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us-gaap:AllOtherSegmentsMember 2022-03-31

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2023
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: 141,460,241 shares as of April 30, 2023.

TABLE OF CONTENTS

|  |  | Page
F ORWARD-L OOKING STATEMENTS | 3
PART I — FINANCIAL INFORMATION | 5
| Item 1. | Consolidated Financial Statements | 5
|  | Consolidated Balance Sheet (Unaudited) | 5
|  | Consolidated Statement of Income (Unaudited) | 6
|  | Consolidated Statement of Comprehensive Income (Loss) (Unaudited) | 7
|  | Consolidated Statement of Changes in Stockholders’ Equity (Unaudited) | 8
|  | Consolidated Statement of Cash Flows (Unaudited) | 9
|  | Notes to Consolidated Financial Statements (Unaudited) | 11
|  | 1 — Basis of Presentation | 11
|  | 2 — Current Accounting Developments and Summary of Significant Accounting Policies | 12
|  | 3 — Fair Value Measurement and Fair Value of Financial Instruments | 13
|  | 4 — Assets Purchased under Resale Agreements and Sold under Repurchase Agreements | 22
|  | 5 — Securities | 24
|  | 6 — Derivatives | 30
|  | 7 — Loans Receivable and Allowance for Credit Losses | 37
|  | 8 — Investments in Qualified Affordable Housing Partnerships, Tax Credit and Other Investments, Net and Variable Interest Entities | 49
|  | 9 — Goodwill | 50
|  | 10 — Short-T erm Borrowings and Long-T erm Debt | 50
|  | 1 1 — Commitments and Contingencies | 51
|  | 1 2 — Stock Compensation Plans | 52
|  | 1 3 — Stockholders’ Equity and Earnings Per Share | 54
|  | 1 4 — Accumulated Other Comprehensive Income (Loss) | 54
|  | 1 5 — Business Segments | 55
| Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations | 57
| Item 3. | Quantitative and Qualitative Disclosures About Market Risk | 93
| Item 4. | Controls and Procedures | 93
PART II — OTHER INFORMATION | 94
| Item 1. | Legal Proceedings | 94
| Item 1A. | Risk Factors | 94
| Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds | 95
| Item 6. | Exhibits | 95
GLOSSARY OF ACRONYMS | 96
SIGNATURE | 97

2

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 assumptions, beliefs, estimates, expectations and projections, many of which, by their nature, are inherently uncertain and beyond the Company’s control. Forward-looking statements may relate to various matters, including the Company’s financial condition, results of operations, plans, objectives, future performance, business or industry, and usually can be identified by the use of forward-looking words, such as “anticipates,” “assumes,” “believes,” “can,” “continues,” “could,” “estimates,” “expects,” “forecasts,” “goal,” “intends,” “likely,” “may,” “might,” “objective,” “plans,” “potential,” “projects,” “remains,” “should,” “target,” “trend,” “will,” “would,” or similar expressions or variations thereof, and the negative thereof, but these terms are not the exclusive means of identifying such statements. You should not place undue reliance on forward-looking statements, as they are subject to risks and uncertainties, including, but not limited to, those described below. When considering these forward-looking statements, you should keep in mind these risks and uncertainties, as well as any cautionary statements the Company may make.
There are various important factors that could cause future results to differ materially from historical performance and any forward-looking statements. Factors that might cause such differences, include, but are not limited to:
•changes in the global economy, including an economic slowdown, capital or financial market disruption, supply chain disruption, level of inflation, interest rate environment, housing prices, employment levels, rate of growth and general business conditions, which could result in, among other things, reduced demand for loans, reduced availability of funding or increased funding costs, declines in asset values and/or recognition of allowance for credit losses;
•changes in local, regional and global business, economic and political conditions and geopolitical events, such as Russia’s invasion of Ukraine;
•the impacts related to or resulting from recent bank failures and other economic and industry volatility, including potential increased regulatory requirements and costs and impacts on macroeconomic conditions, losses in the value of our investment portfolio, deposit withdrawals, or other adverse consequences of negative market perceptions of the banking industry or the Company;
•changes in laws or the regulatory environment, including regulatory reform initiatives and policies of the U.S. Department of the Treasury, the Board of Governors of the Federal Reserve System (“Federal Reserve”), the Federal Deposit Insurance Corporation (“FDIC”), the SEC, the Consumer Financial Protection Bureau (“CFPB”), the California Department of Financial Protection and Innovation — Division of Financial Institutions, the China Banking and Insurance Regulatory Commission, the Hong Kong Monetary Authority, the Hong Kong Securities and Futures Commission, and the Monetary Authority of Singapore;
•changes and effects thereof in trade, monetary and fiscal policies and laws, including the ongoing trade, economic and political disputes between the U.S. and the People’s Republic of China and the monetary policies of the Federal Reserve;
•changes in the commercial and consumer real estate markets;
•changes in consumer or commercial spending, savings and borrowing habits, and patterns and behaviors;
•the impact from potential changes to income tax laws and regulations, federal spending and economic stimulus programs;
•the impact of any future U.S. federal government shutdown and uncertainty regarding the U.S. federal government’s debt limit and credit rating;
•the Company’s ability to compete effectively against financial institutions and other entities, including as a result of emerging technologies;
•the 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;
•the impact on the Company’s funding costs, net interest income and net interest margin from changes in key variable market interest rates, competition, regulatory requirements and the Company’s product mix;
•changes in the Company’s costs of operation, compliance and expansion;
•the Company’s ability to adopt and successfully integrate new technologies into its business in a strategic manner;
3

•the impact of the benchmark interest rate reform in the U.S. including the transition away from the U.S. dollar (“USD”) London Interbank Offered Rate (“LIBOR”) to alternative reference rates;
•the impact of communications or technology disruption, failure in, or breach of, the Company’s operational or security systems or infrastructure, or those of third party vendors with which the Company does business, including as a result of cyber-attacks; and other similar matters which could result in, among other things, confidential and/or proprietary information being disclosed or misused, and materially impact the Company’s ability to provide services to its clients;
•the adequacy of the Company’s risk management framework, disclosure controls and procedures and internal control over financial reporting;
•future credit quality and performance, including the Company’s expectations regarding future credit losses and allowance levels;
•the impact of adverse changes to the Company’s credit ratings from major credit rating agencies;
•the impact of adverse judgments or settlements in litigation;
•the impact 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 (“FASB”) or other regulatory agencies and their impact on the Company’s critical accounting policies and assumptions;
•the Company’s capital requirements and its ability to generate capital internally or raise capital on favorable terms;
•the impact on the Company’s liquidity due to changes in the Company’s ability to receive dividends from its subsidiaries;
•any strategic acquisitions or divestitures;
•changes in the equity and debt securities markets;
•fluctuations in the Company’s stock price;
•fluctuations in foreign currency exchange rates;
•the impact of increased focus on social, environmental and sustainability matters, which may affect the Company’s operations as well as those of its customers and the economy more broadly; and
•the impact of climate change, natural or man-made disasters or calamities, such as wildfires, droughts, hurricanes, flooding and earthquakes or other events that may directly or indirectly result in a negative impact on the 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, 2022, filed with the SEC on February 27, 2023 (the “Company’s 2022 Form 10-K”) under the heading Item 1A. Risk Factors. You should treat forward-looking statements as speaking only as of the date they are made and based only on information then actually known to the Company. The Company does not undertake, and specifically disclaims, any obligation to update or revise any forward-looking statements to reflect the occurrence of events or circumstances after the date of such statements except as required by law.
4

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

|  | March 31, 2023 |  | December 31, 2022
|  | (Unaudited) |  |
ASSETS |  |  |  |
Cash and due from banks |  | $ | 760,317 |  |  | $ | 534,980 |
Interest-bearing cash with banks |  | 5,173,877 |  |  | 2,946,804 |
Cash and cash equivalents |  | 5,934,194 |  |  | 3,481,784 |
Interest-bearing deposits with banks |  | 10,249 |  |  | 139,021 |
Assets purchased under resale agreements (“resale agreements”) |  | 654,288 |  |  | 792,192 |
Securities: |  |  |  |
Available-for-sale (“AFS”) debt securities, at fair value (amortized cost of $7,072,240 and $6,879,225) |  | 6,300,868 |  |  | 6,034,993 |
Held-to-maturity (“HTM”) debt securities, at amortized cost (fair value of $2,502,674 and $2,455,171) |  | 2,993,421 |  |  | 3,001,868 |
Loans held-for-sale |  | 6,861 |  |  | 25,644 |
Loans held-for-investment (net of allowance for loan losses of $619,893 and $595,645) |  | 48,298,155 |  |  | 47,606,785 |
Investments in qualified affordable housing partnerships, tax credit and other investments, net |  | 741,354 |  |  | 763,256 |
Premises and equipment (net of accumulated depreciation of $150,767 and $148,126) |  | 90,212 |  |  | 89,191 |
Goodwill |  | 465,697 |  |  | 465,697 |
Operating lease right-of-use assets |  | 103,114 |  |  | 103,681 |
Other assets |  | 1,646,485 |  |  | 1,608,038 |
TOTAL |  | $ | 67,244,898 |  |  | $ | 64,112,150 |
LIABILITIES |  |  |  |
Deposits: |  |  |  |
Noninterest-bearing |  | $ | 18,327,320 |  |  | $ | 21,051,090 |
Interest-bearing |  | 36,410,082 |  |  | 34,916,759 |
Total deposits |  | 54,737,402 |  |  | 55,967,849 |
Short-term borrowings |  | 4,500,000 |  |  | — |
Assets sold under repurchase agreements (“repurchase agreements”) |  | — |  |  | 300,000 |
Long-term debt and finance lease liabilities |  | 152,467 |  |  | 152,400 |
Operating lease liabilities |  | 112,676 |  |  | 111,931 |
Accrued expenses and other liabilities |  | 1,433,022 |  |  | 1,595,358 |
Total liabilities |  | 60,935,567 |  |  | 58,127,538 |
COMMITMENTS AND CONTINGENCIES (Note 10) |  |  |  |
STOCKHOLDERS’ EQUITY |  |  |  |
Common stock, $0.001 par value, 200,000,000 shares authorized; 169,199,767 and 168,459,045 shares issued |  | 169 |  |  | 168 |
Additional paid-in capital |  | 1,947,518 |  |  | 1,936,389 |
Retained earnings |  | 5,832,291 |  |  | 5,582,546 |
Treasury stock, at cost 27,803,967 and 27,511,199 shares |  | (790,653) |  |  | (768,862) |
Accumulated other comprehensive loss (“AOCI”), net of tax |  | (679,994) |  |  | (765,629) |
Total stockholders’ equity |  | 6,309,331 |  |  | 5,984,612 |
TOTAL |  | $ | 67,244,898 |  |  | $ | 64,112,150 |

See accompanying Notes to Consolidated Financial Statements.
5

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

|  | Three Months Ended March 31, |  |
|  | 2023 |  | 2022 |  |  |  |
INTEREST AND DIVIDEND INCOME |  |  |  |  |  |  |  |
Loans receivable, including fees |  | $ | 728,386 |  |  | $ | 377,110 |  |  |  |  |
Debt securities |  | 65,931 |  |  | 42,667 |  |  |  |  |
Resale agreements |  | 4,503 |  |  | 8,383 |  |  |  |  |
Restricted equity securities |  | 1,039 |  |  | 609 |  |  |  |  |
Interest-bearing cash and deposits with banks |  | 35,647 |  |  | 3,260 |  |  |  |  |
Total interest and dividend income |  | 835,506 |  |  | 432,029 |  |  |  |  |
INTEREST EXPENSE |  |  |  |  |  |  |  |
Deposits |  | 216,794 |  |  | 12,989 |  |  |  |  |
Short-term borrowings |  | 8,825 |  |  | 9 |  |  |  |  |
Federal Home Loan Bank (“FHLB”) advances |  | 6,430 |  |  | 578 |  |  |  |  |
Repurchase agreements |  | 1,052 |  |  | 2,016 |  |  |  |  |
Long-term debt and finance lease liabilities |  | 2,544 |  |  | 824 |  |  |  |  |
Total interest expense |  | 235,645 |  |  | 16,416 |  |  |  |  |
Net interest income before provision for credit losses |  | 599,861 |  |  | 415,613 |  |  |  |  |
Provision for credit losses |  | 20,000 |  |  | 8,000 |  |  |  |  |
Net interest income after provision for credit losses |  | 579,861 |  |  | 407,613 |  |  |  |  |
NONINTEREST INCOME |  |  |  |  |  |  |  |
Lending fees |  | 20,586 |  |  | 19,438 |  |  |  |  |
Deposit account fees |  | 21,703 |  |  | 20,315 |  |  |  |  |
Interest rate contracts and other derivative income |  | 2,564 |  |  | 11,133 |  |  |  |  |
Foreign exchange income |  | 12,660 |  |  | 12,699 |  |  |  |  |
Wealth management fees |  | 6,304 |  |  | 6,052 |  |  |  |  |
Net (losses) gains on sales of loans |  | (22) |  |  | 2,922 |  |  |  |  |
Net realized (losses) gains on AFS debt securities |  | (10,000) |  |  | 1,278 |  |  |  |  |
Other investment income |  | 1,921 |  |  | 1,627 |  |  |  |  |
Other income |  | 4,262 |  |  | 4,279 |  |  |  |  |
Total noninterest income |  | 59,978 |  |  | 79,743 |  |  |  |  |
NONINTEREST EXPENSE |  |  |  |  |  |  |  |
Compensation and employee benefits |  | 129,654 |  |  | 116,269 |  |  |  |  |
Occupancy and equipment expense |  | 15,587 |  |  | 15,464 |  |  |  |  |
Deposit insurance premiums and regulatory assessments |  | 7,910 |  |  | 4,717 |  |  |  |  |
Deposit account expense |  | 9,609 |  |  | 4,693 |  |  |  |  |
Data processing |  | 3,347 |  |  | 3,665 |  |  |  |  |
Computer software expense |  | 7,360 |  |  | 7,294 |  |  |  |  |
Other operating expense |  | 30,998 |  |  | 23,448 |  |  |  |  |
Amortization of tax credit and other investments |  | 10,110 |  |  | 13,900 |  |  |  |  |
Repurchase agreements’ extinguishment cost |  | 3,872 |  |  | — |  |  |  |  |
Total noninterest expense |  | 218,447 |  |  | 189,450 |  |  |  |  |
INCOME BEFORE INCOME TAXES |  | 421,392 |  |  | 297,906 |  |  |  |  |
INCOME TAX EXPENSE |  | 98,953 |  |  | 60,254 |  |  |  |  |
NET INCOME |  | $ | 322,439 |  |  | $ | 237,652 |  |  |  |  |
EARNINGS PER SHARE (“EPS”) |  |  |  |  |  |  |  |
BASIC |  | $ | 2.28 |  |  | $ | 1.67 |  |  |  |  |
DILUTED |  | $ | 2.27 |  |  | $ | 1.66 |  |  |  |  |
WEIGHTED-AVERAGE NUMBER OF SHARES OUTSTANDING |  |  |  |  |  |  |  |
BASIC |  | 141,112 |  |  | 142,025 |  |  |  |  |
DILUTED |  | 141,913 |  |  | 143,223 |  |  |  |  |

See accompanying Notes to Consolidated Financial Statements.
6

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

|  | Three Months Ended March 31, |  |  |  |  |  |
|  | 2023 |  | 2022 |  |  |  |  |  |  |  |  |  |
Net income |  | $ | 322,439 |  |  | $ | 237,652 |  |  |  |  |  |  |  |  |  |  |
Other comprehensive income (loss), net of tax: |  |  |  |  |  |  |  |  |  |  |  |  |  |
Net changes in unrealized gains (losses) on AFS debt securities |  | 51,319 |  |  | (169,270) |  |  |  |  |  |  |  |  |  |  |
Net changes in unrealized gains (losses) on securities transferred from AFS to HTM |  | 2,762 |  |  | (110,680) |  |  |  |  |  |  |  |  |  |  |
Net changes in unrealized gains (losses) on cash flow hedges |  | 28,613 |  |  | (24,723) |  |  |  |  |  |  |  |  |  |  |
Foreign currency translation adjustments |  | 2,941 |  |  | 129 |  |  |  |  |  |  |  |  |  |  |
Other comprehensive income (loss) |  | 85,635 |  |  | (304,544) |  |  |  |  |  |  |  |  |  |  |
COMPREHENSIVE INCOME (LOSS) |  | $ | 408,074 |  |  | $ | (66,892) |  |  |  |  |  |  |  |  |  |  |

See accompanying Notes to Consolidated Financial Statements.
7

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

|  | Common Stock and Additional Paid-in Capital |  | Retained Earnings |  | Treasury Stock |  | AOCI, Net of Tax |  | Total Stockholders’ Equity
|  | Shares |  | Amount |  |  |  |
BALANCE, JANUARY 1, 2022 |  | 141,907,954 |  |  | $ | 1,893,725 |  |  | $ | 4,683,659 |  |  | $ | (649,785) |  |  | $ | (90,381) |  |  | $ | 5,837,218 |
Net income |  | — |  |  | — |  |  | 237,652 |  |  | — |  |  | — |  |  | 237,652 |
Other comprehensive loss |  | — |  |  | — |  |  | — |  |  | — |  |  | (304,544) |  |  | (304,544) |
Issuance of common stock pursuant to various stock compensation plans and agreements |  | 588,114 |  |  | 9,317 |  |  | — |  |  | — |  |  | — |  |  | 9,317 |
Repurchase of common stock pursuant to various stock compensation plans and agreements |  | (239,548) |  |  | — |  |  | — |  |  | (18,597) |  |  | — |  |  | (18,597) |
Cash dividends on common stock ($0.40 per share) |  | — |  |  | — |  |  | (57,590) |  |  | — |  |  | — |  |  | (57,590) |
BALANCE, MARCH 31, 2022 |  | 142,256,520 |  |  | $ | 1,903,042 |  |  | $ | 4,863,721 |  |  | $ | (668,382) |  |  | $ | (394,925) |  |  | $ | 5,703,456 |
BALANCE, JANUARY 1, 2023 |  | 140,947,846 |  |  | $ | 1,936,557 |  |  | $ | 5,582,546 |  |  | $ | (768,862) |  |  | $ | (765,629) |  |  | $ | 5,984,612 |
Cumulative-effect of a change in accounting principle (1) |  | — |  |  | — |  |  | (4,262) |  |  | — |  |  | — |  |  | (4,262) |
Net income |  | — |  |  | — |  |  | 322,439 |  |  | — |  |  | — |  |  | 322,439 |
Other comprehensive income |  | — |  |  | — |  |  | — |  |  | — |  |  | 85,635 |  |  | 85,635 |
Issuance of common stock pursuant to various stock compensation plans and agreements |  | 740,722 |  |  | 11,130 |  |  | — |  |  | — |  |  | — |  |  | 11,130 |
Repurchase of common stock pursuant to various stock compensation plans and agreements |  | (292,768) |  |  | — |  |  | — |  |  | (21,791) |  |  | — |  |  | (21,791) |
Cash dividends on common stock ($0.48 per share) |  | — |  |  | — |  |  | (68,432) |  |  | — |  |  | — |  |  | (68,432) |
BALANCE, MARCH 31, 2023 |  | 141,395,800 |  |  | $ | 1,947,687 |  |  | $ | 5,832,291 |  |  | $ | (790,653) |  |  | $ | (679,994) |  |  | $ | 6,309,331 |

(1)Represents the change in the Company’s allowance for loan losses as a result of the adoption of Accounting Standards Update (“ASU”) 2022-02, Financial Instruments - Credit Losses (Topic 326): Troubled Debt Restructurings and the Vintage Disclosures on January 1, 2023. Refer to Note 2 — Current Accounting Developments and Summary of Significant Accounting Policies in this Form 10-Q for additional information.
See accompanying Notes to Consolidated Financial Statements.
8

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

|  | Three Months Ended March 31, |  |
|  | 2023 |  | 2022 |  |
CASH FLOWS FROM OPERATING ACTIVITIES |  |  |  |  |  |
Net income |  | $ | 322,439 |  |  | $ | 237,652 |  |  |
Adjustments to reconcile net income to net cash provided by operating activities: |  |  |  |  |  |
Depreciation and amortization |  | 32,567 |  |  | 26,555 |  |  |
Amortization of premiums and accretion of discount, net |  | (4,497) |  |  | 11,824 |  |  |
Stock compensation costs |  | 11,075 |  |  | 8,433 |  |  |
Deferred income tax expense (benefit) |  | 609 |  |  | (7,083) |  |  |
Provision for credit losses |  | 20,000 |  |  | 8,000 |  |  |
Net losses (gains) on sales of loans |  | 22 |  |  | (2,922) |  |  |
Net realized losses (gains) on AFS debt securities |  | 10,000 |  |  | (1,278) |  |  |
Loans held-for-sale: |  |  |  |  |  |
Originations and purchases |  | — |  |  | (447) |  |  |
Proceeds from sales and paydowns/payoffs of loans originally classified as held-for-sale |  | — |  |  | 461 |  |  |
Proceeds from distributions received from equity method investees |  | 1,718 |  |  | 3,227 |  |  |
Net change in accrued interest receivable and other assets |  | (75,163) |  |  | (81,628) |  |  |
Net change in accrued expenses and other liabilities |  | (93,948) |  |  | 83,042 |  |  |
Other operating activities, net |  | (1,921) |  |  | 49 |  |  |
Total adjustments |  | (99,538) |  |  | 48,233 |  |  |
Net cash provided by operating activities |  | 222,901 |  |  | 285,885 |  |  |
CASH FLOWS FROM INVESTING ACTIVITIES |  |  |  |  |  |
Net change in: |  |  |  |  |  |
Investments in qualified affordable housing partnerships, tax credit and other investments |  | (27,358) |  |  | (32,853) |  |  |
Interest-bearing deposits with banks |  | 128,772 |  |  | (79,633) |  |  |
Resale agreements: |  |  |  |  |  |
Proceeds from paydowns and maturities |  | 150,629 |  |  | 554,932 |  |  |
Purchases |  | (12,725) |  |  | (158,251) |  |  |
AFS debt securities: |  |  |  |  |  |
Proceeds from sales |  | — |  |  | 103,945 |  |  |
Proceeds from repayments, maturities and redemptions |  | 321,913 |  |  | 446,301 |  |  |
Purchases |  | (532,758) |  |  | (746,855) |  |  |
HTM debt securities: |  |  |  |  |  |
Proceeds from repayments, maturities and redemptions |  | 12,387 |  |  | 15,448 |  |  |
Loans held-for-investment: |  |  |  |  |  |
Proceeds from sales of loans originally classified as held-for-investment |  | 179,237 |  |  | 135,517 |  |  |
Purchases |  | (155,016) |  |  | (225,065) |  |  |
Other changes in loans held-for-investment, net |  | (695,646) |  |  | (1,697,590) |  |  |
Proceeds from sales of other real estate owned (“OREO”) and other foreclosed assets |  | 1,976 |  |  | 760 |  |  |
Proceeds from distributions received from equity method investees |  | 2,244 |  |  | 4,348 |  |  |
Other investing activities, net |  | (6,501) |  |  | (3,518) |  |  |
Net cash used in investing activities |  | (632,846) |  |  | (1,682,514) |  |  |

See accompanying Notes to Consolidated Financial Statements.
9

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

|  | Three Months Ended March 31, |  |
|  | 2023 |  | 2022 |  |
CASH FLOWS FROM FINANCING ACTIVITIES |  |  |  |  |  |
Net change in deposits |  | (1,246,189) |  |  | 1,584,344 |  |  |
Net change in short-term borrowings |  | 4,500,017 |  |  | (31) |  |  |
FHLB advances: |  |  |  |  |  |
Proceeds |  | 6,000,000 |  |  | 100 |  |  |
Repayment |  | (6,000,000) |  |  | (175,100) |  |  |
Repurchase agreements: |  |  |  |  |  |
Repayment of repurchase agreements |  | (300,000) |  |  | — |  |  |
Repurchase agreements’ extinguishment cost |  | (3,872) |  |  | — |  |  |
Long-term debt and lease liabilities: |  |  |  |  |  |
Repayment of long-term debt and lease liabilities |  | (203) |  |  | (229) |  |  |
Common stock: |  |  |  |  |  |
Stock tendered for payment of withholding taxes |  | (21,791) |  |  | (18,597) |  |  |
Cash dividends paid |  | (70,776) |  |  | (58,900) |  |  |
Net cash provided by financing activities |  | 2,857,186 |  |  | 1,331,587 |  |  |
Effect of exchange rate changes on cash and cash equivalents |  | 5,169 |  |  | 807 |  |  |
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS |  | 2,452,410 |  |  | (64,235) |  |  |
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD |  | 3,481,784 |  |  | 3,912,935 |  |  |
CASH AND CASH EQUIVALENTS, END OF PERIOD |  | $ | 5,934,194 |  |  | $ | 3,848,700 |  |  |
SUPPLEMENTAL CASH FLOW INFORMATION |  |  |  |  |  |
Cash paid during the period for: |  |  |  |  |  |
Interest |  | $ | 227,504 |  |  | $ | 20,881 |  |  |
Income taxes, net |  | $ | — |  |  | $ | 581 |  |  |
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 |  | $ | 160,476 |  |  | $ | 133,217 |  |  |

See accompanying Notes to Consolidated Financial Statements.
10

EAST WEST BANCORP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 1 — Basis of Presentation
East West Bancorp, Inc. is a registered bank holding company that offers a full range of banking services to individuals and businesses through its subsidiary bank, East West Bank and its subsidiaries (“East West Bank” or the “Bank”). The unaudited interim Consolidated Financial Statements in this Form 10-Q include the accounts of East West, East West Bank and East West’s subsidiaries. Intercompany transactions and accounts have been eliminated in consolidation. As of March 31, 2023, East West also has six wholly-owned subsidiaries that are statutory business trusts (the “Trusts”). In accordance with FASB Accounting Standards Codification (“ASC”) Topic 810, Consolidation, the Trusts are not included on the Consolidated Financial Statements.
The unaudited interim Consolidated Financial Statements are presented in accordance with U.S. Generally Accepted Accounting Principles (“GAAP”), applicable guidelines prescribed by regulatory authorities and general practices in the banking industry. While the unaudited interim Consolidated Financial Statements reflect all adjustments that, in the opinion of management, are necessary for fair presentation, they primarily serve to update the most recently filed annual report on Form 10-K, and may not include all the information and notes necessary to constitute a complete set of financial statements. Accordingly, they should be read in conjunction with the audited Consolidated Financial Statements and notes thereto included in the Company’s 2022 Form 10-K.
The preparation of the Consolidated Financial Statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the Consolidated Financial Statements, income and expenses during the reporting periods, and the related disclosures. Although our 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.
Risk and Uncertainties
The failures of Silicon Valley Bank and Signature Bank in March 2023 and of First Republic Bank in May 2023 have resulted in significant disruption in the financial services industry, adversely impacted the volatility and market prices of the securities of financial institutions and resulted in lower levels of deposits for us and many other financial institutions. These events have adversely impacted, and could continue to, adversely affect our business, results of operations, and financial condition, as well as the market price and volatility of our common stock. In response to these failures, many large depositors have withdrawn deposits in excess of FDIC insurance limits in order to diversify their risk. If a significant portion of our deposits were to be withdrawn within a short period of time such that additional sources of funding would be required to meet withdrawal demands, we may be unable to obtain funding at favorable terms, which may have an adverse effect on our net interest margin. Moreover, obtaining adequate funding to meet our deposit obligations may be more challenging during periods of elevated interest rates and financial industry instability, both of which we are currently experiencing. Our ability to attract depositors during a time of actual or perceived distress or instability in the marketplace may be limited. Further, interest rates paid for borrowing generally exceed the interest rates paid on deposits. This spread may be exacerbated by higher prevailing interest rates. In addition, because our AFS debt securities lose value when interest rates rise, after-tax proceeds resulting from the sale of such assets may not be sufficient to recover the full amount of our exposure. Under these circumstances, we may be required to access funding from sources such as the Federal Reserve’s discount window or additional funding from its recently established Bank Term Funding Program (“BTFP”), from which we borrowed $4.50 billion during the first quarter of 2023, in order to manage our liquidity risk. See Note 10 — Short-Term Borrowings and Long-Term Debt to the Consolidated Financial Statements in this Form 10-Q for additional information related to the Company’s borrowings from the BTFP.
11

Note 2 — Current Accounting Developments and Summary of Significant Accounting Policies
Accounting Pronouncements Adopted in 2023

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

Recent Accounting Pronouncements Yet to be Adopted

Standard | Required Date of Adoption | Description | Effect on Financial Statements
Standards Not Yet Adopted
ASU 2023-01, Leases (Topic 842): Common Control Arrangements | January 1, 2024 Early adoption is permitted | ASU 2023-01 amends the accounting for leasehold improvements for leases between entities under common control arrangements. The guidance requires leasehold improvements associated with leases between companies under common control to be amortized by a lessee over the economic life of the leasehold improvements, regardless of the lease term or, until the lessee ceases to control the use of the underlying asset through a lease, at which time the remaining value of the leasehold improvement would be accounted for as a transfer between companies under common control through an adjustment to equity. The amendments in this guidance may be applied retrospectively to the beginning of the period in which the entity first applied Topic 842 or prospectively (1) to all new leasehold improvements recognized on or after the date the entity first applies the amendments, or (2) to all new and existing leasehold improvements recognized on or after the date the entity first applies the amendments. | The Company does not expect the adoption of this guidance to have a material impact on the Company’s Consolidated Financial Statements. The Company expects to adopt ASU 2023-01 on January 1, 2024 on a prospective basis.
ASU 2023-02, Investments — Equity Method and Joint Ventures (Topic 323): Accounting for Investments in Tax Credit Structures Using the Proportional Amortization Method | January 1, 2024 Early adoption is permitted | ASU 2023-02 expands the scope of the proportional amortization method to equity tax credit investment programs if certain conditions are met. Previously, the proportional amortization method could only be used for investments in low-income housing tax credit structures. Under this guidance, companies are able to elect, on a tax credit program-by-tax credit program basis, to apply the proportional amortization method to all equity investments meeting the criteria in ASC 323-740-25-1. The amendments in this guidance must be applied on a modified retrospective or a retrospective basis. | The Company is currently evaluating the impact of this guidance on the Company’s Consolidated Financial Statements.

12

Significant Accounting Policies Update
Loan Modifications — Certain loans are modified in the normal course of business for competitive reasons or in conjunction with the Company’s loss mitigation activities. Upon the adoption of ASU 2022-02, the Company applies the general loan modification guidance provided in ASC 310-20 to all loan modifications, including modifications made for borrowers experiencing financial difficulty. Under the general loan modification guidance, a modification is treated as a new loan only if the following two conditions are met: (1) the terms of the new loan are at least as favorable to the Company as the terms for comparable loans to other customers with similar collection risks; and (2) modifications to the terms of the original loan are more than minor. If either condition is not met, the modification is accounted for as the continuation of the existing loan with any effect of the modification treated as a prospective adjustment to the loan’s effective interest rate. A modification may vary by program and by borrower-specific characteristics, and may include rate reductions, principal forgiveness, term extensions, and payment delays, and is intended to minimize the company’s economic loss and to avoid foreclosure or repossession of collateral. The Company applies the same credit loss methodology it uses for similar loans that were not modified. For the Company’s accounting policy related to the loan modifications’ allowance for loan losses, see Note 7 — Loans Receivable and Allowance for Credit Losses — Allowance for Credit Losses to the Consolidated Financial Statements in this Form 10-Q.
Note 3 — Fair Value Measurement and Fair Value of Financial Instruments
Under applicable accounting standards, the Company measures a portion of its assets and liabilities at fair value. These assets and liabilities are predominantly recorded at fair value on a recurring basis. From time to time, certain assets and liabilities are measured at fair value on a nonrecurring basis; that is, they are not measured at fair value on an ongoing basis but are subject to fair value adjustments only as required through the application of an accounting method such as lower of cost or fair value or write-down of individual assets. The Company categorizes its assets and liabilities into three levels based on the established fair value hierarchy and conducts a review of fair value hierarchy classifications on a quarterly basis. For more information regarding the fair value hierarchy and how the Company measures fair value, see Note 1 — Summary of Significant Accounting Policies — Significant Accounting Policies — Fair Value to the Consolidated Financial Statements in the Company’s 2022 Form 10-K for additional information.
Assets and Liabilities Measured at Fair Value on a Recurring Basis
The following section describes the valuation methodologies used by the Company to measure financial assets and liabilities on a recurring basis, as well as the general classification of these instruments within the fair value hierarchy.
Available-for-Sale Debt Securities — The fair value of AFS debt securities is generally determined by independent external pricing service providers who have experience in valuing these securities or by taking the average quoted market prices obtained from independent external brokers. The valuations provided by the third-party pricing service providers are based on observable market inputs, which include benchmark yields, reported trades, issuer spreads, benchmark securities, bids, offers, prepayment expectations and reference data obtained from market research publications. Inputs used by the third-party pricing service providers in valuing collateralized mortgage obligations and other securitization structures also include 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.
13

When a quoted price in an active market exists for the identical security, this price is used to determine the fair value and the AFS debt security is classified as Level 1. Level 1 AFS debt securities consist of U.S. Treasury securities. When pricing is unavailable from third-party pricing service providers for certain securities, the Company requests market quotes from various independent external brokers and utilizes the average quoted market prices. In addition, the Company obtains market quotes from other official published sources. As these valuations are based on observable inputs in the current marketplace, they are classified as Level 2. The Company periodically communicates with the independent external brokers to validate their pricing methodology. Information such as pricing sources, pricing assumptions, data inputs and valuation techniques are reviewed periodically.
Equity Securities — Equity securities consisted of mutual funds as of both March 31, 2023 and December 31, 2022. The Company invested in these mutual funds for Community Reinvestment Act (“CRA”) purposes. The Company uses net asset value (“NAV”) information to determine the fair value of these equity securities. When NAV is available periodically and the equity securities can be put back to the transfer agents at the publicly available NAV, the fair value of the equity securities is classified as Level 1. When NAV is available periodically, but the equity securities may not be readily marketable at its periodic NAV in the secondary market, the fair value of these equity securities is classified as Level 2.
Interest Rate Contracts — 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.
Foreign Exchange Contracts — The Company enters into foreign exchange contracts to accommodate the business needs of its customers. For a majority of the foreign exchange contracts entered with its customers, the Company entered into offsetting foreign exchange contracts with third-party financial institutions to manage its exposure. The Company also utilizes foreign exchange contracts that are not designated as hedging instruments to mitigate the economic effect of fluctuations in certain foreign currency on-balance sheet assets and liabilities, primarily foreign currency denominated deposits that it offers to its customers. The fair value of foreign exchange contracts is determined at each reporting period based on changes in the foreign exchange rates. These are over-the-counter contracts where quoted market prices are not readily available. Valuation is measured using conventional valuation methodologies with observable market data. Due to the short-term nature of the majority of these contracts, the counterparties’ credit risks are considered nominal and result in no adjustments to the valuation of the foreign exchange contracts. Due to the observable nature of the inputs used in deriving the fair value of these contracts, the valuation of foreign exchange contracts is classified as Level 2. As of both March 31, 2023 and December 31, 2022, the Bank held foreign currency non-deliverable forward contracts to hedge its net investment in its China subsidiary, East West Bank (China) Limited, a non-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. Due to the observable nature of all other significant inputs used in deriving the estimated fair value, RPAs are classified as Level 2.
14

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 both March 31, 2023 and December 31, 2022, 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 Company enters into offsetting commodity contracts with third-party financial institutions to manage its exposure. 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.
15

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

|  | Assets and Liabilities Measured at Fair Value on a Recurring Basis as of March 31, 2023
($ in thousands) |  | Quoted Prices in Active Markets for Identical Assets (Level 1) |  | Significant Other Observable Inputs (Level 2) |  | Significant Unobservable Inputs (Level 3) |  | Total Fair Value
AFS debt securities: |  |  |  |  |  |  |  |
U.S. Treasury securities |  | $ | 916,982 |  |  | $ | — |  |  | $ | — |  |  | $ | 916,982 |
U.S. government agency and U.S. government-sponsored enterprise debt securities |  | — |  |  | 463,860 |  |  | — |  |  | 463,860 |
U.S. government agency and U.S. government-sponsored enterprise mortgage-backed securities: |  |  |  |  |  |  |  |
Commercial mortgage-backed securities |  | — |  |  | 497,115 |  |  | — |  |  | 497,115 |
Residential mortgage-backed securities |  | — |  |  | 1,772,082 |  |  | — |  |  | 1,772,082 |
Municipal securities |  | — |  |  | 266,015 |  |  | — |  |  | 266,015 |
Non-agency mortgage-backed securities: |  |  |  |  |  |  |  |
Commercial mortgage-backed securities |  | — |  |  | 396,723 |  |  | — |  |  | 396,723 |
Residential mortgage-backed securities |  | — |  |  | 638,409 |  |  | — |  |  | 638,409 |
Corporate debt securities |  | — |  |  | 516,253 |  |  | — |  |  | 516,253 |
Foreign government bonds |  | — |  |  | 185,883 |  |  | — |  |  | 185,883 |
Asset-backed securities |  | — |  |  | 46,307 |  |  | — |  |  | 46,307 |
Collateralized loan obligations (“CLOs”) |  | — |  |  | 601,239 |  |  | — |  |  | 601,239 |
Total AFS debt securities |  | $ | 916,982 |  |  | $ | 5,383,886 |  |  | $ | — |  |  | $ | 6,300,868 |
Investments in tax credit and other investments: |  |  |  |  |  |  |  |
Equity securities |  | $ | 20,204 |  |  | $ | 4,217 |  |  | $ | — |  |  | $ | 24,421 |
Total investments in tax credit and other investments |  | $ | 20,204 |  |  | $ | 4,217 |  |  | $ | — |  |  | $ | 24,421 |
Derivative assets: |  |  |  |  |  |  |  |
Interest rate contracts |  | $ | — |  |  | $ | 415,000 |  |  | $ | — |  |  | $ | 415,000 |
Foreign exchange contracts |  | — |  |  | 34,050 |  |  | — |  |  | 34,050 |
Equity contracts |  | — |  |  | — |  |  | 277 |  |  | 277 |
Commodity contracts |  | — |  |  | 178,075 |  |  | — |  |  | 178,075 |
Gross derivative assets |  | $ | — |  |  | $ | 627,125 |  |  | $ | 277 |  |  | $ | 627,402 |
Netting adjustments (1) |  | $ | — |  |  | $ | (365,127) |  |  | $ | — |  |  | $ | (365,127) |
Net derivative assets |  | $ | — |  |  | $ | 261,998 |  |  | $ | 277 |  |  | $ | 262,275 |
Derivative liabilities: |  |  |  |  |  |  |  |
Interest rate contracts |  | $ | — |  |  | $ | 462,411 |  |  | $ | — |  |  | $ | 462,411 |
Foreign exchange contracts |  | — |  |  | 32,791 |  |  | — |  |  | 32,791 |
Credit contracts |  | — |  |  | 29 |  |  | — |  |  | 29 |
Commodity contracts |  | — |  |  | 186,599 |  |  | — |  |  | 186,599 |
Gross derivative liabilities |  | $ | — |  |  | $ | 681,830 |  |  | $ | — |  |  | $ | 681,830 |
Netting adjustments (1) |  | $ | — |  |  | $ | (169,849) |  |  | $ | — |  |  | $ | (169,849) |
Net derivative liabilities |  | $ | — |  |  | $ | 511,981 |  |  | $ | — |  |  | $ | 511,981 |

16

|  | Assets and Liabilities Measured at Fair Value on a Recurring Basis as of December 31, 2022
($ in thousands) |  | Quoted Prices in Active Markets for Identical Assets (Level 1) |  | Significant Other Observable Inputs (Level 2) |  | Significant Unobservable Inputs (Level 3) |  | Total Fair Value
AFS debt securities: |  |  |  |  |  |  |  |
U.S. Treasury securities |  | $ | 606,203 |  |  | $ | — |  |  | $ | — |  |  | $ | 606,203 |
U.S. government agency and U.S. government-sponsored enterprise debt securities |  | — |  |  | 461,607 |  |  | — |  |  | 461,607 |
U.S. government agency and U.S. government-sponsored enterprise mortgage-backed securities: |  |  |  |  |  |  |  |
Commercial mortgage-backed securities |  | — |  |  | 500,269 |  |  | — |  |  | 500,269 |
Residential mortgage-backed securities |  | — |  |  | 1,762,195 |  |  | — |  |  | 1,762,195 |
Municipal securities |  | — |  |  | 257,099 |  |  | — |  |  | 257,099 |
Non-agency mortgage-backed securities: |  |  |  |  |  |  |  |
Commercial mortgage-backed securities |  | — |  |  | 398,329 |  |  | — |  |  | 398,329 |
Residential mortgage-backed securities |  | — |  |  | 649,224 |  |  | — |  |  | 649,224 |
Corporate debt securities |  | — |  |  | 526,274 |  |  | — |  |  | 526,274 |
Foreign government bonds |  | — |  |  | 227,053 |  |  | — |  |  | 227,053 |
Asset-backed securities |  | — |  |  | 49,076 |  |  | — |  |  | 49,076 |
CLOs |  | — |  |  | 597,664 |  |  | — |  |  | 597,664 |
Total AFS debt securities |  | $ | 606,203 |  |  | $ | 5,428,790 |  |  | $ | — |  |  | $ | 6,034,993 |
Investments in tax credit and other investments: |  |  |  |  |  |  |  |
Equity securities |  | $ | 19,777 |  |  | $ | 4,177 |  |  | $ | — |  |  | $ | 23,954 |
Total investments in tax credit and other investments |  | $ | 19,777 |  |  | $ | 4,177 |  |  | $ | — |  |  | $ | 23,954 |
Derivative assets: |  |  |  |  |  |  |  |
Interest rate contracts |  | $ | — |  |  | $ | 440,283 |  |  | $ | — |  |  | $ | 440,283 |
Foreign exchange contracts |  | — |  |  | 53,109 |  |  | — |  |  | 53,109 |
Equity contracts |  | — |  |  | — |  |  | 323 |  |  | 323 |
Commodity contracts |  | — |  |  | 261,613 |  |  | — |  |  | 261,613 |
Gross derivative assets |  | $ | — |  |  | $ | 755,005 |  |  | $ | 323 |  |  | $ | 755,328 |
Netting adjustments (1) |  | $ | — |  |  | $ | (614,783) |  |  | $ | — |  |  | $ | (614,783) |
Net derivative assets |  | $ | — |  |  | $ | 140,222 |  |  | $ | 323 |  |  | $ | 140,545 |
Derivative liabilities: |  |  |  |  |  |  |  |
Interest rate contracts |  | $ | — |  |  | $ | 584,516 |  |  | $ | — |  |  | $ | 584,516 |
Foreign exchange contracts |  | — |  |  | 44,117 |  |  | — |  |  | 44,117 |
Credit contracts |  | — |  |  | 23 |  |  | — |  |  | 23 |
Commodity contracts |  | — |  |  | 258,608 |  |  | — |  |  | 258,608 |
Gross derivative liabilities |  | $ | — |  |  | $ | 887,264 |  |  | $ | — |  |  | $ | 887,264 |
Netting adjustments (1) |  | $ | — |  |  | $ | (242,745) |  |  | $ | — |  |  | $ | (242,745) |
Net derivative liabilities |  | $ | — |  |  | $ | 644,519 |  |  | $ | — |  |  | $ | 644,519 |

(1)Represents balance sheet netting of derivative assets and liabilities and related cash collateral under master netting agreements or similar agreements. See Note 6 — Derivatives to the Consolidated Financial Statements in this Form 10-Q for additional information.
17

For the three months ended March 31, 2023 and 2022, 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 months ended March 31, 2023 and 2022:

|  | Three Months Ended March 31, |  |
($ in thousands) |  | 2023 |  | 2022 |  |  |  |
Equity contracts |  |  |  |  |  |  |  |
Beginning balance |  | $ | 323 |  |  | $ | 215 |  |  |  |  |
Total (losses) gains included in earnings (1) |  | (46) |  |  | 3 |  |  |  |  |
Issuances |  | — |  |  | 91 |  |  |  |  |
Ending balance |  | $ | 277 |  |  | $ | 309 |  |  |  |  |

(1)Includes unrealized (losses) gains 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 March 31, 2023 and December 31, 2022. The significant unobservable inputs presented in the table below are those that the Company considers significant to the fair value of the Level 3 assets. The Company considers unobservable inputs to be significant if, by their exclusion, the fair value of the Level 3 assets would be impacted by a predetermined percentage change.

