~~0001069157ewbc:ConstructionAndLandLoanMemberus-gaap:SubstandardMemberus-gaap:FinancialAssetAcquiredWithCreditDeteriorationMemberus-gaap:CommercialPortfolioSegmentMember2019-12-31~~0001069157us-gaap:CommercialPortfolioSegmentMemberewbc:CommercialAndIndustrialLoanMemberus-gaap:FinancialAssetNotPastDueMember2020-12-31

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~~June 30, ~~2020~~2021

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF

THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number 000-24939

EAST WEST BANCORP, INC.

(Exact name of registrant as specified in its charter)

Delaware

(State or other jurisdiction of incorporation or organization)

95-4703316

(I.R.S. Employer Identification No.)

135 North Los Robles Ave., 7th Floor, Pasadena, California 91101

(Address of principal executive offices) (Zip Code)

Registrant’s telephone number, including area code:

(626) 768-6000

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

Title of each class

Trading
Symbol(s)

Name of each exchange
on which registered

Common Stock, par value $0.001 ~~Par Value~~per share

EWBC

The Nasdaq Global Select Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

☒

Accelerated filer

☐

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

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

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes ☐ No ☒

Number of shares outstanding of the issuer’s common stock on the latest practicable date: ~~141,563,982~~141,877,607 shares as of ~~October~~July 31, ~~2020~~2021.

TABLE OF CONTENTS


			Page
PART I — FINANCIAL INFORMATION			3

	Item 1.	Consolidated Financial Statements	3
		Consolidated Balance Sheet (Unaudited)	3
		Consolidated Statement of Income (Unaudited)	4
		Consolidated Statement of Comprehensive Income (Unaudited)	5
		Consolidated Statement of Changes in Stockholders’ Equity (Unaudited)	6
		Consolidated Statement of Cash Flows (Unaudited)	7
		Notes to Consolidated Financial Statements (Unaudited)	9
		1 — Basis of Presentation	9
		2 — Current Accounting Developments ~~and Summary of Significant Accounting Policies~~	10
		3 — Fair Value Measurement and Fair Value of Financial Instruments	1411
		4 — ~~Securities~~Assets Purchased under Resale Agreements and Sold under Repurchase Agreements	2421
		5 — Securities	2522
		6 — Derivatives	2926
		7 — Loans Receivable and Allowance for Credit Losses	3633
		8 — Investments in Qualified Affordable Housing Partnerships, Tax Credit and Other Investments, Net and Variable Interest Entities	5145
		9 — Goodwill and Other Intangible Assets	5347
		10 — Commitments and Contingencies	55
		~~11 — Revenue from Contracts with Customers~~	5648


		1211 — Stock Compensation Plans	5849
		1312 — Stockholders’ Equity and Earnings Per Share	6051
		1413 — Accumulated Other Comprehensive Income (Loss)	6051
		14 — Business Segments	53
		15 — ~~Business Segments~~	62
		~~16 —~~ Subsequent Events	6455

	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	6556










	Item 3.	Quantitative and Qualitative Disclosures About Market Risk	~~121~~108

	Item 4.	Controls and Procedures	~~121~~108


PART II — OTHER INFORMATION			~~122~~109

	Item 1.	Legal Proceedings	~~122~~109
	Item 1A.	Risk Factors	~~122~~109
	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	~~124~~109



	Item 6.	Exhibits	~~125~~110

GLOSSARY OF ACRONYMS			~~126~~111

SIGNATURE			~~127~~112

PART I — FINANCIAL INFORMATION

ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS

EAST WEST BANCORP, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEET

($ in thousands, except shares)

(Unaudited)


		September 30, 2020		December 31, 2019			June 30, 2021		December 31, 2020
		(Unaudited)					(Unaudited)
ASSETS	ASSETS					ASSETS
Cash and due from banks	Cash and due from banks	$	503,376	$	536,221	Cash and due from banks	$	626,716	$	592,117
Interest-bearing cash with banks	Interest-bearing cash with banks	4,003,565		2,724,928		Interest-bearing cash with banks	5,371,089		3,425,854
Cash and cash equivalents	Cash and cash equivalents	4,506,941		3,261,149		Cash and cash equivalents	5,997,805		4,017,971
Interest-bearing deposits with banks	Interest-bearing deposits with banks	699,465		196,161		Interest-bearing deposits with banks	830,279		809,728
Securities purchased under resale agreements (“resale agreements”)		1,210,000		860,000
Assets purchased under resale agreements (“resale agreements”)						Assets purchased under resale agreements (“resale agreements”)	2,299,184		1,460,000
Securities:	Securities:					Securities:
Available-for-sale (“AFS”) debt securities, at fair value (amortized cost of $4,471,694 in 2020 and $3,320,648 in 2019; includes assets pledged as collateral of $710,391 in 2020 and $479,432 in 2019)		4,539,160		3,317,214
Available-for-sale (“AFS”) debt securities, at fair value (amortized cost of $8,411,142 in 2021 and $5,470,523 in 2020; includes assets pledged as collateral of $618,081 in 2021 and $588,484 in 2020)						Available-for-sale (“AFS”) debt securities, at fair value (amortized cost of $8,411,142 in 2021 and $5,470,523 in 2020; includes assets pledged as collateral of $618,081 in 2021 and $588,484 in 2020)	8,399,460		5,544,658
Restricted equity securities, at cost	Restricted equity securities, at cost	79,172		78,580		Restricted equity securities, at cost	76,931		83,046
Loans held-for-sale	Loans held-for-sale	4,148		434		Loans held-for-sale	1,819		1,788
Loans held-for-investment (net of allowance for loan losses of $618,252 in 2020 and $358,287 in 2019; includes assets pledged as collateral of $27,059,316 in 2020 and $22,431,092 in 2019)		36,818,877		34,420,252
Loans held-for-investment (net of allowance for loan losses of $585,724 in 2021 and $619,983 in 2020; includes assets pledged as collateral of $24,233,905 in 2021 and $23,263,517 in 2020)						Loans held-for-investment (net of allowance for loan losses of $585,724 in 2021 and $619,983 in 2020; includes assets pledged as collateral of $24,233,905 in 2021 and $23,263,517 in 2020)	39,485,775		37,770,972
Investments in qualified affordable housing partnerships, net	Investments in qualified affordable housing partnerships, net	192,913		207,037		Investments in qualified affordable housing partnerships, net	287,432		213,555
Investments in tax credit and other investments, net	Investments in tax credit and other investments, net	254,512		254,140		Investments in tax credit and other investments, net	364,187		266,525
Premises and equipment (net of accumulated depreciation of $125,198 in 2020 and $116,790 in 2019)		107,506		118,364
Premises and equipment (net of accumulated depreciation of $133,972 in 2021 and $127,884 in 2020)						Premises and equipment (net of accumulated depreciation of $133,972 in 2021 and $127,884 in 2020)	99,290		103,251
Goodwill	Goodwill	465,697		465,697		Goodwill	465,697		465,697
Operating lease right-of-use assets	Operating lease right-of-use assets	96,092		99,973		Operating lease right-of-use assets	102,609		95,460
Other assets	Other assets	1,396,994		917,095		Other assets	1,444,408		1,324,262
TOTAL	TOTAL	$	50,371,477	$	44,196,096	TOTAL	$	59,854,876	$	52,156,913
LIABILITIES	LIABILITIES					LIABILITIES
Deposits:	Deposits:					Deposits:
Noninterest-bearing	Noninterest-bearing	$	14,924,917	$	11,080,036	Noninterest-bearing	$	21,816,721	$	16,298,301
Interest-bearing	Interest-bearing	26,755,638		26,244,223		Interest-bearing	30,765,854		28,564,451
Total deposits	Total deposits	41,680,555		37,324,259		Total deposits	52,582,575		44,862,752
Short-term borrowings	Short-term borrowings	59,613		28,669		Short-term borrowings	0		21,009

Federal Home Loan Bank (“FHLB”) advances	Federal Home Loan Bank (“FHLB”) advances	657,185		745,915		Federal Home Loan Bank (“FHLB”) advances	248,464		652,612
Securities sold under repurchase agreements (“repurchase agreements”)		348,063		200,000
Assets sold under repurchase agreements (“repurchase agreements”)						Assets sold under repurchase agreements (“repurchase agreements”)	300,000		300,000
Long-term debt and finance lease liabilities	Long-term debt and finance lease liabilities	1,579,317		152,270		Long-term debt and finance lease liabilities	151,997		151,739
Operating lease liabilities	Operating lease liabilities	103,673		108,083		Operating lease liabilities	110,105		102,830
Accrued expenses and other liabilities	Accrued expenses and other liabilities	816,965		619,283		Accrued expenses and other liabilities	914,187		796,796
Total liabilities	Total liabilities	45,245,371		39,178,479		Total liabilities	54,307,328		46,887,738
COMMITMENTS AND CONTINGENCIES (Note 10)	COMMITMENTS AND CONTINGENCIES (Note 10)					COMMITMENTS AND CONTINGENCIES (Note 10)	0		0
STOCKHOLDERS’ EQUITY	STOCKHOLDERS’ EQUITY					STOCKHOLDERS’ EQUITY
Common stock, $0.001 par value, 200,000,000 shares authorized; 167,165,246 and 166,621,959 shares issued in 2020 and 2019, respectively		167		167
Common stock, $0.001 par value, 200,000,000 shares authorized; 167,754,406 and 167,240,600 shares issued in 2021 and 2020, respectively						Common stock, $0.001 par value, 200,000,000 shares authorized; 167,754,406 and 167,240,600 shares issued in 2021 and 2020, respectively	168		167
Additional paid-in capital	Additional paid-in capital	1,850,396		1,826,345		Additional paid-in capital	1,876,079		1,858,352
Retained earnings	Retained earnings	3,875,715		3,689,377		Retained earnings	4,335,327		4,000,414
Treasury stock, at cost — 25,657,816 shares in 2020 and 20,996,574 shares in 2019		(633,486)		(479,864)
Accumulated other comprehensive income (loss) (“AOCI”), net of tax		33,314		(18,408)
Treasury stock, at cost 25,876,901 shares in 2021 and 25,675,371 shares in 2020						Treasury stock, at cost 25,876,901 shares in 2021 and 25,675,371 shares in 2020	(649,337)		(634,083)
Accumulated other comprehensive (loss) income (“AOCI”), net of tax						Accumulated other comprehensive (loss) income (“AOCI”), net of tax	(14,689)		44,325
Total stockholders’ equity	Total stockholders’ equity	5,126,106		5,017,617		Total stockholders’ equity	5,547,548		5,269,175
TOTAL	TOTAL	$	50,371,477	$	44,196,096	TOTAL	$	59,854,876	$	52,156,913

See accompanying Notes to Consolidated Financial Statements.

EAST WEST BANCORP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF INCOME

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

(Unaudited)


		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended June 30,				Six Months Ended June 30,
		2020		2019		2020		2019			2021		2020		2021		2020
INTEREST AND DIVIDEND INCOME	INTEREST AND DIVIDEND INCOME									INTEREST AND DIVIDEND INCOME
Loans receivable, including fees	Loans receivable, including fees	$	336,542	$	433,658	$	1,115,804	$	1,291,642	Loans receivable, including fees	$	352,453	$	367,393	$	694,461	$	779,262
AFS debt securities	AFS debt securities	18,493		15,945		59,639		47,378		AFS debt securities	34,690		21,004		63,790		41,146

Resale agreements	Resale agreements	5,295		6,943		16,434		22,253		Resale agreements	8,021		5,514		14,120		11,139
Restricted equity securities	Restricted equity securities	353		656		1,100		1,874		Restricted equity securities	541		301		1,088		747
Interest-bearing cash and deposits with banks	Interest-bearing cash and deposits with banks	5,045		19,710		20,717		51,920		Interest-bearing cash and deposits with banks	3,628		4,564		7,260		15,672
Total interest and dividend income	Total interest and dividend income	365,728		476,912		1,213,694		1,415,067		Total interest and dividend income	399,333		398,776		780,719		847,966
INTEREST EXPENSE	INTEREST EXPENSE									INTEREST EXPENSE
Deposits	Deposits	33,798		96,820		156,600		286,789		Deposits	17,998		46,399		39,820		122,802
Short-term borrowings	Short-term borrowings	407		382		1,228		1,359		Short-term borrowings	0		265		42		821
FHLB advances	FHLB advances	3,146		5,021		10,655		12,011		FHLB advances	2,099		3,343		5,168		7,509
Repurchase agreements	Repurchase agreements	2,155		3,239		9,686		10,200		Repurchase agreements	1,991		3,540		3,969		7,531
Long-term debt and finance lease liabilities	Long-term debt and finance lease liabilities	2,092		1,643		4,913		5,114		Long-term debt and finance lease liabilities	772		1,454		1,552		2,821
Total interest expense	Total interest expense	41,598		107,105		183,082		315,473		Total interest expense	22,860		55,001		50,551		141,484
Net interest income before provision for credit losses	Net interest income before provision for credit losses	324,130		369,807		1,030,612		1,099,594		Net interest income before provision for credit losses	376,473		343,775		730,168		706,482
Provision for credit losses		10,000		38,284		186,313		80,108
(Reversal of) provision for credit losses										(Reversal of) provision for credit losses	(15,000)		102,443		(15,000)		176,313
Net interest income after provision for credit losses	Net interest income after provision for credit losses	314,130		331,523		844,299		1,019,486		Net interest income after provision for credit losses	391,473		241,332		745,168		530,169
NONINTEREST INCOME	NONINTEREST INCOME									NONINTEREST INCOME
Lending fees	Lending fees	18,736		15,035		56,455		46,427		Lending fees	21,092		21,946		39,449		37,719
Deposit account fees	Deposit account fees	12,573		9,729		33,892		28,804		Deposit account fees	17,342		10,872		32,725		21,319
Interest rate contracts and other derivative (loss) income										Interest rate contracts and other derivative (loss) income	(3,172)		6,107		13,825		13,180
Foreign exchange income	Foreign exchange income	3,310		8,065		15,691		20,366		Foreign exchange income	13,007		4,562		22,533		12,381
Wealth management fees	Wealth management fees	4,553		4,841		12,997		12,415		Wealth management fees	7,951		3,091		14,862		8,444
Interest rate contracts and other derivative income		5,538		8,423		18,718		22,037
Net gains on sales of loans	Net gains on sales of loans	361		2,037		1,443		2,967		Net gains on sales of loans	1,491		132		3,272		1,082
Gains on sales of AFS debt securities	Gains on sales of AFS debt securities	698		58		11,867		3,066		Gains on sales of AFS debt securities	632		9,640		824		11,169

Other investment income		316		663		3,203		2,571
Other investment income (expense)										Other investment income (expense)	7,596		(1,964)		8,521		1,414
Other income	Other income	3,495		2,623		8,000		7,711		Other income	2,492		1,321		5,286		4,505
Total noninterest income	Total noninterest income	49,580		51,474		162,266		146,364		Total noninterest income	68,431		55,707		141,297		111,213
NONINTEREST EXPENSE	NONINTEREST EXPENSE									NONINTEREST EXPENSE
Compensation and employee benefits	Compensation and employee benefits	99,756		97,819		298,671		300,649		Compensation and employee benefits	105,426		96,955		213,234		198,915
Occupancy and equipment expense	Occupancy and equipment expense	16,648		17,912		49,941		52,592		Occupancy and equipment expense	15,377		16,217		31,299		33,293
Deposit insurance premiums and regulatory assessments	Deposit insurance premiums and regulatory assessments	4,006		3,550		11,133		9,557		Deposit insurance premiums and regulatory assessments	4,274		3,700		8,150		7,127
Deposit account expense										Deposit account expense	3,817		3,353		7,709		6,916
Data processing										Data processing	4,035		4,480		8,513		8,306
Computer software expense										Computer software expense	7,521		7,301		14,680		13,467
Consulting expense										Consulting expense	1,868		1,413		3,343		2,630
Legal expense	Legal expense	1,366		1,720		6,093		6,300		Legal expense	1,975		1,530		3,477		4,727
Data processing		3,590		3,328		11,896		9,945
Consulting expense		1,224		2,559		3,854		6,687
Deposit related expense		3,113		3,584		10,029		10,426
Computer software expense		8,539		6,556		22,006		18,845
Other operating expense	Other operating expense	17,122		22,769		57,489		67,737		Other operating expense	17,939		19,248		37,546		40,367
Amortization of tax credit and other investments	Amortization of tax credit and other investments	12,286		16,833		54,370		58,477		Amortization of tax credit and other investments	27,291		21,829		52,649		40,611
Repurchase agreements’ extinguishment cost	Repurchase agreements’ extinguishment cost	0		0		8,740		0		Repurchase agreements’ extinguishment cost	0		8,740		0		8,740
Total noninterest expense	Total noninterest expense	167,650		176,630		534,222		541,215		Total noninterest expense	189,523		184,766		380,600		365,099
INCOME BEFORE INCOME TAXES	INCOME BEFORE INCOME TAXES	196,060		206,367		472,343		624,635		INCOME BEFORE INCOME TAXES	270,381		112,273		505,865		276,283
INCOME TAX EXPENSE	INCOME TAX EXPENSE	36,523		34,951		68,630		138,815		INCOME TAX EXPENSE	45,639		12,921		76,129		32,107
NET INCOME	NET INCOME	$	159,537	$	171,416	$	403,713	$	485,820	NET INCOME	$	224,742	$	99,352	$	429,736	$	244,176
EARNINGS PER SHARE (“EPS”)	EARNINGS PER SHARE (“EPS”)									EARNINGS PER SHARE (“EPS”)
BASIC	BASIC	$	1.13	$	1.18	$	2.83	$	3.34	BASIC	$	1.58	$	0.70	$	3.03	$	1.71
DILUTED	DILUTED	$	1.12	$	1.17	$	2.82	$	3.33	DILUTED	$	1.57	$	0.70	$	3.01	$	1.70
WEIGHTED-AVERAGE NUMBER OF SHARES OUTSTANDING	WEIGHTED-AVERAGE NUMBER OF SHARES OUTSTANDING									WEIGHTED-AVERAGE NUMBER OF SHARES OUTSTANDING
BASIC	BASIC	141,498		145,559		142,595		145,455		BASIC	141,868		141,486		141,758		143,150
DILUTED	DILUTED	142,043		146,120		143,082		146,088		DILUTED	143,040		141,827		142,963		143,560

See accompanying Notes to Consolidated Financial Statements.

EAST WEST BANCORP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

($ in thousands)

(Unaudited)


		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended June 30,				Six Months Ended June 30,
		2020		2019		2020		2019			2021		2020		2021		2020
Net income	Net income	$	159,537	$	171,416	$	403,713	$	485,820	Net income	$	224,742	$	99,352	$	429,736	$	244,176
Other comprehensive income (loss), net of tax:	Other comprehensive income (loss), net of tax:									Other comprehensive income (loss), net of tax:
Net changes in unrealized gains on AFS debt securities		4,634		11,863		49,903		62,901
Net changes in unrealized gains (losses) on AFS debt securities										Net changes in unrealized gains (losses) on AFS debt securities	73,049		17,816		(60,399)		45,269
Net changes in unrealized gains (losses) on cash flow hedges	Net changes in unrealized gains (losses) on cash flow hedges	87		0		(1,246)		0		Net changes in unrealized gains (losses) on cash flow hedges	68		(1,333)		500		(1,333)
Foreign currency translation adjustments	Foreign currency translation adjustments	5,459		(2,858)		3,065		(5,694)		Foreign currency translation adjustments	2,234		(230)		885		(2,394)
Other comprehensive income		10,180		9,005		51,722		57,207
Other comprehensive income (loss)										Other comprehensive income (loss)	75,351		16,253		(59,014)		41,542
COMPREHENSIVE INCOME	COMPREHENSIVE INCOME	$	169,717	$	180,421	$	455,435	$	543,027	COMPREHENSIVE INCOME	$	300,093	$	115,605	$	370,722	$	285,718

See accompanying Notes to Consolidated Financial Statements.

EAST WEST BANCORP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY

($ in thousands, except shares)

(Unaudited)


		Common Stock and Additional Paid-in Capital			Retained Earnings				Treasury Stock		AOCI, Net of Tax				Total Stockholders’ Equity					Common Stock and Additional Paid-in Capital				Retained Earnings			Treasury Stock			AOCI, Net of Tax			Total Stockholders’ Equity
		Shares	Amount											Shares					Amount
BALANCE, JULY 1, 2019		145,546,569	$	1,809,062			$	3,414,901					$	(479,398)			$	(9,972)		$	4,734,593

Net income		—	—		171,416				—		—				171,416
Other comprehensive income		—	—		—				—		9,005				9,005

Net activity of common stock pursuant to various stock compensation plans and agreements		21,143	8,204		—				(61)		—				8,143
Cash dividends on common stock ($0.275 per share)		—	—		(40,493)				—		—				(40,493)
BALANCE, SEPTEMBER 30, 2019		145,567,712	$	1,817,266	$	3,545,824			$	(479,459)	$	(967)			$	4,882,664
BALANCE, JULY 1, 2020		141,486,397	$	1,841,915	$	3,755,649			$	(633,455)	$	23,134			$	4,987,243
BALANCE, APRIL 1, 2020																		BALANCE, APRIL 1, 2020		141,435,099		$	1,833,784		$	3,695,759		$	(633,439)		$	6,881		$	4,902,985

Net income	Net income	—	—		159,537				—		—				159,537			Net income		—		—		99,352			—			—			99,352
Other comprehensive income	Other comprehensive income	—	—		—				—		10,180				10,180			Other comprehensive income		—		—		—			—			16,253			16,253

Net activity of common stock pursuant to various stock compensation plans and agreements	Net activity of common stock pursuant to various stock compensation plans and agreements	21,033	8,648		—				(31)		—				8,617			Net activity of common stock pursuant to various stock compensation plans and agreements		51,298		8,131		—			(16)			—			8,115

Cash dividends on common stock ($0.275 per share)	Cash dividends on common stock ($0.275 per share)	—	—		(39,471)				—		—				(39,471)			Cash dividends on common stock ($0.275 per share)		—		—		(39,462)			—			—			(39,462)
BALANCE, SEPTEMBER 30, 2020		141,507,430	$	1,850,563	$	3,875,715			$	(633,486)	$	33,314			$	5,126,106
BALANCE, JUNE 30, 2020																		BALANCE, JUNE 30, 2020		141,486,397		$	1,841,915	$	3,755,649		$	(633,455)		$	23,134		$	4,987,243
BALANCE, APRIL 1, 2021																		BALANCE, APRIL 1, 2021		141,843,036		$	1,866,101	$	4,158,032		$	(649,066)		$	(90,040)		$	5,285,027

Net income																		Net income		—		—		224,742			—			—			224,742
Other comprehensive income																		Other comprehensive income		—		—		—			—			75,351			75,351

Net activity of common stock pursuant to various stock compensation plans and agreements																		Net activity of common stock pursuant to various stock compensation plans and agreements		34,469		10,146		—			(271)			—			9,875

Cash dividends on common stock ($0.330 per share)																		Cash dividends on common stock ($0.330 per share)		—		—		(47,447)			—			—			(47,447)
BALANCE, JUNE 30, 2021																		BALANCE, JUNE 30, 2021		141,877,505		$	1,876,247	$	4,335,327		$	(649,337)		$	(14,689)		$	5,547,548


		Common Stock and Additional Paid-in Capital			Retained Earnings				Treasury Stock		AOCI, Net of Tax				Total Stockholders’ Equity					Common Stock and Additional Paid-in Capital				Retained Earnings			Treasury Stock			AOCI, Net of Tax			Total Stockholders’ Equity
		Shares	Amount											Shares					Amount
BALANCE, JANUARY 1, 2019		144,961,363	$	1,789,977			$	3,160,132					$	(467,961)			$	(58,174)		$	4,423,974
Cumulative-effect of change in accounting principle related to leases (1)		—	—		14,668				—		—				14,668
Net income		—	—		485,820				—		—				485,820
Other comprehensive income		—	—		—				—		57,207				57,207

Warrants exercised		180,226	1,711		—				2,732		—				4,443
Net activity of common stock pursuant to various stock compensation plans and agreements		426,123	25,578		—				(14,230)		—				11,348
Cash dividends on common stock ($0.780 per share)		—	—		(114,796)				—		—				(114,796)
BALANCE, SEPTEMBER 30, 2019		145,567,712	$	1,817,266	$	3,545,824			$	(479,459)	$	(967)			$	4,882,664
BALANCE, JANUARY 1, 2020	BALANCE, JANUARY 1, 2020	145,625,385	$	1,826,512	$	3,689,377			$	(479,864)	$	(18,408)			$	5,017,617		BALANCE, JANUARY 1, 2020		145,625,385		$	1,826,512		$	3,689,377		$	(479,864)		$	(18,408)		$	5,017,617
Cumulative-effect of change in accounting principle related to credit losses (2)		—	—		(97,967)				—		—				(97,967)
Cumulative-effect of change in accounting principle related to credit losses (1)																		Cumulative-effect of change in accounting principle related to credit losses (1)		—		—		(97,967)			—			—			(97,967)
Net income	Net income	—	—		403,713				—		—				403,713			Net income		—		—		244,176			—			—			244,176
Other comprehensive income	Other comprehensive income	—	—		—				—		51,722				51,722			Other comprehensive income		—		—		—			—			41,542			41,542

Net activity of common stock pursuant to various stock compensation plans and agreements	Net activity of common stock pursuant to various stock compensation plans and agreements	353,727	24,051		—				(7,656)		—				16,395			Net activity of common stock pursuant to various stock compensation plans and agreements		332,694		15,403		—			(7,625)			—			7,778
Repurchase of common stock pursuant to the Stock Repurchase Program	Repurchase of common stock pursuant to the Stock Repurchase Program	(4,471,682)	—		—				(145,966)		—				(145,966)			Repurchase of common stock pursuant to the Stock Repurchase Program		(4,471,682)		—		—			(145,966)			—			(145,966)
Cash dividends on common stock ($0.825 per share)		—	—		(119,408)				—		—				(119,408)
BALANCE, SEPTEMBER 30, 2020		141,507,430	$	1,850,563	$	3,875,715			$	(633,486)	$	33,314			$	5,126,106
Cash dividends on common stock ($0.550 per share)																		Cash dividends on common stock ($0.550 per share)		—		—		(79,937)			—			—			(79,937)
BALANCE, JUNE 30, 2020																		BALANCE, JUNE 30, 2020		141,486,397		$	1,841,915	$	3,755,649		$	(633,455)		$	23,134		$	4,987,243
BALANCE, JANUARY 1, 2021																		BALANCE, JANUARY 1, 2021		141,565,229		$	1,858,519	$	4,000,414		$	(634,083)		$	44,325		$	5,269,175

Net income																		Net income		—		—		429,736			—			—			429,736
Other comprehensive loss																		Other comprehensive loss		—		—		—			—			(59,014)			(59,014)

Net activity of common stock pursuant to various stock compensation plans and agreements																		Net activity of common stock pursuant to various stock compensation plans and agreements		312,276		17,728		—			(15,254)			—			2,474

Cash dividends on common stock ($0.660 per share)																		Cash dividends on common stock ($0.660 per share)		—		—		(94,823)			—			—			(94,823)
BALANCE, JUNE 30, 2021																		BALANCE, JUNE 30, 2021		141,877,505		$	1,876,247	$	4,335,327		$	(649,337)		$	(14,689)		$	5,547,548

(1)Represents the impact of the adoption of Accounting Standards Update (“ASU”) ~~2016-02,~~ ~~Leases~~ ~~(Topic 842) and subsequent related ASUson January 1, 2019.~~

~~(2)Represents the impact of the adoption of ASU~~ 2016-13, Financial Instruments — Credit Losses (Topic 326) on January 1, 2020. ~~Refer to~~

~~Note 2 — Current Accounting Developments and Summary of Significant Accounting Policies~~ ~~to the Consolidated Financial Statements in this Quarterly Report on Form 10-Q (“this Form 10-Q”) for additional information.~~

See accompanying Notes to Consolidated Financial Statements.

EAST WEST BANCORP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF CASH FLOWS

($ in thousands)

(Unaudited)


		Nine Months Ended September 30,					Six Months Ended June 30,
		2020		2019			2021		2020
CASH FLOWS FROM OPERATING ACTIVITIES	CASH FLOWS FROM OPERATING ACTIVITIES					CASH FLOWS FROM OPERATING ACTIVITIES
Net income	Net income	$	403,713	$	485,820	Net income	$	429,736	$	244,176
Adjustments to reconcile net income to net cash provided by operating activities:	Adjustments to reconcile net income to net cash provided by operating activities:					Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	Depreciation and amortization	96,089		103,220		Depreciation and amortization	70,402		68,926
Accretion of discount and amortization of premiums, net		(17,974)		(12,917)
Amortization of premiums and accretion of discount, net						Amortization of premiums and accretion of discount, net	11,310		(18,901)
Stock compensation costs	Stock compensation costs	22,201		23,012		Stock compensation costs	16,025		14,280
Deferred income tax benefit	Deferred income tax benefit	(91)		(2,434)		Deferred income tax benefit	2,571		(111)
Provision for credit losses		186,313		80,108
(Reversal of) provision for credit losses						(Reversal of) provision for credit losses	(15,000)		176,313
Net gains on sales of loans	Net gains on sales of loans	(1,443)		(2,967)		Net gains on sales of loans	(3,272)		(1,082)
Gains on sales of AFS debt securities	Gains on sales of AFS debt securities	(11,867)		(3,066)		Gains on sales of AFS debt securities	(824)		(11,169)

Loans held-for-sale:	Loans held-for-sale:					Loans held-for-sale:
Originations and purchases	Originations and purchases	(53,911)		(6,341)		Originations and purchases	(8,703)		(21,791)
Proceeds from sales and paydowns/payoffs of loans originally classified as held-for-sale	Proceeds from sales and paydowns/payoffs of loans originally classified as held-for-sale	50,339		6,341		Proceeds from sales and paydowns/payoffs of loans originally classified as held-for-sale	10,353		18,386

Proceeds from distributions received from equity method investees	Proceeds from distributions received from equity method investees	4,934		3,012		Proceeds from distributions received from equity method investees	3,564		1,107
Net change in accrued interest receivable and other assets	Net change in accrued interest receivable and other assets	(465,210)		(363,187)		Net change in accrued interest receivable and other assets	(73,809)		(456,374)
Net change in accrued expenses and other liabilities	Net change in accrued expenses and other liabilities	216,992		77,693		Net change in accrued expenses and other liabilities	(44,113)		257,397
Other net operating activities	Other net operating activities	529		725		Other net operating activities	5,571		(241)
Total adjustments	Total adjustments	26,901		(96,801)		Total adjustments	(25,925)		26,740
Net cash provided by operating activities	Net cash provided by operating activities	430,614		389,019		Net cash provided by operating activities	403,811		270,916
CASH FLOWS FROM INVESTING ACTIVITIES	CASH FLOWS FROM INVESTING ACTIVITIES					CASH FLOWS FROM INVESTING ACTIVITIES
Net (increase) decrease in:	Net (increase) decrease in:					Net (increase) decrease in:
Investments in qualified affordable housing partnerships, tax credit and other investments	Investments in qualified affordable housing partnerships, tax credit and other investments	(102,190)		(103,284)		Investments in qualified affordable housing partnerships, tax credit and other investments	(92,780)		(68,884)
Interest-bearing deposits with banks	Interest-bearing deposits with banks	(367,971)		204,474		Interest-bearing deposits with banks	(20,534)		(335,497)
Resale agreements:	Resale agreements:					Resale agreements:
Proceeds from paydowns and maturities	Proceeds from paydowns and maturities	400,000		300,000		Proceeds from paydowns and maturities	506,353		350,000
Purchases	Purchases	(500,000)		(125,000)		Purchases	(1,345,537)		(500,000)
AFS debt securities:	AFS debt securities:					AFS debt securities:
Proceeds from sales	Proceeds from sales	494,877		476,231		Proceeds from sales	164,898		484,380
Proceeds from repayments, maturities and redemptions	Proceeds from repayments, maturities and redemptions	1,532,411		283,974		Proceeds from repayments, maturities and redemptions	877,123		848,633
Purchases	Purchases	(3,167,863)		(1,219,300)		Purchases	(4,015,212)		(1,834,087)
Loans held-for-investment:	Loans held-for-investment:					Loans held-for-investment:
Proceeds from sales of loans originally classified as held-for-investment	Proceeds from sales of loans originally classified as held-for-investment	254,035		224,662		Proceeds from sales of loans originally classified as held-for-investment	248,540		144,015
Purchases	Purchases	(163,861)		(395,502)		Purchases	(542,839)		(145,695)
Other changes in loans held-for-investment, net	Other changes in loans held-for-investment, net	(2,775,014)		(1,509,235)		Other changes in loans held-for-investment, net	(1,389,832)		(2,475,089)
Premises and equipment:
Proceeds from sales		1,883		0
Purchases		(2,260)		(8,504)

Proceeds from distributions received from equity method investees	Proceeds from distributions received from equity method investees	2,601		4,563		Proceeds from distributions received from equity method investees	4,983		1,948

Other net investing activities	Other net investing activities	(1,846)		(1,897)		Other net investing activities	2,388		(337)
Net cash used in investing activities	Net cash used in investing activities	(4,395,198)		(1,868,818)		Net cash used in investing activities	(5,602,449)		(3,530,613)
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase in deposits		4,271,838		1,252,237
Net increase (decrease) in short-term borrowings		30,916		(9,035)

FHLB advances:
Proceeds		10,200		1,500,000
Repayment		(100,200)		(1,082,000)
Repurchase agreements:
Proceeds from repurchase agreements		48,063		0
Repayment of repurchase agreements		(150,000)		0
Repurchase agreements’ extinguishment cost		(8,740)		0
Long-term debt and lease liabilities:
Proceeds from long-term debt		1,437,269		0
Repayment of long-term debt and lease liabilities		(10,609)		(658)
Common stock:
Repurchase of common stocks pursuant to the Stock Repurchase Program		(145,966)		0
Proceeds from issuance pursuant to various stock compensation plans and agreements		1,170		1,895
Stocks tendered for payment of withholding taxes		(7,656)		(14,230)
Cash dividends paid		(119,185)		(114,986)
Net cash provided by financing activities		5,257,100		1,533,223
Effect of exchange rate changes on cash and cash equivalents		(46,724)		(12,520)
NET INCREASE IN CASH AND CASH EQUIVALENTS		1,245,792		40,904
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD		3,261,149		3,001,377
CASH AND CASH EQUIVALENTS, END OF PERIOD		$	4,506,941	$	3,042,281

See accompanying Notes to Consolidated Financial Statements.

EAST WEST BANCORP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF CASH FLOWS

($ in thousands)

(Unaudited)

(Continued)

Nine Months Ended September 30,
2020 2019
SUPPLEMENTAL CASH FLOW INFORMATION
Cash paid during the period for:
Interest $ 188,657 $ 313,793
Income taxes, net $ 82,114 $ 116,074
Noncash investing and financing activities:
Loans transferred from held-for-investment to held-for-sale $ 253,302 $ 222,434
Loans transferred to other real estate owned (“OREO”) $ 19,504 $ 2,013



	Six Months Ended June 30,
	2021		2020

















































CASH FLOWS FROM FINANCING ACTIVITIES
Net increase in deposits	7,708,661		3,355,168
Net (decrease) increase in short-term borrowings	(21,143)		225,834

FHLB advances:
Proceeds	0		10,100
Repayment	(405,000)		(100,099)


Repayment of repurchase agreements	0		(150,000)
Repurchase agreements’ extinguishment cost	0		(8,740)
Long-term debt and lease liabilities:
Proceeds from long-term debt	0		1,437,269
Repayment of long-term debt and lease liabilities	(613)		(9,320)
Common stock:
Repurchase of common stocks pursuant to the Stock Repurchase Program	0		(145,966)
Proceeds from issuance pursuant to various stock compensation plans and agreements	1,180		1,170
Stocks tendered for payment of withholding taxes	(15,254)		(7,625)
Cash dividends paid	(95,060)		(80,271)
Net cash provided by financing activities	7,172,771		4,527,520
Effect of exchange rate changes on cash and cash equivalents	5,701		4,530
NET INCREASE IN CASH AND CASH EQUIVALENTS	1,979,834		1,272,353
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD	4,017,971		3,261,149
CASH AND CASH EQUIVALENTS, END OF PERIOD	$	5,997,805	$	4,533,502

SUPPLEMENTAL CASH FLOW INFORMATION
Cash paid during the period for:
Interest	$	52,228	$	145,723
Income taxes, net	$	114,202	$	5,609
Noncash investing and financing activities:

Loans transferred from held-for-investment to held-for-sale	$	247,636	$	143,283




Loans transferred to other real estate owned (“OREO”) and other foreclosed assets	$	13,025	$	19,504

See accompanying Notes to Consolidated Financial Statements.

EAST WEST BANCORP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 1 — Basis of Presentation

East West Bancorp, Inc. (referred to herein on an unconsolidated basis as “East West” and on a consolidated basis as the “Company”) is a registered bank holding company that offers a full range of banking services to individuals and businesses through its subsidiary bank, East West Bank and its subsidiaries (“East West Bank” or the “Bank”). The unaudited interim Consolidated Financial Statements in this Quarterly Report on Form 10-Q (“this Form 10-Q”) include the accounts of East West, East West Bank and East West’s subsidiaries. Intercompany transactions and accounts have been eliminated in consolidation. As of ~~September~~June 30, ~~2020,~~2021, East West also has 6 wholly-owned subsidiaries that are statutory business trusts (the “Trusts”). In accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 810, Consolidation, the Trusts are not included on the Consolidated Financial Statements. East West also owns East West Insurance Services, Inc. In 2019, the Company acquired East West Markets, LLC, a private broker dealer and also established East West Investment Management LLC, a registered investment adviser. Both East West Markets, LLC and East West Investment Management LLC are wholly-owned subsidiaries of East West.

The unaudited interim Consolidated Financial Statements are presented in accordance with United States (“U.S.”) generally accepted accounting principles (“GAAP”), applicable guidelines prescribed by regulatory authorities and general practices in the banking industry. They reflect all adjustments that, in the opinion of management, are necessary for fair ~~statement~~presentation of the interim Consolidated Financial Statements. Certain items on the Consolidated Financial Statements and notes for the prior periods have been reclassified to conform to the current period presentation.

The current period’s results of operations are not necessarily indicative of results that may be expected for any ~~other~~future interim period or for the year as a whole. Events subsequent to the Consolidated Balance Sheet date have been evaluated through the date the Consolidated Financial Statements are issued for inclusion in the accompanying Consolidated Financial Statements. 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 ~~annual report~~Annual Report on Form 10-K for the year ended December 31, ~~2019,~~2020, filed with the U.S. Securities and Exchange Commission on February ~~27, 2020~~26, 2021 (the “Company’s ~~2019~~2020 Form 10-K”).

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

New Accounting Pronouncements Adopted


Standard	Required Date of Adoption	Description	Effect on Financial Statements
Standards Adopted in ~~2020~~
~~ASU 2016-13,~~ ~~Financial Instruments — Credit Losses~~ ~~(Topic 326):~~ ~~Measurement of Credit Losses on Financial Instruments~~ ~~and subsequent related ASUs~~	January 1, 2020 Early adoption is permitted on January 1, 2019.	The ASU introduces a new current expected credit losses (“CECL”) model that applies to most financial assets measured at amortized cost and certain instruments, including trade and other receivables, loan receivables, AFS and held-to-maturity debt securities, net investments in leases and off-balance sheet credit exposures. The CECL model utilizes a lifetime “expected credit loss” measurement objective for the recognition of credit losses at the time the financial asset is originated or acquired. The expected credit losses are adjusted in each period for changes in expected lifetime credit losses. ASU 2016-13 also eliminates the guidance for purchased credit impaired (“PCI”) loans, but requires an allowance for loan losses for purchased financial assets with more than an insignificant deterioration of credit since origination. The ASU also modifies the other-than-temporary impairment (“OTTI”) model for AFS debt securities to require an allowance for credit losses instead of a direct write-down. A reversal of the allowance for credit losses is allowed in future periods based on improvements in credit performance expectations. This ASU 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). 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. The new guidance also allows optional relief for certain instruments measured at amortized cost with an option to irrevocably elect the fair value option under ASC Topic 825, ~~Financial Instruments~~.	The Company adopted ASU 2016-13 using a modified retrospective approach on January 1, 2020 without electing the fair value option on eligible financial instruments under ASU 2019-05. The adoption of this ASU increased the allowance for loan losses by $125.2 million, and allowance for unfunded credit commitments by $10.5 million and an after-tax decrease to opening retained earnings of $98.0 million on January 1, 2020. The increase to allowance for loan losses was primarily related to the commercial and industrial (“C&I”) and commercial real estate (“CRE”) loan portfolios. The Company did not record an allowance for credit losses related to the Company’s AFS debt securities as a result of this adoption. Disclosures for periods after January 1, 2020 are presented in accordance with ASC 326 while prior period amounts continue to be reported in accordance with previously applicable standards and the accounting policies described in the Company’s 2019 Form 10-K. ~~The Company has elected the CECL phase-in option provided by regulatory capital rules, which delays the impact of CECL on regulatory capital for two years, followed by a three-year transition period.~~
~~ASU 2017-04,~~ ~~Intangibles — Goodwill and Other~~ ~~(Topic 350):~~ ~~Simplifying the Test for Goodwill Impairment~~	January 1, 2020 Early adoption is permitted for interim or annual goodwill impairment tests with measurement dates after January 1, 2017.	The ASU simplifies the accounting for goodwill impairment. Under this guidance, an entity will no longer perform a hypothetical purchase price allocation to measure goodwill impairment. Instead, an impairment loss will be recognized when the carrying amount of a reporting unit exceeds its fair value and the loss recognized should not exceed the total amount of goodwill allocated to that reporting unit. The guidance also eliminates the requirement to perform a qualitative assessment for any reporting units with a zero or negative carrying amount. This guidance should be applied prospectively.	~~The Company adopted this guidance on January 1, 2020. The adoption of this guidance did not have a material impact on the Company’s Consolidated Financial Statements.~~
~~ASU 2018-15,~~ ~~Intangibles — Goodwill and Other — Internal-Use Software (Subtopic 350-40) Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract~~	~~January 1, 2020~~	The ASU amends ASC Topic 350-40 to align the accounting for costs incurred in a cloud computing arrangement with the guidance on developing internal use software. Specifically, if a cloud computing arrangement is deemed to be a service contract, certain implementation costs are eligible for capitalization. The new guidance prescribes the balance sheet and income statement presentation and cash flow classification for the capitalized costs and related amortization expense. The amendments in this ASU should be applied either retrospectively or prospectively to all implementation costs incurred after the date of adoption.	~~The Company adopted this guidance on a prospective basis on January 1, 2020. The adoption of this guidance did not have a material impact on the Company’s Consolidated Financial Statements.~~

~~Recent Accounting Pronouncement~~


~~Standard~~	~~Required Date of Adoption~~	~~Description~~	~~Effect on Financial Statements~~
~~Standard Not Yet Adopted~~2021
ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reportingand subsequent related ASU 2021-01, Reference Rate Reform (Topic 848): Scope	Effective for all entities asfrom the dates of ~~March 12, 2020~~ issuance through December 31, 2022.	In March 2020, the FASB issued ~~a new accounting standard~~an ASU related to contracts or hedging relationships that reference London ~~interbank offered rate~~Interbank Offered Rate (“LIBOR”) or other reference rates that are expected to be discontinued due to reference rate reform. This ASU provides temporary optional expedients and exceptions regarding the accounting requirements related to the modification of certain contracts, hedging relationships and other transactions that are affected by the reference rate reform. The guidance permits the Company to make a one-time election to sell and/or transfer qualifying held-to-maturity securities, and not to apply modification accounting or remeasure lease payments in lease contracts if the changes to the contract are related to the discontinuation of the reference rate. If certain criteria are met, the amendments also allow exceptions to the de-designation criteria of the hedging ~~relationship~~relationships and the assessment of hedge effectiveness during the transition period. This ~~one time~~one-time election may be made at any time after March 12, 2020, but no later than December 31, 2022. In January 2021, the FASB issued ASU 2021-01 as subsequent amendments, which expanded the scope of Topic 848 to include all affected derivatives and clarified certain optional expedients and exceptions regarding the hedge accounting for derivative contracts affected by the discounting transition. The amendments of this guidance could be elected retrospectively or prospectively to new modifications made on or after the date of issuance of this ASU, January 7, 2021.	The Company ~~has~~adopted this guidance on a prospective basis in January 2021. At the time of adoption, the guidance did not ~~yet made~~have a ~~determination~~material impact on ~~whether it~~the Company’s Consolidated Financial Statements. The Company will ~~make this election and is currently tracking~~continue to track the exposure as of each reporting period and ~~assessing the significance of impact towards implementing any necessary modification in consideration of the election of this amendment. The Company will continue~~ to assess the impact as the reference rate transition occurs ~~over~~through the ~~next two years.~~cessation of LIBOR.


ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes	January 1, 2021 Early adoption is permitted on January 1, 2020.	This ASU simplifies the accounting for income taxes by removing certain exceptions to the existing guidance. This includes removing exceptions to: 1) the incremental approach for intraperiod tax allocation, 2) the requirement to recognize a deferred tax liability for equity method investments when a foreign subsidiary becomes an equity method investment, 3) the ability not to recognize a deferred tax liability when a foreign equity method investment becomes a subsidiary, and 4) the general methodology for calculating income taxes in an interim period when a year-to-date loss exceeds the anticipated loss for the year. In addition, this ASU simplifies the accounting for income taxes related to franchise taxes, the tax basis of goodwill and the method for recognizing an enacted change in tax laws. This ASU also specifies that an entity is not required to allocate the consolidated amount of tax expense to a legal entity that is not subject to tax in its separate financial statements. This ASU also makes improvements in the accounting for income taxes related to employee stock ownership plans and equity method investments in qualified affordable housing projects. This guidance should be applied on either a retrospective, modified retrospective or prospective basis depending on the amendments.	The Company adopted this guidance in January 2021 using the transition guidance prescribed by this ASU. At the time of adoption, this guidance did not have a material impact on the Company’s Consolidated Financial Statements.

~~Summary of Significant Accounting Policies~~

~~The Company has revised the following significant accounting policies.~~

~~Allowance for Loan Losses —~~ The allowance for loan losses is established as management’s estimate of expected credit losses inherent in the Company’s lending activities and increased by the provision for credit losses and decreased by net charge-offs. The allowance for loan losses is evaluated quarterly by management based on regular reviews of the collectability of the loans. The Company develops and documents the allowance for loan losses methodology at the portfolio segment level —~~the~~commercial loan portfolio is comprised of C&I, CRE, multifamily residential, and construction and land loans; and the consumer loan portfolio is comprised of single-family residential, home equity lines of credit (“HELOCs”), and other consumer loans.

The allowance for loan losses represents the portion of a loan’s amortized cost basis that the Company does not expect to collect due to anticipated credit losses over the loan’s contractual life, adjusted for prepayments. The Company measures the expected loan losses on a collective pool basis when similar risk characteristics exist. Models consisting of quantitative and qualitative components are designed for each pool to develop the expected credit loss estimates. Reasonable and supportable forecast periods vary by loan portfolio. The Company has adopted lifetime loss rate models for the portfolios, which use historical loss rates and forecast economic variables to calculate the expected credit losses for each loan pool.

When loans do not share similar risk characteristics, the Company evaluates the loan for expected credit losses on an individual basis. Individually assessed loans include nonaccrual and troubled debt restructuring (“TDR”) loans. The Company evaluates loans for expected credit losses on an individual basis if, based on current information and events, it is probable that the Company will be unable to collect all amounts due according to the original contractual terms of the loan agreement. The following three different asset valuation measurement methods are available: (1) the present value of expected future cash flows, (2) the fair value of collateral less costs to sell, and (3) the loan's observable market price. The allowance for loan losses for collateral-dependent loans is determined based on the fair value of the collateral less costs to sell. For loans that are not collateral-dependent, the Company applies the present value of expected future cash flows valuation or the market value of the loan. When the loan is deemed uncollectible, it is the Company’s policy to promptly charge off the estimated credit losses.

~~The amortized cost of loans held-for-investment excludes accrued interest, which is included in~~ ~~Other assets~~ ~~on the Consolidated Balance Sheet. The Company has made~~ ~~an accounting policy election to not recognize an allowance for credit losses for accrued interest receivables as the Company reverses accrued interest if a loan is on nonaccrual status.~~

~~The allowance for loan losses is reported separately on the Consolidated Balance Sheet and the~~ ~~Provision for credit losses~~ ~~is reported on the Consolidated Statement of Income.~~

~~Allowance for Unfunded Credit Commitments —~~ The allowance for unfunded credit commitments includes reserves provided for unfunded loan commitments, letters of credit, standby letters of credit (“SBLCs”) and recourse obligations for loans sold. The Company estimates the allowance for unfunded credit commitments over the contractual period in which the entity is exposed to credit risk via a present contractual obligation to extend credit. Within the period of credit exposure, the estimate of credit losses will consider both the likelihood that funding will occur, and an estimate of the expected credit losses on the commitments that are expected to fund over their estimated lives.

The allowance for unfunded credit commitments is maintained at a level believed by management to be sufficient to absorb estimated expected credit losses related to unfunded credit facilities. The determination of the adequacy of the allowance is based on periodic evaluations of the unfunded credit facilities. For all off-balance sheet instruments and commitments, the unfunded credit exposure is calculated using utilization assumptions based on the Company's historical utilization experience in related portfolio segments. Loss rates are applied to the calculated exposure balances to estimate the allowance for unfunded credit commitments. Other elements such as credit risk factors for loans outstanding, terms and expiration dates of the unfunded credit facilities, and other pertinent information are considered to determine the adequacy of the allowance.

~~The allowance for unfunded credit commitments is included in~~ ~~Accrued expenses and other liabilities~~ ~~on the Consolidated Balance Sheet. Changes to the allowance for unfunded credit commitments are included in~~ ~~Provision for credit losses~~ ~~on the Consolidated Income Statements.~~

~~Allowance for Credit Losses on Available-for-Sale Debt Securities~~— ASU 2016-13 modifies the OTTI model for AFS debt securities to apply an allowance approach for credit impairment as opposed to permanently writing down the cost basis of the security. For each reporting period, AFS debt security that is in an unrealized loss position is individually analyzed as part of the Company’s ongoing assessments to determine whether a fair value below the amortized cost basis has resulted from a credit loss or other factors. The initial indicator of impairment is a decline in fair value below the amortized cost, excluding accrued interest, of the AFS debt security. The Company first considers whether there is a plan to sell the AFS debt security or it is more-likely-than-not that it will be required to sell the debt security before recovery of the amortized cost. In determining whether an impairment is due to credit related factors, the Company considers the severity of the decline in fair value, nature of the security, the underlying collateral, the financial condition of the issuer, changes in the AFS debt securities’ ratings and other qualitative factors. For securities that are fully guaranteed by the U.S. government, or certain government enterprises, the Company believes that the credit loss exposure on these securities is remote and applies a zero credit loss assumption.

When the Company does not intend to sell the impaired AFS debt security and it is more-likely-than-not that the Company will not be required to sell the impaired debt security prior to recovery of its amortized cost basis, the credit component of the unrealized loss of the impaired AFS debt security is recognized as an allowance for credit losses, with a corresponding ~~Provision for credit losses~~ ~~on the Consolidated Statement of Income and the non-credit component is recognized in~~ ~~Other comprehensive income (loss)~~ on the Consolidated Statement of Comprehensive Income, net of applicable taxes. At each reporting period, the Company increases or decreases the allowance for credit losses as appropriate, while limiting reversals of the allowance for credit losses to the extent of the amounts previously recorded. If the Company intends to sell the impaired debt security or it is more-likely-than-not that the Company will be required to sell the impaired debt security prior to recovering its amortized cost basis, the entire impairment amount is recognized as an adjustment to the debt security’s amortized cost basis, with a corresponding ~~Provision for credit losses~~ ~~on the Consolidated Statement of Income.~~

~~The amortized cost of the Company’s AFS debt securities excludes accrued interest, which is included in~~ ~~Other assets~~ on the Consolidated Balance Sheet. The Company has made an accounting policy election to not recognize an allowance for credit losses for accrued interest receivables on AFS debt securities as the Company reverses any accrued interest if a debt security is impaired. As each AFS debt security has a unique security structure, where the accrual status is clearly determined when certain criteria listed in the terms are met, the Company assesses the default status of each security as defined by the debt security’s specific security structure.

~~Allowance for Collateral-Dependent Financial Assets~~— A ~~financial asset is considered collateral-dependent if repayment is expected to be provided substantially through the operation or sale of the collateral.~~ The allowance for credit losses is measured on an individual basis for collateral-dependent financial assets and determined by comparing the fair value of the collateral, minus the cost to sell, to the amortized cost basis of the related financial asset at the reporting date. Other than loans, collateral-dependent financial assets could also include resale agreements. In arrangements which the borrower must continually adjust the collateral securing the asset to reflect changes in the collateral’s fair value (e.g., resale agreements), the Company estimates the expected credit losses on the basis of the unsecured portion of the amortized cost as of the balance sheet date. If the fair value of the collateral is equal to or greater than the amortized cost of the resale agreement, the expected losses would be zero. If the fair value of the collateral is less than the amortized cost of the asset, the expected losses are limited to the difference between the fair value of the collateral and the amortized cost basis of the resale agreement.

~~Allowance for Purchased Credit Deteriorated Assets —~~ ~~ASU 2016-13 replaces the concept of PCI accounting under ASC 310-30~~ ~~Receivables - Loans and Debt Securities Acquired with Deteriorated Credit Quality~~ with the concept of purchased financial assets with credit deterioration. The Company adopted ASU 2016-13 using the prospective transition approach for Purchased credit deteriorated (“PCD”) assets that were previously classified as PCI assets. PCD financial assets are defined as acquired individual financial assets (or groups with similar risk characteristics) that as of the date of acquisition, have experienced a more-than-insignificant deterioration in credit quality since origination. For PCD debt securities and PCD loans, the company records the allowance for credit losses by grossing up the initial amortized cost, which includes the purchase price and the allowance for credit losses. The expected credit losses of PCD debt securities are measured at the individual security level. The expected credit losses for PCD loans are measured based on the loan’s unpaid principal balance. Beginning January 1, 2020, for any asset designated as a PCD asset at the time of acquisition, the Company estimates and records an allowance for credit losses, which is added to the purchase price to establish the initial amortized cost basis of the financial asset. Hence, there is no income statement impact from the acquisition. Subsequent changes in the allowance for credit losses on PCD assets will be recognized in ~~Provision for credit losses~~ on the Consolidated Statement of Income. The non-credit discount or premium will be accreted to interest income based on the effective interest rate on the PCD assets determined after the gross-up for the allowance for credit losses.

~~Troubled Debt Restructurings —~~ The Company has implemented various loan modification programs to provide its borrowers relief from the economic impacts of the Coronavirus Disease 2019 (“COVID-19”). In accordance with the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”), the Company has elected to not apply TDR classification to any COVID-19 related loan modifications that were performed after March 1, 2020 to borrowers who were current as of December 31, 2019. For loans modified in response to the COVID-19 pandemic that do not meet the CARES Act criteria (e.g., current payment status as of December 31, 2019), the Company has applied the guidance included in “~~Interagency Statement on Loan Modifications and Reporting for Financial Institutions Working with Customer Affected by the Coronavirus (Revised)~~” (the “Interagency Statement”) issued by the federal banking regulators on April 7, 2020. The Interagency Statement states that loan modifications performed in light of the COVID-19 pandemic, including loan payment deferrals that are up to six months in duration, that were granted to borrowers who were current as of the implementation date of a loan modification program or modifications granted under government mandated modification programs, are not TDRs. The delinquency of the loans modified under the CARES Act and Interagency Statement is frozen at the time of the modification, and interest income continues to be recognized over the contractual life of the loan. For more information on the Company's TDR accounting, see ~~Note 1 — Summary of Significant Accounting Principles — Troubled Debt Restructurings~~ ~~to the Consolidated Financial Statements of the Company’s 2019 Annual Report on Form 10-K.~~

~~Paycheck Protection Program —~~ From April to August 2020, the Company accepted Paycheck Protection Program (“PPP”) applications and originated loans to qualified small businesses under the PPP established by the CARES Act. These loans are included in the C&I portfolio, carry an interest rate of 1%, and are 100% guaranteed by the Small Business Administration (“SBA”). No allowance for loan losses was recorded for these loans as of September 30, 2020. As of September 30, 2020, the Company funded over 7,400 SBA 7(a) approved PPP loans with an outstanding loan balance of $1.77 billion. The substantial majority of the Company’s PPP loans have a term of two years. The SBA paid the Company fees for processing PPP loans in the following amounts: (1) five percent for loans of not more than $350,000; (2) three percent for loans of more than $350,000 and less than $2,000,000; and (3) one percent for loans of at least $2,000,000. Loan processing fees paid to the Company by the SBA are accounted for as loan origination fees, where net deferred fees are recognized over the estimated life of the loan as a yield adjustment on the loans. Payments by borrowers on PPP loans begin ten months after the loan forgiveness covered period. Under the terms of the PPP, such loans are eligible to be forgiven if certain conditions are satisfied, in which case the SBA will make payments to the Company for the forgiven amounts. If a loan is paid off or forgiven by the SBA prior to its projected estimated life, the remaining unamortized deferred fees will be recognized as interest income in that period.

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

Fair Value Determination

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

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

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

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

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

Assets and Liabilities Measured at Fair Value on a Recurring Basis

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

Available-for-Sale Debt Securities — When available, the Company uses quoted market prices to determine the fair value of AFS debt securities, which are classified as Level 1. Level 1 AFS debt securities are comprised of U.S. Treasury securities. The fair value of ~~other~~ AFS debt securities is generally determined by independent external pricing service providers who have experience in valuing these securities or by taking the average quoted market prices obtained from independent external brokers. The valuations provided by the third-party pricing service providers are based on observable market inputs, which include benchmark yields, reported trades, issuer spreads, benchmark securities, bids, offers, prepayment expectation and reference data obtained from market research publications. Inputs used by the third-party pricing service providers in valuing collateralized mortgage obligations and other securitization structures also include new issue data, monthly payment information, whole loan collateral performance, tranche evaluation and “To Be Announced” prices. In valuing securities issued by state and political subdivisions, inputs used by third-party pricing service providers also include material event notices.

On a monthly basis, the Company validates the valuations provided by third-party pricing service providers to ensure that the fair value determination is consistent with the applicable accounting guidance and the financial instruments are properly classified in the fair value hierarchy. To perform this validation, the Company evaluates the fair values of securities by comparing the fair values provided by the third-party pricing service providers to prices from other available independent sources for the same securities. When significant variances in prices are identified, the Company further compares inputs used by different sources to ascertain the reliability of these sources. On a quarterly basis, the Company reviews the documentation received from the third-party pricing service providers regarding the valuation inputs and methodology used for each category of securities.

When available, the Company uses quoted market prices to determine the fair value of AFS debt securities that are classified as Level 1. Level 1 AFS debt securities are comprised 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. ~~These~~In addition, the Company obtains market quotes from other official published sources. As these valuations are based on observable inputs in the current marketplace, ~~and~~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 technique are ~~reviewed.~~reviewed periodically.

1411

Equity Securities — Equity securities consisted of mutual funds as of both ~~September~~June 30, ~~2020~~2021 and December 31, ~~2019.~~2020. The Company invested in these mutual funds for Community Reinvestment Act (“CRA”) purposes. The Company uses net asset value (“NAV”) information to determine the fair value of these equity securities. When NAV is available periodically and the equity securities can be put back to the transfer agents at the publicly available NAV, the fair value of the equity securities is classified as Level 1. When NAV is available periodically but the equity securities may not be readily marketable at its periodic NAV in the secondary market, the fair value of these equity securities is classified as Level 2.

Interest Rate Contracts — The Company enters into interest rate swap and option contracts that are not designated as hedging instruments with its borrowers to lock in attractive intermediate and long-term interest rates, resulting in the customer obtaining a synthetic fixed-rate loan. To economically hedge against the interest rate risks in the products offered to its customers, the Company enters into mirrored offsetting interest rate contracts with third-party financial institutions. The Company also enters into interest rate swap contracts with institutional counterparties to hedge against ~~certificates of deposit issued~~ ~~and~~ certain variable interest rate borrowings. These interest rate swap contracts with institutional counterparties were designated as cash flow hedges. The fair value of the interest rate swaps is determined using the market standard methodology of netting the discounted future fixed cash payments (or receipts) and the discounted expected variable cash receipts (or payments). The fair value of the interest rate options, which consist of floors and caps, is determined using the market standard methodology of discounting the future expected cash receipts that would occur if variable interest rates fall below (rise above) the strike rate of the floors (caps). In addition, to comply with the provisions of ASC 820, Fair Value Measurement, the Company incorporates credit valuation adjustments to appropriately reflect both its own nonperformance risk and the respective counterparty’s nonperformance risk in the fair value measurements of its derivatives. The credit valuation adjustments associated with the Company’s derivatives utilize model-derived credit spreads, which are Level 3 inputs. As of September 30, 2020 and December 31, 2019, 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 were not significant to the overall valuation of its derivative portfolios. As a result, theThe Company classifies these derivative instruments as Level 2 due to the observable nature of the significant inputs utilized.

Foreign Exchange Contracts — The Company enters into foreign exchange contracts to accommodate the business needs of its customers. ~~For a majority of the foreign exchange contracts entered with its customers, the~~The Company entered into offsetting foreign exchange contracts with third-party financial institutions to manage its ~~exposure.~~exposure with respect to a majority of these foreign exchange contracts. The Company also utilizes foreign exchange contracts that are not designated as hedging instruments to mitigate the economic effect of fluctuations in certain foreign currency on-balance sheet assets and liabilities, primarily foreign currency denominated deposits that it offers to its customers. The fair value of foreign exchange contracts is determined at each reporting period based on changes in the foreign exchange rates. These are over-the-counter contracts where quoted market prices are not readily available. Valuation is measured using conventional valuation methodologies with observable market data. Due to the short-term nature of the majority of these contracts, the counterparties’ credit risks are considered nominal and result in no adjustments to the valuation of the foreign exchange contracts. Due to the observable nature of the inputs used in deriving the fair value of these contracts, the valuation of foreign exchange contracts are classified as Level 2. As of ~~September~~June 30, ~~2020~~2021 and December 31, ~~2019,~~2020, the Bank held foreign currency non-deliverable forward contracts to hedge its net investment in its China subsidiary, East West Bank (China) Limited, a non-U.S. dollar (“USD”) functional currency subsidiary in China. These foreign currency non-deliverable forward contracts were designated as net investment hedges. The fair value of foreign currency non-deliverable forward contracts is determined by comparing the contracted foreign exchange rate to the current market foreign exchange rate. Key inputs of the current market exchange rate include spot rates and forward rates of the contractual currencies. Foreign exchange forward curves are used to determine which forward rate pertains to a specific maturity. Due to the observable nature of the inputs used in deriving the estimated fair value, these instruments are classified as Level 2.

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

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Equity Contracts — As part of the loan origination process, the Company periodically obtains warrants to purchase preferred and/or common stock of technology and life sciences companies to which it provides loans. As of ~~September~~June 30, ~~2020 and~~2021, the warrants included on the Consolidated Financial Statements were from private companies. As of December 31, ~~2019,~~2020, the warrants included on the Consolidated Financial Statements were from both public and private companies. The Company values these warrants based on the Black-Scholes option pricing model. For warrants from public companies, the model uses the underlying stock price, stated strike price, warrant expiration date, risk-free interest rate based on a duration-matched U.S. Treasury rate, and market-observable company-specific option volatility as inputs to value the warrants. Due to the observable nature of the inputs used in deriving the estimated fair value, warrants from public companies are classified as Level 2. For warrants from private companies, the model uses inputs such as the offering price observed in the most recent round of funding, stated strike price, warrant expiration date, risk-free interest rate based on duration-matched U.S. Treasury rate and option volatility. The Company applies proxy volatilities based on the industry sectors of the private companies. The model values are then adjusted for a general lack of liquidity due to the private nature of the underlying companies. Since both option volatility and liquidity discount assumptions are subject to management’s judgment, measurement uncertainty is inherent in the valuation of private companies’ 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. Since both option volatility and liquidity discount assumptions are subject to management’s judgment, measurement uncertainty is inherent in the valuation of private companies’ warrants. Given that the Company holds long positions in all warrants, an increase in volatility assumption would generally result in an increase in fair value. A higher liquidity discount would result in a decrease in fair value. On a quarterly basis, the changes in the fair value of warrants from private companies are reviewed for reasonableness, and a measurement of uncertainty analysis on the option volatility and liquidity discount assumptions is performed.

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

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The following tables present financial assets and liabilities that are measured at fair value on a recurring basis as of ~~September~~June 30, ~~2020~~2021 and December 31, ~~2019:~~2020:


($ in thousands)	($ in thousands)	Assets and Liabilities Measured at Fair Value on a Recurring Basis as of September 30, 2020								($ in thousands)	Assets and Liabilities Measured at Fair Value on a Recurring Basis as of June 30, 2021
		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total Fair Value			Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total Fair Value
AFS debt securities:	AFS debt securities:									AFS debt securities:
U.S. Treasury securities	U.S. Treasury securities	$	50,998	$	0	$	0	$	50,998	U.S. Treasury securities	$	836,940	$	0	$	0	$	836,940
U.S. government agency and U.S. government-sponsored enterprise debt securities	U.S. government agency and U.S. government-sponsored enterprise debt securities	0		727,062		0		727,062		U.S. government agency and U.S. government-sponsored enterprise debt securities	0		1,224,511		0		1,224,511
U.S. government agency and U.S. government-sponsored enterprise mortgage-backed securities:	U.S. government agency and U.S. government-sponsored enterprise mortgage-backed securities:									U.S. government agency and U.S. government-sponsored enterprise mortgage-backed securities:
Commercial mortgage-backed securities	Commercial mortgage-backed securities	0		967,109		0		967,109		Commercial mortgage-backed securities	0		1,188,640		0		1,188,640
Residential mortgage-backed securities	Residential mortgage-backed securities	0		1,238,009		0		1,238,009		Residential mortgage-backed securities	0		2,368,552		0		2,368,552
Municipal securities	Municipal securities	0		333,275		0		333,275		Municipal securities	0		454,923		0		454,923
Non-agency mortgage-backed securities:	Non-agency mortgage-backed securities:									Non-agency mortgage-backed securities:
Commercial mortgage-backed securities	Commercial mortgage-backed securities	0		214,676		0		214,676		Commercial mortgage-backed securities	0		364,172		0		364,172
Residential mortgage-backed securities	Residential mortgage-backed securities	0		277,613		0		277,613		Residential mortgage-backed securities	0		772,474		0		772,474
Corporate debt securities	Corporate debt securities	0		251,177		0		251,177		Corporate debt securities	0		552,715		0		552,715
Foreign government bonds	Foreign government bonds	0		132,671		0		132,671		Foreign government bonds	0		283,175		0		283,175
Asset-backed securities	Asset-backed securities	0		63,148		0		63,148		Asset-backed securities	0		61,829		0		61,829
Collateralized loan obligations (“CLOs”)	Collateralized loan obligations (“CLOs”)	0		283,422		0		283,422		Collateralized loan obligations (“CLOs”)	0		291,529		0		291,529
Total AFS debt securities	Total AFS debt securities	$	50,998	$	4,488,162	$	0	$	4,539,160	Total AFS debt securities	$	836,940	$	7,562,520	$	0	$	8,399,460

Investments in tax credit and other investments:	Investments in tax credit and other investments:									Investments in tax credit and other investments:
Equity securities (1)	Equity securities (1)	$	22,538	$	8,741	$	0	$	31,279	Equity securities (1)	$	22,345	$	4,474	$	0	$	26,819
Total investments in tax credit and other investments	Total investments in tax credit and other investments	$	22,538	$	8,741	$	0	$	31,279	Total investments in tax credit and other investments	$	22,345	$	4,474	$	0	$	26,819

Derivative assets:	Derivative assets:									Derivative assets:
Interest rate contracts	Interest rate contracts	$	0	$	566,635	$	0	$	566,635	Interest rate contracts	$	0	$	329,953	$	0	$	329,953
Foreign exchange contracts	Foreign exchange contracts	0		19,134		0		19,134		Foreign exchange contracts	0		29,867		0		29,867
Credit contracts	Credit contracts	0		47		0		47		Credit contracts	0		3		0		3
Equity contracts	Equity contracts	0		12,455		310		12,765		Equity contracts	0		0		223		223
Commodity contracts	Commodity contracts	0		110,029		0		110,029		Commodity contracts	0		228,536		0		228,536
Gross derivative assets	Gross derivative assets	$	0	$	708,300	$	310	$	708,610	Gross derivative assets	$	0	$	588,359	$	223	$	588,582
Netting adjustments (2)	Netting adjustments (2)	$	0	$	(109,696)	$	0	$	(109,696)	Netting adjustments (2)	$	0	$	(93,091)	$	0	$	(93,091)
Net derivative assets	Net derivative assets	$	0	$	598,604	$	310	$	598,914	Net derivative assets	$	0	$	495,268	$	223	$	495,491

Derivative liabilities:	Derivative liabilities:									Derivative liabilities:
Interest rate contracts	Interest rate contracts	$	0	$	372,057	$	0	$	372,057	Interest rate contracts	$	0	$	228,952	$	0	$	228,952
Foreign exchange contracts	Foreign exchange contracts	0		14,782		0		14,782		Foreign exchange contracts	0		20,555		0		20,555
Credit contracts	Credit contracts	0		307		0		307		Credit contracts	0		87		0		87
Commodity contracts	Commodity contracts	0		118,873		0		118,873		Commodity contracts	0		199,327		0		199,327
Gross derivative liabilities	Gross derivative liabilities	$	0	$	506,019	$	0	$	506,019	Gross derivative liabilities	$	0	$	448,921	$	0	$	448,921
Netting adjustments (2)	Netting adjustments (2)	$	0	$	(202,131)	$	0	$	(202,131)	Netting adjustments (2)	$	0	$	(253,309)	$	0	$	(253,309)
Net derivative liabilities	Net derivative liabilities	$	0	$	303,888	$	0	$	303,888	Net derivative liabilities	$	0	$	195,612	$	0	$	195,612



($ in thousands)	Assets and Liabilities Measured at Fair Value on a Recurring Basis as of December 31, 2020
	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	$	50,761	$	0	$	0	$	50,761
U.S. government agency and U.S. government-sponsored enterprise debt securities	0		814,319		0		814,319
U.S. government agency and U.S. government-sponsored enterprise mortgage-backed securities:
Commercial mortgage-backed securities	0		1,153,770		0		1,153,770
Residential mortgage-backed securities	0		1,660,894		0		1,660,894
Municipal securities	0		396,073		0		396,073
Non-agency mortgage-backed securities:
Commercial mortgage-backed securities	0		239,842		0		239,842
Residential mortgage-backed securities	0		289,775		0		289,775
Corporate debt securities	0		405,968		0		405,968
Foreign government bonds	0		182,531		0		182,531
Asset-backed securities	0		63,231		0		63,231
CLOs	0		287,494		0		287,494
Total AFS debt securities	$	50,761	$	5,493,897	$	0	$	5,544,658

Investments in tax credit and other investments:
Equity securities (1)	$	22,548	$	8,724	$	0	$	31,272
Total investments in tax credit and other investments	$	22,548	$	8,724	$	0	$	31,272

Derivative assets:
Interest rate contracts	$	0	$	489,132	$	0	$	489,132
Foreign exchange contracts	0		30,300		0		30,300
Credit contracts	0		13		0		13
Equity contracts	0		585		273		858
Commodity contracts	0		82,451		0		82,451
Gross derivative assets	$	0	$	602,481	$	273	$	602,754
Netting adjustments (2)	$	0	$	(101,512)	$	0	$	(101,512)
Net derivative assets	$	0	$	500,969	$	273	$	501,242

Derivative liabilities:
Interest rate contracts	$	0	$	317,698	$	0	$	317,698
Foreign exchange contracts	0		22,759		0		22,759
Credit contracts	0		206		0		206
Commodity contracts	0		84,165		0		84,165
Gross derivative liabilities	$	0	$	424,828	$	0	$	424,828
Netting adjustments (2)	$	0	$	(184,697)	$	0	$	(184,697)
Net derivative liabilities	$	0	$	240,131	$	0	$	240,131

(1)Equity securities consist of mutual funds with readily determinable fair values.

~~(2)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~~ The Company invested in ~~this Form 10-Q for additional information.~~

($ in thousands) Assets and Liabilities Measured at Fair Value on a Recurring Basis
as of December 31, 2019
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 $ 176,422 $ 0 $ 0 $ 176,422
U.S. government agency and U.S. government-sponsored enterprise debt securities 0 581,245 0 581,245
U.S. government agency and U.S. government-sponsored enterprise mortgage-backed securities:
Commercial mortgage-backed securities 0 603,471 0 603,471
Residential mortgage-backed securities 0 1,003,897 0 1,003,897
Municipal securities 0 102,302 0 102,302
Non-agency mortgage-backed securities:
Commercial mortgage-backed securities 0 88,550 0 88,550
Residential mortgage-backed securities 0 46,548 0 46,548
Corporate debt securities 0 11,149 0 11,149
Foreign government bonds 0 354,172 0 354,172
Asset-backed securities 0 64,752 0 64,752
CLOs 0 284,706 0 284,706
Total AFS debt securities $ 176,422 $ 3,140,792 $ 0 $ 3,317,214
Investments in tax credit and other investments:
Equity securities (1)
$ 21,746 $ 9,927 $ 0 $ 31,673
Total investments in tax credit and other investments $ 21,746 $ 9,927 $ 0 $ 31,673
Derivative assets:
Interest rate contracts $ 0 $ 192,883 $ 0 $ 192,883
Foreign exchange contracts 0 54,637 0 54,637
Credit contracts 0 2 0 2
Equity contracts 0 993 421 1,414
Commodity contracts 0 81,380 0 81,380
Gross derivative assets $ 0 $ 329,895 $ 421 $ 330,316
Netting adjustments (2)
$ 0 $ (125,319) $ 0 $ (125,319)
Net derivative assets $ 0 $ 204,576 $ 421 $ 204,997
Derivative liabilities:
Interest rate contracts $ 0 $ 127,317 $ 0 $ 127,317
Foreign exchange contracts 0 48,610 0 48,610
Credit contracts 0 84 0 84
Commodity contracts 0 80,517 0 80,517
Gross derivative liabilities $ 0 $ 256,528 $ 0 $ 256,528
Netting adjustments (2)
$ 0 $ (159,799) $ 0 $ (159,799)
Net derivative liabilities $ 0 $ 96,729 $ 0 $ 96,729

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

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

1815

For the three and ~~nine~~six months ended ~~September~~June 30, ~~2020~~2021 and ~~2019,~~2020, Level 3 fair value measurements that were measured on a recurring basis ~~consist~~consisted of warrants issued by private companies. The following table provides a reconciliation of the beginning and ending balances of these equity ~~warrants~~contracts for the three and ~~nine~~six months ended ~~September~~June 30, ~~2020~~2021 and ~~2019:~~2020:


($ in thousands)	($ in thousands)	Three Months Ended September 30,				Nine Months Ended September 30,				($ in thousands)	Three Months Ended June 30,				Six Months Ended June 30,
		2020		2019		2020		2019			2021		2020		2021		2020
Equity Contracts	Equity Contracts									Equity Contracts
Beginning balance	Beginning balance	$	316	$	392	$	421	$	673	Beginning balance	$	272	$	713	$	273	$	421

Total (losses) gains included in earnings (1)		(6)		10		8,262		548
Total gains included in earnings (1)										Total gains included in earnings (1)	47		7,976		46		8,268

Issuances		0		0		0		28

Settlements	Settlements	0		0		0		(847)		Settlements	(96)		0		(96)		0
Transfers out of Level 3 (2)	Transfers out of Level 3 (2)	0		0		(8,373)		0		Transfers out of Level 3 (2)	0		(8,373)		0		(8,373)
Ending balance	Ending balance	$	310	$	402	$	310	$	402	Ending balance	$	223	$	316	$	223	$	316

(1)Includes unrealized (losses) gains of ~~$(6)~~$(27) thousand and ~~$10 thousand~~$8.0 million for the three months ended ~~September~~June 30, 2021 and 2020, respectively, and ~~2019, respectively,~~$(29) thousand and $8.3 million ~~and $(225) thousand~~ for the ~~nine~~six months ended ~~September~~June 30, ~~2020~~2021 and ~~2019,~~2020, respectively. The realized/unrealized gains (losses) of equity ~~warrants~~contracts are included in Lending fees on the Consolidated Statement of Income.

