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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 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: 140,930,142 shares as of October 31, 2023.

TABLE OF CONTENTS

|  |  | Page
FORWARD-LOOKING STATEMENTS | 3
PART I — FINANCIAL INFORMATION | 5
| Item 1. | Consolidated Financial Statements | 5
|  | Consolidated Balance Sheet (Unaudited) | 5
|  | Consolidated Statement of Income (Unaudited) | 6
|  | Consolidated Statement of Comprehensive Income (Loss) (Unaudited) | 7
|  | Consolidated Statement of Changes in Stockholders’ Equity (Unaudited) | 8
|  | Consolidated Statement of Cash Flows (Unaudited) | 9
|  | Notes to Consolidated Financial Statements (Unaudited) | 11
|  | 1 — Basis of Presentation | 11
|  | 2 — Current Accounting Developments and Summary of Significant Accounting Policies | 12
|  | 3 — Fair Value Measurement and Fair Value of Financial Instruments | 14
|  | 4 — Assets Purchased under Resale Agreements and Sold under Repurchase Agreements | 24
|  | 5 — Securities | 26
|  | 6 — Derivatives | 32
|  | 7 — Loans Receivable and Allowance for Credit Losses | 39
|  | 8 — Investments in Qualified Affordable Housing Partnerships, Tax Credit and Other Investments, Net and Variable Interest Entities | 54
|  | 9 — Goodwill | 55
|  | 10 — Short-Term Borrowings and Long-Term Debt | 55
|  | 1 1 — Commitments and Contingencies | 56
|  | 1 2 — Stock Compensation Plans | 58
|  | 1 3 — Stockholders’ Equity and Earnings Per Share | 59
|  | 1 4 — Accumulated Other Comprehensive Income (Loss) | 59
|  | 1 5 — Business Segments | 61
| Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations | 64
| Item 3. | Quantitative and Qualitative Disclosures About Market Risk | 108
| Item 4. | Controls and Procedures | 108
PART II — OTHER INFORMATION | 109
| Item 1. | Legal Proceedings | 109
| Item 1A. | Risk Factors | 109
| Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds | 110
| Item 5. | Other Information | 110
| Item 6. | Exhibits | 111
GLOSSARY OF ACRONYMS | 112
SIGNATURE | 113

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 provisions for such statements provided by the Private Securities Litigation Reform Act of 1995. In addition, East West Bancorp, Inc. (referred to herein on an unconsolidated basis as “East West” and on a consolidated basis as the “Company,” “we” or “EWBC”) may make forward-looking statements in other documents that it files with, or furnishes to, the United States (“U.S.”) Securities and Exchange Commission (“SEC”) and management may make forward-looking statements to analysts, investors, media members and others. Forward-looking statements are those that do not relate to historical facts, and that are based on current assumptions, beliefs, estimates, expectations and projections, many of which, by their nature, are inherently uncertain and beyond the Company’s control. Forward-looking statements may relate to various matters, including the Company’s financial condition, results of operations, plans, objectives, future performance, business or industry, and usually can be identified by the use of forward-looking words, such as “anticipates,” “assumes,” “believes,” “can,” “continues,” “could,” “estimates,” “expects,” “forecasts,” “goal,” “intends,” “likely,” “may,” “might,” “objective,” “plans,” “potential,” “projects,” “remains,” “should,” “target,” “trend,” “will,” “would,” or similar expressions or variations thereof, and the negative thereof, but these terms are not the exclusive means of identifying such statements. You should not place undue reliance on forward-looking statements, as they are subject to risks and uncertainties, including, but not limited to, those described below. When considering these forward-looking statements, you should keep in mind these risks and uncertainties, as well as any cautionary statements the Company may make.
There are various important factors that could cause future results to differ materially from historical performance and any forward-looking statements. Factors that might cause such differences, include, but are not limited to:
•changes in the global economy, including an economic slowdown, capital or financial market disruption, supply chain disruption, level of inflation, interest rate environment, housing prices, employment levels, rate of growth and general business conditions, which could result in, among other things, reduced demand for loans, reduced availability of funding or increased funding costs, declines in asset values and/or recognition of allowance for credit losses;
•changes in local, regional and global business, economic and political conditions and geopolitical events, such as political unrest, wars and acts of terrorism;
•the soundness of other financial institutions and the impacts related to or resulting from recent bank failures and other economic and industry volatility, including potential increased regulatory requirements, Federal Deposit Insurance Corporation (“FDIC”) insurance premiums and assessments, losses in the value of our investment portfolio, deposit withdrawals, or other adverse consequences of negative market perceptions of the banking industry or the Company;
•changes in laws or the regulatory environment, including regulatory reform initiatives and policies of the U.S. Department of the Treasury, the Board of Governors of the Federal Reserve System (“Federal Reserve”), the FDIC, the SEC, the Consumer Financial Protection Bureau (“CFPB”), the California Department of Financial Protection and Innovation — Division of Financial Institutions, China’s National Administration of Financial Regulation, the Hong Kong Monetary Authority, the Hong Kong Securities and Futures Commission, and the Monetary Authority of Singapore;
•changes and effects thereof in trade, monetary and fiscal policies and laws, including the ongoing trade, economic and political disputes between the U.S. and the People’s Republic of China and the monetary policies of the Federal Reserve;
•changes in the commercial and consumer real estate markets;
•changes in consumer or commercial spending, savings and borrowing habits, and patterns and behaviors;
•the impact from potential changes to income tax laws and regulations, federal spending and economic stimulus programs;
•the impact of any future U.S. federal government shutdown and uncertainty regarding the U.S. federal government’s debt limit and credit rating;
•the Company’s ability to compete effectively against financial institutions and other entities, including as a result of emerging technologies;
•the success and timing of the Company’s business strategies;
•the Company’s ability to retain key officers and employees;
•the impact on the Company’s funding costs, net interest income and net interest margin from changes in key variable market interest rates, competition, regulatory requirements and the Company’s product mix;
•changes in the Company’s costs of operation, compliance and expansion;
•the Company’s ability to adopt and successfully integrate new technologies into its business in a strategic manner;
3

•the impact of communications or technology disruption, failure in, or breach of, the Company’s operational or security systems or infrastructure, or those of third party vendors with which the Company does business, including as a result of cyber-attacks; and other similar matters which could result in, among other things, confidential and/or proprietary information being disclosed or misused, and materially impact the Company’s ability to provide services to its clients;
•the adequacy of the Company’s risk management framework, disclosure controls and procedures and internal control over financial reporting;
•future credit quality and performance, including the Company’s expectations regarding future credit losses and allowance levels;
•the impact of adverse changes to the Company’s credit ratings from major credit rating agencies;
•the impact of adverse judgments or settlements in litigation;
•the impact of political developments, pandemics, wars, civil unrest, terrorism or other hostilities that may disrupt or increase volatility in securities or otherwise affect business and economic conditions on the Company and its customers;
•heightened regulatory and governmental oversight and scrutiny of the Company’s business practices, including dealings with consumers;
•the impact of reputational risk from negative publicity, fines, penalties and other negative consequences from regulatory violations, legal actions and the Company’s interactions with business partners, counterparties, service providers and other third parties;
•the impact of regulatory investigations and enforcement actions;
•changes in accounting standards as may be required by the Financial Accounting Standards Board (“FASB”) or other regulatory agencies and their impact on the Company’s critical accounting policies and assumptions;
•the Company’s capital requirements and its ability to generate capital internally or raise capital on favorable terms;
•the impact on the Company’s liquidity due to changes in the Company’s ability to receive dividends from its subsidiaries;
•any strategic acquisitions or divestitures;
•changes in the equity and debt securities markets;
•fluctuations in the Company’s stock price;
•fluctuations in foreign currency exchange rates;
•the impact of increased focus on social, environmental and sustainability matters, which may affect the operations of the Company and its customers and the economy more broadly; and
•the impact of climate change, natural or man-made disasters or calamities, such as wildfires, droughts, hurricanes, flooding and earthquakes or other events that may directly or indirectly result in a negative impact on the financial performance of the Company and its customers.
For a more detailed discussion of some of the factors that might cause such differences, see the Company’s Annual Report on Form 10-K for the year ended December 31, 2022, filed with the SEC on February 27, 2023 (the “Company’s 2022 Form 10-K”) under the heading Item 1A. Risk Factors, and Item 1A. Risk Factors of this Form 10-Q. You should treat forward-looking statements as speaking only as of the date they are made and based only on information then actually known to the Company. The Company does not undertake, and specifically disclaims, any obligation to update or revise any forward-looking statements to reflect the occurrence of events or circumstances after the date of such statements except as required by law.
4

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

|  | September 30, 2023 |  | December 31, 2022
ASSETS |  |  |  |
Cash and due from banks |  | $ | 495,976 |  |  | $ | 534,980 |
Interest-bearing cash with banks |  | 4,065,202 |  |  | 2,946,804 |
Cash and cash equivalents |  | 4,561,178 |  |  | 3,481,784 |
Interest-bearing deposits with banks |  | 17,213 |  |  | 139,021 |
Assets purchased under resale agreements (“resale agreements”) |  | 785,000 |  |  | 792,192 |
Securities: |  |  |  |
Available-for-sale (“AFS”) debt securities, at fair value (amortized cost of $6,976,331 and $6,879,225) |  | 6,039,837 |  |  | 6,034,993 |
Held-to-maturity (“HTM”) debt securities, at amortized cost (fair value of $2,308,048 and $2,455,171) |  | 2,964,235 |  |  | 3,001,868 |
Loans held-for-sale |  | 4,762 |  |  | 25,644 |
Loans held-for-investment (net of allowance for loan losses of $655,523 and $595,645) |  | 50,251,661 |  |  | 47,606,785 |
Investments in qualified affordable housing partnerships, tax credit and other investments, net |  | 901,559 |  |  | 763,256 |
Premises and equipment (net of accumulated depreciation of $155,043 and $148,126) |  | 87,888 |  |  | 89,191 |
Goodwill |  | 465,697 |  |  | 465,697 |
Operating lease right-of-use assets |  | 97,782 |  |  | 103,681 |
Other assets |  | 2,112,646 |  |  | 1,608,038 |
TOTAL |  | $ | 68,289,458 |  |  | $ | 64,112,150 |
LIABILITIES |  |  |  |
Deposits: |  |  |  |
Noninterest-bearing |  | $ | 16,169,072 |  |  | $ | 21,051,090 |
Interest-bearing |  | 38,917,959 |  |  | 34,916,759 |
Total deposits |  | 55,087,031 |  |  | 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 |  | 153,087 |  |  | 152,400 |
Operating lease liabilities |  | 107,695 |  |  | 111,931 |
Accrued expenses and other liabilities |  | 1,844,939 |  |  | 1,595,358 |
Total liabilities |  | 61,692,752 |  |  | 58,127,538 |
COMMITMENTS AND CONTINGENCIES (Note 11) |  |  |  |
STOCKHOLDERS’ EQUITY |  |  |  |
Common stock, $0.001 par value, 200,000,000 shares authorized; 169,316,546 and 168,459,045 shares issued |  | 169 |  |  | 168 |
Additional paid-in capital |  | 1,969,239 |  |  | 1,936,389 |
Retained earnings |  | 6,294,751 |  |  | 5,582,546 |
Treasury stock, at cost 27,830,597 and 27,511,199 shares |  | (792,076) |  |  | (768,862) |
Accumulated other comprehensive loss (“AOCI”), net of tax |  | (875,377) |  |  | (765,629) |
Total stockholders’ equity |  | 6,596,706 |  |  | 5,984,612 |
TOTAL |  | $ | 68,289,458 |  |  | $ | 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 September 30, |  | Nine Months Ended September 30, |  |
|  | 2023 |  | 2022 |  | 2023 |  | 2022 |  |  |  |
INTEREST AND DIVIDEND INCOME |  |  |  |  |  |  |  |  |  |  |  |
Loans receivable, including fees |  | $ | 818,719 |  |  | $ | 560,452 |  |  | $ | 2,318,369 |  |  | $ | 1,376,978 |  |  |  |  |
Debt securities |  | 69,778 |  |  | 51,092 |  |  | 204,679 |  |  | 139,935 |  |  |  |  |
Resale agreements |  | 4,460 |  |  | 6,769 |  |  | 12,932 |  |  | 23,705 |  |  |  |  |
Restricted equity securities |  | 1,079 |  |  | 843 |  |  | 3,054 |  |  | 2,274 |  |  |  |  |
Interest-bearing cash and deposits with banks |  | 67,751 |  |  | 9,080 |  |  | 164,393 |  |  | 17,127 |  |  |  |  |
Total interest and dividend income |  | 961,787 |  |  | 628,236 |  |  | 2,703,427 |  |  | 1,560,019 |  |  |  |  |
INTEREST EXPENSE |  |  |  |  |  |  |  |  |  |  |  |
Deposits |  | 338,296 |  |  | 68,894 |  |  | 842,567 |  |  | 104,371 |  |  |  |  |
Federal funds purchased and other short-term borrowings |  | 49,575 |  |  | 1,177 |  |  | 107,432 |  |  | 1,427 |  |  |  |  |
Federal Home Loan Bank (“FHLB”) advances |  | — |  |  | 392 |  |  | 6,430 |  |  | 1,529 |  |  |  |  |
Repurchase agreements |  | 193 |  |  | 4,421 |  |  | 1,456 |  |  | 8,855 |  |  |  |  |
Long-term debt and finance lease liabilities |  | 2,910 |  |  | 1,543 |  |  | 8,122 |  |  | 3,463 |  |  |  |  |
Total interest expense |  | 390,974 |  |  | 76,427 |  |  | 966,007 |  |  | 119,645 |  |  |  |  |
Net interest income before provision for credit losses |  | 570,813 |  |  | 551,809 |  |  | 1,737,420 |  |  | 1,440,374 |  |  |  |  |
Provision for credit losses |  | 42,000 |  |  | 27,000 |  |  | 88,000 |  |  | 48,500 |  |  |  |  |
Net interest income after provision for credit losses |  | 528,813 |  |  | 524,809 |  |  | 1,649,420 |  |  | 1,391,874 |  |  |  |  |
NONINTEREST INCOME |  |  |  |  |  |  |  |  |  |  |  |
Lending fees |  | 20,312 |  |  | 20,289 |  |  | 61,799 |  |  | 59,869 |  |  |  |  |
Deposit account fees |  | 22,622 |  |  | 23,636 |  |  | 66,610 |  |  | 66,323 |  |  |  |  |
Interest rate contracts and other derivative income |  | 11,208 |  |  | 8,761 |  |  | 21,145 |  |  | 29,695 |  |  |  |  |
Foreign exchange income |  | 12,334 |  |  | 10,083 |  |  | 38,245 |  |  | 34,143 |  |  |  |  |
Wealth management fees |  | 5,877 |  |  | 8,903 |  |  | 19,070 |  |  | 21,494 |  |  |  |  |
Net (losses) gains on sales of loans |  | (12) |  |  | 2,129 |  |  | (41) |  |  | 5,968 |  |  |  |  |
Net (losses) gains on AFS debt securities |  | — |  |  | — |  |  | (10,000) |  |  | 1,306 |  |  |  |  |
Other investment income (loss) |  | 1,751 |  |  | (580) |  |  | 7,675 |  |  | 5,910 |  |  |  |  |
Other income |  | 2,660 |  |  | 2,331 |  |  | 10,858 |  |  | 9,031 |  |  |  |  |
Total noninterest income |  | 76,752 |  |  | 75,552 |  |  | 215,361 |  |  | 233,739 |  |  |  |  |
NONINTEREST EXPENSE |  |  |  |  |  |  |  |  |  |  |  |
Compensation and employee benefits |  | 123,153 |  |  | 127,580 |  |  | 377,744 |  |  | 357,213 |  |  |  |  |
Occupancy and equipment expense |  | 15,353 |  |  | 15,920 |  |  | 47,028 |  |  | 46,853 |  |  |  |  |
Deposit insurance premiums and regulatory assessments |  | 8,583 |  |  | 4,875 |  |  | 24,755 |  |  | 14,519 |  |  |  |  |
Deposit account expense |  | 11,585 |  |  | 6,707 |  |  | 31,753 |  |  | 17,071 |  |  |  |  |
Data processing |  | 3,645 |  |  | 3,725 |  |  | 10,205 |  |  | 10,876 |  |  |  |  |
Computer software expense |  | 8,116 |  |  | 6,889 |  |  | 22,955 |  |  | 20,755 |  |  |  |  |
Other operating expense |  | 31,885 |  |  | 30,403 |  |  | 102,092 |  |  | 86,243 |  |  |  |  |
Amortization of tax credit and other investments |  | 49,694 |  |  | 19,874 |  |  | 115,718 |  |  | 48,753 |  |  |  |  |
Total noninterest expense |  | 252,014 |  |  | 215,973 |  |  | 732,250 |  |  | 602,283 |  |  |  |  |
INCOME BEFORE INCOME TAXES |  | 353,551 |  |  | 384,388 |  |  | 1,132,531 |  |  | 1,023,330 |  |  |  |  |
INCOME TAX EXPENSE |  | 65,813 |  |  | 89,049 |  |  | 210,323 |  |  | 232,010 |  |  |  |  |
NET INCOME |  | $ | 287,738 |  |  | $ | 295,339 |  |  | $ | 922,208 |  |  | $ | 791,320 |  |  |  |  |
EARNINGS PER SHARE (“EPS”) |  |  |  |  |  |  |  |  |  |  |  |
BASIC |  | $ | 2.03 |  |  | $ | 2.10 |  |  | $ | 6.52 |  |  | $ | 5.59 |  |  |  |  |
DILUTED |  | $ | 2.02 |  |  | $ | 2.08 |  |  | $ | 6.49 |  |  | $ | 5.55 |  |  |  |  |
WEIGHTED-AVERAGE NUMBER OF SHARES OUTSTANDING |  |  |  |  |  |  |  |  |  |  |  |
BASIC |  | 141,485 |  |  | 140,917 |  |  | 141,356 |  |  | 141,453 |  |  |  |  |
DILUTED |  | 142,122 |  |  | 142,011 |  |  | 142,044 |  |  | 142,601 |  |  |  |  |

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 September 30, |  | Nine Months Ended September 30, |  |  |  |  |  |
|  | 2023 |  | 2022 |  | 2023 |  | 2022 |  |  |  |  |  |  |  |  |  |
Net income |  | $ | 287,738 |  |  | $ | 295,339 |  |  | $ | 922,208 |  |  | $ | 791,320 |  |  |  |  |  |  |  |  |  |  |
Other comprehensive loss, net of tax: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Net changes in unrealized losses on AFS debt securities |  | (72,691) |  |  | (161,445) |  |  | (64,990) |  |  | (523,593) |  |  |  |  |  |  |  |  |  |  |
Reclassification of unrealized losses on debt securities transferred from AFS to HTM |  | — |  |  | — |  |  | — |  |  | (112,991) |  |  |  |  |  |  |  |  |  |  |
Amortization of unrealized losses on debt securities transferred from AFS to HTM |  | 2,870 |  |  | 3,256 |  |  | 8,448 |  |  | 9,317 |  |  |  |  |  |  |  |  |  |  |
Net changes in unrealized losses on cash flow hedges |  | (27,334) |  |  | (33,269) |  |  | (52,608) |  |  | (64,372) |  |  |  |  |  |  |  |  |  |  |
Foreign currency translation adjustments |  | 3,710 |  |  | (7,926) |  |  | (598) |  |  | (18,012) |  |  |  |  |  |  |  |  |  |  |
Other comprehensive loss |  | (93,445) |  |  | (199,384) |  |  | (109,748) |  |  | (709,651) |  |  |  |  |  |  |  |  |  |  |
COMPREHENSIVE INCOME |  | $ | 194,293 |  |  | $ | 95,955 |  |  | $ | 812,460 |  |  | $ | 81,669 |  |  |  |  |  |  |  |  |  |  |

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, JULY 1, 2022 |  | 140,917,389 |  |  | $ | 1,914,232 |  |  | $ | 5,064,650 |  |  | $ | (768,752) |  |  | $ | (600,648) |  |  | $ | 5,609,482 |
Net income |  | — |  |  | — |  |  | 295,339 |  |  | — |  |  | — |  |  | 295,339 |
Other comprehensive loss |  | — |  |  | — |  |  | — |  |  | — |  |  | (199,384) |  |  | (199,384) |
Issuance of common stock pursuant to various stock compensation plans and agreements |  | 206 |  |  | 12,329 |  |  | — |  |  | — |  |  | — |  |  | 12,329 |
Repurchase of common stock pursuant to various stock compensation plans and agreements |  | (83) |  |  | — |  |  | — |  |  | (6) |  |  | — |  |  | (6) |
Cash dividends on common stock ($0.40 per share) |  | — |  |  | — |  |  | (57,092) |  |  | — |  |  | — |  |  | (57,092) |
BALANCE, SEPTEMBER 30, 2022 |  | 140,917,512 |  |  | $ | 1,926,561 |  |  | $ | 5,302,897 |  |  | $ | (768,758) |  |  | $ | (800,032) |  |  | $ | 5,660,668 |
BALANCE, JULY 1, 2023 |  | 141,483,668 |  |  | $ | 1,959,784 |  |  | $ | 6,075,735 |  |  | $ | (791,890) |  |  | $ | (781,932) |  |  | $ | 6,461,697 |
Net income |  | — |  |  | — |  |  | 287,738 |  |  | — |  |  | — |  |  | 287,738 |
Other comprehensive loss |  | — |  |  | — |  |  | — |  |  | — |  |  | (93,445) |  |  | (93,445) |
Issuance of common stock pursuant to various stock compensation plans and agreements |  | 5,682 |  |  | 9,624 |  |  | — |  |  | — |  |  | — |  |  | 9,624 |
Repurchase of common stock pursuant to various stock compensation plans and agreements |  | (3,401) |  |  | — |  |  | — |  |  | (186) |  |  | — |  |  | (186) |
Cash dividends on common stock ($0.48 per share) |  | — |  |  | — |  |  | (68,722) |  |  | — |  |  | — |  |  | (68,722) |
BALANCE, SEPTEMBER 30, 2023 |  | 141,485,949 |  |  | $ | 1,969,408 |  |  | $ | 6,294,751 |  |  | $ | (792,076) |  |  | $ | (875,377) |  |  | $ | 6,596,706 |

|  | Common Stock and Additional Paid-in Capital |  | Retained Earnings |  | Treasury Stock |  | AOCI, Net of Tax |  | Total Stockholders’ Equity
|  | Shares |  | Amount |  |  |  |
BALANCE, JANUARY 1, 2022 |  | 141,907,954 |  |  | $ | 1,893,725 |  |  | $ | 4,683,659 |  |  | $ | (649,785) |  |  | $ | (90,381) |  |  | $ | 5,837,218 |
Net income |  | — |  |  | — |  |  | 791,320 |  |  | — |  |  | — |  |  | 791,320 |
Other comprehensive loss |  | — |  |  | — |  |  | — |  |  | — |  |  | (709,651) |  |  | (709,651) |
Issuance of common stock pursuant to various stock compensation plans and agreements |  | 640,053 |  |  | 32,836 |  |  | — |  |  | — |  |  | — |  |  | 32,836 |
Repurchase of common stock pursuant to various stock compensation plans and agreements |  | (244,978) |  |  | — |  |  | — |  |  | (18,983) |  |  | — |  |  | (18,983) |
Repurchase of common stock pursuant to the stock repurchase program |  | (1,385,517) |  |  | — |  |  | — |  |  | (99,990) |  |  | — |  |  | (99,990) |
Cash dividends on common stock ($1.20 per share) |  | — |  |  | — |  |  | (172,082) |  |  | — |  |  | — |  |  | (172,082) |
BALANCE, SEPTEMBER 30, 2022 |  | 140,917,512 |  |  | $ | 1,926,561 |  |  | $ | 5,302,897 |  |  | $ | (768,758) |  |  | $ | (800,032) |  |  | $ | 5,660,668 |
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 |  | — |  |  | — |  |  | 922,208 |  |  | — |  |  | — |  |  | 922,208 |
Other comprehensive loss |  | — |  |  | — |  |  | — |  |  | — |  |  | (109,748) |  |  | (109,748) |
Issuance of common stock pursuant to various stock compensation plans and agreements |  | 857,501 |  |  | 32,851 |  |  | — |  |  | — |  |  | — |  |  | 32,851 |
Repurchase of common stock pursuant to various stock compensation plans and agreements |  | (319,398) |  |  | — |  |  | — |  |  | (23,214) |  |  | — |  |  | (23,214) |
Cash dividends on common stock ($1.44 per share) |  | — |  |  | — |  |  | (205,741) |  |  | — |  |  | — |  |  | (205,741) |
BALANCE, SEPTEMBER 30, 2023 |  | 141,485,949 |  |  | $ | 1,969,408 |  |  | $ | 6,294,751 |  |  | $ | (792,076) |  |  | $ | (875,377) |  |  | $ | 6,596,706 |

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

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

|  | Nine Months Ended September 30, |  |
|  | 2023 |  | 2022 |  |
CASH FLOWS FROM OPERATING ACTIVITIES |  |  |  |  |  |
Net income |  | $ | 922,208 |  |  | $ | 791,320 |  |  |
Adjustments to reconcile net income to net cash provided by operating activities: |  |  |  |  |  |
Depreciation and amortization |  | 174,856 |  |  | 81,980 |  |  |
Amortization of premiums and accretion of discount, net |  | (15,740) |  |  | 26,336 |  |  |
Stock compensation costs |  | 29,934 |  |  | 29,338 |  |  |
Deferred income tax expense (benefit) |  | 1,083 |  |  | (6,107) |  |  |
Provision for credit losses |  | 88,000 |  |  | 48,500 |  |  |
Net losses (gains) on sales of loans |  | 41 |  |  | (5,968) |  |  |
Net losses (gains) on AFS debt securities |  | 10,000 |  |  | (1,306) |  |  |
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 |  | 3,727 |  |  | 5,642 |  |  |
Net change in accrued interest receivable and other assets |  | (361,324) |  |  | 56,958 |  |  |
Net change in accrued expenses and other liabilities |  | 11,641 |  |  | 584,655 |  |  |
Other operating activities, net |  | (1,204) |  |  | 5,057 |  |  |
Total adjustments |  | (58,986) |  |  | 825,099 |  |  |
Net cash provided by operating activities |  | 863,222 |  |  | 1,616,419 |  |  |
CASH FLOWS FROM INVESTING ACTIVITIES |  |  |  |  |  |
Net change in: |  |  |  |  |  |
Investments in qualified affordable housing partnerships, tax credit and other investments |  | (154,309) |  |  | (91,710) |  |  |
Interest-bearing deposits with banks |  | 121,730 |  |  | 105,479 |  |  |
Resale agreements: |  |  |  |  |  |
Proceeds from paydowns and maturities |  | 219,917 |  |  | 1,719,076 |  |  |
Purchases |  | (212,725) |  |  | (258,559) |  |  |
AFS debt securities: |  |  |  |  |  |
Proceeds from sales |  | — |  |  | 129,181 |  |  |
Proceeds from repayments, maturities and redemptions |  | 877,377 |  |  | 711,950 |  |  |
Purchases |  | (1,011,326) |  |  | (769,007) |  |  |
HTM debt securities: |  |  |  |  |  |
Proceeds from repayments, maturities and redemptions |  | 49,649 |  |  | 60,140 |  |  |
Purchases |  | — |  |  | (50,000) |  |  |
Loans held-for-investment: |  |  |  |  |  |
Proceeds from sales of loans originally classified as held-for-investment |  | 528,056 |  |  | 453,315 |  |  |
Purchases |  | (433,228) |  |  | (599,660) |  |  |
Other changes in loans held-for-investment, net |  | (2,794,119) |  |  | (5,675,012) |  |  |
Proceeds from distributions received from equity method investees |  | 16,614 |  |  | 13,557 |  |  |
Other investing activities, net |  | (105,258) |  |  | 920 |  |  |
Net cash used in investing activities |  | (2,897,622) |  |  | (4,250,330) |  |  |

See accompanying Notes to Consolidated Financial Statements.
9

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

|  | Nine Months Ended September 30, |  |
|  | 2023 |  | 2022 |  |
CASH FLOWS FROM FINANCING ACTIVITIES |  |  |  |  |  |
Net change in deposits |  | (840,367) |  |  | 623,025 |  |  |
Net change in short-term borrowings |  | 4,500,017 |  |  | 200,006 |  |  |
FHLB advances: |  |  |  |  |  |
Proceeds |  | 6,000,000 |  |  | 4,600,200 |  |  |
Repayment |  | (6,000,000) |  |  | (4,525,200) |  |  |
Repurchase agreements: |  |  |  |  |  |
Proceeds from repurchase agreements |  | — |  |  | 311,785 |  |  |
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 |  | (637) |  |  | (710) |  |  |
Common stock: |  |  |  |  |  |
Repurchase of common stocks pursuant to the Stock Repurchase Program |  | — |  |  | (99,990) |  |  |
Proceeds from issuance pursuant to various stock compensation plans and agreements |  | 1,563 |  |  | 1,444 |  |  |
Stock tendered for payment of withholding taxes |  | (23,214) |  |  | (18,983) |  |  |
Cash dividends paid |  | (206,848) |  |  | (171,991) |  |  |
Net cash provided by financing activities |  | 3,126,642 |  |  | 919,586 |  |  |
Effect of exchange rate changes on cash and cash equivalents |  | (12,848) |  |  | (35,257) |  |  |
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS |  | 1,079,394 |  |  | (1,749,582) |  |  |
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD |  | 3,481,784 |  |  | 3,912,935 |  |  |
CASH AND CASH EQUIVALENTS, END OF PERIOD |  | $ | 4,561,178 |  |  | $ | 2,163,353 |  |  |
SUPPLEMENTAL CASH FLOW INFORMATION |  |  |  |  |  |
Cash paid during the period for: |  |  |  |  |  |
Interest |  | $ | 852,315 |  |  | $ | 107,146 |  |  |
Income taxes, net |  | $ | 284,347 |  |  | $ | 233,082 |  |  |
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 |  | $ | 507,215 |  |  | $ | 463,769 |  |  |

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 September 30, 2023, East West also has six wholly-owned subsidiaries that are statutory business trusts (the “Trusts”). In accordance with FASB Accounting Standards Codification (“ASC”) Topic 810, Consolidation, the Trusts are not included on the Consolidated Financial Statements.
The unaudited interim Consolidated Financial Statements are presented in accordance with U.S. Generally Accepted Accounting Principles (“GAAP”), applicable guidelines prescribed by regulatory authorities and general practices in the banking industry. While the unaudited interim Consolidated Financial Statements reflect all adjustments that, in the opinion of management, are necessary for fair presentation, they primarily serve to update the most recently filed annual report on Form 10-K, and may not include all the information and notes necessary to constitute a complete set of financial statements. Accordingly, they should be read in conjunction with the audited Consolidated Financial Statements and notes thereto included in the Company’s 2022 Form 10-K.
The preparation of the Consolidated Financial Statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the Consolidated Financial Statements, income and expenses during the reporting periods, and the related disclosures. Although our estimates consider current conditions and how we expect them to change in the future, it is reasonably possible that actual results could be materially different from those estimates. Hence, the current period’s results of operations are not necessarily indicative of results that may be expected for any future interim period or for the year as a whole. Events subsequent to the Consolidated Balance Sheet date have been evaluated through the date the Consolidated Financial Statements are issued for inclusion in the accompanying Consolidated Financial Statements.
Risk and Uncertainties
The failures of Silicon Valley Bank, Signature Bank and First Republic Bank earlier in the year have resulted in significant disruption in the financial services industry, which has adversely impacted the volatility and market prices of the securities of financial institutions. In addition, these bank failures have caused concern and uncertainty regarding the liquidity of the banking sector as a whole and resulted in some regional bank customers choosing to maintain deposits with larger financial institutions. Further, competition for deposits has increased in recent periods, and the cost of funding has similarly increased, putting pressure on our net interest margin. These events have adversely impacted, and could continue to adversely affect, our business, results of operations, and financial condition, as well as the market price and volatility of our common stock.
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Note 2 — Current Accounting Developments and Summary of Significant Accounting Policies
Accounting Pronouncements Adopted in 2023

Standard | Required Date of Adoption | Description | Effect on Financial Statements
ASU 2022-02, Financial Instruments —Credit Losses (Topic 326): Troubled Debt Restructurings and the Vintage Disclosures | January 1, 2023 Early adoption is permitted | ASU 2022-02 eliminates the •accounting guidance for troubled debt restructurings (“TDR”), and requires the Company to apply the loan refinancing and restructuring guidance to determine whether a modification made to a loan results in a new loan or a continuation of an existing loan; and •requirement to use a discounted cash flow method to measure receivables. The guidance also requires •enhanced disclosures for certain loan refinancings and restructurings by creditors when the borrower is experiencing financial difficulty; and •vintage disclosures of current period gross charge-offs (on a current year-to-date basis) by year of loan origination for financing receivables and net investments in leases within the scope of ASC 326-20: Financial Instruments — Credit Losses — Measured at Amortized Cost. | The Company adopted ASU 2022-02 on January 1, 2023 on a prospective basis, except for the guidance related to the elimination of TDR recognition and measurement, which was adopted on a modified retrospective approach. This adoption increased the allowance for loan losses on TDRs as of December 31, 2022 by $6.0 million and decreased opening retained earnings on January 1, 2023 by $4.3 million after-tax. Disclosures as of September 30, 2023 are presented in accordance with this guidance while prior year amounts are reported in accordance with previously applicable GAAP.

12

Recent Accounting Pronouncements Yet to be Adopted

Standard | Required Date of Adoption | Description | Effect on Financial Statements
Standards Not Yet Adopted
ASU 2023-01, Leases (Topic 842): Common Control Arrangements | January 1, 2024 Early adoption is permitted | ASU 2023-01 amends the accounting for leasehold improvements for leases between entities under common control arrangements. The guidance requires leasehold improvements associated with leases between companies under common control to be amortized by a lessee over the economic life of the leasehold improvements, regardless of the lease term or, until the lessee ceases to control the use of the underlying asset through a lease, at which time the remaining value of the leasehold improvement would be accounted for as a transfer between companies under common control through an adjustment to equity. The amendments in this guidance may be applied retrospectively to the beginning of the period in which the entity first applied Topic 842 or prospectively (1) to all new leasehold improvements recognized on or after the date the entity first applies the amendments, or (2) to all new and existing leasehold improvements recognized on or after the date the entity first applies the amendments. | The Company does not expect the adoption of this guidance to have a material impact on the Company’s Consolidated Financial Statements. The Company expects to adopt ASU 2023-01 on January 1, 2024 on a prospective basis.
ASU 2023-02, Investments — Equity Method and Joint Ventures (Topic 323): Accounting for Investments in Tax Credit Structures Using the Proportional Amortization Method | January 1, 2024 Early adoption is permitted | ASU 2023-02 expands the scope of the proportional amortization method to equity tax credit investment programs if certain conditions are met. Previously, the proportional amortization method could only be used for investments in low-income housing tax credit structures. Under this guidance, companies are able to elect, on a tax credit program-by-tax credit program basis, to apply the proportional amortization method to all equity investments meeting the criteria in ASC 323-740-25-1. The amendments in this guidance must be applied on a modified retrospective or a retrospective basis. | The Company is currently evaluating the impact of this guidance on the Company’s Consolidated Financial Statements.
ASU 2023-05, Business Combinations — Joint Venture Formations (Subtopic 805-60): Recognition and Initial Measurement | January 1, 2025 Early adoption is permitted | ASU 2023-05 requires a joint venture to recognize and initially measure assets contributed to the joint venture in a formation transaction to be measured at fair value. Under this guidance, the initial formation of the joint venture would trigger a new basis of accounting and recognize contributed net assets generally at fair value as of the joint venture’s formation date. The excess of the fair value of the joint venture’s outstanding equity interests over the fair value of its identifiable assets and liabilities is recognized as goodwill, regardless of whether the joint venture meets the definition of a business in its stand-alone financial statements, and measure its contributed total net assets upon formation as the fair value of the joint venture as a whole, which would equal the fair value of 100% of the joint venture’s outstanding equity interests. The guidance also allows a joint venture to apply the measurement period guidance, which is largely consistent with the acquisition method for business combination in ASC 805-10. The guidance also introduces new disclosure requirements related to the nature and financial effect of the joint venture. The amendments in this guidance are effective prospectively for all joint venture formations with a formation date on or after January 1, 2025. Additionally, joint ventures that were formed before January 1, 2025 may elect to apply the amendments retrospectively if sufficient information exists. | The Company does not expect the adoption of this guidance to have a material impact on the Company’s Consolidated Financial Statements. The Company expects to adopt ASU 2023-05 on January 1, 2025.

13

Significant Accounting Policies Update
Loan Modifications — Certain loans are modified in the normal course of business for competitive reasons or in conjunction with the Company’s loss mitigation activities. Upon the adoption of ASU 2022-02, the Company applies the general loan modification guidance provided in ASC 310-20 to all loan modifications, including modifications made to borrowers experiencing financial difficulty. Under the general loan modification guidance, a modification is treated as a new loan only if the following two conditions are met: (1) the terms of the new loan are at least as favorable to the Company as the terms for comparable loans to other customers with similar collection risks; and (2) modifications to the terms of the original loan are more than minor. If either condition is not met, the modification is accounted for as a continuation of the existing loan with any effect of the modification treated as a prospective adjustment to the loan’s effective interest rate. A modification made to borrowers experiencing financial difficulty may vary by program and by borrower-specific characteristics, and may include rate reductions, principal forgiveness, term extensions, and payment delays, and is intended to minimize the Company’s economic loss and to avoid foreclosure or repossession of collateral. The Company applies the same credit loss methodology it uses for similar loans that were not modified. For the Company’s accounting policy related to the loan modifications’ allowance for loan losses, see Note 7 — Loans Receivable and Allowance for Credit Losses — Allowance for Credit Losses to the Consolidated Financial Statements in this Form 10-Q.
Note 3 — Fair Value Measurement and Fair Value of Financial Instruments
Under applicable accounting standards, the Company measures a portion of its assets and liabilities at fair value. These assets and liabilities are predominantly recorded at fair value on a recurring basis. From time to time, certain assets and liabilities are measured at fair value on a nonrecurring basis; that is, they are subject to fair value adjustments only as required through the application of an accounting method such as lower of cost or fair value or write-down of individual assets. The Company categorizes its assets and liabilities into three levels based on the established fair value hierarchy and conducts a review of fair value hierarchy classifications on a quarterly basis. For more information regarding the fair value hierarchy and how the Company measures fair value, see Note 1 — Summary of Significant Accounting Policies — Significant Accounting Policies — Fair Value to the Consolidated Financial Statements in the Company’s 2022 Form 10-K.
Assets and Liabilities Measured at Fair Value on a Recurring Basis
The following section describes the valuation methodologies used by the Company to measure financial assets and liabilities on a recurring basis, as well as the general classification of these instruments within the fair value hierarchy.
Available-for-Sale Debt Securities — The fair value of AFS debt securities is generally determined by independent external pricing service providers who have experience in valuing these securities or by taking the average quoted market prices obtained from independent external brokers. The valuations provided by the third-party pricing service providers are based on observable market inputs, which include benchmark yields, reported trades, issuer spreads, benchmark securities, bids, offers, prepayment expectations and reference data obtained from market research publications. Inputs used by the third-party pricing service providers in valuing collateralized mortgage obligations and other securitization structures also include newly issued data, monthly payment information, whole loan collateral performance, tranche evaluation and “To Be Announced” prices. In valuing securities issued by state and political subdivisions, inputs used by third-party pricing service providers also include material event notices.
On a monthly basis, the Company validates the valuations provided by third-party pricing service providers to ensure that the fair value determination is consistent with the applicable accounting guidance and the financial instruments are properly classified in the fair value hierarchy. To perform this validation, the Company evaluates the fair values of securities by comparing the fair values provided by the third-party pricing service providers to prices from other available independent sources for the same securities. When significant variances in prices are identified, the Company further compares inputs used by different sources to ascertain the reliability of these sources. On a quarterly basis, the Company reviews the valuation inputs and methodology furnished by third-party pricing service providers for each security category.
14

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 September 30, 2023 and December 31, 2022. The Company invested in these mutual funds for Community Reinvestment Act (“CRA”) purposes. The Company uses net asset value (“NAV”) information to determine the fair value of these equity securities. When NAV is available periodically and the equity securities can be put back to the transfer agents at the publicly available NAV, the fair value of the equity securities is classified as Level 1. When NAV is available periodically, but the equity securities may not be readily marketable at its periodic NAV in the secondary market, the fair value of these equity securities is classified as Level 2.
Interest Rate Contracts — Interest rate contracts consist of interest rate swaps and options. The fair value of the interest rate swaps is determined using the market standard methodology of netting the discounted future fixed cash payments (or receipts) and the discounted expected variable cash receipts (or payments). The fair value of the interest rate options, which consist of floors and caps, is determined using the market standard methodology of discounting the future expected cash receipts that would occur if variable interest rates fall below (rise above) the strike rate of the floors (caps). In addition, to comply with the provisions of ASC 820, Fair Value Measurement, the Company incorporates credit valuation adjustments to appropriately reflect both its own and the respective counterparty’s nonperformance risk in the fair value measurements of its derivatives. The credit valuation adjustments associated with the Company’s derivatives utilize model-derived credit spreads, which are Level 3 inputs. Considering the observable nature of all other significant inputs utilized, the Company classifies these derivative instruments as Level 2.
Foreign Exchange Contracts — The fair value of foreign exchange contracts is determined at each reporting period based on changes in the foreign exchange rates. These are over-the-counter contracts where quoted market prices are not readily available. Valuation is measured using conventional valuation methodologies with observable market data. Due to the short-term nature of the majority of these contracts, the counterparties’ credit risks are considered nominal and result in no adjustments to the valuation of the foreign exchange contracts. Due to the observable nature of the inputs used in deriving the fair value of these contracts, the valuation of foreign exchange contracts is classified as Level 2. As of both September 30, 2023 and December 31, 2022, the Bank held foreign currency non-deliverable forward contracts to hedge its net investment in its China subsidiary, East West Bank (China) Limited, a non-U.S. dollar (“USD”) functional currency subsidiary in China. These foreign currency non-deliverable forward contracts were designated as net investment hedges. The fair value of foreign currency non-deliverable forward contracts is determined by comparing the contracted foreign exchange rate to the current market foreign exchange rate. Key inputs of the current market exchange rate include the spot and forward rates of the contractual currencies. Foreign exchange forward curves are used to determine which forward rate pertains to a specific maturity. Due to the observable nature of the inputs used in deriving the estimated fair value, these instruments are classified as Level 2.
Credit Contracts — Credit contracts utilized by the Company are comprised of credit risk participation agreements (“RPAs”) entered into by the Company with institutional counterparties. The fair value of the RPAs is calculated by determining the total expected asset or liability exposure of the derivatives to the borrowers and applying the borrowers’ credit spread to that exposure. Total expected exposure incorporates both the current and potential future exposure of the derivatives, derived from using observable inputs, such as yield curves and volatilities. Due to the observable nature of all other significant inputs used in deriving the estimated fair value, credit contracts are classified as Level 2.
15

