt securities of $60.3 million and $62.7 million for the first nine months of 2022 and 2021, respectively.
(4)Includes the amortization of premiums on HTM debt securities of $423 thousand for the first nine months of 2022.
(5)Average balances include nonperforming loans and loans held-for-sale.
(6)Loans include the accretion of net deferred loan fees and amortization of net premiums, which totaled $36.3 million and $46.8 million for the first nine months of 2022 and 2021, respectively.

72
             
($ in thousands) Nine Months Ended September 30,
 2017 2016
 
Average
Balance
 Interest 
Average
Yield/
Rate(1)
 Average
Balance		 Interest 
Average
Yield/
Rate(1)
ASSETS            
Interest-earning assets:            
Interest-bearing cash and deposits with banks $2,073,322
 $22,298
 1.44% $1,768,252
 $10,245
 0.77%
Resale agreements (2)
 1,552,198
 25,222
 2.17% 1,672,993
 22,479
 1.79%
Investment securities (3)
 3,060,688
 43,936
(4) 
1.92% 3,289,014
 37,433
(4) 
1.52%
Loans (5)
 26,783,082
 872,039
(6) 
4.35% 24,006,926
 763,189
(6) 
4.25%
Restricted equity securities 73,651
 1,859
 3.37% 76,122
 2,008
 3.52%
Total interest-earning assets 33,542,941
 965,354
 3.85% 30,813,307
 835,354
 3.62%
Noninterest-earning assets:            
Cash and due from banks 387,440
     349,721
    
Allowance for loan losses (268,477)     (264,088)    
Other assets 1,628,638
     1,763,505
    
Total assets $35,290,542
     $32,662,445
    
LIABILITIES AND STOCKHOLDERS’ EQUITY        
Interest-bearing liabilities:          
Checking deposits $3,830,004
 $12,538
 0.44% $3,445,996
 $9,058
 0.35%
Money market deposits 7,968,457
 30,409
 0.51% 7,519,261
 19,295
 0.34%
Saving deposits 2,334,752
 4,525
 0.26% 2,043,547
 3,207
 0.21%
Time deposits 5,873,217
 34,331
 0.78% 5,941,760
 29,148
 0.66%
Federal funds purchased and other short-term borrowings 40,772
 877
 2.88% 19,384
 390
 2.69%
FHLB advances 414,355
 5,738
 1.85% 400,850
 4,153
 1.38%
Repurchase agreements (2)
 170,330
 7,538
 5.92% 182,482
 6,441
 4.71%
Long-term debt 181,337
 4,030
 2.97% 201,060
 3,726
 2.48%
Total interest-bearing liabilities 20,813,224
 99,986
 0.64% 19,754,340
 75,418
 0.51%
Noninterest-bearing liabilities and stockholders’ equity:          
Demand deposits 10,323,254
     9,107,051
    
Accrued expenses and other liabilities 524,002
     534,569
    
Stockholders’ equity 3,630,062
     3,266,485
    
Total liabilities and stockholders’ equity $35,290,542
     $32,662,445
    
Interest rate spread     3.21%     3.11%
Net interest income and net interest margin   $865,368
 3.45%   $759,936
 3.29%
             

(1)Annualized.
(2)
Average balances of resale and repurchase agreements are reported net, pursuant to ASC 210-20-45, Balance Sheet Offsetting.
(3)Yields on tax-exempt securities are not presented on a tax-equivalent basis.
(4)Includes the amortization of net premiums on investment securities of $16.3 million and $18.2 million for the nine months ended September 30, 2017 and 2016, respectively.
(5)Average balance includes nonperforming loans.
(6)Interest income on loans includes net deferred loan fees, accretion of ASC 310-30 discounts and amortization of premiums, which totaled $21.1 million and $39.7 million for the nine months ended September 30, 2017 and 2016, respectively.



The following table summarizes the extent to which changes in (1) interest rates, and changes in(2) volume of average interest-earning assets and average interest-bearing liabilities 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 the changechanges attributable to variations in volume and the change attributable to variations in interest rates.yield/rate. Changes that are not solely due to either volume or yield/rate are allocated proportionally based on the absolute value of the change related to average volume and average rate. Nonaccrual loans are included in average loans used to compute the table below:
($ in thousands)Three Months Ended September 30,Nine Months Ended September 30,
2022 vs. 20212022 vs. 2021
Total
Change		Changes Due toTotal
Change		Changes Due to
VolumeYield/RateVolumeYield/Rate
Interest-earning assets:
Interest-bearing cash and deposits with banks$4,559 $(4,874)$9,433 $5,346 $(7,746)$13,092 
Resale agreements(2,188)(6,674)4,486 628 (5,263)5,891 
AFS debt securities557 (13,051)13,608 4,674 (12,166)16,840 
HTM debt securities12,709 12,709 — 33,645 33,645 — 
Loans196,949 69,707 127,242 319,014 146,568 172,446 
Restricted equity securities343 6 337 686 (46)732 
Total interest and dividend income$212,929 $57,823 $155,106 $363,993 $154,992 $209,001 
Interest-bearing liabilities:
Checking deposits$5,307 $116 $5,191 $1,896 $307 $1,589 
Money market deposits29,655 (71)29,726 33,327 261 33,066 
Savings deposits325 122 203 74 488 (414)
Time deposits17,637 1,162 16,475 13,284 (121)13,405 
Federal funds purchased and other short-term borrowings1,177 — 1,177 1,385 1,403 (18)
FHLB advances(465)(680)215 (4,496)(3,975)(521)
Repurchase agreements2,409 2,204 205 2,874 2,619 255 
Long-term debt and finance lease liabilities781 4 777 1,149 4 1,145 
Total interest expense$56,826 $2,857 $53,969 $49,493 $986 $48,507 
Change in net interest income$156,103 $54,966 $101,137 $314,500 $154,006 $160,494 
 
($ in thousands) Three Months Ended September 30, Nine Months Ended September 30,
 2017 vs. 2016 2017 vs. 2016
 
Total
Change
 Changes Due to 
Total
Change
 Changes Due to
  Volume  Yield/Rate   Volume  Yield/Rate 
Interest-earning assets:        
  
  
Interest-bearing cash and deposits with banks $6,462
 $1,988
 $4,474
 $12,053
 $2,018
 $10,035
Resale agreements 67
 (2,566) 2,633
 2,743
 (1,714) 4,457
Investment securities 1,440
 (1,348) 2,788
 6,503
 (2,746) 9,249
Loans 51,623
 35,780
 15,843
 108,850
 89,417
 19,433
Restricted equity securities 1
 6
 (5) (149) (65) (84)
Total interest and dividend income $59,593
 $33,860
 $25,733
 $130,000
 $86,910
 $43,090
Interest-bearing liabilities:  
      
  
  
Checking deposits $1,515
 $464
 $1,051
 $3,480
 $1,083
 $2,397
Money market deposits 5,165
 420
 4,745
 11,114
 1,211
 9,903
Savings deposits 650
 175
 475
 1,318
 496
 822
Time deposits 2,707
 654
 2,053
 5,183
 (341) 5,524
Federal funds purchased and other short-term borrowings —
 (17) 17
 487
 458
 29
FHLB advances 586
 10
 576
 1,585
 144
 1,441
Repurchase agreements (197) (2,762) 2,565
 1,097
 (452) 1,549
Long-term debt 160
 (132) 292
 304
 (390) 694
Total interest expense $10,586
 $(1,188) $11,774
 $24,568
 $2,209
 $22,359
Change in net interest income $49,007
 $35,048
 $13,959
 $105,432
 $84,701
 $20,731
 


Noninterest Income


Noninterest income increased $283 thousand or 1% to $49.6 million for the three months ended September 30, 2017, compared to $49.3 million for the same period in 2016. This increase was primarily due to a $3.8 million increase in net gain on sale of EWIS’s business and an $872 thousand increase in derivative fees and other income, partially offset by a $4.0 million decrease in other fees and operating income. Noninterest income increased $78.9 million or 59% to $213.0 million for the nine months ended September 30, 2017, compared to $134.1 million for the same period in 2016. This increase was comprised of a $71.2 million increase in net gains on sales of fixed assets, primarily related to the sale of a commercial property, and a $3.8 million increase in net gain on the sale of EWIS’s business, partially offset by a $4.5 million decrease in other fees and operating income. Noninterest income represented 14% and 20% of revenue for the three and nine months ended September 30, 2017, respectively, compared to 16% and 15%, respectively, for the same periods in 2016.



The following table presents the components of noninterest income for the periods indicated:third quarters and first nine months of 2022 and 2021:
($ in thousands)Three Months Ended September 30,Nine Months Ended September 30,
20222021% Change20222021% Change
Lending fees$20,289 $17,516 16%$59,869 $56,965 5%
Deposit account fees23,636 18,508 28%66,323 51,233 29%
Interest rate contracts and other derivative income8,761 7,156 22%29,695 20,981 42%
Foreign exchange income10,083 13,101 (23)%34,143 35,634 (4)%
Wealth management fees8,903 5,598 59%21,494 20,460 5%
Net gains on sales of loans2,129 3,329 (36)%5,968 6,601 (10)%
Gains on sales of AFS debt securities— 354 (100)%1,306 1,178 11%
Other investment (loss) income(580)5,349 (111)%5,910 13,870 (57)%
Other income2,331 2,198 6%9,031 7,484 21%
Total noninterest income$75,552 $73,109 3%$233,739 $214,406 9%

73

 
($ in thousands) Three Months Ended
September 30,		 Nine Months Ended
September 30,
 2017 2016 % Change 2017 2016 % Change
Branch fees $10,803
 $10,408
 4 % $31,799
 $30,983
 3 %
Letters of credit fees and foreign exchange income 10,154
 10,908
 (7)% 33,209
 31,404
 6 %
Ancillary loan fees and other income 5,987
 6,135
 (2)% 16,876
 13,997
 21 %
Wealth management fees 3,615
 4,033
 (10)% 11,682
 9,862
 18 %
Derivative fees and other income 6,663
 5,791
 15 % 12,934
 9,778
 32 %
Net gains on sales of loans 2,361
 2,158
 9 % 6,660
 6,965
 (4)%
Net gains on sales of available-for-sale investment securities 1,539
 1,790
 (14)% 6,733
 8,468
 (20)%
Net gains on sales of fixed assets 1,043
 486
 115 % 74,092
 2,916
 NM
Net gain on sale of business 3,807
 —
 NM
 3,807
 —
 NM
Other fees and operating income 3,652
 7,632
 (52)% 15,255
 19,745
 (23)%
Total noninterest income $49,624
 $49,341
 1 % $213,047
 $134,118
 59 %
 
NM Not Meaningful.

The following discussion providesNoninterest income comprised 12% and 14% of total revenue for the compositionthird quarter and the first nine months of 2022, respectively, compared with 16% for both the major changes inthird quarter and first nine months of 2021, respectively. Third quarter 2022 noninterest income and the factors contributing to the changes.

Net gains on saleswas $75.6 million, an increase of fixed assets increased $71.2$2.4 million to $74.1 million for the nine months ended September 30, 2017,or 3%, compared to $2.9with $73.1 million for the same period in 2016.2021. This increase was primarily due to the $71.7 million of pre-tax gain recognized from the sale of the commercial propertyincreases in California duringdeposit account fees, wealth management fees and lending fees, partially offset by other investment loss and a decrease in foreign exchange income. Noninterest income for the first quarternine months of 2017. In the first quarter2022 was $233.7 million, an increase of 2017, East West Bank completed the sale and leaseback of a commercial property in California for cash consideration of $120.6 million and entered into a lease agreement for part of the property, consisting of a retail branch and office facilities. The total pre-tax profit from the sale was $85.4 million, of which $71.7 million was recognized in the first quarter of 2017, and $13.7 million was deferred and recognized over the term of the lease agreement.

In the third quarter of 2017, the Company sold its insurance brokerage business, EWIS, for $4.3 million and recognized a pre-tax gain of $3.8 million.

Other fees and operating income decreased $4.0$19.3 million or 52% to $3.7 million for the three months ended September 30, 2017 from $7.69%, compared with $214.4 million for the same period in 2016,2021. This increase was primarily due to increases in deposit account fees, interest rate contracts and decreased $4.5 million or 23% to $15.3other derivative income; and lending fees, partially offset by lower other investment income.

Lending fees were $20.3 million for the nine months ended September 30, 2017 from $19.7third quarter of 2022, an increase of $2.8 million or 16% compared with $17.5 million for the same period in 2016. The $4.02021. This was primarily due to increased syndication, unused commitment and other loan fees. For the first nine months of 2022, lending fees were $59.9 million, decreasean increase of $2.9 million or 5%, compared with $57.0 million for the three months ended September 30, 2017, compared to the same period in 2016,2021. This was mainly attributableprimarily due to decreasesincreased unused commitment and other loan fees, partially offset by a decrease in rental income, as a result ofsyndication fees.

Deposit account fees were $23.6 million for the commercial property sale during the firstthird quarter of 2017, and decreases in dividend income from other investments. The $4.52022, an increase of $5.1 million decreaseor 28%, compared with $18.5 million for the nine months ended September 30, 2017, compared to the same period in 2016,2021. For the first nine months of 2022, deposit account fees were $66.3 million, an increase of $15.1 million or 29%, compared with $51.2 million for the same period in 2021. These increases were primarily driven by growth in treasury management fees from commercial deposits.

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

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

Wealth management fees were $8.9 million for the third quarter of 2022, an increase of $3.3 million or 59%, compared with $5.6 million for the same period in 2021. For the first nine months of 2022, wealth management fees were $21.5 million, an increase of $1.0 million or 5%, compared with $20.5 million for the first nine months of 2021. These increases were primarily due to a decreasehigher volume of customer activity.

Other investment loss was $580 thousand for the third quarter of 2022, compared with income of $5.3 million for the same period in rental income as a result of sale of the commercial property during2021. For the first quarternine months of 2017.2022, other investment income was $5.9 million, a decrease of $8.0 million or 57% from $13.9 million for the first nine months of 2021. These decreases primarily reflected unfavorable equity valuation adjustments in the Company’s CRA investments in 2022, compared with the same year-ago periods.




74

Noninterest Expense


NoninterestThe following table presents the components of noninterest expense totaled $164.5 million for the threethird quarters and first nine months ended September 30, 2017, a decrease of $6.02022 and 2021:
($ in thousands)Three Months Ended September 30,Nine Months Ended September 30,
20222021%20222021%
Compensation and employee benefits$127,580 $105,751 21 %$357,213 $318,985 12 %
Occupancy and equipment expense15,920 15,851 0 %46,853 47,150 (1)%
Deposit insurance premiums and regulatory assessments4,875 4,641 5 %14,519 12,791 14 %
Deposit account expense6,707 4,136 62 %17,071 11,845 44 %
Data processing3,725 3,575 4 %10,876 12,088 (10)%
Computer software expense6,889 8,426 (18)%20,755 23,106 (10)%
Consulting expense1,620 1,635 (1)%5,474 4,978 10 %
Legal expense689 2,363 (71)%2,454 5,840 (58)%
Other operating expense28,094 20,998 34 %78,315 58,544 34 %
Amortization of tax credit and other investments19,874 38,008 (48)%48,753 90,657 (46)%
Total noninterest expense$215,973 $205,384 5 %$602,283 $585,984 3 %

Third quarter 2022 noninterest expense was $216.0 million, an increase of $10.6 million or 4%5%, compared to $170.5with $205.4 million for the same period in 2016. This decrease2021. First nine months of 2022 noninterest expense was $602.3 million, an increase of $16.3 million or 3%, compared with $586.0 million for the same period in 2021. These increases were primarily due to an $8.8 millionhigher compensation and employee benefits and other operating expense, partially offset by a decrease in the amortization of tax credit and other investments and a $2.0 million decrease in legal expense, partially offset by a $4.5 million increase in compensationinvestments.

Compensation and employee benefits. Noninterest expense totaled $486.7benefits were $127.6 million for the nine months ended September 30, 2017,third quarter of 2022, an increase of $20.7$21.8 million or 4%21%, compared to $466.0with $105.8 million for the same period in 2016. This increase was primarily due to a $24.8 million increase in2021. For the first nine months of 2022, compensation and employee benefits and a $5.3were $357.2 million, an increase in amortization of tax credit and other investments, partially offset by an $8.3 million decrease in consulting expense and a $3.8 million decrease in legal expense.

The following table presents the various components of noninterest expense for the periods indicated: 
 
  Three Months Ended
September 30,		 Nine Months Ended
September 30,
($ in thousands) 2017 2016 % Change 2017 2016 % Change
Compensation and employee benefits $79,583
 $75,042
 6 % $244,930
 $220,166
 11 %
Occupancy and equipment expense 16,635
 15,456
 8 % 47,829
 45,619
 5 %
Deposit insurance premiums and regulatory assessments 5,676
 6,450
 (12)% 17,384
 17,341
 — %
Legal expense 3,316
 5,361
 (38)% 8,930
 12,714
 (30)%
Data processing 3,004
 2,729
 10 % 9,009
 8,712
 3 %
Consulting expense 4,087
 4,594
 (11)% 10,775
 19,027
 (43)%
Deposit related expenses 2,413
 3,082
 (22)% 7,283
 7,675
 (5)%
Computer software expense 4,393
 3,331
 32 % 13,823
 9,267
 49 %
Other operating expense 19,830
 19,814
 — % 55,357
 58,508
 (5)%
Amortization of tax credit and other investments 23,827
 32,618
 (27)% 66,059
 60,779
 9 %
Amortization of core deposit intangibles 1,735
 2,023
 (14)% 5,314
 6,177
 (14)%
Total noninterest expense $164,499
 $170,500
 (4)% $486,693
 $465,985
 4 %
 

The following provides a discussion of the major changes in noninterest expense and the factors contributing to the changes.

Compensation and employee benefits increased $4.5$38.2 million or 6% to $79.6 million for the three months ended September 30, 2017,12%, compared to $75.0with $319.0 million for the same period in 2016,2021. These increases were primarily due to headcount growth and increased $24.8 million or 11% to $244.9the year-over-year change in deferred loan costs.

Other operating expense was $28.1 million for the nine months ended September 30, 2017,third quarter of 2022, an increase of $7.1 million or 34%, compared to $220.2with $21.0 million for the same period in 2016. The increases2021, primarily due to a reduction in foreclosure related gains and interest expense paid on cash collateral. For the first nine months of 2022, other operating expense was $78.3 million, an increase of $19.8 million or 34%, compared with $58.5 million for the threesame period in 2021, primarily due to increased charitable contributions, foreclosure expenses, miscellaneous operational losses and nine months ended September 30, 2017 were primarily attributable to an increase in headcount to support the Company’s growing business and risk management and compliance requirements, as well as additional severancetravel-related expenses.


Amortization of tax credit and other investments decreased $8.8 million or 27% to $23.8was $19.9 million for the three months ended September 30, 2017,third quarter of 2022, a decrease of $18.1 million or 48%, compared to $32.6with $38.0 million for the same period in 2016,2021. For the first nine months of 2022, amortization of tax credit and increased $5.3other investments was $48.8 million, a decrease of $41.9 million or 9% to $66.1 million for the nine months ended September 30, 2017,46%, compared to $60.8with $90.7 million for the same period in 2016.2021. The decreaseyear-over-year change reflects the mix of tax credits being recognized, which have differing amortization periods, as well as the impact of investments that close in the third quarter of 2017, compared with the prior year period, was mainly driven by higher amortization, which resulted from a renewable energy tax credit investment newly placed in service in the third quarter of 2016. Likewise, the increase in the first nine months of 2017, compared with the prior year period, was primarily driven by additional renewable energy and historical rehabilitation tax credit investments placed in service during the nine months ended September 30, 2017.given period.


Legal expense decreased $2.0 million or 38% to $3.3 million for the three months ended September 30, 2017, compared to $5.4 million for the same period in 2016, and decreased $3.8 million or 30% to $8.9 million for the nine months ended September 30, 2017, compared to $12.7 million for the same period in 2016. The decreases for the three and nine months ended September 30, 2017 were predominantly due to lower legal fees and litigation expense following the resolution of previously outstanding litigation.



Consulting expense decreased $507 thousand or 11% to $4.1 million for the three months ended September 30, 2017, compared to $4.6 million for the same period in 2016, and decreased $8.3 million or 43% to $10.8 million for the nine months ended September 30, 2017, compared to $19.0 million for the same period in 2016. The decreases for both periods were primarily attributable to a decline in Bank Secrecy Act (“BSA”) and Anti-Money Laundering (“AML”) related consulting expense.

Income Taxes
($ in thousands)Three Months Ended September 30,Nine Months Ended September 30,
20222021% Change20222021% Change
Income before income taxes$384,388 $273,431 41 %$1,023,330 $779,296 31 %
Income tax expense$89,049 $47,982 86 %$232,010 $124,111 87 %
Effective tax rate23.2 %17.5 %22.7 %15.9 %
Income
Third quarter 2022 income tax expense was $42.6$89.0 million and $140.2 million for the three and nine months ended September 30, 2017, respectively, compared to $13.3 million and $90.1 million, respectively, for the same periods in 2016. The effective tax rate was 24.3%23.2%, compared with third quarter 2021 income tax expense of $48.0 million and 25.0% foran effective tax rate of 17.5%. For the three andfirst nine months ended September 30, 2017, respectively,of 2022, income tax expense was $232.0 million and the effective tax rate was 22.7%, compared to 10.8%with income tax expense of $124.1 million and 21.9%, respectively,an effective tax rate of 15.9% for the same periodsperiod in 2016.

2021. The higheryear-over-year increases in the income tax expense and the effective tax rates for the three and nine months ended September 30, 2017, compared to the same periods in 2016, were mainly due torate reflected a higher projectedlevel of income before income taxes that was partially offset by increasesand a decrease in tax credits primarily generated from investments in renewable energy, historic rehabilitation and affordable housing partnership projects. For the three and nine months ended September 30, 2017, tax credits generated from these investments were $40.0 million and $106.4 million, respectively, compared to $33.3 million and $83.7 million, respectively, for the same periods in 2016. In addition, the effective tax rates for the three and nine months ended September 30, 2017 were further reduced by the adoption of Accounting Standards Update (“ASU”) 2016-09, Compensation — Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting, beginning January 1, 2017. As a result of the adoption of this ASU, net excess tax benefits for restricted stock units of $151 thousand and $4.6 million were recognized in Income tax expense on the Consolidated Statements of Income during the three and nine months ended September 30, 2017, respectively, which partially offset the higher effective tax rates for the same periods.2022.

75
Management regularly reviews the Company’s tax positions and deferred tax assets. Factors considered in this analysis include the Company’s ability to generate future taxable income, implement tax-planning strategies and utilize taxable income from prior carryback years (if such carryback is permitted under the applicable tax law), as well as future reversals of existing taxable temporary differences. The Company accounts for income taxes using the asset and liability approach, the objective of which is to establish deferred tax assets and liabilities for the temporary differences between the financial reporting basis and the tax basis of the Company’s assets and liabilities at enacted tax rates expected to be in effect when such amounts are realized and settled. As of September 30, 2017 and December 31, 2016, the Company had net deferred tax assets of $142.0 million and $129.7 million, respectively.


