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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2022
or
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 000-24939
EAST WEST BANCORP, INC.
(Exact name of registrant as specified in its charter)
Delaware
(State or other jurisdiction of incorporation or organization)
95-4703316
(I.R.S. Employer Identification No.)
135 North Los Robles Ave., 7th Floor, Pasadena, California 91101
(Address of principal executive offices) (Zip Code)
Registrant’s telephone number, including area code:
(626) 768-6000
Securities registered pursuant to Section 12(b) of the Act:

| Title of each class |  | Trading Symbol(s) |  | Name of each exchange on which registered |
| Common Stock, par value $0.001 per share |  | EWBC |  | The Nasdaq Global Select Market |

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer | ☒ |  | Accelerated filer | ☐
Non-accelerated filer | ☐ |  | Smaller reporting company | ☐
|  | Emerging growth company | ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes ☐ No ☒
Number of shares outstanding of the issuer’s common stock on the latest practicable date: 140,917,512 shares as of July 31, 2022.

TABLE OF CONTENTS

|  |  | Page
PART I — FINANCIAL INFORMATION | 3
| Item 1. | Consolidated Financial Statements | 3
|  | Consolidated Balance Sheet (Unaudited) | 3
|  | Consolidated Statement of Income (Unaudited) | 4
|  | Consolidated Statement of Comprehensive Income (Unaudited) | 5
|  | Consolidated Statement of Changes in Stockholders’ Equity (Unaudited) | 6
|  | Consolidated Statement of Cash Flows (Unaudited) | 7
|  | Notes to Consolidated Financial Statements (Unaudited) | 9
|  | 1 — Basis of Presentation | 9
|  | 2 — Current Accounting Developments and Summary of Significant Accounting Policies | 9
|  | 3 — Fair Value Measurement and Fair Value of Financial Instruments | 10
|  | 4 — Assets Purchased under Resale Agreements and Sold under Repurchase Agreements | 20
|  | 5 — Securities | 22
|  | 6 — Derivatives | 28
|  | 7 — Loans Receivable and Allowance for Credit Losses | 35
|  | 8 — Investments in Qualified Affordable Housing Partnerships, Tax Credit and Other Investments, Net and Variable Interest Entities | 47
|  | 9 — Goodwill | 49
|  | 10 — Commitments and Contingencies | 49
|  | 11 — Stock Compensation Plans | 50
|  | 12 — Stockholders’ Equity and Earnings Per Share | 52
|  | 13 — Accumulated Other Comprehensive Income (Loss) | 53
|  | 14 — Business Segments | 55
| Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations | 58
| Item 3. | Quantitative and Qualitative Disclosures About Market Risk | 102
| Item 4. | Controls and Procedures | 102
PART II — OTHER INFORMATION | 103
| Item 1. | Legal Proceedings | 103
| Item 1A. | Risk Factors | 103
| Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds | 103
| Item 6. | Exhibits | 104
GLOSSARY OF ACRONYMS | 105
SIGNATURE | 106

2

PART I — FINANCIAL INFORMATION
ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS
EAST WEST BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
($ in thousands, except shares)
(Unaudited)

|  | June 30, 2022 |  | December 31, 2021
|  | (Unaudited) |  |
ASSETS |  |  |  |
Cash and due from banks |  | $ | 688,936 |  |  | $ | 527,317 |
Interest-bearing cash with banks |  | 1,213,117 |  |  | 3,385,618 |
Cash and cash equivalents |  | 1,902,053 |  |  | 3,912,935 |
Interest-bearing deposits with banks |  | 712,709 |  |  | 736,492 |
Assets purchased under resale agreements (“resale agreements”) |  | 1,422,794 |  |  | 2,353,503 |
Securities: |  |  |  |
Available-for-sale (“AFS”) debt securities, at fair value (amortized cost of $6,891,522 and $10,087,179) |  | 6,255,504 |  |  | 9,965,353 |
Held-to-maturity (“HTM”) debt securities, at amortized cost (fair value of $2,656,549) |  | 3,028,302 |  |  | — |
Loans held-for-sale |  | 28,464 |  |  | 635 |
Loans held-for-investment (net of allowance for loan losses of $563,270 and $541,579) |  | 45,938,806 |  |  | 41,152,202 |
Investments in qualified affordable housing partnerships, tax credit and other investments, net |  | 634,304 |  |  | 628,263 |
Premises and equipment (net of accumulated depreciation of $143,708 and $139,358) |  | 93,911 |  |  | 97,302 |
Goodwill |  | 465,697 |  |  | 465,697 |
Operating lease right-of-use assets |  | 107,588 |  |  | 98,632 |
Other assets |  | 1,804,151 |  |  | 1,459,687 |
TOTAL |  | $ | 62,394,283 |  |  | $ | 60,870,701 |
LIABILITIES |  |  |  |
Deposits: |  |  |  |
Noninterest-bearing |  | $ | 23,028,831 |  |  | $ | 22,845,464 |
Interest-bearing |  | 31,314,523 |  |  | 30,505,068 |
Total deposits |  | 54,343,354 |  |  | 53,350,532 |
Federal Home Loan Bank (“FHLB”) advances |  | 174,776 |  |  | 249,331 |
Assets sold under repurchase agreements (“repurchase agreements”) |  | 611,785 |  |  | 300,000 |
Long-term debt and finance lease liabilities |  | 152,663 |  |  | 151,997 |
Operating lease liabilities |  | 115,387 |  |  | 105,534 |
Accrued expenses and other liabilities |  | 1,386,836 |  |  | 876,089 |
Total liabilities |  | 56,784,801 |  |  | 55,033,483 |
COMMITMENTS AND CONTINGENCIES (Note 10) |  |  |  |
STOCKHOLDERS’ EQUITY |  |  |  |
Common stock, $0.001 par value, 200,000,000 shares authorized; 168,427,021 and 167,790,645 shares issued |  | 168 |  |  | 168 |
Additional paid-in capital |  | 1,914,064 |  |  | 1,893,557 |
Retained earnings |  | 5,064,650 |  |  | 4,683,659 |
Treasury stock, at cost 27,509,632 and 25,882,691 shares |  | (768,752) |  |  | (649,785) |
Accumulated other comprehensive loss (“AOCI”), net of tax |  | (600,648) |  |  | (90,381) |
Total stockholders’ equity |  | 5,609,482 |  |  | 5,837,218 |
TOTAL |  | $ | 62,394,283 |  |  | $ | 60,870,701 |

See accompanying Notes to Consolidated Financial Statements.
3

EAST WEST BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME
($ and shares in thousands, except per share data)
(Unaudited)

|  | Three Months Ended June 30, |  | Six Months Ended June 30, |  |  |  |
|  | 2022 |  | 2021 |  | 2022 |  | 2021 |  |  |  |  |  |
INTEREST AND DIVIDEND INCOME |  |  |  |  |  |  |  |  |  |  |  |  |  |
Loans receivable, including fees |  | $ | 439,416 |  |  | $ | 352,453 |  |  | $ | 816,526 |  |  | $ | 694,461 |  |  |  |  |  |  |
Debt securities |  | 46,176 |  |  | 34,690 |  |  | 88,843 |  |  | 63,790 |  |  |  |  |  |  |
Resale agreements |  | 8,553 |  |  | 8,021 |  |  | 16,936 |  |  | 14,120 |  |  |  |  |  |  |
Restricted equity securities |  | 822 |  |  | 541 |  |  | 1,431 |  |  | 1,088 |  |  |  |  |  |  |
Interest-bearing cash and deposits with banks |  | 4,787 |  |  | 3,628 |  |  | 8,047 |  |  | 7,260 |  |  |  |  |  |  |
Total interest and dividend income |  | 499,754 |  |  | 399,333 |  |  | 931,783 |  |  | 780,719 |  |  |  |  |  |  |
INTEREST EXPENSE |  |  |  |  |  |  |  |  |  |  |  |  |  |
Deposits |  | 22,488 |  |  | 17,998 |  |  | 35,477 |  |  | 39,820 |  |  |  |  |  |  |
Short-term borrowings |  | 241 |  |  | — |  |  | 250 |  |  | 42 |  |  |  |  |  |  |
FHLB advances |  | 559 |  |  | 2,099 |  |  | 1,137 |  |  | 5,168 |  |  |  |  |  |  |
Repurchase agreements |  | 2,418 |  |  | 1,991 |  |  | 4,434 |  |  | 3,969 |  |  |  |  |  |  |
Long-term debt and finance lease liabilities |  | 1,096 |  |  | 772 |  |  | 1,920 |  |  | 1,552 |  |  |  |  |  |  |
Total interest expense |  | 26,802 |  |  | 22,860 |  |  | 43,218 |  |  | 50,551 |  |  |  |  |  |  |
Net interest income before provision for (reversal of) credit losses |  | 472,952 |  |  | 376,473 |  |  | 888,565 |  |  | 730,168 |  |  |  |  |  |  |
Provision for (reversal of) credit losses |  | 13,500 |  |  | (15,000) |  |  | 21,500 |  |  | (15,000) |  |  |  |  |  |  |
Net interest income after provision for (reversal of) credit losses |  | 459,452 |  |  | 391,473 |  |  | 867,065 |  |  | 745,168 |  |  |  |  |  |  |
NONINTEREST INCOME |  |  |  |  |  |  |  |  |  |  |  |  |  |
Lending fees |  | 20,142 |  |  | 21,092 |  |  | 39,580 |  |  | 39,449 |  |  |  |  |  |  |
Deposit account fees |  | 22,372 |  |  | 17,342 |  |  | 42,687 |  |  | 32,725 |  |  |  |  |  |  |
Interest rate contracts and other derivative income (loss) |  | 9,801 |  |  | (3,172) |  |  | 20,934 |  |  | 13,825 |  |  |  |  |  |  |
Foreign exchange income |  | 11,361 |  |  | 13,007 |  |  | 24,060 |  |  | 22,533 |  |  |  |  |  |  |
Wealth management fees |  | 6,539 |  |  | 7,951 |  |  | 12,591 |  |  | 14,862 |  |  |  |  |  |  |
Net gains on sales of loans |  | 917 |  |  | 1,491 |  |  | 3,839 |  |  | 3,272 |  |  |  |  |  |  |
Gains on sales of AFS debt securities |  | 28 |  |  | 632 |  |  | 1,306 |  |  | 824 |  |  |  |  |  |  |
Other investment income |  | 4,863 |  |  | 7,596 |  |  | 6,490 |  |  | 8,521 |  |  |  |  |  |  |
Other income |  | 2,421 |  |  | 2,492 |  |  | 6,700 |  |  | 5,286 |  |  |  |  |  |  |
Total noninterest income |  | 78,444 |  |  | 68,431 |  |  | 158,187 |  |  | 141,297 |  |  |  |  |  |  |
NONINTEREST EXPENSE |  |  |  |  |  |  |  |  |  |  |  |  |  |
Compensation and employee benefits |  | 113,364 |  |  | 105,426 |  |  | 229,633 |  |  | 213,234 |  |  |  |  |  |  |
Occupancy and equipment expense |  | 15,469 |  |  | 15,377 |  |  | 30,933 |  |  | 31,299 |  |  |  |  |  |  |
Deposit insurance premiums and regulatory assessments |  | 4,927 |  |  | 4,274 |  |  | 9,644 |  |  | 8,150 |  |  |  |  |  |  |
Deposit account expense |  | 5,671 |  |  | 3,817 |  |  | 10,364 |  |  | 7,709 |  |  |  |  |  |  |
Data processing |  | 3,486 |  |  | 4,035 |  |  | 7,151 |  |  | 8,513 |  |  |  |  |  |  |
Computer software expense |  | 6,572 |  |  | 7,521 |  |  | 13,866 |  |  | 14,680 |  |  |  |  |  |  |
Consulting expense |  | 2,021 |  |  | 1,868 |  |  | 3,854 |  |  | 3,343 |  |  |  |  |  |  |
Legal expense |  | 1,047 |  |  | 1,975 |  |  | 1,765 |  |  | 3,477 |  |  |  |  |  |  |
Other operating expense |  | 29,324 |  |  | 17,939 |  |  | 50,221 |  |  | 37,546 |  |  |  |  |  |  |
Amortization of tax credit and other investments |  | 14,979 |  |  | 27,291 |  |  | 28,879 |  |  | 52,649 |  |  |  |  |  |  |
Total noninterest expense |  | 196,860 |  |  | 189,523 |  |  | 386,310 |  |  | 380,600 |  |  |  |  |  |  |
INCOME BEFORE INCOME TAXES |  | 341,036 |  |  | 270,381 |  |  | 638,942 |  |  | 505,865 |  |  |  |  |  |  |
INCOME TAX EXPENSE |  | 82,707 |  |  | 45,639 |  |  | 142,961 |  |  | 76,129 |  |  |  |  |  |  |
NET INCOME |  | $ | 258,329 |  |  | $ | 224,742 |  |  | $ | 495,981 |  |  | $ | 429,736 |  |  |  |  |  |  |
EARNINGS PER SHARE (“EPS”) |  |  |  |  |  |  |  |  |  |  |  |  |  |
BASIC |  | $ | 1.83 |  |  | $ | 1.58 |  |  | $ | 3.50 |  |  | $ | 3.03 |  |  |  |  |  |  |
DILUTED |  | $ | 1.81 |  |  | $ | 1.57 |  |  | $ | 3.47 |  |  | $ | 3.01 |  |  |  |  |  |  |
WEIGHTED-AVERAGE NUMBER OF SHARES OUTSTANDING |  |  |  |  |  |  |  |  |  |  |  |  |  |
BASIC |  | 141,429 |  |  | 141,868 |  |  | 141,725 |  |  | 141,758 |  |  |  |  |  |  |
DILUTED |  | 142,372 |  |  | 143,040 |  |  | 142,838 |  |  | 142,963 |  |  |  |  |  |  |

See accompanying Notes to Consolidated Financial Statements.
4

EAST WEST BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
($ in thousands)
(Unaudited)

|  | Three Months Ended June 30, |  | Six Months Ended June 30, |  |  |  |
|  | 2022 |  | 2021 |  | 2022 |  | 2021 |  |  |  |  |  |
Net income |  | $ | 258,329 |  |  | $ | 224,742 |  |  | $ | 495,981 |  |  | $ | 429,736 |  |  |  |  |  |  |
Other comprehensive (loss) income, net of tax: |  |  |  |  |  |  |  |  |  |  |  |  |  |
Net changes in unrealized (losses) gains on AFS debt securities |  | (192,878) |  |  | 73,049 |  |  | (362,148) |  |  | (60,399) |  |  |  |  |  |  |
Net changes in unrealized gains (losses) on securities transferred from AFS to HTM |  | 3,750 |  |  | — |  |  | (106,930) |  |  | — |  |  |  |  |  |  |
Net changes in unrealized (losses) gains on cash flow hedges |  | (6,380) |  |  | 68 |  |  | (31,103) |  |  | 500 |  |  |  |  |  |  |
Foreign currency translation adjustments |  | (10,215) |  |  | 2,234 |  |  | (10,086) |  |  | 885 |  |  |  |  |  |  |
Other comprehensive (loss) income |  | (205,723) |  |  | 75,351 |  |  | (510,267) |  |  | (59,014) |  |  |  |  |  |  |
COMPREHENSIVE INCOME (LOSS) |  | $ | 52,606 |  |  | $ | 300,093 |  |  | $ | (14,286) |  |  | $ | 370,722 |  |  |  |  |  |  |

See accompanying Notes to Consolidated Financial Statements.
5

EAST WEST BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY
($ in thousands, except shares)
(Unaudited)

|  | Common Stock and Additional Paid-in Capital |  | Retained Earnings |  | Treasury Stock |  | AOCI, Net of Tax |  | Total Stockholders’ Equity
|  | Shares |  | Amount |  |  |  |
BALANCE, APRIL 1, 2021 |  | 141,843,036 |  |  | $ | 1,866,101 |  |  | $ | 4,158,032 |  |  | $ | (649,066) |  |  | $ | (90,040) |  |  | $ | 5,285,027 |
Net Income |  | — |  |  | — |  |  | 224,742 |  |  | — |  |  | — |  |  | 224,742 |
Other comprehensive income |  | — |  |  | — |  |  | — |  |  | — |  |  | 75,351 |  |  | 75,351 |
Issuance of common stock pursuant to various stock compensation plans and agreements |  | 38,073 |  |  | 10,146 |  |  | — |  |  | — |  |  | — |  |  | 10,146 |
Repurchase of common stock pursuant to various stock compensation plans and agreements |  | (3,604) |  |  | — |  |  | — |  |  | (271) |  |  | — |  |  | (271) |
Cash dividends on common stock ($0.33 per share) |  | — |  |  | — |  |  | (47,447) |  |  | — |  |  | — |  |  | (47,447) |
BALANCE, JUNE 30, 2021 |  | 141,877,505 |  |  | $ | 1,876,247 |  |  | $ | 4,335,327 |  |  | $ | (649,337) |  |  | $ | (14,689) |  |  | $ | 5,547,548 |
BALANCE, APRIL 1, 2022 |  | 142,256,520 |  |  | $ | 1,903,042 |  |  | $ | 4,863,721 |  |  | $ | (668,382) |  |  | $ | (394,925) |  |  | $ | 5,703,456 |
Net Income |  | — |  |  | — |  |  | 258,329 |  |  | — |  |  | — |  |  | 258,329 |
Other comprehensive loss |  | — |  |  | — |  |  | — |  |  | — |  |  | (205,723) |  |  | (205,723) |
Issuance of common stock pursuant to various stock compensation plans and agreements |  | 51,733 |  |  | 11,190 |  |  | — |  |  | — |  |  | — |  |  | 11,190 |
Repurchase of common stock pursuant to various stock compensation plans and agreements |  | (5,347) |  |  | — |  |  | — |  |  | (380) |  |  | — |  |  | (380) |
Repurchase of common stock pursuant to the Stock Repurchase Plan |  | (1,385,517) |  |  | — |  |  | — |  |  | (99,990) |  |  | — |  |  | (99,990) |
Cash dividends on common stock ($0.40 per share) |  | — |  |  | — |  |  | (57,400) |  |  | — |  |  | — |  |  | (57,400) |
BALANCE, JUNE 30, 2022 |  | 140,917,389 |  |  | $ | 1,914,232 |  |  | $ | 5,064,650 |  |  | $ | (768,752) |  |  | $ | (600,648) |  |  | $ | 5,609,482 |

|  | Common Stock and Additional Paid-in Capital |  | Retained Earnings |  | Treasury Stock |  | AOCI, Net of Tax |  | Total Stockholders’ Equity
|  | Shares |  | Amount |  |  |  |
BALANCE, JANUARY 1, 2021 |  | 141,565,229 |  |  | $ | 1,858,519 |  |  | $ | 4,000,414 |  |  | $ | (634,083) |  |  | $ | 44,325 |  |  | $ | 5,269,175 |
Net income |  | — |  |  | — |  |  | 429,736 |  |  | — |  |  | — |  |  | 429,736 |
Other comprehensive loss |  | — |  |  | — |  |  | — |  |  | — |  |  | (59,014) |  |  | (59,014) |
Issuance of common stock pursuant to various stock compensation plans and agreements |  | 513,806 |  |  | 17,728 |  |  | — |  |  | — |  |  | — |  |  | 17,728 |
Repurchase of common stock pursuant to various stock compensation plans and agreements |  | (201,530) |  |  | — |  |  | — |  |  | (15,254) |  |  | — |  |  | (15,254) |
Cash dividends on common stock ($0.66 per share) |  | — |  |  | — |  |  | (94,823) |  |  | — |  |  | — |  |  | (94,823) |
BALANCE, JUNE 30, 2021 |  | 141,877,505 |  |  | $ | 1,876,247 |  |  | $ | 4,335,327 |  |  | $ | (649,337) |  |  | $ | (14,689) |  |  | $ | 5,547,548 |
BALANCE, JANUARY 1, 2022 |  | 141,907,954 |  |  | $ | 1,893,725 |  |  | $ | 4,683,659 |  |  | $ | (649,785) |  |  | $ | (90,381) |  |  | $ | 5,837,218 |
Net income |  | — |  |  | — |  |  | 495,981 |  |  | — |  |  | — |  |  | 495,981 |
Other comprehensive loss |  | — |  |  | — |  |  | — |  |  | — |  |  | (510,267) |  |  | (510,267) |
Issuance of common stock pursuant to various stock compensation plans and agreements |  | 639,847 |  |  | 20,507 |  |  | — |  |  | — |  |  | — |  |  | 20,507 |
Repurchase of common stock pursuant to various stock compensation plans and agreements |  | (244,895) |  |  | — |  |  | — |  |  | (18,977) |  |  | — |  |  | (18,977) |
Repurchase of common stock pursuant to the Stock Repurchase Plan |  | (1,385,517) |  |  | — |  |  | — |  |  | (99,990) |  |  | — |  |  | (99,990) |
Cash dividends on common stock ($0.80 per share) |  | — |  |  | — |  |  | (114,990) |  |  | — |  |  | — |  |  | (114,990) |
BALANCE, JUNE 30, 2022 |  | 140,917,389 |  |  | $ | 1,914,232 |  |  | $ | 5,064,650 |  |  | $ | (768,752) |  |  | $ | (600,648) |  |  | $ | 5,609,482 |

See accompanying Notes to Consolidated Financial Statements.
6

EAST WEST BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
($ in thousands)
(Unaudited)

|  | Six Months Ended June 30, |  |
|  | 2022 |  | 2021 |  |
CASH FLOWS FROM OPERATING ACTIVITIES |  |  |  |  |  |
Net income |  | $ | 495,981 |  |  | $ | 429,736 |  |  |
Adjustments to reconcile net income to net cash provided by operating activities: |  |  |  |  |  |
Depreciation and amortization |  | 48,911 |  |  | 70,402 |  |  |
Amortization of premiums and accretion of discount, net |  | 21,519 |  |  | 11,310 |  |  |
Stock compensation costs |  | 17,009 |  |  | 16,025 |  |  |
Deferred income tax (expense) benefit |  | (7,554) |  |  | 2,571 |  |  |
Provision for (reversal of) credit losses |  | 21,500 |  |  | (15,000) |  |  |
Net gains on sales of loans |  | (3,839) |  |  | (3,272) |  |  |
Gains on sales of AFS debt securities |  | (1,306) |  |  | (824) |  |  |
Loans held-for-sale: |  |  |  |  |  |
Originations and purchases |  | (447) |  |  | (8,703) |  |  |
Proceeds from sales and paydowns/payoffs of loans originally classified as held-for-sale |  | 461 |  |  | 10,353 |  |  |
Proceeds from distributions received from equity method investees |  | 4,412 |  |  | 3,564 |  |  |
Net change in accrued interest receivable and other assets |  | (128,071) |  |  | (73,809) |  |  |
Net change in accrued expenses and other liabilities |  | 457,296 |  |  | (44,113) |  |  |
Other net operating activities |  | 3,182 |  |  | 5,571 |  |  |
Total adjustments |  | 433,073 |  |  | (25,925) |  |  |
Net cash provided by operating activities |  | 929,054 |  |  | 403,811 |  |  |
CASH FLOWS FROM INVESTING ACTIVITIES |  |  |  |  |  |
Net (increase) decrease in: |  |  |  |  |  |
Investments in qualified affordable housing partnerships, tax credit and other investments |  | (49,545) |  |  | (92,780) |  |  |
Interest-bearing deposits with banks |  | 23,442 |  |  | (20,534) |  |  |
Resale agreements: |  |  |  |  |  |
Proceeds from paydowns and maturities |  | 1,162,172 |  |  | 506,353 |  |  |
Purchases |  | (231,463) |  |  | (1,345,537) |  |  |
AFS debt securities: |  |  |  |  |  |
Proceeds from sales |  | 129,181 |  |  | 164,898 |  |  |
Proceeds from repayments, maturities and redemptions |  | 613,244 |  |  | 877,123 |  |  |
Purchases |  | (767,015) |  |  | (4,015,212) |  |  |
HTM debt securities: |  |  |  |  |  |
Proceeds from repayments, maturities and redemptions |  | 40,072 |  |  | — |  |  |
Purchases |  | (50,000) |  |  | — |  |  |
Loans held-for-investment: |  |  |  |  |  |
Proceeds from sales of loans originally classified as held-for-investment |  | 325,813 |  |  | 248,540 |  |  |
Purchases |  | (541,997) |  |  | (542,839) |  |  |
Other changes in loans held-for-investment, net |  | (4,639,384) |  |  | (1,389,832) |  |  |
Proceeds from distributions received from equity method investees |  | 8,717 |  |  | 4,983 |  |  |
Other net investing activities |  | 1,354 |  |  | 2,388 |  |  |
Net cash used in investing activities |  | (3,975,409) |  |  | (5,602,449) |  |  |

See accompanying Notes to Consolidated Financial Statements.
7

EAST WEST BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
($ in thousands)
(Unaudited)
(Continued)

|  | Six Months Ended June 30, |  |
|  | 2022 |  | 2021 |  |
CASH FLOWS FROM FINANCING ACTIVITIES |  |  |  |  |  |
Net increase in deposits |  | 1,046,046 |  |  | 7,708,661 |  |  |
Net decrease in short-term borrowings |  | (49) |  |  | (21,143) |  |  |
FHLB advances: |  |  |  |  |  |
Proceeds |  | 3,950,000 |  |  | — |  |  |
Repayment |  | (4,025,000) |  |  | (405,000) |  |  |
Repurchase agreements: |  |  |  |  |  |
Proceeds from repurchase agreements |  | 311,785 |  |  | — |  |  |
Long-term debt and lease liabilities: |  |  |  |  |  |
Repayment of long-term debt and lease liabilities |  | (457) |  |  | (613) |  |  |
Common stock: |  |  |  |  |  |
Repurchase of common stocks pursuant to the Stock Repurchase Program |  | (99,990) |  |  | — |  |  |
Proceeds from issuance pursuant to various stock compensation plans and agreements |  | 1,444 |  |  | 1,180 |  |  |
Stocks tendered for payment of withholding taxes |  | (18,977) |  |  | (15,254) |  |  |
Cash dividends paid |  | (115,623) |  |  | (95,060) |  |  |
Net cash provided by financing activities |  | 1,049,179 |  |  | 7,172,771 |  |  |
Effect of exchange rate changes on cash and cash equivalents |  | (13,706) |  |  | 5,701 |  |  |
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS |  | (2,010,882) |  |  | 1,979,834 |  |  |
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD |  | 3,912,935 |  |  | 4,017,971 |  |  |
CASH AND CASH EQUIVALENTS, END OF PERIOD |  | $ | 1,902,053 |  |  | $ | 5,997,805 |  |  |
SUPPLEMENTAL CASH FLOW INFORMATION |  |  |  |  |  |
Cash paid during the period for: |  |  |  |  |  |
Interest |  | $ | 45,057 |  |  | $ | 52,228 |  |  |
Income taxes, net |  | $ | 188,510 |  |  | $ | 114,202 |  |  |
Noncash investing and financing activities: |  |  |  |  |  |
Securities transferred from AFS to HTM debt securities |  | $ | 3,010,003 |  |  | $ | — |  |  |
Loans transferred from held-for-investment to held-for-sale |  | $ | 351,406 |  |  | $ | 247,636 |  |  |
Loans transferred from held-for-sale to held-for-investment |  | $ | 631 |  |  | $ | — |  |  |
Loans transferred to other real estate owned (“OREO”) and other foreclosed assets |  | $ | — |  |  | $ | 13,025 |  |  |

See accompanying Notes to Consolidated Financial Statements.
8

EAST WEST BANCORP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 1 — Basis of Presentation
East West Bancorp, Inc. (referred to herein on an unconsolidated basis as “East West” and on a consolidated basis as the “Company”) is a registered bank holding company that offers a full range of banking services to individuals and businesses through its subsidiary bank, East West Bank and its subsidiaries (“East West Bank” or the “Bank”). The unaudited interim Consolidated Financial Statements in this Quarterly Report on Form 10-Q (“this Form 10-Q”) include the accounts of East West, East West Bank and East West’s subsidiaries. Intercompany transactions and accounts have been eliminated in consolidation. As of June 30, 2022, East West also has six wholly-owned subsidiaries that are statutory business trusts (the “Trusts”). In accordance with Financial Accounting Standards Board Accounting Standards Codification (“ASC”) Topic 810, Consolidation, the Trusts are not included on the Consolidated Financial Statements.
The unaudited interim Consolidated Financial Statements are presented in accordance with United States (“U.S.”) Generally Accepted Accounting Principles (“GAAP”), applicable guidelines prescribed by regulatory authorities and general practices in the banking industry. While the unaudited interim Consolidated Financial Statements reflect all adjustments that, in the opinion of management, are necessary for fair presentation, they primarily serve to update the most recently filed annual report on Form 10-K, and may not include all the information and notes necessary to constitute a complete set of financial statements. Accordingly, they should be read in conjunction with the audited Consolidated Financial Statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021, filed with the U.S. Securities and Exchange Commission on February 28, 2022 (the “Company’s 2021 Form 10-K”). In addition, certain items on the Consolidated Financial Statements and notes for the prior periods have been reclassified to conform to the current period presentation.
The preparation of the Consolidated Financial Statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the Consolidated Financial Statements, income and expenses during the reporting period, and the related disclosures. Although our current estimates contemplate current conditions and how we expect them to change in the future, it is reasonably possible that actual results could be materially different from those estimates. Hence, the current period’s results of operations are not necessarily indicative of results that may be expected for any future interim period or for the year as a whole. Events subsequent to the Consolidated Balance Sheet date have been evaluated through the date the Consolidated Financial Statements are issued for inclusion in the accompanying Consolidated Financial Statements.
Note 2 — Current Accounting Developments and Summary of Significant Accounting Policies
Recent Accounting Pronouncements

Standard | Required Date of Adoption | Description | Effect on Financial Statements
Standards Not Yet Adopted
Accounting Standards Update (“ASU”) 2022-02, Financial Instruments - Credit Losses (Topic 326): Trouble Debt Restructurings and the Vintage Disclosures | January 1, 2023 | ASU 2022-02 eliminates the troubled debt restructuring (“TDRs”) accounting model for creditors and instead requires companies to apply the loan refinancing and restructuring guidance to determine whether a modification made to a borrower results in a new loan or a continuation of an existing loan. In addition, companies are no longer required to use a discounted cash flow method to measure the allowance for credit losses for certain TDRs and instead allows for the use of an expected loss approach for all loans. The guidance also introduces new disclosure requirements related to restructuring of financing receivables made to borrowers experiencing financial difficulty, and amends vintage disclosures to require current-period gross write-off by year of origination. The guidance should be applied on a prospective basis except for amendments related to recognition and measurement of TDRs, where a modified retrospective transition method is optional. | The Company does not expect the adoption of this guidance to have a material impact on the Company’s Consolidated Financial Statements. The Company expects to adopt ASU 2022-02 on January 1, 2023.

9

Significant Accounting Policies Update
During the first quarter of 2022, the Company transferred $3.01 billion in fair value of debt securities from AFS to HTM.
Transfer between Categories of Debt Securities — Upon transfer of a debt security from the AFS to HTM category, the security’s new amortized cost is reset to fair value, reduced by any previous write-offs but excluding any allowance for credit losses. Unrealized gains or losses at the date of transfer of these securities continue to be reported in AOCI and are amortized into interest income over the remaining life of the securities as effective yield adjustments, in a manner consistent with the amortization or accretion of the original purchase premium or discount on the associated security. For transfers of securities from the AFS to HTM category, any allowance for credit losses that was previously recorded under the AFS model is reversed and an allowance for credit losses is subsequently recorded under the HTM debt security model. The reversal and re-establishment of the allowance for credit losses are recorded in the provision for credit losses.
Held-to-Maturity Debt Securities — Debt securities that the Company has the intent and ability to hold until maturity are classified as HTM and are carried at amortized cost, net of allowance for credit losses. HTM debt securities are generally placed on nonaccrual status using factors similar to those described for loans. The amortized cost of the Company’s HTM debt securities excludes accrued interest, which is included in Other assets on the Consolidated Balance Sheet. The Company has made an accounting policy election not to recognize an allowance for credit losses for accrued interest receivables on HTM debt securities, as the Company reverses any accrued interest against interest income if a debt security is placed on nonaccrual status. Any cash collected on nonaccrual HTM securities is applied to reduce the security’s amortized cost basis and not as interest income. Generally, the Company returns an HTM security to accrual status when all delinquent interest and principal become current under the contractual terms of the security, and the collectability of remaining principal and interest is no longer doubtful.
Allowance for Credit Losses on Held-to-Maturity Debt Securities — For each major HTM debt security type, the allowance for credit losses is estimated collectively for groups of securities with similar risk characteristics. For securities that do not share similar risk characteristics, the losses are estimated individually. Examples of securities for which the Company applies a zero credit loss assumption include debt securities that are either guaranteed or issued by the U.S. government or government-sponsored enterprises, are highly rated by nationally recognized statistical rating organizations (“NRSROs”), and have a long history of no credit losses. Any expected credit loss is recorded through the allowance for credit losses on HTM debt securities and deducted from the amortized cost basis of the security, so that the balance sheet reflects the net amount the Company expects to collect.
Note 3 — Fair Value Measurement and Fair Value of Financial Instruments
Fair Value Determination
Fair value is defined as the price that would be received to sell an asset or the price that would be paid to transfer a liability in an orderly transaction between market participants at the measurement date. In determining the fair value of financial instruments, the Company uses various methods including market and income approaches. Based on these approaches, the Company utilizes certain assumptions that market participants would use in pricing an asset or a liability. These inputs can be readily observable, market corroborated or generally unobservable. The Company utilizes valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs. The fair value hierarchy described below is based on the quality and reliability of the information used to determine fair value. The fair value hierarchy gives the highest priority to quoted prices available in active markets and the lowest priority to prices derived from data lacking transparency. The fair value of the Company’s assets and liabilities is classified and disclosed in one of the following three categories:
•Level 1 — Valuation is based on quoted prices for identical instruments traded in active markets.
•Level 2 — Valuation is based on quoted prices for similar instruments traded in active markets; quoted prices for identical or similar instruments traded in markets that are not active; and model-derived valuations whose inputs are observable and can be corroborated by market data.
•Level 3 — Valuation is based on significant unobservable inputs for determining the fair value of assets or liabilities. These significant unobservable inputs reflect assumptions that market participants may use in pricing the assets or liabilities.
10

The classification of assets and liabilities within the hierarchy is based on whether inputs to the valuation methodology used are observable or unobservable, and the significance of those inputs in the fair value measurement. The Company’s assets and liabilities are classified in their entirety based on the lowest level of input that is significant to their fair value measurements.
Assets and Liabilities Measured at Fair Value on a Recurring Basis
The following section describes the valuation methodologies used by the Company to measure financial assets and liabilities on a recurring basis, as well as the general classification of these instruments pursuant to the fair value hierarchy.
Available-for-Sale Debt Securities — The fair value of AFS debt securities is generally determined by independent external pricing service providers who have experience in valuing these securities or by taking the average quoted market prices obtained from independent external brokers. The valuations provided by the third-party pricing service providers are based on observable market inputs, which include benchmark yields, reported trades, issuer spreads, benchmark securities, bids, offers, prepayment expectations and reference data obtained from market research publications. Inputs used by the third-party pricing service providers in valuing collateralized mortgage obligations and other securitization structures also include new issue data, monthly payment information, whole loan collateral performance, tranche evaluation and “To Be Announced” prices. In valuing securities issued by state and political subdivisions, inputs used by third-party pricing service providers also include material event notices.
On a monthly basis, the Company validates the valuations provided by third-party pricing service providers to ensure that the fair value determination is consistent with the applicable accounting guidance and the financial instruments are properly classified in the fair value hierarchy. To perform this validation, the Company evaluates the fair values of securities by comparing the fair values provided by the third-party pricing service providers to prices from other available independent sources for the same securities. When significant variances in prices are identified, the Company further compares inputs used by different sources to ascertain the reliability of these sources. On a quarterly basis, the Company reviews the valuation inputs and methodology for each security category furnished by third-party pricing service providers.
When available, the Company uses quoted market prices to determine the fair value of AFS debt securities that are classified as Level 1. Level 1 AFS debt securities consist of U.S. Treasury securities. When pricing is unavailable from third-party pricing service providers for certain securities, the Company requests market quotes from various independent external brokers and utilizes the average quoted market prices. In addition, the Company obtains market quotes from other official published sources. As these valuations are based on observable inputs in the current marketplace, they are classified as Level 2. The Company periodically communicates with the independent external brokers to validate their pricing methodology. Information such as pricing sources, pricing assumptions, data inputs and valuation techniques are reviewed periodically.
Equity Securities — Equity securities consisted of mutual funds as of both June 30, 2022 and December 31, 2021. The Company invested in these mutual funds for Community Reinvestment Act (“CRA”) purposes. The Company uses net asset value (“NAV”) information to determine the fair value of these equity securities. When NAV is available periodically and the equity securities can be put back to the transfer agents at the publicly available NAV, the fair value of the equity securities is classified as Level 1. When NAV is available periodically but the equity securities may not be readily marketable at its periodic NAV in the secondary market, the fair value of these equity securities is classified as Level 2.
Interest Rate Contracts — The Company enters into interest rate swap and option contracts that are not designated as hedging instruments with its borrowers to lock in attractive intermediate and long-term interest rates, resulting in the customer obtaining a synthetic fixed-rate loan. To economically hedge against the interest rate risks in the products offered to its customers, the Company enters into mirrored offsetting interest rate contracts with third-party financial institutions. The Company also enters into interest rate swap or interest rate collar contracts with institutional counterparties to hedge against certain variable interest rate borrowings and variable interest rate loans. These interest rate contracts with institutional counterparties are designated as cash flow hedges. The fair value of the interest rate swaps is determined using the market standard methodology of netting the discounted future fixed cash payments (or receipts) and the discounted expected variable cash receipts (or payments). The fair value of the interest rate options, which consist of floors and caps, is determined using the market standard methodology of discounting the future expected cash receipts that would occur if variable interest rates fall below (rise above) the strike rate of the floors (caps). In addition, to comply with the provisions of ASC 820, Fair Value Measurement, the Company incorporates credit valuation adjustments to appropriately reflect both its own and the respective counterparty’s nonperformance risk in the fair value measurements of its derivatives. The credit valuation adjustments associated with the Company’s derivatives utilize model-derived credit spreads, which are Level 3 inputs. Considering the observable nature of all other significant inputs utilized, the Company classifies these derivative instruments as Level 2.
11

Foreign Exchange Contracts — The Company enters into foreign exchange contracts to accommodate the business needs of its customers. For a majority of the foreign exchange contracts entered with its customers, the Company entered into offsetting foreign exchange contracts with third-party financial institutions to manage its exposure. The Company also utilizes foreign exchange contracts that are not designated as hedging instruments to mitigate the economic effect of fluctuations in certain foreign currency on-balance sheet assets and liabilities, primarily foreign currency denominated deposits that it offers to its customers. The fair value of foreign exchange contracts is determined at each reporting period based on changes in the foreign exchange rates. These are over-the-counter contracts where quoted market prices are not readily available. Valuation is measured using conventional valuation methodologies with observable market data. Due to the short-term nature of the majority of these contracts, the counterparties’ credit risks are considered nominal and result in no adjustments to the valuation of the foreign exchange contracts. Due to the observable nature of the inputs used in deriving the fair value of these contracts, the valuation of foreign exchange contracts is classified as Level 2. As of June 30, 2022 and December 31, 2021, the Bank held foreign currency non-deliverable forward contracts to hedge its net investment in its China subsidiary, East West Bank (China) Limited, a non-U.S. dollar (“USD”) functional currency subsidiary in China. These foreign currency non-deliverable forward contracts were designated as net investment hedges. The fair value of foreign currency non-deliverable forward contracts is determined by comparing the contracted foreign exchange rate to the current market foreign exchange rate. Key inputs of the current market exchange rate include spot rates and forward rates of the contractual currencies. Foreign exchange forward curves are used to determine which forward rate pertains to a specific maturity. Due to the observable nature of the inputs used in deriving the estimated fair value, these instruments are classified as Level 2.
Credit Contracts — The Company may periodically enter into credit risk participation agreements (“RPAs”) to manage the credit exposure on interest rate contracts associated with the syndicated loans. The Company may enter into protection sold or protection purchased RPAs with institutional counterparties. The fair value of RPAs is calculated by determining the total expected asset or liability exposure of the derivatives to the borrowers and applying the borrowers’ credit spread to that exposure. Total expected exposure incorporates both the current and potential future exposure of the derivatives, derived from using observable inputs, such as yield curves and volatilities. Since the majority of the inputs used to value the RPAs are observable, RPAs are classified as Level 2.
Equity Contracts — As part of the loan origination process, the Company may obtain warrants to purchase preferred and/or common stock of the borrowers, which are mainly in the technology and life sciences sectors. As of June 30, 2022 and December 31, 2021, the warrants included on the Consolidated Financial Statements were from both public and private companies. The Company values these warrants based on the Black-Scholes option pricing model. For warrants from public companies, the model uses the underlying stock price, stated strike price, warrant expiration date, risk-free interest rate based on a duration-matched U.S. Treasury rate, and market-observable company-specific option volatility as inputs to value the warrants. Due to the observable nature of the inputs used in deriving the estimated fair value, warrants from public companies are classified as Level 2. For warrants from private companies, the model uses inputs such as the offering price observed in the most recent round of funding, stated strike price, warrant expiration date, risk-free interest rate based on duration-matched U.S. Treasury rate and option volatility. The Company applies proxy volatilities based on the industry sectors of the private companies. The model values are then adjusted for a general lack of liquidity due to the private nature of the underlying companies. Since both option volatility and liquidity discount assumptions are subject to management’s judgment, measurement uncertainty is inherent in the valuation of private company warrants. Due to the unobservable nature of the option volatility and liquidity discount assumptions used in deriving the estimated fair value, warrants from private companies are classified as Level 3. On a quarterly basis, the changes in the fair value of warrants from private companies are reviewed for reasonableness, and a measurement of uncertainty analysis on the option volatility and liquidity discount assumptions is performed.
Commodity Contracts — The Company enters into energy commodity contracts consisting of swaps and options with its oil and gas loan customers, which allow them to hedge against the risk of fluctuation in energy commodity prices. The fair value of the commodity option contracts is determined using the Black-Scholes model and assumptions that include expectations of future commodity price and volatility. The future commodity contract price is derived from observable inputs such as the market price of the commodity. Commodity swaps are structured as an exchange of fixed cash flows for floating cash flows. The fair value of the commodity swaps is determined using the market standard methodology of netting the discounted future fixed cash payments (or receipts) and the discounted expected variable cash receipts (or payments) based on the market prices of the commodity. The fixed cash flows are predetermined based on the known volumes and fixed price as specified in the swap agreement. The floating cash flows are correlated with the change of forward commodity prices, which is derived from market corroborated futures settlement prices. As a result, the Company classifies these derivative instruments as Level 2 due to the observable nature of the significant inputs utilized.
12

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

($ in thousands) |  | Assets and Liabilities Measured at Fair Value on a Recurring Basis as of June 30, 2022
| Quoted Prices in Active Markets for Identical Assets (Level 1) |  | Significant Other Observable Inputs (Level 2) |  | Significant Unobservable Inputs (Level 3) |  | Total Fair Value
AFS debt securities: |  |  |  |  |  |  |  |
U.S. Treasury securities |  | $ | 624,686 |  |  | $ | — |  |  | $ | — |  |  | $ | 624,686 |
U.S. government agency and U.S. government-sponsored enterprise debt securities |  | — |  |  | 285,245 |  |  | — |  |  | 285,245 |
U.S. government agency and U.S. government-sponsored enterprise mortgage-backed securities: |  |  |  |  |  |  |  |
Commercial mortgage-backed securities |  | — |  |  | 563,832 |  |  | — |  |  | 563,832 |
Residential mortgage-backed securities |  | — |  |  | 1,910,240 |  |  | — |  |  | 1,910,240 |
Municipal securities |  | — |  |  | 266,733 |  |  | — |  |  | 266,733 |
Non-agency mortgage-backed securities: |  |  |  |  |  |  |  |
Commercial mortgage-backed securities |  | — |  |  | 411,768 |  |  | — |  |  | 411,768 |
Residential mortgage-backed securities |  | — |  |  | 726,989 |  |  | — |  |  | 726,989 |
Corporate debt securities |  | — |  |  | 559,293 |  |  | — |  |  | 559,293 |
Foreign government bonds |  | — |  |  | 242,997 |  |  | — |  |  | 242,997 |
Asset-backed securities |  | — |  |  | 67,350 |  |  | — |  |  | 67,350 |
Collateralized loan obligations (“CLOs”) |  | — |  |  | 596,371 |  |  | — |  |  | 596,371 |
Total AFS debt securities |  | $ | 624,686 |  |  | $ | 5,630,818 |  |  | $ | — |  |  | $ | 6,255,504 |
Investments in tax credit and other investments: |  |  |  |  |  |  |  |
Equity securities |  | $ | 20,463 |  |  | $ | 4,312 |  |  | $ | — |  |  | $ | 24,775 |
Total investments in tax credit and other investments |  | $ | 20,463 |  |  | $ | 4,312 |  |  | $ | — |  |  | $ | 24,775 |
Derivative assets: |  |  |  |  |  |  |  |
Interest rate contracts |  | $ | — |  |  | $ | 261,326 |  |  | $ | — |  |  | $ | 261,326 |
Foreign exchange contracts |  | — |  |  | 42,324 |  |  | — |  |  | 42,324 |
Equity contracts |  | — |  |  | 2 |  |  | 357 |  |  | 359 |
Commodity contracts |  | — |  |  | 404,275 |  |  | — |  |  | 404,275 |
Gross derivative assets |  | $ | — |  |  | $ | 707,927 |  |  | $ | 357 |  |  | $ | 708,284 |
Netting adjustments (1) |  | $ | — |  |  | $ | (251,718) |  |  | $ | — |  |  | $ | (251,718) |
Net derivative assets |  | $ | — |  |  | $ | 456,209 |  |  | $ | 357 |  |  | $ | 456,566 |
Derivative liabilities: |  |  |  |  |  |  |  |
Interest rate contracts |  | $ | — |  |  | $ | 359,674 |  |  | $ | — |  |  | $ | 359,674 |
Foreign exchange contracts |  | — |  |  | 29,144 |  |  | — |  |  | 29,144 |
Credit contracts |  | — |  |  | 76 |  |  | — |  |  | 76 |
Commodity contracts |  | — |  |  | 373,675 |  |  | — |  |  | 373,675 |
Gross derivative liabilities |  | $ | — |  |  | $ | 762,569 |  |  | $ | — |  |  | $ | 762,569 |
Netting adjustments (1) |  | $ | — |  |  | $ | (126,414) |  |  | $ | — |  |  | $ | (126,414) |
Net derivative liabilities |  | $ | — |  |  | $ | 636,155 |  |  | $ | — |  |  | $ | 636,155 |

13

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

(1)Represents balance sheet netting of derivative assets and liabilities and related cash collateral under master netting agreements or similar agreements. See Note 6 — Derivatives to the Consolidated Financial Statements in this Form 10-Q for additional information.
14

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

($ in thousands) |  | Three Months Ended June 30, |  | Six Months Ended June 30,
| 2022 |  | 2021 |  | 2022 |  | 2021
Equity contracts |  |  |  |  |  |  |  |
Beginning balance |  | $ | 309 |  |  | $ | 272 |  |  | $ | 215 |  |  | $ | 273 |
Total gains included in earnings (1) |  | 48 |  |  | 47 |  |  | 51 |  |  | 46 |
Issuances |  | — |  |  | — |  |  | 91 |  |  | — |
Settlements |  | — |  |  | (96) |  |  | — |  |  | (96) |
Ending balance |  | $ | 357 |  |  | $ | 223 |  |  | $ | 357 |  |  | $ | 223 |

(1)Includes unrealized gains (losses) of $48 thousand and $(27) thousand for the three months ended June 30, 2022 and 2021, respectively, and $51 thousand and $(29) thousand for the six months ended June 30, 2022 and 2021, respectively. The realized/unrealized gains (losses) of equity contracts are recorded in Lending fees on the Consolidated Statement of Income.
The following table presents quantitative information about the significant unobservable inputs used in the valuation of Level 3 fair value measurements as of June 30, 2022 and December 31, 2021. The significant unobservable inputs presented in the table below are those that the Company considers significant to the fair value of the Level 3 assets. The Company considers unobservable inputs to be significant if, by their exclusion, the fair value of the Level 3 assets would be impacted by a predetermined percentage change.