Equity Contracts — Equity contracts consist of warrants to purchase common or preferred stock of public and private companies, and any liability-classified contingent issuable shares of the Company. The fair value of the warrants is based on the Black-Scholes option pricing model. For warrants from public companies, the model uses the underlying stock price, stated strike price, warrant expiration date, risk-free interest rate based on a duration-matched U.S. Treasury rate, and market-observable company-specific equity volatility as inputs to value the warrants. Due to the observable nature of the inputs used in deriving the estimated fair value, warrants from public companies are classified as Level 2. For warrants from private companies, the model uses inputs such as the offering price observed in the most recent round of funding, stated strike price, warrant expiration date, risk-free interest rate based on duration-matched U.S. Treasury rate and option volatility. The Company applies proxy volatilities based on the industry sectors of the private companies. The model values are then adjusted for a general lack of liquidity due to the private nature of the underlying companies. Since both option volatility and liquidity discount assumptions are subject to management’s judgment, measurement uncertainty is inherent in the valuation of private company warrants. Due to the unobservable nature of the option volatility and liquidity discount assumptions used in deriving the estimated fair value, warrants from private companies are classified as Level 3. On a quarterly basis, the changes in the fair value of warrants from private companies are reviewed for reasonableness, and a measurement of uncertainty analysis on the option volatility and liquidity discount assumptions is performed.
In connection with the Company’s acquisition of a 49.99% equity interest in Rayliant Global Advisors Limited (“Rayliant”) during the third quarter of 2023, the Company granted performance restricted stock units (“PRSUs”) as part of its consideration. The vesting of these equity contracts is contingent on Rayliant meeting certain financial performance targets, and they are accounted for as a derivative liability. The fair value of these liability-classified equity contracts varies based on the operating revenue and operating EBITDA of Rayliant to be achieved during the future performance period. Due to the unobservable nature of the input assumptions, these equity contracts are classified as Level 3. For additional information on the equity contracts, refer to Note 6 — Derivatives and Note 8 — Investments in Qualified Affordable Housing Partnerships, Tax Credit and Other Investments, Net and Variable Interest Entities to the Consolidated Financial Statements in this Form 10-Q.
Commodity Contracts — Commodity contracts consist of swaps and options referencing commodity products. The fair value of the commodity option contracts is determined using the Black-Scholes model and assumptions that include expectations of future commodity price and volatility. The future commodity contract price is derived from observable inputs such as the market price of the commodity. Commodity swaps are structured as an exchange of fixed cash flows for floating cash flows. The fair value of the commodity swaps is determined using the market standard methodology of netting the discounted future fixed cash payments (or receipts) and the discounted expected variable cash receipts (or payments) based on the market prices of the commodity. The fixed cash flows are predetermined based on the known volumes and fixed price as specified in the swap agreement. The floating cash flows are correlated with the change of forward commodity prices, which is derived from market corroborated futures settlement prices. As a result, the Company classifies these derivative instruments as Level 2 due to the observable nature of the significant inputs utilized.
16

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

|  | Assets and Liabilities Measured at Fair Value on a Recurring Basis as of September 30, 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 |  | $ | 904,101 |  |  | $ | — |  |  | $ | — |  |  | $ | 904,101 |
U.S. government agency and U.S. government-sponsored enterprise debt securities |  | — |  |  | 447,464 |  |  | — |  |  | 447,464 |
U.S. government agency and U.S. government-sponsored enterprise mortgage-backed securities: |  |  |  |  |  |  |  |
Commercial mortgage-backed securities |  | — |  |  | 462,332 |  |  | — |  |  | 462,332 |
Residential mortgage-backed securities |  | — |  |  | 1,694,342 |  |  | — |  |  | 1,694,342 |
Municipal securities |  | — |  |  | 243,556 |  |  | — |  |  | 243,556 |
Non-agency mortgage-backed securities: |  |  |  |  |  |  |  |
Commercial mortgage-backed securities |  | — |  |  | 365,320 |  |  | — |  |  | 365,320 |
Residential mortgage-backed securities |  | — |  |  | 570,787 |  |  | — |  |  | 570,787 |
Corporate debt securities |  | — |  |  | 475,434 |  |  | — |  |  | 475,434 |
Foreign government bonds |  | — |  |  | 222,790 |  |  | — |  |  | 222,790 |
Asset-backed securities |  | — |  |  | 43,757 |  |  | — |  |  | 43,757 |
Collateralized loan obligations (“CLOs”) |  | — |  |  | 609,954 |  |  | — |  |  | 609,954 |
Total AFS debt securities |  | $ | 904,101 |  |  | $ | 5,135,736 |  |  | $ | — |  |  | $ | 6,039,837 |
Investments in qualified affordable housing partnerships, tax credit and other investments, net: |  |  |  |  |  |  |  |
Equity securities |  | $ | 19,447 |  |  | $ | 4,154 |  |  | $ | — |  |  | $ | 23,601 |
Total investments in qualified affordable housing partnerships, tax credit and other investments, net |  | $ | 19,447 |  |  | $ | 4,154 |  |  | $ | — |  |  | $ | 23,601 |
Derivative assets: |  |  |  |  |  |  |  |
Interest rate contracts |  | $ | — |  |  | $ | 624,087 |  |  | $ | — |  |  | $ | 624,087 |
Foreign exchange contracts |  | — |  |  | 100,377 |  |  | — |  |  | 100,377 |
Equity contracts |  | — |  |  | — |  |  | 352 |  |  | 352 |
Commodity contracts |  | — |  |  | 137,500 |  |  | — |  |  | 137,500 |
Gross derivative assets |  | $ | — |  |  | $ | 861,964 |  |  | $ | 352 |  |  | $ | 862,316 |
Netting adjustments (1) |  | $ | — |  |  | $ | (530,331) |  |  | $ | — |  |  | $ | (530,331) |
Net derivative assets |  | $ | — |  |  | $ | 331,633 |  |  | $ | 352 |  |  | $ | 331,985 |
Derivative liabilities: |  |  |  |  |  |  |  |
Interest rate contracts |  | $ | — |  |  | $ | 712,302 |  |  | $ | — |  |  | $ | 712,302 |
Foreign exchange contracts |  | — |  |  | 77,099 |  |  | — |  |  | 77,099 |
Equity contracts (2) |  | — |  |  | — |  |  | 15,119 |  |  | 15,119 |
Credit contracts |  | — |  |  | 12 |  |  | — |  |  | 12 |
Commodity contracts |  | — |  |  | 143,855 |  |  | — |  |  | 143,855 |
Gross derivative liabilities |  | $ | — |  |  | $ | 933,268 |  |  | $ | 15,119 |  |  | $ | 948,387 |
Netting adjustments (1) |  | $ | — |  |  | $ | (262,873) |  |  | $ | — |  |  | $ | (262,873) |
Net derivative liabilities |  | $ | — |  |  | $ | 670,395 |  |  | $ | 15,119 |  |  | $ | 685,514 |

17

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

(1)Represents balance sheet netting of derivative assets and liabilities and related cash collateral under master netting agreements or similar agreements. See Note 6 — Derivatives to the Consolidated Financial Statements in this Form 10-Q for additional information.
(2)Equity contracts classified as derivative liabilities consist of PRSUs granted as part of EWBC’s consideration in its investment in Rayliant.
18

For the three and nine months ended September 30, 2023 and 2022, Level 3 fair value measurements that were measured on a recurring basis consisted of warrant equity contracts issued by private companies and liability-classified contingent issuable shares of the Company. The following table provides a reconciliation of the beginning and ending balances of these equity contracts for the three and nine months ended September 30, 2023 and 2022:

|  | Three Months Ended September 30, |  | Nine Months Ended September 30, |  |
($ in thousands) |  | 2023 |  | 2022 |  | 2023 |  | 2022 |  |  |  |
Derivative assets: |  |  |  |  |  |  |  |  |  |  |  |
Equity contracts |  |  |  |  |  |  |  |  |  |  |  |
Beginning balance |  | $ | 263 |  |  | $ | 357 |  |  | $ | 323 |  |  | $ | 215 |  |  |  |  |
Total (losses) gains included in earnings (1) |  | (3) |  |  | (12) |  |  | (63) |  |  | 39 |  |  |  |  |
Issuances |  | 92 |  |  | — |  |  | 92 |  |  | 91 |  |  |  |  |
Ending balance |  | $ | 352 |  |  | $ | 345 |  |  | $ | 352 |  |  | $ | 345 |  |  |  |  |
Derivative liabilities: |  |  |  |  |  |  |  |  |  |  |  |
Equity contracts (2) |  |  |  |  |  |  |  |  |  |  |  |
Beginning balance |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  |  |  |
Issuances |  | 15,119 |  |  | — |  |  | 15,119 |  |  | — |  |  |  |  |
Ending balance |  | $ | 15,119 |  |  | $ | — |  |  | $ | 15,119 |  |  | $ | — |  |  |  |  |

(1)Includes unrealized (losses) gains recorded in Lending fees on the Consolidated Statement of Income.
(2)Equity contracts classified as derivative liabilities consist of PRSUs granted as part of EWBC’s consideration in its investment in Rayliant.
The following table presents quantitative information about the significant unobservable inputs used in the valuation of Level 3 fair value measurements as of September 30, 2023 and December 31, 2022. The significant unobservable inputs presented in the table below are those that the Company considers significant to the fair value of the Level 3 assets. The Company considers unobservable inputs to be significant if, by their exclusion, the fair value of the Level 3 assets would be impacted by a predetermined percentage change.

($ in thousands) |  | Fair Value Measurements (Level 3) |  | Valuation Technique |  | Unobservable Inputs |  | Range of Inputs |  | Weighted-Average of Inputs |
September 30, 2023 |  |  |  |  |  |  |  |  |  |  |
Derivative assets: |  |  |  |  |  |  |  |  |  |  |
Equity contracts |  | $ | 352 |  |  | Black-Scholes option pricing model |  | Equity volatility |  | 41% — 51% |  | 46 | % | (1)
|  |  |  |  |  | Liquidity discount |  | 47% |  | 47 | % |
Derivative liabilities: |  |  |  |  |  |  |  |  |  |  |
Equity contracts (2) |  | $ | 15,119 |  |  | Internal model |  | Payout % designated based on operating revenue and operating EBITDA of investee |  | 84% |  | 84 | % |
December 31, 2022 |  |  |  |  |  |  |  |  |  |  |
Derivative assets: |  |  |  |  |  |  |  |  |  |  |
Equity contracts |  | $ | 323 |  |  | Black-Scholes option pricing model |  | Equity volatility |  | 42% — 60% |  | 54 | % | (1)
|  |  |  |  |  | Liquidity discount |  | 47% |  | 47 | % |

(1)The calculation for the weighted-average of inputs for the derivative asset equity contracts is based on the fair value of equity contracts as of both September 30, 2023 and December 31, 2022.
(2)Equity contracts classified as derivative liabilities consist of PRSUs granted as part of EWBC’s consideration in its investment in Rayliant.
19

Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis
Assets measured at fair value on a nonrecurring basis include certain individually evaluated loans held-for-investment, investments in qualified affordable housing partnerships, tax credit and other investments, other real estate owned (“OREO”), loans held-for-sale, and other nonperforming assets. Nonrecurring fair value adjustments result from the impairment on certain individually evaluated loans held-for-investment and investments in qualified affordable housing partnerships, tax credit and other investments, from write-downs of OREO and other nonperforming assets, or from the application of lower of cost or fair value on loans held-for-sale.
Individually Evaluated Loans Held-for-Investment — Individually evaluated loans held-for-investment are classified as Level 3 assets. The following two methods are used to derive the fair value of individually evaluated loans held-for-investment:
•Discounted cash flow valuation techniques that consist of developing an expected stream of cash flows over the life of the loans, and then calculating the present value of the loans by discounting the expected cash flows at a designated discount rate.
•When the repayment of an individually evaluated loan is dependent on the sale of the collateral, the fair value of the loan is determined based on the fair value of the underlying collateral, which may take the form of real estate, inventory, equipment, contracts or guarantees. The fair value of the underlying collateral is generally based on third-party appraisals, or an internal valuation if a third-party appraisal is not required by regulations, or is unavailable. An internal valuation utilizes one or more valuation techniques such as the income, market and/or cost approaches.
Investments in Qualified Affordable Housing Partnerships, Tax Credit and Other Investments, Net — The Company conducts due diligence on its investments in qualified affordable housing partnerships, tax credit and other investments prior to the initial investment date and through the placed-in-service date. After these investments are either acquired or placed into service, the Company continues its periodic monitoring process to ensure book values are realizable and that there is no significant tax credit recapture risk. This monitoring process includes reviewing the investment entity’s quarterly financial statements and annual tax returns, the annual financial statements of the guarantor (if any) and a comparison of the actual performance of the investment against the financial projections prepared at the time the investment was made. The Company assesses its tax credit and other investments for possible other-than-temporary impairment on an annual basis or when events or circumstances suggest that the carrying amount of the investments may not be realizable. These circumstances can include, but are not limited to the following factors:
•expected future cash flows that are less than the carrying 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 or at the lower of cost or estimated fair value less the costs to sell subsequent to acquisition. On a monthly basis, the current fair market value of each OREO property is reviewed to ensure that the current carrying value is appropriate. OREO properties are classified as Level 3.
Loans Held-for-Sale — Loans held-for-investment subsequently transferred to held-for-sale are recorded at the lower of cost or fair value upon transfer. Loans held-for-sale may be measured at fair value on a nonrecurring basis when fair value is less than cost. Fair value is generally determined based on available market data for similar loans and therefore, are classified as Level 2.
20

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 September 30, 2023 and December 31, 2022:

|  | Assets Measured at Fair Value on a Nonrecurring Basis as of September 30, 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”) |  | $ | — |  |  | $ | — |  |  | $ | 22,788 |  |  | $ | 22,788 |
Commercial real estate (“CRE”): |  |  |  |  |  |  |  |
Construction and land |  | — |  |  | — |  |  | 11,141 |  |  | 11,141 |
Total commercial |  | — |  |  | — |  |  | 33,929 |  |  | 33,929 |
Consumer: |  |  |  |  |  |  |  |
Residential mortgage: |  |  |  |  |  |  |  |
Home equity lines of credit (“HELOCs”) |  | — |  |  | — |  |  | 1,204 |  |  | 1,204 |
Total consumer |  | — |  |  | — |  |  | 1,204 |  |  | 1,204 |
Total loans held-for-investment |  | $ | — |  |  | $ | — |  |  | $ | 35,133 |  |  | $ | 35,133 |
Investments in qualified affordable housing partnerships, tax credit and other investments, net |  | $ | — |  |  | $ | — |  |  | $ | 1,038 |  |  | $ | 1,038 |

|  | Assets Measured at Fair Value on a Nonrecurring Basis as of December 31, 2022
($ 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 |
CRE: |  |  |  |  |  |  |  |
CRE |  | — |  |  | — |  |  | 31,380 |  |  | 31,380 |
Total commercial |  | — |  |  | — |  |  | 71,391 |  |  | 71,391 |
Consumer: |  |  |  |  |  |  |  |
Residential mortgage: |  |  |  |  |  |  |  |
HELOCs |  | — |  |  | — |  |  | 1,223 |  |  | 1,223 |
Total consumer |  | — |  |  | — |  |  | 1,223 |  |  | 1,223 |
Total loans held-for-investment |  | $ | — |  |  | $ | — |  |  | $ | 72,614 |  |  | $ | 72,614 |

21

The following table presents the increase (decrease) in the fair value of certain assets held at the end of the respective reporting periods, for which a nonrecurring fair value adjustment was recognized for the three and nine months ended September 30, 2023 and 2022:

|  | Three Months Ended September 30, |  | Nine Months Ended September 30, |  |
($ in thousands) |  | 2023 |  | 2022 |  | 2023 |  | 2022 |  |  |  |
Loans held-for-investment: |  |  |  |  |  |  |  |  |  |  |  |
Commercial: |  |  |  |  |  |  |  |  |  |  |  |
C&I |  | $ | 366 |  |  | $ | (15,265) |  |  | $ | (4,437) |  |  | $ | (30,011) |  |  |  |  |
CRE: |  |  |  |  |  |  |  |  |  |  |  |
CRE |  | — |  |  | (118) |  |  | — |  |  | 2,212 |  |  |  |  |
Multifamily residential |  | — |  |  | (5,931) |  |  | — |  |  | (5,939) |  |  |  |  |
Construction and land |  | (10,413) |  |  | — |  |  | (10,413) |  |  | — |  |  |  |  |
Total commercial |  | (10,047) |  |  | (21,314) |  |  | (14,850) |  |  | (33,738) |  |  |  |  |
Consumer: |  |  |  |  |  |  |  |  |  |  |  |
Residential mortgage: |  |  |  |  |  |  |  |  |  |  |  |
HELOCs |  | (41) |  |  | 81 |  |  | (41) |  |  | 166 |  |  |  |  |
Total consumer |  | (41) |  |  | 81 |  |  | (41) |  |  | 166 |  |  |  |  |
Total loans held-for-investment |  | $ | (10,088) |  |  | $ | (21,233) |  |  | $ | (14,891) |  |  | $ | (33,572) |  |  |  |  |
Investments in qualified affordable housing partnerships, tax credit and other investments, net |  | $ | (790) |  |  | $ | — |  |  | $ | (1,577) |  |  | $ | — |  |  |  |  |
Other nonperforming assets |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | (6,861) |  |  |  |  |

The following table presents the quantitative information about the significant unobservable inputs used in the valuation of Level 3 fair value measurements that are measured on a nonrecurring basis as of September 30, 2023 and December 31, 2022:

($ in thousands) |  | Fair Value Measurements (Level 3) |  | Valuation Techniques |  | Unobservable Inputs |  | Range of Inputs |  | Weighted-Average of Inputs (1) |
September 30, 2023 |  |  |  |  |  |  |  |  |  |  |
Loans held-for-investment |  | $ | 13,955 |  |  | Fair value of collateral |  | Discount |  | 15% — 75% |  | 48 | % | (1)
|  | $ | 6,134 |  |  | Fair value of collateral |  | Contract value |  | NM |  | NM |
|  | $ | 15,044 |  |  | Fair value of property |  | Selling cost |  | 8% |  | 8 | % |
Investments in qualified affordable housing partnerships, tax credit and other investments, net |  | $ | 1,038 |  |  | Individual analysis of each investment |  | Expected future tax benefits and distributions |  | NM |  | NM |
December 31, 2022 |  |  |  |  |  |  |  |  |  |  |
Loans held-for-investment |  | $ | 23,322 |  |  | Discounted cash flows |  | Discount |  | 4% — 6% |  | 4 | % | (1)
|  | $ | 17,912 |  |  | Fair value of collateral |  | Discount |  | 15% — 75% |  | 37 | % | (1)
|  | $ | 31,380 |  |  | Fair value of property |  | Selling cost |  | 8% |  | 8 | % |

NM — Not meaningful.
(1)The calculation for the weighted-average of inputs is based on the relative fair value of the respective assets as of September 30, 2023 and December 31, 2022.
22

Disclosures about the Fair Value of Financial Instruments
The following tables present the fair value estimates for financial instruments as of September 30, 2023 and December 31, 2022, excluding financial instruments recorded at fair value on a recurring basis as they are included in the tables presented elsewhere in this Note. The carrying amounts in the following tables are recorded on the Consolidated Balance Sheet under the indicated captions, except for accrued interest receivable, restricted equity securities, at cost, and mortgage servicing rights that are included in Other assets, and accrued interest payable which is included in Accrued expenses and other liabilities. These financial instruments are measured on an amortized cost basis on the Company’s Consolidated Balance Sheet.

|  | September 30, 2023
($ in thousands) |  | Carrying Amount |  | Level 1 |  | Level 2 |  | Level 3 |  | Estimated Fair Value
Financial assets: |  |  |  |  |  |  |  |  |  |
Cash and cash equivalents |  | $ | 4,561,178 |  |  | $ | 4,561,178 |  |  | $ | — |  |  | $ | — |  |  | $ | 4,561,178 |
Interest-bearing deposits with banks |  | $ | 17,213 |  |  | $ | — |  |  | $ | 17,213 |  |  | $ | — |  |  | $ | 17,213 |
Resale agreements |  | $ | 785,000 |  |  | $ | — |  |  | $ | 672,250 |  |  | $ | — |  |  | $ | 672,250 |
HTM debt securities |  | $ | 2,964,235 |  |  | $ | 470,618 |  |  | $ | 1,837,430 |  |  | $ | — |  |  | $ | 2,308,048 |
Restricted equity securities, at cost |  | $ | 79,522 |  |  | $ | — |  |  | $ | 79,522 |  |  | $ | — |  |  | $ | 79,522 |
Loans held-for-sale |  | $ | 4,762 |  |  | $ | — |  |  | $ | 4,762 |  |  | $ | — |  |  | $ | 4,762 |
Loans held-for-investment, net |  | $ | 50,251,661 |  |  | $ | — |  |  | $ | — |  |  | $ | 48,992,846 |  |  | $ | 48,992,846 |
Mortgage servicing rights |  | $ | 5,208 |  |  | $ | — |  |  | $ | — |  |  | $ | 9,821 |  |  | $ | 9,821 |
Accrued interest receivable |  | $ | 317,881 |  |  | $ | — |  |  | $ | 317,881 |  |  | $ | — |  |  | $ | 317,881 |
Financial liabilities: |  |  |  |  |  |  |  |  |  |
Demand, checking, savings and money market deposits |  | $ | 38,435,954 |  |  | $ | — |  |  | $ | 38,435,954 |  |  | $ | — |  |  | $ | 38,435,954 |
Time deposits |  | $ | 16,651,077 |  |  | $ | — |  |  | $ | 16,547,883 |  |  | $ | — |  |  | $ | 16,547,883 |
Short-term borrowings |  | $ | 4,500,000 |  |  | $ | — |  |  | $ | 4,500,000 |  |  | $ | — |  |  | $ | 4,500,000 |
Long-term debt |  | $ | 148,173 |  |  | $ | — |  |  | $ | 144,214 |  |  | $ | — |  |  | $ | 144,214 |
Accrued interest payable |  | $ | 150,890 |  |  | $ | — |  |  | $ | 150,890 |  |  | $ | — |  |  | $ | 150,890 |

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

23

Note 4 — Assets Purchased under Resale Agreements and Sold under Repurchase Agreements
Assets Purchased under Resale Agreements
The Company’s resale agreements exposes it to credit risk for both the counterparties and the underlying collateral. The Company manages credit exposure from certain transactions by entering into master netting agreements and collateral arrangements with the counterparties. The relevant agreements allow for an efficient closeout of the transaction, liquidation and set-off of collateral against the net amount owed by the counterparty following a default. It is also the Company’s policy to take possession, where possible, of the assets underlying resale agreements. As a result of the Company’s credit risk mitigation practices with respect to resale agreements as described above, the Company did not hold any reserves for credit impairment with respect to these agreements as of both September 30, 2023 and December 31, 2022.
Securities Purchased under Resale Agreements — Total securities purchased under resale agreements were $785.0 million as of September 30, 2023, and $760.0 million as of December 31, 2022. The weighted-average yields were 2.73% and 2.41% for the three months ended September 30, 2023 and 2022, respectively; and 2.55% and 1.96% for the nine months ended September 30, 2023 and 2022, respectively.
Loans Purchased under Resale Agreements — Loans purchased under resale agreements were $32.2 million as of December 31, 2022. During the first half of 2023, all of the loans purchased under resale agreements matured and th e Company had no loans purchased under resale agreements as of September 30, 2023. The weighted-average yield was 7.27% for the nine months ended September 30, 2023. In comparison, the weighted-average yields for the three and nine months ended September 30, 2022 were 3.87% and 2.10%, respectively.
Assets Sold under Repurchase Agreements — Gross repurchase agreements were $300.0 million as of December 31, 2022. The Company extinguished $300.0 million of repurchase agreements during the first quarter of 2023. The Company recorded $3.9 million of extinguishment charges during the nine months ended September 30, 2023. In comparison, no extinguishment charges were recorded for the three and nine months ended September 30, 2022. The weighted-average interest rates were 5.51% and 2.81% for the three months ended September 30, 2023 and 2022, respectively; and 4.32% and 2.73% for the nine months ended September 30, 2023 and 2022, respectively. These weighted-average interest rates also reflect the impact of short-term repurchase agreements entered and repaid during the periods presented.
Balance Sheet Offsetting
The Company’s resale and repurchase agreements are transacted under legally enforceable master repurchase agreements that, in the event of default by the counterparty, provide the Company the right to liquidate securities held and to offset receivables and payables with the same counterparty. The Company nets resale and repurchase transactions with the same counterparty on the Consolidated Balance Sheet when it has a legally enforceable master netting agreement and the transactions are eligible for netting under ASC 210-20-45-11, Balance Sheet Offsetting Repurchase and Reverse Repurchase Agreements. Collateral received includes securities and loans that are not recognized on the Consolidated Balance Sheet. Collateral pledged consists of securities that are not netted on the Consolidated Balance Sheet against the related collateralized liability. Securities received or pledged as collateral in resale and repurchase agreements with other financial institutions may also be sold or re-pledged by the secured party, and are usually delivered to and held by the third-party trustees.
24

The following tables present the resale and repurchase agreements included on the Consolidated Balance Sheet as of September 30, 2023 and December 31, 2022:

($ in thousands) |  | September 30, 2023
|  | Gross Amounts of Recognized Assets |  | Gross Amounts Offset on the Consolidated Balance Sheet |  | Net Amounts of Assets Presented on the Consolidated Balance Sheet |  | Gross Amounts Not Offset on the Consolidated Balance Sheet |  | Net Amount
Assets |  |  |  |  | Collateral Received |
Resale agreements |  | $ | 785,000 |  |  | $ | — |  |  | $ | 785,000 |  |  | $ | (687,327) |  | (1) | $ | 97,673 |
|  | Gross Amounts of Recognized Liabilities |  | Gross Amounts Offset on the Consolidated Balance Sheet |  | Net Amounts of Liabilities Presented on the Consolidated Balance Sheet |  | Gross Amounts Not Offset on the Consolidated Balance Sheet |  | Net Amount
Liabilities |  |  |  |  | Collateral Pledged |
Repurchase agreements |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |

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

(1)Represents the fair value of assets the Company has received under resale agreements, limited for table presentation purposes to the amount of the recognized asset due from each counterparty. The application of collateral cannot reduce the net position below zero. Therefore, excess collateral, if any, is not reflected above.
(2)Represents the fair value of assets the Company has pledged under repurchase agreements, limited for table presentation purposes to the amount of the recognized liability due to each counterparty. The application of collateral cannot reduce the net position below zero. Therefore, excess collateral, if any, is not reflected above.
In addition to the amounts included in the tables above, the Company also has balance sheet netting related to derivatives. Refer to Note 6 — Derivatives to the Consolidated Financial Statements in this Form 10-Q for additional information.
25

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 September 30, 2023 and December 31, 2022:

|  | September 30, 2023
($ in thousands) |  | Amortized Cost |  |  |  | Gross Unrealized Gains |  | Gross Unrealized Losses |  | Fair Value
AFS debt securities: |  |  |  |  |  |  |  |  |  |
U.S. Treasury securities |  | $ | 974,615 |  |  |  |  | $ | 48 |  |  | $ | (70,562) |  |  | $ | 904,101 |
U.S. government agency and U.S. government-sponsored enterprise debt securities |  | 512,712 |  |  |  |  | — |  |  | (65,248) |  |  | 447,464 |
U.S. government agency and U.S. government-sponsored enterprise mortgage-backed securities: |  |  |  |  |  |  |  |  |  |
Commercial mortgage-backed securities |  | 545,086 |  |  |  |  | — |  |  | (82,754) |  |  | 462,332 |
Residential mortgage-backed securities |  | 1,983,284 |  |  |  |  | 15 |  |  | (288,957) |  |  | 1,694,342 |
Municipal securities |  | 301,408 |  |  |  |  | — |  |  | (57,852) |  |  | 243,556 |
Non-agency mortgage-backed securities: |  |  |  |  |  |  |  |  |  |
Commercial mortgage-backed securities |  | 418,451 |  |  |  |  | — |  |  | (53,131) |  |  | 365,320 |
Residential mortgage-backed securities |  | 687,674 |  |  |  |  | — |  |  | (116,887) |  |  | 570,787 |
Corporate debt securities |  | 653,501 |  |  |  |  | — |  |  | (178,067) |  |  | 475,434 |
Foreign government bonds |  | 237,531 |  |  |  |  | 75 |  |  | (14,816) |  |  | 222,790 |
Asset-backed securities |  | 44,819 |  |  |  |  | — |  |  | (1,062) |  |  | 43,757 |
CLOs |  | 617,250 |  |  |  |  | — |  |  | (7,296) |  |  | 609,954 |
Total AFS debt securities |  | 6,976,331 |  |  |  |  | 138 |  |  | (936,632) |  |  | 6,039,837 |
HTM debt securities: |  |  |  |  |  |  |  |  |  |
U.S. Treasury securities |  | 528,169 |  |  |  |  | — |  |  | (57,551) |  |  | 470,618 |
U.S. government agency and U.S. government-sponsored enterprise debt securities |  | 1,001,298 |  |  |  |  | — |  |  | (249,007) |  |  | 752,291 |
U.S. government agency and U.S. government-sponsored enterprise mortgage-backed securities: |  |  |  |  |  |  |  |  |  |
Commercial mortgage-backed securities |  | 494,787 |  |  |  |  | — |  |  | (112,623) |  |  | 382,164 |
Residential mortgage-backed securities |  | 750,888 |  |  |  |  | — |  |  | (183,488) |  |  | 567,400 |
Municipal securities |  | 189,093 |  |  |  |  | — |  |  | (53,518) |  |  | 135,575 |
Total HTM debt securities |  | 2,964,235 |  |  |  |  | — |  |  | (656,187) |  |  | 2,308,048 |
Total debt securities |  | $ | 9,940,566 |  |  |  |  | $ | 138 |  |  | $ | (1,592,819) |  |  | $ | 8,347,885 |

26

|  | 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 September 30, 2023 and December 31, 2022, the amortized cost of debt securities excluded accrued interest receivables of $42.6 million and $41.8 million, respectively, which are included in Other assets on the Consolidated Balance Sheet. For the Company’s accounting policy related to debt securities’ accrued interest receivable, see Note 1 — Summary of Significant Accounting Policies — Significant Accounting Policies — Allowance for Credit Losses on Available-for-Sale Debt Securities and Allowance for Credit Losses on Held-to-Maturity Debt Securities to the Consolidated Financial Statements in the Company’s 2022 Form 10-K.
27

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 September 30, 2023 and December 31, 2022.

|  | September 30, 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 |  | $ | — |  |  | $ | — |  |  | $ | 605,730 |  |  | $ | (70,562) |  |  | $ | 605,730 |  |  | $ | (70,562) |
U.S. government agency and U.S. government sponsored enterprise debt securities |  | 199,139 |  |  | (861) |  |  | 248,325 |  |  | (64,387) |  |  | 447,464 |  |  | (65,248) |
U.S. government agency and U.S. government-sponsored enterprise mortgage-backed securities: |  |  |  |  |  |  |  |  |  |  |  |
Commercial mortgage-backed securities |  | 4,434 |  |  | (96) |  |  | 457,898 |  |  | (82,658) |  |  | 462,332 |  |  | (82,754) |
Residential mortgage-backed securities |  | 63,660 |  |  | (517) |  |  | 1,627,451 |  |  | (288,440) |  |  | 1,691,111 |  |  | (288,957) |
Municipal securities |  | 5,891 |  |  | (288) |  |  | 237,665 |  |  | (57,564) |  |  | 243,556 |  |  | (57,852) |
Non-agency mortgage-backed securities: |  |  |  |  |  |  |  |  |  |  |  |
Commercial mortgage-backed securities |  | — |  |  | — |  |  | 365,320 |  |  | (53,131) |  |  | 365,320 |  |  | (53,131) |
Residential mortgage-backed securities |  | — |  |  | — |  |  | 570,787 |  |  | (116,887) |  |  | 570,787 |  |  | (116,887) |
Corporate debt securities |  | — |  |  | — |  |  | 475,434 |  |  | (178,067) |  |  | 475,434 |  |  | (178,067) |
Foreign government bonds |  | 109,413 |  |  | (249) |  |  | 85,433 |  |  | (14,567) |  |  | 194,846 |  |  | (14,816) |
Asset-backed securities |  | — |  |  | — |  |  | 43,757 |  |  | (1,062) |  |  | 43,757 |  |  | (1,062) |
CLOs |  | — |  |  | — |  |  | 609,954 |  |  | (7,296) |  |  | 609,954 |  |  | (7,296) |
Total AFS debt securities |  | $ | 382,537 |  |  | $ | (2,011) |  |  | $ | 5,327,754 |  |  | $ | (934,621) |  |  | $ | 5,710,291 |  |  | $ | (936,632) |

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

28

As of September 30, 2023, the Company had 567 AFS debt securities in a gross unrealized loss position with no credit impairment, primarily consisting of 269 U.S. government agency and U.S. government-sponsored enterprise mortgage-backed securities, 66 corporate debt securities, and 99 non-agency mortgage-backed securities. In comparison, as of December 31, 2022, the Company had 559 AFS debt securities in a gross unrealized loss position with no credit impairment, primarily consisting of 263 U.S. government agency and U.S. government-sponsored enterprise mortgage-backed securities, 100 non-agency mortgage-backed securities, and 68 corporate debt securities.
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 September 30, 2023 were mainly comprised of the following:
•Non-agency mortgage-backed securities — The market value decline as of September 30, 2023, was primarily due to interest rate movement and spread widening. Since these securities are rated investment grade by nationally recognized statistical rating organizations (“NRSROs”), or have high priority in the cash flow waterfall within the securitization structure, and the contractual payments have historically been on time, the Company believes the risk of credit losses on these securities is low.
•Corporate debt securities — The market value decline as of September 30, 2023 was primarily due to interest rate movement and spread widening. A portion of the corporate debt securities is comprised of subordinated debt securities issued by U.S. banks. Despite the reduction of the market value of these securities after the banking sector disruption in the first nine months of 2023, these securities are nearly all rated investment grade by NRSROs or issued by well-capitalized financial institutions with strong profitability. The contractual payments from these corporate debt securities have been and are expected to be received on time. The Company will continue to monitor the market developments in the banking sector and the credit performance of these securities.
As of both September 30, 2023 and December 31, 2022, the Company intended to hold the AFS debt securities with unrealized losses through the anticipated recovery period and it was more-likely-than-not that the Company would not have to sell these securities before the recovery of their amortized cost. The issuers of these securities have not, to the Company’s knowledge, established any cause for default on these securities. As a result, the Company expects to recover the entire amortized cost basis of these securities. Accordingly, there was no allowance for credit losses provided against these securities as of both September 30, 2023 and December 31, 2022. In addition, there was no provision for credit losses recognized for the three and nine months ended September 30, 2023 and 2022.
Allowance for Credit Losses on Held-to-Maturity Debt Securities
The Company separately evaluates its HTM debt securities for any credit losses using an expected loss model, similar to the methodology used for loans. For additional information on the Company’s credit loss methodology, refer to Note 1 — Summary of Significant Accounting Policies — Significant Accounting Policies — Allowance for Credit Losses on Held-to-Maturity Debt Securities to the Consolidated Financial Statements in the Company’s 2022 Form 10-K.
The Company monitors the credit quality of the HTM debt securities using external credit ratings. As of September 30, 2023, all HTM securities were rated investment grade by NRSROs and issued, guaranteed, or supported by U.S. government entities and agencies. Accordingly, the Company applied a zero credit loss assumption and no allowance for credit losses was recorded as of both September 30, 2023 and December 31, 2022. Overall, the Company believes that the credit support levels of the debt securities are strong, and based on current assessments and macroeconomic forecasts, expects that full contractual cash flows will be received.
29

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

|  | Three Months Ended September 30, |  | Nine Months Ended September 30, |  |
($ in thousands) |  | 2023 |  | 2022 |  | 2023 |  | 2022 |  |  |  |
Gross realized gains from sales |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | 1,306 |  |  |  |  |
Impairment write-off (1) |  | $ | — |  |  | $ | — |  |  | $ | 10,000 |  |  | $ | — |  |  |  |  |
Related tax expense (benefit) |  | $ | — |  |  | $ | — |  |  | $ | (2,956) |  |  | $ | 386 |  |  |  |  |

(1)During the first quarter of 2023, the Company fully wrote down a subordinated debt security and recorded the impairment loss as a component of noninterest income in the Company’s Consolidated Statement of Income.
Interest Income
The following table presents the composition of interest income on debt securities for the three and nine months ended September 30, 2023 and 2022:

|  | Three Months Ended September 30, |  | Nine Months Ended September 30, |  |
($ in thousands) |  | 2023 |  | 2022 |  | 2023 |  | 2022 |  |  |  |
Taxable interest |  | $ | 63,877 |  |  | $ | 46,172 |  |  | $ | 189,065 |  |  | $ | 125,626 |  |  |  |  |
Nontaxable interest |  | 5,901 |  |  | 4,920 |  |  | 15,614 |  |  | 14,309 |  |  |  |  |
Total interest income on debt securities |  | $ | 69,778 |  |  | $ | 51,092 |  |  | $ | 204,679 |  |  | $ | 139,935 |  |  |  |  |

30

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 September 30, 2023. Expected maturities will differ from contractual maturities on certain securities as the issuers and borrowers of the underlying collateral may have the right to call or prepay obligations with or without prepayment penalties.

($ in thousands) |  | 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 |  | $ | 298,323 |  |  | $ | 676,292 |  |  | $ | — |  |  | $ | — |  |  | $ | 974,615 |
Fair value |  | 298,371 |  |  | 605,730 |  |  | — |  |  | — |  |  | 904,101 |
Weighted-average yield (1) |  | 5.44 | % |  | 1.20 | % |  | — | % |  | — | % |  | 2.50 | %
U.S. government agency and U.S. government-sponsored enterprise debt securities |  |  |  |  |  |  |  |  |  |
Amortized cost |  | 150,000 |  |  | 96,472 |  |  | 103,171 |  |  | 163,069 |  |  | 512,712 |
Fair value |  | 149,616 |  |  | 91,343 |  |  | 82,252 |  |  | 124,253 |  |  | 447,464 |
Weighted-average yield (1) |  | 4.98 | % |  | 3.08 | % |  | 1.39 | % |  | 2.18 | % |  | 3.01 | %
U.S. government agency and U.S. government-sponsored enterprise mortgage-backed securities |  |  |  |  |  |  |  |  |  |
Amortized cost |  | — |  |  | 42,260 |  |  | 144,846 |  |  | 2,341,264 |  |  | 2,528,370 |
Fair value |  | — |  |  | 39,718 |  |  | 128,933 |  |  | 1,988,023 |  |  | 2,156,674 |
Weighted-average yield (1) (2) |  | — | % |  | 3.16 | % |  | 2.73 | % |  | 3.68 | % |  | 3.62 | %
Municipal securities |  |  |  |  |  |  |  |  |  |
Amortized cost |  | 2,400 |  |  | 36,850 |  |  | 9,007 |  |  | 253,151 |  |  | 301,408 |
Fair value |  | 2,383 |  |  | 33,794 |  |  | 7,596 |  |  | 199,783 |  |  | 243,556 |
Weighted-average yield (1) (2) |  | 3.13 | % |  | 2.34 | % |  | 2.87 | % |  | 2.24 | % |  | 2.28 | %
Non-agency mortgage-backed securities |  |  |  |  |  |  |  |  |  |
Amortized cost |  | 99,830 |  |  | 92,328 |  |  | 11,056 |  |  | 902,911 |  |  | 1,106,125 |
Fair value |  | 98,420 |  |  | 89,370 |  |  | 10,793 |  |  | 737,524 |  |  | 936,107 |
Weighted-average yield (1) |  | 6.27 | % |  | 4.16 | % |  | 0.80 | % |  | 2.58 | % |  | 3.02 | %
Corporate debt securities |  |  |  |  |  |  |  |  |  |
Amortized cost |  | — |  |  | — |  |  | 349,501 |  |  | 304,000 |  |  | 653,501 |
Fair value |  | — |  |  | — |  |  | 280,812 |  |  | 194,622 |  |  | 475,434 |
Weighted-average yield (1) |  | — | % |  | — | % |  | 3.48 | % |  | 1.97 | % |  | 2.78 | %
Foreign government bonds |  |  |  |  |  |  |  |  |  |
Amortized cost |  | 32,875 |  |  | 104,656 |  |  | 50,000 |  |  | 50,000 |  |  | 237,531 |
Fair value |  | 32,810 |  |  | 104,546 |  |  | 49,609 |  |  | 35,825 |  |  | 222,790 |
Weighted-average yield (1) |  | 3.02 | % |  | 2.28 | % |  | 5.71 | % |  | 1.50 | % |  | 2.94 | %
Asset-backed securities |  |  |  |  |  |  |  |  |  |
Amortized cost |  | — |  |  | — |  |  | — |  |  | 44,819 |  |  | 44,819 |
Fair value |  | — |  |  | — |  |  | — |  |  | 43,757 |  |  | 43,757 |
Weighted-average yield (1) |  | — | % |  | — | % |  | — | % |  | 6.01 | % |  | 6.01 | %
CLOs |  |  |  |  |  |  |  |  |  |
Amortized cost |  | — |  |  | — |  |  | 319,000 |  |  | 298,250 |  |  | 617,250 |
Fair value |  | — |  |  | — |  |  | 314,219 |  |  | 295,735 |  |  | 609,954 |
Weighted-average yield (1) |  | — | % |  | — | % |  | 6.71 | % |  | 6.76 | % |  | 6.73 | %
Total AFS debt securities |  |  |  |  |  |  |  |  |  |
Amortized cost |  | $ | 583,428 |  |  | $ | 1,048,858 |  |  | $ | 986,581 |  |  | $ | 4,357,464 |  |  | $ | 6,976,331 |
Fair value |  | $ | 581,600 |  |  | $ | 964,501 |  |  | $ | 874,214 |  |  | $ | 3,619,522 |  |  | $ | 6,039,837 |
Weighted-average yield (1) |  | 5.32 | % |  | 1.86 | % |  | 4.27 | % |  | 3.40 | % |  | 3.45 | %

31

($ 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 |  | $ | — |  | $ | 528,169 |  | $ | — |  | $ | — |  | $ | 528,169
Fair value |  | — |  | 470,618 |  | — |  | — |  | 470,618
Weighted-average yield (1) |  | — | % |  | 1.05 | % |  | — | % |  | — | % |  | 1.05 | %
U.S. government agency and U.S. government-sponsored enterprise debt securities |  |  |  |  |  |  |  |  |  |
Amortized cost |  | — |  | — |  | 328,870 |  | 672,428 |  | 1,001,298
Fair value |  | — |  | — |  | 265,107 |  | 487,184 |  | 752,291
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 |  | — |  | — |  | 94,992 |  | 1,150,683 |  | 1,245,675
Fair value |  | — |  | — |  | 76,426 |  | 873,138 |  | 949,564
Weighted-average yield (1) (2) |  | — | % |  | — | % |  | 1.56 | % |  | 1.68 | % |  | 1.67 | %
Municipal securities |  |  |  |  |  |  |  |  |  |
Amortized cost |  | — |  | — |  | — |  | 189,093 |  | 189,093
Fair value |  | — |  | — |  | — |  | 135,575 |  | 135,575
Weighted-average yield (1) (2) |  | — | % |  | — | % |  | — | % |  | 1.99 | % |  | 1.99 | %
Total HTM debt securities |  |  |  |  |  |  |  |  |  |
Amortized cost |  | $ | — |  | $ | 528,169 |  | $ | 423,862 |  | $ | 2,012,204 |  | $ | 2,964,235
Fair value |  | $ | — |  | $ | 470,618 |  | $ | 341,533 |  | $ | 1,495,897 |  | $ | 2,308,048
Weighted-average yield (1) |  | — | % |  | 1.05 | % |  | 1.84 | % |  | 1.78 | % |  | 1.66 | %

(1)Weighted-average yields are computed based on amortized cost balances.
(2)Yields on tax-exempt securities are not presented on a tax-equivalent basis.
As of September 30, 2023 and December 31, 2022, AFS and HTM debt securities with carrying valu es of $7.04 billion and $794.2 million, respectively, were pledged to secure borrowings, public deposits, repurchase agreements and for other purposes required or permitted by law.
Restricted Equity Securities
The following table presents the restricted equity securities included in Other assets on the Consolidated Balance Sheet as of September 30, 2023 and December 31, 2022:

($ in thousands) |  | September 30, 2023 |  | December 31, 2022
Federal Reserve Bank of San Francisco (“FRBSF”) stock |  | $ | 62,272 |  |  | $ | 61,374 |
FHLB stock |  | 17,250 |  |  | 17,250 |
Total restricted equity securities |  | $ | 79,522 |  |  | $ | 78,624 |