($ in thousands) |  | Fair Value Measurements (Level 3) |  | Valuation Technique |  | Unobservable Inputs |  | Range of Inputs |  | Weighted-Average of Inputs (1)
March 31, 2023 |  |  |  |  |  |  |  |  |  |
Derivative assets: |  |  |  |  |  |  |  |  |  |
Equity contracts |  | $ | 277 |  |  | Black-Scholes option pricing model |  | Equity volatility |  | 43% — 53% |  | 47%
|  |  |  |  |  | Liquidity discount |  | 47% |  | 47%
December 31, 2022 |  |  |  |  |  |  |  |  |  |
Derivative assets: |  |  |  |  |  |  |  |  |  |
Equity contracts |  | $ | 323 |  |  | Black-Scholes option pricing model |  | Equity volatility |  | 42% — 60% |  | 54%
|  |  |  |  |  | Liquidity discount |  | 47% |  | 47%

(1)Weighted-average of inputs is calculated based on the fair value of equity contracts as of both March 31, 2023 and December 31, 2022.
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.
•When the repayment of an individually evaluated loan is dependent on the sale of the collateral, the fair value of the loan is determined based on the fair value of the underlying collateral, which may take the form of real estate, inventory, equipment, contracts or guarantees. The fair value of the underlying collateral is generally based on third-party appraisals, or an internal valuation if a third-party appraisal is not required by regulations, or is unavailable. An internal valuation utilizes one or more valuation techniques such as the income, market and/or cost approaches.
18

Investments in Qualified Affordable Housing Partnerships, Tax Credit and Other Investments, Net — The Company conducts due diligence on its investments in qualified affordable housing partnerships, tax credit and other investments prior to the initial investment date and through the placed-in-service date. After these investments are either acquired or placed into service, the Company continues its periodic monitoring process to ensure book values are realizable and that there is no significant tax credit recapture risk. This monitoring process includes reviewing the investment entity’s quarterly financial statements and annual tax returns, the annual financial statements of the guarantor (if any) and a comparison of the actual performance of the investment against the financial projections prepared at the time the investment was made. The Company assesses its tax credit and other investments for possible other-than-temporary impairment on an annual basis or when events or circumstances suggest that the carrying amount of the investments may not be realizable. These circumstances can include, but are not limited to the following factors:
•expected future cash flows that are less than the carrying amoun t of the investment;
•changes in the economic, market or technological environment that could adversely affect the investee’s operations;
•the potential for tax credit recapture; and
•other factors that raise doubt about the investee’s ability to continue as a going concern, such as negative cash flows from operations and the continuing prospects of the underlying operations of the investment.
All available information is considered in assessing whether a decline in value is other-than-temporary. Generally, none of the aforementioned factors are individually conclusive and the relative importance placed on individual facts may vary depending on the situation. In accordance with ASC 323-10-35-32, Investments — Equity Method and Joint Ventures, an impairment charge would only be recognized in earnings for a decline in value that is determined to be other-than-temporary.
Other Real Estate Owned — The Company’s OREO represents properties acquired through foreclosure, or through full or partial satisfaction of loans held-for-investment. These OREO properties are recorded at estimated fair value less the costs to sell at the time of foreclosure and at the lower of cost or estimated fair value less the costs to sell subsequent to acquisition. On a monthly basis, the current fair market value of each OREO property is reviewed to ensure that the current carrying value is appropriate. OREO properties are classified as Level 3.
Loans Held-for-Sale — Loans held-for-investment subsequently transferred to held-for-sale are recorded at the lower of cost or fair value upon transfer. Loans held-for-sale may be measured at fair value on a nonrecurring basis when fair value is less than cost. Fair value is generally determined based on available market data for similar loans and therefore, are classified as Level 2.
Other Nonperforming Assets — Other nonperforming assets are recorded at fair value upon transfer from loans to foreclosed assets. Subsequently, foreclosed assets are recorded at the lower of carrying value or fair value. Fair value is based on independent market prices, appraised values of the collateral or management’s estimated recovery of the foreclosed asset. The Company records an impairment when the foreclosed asset’s fair value declines below its carrying value. The fair value measurement of other nonperforming assets is classified within one of the three levels in a valuation hierarchy based upon the observability of inputs to the valuation as of the measurement date.
The following tables present the carrying amounts of assets that were still held and had fair value adjustments measured on a nonrecurring basis as of March 31, 2023 and December 31, 2022:

|  | Assets Measured at Fair Value on a Nonrecurring Basis as of March 31, 2023
($ in thousands) |  | Quoted Prices in Active Markets for Identical Assets (Level 1) |  | Significant Other Observable Inputs (Level 2) |  | Significant Unobservable Inputs (Level 3) |  | Fair Value Measurements
Loans held-for-investment: |  |  |  |  |  |  |  |
Commercial: |  |  |  |  |  |  |  |
Commercial and industrial (“C&I”) |  | $ | — |  |  | $ | — |  |  | $ | 15,235 |  |  | $ | 15,235 |
Total commercial |  | — |  |  | — |  |  | 15,235 |  |  | 15,235 |
Total loans held-for-investment |  | $ | — |  |  | $ | — |  |  | $ | 15,235 |  |  | $ | 15,235 |

19

|  | Assets Measured at Fair Value on a Nonrecurring Basis as of December 31, 2022
($ in thousands) |  | Quoted Prices in Active Markets for Identical Assets (Level 1) |  | Significant Other Observable Inputs (Level 2) |  | Significant Unobservable Inputs (Level 3) |  | Fair Value Measurements
Loans held-for-investment: |  |  |  |  |  |  |  |
Commercial: |  |  |  |  |  |  |  |
C&I |  | $ | — |  |  | $ | — |  |  | $ | 40,011 |  |  | $ | 40,011 |
Commercial real estate (“CRE”): |  |  |  |  |  |  |  |
CRE |  | — |  |  | — |  |  | 31,380 |  |  | 31,380 |
Total commercial |  | — |  |  | — |  |  | 71,391 |  |  | 71,391 |
Consumer: |  |  |  |  |  |  |  |
Residential mortgage: |  |  |  |  |  |  |  |
Home equity lines of credit (“HELOCs”) |  | — |  |  | — |  |  | 1,223 |  |  | 1,223 |
Total consumer |  | — |  |  | — |  |  | 1,223 |  |  | 1,223 |
Total loans held-for-investment |  | $ | — |  |  | $ | — |  |  | $ | 72,614 |  |  | $ | 72,614 |

The following table presents the increase (decrease) in the fair value of certain assets held at the end of the respective reporting periods, for which a nonrecurring fair value adjustment was recognized for the three months ended March 31, 2023 and 2022:

|  | Three Months Ended March 31, |  |
($ in thousands) |  | 2023 |  | 2022 |  |  |  |
Loans held-for-investment: |  |  |  |  |  |  |  |
Commercial: |  |  |  |  |  |  |  |
C&I |  | $ | (1,255) |  |  | $ | (10,424) |  |  |  |  |
CRE: |  |  |  |  |  |  |  |
CRE |  | — |  |  | 2,864 |  |  |  |  |
Total commercial |  | (1,255) |  |  | (7,560) |  |  |  |  |
Consumer: |  |  |  |  |  |  |  |
Residential mortgage: |  |  |  |  |  |  |  |
HELOCs |  | — |  |  | 3 |  |  |  |  |
Total consumer |  | — |  |  | 3 |  |  |  |  |
Total loans held-for-investment |  | $ | (1,255) |  |  | $ | (7,557) |  |  |  |  |
Investments in tax credit and other investments |  | $ | 174 |  |  | $ | — |  |  |  |  |

20

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 March 31, 2023 and December 31, 2022:

($ in thousands) |  | Fair Value Measurements (Level 3) |  | Valuation Techniques |  | Unobservable Inputs |  | Range of Inputs |  | Weighted-Average of Inputs (1)
March 31, 2023 |  |  |  |  |  |  |  |  |  |
Loans held-for-investment |  | $ | 15,235 |  |  | Fair value of collateral |  | Discount |  | 15% — 81% |  | 35%
December 31, 2022 |  |  |  |  |  |  |  |  |  |
Loans held-for-investment |  | $ | 23,322 |  |  | Discounted cash flows |  | Discount |  | 4% — 6% |  | 4%
|  | $ | 17,912 |  |  | Fair value of collateral |  | Discount |  | 15% — 75% |  | 37%
|  | $ | 31,380 |  |  | 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 March 31, 2023 and December 31, 2022.
Disclosures about the Fair Value of Financial Instruments
The following tables present the fair value estimates for financial instruments as of March 31, 2023 and December 31, 2022, excluding financial instruments recorded at fair value on a recurring basis as they are included in the tables presented elsewhere in this Note. The carrying amounts in the following tables are recorded on the Consolidated Balance Sheet under the indicated captions, except for accrued interest receivable, restricted equity securities, at cost, and mortgage servicing rights that are included in Other assets, and accrued interest payable which is included in Accrued expenses and other liabilities. These financial assets and liabilities are measured on an amortized cost basis on the Company’s Consolidated Balance Sheet.

|  | March 31, 2023
($ in thousands) |  | Carrying Amount |  | Level 1 |  | Level 2 |  | Level 3 |  | Estimated Fair Value
Financial assets: |  |  |  |  |  |  |  |  |  |
Cash and cash equivalents |  | $ | 5,934,194 |  |  | $ | 5,934,194 |  |  | $ | — |  |  | $ | — |  |  | $ | 5,934,194 |
Interest-bearing deposits with banks |  | $ | 10,249 |  |  | $ | — |  |  | $ | 10,249 |  |  | $ | — |  |  | $ | 10,249 |
Resale agreements |  | $ | 654,288 |  |  | $ | — |  |  | $ | 568,683 |  |  | $ | — |  |  | $ | 568,683 |
HTM debt securities |  | $ | 2,993,421 |  |  | $ | 481,611 |  |  | $ | 2,021,063 |  |  | $ | — |  |  | $ | 2,502,674 |
Restricted equity securities, at cost |  | $ | 78,872 |  |  | $ | — |  |  | $ | 78,872 |  |  | $ | — |  |  | $ | 78,872 |
Loans held-for-sale |  | $ | 6,861 |  |  | $ | — |  |  | $ | 6,861 |  |  | $ | — |  |  | $ | 6,861 |
Loans held-for-investment, net |  | $ | 48,298,155 |  |  | $ | — |  |  | $ | — |  |  | $ | 47,344,680 |  |  | $ | 47,344,680 |
Mortgage servicing rights |  | $ | 5,879 |  |  | $ | — |  |  | $ | — |  |  | $ | 10,648 |  |  | $ | 10,648 |
Accrued interest receivable |  | $ | 279,795 |  |  | $ | — |  |  | $ | 279,795 |  |  | $ | — |  |  | $ | 279,795 |
Financial liabilities: |  |  |  |  |  |  |  |  |  |
Demand, checking, savings and money market deposits |  | $ | 38,643,576 |  |  | $ | — |  |  | $ | 38,643,576 |  |  | $ | — |  |  | $ | 38,643,576 |
Time deposits |  | $ | 16,093,826 |  |  | $ | — |  |  | $ | 16,008,054 |  |  | $ | — |  |  | $ | 16,008,054 |
Short-term borrowings |  | $ | 4,500,000 |  |  | $ | — |  |  | $ | 4,500,000 |  |  | $ | — |  |  | $ | 4,500,000 |
Long-term debt |  | $ | 148,022 |  |  | $ | — |  |  | $ | 144,059 |  |  | $ | — |  |  | $ | 144,059 |
Accrued interest payable |  | $ | 45,339 |  |  | $ | — |  |  | $ | 45,339 |  |  | $ | — |  |  | $ | 45,339 |

21

|  | December 31, 2022
($ in thousands) |  | Carrying Amount |  | Level 1 |  | Level 2 |  | Level 3 |  | Estimated Fair Value
Financial assets: |  |  |  |  |  |  |  |  |  |
Cash and cash equivalents |  | $ | 3,481,784 |  |  | $ | 3,481,784 |  |  | $ | — |  |  | $ | — |  |  | $ | 3,481,784 |
Interest-bearing deposits with banks |  | $ | 139,021 |  |  | $ | — |  |  | $ | 139,021 |  |  | $ | — |  |  | $ | 139,021 |
Resale agreements |  | $ | 792,192 |  |  | $ | — |  |  | $ | 693,656 |  |  | $ | — |  |  | $ | 693,656 |
HTM debt securities |  | $ | 3,001,868 |  |  | $ | 471,469 |  |  | $ | 1,983,702 |  |  | $ | — |  |  | $ | 2,455,171 |
Restricted equity securities, at cost |  | $ | 78,624 |  |  | $ | — |  |  | $ | 78,624 |  |  | $ | — |  |  | $ | 78,624 |
Loans held-for-sale |  | $ | 25,644 |  |  | $ | — |  |  | $ | 25,644 |  |  | $ | — |  |  | $ | 25,644 |
Loans held-for-investment, net |  | $ | 47,606,785 |  |  | $ | — |  |  | $ | — |  |  | $ | 46,670,690 |  |  | $ | 46,670,690 |
Mortgage servicing rights |  | $ | 6,235 |  |  | $ | — |  |  | $ | — |  |  | $ | 10,917 |  |  | $ | 10,917 |
Accrued interest receivable |  | $ | 263,430 |  |  | $ | — |  |  | $ | 263,430 |  |  | $ | — |  |  | $ | 263,430 |
Financial liabilities: |  |  |  |  |  |  |  |  |  |
Demand, checking, savings and money market deposits |  | $ | 42,637,316 |  |  | $ | — |  |  | $ | 42,637,316 |  |  | $ | — |  |  | $ | 42,637,316 |
Time deposits |  | $ | 13,330,533 |  |  | $ | — |  |  | $ | 13,228,777 |  |  | $ | — |  |  | $ | 13,228,777 |
Repurchase agreements |  | $ | 300,000 |  |  | $ | — |  |  | $ | 304,097 |  |  | $ | — |  |  | $ | 304,097 |
Long-term debt |  | $ | 147,950 |  |  | $ | — |  |  | $ | 143,483 |  |  | $ | — |  |  | $ | 143,483 |
Accrued interest payable |  | $ | 37,198 |  |  | $ | — |  |  | $ | 37,198 |  |  | $ | — |  |  | $ | 37,198 |

Note 4 — Assets Purchased under Resale Agreements and Sold under Repurchase Agreements
Assets Purchased under Resale Agreements
With 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 March 31, 2023 and December 31, 2022.
Securities Purchased under Resale Agreements — Total securities purchased under resale agreements were $635.0 million as of March 31, 2023, and $760.0 million as of December 31, 2022. The weighted-average yields were 2.50% and 1.63% for the three months ended March 31, 2023 and 2022, respectively.
Loans Purchased under Resale Agreements — Total loans purchased under resale agreements were $19.3 million as of March 31, 2023, and $32.2 million as of December 31, 2022. The weighted-average yields were 7.12% and 1.60% for the three months ended March 31, 2023 and 2022, respectively.
Assets Sold under Repurchase Agreements — Gross repurchase agreements were $300.0 million as of December 31, 2022. During the first quarter of 2023, all previously outstanding repurchase agreements were extinguished and the Company recorded $3.9 million of charges related to the extinguishment of $300.0 million of repurchase agreements. In comparison, no extinguishment charges were recorded for the three months ended March 31, 2022. The weighted-average interest rates were 4.00% and 2.62% for the three months ended March 31, 2023 and 2022, respectively.
22

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 March 31, 2023 and December 31, 2022:

($ in thousands) |  | March 31, 2023
|  | Gross Amounts of Recognized Assets |  | Gross Amounts Offset on the Consolidated Balance Sheet |  | Net Amounts of Assets Presented on the Consolidated Balance Sheet |  | Gross Amounts Not Offset on the Consolidated Balance Sheet |  | Net Amount
Assets |  |  |  |  | Collateral Received |
Resale agreements |  | $ | 654,288 |  |  | $ | — |  |  | $ | 654,288 |  |  | $ | (574,103) |  | (1) | $ | 80,185 |
|  | Gross Amounts of Recognized Liabilities |  | Gross Amounts Offset on the Consolidated Balance Sheet |  | Net Amounts of Liabilities Presented on the Consolidated Balance Sheet |  | Gross Amounts Not Offset on the Consolidated Balance Sheet |  | Net Amount
Liabilities |  |  |  |  | Collateral Pledged |
Repurchase agreements |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |

($ in thousands) |  | December 31, 2022
|  | Gross Amounts of Recognized Assets |  | Gross Amounts Offset on the Consolidated Balance Sheet |  | Net Amounts of Assets Presented on the Consolidated Balance Sheet |  | Gross Amounts Not Offset on the Consolidated Balance Sheet |  |
Assets |  |  |  |  |  | Net Amount
|  |  |  | Collateral Received |
Resale agreements |  | $ | 792,192 |  |  | $ | — |  |  | $ | 792,192 |  |  | $ | (701,790) |  | (1) | $ | 90,402 |
Liabilities |  | Gross Amounts of Recognized Liabilities |  | Gross Amounts Offset on the Consolidated Balance Sheet |  | Net Amounts of Liabilities Presented on the Consolidated Balance Sheet |  | Gross Amounts Not Offset on the Consolidated Balance Sheet |  |
|  |  |  |  | Net Amount
|  |  |  | Collateral Pledged |
Repurchase agreements |  | $ | 300,000 |  |  | $ | — |  |  | $ | 300,000 |  |  | $ | (300,000) |  | (2) | $ | — |

(1)Represents the fair value of assets the Company has received under resale agreements, limited for table presentation purposes to the amount of the recognized asset due from each counterparty. The application of collateral cannot reduce the net position below zero. Therefore, excess collateral, if any, is not reflected above.
(2)Represents the fair value of assets the Company has pledged under repurchase agreements, limited for table presentation purposes to the amount of the recognized liability due to each counterparty. The application of collateral cannot reduce the net position below zero. Therefore, excess collateral, if any, is not reflected above.
In addition to the amounts included in the tables above, the Company also has balance sheet netting related to derivatives. Refer to Note 6 — Derivatives to the Consolidated Financial Statements in this Form 10-Q for additional information.
23

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 March 31, 2023 and December 31, 2022:

|  | March 31, 2023
($ in thousands) |  | Amortized Cost |  |  |  | Gross Unrealized Gains |  | Gross Unrealized Losses |  | Fair Value
AFS debt securities: |  |  |  |  |  |  |  |  |  |
U.S. Treasury securities |  | $ | 976,615 |  |  |  |  | $ | 37 |  |  | $ | (59,670) |  |  | $ | 916,982 |
U.S. government agency and U.S. government-sponsored enterprise debt securities |  | 515,639 |  |  |  |  | — |  |  | (51,779) |  |  | 463,860 |
U.S. government agency and U.S. government-sponsored enterprise mortgage-backed securities: |  |  |  |  |  |  |  |  |  |
Commercial mortgage-backed securities |  | 564,145 |  |  |  |  | — |  |  | (67,030) |  |  | 497,115 |
Residential mortgage-backed securities |  | 1,997,737 |  |  |  |  | 46 |  |  | (225,701) |  |  | 1,772,082 |
Municipal securities |  | 305,125 |  |  |  |  | 47 |  |  | (39,157) |  |  | 266,015 |
Non-agency mortgage-backed securities: |  |  |  |  |  |  |  |  |  |
Commercial mortgage-backed securities |  | 441,795 |  |  |  |  | 157 |  |  | (45,229) |  |  | 396,723 |
Residential mortgage-backed securities |  | 743,977 |  |  |  |  | — |  |  | (105,568) |  |  | 638,409 |
Corporate debt securities |  | 663,502 |  |  |  |  | — |  |  | (147,249) |  |  | 516,253 |
Foreign government bonds |  | 198,517 |  |  |  |  | 195 |  |  | (12,829) |  |  | 185,883 |
Asset-backed securities |  | 47,938 |  |  |  |  | — |  |  | (1,631) |  |  | 46,307 |
CLOs |  | 617,250 |  |  |  |  | — |  |  | (16,011) |  |  | 601,239 |
Total AFS debt securities |  | 7,072,240 |  |  |  |  | 482 |  |  | (771,854) |  |  | 6,300,868 |
HTM debt securities: |  |  |  |  |  |  |  |  |  |
U.S. Treasury securities |  | 525,432 |  |  |  |  | — |  |  | (43,821) |  |  | 481,611 |
U.S. government agency and U.S. government-sponsored enterprise debt securities |  | 999,855 |  |  |  |  | — |  |  | (193,514) |  |  | 806,341 |
U.S. government agency and U.S. government-sponsored enterprise mortgage-backed securities: |  |  |  |  |  |  |  |  |  |
Commercial mortgage-backed securities |  | 505,492 |  |  |  |  | — |  |  | (83,532) |  |  | 421,960 |
Residential mortgage-backed securities |  | 773,135 |  |  |  |  | — |  |  | (134,969) |  |  | 638,166 |
Municipal securities |  | 189,507 |  |  |  |  | — |  |  | (34,911) |  |  | 154,596 |
Total HTM debt securities |  | 2,993,421 |  |  |  |  | — |  |  | (490,747) |  |  | 2,502,674 |
Total debt securities |  | $ | 10,065,661 |  |  |  |  | $ | 482 |  |  | $ | (1,262,601) |  |  | $ | 8,803,542 |

24

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

As of March 31, 2023 and December 31, 2022, the amortized cost of debt securities excluded accrued interest receivables of $39.1 million and $41.8 million, respectively, which are included in Other assets on the Consolidated Balance Sheet. For the Company’s accounting policy related to debt securities’ accrued interest receivable, see Note 1 — Summary of Significant Accounting Policies — Significant Accounting Policies — Allowance for Credit Losses on Available-for-Sale Debt Securities and Allowance for Credit Losses on Held-to-Maturity Debt Securities to the Consolidated Financial Statements in the Company’s 2022 Form 10-K.
25

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 March 31, 2023 and December 31, 2022.

|  | March 31, 2023
|  | Less Than 12 Months |  | 12 Months or More |  | Total
($ in thousands) |  | Fair Value |  | Gross Unrealized Losses |  | Fair Value |  | Gross Unrealized Losses |  | Fair Value |  | Gross Unrealized Losses
AFS debt securities: |  |  |  |  |  |  |  |  |  |  |  |
U.S. Treasury securities |  | $ | 201,775 |  |  | $ | (52) |  |  | $ | 616,680 |  |  | $ | (59,618) |  |  | $ | 818,455 |  |  | $ | (59,670) |
U.S. government agency and U.S. government sponsored enterprise debt securities |  | 207,936 |  |  | (1,021) |  |  | 255,924 |  |  | (50,758) |  |  | 463,860 |  |  | (51,779) |
U.S. government agency and U.S. government-sponsored enterprise mortgage-backed securities: |  |  |  |  |  |  |  |  |  |  |  |
Commercial mortgage-backed securities |  | 37,222 |  |  | (1,722) |  |  | 459,893 |  |  | (65,308) |  |  | 497,115 |  |  | (67,030) |
Residential mortgage-backed securities |  | 23,200 |  |  | (721) |  |  | 1,741,855 |  |  | (224,980) |  |  | 1,765,055 |  |  | (225,701) |
Municipal securities |  | 2,053 |  |  | (24) |  |  | 256,240 |  |  | (39,133) |  |  | 258,293 |  |  | (39,157) |
Non-agency mortgage-backed securities: |  |  |  |  |  |  |  |  |  |  |  |
Commercial mortgage-backed securities |  | 6,833 |  |  | (151) |  |  | 380,497 |  |  | (45,078) |  |  | 387,330 |  |  | (45,229) |
Residential mortgage-backed securities |  | 332 |  |  | (15) |  |  | 638,077 |  |  | (105,553) |  |  | 638,409 |  |  | (105,568) |
Corporate debt securities |  | 48,026 |  |  | (3,976) |  |  | 468,227 |  |  | (143,273) |  |  | 516,253 |  |  | (147,249) |
Foreign government bonds |  | 71,392 |  |  | (512) |  |  | 37,683 |  |  | (12,317) |  |  | 109,075 |  |  | (12,829) |
Asset-backed securities |  | — |  |  | — |  |  | 46,307 |  |  | (1,631) |  |  | 46,307 |  |  | (1,631) |
CLOs |  | — |  |  | — |  |  | 601,239 |  |  | (16,011) |  |  | 601,239 |  |  | (16,011) |
Total AFS debt securities |  | $ | 598,769 |  |  | $ | (8,194) |  |  | $ | 5,502,622 |  |  | $ | (763,660) |  |  | $ | 6,101,391 |  |  | $ | (771,854) |

|  | December 31, 2022
|  | Less Than 12 Months |  | 12 Months or More |  | Total
($ in thousands) |  | Fair Value |  | Gross Unrealized Losses |  | Fair Value |  | Gross Unrealized Losses |  | Fair Value |  | Gross Unrealized Losses
AFS debt securities: |  |  |  |  |  |  |  |  |  |  |  |
U.S. Treasury securities |  | $ | 131,843 |  |  | $ | (8,761) |  |  | $ | 474,360 |  |  | $ | (61,342) |  |  | $ | 606,203 |  |  | $ | (70,103) |
U.S. government agency and U.S. government-sponsored enterprise debt securities |  | 97,403 |  |  | (6,902) |  |  | 214,136 |  |  | (49,364) |  |  | 311,539 |  |  | (56,266) |
U.S. government agency and U.S. government-sponsored enterprise mortgage-backed securities: |  |  |  |  |  |  |  |  |  |  |  |
Commercial mortgage-backed securities |  | 252,144 |  |  | (30,029) |  |  | 248,125 |  |  | (47,094) |  |  | 500,269 |  |  | (77,123) |
Residential mortgage-backed securities |  | 307,536 |  |  | (20,346) |  |  | 1,448,658 |  |  | (228,554) |  |  | 1,756,194 |  |  | (248,900) |
Municipal securities |  | 95,655 |  |  | (10,194) |  |  | 159,439 |  |  | (36,594) |  |  | 255,094 |  |  | (46,788) |
Non-agency mortgage-backed securities: |  |  |  |  |  |  |  |  |  |  |  |
Commercial mortgage-backed securities |  | 106,184 |  |  | (3,309) |  |  | 282,301 |  |  | (46,087) |  |  | 388,485 |  |  | (49,396) |
Residential mortgage-backed securities |  | 22,715 |  |  | (1,546) |  |  | 626,509 |  |  | (111,432) |  |  | 649,224 |  |  | (112,978) |
Corporate debt securities |  | 173,595 |  |  | (17,907) |  |  | 352,679 |  |  | (129,321) |  |  | 526,274 |  |  | (147,228) |
Foreign government bonds |  | 107,576 |  |  | (429) |  |  | 36,143 |  |  | (13,857) |  |  | 143,719 |  |  | (14,286) |
Asset-backed securities |  | 12,450 |  |  | (524) |  |  | 36,626 |  |  | (1,552) |  |  | 49,076 |  |  | (2,076) |
CLOs |  | 144,365 |  |  | (4,735) |  |  | 453,299 |  |  | (14,851) |  |  | 597,664 |  |  | (19,586) |
Total AFS debt securities |  | $ | 1,451,466 |  |  | $ | (104,682) |  |  | $ | 4,332,275 |  |  | $ | (740,048) |  |  | $ | 5,783,741 |  |  | $ | (844,730) |

26

As of March 31, 2023, the Company had 555 AFS debt securities in a gross unrealized loss position with no credit impairment, primarily consisting of 259 U.S. government agency and U.S. government-sponsored enterprise mortgage-backed securities, 100 non-agency mortgage-backed securities, 67 corporate debt securities, and 17 U.S. Treasury securities. In comparison, as of December 31, 2022, the Company had 559 AFS debt securities in a gross unrealized loss position with no credit impairment, primarily consisting of 263 U.S. government agency and U.S. government-sponsored enterprise mortgage-backed securities, 100 non-agency mortgage-backed securities, 68 corporate debt securities, and 15 U.S. Treasury securities.
Allowance for Credit Losses on Available-for-Sale Debt Securities
The Company evaluates each AFS debt security where the fair value declines below amortized cost. For a discussion of the factors and criteria the Company uses in analyzing securities for impairment related to credit losses, see Note 1 — Summary of Significant Accounting Policies — Significant Accounting Policies — Allowance for Credit Losses on Available-for-Sale Debt Securities to the Consolidated Financial Statements in the Company’s 2022 Form 10-K.
The gross unrealized losses presented in the preceding tables were primarily attributable to interest rate movement and the widening of liquidity and/or credit spreads. U.S. Treasury, U.S. government agency, U.S. government-sponsored agency, and U.S. government-sponsored enterprise debt and mortgage-backed securities are issued, guaranteed, or otherwise supported by the U.S. government and have a zero credit loss assumption. The remaining securities that were in an unrealized loss position as of March 31, 2023 were mainly comprised of the following:
•Non-agency mortgage-backed securities — The market value decline as of March 31, 2023, was primarily due to interest rate movement and spread widening. Since these securities are rated investment grade by nationally recognized statistical rating organizations (“NRSROs”), or have high priority in the cash flow waterfall within the securitization structure, and the contractual payments have historically been on time, the Company believes the risk of credit losses on these securities is low.
•Corporate debt securities — The market value decline as of March 31, 2023 was primarily due to interest rate movement and spread widening. A portion of the corporate debt securities is comprised of subordinated debt securities issued by U.S. banks. Despite the reduction of the market value of these securities after the banking sector disruption during the first quarter of 2023, these securities are nearly all rated investment grade by NRSROs or issued by well-capitalized financial institutions with strong profitability. The contractual payments from these corporate debt securities have been and are expected to be received on time. The Company will continue to monitor the market developments in the banking sector and the credit performance of these securities.
As of both March 31, 2023 and December 31, 2022, the Company intended to hold the AFS debt securities with unrealized losses through the anticipated recovery period and it was more-likely-than-not that the Company would not have to sell these securities before the recovery of their amortized cost. The issuers of these securities have not, to the Company’s knowledge, established any cause for default on these securities. As a result, the Company expects to recover the entire amortized cost basis of these securities. Accordingly, there was no allowance for credit losses provided against these securities as of both March 31, 2023 and December 31, 2022. In addition, there was no provision for credit losses recognized for the three months ended March 31, 2023 and 2022.
Allowance for Credit Losses on Held-to-Maturity Debt Securities
The Company separately evaluates its HTM debt securities for any credit losses using an expected loss model, similar to the methodology used for loans. For additional information on the Company’s credit loss methodology, refer to Note 1 — Summary of Significant Accounting Policies — Significant Accounting Policies — Allowance for Credit Losses on Held-to-Maturity Debt Securities to the Consolidated Financial Statements in the Company’s 2022 Form 10-K.
The Company monitors the credit quality of the HTM debt securities using external credit ratings. As of March 31, 2023, all HTM securities were rated investment grade by NRSROs and issued, guaranteed, or supported by U.S. government entities and agencies. Accordingly, the Company applied a zero credit loss assumption and no allowance for credit losses was recorded as of March 31, 2023. 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.
27

Realized Gains and Losses
The following table presents the gross realized gains and tax expense related to the sales and impairment write-off of AFS debt securities included in earnings for the three months ended March 31, 2023 and 2022:

|  | Three Months Ended March 31, |  |  |  |
($ in thousands) |  | 2023 |  | 2022 |  |  |  |  |  |  |  |
Gross realized gains from sales |  | $ | — |  |  | $ | 1,278 |  |  |  |  |  |  |  |  |
Impairment write-off (1) |  | $ | 10,000 |  |  | $ | — |  |  |  |  |  |  |  |  |
Related tax (benefit) expense |  | $ | (2,956) |  |  | $ | 378 |  |  |  |  |  |  |  |  |

(1)During the first quarter of 2023, the Company fully wrote down a subordinated debt security and recorded the impairment loss as a component of noninterest income in the Company’s Consolidated Statement of Income.
Interest Income
The following table presents the composition of interest income on debt securities for the three months ended March 31, 2023 and 2022:

|  | Three Months Ended March 31, |  |  |  |
($ in thousands) |  | 2023 |  | 2022 |  |  |  |  |  |  |  |
Taxable interest |  | $ | 61,049 |  |  | $ | 38,204 |  |  |  |  |  |  |  |  |
Nontaxable interest |  | 4,882 |  |  | 4,463 |  |  |  |  |  |  |  |  |
Total interest income on debt securities |  | $ | 65,931 |  |  | $ | 42,667 |  |  |  |  |  |  |  |  |

28

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 March 31, 2023. Expected maturities will differ from contractual maturities on certain securities as the issuers and borrowers of the underlying collateral may have the right to call or prepay obligations with or without prepayment penalties.