($ in thousands) |  | Fair Value Measurements (Level 3) |  | Valuation Technique |  | Unobservable Inputs |  | Range of Inputs |  | Weighted- Average of Inputs (1)
June 30, 2022 |  |  |  |  |  |  |  |  |  |
Derivative assets: |  |  |  |  |  |  |  |  |  |
Equity contracts |  | $ | 357 |  |  | Black-Scholes option pricing model |  | Equity volatility |  | 46% — 70%. |  | 61%
|  |  |  |  |  | Liquidity discount |  | 47% |  | 47%
December 31, 2021 |  |  |  |  |  |  |  |  |  |
Derivative assets: |  |  |  |  |  |  |  |  |  |
Equity contracts |  | $ | 215 |  |  | Black-Scholes option pricing model |  | Equity volatility |  | 44% — 54% |  | 49%
|  |  |  |  |  | Liquidity discount |  | 47% |  | 47%

(1)Weighted-average of inputs is calculated based on the fair value of equity contracts as of June 30, 2022 and December 31, 2021.
Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis
Assets measured at fair value on a nonrecurring basis include certain individually evaluated loans held-for-investment, investments in qualified affordable housing partnerships, tax credit and other investments, OREO, loans held-for-sale, and other nonperforming assets. Nonrecurring fair value adjustments result from the impairment on certain individually evaluated loans held-for-investment and investments in qualified affordable housing partnerships, tax credit and other investments, from write-downs of OREO and other nonperforming assets, or from the application of lower of cost or fair value on loans held-for-sale.
Individually Evaluated Loans Held-for-Investment — Individually evaluated loans held-for-investment are classified as Level 3 assets. The following two methods are used to derive the fair value of individually evaluated loans held-for-investment:
•Discounted cash flow valuation techniques that consist of developing an expected stream of cash flows over the life of the loans, and then calculating the present value of the loans by discounting the expected cash flows at a designated discount rate.
15

•When the repayment of an individually evaluated loan is dependent on the sale of the collateral, the fair value of the loan is determined based on the fair value of the underlying collateral, which may take the form of real estate, inventory, equipment, contracts or guarantees. The fair value of the underlying collateral is generally based on third-party appraisals, or an internal valuation if a third-party appraisal is not required by regulations, or unavailable. An internal valuation utilizes one or more valuation techniques such as the income, market and/or cost approaches.
Investments in Qualified Affordable Housing Partnerships, Tax Credit and Other Investments, Net — The Company conducts due diligence on its investments in qualified affordable housing partnerships, tax credit and other investments prior to the initial investment date and through the placed-in-service date. After these investments are either acquired or placed into service, the Company continues its periodic monitoring process to ensure book values are realizable and that there is no significant tax credit recapture risk. This monitoring process includes the quarterly review of the financial statements, the annual review of tax returns of the investment entity, the annual review of the financial statements of the guarantor (if any) and a comparison of the actual performance of the investment against the financial projections prepared at the time when the investment was made. The Company assesses its tax credit and other investments for possible other-than-temporary impairment (“OTTI”) on an annual basis or when events or circumstances suggest that the carrying amount of the investments may not be realizable. These circumstances can include, but are not limited to the following factors:
•expected future cash flows that are less than the carrying amoun t of the investment;
•changes in the economic, market or technological environment that could adversely affect the investee’s operations; and
•other factors that raise doubt about the investee’s ability to continue as a going concern, such as negative cash flows from operations and the continuing prospects of the underlying operations of the investment.
All available information is considered in assessing whether a decline in value is other-than-temporary. Generally, none of the aforementioned factors are individually conclusive and the relative importance placed on individual facts may vary depending on the situation. In accordance with ASC 323-10-35-32, Investments — Equity Method and Joint Ventures, an impairment charge would only be recognized in earnings for a decline in value that is determined to be other-than-temporary.
Other Real Estate Owned — The Company’s OREO represents properties acquired through foreclosure, or through full or partial satisfaction of loans held-for-investment. These OREO properties are recorded at estimated fair value less the costs to sell at the time of foreclosure and at the lower of cost or estimated fair value less the costs to sell subsequent to acquisition. On a monthly basis, the current fair market value of each OREO property is reviewed to ensure that the current carrying value is appropriate. OREO properties are classified as Level 3.
Other Nonperforming Assets — Other nonperforming assets are recorded at fair value upon the transfer from loans to foreclosed assets. Subsequently, foreclosed assets are recorded at the lower of carrying value or fair value. Fair value is based on independent market prices, appraised values of the collateral or management’s estimated recovery of the foreclosed asset. The Company records an impairment when the foreclosed asset’s fair value declines below its carrying value. The fair value measurement of other nonperforming assets is classified within one of the three levels in a valuation hierarchy based upon the observability of inputs to the valuation as of the measurement date.
16

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

($ in thousands) |  | Assets Measured at Fair Value on a Nonrecurring Basis as of June 30, 2022
| Quoted Prices in Active Markets for Identical Assets (Level 1) |  | Significant Other Observable Inputs (Level 2) |  | Significant Unobservable Inputs (Level 3) |  | Fair Value Measurements
Loans held-for-investment: |  |  |  |  |  |  |  |
Commercial: |  |  |  |  |  |  |  |
Commercial and industrial (“C&I”) |  | $ | — |  |  | $ | — |  |  | $ | 55,015 |  |  | $ | 55,015 |
Commercial real estate (“CRE”): |  |  |  |  |  |  |  |
CRE |  | — |  |  | — |  |  | 30,716 |  |  | 30,716 |
Multifamily residential |  | — |  |  | — |  |  | 1,055 |  |  | 1,055 |
Total commercial |  | — |  |  | — |  |  | 86,786 |  |  | 86,786 |
Consumer: |  |  |  |  |  |  |  |
Residential mortgage: |  |  |  |  |  |  |  |
Home equity lines of credit (“HELOCs”) |  | — |  |  | — |  |  | 1,167 |  |  | 1,167 |
Total consumer |  | — |  |  | — |  |  | 1,167 |  |  | 1,167 |
Total loans held-for-investment |  | $ | — |  |  | $ | — |  |  | $ | 87,953 |  |  | $ | 87,953 |

($ in thousands) |  | Assets Measured at Fair Value on a Nonrecurring Basis as of December 31, 2021
| Quoted Prices in Active Markets for Identical Assets (Level 1) |  | Significant Other Observable Inputs (Level 2) |  | Significant Unobservable Inputs (Level 3) |  | Fair Value Measurements
Loans held-for-investment: |  |  |  |  |  |  |  |
Commercial: |  |  |  |  |  |  |  |
C&I |  | $ | — |  |  | $ | — |  |  | $ | 102,349 |  |  | $ | 102,349 |
CRE: |  |  |  |  |  |  |  |
CRE |  | — |  |  | — |  |  | 21,891 |  |  | 21,891 |
Total commercial |  | — |  |  | — |  |  | 124,240 |  |  | 124,240 |
Consumer: |  |  |  |  |  |  |  |
Residential mortgage: |  |  |  |  |  |  |  |
HELOCs |  | — |  |  | — |  |  | 2,744 |  |  | 2,744 |
Total consumer |  | — |  |  | — |  |  | 2,744 |  |  | 2,744 |
Total loans held-for-investment |  | $ | — |  |  | $ | — |  |  | $ | 126,984 |  |  | $ | 126,984 |
Other nonperforming assets |  | $ | 391 |  |  | $ | — |  |  | $ | — |  |  | $ | 391 |

17

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

($ in thousands) |  | Three Months Ended June 30, |  | Six Months Ended June 30,
| 2022 |  | 2021 |  | 2022 |  | 2021
Loans held-for-investment: |  |  |  |  |  |  |  |
Commercial: |  |  |  |  |  |  |  |
C&I |  | $ | (6,054) |  |  | $ | (6,462) |  |  | $ | (14,740) |  |  | $ | (15,530) |
CRE: |  |  |  |  |  |  |  |
CRE |  | (533) |  |  | (275) |  |  | 2,330 |  |  | (7,336) |
Multifamily residential |  | (8) |  |  | 2 |  |  | (8) |  |  | (6) |
Construction and land |  | — |  |  | (209) |  |  | — |  |  | (280) |
Total commercial |  | (6,595) |  |  | (6,944) |  |  | (12,418) |  |  | (23,152) |
Consumer: |  |  |  |  |  |  |  |
Residential mortgage: |  |  |  |  |  |  |  |
Single-family residential |  | — |  |  | — |  |  | — |  |  | (8) |
HELOCs |  | 82 |  |  | 3 |  |  | 85 |  |  | (23) |
Other consumer |  | — |  |  | (2,491) |  |  | — |  |  | (2,491) |
Total consumer |  | 82 |  |  | (2,488) |  |  | 85 |  |  | (2,522) |
Total loans held-for-investment |  | $ | (6,513) |  |  | $ | (9,432) |  |  | $ | (12,333) |  |  | $ | (25,674) |
Investments in tax credit and other investments, net |  | $ | — |  |  | $ | 877 |  |  | $ | — |  |  | $ | 877 |
OREO |  | $ | — |  |  | $ | (910) |  |  | $ | — |  |  | $ | (910) |
Other nonperforming assets |  | $ | (6,861) |  |  | $ | — |  |  | $ | (6,861) |  |  | $ | (3,890) |

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

($ in thousands) |  | Fair Value Measurements (Level 3) |  | Valuation Techniques |  | Unobservable Inputs |  | Range of Inputs |  | Weighted- Average of Inputs (1)
June 30, 2022 |  |  |  |  |  |  |  |  |  |
Loans held-for-investment |  | $ | 36,889 |  |  | Discounted cash flows |  | Discount |  | 4% — 6% |  | 4%
|  | $ | 19,293 |  |  | Fair value of collateral |  | Discount |  | 15% — 77% |  | 37%
|  | $ | 31,771 |  |  | Fair value of property |  | Selling cost |  | 8% |  | 8%
December 31, 2021 |  |  |  |  |  |  |  |  |  |
Loans held-for-investment |  | $ | 64,919 |  |  | Discounted cash flows |  | Discount |  | 4% — 15% |  | 7%
|  | $ | 38,537 |  |  | Fair value of collateral |  | Discount |  | 15% — 75% |  | 41%
|  | $ | 23,528 |  |  | Fair value of property |  | Selling cost |  | 8% |  | 8%

(1)Weighted-average of inputs is based on the relative fair value of the respective assets as of June 30, 2022 and December 31, 2021.
18

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

($ in thousands) |  | June 30, 2022
| Carrying Amount |  | Level 1 |  | Level 2 |  | Level 3 |  | Estimated Fair Value
Financial assets: |  |  |  |  |  |  |  |  |  |
Cash and cash equivalents |  | $ | 1,902,053 |  |  | $ | 1,902,053 |  |  | $ | — |  |  | $ | — |  |  | $ | 1,902,053 |
Interest-bearing deposits with banks |  | $ | 712,709 |  |  | $ | — |  |  | $ | 712,709 |  |  | $ | — |  |  | $ | 712,709 |
Resale agreements |  | $ | 1,422,794 |  |  | $ | — |  |  | $ | 1,348,036 |  |  | $ | — |  |  | $ | 1,348,036 |
HTM debt securities |  | $ | 3,028,302 |  |  | $ | 486,521 |  |  | $ | 2,170,028 |  |  | $ | — |  |  | $ | 2,656,549 |
Restricted equity securities, at cost |  | $ | 77,962 |  |  | $ | — |  |  | $ | 77,962 |  |  | $ | — |  |  | $ | 77,962 |
Loans held-for-sale |  | $ | 28,464 |  |  | $ | — |  |  | $ | 28,464 |  |  | $ | — |  |  | $ | 28,464 |
Loans held-for-investment, net |  | $ | 45,938,806 |  |  | $ | — |  |  | $ | — |  |  | $ | 45,860,749 |  |  | $ | 45,860,749 |
Mortgage servicing rights |  | $ | 5,909 |  |  | $ | — |  |  | $ | — |  |  | $ | 10,349 |  |  | $ | 10,349 |
Accrued interest receivable |  | $ | 172,008 |  |  | $ | — |  |  | $ | 172,008 |  |  | $ | — |  |  | $ | 172,008 |
Financial liabilities: |  |  |  |  |  |  |  |  |  |
Demand, checking, savings and money market deposits |  | $ | 44,965,778 |  |  | $ | — |  |  | $ | 44,965,778 |  |  | $ | — |  |  | $ | 44,965,778 |
Time deposits |  | $ | 9,377,576 |  |  | $ | — |  |  | $ | 9,318,992 |  |  | $ | — |  |  | $ | 9,318,992 |
FHLB advances |  | $ | 174,776 |  |  | $ | — |  |  | $ | 175,207 |  |  | $ | — |  |  | $ | 175,207 |
Repurchase agreements |  | $ | 611,785 |  |  | $ | — |  |  | $ | 619,280 |  |  | $ | — |  |  | $ | 619,280 |
Long-term debt |  | $ | 147,801 |  |  | $ | — |  |  | $ | 139,206 |  |  | $ | — |  |  | $ | 139,206 |
Accrued interest payable |  | $ | 9,596 |  |  | $ | — |  |  | $ | 9,596 |  |  | $ | — |  |  | $ | 9,596 |

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

19

Note 4 — Assets Purchased under Resale Agreements and Sold under Repurchase Agreements
Assets Purchased under Resale Agreements
In the resale agreements, the Company is exposed to credit risk for both the counterparties and the underlying collateral. The Company manages credit exposure from certain transactions by entering into master netting agreements and collateral arrangements with the counterparties. The relevant agreements allow for the efficient closeout of the transaction, liquidation and set-off of collateral against the net amount owed by the counterparty following a default. It is also the Company’s policy to take possession, where possible, of the assets underlying resale agreements. As a result of the Company’s credit risk mitigation practices with respect to resale agreements as described above, the Company did not hold any reserves for credit impairment with respect to these agreements as of both June 30, 2022 and December 31, 2021.
Securities Purchased under Resale Agreements — Total securities purchased under resale agreements were $1.13 billion as of June 30, 2022, and $1.33 billion as of December 31, 2021. The weighted-average yields were 1.96% and 1.54% for the three months ended June 30, 2022 and 2021, respectively; and 1.79% and 1.55% for the six months ended June 30, 2022 and 2021, respectively.
Loans Purchased under Resale Agreements — Total loans purchased under resale agreements were $289.8 million as of June 30, 2022, and $1.02 billion as of December 31, 2021. The weighted-average yields were 2.47% and 1.47% for the three months ended June 30, 2022 and 2021, respectively; and 1.91% and 1.64% for the six months ended June 30, 2022 and 2021, respectively.
Assets Sold under Repurchase Agreements — As of June 30, 2022, securities sold under the repurchase agreements consisted of U.S. government agency and U.S. government-sponsored enterprise mortgage-backed securities, and U.S. Treasury securities. Gross repurchase agreements were $611.8 million as of June 30, 2022, and $300.0 million as of December 31, 2021. The weighted-average interest rates were 2.70% and 2.63% for the three months ended June 30, 2022 and 2021, respectively; and 2.66% and 2.65% for the six months ended June 30, 2022 and 2021, respectively. As of June 30, 2022, $311.8 million and $300.0 million of the securities sold under repurchase agreements will mature in 2022 and 2023, respectively.
Balance Sheet Offsetting
The Company’s resale and repurchase agreements are transacted under legally enforceable master repurchase agreements that, in the event of default by the counterparty, provide the Company the right to liquidate securities held and to offset receivables and payables with the same counterparty. The Company nets resale and repurchase transactions with the same counterparty on the Consolidated Balance Sheet when it has a legally enforceable master netting agreement and the transactions are eligible for netting under ASC 210-20-45-11, Balance Sheet Offsetting Repurchase and Reverse Repurchase Agreements. Collateral received includes securities and loans that are not recognized on the Consolidated Balance Sheet. Collateral pledged consists of securities that are not netted on the Consolidated Balance Sheet against the related collateralized liability. Securities received or pledged as collateral in resale and repurchase agreements with other financial institutions may also be sold or re-pledged by the secured party, and are usually delivered to and held by the third-party trustees.
The following tables present the resale and repurchase agreements included on the Consolidated Balance Sheet as of June 30, 2022 and December 31, 2021:

($ in thousands) |  | June 30, 2022
Assets |  | Gross Amounts of Recognized Assets |  | Gross Amounts Offset on the Consolidated Balance Sheet |  | Net Amounts of Assets Presented on the Consolidated Balance Sheet |  | Gross Amounts Not Offset on the Consolidated Balance Sheet |  | Net Amount
|  |  |  | Collateral Received |
Resale agreements |  | $ | 1,422,794 |  |  | $ | — |  |  | $ | 1,422,794 |  |  | $ | (1,336,962) |  | (1) | $ | 85,832 |
Liabilities |  | Gross Amounts of Recognized Liabilities |  | Gross Amounts Offset on the Consolidated Balance Sheet |  | Net Amounts of Liabilities Presented on the Consolidated Balance Sheet |  | Gross Amounts Not Offset on the Consolidated Balance Sheet |  | Net Amount
|  |  |  | Collateral Pledged |
Repurchase agreements |  | $ | 611,785 |  |  | $ | — |  |  | $ | 611,785 |  |  | $ | (611,785) |  | (2) | $ | — |

20

($ in thousands) |  | December 31, 2021
|  | Gross Amounts of Recognized Assets |  | Gross Amounts Offset on the Consolidated Balance Sheet |  | Net Amounts of Assets Presented on the Consolidated Balance Sheet |  | Gross Amounts Not Offset on the Consolidated Balance Sheet |  |
Assets |  |  |  |  |  | Net Amount
|  |  |  | Collateral Received |
Resale agreements |  | $ | 2,353,503 |  |  | $ | — |  |  | $ | 2,353,503 |  |  | $ | (2,327,687) |  | (1) | $ | 25,816 |
Liabilities |  | Gross Amounts of Recognized Liabilities |  | Gross Amounts Offset on the Consolidated Balance Sheet |  | Net Amounts of Liabilities Presented on the Consolidated Balance Sheet |  | Gross Amounts Not Offset on the Consolidated Balance Sheet |  |
|  |  |  |  | Net Amount
|  |  |  | Collateral Pledged |
Repurchase agreements |  | $ | 300,000 |  |  | $ | — |  |  | $ | 300,000 |  |  | $ | (300,000) |  | (2) | $ | — |

(1)Represents the fair value of assets the Company has received under resale agreements, limited for table presentation purposes to the amount of the recognized asset due from each counterparty. The application of collateral cannot reduce the net position below zero. Therefore, excess collateral, if any, is not reflected above.
(2)Represents the fair value of assets the Company has pledged under repurchase agreements, limited for table presentation purposes to the amount of the recognized liability due to each counterparty. The application of collateral cannot reduce the net position below zero. Therefore, excess collateral, if any, is not reflected above.
In addition to the amounts included in the tables above, the Company also has balance sheet netting related to derivatives. Refer to Note 6 — Derivatives to the Consolidated Financial Statements in this Form 10-Q for additional information.
21

Note 5 — Securities
The following tables present the amortized cost, gross unrealized gains and losses and fair value by major categories of AFS and HTM debt securities as of June 30, 2022 and December 31, 2021:

($ in thousands) |  | June 30, 2022
| Amortized Cost |  |  |  | Gross Unrealized Gains |  | Gross Unrealized Losses |  | Fair Value
AFS debt securities: |  |  |  |  |  |  |  |  |  |
U.S. Treasury securities |  | $ | 676,320 |  |  |  |  | $ | — |  |  | $ | (51,634) |  |  | $ | 624,686 |
U.S. government agency and U.S. government-sponsored enterprise debt securities |  | 324,463 |  |  |  |  | — |  |  | (39,218) |  |  | 285,245 |
U.S. government agency and U.S. government-sponsored enterprise mortgage-backed securities: |  |  |  |  |  |  |  |  |  |
Commercial mortgage-backed securities |  | 614,135 |  |  |  |  | 125 |  |  | (50,428) |  |  | 563,832 |
Residential mortgage-backed securities |  | 2,097,339 |  |  |  |  | 193 |  |  | (187,292) |  |  | 1,910,240 |
Municipal securities |  | 306,419 |  |  |  |  | 22 |  |  | (39,708) |  |  | 266,733 |
Non-agency mortgage-backed securities: |  |  |  |  |  |  |  |  |  |
Commercial mortgage-backed securities |  | 451,200 |  |  |  |  | 247 |  |  | (39,679) |  |  | 411,768 |
Residential mortgage-backed securities |  | 808,012 |  |  |  |  | — |  |  | (81,023) |  |  | 726,989 |
Corporate debt securities |  | 673,502 |  |  |  |  | 105 |  |  | (114,314) |  |  | 559,293 |
Foreign government bonds |  | 253,118 |  |  |  |  | 648 |  |  | (10,769) |  |  | 242,997 |
Asset-backed securities |  | 69,764 |  |  |  |  | — |  |  | (2,414) |  |  | 67,350 |
CLOs |  | 617,250 |  |  |  |  | — |  |  | (20,879) |  |  | 596,371 |
Total AFS debt securities |  | 6,891,522 |  |  |  |  | 1,340 |  |  | (637,358) |  |  | 6,255,504 |
HTM debt securities: |  |  |  |  |  |  |  |  |  |
U.S. Treasury securities |  | 521,352 |  |  |  |  | — |  |  | (34,831) |  |  | 486,521 |
U.S. government agency and U.S. government-sponsored enterprise debt securities |  | 997,369 |  |  |  |  | — |  |  | (144,291) |  |  | 853,078 |
U.S. government agency and U.S. government-sponsored enterprise mortgage-backed securities: |  |  |  |  |  |  |  |  |  |
Commercial mortgage-backed securities |  | 512,391 |  |  |  |  | — |  |  | (62,563) |  |  | 449,828 |
Residential mortgage-backed securities |  | 807,111 |  |  |  |  | — |  |  | (96,637) |  |  | 710,474 |
Municipal securities |  | 190,079 |  |  |  |  | — |  |  | (33,431) |  |  | 156,648 |
Total HTM debt securities |  | 3,028,302 |  |  |  |  | — |  |  | (371,753) |  |  | 2,656,549 |
Total debt securities |  | $ | 9,919,824 |  |  |  |  | $ | 1,340 |  |  | $ | (1,009,111) |  |  | $ | 8,912,053 |

22

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

During the first quarter of 2022, the Company transferred $3.01 billion in fair value of debt securities from AFS to HTM. At the time of the transfer, $113.0 million of unrealized losses, net of tax, was retained in AOCI.
As of June 30, 2022 and December 31, 2021, the amortized cost of debt securities excluded accrued interest receivables of $34.9 million and $33.1 million, respectively, which are included in Other assets on the Consolidated Balance Sheet. For the Company’s accounting policy related to debt securities’ accrued interest receivable, see Note 1 — Summary of Significant Accounting Policies — Significant Accounting Policies — Allowance for Credit Losses on Available-for-Sale Debt Securities to the Consolidated Financial Statements in the Company’s 2021 Form 10-K and Note 2 — Current Accounting Developments and Summary of Significant Accounting Policies to the Consolidated Financial Statements in this Form 10-Q.
23

Unrealized Losses of Available-for-Sale Debt Securities
The following tables present the fair value and the associated gross unrealized losses of the Company’s AFS debt securities, aggregated by investment category and the length of time that the securities have been in a continuous unrealized loss position as of June 30, 2022 and December 31, 2021.

($ in thousands) |  | June 30, 2022
| 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 |  | $ | 466,095 |  |  | $ | (32,524) |  |  | $ | 158,591 |  |  | $ | (19,110) |  |  | $ | 624,686 |  |  | $ | (51,634) |
U.S. government agency and U.S. government sponsored enterprise debt securities |  | 249,274 |  |  | (35,689) |  |  | 35,971 |  |  | (3,529) |  |  | 285,245 |  |  | (39,218) |
U.S. government agency and U.S. government-sponsored enterprise mortgage-backed securities: |  |  |  |  |  |  |  |  |  |  |  |
Commercial mortgage-backed securities |  | 440,235 |  |  | (34,101) |  |  | 110,670 |  |  | (16,327) |  |  | 550,905 |  |  | (50,428) |
Residential mortgage-backed securities |  | 1,433,558 |  |  | (122,567) |  |  | 463,552 |  |  | (64,725) |  |  | 1,897,110 |  |  | (187,292) |
Municipal securities |  | 265,197 |  |  | (39,708) |  |  | — |  |  | — |  |  | 265,197 |  |  | (39,708) |
Non-agency mortgage-backed securities: |  |  |  |  |  |  |  |  |  |  |  |
Commercial mortgage-backed securities |  | 335,199 |  |  | (28,436) |  |  | 65,175 |  |  | (11,243) |  |  | 400,374 |  |  | (39,679) |
Residential mortgage-backed securities |  | 616,819 |  |  | (67,098) |  |  | 110,170 |  |  | (13,925) |  |  | 726,989 |  |  | (81,023) |
Corporate debt securities |  | 295,000 |  |  | (35,503) |  |  | 236,189 |  |  | (78,811) |  |  | 531,189 |  |  | (114,314) |
Foreign government bonds |  | 18,887 |  |  | (165) |  |  | 67,798 |  |  | (10,604) |  |  | 86,685 |  |  | (10,769) |
Asset-backed securities |  | 57,469 |  |  | (1,888) |  |  | 9,881 |  |  | (526) |  |  | 67,350 |  |  | (2,414) |
CLOs |  | 312,368 |  |  | (10,882) |  |  | 284,003 |  |  | (9,997) |  |  | 596,371 |  |  | (20,879) |
Total AFS debt securities |  | $ | 4,490,101 |  |  | $ | (408,561) |  |  | $ | 1,542,000 |  |  | $ | (228,797) |  |  | $ | 6,032,101 |  |  | $ | (637,358) |

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

24

As of June 30, 2022, the Company had a total of 531 AFS debt securities in a gross unrealized loss position with no credit impairment, consisting primarily of 244 U.S. government agency and U.S. government-sponsored enterprise mortgage-backed securities, 100 non-agency mortgage-backed securities, and 63 corporate debt securities. In comparison, as of December 31, 2021, the Company had a total of 431 AFS debt securities in a gross unrealized loss position with no credit impairment, consisting primarily of 180 U.S. government agency and U.S. government-sponsored enterprise mortgage-backed securities, 50 U.S. government agency and U.S. government-sponsored agency debt securities, 21 U.S. Treasury securities, and 30 corporate debt securities.
Allowance for Credit Losses on Available-for-Sale Debt Securities
Each reporting period, the Company assesses each AFS debt security that is in an unrealized loss position to determine whether the decline in fair value below the amortized cost basis resulted from a credit loss or other factors. For a discussion of the factors and criteria the Company uses in analyzing securities for impairment related to credit losses, see Note 1 — Summary of Significant Accounting Policies — Significant Accounting Policies — Allowance for Credit Losses on Available-for-Sale Debt Securities to the Consolidated Financial Statements in the Company’s 2021 Form 10-K.
The gross unrealized losses presented in the preceding tables were primarily attributable to interest rate movement and widening of liquidity and/or credit spreads. U.S. Treasury, U.S. government agency, U.S. government-sponsored agency, and U.S. government-sponsored enterprise mortgage-backed securities, are issued, guaranteed, or otherwise supported by the U.S. government and have a zero credit loss assumption. The other securities that were in an unrealized loss position as of June 30, 2022 were mainly comprised of the following:
•Non-agency mortgage-backed securities — The market value decline as of June 30, 2022 was primarily due to interest rate movement and spreads widening. Since these securities are rated investment grade by NRSROs, or have high priority in the cash flow waterfall within the securitization structure, and the contractual payments have historically been on time, the Company believes the risk of credit losses on these securities is low.
•Corporate debt securities — The market value decline as of June 30, 2022 was primarily due to interest rate movement and spreads widening. Since credit profiles of these securities are strong (rated investment grade by NRSROs) and the contractual payments from these bonds have been and are expected to be received on time, the Company believes that the risk of credit losses on these securities is low.
As of June 30, 2022 and December 31, 2021, the Company had the intent to hold the AFS debt securities with unrealized losses through the anticipated recovery period and it was more-likely-than-not that the Company will not have to sell these securities before the recovery of their amortized cost. The issuers of these securities have not, to the Company’s knowledge, established any cause for default on these securities. As a result, the Company expects to recover the entire amortized cost basis of these securities. Accordingly, there was no allowance for credit losses as of June 30, 2022 and December 31, 2021 provided against these securities. In addition, there was no provision for credit losses recognized for the three and six months ended June 30, 2022 and 2021. If a credit loss had been identified, the Company would record an impairment through the allowance for credit losses with a corresponding Provision for credit losses on the Consolidated Statement of Income.
Allowance for Credit Losses on Held-to-Maturity Debt Securities
The Company separately evaluates its HTM debt securities for any credit losses using an expected loss model, similar to the methodology used for loans. Any expected credit loss is recorded through the allowance for credit losses and is deducted from the amortized cost basis. The net amount the Company expects to collect is reflected on the Consolidated Balance Sheet.
The Company monitors the credit quality of the HTM debt securities using external credit ratings. As of June 30, 2022, all HTM securities were rated investment grade by NRSROs and issued, guaranteed, or supported by U.S. government entities and agencies. Accordingly, the Company applied a zero credit loss assumption and no allowance for credit losses was recorded as of June 30, 2022. Overall, the Company believes that the credit support levels of the debt securities are strong and, based on current assessments and macroeconomic forecasts, expects that full contractual cash flows will be received. For more information on the Company’s credit loss methodology, refer to Note 2 — Current Accounting Developments and Summary of Significant Accounting Policies to the Consolidated Financial Statements in this Form 10-Q.
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Realized Gains and Losses
The following table presents the gross realized gains and tax expense related to the sales of AFS debt securities for the three and six months ended June 30, 2022 and 2021:

($ in thousands) |  | Three Months Ended June 30, |  | Six Months Ended June 30, |  |
| 2022 |  | 2021 |  | 2022 |  | 2021 |  |  |  |
Gross realized gains |  | $ | 28 |  |  | $ | 632 |  |  | $ | 1,306 |  |  | $ | 824 |  |  |  |  |
Related tax expense |  | $ | 8 |  |  | $ | 187 |  |  | $ | 386 |  |  | $ | 244 |  |  |  |  |

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Contractual Maturities of Available-for-Sale and Held-to-Maturity Debt Securities
The following tables present the contractual maturities, amortized cost, fair value and weighted average yields of AFS and HTM debt securities as of June 30, 2022. Expected maturities will differ from contractual maturities on certain securities as the issuers and borrowers of the underlying collateral may have the right to call or prepay obligations with or without prepayment penalties.

($ in thousands) |  | Within One Year |  | After One Year through Five Years |  | After Five Years through Ten Years |  | After Ten Years |  | Total
AFS debt securities: |  |  |  |  |  |  |  |  |  |
U.S. Treasury securities |  |  |  |  |  |  |  |  |  |
Amortized cost |  | $ | — |  |  | $ | 576,626 |  |  | $ | 99,694 |  |  | $ | — |  |  | $ | 676,320 |
Fair value |  | — |  |  | 536,698 |  |  | 87,988 |  |  | — |  |  | 624,686 |
Weighted-average yield (1) |  | — | % |  | 1.28 | % |  | 0.74 | % |  | — | % |  | 1.20 | %
U.S. government agency and U.S. government-sponsored enterprise debt securities |  |  |  |  |  |  |  |  |  |
Amortized cost |  | — |  |  | 29,193 |  |  | 125,001 |  |  | 170,269 |  |  | 324,463 |
Fair value |  | — |  |  | 27,700 |  |  | 110,199 |  |  | 147,346 |  |  | 285,245 |
Weighted-average yield (1) |  | — | % |  | 1.62 | % |  | 1.16 | % |  | 2.09 | % |  | 1.69 | %
U.S. government agency and U.S. government-sponsored enterprise mortgage-backed securities: |  |  |  |  |  |  |  |  |  |
Amortized cost |  | — |  |  | 13,289 |  |  | 192,287 |  |  | 2,505,898 |  |  | 2,711,474 |
Fair value |  | — |  |  | 13,205 |  |  | 182,832 |  |  | 2,278,035 |  |  | 2,474,072 |
Weighted-average yield (1) |  | — | % |  | 3.11 | % |  | 2.69 | % |  | 2.11 | % |  | 2.15 | %
Municipal securities |  |  |  |  |  |  |  |  |  |
Amortized cost |  | — |  |  | 39,712 |  |  | 6,498 |  |  | 260,209 |  |  | 306,419 |
Fair value |  | — |  |  | 37,800 |  |  | 5,758 |  |  | 223,175 |  |  | 266,733 |
Weighted-average yield (1) (2) |  | — | % |  | 2.47 | % |  | 1.79 | % |  | 2.23 | % |  | 2.25 | %
Non-agency mortgage-backed securities |  |  |  |  |  |  |  |  |  |
Amortized cost |  | 10,019 |  |  | 196,136 |  |  | 40,404 |  |  | 1,012,653 |  |  | 1,259,212 |
Fair value |  | 9,894 |  |  | 189,963 |  |  | 39,224 |  |  | 899,676 |  |  | 1,138,757 |
Weighted-average yield (1) |  | 4.47 | % |  | 3.56 | % |  | 1.19 | % |  | 2.23 | % |  | 2.42 | %
Corporate debt securities |  |  |  |  |  |  |  |  |  |
Amortized cost |  | 10,000 |  |  | — |  |  | 334,502 |  |  | 329,000 |  |  | 673,502 |
Fair value |  | 9,847 |  |  | — |  |  | 309,395 |  |  | 240,051 |  |  | 559,293 |
Weighted average yield (1) |  | 3.26 | % |  | — | % |  | 3.59 | % |  | 1.98 | % |  | 2.80 | %
Foreign government bonds |  |  |  |  |  |  |  |  |  |
Amortized cost |  | 108,712 |  |  | 44,406 |  |  | 50,000 |  |  | 50,000 |  |  | 253,118 |
Fair value |  | 108,660 |  |  | 44,832 |  |  | 50,081 |  |  | 39,424 |  |  | 242,997 |
Weighted-average yield (1) |  | 1.82 | % |  | 3.01 | % |  | 0.55 | % |  | 1.50 | % |  | 1.71 | %
Asset-backed securities: |  |  |  |  |  |  |  |  |  |
Amortized cost |  | — |  |  | — |  |  | — |  |  | 69,764 |  |  | 69,764 |
Fair value |  | — |  |  | — |  |  | — |  |  | 67,350 |  |  | 67,350 |
Weighted-average yield (1) |  | — | % |  | — | % |  | — | % |  | 2.74 | % |  | 2.74 | %
CLOs |  |  |  |  |  |  |  |  |  |
Amortized cost |  | — |  |  | — |  |  | — |  |  | 617,250 |  |  | 617,250 |
Fair value |  | — |  |  | — |  |  | — |  |  | 596,371 |  |  | 596,371 |
Weighted average yield (1) |  | — | % |  | — | % |  | — | % |  | 2.22 | % |  | 2.22 | %
Total AFS debt securities |  |  |  |  |  |  |  |  |  |
Amortized cost |  | $ | 128,731 |  |  | $ | 899,362 |  |  | $ | 848,386 |  |  | $ | 5,015,043 |  |  | $ | 6,891,522 |
Fair value |  | $ | 128,401 |  |  | $ | 850,198 |  |  | $ | 785,477 |  |  | $ | 4,491,428 |  |  | $ | 6,255,504 |
Weighted-average yield (1) |  | 2.14 | % |  | 1.95 | % |  | 2.39 | % |  | 2.15 | % |  | 2.15 | %

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($ in thousands) |  | Within One Year |  | After One Year through Five Years |  | After Five Years through Ten Years |  | After Ten Years |  | Total
HTM debt securities: |  |  |  |  |  |  |  |  |  |
U.S. Treasury securities |  |  |  |  |  |  |  |  |  |
Amortized cost |  | $ | — |  | $ | 166,856 |  | $ | 354,496 |  | $ | — |  | $ | 521,352
Fair value |  | — |  | 156,200 |  | 330,321 |  | — |  | 486,521
Weighted-average yield (1) |  | — | % |  | 0.90 | % |  | 1.12 | % |  | — | % |  | 1.05 | %
U.S. government agency and U.S. government-sponsored enterprise debt securities |  |  |  |  |  |  |  |  |  |
Amortized cost |  | — |  | — |  | 213,101 |  | 784,268 |  | 997,369
Fair value |  | — |  | — |  | 193,357 |  | 659,721 |  | 853,078
Weighted-average yield (1) |  | — | % |  | — | % |  | 2.03 | % |  | 1.86 | % |  | 1.90 | %
U.S. government agency and U.S. government-sponsored enterprise mortgage-backed securities |  |  |  |  |  |  |  |  |  |
Amortized cost |  | — |  | — |  | 87,264 |  | 1,232,238 |  | 1,319,502
Fair value |  | — |  | — |  | 78,993 |  | 1,081,309 |  | 1,160,302
Weighted-average yield (1) |  | — | % |  | — | % |  | 1.60 | % |  | 1.59 | % |  | 1.59 | %
Municipal securities |  |  |  |  |  |  |  |  |  |
Amortized cost |  | — |  | — |  | — |  | 190,079 |  | 190,079
Fair value |  | — |  | — |  | — |  | 156,648 |  | 156,648
Weighted-average yield (1) (2) |  | — | % |  | — | % |  | — | % |  | 1.97 | % |  | 1.97 | %
Total HTM debt securities |  |  |  |  |  |  |  |  |  |
Amortized cost |  | $ | — |  | $ | 166,856 |  | $ | 654,861 |  | $ | 2,206,585 |  | $ | 3,028,302
Fair value |  | $ | — |  | $ | 156,200 |  | $ | 602,671 |  | $ | 1,897,678 |  | $ | 2,656,549
Weighted-average yield (1) |  | — | % |  | 0.90 | % |  | 1.48 | % |  | 1.72 | % |  | 1.62 | %

(1)Weighted-average yields are computed based on amortized cost balances.
(2)Yields on tax-exempt securities are not presented on a tax-equivalent basis.
As of June 30, 2022 and December 31, 2021, AFS and HTM debt securities with carrying valu es of $1.29 billion and $803.9 million, respectively, were pledged to secure public deposits, repurchase agreements and for other purposes required or permitted by law.
Restricted Equity Securities
The following table presents the restricted equity securities included in Other assets on the Consolidated Balance Sheet as of June 30, 2022 and December 31, 2021:

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

Note 6 — Derivatives
The Company uses derivatives to manage exposure to market risk, primarily interest rate or foreign currency risk, as well as to assist customers with their risk management objectives. The Company’s goal is to manage interest rate sensitivity and volatility to mitigate the effect of interest rate changes on earnings or capital. The Company also uses foreign exchange contracts to manage the foreign exchange rate risk associated with certain foreign currency-denominated assets and liabilities, as well as the Bank’s investment in East West Bank (China) Limited. The Company recognizes all derivatives on the Consolidated Balance Sheet at fair value. While the Company designates certain derivatives as hedging instruments in a qualifying hedge accounting relationship, other derivatives serve as economic hedges. For additional information on the Company’s derivatives and hedging activities, see Note 1 — Summary of Significant Accounting Policies — Significant Accounting Policies — Derivatives to the Consolidated Financial Statements of the Company’s 2021 Form 10-K.
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The following table presents the notional amounts and gross fair values of the Company’s derivatives, as well as the balance sheet netting adjustments on an aggregate basis as of June 30, 2022 and December 31, 2021. The derivative assets and liabilities are presented on a gross basis prior to the application of bilateral collateral and master netting agreements, but after applicable variation margin payments with central clearing organizations have been applied as settlement. 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 June 30, 2022 and December 31, 2021. The resulting net derivative asset and liability fair values are included in Other assets and Accrued expenses and other liabilities, respectively, on the Consolidated Balance Sheet.