Note 6 — Derivatives
The Company uses derivative instruments to manage exposure to market risk, primarily interest rate and foreign currency risks, as well as to assist customers with their risk management objectives. The Company’s goal is to manage interest rate sensitivity and volatility to mitigate the effect of interest rate changes on earnings or capital. The Company also uses foreign exchange contracts to manage the foreign exchange rate risk associated with certain foreign currency-denominated assets and liabilities, as well as the Bank’s investment in East West Bank (China) Limited. The Company recognizes all derivatives on the Consolidated Balance Sheet at fair value. While the Company designates certain derivatives as hedging instruments in a qualifying hedge accounting relationship, other derivatives serve as economic hedges. For additional information on the Company’s derivatives and hedging activities, see Note 1 — Summary of Significant Accounting Policies — Significant Accounting Policies — Derivatives to the Consolidated Financial Statements of the Company’s 2022 Form 10-K.
32

The following table presents the notional amounts and fair values of the Company’s derivatives as of September 30, 2023 and December 31, 2022. Certain derivative contracts are cleared though central clearing organizations where variation margin is applied daily as settlement to the fair values of the contracts. The fair values are presented on a gross basis prior to the application of bilateral collateral and master netting agreements, but after the application of variation margin payments as settlement to fair values of contracts cleared through central clearing organizations. Applying variation margin payments as settlement to the fair values of derivative contracts cleared through the London Clearing House (“LCH”) and the Chicago Mercantile Exchange (“CME”) resulted in reductions in the derivative asset and liability fair values by $16.0 million and $65.7 million, respectively, as of September 30, 2023. In comparison, applying variation margin payments as settlement to LCH- and CME-cleared derivative transactions resulted in reductions in the derivative asset and liability fair values by $167.2 million and $81.3 million, respectively, as of December 31, 2022. Total derivative asset and liability fair values are adjusted to reflect the effects of legally enforceable master netting agreements and cash collateral received or paid. The resulting net derivative asset and liability fair values are included in Other assets and Accrued expenses and other liabilities, respectively, on the Consolidated Balance Sheet.

|  | September 30, 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 |  | $ | 5,000,000 |  |  | $ | 1,288 |  |  | $ | 96,382 |  |  | $ | 3,450,000 |  |  | $ | 13,455 |  |  | $ | 19,687 |
Net investment hedges: |  |  |  |  |  |  |  |  |  |  |  |
Foreign exchange contracts |  | 81,480 |  |  | 3,709 |  |  | — |  |  | 84,832 |  |  | 5,590 |  |  | — |
Total derivatives designated as hedging instruments |  | $ | 5,081,480 |  |  | $ | 4,997 |  |  | $ | 96,382 |  |  | $ | 3,534,832 |  |  | $ | 19,045 |  |  | $ | 19,687 |
Derivatives not designated as hedging instruments: |  |  |  |  |  |  |  |  |  |  |  |
Interest rate contracts |  | $ | 17,456,102 |  |  | $ | 622,799 |  |  | $ | 615,920 |  |  | $ | 16,932,414 |  |  | $ | 426,828 |  |  | $ | 564,829 |
Commodity contracts (1) |  | — |  |  | 137,500 |  |  | 143,855 |  |  | — |  |  | 261,613 |  |  | 258,608 |
Foreign exchange contracts |  | 5,205,007 |  |  | 96,668 |  |  | 77,099 |  |  | 2,982,891 |  |  | 47,519 |  |  | 44,117 |
Credit contracts (2) |  | 143,703 |  |  | — |  |  | 12 |  |  | 140,950 |  |  | — |  |  | 23 |
Equity contracts |  | — |  |  | 352 |  | (3) | 15,119 |  | (4) | — |  |  | 323 |  | (3) | — |
Total derivatives not designated as hedging instruments |  | $ | 22,804,812 |  |  | $ | 857,319 |  |  | $ | 852,005 |  |  | $ | 20,056,255 |  |  | $ | 736,283 |  |  | $ | 867,577 |
Gross derivative assets/liabilities |  |  |  | $ | 862,316 |  |  | $ | 948,387 |  |  |  |  | $ | 755,328 |  |  | $ | 887,264 |
Less: Master netting agreements |  |  |  | (260,648) |  |  | (260,648) |  |  |  |  | (242,745) |  |  | (242,745) |
Less: Cash collateral received |  |  |  | (269,683) |  |  | (2,225) |  |  |  |  | (372,038) |  |  | — |
Net derivative assets/liabilities |  |  |  | $ | 331,985 |  |  | $ | 685,514 |  |  |  |  | $ | 140,545 |  |  | $ | 644,519 |

(1)The notional amount of the Company’s commodity contracts totaled 20,672 thousand barrels of crude oil and 363,020 thousand units of natural gas, measured in million British thermal units (“MMBTUs”) as of September 30, 2023. In comparison, the notional amount of the Company’s commodity contracts totaled 12,005 thousand barrels of crude oil and 247,704 thousand MMBTUs of natural gas as of December 31, 2022.
(2)The notional amount of the credit contracts reflects the Company’s pro-rata share of the derivative instruments in RPAs.
(3)The Company held warrant equity contracts in one public company and 13 private companies as of both September 30, 2023 and December 31, 2022.
(4)Equity contracts classified as derivative liabilities consist of 349,138 PRSUs granted as part of EWBC’s consideration in its investment in Rayliant.
Derivatives Designated as Hedging Instruments
Cash Flow Hedges — The Company uses interest rate swaps to hedge the variability in interest received on certain floating-rate commercial loans, or paid on certain floating-rate borrowings due to changes in contractually specified interest rates. As of September 30, 2023, interest rate contracts in notional amounts of $5.00 billion were designated as cash flow hedges to convert certain variable-rate loans from floating-rate payments to fixed-rate payments. Gains and losses on the hedging derivative instruments are recognized in AOCI and reclassified to earnings in the same period the hedged cash flows impact earnings and within the same income statement line item as the hedged cash flows. Considering the interest rates, yield curve and notional amount as of September 30, 2023, the Company expects to reclassify an estimated $66.2 million of after-tax net losses on derivative instruments designated as cash flow hedges from AOCI into earnings during the next 12 months.
33

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

|  | Three Months Ended September 30, |  | Nine Months Ended September 30,
($ in thousands) |  | 2023 |  | 2022 |  | 2023 |  | 2022
Losses recognized in AOCI: |  |  |  |  |  |  |  |
Interest rate contracts |  | $ | (62,715) |  |  | $ | (48,325) |  |  | $ | (129,329) |  |  | $ | (88,771) |
Gains (losses) reclassified from AOCI into earnings: |  |  |  |  |  |  |  |
Interest expense (for cash flow hedges on borrowings) |  | $ | — |  |  | $ | 1,251 |  |  | $ | 696 |  |  | $ | 1,385 |
Interest and dividend income (for cash flow hedges on loans) |  | (24,059) |  |  | (2,870) |  |  | (57,265) |  |  | 216 |
Noninterest income |  | — |  |  | — |  |  | 1,614 |  | (1) | — |
Total |  | $ | (24,059) |  |  | $ | (1,619) |  |  | $ | (54,955) |  |  | $ | 1,601 |

(1)Represents the amounts in AOCI reclassified into earnings as a result that the forecasted cash flows were no longer probable to occur.
Net Investment Hedges — The Company enters into foreign currency forward contracts to hedge a portion of the Bank’s investment in East West Bank (China) Limited, a non-USD functional currency subsidiary in China. The hedging instruments designated as net investment hedges were used to hedge against the risk of adverse changes in the foreign currency exchange rate of the Chinese Renminbi (“RMB”). The following table presents the pre-tax gains recognized in AOCI on net investment hedges for the three and nine months ended September 30, 2023 and 2022:

|  | Three Months Ended September 30, |  | Nine Months Ended September 30,
($ in thousands) |  | 2023 |  | 2022 |  | 2023 |  | 2022
Gains recognized in AOCI |  | $ | 63 |  |  | $ | 4,343 |  |  | $ | 2,886 |  |  | $ | 6,027 |

Derivatives Not Designated as Hedging Instruments
Customer-Related Positions and Economic Hedge Derivatives — The Company enters into interest rate, commodity, and foreign exchange derivatives at the request of its customers and generally enters into offsetting derivative contracts with third-party financial institutions to mitigate the inherent market risk. The Company also utilizes foreign exchange contracts to mitigate the effect of currency fluctuations on certain foreign currency-denominated on-balance sheet assets and liabilities, primarily foreign currency denominated deposits that it offers to its customers. A majority of the foreign exchange contracts had original maturities of one year or less as of both September 30, 2023 and December 31, 2022.
34

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

|  | September 30, 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 |  | $ | 6,890,450 |  |  | $ | 691 |  |  | $ | 584,962 |  |  | $ | 6,656,491 |  |  | $ | 1,438 |  |  | $ | 521,719 |  |  |  |  |
Written options |  | 1,486,958 |  |  | — |  |  | 21,864 |  |  | 1,548,158 |  |  | — |  |  | 30,904 |  |  |  |  |
Collars and corridors |  | 306,996 |  |  | — |  |  | 7,619 |  |  | 215,773 |  |  | — |  |  | 8,924 |  |  |  |  |
Subtotal |  | 8,684,404 |  |  | 691 |  |  | 614,445 |  |  | 8,420,422 |  |  | 1,438 |  |  | 561,547 |  |  |  |  |
Foreign exchange contracts: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Forwards and spot |  | 62,237 |  |  | 11,376 |  |  | 24,484 |  |  | 993,588 |  |  | 17,009 |  |  | 18,090 |  |  |  |  |
Swaps |  | 2,494,517 |  |  | 16,282 |  |  | 23,687 |  |  | 623,143 |  |  | 6,629 |  |  | 12,178 |  |  |  |  |
Other |  | 142,000 |  |  | 5,630 |  |  | — |  |  | 121,631 |  |  | 2,070 |  |  | 245 |  |  |  |  |
Subtotal |  | 2,698,754 |  |  | 33,288 |  |  | 48,171 |  |  | 1,738,362 |  |  | 25,708 |  |  | 30,513 |  |  |  |  |
Total |  | $ | 11,383,158 |  |  | $ | 33,979 |  |  | $ | 662,616 |  |  | $ | 10,158,784 |  |  | $ | 27,146 |  |  | $ | 592,060 |  |  |  |  |
Economic hedges: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Interest rate contracts: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Swaps |  | $ | 6,916,364 |  |  | $ | 592,177 |  |  | $ | 1,119 |  |  | $ | 6,683,828 |  |  | $ | 384,201 |  |  | $ | 2,047 |  |  |  |  |
Purchased options |  | 1,517,648 |  |  | 22,285 |  |  | — |  |  | 1,580,275 |  |  | 32,233 |  |  | — |  |  |  |  |
Written options |  | 30,690 |  |  | — |  |  | 356 |  |  | 32,117 |  |  | — |  |  | 1,235 |  |  |  |  |
Collars and corridors |  | 306,996 |  |  | 7,646 |  |  | — |  |  | 215,772 |  |  | 8,956 |  |  | — |  |  |  |  |
Subtotal |  | 8,771,698 |  |  | 622,108 |  |  | 1,475 |  |  | 8,511,992 |  |  | 425,390 |  |  | 3,282 |  |  |  |  |
Foreign exchange contracts: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Forwards and spot |  | 1,060,498 |  |  | 452 |  |  | 313 |  |  | 77,998 |  |  | 3,050 |  |  | 87 |  |  |  |  |
Swaps |  | 1,303,755 |  |  | 62,928 |  |  | 22,985 |  |  | 1,044,900 |  |  | 18,516 |  |  | 11,447 |  |  |  |  |
Other |  | 142,000 |  |  | — |  |  | 5,630 |  |  | 121,631 |  |  | 245 |  |  | 2,070 |  |  |  |  |
Subtotal |  | 2,506,253 |  |  | 63,380 |  |  | 28,928 |  |  | 1,244,529 |  |  | 21,811 |  |  | 13,604 |  |  |  |  |
Total |  | $ | 11,277,951 |  |  | $ | 685,488 |  |  | $ | 30,403 |  |  | $ | 9,756,521 |  |  | $ | 447,201 |  |  | $ | 16,886 |  |  |  |  |

35

The Company enters into energy commodity contracts with its customers in the oil and gas sector, which allow them to hedge against the risk of fluctuation in energy commodity prices. Offsetting contracts entered with third-party financial institutions are used as economic hedges to manage the Company’s exposure on its customer-related positions. The following table presents the notional amounts in units and the gross fair values of the commodity derivatives issued for customer-related positions and economic hedges as of September 30, 2023 and December 31, 2022:

|  | September 30, 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 |  | 3,958 |  |  | Barrels |  | $ | 27,543 |  |  | $ | 1,717 |  |  | 2,465 |  |  | Barrels |  | $ | 39,955 |  |  | $ | 6,178 |  |  |  |  |
Collars |  | 6,362 |  |  | Barrels |  | 24,552 |  |  | 119 |  |  | 3,011 |  |  | Barrels |  | 16,038 |  |  | 2,630 |  |  |  |  |
Written options |  | — |  |  | Barrels |  | — |  |  | — |  |  | — |  |  | Barrels |  | 558 |  |  | — |  |  |  |  |
Subtotal |  | 10,320 |  |  | Barrels |  | 52,095 |  |  | 1,836 |  |  | 5,476 |  |  | Barrels |  | 56,551 |  |  | 8,808 |  |  |  |  |
Natural gas: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Swaps |  | 129,940 |  |  | MMBTUs |  | 32,428 |  |  | 55,387 |  |  | 92,590 |  |  | MMBTUs |  | 112,314 |  |  | 73,208 |  |  |  |  |
Collars |  | 50,763 |  |  | MMBTUs |  | 865 |  |  | 11,535 |  |  | 32,072 |  |  | MMBTUs |  | 2,217 |  |  | 18,317 |  |  |  |  |
Written options |  | 1,955 |  |  | MMBTUs |  | — |  |  | 206 |  |  | — |  |  | MMBTUs |  | — |  |  | — |  |  |  |  |
Subtotal |  | 182,658 |  |  | MMBTUs |  | 33,293 |  |  | 67,128 |  |  | 124,662 |  |  | MMBTUs |  | 114,531 |  |  | 91,525 |  |  |  |  |
Total |  |  |  |  |  | $ | 85,388 |  |  | $ | 68,964 |  |  |  |  |  |  | $ | 171,082 |  |  | $ | 100,333 |  |  |  |  |
Economic hedges: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Commodity contracts: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Crude oil: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Swaps |  | 3,990 |  |  | Barrels |  | $ | 2,165 |  |  | $ | 24,403 |  |  | 2,587 |  |  | Barrels |  | $ | 6,935 |  |  | $ | 36,060 |  |  |  |  |
Collars |  | 6,362 |  |  | Barrels |  | — |  |  | 18,781 |  |  | 3,942 |  |  | Barrels |  | 1,378 |  |  | 12,856 |  |  |  |  |
Purchased options |  | — |  |  | Barrels |  | — |  |  | — |  |  | — |  |  | Barrels |  | — |  |  | 516 |  |  |  |  |
Subtotal |  | 10,352 |  |  | Barrels |  | 2,165 |  |  | 43,184 |  |  | 6,529 |  |  | Barrels |  | 8,313 |  |  | 49,432 |  |  |  |  |
Natural gas: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Swaps |  | 129,405 |  |  | MMBTUs |  | 42,804 |  |  | 31,289 |  |  | 91,900 |  |  | MMBTUs |  | 69,767 |  |  | 106,883 |  |  |  |  |
Collars |  | 49,003 |  |  | MMBTUs |  | 6,937 |  |  | 418 |  |  | 31,142 |  |  | MMBTUs |  | 12,451 |  |  | 1,960 |  |  |  |  |
Purchased options |  | 1,955 |  |  | MMBTUs |  | 206 |  |  | — |  |  | — |  |  | MMBTUs |  | — |  |  | — |  |  |  |  |
Subtotal |  | 180,363 |  |  | MMBTUs |  | 49,947 |  |  | 31,707 |  |  | 123,042 |  |  | MMBTUs |  | 82,218 |  |  | 108,843 |  |  |  |  |
Total |  |  |  |  |  | $ | 52,112 |  |  | $ | 74,891 |  |  |  |  |  |  | $ | 90,531 |  |  | $ | 158,275 |  |  |  |  |

Credit Contracts — The Company periodically enters into credit RPAs with institutional counterparties to manage the credit exposure of the interest rate contracts associated with syndication loans. Under the RPAs, a portion of the credit exposure is transferred from one party (the purchaser of credit protection) to another party (the seller of credit protection). The seller of credit protection is required to make payments to the purchaser of credit protection if the underlying borrower defaults on the related interest rate contract. The Company may enter into protection sold or protection purchased RPAs. Credit risk on RPAs is managed by monitoring the credit worthiness of the borrowers and the institutional counterparties, which is a part of the Company’s normal credit review and monitoring process. All referenced entities of the protection sold RPAs were investment grade and the weighted-average remaining maturity was 2.5 years and 2.4 years as of September 30, 2023 and December 31, 2022, respectively. Assuming that the underlying borrowers referenced in the interest rate contracts defaulted, the Company would not have any current exposure in the protection sold RPAs as of both September 30, 2023 and December 31, 2022.
As of September 30, 2023, the Company had outstanding protection purchased RPAs with notional amount of $25.0 million and minimal fair value. In comparison, the Company did not have any outstanding protection purchased RPAs as of December 31, 2022.
36

Equity Contracts — As part of the loan origination process, the Company may obtain warrants to purchase the preferred and/or common stock of the borrowers’ companies, which are mainly in the technology and life sciences sectors. Warrants grant the Company the right to buy a certain class of the underlying company’s equity at a certain price before expiration. In connection with the Company’s investment in Rayliant during the third quarter of 2023, the Company granted PRSUs as part of its consideration. The vesting of these equity contracts is contingent on Rayliant meeting certain financial performance targets during the future performance period. For additional information on these equity contracts, refer to Note 3 — Fair Value Measurement and Fair Value of Financial Instruments and Note 8 — Investments in Qualified Affordable Housing Partnerships, Tax Credit and Other Investments, Net and Variable Interest Entities to the Consolidated Financial Statements in this Form 10-Q.
The following table presents the net gains (losses) recognized on the Company’s Consolidated Statement of Income related to derivatives not designated as hedging instruments for the three and nine months ended September 30, 2023 and 2022:

|  | Classification on Consolidated Statement of Income |  | Three Months Ended September 30, |  | Nine Months Ended September 30,
($ in thousands) |  |  | 2023 |  | 2022 |  | 2023 |  | 2022
Derivatives not designated as hedging instruments: |  |  |  |  |  |  |  |  |  |
Interest rate contracts |  | Interest rate contracts and other derivative income |  | $ | 5,283 |  |  | $ | 4,870 |  |  | $ | 4,022 |  |  | $ | 18,439 |
Foreign exchange contracts |  | Foreign exchange income |  | 7,267 |  |  | 3,831 |  |  | 37,607 |  |  | 6,596 |
Credit contracts |  | Interest rate contracts and other derivative income |  | 4 |  |  | 50 |  |  | 11 |  |  | 114 |
Equity contracts - warrants |  | Lending fees |  | 89 |  |  | (13) |  |  | 29 |  |  | 175 |
Commodity contracts |  | Interest rate contracts and other derivative income |  | 27 |  |  | (156) |  |  | 193 |  |  | 139 |
Net gains |  |  |  | $ | 12,670 |  |  | $ | 8,582 |  |  | $ | 41,862 |  |  | $ | 25,463 |

Credit-Risk-Related Contingent Features — Certain of the Company’s over-the-counter derivative contracts contain early termination provisions that require the Company to settle any outstanding balances upon the occurrence of a specified credit-risk-related event. Such an event primarily relates to a downgrade of the credit rating of East West Bank to below investment grad e. As of September 30, 2023, the aggregate fair value amounts of all derivative instruments with credit-risk-related contingent features that were in a net liability position totaled $2.2 million, and $2.2 million 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 September 30, 2023 and December 31, 2022.
37

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

($ in thousands) |  | As of September 30, 2023
|  | Gross Amounts Recognized (1) |  | Gross Amounts Offset on the Consolidated Balance Sheet |  | Net Amounts Presented on the Consolidated Balance Sheet |  | Gross Amounts Not Offset on the Consolidated Balance Sheet |  | Net Amount
|  |  | Master Netting Arrangements |  | Cash Collateral Received (3) |  |  | Security Collateral Received (5) |
Derivative assets |  | $ | 862,316 |  |  | $ | (260,648) |  |  | $ | (269,683) |  |  | $ | 331,985 |  |  | $ | (280,043) |  |  | $ | 51,942 |
|  | Gross Amounts Recognized (2) |  | Gross Amounts Offset on the Consolidated Balance Sheet |  | Net Amounts Presented on the Consolidated Balance Sheet |  | Gross Amounts Not Offset on the Consolidated Balance Sheet |  | Net Amount
|  |  | Master Netting Arrangements |  | Cash Collateral Pledged (4) |  |  | Security Collateral Pledged (5) |
Derivative liabilities |  | $ | 948,387 |  |  | $ | (260,648) |  |  | $ | (2,225) |  |  | $ | 685,514 |  |  | $ | — |  |  | $ | 685,514 |

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

(1)Includes $1.8 million and $2.1 million of gross fair value assets with counterparties that were not subject to enforceable master netting arrangements or similar agreements as of September 30, 2023 and December 31, 2022, respectively.
(2)Includes $16.2 million and $566 thousand of gross fair value liabilities with counterparties that were not subject to enforceable master netting arrangements or similar agreements as of September 30, 2023 and December 31, 2022, respectively.
(3)Gross cash collateral received under master netting arrangements or similar agreements was $275.7 million and $384.9 million as of September 30, 2023 and December 31, 2022, respectively. Of the gross cash collateral received, $269.7 million and $372.0 million were used to offset against derivative assets as of September 30, 2023 and December 31, 2022, respectively.
(4)Gross cash collateral pledged under master netting arrangements or similar agreements was $3.1 million and $490 thousand as of September 30, 2023 and December 31, 2022, respectively. Of the gross cash collateral pledged, $2.2 million was used to offset against derivative liabilities as of September 30, 2023. In comparison, no cash collateral was used to offset against derivative liabilities as of 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.
38

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 September 30, 2023 and December 31, 2022:

($ in thousands) |  | September 30, 2023 |  | December 31, 2022
Commercial: |  |  |  |
C&I |  | $ | 15,864,042 |  |  | $ | 15,711,095 |
CRE: |  |  |  |
CRE |  | 14,667,378 |  |  | 13,857,870 |
Multifamily residential |  | 4,900,097 |  |  | 4,573,068 |
Construction and land |  | 798,190 |  |  | 638,420 |
Total CRE |  | 20,365,665 |  |  | 19,069,358 |
Total commercial |  | 36,229,707 |  |  | 34,780,453 |
Consumer: |  |  |  |
Residential mortgage: |  |  |  |
Single-family residential |  | 12,836,558 |  |  | 11,223,027 |
HELOCs |  | 1,776,665 |  |  | 2,122,655 |
Total residential mortgage |  | 14,613,223 |  |  | 13,345,682 |
Other consumer |  | 64,254 |  |  | 76,295 |
Total consumer |  | 14,677,477 |  |  | 13,421,977 |
Total loans held-for-investment (1) |  | $ | 50,907,184 |  |  | $ | 48,202,430 |
Allowance for loan losses |  | (655,523) |  |  | (595,645) |
Loans held-for-investment, net (1) |  | $ | 50,251,661 |  |  | $ | 47,606,785 |

(1)Includes $72.0 million and $70.4 million comprising unamortized deferred and unearned fees, net of premiums as of September 30, 2023 and December 31, 2022, respectively.
Accrued interest receivable on loans held-for-investment was $249.3 million and $208.4 million as of September 30, 2023 and December 31, 2022, respectively, and was included in Other assets on the Consolidated Balance Sheet. The interest income reversed was insignificant for both the three and nine months ended September 30, 2023 and 2022. For the Company’s accounting policy on accrued interest receivable related to loans held-for-investment, see Note 1 — Summary of Significant Accounting Policies — Significant Accounting Policies — Loans Held-for-Investment to the Consolidated Financial Statements of the Company’s 2022 Form 10-K. The Company also has loans held-for-sale. For the Company’s accounting policy on loans held-for-sale, refer to Note 1 — Summary of Significant Accounting Policies — Significant Accounting Policies — Loans Held-for-Sale to the Consolidated Financial Statements in the Company’s 2022 Form 10-K.
The Company’s FRBSF and FHLB borrowings are primarily secured by loans held-for-investment. Loans held-for-investment totaling $35.18 billion and $28.30 billion, respectively, were pledged to secure borrowings and provide additional borrowing capacity as of September 30, 2023 and December 31, 2022.
Credit Quality Indicators
All loans are subject to the Company’s credit review and monitoring process. For the commercial loan portfolio, loans are risk rated based on an analysis of the borrower’s current payment performance or delinquency, repayment sources, financial and liquidity factors, including industry and geographic considerations. For the consumer loan portfolio, payment performance or delinquency is typically the driving indicator for risk ratings.
The Company utilizes internal credit risk ratings to assign each individual loan a risk rating of 1 through 10:
•Pass — loans risk rated 1 through 5 are assigned an internal risk rating category of “Pass.” Loans risk rated 1 are typically loans fully secured by cash. Pass loans have sufficient sources of repayment to repay the loan in full, in accordance with all terms and conditions.
•Special mention — loans assigned a risk rating of 6 have potential weaknesses that warrant closer attention by management; these are assigned an internal risk rating category of “Special Mention.”
•Substandard — loans assigned a risk rating of 7 or 8 have well-defined weaknesses that may jeopardize the full and timely repayment of the loan; these are assigned an internal risk rating category of “Substandard.”
39

•Doubtful — loans assigned a risk rating of 9 have insufficient sources of repayment and a high probability of loss; these are assigned an internal risk rating category of “Doubtful.”
•Loss — loans assigned a risk rating of 10 are uncollectible and of such little value that they are no longer considered bankable assets; these are assigned an internal risk rating category of “Loss.”
Loan exposures categorized as criticized consist of special mention, substandard, doubtful and loss categories. The Company reviews the internal risk ratings of its loan portfolio on a regular basis, and adjusts the ratings based on changes in the borrowers’ financial status and the collectability of the loans.
The following tables summarize the Company’s loans held-for-investment and current year-to-date gross write-offs by loan portfolio segments, internal risk ratings and vintage year as of the periods presented. The vintage year is the year of loan origination, renewal or major modification. Revolving loans that are converted to term loans presented in the tables below are excluded from term loans by vintage year columns.

|  | September 30, 2023 |  |
|  | Term Loans by Origination Year |  |  |  |  |  |  |  |
($ in thousands) |  | 2023 |  | 2022 |  | 2021 |  | 2020 |  | 2019 |  | Prior |  | Revolving Loans |  | Revolving Loans Converted to Term Loans (1) |  | Total |  |
Commercial: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
C&I: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Pass |  | $ | 1,858,749 |  |  | $ | 1,942,241 |  |  | $ | 1,470,818 |  |  | $ | 354,650 |  |  | $ | 259,342 |  |  | $ | 164,149 |  |  | $ | 9,254,852 |  |  | $ | 20,248 |  |  | $ | 15,325,049 |  |  |
Criticized (accrual) |  | 88,542 |  |  | 110,918 |  |  | 91,272 |  |  | 45,069 |  |  | 25,603 |  |  | 23,640 |  |  | 104,802 |  |  | — |  |  | 489,846 |  |  |
Criticized (nonaccrual) |  | 2,084 |  |  | 10,480 |  |  | 13 |  |  | 8,694 |  |  | 6,134 |  |  | 21,709 |  |  | 33 |  |  | — |  |  | 49,147 |  |  |
Total C&I |  | 1,949,375 |  |  | 2,063,639 |  |  | 1,562,103 |  |  | 408,413 |  |  | 291,079 |  |  | 209,498 |  |  | 9,359,687 |  |  | 20,248 |  |  | 15,864,042 |  |  |
YTD gross write-offs (2) |  | 350 |  |  | 28 |  |  | 161 |  |  | 15 |  |  | 6,606 |  |  | 1,684 |  |  | — |  |  | — |  |  | 8,844 |  |  |
CRE: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Pass |  | 2,066,361 |  |  | 4,080,810 |  |  | 2,259,761 |  |  | 1,396,114 |  |  | 1,649,168 |  |  | 2,722,697 |  |  | 101,811 |  |  | 63,050 |  |  | 14,339,772 |  |  |
Criticized (accrual) |  | 36,899 |  |  | 14,717 |  |  | 20,307 |  |  | 100,871 |  |  | 24,544 |  |  | 129,658 |  |  | — |  |  | — |  |  | 326,996 |  |  |
Criticized (nonaccrual) |  | — |  |  | — |  |  | — |  |  | — |  |  | 451 |  |  | 159 |  |  | — |  |  | — |  |  | 610 |  |  |
Subtotal CRE |  | 2,103,260 |  |  | 4,095,527 |  |  | 2,280,068 |  |  | 1,496,985 |  |  | 1,674,163 |  |  | 2,852,514 |  |  | 101,811 |  |  | 63,050 |  |  | 14,667,378 |  |  |
YTD gross write-offs (2) |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 119 |  |  | — |  |  | — |  |  | 119 |  |  |
Multifamily residential: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Pass |  | 478,895 |  |  | 1,495,620 |  |  | 814,391 |  |  | 620,117 |  |  | 503,791 |  |  | 893,282 |  |  | 7,658 |  |  | 1,288 |  |  | 4,815,042 |  |  |
Criticized (accrual) |  | — |  |  | — |  |  | 53,555 |  |  | — |  |  | 696 |  |  | 26,124 |  |  | — |  |  | — |  |  | 80,375 |  |  |
Criticized (nonaccrual) |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 4,680 |  |  | — |  |  | — |  |  | 4,680 |  |  |
Subtotal multifamily residential |  | 478,895 |  |  | 1,495,620 |  |  | 867,946 |  |  | 620,117 |  |  | 504,487 |  |  | 924,086 |  |  | 7,658 |  |  | 1,288 |  |  | 4,900,097 |  |  |
Construction and land: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Pass |  | 151,175 |  |  | 354,415 |  |  | 222,474 |  |  | 37,732 |  |  | 812 |  |  | 5,475 |  |  | 14,966 |  |  | — |  |  | 787,049 |  |  |
Criticized (nonaccrual) |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 11,141 |  |  | — |  |  | — |  |  | 11,141 |  |  |
Subtotal construction and land |  | 151,175 |  |  | 354,415 |  |  | 222,474 |  |  | 37,732 |  |  | 812 |  |  | 16,616 |  |  | 14,966 |  |  | — |  |  | 798,190 |  |  |
YTD gross write-offs |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 10,413 |  |  | — |  |  | — |  |  | 10,413 |  |  |
Total CRE |  | 2,733,330 |  |  | 5,945,562 |  |  | 3,370,488 |  |  | 2,154,834 |  |  | 2,179,462 |  |  | 3,793,216 |  |  | 124,435 |  |  | 64,338 |  |  | 20,365,665 |  |  |
YTD gross write-offs (2) |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 10,532 |  |  | — |  |  | — |  |  | 10,532 |  |  |
Total commercial |  | $ | 4,682,705 |  |  | $ | 8,009,201 |  |  | $ | 4,932,591 |  |  | $ | 2,563,247 |  |  | $ | 2,470,541 |  |  | $ | 4,002,714 |  |  | $ | 9,484,122 |  |  | $ | 84,586 |  |  | $ | 36,229,707 |  |  |
YTD total commercial gross write-offs (2) |  | $ | 350 |  |  | $ | 28 |  |  | $ | 161 |  |  | $ | 15 |  |  | $ | 6,606 |  |  | $ | 12,216 |  |  | $ | — |  |  | $ | — |  |  | $ | 19,376 |  |  |

40

|  | September 30, 2023 |  |
|  | Term Loans by Origination Year |  |  |  |  |  |  |  |
($ in thousands) |  | 2023 |  | 2022 |  | 2021 |  | 2020 |  | 2019 |  | Prior |  | Revolving Loans |  | Revolving Loans Converted to Term Loans (1) |  | Total |  |
Consumer: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Residential mortgage: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Single-family residential: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Pass (3) |  | $ | 2,400,448 |  |  | $ | 3,390,708 |  |  | $ | 2,321,209 |  |  | $ | 1,633,316 |  |  | $ | 1,010,859 |  |  | $ | 2,040,678 |  |  | $ | — |  |  | $ | — |  |  | $ | 12,797,218 |  |  |
Criticized (accrual) |  | 844 |  |  | 1,983 |  |  | 844 |  |  | 1,499 |  |  | 964 |  |  | 9,060 |  |  | — |  |  | — |  |  | 15,194 |  |  |
Criticized (nonaccrual) (3) |  | 1,916 |  |  | 2,866 |  |  | 4,702 |  |  | 2,696 |  |  | 2,868 |  |  | 9,098 |  |  | — |  |  | — |  |  | 24,146 |  |  |
Subtotal single-family residential mortgage |  | 2,403,208 |  |  | 3,395,557 |  |  | 2,326,755 |  |  | 1,637,511 |  |  | 1,014,691 |  |  | 2,058,836 |  |  | — |  |  | — |  |  | 12,836,558 |  |  |
HELOCs: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Pass |  | 182 |  |  | 1,828 |  |  | 5,736 |  |  | 4,318 |  |  | 1,963 |  |  | 13,821 |  |  | 1,611,319 |  |  | 118,088 |  |  | 1,757,255 |  |  |
Criticized (accrual) |  | 741 |  |  | 401 |  |  | 62 |  |  | — |  |  | 353 |  |  | 1,649 |  |  | 2,039 |  |  | 963 |  |  | 6,208 |  |  |
Criticized (nonaccrual) |  | — |  |  | 517 |  |  | — |  |  | 1,359 |  |  | 68 |  |  | 5,396 |  |  | 1,751 |  |  | 4,111 |  |  | 13,202 |  |  |
Subtotal HELOCs |  | 923 |  |  | 2,746 |  |  | 5,798 |  |  | 5,677 |  |  | 2,384 |  |  | 20,866 |  |  | 1,615,109 |  |  | 123,162 |  |  | 1,776,665 |  |  |
YTD gross write-offs (2) |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 41 |  |  | — |  |  | 6 |  |  | 47 |  |  |
Total residential mortgage |  | 2,404,131 |  |  | 3,398,303 |  |  | 2,332,553 |  |  | 1,643,188 |  |  | 1,017,075 |  |  | 2,079,702 |  |  | 1,615,109 |  |  | 123,162 |  |  | 14,613,223 |  |  |
YTD gross write-offs (2) |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 41 |  |  | — |  |  | 6 |  |  | 47 |  |  |
Other consumer: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Pass |  | 3,555 |  |  | 18,138 |  |  | 135 |  |  | — |  |  | — |  |  | 12,315 |  |  | 29,971 |  |  | — |  |  | 64,114 |  |  |
Criticized (accrual) |  | 4 |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 4 |  |  |
Criticized (nonaccrual) |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 136 |  |  | — |  |  | 136 |  |  |
Total other consumer |  | 3,559 |  |  | 18,138 |  |  | 135 |  |  | — |  |  | — |  |  | 12,315 |  |  | 30,107 |  |  | — |  |  | 64,254 |  |  |
Total consumer |  | $ | 2,407,690 |  |  | $ | 3,416,441 |  |  | $ | 2,332,688 |  |  | $ | 1,643,188 |  |  | $ | 1,017,075 |  |  | $ | 2,092,017 |  |  | $ | 1,645,216 |  |  | $ | 123,162 |  |  | $ | 14,677,477 |  |  |
YTD total consumer gross write-offs (2) |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | 41 |  |  | $ | — |  |  | $ | 6 |  |  | $ | 47 |  |  |
Total loans held-for-investment: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Pass |  | $ | 6,959,365 |  |  | $ | 11,283,760 |  |  | $ | 7,094,524 |  |  | $ | 4,046,247 |  |  | $ | 3,425,935 |  |  | $ | 5,852,417 |  |  | $ | 11,020,577 |  |  | $ | 202,674 |  |  | $ | 49,885,499 |  |  |
Criticized (accrual) |  | 127,030 |  |  | 128,019 |  |  | 166,040 |  |  | 147,439 |  |  | 52,160 |  |  | 190,131 |  |  | 106,841 |  |  | 963 |  |  | 918,623 |  |  |
Criticized (nonaccrual) |  | 4,000 |  |  | 13,863 |  |  | 4,715 |  |  | 12,749 |  |  | 9,521 |  |  | 52,183 |  |  | 1,920 |  |  | 4,111 |  |  | 103,062 |  |  |
Total |  | $ | 7,090,395 |  |  | $ | 11,425,642 |  |  | $ | 7,265,279 |  |  | $ | 4,206,435 |  |  | $ | 3,487,616 |  |  | $ | 6,094,731 |  |  | $ | 11,129,338 |  |  | $ | 207,748 |  |  | $ | 50,907,184 |  |  |
YTD total loans held-for-investment gross write-offs (2) |  | $ | 350 |  |  | $ | 28 |  |  | $ | 161 |  |  | $ | 15 |  |  | $ | 6,606 |  |  | $ | 12,257 |  |  | $ | — |  |  | $ | 6 |  |  | $ | 19,423 |  |  |

41

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

(1)$11.2 million and $24.6 million of total commercial loans, primarily comprised of CRE revolving loans, converted to term loans during the three and nine months ended September 30, 2023, respectively. In comparison, $0 and $26.4 million of total commercial loans, primarily comprised of CRE revolving loans, converted to term loans during the three and nine months ended September 30, 2022. $20.6 million and $27.7 million of total consumer loans, comprised of HELOCs, were converted to term loans during three and nine months ended September 30, 2023, respectively. In comparison, $375 thousand of total consumer loans, comprised of HELOCs, converted to term loans during both the three and nine months ended September 30, 2022.
(2)Excludes gross write-offs associated with loans the Company sold or settled.
(3)As of September 30, 2023 and December 31, 2022, $638 thousand and $818 thousand, respectively, of nonaccrual loans whose payments were guaranteed by the Federal Housing Administration were classified with a “Pass” rating.
42

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 September 30, 2023 and December 31, 2022:

|  | September 30, 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 |  | $ | 15,781,468 |  |  | $ | 33,195 |  |  | $ | 232 |  |  |  |  |  |  | $ | 33,427 |  |  |  |  |  |  | $ | 49,147 |  |  | $ | 15,864,042 |
CRE: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
CRE |  | 14,664,230 |  |  | 2,015 |  |  | 523 |  |  |  |  |  |  | 2,538 |  |  |  |  |  |  | 610 |  |  | 14,667,378 |
Multifamily residential |  | 4,894,334 |  |  | 1,083 |  |  | — |  |  |  |  |  |  | 1,083 |  |  |  |  |  |  | 4,680 |  |  | 4,900,097 |
Construction and land |  | 787,049 |  |  | — |  |  | — |  |  |  |  |  |  | — |  |  |  |  |  |  | 11,141 |  |  | 798,190 |
Total CRE |  | 20,345,613 |  |  | 3,098 |  |  | 523 |  |  |  |  |  |  | 3,621 |  |  |  |  |  |  | 16,431 |  |  | 20,365,665 |
Total commercial |  | 36,127,081 |  |  | 36,293 |  |  | 755 |  |  |  |  |  |  | 37,048 |  |  |  |  |  |  | 65,578 |  |  | 36,229,707 |
Consumer: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Residential mortgage: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Single-family residential |  | 12,771,661 |  |  | 24,141 |  |  | 15,972 |  |  |  |  |  |  | 40,113 |  |  |  |  |  |  | 24,784 |  |  | 12,836,558 |
HELOCs |  | 1,746,841 |  |  | 10,416 |  |  | 6,206 |  |  |  |  |  |  | 16,622 |  |  |  |  |  |  | 13,202 |  |  | 1,776,665 |
Total residential mortgage |  | 14,518,502 |  |  | 34,557 |  |  | 22,178 |  |  |  |  |  |  | 56,735 |  |  |  |  |  |  | 37,986 |  |  | 14,613,223 |
Other consumer |  | 63,992 |  |  | 109 |  |  | 17 |  |  |  |  |  |  | 126 |  |  |  |  |  |  | 136 |  |  | 64,254 |
Total consumer |  | 14,582,494 |  |  | 34,666 |  |  | 22,195 |  |  |  |  |  |  | 56,861 |  |  |  |  |  |  | 38,122 |  |  | 14,677,477 |
Total |  | $ | 50,709,575 |  |  | $ | 70,959 |  |  | $ | 22,950 |  |  |  |  |  |  | $ | 93,909 |  |  |  |  |  |  | $ | 103,700 |  |  | $ | 50,907,184 |

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

43

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 September 30, 2023 and December 31, 2022. Nonaccrual loans may not have an allowance for credit losses if the loan balances are well-secured by the collateral value and there is no loss expectation.