A valuation allowance is established for deferred tax assets if, based on the weight of all positive evidence against all negative evidence, it is more likely than not that some portion or all of the deferred tax assets will not be realized. A valuation allowance is used, as needed, to reduce the deferred tax assets to the amount that is more likely than not to be realized. Management has concluded that it is more likely than not that all of the benefits of the deferred tax assets will be realized, with the exception of the deferred tax assets related to net operating losses in certain states. Accordingly, a valuation allowance has been recorded for these amounts. The Company believes that adequate provisions have been made for all income tax uncertainties consistent with ASC 740-10, Income Taxes.



Operating Segment Results

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

These segments are defined by the type of customers served and the related products and services provided. The Retail Banking segment focuses primarily on retail operations throughsegments reflect how financial information is currently evaluated by management. For additional description of the Bank’s branch network. The Commercial Banking segment, which includes commercial and industrial (“C&I”) and commercial real estate (“CRE”) operations, primarily generates commercial loans and deposits through domestic commercial lending offices located in California, New York, Texas, Washington, Massachusetts, Nevada and Georgia, and foreign commercial lending offices located in China and Hong Kong. Furthermore, the Commercial Banking segment offers a wide variety of international finance, trade finance, and cashCompany’s internal management services and products. The remaining centralized functions,reporting process, including the treasury activitiessegment cost allocation methodology, see Note 14 — Business Segments to the Consolidated Financial Statements in this Form 10-Q.

Segment net interest income represents the difference between actual interest earned on assets and interest incurred on liabilities of the Company and eliminations of inter-segment amounts have been aggregated and included insegment, adjusted for funding charges or credits through the “Other” segment, which provides broad administrative support to the two core segments.

Changes in the Company’s management structure or reporting methodologies may result in changes in the measurement of operating segment results. Results for prior periods are generally restated for comparability when there are changes in management structure or reporting methodologies, unless it is deemed not practicable to do so.
The Company’s internal funds transfer pricing process is formulated with the goal of encouraging loan and deposit growth that is consistent with the Company’s overall profitability objectives, as well as to provide a reasonable and consistent basis for the measurement of its business segments and product net interest margins. The Company’s internal funds transfer pricing assumptions and methodologies are reviewed at least annually to ensure that the process is reflective of current market conditions. (“FTP”) process.

Note 15 — Business Segments to the Consolidated Financial Statements describes the Company’s segment reporting methodology and the business activities of each business segment, and presents financial results of these business segments for the three and nine months ended September 30, 2017 and 2016.



The following tables present the selectedresults by operating segment for the periods indicated:
($ in thousands)Three Months Ended September 30,
Consumer and Business BankingCommercial
Banking		Other
202220212022202120222021
Total revenue (loss) (1)
$357,230 $198,777 $271,637 $233,063 $(1,506)$36,975 
Provision for (reversal of) credit losses8,974 1,293 18,026 (11,293)— — 
Noninterest expense104,005 90,575 81,386 66,731 30,582 48,078 
Segment income (loss) before income taxes (1)
244,251 106,909 172,225 177,625 (32,088)(11,103)
Segment net income (loss) (1)
$173,982 $76,577 $122,869 $126,984 $(1,512)$21,888 
($ in thousands)Nine Months Ended September 30,
Consumer and Business BankingCommercial
Banking		Other
202220212022202120222021
Total revenue (loss) (1)
$908,400 $570,225 $807,787 $682,921 $(42,074)$87,134 
Provision for (reversal of) credit losses14,976 (598)33,524 (24,402)— — 
Noninterest expense294,395 267,511 235,804 204,042 72,084 114,431 
Segment income (loss) before income taxes (1)
599,029 303,312 538,459 503,281 (114,158)(27,297)
Segment net income (loss) (1)
$426,695 $217,257 $384,237 $360,275 $(19,612)$77,653 
(1)During the fourth quarter of 2021, the Company enhanced its segment allocation methodology related to the fair values of interest rate and commodity derivative contracts, which are included in noninterest income. These fair values, which were previously allocated to the “Commercial Banking” segment prior to the fourth quarter of 2021, have since been reclassified between “Consumer and Business Banking” and “Commercial Banking.” Balances for the third quarter and nine months of 2021 have been reclassified to reflect these allocation changes for comparability.

Consumer and Business Banking

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

76

The following tables present additional financial information for the threeConsumer and Business Banking segment for the periods indicated:
($ in thousands)Three Months Ended September 30,
Change from 2021
20222021$%
Net interest income before provision for credit losses$326,411 $176,678 $149,733 85 %
Noninterest income (1)
30,819 22,099 8,720 39 %
Total revenue (1)
357,230 198,777 158,453 80 %
Provision for credit losses8,974 1,293 7,681 594 %
Noninterest expense104,005 90,575 13,430 15 %
Segment income before income taxes (1)
244,251 106,909 137,342 128 %
Income tax expense70,269 30,332 39,937 132 %
Segment net income (1)
$173,982 $76,577 $97,405 127 %
Average loans$16,405,433 $14,186,630 $2,218,803 16 %
Average deposits$33,271,717 $32,516,678 $755,039 2 %
($ in thousands)Nine Months Ended September 30,
Change from 2021
20222021$%
Net interest income before provision for (reversal of) credit losses$823,998 $500,352 $323,646 65 %
Noninterest income (1)
84,402 69,873 14,529 21 %
Total revenue (1)
908,400 570,225 338,175 59 %
Provision for (reversal of) credit losses14,976 (598)15,574 2604 %
Noninterest expense294,395 267,511 26,884 10 %
Segment income before income taxes (1)
599,029 303,312 295,717 97 %
Income tax expense172,334 86,055 86,279 100 %
Segment net income (1)
$426,695 $217,257 $209,438 96 %
Average loans$15,448,874 $13,787,675 $1,661,199 12 %
Average deposits$33,272,271 $31,304,335 $1,967,936 6 %
(1)During the fourth quarter of 2021, the Company enhanced its segment allocation methodology related to the fair values of interest rate and commodity derivative contracts, which are included in noninterest income. These fair values, which were previously allocated to the “Commercial Banking” segment prior to the fourth quarter of 2021, have since been reclassified between “Consumer and Business Banking” and “Commercial Banking.” Balances for the third quarter and nine months ended September 30, 2017of 2021 have been reclassified to reflect these allocation changes for comparability.

Consumer and 2016:
 
($ in thousands) Three Months Ended September 30, 2017
 
Retail
Banking
 
Commercial
Banking
 Other Total
Net interest income $147,457
 $138,153
 $17,545
 $303,155
Noninterest income $16,218
 $30,320
 $3,086
 $49,624
Noninterest expense $56,062
 $45,686
 $62,751
 $164,499
Pre-tax income $68,554
 $99,025
 $7,705
 $175,284
   
   
($ in thousands) Three Months Ended September 30, 2016
 
Retail
Banking
 
Commercial
Banking
 Other Total
Net interest income $106,633
 $131,340
 $16,175
 $254,148
Noninterest income $14,700
 $26,218
 $8,423
 $49,341
Noninterest expense $55,942
 $45,306
 $69,252
 $170,500
Pre-tax income $32,304
 $80,393
 $10,767
 $123,464
   
   
($ in thousands) Nine Months Ended September 30, 2017
 
Retail
Banking
 
Commercial
Banking
 Other Total
Net interest income $430,437
 $408,570
 $26,361
 $865,368
Noninterest income $43,767
 $82,645
 $86,635
 $213,047
Noninterest expense $181,811
 $149,510
 $155,372
 $486,693
Pre-tax income $204,601
 $284,195
 $72,177
 $560,973
   
   
($ in thousands) Nine Months Ended September 30, 2016
 
Retail
Banking
 
Commercial
Banking
 Other Total
Net interest income $329,120
 $389,559
 $41,257
 $759,936
Noninterest income $37,798
 $70,450
 $25,870
 $134,118
Noninterest expense $173,337
 $145,695
 $146,953
 $465,985
Pre-tax income $114,513
 $268,401
 $28,137
 $411,051
   

Retail Banking
The RetailBusiness Banking segment reported pre-taxnet income of $68.6increased $97.4 million and $204.6or 127% year-over-year to $174.0 million for the threethird quarter of 2022, and $209.4 million or 96% year-over-year to $426.7 million for the first nine months ended September 30, 2017, respectively, compared to $32.3 million and $114.5 million, respectively, for the same periods in 2016.of 2022. The increases in pre-taxboth periods reflected revenue growth, partially offset by higher income tax expense and noninterest expense. Net interest income before provision for this segmentcredit losses increased $149.7 million or 85% year-over-year to $326.4 million for the threethird quarter of 2022, and $323.6 million or 65% year-over-year to $824.0 million for the first nine months ended September 30, 2017, compared to the sameof 2022. The increases in both periods in 2016, were primarily driven by an increase in nethigher deposit fund transfer pricing credits due to noninterest-bearing deposit growth, and higher loan interest income, partially offset by an increaseprimarily from growth in provision for credit losses.
Net interest income for this segmentresidential mortgage loans. Noninterest expense increased $40.8$13.4 million or 38%15% year-over-year to $147.5$104.0 million for the three months ended September 30, 2017, comparedthird quarter of 2022, and $26.9 million or 10% year-over-year to $106.6$294.4 million for the same period in 2016. Net interest income increased $101.3 million or 31% to $430.4 million for thefirst nine months ended September 30, 2017, compared to $329.1 million for the same period in 2016.of 2022. The increases in net interest income for the three and nine months ended September 30, 2017, compared to the sameboth periods in 2016, were primarily due to the growth in core deposits for the segment, for which the segment receives interest income credit under the Bank’s internal funds transfer pricing system.
Noninterest income for this segment increased $1.5 million or 10% to $16.2 million for the three months ended September 30, 2017, compared to $14.7 million for the same period in 2016. Noninterest income increased $6.0 million or 16% to $43.8 million for the nine months ended September 30, 2017, compared to $37.8 million for the same period in 2016. The increases in noninterest income for the three and nine months ended September 30, 2017, compared to the same periods in 2016, were primarily attributable to increases in branch fees, derivative fees and other income, wealth management fees, and net gains on sales of loans. This was partially offset by a decrease in ancillary loan fees and other income.


Noninterest expense for this segment increased slightly by $120 thousand to $56.1 million for the three months ended September 30, 2017, compared to $55.9 million for the same period in 2016. Noninterest expense increased $8.5 million or 5% to $181.8 million for the nine months ended September 30, 2017, compared to $173.3 million for the same period in 2016. The increases in noninterest expense for the three and nine months ended September 30, 2017, compared to the same periods in 2016, were primarily due to increases inreflected higher compensation and employee benefits occupancy and equipment expense, and data processing expense, partially offset by a decrease in consulting expense.

Commercial Banking

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

77

The following tables present additional financial information for the Commercial Banking segment for the periods indicated:
($ in thousands)Three Months Ended September 30,
Change from 2021
20222021$%
Net interest income before provision for (reversal of) credit losses$222,996 $189,791 $33,205 17 %
Noninterest income (1)
48,641 43,272 5,369 12 %
Total revenue (1)
271,637 233,063 38,574 17 %
Provision for (reversal of) credit losses18,026 (11,293)29,319 260 %
Noninterest expense81,386 66,731 14,655 22 %
Segment income before income taxes (1)
172,225 177,625 (5,400)(3)%
Income tax expense49,356 50,641 (1,285)(3)%
Segment net income (1)
$122,869 $126,984 $(4,115)(3)%
Average loans$30,449,108 $25,773,521 $4,675,587 18 %
Average deposits$16,627,353 $18,275,884 $(1,648,531)(9)%
($ in thousands)Nine Months Ended September 30,
Change from 2021
20222021$%
Net interest income before provision for (reversal of) credit losses$662,037 $559,579 $102,458 18 %
Noninterest income (1)
145,750 123,342 22,408 18 %
Total revenue (1)
807,787 682,921 124,866 18 %
Provision for (reversal of) credit losses33,524 (24,402)57,926 237 %
Noninterest expense235,804 204,042 31,762 16 %
Segment income before income taxes (1)
538,459 503,281 35,178 7 %
Income tax expense154,222 143,006 11,216 8 %
Segment net income (1)
$384,237 $360,275 $23,962 7 %
Average loans$29,099,646 $25,654,076 $3,445,570 13 %
Average deposits$17,296,919 $16,611,906 $685,013 4 %
(1)During the fourth quarter of 2021, the Company enhanced its segment allocation methodology related to the fair values of interest rate and commodity derivative contracts, which are included in noninterest income. These fair values, which were previously allocated to the “Commercial Banking” segment prior to the fourth quarter 2021, have since been reclassified between “Consumer and Business Banking” and “Commercial Banking.” Balances for the third quarter and nine months of 2021 have been reclassified to reflect these allocation changes for comparability.

Commercial Banking segment net income of $99.0decreased $4.1 million and $284.2or 3%, year-over-year to $122.9 million for the threethird quarter of 2022, due to increases in provision for credit losses and noninterest expense, partially offset by revenue growth. For the first nine months ended September 30, 2017, respectively, comparedof 2022, this segment’s net income increased $24.0 million or 7% year-over-year to $80.4$384.2 million. This increase reflected revenue growth, partially offset by higher provision for credit losses and noninterest expense. Net interest income before provision for credit losses increased $33.2 million and $268.4or 17% year-over-year to $223.0 million respectively, for the same periods in 2016.third quarter of 2022, and $102.5 million or 18% year-over-year to $662.0 million for the first nine months of 2022. The increases in pre-tax income for this segment for the three and nine months ended September 30, 2017, compared to the sameboth periods in 2016, were attributable to increases in net interest income and noninterest income.
Net interest income for this segment increased $6.8 million or 5% to $138.2 million for the three months ended September 30, 2017, compared to $131.3 million for the same period in 2016. Net interest income increased $19.0 million or 5% to $408.6 million for the nine months ended September 30, 2017, compared to $389.6 million for the same period in 2016. The increases in net interest income for the three and nine months ended September 30, 2017, compared to the same periods in 2016, were due to the growth in commercial loans and commercial core deposits, for which the segment receives interest income credit under the Bank’s internal funds transfer pricing system.
Noninterest income for this segment increased $4.1 million or 16% to $30.3 million for the three months ended September 30, 2017, compared to $26.2 million for the same period in 2016. Noninterest income increased $12.2 million or 17% to $82.6 million for the nine months ended September 30, 2017, compared to $70.5 million for the same period in 2016. The increases in noninterest income for the three and nine months ended September 30, 2017, compared to the same periods in 2016, were primarily due to a net gain on sale of the Company’s insurance brokerage business, EWIS, during the three and nine months ended September 30, 2017, and increases in branch fees, ancillaryhigher loan fees and otherinterest income as well as letters offrom commercial loan growth. Provision for credit fees and foreign exchange income.
Noninterest expense for this segmentlosses increased slightly by $380 thousand$29.3 million or 260% year-over-year to $45.7$18.0 million for the three months ended September 30, 2017, comparedthird quarter of 2022, and $57.9 million or 237% year-over-year to $45.3$33.5 million for the same period in 2016.first nine months of 2022, primarily driven by the current macroeconomic outlook and commercial loan growth. Noninterest expense increased $3.8$14.7 million or 3%22% year-over-year to $149.5$81.4 million for the nine months ended September 30, 2017, compared to $145.7 million for the same period in 2016. The increases in noninterest expense for the three and nine months ended September 30, 2017, compared to the same periods in 2016, werethird quarter of 2022, primarily due to higher compensation and employee benefits and higher corporate overhead allocations. For the first nine months of 2022, this segment’s noninterest expense increased $31.8 million or 16% year-over-year to $235.8 million, driven by increases in compensation and employee benefits, corporate overhead allocations and consulting expense, partially offset by a decreaseother operating expenses.

Other

Centralized functions, including the corporate treasury activities of the Company and eliminations of inter-segment amounts, have been aggregated and included in legal expense.the Other segment, which provides broad administrative support to the two core segments, namely the Consumer and Business Banking, and the Commercial Banking segments.
78

The following tables present additional financial information for the Other segment for the periods indicated:
($ in thousands)Three Months Ended September 30,
Change from 2021
20222021$%
Net interest income before provision for credit losses$2,402 $29,237 $(26,835)(92)%
Noninterest (loss) income(3,908)7,738 (11,646)(151)%
Total (loss) revenue(1,506)36,975 (38,481)(104)%
Noninterest expense30,582 48,078 (17,496)(36)%
Segment loss before income taxes(32,088)(11,103)(20,985)189 %
Income tax benefit(30,576)(32,991)2,415 (7)%
Segment net (loss) income$(1,512)$21,888 $(23,400)(107)%
Average deposits$4,152,463 $2,704,070 $1,448,393 54 %
($ in thousands)Nine Months Ended September 30,
Change from 2021
20222021$%
Net interest (loss) income before provision for credit losses$(45,661)$65,943 $(111,604)(169)%
Noninterest income3,587 21,191 (17,604)(83)%
Total (loss) revenue(42,074)87,134 (129,208)(148)%
Noninterest expense72,084 114,431 (42,347)(37)%
Segment loss before income taxes(114,158)(27,297)(86,861)318 %
Income tax benefit(94,546)(104,950)10,404 (10)%
Segment net (loss) income$(19,612)$77,653 $(97,265)(125)%
Average deposits$3,499,816 $2,612,897 $886,919 34 %

The Other segment includesreported segment loss before income taxes of $32.1 million and segment net loss of $1.5 million for the activitiesthird quarter of 2022, reflecting an income tax benefit of $30.6 million. For the treasury function, which is responsiblefirst nine months of 2022, the Other segment reported segment loss before income taxes of $114.2 million and segment net loss of $19.6 million, reflecting an income tax benefit of $94.5 million. The increases in segment losses before income taxes for liquidityboth periods were primarily driven by lower revenue, partially offset by decreases in noninterest expense. The $26.8 million and interest rate risk management of the Company, and supports the Retail Banking and Commercial Banking segments through internal funds transfer pricing credits and charges, which are included$111.6 million decreases in net interest income. The Other segment reported pre-tax income of $7.7 million and $72.2 millionbefore provision for credit losses for the threethird quarter and first nine months ended September 30, 2017,of 2022, respectively, compared to $10.8 million and $28.1 million, respectively, for the same periods in 2016. The decrease in pre-tax income for this segment for the three months ended September 30, 2017, compared to the same period in 2016, wasprior year periods, were primarily driven by decreases in noninterestlower FTP spread income and internal funds transfer pricing credits,absorbed by the Other segment, partially offset by a decrease in noninterest expense and an increase in net interest income. The increase in pre-tax income for this segment for the nine months ended September 30, 2017, compared to the same period in 2016, was primarily driven by an increase in noninterest income as the result of the net gain on sale of the commercial property, partially offset by a decrease in net interest income and an increase in noninterest expense.
Net interest income for this segment increased $1.4 million or 8% to $17.5 million for the three months ended September 30, 2017, compared to $16.2 million for the same period in 2016. Net interest income decreased $14.9 million or 36% to $26.4 million for the nine months ended September 30, 2017, compared to $41.3 million for the same period in 2016. The increase in net interest income for the three months ended September 30, 2017, compared to the same period in 2016, was primarily due to an increase in interest income from investments. The decrease in net interest incomeinvestments due to a higher yield on debt securities for the third quarter of 2022, and a higher volume of debt securities for the first nine months ended September 30, 2017, comparedof 2022. Noninterest expense decreased $17.5 million year-over-year to the same period in 2016, was due to increases in interest expense on borrowings and deposits.


Noninterest income for this segment decreased $5.3 million or 63% to $3.1$30.6 million for the three months ended September 30, 2017, comparedthird quarter of 2022, and $42.3 million year-over-year to $8.4$72.1 million for the same period in 2016. Noninterest income increased $60.8 million or 235% to $86.6 million for thefirst nine months ended September 30, 2017, compared to $25.9 million for the same period in 2016. The decrease in noninterest income for the three months ended September 30, 2017, compared to the same period in 2016, wasof 2022, primarily due to decreases in foreign exchange income arising from valuation changes associated with currency hedges and decreases in rental income. The increase in noninterest income for the nine months ended September 30, 2017, compared to the same period in 2016, was primarily due to the $71.7 million net gain on sale of the commercial property, as discussed in the Noninterest income section of MD&A.
Noninterest expense for this segment decreased $6.5 million or 9% to $62.8 million for the three months ended September 30, 2017, compared to $69.3 million for the same period in 2016. Noninterest expense increased $8.4 million or 6% to $155.4 million for the nine months ended September 30, 2017, compared to $147.0 million for the same period in 2016. The decrease in noninterest expense for the three months ended September 30, 2017, compared to the same period in 2016, was primarily attributable to a decrease of $8.8 million inlower amortization of tax creditcredits and other investments, partially offset by increasesinvestments.

The income tax expense or benefit in the Other segment consists of $2.5 million in compensation and employee benefits. The increase in noninterestthe remaining unallocated income tax expense for the nine months ended September 30, 2017, comparedor benefit after allocating income tax expense to the same period in 2016, was primarily attributabletwo core segments. Income tax expense is allocated to increases of $5.3 million in amortization ofthe Consumer and Business Banking and the Commercial Banking segments by applying statutory income tax credit and other investments, and $6.5 million in compensation and employee benefits.rates to the segment income before income taxes.



Balance Sheet Analysis


The following is a discussion of the significant changes between September 30, 2017 and December 31, 2016.

Selected Consolidated Balance Sheets Data
     
      Change
($ in thousands) September 30, 2017 December 31, 2016 $ %
  (Unaudited)      
ASSETS        
Cash and cash equivalents $1,736,749
 $1,878,503
 $(141,754) (8)%
Interest-bearing deposits with banks 404,946
 323,148
 81,798
 25 %
Resale agreements 1,250,000
 2,000,000
 (750,000) (38)%
Available-for-sale investment securities, at fair value 2,956,776
 3,335,795
 (379,019) (11)%
Held-to-maturity investment security, at cost —
 143,971
 (143,971) (100)%
Restricted equity securities, at cost 73,322
 72,775
 547
 1 %
Loans held-for-sale 178
 23,076
 (22,898) (99)%
Loans held-for-investment (net of allowance for loan losses of $285,926 in 2017 and $260,520 in 2016) 28,239,431
 25,242,619
 2,996,812
 12 %
Investments in qualified affordable housing partnerships, net 178,344
 183,917
 (5,573) (3)%
Investments in tax credit and other investments, net 203,758
 173,280
 30,478
 18 %
Premises and equipment 131,311
 159,923
 (28,612) (18)%
Goodwill 469,433
 469,433
 —
 — %
Other assets 663,718
 782,400
 (118,682) (15)%
TOTAL $36,307,966
 $34,788,840
 $1,519,126
 4 %
LIABILITIES  
  
   

Customer deposits $31,311,662
 $29,890,983
 $1,420,679
 5 %
Short-term borrowings 24,813
 60,050
 (35,237) (59)%
FHLB advances 323,323
 321,643
 1,680
 1 %
Repurchase agreements 50,000
 350,000
 (300,000) (86)%
Long-term debt 176,513
 186,327
 (9,814) (5)%
Accrued expenses and other liabilities 639,759
 552,096
 87,663
 16 %
Total liabilities 32,526,070
 31,361,099
 1,164,971
 4 %
STOCKHOLDERS’ EQUITY 3,781,896
 3,427,741
 354,155
 10 %
TOTAL $36,307,966
 $34,788,840
 $1,519,126
 4 %
     

As of September 30, 2017, total assets were $36.31 billion, an increase of $1.52 billion or 4% from December 31, 2016. The predominant area of asset growth was in loans, which was driven by strong increases across all of the Company’s commercial and retail lines of business. These increases were partially offset by maturities of resale agreements, and decreases in investment securities, cash and cash equivalents, and other assets.