(2)During the ~~nine~~three and six months ended ~~September~~June 30, 2020, the Company transferred $8.4 million of equity contracts measured on a recurring basis out of Level 3 into Level 2 after the corresponding issuer of the equity ~~warrant,~~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~~June 30, ~~2020~~2021 and December 31, ~~2019,~~2020, respectively. 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 (1)

($ in thousands)

Fair Value
Measurements
(Level 3)

Valuation
Technique

Unobservable
Inputs

Range of Inputs

Weighted-

Average of Inputs (1)

September 30, 2020

June 30, 2021

Derivative assets:

Equity contracts

310

Black-Scholes option pricing model

Equity volatility

54% — 65%

59%

Equity contracts

223

Black-Scholes option pricing model

Equity volatility

41% — 53%

47%

Liquidity discount

47%

Liquidity discount

47%

December 31, 2019

December 31, 2020

Derivative assets:

Equity contracts

421

Black-Scholes option pricing model

Equity volatility

39% — 44%

42%

Equity contracts

273

Black-Scholes option pricing model

Equity volatility

46% — 61%

53%

Liquidity discount

47%

Liquidity discount

47%

(1)Weighted-average of inputs is calculated based on the fair value of equity ~~warrants~~contracts as of ~~September~~June 30, ~~2020~~2021 and December 31, ~~2019.~~2020.

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 impairment on certain individually evaluated loans held-for-investment and investments in qualified affordable housing partnerships, tax credit and other investments, 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 — The Company typically adjusts the carrying amount of individually evaluated loans held-for-investment when there is evidence of probable loss and when the expected fair value of the loan is less than its carrying amount. Individually evaluated loans held-for-investment ~~with specific reserves~~ 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 ~~flows~~flow valuation techniques that consist of developing an expected stream of cash flows over the life of the loans, and then ~~valuing the loans at~~calculating the present value of the loans by discounting the expected cash flows at a designated discount rate.

•~~A specific reserve is established for~~When the repayment of an individually evaluated loan ~~held-for-investment~~is dependent on the sale of the collateral, the fair value of the loan is determined based on the fair value of the underlying collateral, which may take the form of real estate, inventory, equipment, contracts or guarantees. The fair value of the underlying collateral is generally based on third-party appraisals, or an internal valuation if a third-party appraisal is not required by regulations, ~~which utilize~~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 — ~~As part of its monitoring process, the~~The Company conducts ~~ongoing~~ due diligence on ~~the~~its investments in ~~its~~ qualified affordable housing partnerships, tax credit and other investments ~~after~~prior to the initial investment date and ~~prior to~~through the ~~placed-in-service-date.~~placed-in-service date. After these investments are either acquired or placed into service, the Company continues its periodic monitoring process to ensure realizable book values and that there is ~~performed.~~no significant tax credit recapture risk. This monitoring process includes the quarterly review of the financial statements, the annual review of tax returns of the investment entity, the annual review of the financial statements of the guarantor (if any)~~, the review of the annual tax returns of the investment entity,~~ and ~~the~~a comparison of the actual ~~cash distributions received~~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 ~~OTTI~~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:

•~~The~~ expected future cash flows isthat are less than the carrying ~~amount~~amount of the investment;

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

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

All available evidence 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, an impairment charge would only be recognized in earnings for a decline in value that is determined to be other-than-temporary.

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

Other Nonperforming Assets — Other nonperforming assets are recorded at fair value upon transfers from loans to foreclosed assets. Subsequently, foreclosed assets are recorded at the lower of carrying value or fair value. Fair value is based on independent market prices, appraised values of the collateral or management’s estimates of the foreclosed asset. The Company records an impairment when the foreclosed asset’s fair value declines below its carrying value. Other nonperforming assets are classified as Level 3.

2017

The following tables present the carrying amounts of assets that were still held and had fair value changes measured on a nonrecurring basis as of ~~September~~June 30, ~~2020~~2021 and December 31, ~~2019:~~2020:


($ in thousands)	($ in thousands)	Assets Measured at Fair Value on a Nonrecurring Basis as of September 30, 2020								($ in thousands)	Assets Measured at Fair Value on a Nonrecurring Basis as of June 30, 2021
		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Fair Value Measurements			Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Fair Value Measurements
Loans held-for-investment:	Loans held-for-investment:									Loans held-for-investment:
Commercial:	Commercial:									Commercial:
C&I		$	0	$	0	$	116,077	$	116,077
CRE:
Commercial and industrial (“C&I”)										Commercial and industrial (“C&I”)	$	0	$	0	$	110,211	$	110,211
Commercial real estate (“CRE”):										Commercial real estate (“CRE”):
CRE	CRE	0		0		51,280		51,280		CRE	0		0		53,509		53,509

Multifamily residential										Multifamily residential	0		0		2,428		2,428
Construction and land										Construction and land	0		0		4,191		4,191

Total commercial	Total commercial	0		0		167,357		167,357		Total commercial	0		0		170,339		170,339
Consumer:	Consumer:									Consumer:
Residential mortgage:	Residential mortgage:									Residential mortgage:
Single-family residential										Single-family residential	0		0		1,125		1,125
Home equity lines of credit (“HELOCs”)										Home equity lines of credit (“HELOCs”)	0		0		3,605		3,605

HELOCs		0		0		1,156		1,156

Other consumer		0		0		2,491		2,491
Total consumer	Total consumer	0		0		3,647		3,647		Total consumer	0		0		4,730		4,730
Total loans held-for-investment	Total loans held-for-investment	$	0	$	0	$	171,004	$	171,004	Total loans held-for-investment	$	0	$	0	$	175,069	$	175,069
Investments in tax credit and other investments, net		$	0	$	0	$	6,216	$	6,216

OREO (1)										OREO (1)	$	0	$	0	$	14,914	$	14,914


($ in thousands)	($ in thousands)	Assets Measured at Fair Value on a Nonrecurring Basis as of December 31, 2019								($ in thousands)	Assets Measured at Fair Value on a Nonrecurring Basis as of December 31, 2020
		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Fair Value Measurements			Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Fair Value Measurements
Loans held-for-investment:	Loans held-for-investment:									Loans held-for-investment:
Commercial:	Commercial:									Commercial:
C&I	C&I	$	0	$	0	$	47,554	$	47,554	C&I	$	0	$	0	$	143,331	$	143,331
CRE:	CRE:									CRE:
CRE	CRE	0		0		753		753		CRE	0		0		42,894		42,894

Total commercial	Total commercial	0		0		48,307		48,307		Total commercial	0		0		186,225		186,225
Consumer:	Consumer:									Consumer:
Residential mortgage:	Residential mortgage:									Residential mortgage:

HELOCs	HELOCs	0		0		1,372		1,372		HELOCs	0		0		1,146		1,146

Other consumer										Other consumer	0		0		2,491		2,491
Total consumer	Total consumer	0		0		1,372		1,372		Total consumer	0		0		3,637		3,637
Total loans held-for-investment	Total loans held-for-investment	$	0	$	0	$	49,679	$	49,679	Total loans held-for-investment	$	0	$	0	$	189,862	$	189,862
Investments in tax credit and other investments, net	Investments in tax credit and other investments, net	$	0	$	0	$	3,076	$	3,076	Investments in tax credit and other investments, net	$	0	$	0	$	3,140	$	3,140
OREO (1)	OREO (1)	$	0	$	0	$	125	$	125	OREO (1)	$	0	$	0	$	15,824	$	15,824
Other nonperforming assets		$	0	$	0	$	1,167	$	1,167

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

2118

The following table presents the (decrease) increase ~~(decrease)~~ in fair value of assets for which a nonrecurring fair value adjustment has been recognized for the three and ~~nine~~six months ended ~~September~~June 30, ~~2020~~2021 and ~~2019:~~2020:


($ in thousands)	($ in thousands)	Three Months Ended September 30,				Nine Months Ended September 30,				($ in thousands)	Three Months Ended June 30,				Six Months Ended June 30,
		2020		2019		2020		2019			2021		2020		2021		2020

Loans held-for-investment:	Loans held-for-investment:									Loans held-for-investment:
Commercial:	Commercial:									Commercial:
C&I	C&I	$	(24,928)	$	(20,484)	$	(38,855)	$	(43,109)	C&I	$	(6,462)	$	(8,846)	$	(15,530)	$	(30,372)
CRE:	CRE:									CRE:
CRE	CRE	(15)		2		(292)		6		CRE	(275)		(271)		(7,336)		(276)

Multifamily residential										Multifamily residential	2		0		(6)		0
Construction and land										Construction and land	(209)		0		(280)		0

Total commercial	Total commercial	(24,943)		(20,482)		(39,147)		(43,103)		Total commercial	(6,944)		(9,117)		(23,152)		(30,648)
Consumer:	Consumer:									Consumer:
Residential mortgage:	Residential mortgage:									Residential mortgage:

Single-family residential										Single-family residential	0		0		(8)		0
HELOCs	HELOCs	3		0		(178)		0		HELOCs	3		(64)		(23)		(257)

Other consumer	Other consumer	0		0		2,491		0		Other consumer	(2,491)		0		(2,491)		2,491
Total consumer	Total consumer	3		0		2,313		0		Total consumer	(2,488)		(64)		(2,522)		2,234
Total loans held-for-investment	Total loans held-for-investment	$	(24,940)	$	(20,482)	$	(36,834)	$	(43,103)	Total loans held-for-investment	$	(9,432)	$	(9,181)	$	(25,674)	$	(28,414)
Investments in tax credit and other investments, net	Investments in tax credit and other investments, net	$	0	$	(1,703)	$	(583)	$	(11,573)	Investments in tax credit and other investments, net	$	877	$	(733)	$	877	$	(583)
OREO	OREO	$	0	$	(1,020)	$	0	$	(1,023)	OREO	$	(910)	$	0	$	(910)	$	0

Other nonperforming assets	Other nonperforming assets	$	0	$	0	$	0	$	(3,000)	Other nonperforming assets	$	0	$	0	$	(3,890)	$	0

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~~June 30, ~~2020~~2021 and December 31, ~~2019:~~2020:


($ in thousands)	($ in thousands)	Fair Value Measurements (Level 3)		Valuation Techniques	Unobservable Inputs	Range of Inputs	Weighted- Average of Inputs (1)	($ in thousands)	Fair Value Measurements (Level 3)		Valuation Techniques	Unobservable Inputs	Range of Inputs	Weighted- Average of Inputs (1)
September 30, 2020
June 30, 2021								June 30, 2021
Loans held-for-investment	Loans held-for-investment	$	82,461	Discounted cash flows	Discount	4% — 15%	13%	Loans held-for-investment	$	96,038	Discounted cash flows	Discount	4% — 20%	9%
		$	15,493	Fair value of collateral	Discount	10% — 20%	10%		$	13,638	Fair value of collateral	Discount	20% — 40%	34%
		$	22,469	Fair value of collateral	Contract value	NM	NM
		$	50,581	Fair value of property	Selling cost	8%	8%		$	65,393	Fair value of property	Selling cost	7% — 8%	8%
OREO								OREO	$	14,914	Fair value of property	Selling cost	8%	8%

Investments in tax credit and other investments, net		$	6,216	Individual analysis of each investment	Expected future tax benefits and distributions	NM	NM

December 31, 2019
December 31, 2020								December 31, 2020
Loans held-for-investment	Loans held-for-investment	$	27,841	Discounted cash flows	Discount	4% — 15%	14%	Loans held-for-investment	$	104,783	Discounted cash flows	Discount	3% — 15%	11%

		$	1,014	Fair value of collateral	Discount	8% — 20%	19%		$	22,207	Fair value of collateral	Discount	10% — 26%	15%
		$	20,824	Fair value of collateral	Contract value	NM	NM		$	15,879	Fair value of collateral	Contract value	NM	NM
									$	46,993	Fair value of property	Selling cost	7% — 26%	10%
Investments in tax credit and other investments, net	Investments in tax credit and other investments, net	$	3,076	Individual analysis of each investment	Expected future tax benefits and distributions	NM	NM	Investments in tax credit and other investments, net	$	3,140	Individual analysis of each investment	Expected future tax benefits and distributions	NM	NM
OREO	OREO	$	125	Fair value of property	Selling cost	8%	8%	OREO	$	15,824	Fair value of property	Selling cost	8%	8%
Other nonperforming assets		$	1,167	Fair value of collateral	Contract value	NM	NM

NM — Not meaningful.

(1)Weighted-average of inputs is based on the relative fair value of the respective assets as of ~~September~~June 30, ~~2020~~2021 and December 31, ~~2019.~~2020.

2219

Disclosures about Fair Value of Financial Instruments

The following tables present the fair value estimates for financial instruments as of ~~September~~June 30, ~~2020~~2021 and December 31, ~~2019,~~2020, excluding financial instruments recorded at fair value on a recurring basis as they are included in the tables presented elsewhere in this Note. The carrying amounts in the following tables are recorded on the Consolidated Balance Sheet under the indicated captions, except for accrued interest receivable and mortgage servicing rights that are included in Other assets, and accrued interest payable that is included in Accrued expenses and other liabilities. These financial assets and liabilities are measured at amortized cost basis on the Company’s Consolidated Balance Sheet.


($ in thousands)	($ in thousands)	September 30, 2020										($ in thousands)	June 30, 2021
		Carrying Amount		Level 1		Level 2		Level 3		Estimated Fair Value			Carrying Amount		Level 1		Level 2		Level 3		Estimated Fair Value
Financial assets:	Financial assets:											Financial assets:
Cash and cash equivalents	Cash and cash equivalents	$	4,506,941	$	4,506,941	$	0	$	0	$	4,506,941	Cash and cash equivalents	$	5,997,805	$	5,997,805	$	0	$	0	$	5,997,805
Interest-bearing deposits with banks	Interest-bearing deposits with banks	$	699,465	$	0	$	699,465	$	0	$	699,465	Interest-bearing deposits with banks	$	830,279	$	0	$	830,279	$	0	$	830,279
Resale agreements ~~(1)~~	Resale agreements ~~(1)~~	$	1,210,000	$	0	$	1,215,801	$	0	$	1,215,801	Resale agreements ~~(1)~~	$	2,299,184	$	0	$	2,290,097	$	0	$	2,290,097

Restricted equity securities, at cost	Restricted equity securities, at cost	$	79,172	$	0	$	79,172	$	0	$	79,172	Restricted equity securities, at cost	$	76,931	$	0	$	76,931	$	0	$	76,931
Loans held-for-sale	Loans held-for-sale	$	4,148	$	0	$	4,148	$	0	$	4,148	Loans held-for-sale	$	1,819	$	0	$	1,819	$	0	$	1,819
Loans held-for-investment, net	Loans held-for-investment, net	$	36,818,877	$	0	$	0	$	37,087,711	$	37,087,711	Loans held-for-investment, net	$	39,485,775	$	0	$	0	$	39,414,107	$	39,414,107
Mortgage servicing rights	Mortgage servicing rights	$	5,169	$	0	$	0	$	7,511	$	7,511	Mortgage servicing rights	$	5,373	$	0	$	0	$	8,788	$	8,788
Accrued interest receivable	Accrued interest receivable	$	143,354	$	0	$	143,354	$	0	$	143,354	Accrued interest receivable	$	154,810	$	0	$	154,810	$	0	$	154,810
Financial liabilities:	Financial liabilities:											Financial liabilities:
Demand, checking, savings and money market deposits	Demand, checking, savings and money market deposits	$	32,611,382	$	0	$	32,611,382	$	0	$	32,611,382	Demand, checking, savings and money market deposits	$	44,151,817	$	0	$	44,151,817	$	0	$	44,151,817
Time deposits	Time deposits	$	9,069,173	$	0	$	9,091,802	$	0	$	9,091,802	Time deposits	$	8,430,758	$	0	$	8,442,834	$	0	$	8,442,834
Short-term borrowings		$	59,613	$	0	$	59,613	$	0	$	59,613

FHLB advances	FHLB advances	$	657,185	$	0	$	666,989	$	0	$	666,989	FHLB advances	$	248,464	$	0	$	250,871	$	0	$	250,871
Repurchase agreements ~~(1)~~	Repurchase agreements ~~(1)~~	$	348,063	$	0	$	368,098	$	0	$	368,098	Repurchase agreements ~~(1)~~	$	300,000	$	0	$	314,315	$	0	$	314,315
Long-term debt	Long-term debt	$	1,574,765	$	0	$	1,577,572	$	0	$	1,577,572	Long-term debt	$	147,515	$	0	$	150,232	$	0	$	150,232
Accrued interest payable	Accrued interest payable	$	21,671	$	0	$	21,671	$	0	$	21,671	Accrued interest payable	$	10,279	$	0	$	10,279	$	0	$	10,279

($ in thousands) December 31, 2019
Carrying
Amount Level 1 Level 2 Level 3 Estimated
Fair Value
Financial assets:
Cash and cash equivalents $ 3,261,149 $ 3,261,149 $ 0 $ 0 $ 3,261,149
Interest-bearing deposits with banks $ 196,161 $ 0 $ 196,161 $ 0 $ 196,161
Resale agreements (1)
$ 860,000 $ 0 $ 856,025 $ 0 $ 856,025
Restricted equity securities, at cost $ 78,580 $ 0 $ 78,580 $ 0 $ 78,580
Loans held-for-sale $ 434 $ 0 $ 434 $ 0 $ 434
Loans held-for-investment, net $ 34,420,252 $ 0 $ 0 $ 35,021,300 $ 35,021,300
Mortgage servicing rights $ 6,068 $ 0 $ 0 $ 8,199 $ 8,199
Accrued interest receivable $ 144,599 $ 0 $ 144,599 $ 0 $ 144,599
Financial liabilities:
Demand, checking, savings and money market deposits $ 27,109,951 $ 0 $ 27,109,951 $ 0 $ 27,109,951
Time deposits $ 10,214,308 $ 0 $ 10,208,895 $ 0 $ 10,208,895
Short-term borrowings $ 28,669 $ 0 $ 28,669 $ 0 $ 28,669
FHLB advances $ 745,915 $ 0 $ 755,371 $ 0 $ 755,371
Repurchase agreements (1)
$ 200,000 $ 0 $ 232,597 $ 0 $ 232,597
Long-term debt $ 147,101 $ 0 $ 152,641 $ 0 $ 152,641
Accrued interest payable $ 27,246 $ 0 $ 27,246 $ 0 $ 27,246

~~(1)Resale and repurchase agreements are reported net pursuant to ASC 210-20-45-11,~~ ~~Balance Sheet Offsetting: Repurchase and Reverse Repurchase Agreements~~. ~~As of September 30, 2020,~~ ~~NaN of the~~ ~~$348.1 million of gross repurchase agreements were eligible for netting against gross resale agreements. Out of $450.0 million of gross repurchase agreements, $250.0 million~~ ~~were eligible for netting against gross resale agreements~~ ~~as of~~ ~~December 31, 2019.~~



($ in thousands)	December 31, 2020
	Carrying Amount		Level 1		Level 2		Level 3		Estimated Fair Value
Financial assets:
Cash and cash equivalents	$	4,017,971	$	4,017,971	$	0	$	0	$	4,017,971
Interest-bearing deposits with banks	$	809,728	$	0	$	809,728	$	0	$	809,728
Resale agreements	$	1,460,000	$	0	$	1,464,635	$	0	$	1,464,635

Restricted equity securities, at cost	$	83,046	$	0	$	83,046	$	0	$	83,046
Loans held-for-sale	$	1,788	$	0	$	1,788	$	0	$	1,788
Loans held-for-investment, net	$	37,770,972	$	0	$	0	$	37,803,940	$	37,803,940

Mortgage servicing rights	$	5,522	$	0	$	0	$	8,435	$	8,435
Accrued interest receivable	$	150,140	$	0	$	150,140	$	0	$	150,140
Financial liabilities:

Demand, checking, savings and money market deposits	$	35,862,403	$	0	$	35,862,403	$	0	$	35,862,403
Time deposits	$	9,000,349	$	0	$	9,016,884	$	0	$	9,016,884
Short-term borrowings	$	21,009	$	0	$	21,009	$	0	$	21,009
FHLB advances	$	652,612	$	0	$	659,631	$	0	$	659,631
Repurchase agreements	$	300,000	$	0	$	317,850	$	0	$	317,850
Long-term debt	$	147,376	$	0	$	150,131	$	0	$	150,131
Accrued interest payable	$	11,956	$	0	$	11,956	$	0	$	11,956

2320

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

Assets Purchased under Resale Agreements

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

Securities Purchased under Resale Agreements — Total securities purchased under resale agreements were ~~$1.21~~$1.31 billion and ~~$1.11~~$1.16 billion as of ~~September~~June 30, ~~2020~~2021 and December 31, ~~2019,~~2020, respectively. The weighted-average yields were ~~1.72%~~1.54% and ~~2.59%~~2.14% for the three months ended ~~September~~June 30, 2021 and 2020, respectively; and ~~2019, respectively,~~1.55% and ~~2.09% and 2.71%~~2.32% for the ~~nine~~six months ended ~~September~~June 30, 2021 and 2020, ~~and 2019,~~ respectively.

~~Repurchase~~Loans Purchased under Resale Agreements— The Company participated in resale agreements collateralized with loans with multiple counterparties starting in the fourth quarter of 2020. Total loans purchased under resale agreements were $989.2 million and $300.0 million as of June 30, 2021 and December 31, 2020, respectively. The weighted-average yields were 1.47% and 1.64% for the three and six months ended June 30, 2021, respectively.

Assets Sold under Repurchase Agreements — As of ~~September~~June 30, ~~2020,~~2021, the collateral for the repurchase agreements were comprised of U.S. Treasury securities and U.S. government agency and U.S. government-sponsored enterprise mortgage-backed ~~securities, and U.S. Treasury~~ securities. Gross repurchase agreements were ~~$348.1 million and $450.0~~$300.0 million as of ~~September~~both June 30, ~~2020~~2021 and December 31, ~~2019, respectively.~~2020. The weighted-average interest rates were ~~2.70%~~2.63% and ~~4.68%~~3.40% for the three months ended ~~September~~June 30, ~~2020~~2021 and ~~2019,~~2020, respectively, and ~~3.48%~~2.65% and ~~4.87%~~3.76% for the ~~nine~~six months ended ~~September~~June 30, 2021 and 2020, ~~and 2019,~~ respectively. During the second quarter of 2020, the Company recorded $8.7 million of charges related to the extinguishment of $150.0 million of repurchase agreements. In comparison, there were 0 extinguishment charges recorded in 2019. As of ~~September~~June 30, ~~2020, $48.1 million and $300.0 million of the~~2021, all repurchase agreements will mature in ~~2020 and 2023, respectively.~~2023.

Balance Sheet Offsetting

The Company’s resale and repurchase agreements are transacted under legally enforceable master repurchase agreements that, in the event of default by the counterparty, provide the Company the right to liquidate securities held and to offset receivables and payables with the same counterparty. The Company nets resale and repurchase transactions with the same counterparty on the Consolidated Balance Sheet when it has a legally enforceable master netting agreement and the transactions are eligible for netting under ASC 210-20-45-11, Balance Sheet Offsetting: Repurchase and Reverse Repurchase Agreements. Collateral received includes securities and loans that are not recognized on the Consolidated Balance Sheet. Collateral pledged consists of securities that are not netted on the Consolidated Balance Sheet against the related collateralized liability. ~~Collateral~~Securities received or pledged as collateral in resale and repurchase agreements with other financial institutions may also be sold or re-pledged by the secured party, and isare usually delivered to and held by the third-party trustees. The collateral amounts received/pledged 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 Sheet as of ~~September~~June 30, ~~2020~~2021 and December 31, ~~2019:~~2020:


($ in thousands)	($ in thousands)	September 30, 2020																($ in thousands)				June 30, 2021

		Gross Amounts of Recognized Assets			Gross Amounts Offset on the Consolidated Balance Sheet			Net Amounts of Assets Presented on the Consolidated Balance Sheet				Gross Amounts Not Offset on the Consolidated Balance Sheet
Assets										Assets				Gross Amounts of Recognized Assets				Gross Amounts Offset on the Consolidated Balance Sheet					Net Amounts of Assets Presented on the Consolidated Balance Sheet		Gross Amounts Not Offset on the Consolidated Balance Sheet				Net Amount
	Assets					Gross Amounts Not Offset on the Consolidated Balance Sheet							Net Amount
				Gross Amounts of Recognized Assets												Gross Amounts Offset on the Consolidated Balance Sheet								Net Amounts of Assets Presented on the Consolidated Balance Sheet										Collateral Received
Resale agreements	Resale agreements					$	1,210,000	$	0	$	1,210,000		$	(1,204,933)	(1)					$	5,067				Resale agreements			$		2,299,184			$	0				$	2,299,184			$	(2,285,058)	(1)			$	14,126

					Gross Amounts of Recognized Liabilities			Gross Amounts Offset on the Consolidated Balance Sheet				Net Amounts of Liabilities Presented on the Consolidated Balance Sheet						Gross Amounts Not Offset on the Consolidated Balance Sheet
Liabilities										Liabilities				Gross Amounts of Recognized Liabilities						Gross Amounts Offset on the Consolidated Balance Sheet				Net Amounts of Liabilities Presented on the Consolidated Balance Sheet		Gross Amounts Not Offset on the Consolidated Balance Sheet				Net Amount
	Liabilities					Gross Amounts Not Offset on the Consolidated Balance Sheet										Net Amount
				Gross Amounts of Recognized Liabilities									Gross Amounts Offset on the Consolidated Balance Sheet										Net Amounts of Liabilities Presented on the Consolidated Balance Sheet												Collateral Pledged
Repurchase agreements	Repurchase agreements	$	348,063			$	0	$	348,063	$	(330,600)				(2)		$	17,463	Repurchase agreements							$	300,000				$	0				$	300,000			$	(300,000)		(2)		$	0

2421


($ in thousands)	($ in thousands)	December 31, 2019																			($ in thousands)			December 31, 2020

		Gross Amounts of Recognized Assets		Gross Amounts Offset on the Consolidated Balance Sheet				Net Amounts of Assets Presented on the Consolidated Balance Sheet					Gross Amounts Not Offset on the Consolidated Balance Sheet											Gross Amounts of Recognized Assets				Gross Amounts Offset on the Consolidated Balance Sheet				Net Amounts of Assets Presented on the Consolidated Balance Sheet				Gross Amounts Not Offset on the Consolidated Balance Sheet
Assets	Assets									Net Amount					Assets															Net Amount
			Gross Amounts of Recognized Assets			Gross Amounts Offset on the Consolidated Balance Sheet							Net Amounts of Assets Presented on the Consolidated Balance Sheet				Collateral Received									Gross Amounts of Recognized Assets								Gross Amounts Offset on the Consolidated Balance Sheet		Net Amounts of Assets Presented on the Consolidated Balance Sheet		Collateral Received
Resale agreements	Resale agreements							$	1,110,000	$	(250,000)				$	860,000		$	(856,058)		(1)	$	3,942						Resale agreements			$	1,460,000					$	0	$	1,460,000	$	(1,458,700)	(1)	$	1,300

		Gross Amounts of Recognized Liabilities						Gross Amounts Offset on the Consolidated Balance Sheet							Net Amounts of Liabilities Presented on the Consolidated Balance Sheet						Gross Amounts Not Offset on the Consolidated Balance Sheet
Liabilities										Liabilities				Gross Amounts of Recognized Liabilities								Gross Amounts Offset on the Consolidated Balance Sheet					Net Amounts of Liabilities Presented on the Consolidated Balance Sheet				Gross Amounts Not Offset on the Consolidated Balance Sheet
	Liabilities					Gross Amounts Not Offset on the Consolidated Balance Sheet												Net Amount															Net Amount
			Gross Amounts of Recognized Liabilities									Gross Amounts Offset on the Consolidated Balance Sheet									Net Amounts of Liabilities Presented on the Consolidated Balance Sheet																Collateral Pledged
Repurchase agreements	Repurchase agreements			$	450,000	$	(250,000)	$	200,000	$	(200,000)				(2)					$					0				Repurchase agreements			$			300,000			$	0			$	300,000		$	(300,000)	(2)	$	0

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

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

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

Note 5 — Securities

The following tables present the amortized cost, gross unrealized gains and losses and fair value by major categories of AFS debt securities as of ~~September~~June 30, ~~2020~~2021 and December 31, ~~2019:~~2020:


($ in thousands)	($ in thousands)	September 30, 2020						($ in thousands)			June 30, 2021
		Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value			($ in thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
AFS debt securities:	AFS debt securities:
U.S. Treasury securities	U.S. Treasury securities	$	50,410	$	588	$	0		$	50,998		U.S. Treasury securities	$	841,890	$	1,148	$	(6,098)	$	836,940
U.S. government agency and U.S. government-sponsored enterprise debt securities	U.S. government agency and U.S. government-sponsored enterprise debt securities	718,907		10,565		(2,410)			727,062			U.S. government agency and U.S. government-sponsored enterprise debt securities	1,237,278		5,835		(18,602)		1,224,511
U.S. government agency and U.S. government-sponsored enterprise mortgage-backed securities:	U.S. government agency and U.S. government-sponsored enterprise mortgage-backed securities:											U.S. government agency and U.S. government-sponsored enterprise mortgage-backed securities:
Commercial mortgage-backed securities	Commercial mortgage-backed securities	937,078		34,292		(4,261)			967,109			Commercial mortgage-backed securities	1,177,949		23,374		(12,683)		1,188,640
Residential mortgage-backed securities	Residential mortgage-backed securities	1,206,488		32,578		(1,057)			1,238,009			Residential mortgage-backed securities	2,375,536		18,186		(25,170)		2,368,552
Municipal securities	Municipal securities	327,422		7,199		(1,346)			333,275			Municipal securities	445,028		11,532		(1,637)		454,923
Non-agency mortgage-backed securities:	Non-agency mortgage-backed securities:											Non-agency mortgage-backed securities:
Commercial mortgage-backed securities	Commercial mortgage-backed securities	210,343		5,556		(1,223)			214,676			Commercial mortgage-backed securities	360,704		5,282		(1,814)		364,172
Residential mortgage-backed securities	Residential mortgage-backed securities	277,306		782		(475)			277,613			Residential mortgage-backed securities	772,382		2,308		(2,216)		772,474
Corporate debt securities	Corporate debt securities	251,253		1,327		(1,403)			251,177			Corporate debt securities	558,295		8,597		(14,177)		552,715
Foreign government bonds	Foreign government bonds	134,179		26		(1,534)			132,671			Foreign government bonds	286,579		512		(3,916)		283,175
Asset-backed securities	Asset-backed securities	64,308		0		(1,160)			63,148			Asset-backed securities	61,501		335		(7)		61,829
CLOs	CLOs	294,000		0		(10,578)			283,422			CLOs	294,000		0		(2,471)		291,529
Total AFS debt securities	Total AFS debt securities	$	4,471,694	$	92,913	$	(25,447)		$	4,539,160		Total AFS debt securities	$	8,411,142	$	77,109	$	(88,791)	$	8,399,460

2522


($ in thousands)	($ in thousands)	December 31, 2019						($ in thousands)			December 31, 2020
		Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value			($ in thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
AFS debt securities:	AFS debt securities:
U.S. Treasury securities	U.S. Treasury securities	$	177,215	$	0	$	(793)		$	176,422		U.S. Treasury securities	$	50,310	$	451	$	0	$	50,761
U.S. government agency and U.S. government-sponsored enterprise debt securities	U.S. government agency and U.S. government-sponsored enterprise debt securities	584,275		1,377		(4,407)			581,245			U.S. government agency and U.S. government-sponsored enterprise debt securities	806,814		8,765		(1,260)		814,319
U.S. government agency and U.S. government-sponsored enterprise mortgage-backed securities:	U.S. government agency and U.S. government-sponsored enterprise mortgage-backed securities:											U.S. government agency and U.S. government-sponsored enterprise mortgage-backed securities:
Commercial mortgage-backed securities	Commercial mortgage-backed securities	599,814		8,551		(4,894)			603,471			Commercial mortgage-backed securities	1,125,174		34,306		(5,710)		1,153,770
Residential mortgage-backed securities	Residential mortgage-backed securities	998,447		6,927		(1,477)			1,003,897			Residential mortgage-backed securities	1,634,553		27,952		(1,611)		1,660,894
Municipal securities	Municipal securities	101,621		790		(109)			102,302			Municipal securities	382,573		13,588		(88)		396,073
Non-agency mortgage-backed securities:	Non-agency mortgage-backed securities:											Non-agency mortgage-backed securities:
Commercial mortgage-backed securities	Commercial mortgage-backed securities	86,609		1,947		(6)			88,550			Commercial mortgage-backed securities	234,965		6,107		(1,230)		239,842
Residential mortgage-backed securities	Residential mortgage-backed securities	46,830		3		(285)			46,548			Residential mortgage-backed securities	288,520		1,761		(506)		289,775
Corporate debt securities	Corporate debt securities	11,250		12		(113)			11,149			Corporate debt securities	406,323		3,493		(3,848)		405,968
Foreign government bonds	Foreign government bonds	354,481		198		(507)			354,172			Foreign government bonds	183,828		163		(1,460)		182,531
Asset-backed securities	Asset-backed securities	66,106		0		(1,354)			64,752			Asset-backed securities	63,463		10		(242)		63,231
CLOs	CLOs	294,000		0		(9,294)			284,706			CLOs	294,000		0		(6,506)		287,494
Total AFS debt securities	Total AFS debt securities	$	3,320,648	$	19,805	$	(23,239)		$	3,317,214		Total AFS debt securities	$	5,470,523	$	96,596	$	(22,461)	$	5,544,658

As of ~~September~~June 30, 2021 and December 31, 2020, the amortized cost of AFS debt securities excluded accrued interest receivables of ~~$14.8~~$30.0 million and $22.3 million, respectively, which are included in Other assets on the Consolidated Balance Sheet. For the Company’s accounting policy related to AFS debt securities’ accrued interest receivable, see Note 21 — ~~Current Accounting Developments and~~ Summary of Significant Accounting Policies — Allowance for Credit Losses on Available-for-Sale Debt Securities to the Consolidated Financial Statements in ~~this~~the Company’s 2020 Form ~~10-Q.~~10-K.

Unrealized Losses

The following tables present the fair value and the associated gross unrealized losses of the Company’s AFS debt securities, aggregated by investment category and the length of time that the securities have been in a continuous unrealized loss position as of ~~September~~June 30, ~~2020~~2021 and December 31, ~~2019.~~2020.


($ in thousands)	($ in thousands)	September 30, 2020												($ in thousands)	June 30, 2021
		Less Than 12 Months				12 Months or More				Total					Less Than 12 Months				12 Months or More				Total
		Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses			Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses
AFS debt securities:	AFS debt securities:													AFS debt securities:
U.S. Treasury securities														U.S. Treasury securities	$	544,599	$	(6,098)	$	0	$	0	$	544,599	$	(6,098)
U.S. government agency and U.S. government sponsored enterprise debt securities	U.S. government agency and U.S. government sponsored enterprise debt securities	$	336,399	$	(2,410)	$	0	$	0	$	336,399	$	(2,410)	U.S. government agency and U.S. government sponsored enterprise debt securities	782,327		(17,402)		23,776		(1,200)		806,103		(18,602)
U.S. government agency and U.S. government-sponsored enterprise mortgage-backed securities:	U.S. government agency and U.S. government-sponsored enterprise mortgage-backed securities:													U.S. government agency and U.S. government-sponsored enterprise mortgage-backed securities:
Commercial mortgage-backed securities	Commercial mortgage-backed securities	224,593		(4,194)		10,456		(67)		235,049		(4,261)		Commercial mortgage-backed securities	491,515		(11,487)		28,399		(1,196)		519,914		(12,683)
Residential mortgage-backed securities	Residential mortgage-backed securities	62,150		(1,057)		0		0		62,150		(1,057)		Residential mortgage-backed securities	1,346,061		(25,170)		0		0		1,346,061		(25,170)
Municipal securities	Municipal securities	151,283		(1,346)		0		0		151,283		(1,346)		Municipal securities	108,695		(1,637)		0		0		108,695		(1,637)
Non-agency mortgage-backed securities:	Non-agency mortgage-backed securities:													Non-agency mortgage-backed securities:
Commercial mortgage-backed securities	Commercial mortgage-backed securities	66,469		(1,210)		7,907		(13)		74,376		(1,223)		Commercial mortgage-backed securities	102,043		(1,806)		15,579		(8)		117,622		(1,814)
Residential mortgage-backed securities	Residential mortgage-backed securities	135,192		(475)		0		0		135,192		(475)		Residential mortgage-backed securities	464,404		(2,216)		0		0		464,404		(2,216)
Corporate debt securities	Corporate debt securities	145,134		(866)		9,463		(537)		154,597		(1,403)		Corporate debt securities	254,723		(11,277)		57,100		(2,900)		311,823		(14,177)
Foreign government bonds	Foreign government bonds	102,350		(1,534)		0		0		102,350		(1,534)		Foreign government bonds	59,189		(3,146)		92,844		(770)		152,033		(3,916)
Asset-backed securities	Asset-backed securities	0		0		63,148		(1,160)		63,148		(1,160)		Asset-backed securities	15,948		(7)		0		0		15,948		(7)
CLOs	CLOs	283,422		(10,578)		0		0		283,422		(10,578)		CLOs	0		0		291,529		(2,471)		291,529		(2,471)
Total AFS debt securities	Total AFS debt securities	$	1,506,992	$	(23,670)	$	90,974	$	(1,777)	$	1,597,966	$	(25,447)	Total AFS debt securities	$	4,169,504	$	(80,246)	$	509,227	$	(8,545)	$	4,678,731	$	(88,791)



($ in thousands)	December 31, 2020
	Less Than 12 Months				12 Months or More				Total
	Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses
AFS debt securities:
U.S. Treasury securities	$	352,521	$	(1,260)	$	0	$	0	$	352,521	$	(1,260)

U.S. government agency and U.S. government-sponsored enterprise mortgage-backed securities:
Commercial mortgage-backed securities	292,596		(5,656)		3,543		(54)		296,139		(5,710)
Residential mortgage-backed securities	342,561		(1,611)		0		0		342,561		(1,611)
Municipal securities	24,529		(88)		0		0		24,529		(88)
Non-agency mortgage-backed securities:
Commercial mortgage-backed securities	58,738		(1,230)		7,920		0		66,658		(1,230)
Residential mortgage-backed securities	90,156		(506)		0		0		90,156		(506)
Corporate debt securities	251,674		(3,645)		9,798		(203)		261,472		(3,848)
Foreign government bonds	106,828		(1,460)		0		0		106,828		(1,460)
Asset-backed securities	0		0		34,104		(242)		34,104		(242)
CLOs	0		0		287,494		(6,506)		287,494		(6,506)
Total AFS debt securities	$	1,519,603	$	(15,456)	$	342,859	$	(7,005)	$	1,862,462	$	(22,461)

2624

($ in thousands) December 31, 2019
Less Than 12 Months 12 Months or More Total
Fair
Value Gross
Unrealized
Losses Fair
Value Gross
Unrealized
Losses Fair
Value Gross
Unrealized
Losses
AFS debt securities:
U.S. Treasury securities $ 0 $ 0 $ 176,422 $ (793) $ 176,422 $ (793)
U.S. government agency and U.S. government-sponsored enterprise debt securities 310,349 (4,407) 0 0 310,349 (4,407)
U.S. government agency and U.S. government-sponsored enterprise mortgage-backed securities:
Commercial mortgage-backed securities 204,675 (2,346) 108,314 (2,548) 312,989 (4,894)
Residential mortgage-backed securities 325,354 (1,234) 34,337 (243) 359,691 (1,477)
Municipal securities 31,130 (109) 0 0 31,130 (109)
Non-agency mortgage-backed securities:
Commercial mortgage-backed securities 7,914 (6) 0 0 7,914 (6)
Residential mortgage-backed securities 42,894 (285) 0 0 42,894 (285)
Corporate debt securities 0 0 9,888 (113) 9,888 (113)
Foreign government bonds 129,074 (407) 9,900 (100) 138,974 (507)
Asset-backed securities 52,565 (902) 12,187 (452) 64,752 (1,354)
CLOs 284,706 (9,294) 0 0 284,706 (9,294)
Total AFS debt securities $ 1,388,661 $ (18,990) $ 351,048 $ (4,249) $ 1,739,709 $ (23,239)

As of ~~September~~ June 30, ~~2020,~~2021, the Company had 96a total of 253 AFS debt securities in a gross unrealized loss position with 0 credit ~~impairment. The AFS debt securities~~impairment that ~~made up the gross unrealized loss as of September 30, 2020~~ were comprised primarily of ~~3 CLOs, 25~~102 U.S. government agency and U.S. government-sponsored enterprise mortgage-backed securities, ~~and 13~~34 U.S. government agency and U.S. government-sponsored enterprise debt securities, and 18 corporate debt securities. In comparison, as of December 31, ~~2019,~~2020, the Company had ~~101~~a total of 104 AFS debt securities in a gross unrealized loss position with 0 credit ~~impairment. The AFS debt securities~~impairment that ~~made up the gross unrealized loss as of December 31, 2019~~ were comprised primarily of ~~3 CLOs, 57~~46 U.S. government agency and U.S. government-sponsored enterprise mortgage-backed securities and ~~14 U.S. government agency and U.S. government-sponsored enterprise~~17 corporate debt securities.

Allowance for Credit Losses

Each reporting period, the Company assesses each AFS debt security that is in an unrealized loss position to determine whether the decline in fair value below the amortized cost basis resulted from a credit loss or other factors. For a discussion of the factors and criteria the Company uses in analyzing securities for impairment related to credit losses, see Note 21 — ~~Current Accounting Developments and~~ Summary of Significant Accounting Policies — Allowance for Credit Losses on Available-for-Sale Debt Securities to the Consolidated Financial Statements in ~~this~~the Company’s 2020 Form ~~10-Q. Prior to January 1, 2020, the Company assessed individual securities that were in an unrealized loss position for OTTI.~~10-K.

The gross unrealized losses presented in the above tables were primarily attributable to yield curve movements and widened ~~spreads arising from the negative outlook and uncertainty as a result of the COVID-19 pandemic.~~liquidity spreads. Securities that were in unrealized loss positions as of ~~September~~June 30, ~~2020~~2021 were mainly comprised of the following:

•U.S. government agency and U.S. government-sponsored enterprise ~~debt~~mortgage-backed securities — The market value decline as of ~~September~~June 30, ~~2020~~2021 was primarily due to interest rate movement. ~~Since these debt~~ These securities (issued by Fannie Mae, Ginnie Mae and Freddie Mac) are guaranteed or sponsored by agencies of the U.S. government, and the credit profiles are strong (rated A,Aaa, AA+ and AAA by Moody’s Investors Service (“Moody’s”), Standard and Poor's (“S&P”) and Fitch Ratings (“Fitch”), respectively)~~, the~~. The Company expects to receive all contractual ~~interest payments on-time,~~cash flows on time and believes the risk of credit losses on these securities is remote.

•U.S. government agency and U.S. government-sponsored enterprise ~~mortgage-backed~~debt securities — The market value decline as of ~~September~~June 30, ~~2020~~2021 was primarily due to interest rate movement. ~~Since these~~The securities ~~are guaranteed or sponsored by agencies of~~consisted of the debt securities issued by:

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

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

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

•~~CLOs~~Corporate debt securities — The market value decline as of ~~September~~June 30, ~~2020~~2021 was ~~largely~~primarily due to ~~market dislocation in the CLO sector, which resulted in wider liquidity spreads. The~~interest rate movement and spread widening. Since credit profiles of ~~the~~these securities are strong (rated ABBB- or higher by Moody’s, S~~&P)~~&P, Kroll Bond Rating Agency and Fitch), and the contractual payments from these bonds have been and are expected to be received ~~on-time. Accordingly,~~on time, the Company believes that the risk of credit losses on these securities is remote.

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

As of ~~September~~June 30, 2021 and December 31, 2020, the Company had the intent to hold the AFS debt securities with unrealized losses through the anticipated recovery period and it was more-likely-than-not that the Company will not have to sell these securities before the recovery of their amortized cost. The issuers of these securities have not, to the Company’s knowledge, established any cause for default on these securities. As a result, the Company expects to recover the entire amortized cost basis of these securities. Accordingly, there was 0 allowance for credit losses as of ~~September~~June 30, 2021 and December 31, 2020 provided against these ~~securities, and~~securities. In addition, there was 0 provision for credit losses recognized for the three and ~~nine~~six months ended ~~September~~June 30, ~~2020. For the three~~2021 and ~~nine months ended September 30, 2019, there was 0 OTTI credit loss recognized.~~2020.

Realized Gains and Losses

The following table presents the ~~proceeds,~~ gross realized gains and tax expense related to the sales of AFS debt securities for the three and ~~nine~~six months ended ~~September~~June 30, ~~2020~~2021 and ~~2019:~~2020:


($ in thousands)	($ in thousands)	Three Months Ended September 30,				Nine Months Ended September 30,				($ in thousands)	Three Months Ended June 30,				Six Months Ended June 30,
		2020		2019		2020		2019			2021		2020		2021		2020
Proceeds from sales		$	10,497	$	101,129	$	494,877	$	476,231

Gross realized gains	Gross realized gains	$	698	$	58	$	11,867	$	3,066	Gross realized gains	$	632	$	9,640	$	824	$	11,169
Related tax expense	Related tax expense	$	206	$	17	$	3,508	$	906	Related tax expense	$	187	$	2,850	$	244	$	3,302

Contractual Maturities of Available-for-Sale Debt Securities

The following table presents the contractual maturities of AFS debt securities as of ~~September~~June 30, ~~2020.~~2021. Expected maturities will differ from contractual maturities on certain securities as the issuers and borrowers of the underlying collateral may have the right to call or prepay obligations with or without prepayment penalties.


($ in thousands)	($ in thousands)	Amortized Cost		Fair Value		($ in thousands)	Amortized Cost		Fair Value
Due within one year	Due within one year	$	756,955	$	757,035	Due within one year	$	1,379,762	$	1,353,523
Due after one year through five years	Due after one year through five years	383,722		388,413		Due after one year through five years	785,678		790,794
Due after five years through ten years	Due after five years through ten years	440,452		451,219		Due after five years through ten years	1,483,790		1,491,799
Due after ten years	Due after ten years	2,890,565		2,942,493		Due after ten years	4,761,912		4,763,344
Total AFS debt securities	Total AFS debt securities	$	4,471,694	$	4,539,160	Total AFS debt securities	$	8,411,142	$	8,399,460

As of ~~September~~June 30, ~~2020~~2021 and December 31, ~~2019,~~2020, AFS debt securities with fair valuees of ~~$710.4~~$618.1 million and ~~$479.4~~$588.5 million, respectively, were pledged to secure public deposits, repurchase agreements and for other purposes required or permitted by law.

Restricted Equity Securities

The following table presents the restricted equity securities on the Consolidated Balance Sheet as of ~~September~~June 30, ~~2020~~2021 and December 31, ~~2019:~~2020:


($ in thousands)	($ in thousands)	September 30, 2020		December 31, 2019		($ in thousands)	June 30, 2021		December 31, 2020
Federal Reserve Bank (“FRB”) stock		$	58,990	$	58,330
Federal Reserve Bank of San Francisco (“FRBSF”) stock						Federal Reserve Bank of San Francisco (“FRBSF”) stock	$	59,681	$	59,249
FHLB stock	FHLB stock	20,182		20,250		FHLB stock	17,250		23,797
Total restricted equity securities	Total restricted equity securities	$	79,172	$	78,580	Total restricted equity securities	$	76,931	$	83,046

Note 6 — Derivatives

The Company uses derivatives to manage exposure to market risk, primarily interest rate or foreign currency risk, as well as to assist customers with their risk management objectives. The Company’s goal is to manage interest rate sensitivity and volatility so that movements in interest rates do not significantly affect earnings or capital. The Company also uses foreign exchange contracts to manage the foreign exchange rate risk associated with certain foreign currency-denominated assets and liabilities, as well as the Bank’s investment in East West Bank (China) Limited. The Company recognizes all derivatives on the Consolidated Balance Sheet at fair value. While the Company designates certain derivatives as hedging instruments in a qualifying hedge accounting relationship, other derivatives ~~consist of~~serve as economic hedges. For additional information on the Company’s derivatives and hedging activities, see Note 1 — Summary of Significant Accounting Policies — Significant Accounting Policies — Derivatives to the Consolidated Financial Statements of the Company’s ~~2019~~2020 Form 10-K.

The following table presents the total notional amounts and gross fair values of the Company’s derivatives, as well as the balance sheet netting adjustments on an aggregate basis as of ~~September~~June 30, ~~2020~~2021 and December 31, ~~2019.~~2020. The derivative assets and liabilities are presented on a gross basis prior to the application of bilateral collateral and master netting agreements, but after the variation margin payments with central clearing organizations have been applied as settlement, as applicable. Total derivative assets and liabilities are adjusted to take into consideration the effects of legally enforceable master netting agreements and cash collateral received or paid as of ~~September~~June 30, ~~2020~~2021 and December 31, ~~2019.~~2020. The resulting net derivative asset and liability fair values are included in Other assets and Accrued expenses and other liabilities, respectively, on the Consolidated Balance Sheet.


($ in thousands)	($ in thousands)	September 30, 2020								December 31, 2019								($ in thousands)		June 30, 2021								December 31, 2020
		Notional Amount			Fair Value					Notional Amount			Fair Value							Notional Amount			Fair Value					Notional Amount			Fair Value
				Derivative Assets			Derivative Liabilities					Derivative Assets			Derivative Liabilities				Derivative Assets				Derivative Liabilities				Derivative Assets				Derivative Liabilities
Derivatives designated as hedging instruments:	Derivatives designated as hedging instruments:																				Derivatives designated as hedging instruments:
Fair value hedges:
Interest rate contracts		$	15,194		$	64		$	0	$	31,026		$	0		$	3,198

Cash flow hedges:	Cash flow hedges:																	Cash flow hedges:
Interest rate contracts	Interest rate contracts	275,000			0			1,861		0			0			0		Interest rate contracts		$	275,000		$	0	$	1,184		$	275,000		$	0	$	1,864
Net investment hedges:	Net investment hedges:																	Net investment hedges:
Foreign exchange contracts	Foreign exchange contracts	80,992			0			252		86,167			0			1,586		Foreign exchange contracts		85,176			0		195			84,269			0		235
Total derivatives designated as hedging instruments	Total derivatives designated as hedging instruments	$	371,186		$	64		$	2,113	$	117,193		$	0		$	4,784	Total derivatives designated as hedging instruments		$	360,176		$	0	$	1,379		$	359,269		$	0	$	2,099
Derivatives not designated as hedging instruments:	Derivatives not designated as hedging instruments:																	Derivatives not designated as hedging instruments:
Interest rate contracts	Interest rate contracts	$	17,613,982		$	566,571		$	370,196	$	15,489,692		$	192,883		$	124,119	Interest rate contracts		$	17,836,695		$	329,953	$	227,768		$	18,155,678		$	489,132	$	315,834
Foreign exchange contracts	Foreign exchange contracts	1,832,383			19,134			14,530		4,839,661			54,637			47,024		Foreign exchange contracts		3,756,284			29,867		20,360			3,108,488			30,300		22,524
Credit contracts	Credit contracts	77,397			47			307		210,678			2			84		Credit contracts		83,693			3		87			76,992			13		206
Equity contracts	Equity contracts	0		(1)	12,765			0		0		(1)	1,414			0		Equity contracts		0		(1)	223		0			0		(1)	858		0
Commodity contracts	Commodity contracts	0		(2)	110,029			118,873		0		(2)	81,380			80,517		Commodity contracts		0		(2)	228,536		199,327			0		(2)	82,451		84,165
Total derivatives not designated as hedging instruments	Total derivatives not designated as hedging instruments	$	19,523,762		$	708,546		$	503,906	$	20,540,031		$	330,316		$	251,744	Total derivatives not designated as hedging instruments		$	21,676,672		$	588,582	$	447,542		$	21,341,158		$	602,754	$	422,729
Gross derivative assets/liabilities	Gross derivative assets/liabilities				$	708,610		$	506,019				$	330,316		$	256,528	Gross derivative assets/liabilities					$	588,582	$	448,921					$	602,754	$	424,828
Less: Master netting agreements	Less: Master netting agreements				(104,456)			(104,456)					(121,561)			(121,561)		Less: Master netting agreements					(89,723)		(89,723)						(93,063)		(93,063)
Less: Cash collateral received/paid	Less: Cash collateral received/paid				(5,240)			(97,675)					(3,758)			(38,238)		Less: Cash collateral received/paid					(3,368)		(163,586)						(8,449)		(91,634)
Net derivative assets/liabilities	Net derivative assets/liabilities				$	598,914		$	303,888				$	204,997		$	96,729	Net derivative assets/liabilities					$	495,491	$	195,612					$	501,242	$	240,131

(1)The Company held equity contracts in 314 private companies as of June 30, 2021. In comparison, the Company held equity contracts in 2 public companies and 17 private companies as of ~~September 30, 2020. In comparison, the Company held equity contracts in 3 public companies and 18 private companies as of~~ December 31, ~~2019.~~2020.

(2)The notional amount of the Company’s commodity contracts entered with its customers totaled ~~6,100~~8,484 thousand barrels of crude oil and ~~110,340~~119,921 thousand units of natural gas, measured in million British thermal units (“MMBTUs”) as of ~~September~~June 30, ~~2020.~~2021. In comparison, the notional amount of the Company’s commodity contracts entered with its customers totaled ~~7,811~~6,321 thousand barrels of crude oil and ~~63,773~~109,635 thousand MMBTUs of natural gas as of December 31, ~~2019.~~2020. The Company simultaneously entered into the offsetting commodity contracts with mirrored terms with third-party financial institutions.

Derivatives Designated as Hedging Instruments

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

~~The following table presents the net~~As of both June 30, 2021 and December 31, 2020, there were 0 fair value hedges or hedged certificates of deposit outstanding. There were 0 gains ~~(losses)~~or losses recognized on the Consolidated Statement of Income related to the derivatives designated as fair value hedges for both the three and ~~nine~~six months ended ~~September~~June 30, 2021. In comparison, the net gains recognized on interest rate swaps were $951 thousand and $3.0 million, and the net losses recognized on certificates of deposit were $357 thousand and $1.7 million for the three and six months ended June 30, 2020, ~~and 2019:~~

($ in thousands) Three Months Ended September 30, Nine Months Ended September 30,
2020 2019 2020 2019
Gains (losses) recorded in interest expense:
Recognized on interest rate swaps $ 154 $ 202 $ 3,150 $ 3,056
Recognized on certificates of deposit $ 112 $ (37) $ (1,607) $ (2,732)
respectively, both of which were recorded in interest expense on the Consolidated Statement of Income.

The following table presents the carrying amount and associated cumulative basis adjustment related to the application of fair value hedge accounting that is included in the carrying amount of the hedged certificates of deposit as of September 30, 2020 and December 31, 2019:

($ in thousands)
Carrying Value (1)
Cumulative Fair
Value Adjustment (2)
September 30, 2020 December 31, 2019 September 30, 2020 December 31, 2019
Certificates of deposit $ (14,874) $ (29,080) $ (2) $ 1,604

~~(1)Represents the full carrying amount of the hedged certificates of deposit.~~

~~(2)For liabilities, (increase) decrease to carrying value.~~

Cash Flow Hedges — The Company entered into interest rate swaps that were designated and qualified as cash flow hedges into limit the ~~second quarter of 2020~~exposure to ~~hedge~~ the variability in interest payments on certain floating rate borrowings. For cash flow hedges, the entire change in the fair value of the hedging instruments is recognized in AOCI and reclassified to earnings in the same period when the hedged cash flows impact earnings. Reclassified gains and losses on interest rate swaps are recorded in the same line item as the interest payments of the hedged long-term borrowings within Interest expense in the Consolidated Statements of Income. ~~As of September 30, 2020, the notional amount of the interest rate swaps that were designated as cash flow hedges was $275.0 million.~~ Considering the interest rates, yield curve and notional amounts as of ~~September~~June 30, ~~2020,~~2021, the Company ~~expects~~expected to reclassify an estimated ~~$536~~$605 thousand of after-tax net losses on derivative instruments designated as cash flow hedges from AOCI into earnings during the next 12 months.

The following table presents the pre-tax changes in AOCI from cash flow hedges for the three and ~~nine~~six months ended ~~September~~June 30, ~~2020~~2021 and ~~2019.~~2020. The after-tax impact of cash flow hedges on AOCI is ~~shown~~discussed in Note 1413 — Accumulated Other Comprehensive Income (Loss) to the Consolidated Financial Statements in ~~the~~this Form-10-Q.

($ in thousands) Three Months Ended September 30, Nine Months Ended September 30,
2020 2019 2020 2019
Gains (losses) recognized in AOCI $ 34 $ 0 $ (1,449) $ 0
(Losses) gains reclassified from AOCI to Interest expense $ (87) $ 0 $ 290 $ 0



($ in thousands)	Three Months Ended June 30,				Six Months Ended June 30,
	2021		2020		2021		2020
(Losses) gains recognized in AOCI	$	(106)	$	(1,483)	$	320	$	(1,483)
(Losses) gains reclassified from AOCI to interest expense	$	(201)	$	377	$	(378)	$	377

Net Investment Hedges — ASC 830-20, Foreign Currency Matters — Foreign Currency Transactions and ASC 815, Derivatives and Hedging, allow hedging of the foreign currency risk of a net investment in a foreign operation. The Company enters into foreign currency forward contracts to hedge a portion of the Bank’s investment in East West Bank (China) Limited, a non-USD functional currency subsidiary in China. The hedging instruments designated as net investment hedges involve hedging the risk of changes in the USD equivalent value of a designated monetary amount of the Bank’s net investment in East West Bank (China) Limited, against the risk of adverse changes in the foreign currency exchange rate of the Chinese Renminbi (“RMB”). The Company may de-designate the net investment hedges when the Company expects the hedge will cease to be ~~highly~~ effective. The notional and fair value amounts of the foreign exchange forward contracts were $81.0 million and $252 thousand liability, respectively, as of September 30, 2020. In comparison, the notional and fair value amounts of the foreign exchange forward contracts were $86.2 million and $1.6 million liability, respectively, as of December 31, 2019.

The following table presents the after-tax (losses) gains recognized in AOCI on net investment hedges for the three and ~~nine~~six months ended ~~September~~June 30, ~~2020~~2021 and ~~2019:~~2020:


($ in thousands)	($ in thousands)	Three Months Ended September 30,				Nine Months Ended September 30,				($ in thousands)		Three Months Ended June 30,					Six Months Ended June 30,
		2020		2019		2020		2019			($ in thousands)		2021		2020			2021		2020
(Losses) gains recognized in AOCI	(Losses) gains recognized in AOCI	$	(2,627)	$	2,954	$	(2,000)	$	351				$	(1,643)	$	(377)		$	(1,543)	$	627

Derivatives Not Designated as Hedging Instruments

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

The following tables present the notional amounts and the gross fair values of interest rate derivative contracts outstanding as of ~~September~~June 30, ~~2020~~2021 and December 31, ~~2019:~~2020:


($ in thousands)	($ in thousands)	September 30, 2020																						($ in thousands)		June 30, 2021
		Customer Counterparty											($ in thousands)			Financial Counterparty										Customer Counterparty												($ in thousands)			Financial Counterparty
		Notional Amount				Fair Value								Notional Amount				Fair Value							Notional Amount				Fair Value											Notional Amount			Fair Value
				Assets				Liabilities				($ in thousands)						Assets			Liabilities					Assets					Liabilities				($ in thousands)						Assets			Liabilities
Written options	Written options			$	816,659			$	0					$	64			Purchased options	$	816,659		$	65				$	0		Written options			$	850,152				$	0		$	650		Purchased options		$	850,152			$	656	$	0
Sold collars and corridors	Sold collars and corridors	510,489				9,051				0				Collars and corridors		510,489			0			9,107		Sold collars and corridors		424,212					3,864						218			Collars and corridors	424,212			214				3,910
Swaps	Swaps	7,464,057				556,237				0			Swaps			7,495,629			1,218			361,025		Swaps		7,628,895					309,520				25,743			Swaps			7,659,072			15,699				197,247
Total	Total	$	8,791,205			$	565,288			$	64		Total			$	8,822,777		$	1,283		$	370,132	Total		$	8,903,259				$	313,384			$	26,611		Total			$	8,933,436		$	16,569			$	201,157

($ in thousands) December 31, 2019
Customer Counterparty ($ in thousands) Financial Counterparty
Notional
Amount Fair Value Notional
Amount Fair Value
Assets Liabilities Assets Liabilities
Written options $ 1,003,558 $ 0 $ 66 Purchased options $ 1,003,558 $ 67 $ 0
Sold collars and corridors 490,852 1,971 16 Collars and corridors 490,852 17 1,996
Swaps 6,247,667 187,294 6,237 Swaps 6,253,205 3,534 115,804
Total $ 7,742,077 $ 189,265 $ 6,319 Total $ 7,747,615 $ 3,618 $ 117,800



($ in thousands)	December 31, 2020
	Customer Counterparty						($ in thousands)	Financial Counterparty
	Notional Amount		Fair Value					Notional Amount		Fair Value
			Assets		Liabilities					Assets		Liabilities
Written options	$	957,393	$	0	$	115	Purchased options	$	957,393	$	101	$	15
Sold collars and corridors	518,477		7,673		0		Collars and corridors	518,477		0		7,717
Swaps	7,586,414		479,634		1,364		Swaps	7,617,524		1,724		306,623
Total	$	9,062,284	$	487,307	$	1,479	Total	$	9,093,394	$	1,825	$	314,355

In January 2018, the London Clearing House (“LCH”) amended its rulebook to legally characterize variation margin payments made to and received from LCH as settlements of derivatives, and not as collateral against derivatives. Included in the total notional amount of ~~$8.82~~$8.93 billion of interest rate contracts entered into with financial counterparties as of ~~September~~June 30, ~~2020,~~2021, was a notional amount of ~~$2.99~~$2.96 billion of interest rate swaps that cleared through ~~LCH.~~London Clearing House (“LCH”). Applying variation margin payments as settlement to LCH cleared derivative transactions resulted in a reduction in derivative asset fair value of $13.4 million and liability fair ~~values~~value of ~~$215.9~~$120.0 million as of ~~September~~June 30, ~~2020.~~2021. In comparison, included in the total notional amount of ~~$7.75~~$9.09 billion of interest rate contracts entered into with financial counterparties as of December 31, ~~2019,~~2020 was a notional amount of ~~$2.53~~$2.98 billion of interest rate swaps that cleared through LCH. Applying variation margin payments as settlement to LCH cleared derivative transactions resulted in a reduction in derivative asset fair values of ~~$2.9~~$1.3 million and liability fair values of ~~$75.1~~$187.4 million as of December 31, ~~2019.~~2020.

Foreign Exchange Contracts — The Company enters into foreign exchange contracts with its customers, consisting of forwards, spot, swap and option contracts to accommodate the business needs of its customers. ~~For the foreign exchange contracts entered into with its customers, the~~The Company ~~managed its foreign exchange exposure by entering~~enters into offsetting foreign exchange contracts with third-party financial ~~institutions. The Company also~~institutions to manage its foreign exchange exposure with its customers, or enters into bilateral collateral and master netting agreements with certain customer counterparties to manage its credit exposure. The Company also utilizes foreign exchange contracts ~~which are not designated as hedging instruments~~ to mitigate the economic effect of currency fluctuations on certain foreign currency-denominated on-balance sheet assets and liabilities, primarily ~~for~~ foreign currency-denominated deposits offered to its customers. A majority of the foreign exchange contracts had original maturities of one year or less as of both ~~September~~June 30, ~~2020~~2021 and December 31, ~~2019.~~2020.

The following tables present the notional amounts and the gross fair values of foreign exchange derivative contracts outstanding as of ~~September~~June 30, ~~2020~~2021 and December 31, ~~2019:~~2020:


($ in thousands)	($ in thousands)	September 30, 2020																						($ in thousands)		June 30, 2021
		Customer Counterparty											($ in thousands)			Financial Counterparty										Customer Counterparty												($ in thousands)			Financial Counterparty
		Notional Amount				Fair Value								Notional Amount				Fair Value							Notional Amount				Fair Value											Notional Amount			Fair Value
				Assets				Liabilities				($ in thousands)						Assets			Liabilities					Assets					Liabilities				($ in thousands)						Assets			Liabilities
Forwards and spot	Forwards and spot			$	959,820			$	8,480					$	11,884			Forwards and spot	$	205,113		$	1,367				$	124		Forwards and spot			$	2,299,644				$	20,026		$	16,189		Forwards and spot		$	219,671			$	1,575	$	1,083
Swaps	Swaps	11,373				358				45				Swaps		486,211			8,383			1,951		Swaps		103,086					182						651			Swaps	892,913			8,052				2,405

Written options																								Written options		118,350					0				31			Purchased options			118,350			31				0
Collars	Collars	1,172				0				26			Collars			168,694			546			500		Collars		2,135					1				0			Collars			2,135			0				1
Total	Total	$	972,365			$	8,838			$	11,955		Total			$	860,018		$	10,296		$	2,575	Total		$	2,523,215				$	20,209			$	16,871		Total			$	1,233,069		$	9,658			$	3,489


($ in thousands)	($ in thousands)	December 31, 2019																						($ in thousands)		December 31, 2020
		Customer Counterparty											($ in thousands)			Financial Counterparty										Customer Counterparty												($ in thousands)			Financial Counterparty
		Notional Amount				Fair Value								Notional Amount				Fair Value							Notional Amount				Fair Value											Notional Amount			Fair Value
				Assets				Liabilities				($ in thousands)						Assets			Liabilities					Assets					Liabilities				($ in thousands)						Assets			Liabilities
Forwards and spot	Forwards and spot			$	3,581,036			$	45,911					$	40,591			Forwards and spot	$	207,492		$	1,400				$	507		Forwards and spot			$	1,522,888				$	17,575		$	17,928		Forwards and spot		$	145,197			$	1,230	$	273
Swaps	Swaps	6,889				16				84				Swaps		702,391			6,156			4,712		Swaps		13,590					872						91			Swaps	1,191,355			10,049				3,658
Written options	Written options	87,036				127				0			Purchased options			87,036			0			127		Written options		117,729					0				574			Purchased options			117,729			574				0
Collars		2,244				0				14			Collars			165,537			1,027			989

Total	Total	$	3,677,205			$	46,054			$	40,689		Total			$	1,162,456		$	8,583		$	6,335	Total		$	1,654,207				$	18,447			$	18,593		Total			$	1,454,281		$	11,853			$	3,931

Credit Contracts — The Company may periodically enter into ~~RPA contracts~~RPAs with institutional counterparties to manage the credit exposure on interest rate contracts associated with syndicated ~~loans and~~loans. The Company may enter into protection sold or protection purchased ~~RPAs with institutional counterparties.~~RPAs. Under the RPAs, the Company will ~~receive~~disburse or ~~make~~receive a payment if a borrower defaults on the related interest rate contract. Credit risk on RPAs is managed by monitoring the credit worthiness of the borrowers and institutional counterparties, which is ~~based on~~part of the normal credit review process. The ~~referenced~~majority of the reference entities of the protection sold RPAs were investment grade as of ~~both September~~June 30, ~~2020~~2021, while all were investment grade as of December 31, 2020. Assuming the underlying borrower referenced in the interest rate contracts defaulted as of June 30, 2021 and December 31, ~~2019.~~ 2020, the maximum exposure of protection sold RPAs would be $5.0 million and $6.0 million, respectively. As of June 30, 2021 and December 31, 2020, the weighted-average remaining maturities of the outstanding protection sold RPAs were 3.7 years and 3.5 years, respectively.

The notional amount of the RPAs reflects the Company’s pro-rata share of the derivative instrument. The following table presents the notional amounts and the gross fair values of RPAs sold and purchased outstanding as of ~~September~~June 30, ~~2020~~2021 and December 31, ~~2019:~~2020:

($ in thousands) September 30, 2020 December 31, 2019
Notional
Amount Fair Value Notional
Amount Fair Value
Assets Liabilities Assets Liabilities
RPAs - protection sold $ 66,683 $ 0 $ 307 $ 199,964 $ 0 $ 84
RPAs - protection purchased 10,714 47 0 10,714 2 0
Total RPAs $ 77,397 $ 47 $ 307 $ 210,678 $ 2 $ 84

Assuming all underlying borrowers referenced in the interest rate contracts defaulted as of September 30, 2020 and December 31, 2019, the exposure from the RPAs with protections sold would be $748 thousand and $125 thousand, respectively. As of September 30, 2020 and December 31, 2019, the weighted-average remaining maturities of the outstanding RPAs were 4.0 years and 2.2 years, respectively.



($ in thousands)	June 30, 2021						December 31, 2020
	Notional Amount		Fair Value				Notional Amount		Fair Value
			Assets		Liabilities				Assets		Liabilities
RPAs - protection sold	$	72,979	$	0	$	87	$	66,278	$	0	$	206
RPAs - protection purchased	10,714		3		0		10,714		13		0
Total RPAs	$	83,693	$	3	$	87	$	76,992	$	13	$	206

Equity Contracts — ~~From time to time,~~Periodically, as part of the Company’s loan origination process, the Company obtains warrants to purchase preferred and/or common stock of technology and life sciences 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 314 private companies as of June 30, 2021, and held warrants in 2 public companies and 17 private companies as of ~~September 30, 2020, and held warrants in 3 public companies and 18 private companies as of~~ December 31, ~~2019.~~2020. The total fair value of the warrants held in both public and private companies was ~~$12.8 million~~$223 thousand and ~~$1.4 million~~$858 thousand as of ~~September~~June 30, ~~2020~~2021 and December 31, ~~2019,~~2020, respectively.

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

The following tables present the notional amounts and fair values of the commodity derivative positions outstanding as of ~~September~~June 30, ~~2020~~2021 and December 31, ~~2019:~~2020:


($ and units in thousands)	($ and units in thousands)	September 30, 2020																		($ and units in thousands)			June 30, 2021
		Customer Counterparty								($ and units in thousands)		Financial Counterparty											Customer Counterparty											($ and units in thousands)		Financial Counterparty
		Notional Unit			Fair Value						Notional Unit			Fair Value							Notional Unit						Fair Value								Notional Unit				Fair Value
				Assets			Liabilities						Assets	($ and units in thousands)			Liabilities									Assets		Liabilities					Assets					($ and units in thousands)		Liabilities
Crude oil:	Crude oil:											Crude oil:												Crude oil:												Crude oil:
Written options	Written options	0	Barrels		$	0		$	0	Purchased options		0	Barrels					$	0	Written options			210			Barrels		$	288		$	2		Purchased options		210			Barrels				$	241
Collars	Collars	1,390	Barrels		18			12,245		Collars		1,544	Barrels				12,946			943		Collars			2,406		Barrels			28,308			35		Collars		2,406		Barrels			35			27,811
Swaps	Swaps	4,710	Barrels		3,635			36,622		Swaps		4,759	Barrels		21,336			2,991		Swaps			5,868			Barrels		92,924			27			Swaps		5,868		Barrels		60			76,813
Total	Total	6,100			$	3,653		$	48,867	Total		6,303			$	34,282		$	3,934	Total			8,484					$	121,520		$	64		Total		8,484				$	95		$	104,865

Natural gas:	Natural gas:									Natural gas:										Natural gas:														Natural gas:
Written options	Written options	973	MMBTUs		$	0		$	116	Purchased options		963	MMBTUs		$	115		$	0	Written options			5,336			MMBTUs		$	3		$	16		Purchased options		5,336		MMBTUs		$	16		$	3
Collars	Collars	14,761	MMBTUs		3,705			0		Collars		18,111	MMBTUs		0			3,046		Collars			18,178			MMBTUs		9,327			0			Collars		23,468		MMBTUs		0			7,879
Swaps	Swaps	94,606	MMBTUs		42,231			26,055		Swaps		102,263	MMBTUs		26,043			36,855		Swaps			96,407			MMBTUs		72,438			25,144			Swaps		103,653		MMBTUs		25,137			61,356
Total	Total	110,340			$	45,936		$	26,171	Total		121,337			$	26,158		$	39,901	Total			119,921					$	81,768		$	25,160		Total		132,457				$	25,153		$	69,238

Total	Total				$	49,589		$	75,038	Total					$	60,440		$	43,835	Total								$	203,288		$	25,224		Total						$	25,248		$	174,103

($ and units in thousands) December 31, 2019
Customer Counterparty ($ and units in thousands) Financial Counterparty
Notional
Unit Fair Value Notional
Unit Fair Value
Assets Liabilities Assets Liabilities
Crude oil: Crude oil:
Written options 36 Barrels $ 0 $ 30 Purchased options 36 Barrels $ 29 $ 0
Collars 3,174 Barrels 2,673 538 Collars 3,630 Barrels 677 2,815
Swaps 4,601 Barrels 6,949 5,531 Swaps 4,721 Barrels 4,516 5,215
Total 7,811 $ 9,622 $ 6,099 Total 8,387 $ 5,222 $ 8,030
Natural gas: Natural gas:
Written options 540 MMBTUs $ 0 $ 22 Purchased options 530 MMBTUs $ 21 $ 0
Collars 14,277 MMBTUs 186 522 Collars 14,517 MMBTUs 471 150
Swaps 48,956 MMBTUs 30,257 35,497 Swaps 48,779 MMBTUs 35,601 30,197
Total 63,773 $ 30,443 $ 36,041 Total 63,826 $ 36,093 $ 30,347
Total $ 40,065 $ 42,140 Total $ 41,315 $ 38,377



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

Collars	2,022	Barrels	$	2,344	$	2,193	Collars	2,022	Barrels	$	2,217	$	2,402
Swaps	4,299	Barrels	9,282		14,283		Swaps	4,299	Barrels	8,220		7,135
Total	6,321		$	11,626	$	16,476	Total	6,321		$	10,437	$	9,537

Natural gas:							Natural gas:
Written options	597	MMBTUs	$	0	$	59	Purchased options	597	MMBTUs	$	59	$	0
Collars	12,733	MMBTUs	1,063		205		Collars	16,293	MMBTUs	205		813
Swaps	96,305	MMBTUs	32,073		27,238		Swaps	103,973	MMBTUs	26,988		29,837
Total	109,635		$	33,136	$	27,502	Total	120,863		$	27,252	$	30,650

Total			$	44,762	$	43,978	Total			$	37,689	$	40,187

~~Beginning in January 2017,~~As of June 30, 2021, the notional quantities that cleared through the Chicago Mercantile Exchange (“CME”) amended its rulebook to legally characterize variation margin payments made to and received from CME as settlements of derivatives and not as collateral against derivatives. As of September 30, 2020, the notional quantities that cleared through CME totaled ~~1,506~~1,097 thousand barrels of crude oil and ~~31,395~~26,515 thousand MMBTUs of natural gas. Applying the variation margin payments as settlement to CME-cleared derivative transactions resulted in reductions to the gross derivative asset fair value of ~~$17.8~~$3.8 million and to the liability fair value of ~~$6.6~~$29.2 million as of ~~September~~June 30, ~~2020,~~2021, to a net fair value liability of 0.$3.9 million. In comparison, the notional quantities that cleared through CME totaled ~~1,752~~1,275 thousand barrels of crude oil and ~~6,075~~29,733 thousand MMBTUs of natural gas as of December 31, ~~2019.~~2020. Applying the variation margin payments as settlement to CME-cleared derivative transactions resulted in a ~~reductions~~reduction to the gross derivative asset fair value of ~~$2.9~~$7.9 million and to the liability fair value of ~~$1.5~~$3.7 million, ~~respectively,~~ as of December 31, ~~2019,~~2020, to a net ~~asset~~ fair value of ~~$986 thousand.~~0.