($ in thousands) |  |  | September 30, 2023 |  |  | December 31, 2022
Commercial: |  |  |  |  |  |
C&I |  |  | $ | 29,336 |  |  |  | $ | 11,398 |
CRE |  |  | — |  |  |  | 22,944 |
Multifamily residential |  |  | 4,235 |  |  |  | — |
Construction and land |  |  | 11,141 |  |  |  | — |
Total commercial |  |  | 44,712 |  |  |  | 34,342 |
Consumer: |  |  |  |  |  |
Single-family residential |  |  | 6,681 |  |  |  | 2,998 |
HELOCs |  |  | 8,483 |  |  |  | 7,245 |
Total consumer |  |  | 15,164 |  |  |  | 10,243 |
Total nonaccrual loans with no related allowance for loan losses |  |  | $ | 59,876 |  |  |  | $ | 44,585 |

Foreclosed Assets
The Company acquires assets from borrowers through loan restructurings, workouts, or foreclosures. Assets acquired may include real properties (e.g., residential real estate, land, and buildings) and commercial and personal properties. The Company recognizes foreclosed assets upon receiving assets in satisfaction of a loan (e.g., taking legal title or physical possession).
Foreclosed assets, consisting of OREO and other nonperforming assets, are included in Other assets on the Consolidated Balance Sheet. The Company had no foreclosed assets as of September 30, 2023, compared with $270 thousand as of December 31, 2022. The Company commences the foreclosure process on consumer mortgage loans after a borrower becomes more than 120 days delinquent in accordance with the CFPB guidelines. The carrying value of the consumer real estate loans that were in an active or suspended foreclosure process was $9.9 million and $7.5 million as of September 30, 2023 and December 31, 2022, respectively.
Loan Modifications to Borrowers Experiencing Financial Difficulty
Effective January 1, 2023, the Company adopted ASU 2022-02, which in part eliminated the accounting for TDR and enhanced disclosures requirements for loan modifications to borrowers experiencing financial difficulty. See Note 2 — Current Accounting Developments and Summary of Significant Accounting Policies — Significant Accounting Policies Update — Loan Modifications to the Consolidated Financial Statements in this Form 10-Q for additional information. As part of the Company’s loss mitigation efforts, the Company may agree to modify the contractual terms of a loan to assist borrowers experiencing financial difficulty. The Company negotiates loan modifications on a case-by-case basis to achieve mutually agreeable terms that maximize loan collectability and meet the borrower’s financial needs. The Company considers various factors to identify borrowers experiencing financial difficulty. The primary factor for consumer borrowers is delinquency status. For commercial loan borrowers, these factors include credit risk ratings, the probability of loan risk rating downgrades, and overall risk profile changes. The modification may include, but is not limited to, payment deferrals, interest rate reductions, term extensions, principal forgiveness, or a combination of such modifications. Commercial loan borrowers that require immaterial modifications such as insignificant interest rate changes, short-term extensions (90 days or less) from the original maturity date, or temporary waivers or extensions of financial covenants which would not constitute material credit actions, are generally not considered to be experiencing financial difficulty and are not included in the disclosure. Insignificant payment deferrals (three months or less in the last 12 months) are also not included in the disclosure.
44

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

|  | Three Months Ended September 30, 2023
|  | Modification Type |  |  |  |  |  |
($ in thousands) |  | Term Extension |  | Payment Delay |  | Combination: Term Extension/ Payment Delay |  | Combination: Rate Reduction/ Term Extension |  |  |  | Combination: Rate Reduction/ Payment Delay |  | Total |  | Modification as a % of Loan Class |  |  |  |  |  |
Commercial: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
C&I |  | $ | 1,682 |  |  | $ | 11,603 |  |  | $ | — |  |  | $ | — |  |  |  |  | $ | — |  |  | $ | 13,285 |  |  | 0.08 | % |  |  |  |  |  |
CRE: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
CRE |  | 13,469 |  |  | — |  |  | — |  |  | — |  |  |  |  | — |  |  | 13,469 |  |  | 0.07 | % |  |  |  |  |  |
Total commercial |  | 15,151 |  |  | 11,603 |  |  | — |  |  | — |  |  |  |  | — |  |  | 26,754 |  |  |  |  |  |  |  |  |
Consumer: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Residential mortgage: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Single-family residential: |  | — |  |  | 2,944 |  |  | 1,260 |  |  | — |  |  |  |  | — |  |  | 4,204 |  |  | 0.03 | % |  |  |  |  |  |
HELOCs |  | — |  |  | — |  |  | 334 |  |  | — |  |  |  |  | 183 |  |  | 517 |  |  | 0.03 | % |  |  |  |  |  |
Total consumer |  | — |  |  | 2,944 |  |  | 1,594 |  |  | — |  |  |  |  | 183 |  |  | 4,721 |  |  |  |  |  |  |  |  |
Total |  | $ | 15,151 |  |  | $ | 14,547 |  |  | $ | 1,594 |  |  | $ | — |  |  |  |  | $ | 183 |  |  | $ | 31,475 |  |  |  |  |  |  |  |  |

|  | Nine Months Ended September 30, 2023
|  | Modification Type |  |  |  |
($ in thousands) |  | Term Extension |  | Payment Delay |  | Combination: Term Extension/ Payment Delay |  | Combination: Rate Reduction/ Term Extension |  |  |  | Combination: Rate Reduction/ Payment Delay |  | Total |  | Modification as a % of Loan Class |  |  |  |
Commercial: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
C&I |  | $ | 44,120 |  |  | $ | 20,793 |  |  | $ | — |  |  | $ | — |  |  |  |  | $ | — |  |  | $ | 64,913 |  |  | 0.41 | % |  |  |  |
CRE: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
CRE |  | 13,979 |  |  | — |  |  | — |  |  | 32,724 |  |  |  |  | — |  |  | 46,703 |  |  | 0.23 | % |  |  |  |
Total commercial |  | 58,099 |  |  | 20,793 |  |  | — |  |  | 32,724 |  |  |  |  | — |  |  | 111,616 |  |  |  |  |  |  |
Consumer: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Residential mortgage: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Single-family residential: |  | — |  |  | 7,276 |  |  | 1,809 |  |  | — |  |  |  |  | — |  |  | 9,085 |  |  | 0.07 | % |  |  |  |
HELOCs |  | — |  |  | 741 |  |  | 1,053 |  |  | — |  |  |  |  | 183 |  |  | 1,977 |  |  | 0.11 | % |  |  |  |
Total consumer |  | — |  |  | 8,017 |  |  | 2,862 |  |  | — |  |  |  |  | 183 |  |  | 11,062 |  |  |  |  |  |  |
Total |  | $ | 58,099 |  |  | $ | 28,810 |  |  | $ | 2,862 |  |  | $ | 32,724 |  |  |  |  | $ | 183 |  |  | $ | 122,678 |  |  |  |  |  |  |

45

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

|  | Financial Effects of Loan Modifications
|  | Three Months Ended September 30, 2023
($ in thousands) |  | Principal Forgiveness |  | Weighted-Average Interest Rate Reduction |  | Weighted-Average Term Extension (in years) |  | Weighted-Average Payment Delay (in years)
Commercial: |  |  |  |  |  |  |  |
C&I |  | $ | 26 |  |  | — | % |  | 3.00 |  | 1.54
CRE |  | — |  |  | — | % |  | 1.08 |  | — |
Consumer: |  |  |  |  |  |  |  |
Single-family residential |  | — |  |  | — | % |  | 10.00 |  | 0.96
HELOCs |  | — |  |  | 0.50 | % |  | 16.68 |  | 0.71
Total |  | $ | 26 |  |  |  |  |  |  |

|  |  |  |  |  |  |  |  |  |  |  | Financial Effects of Loan Modifications |  |  |  |  |  |  |  |  |  |
|  |  |  |  |  | Nine months ended September 30, 2023 |  |  |  |  |  |  |  |  |  |
|  |  |  |  |  |  |  |  |  | ($ in thousands) |  | Principal Forgiveness |  | Weighted-Average Interest Rate Reduction |  | Weighted-Average Term Extension (in years) |  | Weighted-Average Payment Delay (in years) |  |  |  |  |  |  |  |  |  |
|  |  |  |  |  |  |  |  |  | Commercial: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
|  |  |  |  |  |  |  |  |  | C&I |  | $ | 371 |  | (1) | — | % | (1) | 1.41 |  | 1.15 |  |  |  |  |  |  |  |  |  |
|  |  |  |  |  |  |  |  |  | CRE |  | — |  |  | 3.00 | % |  | 2.09 |  | — |  |  |  |  |  |  |  |  |  |  |
|  |  |  |  |  |  |  |  |  | Consumer: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
|  |  |  |  |  |  |  |  |  | Single-family residential |  | — |  |  | — | % |  | 9.91 |  | 0.95 |  |  |  |  |  |  |  |  |  |
|  |  |  |  |  |  |  |  |  | HELOCs |  | — |  |  | 0.50 | % |  | 15.36 |  | 0.52 |  |  |  |  |  |  |  |  |  |
|  |  |  |  |  |  |  |  |  | Total |  | $ | 371 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |

(1)Comprised of C&I loans modified during the nine months ended September 30, 2023 where the interest rate is waived in addition to principal forgiveness. No recorded investment was outstanding as of September 30, 2023.
A modified loan may become delinquent and may result in a payment default (generally 90 days past due) subsequent to modification. There were no loans that received modifications which subsequently defaulted during the three and nine months ended September 30, 2023.
The Company closely monitors the performance of modified loans to borrowers experiencing financial difficulty to understand the effectiveness of its modification efforts. The following table presents the performance of loans that were modified as of September 30, 2023 since the adoption of ASU 2022-02 on January 1, 2023.

|  |  |  | Payment Performance as of September 30, 2023
($ in thousands) |  |  |  |  |  |  |  |  |  |  |  |  |  | Current |  | 30 - 89 Days Past Due |  | 90+ Days Past Due |  | Total
Commercial: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
C&I |  |  |  |  |  |  |  |  |  |  |  |  |  | $ | 58,481 |  |  | $ | — |  |  | $ | 6,432 |  |  | $ | 64,913 |
CRE: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
CRE |  |  |  |  |  |  |  |  |  |  |  |  |  | 46,703 |  |  | — |  |  | — |  |  | 46,703 |
Total commercial |  |  |  |  |  |  |  |  |  |  |  |  |  | 105,184 |  |  | — |  |  | 6,432 |  |  | 111,616 |
Consumer: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Residential mortgage: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Single-family residential |  |  |  |  |  |  |  |  |  |  |  |  |  | 7,430 |  |  | 1,190 |  |  | 465 |  |  | 9,085 |
HELOCs |  |  |  |  |  |  |  |  |  |  |  |  |  | 1,236 |  |  | 741 |  |  | — |  |  | 1,977 |
Total consumer |  |  |  |  |  |  |  |  |  |  |  |  |  | 8,666 |  |  | 1,931 |  |  | 465 |  |  | 11,062 |
Total |  |  |  |  |  |  |  |  |  |  |  |  |  | $ | 113,850 |  |  | $ | 1,931 |  |  | $ | 6,897 |  |  | $ | 122,678 |

46

As of September 30, 2023, commitments to lend additional funds to borrowers whose loans were modified were $5.8 million.
Troubled Debt Restructurings Prior to the Adoption of ASU 2022-02
Prior to the adoption of ASU 2022-02, the Company accounted for a modification to the contractual terms of a loan that resulted in granting a concession to a borrower experiencing financial difficulties as a TDR. ASU 2022-02 eliminated TDR accounting prospectively for all restructurings occurring on or after January 1, 2023.
The following table presents the additions to TDRs for the three and nine months ended September 30, 2022:

|  | Loans Modified as TDRs
|  | Three Months Ended September 30, 2022 |  | Nine Months Ended September 30, 2022
($ in thousands) |  | Number of Loans |  | Pre-Modification Outstanding Recorded Investment |  | Post-Modification Outstanding Recorded Investment (1) |  | Financial Impact (2) |  | Number of Loans |  | Pre-Modification Outstanding Recorded Investment |  | Post-Modification Outstanding Recorded Investment (1) |  | Financial Impact (2)
Commercial: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
C&I |  | 1 |  |  | $ | 499 |  |  | $ | 496 |  |  | $ | 98 |  |  | 4 |  |  | $ | 30,633 |  |  | $ | 17,802 |  |  | $ | 16,729 |
Total commercial |  | 1 |  |  | 499 |  |  | 496 |  |  | 98 |  |  | 4 |  |  | 30,633 |  |  | 17,802 |  |  | 16,729 |
Consumer: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Residential mortgage: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
HELOCs |  | 1 |  |  | 62 |  |  | 69 |  |  | 2 |  |  | 1 |  |  | 62 |  |  | 69 |  |  | 2 |
Total residential mortgage |  | 1 |  |  | 62 |  |  | 69 |  |  | 2 |  |  | 1 |  |  | 62 |  |  | 69 |  |  | 2 |
Total consumer |  | 1 |  |  | 62 |  |  | 69 |  |  | 2 |  |  | 1 |  |  | 62 |  |  | 69 |  |  | 2 |
Total |  | 2 |  |  | $ | 561 |  |  | $ | 565 |  |  | $ | 100 |  |  | 5 |  |  | $ | 30,695 |  |  | $ | 17,871 |  |  | $ | 16,731 |

(1)Includes subsequent payments after modification and reflects the balance as of September 30, 2022.
(2)Includes charge-offs since the modification date.
The following table presents the TDR post-modification outstanding balances by the primary modification type for the three and nine months ended September 30, 2022:

|  | Modification Type
|  | Three Months Ended September 30, 2022 |  | Nine Months Ended September 30, 2022
($ in thousands) |  | Principal |  |  |  |  |  |  |  |  |  | Other |  | Total |  | Principal (1) |  |  |  |  |  |  |  |  |  | Other (2) |  | Total
Commercial: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
C&I |  | $ | 496 |  |  |  |  |  |  |  |  |  |  | $ | — |  |  | $ | 496 |  |  | $ | 9,609 |  |  |  |  |  |  |  |  |  |  | $ | 8,193 |  |  | $ | 17,802 |
Total commercial |  | 496 |  |  |  |  |  |  |  |  |  |  | — |  |  | 496 |  |  | 9,609 |  |  |  |  |  |  |  |  |  |  | 8,193 |  |  | 17,802 |
Consumer: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Residential mortgage: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
HELOCs |  | 69 |  |  |  |  |  |  |  |  |  |  | — |  |  | 69 |  |  | 69 |  |  |  |  |  |  |  |  |  |  | — |  |  | 69 |
Total residential mortgage |  | 69 |  |  |  |  |  |  |  |  |  |  | — |  |  | 69 |  |  | 69 |  |  |  |  |  |  |  |  |  |  | — |  |  | 69 |
Total consumer |  | 69 |  |  |  |  |  |  |  |  |  |  | — |  |  | 69 |  |  | 69 |  |  |  |  |  |  |  |  |  |  | — |  |  | 69 |
Total |  | $ | 565 |  |  |  |  |  |  |  |  |  |  | $ | — |  |  | $ | 565 |  |  | $ | 9,678 |  |  |  |  |  |  |  |  |  |  | $ | 8,193 |  |  | $ | 17,871 |

(1)Includes principal deferments that modify the terms of the loan from principal and interest payments to interest payments only.
(2)Includes increase in new commitments.
47

After a loan is modified as a TDR, the Company continues to monitor its performance under its most recent restructured terms. A TDR may become delinquent and result in payment default (generally 90 days past due) subsequent to restructuring. The following table presents information on loans that entered into default during the three and nine months ended September 30, 2022 that were modified as TDRs during the 12 months preceding payment default:

|  | Loan Modified as TDRs that Subsequently Defaulted
|  | Three Months Ended September 30, 2022 |  | Nine Months Ended September 30, 2022
($ in thousands) |  | Number of Loans |  | Recorded Investment |  | Number of Loans |  | Recorded Investment
Commercial: |  |  |  |  |  |  |  |
C&I |  | — |  |  | $ | — |  |  | 2 |  |  | $ | 13,901 |
CRE: |  |  |  |  |  |  |  |
Multifamily residential |  | — |  |  | — |  |  | 1 |  |  | 1,008 |
Total CRE |  | — |  |  | — |  |  | 1 |  |  | 1,008 |
Total commercial |  | — |  |  | — |  |  | 3 |  |  | 14,909 |
Total |  | — |  |  | $ | — |  |  | 3 |  |  | $ | 14,909 |

As of December 31, 2022, the remaining lending commitments to borrowers whose terms of their outstanding owed balances were modified as TDRs was $16.2 million.
Allowance for Credit Losses
The Company has a current expected credit losses framework for all financial assets measured at amortized cost and certain off-balance sheet credit exposures. The Company’s allowance for credit losses, which includes both the allowance for loan losses and the allowance for unfunded credit commitments, is calculated with the objective of maintaining a reserve sufficient to absorb losses inherent in our credit portfolios. The measurement of the allowance for credit losses is based on management’s best estimate of lifetime expected credit losses, and periodic evaluation of the loan portfolio, lending-related commitments, and other relevant factors.
The allowance for credit losses is deducted from the amortized cost basis of a financial asset or a group of financial assets so that the balance sheet reflects the net amount the Company expects to collect. Amortized cost is the principal balance outstanding, net of purchase premiums and discounts, deferred fees and costs, and escrow advances. Subsequent changes in expected credit losses are recognized in net income as a provision for, or a reversal of, credit loss expense.
The allowance for credit losses estimation involves procedures to consider the unique risk characteristics of the portfolio segments. The majority of the Company’s credit exposures that share risk characteristics with other similar exposures are collectively evaluated. The collectively evaluated loans include performing loans and unfunded credit commitments. If an exposure does not share risk characteristics with other exposures, the Company generally estimates expected credit losses on an individual basis.
Allowance for Collectively Evaluated Loans
The allowance for collectively evaluated loans consists of a quantitative component that assesses the different risk factors considered in our models and a qualitative component that considers risk factors external to the models. Each of these components are described below.
Quantitative Component — The Company applies quantitative methods to estimate loan losses by considering a variety of factors such as historical loss experience, the current credit quality of the portfolio, and an economic outlook over the life of the loan. The Company incorporates forward-looking information using macroeconomic scenarios, which include variables that are considered key drivers of increases and decreases in credit losses. The Company utilizes a probability-weighted, multiple-scenario forecast approach. These scenarios may consist of a base forecast representing management's view of the most likely outcome, combined with downside or upside scenarios reflecting possible worsening or improving economic conditions. The quantitative models incorporate a probability-weighted calculation of these macroeconomic scenarios over a reasonable and supportable forecast period. If the life of the loans extends beyond the reasonable and supportable forecast period, the Company will consider historical experience or long-run macroeconomic trends over the remaining life of the loans to estimate the allowance for loan losses.
48

There were no changes to the reasonable and supportable forecast period, except to the C&I segment, and no changes to the reversion to the historical loss experience method for the three and nine months ended September 30, 2023 and 2022. The reasonable and supportable forecast period for the C&I segment changed from 11 quarters to eight quarters due to model redevelopment during the third quarter of 2023.
The following table provides key credit risk characteristics and macroeconomic variables that the Company uses to estimate the expected credit losses by portfolio segment:

Portfolio Segment |  | Risk Characteristics |  | Macroeconomic Variables
C&I |  | Age percentage, size at origination, delinquency status, sector and risk rating |  | Unemployment rate, Gross Domestic Product (“GDP”), and Two-Ten treasury spread (1)
CRE, Multifamily residential, and Construction and land |  | Delinquency status, maturity date, collateral value, property type, and geographic location |  | Unemployment rate, 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 (2)

(1)Macroeconomic variables were updated due to model redevelopment.
(2)Macroeconomic variables are included in the qualitative estimate.
Quantitative Component — Allowance for Loan Losses for the Commercial Loan Portfolio
The Company’s C&I lifetime loss rate model estimates the loss rate expected over the life of a loan. This loss rate is applied to the amortized cost basis, excluding accrued interest receivable, to determine expected credit losses. The lifetime loss rate model’s reasonable and supportable period spans eight 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.
To estimate the life of a loan under both models, the contractual term of the loan is adjusted for estimated prepayments based on historical prepayment experience.
Quantitative Component — Allowance for Loan Losses for the Consumer Loan Portfolio
For single-family residential and HELOC loans, projected PDs and LGDs are applied to the estimated exposure at default, considering the term and payment structure of the loan, to generate estimates of expected loss at the loan level. The forecast of future economic conditions returns to long-run historical economic trends after the reasonable and supportable period. To estimate the life of a loan for the single-family residential and HELOC loan portfolios, the contractual term of the loan is adjusted for estimated prepayments based on historical prepayment experience. For other consumer loans, the Company uses a loss rate approach.
Qualitative Component — The Company also considers the following qualitative factors in the determination of the collectively evaluated allowance if these factors have not already been captured by the quantitative model. Such qualitative factors may include, but are not limited to:
— loan growth trends;
— the volume and severity of past due financial assets, and the volume and severity of adversely classified financial assets;
— the Company’s lending policies and procedures, including changes in lending strategies, underwriting standards, collection, write-off, and recovery practices;
— knowledge of a borrower’s operations;
— the quality of the Company’s credit review system;
— the experience, ability and depth of the Company’s management and associates;
— the effect of other external factors such as the regulatory and legal environments, or changes in technology;
— actual and expected changes in international, national, regional, and local economic and business conditions in which the Company operates; and
— risk factors in certain industry sectors not captured by the quantitative models.
49

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 September 30, 2023, collateral-dependent commercial and consumer loans totaled $18.1 million and $15.2 million, respectively. In comparison, collateral-dependent commercial and consumer loans totaled $47.4 million and $13.4 million, respectively, as of December 31, 2022. The collateral-dependent loans decreased from December 31, 2022, predominantly driven by the adoption of ASU 2022-02 related to the elimination of TDR guidance. The Company's collateral-dependent loans were secured by real estate. As of both September 30, 2023 and December 31, 2022, the collateral value of the properties securing the collateral-dependent loans, net of selling costs, exceeded the recorded value of the loans.
The following tables summarize the activity in the allowance for loan losses by portfolio segments for the three and nine months ended September 30, 2023 and 2022:

|  | Three Months Ended September 30, 2023
|  | Commercial |  | Consumer |  |
|  |  |  | CRE |  | Residential Mortgage |  |  |  |
($ in thousands) |  | C&I |  | CRE |  | Multifamily Residential |  | Construction and Land |  | Single-Family Residential |  | HELOCs |  | Other Consumer |  | Total
Allowance for loan losses, beginning of period |  | $ | 375,333 |  |  | $ | 168,505 |  |  | $ | 22,938 |  |  | $ | 11,325 |  |  | $ | 51,513 |  |  | $ | 4,526 |  |  | $ | 1,260 |  |  | $ | 635,400 |
Provision for (reversal of) credit losses on loans | (a) | 13,006 |  |  | 12,952 |  |  | 772 |  |  | 8,302 |  |  | 3,353 |  |  | (705) |  |  | 456 |  |  | 38,136 |
Gross charge-offs |  | (7,074) |  |  | (3,466) |  |  | — |  |  | (10,413) |  |  | — |  |  | (41) |  |  | (13) |  |  | (21,007) |
Gross recoveries |  | 2,279 |  |  | 49 |  |  | 452 |  |  | 2 |  |  | 64 |  |  | 15 |  |  | — |  |  | 2,861 |
Total net (charge-offs) recoveries |  | (4,795) |  |  | (3,417) |  |  | 452 |  |  | (10,411) |  |  | 64 |  |  | (26) |  |  | (13) |  |  | (18,146) |
Foreign currency translation adjustment |  | 133 |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 133 |
Allowance for loan losses, end of period |  | $ | 383,677 |  |  | $ | 178,040 |  |  | $ | 24,162 |  |  | $ | 9,216 |  |  | $ | 54,930 |  |  | $ | 3,795 |  |  | $ | 1,703 |  |  | $ | 655,523 |

50

|  | Three Months Ended September 30, 2022
|  | Commercial |  | Consumer |  |
|  |  |  | CRE |  | Residential Mortgage |  |  |  |
($ in thousands) |  | C&I |  | CRE |  | Multifamily Residential |  | Construction and Land |  | Single-Family Residential |  | HELOCs |  | Other Consumer |  | Total
Allowance for loan losses, beginning of period |  | $ | 363,282 |  |  | $ | 140,245 |  |  | $ | 26,552 |  |  | $ | 6,682 |  |  | $ | 21,840 |  |  | $ | 3,220 |  |  | $ | 1,449 |  |  | $ | 563,270 |
Provision for credit losses on loans | (a) | 9,575 |  |  | 5,299 |  |  | 5,047 |  |  | 817 |  |  | 6,182 |  |  | 99 |  |  | 255 |  |  | 27,274 |
Gross charge-offs |  | (6,894) |  |  | (288) |  |  | (5,938) |  |  | — |  |  | (775) |  |  | — |  |  | (10) |  |  | (13,905) |
Gross recoveries |  | 7,172 |  |  | 45 |  |  | 19 |  |  | 7 |  |  | 16 |  |  | 5 |  |  | — |  |  | 7,264 |
Total net recoveries (charge-offs) |  | 278 |  |  | (243) |  |  | (5,919) |  |  | 7 |  |  | (759) |  |  | 5 |  |  | (10) |  |  | (6,641) |
Foreign currency translation adjustment |  | (1,386) |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | (1,386) |
Allowance for loan losses, end of period |  | $ | 371,749 |  |  | $ | 145,301 |  |  | $ | 25,680 |  |  | $ | 7,506 |  |  | $ | 27,263 |  |  | $ | 3,324 |  |  | $ | 1,694 |  |  | $ | 582,517 |

|  | Nine Months Ended September 30, 2023
|  | Commercial |  | Consumer |  |
|  |  |  | CRE |  | Residential Mortgage |  |  |  |
($ in thousands) |  | C&I |  | CRE |  | Multifamily Residential |  | Construction and Land |  | Single-Family Residential |  | HELOCs |  | Other Consumer |  | Total
Allowance for loan losses, December 31, 2022 |  | $ | 371,700 |  |  | $ | 149,864 |  |  | $ | 23,373 |  |  | $ | 9,109 |  |  | $ | 35,564 |  |  | $ | 4,475 |  |  | $ | 1,560 |  |  | $ | 595,645 |
Impact of ASU 2022-02 adoption |  | 5,683 |  |  | 337 |  |  | 6 |  |  | — |  |  | 1 |  |  | 1 |  |  | — |  |  | 6,028 |
Allowance for loan losses, beginning of period |  | 377,383 |  |  | 150,201 |  |  | 23,379 |  |  | 9,109 |  |  | 35,565 |  |  | 4,476 |  |  | 1,560 |  |  | 601,673 |
Provision for (reversal of) credit losses on loans | (a) | 17,587 |  |  | 33,313 |  |  | 303 |  |  | 10,507 |  |  | 19,296 |  |  | (569) |  |  | 244 |  |  | 80,681 |
Gross charge-offs |  | (16,309) |  |  | (5,838) |  |  | — |  |  | (10,413) |  |  | — |  |  | (138) |  |  | (101) |  |  | (32,799) |
Gross recoveries |  | 5,555 |  |  | 364 |  |  | 480 |  |  | 13 |  |  | 69 |  |  | 26 |  |  | — |  |  | 6,507 |
Total net (charge-offs) recoveries |  | (10,754) |  |  | (5,474) |  |  | 480 |  |  | (10,400) |  |  | 69 |  |  | (112) |  |  | (101) |  |  | (26,292) |
Foreign currency translation adjustment |  | (539) |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | (539) |
Allowance for loan losses, end of period |  | $ | 383,677 |  |  | $ | 178,040 |  |  | $ | 24,162 |  |  | $ | 9,216 |  |  | $ | 54,930 |  |  | $ | 3,795 |  |  | $ | 1,703 |  |  | $ | 655,523 |

|  | Nine Months Ended September 30, 2022
|  | Commercial |  | Consumer |  |
|  |  |  | CRE |  | Residential Mortgage |  |  |  |
($ in thousands) |  | C&I |  | CRE |  | Multifamily Residential |  | Construction and Land |  | Single-Family Residential |  | HELOCs |  | Other Consumer |  | Total
Allowance for loan losses, beginning of period |  | $ | 338,252 |  |  | $ | 150,940 |  |  | $ | 14,400 |  |  | $ | 15,468 |  |  | $ | 17,160 |  |  | $ | 3,435 |  |  | $ | 1,924 |  |  | $ | 541,579 |
Provision for (reversal of) credit losses on loans | (a) | 37,867 |  |  | (5,013) |  |  | 16,680 |  |  | (8,027) |  |  | 10,569 |  |  | 59 |  |  | (140) |  |  | 51,995 |
Gross charge-offs |  | (18,322) |  |  | (1,357) |  |  | (5,947) |  |  | — |  |  | (775) |  |  | (193) |  |  | (90) |  |  | (26,684) |
Gross recoveries |  | 16,688 |  |  | 731 |  |  | 547 |  |  | 65 |  |  | 309 |  |  | 23 |  |  | — |  |  | 18,363 |
Total net (charge-offs) recoveries |  | (1,634) |  |  | (626) |  |  | (5,400) |  |  | 65 |  |  | (466) |  |  | (170) |  |  | (90) |  |  | (8,321) |
Foreign currency translation adjustment |  | (2,736) |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | (2,736) |
Allowance for loan losses, end of period |  | $ | 371,749 |  |  | $ | 145,301 |  |  | $ | 25,680 |  |  | $ | 7,506 |  |  | $ | 27,263 |  |  | $ | 3,324 |  |  | $ | 1,694 |  |  | $ | 582,517 |

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In addition to the allowance for loan losses, the Company maintains an allowance for unfunded credit commitments. The Company has three general areas for which it provides the allowance for unfunded credit commitments: (1) recourse obligations for loans sold, (2) letters of credit, and (3) unfunded lending commitments. The allowance for unfunded credit commitments is maintained at a level that management believes to be sufficient to absorb estimated expected credit losses related to unfunded credit facilities. See Note 11 — Commitments and Contingencies to the Consolidated Financial Statements in this Form 10-Q for additional information related to unfunded credit commitments. The following table summarizes the activities in the allowance for unfunded credit commitments for the three and nine months ended September 30, 2023 and 2022:

|  | Three Months Ended September 30, |  | Nine Months Ended September 30, |  |
($ in thousands) |  | 2023 |  | 2022 |  | 2023 |  | 2022 |  |  |  |
Unfunded credit facilities |  |  |  |  |  |  |  |  |  |  |  |
Allowance for unfunded credit commitments, beginning of period |  | $ | 29,728 |  |  | $ | 24,304 |  |  | $ | 26,264 |  |  | $ | 27,514 |  |  |  |  |
Provision for (reversal of) credit losses on unfunded credit commitments | (b) | 3,864 |  |  | (274) |  |  | 7,319 |  |  | (3,495) |  |  |  |  |
Foreign currency translation adjustment |  | (3) |  |  | 11 |  |  | 6 |  |  | 22 |  |  |  |  |
Allowance for unfunded credit commitments, end of period |  | $ | 33,589 |  |  | $ | 24,041 |  |  | $ | 33,589 |  |  | $ | 24,041 |  |  |  |  |
Provision for credit losses | (a) + (b) | $ | 42,000 |  |  | $ | 27,000 |  |  | $ | 88,000 |  |  | $ | 48,500 |  |  |  |  |

The allowance for credit losses was $689.1 million as of September 30, 2023, an increase of $67.2 million, compared with $621.9 million as of December 31, 2022. The increase in the allowance for credit losses was primarily driven by net loan growth and economic forecasts that reflect continued caution given persistent high inflation, the high interest rate environment and the CRE market outlook.
The Company considers multiple economic scenarios to develop the estimate of the allowance for loan losses. The scenarios may consist of a baseline forecast representing management's view of the most likely outcome; downside and upside scenarios that reflect possible worsening or improving economic conditions, respectively. The Company assigned the same weightings to its baseline, upside and downside scenarios as of September 30, 2023 and December 31, 2022. Management remains cautious regarding the economic outlook, given the high level of inflation, high interest rates, recent strain to the financial system, concerns on global oil prices, and ongoing global conflicts. The 2023 full year U.S. baseline GDP growth forecast as of September 30, 2023, has improved, compared with that as of December 31, 2022. However the 2024 full year U.S. baseline GDP growth forecast remained at 1.4%, compared with 2.0% forecasted as of December 31, 2022, as interest-sensitive spending weakens amid the elevated interest rate environment. The 2023 full year U.S. unemployment rate is forecasted to be at 3.7%, which improved from that forecasted as of December 31, 2022. Compared with the baseline scenario, the downside scenario assumes a recession in the fourth quarter of 2023 due to a combination of increasing supply shortages, geopolitical tensions, high inflation, and high interest rates. The upside scenario assumes the economy experiences full employment in the near-term, and stable financial markets boosting consumer confidence.
Loan Transfers, Sales and Purchases
The Company’s primary business focus is on directly originated loans. The Company also purchases loans and participates in loan financing with other banks. In the normal course of business, the Company also provides other financial institutions with the ability to participate in commercial loans that it originates, by selling loans to such institutions. Purchased loans may be transferred from held-for-investment to held-for-sale, and write-downs to allowance for loan losses are recorded, when appropriate. The following tables provide information on the carrying value of loans transferred, sold and purchased for the held-for-investment portfolio, during the three and nine months ended September 30, 2023 and 2022:

|  | Three Months Ended September 30, 2023
|  | Commercial |  | Consumer |  |  |  |  |  |
|  |  |  | CRE |  | Residential Mortgage |  |  |  |  |  |
($ in thousands) |  | C&I |  | CRE |  |  |  | Construction and Land |  | Single-Family Residential |  |  |  |  |  | Total
Loans transferred from held-for-investment to held-for-sale (1) |  | $ | 201,299 |  |  | $ | 25,890 |  |  |  |  | $ | — |  |  | $ | — |  |  |  |  |  |  | $ | 227,189 |
Sales (2)(3) |  | $ | 199,511 |  |  | $ | 29,357 |  |  |  |  | $ | — |  |  | $ | — |  |  |  |  |  |  | $ | 228,868 |
Purchases (4) |  | $ | 19,588 |  |  | $ | — |  |  |  |  | $ | — |  |  | $ | 140,771 |  |  |  |  |  |  | $ | 160,359 |

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|  | Three Months Ended September 30, 2022
|  | Commercial |  |  |  | Consumer |  |  |  |  |  |
|  |  |  | CRE |  |  |  | Residential Mortgage |  |  |  |  |  |
($ in thousands) |  | C&I |  | CRE |  | Multifamily Residential |  |  |  | Single-Family Residential |  |  |  |  |  | Total
Loans transferred from held-for-investment to held-for-sale (1) |  | $ | 59,069 |  |  | $ | 33,616 |  |  | $ | 14,500 |  |  |  |  | $ | 5,178 |  |  |  |  |  |  | $ | 112,363 |
Sales (2)(3) |  | $ | 87,597 |  |  | $ | 33,616 |  |  | $ | — |  |  |  |  | $ | 5,952 |  |  |  |  |  |  | $ | 127,165 |
Purchases (4) |  | $ | 56,507 |  |  | $ | — |  |  | $ | — |  |  |  |  | $ | 1,155 |  |  |  |  |  |  | $ | 57,662 |

|  | Nine Months Ended September 30, 2023
|  | Commercial |  | Consumer |  |  |  |  |  |
|  |  |  | CRE |  | Residential Mortgage |  |  |  |  |  |
($ in thousands) |  | C&I |  | CRE |  |  | Construction and Land |  | Single-Family Residential |  |  |  |  |  | Total
Loans transferred from held-for-investment to held-for-sale (1) |  | $ | 469,571 |  |  | $ | 29,490 |  |  |  | $ | 8,154 |  |  | $ | — |  |  |  |  |  |  | $ | 507,215 |
Sales (2)(3) |  | $ | 491,178 |  |  | $ | 32,957 |  |  |  | $ | 8,154 |  |  | $ | — |  |  |  |  |  |  | $ | 532,289 |
Purchases (4) |  | $ | 80,550 |  |  | $ | — |  |  |  | $ | — |  |  | $ | 351,880 |  |  |  |  |  |  | $ | 432,430 |

|  | Nine Months Ended September 30, 2022
|  | Commercial |  | Consumer |  |  |  |  |  |
|  |  |  | CRE |  | Residential Mortgage |  |  |  |  |  |
($ in thousands) |  | C&I |  | CRE |  | Multifamily Residential |  |  |  | Single-Family Residential |  |  |  |  |  | Total
Loans transferred from held-for-investment to held-for-sale (1) |  | $ | 378,841 |  |  | $ | 65,250 |  |  | $ | 14,500 |  |  |  |  | $ | 5,178 |  |  |  |  |  |  | $ | 463,769 |
Loans transferred from held-for-sale to held-for-investment |  | $ | — |  |  | $ | — |  |  | $ | — |  |  |  |  | $ | 631 |  |  |  |  |  |  | $ | 631 |
Sales (2)(3) |  | $ | 375,100 |  |  | $ | 65,250 |  |  | $ | — |  |  |  |  | $ | 6,403 |  |  |  |  |  |  | $ | 446,753 |
Purchases (4) |  | $ | 361,169 |  |  | $ | — |  |  | $ | — |  |  |  |  | $ | 238,253 |  |  |  |  |  |  | $ | 599,422 |

(1)Includes write-downs of $3.6 million and $4.2 million to the allowance for loan losses related to loans transferred from held-for-investment to held-for-sale for the three and nine months ended September 30, 2023, respectively, and $8.7 million and $8.9 million for the three and nine months ended September 30, 2022, respectively.
(2)Includes originated loans sold of $204.1 million and $407.3 million for the three and nine months ended September 30, 2023, respectively, and $86.2 million and $253.9 million for the three and nine months ended September 30, 2022, respectively. Originated loans sold consisted primarily of C&I loans for each of the three and nine months ended September 30, 2023, and C&I and CRE loans for each of the three and nine months ended September 30, 2022.
(3)Includes $24.7 million and $125.0 million of purchased loans sold in the secondary market for the three and nine months ended September 30, 2023, respectively, and $40.9 million and $192.9 million for the three and nine months ended September 30, 2022, respectively.
(4)C&I loan purchases were comprised primarily of syndicated C&I term loans.
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Note 8 — Investments in Qualified Affordable Housing Partnerships, Tax Credit and Other Investments, Net and Variable Interest Entities
The CRA encourages banks to meet the credit needs of their communities, particularly low- and moderate-income individuals and neighborhoods. The Company invests in certain affordable housing projects in the form of ownership interests in limited partnerships or limited liability companies that qualify for CRA consideration and tax credits. These entities are formed to develop and operate apartment complexes designed as high-quality affordable housing for lower income tenants throughout the U.S. To fully utilize the available tax credits, each of these entities must meet the regulatory affordable housing requirements for a 15-year minimum compliance period. In addition to affordable housing projects, the Company invests in small business investment companies and new market tax credit projects that qualify for CRA consideration, as well as eligible projects that qualify for renewable energy and historic tax credits. Investments in renewable energy tax credits help promote the development of renewable energy sources, and investments in historic tax credits promote the rehabilitation of historic buildings and economic revitalization of the surrounding areas. For the Company’s accounting policies on tax credit investments, see Note 1 — Summary of Significant Accounting Policies — Significant Accounting Policies — 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 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 September 30, 2023 and December 31, 2022:

|  | September 30, 2023 |  | December 31, 2022
($ in thousands) |  | Assets |  | Liabilities - Unfunded Commitments (1) |  | Assets |  | Liabilities - Unfunded Commitments (1)
Investments in qualified affordable housing partnerships, net |  | $ | 412,004 |  |  | $ | 252,552 |  |  | $ | 413,253 |  |  | $ | 266,654 |
Investments in tax credit and other investments, net |  | 489,555 |  |  | 345,072 |  |  | 350,003 |  |  | 185,797 |
Total |  | $ | 901,559 |  |  | $ | 597,624 |  |  | $ | 763,256 |  |  | $ | 452,451 |

(1)Included in Accrued expenses and other liabilities on the Consolidated Balance Sheet.
Investments in tax credit and other investments, net presented in the table above include equity securities that are mutual funds with readily determinable fair values of $23.6 million and $24.0 million as of September 30, 2023 and December 31, 2022, respectively. The Company invests in these mutual funds for CRA purposes.
The following table presents additional information related to the investments in qualified affordable housing partnerships, tax credit and other investments for the three and nine months ended September 30, 2023 and 2022:

|  | Three Months Ended September 30, |  | Nine Months Ended September 30, |
($ in thousands) |  | 2023 |  | 2022 |  | 2023 |  | 2022 |  |  |  |
Investments in qualified housing partnerships, net: |  |  |  |  |  |  |  |  |  |  |  |
Tax credits and other tax benefits recognized |  | $ | 15,660 |  |  | $ | 13,180 |  |  | $ | 47,058 |  |  | $ | 38,764 |  |  |  |  |
Amortization expense included in income tax expense |  | $ | 11,587 |  |  | $ | 10,431 |  |  | $ | 34,759 |  |  | $ | 30,498 |  |  |  |  |
Investments in tax credit and other investments, net: |  |  |  |  |  |  |  |  |  |  |  |
Amortization of tax credit and other investments (1) |  | $ | 49,694 |  |  | $ | 19,874 |  |  | $ | 115,718 |  |  | $ | 48,753 |  |  |  |  |
Unrealized losses on equity securities with readily determinable values |  | $ | (674) |  |  | $ | (1,014) |  |  | $ | (682) |  |  | $ | (2,958) |  |  |  |  |

(1)Includes net impairment losses of $790 thousand for the three months ended September 30, 2023, and net impairment recoveries of $831 thousand for the nine months ended September 30, 2023. The activity for both periods was primarily related to historic tax credits. In comparison, there were no impairment recoveries or losses for three or nine months ended September 30, 2022.
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Variable Interest Entities
The majority of both the investments in affordable housing partnerships and tax credit and other investments discussed above are variable interest entities where the Company is a limited partner in these partnerships, and an unrelated third party is typically the general partner or managing member who has control over the significant activities of these investments. While the Company’s interest in some of the investments may exceed 50% of the outstanding equity interests, the Company does not consolidate these investments due to the general partner’s or managing member’s ability to manage the entity, which is indicative of the general partner’s or managing member’s power over the entity. The Company’s maximum exposure to loss in connection with these partnerships consists of the unamortized investment balance and any tax credits claimed that may become subject to recapture.
Other Investments
The Company acquired a 49.99% equity interest in Rayliant during the third quarter of 2023. Rayliant is an asset manager specializing in asset allocation and investment in developed and emerging markets. This investment will expand the Bank’s wealth management business and provide its customers with additional access to institutional-quality investment management products and services. The investment in Rayliant is accounted for under the equity method of accounting and is included in Other assets on the Consolidated Balance Sheet. The Company paid $94.7 million in cash and granted PRSUs that are contingently issuable at vesting. The PRSUs vest on September 1, 2028 into a variable number of the Company’s shares of common stock, ranging from 20% to 200% of the 349,138 shares initially underlying such PRSUs, based on Rayliant’s achievement of certain financial performance targets during the future performance period. For additional information related to these equity contracts accounted for as derivative liability, refer to Note 3 — Fair Value Measurement and Fair Value of Financial Instruments and Note 6 — Derivatives to the Consolidated Financial Statements in this Form 10-Q. The carrying value of the Company's investment in Rayliant was $110.9 million as of September 30, 2023, in which $100.7 million comprised of equity method goodwill.
The Company also held equity securities without readily determinable fair values totaling $148.0 million and $36.5 million as of September 30, 2023 and December 31, 2022, respectively. These equity securities without readily determinable fair values are included in Other Assets on the Consolidated Balance Sheet.
Note 9 — Goodwill
Total goodwill was $465.7 million as of both September 30, 2023 and December 31, 2022. The Company’s goodwill impairment test is performed annually, as of December 31, or more frequently as events occur or circumstances change that would more-likely-than-not reduce the fair value of a reporting unit below its carrying value. Based on the Company’s annual goodwill impairment test as of December 31, 2022, there was no impairment. Additional information pertaining to the Company’s accounting policy for goodwill is summarized in Note 1 — Summary of Significant Accounting Policies — Significant Accounting Policies — Goodwill to the Consolidated Financial Statements in the Company’s 2022 Form 10-K. The Company performed an analysis of goodwill during the third quarter of 2023 that consisted of a qualitative assessment to determine if it is more likely than not that the carrying values of each reporting unit exceeded their estimated fair values. The results of this analysis indicated that no impairment of goodwill existed as of September 30, 2023.
Note 10 — Short-Term Borrowings and Long-Term Debt
Short-Term Borrowings — Bank Term Funding Program
As of September 30, 2023, the Company’s short-term borrowings consisted of funds from the Bank Term Funding Program (“BTFP”). In March 2023, the Federal Reserve announced the creation of the BTFP, which was designed to provide additional liquidity to U.S. depository institutions. The advances will be limited to the par value of eligible collateral pledged by the borrower, for a term of up to one year. U.S. federally insured depository institutions can request advances under the BTFP until at least March 11, 2024.
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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 September 30, 2023, the carrying amount of the Company’s pledged securities to the BTFP totaled $4.34 billion with a remaining borrowing capacity of $238.3 million. In comparison, there were no short-term borrowings as of December 31, 2022. The following table presents details of the Company’s short-term borrowings as of September 30, 2023.

|  |  |  |  |  |  |  | September 30, 2023 |  |
($ in thousands) |  |  |  | Interest Rate |  | Maturity Date |  | Amount |  |
Short-term borrowings |  |  |  | 4.37% |  | 3/19/2024 |  | $ | 4,500,000 |  |  |

Long-Term Debt — Junior Subordinated Debt
Long-term debt totaled $148.2 million as of September 30, 2023 and $148.0 million as of December 31, 2022. During the third quarter of 2023, all junior subordinated debt that referenced London Interbank Offered Rate have transitioned to a Secured Overnight Financing Rate-based replacement rate plus the applicable stated margin. The junior subordinated debt had coupon interest rates ranging from 7.02% to 7.57% as of September 30, 2023 and 6.12% to 6.67% as of December 31, 2022. The junior subordinated debt had remaining maturities ranging between 11.1 years and 14.0 years as of September 30, 2023. For additional information on the junior subordinated debt, refer to Note 10 — Federal Home Loan Bank Advances and Long-Term Debt to the Consolidated Financial Statements in the Company’s 2022 Form 10-K.
Note 11 — Commitments and Contingencies
Commitments to Extend Credit — In the normal course of business, the Company provides loan commitments to customers on predetermined terms. These outstanding commitments to extend credit are not reflected in the accompanying Consolidated Financial Statements. While the Company does not anticipate losses from these transactions, commitments to extend credit are included in determining the appropriate level of allowance for unfunded credit commitments, and outstanding commercial letters of credit and standby letters of credit (“SBLCs”).
The following table presents the Company’s credit-related commitments as of September 30, 2023 and December 31, 2022:

|  | September 30, 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
Loan commitments |  | $ | 4,650,619 |  |  | $ | 3,689,245 |  |  | $ | 1,037,254 |  |  | $ | 139,325 |  |  | $ | 9,516,443 |  |  | $ | 8,211,571 |
Commercial letters of credit and SBLCs |  | 875,757 |  |  | 405,377 |  |  | 122,255 |  |  | 1,124,405 |  |  | 2,527,794 |  |  | 2,291,966 |
Total |  | $ | 5,526,376 |  |  | $ | 4,094,622 |  |  | $ | 1,159,509 |  |  | $ | 1,263,730 |  |  | $ | 12,044,237 |  |  | $ | 10,503,537 |