($ in thousands) |  | 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 |  | $ | 300,316 |  |  | $ | 676,299 |  |  | $ | — |  |  | $ | — |  |  | $ | 976,615 |
Fair value |  | 300,302 |  |  | 616,680 |  |  | — |  |  | — |  |  | 916,982 |
Weighted-average yield (1) |  | 4.57 | % |  | 1.20 | % |  | — | % |  | — | % |  | 2.24 | %
U.S. government agency and U.S. government-sponsored enterprise debt securities |  |  |  |  |  |  |  |  |  |
Amortized cost |  | 100,000 |  |  | 148,135 |  |  | 100,000 |  |  | 167,504 |  |  | 515,639 |
Fair value |  | 99,798 |  |  | 143,681 |  |  | 83,478 |  |  | 136,903 |  |  | 463,860 |
Weighted-average yield (1) |  | 4.97 | % |  | 3.72 | % |  | 1.26 | % |  | 2.10 | % |  | 2.96 | %
U.S. government agency and U.S. government-sponsored enterprise mortgage-backed securities |  |  |  |  |  |  |  |  |  |
Amortized cost |  | — |  |  | 31,502 |  |  | 154,131 |  |  | 2,376,249 |  |  | 2,561,882 |
Fair value |  | — |  |  | 30,182 |  |  | 141,815 |  |  | 2,097,200 |  |  | 2,269,197 |
Weighted-average yield (1) (2) |  | — | % |  | 3.22 | % |  | 2.67 | % |  | 3.39 | % |  | 3.34 | %
Municipal securities |  |  |  |  |  |  |  |  |  |
Amortized cost |  | 2,304 |  |  | 37,282 |  |  | 10,778 |  |  | 254,761 |  |  | 305,125 |
Fair value |  | 2,287 |  |  | 34,889 |  |  | 9,610 |  |  | 219,229 |  |  | 266,015 |
Weighted-average yield (1) (2) |  | 2.21 | % |  | 2.46 | % |  | 2.73 | % |  | 2.24 | % |  | 2.28 | %
Non-agency mortgage-backed securities |  |  |  |  |  |  |  |  |  |
Amortized cost |  | 71,090 |  |  | 139,963 |  |  | 19,881 |  |  | 954,838 |  |  | 1,185,772 |
Fair value |  | 70,089 |  |  | 134,268 |  |  | 19,290 |  |  | 811,485 |  |  | 1,035,132 |
Weighted-average yield (1) |  | 7.23 | % |  | 4.42 | % |  | 0.84 | % |  | 2.61 | % |  | 3.07 | %
Corporate debt securities |  |  |  |  |  |  |  |  |  |
Amortized cost |  | 10,000 |  |  | — |  |  | 349,502 |  |  | 304,000 |  |  | 663,502 |
Fair value |  | 9,817 |  |  | — |  |  | 294,170 |  |  | 212,266 |  |  | 516,253 |
Weighted average yield (1) |  | 3.49 | % |  | — | % |  | 3.48 | % |  | 1.97 | % |  | 2.79 | %
Foreign government bonds |  |  |  |  |  |  |  |  |  |
Amortized cost |  | 62,096 |  |  | 36,421 |  |  | 50,000 |  |  | 50,000 |  |  | 198,517 |
Fair value |  | 62,280 |  |  | 36,390 |  |  | 49,530 |  |  | 37,683 |  |  | 185,883 |
Weighted-average yield (1) |  | 3.19 | % |  | 2.35 | % |  | 4.94 | % |  | 1.50 | % |  | 3.05 | %
Asset-backed securities |  |  |  |  |  |  |  |  |  |
Amortized cost |  | — |  |  | — |  |  | — |  |  | 47,938 |  |  | 47,938 |
Fair value |  | — |  |  | — |  |  | — |  |  | 46,307 |  |  | 46,307 |
Weighted-average yield (1) |  | — | % |  | — | % |  | — | % |  | 5.59 | % |  | 5.59 | %
CLOs |  |  |  |  |  |  |  |  |  |
Amortized cost |  | — |  |  | — |  |  | 319,000 |  |  | 298,250 |  |  | 617,250 |
Fair value |  | — |  |  | — |  |  | 310,154 |  |  | 291,085 |  |  | 601,239 |
Weighted average yield (1) |  | — | % |  | — | % |  | 5.93 | % |  | 5.99 | % |  | 5.96 | %
Total AFS debt securities |  |  |  |  |  |  |  |  |  |
Amortized cost |  | $ | 545,806 |  |  | $ | 1,069,602 |  |  | $ | 1,003,292 |  |  | $ | 4,453,540 |  |  | $ | 7,072,240 |
Fair value |  | $ | 544,573 |  |  | $ | 996,090 |  |  | $ | 908,047 |  |  | $ | 3,852,158 |  |  | $ | 6,300,868 |
Weighted-average yield (1) |  | 4.80 | % |  | 2.11 | % |  | 3.93 | % |  | 3.19 | % |  | 3.25 | %

29

($ 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 |  | $ | — |  | $ | 525,432 |  | $ | — |  | $ | — |  | $ | 525,432
Fair value |  | — |  | 481,611 |  | — |  | — |  | 481,611
Weighted-average yield (1) |  | — | % |  | 1.05 | % |  | — | % |  | — | % |  | 1.05 | %
U.S. government agency and U.S. government-sponsored enterprise debt securities |  |  |  |  |  |  |  |  |  |
Amortized cost |  | — |  | — |  | 280,289 |  | 719,566 |  | 999,855
Fair value |  | — |  | — |  | 240,780 |  | 565,561 |  | 806,341
Weighted-average yield (1) |  | — | % |  | — | % |  | 1.92 | % |  | 1.89 | % |  | 1.90 | %
U.S. government agency and U.S. government-sponsored enterprise mortgage-backed securities |  |  |  |  |  |  |  |  |  |
Amortized cost |  | — |  | — |  | 95,693 |  | 1,182,934 |  | 1,278,627
Fair value |  | — |  | — |  | 81,608 |  | 978,518 |  | 1,060,126
Weighted-average yield (1) (2) |  | — | % |  | — | % |  | 1.56 | % |  | 1.67 | % |  | 1.66 | %
Municipal securities |  |  |  |  |  |  |  |  |  |
Amortized cost |  | — |  | — |  | — |  | 189,507 |  | 189,507
Fair value |  | — |  | — |  | — |  | 154,596 |  | 154,596
Weighted-average yield (1) (2) |  | — | % |  | — | % |  | — | % |  | 1.98 | % |  | 1.98 | %
Total HTM debt securities |  |  |  |  |  |  |  |  |  |
Amortized cost |  | $ | — |  | $ | 525,432 |  | $ | 375,982 |  | $ | 2,092,007 |  | $ | 2,993,421
Fair value |  | $ | — |  | $ | 481,611 |  | $ | 322,388 |  | $ | 1,698,675 |  | $ | 2,502,674
Weighted-average yield (1) |  | — | % |  | 1.05 | % |  | 1.83 | % |  | 1.77 | % |  | 1.65 | %

(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 March 31, 2023 and December 31, 2022, AFS and HTM debt securities with carrying valu es of $7.34 billion and $794.2 million, respectively, were pledged to secure borrowings, public deposits, repurchase agreements and for other purposes required or permitted by law.
Restricted Equity Securities
The following table presents the restricted equity securities included in Other assets on the Consolidated Balance Sheet as of March 31, 2023 and December 31, 2022:

($ in thousands) |  | March 31, 2023 |  | December 31, 2022
Federal Reserve Bank of San Francisco (“FRBSF”) stock |  | $ | 61,622 |  |  | $ | 61,374 |
FHLB stock |  | 17,250 |  |  | 17,250 |
Total restricted equity securities |  | $ | 78,872 |  |  | $ | 78,624 |

Note 6 — Derivatives
The Company uses derivative instruments to manage exposure to market risk, primarily interest rate and 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 2022 Form 10-K.
30

The following table presents the notional amounts and fair values of the Company’s derivatives as of March 31, 2023 and December 31, 2022. The fair values are presented on a gross basis prior to the application of bilateral collateral and master netting agreements, but after the application of variation margin payments as settlement to fair values of contracts cleared through central clearing organizations. Total derivative asset and liability fair values are adjusted to reflect the effects of legally enforceable master netting agreements and cash collateral received or paid. The resulting net derivative asset and liability fair values are included in Other assets and Accrued expenses and other liabilities, respectively, on the Consolidated Balance Sheet.

|  | March 31, 2023 |  | December 31, 2022
|  |  |  | Fair Value |  |  |  | Fair Value
($ in thousands) |  | Notional Amount |  | Derivative Assets |  | Derivative Liabilities |  | Notional Amount |  | Derivative Assets |  | Derivative Liabilities
Derivatives designated as hedging instruments: |  |  |  |  |  |  |  |  |  |  |  |
Cash flow hedges: |  |  |  |  |  |  |  |  |  |  |  |
Interest rate contracts |  | $ | 3,250,000 |  |  | $ | 27,535 |  |  | $ | 3,861 |  |  | $ | 3,450,000 |  |  | $ | 13,455 |  |  | $ | 19,687 |
Net investment hedges: |  |  |  |  |  |  |  |  |  |  |  |
Foreign exchange contracts |  | 81,480 |  |  | — |  |  | 253 |  |  | 84,832 |  |  | 5,590 |  |  | — |
Total derivatives designated as hedging instruments |  | $ | 3,331,480 |  |  | $ | 27,535 |  |  | $ | 4,114 |  |  | $ | 3,534,832 |  |  | $ | 19,045 |  |  | $ | 19,687 |
Derivatives not designated as hedging instruments: |  |  |  |  |  |  |  |  |  |  |  |
Interest rate contracts |  | $ | 17,568,116 |  |  | $ | 387,465 |  |  | $ | 458,550 |  |  | $ | 16,932,414 |  |  | $ | 426,828 |  |  | $ | 564,829 |
Commodity contracts |  | — |  | (1) | 178,075 |  |  | 186,599 |  |  | — |  | (1) | 261,613 |  |  | 258,608 |
Foreign exchange contracts |  | 3,887,403 |  |  | 34,050 |  |  | 32,538 |  |  | 2,982,891 |  |  | 47,519 |  |  | 44,117 |
Credit contracts |  | 109,566 |  | (2) | — |  |  | 29 |  |  | 140,950 |  | (2) | — |  |  | 23 |
Equity contracts |  | — |  | (3) | 277 |  |  | — |  |  | — |  | (3) | 323 |  |  | — |
Total derivatives not designated as hedging instruments |  | $ | 21,565,085 |  |  | $ | 599,867 |  |  | $ | 677,716 |  |  | $ | 20,056,255 |  |  | $ | 736,283 |  |  | $ | 867,577 |
Gross derivative assets/liabilities |  |  |  | $ | 627,402 |  |  | $ | 681,830 |  |  |  |  | $ | 755,328 |  |  | $ | 887,264 |
Less: Master netting agreements |  |  |  | (169,849) |  |  | (169,849) |  |  |  |  | (242,745) |  |  | (242,745) |
Less: Cash collateral received |  |  |  | (195,278) |  |  | — |  |  |  |  | (372,038) |  |  | — |
Net derivative assets/liabilities |  |  |  | $ | 262,275 |  |  | $ | 511,981 |  |  |  |  | $ | 140,545 |  |  | $ | 644,519 |

(1)The notional amount of the Company’s commodity contracts totaled 24,954 thousand barrels of crude oil and 266,047 thousand units of natural gas, measured in million British thermal units (“MMBTUs”) as of March 31, 2023. In comparison, the notional amount of the Company’s commodity contracts totaled 12,005 thousand barrels of crude oil and 247,704 thousand MMBTUs of natural gas as of December 31, 2022.
(2)Notional amount for credit contracts reflects the Company’s pro-rata share of the derivative instruments in RPAs.
(3)The Company held equity contracts in one public company and 11 private companies as of March 31, 2023. In comparison, the Company held equity contracts in one public company and 13 private companies as of December 31, 2022.
Derivatives Designated as Hedging Instruments
Cash Flow Hedges — The Company uses interest rate swaps to hedge the variability in interest payments received on certain floating-rate commercial loans, or paid on certain floating-rate borrowings due to changes in contractually specified interest rates. As of March 31, 2023, interest rate contracts in notional amounts of $3.25 billion were designated as cash flow hedges to convert certain variable-rate loans from floating-rate payments to fixed-rate payments. Gains and losses on the hedging derivative instruments are recognized in AOCI and reclassified to earnings in the same period the hedged cash flows impact earnings and within the same income statement line item as the hedged cash flows. Considering the interest rates, yield curve and notional amount as of March 31, 2023, the Company expects to reclassify an estimated $56.1 million of after-tax net losses on derivative instruments designated as cash flow hedges from AOCI into earnings during the next 12 months.
In the first quarter of 2023, the Company prepaid the variable-rate borrowing where an interest rate swap contract in notional amount of $200.0 million was designated as a cash flow hedge. The interest rate swap was terminated at the same date the borrowing was prepaid. Pre-tax gains in the amount of $696 thousand were reclassified from AOCI to Interest expense before the termination of the hedge and the remaining gains in the amount of $1.6 million in AOCI were immediately recognized into Noninterest income upon the termination of the hedge as the forecasted interest payments on the borrowing were no longer probable to occur.
31

The following table presents the pre-tax changes in AOCI from cash flow hedges for the three months ended March 31, 2023 and 2022. The after-tax impact of cash flow hedges on AOCI is shown in Note 14 — Accumulated Other Comprehensive Income (Loss) to the Consolidated Financial Statements in this Form-10-Q.

|  | Three Months Ended March 31, |  |
($ in thousands) |  | 2023 |  | 2022 |  |  |  |
Gains (losses) recognized in AOCI: |  |  |  |  |  |  |  |
Interest rate contracts |  | $ | 29,843 |  |  | $ | (32,609) |  |  |  |  |
Gains (losses) reclassified from AOCI into earnings: |  |  |  |  |  |  |  |
Interest expense (for cash flow hedges on borrowings) |  | 696 |  |  | (173) |  |  |  |  |
Interest and dividend income (for cash flow hedges on loans) |  | (12,954) |  |  | 2,273 |  |  |  |  |
Noninterest income |  | 1,614 |  | (1) | — |  |  |  |  |
Total |  | $ | (10,644) |  |  | $ | 2,100 |  |  |  |  |

(1)Represents the reclassification of the remaining AOCI into earnings for the terminated cash flow hedge where the forecasted cash flows were no longer probable of occurring.
Net Investment Hedges — The Company enters into foreign currency forward contracts to hedge a portion of the Bank’s investment in East West Bank (China) Limited, a non-USD functional currency subsidiary in China. The hedging instruments designated as net investment hedges were used to hedge against the risk of adverse changes in the foreign currency exchange rate of the Chinese Renminbi (“RMB”). The following table presents the pre-tax losses recognized in AOCI on net investment hedges for the three months ended March 31, 2023 and 2022:

|  | Three Months Ended March 31, |  |
($ in thousands) |  | 2023 |  | 2022 |  |  |  |
Losses recognized in AOCI |  | $ | (1,076) |  |  | $ | (1,571) |  |  |  |  |

Derivatives Not Designated as Hedging Instruments
Customer-Related Positions and other Economic Hedge Derivatives — The Company enters into interest rate, commodity, and foreign exchange derivatives at the request of its customers and generally enters into offsetting derivative contracts with third-party financial institutions to mitigate the inherent market risk. Income primarily results from the spread between the customer derivative and the offsetting dealer position. Certain offsetting derivative contracts entered into by the Company are cleared though central clearing organizations where variation margin is applied daily as settlement to the fair values of the contracts. Applying variation margin payments as settlement to the fair values of derivative contracts cleared through the London Clearing House (“LCH”) and the Chicago Mercantile Exchange (“CME”) resulted in reductions in the derivative asset and liability fair values of $94.0 million and $3.8 million, respectively, as of March 31, 2023. In comparison, applying variation margin payments as settlement to LCH and CME-cleared derivative transactions resulted in reductions in the derivative asset and liability fair values of $163.4 million and $12.1 million, respectively, as of December 31, 2022.
The Company also utilizes foreign exchange contracts to mitigate the effect of currency fluctuations on certain foreign currency-denominated on-balance sheet assets and liabilities. A majority of the foreign exchange contracts had original maturities of one year or less as of both March 31, 2023 and December 31, 2022.
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The following table presents the notional amounts and the gross fair values of the interest rate and foreign exchange derivatives issued for customer-related positions and other economic hedges as of March 31, 2023 and December 31, 2022:

|  | March 31, 2023 |  | December 31, 2022 |  |  |  |
|  |  |  | Fair Value |  |  |  | Fair Value |  |  |  |
($ in thousands) |  | Notional Amount |  | Assets |  | Liabilities |  | Notional Amount |  | Assets |  | Liabilities |  |  |  |
Customer-related positions: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Interest rate contracts: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Swaps |  | $ | 6,776,171 |  |  | $ | 8,537 |  |  | $ | 416,483 |  |  | $ | 6,656,491 |  |  | $ | 1,438 |  |  | $ | 521,719 |  |  |  |  |
Written options |  | 1,693,002 |  |  | — |  |  | 24,329 |  |  | 1,548,158 |  |  | — |  |  | 30,904 |  |  |  |  |
Collars and corridors |  | 269,340 |  |  | 252 |  |  | 7,341 |  |  | 215,773 |  |  | — |  |  | 8,924 |  |  |  |  |
Subtotal |  | 8,738,513 |  |  | 8,789 |  |  | 448,153 |  |  | 8,420,422 |  |  | 1,438 |  |  | 561,547 |  |  |  |  |
Foreign exchange contracts: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Forwards and spot |  | 1,439,521 |  |  | 9,866 |  |  | 18,300 |  |  | 993,588 |  |  | 17,009 |  |  | 18,090 |  |  |  |  |
Swaps |  | 514,659 |  |  | 5,808 |  |  | 2,683 |  |  | 623,143 |  |  | 6,629 |  |  | 12,178 |  |  |  |  |
Other |  | 127,000 |  |  | 1,876 |  |  | — |  |  | 121,631 |  |  | 2,070 |  |  | 245 |  |  |  |  |
Subtotal |  | 2,081,180 |  |  | 17,550 |  |  | 20,983 |  |  | 1,738,362 |  |  | 25,708 |  |  | 30,513 |  |  |  |  |
Total |  | $ | 10,819,693 |  |  | $ | 26,339 |  |  | $ | 469,136 |  |  | $ | 10,158,784 |  |  | $ | 27,146 |  |  | $ | 592,060 |  |  |  |  |
Other economic hedges: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Interest rate contracts: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Swaps |  | $ | 6,803,027 |  |  | $ | 345,976 |  |  | $ | 9,209 |  |  | $ | 6,683,828 |  |  | $ | 384,201 |  |  | $ | 2,047 |  |  |  |  |
Purchased options |  | 1,725,119 |  |  | 25,321 |  |  | — |  |  | 1,580,275 |  |  | 32,233 |  |  | — |  |  |  |  |
Written options |  | 32,117 |  |  | — |  |  | 925 |  |  | 32,117 |  |  | — |  |  | 1,235 |  |  |  |  |
Collars and corridors |  | 269,340 |  |  | 7,379 |  |  | 263 |  |  | 215,772 |  |  | 8,956 |  |  | — |  |  |  |  |
Subtotal |  | 8,829,603 |  |  | 378,676 |  |  | 10,397 |  |  | 8,511,992 |  |  | 425,390 |  |  | 3,282 |  |  |  |  |
Foreign exchange contracts: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Forwards and spot |  | 67,680 |  |  | 72 |  |  | 120 |  |  | 77,998 |  |  | 3,050 |  |  | 87 |  |  |  |  |
Swaps |  | 1,611,543 |  |  | 16,428 |  |  | 9,559 |  |  | 1,044,900 |  |  | 18,516 |  |  | 11,447 |  |  |  |  |
Other |  | 127,000 |  |  | — |  |  | 1,876 |  |  | 121,631 |  |  | 245 |  |  | 2,070 |  |  |  |  |
Subtotal |  | 1,806,223 |  |  | 16,500 |  |  | 11,555 |  |  | 1,244,529 |  |  | 21,811 |  |  | 13,604 |  |  |  |  |
Total |  | $ | 10,635,826 |  |  | $ | 395,176 |  |  | $ | 21,952 |  |  | $ | 9,756,521 |  |  | $ | 447,201 |  |  | $ | 16,886 |  |  |  |  |

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The following table presents the notional amounts in units and the gross fair values of the commodity derivatives issued for customer-related positions and other economic hedges as of March 31, 2023 and December 31, 2022:

|  | March 31, 2023 |  | December 31, 2022 |  |  |  |
|  |  |  |  |  | Fair Value |  |  |  |  |  | Fair Value |  |  |  |
($ and unit in thousands) |  | Notional Units |  | Assets |  | Liabilities |  | Notional Units |  | Assets |  | Liabilities |  |  |  |
Customer-related positions: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Commodity contracts: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Crude oil: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Swaps |  | 7,443 |  |  | Barrels |  | $ | 18,072 |  |  | $ | 8,088 |  |  | 2,465 |  |  | Barrels |  | $ | 39,955 |  |  | $ | 6,178 |  |  |  |  |
Collars |  | 4,597 |  |  | Barrels |  | 6,337 |  |  | 4,528 |  |  | 3,011 |  |  | Barrels |  | 16,038 |  |  | 2,630 |  |  |  |  |
Written options |  | — |  |  | Barrels |  | — |  |  | — |  |  | — |  |  | Barrels |  | 558 |  |  | — |  |  |  |  |
Subtotal |  | 12,040 |  |  | Barrels |  | 24,409 |  |  | 12,616 |  |  | 5,476 |  |  | Barrels |  | 56,551 |  |  | 8,808 |  |  |  |  |
Natural gas: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Swaps |  | 99,111 |  |  | MMBTUs |  | 50,825 |  |  | 71,736 |  |  | 92,590 |  |  | MMBTUs |  | 112,314 |  |  | 73,208 |  |  |  |  |
Collars |  | 34,015 |  |  | MMBTUs |  | 1,003 |  |  | 29,501 |  |  | 32,072 |  |  | MMBTUs |  | 2,217 |  |  | 18,317 |  |  |  |  |
Written options |  | 367 |  |  | MMBTUs |  | — |  |  | 49 |  |  | — |  |  | MMBTUs |  | — |  |  | — |  |  |  |  |
Subtotal |  | 133,493 |  |  | MMBTUs |  | 51,828 |  |  | 101,286 |  |  | 124,662 |  |  | MMBTUs |  | 114,531 |  |  | 91,525 |  |  |  |  |
Total |  |  |  |  |  | $ | 76,237 |  |  | $ | 113,902 |  |  |  |  |  |  | $ | 171,082 |  |  | $ | 100,333 |  |  |  |  |
Other economic hedges: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Commodity contracts: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Crude oil: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Swaps |  | 7,539 |  |  | Barrels |  | $ | 8,900 |  |  | $ | 16,016 |  |  | 2,587 |  |  | Barrels |  | $ | 6,935 |  |  | $ | 36,060 |  |  |  |  |
Collars |  | 5,375 |  |  | Barrels |  | 2,900 |  |  | 5,531 |  |  | 3,942 |  |  | Barrels |  | 1,378 |  |  | 12,856 |  |  |  |  |
Purchased options |  | — |  |  | Barrels |  | — |  |  | — |  |  | — |  |  | Barrels |  | — |  |  | 516 |  |  |  |  |
Subtotal |  | 12,914 |  |  | Barrels |  | 11,800 |  |  | 21,547 |  |  | 6,529 |  |  | Barrels |  | 8,313 |  |  | 49,432 |  |  |  |  |
Natural gas: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Swaps |  | 98,891 |  |  | MMBTUs |  | 66,395 |  |  | 50,147 |  |  | 91,900 |  |  | MMBTUs |  | 69,767 |  |  | 106,883 |  |  |  |  |
Collars |  | 33,296 |  |  | MMBTUs |  | 23,594 |  |  | 1,003 |  |  | 31,142 |  |  | MMBTUs |  | 12,451 |  |  | 1,960 |  |  |  |  |
Purchased options |  | 367 |  |  | MMBTUs |  | 49 |  |  | — |  |  | — |  |  | MMBTUs |  | — |  |  | — |  |  |  |  |
Subtotal |  | 132,554 |  |  | MMBTUs |  | 90,038 |  |  | 51,150 |  |  | 123,042 |  |  | MMBTUs |  | 82,218 |  |  | 108,843 |  |  |  |  |
Total |  |  |  |  |  | $ | 101,838 |  |  | $ | 72,697 |  |  |  |  |  |  | $ | 90,531 |  |  | $ | 158,275 |  |  |  |  |

Credit Contracts — The Company periodically enters into credit RPAs with institutional counterparties to manage the credit exposure of the interest rate contracts associated with syndication loans. Under the RPAs, a portion of the credit exposure is transferred from one party (the purchaser of credit protection) to another party (the seller of credit protection). The seller of credit protection is required to make payments to the purchaser of credit protection if the underlying borrower defaults on the related interest rate contract. The Company may enter into protection sold or protection purchased RPAs. Credit risk on RPAs is managed by monitoring the credit worthiness of the borrowers and the institutional counterparties, which is a part of the Company’s normal credit review and monitoring process. The majority of the referenced entities of the protection sold RPAs were investment grade and the weighted-average remaining maturity was 2.7 years and 2.4 years, respectively, as of March 31, 2023 and December 31, 2022. Assuming that the underlying borrowers referenced in the interest rate contracts defaulted, the Company would not have any current exposure in the protection sold RPAs as of both March 31, 2023 and December 31, 2022. The Company did not have any outstanding protection purchased RPAs as of both March 31, 2023 and December 31, 2022.
Equity Contracts — As part of the loan origination process, the Company may obtain warrants to purchase preferred and/or common stock of their borrowers’ companies, which are mainly in the technology and life sciences sectors. Warrants grant the Company the right to buy a certain class of the underlying company’s equity at a certain price before expiration.
34

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 months ended March 31, 2023 and 2022:

|  | Classification on Consolidated Statement of Income |  | Three Months Ended March 31, |  |
($ in thousands) |  |  | 2023 |  | 2022 |  |  |  |
Derivatives not designated as hedging instruments: |  |  |  |  |  |  |  |  |  |
Interest rate contracts |  | Interest rate contracts and other derivative income |  | $ | (2,484) |  |  | $ | 7,585 |  |  |  |  |
Foreign exchange contracts |  | Foreign exchange income |  | 10,442 |  |  | 7,322 |  |  |  |  |
Credit contracts |  | Interest rate contracts and other derivative income |  | (5) |  |  | 74 |  |  |  |  |
Equity contracts |  | Lending fees |  | (45) |  |  | 94 |  |  |  |  |
Commodity contracts |  | Interest rate contracts and other derivative income |  | 6 |  |  | (49) |  |  |  |  |
Net gains |  |  |  | $ | 7,914 |  |  | $ | 15,026 |  |  |  |  |

Credit-Risk-Related Contingent Features — Certain of the Company’s over-the-counter derivative contracts contain early termination provisions that require the Company to settle any outstanding balances upon the occurrence of a specified credit-risk-related event. Such an event primarily relates to a downgrade in the credit rating of East West Bank to below investment grad e. As of March 31, 2023, the aggregate fair value amounts of all derivative instruments with credit-risk-related contingent features that were in a net liability position totaled zero, and no collateral was posted to cover these positions. In comparison, a s of December 31, 2022, the aggregate fair value amounts of all derivative instruments with credit-risk-related contingent features that were in a net liability position totaled $2.6 million, of which $1.1 million of collateral was posted to cover these positions. If the credit rating of East West Bank had been downgraded to below investment grade, the Company would have been required to post minimal additional collateral as of both March 31, 2023 and December 31, 2022.
Offsetting of Derivatives
The following tables present the gross derivative fair values, the balance sheet netting adjustments and the resulting net fair values recorded on the Consolidated Balance Sheet, as well as the cash and noncash collateral associated with master netting arrangements. The gross amounts of derivative assets and liabilities are presented after the application of variation margin payments as settlements to the fair values of contracts cleared through central clearing organizations, where applicable. The collateral amounts in the following tables are limited to the outstanding balances of the related asset or liability. Therefore, instances of overcollateralization are not shown:

($ in thousands) |  | As of March 31, 2023
|  | Gross Amounts Recognized (1) |  | Gross Amounts Offset on the Consolidated Balance Sheet |  | Net Amounts Presented on the Consolidated Balance Sheet |  | Gross Amounts Not Offset on the Consolidated Balance Sheet |  | Net Amount
|  |  | Master Netting Arrangements |  | Cash Collateral Received (3) |  |  | Security Collateral Received (5) |
Derivative assets |  | $ | 627,402 |  |  | $ | (169,849) |  |  | $ | (195,278) |  |  | $ | 262,275 |  |  | $ | (233,746) |  |  | $ | 28,529 |
|  | 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 |  | $ | 681,830 |  |  | $ | (169,849) |  |  | $ | — |  |  | $ | 511,981 |  |  | $ | — |  |  | $ | 511,981 |

35

($ in thousands) |  | As of December 31, 2022
|  | Gross Amounts Recognized (1) |  | Gross Amounts Offset on the Consolidated Balance Sheet |  | Net Amounts Presented on the Consolidated Balance Sheet |  | Gross Amounts Not Offset on the Consolidated Balance Sheet |  | Net Amount
|  |  | Master Netting Arrangements |  | Cash Collateral Received (3) |  |  | Security Collateral Received (5) |
Derivative assets |  | $ | 755,328 |  |  | $ | (242,745) |  |  | $ | (372,038) |  |  | $ | 140,545 |  |  | $ | (60,567) |  |  | $ | 79,978 |
|  | Gross Amounts Recognized (2) |  | Gross Amounts Offset on the Consolidated Balance Sheet |  | Net Amounts Presented on the Consolidated Balance Sheet |  | Gross Amounts Not Offset on the Consolidated Balance Sheet |  | Net Amount
|  |  | Master Netting Arrangements |  | Cash Collateral Pledged (4) |  |  | Security Collateral Pledged (5) |
Derivative liabilities |  | $ | 887,264 |  |  | $ | (242,745) |  |  | $ | — |  |  | $ | 644,519 |  |  | $ | (38,438) |  |  | $ | 606,081 |

(1)Includes $287 thousand and $2.1 million of gross fair value assets with counterparties that were not subject to enforceable master netting arrangements or similar agreements as of March 31, 2023 and December 31, 2022, respectively.
(2)Includes $15 thousand and $566 thousand of gross fair value liabilities with counterparties that were not subject to enforceable master netting arrangements or similar agreements as of March 31, 2023 and December 31, 2022, respectively.
(3)Gross cash collateral received under master netting arrangements or similar agreements was $205.7 million and $384.9 million as of March 31, 2023 and December 31, 2022, respectively. Of the gross cash collateral received, $195.3 million and $372.0 million were used to offset against derivative assets as of March 31, 2023 and December 31, 2022, respectively.
(4)Gross cash collateral pledged under master netting arrangements or similar agreements was $200 thousand and $490 thousand as of March 31, 2023 and December 31, 2022, respectively. None of the collateral was used to offset against derivative liabilities as of both March 31, 2023 and December 31, 2022.
(5)Represents the fair value of security collateral received or pledged limited to derivative assets or liabilities that are subject to enforceable master netting arrangements or similar agreements. U.S. GAAP does not permit the netting of noncash collateral on the Consolidated Balance Sheet but requires the disclosure of such amounts.
In addition to the amounts included in the tables above, the Company has balance sheet netting related to resale and repurchase agreements. Refer to Note 4 — Assets Purchased under Resale Agreements and Sold under Repurchase Agreements to the Consolidated Financial Statements in this Form 10-Q for additional information. Refer to Note 3 — Fair Value Measurement and Fair Value of Financial Instruments to the Consolidated Financial Statements in this Form 10-Q for fair value measurement disclosures on derivatives.
36

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 March 31, 2023 and December 31, 2022:

($ in thousands) |  | March 31, 2023 |  | December 31, 2022
Commercial: |  |  |  |
C&I |  | $ | 15,641,840 |  |  | $ | 15,711,095 |
CRE: |  |  |  |
CRE |  | 14,019,136 |  |  | 13,857,870 |
Multifamily residential |  | 4,682,280 |  |  | 4,573,068 |
Construction and land |  | 731,394 |  |  | 638,420 |
Total CRE |  | 19,432,810 |  |  | 19,069,358 |
Total commercial |  | 35,074,650 |  |  | 34,780,453 |
Consumer: |  |  |  |
Residential mortgage: |  |  |  |
Single-family residential |  | 11,786,998 |  |  | 11,223,027 |
HELOCs |  | 1,988,881 |  |  | 2,122,655 |
Total residential mortgage |  | 13,775,879 |  |  | 13,345,682 |
Other consumer |  | 67,519 |  |  | 76,295 |
Total consumer |  | 13,843,398 |  |  | 13,421,977 |
Total loans held-for-investment (1) |  | $ | 48,918,048 |  |  | $ | 48,202,430 |
Allowance for loan losses |  | (619,893) |  |  | (595,645) |
Loans held-for-investment, net (1) |  | $ | 48,298,155 |  |  | $ | 47,606,785 |

(1)Includes $(75.4) million and $(70.4) million of net deferred loan fees and net unamortized premiums as of March 31, 2023 and December 31, 2022, respectively.
L oans held-for-investment accrued interest receivable was $221.6 million and $208.4 million as of March 31, 2023 and December 31, 2022, respectively, and was included in Other assets on the Consolidated Balance Sheet. The interest income reversed was insignificant for the three months ended March 31, 2023 and 2022. For the Company’s accounting policy on accrued interest receivable related to loans held-for-investment, see Note 1 — Summary of Significant Accounting Policies — Significant Accounting Policies — Loans Held-for-Investment to the Consolidated Financial Statements of the Company’s 2022 Form 10-K.
The Company’s FRBSF and FHLB borrowings are primarily secured by loans held-for-investment. Loans held-for-investment totaling $34.17 billion and $28.30 billion, respectively, were pledged to secure borrowings and provide additional borrowing capacity as of March 31, 2023 and December 31, 2022.
Credit Quality Indicators
All loans are subject to the Company’s credit review and monitoring process. For the commercial loan portfolio, loans are risk rated based on an analysis of the borrower’s current payment performance or delinquency, repayment sources, financial and liquidity factors, including industry and geographic considerations. For the consumer loan portfolio, payment performance or delinquency is typically the driving indicator for risk ratings.
The Company utilizes internal credit risk ratings to assign each individual loan a risk rating of 1 through 10:
•Pass — loans risk rated 1 through 5 are assigned an internal risk rating category of “Pass.” Loans risk rated 1 are typically loans fully secured by cash. Pass loans have sufficient sources of repayment to repay the loan in full, in accordance with all terms and conditions.
•Special mention — loans assigned a risk rating of 6 have potential weaknesses that warrant closer attention by management; these are assigned an internal risk rating category of “Special Mention.”
•Substandard — loans assigned a risk rating of 7 or 8 have well-defined weaknesses that may jeopardize the full and timely repayment of the loan; these are assigned an internal risk rating category of “Substandard.”
•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.”
37

•Loss — loans assigned a risk rating of 10 are uncollectible and of such little value that they are no longer considered bankable assets; these are assigned an internal risk rating category of “Loss.”
Loan exposures categorized as criticized consist of special mention, substandard, doubtful and loss categories. The Company reviews the internal risk ratings of its loan portfolio on a regular basis, and adjusts the ratings based on changes in the borrowers’ financial status and the collectability of the loans.
The following tables summarize the Company’s loans held-for-investment and current-period gross write-offs by loan portfolio segments, internal risk ratings and vintage year as of the periods presented. The vintage year is the year of loan origination, renewal or major modification. Revolving loans that are converted to term loans presented in the tables below are excluded from term loans by vintage year columns.

|  | March 31, 2023 |  |
|  | Term Loans by Origination Year |  |  |  |  |  |  |  |
($ in thousands) |  | 2023 |  | 2022 |  | 2021 |  | 2020 |  | 2019 |  | Prior |  | Revolving Loans |  | Revolving Loans Converted to Term Loans (1) |  | Total |  |
Commercial: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
C&I: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Pass |  | $ | 674,825 |  |  | $ | 2,578,285 |  |  | $ | 1,783,684 |  |  | $ | 521,410 |  |  | $ | 333,681 |  |  | $ | 253,687 |  |  | $ | 9,060,947 |  |  | $ | 20,446 |  |  | $ | 15,226,965 |  |  |
Criticized (accrual) |  | 2 |  |  | 76,947 |  |  | 90,595 |  |  | 30,558 |  |  | 33,825 |  |  | 9,511 |  |  | 129,690 |  |  | — |  |  | 371,128 |  |  |
Criticized (nonaccrual) |  | 300 |  |  | 18,197 |  |  | 1,773 |  |  | 10,335 |  |  | — |  |  | 13,142 |  |  | — |  |  | — |  |  | 43,747 |  |  |
Total C&I |  | 675,127 |  |  | 2,673,429 |  |  | 1,876,052 |  |  | 562,303 |  |  | 367,506 |  |  | 276,340 |  |  | 9,190,637 |  |  | 20,446 |  |  | 15,641,840 |  |  |
YTD gross write-offs (3) |  | 185 |  |  | 68 |  |  | 72 |  |  | — |  |  | — |  |  | 1,553 |  |  | — |  |  | — |  |  | 1,878 |  |  |
CRE: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Pass |  | 468,751 |  |  | 4,143,097 |  |  | 2,386,362 |  |  | 1,470,520 |  |  | 1,724,371 |  |  | 3,216,726 |  |  | 163,308 |  |  | 54,385 |  |  | 13,627,520 |  |  |
Criticized (accrual) |  | — |  |  | — |  |  | 53,948 |  |  | 155,649 |  |  | 55,225 |  |  | 106,071 |  |  | 1,455 |  |  | — |  |  | 372,348 |  |  |
Criticized (nonaccrual) |  | — |  |  | 171 |  |  | 18,692 |  |  | — |  |  | — |  |  | 405 |  |  | — |  |  | — |  |  | 19,268 |  |  |
Subtotal CRE |  | 468,751 |  |  | 4,143,268 |  |  | 2,459,002 |  |  | 1,626,169 |  |  | 1,779,596 |  |  | 3,323,202 |  |  | 164,763 |  |  | 54,385 |  |  | 14,019,136 |  |  |
YTD gross write-offs |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 6 |  |  | — |  |  | — |  |  | 6 |  |  |
Multifamily residential: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Pass |  | 159,286 |  |  | 1,498,094 |  |  | 882,113 |  |  | 633,118 |  |  | 515,423 |  |  | 951,669 |  |  | 9,253 |  |  | 1,301 |  |  | 4,650,257 |  |  |
Criticized (accrual) |  | — |  |  | — |  |  | — |  |  | — |  |  | 704 |  |  | 31,160 |  |  | — |  |  | — |  |  | 31,864 |  |  |
Criticized (nonaccrual) |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 159 |  |  | — |  |  | — |  |  | 159 |  |  |
Subtotal multifamily residential |  | 159,286 |  |  | 1,498,094 |  |  | 882,113 |  |  | 633,118 |  |  | 516,127 |  |  | 982,988 |  |  | 9,253 |  |  | 1,301 |  |  | 4,682,280 |  |  |
Construction and land: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Pass |  | 47,883 |  |  | 329,458 |  |  | 268,980 |  |  | 34,007 |  |  | 1,245 |  |  | 3,011 |  |  | 12,087 |  |  | — |  |  | 696,671 |  |  |
Criticized (accrual) |  | — |  |  | 13,151 |  |  | — |  |  | — |  |  | — |  |  | 21,572 |  |  | — |  |  | — |  |  | 34,723 |  |  |
Criticized (nonaccrual) |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  |
Subtotal construction and land |  | 47,883 |  |  | 342,609 |  |  | 268,980 |  |  | 34,007 |  |  | 1,245 |  |  | 24,583 |  |  | 12,087 |  |  | — |  |  | 731,394 |  |  |
Total CRE |  | 675,920 |  |  | 5,983,971 |  |  | 3,610,095 |  |  | 2,293,294 |  |  | 2,296,968 |  |  | 4,330,773 |  |  | 186,103 |  |  | 55,686 |  |  | 19,432,810 |  |  |
YTD gross write-offs |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 6 |  |  | — |  |  | — |  |  | 6 |  |  |
Total commercial |  | $ | 1,351,047 |  |  | $ | 8,657,400 |  |  | $ | 5,486,147 |  |  | $ | 2,855,597 |  |  | $ | 2,664,474 |  |  | $ | 4,607,113 |  |  | $ | 9,376,740 |  |  | $ | 76,132 |  |  | $ | 35,074,650 |  |  |
YTD total commercial gross write-offs (3) |  | $ | 185 |  |  | $ | 68 |  |  | $ | 72 |  |  | $ | — |  |  | $ | — |  |  | $ | 1,559 |  |  | $ | — |  |  | $ | — |  |  | $ | 1,884 |  |  |