($ in thousands) |  | June 30, 2022 |  | December 31, 2021
| Notional Amount |  | Fair Value |  | Notional Amount |  | Fair Value
|  | Derivative Assets |  | Derivative Liabilities |  |  | Derivative Assets |  | Derivative Liabilities
Derivatives designated as hedging instruments: |  |  |  |  |  |  |  |  |  |  |  |
Cash flow hedges: |  |  |  |  |  |  |  |  |  |  |  |
Interest rate contracts |  | $ | 1,525,000 |  |  | $ | 586 |  |  | $ | 96 |  |  | $ | 275,000 |  |  | $ | — |  |  | $ | 57 |
Net investment hedges: |  |  |  |  |  |  |  |  |  |  |  |
Foreign exchange contracts |  | 84,832 |  |  | 2,765 |  |  | — |  |  | 86,531 |  |  | — |  |  | 225 |
Total derivatives designated as hedging instruments |  | $ | 1,609,832 |  |  | $ | 3,351 |  |  | $ | 96 |  |  | $ | 361,531 |  |  | $ | — |  |  | $ | 282 |
Derivatives not designated as hedging instruments: |  |  |  |  |  |  |  |  |  |  |  |
Interest rate contracts |  | $ | 17,570,112 |  |  | $ | 260,740 |  |  | $ | 359,578 |  |  | $ | 17,575,420 |  |  | $ | 240,222 |  |  | $ | 179,905 |
Foreign exchange contracts |  | 2,654,194 |  |  | 39,559 |  |  | 29,144 |  |  | 1,874,681 |  |  | 21,033 |  |  | 15,276 |
Credit contracts |  | 121,784 |  |  | — |  |  | 76 |  |  | 72,560 |  |  | — |  |  | 141 |
Equity contracts |  | — |  | (1) | 359 |  |  | — |  |  | — |  | (1) | 220 |  |  | — |
Commodity contracts |  | — |  | (2) | 404,275 |  |  | 373,675 |  |  | — |  | (2) | 222,709 |  |  | 194,567 |
Total derivatives not designated as hedging instruments |  | $ | 20,346,090 |  |  | $ | 704,933 |  |  | $ | 762,473 |  |  | $ | 19,522,661 |  |  | $ | 484,184 |  |  | $ | 389,889 |
Gross derivative assets/liabilities |  |  |  | $ | 708,284 |  |  | $ | 762,569 |  |  |  |  | $ | 484,184 |  |  | $ | 390,171 |
Less: Master netting agreements |  |  |  | (126,414) |  |  | (126,414) |  |  |  |  | (58,679) |  |  | (58,679) |
Less: Cash collateral received/paid |  |  |  | (125,304) |  |  | — |  |  |  |  | (42,274) |  |  | (174,048) |
Net derivative assets/liabilities |  |  |  | $ | 456,566 |  |  | $ | 636,155 |  |  |  |  | $ | 383,231 |  |  | $ | 157,444 |

(1)The Company held equity contracts in one public company and 13 private companies as of June 30, 2022. In comparison, the Company held equity contracts in one public company and 12 private companies as of December 31, 2021.
(2)The notional amount of the Company’s commodity contracts entered with its customers totaled 8,211 thousand barrels of crude oil and 83,113 thousand units of natural gas, measured in million British thermal units (“MMBTUs”) as of June 30, 2022. In comparison, the notional amount of the Company’s commodity contracts entered with its customers totaled 7,519 thousand barrels of crude oil and 83,274 thousand MMBTUs of natural gas as of December 31, 2021. The Company simultaneously entered into the offsetting commodity contracts with mirrored terms with third-party financial institutions.
Derivatives Designated as Hedging Instruments
Cash Flow Hedges — In 2020, the Company entered into $275.0 million in total notional amounts of interest rate swaps that were designated as cash flow hedges to limit the exposure to the variability in interest payments on certain floating rate borrowings. During the six months ended June 30, 2022, the Company entered into $1.00 billion in notional amounts of interest rate swaps and $250.0 million in notional amounts of interest rate collars. These derivative instruments were designated as cash flow hedges to limit the exposure to the variability in interest receipts on certain variable-rate CRE loans. Changes in the fair values of cash flow hedges are recognized in AOCI and reclassified to earnings in the same period when the hedged cash flows impact earnings. Reclassified gains and losses on these interest rate contracts are recorded either in the same line item as the interest payments of the hedged long-term borrowings within Interest expense, or in the same line items as the interest receipts of the hedged variable-rate CRE loans within Interest and dividend income in the Consolidated Statements of Income. Considering the interest rates, yield curve and notional amounts as of June 30, 2022, the Company expected to reclassify an estimated $11.3 million of after-tax net losses on derivative instruments designated as cash flow hedges from AOCI into earnings during the next 12 months.
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The following table presents the pre-tax changes in AOCI from cash flow hedges for the three and six months ended June 30, 2022 and 2021. The after-tax impact of cash flow hedges on AOCI is discussed in Note 13 — Accumulated Other Comprehensive Income (Loss) to the Consolidated Financial Statements in this Form-10-Q.

($ in thousands) |  | Three Months Ended June 30, |  | Six Months Ended June 30, |  |
| 2022 |  | 2021 |  | 2022 |  | 2021 |  |  |  |
(Losses) gains recognized in AOCI: |  |  |  |  |  |  |  |  |  |  |  |
Interest rate contracts |  | $ | (7,837) |  |  | $ | (106) |  |  | $ | (40,446) |  |  | $ | 320 |  |  |  |  |
Gains (losses) reclassified from AOCI into earnings: |  |  |  |  |  |  |  |  |  |  |  |
Interest expense |  | $ | 308 |  |  | $ | (201) |  |  | $ | 135 |  |  | $ | (378) |  |  |  |  |
Interest income |  | 812 |  |  | — |  |  | 3,085 |  |  | — |  |  |  |  |
Total |  | $ | 1,120 |  |  | $ | (201) |  |  | $ | 3,220 |  |  | $ | (378) |  |  |  |  |

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 following table presents the after-tax gains (losses) recognized in AOCI on net investment hedges for the three and six months ended June 30, 2022 and 2021:

($ in thousands) |  | Three Months Ended June 30, |  | Six Months Ended June 30, |  |  |  |
| 2022 |  | 2021 |  | 2022 |  | 2021 |  |  |  |  |  |
Gains (losses) recognized in AOCI |  | $ | 2,319 |  |  | $ | (1,643) |  |  | $ | 1,200 |  |  | $ | (1,543) |  |  |  |  |  |  |

Derivatives Not Designated as Hedging Instruments
Interest Rate Contracts — The Company enters into interest rate contracts, which include interest rate swaps and options with its customers to allow the customers to hedge against the risk of rising interest rates on their variable-rate loans. To economically hedge against the interest rate risks in the products offered to its customers, the Company enters into mirrored offsetting interest rate contracts with third-party financial institutions, including central clearing organizations.
The following tables present the notional amounts and the gross fair values of interest rate derivative contracts outstanding as of June 30, 2022 and December 31, 2021:

($ in thousands) |  | June 30, 2022
| Customer Counterparty |  | ($ in thousands) |  | Financial Counterparty
| Notional Amount |  | Fair Value |  |  | Notional Amount |  | Fair Value
|  | Assets |  | Liabilities |  |  |  | Assets |  | Liabilities
Purchased options |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | Purchased options |  | $ | 1,513,842 |  |  | $ | 20,933 |  |  | $ | — |
Written options |  | 1,481,552 |  |  | — |  |  | 19,760 |  |  | Written options |  | 32,290 |  |  | — |  |  | 1,076 |
Sold collars and corridors |  | 187,168 |  |  | 9 |  |  | 5,040 |  |  | Collars and corridors |  | 187,168 |  |  | 5,071 |  |  | 9 |
Swaps |  | 7,069,901 |  |  | 8,482 |  |  | 326,853 |  |  | Swaps |  | 7,098,191 |  |  | 226,245 |  |  | 6,840 |
Total |  | $ | 8,738,621 |  |  | $ | 8,491 |  |  | $ | 351,653 |  |  | Total |  | $ | 8,831,491 |  |  | $ | 252,249 |  |  | $ | 7,925 |

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

Included in the total notional amount of $8.83 billion of interest rate contracts entered into with financial counterparties as of June 30, 2022, was a notional amount of $2.24 billion of interest rate swaps that cleared through London Clearing House (“LCH”). Applying variation margin payments as settlement to LCH cleared derivative transactions resulted in a reduction in derivative asset fair value of $113.2 million and a reduction in liability fair value of $2.2 million as of June 30, 2022. In comparison, included in the total notional amount of $8.80 billion of interest rate contracts entered into with financial counterparties as of December 31, 2021, was a notional amount of $2.79 billion of interest rate swaps that cleared through LCH. Applying variation margin payments as settlement to LCH cleared derivative transactions resulted in a reduction in derivative asset fair values of $18.1 million and a reduction in liability fair values of $79.9 million as of December 31, 2021.
Foreign Exchange Contracts — The Company enters into foreign exchange contracts with its customers, consisting of forward, spot, swap and option contracts to accommodate the business needs of its customers. The Company enters into offsetting foreign exchange contracts with third-party financial institutions to manage its foreign exchange exposure with its customers, or enters into bilateral collateral and master netting agreements with certain customer counterparties to manage its credit exposure. The Company also utilizes foreign exchange contracts, which are not designated as hedging instruments, to mitigate the economic effect of currency fluctuations on certain foreign currency-denominated on-balance sheet assets and liabilities, primarily foreign currency-denominated deposits offered to its customers. A majority of the foreign exchange contracts had original maturities of one year or less as of both June 30, 2022 and December 31, 2021.
The following tables present the notional amounts and the gross fair values of foreign exchange derivative contracts outstanding as of June 30, 2022 and December 31, 2021:

($ in thousands) |  | June 30, 2022
| Customer Counterparty |  | ($ in thousands) |  | Financial Counterparty
| Notional Amount |  | Fair Value |  |  | Notional Amount |  | Fair Value
|  | Assets |  | Liabilities |  |  |  | Assets |  | Liabilities
Forwards and spots |  | $ | 954,101 |  |  | $ | 13,188 |  |  | $ | 19,119 |  |  | Forwards and spots |  | $ | 310,784 |  |  | $ | 10,139 |  |  | $ | 2,014 |
Swaps |  | 175,373 |  |  | 648 |  |  | 864 |  |  | Swaps |  | 1,163,410 |  |  | 15,061 |  |  | 6,624 |
Written options |  | 20,000 |  |  | 170 |  |  | 312 |  |  | Purchased options |  | 20,000 |  |  | 312 |  |  | 170 |
Collars |  | 5,263 |  |  | — |  |  | 41 |  |  | Collars |  | 5,263 |  |  | 41 |  |  | — |
Total |  | $ | 1,154,737 |  |  | $ | 14,006 |  |  | $ | 20,336 |  |  | Total |  | $ | 1,499,457 |  |  | $ | 25,553 |  |  | $ | 8,808 |

($ in thousands) |  | December 31, 2021
| Customer Counterparty |  | ($ in thousands) |  | Financial Counterparty
| Notional Amount |  | Fair Value |  |  | Notional Amount |  | Fair Value
|  | Assets |  | Liabilities |  |  |  | Assets |  | Liabilities
Forwards and spots |  | $ | 900,290 |  |  | $ | 13,688 |  |  | $ | 9,446 |  |  | Forwards and spots |  | $ | 267,689 |  |  | $ | 1,564 |  |  | $ | 2,695 |
Swaps |  | 66,474 |  |  | 1,034 |  |  | 17 |  |  | Swaps |  | 599,654 |  |  | 4,745 |  |  | 3,116 |
Written options |  | 20,287 |  |  | 1 |  |  | — |  |  | Purchased options |  | 20,287 |  |  | 1 |  |  | 2 |
Total |  | $ | 987,051 |  |  | $ | 14,723 |  |  | $ | 9,463 |  |  | Total |  | $ | 887,630 |  |  | $ | 6,310 |  |  | $ | 5,813 |

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Credit Contracts — The Company may periodically enter into credit RPAs with institutional counterparties to manage the credit exposure of the interest rate contracts associated with the syndicated loans. The Company may enter into protection sold or protection purchased RPAs. The purchaser of credit protection that enters into an interest rate contract with the borrower, may in turn enter into an RPA with a seller of protection, under which the seller of protection receives a fee to accept a portion of the credit risk. A seller of credit protection is required to make payments to the buyer 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 part of the normal credit review and monitoring process. The majority of the reference entities of the protection sold RPAs were investment grade as of both June 30, 2022 and December 31, 2021. Assuming the underlying borrowers referenced in the interest rate contracts defaulted as of June 30, 2022 and December 31, 2021, the maximum exposure of protection sold RPAs would be $38 thousand and $3.2 million, respectively. As of June 30, 2022 and December 31, 2021, the weighted-average remaining maturities of the outstanding protection sold RPAs were 2.6 years and 3.2 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 outstanding as of June 30, 2022 and December 31, 2021:

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

Equity Contracts — From time to time, as part of the Company’s loan origination process, the Company obtains warrants to purchase preferred and/or common stock of technology and life science companies to which it provides loans. Warrants grant the Company the right to buy a certain class of the underlying company’s equity at a certain price before expiration. The Company held warrants in one public company and 13 private companies as of June 30, 2022, and held warrants in one public company and 12 private companies as of December 31, 2021. The total fair value of the warrants held was $359 thousand and $220 thousand as of June 30, 2022 and December 31, 2021, respectively.
Commodity Contracts — The Company enters into energy commodity contracts in the form of swaps and options with its commercial loan customers to allow them to hedge against the risk of energy commodity price fluctuation. To economically hedge against the risk and exposure of commodity price fluctuation in the products offered to its customers, the Company enters into offsetting commodity contracts with third-party financial institutions.
The following tables present the notional amounts and fair values of the commodity derivative positions outstanding as of June 30, 2022 and December 31, 2021:

($ and units in thousands) |  | June 30, 2022
| Customer Counterparty |  | ($ and units in thousands) |  | Financial Counterparty
| Notional Unit |  | Fair Value |  |  | Notional Unit |  | Fair Value
|  | Assets |  | Liabilities |  |  |  | Assets |  | Liabilities
Crude oil: |  |  |  |  |  |  |  |  |  | Crude oil: |  |  |  |  |  |  |  |
Written options |  | 1,205 |  |  | Barrels |  | $ | 1,330 |  |  | $ | — |  |  | Purchased options |  | 1,205 |  |  | Barrels |  | $ | — |  |  | $ | 1,154 |
Collars |  | 3,218 |  |  | Barrels |  | 70,802 |  |  | 817 |  |  | Collars |  | 3,223 |  |  | Barrels |  | 288 |  |  | 65,988 |
Swaps |  | 3,788 |  |  | Barrels |  | 105,189 |  |  | 2,658 |  |  | Swaps |  | 5,935 |  |  | Barrels |  | 43,075 |  |  | 133,723 |
Total |  | 8,211 |  |  |  |  | $ | 177,321 |  |  | $ | 3,475 |  |  | Total |  | 10,363 |  |  |  |  | $ | 43,363 |  |  | $ | 200,865 |
Natural gas: |  |  |  |  |  |  |  |  |  | Natural gas: |  |  |  |  |  |  |  |
Collars |  | 28,206 |  |  | MMBTUs |  | 29,062 |  |  | 3,815 |  |  | Collars |  | 30,122 |  |  | MMBTUs |  | 2,999 |  |  | 28,390 |
Swaps |  | 54,907 |  |  | MMBTUs |  | 98,480 |  |  | 6,478 |  |  | Swaps |  | 91,869 |  |  | MMBTUs |  | 53,050 |  |  | 130,652 |
Total |  | 83,113 |  |  |  |  | $ | 127,542 |  |  | $ | 10,293 |  |  | Total |  | 121,991 |  |  |  |  | $ | 56,049 |  |  | $ | 159,042 |
Total |  |  |  |  |  | $ | 304,863 |  |  | $ | 13,768 |  |  | Total |  |  |  |  |  | $ | 99,412 |  |  | $ | 359,907 |

32

($ and units in thousands) |  | December 31, 2021
| Customer Counterparty |  | ($ and units in thousands) |  | Financial Counterparty
| Notional Unit |  | Fair Value |  |  | Notional Unit |  | Fair Value
|  | Assets |  | Liabilities |  |  |  | Assets |  | Liabilities
Crude oil: |  |  |  |  |  |  |  |  |  | Crude oil: |  |  |  |  |  |  |  |
Written options |  | — |  |  | Barrels |  | $ | 87 |  |  | $ | — |  |  | Purchased options |  | — |  |  | Barrels |  | $ | — |  |  | $ | 81 |
Collars |  | 2,837 |  |  | Barrels |  | 33,826 |  |  | 106 |  |  | Collars |  | 2,888 |  |  | Barrels |  | — |  |  | 33,399 |
Swaps |  | 4,682 |  |  | Barrels |  | 71,242 |  |  | 60 |  |  | Swaps |  | 7,517 |  |  | Barrels |  | 27,524 |  |  | 82,723 |
Total |  | 7,519 |  |  |  |  | $ | 105,155 |  |  | $ | 166 |  |  | Total |  | 10,405 |  |  |  |  | $ | 27,524 |  |  | $ | 116,203 |
Natural gas: |  |  |  |  |  |  |  |  |  | Natural gas: |  |  |  |  |  |  |  |
Collars |  | 24,315 |  |  | MMBTUs |  | $ | 10,903 |  |  | $ | 458 |  |  | Collars |  | 25,929 |  |  | MMBTUs |  | $ | 1,136 |  |  | $ | 10,936 |
Swaps |  | 58,959 |  |  | MMBTUs |  | 49,188 |  |  | 3,775 |  |  | Swaps |  | 109,567 |  |  | MMBTUs |  | 28,803 |  |  | 63,029 |
Total |  | 83,274 |  |  |  |  | $ | 60,091 |  |  | $ | 4,233 |  |  | Total |  | 135,496 |  |  |  |  | $ | 29,939 |  |  | $ | 73,965 |
Total |  |  |  |  |  | $ | 165,246 |  |  | $ | 4,399 |  |  | Total |  |  |  |  |  | $ | 57,463 |  |  | $ | 190,168 |

As of June 30, 2022, the notional amounts that cleared through the Chicago Mercantile Exchange (“CME”) totaled 1,100 thousand barrels of crude oil and 14,625 thousand MMBTUs of natural gas. Applying the variation margin payments as settlement to CME-cleared derivative transactions resulted in a reduction to the gross derivative asset fair value of $2.1 million and a reduction to the liability fair value of $28.9 million, respectively, as of June 30, 2022. In comparison, the notional amounts that cleared through CME totaled 1,036 thousand barrels of crude oil and 11,490 thousand MMBTUs of natural gas as of December 31, 2021. Applying the variation margin payments as settlement to CME-cleared derivative transactions resulted in a reduction to the gross derivative asset fair value of $2.2 million and a reduction to the liability fair value of $25.8 million, respectively, as of December 31, 2021.
The following table presents the net gains (losses) recognized on the Company’s Consolidated Statement of Income related to derivatives not designated as hedging instruments for the three and six months ended June 30, 2022 and 2021:

($ in thousands) |  | Classification on Consolidated Statement of Income |  | Three Months Ended June 30, |  | Six Months Ended June 30,
|  | 2022 |  | 2021 |  | 2022 |  | 2021
Derivatives not designated as hedging instruments: |  |  |  |  |  |  |  |  |  |
Interest rate contracts |  | Interest rate contracts and other derivative income (loss) |  | $ | 5,984 |  |  | $ | (5,338) |  |  | $ | 13,569 |  |  | $ | 8,563 |
Foreign exchange contracts |  | Foreign exchange income |  | (4,557) |  |  | 11,972 |  |  | 2,765 |  |  | 22,215 |
Credit contracts |  | Interest rate contracts and other derivative income (loss) |  | (9) |  |  | 150 |  |  | 65 |  |  | 195 |
Equity contracts |  | Lending fees |  | 93 |  |  | 74 |  |  | 187 |  |  | 385 |
Commodity contracts |  | Interest rate contracts and other derivative income (loss) |  | 344 |  |  | (188) |  |  | 295 |  |  | (19) |
Net gains |  |  |  | $ | 1,855 |  |  | $ | 6,670 |  |  | $ | 16,881 |  |  | $ | 31,339 |

Credit Risk-Related Contingent Features — Certain of the Company’s over-the-counter derivative contracts contain early termination provisions that may require the Company to settle any outstanding balances upon the occurrence of a specified credit risk-related event. Such event primarily relates to a downgrade in the credit rating of East West Bank to below investment grad e. As of June 30, 2022, the aggregate fair value amounts of all derivative instruments with credit risk-related contingent features that were in a net liability position totaled $31.6 million, in which $28.3 million of collateral was posted to cover these positions. In comparison, a s of December 31, 2021, the aggregate fair value amounts of all derivative instruments with credit risk-related contingent features that were in a net liability position totaled $66.8 million, in which $66.6 million of collateral was posted to cover these positions. In the event that the credit rating of East West Bank had been downgraded to below investment grade, minimal additional collateral would have been required to be posted as of June 30, 2022 and December 31, 2021.
33

Offsetting of Derivatives
The following tables present the gross derivative fair values, the balance sheet netting adjustments and the resulting net fair values recorded on the consolidated balance sheet, as well as the cash and noncash collateral associated with master netting arrangements. The gross amounts of derivative assets and liabilities are presented after the application of variation margin payments as settlements 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) |  | As of June 30, 2022
|  | Gross Amounts Recognized (1) |  | Gross Amounts Offset on the Consolidated Balance Sheet |  | Net Amounts Presented on the Consolidated Balance Sheet |  | Gross Amounts Not Offset on the Consolidated Balance Sheet |  | Net Amount
|  | Master Netting Arrangements |  | Cash Collateral Received (3) |  |  | Security Collateral Received (5) |
Derivative assets |  | $ | 708,284 |  |  | $ | (126,414) |  |  | $ | (125,304) |  |  | $ | 456,566 |  |  | $ | — |  |  | $ | 456,566 |
|  | Gross Amounts Recognized (2) |  | Gross Amounts Offset on the Consolidated Balance Sheet |  | Net Amounts Presented on the Consolidated Balance Sheet |  | Gross Amounts Not Offset on the Consolidated Balance Sheet |  | Net Amount
|  | Master Netting Arrangements |  | Cash Collateral Pledged (4) |  |  | Security Collateral Pledged (5) |
Derivative liabilities |  | $ | 762,569 |  |  | $ | (126,414) |  |  | $ | — |  |  | $ | 636,155 |  |  | $ | (118,694) |  |  | $ | 517,461 |

($ in thousands) |  | As of December 31, 2021
|  | Gross Amounts Recognized (1) |  | Gross Amounts Offset on the Consolidated Balance Sheet |  | Net Amounts Presented on the Consolidated Balance Sheet |  | Gross Amounts Not Offset on the Consolidated Balance Sheet |  | Net Amount
|  | Master Netting Arrangements |  | Cash Collateral Received (3) |  |  | Security Collateral Received (5) |
Derivative assets |  | $ | 484,184 |  |  | $ | (58,679) |  |  | $ | (42,274) |  |  | $ | 383,231 |  |  | $ | — |  |  | $ | 383,231 |
|  | Gross Amounts Recognized (2) |  | Gross Amounts Offset on the Consolidated Balance Sheet |  | Net Amounts Presented on the Consolidated Balance Sheet |  | Gross Amounts Not Offset on the Consolidated Balance Sheet |  | Net Amount
|  | Master Netting Arrangements |  | Cash Collateral Pledged (4) |  |  | Security Collateral Pledged (5) |
Derivative liabilities |  | $ | 390,171 |  |  | $ | (58,679) |  |  | $ | (174,048) |  |  | $ | 157,444 |  |  | $ | (106,598) |  |  | $ | 50,846 |

(1)Includes $1.1 million and $587 thousand of gross fair value assets with counterparties that were not subject to enforceable master netting arrangements or similar agreements as of June 30, 2022 and December 31, 2021, respectively.
(2)Includes $517 thousand and $666 thousand of gross fair value liabilities with counterparties that were not subject to enforceable master netting arrangements or similar agreements as of June 30, 2022 and December 31, 2021, respectively.
(3)Gross cash collateral received under master netting arrangements or similar agreements were $141.9 million and $47.0 million as of June 30, 2022 and December 31, 2021, respectively. Of the gross cash collateral received, $125.3 million and $42.3 million were used to offset against derivative assets as of June 30, 2022 and December 31, 2021, respectively.
(4)No cash collateral was pledged under master netting arrangements or similar agreements as of June 30, 2022. In comparison, cash collateral pledged under master netting arrangements or similar agreements was $176.5 million as of December 31, 2021, of which $174.0 million were used to offset against derivative liabilities as of December 31, 2021.
(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 but requires the disclosure of such amounts.
In addition to the amounts included in the tables above, the Company also has balance sheet netting related to the resale and repurchase agreements. Refer to Note 4 — Assets Purchased under Resale Agreements and Sold under Repurchase Agreements to the Consolidated Financial Statements in this Form 10-Q for additional information. Refer to Note 3 — Fair Value Measurement and Fair Value of Financial Instruments to the Consolidated Financial Statements in this Form 10-Q for fair value measurement disclosures on derivatives.
34

Note 7 — Loans Receivable and Allowance for Credit Losses
The following table presents the composition of the Company’s loans held-for-investment outstanding as of June 30, 2022 and December 31, 2021:

($ in thousands) |  | June 30, 2022 |  | December 31, 2021
Commercial: |  |  |  |
C&I (1) |  | $ | 15,377,117 |  |  | $ | 14,150,608 |
CRE: |  |  |  |
CRE |  | 13,566,748 |  |  | 12,155,047 |
Multifamily residential |  | 4,443,704 |  |  | 3,675,605 |
Construction and land |  | 515,857 |  |  | 346,486 |
Total CRE |  | 18,526,309 |  |  | 16,177,138 |
Total commercial |  | 33,903,426 |  |  | 30,327,746 |
Consumer: |  |  |  |
Residential mortgage: |  |  |  |
Single-family residential |  | 10,234,473 |  |  | 9,093,702 |
HELOCs |  | 2,280,080 |  |  | 2,144,821 |
Total residential mortgage |  | 12,514,553 |  |  | 11,238,523 |
Other consumer |  | 84,097 |  |  | 127,512 |
Total consumer |  | 12,598,650 |  |  | 11,366,035 |
Total loans held-for-investment (2) |  | $ | 46,502,076 |  |  | $ | 41,693,781 |
Allowance for loan losses |  | (563,270) |  |  | (541,579) |
Loans held-for-investment, net (2) |  | $ | 45,938,806 |  |  | $ | 41,152,202 |

(1)Includes Paycheck Protection Program loans of $153.3 million and $534.2 million as of June 30, 2022 and December 31, 2021, respectively.
(2)Includes $(56.2) million and $(50.7) million of net deferred loan fees and net unamortized premiums as of June 30, 2022 and December 31, 2021, respectively.
L oans held-for-investment accrued interest receivable was $132.3 million and $107.4 million as of June 30, 2022 and December 31, 2021, respectively, and is included in Other assets on the Consolidated Balance Sheet. Interest income reversed for the three and six months ended June 30, 2022 and 2021 was insignificant. For the Company’s accounting policy on accrued interest receivable related to loans held-for-investment, see Note 1 — Summary of Significant Accounting Policies — Significant Accounting Policies to the Consolidated Financial Statements of the Company’s 2021 Form 10-K.
The Company’s FRBSF and FHLB borrowings are primarily secured by loans held-for-investment. Loans held-for-investment totaling $26.78 billion and $27.67 billion, respectively, were pledged to secure borrowings and provide additional borrowing capacity as of June 30, 2022 and December 31, 2021.
Credit Quality Indicators
All loans are subject to the Company’s credit review and monitoring process. For the commercial loan portfolio, loans are risk rated based on an analysis of the borrower’s current payment performance or delinquency, repayment sources, financial and liquidity factors, including industry and geographic considerations. For the consumer loan portfolio, payment performance or delinquency is typically the driving indicator for risk ratings.
The Company utilizes internal credit risk ratings to assign each individual loan a risk rating of 1 through 10:
•Pass — loans risk rated 1 through 5 are assigned an internal risk rating category of “Pass.” Loans risk rated 1 are typically loans fully secured by cash. Pass loans have sufficient sources of repayment to repay the loan in full, in accordance with all terms and conditions.
•Special mention — loans assigned a risk rating of 6 have potential weaknesses that warrant closer attention by management; these are assigned an internal risk rating category of “Special Mention.”
•Substandard — loans assigned a risk rating of 7 or 8 have well-defined weaknesses that may jeopardize the full and timely repayment of the loan; these are assigned an internal risk rating category of “Substandard.”
•Doubtful — loans assigned a risk rating of 9 have insufficient sources of repayment and a high probability of loss; these are assigned an internal risk rating category of “Doubtful.”
•Loss — loans assigned a risk rating of 10 are uncollectible and of such little value that they are no longer considered bankable assets; these are assigned an internal risk rating category of “Loss.”
35

Loan exposures categorized as criticized consist of special mention, substandard, doubtful and loss categories. The Company reviews the internal risk ratings of its loan portfolio on a regular basis, and adjusts the ratings based on changes in the borrowers’ financial status and the collectability of the loans.
The following tables summarize the Company’s loans held-for-investment by loan portfolio segments, internal risk ratings and vintage year as of June 30, 2022 and December 31, 2021. The vintage year is the year of origination, renewal or major modification.

($ in thousands) |  | June 30, 2022
| Term Loans by Origination Year |  | Revolving Loans |  | Revolving Loans Converted to Term Loans |  | Total
| 2022 |  | 2021 |  | 2020 |  | 2019 |  | 2018 |  | Prior |  |  |
Commercial: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
C&I: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Pass |  | $ | 1,632,575 |  |  | $ | 2,948,526 |  |  | $ | 769,887 |  |  | $ | 524,311 |  |  | $ | 170,119 |  |  | $ | 270,405 |  |  | $ | 8,656,225 |  |  | $ | 28,475 |  |  | $ | 15,000,523 |
Criticized (accrual) |  | 64,608 |  |  | 43,748 |  |  | 50,746 |  |  | 32,574 |  |  | 24,206 |  |  | 19,222 |  |  | 101,437 |  |  | — |  |  | 336,541 |
Criticized (nonaccrual) |  | 3,242 |  |  | 4,129 |  |  | 15,356 |  |  | — |  |  | 5,630 |  |  | 11,660 |  |  | 36 |  |  | — |  |  | 40,053 |
Total C&I |  | 1,700,425 |  |  | 2,996,403 |  |  | 835,989 |  |  | 556,885 |  |  | 199,955 |  |  | 301,287 |  |  | 8,757,698 |  |  | 28,475 |  |  | 15,377,117 |
CRE: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Pass |  | 2,638,027 |  |  | 2,565,665 |  |  | 1,815,298 |  |  | 1,907,721 |  |  | 1,598,242 |  |  | 2,358,965 |  |  | 150,983 |  |  | 14,498 |  |  | 13,049,399 |
Criticized (accrual) |  | 5,023 |  |  | 109,974 |  |  | 69,751 |  |  | 99,541 |  |  | 101,188 |  |  | 102,333 |  |  | 1,455 |  |  | 16,808 |  |  | 506,073 |
Criticized (nonaccrual) |  | — |  |  | 4,201 |  |  | — |  |  | — |  |  | — |  |  | 7,075 |  |  | — |  |  | — |  |  | 11,276 |
Subtotal CRE |  | 2,643,050 |  |  | 2,679,840 |  |  | 1,885,049 |  |  | 2,007,262 |  |  | 1,699,430 |  |  | 2,468,373 |  |  | 152,438 |  |  | 31,306 |  |  | 13,566,748 |
Multifamily residential: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Pass |  | 1,091,403 |  |  | 967,791 |  |  | 687,577 |  |  | 591,961 |  |  | 371,378 |  |  | 661,082 |  |  | 13,301 |  |  | — |  |  | 4,384,493 |
Criticized (accrual) |  | — |  |  | — |  |  |  |  | 714 |  |  | 20,454 |  |  | 36,577 |  |  | — |  |  | — |  |  | 57,745 |
Criticized (nonaccrual) |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 1,466 |  |  | — |  |  | — |  |  | 1,466 |
Subtotal multifamily residential |  | 1,091,403 |  |  | 967,791 |  |  | 687,577 |  |  | 592,675 |  |  | 391,832 |  |  | 699,125 |  |  | 13,301 |  |  | — |  |  | 4,443,704 |
Construction and land: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Pass |  | 94,071 |  |  | 232,421 |  |  | 98,608 |  |  | 60,928 |  |  | 3,332 |  |  | 236 |  |  | — |  |  | — |  |  | 489,596 |
Criticized (accrual) |  | — |  |  |  |  | 4,405 |  |  | — |  |  | 21,856 |  |  | — |  |  | — |  |  | — |  |  | 26,261 |
Criticized (nonaccrual) |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |
Subtotal construction and land |  | 94,071 |  |  | 232,421 |  |  | 103,013 |  |  | 60,928 |  |  | 25,188 |  |  | 236 |  |  | — |  |  | — |  |  | 515,857 |
Total CRE |  | 3,828,524 |  |  | 3,880,052 |  |  | 2,675,639 |  |  | 2,660,865 |  |  | 2,116,450 |  |  | 3,167,734 |  |  | 165,739 |  |  | 31,306 |  |  | 18,526,309 |
Total commercial |  | 5,528,949 |  |  | 6,876,455 |  |  | 3,511,628 |  |  | 3,217,750 |  |  | 2,316,405 |  |  | 3,469,021 |  |  | 8,923,437 |  |  | 59,781 |  |  | 33,903,426 |
Consumer: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Residential mortgage: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Single-family residential: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Pass (1) |  | 1,983,527 |  |  | 2,565,374 |  |  | 1,903,821 |  |  | 1,194,265 |  |  | 898,768 |  |  | 1,655,824 |  |  | — |  |  | — |  |  | 10,201,579 |
Criticized (accrual) |  | — |  |  | — |  |  | 2,146 |  |  | 1,087 |  |  | 2,159 |  |  | 1,301 |  |  | — |  |  | — |  |  | 6,693 |
Criticized (nonaccrual) (1) |  | — |  |  | — |  |  | 753 |  |  | 2,778 |  |  | 8,504 |  |  | 14,166 |  |  | — |  |  | — |  |  | 26,201 |
Total single-family residential mortgage |  | 1,983,527 |  |  | 2,565,374 |  |  | 1,906,720 |  |  | 1,198,130 |  |  | 909,431 |  |  | 1,671,291 |  |  | — |  |  | — |  |  | 10,234,473 |
HELOCs: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Pass |  | 929 |  |  | 6,114 |  |  | 6,859 |  |  | 1,253 |  |  | 2,088 |  |  | 13,340 |  |  | 2,081,521 |  |  | 157,658 |  |  | 2,269,762 |
Criticized (accrual) |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  |  |  | 2 |  |  | 613 |  |  | 615 |
Criticized (nonaccrual) |  | — |  |  | 1,008 |  |  | 815 |  |  | 220 |  |  | 463 |  |  | 1,640 |  |  | 1,692 |  |  | 3,865 |  |  | 9,703 |
Total HELOCs |  | 929 |  |  | 7,122 |  |  | 7,674 |  |  | 1,473 |  |  | 2,551 |  |  | 14,980 |  |  | 2,083,215 |  |  | 162,136 |  |  | 2,280,080 |
Total residential mortgage |  | 1,984,456 |  |  | 2,572,496 |  |  | 1,914,394 |  |  | 1,199,603 |  |  | 911,982 |  |  | 1,686,271 |  |  | 2,083,215 |  |  | 162,136 |  |  | 12,514,553 |
Other consumer: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Pass |  | 1,211 |  |  | 13,072 |  |  | 5,258 |  |  | — |  |  | — |  |  | 15,173 |  |  | 49,369 |  |  | — |  |  | 84,083 |
Criticized (accrual) |  | 3 |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 3 |
Criticized (nonaccrual) |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 11 |  |  | — |  |  | 11 |
Total other consumer |  | 1,214 |  |  | 13,072 |  |  | 5,258 |  |  | — |  |  | — |  |  | 15,173 |  |  | 49,380 |  |  | — |  |  | 84,097 |
Total consumer |  | 1,985,670 |  |  | 2,585,568 |  |  | 1,919,652 |  |  | 1,199,603 |  |  | 911,982 |  |  | 1,701,444 |  |  | 2,132,595 |  |  | 162,136 |  |  | 12,598,650 |
Total by Risk Rating: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Pass |  | 7,441,743 |  |  | 9,298,963 |  |  | 5,287,308 |  |  | 4,280,439 |  |  | 3,043,927 |  |  | 4,975,025 |  |  | 10,951,399 |  |  | 200,631 |  |  | 45,479,435 |
Criticized (accrual) |  | 69,634 |  |  | 153,722 |  |  | 127,048 |  |  | 133,916 |  |  | 169,863 |  |  | 159,433 |  |  | 102,894 |  |  | 17,421 |  |  | 933,931 |
Criticized (nonaccrual) |  | 3,242 |  |  | 9,338 |  |  | 16,924 |  |  | 2,998 |  |  | 14,597 |  |  | 36,007 |  |  | 1,739 |  |  | 3,865 |  |  | 88,710 |
Total |  | $ | 7,514,619 |  |  | $ | 9,462,023 |  |  | $ | 5,431,280 |  |  | $ | 4,417,353 |  |  | $ | 3,228,387 |  |  | $ | 5,170,465 |  |  | $ | 11,056,032 |  |  | $ | 221,917 |  |  | $ | 46,502,076 |

36

($ in thousands) |  | December 31, 2021
| Term Loans by Origination Year |  | Revolving Loans |  | Revolving Loans Converted to Term Loans |  | Total
| 2021 |  | 2020 |  | 2019 |  | 2018 |  | 2017 |  | Prior |  |  |
Commercial: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
C&I: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Pass |  | $ | 3,911,722 |  |  | $ | 1,133,085 |  |  | $ | 629,007 |  |  | $ | 187,195 |  |  | $ | 132,392 |  |  | $ | 225,326 |  |  | $ | 7,383,485 |  |  | $ | 28,842 |  |  | $ | 13,631,054 |
Criticized (accrual) |  | 85,036 |  |  | 117,357 |  |  | 72,277 |  |  | 51,553 |  |  | 15,136 |  |  | 4,005 |  |  | 115,167 |  |  | — |  |  | 460,531 |
Criticized (nonaccrual) |  | 29,456 |  |  | 2,792 |  |  | 513 |  |  | 517 |  |  | 9,301 |  |  | 16,444 |  |  | — |  |  | — |  |  | 59,023 |
Total C&I |  | 4,026,214 |  |  | 1,253,234 |  |  | 701,797 |  |  | 239,265 |  |  | 156,829 |  |  | 245,775 |  |  | 7,498,652 |  |  | 28,842 |  |  | 14,150,608 |
CRE: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Pass |  | 2,792,193 |  |  | 2,090,503 |  |  | 2,230,520 |  |  | 1,863,481 |  |  | 1,120,682 |  |  | 1,727,862 |  |  | 128,668 |  |  | 6,389 |  |  | 11,960,298 |
Criticized (accrual) |  | 71,055 |  |  | 3,200 |  |  | 9,176 |  |  | 21,077 |  |  | 24,851 |  |  | 55,892 |  |  | — |  |  | — |  |  | 185,251 |
Criticized (nonaccrual) |  | 4,350 |  |  | — |  |  | — |  |  | — |  |  | 4,752 |  |  | 396 |  |  | — |  |  | — |  |  | 9,498 |
Subtotal CRE |  | 2,867,598 |  |  | 2,093,703 |  |  | 2,239,696 |  |  | 1,884,558 |  |  | 1,150,285 |  |  | 1,784,150 |  |  | 128,668 |  |  | 6,389 |  |  | 12,155,047 |
Multifamily residential: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Pass |  | 1,026,295 |  |  | 726,772 |  |  | 688,453 |  |  | 419,319 |  |  | 308,087 |  |  | 424,947 |  |  | 20,524 |  |  | — |  |  | 3,614,397 |
Criticized (accrual) |  | — |  |  | — |  |  | 721 |  |  | 22,344 |  |  | 7,033 |  |  | 30,666 |  |  | — |  |  | — |  |  | 60,764 |
Criticized (nonaccrual) |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 444 |  |  | — |  |  | — |  |  | 444 |
Subtotal multifamily residential |  | 1,026,295 |  |  | 726,772 |  |  | 689,174 |  |  | 441,663 |  |  | 315,120 |  |  | 456,057 |  |  | 20,524 |  |  | — |  |  | 3,675,605 |
Construction and land: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Pass |  | 122,983 |  |  | 103,743 |  |  | 90,544 |  |  | 3,412 |  |  | — |  |  | 391 |  |  | — |  |  | — |  |  | 321,073 |
Criticized (accrual) |  | 3,355 |  |  | — |  |  | — |  |  | 22,058 |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 25,413 |
Criticized (nonaccrual) |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |
Subtotal construction and land |  | 126,338 |  |  | 103,743 |  |  | 90,544 |  |  | 25,470 |  |  | — |  |  | 391 |  |  | — |  |  | — |  |  | 346,486 |
Total CRE |  | 4,020,231 |  |  | 2,924,218 |  |  | 3,019,414 |  |  | 2,351,691 |  |  | 1,465,405 |  |  | 2,240,598 |  |  | 149,192 |  |  | 6,389 |  |  | 16,177,138 |
Total commercial |  | 8,046,445 |  |  | 4,177,452 |  |  | 3,721,211 |  |  | 2,590,956 |  |  | 1,622,234 |  |  | 2,486,373 |  |  | 7,647,844 |  |  | 35,231 |  |  | 30,327,746 |
Consumer: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Residential mortgage: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Single-family residential: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Pass (1) |  | 2,616,958 |  |  | 2,108,370 |  |  | 1,375,929 |  |  | 1,079,030 |  |  | 763,351 |  |  | 1,127,516 |  |  | — |  |  | — |  |  | 9,071,154 |
Criticized (accrual) |  | — |  |  | — |  |  | 458 |  |  | 2,813 |  |  | 1,899 |  |  | 3,212 |  |  | — |  |  | — |  |  | 8,382 |
Criticized (nonaccrual) (1) |  | — |  |  | — |  |  | 1,751 |  |  | 3,889 |  |  | 4,295 |  |  | 4,231 |  |  | — |  |  | — |  |  | 14,166 |
Total single-family residential mortgage |  | 2,616,958 |  |  | 2,108,370 |  |  | 1,378,138 |  |  | 1,085,732 |  |  | 769,545 |  |  | 1,134,959 |  |  | — |  |  | — |  |  | 9,093,702 |
HELOCs: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Pass |  | 648 |  |  | 3,277 |  |  | 4,644 |  |  | 1,347 |  |  | 3,268 |  |  | 11,215 |  |  | 1,913,478 |  |  | 197,414 |  |  | 2,135,291 |
Criticized (accrual) |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 371 |  |  | 7 |  |  | 708 |  |  | 1,086 |
Criticized (nonaccrual) |  | — |  |  | — |  |  | 52 |  |  | 188 |  |  | 3,543 |  |  | 973 |  |  | — |  |  | 3,688 |  |  | 8,444 |
Total HELOCs |  | 648 |  |  | 3,277 |  |  | 4,696 |  |  | 1,535 |  |  | 6,811 |  |  | 12,559 |  |  | 1,913,485 |  |  | 201,810 |  |  | 2,144,821 |
Total residential mortgage |  | 2,617,606 |  |  | 2,111,647 |  |  | 1,382,834 |  |  | 1,087,267 |  |  | 776,356 |  |  | 1,147,518 |  |  | 1,913,485 |  |  | 201,810 |  |  | 11,238,523 |
Other consumer: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Pass |  | 16,831 |  |  | 5,258 |  |  | — |  |  | — |  |  | 1,741 |  |  | 52,147 |  |  | 51,481 |  |  | — |  |  | 127,458 |
Criticized (accrual) |  | 2 |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 2 |
Criticized (nonaccrual) |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 52 |  |  | — |  |  | 52 |
Total other consumer |  | 16,833 |  |  | 5,258 |  |  | — |  |  | — |  |  | 1,741 |  |  | 52,147 |  |  | 51,533 |  |  | — |  |  | 127,512 |
Total consumer |  | 2,634,439 |  |  | 2,116,905 |  |  | 1,382,834 |  |  | 1,087,267 |  |  | 778,097 |  |  | 1,199,665 |  |  | 1,965,018 |  |  | 201,810 |  |  | 11,366,035 |
Total by Risk Rating: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Pass |  | 10,487,630 |  |  | 6,171,008 |  |  | 5,019,097 |  |  | 3,553,784 |  |  | 2,329,521 |  |  | 3,569,404 |  |  | 9,497,636 |  |  | 232,645 |  |  | 40,860,725 |
Criticized (accrual) |  | 159,448 |  |  | 120,557 |  |  | 82,632 |  |  | 119,845 |  |  | 48,919 |  |  | 94,146 |  |  | 115,174 |  |  | 708 |  |  | 741,429 |
Criticized (nonaccrual) |  | 33,806 |  |  | 2,792 |  |  | 2,316 |  |  | 4,594 |  |  | 21,891 |  |  | 22,488 |  |  | 52 |  |  | 3,688 |  |  | 91,627 |
Total |  | $ | 10,680,884 |  |  | $ | 6,294,357 |  |  | $ | 5,104,045 |  |  | $ | 3,678,223 |  |  | $ | 2,400,331 |  |  | $ | 3,686,038 |  |  | $ | 9,612,862 |  |  | $ | 237,041 |  |  | $ | 41,693,781 |

(1)As of June 30, 2022 and December 31, 2021, $1.2 million and $1.6 million, respectively, of nonaccrual loans whose payments are guaranteed by the Federal Housing Administration were classified with a “Pass” rating.
37

Revolving loans that are converted to term loans presented in the tables above are excluded from the term loans by vintage year columns. During the three and six months ended June 30, 2022, there were no conversions of HELOC revolving loans to term loans. Two CRE revolving loans of $26.4 million were converted to term loans during the three and six months ended June 30, 2022. In comparison, HELOC revolving loans of $20.9 million and $57.6 million were converted to term loans during the three and six months ended June 30, 2021, respectively. There were no conversions of CRE revolving loans to term loans during the three months ended June 30, 2021. Two CRE revolving loans of $5.0 million were converted to term loans during the six months ended June 30, 2021.
Nonaccrual and Past Due Loans
Loans that are 90 or more days past due are generally placed on nonaccrual status unless the loan is well-collateralized and in the process of collection. Loans that are less than 90 days past due but have identified deficiencies, such as when the full collection of principal or interest becomes uncertain, are also placed on nonaccrual status. The following tables present the aging analysis of total loans held-for-investment as of June 30, 2022 and December 31, 2021:

($ in thousands) |  | June 30, 2022
| Current Accruing Loans (1) |  | Accruing Loans 30-59 Days Past Due |  | Accruing Loans 60-89 Days Past Due |  |  |  |  |  | Total Accruing Past Due Loans |  |  |  |  |  | Total Nonaccrual Loans |  | Total Loans
Commercial: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
C&I |  | $ | 15,326,934 |  |  | $ | 10,097 |  |  | $ | 33 |  |  |  |  |  |  | $ | 10,130 |  |  |  |  |  |  | $ | 40,053 |  |  | $ | 15,377,117 |
CRE: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
CRE |  | 13,554,820 |  |  | 451 |  |  | 201 |  |  |  |  |  |  | 652 |  |  |  |  |  |  | 11,276 |  |  | 13,566,748 |
Multifamily residential |  | 4,441,408 |  |  | 830 |  |  | — |  |  |  |  |  |  | 830 |  |  |  |  |  |  | 1,466 |  |  | 4,443,704 |
Construction and land |  | 515,857 |  |  | — |  |  | — |  |  |  |  |  |  | — |  |  |  |  |  |  | — |  |  | 515,857 |
Total CRE |  | 18,512,085 |  |  | 1,281 |  |  | 201 |  |  |  |  |  |  | 1,482 |  |  |  |  |  |  | 12,742 |  |  | 18,526,309 |
Total commercial |  | 33,839,019 |  |  | 11,378 |  |  | 234 |  |  |  |  |  |  | 11,612 |  |  |  |  |  |  | 52,795 |  |  | 33,903,426 |
Consumer: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Residential mortgage: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Single-family residential |  | 10,186,333 |  |  | 13,718 |  |  | 6,996 |  |  |  |  |  |  | 20,714 |  |  |  |  |  |  | 27,426 |  |  | 10,234,473 |
HELOCs |  | 2,263,510 |  |  | 6,254 |  |  | 613 |  |  |  |  |  |  | 6,867 |  |  |  |  |  |  | 9,703 |  |  | 2,280,080 |
Total residential mortgage |  | 12,449,843 |  |  | 19,972 |  |  | 7,609 |  |  |  |  |  |  | 27,581 |  |  |  |  |  |  | 37,129 |  |  | 12,514,553 |
Other consumer |  | 83,988 |  |  | 92 |  |  | 6 |  |  |  |  |  |  | 98 |  |  |  |  |  |  | 11 |  |  | 84,097 |
Total consumer |  | 12,533,831 |  |  | 20,064 |  |  | 7,615 |  |  |  |  |  |  | 27,679 |  |  |  |  |  |  | 37,140 |  |  | 12,598,650 |
Total |  | $ | 46,372,850 |  |  | $ | 31,442 |  |  | $ | 7,849 |  |  |  |  |  |  | $ | 39,291 |  |  |  |  |  |  | $ | 89,935 |  |  | $ | 46,502,076 |

38

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

(1)As of both June 30, 2022 and December 31, 2021, loans in payment deferral programs offered in response to the Coronavirus Disease 2019 (“COVID-19”) pandemic that are performing according to their modified terms are generally not considered delinquent, and are included in the “Current Accruing Loans” column.
The following table presents the amortized cost of loans on nonaccrual status for which there was no related allowance for loan losses as of both June 30, 2022 and December 31, 2021. Nonaccrual loans may not have an allowance for credit losses since there is no loss expectation when the loan balances are well-secured by the collateral value.