Loan commitments are agreements to lend to customers provided there are no violations of any conditions established in the agreement. Commitments generally have fixed expiration dates or other termination clauses and may require commitment fees. Since many of the commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future funding requirements.
Commercial letters of credit are issued to facilitate domestic and foreign trade transactions, while SBLCs are generally contingent upon the failure of the customers to perform according to the terms of the underlying contract with the third party. As a result, the total contractual amounts do not necessarily represent future funding requirements. The Company’s historical experience is that SBLCs typically expire without being funded. Additionally, in many cases, the Company holds collateral in various forms against these SBLCs. As part of its risk management activities, the Company monitors the creditworthiness of customers in conjunction with its SBLC exposure. Customers are obligated to reimburse the Company for any payment made on the customers’ behalf. If the customers fail to pay, the Company would, as applicable, liquidate the collateral and/or offset existing accounts. As of September 30, 2023, total letters of credit of $2.53 billion consisted of SBLCs of $2.50 billion and commercial letters of credit of $32.7 million. In comparison, as of December 31, 2022, total letters of credit of $2.29 billion consisted of SBLCs of $2.27 billion and commercial letters of credit of $21.6 million. As of both September 30, 2023 and December 31, 2022, substantially all SBLCs were graded as “Pass” utilizing the Bank’s internal credit risk rating system.
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The Company applies the same credit underwriting criteria to extend loans, commitments, and conditional obligations to customers. Each customer’s creditworthiness is evaluated on a case-by-case basis. Collateral and financial guarantees may be obtained based on management’s assessment of a customer’s credit risk. Collateral may include cash, accounts receivable, inventory, personal property, plant and equipment, and real estate property.
Estimated exposure to loss from these commitments is included in the allowance for unfunded credit commitments and amounted to $33.6 million and $26.2 million as of September 30, 2023 and December 31, 2022, respectively.
Guarantees — From time to time, the Company sells or securitizes single-family and multifamily residential loans with recourse in the ordinary course of business. The Company is obligated to repurchase up to the recourse component of the loans if the loans default. The following table presents the carrying amounts of loans sold or securitized with recourse and the maximum potential future payments as of September 30, 2023 and December 31, 2022:

|  | Maximum Potential Future Payments |  | Carrying Value |  |  |  |  |  |  |  |
|  | September 30, 2023 |  | December 31, 2022 |  | September 30, 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 |  | $ | 28 |  |  |  |  | $ | 23 |  |  | $ | 28 |  |  | $ | 6,013 |  |  | $ | 6,092 |  |  | $ | 6,781 |  |  | $ | 6,092 |  |  | $ | 6,781 |  |  |  |  |  |  |  |  |
Multifamily residential loans sold or securitized with recourse |  | — |  |  |  |  | — |  |  | 66 |  |  | 14,930 |  |  | 14,996 |  |  | 14,996 |  |  | 19,887 |  |  | 21,320 |  |  |  |  |  |  |  |  |
Total |  | $ | 28 |  |  |  |  | $ | 23 |  |  | $ | 94 |  |  | $ | 20,943 |  |  | $ | 21,088 |  |  | $ | 21,777 |  |  | $ | 25,979 |  |  | $ | 28,101 |  |  |  |  |  |  |  |  |

The Company’s recourse reserve related to these guarantees is included in the allowance for unfunded credit commitments and totaled $35 thousand and $37 thousand as of September 30, 2023 and December 31, 2022, respectively. The allowance for unfunded credit commitments is included in Accrued expenses and other liabilities on the Consolidated Balance Sheet. The Company continues to experience minimal losses from the single-family and multifamily residential loan portfolios sold or securitized with recourse.
Litigation — The Company is a party to various legal actions arising in the ordinary course of its business. In accordance with ASC 450, Contingencies, the Company accrues reserves for outstanding lawsuits, claims and proceedings when a loss contingency is probable and can be reasonably estimated. The Company estimates the amount of loss contingencies using current available information from legal proceedings, advice from legal counsel and available insurance coverage. Due to the inherent subjectivity of the assessments and unpredictability of the outcomes of the legal proceedings, any amounts accrued or included in this aggregate amount may not represent the ultimate loss to the Company from the legal proceedings in question. Thus, the Company’s exposure and ultimate losses may be higher, and possibly significantly more, than the amounts accrued.
While it is impossible to ascertain the ultimate resolution or range of financial liability, based on information known to the Company as of September 30, 2023, the Company does not believe there is any pending legal proceeding to which the Company is a party that, individually or in the aggregate, would reasonably be expected to have a material adverse effect on the Company’s financial condition. In light of the inherent uncertainty in legal proceedings, however, there can be no assurance that the ultimate resolution will not exceed established reserves and it is possible that the outcome of a particular matter, or a combination of matters, may be material to the Company’s financial condition for a particular period, depending upon the size of the loss and the Company’s income for that particular period.
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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 September 30, 2023 and December 31, 2022.
The following table presents a summary of the total share-based compensation expense and the related net tax (deficiencies) benefits associated with the Company’s various employee share-based compensation plans for the three and nine months ended September 30, 2023 and 2022:

|  | Three Months Ended September 30, |  |  |  | Nine Months Ended September 30,
($ in thousands) |  | 2023 |  | 2022 |  |  |  | 2023 |  | 2022
Stock compensation costs |  | $ | 9,495 |  |  | $ | 12,329 |  |  |  |  | $ | 29,934 |  |  | $ | 29,338 |
Related net tax (deficiencies) benefits for stock compensation plans |  | $ | (18) |  |  | $ | 1 |  |  |  |  | $ | 8,797 |  |  | $ | 5,269 |

Restricted Stock Units — RSUs are granted under the Company’s long-term incentive plan at no cost to the recipient. RSUs generally cliff vest after three years of continued employment from the date of the grant, and are authorized to settle in shares of the Company’s common stock. Dividends are accrued during the vesting period and paid at the time of vesting. While a portion of RSUs are time-based vesting awards, others vest subject to the attainment of specified performance goals, referred to as “performance-based RSUs.” Performance-based RSUs are granted annually upon approval by the Company’s Compensation Committee based on the performance in the year prior to the grant date of the award. The number of awards that vest can range from zero percent to a maximum of 200% of the granted number of awards based on the Company’s achievement of specified performance criteria over a performance period of three years. For information on accounting on stock-based compensation plans, see Note 1 — Summary of Significant Accounting Policies — Significant Accounting Policies — Stock-Based Compensation to the Consolidated Financial Statements of the Company’s 2022 Form 10-K.
The following table presents a summary of the activities for the Company’s time-based and performance-based RSUs that will be settled in shares for the nine months ended September 30, 2023. The number of performance-based RSUs stated below reflects the number of awards granted on the grant date.

|  |  |  |  |  | Time-Based RSUs |  | Performance-Based RSUs
|  |  |  |  |  |  |  |  |  | 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 |  |  |  |  |  |  |  |  |  | 500,180 |  |  | 73.73 |  |  | 96,271 |  |  | 57.50 |
Vested |  |  |  |  |  |  |  |  |  | (522,029) |  |  | 40.79 |  |  | (152,558) |  |  | 39.39 |
Forfeited |  |  |  |  |  |  |  |  |  | (53,379) |  |  | 74.00 |  |  | — |  |  | — |
Outstanding, September 30, 2023 |  |  |  |  |  |  |  |  |  | 1,221,638 |  |  | $ | 74.04 |  |  | 276,223 |  |  | $ | 70.99 |

As of September 30, 2023, there were $32.2 million of unrecognized compensation costs related to unvested time-based RSUs expected to be recognized over a weighted-average period of 1.9 years, and $17.9 million of unrecognized compensation costs related to unvested performance-based RSUs expected to be recognized over a weighted-average period of 1.9 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 and nine months ended September 30, 2023 and 2022. For more information on the calculation of EPS, see Note 1 — Summary of Significant Accounting Policies — Significant Accounting Policies — Earnings Per Share to the Consolidated Financial Statements in the Company’s 2022 Form 10-K.

($ and shares in thousands, except per share data) |  | Three Months Ended September 30, |  | Nine Months Ended September 30, |  |  |  |  |  |  |
| 2023 |  | 2022 |  | 2023 |  | 2022 |  |  |  |  |  |  |  |  |  |  |
Basic: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Net income |  | $ | 287,738 |  |  | $ | 295,339 |  |  | $ | 922,208 |  |  | $ | 791,320 |  |  |  |  |  |  |  |  |  |  |  |
Weighted-average number of shares outstanding |  | 141,485 |  |  | 140,917 |  |  | 141,356 |  |  | 141,453 |  |  |  |  |  |  |  |  |  |  |  |
Basic EPS |  | $ | 2.03 |  |  | $ | 2.10 |  |  | $ | 6.52 |  |  | $ | 5.59 |  |  |  |  |  |  |  |  |  |  |  |
Diluted: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Net income |  | $ | 287,738 |  |  | $ | 295,339 |  |  | $ | 922,208 |  |  | $ | 791,320 |  |  |  |  |  |  |  |  |  |  |  |
Weighted-average number of shares outstanding |  | 141,485 |  |  | 140,917 |  |  | 141,356 |  |  | 141,453 |  |  |  |  |  |  |  |  |  |  |  |
Add: Dilutive impact of unvested RSUs |  | 637 |  |  | 1,094 |  |  | 688 |  |  | 1,148 |  |  |  |  |  |  |  |  |  |  |  |
Diluted weighted-average number of shares outstanding |  | 142,122 |  |  | 142,011 |  |  | 142,044 |  |  | 142,601 |  |  |  |  |  |  |  |  |  |  |  |
Diluted EPS |  | $ | 2.02 |  |  | $ | 2.08 |  |  | $ | 6.49 |  |  | $ | 5.55 |  |  |  |  |  |  |  |  |  |  |  |

For the three and nine months ended September 30, 2023, approximately 575 thousand and 350 thousand weighted-average shares of anti-dilutive RSUs, respectively, were excluded from the diluted EPS computations. In comparison, approximately 61 thousand and 58 thousand weighted-average shares of anti-dilutive RSUs were excluded from the diluted EPS computations for the three and nine months ended September 30, 2022, respectively.
Note 14 — Accumulated Other Comprehensive Income (Loss)
The following tables present the changes in the components of AOCI balances for the three and nine months ended September 30, 2023 and 2022:

($ in thousands) |  | Debt Securities (1) |  | Cash Flow Hedges |  | Foreign Currency Translation Adjustments (2) |  | Total
Balance, July 1, 2022 |  | $ | (554,781) |  |  | $ | (30,846) |  |  | $ | (15,021) |  |  | $ | (600,648) |
Net unrealized losses arising during the period |  | (161,445) |  |  | (34,423) |  |  | (7,926) |  |  | (203,794) |
Amounts reclassified from AOCI |  | 3,256 |  |  | 1,154 |  |  | — |  |  | 4,410 |
Changes, net of tax |  | (158,189) |  |  | (33,269) |  |  | (7,926) |  |  | (199,384) |
Balance, September 30, 2022 |  | $ | (712,970) |  |  | $ | (64,115) |  |  | $ | (22,947) |  |  | $ | (800,032) |
Balance, July 1, 2023 |  | $ | (681,536) |  |  | $ | (74,805) |  |  | $ | (25,591) |  |  | $ | (781,932) |
Net unrealized (losses) gains arising during the period |  | (72,691) |  |  | (44,347) |  |  | 3,710 |  |  | (113,328) |
Amounts reclassified from AOCI |  | 2,870 |  |  | 17,013 |  |  | — |  |  | 19,883 |
Changes, net of tax |  | (69,821) |  |  | (27,334) |  |  | 3,710 |  |  | (93,445) |
Balance, September 30, 2023 |  | $ | (751,357) |  |  | $ | (102,139) |  |  | $ | (21,881) |  |  | $ | (875,377) |

59

($ 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 arising during the period |  | (635,664) |  |  | (63,232) |  |  | (18,012) |  |  | (716,908) |
Amounts reclassified from AOCI |  | 8,397 |  |  | (1,140) |  |  | — |  |  | 7,257 |
Changes, net of tax |  | (627,267) |  |  | (64,372) |  |  | (18,012) |  |  | (709,651) |
Balance, September 30, 2022 |  | $ | (712,970) |  |  | $ | (64,115) |  |  | $ | (22,947) |  |  | $ | (800,032) |
Balance, January 1, 2023 |  | $ | (694,815) |  |  | $ | (49,531) |  |  | $ | (21,283) |  |  | $ | (765,629) |
Net unrealized losses arising during the period |  | (72,034) |  |  | (91,468) |  |  | (598) |  |  | (164,100) |
Amounts reclassified from AOCI |  | 15,492 |  |  | 38,860 |  |  | — |  |  | 54,352 |
Changes, net of tax |  | (56,542) |  |  | (52,608) |  |  | (598) |  |  | (109,748) |
Balance, September 30, 2023 |  | $ | (751,357) |  |  | $ | (102,139) |  |  | $ | (21,881) |  |  | $ | (875,377) |

(1)Includes after-tax unamortized losses related to AFS debt securities that were transferred to HTM in 2022.
(2)Represents foreign currency translation adjustments related to the Company’s net investment in non-U.S. operations, including related hedges. The functional currency and reporting currency of the Company’s foreign subsidiary is RMB and USD, respectively.
The following tables present the components of other comprehensive income (loss), reclassifications to net income and the related tax effects for the three and nine months ended September 30, 2023 and 2022:

|  | Three Months Ended September 30,
|  | 2023 |  | 2022
($ in thousands) |  | Before-Tax |  | Tax Effect |  | Net-of-Tax |  | Before-Tax |  | Tax Effect |  | Net-of-Tax
Debt securities: |  |  |  |  |  |  |  |  |  |  |  |
Net unrealized losses on AFS debt securities arising during the period |  | $ | (103,183) |  |  | $ | 30,492 |  |  | $ | (72,691) |  |  | $ | (229,246) |  |  | $ | 67,801 |  |  | $ | (161,445) |
Reclassification adjustments: |  |  |  |  |  |  |  |  |  |  |  |
Amortization of unrealized losses on transferred debt securities (1) |  | 4,075 |  |  | (1,205) |  |  | 2,870 |  |  | 4,623 |  |  | (1,367) |  |  | 3,256 |
Net change |  | (99,108) |  |  | 29,287 |  |  | (69,821) |  |  | (224,623) |  |  | 66,434 |  |  | (158,189) |
Cash flow hedges: |  |  |  |  |  |  |  |  |  |  |  |
Net unrealized losses arising during the period |  | (62,715) |  |  | 18,368 |  |  | (44,347) |  |  | (48,325) |  |  | 13,902 |  |  | (34,423) |
Net realized losses reclassified into net income (2) |  | 24,059 |  |  | (7,046) |  |  | 17,013 |  |  | 1,619 |  |  | (465) |  |  | 1,154 |
Net change |  | (38,656) |  |  | 11,322 |  |  | (27,334) |  |  | (46,706) |  |  | 13,437 |  |  | (33,269) |
Foreign currency translation adjustments, net of hedges: |  |  |  |  |  |  |  |  |  |  |  |
Net unrealized gains (losses) arising during the period |  | 3,728 |  |  | (18) |  |  | 3,710 |  |  | (6,676) |  |  | (1,250) |  |  | (7,926) |
Net change |  | 3,728 |  |  | (18) |  |  | 3,710 |  |  | (6,676) |  |  | (1,250) |  |  | (7,926) |
Other comprehensive loss |  | $ | (134,036) |  |  | $ | 40,591 |  |  | $ | (93,445) |  |  | $ | (278,005) |  |  | $ | 78,621 |  |  | $ | (199,384) |

60

|  | Nine Months Ended September 30,
|  | 2023 |  | 2022
($ in thousands) |  | Before-Tax |  | Tax Effect |  | Net-of-Tax |  | Before-Tax |  | Tax Effect |  | Net-of-Tax
Debt securities: |  |  |  |  |  |  |  |  |  |  |  |
Net unrealized losses on AFS debt securities arising during the period |  | $ | (102,262) |  |  | $ | 30,228 |  |  | $ | (72,034) |  |  | $ | (742,132) |  |  | $ | 219,459 |  |  | $ | (522,673) |
Unrealized losses on debt securities transferred from AFS to HTM |  | — |  |  | — |  |  | — |  |  | (160,416) |  |  | 47,425 |  |  | (112,991) |
Reclassification adjustments: |  |  |  |  |  |  |  |  |  |  |  |
Net realized losses (gains) on AFS debt securities reclassified into net income (3) |  | 10,000 |  | (4) | (2,956) |  |  | 7,044 |  |  | (1,306) |  |  | 386 |  |  | (920) |
Amortization of unrealized losses on transferred debt securities (1) |  | 11,994 |  |  | (3,546) |  |  | 8,448 |  |  | 13,228 |  |  | (3,911) |  |  | 9,317 |
Net change |  | (80,268) |  |  | 23,726 |  |  | (56,542) |  |  | (890,626) |  |  | 263,359 |  |  | (627,267) |
Cash flow hedges: |  |  |  |  |  |  |  |  |  |  |  |
Net unrealized losses arising during the period |  | (129,329) |  |  | 37,861 |  |  | (91,468) |  |  | (88,771) |  |  | 25,539 |  |  | (63,232) |
Net realized losses (gains) reclassified into net income (2) |  | 54,955 |  |  | (16,095) |  |  | 38,860 |  |  | (1,601) |  |  | 461 |  |  | (1,140) |
Net change |  | (74,374) |  |  | 21,766 |  |  | (52,608) |  |  | (90,372) |  |  | 26,000 |  |  | (64,372) |
Foreign currency translation adjustments, net of hedges: |  |  |  |  |  |  |  |  |  |  |  |
Net unrealized gains (losses) arising during the period |  | 247 |  |  | (845) |  |  | (598) |  |  | (16,276) |  |  | (1,736) |  |  | (18,012) |
Net change |  | 247 |  |  | (845) |  |  | (598) |  |  | (16,276) |  |  | (1,736) |  |  | (18,012) |
Other comprehensive loss |  | $ | (154,395) |  |  | $ | 44,647 |  |  | $ | (109,748) |  |  | $ | (997,274) |  |  | $ | 287,623 |  |  | $ | (709,651) |

(1)Represents unrealized losses amortized over the remaining lives of securities that were transferred from the AFS to HTM portfolio in 2022.
(2)Pre-tax amounts related to cash flow hedges on variable rate loans and long-term borrowings, where applicable, were reported in Interest and dividend income and in Interest expense, respectively, on the Consolidated Statement of Income.
(3)Pre-tax amounts were reported in Net (losses) gains on AFS debt securities on the Consolidated Statement of Income.
(4)Represents the full write-off of an impaired subordinated debt security during the first quarter of 2023.
Note 15 — Business Segments
The Company organizes its operations into three reportable operating segments: (1) Consumer and Business Banking; (2) Commercial Banking; and (3) Other. These segments are defined by the type of customers served and the related products and services provided. The segments reflect how financial information is currently evaluated by management. Operating segment results are based on the Company’s internal management reporting process, which reflects assignments and allocations of certain balance sheet and income statement items. The information presented is not indicative of how the segments would perform if they operated as independent entities.
The Consumer and Business Banking segment primarily provides financial products and services to consumer and commercial customers through the Company’s domestic branch network and digital banking platform. This segment offers consumer and commercial deposits, mortgage and home equity loans, and other products and services. It also originates commercial loans for small- and medium-sized enterprises through the Company’s branch network. Other products and services provided by this segment include wealth management, treasury management, interest rate risk hedging and foreign exchange services.
The Commercial Banking segment primarily generates commercial loan and deposit products. Commercial loan products include CRE lending, construction financing, commercial business lending, working capital lines of credit, trade finance, letters of credit, affordable housing lending, asset-based lending, asset-backed finance, project finance and equipment financing. Commercial deposit products and other financial services include treasury management, foreign exchange services and interest rate and commodity risk hedging.
The remaining centralized functions, including the corporate treasury activities of the Company and eliminations of inter-segment amounts, have been aggregated and included in the Other segment, which provides broad administrative support to the two core segments, namely the Consumer and Business Banking and the Commercial Banking segments.
61

The Company utilizes an internal reporting process to measure the performance of the three operating segments within the Company. The internal reporting process derives operating segment results by utilizing allocation methodologies for revenues and expenses. Net interest income of each segment represents the difference between actual interest earned on assets and interest incurred on liabilities of the segment, adjusted for funding charges or credits through the Company’s internal funds transfer pricing (“FTP”) process. Noninterest income and noninterest expense directly attributable to a business segment are assigned to that segment. Indirect costs, including technology-related costs and corporate overhead, are allocated based on a segment’s estimated usage using factors including but not limited to, full-time equivalent employees, net interest income, and loan and deposit volume. Charge-offs are recorded to the segment directly associated with the respective loans charged off, and provision for credit losses is recorded to the segments based on the related loans for which allowances are evaluated. The Company’s internal reporting process utilizes a full-allocation methodology. Under this methodology, corporate and indirect expenses incurred by the Other segment are allocated to the Consumer and Business Banking and the Commercial Banking segments, except certain corporate treasury-related expenses and insignificant unallocated expenses.
The corporate treasury function within the Other segment is responsible for the Company’s liquidity and interest rate management and the internal FTP process. The FTP process is formulated with the goal of encouraging loan and deposit growth that is consistent with the Company’s overall profitability objectives, as well as providing a reasonable and consistent basis for the measurement of its business segments’ net interest margins and profitability. The FTP process charges a cost to fund loans (“FTP charges for loans”) and allocates credits for funds provided from deposits (“FTP credits for deposits”) using internal FTP rates. FTP charges for loans are determined based on a matched cost of funds, which is tied to the pricing and term characteristics of the loans. FTP credits for deposits are based on matched funding credit rates, which are tied to the implied or stated maturity of the deposits. FTP credits for deposits reflect the long-term value generated by the deposits. The net spread between the total internal FTP charges and credits is recorded as part of net interest income in the Other segment. The FTP process transfers the corporate interest rate risk exposure to the treasury function within the Other segment, where such exposures are centrally managed. The Company’s internal FTP assumptions and methodologies are reviewed at least annually to ensure that the process is reflective of current market conditions.
The following tables present the operating results and other key financial measures for the individual operating segments as of and for the three and nine months ended September 30, 2023 and 2022:

($ in thousands) |  | Consumer and Business Banking |  | Commercial Banking |  | Other |  | Total
Three Months Ended September 30, 2023 |  |  |  |  |  |  |  |
Net interest income before provision for credit losses |  | $ | 315,409 |  |  | $ | 242,345 |  |  | $ | 13,059 |  |  | $ | 570,813 |
Provision for credit losses |  | 1,633 |  |  | 40,367 |  |  | — |  |  | 42,000 |
Noninterest income |  | 25,132 |  |  | 43,672 |  |  | 7,948 |  |  | 76,752 |
Noninterest expense |  | 106,626 |  |  | 87,556 |  |  | 57,832 |  |  | 252,014 |
Segment income (loss) before income taxes |  | 232,282 |  |  | 158,094 |  |  | (36,825) |  |  | 353,551 |
Segment net income |  | $ | 164,051 |  |  | $ | 110,182 |  |  | $ | 13,505 |  |  | $ | 287,738 |
As of September 30, 2023 |  |  |  |  |  |  |  |
Segment assets |  | $ | 18,935,452 |  |  | $ | 34,438,787 |  |  | $ | 14,915,219 |  |  | $ | 68,289,458 |

($ in thousands) |  | Consumer and Business Banking |  | Commercial Banking |  | Other |  | Total
Three Months Ended September 30, 2022 |  |  |  |  |  |  |  |
Net interest income before provision for credit losses |  | $ | 326,411 |  |  | $ | 222,996 |  |  | $ | 2,402 |  |  | $ | 551,809 |
Provision for credit losses |  | 8,974 |  |  | 18,026 |  |  | — |  |  | 27,000 |
Noninterest income (loss) |  | 30,819 |  |  | 48,641 |  |  | (3,908) |  |  | 75,552 |
Noninterest expense |  | 104,005 |  |  | 81,386 |  |  | 30,582 |  |  | 215,973 |
Segment income (loss) before income taxes |  | 244,251 |  |  | 172,225 |  |  | (32,088) |  |  | 384,388 |
Segment net income (loss) |  | $ | 173,982 |  |  | $ | 122,869 |  |  | $ | (1,512) |  |  | $ | 295,339 |
As of September 30, 2022 |  |  |  |  |  |  |  |
Segment assets |  | $ | 17,002,000 |  |  | $ | 32,836,381 |  |  | $ | 12,737,680 |  |  | $ | 62,576,061 |

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($ in thousands) |  | Consumer and Business Banking |  | Commercial Banking |  | Other |  | Total
Nine Months Ended September 30, 2023 |  |  |  |  |  |  |  |
Net interest income before provision for credit losses |  | $ | 927,173 |  |  | $ | 742,108 |  |  | $ | 68,139 |  |  | $ | 1,737,420 |
Provision for credit losses |  | 22,169 |  |  | 65,831 |  |  | — |  |  | 88,000 |
Noninterest income |  | 78,254 |  |  | 129,809 |  |  | 7,298 |  |  | 215,361 |
Noninterest expense |  | 327,476 |  |  | 263,137 |  |  | 141,637 |  |  | 732,250 |
Segment income (loss) before income taxes |  | 655,782 |  |  | 542,949 |  |  | (66,200) |  |  | 1,132,531 |
Segment net income |  | $ | 463,151 |  |  | $ | 383,669 |  |  | $ | 75,388 |  |  | $ | 922,208 |
As of September 30, 2023 |  |  |  |  |  |  |  |
Segment assets |  | $ | 18,935,452 |  |  | $ | 34,438,787 |  |  | $ | 14,915,219 |  |  | $ | 68,289,458 |

($ in thousands) |  | Consumer and Business Banking |  | Commercial Banking |  | Other |  | Total
Nine Months Ended September 30, 2022 |  |  |  |  |  |  |  |
Net interest income (loss) before provision for credit losses |  | $ | 823,998 |  |  | $ | 662,037 |  |  | $ | (45,661) |  |  | $ | 1,440,374 |
Provision for credit losses |  | 14,976 |  |  | 33,524 |  |  | — |  |  | 48,500 |
Noninterest income |  | 84,402 |  |  | 145,750 |  |  | 3,587 |  |  | 233,739 |
Noninterest expense |  | 294,395 |  |  | 235,804 |  |  | 72,084 |  |  | 602,283 |
Segment income (loss) before income taxes |  | 599,029 |  |  | 538,459 |  |  | (114,158) |  |  | 1,023,330 |
Segment net income (loss) |  | $ | 426,695 |  |  | $ | 384,237 |  |  | $ | (19,612) |  |  | $ | 791,320 |
As of September 30, 2022 |  |  |  |  |  |  |  |
Segment assets |  | $ | 17,002,000 |  |  | $ | 32,836,381 |  |  | $ | 12,737,680 |  |  | $ | 62,576,061 |

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

|  |  | Page
| Overview | 65
| Financial Review | 67
| Results of Operations | 68
|  | Net Interest Income | 68
|  | Noninterest Income | 74
|  | Noninterest Expense | 75
|  | Income Taxes | 76
|  | Operating Segment Results | 76
| Balance Sheet Analysis | 81
|  | Debt Securities | 81
|  | Loan Portfolio | 83
|  | Foreign Outstandings | 89
|  | Capital | 89
|  | Deposits and Other Sources of Funding | 90
|  | Regulatory Capital and Ratios | 92
| Risk Management | 93
|  | Credit Risk Management | 94
|  | Liquidity Risk Management | 97
|  | Market Risk Management | 100
| Critical Accounting Policies and Estimates | 105
| Reconciliation of GAAP to Non-GAAP Financial Measures | 105

64

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 September 30, 2023, the Company had $68.29 billion in assets and approximately 3,200 full-time equivalent employees. For additional information on our strategy, and the products and services provided by the Bank, see Item 1. Business — Strategy and Banking Services in the Company’s 2022 Form 10-K.
Current Developments
Economic Developments
Recent external data indicate that the pace of inflation has slowed steadily and the volatility in the banking industry earlier in the year has abated. However, inflation remains above the Board of Governors of the Federal Reserve System’s (“Federal Reserve”) 2% target, which could signal a potential interest rate hike later this year. The higher interest rate environment continues to negatively impact the market value of bank-held securities. Additionally, the commercial real estate (“CRE”) market is under pressure due to tighter credit conditions and decreased demand. These factors have adversely affected economic activity and the banking sector. Despite these concerns, fears of a potential recession in 2023 are falling, bolstered by the Federal Reserve’s commitment to steering the economy towards a “soft landing”, a scenario in which inflation retreats without a sharp uptick in unemployment. However, factors such as the economic impacts of unrest, wars, and acts of terrorism could lead to higher oil prices and increased inflationary pressures, along with the possibility that the Federal Reserve will maintain high interest rates longer than anticipated. It is also uncertain whether there will be a U.S. government shutdown in November 2023 or subsequently, which could negatively impact the economy and inflation domestically. The Company is actively monitoring changes in economic and industry conditions and their impacts on the Company’s business, customers, employees, communities and markets.
Further discussion of the potential impacts on the Company’s business due to interest rate hikes has been provided in Item 1A. — Risk Factors — Risks Related to Financial Matters in the Company’s 2022 Form 10-K.
Recent Bank Failures and Potential Regulatory Reforms
Following the bank failures in March 2023, Congress and federal regulatory agencies are considering potential changes to the laws and regulations that apply to banks. On April 28, 2023, the Federal Reserve and the Federal Deposit Insurance Corporation (“FDIC”) issued reports on the failures of Silicon Valley Bank and Signature Bank, respectively, identifying potential causes that the federal banking agencies may seek to address through changes to their supervisory and regulatory policies.
65

On July 27, 2023, the Federal Reserve, FDIC, and Office of the Comptroller of the Currency (together, the “Agencies”) jointly released a proposed rule to implement the international capital standards issued by the Basel Committee on Banking Supervision and known as “Basel III Endgame.” The Basel III Endgame proposal would revise the capital framework applicable to large banking organizations with $100 billion or more in total consolidated assets or with significant trading activity and, if finalized, would likely result in meaningfully increased capital requirements for those organizations. In addition, on August 29, 2023, the FDIC released a proposed rule that would require covered insured depository institutions (“IDIs”) to develop and submit detailed plans demonstrating how they could be resolved in an orderly and timely manner in the event of receivership. IDIs with total assets of $100 billion or more would be required to submit full resolution plans, and IDIs with total assets between $50 billion and $100 billion, including the Bank, would be required to submit more limited informational filings. Under the proposal, if the FDIC deemed a resolution plan or informational filing not credible and the IDI fails to resubmit a credible plan, the IDI could become subject to an enforcement action. The Company is evaluating the impact of this proposal.
On August 29, 2023, the Agencies jointly released a proposed rule that would require bank holding companies and non-consolidated banks with total assets of $100 billion or more to issue and maintain minimum amounts of long-term debt. The Company has total consolidated assets of less than $100 billion and does not have significant trading activity, and therefore would not be subject to the Basel III Endgame requirements or the long-term debt requirements if they are finalized as proposed. However, by imposing additional costs on banking organizations with $100 billion or more in total consolidated assets, these rule proposals could reduce the benefits of growth beyond that size for a banking organization that has less than $100 billion in total consolidated assets, such as the Company.
FDIC Special Assessment and Uninsured Deposits
On May 11, 2023, the FDIC released a proposed rule that would impose a special deposit insurance assessment on banks in order to recover losses that the FDIC's Deposit Insurance Fund (“DIF”) has incurred in the receiverships of failed institutions in 2023. The proposed rule would impose the special assessment for eight quarterly assessment periods beginning with the first quarter of 2024 assessment period, subject to adjustments if the total amount collected is insufficient to cover the DIF’s costs. Each quarterly special assessment would be equal to 3.13 basis points (“bps”), or 0.0313% of a bank’s estimated uninsured deposits that exceeded $5 billion as of December 31, 2022. The estimated impact of the special assessment is not expected to be material to the Company.
On July 24, 2023, the FDIC issued Financial Institution Letter (“FIL”) 37-2023 — Estimated Uninsured Deposits Reporting Expectations, which clarified the reporting of an insured depository institution’s estimated uninsured deposits in the Call Report Schedule RC-O, Memorandum item 2 (“RC-OM item 2”). This FIL specified that uninsured deposits reported in RC-OM item 2 should include the deposit balances in excess of the FDIC limit that have been collateralized by pledged assets, and include all deposits of subsidiaries. The Company revised its calculation of RC-OM item 2 and resubmitted its December 31, 2022 and March 31, 2023 Call Reports to comply with the FIL during the third quarter of 2023.
Community Reinvestment Act Reform
On October 24, 2023, the Agencies issued a final rule revising their framework for evaluating banks’ records of community reinvestment under the Community Reinvestment Act. Under the revised framework, banks with assets of at least $2 billion, such as the Bank, are considered large banks and their retail lending, retail services and products, community development financing, and community development services will be subject to periodic evaluation. Depending on a large bank’s geographic distribution of lending, the evaluation of retail lending may include assessment areas in which the bank extends loans but does not operate any deposit-taking facilities, in addition to assessment areas in which the bank has deposit-taking facilities. Certain provisions of the final rule will apply beginning January 1, 2026, and the remaining provisions will apply beginning January 1, 2027. The Company is evaluating the impact of the final rule.
66

Climate Accountability
In October 2023, California Governor Gavin Newsom signed into law Senate Bill 253, the Climate Corporate Data Accountability Act (“CCDAA”) and Senate Bill 261, the Climate-Related Financial Risk Act (“CRFRA”). The CCDAA is applicable to U.S.-organized entities that do business in California with annual revenue in excess of $1 billion. Subject to the adoption of implementing regulations by the California Air Resources Board, these entities will need to file annual reports publicly disclosing their direct greenhouse gas (“GHG”) emissions from operations (“Scope 1 emissions”), indirect GHG emissions from energy use (“Scope 2 emissions”) and indirect upstream and downstream supply-chain GHG emissions (“Scope 3 emissions”). The reporting requirements related to Scope 1 and 2 emissions will begin in 2026, while the reporting requirements of Scope 3 emissions will begin in 2027. The CRFRA requires U.S.-organized entities that do business in California, with annual revenues over $500 million to prepare biennial reports disclosing climate-related financial risk and the measures they have adopted to reduce and adapt to that risk. The initial round of the climate risk disclosure reports will be due by January 1, 2026. The Company is a reporting entity under both laws and is reviewing them in preparation for compliance.
Financial Review

|  | Three Months Ended September 30, |  | Nine Months Ended September 30, |  |  |  |  |
($ and shares in thousands, except per share, and ratio data) |  | 2023 |  |  |  | 2022 |  | 2023 |  | 2022 |  |  |  |  |  |  |
Summary of operations: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Net interest income before provision for credit losses |  | $ | 570,813 |  |  |  |  | $ | 551,809 |  |  | $ | 1,737,420 |  |  | $ | 1,440,374 |  |  |  |  |  |  |  |
Noninterest income |  | 76,752 |  |  |  |  | 75,552 |  |  | 215,361 |  |  | 233,739 |  |  |  |  |  |  |  |
Total revenue |  | 647,565 |  |  |  |  | 627,361 |  |  | 1,952,781 |  |  | 1,674,113 |  |  |  |  |  |  |  |
Provision for credit losses |  | 42,000 |  |  |  |  | 27,000 |  |  | 88,000 |  |  | 48,500 |  |  |  |  |  |  |  |
Noninterest expense |  | 252,014 |  |  |  |  | 215,973 |  |  | 732,250 |  |  | 602,283 |  |  |  |  |  |  |  |
Income before income taxes |  | 353,551 |  |  |  |  | 384,388 |  |  | 1,132,531 |  |  | 1,023,330 |  |  |  |  |  |  |  |
Income tax expense |  | 65,813 |  |  |  |  | 89,049 |  |  | 210,323 |  |  | 232,010 |  |  |  |  |  |  |  |
Net income |  | $ | 287,738 |  |  |  |  | $ | 295,339 |  |  | $ | 922,208 |  |  | $ | 791,320 |  |  |  |  |  |  |  |
Per share: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Basic earnings |  | $ | 2.03 |  |  |  |  | $ | 2.10 |  |  | $ | 6.52 |  |  | $ | 5.59 |  |  |  |  |  |  |  |
Diluted earnings |  | $ | 2.02 |  |  |  |  | $ | 2.08 |  |  | $ | 6.49 |  |  | $ | 5.55 |  |  |  |  |  |  |  |
Dividends declared |  | $ | 0.48 |  |  |  |  | $ | 0.40 |  |  | $ | 1.44 |  |  | $ | 1.20 |  |  |  |  |  |  |  |
Weighted-average number of shares outstanding: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Basic |  | 141,485 |  |  |  |  | 140,917 |  |  | 141,356 |  |  | 141,453 |  |  |  |  |  |  |  |
Diluted |  | 142,122 |  |  |  |  | 142,011 |  |  | 142,044 |  |  | 142,601 |  |  |  |  |  |  |  |
Performance metrics: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Return on average assets (“ROA”) |  | 1.66 | % |  |  |  | 1.86 | % |  | 1.83 | % |  | 1.70 | % |  |  |  |  |  |  |
Return on average common equity (“ROE”) |  | 17.28 | % |  |  |  | 20.30 | % |  | 19.23 | % |  | 18.35 | % |  |  |  |  |  |  |
Return on average tangible common equity (“TCE”) (1) |  | 18.65 | % |  |  |  | 22.16 | % |  | 20.80 | % |  | 20.04 | % |  |  |  |  |  |  |
Common dividend payout ratio |  | 23.88 | % |  |  |  | 19.33 | % |  | 22.31 | % |  | 21.75 | % |  |  |  |  |  |  |
Net interest margin |  | 3.48 | % |  |  |  | 3.68 | % |  | 3.66 | % |  | 3.27 | % |  |  |  |  |  |  |
Efficiency ratio (2) |  | 38.92 | % |  |  |  | 34.43 | % |  | 37.50 | % |  | 35.98 | % |  |  |  |  |  |  |
Adjusted efficiency ratio (1) |  | 31.18 | % |  |  |  | 31.18 | % |  | 31.15 | % |  | 32.98 | % |  |  |  |  |  |  |

At period end: |  | September 30, 2023 |  | December 31, 2022
Total assets |  | $ | 68,289,458 |  |  | $ | 64,112,150 |
Total loans |  | $ | 50,911,946 |  |  | $ | 48,228,074 |
Total deposits |  | $ | 55,087,031 |  |  | $ | 55,967,849 |
Common shares outstanding at period-end |  | 141,486 |  |  | 140,948 |
Book value per share |  | $ | 46.62 |  |  | $ | 42.46 |
Tangible book value per share (1) |  | $ | 43.29 |  |  | $ | 39.10 |

(1)For additional information regarding the reconciliation of these non-U.S. Generally Accepted Accounting Principles (“GAAP”) financial measures, refer to Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) — Reconciliation of GAAP to Non-GAAP Financial Measures in this Quarterly Report on Form 10-Q (this “Form 10-Q”).
(2)Efficiency ratio is calculated as noninterest expense divided by total revenue.
67

The Company’s third quarter 2023 net income was $287.7 million, a decrease of $7.6 million or 3%, compared with third quarter 2022 net income of $295.3 million. The decrease was primarily due to higher noninterest expense and provision for credit losses, partially offset by lower income tax expense and higher net interest income during the quarter. Net income for the first nine months of 2023 was $922.2 million, an increase of $130.9 million or 17% compared with first nine months of 2022 net income of $791.3 million. The increase was primarily due to higher net interest income, partially offset by higher noninterest expense and provision for credit losses. Noteworthy items about the Company’s performance for the third quarter and first nine months of 2023 included:
•Net interest income growth and net interest margin. Third quarter 2023 net interest income before provision for credit losses was $570.8 million, an increase of $19.0 million or 3% from the third quarter of 2022. Third quarter 2023 net interest margin of 3.48% was down 20 bps year-over-year. For the first nine months of 2023, net interest income before provision for credit losses was $1.74 billion, an increase of $297.0 million or 21% year-over-year. The net interest margin for the first nine months of 2023 was 3.66%, up 39 bps year-over-year.
•Profitability ratios. Third quarter 2023 ROA, ROE and the return on average TCE of 1.66%, 17.28% and 18.65%, respectively, were down year-over-year by 20 bps, 302 bps and 351 bps, respectively. For the first nine months of 2023, ROA, ROE and the return on average TCE of 1.83%, 19.23% and 20.80%, respectively, all expanded year-over-year by 13 bps, 88 bps and 76 bps, respectively. Return on average TCE is a non-GAAP financial measure. For additional details, see the reconciliation of non-GAAP financial measures presented under Item 2. MD&A — Reconciliation of GAAP to Non-GAAP Financial Measures in this Form 10-Q.
•Asset growth. Total assets reached $68.29 billion, an increase of $4.18 billion or 7% from December 31, 2022, primarily driven by a $2.68 billion or 6% increase in total loans, and a $1.08 billion or 31% increase in cash and cash equivalents. The increase in cash and cash equivalents was primarily funded with borrowings from the Bank Term Funding Program (“BTFP”).
•Loan growth. Total loans were $50.91 billion as of September 30, 2023, an increase of $2.68 billion or 6% from $48.23 billion as of December 31, 2022. This was primarily driven by growth in CRE and residential mortgage loan segments.
•Strong capital levels. Stockholders’ equity was $6.60 billion or $46.62 per share as of September 30, 2023, both up 10% from $5.98 billion or $42.46 per share as of December 31, 2022. Tangible book value per share of $43.29 as of September 30, 2023, increased $4.19 or 11% from $39.10 as of December 31, 2022. Tangible book value per share is a non-GAAP financial measure. For additional details, see the reconciliation of non-GAAP financial measures presented under Item 2. MD&A - Reconciliation of GAAP to non-GAAP Financial Measures in this Form 10-Q.
Results of Operations
Net Interest Income
The Company’s primary source of revenue is net interest income, which is the interest income earned on interest-earning assets less interest expense paid on interest-bearing liabilities. Net interest margin is the ratio of net interest income to average interest-earning assets. Net interest income and net interest margin are impacted by several factors, including changes in average balances and the composition of interest-earning assets and funding sources, market interest rate fluctuations and the slope of the yield curve, repricing characteristics and maturity of interest-earning assets and interest-bearing liabilities, the volume of noninterest-bearing sources of funds and asset quality.
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The increases in net interest income in the third quarter and the first nine months of 2023, and the increase in net interest margin for the first nine months of 2023, compared with the same prior year periods primarily reflected higher loan yields and increased loan volume, partially offset by a higher cost of interest-bearing deposits. The decrease in net interest margin for the third quarter of 2023, compared with the same prior year period was primarily driven by a higher rate of increase in the cost of interest-bearing deposits, which has more than offset expanding interest-earning asset yields. The changes in yield and rate reflected rising benchmark interest rates.
Average interest-earning assets were $65.05 billion for the third quarter of 2023, an increase of $5.57 billion or 9% from $59.48 billion for the third quarter of 2022. For the first nine months of 2023, the average interest-earning assets were $63.55 billion, an increase of $4.60 billion or 8% from $58.95 billion for the first nine months of 2022. The increases in average interest-earning assets in both periods primarily reflected loan growth, and higher interest-bearing cash and deposits with banks, partially offset by decreases in assets purchased under resale agreements and available-for-sale (“AFS”) debt securities.
The yield on average interest-earning assets for the third quarter of 2023 was 5.87%, an increase of 168 bps from 4.19% for the third quarter of 2022. The yield on average interest-earning assets for the first nine months of 2023 was 5.69%, an increase of 215 bps from 3.54% for the first nine months of 2022. The year-over-year increases in the yield on average interest-earning assets primarily resulted from rising benchmark interest rates.
69