The following table presents the net gains (losses) ~~gains~~ recognized on the Company’s Consolidated Statement of Income related to derivatives not designated as hedging instruments for the three and ~~nine~~six months ended ~~September~~June 30, ~~2020~~2021 and ~~2019:~~2020:


($ in thousands)	($ in thousands)	Classification on Consolidated Statement of Income		Three Months Ended September 30,						Nine Months Ended September 30,					($ in thousands)		Classification on Consolidated Statement of Income		Three Months Ended June 30,				Six Months Ended June 30,
			2020			2019			2020			2019				2021			2020		2021		2020
Derivatives not designated as hedging instruments:	Derivatives not designated as hedging instruments:																	Derivatives not designated as hedging instruments:
Interest rate contracts	Interest rate contracts	Interest rate contracts and other derivative income		$	(3,013)		$	(2,738)		$	(15,385)		$	(5,876)	Interest rate contracts		Interest rate contracts and other derivative income		$	(5,338)	$	(5,361)	$	8,563	$	(12,372)
Foreign exchange contracts	Foreign exchange contracts	Foreign exchange income		5,255			5,306			14,317			15,127		Foreign exchange contracts		Foreign exchange income		11,972		6,201		22,215		9,062
Credit contracts	Credit contracts	Interest rate contracts and other derivative income		26			(3)			(72)			44		Credit contracts		Interest rate contracts and other derivative income		150		(75)		195		(98)
Equity contracts	Equity contracts	Lending fees		3,592			(442)			11,971			725		Equity contracts		Lending fees		74		8,070		385		8,379
Commodity contracts	Commodity contracts	Interest rate contracts and other derivative income		34			14			(13)			(4)		Commodity contracts		Interest rate contracts and other derivative income		(188)		(71)		(19)		(47)
Net gains	Net gains			$	5,894		$	2,137		$	10,818		$	10,016	Net gains				$	6,670	$	8,764	$	31,339	$	4,924

Credit Risk-Related Contingent Features — Certain over-the-counter derivative contracts of the Company contain early termination provisions that may require the Company to settle any outstanding balances upon the occurrence of a specified credit risk-related event. These events, which are defined by the existing derivative contracts, primarily relate to a downgrade in the credit rating of East West Bank to below investment ~~grade.~~grade. As of ~~September~~June 30, 2021, the aggregate fair value amounts of all derivative instruments with credit risk-related contingent features that were in a net liability position totaled $89.3 million, in which $89.1 million of collateral was posted to cover these positions. As of December 31, 2020, the aggregate fair value amounts of all derivative instruments with credit risk-related contingent features that were in a net liability position totaled ~~$126.4~~$107.4 million, in which ~~$126.3~~$106.8 million ~~in cash and securities~~of collateral was posted to cover these positions. As of December 31, 2019, the aggregate fair value amounts of all derivative instruments with credit risk-related contingent features that were in a net liability position totaled $56.4 million, which included $14.4 million in derivative assets and $70.8 million in derivative liabilities. The Company posted $56.4 million in cash and securities collateral to cover these positions as of December 31, 2019. In the event that the credit rating of East West Bank had been downgraded to below investment grade, minimal additional ~~minimal~~ collateral would have been required to be posted as of ~~September~~June 30, ~~2020,~~2021 and December 31, ~~2019.~~2020.

Offsetting of Derivatives

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


($ in thousands)	($ in thousands)	As of September 30, 2020															($ in thousands)				As of June 30, 2021

		Gross Amounts Recognized (1)			Gross Amounts Offset on the Consolidated Balance Sheet					Net Amounts Presented on the Consolidated Balance Sheet			Gross Amounts Not Offset on the Consolidated Balance Sheet			Net Amount					Gross Amounts Recognized (1)				Gross Amounts Offset on the Consolidated Balance Sheet								Net Amounts Presented on the Consolidated Balance Sheet				Gross Amounts Not Offset on the Consolidated Balance Sheet				Net Amount
			Master Netting Arrangements			Cash Collateral Received (3)					Security Collateral Received (5)							Master Netting Arrangements							Cash Collateral Received (3)						Security Collateral Received (5)
Derivative assets	Derivative assets		$	708,610		$	(104,456)	$	(5,240)		$	598,914		$	(8,647)				$	590,267		Derivative assets			$	588,582			$	(89,723)			$	(3,368)			$	495,491			$	0			$	495,491
																					Gross Amounts Recognized (2)				Gross Amounts Offset on the Consolidated Balance Sheet								Net Amounts Presented on the Consolidated Balance Sheet				Gross Amounts Not Offset on the Consolidated Balance Sheet				Net Amount
		Gross Amounts Recognized (2)			Gross Amounts Offset on the Consolidated Balance Sheet					Net Amounts Presented on the Consolidated Balance Sheet			Gross Amounts Not Offset on the Consolidated Balance Sheet			Net Amount							Master Netting Arrangements				Cash Collateral Pledged (4)								Security Collateral Pledged (5)
			Master Netting Arrangements			Cash Collateral Pledged (4)					Security Collateral Pledged (5)
Derivative liabilities	Derivative liabilities		$	506,019		$	(104,456)	$	(97,675)		$	303,888		$	(262,165)				$	41,723				Derivative liabilities			$	448,921			$	(89,723)			$	(163,586)			$	195,612			$	(155,245)			$	40,367


($ in thousands)	($ in thousands)	As of December 31, 2019															($ in thousands)				As of December 31, 2020

		Gross Amounts Recognized (1)			Gross Amounts Offset on the Consolidated Balance Sheet					Net Amounts Presented on the Consolidated Balance Sheet			Gross Amounts Not Offset on the Consolidated Balance Sheet			Net Amount					Gross Amounts Recognized (1)				Gross Amounts Offset on the Consolidated Balance Sheet								Net Amounts Presented on the Consolidated Balance Sheet				Gross Amounts Not Offset on the Consolidated Balance Sheet				Net Amount
			Master Netting Arrangements			Cash Collateral Received (3)					Security Collateral Received (5)							Master Netting Arrangements							Cash Collateral Received (3)						Security Collateral Received (5)
Derivative assets	Derivative assets		$	330,316		$	(121,561)	$	(3,758)		$	204,997		$	0				$	204,997		Derivative assets			$	602,754			$	(93,063)			$	(8,449)			$	501,242			$	(35)			$	501,207
																					Gross Amounts Recognized (2)				Gross Amounts Offset on the Consolidated Balance Sheet								Net Amounts Presented on the Consolidated Balance Sheet				Gross Amounts Not Offset on the Consolidated Balance Sheet				Net Amount
		Gross Amounts Recognized (2)			Gross Amounts Offset on the Consolidated Balance Sheet					Net Amounts Presented on the Consolidated Balance Sheet			Gross Amounts Not Offset on the Consolidated Balance Sheet			Net Amount							Master Netting Arrangements				Cash Collateral Pledged (4)								Security Collateral Pledged (5)
			Master Netting Arrangements			Cash Collateral Pledged (4)					Security Collateral Pledged (5)
Derivative liabilities	Derivative liabilities		$	256,528		$	(121,561)	$	(38,238)		$	96,729		$	(79,619)				$	17,110				Derivative liabilities			$	424,828			$	(93,063)			$	(91,634)			$	240,131			$	(221,150)			$	18,981

(1)~~Gross amounts recognized for derivative~~Includes $940 thousand and $1.1 million of gross fair value assets ~~include amounts~~ with counterparties subject to enforceable master netting arrangements or similar agreements of $695.6 million and $328.7 million, respectively, as of September 30, 2020 and December 31, 2019, and amounts with counterpartiesthat were not subject to enforceable master netting arrangements or similar agreements ~~of $13.0 million and $1.6 million, respectively,~~ as of ~~September~~June 30, ~~2020~~2021 and December 31, ~~2019.~~2020, respectively.

(2)~~Gross amounts recognized for derivative~~Includes $842 thousand and $220 thousand of gross fair value liabilities ~~include amounts~~ with counterparties subject to enforceable master netting arrangements or similar agreements of $505.8 million and $256.5 million, respectively, as of September 30, 2020 and December 31, 2019, and amounts with counterpartiesthat were not subject to enforceable master netting arrangements or similar agreements ~~of $208 thousand and $20 thousand, respectively,~~ as of ~~September~~June 30, ~~2020~~2021 and December 31, ~~2019.~~2020, respectively.

(3)Gross cash collateral received under master netting arrangements or similar agreements were ~~$9.1~~$9.8 million and ~~$3.8~~$15.8 million ~~respectively,~~ as of ~~September~~June 30, ~~2020~~2021 and December 31, ~~2019.~~2020, respectively. Of the gross cash collateral received, ~~$5.2~~$3.4 million and ~~$3.8~~$8.4 million were used to offset against derivative assets ~~respectively,~~ as of ~~September~~June 30, ~~2020~~2021 and December 31, ~~2019.~~2020, respectively.

(4)Gross cash collateral pledged under master netting arrangements or similar agreements were ~~$100.1~~$163.9 million and ~~$43.0~~$91.6 million ~~respectively,~~ as of ~~September~~June 30, ~~2020~~2021 and December 31, ~~2019.~~2020, respectively. Of the gross cash collateral pledged, ~~$97.7~~$163.6 million and ~~$38.2~~$91.6 million were used to offset against derivative liabilities ~~respectively,~~ as of ~~September~~June 30, ~~2020~~2021 and December 31, ~~2019.~~2020, respectively.

(5)Represents the fair value of security collateral received and pledged limited to derivative assets and liabilities 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~~Consolidated Balance Sheet but requires disclosure of such amounts.

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

3532

Note 7 — Loans Receivable and Allowance for Credit Losses

The following table presents the composition of the Company’s loans held-for-investment as of ~~September~~June 30, ~~2020~~2021 and December 31, ~~2019:~~2020:


($ in thousands)	($ in thousands)	September 30, 2020		December 31, 2019						($ in thousands)	June 30, 2021		December 31, 2020
		Amortized Cost (1)		Non-PCI Loans (1)		PCI Loans		Total (1)
Commercial:	Commercial:									Commercial:
C&I (2)		$	13,305,024	$	12,149,121	$	1,810	$	12,150,931
C&I (1)										C&I (1)	$	13,790,461	$	13,631,726
CRE:	CRE:									CRE:
CRE	CRE	11,037,987		10,165,247		113,201		10,278,448		CRE	11,711,369		11,174,611
Multifamily residential	Multifamily residential	3,057,274		2,834,212		22,162		2,856,374		Multifamily residential	3,219,796		3,033,998
Construction and land	Construction and land	578,407		628,459		40		628,499		Construction and land	460,678		599,692
Total CRE	Total CRE	14,673,668		13,627,918		135,403		13,763,321		Total CRE	15,391,843		14,808,301
Total commercial	Total commercial	27,978,692		25,777,039		137,213		25,914,252		Total commercial	29,182,304		28,440,027
Consumer:	Consumer:									Consumer:
Residential mortgage:	Residential mortgage:									Residential mortgage:
Single-family residential	Single-family residential	7,785,759		7,028,979		79,611		7,108,590		Single-family residential	8,869,370		8,185,953
HELOCs	HELOCs	1,514,388		1,466,736		6,047		1,472,783		HELOCs	1,872,166		1,601,716
Total residential mortgage	Total residential mortgage	9,300,147		8,495,715		85,658		8,581,373		Total residential mortgage	10,741,536		9,787,669
Other consumer	Other consumer	158,290		282,914		0		282,914		Other consumer	147,659		163,259
Total consumer	Total consumer	9,458,437		8,778,629		85,658		8,864,287		Total consumer	10,889,195		9,950,928
Total loans held-for-investment		$	37,437,129	$	34,555,668	$	222,871	$	34,778,539
Total loans held-for-investment (2)										Total loans held-for-investment (2)	$	40,071,499	$	38,390,955
Allowance for loan losses	Allowance for loan losses	(618,252)		(358,287)		0		(358,287)		Allowance for loan losses	(585,724)		(619,983)
Loans held-for-investment, net		$	36,818,877	$	34,197,381	$	222,871	$	34,420,252
Loans held-for-investment, net (2)										Loans held-for-investment, net (2)	$	39,485,775	$	37,770,972

(1)Includes Paycheck Protection Program (“PPP”) loans of $1.43 billion and $1.57 billion as of June 30, 2021 and December 31, 2020, respectively.

(2)Includes net deferred loan fees, unearned fees, unamortized premiums and unaccreted discounts of $(67.0) million and ~~$(43.2)~~$(58.8) million as of ~~September~~June 30, ~~2020~~2021 and December 31, ~~2019,~~2020, respectively.

~~(2)Includes~~ Net origination fees related to PPP loans of ~~$1.77 billion~~were $(25.9) million and $(12.7) million as of ~~September~~June 30, ~~2020.~~2021 and December 31, 2020, respectively.

Loans ~~held-for-investments’~~held-for-investment accrued interest receivable was ~~$108.1~~$103.6 million and ~~$121.8~~$107.5 million as of ~~September~~June 30, ~~2020~~2021 and December 31, ~~2019, respectively. Reversal of interest income related to nonaccrual loans was approximately $1.2 million~~2020, respectively, and ~~$2.6 million during~~is presented in Other assets on the ~~three and nine months ended September 30, 2020, respectively. Interest income recognized on nonaccrual loans was approximately $18 thousand and $29 thousand for~~Consolidated Balance Sheet. For the ~~three and nine months ended September 30, 2020, respectively. For the~~Company’s accounting policy on accrued interest receivable related to loans held-for-investment, seeNote 21 — ~~Current Accounting Developments and~~ Summary of Significant Accounting Policies — Significant Accounting Policies to the Consolidated Financial Statements ~~in this~~of the Company’s 2020 Form ~~10-Q.~~10-K.

Loans totaling $~~27.06~~24.23 billion and ~~$22.43~~$23.26 billion as of ~~September~~June 30, ~~2020~~2021 and December 31, ~~2019,~~2020, respectively, were pledged to secure borrowings and provide additional borrowing capacity from the ~~FRB~~FRBSF and the FHLB.

Credit Quality Indicators

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

~~For the Company’s~~ The Company utilizes internal credit risk ratings to assign each individual loan ~~is given~~ a risk rating of 1one through 10. Loans risk rated 1one through 5five are assigned an internal risk rating of ~~“Pass”, with loans~~“Pass.” Loans risk rated ~~1 being~~one are typically loans fully secured by ~~cash or U.S. government and its agencies.~~cash. Pass loans have sufficient sources of repayment to repay the loan in full, in accordance with all terms and conditions. Loans assigned a risk rating of 6six have potential weaknesses that warrant closer attention by management; these are assigned an internal risk rating of “Special ~~Mention”.~~Mention.” Loans assigned a risk rating of 7seven or 8eight have well-defined weaknesses that may jeopardize the full and timely repayment of the loan; these are assigned an internal risk rating of ~~“Substandard”.~~“Substandard.” Loans assigned a risk rating of 9nine have insufficient sources of repayment and a high probability of loss; these are assigned an internal risk rating of ~~“Doubtful”.~~“Doubtful.” Loans assigned a risk rating of 10 are ~~uncollectable~~uncollectible and of such little value that they are no longer considered bankable assets; these are assigned an internal risk rating of ~~“Loss”.~~“Loss.” Exposures categorized as criticized consist of special mention, substandard, doubtful and loss categories. The Company reviews the internal risk ratings of its loan portfolio on a regular ~~and ongoing~~ basis, and adjusts the ratings based on changes in the borrowers’ financial status and the collectability of the loans.

3733

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


($ in thousands)		September 30, 2020
		Term Loans													Revolving Loans Amortized Cost Basis			Revolving Loans Converted to Term Loans Amortized Cost Basis				Total

														Amortized Cost Basis by Origination Year
																								June 30, 2021
																													Term Loans																								Revolving Loans Amortized Cost Basis			Revolving Loans Converted to Term Loans Amortized Cost Basis					Total

																											Amortized Cost Basis by Origination Year
($ in thousands)	($ in thousands)													2020						2019						2018																							2017					2016								Prior	Revolving Loans Amortized Cost Basis	Revolving Loans Converted to Term Loans Amortized Cost Basis	Total	($ in thousands)	2021	2020	2019	2018	2017	Prior
																				Commercial:
																				C&I:
		$	3,445,214	$	1,746,325	$	674,022	$	361,648	$	72,914	$	140,094					Pass			$			2,473,716			$	2,133,586			$	1,062,978			$	333,190			$	200,711			$	261,156			$	6,706,592			$	29,175					$	13,201,104
		5,466		55,742		103,052		11,576		129		2,085
		42,386		95,152		30,772		24,972		6,254		6,004					281,302			0					486,842
Doubtful		6		0		0		0		905		0					0			0					911
Criticized (accrual)																								Criticized (accrual)			63,030			115,148				87,636				13,847				3,184				4,939				218,348					0					506,132
Criticized (nonaccrual)																								Criticized (nonaccrual)			16,760			814				2,114				20,977				12,748				1,377				28,435				0					83,225

Total C&I	Total C&I	3,493,072		1,897,219		807,846		398,196		80,202		148,183					6,470,571			9,735				13,305,024		Total C&I			2,553,506				2,249,548				1,152,728				368,014				216,643				267,472				6,953,375			29,175					13,790,461

CRE:																								CRE:
CRE:	CRE:																							CRE:
Pass	Pass	1,774,436		2,718,564		2,268,952		1,260,364		784,464		1,559,165			188,182			19,065				10,573,192		Pass			1,296,562			2,215,380				2,316,293				2,142,042				1,239,195				2,021,101				153,758				24,073					11,408,404
Special mention		3,593		51,598		56,943		84,362		1,600		81,431			0			0				279,527
Substandard		25,431		58,561		14,289		43,895		509		42,583			0			0				185,268
Criticized (accrual)																								Criticized (accrual)			80,204			13,844				48,131				9,743				33,358				58,905				0				0					244,185
Criticized (nonaccrual)																								Criticized (nonaccrual)			4,500			0				0				46,829				5,868				1,583				0				0					58,780

Total CRE	Total CRE	1,803,460		2,828,723		2,340,184		1,388,621		786,573		1,683,179			188,182			19,065				11,037,987		Total CRE			1,381,266			2,229,224				2,364,424				2,198,614				1,278,421				2,081,589				153,758				24,073					11,711,369
Multifamily residential:	Multifamily residential:																							Multifamily residential:
Pass	Pass	692,581		956,657		493,769		386,329		146,346		318,675			5,342			0				2,999,699		Pass			384,655			760,226				743,769				454,684				338,701				469,340				6,430				0					3,157,805
Special mention		0		0		0		0		24,602		986			0			0				25,588
Substandard		0		739		23,807		0		0		7,441			0			0				31,987
Criticized (accrual)																								Criticized (accrual)			0			0				728				22,337				6,035				29,998				0				0					59,098
Criticized (nonaccrual)																								Criticized (nonaccrual)			0			0				0				1,189				0				1,704				0				0					2,893

Total multifamily residential	Total multifamily residential	692,581		957,396		517,576		386,329		170,948		327,102			5,342			0				3,057,274		Total multifamily residential			384,655			760,226				744,497				478,210				344,736				501,042				6,430				0					3,219,796
Construction and land:	Construction and land:																							Construction and land:
Pass	Pass	118,823		253,079		155,371		5,248		21,371		1,158			0			0				555,050		Pass			54,054			120,898				130,702				111,112				0				1,421				0				0					418,187

Substandard		3,565		0		0		0		0		19,792			0			0				23,357

Criticized (accrual)																								Criticized (accrual)			3,440			0				0				0				0				19,151				0				0					22,591
Criticized (nonaccrual)																								Criticized (nonaccrual)			0			0				0				0				0				19,900				0				0					19,900
Total construction and land	Total construction and land	122,388		253,079		155,371		5,248		21,371		20,950			0			0				578,407		Total construction and land			57,494			120,898				130,702				111,112				0				40,472				0				0					460,678
Total CRE	Total CRE	2,618,429		4,039,198		3,013,131		1,780,198		978,892		2,031,231			193,524			19,065				14,673,668		Total CRE			1,823,415			3,110,348				3,239,623				2,787,936				1,623,157				2,623,103				160,188				24,073					15,391,843
Total commercial	Total commercial	6,111,501		5,936,417		3,820,977		2,178,394		1,059,094		2,179,414			6,664,095			28,800				27,978,692		Total commercial			4,376,921			5,359,896				4,392,351				3,155,950				1,839,800				2,890,575				7,113,563				53,248					29,182,304
Consumer:	Consumer:																							Consumer:

Residential mortgage:																								Residential mortgage:
Single-family residential:	Single-family residential:																							Single-family residential:
Pass		1,619,709		1,916,265		1,603,227		1,086,999		561,422		978,167			0			0				7,765,789
Special mention		0		227		347		351		324		3,474			0			0				4,723
Substandard		0		0		1,474		2,159		858		10,756			0			0				15,247

Pass (1)																								Pass (1)			1,526,669			2,319,273				1,567,312				1,273,541				879,004				1,282,396				0				0					8,848,195
Criticized (accrual)																								Criticized (accrual)			0			397				156				1,100				0				0				0				0					1,653
Criticized (nonaccrual) (1)																								Criticized (nonaccrual) (1)			1,125			0				1,420				2,667				2,245				12,065				0				0					19,522
Total single-family residential mortgage	Total single-family residential mortgage	1,619,709		1,916,492		1,605,048		1,089,509		562,604		992,397			0			0				7,785,759		Total single-family residential mortgage			1,527,794			2,319,670				1,568,888				1,277,308				881,249				1,294,461				0				0					8,869,370
HELOCs:	HELOCs:																							HELOCs:
Pass	Pass	7		454		2,823		5,993		4,666		18,891			1,260,001			208,520				1,501,355		Pass			0			1,938				1,501				1,824				4,508				11,385				1,592,348				247,174					1,860,678
Special mention		0		0		0		0		0		0			3			637				640
Substandard		0		0		488		4,625		1,266		2,785			0			3,229				12,393

Criticized (accrual)																								Criticized (accrual)			0			0				0				201				0				600				366				0					1,167
Criticized (nonaccrual)																								Criticized (nonaccrual)			0			0				618				188				3,533				1,927				0				4,055					10,321
Total HELOCs	Total HELOCs	7		454		3,311		10,618		5,932		21,676			1,260,004			212,386				1,514,388		Total HELOCs			0			1,938				2,119				2,213				8,041				13,912				1,592,714				251,229					1,872,166
Total residential mortgage	Total residential mortgage	1,619,716		1,916,946		1,608,359		1,100,127		568,536		1,014,073			1,260,004			212,386				9,300,147		Total residential mortgage			1,527,794			2,321,608				1,571,007				1,279,521				889,290				1,308,373				1,592,714				251,229					10,741,536
Other consumer:	Other consumer:																							Other consumer:
Pass	Pass	18,282		3,625		34		1,838		0		84,179			47,837			0				155,795		Pass			4,096			7,228				0				0				1,741				81,906				50,166				0					145,137

Substandard		0		0		0		2,491		0		0			4			0				2,495

Criticized (accrual)																								Criticized (accrual)			19			0				0				0				0				0				0				0					19
Criticized (nonaccrual)																								Criticized (nonaccrual)			0			0				0				0				2,491				0				12				0					2,503
Total other consumer	Total other consumer	18,282		3,625		34		4,329		0		84,179			47,841			0				158,290		Total other consumer			4,115			7,228				0				0				4,232				81,906				50,178				0					147,659
Total consumer	Total consumer	1,637,998		1,920,571		1,608,393		1,104,456		568,536		1,098,252			1,307,845			212,386				9,458,437		Total consumer			1,531,909			2,328,836				1,571,007				1,279,521				893,522				1,390,279				1,642,892				251,229					10,889,195
Total	Total	$	7,749,499	$	7,856,988	$	5,429,370	$	3,282,850	$	1,627,630	$	3,277,666		$	7,971,940		$	241,186			$	37,437,129	Total			$	5,908,830		$	7,688,732			$	5,963,358			$	4,435,471			$	2,733,322			$	4,280,854			$	8,756,455			$	304,477				$	40,071,499



($ in thousands)	December 31, 2020
	Term Loans												Revolving Loans Amortized Cost Basis		Revolving Loans Converted to Term Loans Amortized Cost Basis		Total


	Amortized Cost Basis by Origination Year
	2020		2019		2018		2017		2016		Prior
Commercial:
C&I:
Pass	$	3,912,147	$	1,477,740	$	483,725	$	245,594	$	69,482	$	245,615	$	6,431,003	$	29,487	$	12,894,793
Criticized (accrual)	120,183		74,601		56,785		19,426		1,487		5,872		324,640		0		602,994
Criticized (nonaccrual)	2,125		25,267		22,240		18,787		4,964		1,592		58,964		0		133,939


Total C&I	4,034,455		1,577,608		562,750		283,807		75,933		253,079		6,814,607		29,487		13,631,726
CRE:
CRE:
Pass	2,296,649		2,402,136		2,310,748		1,328,251		732,694		1,529,681		173,267		19,064		10,792,490
Criticized (accrual)	47,459		63,654		43,447		98,259		2,094		80,662		0		0		335,575
Criticized (nonaccrual)	0		0		42,067		1,115		0		3,364		0		0		46,546


Total CRE	2,344,108		2,465,790		2,396,262		1,427,625		734,788		1,613,707		173,267		19,064		11,174,611
Multifamily residential:
Pass	783,671		783,589		479,959		411,945		181,213		348,751		5,895		0		2,995,023
Criticized (accrual)	0		735		22,330		6,101		264		5,877		0		0		35,307
Criticized (nonaccrual)	0		0		1,475		0		0		2,193		0		0		3,668


Total multifamily residential	783,671		784,324		503,764		418,046		181,477		356,821		5,895		0		3,033,998
Construction and land:
Pass	224,924		172,707		156,712		0		20,897		1,028		0		0		576,268
Criticized (accrual)	3,524		0		0		0		0		19,900		0		0		23,424
Criticized (nonaccrual)	0		0		0		0		0		0		0		0		0
Total construction and land	228,448		172,707		156,712		0		20,897		20,928		0		0		599,692
Total CRE	3,356,227		3,422,821		3,056,738		1,845,671		937,162		1,991,456		179,162		19,064		14,808,301
Total commercial	7,390,682		5,000,429		3,619,488		2,129,478		1,013,095		2,244,535		6,993,769		48,551		28,440,027
Consumer:
Residential mortgage:
Single-family residential:
Pass (1)	2,385,853		1,813,200		1,501,660		1,021,707		523,170		921,714		0		0		8,167,304
Criticized (accrual)	0		1,429		0		0		119		1,034		0		0		2,582
Criticized (nonaccrual) (1)	0		226		812		1,789		1,994		11,246		0		0		16,067
Total single-family residential mortgage	2,385,853		1,814,855		1,502,472		1,023,496		525,283		933,994		0		0		8,185,953
HELOCs:
Pass	1,131		880		2,879		5,363		8,433		13,475		1,328,919		225,810		1,586,890
Criticized (accrual)	0		0		200		0		996		0		1,328		606		3,130
Criticized (nonaccrual)	0		151		285		4,617		164		1,962		0		4,517		11,696
Total HELOCs	1,131		1,031		3,364		9,980		9,593		15,437		1,330,247		230,933		1,601,716
Total residential mortgage	2,386,984		1,815,886		1,505,836		1,033,476		534,876		949,431		1,330,247		230,933		9,787,669
Other consumer:
Pass	9,531		0		0		1,830		0		83,255		66,136		0		160,752
Criticized (accrual)	16		0		0		0		0		0		0		0		16
Criticized (nonaccrual)	0		0		0		2,491		0		0		0		0		2,491
Total other consumer	9,547		0		0		4,321		0		83,255		66,136		0		163,259
Total consumer	2,396,531		1,815,886		1,505,836		1,037,797		534,876		1,032,686		1,396,383		230,933		9,950,928
Total	$	9,787,213	$	6,816,315	$	5,125,324	$	3,167,275	$	1,547,971	$	3,277,221	$	8,390,152	$	279,484	$	38,390,955

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

3835

Revolving loans ~~that are~~ converted to term loans presented in the table above are excluded from the term loans by vintage year columns. During the three and ~~nine~~six months ended ~~September~~June 30, ~~2020,~~2021, HELOCs totaling ~~$59.8~~$20.9 million and ~~$118.2~~$57.6 million, respectively, were converted to term loans. ~~One C&I revolving loan of $250 thousand was converted to a term loan~~In comparison, during the three and ~~nine~~six months ended ~~September~~June 30, 2020, HELOCs totaling $12.1 million and $43.4 million, respectively, were converted to term loans. During both the three and six months ended June 30, 2021 and 2020, there were 0 conversions of C&I revolving loans to term loans. There were 0 conversions of CRE revolving loans to term loans during the three ~~and nine~~ months ended ~~September~~June 30, 2021. NaN CRE revolving loans totaling $5.0 million were converted to term loans during the six months ended June 30, 2021. In comparison, there were 0 conversions of CRE revolving loans to term loans during both the three and six months ended June 30, 2020.

~~The following tables present the credit risk ratings for non-PCI and PCI loans by portfolio segments as of December 31, 2019:~~

($ in thousands) December 31, 2019
Pass Special
Mention Substandard Doubtful Total
Non-PCI Loans
Commercial:
C&I $ 11,423,094 $ 406,543 $ 302,509 $ 16,975 $ 12,149,121
CRE:
CRE 10,003,749 83,683 77,815 0 10,165,247
Multifamily residential 2,806,475 20,406 7,331 0 2,834,212
Construction and land 603,447 0 25,012 0 628,459
Total CRE 13,413,671 104,089 110,158 0 13,627,918
Total commercial 24,836,765 510,632 412,667 16,975 25,777,039
Consumer:
Residential mortgage:
Single-family residential 7,012,522 2,278 14,179 0 7,028,979
HELOCs 1,453,207 2,787 10,742 0 1,466,736
Total residential mortgage 8,465,729 5,065 24,921 0 8,495,715
Other consumer 280,392 5 2,517 0 282,914
Total consumer 8,746,121 5,070 27,438 0 8,778,629
Total $ 33,582,886 $ 515,702 $ 440,105 $ 16,975 $ 34,555,668

($ in thousands) December 31, 2019
Pass Special
Mention Substandard Doubtful Total
PCI Loans
Commercial:
C&I $ 1,810 $ 0 $ 0 $ 0 $ 1,810
CRE:
CRE 102,257 0 10,944 0 113,201
Multifamily residential 22,162 0 0 0 22,162
Construction and land 40 0 0 0 40
Total CRE 124,459 0 10,944 0 135,403
Total commercial 126,269 0 10,944 0 137,213
Consumer:
Residential mortgage:
Single-family residential 79,517 0 94 0 79,611
HELOCs 5,849 0 198 0 6,047
Total residential mortgage 85,366 0 292 0 85,658
Total consumer 85,366 0 292 0 85,658
Total (1)
$ 211,635 $ 0 $ 11,236 $ 0 $ 222,871

~~(1)Loans net of ASC 310-10 discount.~~

Nonaccrual and Past Due Loans

Loans that are 90 or more days past due are generally placed on nonaccrual status, unless the loan is well-collateralized ~~or guaranteed by government agencies,~~ and in the process of collection. Loans that are less than 90 days past due but have identified deficiencies, such as when the full collection of principal or interest becomes uncertain, are also placed on nonaccrual status. Payment deferral activities instituted in response to the COVID-19 pandemic could delay the recognition of delinquencies for customers who otherwise would have moved into nonaccrual status. The following ~~table presents~~tables present the aging analysis of total loans held-for-investment as of ~~September~~June 30, 2021 and December 31, 2020:


($ in thousands)	($ in thousands)	September 30, 2020																($ in thousands)	June 30, 2021
		Current Accruing Loans		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		Total Loans				($ in thousands)	Current Accruing Loans (1)		Accruing Loans 30-59 Days Past Due		Accruing Loans 60-89 Days Past Due		Total Accruing Past Due Loans		Total Nonaccrual Loans		Total Loans
Commercial:	Commercial:
C&I	C&I	$	13,105,895	$	6,024	$	47,119	$	53,143	$	110,068	$	35,918	$	145,986	$	13,305,024			C&I	$	13,677,054	$	30,148	$	34	$	30,182	$	83,225	$	13,790,461
CRE:	CRE:																			CRE:
CRE	CRE	10,973,345		8,646		0		8,646		1,338		54,658		55,996		11,037,987				CRE	11,647,942		4,647		0		4,647		58,780		11,711,369
Multifamily residential	Multifamily residential	3,049,683		3,504		359		3,863		2,404		1,324		3,728		3,057,274				Multifamily residential	3,215,139		1,764		0		1,764		2,893		3,219,796
Construction and land	Construction and land	578,407		0		0		0		0		0		0		578,407				Construction and land	440,778		0		0		0��		19,900		460,678
Total CRE	Total CRE	14,601,435		12,150		359		12,509		3,742		55,982		59,724		14,673,668				Total CRE	15,303,859		6,411		0		6,411		81,573		15,391,843
Total commercial	Total commercial	27,707,330		18,174		47,478		65,652		113,810		91,900		205,710		27,978,692				Total commercial	28,980,913		36,559		34		36,593		164,798		29,182,304
Consumer:	Consumer:																			Consumer:
Residential mortgage:	Residential mortgage:																			Residential mortgage:
Single-family residential	Single-family residential	7,755,878		9,076		4,911		13,987		1,149		14,745		15,894		7,785,759				Single-family residential	8,834,580		12,969		1,653		14,622		20,168		8,869,370
HELOCs	HELOCs	1,497,315		4,038		640		4,678		580		11,815		12,395		1,514,388				HELOCs	1,858,040		2,643		1,162		3,805		10,321		1,872,166
Total residential mortgage	Total residential mortgage	9,253,193		13,114		5,551		18,665		1,729		26,560		28,289		9,300,147				Total residential mortgage	10,692,620		15,612		2,815		18,427		30,489		10,741,536
Other consumer	Other consumer	155,120		672		3		675		0		2,495		2,495		158,290				Other consumer	144,871		265		20		285		2,503		147,659
Total consumer	Total consumer	9,408,313		13,786		5,554		19,340		1,729		29,055		30,784		9,458,437				Total consumer	10,837,491		15,877		2,835		18,712		32,992		10,889,195
Total	Total	$	37,115,643	$	31,960	$	53,032	$	84,992	$	115,539	$	120,955	$	236,494	$	37,437,129			Total	$	39,818,404	$	52,436	$	2,869	$	55,305	$	197,790	$	40,071,499



($ in thousands)	December 31, 2020
	Current Accruing Loans (1)		Accruing Loans 30-59 Days Past Due		Accruing Loans 60-89 Days Past Due		Total Accruing Past Due Loans		Total Nonaccrual Loans		Total Loans
Commercial:
C&I	$	13,488,070	$	8,993	$	724	$	9,717	$	133,939	$	13,631,726
CRE:
CRE	11,127,690		375		0		375		46,546		11,174,611
Multifamily residential	3,028,512		1,818		0		1,818		3,668		3,033,998
Construction and land	579,792		19,900		0		19,900		0		599,692
Total CRE	14,735,994		22,093		0		22,093		50,214		14,808,301
Total commercial	28,224,064		31,086		724		31,810		184,153		28,440,027
Consumer:
Residential mortgage:
Single-family residential	8,156,645		9,911		2,583		12,494		16,814		8,185,953
HELOCs	1,583,968		2,922		3,130		6,052		11,696		1,601,716
Total residential mortgage	9,740,613		12,833		5,713		18,546		28,510		9,787,669
Other consumer	160,534		217		17		234		2,491		163,259
Total consumer	9,901,147		13,050		5,730		18,780		31,001		9,950,928
Total	$	38,125,211	$	44,136	$	6,454	$	50,590	$	215,154	$	38,390,955

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

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



~~($ in thousands)~~	~~September 30, 2020~~
~~Commercial:~~
~~C&I~~	$	~~95,475~~
~~CRE:~~
~~CRE~~	~~54,659~~
~~Multifamily residential~~	~~2,550~~

~~Total CRE~~	~~57,209~~
~~Total commercial~~	~~152,684~~
~~Consumer:~~
~~Residential mortgage:~~
~~Single-family residential~~	~~6,014~~
~~HELOCs~~	~~8,339~~
~~Total residential mortgage~~	~~14,353~~
~~Other consumer~~	~~2,491~~
~~Total consumer~~	~~16,844~~
~~Total nonaccrual loans with no related allowance for loan losses~~	$	~~169,528~~



($ in thousands)	June 30, 2021		December 31, 2020

Commercial:
C&I	$	44,110	$	62,040
CRE:
CRE	58,346		45,537
Multifamily residential	2,428		2,519
Construction and land	19,900		0
Total CRE	80,674		48,056
Total commercial	124,784		110,096
Consumer:
Residential mortgage:
Single-family residential	8,702		6,013
HELOCs	6,871		8,076
Total residential mortgage	15,573		14,089
Other consumer	0		2,491
Total consumer	15,573		16,580
Total nonaccrual loans with no related allowance for loan losses	$	140,357	$	126,676

4037

~~The following table presents the aging analysis of non-PCI loans as of December 31, 2019:~~

($ in thousands) December 31, 2019
Current
Accruing
Loans 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 Total
Non-PCI
Loans
Commercial:
C&I $ 12,026,131 $ 31,121 $ 17,034 $ 48,155 $ 31,084 $ 43,751 $ 74,835 $ 12,149,121
CRE:
CRE 10,123,999 22,830 1,977 24,807 540 15,901 16,441 10,165,247
Multifamily residential 2,832,664 198 531 729 534 285 819 2,834,212
Construction and land 628,459 0 0 0 0 0 0 628,459
Total CRE 13,585,122 23,028 2,508 25,536 1,074 16,186 17,260 13,627,918
Total commercial 25,611,253 54,149 19,542 73,691 32,158 59,937 92,095 25,777,039
Consumer:
Residential mortgage:
Single-family residential 6,993,597 15,443 5,074 20,517 1,964 12,901 14,865 7,028,979
HELOCs 1,448,930 4,273 2,791 7,064 1,448 9,294 10,742 1,466,736
Total residential mortgage 8,442,527 19,716 7,865 27,581 3,412 22,195 25,607 8,495,715
Other consumer 280,386 6 5 11 0 2,517 2,517 282,914
Total consumer 8,722,913 19,722 7,870 27,592 3,412 24,712 28,124 8,778,629
Total $ 34,334,166 $ 73,871 $ 27,412 $ 101,283 $ 35,570 $ 84,649 $ 120,219 $ 34,555,668

PCI loans were excluded from the above aging analysis table as of December 31, 2019, as the Company elected to account for these loans on a pool level basis under ASC 310-30 at the time of acquisition. As of December 31, 2019, PCI loans on nonaccrual status totaled $297 thousand.

Foreclosed Assets

Foreclosed assets, consisting of OREO and other nonperforming assets, are included in Other assets on the Consolidated Balance Sheet. The Company had ~~$23.4~~$27.9 million in foreclosed assets as of ~~September~~June 30, ~~2020~~2021, compared with ~~$1.3~~$19.7 million as of December 31, ~~2019.~~2020. The Company commences the foreclosure process on consumer mortgage loans ~~when~~after a borrower becomes more than 120 days delinquent in accordance with the Consumer ~~Finance~~Financial Protection Bureau guidelines. The carrying ~~values~~value of consumer real estate loans that were in the process of active or suspended foreclosure ~~were $3.5~~was $18.2 million and ~~$7.2~~$4.1 million as of ~~September~~June 30, ~~2020~~2021 and December 31, ~~2019,~~2020, respectively. The Company ~~has~~ suspended certain mortgage foreclosure activities in connection with our actions to support our customers during the COVID-19 pandemic.In addition, certain other foreclosures are waiting the end of government-mandated foreclosure moratoriums in certain states.

Troubled Debt Restructurings

~~TDRs~~Troubled debt restructurings (“TDRs”) are individually evaluated, and the type of restructuring is selected based on the loan type and the circumstances of the borrower’s financial difficulty. 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~~Since March 2020, the Company has implemented various commercial and consumer loan modification programs to provide its borrowers relief from the economic impacts of the COVID-19 ~~pandemic that~~pandemic. These COVID-related modifications are 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 ~~considered TDRs. For additional details related~~included in the discussion below. Assistance provided in response to the COVID-19 pandemic ~~see~~ could delay the recognition of delinquencies, nonaccrual status, and net charge-offs for those borrowers who would have otherwise moved into past due or nonaccrual status. SeeNote ~~2 — Current Accounting Developments and Summary of Significant Accounting Policies~~1 — Summary of Significant Accounting Policies — ~~Troubled Debt Restructurings~~Significant Accounting Policies to the Consolidated Financial ~~Statements.~~Statements of the Company’s 2020 Form 10-K.

The following tables present the additions to TDRs for the three and ~~nine~~six months ended ~~September~~June 30, ~~2020~~2021 and ~~2019:~~2020:

($ in thousands) Loans Modified as TDRs During the Three Months Ended September 30,
2020 2019
Number
of
Loans Pre-
Modification
Outstanding
Recorded
Investment
Post-
Modification
Outstanding
Recorded
   Investment (1)
Financial
   Impact (2)
Number
of
Loans Pre-
Modification
Outstanding
Recorded
Investment
Post-
Modification
Outstanding
Recorded
   Investment (1)
Financial
   Impact (2)
Commercial:
C&I 6 $ 43,378 $ 35,568 $ 12,108 1 $ 7,933 $ 6,000 $ 2,396
CRE:
CRE 2 21,429 21,242 21 0 0 0 0
Multifamily residential 1 1,220 1,226 0 0 0 0 0
Total CRE 3 22,649 22,468 21 0 0 0 0
Total commercial 9 66,027 58,036 12,129 1 7,933 6,000 2,396
Consumer:
Residential mortgage:
Single-family residential 0 0 0 0 1 903 893 0
HELOCs 0 0 0 0 1 139 136 0
Total residential mortgage 0 0 0 0 2 1,042 1,029 0
Total consumer 0 0 0 0 2 1,042 1,029 0
Total 9 $ 66,027 $ 58,036 $ 12,129 3 $ 8,975 $ 7,029 $ 2,396



($ in thousands)	Loans Modified as TDRs During the Three Months Ended June 30,
	2021							2020
	Number of Loans	Pre- Modification Outstanding Recorded Investment		Post- Modification Outstanding Recorded Investment (1)		Financial Impact (2)		Number of Loans	Pre- Modification Outstanding Recorded Investment		Post- Modification Outstanding Recorded Investment (1)		Financial Impact (2)
Commercial:
C&I	4	$	20,375	$	20,084	$	2,162	3	$	35,260	$	28,926	$	872













Total	4	$	20,375	$	20,084	$	2,162	3	$	35,260	$	28,926	$	872

($ in thousands) Loans Modified as TDRs During the Nine Months Ended September 30,
2020 2019
Number
of
Loans Pre-
Modification
Outstanding
Recorded
Investment
Post-
Modification
Outstanding
Recorded
   Investment (1)
Financial
   Impact (2)
Number
of
Loans Pre-
Modification
Outstanding
Recorded
Investment
Post-
Modification
Outstanding
Recorded
   Investment (1)
Financial
   Impact (2)
Commercial:
C&I 11 $ 93,235 $ 79,713 $ 12,507 9 $ 85,073 $ 81,038 $ 9,231
CRE:
CRE 2 21,429 21,242 21 0 0 0 0
Multifamily residential 1 1,220 1,226 0 0 0 0 0
Total CRE 3 22,649 22,468 21 0 0 0 0
Total commercial 14 115,884 102,181 12,528 9 85,073 81,038 9,231
Consumer:
Residential mortgage:
Single-family residential 0 0 0 0 2 1,123 1,109 2
HELOCs 0 0 0 0 1 139 136 0
Total residential mortgage 0 0 0 0 3 1,262 1,245 2
Total consumer 0 0 0 0 3 1,262 1,245 2
Total 14 $ 115,884 $ 102,181 $ 12,528 12 $ 86,335 $ 82,283 $ 9,233



($ in thousands)	Loans Modified as TDRs During the Six Months Ended June 30,
	2021							2020
	Number of Loans	Pre- Modification Outstanding Recorded Investment		Post- Modification Outstanding Recorded Investment (1)		Financial Impact (2)		Number of Loans	Pre- Modification Outstanding Recorded Investment		Post- Modification Outstanding Recorded Investment (1)		Financial Impact (2)
Commercial:
C&I	5	$	20,818	$	20,499	$	2,318	6	$	51,708	$	43,833	$	1,000













Total	5	$	20,818	$	20,499	$	2,318	6	$	51,708	$	43,833	$	1,000

(1)Includes subsequent payments after modification and reflects the balance as of ~~September~~June 30, ~~2020~~2021 and ~~2019.~~2020.

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

4238

The following tables present the TDR post-modification outstanding balances for the three and ~~nine~~six months ended ~~September~~June 30, ~~2020~~2021 and ~~2019~~2020 by modification type:

($ in thousands) Modification Type During the Three Months Ended September 30,
2020 2019
Principal (1)
Principal
and
Interest Interest
Deferments Total
Principal (1)
Interest
Deferments Other Total
Commercial:
C&I $ 19,025 $ 0 $ 16,543 $ 35,568 $ 6,000 $ 0 $ 0 $ 6,000
CRE:
CRE 21,242 0 0 21,242 0 0 0 0
Multifamily residential 1,226 0 0 1,226 0 0 0 0
Total CRE 22,468 0 0 22,468 0 0 0 0
Total commercial 41,493 0 16,543 58,036 6,000 0 0 6,000
Consumer:
Residential mortgage:
Single-family residential 0 0 0 0 0 893 0 893
HELOCs 0 0 0 0 0 0 136 136
Total residential mortgage 0 0 0 0 0 893 136 1,029
Total consumer 0 0 0 0 0 893 136 1,029
Total $ 41,493 $ 0 $ 16,543 $ 58,036 $ 6,000 $ 893 $ 136 $ 7,029



($ in thousands)	Modification Type During the Three Months Ended June 30,
	2021								2020
	Principal (1)		Principal and Interest		Interest Deferments		Interest Rate Reduction		Total		Principal (1)		Principal and Interest		Interest Deferments		Interest Rate Reduction		Total
Commercial:
C&I	$	3,373	$	0	$	0	$	16,711	$	20,084	$	11,766	$	0	$	17,160	$	0	$	28,926













Total	$	3,373	$	0	$	0	$	16,711	$	20,084	$	11,766	$	0	$	17,160	$	0	$	28,926

($ in thousands) Modification Type During the Nine Months Ended September 30,
2020 2019
Principal (1)
Principal
and Interest (2)
Interest
Deferments Total
Principal (1)
Interest
Deferments
Other (3)
Total
Commercial:
C&I $ 36,043 $ 10,819 $ 32,851 $ 79,713 $ 44,271 $ 0 $ 36,767 $ 81,038
CRE:
CRE 21,242 0 0 21,242 0 0 0 0
Multifamily residential 1,226 0 0 1,226 0 0 0 0
Total CRE 22,468 0 0 22,468 0 0 0 0
Total commercial 58,511 10,819 32,851 102,181 44,271 0 36,767 81,038
Consumer:
Residential mortgage:
Single-family residential 0 0 0 0 0 1,109 0 1,109
HELOCs 0 0 0 0 0 0 136 136
Total residential mortgage 0 0 0 0 0 1,109 136 1,245
Total consumer 0 0 0 0 0 1,109 136 1,245
Total $ 58,511 $ 10,819 $ 32,851 $ 102,181 $ 44,271 $ 1,109 $ 36,903 $ 82,283



($ in thousands)	Modification Type During the Six Months Ended June 30,
	2021								2020
	Principal (1)		Principal and Interest		Interest Deferments		Interest Rate Reduction		Total		Principal (1)		Principal and Interest(2)		Interest Deferments		Interest Rate Reduction		Total
Commercial:
C&I	$	3,788	$	0	$	0	$	16,711	$	20,499	$	15,898	$	10,775	$	17,160	$	0	$	43,833













Total	$	3,788	$	0	$	0	$	16,711	$	20,499	$	15,898	$	10,775	$	17,160	$	0	$	43,833

(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.

~~(3)Includes funding to secure additional collateral and provides liquidity to collateral-dependent C&I loans.~~

After a loan is modified as TDR, the Company continues to monitor its performance under its most recent restructured terms. A TDR may become delinquent and result in payment default (generally 90 days past due) subsequent to restructuring. The following tables present information on loans for which a subsequent payment default occurred during the three and ~~nine~~six months ended ~~September~~June 30, ~~2020~~2021 and ~~2019,~~2020, respectively, which had been modified as TDR within the previous 12 months of ~~its~~their default, and which were still in default as of ~~September~~June 30, ~~2020~~2021 and ~~2019:~~2020.


($ in thousands)	($ in thousands)	Loans Modified as TDRs that Subsequently Defaulted During the Three Months Ended September 30,						($ in thousands)	Loans Modified as TDRs that Subsequently Defaulted During the Three Months Ended June 30,
		2020			2019				2021			2020
		Number of Loans	Recorded Investment		Number of Loans	Recorded Investment			Number of Loans	Recorded Investment		Number of Loans	Recorded Investment
Commercial:	Commercial:							Commercial:
C&I	C&I	0	$	0	4	$	27,040	C&I	0	$	0	1	$	17,160

Total commercial		0	0		4	27,040

Total	Total	0	$	0	4	$	27,040	Total	0	$	0	1	$	17,160


($ in thousands)	($ in thousands)	Loans Modified as TDRs that Subsequently Defaulted During the Nine Months Ended September 30,						($ in thousands)	Loans Modified as TDRs that Subsequently Defaulted During the Six Months Ended June 30,
		2020			2019				2021			2020
		Number of Loans	Recorded Investment		Number of Loans	Recorded Investment			Number of Loans	Recorded Investment		Number of Loans	Recorded Investment
Commercial:	Commercial:							Commercial:
C&I	C&I	1	$	16,309	5	$	28,415	C&I	1	$	11,431	1	$	17,160

Total commercial		1	16,309		5	28,415

Total	Total	1	$	16,309	5	$	28,415	Total	1	$	11,431	1	$	17,160

The amount of additional funds committed to lend to borrowers whose terms have been modified as TDRs was ~~$5.0~~$10.2 million and ~~$2.2~~$3.0 million as of ~~September~~June 30, ~~2020~~2021 and December 31, ~~2019,~~2020, respectively.

~~Impaired Loans~~

In connection with the adoption of ASU 2016-13 on January 1, 2020, the Company no longer provides information on impaired loans. Information on non-PCI impaired loans as of December 31, 2019 is presented as follows:

($ in thousands) December 31, 2019
Unpaid
Principal
Balance Recorded
Investment
With No
Allowance Recorded
Investment
With
Allowance Total
Recorded
Investment Related
Allowance
Commercial:
C&I $ 174,656 $ 73,956 $ 40,086 $ 114,042 $ 2,881
CRE:
CRE 27,601 20,098 1,520 21,618 97
Multifamily residential 4,965 1,371 3,093 4,464 55
Construction and land 19,696 19,691 0 19,691 0
Total CRE 52,262 41,160 4,613 45,773 152
Total commercial 226,918 115,116 44,699 159,815 3,033
Consumer:
Residential mortgage:
Single-family residential 23,626 8,507 13,704 22,211 35
HELOCs 13,711 6,125 7,449 13,574 8
Total residential mortgage 37,337 14,632 21,153 35,785 43
Other consumer 2,517 0 2,517 2,517 2,517
Total consumer 39,854 14,632 23,670 38,302 2,560
Total non-PCI impaired loans $ 266,772 $ 129,748 $ 68,369 $ 198,117 $ 5,593

~~The following table presents the average recorded investment and interest income recognized on non-PCI impaired loans for the three and nine months ended September 30, 2019:~~

($ in thousands) Three Months Ended September 30, 2019 Nine Months Ended September 30, 2019
Average
Recorded
Investment
Recognized
Interest
Income (1)
Average
Recorded
Investment
Recognized
Interest
Income (1)
Commercial:
C&I $ 150,063 $ 340 $ 198,024 $ 2,156
CRE:
CRE 28,846 114 33,329 363
Multifamily residential 5,226 58 5,856 179
Total CRE 34,072 172 39,185 542
Total commercial 184,135 512 237,209 2,698
Consumer:
Residential mortgage:
Single-family residential 23,779 124 27,758 382
HELOCs 15,382 37 19,529 93
Total residential mortgage 39,161 161 47,287 475
Other consumer 2,504 0 2,526 0
Total consumer 41,665 161 49,813 475
Total non-PCI impaired loans $ 225,800 $ 673 $ 287,022 $ 3,173

~~(1)Includes interest income recognized on accruing non-PCI TDRs. Interest payments received on nonaccrual non-PCI loans are reflected as a reduction to principal, not as interest income.~~

Allowance for ~~Loan~~Credit Losses

~~On January 1, 2020, the~~The Company ~~adopted~~has an allowance framework under ASU 2016-13 ~~that establishes a single allowance framework~~ for all financial assets measured at amortized cost and certain off-balance sheet credit exposures. ~~It requires the~~The measurement of the allowance for ~~loan~~credit losses ~~to be~~is based on management’s best estimate of lifetime expected credit losses inherent in the Company’s relevant financial assets.Balance sheet information and results of operations for reporting periods beginning with January 1, 2020 are presented under ASC 326, while prior period comparisons continue to be presented under legacy GAAP.

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 process of the allowance for ~~loan~~credit losses involves procedures to consider the unique risk characteristics of the portfolio segments. ~~For each loan portfolio segment,~~The majority of the Company’s credit exposures share risk characteristics with other similar exposures, and as a result are collectively evaluated. The collectively evaluated loans cover performing risk-rated loans and unfunded credit commitments. If an exposure does not share risk characteristics with other exposures, the Company generally estimates expected credit losses ~~are estimated collectively for groups of~~on an individual basis. The individually assessed loans ~~with similar risk characteristics. For~~cover loans modified in a TDR and collateral-dependent loans, as well as, risk-rated loans that ~~do not share similar risk characteristics, the expected credit losses are estimated individually~~.have been placed on nonaccrual status.

Allowance for Collectively Evaluated Loans

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

Quantitative Component —The allowance for loan losses is estimated using quantitative methods that consider a variety of factors such as historical loss experience, the current credit quality of the portfolio, ~~as well as~~and an economic outlook over the life of the loan. The Company incorporates forward-looking information using macroeconomic scenarios applied over the forecasted life of the loans. The forward-looking information is limited to the reasonable and supportable period. These macroeconomic scenarios include variables that are considered key drivers of increases and decreases in credit losses. The Company utilizes a probability-weighted multiple scenario forecast approach. These scenarios may consist of a base forecast representing management's view of the most likely outcome, ~~combined with~~and downside ~~and~~or upside scenarios reflecting possible worsening or improving economic conditions. AThe quantitative models incorporate a probability-weighted ~~average~~calculation of these macroeconomic scenarios over a reasonable and supportable forecast ~~period is incorporated into the quantitative models.~~period. If the loans’ ~~life extends~~lives extend beyond the reasonable and supportable forecast period, then historical experience, isor long-run macroeconomic trends, are considered over the remaining ~~life~~lives of the loans ~~in estimation of the~~to estimate allowance for loan ~~losses~~.losses.

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 ~~or rated~~ financial assets;

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

•Knowledge of ~~the~~a borrower’s ~~operations or the borrower’s standing in the community;~~operations;

•The quality of the Company’s credit review system;

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

•The effect of other external factors such as the regulatory and legal environments and ~~technological environments; and~~changes in technology;

•Actual and expected changes in international, national, regional, and local economic and business conditions in which the Company ~~operates, including~~operates; and

•Risk factors in certain industry sectors not captured by the ~~actual and expected conditions of various market segments.~~quantitative models.

The magnitude of the impact of these factors on the Company’s qualitative assessment of the allowance for credit losses changes from period to period according to changes made by management in its assessment of these factors. The extent to which these factors change may be dependent on whether they are already reflected in quantitative loss estimates during the current period and the extent to which changes in these factors diverge from period to period. For both the three and six months ended June 30, 2021 and 2020, there were no changes to the reasonable and supportable forecast period and reversion to historical loss experience method.

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

Portfolio Segment

Risk Characteristics

Macroeconomic Variables

C&I

Internal risk ~~rating;~~rating, size and credit spread at origination, and time to maturity

Unemployment rate, and ~~two~~two- and ~~ten year treasury~~ten-year U.S. Treasury spread

CRE, Multifamily residential, and Construction and land

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

Unemployment ~~rate;~~rate, GDP, and U.S. Treasury rates

Single-family residential and HELOCs

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

Unemployment ~~rate;~~rate, GDP, and home price index

Other consumer

Historical loss experience

Immaterial (1)

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

Management updated the macroeconomic forecast used in its credit loss estimation process as of September 30, 2020, which reflected more stabilized economic conditions as a result of an improved macroeconomic forecast, compared with June 30, 2020. The improvements in the macroeconomic forecast used in the credit loss estimation reflected improvements in gross domestic product growth and unemployment rate forecasts. The Company also considered the economic uncertainty caused by the COVID-19 pandemic, U.S. monetary and fiscal responses to the pandemic, the expected impacts of lower oil prices and deteriorating credit trends on the oil & gas portfolio, among other assumptions. For the three and nine months ended September 30, 2020, there were no changes to the reasonable and supportable forecast period, and reversion to historical loss experience method.

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

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

In order to estimate the life of a loan under both models, the contractual term of the loan is adjusted for estimated prepayments ~~which are~~ 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. After athe reasonable and supportable period, the forecast of future economic conditions ~~reverts~~returns to long-run historical economic trends.

For other consumer loans, the Company uses a loss rate approach.

In order to estimate the life of a loan for the consumer portfolio, the contractual term of the loan is adjusted for estimated prepayments ~~which are~~ based on historical prepayment experience.

Qualitative Allowance for Collectively Evaluated Loans — While the Company’s allowance methodologies strive to reflect all relevant credit risk factors, there continues to be uncertainty associated with, but not limited to, potential imprecision in the estimation process due to the inherent time lag of obtaining information and normal variations between expected and actual outcomes. The Company may hold additional qualitative reserves that are designed to provide coverage for losses attributable to such risk. ~~The allowance for loan losses as of September 30, 2020 also included qualitative adjustments for certain industry sectors, such as oil & gas, included as part of the C&I loan portfolio.~~

Allowance for Individually ~~Assessed~~Evaluated Loans —

When a loan no longer shares similar risk characteristics with other loans, such as in the case ~~for~~of certain nonaccrual or TDR loans, the Company estimates the allowance for loan losses on an individual loan basis. The allowance for loan losses for individually evaluated loans is measured as the difference between the recorded value of the loans and their fair value. For loans evaluated individually, the Company uses one of three different asset valuation measurement methods: (1) the fair value of collateral less costs to sell; (2) the present value of expected future cash flows; and (3) the loan's observable market price. If an individually evaluated loan is determined to be collateral dependent, the Company applies the fair value of the collateral less costs to sell method. If an individually evaluated loan is determined not to be collateral dependent, the Company uses the present value of future cash flows or the observable market value of the loan.

Collateral-Dependent Loans — When a loan is ~~collateral dependent,~~collateral-dependent, the allowance is measured on an individual loan basis and is limited to the difference between the recorded value and fair value of the collateral less cost of disposal or sale. As of ~~September~~June 30, ~~2020,~~2021, collateral-dependent commercial and consumer loans totaled ~~$109.7~~$107.2 million and ~~$17.6~~$18.8 million, respectively. In comparison, collateral-dependent commercial and consumer loans totaled $97.2 million and $17.3 million as of December 31, 2020, respectively. The Company's commercial collateral-dependent loans were secured by real ~~estates~~estate or other collateral. The Company's consumer collateral-dependent loans were all residential mortgage loans, secured by ~~their~~the underlying real ~~estates.~~estate. As of ~~September~~both June 30, 2021 and December 31, 2020, the collateral value of the properties securing each of these ~~collateral dependent~~collateral-dependent loans, net of selling costs, exceeded the recorded value of the individual ~~loans.~~ ~~For the three and nine months ended September 30, 2020, there were no significant changes or deterioration in the collateral securing these~~ loans.

The following tables summarize the activity in the allowance for loan losses by portfolio segments for the three and ~~nine~~six months ended ~~September~~June 30, ~~2020~~2021 and ~~2019:~~2020:


($ in thousands)	($ in thousands)		Three Months Ended September 30, 2020																														($ in thousands)			Three Months Ended June 30, 2021
			Commercial																Consumer												Total						($ in thousands)				Commercial																Consumer												Total
			C&I				CRE												Residential Mortgage								Other Consumer														C&I				CRE												Residential Mortgage								Other Consumer
					CRE				Multifamily Residential				Construction and Land				Single- Family Residential				HELOCs									Total									CRE						Multifamily Residential				Construction and Land				Single- Family Residential				HELOCs

Allowance for loan losses, beginning of period	Allowance for loan losses, beginning of period				$	380,723			$	176,040			$	25,058			$	18,551			$	25,314			$	3,867			$			2,518		$	632,071					Allowance for loan losses, beginning of period			$	394,084			$	146,399			$	27,407			$	19,089			$	15,839			$	2,670			$	2,018			$	607,506
Provision for (reversal of) credit losses on loans		(a)	31,691				(8,301)				(1,916)				(8,180)				(2,692)				(637)				(76)					9,889
(Reversal of) provision for credit losses on loans																																						(Reversal of) provision for credit losses on loans		(a)		(22,586)				19,375				(5,385)				(3,243)				609				250				2,209				(8,771)
Gross charge-offs	Gross charge-offs		(25,111)				(1,414)				0				0				0				0				(124)				(26,649)							Gross charge-offs				(10,572)				(4,134)				(113)				(209)				0				0				(32)				(15,060)
Gross recoveries	Gross recoveries		1,218				485				665				30				0				43				0				2,441						Gross recoveries				1,338				322				16				6				82				18				3				1,785
Total net (charge-offs) recoveries	Total net (charge-offs) recoveries		(23,893)				(929)				665				30				0				43				(124)				(24,208)						Total net (charge-offs) recoveries				(9,234)				(3,812)				(97)				(203)				82				18				(29)				(13,275)
Foreign currency translation adjustment	Foreign currency translation adjustment		500				0				0				0				0				0				0				500						Foreign currency translation adjustment				264				0				0				0				0				0				0				264
Allowance for loan losses, end of period	Allowance for loan losses, end of period		$	389,021			$	166,810			$	23,807			$	10,401			$	22,622			$	3,273			$	2,318			$	618,252					Allowance for loan losses, end of period				$	362,528			$	161,962			$	21,925			$	15,643			$	16,530			$	2,938			$	4,198			$	585,724



($ in thousands)		Three Months Ended June 30, 2020
		Commercial								Consumer						Total
		C&I		CRE						Residential Mortgage				Other Consumer
				CRE		Multifamily Residential		Construction and Land		Single- Family Residential		HELOCs
Allowance for loan losses, beginning of period		$	362,629	$	132,819	$	16,530	$	11,018	$	26,822	$	3,881	$	3,304	$	557,003

Provision for (reversal of) credit losses on loans	(a)	37,862		43,315		7,908		7,526		(1,667)		205		(849)		94,300

Gross charge-offs		(20,378)		(320)		0		0		0		(221)		(30)		(20,949)
Gross recoveries		602		226		620		7		159		2		93		1,709
Total net (charge-offs) recoveries		(19,776)		(94)		620		7		159		(219)		63		(19,240)
Foreign currency translation adjustment		8		0		0		0		0		0		0		8
Allowance for loan losses, end of period		$	380,723	$	176,040	$	25,058	$	18,551	$	25,314	$	3,867	$	2,518	$	632,071

4742


($ in thousands)	($ in thousands)		Three Months Ended September 30, 2019																														($ in thousands)			Six Months Ended June 30, 2021
			Commercial																Consumer												Total						($ in thousands)				Commercial																Consumer												Total
			C&I				CRE												Residential Mortgage								Other Consumer														C&I				CRE												Residential Mortgage								Other Consumer
					CRE				Multifamily Residential				Construction and Land				Single- Family Residential				HELOCs									Total									CRE						Multifamily Residential				Construction and Land				Single- Family Residential				HELOCs

Allowance for loan losses, beginning of period	Allowance for loan losses, beginning of period				$	205,503			$	39,811			$	19,280			$	22,961			$	32,763			$	6,177			$			4,130		$	330,625					Allowance for loan losses, beginning of period			$	398,040			$	163,791			$	27,573			$	10,239			$	15,520			$	2,690			$	2,130			$	619,983
Provision for (reversal of) credit losses on loans		(a)	37,281				(3,213)				985				6,189				(2,877)				(326)				(160)					37,879
(Reversal of) provision for credit losses on loans																																						(Reversal of) provision for credit losses on loans		(a)		(18,747)				9,098				(6,776)				5,349				985				272				2,096				(7,723)
Gross charge-offs	Gross charge-offs		(25,098)				(1,021)				0				0				(11)				0				(12)				(26,142)							Gross charge-offs				(19,008)				(11,329)				(130)				(280)				(134)				(45)				(33)				(30,959)
Gross recoveries	Gross recoveries		1,648				1,896				42				21				60				5				7				3,679						Gross recoveries				2,098				402				1,258				335				159				21				5				4,278
Total net (charge-offs) recoveries	Total net (charge-offs) recoveries		(23,450)				875				42				21				49				5				(5)				(22,463)						Total net (charge-offs) recoveries				(16,910)				(10,927)				1,128				55				25				(24)				(28)				(26,681)
Foreign currency translation adjustment	Foreign currency translation adjustment		(465)				0				0				0				0				0				0				(465)						Foreign currency translation adjustment				145				0				0				0				0				0				0				145
Allowance for loan losses, end of period	Allowance for loan losses, end of period		$	218,869			$	37,473			$	20,307			$	29,171			$	29,935			$	5,856			$	3,965			$	345,576					Allowance for loan losses, end of period				$	362,528			$	161,962			$	21,925			$	15,643			$	16,530			$	2,938			$	4,198			$	585,724

($ in thousands) Nine Months Ended September 30, 2020
Commercial Consumer Total
C&I CRE Residential Mortgage Other
Consumer
CRE Multifamily
Residential Construction
and Land Single-
Family
Residential HELOCs
Allowance for loan losses, beginning of period $ 238,376 $ 40,509 $ 22,826 $ 19,404 $ 28,527 $ 5,265 $ 3,380 $ 358,287
Impact of ASU 2016-13 adoption
74,237 72,169 (8,112) (9,889) (3,670) (1,798) 2,221 125,158
Allowance for loan losses, January 1, 2020 312,613 112,678 14,714 9,515 24,857 3,467 5,601 483,445
Provision for (reversal of) credit losses on loans (a) 130,171 46,449 7,273 828 (2,659) (20) (3,197) 178,845
Gross charge-offs (57,466) (2,688) 0 0 0 (221) (180) (60,555)
Gross recoveries 3,395 10,371 1,820 58 424 47 94 16,209
Total net (charge-offs) recoveries (54,071) 7,683 1,820 58 424 (174) (86) (44,346)
Foreign currency translation adjustment 308 0 0 0 0 0 0 308
Allowance for loan losses, end of period $ 389,021 $ 166,810 $ 23,807 $ 10,401 $ 22,622 $ 3,273 $ 2,318 $ 618,252


($ in thousands)	($ in thousands)		Nine Months Ended September 30, 2019																														($ in thousands)			Six Months Ended June 30, 2020
			Commercial																Consumer												Total									($ in thousands)			Commercial																Consumer												Total
			C&I				CRE												Residential Mortgage								Other Consumer										($ in thousands)		C&I				CRE												Residential Mortgage								Other Consumer				Total
					CRE				Multifamily Residential				Construction and Land				Single- Family Residential				HELOCs									Total								CRE					Multifamily Residential				Construction and Land				Single- Family Residential				HELOCs

Allowance for loan losses, beginning of period	Allowance for loan losses, beginning of period				$	189,117			$	40,666			$	19,885			$	20,290			$	31,340			$	5,774			$			4,250		$	311,322							Allowance for loan losses, beginning of period			$	238,376			$	40,509			$	22,826			$	19,404			$	28,527			$	5,265			$	3,380			$	358,287
Impact of ASU 2016-13 adoption																																									Impact of ASU 2016-13 adoption			74,237				72,169				(8,112)				(9,889)				(3,670)				(1,798)				2,221				125,158
Allowance for loan losses, January 1, 2020																																								Allowance for loan losses, January 1, 2020			312,613				112,678				14,714				9,515				24,857				3,467				5,601				483,445
Provision for (reversal of) credit losses on loans	Provision for (reversal of) credit losses on loans	(a)	78,685				(6,127)				46				8,358				(1,528)				75				(259)					79,250									Provision for (reversal of) credit losses on loans	(a)		98,480				54,750				9,189				9,008				33				617				(3,121)				168,956

Gross charge-offs	Gross charge-offs		(54,087)				(1,021)				0				0				(11)				0				(40)				(55,159)									Gross charge-offs			(32,355)				(1,274)				0				0				0				(221)				(56)				(33,906)
Gross recoveries	Gross recoveries		5,612				3,955				376				523				134				7				14				10,621									Gross recoveries			2,177				9,886				1,155				28				424				4				94				13,768
Total net (charge-offs) recoveries	Total net (charge-offs) recoveries		(48,475)				2,934				376				523				123				7				(26)				(44,538)									Total net (charge-offs) recoveries			(30,178)				8,612				1,155				28				424				(217)				38				(20,138)
Foreign currency translation adjustment	Foreign currency translation adjustment		(458)				0				0				0				0				0				0				(458)									Foreign currency translation adjustment			(192)				0				0				0				0				0				0				(192)
Allowance for loan losses, end of period	Allowance for loan losses, end of period		$	218,869			$	37,473			$	20,307			$	29,171			$	29,935			$	5,856			$	3,965			$	345,576								Allowance for loan losses, end of period			$	380,723			$	176,040			$	25,058			$	18,551			$	25,314			$	3,867			$	2,518			$	632,071

The following table summarizes the ~~activity~~activities in the allowance for unfunded credit commitments for the three and ~~nine~~six months ended ~~September~~June 30, ~~2020~~2021 and ~~2019:~~2020:


($ in thousands)	($ in thousands)		Three Months Ended September 30,				Nine Months Ended September 30,				($ in thousands)		Three Months Ended June 30,				Six Months Ended June 30,
			2020		2019		2020		2019				2021		2020		2021		2020
Unfunded credit facilities	Unfunded credit facilities										Unfunded credit facilities
Allowance for unfunded credit commitments, beginning of period	Allowance for unfunded credit commitments, beginning of period		$	28,972	$	13,019	$	11,158	$	12,566	Allowance for unfunded credit commitments, beginning of period		$	32,529	$	20,829	$	33,577	$	11,158
Impact of ASU 2016-13 adoption	Impact of ASU 2016-13 adoption		0		0		10,457		0		Impact of ASU 2016-13 adoption		0		0		0		10,457

Provision for credit losses on unfunded credit commitments		(b)	111		405		7,468		858
(Reversal of) provision for credit losses on unfunded credit commitments											(Reversal of) provision for credit losses on unfunded credit commitments	(b)	(6,229)		8,143		(7,277)		7,357
Allowance for unfunded credit commitments, end of period	Allowance for unfunded credit commitments, end of period		$	29,083	$	13,424	$	29,083	$	13,424	Allowance for unfunded credit commitments, end of period		26,300		28,972		26,300		28,972

Provision for credit losses		(a) + (b)	$	10,000	$	38,284	$	186,313	$	80,108
(Reversal of) provision for credit losses											(Reversal of) provision for credit losses	(a) + (b)	$	(15,000)	$	102,443	$	(15,000)	$	176,313

The allowance for ~~loan~~credit losses as of ~~September~~June 30, ~~2020~~2021, was ~~$618.3~~$612.0 million, ~~an increase~~a decrease of ~~$260.0~~$41.6 million compared with ~~$358.3~~$653.6 million as of December 31, ~~2019.~~2020. The ~~overall increase~~change in the allowance for credit losses was comprised of a net decrease of $34.3 million in the allowance for loan losses and a $7.3 million decrease in the ~~provision~~allowance for unfunded credit commitments. An improved macroeconomic outlook resulted in an overall decrease in the required allowance for credit losses as of ~~$186.3~~June 30, 2021, leading to a $15.0 million reversal of credit losses for the ~~nine~~three and six months ended September 30, 2020 were primarily driven by the deteriorating macroeconomic conditions and outlook as a result of the COVID-19 pandemic. In addition, the adoption of ASU 2016-13 increased the allowance for loan losses by $125.2 million on January 1, 2020. For the three months ended September 30, 2020, the provision for loan losses was $10.0 million, largely reflecting the improvement in the macroeconomic conditions and outlook as compared to June 30, ~~2020.~~2021.