38

|  | March 31, 2023 |  |
|  | Term Loans by Origination Year |  |  |  |  |  |  |  |
($ in thousands) |  | 2023 |  | 2022 |  | 2021 |  | 2020 |  | 2019 |  | Prior |  | Revolving Loans |  | Revolving Loans Converted to Term Loans (1) |  | Total |  |
Consumer: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Residential mortgage: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Single-family residential: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Pass (2) |  | $ | 789,902 |  |  | $ | 3,504,956 |  |  | $ | 2,414,724 |  |  | $ | 1,728,663 |  |  | $ | 1,075,516 |  |  | $ | 2,246,626 |  |  | $ | — |  |  | $ | — |  |  | $ | 11,760,387 |  |  |
Criticized (accrual) |  | — |  |  | — |  |  | 629 |  |  | 733 |  |  | 2,436 |  |  | 3,100 |  |  | — |  |  | — |  |  | 6,898 |  |  |
Criticized (nonaccrual) (2) |  | — |  |  | 142 |  |  | 676 |  |  | 1,006 |  |  | 3,240 |  |  | 14,649 |  |  | — |  |  | — |  |  | 19,713 |  |  |
Subtotal single-family residential mortgage |  | 789,902 |  |  | 3,505,098 |  |  | 2,416,029 |  |  | 1,730,402 |  |  | 1,081,192 |  |  | 2,264,375 |  |  | — |  |  | — |  |  | 11,786,998 |  |  |
HELOCs: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Pass |  | — |  |  | 1,683 |  |  | 1,183 |  |  | 4,240 |  |  | 2,351 |  |  | 10,592 |  |  | 1,835,459 |  |  | 119,520 |  |  | 1,975,028 |  |  |
Criticized (accrual) |  | — |  |  | — |  |  | 223 |  |  | 655 |  |  | — |  |  | 2,905 |  |  | 488 |  |  | 537 |  |  | 4,808 |  |  |
Criticized (nonaccrual) |  | — |  |  | — |  |  | 6 |  |  | 183 |  |  | 69 |  |  | 4,965 |  |  | 191 |  |  | 3,631 |  |  | 9,045 |  |  |
Subtotal HELOCs |  | — |  |  | 1,683 |  |  | 1,412 |  |  | 5,078 |  |  | 2,420 |  |  | 18,462 |  |  | 1,836,138 |  |  | 123,688 |  |  | 1,988,881 |  |  |
Total residential mortgage |  | 789,902 |  |  | 3,506,781 |  |  | 2,417,441 |  |  | 1,735,480 |  |  | 1,083,612 |  |  | 2,282,837 |  |  | 1,836,138 |  |  | 123,688 |  |  | 13,775,879 |  |  |
Other consumer: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Pass |  | 889 |  |  | 16,824 |  |  | 137 |  |  | 5,356 |  |  | — |  |  | 7,229 |  |  | 36,715 |  |  | — |  |  | 67,150 |  |  |
Criticized (accrual) |  | 3 |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 3 |  |  |
Criticized (nonaccrual) |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 366 |  |  | — |  |  | 366 |  |  |
Total other consumer |  | 892 |  |  | 16,824 |  |  | 137 |  |  | 5,356 |  |  | — |  |  | 7,229 |  |  | 37,081 |  |  | — |  |  | 67,519 |  |  |
YTD gross write-offs |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 40 |  |  | — |  |  | 40 |  |  |
Total consumer |  | $ | 790,794 |  |  | $ | 3,523,605 |  |  | $ | 2,417,578 |  |  | $ | 1,740,836 |  |  | $ | 1,083,612 |  |  | $ | 2,290,066 |  |  | $ | 1,873,219 |  |  | $ | 123,688 |  |  | $ | 13,843,398 |  |  |
YTD total consumer gross write-offs (3) |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | 40 |  |  | $ | — |  |  | $ | 40 |  |  |
Total loans held-for-investment: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Pass |  | $ | 2,141,536 |  |  | $ | 12,072,397 |  |  | $ | 7,737,183 |  |  | $ | 4,397,314 |  |  | $ | 3,652,587 |  |  | $ | 6,689,540 |  |  | $ | 11,117,769 |  |  | $ | 195,652 |  |  | $ | 48,003,978 |  |  |
Criticized (accrual) |  | 5 |  |  | 90,098 |  |  | 145,395 |  |  | 187,595 |  |  | 92,190 |  |  | 174,319 |  |  | 131,633 |  |  | 537 |  |  | 821,772 |  |  |
Criticized (nonaccrual) |  | 300 |  |  | 18,510 |  |  | 21,147 |  |  | 11,524 |  |  | 3,309 |  |  | 33,320 |  |  | 557 |  |  | 3,631 |  |  | 92,298 |  |  |
Total |  | $ | 2,141,841 |  |  | $ | 12,181,005 |  |  | $ | 7,903,725 |  |  | $ | 4,596,433 |  |  | $ | 3,748,086 |  |  | $ | 6,897,179 |  |  | $ | 11,249,959 |  |  | $ | 199,820 |  |  | $ | 48,918,048 |  |  |
YTD total loans held-for-investment gross write-offs (3) |  | $ | 185 |  |  | $ | 68 |  |  | $ | 72 |  |  | $ | — |  |  | $ | — |  |  | $ | 1,559 |  |  | $ | 40 |  |  | $ | — |  |  | $ | 1,924 |  |  |

39

|  | December 31, 2022
|  | Term Loans by Origination Year |  |  |  |  |  |
($ in thousands) |  | 2022 |  | 2021 |  | 2020 |  | 2019 |  | 2018 |  | Prior |  | Revolving Loans |  | Revolving Loans Converted to Term Loans (1) |  | Total
Commercial: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
C&I: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Pass |  | $ | 2,831,834 |  |  | $ | 2,053,215 |  |  | $ | 623,026 |  |  | $ | 392,013 |  |  | $ | 143,970 |  |  | $ | 97,605 |  |  | $ | 9,177,401 |  |  | $ | 20,548 |  |  | $ | 15,339,612 |
Criticized (accrual) |  | 72,210 |  |  | 34,296 |  |  | 48,761 |  |  | 34,221 |  |  | 20,646 |  |  | 12,933 |  |  | 97,988 |  |  | — |  |  | 321,055 |
Criticized (nonaccrual) |  | 18,722 |  |  | 4,797 |  |  | 10,733 |  |  | 243 |  |  | 5,618 |  |  | 10,315 |  |  | — |  |  | — |  |  | 50,428 |
Total C&I |  | 2,922,766 |  |  | 2,092,308 |  |  | 682,520 |  |  | 426,477 |  |  | 170,234 |  |  | 120,853 |  |  | 9,275,389 |  |  | 20,548 |  |  | 15,711,095 |
CRE: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Pass |  | 4,178,780 |  |  | 2,404,634 |  |  | 1,505,150 |  |  | 1,771,679 |  |  | 1,471,710 |  |  | 1,909,925 |  |  | 165,653 |  |  | 22,009 |  |  | 13,429,540 |
Criticized (accrual) |  | 3,518 |  |  | 60,573 |  |  | 159,424 |  |  | 40,095 |  |  | 91,132 |  |  | 32,173 |  |  | 1,455 |  |  | 16,716 |  |  | 405,086 |
Criticized (nonaccrual) |  | — |  |  | 19,044 |  |  | — |  |  | — |  |  | — |  |  | 4,200 |  |  | — |  |  | — |  |  | 23,244 |
Subtotal CRE |  | 4,182,298 |  |  | 2,484,251 |  |  | 1,664,574 |  |  | 1,811,774 |  |  | 1,562,842 |  |  | 1,946,298 |  |  | 167,108 |  |  | 38,725 |  |  | 13,857,870 |
Multifamily residential: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Pass |  | 1,500,289 |  |  | 892,598 |  |  | 641,677 |  |  | 519,614 |  |  | 350,044 |  |  | 625,293 |  |  | 11,325 |  |  | — |  |  | 4,540,840 |
Criticized (accrual) |  | — |  |  | — |  |  | — |  |  | 707 |  |  | 4,276 |  |  | 27,076 |  |  | — |  |  | — |  |  | 32,059 |
Criticized (nonaccrual) |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 169 |  |  | — |  |  | — |  |  | 169 |
Subtotal multifamily residential |  | 1,500,289 |  |  | 892,598 |  |  | 641,677 |  |  | 520,321 |  |  | 354,320 |  |  | 652,538 |  |  | 11,325 |  |  | — |  |  | 4,573,068 |
Construction and land: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Pass |  | 288,394 |  |  | 276,839 |  |  | 31,804 |  |  | 3,104 |  |  | 2,805 |  |  | 231 |  |  | 9,073 |  |  | — |  |  | 612,250 |
Criticized (accrual) |  | 4,504 |  |  | — |  |  | — |  |  | — |  |  | 21,666 |  |  | — |  |  | — |  |  | — |  |  | 26,170 |
Criticized (nonaccrual) |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |
Subtotal construction and land |  | 292,898 |  |  | 276,839 |  |  | 31,804 |  |  | 3,104 |  |  | 24,471 |  |  | 231 |  |  | 9,073 |  |  | — |  |  | 638,420 |
Total CRE |  | 5,975,485 |  |  | 3,653,688 |  |  | 2,338,055 |  |  | 2,335,199 |  |  | 1,941,633 |  |  | 2,599,067 |  |  | 187,506 |  |  | 38,725 |  |  | 19,069,358 |
Total commercial |  | $ | 8,898,251 |  |  | $ | 5,745,996 |  |  | $ | 3,020,575 |  |  | $ | 2,761,676 |  |  | $ | 2,111,867 |  |  | $ | 2,719,920 |  |  | $ | 9,462,895 |  |  | $ | 59,273 |  |  | $ | 34,780,453 |
Consumer: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Residential mortgage: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Single-family residential: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Pass (2) |  | $ | 3,548,894 |  |  | $ | 2,453,717 |  |  | $ | 1,775,696 |  |  | $ | 1,101,965 |  |  | $ | 817,164 |  |  | $ | 1,500,359 |  |  | $ | — |  |  | $ | — |  |  | $ | 11,197,795 |
Criticized (accrual) |  | — |  |  | 1,275 |  |  | 785 |  |  | 1,463 |  |  | 4,352 |  |  | 3,935 |  |  | — |  |  | — |  |  | 11,810 |
Criticized (nonaccrual) (2) |  | 141 |  |  | — |  |  | 204 |  |  | 3,202 |  |  | 1,721 |  |  | 8,154 |  |  | — |  |  | — |  |  | 13,422 |
Subtotal single-family residential mortgage |  | 3,549,035 |  |  | 2,454,992 |  |  | 1,776,685 |  |  | 1,106,630 |  |  | 823,237 |  |  | 1,512,448 |  |  | — |  |  | — |  |  | 11,223,027 |
HELOCs: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Pass |  | 520 |  |  | 3,583 |  |  | 7,336 |  |  | 3,203 |  |  | 525 |  |  | 8,960 |  |  | 1,958,692 |  |  | 127,401 |  |  | 2,110,220 |
Criticized (accrual) |  | — |  |  | 6 |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 4 |  |  | 1,079 |  |  | 1,089 |
Criticized (nonaccrual) |  | — |  |  | — |  |  | 483 |  |  | 231 |  |  | 1,017 |  |  | 4,844 |  |  | 1,001 |  |  | 3,770 |  |  | 11,346 |
Subtotal HELOCs |  | 520 |  |  | 3,589 |  |  | 7,819 |  |  | 3,434 |  |  | 1,542 |  |  | 13,804 |  |  | 1,959,697 |  |  | 132,250 |  |  | 2,122,655 |
Subtotal residential mortgage |  | 3,549,555 |  |  | 2,458,581 |  |  | 1,784,504 |  |  | 1,110,064 |  |  | 824,779 |  |  | 1,526,252 |  |  | 1,959,697 |  |  | 132,250 |  |  | 13,345,682 |
Other consumer: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Pass |  | 17,088 |  |  | 137 |  |  | 5,356 |  |  | — |  |  | — |  |  | 15,808 |  |  | 37,804 |  |  | — |  |  | 76,193 |
Criticized (accrual) |  | 3 |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 3 |
Criticized (nonaccrual) |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 99 |  |  | — |  |  | 99 |
Total other consumer |  | 17,091 |  |  | 137 |  |  | 5,356 |  |  | — |  |  | — |  |  | 15,808 |  |  | 37,903 |  |  | — |  |  | 76,295 |
Total consumer |  | $ | 3,566,646 |  |  | $ | 2,458,718 |  |  | $ | 1,789,860 |  |  | $ | 1,110,064 |  |  | $ | 824,779 |  |  | $ | 1,542,060 |  |  | $ | 1,997,600 |  |  | $ | 132,250 |  |  | $ | 13,421,977 |
Total by Risk Rating: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Pass |  | $ | 12,365,799 |  |  | $ | 8,084,723 |  |  | $ | 4,590,045 |  |  | $ | 3,791,578 |  |  | $ | 2,786,218 |  |  | $ | 4,158,181 |  |  | $ | 11,359,948 |  |  | $ | 169,958 |  |  | $ | 47,306,450 |
Criticized (accrual) |  | 80,235 |  |  | 96,150 |  |  | 208,970 |  |  | 76,486 |  |  | 142,072 |  |  | 76,117 |  |  | 99,447 |  |  | 17,795 |  |  | 797,272 |
Criticized (nonaccrual) |  | 18,863 |  |  | 23,841 |  |  | 11,420 |  |  | 3,676 |  |  | 8,356 |  |  | 27,682 |  |  | 1,100 |  |  | 3,770 |  |  | 98,708 |
Total |  | $ | 12,464,897 |  |  | $ | 8,204,714 |  |  | $ | 4,810,435 |  |  | $ | 3,871,740 |  |  | $ | 2,936,646 |  |  | $ | 4,261,980 |  |  | $ | 11,460,495 |  |  | $ | 191,523 |  |  | $ | 48,202,430 |

(1)$12.2 million of total commercial loans, primarily comprised of CRE revolving loans and $5.1 million of total consumer loans, comprised of HELOC revolving loans converted to term loans during the three months ended March 31, 2023. In comparison, no commercial or consumer loans were converted to term loans during the three months ended March 31, 2022.
(2)As of March 31, 2023 and December 31, 2022, $827 thousand and $818 thousand, respectively, of nonaccrual loans whose payments are guaranteed by the Federal Housing Administration were classified with a “Pass” rating.
(3)Excludes current-period gross write-offs associated with loans the Company sold or settled.
40

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

|  | March 31, 2023
($ in thousands) |  | Current Accruing Loans |  | Accruing Loans 30-59 Days Past Due |  | Accruing Loans 60-89 Days Past Due |  |  |  |  |  | Total Accruing Past Due Loans |  |  |  |  |  | Total Nonaccrual Loans |  | Total Loans
Commercial: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
C&I |  | $ | 15,589,505 |  |  | $ | 4,758 |  |  | $ | 3,830 |  |  |  |  |  |  | $ | 8,588 |  |  |  |  |  |  | $ | 43,747 |  |  | $ | 15,641,840 |
CRE: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
CRE |  | 13,998,080 |  |  | 1,304 |  |  | 484 |  |  |  |  |  |  | 1,788 |  |  |  |  |  |  | 19,268 |  |  | 14,019,136 |
Multifamily residential |  | 4,681,411 |  |  | 391 |  |  | 319 |  |  |  |  |  |  | 710 |  |  |  |  |  |  | 159 |  |  | 4,682,280 |
Construction and land |  | 723,240 |  |  | — |  |  | 8,154 |  |  |  |  |  |  | 8,154 |  |  |  |  |  |  | — |  |  | 731,394 |
Total CRE |  | 19,402,731 |  |  | 1,695 |  |  | 8,957 |  |  |  |  |  |  | 10,652 |  |  |  |  |  |  | 19,427 |  |  | 19,432,810 |
Total commercial |  | 34,992,236 |  |  | 6,453 |  |  | 12,787 |  |  |  |  |  |  | 19,240 |  |  |  |  |  |  | 63,174 |  |  | 35,074,650 |
Consumer: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Residential mortgage: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Single-family residential |  | 11,740,953 |  |  | 17,964 |  |  | 7,541 |  |  |  |  |  |  | 25,505 |  |  |  |  |  |  | 20,540 |  |  | 11,786,998 |
HELOCs |  | 1,969,546 |  |  | 5,485 |  |  | 4,805 |  |  |  |  |  |  | 10,290 |  |  |  |  |  |  | 9,045 |  |  | 1,988,881 |
Total residential mortgage |  | 13,710,499 |  |  | 23,449 |  |  | 12,346 |  |  |  |  |  |  | 35,795 |  |  |  |  |  |  | 29,585 |  |  | 13,775,879 |
Other consumer |  | 67,008 |  |  | 89 |  |  | 56 |  |  |  |  |  |  | 145 |  |  |  |  |  |  | 366 |  |  | 67,519 |
Total consumer |  | 13,777,507 |  |  | 23,538 |  |  | 12,402 |  |  |  |  |  |  | 35,940 |  |  |  |  |  |  | 29,951 |  |  | 13,843,398 |
Total |  | $ | 48,769,743 |  |  | $ | 29,991 |  |  | $ | 25,189 |  |  |  |  |  |  | $ | 55,180 |  |  |  |  |  |  | $ | 93,125 |  |  | $ | 48,918,048 |

|  | December 31, 2022
($ in thousands) |  | Current Accruing Loans |  | Accruing Loans 30-59 Days Past Due |  | Accruing Loans 60-89 Days Past Due |  |  |  | Total Accruing Past Due Loans |  |  |  |  |  | Total Nonaccrual Loans |  | Total Loans
Commercial: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
C&I |  | $ | 15,651,312 |  |  | $ | 6,482 |  |  | $ | 2,873 |  |  |  |  | $ | 9,355 |  |  |  |  |  |  | $ | 50,428 |  |  | $ | 15,711,095 |
CRE: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
CRE |  | 13,820,441 |  |  | 14,185 |  |  | — |  |  |  |  | 14,185 |  |  |  |  |  |  | 23,244 |  |  | 13,857,870 |
Multifamily residential |  | 4,571,899 |  |  | 678 |  |  | 322 |  |  |  |  | 1,000 |  |  |  |  |  |  | 169 |  |  | 4,573,068 |
Construction and land |  | 638,420 |  |  | — |  |  | — |  |  |  |  | — |  |  |  |  |  |  | — |  |  | 638,420 |
Total CRE |  | 19,030,760 |  |  | 14,863 |  |  | 322 |  |  |  |  | 15,185 |  |  |  |  |  |  | 23,413 |  |  | 19,069,358 |
Total commercial |  | 34,682,072 |  |  | 21,345 |  |  | 3,195 |  |  |  |  | 24,540 |  |  |  |  |  |  | 73,841 |  |  | 34,780,453 |
Consumer: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Residential mortgage: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Single-family residential |  | 11,183,134 |  |  | 13,523 |  |  | 12,130 |  |  |  |  | 25,653 |  |  |  |  |  |  | 14,240 |  |  | 11,223,027 |
HELOCs |  | 2,102,523 |  |  | 7,700 |  |  | 1,086 |  |  |  |  | 8,786 |  |  |  |  |  |  | 11,346 |  |  | 2,122,655 |
Total residential mortgage |  | 13,285,657 |  |  | 21,223 |  |  | 13,216 |  |  |  |  | 34,439 |  |  |  |  |  |  | 25,586 |  |  | 13,345,682 |
Other consumer |  | 73,004 |  |  | 109 |  |  | 3,083 |  |  |  |  | 3,192 |  |  |  |  |  |  | 99 |  |  | 76,295 |
Total consumer |  | 13,358,661 |  |  | 21,332 |  |  | 16,299 |  |  |  |  | 37,631 |  |  |  |  |  |  | 25,685 |  |  | 13,421,977 |
Total |  | $ | 48,040,733 |  |  | $ | 42,677 |  |  | $ | 19,494 |  |  |  |  | $ | 62,171 |  |  |  |  |  |  | $ | 99,526 |  |  | $ | 48,202,430 |

41

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 March 31, 2023 and December 31, 2022. Nonaccrual loans may not have an allowance for credit losses if the loan balances are well-secured by the collateral value and there is no loss expectation.

($ in thousands) |  |  | March 31, 2023 |  |  | December 31, 2022
Commercial: |  |  |  |  |  |
C&I |  |  | $ | 16,227 |  |  |  | $ | 11,398 |
CRE |  |  | 18,693 |  |  |  | 22,944 |
Total commercial |  |  | 34,920 |  |  |  | 34,342 |
Consumer: |  |  |  |  |  |
Single-family residential |  |  | 7,206 |  |  |  | 2,998 |
HELOCs |  |  | 5,050 |  |  |  | 7,245 |
Total consumer |  |  | 12,256 |  |  |  | 10,243 |
Total nonaccrual loans with no related allowance for loan losses |  |  | $ | 47,176 |  |  |  | $ | 44,585 |

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 $270 thousand of foreclosed assets as of both March 31, 2023 and December 31, 2022. The Company commences the foreclosure process on consumer mortgage loans after a borrower becomes more than 120 days delinquent in accordance with the CFPB guidelines. The carrying value of consumer real estate loans that were in an active or suspended foreclosure process was $8.4 million and $7.5 million as of March 31, 2023 and December 31, 2022, respectively.
Loan Modifications to Borrowers Experiencing Financial Difficulty
As part of the Company’s loss mitigation efforts, the Company may agree to modify the contractual terms of a loan to a borrower experiencing financial difficulty. In addition to loan modifications, the Company also provides other loss mitigation options to assist borrowers who are experiencing financial difficulties. The Company offers restructurings mainly in the form of payment deferrals and term extensions. Upon the adoption of ASU 2022-02, which was effective as of January 1, 2023, the Company applies the loan refinancing and restructuring guidance provided in ASU 310-20 to determine whether a modification made to a borrower results in a new loan or a continuation of an existing loan. See Note 2 — Current Accounting Developments and Summary of Significant Accounting Policies — Significant Accounting Policies Update — Loan Modifications to the Consolidated Financial Statements in this Form 10-Q for additional information. The disclosures below provide information on loan modifications to borrowers experiencing financial difficulty. Loans that were both modified and paid off or charged-off during the period, resulting in an amortized cost balance of zero at the end of each period, were excluded from the disclosures below.
42

The following table presents the amortized cost of modified loans and the financial effects of the modifications for the three months ended March 31, 2023 by loan class and modification type:

|  | For the Three Months Ended March 31, 2023
|  | Modification Type |  |  |  |  |  | Financial Effects of Loan Modifications
($ in thousands) |  | Term Extension |  | Payment Delay |  | Total |  | Modification as a % of Loan Class |  | Weighted-Average Term Extension (in years) |  | Weighted-Average Payment Delay (in years)
Commercial: |  |  |  |  |  |  |  |  |  |  |  |
C&I |  | $ | 19,974 |  |  | $ | 14,364 |  |  | $ | 34,338 |  |  | 0.22 | % |  | 0.9 years |  | 1.0 year
CRE: |  |  |  |  |  |  |  |  |  |  |  |
CRE |  | 543 |  |  | — |  |  | 543 |  |  | 0.00 | % |  | 2.0 years |  |
Total commercial |  | 20,517 |  |  | 14,364 |  |  | 34,881 |  |  |  |  |  |  |
Consumer: |  |  |  |  |  |  |  |  |  |  |  |
Residential mortgage: |  |  |  |  |  |  |  |  |  |  |  |
HELOCs |  | 738 |  |  | — |  |  | 738 |  |  | 0.04 | % |  | 14.8 years |  |
Total consumer |  | 738 |  |  | — |  |  | 738 |  |  |  |  |  |  |
Total |  | $ | 21,255 |  |  | $ | 14,364 |  |  | $ | 35,619 |  |  |  |  |  |  |

The Company tracks the performance of modified loans. A modified loan may become delinquent and may result in a payment default (generally 90 days past due) subsequent to modification. There were no loans that received a modification during the three months ended March 31, 2023 that subsequently defaulted.
The following table presents the performance of loans that were modified during the three months ended March 31, 2023.

|  | Payment Performance as of March 31, 2023 |  |
($ in thousands) |  | Current |  | 30 - 89 Days Past Due |  | 90+ Days Past Due |  | Total |  |  |  |  |  |
Commercial: |  |  |  |  |  |  |  |  |  |  |  |  |  |
C&I |  | $ | 27,393 |  |  | $ | 6,945 |  |  | $ | — |  |  | $ | 34,338 |  |  |  |  |  |  |
CRE: |  |  |  |  |  |  |  |  |  |  |  |  |  |
CRE |  | 543 |  |  | — |  |  | — |  |  | 543 |  |  |  |  |  |  |
Total commercial |  | 27,936 |  |  | 6,945 |  |  | — |  |  | 34,881 |  |  |  |  |  |  |
Consumer: |  |  |  |  |  |  |  |  |  |  |  |  |  |
Residential mortgage: |  |  |  |  |  |  |  |  |  |  |  |  |  |
HELOCs |  | 738 |  |  | — |  |  | — |  |  | 738 |  |  |  |  |  |  |
Total consumer |  | 738 |  |  | — |  |  | — |  |  | 738 |  |  |  |  |  |  |
Total |  | $ | 28,674 |  |  | $ | 6,945 |  |  | $ | — |  |  | $ | 35,619 |  |  |  |  |  |  |

As of March 31, 2023, there were no additional commitments to lend to borrowers whose loans were modified.
Troubled Debt Restructurings Prior to the Adoption of ASU 2022-02
Prior to the adoption of ASU 2022-02, the Company accounted for a modification to the contractual terms of a loan that resulted in granting a concession to a borrower experiencing financial difficulties as a TDR. ASU 2022-02 eliminated TDR accounting prospectively for all restructurings occurring on or after January 1, 2023.
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The following table presents the additions to TDRs for the three months ended March 31, 2022:

|  | Loans Modified as TDRs During the three months ended March 31, 2022
($ in thousands) |  | Number of Loans |  | Pre-Modification Outstanding Recorded Investment |  | Post-Modification Outstanding Recorded Investment (1) |  | Financial Impact (2)
Commercial: |  |  |  |  |  |  |  |
C&I |  | 1 |  |  | $ | 17,179 |  |  | $ | 9,224 |  |  | $ | 7,545 |
Total |  | 1 |  |  | $ | 17,179 |  |  | $ | 9,224 |  |  | $ | 7,545 |

(1)Includes subsequent payments after modification and reflects the balance as of March 31, 2022.
(2)Includes charge-offs since the modification date.
The following table presents the TDR post-modification outstanding balances by the primary modification type for the three months ended March 31, 2022:

|  | Modification Type During the Three Months Ended March 31, 2022
($ in thousands) |  | Principal (1) |  |  |  |  |  |  |  |  |  |  |  | Total
Commercial: |  |  |  |  |  |  |  |  |  |  |  |  |  |
C&I |  | $ | 9,224 |  |  |  |  |  |  |  |  |  |  |  |  | $ | 9,224 |
Total |  | $ | 9,224 |  |  |  |  |  |  |  |  |  |  |  |  | $ | 9,224 |

(1)Includes principal deferments that modify the terms of the loan from principal and interest payments to interest payments only.
After a loan is modified as a TDR, the Company continues to monitor its performance under its most recent restructured terms. A TDR may become delinquent and result in payment default (generally 90 days past due) subsequent to restructuring. The following table presents information on loans that entered into default during the three months ended March 31, 2022 that were modified as TDRs during the 12 months preceding payment default:

|  | Loans Modified as TDRs that Subsequently Defaulted During the Three Months Ended March 31, 2022
($ in thousands) |  | Number of Loans |  | Recorded Investment
Commercial: |  |  |  |
C&I |  | 1 |  |  | $ | 3,250 |
Total |  | 1 |  |  | $ | 3,250 |

As of December 31, 2022, the remaining lending commitments to borrowers whose terms of their outstanding owed balances were modified as TDRs was $16.2 million.
Allowance for Credit Losses
The Company has a current expected credit losses framework for all financial assets measured at amortized cost and certain off-balance sheet credit exposures. The Company’s allowance for credit losses, which includes both the allowance for loan losses and the allowance for unfunded credit commitments, is calculated with the objective of maintaining a reserve sufficient to absorb losses inherent in our credit portfolios. The measurement of the allowance for credit losses is based on management’s best estimate of lifetime expected credit losses, and periodic evaluation of the loan portfolio, lending-related commitments, and other relevant factors.
The allowance for credit losses is deducted from the amortized cost basis of a financial asset or a group of financial assets so that the balance sheet reflects the net amount the Company expects to collect. Amortized cost is the principal balance outstanding, net of purchase premiums and discounts, deferred fees and costs, and escrow advances. Subsequent changes in expected credit losses are recognized in net income as a provision for, or a reversal of, credit loss expense.
The allowance for credit losses estimation involves procedures to consider the unique risk characteristics of the portfolio segments. The majority of the Company’s credit exposures that share risk characteristics with other similar exposures are collectively evaluated. The collectively evaluated loans include performing loans and unfunded credit commitments. If an exposure does not share risk characteristics with other exposures, the Company generally estimates expected credit losses on an individual basis.
44

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.
There were no changes to the overall model methodology or the reasonable and supportable forecast period and reversion to the historical loss experience method for the three months ended March 31, 2023 and 2022.
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, size and spread at origination, and risk rating |  | Volatility Index and BBB yield to 10-year U.S. Treasury spread
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 |  | Loss rate approach |  | Immaterial (1)

(1)Macroeconomic variables are included in the qualitative estimate.
Allowance for Loan Losses for the Commercial Loan Portfolio
The Company’s C&I lifetime loss rate model estimates the loss rate expected over the life of a loan. This loss rate is applied to the amortized cost basis, excluding accrued interest receivable, to determine expected credit losses. The lifetime loss rate model’s reasonable and supportable period spans 11 quarters, thereafter, immediately reverting to the historical average loss rate, expressed through the loan-level lifetime loss rate.
To generate estimates of expected loss at the loan level for CRE, multifamily residential, and construction and land loans, projected probabilities of default (“PDs”) and loss given defaults (“LGDs”) are applied to the estimated exposure at default, considering the term and payment structure of the loan. The forecast of future economic conditions returns to long-run historical economic trends within the reasonable and supportable period.
In order to estimate the life of a loan under both models, the contractual term of the loan is adjusted for estimated prepayments based on historical prepayment experience.
Allowance for Loan Losses for the Consumer Loan Portfolio
For single-family residential and HELOC loans, projected PDs and LGDs are applied to the estimated exposure at default, considering the term and payment structure of the loan, to generate estimates of expected loss at the loan level. The forecast of future economic conditions returns to long-run historical economic trends after the reasonable and supportable period. To estimate the life of a loan for the single-family residential and HELOC portfolios, the contractual term of the loan is adjusted for estimated prepayments based on historical prepayment experience. For other consumer loans, the Company uses a loss rate approach.
45

Qualitative Component — The Company also considers the following qualitative factors in the determination of the collectively evaluated allowance if these factors have not already been captured by the quantitative model. Such qualitative factors may include, but are not limited to:
— loan growth trends;
— the volume and severity of past due financial assets, and the volume and severity of adversely classified financial assets;
— the Company’s lending policies and procedures, including changes in lending strategies, underwriting standards, collection, write-off, and recovery practices;
— knowledge of a borrower’s operations;
— the quality of the Company’s credit review system;
— the experience, ability and depth of the Company’s management and associates;
— the effect of other external factors such as the regulatory and legal environments, or changes in technology;
— actual and expected changes in international, national, regional, and local economic and business conditions in which the Company operates; and
— risk factors in certain industry sectors not captured by the quantitative models.
The magnitude of the impact of these factors on the Company’s qualitative assessment of the allowance for credit losses changes from period to period according to changes made by management in its assessment of these factors. The extent to which these factors change may be dependent on whether they are already reflected in quantitative loss estimates during the current period and the extent to which changes in these factors diverge from period to period.
While the Company’s allowance methodologies strive to reflect all relevant credit risk factors, there continues to be uncertainty associated with, but not limited to, potential imprecision in the estimation process due to the inherent time lag of obtaining information and normal variations between expected and actual outcomes. The Company may hold additional qualitative reserves that are designed to provide coverage for losses attributable to such risk.
Allowance for Individually Evaluated Loans
When a loan no longer shares similar risk characteristics with other loans, such as in the case of certain nonaccrual loans, the Company estimates the allowance for loan losses on an individual loan basis. The allowance for loan losses for individually evaluated loans is measured as the difference between the recorded value of the loans and their fair value. For loans evaluated individually, the Company uses one of three different asset valuation measurement methods: (1) the fair value of collateral less costs to sell; (2) the present value of expected future cash flows; or (3) the loan's observable market price. If an individually evaluated loan is determined to be collateral dependent, the Company applies the fair value of the collateral less costs to sell method. If an individually evaluated loan is determined not to be collateral dependent, the Company uses the present value of future cash flows or the observable market value of the loan.
•Collateral-Dependent Loans — The allowance of a collateral-dependent loan is limited to the difference between the recorded value and fair value of the collateral less cost of disposal or sale. As of March 31, 2023, collateral-dependent commercial and consumer loans totaled $18.7 million and $12.3 million, respectively. In comparison, collateral-dependent commercial and consumer loans totaled $47.4 million and $13.4 million, respectively, as of December 31, 2022. The collateral-dependent loans decreased from December 31, 2022, predominantly driven by the adoption of ASU 2022-02 related to the elimination of TDR guidance. The Company's collateral-dependent loans were secured by real estate. As of both March 31, 2023 and December 31, 2022, the collateral value of the properties securing the collateral-dependent loans, net of selling costs, exceeded the recorded value of the loans.
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The following tables summarize the activity in the allowance for loan losses by portfolio segments for the three months ended March 31, 2023 and 2022:

|  | Three Months Ended March 31, 2023
|  | Commercial |  | Consumer |  |
|  |  |  | CRE |  | Residential Mortgage |  |  |  |
($ in thousands) |  | C&I |  | CRE |  | Multifamily Residential |  | Construction and Land |  | Single-Family Residential |  | HELOCs |  | Other Consumer |  | Total
Allowance for loan losses, December 31, 2022 |  | $ | 371,700 |  |  | $ | 149,864 |  |  | $ | 23,373 |  |  | $ | 9,109 |  |  | $ | 35,564 |  |  | $ | 4,475 |  |  | $ | 1,560 |  |  | $ | 595,645 |
Impact of ASU 2022-02 adoption |  | 5,683 |  |  | 337 |  |  | 6 |  |  | — |  |  | 1 |  |  | 1 |  |  | — |  |  | 6,028 |
Allowance for loan losses, January 1, 2023 |  | 377,383 |  |  | 150,201 |  |  | 23,379 |  |  | 9,109 |  |  | 35,565 |  |  | 4,476 |  |  | 1,560 |  |  | 601,673 |
(Reversal of) provision for credit losses on loans | (a) | (678) |  |  | 4,676 |  |  | 1,135 |  |  | 210 |  |  | 12,442 |  |  | 580 |  |  | 155 |  |  | 18,520 |
Gross charge-offs |  | (1,900) |  |  | (6) |  |  | — |  |  | — |  |  | — |  |  | (91) |  |  | (40) |  |  | (2,037) |
Gross recoveries |  | 1,211 |  |  | 196 |  |  | 12 |  |  | 3 |  |  | — |  |  | 6 |  |  | — |  |  | 1,428 |
Total net (charge-offs) recoveries |  | (689) |  |  | 190 |  |  | 12 |  |  | 3 |  |  | — |  |  | (85) |  |  | (40) |  |  | (609) |
Foreign currency translation adjustment |  | 309 |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 309 |
Allowance for loan losses, end of period |  | $ | 376,325 |  |  | $ | 155,067 |  |  | $ | 24,526 |  |  | $ | 9,322 |  |  | $ | 48,007 |  |  | $ | 4,971 |  |  | $ | 1,675 |  |  | $ | 619,893 |

|  | Three Months Ended March 31, 2022
|  | Commercial |  | Consumer |  |
|  |  |  | CRE |  | Residential Mortgage |  |  |  |
($ in thousands) |  | C&I |  | CRE |  | Multifamily Residential |  | Construction and Land |  | Single-Family Residential |  | HELOCs |  | Other Consumer |  | Total
Allowance for loan losses, beginning of period |  | $ | 338,252 |  |  | $ | 150,940 |  |  | $ | 14,400 |  |  | $ | 15,468 |  |  | $ | 17,160 |  |  | $ | 3,435 |  |  | $ | 1,924 |  |  | $ | 541,579 |
Provision for (reversal of) credit losses on loans | (a) | 9,262 |  |  | (3,493) |  |  | 9,657 |  |  | (4,506) |  |  | 926 |  |  | 299 |  |  | 107 |  |  | 12,252 |
Gross charge-offs |  | (11,188) |  |  | (398) |  |  | (1) |  |  | — |  |  | — |  |  | — |  |  | (46) |  |  | (11,633) |
Gross recoveries |  | 3,002 |  |  | 55 |  |  | 120 |  |  | 54 |  |  | 124 |  |  | 14 |  |  | — |  |  | 3,369 |
Total net (charge-offs) recoveries |  | (8,186) |  |  | (343) |  |  | 119 |  |  | 54 |  |  | 124 |  |  | 14 |  |  | (46) |  |  | (8,264) |
Foreign currency translation adjustment |  | 118 |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 118 |
Allowance for loan losses, end of period |  | $ | 339,446 |  |  | $ | 147,104 |  |  | $ | 24,176 |  |  | $ | 11,016 |  |  | $ | 18,210 |  |  | $ | 3,748 |  |  | $ | 1,985 |  |  | $ | 545,685 |

The allowance for unfunded credit commitments is maintained at a level that management believes to be sufficient to absorb estimated expected credit losses related to unfunded credit facilities. See Note 11 — Commitments and Contingencies to the Consolidated Financial Statements in this Form 10-Q for additional information related to unfunded credit commitments. The following table summarizes the activities in the allowance for unfunded credit commitments for the three months ended March 31, 2023 and 2022:

|  | Three Months Ended March 31, |  |
($ in thousands) |  | 2023 |  | 2022 |  |  |  |
Unfunded credit facilities |  |  |  |  |  |  |  |
Allowance for unfunded credit commitments, beginning of period |  | $ | 26,264 |  |  | $ | 27,514 |  |  |  |  |
Provision for (reversal of) credit losses on unfunded credit commitments | (b) | 1,480 |  |  | (4,252) |  |  |  |  |
Foreign currency translation adjustment |  | (3) |  |  | — |  |  |  |  |
Allowance for unfunded credit commitments, end of period |  | $ | 27,741 |  |  | $ | 23,262 |  |  |  |  |
Provision for credit losses | (a) + (b) | $ | 20,000 |  |  | $ | 8,000 |  |  |  |  |