As of September 30, 2017, total liabilities were $32.53 billion, an increase of $1.16 billion or 4% from December 31, 2016, primarily due to increases in customer deposits, reflecting the continued strong growth from existing and new customers. This increase was partially offset by a decrease in repurchase agreements primarily due to an increase in resale agreements that were eligible for netting against repurchase agreements under ASC 210-20-45, Balance Sheet Offsetting.

Stockholders’ equity growth benefited primarily from $420.7 million in net income, partially offset by $87.6 million of cash dividends on common stock.



InvestmentDebt Securities

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


•interest income for earnings and yield enhancement;
•availability for funding needs arising during the normal course of business;
•the ability to execute interest rate risk management strategies duein response to changes in economic or market conditions, which influence loan origination, prepayment speeds, or deposit balancesconditions; and mix; and
•collateral to support pledging agreements as required and/or to enhance the Company’s borrowing capacity.

79

Held-to-maturity investment security

During the first quarter of 2016,While the Company securitized $201.7 million of multifamily residential loans and retained $160.1 million of the senior tranche of the resultingintends to hold its debt securities from the securitization as held-to-maturity, which is carried at amortized cost. The held-to-maturity investment security is a non-agency commercial mortgage-backed security maturing on April 25, 2046. During the third quarter of 2017, the Company transferred this non-agency commercial mortgage-backed security with a net carrying amount of $115.6 million from held-to-maturityindefinitely, it may sell AFS securities in response to available-for-sale. The transfer reflects the Company’s intent to sell the security under active liquidity management.

Available-for-sale investment securities

As of September 30, 2017 and December 31, 2016, the Company’s available-for-sale investment securities portfolio was primarily comprised of U.S. government agency and U.S. government sponsored enterprise mortgage-backed securities, U.S. Treasury securities and foreign bonds. Investment securities classified as available-for-sale are carried at their estimated fair value with the corresponding changes in fair value recorded in Accumulated other comprehensive loss, net of tax, as a component of Stockholders’ equity on the Consolidated Balance Sheets.balance sheet and related interest rate risk to meet liquidity, regulatory and strategic requirements.


The following table presents the breakoutdistribution of the amortized costCompany’s AFS and fair value of available-for-sale investmentHTM debt securities by major categoriesportfolio as of September 30, 20172022 and December 31, 2016:2021, and by credit ratings as of September 30, 2022:
($ in thousands)September 30, 2022December 31, 2021
Ratings as of September 30, 2022 (1)
Amortized
 Cost		Fair
Value		% of Fair ValueAmortized
 Cost		Fair
Value		% of Fair ValueAAA/AAABBBBB and Lower
No Rating (2)
AFS debt securities:
U.S. Treasury securities$676,312 $600,677 10 %$1,049,238 $1,032,681 10 %100 %— %— %— %— %
U.S. government agency and U.S. government-sponsored enterprise debt securities319,070 260,424 5 %1,333,984 1,301,971 13 %100 %— %— %— %— %
U.S. government agency and U.S. government-sponsored enterprise mortgage-backed securities2,639,133 2,315,314 39 %4,210,832 4,157,263 42 %100 %— %— %— %— %
Municipal securities307,084 249,502 4 %519,381 523,158 5 %91 %5 %— %— %4 %
Non-agency mortgage-backed securities1,233,490 1,069,513 18 %1,388,857 1,378,374 14 %82 %— %— %— %18 %
Corporate debt securities673,502 529,565 9 %657,516 649,665 6 %— %31 %67 %2 %— %
Foreign government bonds238,720 225,810 4 %260,447 257,733 3 %47 %53 %— %— %— %
Asset-backed securities66,793 64,870 1 %74,674 74,558 1 %100 %— %— %— %— %
Collateralized loan obligations (“CLOs”)617,250 590,415 10 %592,250 589,950 6 %96 %4 %— %— %— %
Total AFS debt securities$6,771,354 $5,906,090 100 %$10,087,179 $9,965,353 100 %85 %5 %6 %0 %4 %
HTM debt securities:
U.S. Treasury securities$522,713 $466,085 19 %$— $— — %100 %— %— %— %— %
U.S. government agency and U.S. government-sponsored enterprise debt securities998,233 782,617 32 %— — — %100 %— %— %— %— %
U.S. government agency and U.S. government-sponsored enterprise mortgage-backed securities1,301,824 1,066,339 43 %— — — %100 %— %— %— %— %
Municipal securities189,897 144,094 6 %— — — %100 %— %— %— %— %
Total HTM debt securities$3,012,667 $2,459,135 100 %$— $— — %100 %— %— %— %— %
Total debt securities$9,784,021 $8,365,225 $10,087,179 $9,965,353 
 
($ in thousands) September 30, 2017 December 31, 2016
 
Amortized
Cost
 
Fair
Value
 
Amortized
Cost
 
Fair
Value
Available-for-sale investment securities:        
U.S. Treasury securities $533,035
 $526,332
 $730,287
 $720,479
U.S. government agency and U.S. government sponsored enterprise debt securities 191,727
 189,185
 277,891
 274,866
U.S. government agency and U.S. government sponsored enterprise mortgage-backed securities 1,475,969
 1,466,106
 1,539,044
 1,525,546
Municipal securities 116,798
 117,242
 148,302
 147,654
Non-agency residential mortgage-backed securities 9,680
 9,694
 11,592
 11,477
Corporate debt securities 12,655
 11,942
 232,381
 231,550
Foreign bonds 505,395
 489,140
 405,443
 383,894
Other securities (1)
 147,504
 147,135
 40,501
 40,329
Total available-for-sale investment securities $2,992,763
 $2,956,776
 $3,385,441
 $3,335,795
 
(1)During the third quarter of 2017, the Company transferred a non-agency commercial mortgage-backed security with a net carrying amount of $115.6 million from held-to-maturity to available-for-sale.

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

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


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

Available-for-Sale Debt Securities

The fair value of the available-for-sale investmentAFS debt securities portfolio totaled $2.96$5.91 billion as of September 30, 2017, compared to $3.342022, a decrease of $4.06 billion or 41% from $9.97 billion as of December 31, 2016. The decrease of $379.0 million or 11% primarily reflected the sales of corporate debt securities, U.S. Treasury securities, U.S. government agency and U.S. government sponsored enterprise mortgage-backed securities, and municipal securities; and paydowns, maturities and calls of U.S. government agency and U.S. government sponsored enterprise mortgage-backed securities, U.S. government agency and U.S. government sponsored enterprise debt securities, and U.S. Treasury securities.2021. The decrease was partially offset by purchasesprimarily due to the Company’s transfer of U.S. government agency$3.01 billion of AFS securities to HTM securities during the first quarter of 2022 and U.S. government sponsored enterprise mortgage-backed securities, foreign bonds, U.S. government agency and U.S. government sponsored enterprise debt securities, U.S. Treasury securities and municipal securities; anda decline in the portfolio valuation within the rising interest rate environment. For further discussion regarding the transfer, of a non-agency commercial mortgage-backed security from held-to-maturity security.

refer to the Held-to-Maturity Debt Securities section below. The Company’s available-for-sale investmentAFS debt securities are carried at fair value with changesnoncredit-related unrealized gains and losses, net of tax, reported in fair value reflected in Other comprehensive (loss) income (loss) unless a security is deemed to be other-than-temporarily impaired. Ason the Consolidated Statement of September 30, 2017, the Company’sComprehensive Income. Pre-tax net unrealized losses on available-for-sale investmentAFS debt securities were $36.0$865.3 million as of September 30, 2022, compared to $49.6with $121.8 million as of December 31, 2016. The favorable change in2021.
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As of September 30, 2022, 96% of the netcarrying value of the AFS debt securities portfolio was rated investment grade by NRSROs, compared with 98% as of December 31, 2021. Of the AFS debt securities with gross unrealized losses, was primarily attributed to the flattening in the yield curve with long-term interest rates falling. Gross unrealized losses on available-for-salesubstantially all were rated investment securities totaled $42.3 milliongrade as of September 30, 2017, compared2022 and December 31, 2021. There was no allowance for credit losses as of September 30, 2022 and December 31, 2021, provided against the AFS debt securities. Additionally, there were no credit losses recognized in earnings for both the third quarters and first nine months of 2022 and 2021. For additional discussion on the allowance for credit losses, see Note 5 — Securities — Allowance for Credit Losses on Available-for-Sale Debt Securities to $56.3 millionthe Consolidated Financial Statements in this Form 10-Q.

Held-to-Maturity Debt Securities

During the first quarter of 2022, the Company transferred $3.01 billion in aggregate fair value of U.S. Treasury, government agency and government-sponsored enterprise debt and mortgage-back securities, and municipal securities from AFS to HTM. In comparison, there were no HTM debt securities as of December 31, 2016. As2021. The Company’s HTM debt securities are carried at amortized cost. The unrealized gains or losses at the date of transfer of these securities continue to be reported in Accumulated other comprehensive income (loss) (“AOCI”), net of tax on the Consolidated Balance Sheet and are amortized over the remaining life of the securities.

All HTM debt securities were issued, guaranteed, or supported by the U.S. government or government-sponsored enterprises. Accordingly, the Company applied a zero credit loss assumption for these securities and no allowance for credit loss was recorded as of September 30, 2017,2022. For additional discussion on the Company had no intentionallowance for credit losses, see Note 5 — Securities — Allowance for Credit Losses on Held-to-Maturity Debt Securities to sellthe Consolidated Financial Statements in this Form 10-Q.

For additional information on AFS and HTM securities, with unrealized lossessee Note 1— Summary of Significant Accounting Policies to the Consolidated Financial Statements in the Company’s2021 Form 10-K and believes it is more likely than not that it would not be required to sell such securities before recoveryNote 2— Current Accounting Developments and Summary of their amortized cost. No other-than-temporary impairment was recognized for the three and nine months ended September 30, 2017 and 2016. For a complete discussion and disclosure, see Significant Accounting Policies, Note 43 — Fair Value Measurement and Fair Value of Financial Instruments, and Note 65 — Securities to the Consolidated Financial Statements.Statements in this Form 10-Q.


As of September 30, 2017 and December 31, 2016, available-for-sale investment securities with a fair value of $584.9 million and $767.4 million, respectively, were pledged to secure public deposits, repurchase agreements, the Federal Reserve Bank’s discount window and for other purposes required or permitted by law.


The following table presents the weighted average yields and contractual maturity distributions, excluding periodic principal payments, of the Company’s investment securities as of the periods indicated. Actual maturities of mortgage-backed securities can differ from contractual maturities as the borrowers have the right to prepay the obligations. In addition, such factors as prepayments and interest rate changes may affect the yields on the carrying value of mortgage-backed securities.
 
($ in thousands) September 30, 2017 December 31, 2016
 Amortized
Cost		 Fair Value 
Yield (1)
 Amortized
Cost		 Fair Value 
Yield (1)
Available-for-sale investment securities:            
U.S. Treasury securities:            
Maturing in one year or less $150,431
 $150,134
 0.96% $100,707
 $100,653
 0.65%
Maturing after one year through five years 382,604
 376,198
 1.35% 376,580
 371,917
 1.27%
Maturing after five years through ten years —
 —
 —% 253,000
 247,909
 1.59%
Total 533,035
 526,332
 1.24% 730,287
 720,479
 1.29%
U.S. government agency and U.S. government sponsored enterprise debt securities:            
Maturing in one year or less 24,999
 24,916
 1.02% 118,966
 118,982
 0.94%
Maturing after one year through five years 9,732
 9,774
 2.37% 52,622
 52,630
 1.38%
Maturing after five years through ten years 103,394
 101,030
 2.19% 81,829
 78,977
 2.07%
Maturing after ten years 53,602
 53,465
 2.58% 24,474
 24,277
 2.50%
Total 191,727
 189,185
 2.15% 277,891
 274,866
 1.49%
U.S. government agency and U.S. government sponsored enterprise mortgage-backed securities:            
Maturing after one year through five years 52,312
 52,055
 2.33% 47,278
 46,950
 1.74%
Maturing after five years through ten years 66,351
 65,534
 2.45% 79,379
 78,903
 3.11%
Maturing after ten years 1,357,306
 1,348,517
 2.20% 1,412,387
 1,399,693
 2.34%
Total 1,475,969
 1,466,106
 2.22% 1,539,044
 1,525,546
 2.36%
Municipal securities (2):
            
Maturing in one year or less 12,987
 13,058
 3.56% 6,404
 6,317
 2.56%
Maturing after one year through five years 85,244
 85,767
 2.29% 127,178
 127,080
 2.31%
Maturing after five years through ten years 6,274
 6,235
 2.50% 9,785
 9,515
 2.50%
Maturing after ten years 12,293
 12,182
 4.31% 4,935
 4,742
 3.95%
Total 116,798
 117,242
 2.67% 148,302
 147,654
 2.40%
Non-agency residential mortgage-backed securities:            
Maturing after ten years 9,680
 9,694
 2.72% 11,592
 11,477
 2.52%
Corporate debt securities:            
Maturing in one year or less 12,655
 11,942
 2.19% 12,671
 11,347
 1.80%
Maturing after five years through ten years —
 —
 —% 40,479
 40,500
 2.40%
Maturing after ten years —
 —
 —% 179,231
 179,703
 2.26%
Total 12,655
 11,942
 2.19% 232,381
 231,550
 2.26%
Foreign bonds:            
Maturing in one year or less 405,395
 389,876
 2.13% 304,427
 287,695
 2.09%
Maturing after one year through five years 100,000
 99,264
 2.70% 101,016
 96,199
 2.11%
Total 505,395
 489,140
 2.24% 405,443
 383,894
 2.09%
Other securities:            
Maturing in one year or less 31,790
 31,417
 —% 40,501
 40,329
 2.72%
Maturing after five years through ten years 99
 103
 1.43% —
 —
 —%
Maturing after ten years 115,615
 115,615
 3.78% —
 —
 —%
Total 147,504
 147,135
 2.96% 40,501
 40,329
 2.72%
             
Total:            
Maturing in one year or less 638,257
 621,343
   583,676
 565,323
  
Maturing after one year through five years 629,892
 623,058
   704,674
 694,776
  
Maturing after five years through ten years 176,118
 172,902
   464,472
 455,804
  
Maturing after ten years 1,548,496
 1,539,473
   1,632,619
 1,619,892
  
 Total available-for-sale investment securities $2,992,763
 $2,956,776
   $3,385,441
 $3,335,795
  
             
Held-to-maturity investment security:            
Non-agency commercial mortgage-backed security:            
Maturing after ten years $—
 $—
 —% $143,971
 $144,593
 3.91%
 
(1)Weighted average yields are computed based on amortized cost balances.
(2)Yields on tax-exempt securities are not presented on a tax-equivalent basis.



The following sections discuss additional information on the Company’s loan portfolios, non-purchased credit impaired (“non-PCI”) nonperforming assets and allowance for credit losses.

Total Loan Portfolio

The Company offers a broad range of financial products designed to meet the credit needs of its borrowers. The Company’s loan portfolio segments include CRE,commercial loans, which consist of C&I, CRE, multifamily residential, construction and land loans, and consumer loans, which consist of single-family residential, home equity lines of credit (“HELOCs”), and other consumer loans. NetTotal net loans including loans held-for-sale, increased $2.97 billion or 12% to $28.24were $46.87 billion as of September 30, 20172022, an increase of $5.72 billion or 14% from $25.27$41.15 billion as of December 31, 2016. The2021. This increase was broad based andprimarily driven by strongwell-diversified growth throughout our major loan categories including increases of $1.14$2.53 billion or 22%16% in total CRE loans, $1.80 billion or 16% in residential mortgage loans, $1.00and $1.47 billion or 10% in C&I loans, $836.3 million or 10% in CRE loans and $44.1 million or 2% in consumer loans.
 
($ in thousands) September 30, 2017 December 31, 2016
 
Amount (1)
 Percent 
Amount (1)
 Percent
CRE:        
Income producing $8,843,776
 31% $8,016,109
 31%
Construction 572,027
 2% 551,560
 2%
Land 111,377
 —% 123,194
 1%
Total CRE 9,527,180
 33% 8,690,863
 34%
C&I:        
Commercial business 9,776,254
 34% 8,959,633
 35%
Trade finance 868,902
 3% 680,930
 3%
Total C&I 10,645,156
 37% 9,640,563
 38%
Residential:        
Single-family 4,356,009
 16% 3,509,779
 14%
Multifamily 1,876,956
 7% 1,585,939
 6%
Total residential 6,232,965
 23% 5,095,718
 20%
Consumer 2,120,056
 7% 2,075,995
 8%
Total loans held-for-investment (2)
 $28,525,357
 100% $25,503,139
 100%
Allowance for loan losses (285,926)   (260,520)  
Loans held-for-sale 178
   23,076
  
Total loans, net $28,239,609
   $25,265,695
  
 
(1)Includes $(29.2) million and $1.2 million as of September 30, 2017 and December 31, 2016, respectively, of net deferred loan fees, unearned income, unamortized premiums and unaccreted discounts.
(2)Loans net of ASC 310-30 discount.

Although the loan portfolio grew 12% during the nine months ended September 30, 2017, the loan type composition remained relatively unchanged from December 31, 2016. The Company’s largest credit risks are concentrated in the commercial lending portfolios, which are comprised of C&I and CRE loans. The commercial lending portfolios comprised 70% and 72%composition of the total loan portfolio as of September 30, 2017 and2022 was similar to the composition as of December 31, 2016, respectively, and are discussed further below.2021.


C&I Loans. C&I loans of $10.65 billion and $9.64 billion, which accounted for 37% and 38%
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The following table presents the composition of the Company’s total loan portfolio by loan type as of September 30, 20172022 and December 31, 2016, respectively, include commercial business2021:
($ in thousands)September 30, 2022December 31, 2021
Amount%Amount%
Commercial:
C&I (1)
$15,625,072 33 %$14,150,608 34 %
CRE:
CRE13,573,157 28 %12,155,047 29 %
Multifamily residential4,559,302 10 %3,675,605 9 %
Construction and land556,894 1 %346,486 1 %
Total CRE18,689,353 39 %16,177,138 39 %
Total commercial34,314,425 72 %30,327,746 73 %
Consumer:
Residential mortgage:
Single-family residential10,855,345 23 %9,093,702 22 %
HELOCs2,184,924 5 %2,144,821 5 %
Total residential mortgage13,040,269 28 %11,238,523 27 %
Other consumer87,561 0 %127,512 0 %
Total consumer13,127,830 28 %11,366,035 27 %
Total loans held-for-investment (2)
47,442,255 100 %41,693,781 100 %
Allowance for loan losses(582,517)(541,579)
Loans held-for-sale (3)
14,500 635 
Total loans, net$46,874,238 $41,152,837 
(1)Includes $110.9 million and trade finance$534.2 million of Paycheck Protection Program (“PPP”) loans which comprised the largest sector in the lending portfolio. Over the last few years, the Company has experienced higher growth in specialized lending verticals in industries such as private equity, energy, entertainment and structured specialty finance. As of September 30, 20172022 and December 31, 2016, specialized lending verticals2021, respectively.
(2)Includes $(60.3) million and $(50.7) million of net deferred loan fees and net unamortized premiums as of September 30, 2022 and December 31, 2021, respectively.
(3)Consists of a multi-family residential loan as of September 30, 2022 and single-family residential loans as of December 31, 2021.

Commercial

The commercial loan portfolio comprised 42%72% and 37%73% of total C&I loans as of September 30, 2022 and December 31, 2021, respectively. The Company actively monitors the commercial lending portfolio for elevated levels of credit risk and reviews credit exposures for sensitivity to changing economic conditions.


Although the C&I industry sectors in which the Company provides financing are diversified, the Company has higher concentrations in the industry sectors of wholesale trade, manufacturing, real estateCommercial — Commercial and leasing, entertainment and private equity. The Company’sIndustrial Loans. Total C&I loan exposures within the wholesale trade sector, which totaled $1.63 billion and $1.38commitments (loans outstanding plus unfunded credit commitments, excluding issued letters of credit) were $22.21 billion as of September 30, 20172022, an increase of $1.92 billion or 9% from $20.29 billion as of December 31, 2021. Total C&I loans were $15.63 billion as of September 30, 2022, an increase of $1.47 billion or 10% from $14.15 billion. Total C&I loans made up 33% and 34% of total loans held-for-investment as of September 30, 2022 and December 31, 2016, respectively, are largely related to U.S. domiciled companies, which import goods from Greater China for U.S. consumer consumption, many of which are companies based in California.2021, respectively. The private equity loans are largely capital call lines of credit. The Company also has a syndicated loan portfolio within the C&I loan portfolio includes loans and financing for businesses in a wide spectrum of industries, comprised of working capital lines of credit, trade finance, letters of credit, affordable housing lending, asset-based lending, asset-backed finance, project finance and equipment financing. The C&I loan portfolio also includes PPP loans. Additionally, the Company has a portfolio of broadly syndicated C&I loans, which represent revolving or term loan facilities that are marketed and sold primarily to institutional investors. This portfolio totaled $627.9$948.2 million and $758.5$939.4 million as of September 30, 20172022 and December 31, 2016,2021, respectively. The majority of the C&I loans had variable interest rates as of both September 30, 2022 and December 31, 2021.

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



ewbc-20220930_g6.jpgewbc-20220930_g7.jpg


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

The Company’s total CRE portfolio is diversified by property type with an average CRE loan size of $2.7 million and $2.5 million as of September 30, 2022 and December 31, 2021, respectively. The following table summarizes the Company’s total CRE loans by property type as of September 30, 2022 and December 31, 2021:
($ in thousands)September 30, 2022December 31, 2021
Amount%Amount%
Property types:
Retail (1)
$3,991,541 21 %$3,685,900 23 %
Multifamily4,559,302 24 %3,675,605 23 %
Office (1)
2,943,391 16 %2,804,006 17 %
Industrial (1)
3,474,909 19 %2,807,325 18 %
Hospitality (1)
2,099,226 11 %1,993,995 12 %
Construction and land556,894 3 %346,486 2 %
Other (1)
1,064,090 6 %863,821 5 %
Total CRE loans$18,689,353 100 %$16,177,138 100 %
(1)Included in CRE loan category.