The allowance for unfunded credit commitments is maintained at a level that management believes to be sufficient to absorb estimated expected credit losses related to unfunded credit facilities. SeeNote 10 — Commitments and Contingenciesto the Consolidated Financial Statements in this Form 10-Q for additional information related to unfunded credit commitments.

The following table presents the Company’s allowance for loan losses and recorded investments by portfolio segments and impairment methodology as of December 31, 2019. This table is no longer presented after December 31, 2019, given the adoption of ASU 2016-13 on January 1, 2020, which has a single impairment methodology.

($ in thousands) December 31, 2019
Commercial Consumer Total
C&I CRE Residential Mortgage Other
Consumer
CRE Multifamily
Residential Construction
and Land Single-
Family
Residential HELOCs
Allowance for loan losses
Individually evaluated for impairment $ 2,881 $ 97 $ 55 $ 0 $ 35 $ 8 $ 2,517 $ 5,593
Collectively evaluated for impairment 235,495 40,412 22,771 19,404 28,492 5,257 863 352,694
Total $ 238,376 $ 40,509 $ 22,826 $ 19,404 $ 28,527 $ 5,265 $ 3,380 $ 358,287
Recorded investment in loans
Individually evaluated for impairment $ 114,042 $ 21,618 $ 4,464 $ 19,691 $ 22,211 $ 13,574 $ 2,517 $ 198,117
Collectively evaluated for impairment 12,035,079 10,143,629 2,829,748 608,768 7,006,768 1,453,162 280,397 34,357,551
Acquired with deteriorated credit quality (1)
1,810 113,201 22,162 40 79,611 6,047 0 222,871
Total (1)
$ 12,150,931 $ 10,278,448 $ 2,856,374 $ 628,499 $ 7,108,590 $ 1,472,783 $ 282,914 $ 34,778,539

~~(1)Loans net of ASC 310-10 discount.~~

~~Purchased Credit-Deteriorated Loans~~

On January 1, 2020, the amortized cost basis of PCD loans was adjusted to reflect the $1.2 million of allowance for loan losses. For the three and nine months ended September 30, 2020, the Company did not acquire any PCD loans. For information on PCD loans, see ~~Note 2 — Current Accounting Developments and Summary of Significant Accounting Policies~~ ~~to the Consolidated Financial Statements in this Form 10-Q.~~

~~The following table presents the changes in the accretable yield on PCI loans for the three and nine months ended September 30, 2019:~~

($ in thousands) Three Months Ended
September 30, 2019 Nine Months Ended
September 30, 2019
Accretable yield for PCI loans, beginning of period $ 64,053 $ 74,870
Accretion (6,198) (18,205)
Changes in expected cash flows (934) 256
Accretable yield for PCI loans, end of period $ 56,921 $ 56,921

Loans Held-for-Sale

As of ~~September~~June 30, ~~2020 and December 31, 2019,~~2021, loans held-for-sale of ~~$4.1~~$1.8 million consisted of $1.5 million and ~~$434~~$326 thousand ~~respectively,~~of C&I and single-family residential loans, respectively. As of December 31, 2020, loans held-for-sale of $1.8 million consisted of single-family residential loans. Refer to Note 1 — Summary of Significant Accounting Policies — Significant Accounting Policies — Loans Held-for-Sale to the Consolidated Financial Statements of the Company’s ~~2019~~2020 Form 10-K for additional details related to the Company’s loans held-for-sale.

Loan Transfers, Sales and Purchases

The Company purchases and sells loans in the secondary market in the ordinary course of business. Purchased loans may be transferred from held-for-investment to held-for-sale, and write-downs to allowance for loan losses are recorded, when appropriate. The following tables provide information about the carrying value of loans transferred, loans sold and purchased for the held-for-investment portfolio, ~~loans sold, and loans transferred from held-for-investment to held-for-sale at the lower of cost or fair value~~ during the three and ~~nine~~six months ended ~~September~~June 30, ~~2020~~2021 and ~~2019:~~2020:


($ in thousands)	($ in thousands)	Three Months Ended September 30, 2020																				($ in thousands)	Three Months Ended June 30, 2021
		Commercial																Consumer						Total		($ in thousands)				Commercial								Consumer								Total
		C&I				CRE												Residential Mortgage												C&I				CRE						Residential Mortgage
				CRE				Multifamily Residential				Construction and Land				Single-Family Residential											CRE												Single-Family Residential			Total
Loans transferred from held-for-investment to held-for-sale (1)	Loans transferred from held-for-investment to held-for-sale (1)			$	89,394			$	0			$	0			$	0			$	0								$	89,394			$	84,745			$	17,019						$	0				$	101,764

Sales (2)(3)(4)	Sales (2)(3)(4)	$	92,237			$	0			$	0			$	0			$	31,847								$	124,084		Sales (2)(3)(4)			$	84,503			$	17,019					$	2,658				$	104,180
Purchases(5)	Purchases(5)	$	0			$	0			$	838			$	0			$	17,294						$	18,132	Purchases(5)				$	66,415			$	0					$		165,163				$	231,578


($ in thousands)	($ in thousands)	Three Months Ended September 30, 2019																				($ in thousands)		Three Months Ended June 30, 2020
		Commercial																Consumer							Total		($ in thousands)				Commercial								Consumer										Total
		C&I				CRE												Residential Mortgage													C&I						CRE							Residential Mortgage
				CRE				Multifamily Residential				Construction and Land				Single-Family Residential							Total	C&I									Multifamily Residential									Single-Family Residential
Loans transferred from held-for-investment to held-for-sale (1)	Loans transferred from held-for-investment to held-for-sale (1)			$	34,071			$	14,969			$	0			$	0			$	0					$			49,040	$	33,060					$	0						$	0						$	33,060

Sales (2)(3)(4)	Sales (2)(3)(4)	$	37,986			$	14,969			$	0			$	0			$	2,708									$	55,663	Sales (2)(3)(4)				$	33,060					$	0						$	13,708						$	46,768
Purchases (5)	Purchases (5)	$	38,047			$	0			$	1,350			$	0			$	29,568							$	68,965		Purchases (5)			$	12,503					$	7						$	0						$	12,510



	Six Months Ended June 30, 2021
	Commercial						Consumer
			CRE				Residential Mortgage
($ in thousands)	C&I		CRE		Multifamily Residential			Single-Family Residential		Total
Loans transferred from held-for-investment to held-for-sale (1)	$	210,585	$	37,051	$	0		$	0	$	247,636

Sales (2)(3)(4)	$	210,382	$	37,051	$	0		$	10,164	$	257,597
Purchases (5)	$	245,093	$	0	$	370		$	296,963	$	542,426

5044

($ in thousands) Nine Months Ended September 30, 2020
Commercial Consumer Total
C&I CRE Residential Mortgage
CRE Multifamily
Residential Construction
and Land Single-Family
Residential
Loans transferred from held-for-investment to held-for-sale (1)
$ 246,052 $ 7,250 $ 0 $ 0 $ 0 $ 253,302
Sales (2)(3)(4)
$ 248,895 $ 7,250 $ 0 $ 0 $ 50,197 $ 306,342
Purchases (5)
$ 143,086 $ 0 $ 2,358 $ 0 $ 18,378 $ 163,822


($ in thousands)		Nine Months Ended September 30, 2019
		Commercial												Consumer					Total
		C&I			CRE									Residential Mortgage
																						Six Months Ended June 30, 2020
																									Commercial															Consumer
																														CRE										Residential Mortgage
($ in thousands)	($ in thousands)			C&I			CRE			Multifamily Residential			Construction and Land			Single-Family Residential					Total		($ in thousands)				C&I					CRE					Multifamily Residential						Single-Family Residential			Total
					$	31,624		$	0		$	1,573		$	0		$	222,434	Loans transferred from held-for-investment to held-for-sale (1)						$	136,033				$	7,250				$	0					$	0					$	143,283

		$	189,663		$	31,624		$	0		$	1,573		$	6,322				$	229,182				Sales (2)(3)(4)				$	136,033				$	7,250				$	0					$	18,350				$	161,633
Purchases (5)	Purchases (5)	$	304,341		$	0		$	7,302		$	0		$	83,607				$	395,250		Purchases (5)			$	143,086				$	0				$	1,520					$	1,084					$	145,690

(1)~~The Company recorded~~Includes write-downs of ~~$2.8~~$1.3 million to the allowance for loan losses related to loans transferred from held-for-investment to held-for-sale for ~~each of~~ the three and ~~nine~~six months ended ~~September~~June 30, ~~2020, and $36 thousand and $426 thousand~~2021. There were 0 write-downs for the ~~same periods in 2019, respectively.~~three and six months ended June 30, 2020.

(2)Includes originated loans sold of ~~$112.3~~$67.6 million and ~~$294.6~~$198.6 million for the three and ~~nine~~six months ended ~~September~~June 30, ~~2020,~~2021, respectively, and ~~$47.8~~$46.8 million and ~~$180.0~~$161.6 million for the ~~same periods in 2019,~~three and six months ended June 30, 2020, respectively. Originated loans sold ~~consist~~consisted primarily of C&I loans during the three and six months ended June 30, 2021. In comparison, originated loans sold consisted primarily of C&I and single-family residential loans ~~during~~for the three and ~~nine~~six months ended ~~September~~June 30, 2020. ~~In comparison, originated loans sold consist primarily of C&I loans for the same periods in 2019.~~

(3)Includes $36.6 million and $59.0 million of purchased loans ~~of $11.8 million~~ sold in the secondary market for ~~each of~~ the three and ~~nine~~six months ended ~~September~~June 30, ~~2020, and $7.9 million and $49.2 million~~2021, respectively. There were 0 purchased loans sold in the secondary market for the ~~same periods in 2019, respectively.~~three and six months ended June 30, 2020.

(4)Net gains on sales of loans were ~~$361 thousand~~$1.5 million and ~~$1.4~~$3.3 million for the three and ~~nine~~six months ended ~~September~~June 30, ~~2020,~~2021, respectively, and ~~$2.0 million~~$132 thousand and ~~$3.0~~$1.1 million for the ~~same periods in 2019,~~three and six months ended June 30, 2020, respectively.

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

Note 8 — Investments in Qualified Affordable Housing Partnerships, Tax Credit and Other Investments, Net and Variable Interest Entities

The ~~Community Reinvestment Act (“CRA”)~~CRA encourages banks to meet the credit needs of their communities, ~~for housing and other purposes,~~ particularly in low- and moderate-income individuals and neighborhoods. The Company invests in certain affordable housing projects in the form of ownership interests in limited partnerships or limited liability companies that qualify for CRA consideration and tax credits. These entities are formed to develop and operate apartment complexes designed as high-quality affordable housing for lower income tenants throughout the U.S. To fully utilize the available tax credits, each of these entities must meet the regulatory affordable housing requirements for a minimum 15-year compliance period. In addition to affordable housing projects, the Company also invests in ~~New Market Tax Credit~~small business investment companies and new market tax credit projects that qualify for CRA ~~credits,~~consideration, as well as eligible projects that qualify for renewable energy and historic tax credits. Investments in renewable energy tax credits help promote the development of renewable energy sources, and the investments in historic tax credits promote the rehabilitation of historic buildings and economic revitalization of the surrounding areas.

Investments in Qualified Affordable Housing Partnerships, Net

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

The following table presents the Company’s investments in qualified affordable housing partnerships, net, and related unfunded commitments as of ~~September~~June 30, ~~2020~~2021 and December 31, ~~2019:~~2020:


($ in thousands)	($ in thousands)	September 30, 2020		December 31, 2019		($ in thousands)	June 30, 2021		December 31, 2020
Investments in qualified affordable housing partnerships, net	Investments in qualified affordable housing partnerships, net	$	192,913	$	207,037	Investments in qualified affordable housing partnerships, net	$	287,432	$	213,555
Accrued expenses and other liabilities — Unfunded commitments	Accrued expenses and other liabilities — Unfunded commitments	$	58,695	$	80,294	Accrued expenses and other liabilities — Unfunded commitments	$	136,571	$	77,444

The following table presents additional information related to the Company’s investments in qualified affordable housing partnerships, net, for the three and ~~nine~~six months ended ~~September~~June 30, ~~2020~~2021 and ~~2019:~~2020:


($ in thousands)	($ in thousands)	Three Months Ended September 30,				Nine Months Ended September 30,				($ in thousands)	Three Months Ended June 30,				Six Months Ended June 30,
		2020		2019		2020		2019			2021		2020		2021		2020
Tax credits and other tax benefits recognized	Tax credits and other tax benefits recognized	$	11,402	$	11,539	$	34,205	$	34,871	Tax credits and other tax benefits recognized	$	10,052	$	11,772	$	21,080	$	22,803
Amortization expense included in income tax expense	Amortization expense included in income tax expense	$	8,975	$	8,452	$	26,507	$	27,006	Amortization expense included in income tax expense	$	7,736	$	9,148	$	16,448	$	17,532

Investments in Tax Credit and Other Investments, Net

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

The following table presents the Company’s investments in tax credit and other investments, net, and related unfunded commitments as of ~~September~~June 30, ~~2020~~2021 and December 31, ~~2019:~~2020:


($ in thousands)	($ in thousands)	September 30, 2020		December 31, 2019		($ in thousands)	June 30, 2021		December 31, 2020
Investments in tax credit and other investments, net	Investments in tax credit and other investments, net	$	254,512	$	254,140	Investments in tax credit and other investments, net	$	364,187	$	266,525
Accrued expenses and other liabilities — Unfunded commitments	Accrued expenses and other liabilities — Unfunded commitments	$	107,583	$	113,515	Accrued expenses and other liabilities — Unfunded commitments	$	195,631	$	105,282

Amortization of tax credit and other investments ~~was $12.3~~totaled $27.3 million and ~~$54.4~~$52.6 million, respectively, for the three and ~~nine~~six months ended ~~September~~June 30, ~~2020,~~2021, as compared with ~~$16.8~~$21.8 million and ~~$58.5~~$40.6 million, respectively, for the same periods in ~~2019.~~

There were 0 OTTI charges recorded on the Company’s investments in tax credits and other investments, net, during the three months ended September 30, 2020, while $1.7 million in OTTI charges were recorded during the three months ended September 30, 2019. The Company recorded $474 thousand and $11.6 million in OTTI charges for the nine months ended September 30, 2020 and 2019, respectively. The higher OTTI charges recorded during the nine months ended September 30, 2019 primarily included $7.0 million in OTTI charges related to the Company’s investment in DC Solar.2020.

~~Included in~~ ~~Investments in tax credit and other investments, net, on the Consolidated Balance Sheet were~~The Company held equity securities that are mutual funds with readily determinable fair values of ~~$31.3~~$26.8 million and ~~$31.7~~$31.3 million, as of ~~September~~June 30, ~~2020~~2021 and December 31, ~~2019,~~2020, respectively. The Company invested in these mutual funds for CRA purposes. These equity securities were ~~CRA investments~~ measured at fair value with changes in fair value recorded in net income. The Company recorded unrealized gains onof $69 thousand and $720 thousand related to these equity securities ~~of $55 thousand and $813 thousand during~~for the three ~~and nine~~ months ended ~~September~~June 30, 2021 and 2020, ~~respectively,~~respectively. For the six months ended June 30, 2021 and 2020, the Company recorded unrealized losses of $428 thousand and unrealized gains of ~~$188~~$758 thousand, respectively. Equity securities with readily determinable fair value were included in Investments in tax credit and ~~$955 thousand, respectively, for~~other investments, net on the ~~same periods in 2019.~~Consolidated Balance Sheet.

~~Included in~~ ~~Other Assets,~~ ~~on the Consolidated Balance Sheet were~~The Company held equity securities without readily determinable fair values totaling ~~$18.8~~$29.3 million and ~~$19.1~~$23.7 million as of ~~September~~June 30, ~~2020~~2021 and December 31, ~~2019,~~2020, respectively, which were measured using the measurement alternative at cost less impairment and adjusted for observable price changes. For the three and ~~nine~~six months ended ~~September~~June 30, ~~2020~~2021 and ~~2019,~~2020, there were 0 adjustments made to these securities. Equity securities without readily determinable fair values were included in Investments in tax credit and other investments, net and Other assets on the Consolidated Balance Sheet.

52Tax credit investments are evaluated for possible OTTI on an annual basis or when events or changes in circumstances suggest that the carrying amount of the tax credit investments may not be realizable. OTTI charges and impairment recoveries are recorded within Amortization of tax credit and other investments on the Consolidated Statement of Income. Refer to Note 3 — Fair Value Measurement and Fair Value of Financial Instruments to the Consolidated Financial Statements in this Form 10-Q for a discussion on the Company’s impairment evaluation and monitoring process of tax credit investments. For the three months ended June 30, 2021, the Company recorded impairment recoveries of $877 thousand related to 2 energy tax credit investments. For the six months ended June 30, 2021, the Company recorded $1.3 million of impairment recoveries related to 1 historic tax credit and 2 energy tax credits. In comparison, the Company recorded an impairment recovery of $109 thousand related to 1 historic tax credit investment for the three months ended June 30, 2020, and impairment recoveries of $259 thousand related to 2 historic tax credit investments for the six months ended June 30, 2020. NaN OTTI charges were recorded during the three and six months ended June 30, 2021. In comparison, the Company recorded a $733 thousand OTTI charge related to 1 historic tax credit and 1 CRA investment during the three and six months ended June 30, 2020.

Variable Interest Entities

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

Special purpose entities formed in connection with securitization transactions are generally considered VIEs. The Company is the servicer of multifamily residential loans it securitized in 2016. Because the Company does not have the power or hold a variable interest that could potentially be significant to this VIE, the multifamily securitization entity is not consolidated. A CLO is a VIE that purchases a pool of assets consisting primarily of non-investment grade corporate loans, and issues multiple tranches of notes to investors to fund the asset purchases and pay upfront expenses associated with forming the CLO. The Company ~~serves~~served as the collateral manager of a CLO that closed in ~~the fourth quarter of~~ 2019 and ~~has~~subsequently reassigned its portfolio manager responsibilities in 2020. The Company retained ~~substantially all of~~ the top three investment grade-rated ~~securities~~tranches issued by the ~~CLO. In accordance with GAAP,~~CLO, for which the ~~Company does not consolidate the CLO as it does not hold interests that could potentially be significant to the CLO. The Company’s maximum exposure to loss from the CLO is equal to the~~total carrying amount ~~of the retained securities, which~~ was ~~$283.4~~$291.5 million and ~~$284.7~~$287.5 million as of ~~September~~June 30, ~~2020~~2021 and December 31, ~~2019,~~2020, respectively.

Note 9 — Goodwill and Other Intangible Assets

Goodwill

Total goodwill was $465.7 million as of both ~~September~~June 30, ~~2020~~2021 and December 31, ~~2019. Goodwill represents the excess of the purchase price over the fair value of net assets acquired in an acquisition.~~2020. The ~~Company assesses~~Company’s annual goodwill ~~for~~ impairment ~~at the reporting unit level, equivalent to the same level as the Company’s business segments. This assessment~~testing is performed ~~on an annual basis~~ as of December 31 of each year, or more frequently ifas events occur or circumstances such as adverse changes in the economic or business environment, indicate there may be impairment. The Company organizes its operations into 3 reporting segments: (1) Consumer and Business Banking; (2) Commercial Banking; and (3) Other. For information on how the reporting units are identified and the components are aggregated, see ~~Note 15 — Business Segments~~ ~~to the Consolidated Financial Statements in this Form 10-Q.~~

There were 0 changes in the carrying amount of goodwill during the three and nine months ended September 30, 2020. The following table presents changes in the carrying amount of goodwill by reporting unit during the nine months ended September 30, 2019:

($ in thousands) Consumer
and
Business Banking Commercial
Banking Total
Beginning balance, January 1, 2019 $ 353,321 $ 112,226 $ 465,547
Acquisition of East West Markets, LLC 0 150 150
Ending balance, September 30, 2019 $ 353,321 $ 112,376 $ 465,697

~~Impairment Analysis~~

~~The Company performed its annual impairment analysis as of December 31, 2019, and concluded~~change that ~~there was 0 goodwill impairment as~~would more-likely-than-not reduce the fair value of ~~all~~a reporting ~~units exceeded the~~unit below its carrying ~~amount of each respective reporting unit. Given the economic and market deterioration as a result of the COVID-19 pandemic and public health response~~value. Additional information pertaining to contain it, the Company performed a goodwill impairment analysis as of March 31, 2020, and concluded that 0 impairment was warranted: the fair value of all reporting units exceeded the carrying amount of the respective reporting units. As of September 30, 2020, while there continued to be uncertainty about the duration of the COVID-19 pandemic, and its impact on the economic recovery, the Company did not note further stress to adverse macroeconomic and market conditions, deterioration of the Company’s financial performance, or any other significant events that would negatively impact the fair value of its reporting units as of September 30, 2020. Based on this, the Company concluded that there was 0accounting policy for goodwill ~~impairment. Refer to~~is summarized in Note 91 — Summary of Significant Accounting Policies — Goodwill and Other Intangible Assets to the Consolidated Financial Statements of the Company’s ~~2019~~2020 Form ~~10-K for additional details related to the Company’s~~10-K. The Company completed its annual goodwill impairment ~~analysis.~~testing as of December 31, 2020, and determined there was 0 goodwill impairment. As of June 30, 2021, the Company reviewed the macroeconomic conditions, including the impacts of the COVID-19 pandemic on its business performance and market capitalization, and concluded that goodwill was not impaired.

Core Deposit Intangibles

~~Core deposit intangibles represent the intangible value of depositor relationships resulting from deposit liabilities assumed in various acquisitions and are included in~~ ~~Other assets~~ on the Consolidated Balance Sheet. These intangibles are tested for impairment on an annual basis, or more frequently as events occur or current circumstances and conditions warrant. There were 0 impairment write-downs of the core deposit intangibles for each of the three and nine months ended September 30, 2020 and 2019.

The following table presents the gross carrying amount of core deposit intangible assets and accumulated amortization as of ~~September~~June 30, ~~2020~~2021 and December 31, ~~2019:~~2020:


($ in thousands)	($ in thousands)	September 30, 2020		December 31, 2019		($ in thousands)	June 30, 2021		December 31, 2020
Gross balance (1)	Gross balance (1)	$	86,099	$	86,099	Gross balance (1)	$	86,099	$	86,099
Accumulated amortization (1)	Accumulated amortization (1)	(78,899)		(76,088)		Accumulated amortization (1)	(81,164)		(79,722)
Net carrying balance (1)	Net carrying balance (1)	$	7,200	$	10,011	Net carrying balance (1)	$	4,935	$	6,377

(1)Excludes fully amortized core deposit intangible assets.

There were 0 impairment write-downs on core deposit intangibles during the three and six months ended June 30, 2021 and 2020.

Amortization Expense

The Company amortizes the core deposit intangibles based on the projected useful lives of the related deposits. The amortization expense related to the core deposit intangible assets was ~~$927~~$710 thousand and ~~$1.2 million~~$931 thousand for the three months ended ~~September~~June 30, ~~2020~~2021 and ~~2019,~~2020, respectively, and ~~$2.8~~$1.4 million and ~~$3.5~~$1.9 million for the ~~nine~~six months ended ~~September~~June 30, ~~2020~~2021 and ~~2019,~~2020, respectively.

The following table presents the estimated future amortization expense of core deposit intangibles as of ~~September~~June 30, ~~2020:~~2021:


($ in thousands)	($ in thousands)	Amount		($ in thousands)	Amount
Remainder of 2020		$	823
2021		2,749
Remainder of 2021				Remainder of 2021	$	1,308
2022	2022	1,865		2022	1,864
2023	2023	1,199		2023	1,199
2024	2024	553		2024	553
Thereafter		11
2025				2025	11

Total	Total	$	7,200	Total	$	4,935

5447

Note 10 — Commitments and Contingencies

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

The following table presents the Company’s credit-related commitments as of ~~September~~June 30, ~~2020~~2021 and December 31, ~~2019:~~2020:


							June 30, 2021										December 31, 2020
($ in thousands)	($ in thousands)	September 30, 2020		December 31, 2019		($ in thousands)	Expire in One Year or Less		Expire After One Year Through Three Years		Expire After Three Years Through Five Years		Expire After Five Years		Total		Total
Loan commitments	Loan commitments	$	5,451,060	$	5,330,211	Loan commitments	$	3,051,435	$	2,044,785	$	621,980	$	170,089	$	5,888,289	$	5,690,847
Commercial letters of credit and SBLCs	Commercial letters of credit and SBLCs	$	2,118,278	$	1,860,414	Commercial letters of credit and SBLCs	1,195,372		351,903		170,148		535,953		2,253,376		2,240,813
Total						Total	$	4,246,807	$	2,396,688	$	792,128	$	706,042	$	8,141,665	$	7,931,660

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

Commercial letters of credit are issued to facilitate domestic and foreign trade transactions, while SBLCs are generally contingent upon the failure of the customers to perform according to the terms of the underlying contract with the third party. As a result, the total contractual amounts do not necessarily represent future funding requirements. The Company’s historical experience is that SBLCs typically expire without being funded. Additionally, in many cases, the Company holds collateral in various forms against these SBLCs. As part of its risk management activities, the Company monitors the creditworthiness of customers in conjunction with its SBLC exposure. Customers are obligated to reimburse the Company for any payment made on the customers’ behalf. If the customers fail to pay, the Company would, as applicable, liquidate the collateral and/or offset existing accounts. As of ~~September~~June 30, ~~2020,~~2021, total letters of credit of ~~$2.12~~$2.25 billion consisted of SBLCs of ~~$2.05~~$2.17 billion and commercial letters of credit of ~~$72.3~~$87.4 million. As of December 31, ~~2019,~~2020, total letters of credit of ~~$1.86~~$2.24 billion ~~were comprised~~consisted of SBLCs of ~~$1.81~~$2.12 billion and commercial letters of credit of ~~$48.5~~$124.9 million. As of both June 30, 2021 and December 31, 2020, substantially all SBLCs were rated as “Pass” by the Bank’s internal credit risk rating system.

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

Estimated exposure to loss from these commitments is included in the allowance for unfunded credit commitments and amounted to ~~$29.0~~$26.2 million and $33.5 million as of ~~September~~June 30, ~~2020,~~2021 and ~~$11.1 million as of~~ December 31, ~~2019.~~2020, respectively.

Guarantees — ~~The~~From time to time, the Company sells or securitizes single-family and multifamily residential loans with recourse in the ordinary course of business. The ~~recourse component of the loans sold or securitized with recourse is considered a guarantee. As the guarantor, the~~ Company is obligated to repurchase up to the recourse ~~component~~percentage of the loans if the loans default. The following table presents the ~~types~~carrying amounts of ~~guarantees~~loans sold or securitized with recourse and the ~~Company had outstanding~~maximum potential future payments as of ~~September~~June 30, ~~2020~~2021 and December 31, ~~2019:~~2020:


											Maximum Potential Future Payments												Carrying Value
											June 30, 2021										December 31, 2020		June 30, 2021		December 31, 2020
($ in thousands)	($ in thousands)	Maximum Potential Future Payments				Carrying Value				($ in thousands)	Expire in One Year or Less		Expire After One Year Through Three Years		Expire After Three Years Through Five Years		Expire After Five Years		Total		Total		Total		Total
		September 30, 2020		December 31, 2019		September 30, 2020		December 31, 2019
Single-family residential loans sold or securitized with recourse	Single-family residential loans sold or securitized with recourse	$	11,069	$	12,578	$	11,069	$	12,578	Single-family residential loans sold or securitized with recourse	$	41	$	396	$	208	$	8,766	$	9,411	$	10,526	$	9,411	$	10,526
Multifamily residential loans sold or securitized with recourse		15,677		15,892		27,589		40,708
Multi-family residential loans sold or securitized with recourse										Multi-family residential loans sold or securitized with recourse	0		193		0		14,996		15,189		15,672		24,562		26,619
Total	Total	$	26,746	$	28,470	$	38,658	$	53,286	Total	$	41	$	589	$	208	$	23,762	$	24,600	$	26,198	$	33,973	$	37,145

The Company’s recourse reserve related to these guarantees is included in the allowance for unfunded credit commitments and totaled ~~$76~~$68 thousand and $88 thousand as of ~~both September~~June 30, ~~2020~~2021 and December 31, ~~2019.~~2020, respectively. The allowance for unfunded credit commitments is included in Accrued expenses and other liabilities on the Consolidated Balance Sheet. The Company continues to experience minimal losses from the single-family and multifamily residential loan portfolios sold or securitized with recourse.

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

Other Commitments — The Company has commitments to invest in qualified affordable housing partnerships, tax credit and other investments as discussed in Note 8 — Investments in Qualified Affordable Housing Partnerships, Tax Credit and Other Investments, Net and Variable Interest Entities to the Consolidated Financial Statements in this Form 10-Q. As of ~~September~~June 30, ~~2020~~2021 and December 31, ~~2019,~~2020, these commitments were ~~$166.3~~$332.2 million and ~~$193.8~~$182.7 million, respectively. These commitments are included in Accrued expenses and other liabilities on the Consolidated Balance Sheet.

Note 11 ~~— Revenue from Contracts with Customers~~

~~The following tables present revenue from contracts with customers within the scope of ASC 606,~~ ~~Revenue from Contracts with Customers, and other noninterest income, segregated by operating segments for the three and nine months ended September 30, 2020 and 2019:~~

($ in thousands) Three Months Ended September 30, 2020
Consumer and
Business
Banking Commercial
Banking Other Total
Noninterest income:
Revenue from contracts with customers:
Deposit account fees:
Deposit service charges and related fee income $ 6,995 $ 4,539 $ 7 $ 11,541
Card income 848 184 0 1,032
Wealth management fees 4,553 0 0 4,553
Total revenue from contracts with customers $ 12,396 $ 4,723 $ 7 $ 17,126
Other sources of noninterest income (1)
5,030 24,261 3,163 32,454
Total noninterest income $ 17,426 $ 28,984 $ 3,170 $ 49,580

($ in thousands) Three Months Ended September 30, 2019
Consumer and
Business
Banking Commercial
Banking Other Total
Noninterest income:
Revenue from contracts with customers:
Deposit account fees:
Deposit service charges and related fee income $ 5,345 $ 3,434 $ 9 $ 8,788
Card income 796 145 0 941
Wealth management fees 4,644 197 0 4,841
Total revenue from contracts with customers $ 10,785 $ 3,776 $ 9 $ 14,570
Other sources of noninterest income (1)
4,318 29,955 2,631 36,904
Total noninterest income $ 15,103 $ 33,731 $ 2,640 $ 51,474

($ in thousands) Nine Months Ended September 30, 2020
Consumer and
Business
Banking Commercial
Banking Other Total
Noninterest income:
Revenue from contracts with customers:
Deposit account fees:
Deposit service charges and related fee income $ 18,705 $ 12,242 $ 54 $ 31,001
Card income 2,385 506 0 2,891
Wealth management fees 12,257 740 0 12,997
Total revenue from contracts with customers $ 33,347 $ 13,488 $ 54 $ 46,889
Other sources of noninterest income (1)
14,424 81,839 19,114 115,377
Total noninterest income $ 47,771 $ 95,327 $ 19,168 $ 162,266

($ in thousands) Nine Months Ended September 30, 2019
Consumer and
Business
Banking Commercial
Banking Other Total
Noninterest income:
Revenue from contracts with customers:
Deposit account fees:
Deposit service charges and related fee income $ 15,975 $ 10,007 $ 35 $ 26,017
Card income 2,303 484 0 2,787
Wealth management fees 11,877 538 0 12,415
Total revenue from contracts with customers $ 30,155 $ 11,029 $ 35 $ 41,219
Other sources of noninterest income (1)
13,223 80,902 11,020 105,145
Total noninterest income $ 43,378 $ 91,931 $ 11,055 $ 146,364

~~(1)Primarily represents revenue from contracts with customers that are out of the scope of ASC 606,~~ ~~Revenue from Contracts with Customers~~.

Generally, the Company recognizes revenue from contracts with customers when it satisfies its performance obligations. The Company’s performance obligations are typically satisfied as services are rendered. The Company generally records contract liabilities, or deferred revenue, when payments from customers are received or due in advance of providing services. The Company records contract assets when services are provided to customers before payment is received or before payment is due. Since the Company receives payments for its services during the period or at the time services are provided, there were 0 contract assets or contract liabilities as of both September 30, 2020 and December 31, 2019.

~~The major revenue streams by fee type that are within the scope of ASC 606 presented in the above tables are described in additional detail below:~~

~~Deposit Account Fees — Deposit Service Charges and Related Fee Income~~

The Company offers a range of deposit products to individuals and businesses, which includes savings, money market, checking and time deposit accounts. The deposit account services include ongoing account maintenance, as well as certain optional services such as automated teller machine usage, wire transfer services or check orders. In addition, treasury management and business account analysis services are offered to commercial deposit customers. The monthly account fees may vary with the amount of average monthly deposit balances maintained, or the Company may charge a fixed monthly account maintenance fee if certain average balances are not maintained. In addition, each time a deposit customer selects an optional service, the Company may earn transactional fees, generally recognized by the Company at the point when the transaction occurs. For business analysis accounts, commercial deposit customers receive an earnings credit based on their account balance, which can be used to offset the cost of banking and treasury management services. Business analysis accounts that are assessed fees in excess of earnings credits received are typically charged at the end of each month, after all transactions are known and the credits are calculated.

~~Deposit Account Fees — Card Income~~

Card income is comprised of merchant referral fees and interchange income. For merchant referral fees, the Company provides marketing and referral services to acquiring banks for merchant card processing services and earns variable referral fees based on transaction activities. The Company satisfies its performance obligation over time as the Company identifies, solicits, and refers business customers who are provided such services. The Company receives monthly fees net of consideration it pays to the acquiring bank performing the merchant card processing services. The Company recognizes revenue on a monthly basis when the uncertainty associated with the variable referral fees is resolved after the Company receives monthly statements from the acquiring bank. For interchange income, the Company, as a card issuer, has a stand ready performance obligation to authorize, clear, and settle card transactions. The Company earns, or pays, interchange fees, which are percentage-based on each transaction, and based on rates published by the corresponding payment network for transactions processed using their network. The Company measures its progress toward the satisfaction of its performance obligation over time, as services are rendered, and the Company provides continuous access to this service and settles transactions as its customer or the payment network requires. Interchange income is presented net of direct costs paid to the customer and entities in their distribution chain, which are transaction-based expenses such as rewards program expenses and certain network costs. Revenue is recognized when the net profit is determined by the payment networks at the end of each day.

~~Wealth Management Fees~~

The Company provides investment planning services for customers including wealth management services, asset allocation strategies, portfolio analysis and monitoring, investment strategies, and risk management strategies. The fees the Company earns are variable and are generally received monthly. The Company recognizes revenue for the services performed at quarter-end based on actual transaction details received from the broker-dealer the Company engages.

~~Practical Expedients and Exemptions~~

The Company applies the practical expedient in ASC 606-10-50-14 and does not disclose the value of unsatisfied performance obligations as the Company’s contracts with customers generally have a term that is less than one year, are open-ended with a cancellation period that is less than one year, or allow the Company to recognize revenue in the amount to which the Company has the right to invoice.

In addition, given the short-term nature of the contracts, the Company also applies the practical expedient in ASC 606-10-32-18 and does not adjust the consideration from customers for the effects of a significant financing component, if at contract inception, the period between when the entity transfers the goods or services and when the customer pays for that good or service is one year or less.

~~Note 12~~ — Stock Compensation Plans

Pursuant to the Company’s 2016 Stock Incentive Plan, as amended, the Company may issue stocks, stock options, restricted stock, restricted stock units (“RSUs”), stock purchase warrants, stock appreciation rights, phantom stock and dividend equivalents to eligible employees, non-employee directors, consultants, and other service providers of the Company and its subsidiaries. ~~There~~The Company has granted RSUs as its primary incentive awards. Stock options have not been issued since 2011 and 0 stock options were 0 outstanding ~~stock awards other than RSUs~~ as of both ~~September~~June 30, ~~2020~~2021 and December 31, ~~2019.~~2020.

The following table presents a summary of the total share-based compensation expense and the related net tax benefits (deficiencies) ~~benefits~~ associated with the Company’s various employee share-based compensation plans for the three and ~~nine~~six months ended ~~September~~June 30, ~~2020~~2021 and ~~2019:~~2020:


($ in thousands)	($ in thousands)	Three Months Ended September 30,				Nine Months Ended September 30,				($ in thousands)	Three Months Ended June 30,				Six Months Ended June 30,
		2020		2019		2020		2019			2021		2020		2021		2020
Stock compensation costs	Stock compensation costs	$	7,921	$	7,487	$	22,201	$	23,012	Stock compensation costs	$	8,208	$	7,071	$	16,025	$	14,280
Related net tax (deficiencies) benefits for stock compensation plans		$	(14)	$	15	$	(1,589)	$	4,723
Related net tax benefits (deficiencies) for stock compensation plans										Related net tax benefits (deficiencies) for stock compensation plans	$	37	$	(9)	$	1,657	$	(1,575)

Restricted Stock Units — RSUs are granted under the Company’s long-term incentive plan at no cost to the recipient. RSUs ~~vest ratably after three years or~~generally cliff vest after three ~~or five~~ 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 ~~will be~~are settled in cash. ~~RSUs entitle the recipient to receive cash dividend equivalents to any dividends paid on the underlying common stock during the period RSUs are outstanding. The dividends~~Dividends are accrued during the vesting period and ~~are~~ paid at the time of vesting. While a portion of RSUs are ~~time-vesting~~time-based vesting awards, others vest subject to the attainment of specified performance goals, referred to as “performance-based RSUs.” ~~Substantially all RSUs are subject to forfeiture until vested unless otherwise specified in the employment terms.~~

Performance-based RSUs are granted atannually upon approval by the ~~target amount of awards. Based~~Company’s Compensation Committee based on the ~~Company’s attainment~~performance in the year prior to the grant date of ~~specified performance goals and consideration of market conditions,~~ the award. The number of ~~shares~~awards that vest can ~~be adjusted to a minimum of 0% and~~range from 0 to a maximum of 200% of the ~~target. The amount~~granted number of ~~performance-based RSUs that are eligible to vest is determined at~~awards based on the ~~end~~Company’s achievement of ~~each~~specified performance criteria over a performance period ~~and is then added together as the total number~~ of ~~performance shares to vest. Performance-based RSUs cliff vest~~ three ~~years from the date of each grant.~~years.

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

The following table presents a summary of the activities for the Company’s time-based and performance-based RSUs that will be settled in shares for the ~~nine~~six months ended ~~September~~June 30, ~~2020.~~2021. The number of ~~outstanding~~ performance-based RSUs stated below ~~assumes~~reflects the ~~associated performance targets will be met at~~number of awards granted on the ~~target level.~~grant date.


		Time-Based RSUs	Performance-Based RSUs							Time-Based RSUs	Performance-Based RSUs
			Shares	Weighted-Average Grant Date Fair Value		Shares	Weighted-Average Grant Date Fair Value					Shares	Weighted-Average Grant Date Fair Value		Shares	Weighted-Average Grant Date Fair Value
Outstanding, January 1, 2020			1,139,868	$	57.78	386,483	$	60.13
Outstanding, January 1, 2021									Outstanding, January 1, 2021			1,345,635	$	50.22	398,057	$	53.66
Granted	Granted		657,593	40.51		165,084	39.79		Granted			382,359	71.41		91,960	77.67
Vested	Vested		(253,726)	54.49		(131,597)	56.59		Vested			(285,513)	67.26		(120,286)	70.13
Forfeited	Forfeited		(144,944)	53.32		0	0		Forfeited			(65,648)	56.26		0	0
Outstanding, September 30, 2020			1,398,791	$	50.72	419,970	$	53.24
Outstanding, June 30, 2021									Outstanding, June 30, 2021			1,376,833	$	52.28	369,731	$	54.28

The following table presents a summary of the activities for the Company’s time-based RSUs that will be ~~settled~~vested in cash for the ~~nine~~six months ended ~~September~~June 30, ~~2020:~~2021:

Outstanding, January 1, ~~2020~~2021

~~11,638~~21,802

Granted

~~11,215~~15,803

Vested

Forfeited

~~(764)~~(8,432)

Outstanding, ~~September~~June 30, ~~2020~~2021

~~22,089~~29,173

As of ~~September~~June 30, ~~2020,~~2021, there were ~~$26.4~~$32.3 million and ~~$16.8~~$19.4 million of total unrecognized compensation costs related to unvested time-based and performance-based RSUs, respectively. These costs are expected to be recognized over a weighted-average period of ~~1.87~~2.04 years and ~~1.88~~2.10 years, respectively.

Note 1312 — Stockholders’ Equity and Earnings Per Share

The following table presents the basic and diluted EPS calculations for the three and ~~nine~~six months ended ~~September~~June 30, ~~2020~~2021 and ~~2019.~~2020. 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 ~~2019~~2020 Form 10-K.


($ and shares in thousands, except per share data)	($ and shares in thousands, except per share data)	Three Months Ended September 30,				Nine Months Ended September 30,				($ and shares in thousands, except per share data)	Three Months Ended June 30,				Six Months Ended June 30,
		2020		2019		2020		2019			2021		2020		2021		2020
Basic:	Basic:									Basic:
Net income	Net income	$	159,537	$	171,416	$	403,713	$	485,820	Net income	$	224,742	$	99,352	$	429,736	$	244,176
Basic weighted-average number of shares outstanding	Basic weighted-average number of shares outstanding	141,498		145,559		142,595		145,455		Basic weighted-average number of shares outstanding	141,868		141,486		141,758		143,150
Basic EPS	Basic EPS	$	1.13	$	1.18	$	2.83	$	3.34	Basic EPS	$	1.58	$	0.70	$	3.03	$	1.71
Diluted:	Diluted:									Diluted:
Net income	Net income	$	159,537	$	171,416	$	403,713	$	485,820	Net income	$	224,742	$	99,352	$	429,736	$	244,176
Basic weighted-average number of shares outstanding (1)		141,498		145,559		142,595		145,455
Basic weighted-average number of shares outstanding										Basic weighted-average number of shares outstanding	141,868		141,486		141,758		143,150
Diluted potential common shares ~~(2)~~(1)	Diluted potential common shares ~~(2)~~(1)	545		561		487		633		Diluted potential common shares ~~(2)~~(1)	1,172		341		1,205		410
Diluted weighted-average number of shares outstanding ~~(2)~~(1)	Diluted weighted-average number of shares outstanding ~~(2)~~(1)	142,043		146,120		143,082		146,088		Diluted weighted-average number of shares outstanding ~~(2)~~(1)	143,040		141,827		142,963		143,560
Diluted EPS	Diluted EPS	$	1.12	$	1.17	$	2.82	$	3.33	Diluted EPS	$	1.57	$	0.70	$	3.01	$	1.70

(1)The Company acquired MetroCorp Bancshares, Inc. (“MetroCorp”) on January 17, 2014. Prior to the acquisition, MetroCorp had outstanding warrants to purchase 771,429 shares of its common stock. Upon the acquisition, the rights of the warrant holders were converted into the rights to acquire 230,282 shares of East West’s common stock until January 16, 2019. All warrants were exercised on January 7, 2019.

~~(2)~~Includes dilutive shares from RSUs for the three and ~~nine~~six months ended ~~September~~June 30, ~~2020~~2021 and ~~2019.~~2020.

For the three and ~~nine~~six months ended ~~September~~June 30, ~~2020, 124 thousand~~2021, 2000 and ~~123 thousand~~4000 weighted-average shares of anti-dilutive RSUs, respectively, were excluded from the diluted EPS computation. In comparison, ~~564 thousand~~1.2 million and ~~277~~620 thousand weighted-average shares of anti-dilutive RSUs, respectively, were excluded from the diluted EPS computation for the three and ~~nine~~six months ended ~~September~~June 30, ~~2019.~~2020.

Stock Repurchase Program — ~~On March 3,~~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, 2020, there were 0 share repurchases. For the nine months ended September 30, 2020,~~stock, and the Company repurchased 4,471,682 shares at an average price of $32.64 per share, ~~and~~for a total cost of $146.0 million. The Company did not repurchase any shares during the three and ~~nine~~six months ended ~~September~~June 30, ~~2019.~~2021.

Note 1413 — Accumulated Other Comprehensive Income (Loss)

The following ~~tables present~~table presents the changes in the components of AOCI balances for the three and ~~nine~~six months ended ~~September~~June 30, ~~2020~~2021 and ~~2019:~~2020:


($ in thousands)	($ in thousands)	AFS Debt Securities		Cash Flow Hedges		Foreign Currency Translation Adjustments (1)		Total		($ in thousands)	AFS Debt Securities		Cash Flow Hedges		Foreign Currency Translation Adjustments (1)		Total
Balance, July 1, 2019		$	5,217	$	0	$	(15,189)	$	(9,972)
Balance, April 1, 2020										Balance, April 1, 2020	$	25,034	$	0	$	(18,153)	$	6,881
Net unrealized gains (losses) arising during the period	Net unrealized gains (losses) arising during the period	11,904		0		(2,858)		9,046		Net unrealized gains (losses) arising during the period	24,606		(1,063)		(230)		23,313
Amounts reclassified from AOCI	Amounts reclassified from AOCI	(41)		0		0		(41)		Amounts reclassified from AOCI	(6,790)		(270)		0		(7,060)
Changes, net of tax	Changes, net of tax	11,863		0		(2,858)		9,005		Changes, net of tax	17,816		(1,333)		(230)		16,253
Balance, September 30, 2019		$	17,080	$	0	$	(18,047)	$	(967)
Balance, June 30, 2020										Balance, June 30, 2020	$	42,850	$	(1,333)	$	(18,383)	$	23,134

Balance, July 1, 2020		$	42,850	$	(1,333)	$	(18,383)	$	23,134
Balance, April 1, 2021										Balance, April 1, 2021	$	(81,201)	$	(798)	$	(8,041)	$	(90,040)
Net unrealized gains (losses) arising during the period	Net unrealized gains (losses) arising during the period	5,126		25		5,459		10,610		Net unrealized gains (losses) arising during the period	73,494		(76)		2,234		75,652
Amounts reclassified from AOCI	Amounts reclassified from AOCI	(492)		62		0		(430)		Amounts reclassified from AOCI	(445)		144		0		(301)
Changes, net of tax	Changes, net of tax	4,634		87		5,459		10,180		Changes, net of tax	73,049		68		2,234		75,351
Balance, September 30, 2020		$	47,484	$	(1,246)	$	(12,924)	$	33,314
Balance, June 30, 2021										Balance, June 30, 2021	$	(8,152)	$	(730)	$	(5,807)	$	(14,689)

6051


($ in thousands)	($ in thousands)	AFS Debt Securities		Cash Flow Hedges		Foreign Currency Translation Adjustments (1)		Total		($ in thousands)	AFS Debt Securities		Cash Flow Hedges		Foreign Currency Translation Adjustments (1)		Total
Balance, January 1, 2019		$	(45,821)	$	0	$	(12,353)	$	(58,174)
Net unrealized gains (losses) arising during the period		65,061		0		(5,694)		59,367
Amounts reclassified from AOCI		(2,160)		0		0		(2,160)
Changes, net of tax		62,901		0		(5,694)		57,207
Balance, September 30, 2019		$	17,080	$	0	$	(18,047)	$	(967)
Balance, January 1, 2020	Balance, January 1, 2020	$	(2,419)	$	0	$	(15,989)	$	(18,408)	Balance, January 1, 2020	$	(2,419)	$	0	$	(15,989)	$	(18,408)
Net unrealized gains (losses) arising during the period	Net unrealized gains (losses) arising during the period	58,262		(1,038)		3,065		60,289		Net unrealized gains (losses) arising during the period	53,136		(1,063)		(2,394)		49,679
Amounts reclassified from AOCI	Amounts reclassified from AOCI	(8,359)		(208)		0		(8,567)		Amounts reclassified from AOCI	(7,867)		(270)		0		(8,137)
Changes, net of tax	Changes, net of tax	49,903		(1,246)		3,065		51,722		Changes, net of tax	45,269		(1,333)		(2,394)		41,542
Balance, September 30, 2020		$	47,484	$	(1,246)	$	(12,924)	$	33,314
Balance, June 30, 2020										Balance, June 30, 2020	$	42,850	$	(1,333)	$	(18,383)	$	23,134

Balance, January 1, 2021										Balance, January 1, 2021	$	52,247	$	(1,230)	$	(6,692)	$	44,325
Net unrealized (losses) gains arising during the period										Net unrealized (losses) gains arising during the period	(59,819)		229		885		(58,705)
Amounts reclassified from AOCI										Amounts reclassified from AOCI	(580)		271		0		(309)
Changes, net of tax										Changes, net of tax	(60,399)		500		885		(59,014)
Balance, June 30, 2021										Balance, June 30, 2021	$	(8,152)	$	(730)	$	(5,807)	$	(14,689)

(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 RMB and USD, respectively.

The following ~~tables present~~table presents the components of other comprehensive income (loss), reclassifications to net income and the related tax effects for the three and ~~nine~~six months ended ~~September~~June 30, ~~2020~~2021 and ~~2019:~~2020:


($ in thousands)	($ in thousands)	Three Months Ended September 30,												($ in thousands)	Three Months Ended June 30,
		2020						2019							2021						2020
		Before-Tax		Tax Effect		Net-of-Tax		Before-Tax		Tax Effect		Net-of-Tax			Before-Tax		Tax Effect		Net-of-Tax		Before-Tax		Tax Effect		Net-of-Tax
AFS debt securities:	AFS debt securities:													AFS debt securities:
Net unrealized gains arising during the period	Net unrealized gains arising during the period	$	7,304	$	(2,178)	$	5,126	$	16,900	$	(4,996)	$	11,904	Net unrealized gains arising during the period	$	104,283	$	(30,789)	$	73,494	$	34,970	$	(10,364)	$	24,606
Net realized (gains) reclassified into net income (1)	Net realized (gains) reclassified into net income (1)	(698)		206		(492)		(58)		17		(41)		Net realized (gains) reclassified into net income (1)	(632)		187		(445)		(9,640)		2,850		(6,790)
Net change	Net change	6,606		(1,972)		4,634		16,842		(4,979)		11,863		Net change	103,651		(30,602)		73,049		25,330		(7,514)		17,816
Cash flow hedges
Net unrealized gains arising during the period		34		(9)		25		0		0		0
Net realized losses reclassified into net income (2)		87		(25)		62		0		0		0
Cash flow hedges:														Cash flow hedges:
Net unrealized losses arising during the period														Net unrealized losses arising during the period	(106)		30		(76)		(1,483)		420		(1,063)
Net realized losses (gains) reclassified into net income (2)														Net realized losses (gains) reclassified into net income (2)	201		(57)		144		(377)		107		(270)
Net change	Net change	121		(34)		87		0		0		0		Net change	95		(27)		68		(1,860)		527		(1,333)
Foreign currency translation adjustments, net of hedges:	Foreign currency translation adjustments, net of hedges:													Foreign currency translation adjustments, net of hedges:
Net unrealized gains (losses) arising during the period	Net unrealized gains (losses) arising during the period	4,419		1,040		5,459		(1,618)		(1,240)		(2,858)		Net unrealized gains (losses) arising during the period	1,584		650		2,234		(379)		149		(230)
Net change	Net change	4,419		1,040		5,459		(1,618)		(1,240)		(2,858)		Net change	1,584		650		2,234		(379)		149		(230)
Other comprehensive income (loss)		$	11,146	$	(966)	$	10,180	$	15,224	$	(6,219)	$	9,005
Other comprehensive income														Other comprehensive income	$	105,330	$	(29,979)	$	75,351	$	23,091	$	(6,838)	$	16,253

($ in thousands) Nine Months Ended September 30,
2020 2019
Before-Tax Tax Effect Net-of-Tax Before-Tax Tax Effect Net-of-Tax
AFS debt securities:
Net unrealized gains arising during the period $ 82,767 $ (24,505) $ 58,262 $ 92,369 $ (27,308) $ 65,061
Net realized (gains) reclassified into net income (1)
(11,867) 3,508 (8,359) (3,066) 906 (2,160)
Net change 70,900 (20,997) 49,903 89,303 (26,402) 62,901
Cash flow hedges
Net unrealized (losses) arising during the period (1,449) 411 (1,038) 0 0 0
Net realized (gains) reclassified into net income (2)
(290) 82 (208) 0 0 0
Net change (1,739) 493 (1,246) 0 0 0
Foreign currency translation adjustments, net of hedges:
Net unrealized gains (losses) arising during the period 2,274 791 3,065 (1,427) (4,267) (5,694)
Net change 2,274 791 3,065 (1,427) (4,267) (5,694)
Other comprehensive income (loss) $ 71,435 $ (19,713) $ 51,722 $ 87,876 $ (30,669) $ 57,207



($ in thousands)	Six Months Ended June 30,
	2021						2020
	Before-Tax		Tax Effect		Net-of-Tax		Before-Tax		Tax Effect		Net-of-Tax
AFS debt securities:
Net unrealized (losses) gains arising during the period	$	(84,993)	$	25,174	$	(59,819)	$	75,463	$	(22,327)	$	53,136
Net realized (gains) reclassified into net income (1)	(824)		244		(580)		(11,169)		3,302		(7,867)
Net change	(85,817)		25,418		(60,399)		64,294		(19,025)		45,269
Cash flow hedges:
Net unrealized gains (losses) arising during the period	320		(91)		$	229	(1,483)		420		(1,063)
Net realized losses (gains) reclassified into net income (2)	378		(107)		271		(377)		107		(270)
Net change	698		(198)		500		(1,860)		527		(1,333)
Foreign currency translation adjustments, net of hedges:
Net unrealized gains (losses) arising during the period	275		610		885		(2,145)		(249)		(2,394)
Net change	275		610		885		(2,145)		(249)		(2,394)
Other comprehensive (loss) income	$	(84,844)	$	25,830	$	(59,014)	$	60,289	$	(18,747)	$	41,542

(1)For the three and ~~nine~~six months ended ~~September~~June 30, ~~2020~~2021 and ~~2019,~~2020, pre-tax amounts were reported in Gains on sales of AFS debt securities on the Consolidated Statement of Income.

(2)For the three and ~~nine~~six months ended ~~September~~June 30, ~~2020~~2021 and ~~2019,~~2020, pre-tax amounts were reported in Interest expense on the Consolidated Statement of Income.

Note 1514 — Business Segments

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

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

The remaining centralized functions, including the corporate treasury activities of the Company and eliminations of inter-segment amounts, have been aggregated and included in the Other segment, which provides broad administrative support to the 2 core segments, namely the Consumer and Business Banking and the Commercial Banking segments.

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

The corporate treasury function within the Other segment is responsible for the Company’s liquidity and interest rate ~~management of the Company.~~management. The Company’s internal FTP process is also managed by the corporate treasury function within the Other segment. The process is formulated with the goal of encouraging loan and deposit growth that is consistent with the Company’s overall profitability objectives, as well as to provide a reasonable and consistent basis for the measurement of its business segments’ net interest margins and profitability. The FTP process charges a cost to fund loans (“FTP charges for loans”) and allocates credits for funds provided from deposits (“FTP credits for deposits”) using internal FTP rates. FTP charges for loans are determined based on a matched cost of funds, which is tied to the pricing and term characteristics of the loans. FTP credits for deposits are based on matched funding credit rates, which are tied to the implied or stated maturity of the deposits. FTP credits for deposits reflect the long-term value generated by the deposits. The net spread between the total internal FTP charges and credits is recorded as part of net interest income in the Other segment. The FTP process transfers the corporate interest rate risk exposure to the treasury function within the Other segment, where such exposures are centrally managed.

The Company’s internal FTP assumptions and methodologies are reviewed at least annually to ensure that the process is reflective of current market conditions. During the third quarter of 2019, the Company enhanced its FTP methodology related to deposits by setting a minimum floor rate using the short-term FHLB rate as a reference rate for the FTP credits paid for deposits in the event of flattened and inverted yield curves in the market. The process is effective in the current market conditions as of September 30, 2020. Effective January 1, 2020, in connection with the adoption of ASU 2016-13, ~~Financial Instruments — Credit Losses~~ ~~(Topic 326), the provision for credit losses is booked by segment based on segment loans against which an allowance is recorded instead of being allocated to segments based on loan volume.~~

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~~six months ended ~~September~~June 30, ~~2020~~2021 and ~~2019:~~2020:

($ in thousands) Consumer and
Business
Banking Commercial
Banking Other Total
Three Months Ended September 30, 2020
Net interest income before (reversal of) provision for credit losses $ 120,969 $ 162,884 $ 40,277 $ 324,130
(Reversal of) provision for credit losses (3,470) 13,470 0 10,000
Noninterest income 17,426 28,984 3,170 49,580
Noninterest expense 81,419 61,863 24,368 167,650
Segment income before income taxes 60,446 116,535 19,079 196,060
Segment net income $ 43,310 $ 83,340 $ 32,887 $ 159,537
As of September 30, 2020
Segment assets $ 12,838,625 $ 26,526,173 $ 11,006,679 $ 50,371,477

($ in thousands) Consumer and
Business
Banking Commercial
Banking Other Total
Three Months Ended September 30, 2019
Net interest income before provision for credit losses $ 170,183 $ 166,106 $ 33,518 $ 369,807
Provision for credit losses 4,251 34,033 0 38,284
Noninterest income 15,103 33,731 2,640 51,474
Noninterest expense 86,489 62,246 27,895 176,630
Segment income before income taxes 94,546 103,558 8,263 206,367
Segment net income $ 67,592 $ 74,111 $ 29,713 $ 171,416
As of September 30, 2019
Segment assets $ 11,277,171 $ 24,885,849 $ 7,111,639 $ 43,274,659


($ in thousands)	($ in thousands)	Consumer and Business Banking		Commercial Banking		Other		Total		($ in thousands)	Consumer and Business Banking		Commercial Banking		Other		Total
Nine Months Ended September 30, 2020
Three Months Ended June 30, 2021										Three Months Ended June 30, 2021

Net interest income before provision for credit losses		$	398,486	$	530,181	$	101,945	$	1,030,612
Provision for credit losses		9,908		176,405		0		186,313
Net interest income before provision for (reversal of) credit losses										Net interest income before provision for (reversal of) credit losses	$	173,775	$	192,696	$	10,002	$	376,473
Provision for (reversal of) credit losses										Provision for (reversal of) credit losses	2,358		(17,358)		0		(15,000)
Noninterest income	Noninterest income	47,771		95,327		19,168		162,266		Noninterest income	24,454		32,552		11,425		68,431
Noninterest expense	Noninterest expense	248,547		196,889		88,786		534,222		Noninterest expense	87,650		64,164		37,709		189,523
Segment income before income taxes		187,802		252,214		32,327		472,343
Segment income (loss) before income taxes										Segment income (loss) before income taxes	108,221		178,442		(16,282)		270,381

Segment net income	Segment net income	$	134,563	$	180,649	$	88,501	$	403,713	Segment net income	$	77,517	$	127,785	$	19,440	$	224,742
As of September 30, 2020
As of June 30, 2021										As of June 30, 2021

Segment assets	Segment assets	$	12,838,625	$	26,526,173	$	11,006,679	$	50,371,477	Segment assets	$	14,594,087	$	27,354,253	$	17,906,536	$	59,854,876

6354

($ in thousands) Consumer and
Business
Banking Commercial
Banking Other Total
Nine Months Ended September 30, 2019
Net interest income before provision for credit losses $ 536,153 $ 477,755 $ 85,686 $ 1,099,594
Provision for credit losses 8,880 71,228 0 80,108
Noninterest income 43,378 91,931 11,055 146,364
Noninterest expense 258,051 200,093 83,071 541,215
Segment income before income taxes 312,600 298,365 13,670 624,635
Segment net income $ 223,478 $ 213,331 $ 49,011 $ 485,820
As of September 30, 2019
Segment assets $ 11,277,171 $ 24,885,849 $ 7,111,639 $ 43,274,659



($ in thousands)	Consumer and Business Banking		Commercial Banking		Other		Total
Three Months Ended June 30, 2020






Net interest income before provision for credit losses	$	124,926	$	183,796	$	35,053	$	343,775
Provision for credit losses	5,590		96,853		0		102,443
Noninterest income	13,943		33,887		7,877		55,707
Noninterest expense	80,164		64,900		39,702		184,766
Segment income before income taxes	53,115		55,930		3,228		112,273

Segment net income	$	38,058	$	40,178	$	21,116	$	99,352
As of June 30, 2020

Segment assets	$	12,666,938	$	26,984,013	$	9,756,642	$	49,407,593



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






Net interest income before reversal of credit losses	$	323,674	$	369,788	$	36,706	$	730,168
Reversal of credit losses	(1,891)		(13,109)		0		(15,000)
Noninterest income	45,282		82,562		13,453		141,297
Noninterest expense	176,936		133,421		70,243		380,600
Segment income (loss) before income taxes	193,911		332,038		(20,084)		505,865

Segment net income	$	138,895	$	237,865	$	52,976	$	429,736
As of June 30, 2021

Segment assets	$	14,594,087	$	27,354,253	$	17,906,536	$	59,854,876



($ in thousands)	Consumer and Business Banking		Commercial Banking		Other		Total
Six Months Ended June 30, 2020






Net interest income before provision for credit losses	$	277,517	$	367,297	$	61,668	$	706,482
Provision for credit losses	13,378		162,935		0		176,313
Noninterest income	30,345		66,343		14,525		111,213
Noninterest expense	167,128		135,026		62,945		365,099
Segment income before income taxes	127,356		135,679		13,248		276,283

Segment net income	$	91,253	$	97,309	$	55,614	$	244,176
As of June 30, 2020

Segment assets	$	12,666,938	$	26,984,013	$	9,756,642	$	49,407,593

Note 1615 — Subsequent Events

On ~~October~~July 22, ~~2020,~~2021, the Company’s Board of Directors declared ~~fourth~~third quarter ~~2020~~2021 cash dividends for the Company’s common stock. The common stock cash dividend of ~~$0.275~~$0.33 per share is payable on ~~November~~August 16, ~~2020~~2021 to stockholders of record as of ~~November~~August 2, ~~2020.~~

~~The Company repaid in full $1.43 billion of the Paycheck Protection Program Liquidity Facility borrowings in October 2020.~~2021.

6455

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

6556

Overview

The following discussion provides information about the results of operations, financial condition, liquidity and capital resources of East West Bancorp, Inc. (referred to herein on an unconsolidated basis as “East West” and on a consolidated basis as the ~~“Company”,~~“Company,” “we” or “EWBC” ~~or “we”~~), and its subsidiaries, including its subsidiary bank, East West Bank and its subsidiaries (referred to herein as “East West Bank” or the “Bank”). This information is intended to facilitate the understanding and assessment of significant changes and trends related to the Company’s results of operations and financial condition. This discussion and analysis should be read in conjunction with the Consolidated Financial Statements and the accompanying notes presented elsewhere in this report, and the Company’s ~~annual report~~Annual Report on Form 10-K for the year ended December 31, ~~2019,~~2020, filed with the United States (“U.S.”) Securities and Exchange Commission (“SEC”) on February ~~27, 2020~~26, 2021 (the “Company’s ~~2019~~2020 Form 10-K”).

Company 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.~~Act. The Company commenced business on December 30, 1998 when, pursuant to a reorganization, it acquired all of the voting stock of the Bank, which became its principal asset. The Bank is an independent commercial bank headquartered in California that has a ~~strong~~ focus on the financial service needs of the Asian-American community. Through over ~~125~~120 locations in the U.S. and ~~Greater~~ China, the Company provides a full range of consumer and commercial products and services through ~~three~~the following business segments: Consumer and Business Banking and Commercial Banking, with the remaining operations ~~included~~recorded in Other. The Company’s principal activity is lending to and accepting deposits from businesses and individuals. The primary source of revenue is net interest income, which is principally derived from the difference between interest earned on loans and debt securities and interest paid on deposits and other funding sources. As of ~~September~~June 30, ~~2020,~~2021, the Company had ~~$50.37~~$59.85 billion in assets and approximately 3,200 full-time equivalent employees. For additional information on products and services provided by the Bank, see Item 1. Business — Banking Services of the Company’s ~~2019~~2020 Form 10-K.

Corporate Strategy

We are committed to enhancing long-term shareholder value by ~~executing on the fundamentals of~~ growing loans, deposits and revenue, improving profitability, and investing for the future, while managing ~~risk,~~risks, expenses and capital. Our business model is built on customer loyalty and engagement, understanding of our customers’ financial goals, and meeting our customers’ financial needs through our diverse products and services. The Company’s approach is concentrated on seeking out and deepening client relationships that meet our risk/return ~~measures.~~parameters. This ~~focus~~ guides our decision-making across every aspect of our operations: the products we develop, the expertise we cultivate, and the infrastructure we build to help our customers conduct ~~businesses.~~business. We expect our relationship-focused business model to continue to generate organic growth and to expand our targeted customer bases. ~~On an ongoing basis, we~~We continually invest in technology ~~related~~ to improve the customer user experience, strengthen critical business infrastructure, and ~~streamlining~~streamline core processes, ~~in the context of maintaining appropriate expense management.~~while appropriately managing operating expenses. Our risk management activities are focused on ensuring that the Company identifies and manages risks to maintain safety and soundness while maximizing profitability.

Coronavirus Disease 2019 Global Pandemic

~~The~~Throughout the Coronavirus Disease 2019 (“COVID-19”) pandemic, the Company has ~~caused significant, unprecedented disruption around~~been focused on serving our customers and communities and maintaining the ~~world, as well as economic~~well-being of our employees. The Company has been, and financial market deterioration, which did not exist at the beginning of 2020. The recession resulting from government-mandated closures of certain businesses and “stay-at-home” orders has significantlymay continue to be, impacted ~~businesses, investments in those businesses and consumer spending, and heightened volatility in the global financial markets. These economic and operating conditions caused~~ by the pandemic. While COVID-19 ~~pandemic~~cases have ~~created financial difficulties for many of the Company’s commercial and consumer customers. As a result, some borrowers may not be able~~begun to satisfy their obligations to us. As many of the Company’s loans are secured by real estate, a potential decline in the real estate markets could also negatively impact the Company’s business, financial condition and the credit quality of the Company’s loan portfolio. As we look forward, the trajectory of the economic recovery remains unclear as the negative impact of the COVID-19 pandemic continues, and further fiscal stimulus remains uncertain. With the substantial increase in provision for credit losses on loans that the Company recordedease during the first half of ~~2020~~2021, the spread of new and more contagious variants has impacted the magnitude and duration of this health crisis. Ongoing virus containment efforts and vaccination progress, as well as the possibility of further government stimulus measures, could accelerate the macroeconomic recovery. We do not know and cannot quantify all the specific impacts, and the ~~improved macroeconomic forecast for~~extent to which the ~~third quarter~~COVID-19 pandemic may negatively affect our business, financial condition and results of ~~2020, the Company was~~operations, regulatory capital, and liquidity ratios in ~~a position to provide a smaller provision for credit losses on loans during the third quarter of 2020.~~2021.

On March 11, 2021, President Biden signed the American Rescue Plan Act of 2021 (“ARPA”) to provide additional relief for individuals and businesses affected by the COVID-19 pandemic, including additional funding for the Paycheck Protection Program (“PPP”). The PPP Extension Act of 2021, enacted on March 30, 2021, extended the PPP through May 31, 2021. The Company participated in the PPP. As of June 30, 2021, the Company had approximately 6,200 PPP loans outstanding with balances totaling $1.43 billion, which were recorded in the commercial and industrial (“C&I”) portfolio. During the second quarter and first half of 2021, the Company has funded 448 new PPP loans totaling $68.3 million and 5,523 new PPP loans totaling $896.5 million, respectively. During the first half of 2021, the Company submitted and received Small Business Administration (“SBA”) approval for the forgiveness of approximately 5,000 PPP loans, totaling $1.00 billion.

~~Regulatory Developments Relating~~The Company also participated in the Board of Governors of the Federal Reserve System’s (the “Federal Reserve”) Main Street Lending Program (“MSLP”) and funded $233.6 million in MSLP loans as of December 31, 2020. The related Main Street special purpose vehicle purchased participations in these loans amounting to $223.7 million or 95% of the ~~COVID-19 Pandemic~~total amount of MSLP loans funded as of June 30, 2021. The MSLP was terminated on January 8, 2021.

For additional information on the PPP and other U.S. government facilities, programs and loan modification relief, including as established by the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”), refer to Overview — Coronavirus Disease 2019 Global Pandemic~~The Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) was enacted on March 27,~~ section in the Company’s 2020 to address the economic impact to individuals and businesses as a result of the COVID-19 pandemic. As part of the CARES Act, various initiatives to protect individuals, businesses and local economies have been established in an effort to lessen the impact of the COVID-19 pandemic on consumers and businesses. These initiatives included extended unemployment benefits, mortgage forbearance, the Small Business Administration (“SBA”) Paycheck Protection Program (“PPP”) and the Main Street Lending Program.Form 10-K.

In response to the pandemic, the Company has implemented protocols and processes to execute its business continuity plans to protect its employees and support its customers. As ~~part of~~state and local governments have relaxed restrictions on temporary business closures, we have reopened more branches and have been actively planning for our ~~commitment~~U.S.-based corporate associates to ~~support~~return to the office. For additional information on our ~~customers, t~~response to the COVID-19 Pandemic, refer to ~~he Bank participated as a lender~~Overview — Coronavirus Disease 2019 Global Pandemic section in the ~~PPP. As of September 30,~~Company’s 2020 the Company funded over 7,400 SBA 7(a) PPP loans with an outstanding loan balance of $1.77 billion. The SBA guarantees 100% of the PPP loans made to eligible borrowers, and the loans are eligible to be forgiven if certain conditions are met, at which point the SBA will make payments to the Bank for the forgiven amounts. These loans are included in our commercial and industrial (“C&I”) portfolio, have an interest rate of 1%. The ~~substantial majority~~ of the PPP loans in our portfolio have a maturity of two years. The Board of Governors of the Federal Reserve System (“Federal Reserve”) established the Paycheck Protection Program Liquidity Facility (“PPPLF”) to enable Federal Reserve Banks (“FRB”) to extend credit to financial institutions that originate PPP loans, while taking the PPP loans as collateral. As of September 30, 2020, we had drawn down $1.43 billion from the Federal Reserve PPPLF and pledged the same amount in PPP loans as collateral. During the month of October 2020, we paid down this amount in full. On June 22, 2020, the FDIC issued a final rule to remove the effect of participation in the PPP and borrowings under the PPPLF from the various risk measures used to calculate an insured depository institution’s assessment rate. The Bank is also a participating lender in the Main Street Lending Program, which was established by the Federal Reserve, to support lending to small- and medium-sized businesses and nonprofit organizations that were in sound financial condition before the onset of the COVID-19 pandemic.Form 10-K.

~~The CARES Act requires mortgage servicers to grant, on a borrower’s request, forbearance for up to 180 days (which can be extended for an~~For additional 180 days) on a federally-backed single-family mortgage loan or forbearance up to 30 days (which can be extended for two additional 30-day periods) on a federally-backed multifamily mortgage loan when the borrowers experience financial hardship due to the COVID-19 pandemic.

~~Loan Modifications —~~information, see The CARES Act also includes an option for financial institutions to suspend the U.S. generally accepted accounting principles (“GAAP”) requirements and regulatory determinations for loan modifications related to the COVID-19 pandemic that would otherwise be categorized as a troubled debt restructuring (“TDR”) from March 1, 2020, through the earlier of 60 days after the date of the COVID-19 National Emergency comes to an end or December 31, 2020. On April 7, 2020, the federal banking regulators issued the ~~“Interagency Statement on Loan Modifications and Reporting for Financial Institutions Working with Customer Affected by the Coronavirus (Revised)” (the “Interagency Statement”)~~. The Interagency Statement also provides financial institutions the option to suspend the application of the TDR accounting guidance for short-term modifications (i.e., six months or less) made on a good faith basis in response to the COVID-19 pandemic to borrowers who were current at the time of modification. Given that nonaccrual loans are more heavily risk-weighted for capital purposes, this TDR relief allows a capital benefit in the form of reduced risk-weighted assets since the aging of such loans was frozen at the time of modification. We grant loan modifications to our customers in the form of maturity extensions, payment deferrals and forbearance. For a summary of the loans that we have modified in response to the COVID-19 pandemic, please refer toItem 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”)— ~~Risk Management — Credit Risk Management~~ ~~in this Quarterly Report on Form 10-Q (“this Form 10-Q”).~~

~~Regulatory Capital —~~ On March 31, 2020, the U.S. federal banking agencies issued an interim final rule that provided the option to temporarily delay the effects of current expected credit losses (“CECL”) on regulatory capital for two years, followed by a three-year transition period (“CECL Capital Transition”). The Company elected to apply the CECL Capital Transition during the first quarter of 2020. ~~In addition, the CARES Act requires PPP loans to be assigned a zero percent risk weight under the federal banking agencies’ risk-based capital rules.~~

~~Reserve Requirements —~~ On March 26, 2020, the Federal Reserve reduced reserve requirement ratios to zero percent, eliminating the reserve requirement for all depository institutions, an action that provides liquidity in the banking system to support lending to households and businesses.

~~Our Response to the COVID-19 Pandemic~~

In response to the COVID-19 pandemic, we have been working diligently to protect employee safety while continuing to carry out our role as a provider of critical and essential services to the public. We have taken comprehensive steps to help our employees and customers as follows:

•~~Employees:~~

For employees with jobs that are required to be performed on-site, we have taken significant actions to ensure employee safety by providing personal protection equipment, adopting social distancing measures, placing visual safety reminders related to social distancing, implementing an enhanced cleaning program, installing plexiglass panels, requiring temperature screenings and the wearing of masks for all employees physically at on-site locations.

•~~Customers:~~

We offered assistance to our commercial, consumer and small business clients affected by the COVID-19 pandemic through payment deferrals, suspension of foreclosures on certain residential mortgage loans, and participation in the SBA PPP and the Main Street Lending Programs.~~We intend to evaluate participation in additional new government-sponsored programs, as they are established.~~

Due to the uncertainty of the full magnitude and duration of the business and economic impact from the public health efforts to contain and combat the spread of the COVID-19 pandemic, the Company has been continuously and closely monitoring any impacts on the Company’s business and its loan portfolio. Thus far, the impact of the COVID-19 pandemic on our financial condition and operations has been manageable. Although current economic indicators are weak, business activity is gradually resuming compared to the first half of 2020. However, given the unprecedented scale and global nature of the pandemic, we could experience material declines in revenues, profitability and/or cash flows in the near future, compared to the corresponding prior-year periods and compared to our expectations at the beginning of the 2020 fiscal year.