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The allowance for credit losses was $647.6 million as of March 31, 2023, an increase of $25.7 million, compared with $621.9 million as of December 31, 2022. The increase in the allowance for credit losses was primarily driven by the current economic outlook as well as loan growth. The current economic outlook reflected ongoing concerns with inflation, global supply chain disruptions and rising interest rates.
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 that reflect possible worsening or improving economic conditions, respectively. As of March 31, 2023, the Company did not assign a weighting to its upside scenario. Instead, it assigned a slightly higher weighting to its downside scenario, while maintaining the same weighting to its baseline scenario, compared with the weightings assigned as of December 31, 2022. Management remains cautious regarding the economic outlook given the persistently high level of inflation, rising interest rates, the recent strain to the financial system, and continued concerns on global oil prices and supply-chain issues. The baseline GDP growth forecast for the first two quarters of 2023 rose to 2.5% and 1.0%, compared with 0.1% and 0.7% in the December 2022 forecast. Additionally, the GDP growth forecast for the second half of 2023 has been lowered compared with the December 2022 forecast. GDP growth for the full year 2024, was lowered to 1.9% from the previous 2.0% forecasted as of December 31, 2022, reflecting an expected GDP slow-down as interest-sensitive spending weakens amid elevated interest rates. Average unemployment rates are expected to remain stable at 3.5% for 2023. However, job market softening is expected in 2024 and 2025. Compared with the baseline scenario, the downside scenario assumes that the combination of increasing supply shortages, political tensions between China and Taiwan, recent bank failures, still-elevated inflation, and the Federal Reserve’s decision to keep the federal funds rate elevated will lead to a recession in the second quarter of 2023.
Loans Held-for-Sale
Loans held-for-sale consisted of $6.9 million and $25.6 million of C&I loans as of March 31, 2023 and December 31, 2022, 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 2022 Form 10-K for additional details.
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 business, the Company also provides other financial institutions with the ability to participate in commercial loans that it originates, by selling loans to such institutions. Purchased loans may be transferred from held-for-investment to held-for-sale, and write-downs to allowance for loan losses are recorded, when appropriate. The following tables provide information on the carrying value of loans transferred, sold and purchased for the held-for-investment portfolio, during the three months ended March 31, 2023 and 2022:

|  | Three Months Ended March 31, 2023
|  | Commercial |  |  |  | Consumer |  |  |  |  |  |
|  |  |  |  |  |  |  | Residential Mortgage |  |  |  |  |  |
($ in thousands) |  | C&I |  | CRE |  |  |  |  | Single-Family Residential |  |  |  |  |  | Total
Loans transferred from held-for-investment to held-for-sale (1) |  | $ | 156,876 |  |  | $ | 3,600 |  |  |  |  |  | $ | — |  |  |  |  |  |  | $ | 160,476 |
Sales (2)(3)(4) |  | $ | 175,932 |  |  | $ | 3,600 |  |  |  |  |  | $ | — |  |  |  |  |  |  | $ | 179,532 |
Purchases (5) |  | $ | 22,683 |  |  | $ | — |  |  |  |  |  | $ | 131,999 |  |  |  |  |  |  | $ | 154,682 |

48

|  | Three Months Ended March 31, 2022
|  | Commercial |  | Consumer |  |  |  |  |  |
|  |  |  |  |  | Residential Mortgage |  |  |  |  |  |
($ in thousands) |  | C&I |  | CRE |  |  |  |  |  | Single-Family Residential |  |  |  |  |  | Total
Loans transferred from held-for-investment to held-for-sale (1) |  | $ | 111,437 |  |  | $ | 21,780 |  |  |  |  |  |  | $ | — |  |  |  |  |  |  | $ | 133,217 |
Sales (2)(3)(4) |  | $ | 107,474 |  |  | $ | 21,780 |  |  |  |  |  |  | $ | 451 |  |  |  |  |  |  | $ | 129,705 |
Purchases (5) |  | $ | 110,596 |  |  | $ | — |  |  |  |  |  |  | $ | 114,375 |  |  |  |  |  |  | $ | 224,971 |

(1)Includes write-downs of $273 thousand and $59 thousand to the allowance for loan losses related to loans transferred from held-for-investment to held-for-sale for the three months ended March 31, 2023 and 2022, respectively.
(2)Includes originated loans sold of $111.0 million and $112.3 million for the three months ended March 31, 2023 and 2022, respectively. Originated loans sold consisted primarily of C&I loans for both periods.
(3)Includes $68.5 million and $17.4 million of purchased loans sold in the secondary market for the three months ended March 31, 2023 and 2022, respectively.
(4)Net (losses) gains on sales of loans were $(22) thousand and $2.9 million for the three months ended March 31, 2023 and 2022, 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 invests in small business investment companies and new market tax credit projects that qualify for CRA consideration, as well as eligible projects that qualify for renewable energy and historic tax credits. Investments in renewable energy tax credits help promote the development of renewable energy sources, and investments in historic tax credits promote the rehabilitation of historic buildings and economic revitalization of the surrounding areas. For the Company’s accounting policies on tax credit investments, see Note 1 — Summary of Significant Accounting Policies — Significant Accounting Policies — Securities and Investments in Qualified Affordable Housing Partnerships, Tax Credit and Other Investments, Net to the Consolidated Financial Statements in the Company’s 2022 Form 10-K for additional details. For a discussion on the Company’s impairment evaluation and monitoring process of tax credit investments, refer to Note 3 — Fair Value Measurement and Fair Value of Financial Instruments — Investments in Qualified Affordable Housing Partnerships, Tax Credit and Other Investments, Net to the Consolidated Financial Statements in this Form 10-Q.
The following table presents investments and unfunded commitments of the Company’s qualified affordable housing partnerships, tax credit, and other investments as of March 31, 2023 and December 31, 2022:

|  | March 31, 2023 |  | December 31, 2022
($ in thousands) |  | Assets |  | Liabilities - Unfunded Commitments (1) |  | Assets |  | Liabilities - Unfunded Commitments (1)
Investments in qualified affordable housing partnerships, net |  | $ | 388,926 |  |  | $ | 241,371 |  |  | $ | 413,253 |  |  | $ | 266,654 |
Investments in tax credit and other investments, net |  | 352,428 |  |  | 190,010 |  |  | 350,003 |  |  | 185,797 |
Total |  | $ | 741,354 |  |  | $ | 431,381 |  |  | $ | 763,256 |  |  | $ | 452,451 |

(1)Included in Accrued expenses and other liabilities on the Consolidated Balance Sheet.
Investments in tax credit and other investments, net presented in the table above include equity securities that are mutual funds with readily determinable fair values of $24.4 million and $24.0 million as of March 31, 2023 and December 31, 2022, respectively. The Company invests in these mutual funds for CRA purposes. The Company also held equity securities without readily determinable fair values totaling $36.0 million and $36.5 million as of March 31, 2023 and December 31, 2022, respectively.
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The following table presents additional information related to the investments in qualified affordable housing partnerships, tax credit and other investments for the three months ended March 31, 2023 and 2022:

|  | Three Months Ended March 31, |  |  |
($ in thousands) |  | 2023 |  | 2022 |  |  |  |  |  |  |  |
Investments in qualified housing partnerships, net |  |  |  |  |  |  |  |  |  |  |  |
Tax credits and other tax benefits recognized |  | $ | 16,094 |  |  | $ | 12,830 |  |  |  |  |  |  |  |  |
Amortization expense included in income tax expense |  | $ | 12,666 |  |  | $ | 10,025 |  |  |  |  |  |  |  |  |
Investments in tax credit and other investments, net |  |  |  |  |  |  |  |  |  |  |  |
Amortization of tax credit and other investments (1) |  | $ | 10,110 |  |  | $ | 13,900 |  |  |  |  |  |  |  |  |
Unrealized gains (losses) on equity securities with readily determinable values |  | $ | 361 |  |  | $ | (1,161) |  |  |  |  |  |  |  |  |

(1)Includes $174 thousand in impairment recovery related to the $3.7 million cash settlement received from the Company’s investment in DC Solar that was previously written off.
Variable Interest Entities
The majority of both the investments in affordable housing partnerships and tax credit and other investments discussed above are variable interest entities (“VIEs”) where the Company is a limited partner in these partnerships, and an unrelated third party is typically the general partner or managing member who has control over the significant activities of these investments. While the Company’s interest in some of the investments may exceed 50% of the outstanding equity interests, the Company does not consolidate these structures 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.
Note 9 — Goodwill
Total goodwill was $465.7 million as of both March 31, 2023 and December 31, 2022. The Company’s goodwill impairment test is performed annually, as of December 31, or more frequently as events occur or circumstances change that would more-likely-than-not reduce the fair value of a reporting unit below its carrying value. Based on the Company’s annual goodwill impairment testing as of December 31, 2022, there was no impairment. Additional information pertaining to the Company’s accounting policy for goodwill is summarized in Note 1 — Summary of Significant Accounting Policies — Significant Accounting Policies — Goodwill to the Consolidated Financial Statements in the Company’s 2022 Form 10-K. Given the recent volatility in the banking industry, the Company performed an analysis of goodwill during the first quarter of 2023 that consisted of a qualitative assessment to determine if it is more likely than not that the carrying values of each reporting unit exceeded their estimated fair values. The results of this analysis indicated that no impairment of goodwill existed as of March 31, 2023.
Note 10 — Short-Term Borrowings and Long-Term Debt
Short-Term Borrowings — Bank Term Funding Program
As of March 31, 2023, the Company’s short-term borrowings consisted of funds from the BTFP. In March 2023, the Federal Reserve announced the creation of the BTFP, which was designed to provide additional liquidity to U.S. depository institutions. The advances will be limited to the par value of eligible collateral pledged by the borrower, for a term of up to one year. U.S. federally insured depository institutions can request advances under the BTFP until at least March 11, 2024.
The following table presents details of the Company’s short-term borrowings as of March 31, 2023. The Company pledged eligible U.S. government agency and U.S. government-sponsored enterprise debt and mortgage-backed securities, and U.S. Treasury securities as collateral for the borrowings under the BTFP. As of March 31, 2023, the face amount of the Company’s pledged securities to the BTFP totaled $4.84 billion with a remaining borrowing capacity of $339.0 million. There were no short-term borrowings as of December 31, 2022.

|  |  |  |  |  |  |  | March 31, 2023 |  |
($ in thousands) |  |  |  | Interest Rate |  | Maturity Date |  | Amount |  |
Short-term borrowings |  |  |  | 4.37% |  | 3/19/2024 |  | $ | 4,500,000 |  |  |

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Long-Term Debt — Junior Subordinated Debt
Long-term debt totaled $148.0 million as of both March 31, 2023 and December 31, 2022. The interest rates on the junior subordinated debt are based on LIBOR plus the applicable stated margin. The junior subordinated debt had a weighted-average interest rate of 6.39% and 3.49% as of March 31, 2023 and December 31, 2022, respectively, with remaining maturities ranging between 11.6 years and 14.5 years as of March 31, 2023. For additional information on the junior subordinated debt, refer to Note 10 — Federal Home Loan Bank Advances and Long-Term Debt to the Consolidated Financial Statements in the Company’s 2022 Form 10-K.
Note 11 — Commitments and Contingencies
Commitments to Extend Credit — In the normal course of business, the Company provides loan commitments to customers on predetermined terms. These outstanding commitments to extend credit are not reflected in the accompanying Consolidated Financial Statements. While the Company does not anticipate losses from these transactions, commitments to extend credit are included in determining the appropriate level of allowance for unfunded credit commitments, and outstanding commercial letters of credit and standby letters of credit (“SBLCs”).
The following table presents the Company’s credit-related commitments as of March 31, 2023 and December 31, 2022:

|  | March 31, 2023 |  | December 31, 2022
($ in thousands) |  | Expire in One Year or Less |  | Expire After One Year Through Three Years |  | Expire After Three Year Through Five Years |  | Expire After Five Years |  | Total |  | Total
Loan commitments |  | $ | 2,984,815 |  |  | $ | 2,391,830 |  |  | $ | 1,091,375 |  |  | $ | 2,076,229 |  |  | $ | 8,544,249 |  |  | $ | 8,211,571 |
Commercial letters of credit and SBLCs |  | 703,038 |  |  | 567,135 |  |  | 84,709 |  |  | 1,075,196 |  |  | 2,430,078 |  |  | 2,291,966 |
Total |  | $ | 3,687,853 |  |  | $ | 2,958,965 |  |  | $ | 1,176,084 |  |  | $ | 3,151,425 |  |  | $ | 10,974,327 |  |  | $ | 10,503,537 |

Loan commitments are agreements to lend to customers provided there are no violations of any conditions established in the agreement. Commitments generally have fixed expiration dates or other termination clauses and may require maintenance of compensatory balances. 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 March 31, 2023, total letters of credit of $2.43 billion consisted of SBLCs of $2.40 billion and commercial letters of credit of $29.6 million. In comparison, as of December 31, 2022, total letters of credit of $2.29 billion consisted of SBLCs of $2.27 billion and commercial letters of credit of $21.6 million. As of both March 31, 2023 and December 31, 2022, substantially all SBLCs were rated as “Pass” by the Bank’s internal credit risk rating system.
The Company applies the same credit underwriting criteria to extend loans, commitments, and conditional obligations to customers. Each customer’s creditworthiness is evaluated on a case-by-case basis. Collateral and financial guarantees may be obtained based on management’s assessment of a customer’s credit 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 $27.7 million and $26.2 million as of March 31, 2023 and December 31, 2022, respectively.
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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 March 31, 2023 and December 31, 2022:

|  | Maximum Potential Future Payments |  | Carrying Value
|  | March 31, 2023 |  | December 31, 2022 |  | March 31, 2023 |  | December 31, 2022
($ in thousands) |  | Expire in One Year or Less |  |  |  | Expire After One Year Through Three Years |  | Expire After Three Years Through Five Years |  | Expire After Five Years |  | Total |  | Total |  | Total |  | Total
Single-family residential loans sold or securitized with recourse |  | $ | 37 |  |  |  |  | $ | 67 |  |  | $ | — |  |  | $ | 6,404 |  |  | $ | 6,508 |  |  | $ | 6,781 |  |  | $ | 6,508 |  |  | $ | 6,781 |
Multifamily residential loans sold or securitized with recourse |  | — |  |  |  |  | — |  |  | — |  |  | 14,996 |  |  | 14,996 |  |  | 14,996 |  |  | 21,016 |  |  | 21,320 |
Total |  | $ | 37 |  |  |  |  | $ | 67 |  |  | $ | — |  |  | $ | 21,400 |  |  | $ | 21,504 |  |  | $ | 21,777 |  |  | $ | 27,524 |  |  | $ | 28,101 |

The Company’s recourse reserve related to these guarantees is included in the allowance for unfunded credit commitments and totaled $36 thousand and $37 thousand as of March 31, 2023 and December 31, 2022, respectively. The allowance for unfunded credit commitments is included in Accrued expenses and other liabilities on the Consolidated Balance Sheet. The Company continues to experience minimal losses from the single-family and multifamily residential loan portfolios sold or securitized with recourse.
Litigation — The Company is a party to various legal actions arising in the ordinary course of its business. In accordance with ASC 450, Contingencies, the Company accrues reserves for outstanding lawsuits, claims and proceedings when a loss contingency is probable and can be reasonably estimated. The Company estimates the amount of loss contingencies using current available information from legal proceedings, advice from legal counsel and available insurance coverage. Due to the inherent subjectivity of the assessments and unpredictability of the outcomes of the legal proceedings, any amounts accrued or included in this aggregate amount may not represent the ultimate loss to the Company from the legal proceedings in question. Thus, the Company’s exposure and ultimate losses may be higher, and possibly significantly more, than the amounts accrued.
While it is impossible to ascertain the ultimate resolution or range of financial liability, based on information known to the Company, as of March 31, 2023, the Company does not believe there is any pending legal proceeding to which the Company is a party that, individually or in the aggregate, would reasonably be expected to have a material adverse effect on the Company’s financial condition. In light of the inherent uncertainty in legal proceedings, however, there can be no assurance that the ultimate resolution will not exceed established reserves and it is possible that the outcome of a particular matter, or a combination of matters, may be material to the Company’s financial condition for a particular period, depending upon the size of the loss and the Company’s income for that particular period.
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 March 31, 2023 and December 31, 2022, these commitments were $431.4 million and $452.5 million, respectively. These commitments are included in Accrued expenses and other liabilities on the Consolidated Balance Sheet.
Note 12 — Stock Compensation Plans
Pursuant to the Company’s 2021 Stock Incentive Plan, as amended, the Company may issue stock, stock options, restricted stock, restricted stock units (“RSUs”) including performance-based RSUs, stock purchase warrants, stock appreciation rights, phantom stock and dividend equivalents to eligible employees, non-employee directors, consultants, and other service providers of the Company and its subsidiaries. The Company has granted RSUs as its primary incentive awards. There were no outstanding awards other than RSUs as of both March 31, 2023 and December 31, 2022.
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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 months ended March 31, 2023 and 2022:

|  |  |  |  |  |  | Three Months Ended March 31,
($ in thousands) |  |  |  |  |  |  |  |  | 2023 |  | 2022
Stock compensation costs |  |  |  |  |  |  |  |  | $ | 11,075 |  |  | $ | 8,433 |
Related net tax benefits for stock compensation plans |  |  |  |  |  |  |  |  | $ | 8,290 |  |  | $ | 5,159 |

Restricted Stock Units — RSUs are granted under the Company’s long-term incentive plan at no cost to the recipient. RSUs generally cliff vest after three years of continued employment from the date of the grant, and are authorized to settle in shares of the Company’s common stock. Dividends are accrued during the vesting period and paid at the time of vesting. While a portion of RSUs are time-based vesting awards, others vest subject to the attainment of specified performance goals, referred to as “performance-based RSUs.” Performance-based RSUs are granted annually upon approval by the Company’s Compensation Committee based on the performance in the year prior to the grant date of the award. The number of awards that vest can range from zero to a maximum of 200% of the granted number of awards based on the Company’s achievement of specified performance criteria over a performance period of three years. For accounting on stock-based compensation plans, see Note 1 — Summary of Significant Accounting Policies — Significant Accounting Policies — Stock-Based Compensation to the Consolidated Financial Statements of the Company’s 2022 Form 10-K.
The following table presents a summary of the activities for the Company’s time-based and performance-based RSUs that will be settled in shares for the three months ended March 31, 2023. The number of performance-based RSUs stated below reflects the number of awards granted on the grant date.

|  |  |  |  |  | Time-Based RSUs |  | Performance-Based RSUs
|  |  |  |  |  |  |  |  |  | Shares |  | Weighted-Average Grant Date Fair Value |  | Shares |  | Weighted-Average Grant Date Fair Value
Outstanding, January 1, 2023 |  |  |  |  |  |  |  |  |  | 1,296,866 |  |  | $ | 60.77 |  |  | 332,510 |  |  | $ | 60.40 |
Granted |  |  |  |  |  |  |  |  |  | 479,758 |  |  | 74.53 |  |  | 96,271 |  |  | 57.50 |
Vested |  |  |  |  |  |  |  |  |  | (462,248) |  |  | 42.35 |  |  | (152,558) |  |  | 39.39 |
Forfeited |  |  |  |  |  |  |  |  |  | (9,280) |  |  | 70.26 |  |  | — |  |  | — |
Outstanding, March 31, 2023 |  |  |  |  |  |  |  |  |  | 1,305,096 |  |  | $ | 72.28 |  |  | 276,223 |  |  | $ | 70.99 |

As of March 31, 2023, there were $41.8 million of unrecognized compensation costs related to unvested time-based RSUs expected to be recognized over a weighted-average period of 2.2 years, and $24.1 million of unrecognized compensation costs related to unvested performance-based RSUs expected to be recognized over a weighted-average period of 2.3 years.
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Note 13 — Stockholders’ Equity and Earnings Per Share
The following table presents the basic and diluted EPS calculations for the three months ended March 31, 2023 and 2022. For more information on the calculation of EPS, see Note 1 — Summary of Significant Accounting Policies — Significant Accounting Policies — Earnings Per Share to the Consolidated Financial Statements of the Company’s 2022 Form 10-K.

|  | Three Months Ended March 31, |  |  |  |  |  |  |
($ and shares in thousands, except per share data) |  | 2023 |  | 2022 |  |  |  |  |  |  |  |  |  |  |
Basic: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Net income |  | $ | 322,439 |  |  | $ | 237,652 |  |  |  |  |  |  |  |  |  |  |  |
Weighted-average number of shares outstanding |  | 141,112 |  |  | 142,025 |  |  |  |  |  |  |  |  |  |  |  |
Basic EPS |  | $ | 2.28 |  |  | $ | 1.67 |  |  |  |  |  |  |  |  |  |  |  |
Diluted: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Net income |  | $ | 322,439 |  |  | $ | 237,652 |  |  |  |  |  |  |  |  |  |  |  |
Weighted-average number of shares outstanding |  | 141,112 |  |  | 142,025 |  |  |  |  |  |  |  |  |  |  |  |
Add: Dilutive impact of unvested RSUs |  | 801 |  |  | 1,198 |  |  |  |  |  |  |  |  |  |  |  |
Diluted weighted-average number of shares outstanding |  | 141,913 |  |  | 143,223 |  |  |  |  |  |  |  |  |  |  |  |
Diluted EPS |  | $ | 2.27 |  |  | $ | 1.66 |  |  |  |  |  |  |  |  |  |  |  |

Approximately 417 thousand and 123 thousand weighted-average shares of anti-dilutive RSUs were excluded from the diluted EPS computations for the three months ended March 31, 2023 and 2022, respectively.
Note 14 — Accumulated Other Comprehensive Income (Loss)
The following table presents the changes in the components of AOCI balances for the three months ended March 31, 2023 and 2022:

($ in thousands) |  | Debt Securities (1) |  | Cash Flow Hedges |  | Foreign Currency Translation Adjustments (2) |  | Total
Balance, January 1, 2022 |  | $ | (85,703) |  |  | $ | 257 |  |  | $ | (4,935) |  |  | $ | (90,381) |
Net unrealized (losses) gains arising during the period |  | (281,361) |  |  | (23,227) |  |  | 129 |  |  | (304,459) |
Amounts reclassified from AOCI |  | 1,411 |  |  | (1,496) |  |  | — |  |  | (85) |
Changes, net of tax |  | (279,950) |  |  | (24,723) |  |  | 129 |  |  | (304,544) |
Balance, March 31, 2022 |  | $ | (365,653) |  |  | $ | (24,466) |  |  | $ | (4,806) |  |  | $ | (394,925) |
Balance, January 1, 2023 |  | $ | (694,815) |  |  | $ | (49,531) |  |  | $ | (21,283) |  |  | $ | (765,629) |
Net unrealized gains arising during the period |  | 44,275 |  |  | 21,086 |  |  | 2,941 |  |  | 68,302 |
Amounts reclassified from AOCI |  | 9,806 |  |  | 7,527 |  |  | — |  |  | 17,333 |
Changes, net of tax |  | 54,081 |  |  | 28,613 |  |  | 2,941 |  |  | 85,635 |
Balance, March 31, 2023 |  | $ | (640,734) |  |  | $ | (20,918) |  |  | $ | (18,342) |  |  | $ | (679,994) |

(1)Includes after-tax unamortized losses related to AFS debt securities that were transferred to HTM in 2022.
(2)Represents foreign currency translation adjustments related to the Company’s net investment in non-U.S. operations, including related hedges. The functional currency and reporting currency of the Company’s foreign subsidiary is RMB and USD, respectively.
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The following table presents the components of other comprehensive income (loss), reclassifications to net income and the related tax effects for the three months ended March 31, 2023 and 2022:

|  | Three Months Ended March 31,
|  | 2023 |  | 2022
($ in thousands) |  | Before-Tax |  | Tax Effect |  | Net-of-Tax |  | Before-Tax |  | Tax Effect |  | Net-of-Tax
Debt securities: |  |  |  |  |  |  |  |  |  |  |  |
Net unrealized gains (losses) arising during the period |  | $ | 62,860 |  |  | $ | (18,585) |  |  | $ | 44,275 |  |  | $ | (399,462) |  |  | $ | 118,101 |  |  | $ | (281,361) |
Reclassification adjustments: |  |  |  |  |  |  |  |  |  |  |  |
Net realized losses (gains) reclassified into net income (1) |  | 10,000 |  | (2) | (2,956) |  |  | 7,044 |  |  | (1,278) |  |  | 378 |  |  | (900) |
Amortization of unrealized losses on transferred securities (3) |  | 3,921 |  |  | (1,159) |  |  | 2,762 |  |  | 3,281 |  |  | (970) |  |  | 2,311 |
Net change |  | 76,781 |  |  | (22,700) |  |  | 54,081 |  |  | (397,459) |  |  | 117,509 |  |  | (279,950) |
Cash flow hedges: |  |  |  |  |  |  |  |  |  |  |  |
Net unrealized gains (losses) arising during the period |  | 29,843 |  |  | (8,757) |  |  | 21,086 |  |  | (32,609) |  |  | 9,382 |  |  | (23,227) |
Net realized losses (gains) reclassified into net income (4) |  | 10,644 |  |  | (3,117) |  |  | 7,527 |  |  | (2,100) |  |  | 604 |  |  | (1,496) |
Net change |  | 40,487 |  |  | (11,874) |  |  | 28,613 |  |  | (34,709) |  |  | 9,986 |  |  | (24,723) |
Foreign currency translation adjustments, net of hedges: |  |  |  |  |  |  |  |  |  |  |  |
Net unrealized gains (losses) arising during the period |  | 2,626 |  |  | 315 |  |  | 2,941 |  |  | (322) |  |  | 451 |  |  | 129 |
Net change |  | 2,626 |  |  | 315 |  |  | 2,941 |  |  | (322) |  |  | 451 |  |  | 129 |
Other comprehensive income (loss) |  | $ | 119,894 |  |  | $ | (34,259) |  |  | $ | 85,635 |  |  | $ | (432,490) |  |  | $ | 127,946 |  |  | $ | (304,544) |

(1)Pre-tax amounts were reported in Net realized (losses) gains on AFS debt securities on the Consolidated Statement of Income.
(2)Represents the full write-off of an impaired subordinated debt security during the first quarter of 2023.
(3)Represents unrealized losses amortized over the remaining lives of securities that were transferred from the AFS to HTM portfolio.
(4)Pre-tax amounts related to cash flow hedges on CRE loans and long-term borrowings were reported in Interest and dividend income and in Interest expense, respectively, on the Consolidated Statement of Income.
Note 15 — Business Segments
The Company organizes its operations into three reportable operating segments: (1) Consumer and Business Banking; (2) Commercial Banking; and (3) Other. These segments are defined by the type of customers served and the related products and services provided. The segments reflect how financial information is currently evaluated by management. Operating segment results are based on the Company’s internal management reporting process, which reflects assignments and allocations of certain balance sheet and income statement items. The information presented is not indicative of how the segments would perform if they operated as independent entities 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, commercial business lending, working capital lines of credit, trade finance, letters of credit, affordable housing lending, asset-based lending, asset-backed finance, project finance and equipment financing. Commercial deposit products and other financial services include treasury management, foreign exchange services and interest rate and commodity risk hedging.
The remaining centralized functions, including the corporate treasury activities of the Company and eliminations of inter-segment amounts, have been aggregated and included in the Other segment, which provides broad administrative support to the two core segments, namely the Consumer and Business Banking and the Commercial Banking segments.
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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 included 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.
The following tables present the operating results and other key financial measures for the individual operating segments as of and for the three months ended March 31, 2023 and 2022:

($ in thousands) |  | Consumer and Business Banking |  | Commercial Banking |  | Other |  | Total
Three Months Ended March 31, 2023 |  |  |  |  |  |  |  |
Net interest income before provision for credit losses |  | $ | 304,242 |  |  | $ | 236,723 |  |  | $ | 58,896 |  |  | $ | 599,861 |
Provision for credit losses |  | 15,012 |  |  | 4,988 |  |  | — |  |  | 20,000 |
Noninterest income (loss) |  | 26,002 |  |  | 43,599 |  |  | (9,623) |  |  | 59,978 |
Noninterest expense |  | 113,823 |  |  | 87,248 |  |  | 17,376 |  |  | 218,447 |
Segment income before income taxes |  | 201,409 |  |  | 188,086 |  |  | 31,897 |  |  | 421,392 |
Segment net income |  | $ | 142,247 |  |  | $ | 134,457 |  |  | $ | 45,735 |  |  | $ | 322,439 |
As of March 31, 2023 |  |  |  |  |  |  |  |
Segment assets |  | $ | 17,880,525 |  |  | $ | 33,647,465 |  |  | $ | 15,716,908 |  |  | $ | 67,244,898 |

($ in thousands) |  | Consumer and Business Banking |  | Commercial Banking |  | Other |  | Total
Three Months Ended March 31, 2022 |  |  |  |  |  |  |  |
Net interest income (loss) before provision for credit losses |  | $ | 213,214 |  |  | $ | 208,077 |  |  | $ | (5,678) |  |  | $ | 415,613 |
Provision for credit losses |  | 3,104 |  |  | 4,896 |  |  | — |  |  | 8,000 |
Noninterest income |  | 25,199 |  |  | 49,077 |  |  | 5,467 |  |  | 79,743 |
Noninterest expense |  | 96,095 |  |  | 73,395 |  |  | 19,960 |  |  | 189,450 |
Segment income (loss) before income taxes |  | 139,214 |  |  | 178,863 |  |  | (20,171) |  |  | 297,906 |
Segment net income |  | $ | 99,164 |  |  | $ | 127,507 |  |  | $ | 10,981 |  |  | $ | 237,652 |
As of March 31, 2022 |  |  |  |  |  |  |  |
Segment assets |  | $ | 15,338,579 |  |  | $ | 30,199,416 |  |  | $ | 16,703,461 |  |  | $ | 62,241,456 |

56

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

|  |  | Page
| Overview | 58
| Financial Review | 60
| Results of Operations | 61
|  | Net Interest Income | 61
|  | Noninterest Income | 65
|  | Noninterest Expense | 66
|  | Income Taxes | 67
|  | Operating Segment Results | 67
| Balance Sheet Analysis | 69
|  | Debt Securities | 69
|  | Loan Portfolio | 71
|  | Foreign Outstandings | 76
|  | Capital | 77
|  | Deposits and Other Sources of Funding | 78
|  | Regulatory Capital and Ratios | 79
| Risk Management | 80
|  | Credit Risk Management | 81
|  | Liquidity Risk Management | 84
|  | Market Risk Management | 86
| Critical Accounting Policies and Estimates | 90
| Reconciliation of GAAP to Non-GAAP Financial Measures | 91

57

Overview
The following discussion provides information about the results of operations, financial condition, liquidity and capital resources of East West Bancorp, Inc. (referred to herein on an unconsolidated basis as “East West” and on a consolidated basis as the “Company,” “we” or “EWBC”) and its subsidiaries, including its subsidiary bank, East West Bank and its subsidiaries (referred to herein as “East West Bank” or the “Bank”). This information is intended to facilitate the understanding and assessment of significant changes and trends related to the Company’s results of operations and financial condition. This discussion and analysis should be read in conjunction with the Consolidated Financial Statements and the accompanying notes presented elsewhere in this report, and the Company’s Annual Report on Form 10-K for the year ended December 31, 2022, filed with the United States (“U.S.”) Securities and Exchange Commission (“SEC”) on February 27, 2023 (the “Company’s 2022 Form 10-K”).
Organization and Strategy
East West is a bank holding company incorporated in Delaware on August 26, 1998 and is registered under the Bank Holding Company Act of 1956, as amended. The Company commenced business on December 30, 1998 when, pursuant to a reorganization, it acquired all of the voting stock of the Bank, which became its principal asset. The Bank is an independent commercial bank headquartered in California that focuses on the financial service needs of individuals and businesses that operate in both the U.S. and Asia. Through over 120 locations in the U.S. and Asia, the Company provides a full range of consumer and commercial products and services through the following three business segments: (1) Consumer and Business Banking and (2) Commercial Banking, with the remaining operations recorded in (3) Other. The Company’s principal activity is lending to and accepting deposits from businesses and individuals. We are committed to enhancing long-term stockholder value by growing loans, deposits and revenue, improving profitability, and investing for the future while managing risks, expenses and capital. Our business model is built on customer loyalty and engagement, understanding our customers’ financial goals, and meeting our customers’ financial needs through our diverse products and services. We expect our relationship-focused business model to continue generating organic growth from existing customers and to expand our targeted customer bases. As of March 31, 2023, the Company had $67.24 billion in assets and approximately 3,200 full-time equivalent employees. For additional information on our strategy, and the products and services provided by the Bank, see Item 1. Business — Strategy and Banking Services in the Company’s 2022 Form 10-K.
Current Developments
Economic Developments
In response to the recent volatility in the banking industry, the U.S. government intervened to maintain financial stability by implementing a “systemic risk exception” which allowed the Federal Deposit Insurance Corporation (“FDIC”) to protect all the depositors of certain failed banks, while the Board of Governors of the Federal Reserve System (“Federal Reserve”) created a new lending facility to mitigate liquidity pressures on the banking system. Although the broader banking system remains well capitalized, the market value of U.S. Treasury and government-backed mortgage securities held by banks continues to decline due to rising interest rates. Meanwhile, inflationary concerns continue to drive higher interest rates and weigh on the economy. The Federal Reserve’s monetary policy has included multiple interest rate hikes that have slowed the pace of inflation. Despite the slowdown in inflation, the Federal Reserve has indicated that additional measures are necessary to bring inflation in line with its 2% annual target. The combination of higher interest rates, depressed global equity prices, elevated market volatility and a slowdown in global economies has led to concerns of a potential recession. The Company continues to monitor the economy and its effects on the Company’s business, customers, employees, communities and markets.
Further discussion of the potential impacts on the Company’s business due to interest rate hikes have been provided in Item 1A. — Risk Factors — Risks Related to Financial Matters in the Company’s 2022 Form 10-K.
58

LIBOR Transition
London Interbank Offered Rate (“LIBOR”), a benchmark rate that has historically been widely referenced, will no longer be published after June 30, 2023. On January 1, 2022, the Company ceased offering new loans or loan renewals based on LIBOR, and began offering loans based on alternative reference rates (“ARRs”) such as Term Secured Overnight Financing Rate (“SOFR”) and the Bloomberg Short-Term Bank Yield Index. A significant majority of the Company’s LIBOR exposure, predominantly comprised of commercial loans and derivative contracts have been remediated (i.e., amended to reference an ARR either before or immediately after June 2023) or already contains appropriate fallback provisions to transition to an ARR. The remaining LIBOR exposure represents a small minority of the Company’s assets and liabilities. The Company will leverage the appropriate contractual and statutory provisions, including the Adjustable Interest Rate (LIBOR) Act and other relevant legislation, to transition any remaining LIBOR-based product exposures maturing after June 2023 to the appropriate benchmark replacement rates. The Company’s LIBOR transition is anticipated to continue through June 30, 2023.
For additional information related to the potential impact surrounding the transition from LIBOR on the Company’s business, see item 1A. Risk Factors — Risks Related to Financial Matters in the Company’s 2022 Form 10-K. For additional background information on the LIBOR transition, see Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) — Overview in the Company’s 2022 Form 10-K.
Potential Regulatory Reforms in Response to Recent Bank Failures
The recent failures of Silicon Valley Bank, Santa Clara, California, and Signature Bank, New York, New York, in March 2023, and First Republic Bank, San Francisco, California, in May 2023, may lead to regulatory changes and initiatives that could impact the Company. For example, the FDIC has stated that it plans to impose a special deposit insurance assessment on banks in order to recover losses that the FDIC’s Deposit Insurance Fund incurs in the receivership of these institutions. Changes in the financial services industry, including an increase in uninsured deposits and technological advances, have also prompted the FDIC to explore options and potential reforms to the deposit insurance system. Additionally, in response to these bank failures, President Biden has encouraged the federal banking agencies to adopt various reforms, including establishing more stringent capital and liquidity rules and other enhanced prudential standards for banking organizations with $100 billion or more in assets and completing an incentive compensation rule for bank executives pursuant to Section 956 of the Dodd-Frank Act. On April 28, 2023, the Federal Reserve and the FDIC issued reports on the potential causes of failures of Silicon Valley Bank and Signature Bank, respectively. Among the changes discussed, the Federal Reserve and the FDIC highlighted potential changes needed to supervisory approaches for banks of all sizes as well as to regulatory requirements. Currently, it is unclear what actions federal regulatory agencies will take as a result of these failures.
Small Business Lending Data Collection Rule
On March 30, 2023, the Consumer Financial Protection Bureau finalized a rule under section 1071 of the Dodd-Frank Act requiring lenders to collect and report data regarding small business lending activity. The Company is evaluating the impact of the new rule.
Bank Term Funding Program
In March 2023, the Federal Reserve announced the creation of the Bank Term Funding Program (“BTFP”), which was designed to make additional funding available to eligible depository institutions by allowing them to receive short-term advances backed by collateral pledged at par value. See Note 10 — Short-Term Borrowings and Long-Term Debt to the Consolidated Financial Statements and Item 2. MD&A — Balance Sheet Analysis — Deposits and Other Sources of Funding — Other Sources of Funding in this Quarterly Report on Form 10-Q (this “Form 10-Q”) for additional information related to the Company’s borrowings from the BTFP.
59

Financial Review

|  | Three Months Ended March 31, |  |  |  |  |  |  |
($ and shares in thousands, except per share, and ratio data) |  | 2023 |  |  |  | 2022 |  |  |  |  |  |  |  |  |  |  |
Summary of operations: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Net interest income before provision for credit losses |  | $ | 599,861 |  |  |  |  | $ | 415,613 |  |  |  |  |  |  |  |  |  |  |  |
Noninterest income |  | 59,978 |  |  |  |  | 79,743 |  |  |  |  |  |  |  |  |  |  |  |
Total revenue |  | 659,839 |  |  |  |  | 495,356 |  |  |  |  |  |  |  |  |  |  |  |
Provision for credit losses |  | 20,000 |  |  |  |  | 8,000 |  |  |  |  |  |  |  |  |  |  |  |
Noninterest expense |  | 218,447 |  |  |  |  | 189,450 |  |  |  |  |  |  |  |  |  |  |  |
Income before income taxes |  | 421,392 |  |  |  |  | 297,906 |  |  |  |  |  |  |  |  |  |  |  |
Income tax expense |  | 98,953 |  |  |  |  | 60,254 |  |  |  |  |  |  |  |  |  |  |  |
Net income |  | $ | 322,439 |  |  |  |  | $ | 237,652 |  |  |  |  |  |  |  |  |  |  |  |
Per share: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Basic earnings |  | $ | 2.28 |  |  |  |  | $ | 1.67 |  |  |  |  |  |  |  |  |  |  |  |
Diluted earnings |  | $ | 2.27 |  |  |  |  | $ | 1.66 |  |  |  |  |  |  |  |  |  |  |  |
Dividends declared |  | $ | 0.48 |  |  |  |  | $ | 0.40 |  |  |  |  |  |  |  |  |  |  |  |
Weighted-average number of shares outstanding: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Basic |  | 141,112 |  |  |  |  | 142,025 |  |  |  |  |  |  |  |  |  |  |  |
Diluted |  | 141,913 |  |  |  |  | 143,223 |  |  |  |  |  |  |  |  |  |  |  |
Performance metrics: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Return on average assets (“ROA”) |  | 2.01 | % |  |  |  | 1.56 | % |  |  |  |  |  |  |  |  |  |  |
Return on average common equity (“ROE”) |  | 21.15 | % |  |  |  | 16.50 | % |  |  |  |  |  |  |  |  |  |  |
Return on average tangible common equity (“TCE”) (1) |  | 22.94 | % |  |  |  | 18.00 | % |  |  |  |  |  |  |  |  |  |  |
Common dividend payout ratio |  | 21.22 | % |  |  |  | 24.23 | % |  |  |  |  |  |  |  |  |  |  |
Net interest margin |  | 3.96 | % |  |  |  | 2.87 | % |  |  |  |  |  |  |  |  |  |  |
Efficiency ratio (2) |  | 33.11 | % |  |  |  | 38.25 | % |  |  |  |  |  |  |  |  |  |  |
Adjusted efficiency ratio (1) |  | 30.46 | % |  |  |  | 35.34 | % |  |  |  |  |  |  |  |  |  |  |