The average loan yield for the third quarter of 2023 was 6.51%, an increase of 176 bps from 4.75% for the third quarter of 2022. The average loan yield for the first nine months of 2022 was 6.33%, an increase of 220 bps from 4.13% for the first nine months of 2022. The changes in the average loan yield reflected the loan portfolio’s sensitivity to rising benchmark interest rates. Approximately 59% and 62% of loans held-for-investment were variable-rate a s of September 30, 2023 and 2022, respectively.
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Deposits are an important source of funds and impact both net interest income and net interest margin. Average deposits were $55.20 billion for the third quarter of 2023, which increased $1.15 billion or 2% from $54.05 billion for the third quarter of 2022. For the first nine months of 2023, average deposits were $54.81 billion, an increase of $744.2 million or 1% from $54.07 billion for the first nine months of 2022. Average noninterest-bearing deposits were $16.30 billion for the third quarter of 2023, a decrease of $6.12 billion or 27% from $22.42 billion for the third quarter of 2022. For the first nine months of 2023, average noninterest-bearing deposits were $17.63 billion, a decrease of $5.61 billion or 24% from $23.24 billion for the first nine months of 2022. Average noninterest-bearing deposits made up 30% and 41% of average deposits for the third quarters of 2023 and 2022, respectively, and 32% and 43% for the first nine months of 2023 and 2022, respectively.
The average cost of deposits was 2.43% for the third quarter of 2023, a 192 bps increase from 0.51% for the third quarter of 2022. The average cost of interest-bearing deposits was 3.45% for the third quarter of 2023, a 259 bps increase from 0.86% for the third quarter of 2022. The average cost of deposits was 2.06% for the first nine months of 2023, a 180 bps increase from 0.26% for the first nine months of 2022. The average cost of interest-bearing deposits was 3.03% for the first nine months of 2023, a 258 bps increase from 0.45% for the first nine months of 2022. The year-over-year increases primarily reflected higher rates paid on time deposits, money market and checking deposits in response to the rising interest rate environment.
The average cost of funds calculation includes deposits, short-term borrowings, Federal Home Loan Bank (“FHLB”) advances, assets sold under repurchase agreements (“repurchase agreements”), and long-term debt. For the third quarter of 2023, the average cost of funds was 2.59%, a 204 bps increase from 0.55% for the third quarter of 2022. For the first nine months of 2023, the average cost of funds was 2.21%, a 192 bps increase from 0.29% for the first nine months of 2022. The increases in both periods were mainly driven by the increased cost of deposits discussed above.
The Company utilizes various tools to manage interest rate risk. Refer to the Interest Rate Risk Management section of Item 2. MD&A — Risk Management — Market Risk Management in this Form 10-Q.
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The following table presents the interest spread, net interest margin, average balances, interest income and expense, and the average yield/rate by asset and liability component for the third quarters of 2023 and 2022:

|  | Three Months Ended September 30,
|  | 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 |  | $ | 5,392,795 |  |  | $ | 67,751 |  |  | 4.98 | % |  | $ | 2,287,010 |  |  | $ | 9,080 |  |  | 1.58 | %
Resale agreements |  | 648,587 |  |  | 4,460 |  |  | 2.73 | % |  | 1,037,292 |  |  | 6,769 |  |  | 2.59 | %
AFS debt securities (2)(3) |  | 6,074,119 |  |  | 57,177 |  |  | 3.73 | % |  | 6,204,729 |  |  | 38,383 |  |  | 2.45 | %
Held-to-maturity (“HTM”) debt securities (2) |  | 2,967,703 |  |  | 12,601 |  |  | 1.68 | % |  | 3,017,063 |  |  | 12,709 |  |  | 1.67 | %
Loans (4)(5) |  | 49,888,862 |  |  | 818,719 |  |  | 6.51 | % |  | 46,854,541 |  |  | 560,452 |  |  | 4.75 | %
Restricted equity securities |  | 79,395 |  |  | 1,079 |  |  | 5.39 | % |  | 78,054 |  |  | 843 |  |  | 4.28 | %
Total interest-earning assets |  | $ | 65,051,461 |  |  | $ | 961,787 |  |  | 5.87 | % |  | $ | 59,478,689 |  |  | $ | 628,236 |  |  | 4.19 | %
Noninterest-earning assets: |  |  |  |  |  |  |  |  |  |  |  |
Cash and due from banks |  | 544,939 |  |  |  |  |  |  | 615,836 |  |  |  |  |
Allowance for loan losses |  | (629,229) |  |  |  |  |  |  | (566,369) |  |  |  |  |
Other assets |  | 3,969,615 |  |  |  |  |  |  | 3,551,288 |  |  |  |  |
Total assets |  | $ | 68,936,786 |  |  |  |  |  |  | $ | 63,079,444 |  |  |  |  |
LIABILITIES AND STOCKHOLDERS’ EQUITY |  |  |  |  |  |  |  |  |  |  |  |
Interest-bearing liabilities: |  |  |  |  |  |  |  |  |  |  |  |
Checking deposits |  | $ | 8,080,025 |  |  | $ | 54,285 |  |  | 2.67 | % |  | $ | 6,879,632 |  |  | $ | 8,493 |  |  | 0.49 | %
Money market deposits |  | 12,180,806 |  |  | 113,217 |  |  | 3.69 | % |  | 12,351,571 |  |  | 33,101 |  |  | 1.06 | %
Savings deposits |  | 2,013,246 |  |  | 4,047 |  |  | 0.80 | % |  | 2,961,634 |  |  | 2,268 |  |  | 0.30 | %
Time deposits |  | 16,621,683 |  |  | 166,747 |  |  | 3.98 | % |  | 9,435,063 |  |  | 25,032 |  |  | 1.05 | %
Federal funds purchased and other short-term borrowings |  | 4,501,327 |  |  | 49,575 |  |  | 4.37 | % |  | 211,794 |  |  | 1,177 |  |  | 2.20 | %
FHLB advances |  | 1 |  |  | — |  |  | — | % |  | 86,243 |  |  | 392 |  |  | 1.80 | %
Repurchase agreements |  | 13,897 |  |  | 193 |  |  | 5.51 | % |  | 624,821 |  |  | 4,421 |  |  | 2.81 | %
Long-term debt and finance lease liabilities |  | 152,962 |  |  | 2,910 |  |  | 7.55 | % |  | 152,565 |  |  | 1,543 |  |  | 4.01 | %
Total interest-bearing liabilities |  | $ | 43,563,947 |  |  | $ | 390,974 |  |  | 3.56 | % |  | $ | 32,703,323 |  |  | $ | 76,427 |  |  | 0.93 | %
Noninterest-bearing liabilities and stockholders’ equity: |  |  |  |  |  |  |  |  |  |  |  |
Demand deposits |  | 16,302,296 |  |  |  |  |  |  | 22,423,633 |  |  |  |  |
Accrued expenses and other liabilities |  | 2,465,745 |  |  |  |  |  |  | 2,179,850 |  |  |  |  |
Stockholders’ equity |  | 6,604,798 |  |  |  |  |  |  | 5,772,638 |  |  |  |  |
Total liabilities and stockholders’ equity |  | $ | 68,936,786 |  |  |  |  |  |  | $ | 63,079,444 |  |  |  |  |
Interest rate spread |  |  |  |  |  | 2.31 | % |  |  |  |  |  | 3.26 | %
Net interest income and net interest margin |  |  |  | $ | 570,813 |  |  | 3.48 | % |  |  |  | $ | 551,809 |  |  | 3.68 | %

(1)Annualized.
(2)Yields on tax-exempt securities are not presented on a tax-equivalent basis.
(3)Includes the amortization of net premiums on AFS debt securities of $7.8 million and $16.5 million for the third quarters of 2023 and 2022, respectively.
(4)Average balances include nonperforming loans and loans held-for-sale.
(5)Loans include the accretion of net deferred loan fees and amortization of net premiums, which totaled $13.1 million and $12.5 million for the third quarters of 2023 and 2022, respectively.
72

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 nine months of 2023 and 2022:

|  | Nine Months Ended September 30,
|  | 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 |  | $ | 4,703,843 |  |  | $ | 164,393 |  |  | 4.67 | % |  | $ | 3,175,596 |  |  | $ | 17,127 |  |  | 0.72 | %
Resale agreements |  | 659,621 |  |  | 12,932 |  |  | 2.62 | % |  | 1,588,452 |  |  | 23,705 |  |  | 2.00 | %
AFS debt securities (2)(3) |  | 6,146,653 |  |  | 166,666 |  |  | 3.63 | % |  | 6,886,268 |  |  | 106,290 |  |  | 2.06 | %
HTM debt securities (2) |  | 2,982,284 |  |  | 38,013 |  |  | 1.70 | % |  | 2,672,797 |  |  | 33,645 |  |  | 1.68 | %
Loans (4)(5) |  | 48,969,843 |  |  | 2,318,369 |  |  | 6.33 | % |  | 44,548,520 |  |  | 1,376,978 |  |  | 4.13 | %
Restricted equity securities |  | 83,013 |  |  | 3,054 |  |  | 4.92 | % |  | 77,824 |  |  | 2,274 |  |  | 3.91 | %
Total interest-earning assets |  | $ | 63,545,257 |  |  | $ | 2,703,427 |  |  | 5.69 | % |  | $ | 58,949,457 |  |  | $ | 1,560,019 |  |  | 3.54 | %
Noninterest-earning assets: |  |  |  |  |  |  |  |  |  |  |  |
Cash and due from banks |  | 578,144 |  |  |  |  |  |  | 656,772 |  |  |  |  |
Allowance for loan losses |  | (617,381) |  |  |  |  |  |  | (551,818) |  |  |  |  |
Other assets |  | 3,690,570 |  |  |  |  |  |  | 3,307,207 |  |  |  |  |
Total assets |  | $ | 67,196,590 |  |  |  |  |  |  | $ | 62,361,618 |  |  |  |  |
LIABILITIES AND STOCKHOLDERS’ EQUITY |  |  |  |  |  |  |  |  |  |  |  |
Interest-bearing liabilities: |  |  |  |  |  |  |  |  |  |  |  |
Checking deposits |  | $ | 7,675,325 |  |  | $ | 127,030 |  |  | 2.21 | % |  | $ | 6,747,711 |  |  | $ | 13,073 |  |  | 0.26 | %
Money market deposits |  | 11,295,157 |  |  | 275,738 |  |  | 3.26 | % |  | 12,526,222 |  |  | 45,196 |  |  | 0.48 | %
Savings deposits |  | 2,215,102 |  |  | 11,679 |  |  | 0.70 | % |  | 2,954,098 |  |  | 5,836 |  |  | 0.26 | %
Time deposits |  | 15,993,669 |  |  | 428,120 |  |  | 3.58 | % |  | 8,596,728 |  |  | 40,266 |  |  | 0.63 | %
Federal funds purchased and other short-term borrowings |  | 3,284,663 |  |  | 107,432 |  |  | 4.37 | % |  | 93,370 |  |  | 1,427 |  |  | 2.04 | %
FHLB advances |  | 164,836 |  |  | 6,430 |  |  | 5.22 | % |  | 128,137 |  |  | 1,529 |  |  | 1.60 | %
Repurchase agreements |  | 45,080 |  |  | 1,456 |  |  | 4.32 | % |  | 433,340 |  |  | 8,855 |  |  | 2.73 | %
Long-term debt and finance lease liabilities |  | 152,716 |  |  | 8,122 |  |  | 7.11 | % |  | 152,259 |  |  | 3,463 |  |  | 3.04 | %
Total interest-bearing liabilities |  | $ | 40,826,548 |  |  | $ | 966,007 |  |  | 3.16 | % |  | $ | 31,631,865 |  |  | $ | 119,645 |  |  | 0.51 | %
Noninterest-bearing liabilities and stockholders’ equity: |  |  |  |  |  |  |  |  |  |  |  |
Demand deposits |  | 17,633,922 |  |  |  |  |  |  | 23,244,247 |  |  |  |  |
Accrued expenses and other liabilities |  | 2,324,870 |  |  |  |  |  |  | 1,719,869 |  |  |  |  |
Stockholders’ equity |  | 6,411,250 |  |  |  |  |  |  | 5,765,637 |  |  |  |  |
Total liabilities and stockholders’ equity |  | $ | 67,196,590 |  |  |  |  |  |  | $ | 62,361,618 |  |  |  |  |
Interest rate spread |  |  |  |  |  | 2.53 | % |  |  |  |  |  | 3.03 | %
Net interest income and net interest margin |  |  |  | $ | 1,737,420 |  |  | 3.66 | % |  |  |  | $ | 1,440,374 |  |  | 3.27 | %

(1)Annualized.
(2)Yields on tax-exempt securities are not presented on a tax-equivalent basis.
(3)Includes the amortization of net premiums on AFS debt securities of $24.2 million and $60.3 million for the first nine months of 2023 and 2022, respectively.
(4)Average balances include nonperforming loans and loans held-for-sale.
(5)Include the accretion of net deferred loan fees and amortization of net premiums, which totaled $40.1 million and $36.3 million for the first nine months of 2023 and 2022, respectively.
73

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

($ in thousands) |  | Three Months Ended September 30, |  | Nine Months Ended September 30, |  |  |  |  |  |  |  |
| 2023 vs. 2022 |  | 2023 vs. 2022 |  |  |  |
| Total Change |  | Changes Due to |  | Total Change |  | Changes Due to |  |  |  |  |  |  |  |
|  | Volume |  | Yield/Rate |  |  | Volume |  | Yield/Rate |  |  |  |  |  |  |  |  |  |
Interest-earning assets: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Interest-bearing cash and deposits with banks |  | $ | 58,671 |  |  | $ | 22,620 |  |  | $ | 36,051 |  |  | $ | 147,266 |  |  | $ | 11,889 |  |  | $ | 135,377 |  |  |  |  |  |  |  |  |  |  |  |  |
Resale agreements |  | (2,309) |  |  | (2,656) |  |  | 347 |  |  | (10,773) |  |  | (16,691) |  |  | 5,918 |  |  |  |  |  |  |  |  |  |  |  |  |
AFS debt securities |  | 18,794 |  |  | (824) |  |  | 19,618 |  |  | 60,376 |  |  | (12,490) |  |  | 72,866 |  |  |  |  |  |  |  |  |  |  |  |  |
HTM debt securities |  | (108) |  |  | (209) |  |  | 101 |  |  | 4,368 |  |  | 3,940 |  |  | 428 |  |  |  |  |  |  |  |  |  |  |  |  |
Loans |  | 258,267 |  |  | 38,297 |  |  | 219,970 |  |  | 941,391 |  |  | 148,091 |  |  | 793,300 |  |  |  |  |  |  |  |  |  |  |  |  |
Restricted equity securities |  | 236 |  |  | 15 |  |  | 221 |  |  | 780 |  |  | 160 |  |  | 620 |  |  |  |  |  |  |  |  |  |  |  |  |
Total interest and dividend income |  | $ | 333,551 |  |  | $ | 57,243 |  |  | $ | 276,308 |  |  | $ | 1,143,408 |  |  | $ | 134,899 |  |  | $ | 1,008,509 |  |  |  |  |  |  |  |  |  |  |  |  |
Interest-bearing liabilities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Checking deposits |  | $ | 45,792 |  |  | $ | 1,731 |  |  | $ | 44,061 |  |  | $ | 113,957 |  |  | $ | 2,040 |  |  | $ | 111,917 |  |  |  |  |  |  |  |  |  |  |  |  |
Money market deposits |  | 80,116 |  |  | (464) |  |  | 80,580 |  |  | 230,542 |  |  | (4,871) |  |  | 235,413 |  |  |  |  |  |  |  |  |  |  |  |  |
Savings deposits |  | 1,779 |  |  | (921) |  |  | 2,700 |  |  | 5,843 |  |  | (1,778) |  |  | 7,621 |  |  |  |  |  |  |  |  |  |  |  |  |
Time deposits |  | 141,715 |  |  | 30,467 |  |  | 111,248 |  |  | 387,854 |  |  | 59,857 |  |  | 327,997 |  |  |  |  |  |  |  |  |  |  |  |  |
Federal funds purchased and other short-term borrowings |  | 48,398 |  |  | 46,160 |  |  | 2,238 |  |  | 106,005 |  |  | 102,583 |  |  | 3,422 |  |  |  |  |  |  |  |  |  |  |  |  |
FHLB advances |  | (392) |  |  | (196) |  |  | (196) |  |  | 4,901 |  |  | 549 |  |  | 4,352 |  |  |  |  |  |  |  |  |  |  |  |  |
Repurchase agreements |  | (4,228) |  |  | (6,420) |  |  | 2,192 |  |  | (7,399) |  |  | (10,729) |  |  | 3,330 |  |  |  |  |  |  |  |  |  |  |  |  |
Long-term debt and finance lease liabilities |  | 1,367 |  |  | 4 |  |  | 1,363 |  |  | 4,659 |  |  | 10 |  |  | 4,649 |  |  |  |  |  |  |  |  |  |  |  |  |
Total interest expense |  | $ | 314,547 |  |  | $ | 70,361 |  |  | $ | 244,186 |  |  | $ | 846,362 |  |  | $ | 147,661 |  |  | $ | 698,701 |  |  |  |  |  |  |  |  |  |  |  |  |
Change in net interest income |  | $ | 19,004 |  |  | $ | (13,118) |  |  | $ | 32,122 |  |  | $ | 297,046 |  |  | $ | (12,762) |  |  | $ | 309,808 |  |  |  |  |  |  |  |  |  |  |  |  |

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

|  | Three Months Ended September 30, |  | Nine Months Ended September 30, |  |
($ in thousands) |  | 2023 |  | 2022 |  |  |  | % Change |  | 2023 |  | 2022 |  | % Change |  |  |  |  |  |
Lending fees |  | $ | 20,312 |  |  | $ | 20,289 |  |  |  |  | 0% |  | $ | 61,799 |  |  | $ | 59,869 |  |  | 3% |  |  |  |  |  |
Deposit account fees |  | 22,622 |  |  | 23,636 |  |  |  |  | (4)% |  | 66,610 |  |  | 66,323 |  |  | 0% |  |  |  |  |  |
Interest rate contracts and other derivative income |  | 11,208 |  |  | 8,761 |  |  |  |  | 28% |  | 21,145 |  |  | 29,695 |  |  | (29)% |  |  |  |  |  |
Foreign exchange income |  | 12,334 |  |  | 10,083 |  |  |  |  | 22% |  | 38,245 |  |  | 34,143 |  |  | 12% |  |  |  |  |  |
Wealth management fees |  | 5,877 |  |  | 8,903 |  |  |  |  | (34)% |  | 19,070 |  |  | 21,494 |  |  | (11)% |  |  |  |  |  |
Net (losses) gains on sales of loans |  | (12) |  |  | 2,129 |  |  |  |  | NM |  | (41) |  |  | 5,968 |  |  | NM |  |  |  |  |  |
Net (losses) gains on AFS debt securities |  | — |  |  | — |  |  |  |  | —% |  | (10,000) |  |  | 1,306 |  |  | NM |  |  |  |  |  |
Other investment income |  | 1,751 |  |  | (580) |  |  |  |  | NM |  | 7,675 |  |  | 5,910 |  |  | 30% |  |  |  |  |  |
Other income |  | 2,660 |  |  | 2,331 |  |  |  |  | 14% |  | 10,858 |  |  | 9,031 |  |  | 20% |  |  |  |  |  |
Total noninterest income |  | $ | 76,752 |  |  | $ | 75,552 |  |  |  |  | 2% |  | $ | 215,361 |  |  | $ | 233,739 |  |  | (8)% |  |  |  |  |  |

NM — Not meaningful.
74

Noninterest income comprised 12% and 11% of total revenue for the third quarter and the first nine months of 2023, respectively, compared with 12% and 14% for the third quarter and the first nine months of 2022, respectively. Third quarter 2023 noninterest income of $76.8 million was relatively flat compared with $75.6 million for the same period in 2022. Noninterest income for the first nine months of 2023 was $215.4 million, a decrease of $18.4 million or 8%, compared with $233.7 million for the same period in 2022. This decrease was primarily due to net losses on AFS debt securities, a decrease in interest rate contracts and other derivative income, and net losses on sales of loans, partially offset by an increase in foreign exchange income during the first nine months of 2023.
Interest rate contracts and other derivative income was $11.2 million for the third quarter of 2023, an increase of $2.4 million or 28%, compared with $8.8 million for the same period in 2022. The increase was primarily due to increases in transaction volume and interest received on derivative collateral posted. For the first nine months of 2023, interest rate contracts and other derivative income was $21.1 million, a decrease of $8.6 million or 29%, compared with $29.7 million for the same period in 2022. The decrease was primarily due to lower favorable credit valuation adjustments, partially offset by increases in transaction volume and interest received on derivative collateral posted.
Foreign exchange income was $12.3 million for the third quarter of 2023, an increase of $2.3 million or 22%, compared with $10.1 million for the same period in 2022. This increase was primarily due to higher losses on foreign exchange trades in the prior-year period. For the first nine months of 2023, foreign exchange income was $38.2 million, an increase of $4.1 million or 12% compared with $34.1 million for the same period in 2022. This increase was primarily due to a higher level of gains on foreign exchange trades, partially offset by the unfavorable valuation of certain foreign currency denominated balance sheet items.
Net losses on sales of loans were $12 thousand and $41 thousand for the third quarter and first nine months of 2023, respectively. In comparison, net gains on sales of loans were $2.1 million and $6.0 million for the third quarter and first nine months of 2022, respectively. The year-over-year decreases were primarily due to a higher level of Small Business Administration loan sales in the prior periods.
Net losses on AFS debt securities of $10.0 million for the first nine months of 2023 were due to the write-off of an impaired subordinated debt security during the first quarter of 2023. In comparison, net gains on AFS debt securities were zero and $1.3 million for the third quarter and first nine months of 2022, respectively.
Noninterest Expense
The following table presents the components of noninterest expense for the third quarters and first nine months of 2023 and 2022:

|  | Three Months Ended September 30, |  | Nine Months Ended September 30, |  |
($ in thousands) |  | 2023 |  | 2022 |  |  |  | % Change |  | 2023 |  | 2022 |  | % Change |  |  |  |  |  |
Compensation and employee benefits |  | $ | 123,153 |  |  | $ | 127,580 |  |  |  |  | (3) | % |  | $ | 377,744 |  |  | $ | 357,213 |  |  | 6 | % |  |  |  |  |  |
Occupancy and equipment expense |  | 15,353 |  |  | 15,920 |  |  |  |  | (4) | % |  | 47,028 |  |  | 46,853 |  |  | 0 | % |  |  |  |  |  |
Deposit insurance premiums and regulatory assessments |  | 8,583 |  |  | 4,875 |  |  |  |  | 76 | % |  | 24,755 |  |  | 14,519 |  |  | 71 | % |  |  |  |  |  |
Deposit account expense |  | 11,585 |  |  | 6,707 |  |  |  |  | 73 | % |  | 31,753 |  |  | 17,071 |  |  | 86 | % |  |  |  |  |  |
Data processing |  | 3,645 |  |  | 3,725 |  |  |  |  | (2) | % |  | 10,205 |  |  | 10,876 |  |  | (6) | % |  |  |  |  |  |
Computer software expense |  | 8,116 |  |  | 6,889 |  |  |  |  | 18 | % |  | 22,955 |  |  | 20,755 |  |  | 11 | % |  |  |  |  |  |
Other operating expense |  | 31,885 |  |  | 30,403 |  |  |  |  | 5 | % |  | 102,092 |  |  | 86,243 |  |  | 18 | % |  |  |  |  |  |
Amortization of tax credit and other investments |  | 49,694 |  |  | 19,874 |  |  |  |  | 150 | % |  | 115,718 |  |  | 48,753 |  |  | 137 | % |  |  |  |  |  |
Total noninterest expense |  | $ | 252,014 |  |  | $ | 215,973 |  |  |  |  | 17 | % |  | $ | 732,250 |  |  | $ | 602,283 |  |  | 22 | % |  |  |  |  |  |

Third quarter 2023 noninterest expense was $252.0 million, an increase of $36.0 million or 17%, compared with $216.0 million for the same period in 2022. The increase in the third quarter of 2023 was primarily due to increases in amortization of tax credit and other investments, deposit account expense, and deposit insurance premiums and regulatory assessments, partially offset by a decrease in compensation and employee benefits. For the first nine months of 2023, noninterest expense was $732.3 million, an increase of $130.0 million or 22%, compared with $602.3 million for the same period in 2022. The increase in the first nine months of 2023 was primarily due to higher amortization of tax credit and other investments, compensation and employee benefits, other operating expense, deposit account expense and deposit insurance premiums and regulatory assessments.
75

Compensation and employee benefits were $123.2 million for the third quarter of 2023, a decrease of $4.4 million or 3%, compared with $127.6 million for the same period in 2022. The decrease was primarily due to a decrease in temporary staffing and bonus accrual, partially offset by staffing growth. For the first nine months of 2023, compensation and employee benefits were $377.7 million, an increase of $20.5 million or 6%, compared with $357.2 million for the first nine months of 2022. This increase was primarily driven by staffing growth.
Deposit insurance premiums and regulatory assessments were $8.6 million for the third quarter of 2023, an increase of $3.7 million or 76%, compared with $4.9 million for the same period in 2022. For the first nine months of 2023, deposit insurance premiums and regulatory assessments were $24.8 million, an increase of $10.2 million or 71%, compared with $14.5 million for the same period in 2022. These increases were primarily due to a two bps increase in the base deposit insurance assessment rate under the FDIC’s Amended Restoration Plan.
Deposit account expense was $11.6 million for the third quarter of 2023, an increase of $4.9 million or 73%, compared with $6.7 million for the same period in 2022. For the first nine months of 2023, deposit account expense was $31.8 million, an increase of $14.7 million or 86%, compared with $17.1 million for the same period in 2022. These increases were primarily due to an increase in deposit referral fees which were driven by higher interest rates and an increase in insured cash sweep (“ICS”) product fees due to higher deposit balances. Such deposit referral fees are variable fees, sensitive to market rates and paid in lieu of interest on a small portion of the Bank’s deposit balances.
Other operating expense of $31.9 million for the third quarter of 2023, was essentially flat, compared with $30.4 million for the same period in 2022. For the first nine months of 2023, other operating expense was $102.1 million, an increase of $15.8 million or 18%, compared with $86.2 million for the same period in 2022. The increase in the first nine months of 2023 compared with the same period in 2022 was primarily due to higher interest expense paid on cash collateral and an increase in corporate expenses, partially offset by a reduction in foreclosure expenses.
Amortization of tax credit and other investments was $49.7 million for the third quarter of 2023, an increase of $29.8 million or 150%, compared with $19.9 million for the same period in 2022. For the first nine months of 2023, amortization of tax credit and other investments was $115.7 million, an increase of $67.0 million or 137%, compared with $48.8 million for the same period in 2022. The year-over-year increases were largely due to the timing of renewable energy tax credit investments that closed.
Income Taxes

|  | Three Months Ended September 30, |  |  |  |  |  | Nine Months Ended September 30,
($ in thousands) |  | 2023 |  | 2022 |  | % Change |  |  |  |  |  |  |  |  |  |  |  |  |  | 2023 |  | 2022 |  | % Change
Income before income taxes |  | $ | 353,551 |  |  | $ | 384,388 |  |  | (8) | % |  |  |  |  |  |  |  |  |  |  |  |  |  | $ | 1,132,531 |  |  | $ | 1,023,330 |  |  | 11 | %
Income tax expense |  | $ | 65,813 |  |  | $ | 89,049 |  |  | (26) | % |  |  |  |  |  |  |  |  |  |  |  |  |  | $ | 210,323 |  |  | $ | 232,010 |  |  | (9) | %
Effective tax rate |  | 18.6 | % |  | 23.2 | % |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | 18.6 | % |  | 22.7 | % |  |

Third quarter 2023 income tax expense was $65.8 million and the effective tax rate was 18.6%, compared with third quarter 2022 income tax expense of $89.0 million and an effective tax rate of 23.2%. For the first nine months of 2023, income tax expense was $210.3 million and the effective tax rate was 18.6%, compared with income tax expense of $232.0 million and an effective tax rate of 22.7% for the same period in 2022. The decrease in income tax expense for the third quarter of 2023 compared with the year-ago same period was primarily due to lower pre-tax income and higher tax credits. The decrease in income tax expense for the first nine months of 2023 compared with the first nine months of 2022 was primarily due to higher tax credits. The increases in tax credits in both periods were primarily due to renewable energy tax credit investments.
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.
76

Segment net interest income represents the difference between actual interest earned on assets and interest incurred on liabilities of the segment, adjusted for funding charges or credits through the Company’s internal funds transfer pricing (“FTP”) process.
The following tables present the results by operating segment for the periods indicated:

|  | Three Months Ended September 30,
|  | Consumer and Business Banking |  | Commercial Banking |  | Other
($ in thousands) |  | 2023 |  | 2022 |  | 2023 |  | 2022 |  | 2023 |  | 2022
Total revenue (loss) |  | $ | 340,541 |  |  | $ | 357,230 |  |  | $ | 286,017 |  |  | $ | 271,637 |  |  | $ | 21,007 |  |  | $ | (1,506) |
Provision for credit losses |  | 1,633 |  |  | 8,974 |  |  | 40,367 |  |  | 18,026 |  |  | — |  |  | — |
Noninterest expense |  | 106,626 |  |  | 104,005 |  |  | 87,556 |  |  | 81,386 |  |  | 57,832 |  |  | 30,582 |
Segment income (loss) before income taxes |  | 232,282 |  |  | 244,251 |  |  | 158,094 |  |  | 172,225 |  |  | (36,825) |  |  | (32,088) |
Segment net income (loss) |  | $ | 164,051 |  |  | $ | 173,982 |  |  | $ | 110,182 |  |  | $ | 122,869 |  |  | $ | 13,505 |  |  | $ | (1,512) |

($ in thousands) |  | Nine Months Ended September 30, |  |  |
| Consumer and Business Banking |  | Commercial Banking |  | Other |  |  |
| 2023 |  | 2022 |  | 2023 |  | 2022 |  | 2023 |  | 2022 |  |  |
Total revenue (loss) |  | $ | 1,005,427 |  |  | $ | 908,400 |  |  | $ | 871,917 |  |  | $ | 807,787 |  |  | $ | 75,437 |  |  | $ | (42,074) |  |  |  |
Provision for credit losses |  | 22,169 |  |  | 14,976 |  |  | 65,831 |  |  | 33,524 |  |  | — |  |  | — |  |  |  |
Noninterest expense |  | 327,476 |  |  | 294,395 |  |  | 263,137 |  |  | 235,804 |  |  | 141,637 |  |  | 72,084 |  |  |  |
Segment income (loss) before income taxes |  | 655,782 |  |  | 599,029 |  |  | 542,949 |  |  | 538,459 |  |  | (66,200) |  |  | (114,158) |  |  |  |
Segment net income (loss) |  | $ | 463,151 |  |  | $ | 426,695 |  |  | $ | 383,669 |  |  | $ | 384,237 |  |  | $ | 75,388 |  |  | $ | (19,612) |  |  |  |

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

|  | Three Months Ended September 30,
|  |  |  |  |  | Change from 2022
($ in thousands) |  | 2023 |  | 2022 |  | $ |  | %
Net interest income before provision for credit losses |  | $ | 315,409 |  |  | $ | 326,411 |  |  | $ | (11,002) |  |  | (3) | %
Noninterest income |  | 25,132 |  |  | 30,819 |  |  | (5,687) |  |  | (18) | %
Total revenue |  | 340,541 |  |  | 357,230 |  |  | (16,689) |  |  | (5) | %
Provision for credit losses |  | 1,633 |  |  | 8,974 |  |  | (7,341) |  |  | (82) | %
Noninterest expense |  | 106,626 |  |  | 104,005 |  |  | 2,621 |  |  | 3 | %
Segment income before income taxes |  | 232,282 |  |  | 244,251 |  |  | (11,969) |  |  | (5) | %
Income tax expense |  | 68,231 |  |  | 70,269 |  |  | (2,038) |  |  | (3) | %
Segment net income |  | $ | 164,051 |  |  | $ | 173,982 |  |  | $ | (9,931) |  |  | (6) | %
Average loans |  | $ | 18,215,015 |  |  | $ | 16,405,433 |  |  | $ | 1,809,582 |  |  | 11 | %
Average deposits |  | $ | 33,755,409 |  |  | $ | 33,271,717 |  |  | $ | 483,692 |  |  | 1 | %

77

($ in thousands) |  | Nine Months Ended September 30,
|  |  |  |  | Change from 2022
| 2023 |  | 2022 |  | $ |  | %
Net interest income before provision for credit losses |  | $ | 927,173 |  |  | $ | 823,998 |  |  | $ | 103,175 |  |  | 13 | %
Noninterest income |  | 78,254 |  |  | 84,402 |  |  | (6,148) |  |  | (7) | %
Total revenue |  | 1,005,427 |  |  | 908,400 |  |  | 97,027 |  |  | 11 | %
Provision for credit losses |  | 22,169 |  |  | 14,976 |  |  | 7,193 |  |  | 48 | %
Noninterest expense |  | 327,476 |  |  | 294,395 |  |  | 33,081 |  |  | 11 | %
Segment income before income taxes |  | 655,782 |  |  | 599,029 |  |  | 56,753 |  |  | 9 | %
Income tax expense |  | 192,631 |  |  | 172,334 |  |  | 20,297 |  |  | 12 | %
Segment net income |  | $ | 463,151 |  |  | $ | 426,695 |  |  | $ | 36,456 |  |  | 9 | %
Average loans |  | $ | 17,653,442 |  |  | $ | 15,448,874 |  |  | $ | 2,204,568 |  |  | 14 | %
Average deposits |  | $ | 33,622,756 |  |  | $ | 33,272,271 |  |  | $ | 350,485 |  |  | 1 | %

Consumer and Business Banking segment net income decreased by $9.9 million or 6% year-over-year to $164.1 million for the third quarter of 2023. This decrease was primarily driven by decreases in net interest income and noninterest income, partially offset by a decrease in provision for credit losses. Net interest income before provision for credit losses decreased by $11.0 million or 3% year-over-year to $315.4 million for the third quarter of 2023. This decrease was primarily driven by an increase in loan FTP charges due to the year-over-year increase in market rates. Noninterest income decreased by $5.7 million or 18% to $25.1 million for the third quarter of 2023, mainly due to decreases in wealth management fees and deposit account fees.
Net income in this segment increased by $36.5 million or 9% year-over-year to $463.2 million for the first nine months of 2023. This increase was primarily driven by an increase in net interest income, partially offset by higher noninterest expense and income tax expense. Net interest income before provision for credit losses increased by $103.2 million or 13% year-over-year to $927.2 million for the first nine months of 2023. This increase was primarily driven by higher deposit FTP credits due to the year-over-year increase in market rates. Noninterest expense increased by $33.1 million or 11% year-over-year to $327.5 million for the first nine months of 2023, reflecting higher allocated corporate overhead expenses, compensation and employee benefits expense, deposit insurance premium and regulatory assessments, and deposit account expense.
Commercial Banking
The Commercial Banking segment primarily generates commercial loan and deposit products. Commercial loan products include CRE lending, construction finance, commercial business lending, working capital lines of credit, trade finance, letters of credit, affordable housing lending, asset-based lending, asset-backed finance, project finance and equipment financing. Commercial deposit products and other financial services include treasury management, foreign exchange services, and interest rate and commodity risk hedging.
78

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

|  | Three Months Ended September 30,
|  |  |  |  |  | Change from 2022
($ in thousands) |  | 2023 |  | 2022 |  | $ |  | %
Net interest income before provision for credit losses |  | $ | 242,345 |  |  | $ | 222,996 |  |  | $ | 19,349 |  |  | 9 | %
Noninterest income |  | 43,672 |  |  | 48,641 |  |  | (4,969) |  |  | (10) | %
Total revenue |  | 286,017 |  |  | 271,637 |  |  | 14,380 |  |  | 5 | %
Provision for credit losses |  | 40,367 |  |  | 18,026 |  |  | 22,341 |  |  | 124 | %
Noninterest expense |  | 87,556 |  |  | 81,386 |  |  | 6,170 |  |  | 8 | %
Segment income before income taxes |  | 158,094 |  |  | 172,225 |  |  | (14,131) |  |  | (8) | %
Income tax expense |  | 47,912 |  |  | 49,356 |  |  | (1,444) |  |  | (3) | %
Segment net income |  | $ | 110,182 |  |  | $ | 122,869 |  |  | $ | (12,687) |  |  | (10) | %
Average loans |  | $ | 31,673,847 |  |  | $ | 30,449,108 |  |  | $ | 1,224,739 |  |  | 4 | %
Average deposits |  | $ | 18,176,331 |  |  | $ | 16,627,353 |  |  | $ | 1,548,978 |  |  | 9 | %

($ in thousands) |  | Nine Months Ended September 30,
|  |  |  |  | Change from 2022
| 2023 |  | 2022 |  | $ |  | %
Net interest income before provision for credit losses |  | $ | 742,108 |  |  | $ | 662,037 |  |  | $ | 80,071 |  |  | 12 | %
Noninterest income |  | 129,809 |  |  | 145,750 |  |  | (15,941) |  |  | (11) | %
Total revenue |  | 871,917 |  |  | 807,787 |  |  | 64,130 |  |  | 8 | %
Provision for credit losses |  | 65,831 |  |  | 33,524 |  |  | 32,307 |  |  | 96 | %
Noninterest expense |  | 263,137 |  |  | 235,804 |  |  | 27,333 |  |  | 12 | %
Segment income before income taxes |  | 542,949 |  |  | 538,459 |  |  | 4,490 |  |  | 1 | %
Income tax expense |  | 159,280 |  |  | 154,222 |  |  | 5,058 |  |  | 3 | %
Segment net income |  | $ | 383,669 |  |  | $ | 384,237 |  |  | $ | (568) |  |  | 0 | %
Average loans |  | $ | 31,316,401 |  |  | $ | 29,099,646 |  |  | $ | 2,216,755 |  |  | 8 | %
Average deposits |  | $ | 17,419,190 |  |  | $ | 17,296,919 |  |  | $ | 122,271 |  |  | 1 | %

Commercial Banking segment net income decreased by $12.7 million or 10% year-over-year to $110.2 million for the third quarter of 2023. This decrease was due to higher provision for credit losses and noninterest expense and lower noninterest income, partially offset by higher net interest income. Net interest income before provision for credit losses increased $19.4 million or 9% year-over-year to $242.3 million for the third quarter of 2023. This increase was primarily due to higher loan interest income from commercial loan growth, partially offset by higher interest expense due to interest-bearing deposit growth. Noninterest income decreased by $5.0 million or 10% year-over-year to $43.7 million for the third quarter of 2023, mainly due to a decrease in foreign exchange income. Provision for credit losses increased $22.3 million or 124% year-over-year to $40.4 million for the third quarter of 2023, primarily driven by commercial loan growth as well as the current economic outlook. Noninterest expense increased $6.2 million or 8% year-over-year to $87.6 million for the third quarter of 2023, primarily due to higher deposit account expense.
Net income in this segment decreased by $568 thousand to $383.7 million for the first nine months of 2023. This decrease reflected higher provision for credit losses and noninterest expense and lower noninterest income, partially offset by higher net interest income. Net interest income before provision for credit losses increased $80.1 million or 12% year-over-year to $742.1 million for the first nine months of 2023. This increase was primarily due to higher loan interest income from commercial loan growth. Noninterest income decreased by $15.9 million or 11% year-over-year to $129.8 million for the first nine months of 2023, mainly due to decreases in interest rate contracts and other derivative income, net gains on sales of loans, and foreign exchange income. Provision for credit losses increased $32.3 million or 96% year-over-year to $65.8 million for the first nine months of 2023, primarily driven by commercial loan growth as well as the current economic outlook. Noninterest expense increased $27.3 million or 12% year-over-year to $263.1 million for the first nine months of 2023, primarily due to higher deposit account expense, allocated corporate overhead expenses and compensation and employee benefits.
79

Other
Centralized functions, including the corporate treasury activities of the Company and eliminations of inter-segment amounts, have been aggregated and included in the Other segment, which provides broad administrative support to the two core segments, namely the Consumer and Business Banking and the Commercial Banking segments.
The following tables present additional financial information for the Other segment for the periods indicated:

|  | Three Months Ended September 30,
|  |  |  |  |  | Change from 2022
($ in thousands) |  | 2023 |  | 2022 |  | $ |  | %
Net interest income before provision for credit losses |  | $ | 13,059 |  |  | $ | 2,402 |  |  | $ | 10,657 |  |  | 444 | %
Noninterest income (loss) |  | 7,948 |  |  | (3,908) |  |  | 11,856 |  |  | 303 | %
Total revenue (loss) |  | 21,007 |  |  | (1,506) |  |  | 22,513 |  |  | NM
Noninterest expense |  | 57,832 |  |  | 30,582 |  |  | 27,250 |  |  | 89 | %
Segment loss before income taxes |  | (36,825) |  |  | (32,088) |  |  | (4,737) |  |  | (15) | %
Income tax benefit |  | (50,330) |  |  | (30,576) |  |  | (19,754) |  |  | 65 | %
Segment net income (loss) |  | $ | 13,505 |  |  | $ | (1,512) |  |  | $ | 15,017 |  |  | NM
Average deposits |  | $ | 3,266,316 |  |  | $ | 4,152,463 |  |  | $ | (886,147) |  |  | (21) | %

($ in thousands) |  | Nine Months Ended September 30,
|  |  |  |  | Change from 2022
| 2023 |  | 2022 |  | $ |  | %
Net interest income (loss) before provision for credit losses |  | $ | 68,139 |  |  | $ | (45,661) |  |  | $ | 113,800 |  |  | 249 | %
Noninterest income |  | 7,298 |  |  | 3,587 |  |  | 3,711 |  |  | 103 | %
Total revenue (loss) |  | 75,437 |  |  | (42,074) |  |  | 117,511 |  |  | 279 | %
Noninterest expense |  | 141,637 |  |  | 72,084 |  |  | 69,553 |  |  | 96 | %
Segment loss before income taxes |  | (66,200) |  |  | (114,158) |  |  | 47,958 |  |  | 42 | %
Income tax benefit |  | (141,588) |  |  | (94,546) |  |  | (47,042) |  |  | 50 | %
Segment net income (loss) |  | $ | 75,388 |  |  | $ | (19,612) |  |  | $ | 95,000 |  |  | 484 | %
Average deposits |  | $ | 3,771,229 |  |  | $ | 3,499,816 |  |  | $ | 271,413 |  |  | 8 | %

The Other segment reported segment loss before income taxes of $36.8 million and segment net income of $13.5 million, reflecting an income tax benefit of $50.3 million, for the third quarter of 2023. The increase in segment loss before income taxes was primarily driven by higher noninterest expense, partially offset by increases in noninterest income and net interest income. The $10.7 million increase in net interest income before provision for credit losses for the third quarter of 2023 was primarily driven by higher investment interest income due to a balance increase in interest-bearing cash and deposits with banks and higher yields on debt securities and interest-bearing cash and deposits with banks, partially offset by higher costs of interest-bearing deposits and borrowings. Noninterest income increased by $11.9 million for the third quarter of 2023, mainly due to an increase in foreign exchange income. Noninterest expense increased $27.3 million for the third quarter of 2023, primarily due to the timing of investments that closed.
For the first nine months of 2023, the Other segment reported segment loss before income taxes of $66.2 million and segment net income of $75.4 million, reflecting an income tax benefit of $141.6 million. The decrease in segment loss before income taxes was primarily due to higher net interest income, partially offset by higher noninterest expense. The $113.8 million increase in net interest income before provision for credit losses for the first nine months of 2023 was primarily driven by higher investment interest income due to higher yields on interest-bearing cash and deposits with banks, and debt securities, and a higher FTP spread income absorbed by the Other segment, partially offset by higher costs of interest-bearing deposits and borrowings. Noninterest expense increased $69.6 million for the first nine months of 2023, reflecting the timing of investments that closed.
80