During this volatile time, we have maintained strong capital ratios and liquidity. Our return on average assets and return on average equity was 1.13% and 10.73%, respectively, for the first nine months of 2020. The greatest impact of the COVID-19 pandemic on our financial condition has been in the increase of the provision for credit losses and the allowance for loan losses. We recorded a provision for credit losses of $186.3 million through an allowance for loan losses during the first nine months of 2020, bringing the allowance for loan losses to $618.3 million as of September 30, 2020, equivalent to an allowance for loan losses to loans held-for-investment ratio of 1.65%.

~~For additional information, see~~ ~~Item 2. MD&A~~ — Risk Management — Credit Risk Management and — Liquidity Risk Management, and — Balance Sheet Analysis — Regulatory Capital and Ratios in this Quarterly Report on Form ~~10-Q.~~10-Q (“this Form 10-Q”). Further discussion of the potential impacts on our business from the COVID-19 pandemic is provided ~~below under~~in ~~Part II,~~ Item 1A — Risk Factors ~~in this~~of the Company’s 2020 Form ~~10-Q~~.10-K.

6858

Selected Financial Data


($ and shares in thousands, except per share, ratio and headcount data)	($ and shares in thousands, except per share, ratio and headcount data)	Three Months Ended									Nine Months Ended						($ and shares in thousands, except per share, ratio and headcount data)	Three Months Ended									Six Months Ended
		September 30, 2020			June 30, 2020			September 30, 2019			September 30, 2020			September 30, 2019				June 30, 2021			March 31, 2021			June 30, 2020			June 30, 2021			June 30, 2020
Summary of operations:	Summary of operations:																Summary of operations:
Interest and dividend income (1)		$	365,728		$	398,776		$	476,912		$	1,213,694		$	1,415,067
Interest expense		41,598			55,001			107,105			183,082			315,473
Net interest income before provision for credit losses		324,130			343,775			369,807			1,030,612			1,099,594
Provision for credit losses		10,000			102,443			38,284			186,313			80,108
Net interest income after provision for credit losses		314,130			241,332			331,523			844,299			1,019,486
Net interest income before provision for credit losses (1)																	Net interest income before provision for credit losses (1)	$	376,473		$	353,695		$	343,775		$	730,168		$	706,482
Noninterest income	Noninterest income	49,580			58,637			51,474			162,266			146,364			Noninterest income	68,431			72,866			55,707			141,297			111,213
Total revenue																	Total revenue	444,904			426,561			399,482			871,465			817,695
(Reversal of) provision for credit losses																	(Reversal of) provision for credit losses	(15,000)			—			102,443			(15,000)			176,313

Noninterest expense ~~(2)~~	Noninterest expense ~~(2)~~	167,650			187,696			176,630			534,222			541,215			Noninterest expense ~~(2)~~	189,523			191,077			184,766			380,600			365,099
Income before income taxes	Income before income taxes	196,060			112,273			206,367			472,343			624,635			Income before income taxes	270,381			235,484			112,273			505,865			276,283
Income tax expense ~~(3)~~	Income tax expense ~~(3)~~	36,523			12,921			34,951			68,630			138,815			Income tax expense ~~(3)~~	45,639			30,490			12,921			76,129			32,107

Net income ~~(3)~~(1)	Net income ~~(3)~~(1)	$	159,537		$	99,352		$	171,416		$	403,713		$	485,820		Net income ~~(3)~~(1)	$	224,742		$	204,994		$	99,352		$	429,736		$	244,176

Per common share:	Per common share:																Per common share:
Basic earnings	Basic earnings	$	1.13		$	0.70		$	1.18		$	2.83		$	3.34		Basic earnings	$	1.58		$	1.45		$	0.70		$	3.03		$	1.71
Diluted earnings	Diluted earnings	$	1.12		$	0.70		$	1.17		$	2.82		$	3.33		Diluted earnings	$	1.57		$	1.44		$	0.70		$	3.01		$	1.70
Dividends declared	Dividends declared	$	0.28		$	0.28		$	0.28		$	0.83		$	0.78		Dividends declared	$	0.330		$	0.330		$	0.275		$	0.660		$	0.550
Book value	Book value	$	36.22		$	35.25		$	33.54		$	36.22		$	33.54		Book value	$	39.10		$	37.26		$	35.25		$	39.10		$	35.25

Non-GAAP tangible common equity per share (4)		$	32.85		$	31.86		$	30.22		$	32.85		$	30.22
Non-Generally Accepted Accounting Principles (“GAAP”) tangible common equity per share (2)																	Non-Generally Accepted Accounting Principles (“GAAP”) tangible common equity per share (2)	$	35.75		$	33.90		$	31.86		$	35.75		$	31.86
Weighted-average number of shares outstanding:	Weighted-average number of shares outstanding:																Weighted-average number of shares outstanding:
Basic	Basic	141,498			141,486			145,559			142,595			145,455			Basic	141,868			141,646			141,486			141,758			143,150
Diluted	Diluted	142,043			141,827			146,120			143,082			146,088			Diluted	143,040			142,844			141,827			142,963			143,560
Common shares outstanding at period-end	Common shares outstanding at period-end	141,507			141,486			145,568			141,507			145,568			Common shares outstanding at period-end	141,878			141,843			141,486			141,878			141,486

Performance metrics:																	Performance metrics:
ROA																	ROA	1.56		%	1.50		%	0.83		%	1.53		%	1.06		%
ROE																	ROE	16.61		%	15.57		%	8.02		%	16.10		%	9.82		%
Return on average non-GAAP tangible equity (2)																	Return on average non-GAAP tangible equity (2)	18.28		%	17.17		%	8.96		%	17.73		%	10.95		%
Total average equity to total average assets																	Total average equity to total average assets	9.39		%	9.60		%	10.33		%	9.49		%	10.76		%
Common dividend payout ratio																	Common dividend payout ratio	21.11		%	23.11		%	39.72		%	22.07		%	32.74		%
Net interest margin																	Net interest margin	2.75		%	2.71		%	3.04		%	2.73		%	3.24		%
Efficiency ratio (3)																	Efficiency ratio (3)	42.60		%	44.79		%	46.25		%	43.67		%	44.65		%
Non-GAAP efficiency ratio (2)																	Non-GAAP efficiency ratio (2)	36.30		%	38.68		%	38.37		%	37.47		%	38.38		%
At period end:	At period end:																At period end:
Total assets	Total assets	$	50,371,477		$	49,407,593		$	43,274,659		$	50,371,477		$	43,274,659		Total assets	$	59,854,876		$	56,874,146		$	49,407,593		$	59,854,876		$	49,407,593
Total loans (5)		$	37,441,277		$	37,233,287		$	34,025,270		$	37,441,277		$	34,025,270
Interest-earning assets																	Interest-earning assets	$	57,050,261		$	54,400,035		$	46,918,943		$	57,050,261		$	46,918,943
Total loans (4)																	Total loans (4)	$	40,073,318		$	39,588,748		$	37,233,287		$	40,073,318		$	37,233,287
Available-for-sale (“AFS”) debt securities	Available-for-sale (“AFS”) debt securities	$	4,539,160		$	3,884,574		$	3,284,034		$	4,539,160		$	3,284,034		Available-for-sale (“AFS”) debt securities	$	8,399,460		$	7,789,213		$	3,884,574		$	8,399,460		$	3,884,574
Total deposits	Total deposits	$	41,680,555		$	40,672,678		$	36,659,526		$	41,680,555		$	36,659,526		Total deposits	$	52,582,575		$	49,547,136		$	40,672,678		$	52,582,575		$	40,672,678
Long-term debt and finance lease liabilities (6)		$	1,579,317		$	1,580,442		$	152,390		$	1,579,317		$	152,390
Long-term debt																	Long-term debt	$	147,515		$	147,445		$ 1,575,653(5)			$	147,515		$ 1,575,653(5)
Federal Home Loan Bank (“FHLB”) advances	Federal Home Loan Bank (“FHLB”) advances	$	657,185		$	656,759		$	745,494		$	657,185		$	745,494		Federal Home Loan Bank (“FHLB”) advances	$	248,464		$	653,035		$	656,759		$	248,464		$	656,759
Stockholders’ equity (7)		$	5,126,106		$	4,987,243		$	4,882,664		$	5,126,106		$	4,882,664
Stockholders’ equity																	Stockholders’ equity	$	5,547,548		$	5,285,027		$	4,987,243		$	5,547,548		$	4,987,243

Non-GAAP tangible common equity (4)		$	4,648,040		$	4,508,056		$	4,399,532		$	4,648,040		$	4,399,532
Non-GAAP tangible common equity (2)																	Non-GAAP tangible common equity (2)	$	5,071,542		$	4,808,179		$	4,508,056		$	5,071,542		$	4,508,056
Head count (full-time equivalent)	Head count (full-time equivalent)	3,208			3,249			3,282			3,208			3,282			Head count (full-time equivalent)	3,161			3,180			3,249			3,161			3,249
Performance metrics:
Return on average assets (“ROA”)		1.26		%	0.83		%	1.58		%	1.13		%	1.55		%
Return on average equity (“ROE”)		12.50		%	8.02		%	14.06		%	10.73		%	13.86		%
Net interest margin		2.72		%	3.04		%	3.59		%	3.05		%	3.70		%
Efficiency ratio (8)		44.86		%	46.64		%	41.93		%	44.78		%	43.44		%
Non-GAAP efficiency ratio (4)		41.33		%	38.09		%	37.66		%	39.26		%	38.47		%
Credit quality metrics:
Allowance for loan losses (7)		$	618,252		$	632,071		$	345,576		$	618,252		$	345,576
Allowance for loan losses (7) to loans held-for-investment		1.65		%	1.70		%	1.02		%	1.65		%	1.02		%
Nonperforming assets to total assets		0.52		%	0.41		%	0.31		%	0.52		%	0.31		%
Annualized net charge-offs to average loans held-for-investment		0.26		%	0.21		%	0.26		%	0.16		%	0.18		%

Selected metrics:
Total average equity to total average assets		10.11		%	10.33		%	11.22		%	10.53		%	11.21		%
Common dividend payout ratio		24.74		%	39.72		%	23.62		%	29.58		%	23.63		%
Loan-to-deposit ratio		89.83		%	91.54		%	92.81		%	89.83		%	92.81		%

EWBC capital ratios:	EWBC capital ratios:																EWBC capital ratios:

Common Equity Tier 1 (“CET1”) capital	Common Equity Tier 1 (“CET1”) capital	12.8		%	12.7		%	12.8		%	12.8		%	12.8		%	Common Equity Tier 1 (“CET1”) capital	12.8		%	12.7		%	12.7		%	12.8		%	12.7		%
Tier 1 capital	Tier 1 capital	12.8		%	12.7		%	12.8		%	12.8		%	12.8		%	Tier 1 capital	12.8		%	12.7		%	12.7		%	12.8		%	12.7		%
Total capital	Total capital	14.5		%	14.4		%	14.2		%	14.5		%	14.2		%	Total capital	14.3		%	14.3		%	14.4		%	14.3		%	14.4		%
Tier 1 leverage capital	Tier 1 leverage capital	9.8		%	9.7		%	10.3		%	9.8		%	10.3		%	Tier 1 leverage capital	9.1		%	9.1		%	9.7		%	9.1		%	9.7		%
Total stockholders’ equity to total assets																	Total stockholders’ equity to total assets	9.3		%	9.3		%	10.1		%	9.3		%	10.1		%

Non-GAAP tangible common equity to tangible assets (2)																	Non-GAAP tangible common equity to tangible assets (2)	8.5		%	8.5		%	9.2		%	8.5		%	9.2		%

(1)Includes ~~$7.8~~$15.4 million, $15.0 million and $21.3 million of interest income related to PPP loans for the ~~third quarter~~three months ended June 30, 2021, March 31, 2021 and ~~second quarter of~~June 30, 2020, respectively, and $30.4 million and $21.3 million for the six months ended June 30, 2021 and 2020, respectively.

(2)~~Includes $8.7 million of securities sold under repurchase agreements’ (“repurchase agreements”) extinguishment cost for the second quarter of 2020.~~

~~(3)Includes $30.1 million of additional tax expense to reverse certain previously claimed tax credits related to the DC Solar tax credit investments (“DC Solar”) during the second quarter of 2019.~~

~~(4)~~For a discussion of non-GAAP tangible common equity per share, return on average non-GAAP tangible equity, non-GAAP efficiency ratio, non-GAAP tangible common equity ~~per share~~ and non-GAAP ~~efficiency ratio,~~tangible common equity to tangible assets, refer to Item 2. MD&A — ~~Supplemental~~ ~~Information — Explanation~~Reconciliation of GAAP to Non-GAAP Financial Measures in this Form 10-Q.

~~(5)Includes $1.77 billion and $1.75 billion of PPP loans as of September 30 and June 30, 2020, respectively.~~

~~(6)Includes $1.43 billion of advances from the PPPLF~~ ~~as of both September 30 and June 30, 2020.~~

~~(7)On January 1, 2020, the Company adopted Accounting Standards Update (“ASU”) 2016-13,~~ ~~Financial Instrument~~s ~~— Credit Losses~~ ~~(Topic 326):~~ ~~Measurement of Credit Losses on Financial Instruments~~ using the modified retrospective approach. The Company recorded $125.2 million increase to allowance for loan losses and $98.0 million after-tax decrease to opening retained earnings as of January 1, 2020.

~~(8)~~(3)The efficiency ratio is noninterest expense divided by total revenue ~~(net interest income before provision for credit losses~~.

(4)Includes $1.43 billion, $2.07 billion and ~~noninterest income).~~$1.75 billion of PPP loans as of June 30, 2021, March 31, 2021 and June 30, 2020, respectively.

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

6959

Financial Review

Noteworthy items about the Company’s performance for the ~~third~~second quarter and first ~~nine months~~half of ~~2020~~2021 included:

•Earnings: ~~Third~~Second quarter 2021 net income was $224.7 million or $1.57 per diluted share, compared with second quarter 2020 net income of $99.4 million or $0.70 per diluted share, an increase of $125.3 million or 126%. Net income for the first half of 2021 was ~~$159.5~~$429.7 million ~~with~~or $3.01 per diluted ~~earnings per~~ share, ~~(“EPS”) of $1.12,~~ compared with ~~third quarter 2019~~first half of 2020 net income of ~~$171.4 million with diluted EPS of $1.17, a decrease of $11.9~~$244.2 million or 7%$1.70 per diluted share, an increase of $185.5 million or 76%. The increases in ~~net income, and 4% in EPS. The decrease in net income was~~both periods were primarily due to ~~lower net interest income, driven by materially lower interest rates, partially offset by less~~a $15.0 million reversal of provision for credit losses in the ~~third~~second quarter of 2020. Net income for the first nine months of 2020 was $403.7 million with diluted EPS of $2.82, compared with net income of $485.8 million with diluted EPS of $3.33 for the first nine months of 2019, a decrease of $82.1 million or 17% in net income, and 15% in EPS. This decrease was primarily due to higher provision for credit losses resulting from the deteriorating macroeconomic conditions and outlook as a result of the COVID-19 pandemic and the adoption of CECL methodology, and lower net interest income driven by significantly2021, lower interest ~~rates, partially offset by a decrease in income tax expense. Provision for credit losses of $186.3 million for the first nine months of 2020 increased by 133% compared with the same period a year ago.~~

•~~Adjusted Earnings:~~ ~~There were no adjustments for non-recurring items during the third quarter~~expense and the first nine months of 2020, and during the third quarter of 2019, which affected non-GAAP net income and diluted EPS. The Company recorded a $7.0 million pre-tax impairment charge and reversed $30.1 million of certain previously claimed tax credits related to the DC Solar during the first and second quarters of 2019. Refer to reconciliations of non-GAAP measures presented under ~~Item 2. MD&A — Supplemental Information — Explanation of GAAP to Non-GAAP Financial Measures~~ ~~in this Form 10-Q. Adjusting for these non-recurring items, non-GAAP net income and non-GAAP diluted EPS for the first nine months of 2019 were $520.8 million and $3.57, respectively.~~

•~~Revenue:~~ ~~Revenue, or the sum of net interest income before provision for credit losses and~~higher noninterest income, was $373.7 million for the third quarter of 2020, compared with $421.3 million for the third quarter of 2019, a decrease of $47.6 million or 11%. This decrease was primarily due to lower net interest income, driven by significantly lower interest rates. Revenue for the first nine months of 2020 was $1.19 billion, compared with $1.25 billion for the first nine months of 2019, a decrease of $53.1 million or 4%. This decrease was primarily due to lower net interest income, partially offset by ~~an increase in noninterest income.~~higher income tax expense.

•Net Interest Income and Net Interest Margin: ~~Third~~Second quarter 2021 net interest income before provision for credit losses was $376.5 million, an increase of $32.7 million or 10%, compared with second quarter 2020 net interest income ~~was $324.1 million, a decrease~~ of ~~$45.7 million or 12%, compared with third~~$343.8 million. Second quarter ~~of 2019 net interest income of $369.8 million. Third quarter of 2020~~2021 net interest margin was ~~2.72%~~2.75%, ~~an 87~~a decrease of 29 basis ~~point decrease~~points from ~~3.59%~~3.04% for the ~~third~~second quarter of ~~2019.~~2020. Net interest income for the first ~~nine months~~half of ~~2020~~2021 was ~~$1.03 billion,~~$730.2 million, an increase of $23.7 million or 3%, compared with ~~$1.10 billion~~$706.5 million for the first ~~nine months~~half of ~~2019, a decrease of $69.0 million or 6%.~~2020. Net interest margin was ~~3.05%~~2.73% for the first ~~nine months~~half of ~~2020,~~2021, a decrease of 6551 basis points from ~~3.70%~~3.24% for the first ~~nine months~~half of ~~2019.~~2020. The ~~decreases~~changes in ~~the~~ net interest income and net interest margin primarily reflected ~~significantly~~lower cost of time and money market deposits, and higher AFS debt securities' income due to volume growth, partially offset by lower interest ~~rates year-over-year, including a cumulative 175 basis point reduction in the federal funds rate since September 30, 2019.~~income on loans due to yield compression.

•~~Operating Efficiency:~~Provision for Credit Losses: ~~Efficiency ratio, calculated as noninterest expense divided by revenue, was 44.86%~~During the second quarter and ~~41.93%~~first half of 2021, the Company recorded a $15.0 million reversal of provision for credit losses, compared with a provision of $102.4 million and $176.3 million for the ~~third~~same periods of 2020, respectively. The year-over-year change in the provision for credit losses was primarily due to an improved macroeconomic outlook. Second quarter 2021 net charge-offs were $13.3 million or annualized 0.13% of average loans held-for-investment, compared with $19.2 million or annualized 0.21% of average loans held-for-investment for the second quarter of ~~2020 and 2019, respectively. The efficiency ratio was 44.78%~~2020. Net charge-offs for the first ~~nine months~~half of ~~2020,~~2021 were $26.7 million or annualized 0.14% of average loans held-for-investment, compared with ~~43.44%~~$20.1 million or annualized 0.11% of average loans held-for-investment for the first ~~nine months~~half of 2019. Non-GAAP efficiency ratio, adjusted for the amortization of tax credit and other investments, amortization of core deposit intangibles, and repurchase agreements’ extinguishment cost (where applicable), was 41.33% for the third quarter of 2020, a 367 basis point increase from 37.66% for the third quarter of 2019. For the first nine months of 2020, non-GAAP efficiency ratio was 39.26%, a 79 basis point increase from 38.47% for the first nine months of 2019. The year-over-year increase in the efficiency ratios primarily reflects decreased revenue. For additional detail, see the reconciliations of non-GAAP measures presented under ~~Item 2. MD&A — Supplemental Information — Explanation of GAAP to Non-GAAP Financial Measures~~ ~~in this Form 10-Q.~~2020.

•Tax: Income tax expense was ~~$36.5~~$45.6 million and the effective tax rate was ~~18.6%~~16.9% for the ~~third~~second quarter of ~~2020,~~2021, compared with income tax expense of ~~$35.0~~$12.9 million and an effective tax rate of ~~16.9%~~11.5% for the ~~third~~second quarter of ~~2019.~~2020. Income tax expense was ~~$68.6~~$76.1 million and the effective tax rate was ~~14.5%~~15.0% for the first ~~nine months~~half of ~~2020,~~2021, compared with income tax expense of ~~$138.8~~$32.1 million and an effective tax rate of ~~22.2%~~11.6% for the first ~~nine months~~half of ~~2019. Tax expense for the first nine months of 2019 included a reversal of $30.1 million of certain previously claimed tax credits related to DC Solar.~~2020.

•Profitability: Second quarter 2021 ROA was 1.56%, compared with 0.83% for the ~~third~~second quarter of ~~2020 and 2019~~2020. First half of 2021 ROA was ~~1.26% and 1.58%~~1.53%, ~~respectively. ROA~~compared with 1.06% for ~~the first nine months of 2020 and~~ ~~2019 was 1.13% and 1.55%, respectively. ROE for the third quarter of 2020 and 2019 was 12.50% and 14.06%, respectively. R~~OE for the first nine months of 2020 and 2019 was 10.73% and 13.86%, respectively. There were no adjustments for non-recurring items during the third quarter of 2020 and 2019 and during the first nine months of 2020 that affected non-GAAP ROA and non-GAAP ROE. Adjusted for the non-recurring items related to DC Solar which occurred in the first half of ~~2019, non-GAAP ROA and non-GAAP~~2020. Second quarter 2021 ROE was 16.61%, compared with 8.02% for the second quarter of 2020. First half of 2021 ROE was 16.10%, compared with 9.82% for the first ~~nine months~~half of ~~2019~~2020.

•Total Assets: As of June 30, 2021, total assets were ~~1.67%~~$59.85 billion, an increase of $7.69 billion or 15% from $52.16 billion as of December 31, 2020, primarily due to purchases of AFS debt securities, loan growth, and ~~14.85%, respectively. For additional detail, see the reconciliations of non-GAAP measures presented under~~ ~~Item 2. MD&A — Supplemental Information — Explanation of GAAP to Non-GAAP Financial Measures~~ an increase in ~~this Form 10-Q.~~interest-bearing cash with banks.

•Loans: Total loans were ~~$37.44~~$40.07 billion as of ~~September~~June 30, ~~2020,~~2021, an increase of ~~$2.66~~$1.68 billion or 8%4% from ~~$34.78~~$38.39 billion as of December 31, ~~2019.~~2020. Loan growth was well-diversified across ~~each of~~ the Company’s major loan portfolios, with ~~growth~~increases from ~~C&I, which was driven by PPP loan funding,~~residential mortgage, commercial real estate (“CRE”) and C&I.

•~~single-family~~Total Liabilities: ~~residential loans.~~As of June 30, 2021, total liabilities were $54.31 billion, an increase of $7.42 billion or 16% from $46.89 billion as of December 31, 2020, primarily due to deposit growth.

•Deposits: Total deposits were ~~$41.68~~$52.58 billion as of ~~September~~June 30, ~~2020,~~2021, an increase of ~~$4.36~~$7.72 billion or ~~12%~~17% from ~~$37.32~~$44.86 billion as of December 31, ~~2019. This increase~~2020. Growth was primarily driven by ~~growth in~~ noninterest-bearing demand deposits and money market ~~accounts, partially offset by a decrease~~accounts.

•Allowance for Loan Losses: The allowance for loan losses was $585.7 million or 1.46% of loans held-for-investment as of June 30, 2021, compared with $620.0 million or 1.61% of loans held-for-investment as of December 31, 2020. The year-to-date change in ~~time deposits.~~the allowance reflects an improved macroeconomic outlook.

•Asset Quality Metrics: ~~The allowance for loan losses was $618.3 million~~As of June 30, 2021, criticized loans totaled $1.03 billion or ~~1.65%~~2.58% of loans held-for-investment, asa decrease of ~~September 30, 2020,~~$185.4 million or 15%, compared with ~~$358.3 million~~$1.22 billion or ~~1.03%~~3.17% of loans held-for-investment as of December 31, 2019. The increase in the allowance for loan losses was primarily due to the adverse economic impact that the COVID-19 pandemic had on our customer base; as well as the adoption of ASU 2016-13, which increased the allowance for loan losses by $125.2 million.2020. Nonperforming assets were ~~$259.9~~$225.7 million or ~~0.52%~~0.38% of total assets as of ~~September~~June 30, ~~2020, an increase from $121.5~~2021, a decrease of $9.2 million or ~~0.27%~~4%, compared with $234.9 million or 0.45% of total assets as of December 31, ~~2019. Third quarter 2020 net charge-offs were $24.2 million or an annualized 0.26% of average loans held-for-investment, compared with~~ ~~$22.5 million or an annualized 0.26%~~ ~~of average loans held-for-investment for~~2020. The improvement in asset quality metrics reflects improved loan risk ratings and borrower financial profiles as the ~~third quarter of 2019. For the first nine months of 2020, net charge-offs were $44.3 million or annualized 0.16% of average loans held-for-investment, compared with~~ ~~$44.5 million or annualized 0.18% of~~ ~~average loans held-for-investment for the first nine months of 2019.~~economy reopens and pandemic-related business restrictions are lifted.

•Capital Levels: Our capital levels are strong. As of ~~September~~June 30, ~~2020,~~2021, all of the Company’s and the Bank’s regulatory capital ratios were well above the regulatory requirements to be considered well-capitalized. See Item 2. MD&A — Balance Sheet Analysis — Regulatory Capital and Ratios in this Form 10-Q for more information regarding capital.

•Capital Return: The quarterly cash common stock dividend for the ~~third~~second quarter of ~~2020 and 2019~~2021 was $0.33 per share, an increase of $0.055 or 20% from $0.275 per ~~share.~~share for the second quarter of 2020. Cash dividends of ~~$39.5~~$47.4 million during the ~~third~~second quarter of ~~2020~~2021 and ~~$119.4~~$94.8 million during the first ~~nine months~~half of ~~2020~~2021 were returned to stockholders, compared with ~~$40.5~~$39.5 million and ~~$114.8~~$79.9 million during the same periods in ~~2019,~~2020, respectively. On March 3, 2020, the Company’s Board of Directors authorized a stock repurchase program to buy back up to $500.0 million of the Company’s common stock. During the first quarter of 2020, the Company repurchased 4,471,682 shares at an average price of $32.64 per share and a total cost of $146.0 million. There were no share repurchases during the second and third quarters of 2020.

Results of Operations

Net Interest Income

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

~~Third~~Second quarter ~~of 2020~~2021 net interest income was ~~$324.1~~$376.5 million, ~~a decrease~~an increase of ~~$45.7~~$32.7 million or ~~12%~~10%, compared with ~~$369.8~~$343.8 million for the ~~third~~second quarter of ~~2019.~~2020. For the first ~~nine months~~half of ~~2020,~~2021, net interest income was ~~$1.03 billion,~~$730.2 million, an increase of $23.7 million or 3%, compared with $706.5 million for the first half of 2020. Second quarter 2021 net interest margin was 2.75%, a decrease of ~~$69.0 million~~29 basis points from 3.04% for the second quarter of 2020. For the first half of 2021, net interest margin was 2.73%, a decrease of 51 basis points from 3.24% for the first half of 2020. The year-over-year changes in net interest income and net interest margin primarily reflected lower cost of time and money market deposits, higher AFS debt securities income due to volume growth, partially offset by lower interest income on loans due to yield compression.

Average interest-earning assets were $54.90 billion for the second quarter of 2021, an increase of $9.49 billion or ~~6%, compared with $1.10~~21% from $45.41 billion for the second quarter of 2020. For the first half of 2021, the average interest-earning assets were $53.88 billion, an increase of $9.99 billion or 23% from $43.89 billion for the first ~~nine months~~half of ~~2019.~~2020. The year-over-year ~~decline~~increases in ~~net interest income~~average interest-earning assets reflect growth in average AFS debt securities, average loans, and average interest-bearing cash and deposits with banks.

The yield on average interest-earning assets for the second quarter of 2021 was ~~due to decreased~~2.92%, a decrease of 61 basis points from 3.53% for the second quarter of 2020. The yield on average interest-earning ~~asset yields which reflected significantly lower~~assets for the first half of 2021 was 2.92%, a decrease of 97 basis points from 3.89% for the first half of 2020. The year-over-year compressions in the yield on average interest-earning assets reflect the drop in benchmark interest rates ~~in 2020, partially offset by decreases in~~at the ~~cost~~end of ~~funds. Third~~the first quarter of 2020 net interest margin was 2.72%, an 87 basis point decrease from 3.59% for the third quarter of 2019. For the first nine months of 2020, net interest margin was 3.05%, a 65 basis point compression from 3.70% for the first nine months of 2019.

2020. The average loan yield for the ~~third~~second quarter of ~~2020~~2021 was ~~3.60%~~3.57%, a ~~151~~decrease of 41 basis ~~point decrease~~points from ~~5.11%~~3.98% for the ~~third~~second quarter of ~~2019. For the first nine months of 2020, the~~2020. The average loan yield ~~was 4.08%, a 115 basis point decrease from 5.23%~~ for the first ~~nine months~~half of ~~2019. These decreases, compared with the same periods in 2019, reflected materially lower interest rates, including~~2021 was 3.57%, a ~~cumulative 175~~decrease of 77 basis points ~~reduction to~~from 4.34% for the ~~federal funds rate since September 30, 2019.~~first half of 2020. Approximately ~~65%~~64% and ~~70%~~65% of loans held-for-investment were variable-rate or hybrid loans in their adjustable rate period as of ~~September~~June 30, ~~2020~~2021 and ~~2019, respectively. Third quarter of~~ 2020, average loans were $37.16 billion, an increase of $3.50 billion or 10% from $33.66 billion for the third quarter of 2019. For the first nine months of 2020, average loans were $36.49 billion, an increase of $3.47 billion or 10% from $33.02 billion for the first nine months of 2019. The year-over-year increases stemmed from growth in CRE, single-family residential and C&I loans. C&I loan growth was driven by PPP loan originations.

Third quarter of 2020 average interest-earning assets were $47.43 billion, an increase of $6.51 billion or 16% from $40.92 billion for the third quarter of 2019. This was primarily driven by growth in average loans, average AFS debt securities, and average interest-bearing cash and deposits with banks which increased $3.50 billion, $1.41 billion, and $1.36 billion, respectively. For the first nine months of 2020, average interest-earning assets were $45.08 billion, an increase of $5.36 billion or 13% from $39.72 billion for the first nine months of 2019. This was primarily driven by growth in average loans, average AFS debt securities, and average interest-bearing cash and deposits with banks which increased $3.47 billion, $1.07 billion, and $778.9 million, respectively.

Deposits are an important source of funds and impact both net interest income and net interest margin. Average ~~noninterest-bearing demand~~total deposits ~~totaled $14.30~~were $50.18 billion for the ~~third~~second quarter of ~~2020, compared with $10.71~~2021, an increase of $10.28 billion or 26% from $39.90 billion for the ~~third~~second quarter of ~~2019,~~2020. Average total deposits were $49.02 billion for the first half of 2021, an increase of ~~$3.59~~$10.33 billion or ~~33%.~~27% from $38.69 billion for the first half of 2020. Average noninterest-bearing demand deposits ~~comprised 35%~~were $19.72 billion for the second quarter of 2021, an increase of $6.19 billion or 46% from $13.53 billion for the second quarter of 2020. Average noninterest-bearing demand deposits were $18.91 billion for the first half of 2021, an increase of $6.58 billion or 53% from $12.33 billion for the first half of 2020. Due to the strong growth in average noninterest-bearing deposits, the share of noninterest-bearing demand deposits increased to 39% of average total deposits for both the ~~third~~second quarter and first half of ~~2020, up from 29%~~2021, compared with 34% and 32% for the ~~third quarter~~same periods of 2019. Average noninterest-bearing demand deposits were $12.99 billion for the first nine months of 2020, compared with $10.34 billion for the first nine months of 2019, an increase of $2.65 billion or 26%. Average noninterest-bearing demand deposits comprised 33% of average total deposits for the first nine months of 2020, up from 29% for the first nine months of 2019. Average interest-bearing deposits of $26.91 billion for the third quarter of 2020 increased $1.12 billion or 4% from $25.79 billion for the third quarter of 2019. Average interest-bearing deposits of $26.55 billion for the first nine months of 2020 increased $1.30 billion or 5%, from $25.25 billion for the first nine months of 2019.2020.

The average cost of funds was ~~0.38%~~0.18% for the ~~third~~second quarter of ~~2020,~~2021, a decrease of 7535 basis points from ~~1.13%~~0.53% for the ~~third~~second quarter of ~~2019.~~2020. For the first ~~nine months~~half of ~~2020,~~2021, the average cost of funds was ~~0.59%~~0.20%, a decrease of 5751 basis points from ~~1.16%~~0.71% for the first ~~nine months~~half of ~~2019.~~2020. The ~~decreases~~decrease in the average cost of funds primarily reflected ~~a cumulative 175 basis points reduction to~~ the ~~federal funds~~changed interest rate since September 30, 2019. The average cost of deposits was 0.33% for the third quarter of 2020, a decrease of 72 basis points from 1.05% for the third quarter of 2019. For the first nine months of 2020, the average cost of deposits was 0.53%, a decrease of 55 basis points from 1.08% for the first nine months of 2019.

The average cost of interest-bearing deposits was 0.50% for the third quarter of 2020, a decrease of 99 basis points from 1.49% for the third quarter of 2019. For the first nine months of 2020, the average cost of interest-bearing deposits was 0.79%, a decrease of 73 basis points from 1.52% for the first nine months of 2019.environment. Other sources of funding included in the calculation of the average cost of funds consist of ~~short-term borrowings,~~ FHLB advances, assets sold under repurchase agreements (“repurchase agreements”), long-term debt and ~~long-term debt.~~short-term borrowings. The average cost of interest-bearing deposits was 0.24% for the second quarter of 2021, a decrease of 47 basis points from 0.71% for the second quarter of 2020. The average cost of interest-bearing deposits was 0.27% for the first half of 2021, a decrease of 67 basis points from 0.94% for the first half of 2020.

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

7362

The following table presents the interest spread, net interest margin, average balances, interest income and expense, and the average yield/rate by asset and liability component for the ~~third~~second quarter of ~~2020~~2021 and ~~2019:~~2020:


($ in thousands)	($ in thousands)	Three Months Ended September 30,												($ in thousands)	Three Months Ended June 30,
		2020						2019							2021						2020
		Average Balance		Interest		Average Yield/ Rate (1)		Average Balance		Interest		Average Yield/ Rate (1)			Average Balance		Interest		Average Yield/ Rate (1)		Average Balance			Interest		Average Yield/ Rate (1)
ASSETS	ASSETS													ASSETS
Interest-earning assets:	Interest-earning assets:													Interest-earning assets:
Interest-bearing cash and deposits with banks	Interest-bearing cash and deposits with banks	$	4,904,394	$	5,045	0.41	%	$	3,547,626	$	19,710	2.20	%	Interest-bearing cash and deposits with banks	$	5,072,225	$	3,628	0.29	%	$	3,435,920		$	4,564	0.53	%
Securities purchased under resale agreements (“resale agreements”) (2)		1,225,217		5,295		1.72	%	981,196		6,943		2.81	%
Assets purchased under resale agreements (“resale agreements”)														Assets purchased under resale agreements (“resale agreements”)	2,129,567		8,021		1.51	%	1,037,473			5,514		2.14	%
AFS debt securities ~~(4)~~(3)	AFS debt securities ~~(4)~~(3)	4,059,456		18,493		1.81	%	2,651,069		15,945		2.39	%	AFS debt securities ~~(4)~~(3)	7,997,005		34,690		1.74	%	3,719,209			21,004		2.27	%
Loans ~~(6)~~(5)	Loans ~~(6)~~(5)	37,160,445		336,542		3.60	%	33,661,282		433,658		5.11	%	Loans ~~(6)~~(5)	39,622,270		352,453		3.57	%	37,141,773			367,393		3.98	%
Restricted equity securities	Restricted equity securities	79,074		353		1.78	%	78,213		656		3.33	%	Restricted equity securities	80,142		541		2.71	%	78,867			301		1.54	%
Total interest-earning assets	Total interest-earning assets	$	47,428,586	$	365,728	3.07	%	$	40,919,386	$	476,912	4.62	%	Total interest-earning assets	$	54,901,209	$	399,333	2.92	%	$	45,413,242		$	398,776	3.53	%
Noninterest-earning assets:	Noninterest-earning assets:													Noninterest-earning assets:
Cash and due from banks	Cash and due from banks	522,699						441,898						Cash and due from banks	600,053						498,908
Allowance for loan losses	Allowance for loan losses	(632,216)						(328,523)						Allowance for loan losses	(607,523)						(566,473)
Other assets	Other assets	2,928,190						2,103,512						Other assets	2,878,098						2,883,237
Total assets	Total assets	$	50,247,259					$	43,136,273					Total assets	$	57,771,837					$	48,228,914
LIABILITIES AND STOCKHOLDERS’ EQUITY	LIABILITIES AND STOCKHOLDERS’ EQUITY													LIABILITIES AND STOCKHOLDERS’ EQUITY
Interest-bearing liabilities:	Interest-bearing liabilities:													Interest-bearing liabilities:
Checking deposits	Checking deposits	$	5,663,873	$	4,345	0.31	%	$	4,947,511	$	14,488	1.16	%	Checking deposits	$	6,671,358	$	3,777	0.23	%	$	4,687,178		$	5,404	0.46	%
Money market deposits	Money market deposits	9,981,704		6,837		0.27	%	8,344,993		26,943		1.28	%	Money market deposits	12,596,515		3,712		0.12	%	9,893,816			8,093		0.33	%
Savings deposits	Savings deposits	2,259,788		1,481		0.26	%	2,154,592		2,656		0.49	%	Savings deposits	2,676,865		2,078		0.31	%	2,149,965			1,445		0.27	%
Time deposits	Time deposits	9,008,907		21,135		0.93	%	10,337,990		52,733		2.02	%	Time deposits	8,518,936		8,431		0.40	%	9,634,696			31,457		1.31	%
Short-term borrowings	Short-term borrowings	84,858		407		1.91	%	40,433		382		3.75	%	Short-term borrowings	336		—		—	%	242,185			265		0.44	%
FHLB advances	FHLB advances	656,906		3,146		1.91	%	745,263		5,021		2.67	%	FHLB advances	474,887		2,099		1.77	%	653,665			3,343		2.06	%
Repurchase agreements ~~(2)~~	Repurchase agreements ~~(2)~~	317,097		2,155		2.70	%	50,000		3,239		25.70	%	Repurchase agreements ~~(2)~~	303,118		1,991		2.63	%	418,681			3,540		3.40	%
Long-term debt and finance lease liabilities	Long-term debt and finance lease liabilities	1,579,623		2,092		0.53	%	152,471		1,643		4.28	%	Long-term debt and finance lease liabilities	152,099		772		2.04	%	682,432		(6)	1,454		0.86	%
Total interest-bearing liabilities	Total interest-bearing liabilities	$	29,552,756	$	41,598	0.56	%	$	26,773,253	$	107,105	1.59	%	Total interest-bearing liabilities	$	31,394,114	$	22,860	0.29	%	$	28,362,618		$	55,001	0.78	%
Noninterest-bearing liabilities and stockholders’ equity:	Noninterest-bearing liabilities and stockholders’ equity:													Noninterest-bearing liabilities and stockholders’ equity:
Demand deposits	Demand deposits	14,296,475						10,712,612						Demand deposits	19,717,315						13,534,873
Accrued expenses and other liabilities	Accrued expenses and other liabilities	1,318,677						812,127						Accrued expenses and other liabilities	1,234,456						1,348,977
Stockholders’ equity	Stockholders’ equity	5,079,351						4,838,281						Stockholders’ equity	5,425,952						4,982,446
Total liabilities and stockholders’ equity	Total liabilities and stockholders’ equity	$	50,247,259					$	43,136,273					Total liabilities and stockholders’ equity	$	57,771,837					$	48,228,914
Interest rate spread	Interest rate spread					2.51	%					3.03	%	Interest rate spread					2.63	%						2.75	%
Net interest income and net interest margin	Net interest income and net interest margin			$	324,130	2.72	%			$	369,807	3.59	%	Net interest income and net interest margin			$	376,473	2.75	%				$	343,775	3.04	%

(1)Annualized.

(2)~~There was no netting~~Yields on tax-exempt securities are not presented on a tax-equivalent basis.

(3)Includes the amortization of ~~repurchase agreements against resale agreements~~premiums on debt securities of $21.0 million and $5.9 million for the ~~third~~second quarter of 2021 and 2020, respectively.

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

(5)Loans include the accretion of net deferred loan fees, unearned fees and amortization of premiums, which totaled $15.8 million and $21.1 million for the second quarter of 2021 and 2020, respectively.

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



($ in thousands)	Six Months Ended June 30,
	2021						2020
	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	$	5,592,124	$	7,260	0.26	%	$	3,204,463		$	15,672	0.98	%
Resale agreements (2)	1,797,578		14,120		1.58	%	959,807			11,139		2.33	%
AFS debt securities (3)(4)	7,232,686		63,790		1.78	%	3,496,974			41,146		2.37	%
Loans (5)(6)	39,178,255		694,461		3.57	%	36,147,871			779,262		4.34	%
Restricted equity securities	81,645		1,088		2.69	%	78,771			747		1.91	%
Total interest-earning assets	$	53,882,288	$	780,719	2.92	%	$	43,887,886		$	847,966	3.89	%
Noninterest-earning assets:
Cash and due from banks	590,219						504,710
Allowance for loan losses	(613,026)						(529,385)
Other assets	2,829,594						2,629,000
Total assets	$	56,689,075					$	46,492,211
LIABILITIES AND STOCKHOLDERS’ EQUITY
Interest-bearing liabilities:
Checking deposits	$	6,532,965	$	7,991	0.25	%	$	4,844,425		$	15,650	0.65	%
Money market deposits	12,088,006		8,423		0.14	%	9,453,599			30,341		0.65	%
Savings deposits	2,675,677		3,819		0.29	%	2,113,118			3,262		0.31	%
Time deposits	8,814,159		19,587		0.45	%	9,949,351			73,549		1.49	%
Short-term borrowings	2,508		42		3.38	%	151,081			821		1.09	%
FHLB advances	563,331		5,168		1.85	%	673,511			7,509		2.24	%
Repurchase agreements (2)	301,567		3,969		2.65	%	375,549			7,531		4.03	%
Long-term debt and finance lease liabilities	152,094		1,552		2.06	%	417,345		(6)	2,821		1.36	%
Total interest-bearing liabilities	$	31,130,307	$	50,551	0.33	%	$	27,977,979		$	141,484	1.02	%
Noninterest-bearing liabilities and stockholders’ equity:
Demand deposits	18,909,991						12,326,291
Accrued expenses and other liabilities	1,266,510						1,185,715
Stockholders’ equity	5,382,267						5,002,226
Total liabilities and stockholders’ equity	$	56,689,075					$	46,492,211
Interest rate spread					2.59	%						2.87	%
Net interest income and net interest margin			$	730,168	2.73	%				$	706,482	3.24	%

(1)Annualized.

(2)Average balances of resale and repurchase agreements for the ~~third quarter of 2019~~six months ended June 30, 2020 have been reported net, pursuant to Accounting Standards Codification (“ASC”) 210-20-45-11, Balance Sheet Offsetting: Repurchase and Reverse Repurchase Agreements. The weighted-average yields of gross resale ~~agreements were 1.72%~~ and ~~2.59% for the third quarter of 2020 and 2019, respectively. The weighted-average interest rates of~~ gross repurchase agreements ~~were 2.70% and 4.68%~~ for the ~~third quarter of~~six months ended June 30, 2020 were 2.32% and ~~2019,~~3.76%, respectively.

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

(4)Includes the amortization of premiums on debt securities of ~~$8.1~~$40.1 million and ~~$3.0~~$9.2 million for ~~the third quarter~~first half of ~~2020~~2021 and ~~2019,~~2020, respectively.

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

(6)Loans include the accretion of net deferred loan fees, unearned fees and amortization of premiums, which totaled ~~$7.7~~$29.8 million and ~~$7.8~~$29.1 million for ~~the third quarter~~first half of ~~2020~~2021 and ~~2019, respectively.~~

($ in thousands) Nine Months Ended September 30,
2020 2019
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 $ 3,775,242 $ 20,717 0.73 % $ 2,996,340 $ 51,920 2.32 %
Resale agreements (2)
1,048,923 16,434 2.09 % 1,005,147 22,253 2.96 %
AFS debt securities (3)(4)
3,685,837 59,639 2.16 % 2,614,949 47,378 2.42 %
Loans (5)(6)
36,487,859 1,115,804 4.08 % 33,023,713 1,291,642 5.23 %
Restricted equity securities 78,873 1,100 1.86 % 76,313 1,874 3.28 %
Total interest-earning assets $ 45,076,734 $ 1,213,694 3.60 % $ 39,716,462 $ 1,415,067 4.76 %
Noninterest-earning assets:
Cash and due from banks 510,750 449,739
Allowance for loan losses (563,912) (321,486)
Other assets 2,729,458 1,970,775
Total assets $ 47,753,030 $ 41,815,490
LIABILITIES AND STOCKHOLDERS’ EQUITY
Interest-bearing liabilities:
Checking deposits $ 5,119,568 $ 19,995 0.52 % $ 5,145,308 $ 44,579 1.16 %
Money market deposits 9,630,918 37,178 0.52 % 8,094,933 85,858 1.42 %
Savings deposits 2,162,365 4,743 0.29 % 2,117,773 7,360 0.46 %
Time deposits 9,633,582 94,684 1.31 % 9,887,274 148,992 2.01 %
Short-term borrowings 128,846 1,228 1.27 % 45,410 1,359 4.00 %
FHLB advances 667,935 10,655 2.13 % 540,535 12,011 2.97 %
Repurchase agreements (2)
355,923 9,686 3.64 % 50,000 10,200 27.27 %
Long-term debt and finance lease liabilities 807,599 4,913 0.81 % 152,480 5,114 4.48 %
Total interest-bearing liabilities $ 28,506,736 $ 183,082 0.86 % $ 26,033,713 $ 315,473 1.62 %
Noninterest-bearing liabilities and stockholders’ equity:
Demand deposits 12,987,813 10,342,966
Accrued expenses and other liabilities 1,230,359 751,065
Stockholders’ equity 5,028,122 4,687,746
Total liabilities and stockholders’ equity $ 47,753,030 $ 41,815,490
Interest rate spread 2.74 % 3.14 %
Net interest income and net interest margin $ 1,030,612 3.05 % $ 1,099,594 3.70 %

~~(1)Annualized.~~

~~(2)Average balances of resale and repurchase agreements have been reported net, pursuant to ASC 210-20-45-11,~~ ~~Balance Sheet Offsetting: Repurchase and Reverse Repurchase Agreements~~. The weighted-average yields of gross resale agreements were 2.09% and 2.71% for the first nine months of 2020 and 2019, respectively. The weighted-average interest rates of gross repurchase agreements were 3.48% and 4.87% for the first nine months of 2020 and 2019, respectively.

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

~~(4)Includes the amortization of premiums on debt securities of $17.3 million and $9.0 million for the first nine months of 2020 and 2019, respectively.~~

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

~~(6)Loans include the accretion of net deferred loan fees, unearned fees and amortization of premiums, which totaled $36.8 million and $24.6 million for the first nine months of 2020 and 2019,~~ respectively.

7564

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


($ in thousands)	($ in thousands)	Three Months Ended September 30,								Nine Months Ended September 30,										($ in thousands)		Three Months Ended June 30,								Six Months Ended June 30,
		2020 vs. 2019								2020 vs. 2019								($ in thousands)	2021 vs. 2020					2021 vs. 2020
		Total Change			Changes Due to					Total Change			Changes Due to								Total Change		Changes Due to						Total Change				Changes Due to
				Volume			Yield/Rate					Volume			Yield/Rate							Total Change			Volume					Total Change				Volume			Yield/Rate
Interest-earning assets:	Interest-earning assets:
Interest-bearing cash and deposits with banks	Interest-bearing cash and deposits with banks	$	(14,665)		$	5,544		$	(20,209)	$	(31,203)		$	10,978		$	(42,181)									Interest-bearing cash and deposits with banks	$	(936)			$	1,674			$	(2,610)		$	(8,412)		$	7,318		$	(15,730)
Resale agreements	Resale agreements	(1,648)			1,454			(3,102)		(5,819)			936			(6,755)										Resale agreements	2,507			4,497				(1,990)			2,981			7,396			(4,415)
AFS debt securities	AFS debt securities	2,548			7,019			(4,471)		12,261			17,798			(5,537)										AFS debt securities	13,686			19,563				(5,877)			22,644			34,909			(12,265)
Loans	Loans	(97,116)			41,192			(138,308)		(175,838)			126,385			(302,223)										Loans	(14,940)			24,001				(38,941)			(84,801)			60,753			(145,554)
Restricted equity securities	Restricted equity securities	(303)			7			(310)		(774)			61			(835)										Restricted equity securities	240			5				235			341			28			313
Total interest and dividend income	Total interest and dividend income	$	(111,184)		$	55,216		$	(166,400)	$	(201,373)		$	156,158		$	(357,531)									Total interest and dividend income	$	557		$	49,740			$	(49,183)		$	(67,247)		$	110,404		$	(177,651)
Interest-bearing liabilities:	Interest-bearing liabilities:																									Interest-bearing liabilities:
Checking deposits	Checking deposits	$	(10,143)		$	1,832		$	(11,975)	$	(24,584)		$	(222)		$	(24,362)									Checking deposits	$	(1,627)		$	1,770			$	(3,397)		$	(7,659)		$	4,210		$	(11,869)
Money market deposits	Money market deposits	(20,106)			4,428			(24,534)		(48,680)			13,941			(62,621)										Money market deposits	(4,381)			1,799				(6,180)			(21,918)			6,677			(28,595)
Savings deposits	Savings deposits	(1,175)			123			(1,298)		(2,617)			152			(2,769)										Savings deposits	633			391				242			557			809			(252)
Time deposits	Time deposits	(31,598)			(6,087)			(25,511)		(54,308)			(3,726)			(50,582)										Time deposits	(23,026)			(3,278)				(19,748)			(53,962)			(7,576)			(46,386)
Short-term borrowings	Short-term borrowings	25			276			(251)		(131)			1,257			(1,388)										Short-term borrowings	(265)			(132)				(133)			(779)			(1,344)			565
FHLB advances	FHLB advances	(1,875)			(548)			(1,327)		(1,356)			2,474			(3,830)										FHLB advances	(1,244)			(827)				(417)			(2,341)			(1,132)			(1,209)
Repurchase agreements	Repurchase agreements	(1,084)			4,023			(5,107)		(514)			15,051			(15,565)										Repurchase agreements	(1,549)			(853)				(696)			(3,562)			(1,302)			(2,260)
Long-term debt and finance lease liabilities	Long-term debt and finance lease liabilities	449			3,038			(2,589)		(201)			6,872			(7,073)										Long-term debt and finance lease liabilities	(682)			(1,694)				1,012			(1,269)			(2,300)			1,031
Total interest expense	Total interest expense	$	(65,507)		$	7,085		$	(72,592)	$	(132,391)		$	35,799		$	(168,190)									Total interest expense	$	(32,141)		$	(2,824)			$	(29,317)		$	(90,933)		$	(1,958)		$	(88,975)
Change in net interest income	Change in net interest income	$	(45,677)		$	48,131		$	(93,808)	$	(68,982)		$	120,359		$	(189,341)									Change in net interest income	$	32,698		$	52,564			$	(19,866)		$	23,686		$	112,362		$	(88,676)

Noninterest Income

The following table presents the components of noninterest income for the ~~third~~second quarter and first ~~nine months~~half of ~~2020~~2021 and ~~2019:~~2020:


($ in thousands)	($ in thousands)	Three Months Ended September 30,						Nine Months Ended September 30,						($ in thousands)	Three Months Ended June 30,				Six Months Ended June 30,
		2020		2019		% Change		2020		2019		% Change			2021		2020		% Change	2021		2020		% Change
Lending fees	Lending fees	$	18,736	$	15,035	25	%	$	56,455	$	46,427	22	%	Lending fees	$	21,092	$	21,946	(4)%	$	39,449	$	37,719	5%
Deposit account fees	Deposit account fees	12,573		9,729		29	%	33,892		28,804		18	%	Deposit account fees	17,342		10,872		60%	32,725		21,319		54%
Interest rate contracts and other derivative (loss) income														Interest rate contracts and other derivative (loss) income	(3,172)		6,107		NM	13,825		13,180		5%
Foreign exchange income	Foreign exchange income	3,310		8,065		(59)	%	15,691		20,366		(23)	%	Foreign exchange income	13,007		4,562		185%	22,533		12,381		82%
Wealth management fees	Wealth management fees	4,553		4,841		(6)	%	12,997		12,415		5	%	Wealth management fees	7,951		3,091		157%	14,862		8,444		76%
Interest rate contracts and other derivative income		5,538		8,423		(34)	%	18,718		22,037		(15)	%
Net gains on sales of loans	Net gains on sales of loans	361		2,037		(82)	%	1,443		2,967		(51)	%	Net gains on sales of loans	1,491		132		NM	3,272		1,082		202%
Gains on sales of AFS debt securities	Gains on sales of AFS debt securities	698		58		NM		11,867		3,066		287	%	Gains on sales of AFS debt securities	632		9,640		(93)%	824		11,169		(93)%

Other investment income	Other investment income	316		663		(52)	%	3,203		2,571		25	%	Other investment income	7,596		(1,964)		NM	8,521		1,414		503%
Other income	Other income	3,495		2,623		33	%	8,000		7,711		4	%	Other income	2,492		1,321		89%	5,286		4,505		17%
Total noninterest income	Total noninterest income	$	49,580	$	51,474	(4)	%	$	162,266	$	146,364	11	%	Total noninterest income	$	68,431	$	55,707	23%	$	141,297	$	111,213	27%

NM —- Not meaningful.

7665

Noninterest income comprised ~~13%~~15% and ~~14%~~16% of total revenue for the ~~third~~second quarter and first ~~nine months~~half of ~~2020,~~2021, respectively, compared with ~~12%~~14% for both the ~~third~~second quarter and the first ~~nine months~~half of ~~2019. Third~~2020. Second quarter ~~2020~~of 2021 noninterest income was ~~$49.6~~$68.4 million, ~~a decrease~~an increase of ~~$1.9~~$12.7 million or 4%23%, compared with ~~$51.5~~$55.7 million for the same period in ~~2019.~~2020. This ~~decrease~~increase was primarily due to ~~decreases~~increases in other investment income, foreign exchange income, deposit account fees, and wealth management fees, partially offset by a decrease in interest rate contracts and other derivative income and ~~net~~lower gains on sales of ~~loans, partially offset by increases in lending fees and deposit account fees.~~AFS debt securities. Noninterest income for the first ~~nine months~~half of ~~2020~~2021 was ~~$162.3~~$141.3 million, an increase of ~~$15.9~~$30.1 million or ~~11%~~27%, compared with ~~$146.4~~$111.2 million for the ~~first nine months of 2019.~~same period in 2020. This increase was primarily due to increases in ~~lending~~deposit account fees, ~~gains on sale of AFS debt securities~~foreign exchange income, other investment income and ~~deposit account~~wealth management fees, partially offset by ~~decreases in foreign exchange income, and interest rate contracts and other derivative income. The following discussion provides the composition~~lower gains on sales of ~~the major changes in noninterest income:~~

Lending fees increased $3.7 million or 25% to $18.7 million for the third quarter of 2020, and increased $10.0 million or 22% to $56.5 million for the first nine months of 2020, as compared with the same periods in 2019. These increases primarily reflected an increase in the valuation of warrants received as part of lending relationships.AFS debt securities.

Deposit account fees increased ~~$2.8~~by $6.5 million or ~~29%~~60% to ~~$12.6~~$17.3 million for the ~~third~~second quarter of ~~2020,~~2021, and increased ~~$5.1~~by $11.4 million or ~~18%~~54% to ~~$33.9~~$32.7 million for the ~~first nine months~~second half of ~~2020, as~~2021, compared with the same periods in ~~2019.~~2020. These increases ~~primarily reflected an increase~~reflect new customer acquisition and growth in customer-driven transactions.

~~Foreign exchange~~Interest rate contracts and other derivative loss was $3.2 million forthe second quarter of 2021, compared with income ~~decreased $4.8 million or 59% to $3.3~~of $6.1 million for the ~~third quarter of 2020,~~same period in 2020. This decrease was primarily due to lower customer-driven revenue. Interest rate contracts and ~~decreased $4.7 million~~other derivative income increased $645 thousand or ~~23%~~5% to ~~$15.7~~$13.9 million for the first ~~nine months~~half of ~~2020, as~~2021, compared with the same period in 2020. This increase reflects favorable credit valuation adjustments, partially offset by lower customer-driven revenue.

Foreign exchange income increased by $8.4 million or 185% to $13.0 million for the second quarter of 2021, and increased by $10.2 million or 82% to $22.5 million for the first half of 2021, compared with the same periods in ~~2019.~~2020. These ~~decreases were primarily driven by the downward~~increases reflect new customer acquisition and growth in customer-driven transactions, as well as positive revaluation of certain foreign currency-denominated balance sheet items.

~~Interest rate contracts and other derivative income decreased $2.9~~Wealth management fees increased by $4.9 million or ~~34%~~157% to ~~$5.5~~$8.0 million for the ~~third~~second quarter of ~~2020,~~2021, and ~~decreased $3.3~~increased by $6.4 million or ~~15%~~76% to ~~$18.7~~$14.9 million for the first ~~nine months~~half of ~~2020, as~~2021, compared with the same periods in ~~2019.~~2020. The ~~$2.9 million or 34% decrease during the third quarter of 2020, compared with the same period in 2019~~increase was primarily reflected a decline in customer demand for interest rate swaps. The $3.3 million or 15% decrease during the first nine months of 2020, compared with the same period in 2019 primarily reflected the impact of negative credit valuation adjustments due to ~~higher loss probabilities for borrowers impacted by the COVID-19 pandemic, partially offset by higher year-to-date customer demand for interest rate swaps compared with the year-ago period.~~growth in customer-driven transactions.

Net gains on sales of loans decreased $1.7 million or 82% to $361 thousand for the third quarter of 2020, and decreased $1.5 million or 51% to $1.4 million for the first nine months of 2020, as compared with the same periods in 2019. These decreases were primarily driven by lower SBA loan sale activity. There were no sales during the third quarter of 2020 compared with $21.1 million during the third quarter of 2019. SBA loan sales during the first nine months of 2020 were $11.2 million compared with $32.9 million during the first nine months of 2019.

Gains on sales of AFS debt securities ~~increased $640~~decreased by $9.0 million or 93% to $632 thousand forthe second quarter of 2021, and decreased $10.3 million or 93% to ~~$698~~$824 thousand for the ~~third quarter~~first half of ~~2020, up from $58 thousand for~~2021, compared with the ~~third quarter of 2019. This increase was~~same periods in 2020. These decreases primarily ~~driven by the sales of U.S. government agency mortgage-backed securities of $9.8 million during the third quarter of 2020. Gains on sales~~reflect a lower volume of AFS debt ~~securities increased $8.8~~securities’ sales.

Other investment income was $7.6 million ~~or 287% to $11.9~~forthe second quarter of 2021, an increase of $9.6 million compared with a loss of $2.0 million for the same period in 2020. Other investment income was $8.5 million for the first ~~nine months~~half of ~~2020, up from $3.1~~2021, an increase of $7.1 million or 503%, compared with $1.4 million for the ~~first nine months~~same period in 2020. These year-over-year increases reflected higher valuations of ~~2019. This increase was primarily driven by $131.6 million in sales of municipal bonds during the second quarter of 2020.~~Community Reinvestment Act investments.

7766

Noninterest Expense

The following table presents the components of noninterest expense for the ~~third~~second quarter and first ~~nine months~~half of ~~2020~~2021 and ~~2019:~~2020:


($ in thousands)	($ in thousands)	Three Months Ended September 30,						Nine Months Ended September 30,						($ in thousands)	Three Months Ended June 30,						Six Months Ended June 30,
		2020		2019		% Change		2020		2019		% Change			2021			2020			% Change		2021			2020			% Change
Compensation and employee benefits	Compensation and employee benefits	$	99,756	$	97,819	2	%	$	298,671	$	300,649	(1)	%	Compensation and employee benefits	$	105,426		$	96,955		9	%	$	213,234		$	198,915		7	%
Occupancy and equipment expense	Occupancy and equipment expense	16,648		17,912		(7)	%	49,941		52,592		(5)	%	Occupancy and equipment expense	15,377			16,217			(5)	%	31,299			33,293			(6)	%
Deposit insurance premiums and regulatory assessments	Deposit insurance premiums and regulatory assessments	4,006		3,550		13	%	11,133		9,557		16	%	Deposit insurance premiums and regulatory assessments	4,274			3,700			16	%	8,150			7,127			14	%
Deposit account expense														Deposit account expense	3,817			3,353			14	%	7,709			6,916			11	%
Data processing														Data processing	4,035			4,480			(10)	%	8,513			8,306			2	%
Computer software expense														Computer software expense	7,521			7,301			3	%	14,680			13,467			9	%
Consulting expense														Consulting expense	1,868			1,413			32	%	3,343			2,630			27	%
Legal expense	Legal expense	1,366		1,720		(21)	%	6,093		6,300		(3)	%	Legal expense	1,975			1,530			29	%	3,477			4,727			(26)	%
Data processing		3,590		3,328		8	%	11,896		9,945		20	%
Consulting expense		1,224		2,559		(52)	%	3,854		6,687		(42)	%
Deposit related expense		3,113		3,584		(13)	%	10,029		10,426		(4)	%
Computer software expense		8,539		6,556		30	%	22,006		18,845		17	%
Other operating expense	Other operating expense	17,122		22,769		(25)	%	57,489		67,737		(15)	%	Other operating expense	17,939			19,248			(7)	%	37,546			40,367			(7)	%
Amortization of tax credit and other investments	Amortization of tax credit and other investments	12,286		16,833		(27)	%	54,370		58,477		(7)	%	Amortization of tax credit and other investments	27,291			21,829			25	%	52,649			40,611			30	%
Repurchase agreements’ extinguishment cost	Repurchase agreements’ extinguishment cost	—		—		—	%	8,740		—		100	%	Repurchase agreements’ extinguishment cost	—			8,740			(100)	%	—			8,740			100	%

Total noninterest expense	Total noninterest expense	$	167,650	$	176,630	(5)	%	$	534,222	$	541,215	(1)	%	Total noninterest expense	$	189,523		$	184,766		3	%	$	380,600		$	365,099		4	%
Efficiency ratio (1)														Efficiency ratio (1)	42.60		%	46.25		%			43.67		%	44.65		%

(1)Refer to Item 2. MD&A — Reconciliation of GAAP to Non-GAAP Financial Measures in this Form 10-Q for the detailed calculation of GAAP and non-GAAP efficiency ratios.

~~Third~~Second quarter ~~2020~~2021 noninterest expense was ~~$167.7~~$189.5 million, ~~a decrease~~an increase of ~~$8.9~~$4.8 million or 5%3%, compared with ~~$176.6~~$184.8 million for the same period in ~~2019. This decrease~~2020. First half of 2021 noninterest expense was $380.6 million, an increase of $15.5 million or 4%, compared with $365.1 million for the same period in 2020. These increases were primarily due to ~~decreases in other operating expense,~~higher compensation and employee benefits and amortization of tax credit and other investments, partially offset by ~~an increase in computer software expense. Noninterest expense~~no repurchase agreements’ extinguishment cost for the second quarter and first ~~nine months~~half of ~~2020 was $534.2 million, a decrease of $7.0~~2021.

Compensation and employee benefits increased by $8.5 million or ~~1%, compared with $541.2~~9% to $105.4 million for the second quarter of 2021, and increased by $14.3 million or 7% to $213.2 million for the first ~~nine months~~half of 2019. This decrease was primarily due to decreases in other operating expense, amortization of tax credit and other investments, and consulting expense, partially offset by increases in repurchase agreements’ extinguishment cost and computer software expense.

~~Consulting expense decreased $1.4 million or 52% to $1.2 million for the third quarter of 2020, and decreased $2.8 million or 42% to $3.9 million for the first nine months of 2020, as~~2021, compared with the same periods in ~~2019. These decreases were primarily due to reductions in consulting expense related to loan-related operations, treasury management, CECL implementation, and tax credit investment projects.~~

Computer software expense increased $2.0 million or 30% to $8.5 million for the third quarter of 2020, and increased $3.2 million or 17% to $22.0 million for the first nine months of 2020, as compared with the same periods in 2019.2020. These increases were primarily due to ~~software development expenses.~~

Other operating expense primarily consists of telecommunications and postage, loan related expenses, marketing, charitable contributions, travel, and other miscellaneous expense categories. Other operating expense decreased $5.7 million or 25% to $17.1 million for the third quarter of 2020, and decreased $10.2 million or 15% to $57.5 million for the first nine months of 2020, as compared with the same periodsan increase in ~~2019. These decreases were primarily driven by decreases in marketing, travel and other miscellaneous expense categories, largely due to the COVID-19 pandemic.~~bonus accrual.

Amortization of tax credit and other investments ~~decreased $4.5~~increased $5.5 million or ~~27%~~25% to ~~$12.3~~$27.3 million for the ~~third~~second quarter of ~~2020,~~2021, and increased by $12.0 million or 30% to $52.6 million for the first half of 2021, compared with the same ~~period~~periods in ~~2019. Amortization of tax credit and other investments decreased $4.1 million or 7% to $54.4 million for the first nine months of 2020, as compared with the same period in 2019.~~2020. These year-over-year ~~decreases~~increases were primarily due to ~~a decrease in other-than-temporary impairment (“OTTI”) charges, partially offset by additional~~the timing of the tax credit ~~investments that were placed~~recognition in service during 2020. No OTTI charges were recorded during the third quarter of 2020, while $1.7 million of OTTI charges related to two historic tax credits were recorded in the third quarter of 2019. For the first nine months of 2020, $474 thousand of OTTI charges, net of recoveries were recorded. For the first nine months of 2019, $7.0 million in full write-off of the DC Solar relatedeach period, based on when new tax credit ~~investments and $4.6 million of OTTI charges related to three historic tax credits and a CRA investment were recorded.~~projects go into service.

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

Efficiency ratio, calculated as noninterest expense divided by total revenue, was 42.60% and 46.25% for the second quarter of ~~2020; nor~~2021 and 2020, respectively, and 43.67% and 44.65% for the ~~third~~first half of 2021 and 2020, respectively. Non-GAAP efficiency ratio, adjusted for the amortization of tax credit and other investments and the amortization of core deposit intangibles, improved 207 basis points to 36.30% for the second quarter of 2021, and improved 92 basis points to 37.47% for the first ~~nine months~~half of ~~2019.~~2021, compared with the same periods in 2020. For additional details, see the reconciliations of non-GAAP measures presented under Item 2. MD&A — Reconciliation of GAAP to Non-GAAP Financial Measures in this Form 10-Q.

Income Taxes



($ in thousands)	Three Months Ended June 30,								Six Months Ended June 30,
	2021			2020			% Change			2021			2020			% Change
Income before income taxes	$	270,381		$	112,273		141	%		$	505,865		$	276,283		83	%
Income tax expense	$	45,639		$	12,921		253	%		$	76,129		$	32,107		137	%
Effective tax rate	16.9		%	11.5		%				15.0		%	11.6		%

($ in thousands) Three Months Ended September 30, Nine Months Ended September 30,
2020 2019 % Change 2020 2019 % Change
Income before income taxes $ 196,060 $ 206,367 (5) % $ 472,343 $ 624,635 (24) %
Income tax expense $ 36,523 $ 34,951 4 % $ 68,630 $ 138,815 (51) %
Effective tax rate 18.6 % 16.9 % 10 % 14.5 % 22.2 % (35) %

~~Income~~Second quarter 2021 income tax expense was ~~$36.5~~$45.6 million and the effective tax rate was ~~18.6% for the third quarter of 2020,~~16.9%, compared with ansecond quarter 2020 income tax expense of ~~$35.0~~$12.9 million and an effective tax rate of ~~16.9% for~~11.5%. For the ~~same period in 2019. The increase in effective tax rate for the third quarter~~first half of ~~2020 compared with the same period in 2019 was primarily due to a decrease in tax credits recognized from investments in solar tax credit projects during these periods.~~

~~The~~2021, income tax expense was ~~$68.6~~$76.1 million and the effective tax rate was ~~14.5% for the first nine months of 2020,~~15.0%, compared with an income tax expense of ~~$138.8~~$32.1 million and an effective tax rate of ~~22.2%~~11.6% for the same period in ~~2019.~~2020. The higher effective tax rate of 22.2% during the first nine months of 2019 was primarily due to $30.1 million of additional income tax expense recorded during the second quarter of 2019 to reverse certain previously claimed tax credits related to the Company’s investment in DC Solar. Excluding this $30.1 million of additional income tax expense, non-GAAP effective tax rates for the first nine months of 2019 was 17.4%. For more details, see reconciliations of non-GAAP measures presented under ~~Item 2. MD&A — Supplemental Information — Explanation of GAAP to Non-GAAP Financial Measures~~ ~~in this Form 10-Q.Excluding this non-GAAP impact, the~~ year-over-year ~~decrease~~increase in the effective tax rate for ~~the first nine months of 2020, compared to the year-ago period,~~both periods was primarily due to ~~a year-over-year increase in tax credits recognized from investments in renewable energy and historic~~the relative impact of tax credit ~~projects.~~investments on income tax expense in each period.

Operating Segment Results

The Company organizes its operations into three reportable operating segments: (1) Consumer and Business Banking; (2) Commercial Banking; and (3) Other. These segments are defined by the type of customers served and the related products and services provided. The segments reflect how financial information is currently evaluated by management. For additional description of the Company’s internal management reporting process, including the segment cost allocation methodology, see Note 1514 — Business Segments to the Consolidated Financial Statements in this Form 10-Q.

Segment net interest income ~~before provision for credit losses~~ represents the difference between actual interest ~~income~~ earned on ~~loans~~assets and interest ~~expense paid~~incurred on ~~customer deposits~~liabilities of the segment, adjusted for funding charges ~~for loans~~ or ~~funding~~ credits ~~for deposits~~ through the Company’s internal funds transfer pricing (“FTP”) process. During the third quarter of 2019, the Company enhanced its FTP methodology related to deposits by setting a minimum floor rate using the short-term FHLB rate as a reference rate for the FTP credits paid for deposits in the event of flattened and inverted yield curves in the market. The process is effective in the current market conditions as of September 30, 2020. Effective January 1, 2020, in connection with the adoption of ASU 2016-13, ~~Financial Instruments~~ — ~~Credit Losses~~ ~~(Topic 326), the provision for credit losses is booked by segment based on segment loans against which an allowance is recorded instead of being allocated to segments based on loan volume.~~

The following tables present ~~selected~~the results by operating segment ~~information~~ for the ~~third quarter and first nine months of 2020 and 2019:~~periods indicated:

($ in thousands) Three Months Ended September 30, 2020
Consumer and
Business
Banking Commercial
Banking Other Total
Net interest income before (reversal of) provision for credit losses $ 120,969 $ 162,884 $ 40,277 $ 324,130
(Reversal of) provision for credit losses (3,470) 13,470 — 10,000
Noninterest income 17,426 28,984 3,170 49,580
Noninterest expense 81,419 61,863 24,368 167,650
Segment income before income taxes 60,446 116,535 19,079 196,060
Segment net income $ 43,310 $ 83,340 $ 32,887 $ 159,537
Average loans $ 12,267,993 $ 24,892,452 $ — $ 37,160,445
Average deposits $ 27,596,090 $ 10,766,677 $ 2,847,980 $ 41,210,747



($ in thousands)	Three Months Ended June 30,
	Consumer and Business Banking				Commercial Banking				Other
	2021		2020		2021		2020		2021		2020
Total revenue	$	198,229	$	138,869	$	225,248	$	217,683	$	21,427	$	42,930
Provision for (reversal of) credit losses	2,358		5,590		(17,358)		96,853		—		—























Noninterest expense	87,650		80,164		64,164		64,900		37,709		39,702
Segment income (loss) before income taxes	108,221		53,115		178,442		55,930		(16,282)		3,228

Segment net income	$	77,517	$	38,058	$	127,785	$	40,178	$	19,440	$	21,116

($ in thousands) Three Months Ended September 30, 2019
Consumer and
Business
Banking Commercial
Banking Other Total
Net interest income before provision for credit losses $ 170,183 $ 166,106 $ 33,518 $ 369,807
Provision for credit losses 4,251 34,033 — 38,284
Noninterest income 15,103 33,731 2,640 51,474
Noninterest expense 86,489 62,246 27,895 176,630
Segment income before income taxes 94,546 103,558 8,263 206,367
Segment net income $ 67,592 $ 74,111 $ 29,713 $ 171,416
Average loans $ 10,721,391 $ 22,939,891 $ — $ 33,661,282
Average deposits $ 25,006,435 $ 8,686,523 $ 2,804,740 $ 36,497,698

($ in thousands) Nine Months Ended September 30, 2020
Consumer and
Business
Banking Commercial
Banking Other Total
Net interest income before provision for credit losses $ 398,486 $ 530,181 $ 101,945 $ 1,030,612
Provision for credit losses 9,908 176,405 — 186,313
Noninterest income 47,771 95,327 19,168 162,266
Noninterest expense 248,547 196,889 88,786 534,222
Segment income before income taxes 187,802 252,214 32,327 472,343
Segment net income $ 134,563 $ 180,649 $ 88,501 $ 403,713
Average loans $ 11,851,089 $ 24,636,770 $ — $ 36,487,859
Average deposits $ 26,734,437 $ 10,197,018 $ 2,602,791 $ 39,534,246

($ in thousands) Nine Months Ended September 30, 2019
Consumer and
Business
Banking Commercial
Banking Other Total
Net interest income before provision for credit losses $ 536,153 $ 477,755 $ 85,686 $ 1,099,594
Provision for credit losses 8,880 71,228 — 80,108
Noninterest income 43,378 91,931 11,055 146,364
Noninterest expense 258,051 200,093 83,071 541,215
Segment income before income taxes 312,600 298,365 13,670 624,635
Segment net income $ 223,478 $ 213,331 $ 49,011 $ 485,820
Average loans $ 10,535,455 $ 22,488,258 $ — $ 33,023,713
Average deposits $ 25,021,677 $ 8,354,914 $ 2,211,663 $ 35,588,254



($ in thousands)	Six Months Ended June 30,
	Consumer and Business Banking				Commercial Banking				Other
	2021		2020		2021		2020		2021		2020
Total revenue	$	368,956	$	307,862	$	452,350	$	433,640	$	50,159	$	76,193
(Reversal of) provision for credit losses	(1,891)		13,378		(13,109)		162,935		—		—























Noninterest expense	176,936		167,128		133,421		135,026		70,243		62,945
Segment income (loss) before income taxes	193,911		127,356		332,038		135,679		(20,084)		13,248

Segment net income	$	138,895	$	91,253	$	237,865	$	97,309	$	52,976	$	55,614

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~~small- and medium-sized enterprises. Other products and services provided by this segment include wealth management, treasury management and foreign exchange services. The integration of digital channels and our brick and mortar channels has been a priority for the Bank. The Company is developing a digital consumer banking platform to enhance the customer user experience and offer a full suite of banking services. Customer adoption of the digital banking application is in progress and has contributed to growth in segment fee income and deposit growth.