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

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The following tables provide a summary of the Company’s CRE, multifamily residential, and construction and land loans where the interest rates may be fixed, variable or hybrid.by geography as of September 30, 2022 and December 31, 2021. The Company focuses on providing financing to experienced real estate investors and developers who are long-time customers and have moderate levels of leverage. Loans are generally underwritten with high standards for cash flows, debt service coverage ratios and loan-to-value ratios. Due to the naturedistribution of the Company’s geographical footprint and market presence, the Company has CRE loan concentrations primarily in California, which comprised 74% of thetotal CRE loan portfolio asreflects the Company’s geographic footprint, which is primarily concentrated in California:
($ in thousands)September 30, 2022
CRE%Multifamily
Residential		%Construction
and Land		%Total CRE%
Geographic markets:
Southern California$7,022,529 $2,257,999 $203,939 $9,484,467 
Northern California2,802,337 871,497 209,083 3,882,917 
California9,824,866 72 %3,129,496 69 %413,022 74 %13,367,384 72 %
Texas1,140,975 8 %412,316 9 %3,037 1 %1,556,328 8 %
New York684,810 5 %214,032 5 %82,135 15 %980,977 5 %
Washington467,321 4 %170,864 4 %13,132 2 %651,317 3 %
Nevada160,055 1 %110,203 2 %23,693 4 %293,951 2 %
Arizona226,931 2 %99,367 2 %407 0 %326,705 2 %
Other markets1,068,199 8 %423,024 9 %21,468 4 %1,512,691 8 %
Total loans$13,573,157 100 %$4,559,302 100 %$556,894 100 %$18,689,353 100 %
($ in thousands)December 31, 2021
CRE%Multifamily
Residential		%Construction
and Land		%Total CRE%
Geographic markets:
Southern California$6,406,609 $2,030,938 $138,953 $8,576,500 
Northern California2,622,398 748,631 109,483 3,480,512 
California9,029,007 75 %2,779,569 77 %248,436 70 %12,057,012 75 %
Texas1,005,455 8 %308,652 8 %1,896 1 %1,316,003 8 %
New York630,442 5 %157,099 4 %78,368 23 %865,909 5 %
Washington408,913 3 %116,047 3 %9,865 3 %534,825 3 %
Nevada128,395 1 %115,163 3 %5,775 2 %249,333 2 %
Arizona122,164 1 %49,836 1 %— — %172,000 1 %
Other markets830,671 7 %149,239 4 %2,146 1 %982,056 6 %
Total loans$12,155,047 100 %$3,675,605 100 %$346,486 100 %$16,177,138 100 %

Because 72% and 75% of eachtotal CRE loans were concentrated in California as of September 30, 20172022 and December 31, 2016. Accordingly,2021, respectively, changes in the CaliforniaCalifornia’s economy and real estate values could have a significant impact on the collectability of these loans and the required level of allowance for loan losses. For additional information related to the higher degree of risk from a downturn in the California real estate market, see Item 1A. Risk Factors — Risks Related to Geopolitical Uncertainties to the Company’s2021 Form 10-K.

Commercial — Commercial Real Estate Loans. The Company focuses on providing financing to experienced real estate investors and developers who have moderate levels of leverage, many of whom are long-time customers of the Bank. CRE loans totaled $13.57 billion as of September 30, 2022, compared with $12.16 billion as of December 31, 2021. CRE loans made up 28% and 29% of total loans held-for-investment as of September 30, 2022 and December 31, 2021, respectively. Interest rates on CRE loans may be fixed, variable or hybrid. As of September 30, 2022, 66% of our CRE portfolio was variable rate, of which 48% had customer-level interest rate derivative contracts in place. These are hedging contracts offered by the Company to help our customers manage their interest rate risk while the Bank's own exposure remained variable rate. In comparison, as of December 31, 2021, 75% of our CRE portfolio was variable rate, of which 52% had customer-level interest rate derivative contracts in place. Loans are underwritten with conservative standards for cash flows, debt service coverage and LTV.

Owner-occupied properties comprised 19% and 20% of the CRE loans as of each of September 30, 20172022 and December 31, 20162021, respectively. The remainder were owner occupiednon-owner-occupied properties, while the remaining 81% were non-owner occupied properties (wherewhere 50% or more of the debt service for the loan is typically provided by rental income). As of September 30, 2017 and December 31, 2016, the Company hadincome from an income-producing CRE portfolio that was broadly diversified across all property types.unaffiliated third party.

84

The Company had $572.0 million of construction loans and $507.3 million of unfunded commitments as of September 30, 2017, compared to $551.6 million of construction loans and $526.4 million of unfunded commitments as of December 31, 2016. The construction portfolio as of September 30, 2017 and December 31, 2016 was largely comprised of financing for the construction of hotels, multifamily and residential condominiums, as well as mixed use (residential and retail) structures.

Commercial —Multifamily Residential Loans. Residential loans are comprised of single-family and The multifamily residential loans. The Company offers first lien mortgage loans secured by one-to-four unit residential properties located in its primary lending areas. The Company offers a variety of first lien mortgage loan programs, including fixed rate conforming loans and adjustable rate mortgage loans with initial fixed periods of one to seven years, which adjust annually thereafter. The Company’s multifamily loan portfolio is largely comprised of loans secured by smaller multifamilyresidential properties ranging from 5 to 15 units in its primary lending areas. 71% and 73% of the Company’swith five or more units. Multifamily residential loans were concentrated in Californiatotaled $4.56 billion as of September 30, 20172022, compared with $3.68 billion as of December 31, 2021, and accounted for 10% and 9% of total loans held-for-investment as of September 30, 2022 and December 31, 2016,2021, respectively. ManyThe Company offers a variety of first lien mortgages, including fixed- and variable-rate loans, as well as hybrid loans with interest rates that adjust annually after an initial fixed rate period of three to ten years. As of September 30, 2022, 56% of our multifamily residential portfolio was variable rate, of which 35% had customer-level interest rate derivative contracts in place. These are hedging contracts offered by the Company to help our customers manage their interest rate risk while the Bank's own exposure remained variable rate. In comparison, as of December 31, 2021, 66% of our multifamily residential portfolio was variable rate, of which 39% had customer-level interest rate derivative contracts in place.

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

Consumer

The following tables summarize the Company’s single-family residential and HELOC loan portfolios by geography as of September 30, 2022 and December 31, 2021:
($ in thousands)September 30, 2022
Single-Family
Residential		%HELOCs%Total Residential
Mortgage		%
Geographic markets:
Southern California$4,021,598 $974,763 $4,996,361 
Northern California1,252,150 512,356 1,764,506 
California5,273,748 48 %1,487,119 68 %6,760,867 52 %
New York3,849,305 35 %295,946 14 %4,145,251 32 %
Washington621,347 6 %247,570 11 %868,917 7 %
Massachusetts291,154 3 %90,052 4 %381,206 3 %
Georgia282,611 3 %24,212 1 %306,823 2 %
Texas300,007 3 %— — %300,007 2 %
Other markets237,173 2 %40,025 2 %277,198 2 %
Total$10,855,345 100 %$2,184,924 100 %$13,040,269 100 %
Lien priority:
First mortgage$10,855,345 100 %$1,855,057 85 %$12,710,402 97 %
Junior lien mortgage— — %329,867 15 %329,867 3 %
Total$10,855,345 100 %$2,184,924 100 %$13,040,269 100 %
85

($ in thousands)December 31, 2021
Single-Family
Residential		%HELOCs%Total Residential
Mortgage		%
Geographic markets:
Southern California$3,520,010 $971,731 $4,491,741 
Northern California1,024,564 506,310 1,530,874 
California4,544,574 49 %1,478,041 68 %6,022,615 54 %
New York3,102,129 34 %292,540 14 %3,394,669 30 %
Washington526,721 6 %230,294 11 %757,015 7 %
Massachusetts258,372 3 %75,815 4 %334,187 3 %
Georgia279,328 3 %25,208 1 %304,536 3 %
Texas230,402 3 %— — %230,402 2 %
Other markets152,176 2 %42,923 2 %195,099 1 %
Total$9,093,702 100 %$2,144,821 100 %$11,238,523 100 %
Lien priority:
First mortgage$9,093,702 100 %$1,872,440 87 %$10,966,142 98 %
Junior lien mortgage— — %272,381 13 %272,381 2 %
Total$9,093,702 100 %$2,144,821 100 %$11,238,523 100 %

Consumer — Single-Family Residential Mortgages. Single-family residential loans totaled $10.86 billion or 23% of total loans held-for-investment as of September 30, 2022, compared with $9.09 billion or 22% of total loans held-for-investment as of December 31, 2021. Year-to-date, single-family residential mortgages increased $1.76 billion or 19%, primarily driven by net growth in California and New York. The Company was in a first lien position for all of its single-family residential loans within the Company’s portfolioas of both September 30, 2022 and December 31, 2021. Many of these loans are reduced documentation loans, wherefor which a substantial down payment is required, resulting in a low loan-to-valueLTV ratio at origination, typically 60%65% or less. These loans have historically experienced low delinquency and defaultloss rates. The Company offers a variety of single-family residential first lien mortgage loan programs, including fixed- and variable-rate loans, as well as hybrid loans with interest rates that adjust on a regular basis, typically each year, after an initial fixed rate period.

Consumer Loans. Consumer loans are comprised— Home Equity Lines of home equity lines of credit (“HELOCs”), insurance premium financing loans, credit card and auto loans. AsCredit. Total HELOC commitments were $3.27 billion as of September 30, 20172022, which grew by $775.2 million or 31% from $2.49 billion as of December 31, 2021. Unfunded HELOC commitments are unconditionally cancellable. HELOCs outstanding totaled $2.18 billion as of September 30, 2022, compared with $2.14 billion as of December 31, 2021, and accounted for 5% of total loans held-for-investment as of both dates. Year-to-date, HELOCs increased $40.1 million or 2%, primarily driven by growth in Washington, Massachusetts, and California. The Company was in a first lien position for 85% and 87% of total outstanding HELOCs as of September 30, 2022 and December 31, 2016, the Company’s HELOCs were the largest component2021, respectively. Many of the consumer loan portfolio, and were secured by one-to-four unit residential properties located in its primary lending areas. The HELOC loan portfolio is largely comprised ofthese loans originated through aare reduced documentation loan program whereloans, for which a substantial down payment is required, resulting in a low loan-to-valueLTV ratio at origination, typically 60%65% or less. The Company is in a first lien position for many of these reduced documentation HELOCs. These loans have historically experienced low delinquency and defaultloss rates.

The Substantially all of the Company’s total loan portfolio includes originated and purchased loans. Originated and purchasedHELOCs were variable-rate loans for which there was no evidence of credit deterioration at their acquisition date, are collectively referred to as non-PCI loans. Acquired loans for which there was, at the acquisition date, evidence of credit deterioration are referred to as PCI loans. PCI loans are recorded net of ASC 310-30 discount and totaled $532.3 million and $642.4 million as of both September 30, 20172022 and December 31, 2016, respectively. For additional details regarding PCI2021.

All originated commercial and consumer loans see Note 8 — Loans Receivable and Allowance for Credit Lossesare subject to the Consolidated Financial Statements.Company’s underwriting guidelines and loan origination standards. Management believes that the Company’s underwriting criteria and procedures adequately consider the unique risks associated with these products. The Company conducts a variety of quality control procedures and periodic audits, including the review of lending and legal requirements, to ensure that the Company is in compliance with these requirements.


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Foreign Outstandings

The Company’s overseas offices, which include the branch in Hong Kong and the subsidiary bank in China.China, are subject to the general risks inherent in conducting business in foreign countries, such as regulatory, economic and political uncertainties. As of September 30, 2017such, the Company’s international operation risk exposure is largely concentrated in China and December 31, 2016, loansHong Kong. In addition, the Company’s financial assets held in the Hong Kong branch totaled $686.3 million and $733.3 million, respectively. As of September 30, 2017 and December 31, 2016, loans held in the subsidiary bank in China totaled $499.5 million and $425.3 million, respectively. Thesemay be affected by fluctuations in currency exchange rates or other factors. The following table presents the major financial assets held in the Company’s overseas loans are comprised mainly of C&I loans made to cross-border or trade finance companies. In total, these loans represented 3% of total consolidated assetsoffices as of September 30, 20172022 and December 31, 2016.2021:

($ in thousands)September 30, 2022December 31, 2021
Amount% of Total
Consolidated
Assets		Amount% of Total
Consolidated
Assets
Hong Kong branch:
Cash and cash equivalents$871,196 1 %$831,283 1 %
Interest-bearing deposits with banks$72,245 0 %$— — %
AFS debt securities (1)
$280,817 0 %$242,926 0 %
Loans held-for-investment (2)
$907,153 1 %$849,573 1 %
Total assets$2,152,110 3 %$1,933,164 3 %
Subsidiary bank in China:
Cash and cash equivalents$539,133 1 %$543,134 1 %
Interest-bearing deposits with banks$13,049 0 %$51,243 0 %
AFS debt securities (3)
$120,178 0 %$141,404 0 %
Loans held-for-investment (2)
$1,192,883 2 %$984,591 2 %
Total assets$1,850,531 3 %$1,709,640 3 %


When a determination is made at the time(1)Comprised of commitment to originate or purchase loansU.S. Treasury securities and foreign government bonds as held-for-investment, it is the Company’s intent to hold these loans to maturity or for the “foreseeable future,” subject to periodic reviews under the Company’s management evaluation processes, including asset/liability management. When the Company subsequently changes its intent to hold certain loans, the loans are transferred from held-for-investment to held-for-sale at the lower of cost or fair value. As ofboth September 30, 2017, loans held-for-sale amounted to $178 thousand, which were comprised of single-family residential loans. In comparison, as of2022 and December 31, 2016, loans held-for-sale amounted to $23.1 million, which were primarily comprised of consumer loans. Loans transferred from held-for-investment to held-for-sale were $74.5 million and $418.5 million during the three and nine months ended September 30, 2017, respectively. These loan transfers were primarily2021.
(2)Primarily comprised of C&I loans foras of both periods. In comparison, $144.9 million and $720.7 million of loans were transferred from held-for-investment to held-for-sale during the three and nine months ended September 30, 2016, respectively. These loan transfers were primarily comprised of C&I, multifamily residential and CRE loans for both periods. The Company recorded $232 thousand and $441 thousand in write-downs to the allowance for loan losses related to loans transferred from held-for-investment to held-for-sale for the three and nine months ended September 30, 2017, respectively. In comparison, there were no write-downs and $1.9 million of write-downs recorded to the allowance for loan losses related to loans transferred from held-for-investment to held-for-sale for the three and nine months ended September 30, 2016, respectively.

During the three and nine months ended September 30, 2017, the Company sold $33.8 million and $101.4 million, respectively, in originated loans, resulting in net gains of $2.3 million and $5.5 million, respectively. Originated loans sold during the three months ended September 30, 2017 were primarily comprised of $15.7 million of CRE loans and $12.3 million of C&I loans. Originated loans sold during the nine months ended September 30, 2017 were primarily comprised of $50.5 million of C&I loans and $34.8 million of CRE loans. In comparison, the Company sold $107.3 million in originated loans during the three months ended September 30, 2016, resulting in net gains of $2.2 million. Originated loans sold during this period were primarily comprised of $53.9 million of C&I loans and $46.0 million of CRE loans. During the nine months ended September 30, 2016, the Company sold or securitized $529.5 million in originated loans, resulting in net gains of $9.3 million. Included in these amounts were $201.7 million of multifamily residential loans securitized during the first quarter of 2016, which resulted in net gains of $1.1 million, $641 thousand in mortgage servicing rights and $160.1 million of held-to-maturity investment security that were recorded. The remaining $327.8 million of originated loans sold during the nine months ended September 30, 2016, primarily comprising of $171.9 million of CRE loans and $99.6 million of C&I loans, resulted in net gains of $8.2 million.

During the three and nine months ended September 30, 2017, the Company purchased $72.4 million and $441.1 million loans, respectively, compared to $256.2 million and $1.04 billion during the three and nine months ended September 30, 2016, respectively. Purchased loans for each of the three and nine months ended September 30, 2017 were primarily comprised of C&I syndication loans. Purchased loans for each of the three and nine months ended September 30, 2016 were primarily comprised of C&I syndication loans and single-family residential loans. The higher loans purchased for the three and nine months ended September 30, 2016, primarily included $165.8 million and $488.3 million, respectively, of single-family residential loans purchased for Community Reinvestment Act purposes.

From time to time, the Company purchases and sells loans in the secondary market. Certain purchased loans are transferred from held-for-investment to held-for-sale and write-downs to allowance for loan losses are recorded, when appropriate. During the three and nine months ended September 30, 2017, the Company sold loans of $57.4 million and $354.5 million, respectively, in the secondary market at net gains of $19 thousand and $1.2 million, respectively. In comparison, the Company sold loans of $45.8 million and $179.4 million for the three and nine months ended September 30, 2016, respectively, in the secondary market. Loan sales in the secondary market resulted in no gains or losses and $69 thousand in net gains recorded for the three and nine months ended September 30, 2016, respectively.

The Company records valuation adjustments in Net gains on sales of loans on the Consolidated Statements of Income to carry the loans held-for-sale portfolio at the lower of cost or fair value. For each of the three months ended September 30, 2017 and 2016, no valuation adjustments were recorded. For the nine months ended September 30, 2017 and 2016, the Company recorded $61 thousand and $2.4 million, respectively, in valuation adjustments.



Non-PCI Nonperforming Assets
Non-PCI nonperforming assets are comprised of nonaccrual loans and other real estate owned (“OREO”), net. Loans are placed on nonaccrual status when they become 90 days past due or when the full collection of principal or interest becomes uncertain regardless of the length of past due status. The following table presents information regarding non-PCI nonperforming assets as of September 30, 20172022 and December 31, 2016:2021.
 
($ in thousands) September 30, 2017 December 31, 2016
Nonaccrual loans:    
Real estate - commercial $24,802
 $26,907
Real estate - land and construction 4,183
 5,326
Commercial 73,384
 81,256
Real estate - single-family 6,639
 4,214
Real estate - multifamily 2,620
 2,984
Consumer 3,097
 2,130
Total nonaccrual loans 114,725
 122,817
OREO, net 2,289
 6,745
Total nonperforming assets $117,014
 $129,562
Non-PCI nonperforming assets to total assets (1)
 0.32% 0.37%
Non-PCI nonaccrual loans to loans held-for-investment (1)
 0.40% 0.48%
Allowance for loan losses to non-PCI nonaccrual loans 249.23% 212.12%
 
(1)Total assets and loans held-for-investment include PCI loans of $532.3 million and $642.4 million as of September 30, 2017 and December 31, 2016, respectively.

Typically, changes to nonaccrual loans period-over-period represent inflows for loans that are placed on nonaccrual status in accordance with the Company’s accounting policy, offset by reductions for loans that are paid down, charged off, sold, foreclosed, or no longer classified as nonaccrual as a result(3)Comprised of continued performance and improvement in the borrower’s financial condition and loan repayment capabilities. Nonaccrual loans decreased by $8.1 million or 7% to $114.7 millionforeign government bonds as of both September 30, 2017 from $122.8 million as of December 31, 2016. The decrease in nonaccrual loans was primarily due to payoffs and paydowns of nonaccrual loans of $70.2 million, transfers of nonaccrual loans to accrual status of $37.2 million, and charge-offs of nonaccrual loans of $19.5 million, partially offset by loans transferred to nonaccrual status of $119.4 million, during the nine months ended September 30, 2017. Nonaccrual loans as a percentage of loans held-for-investment declined from 0.48% as of December 31, 2016 to 0.40% as of September 30, 2017. C&I loans comprised 64% and 66% of total nonaccrual loans as of September 30, 20172022 and December 31, 2016, respectively. Credit risks related to the C&I nonaccrual loans were mitigated by the collateral. In addition, the risk of loss of all nonaccrual loans had been considered as of September 30, 2017 and December 31, 2016 and the Company believes that this was appropriately covered by the allowance for loan losses.2021.

In addition, 36% and 64% of non-PCI nonaccrual loans consisted of loans that were less than 90 days delinquent as of September 30, 2017 and December 31, 2016, respectively.

For additional details regarding the Company’s non-PCI nonaccrual loans policy, see Note 1 — Summary of Significant Accounting Policies to the Consolidated Financial Statements of the Company’s 2016 Form 10-K.

Troubled debt restructurings (“TDRs”) may be designated as performing or nonperforming. A TDR may be designated as performing, if the loan has demonstrated sustained performance under the modified terms. The period of sustained performance may include the periods prior to modification if prior performance has met or exceeded the modified terms. A loan will remain on nonaccrual status until the borrower demonstrates a sustained period of performance, generally six consecutive months of payments.



The following table presents the performingtotal revenue generated by the Company’s overseas offices for the third quarter and nonperforming TDRs by loan segmentfirst nine months of 2022 and 2021:
($ in thousands)Three Months Ended September 30,Nine Months Ended September 30,
2022202120222021
Amount% of Total
Consolidated
Revenue		Amount% of Total
Consolidated
Revenue		Amount% of Total
Consolidated
Revenue		Amount% of Total
Consolidated
Revenue
Hong Kong Branch:
Total revenue$14,296 2 %$5,912 1 %$32,405 2 %$18,252 1 %
Subsidiary Bank in China:
Total revenue$11,616 2 %$7,592 2 %$30,652 2 %$20,271 2 %

Capital

The Company maintains a strong capital base to support its anticipated asset growth, operating needs, and credit risks, and to ensure that the Company and the Bank are in compliance with all regulatory capital guidelines. The Company engages in regular capital planning processes on at least an annual basis to optimize the use of available capital and to appropriately plan for future capital needs, allocating capital to existing and future business activities. Furthermore, the Company conducts capital stress tests as part of its capital planning process. The stress tests enable the Company to assess the impact of adverse changes in the economy and interest rates on its capital base.

On March 3, 2020, the Company’s Board of Directors authorized the repurchase of $500.0 million of the Company’s common stock, of which $254.0 million remains available. During the second quarter of 2022, the Company repurchased $100.0 million of common stock or 1,385,517 shares, at an average price of $72.17 per share. The Company did not repurchase shares during the third quarter of 2022. For additional information about the share repurchases, see Part II, Item 2.— Unregistered Sales of Equity Securities and Use of Proceeds in this Form 10-Q.
87

The Company’s stockholders’ equity was $5.66 billion as of September 30, 2017 and2022, a decrease of $176.6 million or 3% from $5.84 billion as of December 31, 2016:2021. The year-to-date decrease in the Company’s stockholders’ equity was primarily due to a negative change in AOCI of $709.7 million, $172.1 million in common dividends declared, and $100.0 million in common stock repurchases, partially offset by $791.3 million in net income. The negative change in AOCI was primarily due to increased unrealized losses in AFS debt securities. 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.