($ in thousands) |  |  | June 30, 2022 |  |  | December 31, 2021
Commercial: |  |  |  |  |  |
C&I |  |  | $ | 18,251 |  |  |  | $ | 22,967 |
CRE |  |  | 10,956 |  |  |  | 9,102 |
Multifamily residential |  |  | 1,055 |  |  |  | — |
Total commercial |  |  | 30,262 |  |  |  | 32,069 |
Consumer: |  |  |  |  |  |
Single-family residential |  |  | 12,952 |  |  |  | 5,785 |
HELOCs |  |  | 5,351 |  |  |  | 5,033 |
Total consumer |  |  | 18,303 |  |  |  | 10,818 |
Total nonaccrual loans with no related allowance for loan losses |  |  | $ | 48,565 |  |  |  | $ | 42,887 |

Foreclosed Assets
The Company acquires assets from borrowers through loan restructurings, workouts, and foreclosures. Assets acquired may include real properties (e.g., residential real estate, land, and buildings) and commercial and personal properties. The Company recognizes foreclosed assets upon receiving assets in satisfaction of a loan (e.g., taking legal title or physical possession).
Foreclosed assets, consisting of OREO and other nonperforming assets, are included in Other assets on the Consolidated Balance Sheet. The Company had no foreclosed assets as of June 30, 2022, compared with $10.3 million as of December 31, 2021. The Company commences the foreclosure process on consumer mortgage loans after a borrower becomes more than 120 days delinquent in accordance with the Consumer Financial Protection Bureau guidelines. The carrying value of consumer real estate loans that were in the process of active or suspended foreclosure was $12.9 million and $7.3 million as of June 30, 2022 and December 31, 2021, respectively.
39

As part of our actions to support customers during the COVID-19 pandemic, the Company temporarily suspended certain mortgage foreclosure activities through December 31, 2021. Beginning January 1, 2022, the Company resumed these mortgage foreclosure activities. The Company continues to take proactive measures to prevent avoidable foreclosures.
Troubled Debt Restructurings
TDRs are individually evaluated, and the type of restructuring is selected based on the loan type and the circumstances of the borrower’s financial difficulties. A TDR is a modification of the terms of a loan when the Company, for economic or legal reasons related to the borrower’s financial difficulties, grants a concession to the borrower that it would not have otherwise considered. The COVID-related modifications that occurred between March 2020 and January 1, 2022, were generally not classified as TDRs due to the relief under the Coronavirus Aid, Relief, and Economic Security Act, as amended by the Consolidated Appropriations Act, 2021, and the Interagency Statement on Loan Modifications and Reporting for Financial Institutions Working with Customers Affected by the Coronavirus (Revised), and therefore are not included in the discussion below. See Note 1 — Summary of Significant Accounting Policies — Significant Accounting Policies — Troubled Debt Restructurings to the Consolidated Financial Statements in the Company’s 2021 Form 10-K for additional information.
The following tables present the additions to TDRs for the three and six months ended June 30, 2022 and 2021:

($ in thousands) |  | Loans Modified as TDRs During the Three Months Ended June 30,
| 2022 |  | 2021
| Number of Loans |  | Pre- Modification Outstanding Recorded Investment |  | Post- Modification Outstanding Recorded Investment (1) |  | Financial Impact (2) |  | Number of Loans |  | Pre- Modification Outstanding Recorded Investment |  | Post- Modification Outstanding Recorded Investment (1) |  | Financial Impact (2)
Commercial: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
C&I |  | 2 |  | $ | 12,955 |  |  | $ | 12,245 |  |  | $ | 2,111 |  |  | 4 |  | $ | 20,375 |  |  | $ | 20,084 |  |  | $ | 2,162 |
Total |  | 2 |  | $ | 12,955 |  |  | $ | 12,245 |  |  | $ | 2,111 |  |  | 4 |  | $ | 20,375 |  |  | $ | 20,084 |  |  | $ | 2,162 |

($ in thousands) |  | Loans Modified as TDRs During the Six Months Ended June 30,
| 2022 |  | 2021
| Number of Loans |  | Pre- Modification Outstanding Recorded Investment |  | Post- Modification Outstanding Recorded Investment (1) |  | Financial Impact (2) |  | Number of Loans |  | Pre- Modification Outstanding Recorded Investment |  | Post- Modification Outstanding Recorded Investment (1) |  | Financial Impact (2)
Commercial: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
C&I |  | 3 |  | $ | 30,134 |  |  | $ | 21,428 |  |  | $ | 10,157 |  |  | 5 |  | $ | 20,818 |  |  | $ | 20,499 |  |  | $ | 2,318 |
Total |  | 3 |  | $ | 30,134 |  |  | $ | 21,428 |  |  | $ | 10,157 |  |  | 5 |  | $ | 20,818 |  |  | $ | 20,499 |  |  | $ | 2,318 |

(1)Includes subsequent payments after modification and reflects the balance as of June 30, 2022 and 2021.
(2)Includes charge-offs and specific reserves recorded since the modification date.
The following tables present the TDR post-modification outstanding balances by the primary modification type for the three and six months ended June 30, 2022 and 2021:

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

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($ in thousands) |  | Modification Type During the Six Months Ended June 30,
| 2022 |  | 2021
| Principal (1) |  |  |  |  |  |  |  | Interest Rate Reduction |  | Other (2) |  | Total |  | Principal (1) |  |  |  |  |  | Interest Rate Reduction |  | Other |  | Total
Commercial: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
C&I |  | $ | 9,183 |  |  |  |  |  |  |  |  | $ | — |  |  | $ | 12,245 |  |  | $ | 21,428 |  |  | $ | 3,788 |  |  |  |  |  |  | $ | 16,711 |  |  | $ | — |  |  | $ | 20,499 |
Total |  | $ | 9,183 |  |  |  |  |  |  |  |  | $ | — |  |  | $ | 12,245 |  |  | $ | 21,428 |  |  | $ | 3,788 |  |  |  |  |  |  | $ | 16,711 |  |  | $ | — |  |  | $ | 20,499 |

(1)Includes forbearance payments, term extensions and principal deferments that modify the terms of the loan from principal and interest payments to interest payments only.
(2)Includes increase in new commitment.
After a loan is modified as TDR, the Company continues to monitor its performance under its most recent restructured terms. A TDR may become delinquent and result in payment default (generally 90 days past due) subsequent to restructuring. The following tables present information on loans that entered into default during the three and six months ended June 30, 2022 and 2021, that were modified as TDRs during the 12 months preceding payment default:

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

($ in thousands) |  | Loans Modified as TDRs that Subsequently Defaulted During the Six Months Ended June 30,
| 2022 |  | 2021 |  |  |  |
| Number of Loans |  | Recorded Investment |  | Number of Loans |  | Recorded Investment |  |  |  |
Commercial: |  |  |  |  |  |  |  |  |  |  |  |
C&I |  | 2 |  |  | $ | 4,305 |  |  | 1 |  |  | $ | 11,431 |  |  |  |  |
Total |  | 2 |  |  | $ | 4,305 |  |  | 1 |  |  | $ | 11,431 |  |  |  |  |

As of June 30, 2022 and December 31, 2021, the remaining commitments to lend to borrowers whose terms of their outstanding owed balances were modified as TDRs were $1.9 million and $5.0 million, respectively.
Allowance for Credit Losses
The Company has an allowance framework under ASU 2016-13 for all financial assets measured at amortized cost and certain off-balance sheet credit exposures. The Company’s allowance for credit losses, which includes both the allowance for loan losses and the allowance for unfunded credit commitments, is calculated with the objective of maintaining a reserve sufficient to absorb losses inherent in our credit portfolios. The measurement of the allowance for credit losses is based on management’s best estimate of lifetime expected credit losses, and periodic evaluation of the loan portfolio, lending-related commitments and other relevant factors.
The allowance for credit losses is deducted from the amortized cost basis of a financial asset or a group of financial assets so that the balance sheet reflects the net amount the Company expects to collect. Amortized cost is the principal balance outstanding, net of purchase premiums and discounts, deferred fees and costs, and escrow advances. Subsequent changes in expected credit losses are recognized in net income as a provision for, or a reversal of, credit loss expense.
The allowance for credit losses estimation involves procedures to consider the unique risk characteristics of the portfolio segments. The majority of the Company’s credit exposures that share risk characteristics with other similar exposures are collectively evaluated. The collectively evaluated loans include performing risk-rated loans and unfunded credit commitments. If an exposure does not share risk characteristics with other exposures, the Company generally estimates expected credit losses on an individual basis. These individually assessed loans include TDR and nonaccrual loans.
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Allowance for Collectively Evaluated Loans
The allowance for collectively evaluated loans consists of a quantitative component that assesses the different risk factors considered in our models and a qualitative component that considers risk factors external to the models. Each of these components are described below.
•Quantitative Component — The Company applies quantitative methods to estimate loan losses by considering a variety of factors such as historical loss experience, the current credit quality of the portfolio, and an economic outlook over the life of the loan. The Company incorporates forward-looking information using macroeconomic scenarios, which include variables that are considered key drivers of increases and decreases in credit losses. The Company utilizes a probability-weighted, multiple-scenario forecast approach. These scenarios may consist of a base forecast representing management's view of the most likely outcome, combined with downside or upside scenarios reflecting possible worsening or improving economic conditions. The quantitative models incorporate a probability-weighted calculation of these macroeconomic scenarios over a reasonable and supportable forecast period. If the life of loans extends beyond the reasonable and supportable forecast period, the Company will consider historical experience or long-run macroeconomic trends over the remaining lives of the loans to estimate the allowance for loan losses.
During the third quarter of 2021, the reasonable and supportable forecast period, key credit risk characteristics and macroeconomic variables to estimate the expected credit losses of the C&I segment were modified due to model enhancement. There were no changes to the overall model methodology. For the three and six months ended June 30, 2022, there were no changes to the reasonable and supportable forecast period and reversion to the historical loss experience method.
The following table provides key credit risk characteristics and macroeconomic variables that the Company uses to estimate the expected credit losses by portfolio segment:

Portfolio Segment |  | Risk Characteristics |  | Macroeconomic Variables
C&I |  | Age (1), size and spread at origination, and risk rating |  | Volatility Index (“VIX”) and BBB yield to 10-year U.S. Treasury spread (“BBB Spread”) (1)
CRE, Multifamily residential, and Construction and land |  | Delinquency status, maturity date, collateral value, property type, and geographic location |  | Unemployment rate, Gross Domestic Product (“GDP”), and U.S. Treasury rates
Single-family residential and HELOCs |  | FICO score, delinquency status, maturity date, collateral value, and geographic location |  | Unemployment rate, GDP, and home price index
Other consumer |  | Historical loss experience |  | Immaterial (2)

(1)Due to the model enhancements during the third quarter of 2021, the risk characteristic related to “time-to-maturity” was changed to “age”; while macroeconomic variables related to “unemployment rate and two- and ten-year U.S. Treasury spread” were changed to “VIX and BBB Spread”.
(2)Macroeconomic variables are included in the qualitative estimate.
Allowance for Loan Losses for the Commercial Loan Portfolio
The Company’s C&I lifetime loss rate model estimates credit losses by estimating a loss rate expected over the life of a loan. This loss rate is applied to the amortized cost basis, excluding accrued interest receivable, to determine expected credit losses. The lifetime loss rate model’s reasonable and supportable period spans 11 quarters, thereafter immediately reverting to the historical average loss rate, expressed through the loan-level lifetime loss rate.
For CRE, multifamily residential, and construction and land loans, projected probabilities of default (“PDs”) and loss given defaults (“LGDs”) are applied to the estimated exposure at default, considering the term and payment structure of the loan, to generate estimates of expected loss at the loan level. The forecast of future economic conditions returns to long-run historical economic trends within the reasonable and supportable period.
In order to estimate the life of a loan under both models, the contractual term of the loan is adjusted for estimated prepayments based on historical prepayment experience.
42

Allowance for Loan Losses for the Consumer Loan Portfolio
For single-family residential and HELOC loans, projected PDs and LGDs are applied to the estimated exposure at default, considering the term and payment structure of the loan, to generate estimates of expected loss at the loan level. The forecast of future economic conditions returns to long-run historical economic trends after the reasonable and supportable period. In order to estimate the life of a loan for the single-family residential and HELOC portfolios, the contractual term of the loan is adjusted for estimated prepayments based on historical prepayment experience. For other consumer loans, the Company uses a loss rate approach.
•Qualitative Component — The Company also considers the following qualitative factors in the determination of the collectively evaluated allowance, if these factors have not already been captured by the quantitative model. Such qualitative factors may include, but are not limited to:
–Loan growth trends;
–the volume and severity of past due financial assets, and the volume and severity of adversely classified financial assets;
–the Company’s lending policies and procedures, including changes in lending strategies, underwriting standards, collection, write-off and recovery practices;
–knowledge of a borrower’s operations;
–the quality of the Company’s credit review system;
–the experience, ability and depth of the Company’s management, lending associates and other relevant associates;
–the effect of other external factors such as the regulatory and legal environments and changes in technology;
–actual and expected changes in international, national, regional, and local economic and business conditions in which the Company operates; and
–risk factors in certain industry sectors not captured by the quantitative models.
The magnitude of the impact of these factors on the Company’s qualitative assessment of the allowance for credit losses changes from period to period according to changes made by management in its assessment of these factors. The extent to which these factors change may be dependent on whether they are already reflected in quantitative loss estimates during the current period and the extent to which changes in these factors diverge from period to period.
While the Company’s allowance methodologies strive to reflect all relevant credit risk factors, there continues to be uncertainty associated with, but not limited to, potential imprecision in the estimation process due to the inherent time lag of obtaining information and normal variations between expected and actual outcomes. The Company may hold additional qualitative reserves that are designed to provide coverage for losses attributable to such risk.
Allowance for Individually Evaluated Loans
When a loan no longer shares similar risk characteristics with other loans, such as in the case of certain nonaccrual or TDR loans, the Company estimates the allowance for loan losses on an individual loan basis. The allowance for loan losses for individually evaluated loans is measured as the difference between the recorded value of the loans and their fair value. For loans evaluated individually, the Company uses one of three different asset valuation measurement methods: (1) the fair value of collateral less costs to sell; (2) the present value of expected future cash flows; and (3) the loan's observable market price. If an individually evaluated loan is determined to be collateral dependent, the Company applies the fair value of the collateral less costs to sell method. If an individually evaluated loan is determined not to be collateral dependent, the Company uses the present value of future cash flows or the observable market value of the loan.
•Collateral-Dependent Loans — The allowance of a collateral-dependent loan is limited to the difference between the recorded value and fair value of the collateral less cost of disposal or sale. As of June 30, 2022, collateral-dependent commercial and consumer loans totaled $38.9 million and $19.0 million, respectively. In comparison, collateral-dependent commercial and consumer loans totaled $37.0 million and $14.0 million, respectively, as of December 31, 2021. The Company's commercial collateral-dependent loans were secured by real estate, and its consumer collateral-dependent loans were all residential mortgage loans, secured by the underlying real estate. As of both June 30, 2022 and December 31, 2021, the collateral value of the properties securing the collateral-dependent loans, net of selling costs, exceeded t he recorded value of the loans.
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The following tables summarize the activities in the allowance for loan losses by portfolio segments for the three and six months ended June 30, 2022 and 2021:

($ in thousands) |  | Three Months Ended June 30, 2022
| Commercial |  | Consumer |  | Total
| C&I |  | CRE |  | Residential Mortgage |  | Other Consumer |
|  | CRE |  | Multifamily Residential |  | Construction and Land |  | Single- Family Residential |  | HELOCs |  |
Allowance for loan losses, beginning of period |  | $ | 339,446 |  |  | $ | 147,104 |  |  | $ | 24,176 |  |  | $ | 11,016 |  |  | $ | 18,210 |  |  | $ | 3,748 |  |  | $ | 1,985 |  |  | $ | 545,685 |
Provision for (reversal of) credit losses on loans | (a) | 19,030 |  |  | (6,819) |  |  | 1,976 |  |  | (4,338) |  |  | 3,461 |  |  | (339) |  |  | (502) |  |  | 12,469 |
Gross charge-offs |  | (240) |  |  | (671) |  |  | (8) |  |  | — |  |  | — |  |  | (193) |  |  | (34) |  |  | (1,146) |
Gross recoveries |  | 6,514 |  |  | 631 |  |  | 408 |  |  | 4 |  |  | 169 |  |  | 4 |  |  | — |  |  | 7,730 |
Total net recoveries (charge-offs) |  | 6,274 |  |  | (40) |  |  | 400 |  |  | 4 |  |  | 169 |  |  | (189) |  |  | (34) |  |  | 6,584 |
Foreign currency translation adjustment |  | (1,468) |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | (1,468) |
Allowance for loan losses, end of period |  | $ | 363,282 |  |  | $ | 140,245 |  |  | $ | 26,552 |  |  | $ | 6,682 |  |  | $ | 21,840 |  |  | $ | 3,220 |  |  | $ | 1,449 |  |  | $ | 563,270 |

($ in thousands) |  | Three Months Ended June 30, 2021
| Commercial |  | Consumer |  | Total
| C&I |  | CRE |  | Residential Mortgage |  | Other Consumer |
|  | CRE |  | Multifamily Residential |  | Construction and Land |  | Single- Family Residential |  | HELOCs |  |
Allowance for loan losses, beginning of period |  | $ | 394,084 |  |  | $ | 146,399 |  |  | $ | 27,407 |  |  | $ | 19,089 |  |  | $ | 15,839 |  |  | $ | 2,670 |  |  | $ | 2,018 |  |  | $ | 607,506 |
(Reversal of) provision for credit losses on loans | (a) | (22,605) |  |  | 19,375 |  |  | (5,385) |  |  | (3,243) |  |  | 609 |  |  | 250 |  |  | 2,209 |  |  | (8,790) |
Gross charge-offs |  | (10,572) |  |  | (4,134) |  |  | (113) |  |  | (209) |  |  | — |  |  | — |  |  | (32) |  |  | (15,060) |
Gross recoveries |  | 1,338 |  |  | 322 |  |  | 16 |  |  | 6 |  |  | 82 |  |  | 18 |  |  | 3 |  |  | 1,785 |
Total net (charge-offs) recoveries |  | (9,234) |  |  | (3,812) |  |  | (97) |  |  | (203) |  |  | 82 |  |  | 18 |  |  | (29) |  |  | (13,275) |
Foreign currency translation adjustment |  | 283 |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 283 |
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) |  | Six Months Ended June 30, 2022
| Commercial |  | Consumer |  | Total
| C&I |  | CRE |  | Residential Mortgage |  | Other Consumer |
|  | CRE |  | Multifamily Residential |  | Construction and Land |  | Single- Family Residential |  | HELOCs |  |
Allowance for loan losses, beginning of period |  | $ | 338,252 |  |  | $ | 150,940 |  |  | $ | 14,400 |  |  | $ | 15,468 |  |  | $ | 17,160 |  |  | $ | 3,435 |  |  | $ | 1,924 |  |  | $ | 541,579 |
Provision for (reversal of) credit losses on loans | (a) | 28,292 |  |  | (10,312) |  |  | 11,633 |  |  | (8,844) |  |  | 4,387 |  |  | (40) |  |  | (395) |  |  | 24,721 |
Gross charge-offs |  | (11,428) |  |  | (1,069) |  |  | (9) |  |  | — |  |  | — |  |  | (193) |  |  | (80) |  |  | (12,779) |
Gross recoveries |  | 9,516 |  |  | 686 |  |  | 528 |  |  | 58 |  |  | 293 |  |  | 18 |  |  | — |  |  | 11,099 |
Total net (charge-offs) recoveries |  | (1,912) |  |  | (383) |  |  | 519 |  |  | 58 |  |  | 293 |  |  | (175) |  |  | (80) |  |  | (1,680) |
Foreign currency translation adjustment |  | (1,350) |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | (1,350) |
Allowance for loan losses, end of period |  | $ | 363,282 |  |  | $ | 140,245 |  |  | $ | 26,552 |  |  | $ | 6,682 |  |  | $ | 21,840 |  |  | $ | 3,220 |  |  | $ | 1,449 |  |  | $ | 563,270 |

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($ in thousands) |  | Six Months Ended June 30, 2021
| Commercial |  | Consumer |  | Total
| C&I |  | CRE |  | Residential Mortgage |  | Other Consumer |
|  | CRE |  | Multifamily Residential |  | Construction and Land |  | Single- Family Residential |  | HELOCs |  |
Allowance for loan losses, beginning of period |  | $ | 398,040 |  |  | $ | 163,791 |  |  | $ | 27,573 |  |  | $ | 10,239 |  |  | $ | 15,520 |  |  | $ | 2,690 |  |  | $ | 2,130 |  |  | $ | 619,983 |
(Reversal of) provision for credit losses on loans | (a) | (18,763) |  |  | 9,098 |  |  | (6,776) |  |  | 5,349 |  |  | 985 |  |  | 272 |  |  | 2,096 |  |  | (7,739) |
Gross charge-offs |  | (19,008) |  |  | (11,329) |  |  | (130) |  |  | (280) |  |  | (134) |  |  | (45) |  |  | (33) |  |  | (30,959) |
Gross recoveries |  | 2,098 |  |  | 402 |  |  | 1,258 |  |  | 335 |  |  | 159 |  |  | 21 |  |  | 5 |  |  | 4,278 |
Total net (charge-offs) recoveries |  | (16,910) |  |  | (10,927) |  |  | 1,128 |  |  | 55 |  |  | 25 |  |  | (24) |  |  | (28) |  |  | (26,681) |
Foreign currency translation adjustment |  | 161 |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 161 |
Allowance for loan losses, end of period |  | $ | 362,528 |  |  | $ | 161,962 |  |  | $ | 21,925 |  |  | $ | 15,643 |  |  | $ | 16,530 |  |  | $ | 2,938 |  |  | $ | 4,198 |  |  | $ | 585,724 |

The allowance for unfunded credit commitments is maintained at a level that management believes to be sufficient to absorb estimated expected credit losses related to unfunded credit facilities. See Note 10 — Commitments and Contingencies to the Consolidated Financial Statements in this Form 10-Q for additional information related to unfunded credit commitments. The following table summarizes the activities in the allowance for unfunded credit commitments for the three and six months ended June 30, 2022 and 2021:

($ in thousands) |  | Three Months Ended June 30, |  | Six Months Ended June 30, |  |
| 2022 |  | 2021 |  | 2022 |  | 2021 |  |  |  |
Unfunded credit facilities |  |  |  |  |  |  |  |  |  |  |  |
Allowance for unfunded credit commitments, beginning of period |  | $ | 23,262 |  |  | $ | 32,529 |  |  | $ | 27,514 |  |  | $ | 33,577 |  |  |  |  |
Provision for (reversal of) credit losses on unfunded credit commitments | (b) | 1,031 |  |  | (6,210) |  |  | (3,221) |  |  | (7,261) |  |  |  |  |
Foreign currency translation adjustment |  | 11 |  |  | (19) |  |  | 11 |  |  | (16) |  |  |  |  |
Allowance for unfunded credit commitments, end of period |  | 24,304 |  |  | 26,300 |  |  | 24,304 |  |  | 26,300 |  |  |  |  |
Provision for (reversal of) credit losses | (a) + (b) | $ | 13,500 |  |  | $ | (15,000) |  |  | $ | 21,500 |  |  | $ | (15,000) |  |  |  |  |

The allowance for credit losses was $587.6 million as of June 30, 2022, an increase of $18.5 million, compared with $569.1 million as of December 31, 2021. The increase in the allowance for credit losses was primarily due to an increase in provision for credit losses, driven by loan growth across the segments and a weakening economic outlook, partially offset by lower net charge-offs in 2022 year-to-date.
Loans Held-for-Sale
Loans held-for-sale consisted of $28.5 million C&I loans and $635 thousand single-family residential loans as of June 30, 2022 and December 31, 2021, respectively. Refer to Note 1 — Summary of Significant Accounting Policies — Significant Accounting Policies — Loans Held-for-Sale to the Consolidated Financial Statements in the Company’s 2021 Form 10-K for additional details.
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Loan Transfers, Sales and Purchases
The Company’s primary business focus is on directly originated loans. The Company also purchases loans and participates in loans with other banks. In the normal course of doing business, the Company also provides other financial institutions with the ability to participate in commercial loans that it originates and sells loans to such institutions. Purchased loans may be transferred from held-for-investment to held-for-sale, and write-downs to allowance for loan losses are recorded, when appropriate. The following tables provide information on the carrying value of loans transferred, loans sold and purchased for the held-for-investment portfolio, during the three and six months ended June 30, 2022 and 2021:

($ in thousands) |  | Three Months Ended June 30, 2022
| Commercial |  | Consumer |  |  |  |  |  | Total
| C&I |  | CRE |  |  |  | Residential Mortgage |  |  |  |  |
|  | CRE |  | Multifamily Residential |  |  |  | Single-Family Residential |  |  |  |  |
Loans transferred from held-for-investment to held-for-sale (1) |  | $ | 208,335 |  |  | $ | 9,854 |  |  | $ | — |  |  |  |  | $ | — |  |  |  |  |  |  | $ | 218,189 |
Loans transferred from held-for-sale to held-for-investment |  | $ | — |  |  | $ | — |  |  | $ | — |  |  |  |  | $ | 631 |  |  |  |  |  |  | $ | 631 |
Sales (2)(3)(4) |  | $ | 180,029 |  |  | $ | 9,854 |  |  | $ | — |  |  |  |  | $ | — |  |  |  |  |  |  | $ | 189,883 |
Purchases (5) |  | $ | 194,066 |  |  | $ | — |  |  | $ | — |  |  |  |  | $ | 122,723 |  |  |  |  |  |  | $ | 316,789 |

($ in thousands) |  | Three Months Ended June 30, 2021
| Commercial |  | Consumer |  |  |  |  |  | Total
| C&I |  | CRE |  |  |  | Residential Mortgage |  |  |  |  |
|  | CRE |  | Multifamily Residential |  |  |  | Single-Family Residential |  |  |  |
Loans transferred from held-for-investment to held-for-sale (1) |  | $ | 84,745 |  |  | $ | 17,019 |  |  | $ | — |  |  |  |  | $ | — |  |  |  |  |  |  | $ | 101,764 |
Sales (2)(3)(4) |  | $ | 84,503 |  |  | $ | 17,019 |  |  | $ | — |  |  |  |  | $ | 2,658 |  |  |  |  |  |  | $ | 104,180 |
Purchases (5) |  | $ | 66,415 |  |  | $ | — |  |  | $ | — |  |  |  |  | $ | 165,163 |  |  |  |  |  |  | $ | 231,578 |

($ in thousands) |  | Six Months Ended June 30, 2022
| Commercial |  | Consumer |  |  |  |  |  | Total
| C&I |  | CRE |  |  |  | Residential Mortgage |  |  |  |  |
|  | CRE |  | Multifamily Residential |  |  |  | Single-Family Residential |  |  |  |  |
Loans transferred from held-for-investment to held-for-sale (1) |  | $ | 319,772 |  |  | $ | 31,634 |  |  | $ | — |  |  |  |  | $ | — |  |  |  |  |  |  | $ | 351,406 |
Loans transferred from held-for-sale to held-for-investment |  | $ | — |  |  | $ | — |  |  | $ | — |  |  |  |  | $ | 631 |  |  |  |  |  |  | $ | 631 |
Sales (2)(3)(4) |  | $ | 287,503 |  |  | $ | 31,634 |  |  | $ | — |  |  |  |  | $ | 451 |  |  |  |  |  |  | $ | 319,588 |
Purchases (5) |  | $ | 304,662 |  |  | $ | — |  |  | $ | — |  |  |  |  | $ | 237,098 |  |  |  |  |  |  | $ | 541,760 |

46

($ in thousands) |  | Six Months Ended June 30, 2021
| Commercial |  | Consumer |  |  |  |  |  | Total
| C&I |  | CRE |  |  |  | Residential Mortgage |  |  |  |  |
|  | CRE |  | Multifamily Residential |  |  |  | Single-Family Residential |  |  |  |  |
Loans transferred from held-for-investment to held-for-sale (1) |  | $ | 210,585 |  |  | $ | 37,051 |  |  | $ | — |  |  |  |  | $ | — |  |  |  |  |  |  | $ | 247,636 |
Sales (2)(3)(4) |  | $ | 210,382 |  |  | $ | 37,051 |  |  | $ | — |  |  |  |  | $ | 10,164 |  |  |  |  |  |  | $ | 257,597 |
Purchases (5) |  | $ | 245,093 |  |  | $ | — |  |  | $ | 370 |  |  |  |  | $ | 296,963 |  |  |  |  |  |  | $ | 542,426 |

(1)Includes write-downs of $158 thousand and $217 thousand to the allowance for loan losses related to loans transferred from held-for-investment to held-for-sale for the three and six months ended June 30, 2022 and $1.3 million for the three and six months ended June 30, 2021.
(2)Includes originated loans sold of $55.4 million and $167.7 million for the three and six months ended June 30, 2022, respectively, and $67.6 million and $198.6 million for the three and six months ended June 30, 2021, respectively. Originated loans sold consisted primarily of C&I loans for each of the three and six months ended June 30, 2022 and 2021.
(3)Includes $134.5 million and $151.9 million of purchased loans sold in the secondary market for the three and six months ended June 30, 2022, respectively and $36.6 million and $59.0 million for the three and six months ended June 30, 2021, respectively.
(4)Net gains on sales of loans were $917 thousand and $3.8 million for the three and six months ended June 30, 2022, respectively, and $1.5 million and $3.3 million for the three and six months ended June 30, 2021, respectively.
(5)C&I loan purchases were comprised primarily of syndicated C&I term loans.
Note 8 — Investments in Qualified Affordable Housing Partnerships, Tax Credit and Other Investments, Net and Variable Interest Entities
The CRA encourages banks to meet the credit needs of their communities, particularly low- and moderate-income individuals and neighborhoods. The Company invests in certain affordable housing projects in the form of ownership interests in limited partnerships or limited liability companies that qualify for CRA consideration and tax credits. These entities are formed to develop and operate apartment complexes designed as high-quality affordable housing for lower income tenants throughout the U.S. To fully utilize the available tax credits, each of these entities must meet the regulatory affordable housing requirements for a minimum 15-year compliance period. In addition to affordable housing projects, the Company also invests in small business investment companies and new market tax credit projects that qualify for CRA consideration, as well as eligible projects that qualify for renewable energy and historic tax credits. Investments in renewable energy tax credits help promote the development of renewable energy sources, and the investments in historic tax credits promote the rehabilitation of historic buildings and economic revitalization of the surrounding areas.
Investments in Qualified Affordable Housing Partnerships, Net
The Company records its investments in qualified affordable housing partnerships, net, using the proportional amortization method if certain criteria are met. Under the proportional amortization method, the Company amortizes the initial cost of the investment in proportion to the tax credits and other tax benefits received and recognizes the amortization in Income tax expense on the Consolidated Statement of Income.
The following table presents the Company’s investments in qualified affordable housing partnerships, net, and related unfunded commitments as of June 30, 2022 and December 31, 2021:

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

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

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

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Investments in Tax Credit and Other Investments, Net
Depending on the Company’s ownership percentage in investments in tax credit and other investments, the Company applies the equity or fair value method of accounting, or the measurement alternative as elected under ASU 2016-01 for equity investments without readily determinable fair values.
The following table presents the Company’s investments in tax credit and other investments, net, and related unfunded commitments as of June 30, 2022 and December 31, 2021:

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

Amortization of tax credit and other investments totaled $15.0 million and $28.9 million, for the three and six months ended June 30, 2022, respectively, as compared with $27.3 million and $52.6 million, for the same periods in 2021, respectively.
For CRA investment purposes, the Company held equity securities that are mutual funds with readily determinable fair values of $24.8 million and $26.6 million, as of June 30, 2022 and December 31, 2021, respectively. These equity securities were measured at fair value with changes in fair value recorded in Other investment income on the Consolidated Statement of Income. The Company recorded unrealized losses of $783 thousand and unrealized gains of $69 thousand on these equity securities for the three months ended June 30, 2022 and 2021, respectively. For the six months ended June 30, 2022 and 2021, the Company recorded unrealized losses of $1.9 million and $428 thousand, respectively. Equity securities with readily determinable fair values were included in Investments in tax credit and other investments, net on the Consolidated Balance Sheet.
The Company held equity securities without readily determinable fair values totaling $35.0 million and $33.1 million as of June 30, 2022 and December 31, 2021, respectively, which were measured using the measurement alternative at cost less impairment and adjusted for observable price changes. For the three and six months ended June 30, 2022 and 2021, there were no adjustments made to these securities. Equity securities without readily determinable fair values were included in Investments in qualified affordable housing partnerships, tax credit and other investments, net and Other assets on the Consolidated Balance Sheet.
Tax credit investments are evaluated for possible OTTI on an annual basis or when events or changes in circumstances suggest that the carrying amount of the tax credit investments may not be realizable. OTTI charges and impairment recoveries are recorded within Amortization of tax credit and other investments on the Consolidated Statement of Income. Refer to Note 3 — Fair Value Measurement and Fair Value of Financial Instruments to the Consolidated Financial Statements in this Form 10-Q for a discussion on the Company’s impairment evaluation and monitoring process of tax credit investments. For the three and six months ended June 30, 2022, the Company recorded no impairment recoveries and no OTTI charges. In comparison, the Company recorded impairment recoveries of $877 thousand related to two energy tax credit investments and no OTTI charges for the three months ended June 30, 2021. For the six months ended June 30, 2021, the Company recorded $1.3 million of impairment recoveries related to one historic tax credit and two energy tax credits and no OTTI charges.
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’s or managing member’s ability to manage the entity, which is indicative of the general partner’s or managing member’s power over the entity. The Company’s maximum exposure to loss in connection with these partnerships consists of the unamortized investment balance and any tax credits claimed that may become subject to recapture.
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Special purpose entities formed in connection with securitization transactions are generally considered VIEs. A CLO is a VIE that purchases a pool of assets consisting primarily of non-investment grade corporate loans, and issues multiple tranches of notes to investors to fund the asset purchases and pay upfront expenses associated with forming the CLO. The Company served as the collateral manager of a CLO that closed in 2019 and subsequently reassigned its portfolio manager responsibilities in 2020. The Company retained the top three investment grade-rated tranches issued by the CLO, for which the total carrying amount was $284.0 million and $291.7 million as of June 30, 2022 and December 31, 2021, respectively.
Note 9 — Goodwill
Total goodwill was $465.7 million as of both June 30, 2022 and December 31, 2021. The Company’s goodwill impairment test is performed annually, as of December 31, or more frequently if events occur or circumstances change that would more-likely-than-not reduce the fair value of a reporting unit below its carrying value. Based on the Company’s annual goodwill impairment testing as of December 31, 2021, there was no impairment. Additional information pertaining to the Company’s accounting policy for goodwill is summarized in Note 1 — Summary of Significant Accounting Policies — Significant Accounting Policies — Goodwill and Other Intangible Assets to the Consolidated Financial Statements in the Company’s 2021 Form 10-K. As of June 30, 2022, the Company reviewed recent market movements, as well as its business performance and market capitalization, and concluded that goodwill was not impaired.
Note 10 — Commitments and Contingencies
Commitments to Extend Credit — In the normal course of doing business, the Company provides customers loan commitments on predetermined terms. These outstanding commitments to extend credit are not reflected in the accompanying Consolidated Financial Statements. While the Company does not anticipate losses from these transactions, commitments to extend credit are included in determining the appropriate level of allowance for unfunded credit commitments, and outstanding commercial letters of credit and standby letters of credit (“SBLCs”).
The following table presents the Company’s credit-related commitments as of June 30, 2022 and December 31, 2021:

|  | June 30, 2022 |  | December 31, 2021
($ 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 |  | $ | 3,642,119 |  |  | $ | 2,880,229 |  |  | $ | 963,277 |  |  | $ | 139,623 |  |  | $ | 7,625,248 |  |  | $ | 6,911,398 |
Commercial letters of credit and SBLCs |  | 1,080,377 |  |  | 342,243 |  |  | 111,182 |  |  | 732,561 |  |  | 2,266,363 |  |  | 2,221,699 |
Total |  | $ | 4,722,496 |  |  | $ | 3,222,472 |  |  | $ | 1,074,459 |  |  | $ | 872,184 |  |  | $ | 9,891,611 |  |  | $ | 9,133,097 |

Loan commitments are agreements to lend to customers provided there are no violations of any conditions established in the agreement. Commitments generally have fixed expiration dates or other termination clauses and may require maintenance of compensatory balances. Since many of the commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future funding requirements.
Commercial letters of credit are issued to facilitate domestic and foreign trade transactions, while SBLCs are generally contingent upon the failure of the customers to perform according to the terms of the underlying contract with the third party. As a result, the total contractual amounts do not necessarily represent future funding requirements. The Company’s historical experience is that SBLCs typically expire without being funded. Additionally, in many cases, the Company holds collateral in various forms against these SBLCs. As part of its risk management activities, the Company monitors the creditworthiness of customers in conjunction with its SBLC exposure. Customers are obligated to reimburse the Company for any payment made on the customers’ behalf. If the customers fail to pay, the Company would, as applicable, liquidate the collateral and/or offset existing accounts. As of June 30, 2022, total letters of credit of $2.27 billion consisted of SBLCs of $2.23 billion and commercial letters of credit of $33.6 million. As of December 31, 2021, total letters of credit of $2.22 billion consisted of SBLCs of $2.14 billion and commercial letters of credit of $78.9 million. As of both June 30, 2022 and December 31, 2021, substantially all SBLCs were rated as “Pass” by the Bank’s internal credit risk rating system.
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The Company applies the same credit underwriting criteria to extend loans, commitments and conditional obligations to customers. Each customer’s creditworthiness is evaluated on a case-by-case basis. Collateral and financial guarantees may be obtained based on management’s assessment of a customer’s credit risk. Collateral may include cash, accounts receivable, inventory, property, plant and equipment, and real estate property.
Estimated exposure to loss from these commitments is included in the allowance for unfunded credit commitments and amounted to $24.3 million and $27.5 million as of June 30, 2022 and December 31, 2021, respectively.
Guarantees — From time to time, the Company sells or securitizes single-family and multifamily residential loans with recourse in the ordinary course of business. The Company is obligated to repurchase up to the recourse component of the loans if the loans default. The following table presents the carrying amounts of loans sold or securitized with recourse and the maximum potential future payments as of June 30, 2022 and December 31, 2021:

($ in thousands) |  | Maximum Potential Future Payments |  | Carrying Value
| June 30, 2022 |  | December 31, 2021 |  | June 30, 2022 |  | December 31, 2021
| Expire in One Year or Less |  |  |  | Expire After One Year Through Three Years |  | Expire After Three Years Through Five Years |  | Expire After Five Years |  | Total |  | Total |  | Total |  | Total
Single-family residential loans sold or securitized with recourse |  | $ | 12 |  |  |  |  | $ | 174 |  |  | $ | 32 |  |  | $ | 6,897 |  |  | $ | 7,115 |  |  | $ | 7,926 |  |  | $ | 7,115 |  |  | $ | 7,926 |
Multifamily residential loans sold or securitized with recourse |  | — |  |  |  |  | — |  |  | — |  |  | 14,996 |  |  | 14,996 |  |  | 14,996 |  |  | 22,089 |  |  | 23,169 |
Total |  | $ | 12 |  |  |  |  | $ | 174 |  |  | $ | 32 |  |  | $ | 21,893 |  |  | $ | 22,111 |  |  | $ | 22,922 |  |  | $ | 29,204 |  |  | $ | 31,095 |

The Company’s recourse reserve related to these guarantees is included in the allowance for unfunded credit commitments and totaled $37 thousand and $29 thousand as of June 30, 2022 and December 31, 2021, respectively. The allowance for unfunded credit commitments is included in Accrued expenses and other liabilities on the Consolidated Balance Sheet. The Company continues to experience minimal losses from the single-family and multifamily residential loan portfolios sold or securitized with recourse.
Litigation — The Company is a party to various legal actions arising in the ordinary course of its business. In accordance with ASC 450, Contingencies, the Company accrues reserves for outstanding lawsuits, claims and proceedings when a loss contingency is probable and can be reasonably estimated. The Company estimates the amount of loss contingencies using current available information from legal proceedings, advice from legal counsel and available insurance coverage. Due to the inherent subjectivity of the assessments and unpredictability of the outcomes of the legal proceedings, any amounts accrued or included in this aggregate amount may not represent the ultimate loss to the Company from the legal proceedings in question. Thus, the Company’s exposure and ultimate losses may be higher, and possibly significantly more, than the amounts accrued.
Other Commitments — The Company has commitments to invest in qualified affordable housing partnerships, tax credit and other investments as discussed in Note 8 — Investments in Qualified Affordable Housing Partnerships, Tax Credit and Other Investments, Net and Variable Interest Entities to the Consolidated Financial Statements in this Form 10-Q. As of June 30, 2022 and December 31, 2021, these commitments were $323.0 million and $309.6 million, respectively. These commitments are included in Accrued expenses and other liabilities on the Consolidated Balance Sheet.
Note 11 — Stock Compensation Plans
Pursuant to the Company’s 2021 Stock Incentive Plan, as amended, the Company may issue stocks, stock options, restricted stock, restricted stock units (“RSUs”) including performance-based RSUs, stock purchase warrants, stock appreciation rights, phantom stock and dividend equivalents to eligible employees, non-employee directors, consultants, and other service providers of the Company and its subsidiaries. There were no outstanding awards other than RSUs as of both June 30, 2022 and December 31, 2021.
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The following table presents a summary of the total share-based compensation expense and the related net tax benefits associated with the Company’s various employee share-based compensation plans for the three and six months ended June 30, 2022 and 2021:

($ in thousands) |  | Three Months Ended June 30, |  | Six Months Ended June 30,
| 2022 |  | 2021 |  | 2022 |  | 2021
Stock compensation costs |  | $ | 8,576 |  |  | $ | 8,208 |  |  | $ | 17,009 |  |  | $ | 16,025 |
Related net tax benefits for stock compensation plans |  | $ | 109 |  |  | $ | 37 |  |  | $ | 5,268 |  |  | $ | 1,657 |

Restricted Stock Units — RSUs are granted under the Company’s long-term incentive plan at no cost to the recipient. RSUs generally cliff vest after three years of continued employment from the date of the grant, and are authorized to settle predominantly in shares of the Company’s common stock. Certain RSUs are settled in cash. Dividends are accrued during the vesting period and paid at the time of vesting. While a portion of RSUs are time-based vesting awards, others vest subject to the attainment of specified performance goals, referred to as “performance-based RSUs.” Performance-based RSUs are granted annually upon approval by the Company’s Compensation Committee based on the performance in the year prior to the grant date of the award. The number of awards that vest can range from zero to a maximum of 200% of the granted number of awards based on the Company’s achievement of specified performance criteria over a performance period of three years.
Compensation costs are calculated using the quoted market price of the Company’s common stock at the grant date. Compensation costs for certain time-based awards that will be settled in cash are adjusted to fair value based on changes in the share price of the Company’s common stock up to the settlement date. For performance-based RSUs, the compensation costs are based on grant date fair value which considers both performance and market conditions, and is subject to subsequent adjustments based on the Company’s outcome in meeting the performance criteria at the end of the performance period. Compensation costs of both time and performance-based awards are estimated based on awards ultimately expected to vest, and are recognized net of estimated forfeitures on a straight-line basis from the grant date until the vesting date of each grant. For accounting on stock-based compensation plans, see Note 1 — Summary of Significant Accounting Policies — Significant Accounting Policies — Stock-Based Compensation to the Consolidated Financial Statements of the Company’s 2021 Form 10-K for additional information.
During the six months ended June 30, 2022, the Company modified 31,523 time-based RSUs held by 119 foreign employees from vesting in cash to vesting in shares without changing any of the other terms. There was no incremental compensation expense recognized as a result of the modification for the three and six months ended June 30, 2022.
The following table presents a summary of the activities for the Company’s time-based and performance-based RSUs that will be settled in shares for the six months ended June 30, 2022. The number of performance-based RSUs stated below reflects the number of awards granted on the grant date.

|  |  |  |  |  | Time-Based RSUs |  | Performance-Based RSUs
|  |  |  |  |  |  |  |  | Shares |  | Weighted- Average Grant Date Fair Value |  | Shares |  | Weighted- Average Grant Date Fair Value
Outstanding, January 1, 2022 |  |  |  |  |  |  |  |  |  | 1,329,946 |  |  | $ | 52.65 |  |  | 369,731 |  |  | $ | 54.28 |
Modified from cash-settled RSUs |  |  |  |  |  |  |  |  |  | 31,523 |  |  | 77.28 |  |  | — |  |  | — |
Granted |  |  |  |  |  |  |  |  |  | 409,065 |  |  | 52.97 |  |  | 91,874 |  |  | 77.91 |
Vested |  |  |  |  |  |  |  |  |  | (370,018) |  |  | 53.11 |  |  | (125,213) |  |  | 54.64 |
Forfeited |  |  |  |  |  |  |  |  |  | (68,084) |  |  | 61.50 |  |  | — |  |  | — |
Outstanding, June 30, 2022 |  |  |  |  |  |  |  |  |  | 1,332,432 |  |  | $ | 52.76 |  |  | 336,392 |  |  | $ | 60.60 |

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

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

As of June 30, 2022, there were $38.1 million and $20.3 million of total unrecognized compensation costs related to unvested time-based and performance-based RSUs, respectively. Both of these costs are expected to be recognized over a weighted-average period of 2.13 years and 2.11 years, respectively.
Note 12 — Stockholders’ Equity and Earnings Per Share
The following table presents the basic and diluted EPS calculations for the three and six months ended June 30, 2022 and 2021. For more information on the calculation of EPS, see Note 1 — Summary of Significant Accounting Policies — Significant Accounting Policies — Earnings Per Share to the Consolidated Financial Statements of the Company’s 2021 Form 10-K.

($ and shares in thousands, except per share data) |  | Three Months Ended June 30, |  | Six Months Ended June 30, |  |  |  |  |
| 2022 |  | 2021 |  | 2022 |  | 2021 |  |  |  |  |  |  |
Basic: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Net income |  | $ | 258,329 |  |  | $ | 224,742 |  |  | $ | 495,981 |  |  | $ | 429,736 |  |  |  |  |  |  |  |
Weighted-average number of shares outstanding |  | 141,429 |  |  | 141,868 |  |  | 141,725 |  |  | 141,758 |  |  |  |  |  |  |  |
Basic EPS |  | $ | 1.83 |  |  | $ | 1.58 |  |  | $ | 3.50 |  |  | $ | 3.03 |  |  |  |  |  |  |  |
Diluted: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Net income |  | $ | 258,329 |  |  | $ | 224,742 |  |  | $ | 495,981 |  |  | $ | 429,736 |  |  |  |  |  |  |  |
Weighted-average number of shares outstanding |  | 141,429 |  |  | 141,868 |  |  | 141,725 |  |  | 141,758 |  |  |  |  |  |  |  |
Add: Dilutive impact of unvested RSUs |  | 943 |  |  | 1,172 |  |  | 1,113 |  |  | 1,205 |  |  |  |  |  |  |  |
Diluted weighted-average number of shares outstanding |  | 142,372 |  |  | 143,040 |  |  | 142,838 |  |  | 142,963 |  |  |  |  |  |  |  |
Diluted EPS |  | $ | 1.81 |  |  | $ | 1.57 |  |  | $ | 3.47 |  |  | $ | 3.01 |  |  |  |  |  |  |  |

For the three and six months ended June 30, 2022, approximately 381 thousand and 70 thousand weighted-average shares of anti-dilutive RSUs, respectively, were excluded from the diluted EPS computations. In comparison, two thousand and four thousand weighted-average shares of anti-dilutive RSUs were excluded from the diluted EPS computations for the three and six months ended June 30, 2021, respectively.
Stock Repurchase Program — In 2020, the Company’s Board of Directors authorized a stock repurchase program to buy back up to $500.0 million of the Company’s common stock. During the three and six months ended June 30, 2022, the Company repurchased 1,385,517 shares at an average price of $72.17 per share at a total cost of $100.0 million.
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Note 13 — Accumulated Other Comprehensive Income (Loss)
The following tables present the changes in the components of AOCI balances for the three and six months ended June 30, 2022 and 2021:

($ in thousands) |  | Debt Securities |  | Cash Flow Hedges |  | Foreign Currency Translation Adjustments (1) |  | Total
Balance, April 1, 2021 |  | $ | (81,201) |  |  | $ | (798) |  |  | $ | (8,041) |  |  | $ | (90,040) |
Net unrealized gains (losses) arising during the period |  | 73,494 |  |  | (76) |  |  | 2,234 |  |  | 75,652 |
Amounts reclassified from AOCI |  | (445) |  |  | 144 |  |  | — |  |  | (301) |
Changes, net of tax |  | 73,049 |  |  | 68 |  |  | 2,234 |  |  | 75,351 |
Balance, June 30, 2021 |  | $ | (8,152) |  |  | $ | (730) |  |  | $ | (5,807) |  |  | $ | (14,689) |
Balance, April 1, 2022 |  | $ | (365,653) |  | (2) | $ | (24,466) |  |  | $ | (4,806) |  |  | $ | (394,925) |
Net unrealized losses arising during the period |  | (192,858) |  |  | (5,582) |  |  | (10,215) |  |  | (208,655) |
Amounts reclassified from AOCI |  | 3,730 |  |  | (798) |  |  | — |  |  | 2,932 |
Changes, net of tax |  | (189,128) |  |  | (6,380) |  |  | (10,215) |  |  | (205,723) |
Balance, June 30, 2022 |  | $ | (554,781) |  |  | $ | (30,846) |  |  | $ | (15,021) |  |  | $ | (600,648) |

($ in thousands) |  | Debt Securities |  | Cash Flow Hedges |  | Foreign Currency Translation Adjustments (1) |  | Total
Balance, January 1, 2021 |  | $ | 52,247 |  |  | $ | (1,230) |  |  | $ | (6,692) |  |  | $ | 44,325 |
Net unrealized (losses) gains arising during the period |  | (59,819) |  |  | 229 |  |  | 885 |  |  | (58,705) |
Amounts reclassified from AOCI |  | (580) |  |  | 271 |  |  | — |  |  | (309) |
Changes, net of tax |  | (60,399) |  |  | 500 |  |  | 885 |  |  | (59,014) |
Balance, June 30, 2021 |  | $ | (8,152) |  |  | $ | (730) |  |  | $ | (5,807) |  |  | $ | (14,689) |
Balance, January 1, 2022 |  | $ | (85,703) |  |  | $ | 257 |  |  | $ | (4,935) |  |  | $ | (90,381) |
Net unrealized losses arising during the period |  | (474,219) |  |  | (28,809) |  |  | (10,086) |  |  | (513,114) |
Amounts reclassified from AOCI |  | 5,141 |  |  | (2,294) |  |  | — |  |  | 2,847 |
Changes, net of tax |  | (469,078) |  |  | (31,103) |  |  | (10,086) |  |  | (510,267) |
Balance, June 30, 2022 |  | $ | (554,781) |  | (2) | $ | (30,846) |  |  | $ | (15,021) |  |  | $ | (600,648) |

(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.
(2)Includes after-tax unamortized losses of $113.0 million related to AFS debt securities that were transferred to HTM. For further information, refer to Note 5 — Securities to the Consolidated Financial Statements in this Form 10-Q.
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The following tables present the components of other comprehensive income (loss), reclassifications to net income and the related tax effects for the three and six months ended June 30, 2022 and 2021:

($ in thousands) |  | Three Months Ended June 30,
| 2022 |  | 2021
| Before-Tax |  | Tax Effect |  | Net-of-Tax |  | Before-Tax |  | Tax Effect |  | Net-of-Tax
Debt securities: |  |  |  |  |  |  |  |  |  |  |  |
Net unrealized (losses) gains arising during the period |  | $ | (273,840) |  |  | $ | 80,982 |  |  | $ | (192,858) |  |  | $ | 104,283 |  |  | $ | (30,789) |  |  | $ | 73,494 |
Reclassification adjustments: |  |  |  |  |  |  |  |  |  |  |  |
Net realized (gains) reclassified into net income (1) |  | (28) |  |  | 8 |  |  | (20) |  |  | (632) |  |  | 187 |  |  | (445) |
Amortization of unrealized losses on transferred securities (2) |  | 5,324 |  |  | (1,574) |  |  | 3,750 |  |  | — |  |  | — |  |  | — |
Net change |  | (268,544) |  |  | 79,416 |  |  | (189,128) |  |  | 103,651 |  |  | (30,602) |  |  | 73,049 |
Cash flow hedges: |  |  |  |  |  |  |  |  |  |  |  |
Net unrealized (losses) gains arising during the period |  | (7,837) |  |  | 2,255 |  |  | (5,582) |  |  | (106) |  |  | 30 |  |  | (76) |
Net realized (gains) losses reclassified into net income (3) |  | (1,120) |  |  | 322 |  |  | (798) |  |  | 201 |  |  | (57) |  |  | 144 |
Net change |  | (8,957) |  |  | 2,577 |  |  | (6,380) |  |  | 95 |  |  | (27) |  |  | 68 |
Foreign currency translation adjustments, net of hedges: |  |  |  |  |  |  |  |  |  |  |  |
Net unrealized (losses) gains arising during the period |  | (9,278) |  |  | (937) |  |  | (10,215) |  |  | 1,584 |  |  | 650 |  |  | 2,234 |
Net change |  | (9,278) |  |  | (937) |  |  | (10,215) |  |  | 1,584 |  |  | 650 |  |  | 2,234 |
Other comprehensive (loss) income |  | $ | (286,779) |  |  | $ | 81,056 |  |  | $ | (205,723) |  |  | $ | 105,330 |  |  | $ | (29,979) |  |  | $ | 75,351 |

($ in thousands) |  | Six Months Ended June 30,
| 2022 |  | 2021
| Before-Tax |  | Tax Effect |  | Net-of-Tax |  | Before-Tax |  | Tax Effect |  | Net-of-Tax
Debt securities: |  |  |  |  |  |  |  |  |  |  |  |
Net unrealized losses arising during the period |  | $ | (673,302) |  |  | $ | 199,083 |  |  | $ | (474,219) |  |  | $ | (84,993) |  |  | $ | 25,174 |  |  | $ | (59,819) |
Reclassification adjustments: |  |  |  |  |  |  |  |  |  |  |  |
Net realized (gains) reclassified into net income (1) |  | (1,306) |  |  | 386 |  |  | (920) |  |  | (824) |  |  | 244 |  |  | (580) |
Amortization of unrealized losses on transferred securities (2) |  | 8,605 |  |  | (2,544) |  |  | 6,061 |  |  | — |  |  | — |  |  | — |
Net change |  | (666,003) |  |  | 196,925 |  |  | (469,078) |  |  | (85,817) |  |  | 25,418 |  |  | (60,399) |
Cash flow hedges: |  |  |  |  |  |  |  |  |  |  |  |
Net unrealized (losses) gains arising during the period |  | (40,446) |  |  | 11,637 |  |  | (28,809) |  |  | 320 |  |  | (91) |  |  | 229 |
Net realized (gains) losses reclassified into net income (3) |  | (3,220) |  |  | 926 |  |  | (2,294) |  |  | 378 |  |  | (107) |  |  | 271 |
Net change |  | (43,666) |  |  | 12,563 |  |  | (31,103) |  |  | 698 |  |  | (198) |  |  | 500 |
Foreign currency translation adjustments, net of hedges: |  |  |  |  |  |  |  |  |  |  |  |
Net unrealized (losses) gains arising during the period |  | (9,600) |  |  | (486) |  |  | (10,086) |  |  | 275 |  |  | 610 |  |  | 885 |
Net change |  | (9,600) |  |  | (486) |  |  | (10,086) |  |  | 275 |  |  | 610 |  |  | 885 |
Other comprehensive loss |  | $ | (719,269) |  |  | $ | 209,002 |  |  | $ | (510,267) |  |  | $ | (84,844) |  |  | $ | 25,830 |  |  | $ | (59,014) |

(1)For the three and six months ended June 30, 2022 and 2021, pre-tax amounts were reported in Gains on sales of AFS debt securities on the Consolidated Statement of Income.
(2)Represents unrealized losses amortized over the remaining lives of securities that were transferred from the AFS to HTM portfolio.
(3)For the three and six months ended June 30, 2022 and 2021, pre-tax amounts were reported in Interest expense on the Consolidated Statement of Income.
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Note 14 — Business Segments
The Company organizes its operations into three reportable operating segments: (1) Consumer and Business Banking; (2) Commercial Banking; and (3) Other. These segments are defined by the type of customers served, and the related products and services provided. The segments reflect how financial information is currently evaluated by management. Operating segment results are based on the Company’s internal management reporting process, which reflects assignments and allocations of certain balance sheet and income statement items. The information presented is not indicative of how the segments would perform if they operated as independent entities due to the interrelationships among the segments.
The Consumer and Business Banking segment primarily provides financial products and services to consumer and commercial customers through the Company’s domestic branch network and digital banking platform. This segment offers consumer and commercial deposits, mortgage and home equity loans, and other products and services. It also originates commercial loans for small- and medium-sized enterprises through the Company’s branch network. Other products and services provided by this segment include wealth management, treasury management, interest rate risk hedging and foreign exchange services.
The Commercial Banking segment primarily generates commercial loan and deposit products. Commercial loan products include CRE lending, construction finance, working capital lines of credit, trade finance, letters of credit, commercial business lending, affordable housing lending, asset-based lending, asset-backed finance, project finance and equipment financing. Commercial deposit products and other financial services include treasury management, foreign exchange services and interest rate and commodity risk hedging.
The remaining centralized functions, including the corporate treasury activities of the Company and eliminations of inter-segment amounts, have been aggregated and included in the Other segment, which provides broad administrative support to the two core segments, namely the Consumer and Business Banking and the Commercial Banking segments.
The Company utilizes an internal reporting process to measure the performance of the three operating segments within the Company. The internal reporting process derives operating segment results by utilizing allocation methodologies for revenues and expenses. Net interest income of each segment represents the difference between actual interest earned on assets and interest incurred on liabilities of the segment, adjusted for funding charges or credits through the Company’s internal funds transfer pricing (“FTP”) process. Noninterest income and noninterest expense directly attributable to a business segment are assigned to that segment. Indirect costs, including technology-related costs and corporate overhead, are allocated based on a segment’s estimated usage using factors including but not limited to, full-time equivalent employees, net interest income, and loan and deposit volume. Charge-offs are recorded to the segment directly associated with the respective loans charged off, and provision for credit losses is recorded to the segments based on the related loans for which allowances are evaluated. The Company’s internal reporting process utilizes a full-allocation methodology. Under this methodology, corporate and indirect expenses incurred by the Other segment are allocated to the Consumer and Business Banking and the Commercial Banking segments, except certain corporate treasury-related expenses and insignificant unallocated expenses.
The corporate treasury function within the Other segment is responsible for the Company’s liquidity and interest rate management. The Company’s 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.
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The following tables present the operating results and other key financial measures for the individual operating segments as of and for the three and six months ended June 30, 2022 and 2021:

($ in thousands) |  | Consumer and Business Banking |  | Commercial Banking |  | Other |  | Total
Three Months Ended June 30, 2022 |  |  |  |  |  |  |  |
Net interest income (loss) before provision for credit losses |  | $ | 284,373 |  |  | $ | 230,964 |  |  | $ | (42,385) |  |  | $ | 472,952 |
Provision for credit losses |  | 2,898 |  |  | 10,602 |  |  | — |  |  | 13,500 |
Noninterest income |  | 28,384 |  |  | 48,032 |  |  | 2,028 |  |  | 78,444 |
Noninterest expense |  | 94,295 |  |  | 81,023 |  |  | 21,542 |  |  | 196,860 |
Segment income (loss) before income taxes |  | 215,564 |  |  | 187,371 |  |  | (61,899) |  |  | 341,036 |
Segment net income (loss) |  | $ | 153,549 |  |  | $ | 133,861 |  |  | $ | (29,081) |  |  | $ | 258,329 |
As of June 30, 2022 |  |  |  |  |  |  |  |
Segment assets |  | $ | 16,472,373 |  |  | $ | 32,256,044 |  |  | $ | 13,665,866 |  |  | $ | 62,394,283 |

($ in thousands) |  | Consumer and Business Banking |  | Commercial Banking |  | Other |  | Total
Three Months Ended June 30, 2021 |  |  |  |  |  |  |  |
Net interest income before provision for (reversal of) credit losses |  | $ | 173,775 |  |  | $ | 192,696 |  |  | $ | 10,002 |  |  | $ | 376,473 |
Provision for (reversal of) credit losses |  | 2,358 |  |  | (17,358) |  |  | — |  |  | (15,000) |
Noninterest income (1) |  | 24,332 |  |  | 32,674 |  |  | 11,425 |  |  | 68,431 |
Noninterest expense |  | 87,650 |  |  | 64,164 |  |  | 37,709 |  |  | 189,523 |
Segment income (loss) before income taxes (1) |  | 108,099 |  |  | 178,564 |  |  | (16,282) |  |  | 270,381 |
Segment net income (1) |  | $ | 77,429 |  |  | $ | 127,873 |  |  | $ | 19,440 |  |  | $ | 224,742 |
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, 2022 |  |  |  |  |  |  |  |
Net interest income (loss) before provision for credit losses |  | $ | 497,587 |  |  | $ | 439,041 |  |  | $ | (48,063) |  |  | $ | 888,565 |
Provision for credit losses |  | 6,002 |  |  | 15,498 |  |  | — |  |  | 21,500 |
Noninterest income |  | 53,583 |  |  | 97,109 |  |  | 7,495 |  |  | 158,187 |
Noninterest expense |  | 190,390 |  |  | 154,418 |  |  | 41,502 |  |  | 386,310 |
Segment income (loss) before income taxes |  | 354,778 |  |  | 366,234 |  |  | (82,070) |  |  | 638,942 |
Segment net income (loss) |  | $ | 252,713 |  |  | $ | 261,368 |  |  | $ | (18,100) |  |  | $ | 495,981 |
As of June 30, 2022 |  |  |  |  |  |  |  |
Segment assets |  | $ | 16,472,373 |  |  | $ | 32,256,044 |  |  | $ | 13,665,866 |  |  | $ | 62,394,283 |

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($ 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) |  |  | — |  |  | (15,000) |
Noninterest income (1) |  | 47,774 |  |  | 80,070 |  |  | 13,453 |  |  | 141,297 |
Noninterest expense |  | 176,936 |  |  | 133,421 |  |  | 70,243 |  |  | 380,600 |
Segment income (loss) before income taxes (1) |  | 196,403 |  |  | 329,546 |  |  | (20,084) |  |  | 505,865 |
Segment net income (1) |  | $ | 140,680 |  |  | $ | 236,080 |  |  | $ | 52,976 |  |  | $ | 429,736 |
As of June 30, 2021 |  |  |  |  |  |  |  |
Segment assets |  | $ | 14,594,087 |  |  | $ | 27,354,253 |  |  | $ | 17,906,536 |  |  | $ | 59,854,876 |

(1)During the fourth quarter of 2021, the Company enhanced its segment allocation methodology related to the fair values of interest rate and commodity derivative contracts, which are included in noninterest income. These fair values, which were previously allocated to the “Commercial Banking” segment prior to the fourth quarter of 2021, have since been reclassified between “Consumer and Business Banking” and “Commercial Banking.” Balances for the second quarter and first half of 2021 have been reclassified to reflect these allocation changes for comparability.
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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

|  |  | Page
| Forward-Looking Statements | 59
| Overview | 61
| Financial Review | 63
| Results of Operations | 64
|  | Net Interest Income | 64
|  | Noninterest Income | 69
|  | Noninterest Expense | 70
|  | Income Taxes | 71
|  | Operating Segment Results | 71
| Balance Sheet Analysis | 75
|  | Debt Securities | 75
|  | Loan Portfolio | 77
|  | Foreign Outstandings | 83
|  | Capital | 83
|  | Deposits and Other Sources of Funding | 84
|  | Regulatory Capital and Ratios | 85
| Risk Management | 86
|  | Credit Risk Management | 87
|  | Liquidity Risk Management | 92
|  | Market Risk Management | 94
| Critical Accounting Policies and Estimates | 100
| Reconciliation of GAAP to Non-GAAP Financial Measures | 100

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Forward-Looking Statements
Certain matters discussed in this Quarterly Report on Form 10-Q (“this Form 10-Q”) contain forward-looking statements that are intended to be covered by the safe harbor for such statements provided by the Private Securities Litigation Reform Act of 1995. In addition, East West Bancorp, Inc. (referred to herein on an unconsolidated basis as “East West” and on a consolidated basis as the “Company,” “we” or “EWBC”) may make forward-looking statements in other documents that it files with, or furnishes to, the United States (“U.S.”) Securities and Exchange Commission (“SEC”) and management may make forward-looking statements to analysts, investors, media members and others. Forward-looking statements are those that do not relate to historical facts, and that are based on current expectations, estimates and projections about the Company’s industry, management’s beliefs and certain assumptions made by management, many of which, by their nature, are inherently uncertain and beyond the Company’s control. These statements may relate to the Company’s financial condition, results of operations, plans, objectives, future performance and/or business and usually can be identified by the use of forward-looking language, such as “anticipates,” “assumes,” “believes,” “can,” “continues,” “could,” “estimates,” “expects,” “forecasts,” “goal,” “intends to,” “likely,” “may,” “might,” “objective,” “plans,” “potential,” “projects,” “remains,” “should,” “target,” “trend,” “will,” “would,” or similar expressions, and the negative thereof. You should not place undue reliance on these statements, as they are subject to risks and uncertainties, including, but not limited to, those described below. When considering these forward-looking statements, you should keep in mind these risks and uncertainties, as well as any cautionary statements the Company may make. Moreover, you should treat these statements as speaking only as of the date they are made and based only on information then actually known to the Company.
There are a number of important factors that could cause future results to differ materially from historical performance and any forward-looking statements. Factors that might cause such differences, include, but are not limited to:
•changes in the global economy, including an economic slowdown, market or supply chain disruption, level of inflation, interest rate environment, housing prices, employment levels, rate of growth and general business conditions;
•the impact of any future federal government shutdown and uncertainty regarding the federal government’s debt limit;
•changes in local, regional and global business, economic and political conditions and geopolitical events;
•the economic, financial, reputational and other impacts of the ongoing Coronavirus Disease 2019 (“COVID-19”) pandemic, including variants, thereof and any other pandemic, epidemic or health-related crisis, as well as a deterioration of asset quality and an increase in credit losses due to the COVID-19 pandemic;
•changes in laws or the regulatory environment, including regulatory reform initiatives and policies of the U.S. Department of the Treasury, the Board of Governors of the Federal Reserve System (“Federal Reserve”), the Federal Deposit Insurance Corporation, the Office of the Comptroller of the Currency, the SEC, the Consumer Financial Protection Bureau, and the California Department of Financial Protection and Innovation - Division of Financial Institutions;
•changes and effects thereof in trade, monetary and fiscal policies and laws, including the ongoing economic and political disputes between the U.S. and the People’s Republic of China and the monetary policies of the Federal Reserve;
•changes in the commercial and consumer real estate markets;
•changes in consumer or commercial spending, savings and borrowing habits, and patterns and behaviors;
•fluctuations in the Company’s stock price;
•the impact from potential changes to income tax laws and regulations, federal spending and economic stimulus programs;
•the Company’s ability to compete effectively against financial institutions in its banking markets and other entities, including as a result of emerging technologies;
•the soundness of other financial institutions;
•the success and timing of the Company’s business strategies;
•the Company’s ability to retain key officers and employees;
•impact on the Company’s funding costs, net interest income and net interest margin from changes in key variable market interest rates, competition, regulatory requirements and the Company’s product mix;
•changes in the Company’s costs of operation, compliance and expansion;
•the Company’s ability to adopt and successfully integrate new technologies into its business in a strategic manner;
•the impact of the benchmark interest rate reform in the U.S. including the transition away from the U.S. dollar (“USD”) London Interbank Offered Rate (“LIBOR”) to alternative reference rates;
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•the impact of communications or technology disruption, failure in, or breach of, the Company’s operational or security systems or infrastructure, or those of third party vendors with which the Company does business, including as a result of cyber-attacks; and other similar matters which could result in, among other things, confidential and/or proprietary information being disclosed or misused, and materially impact the Company’s ability to provide services to its clients;
•the adequacy of the Company’s risk management framework, disclosure controls and procedures and internal control over financial reporting;
•future credit quality and performance, including the Company’s expectations regarding future credit losses and allowance levels;
•the impact of adverse changes to the Company’s credit ratings from major credit rating agencies;
•impact of adverse judgments or settlements in litigation;
•the impact on the Company’s operations due to political developments, pandemics, wars, civil unrest, terrorism or other hostilities that may disrupt or increase volatility in securities or otherwise affect business and economic conditions;
•heightened regulatory and governmental oversight and scrutiny of the Company’s business practices, including dealings with consumers;
•the impact of reputational risk from negative publicity, fines, penalties and other negative consequences from regulatory violations, legal actions and the Company’s interactions with business partners, counterparties, service providers and other third parties;
•the impact of regulatory investigations and enforcement actions;
•changes in accounting standards as may be required by the Financial Accounting Standards Board or other regulatory agencies and their impact on critical accounting policies and assumptions;
•the Company’s capital requirements and its ability to generate capital internally or raise capital on favorable terms;
•the impact on the Company’s liquidity due to changes in the Company’s ability to receive dividends from its subsidiaries;
•any future strategic acquisitions or divestitures;
•changes in the equity and debt securities markets;
•fluctuations in foreign currency exchange rates;
•the impact of increased focus on social, environmental and sustainability matters, which may affect the Company’s operations as well as those of its customers and the economy more broadly;
•significant turbulence or disruption in the capital or financial markets, which could result in, among other things, reduced investor demand for loans, a reduction in the availability of funding or increases in funding costs, declines in asset values and/or recognition of allowance for credit losses on securities held in the Company’s debt securities and equity securities portfolio; and
•the impact of climate change, natural or man-made disasters or calamities, such as wildfires, droughts and earthquakes, all of which are particularly common in California, or other events that may directly or indirectly result in a negative impact on the Company’s financial performance.
For a more detailed discussion of some of the factors that might cause such differences, see the Company’s Annual Report on Form 10-K for the year ended December 31, 2021, filed with the SEC on February 28, 2022 (the “Company’s 2021 Form 10-K”) under the heading Item 1A. Risk Factors and the information set forth under Item 1A. Risk Factors in this Form 10-Q. The Company does not undertake, and specifically disclaims any obligation to update or revise any forward-looking statements to reflect the occurrence of events or circumstances after the date of such statements except as required by law.
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Overview
The following discussion provides information about the results of operations, financial condition, liquidity and capital resources of the Company and its subsidiaries, including its subsidiary bank, East West Bank and its subsidiaries (referred to herein as “East West Bank” or the “Bank”). This information is intended to facilitate the understanding and assessment of significant changes and trends related to the Company’s results of operations and financial condition. This discussion and analysis should be read in conjunction with the Consolidated Financial Statements and the accompanying notes presented elsewhere in this report, and the Company’s 2021 Form 10-K.
Organization and Strategy
East West is a bank holding company incorporated in Delaware on August 26, 1998 and is registered under the Bank Holding Company Act of 1956, as amended. The Company commenced business on December 30, 1998 when, pursuant to a reorganization, it acquired all of the voting stock of the Bank, which became its principal asset. The Bank is an independent commercial bank headquartered in California that focuses on the financial service needs of the Asian-American community. Through over 120 locations in the U.S. and China, the Company provides a full range of consumer and commercial products and services through the following three business segments: (1) Consumer and Business Banking, and (2) Commercial Banking, with the remaining operations recorded in (3) Other. The Company’s principal activity is lending to and accepting deposits from businesses and individuals. We are committed to enhancing long-term stockholder value by growing loans, deposits and revenue, improving profitability, and investing for the future while managing risks, expenses and capital. Our business model is built on promoting customer loyalty and engagement, understanding our customers’ financial goals, and meeting our customers’ financial needs through our diverse products and services. We expect our relationship-focused business model to continue to generate organic growth from existing customers and to expand our targeted customer bases. As of June 30, 2022, the Company had $62.39 billion in assets and approximately 3,200 full-time equivalent employees. For additional information on our strategy, and the products and services provided by the Bank, see Item 1. Business — Strategy and Banking Services in the Company’s 2021 Form 10-K.
Developments
The COVID-19 Pandemic
The COVID-19 pandemic created a historic public health crisis and caused unprecedented disruptions to global economies. Although U.S. economic conditions have continued to recover from the COVID-19 pandemic as many health and safety restrictions have been lifted and vaccine rates have increased, certain adverse consequences of the pandemic continue to impact the macroeconomic environment and may persist for some time, including inflationary concerns, and global supply chain disruption. As a result, it is difficult to predict and quantify all the specific impacts, and the extent to which the COVID-19 pandemic may negatively affect our business, financial condition, results of operations, regulatory capital, and liquidity ratios. The Company has been, and may continue to be, impacted by the COVID-19 pandemic. Despite this, the Company has continued to focus on serving its customers and communities and maintaining the well-being of its employees. The Company continues to monitor the external environment and make changes to its safety protocols as appropriate.
Refer to Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) — Overview in the Company’s 2021 Form 10-K and Item 2. MD&A — Balance Sheet Analysis — Loan Portfolio in this Form 10-Q for a discussion on the initiatives the Company has undertaken to support its customers. Further discussion of the potential impacts on the Company’s business due to the COVID-19 pandemic has been provided in Item 1A. — Risk Factors — Risks Related to the COVID-19 Pandemic in the Company’s 2021 Form 10-K.
LIBOR Transition
LIBOR is the average interbank interest rate at which a large number of banks are prepared to lend one another unsecured funds. In March 2021, the United Kingdom’s Financial Conduct Authority and Intercontinental Exchange Benchmark Administration announced that the one-week and two-month USD LIBOR settings would cease to be published after December 31, 2021. The publication of overnight, one-, three-, six- and 12-month USD LIBOR settings will be extended through June 30, 2023, which will provide additional time to wind down or renegotiate existing contracts that reference these LIBOR settings, and will cease or become non-representative after June 30, 2023.
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In March 2022, President Biden signed into law the Adjustable Interest Rate (LIBOR) Act (the “LIBOR Act”) to facilitate the transition of legacy LIBOR-based contracts that either (a) lack LIBOR fallback provisions entirely or (b) contain inadequate LIBOR fallback provisions. The LIBOR Act includes different statutory provisions that may apply to LIBOR-based contracts, depending on the type of fallback provisions included in the contract, if any. One statutory provision automatically replaces LIBOR with a benchmark selected by the Federal Reserve (the “Board-selected benchmark replacement”) by operation of law in certain circumstances, including when the contract has no fallback provisions. Another statutory provision applies to contracts that allow a designated person to select a benchmark replacement rate and provides a safe harbor should that individual select the Board-selected benchmark replacement. Any Federal Reserve-identified replacement benchmark will be based on the Secured Overnight Financing Rate (“SOFR”), a rate published by the Federal Reserve Bank of New York.
The Company holds a significant volume of LIBOR-based products, including loans, derivatives, debt securities, assets purchased under resale agreements (“resale agreements”), junior subordinated debt, and assets sold under repurchase agreements (“repurchase agreements”) that are indexed to LIBOR tenors that will cease to be published after June 30, 2023. The Company has a cross-functional team to manage the communication of the Company’s transition plans with both internal and external stakeholders. The team helps to ensure that the Company appropriately updates its business processes, analytical tools, information systems and contract language to minimize disruption during and after the LIBOR transition. The Company has invested in updates to business and legal processes, models, analytical tools, and information and operational systems to facilitate the transition of legacy LIBOR products and offer products under alternative rates.
The Company began offering loans based on alternative reference rates, including SOFR and the Bloomberg Short-Term Bank Yield Index during the fourth quarter of 2021, and ceased offering new LIBOR loans and LIBOR loan renewals beginning January 1, 2022. The Company also adopted industry best practice guidelines for fallback language for new transactions and distributed communications related to the transition to certain impacted internal and external stakeholders. The Company has begun dialogue with customers to proactively modify LIBOR-based product contracts and transition to a benchmark replacement prior to June 30, 2023. The Company is assessing and planning to leverage relevant contractual and statutory solutions, including the LIBOR Act and other relevant legislation, to transition any residual LIBOR-based product exposures maturing after June 2023 to appropriate benchmark replacements. The Company’s LIBOR transition is anticipated to continue through June 30, 2023.
The Company will continue to monitor potential risks and impacts associated with the transition. For additional information related to the potential impact surrounding the transition from LIBOR on the Company’s business, see Item 1A. Risk Factors — Risks Related to Financial Matters in the Company’s 2021 Form 10-K.
Deposit Insurance Assessment Rates
On June 21, 2022, the FDIC issued a proposed rule to increase initial base deposit insurance assessment rates for insured depository institutions by two basis points (“bps”), beginning with the first quarterly assessment period of 2023. The proposed assessment rate schedules would remain in effect unless and until the reserve ratio of the Deposit Insurance Fund meets or exceeds two percent. If the proposed rule is finalized as proposed, the FDIC insurance costs of insured depository institutions, including the Bank, would generally increase.
Community Reinvestment Act
On May 5, 2022, the federal banking agencies issued a proposed rule that would substantially revise how they evaluate an insured depository institution’s record of satisfying the credit needs of its entire communities, including low- and moderate-income individuals and neighborhoods, under the Community Reinvestment Act (“CRA”). We are evaluating the potential impact of the proposed rule on the Bank.
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Financial Review

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

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

(1)Includes $1.4 million and $15.4 million of interest income related to Paycheck Protection Program (“PPP”) loans for the three months ended June 30, 2022 and 2021, respectively, and $6.5 million and $30.4 million for the six months ended June 30, 2022 and 2021, respectively.
(2)For additional information regarding the reconciliation of these non-U.S. Generally Accepted Accounting Principles (“GAAP”) financial measures, refer to Item 2. MD&A — Reconciliation of GAAP to Non-GAAP Financial Measures in this Form 10-Q.
(3)Efficiency ratio is calculated as noninterest expense divided by total revenue.
(4)Includes $153.3 million an d $534.2 million of PPP loans as of June 30, 2022 and December 31, 2021, respectively.
The Company’s second quarter 2022 net income was $258.3 million, an increase of $33.6 million or 15%, compared with second quarter 2021 net income of $224.7 million. Net income for the first half of 2022 was $496.0 million, an increase of $66.2 million or 15% compared with first half of 2021 net income of $429.7 million. The increases in both periods were primarily due to higher net interest income, partially offset by higher income tax expense and provision for credit losses. Noteworthy items about the Company’s second quarter and first half of 2022 performance included:
•Expanding profitability. Second quarter 2022 ROA, ROE and the tangible return on average tangible equity of 1.66%, 18.23% and 19.94%, respectively, all expanded compared with second quarter 2021. Likewise, for the first half of 2022, ROA, ROE and the tangible return on average tangible equity of 1.61%, 17.36% and 18.96%, respectively, all expanded year-over-year. For additional details, see the reconciliation of non-GAAP measures presented under Item 2. MD&A — Reconciliation of GAAP to Non-GAAP Financial Measures in this Form 10-Q.
•Net interest income growth and net interest margin expansion. Second quarter 2022 net interest income before provision for (reversal of) credit losses was $473.0 million, an increase of $96.5 million or 26%, from the second quarter 2021 Second quarter 2022 net interest margin of 3.23% expanded by 48 bps year-over-year. For the first half of 2022, net interest income before provision for (reversal of) credit losses was $888.6 million, an increase of $158.4 million or 22% year-over-year; first half of 2022 net interest margin was 3.05%, up by 32 bps year-over-year.
63

•Improved efficiency. Efficiency ratios of 35.70% and 36.91% for the second quarter and first half of 2022, respectively, both improved year-over-year. The adjusted efficiency ratios of 32.90% and 34.05% for the second quarter and first half of 2022, respectively, both improved year-over-year. For additional details, see the reconciliation of non-GAAP measures presented under Item 2. MD&A — Reconciliation of GAAP to Non-GAAP Financial Measures in this Form 10-Q.
•The Company recorded a provision for credit losses of $13.5 million and $21.5 million for the second quarter and first half of 2022, respectively, compared with a reversal of provision for credit losses of $15.0 million during both the second quarter and first half of 2021.
•Total assets reached $62.39 billion, growing by $1.52 billion or 3% from December 31, 2021, primarily driven by loan growth.
•Total loans were $46.53 billion as of June 30, 2022, an increase of $4.84 billion or 12% from $41.69 billion as of December 31, 2021. This was primarily driven by well-diversified growth across the commercial real estate (“CRE”), residential mortgage, and commercial and industrial (“C&I”) loan segments.
•Total deposits were $54.34 billion as of June 30, 2022, an increase of $992.8 million or 2%, from $53.35 billion as of December 31, 2021. Growth was primarily driven by time and interest-bearing checking deposits, partially offset by a decrease in money market accounts. Noninterest-bearing demand deposit balances were $23.03 billion as of June 30, 2022, an increase of $183.4 million or 1% year-to-date. Noninterest-bearing demand deposits comprised 42% of total deposits as of June 30, 2022.
Results of Operations
Net Interest Income
The Company’s primary source of revenue is net interest income, which is the interest income earned on interest-earning assets less interest expense paid on interest-bearing liabilities. Net interest margin is the ratio of net interest income to average interest-earning assets. Net interest income and net interest margin are impacted by several factors, including changes in average balances and the composition of interest-earning assets and funding sources, market interest rate fluctuations and the slope of the yield curve, repricing characteristics and maturity of interest-earning assets and interest-bearing liabilities, the volume of noninterest-bearing sources of funds, and asset quality.
Second quarter 2022 net interest income before provision for credit losses was $473.0 million, an increase of $96.5 million or 26%, compared with $376.5 million for the second quarter 2021. For the first half of 2022, net interest income was $888.6 million, an increase of $158.4 million or 22%, compared with $730.2 million for the first half of 2021. Second quarter 2022 net interest margin was 3.23%, an increase of 48 bps from 2.75% for the second quarter of 2021. For the first half of 2022, net interest margin was 3.05%, an increase of 32 bps from 2.73% for the first half of 2021. The year-over-year changes in net interest income and net interest margin primarily reflected strong loan growth, higher loan yields, and higher debt securities yield and volume. Yields expanded year-over-year due to rising interest rates.
64

Average interest-earning assets were $58.67 billion for the second quarter of 2022, an increase of $3.77 billion or 7% from $54.90 billion for the second quarter of 2021. For the first half of 2022, the average interest-earning assets were $58.68 billion, an increase of $4.80 billion or 9% from $53.88 billion for the first half of 2021. The increases in average interest-earning assets in both periods primarily reflected growth in loans and debt securities, partially offset by a decrease in interest-bearing cash and deposits with banks.
The yield on average interest-earning assets for the second quarter of 2022 was 3.42%, an increase of 50 bps from 2.92% for the second quarter 2021. The yield on average interest-earning assets for the first half of 2022 was 3.20%, an increase of 28 bps from 2.92% for the first half of 2021. The year-over-year changes in the yield on average interest-bearing assets primarily resulted from rising benchmark interest rates and a changed earning asset mix in favor of higher-yielding assets.
`
The average loan yield for the second quarter of 2022 was 3.95%, an increase of 38 bps from 3.57% for the second quarter of 2021. The average loan yield for the first half of 2022 was 3.80%, an increase of 23 bps from 3.57% for the first half of 2021. The year-over-year changes in the average loan yield reflect the loan portfolio’s sensitivity to rising benchmark interest rates. Approximately 63% and 64% of loans held-for-investment were variable-rate or hybrid loans in their adjustable-rate period as of June 30, 2022 and 2021, respectively.
65