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



($ in thousands)	Three Months Ended June 30,
					Change from 2020
	2021		2020		$		%
Net interest income before provision for credit losses	$	173,775	$	124,926	$	48,849	39	%
Noninterest income	24,454		13,943		10,511		75	%
Total revenue	198,229		138,869		59,360		43	%
Provision for credit losses	2,358		5,590		(3,232)		(58)	%
Noninterest expense	87,650		80,164		7,486		9	%
Segment income before income taxes	108,221		53,115		55,106		104	%
Income tax expense	30,704		15,057		15,647		104	%
Segment net income	$	77,517	$	38,058	$	39,459	104	%
Average loans	$	13,866,502	$	12,011,203	$	1,855,299	15	%
Average deposits	$	31,146,296	$	27,004,689	$	4,141,607	15	%



($ in thousands)	Six Months Ended June 30,
					Change from 2020
	2021		2020		$		%
Net interest income before provision for credit losses	$	323,674	$	277,517	$	46,157	17	%
Noninterest income	45,282		30,345		14,937		49	%
Total revenue	368,956		307,862		61,094		20	%
(Reversal of) provision for credit losses	(1,891)		13,378		(15,269)		(114)	%
Noninterest expense	176,936		167,128		9,808		6	%
Segment income before income taxes	193,911		127,356		66,555		52	%
Income tax expense	55,016		36,103		18,913		52	%
Segment net income	$	138,895	$	91,253	$	47,642	52	%
Average loans	$	13,584,892	$	11,640,346	$	1,944,546	17	%
Average deposits	$	30,688,116	$	26,298,876	$	4,389,240	17	%

Segment net income increased $39.5 million or 104% to$77.5 million during the second quarter of 2021, compared with $38.1 million for the same period in 2020. For the first half of 2021, segment net income increased $47.6 million or 52% to $138.9 million, compared with $91.3 million for the same period in 2020. The increases in both periods were primarily due to higher revenue and lower provision for credit losses, partially offset by higher income tax expense.

Second quarter 2021 net interest income before provision for credit losses increased $48.8 million or 39% to $173.8 million, compared with $124.9 million for the same period in 2020. First half of 2021 net interest income before provision for credit losses increased $46.2 million or 17% to $323.7 million, compared with $277.5 million for the same period in 2020. The year-over-year increase in net interest income for both periods was driven by lower interest expense, due to lower interest rates and growth in noninterest-bearing demand deposits, and higher interest income due to growth in average loans, especially in residential mortgage.

The Consumer and Business Banking segment ~~reported net income~~recorded a $2.4 million provision for credit losses during the second quarter of ~~$43.3~~2021, compared with a $5.6 million provision for credit losses recorded for the ~~third~~same period in 2020. For the first half of 2021, the segment recorded a $1.9 million reversal of provision for credit losses, compared with a $13.4 million provision for credit losses recorded for the same period in 2020. The year-over-year decrease in the provision for credit losses for both periods was primarily driven by improved macroeconomic conditions and outlook.

Noninterest income increased $10.5 million or 75% to $24.5 million during the second quarter of ~~2020,~~2021, compared with ~~$67.6~~$13.9 million for the same period in ~~2019. The decrease in segment net~~2020. First half of 2021 noninterest income ~~of $24.3~~increased $15.0 million or ~~36% was primarily due~~49% to ~~a decrease in net interest income before reversal of provision for credit losses.~~

~~Third quarter 2020 net interest income before reversal of provision for credit losses for this segment was $121.0~~$45.3 million, ~~a decrease of $49.2 million or 29%,~~ compared with ~~$170.2~~$30.3 million for the same period in ~~2019. Interest income earned on loans decreased by 8%, driven by a decrease~~2020. The increases in the average loan yield, partially offset by growth in income driven by average loan growth. Interest expense paid on deposits decreased by 65%, driven by a decline in the average cost of deposits. FTP funding charges assessed for loans decreased, reflecting a decline in the loans FTP rate, and FTP credits received for deposits decreased, reflecting a decline in the deposits FTP rate. Combined, these factors contributed to a 29% decrease in segment net interest income before reversal of provision for credit losses, with the largest driver being lower FTP credits received for deposits.

Third quarter 2020 reversal of provision for credit losses was $3.5 million, a decrease of $7.8 million, compared with $4.3 million of provision for credit losses for the same period in 2019. The reversal of provision for credit losses in the third quarter of 2020 reflects a quarter-over-quarter decrease in the allowance for loan losses assigned to the Consumer and Business Banking segment, primarily due to an improved macroeconomic forecast used in the credit estimation process.

~~Third quarter 2020 average loans for this segment~~both periods were ~~$12.27 billion, an increase of $1.55 billion or 14% from $10.72 billion for the same period in 2019,~~ primarily driven by higher wealth management fees, foreign exchange income, and deposit account fees due to growth in residential mortgage and C&I loans, namely PPP loans. Third quarter 2020 average deposits for this segment were $27.60 billion, an increase of $2.59 billion or 10% from $25.01 billion for the same period in 2019, primarily driven by growth in noninterest-bearing demand and interest-bearing checking deposits.

~~The Consumer and Business Banking segment reported net income of~~ ~~$134.6 million~~ ~~for the first nine months of 2020, compared with~~ ~~$223.5 million~~ ~~for the same period in 2019. The decrease in segment net income of $88.9 million or 40% was primarily due to a decrease in net interest income before provision for credit losses.~~customer-driven transactions.

8169

Net interest income before provision for credit losses for this segment for the first nine months of 2020 was $398.5 million, a decrease of $137.7 million or 26%, compared with $536.2 million for the same period in 2019. Interest income earned on loans remained relatively flat. Interest expense paid on deposits decreased by 46%, driven by a decline in the average cost of deposits. FTP funding charges assessed for loans decreased, reflecting a decline in the loans FTP rate, and FTP credits received for deposits decreased, reflecting a decline in the deposits FTP rate. Combined, these factors drove a 26% decrease in segment net interest income before provision for credit losses, with the largest driver being lower FTP credits received for deposits.

Average loans for this segment were $11.85 billion for the first nine months of 2020, an increase of $1.31 billion or 12% from $10.54 billion for the same period in 2019, primarily driven by growth in residential mortgage loans. Average deposits for this segment were $26.73 billion for the first nine months of 2020, an increase of $1.71 billion or 7% from $25.02 billion for the same period in 2019, primarily driven by growth in noninterest-bearing demand and money market deposits.

Commercial Banking

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

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



($ in thousands)	Three Months Ended June 30,
					Change from 2020
	2021		2020		$		%
Net interest income before provision for credit losses	$	192,696	$	183,796	$	8,900	5	%
Noninterest income	32,552		33,887		(1,335)		(4)	%
Total revenue	225,248		217,683		7,565		3	%
(Reversal of) provision for credit losses	(17,358)		96,853		(114,211)		(118)	%
Noninterest expense	64,164		64,900		(736)		(1)	%
Segment income before income taxes	178,442		55,930		122,512		219	%
Income tax expense	50,657		15,752		34,905		222	%
Segment net income	$	127,785	$	40,178	$	87,607	218	%
Average loans	$	25,755,768	$	25,130,570	$	625,198	2	%
Average deposits	$	16,429,188	$	10,642,686	$	5,786,502	54	%



($ in thousands)	Six Months Ended June 30,
					Change from 2020
	2021		2020		$		%
Net interest income before provision for credit losses	$	369,788	$	367,297	$	2,491	1	%
Noninterest income	82,562		66,343		16,219		24	%
Total revenue	452,350		433,640		18,710		4	%
(Reversal of) provision for credit losses	(13,109)		162,935		(176,044)		(108)	%
Noninterest expense	133,421		135,026		(1,605)		(1)	%
Segment income before income taxes	332,038		135,679		196,359		145	%
Income tax expense	94,173		38,370		55,803		145	%
Segment net income	$	237,865	$	97,309	$	140,556	144	%
Average loans	$	25,593,363	$	24,507,525	$	1,085,838	4	%
Average deposits	$	15,766,127	$	9,909,058	$	5,857,069	59	%

Segment net income ~~of $83.3~~increased $87.6 million ~~for~~or 218% to $127.8 million during the ~~third~~second quarter of ~~2020,~~2021, compared with ~~$74.1~~$40.2 million for the same period in ~~2019. The increase in~~2020. For the first half of 2021, segment net income ~~of $9.2~~increased $140.6 million or ~~12% reflected a decrease in provision for credit losses, partially offset by a decrease in noninterest income.~~

~~Third quarter 2020 provision for credit losses was $13.5~~144% to $237.9 million, ~~a decrease of $20.5 million or 60%,~~ compared with ~~$34.0~~$97.3 million for the same period in ~~2019.~~2020. The year-over-year increases in both periods reflected a lower provision for credit losses in the third quarter of 2020 reflected the quarter-over-quarter change in the allowance for loan losses assigned to the Commercial Banking segment, which is primarily due to an improved macroeconomic forecast used in the credit estimation process, partially offset byand higher ~~reserves for oil & gas related loans.~~

Noninterest income for the third quarter of 2020 was $29.0 million, a decrease of $4.7 million or 14%, compared with $33.7 million for the same period in 2019. This decrease was mainly due to decreases in foreign exchange income, interest rate contracts and other derivative income,revenue, partially offset by an increase in ~~lending fees.~~income tax expense.

Third quarter 2020 average loans for this segment were $24.89 billion, an increase of $1.95 billion or 9% from $22.94 billion for the same period in 2019, primarily driven by the growth in CRE and C&I loans, namely PPP loans. Third quarter 2020 average deposits were $10.77 billion, an increase of $2.08 billion or 24% from $8.69 billion for the same period in 2019, primarily driven by an increase in noninterest-bearing demand deposits.

The Commercial Banking segment reported segment net income of $180.6 million for the first nine months of 2020, compared with $213.3 million for the same period in 2019. The decrease in segment net income of $32.7 million or 15% reflected an increase in provision for credit losses, partially offset by an increase in net interest income before provision for credit losses. Provision for credit losses for the first nine months of 2020 was $176.4 million, an increase of $105.2 million or 148%, compared with $71.2 million for the same period in 2019. This increase was primarily due to deteriorating macroeconomic conditions and outlook as a result of the COVID-19 pandemic, and higher reserves for oil & gas-related loans.

Net interest income before provision for credit losses ~~for this segment for the first nine months of 2020 was $530.2 million, an increase of $52.4~~increased $8.9 million or ~~11%,~~5% to $192.7 million during the second quarter of 2021, compared with ~~$477.8~~$183.8 million for the same period in ~~2019. Interest income earned on loans decreased by18%, which was primarily attributable to a decrease in average loan yields partially offset by growth in income driven by average loan growth. Interest expense paid on deposits decreased by39%, driven by a decline in~~2020. For the ~~average cost~~first half of deposits. FTP funding charges assessed for loans decreased, reflecting a decline in the FTP rate on loans. FTP credits received for deposits decreased, reflecting a decline in the FTP rate on deposits. Combined, these factors drove an increase of 11% in segment2021, net interest income before provision for credit losses ~~primarily~~increased $2.5 million or 1% to $369.8 million, compared with $367.3 million for the same period in 2020. The year-over-year increase in net interest income for both periods was driven by lower ~~FTP funding charges assessed for loans.~~interest expense, due to lower interest rates and growth in noninterest-bearing demand deposits, partially offset by a decline in interest income, due to compression in commercial loan yields.

8270

~~Average loans~~The Commercial Banking segment recorded a $17.4 million reversal of provision for ~~this~~credit losses during the second quarter of 2021, compared with a provision for credit losses of $96.9 million recorded in the same period of 2020. For the first half of 2021 the segment ~~were $24.64 billion~~recorded a $13.1 million reversal of provision for credit losses, compared with a provision for credit losses of $162.9 million recorded for the same period of 2020. The year-over-year decrease in the provision for credit losses was primarily driven by improved macroeconomic conditions and outlook.

Noninterest income decreased $1.3 million or 4% to $32.6 million in the second quarter 2021, compared with $33.9 million in the same period in 2020. This decrease was primarily driven by lower interest rate contracts and other derivative income, which reflected an unfavorable change in the credit valuation adjustment, partially offset by higher foreign exchange income and deposit account fees. For the first ~~nine months~~half of ~~2020, an increase of $2.15 billion~~2021, noninterest income increased $16.2 million or ~~10% from $22.49 billion~~24% to $82.6 million, compared with $66.3 million for the same period in ~~2019,~~2020. This increase was primarily driven by ~~the growth in CRE~~higher deposit account fees, foreign exchange income and C&I loans, namely PPP loans. Average deposits for this segment were $10.20 billion for the first nine months of 2020, an increase of $1.85 billion or 22% from $8.35 billion for the same period in 2019, primarily driven by increases in noninterest-bearing demandinterest rate contracts and ~~time deposits.~~other derivative income.

Other

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

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



($ in thousands)	Three Months Ended June 30,
					Change from 2020
	2021		2020		$		%
Net interest income before provision for credit losses	$	10,002	$	35,053	$	(25,051)	(71)	%
Noninterest income	11,425		7,877		3,548		45	%
Total revenue	21,427		42,930		(21,503)		(50)	%

Noninterest expense	37,709		39,702		(1,993)		(5)	%
Segment (loss) income before income taxes	(16,282)		3,228		(19,510)		(604)	%
Income tax benefit	(35,722)		(17,888)		(17,834)		100	%
Segment net income	$	19,440	$	21,116	$	(1,676)	(8)	%

Average deposits	$	2,605,505	$	2,253,153	$	352,352	16	%



($ in thousands)	Six Months Ended June 30,
					Change from 2020
	2021		2020		$		%
Net interest income before provision for credit losses	$	36,706	$	61,668	$	(24,962)	(40)	%
Noninterest income	13,453		14,525		(1,072)		(7)	%
Total revenue	50,159		76,193		(26,034)		(34)	%

Noninterest expense	70,243		62,945		7,298		12	%
Segment (loss) income before income taxes	(20,084)		13,248		(33,332)		(252)	%
Income tax benefit	(73,060)		(42,366)		(30,694)		72	%
Segment net income	$	52,976	$	55,614	$	(2,638)	(5)	%

Average deposits	$	2,566,555	$	2,478,850	$	87,705	4	%

Segment net income ~~before income taxes~~decreased $1.7 million or 8% to $19.4 million during the second quarter of ~~$19.1~~2021, compared with $21.1 million ~~and~~for the same period in 2020. For the first half of 2021, segment net income ~~of $32.9~~decreased $2.6 million or 5% to $53.0 million, compared with $55.6 million for the ~~third~~same period in 2020. The year-over-year decreases in both periods reflected lower revenue, partially offset by higher income tax benefit.

Net interest income before provision for credit losses decreased $25.1 million or 71% to $10.0 million during the second quarter of ~~2020, reflecting an income tax benefit of $13.8 million. In comparison, the Other segment reported segment income before income taxes of $8.3 million and segment net income of $29.7~~2021, compared with $35.1 million for the ~~third quarter~~same period in 2020. For the first half of ~~2019, reflecting an income tax benefit of $21.4 million.~~

~~The increase in third quarter 2020 segment income before income taxes was primarily driven by an increase in~~2021, net interest income before provision for credit losses ~~and a decrease in noninterest expense. Third quarter 2020 net interest income before provision for credit losses was $40.3 million, an increase of $6.8~~decreased $25.0 million or ~~20%,~~40% to $36.7 million, compared with ~~$33.5~~$61.7 million for the same period in ~~2019. This increase mainly reflected a decrease~~2020. The year-over-year decreases in ~~interest expense paid on deposits,~~both periods were primarily driven by ~~a decline in average cost of deposits and an increase in~~lower FTP ~~net spread. FTP net~~ spread isincome assigned to the ~~difference between the total internal FTP charges and credits and is recorded as part of net~~Other segment, partially offset by higher interest income ~~in the Other segment.~~ from investments.

Noninterest ~~expense was $24.4 million, a decrease of~~income increased $3.5 million or ~~13%,~~45% to $11.4 million during the second quarter of 2021, compared with ~~$27.9~~$7.9 million for the same period in ~~2019. This decrease was primarily driven~~2020, reflecting higher other income, partially offset by ~~the quarter-over-quarter change in the amortization~~lower gains on sales of ~~tax credit and other investments.~~

~~The Other segment reported segment income before income taxes of $32.3 million and segment net income of $88.5 million for~~AFS debt securities. For the first ~~nine months~~half of ~~2020, reflecting an~~2021, noninterest income tax benefit of $56.2 million. In comparison, the Other segment reported segment income before income taxes of $13.7 million and segment net income of $49.0 million for the first nine months of 2019, reflecting an income tax benefit of $35.3 million.

The increase in segment income before income taxes was primarily driven by an increase in net interest income before provision for credit losses. Net interest income before provision for credit losses for the first nine months of 2020 was $101.9 million, an increase of $16.2decreased $1.1 million or ~~19%,~~7% to $13.5 million, compared with ~~$85.7~~$14.5 million for the same period in ~~2019. This increase reflected a decrease in interest expense paid~~2020, reflecting lower gains on ~~deposits, driven~~sales of AFS debt securities, partially offset by ~~a decline in the average cost of deposits and an increase in FTP net spread.~~higher other income.

The income tax expense or benefit in the Other segment consists of the remaining unallocated income tax expense or benefit after allocating income tax expense to the two core segments. Income tax expense is allocated to the Consumer and Business Banking and the Commercial Banking segments ~~by applying~~based on statutory income tax rates, applied to ~~the~~ segment income before income taxes.

Balance Sheet Analysis

~~The following table presents the significant changes between September 30, 2020 and December 31, 2019:~~

~~Selected Consolidated Balance Sheet Data~~

($ in thousands) September 30, 2020 December 31, 2019 Change
($) (%)
(Unaudited)
ASSETS
Cash and cash equivalents $ 4,506,941 $ 3,261,149 $ 1,245,792 38 %
Interest-bearing deposits with banks 699,465 196,161 503,304 257 %
Resale agreements 1,210,000 860,000 350,000 41 %
AFS debt securities, at fair value (amortized cost of $4,471,694 in 2020 and $3,320,648 in 2019) 4,539,160 3,317,214 1,221,946 37 %
Restricted equity securities, at cost 79,172 78,580 592 1 %
Loans held-for-sale 4,148 434 3,714 856 %
Loans held-for-investment (net of allowance (1) for loan losses of $618,252 in 2020 and $358,287 in 2019)
36,818,877 34,420,252 2,398,625 7 %
Investments in qualified affordable housing partnerships, net 192,913 207,037 (14,124) (7) %
Investments in tax credit and other investments, net 254,512 254,140 372 0 %
Premises and equipment, net 107,506 118,364 (10,858) (9) %
Goodwill 465,697 465,697 — — %
Operating lease right-of-use assets 96,092 99,973 (3,881) (4) %
Other assets 1,396,994 917,095 479,899 52 %
TOTAL $ 50,371,477 $ 44,196,096 $ 6,175,381 14 %
LIABILITIES
Noninterest-bearing $ 14,924,917 $ 11,080,036 $ 3,844,881 35 %
Interest-bearing 26,755,638 26,244,223 511,415 2 %
Total deposits 41,680,555 37,324,259 4,356,296 12 %
Short-term borrowings 59,613 28,669 30,944 108 %
FHLB advances 657,185 745,915 (88,730) (12) %
Repurchase agreements 348,063 200,000 148,063 74 %
Long-term debt and finance lease liabilities (2)
1,579,317 152,270 1,427,047 937 %
Operating lease liabilities 103,673 108,083 (4,410) (4) %
Accrued expenses and other liabilities 816,965 619,283 197,682 32 %
Total liabilities 45,245,371 39,178,479 6,066,892 15 %
STOCKHOLDERS’ EQUITY (1)
5,126,106 5,017,617 108,489 2 %
TOTAL $ 50,371,477 $ 44,196,096 $ 6,175,381 14 %

~~(1)On January 1, 2020, the Company adopted ASU 2016-13,~~ ~~Financial Instruments — Credit Losses~~ ~~(Topic 326):~~ ~~Measurement of Credit Losses on Financial Instruments~~ using the modified retrospective approach. The Company recorded $125.2 million increase to allowance for loan losses and $98.0 million after-tax decrease to opening retained earnings as of January 1, 2020.

~~(2)Includes $1.43 billion of advances from the Federal Reserve’s PPPLF as of September 30, 2020.~~

~~As of September 30, 2020, total assets were $50.37 billion, an increase of $6.18 billion or 14% from December 31, 2019, primarily due t~~o loan growth, and increases in cash equivalents and AFS debt securities. The loan growth came from each of the Company’s major loan portfolios, with the strongest growth from C&I, driven by PPP loan growth. CRE and single-family residential loans contributed to the growth as well. The increase in cash and cash equivalents was primarily driven by deposit growth and advances from the PPPLF. AFS debt securities increased as runoff and sales were more than offset by purchases.

~~As of September 30, 2020, total liabilities were $45.25 billion, an increase of $6.07 billion or 15% from December 31, 2019, primarily due to~~ increases in deposits and long-term debt. Deposit growth was attributable to strong growth from both commercial and consumer customers, partially offset by a reduction in higher-cost time deposits. The increase in long-term debt was primarily driven by advances from the PPPLF.

As of September 30, 2020, total stockholders’ equity was $5.13 billion, an increase of $108.5 million or 2% from December 31, 2019. This increase was primarily driven by net income for the first nine months of 2020, partially offset by common stock repurchases and cash dividends declared on common stock.

Debt Securities

The Company maintains a ~~debt securities~~ portfolio ~~that consists~~ of high quality and liquid debt securities with ~~relatively short~~moderate durations to minimize overall interest rate and liquidity risks. The Company’s ~~AFS~~ debt securities provide:

•interest income for earnings and yield enhancement;

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

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

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

Available-for-Sale Debt Securities

As of September 30, 2020 and December 31, 2019, the Company’s AFS debt securities portfolio primarily consisted of mortgage-backed securities and debt securities issued by U.S. government agency and U.S. government-sponsored enterprises, non-agency mortgage-backed securities, municipal securities, collateralized loan obligations (“CLOs”), corporate debt securities, foreign government bonds, and U.S. Treasury securities. Debt securities classified as AFS are carried at their fair value with the corresponding changes in fair value recorded in Accumulated other comprehensive income (loss), net of tax,, as a component of Stockholders’ equity on the Consolidated Balance Sheet.

The following table presents the ~~amortized cost and fair value~~distribution of the Company’s AFS debt securities portfolio by ~~major categories~~fair value and percentage of fair value as of ~~September~~June 30, ~~2020~~2021 and December 31, ~~2019:~~2020, and by credit ratings as of June 30, 2021:


($ in thousands)	($ in thousands)	September 30, 2020				December 31, 2019				($ in thousands)	June 30, 2021				December 31, 2020					Ratings as of June 30, 2021 (2)
		Amortized Cost		Fair Value		Amortized Cost		Fair Value			Fair Value		% of Total			Fair Value		% of Total			AAA/AA		A		BBB		No Rating
AFS debt securities:	AFS debt securities:									AFS debt securities:
U.S. Treasury securities	U.S. Treasury securities	$	50,410	$	50,998	$	177,215	$	176,422	U.S. Treasury securities	$	836,940	10	%		$	50,761	1	%		100	%	—	%	—	%	—	%
U.S. government agency and U.S. government-sponsored enterprise debt securities	U.S. government agency and U.S. government-sponsored enterprise debt securities	718,907		727,062		584,275		581,245		U.S. government agency and U.S. government-sponsored enterprise debt securities	1,224,511		15	%		814,319		15	%		100	%	—	%	—	%	—	%
U.S. government agency and U.S. government-sponsored enterprise mortgage-backed securities	U.S. government agency and U.S. government-sponsored enterprise mortgage-backed securities	2,143,566		2,205,118		1,598,261		1,607,368		U.S. government agency and U.S. government-sponsored enterprise mortgage-backed securities	3,557,192		42	%		2,814,664		51	%		100	%	—	%	—	%	—	%
Municipal securities(1)	Municipal securities(1)	327,422		333,275		101,621		102,302		Municipal securities(1)	454,923		5	%		396,073		7	%		92	%	5	%	—	%	3	%
Non-agency mortgage-backed securities(1)	Non-agency mortgage-backed securities(1)	487,649		492,289		133,439		135,098		Non-agency mortgage-backed securities(1)	1,136,646		14	%		529,617		10	%		89	%	—	%	—	%	11	%
Corporate debt securities(1)	Corporate debt securities(1)	251,253		251,177		11,250		11,149		Corporate debt securities(1)	552,715		7	%		405,968		7	%		—	%	26	%	74	%	—	%
Foreign government bonds (1)	Foreign government bonds (1)	134,179		132,671		354,481		354,172		Foreign government bonds (1)	283,175		3	%		182,531		3	%		41	%	59	%	—	%	—	%
Asset-backed securities (1)	Asset-backed securities (1)	64,308		63,148		66,106		64,752		Asset-backed securities (1)	61,829		1	%		63,231		1	%		100	%	—	%	—	%	—	%
CLOs (1)		294,000		283,422		294,000		284,706

Collateralized loan obligations (CLOs) (1)										Collateralized loan obligations (CLOs) (1)	291,529		3	%		287,494		5	%		92	%	8	%	—	%	—	%
Total AFS debt securities	Total AFS debt securities	$	4,471,694	$	4,539,160	$	3,320,648	$	3,317,214	Total AFS debt securities	$	8,399,460	100	%		$	5,544,658	100	%		89	%	4	%	5	%	2	%

(1)There were no securities of a single ~~non-governmental~~non-federal governmental agency issuer that exceeded 10% of stockholder’s equity as of both ~~September~~June 30, ~~2020~~2021 and December 31, ~~2019.~~2020.

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

The fair value of AFS debt securities totaled ~~$4.54~~$8.40 billion as of ~~September~~June 30, ~~2020, compared with $3.32~~2021, an increase of $2.85 billion or 51% from $5.54 billion as of December 31, ~~2019.~~2020. The ~~$1.22 billion or 37% increase was primarily attributable to the purchases of~~largest changes came from U.S. Treasury securities, which increased $786.2 million, followed by U.S. government agency and U.S. government-sponsored enterprise mortgage-backed securities, ~~U.S. government agency~~which increased $742.5 million, and ~~U.S. government-sponsored enterprise debt securities,~~ non-agency mortgage-backed securities, and municipal securities; partially offset by the sales, repayments, calls, and maturities of U.S. government agency and U.S. government-sponsored enterprise mortgage-backed securities, foreign government bonds, U.S Treasury securities, and U.S. government agency and U.S. government-sponsored enterprise debt securities.which increased $607.0 million.

The Company’s AFS debt securities portfolio had an effective duration, defined as a change in the price of ~~3.8 years~~a portfolio due to a 100 basis point shift in the yield curve, of 5.5 as of ~~September~~June 30, ~~2020 which~~2021. This increased from ~~3.1 years~~4.2 as of December 31, ~~2019,~~2020, primarily due to ~~an increase in~~ the ~~target duration~~steepening of ~~securities purchases to achieve enhancement in portfolio yield.~~the yield curve. As of ~~September~~June 30, ~~2020 and December 31, 2019, 90% and 97%, respectively,~~2021, 89% of the carrying value of the Company’s debt securities portfolio was rated “AA-” or “Aa3” or higher by nationally recognized credit rating ~~agencies.~~agencies, compared with 88% as of December 31, 2020. Credit ratings of BBB- or higher by ~~Standard~~S&P and ~~Poor’s (“S&P”) and~~ Fitch, ~~Ratings (“Fitch”),~~ or Baa3 or higher by Moody’s, ~~Investors Service (“Moody’s”),~~ are considered investment grade.

The Company’s AFS debt securities are carried at fair value with noncredit-related unrealized gains and losses, net of tax, reported in Other comprehensive income (loss) on the Consolidated Statement of Comprehensive Income. ~~If a credit loss exists, the Company records impairment related to credit~~Pre-tax net unrealized losses ~~through allowance for credit losses~~on AFS debt securities were $11.7 million as of June 30, 2021, compared with ~~a corresponding~~ ~~Provision for credit losses~~ ~~on the Consolidated Statement of Income. Pre-tax~~pre-tax net unrealized gains on AFS debt securities ~~were $67.5 million as~~ of ~~September 30, 2020, which improved from pre-tax net unrealized losses of $3.4~~$74.1 million as of December 31, ~~2019.~~2020. This change was primarily due to ~~the decrease~~increases in interest ~~rates during the period, partially offset by increased spreads.~~

Gross unrealized losses on AFS debt securities totaled $25.4 million as of September 30, 2020, compared with $23.2 million as of December 31, 2019. Of the securities with gross unrealized losses, substantially all were rated investment grade as of both September 30, 2020 and December 31, 2019, as classified based upon the lowest of the credit ratings issued by S&P, Moody’s, or Fitch. The Company believes that the gross unrealized losses were due to non-credit related factors and the gross unrealized losses were primarily attributable to yield curve movement and widened spreads arising from the negative outlook and uncertainty as a result of the COVID-19 pandemic. The Company believes that the credit support levels of the AFS debt securities are strong and, based on current assessments and macroeconomic forecasts, expects that full contractual cash flows will be received, even if the credit performance deteriorates under the impact of the COVID-19 pandemic.

rates. As of ~~September~~June 30, ~~2020,~~2021, the Company had no intention to sell securities with unrealized losses and believed it is more-likely-than-not that it would not be required to sell such securities before recovery of their amortized costs.

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

If a credit loss is identified, the Company records an impairment related to credit losses through the allowance for credit losses with a corresponding Provision for credit losses on the Consolidated Statement of Income. There were no credit losses recognized in earnings for both the second quarter and first half of 2021 and 2020. The Company assesses individual securities for credit losses for each reporting period. ~~There were no credit losses recognized in earnings for the third quarter and first nine months of 2020, and no OTTI credit losses were recognized in earnings for the same periods of 2019.~~ For additional information of the Company’s accounting policies, valuation and composition, see Note 21 — ~~Current Accounting Developments and~~ Summary of Significant Accounting Policies,to the Consolidated Financial Statements of the Company’s 2020 Form 10-K and Note 3 — Fair Value Measurement and Fair Value of Financial Instruments and Note 5 — Securities to the Consolidated Financial Statements in this Form 10-Q.

8673

The following table presents the weighted-average yields and contractual maturity distribution, excluding periodic principal payments, of the Company’s AFS debt securities as of ~~September~~June 30, ~~2020~~2021 and December 31, ~~2019.~~2020. Actual maturities of certain securities can differ from contractual maturities as the borrowers have the right to prepay obligations with or without prepayment penalties. In addition, factors such as prepayments and interest rates may affect the yields on the carrying values of these securities.


($ in thousands)	($ in thousands)	September 30, 2020						December 31, 2019						($ in thousands)	June 30, 2021						December 31, 2020
		Amortized Cost		Fair Value		Yield (1)		Amortized Cost		Fair Value		Yield (1)			Amortized Cost		Fair Value		Yield (1)		Amortized Cost		Fair Value		Yield (1)
AFS debt securities:	AFS debt securities:													AFS debt securities:
U.S. Treasury securities:	U.S. Treasury securities:													U.S. Treasury securities:
Maturing in one year or less	Maturing in one year or less	$	25,215	$	25,496	1.26	%	$	—	$	—	—	%	Maturing in one year or less	$	50,113	$	50,290	1.26	%	$	50,310	$	50,761	1.26	%
Maturing after one year through five years		25,195		25,502		1.27	%	177,215		176,422		1.33	%

Maturing after five years through ten years														Maturing after five years through ten years	791,777		786,650		0.95	%	—		—		—	%

Total	Total	50,410		50,998		1.26	%	177,215		176,422		1.33	%	Total	841,890		836,940		0.97	%	50,310		50,761		1.26	%
U.S. government agency and U.S. government- sponsored enterprise debt securities:	U.S. government agency and U.S. government- sponsored enterprise debt securities:													U.S. government agency and U.S. government- sponsored enterprise debt securities:
Maturing in one year or less	Maturing in one year or less	573,323		573,278		1.95	%	328,628		326,341		2.62	%	Maturing in one year or less	1,041,100		1,024,388		1.87	%	640,153		640,366		1.78	%
Maturing after one year through five years	Maturing after one year through five years	95,565		100,290		2.57	%	158,490		156,431		2.69	%	Maturing after one year through five years	114,308		115,981		2.38	%	118,053		122,012		2.38	%
Maturing after five years through ten years	Maturing after five years through ten years	11,099		11,744		2.54	%	44,908		45,189		2.38	%	Maturing after five years through ten years	34,009		34,189		1.74	%	11,091		11,697		2.54	%
Maturing after ten years	Maturing after ten years	38,920		41,750		2.73	%	52,249		53,284		2.78	%	Maturing after ten years	47,861		49,953		2.51	%	37,517		40,244		2.74	%
Total	Total	718,907		727,062		2.08	%	584,275		581,245		2.63	%	Total	1,237,278		1,224,511		1.94	%	806,814		814,319		1.92	%
U.S. government agency and U.S. government- sponsored enterprise mortgage-backed securities:	U.S. government agency and U.S. government- sponsored enterprise mortgage-backed securities:													U.S. government agency and U.S. government- sponsored enterprise mortgage-backed securities:
Maturing in one year or less	Maturing in one year or less	—		—		—	%	112		113		2.72	%	Maturing in one year or less	10,508		10,572		2.77	%	4,185		4,232		3.46	%
Maturing after one year through five years	Maturing after one year through five years	20,685		21,558		2.56	%	23,144		23,289		2.29	%	Maturing after one year through five years	18,586		19,630		2.85	%	21,566		22,668		2.72	%
Maturing after five years through ten years	Maturing after five years through ten years	213,605		221,082		2.19	%	85,970		88,261		2.72	%	Maturing after five years through ten years	285,291		290,215		2.24	%	216,332		222,905		2.17	%
Maturing after ten years	Maturing after ten years	1,909,276		1,962,478		2.29	%	1,489,035		1,495,705		2.66	%	Maturing after ten years	3,239,100		3,236,775		1.77	%	2,517,644		2,564,859		2.11	%
Total	Total	2,143,566		2,205,118		2.28	%	1,598,261		1,607,368		2.66	%	Total	3,553,485		3,557,192		1.81	%	2,759,727		2,814,664		2.12	%
Municipal securities (2):	Municipal securities (2):													Municipal securities (2):
Maturing in one year or less	Maturing in one year or less	29,196		29,372		2.94	%	37,136		37,291		2.67	%	Maturing in one year or less	16,699		16,886		3.05	%	18,663		18,868		3.04	%
Maturing after one year through five years	Maturing after one year through five years	16,102		16,425		2.26	%	18,699		18,948		2.52	%	Maturing after one year through five years	35,887		37,078		2.74	%	36,000		37,716		2.89	%
Maturing after five years through ten years	Maturing after five years through ten years	153,047		155,338		2.21	%	12,151		12,451		3.15	%	Maturing after five years through ten years	233,357		241,358		2.20	%	230,851		239,883		2.07	%
Maturing after ten years	Maturing after ten years	129,077		132,140		2.76	%	33,635		33,612		2.63	%	Maturing after ten years	159,085		159,601		2.05	%	97,059		99,606		2.08	%
Total	Total	327,422		333,275		2.50	%	101,621		102,302		2.69	%	Total	445,028		454,923		2.22	%	382,573		396,073		2.20	%
Non-agency mortgage-backed securities:	Non-agency mortgage-backed securities:													Non-agency mortgage-backed securities:
Maturing in one year or less	Maturing in one year or less	7,920		7,907		1.63	%	—		—		—	%	Maturing in one year or less	7,921		7,920		2.43	%	7,920		7,920		0.63	%
Maturing after one year through five years	Maturing after one year through five years	6,044		6,045		3.56	%	7,920		7,914		3.78	%	Maturing after one year through five years	114,443		114,714		3.55	%	49,704		49,870		3.80	%
Maturing after five years through ten years	Maturing after five years through ten years	28,701		28,782		2.97	%	—		—		—	%	Maturing after five years through ten years	50,357		50,355		0.93	%	21,332		21,376		1.50	%
Maturing after ten years	Maturing after ten years	444,984		449,555		2.48	%	125,519		127,184		3.21	%	Maturing after ten years	960,365		963,657		1.91	%	444,529		450,451		2.48	%
Total	Total	487,649		492,289		2.50	%	133,439		135,098		3.24	%	Total	1,133,086		1,136,646		2.04	%	523,485		529,617		2.48	%
Corporate debt securities:	Corporate debt securities:													Corporate debt securities:
Maturing in one year or less	Maturing in one year or less	76,250		75,964		1.68	%	1,250		1,262		5.20	%	Maturing in one year or less	156,292		149,482		1.81	%	126,250		124,846		1.71	%
Maturing after one year through five years	Maturing after one year through five years	131,003		130,940		3.60	%	10,000		9,887		4.00	%	Maturing after one year through five years	363,003		364,392		3.36	%	276,073		277,103		3.56	%
Maturing after five years through ten years	Maturing after five years through ten years	34,000		34,273		4.43	%	—		—		—	%	Maturing after five years through ten years	39,000		38,841		2.62	%	4,000		4,019		4.50	%
Maturing after ten years		10,000		10,000		4.13	%	—		—		—	%

Total	Total	251,253		251,177		3.15	%	11,250		11,149		4.13	%	Total	558,295		552,715		2.87	%	406,323		405,968		2.99	%
Foreign government bonds:	Foreign government bonds:													Foreign government bonds:
Maturing in one year or less	Maturing in one year or less	45,051		45,018		0.83	%	354,481		354,172		2.22	%	Maturing in one year or less	97,129		93,985		1.39	%	45,681		45,655		0.85	%
Maturing after one year through five years	Maturing after one year through five years	89,128		87,653		2.11	%	—		—		—	%	Maturing after one year through five years	139,451		138,999		2.39	%	138,147		136,876		2.41	%
Maturing after five years through ten years														Maturing after five years through ten years	49,999		50,191		0.38	%	—		—		—	%
Total	Total	134,179		132,671		1.68	%	354,481		354,172		2.22	%	Total	286,579		283,175		1.70	%	183,828		182,531		2.02	%
Asset-backed securities:	Asset-backed securities:													Asset-backed securities:
Maturing after ten years	Maturing after ten years	64,308		63,148		0.93	%	66,106		64,752		2.65	%	Maturing after ten years	61,501		61,829		0.83	%	63,463		63,231		0.85	%

CLOs:	CLOs:													CLOs:
Maturing after ten years	Maturing after ten years	294,000		283,422		1.39	%	294,000		284,706		3.08	%	Maturing after ten years	294,000		291,529		1.31	%	294,000		287,494		1.34	%
Total AFS debt securities	Total AFS debt securities	$	4,471,694	$	4,539,160	2.23	%	$	3,320,648	$	3,317,214	2.60	%	Total AFS debt securities	$	8,411,142	$	8,399,460	1.84	%	$	5,470,523	$	5,544,658	2.13	%

Total aggregated by maturities:	Total aggregated by maturities:													Total aggregated by maturities:
Maturing in one year or less	Maturing in one year or less	$	756,955	$	757,035	1.87	%	$	721,607	$	719,179	2.43	%	Maturing in one year or less	$	1,379,762	$	1,353,523	1.84	%	$	893,162	$	892,648	1.72	%
Maturing after one year through five years	Maturing after one year through five years	383,722		388,413		2.73	%	395,468		392,891		2.11	%	Maturing after one year through five years	785,678		790,794		3.03	%	639,543		646,245		3.05	%
Maturing after five years through ten years	Maturing after five years through ten years	440,452		451,219		2.43	%	143,029		145,901		2.65	%	Maturing after five years through ten years	1,483,790		1,491,799		1.44	%	483,606		499,880		2.12	%
Maturing after ten years	Maturing after ten years	2,890,565		2,942,493		2.23	%	2,060,544		2,059,243		2.76	%	Maturing after ten years	4,761,912		4,763,344		1.77	%	3,454,212		3,505,885		2.08	%
Total AFS debt securities	Total AFS debt securities	$	4,471,694	$	4,539,160	2.23	%	$	3,320,648	$	3,317,214	2.60	%	Total AFS debt securities	$	8,411,142	$	8,399,460	1.84	%	$	5,470,523	$	5,544,658	2.13	%

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

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

8774

Loan Portfolio

The Company offers a broad range of financial products designed to meet the credit needs of its borrowers. The Company’s loan portfolio segments include commercial loans, which consist of C&I, CRE, multifamily residential, and construction and land loans; and consumer loans, which consist of single-family residential, home equity lines of credit (“HELOCs”), and other consumer loans. Total net loans, including loans held-for-sale, were ~~$36.82~~$39.49 billion as of ~~September~~June 30, ~~2020,~~2021, an increase of ~~$2.40~~$1.71 billion or 7%5% from ~~$34.42~~$37.77 billion as of December 31, ~~2019.~~2020. This was primarily driven by ~~increases~~growth of ~~$1.15 billion or 9% in C&I loans,~~ ~~driven by PPP loan growth, $759.5 million or 7% in CRE loans and $680.9~~$952.4 million or 10% in ~~single-family~~ residential mortgage, $583.5 million or 4% in total CRE loans, and $160.2 million or 1% in C&I loans. The composition of the loan portfolio as of ~~September~~June 30, ~~2020~~2021 was similar to the composition as of December 31, ~~2019.~~2020.

The following table presents the composition of the Company’s total loan portfolio by loan type as of ~~September~~June 30, ~~2020~~2021 and December 31, ~~2019:~~2020:


($ in thousands)	($ in thousands)	September 30, 2020				December 31, 2019				($ in thousands)		June 30, 2021						December 31, 2020
		Amount (1)		%		Amount (1)		%			($ in thousands)			Amount (1)			%			Amount (1)			%
Commercial:	Commercial:
C&I (2)	C&I (2)	$	13,305,024	36	%	$	12,150,931	35	%				C&I (2)		$	13,790,461		35	%		$	13,631,726		36	%
CRE:	CRE:												CRE:
CRE	CRE	11,037,987		29	%	10,278,448		30	%				CRE		11,711,369			29	%		11,174,611			29	%
Multifamily residential	Multifamily residential	3,057,274		8	%	2,856,374		8	%				Multifamily residential		3,219,796			8	%		3,033,998			8	%
Construction and land	Construction and land	578,407		2	%	628,499		2	%				Construction and land		460,678			1	%		599,692			2	%
Total CRE	Total CRE	14,673,668		39	%	13,763,321		40	%				Total CRE		15,391,843			38	%		14,808,301			39	%
Total commercial	Total commercial	27,978,692		75	%	25,914,252		75	%				Total commercial		29,182,304			73	%		28,440,027			75	%
Consumer:	Consumer:												Consumer:
Residential mortgage:	Residential mortgage:												Residential mortgage:
Single-family residential	Single-family residential	7,785,759		21	%	7,108,590		20	%				Single-family residential		8,869,370			22	%		8,185,953			21	%
HELOCs	HELOCs	1,514,388		4	%	1,472,783		4	%				HELOCs		1,872,166			5	%		1,601,716			4	%
Total residential mortgage	Total residential mortgage	9,300,147		25	%	8,581,373		24	%				Total residential mortgage		10,741,536			27	%		9,787,669			25	%
Other consumer	Other consumer	158,290		0	%	282,914		1	%				Other consumer		147,659			0	%		163,259			0	%
Total consumer	Total consumer	9,458,437		25	%	8,864,287		25	%				Total consumer		10,889,195			27	%		9,950,928			25	%
Total loans held-for-investment	Total loans held-for-investment	37,437,129		100	%	34,778,539		100	%				Total loans held-for-investment		40,071,499			100	%		38,390,955			100	%
Allowance for loan losses	Allowance for loan losses	(618,252)				(358,287)							Allowance for loan losses		(585,724)						(619,983)
Loans held-for-sale (3)	Loans held-for-sale (3)	4,148				434							Loans held-for-sale (3)		1,819						1,788
Total loans, net	Total loans, net	$	36,823,025			$	34,420,686						Total loans, net		$	39,487,594					$	37,772,760

(1)~~On January 1, 2020, the Company adopted ASU 2016-13. Total loans include~~Includes net deferred loan fees, unearned fees, unamortized premiums and unaccreted discounts of $(67.0) million and ~~$(43.2)~~$(58.8) million as of ~~September~~June 30, ~~2020~~2021 and December 31, ~~2019,~~2020, respectively. Net origination fees related to PPP loans were ~~$(22.6)~~$(25.9) million and $(12.7) million as of ~~September~~June 30, ~~2020.~~2021 and December 31, 2020, respectively.

(2)Includes ~~$1.77~~$1.43 billion and $1.57 billion of PPP loans as of ~~September~~June 30, ~~2020.~~2021 and December 31, 2020, respectively.

(3)Consists of C&I and single-family residential loans as of ~~both September~~June 30, ~~2020~~2021 and single-family residential loans as of December 31, ~~2019.~~2020.

Actions to Support Customers during the COVID-19 Pandemic

In response to the COVID-19 pandemic, the Company assisted customers ~~faced with financial difficulties~~ by offering SBA PPP loans ~~as well as providing~~in 2020 and 2021 to help struggling businesses in our communities pay their employees and sustain their businesses. The PPP closed to new loan applications on May 31, 2021. For more information on PPP loans, refer to Item 2. MD&A — Overview — Regulatory Developments Relating to the COVID-19 Pandemic — Paycheck Protection Program of the Company’s Form 10-K and Note 1 — Summary of Significant Accounting Policies — Paycheck Protection Program to the Consolidated Financial Statements of the Company’s 2020 Form 10-K.

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

From April to August 2020, the Company accepted PPP applications and originated loans to qualified small businesses under the PPP established by the CARES Act. These loans are included in the C&I portfolio, carrying an interest rate of 1%, and are 100% guaranteed by the SBA. The substantial majority of the Company’s PPP loans have a term of two years. As of September 30, 2020, the Company funded ~~over 7,400 SBA 7(a) PPP loans with an outstanding loan balance of $1.77 billion. For more information on PPP loans, refer to~~ ~~Note 2 — Current Accounting Developments and Summary of Significant Accounting Policies — Summary of Significant Accounting Policies — Paycheck Protection Program~~ ~~to the Consolidated Financial Statements in this Form 10-Q.~~

8875

Commercial

The commercial loan portfolio comprised 73% of total loans as of June 30, 2021, compared with 75% of total loans as of ~~both September 30, 2020 and~~ December 31, ~~2019. Given~~2020. The Company actively monitors the ~~widespread impact of the COVID-19 pandemic on the U.S. and the global economy, the Company has been actively evaluating and monitoring its commercial lending~~ portfolio for elevated levels of credit risk and ~~reviewing~~reviews credit exposures for sensitivity to ~~prospective weakening of~~changing economic conditions.

Commercial — Commercial and Industrial ~~Loans~~Loans. Total C&I loan commitments (loans outstanding plus unfunded credit commitments, excluding issued letters of credit) were $19.14 billion and $18.69 billion as of June 30, 2021 and December 31, 2020, respectively, an increase of 2% year-to-date. C&I loans totaled ~~$13.31~~$13.79 billion ~~and $12.15 billion, which accounted for 36% and~~or 35% of total loans held-for-investment as of ~~September~~June 30, ~~2020 and December 31, 2019, respectively. The $1.16~~2021, growing by 1% from $13.63 billion or ~~9% year-to-date increase in C&I~~36% of total loans ~~was driven by PPP loan funding during the second and third quarters~~held-for-investment as of December 31, 2020. The C&I loan portfolio includes loans and financing for businesses in a wide spectrum of industries, ~~and includes~~including asset-based lending, equipment financing and leasing, project-based finance, revolving lines of credit, SBA lending, structured finance, term loans and trade finance. The Company also has a portfolio of broadly syndicated C&I loans, primarily of Term B, ~~loans,~~ which totaled ~~$948.0 million~~$1.02 billion and ~~$894.6~~$892.1 million as of ~~September~~June 30, ~~2020~~2021 and December 31, ~~2019,~~2020, respectively. The majority of the C&I loans ~~are~~have variable interest ~~rate loans as of September 30, 2020 and December 31, 2019.~~rates.

The C&I portfolio is well-diversified by industry. The Company monitors ~~the~~ concentrations within the C&I loan portfolio by customer exposure and industry classification, setting diversification targets and exposure limits ~~for specialized underwriting portfolios. Exposures to various industries~~by industry or loan product. The following charts illustrate the industry mix within our C&I portfolio ~~are shown in the following charts~~ as of ~~September~~June 30, ~~2020~~2021 and December 31, ~~2019.~~2020.

Commercial — Commercial Real Estate Loans.

~~Oil & gas~~ Total CRE loans ~~comprised 9% of C&I loans and 3%~~outstanding were $15.39 billion or 38% of total loans held-for-investment as of ~~September~~June 30, ~~2020.~~ ~~There were $1.18~~2021, growing by 4% from $14.81 billion in oil & gas loans outstanding and $320.1 million in unfunded commitments as of September 30, 2020. Based on total commitment as of September 30, 2020, the oil & gas portfolio mix was: 60% exploration and production (“E&P”) companies, 33% midstream and downstream companies, and 7% oilfield services and other companies. ~~Oil & gas loans comprised 11% of C&I loans and 4%~~or 39% of total loans held-for-investment as of December 31, ~~2019. There were $1.33 billion in oil & gas loans outstanding and $477.6 million in unfunded commitments as of~~ ~~December 31, 2019. Based on~~2020. The total ~~commitment as of~~ ~~December 31, 2019, the oil & gas portfolio mix was: 64% E&P companies, 29% midstream and downstream companies, and 7% oilfield services and other companies.~~ The COVID-19 pandemic, global commodity demand, and oil & gas price volatility have unfavorably impacted the credit risk of the oil & gas industry sector. Accordingly, the Company increased its allowance for loan loss coverage for the oil & gas portfolio to 10% as of September 30, 2020, up from 5% as of December 31, 2019.

~~Commercial — Commercial Real Estate Loans~~ ~~The total~~CRE loan portfolio consists of income-producing CRE, multifamily residential, and construction and land loans. ~~Total~~Year-to-date growth in total CRE loans ~~outstanding were $14.67 billion~~was driven by growth in income-producing CRE and ~~$13.76 billion,~~multifamily residential loans, partially offset by declines in construction and ~~accounted for 39% and 40% of total loans held-for-investment as of September 30, 2020 and December 31, 2019, respectively.~~land loans.

The Company’s total CRE portfolio is ~~broadly~~granular and diversified by property ~~type, which serves to mitigate some~~type. The average loan size of ~~its geographical concentration in California.~~total CRE was $2.4 million as of both June 30, 2021 and December 31, 2020. The following table summarizes the Company’s total CRE loan portfolio by property type as of ~~September~~June 30, ~~2020~~2021 and December 31, ~~2019:~~2020:


($ in thousands)	($ in thousands)	September 30, 2020				December 31, 2019				($ in thousands)	June 30, 2021				December 31, 2020
		Amount		%		Amount		%			Amount		%		Amount		%
Property types:	Property types:									Property types:
Retail	Retail	$	3,422,506	23	%	$	3,300,106	24	%	Retail	$	3,565,160	23	%	$	3,466,141	23	%
Multifamily	Multifamily	3,057,274		21	%	2,856,374		21	%	Multifamily	3,219,796		21	%	3,033,998		20	%
Offices	Offices	2,636,977		18	%	2,375,087		17	%	Offices	2,932,602		19	%	2,747,082		19	%
Industrial	Industrial	2,389,761		16	%	2,163,769		16	%	Industrial	2,614,414		17	%	2,407,594		16	%
Hospitality	Hospitality	1,966,109		14	%	1,865,031		14	%	Hospitality	1,957,260		13	%	1,888,797		13	%
Construction and land	Construction and land	578,407		4	%	628,499		4	%	Construction and land	460,678		3	%	599,692		4	%
Other	Other	622,634		4	%	574,455		4	%	Other	641,933		4	%	664,997		5	%
Total CRE loans	Total CRE loans	$	14,673,668	100	%	$	13,763,321	100	%	Total CRE loans	$	15,391,843	100	%	$	14,808,301	100	%

~~Approximately 89%~~The weighted-average loan-to-value (“LTV”) ratio of the total CRE portfolio was 51% as of both June 30, 2021 and December 31, 2020. The low weighted-average LTV ratio was consistent by CRE property type. Approximately 90% of total CRE loans had ~~a loan-to-value (“LTV”)~~an LTV ratio of 65% or lower as of ~~September~~June 30, ~~2020,~~2021, compared with ~~85%~~89% as of December 31, 2019. The weighted-average LTV ratios of total CRE were 51% and 50% as of September 30, 2020 and December 31, 2019, respectively. The low LTV ratio was consistent across the various CRE property types.2020. The consistency of the Company’s low LTV underwriting standards has historically resulted in lower credit losses for income-producing CRE and multifamily residential loans. ~~The average loan size of total CRE was $2.4 million and $2.1 million as of September 30, 2020 and December 31, 2019, respectively.~~

The following tables provide a summary of the Company’s income-producing CRE, multifamily residential, and construction and land loans by geography as of ~~September~~June 30, ~~2020~~2021 and December 31, ~~2019.~~2020. The distribution of the CRE loan portfolio reflects the Company’s geographical footprint, which is concentrated in California:


($ in thousands)	($ in thousands)	September 30, 2020																($ in thousands)	June 30, 2021
		CRE		%		Multifamily Residential		%		Construction and Land		%		Total CRE		%			CRE		%		Multifamily Residential		%		Construction and Land		%		Total CRE		%
Geographic markets:	Geographic markets:																	Geographic markets:
Southern California	Southern California	$	5,867,994			$	1,902,956			$	244,753			$	8,015,703			Southern California	$	6,283,774			$	1,970,560			$	176,745			$	8,431,079
Northern California	Northern California	2,506,972				675,986				187,817				3,370,775				Northern California	2,557,802				682,515				131,370				3,371,687
California	California	8,374,966		76	%	2,578,942		84	%	432,570		75	%	11,386,478		78	%	California	8,841,576		75	%	2,653,075		82	%	308,115		67	%	11,802,766		77	%
New York	New York	701,637		6	%	128,782		4	%	90,583		16	%	921,002		6	%	New York	698,700		6	%	146,241		5	%	86,340		19	%	931,281		6	%
Texas	Texas	757,725		7	%	114,496		4	%	2,587		0	%	874,808		6	%	Texas	906,735		8	%	186,912		6	%	1,918		0	%	1,095,565		7	%
Washington	Washington	331,092		3	%	86,944		3	%	17,284		3	%	435,320		3	%	Washington	300,293		3	%	105,462		3	%	15,906		3	%	421,661		3	%
Arizona	Arizona	148,198		1	%	12,353		0	%	—		—	%	160,551		1	%	Arizona	136,806		1	%	7,152		0	%	—		—	%	143,958		1	%
Nevada	Nevada	90,520		1	%	86,866		3	%	16,267		3	%	193,653		1	%	Nevada	91,750		1	%	81,656		3	%	30,724		7	%	204,130		1	%
Other markets	Other markets	633,849		6	%	48,891		2	%	19,116		3	%	701,856		5	%	Other markets	735,509		6	%	39,298		1	%	17,675		4	%	792,482		5	%
Total loans	Total loans	$	11,037,987	100	%	$	3,057,274	100	%	$	578,407	100	%	$	14,673,668	100	%	Total loans	$	11,711,369	100	%	$	3,219,796	100	%	$	460,678	100	%	$	15,391,843	100	%



($ in thousands)	December 31, 2020
	CRE		%		Multifamily Residential		%		Construction and Land		%		Total CRE		%
Geographic markets:
Southern California	$	5,884,691			$	1,867,646			$	249,282			$	8,001,619
Northern California	2,476,510				674,813				197,195				3,348,518
California	8,361,201		75	%	2,542,459		84	%	446,477		74	%	11,350,137		77	%
New York	696,712		6	%	137,114		4	%	93,806		16	%	927,632		6	%
Texas	864,639		8	%	116,367		4	%	2,581		0	%	983,587		7	%
Washington	341,374		3	%	91,824		3	%	22,724		4	%	455,922		3	%
Arizona	147,187		1	%	12,406		0	%	—		—	%	159,593		1	%
Nevada	88,959		1	%	86,644		3	%	22,384		4	%	197,987		1	%
Other markets	674,539		6	%	47,184		2	%	11,720		2	%	733,443		5	%
Total loans	$	11,174,611	100	%	$	3,033,998	100	%	$	599,692	100	%	$	14,808,301	100	%

($ in thousands) December 31, 2019
CRE % Multifamily
Residential % Construction
and Land % Total CRE %
Geographic markets:
Southern California $ 5,446,786 $ 1,728,086 $ 247,170 $ 7,422,042
Northern California 2,359,808 603,135 203,706 3,166,649
California 7,806,594 76 % 2,331,221 82 % 450,876 72 % 10,588,691 77 %
New York 701,902 7 % 116,923 4 % 79,962 13 % 898,787 7 %
Texas 628,576 6 % 124,646 4 % 8,604 1 % 761,826 6 %
Washington 306,247 3 % 55,913 2 % 37,552 6 % 399,712 3 %
Arizona 149,151 1 % 37,208 1 % 6,951 1 % 193,310 1 %
Nevada 102,891 1 % 138,577 5 % 40 0 % 241,508 2 %
Other markets 583,087 6 % 51,886 2 % 44,514 7 % 679,487 4 %
Total loans (1)
$ 10,278,448 100 % $ 2,856,374 100 % $ 628,499 100 % $ 13,763,321 100 %

~~(1)Loans net~~Since 77% of ~~ASC 310-30 discount.~~

~~Since the majority of these~~total CRE loans ~~are~~were concentrated in California as of both June 30, 2021 and December 31, 2020, changes in California’s economy and real estate values could have a significant impact on the collectability of these loans and the required level of allowance for loan losses. For additional information related to the risk of real estate markets in California, see Item 1A. Risk Factors to the Company’s2020 Form 10-K.

Commercial — Income-Producing Commercial Real Estate ~~Loans~~Loans. The Company ~~focuses on providing~~provides financing to experienced real estate investors and developers who have moderate levels of leverage, many of whom are long-time customers of the Bank. Income-producing CRE loans totaled ~~$11.04~~$11.71 billion ~~and $10.28~~as of June 30, 2021, compared with $11.17 billion ~~which~~as of December 31, 2020, and accounted for 29% ~~and 30%~~ of total loans held-for-investment as of ~~September 30, 2020 and December 31, 2019, respectively. As of~~ both ~~September 30, 2020 and December 31, 2019, 76% of the income-producing CRE loan portfolio was concentrated in California.~~dates. Interest rates on CRE loans may be fixed, variable or hybrid. Loans are underwritten with conservative standards for cash flows, debt service coverage and LTV.

Owner-occupied properties comprised 20% of the income-producing CRE loans as of both ~~September~~June 30, ~~2020~~2021 and December 31, ~~2019.~~2020. The remainder were non-owner-occupied properties, where 50% or more of the debt service for the loan is typically provided by unaffiliated rental income from a third party.

Commercial — Multifamily Residential ~~Loans~~Loans. The multifamily residential loan portfolio is largely ~~comprised~~made up of loans secured by residential properties with five or more units. Multifamily residential loans totaled $3.22 billion as of June 30, 2021, compared with $3.03 billion as of December 31, 2020, and accounted for 8% of total loans held-for-investment as of both dates. The Company offers a variety of first lien mortgages, including fixed- and variable-rate loans, as well as hybrid loans with interest rates that adjust annually after an initial ~~fixed rate~~fixed-rate period of three to ~~seven~~ten years. Multifamily residential loans totaled $3.06 billion and $2.86 billion as of September 30, 2020 and December 31, 2019, respectively, and accounted for 8% of total loans held-for-investment as of both dates. As of September 30, 2020 and December 31, 2019, 84% and 82% of the Company’s multifamily residential loans, respectively, were concentrated in California.

Commercial — Construction and Land ~~Loans~~Loans. Construction and land loans provide financing for ~~the major CRE~~a portfolio of projects diversified by real estate property ~~types.~~type. These loans totaled ~~$578.4~~$460.7 million ~~and $628.5 million~~or 1% of total loans held-for-investment as of ~~September~~June 30, ~~2020 and December 31, 2019, respectively, and accounted for~~2021, compared with $599.7 million or 2% of total loans held-for-investment as of ~~both dates. Included~~December 31, 2020. Construction loans exposure consisted of $414.6 million in ~~the portfolio were construction~~ loans ~~of $534.3~~outstanding and $243.1 million ~~and $558.2 million, which had additional~~in unfunded commitments as of ~~$327.7~~June 30, 2021, compared with $554.7 million in loans outstanding and ~~$351.4~~$288.2 million in unfunded commitments as of December 31, 2020. Land loans totaled $46.1 million as of ~~September~~June 30, ~~2020 and~~2021, compared with $45.0 million as December 31, ~~2019, respectively. Similar to income-producing CRE and multifamily residential loans, the Company has a geographic concentration of construction and land loans in California.~~2020.

Consumer

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



($ in thousands)	June 30, 2021
	Single-Family Residential		%		HELOCs		%		Total Residential Mortgage		%
Geographic markets:
Southern California	$	3,492,408			$	845,403			$	4,337,811
Northern California	1,034,537				428,861				1,463,398
California	4,526,945		51	%	1,274,264		68	%	5,801,209		54	%
New York	2,884,542		33	%	267,698		14	%	3,152,240		29	%
Washington	565,306		6	%	210,517		11	%	775,823		7	%
Massachusetts	252,771		3	%	65,588		4	%	318,359		3	%
Texas	218,669		2	%	—		—	%	218,669		2	%
Georgia	282,035		3	%	20,184		1	%	302,219		3	%
Other markets	139,102		2	%	33,915		2	%	173,017		2	%
Total	$	8,869,370	100	%	$	1,872,166	100	%	$	10,741,536	100	%
Lien priority:
First mortgage	$	8,869,370	100	%	$	1,643,296	88	%	$	10,512,666	98	%
Junior lien mortgage	—		—	%	228,870		12	%	228,870		2	%
Total	$	8,869,370	100	%	$	1,872,166	100	%	$	10,741,536	100	%

~~Consumer~~

~~The following tables summarize the Company’s single-family residential and HELOCs loan portfolios by geography as of September 30, 2020 and December 31, 2019:~~

($ in thousands) September 30, 2020
Single-
Family
Residential % HELOCs % Total
Residential
Mortgage %
Geographic markets:
Southern California $ 3,297,000 $ 701,583 $ 3,998,583
Northern California 1,068,706 332,556 1,401,262
California 4,365,706 56 % 1,034,139 68 % 5,399,845 58 %
New York 2,068,081 27 % 235,928 16 % 2,304,009 25 %
Washington 614,708 8 % 163,211 11 % 777,919 8 %
Massachusetts 247,967 3 % 35,996 2 % 283,963 3 %
Texas 196,425 2 % — — % 196,425 2 %
Other markets 292,872 4 % 45,114 3 % 337,986 4 %
Total $ 7,785,759 100 % $ 1,514,388 100 % $ 9,300,147 100 %
Lien priority:
First mortgage $ 7,785,759 100 % $ 1,282,056 85 % $ 9,067,815 98 %
Junior lien mortgage — — % 232,332 15 % 232,332 2 %
Total $ 7,785,759 100 % $ 1,514,388 100 % $ 9,300,147 100 %

($ in thousands) December 31, 2019
Single-
Family
Residential % HELOCs % Total
Residential
Mortgage %
Geographic markets:
Southern California $ 3,081,368 $ 702,915 $ 3,784,283
Northern California 1,038,945 309,883 1,348,828
California 4,120,313 58 % 1,012,798 69 % 5,133,111 60 %
New York 1,657,732 23 % 257,344 17 % 1,915,076 22 %
Washington 630,307 9 % 133,625 9 % 763,932 9 %
Massachusetts 235,393 3 % 31,310 2 % 266,703 3 %
Texas 188,838 3 % — — % 188,838 2 %
Other markets 276,007 4 % 37,706 3 % 313,713 4 %
Total (1)
$ 7,108,590 100 % $ 1,472,783 100 % $ 8,581,373 100 %
Lien priority:
First mortgage $ 7,108,588 100 % $ 1,238,186 84 % $ 8,346,774 97 %
Junior lien mortgage 2 0 % 234,597 16 % 234,599 3 %
Total (1)
$ 7,108,590 100 % $ 1,472,783 100 % $ 8,581,373 100 %

~~(1)Loans net of ASC 310-30 discount.~~



($ in thousands)	December 31, 2020
	Single-Family Residential		%		HELOCs		%		Total Residential Mortgage		%
Geographic markets:
Southern California	$	3,462,067			$	728,733			$	4,190,800
Northern California	1,059,832				354,014				1,413,846
California	4,521,899		55	%	1,082,747		68	%	5,604,646		57	%
New York	2,277,722		28	%	244,425		15	%	2,522,147		26	%
Washington	597,231		7	%	180,765		11	%	777,996		8	%
Massachusetts	259,368		3	%	44,633		3	%	304,001		3	%
Texas	209,737		3	%	—		—	%	209,737		2	%

Other markets	319,996		4	%	49,146		3	%	369,142		4	%
Total	$	8,185,953	100	%	$	1,601,716	100	%	$	9,787,669	100	%
Lien priority:
First mortgage	$	8,185,953	100	%	$	1,372,270	86	%	$	9,558,223	98	%
Junior lien mortgage	—		—	%	229,446		14	%	229,446		2	%
Total	$	8,185,953	100	%	$	1,601,716	100	%	$	9,787,669	100	%

Consumer — Single-Family Residential ~~Loans~~Mortgages. The Company offers a variety of single-family residential first lien mortgage loan programs, including fixed- and variable-rate loans, as well as hybrid loans with interest rates that adjust annually after an initial fixed rate period. Single-family residential loans totaled ~~$7.79~~$8.87 billion ~~and $7.11 billion, which accounted for 21% and 20%~~or 22% of total loans held-for-investment as of ~~September~~June 30, ~~2020 and~~2021, compared with $8.19 billion or 21% of total loans held-for-investment as of December 31, ~~2019, respectively.~~2020. Year-to-date single-family residential mortgages grew by $683.4 million or 8%, primarily driven by net growth in New York. The Company was in a first lien position for virtually all of its single-family residential loans as of both ~~September~~June 30, ~~2020~~2021 and December 31, ~~2019.~~2020. Many of these loans are reduced documentation loans, for which a substantial down payment is required, resulting in a low LTV ratio at origination, typically 65% or less. These loans have historically experienced low delinquency and loss rates. AsThe Company offers a variety of ~~September 30, 2020 and December 31, 2019, 56% and 58% of the Company’s~~ single-family residential first lien mortgage loan programs, including fixed- and variable-rate loans, ~~respectively, were concentrated in California.~~as well as hybrid loans with interest rates that adjust annually after an initial fixed-rate period.

Consumer — Home Equity Lines of ~~Credit~~Credit. ~~HELOCs totaled $1.51 billion and $1.47~~Total HELOC commitments were $2.03 billion as of ~~September~~June 30, ~~2020 and~~2021, growing by $276.1 million or 16% from $1.75 billion as of December 31, ~~2019, respectively, and accounted for~~2020. Unfunded HELOC commitments are unconditionally cancellable. HELOCs outstanding totaled $1.87 billion or 5% of total loans held-for-investment as of June 30, 2021, compared with $1.60 billion or 4% of total loans held-for-investment as of ~~both dates.~~December 31, 2020. Year-to-date HELOCs increased $270.5 million or 17%, primarily driven by growth in California. The Company was in a first lien position for ~~85%~~88% and ~~84%~~86% of total HELOCs as of ~~September~~June 30, ~~2020~~2021 and December 31, ~~2019,~~2020, respectively. Many of the loans within this portfolio are reduced documentation loans, for which a substantial down payment is required, resulting in a low LTV ratio at origination, typically 60% or less. These loans have historically experienced low delinquency and loss rates. ~~As of September 30, 2020 and December 31, 2019, 68% and 69%~~Substantially all of the Company’s HELOCs ~~respectively, were concentrated in California, and virtually all~~ were variable-rate loans.

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

~~Purchased Credit Deteriorated Loans~~

The Company adopted ASU 2016-13 using the prospective transition approach for purchased financial assets with credit deterioration that were previously classified as purchased credit impaired (“PCI”) and accounted for under ASC 310-30. On January 1, 2020, the amortized cost basis of the purchased credit deteriorated (“PCD”) loans was adjusted to reflect a $1.2 million addition of allowance for loan losses. The Company did not acquire any PCD loans during the first nine months of 2020. For additional details regarding PCD loans, see ~~Note 2 — Current Accounting Developments and Summary of Significant Accounting Policies~~ ~~and~~ ~~Note 7 — Loans Receivable and Allowance for Credit Losses~~ ~~to the Consolidated Financial Statements in this Form 10-Q. Prior to the adoption of ASU 2016-13, the carrying value of PCI loans totaled $222.9 million as of December 31, 2019.~~

Loans Held-for-Sale

As of ~~September~~June 30, ~~2020~~2021, loans held-for-sale of $1.8 million consisted of $1.5 million and $326 thousand of C&I and single-family residential loans, respectively. As of December 31, ~~2019,~~2020, loans held-for-sale ~~totaled $4.1~~of $1.8 million ~~and $434 thousand, respectively, and~~ consisted of single-family residential loans. At the time of commitment to originate or purchase a loan, a loan is determined to be held-for-investment if it is the Company’s intent to hold the loan to maturity or for the “foreseeable future,” subject to periodic reviews under the Company’s evaluation processes, including liquidity and credit risk management. If the Company subsequently changes its intent to hold certain loans, those loans are transferred from held-for-investment to held-for-sale at the lower of cost or fair value.

Sales of Originated Loans and Purchased Loans

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

The following tables provide information on loan sales during the ~~third~~second quarter and first ~~nine months~~half of ~~2020~~2021 and ~~2019.~~2020. Refer to Note 7 — Loans Receivable and Allowance for Credit Losses to the Consolidated Financial Statements in this Form 10-Q for additional information on loan purchases and transfers.


($ in thousands)	($ in thousands)	Three Months Ended September 30, 2020											($ in thousands)		Three Months Ended June 30, 2021
		Commercial						Consumer								Total	($ in thousands)		Commercial															Consumer					Total
		C&I			CRE			Residential Mortgage											C&I					Total CRE										Residential Mortgage
				CRE			Construction and Land			Single-Family Residential				Total	($ in thousands)			C&I						CRE										Single-Family Residential

Loans sold:	Loans sold:																														Loans sold:
Originated loans:	Originated loans:																				Originated loans:
Amount	Amount	$	80,457		$	—		$	—		$	31,847										$	112,304		Amount			$	47,872			$	17,019				$	2,658				$	67,549
Net gains	Net gains	$	—		$	—		$	—		$	361										$	361		Net gains			$	167			$	1,239				$	66				$	1,472

Purchased loans:	Purchased loans:																				Purchased loans:
Amount	Amount	$	11,780		$	—		$	—		$	—							$	11,780	Amount					$	36,631			$	—				$	—				$	36,631
Net gains																					Net gains					$	19			$	—				$	—				$	19



($ in thousands)	Three Months Ended June 30, 2020
	Commercial				Consumer		Total
	C&I		Total CRE		Residential Mortgage
			CRE		Single-Family Residential



Loans sold:
Originated loans:
Amount	$	33,060	$	—	$	13,708		$	46,768
Net gains	$	—	$	—	$	132		$	132



($ in thousands)	Six Months Ended June 30, 2021
	Commercial				Consumer		Total
	C&I		Total CRE		Residential Mortgage
			CRE		Single-Family Residential



Loans sold:
Originated loans:
Amount	$	151,357	$	37,051	$	10,164	$	198,572
Net gains	$	396	$	2,502	$	280	$	3,178

Purchased loans:
Amount	$	59,025	$	—	$	—	$	59,025
Net gains	$	94	$	—	$	—	$	94

9380

($ in thousands) Three Months Ended September 30, 2019
Commercial Consumer Total
C&I CRE Residential Mortgage
CRE Construction
and Land Single-Family
Residential
Loans sold:
Originated loans:
Amount $ 30,070 $ 14,969 $ — $ 2,708 $ 47,747
Net gains $ 405 $ 1,606 $ — $ 26 $ 2,037
Purchased loans:
Amount $ 7,916 $ — $ — $ — $ 7,916

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

($ in thousands) Nine Months Ended September 30, 2019
Commercial Consumer Total
C&I CRE Residential Mortgage
CRE Construction
and Land Single-Family
Residential
Loans sold:
Originated loans:
Amount $ 140,451 $ 31,624 $ 1,573 $ 6,322 $ 179,970
Net gains $ 536 $ 2,359 $ — $ 72 $ 2,967
Purchased loans (1):
Amount $ 49,212 $ — $ — $ — $ 49,212

~~(1)Net gains on sales of purchased loans for the first nine months of 2019 were insignificant.~~



($ in thousands)	Six Months Ended June 30, 2020
	Commercial				Consumer	Total
	C&I		Total CRE		Residential Mortgage
			CRE						Single-Family Residential



Loans sold:
Originated loans:
Amount	$	136,033	$	7,250			$	18,350		$	161,633
Net gains	$	235	$	665			$	182		$	1,082

Foreign Outstandings

The Company’s overseas offices, which include the branch in Hong Kong and the subsidiary bank in China, are subject to the general risks inherent in conducting business in foreign countries, such as ~~regulations,~~regulatory risk, or economic and political uncertainties. In addition, the Company’s financial assets held in the Hong Kong branch and the subsidiary bank in China may be affected by fluctuations in currency exchange rates or other factors. The Company’s country risk exposure is largely concentrated in ~~China and Hong Kong.~~these locations. The following table presents the major financial assets held in the Company’s overseas offices as of ~~September~~June 30, ~~2020~~2021 and December 31, ~~2019:~~2020:


($ in thousands)	($ in thousands)	September 30, 2020				December 31, 2019				($ in thousands)	June 30, 2021				December 31, 2020
		Amount		% of Total Consolidated Assets		Amount		% of Total Consolidated Assets			Amount		% of Total Consolidated Assets		Amount		% of Total Consolidated Assets
Hong Kong branch:	Hong Kong branch:									Hong Kong branch:
Cash and cash equivalents	Cash and cash equivalents	$	362,412	1	%	$	511,639	1	%	Cash and cash equivalents	$	652,256	1	%	$	647,883	1	%

AFS debt securities (1)		$	210,317	0	%	$	204,948	0	%
AFS debt securities, at fair value (1)										AFS debt securities, at fair value (1)	$	248,999	0	%	$	66,170	0	%
Loans held-for-investment (2)	Loans held-for-investment (2)	$	608,007	1	%	$	573,305	1	%	Loans held-for-investment (2)	$	701,676	1	%	$	704,415	1	%
Total assets	Total assets	$	1,190,251	2	%	$	1,361,652	3	%	Total assets	$	1,626,275	3	%	$	1,426,479	3	%
Subsidiary bank in China:	Subsidiary bank in China:									Subsidiary bank in China:
Cash and cash equivalents	Cash and cash equivalents	$	512,638	1	%	$	548,930	1	%	Cash and cash equivalents	$	423,538	1	%	$	611,088	1	%
Interest-bearing deposits with banks	Interest-bearing deposits with banks	$	189,216	0	%	$	142,587	0	%	Interest-bearing deposits with banks	$	95,030	0	%	$	74,079	0	%

AFS debt securities (3)										AFS debt securities (3)	$	166,789	0	%	$	152,219	0	%
Loans held-for-investment (2)	Loans held-for-investment (2)	$	732,677	1	%	$	819,110	2	%	Loans held-for-investment (2)	$	884,413	1	%	$	796,153	2	%
Total assets	Total assets	$	1,534,094	3	%	$	1,520,627	3	%	Total assets	$	1,564,612	3	%	$	1,634,896	3	%

(1)Comprised of U.S. Treasury securities, corporate debt securities and foreign government ~~agency and U.S. government-sponsored enterprise mortgage-backed securities,~~bonds as of June 30, 2021; comprised of U.S. Treasury securities and foreign government bonds as of ~~September 30, 2020; comprised of foreign government bonds and U.S. Treasury securities as of~~ December 31, ~~2019.~~2020.