 
($ in thousands) September 30, 2017 December 31, 2016
 
Performing
TDRs
 
Nonperforming
TDRs
 
Performing
TDRs
 
Nonperforming
TDRs
CRE $10,347
 $19,830
 $20,145
 $14,446
C&I 20,416
 44,292
 44,363
 23,771
Residential 18,872
 486
 17,178
 717
Consumer 1,204
 375
 1,552
 49
Total TDRs $50,839
 $64,983
 $83,238
 $38,983
 

Performing TDRs decreased by $32.4 million or 39% to $50.8 millionBook value was $40.17 per common share as of September 30, 2017,2022, a decrease of 2% from $41.13 per common share as of December 31, 2021, primarily due toas a result of the transfers of one CRE and two C&I loans from performing to nonperforming status during the nine months ended September 30, 2017. Nonperforming TDRs increased by $26.0 million or 67% to $65.0 millionfactors described above. Tangible equity per common share was $36.80 as of September 30, 2017, primarily due to the aforementioned transfers of CRE and C&I loans between performing and nonperforming status and a C&I loan becoming a TDR loan during the nine months ended September 30, 2017.
The Company’s impaired loans include predominantly non-PCI loans held-for-investment on nonaccrual status and non-PCI loans modified as a TDR, on either accrual or nonaccrual status. See Note 1 — Summary of Significant Accounting Policies to the Consolidated Financial Statements of the Company’s 2016 Form 10-K for additional information regarding the Company’s TDRs and impaired loan policies. As of September 30, 2017, the allowance for loan losses included $20.8 million for impaired loans2022, compared with a total recorded investment balance of $72.6 million. In comparison, the allowance for loan losses included $12.7 million for impaired loans with a total recorded investment balance of $84.1 million$37.79 as of December 31, 2016.2021. For additional details, see the reconciliation of non-GAAP measures presented under Item 2. MD&A — Reconciliation of GAAP to Non-GAAP Financial Measures in this Form 10-Q.


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

Deposits and Other Sources of Funding

Deposits are the Company’s primary source of funding, the cost of which has a significant impact on the Company’s net interest income and net interest margin. Additional funding is provided by short- and long-term borrowings, and long-term debt. See Item 2.MD&A — Risk Management — Liquidity Risk Management — Liquidity in this Form 10-Q for a discussion of the Company’s liquidity management. The following table presentssummarizes the recorded investment balances for non-PCI impaired loansCompany’s sources of funds as of September 30, 20172022 and December 31, 2016:2021:
($ in thousands)September 30, 2022December 31, 2021Change
Amount%Amount%$%
Deposits:
Noninterest-bearing demand$21,645,394 40 %$22,845,464 43 %$(1,200,070)(5)%
Interest-bearing checking6,822,343 13 %6,524,721 12 %297,622 5 %
Money market12,113,292 23 %13,130,300 25 %(1,017,008)(8)%
Savings2,917,770 5 %2,888,065 5 %29,705 1 %
Time deposits10,358,563 19 %7,961,982 15 %2,396,581 30 %
Total deposits$53,857,362 100 %$53,350,532 100 %$506,830 1 %
Other Funds:
Federal funds purchased$200,000 $— $200,000 100 %
FHLB advances324,920 249,331 75,589 30 %
Repurchase agreements611,785 300,000 311,785 104 %
Long-term debt147,875 147,658 217 0 %
Total other funds$1,284,580 $696,989 $587,591 84 %
Total sources of funds$55,141,942 $54,047,521 $1,094,421 2 %
 
($ in thousands) September 30, 2017 December 31, 2016
 Amount Percent Amount Percent
CRE:        
Income producing $35,149
 21% $46,508
 23%
Land 4,183
 3% 5,870
 3%
Total CRE impaired loans 39,332
 24% 52,378
 26%
C&I:        
Commercial business 89,092
 54% 120,453
 58%
Trade finance 4,708
 3% 5,166
 2%
Total C&I impaired loans 93,800
 57% 125,619
 60%
Residential:        
Single-family 15,899
 10% 14,335
 7%
Multifamily 12,232
 7% 10,041
 5%
Total residential impaired loans 28,131
 17% 24,376
 12%
Consumer 4,301
 2% 3,682
 2%
Total impaired loans $165,564
 100% $206,055
 100%
 


Allowance for Credit Losses
Allowance for credit losses consists of allowance for loan losses and allowance for unfunded credit reserves. Unfunded credit reserves include reserves provided for unfunded lending commitments, issued commercial letters of credit and standby letters of credit (“SBLCs”), and recourse obligations for loans sold. The allowance for credit losses is increased by the provision for credit losses which is charged against current period operating results, and is increased or decreased by the amount of net recoveries or charge-offs, respectively, during the period. The allowance for unfunded credit reserves is included in Accrued expenses and other liabilities on the Consolidated Balance Sheets. Net adjustments to the allowance for unfunded credit reserves are included in Provision for credit losses on the Consolidated Statements of Income.

The Company is committed to maintaining the allowance for credit losses at a level that is commensurate with the estimated inherent loss in the loan portfolio, including unfunded credit reserves. In addition to regular quarterly reviews of the adequacy of the allowance for credit losses, the Company performs an ongoing assessment of the risks inherent in the loan portfolio. While the Company believes that the allowance for loan losses is appropriate as of September 30, 2017, future allowance levels may increase or decrease based on a variety of factors, including loan growth, portfolio performance and general economic conditions. For additional details on the Company’s allowance for credit losses, including the methodologies used, see Note 8 — Loans Receivable and Allowance for Credit Losses to the Consolidated Financial Statements, and Item 7. MD&A — Critical Accounting Policies and Estimates and Note 1 — Summary of Significant Accounting Policies to the Consolidated Financial Statements of the Company’s 2016 Form 10-K.

The following table presents a summary of activities in the allowance for credit losses for the three and nine months ended September 30, 2017 and 2016:
 
($ in thousands) Three Months Ended September 30, Nine Months Ended September 30,
 2017 2016 2017 2016
Allowance for loan losses, beginning of period $276,316
 $266,768
 $260,520
 $264,959
Provision for loan losses 13,448
 11,514
 32,134
 19,049
Gross charge-offs:        
CRE —
 (309) (149) (504)
C&I (7,359) (23,696) (19,802) (31,770)
Residential —
 (29) (1) (166)
Consumer (65) (13) (72) (17)
Total gross charge-offs (7,424) (24,047) (20,024) (32,457)
Gross recoveries:        
CRE 610
 634
 1,714
 873
C&I 2,165
 165
 9,658
 2,068
Residential 809
 654
 1,758
 1,048
Consumer 2
 124
 166
 272
Total gross recoveries 3,586
 1,577
 13,296
 4,261
Net charge-offs (3,838) (22,470) (6,728) (28,196)
Allowance for loan losses, end of period 285,926
 255,812
 285,926
 255,812
         
Allowance for unfunded credit reserves, beginning of period 15,188
 20,318
 16,121
 20,360
Reversal of unfunded credit reserves (452) (1,989) (1,385) (2,031)
Allowance for unfunded credit reserves, end of period 14,736
 18,329
 14,736
 18,329
Allowance for credit losses $300,662
 $274,141
 $300,662
 $274,141
         
Average loans held-for-investment $27,529,103
 $24,258,913
 $26,764,327
 $23,961,288
Loans held-for-investment, end of period $28,525,357
 $24,731,962
 $28,525,357
 $24,731,962
Annualized net charge-offs to average loans held-for-investment (0.06)% (0.37)% (0.03)% (0.16)%
Allowance for loan losses to loans held-for-investment 1.00 % 1.03 % 1.00 % 1.03 %



As of September 30, 2017, the allowance for loan losses amounted to $285.9 million or 1.00% of loans held-for-investment, compared to $260.5 million or 1.02% and $255.8 million or 1.03% of loans held-for-investment as of December 31, 2016 and September 30, 2016, respectively. The increase in the allowance for loan losses was largely due to the overall growth in the loan portfolio. The allowance for loan losses to loans held-for-investment ratio as of September 30, 2017 decreased slightly compared to both December 31, 2016 and September 30, 2016. The decrease in this ratio was primarily attributable to the higher credit quality of newly originated loans, resulting in loans held-for-investment increasing at a higher rate than the estimated allowance for loan losses. In addition, the extended good economic cycle and sound credit risk management practices have led to continued declines in the Company’s historical loss rate experience, which has resulted in a slower rate of change in the allowance for loan losses compared to the Company’s loan growth.Provision for credit losses includes provision for loan losses and unfunded credit reserves. Provision for credit losses is charged to income to bring the allowance for credit losses to a level deemed appropriate by the Company based on the factors described above. The fluctuation in the provision for credit losses is highly dependent on the historical loss rates trend along with the net charge-offs experienced during the period. The increase in the provision for credit losses for the three and nine months ended September 30, 2017, compared to the same periods in 2016, was reflective of the overall loan portfolio growth, partially offset by a decline in the historical loss factor during the same periods. The Company believes the allowance for credit losses as of September 30, 2017 and December 31, 2016 was appropriate to cover credit losses inherent in the loan portfolio, including unfunded credit commitments, at that date.

The following table presents the Company’s allocation of the allowance for loan losses by segment and the ratio of each loan segment to total loans held-for-investment as of September 30, 2017 and December 31, 2016:
($ in thousands) September 30, 2017 December 31, 2016
 
Allowance
Allocation
 
% of
Total Loans
 
Allowance
Allocation
 
% of
Total Loans
CRE $74,317
 33% $72,916
 34%
C&I 160,598
 37% 142,167
 38%
Residential 43,905
 23% 37,338
 20%
Consumer 7,106
 7% 8,099
 8%
Total $285,926
 100% $260,520
 100%
 

The Company maintains an allowance on non-PCI and PCI loans. Based on the Company’s estimates of cash flows expected to be collected, an allowance for the PCI loans is established, with a charge to income through the provision for loan losses. PCI loan losses are estimated collectively for groups of loans with similar characteristics. As of September 30, 2017, the Company established an allowance of $68 thousand on $532.3 million of PCI loans. In comparison, an allowance of $118 thousand was established on $642.4 million of PCI loans as of December 31, 2016. The allowance balances for both periods were attributed mainly to the PCI CRE loans.




Deposits

The Company offers a wide variety of deposit products to both consumer and commercial customers. Deposits are an importantTo provide a stable and low-cost source of funding and affect net interest income and net interest margin. The following table presentsliquidity, the balances for customer deposits as of September 30, 2017 and December 31, 2016:
 
($ in thousands)  Change
 September 30, 2017 
% of total
deposits
 December 31, 2016 % of total
deposits		 $ %
Core deposits:            
Noninterest-bearing demand $10,992,674
 35% $10,183,946
 34% $808,728
 8 %
Interest-bearing checking 4,108,859
 13% 3,674,417
 12% 434,442
 12 %
Money market 7,939,031
 25% 8,174,854
 27% (235,823) (3)%
Savings 2,476,557
 8% 2,242,497
 8% 234,060
 10 %
Total core deposits 25,517,121
 81% 24,275,714
 81% 1,241,407
 5 %
Time deposits 5,794,541
 19% 5,615,269
 19% 179,272
 3 %
Total deposits $31,311,662
 100% $29,890,983
 100% $1,420,679
 5 %
       

Total deposits increased mainly due to growth in noninterest-bearing demand and interest-bearing checking deposits from existing and new customers. The Company’s deposit strategy is to grow and retain relationship-based deposits. Total deposits and provide a source of low-cost funding and liquidity to the Company. Core deposits comprised 81% of total depositswere $53.86 billion as of each of September 30, 2017 and2022, an increase of $506.8 million or 1% from $53.35 billion as of December 31, 2016.2021. The $1.24 billion or 5% increase in core deposits was primarily due to the increasesgrowth in time deposits, partially offset by decreases in noninterest-bearing demand and money market deposits. This move from noninterest-bearing and lower paying non-maturity deposits and interest-bearing checking deposits.to time deposits was largely driven by continued increases in benchmark rates. Noninterest-bearing demand deposits comprised 35%40% and 34%43% of total deposits as of September 30, 20172022 and December 31, 2016,2021, respectively. Interest-bearing checking

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Additional information regarding the impact of deposits comprised 13%on net interest income, with a comparison of average deposit balances and 12%rates, is provided in Item 2. MD&A — Results of totalOperations — Net Interest Income in this Form 10-Q. See also the discussion of the impact of deposits on liquidity at Item 2. MD&A — Liquidity Risk Management — Liquidity in this Form 10-Q.

Other Sources of Funding

The Company had an outstanding overnight federal funds purchase of $200.0 million, with a fixed interest rate of 3.11% as of September 30, 2017 and December 31, 2016, respectively. As of September 30, 2017, deposits were 110% of total loans, compared to 117%2022. There was no outstanding overnight federal funds purchase as of December 31, 2016, as the growth in total loans outpaced deposit growth.2021.

Borrowings

The Company utilizes short-term and long-term borrowings to manage its liquidity position. Borrowings include short-term borrowings, long-term FHLB advances and repurchase agreements.


As of September 30, 2017 and2022, the Company had FHLB advances of $324.9 million, compared with advances totaling $249.3 million as of December 31, 2016, short-term borrowings were comprised of the Company’s subsidiary, East West Bank (China) Limited’s borrowings of $24.8 million and $60.1 million, respectively. The interest rates of these borrowings ranged from 2.96% to 3.27% and 2.80% to 3.27% as of September 30, 2017 and December 31, 2016, respectively.2021. As of September 30, 2017,2022, the short-term borrowings of $24.8 million are due to mature in the fourth quarter of 2017.     

FHLB advances increased by $1.7were comprised of an overnight advance of $250.0 million to $323.3with a fixed interest rate of 3.22% and a term advance of $74.9 million with a floating interest rate of 3.25% that matures in November 2022.

Gross repurchase agreements totaled $611.8 million and $300.0 million as of September 30, 2017 from $321.6 million as of December 31, 2016. As of September 30, 2017, FHLB advances had floating interest rates ranging from 1.48% to 1.72% with remaining maturities between 1.4 and 5.1 years.    

Gross repurchase agreements totaled $450.0 million as of each of September 30, 20172022 and December 31, 2016.2021, respectively. Resale and repurchase agreements are reported net, pursuant to ASC 210-20-45, Accounting Standards Codification (“ASC”) 210-20-45-11, Balance Sheet OffsettingOffsetting: Repurchase and Reverse Repurchase Agreements. Net repurchase agreements totaled $50.0 million and $350.0 million asAs of both September 30, 20172022 and December 31, 2016,2021, the Company did not have any gross resale agreements that were eligible for netting pursuant to ASC 210-20-45-11. The weighted-average interest rates were 2.81% and 2.57% for the third quarters of 2022 and 2021, respectively; and 2.73% and 2.62% for the first nine months of 2022 and 2021, respectively. As of September 30, 2017, $400.0 million of repurchase agreements were eligible for netting against resale agreements, resulting in $50.0 million of net repurchase agreements reported. In comparison, $100.0 million of2022, gross repurchase agreements were eligible for netting against resale agreements, resulting in $350.0 million of net repurchase agreements reported as of December 31, 2016. As of September 30, 2017, gross repurchase agreements of $450.0 million had interest rates ranging between 3.54% to 3.58% and original terms ranging between 10.0six months and 16.5 years. Thenine years and remaining maturity terms of the repurchase agreements rangematurities between 5.1three months and 5.9 years.11 months.




Repurchase agreements are accounted for as collateralized financing transactions and recorded atas liabilities based on the balancesvalues at which the securities wereassets are sold. TheAs of September 30, 2022, the collateral for the repurchase agreements is primarilywas comprised of U.S. Treasury securities, U.S. government agency and U.S. government sponsoredgovernment-sponsored enterprise mortgage-backed securities, and U.S. government agency and U.S. government sponsored enterprise debtTreasury securities. To ensure that the market value of the underlying collateral remains sufficient, the Company monitors the fair value of collateral pledged relative to the principal amounts borrowed under repurchase agreements. The Company manages liquidity risks related to the repurchase agreements by sourcing fundingfunds from a diverse group of counterparties, and entering into repurchase agreements with longer durations, when appropriate. For additional details, see Note 5 4 — Securities Assets Purchased under Resale Agreements and Sold under Repurchase Agreements to the Consolidated Financial Statements.Statements in this Form 10-Q.

Long-Term Debt

The Company uses long-term debt to provide funding to acquire income earninginterest-earning assets, and to enhance liquidity.liquidity and regulatory capital adequacy. Long-term debt whichtotaled $147.9 million and $147.7 million as of September 30, 2022 and December 31, 2021, respectively. Long-term debt consists of junior subordinated debt, and a term loan, decreased $9.8 million or 5% from $186.3 millionwhich qualifies as of December 31, 2016 to $176.5 million as of September 30, 2017. The decrease was primarily due to the quarterly repayment on the term loan, totaling $10.0 million, during the nine months ended September 30, 2017.

Tier 2 capital for regulatory purposes. The junior subordinated debt was issued in connection with the Company’s various pooled trust preferred securities offerings. Junior subordinated debt is recordedofferings, as a component of long-term debt and includes the value of thewell as with common stock issued by the six wholly-owned subsidiaries of the Company in conjunction with these transactions. The junior subordinated debt totaled $152.6 million and $146.3 million as of September 30, 2017 and December 31, 2016, respectively.offerings. The junior subordinated debt had a weighted averageweighted-average interest raterates of 2.73%2.86% and 2.22%1.74% for the first nine months ended September 30, 2017of 2022 and 2016,2021, respectively, with remaining maturities ranging between 12.2 years and remaining maturity terms of 17.2 to 20.015.0 years as of September 30, 2017. Beginning in 2016, trust preferred securities no longer qualify as Tier 1 capital and are limited to Tier 2 capital for regulatory purposes, based on Basel III Capital Rules. For further discussion, see Item 1. Business — Supervision and Regulation — Capital Requirements of the Company’s 2016 Form 10-K.2022.


In 2013, the Company entered into a $100.0 million three-year term loan agreement. The terms of the agreement were modified in 2015 to extend the term loan maturity from July 1, 2016 to December 31, 2018, where principal repayments of $5.0 million are due quarterly. The term loan bears interest at the rate of the three-month London Interbank Offered Rate plus 150 basis points and the weighted average interest rate was 2.65% and 2.19% for the nine months ended September 30, 2017 and 2016, respectively. The outstanding balance of the term loan was $30.0 million and $40.0 million as of September 30, 2017 and December 31, 2016, respectively.

Capital
The Company maintains an adequate capital base to support its anticipated asset growth, operating needs and credit risks, and to ensure that East West and the Bank are in compliance with all regulatory capital guidelines. The Company engages in regular capital planning processes to optimize the use of available capital and to appropriately plan for future capital needs. The capital plan considers capital needs for the foreseeable future and allocates capital to both existing and future business activities. In addition, the Company conducts capital stress tests as part of its annual capital planning process. The stress tests enable the Company to assess the impact of adverse changes in the economy and interest rates on its capital base.

The Company’s stockholders’ equity increased by $354.2 million or 10% to $3.78 billion as of September 30, 2017, compared to $3.43 billion as of December 31, 2016. The Company’s primary source of capital is the retention of its operating earnings. Retained earnings increased by $333.1 million or 15%to $2.52 billion as of September 30, 2017, compared to $2.19 billion as of December 31, 2016. The increase was primarily due to net income of $420.7 million, reduced by $87.6 million of cash dividends during the nine months ended September 30, 2017. In addition, common stock and additional paid-in capital increased by $17.7 million or 1.0% primarily due to the activities in employee stock compensation plans. For other factors that contributed to the changes in stockholders’ equity, refer to the Consolidated Statements of Changes in Stockholders’ Equity.
Book value was $26.17 per common share based on 144.5 million common shares outstanding as of September 30, 2017, compared to $23.78 per common share based on 144.2 million common shares outstanding as of December 31, 2016. The Company made dividend payments of $0.20 per common share in each quarter during the nine months ended September 30, 2017 and 2016. In October 2017, the Company’s Board of Directors (the “Board”) declared fourth quarter 2017 cash dividends for the Company’s common stock. The common stock cash dividend of $0.20 per share is payable on November 15, 2017 to stockholders of record as of November 1, 2017.



Regulatory Capital and Ratios

The federal banking agencies have risk-based capital adequacy guidelinesrequirements intended to ensure that are designed to reflectbanking organizations maintain capital that is commensurate with the degree of risk associated with a banking organization’s operationstheir operations. The Company and transactions. The guidelines cover transactions thatthe Bank are reported on the balance sheet as well as those recorded as off-balance sheet items. In 2013, the Federal Reserve Board, Federal Deposit Insurance Corporation and Office of the Comptroller of the Currency issued the final Basel III Capital Rules establishing a new comprehensiveeach subject to these regulatory capital framework for strengthening international capital standards as well as implementing certain provisions of the “Dodd-Frank Act”.adequacy requirements. See Item 1. Business — Supervision and Regulation — Regulatory Capital Requirements ofand Regulatory Capital-Related Development in the Company’s 20162021 Form 10-K for additional details.

The Basel III Capital Rules became effective for the Company and the Bankadopted Accounting Standards Update (“ASU”) 2016-13 on January 1, 2015 (subject2020, which requires the measurement of the allowance for credit losses to be based on management’s best estimate of lifetime expected credit losses inherent in the Company’s relevant financial assets. The Company has elected the phase-in periodsoption provided by a final rule that delays an estimate of the current expected credit losses methodology (“CECL”) effect on regulatory capital for certain components).

two years and phases in the impact over three years. The Basel III Capital Rules require thatrule permits certain banking organizations maintainto 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 minimum CET1 ratio of 4.5%, a Tier 1 capital ratio of 6.0%,three-year phase-out period in which the aggregate benefit is reduced by 25% in 2022, 50% in 2023 and a total capital ratio of 8.0%. Moreover, the rules require that banking organizations maintain a capital conservation buffer of 2.5% above75% in 2024. Accordingly, the capital minimums are being phased-in over four years beginning in 2016 (increasing by 0.625% on each subsequent January 1, until it reaches 2.5% on January 1, 2019). When fully phased-in in 2019, the banking organizations will be required to maintain a minimum CET1 capital ratio of 7.0%, a minimum Tier 1 capital ratio of 8.5% and a minimum total capital ratio of 10.5% to avoid limitations on capital distributions (including common stock dividends and share repurchases) and certain discretionary incentive compensation payments.

The Company is committed to maintaining capital at a level sufficient to assure the Company’s stockholders, customers and regulators that the Company and the Bank are financially sound. Asratios as of September 30, 2017 and December 31, 2016, both2022 delayed 75% of the Company andestimated impact of CECL on regulatory capital through the Bank were considered “well-capitalized,” and met all capital requirements on a fully phased-in basis under the Basel III Capital Rules.year 2021.