At period end: |  | March 31, 2023 |  | December 31, 2022
Total assets |  | $ | 67,244,898 |  |  | $ | 64,112,150 |
Total loans |  | $ | 48,924,909 |  |  | $ | 48,228,074 |
Total deposits |  | $ | 54,737,402 |  |  | $ | 55,967,849 |
Common shares outstanding at period-end |  | 141,396 |  |  | 140,948 |
Book value per share |  | $ | 44.62 |  |  | $ | 42.46 |
Tangible book value per share (1) |  | $ | 41.28 |  |  | $ | 39.10 |

(1)For additional information regarding the reconciliation of these non-U.S. Generally Accepted Accounting Principles (“GAAP”) financial measures, refer to Item 2. MD&A — Reconciliation of GAAP to Non-GAAP Financial Measures in this Form 10-Q.
(2)Efficiency ratio is calculated as noninterest expense divided by total revenue.
The Company’s first quarter 2023 net income was $322.4 million, an increase of $84.8 million or 36%, compared with first quarter 2022 net income of $237.7 million. The increase was primarily due to higher net interest income, partially offset by higher income tax and noninterest expense and lower noninterest income. Noteworthy items about the Company’s first quarter 2023 performance included:
•Net interest income growth and net interest margin expansion. First quarter 2023 net interest income before provision for credit losses was $599.9 million, an increase of $184.2 million or 44% from the first quarter of 2022. First quarter 2023 net interest margin of 3.96%, expanded by 109 basis points (“bps”), compared with the first quarter of 2022.
•Expanding profitability. First quarter 2023 ROA, ROE and the return on average TCE of 2.01%, 21.15% and 22.94%, respectively, all expanded year-over-year by 45 bps, 465 bps and 494 bps, respectively. Return on average TCE is a non-GAAP financial measure. For additional details, see the reconciliation of non-GAAP financial measures presented under Item 2. MD&A — Reconciliation of GAAP to Non-GAAP Financial Measures in this Form 10-Q.
60

•Improved efficiency. Efficiency ratio of 33.11% and adjusted efficiency ratio of 30.46% for the first quarter of 2023 both improved year-over-year. Adjusted efficiency ratio is a non-GAAP measure. 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.
•Asset growth. Total assets reached $67.24 billion, growing $3.13 billion or 5% from December 31, 2022, primarily driven by the $2.45 billion or 70% increase in cash and cash equivalents. This increase in on-balance sheet liquidity was in response to the recent volatility in the banking industry and reflects the Company’s conservative liquidity management practices. The increase in cash and cash equivalent was primarily funded with borrowings from the BTFP totaling $4.50 billion as of March 31, 2023.
•Loan growth. Total loans were $48.92 billion as of March 31, 2023, an increase of $696.8 million or 1% from $48.23 billion as of December 31, 2022. This was primarily driven by growth in the residential mortgage and commercial real estate (“CRE”) loan segments.
•Strong capital levels. Stockholders’ equity was $6.31 billion or $44.62 per share as of March 31, 2023, both up 5% from $5.98 billion or $42.46 per share as of December 31, 2022. Tangible book value per share of $41.28 as of March 31, 2023, increased by $2.18 or 6% from $39.10 as of December 31, 2022. Tangible book value per share is a non-GAAP financial measure. For additional details, see the reconciliation of non-GAAP financial measures presented under Item 2. MD&A - Reconciliation of GAAP to non-GAAP Financial Measures in this Form 10-Q.
Results of Operations
Net Interest Income
The Company’s primary source of revenue is net interest income, which is the interest income earned on interest-earning assets less interest expense paid on interest-bearing liabilities. Net interest margin is the ratio of net interest income to average interest-earning assets. Net interest income and net interest margin are impacted by several factors, including changes in average balances and the composition of interest-earning assets and funding sources, market interest rate fluctuations and the slope of the yield curve, repricing characteristics and maturity of interest-earning assets and interest-bearing liabilities, the volume of noninterest-bearing sources of funds, and asset quality.
First quarter 2023 net interest income before provision for credit losses was $599.9 million, an increase of $184.2 million or 44%, compared with $415.6 million for the first quarter of 2022. First quarter 2023 net interest margin was 3.96%, an increase of 109 bps from 2.87% for the first quarter of 2022. The increases in net interest income and net interest margin primarily reflected higher interest-earning asset yields and strong loan growth, partially offset by a higher average cost of deposits. The changes in yields and rates reflected rising benchmark interest rates.
61

Average interest-earning assets were $61.48 billion for the first quarter of 2023, an increase of $2.79 billion or 5% from $58.69 billion for the first quarter of 2022. The increase in average interest-earning assets primarily reflected loan growth, partially offset by decreases in assets purchased under resale agreements (“resale agreements”) and interest-bearing cash and deposits with banks.
The yield on average interest-earning assets for the first quarter of 2023 was 5.51%, an increase of 252 bps from 2.99% for the first quarter of 2022. The year-over-year increase in the yield on average interest-bearing assets primarily resulted from rising benchmark interest rates.
The average loan yield for the first quarter of 2023 was 6.14%, an increase of 251 bps from 3.63% for the first quarter of 2022. The changes in the average loan yield reflected the loan portfolio’s sensitivity to rising benchmark interest rates. Approximately 61% and 65% of loans held-for-investment were variable-rate or hybrid loans in their adjustable-rate period a s of March 31, 2023 and 2022, respectively.
62

Deposits are an important source of funds and impact both net interest income and net interest margin. Average deposits were $54.95 billion for the first quarter of 2023, an increase of $928.6 million or 2% from $54.03 billion for the first quarter of 2022. Average noninterest-bearing deposits were $19.71 billion for the first quarter of 2023, a decrease of $3.72 billion or 16% from $23.43 billion for the first quarter of 2022. Average noninterest-bearing deposits made up 36% and 43% of average deposits for the first quarters of 2023 and 2022, respectively.
The average cost of deposits was 1.60% for the first quarter of 2023, a 150 bps increase from 0.10% for the first quarter of 2022. The increase primarily reflected higher rates paid on time deposits and money market deposits in response to the rising interest rate environment.
The average cost of funds calculation includes deposits, Federal Home Loan Bank (“FHLB”) advances, assets sold under repurchase agreements (“repurchase agreements”), long-term debt and short-term borrowings. For the first quarter of 2023, the average cost of funds was 1.69%, a 157 bps increase from 0.12% for the first quarter of 2022. The increase in the average cost of funds was primarily driven by the increase in the cost of deposits discussed above.
The Company utilizes various tools to manage interest rate risk. Refer to the Interest Rate Risk Management section of Item 2. MD&A — Risk Management — Market Risk Management in this Form 10-Q.
63

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 quarters of 2023 and 2022:

|  | Three Months Ended March 31,
|  | 2023 |  | 2022
($ in thousands) |  | Average Balance |  | Interest |  | Average Yield/ Rate (1) |  | Average Balance |  | Interest |  | Average Yield/ Rate (1)
ASSETS |  |  |  |  |  |  |  |  |  |  |  |
Interest-earning assets: |  |  |  |  |  |  |  |  |  |  |  |
Interest-bearing cash and deposits with banks |  | $ | 3,449,626 |  |  | $ | 35,647 |  |  | 4.19 | % |  | $ | 4,466,012 |  |  | $ | 3,260 |  |  | 0.30 | %
Resale agreements |  | 688,778 |  |  | 4,503 |  |  | 2.65 | % |  | 2,097,998 |  |  | 8,383 |  |  | 1.62 | %
Available-for-sale (“AFS”) debt securities (2)(3) |  | 6,108,825 |  |  | 53,197 |  |  | 3.53 | % |  | 7,969,795 |  |  | 34,469 |  |  | 1.75 | %
Held-to-maturity (“HTM”) debt securities (2)(4) |  | 2,995,677 |  |  | 12,734 |  |  | 1.72 | % |  | 1,968,568 |  |  | 8,198 |  |  | 1.69 | %
Loans (5)(6) |  | 48,149,837 |  |  | 728,386 |  |  | 6.14 | % |  | 42,112,418 |  |  | 377,110 |  |  | 3.63 | %
Restricted equity securities |  | 90,790 |  |  | 1,039 |  |  | 4.64 | % |  | 77,575 |  |  | 609 |  |  | 3.18 | %
Total interest-earning assets |  | $ | 61,483,533 |  |  | $ | 835,506 |  |  | 5.51 | % |  | $ | 58,692,366 |  |  | $ | 432,029 |  |  | 2.99 | %
Noninterest-earning assets: |  |  |  |  |  |  |  |  |  |  |  |
Cash and due from banks |  | 621,104 |  |  |  |  |  |  | 641,882 |  |  |  |  |
Allowance for loan losses |  | (602,754) |  |  |  |  |  |  | (543,345) |  |  |  |  |
Other assets |  | 3,611,721 |  |  |  |  |  |  | 2,967,145 |  |  |  |  |
Total assets |  | $ | 65,113,604 |  |  |  |  |  |  | $ | 61,758,048 |  |  |  |  |
LIABILITIES AND STOCKHOLDERS’ EQUITY |  |  |  |  |  |  |  |  |  |  |  |
Interest-bearing liabilities: |  |  |  |  |  |  |  |  |  |  |  |
Checking deposits |  | $ | 6,493,865 |  |  | $ | 23,174 |  |  | 1.45 | % |  | $ | 6,648,065 |  |  | $ | 1,402 |  |  | 0.09 | %
Money market deposits |  | 11,260,715 |  |  | 76,102 |  |  | 2.74 | % |  | 12,913,336 |  |  | 3,203 |  |  | 0.10 | %
Savings deposits |  | 2,436,587 |  |  | 3,669 |  |  | 0.61 | % |  | 2,930,309 |  |  | 1,704 |  |  | 0.24 | %
Time deposits |  | 15,052,762 |  |  | 113,849 |  |  | 3.07 | % |  | 8,100,890 |  |  | 6,680 |  |  | 0.33 | %
Federal funds purchased and other short-term borrowings |  | 811,551 |  |  | 8,825 |  |  | 4.41 | % |  | 1,866 |  |  | 9 |  |  | 1.96 | %
FHLB advances |  | 500,000 |  |  | 6,430 |  |  | 5.22 | % |  | 160,018 |  |  | 578 |  |  | 1.46 | %
Repurchase agreements |  | 106,785 |  |  | 1,052 |  |  | 4.00 | % |  | 311,984 |  |  | 2,016 |  |  | 2.62 | %
Long-term debt and finance lease liabilities |  | 152,420 |  |  | 2,544 |  |  | 6.77 | % |  | 152,011 |  |  | 824 |  |  | 2.20 | %
Total interest-bearing liabilities |  | $ | 36,814,685 |  |  | $ | 235,645 |  |  | 2.60 | % |  | $ | 31,218,479 |  |  | $ | 16,416 |  |  | 0.21 | %
Noninterest-bearing liabilities and stockholders’ equity: |  |  |  |  |  |  |  |  |  |  |  |
Demand deposits |  | 19,709,980 |  |  |  |  |  |  | 23,432,746 |  |  |  |  |
Accrued expenses and other liabilities |  | 2,405,615 |  |  |  |  |  |  | 1,264,208 |  |  |  |  |
Stockholders’ equity |  | 6,183,324 |  |  |  |  |  |  | 5,842,615 |  |  |  |  |
Total liabilities and stockholders’ equity |  | $ | 65,113,604 |  |  |  |  |  |  | $ | 61,758,048 |  |  |  |  |
Interest rate spread |  |  |  |  |  | 2.91 | % |  |  |  |  |  | 2.78 | %
Net interest income and net interest margin |  |  |  | $ | 599,861 |  |  | 3.96 | % |  |  |  | $ | 415,613 |  |  | 2.87 | %

(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 $9.1 million and $23.5 million for the first quarters of 2023 and 2022, respectively.
(4)Includes the amortization of premiums on HTM debt securities of $18 thousand and $134 thousand for the first quarters of 2023 and 2022, respectively.
(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 $13.7 million and $12.4 million for the first quarters of 2023 and 2022, respectively.
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The following table summarizes the extent to which changes in (1) interest rates, and (2) volume of average interest-earning assets and average interest-bearing liabilities affected the Company’s net interest income for the periods presented. The total change for each category of interest-earning assets and interest-bearing liabilities is segmented into changes attributable to variations in volume and yield/rate. Changes that are not solely due to either volume or yield/rate are allocated proportionally based on the absolute value of the change related to average volume and average yield/rate.

|  | Three Months Ended March 31, |  |  |  |  |  |  |  |  |  |
|  | 2023 vs. 2022 |  |  |  |  |  |
|  |  |  | Changes Due to |  |  |  |  |  |  |  |  |  |  |  |
($ in thousands) |  | Total Change |  | Volume |  | Yield/Rate |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Interest-earning assets: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Interest-bearing cash and deposits with banks |  | $ | 32,387 |  |  | $ | (908) |  |  | $ | 33,295 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Resale agreements |  | (3,880) |  |  | (7,471) |  |  | 3,591 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
AFS debt securities |  | 18,728 |  |  | (9,576) |  |  | 28,304 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
HTM debt securities |  | 4,536 |  |  | 4,362 |  |  | 174 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Loans |  | 351,276 |  |  | 60,480 |  |  | 290,796 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Restricted equity securities |  | 430 |  |  | 117 |  |  | 313 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Total interest and dividend income |  | $ | 403,477 |  |  | $ | 47,004 |  |  | $ | 356,473 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Interest-bearing liabilities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Checking deposits |  | $ | 21,772 |  |  | $ | (33) |  |  | $ | 21,805 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Money market deposits |  | 72,899 |  |  | (462) |  |  | 73,361 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Savings deposits |  | 1,965 |  |  | (331) |  |  | 2,296 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Time deposits |  | 107,169 |  |  | 10,184 |  |  | 96,985 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Federal funds purchased and other short-term borrowings |  | 8,816 |  |  | 8,791 |  |  | 25 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
FHLB advances |  | 5,852 |  |  | 2,654 |  |  | 3,198 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Repurchase agreements |  | (964) |  |  | (1,713) |  |  | 749 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Long-term debt and finance lease liabilities |  | 1,720 |  |  | 2 |  |  | 1,718 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Total interest expense |  | $ | 219,229 |  |  | $ | 19,092 |  |  | $ | 200,137 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Change in net interest income |  | $ | 184,248 |  |  | $ | 27,912 |  |  | $ | 156,336 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |

Noninterest Income
The following table presents the components of noninterest income for the first quarters of 2023 and 2022:

|  | Three Months Ended March 31, |  |  |  |
|  |  |  |  |  | Change from 2022 |  |  |  |  |  |  |  |  |  |  |  |
($ in thousands) |  | 2023 |  | 2022 |  | $ |  | % |  |  |  |  |  |  |  |  |  |  |  |
Lending fees |  | $ | 20,586 |  |  | $ | 19,438 |  |  | $ | 1,148 |  |  | 6% |  |  |  |  |  |  |  |  |  |  |  |
Deposit account fees |  | 21,703 |  |  | 20,315 |  |  | 1,388 |  |  | 7% |  |  |  |  |  |  |  |  |  |  |  |
Interest rate contracts and other derivative income |  | 2,564 |  |  | 11,133 |  |  | (8,569) |  |  | (77)% |  |  |  |  |  |  |  |  |  |  |  |
Foreign exchange income |  | 12,660 |  |  | 12,699 |  |  | (39) |  |  | 0% |  |  |  |  |  |  |  |  |  |  |  |
Wealth management fees |  | 6,304 |  |  | 6,052 |  |  | 252 |  |  | 4% |  |  |  |  |  |  |  |  |  |  |  |
Net (losses) gains on sales of loans |  | (22) |  |  | 2,922 |  |  | (2,944) |  |  | NM |  |  |  |  |  |  |  |  |  |  |  |
Net realized (losses) gains on AFS debt securities |  | (10,000) |  |  | 1,278 |  |  | (11,278) |  |  | NM |  |  |  |  |  |  |  |  |  |  |  |
Other investment income |  | 1,921 |  |  | 1,627 |  |  | 294 |  |  | 18% |  |  |  |  |  |  |  |  |  |  |  |
Other income |  | 4,262 |  |  | 4,279 |  |  | (17) |  |  | 0% |  |  |  |  |  |  |  |  |  |  |  |
Total noninterest income |  | $ | 59,978 |  |  | $ | 79,743 |  |  | $ | (19,765) |  |  | (25)% |  |  |  |  |  |  |  |  |  |  |  |

NM — Not meaningful.
65

Noninterest income comprised 9% of total revenue for the first quarter of 2023, compared with 16% for the first quarter of 2022. First quarter 2023 noninterest income was $60.0 million, a decrease of $19.8 million or 25%, compared with $79.7 million for the same period in 2022. This decrease was primarily due to net realized losses on AFS debt securities and a decrease in interest rate contracts and other derivative income.
The $10.0 million net realized losses on AFS debt securities was due to the write-off of an impaired subordinated debt security during the first quarter of 2023. Net realized gains on AFS debt securities was $1.3 million during the first quarter of 2022.
Interest rate contracts and other derivative income was $2.6 million for the first quarter of 2023, a decrease of $8.6 million or 77%, compared with $11.1 million for the same period in 2022. The decrease was primarily due to unfavorable credit valuation adjustments during the first quarter of 2023, partially offset by an increase in transaction volume.
Noninterest Expense
The following table presents the components of noninterest expense for the first quarters of 2023 and 2022:

|  | Three Months Ended March 31, |  |  |  |
|  |  |  |  |  | Change from 2022 |  |  |  |  |  |  |  |  |  |  |  |
($ in thousands) |  | 2023 |  | 2022 |  | $ |  | % |  |  |  |  |  |  |  |  |  |  |  |
Compensation and employee benefits |  | $ | 129,654 |  |  | $ | 116,269 |  |  | $ | 13,385 |  |  | 12 | % |  |  |  |  |  |  |  |  |  |  |  |
Occupancy and equipment expense |  | 15,587 |  |  | 15,464 |  |  | 123 |  |  | 1 | % |  |  |  |  |  |  |  |  |  |  |  |
Deposit insurance premiums and regulatory assessments |  | 7,910 |  |  | 4,717 |  |  | 3,193 |  |  | 68 | % |  |  |  |  |  |  |  |  |  |  |  |
Deposit account expense |  | 9,609 |  |  | 4,693 |  |  | 4,916 |  |  | 105 | % |  |  |  |  |  |  |  |  |  |  |  |
Data processing |  | 3,347 |  |  | 3,665 |  |  | (318) |  |  | (9) | % |  |  |  |  |  |  |  |  |  |  |  |
Computer software expense |  | 7,360 |  |  | 7,294 |  |  | 66 |  |  | 1 | % |  |  |  |  |  |  |  |  |  |  |  |
Other operating expense |  | 30,998 |  |  | 23,448 |  |  | 7,550 |  |  | 32 | % |  |  |  |  |  |  |  |  |  |  |  |
Amortization of tax credit and other investments |  | 10,110 |  |  | 13,900 |  |  | (3,790) |  |  | (27) | % |  |  |  |  |  |  |  |  |  |  |  |
Repurchase agreements’ extinguishment cost |  | 3,872 |  |  | — |  |  | 3,872 |  |  | 100 | % |  |  |  |  |  |  |  |  |  |  |  |
Total noninterest expense |  | $ | 218,447 |  |  | $ | 189,450 |  |  | $ | 28,997 |  |  | 15 | % |  |  |  |  |  |  |  |  |  |  |  |

First quarter 2023 noninterest expense was $218.4 million, an increase of $29.0 million or 15%, compared with $189.5 million for the same period in 2022. The increase was primarily due to higher compensation and employee benefits, other operating expense, deposit account expense, repurchase agreements’ extinguishment cost and deposit insurance premiums and regulatory assessments, partially offset by a decrease in the amortization of tax credit and other investments.
Compensation and employee benefits were $129.7 million for the first quarter of 2023, an increase of $13.4 million or 12%, compared with $116.3 million for the same period in 2022. The change was primarily due to staffing growth to support the Company’s growing business and annual employee merit increases.
Deposit insurance premiums and regulatory assessments were $7.9 million for the first quarter of 2023, an increase $3.2 million or 68%, compared with $4.7 million for the same period in 2022. The increase was primarily due to a two bps increase in the base deposit insurance assessment rate under the FDIC’s Amended Restoration Plan.
Deposit account expense was $9.6 million for the first quarter of 2023, an increase of $4.9 million or 105%, compared with $4.7 million for the same period in 2022. The change was primarily due to an increase in deposit referral fees which was driven by higher interest rates.
Other operating expense was $31.0 million for the first quarter of 2023, an increase of $7.6 million or 32%, compared with $23.4 million for the same period in 2022. This increase was primarily due to higher interest expense on cash collateral and corporate expenses.
Amortization of tax credit and other investments was $10.1 million for the first quarter of 2023, a decrease of $3.8 million or 27%, compared with $13.9 million for the same period in 2022. The year-over-year change was largely due to the timing of investments that closed, which have differing amortization periods.
66

During the first quarter of 2023, the Company prepaid $300.0 million of repurchase agreements and incurred debt extinguishment costs of $3.9 million. No such expense was incurred in the same period in 2022.
Income Taxes

|  | Three Months Ended March 31, |  |  |  |  |  |
($ in thousands) |  | 2023 |  | 2022 |  | % Change |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Income before income taxes |  | $ | 421,392 |  |  | $ | 297,906 |  |  | 41 | % |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Income tax expense |  | $ | 98,953 |  |  | $ | 60,254 |  |  | 64 | % |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Effective tax rate |  | 23.5 | % |  | 20.2 | % |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |

First quarter 2023 income tax expense was $99.0 million and the effective tax rate was 23.5%, compared with first quarter 2022 income tax expense of $60.3 million and an effective tax rate of 20.2%. The increases in the income tax expense and the effective tax rate primarily reflected a higher level of income in 2023 and the timing of tax credits recognized.
Operating Segment Results
The Company organizes its operations into three reportable operating segments: (1) Consumer and Business Banking; (2) Commercial Banking; and (3) Other. These segments are defined by the type of customers served and the related products and services provided. The segments reflect how financial information is currently evaluated by management. For a description of the Company’s internal management reporting process, including the segment cost allocation methodology, see Note 15 — Business Segments to the Consolidated Financial Statements in this Form 10-Q.
Segment net interest income represents the difference between actual interest earned on assets and interest incurred on liabilities of the segment, adjusted for funding charges or credits through the Company’s internal funds transfer pricing (“FTP”) process.
The following table presents the results by operating segment for the periods indicated:

|  | Three Months Ended March 31,
|  | Consumer and Business Banking |  | Commercial Banking |  | Other
($ in thousands) |  | 2023 |  | 2022 |  | 2023 |  | 2022 |  | 2023 |  | 2022
Total revenue (loss) |  | $ | 330,244 |  |  | $ | 238,413 |  |  | $ | 280,322 |  |  | $ | 257,154 |  |  | $ | 49,273 |  |  | $ | (211) |
Provision for credit losses |  | 15,012 |  |  | 3,104 |  |  | 4,988 |  |  | 4,896 |  |  | — |  |  | — |
Noninterest expense |  | 113,823 |  |  | 96,095 |  |  | 87,248 |  |  | 73,395 |  |  | 17,376 |  |  | 19,960 |
Segment income (loss) before income taxes |  | 201,409 |  |  | 139,214 |  |  | 188,086 |  |  | 178,863 |  |  | 31,897 |  |  | (20,171) |
Segment net income |  | $ | 142,247 |  |  | $ | 99,164 |  |  | $ | 134,457 |  |  | $ | 127,507 |  |  | $ | 45,735 |  |  | $ | 10,981 |

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 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.
67

The following table presents additional financial information for the Consumer and Business Banking segment for the periods indicated:

|  | Three Months Ended March 31,
|  |  |  |  |  | Change from 2022
($ in thousands) |  | 2023 |  | 2022 |  | $ |  | %
Net interest income before provision for credit losses |  | $ | 304,242 |  |  | $ | 213,214 |  |  | $ | 91,028 |  |  | 43 | %
Noninterest income |  | 26,002 |  |  | 25,199 |  |  | 803 |  |  | 3 | %
Total revenue |  | 330,244 |  |  | 238,413 |  |  | 91,831 |  |  | 39 | %
Provision for credit losses |  | 15,012 |  |  | 3,104 |  |  | 11,908 |  |  | 384 | %
Noninterest expense |  | 113,823 |  |  | 96,095 |  |  | 17,728 |  |  | 18 | %
Segment income before income taxes |  | 201,409 |  |  | 139,214 |  |  | 62,195 |  |  | 45 | %
Income tax expense |  | 59,162 |  |  | 40,050 |  |  | 19,112 |  |  | 48 | %
Segment net income |  | $ | 142,247 |  |  | $ | 99,164 |  |  | $ | 43,083 |  |  | 43 | %
Average loans |  | $ | 17,110,917 |  |  | $ | 14,606,446 |  |  | $ | 2,504,471 |  |  | 17 | %
Average deposits |  | $ | 33,848,051 |  |  | $ | 33,113,820 |  |  | $ | 734,231 |  |  | 2 | %

Consumer and Business Banking segment net income increased $43.1 million or 43%, year-over-year to $142.2 million for the first quarter of 2023. The increase reflected revenue growth, partially offset by higher income tax expense, noninterest expense, and provision for credit losses. Net interest income before provision for credit losses increased $91.0 million or 43%, year-over-year to $304.2 million for the first quarter of 2023. The increase was primarily driven by higher deposit fund transfer pricing credits due to the year-over-year increase in market rates. Provision for credit losses increased $11.9 million or 384%, year-over-year to $15.0 million, primarily driven by changes to the macroeconomic outlook and residential mortgage loan growth. Noninterest expense increased $17.7 million or 18%, year-over-year to $113.8 million for the first quarter of 2023. The increase primarily reflected higher compensation and employee benefits expense and allocated corporate overhead expenses.
Commercial Banking
The Commercial Banking segment primarily generates commercial loan and deposit products. Commercial loan products include CRE lending, construction finance, commercial business lending, working capital lines of credit, trade finance, letters of credit, affordable housing lending, asset-based lending, asset-backed finance, project finance and equipment financing. Commercial deposit products and other financial services include treasury management, foreign exchange services, and interest rate and commodity risk hedging.
The following table presents additional financial information for the Commercial Banking segment for the periods indicated:

|  | Three Months Ended March 31,
|  |  |  |  |  | Change from 2022
($ in thousands) |  | 2023 |  | 2022 |  | $ |  | %
Net interest income before provision for credit losses |  | $ | 236,723 |  |  | $ | 208,077 |  |  | $ | 28,646 |  |  | 14 | %
Noninterest income |  | 43,599 |  |  | 49,077 |  |  | (5,478) |  |  | (11) | %
Total revenue |  | 280,322 |  |  | 257,154 |  |  | 23,168 |  |  | 9 | %
Provision for credit losses |  | 4,988 |  |  | 4,896 |  |  | 92 |  |  | 2 | %
Noninterest expense |  | 87,248 |  |  | 73,395 |  |  | 13,853 |  |  | 19 | %
Segment income before income taxes |  | 188,086 |  |  | 178,863 |  |  | 9,223 |  |  | 5 | %
Income tax expense |  | 53,629 |  |  | 51,356 |  |  | 2,273 |  |  | 4 | %
Segment net income |  | $ | 134,457 |  |  | $ | 127,507 |  |  | $ | 6,950 |  |  | 5 | %
Average loans |  | $ | 31,038,920 |  |  | $ | 27,505,972 |  |  | $ | 3,532,948 |  |  | 13 | %
Average deposits |  | $ | 17,282,964 |  |  | $ | 17,736,525 |  |  | $ | (453,561) |  |  | (3) | %

68

Commercial Banking segment net income increased $7.0 million or 5%, year-over-year to $134.5 million for the first quarter of 2023, driven by an increase in net interest income, partially offset by an increase in noninterest expense and a decrease in noninterest income. Net interest income before provision for credit losses increased $28.6 million or 14%, year-over-year to $236.7 million for the first quarter of 2023. The increase was primarily due to higher loan interest income from commercial loan growth and higher deposit fund transfer pricing credits due to the year-over-year increase in market rates. Noninterest income decreased $5.5 million or 11%, to $43.6 million, mainly due to a decrease in interest rate contracts and other derivative income. Noninterest expense increased $13.9 million or 19%, year-over-year to $87.2 million for the first quarter of 2023, primarily due to higher compensation and employee benefits and allocated corporate overhead expenses.
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 table presents additional financial information for the Other segment for the periods indicated:

|  | Three Months Ended March 31,
|  |  |  |  |  | Change from 2022
($ in thousands) |  | 2023 |  | 2022 |  | $ |  | %
Net interest income (loss) before provision for credit losses |  | $ | 58,896 |  |  | $ | (5,678) |  |  | $ | 64,574 |  |  | NM
Noninterest (loss) income |  | (9,623) |  |  | 5,467 |  |  | (15,090) |  |  | (276) | %
Total revenue (loss) |  | 49,273 |  |  | (211) |  |  | 49,484 |  |  | NM
Noninterest expense |  | 17,376 |  |  | 19,960 |  |  | (2,584) |  |  | (13) | %
Segment income (loss) before income taxes |  | 31,897 |  |  | (20,171) |  |  | 52,068 |  |  | 258 | %
Income tax benefit |  | 13,838 |  |  | 31,152 |  |  | (17,314) |  |  | (56) | %
Segment net income |  | $ | 45,735 |  |  | $ | 10,981 |  |  | $ | 34,754 |  |  | 316 | %
Average deposits |  | $ | 3,822,894 |  |  | $ | 3,175,001 |  |  | $ | 647,893 |  |  | 20 | %

NM — Not meaningful.
The Other segment reported segment income before income taxes of $31.9 million and segment net income of $45.7 million for the first quarter of 2023, reflecting an income tax benefit of $13.8 million. The increase in segment income before income taxes was primarily driven by higher net interest income, partially offset by a decrease in noninterest income. The $64.6 million increase in net interest income before provision for credit losses was primarily driven by an increase in interest income from investments due to a higher yield on debt securities and interest-bearing cash with banks, and a higher FTP spread income absorbed by the Other segment. The $15.1 million decrease in noninterest income was mainly due to a $10.0 million write-off of an impaired subordinated debt security during the first quarter of 2023 and a $6.5 million decrease in foreign exchange income.
The income tax expense or benefit in the Other segment consists of the remaining unallocated income tax expense or benefit after allocating income tax expense to the two core segments, and reflects the impact of tax credit investment activity. Income tax expense is allocated to the Consumer and Business Banking and the Commercial Banking segments by applying statutory income tax rates to the segment income before income taxes. Tax credit investment amortization is allocated to the Other segment.
Balance Sheet Analysis
Debt Securities
The Company maintains a portfolio of high quality and liquid debt securities with a moderate duration profile. It closely manages the overall portfolio credit, interest rate and liquidity risks. The Company’s debt securities provide:
•interest income for earnings and yield enhancement;
•funding availability for needs arising during the normal course of business;
•the ability to execute interest rate risk management strategies in response to changes in economic or market conditions; and
•collateral to support pledging agreements as required and/or to enhance the Company’s borrowing capacity.
69

While the Company does not intend to sell its debt securities, it may sell AFS securities in response to changes in the balance sheet and related interest rate risk to meet liquidity, regulatory and strategic requirements.
The following table presents the distribution of the Company’s AFS and HTM debt securities portfolio as of March 31, 2023 and December 31, 2022, and by credit ratings as of March 31, 2023:

|  | March 31, 2023 |  | December 31, 2022 |  |  |  |  |  | Ratings as of March 31, 2023 (1) |
($ in thousands) |  | Amortized Cost |  | Fair Value |  |  | % of Fair Value |  | Amortized Cost |  | Fair Value |  |  | % of Fair Value |  |  |  |  |  | AAA/AA |  | A |  | BBB |  | BB and Lower |  | No Rating (2) |
AFS debt securities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
U.S. Treasury securities |  | $ | 976,615 |  |  | $ | 916,982 |  |  |  | 15 | % |  | $ | 676,306 |  |  | $ | 606,203 |  |  |  | 10 | % |  |  |  |  |  | 100 | % |  | — | % |  | — | % |  | — | % |  | — | % |
U.S. government agency and U.S. government-sponsored enterprise debt securities |  | 515,639 |  |  | 463,860 |  |  |  | 7 | % |  | 517,806 |  |  | 461,607 |  |  |  | 8 | % |  |  |  |  |  | 100 | % |  | — | % |  | — | % |  | — | % |  | — | % |
U.S. government agency and U.S. government-sponsored enterprise mortgage-backed securities |  | 2,561,882 |  |  | 2,269,197 |  |  |  | 36 | % |  | 2,588,446 |  |  | 2,262,464 |  |  |  | 37 | % |  |  |  |  |  | 100 | % |  | — | % |  | — | % |  | — | % |  | — | % |
Municipal securities |  | 305,125 |  |  | 266,015 |  |  |  | 4 | % |  | 303,884 |  |  | 257,099 |  |  |  | 4 | % |  |  |  |  |  | 97 | % |  | — | % |  | — | % |  | — | % |  | 3 | % |
Non-agency mortgage-backed securities |  | 1,185,772 |  |  | 1,035,132 |  |  |  | 16 | % |  | 1,209,714 |  |  | 1,047,553 |  |  |  | 17 | % |  |  |  |  |  | 81 | % |  | — | % |  | — | % |  | — | % |  | 19 | % |
Corporate debt securities |  | 663,502 |  |  | 516,253 |  |  |  | 8 | % |  | 673,502 |  |  | 526,274 |  |  |  | 9 | % |  |  |  |  |  | — | % |  | 33 | % |  | 64 | % |  | 3 | % |  | — | % |
Foreign government bonds |  | 198,517 |  |  | 185,883 |  |  |  | 3 | % |  | 241,165 |  |  | 227,053 |  |  |  | 4 | % |  |  |  |  |  | 57 | % |  | 43 | % |  | — | % |  | — | % |  | — | % |
Asset-backed securities |  | 47,938 |  |  | 46,307 |  |  |  | 1 | % |  | 51,152 |  |  | 49,076 |  |  |  | 1 | % |  |  |  |  |  | 100 | % |  | — | % |  | — | % |  | — | % |  | — | % |
Collateralized loan obligations (“CLOs”) |  | 617,250 |  |  | 601,239 |  |  |  | 10 | % |  | 617,250 |  |  | 597,664 |  |  |  | 10 | % |  |  |  |  |  | 96 | % |  | 4 | % |  | — | % |  | — | % |  | — | % |
Total AFS debt securities |  | $ | 7,072,240 |  |  | $ | 6,300,868 |  |  |  | 100 | % |  | $ | 6,879,225 |  |  | $ | 6,034,993 |  |  |  | 100 | % |  |  |  |  |  | 87 | % |  | 5 | % |  | 5 | % |  | — | % |  | 3 | % |
HTM debt securities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
U.S. Treasury securities |  | $ | 525,432 |  |  | $ | 481,611 |  |  |  | 19 | % |  | $ | 524,081 |  |  | $ | 471,469 |  |  |  | 19 | % |  |  |  |  |  | 100 | % |  | — | % |  | — | % |  | — | % |  | — | % |
U.S. government agency and U.S. government-sponsored enterprise debt securities |  | 999,855 |  |  | 806,341 |  |  |  | 32 | % |  | 998,972 |  |  | 789,412 |  |  |  | 32 | % |  |  |  |  |  | 100 | % |  | — | % |  | — | % |  | — | % |  | — | % |
U.S. government agency and U.S. government-sponsored enterprise mortgage-backed securities |  | 1,278,627 |  |  | 1,060,126 |  |  |  | 43 | % |  | 1,289,106 |  |  | 1,042,310 |  |  |  | 43 | % |  |  |  |  |  | 100 | % |  | — | % |  | — | % |  | — | % |  | — | % |
Municipal securities |  | 189,507 |  |  | 154,596 |  |  |  | 6 | % |  | 189,709 |  |  | 151,980 |  |  |  | 6 | % |  |  |  |  |  | 100 | % |  | — | % |  | — | % |  | — | % |  | — | % |
Total HTM debt securities |  | $ | 2,993,421 |  |  | $ | 2,502,674 |  |  |  | 100 | % |  | $ | 3,001,868 |  |  | $ | 2,455,171 |  |  |  | 100 | % |  |  |  |  |  | 100 | % |  | — | % |  | — | % |  | — | % |  | — | % |
Total debt securities |  | $ | 10,065,661 |  |  | $ | 8,803,542 |  |  |  |  |  | $ | 9,881,093 |  |  | $ | 8,490,164 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |

(1)Credit ratings express opinions about the credit quality of a debt security. The Company determines the credit rating of a security according to the lowest credit rating made available by nationally recognized statistical rating organizations (“NRSROs”). Debt securities rated investment grade, which are those with ratings similar to BBB- or above (as defined by NRSROs), are generally considered by the rating agencies and market participants to be low credit risk. Ratings percentages are allocated based on fair value.
(2)For debt securities not rated by NRSROs, the Company uses other factors which include but are not limited to the priority in collections within the securitization structure, and whether the contractual payments have historically been on time.
As of March 31, 2023, the Company’s AFS and HTM debt securities portfolios had an effective duration (defined as the sensitivity of the value of the portfolio to interest rate changes) of 3.9 and 7.9, respectively, compared with 4.1 and 8.0, respectively, as of December 31, 2022. The slight decrease in both the AFS and HTM effective durations was primarily due to the change in the level and shape of the yield curve as a result of a more bearish economic outlook.
Available-for-Sale Debt Securities
The fair value of the AFS debt securities portfolio totaled $6.30 billion as of March 31, 2023, an increase of $265.9 million or 4% from $6.03 billion as of December 31, 2022. The increase was primarily due to purchases of U.S. Treasury securities. The Company’s AFS debt securities are carried at fair value with noncredit-related unrealized gains and losses, net of tax, reported in Other comprehensive income (loss) on the Consolidated Statement of Comprehensive Income. Pre-tax net unrealized losses on AFS debt securities were $771.4 million as of March 31, 2023, compared with $844.2 million as of December 31, 2022.
70