(2)Primarily comprised of C&I loans as of both ~~September~~June 30, ~~2020~~2021 and December 31, ~~2019.~~2020.

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

The following table presents the total revenue generated by the Company’s overseas offices for the ~~third~~second quarter and first ~~nine months~~half of ~~2020~~2021 and ~~2019:~~2020:


($ in thousands)	($ in thousands)	Three Months Ended September 30,								Nine Months Ended September 30,								($ in thousands)	Three Months Ended June 30,								Six Months Ended June 30,
		2020				2019				2020				2019					2021				2020				2021				2020
		Amount		% of Total Consolidated Revenue		Amount		% of Total Consolidated Revenue		Amount		% of Total Consolidated Revenue		Amount		% of Total Consolidated Revenue			Amount		% of Total Consolidated Revenue		Amount		% of Total Consolidated Revenue		Amount		% of Total Consolidated Revenue		Amount		% of Total Consolidated Revenue
Hong Kong branch:	Hong Kong branch:																	Hong Kong branch:
Total revenue	Total revenue	$	4,967	1	%	$	8,161	2	%	$	19,157	2	%	$	25,909	2	%	Total revenue	$	6,873	2	%	$	7,261	2	%	$	12,340	1	%	$	14,190	2	%
Subsidiary bank in China:	Subsidiary bank in China:																	Subsidiary bank in China:
Total revenue	Total revenue	$	3,859	1	%	$	9,393	2	%	$	16,644	1	%	$	25,584	2	%	Total revenue	$	6,158	1	%	$	5,606	1	%	$	12,679	1	%	$	12,785	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 compliant with ~~all~~applicable regulatory capital ~~guidelines.~~requirements. The Company ~~engages in regular~~regularly conducts capital planning, ~~processes~~at a minimum on ~~at least~~ an annual basis, to optimize the use of available capital, ~~and~~ to appropriately plan for future capital needs, ~~allocating~~and to allocate capital to existing and future business activities. Furthermore, the Company ~~conducts~~performs 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.

In March 2020, the Company’s Board of Directors authorized the repurchase of up to $500.0 million of the Company’s common stock. This $500.0 million repurchase authorization was inclusive of the Company’s $100.0 million stock repurchase authorization previously outstanding. The Company determines the timing and amount of stock repurchases, based on its assessment of various factors, including prevailing market conditions, alternate uses of capital, liquidity and the economic environment. ~~The~~During the first quarter of 2020, the Company repurchased 4,471,682 shares at an average price of $32.64 per share for a total cost of $146.0 ~~million during the first quarter of 2020.~~million. The Company did not repurchase any shares during the ~~second and third quarters~~remainder of 2020. or in the first half of 2021. As of ~~September~~June 30, ~~2020, t~~he2021, the total remaining available capital authorized for repurchase was $354.0 million.

The Company’s stockholders’ equity was ~~$5.13~~$5.55 billion as of ~~September~~June 30, ~~2020, a $108.5~~2021, an increase of $278.4 million or ~~2% increase~~5.3% from ~~$5.02~~$5.27 billion as of December 31, ~~2019.~~2020. The increase in the Company’s stockholders’ equity was primarily due to net income of ~~$403.7~~$429.7 million for the first ~~nine months~~half of ~~2020,~~2021, partially offset by ~~share repurchases~~an increase in other comprehensive loss of ~~$146.0~~$59.0 million ~~during the first quarter of 2020~~ and cash dividends declared of ~~$119.4~~$94.8 million during the first ~~nine months~~half of ~~2020.~~2021. For other factors that contributed to the changes in stockholders’ equity, refer to Item 1. Consolidated Financial Statements — Consolidated Statement of Changes in Stockholders’ Equity in this Form 10-Q.

Book value was ~~$36.22~~$39.10 per common share as of ~~September~~June 30, ~~2020, compared with $34.46~~2021, an increase of 5.1% from $37.22 per common share as of December 31, ~~2019.~~2020. The Company paid a quarterly cash dividends of ~~$0.275 per common share every quarter for the first nine months of 2020; $0.23 per common share for the first quarter of 2019,~~$0.33 and $0.275 per common share for ~~both~~the second quarter of 2021 and ~~third quarters of 2019.~~2020, respectively. In ~~October 2020,~~July 2021, the Company’s Board of Directors declared ~~fourth~~third quarter ~~2020~~2021 cash dividends of ~~$0.275~~$0.33 per common share. The dividend is payable on ~~November~~August 16, ~~2020~~2021 to stockholders of record as of ~~November~~August 2, ~~2020.~~2021.

Deposits and Other Sources of Funds

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 22. — MD&A — Risk Management — Liquidity Risk Management — Liquidity in this Form 10-Q for a discussion of the Company’s liquidity management. The following table summarizes the Company’s sources of funds as of ~~September~~June 30, ~~2020~~2021 and December 31, ~~2019:~~2020:


($ in thousands)	($ in thousands)	September 30, 2020				December 31, 2019				Change				($ in thousands)	June 30, 2021				December 31, 2020				Change
		Amount		%		Amount		%		$		%			Amount		%		Amount		%		$		%
Deposits	Deposits													Deposits

Noninterest-bearing demand	Noninterest-bearing demand	$	14,924,917	36	%	$	11,080,036	30	%	$	3,844,881	35	%	Noninterest-bearing demand	$	21,816,721	42	%	$	16,298,301	36	%	$	5,518,420	34	%
Interest-bearing checking	Interest-bearing checking	5,731,573		13	%	5,200,755		14	%	530,818		10	%	Interest-bearing checking	6,762,178		13	%	6,142,193		14	%	619,985		10	%
Money market	Money market	9,553,574		23	%	8,711,964		23	%	841,610		10	%	Money market	12,853,812		24	%	10,740,667		24	%	2,113,145		20	%
Savings	Savings	2,401,318		6	%	2,117,196		6	%	284,122		13	%	Savings	2,719,106		5	%	2,681,242		6	%	37,864		1	%

Time deposits	Time deposits	9,069,173		22	%	10,214,308		27	%	(1,145,135)		(11)	%	Time deposits	8,430,758		16	%	9,000,349		20	%	(569,591)		(6)	%
Total deposits	Total deposits	$	41,680,555	100	%	$	37,324,259	100	%	$	4,356,296	12	%	Total deposits	$	52,582,575	100	%	$	44,862,752	100	%	$	7,719,823	17	%
Other Funds	Other Funds													Other Funds
Short-term borrowings	Short-term borrowings	$	59,613			$	28,669			$	30,944	108	%	Short-term borrowings	$	—			$	21,009			$	(21,009)	(100)	%

FHLB advances	FHLB advances	657,185				745,915				(88,730)		(12)	%	FHLB advances	248,464				652,612				(404,148)		(62)	%
Repurchase agreements	Repurchase agreements	348,063				200,000				148,063		74	%	Repurchase agreements	300,000				300,000				—		—	%
Long-term debt ~~(1)~~	Long-term debt ~~(1)~~	1,574,765				147,101				1,427,664		971	%	Long-term debt ~~(1)~~	147,515				147,376				139		0	%
Total other funds	Total other funds	$	2,639,626			$	1,121,685			$	1,517,941	135	%	Total other funds	$	695,979			$	1,120,997			$	(425,018)	(38)	%
Total sources of funds	Total sources of funds	$	44,320,181			$	38,445,944			$	5,874,237	15	%	Total sources of funds	$	53,278,554			$	45,983,749			$	7,294,805	16	%

~~(1)Includes $1.43 billion of advances from the Federal Reserve’s PPPLF as of September 30, 2020~~

Deposits

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

Total deposits were ~~$41.68~~$52.58 billion as of ~~September~~June 30, ~~2020,~~2021, an increase of ~~$4.36~~$7.72 billion or ~~12%~~17% from ~~$37.32~~$44.86 billion as of December 31, 2019. This growth was primarily due to a $3.84 billion or 35% increase in noninterest-bearing demand, an $841.6 million or 10% increase in money market and a $530.8 million or 10% increase in interest-bearing checking deposits, partially offset by a $1.15 billion or 11% decrease in time deposits.2020. Deposit growth was attributable to strong growth ~~from both commercial and consumer customers,~~in non-maturity deposits, partially offset by a reduction in higher-cost time ~~deposits.~~deposits, from both commercial and consumer customers. The strongest growth was in noninterest-bearing demand deposits, which grew by $5.52 billion or 34% from December 31, 2020. Noninterest-bearing demand deposits ~~comprised 36%~~were $21.82 billion or 42% of total deposits as of ~~September~~June 30, ~~2020,~~2021, up from ~~30%~~$16.30 billion or 36% of total deposits as of December 31, ~~2019.~~2020. Additional information regarding the impact of deposits on net interest income, with a comparison of average deposit balances and rates, is provided in Item 2. MD&A — Results of Operations — Net Interest Income in this Form ~~10-Q~~.10-Q.

Other Sources of Funding

There were no short-term borrowings as of June 30, 2021. Short-term borrowings ~~consist~~ of ~~FRB discount window borrowing,~~$21.0 million as ~~well as short-term~~of December 31, 2020 consisted of borrowings entered into by the Company’s subsidiary, East West Bank (China) Limited and the branch in Hong Kong. The Company had short-term borrowings outstanding of $59.6 million as of September 30, 2020, compared with $28.7 million as of December 31, 2019. During the second quarter of 2020, the Company borrowed $200.0 million from the FRB discount window with a term of 90 days at a rate of 0.25% that matured in July 2020. Short-term borrowings entered into by East West Bank (China) Limited were $40.3 million and $28.7 million as of September 30, 2020 and December 31, 2019, respectively. As of September 30, 2020, short-term borrowings entered into by East West Bank (China) Limited had fixed interest rates ranging from 3.68% to 3.70%, and had maturities in the fourth quarter of 2020 and the first quarter of 2021. As of September 30, 2020, the Hong Kong branch entered into a short-term borrowing of $19.3 million with a fixed interest rate of 0.78% and a maturity date in the fourth quarter of 2020.Limited.

FHLB advances were ~~$657.2~~$248.5 million as of ~~September~~June 30, ~~2020,~~2021, a decrease of ~~$88.7~~$404.1 million ~~or 12%~~ from ~~$745.9~~$652.6 million as of December 31, ~~2019.~~2020. As of ~~September~~June 30, ~~2020,~~2021, FHLB advances had ~~fixed and~~ floating interest rates ~~ranging from zero percent to 2.34%~~of 0.55% and remaining maturities between ~~0.1 years~~eight months and ~~2.1~~1.4 years.

Gross repurchase agreements totaled ~~$348.1 million and $450.0~~$300.0 million as of ~~September~~both June 30, ~~2020~~2021 and December 31, ~~2019, respectively. The decrease was primarily due to the extinguishment of $150.0 million in the second quarter of~~ 2020. Resale and repurchase agreements are reported net, pursuant to ASC 210-20-45-11, Balance Sheet Offsetting: Repurchase and Reverse Repurchase Agreements. As of ~~September~~both June 30, 2021 and December 31, 2020, the Company did not have any gross resale agreements that were eligible for netting pursuant to ASC 210-20-45-11. ~~In comparison, net repurchase agreements totaled $200.0 million as of December 31, 2019, after netting gross repurchase agreements of $250.0 million against gross resale agreements.~~ As of ~~September~~June 30, ~~2020,~~2021, gross repurchase agreements had interest rates ranging from ~~0.48%~~2.36% to ~~2.51%~~2.45%, with original terms between ~~0.2~~4.0 years and 8.5 years and remaining maturities between ~~0.2~~2.1 years and ~~2.9~~2.2 years.

Repurchase agreements are accounted for as collateralized financing transactions and recorded as liabilities based on the values at which the ~~securities~~assets are sold. As of ~~September~~June 30, ~~2020,~~2021, the collateral for the repurchase agreements was comprised of U.S. Treasury securities, and U.S. government agency and U.S. government-sponsored enterprise mortgage-backed ~~securities, and U.S. Treasury~~ securities. To ensure the market value of the underlying collateral remains sufficient, the Company monitors the fair value of collateral pledged relative to the principal amounts borrowed under repurchase agreements. The Company manages liquidity risks related to the repurchase agreements by sourcing funds from a diverse group of counterparties, and entering into repurchase agreements with longer durations, when appropriate. For additional details, see Note 4 — ~~Securities~~Assets Purchased under Resale Agreements and Sold under Repurchase Agreements to the Consolidated Financial Statements in this Form 10-Q.

The Company uses long-term debt to provide funding to acquire interest-earning assets, ~~as well as~~and to enhance liquidity and regulatory capital adequacy. Long-term debt totaled ~~$1.57 billion~~$147.5 million and $147.4 million as of ~~September~~June 30, 2021 and December 31, 2020, ~~consisting~~respectively. Long-term debt consists of ~~PPPLF and~~ junior subordinated debt, ~~and $147.1 million as of December 31, 2019, consisting of junior subordinated debt. During the second quarter of 2020, the Company participated in the PPPLF and~~ ~~added $1.43 billion to long-term debt funding at a rate of 0.35%.~~ ~~During the month of October 2020, this debt was fully repaid.Junior subordinated debt~~which qualifies as Tier 2 capital for regulatory purposes. The junior subordinated debt was issued in connection with the Company’s various pooled trust preferred securities offerings, as well as with common stock ~~issuance~~issued by the six wholly-owned subsidiaries of the Company in conjunction with these offerings. The junior subordinated debt had a weighted-average interest rate of ~~2.41%~~1.76% and ~~4.11%~~2.67% for the first ~~nine months~~half of ~~2020~~2021 and ~~2019,~~2020, respectively, with remaining maturities ranging between 1413.4 years and 1716.2 years as of ~~September~~June 30, ~~2020.~~2021.

Regulatory Capital and Ratios

The federal banking agencies have risk-based capital adequacy ~~guidelines~~requirements intended to ensure that banking organizations maintain capital that is commensurate with the degree of risk associated with a banking organization’s operations. The Company and the Bank are subject to regulatory capital adequacy requirements. The Bank is a member bank of the Federal Reserve System and is primarily regulated by the Federal Reserve and the California Department of Financial Protection and Innovation (“DFPI”). The Company and the Bank are required to comply with the Basel III Capital Rules adopted by the federal banking agencies. Both the Company and the Bank are standardized approach institutions under Basel III Capital Rules. See Item 1. Business — Supervision and Regulation — Regulatory Capital Requirementsand Recent Regulatory Capital-Related Development of the Company’s ~~2019~~2020 Form 10-K for additional details.

The Company adopted ~~ASU~~Accounting Standards Update (“ASU”) 2016-13 on January 1, 2020. The Company has elected the phase-in option provided by regulatory guidance, which delays the estimated impact of ~~CECL~~Current Expected Credit Losses (“CECL”) on regulatory capital for two years and phases the impact over three ~~years beginning 2022.~~years. As a result, the effects of CECL on the Company’s and the Bank’s regulatory capital will be delayed through the year 2021, after which the effects will be phased-in over a three-year period from January 1, 2022 through December 31, 2024. In April 2020, in recognition of the CARES Act requirements, and to facilitate the use of the PPPLF, the ~~U.S~~U.S. banking agencies issued an interim final rule that banking organizations may exclude from leverage and risk-based capital requirements any eligible assets sold or pledged to the Federal Reserve on a non-recourse basis as part of ~~these programs. The interim final rule states that PPP covered~~the PPPLF. In addition, under the CARES Act, loans originated by a banking organization under the PPP (whether or not sold or pledged in the PPPLF) will be risk-weighted at zero percent for regulatory capital purposes. ~~The September~~Accordingly, the June 30, ~~2020~~2021 capital ratios exclude the impact of the increased allowance for loan losses due to CECL, and PPP loans are ~~risk weighted~~risk-weighted at zero percent. ~~In addition,~~As of June 30, 2021, the ~~impact of~~Company did not have any PPP loans ~~that have been~~ pledged as collateral to ~~PPPLF has been excluded from~~ the ~~Tier 1 leverage ratio.~~PPPLF.

The following table presents the Company’s and the Bank’s capital ratios as of ~~September~~June 30, ~~2020~~2021 and December 31, ~~2019~~2020 under the Basel III Capital Rules, and those required by regulatory agencies for capital adequacy and well-capitalized classification purposes:


		Basel III Capital Rules																		Basel III Capital Rules
		September 30, 2020				December 31, 2019				Minimum Regulatory Requirements		Fully Phased-in Minimum Regulatory Requirements (2)		Well- Capitalized Requirements						June 30, 2021						December 31, 2020								Minimum Regulatory Requirements					Fully Phased-in Minimum Regulatory Requirements (2)					Well- Capitalized Requirements
		Company		East West Bank		Company		East West Bank								Company				East West Bank			Company			East West Bank			Minimum Regulatory Requirements			Fully Phased-in Minimum Regulatory Requirements (2)					Well- Capitalized Requirements
Risk-Based Capital Ratios:
Risk-based capital ratios:																	Risk-based capital ratios:
CET1 capital(1)	CET1 capital(1)	12.8	%	12.1	%	12.9	%	12.9	%	4.5	%	7.0	%	6.5	%				CET1 capital(1)		12.8	%		12.3	%		12.7	%			12.1		%			4.5		%			7.0		%			6.5		%
Tier 1 capital	Tier 1 capital	12.8	%	12.1	%	12.9	%	12.9	%	6.0	%	8.5	%	8.0	%			Tier 1 capital		12.8	%		12.3	%		12.7	%			12.1		%			6.0		%			8.5		%			8.0		%
Total capital	Total capital	14.5	%	13.4	%	14.4	%	13.9	%	8.0	%	10.5	%	10.0	%			Total capital		14.3	%		13.4	%		14.3	%		13.4		%			8.0		%			10.5		%			10.0		%
Tier 1 leverage (1)	Tier 1 leverage (1)	9.8	%	9.3	%	10.3	%	10.3	%	4.0	%	4.0	%	5.0	%			Tier 1 leverage (1)		9.1	%		8.7	%		9.4	%		9.0		%			4.0		%			4.0		%			5.0		%

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

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

The Company is committed to maintaining strong capital levels to assure the Company’s investors, customers and regulators that the Company and the Bank are financially sound. As of ~~September~~June 30, ~~2020~~2021 and December 31, ~~2019,~~2020, both the Company and the Bank continued to exceed all “well-capitalized” capital requirements and the fully phased-in required minimum capital requirements under the Basel III Capital Rules. Total risk-weighted assets were ~~$36.92~~$40.61 billion as of ~~September~~June 30, ~~2020,~~2021, an increase of ~~$1.78~~$2.20 billion or 5%6% from ~~$35.14~~$38.41 billion as of December 31, ~~2019.~~2020. The increase in the risk-weighted assets was primarily due to ~~real estate~~ loan ~~growth.~~growth and increased AFS debt securities.

Other Matters

~~LIBOR~~London Interbank Offered Rate Transition

On ~~July 27, 2017,~~March 5, 2021, the United Kingdom’s Financial Conduct Authority ~~which regulates~~(“FCA”) confirmed that the one-week and two-month U.S. dollar (“USD”) London Interbank Offered Rate (“LIBOR”)~~, announced~~ settings will permanently cease following the LIBOR publication on December 31, 2021, and that itthe overnight, one-month, three-month, six-month and 12-month USD LIBOR settings will ~~no longer persuade~~permanently cease following the LIBOR publication on June 30, 2023. The FCA will consider requiring the ICE Benchmark Administration to publish one-month, three-month and six-month USD LIBOR settings on a “synthetic” basis after the LIBOR publication on June 30, 2023. However, any “synthetic” USD LIBOR settings will not be considered representative of the underlying market or ~~require~~economic reality they are intended to measure. The federal banking agencies have continued to encourage banks to ~~submit~~cease entering into new contracts that use USD LIBOR as a reference rate as soon as practicable and in any event by December 31, 2021. The Alternative Reference Rates Committee (“ARRC”) has proposed the Secured Overnight Financing Rate (“SOFR”) as its preferred alternative to LIBOR, although the adoption of SOFR remains voluntary. The ARRC has also formally recommended the CME Group’s forward-looking SOFR term rates. The ARRC supports the use of SOFR term rates for ~~the calculation~~business loan activity and continues to recommend using forms of ~~LIBOR after 2021. Given LIBOR’s extensive use across financial markets, the transition away from LIBOR presents various risks~~overnight and challenges to financial markets and institutions, including to the Company. The Company’s commercial and consumer businesses issue, trade, and hold various products that are currently indexed to LIBOR. A portionaverages of SOFR where possible.

Majority of the Company’s LIBOR-based loans, derivatives, debt securities, resale agreements, ~~FHLB advances, as well as~~ junior subordinated debt and repurchase agreements are indexed to LIBOR ~~and mature~~tenors that will cease to be published after ~~2021.~~June 30, 2023. The volume of the Company’s LIBOR-based products that ~~are indexed to LIBOR~~mature after June 30, 2023 is significant and, if not sufficiently planned for, the discontinuation of LIBOR could result in financial, operational, legal, reputational or compliance ~~risks.~~

The Alternative Reference Rates Committee (“ARRC”) has proposed the Secured Overnight Financing Rate (“SOFR”) as its preferred alternative rate for LIBOR. In 2019 and 2020, the ARRC released recommended fallback contract language for new issuances of LIBOR indexed bilateral business loans, syndicated loans, floating-rate notes, securitizations, residential adjustable rate mortgages and private student loans. During 2020, the ARRC has issued updated hardwired fallback language for bilateral business loans and syndicated loans, and a recommended spread methodology for non-consumer cash products, as well as guidance on several matters relatedrisks to the transition. On October 23, 2020, the International Swaps and Derivatives Association, Inc. (“ISDA”) launched its 2020 IBOR Fallbacks Supplement (“Supplement”) and IBOR Fallbacks Protocol (“Protocol”). The Supplement and the amendments made by the Protocol will take effect on January 25, 2021. The ARRC supports the ISDA Protocol.

The Company has been closely monitoring the impact of the COVID-19 pandemic and any potential delay in the cessation of LIBOR. Although the Financial Conduct Authority continues to assess the evolving impact of COVID-19 on firms’ LIBOR transition efforts, the target LIBOR cessation date currently remains unchanged.Company.

~~Due to the uncertainty surrounding the future of LIBOR, the~~The transition is anticipated to span several reporting periods through mid-2023 (depending on the ~~end of 2021. Certain actions already taken by~~setting) with the confirmed LIBOR cessation dates. The Company ~~related to the transition of LIBOR include (1) establishing~~created a cross-functional team to identify, assess and monitor risks associated with the transition of LIBOR and other benchmark rates; (2) completing an inventory of LIBOR indexed products; (3) implementing more robust fallback contract language for new loans, which identifies LIBOR cessation trigger events, provides for an alternative index and permits an adjustment to the margin as applicable; and (4) creating an entity-wide transition project plan, to ensure an effective transition away from LIBOR. The Company continues to monitor this activity and evaluate the related risks. The Company’s cross-functional team also managesmanage the communication of the Company’s transition plans with both internal and external stakeholders and ~~ensures~~to ensure that the Company appropriately updates its business processes, analytical tools, information systems and contract language to minimize ~~disruption~~disruptions during and after the LIBOR transition. The Company has completed a review of LIBOR contracts maturing after the LIBOR cessation dates and has begun taking steps to transition these contracts to alternative rates. For additional information related to the potential impact surrounding the transition from LIBOR on the Company’s business, seeItem 1A. Risk Factorsin the Company’s ~~2019~~2020 Form 10-K.

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 Sheet and are considered to be off-balance sheet arrangements. Off-balance sheet arrangements are any contractual arrangements to which a nonconsolidated entity is a party and under which the Company has: (1) any obligation under a guarantee contract; (2) a retained or contingent interest in assets transferred to an unconsolidated entity or similar arrangement that serves as credit, liquidity or market risk support to that entity for such assets; (3) any obligation under certain derivative instruments; or (4) any obligation under a material variable interest held by the Company in a nonconsolidated entity that provides financing, liquidity, market risk or credit risk support to the Company, or engages in leasing, hedging or research and development services with the Company.

Commitments to Extend Credit

As a financial service provider, the Company routinely enters into commitments to extend credit such as loan commitments, commercial letters of credit for foreign and domestic trade, standby letters of credit (“SBLCs”) and financial guarantees to meet the financing needs of its customers. Many of these commitments to extend credit may expire without being drawn upon. The credit policies used in underwriting loans to customers are also used to extend these commitments. Under some of these contractual agreements, the Company may also have liabilities contingent upon the occurrence of certain events. The Company’s liquidity sources have been, and are expected to be, sufficient to meet the cash requirements of its lending activities. 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.

Guarantees

In the ordinary course of business, the Company periodically enters into various guarantee agreements in which the Company sells or securitizes loans with recourse. Under these guarantee arrangements, the Company is contingently obligated to repurchase the recourse component of the loans when the loans default. Additional information regarding guarantees is provided in Note 10 — Commitments and Contingencies to the Consolidated Financial Statements in this Form 10-Q.

A discussion of significant contractual arrangements under which the Company may be held contingently liable is included in Note 10 — Commitments and Contingencies to the Consolidated Financial Statements in this Form 10-Q. In addition, the Company has commitments and obligations under post-retirement benefit plans as described in Note 1714 — Employee Benefit Plans to the Consolidated Financial Statements of the Company’s ~~2019~~2020 Form 10-K, and has contractual obligations for future payments on debts, borrowings and lease obligations as detailed in Item 7. MD&A — Off-Balance Sheet Arrangements and Contractual Obligations of the Company’s ~~2019~~2020 Form 10-K.

Risk Management

Overview

In conducting its businesses, the Company is exposed to a variety of risks, some of which are inherent to the financial services industry and others of which are more specific to the Company’s businesses. The Company operates under a Board-approved ~~enterprise risk management~~Enterprise Risk Management (“ERM”) framework, which outlines ~~its~~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,~~risk; market risk; operational risk; compliance and regulatory risks; legal risks; strategic ~~risk, credit risk, liquidity risk, market risk, operational risk,~~risks; and reputational ~~risk, and legal and compliance risk.~~risks.

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

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

Credit Risk Management

Credit risk is the risk that a borrower or 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 ~~our~~the Company’s assets and exposures such as loans and certain derivatives. The majority of the ~~Company's~~Company’s credit risk is associated with lending activities.

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

The Company assesses overall credit quality performance of the loan held-for-investment portfolio through an integrated analysis of specific performance ratios. This approach forms the basis of the discussion in the sections immediately following: Credit Quality, Nonperforming Assets, ~~TDRs~~Troubled Debt Restructurings (“TDRs”) and Allowance for Credit Losses.

~~100~~86

Credit Quality

The Company utilizes a credit risk rating system to assist in monitoring credit quality. Loans are evaluated using the Company’s internal credit risk rating of 1 through 10. Loans risk rated 1 through 5 are assigned an internal risk rating of “Pass.” Loans assigned with a credit risk rating of 6 have potential weaknesses that warrant closer attention by management and are assigned an internal risk rating of “Special mention.” Loans assigned a credit risk rating of 7 or 8 have well-defined weaknesses that may jeopardize the full and timely repayment of the loan; these are assigned an internal risk rating of “Substandard.” Loans assigned a credit risk rating of 9 have insufficient sources of repayment and a high probability of loss; these are assigned an internal risk rating of “Doubtful.” Loans assigned a credit risk rating of 10 are uncollectible and of such little value that they are no longer considered bankable assets; these are assigned an internal risk rating of “Loss.” Exposures categorized as criticized consist of “Special mention,” “Substandard,” “Doubtful” and “Loss” categories. Exposures categorized as classified consist of “Substandard,” “Doubtful” and “Loss” categories. For more information on credit quality indicators, refer to Note 7 — Loans Receivable and Allowance for Credit Losses to the Consolidated Financial Statements in this Form 10-Q.

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



($ in thousands)							Change
	June 30, 2021			December 31, 2020			$		%
Criticized loans




































Special mention loans	$	386,807		$	564,555		$	(177,748)	(31)	%
Classified loans	645,182			652,880			(7,698)		(1)	%
Total criticized loans	$	1,031,989		$	1,217,435		$	(185,446)	(15	%)

Special mention loans to loans held-for-investment	0.97		%	1.47		%
Classified loans to loans held-for-investment	1.61		%	1.70		%
Criticized loans to loans held-for-investment	2.58		%	3.17		%

As of June 30, 2021, criticized loans totaled $1.03 billion or 2.58% of loans held-for-investment, compared with $1.22 billion or 3.17% of loans held-for-investment as of December 31, 2020. During the first half of 2021, criticized loans decreased by $185.4 million or 15%, to $1.03 billion as of June 30, 2021. The decrease in criticized loans was primarily in the C&I and CRE categories. During the first half of 2021, special mention loans decreased by $177.7 million or 31% to $386.8 million or 0.97% of loans held-for investment, and classified loans decreased $7.7 million or 1% to $645.2 million or 1.61% of loans held-for-investment.

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. Loans are generally placed on nonaccrual status when they become 90 days past due or when the full collection of principal or interest becomes uncertain regardless of the length of past due status. Collectability is generally assessed based on economic and business conditions, the borrower’s financial condition and the adequacy of collateral, if any. For additional details regarding the Company’s nonaccrual loan policy, see Note 1 — Summary of Significant Accounting Policies — Loans Held-for-Investment to the Consolidated Financial Statements of the Company’s ~~2019~~2020 Form 10-K.

The following table presents information regarding nonperforming assets as of ~~September 30, 2020 and December 31, 2019:~~the periods indicated:


($ in thousands)	($ in thousands)	September 30, 2020			December 31, 2019			($ in thousands)							Change
		Nonaccrual Loans			Non-PCI Nonaccrual Loans				June 30, 2021			December 31, 2020			$		%
Commercial:	Commercial:							Commercial:
C&I	C&I	$	145,986		$	74,835		C&I	$	83,225		$	133,939		$	(50,714)	(38)	%
CRE:	CRE:							CRE:
CRE	CRE	55,996			16,441			CRE	58,780			46,546			12,234		26	%
Multifamily residential	Multifamily residential	3,728			819			Multifamily residential	2,893			3,668			(775)		(21)	%

Construction and land								Construction and land	19,900			—			19,900		100	%
Total CRE	Total CRE	59,724			17,260			Total CRE	81,573			50,214			31,359		62	%
Consumer:	Consumer:							Consumer:
Residential mortgage:	Residential mortgage:							Residential mortgage:
Single-family residential	Single-family residential	15,894			14,865			Single-family residential	20,168			16,814			3,354		20	%
HELOCs	HELOCs	12,395			10,742			HELOCs	10,321			11,696			(1,375)		(12)	%
Total residential mortgage	Total residential mortgage	28,289			25,607			Total residential mortgage	30,489			28,510			1,979		7	%
Other consumer	Other consumer	2,495			2,517			Other consumer	2,503			2,491			12		0	%
Total nonaccrual loans	Total nonaccrual loans	236,494			120,219			Total nonaccrual loans	197,790			215,154			(17,364)		(8)	%

OREO, net	OREO, net	19,504			125			OREO, net	14,914			15,824			(910)		(6)	%
Other nonperforming assets	Other nonperforming assets	3,890			1,167			Other nonperforming assets	13,025			3,890			9,135		235	%
Total nonperforming assets	Total nonperforming assets	$	259,888		$	121,511		Total nonperforming assets	$	225,729		$	234,868		$	(9,139)	(4)	%
Nonperforming assets to total assets	Nonperforming assets to total assets	0.52		%	0.27		%	Nonperforming assets to total assets	0.38		%	0.45		%
Nonaccrual loans to loans held-for-investment	Nonaccrual loans to loans held-for-investment	0.63		%	0.35		%	Nonaccrual loans to loans held-for-investment	0.49		%	0.56		%
Allowance for loan losses to nonaccrual loans	Allowance for loan losses to nonaccrual loans	261.42		%	298.03		%	Allowance for loan losses to nonaccrual loans	296.13		%	288.16		%
Annualized quarterly net charge-offs to average loans held-for-investment		0.26		%	0.10		%

TDRs included in nonperforming loans	TDRs included in nonperforming loans	$	40,728		$	54,466		TDRs included in nonperforming loans	$	66,648		$	71,924

Period-over-period changes to nonaccrual loans represent loans that are placed on nonaccrual status in accordance with the Company’s accounting policy, offset by reductions from loans that are repaid, paid down, charged off, sold, foreclosed or ~~no longer classified as nonaccrual as a result of~~upgraded due to continued performance and improvement in the borrowers’ financial ~~condition. Nonaccrual~~condition and loan repayment capabilities. The $17.4 million or 8% decrease in nonaccrual loans ~~were $236.5~~to $197.8 million as of ~~September~~June 30, ~~2020, an increase of $116.3 million or 97%~~2021, down from ~~$120.2~~$215.2 million as of December 31, ~~2019. This increase~~2020, was primarily ~~driven~~due to C&I loan upgrades and loan pay downs. This decrease was partially offset by inflows of C&I, ~~oil & gas loans,~~construction and land, and CRE loans that were placed on nonaccrual.

~~partially offset by charge-offs and sales~~

As of June 30, 2021, C&I loans ~~as well as a transfer of a~~comprised 42% and total CRE ~~loan to OREO.~~ ~~Nonaccrual~~ loans ~~as a percentage of loans held-for-investment were 0.63% and 0.35% as of September 30, 2020 and December 31, 2019, respectively. C&I nonaccrual loans were 62%~~comprised 41% of total nonaccrual ~~loans as~~loans. As of ~~both September 30, 2020 and~~ December 31, ~~2019.~~2020, C&I loans comprised 62% and total CRE loans comprised 23% of total nonaccrual loans. As of ~~September~~June 30, ~~2020, $115.5~~2021, $80.1 million or ~~49%,~~41% of ~~the $236.5 million~~ nonaccrual loans were less than 90 days delinquent. In comparison, ~~$35.6~~$106.4 million or ~~30%~~49% of ~~the $120.2 million~~ nonaccrual loans were less than 90 days delinquent as of December 31, ~~2019.~~2020.

OREO ~~increased by $19.4~~was $14.9 million ~~from $125 thousand as of December 31, 2019 to $19.5~~and $15.8 million as of ~~September~~June 30, 2021 and December 31, 2020, ~~due to the Company taking possession~~respectively, primarily consisting of one retail CRE property located in Southern California, which the Company took possession of during the first quarter of 2020.

Other nonperforming assets totaled $13.0 million and $3.9 million as of June 30, 2021 and December 31, 2020, respectively, an increase of $9.1 million or 235%, primarily due to three oil and gas loans that were transferred to foreclosed assets.

~~101~~

The following table presents the accruing loans past due by portfolio segment as of ~~September~~June 30, ~~2020~~2021 and December 31, ~~2019:~~2020:


($ in thousands)	($ in thousands)	Total Accruing Past Due Loans (1)				Change				Percentage of Total Loans Outstanding				($ in thousands)	Total Accruing Past Due Loans (1)				Change				Percentage of Total Loans Outstanding
		September 30, 2020		December 31, 2019		($)		(%)		September 30, 2020		December 31, 2019			June 30, 2021		December 31, 2020		$		%		June 30, 2021		December 31, 2020
Commercial:	Commercial:													Commercial:
C&I	C&I	$	53,143	$	48,155	$	4,988	10	%	0.40	%	0.40	%	C&I	$	30,182	$	9,717	$	20,465	211	%	0.22	%	0.07	%
CRE:	CRE:													CRE:
CRE	CRE	8,646		24,807		(16,161)		(65)	%	0.08	%	0.24	%	CRE	4,647		375		4,272		NM		0.04	%	0.00	%
Multifamily residential	Multifamily residential	3,863		729		3,134		430	%	0.13	%	0.03	%	Multifamily residential	1,764		1,818		(54)		(3	%)	0.05	%	0.06	%

Construction and land														Construction and land	—		19,900		(19,900)		(100	%)	—	%	3.32	%
Total CRE	Total CRE	12,509		25,536		(13,027)		(51)	%	0.09	%	0.19	%	Total CRE	6,411		22,093		(15,682)		(71	%)	0.04	%	0.15	%
Total commercial	Total commercial	65,652		73,691		(8,039)		(11)	%	0.23	%	0.29	%	Total commercial	36,593		31,810		4,783		15	%	0.13	%	0.11	%
Consumer:	Consumer:													Consumer:
Residential mortgage:	Residential mortgage:													Residential mortgage:
Single-family residential	Single-family residential	13,987		20,517		(6,530)		(32)	%	0.18	%	0.29	%	Single-family residential	14,622		12,494		2,128		17	%	0.16	%	0.15	%
HELOCs	HELOCs	4,678		7,064		(2,386)		(34)	%	0.31	%	0.48	%	HELOCs	3,805		6,052		(2,247)		(37	%)	0.20	%	0.38	%
Total residential mortgage	Total residential mortgage	18,665		27,581		(8,916)		(32)	%	0.20	%	0.32	%	Total residential mortgage	18,427		18,546		(119)		(1	%)	0.17	%	0.19	%
Other consumer	Other consumer	675		11		664		NM		0.43	%	0.00	%	Other consumer	285		234		51		22	%	0.19	%	0.14	%
Total consumer	Total consumer	19,340		27,592		(8,252)		(30)	%	0.20	%	0.31	%	Total consumer	18,712		18,780		(68)		0	%	0.17	%	0.19	%
Total	Total	$	84,992	$	101,283	$	(16,291)	(16)	%	0.23	%	0.29	%	Total	$	55,305	$	50,590	$	4,715	9	%	0.14	%	0.13	%

NM — Not meaningful.

(1)There were no accruing loans past due 90 days or more as of both ~~September~~June 30, ~~2020~~2021 and December 31, ~~2019.~~2020.

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~~June 30, ~~2020~~2021 and December 31, ~~2019.~~2020. The allowance for loan losses for TDRs was ~~$4.8~~$5.9 million ~~and $400 thousand~~ as of ~~September~~June 30, ~~2020~~2021 and ~~December 31, 2019, respectively.~~

($ in thousands) September 30, 2020 December 31, 2019
Performing
TDRs Nonperforming
TDRs Performing
TDRs Nonperforming
TDRs
Commercial:
C&I $ 61,727 $ 36,955 $ 39,208 $ 41,014
CRE:
CRE 26,381 316 5,177 11,503
Multifamily residential 3,323 1,453 3,644 229
Construction and land 19,792 — 19,691 —
Total CRE 49,496 1,769 28,512 11,732
Consumer:
Residential mortgage:
Single-family residential 6,757 1,148 7,346 1,098
HELOCs 2,644 856 2,832 722
Total residential mortgage 9,401 2,004 10,178 1,820
Total TDRs $ 120,624 $ 40,728 $ 77,898 $ 54,566

$10.3 million

~~102~~

~~Performing TDRs were $120.6 million as of September 30, 2020, an increase of $42.7 million or 55% from $77.9 million~~ as of December 31, ~~2019. This increase reflected $45.8~~2020.



($ in thousands)	June 30, 2021						December 31, 2020
	Performing TDRs		Nonperforming TDRs		Total		Performing TDRs		Nonperforming TDRs		Total
Commercial:
C&I	$	105,521	$	43,361	$	148,882	$	85,767	$	68,451	$	154,218
CRE:
CRE	24,620		—		24,620		24,851		—		24,851
Multifamily residential	3,253		1,398		4,651		3,310		1,448		4,758
Construction and land	—		19,900		19,900		19,900		—		19,900
Total CRE	27,873		21,298		49,171		48,061		1,448		49,509
Consumer:
Residential mortgage:
Single-family residential	6,745		1,132		7,877		6,748		1,169		7,917
HELOCs	2,599		857		3,456		2,631		856		3,487
Total residential mortgage	9,344		1,989		11,333		9,379		2,025		11,404

Total TDRs	$	142,738	$	66,648	$	209,386	$	143,207	$	71,924	$	215,131

Performing TDRs were $142.7 million ~~in newly designated~~and $143.2 million as of June 30, 2021 and December 31, 2020, respectively. Performing C&I ~~TDR loans, primarily~~TDRs were largely comprised of borrowers from the oil and gas, and general manufacturing &and wholesale sectors. Over 97% and ~~oil & gas sectors, and $29.8 million in CRE TDR loans. The majority~~85% of the performing TDRs were current as of ~~September~~June 30, ~~2020~~2021 and December 31, ~~2019.~~2020, respectively.

Nonperforming TDRs were ~~$40.7~~$66.6 million as of ~~September~~June 30, ~~2020,~~2021, a decrease of ~~$13.8~~$5.3 million or ~~25%~~7% from ~~$54.5~~$71.9 million as of December 31, ~~2019. This decrease primarily reflected $19.9 million in sale~~2020. The nonperforming TDRs were mainly comprised of C&I ~~loan,~~loans from the oil and ~~an $11.1 million transfer of a nonperforming CRE loan to OREO, partially offset by additions to TDR, primarily from C&I oil &~~ gas sector, and construction and land loans.

Existing TDRs that were subsequently modified in response to the COVID-19 pandemic continue to be classified as TDRs. As of ~~September~~June 30, ~~2020,~~2021, there were 11two TDRs totaling ~~$31.3~~$1.1 million that were provided subsequent modifications related to the COVID-19 pandemic. As of December 31, 2020, there were four TDRs totaling $11.8 million that were provided subsequent modifications related to the COVID-19 pandemic.

Loan Modifications Due to COVID-19 Pandemic

Since late March 2020, under various forbearance programs, the Company has granted a range of commercial and consumer loan accommodation, predominantly in the form of payment deferrals, to provide relief to borrowers experiencing financial hardship due to the COVID-19 pandemic. Section 4013 of the CARES Act, ~~includes a provision that~~as amended by the Consolidated Appropriations Act, 2021 (“CAA”), permits a financial institution to elect to temporarily suspend TDR accounting under ASC Subtopic 310-40 in certain ~~circumstances (“Section 4013 CARES Act”).~~circumstances. To be eligible under Section 4013 of the CARES Act, as modified by the CAA, a loan modification must be (1) related to the COVID-19 pandemic; (2) executed on a loan that was not more than 30 days past due as of December 31, 2019; and (3) executed between March 1, 2020, and the earlier of (a) 60 days after the date of termination of the federal National Emergency or (b) ~~December 31, 2020. In response to the loan modification provisions under Section 4013 of the CARES Act, the~~January 1, 2022. The federal banking regulators, ~~issued a revised interagency statement (the “Interagency Statement”) on April 7, 2020~~ in consultation with the Financial Accounting Standards Board (“FASB”)~~. The~~, issued the Interagency Statement ~~confirmed~~on Loan Modifications and Reporting for Financial Institutions Working with Customer Affected by the Coronavirus (Revised) (the “Interagency Statement”) on April 7, 2020 confirming that, for loans not subject to Section 4013 of the CARES Act, short-term modifications (i.e., six months or less) made on a good faith basis in response to the COVID-19 pandemic to borrowers who were current as of the implementation date of a loan modification, ~~program,~~ or modifications granted under government mandated modification programs, are not considered as TDRs under ASC Subtopic 310-40. See additional information in Note 1 — Summary of Significant Accounting Policies — Troubled Debt Restructurings to the Consolidated Financial Statements of the Company’s 2020 Form 10-K.

The delinquency aging of loans modified related to the COVID-19 pandemic is frozen at the time of the modification. As a result, the recognition of delinquent loans, nonaccrual status and loan net charge-offs may be delayed for certain borrowers who are enrolled in these loan modification programs, ~~and who~~which would have otherwise moved into past due or nonaccrual status. Interest income continues to be recognized over the accommodation period.

~~103~~90

Beginning in late March 2020, the Company provided various commercial and consumer loan modification programs, predominantly in the form of payment deferrals to its borrowers, to offer relief to borrowers from the economic impact of the COVID-19 pandemic. The following table provides a summary of the COVID-19 pandemic-related loan modifications ~~in place~~that remained under their modified terms as of ~~September~~June 30, 2021 and December 31, 2020 ~~none of which were classified as a TDR. A portion~~. These amounts represent loan modifications that meet the criteria under Section 4013 of the ~~balances~~CARES Act, as amended by the CAA, or Interagency Statement and therefore are not considered TDRs. These amounts also exclude loan modifications related to the COVID-19 pandemic made on ~~deferral represent borrowers who have received multiple accommodations.~~existing TDRs. A loan is counted once in the table regardless of the number of accommodations the borrower has received.


($ in thousands)	($ in thousands)			September 30, 2020				($ in thousands)			June 30, 2021											December 31, 2020
		($ in thousands)
			Number of Loans		Outstanding Balance				% of Balance to Respective Loan Portfolio		($ in thousands)			Number of Loans			Outstanding Balance				% of Balance to Respective Loan Portfolio					Number of Loans			Outstanding Balance				% of Balance to Respective Loan Portfolio
Payment deferral and forbearance	Payment deferral and forbearance
Commercial:	Commercial:
C&I	C&I			10		$	32,599			0		%	C&I			8			$	9,856			0		%			16			$	54,215			0		%
CRE:	CRE:											CRE:
CRE	CRE			94		1,029,105				9	%	CRE			52			522,995				4		%			63			597,972				5		%
Multifamily residential	Multifamily residential			14		83,755				3	%	Multifamily residential			7			94,675				3		%			4			17,111				1		%
Construction and land	Construction and land			2		52,852				9	%	Construction and land			3			56,189				12		%			3			66,629				11		%
Total CRE	Total CRE			110		1,165,712				8	%	Total CRE			62			673,859				4		%			70			681,712				5		%
Total commercial	Total commercial			120		1,198,311				4	%	Total commercial			70			683,715				2		%			86			735,927				3		%
Consumer:	Consumer:											Consumer:
Residential mortgage:	Residential mortgage:											Residential mortgage:
Single-family residential	Single-family residential			775		316,745				4	%	Single-family residential			333			153,712				2		%			498			207,797				3		%
HELOCs	HELOCs			134		52,866				3	%	HELOCs			60			26,051				1		%			102			39,469				2		%
Total residential mortgage	Total residential mortgage			909		369,611				4	%	Total residential mortgage			393			179,763				2		%			600			247,266				3		%
Total consumer	Total consumer			909		369,611				4	%	Total consumer			393			179,763				2		%			600			247,266				2		%
Total payment deferral and forbearance	Total payment deferral and forbearance			1,029		$	1,567,922			4	%	Total payment deferral and forbearance			463			$	863,478			2		%			686			$	983,193			3		%

The above table excludes loan modifications related to the COVID-19 pandemic that did not meet the criteria provided under Section 4013 of the CARES Act, as amended by the CAA, or the Interagency Statement, ~~which are also~~and that were evaluated and deemed to not ~~considered~~be classified as TDRs. The determination to not consider a modification a TDR was made on the premise that the amount of the delayed restructured payments was insignificant relative to the unpaid principal or collateral value of the loan, resulting in an insignificant shortfall in the contractual amount due from the borrower, or an insignificant delay in the timing of the restructured payment period relative to the payment frequency under the loan’s original contractual maturity or expected duration. ~~The table above also excludes loan modifications related to the COVID-19 pandemic made on existing TDRs.~~

The ~~majority of the~~ COVID-19 pandemic-related loan modifications primarily consisted of payment deferrals ~~three~~six months or less in duration, in the form of either principal payment deferrals, where the borrower was still paying interest, or full principal and interest payment deferrals. Other forbearance programs consisted of interest rate concessions. The deferred payments for commercial loans are either repaid at contractual maturity or spread over the remaining contractual term of the loan. The deferred payments for consumer loans are repaid under defined payment plans between six to 3660 months after the deferral period ends, or the loan term is extended beyond the contractual maturity by the number of payments deferred.

As of June 30, 2021, the Company had $863.5 million of loans under payment deferral and forbearance programs, a decrease of $119.7 million or 12% from $983.2 million as of December 31, 2020. The loans on deferral as of June 30, 2021 and December 31, 2020, largely consisted of CRE and residential mortgage loans. The year-to-date decrease in loans on deferral reflected the lifting of COVID-19 related business shutdowns and restrictions on travel and restaurant dining. The increase of CRE COVID-19 related loan deferrals that were making at least partial payments from 73% as of December 31, 2020 to 88% as of June 30, 2021 also signaled improvements in the economy. Loans that have exited the modification program were predominantly current as of June 30, 2021. The Company monitors the delinquency status of loans exiting relief programs on an ongoing basis. The impacts of the COVID-19 loan modifications were considered in the determination of the allowance for credit loss.

Allowance for Credit Losses

~~Effective January 1, 2020, the Company adopted ASU 2016-13,~~ ~~Financial Instruments — Credit Losses~~ ~~that requires the~~The Company’s measurement of the allowance for credit losses ~~to be~~is based on management’s best estimate of lifetime expected credit losses inherent in the Company’s relevant financial assets. The allowance for credit losses estimate uses various models and estimation techniques based on historical loss experience, current borrower characteristics, current conditions, reasonable and supportable forecasts and other relevant factors. ~~On January 1, 2020,~~In the ~~adoption~~case of loans and securities, allowance for credit losses are contra-asset valuation accounts that are deducted from the ~~new accounting standard increased~~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 ~~loan losses by $125.2 million, and the allowance for unfunded credit commitments by $10.5 million, partially offset by an after-tax decrease to opening retained earnings of $98.0 million.~~

~~104~~

~~The Company’s methodology for determining the allowance for loan losses includes an estimate of expected~~ credit losses onis a ~~collective basis for loan groups with similar risk characteristics,~~liability account that is reported as a component of Accrued expenses and a specific allowance for loans which are individually evaluated. For collectively evaluated loans, the Company uses quantitative models to forecast expected credit losses and these models consider historical credit loss experience, current market and economic conditions, and forecasted changesother liabilities in market and economic conditions, if such forecasts are considered reasonable and supportable. The Company also considers qualitative factors in determining the allowance for loan losses. Qualitative adjustments are used to capture characteristics in the portfolio that impact expected credit losses, and which are not otherwise fully captured within the Company’s expected credit loss models.our Consolidated Balance Sheet.

In addition to the allowance for loan losses, the Company maintains an allowance for unfunded credit commitments. The Company has three general areas ~~where~~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 for unfunded lending commitments calculation 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 segment of the individual credit.

The Company employs a disciplined process and methodology to establish its allowance for loan losses each quarter. The process for estimating the allowance for loan losses takes into consideration many factors, including historical and forecasted loan loss trends, loan-level credit quality ratings and loan-specific risk characteristics. In addition to regular quarterly reviews of the adequacy of the allowance for loan losses, the Company performs ongoing assessments of the risks inherent in the loan portfolio. Determining the appropriateness of the allowance for loan losses is complex and requires judgement by management about the effect of matters that are inherently uncertain.

The Company is committed to maintaining the allowance for ~~loan~~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 ~~loan~~credit losses as of June 30, 2021 was appropriate ~~as of September 30, 2020,~~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. ~~See~~For a description of the policies, methodologies and judgments used to determine the allowance for credit losses, see ~~Note 2 —Current Accounting Developments and Summary of Significant Accounting Policies —New Accounting Pronouncements Adopted~~, ~~Note 7 — Loans Receivables and Allowance for Loan Losses — Allowance for Loan Losses~~ ~~and~~Item 2.7. MD&A — Critical Accounting Policies and Estimates of the Company’s 2020 Form 10-Kand Note 1 — Summary of Significant Accounting Policies to the Consolidated Financial Statements of the Company’s 2020 Form 10-K, and Note 7—Loans Receivable and Allowance for Credit Losses to the Consolidated Financial Statements in this Form ~~10-Q~~10-Q.

~~for a description~~

The following table presents an allocation of ~~the policies, methodologies and judgements used to determine~~ the allowance for loan losses by loan portfolio segments and unfunded credit ~~losses~~commitments as of June 30, 2021 and .December 31, 2020:



($ in thousands)	June 30, 2021						December 31, 2020
	Allowance Allocation			% of Loan Type to Total Loans			Allowance Allocation			% of Loan Type to Total Loans
Allowance for loan losses
Commercial:
C&I	$	362,528		35		%	$	398,040		36		%
CRE:
CRE	161,962			29		%	163,791			29		%
Multifamily residential	21,925			8		%	27,573			8		%
Construction and land	15,643			1		%	10,239			2		%
Total CRE	199,530			38		%	201,603			39		%
Total commercial	562,058			73		%	599,643			75		%
Consumer:
Residential mortgage:
Single-family residential	16,530			22		%	15,520			21		%
HELOCs	2,938			5		%	2,690			4		%
Total residential mortgage	19,468			27		%	18,210			25		%
Other consumer	4,198			0		%	2,130			0		%
Total consumer	23,666			27		%	20,340			25		%
Total allowance for loan losses	$	585,724		100		%	$	619,983		100		%
Allowance for unfunded credit commitments	$	26,300					$	33,577
Total allowance for credit losses	$	612,024					$	653,560

Loans held-for-investment	$	40,071,499					$	38,390,955
Allowance for loan losses to loans held-for-investment	1.46		%				1.61		%

	Three Months Ended June 30,						Six Months Ended June 30,
	2021			2020			2021			2020
Average loans held-for-investment	$	39,622,090		$	37,139,949		$	39,177,831		$	36,146,736


Annualized net charge-offs to average loans held-for-investment	0.13		%	0.21		%	0.14		%	0.11		%

The allowance for loan losses was $585.7 million as of June 30, 2021, a decrease of $34.3 million from $620.0 million as of December 31, 2020, primarily driven by a reduction in the allowance against the C&I loan portfolio. The change in the allowance reflects year-to-date improvement in the macroeconomic forecast and borrowers’ credit ratings, partially offset by loan growth.

The Company considers multiple economic scenarios to develop the estimate of the allowance for loans. The scenarios may consist of a base forecast representing management's view of the most likely outcome and downside or upside scenarios reflecting possible worsening or improving economic conditions. The base forecast assumed better near-term economic conditions with a quicker recovery than from previous forecasts with upward revision to GDP growth and downward revision to the unemployment rate. The downside scenario assumed risks of a significant and persistent tightening in financial market conditions, causing a pull-back in the expected economic recovery, as compared to the base forecast. An upside scenario assumed a more optimistic view for the economic recovery, as compared with the base forecast, including faster GDP growth, declining unemployment rate and improved consumer optimism.

As of June 30, 2021 and December 31, 2020, PPP loans outstanding were $1.43 billion and $1.57 billion, respectively. As these loans are 100% guaranteed by the SBA, the Company believes they will have zero expected loss. Accordingly, as of June 30, 2021 and December 31, 2020, these loans had no related allowance for loan losses.

Second quarter 2021 net charge-offs were $13.3 million or annualized 0.13% of average loans-held-for-investment, compared with $19.2 million or annualized 0.21% of average loans held-for-investment for the second quarter of 2020. The year-over-year decrease was primarily from a decline in C&I charge-offs. First half of 2021 net charge-offs were $26.7 million or annualized 0.14% of average loans held-for-investment, compared with $20.1 million or annualized 0.11% of average loans held-for-investment for the first half of 2020. The year-over-year increase was primarily due to an increase in CRE charge-offs and a decrease in CRE recoveries, partially offset by lower C&I charge-offs. Payment deferral activities instituted in response to the COVID-19 pandemic could delay the recognition of certain loan charge-offs.

The following tables summarize activity in the allowance for loan losses for loans by portfolio segments for the ~~third~~second quarter and first ~~nine months~~half of ~~2020~~2021 and ~~2019:~~2020:


($ in thousands)	($ in thousands)		Three Months Ended September 30, 2020																														($ in thousands)				Three Months Ended June 30, 2021
			Commercial																Consumer												Total						Commercial								Consumer						Total
			C&I				CRE												Residential Mortgage								Other Consumer										C&I		CRE						Residential Mortgage				Other Consumer
					CRE				Multi-Family Residential				Construction and Land				Single- Family Residential				HELOCs													CRE					Multifamily Residential		Construction and Land		Single- Family Residential		HELOCs
Allowance for loan losses, beginning of period	Allowance for loan losses, beginning of period				$	380,723			$	176,040			$	25,058			$	18,551			$	25,314			$	3,867			$	2,518					$	632,071		Allowance for loan losses, beginning of period	$	394,084	$	146,399	$	27,407	$	19,089	$	15,839	$	2,670	$	2,018	$	607,506
Provision for (reversal of) credit losses on loans		(a)	31,691				(8,301)				(1,916)				(8,180)				(2,692)				(637)				(76)				9,889
(Reversal of) provision for credit losses on loans																																	(Reversal of) provision for credit losses on loans	(a)			(22,586)		19,375		(5,385)		(3,243)		609		250		2,209		(8,771)
Gross charge-offs	Gross charge-offs		(25,111)				(1,414)				—				—				—				—				(124)				(26,649)		Gross charge-offs				(10,572)		(4,134)		(113)		(209)		—		—		(32)		(15,060)
Gross recoveries	Gross recoveries		1,218				485				665				30				—				43				—				2,441		Gross recoveries				1,338		322		16		6		82		18		3		1,785
Total net (charge-offs) recoveries	Total net (charge-offs) recoveries		(23,893)				(929)				665				30				—				43				(124)				(24,208)		Total net (charge-offs) recoveries				(9,234)		(3,812)		(97)		(203)		82		18		(29)		(13,275)
Foreign currency translation adjustment	Foreign currency translation adjustment		500				—				—				—				—				—				—				500		Foreign currency translation adjustment				264		—		—		—		—		—		—		264
Allowance for loan losses, end of period	Allowance for loan losses, end of period		$	389,021			$	166,810			$	23,807			$	10,401			$	22,622			$	3,273			$	2,318			$	618,252	Allowance for loan losses, end of period				$	362,528	$	161,962	$	21,925	$	15,643	$	16,530	$	2,938	$	4,198	$	585,724



($ in thousands)		Three Months Ended June 30, 2020
		Commercial								Consumer						Total
		C&I		CRE						Residential Mortgage				Other Consumer
				CRE		Multifamily Residential		Construction and Land		Single- Family Residential		HELOCs
Allowance for loan losses, beginning of period		$	362,629	$	132,819	$	16,530	$	11,018	$	26,822	$	3,881	$	3,304	$	557,003

Provision for (reversal of) credit losses on loans	(a)	37,862		43,315		7,908		7,526		(1,667)		205		(849)		94,300

Gross charge-offs		(20,378)		(320)		—		—		—		(221)		(30)		(20,949)
Gross recoveries		602		226		620		7		159		2		93		1,709
Total net (charge-offs) recoveries		(19,776)		(94)		620		7		159		(219)		63		(19,240)
Foreign currency translation adjustment		8		—		—		—		—		—		—		8
Allowance for loan losses, end of period		$	380,723	$	176,040	$	25,058	$	18,551	$	25,314	$	3,867	$	2,518	$	632,071

~~105~~94


($ in thousands)	($ in thousands)		Three Months Ended September 30, 2019																														($ in thousands)				Six Months Ended June 30, 2021
			Commercial																Consumer												Total						Commercial								Consumer						Total
			C&I				CRE												Residential Mortgage								Other Consumer										C&I		CRE						Residential Mortgage				Other Consumer
					CRE				Multi-Family Residential				Construction and Land				Single- Family Residential				HELOCs													CRE					Multifamily Residential		Construction and Land		Single- Family Residential		HELOCs
Allowance for loan losses, beginning of period	Allowance for loan losses, beginning of period				$	205,503			$	39,811			$	19,280			$	22,961			$	32,763			$	6,177			$	4,130					$	330,625		Allowance for loan losses, beginning of period	$	398,040	$	163,791	$	27,573	$	10,239	$	15,520	$	2,690	$	2,130	$	619,983
Provision for (reversal of) credit losses on loans		(a)	37,281				(3,213)				985				6,189				(2,877)				(326)				(160)				37,879

(Reversal of) provision for credit losses on loans																																	(Reversal of) provision for credit losses on loans	(a)			(18,747)		9,098		(6,776)		5,349		985		272		2,096		(7,723)
Gross charge-offs	Gross charge-offs		(25,098)				(1,021)				—				—				(11)				—				(12)				(26,142)		Gross charge-offs				(19,008)		(11,329)		(130)		(280)		(134)		(45)		(33)		(30,959)
Gross recoveries	Gross recoveries		1,648				1,896				42				21				60				5				7				3,679		Gross recoveries				2,098		402		1,258		335		159		21		5		4,278
Total net (charge-offs) recoveries	Total net (charge-offs) recoveries		(23,450)				875				42				21				49				5				(5)				(22,463)		Total net (charge-offs) recoveries				(16,910)		(10,927)		1,128		55		25		(24)		(28)		(26,681)
Foreign currency translation adjustment	Foreign currency translation adjustment		(465)				—				—				—				—				—				—				(465)		Foreign currency translation adjustment				145		—		—		—		—		—		—		145
Allowance for loan losses, end of period	Allowance for loan losses, end of period		$	218,869			$	37,473			$	20,307			$	29,171			$	29,935			$	5,856			$	3,965			$	345,576	Allowance for loan losses, end of period				$	362,528	$	161,962	$	21,925	$	15,643	$	16,530	$	2,938	$	4,198	$	585,724

($ in thousands) Nine Months Ended September 30, 2020
Commercial Consumer Total
C&I CRE Residential Mortgage Other
Consumer
CRE Multi-Family
Residential Construction
and Land Single-
Family
Residential HELOCs
Allowance for loan losses, beginning of period $ 238,376 $ 40,509 $ 22,826 $ 19,404 $ 28,527 $ 5,265 $ 3,380 $ 358,287
Impact of ASU 2016-13 adoption 74,237 72,169 (8,112) (9,889) (3,670) (1,798) 2,221 125,158
Allowance for loan losses, January 1, 2020 312,613 112,678 14,714 9,515 24,857 3,467 5,601 483,445
Provision for (reversal of) credit losses on loans (a) 130,171 46,449 7,273 828 (2,659) (20) (3,197) 178,845
Gross charge-offs (57,466) (2,688) — — — (221) (180) (60,555)
Gross recoveries 3,395 10,371 1,820 58 424 47 94 16,209
Total net (charge-offs) recoveries (54,071) 7,683 1,820 58 424 (174) (86) (44,346)
Foreign currency translation adjustment 308 — — — — — — 308
Allowance for loan losses, end of period $ 389,021 $ 166,810 $ 23,807 $ 10,401 $ 22,622 $ 3,273 $ 2,318 $ 618,252


($ in thousands)	($ in thousands)		Nine Months Ended September 30, 2019																														($ in thousands)				Six Months Ended June 30, 2020
			Commercial																Consumer												Total						Commercial								Consumer						Total
			C&I				CRE												Residential Mortgage								Other Consumer										C&I		CRE						Residential Mortgage				Other Consumer
					CRE				Multi-Family Residential				Construction and Land				Single- Family Residential				HELOCs													CRE					Multifamily Residential		Construction and Land		Single- Family Residential		HELOCs
Allowance for loan losses, beginning of period	Allowance for loan losses, beginning of period				$	189,117			$	40,666			$	19,885			$	20,290			$	31,340			$	5,774			$	4,250					$	311,322		Allowance for loan losses, beginning of period	$	238,376	$	40,509	$	22,826	$	19,404	$	28,527	$	5,265	$	3,380	$	358,287
Impact of ASU 2016-13 adoption																																	Impact of ASU 2016-13 adoption				74,237		72,169		(8,112)		(9,889)		(3,670)		(1,798)		2,221		125,158
Allowance for loan losses, January 1, 2020																																	Allowance for loan losses, January 1, 2020				312,613		112,678		14,714		9,515		24,857		3,467		5,601		483,445
Provision for (reversal of) credit losses on loans	Provision for (reversal of) credit losses on loans	(a)	78,685				(6,127)				46				8,358				(1,528)				75				(259)				79,250		Provision for (reversal of) credit losses on loans	(a)			98,480		54,750		9,189		9,008		33		617		(3,121)		168,956

Gross charge-offs	Gross charge-offs		(54,087)				(1,021)				—				—				(11)				—				(40)				(55,159)		Gross charge-offs				(32,355)		(1,274)		—		—		—		(221)		(56)		(33,906)
Gross recoveries	Gross recoveries		5,612				3,955				376				523				134				7				14				10,621		Gross recoveries				2,177		9,886		1,155		28		424		4		94		13,768
Total net (charge-offs) recoveries	Total net (charge-offs) recoveries		(48,475)				2,934				376				523				123				7				(26)				(44,538)		Total net (charge-offs) recoveries				(30,178)		8,612		1,155		28		424		(217)		38		(20,138)
Foreign currency translation adjustment	Foreign currency translation adjustment		(458)				—				—				—				—				—				—				(458)		Foreign currency translation adjustment				(192)		—		—		—		—		—		—		(192)
Allowance for loan losses, end of period	Allowance for loan losses, end of period		$	218,869			$	37,473			$	20,307			$	29,171			$	29,935			$	5,856			$	3,965			$	345,576	Allowance for loan losses, end of period				$	380,723	$	176,040	$	25,058	$	18,551	$	25,314	$	3,867	$	2,518	$	632,071

~~106~~

The following table summarizes activity in the allowance for unfunded credit commitments for the ~~third quarter and~~ ~~first nine months of 2020and 2019:~~

Three Months Ended
September 30, Nine Months Ended
September 30,
($ in thousands) 2020 2019 2020 2019
Unfunded credit facilities
Allowance for unfunded credit commitments, beginning of period $ 28,972 $ 13,019 $ 11,158 $ 12,566
Impact of ASU 2016-13 adoption — — 10,457 —
Provision for credit losses on unfunded credit commitments (b) 111 405 7,468 858
Allowance for unfunded credit commitments, end of period $ 29,083 $ 13,424 $ 29,083 $ 13,424
Provision for credit losses (a) + (b) $ 10,000 $ 38,284 $ 186,313 $ 80,108

~~The following table presents the Company’s credit quality ratios for the third quarter and~~ ~~first nine months of 2020~~ ~~and 2019:~~

($ in thousands) Three Months Ended September 30, Nine Months Ended September 30,
2020 2019 2020 2019
Average loans held-for-investment $ 37,157,095 $ 33,661,077 $ 36,485,980 $ 33,023,468
Loans held-for-investment $ 37,437,129 $ 34,024,976 $ 37,437,129 $ 34,024,976
Allowance for loan losses to loans held-for-investment 1.65 % 1.02 % 1.65 % 1.02 %
Annualized net charge-offs to average loans held-for-investment 0.26 % 0.26 % 0.16 % 0.18 %

As of September 30, 2020, the allowance for loan losses amounted to $618.3 million or 1.65% of loans held-for-investment, compared with $358.3 million or 1.03%, and $345.6 million or 1.02% of loans held-for-investment, as of December 31, 2019 and September 30, 2019, respectively. The $260.0 million or 73% increase in the allowance for loan losses since December 31, 2019 was primarily driven by deteriorating macroeconomic conditions and outlook as a result of the COVID-19 pandemic. Accordingly, the provision for credit losses for the first nine months of 2020 was $186.3 million, compared with $80.1 million for the first nine months of 2019. Additionally, the adoption of ASU 2016-13 increased the allowance for loan losses by $125.2 million on January 1, 2020. The increase to the allowance for loan losses was partially offset by net charge-offs of $44.3 million for the first nine months of 2020.

The allowance for loan losses as of September 30, 2020 was $618.3 million, a decrease of $13.8 million from $632.1 million as of June 30, 2020. The quarter-to-date decrease in the allowance for loan losses was primarily due to an improved macroeconomic outlook as of September 30, 2020, relative to June 30, 2020. This decreased the expected lifetime loan losses for the loan portfolio, supporting a modest reduction in the allowance for loan losses. Accordingly, the provision for credit losses was $10.0 million for the third quarter of 2020, compared with $176.3 million for the first six months of 2020. The allowance for loan losses was also decreased by net charge-offs of $24.2 million for the third quarter of 2020.

~~While the baseline macroeconomic forecasts for the third and~~ second quarters of 2020 both assumed the global recession beginning to recover from peak recessionary levels by the second quarter of 2020, followed by continued recovery in the second half of 2020, the third quarter forecast projected a sharper recovery in economic conditions. The macroeconomic forecast as of September 30, 2020 reflected slightly improved U.S. GDP growth and unemployment rate, versus the forecast as of June 30, 2020. Our estimate of the allowance for loan losses as of September 30, 2020 was based on a probability weighting of the baseline, upside and downside scenarios. The baseline scenario was considered the “most-likely” outcome by management and is most heavily weighted. Overall, each scenario as of September 30, 2020 assumed less severe adverse economic impacts resulting from the COVID-19 pandemic, compared with June 30, 2020.

Third quarter 2020 gross charge-offs were $26.6 million, primarily from C&I loans, partially offset by gross recoveries of $2.4 million, resulting in net charge-offs of $24.2 million or an annualized 0.26% of average loans held-for-investment. Gross charge-offs for the first nine months of 2020 were $60.6 million, were primarily from C&I loans, partially offset by gross recoveries of $16.2 million, primarily from CRE loans, resulting in net charge-offs of $44.3 million, or an annualized 0.16% of average loans held-for-investment. C&I loan gross charge-offs totaled $25.1 million and $57.5 million for the third quarter and first ~~nine months~~half of ~~2020, respectively, which included $22.1 million~~2021 and ~~$47.8 million of oil & gas loan charge-offs during these respective periods.~~2020:

~~107~~

As of September 30, 2020, PPP loans outstanding were $1.77 billion. As these loans are 100% guaranteed by SBA, the Company expects these loans will have zero expected loss. Accordingly, as of September 30, 2020, these loans had no related allowance for loan losses.



($ in thousands)		Three Months Ended June 30,				Six Months Ended June 30,
		2021		2020		2021		2020
Unfunded credit facilities
Allowance for unfunded credit commitments, beginning of period		$	32,529	$	20,829	$	33,577	$	11,158
Impact of ASU 2016-13 adoption		—		—		—		10,457
(Reversal of) provision for credit losses on unfunded credit commitments	(b)	(6,229)		8,143		(7,277)		7,357
Allowance for unfunded credit commitments, end of period		$	26,300	$	28,972	$	26,300	$	28,972

(Reversal of) provision for credit losses	(a) + (b)	$	(15,000)	$	102,443	$	(15,000)	$	176,313

The allowance for unfunded credit commitments was ~~$29.1~~$26.3 million as of ~~September~~June 30, ~~2020,~~2021, compared with ~~$11.2 million and $13.4~~$33.6 million as of December 31, ~~2019 and September 30, 2019, respectively. The Company believes the allowance for loan losses as of September 30, 2020, December 31, 2019 and September 30, 2019 was adequate.~~2020.

~~The following table presents an allocation of the allowance for loan losses by portfolio segment as of September 30, 2020 and December 31, 2019 (prior to the adoption of ASU 2016-13):~~

($ in thousands) September 30, 2020 December 31, 2019
Allowance
Allocation % of
Allowance to
Total
Allowance Loans as % of
Total Loans % of ACL to Loans Allowance
Allocation % of
Allowance to
Total
Allowance Loans as % of
Total Loans % of ACL to Loans
Commercial:
C&I $ 389,021 63 % 36 % 2.92 % $ 238,376 67 % 35 % 1.96 %
CRE:
CRE 166,810 27 % 29 % 1.51 % 40,509 11 % 30 % 0.39 %
Multifamily residential 23,807 4 % 8 % 0.78 % 22,826 6 % 8 % 0.80 %
Construction and land 10,401 2 % 2 % 1.80 % 19,404 5 % 2 % 3.09 %
Total CRE 201,018 33 % 39 % 1.37 % 82,739 22 % 40 % 0.60 %
Consumer:
Residential mortgage:
Single-family residential 22,622 3 % 21 % 0.29 % 28,527 8 % 20 % 0.40 %
HELOCs 3,273 1 % 4 % 0.22 % 5,265 2 % 4 % 0.36 %
Total residential mortgage 25,895 4 % 25 % 0.28 % 33,792 10 % 24 % 0.39 %
Other consumer 2,318 0 % 0 % 1.46 % 3,380 1 % 1 % 1.19 %
Total $ 618,252 100 % 100 % 1.65 % $ 358,287 100 % 100 % 1.03 %

Upon adoption of ASU 2016-13, allowance for loan losses for PCD loans is determined using the same methodology as other loans held-for-investment. As of December 31, 2019, the Company had no allowance for loan losses against $222.9 million of PCI loans.

Liquidity Risk Management

Liquidity

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

The Board of Directors’ Risk Oversight Committee has primary oversight ~~responsibility.~~responsibility over liquidity risk management. At the management level, the Company’s Asset/Liability Committee (“ALCO”) ~~sets~~establishes 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 for East West on a stand-alone basis to ensure that the Company can serve as a source of strength for its subsidiaries. The ALCO regularly monitors the Company’s liquidity status and related management processes, ~~and provides~~providing regular reports to the Board of Directors. ~~These~~The Company’s liquidity management practices have ~~allowed the Company to effectively manage the~~been effective under normal operating and stressed market ~~stress that began in the first quarter of 2020 due to the COVID-19 pandemic.~~conditions.

~~108~~

Liquidity Risk — Liquidity Sources. The Company’s primary source of funding is from deposits generated by its banking business, which are relatively stable and low-cost. Total deposits amounted to ~~$41.68~~$52.58 billion as of ~~September~~June 30, ~~2020,~~2021, compared with ~~$37.32~~$44.86 billion as of December 31, ~~2019.~~2020. The Company’s loan-to-deposit ratio was ~~90% and 93%~~76% as of ~~September~~June 30, ~~2020 and~~2021, compared with 86% as of December 31, ~~2019, respectively.~~ 2020.