89


The following table presents the Company’s and the Bank’s capital ratios as of September 30, 20172022 and December 31, 20162021, under the Basel III Capital Rules, and those required by regulatory agencies for capital adequacy and well-capitalized classification purposes:
Basel III Capital Rules
September 30, 2022December 31, 2021Minimum
Regulatory
Requirements		Minimum
Regulatory
Requirements including Capital Conservation Buffer		Well-
Capitalized
Requirements
Company
Bank		Company
Bank
Risk-based capital ratios:
Common Equity Tier 1 capital12.3 %12.1 %12.8 %12.3 %4.5 %7.0 %6.5 %
Tier 1 capital (1)
12.3 %12.1 %12.8 %12.3 %6.0 %8.5 %8.0 %
Total capital13.6 %13.1 %14.1 %13.2 %8.0 %10.5 %10.0 %
Tier 1 leverage (1)
9.6 %9.4 %9.0 %8.6 %4.0 %4.0 %5.0 %
 
  Basel III Capital Rules
 September 30, 2017 December 31, 2016 
Minimum
Regulatory
Requirements
 
Well-
Capitalized
Requirements
 
Fully
Phased-in
Minimum
Regulatory
Requirements
 Company East
West
Bank		 Company East
West
Bank		   
CET1 risk-based capital 11.4% 11.3% 10.9% 11.3% 4.5% 6.5% 7.0%
Tier 1 risk-based capital 11.4% 11.3% 10.9% 11.3% 6.0% 8.0% 8.5%
Total risk-based capital 12.9% 12.3% 12.4% 12.3% 8.0% 10.0% 10.5%
Tier 1 leverage capital 9.4% 9.3% 8.7% 9.1% 4.0% 5.0% 4.0%
 

(1)The Company’s CET1 and Tier 1 capital ratios have improved by 49 basis points, while the total risk-based and Tier 1 leverage well-capitalized requirement applies only to the Bank since there is no Tier 1 leverage ratio component in the definition of a well-capitalized bank holding company. The minimum Tier 1 risk-based capital ratios increased by 48ratio requirement for the Company to be considered well-capitalized is 6.0%.

The Company is committed to maintaining strong capital levels to assure its investors, customers and 65 basis points, respectively, duringregulators that the nine months endedCompany and the Bank are financially sound. As of both September 30, 2017. The improvement was primarily driven by2022 and December 31, 2021, the increases in revenues, primarily dueCompany and the Bank continued to exceed all “well-capitalized” capital requirements and the required minimum capital requirements under the Basel III Capital Rules. Total risk-weighted assets were $49.27 billion as of September 30, 2022, an increase in net interest income and net gains recorded from the sale of commercial property during the first quarter of 2017. The $1.82$5.68 billion or 7% increase in risk-weighted assets increased13% from $27.36$43.59 billion as of December 31, 2016 to $29.18 billion as of September 30, 20172021. The increase in the risk-weighted assets was primarily due to loan growth.

Risk Management

Overview

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

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

The Company’s ERM program is executed along the three lines of defense model, which provides for a consistent and Tier 1 leverage capital ratios were 11.4%, 11.4%, 12.9%standardized risk management control environment across the enterprise. The first line of defense is comprised of production, operational, and 9.4%, respectively, well abovesupport units. The second line of defense is comprised of various risk management and control functions charged with monitoring and managing specific major risk categories and/or risk subcategories. The third line of defense is comprised of the well-capitalizedInternal Audit function and Independent Asset Review (“IAR”). Internal Audit and IAR provides assurance and evaluates the effectiveness of risk management, control and governance processes as established by the Company. Reporting directly to the Board’s Audit Committee, Internal Audit maintains organizational independence and objectivity. Further discussion and analysis of the primary risk areas are detailed in the following subsections of Risk Management.

90

Credit Risk Management

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

The Risk Oversight Committee has primary oversight responsibility for identified enterprise risk categories including credit risk. The Risk Oversight Committee monitors management’s assessment of asset quality, credit risk trends, credit quality administration, underwriting standards, and portfolio credit risk management strategies and processes, such as diversification and concentration limits, all of which enable management to control credit risk. At the management level, the Credit Risk Management Committee has primary oversight responsibility for credit risk. The Senior Credit Supervision function manages credit policy for the line of business transactional credit risk, assuring that all exposure is risk-rated according to the requirements of 6.5%, 8.0%, 10.0%the credit risk rating policy. The Senior Credit Supervision function evaluates and 5.0%, respectively.reports the overall credit risk exposure to senior management and the Risk Oversight Committee. Reporting directly to the Board’s Risk Oversight Committee, the Independent Asset Review function provides additional support to the Company’s strong credit risk management culture by providing 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 process.


Regulatory Matters

The Bank entered into a Written Agreement, dated November 9, 2015, withCompany assesses the Federal Reserve Bankoverall credit quality performance of San Francisco (the “Written Agreement”), to correct less than satisfactory BSA and AML programs detailedthe loans held-for-investment portfolio through an integrated analysis of specific performance ratios. This approach forms the basis of the discussion in a joint examination by the Federal Reserve Bank of San Franciscosections immediately following: Nonperforming Assets, Troubled Debt Restructurings (“FRB”TDR”) and Allowance for Credit Losses.

Credit Quality

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




The Company believes that the Bank is making progress in executing the compliance plans and programs required by the Written Agreement and MOU, although there can be no assurances that our plans and progress will be found to be satisfactory by our regulators. To date, the Bank has added significant resources to meet the monitoring and reporting obligations imposed by the Written Agreement and will continue to require significant management and third party consultant resources to comply with the Written Agreement and MOU, and to address any additional findings or recommendations by the regulators. These incremental administrative and third party costs, as well as the operational restrictions imposed by the Written Agreement, may adversely affect the Bank’s results of operations.

If additional compliance issues are identified or the regulators determine the Bank has not satisfactorily complied with the terms of the Written Agreement, the regulators could take further actions with respect to the Bank and, if such further actions were taken, such actions could have a material adverse effect on the Bank. The operating and other conditions in the BSA and AML program and the auditing and oversight of the program that led to the Written Agreement and MOU could also lead to an increased risk of being subject to additional actions by the DBO and FRB, an increased risk of future examinations that may downgrade the regulatory ratings of the Bank, and an increased risk investigations by other government agencies may result in fines, penalties, increased expenses or restrictions on operations. 

Off-Balance Sheet Arrangements
In the course of the Company’s business, the Company may enter into or be a party to transactions that are not recorded on the Consolidated Balance Sheets and are considered to be off-balance sheet arrangements. Off-balance sheet arrangements are any contractual arrangements whereby an unconsolidated entity is a party, under which the Company has: (1) any obligation under a guarantee contract; (2) a retained or contingent interest in assets transferred to an unconsolidated entity or similar arrangement that serves as credit, liquidity or market risk support to that entity for such assets; (3) any obligation under certain derivative instruments; or (4) any obligation under a material variable interest held by the Company in an unconsolidated entity that provides financing, liquidity, market risk or credit risk support to the Company, or engages in leasing, hedging or research and development services with the Company.

As a financial service provider, the Company routinely enters into commitments to extend credit to customers, such as loan commitments, commercial letters of credit for foreign and domestic trade, SBLCs and financial guarantees. Many of these commitments to extend credit may expire without being drawn upon. The credit policies used in underwriting loans to customers are also used to extend these commitments. Under some of these contractual agreements, the Company may also have liabilities contingent upon the occurrence of certain events. The Company’s liquidity sources have been, and are expected to be, sufficient to meet the cash requirements of its lending activities. The following table presents the Company’s loan commitments, commercial letters of credit and SBLCscriticized loans as of September 30, 2017:2022 and December 31, 2021:
($ in thousands)Change
September 30, 2022December 31, 2021$%
Criticized loans:
Special mention loans$470,964 $384,694 $86,270 22 %
Classified loans434,242 448,362 (14,120)(3)%
Total criticized loans (1)
$905,206 $833,056 $72,150 9 %
Special mention loans to loans held-for-investment0.99 %0.92 %
Classified loans to loans held-for-investment0.92 %1.08 %
Criticized loans to loans held-for-investment1.91 %2.00 %
(1)Excludes loans held-for-sale.

Nonperforming Assets

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

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($ in thousands) Commitments
Outstanding
Loan commitments $4,956,515
Commercial letters of credit and SBLCs $1,757,648
 
The following table presents nonperforming assets information as of September 30, 2022 and December 31, 2021:

($ in thousands)Change
September 30, 2022December 31, 2021$%
Commercial:
C&I$47,988 $59,023 $(11,035)(19)%
CRE:
CRE11,035 9,498 1,537 16 %
Multifamily residential174 444 (270)(61)%
Total CRE11,209 9,942 1,267 13 %
Consumer:
Residential mortgage:
Single-family residential12,741 15,720 (2,979)(19)%
HELOCs10,568 8,444 2,124 25 %
Total residential mortgage23,309 24,164 (855)(4)%
Other consumer37 52 (15)(29)%
Total nonaccrual loans82,543 93,181 (10,638)(11)%
OREO, net— 363 (363)(100)%
Other nonperforming assets— 9,938 (9,938)(100)%
Nonperforming loans HFS14,500 — 14,500 100 %
Total nonperforming assets$97,043 $103,482 $(6,439)(6)%
Nonperforming assets to total assets
0.16 %0.17 %
Nonaccrual loans to loans held-for-investment0.17 %0.22 %
Allowance for loan losses to nonaccrual loans705.71 %581.21 %
TDRs included in nonperforming loans$32,688 $30,383 
 A discussion
Loans are generally placed on nonaccrual status when they become 90 days past due or when the full collection of significant contractual arrangements under whichprincipal or interest becomes uncertain regardless of the Company may be held contingently liablelength of past due status. Collectability is included in generally assessed based on economic and business conditions, the borrower’s financial condition, and the adequacy of collateral, if any. For additional details regarding the Company’s nonaccrual loan policy, see Note 11 1 — Commitments and Contingencies to the Consolidated Financial Statements. In addition, the Company has commitments and obligations under post-retirement benefit plans as described in Note 15 Summary of Significant Accounting Policies — Employee Benefit Plans Significant Accounting Policies — Loans Held-for-Investment to the Consolidated Financial Statements in the Company’s 2021 Form 10-K.

Nonaccrual loans were $82.5 million as of September 30, 2022, a decrease of $10.6 million or 11% from $93.2 million as of December 31, 2021. This decrease was predominantly the result of charge-offs and paydowns of commercial loans. As of September 30, 2022, $54.4 million or 66% of nonaccrual loans were less than 90 days delinquent. In comparison, $54.2 million or 58%, of nonaccrual loans were less than 90 days delinquent as of December 31, 2021.

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The following table presents the accruing loans past due by portfolio segment as of September 30, 2022 and December 31, 2021:
($ in thousands)
Total Accruing Past Due Loans (1)
ChangePercentage of
Total Loans Outstanding
September 30,
2022		December 31,
2021		$%September 30,
2022		December 31,
2021
Commercial:
C&I$20,960 $11,069 $9,891 89 %0.13 %0.08 %
CRE:
CRE623 3,722 (3,099)(83)%0.00 %0.03 %
Multifamily residential795 5,342 (4,547)(85)%0.02 %0.15 %
Total CRE1,418 9,064 (7,646)(84)%0.01 %0.06 %
Total commercial22,378 20,133 2,245 11 %0.07 %0.07 %
Consumer:
Residential mortgage:
Single-family residential22,239 18,760 3,479 19 %0.20 %0.21 %
HELOCs4,916 5,854 (938)(16)%0.22 %0.27 %
Total residential mortgage27,155 24,614 2,541 10 %0.21 %0.22 %
Other consumer80 108 (28)(26)%0.09 %0.08 %
Total consumer27,235 24,722 2,513 10 %0.21 %0.22 %
Total$49,613 $44,855 $4,758 11 %0.10 %0.11 %
(1)There were no accruing loans past due 90 days or more as of both September 30, 2022 and December 31, 2021.

Troubled Debt Restructurings

TDRs are loans for which contractual terms have been modified by the Company for economic or legal reasons related to a borrower’s financial difficulties, and for which a concession to the borrower was granted that the Company would not otherwise consider. The Company’s loan modifications are handled on a case-by-case basis and are negotiated to achieve mutually agreeable terms that maximize loan collectability and meet the borrower’s financial needs. The following table presents the performing and nonperforming TDRs by portfolio segment as of September 30, 2022 and December 31, 2021. The allowance for loan losses for TDRs was $16.9 million as of September 30, 2022 and $4.8 million as of December 31, 2021.
($ in thousands)September 30, 2022December 31, 2021
Performing
TDRs		Nonperforming
TDRs		TotalPerforming
TDRs		Nonperforming
TDRs		Total
Commercial:
C&I$58,273 $32,121 $90,394 $77,256 $28,239 $105,495 
CRE:
CRE22,768 — 22,768 23,379 — 23,379 
Multifamily residential3,876 174 4,050 4,042 197 4,239 
Total CRE26,644 174 26,818 27,421 197 27,618 
Consumer:
Residential mortgage:
Single-family residential4,786 68 4,854 6,585 1,102 7,687 
HELOCs2,244 325 2,569 2,553 845 3,398 
Total residential mortgage7,030 393 7,423 9,138 1,947 11,085 
Total TDRs$91,947 $32,688 $124,635 $113,815 $30,383 $144,198 

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

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

Loan Modifications Due to COVID-19 Pandemic

The Company has granted a range of commercial and consumer loan accommodations, predominantly in the form of payment deferrals, to provide relief to borrowers experiencing financial hardship due to the COVID-19 pandemic. For COVID-19 related loan modifications, which occurred between March 1, 2020 through January 1, 2022, that have met the loan modification criteria under Section 4013 of the CARES Act, as amended by the Consolidated Appropriations Act, 2021, or under the Interagency Statement on Loan Modifications and Reporting for Financial Institutions Working with Customers Affected by the Coronavirus (Revised), the Company elected to temporarily suspend TDR accounting under ASC Subtopic 310-40, Receivables — Troubled Debt Restructurings by Creditors. As of September 30, 2022, COVID-19 loans under payment deferral and forbearance programs totaled $42.4 million, or 0.1% of total loans, compared with $363.1 million, or 0.9% of total loans as of December 31, 2021. Loans that have exited the modification program were substantially all current as of September 30, 2022.

Allowance for Credit Losses

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

In addition to the allowance for loan losses, the Company maintains an allowance for unfunded credit commitments. The Company has three general areas for which it provides the allowance for unfunded credit commitments: (1) recourse obligations for loans sold, (2) letters of credit, and (3) unfunded lending commitments. The Company’s methodology for determining the allowance calculation for unfunded lending commitments uses the lifetime loss rates of the on-balance sheet commitment. Recourse obligations for loans sold and letters of credit use the weighted loss rates for the applicable segment of the individual credit.

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

The Company is committed to maintaining the allowance for credit losses at a level that is commensurate with the estimated inherent losses in the loan portfolio, including unfunded credit facilities. While the Company believes that the allowance for credit losses as of September 30, 2022 was appropriate to absorb losses inherent in the loan portfolio and in unfunded credit commitments based on the information available, future allowance levels may increase or decrease based on a variety of factors, including but not limited to, accounting standard and regulatory changes, loan growth, portfolio performance and general economic conditions. This evaluation is inherently subjective as it requires numerous estimates and judgements. For a description of the policies, methodologies and judgments used to determine the allowance for credit losses, see Item 7. MD&A — Critical Accounting Estimates and Note 1 — Summary of Significant Accounting Policies to the Consolidated Financial Statements in the Company’s 2021 Form 10-K, and has contractual obligationsNote 7—Loans Receivable and Allowance for future payments on debts, borrowings and lease obligations as detailedCredit Losses to the Consolidated Financial Statements in Item 7 — MD&A — Off-Balance Sheet Arrangements and Aggregate Contractual Obligations this Form 10-Q.

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The following table presents an allocation of the Company’s 2016 Form 10-K.allowance for loan losses by loan portfolio segments and unfunded credit commitments as of September 30, 2022 and December 31, 2021:


($ in thousands)September 30, 2022December 31, 2021
Allowance
Allocation		% of Loan Type to Total LoansAllowance
Allocation		% of Loan Type to Total Loans
Allowance for loan losses
Commercial:
C&I$371,749 33 %$338,252 34 %
CRE:
CRE145,301 29 %150,940 29 %
Multifamily residential25,680 10 %14,400 9 %
Construction and land7,506 1 %15,468 1 %
Total CRE178,487 40 %180,808 39 %
Total commercial550,236 73 %519,060 73 %
Consumer:
Residential mortgage:
Single-family residential27,263 23 %17,160 22 %
HELOCs3,324 4 %3,435 5 %
Total residential mortgage30,587 27 %20,595 27 %
Other consumer1,694 0 %1,924 0 %
Total consumer32,281 27 %22,519 27 %
Total allowance for loan losses$582,517 100 %$541,579 100 %
Allowance for unfunded credit commitments$24,041 $27,514 
Total allowance for credit losses$606,558 $569,093 
Loans held-for-investment$47,442,255 $41,693,781 
Allowance for loan losses to loans held-for-investment1.23 %1.30 %
Three Months Ended September 30,Nine Months Ended September 30,
2022202120222021
Average loans held-for-investment$46,845,030 $39,959,972 $44,544,863 $39,441,410 
Annualized net charge-offs to average loans held-for-investment0.06 %0.13 %0.02 %0.14 %


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

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The Company considers multiple economic scenarios to develop the estimate of the allowance for loan losses. The scenarios may consist of a baseline forecast representing management's view of the most likely outcome, and downside or upside scenarios reflecting possible worsening or improving economic conditions. As of September 30, 2022, the Company assigned a lower weighting to its downside scenario and higher weightings to the baseline and upside scenarios, compared with the weightings assigned as of December 31, 2021. The current forecast as of September 30, 2022 incorporates an updated impact of high inflation, lower than previously expected annual Gross Domestic Product (“GDP”) growth, rising interest rates, and continued global oil and supply chain issues caused by the Russian invasion of Ukraine. Macroeconomic assumptions underlying the baseline forecast include annual GDP growth of 1.6% and 1.4% for 2022 and 2023, respectively, and the unemployment rate to average 3.7% and 3.9% for 2022 and 2023, respectively. The downside scenario assumed annual GDP growth of 1.5% in 2022 dropping to a 2.0% decline for 2023, and the unemployment rate to rise from a 4.2% average for 2022 to a 7.3% average for 2023. The upside scenario assumed annual GDP growth of 1.9% and 4.1% for 2022 and 2023, respectively, and the unemployment rate to improve from an average of 3.6% for 2022 to 3.3% for 2023.

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

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

Liquidity Risk Management

Liquidity

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

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


Liquidity Risk — Liquidity Sources. The Company maintains liquidity in the form of cash and cash equivalents, interest-bearing deposits with banks and available-for-sale investment securities. These assets totaled $5.10 billion and $5.54 billion, accounting for 14% and 16% of total assets, as of September 30, 2017 and December 31, 2016, respectively. Traditional formsCompany’s primary source of funding such as customeris from deposits generated by its banking business, which are relatively stable and borrowings augment these liquid assets.low-cost. Total customer deposits amounted to $31.31$53.86 billion as of September 30, 2017,2022, compared to $29.89with $53.35 billion as of December 31, 2016, of which core deposits comprised 81% of total deposits2021. The Company’s loan-to-deposit ratio was 88% as of each of September 30, 2017 and2022, compared with 78% as of December 31, 2016. As a means of augmenting the Company’s liquidity,2021.

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In addition to deposits, the Company maintains availablehas access to various sources of wholesale financing, including borrowing capacity under secured borrowing lines with the FHLB and FRB,Federal Reserve Bank of San Francisco (“FRBSF”), unsecured federal funds’funds lines of credit with various correspondent banks, for purchase of overnight funds, and several master repurchase agreements with major brokerage companies.companies to sustain an adequate liquid asset portfolio, meet daily cash demands and allow management flexibility to execute its business strategy. Economic conditions and the stability of capital markets impact the Company’s access to and the cost of wholesale financing. The Company’s access to capital markets is also affected by the ratings received from various credit rating agencies. As of September 30, 2022, the Company had available borrowing capacity of $20.51 billion. The available borrowing capacity included $10.88 billion with the FHLB, and FRB was $6.45$2.17 billion and $3.23 billion, respectively, as of September 30, 2017. The Bank’swith the FRBSF, unsecured federal funds’funds lines of credit subject to availability, totaled $731.0 million with correspondent banks of $936.0 million, and borrowing capacity from unpledged debt securities of $6.52 billion. Unencumbered loans and/or debt securities were pledged to the FHLB and the FRBSF discount window as collateral. The Company has established operational procedures to enable borrowing against these assets, including regular monitoring of September 30, 2017.the total pool of loans and debt securities eligible as collateral. Eligibility of collateral is defined in guidelines from the FHLB and FRBSF and is subject to change at their discretion. The Company believes that its liquidity sources are sufficient to meet all reasonably foreseeable short-term needs. See Item 2— MD&A — Balance Sheet Analysis — Deposits and intermediate-term needs.Other Sources of Funding in this Form 10-Q for further detail related to the Company’s funding sources.

The Company experienced netmaintains a certain level of liquid assets in the form of cash inflowsand cash equivalents, interest-bearing deposits with banks, short-term resale agreements and unencumbered high-quality and liquid AFS debt securities. The following table presents the Company’s liquid assets as of September 30, 2022 and December 31, 2021:
($ in thousands)September 30, 2022December 31, 2021
EncumberedUnencumberedTotalEncumberedUnencumberedTotal
Cash and cash equivalents$— $2,163,353 $2,163,353 $— $3,912,935 $3,912,935 
Interest-bearing deposits with banks— 630,543 630,543 — 736,492 736,492 
Resale agreements due to mature in one year— 407,986 407,986 — 1,818,503 1,818,503 
AFS debt securities:
U.S. Treasury, and U.S. government agency and U.S. government-sponsored enterprise debt securities273,735 587,366 861,101 384,895 1,949,757 2,334,652 
U.S. government agency and U.S. government-sponsored enterprise mortgage-backed securities189,722 2,125,592 2,315,314 418,761 3,738,502 4,157,263 
Foreign government bonds— 225,810 225,810 — 257,733 257,733 
Municipal securities— 249,502 249,502 — 523,158 523,158 
Non-agency mortgage-backed securities, asset-backed securities and CLOs181 1,724,617 1,724,798 240 2,042,642 2,042,882 
Corporate debt securities— 529,565 529,565 — 649,665 649,665 
Total$463,638 $8,644,334 $9,107,972 $803,896 $15,629,387 $16,433,283 

Unencumbered liquid assets totaled $8.64 billion as of September 30, 2022, compared with $15.63 billion as of December 31, 2021. AFS debt securities, included as part of liquidity sources, consist of high quality and liquid securities with moderate durations to minimize overall interest rate and liquidity risks. The Company believes these AFS debt securities provide quick sources of liquidity to obtain financing, regardless of market conditions, through sale or pledging. The decrease in liquid assets was primarily related to the transfer of $3.01 billion of debt securities from operating activities of $665.0 million and $417.6 millionAFS to HTM during the nine months ended September 30, 2017first quarter of 2022, a decrease in cash and 2016, respectively. The $247.4 million increasecash equivalents driven by loan funding activities, a decrease in net cash inflows from operating activities between these periods wasresale agreements primarily due to a $99.8 million increase in net income, a $108.3 million increase in net changes in cash flows receivable from other assetsrepayments, and a $76.2 million increase in net changes in the cash flows from accrued expenses and other liabilities, partially offset by a $32.5 million change in non-cash amounts. The $108.3 million increase in net changes in cash flows receivable from other assets, comparing the nine months ended September 30, 2017 to the same period in 2016, was primarily due to a reduction in tax receivables, and an increasedecrease in fair value of interest rate swaps and options during the nine months ended September 30, 2016 contributing to operating cash outflows in that period. The $76.2 million increase in net changes in the cash flows from accrued expenses and other liabilities, comparing the nine months ended September 30, 2017 to the same period in 2016, wasAFS debt securities primarily due to a larger wire transferinterest rate increases.