Deposits are an important source of funds and impact both net interest income and net interest margin. Average deposits were $54.13 billion for the second quarter of 2022, an increase of $3.95 billion or 8% from $50.18 billion for the second quarter of 2021. For the first half of 2022, average deposits were $54.08 billion, an increase of $5.06 billion or 10% from $49.02 billion for the first half of 2021. Average noninterest-bearing deposits were $23.89 billion for the second quarter of 2022, an increase of $4.17 billion or 21% from $19.72 billion for the second quarter of 2021. For the first half of 2022, average noninterest-bearing deposits were $23.66 billion, an increase of $4.75 billion or 25% from $18.91 billion for the first half of 2021. Average noninterest-bearing deposits made up 44% of average deposits for both the second quarter and first half of 2022, compared with 39% in the year-ago periods.
The average cost of deposits was 0.17% for the second quarter of 2022, a three bp increase from 0.14% for the second quarter of 2021. The average cost of interest-bearing deposits was 0.30% for the second quarter of 2022, an increase of six bps, from 0.24% for the second quarter of 2021. The year-over-year increases were primarily due to higher rates paid on money market accounts.
The average cost of deposits was 0.13% for the first half of 2022, a three bp decrease from 0.16% for the first half of 2021. The average cost of interest-bearing deposits was 0.24% for the first half of 2022, a three bp decrease from 0.27% for the first half of 2021. The year-over-year decreases reflected lower rates paid on checking and time deposits, and the run-off of higher-cost time deposits, partially offset by higher interest paid on money market deposits.
The average cost of funds calculation includes deposits, Federal Home Loan Bank (“FHLB”) advances, repurchase agreements, long-term debt and short-term borrowings. For the second quarter of 2022, the average cost of funds was 0.20%, a two bp increase from 0.18% for the second quarter of 2021. For the first half of 2022, the average cost of funds was 0.16%, a four bp decrease from 0.20% for the first half of 2021. The year-over-year changes in the average cost of funds were driven by the changes in the cost of deposits as discussed above, and the maturity of higher cost FHLB advances. $405.0 million and $175.0 million in FHLB advances matured during the second quarter of 2021 and first quarter of 2022, respectively.
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The Company utilizes various tools to manage interest rate risk. Refer to the Interest Rate Risk Management section of Item 2. MD&A — Risk Management — Market Risk Management in this Form 10-Q.
The following table presents the interest spread, net interest margin, average balances, interest income and expense, and the average yield/rate by asset and liability component for the second quarters of 2022 and 2021:

($ in thousands) |  | Three Months Ended June 30,
| 2022 |  | 2021
| Average Balance |  | Interest |  | Average Yield/ Rate (1) |  | Average Balance |  | Interest |  | Average Yield/ Rate (1)
ASSETS |  |  |  |  |  |  |  |  |  |  |  |
Interest-earning assets: |  |  |  |  |  |  |  |  |  |  |  |
Interest-bearing cash and deposits with banks |  | $ | 2,797,711 |  |  | $ | 4,787 |  |  | 0.69 | % |  | $ | 5,072,225 |  |  | $ | 3,628 |  |  | 0.29 | %
Resale agreements |  | 1,641,723 |  |  | 8,553 |  |  | 2.09 | % |  | 2,129,567 |  |  | 8,021 |  |  | 1.51 | %
Available-for-sale (“AFS”) debt securities (2)(3) |  | 6,503,677 |  |  | 33,438 |  |  | 2.06 | % |  | 7,997,005 |  |  | 34,690 |  |  | 1.74 | %
Held-to-maturity (“HTM”) debt securities (2)(4) |  | 3,021,239 |  |  | 12,738 |  |  | 1.69 | % |  | — |  |  | — |  |  | — | %
Loans (5)(6) |  | 44,626,488 |  |  | 439,416 |  |  | 3.95 | % |  | 39,622,270 |  |  | 352,453 |  |  | 3.57 | %
Restricted equity securities |  | 77,839 |  |  | 822 |  |  | 4.24 | % |  | 80,142 |  |  | 541 |  |  | 2.71 | %
Total interest-earning assets |  | $ | 58,668,677 |  |  | $ | 499,754 |  |  | 3.42 | % |  | $ | 54,901,209 |  |  | $ | 399,333 |  |  | 2.92 | %
Noninterest-earning assets: |  |  |  |  |  |  |  |  |  |  |  |
Cash and due from banks |  | 712,884 |  |  |  |  |  |  | 600,053 |  |  |  |  |
Allowance for loan losses |  | (545,489) |  |  |  |  |  |  | (607,523) |  |  |  |  |
Other assets |  | 3,396,769 |  |  |  |  |  |  | 2,878,098 |  |  |  |  |
Total assets |  | $ | 62,232,841 |  |  |  |  |  |  | $ | 57,771,837 |  |  |  |  |
LIABILITIES AND STOCKHOLDERS’ EQUITY |  |  |  |  |  |  |  |  |  |  |  |
Interest-bearing liabilities: |  |  |  |  |  |  |  |  |  |  |  |
Checking deposits |  | $ | 6,712,890 |  |  | $ | 3,178 |  |  | 0.19 | % |  | $ | 6,671,358 |  |  | $ | 3,777 |  |  | 0.23 | %
Money market deposits |  | 12,319,930 |  |  | 8,892 |  |  | 0.29 | % |  | 12,596,515 |  |  | 3,712 |  |  | 0.12 | %
Savings deposits |  | 2,970,007 |  |  | 1,864 |  |  | 0.25 | % |  | 2,676,865 |  |  | 2,078 |  |  | 0.31 | %
Time deposits |  | 8,239,571 |  |  | 8,554 |  |  | 0.42 | % |  | 8,518,936 |  |  | 8,431 |  |  | 0.40 | %
Short-term borrowings |  | 64,145 |  |  | 241 |  |  | 1.51 | % |  | 336 |  |  | — |  |  | — | %
FHLB advances |  | 138,960 |  |  | 559 |  |  | 1.61 | % |  | 474,887 |  |  | 2,099 |  |  | 1.77 | %
Repurchase agreements |  | 359,778 |  |  | 2,418 |  |  | 2.70 | % |  | 303,118 |  |  | 1,991 |  |  | 2.63 | %
Long-term debt and finance lease liabilities |  | 152,194 |  |  | 1,096 |  |  | 2.89 | % |  | 152,099 |  |  | 772 |  |  | 2.04 | %
Total interest-bearing liabilities |  | $ | 30,957,475 |  |  | $ | 26,802 |  |  | 0.35 | % |  | $ | 31,394,114 |  |  | $ | 22,860 |  |  | 0.29 | %
Noninterest-bearing liabilities and stockholders’ equity: |  |  |  |  |  |  |  |  |  |  |  |
Demand deposits |  | 23,887,452 |  |  |  |  |  |  | 19,717,315 |  |  |  |  |
Accrued expenses and other liabilities |  | 1,705,487 |  |  |  |  |  |  | 1,234,456 |  |  |  |  |
Stockholders’ equity |  | 5,682,427 |  |  |  |  |  |  | 5,425,952 |  |  |  |  |
Total liabilities and stockholders’ equity |  | $ | 62,232,841 |  |  |  |  |  |  | $ | 57,771,837 |  |  |  |  |
Interest rate spread |  |  |  |  |  | 3.07 | % |  |  |  |  |  | 2.63 | %
Net interest income and net interest margin |  |  |  | $ | 472,952 |  |  | 3.23 | % |  |  |  | $ | 376,473 |  |  | 2.75 | %

(1)Annualized.
(2)Yields on tax-exempt securities are not presented on a tax-equivalent basis.
(3)Includes the amortization of premiums on AFS debt securities of $20.3 million and $21.0 million for the second quarters of 2022 and 2021, respectively.
(4)Includes the amortization of premiums on HTM debt securities of $100 thousand for the second quarter of 2022.
(5)Average balances include nonperforming loans and loans held-for-sale.
(6)Loans include the accretion of net deferred loan fees and amortization of net premiums, which totaled $11.4 million and $15.8 million for the second quarters of 2022 and 2021, respectively.
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The following table presents the interest spread, net interest margin, average balances, interest income and expense, and the average yield/rate by asset and liability component for the first halves of 2022 and 2021:

($ in thousands) |  | Six Months Ended June 30,
| 2022 |  | 2021
| 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 |  | $ | 3,627,253 |  |  | $ | 8,047 |  |  | 0.45 | % |  | $ | 5,592,124 |  |  | $ | 7,260 |  |  | 0.26 | %
Resale agreements |  | 1,868,600 |  |  | 16,936 |  |  | 1.83 | % |  | 1,797,578 |  |  | 14,120 |  |  | 1.58 | %
AFS debt securities (2)(3) |  | 7,232,686 |  |  | 67,907 |  |  | 1.89 | % |  | 7,232,686 |  |  | 63,790 |  |  | 1.78 | %
HTM debt securities (2)(4) |  | 2,497,811 |  |  | 20,936 |  |  | 1.69 | % |  | — |  |  | — |  |  | — | %
Loans (5)(6) |  | 43,376,398 |  |  | 816,526 |  |  | 3.80 | % |  | 39,178,255 |  |  | 694,461 |  |  | 3.57 | %
Restricted equity securities |  | 77,708 |  |  | 1,431 |  |  | 3.71 | % |  | 81,645 |  |  | 1,088 |  |  | 2.69 | %
Total interest-earning assets |  | $ | 58,680,456 |  |  | $ | 931,783 |  |  | 3.20 | % |  | $ | 53,882,288 |  |  | $ | 780,719 |  |  | 2.92 | %
Noninterest-earning assets: |  |  |  |  |  |  |  |  |  |  |  |
Cash and due from banks |  | 677,579 |  |  |  |  |  |  | 590,219 |  |  |  |  |
Allowance for loan losses |  | (544,423) |  |  |  |  |  |  | (613,026) |  |  |  |  |
Other assets |  | 3,183,144 |  |  |  |  |  |  | 2,829,594 |  |  |  |  |
Total assets |  | $ | 61,996,756 |  |  |  |  |  |  | $ | 56,689,075 |  |  |  |  |
LIABILITIES AND STOCKHOLDERS’ EQUITY |  |  |  |  |  |  |  |  |  |  |  |
Interest-bearing liabilities: |  |  |  |  |  |  |  |  |  |  |  |
Checking deposits |  | $ | 6,680,657 |  |  | $ | 4,580 |  |  | 0.14 | % |  | $ | 6,532,965 |  |  | $ | 7,991 |  |  | 0.25 | %
Money market deposits |  | 12,614,994 |  |  | 12,095 |  |  | 0.19 | % |  | 12,088,006 |  |  | 8,423 |  |  | 0.14 | %
Savings deposits |  | 2,950,268 |  |  | 3,568 |  |  | 0.24 | % |  | 2,675,677 |  |  | 3,819 |  |  | 0.29 | %
Time deposits |  | 8,170,613 |  |  | 15,234 |  |  | 0.38 | % |  | 8,814,159 |  |  | 19,587 |  |  | 0.45 | %
Short-term borrowings |  | 33,177 |  |  | 250 |  |  | 1.52 | % |  | 2,508 |  |  | 42 |  |  | 3.38 | %
FHLB advances |  | 149,431 |  |  | 1,137 |  |  | 1.53 | % |  | 563,331 |  |  | 5,168 |  |  | 1.85 | %
Repurchase agreements |  | 336,013 |  |  | 4,434 |  |  | 2.66 | % |  | 301,567 |  |  | 3,969 |  |  | 2.65 | %
Long-term debt and finance lease liabilities |  | 152,103 |  |  | 1,920 |  |  | 2.55 | % |  | 152,094 |  |  | 1,552 |  |  | 2.06 | %
Total interest-bearing liabilities |  | $ | 31,087,256 |  |  | $ | 43,218 |  |  | 0.28 | % |  | $ | 31,130,307 |  |  | $ | 50,551 |  |  | 0.33 | %
Noninterest-bearing liabilities and stockholders’ equity: |  |  |  |  |  |  |  |  |  |  |  |
Demand deposits |  | 23,661,355 |  |  |  |  |  |  | 18,909,991 |  |  |  |  |
Accrued expenses and other liabilities |  | 1,486,067 |  |  |  |  |  |  | 1,266,510 |  |  |  |  |
Stockholders’ equity |  | 5,762,078 |  |  |  |  |  |  | 5,382,267 |  |  |  |  |
Total liabilities and stockholders’ equity |  | $ | 61,996,756 |  |  |  |  |  |  | $ | 56,689,075 |  |  |  |  |
Interest rate spread |  |  |  |  |  | 2.92 | % |  |  |  |  |  | 2.59 | %
Net interest income and net interest margin |  |  |  | $ | 888,565 |  |  | 3.05 | % |  |  |  | $ | 730,168 |  |  | 2.73 | %

(1)Annualized.
(2)Yields on tax-exempt securities are not presented on a tax-equivalent basis.
(3)Includes the amortization of premiums on AFS debt securities of $43.8 million and $40.1 million for the first halves of 2022 and 2021, respectively.
(4)Includes the amortization of premiums on HTM debt securities of $234 thousand for the first half of 2022.
(5)Average balances include nonperforming loans and loans held-for-sale.
(6)Loans include the accretion of net deferred loan fees and amortization of net premiums, which totaled $23.8 million and $29.8 million for the first halves of 2022 and 2021, respectively.
68

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) |  | Three Months Ended June 30, |  | Six Months Ended June 30, |  |  |  |  |  |  |  |
| 2022 vs. 2021 |  | 2022 vs. 2021 |  |  |  |
| Total Change |  | Changes Due to |  | Total Change |  | Changes Due to |  |  |  |  |  |  |  |
|  | Volume |  | Yield/Rate |  |  | Volume |  | Yield/Rate |  |  |  |  |  |  |  |  |  |
Interest-earning assets: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Interest-bearing cash and deposits with banks |  | $ | 1,159 |  |  | $ | (2,179) |  |  | $ | 3,338 |  |  | $ | 787 |  |  | $ | (3,150) |  |  | $ | 3,937 |  |  |  |  |  |  |  |  |  |  |  |  |
Resale agreements |  | 532 |  |  | (2,101) |  |  | 2,633 |  |  | 2,816 |  |  | 575 |  |  | 2,241 |  |  |  |  |  |  |  |  |  |  |  |  |
AFS debt securities |  | (1,252) |  |  | (7,080) |  |  | 5,828 |  |  | 4,117 |  |  | — |  |  | 4,117 |  |  |  |  |  |  |  |  |  |  |  |  |
HTM debt securities |  | 12,738 |  |  | 12,738 |  |  | — |  |  | 20,936 |  |  | 20,936 |  |  | — |  |  |  |  |  |  |  |  |  |  |  |  |
Loans |  | 86,963 |  |  | 47,092 |  |  | 39,871 |  |  | 122,065 |  |  | 77,337 |  |  | 44,728 |  |  |  |  |  |  |  |  |  |  |  |  |
Restricted equity securities |  | 281 |  |  | (16) |  |  | 297 |  |  | 343 |  |  | (55) |  |  | 398 |  |  |  |  |  |  |  |  |  |  |  |  |
Total interest and dividend income |  | $ | 100,421 |  |  | $ | 48,454 |  |  | $ | 51,967 |  |  | $ | 151,064 |  |  | $ | 95,643 |  |  | $ | 55,421 |  |  |  |  |  |  |  |  |  |  |  |  |
Interest-bearing liabilities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Checking deposits |  | $ | (599) |  |  | $ | 23 |  |  | $ | (622) |  |  | $ | (3,411) |  |  | $ | 177 |  |  | $ | (3,588) |  |  |  |  |  |  |  |  |  |  |  |  |
Money market deposits |  | 5,180 |  |  | (83) |  |  | 5,263 |  |  | 3,672 |  |  | 382 |  |  | 3,290 |  |  |  |  |  |  |  |  |  |  |  |  |
Savings deposits |  | (214) |  |  | 212 |  |  | (426) |  |  | (251) |  |  | 368 |  |  | (619) |  |  |  |  |  |  |  |  |  |  |  |  |
Time deposits |  | 123 |  |  | (282) |  |  | 405 |  |  | (4,353) |  |  | (1,358) |  |  | (2,995) |  |  |  |  |  |  |  |  |  |  |  |  |
Short-term borrowings |  | 241 |  |  | — |  |  | 241 |  |  | 208 |  |  | 243 |  |  | (35) |  |  |  |  |  |  |  |  |  |  |  |  |
FHLB advances |  | (1,540) |  |  | (1,366) |  |  | (174) |  |  | (4,031) |  |  | (3,271) |  |  | (760) |  |  |  |  |  |  |  |  |  |  |  |  |
Repurchase agreements |  | 427 |  |  | 380 |  |  | 47 |  |  | 465 |  |  | 455 |  |  | 10 |  |  |  |  |  |  |  |  |  |  |  |  |
Long-term debt and finance lease liabilities |  | 324 |  |  | — |  |  | 324 |  |  | 368 |  |  | — |  |  | 368 |  |  |  |  |  |  |  |  |  |  |  |  |
Total interest expense |  | $ | 3,942 |  |  | $ | (1,116) |  |  | $ | 5,058 |  |  | $ | (7,333) |  |  | $ | (3,004) |  |  | $ | (4,329) |  |  |  |  |  |  |  |  |  |  |  |  |
Change in net interest income |  | $ | 96,479 |  |  | $ | 49,570 |  |  | $ | 46,909 |  |  | $ | 158,397 |  |  | $ | 98,647 |  |  | $ | 59,750 |  |  |  |  |  |  |  |  |  |  |  |  |

Noninterest Income
The following table presents the components of noninterest income for the second quarters and first halves of 2022 and 2021:

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

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Noninterest income comprised 14% and 15% of total revenue for the second quarter and the first half of 2022, respectively, compared with 15% and 16% for the second quarter and the first half of 2021, respectively. Second quarter 2022 noninterest income was $78.4 million, an increase of $10.0 million or 15%, compared with $68.4 million for the same period in 2021. This increase was primarily due to increases in interest rate contracts and other derivative income, and deposit account fees, partially offset by decreases in other investment income, foreign exchange income and wealth management fees. Noninterest income for the first half of 2022 was $158.2 million, an increase of $16.9 million or 12%, compared with $141.3 million for the same period in 2021. This increase was primarily due to increases in deposit account fees, interest rate contracts and other derivative income, and foreign exchange income, partially offset by lower wealth management fees and other investment income.
Deposit account fees were $22.4 million for the second quarter of 2022, an increase of $5.0 million or 29%, compared with $17.3 million for the same period in 2021. For the first half of 2022, deposit account fees were $42.7 million, an increase of $10.0 million or 30%, compared with $32.7 million for the same period in 2021. These increases were primarily driven by commercial deposit account growth.
Interest rate contracts and other derivative income was $9.8 million for the second quarter of 2022, compared with a loss of $3.2 million for the same period in 2021. For the first half of 2022, interest rate contracts and other derivative income was $20.9 million, an increase of $7.1 million or 51%, compared with $13.8 million for the same period in 2021. These increases were primarily due to higher favorable credit valuation adjustments during the second quarter and first half of 2022, compared to the same year-ago periods.
Foreign exchange income was $11.4 million for the second quarter of 2022, a decrease of $1.6 million or 13%, compared with $13.0 million for the same period in 2021. For the first half of 2022, foreign exchange income was $24.1 million, an increase of $1.5 million or 7%, compared with $22.5 million for the first half of 2021. Wealth management fees were $6.5 million for the second quarter of 2022, a decrease of $1.4 million or 18%, compared with $8.0 million for the same period in 2021. For the first half of 2022, wealth management fees were $12.6 million, a decrease of $2.3 million or 15%, compared with $14.9 million for the first half of 2021.
Other investment income was $4.9 million for the second quarter of 2022, a decrease of $2.7 million or 36%, compared with $7.6 million for the same period in 2021. For the first half of 2022, other investment income was $6.5 million, a decrease of $2.0 million or 24%, compared with $8.5 million for the first half of 2021. The decreases reflected a decrease in equity pick-up and a smaller amount of valuation adjustments in 2022, compared with the year-ago periods.
Noninterest Expense
The following table presents the components of noninterest expense for the second quarters and first halves of 2022 and 2021:

($ in thousands) |  | Three Months Ended June 30, |  | Six Months Ended June 30, |  |
| 2022 |  | 2021 |  | % |  | 2022 |  | 2021 |  | % |  |  |  |  |  |
Compensation and employee benefits |  | $ | 113,364 |  |  | $ | 105,426 |  |  | 8 | % |  | $ | 229,633 |  |  | $ | 213,234 |  |  | 8 | % |  |  |  |  |  |
Occupancy and equipment expense |  | 15,469 |  |  | 15,377 |  |  | 1 | % |  | 30,933 |  |  | 31,299 |  |  | (1) | % |  |  |  |  |  |
Deposit insurance premiums and regulatory assessments |  | 4,927 |  |  | 4,274 |  |  | 15 | % |  | 9,644 |  |  | 8,150 |  |  | 18 | % |  |  |  |  |  |
Deposit account expense |  | 5,671 |  |  | 3,817 |  |  | 49 | % |  | 10,364 |  |  | 7,709 |  |  | 34 | % |  |  |  |  |  |
Data processing |  | 3,486 |  |  | 4,035 |  |  | (14) | % |  | 7,151 |  |  | 8,513 |  |  | (16) | % |  |  |  |  |  |
Computer software expense |  | 6,572 |  |  | 7,521 |  |  | (13) | % |  | 13,866 |  |  | 14,680 |  |  | (6) | % |  |  |  |  |  |
Consulting expense |  | 2,021 |  |  | 1,868 |  |  | 8 | % |  | 3,854 |  |  | 3,343 |  |  | 15 | % |  |  |  |  |  |
Legal expense |  | 1,047 |  |  | 1,975 |  |  | (47) | % |  | 1,765 |  |  | 3,477 |  |  | (49) | % |  |  |  |  |  |
Other operating expense |  | 29,324 |  |  | 17,939 |  |  | 63 | % |  | 50,221 |  |  | 37,546 |  |  | 34 | % |  |  |  |  |  |
Amortization of tax credit and other investments |  | 14,979 |  |  | 27,291 |  |  | (45) | % |  | 28,879 |  |  | 52,649 |  |  | (45) | % |  |  |  |  |  |
Total noninterest expense |  | $ | 196,860 |  |  | $ | 189,523 |  |  | 4 | % |  | $ | 386,310 |  |  | $ | 380,600 |  |  | 2 | % |  |  |  |  |  |

70

Second quarter 2022 noninterest expense was $196.9 million, an increase of $7.3 million or 4%, compared with $189.5 million for the same period in 2021. First half of 2022 noninterest expense was $386.3 million, an increase of $5.7 million or 2%, compared with $380.6 million for the same period in 2021. The increases in both the second quarter and the first half of 2022, were primarily due to increases in other operating expense and compensation and employee benefits, partially offset by a decrease in the amortization of tax credit and other investments.
Compensation and employee benefits was $113.4 million for the second quarter of 2022, an increase of $7.9 million or 8%, compared with $105.4 million for the same period in 2021, primarily due to headcount growth and higher bonus accrual. First half of 2022 compensation and employee benefits was $229.6 million, an increase of $16.4 million or 8%, compared with $213.2 million for the first half of 2021, primarily due to headcount growth and the year-over-year change in deferred loan costs.
Other operating expense was $29.3 million for the second quarter of 2022, an increase of $11.4 million or 63%, compared with $17.9 million for the same period in 2021, primarily due to the write-downs of other foreclosed assets and miscellaneous operational losses. For the first half of 2022, other operating expense was $50.2 million, an increase of $12.7 million or 34% compared with $37.5 million for the same period in 2021, primarily due to miscellaneous operational losses, increased charitable contributions, travel and loan related expenses.
Amortization of tax credit and other investments was $15.0 million for the second quarter of 2022, a decrease of $12.3 million or 45%, compared with $27.3 million for the same period in 2021. For the first half of 2022, amortization of tax credit and other investments was $28.9 million, a decrease of $23.8 million or 45%, compared with $52.6 million for the same period in 2021. The year-over-year change reflects the mix of tax credits being recognized, which have differing amortization periods, as well as the impact of investments that close in a given period.
Income Taxes

($ in thousands) |  | Three Months Ended June 30, |  | Six Months Ended June 30, |  |  |  |
| 2022 |  | 2021 |  | % Change |  | 2022 |  | 2021 |  | % Change |  |  |  |  |  |  |  |  |  |  |  |
Income before income taxes |  | $ | 341,036 |  |  | $ | 270,381 |  |  | 26 | % |  | $ | 638,942 |  |  | $ | 505,865 |  |  | 26 | % |  |  |  |  |  |  |  |  |  |  |  |
Income tax expense |  | $ | 82,707 |  |  | $ | 45,639 |  |  | 81 | % |  | $ | 142,961 |  |  | $ | 76,129 |  |  | 88 | % |  |  |  |  |  |  |  |  |  |  |  |
Effective tax rate |  | 24.3 | % |  | 16.9 | % |  |  |  | 22.4 | % |  | 15.0 | % |  |  |  |  |  |  |  |  |  |  |  |  |  |

Second quarter 2022 income tax expense was $82.7 million and the effective tax rate was 24.3%, compared with second quarter 2021 income tax expense of $45.6 million and an effective tax rate of 16.9%. For the first half of 2022, income tax expense was $143.0 million and the effective tax rate was 22.4%, compared with income tax expense of $76.1 million and an effective tax rate of 15.0% for the same period in 2021. The year-over-year increases in the income tax expense and the effective tax rate reflected a higher level of income before income taxes and a decrease in tax credits recognized in 2022.
Operating Segment Results
The Company organizes its operations into three reportable operating segments: (1) Consumer and Business Banking; (2) Commercial Banking; and (3) Other. These segments are defined by the type of customers served and the related products and services provided. The segments reflect how financial information is currently evaluated by management. For additional description of the Company’s internal management reporting process, including the segment cost allocation methodology, see Note 14 — Business Segments to the Consolidated Financial Statements in this Form 10-Q.
Segment net interest income represents the difference between actual interest earned on assets and interest incurred on liabilities of the segment, adjusted for funding charges or credits through the Company’s internal funds transfer pricing (“FTP”) process.
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The following tables present the results by operating segment for the periods indicated:

($ in thousands) |  | Three Months Ended June 30,
| Consumer and Business Banking |  | Commercial Banking |  | Other
| 2022 |  | 2021 |  | 2022 |  | 2021 |  | 2022 |  | 2021
Total revenue (loss) (1) |  | $ | 312,757 |  |  | $ | 198,107 |  |  | $ | 278,996 |  |  | $ | 225,370 |  |  | $ | (40,357) |  |  | $ | 21,427 |
Provision for (reversal of) credit losses |  | 2,898 |  |  | 2,358 |  |  | 10,602 |  |  | (17,358) |  |  | — |  |  | — |
Noninterest expense |  | 94,295 |  |  | 87,650 |  |  | 81,023 |  |  | 64,164 |  |  | 21,542 |  |  | 37,709 |
Segment income (loss) before income taxes (1) |  | 215,564 |  |  | 108,099 |  |  | 187,371 |  |  | 178,564 |  |  | (61,899) |  |  | (16,282) |
Segment net income (loss) (1) |  | $ | 153,549 |  |  | $ | 77,429 |  |  | $ | 133,861 |  |  | $ | 127,873 |  |  | $ | (29,081) |  |  | $ | 19,440 |

($ in thousands) |  | Six Months Ended June 30, |  |  |
| Consumer and Business Banking |  | Commercial Banking |  | Other |  |  |
| 2022 |  | 2021 |  | 2022 |  | 2021 |  | 2022 |  | 2021 |  |  |
Total revenue (loss) (1) |  | $ | 551,170 |  |  | $ | 371,448 |  |  | $ | 536,150 |  |  | $ | 449,858 |  |  | $ | (40,568) |  |  | $ | 50,159 |  |  |  |
Provision for (reversal of) credit losses |  | 6,002 |  |  | (1,891) |  |  | 15,498 |  |  | (13,109) |  |  | — |  |  | — |  |  |  |
Noninterest expense |  | 190,390 |  |  | 176,936 |  |  | 154,418 |  |  | 133,421 |  |  | 41,502 |  |  | 70,243 |  |  |  |
Segment income (loss) before income taxes (1) |  | 354,778 |  |  | 196,403 |  |  | 366,234 |  |  | 329,546 |  |  | (82,070) |  |  | (20,084) |  |  |  |
Segment net income (loss) (1) |  | $ | 252,713 |  |  | $ | 140,680 |  |  | $ | 261,368 |  |  | $ | 236,080 |  |  | $ | (18,100) |  |  | $ | 52,976 |  |  |  |

(1)During the fourth quarter of 2021, the Company enhanced its segment allocation methodology related to the fair values of interest rate and commodity derivative contracts, which are included in noninterest income. These fair values, which were previously allocated to the “Commercial Banking” segment prior to the fourth quarter of 2021, have since been reclassified between “Consumer and Business Banking” and “Commercial Banking.” Balances for the second quarter and first half of 2021 have been reclassified to reflect these allocation changes for comparability.
Consumer and Business Banking
The Consumer and Business Banking segment primarily provides financial products and services to consumer and commercial customers through the Company’s domestic branch network. This segment offers consumer and commercial deposits, mortgage and home equity loans, and other products and services. It also originates commercial loans for small- and medium-sized enterprises. Other products and services provided by this segment include wealth management, treasury management, interest rate risk hedging and foreign exchange services.
The following tables present additional financial information for the Consumer and Business Banking segment for the periods indicated:

($ in thousands) |  | Three Months Ended June 30,
|  |  |  |  | Change from 2021
| 2022 |  | 2021 |  | $ |  | %
Net interest income before provision for credit losses |  | $ | 284,373 |  |  | $ | 173,775 |  |  | $ | 110,598 |  |  | 64 | %
Noninterest income (1) |  | 28,384 |  |  | 24,332 |  |  | 4,052 |  |  | 17 | %
Total revenue (1) |  | 312,757 |  |  | 198,107 |  |  | 114,650 |  |  | 58 | %
Provision for credit losses |  | 2,898 |  |  | 2,358 |  |  | 540 |  |  | 23 | %
Noninterest expense |  | 94,295 |  |  | 87,650 |  |  | 6,645 |  |  | 8 | %
Segment income before income taxes (1) |  | 215,564 |  |  | 108,099 |  |  | 107,465 |  |  | 99 | %
Income tax expense |  | 62,015 |  |  | 30,670 |  |  | 31,345 |  |  | 102 | %
Segment net income (1) |  | $ | 153,549 |  |  | $ | 77,429 |  |  | $ | 76,120 |  |  | 98 | %
Average loans |  | $ | 15,314,974 |  |  | $ | 13,866,502 |  |  | $ | 1,448,472 |  |  | 10 | %
Average deposits |  | $ | 33,429,541 |  |  | $ | 31,146,296 |  |  | $ | 2,283,245 |  |  | 7 | %

72

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

(1)During the fourth quarter of 2021, the Company enhanced its segment allocation methodology related to the fair values of interest rate and commodity derivative contracts, which are included in noninterest income. These fair values, which were previously allocated to the “Commercial Banking” segment prior to the fourth quarter of 2021, have since been reclassified between “Consumer and Business Banking” and “Commercial Banking.” Balances for the second quarter and first half of 2021 have been reclassified to reflect these allocation changes for comparability.
Consumer and Business Banking segment net income increased $76.1 million or 98% year-over-year to $153.5 million for the second quarter of 2022, and $112.0 million or 80% year-over-year to $252.7 million for the first half of 2022. The increases in both periods reflected revenue growth, partially offset by higher income tax expense and noninterest expense. Net interest income before provision for credit losses increased $110.6 million or 64% year-over-year to $284.4 million for the second quarter of 2022, and $173.9 million or 54% year-over-year to $497.6 million for the first half of 2022. The increases in both periods were primarily driven by higher deposit fund transfer pricing credits due to noninterest-bearing deposit growth, and higher loan interest income, primarily from growth in residential mortgage loans. Noninterest expense increased $6.6 million or 8% year-over-year to $94.3 million for the second quarter of 2022, and $13.5 million or 8% year-over-year to $190.4 million for the first half of 2022. The increases in both periods reflected higher compensation and employee benefits expense, and higher allocated corporate overhead.
Commercial Banking
The Commercial Banking segment primarily generates commercial loan and deposit products. Commercial loan products include CRE lending, construction finance, working capital lines of credit, trade finance, letters of credit, commercial business lending, affordable housing lending, asset-based lending, asset-backed finance, project finance and equipment financing. Commercial deposit products and other financial services include treasury management, foreign exchange services, and interest rate and commodity risk hedging.
The following tables present additional financial information for the Commercial Banking segment for the periods indicated:

($ in thousands) |  | Three Months Ended June 30,
|  |  |  |  | Change from 2021
| 2022 |  | 2021 |  | $ |  | %
Net interest income before provision for (reversal of) credit losses |  | $ | 230,964 |  |  | $ | 192,696 |  |  | $ | 38,268 |  |  | 20 | %
Noninterest income (1) |  | 48,032 |  |  | 32,674 |  |  | 15,358 |  |  | 47 | %
Total revenue (1) |  | 278,996 |  |  | 225,370 |  |  | 53,626 |  |  | 24 | %
Provision for (reversal of) credit losses |  | 10,602 |  |  | (17,358) |  |  | 27,960 |  |  | 161 | %
Noninterest expense |  | 81,023 |  |  | 64,164 |  |  | 16,859 |  |  | 26 | %
Segment income before income taxes (1) |  | 187,371 |  |  | 178,564 |  |  | 8,807 |  |  | 5 | %
Income tax expense |  | 53,510 |  |  | 50,691 |  |  | 2,819 |  |  | 6 | %
Segment net income (1) |  | $ | 133,861 |  |  | $ | 127,873 |  |  | $ | 5,988 |  |  | 5 | %
Average loans |  | $ | 29,311,514 |  |  | $ | 25,755,768 |  |  | $ | 3,555,746 |  |  | 14 | %
Average deposits |  | $ | 17,539,067 |  |  | $ | 16,429,188 |  |  | $ | 1,109,879 |  |  | 7 | %

73

($ in thousands) |  | Six Months Ended June 30,
|  |  |  |  | Change from 2021
| 2022 |  | 2021 |  | $ |  | %
Net interest income before provision for (reversal of) credit losses |  | $ | 439,041 |  |  | $ | 369,788 |  |  | $ | 69,253 |  |  | 19 | %
Noninterest income (1) |  | 97,109 |  |  | 80,070 |  |  | 17,039 |  |  | 21 | %
Total revenue (1) |  | 536,150 |  |  | 449,858 |  |  | 86,292 |  |  | 19 | %
Provision for (reversal of) credit losses |  | 15,498 |  |  | (13,109) |  |  | 28,607 |  |  | 218 | %
Noninterest expense |  | 154,418 |  |  | 133,421 |  |  | 20,997 |  |  | 16 | %
Segment income before income taxes (1) |  | 366,234 |  |  | 329,546 |  |  | 36,688 |  |  | 11 | %
Income tax expense |  | 104,866 |  |  | 93,466 |  |  | 11,400 |  |  | 12 | %
Segment net income (1) |  | $ | 261,368 |  |  | $ | 236,080 |  |  | $ | 25,288 |  |  | 11 | %
Average loans |  | $ | 28,413,731 |  |  | $ | 25,593,363 |  |  | $ | 2,820,368 |  |  | 11 | %
Average deposits |  | $ | 17,637,251 |  |  | $ | 15,766,127 |  |  | $ | 1,871,124 |  |  | 12 | %

(1)During the fourth quarter of 2021, the Company enhanced its segment allocation methodology related to the fair values of interest rate and commodity derivative contracts, which are included in noninterest income. These fair values, which were previously allocated to the “Commercial Banking” segment prior to the fourth quarter 2021, have since been reclassified between “Consumer and Business Banking” and “Commercial Banking.” Balances for the second quarter and first half of 2021 have been reclassified to reflect these allocation changes for comparability.
Commercial Banking segment net income increased $6.0 million or 5% year-over-year to $133.9 million for the second quarter of 2022, and $25.3 million or 11% year-over-year to $261.4 million for the first half of 2022. The increases in both periods reflected revenue growth, partially offset by higher provision for credit losses and noninterest expense. Net interest income before provision for credit losses increased $38.3 million or 20% year-over-year to $231.0 million for the second quarter of 2022, and $69.3 million or 19% year-over-year to $439.0 million for the first half of 2022. The increases in both periods were primarily due to higher loan interest income from commercial loan growth. Provision for credit losses increased $28.0 million or 161% year-over-year to $10.6 million for the second quarter of 2022, and $28.6 million or 218% year-over-year to $15.5 million for the first half of 2022, primarily driven by commercial loan growth and a weakening economic outlook, partially offset by lower net charge-offs. Noninterest expense increased $16.9 million or 26% year-over-year to $81.0 million for the second quarter of 2022 and increased $21.0 million or 16% year-over-year to $154.4 million for the first half of 2022. The increases in both periods were driven by higher compensation and employee benefits, miscellaneous operational losses and write-downs on other foreclosed assets, and higher corporate overhead allocations.
Other
Centralized functions, including the corporate treasury activities of the Company and eliminations of inter-segment amounts, have been aggregated and included in the Other segment, which provides broad administrative support to the two core segments, namely the Consumer and Business Banking, and the Commercial Banking segments.
The following tables present additional financial information for the Other segment for the periods indicated:

($ in thousands) |  | Three Months Ended June 30,
|  |  |  |  | Change from 2021
| 2022 |  | 2021 |  | $ |  | %
Net interest (loss) income before provision for credit losses |  | $ | (42,385) |  |  | $ | 10,002 |  |  | $ | (52,387) |  |  | (524) | %
Noninterest income |  | 2,028 |  |  | 11,425 |  |  | (9,397) |  |  | (82) | %
Total (loss) revenue |  | (40,357) |  |  | 21,427 |  |  | (61,784) |  |  | (288) | %
Noninterest expense |  | 21,542 |  |  | 37,709 |  |  | (16,167) |  |  | (43) | %
Segment loss before income taxes |  | (61,899) |  |  | (16,282) |  |  | (45,617) |  |  | 280 | %
Income tax (benefit) expense |  | (32,818) |  |  | (35,722) |  |  | 2,904 |  |  | (8) | %
Segment net (loss) income |  | $ | (29,081) |  |  | $ | 19,440 |  |  | $ | (48,521) |  |  | (250) | %
Average deposits |  | $ | 3,161,242 |  |  | $ | 2,605,505 |  |  | $ | 555,737 |  |  | 21 | %

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($ in thousands) |  | Six Months Ended June 30,
|  |  |  |  | Change from 2021
| 2022 |  | 2021 |  | $ |  | %
Net interest (loss) income before provision for credit losses |  | $ | (48,063) |  |  | $ | 36,706 |  |  | $ | (84,769) |  |  | (231) | %
Noninterest income |  | 7,495 |  |  | 13,453 |  |  | (5,958) |  |  | (44) | %
Total (loss) revenue |  | (40,568) |  |  | 50,159 |  |  | (90,727) |  |  | (181) | %
Noninterest expense |  | 41,502 |  |  | 70,243 |  |  | (28,741) |  |  | (41) | %
Segment loss before income taxes |  | (82,070) |  |  | (20,084) |  |  | (61,986) |  |  | 309 | %
Income tax (benefit) expense |  | (63,970) |  |  | (73,060) |  |  | 9,090 |  |  | (12) | %
Segment net (loss) income |  | $ | (18,100) |  |  | $ | 52,976 |  |  | $ | (71,076) |  |  | (134) | %
Average deposits |  | $ | 3,168,083 |  |  | $ | 2,566,555 |  |  | $ | 601,528 |  |  | 23 | %

Other segment net loss was $29.1 million for the second quarter of 2022, a decrease of $48.5 million from net income of $19.4 million for the same period in 2021. For the first half of 2022, the Other segment net loss was $18.1 million, a decrease of $71.1 million from net income of $53.0 million for the same period in 2021. The decreases in both periods were primarily driven by lower revenue, partially offset by lower noninterest expense. For the second quarter of 2022, the Other segment recorded a net interest loss before provision for credit losses of $42.4 million, a $52.4 million decrease from $10.0 million of net interest income before provision for credit losses in the second quarter of 2021. For the first half of 2022, the Other segment recorded a net interest loss before provision for credit losses of $48.1 million, an $84.8 million decrease from $36.7 million of net interest income before provision for credit losses in the first half of 2021. The decreases in both periods were primarily driven by lower FTP spread income absorbed by the Other segment, partially offset by an increase in interest income from investments due to a higher volume of debt securities. Noninterest expense decreased $16.2 million year-over-year to $21.5 million for the second quarter of 2022, and $28.7 million year-over-year to $41.5 million for the first half of 2022, primarily due to lower amortization of tax credits and other investments.
Balance Sheet Analysis
Debt Securities
The Company maintains a portfolio of high quality and liquid debt securities with a moderate duration profile. It closely manages the overall portfolio interest rate and liquidity risks. The Company’s debt securities provide:
•interest income for earnings and yield enhancement;
•availability for funding needs arising during the normal course of business;
•the ability to execute interest rate risk management strategies in response to changes in economic or market conditions; and
•collateral to support pledging agreements as required and/or to enhance the Company’s borrowing capacity.
While the Company intends to hold its debt securities indefinitely, it may sell AFS securities in response to changes in the balance sheet and related interest rate risk to meet liquidity, regulatory, and strategic requirements.
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The following table presents the distribution of the Company’s AFS and HTM debt securities portfolio as of June 30, 2022 and December 31, 2021, and by credit ratings as of June 30, 2022:

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

(1)Credit ratings express opinions about the credit quality of a debt security. The Company determines the credit rating of a security according to the lowest credit rating made available by nationally recognized statistical rating organizations (“NRSROs”). Debt securities rated investment grade, which are those with ratings similar to BBB- or above (as defined by NRSROs), are generally considered by the rating agencies and market participants to be low credit risk. Ratings percentages are allocated based on fair value.
(2)For debt securities not rated by NRSROs, the Company uses other factors which include but are not limited to the priority in collections within the securitization structure, and whether the contractual payments have historically been on time.
The Company’s AFS and HTM debt securities portfolios had an effective duration, defined as the sensitivity of the value of the portfolio to interest rate changes, of 5.5 as of June 30, 2022. This increased from 5.0 as of December 31, 2021, primarily due to both the upshifting and steepening of the yield curve.
Available-for-Sale Debt Securities
The fair value of the AFS debt securities portfolio totaled $6.26 billion as of June 30, 2022, a decrease of $3.71 billion or 37% from $9.97 billion as of December 31, 2021. The decrease was primarily due to the Company’s transfer of $3.01 billion of AFS securities to HTM securities during the first quarter of 2022 and a decline in the portfolio valuation within the rising interest rate environment. For further discussion regarding the transfer, refer to the Held-to-Maturity Debt Securities section below. The Company’s AFS debt securities are carried at fair value with noncredit-related unrealized gains and losses, net of tax, reported in Other comprehensive (loss) income on the Consolidated Statement of Comprehensive Income. Pre-tax net unrealized losses on AFS debt securities were $636.0 million as of June 30, 2022, compared with $121.8 million as of December 31, 2021.
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As of June 30, 2022, 97% of the carrying value of the AFS debt securities portfolio was rated investment grade by NRSROs, compared with 98% as of December 31, 2021. Of the AFS debt securities with gross unrealized losses, substantially all were rated investment grade as of June 30, 2022 and December 31, 2021. There was no allowance for credit losses as of June 30, 2022 and December 31, 2021, provided against the AFS debt securities. Additionally, there were no credit losses recognized in earnings for both the second quarters and first halves of 2022 and 2021. For additional discussion on the allowance for credit losses, see Note 5 — Securities — Allowance for Credit Losses on Available-for-Sale Debt Securities to the Consolidated Financial Statements in this Form 10-Q.
Held-to-Maturity Debt Securities
During the first quarter of 2022, the Company transferred $3.01 billion in aggregate fair value of U.S. Treasury, government agency and government-sponsored enterprise debt and mortgage-back securities, and municipal securities from AFS to HTM. In comparison, there were no HTM debt securities as of December 31, 2021. The Company’s HTM debt securities are carried at amortized cost. The unrealized gains or losses at the date of transfer of these securities continue to be reported in Accumulated other comprehensive income (loss) (“AOCI”), net of tax on the Consolidated Balance Sheet and are amortized over the remaining life of the securities.
All HTM debt securities were issued, guaranteed, or supported by the U.S. government or government-sponsored enterprises. Accordingly, the Company applied a zero credit loss assumption for these securities and no allowance for credit loss was recorded as of June 30, 2022. For additional discussion on the allowance for credit losses, see Note 5 — Securities — Allowance for Credit Losses on Held-to-Maturity Debt Securities to the Consolidated Financial Statements in this Form 10-Q.
For additional information on AFS and HTM securities, see Note 1 — Summary of Significant Accounting Policies to the Consolidated Financial Statements in the Company’s 2021 Form 10-K and Note 2 — Current Accounting Developments and Summary of Significant Accounting Policies, Note 3 — Fair Value Measurement and Fair Value of Financial Instruments and Note 5 — Securities to the Consolidated Financial Statements in this Form 10-Q.
Loan Portfolio
The Company offers a broad range of financial products designed to meet the credit needs of its borrowers. The Company’s loan portfolio segments include commercial loans, which consist of C&I, CRE, multifamily residential, construction and land loans, and consumer loans, which consist of single-family residential, home equity lines of credit (“HELOCs”), and other consumer loans. Total net loans were $45.97 billion as of June 30, 2022, an increase of $4.81 billion or 12% from $41.15 billion as of December 31, 2021. This increase was primarily driven by well-diversified growth throughout our major loan categories including increases of $2.35 billion or 15% in total CRE loans, $1.28 billion or 11% in residential mortgage loans, and $1.25 billion or 9% in C&I loans. The composition of the loan portfolio as of June 30, 2022 was similar to the composition as of December 31, 2021.
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The following table presents the composition of the Company’s total loan portfolio by loan type as of June 30, 2022 and December 31, 2021:

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

(1)Includes $153.3 million and $534.2 million of PPP loans as of June 30, 2022 and December 31, 2021, respectively.
(2)Includes $(56.2) million and $(50.7) million of net deferred loan fees and net unamortized premiums as of June 30, 2022 and December 31, 2021, respectively.
(3)Consists of C&I loans as of June 30, 2022 and single-family residential loans as of December 31, 2021.
Actions to Support Customers during the COVID-19 Pandemic
In response to the COVID-19 pandemic, the Company assisted customers by offering Small Business Administration (“SBA”) PPP loans to help struggling businesses in our communities pay their employees and sustain their businesses. The SBA stopped accepting new loan applications on May 31, 2021. As of June 30, 2022, the Company had PPP loans outstanding totaling $153.3 million, which were recorded in the C&I portfolio. During the first half of 2022, the Company submitted and received SBA approval for the forgiveness of PPP loans totaling $356.4 million. For more information on PPP loans, refer to Note 1 — Summary of Significant Accounting Policies — Significant Accounting Policies — Paycheck Protection Program to the Consolidated Financial Statements in the Company’s 2021 Form 10-K.
In addition, the Company provided payment relief through various loan modification programs, which expired on January 1, 2022. Refer to Item 2. MD&A — Risk Management — Credit Risk Management in this Form 10-Q for details.
Commercial
The commercial loan portfolio comprised 73% of total loans as of both June 30, 2022 and December 31, 2021. The Company actively monitors this commercial lending portfolio for elevated levels of credit risk and reviews credit exposures for sensitivity to changing economic conditions.
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Commercial — Commercial and Industrial Loans. Total C&I loan commitments (loans outstanding plus unfunded credit commitments, excluding issued letters of credit) were $22.04 billion as of June 30, 2022, an increase of $1.75 billion or 9% from $20.29 billion as of December 31, 2021. Total C&I loans were $15.38 billion as of June 30, 2022, an increase of $1.23 billion or 9% from $14.15 billion. Total C&I loans made up 33% and 34% of total loans held-for-investment as of June 30, 2022 and December 31, 2021, respectively. The C&I loan portfolio includes loans and financing for businesses in a wide spectrum of industries, comprised of working capital lines of credit, trade finance, letters of credit, affordable housing lending, asset-based lending, asset-backed finance, project finance and equipment financing. The C&I loan portfolio also includes PPP loans. Additionally, the Company has a portfolio of broadly syndicated C&I loans, which represent revolving or term loan facilities that are marketed and sold primarily to institutional investors. This portfolio totaled $936.4 million and $939.4 million as of June 30, 2022 and December 31, 2021, respectively. The majority of the C&I loans had variable interest rates as of both June 30, 2022 and December 31, 2021.
The C&I portfolio is well-diversified by industry. The Company monitors concentrations within the C&I loan portfolio by customer exposure and industry classification, setting diversification targets and exposure limits by industry or loan product. The following charts illustrate the industry mix within our C&I portfolio as of June 30, 2022 and December 31, 2021.
Commercial — Total Commercial Real Estate Loans. Total CRE loans outstanding were $18.53 billion as of June 30, 2022, which grew by $2.35 billion or 15%, from $16.18 billion as of December 31, 2021, and accounted for 40% and 39% of total loans held-for-investment as of June 30, 2022 and December 31, 2021, respectively. The total CRE loan portfolio consists of CRE, multifamily residential, and construction and land loans. The year-to-date growth in total CRE loans was primarily driven by multifamily and industrial property types.
The Company’s total CRE portfolio is diversified by property type with an average CRE loan size of $2.7 million and $2.5 million as of June 30, 2022 and December 31, 2021, respectively. The following table summarizes the Company’s total CRE loans by property type as of June 30, 2022 and December 31, 2021:

($ in thousands) |  | June 30, 2022 |  | December 31, 2021
| Amount |  | % |  | Amount |  | %
Property types: |  |  |  |  |  |  |  |
Retail (1) |  | $ | 4,015,944 |  |  | 22 | % |  | $ | 3,685,900 |  |  | 23 | %
Multifamily |  | 4,443,704 |  |  | 24 | % |  | 3,675,605 |  |  | 23 | %
Office (1) |  | 3,050,073 |  |  | 17 | % |  | 2,804,006 |  |  | 17 | %
Industrial (1) |  | 3,375,663 |  |  | 18 | % |  | 2,807,325 |  |  | 18 | %
Hospitality (1) |  | 2,115,184 |  |  | 11 | % |  | 1,993,995 |  |  | 12 | %
Construction and land |  | 515,857 |  |  | 3 | % |  | 346,486 |  |  | 2 | %
Other (1) |  | 1,009,884 |  |  | 5 | % |  | 863,821 |  |  | 5 | %
Total CRE loans |  | $ | 18,526,309 |  |  | 100 | % |  | $ | 16,177,138 |  |  | 100 | %

(1)Included in CRE loan category.
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The weighted-average loan-to-value (“LTV”) ratio of the total CRE portfolio was 52% and 51% as of June 30, 2022 and December 31, 2021, respectively. The low weighted-average LTV ratio was consistent across CRE property types. Approximately 90% and 89% of total CRE loans had an LTV ratio of 65% or lower as of June 30, 2022 and December 31, 2021, respectively. The consistency of the Company’s low LTV underwriting standards has historically resulted in lower credit losses for CRE and multifamily residential loans.
The following tables provide a summary of the Company’s CRE, multifamily residential, and construction and land loans by geography as of June 30, 2022 and December 31, 2021. The distribution of the total CRE loan portfolio reflects the Company’s geographic footprint, which is primarily concentrated in California:

($ in thousands) |  | June 30, 2022
| CRE |  | % |  | Multifamily Residential |  | % |  | Construction and Land |  | % |  | Total CRE |  | %
Geographic markets: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Southern California |  | $ | 7,008,837 |  |  |  |  | $ | 2,210,717 |  |  |  |  | $ | 172,168 |  |  |  |  | $ | 9,391,722 |  |  |
Northern California |  | 2,796,688 |  |  |  |  | 828,553 |  |  |  |  | 195,423 |  |  |  |  | 3,820,664 |  |  |
California |  | 9,805,525 |  |  | 72 | % |  | 3,039,270 |  |  | 68 | % |  | 367,591 |  |  | 71 | % |  | 13,212,386 |  |  | 72 | %
Texas |  | 1,159,905 |  |  | 9 | % |  | 414,697 |  |  | 9 | % |  | 3,868 |  |  | 1 | % |  | 1,578,470 |  |  | 9 | %
New York |  | 696,957 |  |  | 5 | % |  | 218,493 |  |  | 5 | % |  | 95,248 |  |  | 18 | % |  | 1,010,698 |  |  | 5 | %
Washington |  | 452,341 |  |  | 3 | % |  | 171,769 |  |  | 4 | % |  | 11,356 |  |  | 2 | % |  | 635,466 |  |  | 3 | %
Nevada |  | 170,745 |  |  | 1 | % |  | 110,717 |  |  | 3 | % |  | 19,852 |  |  | 4 | % |  | 301,314 |  |  | 2 | %
Arizona |  | 196,250 |  |  | 2 | % |  | 81,628 |  |  | 2 | % |  | — |  |  | — | % |  | 277,878 |  |  | 1 | %
Other markets |  | 1,085,025 |  |  | 8 | % |  | 407,130 |  |  | 9 | % |  | 17,942 |  |  | 4 | % |  | 1,510,097 |  |  | 8 | %
Total loans |  | $ | 13,566,748 |  |  | 100 | % |  | $ | 4,443,704 |  |  | 100 | % |  | $ | 515,857 |  |  | 100 | % |  | $ | 18,526,309 |  |  | 100 | %

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

Because 72% and 75% of total CRE loans were concentrated in California as of June 30, 2022 and December 31, 2021, respectively, changes in California’s economy and real estate values could have a significant impact on the collectability of these loans and the required level of allowance for loan losses. For additional information related to the higher degree of risk from a downturn in the California real estate market, see Item 1A. Risk Factors — Risks Related to Geopolitical Uncertainties to the Company’s 2021 Form 10-K.
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Commercial — Commercial Real Estate Loans. The Company focuses on providing financing to experienced real estate investors and developers who have moderate levels of leverage, many of whom are long-time customers of the Bank. CRE loans totaled $13.57 billion as of June 30, 2022, compared with $12.16 billion as of December 31, 2021, and accounted for 29% of total loans held-for-investment as of both periods. Interest rates on CRE loans may be fixed, variable or hybrid. As of June 30, 2022, 66% of our CRE portfolio was variable rate, of which 49% had customer-level interest rate derivative contracts in place. These are hedging contracts offered by EWB to help our customers manage their interest rate risk while the Bank's own exposure remained variable rate. In comparison, as of December 31, 2021, 75% of our CRE portfolio was variable rate, of which 52% had customer-level interest rate derivative contracts in place. Loans are underwritten with conservative standards for cash flows, debt service coverage and LTV.
Owner-occupied properties comprised 19% and 20% of the CRE loans as of June 30, 2022 and December 31, 2021, respectively. The remainder were non-owner-occupied properties, where 50% or more of the debt service for the loan is typically provided by rental income from an unaffiliated third party.
Commercial — Multifamily Residential Loans. The multifamily residential loan portfolio is largely comprised of loans secured by residential properties with five or more units. Multifamily residential loans totaled $4.44 billion as of June 30, 2022, compared with $3.68 billion as of December 31, 2021, and accounted for 10% and 9% of total loans held-for-investment as of June 30, 2022 and December 31, 2021, respectively. The Company offers a variety of first lien mortgages, including fixed- and variable-rate loans, as well as hybrid loans with interest rates that adjust annually after an initial fixed rate period of three to ten years.
Commercial — Construction and Land Loans. Construction and land loans provide financing for a portfolio of projects diversified by real estate property type. Construction and land loans totaled $515.9 million as of June 30, 2022, compared with $346.5 million as of December 31, 2021, and accounted for 1% of total loans held-for-investment as of both dates. Construction loans exposure was made up of $417.2 million in loans outstanding, plus $424.9 million in unfunded commitments as of June 30, 2022, compared with $297.9 million in loans outstanding, plus $361.2 million in unfunded commitments as of December 31, 2021. Land loans totaled $98.7 million as of June 30, 2022, compared with $48.6 million as of December 31, 2021.
Consumer
The following tables summarize the Company’s single-family residential and HELOC loan portfolios by geography as of June 30, 2022 and December 31, 2021:

($ in thousands) |  | June 30, 2022
| Single-Family Residential |  | % |  | HELOCs |  | % |  | Total Residential Mortgage |  | %
Geographic markets: |  |  |  |  |  |  |  |  |  |  |  |
Southern California |  | $ | 3,893,421 |  |  |  |  | $ | 1,026,617 |  |  |  |  | $ | 4,920,038 |  |  |
Northern California |  | 1,155,502 |  |  |  |  | 525,676 |  |  |  |  | 1,681,178 |  |  |
California |  | 5,048,923 |  |  | 48 | % |  | 1,552,293 |  |  | 69 | % |  | 6,601,216 |  |  | 53 | %
New York |  | 3,581,285 |  |  | 35 | % |  | 307,075 |  |  | 13 | % |  | 3,888,360 |  |  | 31 | %
Washington |  | 570,950 |  |  | 6 | % |  | 261,383 |  |  | 11 | % |  | 832,333 |  |  | 7 | %
Massachusetts |  | 277,068 |  |  | 3 | % |  | 89,026 |  |  | 4 | % |  | 366,094 |  |  | 3 | %
Georgia |  | 275,454 |  |  | 3 | % |  | 25,440 |  |  | 1 | % |  | 300,894 |  |  | 2 | %
Texas |  | 281,683 |  |  | 3 | % |  | — |  |  | — | % |  | 281,683 |  |  | 2 | %
Other markets |  | 199,110 |  |  | 2 | % |  | 44,863 |  |  | 2 | % |  | 243,973 |  |  | 2 | %
Total |  | $ | 10,234,473 |  |  | 100 | % |  | $ | 2,280,080 |  |  | 100 | % |  | $ | 12,514,553 |  |  | 100 | %
Lien priority: |  |  |  |  |  |  |  |  |  |  |  |
First mortgage |  | $ | 10,234,473 |  |  | 100 | % |  | $ | 1,964,856 |  |  | 86 | % |  | $ | 12,199,329 |  |  | 97 | %
Junior lien mortgage |  | — |  |  | — | % |  | 315,224 |  |  | 14 | % |  | 315,224 |  |  | 3 | %
Total |  | $ | 10,234,473 |  |  | 100 | % |  | $ | 2,280,080 |  |  | 100 | % |  | $ | 12,514,553 |  |  | 100 | %

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

Consumer — Single-Family Residential Mortgages. Single-family residential loans totaled $10.23 billion as of June 30, 2022, compared with $9.09 billion as of December 31, 2021, and accounted for 22% of total loans held-for-investment as of both dates. Year-to-date, single-family residential mortgages increased $1.14 billion or 13%, primarily driven by net growth in California and New York. The Company was in a first lien position for all of its single-family residential loans as of both June 30, 2022 and December 31, 2021. Many of these loans are reduced documentation loans, for which a substantial down payment is required, resulting in a low LTV ratio at origination, typically 65% or less. These loans have historically experienced low delinquency and loss rates. The Company offers a variety of single-family residential first lien mortgage loan programs, including fixed- and variable-rate loans, as well as hybrid loans with interest rates that adjust on a regular basis, typically each year, after an initial fixed rate period.
Consumer — Home Equity Lines of Credit. Total HELOC commitments were $2.91 billion as of June 30, 2022, which grew by $411.7 million or 17% from $2.49 billion as of December 31, 2021. Unfunded HELOC commitments are unconditionally cancellable. HELOCs outstanding totaled $2.28 billion as of June 30, 2022, compared with $2.14 billion as of December 31, 2021, and accounted for 5% of total loans held-for-investment as of both dates. Year-to-date, HELOCs increased $135.3 million or 6%, primarily driven by growth in California and Washington. The Company was in a first lien position for 86% and 87% of total outstanding HELOCs as of June 30, 2022 and December 31, 2021, respectively. Many of these loans are reduced documentation loans, for which a substantial down payment is required, resulting in a low LTV ratio at origination, typically 65% or less. These loans have historically experienced low delinquency and loss rates. Substantially all of the Company’s HELOCs were variable-rate loans as of both June 30, 2022 and December 31, 2021.
All originated commercial and consumer loans are subject to the Company’s underwriting guidelines and loan origination standards. Management believes that the Company’s underwriting criteria and procedures adequately consider the unique risks associated with these products. The Company conducts a variety of quality control procedures and periodic audits, including the review of lending and legal requirements, to ensure that the Company is in compliance with these requirements.
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Foreign Outstandings
The Company’s overseas offices, which include the branch in Hong Kong and the subsidiary bank in China, are subject to the general risks inherent in conducting business in foreign countries, such as regulatory, economic and political uncertainties. As such, the Company’s international operation risk exposure is largely concentrated in China and Hong Kong. In addition, the Company’s financial assets held in the Hong Kong branch and the subsidiary bank in China may be affected by fluctuations in currency exchange rates or other factors. The following table presents the major financial assets held in the Company’s overseas offices as of June 30, 2022 and December 31, 2021:

($ in thousands) |  | June 30, 2022 |  | December 31, 2021
| Amount |  | % of Total Consolidated Assets |  | Amount |  | % of Total Consolidated Assets
Hong Kong branch: |  |  |  |  |  |  |  |
Cash and cash equivalents |  | $ | 813,263 |  |  | 1 | % |  | $ | 831,283 |  |  | 1 | %
Interest-bearing deposits with banks |  | $ | 50,000 |  |  | 0 | % |  | $ | — |  |  | — | %
AFS debt securities (1) |  | $ | 290,747 |  |  | 0 | % |  | $ | 242,926 |  |  | 0 | %
Loans held-for-investment (2) |  | $ | 1,028,028 |  |  | 2 | % |  | $ | 849,573 |  |  | 1 | %
Total assets |  | $ | 2,194,940 |  |  | 4 | % |  | $ | 1,933,164 |  |  | 3 | %
Subsidiary bank in China: |  |  |  |  |  |  |  |
Cash and cash equivalents |  | $ | 504,764 |  |  | 1 | % |  | $ | 543,134 |  |  | 1 | %
Interest-bearing deposits with banks |  | $ | 17,460 |  |  | 0 | % |  | $ | 51,243 |  |  | 0 | %
AFS debt securities (3) |  | $ | 134,605 |  |  | 0 | % |  | $ | 141,404 |  |  | 0 | %
Loans held-for-investment (2) |  | $ | 1,138,011 |  |  | 2 | % |  | $ | 984,591 |  |  | 2 | %
Total assets |  | $ | 1,780,396 |  |  | 3 | % |  | $ | 1,709,640 |  |  | 3 | %

(1)Primarily comprised of U.S. Treasury securities and foreign government bonds as of both June 30, 2022 and December 31, 2021.
(2)Primarily comprised of C&I loans as of both June 30, 2022 and December 31, 2021.
(3)Comprised of foreign government bonds as of both June 30, 2022 and December 31, 2021.
The following table presents the total revenue generated by the Company’s overseas offices for the second quarters and first halves of 2022 and 2021:

($ in thousands) |  | Three Months Ended June 30, |  | Six Months Ended June 30,
| 2022 |  | 2021 |  | 2022 |  | 2021
| Amount |  | % of Total Consolidated Revenue |  | Amount |  | % of Total Consolidated Revenue |  | Amount |  | % of Total Consolidated Revenue |  | Amount |  | % of Total Consolidated Revenue
Hong Kong Branch: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Total revenue |  | $ | 10,768 |  |  | 2 | % |  | $ | 6,873 |  |  | 2 | % |  | $ | 18,109 |  |  | 2 | % |  | $ | 12,340 |  |  | 1 | %
Subsidiary Bank in China: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Total revenue |  | $ | 11,236 |  |  | 2 | % |  | $ | 6,158 |  |  | 1 | % |  | $ | 19,036 |  |  | 2 | % |  | $ | 12,679 |  |  | 1 | %

Capital
The Company maintains a strong capital base to support its anticipated asset growth, operating needs, and credit risks, and to ensure that the Company and the Bank are in compliance with all regulatory capital guidelines. The Company engages in regular capital planning processes on at least an annual basis to optimize the use of available capital and to appropriately plan for future capital needs, allocating capital to existing and future business activities. Furthermore, the Company conducts capital stress tests as part of its capital planning process. The stress tests enable the Company to assess the impact of adverse changes in the economy and interest rates on its capital base.
On March 3, 2020, the Company’s Board of Directors authorized the repurchase of $500.0 million of the Company’s common stock, of which $354.0 million was available as of March 31, 2022. During the second quarter of 2022, the Company repurchased $100.0 million of common stock or 1,385,517 shares, at an average price of $72.17 per share. As of June 30, 2022, the total remaining available capital authorized for repurchase was $254.0 million. For additional information about the share repurchases, see Part II, Item 2. — Unregistered Sales of Equity Securities and Use of Proceeds in this Form 10-Q.
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The Company’s stockholders’ equity was $5.61 billion as of June 30, 2022, a decrease of $227.7 million or 4% from $5.84 billion as of December 31, 2021. The year-to-date decrease in the Company’s stockholders’ equity was primarily due to a negative change in AOCI of $510.3 million, $115.0 million in common dividends declared, and $100.0 million in common stock repurchases, partially offset by $496.0 million in net income. The negative change in AOCI was primarily due to increased unrealized losses in AFS debt securities. For other factors that contributed to the changes in stockholders’ equity, refer to Item 1. Consolidated Financial Statements — Consolidated Statement of Changes in Stockholders’ Equit y in this Form 10-Q.
Book value was $39.81 per common share as of June 30, 2022, a decrease of 3% from $41.13 per common share as of December 31, 2021, primarily as a result of the factors described above. Tangible equity per common share was $36.44 as of June 30, 2022, compared with $37.79 as of December 31, 2021. For additional details, see the reconciliation of non-GAAP measures presented under Item 2. MD&A — Reconciliation of GAAP to Non-GAAP Financial Measures in this Form 10-Q. The Company paid a quarterly cash dividend of $0.40 and $0.33 per common share during the second quarters of 2022 and 2021, respectively. In July 2022, the Company’s Board of Directors declared third quarter 2022 cash dividend of $0.40 per common share. The dividend is payable on August 15, 2022 to stockholders of record as of August 1, 2022.
Deposits and Other Sources of Funding
Deposits are the Company’s primary source of funding, the cost of which has a significant impact on the Company’s net interest income and net interest margin. Additional funding is provided by short- and long-term borrowings, and long-term debt. See Item 2. MD&A — Risk Management — Liquidity Risk Management — Liquidity in this Form 10-Q for a discussion of the Company’s liquidity management. The following table summarizes the Company’s sources of funds as of June 30, 2022 and December 31, 2021:

($ in thousands) |  | June 30, 2022 |  | December 31, 2021 |  | Change
| Amount |  | % |  | Amount |  | % |  | $ |  | %
Deposits |  |  |  |  |  |  |  |  |  |  |  |
Noninterest-bearing demand |  | $ | 23,028,831 |  |  | 42 | % |  | $ | 22,845,464 |  |  | 43 | % |  | $ | 183,367 |  |  | 1 | %
Interest-bearing checking |  | 7,094,726 |  |  | 13 | % |  | 6,524,721 |  |  | 12 | % |  | 570,005 |  |  | 9 | %
Money market |  | 11,814,402 |  |  | 22 | % |  | 13,130,300 |  |  | 25 | % |  | (1,315,898) |  |  | (10) | %
Savings |  | 3,027,819 |  |  | 6 | % |  | 2,888,065 |  |  | 5 | % |  | 139,754 |  |  | 5 | %
Time deposits |  | 9,377,576 |  |  | 17 | % |  | 7,961,982 |  |  | 15 | % |  | 1,415,594 |  |  | 18 | %
Total deposits |  | $ | 54,343,354 |  |  | 100 | % |  | $ | 53,350,532 |  |  | 100 | % |  | $ | 992,822 |  |  | 2 | %
Other Funds |  |  |  |  |  |  |  |  |  |  |  |
FHLB advances |  | $ | 174,776 |  |  |  |  | $ | 249,331 |  |  |  |  | $ | (74,555) |  |  | (30) | %
Repurchase agreements |  | 611,785 |  |  |  |  | 300,000 |  |  |  |  | 311,785 |  |  | 104 | %
Long-term debt |  | 147,801 |  |  |  |  | 147,658 |  |  |  |  | 143 |  |  | 0 | %
Total other funds |  | $ | 934,362 |  |  |  |  | $ | 696,989 |  |  |  |  | $ | 237,373 |  |  | 34 | %
Total sources of funds |  | $ | 55,277,716 |  |  |  |  | $ | 54,047,521 |  |  |  |  | $ | 1,230,195 |  |  | 2 | %

Deposits
The Company offers a wide variety of deposit products to consumer and commercial customers. To provide a stable and low-cost source of funding and liquidity, the Company’s strategy is to grow and retain relationship-based deposits. Total deposits were $54.34 billion as of June 30, 2022, an increase of $992.8 million or 2% from $53.35 billion as of December 31, 2021. The increase in deposits was primarily driven by growth in time and interest-bearing checking deposits, partially offset by a decrease in money market deposits. 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.
Other Sources of Funding
As of June 30, 2022, the Company had FHLB advances of $174.8 million compared with advances totaling $249.3 million as of December 31, 2021. As of June 30, 2022, the FHLB advances were comprised of an overnight advance of $100.0 million with a fixed interest rate of 1.66% and a term advance of $74.8 million with a floating interest rate of 1.76% and maturity in four months.
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Gross repurchase agreements totaled $611.8 million and $300.0 million as of June 30, 2022 and December 31, 2021, respectively. Resale and repurchase agreements are reported net, pursuant to Accounting Standards Codification (“ASC”) 210-20-45-11, Balance Sheet Offsetting: Repurchase and Reverse Repurchase Agreements. As of both June 30, 2022 and December 31, 2021, the Company did not have any gross resale agreements that were eligible for netting pursuant to ASC 210-20-45-11. The weighted-average interest rates were 2.70% and 2.63% for the second quarters of June 30, 2022 and 2021, respectively; and 2.66% and 2.65% for the first half of 2022 and 2021, respectively. As of June 30, 2022, gross repurchase agreements had original terms between six months and 10.0 years and remaining maturities between six months and 1.2 years.
Repurchase agreements are accounted for as collateralized financing transactions and recorded as liabilities based on the values at which the assets are sold. As of June 30, 2022, the collateral for the repurchase agreements was comprised of U.S. government agency and U.S. government-sponsored enterprise mortgage-backed securities, and U.S. Treasury securities. To ensure the market value of the underlying collateral remains sufficient, the Company monitors the fair value of collateral pledged relative to the principal amounts borrowed under repurchase agreements. The Company manages liquidity risks related to the repurchase agreements by sourcing funds from a diverse group of counterparties, and entering into repurchase agreements with longer durations, when appropriate. For additional details, see Note 4 — Assets Purchased under Resale Agreements and Sold under Repurchase Agreements to the Consolidated Financial Statements in this Form 10-Q.
The Company uses long-term debt to provide funding to acquire interest-earning assets, and to enhance liquidity and regulatory capital adequacy. Long-term debt totaled $147.8 million and $147.7 million as of June 30, 2022 and December 31, 2021, respectively. Long-term debt consists of junior subordinated debt, which qualifies as Tier 2 capital for regulatory purposes. The junior subordinated debt was issued in connection with the Company’s various pooled trust preferred securities offerings, as well as with common stock issued by the six wholly-owned subsidiaries of the Company in conjunction with these offerings. The junior subordinated debt had weighted-average interest rates of 2.34% and 1.76% for the first halves of 2022 and 2021, respectively, with remaining maturities ranging between 12.4 years and 15.2 years as of June 30, 2022.
Regulatory Capital and Ratios
The federal banking agencies have risk-based capital adequacy requirements intended to ensure that banking organizations maintain capital that is commensurate with the degree of risk associated with their operations. The Company and the Bank are each subject to these regulatory capital adequacy requirements. See Item 1. Business — Supervision and Regulation — Regulatory Capital Requirements and Regulatory Capital-Related Development in the Company’s 2021 Form 10-K for additional details.
The Company adopted Accounting Standards Update (“ASU”) 2016-13 on January 1, 2020, which requires the measurement of the allowance for credit losses to be based on management’s best estimate of lifetime expected credit losses inherent in the Company’s relevant financial assets. The Company has elected the phase-in option provided by a final rule that delays an estimate of the current expected credit losses methodology (“CECL”) effect on regulatory capital for two years and phases the impact over three years. The rule permits certain banking organizations to exclude from regulatory capital the initial adoption impact of CECL, plus 25% of the cumulative changes in the allowance for credit losses under CECL for each period until December 31, 2021, followed by a three-year phase-out period in which the aggregate benefit is reduced by 25% in 2022, 50% in 2023 and 75% in 2024. Under the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”), loans originated by a banking organization under the PPP will be risk-weighted at zero percent for regulatory capital purposes. Accordingly, the capital ratios as of June 30, 2022 delayed 75% of the estimated impact of CECL on regulatory capital through the year 2021, and PPP loans are risk-weighted at 0%.
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The following table presents the Company’s and the Bank’s capital ratios as of June 30, 2022 and December 31, 2021, under the Basel III Capital Rules, and those required by regulatory agencies for capital adequacy and well-capitalized classification purposes:

|  | Basel III Capital Rules |  |
| June 30, 2022 |  | December 31, 2021 |  | Minimum Regulatory Requirements |  | Minimum Regulatory Requirements including Capital Conservation Buffer |  | Well- Capitalized Requirements |  |
| Company |  | Bank |  | Company |  | Bank |  |  |  |
Risk-based capital ratios: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Common Equity Tier 1 capital |  | 12.0 | % |  | 11.8 | % |  | 12.8 | % |  | 12.3 | % |  | 4.5 | % |  | 7.0 | % |  | 6.5 | % |  |
Tier 1 capital (1) |  | 12.0 | % |  | 11.8 | % |  | 12.8 | % |  | 12.3 | % |  | 6.0 | % |  | 8.5 | % |  | 8.0 | % |  |
Total capital |  | 13.2 | % |  | 12.8 | % |  | 14.1 | % |  | 13.2 | % |  | 8.0 | % |  | 10.5 | % |  | 10.0 | % |  |
Tier 1 leverage (1) |  | 9.3 | % |  | 9.2 | % |  | 9.0 | % |  | 8.6 | % |  | 4.0 | % |  | 4.0 | % |  | 5.0 | % |  |

(1)The Tier 1 leverage well-capitalized requirement applies only to the Bank since there is no Tier 1 leverage ratio component in the definition of a well-capitalized bank holding company. In addition, the minimum Tier 1 risk-based capital ratio requirement for the Company to be considered well-capitalized is 6.0%.
The Company is committed to maintaining strong capital levels to assure its investors, customers and regulators that the Company and the Bank are financially sound. As of both June 30, 2022 and December 31, 2021, the Company and the Bank continued to exceed all “well-capitalized” capital requirements and the required minimum capital requirements under the Basel III Capital Rules. Total risk-weighted assets were $48.50 billion as of June 30, 2022, an increase of $4.91 billion or 11%, from $43.59 billion as of December 31, 2021. The increase in the risk-weighted assets was primarily due to loan growth.
Risk Management
Overview
In the normal course of conducting its business, the Company is exposed to a variety of risks, some of which are inherent to the financial services industry and others of which are more specific to the Company’s businesses. The Company operates under a Board-approved enterprise risk management (“ERM”) framework, which outlines the company-wide approach to risk management and oversight, and describes the structures and practices employed to manage the current and emerging risks inherent to the Company. The Company’s ERM program incorporates risk management throughout the organization in identifying, managing, monitoring, and reporting risks. It identifies the Company’s major risk categories as credit risk, liquidity risk, capital risk, market risk, operational risk, compliance and regulatory risks, legal risks, strategic risks, and reputational risks.
The Risk Oversight Committee of the Board of Directors monitors the ERM program through established risk categories and provides oversight of the Company’s risk appetite and control environment. The Risk Oversight Committee provides focused oversight of the Company’s identified enterprise risk categories on behalf of the full Board of Directors. Under the direction of the Risk Oversight Committee, management committees apply targeted strategies to reduce the risks to which the Company’s operations are exposed.
The Company’s ERM program is executed along the three lines of defense model, which provides for a consistent and standardized risk management control environment across the enterprise. The first line of defense is comprised of production, operational, and support units. The second line of defense is comprised of various risk management and control functions charged with monitoring and managing specific major risk categories and/or risk subcategories. The third line of defense is comprised of the Internal Audit function and Independent Asset Review. 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 analysis of the primary risk areas are detailed in the following subsections of Risk Management.
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Credit Risk Management
Credit risk is the risk that a borrower or a counterparty will fail to perform according to the terms and conditions of a loan or investment and expose the Company to loss. Credit risk exists with many of the Company’s assets and exposures such as loans and certain derivatives. The majority of the Company’s credit risk is associated with lending activities.
The Risk Oversight Committee has primary oversight responsibility for identified enterprise risk categories including credit risk. The Risk Oversight Committee monitors management’s assessment of asset quality, credit risk trends, credit quality administration, underwriting standards, and portfolio credit risk management strategies and processes, such as diversification and concentration limits, all of which enable management to control credit risk. At the management level, the Credit Risk Management Committee has primary oversight responsibility for credit risk. The Senior Credit Supervision function manages credit policy for the line of business transactional credit risk, assuring that all exposure is risk-rated according to the requirements of the credit risk rating policy. The Senior Credit Supervision function evaluates and reports the overall credit risk exposure to senior management and the Risk Oversight Committee. The Independent Asset Review function supports a strong credit risk management culture by providing an independent and objective assessment of underwriting and documentation quality, reporting directly to the Board’s Risk Oversight Committee. A key focus of our 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: Nonperforming Assets, Troubled Debt Restructurings (“TDR”) and Allowance for Credit Losses.
Credit Quality
The Company utilizes a credit risk rating system to assist in monitoring credit quality. Loans are evaluated using the Company’s internal credit risk rating of 1 through 10. For more information on the Company’s credit quality indicators and internal credit risk ratings, refer to Note 7 — Loans Receivable and Allowance for Credit Losses to the Consolidated Financial Statements in this Form 10-Q.
The following table presents the Company’s criticized loans as of June 30, 2022 and December 31, 2021:

($ in thousands) |  |  |  |  |  | Change
| June 30, 2022 |  | December 31, 2021 |  | $ |  | %
Criticized loans |  |  |  |  |  |  |  |
Special mention loans |  | $ | 590,227 |  |  | $ | 384,694 |  |  | $ | 205,533 |  |  | 53 | %
Classified loans |  | 432,414 |  |  | 448,362 |  |  | (15,948) |  |  | (4) | %
Total criticized loans |  | $ | 1,022,641 |  |  | $ | 833,056 |  |  | $ | 189,585 |  |  | 23 | %
Special mention loans to loans held-for-investment |  | 1.27 | % |  | 0.92 | % |  |  |  |
Classified loans to loans held-for-investment |  | 0.93 | % |  | 1.08 | % |  |  |  |
Criticized loans to loans held-for-investment |  | 2.20 | % |  | 2.00 | % |  |  |  |

Nonperforming Assets
Nonperforming assets are comprised of nonaccrual loans, other real estate owned (“OREO”) and other nonperforming assets. Other nonperforming assets and OREO are repossessed assets and properties, respectively, acquired through foreclosure, or through full or partial satisfaction of loans held-for-investment. Nonperforming assets were $89.9 million or 0.14% of total assets as of June 30, 2022, a decrease of $13.5 million or 13%, compared with $103.5 million or 0.17% of total assets as of December 31, 2021.
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The following table presents information regarding nonperforming assets as of June 30, 2022 and December 31, 2021:

($ in thousands) |  |  |  |  |  | Change
| June 30, 2022 |  | December 31, 2021 |  | $ |  | %
Commercial: |  |  |  |  |  |  |  |
C&I |  | $ | 40,053 |  |  | $ | 59,023 |  |  | $ | (18,970) |  |  | (32) | %
CRE: |  |  |  |  |  |  |  |
CRE |  | 11,276 |  |  | 9,498 |  |  | 1,778 |  |  | 19 | %
Multifamily residential |  | 1,466 |  |  | 444 |  |  | 1,022 |  |  | 230 | %
Total CRE |  | 12,742 |  |  | 9,942 |  |  | 2,800 |  |  | 28 | %
Consumer: |  |  |  |  |  |  |  |
Residential mortgage: |  |  |  |  |  |  |  |
Single-family residential |  | 27,426 |  |  | 15,720 |  |  | 11,706 |  |  | 74 | %
HELOCs |  | 9,703 |  |  | 8,444 |  |  | 1,259 |  |  | 15 | %
Total residential mortgage |  | 37,129 |  |  | 24,164 |  |  | 12,965 |  |  | 54 | %
Other consumer |  | 11 |  |  | 52 |  |  | (41) |  |  | (79) | %
Total nonaccrual loans |  | 89,935 |  |  | 93,181 |  |  | (3,246) |  |  | (3) | %
OREO, net |  | — |  |  | 363 |  |  | (363) |  |  | (100) | %
Other nonperforming assets |  | — |  |  | 9,938 |  |  | (9,938) |  |  | (100) | %
Total nonperforming assets |  | $ | 89,935 |  |  | $ | 103,482 |  |  | $ | (13,547) |  |  | (13) | %
Nonperforming assets to total assets |  | 0.14 | % |  | 0.17 | % |  |  |  |
Nonaccrual loans to loans held-for-investment |  | 0.19 | % |  | 0.22 | % |  |  |  |
Allowance for loan losses to nonaccrual loans |  | 626.31 | % |  | 581.21 | % |  |  |  |
TDRs included in nonperforming loans |  | $ | 41,314 |  |  | $ | 30,383 |  |  |  |  |

Loans are generally placed on nonaccrual status when they become 90 days past due or when the full collection of principal or interest becomes uncertain regardless of the length of past due status. Collectability is generally assessed based on economic and business conditions, the borrower’s financial condition, and the adequacy of collateral, if any. For additional details regarding the Company’s nonaccrual loan policy, see Note 1 — Summary of Significant Accounting Policies — Significant Accounting Policies — Loans Held-for-Investment to the Consolidated Financial Statements in the Company’s 2021 Form 10-K.
Nonaccrual loans were $89.9 million as of June 30, 2022, a decrease of $3.2 million or 3% from $93.2 million as of December 31, 2021. This decrease was predominantly the result of charge-offs and paydowns of commercial loans, partially offset by increases in single-family residential nonaccrual loans. As of June 30, 2022, $44.3 million or 49% of nonaccrual loans were less than 90 days delinquent. In comparison, $54.2 million or 58% of nonaccrual loans were less than 90 days delinquent as of December 31, 2021.
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The following table presents the accruing loans past due by portfolio segment as of June 30, 2022 and December 31, 2021:

($ in thousands) |  |  |  | Total Accruing Past Due Loans (1) |  | Change |  | Percentage of Total Loans Outstanding
|  |  | June 30, 2022 |  | December 31, 2021 |  | $ |  | % |  | June 30, 2022 |  | December 31, 2021
Commercial: |  |  |  |  |  |  |  |  |  |  |  |  |  |
C&I |  |  |  | $ | 10,130 |  |  | $ | 11,069 |  |  | $ | (939) |  |  | (8) | % |  | 0.07 | % |  | 0.08 | %
CRE: |  |  |  |  |  |  |  |  |  |  |  |  |  |
CRE |  |  |  | 652 |  |  | 3,722 |  |  | (3,070) |  |  | (82) | % |  | 0.00 | % |  | 0.03 | %
Multifamily residential |  |  |  | 830 |  |  | 5,342 |  |  | (4,512) |  |  | (84) | % |  | 0.02 | % |  | 0.15 | %
Total CRE |  |  |  | 1,482 |  |  | 9,064 |  |  | (7,582) |  |  | (84) | % |  | 0.01 | % |  | 0.06 | %
Total commercial |  |  |  | 11,612 |  |  | 20,133 |  |  | (8,521) |  |  | (42) | % |  | 0.03 | % |  | 0.07 | %
Consumer: |  |  |  |  |  |  |  |  |  |  |  |  |  |
Residential mortgage: |  |  |  |  |  |  |  |  |  |  |  |  |  |
Single-family residential |  |  |  | 20,714 |  |  | 18,760 |  |  | 1,954 |  |  | 10 | % |  | 0.20 | % |  | 0.21 | %
HELOCs |  |  |  | 6,867 |  |  | 5,854 |  |  | 1,013 |  |  | 17 | % |  | 0.30 | % |  | 0.27 | %
Total residential mortgage |  |  |  | 27,581 |  |  | 24,614 |  |  | 2,967 |  |  | 12 | % |  | 0.22 | % |  | 0.22 | %
Other consumer |  |  |  | 98 |  |  | 108 |  |  | (10) |  |  | (9) | % |  | 0.12 | % |  | 0.08 | %
Total consumer |  |  |  | 27,679 |  |  | 24,722 |  |  | 2,957 |  |  | 12 | % |  | 0.22 | % |  | 0.22 | %
Total |  |  |  | $ | 39,291 |  |  | $ | 44,855 |  |  | $ | (5,564) |  |  | (12) | % |  | 0.08 | % |  | 0.11 | %

(1)There were no accruing loans past due 90 days or more as of both June 30, 2022 and December 31, 2021.
Troubled Debt Restructurings
TDRs are loans for which contractual terms have been modified by the Company for economic or legal reasons related to a borrower’s financial difficulties, and for which a concession to the borrower was granted that the Company would not otherwise consider. The Company’s loan modifications are handled on a case-by-case basis and are negotiated to achieve mutually agreeable terms that maximize loan collectability and meet the borrower’s financial needs. The following table presents the performing and nonperforming TDRs by portfolio segment as of June 30, 2022 and December 31, 2021. The allowance for loan losses for TDRs was $12.6 million as of June 30, 2022 and $4.8 million as of December 31, 2021.