As of both March 31, 2023 and December 31, 2022, 97% of the carrying value of the AFS debt securities portfolio was rated investment grade by NRSROs. Of the AFS debt securities with gross unrealized losses, substantially all were rated investment grade as of both March 31, 2023 and December 31, 2022. There was no allowance for credit losses provided against the AFS debt securities as of each of March 31, 2023 and December 31, 2022. Additionally, there were no credit losses recognized in earnings for either March 31, 2023 or December 31, 2022.
Held-to-Maturity Debt Securities
All HTM debt securities were issued, guaranteed, or supported by the U.S. government or government-sponsored enterprises. Accordingly, the Company applied a zero credit loss assumption for these securities and no allowance for credit loss was recorded as of both March 31, 2023 and December 31, 2022.
For additional information on AFS and HTM securities, see Note 1 — Summary of Significant Accounting Policies to the Consolidated Financial Statements in the Company’s 2022 Form 10-K and Note 3 — Fair Value Measurement and Fair Value of Financial Instruments and Note 5 — Securities to the Consolidated Financial Statements in this Form 10-Q.
Loan Portfolio
The Company offers a broad range of financial products designed to meet the credit needs of its borrowers. The Company’s loan portfolio segments include commercial loans, which consist of commercial and industrial (“C&I”), CRE, multifamily residential, and construction and land loans, as well as consumer loans, which consist of single-family residential, home equity lines of credit (“HELOCs”) and other consumer loans. Loans held-for-investment totaled $48.92 billion as of March 31, 2023, an increase of $715.6 million or 1% from $48.20 billion as of December 31, 2022. This growth was primarily driven by increases of $430.2 million or 3% in total residential mortgage loans and $363.5 million or 2% in total CRE loans. The composition of the loan portfolio as of March 31, 2023 was similar to the composition as of December 31, 2022.
The following table presents the composition of the Company’s total loan portfolio by loan type as of March 31, 2023 and December 31, 2022:

|  | March 31, 2023 |  | December 31, 2022 |  |
($ in thousands) |  | Amount |  | % |  | Amount |  | % |  |  |  |
Commercial: |  |  |  |  |  |  |  |  |  |  |  |
C&I |  | $ | 15,641,840 |  |  | 32 | % |  | $ | 15,711,095 |  |  | 33 | % |  |  |  |
CRE: |  |  |  |  |  |  |  |  |  |  |  |
CRE |  | 14,019,136 |  |  | 29 | % |  | 13,857,870 |  |  | 29 | % |  |  |  |
Multifamily residential |  | 4,682,280 |  |  | 10 | % |  | 4,573,068 |  |  | 9 | % |  |  |  |
Construction and land |  | 731,394 |  |  | 1 | % |  | 638,420 |  |  | 1 | % |  |  |  |
Total CRE |  | 19,432,810 |  |  | 40 | % |  | 19,069,358 |  |  | 39 | % |  |  |  |
Total commercial |  | 35,074,650 |  |  | 72 | % |  | 34,780,453 |  |  | 72 | % |  |  |  |
Consumer: |  |  |  |  |  |  |  |  |  |  |  |
Residential mortgage: |  |  |  |  |  |  |  |  |  |  |  |
Single-family residential |  | 11,786,998 |  |  | 24 | % |  | 11,223,027 |  |  | 23 | % |  |  |  |
HELOCs |  | 1,988,881 |  |  | 4 | % |  | 2,122,655 |  |  | 5 | % |  |  |  |
Total residential mortgage |  | 13,775,879 |  |  | 28 | % |  | 13,345,682 |  |  | 28 | % |  |  |  |
Other consumer |  | 67,519 |  |  | 0 | % |  | 76,295 |  |  | 0 | % |  |  |  |
Total consumer |  | 13,843,398 |  |  | 28 | % |  | 13,421,977 |  |  | 28 | % |  |  |  |
Total loans held-for-investment (1) |  | 48,918,048 |  |  | 100 | % |  | 48,202,430 |  |  | 100 | % |  |  |  |
Allowance for loan losses |  | (619,893) |  |  |  |  | (595,645) |  |  |  |  |  |  |
Loans held-for-sale (2) |  | 6,861 |  |  |  |  | 25,644 |  |  |  |  |  |  |
Total loans, net |  | $ | 48,305,016 |  |  |  |  | $ | 47,632,429 |  |  |  |  |  |  |

(1)Includes $(75.4) million and $(70.4) million of net deferred loan fees and net unamortized premiums as of March 31, 2023 and December 31, 2022, respectively.
(2)Consists of C&I loans as of both March 31, 2023 and December 31, 2022.
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Commercial
The commercial loan portfolio comprised 72% of total loans as of both March 31, 2023 and December 31, 2022. The Company actively monitors the commercial lending portfolio for elevated levels of credit risk and reviews credit exposures for sensitivity to changing economic conditions.
Commercial — Commercial and Industrial Loans. Total C&I loan commitments were $23.06 billion as of March 31, 2023, an increase of $275.0 million or 1% from $22.78 billion as of December 31, 2022. Total C&I loans were $15.64 billion as of March 31, 2023, a decrease of $69.3 million or less than 0.5% from $15.71 billion as of December 31, 2022, with a utilization rate of 68% as of March 31, 2023, compared with 69% as of December 31, 2022. Total C&I loans made up 32% and 33% of total loans held-for-investment as of March 31, 2023 and December 31, 2022, respectively. The C&I loan portfolio includes loans and financing for businesses across a wide spectrum of industries, comprised of commercial business lending, working capital lines of credit, trade finance, letters of credit, asset-based lending, asset-backed finance, project finance and equipment financing. Additionally, the Company has a portfolio of broadly syndicated C&I loans, which represent revolving or term loan facilities that are marketed and sold primarily to institutional investors. This portfolio totaled $812.1 million and $855.9 million as of March 31, 2023 and December 31, 2022, respectively. The majority of the C&I loans had variable interest rates as of both March 31, 2023 and December 31, 2022.
The C&I portfolio is well-diversified by industry. The Company monitors concentrations within the C&I loan portfolio by industry and customer exposure, and has exposure limits by industry and loan product. The following charts illustrate the industry mix within the Company’s C&I loan portfolio as of March 31, 2023 and December 31, 2022.
(1)Includes loans held-for-sale.
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Commercial — Total Commercial Real Estate Loans. Total CRE loans totaled $19.43 billion as of March 31, 2023, which grew by $363.5 million or 2% from $19.07 billion as of December 31, 2022, and accounted for 40% of total loans held-for-investment as of March 31, 2023, compared with 39% as of December 31, 2022. The total CRE portfolio consists of CRE, multifamily residential, and construction and land loans, and affordable housing lending. The increase in total CRE loans was driven by well-diversified growth across our major property types, partially offset by a decrease in office CRE loans. The Company’s underwriting parameters for CRE loans are established in compliance with supervisory guidance, including: property type, geography and loan-to-value (“LTV”). The consistency of the Company’s low LTV underwriting standards has historically resulted in lower credit losses.
The Company’s total CRE loan portfolio is well-diversified by property type with an average CRE loan size of $2.8 million as of both March 31, 2023 and December 31, 2022. The following table summarizes the Company’s total CRE loans by property type as of March 31, 2023 and December 31, 2022:

|  | March 31, 2023 |  | December 31, 2022
($ in thousands) |  | Amount |  | % |  | Amount |  | %
Property types: |  |  |  |  |  |  |  |
Retail (1) |  | $ | 4,144,837 |  |  | 21 | % |  | $ | 4,075,769 |  |  | 22 | %
Multifamily |  | 4,682,280 |  |  | 24 | % |  | 4,573,067 |  |  | 24 | %
Office (1) |  | 2,376,552 |  |  | 12 | % |  | 2,522,554 |  |  | 13 | %
Industrial (1) |  | 3,661,352 |  |  | 19 | % |  | 3,617,086 |  |  | 19 | %
Hotel (1) |  | 2,152,237 |  |  | 11 | % |  | 2,085,910 |  |  | 11 | %
Healthcare (1) |  | 836,826 |  |  | 4 | % |  | 796,577 |  |  | 4 | %
Construction and land |  | 731,394 |  |  | 4 | % |  | 638,420 |  |  | 3 | %
Other (1) |  | 847,332 |  |  | 5 | % |  | 759,975 |  |  | 4 | %
Total CRE loans |  | $ | 19,432,810 |  |  | 100 | % |  | $ | 19,069,358 |  |  | 100 | %

(1)Included in CRE loans, which is a subset of Total CRE loans.
The weighted-average LTV ratio of the total CRE loan portfolio was 51% as of both March 31, 2023 and December 31, 2022. Weighted average LTV is based on the most recent LTV, which is based on the latest available appraisal and current loan commitment. Approximately 90% of total CRE loans had an LTV ratio of 65% or lower as of both March 31, 2023 and December 31, 2022.
The following tables provide a summary of the Company’s CRE, multifamily residential, and construction and land loans by geography as of March 31, 2023 and December 31, 2022. The distribution of the total CRE loan portfolio reflects the Company’s geographical branch footprint, which is primarily concentrated in California:

|  | March 31, 2023
($ in thousands) |  | CRE |  | % |  | Multifamily Residential |  | % |  | Construction and Land |  | % |  | Total CRE |  | %
Geographic markets: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Southern California |  | $ | 7,265,568 |  |  |  |  | $ | 2,269,854 |  |  |  |  | $ | 258,852 |  |  |  |  | $ | 9,794,274 |  |  |
Northern California |  | 2,739,749 |  |  |  |  | 917,513 |  |  |  |  | 248,528 |  |  |  |  | 3,905,790 |  |  |
California |  | 10,005,317 |  |  | 71 | % |  | 3,187,367 |  |  | 68 | % |  | 507,380 |  |  | 69 | % |  | 13,700,064 |  |  | 71 | %
Texas |  | 1,144,156 |  |  | 8 | % |  | 413,534 |  |  | 9 | % |  | 13,384 |  |  | 2 | % |  | 1,571,074 |  |  | 8 | %
New York |  | 673,182 |  |  | 5 | % |  | 213,656 |  |  | 5 | % |  | 108,851 |  |  | 15 | % |  | 995,689 |  |  | 5 | %
Washington |  | 445,604 |  |  | 3 | % |  | 192,710 |  |  | 4 | % |  | 17,616 |  |  | 3 | % |  | 655,930 |  |  | 3 | %
Arizona |  | 296,275 |  |  | 2 | % |  | 107,916 |  |  | 2 | % |  | 9,521 |  |  | 1 | % |  | 413,712 |  |  | 2 | %
Nevada |  | 178,916 |  |  | 1 | % |  | 107,874 |  |  | 2 | % |  | 27,335 |  |  | 4 | % |  | 314,125 |  |  | 2 | %
Other markets |  | 1,275,686 |  |  | 10 | % |  | 459,223 |  |  | 10 | % |  | 47,307 |  |  | 6 | % |  | 1,782,216 |  |  | 9 | %
Total loans |  | $ | 14,019,136 |  |  | 100 | % |  | $ | 4,682,280 |  |  | 100 | % |  | $ | 731,394 |  |  | 100 | % |  | $ | 19,432,810 |  |  | 100 | %

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

Because 71% of total CRE loans were concentrated in California as of both March 31, 2023 and December 31, 2022, changes in California’s economy and real estate values could have a significant impact on the collectability of these loans and the required level of allowance for loan losses. For additional information related to the higher degree of risk from a downturn in the California real estate markets, see Item 1A. Risk Factors — Risks Related to Geopolitical Uncertainties to the Company’s 2022 Form 10-K.
Commercial — Commercial Real Estate Loans. The Company focuses on providing financing to experienced real estate investors and developers who have moderate levels of leverage, many of whom are long-time customers of the Bank. CRE loans totaled $14.02 billion as of March 31, 2023, compared with $13.86 billion as of December 31, 2022, and accounted for 29% of total loans held-for-investment as of both dates. Interest rates on CRE loans may be fixed, variable or hybrid. As of March 31, 2023, 64% of our CRE portfolio was variable rate, of which 47% had customer-level interest rate derivative contracts in place. These are hedging contracts offered by the Company to help our customers manage their interest rate risk while the Bank's own exposure remained variable rate. In comparison, as of December 31, 2022, 65% of our CRE portfolio was variable rate, of which 47% had customer-level interest rate derivative contracts in place. Loans are underwritten with conservative standards for cash flows, debt service coverage and LTV.
Owner-occupied properties comprised 21% and 20% of the CRE loans as of March 31, 2023 and December 31, 2022, 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 $4.68 billion as of March 31, 2023, compared with $4.57 billion as of December 31, 2022, and accounted for 10% and 9% of total loans held-for-investment as of March 31, 2023 and December 31, 2022, respectively. The Company offers a variety of first lien mortgages, including fixed- and variable-rate loans, as well as hybrid loans with interest rates that adjust annually after an initial fixed rate period of three to ten years. As of March 31, 2023, 55% of our multifamily residential loan portfolio was variable rate, of which 35% had customer-level interest rate derivative contracts in place. These are hedging contracts offered by the Company to help our customers manage their interest rate risk while the Bank's own exposure remained variable rate. In comparison, as of December 31, 2022, 57% of our multifamily residential loan portfolio was variable rate, of which 34% had customer-level interest rate derivative contracts in place.
Commercial — Construction and Land Loans. Construction and land loans provide financing for a portfolio of projects diversified by real estate property type. Construction and land loans totaled $731.4 million as of March 31, 2023, compared with $638.4 million as of December 31, 2022, and accounted for 1% of total loans held-for-investment as of both dates. Construction loan exposure was made up of $609.2 million in loans outstanding, plus $668.5 million in unfunded commitments as of March 31, 2023, compared with $536.8 million in loans outstanding, plus $611.4 million in unfunded commitments as of December 31, 2022. Land loans totaled $122.2 million as of March 31, 2023, compared with $101.7 million as of December 31, 2022.
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Consumer
Residential mortgage loans are primarily originated through the Bank’s branch network. The following tables summarize the Company’s single-family residential and HELOC loan portfolios by geography as of March 31, 2023 and December 31, 2022. The average total residential loan size was $434 thousand as of both dates:

|  | March 31, 2023
($ in thousands) |  | Single-Family Residential |  | % |  | HELOCs |  | % |  | Total Residential Mortgage |  | %
Geographic markets: |  |  |  |  |  |  |  |  |  |  |  |
Southern California |  | $ | 4,367,943 |  |  |  |  | $ | 899,214 |  |  |  |  | $ | 5,267,157 |  |  |
Northern California |  | 1,381,289 |  |  |  |  | 452,056 |  |  |  |  | 1,833,345 |  |  |
California |  | 5,749,232 |  |  | 49 | % |  | 1,351,270 |  |  | 68 | % |  | 7,100,502 |  |  | 52 | %
New York |  | 4,062,782 |  |  | 34 | % |  | 272,715 |  |  | 14 | % |  | 4,335,497 |  |  | 31 | %
Washington |  | 655,327 |  |  | 5 | % |  | 226,904 |  |  | 11 | % |  | 882,231 |  |  | 6 | %
Massachusetts |  | 313,153 |  |  | 3 | % |  | 82,003 |  |  | 4 | % |  | 395,156 |  |  | 3 | %
Georgia |  | 338,646 |  |  | 3 | % |  | 19,948 |  |  | 1 | % |  | 358,594 |  |  | 3 | %
Texas |  | 351,105 |  |  | 3 | % |  | — |  |  | — | % |  | 351,105 |  |  | 3 | %
Nevada |  | 301,936 |  |  | 3 | % |  | 36,041 |  |  | 2 | % |  | 337,977 |  |  | 2 | %
Other markets |  | 14,817 |  |  | 0 | % |  | — |  |  | — | % |  | 14,817 |  |  | 0 | %
Total |  | $ | 11,786,998 |  |  | 100 | % |  | $ | 1,988,881 |  |  | 100 | % |  | $ | 13,775,879 |  |  | 100 | %
Lien priority: |  |  |  |  |  |  |  |  |  |  |  |
First mortgage |  | $ | 11,786,998 |  |  | 100 | % |  | $ | 1,627,886 |  |  | 82 | % |  | $ | 13,414,884 |  |  | 97 | %
Junior lien mortgage |  | — |  |  | — | % |  | 360,995 |  |  | 18 | % |  | 360,995 |  |  | 3 | %
Total |  | $ | 11,786,998 |  |  | 100 | % |  | $ | 1,988,881 |  |  | 100 | % |  | $ | 13,775,879 |  |  | 100 | %

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

75

Consumer — Single-Family Residential Loans. Single-family residential loans totaled $11.79 billion or 24% of total loans held-for-investment as of March 31, 2023, compared with $11.22 billion or 23% of total loans held-for-investment as of December 31, 2022. Single-family residential loans increased $564.0 million or 5% from December 31, 2022, primarily driven by organic growth in mortgages and residential properties in California and New York. The Company was in a first lien position for all of its single-family residential loans as of both March 31, 2023 and December 31, 2022. Many of these loans are reduced documentation loans, for which a substantial down payment is required, resulting in a low LTV ratio at origination, typically 65% or less. The weighted-average LTV ratio was 53% as of both dates. These loans have historically experienced low delinquency and loss rates. The Company offers a variety of single-family residential first lien mortgage loan programs, including fixed- and variable-rate loans, as well as hybrid loans with interest rates that adjust on a regular basis, typically annually, after an initial fixed rate period.
Consumer — Home Equity Lines of Credit. Total HELOC commitments were $3.49 billion as of March 31, 2023, an increase of $108.0 million or 3% from $3.38 billion, with a utilization rate of 36% as of March 31, 2023, compared with 39% as of December 31, 2022. Unfunded HELOC commitments are unconditionally cancellable. HELOCs outstanding totaled $1.99 billion or 4% of total loans held-for-investment as of March 31, 2023, compared with $2.12 billion or 5% of total loans held-for-investment as of December 31, 2022. HELOCs outstanding decreased $133.8 million or 6% from December 31, 2022. The Company was in a first lien position for 82% and 83% of total outstanding HELOCs as of March 31, 2023 and December 31, 2022, respectively. The weighted-average LTV ratio was 49% on HELOC commitments as of both March 31, 2023 and December 31, 2022. Weighted-average LTV ratio represents the loan’s balance divided by the estimated current property value. For junior lien home equity loans, combined LTV ratios are used for junior lien home equity products. Many of these loans are reduced documentation loans, for which a substantial down payment is required, resulting in a low LTV ratio at origination, typically 65% or less. As a result, these loans have historically experienced low delinquency and loss rates. Substantially all of the Company’s HELOCs were variable-rate loans as of both March 31, 2023 and December 31, 2022.
All originated commercial and consumer loans are subject to the Company’s conservative underwriting guidelines and loan origination standards. Management believes that the Company’s underwriting criteria and procedures adequately consider the unique risks associated with these products. The Company conducts a variety of quality control procedures and periodic audits, including the review of lending and legal requirements, to ensure that the Company is in compliance with these requirements.
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 March 31, 2023 and December 31, 2022:

|  | March 31, 2023 |  | December 31, 2022
($ in thousands) |  | Amount |  | % of Total Consolidated Assets |  | Amount |  | % of Total Consolidated Assets
Hong Kong branch: |  |  |  |  |  |  |  |
Cash and cash equivalents |  | $ | 611,510 |  |  | 1 | % |  | $ | 911,784 |  |  | 1 | %
Interest-bearing deposits with banks |  | $ | — |  |  | — | % |  | $ | 28,772 |  |  | 0 | %
AFS debt securities (1) |  | $ | 586,296 |  |  | 1 | % |  | $ | 281,804 |  |  | 0 | %
Loans held-for-investment (2) |  | $ | 972,736 |  |  | 1 | % |  | $ | 968,450 |  |  | 2 | %
Total assets |  | $ | 2,181,807 |  |  | 3 | % |  | $ | 2,212,606 |  |  | 3 | %
Subsidiary bank in China: |  |  |  |  |  |  |  |
Cash and cash equivalents |  | $ | 592,076 |  |  | 1 | % |  | $ | 556,656 |  |  | 1 | %
AFS debt securities (3) |  | $ | 80,061 |  |  | 0 | % |  | $ | 122,053 |  |  | 0 | %
Loans held-for-investment (2) |  | $ | 1,191,178 |  |  | 2 | % |  | $ | 1,170,437 |  |  | 2 | %
Total assets |  | $ | 1,853,752 |  |  | 3 | % |  | $ | 1,836,811 |  |  | 3 | %

(1)Comprised of U.S. Treasury securities and foreign government bonds as of both March 31, 2023 and December 31, 2022.
(2)Primarily comprised of C&I loans as of both March 31, 2023 and December 31, 2022.
(3)Comprised of foreign government bonds as of both March 31, 2023 and December 31, 2022.
76

The following table presents the total revenue generated by the Company’s overseas offices for the first quarters of 2023 and 2022:

|  | Three Months Ended March 31, |
|  | 2023 |  | 2022 |
($ in thousands) |  | Amount |  | % of Total Consolidated Revenue |  | Amount |  | % of Total Consolidated Revenue |
Hong Kong Branch: |  |  |  |  |  |  |  |  |
Total revenue |  | $ | 15,318 |  |  | 2 | % |  | $ | 7,341 |  |  | 1 | % |
Subsidiary Bank in China: |  |  |  |  |  |  |  |  |
Total revenue |  | $ | 7,885 |  |  | 1 | % |  | $ | 7,866 |  |  | 2 | % |

Capital
The Company maintains a strong capital base to support its anticipated asset growth, operating needs, and credit risks, and to ensure that the Company and the Bank are in compliance with all regulatory capital guidelines. The Company engages in regular capital planning processes on at least an annual basis to optimize the use of available capital and to appropriately plan for future capital needs, allocating capital to existing and future business activities. Furthermore, the Company conducts capital stress tests as part of its capital planning process. The stress tests enable the Company to assess the impact of adverse changes in the economy and interest rates on its capital base.
The Company’s stockholders’ equity was $6.31 billion as of March 31, 2023, an increase of $324.7 million or 5% from $5.98 billion as of December 31, 2022. The increase in the Company’s stockholders’ equity was primarily due to $322.4 million in net income and a positive change in accumulated other comprehensive income (“AOCI”) of $85.6 million, partially offset by $68.4 million in common dividends declared. The positive change in AOCI was primarily due to increased unrealized gains in AFS debt securities and cash flow hedges. 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 per share was $44.62 as of March 31, 2023, an increase of 5% from $42.46 per share as of December 31, 2022, primarily as a result of the factors described above. Tangible book value per share was $41.28 as of March 31, 2023, compared with $39.10 as of December 31, 2022. For additional details, see the reconciliation of non-GAAP measures presented under Item 2. MD&A — Reconciliation of GAAP to Non-GAAP Financial Measures in this Form 10-Q.
The Company paid common stock cash dividends of $0.48 and $0.40 per share during the first quarter of 2023 and 2022, respectively. In April 2023, the Company’s Board of Directors declared second quarter 2023 cash dividend of $0.48 per share. The dividend is payable on May 15, 2023, to stockholders of record as of May 1, 2023.
77

Deposits and Other Sources of Funding
Deposits are the Company’s primary source of funding, the cost of which has a significant impact on the Company’s net interest income and net interest margin. Additional funding is provided by short- and long-term borrowings, and long-term debt. See Item 2. MD&A — Risk Management — Liquidity Risk Management — Liquidity in this Form 10-Q for a discussion of the Company’s liquidity management. The following table summarizes the Company’s sources of funding as of March 31, 2023 and December 31, 2022:

|  | March 31, 2023 |  | December 31, 2022 |  | Change
($ in thousands) |  | Amount |  | % |  | Amount |  | % |  | $ |  | %
Deposits: |  |  |  |  |  |  |  |  |  |  |  |
Noninterest-bearing demand |  | $ | 18,327,320 |  |  | 34 | % |  | $ | 21,051,090 |  |  | 38 | % |  | $ | (2,723,770) |  |  | (13) | %
Interest-bearing checking |  | 8,742,580 |  |  | 16 | % |  | 6,672,165 |  |  | 12 | % |  | 2,070,415 |  |  | 31 | %
Money market |  | 9,293,114 |  |  | 17 | % |  | 12,265,024 |  |  | 22 | % |  | (2,971,910) |  |  | (24) | %
Savings |  | 2,280,562 |  |  | 4 | % |  | 2,649,037 |  |  | 4 | % |  | (368,475) |  |  | (14) | %
Time deposits |  | 16,093,826 |  |  | 29 | % |  | 13,330,533 |  |  | 24 | % |  | 2,763,293 |  |  | 21 | %
Total deposits |  | $ | 54,737,402 |  |  | 100 | % |  | $ | 55,967,849 |  |  | 100 | % |  | $ | (1,230,447) |  |  | (2) | %
Other Funds: |  |  |  |  |  |  |  |  |  |  |  |
Short-term borrowings |  | $ | 4,500,000 |  |  | 97 | % |  | $ | — |  |  | — | % |  | $ | 4,500,000 |  |  | 100 | %
Repurchase agreements |  | — |  |  | — | % |  | 300,000 |  |  | 67 | % |  | (300,000) |  |  | (100) | %
Long-term debt |  | 148,022 |  |  | 3 | % |  | 147,950 |  |  | 33 | % |  | 72 |  |  | 0 | %
Total other funds |  | $ | 4,648,022 |  |  | 100 | % |  | $ | 447,950 |  |  | 100 | % |  | $ | 4,200,072 |  |  | NM
Total sources of funds |  | $ | 59,385,424 |  |  |  |  | $ | 56,415,799 |  |  |  |  | $ | 2,969,625 |  |  | 5 | %

NM — Not meaningful.
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 $54.74 billion as of March 31, 2023, a decrease of $1.23 billion or 2% from $55.97 billion as of December 31, 2022. The decrease in deposits was primarily due to decreases in money market and noninterest-bearing demand accounts which reflected changing client behavior due to high interest rates as well as the recent events that impacted the banking industry. The decrease was partially offset by increases in time deposits and interest-bearing checking deposits. The growth in time deposits reflected a successful branch-based Lunar New Year certificate of deposit campaign. Noninterest-bearing demand deposits comprised 34% and 38% of total deposits as of March 31, 2023 and December 31, 2022, respectively.
As of March 31, 2023, the Company’s domestic deposits were $52.30 billion, of which insured or otherwise collateralized deposits were estimated at $29.49 billion. In comparison, as of December 31, 2022, the Company’s domestic deposits were $53.23 billion, of which insured or otherwise collateralized deposits were estimated at $26.48 billion. The Company’s domestic uninsured deposit ratio improved to 44% as of March 31, 2023, compared with 50% as of December 31, 2022. The Company maintains a granular and relationship-based deposit base, which is well diversified by industry and customer type. The Company gathers deposits through its more than 120 retail branches and locations in the U.S. and Asia. As of March 31, 2023, total commercial deposits, state and public agency, brokered and foreign office deposits totaled $36.72 billion, or 67% of total deposits, and comprised approximately 98,000 accounts with an approximate average account size of $375,000. Commercial deposit accounts were diversified across various industry sectors, with no one sector representing more than 10% of deposits. As of March 31, 2023, $18.02 billion or 33% of total deposits were consumer deposits and comprised over 468,000 accounts with an approximate average account size of $40,000.
Additional information regarding the impact of deposits on net interest income, with a comparison of average deposit balances and rates, is provided in Item 2. MD&A — Results of Operations — Net Interest Income in this Form 10-Q. See also the discussion of the impact of deposits on liquidity at Item 2. MD&A — Liquidity Risk Management — Liquidity in this Form 10-Q.
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Other Sources of Funding
The Company had $4.50 billion of short-term borrowings outstanding as of March 31, 2023, which consisted of funds from the BTFP, which were more cost effective than other borrowing sources and have a positive carry when left as cash placed at the Federal Reserve Bank. There were no short-term borrowings outstanding as of December 31, 2022. Refer to Note 10 — Short-Term Borrowings and Long-Term Debt to the Consolidated Financial Statements in this Form 10-Q for additional information on the BTFP and the Company’s related borrowings.
Repurchase agreements were $300.0 million as of December 31, 2022. During the first quarter of 2023, the Company recorded $3.9 million of charges related to the extinguishment of $300.0 million of repurchase agreements. Repurchase agreements are accounted for as collateralized financing transactions and recorded as liabilities based on the values at which the assets are sold. 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 the 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 $148.0 million as of both March 31, 2023 and December 31, 2022. Long-term debt consists of junior subordinated debt, which qualifies as Tier 2 capital for regulatory capital purposes. Refer to Note 10 — Short-Term Borrowings and Long-Term Debt to the Consolidated Financial Statements in this Form 10-Q for additional information on the junior subordinated debt.
Regulatory Capital and Ratios
The federal banking agencies have risk-based capital adequacy requirements intended to ensure that banking organizations maintain capital that is commensurate with the degree of risk associated with their operations. The Company and the Bank are each subject to these regulatory capital adequacy requirements. See Item 1. Business — Supervision and Regulation — Regulatory Capital Requirements and Regulatory Capital-Related Development in the Company’s 2022 Form 10-K for additional details.
The Company adopted Accounting Standards Update 2016-13 on January 1, 2020, which requires the measurement of the allowance for credit losses to be based on management’s best estimate of lifetime expected credit losses inherent in the Company’s relevant financial assets. The Company has elected the phase-in option provided by a final rule that delays an estimate of the current expected credit losses (“CECL”) effect on regulatory capital for two years and phases in the impact over three years. The rule permits certain banking organizations to exclude from regulatory capital the initial adoption impact of CECL, plus 25% of the cumulative changes in the allowance for credit losses under CECL for each period until December 31, 2021, followed by a three-year phase-out period in which the aggregate benefit is reduced by 25% in 2022, 50% in 2023 and 75% in 2024. Accordingly, our capital ratios as of March 31, 2023 reflect a delay of 50% of the estimated impact of CECL on regulatory capital.
79

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

|  | Basel III Capital Rules |  |
|  | March 31, 2023 |  | December 31, 2022 |  |  |  |  |  |  |  |
|  | Company |  | Bank |  | Company |  | Bank |  | Minimum Regulatory Requirements |  | Minimum Regulatory Requirements including Capital Conservation Buffer |  | Well-Capitalized Requirements |  |
Risk-based capital ratios: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Common Equity Tier 1 capital (1) |  | 13.1 | % |  | 12.8 | % |  | 12.7 | % |  | 12.5 | % |  | 4.5 | % |  | 7.0 | % |  | 6.5 | % |  |
Tier 1 capital (1) |  | 13.1 | % |  | 12.8 | % |  | 12.7 | % |  | 12.5 | % |  | 6.0 | % |  | 8.5 | % |  | 8.0 | % |  |
Total capital |  | 14.5 | % |  | 14.0 | % |  | 14.0 | % |  | 13.5 | % |  | 8.0 | % |  | 10.5 | % |  | 10.0 | % |  |
Tier 1 leverage (1) |  | 10.0 | % |  | 9.9 | % |  | 9.8 | % |  | 9.7 | % |  | 4.0 | % |  | 4.0 | % |  | 5.0 | % |  |

(1)The Common Equity Tier 1 capital and Tier 1 leverage well-capitalized requirements apply only to the Bank since there is no Common Equity Tier 1 capital component or Tier 1 leverage ratio component in the definition of a well-capitalized bank holding company. The 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 March 31, 2023 and December 31, 2022, the Company and the Bank continued to exceed all “well-capitalized” capital requirements and the required minimum capital requirements under the Basel III Capital Rules. Total risk-weighted assets were $50.23 billion as of March 31, 2023, an increase of $190.6 million from $50.04 billion as of December 31, 2022. The increase in the risk-weighted assets was primarily due to residential mortgage and CRE loan growth.
Risk Management
Overview
In the normal course of business, the Company is exposed to a variety of risks, some of which are inherent to the financial services industry and others of which are more specific to the Company’s business. The Company operates under a Board-approved enterprise risk management (“ERM”) framework, which outlines the company-wide approach to risk management and oversight, and describes the structures and practices employed to manage the current and emerging risks inherent to the Company. The Company’s ERM program incorporates risk management throughout the organization in identifying, managing, monitoring, and reporting risks. It identifies the Company’s major risk categories as: credit, liquidity, capital, market, operational, compliance, legal, strategic, and reputational.
The Risk Oversight Committee of the Board of Directors monitors the ERM program through identified risk categories and provides oversight of the Company’s risk appetite and control environment. The Risk Oversight Committee provides focused oversight of the Company’s identified enterprise risk categories on behalf of the full Board of Directors. Under the direction of the Risk Oversight Committee, management committees apply targeted strategies to manage and 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 (“IAR”). Internal Audit and IAR provide assurance and evaluate the effectiveness of risk management, control and governance processes as established by the Company. Reporting directly to the Board’s Audit Committee, Internal Audit maintains organizational independence and objectivity. Further discussion and analysis of the primary risk areas are detailed in the following subsections of Risk Management.
80

Credit Risk Management
Credit risk is the risk that a borrower or a counterparty will fail to perform according to the terms and conditions of a loan or investment and expose the Company to loss. Credit risk exists with many of the Company’s assets and exposures such as loans, debt securities and certain derivatives. The majority of the Company’s credit risk is associated with lending activities.
The Risk Oversight Committee has primary oversight responsibility for identified enterprise risk categories including credit risk. The Risk Oversight Committee monitors management’s assessment of asset quality, credit risk trends, credit quality administration, underwriting standards, and portfolio credit risk management strategies and processes, such as diversification and concentration limits, all of which enable management to control credit risk. At the management level, the Credit Risk Management Committee has primary oversight responsibility for credit risk. The Senior Credit Supervision function manages credit policy for the line of business transactional credit risk, assuring that all exposure is risk-rated according to the requirements of the credit risk rating policy. The Senior Credit Supervision function evaluates and reports the overall credit risk exposure to senior management and the Risk Oversight Committee. Reporting directly to the Board’s Risk Oversight Committee, the IAR function provides additional support to the Company’s strong credit risk management culture by providing an independent and objective assessment of underwriting and documentation quality. A key focus of our credit risk management is adherence to a well-controlled underwriting process.
The Company assesses the overall credit quality performance of the loans held-for-investment portfolio through an integrated analysis of specific performance ratios. This approach forms the basis of the discussion in the sections immediately following: Credit Quality, Nonperforming Assets and Allowance for Credit Losses.
Credit Quality
The Company utilizes a credit risk rating system to assist in monitoring credit quality. Loans are evaluated using the Company’s internal credit risk rating of 1 through 10. For more information on the Company’s credit quality indicators and internal credit risk ratings, refer to Note 7 — Loans Receivable and Allowance for Credit Losses to the Consolidated Financial Statements in this Form 10-Q.
The following table presents the Company’s criticized loans as of March 31, 2023 and December 31, 2022:

|  |  |  |  |  | Change
($ in thousands) |  | March 31, 2023 |  | December 31, 2022 |  | $ |  | %
Criticized loans: |  |  |  |  |  |  |  |
Special mention loans |  | $ | 461,356 |  |  | $ | 468,471 |  |  | $ | (7,115) |  |  | (2) | %
Classified loans |  | 452,715 |  |  | 427,509 |  |  | 25,206 |  |  | 6 | %
Total criticized loans (1) |  | $ | 914,071 |  |  | $ | 895,980 |  |  | $ | 18,091 |  |  | 2 | %
Special mention loans to loans held-for-investment |  | 0.94 | % |  | 0.97 | % |  |  |  |
Classified loans to loans held-for-investment |  | 0.93 | % |  | 0.89 | % |  |  |  |
Criticized loans to loans held-for-investment |  | 1.87 | % |  | 1.86 | % |  |  |  |

(1)Excludes loans held-for-sale.
Nonperforming Assets
Nonperforming assets are comprised of nonaccrual loans, other real estate owned (“OREO”) and other nonperforming assets. Other nonperforming assets and OREO are repossessed assets and properties, respectively, acquired through foreclosure, or through full or partial satisfaction of loans held-for-investment. Nonperforming assets were $93.4 million or 0.14% of total assets as of March 31, 2023, a decrease of $6.4 million or 6%, compared with $99.8 million or 0.16% of total assets as of December 31, 2022.
81

The following table presents nonperforming assets information as of March 31, 2023 and December 31, 2022:

|  |  |  |  |  | Change
($ in thousands) |  | March 31, 2023 |  | December 31, 2022 |  | $ |  | %
Commercial: |  |  |  |  |  |  |  |
C&I |  | $ | 43,747 |  |  | $ | 50,428 |  |  | $ | (6,681) |  |  | (13) | %
CRE: |  |  |  |  |  |  |  |
CRE |  | 19,268 |  |  | 23,244 |  |  | (3,976) |  |  | (17) | %
Multifamily residential |  | 159 |  |  | 169 |  |  | (10) |  |  | (6) | %
Total CRE |  | 19,427 |  |  | 23,413 |  |  | (3,986) |  |  | (17) | %
Consumer: |  |  |  |  |  |  |  |
Residential mortgage: |  |  |  |  |  |  |  |
Single-family residential |  | 20,540 |  |  | 14,240 |  |  | 6,300 |  |  | 44 | %
HELOCs |  | 9,045 |  |  | 11,346 |  |  | (2,301) |  |  | (20) | %
Total residential mortgage |  | 29,585 |  |  | 25,586 |  |  | 3,999 |  |  | 16 | %
Other consumer |  | 366 |  |  | 99 |  |  | 267 |  |  | 270 | %
Total nonaccrual loans |  | 93,125 |  |  | 99,526 |  |  | (6,401) |  |  | (6) | %
OREO, net |  | 270 |  |  | 270 |  |  | — |  |  | — | %
Total nonperforming assets |  | $ | 93,395 |  |  | $ | 99,796 |  |  | $ | (6,401) |  |  | (6) | %
Nonperforming assets to total assets |  | 0.14 | % |  | 0.16 | % |  |  |  |
Nonaccrual loans to loans held-for-investment |  | 0.19 | % |  | 0.21 | % |  |  |  |
Allowance for loan losses to nonaccrual loans |  | 665.66 | % |  | 598.48 | % |  |  |  |

Loans are generally placed on nonaccrual status when they become 90 days past due or when the full collection of principal or interest becomes uncertain regardless of the length of past due status. Collectability is generally assessed based on economic and business conditions, the borrower’s financial condition, and the adequacy of collateral, if any. For additional details regarding the Company’s nonaccrual loan policy, see Note 1 — Summary of Significant Accounting Policies — Significant Accounting Policies — Loans Held-for-Investment to the Consolidated Financial Statements in the Company’s 2022 Form 10-K.
Nonaccrual loans were $93.1 million as of March 31, 2023, a decrease of $6.4 million or 6% from $99.5 million as of December 31, 2022. This decrease was predominantly due to increases in paydowns, charge-offs and pay-offs of commercial loans, partially offset by an increase in single-family residential nonaccrual loans. As of March 31, 2023, $61.4 million or 66% of nonaccrual loans were less than 90 days delinquent. In comparison, $68.3 million or 69% of nonaccrual loans were less than 90 days delinquent as of December 31, 2022.
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The following table presents the accruing loans past due by portfolio segment as of March 31, 2023 and December 31, 2022:

|  |  |  | Total Accruing Past Due Loans (1) |  | Change |  | Percentage of Total Loans Outstanding
($ in thousands) |  |  |  | March 31, 2023 |  | December 31, 2022 |  | $ |  | % |  | March 31, 2023 |  | December 31, 2022
Commercial: |  |  |  |  |  |  |  |  |  |  |  |  |  |
C&I |  |  |  | $ | 8,588 |  |  | $ | 9,355 |  |  | $ | (767) |  |  | (8) | % |  | 0.05 | % |  | 0.06 | %
CRE: |  |  |  |  |  |  |  |  |  |  |  |  |  |
CRE |  |  |  | 1,788 |  |  | 14,185 |  |  | (12,397) |  |  | (87) | % |  | 0.01 | % |  | 0.10 | %
Multifamily residential |  |  |  | 710 |  |  | 1,000 |  |  | (290) |  |  | (29) | % |  | 0.02 | % |  | 0.02 | %
Construction and land |  |  |  | 8,154 |  |  | — |  |  | 8,154 |  |  | 100 | % |  | 1.11 | % |  | — | %
Total CRE |  |  |  | 10,652 |  |  | 15,185 |  |  | (4,533) |  |  | (30) | % |  | 0.05 | % |  | 0.08 | %
Total commercial |  |  |  | 19,240 |  |  | 24,540 |  |  | (5,300) |  |  | (22) | % |  | 0.05 | % |  | 0.07 | %
Consumer: |  |  |  |  |  |  |  |  |  |  |  |  |  |
Residential mortgage: |  |  |  |  |  |  |  |  |  |  |  |  |  |
Single-family residential |  |  |  | 25,505 |  |  | 25,653 |  |  | (148) |  |  | (1) | % |  | 0.22 | % |  | 0.23 | %
HELOCs |  |  |  | 10,290 |  |  | 8,786 |  |  | 1,504 |  |  | 17 | % |  | 0.52 | % |  | 0.41 | %
Total residential mortgage |  |  |  | 35,795 |  |  | 34,439 |  |  | 1,356 |  |  | 4 | % |  | 0.26 | % |  | 0.26 | %
Other consumer |  |  |  | 145 |  |  | 3,192 |  |  | (3,047) |  |  | (95) | % |  | 0.21 | % |  | 4.18 | %
Total consumer |  |  |  | 35,940 |  |  | 37,631 |  |  | (1,691) |  |  | (4) | % |  | 0.26 | % |  | 0.28 | %
Total |  |  |  | $ | 55,180 |  |  | $ | 62,171 |  |  | $ | (6,991) |  |  | (11) | % |  | 0.11 | % |  | 0.13 | %