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

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Liquidity Risk — Cash Requirements. In the ordinary course of the Company’s business, the Company enters into contractual obligations that require future cash payments, including funding for customer deposit withdrawals, repayments for short- and long-term borrowings, leases obligations and other cash commitments. The Company also has off-balance sheet arrangements which represent transactions that are not recorded on the Consolidated Balance Sheet. The Company’s off-balance sheet arrangements include (1) commitments to extend credit, such as loan commitments, commercial letters of 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 tax payables.leasing, hedging or research and development services with the Company. Since many of these commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future funding requirements. Information about the Company’s loan commitments, commercial letters of credit and SBLCs is provided in Note 10 — Commitments and Contingencies to the Consolidated Financial Statements in this Form 10-Q. The Company’s liquidity sources have been, and are expected to be, sufficient to meet all such cash requirements.


NetThe Consolidated Statement of Cash Flows summarizes the Company’s sources and uses of cash used inby type of activities for the first nine months of 2022 and 2021. Excess cash generated by operating and investing activities totaled $2.07 billion and $473.3 million during the nine months ended September 30, 2017 and 2016, respectively. The $1.59 billion increasemay be used to repay outstanding debt or invest in net cash used in investing activities was primarily dueliquid assets.

Liquidity Risk — Liquidity for East West. In addition to a $1.69 billion increase in net cash outflows from loans held-for-investment, partially offset by a $150.0 million increase in net cash inflows from resale agreements.

During the nine months ended September 30, 2017 and 2016,bank level liquidity management, the Company experienced netmanages liquidity at the parent company level for various operating needs including payment of dividends, repurchases of common stock, principal and interest payments on its borrowings, acquisitions and additional investments in its subsidiaries. East West’s primary source of liquidity is from cash inflows from financing activitiesdividends distributed by its subsidiary, East West Bank. The Bank is subject to various statutory and regulatory restrictions on its ability to pay dividends as discussed in Item 1. Business — Supervision and Regulation — Dividends and Other Transfers of $1.24 billionFunds of the Company’s 2021 Form 10-K. East West held $226.5 million and $365.6 million, respectively. Net cash inflows from financing activities of $1.24 billion during the nine months ended September 30, 2017 was primarily comprised of a $1.39 billion net increase in customer deposits, partially offset by $87.9$345.0 million in cash dividends paid. Netand cash inflows from financing activitiesequivalents as of $365.6 million duringSeptember 30, 2022 and December 31, 2021, respectively. Management believes that East West has sufficient cash and cash equivalents to meet the same periodprojected cash obligations for the current year.

Liquidity Risk — Liquidity Stress Testing. The Company utilizes liquidity stress analysis to determine the appropriate amounts of liquidity to maintain at the Company, foreign subsidiary and foreign branch levels needed to meet contractual and contingent cash outflows under a range of scenarios. Scenario analyses include assumptions about significant changes in 2016 were primarily comprisedkey funding sources, market triggers, potential uses of funding and economic conditions in certain countries. In addition, Company specific events are incorporated into the stress testing. Liquidity stress tests are conducted to ascertain potential mismatches between liquidity sources and uses over a $1.13 billion net increase in customer depositsvariety of time horizons, both immediate and longer term, and over a $37.7 million increase in short-term borrowings, partially offset byvariety of stressed conditions. Given the range of potential stresses, the Company maintains contingency funding plans on a $700.0 million repayment of short-term FHLB advancesconsolidated basis and $87.0 million in cash dividends paid.for individual entities.


As of September 30, 2017,2022, the Company is not aware of any trends, events or uncertainties that had or were reasonably likely to have a material effect on its liquidity position. Furthermore, the Company iswas not aware of any material commitments for capital expenditures in the foreseeable future.future and believes it has adequate liquidity resources to conduct operations and meet other needs in the ordinary course of business. Given the uncertainty and the rapidly changing market and economic conditions, the Company will continue to actively evaluate the impact on its business and financial position. For more information on how economic conditions may impact our liquidity, see Item 1A. Risk Factors of the Company’s 2021 Form 10-K.



Market Risk Management
East West’s liquidity has historically been dependent
Market risk is the risk that the Company’s financial condition may change resulting from adverse movements in market rates or prices, including interest rates, foreign exchange rates, interest rate contracts prices, investment securities prices, credit spreads, and related risk due to mismatches in rate sensitive assets and liabilities. In the event of market stress, the risk could have a material impact on the paymentCompany’s results of cash dividends by its subsidiary, East West Bank, subjectoperations and financial condition.

The Board’s Risk Oversight Committee has primary oversight responsibility over market risk management. At the management level, the ALCO establishes and monitors compliance with the policies and risk limits pertaining to applicable statutes, regulationsmarket risk management activities. Corporate Treasury supports the ALCO in measuring, monitoring, and special approval. The Bank paid total dividends of $255.0 million and $100.0 million to East West during the nine months ended September 30, 2017 and 2016, respectively. In addition, in October 2017, the Board declared a quarterly cash dividend of $0.20 per share for the Company’s common stock payable on November 15, 2017 to stockholders of record on November 1, 2017.managing interest rate risk as well as all other market risks.


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Interest Rate Risk Management


Interest rate risk results primarily from the Company’s traditional banking activities of gathering deposits and extending loans, and iswhich are the primary areas of market risk for the Company. Economic and financial conditions, movements in interest rates, and consumer preferences impact the level of noninterest-bearing funding sources at the Company, as well as affect the difference between the interest the Company earns on interest-earning assets and pays on interest-bearing liabilities, and the level of the noninterest-bearing funding sources.liabilities. In addition, changes in interest rates can influence the rate of principal prepayments on loans and the speed of deposit withdrawals. Due to the pricing term mismatches and the embedded options inherent in certain products, changes in market interest rates affect not only affectthe expected near-term earnings, but also the economic value of these interest-earning assets and interest-bearing liabilities. Other market risks include foreign currency exchange risk and equity price risk. These risks are not considered significant to the Company’s interest rate riskCompany and no separate quantitative information concerning these risks is presented herein.


WithUnder the oversight byof the Company’s Board of Directors, the ALCO coordinates the overall management of the Company’s interest rate risk. The ALCO meets regularly and is responsible for reviewing the Company’s open market positions and establishing policies to monitor and limit exposureexposures to market risk. Management of interest rate risk is carried out primarily through strategies involving the Company’s investmentdebt securities portfolio, loan portfolio, available funding channels, and capital market activities. In addition, the Company’s policies permit the use of off-balance sheet derivative instruments to assist in managing interest rate risk.


The interest rate risk exposure is measured and monitored through various risk management tools, which include a simulation model that performs interest rate sensitivity analysisanalyses under multiplevarious interest rate scenarios. The model includesincorporates the Company’s cash instruments, loans, investmentdebt securities, resale agreements, customer deposits, borrowings and borrowing portfolios, including repurchase agreements. Theagreements, as well as financial instruments from the Company’s domestic and foreign operations, forecasted noninterest income and noninterest expense items are also incorporated in the simulation. The interest rate scenarios simulated include an instantaneous parallel shift and non-parallel shift in the yield curve. In addition, the Company also performs various simulations using alternative interest rate scenarios. The alternative interest rate scenarios include yield curve flattening, yield curve steepening and yield curve inverting. In order to apply the assumed interest rate environment, adjustments are made to reflect the shift in the U.S. Treasury and other appropriate yield curves.operations. The Company incorporatesuses both a static balance sheet and a forward growth balance sheet in order to perform these evaluations.the interest rate sensitivity analyses. The simulated interest rate scenarios include an instantaneous non-parallel shift in the yield curve and a gradual non-parallel shift in the yield curve (“rate ramp”) over a static balance sheet. In addition, the Company also performs simulations using other alternative interest rate scenarios, including various permutations of the yield curve flattening, steepening or inverting. Results of these various simulations are used to formulate and gauge strategies to achieve a desired risk profile within the Company’s capital and liquidity guidelines.


The net interest income simulation model is based on the actual maturity and re-pricingrepricing characteristics of the Company’s interest-rate sensitive assets, liabilities, and related derivative contracts. It also incorporates various assumptions, which management believes to be reasonable but may have a significant impact on the results. These assumptions include, but are not limited to, the timing and magnitude of changes in interest rates, the yield curve evolution and shape, the correlation between various interest rate indices, financial instruments’ future repricing characteristics and spread relative to benchmark rates, and the effect of interest rate floors and caps. The modeled results are highly sensitive to the deposit decay and deposit beta assumptions, used for deposits that do not have specific maturities. The Company uses historicalwhich are derived from a regression analysis of the Company’s internalhistorical deposit data as a guidedata. The Company used full- through-the-economic-cycle betas with each incremental rate increase in the rate ramp scenarios, and did not assume lags in repricing. Deposit beta commonly refers to set deposit decay assumptions. In addition, the model is also highly sensitive to certain assumptions on the correlation of the changechanges in interest rates paid on core deposits to changes in the benchmark market interest rates, commonly referred to as deposit beta assumptions. Deposit beta assumptions are based on the Company’s historical experience.rates. The model is also sensitive to the loan and investment prepayment assumption. The loanassumptions that are based on an independent model and investmentthe Company’s historical prepayment assumption,data, which considers theconsider anticipated prepayments under different interest rate environments,environments.

Simulation results are highly dependent on input assumptions. To the extent the actual behavior is based on an independent model, as well asdifferent from the Company’s historical prepayment experiences.

Existing investment securities, loans, customer deposits and borrowings are assumed to roll into new instruments at a similar spread relative to benchmarkassumptions used in the models, there could be material changes in interest rates and internal pricing guidelines.rate sensitivity results. The assumptions applied in the model are documented, supported, and supported for reasonableness.periodically back-tested to assess the reasonableness and effectiveness. The Company makes appropriate calibrations to the model as needed and continually validates the model, methodology and results. Changes to key model assumptions are reviewed by the ALCO. Due to the sensitivity of the modelScenario results the Company performs periodic testing to assess the impact of the assumptions. The Company also makes appropriate calibrations when necessary. Scenarios do not reflect strategies that the management could employ to limit the impact asof changing interest rate expectations change.expectations.

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

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Twelve-Month Net Interest Income Simulation results are highly dependent on these assumptions. To

Net interest income simulation modeling measures interest rate risk through earnings volatility. The simulation projects the extent actual behavior is different from the assumptions in the models, there could be a material changecash flow changes in interest rate sensitivity.sensitive assets and liabilities, expressed in terms of net interest income, over a specified time horizon for defined interest rate scenarios. Net interest income simulations provide insight into the impact of market rates changes on earnings, which help guide risk management decisions. The Company assesses interest rate risk by comparing the changes of net interest income in different interest rate scenarios.




The following table presents the Company’s net interest income and economic value of equity (“EVE”) sensitivity as of September 30, 2017 and December 31, 2016 related to an instantaneous and sustained non-parallel shift in market interest rates ofby 100 and 200 basis points in both directions:
 
Change in
Interest Rates
(BP)
 
Net Interest
Income
   Volatility (1)
 
EVE
    Volatility (2)
 September 30, 2017 December 31, 2016 September 30, 2017 December 31, 2016
+200 20.5 % 22.4 % 13.4 % 12.3 %
+100 11.4 % 12.0 % 7.0 % 7.5 %
-100 (8.0)% (6.8)% (3.7)% (5.0)%
-200 (10.4)% (7.5)% (9.6)% (9.3)%
 
(1)The percentage change represents net interest income over 12 months in a stable interest rate environment versus net interest income in the various rate scenarios.
(2)The percentage change represents net portfolio value of the Company in a stable interest rate environment versus net portfolio value in the various rate scenarios.

Twelve-Month Net Interest Income Simulation

The Company’s estimated twelve-month net interest income sensitivitybps as of September 30, 2017 was slightly lower compared to2022 and December 31, 2016 for both upward2021, based on a static balance sheet as of the date of the analysis.
Change in Interest Rates
(in bps)
Net Interest Income Volatility (1)
September 30, 2022December 31, 2021
+20011.7 %19.5 %
+1006.0 %9.4 %
-100(5.2)%NM
-200(10.2)%NM
NM — Not meaningful.
(1)The percentage change represents net interest income change over 12 month period in a stable interest rate environment versus in the various interest rate scenarios.

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

While an instantaneous and sustained non-parallel shift in market interest rates was used in the simulation model described in the preceding paragraph, the Company also models scenarios based on gradual shifts in interest rates and assesses the corresponding impacts. These interest rate scenarios as simulated increases inprovide additional information to estimate the Company’s underlying interest rate risk. The rate ramp table below shows the net interest income are offsetvolatility under a gradual non-parallel shift of the yield curve, in even monthly increments over the first 12 months, followed by an increaserates held constant thereafter based on a static balance sheet as of the date of the analysis. Actual results will vary based on the timing and pace of interest rate changes, as well as changes in the rate of repricing for the Company’s deposit portfolio. In a simulated downward interest rate scenario, sensitivity increased overall for both of the downward interest rate scenarios, mainly due to the impact of the recent interest rate increases on December 14, 2016, March 15, 2017, and June 14, 2017. As interest rates rise further away from all time historical lows, there is more room for the Company’s simulated interest income to decline in a downward interest rate scenario, relative to previous simulations.balance sheet.
Change in Interest Rates
(in bps)		Net Interest Income Volatility
September 30, 2022December 31, 2021
+200 Rate Ramp5.2 %9.2 %
+100 Rate Ramp2.6 %4.1 %
-100 Rate Ramp(2.2)%NM
-200 Rate Ramp(4.9)%NM
Under most rising interest rate environments, the Company would expect some customers to move balances in demand deposits into higher interest-bearing deposits such as money market, savings or time deposits. The models are particularly sensitive to the assumption about the rate of such migration. The federal funds target rate was between 0.50% and 0.75% as of December 31, 2016, and between 1.00% and 1.25% asNM — Not meaningful.

As of September 30, 2017. It should be noted that despite the two interest rate increases in 2017, as of September 30, 2017, the Company has not experienced this deposit movement, though there can be no assurance as to how long this is expected to last.

The following table presents2022, the Company’s net interest income sensitivityprofile reflects an asset sensitive position. Net interest income is expected to increase when interest rates rise, as the Company has a large share of September 30, 2017 for the +100 and +200 basis pointsvariable rate loans in its loan portfolio, primarily linked to Prime or LIBOR indices. The Company’s interest income is sensitive to changes in short-term interest rates. The Company’s deposit portfolio is primarily composed of non-maturity deposits, which are not directly tied to short-term interest rate scenarios assumingindices, but are, nevertheless, sensitive to changes in short-term interest rates. The modeled results are highly sensitive to reinvestment yield and deposit beta assumptions. Actual results in terms of net interest income growth during a $1.00 billion, $2.00 billionperiod of rising interest rates will also reflect earning asset growth and $3.00 billion demand deposit migrations:mix changes based on customer preferences relative to the interest rate environment.

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Change in
Interest Rates
(BP)
 Net Interest Income Volatility
 September 30, 2017
 
$1.00 Billion
Migration
12 Months
 
$2.00 Billion
Migration
12 Months
 
$3.00 Billion
Migration
12 Months
+200 18.3% 16.0% 13.8%
+100 9.9% 8.5% 7.0%
   


Economic Value of Equity at Risk


Economic value of equity (“EVE”) is a cash flow calculation that takes the present value of all asset cash flows and subtracts the present value of all liability cash flows. This calculation is used for asset/liability management and measures changes in the economic value of the bank. The economic value approach provides a comparatively broader scope than the net interest income volatility approach since it captures all anticipated cash flows.

The EVE simulation reflects the sensitivity of the EVE to interest rate changes across the full maturity spectrum of the Company’s assets and liabilities. It identifies risks arising from repricing, prepayment and maturity gaps between assets and liabilities on the balance sheet, as well as from derivative exposures that are off-balance sheet. The simulation provides long-term economic perspective into the Bank’s interest rate risk profile, which allows the Bank to manage anticipated negative effects of interest rate fluctuations.

The following table presents the Company’s EVE sensitivity related to an instantaneous and sustained non-parallel shift in market interest rates by 100 and 200 bps as of September 30, 2022 and December 31, 2021:
Change in Interest Rates
(in bps)
EVE Volatility (1)
September 30, 2022December 31, 2021
+2001.0 %7.1 %
+1001.0 %3.5 %
-1000.0 %NM
-200(0.3)%NM
NM — Not meaningful.
(1)The percentage change represents net portfolio value change of the Company in a stable interest rate environment versus in the various interest rate scenarios.

The Company’s EVE sensitivity increasedfor the upward interest rate scenarios decreased as of September 30, 2017,2022, compared towith the results as of December 31, 2016, for both2021. The changes in EVE sensitivity were primarily due to faster deposit decay and higher deposit beta assumptions used in the model, changes in the level and shape of the upward interest rate scenarios. In the simulated upward 100 basis pointsyield curve, and 200 basis points interest rate scenarios, EVE sensitivity was 7.0% and 13.4%, respectively. The increase in sensitivitylower cash balances as of September 30, 2017 compared to December 31, 2016 in the upward interest rate scenario was primarily due to changes in the balance sheet portfolio mix. EVE declined 3.7% and 9.6% of the base level as of September 30, 2017 in declining rate scenarios of 100 and 200 basis points, respectively.2022.




The Company’s net interest income and EVE profile as of September 30, 2017, as presented in the net interest income and EVE tables,2022 reflects an asset sensitive netEVE position under the higher interest income position and an asset sensitive EVE position. The Company is naturally asset sensitive due to its large portfolio of rate-sensitive loans that are funded in part by noninterest-bearing and rate-stable core deposits. As a result, if there are no significant changes in the mix of assets and liabilities, net interest income increases when interest rates increase, and decreases when interest rates decrease.rate scenarios. Given the uncertainty of the magnitude, timing and direction of future interest rate movements, andas well as the shape of the yield curve, actual results may vary from those predicted by the Company’s model.


Derivatives


It is the Company’s policy not to speculate on the future direction of interest rates, or foreign currency exchange rates.rates and energy commodity prices. However, the Company will, from time to time, enterperiodically enters into derivativesderivative transactions in order to reduce its exposure to market risks, includingprimarily interest rate risk and foreign currency risk. The Company believes that these derivative transactions, when properly structured and managed, may provideprovides a hedge against inherent risk in certain assets orand liabilities andor against risk in specific transactions. Hedging transactions may be implemented using a variety of derivative instruments such as swaps, caps, floors, financial futures, forwards, options, and options.collars. Prior to entering into any hedging activities, the Company analyzes the costs and benefits of the hedge in comparison to alternative strategies. In addition, the Company enters into derivative transactions in order to assist customers with their risk management objectives, such as managing exposure to fluctuations in interest rates, foreign currencies and energy commodity prices. To economically hedge against the derivative contracts entered with the Company’s customers, the Company enters into mirrored derivative contracts with third-party financial institutions. The exposures from derivative transactions are collateralized by cash and/or eligible securities based on limits as set forth in the respective agreements entered between the Company and counterparty financial institutions.


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The Company is subject to credit risk associated with the counterparties to the derivative contracts. This counterparty credit risk is a multi-dimensional form of risk, affected by both the exposure and credit quality of the counterparty, both of which are sensitive to market-induced changes. The Company’s Credit Risk Management Committee provides oversight of credit risks and the Company has guidelines in place to manage counterparty concentration, tenor limits, and collateral. The Company manages the credit risk of its derivative exposures by diversifying its positions among various counterparties, by entering into legally enforceable master netting arrangements, and by requiring collateral arrangements, where possible. The Company may also transfer counterparty credit risk related to interest rate swaps to third-party financial institutions through the use of credit risk participation agreements. Certain derivative contracts are required to be centrally cleared through clearinghouses, which further mitigates credit risk. The Company incorporates credit value adjustments and other market standard methodologies to appropriately reflect its own nonperformance risk and the respective counterparty’s nonperformance risk in the fair value measurements of its derivatives.

The following table summarizes certain information about derivative financial instruments utilized by the Company in its management of interest rate risk and foreign currency risk as of September 30, 2022 and December 31, 2021:
September 30, 2022December 31, 2021
($ in thousands)Interest Rate ContractsForeign Exchange ContractsInterest Rate ContractsForeign Exchange Contracts
Derivatives designated as hedging instruments:Cash Flow
Hedges		Net Investment HedgesCash Flow
Hedges		Net Investment Hedges
Notional amounts$2,525,000 $84,832 $275,000 $86,531 
Fair value:
Recognized as an asset533 7,107 — — 
Recognized as a liability24,679 — 57 225 
Net fair value$(24,146)$7,107 $(57)$(225)
Weighted-average interest rates:
Variable-rate borrowings — Pay fixed (receive floating)0.483%
(3-month USD-LIBOR)		NA0.483%
(3-month USD-LIBOR)		NA
Variable-rate loans — Receive fixed (pay floating)1.09%
(1-month USD-LIBOR)		NANANA
Variable-rate loans — Receive fixed (pay floating)6.475%
(USD-PRIME)		NANANA
Variable-rate loans — Sell cap-buy floor (floating rate )4.575%-1.500%
(1-month USD-SOFR)		NANANA
Weighted-average remaining term to maturity (in months):39.6 5.7 13.9 2.7 
Derivatives not designated as hedging instruments:Interest Rate ContractsForeign Exchange ContractsInterest Rate ContractsForeign Exchange Contracts
Notional amounts$17,261,862 $2,762,150 $17,575,420 $1,874,681 
Fair value:
Recognized as an asset429,50574,767240,22221,033
Recognized as a liability590,64864,049179,90515,276
Net fair value$(161,143)$10,718 $60,317 $5,757 
NA — Not applicable.