The income tax expense or benefit in the Other segment consists of the remaining unallocated income tax expense or benefit after allocating income tax expense to the two core segments, and reflects the impact of tax credit investment activity. Income tax expense is allocated to the Consumer and Business Banking and the Commercial Banking segments by applying statutory income tax rates to the segment income before income taxes. Tax credit investment amortization is allocated to the Other segment.
Balance Sheet Analysis
Debt Securities
The Company maintains a portfolio of high quality and liquid debt securities with a moderate duration profile. It closely manages the overall portfolio credit, interest rate and liquidity risks. The Company’s debt securities provide:
•interest income for earnings and yield enhancement;
•funding availability for needs arising during the normal course of business;
•the ability to execute interest rate risk management strategies in response to changes in economic or market conditions; and
•collateral to support pledging agreements as required and/or to enhance the Company’s borrowing capacity.
While the Company does not intend to sell its debt securities, it may sell AFS securities in response to changes in the balance sheet and related interest rate risk to meet liquidity, regulatory and strategic requirements.
81

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

|  | September 30, 2023 |  | December 31, 2022 |  |  |  |  |  | Ratings as of September 30, 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 |  | $ | 974,615 |  |  | $ | 904,101 |  |  |  | 15 | % |  | $ | 676,306 |  |  | $ | 606,203 |  |  |  | 10 | % |  |  |  |  |  | 100 | % |  | — | % |  | — | % |  | — | % |  | — | % |
U.S. government agency and U.S. government-sponsored enterprise debt securities |  | 512,712 |  |  | 447,464 |  |  |  | 7 | % |  | 517,806 |  |  | 461,607 |  |  |  | 8 | % |  |  |  |  |  | 100 | % |  | — | % |  | — | % |  | — | % |  | — | % |
U.S. government agency and U.S. government-sponsored enterprise mortgage-backed securities |  | 2,528,370 |  |  | 2,156,674 |  |  |  | 36 | % |  | 2,588,446 |  |  | 2,262,464 |  |  |  | 37 | % |  |  |  |  |  | 100 | % |  | — | % |  | — | % |  | — | % |  | — | % |
Municipal securities |  | 301,408 |  |  | 243,556 |  |  |  | 4 | % |  | 303,884 |  |  | 257,099 |  |  |  | 4 | % |  |  |  |  |  | 97 | % |  | — | % |  | — | % |  | — | % |  | 3 | % |
Non-agency mortgage-backed securities |  | 1,106,125 |  |  | 936,107 |  |  |  | 15 | % |  | 1,209,714 |  |  | 1,047,553 |  |  |  | 17 | % |  |  |  |  |  | 81 | % |  | — | % |  | — | % |  | — | % |  | 19 | % |
Corporate debt securities |  | 653,501 |  |  | 475,434 |  |  |  | 8 | % |  | 673,502 |  |  | 526,274 |  |  |  | 9 | % |  |  |  |  |  | — | % |  | 31 | % |  | 65 | % |  | 4 | % |  | — | % |
Foreign government bonds |  | 237,531 |  |  | 222,790 |  |  |  | 4 | % |  | 241,165 |  |  | 227,053 |  |  |  | 4 | % |  |  |  |  |  | 47 | % |  | 53 | % |  | — | % |  | — | % |  | — | % |
Asset-backed securities |  | 44,819 |  |  | 43,757 |  |  |  | 1 | % |  | 51,152 |  |  | 49,076 |  |  |  | 1 | % |  |  |  |  |  | 100 | % |  | — | % |  | — | % |  | — | % |  | — | % |
Collateralized loan obligations |  | 617,250 |  |  | 609,954 |  |  |  | 10 | % |  | 617,250 |  |  | 597,664 |  |  |  | 10 | % |  |  |  |  |  | 96 | % |  | 4 | % |  | — | % |  | — | % |  | — | % |
Total AFS debt securities |  | $ | 6,976,331 |  |  | $ | 6,039,837 |  |  |  | 100 | % |  | $ | 6,879,225 |  |  | $ | 6,034,993 |  |  |  | 100 | % |  |  |  |  |  | 87 | % |  | 5 | % |  | 5 | % |  | — | % |  | 3 | % |
HTM debt securities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
U.S. Treasury securities |  | $ | 528,169 |  |  | $ | 470,618 |  |  |  | 20 | % |  | $ | 524,081 |  |  | $ | 471,469 |  |  |  | 19 | % |  |  |  |  |  | 100 | % |  | — | % |  | — | % |  | — | % |  | — | % |
U.S. government agency and U.S. government-sponsored enterprise debt securities |  | 1,001,298 |  |  | 752,291 |  |  |  | 33 | % |  | 998,972 |  |  | 789,412 |  |  |  | 32 | % |  |  |  |  |  | 100 | % |  | — | % |  | — | % |  | — | % |  | — | % |
U.S. government agency and U.S. government-sponsored enterprise mortgage-backed securities |  | 1,245,675 |  |  | 949,564 |  |  |  | 41 | % |  | 1,289,106 |  |  | 1,042,310 |  |  |  | 43 | % |  |  |  |  |  | 100 | % |  | — | % |  | — | % |  | — | % |  | — | % |
Municipal securities |  | 189,093 |  |  | 135,575 |  |  |  | 6 | % |  | 189,709 |  |  | 151,980 |  |  |  | 6 | % |  |  |  |  |  | 100 | % |  | — | % |  | — | % |  | — | % |  | — | % |
Total HTM debt securities |  | $ | 2,964,235 |  |  | $ | 2,308,048 |  |  |  | 100 | % |  | $ | 3,001,868 |  |  | $ | 2,455,171 |  |  |  | 100 | % |  |  |  |  |  | 100 | % |  | — | % |  | — | % |  | — | % |  | — | % |
Total debt securities |  | $ | 9,940,566 |  |  | $ | 8,347,885 |  |  |  |  |  | $ | 9,881,093 |  |  | $ | 8,490,164 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |

(1)Credit ratings express opinions about the credit quality of a debt security. The Company determines the credit rating of a security according to the lowest credit rating made available by nationally recognized statistical rating organizations (“NRSROs”). Debt securities rated investment grade, which are those with ratings similar to BBB- or above (as defined by NRSROs), are generally considered by the rating agencies and market participants to be low credit risk. Ratings percentages are allocated based on fair value.
(2)For debt securities not rated by NRSROs, the Company uses other factors which include but are not limited to the priority in collections within the securitization structure, and whether the contractual payments have historically been on time.
As of September 30, 2023, the Company’s AFS and HTM debt securities portfolios had an effective duration (defined as the sensitivity of the value of the portfolio to interest rate changes) of 3.8 and 7.7, respectively, compared with 4.1 and 8.0, respectively, as of December 31, 2022. The modest decreases in both the AFS and HTM effective durations were due to the portfolio seasoning and reduced variation of optionality under the current interest rate environment.
Available-for-Sale Debt Securities
As of September 30, 2023, the fair value of the AFS debt securities portfolio was relatively unchanged at $6.04 billion from December 31, 2022. 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 $936.5 million as of September 30, 2023, compared with $844.2 million as of December 31, 2022.
82

As of both September 30, 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 September 30, 2023 and December 31, 2022. There was no allowance for credit losses provided against the AFS debt securities as of each of September 30, 2023 and December 31, 2022. Additionally, there were no credit losses recognized in earnings for both the third quarter and first nine months of 2023 and 2022.
Held-to-Maturity Debt Securities
All HTM debt securities were issued, guaranteed, or supported by the U.S. government or government-sponsored enterprises. Accordingly, the Company applied a zero credit loss assumption for these securities and no allowance for credit loss was recorded as of both September 30, 2023 and December 31, 2022.
For additional information on AFS and HTM securities, see Note 1 — Summary of Significant Accounting Policies to the Consolidated Financial Statements in the Company’s 2022 Form 10-K and Note 3 — Fair Value Measurement and Fair Value of Financial Instruments and Note 5 — Securities to the Consolidated Financial Statements in this Form 10-Q.
Loan Portfolio
The Company offers a broad range of financial products designed to meet the credit needs of its borrowers. The Company’s loan portfolio segments include commercial loans, which consist of commercial and industrial (“C&I”), CRE, multifamily residential, and construction and land loans, as well as consumer loans, which consist of single-family residential, home equity lines of credit (“HELOCs”) and other consumer loans. Loans held-for-investment totaled $50.91 billion as of September 30, 2023, an increase of $2.70 billion or 6% from $48.20 billion as of December 31, 2022. This growth was primarily driven by increases of $1.30 billion or 7% in total CRE loans and $1.27 billion or 9% in total residential mortgage loans. The composition of the loan portfolio as of September 30, 2023 was similar to the composition as of December 31, 2022.
The following table presents the composition of the Company’s total loan portfolio by loan type as of September 30, 2023 and December 31, 2022:

|  | September 30, 2023 |  | December 31, 2022 |  |
($ in thousands) |  | Amount |  | % |  | Amount |  | % |  |  |  |
Commercial: |  |  |  |  |  |  |  |  |  |  |  |
C&I |  | $ | 15,864,042 |  |  | 31 | % |  | $ | 15,711,095 |  |  | 33 | % |  |  |  |
CRE: |  |  |  |  |  |  |  |  |  |  |  |
CRE |  | 14,667,378 |  |  | 29 | % |  | 13,857,870 |  |  | 29 | % |  |  |  |
Multifamily residential |  | 4,900,097 |  |  | 10 | % |  | 4,573,068 |  |  | 9 | % |  |  |  |
Construction and land |  | 798,190 |  |  | 2 | % |  | 638,420 |  |  | 1 | % |  |  |  |
Total CRE |  | 20,365,665 |  |  | 41 | % |  | 19,069,358 |  |  | 39 | % |  |  |  |
Total commercial |  | 36,229,707 |  |  | 72 | % |  | 34,780,453 |  |  | 72 | % |  |  |  |
Consumer: |  |  |  |  |  |  |  |  |  |  |  |
Residential mortgage: |  |  |  |  |  |  |  |  |  |  |  |
Single-family residential |  | 12,836,558 |  |  | 25 | % |  | 11,223,027 |  |  | 23 | % |  |  |  |
HELOCs |  | 1,776,665 |  |  | 3 | % |  | 2,122,655 |  |  | 5 | % |  |  |  |
Total residential mortgage |  | 14,613,223 |  |  | 28 | % |  | 13,345,682 |  |  | 28 | % |  |  |  |
Other consumer |  | 64,254 |  |  | 0 | % |  | 76,295 |  |  | 0 | % |  |  |  |
Total consumer |  | 14,677,477 |  |  | 28 | % |  | 13,421,977 |  |  | 28 | % |  |  |  |
Total loans held-for-investment (1) |  | 50,907,184 |  |  | 100 | % |  | 48,202,430 |  |  | 100 | % |  |  |  |
Allowance for loan losses |  | (655,523) |  |  |  |  | (595,645) |  |  |  |  |  |  |
Loans held-for-sale (2) |  | 4,762 |  |  |  |  | 25,644 |  |  |  |  |  |  |
Total loans, net |  | $ | 50,256,423 |  |  |  |  | $ | 47,632,429 |  |  |  |  |  |  |

(1)Includes $72.0 million and $70.4 million comprising unamortized deferred and unearned fees, net of premiums as of September 30, 2023 and December 31, 2022, respectively.
(2)Consists of C&I loans as of both September 30, 2023 and December 31, 2022.
83

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

|  | September 30, 2023 |  |  |  | December 31, 2022
($ in thousands) |  | Amount |  | % |  | ($ in thousands) |  | Amount |  | %
Industry: |  |  |  |  |  | Industry: |  |  |  |
Private equity |  | $ | 2,422,674 |  |  | 15 | % |  | Private equity |  | $ | 2,238,723 |  |  | 14 | %
Media & entertainment |  | 1,794,897 |  |  | 11 | % |  | Media & entertainment |  | 1,841,719 |  |  | 12 | %
Real estate investment & management |  | 1,383,773 |  |  | 9 | % |  | Real estate investment & management |  | 1,272,169 |  |  | 8 | %
Manufacturing & wholesale |  | 900,674 |  |  | 6 | % |  | Manufacturing & wholesale |  | 1,091,933 |  |  | 7 | %
Infrastructure & clean energy |  | 878,025 |  |  | 6 | % |  | Infrastructure & clean energy |  | 820,095 |  |  | 5 | %
Tech & telecom |  | 668,514 |  |  | 4 | % |  | Food production & distribution |  | 738,636 |  |  | 5 | %
Food production & distribution |  | 648,224 |  |  | 4 | % |  | Tech & telecom |  | 618,719 |  |  | 4 | %
Hospitality & leisure |  | 597,753 |  |  | 4 | % |  | Hospitality & leisure |  | 562,234 |  |  | 4 | %
Oil & gas |  | 574,966 |  |  | 4 | % |  | Oil & gas |  | 519,784 |  |  | 3 | %
Healthcare services |  | 377,434 |  |  | 2 | % |  | Consumer goods |  | 425,214 |  |  | 3 | %
All other C&I |  | 5,617,108 |  |  | 35 | % |  | All other C&I |  | 5,581,869 |  |  | 35 | %
Total C&I |  | $ | 15,864,042 |  |  | 100 | % |  | Total C&I |  | $ | 15,711,095 |  |  | 100 | %

Commercial — Total Commercial Real Estate Loans. Total CRE loans totaled $20.37 billion as of September 30, 2023, which grew $1.30 billion or 7% from $19.07 billion as of December 31, 2022, and accounted for 41% of total loans held-for-investment as of September 30, 2023, compared with 39% as of December 31, 2022. The total CRE portfolio consists of CRE, multifamily residential, and construction and land loans, and affordable housing lending. The increase in total CRE loans was driven by well-diversified growth across our major property types, partially offset by a decrease in office CRE loans. The Company’s underwriting parameters for CRE loans are established in compliance with supervisory guidance, including: property type, geography and loan-to-value (“LTV”). The consistency of the Company’s low LTV underwriting standards has historically resulted in lower credit losses.
84

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

|  | September 30, 2023 |  | December 31, 2022
($ in thousands) |  | Amount |  | % |  | Amount |  | %
Property types: |  |  |  |  |  |  |  |
Multifamily |  | $ | 4,900,097 |  |  | 24 | % |  | $ | 4,573,068 |  |  | 24 | %
Retail (1) |  | 4,250,593 |  |  | 21 | % |  | 4,075,768 |  |  | 22 | %
Industrial (1) |  | 3,947,570 |  |  | 19 | % |  | 3,617,086 |  |  | 19 | %
Hotel (1) |  | 2,339,435 |  |  | 12 | % |  | 2,085,910 |  |  | 11 | %
Office (1) |  | 2,285,846 |  |  | 11 | % |  | 2,522,554 |  |  | 13 | %
Healthcare (1) |  | 836,882 |  |  | 4 | % |  | 796,577 |  |  | 4 | %
Construction and land |  | 798,190 |  |  | 4 | % |  | 638,420 |  |  | 3 | %
Other (1) |  | 1,007,052 |  |  | 5 | % |  | 759,975 |  |  | 4 | %
Total CRE loans |  | $ | 20,365,665 |  |  | 100 | % |  | $ | 19,069,358 |  |  | 100 | %

(1)Included in CRE loans, which is a subset of Total CRE loans.
The weighted-average LTV ratio of the total CRE loan portfolio was 51% as of both September 30, 2023 and December 31, 2022. Weighted average LTV is based on the most recent LTV, which is based on the latest available appraisal and current loan commitment. Approximately 91% of total CRE loans had an LTV ratio of 65% or lower as of September 30, 2023, compared with 90% as of December 31, 2022.
The following tables provide a summary of the Company’s CRE, multifamily residential, and construction and land loans by geography as of September 30, 2023 and December 31, 2022. The distribution of the total CRE loan portfolio reflects the Company’s geographical branch footprint, which is primarily concentrated in California:

|  | September 30, 2023
($ in thousands) |  | CRE |  | % |  | Multifamily Residential |  | % |  | Construction and Land |  | % |  | Total CRE |  | %
Geographic markets: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Southern California |  | $ | 7,552,830 |  |  | 51 | % |  | $ | 2,296,539 |  |  | 47 | % |  | $ | 297,311 |  |  | 37 | % |  | $ | 10,146,680 |  |  | 50 | %
Northern California |  | 2,729,784 |  |  | 19 | % |  | 988,375 |  |  | 20 | % |  | 246,404 |  |  | 31 | % |  | 3,964,563 |  |  | 19 | %
California |  | 10,282,614 |  |  | 70 | % |  | 3,284,914 |  |  | 67 | % |  | 543,715 |  |  | 68 | % |  | 14,111,243 |  |  | 69 | %
Texas |  | 1,111,775 |  |  | 8 | % |  | 445,144 |  |  | 9 | % |  | 20,720 |  |  | 3 | % |  | 1,577,639 |  |  | 8 | %
New York |  | 696,583 |  |  | 5 | % |  | 261,433 |  |  | 5 | % |  | 76,786 |  |  | 10 | % |  | 1,034,802 |  |  | 5 | %
Washington |  | 488,814 |  |  | 3 | % |  | 165,257 |  |  | 4 | % |  | 18,592 |  |  | 2 | % |  | 672,663 |  |  | 3 | %
Arizona |  | 357,997 |  |  | 2 | % |  | 149,327 |  |  | 3 | % |  | 28,496 |  |  | 3 | % |  | 535,820 |  |  | 3 | %
Nevada |  | 237,442 |  |  | 2 | % |  | 106,843 |  |  | 2 | % |  | 32,213 |  |  | 4 | % |  | 376,498 |  |  | 2 | %
Other markets |  | 1,492,153 |  |  | 10 | % |  | 487,179 |  |  | 10 | % |  | 77,668 |  |  | 10 | % |  | 2,057,000 |  |  | 10 | %
Total loans |  | $ | 14,667,378 |  |  | 100 | % |  | $ | 4,900,097 |  |  | 100 | % |  | $ | 798,190 |  |  | 100 | % |  | $ | 20,365,665 |  |  | 100 | %

85

|  | December 31, 2022
($ in thousands) |  | CRE |  | % |  | Multifamily Residential |  | % |  | Construction and Land |  | % |  | Total CRE |  | %
Geographic markets: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Southern California |  | $ | 7,233,902 |  |  | 52 | % |  | $ | 2,215,632 |  |  | 48 | % |  | $ | 222,425 |  |  | 35 | % |  | $ | 9,671,959 |  |  | 51 | %
Northern California |  | 2,798,840 |  |  | 20 | % |  | 890,002 |  |  | 20 | % |  | 235,732 |  |  | 37 | % |  | 3,924,574 |  |  | 20 | %
California |  | 10,032,742 |  |  | 72 | % |  | 3,105,634 |  |  | 68 | % |  | 458,157 |  |  | 72 | % |  | 13,596,533 |  |  | 71 | %
Texas |  | 1,150,401 |  |  | 8 | % |  | 410,872 |  |  | 9 | % |  | 2,153 |  |  | 0 | % |  | 1,563,426 |  |  | 8 | %
New York |  | 682,096 |  |  | 5 | % |  | 221,253 |  |  | 5 | % |  | 99,595 |  |  | 16 | % |  | 1,002,944 |  |  | 5 | %
Washington |  | 449,423 |  |  | 3 | % |  | 173,611 |  |  | 4 | % |  | 15,557 |  |  | 2 | % |  | 638,591 |  |  | 3 | %
Arizona |  | 291,114 |  |  | 2 | % |  | 95,460 |  |  | 2 | % |  | 297 |  |  | 0 | % |  | 386,871 |  |  | 2 | %
Nevada |  | 159,092 |  |  | 1 | % |  | 108,060 |  |  | 2 | % |  | 30,673 |  |  | 5 | % |  | 297,825 |  |  | 2 | %
Other markets |  | 1,093,002 |  |  | 9 | % |  | 458,178 |  |  | 10 | % |  | 31,988 |  |  | 5 | % |  | 1,583,168 |  |  | 9 | %
Total loans |  | $ | 13,857,870 |  |  | 100 | % |  | $ | 4,573,068 |  |  | 100 | % |  | $ | 638,420 |  |  | 100 | % |  | $ | 19,069,358 |  |  | 100 | %

As 69% and 71% of total CRE loans were concentrated in California as of September 30, 2023 and December 31, 2022, respectively, changes in California’s economy and real estate values could have a significant impact on the collectability of these loans and the required level of allowance for loan losses. For additional information related to the higher degree of risk from a downturn in the California real estate markets, see Item 1A. Risk Factors — Risks Related to Geopolitical Uncertainties to the Company’s 2022 Form 10-K.
Commercial — Commercial Real Estate Loans. The Company focuses on providing financing to experienced real estate investors and developers who have moderate levels of leverage, many of whom are long-time customers of the Bank. CRE loans totaled $14.67 billion as of September 30, 2023, compared with $13.86 billion as of December 31, 2022, and accounted for 29% of total loans held-for-investment as of both dates. Interest rates on CRE loans may be fixed, variable or hybrid. As of September 30, 2023, 60% of our CRE portfolio was variable rate, of which 50% had customer-level interest rate derivative contracts in place. These are hedging contracts offered by the Company to help our customers manage their interest rate risk while the Bank's own exposure remained variable rate. In comparison, as of December 31, 2022, 65% of our CRE portfolio was variable rate, of which 47% had customer-level interest rate derivative contracts in place. Loans are underwritten with conservative standards for cash flows, debt service coverage and LTV.
Owner-occupied properties comprised 20% of the CRE loans as of both September 30, 2023 and December 31, 2022. The remainder were non-owner-occupied properties, where 50% or more of the debt service for the loan is typically provided by rental income from an unaffiliated third party.
Commercial — Multifamily Residential Loans. The multifamily residential loan portfolio is largely comprised of loans secured by residential properties with five or more units. Multifamily residential loans totaled $4.90 billion as of September 30, 2023, compared with $4.57 billion as of December 31, 2022, and accounted for 10% and 9% of total loans held-for-investment as of September 30, 2023 and December 31, 2022, respectively. The Company offers a variety of first lien mortgages, including fixed- and variable-rate loans, as well as hybrid loans with interest rates that adjust annually after an initial fixed rate period of three to ten years. As of September 30, 2023, 54% of our multifamily residential loan portfolio was variable rate, of which 39% had customer-level interest rate derivative contracts in place. These are hedging contracts offered by the Company to help our customers manage their interest rate risk while the Bank's own exposure remained variable rate. In comparison, as of December 31, 2022, 57% of our multifamily residential loan portfolio was variable rate, of which 34% had customer-level interest rate derivative contracts in place.
Commercial — Construction and Land Loans. Construction and land loans provide financing for a portfolio of projects diversified by real estate property type. Construction and land loans totaled $798.2 million as of September 30, 2023, compared with $638.4 million as of December 31, 2022, and accounted for 2% and 1% of total loans held-for-investment as of September 30, 2023 and December 31, 2022, respectively. Construction loan exposure was made up of $655.2 million in loans outstanding, plus $699.0 million in unfunded commitments as of September 30, 2023, compared with $536.8 million in loans outstanding, plus $611.4 million in unfunded commitments as of December 31, 2022. Land loans totaled $143.0 million as of September 30, 2023, compared with $101.7 million as of December 31, 2022.
86

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

|  | September 30, 2023
($ in thousands) |  | Single-Family Residential |  | % |  | HELOCs |  | % |  | Total Residential Mortgage |  | %
Geographic markets: |  |  |  |  |  |  |  |  |  |  |  |
Southern California |  | $ | 4,750,136 |  |  | 37 | % |  | $ | 819,560 |  |  | 46 | % |  | $ | 5,569,696 |  |  | 38 | %
Northern California |  | 1,560,454 |  |  | 12 | % |  | 387,532 |  |  | 22 | % |  | 1,947,986 |  |  | 13 | %
California |  | 6,310,590 |  |  | 49 | % |  | 1,207,092 |  |  | 68 | % |  | 7,517,682 |  |  | 51 | %
New York |  | 4,274,703 |  |  | 33 | % |  | 252,036 |  |  | 14 | % |  | 4,526,739 |  |  | 31 | %
Washington |  | 688,842 |  |  | 6 | % |  | 195,881 |  |  | 11 | % |  | 884,723 |  |  | 6 | %
Massachusetts |  | 366,793 |  |  | 3 | % |  | 70,672 |  |  | 4 | % |  | 437,465 |  |  | 3 | %
Georgia |  | 401,471 |  |  | 3 | % |  | 16,822 |  |  | 1 | % |  | 418,293 |  |  | 3 | %
Nevada |  | 377,730 |  |  | 3 | % |  | 32,665 |  |  | 2 | % |  | 410,395 |  |  | 3 | %
Texas |  | 400,214 |  |  | 3 | % |  | — |  |  | — | % |  | 400,214 |  |  | 3 | %
Other markets |  | 16,215 |  |  | 0 | % |  | 1,497 |  |  | 0 | % |  | 17,712 |  |  | 0 | %
Total |  | $ | 12,836,558 |  |  | 100 | % |  | $ | 1,776,665 |  |  | 100 | % |  | $ | 14,613,223 |  |  | 100 | %
Lien priority: |  |  |  |  |  |  |  |  |  |  |  |
First mortgage |  | $ | 12,836,558 |  |  | 100 | % |  | $ | 1,412,482 |  |  | 80 | % |  | $ | 14,249,040 |  |  | 98 | %
Junior lien mortgage |  | — |  |  | — | % |  | 364,183 |  |  | 20 | % |  | 364,183 |  |  | 2 | %
Total |  | $ | 12,836,558 |  |  | 100 | % |  | $ | 1,776,665 |  |  | 100 | % |  | $ | 14,613,223 |  |  | 100 | %

|  | December 31, 2022
($ in thousands) |  | Single-Family Residential |  | % |  | HELOCs |  | % |  | Total Residential Mortgage |  | %
Geographic markets: |  |  |  |  |  |  |  |  |  |  |  |
Southern California |  | $ | 4,142,623 |  |  | 37 | % |  | $ | 959,632 |  |  | 45 | % |  | $ | 5,102,255 |  |  | 38 | %
Northern California |  | 1,294,721 |  |  | 11 | % |  | 492,921 |  |  | 23 | % |  | 1,787,642 |  |  | 14 | %
California |  | 5,437,344 |  |  | 48 | % |  | 1,452,553 |  |  | 68 | % |  | 6,889,897 |  |  | 52 | %
New York |  | 3,964,779 |  |  | 35 | % |  | 286,285 |  |  | 14 | % |  | 4,251,064 |  |  | 32 | %
Washington |  | 632,892 |  |  | 6 | % |  | 236,434 |  |  | 11 | % |  | 869,326 |  |  | 7 | %
Massachusetts |  | 299,051 |  |  | 3 | % |  | 85,590 |  |  | 4 | % |  | 384,641 |  |  | 3 | %
Georgia |  | 303,615 |  |  | 3 | % |  | 21,493 |  |  | 1 | % |  | 325,108 |  |  | 2 | %
Texas |  | 316,771 |  |  | 3 | % |  | — |  |  | — | % |  | 316,771 |  |  | 2 | %
Nevada |  | 253,702 |  |  | 2 | % |  | 40,300 |  |  | 2 | % |  | 294,002 |  |  | 2 | %
Other markets |  | 14,873 |  |  | 0 | % |  | — |  |  | — | % |  | 14,873 |  |  | 0 | %
Total |  | $ | 11,223,027 |  |  | 100 | % |  | $ | 2,122,655 |  |  | 100 | % |  | $ | 13,345,682 |  |  | 100 | %
Lien priority: |  |  |  |  |  |  |  |  |  |  |  |
First mortgage |  | $ | 11,223,027 |  |  | 100 | % |  | $ | 1,770,741 |  |  | 83 | % |  | $ | 12,993,768 |  |  | 97 | %
Junior lien mortgage |  | — |  |  | — | % |  | 351,914 |  |  | 17 | % |  | 351,914 |  |  | 3 | %
Total |  | $ | 11,223,027 |  |  | 100 | % |  | $ | 2,122,655 |  |  | 100 | % |  | $ | 13,345,682 |  |  | 100 | %

87

Consumer — Single-Family Residential Loans. Single-family residential loans totaled $12.84 billion or 25% of total loans held-for-investment as of September 30, 2023, compared with $11.22 billion or 23% of total loans held-for-investment as of December 31, 2022. Single-family residential loans increased $1.61 billion or 14% from December 31, 2022, primarily driven by organic growth in mortgages and residential properties in California and New York. The Company was in a first lien position for all of its single-family residential loans as of both September 30, 2023 and December 31, 2022. Many of these loans are reduced documentation loans, for which a substantial down payment is required, resulting in a low LTV ratio at origination, typically 65% or less. The weighted-average LTV ratio was 53% as of both dates. These loans have historically experienced low delinquency and loss rates. The Company offers a variety of single-family residential first lien mortgage loan programs, including fixed- and variable-rate loans, as well as hybrid loans with interest rates that adjust on a regular basis, typically annually, after an initial fixed rate period.
Consumer — Home Equity Lines of Credit. Total HELOC commitments were $5.31 billion as of September 30, 2023, a decrease of $190.5 million or 3% from $5.50 billion as of December 31, 2022, with a utilization rate of 33% as of September 30, 2023, compared with 39% as of December 31, 2022. A majority of unfunded HELOC commitments are unconditionally cancellable. HELOCs outstanding totaled $1.78 billion or 3% of total loans held-for-investment as of September 30, 2023, compared with $2.12 billion or 5% of total loans held-for-investment as of December 31, 2022. HELOCs outstanding decreased $346.0 million or 16% from December 31, 2022. The Company was in a first lien position for 80% and 83% of total outstanding HELOCs as of September 30, 2023 and December 31, 2022, respectively. The weighted-average LTV ratio was 48% on HELOC commitments as of September 30, 2023, compared with 49% as of December 31, 2022. Weighted-average LTV ratio represents the loan’s balance divided by the estimated current property value. For junior lien home equity loans, combined LTV ratios are used for junior lien home equity products. Many of these loans are reduced documentation loans, for which a substantial down payment is required, resulting in a low LTV ratio at origination, typically 65% or less. As a result, these loans have historically experienced low delinquency and loss rates. Substantially all of the Company’s HELOCs were variable-rate loans as of both September 30, 2023 and December 31, 2022.
All originated commercial and consumer loans are subject to the Company’s conservative underwriting guidelines and loan origination standards. Management believes that the Company’s underwriting criteria and procedures adequately consider the unique risks associated with these products. The Company conducts a variety of quality control procedures and periodic audits, including the review of lending and legal requirements, to ensure that the Company is in compliance with these requirements.
88

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 September 30, 2023 and December 31, 2022:

|  | September 30, 2023 |  | December 31, 2022
($ in thousands) |  | Amount |  | % of Total Consolidated Assets |  | Amount |  | % of Total Consolidated Assets
Hong Kong branch: |  |  |  |  |  |  |  |
Cash and cash equivalents |  | $ | 543,497 |  |  | 1 | % |  | $ | 911,784 |  |  | 1 | %
Interest-bearing deposits with banks |  | $ | — |  |  | — | % |  | $ | 28,772 |  |  | 0 | %
AFS debt securities (1) |  | $ | 579,226 |  |  | 1 | % |  | $ | 281,804 |  |  | 0 | %
Loans held-for-investment (2) |  | $ | 862,116 |  |  | 1 | % |  | $ | 968,450 |  |  | 2 | %
Total assets |  | $ | 1,995,583 |  |  | 3 | % |  | $ | 2,212,606 |  |  | 3 | %
Subsidiary bank in China: |  |  |  |  |  |  |  |
Cash and cash equivalents |  | $ | 603,667 |  |  | 1 | % |  | $ | 556,656 |  |  | 1 | %
AFS debt securities (3) |  | $ | 118,523 |  |  | 0 | % |  | $ | 122,053 |  |  | 0 | %
Loans held-for-investment (2) |  | $ | 1,301,045 |  |  | 2 | % |  | $ | 1,170,437 |  |  | 2 | %
Total assets |  | $ | 2,016,267 |  |  | 3 | % |  | $ | 1,836,811 |  |  | 3 | %

(1)Comprised of U.S. Treasury securities and foreign government bonds as of both September 30, 2023 and December 31, 2022.
(2)Primarily comprised of C&I loans as of both September 30, 2023 and December 31, 2022.
(3)Comprised of foreign government bonds as of both September 30, 2023 and December 31, 2022.
The following table presents the total revenue generated by the Company’s overseas offices for the third quarters and first nine months of 2023 and 2022:

($ in thousands) |  | Three Months Ended September 30, |  | Nine Months Ended September 30,
| 2023 |  | 2022 |  | 2023 |  | 2022
| Amount |  | % of Total Consolidated Revenue |  | Amount |  | % of Total Consolidated Revenue |  | Amount |  | % of Total Consolidated Revenue |  | Amount |  | % of Total Consolidated Revenue
Hong Kong Branch: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Total revenue |  | $ | 13,906 |  |  | 2 | % |  | $ | 14,296 |  |  | 2 | % |  | $ | 41,479 |  |  | 2 | % |  | $ | 32,405 |  |  | 2 | %
Subsidiary Bank in China: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Total revenue |  | $ | 6,788 |  |  | 1 | % |  | $ | 11,616 |  |  | 2 | % |  | $ | 26,098 |  |  | 1 | % |  | $ | 30,652 |  |  | 2 | %

Capital
The Company maintains a strong capital base to support its anticipated asset growth, operating needs, and credit risks, and to ensure that the Company and the Bank are in compliance with all regulatory capital guidelines. The Company engages in regular capital planning processes on at least an annual basis to optimize the use of available capital and to appropriately plan for future capital needs, allocating capital to existing and future business activities. Furthermore, the Company conducts capital stress tests as part of its capital planning process. The stress tests enable the Company to assess the impact of adverse changes in the economy and interest rates on its capital base.
The Company’s stockholders’ equity was $6.60 billion as of September 30, 2023, an increase of $612.1 million or 10% from $5.98 billion as of December 31, 2022. The increase in the Company’s stockholders’ equity was primarily due to $922.2 million of net income, partially offset by $205.7 million of common dividends declared and $109.7 million of other comprehensive loss. For other factors that contributed to the changes in stockholders’ equity, refer to Item 1. Consolidated Financial Statements — Consolidated Statement of Changes in Stockholders’ Equit y in this Form 10-Q.
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Book value per share was $46.62 as of September 30, 2023, an increase of 10% from $42.46 per share as of December 31, 2022, primarily as a result of the factors described above. Tangible book value per share was $43.29 as of September 30, 2023, compared with $39.10 as of December 31, 2022. For additional details, see the reconciliation of non-GAAP measures presented under Item 2. MD&A — Reconciliation of GAAP to Non-GAAP Financial Measures in this Form 10-Q.
The Company paid a quarterly common stock cash dividend of $0.48 and $0.40 per share during the third quarters of 2023 and 2022, respectively. In October 2023, the Company’s Board of Directors declared fourth quarter 2023 cash dividend of $0.48 per share. The dividend is payable on November 15, 2023, to stockholders of record as of November 1, 2023. In addition, the Company publicly announced in October 2023, that the Board approved the resumption of share repurchases under the previously authorized stock repurchase plan of $500.0 million of the Company’s common stock, of which $254.0 million was available as of September 30, 2023.
Deposits and Other Sources of Funding
Deposits are the Company’s primary source of funding, the cost of which has a significant impact on the Company’s net interest income and net interest margin. Additional funding is provided by short- and long-term borrowings, and long-term debt. See Item 2. MD&A — Risk Management — Liquidity Risk Management — Liquidity in this Form 10-Q for a discussion of the Company’s liquidity management. The following table summarizes the Company’s sources of funding as of September 30, 2023 and December 31, 2022:

|  | September 30, 2023 |  | December 31, 2022 |  | Change
($ in thousands) |  | Amount |  | % |  | Amount |  | % |  | $ |  | %
Deposits: |  |  |  |  |  |  |  |  |  |  |  |
Noninterest-bearing demand |  | $ | 16,169,072 |  |  | 29 | % |  | $ | 21,051,090 |  |  | 38 | % |  | $ | (4,882,018) |  |  | (23) | %
Interest-bearing checking |  | 7,689,289 |  |  | 14 | % |  | 6,672,165 |  |  | 12 | % |  | 1,017,124 |  |  | 15 | %
Money market |  | 12,613,827 |  |  | 23 | % |  | 12,265,024 |  |  | 22 | % |  | 348,803 |  |  | 3 | %
Savings |  | 1,963,766 |  |  | 4 | % |  | 2,649,037 |  |  | 4 | % |  | (685,271) |  |  | (26) | %
Time deposits |  | 16,651,077 |  |  | 30 | % |  | 13,330,533 |  |  | 24 | % |  | 3,320,544 |  |  | 25 | %
Total deposits |  | $ | 55,087,031 |  |  | 100 | % |  | $ | 55,967,849 |  |  | 100 | % |  | $ | (880,818) |  |  | (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 |  | 148,173 |  |  | 3 | % |  | 147,950 |  |  | 33 | % |  | 223 |  |  | 0 | %
Total other funds |  | $ | 4,648,173 |  |  | 100 | % |  | $ | 447,950 |  |  | 100 | % |  | $ | 4,200,223 |  |  | NM
Total sources of funds |  | $ | 59,735,204 |  |  |  |  | $ | 56,415,799 |  |  |  |  | $ | 3,319,405 |  |  | 6 | %

NM — Not meaningful.
Deposits
The Company’s strategy is to grow and retain relationship-based deposits to provide a stable and low-cost source of funding and liquidity. Accordingly, the Company offers a wide variety of deposit products to meet the needs of its consumer and commercial customers. As a result, the Company’s deposit base is seasoned, stable and well-diversified. The following chart presents the Company’s deposits by customer segment as of September 30, 2023 and December 31, 2022.
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Total deposits were $55.09 billion as of September 30, 2023, a decrease of $880.8 million or 2% from $55.97 billion as of December 31, 2022. The decrease in deposits was primarily driven by lower brokered deposits, partially offset by an increase in customer deposits. The Company paid down a portion of its brokered deposits as of September 30, 2023, which decreased the percentage of brokered deposits to total deposits to 4% from 6% as of December 31, 2022. Noninterest-bearing demand deposits comprised 29% and 38% of total deposits as of September 30, 2023 and December 31, 2022, respectively.
Uninsured deposits represent the portion of deposit accounts in U.S. offices that exceed the FDIC insurance limit. The Company calculates its uninsured deposits based on the methodologies and assumptions used for regulatory reporting. Total uninsured deposit balances reported on Schedule RC-OM item 2 of the Bank’s Call report were $26.46 billion and $31.04 billion as of September 30, 2023 and December 31, 2022, respectively.
The following table summarizes the Company’s uninsured deposits information as of September 30, 2023 and December 31, 2022, after certain adjustments:

($ in thousands) |  |  | September 30, 2023 |  | December 31, 2022
Uninsured deposits, per regulatory reporting requirements |  |  | $ | 26,464,794 |  |  | $ | 31,036,308 |
Less: Collateralized deposits |  |  | (3,826,088) |  |  | (3,780,329) |
Affiliate deposits |  |  | (318,804) |  |  | (352,977) |
Uninsured deposits, excluding collateralized and affiliate deposits | (a) |  | $ | 22,319,902 |  |  | $ | 26,903,002 |
Total domestic deposits | (b) |  | $ | 52,602,805 |  |  | $ | 53,225,764 |
Uninsured deposits, excluding collateralized and affiliate deposits ratio | (a) / (b) |  | 42 | % |  | 51 | %

Management believes that presenting uninsured deposits excluding collateralized and affiliate deposits provides a more accurate view of the deposits at risk, given that the collateralized deposits are secured, and the affiliate deposits are not customer-facing and are eliminated in consolidation. The Company’s domestic uninsured deposits, excluding collateralized and affiliate deposits ratio improved to 42% as of September 30, 2023, compared with 51% as of December 31, 2022. The Company offers an ICS product that allows customers to insure deposits above FDIC insurance limits. Increasing customer demand for the ICS product has contributed to the improvement in the uninsured deposits, excluding collateralized and affiliate deposits ratio.
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Additional information regarding the impact of deposits on net interest income, with a comparison of average deposit balances and rates, is provided in Item 2. MD&A — Results of Operations — Net Interest Income in this Form 10-Q. See also the discussion of the impact of deposits on liquidity at Item 2. MD&A — Liquidity Risk Management — Liquidity in this Form 10-Q.
Other Sources of Funding
The Company had $4.50 billion of short-term borrowings outstanding as of September 30, 2023, consisting of funds borrowed from the BTFP in March 2023. These borrowings were more cost effective than other borrowing sources and have a positive carry as cash placed at the Federal Reserve Bank. There were no short-term borrowings outstanding as of December 31, 2022. Refer to Note 10 — Short-Term Borrowings and Long-Term Debt to the Consolidated Financial Statements in this Form 10-Q for additional information on the BTFP and the Company’s related borrowings.
Repurchase agreements were $300.0 million as of December 31, 2022. The Company extinguished $300.0 million of repurchase agreements during the first quarter of 2023. The Company recorded $3.9 million of charges related to the extinguishment of repurchase agreements during the first nine months of 2023. For additional details, see Note 4 — Assets Purchased under Resale Agreements and Sold under Repurchase Agreements to the Consolidated Financial Statements in this Form 10-Q.
The Company uses long-term debt to provide funding to acquire interest-earning assets, and to enhance liquidity and regulatory capital adequacy. Long-term debt consists of junior subordinated debt, which qualifies as Tier 2 capital for regulatory capital purposes. Refer to Note 10 — Short-Term Borrowings and Long-Term Debt to the Consolidated Financial Statements in this Form 10-Q for additional information on the junior subordinated debt.
Regulatory Capital and Ratios
The federal banking agencies have risk-based capital adequacy requirements intended to ensure that banking organizations maintain capital that is commensurate with the degree of risk associated with their operations. The Company and the Bank are each subject to these regulatory capital adequacy requirements. See Item 1. Business — Supervision and Regulation — Regulatory Capital Requirements and Regulatory Capital-Related Development in the Company’s 2022 Form 10-K for additional details.
The Company adopted Accounting Standards Update 2016-13 on January 1, 2020, which requires the measurement of the allowance for credit losses to be based on management’s best estimate of lifetime expected credit losses inherent in the Company’s relevant financial assets. The Company has elected the phase-in option provided by a final rule that delays an estimate of the current expected credit losses (“CECL”) effect on regulatory capital for two years and phases in the impact over three years. The rule permits certain banking organizations to exclude from regulatory capital the initial adoption impact of CECL, plus 25% of the cumulative changes in the allowance for credit losses under CECL for each period until December 31, 2021, followed by a three-year phase-out period in which the aggregate benefit is reduced by 25% in 2022, 50% in 2023 and 75% in 2024. Accordingly, our capital ratios as of September 30, 2023 reflect a delay of 50% of the estimated impact of CECL on regulatory capital.
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The following table presents the Company’s and the Bank’s capital ratios as of September 30, 2023 and December 31, 2022 under the Basel III Capital Rules, and those required by regulatory agencies for capital adequacy and well-capitalized classification purposes:

|  | Basel III Capital Rules |  |
|  | September 30, 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) |  | 13.3 | % |  | 12.9 | % |  | 12.7 | % |  | 12.5 | % |  | 4.5 | % |  | 7.0 | % |  | 6.5 | % |  |
Tier 1 capital (1) |  | 13.3 | % |  | 12.9 | % |  | 12.7 | % |  | 12.5 | % |  | 6.0 | % |  | 8.5 | % |  | 8.0 | % |  |
Total capital |  | 14.7 | % |  | 14.1 | % |  | 14.0 | % |  | 13.5 | % |  | 8.0 | % |  | 10.5 | % |  | 10.0 | % |  |
Tier 1 leverage (1) |  | 10.2 | % |  | 9.8 | % |  | 9.8 | % |  | 9.7 | % |  | 4.0 | % |  | 4.0 | % |  | 5.0 | % |  |