(1)There were no accruing loans past due 90 days or more as of both March 31, 2023 and December 31, 2022.
Allowance for Credit Losses
The allowance for credit losses represents 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.
For 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. For unfunded credit commitments, the allowance for credit losses is a liability account that is reported as a component of Accrued expenses and other liabilities in our Consolidated Balance Sheet.
The Company is committed to maintaining the allowance for credit losses at a level that is commensurate with the estimated inherent losses in the loan portfolio, including unfunded credit facilities. While the Company believes that the allowance for credit losses as of March 31, 2023 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 Item 8. Financial Statements — Note 1 — Summary of Significant Accounting Policies to the Consolidated Financial Statements in the Company’s 2022 Form 10-K, and Note 7 — Loans Receivable and Allowance for Credit Losses to the Consolidated Financial Statements in this Form 10-Q.
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The following table presents an allocation of the allowance for loan losses by loan portfolio segments and unfunded credit commitments as of March 31, 2023 and December 31, 2022:

|  | March 31, 2023 |  | December 31, 2022 |  |  |  |
($ in thousands) |  | Allowance Allocation |  | % of Loan Type to Total Loans |  | Allowance Allocation |  | % of Loan Type to Total Loans |  |  |  |
Allowance for loan losses |  |  |  |  |  |  |  |  |  |  |  |
Commercial: |  |  |  |  |  |  |  |  |  |  |  |
C&I |  | $ | 376,325 |  |  | 32 | % |  | $ | 371,700 |  |  | 33 | % |  |  |  |
CRE: |  |  |  |  |  |  |  |  |  |  |  |
CRE |  | 155,067 |  |  | 29 | % |  | 149,864 |  |  | 29 | % |  |  |  |
Multifamily residential |  | 24,526 |  |  | 10 | % |  | 23,373 |  |  | 10 | % |  |  |  |
Construction and land |  | 9,322 |  |  | 1 | % |  | 9,109 |  |  | 1 | % |  |  |  |
Total CRE |  | 188,915 |  |  | 40 | % |  | 182,346 |  |  | 40 | % |  |  |  |
Total commercial |  | 565,240 |  |  | 72 | % |  | 554,046 |  |  | 73 | % |  |  |  |
Consumer: |  |  |  |  |  |  |  |  |  |  |  |
Residential mortgage: |  |  |  |  |  |  |  |  |  |  |  |
Single-family residential |  | 48,007 |  |  | 24 | % |  | 35,564 |  |  | 23 | % |  |  |  |
HELOCs |  | 4,971 |  |  | 4 | % |  | 4,475 |  |  | 4 | % |  |  |  |
Total residential mortgage |  | 52,978 |  |  | 28 | % |  | 40,039 |  |  | 27 | % |  |  |  |
Other consumer |  | 1,675 |  |  | 0 | % |  | 1,560 |  |  | 0 | % |  |  |  |
Total consumer |  | 54,653 |  |  | 28 | % |  | 41,599 |  |  | 27 | % |  |  |  |
Total allowance for loan losses |  | $ | 619,893 |  |  | 100 | % |  | $ | 595,645 |  |  | 100 | % |  |  |  |
Allowance for unfunded credit commitments |  | $ | 27,741 |  |  |  |  | $ | 26,264 |  |  |  |  |  |  |
Total allowance for credit losses |  | $ | 647,634 |  |  |  |  | $ | 621,909 |  |  |  |  |  |  |
Loans held-for-investment |  | $ | 48,918,048 |  |  |  |  | $ | 48,202,430 |  |  |  |  |  |  |
Allowance for loan losses to loans held-for-investment |  | 1.27 | % |  |  |  | 1.24 | % |  |  |  |  |  |
|  | Three Months Ended March 31, |  |  |  |
|  | 2023 |  | 2022 |  |  |  |
Average loans held-for-investment |  | $ | 48,144,120 |  |  | $ | 42,111,786 |  |  |  |  |
Annualized net charge-offs to average loans held-for-investment |  | 0.01 | % |  | 0.08 | % |  |  |  |

First quarter 2023 net charge-offs were $609 thousand, or annualized 0.01% of average loans held-for-investment, compared with $8.3 million, or annualized 0.08% of average loans held-for-investment, for the first quarter of 2022. The decrease in net charge-offs was primarily due to a decrease in C&I charge-offs.
Liquidity Risk Management
Liquidity
Liquidity risk arises from the Company’s inability to meet its customer deposit withdrawals and obligations to other counterparties as they come due, or to obtain adequate funding at a reasonable cost to meet those obligations. Liquidity risk also considers the stability of deposits. The objective of liquidity management is to manage the potential mismatch of asset and liability cash flows. Maintaining an adequate level of liquidity depends on the institution’s ability to efficiently meet both expected and unexpected cash 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.
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The Board of Directors’ Risk Oversight Committee has primary oversight responsibility over liquidity risk management. At the management level, the Company’s Asset/Liability Committee (“ALCO”) establishes the liquidity guidelines that govern the day-to-day active management of the Company’s liquidity position by requiring sufficient asset-based liquidity to cover potential funding requirements and avoid over-dependence on volatile, less reliable funding markets. These guidelines are established and monitored for both the Bank and East West on a stand-alone basis to ensure that the Company can serve as a source of strength for its subsidiaries. The ALCO regularly monitors the Company’s liquidity status and related management processes, providing 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 we believe is a relatively stable and low-cost source of funding. Our loans are funded by deposits, which amounted to $54.74 billion as of March 31, 2023, compared with $55.97 billion as of December 31, 2022. The Company’s loan-to-deposit ratio was 89% as of March 31, 2023, compared with 86% as of December 31, 2022.
In addition to deposits, the Company has access to various sources of wholesale financing, including borrowing capacity with the FHLB and Federal Reserve Bank of San Francisco (“FRBSF”), such as under the newly established BTFP, unsecured federal funds lines of credit with various correspondent banks, and several master repurchase agreements with major brokerage companies to sustain an adequate liquid asset portfolio, meet daily cash demands and allow management flexibility to execute its business strategy. However, general financial market and economic conditions could impact our access and cost of external funding. Additionally, the Company’s access to capital markets is affected by the ratings received from various credit rating agencies.
Unencumbered loans and/or debt securities were pledged to the FHLB, the FRBSF discount window, and the FRBSF BTFP as collateral. The Company has established operational procedures to enable borrowing against these assets, including regular monitoring of the total pool of loans and debt securities eligible as collateral. Eligibility of collateral is defined in guidelines from the FHLB and FRBSF and is subject to change at their discretion. See Item 2 — MD&A — Balance Sheet Analysis — Deposits and Other Sources of Funding in this Form 10-Q for further detail related to the Company’s funding sources. The Company believes its cash and cash equivalents and available borrowing capacity described below provide sufficient liquidity above its expected cash needs.
The Company maintains its source of liquidity in the form of cash and cash equivalents and borrowing capacity with its eligible loans and debt securities as collateral. The following table presents the Company’s total cash and cash equivalents and borrowing capacity as of March 31, 2023 and December 31, 2022:

|  |  |  |  |  | Change
($ in thousands) |  | March 31, 2023 |  | December 31, 2022 |  | $ |  | %
Cash and cash equivalents |  | $ | 5,934,194 |  |  | $ | 3,481,784 |  |  | $ | 2,452,410 |  |  | 70 | %
Interest-bearing deposits with banks |  | 10,249 |  |  | 139,021 |  |  | (128,772) |  |  | (93) | %
Borrowing capacity: |  |  |  |  |  |  |  |
FHLB |  | 13,066,246 |  |  | 12,773,996 |  |  | 292,250 |  |  | 2 | %
FRBSF |  | 8,822,513 |  |  | 2,049,048 |  |  | 6,773,465 |  |  | 331 | %
Unpledged securities available |  | 1,770,416 |  |  | 6,939,591 |  |  | (5,169,175) |  |  | (74) | %
Federal funds facility |  | 1,056,000 |  |  | 1,136,000 |  |  | (80,000) |  |  | (7) | %
Total |  | $ | 30,659,618 |  |  | $ | 26,519,440 |  |  | $ | 4,140,178 |  |  | 16 | %

The Company’s total cash and cash equivalents and borrowing capacity totaled $30.66 billion as of March 31, 2023, compared with $26.52 billion as of December 31, 2022. The quarter-over-quarter increase was primarily related to an increase in collateral available at the FRBSF and an increase in cash and cash equivalents, which was funded by borrowings from the BTFP during the first quarter of 2023. The BTFP was secured by pledged securities.
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Liquidity Risk — Cash Requirements. In the ordinary course of business, the Company enters contractual obligations that require future cash payments, including funding for customer deposit withdrawals, repayments for short- and long-term borrowings, and other cash commitments. For additional information on these obligations, see Note 9 — Deposits to the Consolidated Financial Statements in the Company’s 2022 Form 10-K, and Note 4 — Assets Purchased under Resale Agreements and Sold under Repurchase Agreements, Note 8 — Investments in Qualified Affordable Housing Partnerships, Tax Credit and Other Investments, Net and Variable Interest Entities and Note 10 — Short-Term Borrowings and Long-Term Debt to the Consolidated Financial Statements in this Form 10-Q.
The Company also has off-balance sheet arrangements which represent transactions that are not recorded on the Consolidated Balance Sheet. The Company’s off-balance sheet arrangements include (1) commitments to extend credit, such as loan commitments, commercial letters of credit for foreign and domestic trade, standby letters of credit (“SBLCs”), and financial guarantees, to meet the financing needs of its customers, (2) future interest obligations related to customer deposits and the Company’s borrowings, and (3) transactions with unconsolidated entities that provide financing, liquidity, market risk or credit risk support to the Company, or engage in leasing, hedging or research and development services with the Company. Because many of these commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future funding requirements. Information about the Company’s loan commitments, commercial letters of credit and SBLCs is provided in Note 11 — Commitments and Contingencies to the Consolidated Financial Statements in this Form 10-Q.
The Consolidated Statement of Cash Flows summarizes the Company’s sources and uses of cash by type of activity for the three months ended March 31, 2023 and 2022. Excess cash generated by operating and investing activities may be used to repay outstanding debt or invest in liquid assets.
Liquidity Risk — Liquidity for East West. In addition to bank level liquidity management, the Company manages liquidity at the parent company level for various operating needs including payment of dividends, repurchases of common stock, principal and interest payments on its borrowings, acquisitions and additional investments in its subsidiaries. East West’s primary source of liquidity is from cash dividends distributed by its subsidiary, East West Bank. The Bank is subject to various statutory and regulatory restrictions on its ability to pay dividends as discussed in Item 1. Business — Supervision and Regulation — Dividends and Other Transfers of Funds in the Company’s 2022 Form 10-K. East West held $243.0 million and $228.5 million in cash and cash equivalents as of March 31, 2023 and December 31, 2022, respectively. Management believes that East West has sufficient cash and cash equivalents to meet the projected cash obligations for the coming year.
Liquidity Risk — Liquidity Stress Testing. The Company utilizes liquidity stress analysis to determine the appropriate amounts of liquidity to maintain at the Company, foreign subsidiary and foreign branch to meet contractual and contingent cash outflows under a range of scenarios. Scenario analyses include assumptions about significant changes in key funding sources, market triggers, potential uses of funding and economic conditions in certain countries. In addition, Company specific events are incorporated into the stress testing. 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 March 31, 2023, the Company believes it has adequate liquidity resources to conduct operations and meet other needs in the ordinary course of business, and is not aware of any events that are reasonably likely to have a material adverse effect on its liquidity, capital resources or operations. Given the uncertain and rapidly changing market and economic conditions, the Company will continue to actively evaluate the impact on its business and financial position. For more information on how economic conditions may impact our liquidity, see Item 1A. Risk Factors in the Company’s 2022 Form 10-K.
Market Risk Management
Market risk refers to the risk of potential loss due to adverse movements in market risk factors, including interest rates, foreign exchange rates, commodity prices, and credit spreads. The Company is primarily exposed to interest rate risk through its core business activities of extending loans and acquiring deposits. There have been no significant changes in our risk management practices as described in Item 7. MD&A — Market Risk Management in the Company’s 2022 Form 10-K.
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Interest Rate Risk Management
Interest rate risk results primarily from the Company’s traditional banking activities of gathering deposits and extending loans, which are the primary areas of market risk for the Company. The ALCO coordinates the overall management of the Company’s interest rate risk, meets regularly to review the Company’s open market positions and establishes policies to monitor and limit exposure to market risk. Interest rate risk management is carried out primarily through strategies involving the Company’s 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.
Interest rate risk exposure is measured and monitored through various risk management tools, which include a simulation model that performs interest rate sensitivity analyses under multiple interest rate scenarios against a baseline. The simulation model incorporates the market’s forward rate expectations and the Company’s earning assets and liabilities. The 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 the results.
Simulation results are highly dependent on input assumptions. To the extent the actual behavior is different from the assumptions used in the models, there could be material changes in interest rate sensitivity results. The assumptions applied in the model are documented, supported, and periodically back-tested to assess the reasonableness and effectiveness. For a more detailed discussion of the Company’s interest income simulation model, refer to Item 7. MD&A — Market Risk Management in the Company’s 2022 Form 10-K.
The Federal Reserve continued its aggressive response to inflation by incrementally raising the target range for the fed funds rate to a range of 4.75% to 5.00% in March 2023, from the 2022 year-end range of 4.25% to 4.50%. On May 3, 2023 the Federal Reserve raised the target rate range to 5.00% to 5.25%. However, increased uncertainty regarding a potential recession has also led to the expectation of rate cuts potentially starting in September 2023.
Twelve-Month Net Interest Income Simulation
Net interest income simulation modeling measures interest rate risk through earnings volatility. The simulation projects the cash flow changes in interest rate sensitive assets and liabilities, expressed in terms of net interest income, over a specified time horizon for defined interest rate scenarios. Net interest income simulations provide insight into the impact of market rate changes on earnings, which help guide risk management decisions. The Company assesses interest rate risk by comparing the changes of net interest income in different interest rate scenarios.
The following table presents the Company’s net interest income sensitivity related to an instantaneous and sustained non-parallel shift in market interest rates by 100 and 200 bps as of March 31, 2023 and December 31, 2022, based on a static balance sheet as of the date of the analysis.

|  | Net Interest Income Volatility (1) |  |
Change in Interest Rates (in bps) |  | March 31, 2023 |  | December 31, 2022 |  |  |  |
+200 |  | 9.0 | % |  | 11.6 | % |  |  |  |
+100 |  | 4.8 | % |  | 5.9 | % |  |  |  |
-100 |  | (4.7) | % |  | (5.3) | % |  |  |  |
-200 |  | (9.3) | % |  | (8.6) | % |  |  |  |

(1)The percentage change represents net interest income change over a 12-month period in a stable interest rate environment versus in the various interest rate scenarios.
The composition of the Company’s loan portfolio creates sensitivity to interest rate movements due to a mismatch of repricing behavior between the floating-rate loan portfolio and deposit products. In the table above, net interest income volatility expressed in relation to base-case net interest income, decreased quarter-over-quarter primarily as a result of changes in the Company’s balance sheet composition.
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While an instantaneous and sustained non-parallel shift in market interest rates was used in the simulation model described in the preceding paragraph, the Company also models scenarios based on gradual shifts in interest rates and assesses the corresponding impacts. These interest rate scenarios 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.

|  | Net Interest Income Volatility
Change in Interest Rates (in bps) |  | March 31, 2023 |  | December 31, 2022
+200 Rate Ramp |  | 4.5 | % |  | 6.3 | %
+100 Rate Ramp |  | 2.3 | % |  | 3.4 | %
-100 Rate Ramp |  | (2.4) | % |  | (2.4) | %
-200 Rate Ramp |  | (4.8) | % |  | (4.9) | %

As of March 31, 2023, 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 population of variable rate loans, primarily linked to Prime, LIBOR, and Term SOFR indices. The Company’s interest income is sensitive to changes in short-term interest rates. As of March 31, 2023, the Company designated interest rate contracts with a notional amount of $3.25 billion as cash flow hedges. The modeled results incorporated an additional $1.00 billion of interest rate contracts that were designated as cash flow hedges during April 2023. The increase in the total notional amount of cash flow hedges to $4.25 billion reduced net interest income volatility by approximately 1.5% of the base net interest income for every 100 bps change in 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 deposit durations, beta, deposit mix and other behavioral assumptions, which were derived using a combination of quantitative and qualitative approaches. Actual results may deviate from the model results in terms of net interest income due to earning asset growth variation and deposit mix changes based on customer preferences relative to the interest rate environment. During a period of declining interest rates, balance sheet growth could offset headwinds to net interest income from yield compression.
Economic Value of Equity at Risk
Economic value of equity (“EVE”) is a cash flow calculation that takes the present value of all asset cash flows and subtracts the present value of all liability cash flows. This calculation is used for asset/liability management and measures changes in the economic value of the bank.
The economic value approach provides a comparatively broader scope than the net interest income volatility approach since it represents the discounted present value of cash flows over the expected life of the instruments. Due to this longer horizon, EVE is useful to identify risks arising from repricing, prepayment and maturity gaps between assets and liabilities on the balance sheet, as well as from off-balance sheet derivative exposure, over their lifetime. This long-term economic perspective into the Company’s interest rate risk profile allows the Company to identify anticipated negative effects of interest rate fluctuations. However, the difference in time horizons can cause the EVE analysis to diverge from the shorter term net interest income analysis presented above. Given the uncertainty of the magnitude, timing and direction of future interest rate movements, the shape of the yield curve, and potential changes to the balance sheet, actual results may vary from those predicted by the Company’s model.
The following table presents the Company’s EVE sensitivity related to an instantaneous non-parallel shift in market interest rates by 100 and 200 bps as of March 31, 2023 and December 31, 2022:

|  | EVE Volatility (1)
Change in Interest Rates (in bps) |  | March 31, 2023 |  | December 31, 2022
+200 |  | (1.8) | % |  | (6.0) | %
+100 |  | (1.0) | % |  | (2.9) | %
-100 |  | 1.0 | % |  | 1.1 | %
-200 |  | 2.0 | % |  | 2.3 | %

(1)The percentage change represents net portfolio value change of the Company in a stable interest rate environment versus in the various interest rate scenarios.
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As of March 31, 2023, the Company’s EVE profile reflects a liability sensitive position as the Company’s EVE is expected to decrease when interest rates rise. The EVE sensitivity decreased quarter-over-quarter primarily due to increases in fixed-rate short-term borrowings and cash and cash equivalents.
Derivatives
It is the Company’s policy not to speculate on the future direction of interest rates, foreign currency exchange rates and commodity prices. However, the Company periodically enters into derivative transactions in order to manage its exposure to market risk, primarily interest rate risk and foreign currency risk. The Company believes these derivative transactions, when properly structured and managed, provides a hedge against inherent risk in certain assets and liabilities or against risk in specific transactions. Hedging transactions may be implemented using a variety of derivative instruments such as swaps, forwards, options, and collars. The Company uses interest rate swaps to hedge the variability in interest payments received on certain floating-rate commercial loans and interest payments paid on certain floating-rate borrowings. Foreign exchange derivatives are used in net investment hedging strategies to mitigate the risk of changes in the U.S. dollar equivalent value of a designated monetary amount of the Company’s net investment in East West Bank (China) Limited. Prior to entering into any accounting hedge activities, the Company analyzes the costs and benefits of the hedge in comparison to alternative strategies. The Company also repositions its hedging derivatives portfolio based on the current assessment of economic and financial conditions, including the interest rate and foreign currency environments, balance sheet composition and trends, and the relative mix of its cash and derivative positions.
In addition, the Company enters into derivative transactions in order to accommodate its customers with their business needs or to assist customers with their risk management objectives, such as managing exposure to fluctuations in interest rates, foreign currencies and commodity prices. To economically hedge against the derivative contracts entered into with the Company’s customers, the Company enters into offsetting derivative contracts with third-party financial institutions, some of which are cleared through central clearing organizations. The exposures from derivative transactions are collateralized by cash and/or eligible securities based on limits as set forth in the respective agreements between the Company and counterparty financial institutions. The changes in fair values 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 in the contracts and the spread variances between the customer derivatives and the offsetting financial counterparty positions. The Company also utilizes foreign exchange contracts that are not designated as hedging instruments to mitigate the economic effect of fluctuations in certain foreign currency on-balance sheet assets and liabilities, primarily foreign currency denominated deposits offered to its customers.
The Company is subject to credit risk associated with the counterparties to the derivative contracts. This counterparty credit risk is a multi-dimensional form of risk, affected by both the exposure and credit quality of the counterparty, both of which are sensitive to market-induced changes. The Company’s Credit Risk Management Committee provides oversight of credit risk and the Company has guidelines in place to manage counterparty concentration, tenor limits, and collateral. The Company manages the credit risk of its derivative positions by diversifying its positions among various counterparties, by entering into legally enforceable master netting agreements and by requiring collateral arrangements, where possible. The Company may also transfer counterparty credit risk related to interest rate swaps to institutional third-parties through the use of credit risk participation agreements. Certain derivative contracts are required to be cleared through central clearinghouses, to further mitigate counterparty credit risk, where variation margin is applied daily as settlement to the fair value of the derivative contracts. In addition, the Company incorporates credit value adjustments and other market standard methodologies to appropriately reflect the counterparty’s and its own nonperformance risk in the fair value measurement of its derivatives. As of March 31, 2023, the Company anticipates performance by its counterparties and has not incurred any related credit losses.
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The following table summarizes certain information on derivative instruments designated as accounting hedges and utilized by the Company in its management of interest rate and foreign currency risk as of March 31, 2023 and December 31, 2022:

|  | March 31, 2023 |  | December 31, 2022
($ in thousands) |  | Interest Rate Contracts Hedging Loans (1) |  | Interest Rate Contracts Hedging Borrowings (2) |  | Interest Rate Contracts Hedging Loans (1) |  | Interest Rate Contracts Hedging Borrowings (2)
Cash flow hedges |  |  |  |  |  |  |  |
Notional amount |  | $ | 3,000,000 |  | (3) | $ | — |  |  | $ | 3,000,000 |  | (3) | $ | 200,000 |
Weighted average: |  |  |  |  |  |  |  |
Receive rate |  | 4.91 | % |  | NA |  | 4.91 | % |  | 3.83 | %
Pay rate |  | 6.78 | % |  | NA |  | 6.23 | % |  | 0.48 | %
Remaining term (in months) |  | 43.6 |  |  | NA |  | 46.6 |  |  | 3.2 |
($ in thousands) |  | Foreign Exchange Contracts |  | Foreign Exchange Contracts
Net investment hedges |  |  |  |  |  |  |  |
Notional amount |  | $ | 81,480 |  |  |  | $ | 84,832 |  |
Hedged percentage (4) |  | 44 | % |  |  |  | 44 | % |  |
Remaining term (in months) |  | 11.7 |  |  |  |  | 2.6 |  |  |

NA — Not applicable.
(1)Represents receive-fixed/pay-floating interest rate swaps and excludes interest rate collars. Floating rates paid are based on one-month LIBOR and Prime.
(2)Represents receive-floating/pay-fixed interest rate swaps. Floating rate received was based on three-month LIBOR. The hedge was terminated during the first quarter of 2023.
(3)Interest rate collars in notional amount of $250.0 million designated to hedge loans were not included as of both March 31, 2023 and December 31, 2022.
(4)Represents percentage between the notional of outstanding foreign exchange contracts and the net RMB exposure from East West Bank (China) Limited.
Additional information on the Company’s derivatives is presented in Note 1 — Summary of Significant Accounting Policies — Significant Accounting Policies — Derivatives to the Consolidated Financial Statements in the Company’s 2022 Form 10-K, Note 3 — Fair Value Measurement and Fair Value of Financial Instruments and Note 6 — Derivatives to the Consolidated Financial Statements in this Form 10-Q.
Critical Accounting Policies and Estimates
The Company’s significant accounting policies are described in Note 1 — Summary of Significant Accounting Policies to the Consolidated Financial Statements in the Company’s 2022 Form 10-K. Certain of these policies include critical accounting estimates, which are subject to valuation assumptions, subjective or complex judgments about matters that are inherently uncertain, and it is likely that materially different amounts could be reported under different assumptions and conditions. The Company has procedures and processes in place to facilitate making these judgments. The following accounting policies are critical to the Company’s Consolidated Financial Statements:
•allowance for credit losses;
•fair value estimates;
•goodwill impairment; and
•income taxes.
For additional information on the Company’s critical accounting estimates involving significant judgments, see Item 7. MD&A — Critical Accounting Estimates in the Company’s 2022 Form 10-K.
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Reconciliation of GAAP to Non-GAAP Financial Measures
To supplement the Company’s unaudited interim Consolidated Financial Statements presented in accordance with U.S. GAAP, the Company uses certain non-GAAP measures of financial performance. Non-GAAP financial measures are not prepared in accordance with, or as an alternative to U.S. GAAP. Generally, a non-GAAP financial measure is a numerical measure of a company’s performance that either excludes or includes amounts, or is subject to adjustments that have such an effect, that are not normally excluded or included in the most directly comparable financial measure that is calculated and presented in accordance with U.S. GAAP. The non-GAAP financial measures discussed in this Form 10-Q are return on average TCE, adjusted efficiency ratio, and tangible book value per share. Certain additional non-GAAP financial measures that are components of the foregoing non-GAAP financial measures are also set forth and reconciled in the table below. The Company believes these non-GAAP financial measures, when taken together with the corresponding U.S. GAAP financial measures, provide meaningful supplemental information regarding its performance, and allow comparability to prior periods. These non-GAAP financial measures may be different from non-GAAP financial measures used by other companies, limiting their usefulness for comparison purposes.
The following tables present the reconciliations of U.S. GAAP to non-GAAP financial measures for the periods presented:

|  |  | Three Months Ended March 31, |  |
($ in thousands) |  | 2023 |  |  |  | 2022 |  |  |  |
Net income | (a) |  | $ | 322,439 |  |  |  |  | $ | 237,652 |  |  |  |  |
Add: Amortization of core deposit intangibles |  |  | 441 |  |  |  |  | 511 |  |  |  |  |
Amortization of mortgage servicing assets |  |  | 356 |  |  |  |  | 392 |  |  |  |  |
Tax effect of amortization adjustments (1) |  |  | (233) |  |  |  |  | (260) |  |  |  |  |
Tangible net income (non-GAAP) | (b) |  | $ | 323,003 |  |  |  |  | $ | 238,295 |  |  |  |  |
Average stockholders’ equity | (c) |  | $ | 6,183,324 |  |  |  |  | $ | 5,842,615 |  |  |  |  |
Less: Average goodwill |  |  | (465,697) |  |  |  |  | (465,697) |  |  |  |  |
Average other intangible assets (2) |  |  | (7,696) |  |  |  |  | (9,207) |  |  |  |  |
Average TCE (non-GAAP) | (d) |  | $ | 5,709,931 |  |  |  |  | $ | 5,367,711 |  |  |  |  |
Return on average common equity (3) | (a)/(c) |  | 21.15 | % |  |  |  | 16.50 | % |  |  |  |
Return on average TCE (3) (non-GAAP) | (b)/(d) |  | 22.94 | % |  |  |  | 18.00 | % |  |  |  |

(1)Applied statutory tax rate of 29.29% for the first quarter of 2023 and 28.77% for the first quarter of 2022.
(2)Includes core deposit intangibles and mortgage servicing assets.
(3)Annualized.
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|  |  | Three Months Ended March 31,
($ in thousands) |  | 2023 |  | 2022
Net interest income before provision for credit losses | (a) |  | $ | 599,861 |  |  | $ | 415,613 |
Total noninterest income |  |  | 59,978 |  |  | 79,743 |
Total revenue | (b) |  | $ | 659,839 |  |  | $ | 495,356 |
Noninterest income |  |  | $ | 59,978 |  |  | $ | 79,743 |
Add: Write-off of AFS debt security (1) |  |  | 10,000 |  |  | — |
Adjusted noninterest income (non-GAAP) | (c) |  | 69,978 |  |  | 79,743 |
Adjusted revenue (non-GAAP) | (a)+(c)=(d) |  | $ | 669,839 |  |  | $ | 495,356 |
Total noninterest expense | (e) |  | $ | 218,447 |  |  | $ | 189,450 |
Less: Amortization of tax credit and other investments |  |  | (10,110) |  |  | (13,900) |
Amortization of core deposit intangibles |  |  | (441) |  |  | (511) |
Repurchase agreements’ extinguishment cost (1) |  |  | (3,872) |  |  | — |
Adjusted noninterest expense (non-GAAP) | (f) |  | $ | 204,024 |  |  | $ | 175,039 |
Efficiency ratio | (e)/(b) |  | 33.11 | % |  | 38.25 | %
Adjusted efficiency ratio (non-GAAP) | (f)/(d) |  | 30.46 | % |  | 35.34 | %

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

($ and shares in thousands, except per share data) |  |  | March 31, 2023 |  | December 31, 2022 |  |
Stockholders’ equity | (a) |  | $ | 6,309,331 |  |  | $ | 5,984,612 |  |  |
Less: Goodwill |  |  | (465,697) |  |  | (465,697) |  |  |
Other intangible assets (1) |  |  | (7,201) |  |  | (7,998) |  |  |
TCE (non-GAAP) | (b) |  | $ | 5,836,433 |  |  | $ | 5,510,917 |  |  |
Number of common shares at period-end | (c) |  | 141,396 |  |  | 140,948 |  |  |
Book value per share | (a)/(c) |  | $ | 44.62 |  |  | $ | 42.46 |  |  |
Tangible book value per share (non-GAAP) | (b)/(c) |  | $ | 41.28 |  |  | $ | 39.10 |  |  |

(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 March 31, 2023, pursuant to Rule 13a-15(b) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), the Company conducted an evaluation, under the supervision and with the participation of the Company’s management, including the Chief Executive Officer and Chief Financial Officer, of the effectiveness of the Company’s disclosure controls and procedures (as defined in Rule 13a-15(e) of the Exchange Act). Based upon that evaluation, the Company’s Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures were effective as of March 31, 2023.
The Company’s disclosure controls and procedures are designed to ensure that information required to be disclosed by the Company in the reports that the Company files or submits under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the rules and forms of the SEC. The Company’s disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by the Company in the reports that the Company files under the Exchange Act is accumulated and communicated to the Company’s management, including the Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.
Change in Internal Control over Financial Reporting
There were no changes in the Company’s internal control over financial reporting (as defined in Rule 13a-15(f) of the Exchange Act) during the quarter ended March 31, 2023, 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 11 — Commitments and Contingencies — Litigation to the Consolidated Financial Statements in Part I of this Form 10-Q, incorporated herein by reference.
ITEM 1A. RISK FACTORS
The Company’s 2022 Form 10-K contains disclosure regarding the risks and uncertainties related to the Company’s business under the heading Item 1A. Risk Factors. There have been no material changes to the Company’s risk factors as presented in the Company’s 2022 Form 10-K, except as described below:
Risks Related to Our Operations
We may be impacted by the actions, soundness or creditworthiness of other financial institutions, which can cause disruption within the industry and increase expenses. (1)
Financial services institutions are interrelated as a result of trading, clearing, counterparty, or other relationships. We execute transactions with various counterparties in the financial industry, including broker-dealers, commercial banks, and investment banks. Defaults or failures of financial services institutions and instability in the financial services industry in general can lead to market-wide liquidity problems, increased credit risk and withdrawals of uninsured deposits. The failures of Silicon Valley Bank and Signature Bank in March 2023 and of First Republic Bank in May 2023 have resulted in significant disruption in the financial services industry, adversely impacted the volatility and market prices of the securities of financial institutions and resulted in lower levels of deposits for us and many other financial institutions. These events have adversely impacted, and could continue to, adversely affect our business, results of operations, and financial condition, as well as the market price and volatility of our common stock.
The cost of resolving the recent bank failures may lead to further increases in FDIC premiums or additional special assessments. Such events may also increase the risk of a recession or lead to regulatory changes and initiatives that could adversely impact the Company. Changes to laws or regulations, or the impositions of additional restrictions through supervisory or enforcement activities, could have a material impact on our business. Regulatory changes could also adversely impact our ability to access funding, increase the cost of funding, limit our access to capital markets, or negatively impact our overall financial condition.
The proportion of our deposit account balances that exceed FDIC insurance limits may expose us to enhanced liquidity risk.
A significant factor in the recent failures of Silicon Valley Bank, Signature Bank and First Republic Bank appears to have been the proportion of the deposits held by each institution that exceeded applicable FDIC insurance limits. In response to these failures, many large depositors have withdrawn deposits in excess of FDIC insurance limits in order to diversify their risk. If a significant portion of our deposits were to be withdrawn within a short period of time such that additional sources of funding would be required to meet withdrawal demands, we may be unable to obtain funding at favorable terms, which may have an adverse effect on our net interest margin. Moreover, obtaining adequate funding to meet our deposit obligations may be more challenging during periods of elevated interest rates and financial industry instability, both of which we are currently experiencing. Our ability to attract depositors during a time of actual or perceived distress or instability in the marketplace may be limited. Further, interest rates paid for borrowing generally exceed the interest rates paid on deposits. This spread may be exacerbated by higher prevailing interest rates. In addition, because our AFS debt securities lose value when interest rates rise, after-tax proceeds resulting from the sale of such assets may not be sufficient to recover the full amount of our exposure. Under these circumstances, we may be required to access funding from sources such as the Federal Reserve’s discount window or additional funding from its recently established Bank Term Funding Program, from which we borrowed $4.50 billion during the first quarter of 2023, in order to manage our liquidity risk. See Note 10 — Short-Term Borrowings and Long-Term Debt to the Consolidated Financial Statements in this Form 10-Q for additional information related to the Company’s borrowings from the BTFP.
(1) Represents an update to Item 1A. Risk Factors in the Company's 2022 Form 10-K under the heading, "The actions and soundness of other financial institutions could affect us."
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ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
There were no unregistered sales of equity securities or repurchase activities during the three months ended March 31, 2023.
ITEM 6. EXHIBITS
The following exhibit index lists Exhibits filed, or in the case of Exhibits 32.1 and 32.2 furnished, with this report:

Exhibit No. |  | Exhibit Description
3.1 |  | Certificate of Incorporation of the Registrant [Incorporated by reference to Exhibit 3(i) from Registrant’s Registration Statement on Form S-4 filed with the Commission on September 17, 1998 (File No. 333-63605).]
3.1.1 |  | Certificate of Amendment to Certificate of Incorporation of the Registrant [Incorporated by reference to Exhibit 3(i).1 from Registrant’s Annual Report on Form 10-K for the year ended December 31, 2002 filed with the Commission on March 28, 2003 (File No. 000-24939).]
3.1.2 |  | Amendment to Certificate of Incorporation to Increase Authorized Shares of the Registrant [Incorporated by reference from Registrant’s Definitive Proxy Statement on Schedule 14A filed with the Commission on April 15, 2005 (File No. 000-24939).]
3.1.3 |  | Certificate of Amendment to Certificate of Incorporation of the Registrant [Incorporated by reference to Exhibit A from Registrant’s Definitive Proxy Statement on Schedule 14A filed with the Commission on April 23, 2008 (File No. 000-24939).]
3.1.4 |  | Certificate of Designations of 8.00% Non-Cumulative Perpetual Convertible Preferred Stock, Series A of the Registrant [Incorporated by reference to Exhibit 3.1 from Registrant’s Current Report on Form 8-K, filed with the Commission on April 30, 2008 (File No. 000-24939).]
3.1.5 |  | Certificate of Designations of Fixed Rate Cumulative Perpetual Preferred Stock, Series B of the Registrant [Incorporated by reference to Exhibit 3.1, 4.1 from Registrant’s Current Report on Form 8-K filed with the Commission on December 9, 2008 (File No. 000-24939).]
3.1.6 |  | Certificate of Designations of Mandatorily Convertible Cumulative Non-Voting Perpetual Preferred Stock, Series C of the Registrant [Incorporated by reference to Exhibit 3.1, 4.1 from Registrant’s Current Report on Form 8-K filed with the Commission on November 12, 2009 (File No. 000-24939).]
3.2 |  | Amended and Restated Bylaws of the Registrant dated Ma rch 14, 2023 [Incorporated by reference to Exhibit 3.1 from Registrant’s Current Report on Form 8-K filed with the Commission on Ma rch 1 7, 202 3 (File No. 000-24939).]
31.1 |  | Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. Filed herewith.
31.2 |  | Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. Filed herewith.
32.1 |  | Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. Furnished herewith.
32.2 |  | Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. Furnished herewith.
101.INS |  | The instance document does not appear in the interactive data file because its XBRL tags are embedded within the inline XBRL document.
101.SCH |  | Inline XBRL Taxonomy Extension Schema Document. Filed herewith.
101.CAL |  | Inline XBRL Taxonomy Extension Calculation Linkbase Document. Filed herewith.
101.DEF |  | Inline XBRL Taxonomy Extension Definition Linkbase Document. Filed herewith.
101.LAB |  | Inline XBRL Taxonomy Extension Label Linkbase Document. Filed herewith.
101.PRE |  | Inline XBRL Taxonomy Extension Presentation Linkbase Document. Filed herewith.
104 |  | Cover Page Interactive Data (formatted as Inline XBRL and contained in Exhibit 101 filed herewith). Filed herewith.

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GLOSSARY OF ACRONYMS

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

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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: | May 9, 2023 |
|  | EAST WEST BANCORP, INC. (Registrant)
|  | By | /s/ IRENE H. OH |
|  |  | Irene H. Oh
|  |  | Executive Vice President and Chief Financial Officer

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