($ in thousands) |  | June 30, 2022 |  | December 31, 2021 |  |  |  |  |  |
| Performing TDRs |  | Nonperforming TDRs |  | Total |  | Performing TDRs |  | Nonperforming TDRs |  | Total |  |  |  |  |  |
Commercial: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
C&I |  | $ | 65,402 |  |  | $ | 36,012 |  |  | $ | 101,414 |  |  | $ | 77,256 |  |  | $ | 28,239 |  |  | $ | 105,495 |  |  |  |  |  |  |
CRE: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
CRE |  | 22,937 |  |  | — |  |  | 22,937 |  |  | 23,379 |  |  | — |  |  | 23,379 |  |  |  |  |  |  |
Multifamily residential |  | 2,903 |  |  | 1,238 |  |  | 4,141 |  |  | 4,042 |  |  | 197 |  |  | 4,239 |  |  |  |  |  |  |
Total CRE |  | 25,840 |  |  | 1,238 |  |  | 27,078 |  |  | 27,421 |  |  | 197 |  |  | 27,618 |  |  |  |  |  |  |
Consumer: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Residential mortgage: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Single-family residential |  | 3,018 |  |  | 3,604 |  |  | 6,622 |  |  | 6,585 |  |  | 1,102 |  |  | 7,687 |  |  |  |  |  |  |
HELOCs |  | 2,060 |  |  | 460 |  |  | 2,520 |  |  | 2,553 |  |  | 845 |  |  | 3,398 |  |  |  |  |  |  |
Total residential mortgage |  | 5,078 |  |  | 4,064 |  |  | 9,142 |  |  | 9,138 |  |  | 1,947 |  |  | 11,085 |  |  |  |  |  |  |
Total TDRs |  | $ | 96,320 |  |  | $ | 41,314 |  |  | $ | 137,634 |  |  | $ | 113,815 |  |  | $ | 30,383 |  |  | $ | 144,198 |  |  |  |  |  |  |

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Performing TDRs were $96.3 million as of June 30, 2022, a decrease of $17.5 million or 15% from $113.8 million as of December 31, 2021. This decrease primarily reflected the paydowns of performing C&I TDR loans and transfers of single-family and multifamily residential loans to nonperforming status. Approximately 97% and 94% of the performing TDRs were current as of June 30, 2022 and December 31, 2021, respectively. Nonperforming TDRs were $41.3 million as of June 30, 2022, an increase of $10.9 million or 36% from $30.4 million as of December 31, 2021. This increase primarily reflected newly designated nonperforming C&I TDR loans and transfers of single-family and multifamily residential loans from performing to nonperforming TDR status, partially offset by payoffs and paydowns of C&I nonperforming TDR loans.
Existing TDRs that were subsequently modified in response to the COVID-19 pandemic continue to be classified as TDRs. Customers who require further assistance upon exiting from the COVID-19 deferred programs may receive further modifications which may be classified as TDRs. As of June 30, 2022, there were no TDRs that were provided modifications related to the COVID-19 pandemic, and the amount of TDRs that were provided modification related to the COVID-19 pandemic were insignificant as of December 31, 2021.
Loan Modifications Due to COVID-19 Pandemic
The Company has granted a range of commercial and consumer loan accommodations, predominantly in the form of payment deferrals, to provide relief to borrowers experiencing financial hardship due to the COVID-19 pandemic. For COVID-19 related loan modifications, which occurred between March 2020 through January 1, 2022, that have met the loan modification criteria under Section 4013 of the CARES Act, as amended by the Consolidated Appropriations Act, 2021, or under the Interagency Statement on Loan Modifications and Reporting for Financial Institutions Working with Customers Affected by the Coronavirus (Revised), the Company elected to temporarily suspend TDR accounting under ASC Subtopic 310-40. Accordingly, the delinquency aging of loans modified related to the COVID-19 pandemic were frozen at the time of the modification during the relief period which expired on January 1, 2022. Interest income continues to be recognized over the accommodation periods. See additional information in Note 1 — Summary of Significant Accounting Policies — Significant Accounting Policies — Troubled Debt Restructurings to the Consolidated Financial Statements in the Company’s 2021 Form 10-K. As of June 30, 2022, COVID-19 loans under payment deferral and forbearance programs totaled $49.8 million, or 0.1% of total loans, compared with $363.1 million, or 0.9% of total loans as of December 31, 2021. Loans that have exited the modification program were predominantly current as of June 30, 2022.
Allowance for Credit Losses
ASU 2016-13, Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments requires the measurement of the allowance for credit losses to be based on management’s best estimate of lifetime expected credit losses inherent in the Company’s relevant financial assets. The allowance for credit losses estimate uses various models and estimation techniques based on historical loss experience, current borrower characteristics, current conditions, reasonable and supportable forecasts, and other relevant factors.
In addition to the allowance for loan losses, the Company maintains an allowance for unfunded credit commitments. The Company has three general areas for which it provides the allowance for unfunded credit commitments: 1) recourse obligations for loans sold, 2) letters of credit, and 3) unfunded lending commitments. The Company’s methodology for determining the allowance calculation for unfunded lending commitments uses the lifetime loss rates of the on-balance sheet commitment. Recourse obligations for loans sold and letters of credit use the weighted loss rates for the applicable segment of the individual credit.
In the case of loans and securities, allowance for credit losses are contra-asset valuation accounts that are deducted from the amortized cost basis of these assets to present the net amount expected to be collected. In the case of unfunded credit commitments, the allowance for credit losses is a liability account that is reported as a component of Accrued expenses and other liabilities in our Consolidated Balance Sheet.
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The Company is committed to maintain the allowance for credit losses at a level that is commensurate with the estimated inherent losses in the loan portfolio, including unfunded credit facilities. While the Company believes that the allowance for credit losses as of June 30, 2022 was appropriate to absorb losses inherent in the loan portfolio and in unfunded credit commitments based on the information available, future allowance levels may increase or decrease based on a variety of factors, including but not limited to, accounting standard and regulatory changes, loan growth, portfolio performance and general economic conditions. This evaluation is inherently subjective as it requires numerous estimates and judgements. For a description of the policies, methodologies and judgments used to determine the allowance for credit losses, see Item 7. MD&A — Critical Accounting Estimates and Note 1 — Summary of Significant Accounting Policies to the Consolidated Financial Statements in the Company’s 2021 Form 10-K, and Note 7 — Loans Receivable and Allowance for Credit Losses to the Consolidated Financial Statements in this Form 10-Q.
The following table presents an allocation of the allowance for loan losses by loan portfolio segments and unfunded credit commitments as of June 30, 2022 and December 31, 2021:

($ in thousands) |  | June 30, 2022 |  | December 31, 2021
| Allowance Allocation |  | % of Loan Type to Total Loans |  | Allowance Allocation |  | % of Loan Type to Total Loans
Allowance for loan losses |  |  |  |  |  |  |  |
Commercial: |  |  |  |  |  |  |  |
C&I |  | $ | 363,282 |  |  | 33 | % |  | $ | 338,252 |  |  | 34 | %
CRE: |  |  |  |  |  |  |  |
CRE |  | 140,245 |  |  | 29 | % |  | 150,940 |  |  | 29 | %
Multifamily residential |  | 26,552 |  |  | 10 | % |  | 14,400 |  |  | 9 | %
Construction and land |  | 6,682 |  |  | 1 | % |  | 15,468 |  |  | 1 | %
Total CRE |  | 173,479 |  |  | 40 | % |  | 180,808 |  |  | 39 | %
Total commercial |  | 536,761 |  |  | 73 | % |  | 519,060 |  |  | 73 | %
Consumer: |  |  |  |  |  |  |  |
Residential mortgage: |  |  |  |  |  |  |  |
Single-family residential |  | 21,840 |  |  | 22 | % |  | 17,160 |  |  | 22 | %
HELOCs |  | 3,220 |  |  | 5 | % |  | 3,435 |  |  | 5 | %
Total residential mortgage |  | 25,060 |  |  | 27 | % |  | 20,595 |  |  | 27 | %
Other consumer |  | 1,449 |  |  | 0 | % |  | 1,924 |  |  | 0 | %
Total consumer |  | 26,509 |  |  | 27 | % |  | 22,519 |  |  | 27 | %
Total allowance for loan losses |  | $ | 563,270 |  |  | 100 | % |  | $ | 541,579 |  |  | 100 | %
Allowance for unfunded credit commitments |  | $ | 24,304 |  |  |  |  | $ | 27,514 |  |  |
Total allowance for credit losses |  | $ | 587,574 |  |  |  |  | $ | 569,093 |  |  |
Loans held-for-investment |  | $ | 46,502,076 |  |  |  |  | $ | 41,693,781 |  |  |
Allowance for loan losses to loans held-for-investment |  | 1.21 | % |  |  |  | 1.30 | % |  |
|  | Three Months Ended June 30, |  | Six Months Ended June 30,
|  | 2022 |  | 2021 |  | 2022 |  | 2021
Average loans held-for-investment |  | $ | 44,625,760 |  |  | $ | 39,622,090 |  |  | $ | 43,375,718 |  |  | $ | 39,177,831 |
Annualized net (recoveries) charge-offs to average loans held-for-investment |  | (0.06) | % |  | 0.13 | % |  | 0.01 | % |  | 0.14 | %

The allowance for loan losses was $563.3 million as of June 30, 2022, an increase of $21.7 million from $541.6 million as of December 31, 2021, primarily reflecting loan growth. Second quarter 2022 net recoveries were $6.6 million or annualized 0.06% of average loans held-for-investment, compared with net charge-offs of $13.3 million or annualized 0.13% of average loans held-for-investment, for the second quarter of 2021. First half of 2022 net charge-offs were $1.7 million or annualized 0.01% of average loans held-for investment, compared with $26.7 million or annualized 0.14% of average loans held-for-investment for the first half of 2021. The decrease in net charge-offs was primarily due to decreases in C&I and CRE charge-offs.
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The Company considers multiple economic scenarios to develop the estimate of the allowance for loan losses. The scenarios may consist of a baseline forecast representing management's view of the most likely outcome, and downside or upside scenarios reflecting possible worsening or improving economic conditions, respectively. As of June 30, 2022, the Company assigned a lower weighting to its downside scenario and higher weighting to the baseline and upside scenarios, compared with the weightings assigned as of December 31, 2021. The current forecast incorporates an updated impact of rising inflation on the economy, supply chain constraints compounded by the continuing Russia-Ukraine war, and the lower than previously expected annual Gross Domestic Product (“GDP”) growth. Although economic growth has slowed, the labor market has remained strong. Macroeconomic assumptions underlying the baseline forecast include: (1) annual GDP growth of 2.7% for 2022; (2) 3.3% unemployment rate by the end of 2022; and (3) rising interest rates. The downside scenario assumed annual GDP growth of 1.5% in 2022, and an unemployment rate that was expected to rise from 3.6% to 6.4% by the end of 2022. The upside scenario assumed an annual GDP growth of 3.2% in 2022 and an unemployment rate that was expected to decline from 3.6% to 2.9% by the end of 2022.
As of June 30, 2022 and December 31, 2021, PPP loans outstanding were $153.3 million and $534.2 million, respectively. Because these loans are fully guaranteed by the SBA, there was no allowance for loan losses established for these loans as of June 30, 2022 and December 31, 2021.
The allowance for unfunded credit commitments was $24.3 million as of June 30, 2022, compared with $27.5 million as of December 31, 2021.
Liquidity Risk Management
Liquidity
Liquidity is a financial institution’s capacity to meet its deposit and obligations to other counterparties as they come due, or to obtain adequate funding at a reasonable cost to meet those obligations. The objective of liquidity management is to manage the potential mismatch of asset and liability cash flows. Maintaining an adequate level of liquidity depends on the institution’s ability to efficiently meet both expected and unexpected cash flows, and collateral needs without adversely affecting daily operations or the financial condition of the institution. To achieve this objective, the Company analyzes its liquidity risk, maintains readily available liquid assets, and utilizes diverse funding sources including its stable core deposit base.
The Board of Directors’ Risk Oversight Committee has primary oversight responsibility over liquidity risk management. At the management level, the Company’s Asset/Liability Committee (“ALCO”) establishes the liquidity guidelines that govern the day-to-day active management of the Company’s liquidity position by requiring sufficient asset-based liquidity to cover potential funding requirements and avoid over-dependence on volatile, less reliable funding markets. These guidelines are established and monitored for both the Bank and for East West on a stand-alone basis to ensure that the Company can serve as a source of strength for its subsidiaries. The ALCO regularly monitors the Company’s liquidity status and related management processes, providing regular reports to the Board of Directors. The Company’s liquidity management practices have been effective under normal operating and stressed market conditions.
Liquidity Risk — Liquidity Sources. The Company’s primary source of funding is from deposits generated by its banking business, which are relatively stable and low-cost. Total deposits amounted to $54.34 billion as of June 30, 2022, compared with $53.35 billion as of December 31, 2021. The Company’s loan-to-deposit ratio was 86% as of June 30, 2022, compared with 78% as of December 31, 2021.
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In addition to deposits, the Company has access to various sources of wholesale financing, including borrowing capacity with the FHLB and Federal Reserve Bank of San Francisco (“FRBSF”), unsecured federal funds lines of credit with various correspondent banks, and several master repurchase agreements with major brokerage companies to sustain an adequate liquid asset portfolio, meet daily cash demands and allow management flexibility to execute its business strategy. Economic conditions and the stability of capital markets impact the Company’s access to and the cost of wholesale financing. The Company’s access to capital markets is also affected by the ratings received from various credit rating agencies. As of June 30, 2022, the Company had available borrowing capacity of $22.62 billion, including $12.60 billion with the FHLB and $1.96 billion with the FRBSF. The Company believes that its liquidity sources are sufficient to meet all reasonably foreseeable short-term needs. Unencumbered loans and/or debt securities were pledged to the FHLB and the FRBSF discount window as collateral. The Company has established operational procedures to enable borrowing against these assets, including regular monitoring of the total pool of loans and debt securities eligible as collateral. Eligibility of collateral is defined in guidelines from the FHLB and FRBSF and is subject to change at their discretion. The Bank’s unsecured federal funds lines of credit with correspondent banks, subject to availability, totaled $1.04 billion as of June 30, 2022. Estimated borrowing capacity from unpledged debt securities totaled $7.03 billion as of June 30, 2022. See Item 2 — MD&A — Balance Sheet Analysis — Deposits and Other Sources of Funding in this Form 10-Q for further detail related to the Company’s funding sources.
The Company maintains a certain level of liquid assets in the form of cash and cash equivalents, interest-bearing deposits with banks, short-term resale agreements and unencumbered high-quality and liquid AFS debt securities. The following table presents the Company’s liquid assets as of June 30, 2022 and December 31, 2021:

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

Unencumbered liquid assets totaled $9.08 billion as of June 30, 2022, compared with $15.63 billion as of December 31, 2021. AFS debt securities, included as part of liquidity sources, consist of high quality and liquid securities with moderate durations to minimize overall interest rate and liquidity risks. The Company believes these AFS debt securities provide quick sources of liquidity to obtain financing, regardless of market conditions, through sale or pledging. The year-to-date decrease in liquid assets was primarily related to the transfer of $3.01 billion of debt securities from AFS to HTM, a $2.01 billion decrease in cash and cash equivalents primarily to fund loans, and a $1.22 billion decrease in resale agreements primarily due to repayments.
Management believes that the Company’s excess cash, unencumbered AFS debt securities, borrowing capacity and access to sufficient sources of capital are adequate to meet its short- and long-term liquidity needs in the foreseeable future. In addition, the Company may use debt and equity issuances when costs are deemed attractive, should longer term needs arise.
93

Liquidity Risk — Cash Requirements. In the ordinary course of the Company’s business, the Company enters into contractual obligations that require future cash payments, including funding for customer deposit withdrawals, repayments for short- and long-term borrowings, leases obligations and other cash commitments. The Company also has off-balance sheet arrangements which represent transactions that are not recorded on the Consolidated Balance Sheet. The Company’s off-balance sheet arrangements include (i) 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 financing needs of its customers, (ii) future interest obligations related to customer deposits and the Company’s borrowings, and (iii) transactions with unconsolidated entities that provide financing, liquidity, market risk or credit risk support to the Company, or engages in leasing, hedging or research and development services with the Company. Since many of these commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future funding requirements. Information about the Company’s loan commitments, commercial letters of credit and SBLCs is provided in Note 10 — Commitments and Contingencies to the Consolidated Financial Statements in this Form 10-Q. The Company’s liquidity sources have been, and are expected to be, sufficient to meet all such cash requirements.
The Consolidated Statement of Cash Flows summarizes the Company’s sources and uses of cash by type of activities in the first halves of 2022 and 2021. Excess cash generated by operating and investing activities may be used to repay outstanding debt or invest in liquid assets.
Liquidity Risk — Liquidity for East West. In addition to bank level liquidity management, the Company manages liquidity at the parent company level for various operating needs including payment of dividends, repurchases of common stock, principal and interest payments on its borrowings, acquisitions and additional investments in its subsidiaries. East West’s primary source of liquidity is from cash dividends distributed by its subsidiary, East West Bank. The Bank is subject to various statutory and regulatory restrictions on its ability to pay dividends as discussed in Item 1. Business — Supervision and Regulation — Dividends and Other Transfers of Funds of the Company’s 2021 Form 10-K. East West held $231.6 million and $345.0 million in cash and cash equivalents as of June 30, 2022 and December 31, 2021, respectively. Management believes that East West has sufficient cash and cash equivalents to meet the projected cash obligations for the current year.
Liquidity Risk — Liquidity Stress Testing. The Company utilizes liquidity stress analysis to determine the appropriate amounts of liquidity to maintain at the Company, foreign subsidiary and foreign branch levels needed to meet contractual and contingent cash outflows under a range of scenarios. Scenario analyses include assumptions about significant changes in key funding sources, market triggers, potential uses of funding and economic conditions in certain countries. In addition, Company specific events are incorporated into the stress testing. Liquidity stress tests are conducted to ascertain potential mismatches between liquidity sources and uses over a variety of time horizons, both immediate and longer term, and over a variety of stressed conditions. Given the range of potential stresses, the Company maintains contingency funding plans on a consolidated basis and for individual entities.
As of June 30, 2022, the Company was not aware of any material commitments for capital expenditures in the foreseeable future and believes it has adequate liquidity resources to conduct operations and meet other needs in the ordinary course of business. Given the uncertainty and the rapidly changing market and economic conditions, the Company will continue to actively evaluate the impact on its business and financial position. For more information on how economic conditions may impact our liquidity, see Item 1A. Risk Factors of the Company’s 2021 Form 10-K.
Market Risk Management
Market risk is the risk that the Company’s financial condition may change resulting from adverse movements in market rates or prices including interest rates, foreign exchange rates, interest rate contracts, 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 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.
94

Interest Rate Risk Management
Interest rate risk results primarily from the Company’s traditional banking activities of gathering deposits and extending loans, which are the primary areas of market risk for the Company. Economic and financial conditions, movements in interest rates, and consumer preferences impact the level of noninterest-bearing funding sources at the Company, as well as affect the difference between the interest the Company earns on interest-earning assets and pays on interest-bearing liabilities. In addition, changes in interest rates can influence the rate of principal prepayments on loans and the speed of deposit withdrawals. Due to the pricing term mismatches and the embedded options inherent in certain products, changes in market interest rates 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 debt securities portfolio, loan portfolio, available funding channels, and capital market activities. In addition, the Company’s policies permit the use of derivative instruments to assist in managing interest rate risk.
The interest rate risk exposure is measured and monitored through various risk management tools, which include a simulation model that performs interest rate sensitivity analyses under various interest rate scenarios. The model incorporates the Company’s cash instruments, loans, debt securities, resale agreements, deposits, borrowings and repurchase agreements, as well as financial instruments from the Company’s foreign operations. The Company uses both a static balance sheet and a forward growth balance sheet to perform these analyses. The simulated interest rate scenarios include a non-parallel shift in the yield curve and a gradual non-parallel shift in the yield curve (“rate ramp”) over a static balance sheet. In addition, the Company also performs simulations using 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 instruments’ future repricing characteristics and spread relative to benchmark rates, and the effect of interest rate floors and caps. The modeled results are highly sensitive to deposit decay and deposit beta assumptions, which are derived from a regression analysis of the Company’s historical deposit data. The Company used full betas with each incremental rate increase in the rate ramp scenarios, and did not assume lags in repricing. Deposit beta commonly refers to the correlation of the changes in interest rates paid on deposits to changes in benchmark interest rates. The model is also sensitive to the loan and investment prepayment assumptions that are based on an independent model and the Company’s historical prepayment data, which consider anticipated prepayments under different interest rate environments.
Simulation results are highly dependent on input assumptions. To the extent actual behavior is different from the assumptions in the models, there could be material changes in interest rate sensitivity results. The assumptions applied in the model are documented and supported for reasonableness, and periodically back-tested to assess their effectiveness. The Company makes appropriate calibrations to the model as needed and continually validates the model, methodology and results. Changes to key model assumptions are reviewed by the ALCO. Scenario results do not reflect strategies that management could employ to limit the impact of changing interest rate expectations.
In March 2022, the Federal Reserve raised the target range for the fed funds rate to 0.25% to 0.50% to address concerns about inflation, which reflected supply and demand imbalances due to the pandemic, higher energy prices, and broader price pressures. In June 2022, the Federal Reserve continued its aggressive approach in responding to inflation, raising the target range for the fed funds rate to 1.50% to 1.75%. In July 2022, the Federal Reserve further raised the benchmark rate to 2.25% to 2.50% and the market estimates that interest rates are likely to continue rising, potentially reaching 3.50% or higher by the end of 2022.
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Twelve-Month Net Interest Income Simulation
Net interest income simulation modeling measures interest rate risk through earnings volatility. The simulation projects the cash flow changes in interest rate sensitive assets and liabilities, expressed in terms of net interest income, over a specified time horizon for defined interest rate scenarios. Net interest income simulations generate insight into the impact of market rates changes on earnings, which help guide risk management decisions. The Company assesses interest rate risk by comparing the impacts of net interest income in different interest rate scenarios.
The following table presents the Company’s net interest income sensitivity related to an instantaneous and sustained non-parallel shift in market interest rates of 100 and 200 bps as of June 30, 2022 and December 31, 2021, based on a static balance sheet as of the date of the analysis.

Change in Interest Rates (in bps) |  | Net Interest Income Volatility (1) |  |
| June 30, 2022 |  | December 31, 2021 |  |  |  |
+200 |  | 13.8 | % |  | 19.5 | % |  |  |  |
+100 |  | 7.0 | % |  | 9.4 | % |  |  |  |
-100 |  | (7.0) | % |  | NM |  |  |  |
-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 composition of the Company’s loan portfolio creates sensitivity to interest rate movements due to the imbalance between the faster repricing of the floating-rate loan portfolio versus deposit products. Growth and/or contraction in the Company’s loans, other earning assets, deposits and borrowings may lead to changes in sensitivity to interest rate movements. Year-to-date decreases in cash and cash equivalents, resale agreements, and short-term investments; growth in fixed-rate loans, as well as changes in the funding mix have decreased the Company’s asset sensitivity. In the table above, net interest income volatility is expressed in relation to base-case net interest income, which increased between June 30, 2022 and December 31, 2021, due to balance sheet growth and an expanded base-case net interest margin.
While an instantaneous and sustained non-parallel shift in market interest rates was used in the simulation model described in the preceding paragraphs, the Company also models scenarios based on gradual shifts in interest rates and the corresponding impacts. These interest rate scenarios provide additional information to estimate the Company’s underlying interest rate risk. The rate ramp table below shows the net interest income volatility under a gradual non-parallel shift of the yield curve, in even monthly increments over the first 12 months, followed by rates held constant thereafter based on a static balance sheet as of the date of the analysis. Actual results will vary based on the timing and pace of interest rate changes, as well as changes of the balance sheet.

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

NM — Not meaningful.
As of June 30, 2022, the Company’s net interest income profile reflects an asset sensitive position. Net interest income is expected to increase when interest rates rise, as the Company has a large share of variable rate loans in its loan portfolio, primarily linked to Prime or LIBOR indices. The Company’s interest income is sensitive to changes in short-term interest rates. The Company’s deposit portfolio is primarily composed of non-maturity deposits, which are not directly tied to short-term interest rate indices, but are, nevertheless, sensitive to changes in short-term interest rates. The modeled results are highly sensitive to reinvestment yield and deposit beta assumptions. Actual results in terms of net interest income growth during a period of rising interest rates will also reflect earning asset growth and deposit mix changes based on customer preferences relative to the interest rate environment.
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Economic Value of Equity at Risk
Economic value of equity (“EVE”) is a cash flow calculation that takes the present value of all asset cash flows and subtracts the present value of all liability cash flows. This calculation is used for asset/liability management and measures changes in the economic value of the bank. The fair market values of a bank's assets and liabilities are directly linked to interest rates. The economic value approach provides a comparatively broader scope than the net interest income volatility approach since it captures all anticipated cash flows.
The EVE simulation reflects the sensitivity of the EVE to interest rate changes across the full maturity spectrum of the Company’s assets and liabilities. It identifies risks arising from repricing, prepayment and maturity gaps between assets and liabilities on the balance sheet, as well as off-balance sheet derivative exposure. The simulation provides long-term economic perspective into the Bank’s interest rate risk profile, which allows the Bank to manage anticipated negative effects of interest rate fluctuations.
The following table presents the Company’s EVE sensitivity related to an instantaneous and sustained non-parallel shift in market interest rates of 100 and 200 bps as of June 30, 2022 and December 31, 2021:

Change in Interest Rates (in bps) |  | EVE Volatility (1)
| June 30, 2022 |  | December 31, 2021
+200 |  | 2.7 | % |  | 7.1 | %
+100 |  | 1.4 | % |  | 3.5 | %
-100 |  | (1.1) | % |  | NM
-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 decreased as of June 30, 2022, compared with the results as of December 31, 2021. The changes in EVE sensitivity were primarily due to faster deposit decay speed assumptions used in the model, changes in level and shape of the yield curve, and lower cash balances as of June 30, 2022.
The Company’s EVE profile as of June 30, 2022 reflects an asset sensitive EVE position under the higher interest rate scenarios. Given the uncertainty of the magnitude, timing and direction of future interest rate movements, and the shape of the yield curve, actual results may vary from those predicted by the Company’s model.
Derivatives
It is the Company’s policy not to speculate on the future direction of interest rates, foreign currency exchange rates and energy commodity prices. However, the Company periodically enters into derivative transactions in order to reduce its exposure to market risks, primarily interest rate risk and foreign currency risk. The Company believes that these derivative transactions, when properly structured and managed, may provide a hedge against inherent risk in certain assets and liabilities or against risk in specific transactions. Hedging transactions may be implemented using a variety of derivative instruments such as swaps, forwards, options, and collars. Prior to entering into any hedging activities, the Company analyzes the costs and benefits of the hedge in comparison to alternative strategies. In addition, the Company enters into derivative transactions in order to assist customers with their risk management objectives, such as managing exposure to fluctuations in interest rates, foreign currencies and energy commodity prices. To economically hedge against the derivative contracts entered with the Company’s customers, the Company enters into mirrored derivative contracts with third-party financial institutions. The exposures from derivative transactions are collateralized by cash and/or eligible securities based on limits as set forth in the respective agreements entered between the Company and counterparty financial institutions.
97

The Company is subject to credit risk associated with the counterparties to the derivative contracts. This counterparty credit risk is a multi-dimensional form of risk, affected by both the exposure and credit quality of the counterparty, both of which are sensitive to market-induced changes. The Company’s Credit Risk Management Committee provides oversight of credit risks and the Company has guidelines in place to manage counterparty concentration, tenor limits, and collateral. The Company manages the credit risk of its derivative positions by diversifying its positions among various counterparties, by entering into legally enforceable master netting arrangements, and by requiring collateral arrangements, where possible. The Company may also transfer counterparty credit risk related to interest rate swaps to third-party financial institutions through the use of credit risk participation agreements. Certain derivative contracts are required to be centrally cleared through clearinghouses to further mitigate credit risk. The Company incorporates credit value adjustments and other market standard methodologies to appropriately reflect its own nonperformance risk and the respective counterparty’s nonperformance risk in the fair value measurements of its derivatives.
The following table summarizes certain information about derivative financial instruments utilized by the Company in its management of interest rate risk and foreign currency risk as of June 30, 2022 and December 31, 2021:

|  | June 30, 2022 |  | December 31, 2021
($ in thousands) |  | Interest Rate Contracts |  | Foreign Exchange Contracts |  | Interest Rate Contracts |  | Foreign Exchange Contracts
Derivatives designated as hedging instruments: |  | Cash Flow Hedges |  | Net Investment Hedges |  | Cash Flow Hedges |  | Net Investment Hedges
Notional amounts |  | $ | 1,525,000 |  |  | $ | 84,832 |  |  | $ | 275,000 |  |  | $ | 86,531 |
Fair value: |  |  |  |  |  |  |  |
Recognized as an asset |  | 586 |  |  | 2,765 |  |  | — |  |  | — |
Recognized as a liability |  | 96 |  |  | — |  |  | 57 |  |  | 225 |
Net fair value |  | $ | 490 |  |  | $ | 2,765 |  |  | $ | (57) |  |  | $ | (225) |
Weighted-average interest rates: |  |  |  |  |  |  |  |
Variable-rate borrowings — Pay fixed (receive floating) |  | 0.483% (3-month USD-LIBOR) |  | NM |  | 0.483% (3-month USD-LIBOR) |  | NM
Variable-rate loans — Receive fixed (pay floating) |  | 1.787% (1-month USD-LIBOR) |  | NM |  | NA |  | NM
Variable-rate loans — Sell cap-buy floor (floating rate ) |  | 4.575%-1.500% (1-month USD-SOFR) |  | NM |  | NA |  | NM
Weighted-average remaining term to maturity (in months): |  | 29.2 |  |  | 8.7 |  |  | 13.9 |  |  | 2.7 |
Derivatives not designated as hedging instruments: |  | Interest Rate Contracts |  | Foreign Exchange Contracts |  | Interest Rate Contracts |  | Foreign Exchange Contracts
Notional amounts |  | $ | 17,570,112 |  |  | $ | 2,654,194 |  |  | $ | 17,575,420 |  |  | $ | 1,874,681 |
Fair value: |  |  |  |  |  |  |  |
Recognized as an asset |  | 260,740 |  | 39,559 |  | 240,222 |  | 21,033
Recognized as a liability |  | 359,578 |  | 29,144 |  | 179,905 |  | 15,276
Net fair value |  | $ | (98,838) |  |  | $ | 10,415 |  |  | $ | 60,317 |  |  | $ | 5,757 |

NM — Not meaningful.
Derivatives Designated as Hedging Instruments — Interest rate and foreign exchange derivative contracts are utilized in the Company’s asset and liability management activities and serve as an efficient tool to manage the Company’s interest rate risk and foreign exchange risk. The Company uses derivatives to hedge the risk of variable cash flows in its variable interest rate borrowings, which includes repurchase agreements and FHLB advances, as well as a portion of its variable interest rate CRE loans. The Company also uses derivatives to hedge the risk of changes in the USD equivalent value of a designated monetary amount of the Company’s net investment in East West Bank (China) Limited. For both the cash flow and the net investment hedges, the changes in the fair value of the hedging instruments are recognized in AOCI, net of tax, on the Consolidated Balance Sheet.
The fluctuation in foreign currency translation of the hedged exposure is expected to be offset by changes in the fair value of the forward contracts. As of June 30, 2022, the outstanding foreign currency forwards effectively hedged approximately 44% of the net Chinese Renminbi exposure from East West Bank (China) Limited.
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Changes to the composition of the Company’s derivatives designated as hedging instruments during the first half of 2022 reflect actions taken for interest rate risk and foreign exchange rate risk management. The Company repositions its derivatives portfolio based on the current assessment of economic and financial conditions, including the interest rate and foreign currency environments, balance sheet composition and trends, and the relative mix of its cash and derivative positions.
Derivatives Not Designated as Hedging Instruments — The Company enters into interest rate, foreign exchange and energy commodity contracts to support the business needs of its customers. When derivative transactions are executed with its customers, the derivative contracts are offset by paired trades with third-party financial institutions. The Company may enter into derivative contracts that are either exchange-traded, centrally cleared through a clearinghouse or over-the-counter.
The Company offers various interest rate derivative contracts to its customers. For the interest rate contracts entered into with its customers, the Company managed its interest rate risk by entering into offsetting interest rate contracts with third-party financial institutions or central clearing organizations. Certain derivative 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 any specific Company assets or liabilities on the Consolidated Balance Sheet, or to forecasted transactions in a hedging relationship, and are therefore classified as economic hedges. The contracts are marked-to-market at each reporting period. The changes in fair values of the derivative contracts traded with third-party financial institutions are expected to be largely comparable to the changes in fair values of the derivative transactions executed with customers throughout the terms of these contracts, except for the credit valuation adjustment component. The Company records credit valuation adjustments on derivatives to properly reflect the variances of credit worthiness between the Company and the counterparties, considering the effects of enforceable master netting agreements and collateral arrangements.
The Company enters into foreign exchange contracts with its customers, consisting of forward, spot, swap and option contracts to accommodate the business needs of its customers. For the foreign exchange contracts entered into with its customers, the Company managed its foreign exchange 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. 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, 2022, the Company anticipates performance by all counterparties and has not experienced nonperformance by any of its counterparties, and therefore did not incur any related losses. The Company also utilizes foreign exchange contracts that are not designated as hedging instruments to mitigate the economic effect of fluctuations in certain foreign currency on-balance sheet assets and liabilities, primarily foreign currency denominated deposits offered to its customers. The Company’s policies permit taking proprietary currency positions within approved limits, in compliance with exemptions to proprietary trading restrictions provided under Section 619 of the Dodd-Frank Wall Street Reform and Consumer Protection Act, or the Volcker Rule. The Company does not speculate in the foreign exchange markets, and actively manages its foreign exchange exposures within prescribed risk limits and defined controls.
The Company enters into energy commodity contracts with its customers to allow them to hedge against the risk of energy commodity price fluctuations. To economically hedge against the risk of fluctuation in energy commodity prices in the products offered to its customers, the Company enters into offsetting energy commodity contracts with third-party financial institutions or central clearing organizations. Certain derivative contracts entered into with central clearing organizations are settled-to-market daily, to the extent the central clearing organizations’ rulebooks legally characterize the variation margin as settlement. The changes in fair values of the energy commodity contracts traded with third-party financial institutions are expected to be largely comparable to the changes in fair values of the energy commodity transactions executed with customers throughout the terms of these contracts.
Additional information on the Company’s derivatives is presented in Note 1 — Summary of Significant Accounting Policies — Significant Accounting Policies — Derivatives to the Consolidated Financial Statements in the Company’s 2021 Form 10-K, and Note 3 — Fair Value Measurement and Fair Value of Financial Instruments and Note 6 — Derivatives to the Consolidated Financial Statements in this Form 10-Q.
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Critical Accounting Policies and Estimates
The Company’s significant accounting policies are described in Note 1 — Summary of Significant Accounting Policies to the Consolidated Financial Statements in the Company’s 2021 Form 10-K. Certain of these policies include critical accounting estimates, which are subject to valuation assumptions, subjective or complex judgments about matters that are inherently uncertain, and it is likely that materially different amounts could be reported under different assumptions and conditions. The Company has procedures and processes in place to facilitate making these judgments. The following accounting policies are critical to the Company’s Consolidated Financial Statements:
•allowance for credit losses;
•fair value estimates;
•goodwill impairment; and
•income taxes.
For additional information on the Company’s critical accounting estimates involving significant judgments, see Item 7. MD&A — Critical Accounting Estimates in the Company’s 2021 Form 10-K.
Reconciliation of GAAP to Non-GAAP Financial Measures
To supplement the Company’s unaudited interim Consolidated Financial Statements presented in accordance with U.S. GAAP, the Company uses certain non-GAAP measures of financial performance. Non-GAAP financial measures are not prepared in accordance with, or as an alternative to U.S. GAAP. Generally, a non-GAAP financial measure is a numerical measure of a company’s performance that either excludes or includes amounts that are not normally excluded or included in the most directly comparable measure calculated and presented in accordance with U.S. GAAP. A non-GAAP financial measure may also be a financial metric that is not required by U.S. GAAP or other applicable requirements. The Company believes these non-GAAP financial measures, when taken together with the corresponding U.S. GAAP financial measures, provide meaningful supplemental information regarding its performance, and allow comparability to prior periods. These non-GAAP financial measures may be different from non-GAAP financial measures used by other companies, limiting their usefulness for comparison purposes.
The following tables present the reconciliations of U.S. GAAP to non-GAAP financial measures for the periods presented:

($ in thousands) |  |  | Three Months Ended June 30, |  | Six Months Ended June 30,
| 2022 |  |  |  | 2021 |  | 2022 |  | 2021
Net income | (a) |  | $ | 258,329 |  |  |  |  | $ | 224,742 |  |  | $ | 495,981 |  |  | $ | 429,736 |
Add: Amortization of core deposit intangibles |  |  | 488 |  |  |  |  | 710 |  |  | 999 |  |  | 1,442 |
Amortization of mortgage servicing assets |  |  | 364 |  |  |  |  | 420 |  |  | 756 |  |  | 834 |
Tax effect of amortization adjustments (1) |  |  | (245) |  |  |  |  | (321) |  |  | (505) |  |  | (646) |
Tangible net income | (b) |  | $ | 258,936 |  |  |  |  | $ | 225,551 |  |  | $ | 497,231 |  |  | $ | 431,366 |
Average stockholders’ equity | (c) |  | $ | 5,682,427 |  |  |  |  | $ | 5,425,952 |  |  | $ | 5,762,078 |  |  | $ | 5,382,267 |
Less: Average goodwill |  |  | (465,697) |  |  |  |  | (465,697) |  |  | (465,697) |  |  | (465,697) |
Average other intangible assets (2) |  |  | (8,827) |  |  |  |  | (10,827) |  |  | (9,016) |  |  | (11,209) |
Average tangible equity | (d) |  | $ | 5,207,903 |  |  |  |  | $ | 4,949,428 |  |  | $ | 5,287,365 |  |  | $ | 4,905,361 |
Return on average equity (3) | (a)/(c) |  | 18.23 | % |  |  |  | 16.61 | % |  | 17.36 | % |  | 16.10 | %
Tangible return on average tangible equity (3) | (b)/(d) |  | 19.94 | % |  |  |  | 18.28 | % |  | 18.96 | % |  | 17.73 | %

(1)Applied statutory tax rate of 28.77% for the second quarter and first half of 2022. Applied statutory tax rate of 28.37% for the second quarter and first half of 2021.
(2)Includes core deposit intangibles and mortgage servicing assets.
(3)Annualized.
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($ in thousands) |  |  | Three Months Ended June 30, |  | Six Months Ended June 30, |  |  |  |
| 2022 |  |  |  | 2021 |  | 2022 |  | 2021 |  |  |  |  |  |
Net interest income before provision for (reversal of) credit losses |  |  | $ | 472,952 |  |  |  |  | $ | 376,473 |  |  | $ | 888,565 |  |  | $ | 730,168 |  |  |  |  |  |  |
Total noninterest income |  |  | 78,444 |  |  |  |  | 68,431 |  |  | 158,187 |  |  | 141,297 |  |  |  |  |  |  |
Total revenue | (a) |  | $ | 551,396 |  |  |  |  | $ | 444,904 |  |  | $ | 1,046,752 |  |  | $ | 871,465 |  |  |  |  |  |  |
Total noninterest expense | (b) |  | $ | 196,860 |  |  |  |  | $ | 189,523 |  |  | $ | 386,310 |  |  | $ | 380,600 |  |  |  |  |  |  |
Less: Amortization of tax credit and other investments |  |  | (14,979) |  |  |  |  | (27,291) |  |  | (28,879) |  |  | (52,649) |  |  |  |  |  |  |
Amortization of core deposit intangibles |  |  | (488) |  |  |  |  | (710) |  |  | (999) |  |  | (1,442) |  |  |  |  |  |  |
Adjusted noninterest expense | (c) |  | $ | 181,393 |  |  |  |  | $ | 161,522 |  |  | $ | 356,432 |  |  | $ | 326,509 |  |  |  |  |  |  |
Efficiency ratio | (b)/(a) |  | 35.70 | % |  |  |  | 42.60 | % |  | 36.91 | % |  | 43.67 | % |  |  |  |  |  |
Adjusted efficiency ratio | (c)/(a) |  | 32.90 | % |  |  |  | 36.30 | % |  | 34.05 | % |  | 37.47 | % |  |  |  |  |  |

($ and shares in thousands, except per share data) |  |  | June 30, 2022 |  | December 31, 2021 |  |
Stockholders’ equity | (a) |  | $ | 5,609,482 |  |  | $ | 5,837,218 |  |  |
Less: Goodwill |  |  | (465,697) |  |  | (465,697) |  |  |
Other intangible assets (1) |  |  | (8,537) |  |  | (9,334) |  |  |
Tangible equity | (b) |  | $ | 5,135,248 |  |  | $ | 5,362,187 |  |  |
Number of common shares at period-end | (c) |  | 140,917 |  |  | 141,908 |  |  |
Book value per common share | (a)/(c) |  | $ | 39.81 |  |  | $ | 41.13 |  |  |
Tangible equity per common share | (b)/(c) |  | $ | 36.44 |  |  | $ | 37.79 |  |  |

(1)Includes core deposit intangibles and mortgage servicing assets.
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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
For quantitative and qualitative disclosures regarding market risk in the Company’s portfolio, see Note 6 — Derivatives to the Consolidated Financial Statements in this Form 10-Q and Item 2. MD&A — Risk Management — Market Risk Management in this Form 10-Q.
ITEM 4. CONTROLS AND PROCEDURES
Disclosure Controls and Procedures
As of June 30, 2022, pursuant to Rule 13a-15(b) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), the Company conducted an evaluation, under the supervision and with the participation of the Company’s management, including the Chief Executive Officer and Chief Financial Officer, of the effectiveness of the Company’s disclosure controls and procedures (as defined in Rule 13a-15(e) of the Exchange Act). Based upon that evaluation, the Company’s Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures were effective as of June 30, 2022.
The Company’s disclosure controls and procedures are designed to ensure that information required to be disclosed by the Company in the reports that the Company files or submits under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the rules and forms of the SEC. The Company’s disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by the Company in the reports that the Company files under the Exchange Act is accumulated and communicated to the Company’s management, including the Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.
Change in Internal Control over Financial Reporting
There were no changes in the Company’s internal control over financial reporting (as defined in Rule 13a-15(f) of the Exchange Act) during the quarter ended June 30, 2022, that have materially affected or are reasonably likely to materially affect the Company’s internal control over financial reporting.
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PART II — OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
See Note 10 — Commitments and Contingencies — Litigation to the Consolidated Financial Statements in Part I of this Form 10-Q, incorporated herein by reference.
ITEM 1A. RISK FACTORS
The Company’s 2021 Form 10-K contains disclosure regarding the risks and uncertainties related to the Company’s business under the heading Item 1A. Risk Factors. There has been no material change to the Company’s risk factors as presented in the Company’s 2021 Form 10-K.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
The following table summarizes common stock repurchased by the Company under the Company’s common stock repurchase program for the second quarter of 2022:

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

(1)Excludes the repurchase of common stock pursuant to various stock compensation plans and agreements totaling $380 thousand during the second quarter of 2022.
(2)On March 3, 2020, the Company’s Board of Directors authorized, and the Company announced, the repurchase of up to $500.0 million of the Company’s common stock. This $500.0 million repurchase authorization is inclusive of the Company’s $100.0 million stock repurchase authorization that is previously outstanding. The share repurchase authorization has no expiration date.
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ITEM 6. EXHIBITS
The following exhibit index lists Exhibits filed, or in the case of Exhibits 32.1 and 32.2 furnished, with this report:

Exhibit No. |  | Exhibit Description
3.1 |  | Certificate of Incorporation of the Registrant [Incorporated by reference to Exhibit 3(i) from Registrant’s Registration Statement on Form S-4 filed with the Commission on Sept ember 17, 1998 (File No. 333-63605).]
3.1.1 |  | Certificate of Amendment to Certificate of Incorporation of the Registrant [Incorporated by reference to Exhibit 3(i).1 from Registrant’s Annual Report on Form 10-K for the year ended December 31, 2002 filed with the Commission on March 28, 2003 (File No. 000-24939).]
3.1.2 |  | Amendment to Certificate of Incorporation to Increase Authorized Shares of the Registrant [Incorporated by reference from Registrant’s Definitive Proxy Statement on Schedule 14A filed with the Commission on April 15, 2005 (File No. 000-24939).]
3.1.3 |  | Certificate of Amendment to Certificate of Incorporation of the Registrant [Incorporated by reference to Exhibit A from Registrant’s Definitive Proxy Statement on Schedule 14A filed with the Commission on April 23, 2008 (File No. 000-24939).]
3.1.4 |  | Certificate of Designations of 8.00% Non-Cumulative Perpetual Convertible Preferred Stock, Series A of the Registrant [Incorporated by reference to Exhibit 3.1 from Registrant’s Current Report on Form 8-K, filed with the Commission on April 30, 2008 (File No. 000-24939).]
3.1.5 |  | Certificate of Designations of Fixed Rate Cumulative Perpetual Preferred Stock, Series B of the Registrant [Incorporated by reference to Exhibit 3.1, 4.1 from Registrant’s Current Report on Form 8-K filed with the Commission on December 9, 2008 (File No. 000-24939).]
3.1.6 |  | Certificate of Designations of Mandatorily Convertible Cumulative Non-Voting Perpetual Preferred Stock, Series C of the Registrant [Incorporated by reference to Exhibit 3.1, 4.1 from Registrant’s Current Report on Form 8-K filed with the Commission on November 12, 2009 (File No. 000-24939).]
3.2 |  | Amended and Restated Bylaws of the Registrant dated May 26, 2022 [Incorporated by reference to Exhibit 3.1 from Registrant’s Current Report on Form 8-K filed with the Commission on May 27, 2022 (File No. 000-24939).]
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.

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GLOSSARY OF ACRONYMS

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

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

Dated: | August 8, 2022 |
|  | EAST WEST BANCORP, INC. (Registrant)
|  | By | /s/ IRENE H. OH |
|  |  | Irene H. Oh
|  |  | Executive Vice President and Chief Financial Officer

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