Derivatives Designated as Hedging Instruments — Interest Rate Swapsrate and foreign exchange derivative contracts are utilized in the Company’s asset and liability management activities and serve as an efficient tool to manage the Company’s interest rate risk and foreign exchange risk. The Company uses interest rate derivatives to hedge the risk of variable cash flows in its variable interest rate borrowings, which includes repurchase agreements and FHLB advances, as well as a portion of its variable interest rate CRE loans. The Company also uses foreign exchange derivatives to hedge the risk of changes in the USD equivalent value of a designated monetary amount of the Company’s net investment in East West Bank (China) Limited. For both the cash flow and the net investment hedges, the changes in the fair value of the hedging instruments are recognized in AOCI, net of tax, on Certificatesthe Consolidated Balance Sheet.

The fluctuation in foreign currency translation of Deposit —the hedged exposure is expected to be offset by changes in the fair value of the forward contracts. As of September 30, 2017 and December 31, 2016,2022, the Company had two cancellableoutstanding foreign currency forwards effectively hedged approximately 44% of the net Chinese Renminbi exposure from East West Bank (China) Limited.
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Changes to the composition of the Company’s derivatives designated as hedging instruments during the first nine months of 2022 reflect actions taken for interest rate swap contracts with original terms of 20 years.risk and foreign exchange rate risk management. The objective of these interest rate swaps, which were designated as fair value hedges, was to obtain low-cost floating rate fundingCompany repositions its hedging derivatives portfolio based on the Company’s brokered certificatescurrent assessment of deposit. As of September 30, 2017economic and December 31, 2016, underfinancial conditions, including the terms of the swap contracts, the Company received a fixed interest rate and paid a variable interest rate. Asforeign currency environments, balance sheet composition and trends, and the relative mix of September 30, 2017its cash and December 31, 2016, the notional amounts of the Company’s brokered certificates of deposit interest rate swaps were $42.6 million and $48.4 million, respectively. The fair value liabilities of the interest rate swaps were $6.6 million and $6.0 millionderivative positions.

Derivatives Not Designated as of September 30, 2017 and December 31, 2016, respectively.

Interest Rate Swaps and OptionsHedging Instruments — The Company also offers variousenters into interest rate, derivative productsforeign exchange and energy commodity contracts to support the business needs of its customers. When derivative transactions are executed with its customers, the derivative contracts are offset by paired trades with registered swap dealers. Thesethird-party financial institutions. The Company may enter into derivative contracts that are either exchange-traded, centrally cleared through a clearinghouse or over-the-counter. Derivative contracts entered with central clearing organizations are settled-to-market daily to the extent the central clearing organizations’ rulebook legally characterize daily payments of variation margin as a settlement.

The Company offers various interest rate derivative contracts to its customers and enters into offsetting contracts with third-party financial institutions, including central clearing organizations, to manage its interest risk. Interest rate derivative contracts allow borrowers to lock in attractive intermediate and long-term fixed rate financing while not increasing the interest rate risk to the Company. These transactions are not linked to any specific Company assets or liabilities on the Consolidated Balance SheetsSheet, or to forecasted transactions in a hedgehedging relationship, and are therefore areclassified as economic hedges. The contracts are marked to marketmarked-to-market at each reporting period. Fair values are determined from verifiable third-party sources that have considerable experience with derivative markets. The Company provides data to the third party source to calculate the credit valuation component of thechanges in fair values of the client derivative contracts.

As of September 30, 2017,contracts traded with third-party financial institutions are expected to be largely comparable to the total notional amounts of interest rate swaps and options, including mirrored transactions with institutional counterparties and the Company’s customers, totaled $4.37 billion for derivatives that werechanges in an asset valuation position and $4.37 billion for derivatives that were in a liability valuation position. As of December 31, 2016, the total notional amounts of interest rate swaps and options, including mirrored transactions with institutional counterparties and the Company’s customers, totaled $3.86 billion for derivatives that were in an asset valuation position and $3.81 billion for derivatives that were in a liability valuation position. The fair values of interest rate swap and optionthe derivative transactions executed with customers throughout the terms of these contracts, with institutional counterpartiesexcept for the credit valuation adjustment component. The Company records credit valuation adjustments on derivatives to properly reflect the variances of credit worthiness between the Company and the Company’s customers amounted to a $64.8 million assetcounterparties, considering the effects of enforceable master netting agreements and a $64.2 million liability as of September 30, 2017. The fair values of interest rate swap and option contracts with institutional counterparties and the Company’s customers amounted to a $67.6 million asset and a $65.1 million liability as of December 31, 2016.collateral arrangements.


Foreign Exchange Contracts — The Company enters into foreign exchange contracts with its customers primarily comprised ofto accommodate their business needs. The foreign exchange contracts include forward swap and spot contracts, to enable its customers to hedge their transactions in foreign currencies from fluctuations in foreign exchange rates,swaps and also to allow the Company to economically hedge against foreign currency fluctuations in certain foreign currency denominated deposits that it offers to its customers, as well as the Company’s investment in its China subsidiary, East West Bank (China) Limited.

For a majority ofoptions. To manage the foreign exchange transactions enteredrisk and credit exposures from the contracts with its customers, the Company enters into offsetting foreign exchange contracts with institutionalthird-party financial institutions and/or enters into bilateral collateral and master netting agreements with certain customer counterparties. The changes in the fair values of contracts entered with third-party financial institutions are expected to be largely comparable to the changes in fair values of the foreign exchange transactions executed with the customers throughout the terms of these contracts. As of September 30, 2022, the Company anticipates performance by all counterparties and has not experienced nonperformance by any of its counterparties, and therefore did not incur any related losses. The Company also utilizes foreign exchange contracts that are not designated as hedging instruments to mitigate the economic effect of fluctuations in certain foreign exchange risk. These transactions are economic hedgescurrency-denominated on-balance sheet assets and the Company does not apply hedge accounting.liabilities, primarily foreign currency-denominated deposits offered to its customers. The Company’s policies also permit taking proprietary currency positions within approved limits, in compliance with theexemptions to proprietary trading exemptionrestrictions provided under Section 619 of the Dodd-Frank Act.Wall Street Reform and Consumer Protection Act, or the Volcker Rule. The Company does not speculate in the foreign exchange markets, and actively manages its foreign exchange exposures within prescribed risk limits and defined controls.




ASC 830-20, Foreign Currency Matters — Foreign Currency Transactions and ASC 815, Derivatives and Hedging, The Company enters into energy commodity contracts with its customers to allow hedging of the foreign currency risk of a net investment in a foreign operation. During the fourth quarter of 2015, the Company began entering into foreign currency forward contractsthem to hedge its investment in East West Bank (China) Limited, a non-U.S. dollar (“USD”) functional currency subsidiary in China. The hedging instruments, designated as net investment hedges, involve hedging the risk of changes in the USD equivalent value of a designated monetary amount of the Company’s net investment in China, against the risk of adverseenergy commodity price fluctuations. To economically hedge against the risk of fluctuation in energy commodity prices in the products offered to its customers, the Company enters into offsetting energy commodity contracts with third-party financial institutions, including central clearing organizations. The changes in the foreign currency exchange rate. The notional amount and fair value of the net investment hedges were $83.0 million and a $4.3 million asset, respectively, as of December 31, 2016. Since recent policy changes by the People’s Bank of China, the central bank of the People’s Republic of China, as well as market sentiments have caused a divergence in the exchange rate movements of the on-shore Chinese Renminbi and off-shore Chinese Renminbi, the net investment hedge relationships were dedesignated during the first quarter of 2017, even though they continued to meet the hedge effectiveness test. As of September 30, 2017, the notional amount and fair value of these two foreign exchange forward contracts designated as economic hedges were $93.3 million and a $4.8 million liability, respectively, and have been included in the foreign exchange contracts’ notional amount of $1.13 billion and fair value of $14.2 million disclosed below.

As of September 30, 2017 and December 31, 2016, the Company’s total notional amounts of the foreign exchange contracts that were not designated as hedging instruments were $1.13 billion and $767.8 million, respectively. The fair values of the foreign exchangeenergy commodity contracts were a $14.2 million asset and a $20.1 million liability, respectively, as of September 30, 2017 and an $11.9 million asset and an $11.2 million liability, respectively, as of December 31, 2016.

Credit Risk Participation Agreements — The Company has entered into credit risk participation agreements (“RPAs”) under whichtraded with third-party financial institutions are expected to be largely comparable to the Company assumed its pro-rata sharechanges in fair values of the credit exposure associatedenergy commodity transactions executed with customers throughout the borrower’s performance related to interest rate derivativeterms of these contracts. The Company may or may not be a party to the interest rate derivative contract and enters into such RPAs in instances where the Company is a party to the related loan participation agreement with the borrower. The Company will make/receive payments under the RPAs if the borrower defaults on its obligation to perform under the interest rate derivative contract. The Company manages its credit risk on the RPAs by monitoring the credit worthiness of the borrowers, which is based on the normal credit review process. The notional amount of the RPAs reflects the Company’s pro-rata share of the derivative instrument. As of September 30, 2017, the notional amount and fair value of the RPAs purchased were $47.8 million and a $1 thousand liability, respectively. As of September 30, 2017, the notional amount and fair value of the RPAs sold were $20.6 million and a $2 thousand asset, respectively. As of December 31, 2016, the notional amount and fair value of the RPAs purchased were $48.3 million and a $3 thousand liability, respectively. As of December 31, 2016, the notional amount and fair value of the RPAs sold were $23.1 million and a $3 thousand asset, respectively.


Warrants — The Company obtained warrants to purchase preferred and common stock of technology and life sciences companies, as part of the loan origination process. As of September 30, 2017, the warrants included on the Consolidated Financial Statements were from public and private companies. The Company valued these warrants based on the Black-Scholes option pricing model. For warrants from public companies, the model uses the underlying stock price, stated strike price, warrant expiration date, risk-free interest rate based on duration-matched U.S. Treasury rate and market-observable company-specific option volatility as inputs to value the warrants. For warrants from private companies, the model uses inputs such as the offering price observed in the most recent round of funding, stated strike price, warrant expiration date, risk-free interest rate based on duration-matched U.S. Treasury rate and option volatility. The option volatility assumption was based on public market indices that include members that operate in similar industries as the companies in our private company portfolio. The model values were further adjusted for a general lack of liquidity due to the private nature of the underlying companies. As of September 30, 2017, the total fair value of the warrants held in public and private companies was a $1.5 million asset.

Additional information on the Company’s derivatives is presented in Note 1 — Summary of Significant Accounting Policies — Significant Accounting Policies — Derivatives to the Consolidated Financial Statements ofin the Company’s 20162021 Form 10-K,, and Note 4 3 —Fair Value Measurement and Fair Value of Financial Instruments and Note 7 6 — Derivatives to the Consolidated Financial Statements.Statements in this Form 10-Q.


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Critical Accounting Policies and Estimates


SignificantThe Company’s significant accounting policies (see are described in Note 1 — Summary of Significant Accounting Policies to the Consolidated Financial Statements and Item 7. MD&A — Critical Accounting Policies and Estimates ofin the Company’s 20162021 Form 10-K)10-K. Certain of these policies include critical accounting estimates, which are fundamentalsubject to understanding the Company’s reported results. Some accounting policies, by their nature,valuation assumptions, subjective or complex judgments about matters that are inherently subject to estimation techniques, valuationuncertain, and it is likely that materially different amounts could be reported under different assumptions and other subjective assessments. In addition, some accounting policies require significant judgment in applying complex accounting principles to individual transactions to determine the most appropriate treatment.conditions. The Company has procedures and processes in place to facilitate making these judgments.



Certain The following accounting policies are consideredcritical to have a critical effect on the Company’s Consolidated Financial Statements in the Company’s judgment. In each area, the Company has identified the most important variables in the estimation process. The Company has used the best information available to make the estimations necessary for the related assets and liabilities. Actual results could differ from the Company’s estimates, and future changes in the key variables could change future valuations and impact the results of operations. The following is a list of the more judgmental and complex accounting estimates and principles:Statements:


fair value of financial instruments;
available-for-sale investment securities;
PCI loans;
•allowance for credit losses;
•fair value estimates;
•goodwill impairment; and
•income taxes.

For additional information on the Company’s critical accounting estimates involving significant judgments, see Item 7. MD&A — Critical Accounting Estimates in the Company’s 2021 Form 10-K.
Recently Issued Accounting Standards
For detailed discussion and disclosure on new accounting pronouncements adopted and recent accounting pronouncements issued, see Note 2 — Current Accounting Developments
Reconciliation of GAAP to Non-GAAP Financial Measures

To supplement the Company’s unaudited interim Consolidated Financial Statements.Statements presented in accordance with U.S. GAAP, the Company uses certain non-GAAP measures of financial performance. Non-GAAP financial measures are not prepared in accordance with, or as an alternative to U.S. GAAP. Generally, a non-GAAP financial measure is a numerical measure of a company’s performance that either excludes or includes amounts that are not normally excluded or included in the most directly comparable measure calculated and presented in accordance with U.S. GAAP. A non-GAAP financial measure may also be a financial metric that is not required by U.S. GAAP or other applicable requirements. The Company believes these non-GAAP financial measures, when taken together with the corresponding U.S. GAAP financial measures, provide meaningful supplemental information regarding its performance, and allow comparability to prior periods. These non-GAAP financial measures may be different from non-GAAP financial measures used by other companies, limiting their usefulness for comparison purposes.



The following tables present the reconciliations of U.S. GAAP to non-GAAP financial measures for the third quarters and first nine months of 2022 and 2021:
($ in thousands)Three Months Ended September 30,Nine Months Ended September 30,
2022202120222021
Net income(a)$295,339 $225,449 $791,320 $655,185 
Add: Amortization of core deposit intangibles485 705 1,484 2,147 
  Amortization of mortgage servicing assets340 430 1,096 1,264 
Tax effect of amortization adjustments (1)
(237)(322)(742)(968)
Tangible net income(b)$295,927 $226,262 $793,158 $657,628 
Average stockholders’ equity(c)$5,772,638 $5,680,306 $5,765,637 $5,482,705 
Less: Average goodwill(465,697)(465,697)(465,697)(465,697)
  Average other intangible assets (2)
(8,379)(10,135)(8,801)(10,847)
Average tangible equity(d)$5,298,562 $5,204,474 $5,291,139 $5,006,161 
Return on average equity (3)
(a)/(c)20.30 %15.75 %18.35 %15.98 %
Tangible return on average tangible equity (3)
(b)/(d)22.16 %17.25 %20.04 %17.56 %
(1)Applied statutory tax rate of 28.77% for the third quarter and first nine months of 2022. Applied statutory tax rate of 28.37% for the third quarter and first nine months of 2021.
(2)Includes core deposit intangibles and mortgage servicing assets.
(3)Annualized.

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($ in thousands)Three Months Ended September 30,Nine Months Ended September 30,
2022202120222021
Net interest income before provision for (reversal of) credit losses$551,809 $395,706 $1,440,374 $1,125,874 
Total noninterest income75,552 73,109 233,739 214,406 
Total revenue(a)$627,361 $468,815 $1,674,113 $1,340,280 
Total noninterest expense
(b)$215,973 $205,384 $602,283 $585,984 
Less: Amortization of tax credit and other investments(19,874)(38,008)(48,753)(90,657)
 Amortization of core deposit intangibles(485)(705)(1,484)(2,147)
Adjusted noninterest expense(c)$195,614 $166,671 $552,046 $493,180 
Efficiency ratio(b)/(a)34.43 %43.81 %35.98 %43.72 %
Adjusted efficiency ratio(c)/(a)31.18 %35.55 %32.98 %36.80 %
($ and shares in thousands, except per share data)September 30, 2022December 31, 2021
Stockholders’ equity(a)$5,660,668 $5,837,218 
Less: Goodwill(465,697)(465,697)
  Other intangible assets (1)
(8,667)(9,334)
Tangible equity(b)$5,186,304 $5,362,187 
Number of common shares at period-end(c)140,918 141,908 
Book value per common share(a)/(c)$40.17 $41.13 
Tangible equity per common share(b)/(c)$36.80 $37.79 
(1)Includes core deposit intangibles and mortgage servicing assets.


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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

For quantitative and qualitative disclosures regarding market risk in the Company’s portfolio, see Item 1.Note 6 — Derivatives to the Consolidated Financial Statements — Note 7 — Derivativesin this Form 10-Q and Item 2. MD&A — Asset Liability andRisk Management — Market Risk Management in Part I of this report. Form 10-Q.



ITEM 4. CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

As of September 30, 2017,2022, pursuant to Rule 13a-15(b) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), the Company conducted an evaluation, under the supervision and with the participation of the Company’s management, including the Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures (as defined in Rule 13a-15(e) of the Exchange Act). Based upon that evaluation, the Company’s Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures were effective as of September 30, 2017.2022.


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


Change in Internal Control over Financial Reporting

There has beenwere no changechanges in the Company’s internal control over financial reporting (as defined in Rule 13a-15(f) of the Exchange Act) during the quarter ended September 30, 2017,2022, that hashave materially affected or isare reasonably likely to materially affect the Company’s internal control over financial reporting.



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PART II — OTHER INFORMATION


ITEM 1. LEGAL PROCEEDINGS

See Note 1110 —Commitments and Contingencies— Litigation to the Consolidated Financial Statements in Part I of this report,Form 10-Q, incorporated herein by reference.


ITEM 1A. RISK FACTORS


The Company’s 20162021 Form 10-K contains disclosure regarding the risks and uncertainties related to the Company’s business under the heading Item 1A. Risk Factors. There has been no material change to the Company’s risk factors as presented in the Company’s 20162021 Form 10-K.



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

There were no unregistered sales of equity securities or repurchase activities during the three months ended September 30, 2017.third quarter of 2022.

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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[IncorporatedbyreferencetoExhibit3.1, 4.1fromRegistrant’sCurrentReportonForm8-Kfiledwith the Commission on November 12, 2009 (File No. 000-24939).]
3.2
Amended and Restated Bylaws of the Registrant dated May 26, 2022 [Incorporated by reference to Exhibit 3.1 from Registrant’s Current Report on Form 8-K filed with the Commission on May 27, 2022 (File No. 000-24939).]
Exhibit No.Exhibit Description
31.1
10.1
Amendment to Employment Agreement - Irene H. Oh. Filed herewith.
31.1
Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. Filed herewith.
31.2
Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. Filed herewith.
32.1
Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. Furnished herewith.
32.2
Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. Furnished herewith.
101.INSThe instance document does not appear in the interactive data file because its XBRL Instance Document.tags are embedded within the inline XBRL document.
101.SCHInline XBRL Taxonomy Extension Schema Document. Filed herewith.
101.CALInline XBRL Taxonomy Extension Calculation Linkbase Document. Filed herewith.
101.DEFInline XBRL Taxonomy Extension Definition Linkbase Document. Filed herewith.
101.LABInline XBRL Taxonomy Extension Label Linkbase Document. Filed herewith.
101.PREInline XBRL Taxonomy Extension Presentation Linkbase Document. Filed herewith.
104Cover Page Interactive Data (formatted as Inline XBRL and contained in Exhibit 101 filed herewith). Filed herewith.

108
All other material referenced in this report which is required to be filed as an exhibit hereto has previously been submitted.





GLOSSARY OF ACRONYMS

ALCOAFSAvailable-for-saleLCHLondon Clearing House
ALCOAsset/Liability CommitteeLGDLoss given default
AMLAOCIAnti-Money Laundering
AOCIAccumulated other comprehensive (loss) income (loss)LIBORLondon Interbank Offered Rate
ASCAccounting Standards CodificationLIBOR ActAdjustable Interest Rate (LIBOR) Act
ASUAccounting Standards UpdateLTVLoan-to-value
BPC&IBasis point
BSABank Secrecy Act
C&ICommercial and industrial
CET1Common Equity Tier 1
CRAMD&ACommunity Reinvestment Act
CRECommercial real estate
DBOCalifornia Department of Business Oversight
EPSEarnings per share
EVEEconomic value of equity
EWISEast West Insurance Service, Inc.
FASBFinancial Accounting Standards Board
FHLBFederal Home Loan Bank
FRBFederal Reserve Bank of San Francisco
GAAPGenerally Accepted Accounting Principles
HELOCsHome equity lines of credit
MD&AManagement’s Discussion and Analysis of Financial Condition and Results of Operations
MOUCARES ActMemorandum of UnderstandingCoronavirus Aid, Relief, and Economic Security ActMMBTUMillion British thermal unit
Non-GAAPCECLNon-Generally Accepted Accounting PrinciplesCurrent expected credit lossesNAVNet asset value
Non-PCICLONon-purchased credit impairedCollateralized loan obligationsNRSRONationally recognized statistical rating organizations
OREOCMEChicago Mercantile ExchangeOREOOther real estate owned
OTTICOVID-19Coronavirus Disease 2019OTTIOther-than-temporary impairment
PCICRAPurchased credit impairedCommunity Reinvestment ActPDProbability of default
RPAsCRECommercial real estatePPPPaycheck Protection Program
DIFDeposit Insurance FundRMBChinese Renminbi
EPSEarnings per shareROAReturn on average assets
ERMEnterprise risk managementROEReturn on average equity
EVEEconomic value of equityRPACredit risk participation agreementsagreement
RSAsFDICFederal Deposit Insurance CorporationRSURestricted stock awardsunit
RSUsFHLBRestricted stock units
SBLCsFederal Home Loan BankSBLCStandby letters of credit
S&PFRBSFStandardFederal Reserve Bank of San FranciscoSECU.S. Securities and Poor’sExchange Commission
TDRsFTPTroubled debt restructuringsFunds transfer pricingSOFRSecured Overnight Financing Rate
U.S.GAAPUnited States
U.S. GAAPUnited States Generally Accepted Accounting PrinciplesTDRTroubled debt restructuring
USDGDPGross Domestic ProductU.S.United States
HELOCHome equity lines of creditUSDU.S. Dollardollar
HTMHeld-to-maturityVIEVariable interest entity




109

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

Dated:November 7, 20178, 2022
EAST WEST BANCORP, INC.
(Registrant)
By/s/ IRENE H. OH
Irene H. Oh
Executive Vice President and
Chief Financial Officer





EXHIBIT INDEX
The following exhibit index lists Exhibits filed, or in the case of Exhibits 32.1 and 32.2, furnished with this report:
Exhibit No.Exhibit DescriptionEAST WEST BANCORP, INC.
(Registrant)
31.1
Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
By		/s/ IRENE H. OH
Irene H. Oh
31.2
Certification of
Executive Vice President and
Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1
Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2
Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INSXBRL Instance Document.
101.SCHXBRL Taxonomy Extension Schema Document.
101.CALXBRL Taxonomy Extension Calculation Linkbase Document.
101.DEFXBRL Taxonomy Extension Definition Linkbase Document.
101.LABXBRL Taxonomy Extension Label Linkbase Document.
101.PREXBRL Taxonomy Extension Presentation Linkbase Document.

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



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110