In addition to deposits, the Company has access to various sources of wholesale funding, as well as borrowing capacity at the FHLB and ~~FRB~~Federal Reserve Bank of San Francisco (“FRBSF”) to sustain an adequate liquid asset portfolio, meet daily cash demands and allow management flexibility to execute its business strategy. Economic conditions and the stability of capital markets impact the Company’s access to and the cost of wholesale financing. The Company’s access to capital markets is also affected by the ratings received from various credit rating agencies. See Item 2 — MD&A — Balance Sheet Analysis — Deposits and Other Sources of Funds in this Form 10-Q for further detail related to the Company’s funding sources.

The ~~Company’s liquid assets include~~Company maintains liquidity in the form of cash and cash equivalents, interest-bearing deposits with banks, short-term resale agreements and unencumbered high-quality and liquid AFS debt securities. The following table presents the Company’s liquid assets as of ~~September~~June 30, ~~2020~~2021 and December 31, ~~2019:~~2020:


($ in thousands)	($ in thousands)	September 30, 2020						December 31, 2019						($ in thousands)	June 30, 2021						December 31, 2020
		Encumbered		Unencumbered		Total		Encumbered		Unencumbered		Total			Encumbered		Unencumbered		Total		Encumbered		Unencumbered		Total
Cash and cash equivalents	Cash and cash equivalents	$	—	$	4,506,941	$	4,506,941	$	—	$	3,261,149	$	3,261,149	Cash and cash equivalents	$	—	$	5,997,805	$	5,997,805	$	—	$	4,017,971	$	4,017,971
Interest-bearing deposits with banks	Interest-bearing deposits with banks	—		699,465		699,465		—		196,161		196,161		Interest-bearing deposits with banks	—		830,279		830,279		—		809,728		809,728
Short-term resale agreements	Short-term resale agreements	—		650,000		650,000		—		400,000		400,000		Short-term resale agreements	—		1,689,184		1,689,184		—		900,000		900,000
AFS debt securities		710,391		3,828,769		4,539,160		479,432		2,837,782		3,317,214
U.S. Treasury, and U.S. government agency and U.S. government-sponsored enterprise debt securities														U.S. Treasury, and U.S. government agency and U.S. government-sponsored enterprise debt securities	80,316		1,981,135		2,061,451		91,637		773,443		865,080
U.S. government agency and U.S. government-sponsored enterprise mortgage-backed securities														U.S. government agency and U.S. government-sponsored enterprise mortgage-backed securities	537,478		3,019,714		3,557,192		494,132		2,320,532		2,814,664
Foreign government bonds														Foreign government bonds	—		283,175		283,175		—		182,531		182,531
Municipal securities														Municipal securities	—		454,923		454,923		1,033		395,040		396,073
Non-agency mortgage-backed securities, asset-backed securities and CLOs														Non-agency mortgage-backed securities, asset-backed securities and CLOs	287		1,489,717		1,490,004		434		879,908		880,342
Corporate debt securities														Corporate debt securities	—		552,715		552,715		1,249		404,719		405,968
Total	Total	$	710,391	$	9,685,175	$	10,395,566	$	479,432	$	6,695,092	$	7,174,524	Total	$	618,081	$	16,298,647	$	16,916,728	$	588,485	$	10,683,872	$	11,272,357

Unencumbered liquid assets totaled ~~$9.69 billion and $6.70~~$16.30 billion as of ~~September~~June 30, ~~2020 and~~2021, compared with $10.68 billion as of December 31, ~~2019, respectively.~~2020. AFS debt securities, included as part of liquidity sources, ~~are primarily comprised~~consist of ~~mortgage-backed~~high quality and liquid securities with moderate durations to minimize overall interest rate and ~~debt securities issued by U.S. government agency and U.S. government-sponsored enterprises, and municipal securities.~~liquidity risks. The Company believes these AFS debt securities provide quick sources of liquidity to obtain financing, regardless of market conditions, through sale or pledging.

As a means ~~of augmenting the Company’s~~to generate incremental liquidity, the Company maintains available borrowing capacity under secured borrowing lines with the FHLB and ~~FRB,~~FRBSF, unsecured federal funds lines of credit with various correspondent banks, and several master repurchase agreements with major brokerage companies. As of ~~September~~June 30, ~~2020,~~2021, the Company had available borrowing capacity of ~~$17.46 billion.~~$22.43 billion, including $9.19 billion with the FHLB and $5.42 billion with the FRBSF. The Company believes that its liquidity sources are sufficient to meet all reasonably foreseeable short-term ~~needs over the next 12 months~~

~~As of September 30, 2020, the Company’s available borrowing capacity with the FHLB and FRB was $8.53 billion and $4.65 billion, respectively.~~needs. Unencumbered loans and/or debt securities were pledged to the FHLB and ~~FRB~~the FRBSF discount window as collateral. The Company has established operational procedures to enable borrowing against these assets, including regular monitoring of the total pool of loans and debt securities eligible as collateral. Eligibility of collateral is defined in guidelines from the FHLB and ~~FRB~~FRBSF and is subject to change at their discretion. The Bank’s unsecured federal funds lines of credit with correspondent banks, subject to availability, totaled ~~$976.0 million~~$1.01 billion as of ~~September~~June 30, ~~2020.~~2021. Estimated borrowing capacity from unpledged AFS debt securities totaled ~~$3.31~~$6.81 billion as of ~~September~~June 30, ~~2020.~~

In connection with the Company’s participation in the PPP under the CARES Act, the Company has the ability to pledge loans it has originated under the SBA’s PPP program to the PPPLF and receives term funding matching the term of the pledged loans for the full balance of PPP loans held by the Company. As of September 30, 2020, the Company had drawn down PPPLF borrowings totaling $1.43 billion. The Company repaid in full $1.43 billion of the PPPLF borrowings in October 2020.2021.

Liquidity Risk — Liquidity for East West. In addition to bank level liquidity management, the Company manages liquidity at the parent company level for various operating needs including payment of dividends, repurchases of common stock, principal and interest payments on its borrowings, acquisitions and additional investments in its subsidiaries. East West’s primary source of liquidity is from cash dividends distributed by its subsidiary, East West Bank. The Bank is subject to various statutory and regulatory restrictions on its ability to pay dividends as discussed in Item 1. Business — Supervision and Regulation — Dividends and Other Transfers of Funds of the Company’s ~~2019~~2020 Form 10-K. ~~During the first nine months~~As of ~~2020 and 2019, the Bank paid total dividends of $511.0~~June 30, 2021, East West held $342.5 million and ~~$140.0~~$439.1 million toin cash and cash equivalents as of June 30, 2021 and December 31, 2020, respectively. As of June 30, 2021, management believes that East West ~~respectively.~~has sufficient cash and cash equivalents to service its operating needs.

~~109~~

Liquidity Risk — Liquidity Stress Testing. Liquidity stress testing is performed at the Company level, as well as at the foreign subsidiary and foreign branch levels. Stress ~~testing~~tests and scenario ~~analysis~~analyses are intended to quantify the potential impact of a liquidity event on the financial and liquidity position of the entity. ~~These scenarios~~Scenario analyses include assumptions about significant changes in key funding sources, market triggers, and potential uses of funding and economic conditions in certain countries. In addition, Company specific events are incorporated into the stress testing. Liquidity stress tests are conducted to ascertain potential mismatches between liquidity sources and uses over a variety of time horizons, both immediate and longer term, and over a variety of stressed conditions. Given the range of potential stresses, the Company maintains ~~a series of~~ contingency funding plans on a consolidated basis and for individual entities.

Liquidity Risk — COVID-19 Pandemic.In response to ~~recent~~the ongoing developments ~~relating~~related to the COVID-19 pandemic, the Company continues to closely monitor the impact of the pandemic on its business. ~~The uncertainty surrounding the COVID-19 pandemic and in its impact on the financial services industry could potentially impact the liquidity of the Company. The prolonged~~Prolonged strained economic, capital, credit and/or financial market conditions may expose the Company to liquidity risk. ~~Nevertheless,~~During the ~~Company believes that~~first half of 2021, the ~~market conditions~~macroeconomic outlook improved in the U.S. as vaccinations became more widely available and more businesses have ~~shown signs~~reopened. However, additional waves of ~~improvement after~~COVID-19 and its evolved strains still cause uncertainty and could potentially impact the ~~Federal Reserve stepped in with a broad array~~liquidity of ~~actions to stabilize financial markets and lower borrowing costs.~~ the Company.

As of ~~September~~June 30, ~~2020,~~2021, the Company was not aware of any material commitments for capital expenditures in the foreseeable future and believes it has adequate liquidity resources to conduct operations and meet other needs in the ordinary course of business. Given the uncertainty and the rapidly changing market and economic conditions related to the COVID-19 pandemic, the Company will continue to actively evaluate the nature and extent of the impact ~~of the COVID-19 pandemic~~ on its business and financial position.

Consolidated Cash Flows Analysis

The following table presents a summary of the Company’s Consolidated Statement of Cash Flows for the periods ~~indicated, which~~indicated. While this information may be helpful to highlight business strategies and ~~trends. In~~certain macroeconomic trends, the cash flow analysis may not be as relevant when analyzing changes in the Company’s net earnings and assets. The Company believes that in addition to this traditional cash flow analysis, the discussion related to liquidity in Item 7.2. MD&A — Risk Management — Liquidity Risk Management — Liquidity in this Form 10-Q may provide a useful context in evaluating the Company’s liquidity position and related activity.


($ in thousands)	($ in thousands)	Nine Months Ended September 30,				($ in thousands)	Six Months Ended June 30,
		2020		2019			2021		2020
Net cash provided by operating activities	Net cash provided by operating activities	$	430,614	$	389,019	Net cash provided by operating activities	$	403,811	$	270,916
Net cash used in investing activities	Net cash used in investing activities	(4,395,198)		(1,868,818)		Net cash used in investing activities	(5,602,449)		(3,530,613)
Net cash provided by financing activities	Net cash provided by financing activities	5,257,100		1,533,223		Net cash provided by financing activities	7,172,771		4,527,520
Effect of exchange rate changes on cash and cash equivalents	Effect of exchange rate changes on cash and cash equivalents	(46,724)		(12,520)		Effect of exchange rate changes on cash and cash equivalents	5,701		4,530
Net increase in cash and cash equivalents	Net increase in cash and cash equivalents	1,245,792		40,904		Net increase in cash and cash equivalents	1,979,834		1,272,353
Cash and cash equivalents, beginning of period	Cash and cash equivalents, beginning of period	3,261,149		3,001,377		Cash and cash equivalents, beginning of period	4,017,971		3,261,149
Cash and cash equivalents, end of period	Cash and cash equivalents, end of period	$	4,506,941	$	3,042,281	Cash and cash equivalents, end of period	$	5,997,805	$	4,533,502

Operating Activities — Net cash provided by operating activities was ~~$430.6~~$403.8 million and ~~$389.0~~$270.9 million for the first ~~nine months~~half of ~~2020~~2021 and ~~2019,~~2020, respectively. During the first ~~nine months~~half of ~~2020 and 2019,~~2021, net cash provided by operating activities mainly reflected ~~inflows~~inflow of ~~$403.7 million and $485.8~~$429.7 million from net income, ~~respectively. During the first nine months of 2020, net operating cash inflows also benefited from noncash adjustments of $273.2 million to reconcile~~plus net income ~~to net operating cash, as well as net changes in accrued expenses and other liabilities~~adjusted for certain noncash items of ~~$217.0~~$81.2 million, partially offset by ~~net changes~~$73.8 million increase in accrued interest receivable and other assets, ~~of $465.2 million. The net changes~~and $44.1 million decrease in accrued ~~interest receivable~~expenses and other ~~assets of $465.2 million during the first nine months of 2020 was primarily due to changes in derivative asset fair values.~~liabilities. In comparison, during the same period in ~~2019,~~2020, net cash provided by operating ~~cash inflows benefited~~activities mainly reflected inflow of $244.2 million from ~~noncash adjustments of $185.0 million to reconcile~~ net income, to net ~~operating cash, as well as net changes~~income adjusted for certain noncash items of $228.3 million and $257.4 million increase in accrued expenses and other liabilities, ~~of $77.7 million,~~ partially offset by ~~net changes~~$456.4 million increase in accrued interest receivable and other ~~assets of $363.2 million.~~assets.

Investing Activities — Net cash used in investing activities was ~~$4.40~~$5.60 billion and ~~$1.87~~$3.53 billion for the first ~~nine months~~half of ~~2020~~2021 and ~~2019,~~2020, respectively. During the first ~~nine months~~half of 2021, cash used in investing activities primarily reflected $2.97 billion of net AFS debt securities purchases (net of sales, maturities and redemptions), $1.68 billion in cash used for growth in the loan portfolio, and $839.2 million in net resale agreements purchases (net of paydowns and maturities). During the same period in 2020, net cash used in investing activities primarily reflected cash outflows of ~~$2.68~~$2.48 billion from loans held-for-investment, ~~$1.14 billion from~~$501.1 million of net AFS debt securities purchases (net of sales, maturities and ~~$368.0~~redemptions), $335.5 million from interest-bearing deposits with banks. The cash outflows from loans held-for-investment were primarily due to C&I, CRE and single-family residential loan growth during the first nine months of 2020. During the same period in ~~2019, net~~ cash used in investing activities primarily reflected cash outflows of $1.68 billion from loans held-for-investment, $459.1 million from AFS debt securities, and $103.3 million from investments in qualified affordable housing partnerships, tax credit and other investments. These cash outflows used in investing activities were partially offset by cash inflows of $204.5 million fromfor interest-bearing deposits with banks, and ~~$175.0~~$150.0 million ~~from~~net resale agreements ~~for the first nine months~~purchases (net of ~~2019.~~paydowns and maturities).

~~110~~

Financing Activities — Net cash provided by financing activities was ~~$5.26~~$7.17 billion and ~~$1.53~~$4.53 billion for the first ~~nine months~~half of ~~2020~~2021 and ~~2019,~~2020, respectively. During the first ~~nine months~~half of 2021, net cash provided by financing activities primarily reflected a net increase of $7.71 billion in deposits, partially offset by $405.0 million in repayment of FHLB advances, and $95.1 million in cash dividends paid. During the same period in 2020, net cash provided by financing activities primarily reflected net increases of ~~$4.27~~$3.36 billion in deposits, ~~and $1.44~~$1.43 billion in PPPLF advances, and $225.8 million in short-term borrowings, partially offset by $158.7 million in repayment of repurchase agreements and the related extinguishment cost, $146.0 million in shares repurchased, ~~and $119.2~~$90.0 million ~~in cash dividends paid. During the same period in 2019,~~ net ~~cash provided by financing activities primarily reflected net increases of $1.25 billion in deposits and $418.0 million~~repayment in FHLB advances, ~~partially offset by $115.0~~and $80.3 million in cash dividends paid.

Market Risk Management

Market risk is the risk that the Company’s financial condition may change resulting from adverse movements in market rates or prices including interest rates, foreign exchange rates, interest rate contracts, investment securities prices, credit spreads and related risk resulting from mismatches in rate sensitive assets and liabilities. In the event of market stress, the risk could have a material impact on our results of operations and financial condition.

The Board’s Risk Oversight Committee has primary oversight ~~responsibility.~~responsibility over market risk management. At the management level, the ALCO establishes and monitors compliance with the policies and risk limits pertaining to market risk management activities. Corporate Treasury supports the ALCO in measuring, monitoring and managing interest rate risk as well as all other market risks.

Interest Rate Risk Management

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

With oversight by the Company’s Board of Directors, the ALCO coordinates the overall management of the Company’s interest rate risk. The ALCO meets regularly and is responsible for reviewing the Company’s open market positions and establishing policies to monitor and limit exposure to market risk. Management of interest rate risk is carried out primarily through strategies involving the Company’s ~~investment~~debt securities portfolio, ~~loan~~loans portfolio, available funding channels and capital market activities. In addition, the Company’s policies permit the use of derivative instruments to assist in managing interest rate risk.

The interest rate risk exposure is measured and monitored through various risk management tools, which include a simulation model that performs interest rate sensitivity analyses under multiple interest rate scenarios. The model incorporates the Company’s cash instruments, loans, debt securities, resale agreements, deposits, borrowings and repurchase agreements, as well as financial instruments from the Company’s foreign operations. The Company ~~incorporates~~uses both a static balance sheet and a forward growth balance sheet ~~in order~~ to perform these analyses. The simulated interest rate scenarios include a non-parallel shift in the yield curve (“rate shock”) and a gradual non-parallel shift in the yield curve (“rate ramp”). In addition, the Company also performs simulations using alternative interest rate scenarios, including various permutations of the yield curve flattening, steepening or inverting. Results of these various simulations are used to formulate and gauge strategies to achieve a desired risk profile within the Company’s capital and liquidity guidelines.

The net interest income simulation model is based on the actual maturity and repricing characteristics of the Company’s interest-rate sensitive assets, liabilities and related derivative contracts. It also incorporates various assumptions, which management believes to be reasonable but may have a significant impact on results. These assumptions include, but are not limited to, the timing and magnitude of changes in interest rates, the yield curve evolution and shape, the correlation between various interest rate indices, financial instrument future repricing characteristics and spread relative to benchmark rates, and the effect of interest rate floors and caps. The modeled results are highly sensitive to deposit decay and deposit beta assumptions, which are derived from a regression analysis of the Company’s historical deposit data. Deposit beta commonly refers to the correlation of the changes in interest rates paid on deposits to changes in benchmark ~~market~~ interest rates. The model is also sensitive to the loan and investment prepayment assumptions, based on an independent model and the Company’s historical prepayment data, which consider anticipated prepayments under different interest rate environments.

~~111~~

Simulation results are highly dependent on input assumptions. To the extent actual behavior is different from the assumptions in the models, there could be a material change in interest rate sensitivity. The assumptions applied in the model are documented and supported for reasonableness, and periodically back-tested to assess their effectiveness. The Company makes appropriate calibrations to the model as needed, continually refining the model, methodology and results. Changes to key model assumptions are reviewed by the ALCO. Scenario results do not reflect strategies that management could employ to limit the impact of changing interest rate expectations.

Since the federal funds rate range was lowered to near zero ~~(between 0.00% and 0.25%)~~ in March 2020 and the Federal Reserve has committed its resources to support the financial markets, business, and state and local governments, it is not expected that rates will decline further, nor is it expected that rates will enter into the negative territory. Consequently, the simulation results for the downward interest rate scenarios as of ~~September~~June 30, ~~2020~~2021 are not provided.

Twelve-Month Net Interest Income Simulation

Net ~~Interest Income~~interest income simulation modeling looks at interest rate risk through earnings. It projects the changes in interest rate sensitive asset and liability cash flows, expressed in terms of net interest income, over a specified time horizon for defined interest rates scenarios. Net interest income simulations generate insight into the impact of market rates changes on earnings and guide risk management decisions. The Company assesses interest rate risk by comparing net interest income using different interest rate scenarios.

The federal funds target rate range was ~~between 0.00% and~~ 0.25% as of ~~September~~both June 30, ~~2020~~2021 and ~~between 1.50% and 1.75% as of~~ December 31, ~~2019.~~2020. After lowering the range to between 0.00% and 0.25% in March 2020, the Federal Open Market Committee (“FOMC”) pledged to maintain monetary support for the economy. ~~Moreover,~~However, in ~~September 2020,~~June 2021, the ~~majority~~FOMC, citing increasing signs of inflationary pressures, indicated that rate increases will likely be implemented as early as 2023. During the June 2021 meeting the FOMC ~~members projected that~~also indicated it would hold the near-term federal funds target rate ~~range will likely remain unchanged through 2022 to provide stimulus to the economy which continues to be strained from the impact of the COVID-19 pandemic.~~at between 0.00% and 0.25%. Current market expectations are for two rate hikes in 2023.

The following table presents the Company’s net interest income sensitivity related to an instantaneous and sustained non-parallel shift in market interest rates of 100 and 200 basis points in upward direction as of ~~September~~June 30, ~~2020~~2021 and ~~in both directions as of~~ December 31, ~~2019.~~2020.


Change in Interest Rates (Basis Points)	Change in Interest Rates (Basis Points)	Net Interest Income Volatility (1)				Change in Interest Rates (Basis Points)		Net Interest Income Volatility (1)
		September 30, 2020		December 31, 2019			Change in Interest Rates (Basis Points)			June 30, 2021			December 31, 2020
+200	+200	15.0	%	13.2	%					15.6	%		12.6	%
+100	+100	6.9	%	6.7	%				+100		7.4	%		5.6	%
-100	-100	NM		(5.5)	%				-100		NM			NM
-200	-200	NM		(8.7)	%				-200		NM			NM

NM — Not meaningful.

(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.

The Company’s net interest income profile as of ~~September~~June 30, ~~2020~~2021 reflects an asset sensitive position. Net interest income would be expected to increase if interest rates rise and to decrease if interest rates decline. The potential impact of rate decreases is somewhat muted due to the current low rate environment with the federal funds rate floored and the federal funds rate range between 0.00% and 0.25%. The Company is naturally asset sensitive due to the large share of variable rate loans in its loan portfolio, which are primarily linked to Prime and LIBOR indices. The Company’s interest income is vulnerable to changes in short-term interest rates. However, given the current low level of interest rates, the potential for further rate decreases is limited, which reduces the Bank’s exposure to risks associated with falling rates. The Company’s deposit portfolio is primarily comprised of non-maturity deposits, which are not directly tied to short-term interest rate indices, but are, nevertheless, sensitive to changes in short-term interest rates.

The Company’s estimated twelve-month net interest income sensitivity as of ~~September~~June 30, ~~2020~~2021 was slightly higher ~~when~~as compared with the sensitivity as of December 31, ~~2019, for the upward 200 basis point~~2020 under both higher rate ~~scenario, while the sensitivity remained relatively consistent for the upward 100 basis point rate scenario.~~scenarios. This reflects ~~a greater~~both an increased asset rate ~~of upward repricing~~sensitivity in the Company’s ~~rate sensitive~~ assets ~~which offsets simulated increases in interest expense from higher rates on deposits. While there has been~~and an increase in the population of floating rate loans currently at rate floors under the current low rate environment, the combined impact from increases in cash and cash equivalents, noninterest-bearing deposits and a reduction in the base case twelve-month net interest income resulted in the increased net interest income sensitivity for the upward interest rate scenarios.noninterest bearing deposits.

~~112~~

While an instantaneous and sustained non-parallel shift in market interest rates was used in the simulation model described in the preceding paragraphs, the Company believes that any shift in interest rates would likely be more gradual and would therefore have a more modest impact. The rate ramp table below shows the net income volatility under a gradual non-parallel shift ~~upward and downward~~ of the yield curve upward direction, in even quarterly increments over the first ~~twelve~~12 months, followed by rates held constant thereafter:


Change in Interest Rates (Basis Points)	Change in Interest Rates (Basis Points)	Net Interest Income Volatility (1)				Change in Interest Rates (Basis Points)	Net Interest Income Volatility (1)
		September 30, 2020		December 31, 2019			June 30, 2021		December 31, 2020
+200 Rate Ramp	+200 Rate Ramp	5.9	%	6.0	%	+200 Rate Ramp	6.6	%	4.9	%
+100 Rate Ramp	+100 Rate Ramp	2.8	%	3.0	%	+100 Rate Ramp	2.8	%	2.2	%
-100 Rate Ramp	-100 Rate Ramp	NM		(2.6)	%	-100 Rate Ramp	NM		NM
-200 Rate Ramp	-200 Rate Ramp	NM		(5.1)	%	-200 Rate Ramp	NM		NM

NM — Not meaningful.

(1)The percentage change represents net interest income under a gradual non-parallel shift in even quarterly increments over 12 months.

100

The Company believes that the rate ramp table, shown above, when evaluated together with the results of the rate shock simulation, presents a more meaningful indication of the potential impact of rising interest rates to the Company’s twelve-month net interest ~~income in a rising and falling rate scenario.~~income. During the ~~first nine months~~second quarter of ~~2020,~~2021, the Company’s modeled asset sensitivity ~~slightly decreased~~increased under asimulations for the up 200 and up 100 basis point ramp ~~simulation under the upward interest rate~~ scenarios.

Economic Value of Equity at Risk

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

EVE simulation reflects the effect of interest rate shifts on the value of the Company and is used to assess the degree of interest rate risk exposure. In contrast to the earnings perspective, the economic perspective identifies risks arising from repricing or maturity gaps ~~for~~over the life of the balance sheet. Changes in economic value indicate anticipated changes in the value of the ~~bank’s~~Bank’s future cash flows. Thus, the economic perspective can provide a leading indicator of the ~~bank’s~~Bank’s future earnings and capital values. The economic ~~valuation~~value method also reflects ~~those sensitivities~~sensitivity across the full maturity spectrum of the ~~bank’s~~Bank’s assets and liabilities.

The following table presents the Company’s EVE sensitivity related to an instantaneous and sustained non-parallel shift in market interest rates of 100 and 200 basis points in an upward direction as of ~~September~~June 30, ~~2020~~2021 and ~~in both directions as of~~ December 31, ~~2019:~~2020:


Change in Interest Rates (Basis Points)	Change in Interest Rates (Basis Points)	EVE Volatility (1)				Change in Interest Rates (Basis Points)	EVE Volatility (1)
		September 30, 2020		December 31, 2019			June 30, 2021		December 31, 2020
+200	+200	11.7	%	7.0	%	+200	7.0	%	9.6	%
+100	+100	5.8	%	3.6	%	+100	3.7	%	4.8	%
-100	-100	NM		(1.4)	%	-100	NM		NM
-200	-200	NM		(3.5)	%	-200	NM		NM

NM — Not meaningful.

(1)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.

The Company’s EVE sensitivity for the upward interest rate scenarios ~~increased~~decreased as of ~~September~~June 30, ~~2020,~~2021, compared with the results as of December 31, ~~2019.~~2020. The changes in EVE sensitivity during this period were primarily due to ~~the reduced base EVE, the~~ changes in level and shape of the yield ~~curve and large increases in low and noninterest-bearing deposits.~~curve.

The Company’s EVE profile as of ~~September~~June 30, ~~2020~~2021 reflects an asset sensitive EVE position under the ~~upward~~higher interest rate scenarios. Given the uncertainty of the magnitude, timing and direction of future interest rate movements, and the shape of the yield curve, actual results may vary from those predicted by the Company’s model.

~~113~~

Derivatives

It is the Company’s policy not to speculate on the future direction of interest rates, foreign currency exchange rates and commodity prices. However, the Company will periodically enter into derivative transactions in order to reduce its exposure to market risks, primarily interest rate risk and foreign currency risk. The Company believes that these derivative transactions, when properly structured and managed, may provide a hedge against inherent risk in certain assets and liabilities and against risk in specific transactions. Hedging transactions may be implemented using a variety of derivative instruments such as swaps, forwards and options. 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, ~~primarily to manage exposures~~such as managing exposure to fluctuations in interest rates, foreign currencies and commodity prices. To economically hedge against the derivative contracts entered into with the Company’s customers, the Company enters into 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 ~~the~~counterparty financial institutions.

101

The Company is subject to credit risk associated with the counterparties to the derivative contracts. This counterparty credit risk is a ~~multidimensional~~multi-dimensional form of risk, affected by both the exposure and credit quality of the counterparty, both of which are sensitive to market-induced changes. The Company’s Credit Risk Management Committee provides oversight of credit risks and the Company has guidelines in place to manage counterparty concentration, tenor limits and collateral. The Company manages the credit risk of its derivative positions by diversifying its positions among various counterparties, by entering into legally enforceable master netting arrangements and by requiring collateral arrangements, where possible. The Company may also transfer counterparty credit ~~risk related~~risk-related to interest rate swaps to institutional third parties through the use of credit risk participation ~~agreements (“RPAs”).~~agreements. Certain derivative contracts are required to be centrally cleared through clearinghouses to further mitigate counterparty 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.

~~Fair Value Hedges —~~The following table summarizes certain information concerning derivative financial instruments utilized by the Company ~~had one and two cancellable~~in its management of interest rate ~~swap contracts~~risk and foreign currency risk as of ~~September~~June 30, ~~2020~~2021 and December 31, 2019, respectively, with original terms of 20 years each. These swap contracts involve the exchange of variable rate payments over the life of the agreements without the exchange of the underlying notional amounts. The changes in fair value of the hedged brokered certificates of deposit are expected to be effectively offset by the changes in fair value of the swaps throughout the terms of these contracts.2020:



	June 30, 2021				December 31, 2020
($ in thousands)	Interest Rate Contracts		Foreign Exchange Contracts		Interest Rate Contracts		Foreign Exchange Contracts
Derivatives designated as hedging instruments:	Cash Flow Hedges		Net Investment Hedges		Cash Flow Hedges		Net Investment Hedges
Notional amounts:	$	275,000	$	85,176	$	275,000	$	84,269
Fair value:

Recognized as a liability	1,184		195		1,864		235
Net fair value	$	(1,184)	$	(195)	$	(1,864)	$	(235)
Weighted-average interest rates:
Pay fixed (receive floating)	0.351% (3-month USD-LIBOR)		NM		0.483% (3-month USD-LIBOR)		NM
Weighted-average remaining term to maturity (in months):	19.9		2.8		25.8		2.6
Derivatives not designated as hedging instruments:	Interest Rate Contracts		Foreign Exchange Contracts		Interest Rate Contracts		Foreign Exchange Contracts
Notional amounts:	$	17,836,695	$	3,756,284	$	18,155,678	$	3,108,488
Fair value:
Recognized as an asset	329,953		29,867		489,132		30,300
Recognized as a liability	227,768		20,360		315,834		22,524
Net fair value	$	102,185	$	9,507	$	173,298	$	7,776

NM — Not meaningful.

~~Cash Flow Hedges~~Derivatives Designated as Hedging Instruments — ~~As of September 30, 2020,~~ Interest rate and foreign exchange derivative contracts are utilized in our asset and liability management activities and serve as an efficient tool to manage the ~~Company entered into two~~Company’s interest rate ~~swap contracts designated~~risk and foreign exchange risk. We use derivatives to hedge ~~against~~ the risk of variable cash ~~flow~~flows that the Company is exposed to from its variable interest rate borrowings, including repurchase agreements and FHLB advances. ~~For cash flow hedges, the entire change in the fair value of the hedging instruments is recognized in AOCI and reclassified~~The Company also uses derivatives to ~~earnings in the same period during which the hedged cash flows impact earnings.~~

~~Net Investment Hedges —~~ ~~ASC 830-20,~~ ~~Foreign Currency Matters — Foreign Currency Transactions~~ ~~and ASC 815,~~ ~~Derivatives and Hedging,~~ ~~allow hedging of the foreign currency risk of a net investment in a foreign operation. The Bank entered into foreign currency forward contracts to~~ hedge ~~its investment in East West Bank (China) Limited, a non-U.S. dollar functional currency subsidiary in China. The hedging instruments designated as net investment hedges, involve hedging~~ the risk of changes in the ~~U.S. dollar~~USD equivalent value of a designated monetary amount of the Company’s net investment in East West Bank (China) ~~Limited, against~~Limited. For both cash flow and net investment hedges, the ~~risk of adverse changes~~change in the ~~foreign currency exchange rate~~fair value of the ~~Chinese Renminbi (“RMB”). As~~hedging instruments is recognized in Accumulated other comprehensive (loss) income, net of ~~September 30, 2020,~~tax, on the ~~outstanding foreign currency forwards effectively hedged approximately 50% of the RMB exposure in East West Bank (China) Limited.~~ Consolidated Balance Sheet.

The fluctuation in foreign currency translation of the hedged exposure is expected to be offset by changes in the fair value of the forwards. As of June 30, 2021, the outstanding foreign currency forwards effectively hedged approximately 50% of the Chinese Renminbi exposure in East West Bank (China) Limited.

Changes to the composition of the Company’s derivatives designated as hedging instruments reflect actions taken for interest rate risk and foreign exchange rate risk management. The decisions to reposition our derivatives portfolio are based on the current assessment of economic and financial conditions, including the interest rate and foreign currency environments, balance sheet composition and trends, and the relative mix of our cash and derivative positions.

~~114~~102

~~Interest Rate Contracts~~Derivatives Not Designated as Hedging Instruments — The Company ~~offers various~~enters into interest rate, ~~derivative~~foreign exchange and energy commodity contracts to support the business requirements of its customers. When derivative transactions are executed with its customers, the derivative contracts are offset by paired trades with third-party financial institutions. The Company may enter into derivative contracts that are either exchange-traded, centrally cleared through a clearinghouse or over-the-counter.

The Company offers various interest rate derivative contracts to its customers. For the interest rate contracts entered into with its customers, the Company managed its interest rate risk by entering into offsetting interest rate contracts with third-party financial institutions including with central clearing organizations. Certain derivative contracts entered with central clearing organizations are settled-to-market daily to the extent the central clearing organizations’ rulebooks legally characterize the variation margin as settlement. 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 specific Company assets or liabilities on the Consolidated Balance Sheet, or to forecasted transactions in a hedging relationship, and are therefore ~~are~~ economic hedges. The contracts are marked-to-market at each reporting period. The changes in fair values of the derivative contracts traded with third-party financial institutions are expected to be largely comparable to the changes in fair values of the derivative transactions executed with customers throughout the terms of these contracts, except for the credit valuation adjustment component. The Company records credit valuation adjustments on derivatives to properly reflect the variances of credit worthiness between the Company and the counterparties, considering the effects of enforceable master netting agreements and collateral arrangements.

~~Foreign Exchange Contracts~~—The Company enters into foreign exchange contracts with its customers, consisting of forward, spot, swap and option contracts to accommodate the business needs of its customers. For the foreign exchange contracts entered into with its customers, the Company managed its foreign exchange ~~exposure~~and credit exposures by entering into offsetting foreign exchange contracts with third-party financial institutions and/or entering into bilateral collateral and master netting agreements with customer ~~counterparties to manage its credit exposure.~~counterparties. The changes in the fair values entered with third-party financial institutions are expected to be largely comparable to the changes in fair values of the foreign exchange transactions executed with ~~the~~ customers throughout the terms of these contracts. As of June 30, 2021, the Company anticipates performance by all counterparties and has not experienced nonperformance by any of its counterparties, and therefore did not incur any related losses. The Company also utilizes foreign exchange contracts that are not designated as hedging instruments to mitigate the economic effect of fluctuations in certain foreign currency on-balance sheet ~~assets and liabilities,~~items, primarily foreign currency denominated deposits offered to its customers. The Company’s policies permit taking proprietary currency positions within approved limits, in compliance with ~~the~~exemptions to proprietary trading ~~exemption~~restrictions provided under Section 619 of the Dodd-Frank Wall Street Reform and Consumer Protection Act, ~~(the “Dodd-Frank 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.

~~Credit Contracts~~— The Company may periodically enter into RPAs to manage the credit exposure on interest rate contracts associated with its syndicated loans. The Company may enter into protection sold or protection purchased RPAs with institutional counterparties. Under the RPA, the Company will receive or make a payment if a borrower defaults on the related interest rate contract. The Company manages its credit risk on the RPAs by monitoring the credit worthiness of the borrowers, which is based on the Company’s normal credit review process.

~~Equity Contracts —~~ As part of the loan origination process, the Company periodically obtains warrants to purchase preferred and/or common stock of technology and life sciences companies to which it provides loans. The warrants included on the Consolidated Financial Statements were from public and private companies.

~~Commodity Contracts~~—The Company enters into energy commodity contracts with its customers to allow them to hedge against the risk of fluctuation in energy commodity prices. To economically hedge against the risk of fluctuation in commodity prices in the products offered to its customers, the Company enters into offsetting commodity contracts with third-party financial institutions, including with central clearing organizations. Certain derivative contracts entered into with central clearing organizations are ~~settled to market~~settled-to-market daily, to the extent the central clearing organizations’ rulebooks legally characterize the variation margin as settlement. The changes in fair values of the energy commodity contracts traded with third-party financial institutions are expected to be largely comparable to the changes in fair values of the energy commodity transactions executed with customers throughout the terms of these contracts.

Additional information on the Company’s derivatives is presented in Note 1 — Summary of Significant Accounting Policies — Derivatives to the Consolidated Financial Statements of the Company’s ~~2019~~2020 Form 10-K and, Note 3 — Fair Value Measurement and Fair Value of Financial Instruments and Note 6 — Derivatives to the Consolidated Financial Statements ofin this Form 10-Q.

~~115~~

Impact of Inflation

The ~~consolidated financial statements~~Consolidated Financial Statements and related financial data presented in this report have been prepared according to GAAP, which require the measurement of financial and operating results in terms of historical dollars without considering the change in the relative purchasing power of money over time due to inflation. The primary impact of inflation on our operations is reflected in increased operating costs and the effect that inflation may have on both ~~short-term~~short- and long-term interest rates. Since almost all the assets and liabilities of a financial institution are monetary in nature, interest rates generally have a more significant impact on a financial institution's performance than ~~do general levels of~~ inflation. While inflation expectations do affect interest rates, interest rates do not necessarily move in the same direction or to the same extent as the prices of goods and services.

103

Critical Accounting Policies and Estimates

The Company’s significant accounting policies ~~and use~~(Note 1 — Summary of ~~estimates~~Significant Accounting Policies to the Consolidated Financial Statements of the Company’s 2020 Form 10-K) are fundamental to understanding ~~its~~our results of operations and financial condition. Some accounting policies, by their nature, are inherently subject to estimation techniques, valuation assumptions and other subjective ~~assessments. In addition, some significant accounting policies~~assessments and may require significant judgments in applying complex accounting principles to individual ~~transaction and determining~~transactions, where actual results could differ materially from the ~~most appropriate treatment.~~Company’s estimates. The Company has procedures and processes in place to facilitate making these judgments. ~~For significant accounting policies and use of estimates of allowance for credit losses, see~~ ~~Note 2~~—~~Current Accounting Developments and Summary of Significant Accounting Policies~~ ~~to the Consolidated Financial Statements in this Form 10-Q; and for all other significant accounting policies and use of estimates, see~~ ~~Note 1 — Summary of Significant Accounting Policies~~ ~~of the Company’s 2019 Form 10-K.~~

~~Certain~~In addition, certain accounting policies are ~~considered~~more likely than others to have a critical effect on the Company’s Consolidated Financial Statements, ~~in the Company’s judgment. Critical accounting policies are defined as those that require the most complex or subjective judgments~~ and ~~are reflective~~may apply to areas of significant uncertainties, and whose actual results could differ from the Company’s estimates. Future changes in the key variables could change future valuations and impact the results of operations. 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.relatively greater business importance. The following accounting policies are critical to the Company’s Consolidated Financial ~~Statements as they require management to make subjective and complex judgments about matters that are inherently uncertain where actual results could differ materially from the Company’s estimates:~~Statements:

•fair value of financial instruments;

•allowance for loan losses and unfunded credit ~~losses;~~commitments;

•goodwill impairment; and

•income taxes.

Recently Issued Accounting Standards

For a detailed discussion and disclosure on new accounting pronouncements adopted, ~~and recent accounting pronouncements issued,~~ see Note 2 — Current Accounting Developments ~~and Summary of Significant Accounting Policies~~ to the Consolidated Financial Statements in this Form 10-Q.

~~Supplemental Information~~ — ~~Explanation~~Reconciliation of GAAP to Non-GAAP Financial Measures

To supplement the Company’s unaudited interim Consolidated Financial Statements presented in accordance with GAAP, the Company uses certain non-GAAP measures of financial performance. Non-GAAP financial measures are not in accordance with, or an alternative to 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 requirements. The Company believes these non-GAAP financial measures, when taken together with the corresponding 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.

~~During the second quarter of 2020, the Company prepaid $150.0 million of repurchase agreements and~~ ~~incurred a debt extinguishment cost of $8.7 million~~. During the first and second quarters of 2019, the Company recorded a $7.0 million pre-tax impairment charge and reversed certain previously claimed tax credits of $30.1 million related to DC Solar, respectively.

~~116~~

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

($ and shares in thousands, except per share data) Three Months Ended September 30, Nine Months Ended September 30,
2020 2019 2020 2019
Net income (a) $ 159,537 $ 171,416 $ 403,713 $ 485,820
Add: Impairment charge related to DC Solar (1)
— — — 6,978
Tax effect of adjustments (2)
— — — (2,063)
Add: Reversal of certain previously claimed tax credits related to DC Solar — — — 30,104
Non-GAAP net income (b) $ 159,537 $ 171,416 $ 403,713 $ 520,839
Diluted weighted-average number of shares outstanding 142,043 146,120 143,082 146,088
Diluted EPS $ 1.12 $ 1.17 $ 2.82 $ 3.33
Diluted EPS impact of impairment charge related to DC Solar, net of tax — — — 0.03
Diluted EPS impact of reversal of certain previously claimed tax credits related to DC Solar — — — 0.21
Non-GAAP diluted EPS $ 1.12 $ 1.17 $ 2.82 $ 3.57
Average total assets (c) $ 50,247,259 $ 43,136,273 $ 47,753,030 $ 41,815,490
Average stockholders’ equity (d) $ 5,079,351 $ 4,838,281 $ 5,028,122 $ 4,687,746
ROA (3)
(a)/(c) 1.26 % 1.58 % 1.13 % 1.55 %
Non-GAAP ROA (3)
(b)/(c) 1.26 % 1.58 % 1.13 % 1.67 %
ROE (3)
(a)/(d) 12.50 % 14.06 % 10.73 % 13.86 %
Non-GAAP ROE (3)
(b)/(d) 12.50 % 14.06 % 10.73 % 14.85 %



($ in thousands)		Three Months Ended									Six Months Ended
		June 30, 2021			March 31, 2021			June 30, 2020			June 30, 2021			June 30, 2020
Net interest income before provision for credit losses	(a)	$	376,473		$	353,695		$	343,775		$	730,168		$	706,482
Total noninterest income (1)		68,431			72,866			55,707			141,297			111,213
Total revenue	(b)	$	444,904		$	426,561		$	399,482		$	871,465		$	817,695





Total noninterest expense (1)	(c)	$	189,523		$	191,077		$	184,766		$	380,600		$	365,099
Less: Amortization of tax credit and other investments (1)		$	(27,291)		(25,358)			(21,829)			(52,649)			(40,611)
Amortization of core deposit intangibles		(710)			(732)			(931)			(1,442)			(1,884)
Repurchase agreements’ extinguishment cost		—			—			(8,740)						(8,740)
Non-GAAP noninterest expense	(d)	$	161,522		$	164,987		$	153,266		$	326,509		$	313,864

Efficiency ratio	(c)/(b)	42.60		%	44.79		%	46.25		%	43.67		%	44.65		%
Non-GAAP efficiency ratio	(d)/(b)	36.30		%	38.68		%	38.37		%	37.47		%	38.38		%

(1)~~Included in~~In the fourth quarter of 2020, the Company reclassified certain income/losses from equity-method investments from Amortization of tax credit and other investments to Other investment income, with no effect on net income. Prior-period amounts have been revised to conform with the ~~Consolidated Statement of Income.~~

~~(2)Applied statutory rate of 29.56% for the nine months ended September 30, 2019.~~

~~(3)Annualized.~~current presentation.

($ in thousands) Three Months Ended September 30, Nine Months Ended September 30,
2020 2019 2020 2019
Income tax expense (a) $ 36,523 $ 34,951 $ 68,630 $ 138,815
Less: Reversal of certain previously claimed tax credits related to DC Solar (b) — — — (30,104)
Non-GAAP income tax expense (c) $ 36,523 $ 34,951 $ 68,630 $ 108,711
Income before income taxes (d) 196,060 $ 206,367 $ 472,343 $ 624,635
Effective tax rate (a)/(d) 18.63 % 16.94 % 14.53 % 22.22 %
Less: Reversal of certain previously claimed tax credits related to DC Solar (b)/(d) — % — % — % (4.82) %
Non-GAAP effective tax rate (c)/(d) 18.63 % 16.94 % 14.53 % 17.40 %

~~117~~104

($ in thousands) Three Months Ended September 30, Nine Months Ended September 30,
2020 2019 2020 2019
Net interest income before provision for credit losses (a) $ 324,130 $ 369,807 $ 1,030,612 $ 1,099,594
Total noninterest income 49,580 51,474 162,266 146,364
Total revenue (b) $ 373,710 $ 421,281 $ 1,192,878 $ 1,245,958
Total noninterest expense (c) $ 167,650 $ 176,630 $ 534,222 $ 541,215
Less: Amortization of tax credit and other investments (12,286) (16,833) (54,370) (58,477)
Amortization of core deposit intangibles (927) (1,148) (2,811) (3,474)
Repurchase agreements’ extinguishment cost — — (8,740) —
Non-GAAP noninterest expense (d) $ 154,437 $ 158,649 $ 468,301 $ 479,264
Efficiency ratio (c)/(b) 44.86 % 41.93 % 44.78 % 43.44 %
Non-GAAP efficiency ratio (d)/(b) 41.33 % 37.66 % 39.26 % 38.47 %


($ and shares in thousands, except per share data)	($ and shares in thousands, except per share data)		September 30, 2020		June 30, 2020		September 30, 2019		($ and shares in thousands, except per share data)		June 30, 2021			March 31, 2021			June 30, 2020
Stockholders’ equity	Stockholders’ equity	(a)	$	5,126,106	$	4,987,243	$	4,882,664	Stockholders’ equity	(a)	$	5,547,548		$	5,285,027		$	4,987,243
Less: Goodwill	Less: Goodwill		(465,697)		(465,697)		(465,697)		Less: Goodwill		(465,697)			(465,697)			(465,697)
Other intangible assets (1)	Other intangible assets (1)		(12,369)		(13,490)		(17,435)		Other intangible assets (1)		(10,309)			(11,151)			(13,490)
Non-GAAP tangible common equity	Non-GAAP tangible common equity	(b)	$	4,648,040	$	4,508,056	$	4,399,532	Non-GAAP tangible common equity	(b)	$	5,071,542		$	4,808,179		$	4,508,056

Total assets									Total assets	(c)	$	59,854,876		$	56,874,146		$	49,407,593
Less: Goodwill									Less: Goodwill		(465,697)			(465,697)			(465,697)
Other intangible assets (1)									Other intangible assets (1)		(10,309)			(11,151)			(13,490)
Non-GAAP tangible assets									Non-GAAP tangible assets	(d)	$	59,378,870		$	56,397,298		$	48,928,406

Total stockholders’ equity to total assets									Total stockholders’ equity to total assets	(a)/(c)	9.27		%	9.29		%	10.09		%
Non-GAAP tangible common equity to tangible assets									Non-GAAP tangible common equity to tangible assets	(b)/(d)	8.54		%	8.53		%	9.21		%

Number of common shares at period-end	Number of common shares at period-end	(c)	141,507		141,486		145,568		Number of common shares at period-end	(e)	141,878			141,843			141,486
Non-GAAP tangible common equity per share	Non-GAAP tangible common equity per share	(b)/(c)	$	32.85	$	31.86	$	30.22	Non-GAAP tangible common equity per share	(b)/(e)	$	35.75		$	33.90		$	31.86

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



($ in thousands)		Three Months Ended									Six Months Ended
		June 30, 2021			March 31, 2021			June 30, 2020			June 30, 2021			June 30, 2020
Net income		$	224,742		$	204,994		$	99,352		$	429,736		$	244,176
Add: Amortization of core deposit intangibles		710			732			931			1,442			1,884
Amortization of mortgage servicing assets		420			414			458			834			1,042
Tax effect of adjustments (1)		(321)			(325)			(394)			(646)			(830)
Non-GAAP tangible net income	(a)	$	225,551		$	205,815		$	100,347		$	431,366		$	246,272






Average stockholders’ equity		$	5,425,952		$	5,338,098		$	4,982,446		$	5,382,267		$	5,002,226
Less: Average goodwill		(465,697)			(465,697)			(465,697)			(465,697)			(465,697)
Average other intangible assets (2)		(10,827)			(11,594)			(14,247)			(11,209)			(14,918)
Average non-GAAP tangible equity	(b)	$	4,949,428		$	4,860,807		$	4,502,502		$	4,905,361		$	4,521,611

Return on average non-GAAP tangible equity (3)	(a)/(b)	18.28		%	17.17		%	8.96		%	17.73		%	10.95		%

(1)Applied statutory rates of 28.37% for the second quarter and first half of 2021, and the first quarter of 2021. Applied statutory tax rate of 28.35% for the second quarter and first half of 2020.

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

(3)Annualized.

~~118~~

105

Forward-Looking Statements

Certain matters discussed in this Form 10-Q ~~contains certain~~contain forward-looking ~~information about us~~statements that isare intended to be covered by the safe harbor for ~~“forward-looking statements”~~such statements provided by the Private Securities Litigation Reform Act of 1995. In addition, the Company may make forward-looking statements in other documents that it files with, or furnishes to, the SEC and management may make forward-looking statements to analysts, investors, media members and others. Forward-looking statements are statements that are not historical facts, and are based on current expectations, estimates and projections about the Company’s industry, management’s beliefs and certain assumptions made by management, many of which, by their nature, are inherently uncertain and beyond the Company’s control, ~~particularly with regard to developments related to~~such as the future impacts of the COVID-19 pandemic. These statements relate to the Company’s financial condition, results of operations, plans, objectives, future performance and/or business. They usually can be identified by the use of forward-looking language, such as “likely result in,” “expects,” “anticipates,” “estimates,” “forecasts,” “projects,” “intends to,” “assumes,” ~~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,~~expressions, and the negative thereof. You should not place undue reliance on these statements, as they are subject to risks and uncertainties, including, but not limited to, those described in the documents incorporated by reference. When considering these forward-looking statements, you should keep in mind these risks and uncertainties, as well as any cautionary statements the Company may make. Moreover, you should treat these statements as speaking only as of the date they are made and based only on information then actually known to the Company.

There are a number of important factors that could cause future results to differ materially from historical performance and these forward-looking statements. Factors that might cause such differences, some of which are beyond the Company’s control, include, but are not limited toto:

•the impact of disease pandemics, such as the worldwide spread and a resurgence of the COVID-19 pandemic on the Company, its operations and its customers, employees and the markets in which the Company operates and in which its loans are concentrated; and the measures that international, federal, state and local governments, agencies, law enforcement and/or health authorities implement to address it, which may precipitate or exacerbate one or more of the below-mentioned and/or other risks, and significantly disrupt or prevent the Company from operating its business in the ordinary course for an extended period;

•changes in governmental policy and regulation, including measures taken in response to economic, business, political and social conditions, such as the SBA’s PPP, the CARES Act and any similar or related rules and regulations, the Federal Reserve efforts to provide liquidity to the U.S. financial system, including changes in government interest rate policies, and to provide credit to private commercial and municipal borrowers, and other programs designed to address the effects of the COVID-19 pandemic, as well as the resulting effect of all such items on the Company’s operations, liquidity and capital position, and on the financial condition of the Company’s borrowers and other customers;

•changes in the U.S. economy, including an economic slowdown, ~~or recession,~~ inflation, deflation, housing prices, employment levels, rate of growth and general business conditions;

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

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

•changes in laws or the regulatory environment including regulatory reform initiatives and policies of the U.S. Department of Treasury, the Federal Reserve, the Federal Deposit Insurance Corporation, the Office of the Comptroller of the Currency, the SEC, the Consumer Financial Protection Bureau, and the DFPI;

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

•changes in the commercial and consumer real estate markets;

•changes in consumer spending and savings habits;

•fluctuations in the Company’s stock price;

•changes in income tax laws and regulations;

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

•the soundness of other financial institutions;

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

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

•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;

•impact of the benchmark interest rate reform in the U.S. ~~that resulted in~~including the ~~SOFR selected as the preferred~~transition away from USD LIBOR to alternative reference ~~rate to the LIBOR;~~rates;

•impact of a communications or technology disruption, 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;~~cyber-attacks, and other similar matters which could result in, among other things, confidential and/or proprietary information being disclosed or misused and materially impact the Company’s ability to provide services to its clients;

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

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

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

~~119~~106

•impact of adverse judgments or settlements in litigation;

•~~changes in consumer spending and savings habits;~~

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

•~~impact of the Dodd-Frank Act on the Company’s business, business practices, cost of operations and executive compensation;~~

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

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

•impact of regulatory enforcement actions;

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

•impact of other potential federal tax changes and spending cuts;

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

•impact on the Company’s liquidity due to changes in the Company’s ability to pay dividends and repurchase common stock and to receive dividends from its subsidiaries;

•any future strategic acquisitions or divestitures;

•~~continuing consolidation in the financial services industry;~~

•changes in the equity and debt securities markets;

•fluctuations in foreign currency exchange rates;

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

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

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

In addition to the risk factors enumerated above, the economic impact of the COVID-19 pandemic could cause actual outcomes to differ, possibly materially, from the Company’s forward-looking statements due to factors and future developments that are uncertain, unpredictable and in many cases beyond the Company’s control. Given the ongoing and dynamic nature of the circumstances, it is difficult to predict the full impact of the COVID-19 pandemic on the Company’s business. The extent to which the COVID-19 pandemic impacts the Company will depend on future developments that are uncertain and unpredictable, including the scope, severity and duration of the pandemic and its impact on the Company’s customers, the actions taken by governmental authorities in response to the pandemic as well as its impact on global and regional economies, and the pace of recovery when the COVID-19 pandemic subsides, among others.

For a more detailed discussion of some of the factors that might cause such differences, see the Company’s ~~2019~~2020 Form 10-K under the heading Item 1A. Risk Factors and the information set forth under Item 1A. Risk Factors in this Form 10-Q. The Company does not undertake, and specifically disclaims, any obligation to update or revise any forward-looking statements to reflect the occurrence of events or circumstances after the date of such statements except as required by law.

~~120~~107

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. Consolidated Financial Statements —~~ Note 6 — Derivatives to the Consolidated Financial Statements in this Form 10-Q and Item 2. MD&A — Risk Management — Market Risk Management in ~~Part I of~~ this Form 10-Q.

ITEM 4. CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

As of ~~September~~June 30, ~~2020,~~2021, pursuant to Rule 13a-15(b) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), the Company conducted an evaluation, under the supervision and with the participation of the Company’s management, including the Chief Executive Officer and Chief Financial Officer, of the effectiveness of the Company’s disclosure controls and procedures (as defined in Rule 13a-15(e) of the Exchange Act). Based upon that evaluation, the Company’s Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures were effective as of ~~September~~June 30, ~~2020.~~2021.

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

Change in Internal Control over Financial Reporting

There were no changes in the Company’s internal control over financial reporting (as defined in Rule 13a-15(f) of the Exchange Act) during the quarter ended ~~September~~June 30, ~~2020,~~2021, that have materially affected or are reasonably likely to materially affect the Company’s internal control over financial reporting.

~~121~~

108

PART II — OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

See ~~Item 1. Consolidated Financial Statements~~ —Note 10 — 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

~~In addition to the risk factor set forth below and the information set forth in this~~The Company’s 2020 Form ~~10-Q, you should carefully consider the~~10-K contains disclosure regarding the risks and uncertainties related to the Company’s business under the heading Item 1A. Risk Factors~~in the Company’s 2019 Form 10-K.~~. There has been no material ~~changes~~change to the Company’s risk factors as presented in the Company’s ~~2019~~2020 Form ~~10-K, other than the risk factors set forth below:~~10-K.

The effects of the COVID-19 pandemic have had and may continue to impact the Company’s businesses, financial condition, liquidity, capital and results of operations, and the extent and duration of these impacts depend on future developments, which remain uncertain and cannot be predicted. A second wave of the COVID-19 pandemic may have a similar or worse impact on the Company than the first wave, and a safe and effective vaccine may not become widely available for some time. The COVID-19 pandemic and governmental responses to the pandemic have had and will likely continue to have a severe impact on global economic conditions, including disruption and volatility in the financial markets, disruption of global supply chains, temporary closures or failures of businesses, increased unemployment, and the imposition of social distancing and restrictions on movement in the U.S. and other countries.

East West Bank is considered an essential business in the eight states where we have branches or office locations. As part of the CARES Act passed by Congress in March 2020, various initiatives to protect and support individuals, businesses and local economies, such as the SBA PPP and the Main Street Lending Program were established. The Company participated in the SBA PPP, which was available until August 8, 2020, and is currently participating in facilitating the forgiveness process. Further, the Company is a participant in the Main Street Lending Program. In addition, to provide further relief to customers during these turbulent times, we are providing loan modifications and payment deferrals for customers impacted by the COVID-19 pandemic, and deferring foreclosures on certain residential mortgage loans consistent with state laws. Our loan portfolio includes loans that are in forbearance but which are not classified as TDRs due to the exclusions provided in the CARES Act and federal banking regulators. In the future, we may be required to classify a portion of these loans as TDRs. In addition, the Company’s participation in and execution of measures taken by governments and regulatory authorities could subject us to increased governmental and regulatory scrutiny, negative publicity or increased exposure to litigation, which could increase our operational, legal and compliance costs and damage our reputation. There can be no assurance that the current or any new federal stimulus measures will improve the markets or economies in which we conduct operations. If the federal stimulus measures are not effective in mitigating the effect of the COVID-19 pandemic, credit issues for our loan customers may be severe and adversely affect our business, results of operations, and financial condition more substantially over a longer period of time.

The Company has begun to implement its return to the office plan. A portion of our U.S. employees have returned to the office and have started their pre-pandemic routines, including business travel with safety guidelines. All of our employees in Asia are back to the office. We have prepared all East West Bank facilities with employee safety protocols, including personal protection equipment, visual safety reminders related to social distancing, social distancing markers, temperature checks and sanitary products. While the Company is reopening its offices, some of our corporate office employees continue to work remotely or to work on a rotational schedule. However, a resurgence or a second wave of the COVID-19 pandemic may negatively affect our ability to provide services due to increased illnesses among our employees, quarantines, new “stay-at-home” orders or other restrictions on our employees, or the safety measures implemented to prevent illnesses of our employees, including the potential closure of particular branches and certain employees working remotely.

We may face increased cybersecurity risks due to the shifting of a majority of our corporate and division office functions to operating remotely in regions impacted by “stay-at-home” orders. Increased levels of remote access may create additional opportunities for cybercriminals to attempt to exploit vulnerabilities, and our employees may be more susceptible to phishing and social engineering attempts due to increased stress caused by the crisis and from balancing family and work responsibilities at home. In addition, our technological resources may be strained due to the number of remote users.

~~122~~

The conditions caused by the COVID-19 pandemic could continue to adversely affect the ability of the Company’s borrowers to satisfy their obligations. Taken into consideration that many of the Company’s loans are secured by real estate, a potential decline in real estate markets could further impact the Company’s business and financial condition and the credit quality of the Company’s loan portfolio. If unemployment continues to rise and our customers experience credit deterioration, including inability to pay their loans as they come due or a decrease in the value of collateral and/or higher than usual draws on outstanding lines of credit, our level of charge-offs and provision for credit losses could continue to increase. Further, the disruptions related to COVID-19 pandemic may decrease our borrowers’ confidence with respect to purchasing real estate or homes and adversely affect the demand for the Company’s loans and other products and services, the valuation of our loans, securities, derivatives portfolios, goodwill and intangible, the carrying value of our deferred tax assets, our capital levels and liquidity, and our results of operations.

In addition, the unprecedented developments and reports relating to COVID-19 have contributed to heightened volatility in financial markets in the U.S. and worldwide. The continuation of prolonged adverse economic conditions (including whether due to a resurgence or a second wave of COVID-19 infections) primarily in the U.S. and/or Greater China can be expected to have adverse effects on the Company’s businesses, results of operations and financial condition, which could have material impacts on the value of securities, derivatives and other financial instruments which the Company owns. The Company executes transactions with various counterparties in the financial industry, including broker-dealers, commercial banks and investment banks. Defaults by financial services institutions and uncertainty in the financial services industry in general could lead to market-wide liquidity problems and may expose the Company to credit risk in the event of default of its counterparties or clients and further increase the possibility of downgrades in the Company’s credit ratings. This pandemic, and any further measures undertaken by governmental authorities to address it, could significantly disrupt or prevent us from operating our business in the ordinary course for an extended period, and thereby, and/or along with any associated economic and/or social instability or distress, have a significant adverse effect on our results of operations and financial condition. Additionally, the earnings impact from recent and continued emergency interest rate cuts could further compress interest margins, which could potentially have an adverse effect on our results of operations and financial condition.

The extent to which the COVID-19 pandemic and a resultant or prolonged economic downturn continue to impact our business, results of operations and financial condition is uncertain and will depend on numerous evolving factors that are outside our control and we may not be able to accurately predict, including the scope, severity and duration of the pandemic, the governmental, business and individual actions in response to the pandemic, the impact of those actions on global economic activities, as well as the pace of economic recovery when the COVID-19 pandemic subsides. To the extent the COVID-19 pandemic continues to adversely affect our business, results of operations and financial condition, as well as global economic conditions more generally, it may also heighten many of the other risk factors described in the Company’s 2019 Form 10-K.

~~123~~

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

There were no unregistered sales of equity securities ~~for~~or repurchase activities during the ~~third quarter and~~ ~~first nine~~six months ~~of 2020. The following table summarizes common stock repurchased by the Company under the Company’s common stock repurchase program for the~~ ~~first nine months of 2020. There were no repurchased activities for the second and third quarters of 2020.~~

Period
Total Number of
Shares
Repurchased (1)
Average Price
Paid per Share of
Common Stock Total Number of
Shares of Common
Stock Purchased
as Part of Publicly
Announced Plans
or Programs
Approximate
Dollar Value of
Shares that May
Yet Be Purchased
Under the Plans or
Programs
($ in millions) (2)
January 1, 2020 — January 31, 2020
— $ — — $ 500.0
February 1, 2020 — February 29, 2020
— — — 500.0
March 1, 2020 — March 31, 2020
4,471,682 32.64 4,471,682 354.0
April 1, 2020 — April 30, 2020
— — — 354.0
May 1, 2020 — May 31, 2020
— — — 354.0
June 1, 2020 — June 30, 2020
— — — 354.0
July 1, 2020 — July 31, 2020
— — — 354.0
August 1, 2020 — August 31, 2020
— — — 354.0
September 1, 2020 — September 30, 2020
— — — 354.0
Total 4,471,682 $ 32.64 4,471,682 $ 354.0

~~(1)Excludes activity of common stock pursuant to various stock compensation plans and agreements totaling $7.7 million.~~

~~(2)~~On March 3, 2020, the Company’s Board of Directors authorized the repurchase of up to $500.0 million of the Company’s common stock. This $500.0 million repurchase authorization is inclusive of the Company’s $100.0 million stock repurchase authorization previously outstanding. The share repurchase authorization has no expiration date.ended June 30, 2021.

~~124~~109

ITEM 6. EXHIBITS

The following exhibit index lists Exhibits filed, or in the case of Exhibits 32.1 and 32.2 furnished, with this report:


Exhibit No.						Exhibit Description

3.1						Certificate of Incorporation of the Registrant [Incorporated by reference to Exhibit 3(i) from Registrant’s Registration Statement on Form S-4/A filed with the Commission on November 13, 1998 (File No. 333-63605).]

3.1.1						Certificate of Amendment to Certificate of Incorporation of the Registrant [Incorporated by reference to Exhibit 3(i).1 from Registrant’s Annual Report on Form 10-K for the year ended December 31, 2002 filed with the Commission on March 28, 2003 (File No. 000-24939).]

3.1.2						Amendment to Certificate of Incorporation to Increase Authorized Shares of the Registrant [Incorporated by reference from Registrant’s Definitive Proxy Statement on Schedule 14A filed with the Commission on April 15, 2005 (File No. 000-24939).]

3.1.3						Certificate of Amendment to Certificate of Incorporation of the Registrant [Incorporated by reference to Exhibit A from the Registrant’s Definitive Proxy Statement on Schedule 14A filed with the Commission on April 23, 2008 (File No. 000-24939).]

3.2						Amended and Restated Bylaws of the Registrant dated January 29, 2013 [Incorporated by reference to Exhibit 3.10 from Registrant’s Current Report on Form 8-K, filed with the Commission on January 30, 2013 (File No. 000-24939).]






~~10.1~~						~~Amendment to Employment Agreement -~~ ~~IreneH. Oh~~ * Filed herewith.

~~10.2~~						~~Amendment to Employment Agreement~~ -~~Catherine~~Zhou * ~~Filed herewith.~~




31.1						Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. Filed herewith.

31.2						Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. Filed herewith.

32.1						Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. Furnished herewith.

32.2						Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. Furnished herewith.

101.INS						The instance document does not appear in the interactive data file because its XBRL tags are embedded within the inline XBRL document.

101.SCH						Inline XBRL Taxonomy Extension Schema Document. Filed herewith.

101.CAL						Inline XBRL Taxonomy Extension Calculation Linkbase Document. Filed herewith.

101.DEF						Inline XBRL Taxonomy Extension Definition Linkbase Document. Filed herewith.

101.LAB						Inline XBRL Taxonomy Extension Label Linkbase Document. Filed herewith.

101.PRE						Inline XBRL Taxonomy Extension Presentation Linkbase Document. Filed herewith.

104						Cover Page Interactive Data (formatted as Inline XBRL and contained in Exhibit 101 filed herewith). Filed herewith.

* Denotes management contract or compensatory plan or arrangement.

~~125~~110

GLOSSARY OF ACRONYMS


AFS	Available-for-sale	HELOC	Home equity line of credit
ALCO	Asset/Liability Committee	LCH	London Clearing House
AOCI	Accumulated other comprehensive (loss) income	LGD	Loss given default
~~ALCO~~ARPA	~~Asset/Liability Committee~~American Rescue Plan Act of 2021	LIBOR	London Interbank Offered Rate
~~AOCI~~ARRC	~~Accumulated other comprehensive income (loss)~~Alternative Reference Rates Committee	LTV	Loan-to-value
~~ARRC~~ASC	~~Alternative Reference Rates Committee~~Accounting Standards Codification	MD&A	Management’s Discussion and Analysis of Financial Condition and Results of Operations
~~ASC~~ASU	Accounting Standards ~~Codification~~Update	MMBTU	Million British thermal unit
~~ASU~~	~~Accounting Standards Update~~	~~Moody's~~	~~Moody’s Investors Service~~
C&I	Commercial and industrial	MSLP	Main Street Lending Program
CAA	Consolidated Appropriations Act, 2021	NAV	Net asset value
CARES Act	Coronavirus Aid, Relief, and Economic Security Act	OREO	Other real estate owned
CECL	Current expected credit losses	OTTI	Other-than-temporary impairment
CET1	Common Equity Tier 1	~~PCD~~PD	~~Purchased credit deteriorated~~Probability of default
CLO	Collateralized loan obligation	~~PCI~~PPP	~~Purchased credit impaired~~Paycheck Protection Program
CME	Chicago Mercantile Exchange	PD	~~Probability of default~~
~~COVID-19~~	~~Coronavirus Disease 2019~~	~~PPP~~	~~Paycheck Protection Program~~
~~CRA~~	~~Community Reinvestment Act~~	PPPLF	Paycheck Protection Program Liquidity Facility
~~CRE~~COVID-19	~~Commercial real estate~~Coronavirus Disease 2019	RMB	Chinese ~~renminbi~~Renminbi
~~E&P~~CRA	~~Exploration and production~~Community Reinvestment Act	ROA	Return on average assets
~~EPS~~CRE	~~Earnings per share~~Commercial real estate	ROE	Return on average equity
~~ERM~~DFPI	~~Enterprise risk management~~California Department of Financial Protection and Innovation	RPA	Credit risk participation agreement
EPS	Earnings per share	RSU	Restricted stock unit
ERM	Enterprise risk management	S&P	Standard and Poor's
EVE	Economic value of equity	~~RSU~~SBA	~~Restricted stock unit~~Small Business Administration
FASB	Financial Accounting Standards Board	~~S&P~~	~~Standard and Poor's~~
~~FHLB~~	~~Federal Home Loan Bank~~	~~SBA~~	~~Small Business Administration~~
~~Fitch~~	~~Fitch Ratings~~	SBLC	Standby letter of credit
~~FOMC~~FCA	~~Federal Open Market Committee~~Financial Conduct Authority	SEC	U.S. Securities and Exchange Commission
~~FRB~~FHLB	Federal ~~Reserve~~Home Loan Bank	SOFR	Secured Overnight Financing Rate
FOMC	Federal Open Market Committee	TDR	Troubled debt restructuring
FRBSF	Federal Reserve Bank of San Francisco	U.S.	United States
FTP	Funds transfer pricing	~~TDR~~USD	~~Troubled debt restructuring~~U.S. dollar
GAAP	Generally accepted accounting principles	~~U.S.~~	~~United States~~
~~HELOC~~	~~Home equity line of credit~~	~~UER~~	~~Unemployment rate~~
~~ISDA~~	~~International Swaps and Derivatives Association, Inc.~~	~~USD~~	~~U.S. dollar~~
~~LCH~~	~~London Clearing House~~	VIE	Variable interest entity

~~126~~111

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~~August 6, ~~2020~~2021

EAST WEST BANCORP, INC.
(Registrant)

/s/ IRENE H. OH

Irene H. Oh

Executive Vice President and
Chief Financial Officer

~~127~~112



($ in thousands)	Carrying Value (1)				Cumulative Fair Value Adjustment (2)
	September 30, 2020		December 31, 2019		September 30, 2020		December 31, 2019
Certificates of deposit	$	(14,874)	$	(29,080)	$	(2)	$	1,604



($ in thousands)	Loans Modified as TDRs During the Nine Months Ended September 30,
	2020							2019
	Number of Loans	Pre- Modification Outstanding Recorded Investment		Post- Modification Outstanding Recorded Investment (1)		Financial Impact (2)		Number of Loans	Pre- Modification Outstanding Recorded Investment		Post- Modification Outstanding Recorded Investment (1)		Financial Impact (2)
Commercial:
C&I	11	$	93,235	$	79,713	$	12,507	9	$	85,073	$	81,038	$	9,231
CRE:
CRE	2	21,429		21,242		21		0	0		0		0
Multifamily residential	1	1,220		1,226		0		0	0		0		0

Total CRE	3	22,649		22,468		21		0	0		0		0
Total commercial	14	115,884		102,181		12,528		9	85,073		81,038		9,231
Consumer:
Residential mortgage:
Single-family residential	0	0		0		0		2	1,123		1,109		2
HELOCs	0	0		0		0		1	139		136		0
Total residential mortgage	0	0		0		0		3	1,262		1,245		2

Total consumer	0	0		0		0		3	1,262		1,245		2
Total	14	$	115,884	$	102,181	$	12,528	12	$	86,335	$	82,283	$	9,233



($ in thousands)	Modification Type During the Nine Months Ended September 30,
	2020								2019
	Principal (1)		Principal and Interest (2)		Interest Deferments		Total		Principal (1)		Interest Deferments		Other (3)		Total
Commercial:
C&I	$	36,043	$	10,819	$	32,851	$	79,713	$	44,271	$	0	$	36,767	$	81,038
CRE:
CRE	21,242		0		0		21,242		0		0		0		0
Multifamily residential	1,226		0		0		1,226		0		0		0		0

Total CRE	22,468		0		0		22,468		0		0		0		0
Total commercial	58,511		10,819		32,851		102,181		44,271		0		36,767		81,038
Consumer:
Residential mortgage:
Single-family residential	0		0		0		0		0		1,109		0		1,109
HELOCs	0		0		0		0		0		0		136		136
Total residential mortgage	0		0		0		0		0		1,109		136		1,245

Total consumer	0		0		0		0		0		1,109		136		1,245
Total	$	58,511	$	10,819	$	32,851	$	102,181	$	44,271	$	1,109	$	36,903	$	82,283



($ in thousands)	December 31, 2019
	Unpaid Principal Balance		Recorded Investment With No Allowance		Recorded Investment With Allowance		Total Recorded Investment		Related Allowance
Commercial:
C&I	$	174,656	$	73,956	$	40,086	$	114,042	$	2,881
CRE:
CRE	27,601		20,098		1,520		21,618		97
Multifamily residential	4,965		1,371		3,093		4,464		55
Construction and land	19,696		19,691		0		19,691		0
Total CRE	52,262		41,160		4,613		45,773		152
Total commercial	226,918		115,116		44,699		159,815		3,033
Consumer:
Residential mortgage:
Single-family residential	23,626		8,507		13,704		22,211		35
HELOCs	13,711		6,125		7,449		13,574		8
Total residential mortgage	37,337		14,632		21,153		35,785		43
Other consumer	2,517		0		2,517		2,517		2,517
Total consumer	39,854		14,632		23,670		38,302		2,560
Total non-PCI impaired loans	$	266,772	$	129,748	$	68,369	$	198,117	$	5,593



($ in thousands)	Three Months Ended September 30, 2019	Nine Months Ended September 30, 2019
Accretable yield for PCI loans, beginning of period		$	64,053	$	74,870

Accretion		(6,198)		(18,205)
Changes in expected cash flows		(934)		256
Accretable yield for PCI loans, end of period		$	56,921	$	56,921



($ in thousands)	Consumer and Business Banking		Commercial Banking		Total
Beginning balance, January 1, 2019	$	353,321	$	112,226	$	465,547
Acquisition of East West Markets, LLC	0		150		150
Ending balance, September 30, 2019	$	353,321	$	112,376	$	465,697


		Page
Overview		6657
Selected Financial Data		6959
Financial Review		7060
Results of Operations		7261
	Net Interest Income	7261
	Noninterest Income	7665
	Noninterest Expense	7867
	Income Taxes	7967
	Operating Segment Results	7968
Balance Sheet Analysis		84
	~~Selected Consolidated Balance Sheet Data~~	8472
	Debt Securities	8572
	Loan Portfolio	8875
	Foreign Outstandings	9581
	Capital	9582
	Deposits and Other Sources of Funds	9682
	Regulatory Capital and Ratios	9883
Other Matters		9884
Off-Balance Sheet Arrangements		9985
Risk Management		~~100~~86
	Credit Risk Management	~~100~~86
	Liquidity Risk Management	~~108~~96
	Market Risk Management	~~111~~98
Critical Accounting Policies and Estimates		~~116~~104
~~Supplemental Information — Explanation~~Reconciliation of GAAP to Non-GAAP Financial Measures		~~116~~104
Forward-Looking Statements		~~119~~106



Period	Total Number of Shares Repurchased (1)	Average Price Paid per Share of Common Stock		Total Number of Shares of Common Stock Purchased as Part of Publicly Announced Plans or Programs	Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs ($ in millions) (2)
January 1, 2020 — January 31, 2020	—	$	—	—	$	500.0
February 1, 2020 — February 29, 2020	—	—		—	500.0
March 1, 2020 — March 31, 2020	4,471,682	32.64		4,471,682	354.0
April 1, 2020 — April 30, 2020	—	—		—	354.0
May 1, 2020 — May 31, 2020	—	—		—	354.0
June 1, 2020 — June 30, 2020	—	—		—	354.0
July 1, 2020 — July 31, 2020	—	—		—	354.0
August 1, 2020 — August 31, 2020	—	—		—	354.0
September 1, 2020 — September 30, 2020	—	—		—	354.0
Total	4,471,682	$	32.64	4,471,682	$	354.0