(1)The Common Equity Tier 1 capital and Tier 1 leverage well-capitalized requirements apply only to the Bank since there is no Common Equity Tier 1 capital component or Tier 1 leverage ratio component in the definition of a well-capitalized bank holding company. The well-capitalized Tier 1 capital ratio requirements for the Company and the Bank are 6.0% and 8.0%, respectively.
The Company is committed to maintaining strong capital levels to assure its investors, customers and regulators that the Company and the Bank are financially sound. As of both September 30, 2023 and December 31, 2022, the Company and the Bank continued to exceed all “well-capitalized” capital requirements and the required minimum capital requirements under the Basel III Capital Rules. Total risk-weighted assets were $52.95 billion as of September 30, 2023, an increase of $2.91 billion from $50.04 billion as of December 31, 2022. The increase in the risk-weighted assets was due to growth across all major loan portfolios.
Risk Management
Overview
In the normal course of business, the Company is exposed to a variety of risks, some of which are inherent to the financial services industry and others of which are more specific to the Company’s business. The Company operates under a Board-approved enterprise risk management (“ERM”) framework, which outlines the company-wide approach to risk management and oversight, and describes the structures and practices employed to manage the current and emerging risks inherent to the Company. The Company’s ERM program incorporates risk management throughout the organization in identifying, managing, monitoring, and reporting risks. It identifies the Company’s major risk categories as: credit, liquidity, capital, market, operational, compliance, legal, strategic, technology and reputational.
The Risk Oversight Committee of the Board of Directors monitors the ERM program through such identified risk categories and provides oversight of the Company’s risk appetite and control environment. The Risk Oversight Committee provides focused oversight of the Company’s identified enterprise risk categories on behalf of the full Board of Directors. Under the direction of the Risk Oversight Committee, management committees apply targeted strategies to manage 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 Internal Audit and Independent Asset Review (“IAR”), Internal Audit reports to the Chief Audit Executive (“CAE”) who reports to the Board’s Audit Committee. Internal Audit provides assurance and evaluates the effectiveness of risk management, control, and governance processes as established by the Company. IAR serves as an internal loan review and independent credit risk monitoring function within the Bank that works under the direction of the CAE and reports to the Board’s Risk Oversight Committee (“ROC”). IAR provides management and the ROC with an objective and independent assessment of the Bank’s credit profile and credit risk management process. Further discussion and analysis of selected primary risk areas are discussed in the following subsections of Risk Management.
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Credit Risk Management
Credit risk is the risk that a borrower or a counterparty will fail to perform according to the terms and conditions of a loan or investment and expose the Company to loss. Credit risk exists with many of the Company’s assets and exposures such as loans, 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 liquidity, all of which enable management to control credit risk. At the management level, the Credit Risk Management Committee has primary oversight responsibility for credit risk. The Senior Credit Supervision function manages credit policy for the line of business transactional credit risk, assuring that all exposure is risk-rated according to the requirements of the credit risk rating policy. The Senior Credit Supervision function evaluates and reports the overall credit risk exposure to senior management and the Risk Oversight Committee. Reporting directly to the Board’s Risk Oversight Committee, the IAR function provides additional support to the Company’s strong credit risk management culture by performing an independent and objective assessment of underwriting and documentation quality. A key focus of our credit risk management is adherence to a well-controlled underwriting and audit monitoring process.
The Company assesses the overall credit quality performance of the loans held-for-investment portfolio through an integrated analysis of specific performance ratios. This approach forms the basis of the discussion in the sections immediately following: Credit Quality, Nonperforming Assets and Allowance for Credit Losses.
Credit Quality
The Company utilizes a credit risk rating system to assist in monitoring credit quality. Loans are evaluated using the Company’s internal credit risk rating of 1 through 10. For more information on the Company’s credit quality indicators and internal credit risk ratings, refer to Note 7 — Loans Receivable and Allowance for Credit Losses to the Consolidated Financial Statements in this Form 10-Q.
The following table presents the Company’s criticized loans as of September 30, 2023 and December 31, 2022:

|  |  |  |  |  | Change
($ in thousands) |  | September 30, 2023 |  | December 31, 2022 |  | $ |  | %
Criticized loans: |  |  |  |  |  |  |  |
Special mention loans |  | $ | 483,428 |  |  | $ | 468,471 |  |  | $ | 14,957 |  |  | 3 | %
Classified loans (1) |  | 538,258 |  |  | 427,509 |  |  | 110,749 |  |  | 26 | %
Total criticized loans (2) |  | $ | 1,021,686 |  |  | $ | 895,980 |  |  | $ | 125,706 |  |  | 14 | %
Special mention loans to loans held-for-investment |  | 0.95 | % |  | 0.97 | % |  |  |  |
Classified loans to loans held-for-investment |  | 1.06 | % |  | 0.89 | % |  |  |  |
Criticized loans to loans held-for-investment |  | 2.01 | % |  | 1.86 | % |  |  |  |

(1)Consists of substandard, doubtful and loss categories.
(2)Excludes loans held-for-sale.
Nonperforming Assets
Nonperforming assets are comprised of nonaccrual loans, other real estate owned (“OREO”) and other nonperforming assets. Other nonperforming assets and OREO are repossessed assets and properties, respectively, acquired through foreclosure, or through full or partial satisfaction of loans held-for-investment. Nonperforming assets were $103.7 million or 0.15% of total assets as of September 30, 2023, an increase of $3.9 million or 4%, compared with $99.8 million or 0.16% of total assets as of December 31, 2022.
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The following table presents nonperforming assets information as of September 30, 2023 and December 31, 2022:

|  |  |  |  |  | Change
($ in thousands) |  | September 30, 2023 |  | December 31, 2022 |  | $ |  | %
Commercial: |  |  |  |  |  |  |  |
C&I |  | $ | 49,147 |  |  | $ | 50,428 |  |  | $ | (1,281) |  |  | (3) | %
CRE: |  |  |  |  |  |  |  |
CRE |  | 610 |  |  | 23,244 |  |  | (22,634) |  |  | (97) | %
Multifamily residential |  | 4,680 |  |  | 169 |  |  | 4,511 |  |  | NM
Construction and land |  | 11,141 |  |  | — |  |  | 11,141 |  |  | 100 | %
Total CRE |  | 16,431 |  |  | 23,413 |  |  | (6,982) |  |  | (30) | %
Consumer: |  |  |  |  |  |  |  |
Residential mortgage: |  |  |  |  |  |  |  |
Single-family residential |  | 24,784 |  |  | 14,240 |  |  | 10,544 |  |  | 74 | %
HELOCs |  | 13,202 |  |  | 11,346 |  |  | 1,856 |  |  | 16 | %
Total residential mortgage |  | 37,986 |  |  | 25,586 |  |  | 12,400 |  |  | 48 | %
Other consumer |  | 136 |  |  | 99 |  |  | 37 |  |  | 37 | %
Total nonaccrual loans |  | 103,700 |  |  | 99,526 |  |  | 4,174 |  |  | 4 | %
OREO, net |  | — |  |  | 270 |  |  | (270) |  |  | (100) | %
Total nonperforming assets |  | $ | 103,700 |  |  | $ | 99,796 |  |  | $ | 3,904 |  |  | 4 | %
Nonperforming assets to total assets |  | 0.15 | % |  | 0.16 | % |  |  |  |
Nonaccrual loans to loans held-for-investment |  | 0.20 | % |  | 0.21 | % |  |  |  |
Allowance for loan losses to nonaccrual loans |  | 632.13 | % |  | 598.48 | % |  |  |  |

NM — Not meaningful.
Loans are generally placed on nonaccrual status when they become 90 days past due or when the full collection of principal or interest becomes uncertain regardless of the length of past due status. Collectability is generally assessed based on economic and business conditions, the borrower’s financial condition, and the adequacy of collateral, if any. For additional details regarding the Company’s nonaccrual loan policy, see Note 1 — Summary of Significant Accounting Policies — Significant Accounting Policies — Loans Held-for-Investment to the Consolidated Financial Statements in the Company’s 2022 Form 10-K.
Nonaccrual loans were $103.7 million as of September 30, 2023, compared with $99.8 million as of December 31, 2022. Increases in construction, multifamily and single-family residential nonaccrual loans were predominantly offset by sales of CRE nonaccrual loans. As of September 30, 2023, $40.6 million or 39% of nonaccrual loans were less than 90 days delinquent. In comparison, $68.3 million or 69% of nonaccrual loans were less than 90 days delinquent as of December 31, 2022.
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The following table presents the accruing loans past due by portfolio segment as of September 30, 2023 and December 31, 2022:

|  |  |  | Total Accruing Past Due Loans (1) |  | Change |  | Percentage of Total Loans Outstanding
($ in thousands) |  |  |  | September 30, 2023 |  | December 31, 2022 |  | $ |  | % |  | September 30, 2023 |  | December 31, 2022
Commercial: |  |  |  |  |  |  |  |  |  |  |  |  |  |
C&I |  |  |  | $ | 33,427 |  |  | $ | 9,355 |  |  | $ | 24,072 |  |  | 257 | % |  | 0.21 | % |  | 0.06 | %
CRE: |  |  |  |  |  |  |  |  |  |  |  |  |  |
CRE |  |  |  | 2,538 |  |  | 14,185 |  |  | (11,647) |  |  | (82) | % |  | 0.02 | % |  | 0.10 | %
Multifamily residential |  |  |  | 1,083 |  |  | 1,000 |  |  | 83 |  |  | 8 | % |  | 0.02 | % |  | 0.02 | %
Total CRE |  |  |  | 3,621 |  |  | 15,185 |  |  | (11,564) |  |  | (76) | % |  | 0.02 | % |  | 0.08 | %
Total commercial |  |  |  | 37,048 |  |  | 24,540 |  |  | 12,508 |  |  | 51 | % |  | 0.10 | % |  | 0.07 | %
Consumer: |  |  |  |  |  |  |  |  |  |  |  |  |  |
Residential mortgage: |  |  |  |  |  |  |  |  |  |  |  |  |  |
Single-family residential |  |  |  | 40,113 |  |  | 25,653 |  |  | 14,460 |  |  | 56 | % |  | 0.31 | % |  | 0.23 | %
HELOCs |  |  |  | 16,622 |  |  | 8,786 |  |  | 7,836 |  |  | 89 | % |  | 0.94 | % |  | 0.41 | %
Total residential mortgage |  |  |  | 56,735 |  |  | 34,439 |  |  | 22,296 |  |  | 65 | % |  | 0.39 | % |  | 0.26 | %
Other consumer |  |  |  | 126 |  |  | 3,192 |  |  | (3,066) |  |  | (96) | % |  | 0.20 | % |  | 4.18 | %
Total consumer |  |  |  | 56,861 |  |  | 37,631 |  |  | 19,230 |  |  | 51 | % |  | 0.39 | % |  | 0.28 | %
Total |  |  |  | $ | 93,909 |  |  | $ | 62,171 |  |  | $ | 31,738 |  |  | 51 | % |  | 0.18 | % |  | 0.13 | %

(1)There were no accruing loans past due 90 days or more as of both September 30, 2023 and December 31, 2022.
Allowance for Credit Losses
The Company maintains the allowance for credit losses at a level sufficient to provide appropriate reserves to absorb estimated future credit losses in accordance with GAAP. For additional information on the policies, methodologies and judgments used to determine the allowance for credit losses, see Item 7. MD&A — Critical Accounting Estimates and Item 8. Financial Statements — Note 1 — Summary of Significant Accounting Policies to the Consolidated Financial Statements in the Company’s 2022 Form 10-K, and Note 7 — Loans Receivable and Allowance for Credit Losses to the Consolidated Financial Statements in this Form 10-Q.
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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 September 30, 2023 and December 31, 2022:

|  | September 30, 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 |  | $ | 383,677 |  |  | 31 | % |  | $ | 371,700 |  |  | 33 | % |  |  |  |
CRE: |  |  |  |  |  |  |  |  |  |  |  |
CRE |  | 178,040 |  |  | 29 | % |  | 149,864 |  |  | 29 | % |  |  |  |
Multifamily residential |  | 24,162 |  |  | 10 | % |  | 23,373 |  |  | 10 | % |  |  |  |
Construction and land |  | 9,216 |  |  | 2 | % |  | 9,109 |  |  | 1 | % |  |  |  |
Total CRE |  | 211,418 |  |  | 41 | % |  | 182,346 |  |  | 40 | % |  |  |  |
Total commercial |  | 595,095 |  |  | 72 | % |  | 554,046 |  |  | 73 | % |  |  |  |
Consumer: |  |  |  |  |  |  |  |  |  |  |  |
Residential mortgage: |  |  |  |  |  |  |  |  |  |  |  |
Single-family residential |  | 54,930 |  |  | 25 | % |  | 35,564 |  |  | 23 | % |  |  |  |
HELOCs |  | 3,795 |  |  | 3 | % |  | 4,475 |  |  | 4 | % |  |  |  |
Total residential mortgage |  | 58,725 |  |  | 28 | % |  | 40,039 |  |  | 27 | % |  |  |  |
Other consumer |  | 1,703 |  |  | 0 | % |  | 1,560 |  |  | 0 | % |  |  |  |
Total consumer |  | 60,428 |  |  | 28 | % |  | 41,599 |  |  | 27 | % |  |  |  |
Total allowance for loan losses |  | $ | 655,523 |  |  | 100 | % |  | $ | 595,645 |  |  | 100 | % |  |  |  |
Allowance for unfunded credit commitments |  | $ | 33,589 |  |  |  |  | $ | 26,264 |  |  |  |  |  |  |
Total allowance for credit losses |  | $ | 689,112 |  |  |  |  | $ | 621,909 |  |  |  |  |  |  |
Loans held-for-investment |  | $ | 50,907,184 |  |  |  |  | $ | 48,202,430 |  |  |  |  |  |  |
Allowance for loan losses to loans held-for-investment |  | 1.29 | % |  |  |  | 1.24 | % |  |  |  |  |  |
|  | Three Months Ended September 30, |  | Nine Months Ended September 30, |  |  |  |
|  | 2023 |  | 2022 |  | 2023 |  | 2022 |  |  |  |
Average loans held-for-investment |  | $ | 49,888,205 |  |  | $ | 46,845,030 |  |  | $ | 48,966,981 |  |  | $ | 44,544,863 |  |  |  |  |
Annualized net charge-offs to average loans held-for-investment |  | 0.14 | % |  | 0.06 | % |  | 0.07 | % |  | 0.02 | % |  |  |  |

Third quarter of 2023 net charge-offs were $18.1 million, or annualized 0.14% of average loans held-for-investment, compared with net charge-offs of $6.6 million, or annualized 0.06% of average loans held-for-investment for the third quarter of 2022. Net charge-offs in the first nine months of 2023 were $26.3 million or annualized 0.07% of average loans held-for-investment, compared with $8.3 million or annualized 0.02% of average loans held-for-investment for the first nine months of 2022. The increases in net charge-offs in both periods were primarily driven by higher losses in the construction and land portfolio and the CRE portfolio, as well as lower recoveries in the C&I portfolio. These increases were partially offset by lower charge-offs in the multifamily residential portfolio.
Liquidity Risk Management
Liquidity
Liquidity risk arises from the Company’s inability to meet its customer deposit withdrawals and obligations to other counterparties as they come due, or to obtain adequate funding at a reasonable cost to meet those obligations. Liquidity risk also considers the stability of deposits. The objective of liquidity management is to manage the potential mismatch of asset and liability cash flows. Maintaining an adequate level of liquidity depends on the institution’s ability to efficiently meet both expected and unexpected cash flow and collateral needs without adversely affecting daily operations or the financial condition of the institution. To achieve this objective, the Company analyzes its liquidity risk, maintains readily available liquid assets, and utilizes diverse funding sources including its stable core deposit base.
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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, and provides regular reports on the Company’s liquidity position relative to policy limits and guidelines to the Board of Directors. The Company’s liquidity management practices have been effective under normal operating and stressed market conditions.
The Company also maintains a Liquidity Contingency Plan to detect early-warning indicators of liquidity problems and provide timely response. The Liquidity Contingency Plan describes the procedures, roles and responsibilities, and communication protocols for managing any identified liquidity problem. Management monitors the early-warning indicators defined in the Liquidity Contingency Plan, which are categorized according to their relevance to liquidity, ratings, market conditions, credit performance, or financial performance. Other indicators can include company specific or systemic events, as well as market speculation, rumors about the Company, or the banking industry in general. When early-warning signals are detected, the ALCO is informed, and the problem is evaluated for severity. The ALCO will determine the course of action and appropriate contingency funding sources, if any, that are needed.
Liquidity Risk — Liquidity Sources. The Company’s primary source of funding is from deposits generated by its banking business, which we believe is a relatively stable and low-cost source of funding. Our loans are funded by deposits, which amounted to $55.09 billion as of September 30, 2023, compared with $55.97 billion as of December 31, 2022. The Company’s loan-to-deposit ratio was 92% as of September 30, 2023, compared with 86% as of December 31, 2022.
In addition to deposits, the Company has access to various sources of wholesale financing, including borrowing capacity with the FHLB and Federal Reserve Bank of San Francisco (“FRBSF”), such as under the BTFP, unsecured federal funds lines of credit with various correspondent banks, and several master repurchase agreements with major brokerage companies to sustain an adequate liquid asset portfolio, meet daily cash demands and allow management flexibility to execute its business strategy. However, general financial market and economic conditions could impact our access and cost of external funding. Additionally, the Company’s access to capital markets is affected by the ratings received from various credit rating agencies.
Unencumbered loans and/or debt securities were pledged to the FHLB, the FRBSF discount window, and the FRBSF BTFP as collateral. The Company has established operational procedures to enable borrowing against these assets, including regular monitoring of the total pool of loans and debt securities eligible as collateral. Eligibility of collateral is defined in guidelines from the FHLB and FRBSF and is subject to change at their discretion. See Item 2 — MD&A — Balance Sheet Analysis — Deposits and Other Sources of Funding in this Form 10-Q for further details related to the Company’s funding sources. The Company believes its cash and cash equivalents and available borrowing capacity described below provide sufficient liquidity above its expected cash needs.
The Company maintains its source of liquidity in the form of cash and cash equivalents and borrowing capacity with its eligible loans and debt securities as collateral. The following table presents the Company’s total cash and cash equivalents and borrowing capacity as of September 30, 2023 and December 31, 2022:

|  |  |  |  |  | Change
($ in thousands) |  | September 30, 2023 |  | December 31, 2022 |  | $ |  | %
Cash and cash equivalents |  | $ | 4,561,178 |  |  | $ | 3,481,784 |  |  | $ | 1,079,394 |  |  | 31 | %
Interest-bearing deposits with banks |  | 17,213 |  |  | 139,021 |  |  | (121,808) |  |  | (88) | %
Borrowing capacity: |  |  |  |  |  |  |  |
FHLB |  | 13,715,609 |  |  | 12,773,996 |  |  | 941,613 |  |  | 7 | %
FRBSF |  | 8,480,896 |  |  | 2,049,048 |  |  | 6,431,848 |  |  | 314 | %
Unpledged available securities |  | 1,806,702 |  |  | 6,939,591 |  |  | (5,132,889) |  |  | (74) | %
Federal funds facility |  | 946,000 |  |  | 1,136,000 |  |  | (190,000) |  |  | (17) | %
Total |  | $ | 29,527,598 |  |  | $ | 26,519,440 |  |  | $ | 3,008,158 |  |  | 11 | %

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The Company’s total cash and cash equivalents and borrowing capacity totaled $29.53 billion as of September 30, 2023, compared with $26.52 billion as of December 31, 2022. The increase was primarily related to an increase in collateral available at the FRBSF and an increase in cash and cash equivalents, which was funded by borrowings from the BTFP in the first quarter of 2023. The BTFP borrowings were secured by pledged securities and reflected the Company’s conservative liquidity management practices in response to the volatility in the banking industry earlier in the year.
Liquidity Risk — Cash Requirements. In the ordinary course of business, the Company enters contractual obligations that require future cash payments, including funding for customer deposit withdrawals, repayments for short- and long-term borrowings, and other cash commitments. For additional information on these obligations, see Note 9 — Deposits to the Consolidated Financial Statements in the Company’s 2022 Form 10-K, and Note 4 — Assets Purchased under Resale Agreements and Sold under Repurchase Agreements, Note 8 — Investments in Qualified Affordable Housing Partnerships, Tax Credit and Other Investments, Net and Variable Interest Entities and Note 10 — Short-Term Borrowings and Long-Term Debt to the Consolidated Financial Statements in this Form 10-Q.
The Company also has off-balance sheet arrangements which represent transactions that are not recorded on the Consolidated Balance Sheet. The Company’s off-balance sheet arrangements include (1) commitments to extend credit, such as loan commitments, commercial letters of credit for foreign and domestic trade, standby letters of credit (“SBLCs”), and financial guarantees, to meet the financing needs of its customers, (2) future interest obligations related to customer deposits and the Company’s borrowings, and (3) transactions with unconsolidated entities that provide financing, liquidity, market risk or credit risk support to the Company, or engage in leasing, hedging or research and development services with the Company. Because many of these commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future funding requirements. The Company does not expect the total commitment amounts as of September 30, 2023 to have a material current or future impact on the Company’s financial conditions or results of operations. Information about the Company’s loan commitments, commercial letters of credit and SBLCs is provided in Note 11 — Commitments and Contingencies to the Consolidated Financial Statements in this Form 10-Q.
The Consolidated Statement of Cash Flows summarizes the Company’s sources and uses of cash by type of activity for the nine months ended September 30, 2023 and 2022. Excess cash generated by operating and investing activities may be used to repay outstanding debt or invest in liquid assets.
Liquidity Risk — Liquidity for East West. In addition to bank level liquidity management, the Company manages liquidity at the parent company level for various operating needs including payment of dividends, repurchases of common stock, principal and interest payments on its borrowings, acquisitions and additional investments in its subsidiaries. East West’s primary source of liquidity is from cash dividends distributed by its subsidiary, East West Bank. The Bank is subject to various statutory and regulatory restrictions on its ability to pay dividends as discussed in Item 1. Business — Supervision and Regulation — Dividends and Other Transfers of Funds in the Company’s 2022 Form 10-K. East West held $263.2 million and $228.5 million in cash and cash equivalents as of September 30, 2023 and December 31, 2022, respectively. Management believes that East West has sufficient cash and cash equivalents to meet the projected cash obligations for the coming year.
Liquidity Risk — Liquidity Stress Testing. The Company utilizes liquidity stress analysis to determine the appropriate amounts of liquidity to maintain at the Company, foreign subsidiary and foreign branch to meet contractual and contingent cash outflows under a range of scenarios. Scenario analyses include assumptions about significant changes in key funding sources, market triggers, potential uses of funding and economic conditions in certain countries. In addition, Company-specific events are incorporated into the stress testing. For example, based on the Company’s analysis of the banking industry disruption earlier in 2023, deposit runoffs were assumed to be more front-loaded to trigger earlier remediation actions. Liquidity stress tests are conducted to ascertain potential mismatches between liquidity sources and uses over a variety of time horizons, both immediate and longer term, and over a variety of stressed conditions. Given the range of potential stresses, the Company maintains contingency funding plans on a consolidated basis and for individual entities.
As of September 30, 2023, the Company believes it has adequate liquidity resources to conduct operations and meet other needs in the ordinary course of business, and is not aware of any events that are reasonably likely to have a material adverse effect on its liquidity, capital resources or operations. Given the uncertain and rapidly changing market and economic conditions, the Company will continue to actively evaluate the impact on its business and financial position. For more details on how economic conditions may impact our liquidity, see Item 1A. Risk Factors in the Company’s 2022 Form 10-K.
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Market Risk Management
Market risk refers to the risk of potential loss due to adverse movements in market risk factors, including interest rates, foreign exchange rates, commodity prices, and credit spreads. The Company is primarily exposed to interest rate risk through its core business activities of extending loans and acquiring deposits. There have been no significant changes in our risk management practices as described in Item 7. MD&A — Market Risk Management in the Company’s 2022 Form 10-K.
Interest Rate Risk Management
Interest rate risk is the risk that market fluctuations in interest rates can have a negative impact on the Company’s earnings and capital stemming from mismatches in the Company’s asset and liability cash flows primarily arising from customer-related activities such as lending and deposit-taking. The Company is subject to interest rate risk because:
•Assets and liabilities may mature or reprice at different times. If assets reprice faster than liabilities and interest rates are generally rising, earnings will initially increase;
•Assets and liabilities may reprice at the same time but by different amounts;
•Short- and long-term market interest rates may change by different amounts. For example, the shape of the yield curve may affect the yield of new loans and funding costs differently;
•The remaining maturity of various assets or liabilities may shorten or lengthen as interest rates change. For example, if long-term mortgage interest rates increase sharply, mortgage-related products may pay down at a slower rate than anticipated, which could impact portfolio income and valuation; or
•Interest rates may have a direct or indirect effect on loan demand, collateral values, mortgage origination volume, and the fair value of other financial instruments.
The ALCO coordinates the overall management of the Company’s interest rate risk, meets regularly to review the Company’s open market positions and establishes policies to monitor and limit exposure to market risk. Interest rate risk management is carried out primarily through strategies involving the Company’s loan portfolio, debt securities portfolio, available funding channels and capital market activities. In addition, the Company’s policies permit the use of derivative instruments to assist in managing interest rate risk.
We measure and monitor interest rate risk exposure through various risk management tools, which include a simulation model that performs interest rate sensitivity analyses under multiple interest rate scenarios against a baseline. The simulation model incorporates the market’s forward rate expectations and the Company’s earning assets and liabilities. The Company uses both a static balance sheet and a forward growth balance sheet to perform the interest rate sensitivity analyses. The simulated interest rate scenarios include an instantaneous non-parallel shift in the yield curve and a gradual non-parallel shift in the yield curve (“rate ramp”). In addition, the Company also performs simulations using other alternative interest rate scenarios, including various permutations of the yield curve flattening, steepening or inverting. The Company uses the results of these simulations to formulate and gauge strategies to achieve a desired risk profile within its capital and liquidity guidelines.
The net interest income simulation model is based on the maturity and repricing characteristics of the Company’s interest rate sensitive assets, liabilities, and related derivative contracts. This model also incorporates various assumptions, which management believes to be reasonable but that may have a significant impact on the results. These key assumptions include the timing and magnitude of changes in interest rates, the yield curve evolution and shape, the correlation between various interest rate indices, financial instruments’ future repricing characteristics and spread relative to benchmark rates, and the effect of interest rate floors and caps. The modeled results are highly sensitive to deposit decay and deposit beta assumptions, which we derive from a regression analysis of the Company’s historical deposit data.
Simulation results are highly dependent on modeled behaviors and input assumptions. To the extent that actual behaviors are different from the assumptions used in the models, there could be material changes to the interest rate sensitivity results. The key behavioral models impacting interest rate sensitivity simulations include deposit repricing, deposit balance forecasts, and mortgage prepayments. These models and assumptions are documented, supported, and periodically back-tested to assess the reasonableness and effectiveness. The Company also regularly monitors the sensitivity of the other important modeling assumptions, such as loan and security prepayments and early withdrawal on fixed-rate customer liabilities. The Company makes appropriate calibrations to the model as needed and continually validates the model, methodology and results. Changes to key model assumptions are reviewed by the ALCO. Scenario results do not reflect strategies that the management could employ to limit the impact of changing interest rate expectations. The simulation does not represent a forecast of the Company’s net interest income but is a tool utilized to assess the risk of the impact of changing market interest rates across a range of interest rate environments.
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The Company employs a variety of quantitative and qualitative approaches to capture historical deposit repricing and balance behaviors. These historical observations are performed at a granular level based on key product characteristics, including distinctions for brokered, public, and large commercial deposits, which are then combined with forward-looking market expectations and the competitive landscape to generate the deposit repricing and balance forecasting models. The Company uses these deposit repricing models to forecast deposit interest expense. The repricing models provide sufficient granularity to reflect key behavioral differences across product and customer types. The deposit beta is a key parameter of the deposit rate forecast. The deposit beta defines the sensitivity of deposit rates to changes in the Effective Fed Funds Rate (“EFFR”).
The Company recalibrated its deposit repricing models and betas in December 2022, and qualitatively increased the long run (through the cycle) betas in March, June, and September of 2023 to better reflect increased competition and higher terminal fed funds rates than previously observed in the historical data. Overall, the Company observed a weighted average increase of the deposit beta for total deposits of approximately 5% in March 2023 (taking total deposit beta to 39% as of March 31, 2023), an additional 5% in June 2023 (taking total deposit beta to 44% as of June 30, 2023), and an additional 2% in September 2023 (taking total deposit beta to 46% as of September 30, 2023). These increases reflected the Company’s forward-looking views of deposit rates given the expected EFFR at the time. The Company also modified deposit balance runoff models in December 2022, to better capture behavioral differences across product and customer types and carved out stable and non-stable balances to reflect the volatility and interest rate sensitivity of such deposit balances. The assumptions used for the identification of stable balances were updated in June and September 2023 to reflect a larger portion of potential non-stable balances.
Additionally, to reflect changes in interest expense due to the shift from noninterest-bearing to interest-bearing accounts in the deposit mix, the Company utilized a qualitative assumption in March 2023. This assumption considered the amount of surplus noninterest-bearing deposits assumed to be rate sensitive and migrated them to interest-bearing deposits. This assumption was included in the net interest income volatility simulations to reflect more realistic net interest income volatility in rising rate scenarios. The qualitative assumption was enhanced in June 2023 with a more robust quantitative approach. This updated approach incorporated internally observed historical data reflecting the evolution of noninterest-bearing deposits as a percent of total deposits, based on the historical behavior observed during the prior rising interest rate cycle. The assumption forecasts that a portion of noninterest-bearing deposits would migrate to interest-bearing certificates of deposits as the 12-month moving average of the overnight indexed swap rate increases.
In the net interest income simulations, the Company also makes assumptions on the yield related to the re-investment of investment securities and the yields on new loan originations. These assumptions are updated quarterly to reflect recent market conditions as well as forward-looking expectations. In March 2023, loans and deposits with cash flows indexed to China related benchmark interest rates were removed from the interest rate scenario shocks, which reduced net interest income sensitivity by approximately 0.4%.
As loan and security prepayment assumptions are key components of the Company’s model, the Company incorporates third-party vendor models to forecast prepayment behavior on mortgage loans and securities which have mortgage loans as underlying collateral. These third-party vendor models have access to more comprehensive industry-level data which can capture specific borrower and collateral characteristics over a variety of interest rate cycles. The Company will periodically assess and adjust the vendor models when appropriate to include its own available observations and expectations. In March 2023, the Company updated its version of the asset liability management simulation tool and vendor prepayment model. This change updated the calibration of the vendor model to better fit recent data and better supported the transition from London Interbank Offered Rate (“LIBOR”) to Secured Overnight Financing Rate (“SOFR”) indexed loans. Overall, the update had minimal impact on forecasted prepayments. During the third quarter 2023, the Company updated the vendor prepayment model tuning factors to slow down prepayment speeds on single-family residential mortgages so that it better aligned with actual and expected prepayments.
During the third quarter 2023, the Company replaced the U.S. dollar (“USD”) LIBOR Swap curve and rates with the respective SOFR Swap and SOFR reference rates. This change had a minimal impact on the overall results of net interest income and economic value of equity (“EVE”) simulations as the overall yields and discount rates were not impacted.
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Twelve-Month Net Interest Income Simulation
Net interest income simulation modeling measures interest rate risk through earnings volatility. The simulation projects the cash flow changes in interest rate sensitive assets and liabilities, expressed in terms of net interest income, over a specified time horizon for defined interest rate scenarios. Net interest income simulations 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 September 30, 2023 and December 31, 2022, on a balance sheet assuming flat forward rates and flat loan and deposit growth on the date of analysis. The non-parallel shift scenarios were calibrated internally based on historical analysis. As of December 31, 2022, the up 100 and 200 bps scenarios reflected parallel shifts due to the significant inversion of the yield curve while the down 100 and 200 bps scenarios reflected a bull steepening yield curve.

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

(1)The percentage change represents net interest income change over a 12-month period in a stable interest rate environment versus in the various interest rate scenarios.
The composition of the Company’s loan portfolio creates sensitivity to interest rate movements due to a mismatch of repricing behavior between the floating-rate loan portfolio and deposit products. In the table above, net interest income volatility expressed in relation to base-case net interest income decreased as of September 30, 2023. This decrease reflected updates to the deposit repricing assumptions and deposit product mix. Noninterest-bearing deposit account balances are assumed to be sensitive to interest rate levels and migrate to interest-bearing deposit accounts.
The Company also models scenarios based on gradual shifts in interest rates and assesses the corresponding impacts. These interest rate scenarios provide additional information to estimate the Company’s underlying interest rate risk. The rate ramp table below shows the net interest income volatility under a gradual non-parallel shift of the yield curve, in even monthly increments over the first 12 months, followed by rates held constant thereafter based on a flat balance sheet as of the date of the analysis.

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

As of September 30, 2023, the Company’s net interest income profile reflects an asset sensitive position, where assets reprice faster or more significantly than liabilities. Net interest income is expected to increase when interest rates rise as the Company has a large population of variable rate loans, primarily tied to Prime and Term SOFR indices. The Company’s interest income is sensitive to changes in short-term interest rates. As of September 30, 2023, the Company designated interest rate contracts with a notional amount of $4.75 billion as cash flow hedges, which reduced net interest income volatility by approximately 2.73% of the base net interest income for every 100 bps change in interest rate.
The Company’s deposit portfolio is primarily composed of non-maturity deposits, which are not directly tied to short-term interest rate indices, but are, nevertheless, sensitive to changes in short-term interest rates. The modeled results are highly sensitive to modeled behavior and assumptions. Actual net interest income results may deviate from the model’s net interest income due to earning asset growth variation and deposit mix changes based on customer preferences relative to the interest rate environment. During a period of declining interest rates, balance sheet growth could offset headwinds to net interest income from yield compression.
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Economic Value of Equity at Risk
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’s assets and liabilities due to changes in interest rates.
The economic value approach provides a comparatively broader scope than the net interest income volatility approach since it represents the discounted present value of cash flows over the expected life of the instruments. Due to this longer horizon, EVE is useful to identify risks arising from repricing, prepayment and maturity gaps between assets and liabilities on the balance sheet, as well as from off-balance sheet derivative exposures, over their lifetime. This long-term economic perspective into the Company’s interest rate risk profile allows the Company to identify anticipated negative effects of interest rate fluctuations. However, the difference in time horizons can cause the EVE analysis to diverge from the shorter-term 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 September 30, 2023 and December 31, 2022. The non-parallel shift scenarios were calibrated internally based on historical analysis. As of December 31, 2022, the up 100 and 200 bps scenarios reflect parallel shifts due to the significant inversion of the yield curve while the down 100 and 200 bps scenarios reflect a bull steepening of the yield curve.

|  | EVE Volatility (1)
Change in Interest Rates (in bps) |  | September 30, 2023 |  | December 31, 2022
+200 |  | (12.3) | % |  | (6.0) | %
+100 |  | (6.1) | % |  | (2.9) | %
-100 |  | 2.6 | % |  | 1.1 | %
-200 |  | 5.5 | % |  | 2.3 | %

(1)The percentage change represents net portfolio value change of the Company in a stable interest rate environment versus in the various interest rate scenarios.
As of September 30, 2023, the Company’s EVE is expected to decrease when interest rates rise. The change in EVE sensitivity was due to shorter deposit durations as a result of deposit modeling assumptions, slower prepayments on fixed-rate mortgages and mortgage-backed securities, and additional cash flow hedges to reduce net interest income volatility.
Derivatives
It is the Company’s policy not to speculate on the future direction of interest rates, foreign currency exchange rates and commodity prices. However, the Company periodically enters into derivative transactions in order to manage its exposure to market risk, primarily interest rate risk and foreign currency risk. The Company believes these derivative transactions, when properly structured and managed, provide a hedge against inherent risk in certain assets and liabilities or against risk in specific transactions. Hedging transactions may be implemented using a variety of derivative instruments such as swaps, forwards, options, and collars. The Company uses interest rate swaps to hedge the variability in interest received on certain floating-rate commercial loans and interest paid on certain floating-rate borrowings. Foreign exchange derivatives are used in net investment hedging strategies to mitigate the risk of changes in the USD equivalent value of a designated monetary amount of the Company’s net investment in East West Bank (China) Limited. Prior to entering into any accounting hedge activities, the Company analyzes the costs and benefits of the hedge in comparison to alternative strategies. The Company also repositions its hedging derivatives portfolio based on the current assessment of economic and financial conditions, including the interest rate and foreign currency environments, balance sheet composition and trends, and the relative mix of its cash and derivative positions.
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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 fair value changes of the derivative contracts traded with third-party financial institutions are expected to be largely comparable to the fair value changes of the derivative transactions executed with customers throughout the terms of these contracts, except for the credit valuation adjustment component in the contracts and the spread variances between the customer derivatives and the offsetting financial counterparty positions. The Company also utilizes foreign exchange contracts that are not designated as hedging instruments to mitigate the economic effect of fluctuations in certain foreign currency on-balance sheet assets and liabilities, primarily foreign currency denominated deposits offered to its customers.
The Company is subject to credit risk associated with the counterparties to the derivative contracts. This counterparty credit risk is a multi-dimensional form of risk, affected by both the exposure and credit quality of the counterparty, both of which are sensitive to market-induced changes. The Company’s Credit Risk Management Committee provides oversight of credit risk and the Company has guidelines in place to manage counterparty concentration, tenor limits, and collateral. The Company manages the credit risk of its derivative positions by diversifying its positions among various counterparties, by entering into legally enforceable master netting agreements, and by requiring collateral arrangements, where possible. The Company may also transfer counterparty credit risk related to interest rate swaps to institutional third-parties through the use of credit risk participation agreements. Certain derivative contracts are required to be cleared through central clearinghouses, to further mitigate counterparty credit risk, where variation margin is applied daily as settlement to the fair value of the derivative contracts. In addition, the Company incorporates credit value adjustments and other market standard methodologies to appropriately reflect the counterparty’s and the Company’s own nonperformance risk in the fair value measurement of its derivatives. As of September 30, 2023, the Company anticipates performance by its counterparties and has not incurred any related credit losses.
The following table summarizes certain information on derivative instruments designated as accounting hedges and utilized by the Company in its management of interest rate and foreign currency risk as of September 30, 2023 and December 31, 2022:

|  | September 30, 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 |  | $ | 4,000,000 |  | (3)(4) | $ | — |  |  | $ | 3,000,000 |  | (3) | $ | 200,000 |
Weighted average: |  |  |  |  |  |  |  |
Receive rate |  | 4.95 | % |  | NA |  | 4.91 | % |  | 3.83 | %
Pay rate |  | 7.31 | % |  | NA |  | 6.23 | % |  | 0.48 | %
Remaining term (in months) |  | 38.8 |  |  | NA |  | 46.6 |  |  | 3.2 |
($ in thousands) |  | Foreign Exchange Contracts |  | Foreign Exchange Contracts
Net investment hedges |  |  |  |  |  |  |  |
Notional amount |  | $ | 81,480 |  |  |  | $ | 84,832 |  |
Hedged percentage (5) |  | 44 | % |  |  |  | 44 | % |  |
Remaining term (in months) |  | 5.7 |  |  |  |  | 2.6 |  |  |

NA — Not applicable.
(1)Represents receive-fixed/pay-floating interest rate swaps and excludes interest rate collars. Floating rates paid are based on SOFR, or Prime.
(2)Represents receive-floating/pay-fixed interest rate swaps. Floating rate received was based on three-month LIBOR. The hedge was terminated during the first quarter of 2023.
(3)Excludes interest rate collars in total notional amount of $250.0 million as of both September 30, 2023 and December 31, 2022.
(4)Excludes forward-starting swaps in total notional amount of $750.0 million not effective as of September 30, 2023.
(5)Represents percentage between the notional of outstanding foreign exchange contracts and the net RMB exposure from East West Bank (China) Limited.
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Additional information on the Company’s derivatives is presented in Note 1 — Summary of Significant Accounting Policies — Significant Accounting Policies — Derivatives to the Consolidated Financial Statements in the Company’s 2022 Form 10-K, Note 3 — Fair Value Measurement and Fair Value of Financial Instruments, and Note 6 — Derivatives to the Consolidated Financial Statements in this Form 10-Q.
Critical Accounting Policies and Estimates
The Company’s significant accounting policies are described in Note 1 — Summary of Significant Accounting Policies to the Consolidated Financial Statements in the Company’s 2022 Form 10-K. Certain of these policies include critical accounting estimates, which are subject to valuation assumptions, subjective or complex judgments about matters that are inherently uncertain, and it is likely that materially different amounts could be reported under different assumptions and conditions. The Company has procedures and processes in place to facilitate making these judgments. The following accounting policies are critical to the Company’s Consolidated Financial Statements:
•allowance for credit losses;
•fair value estimates;
•goodwill impairment; and
•income taxes.
For additional information on the Company’s critical accounting estimates involving significant judgments, see Item 7. MD&A — Critical Accounting Estimates in the Company’s 2022 Form 10-K.
Reconciliation of GAAP to Non-GAAP Financial Measures
To supplement the Company’s unaudited interim Consolidated Financial Statements presented in accordance with U.S. GAAP, the Company uses certain non-GAAP measures of financial performance. Non-GAAP financial measures are not prepared in accordance with, or as an alternative to U.S. GAAP. Generally, a non-GAAP financial measure is a numerical measure of a company’s performance that either excludes or includes amounts, or is subject to adjustments that have such an effect, that are not normally excluded or included in the most directly comparable financial measure that is calculated and presented in accordance with U.S. GAAP. The non-GAAP financial measures discussed in this Form 10-Q are return on average TCE, adjusted efficiency ratio, and tangible book value per share. Certain additional non-GAAP financial measures that are components of the foregoing non-GAAP financial measures are also set forth and reconciled in the table below. The Company believes these non-GAAP financial measures, when taken together with the corresponding U.S. GAAP financial measures, provide meaningful supplemental information regarding its performance, and allow comparability to prior periods. These non-GAAP financial measures may be different from non-GAAP financial measures used by other companies, limiting their usefulness for comparison purposes.
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The following tables present the reconciliations of U.S. GAAP to non-GAAP financial measures for the periods presented:

|  |  | Three Months Ended September 30, |  | Nine Months Ended September 30,
($ in thousands) |  |  | 2023 |  | 2022 |  | 2023 |  | 2022
Net income | (a) |  | $ | 287,738 |  |  | $ | 295,339 |  |  | $ | 922,208 |  |  | $ | 791,320 |
Add: Amortization of core deposit intangibles |  |  | 441 |  |  | 485 |  |  | 1,322 |  |  | 1,484 |
Amortization of mortgage servicing assets |  |  | 328 |  |  | 340 |  |  | 1,026 |  |  | 1,096 |
Tax effect of amortization adjustments (1) |  |  | (225) |  |  | (237) |  |  | (688) |  |  | (742) |
Tangible net income (non-GAAP) | (b) |  | $ | 288,282 |  |  | $ | 295,927 |  |  | $ | 923,868 |  |  | $ | 793,158 |
Average stockholders’ equity | (c) |  | $ | 6,604,798 |  |  | $ | 5,772,638 |  |  | $ | 6,411,250 |  |  | $ | 5,765,637 |
Less: Average goodwill |  |  | (465,697) |  |  | (465,697) |  |  | (465,697) |  |  | (465,697) |
Average other intangible assets (2) |  |  | (6,148) |  |  | (8,379) |  |  | (6,916) |  |  | (8,801) |
Average tangible book value (non-GAAP) | (d) |  | $ | 6,132,953 |  |  | $ | 5,298,562 |  |  | $ | 5,938,637 |  |  | $ | 5,291,139 |
Return on average common equity (3) | (a)/(c) |  | 17.28 | % |  | 20.30 | % |  | 19.23 | % |  | 18.35 | %
Return on average TCE (3) (non-GAAP) | (b)/(d) |  | 18.65 | % |  | 22.16 | % |  | 20.80 | % |  | 20.04 | %

(1)Applied statutory tax rate of 29.29% for the third quarter and first nine months of 2023. Applied statutory tax rate of 28.77% for the third quarter and first nine months of 2022.
(2)Includes core deposit intangibles and mortgage servicing assets.
(3)Annualized.

|  |  | Three Months Ended September 30, |  | Nine Months Ended September 30,
($ in thousands) |  |  | 2023 |  | 2022 |  | 2023 |  | 2022
Net interest income before provision for credit losses | (a) |  | $ | 570,813 |  |  | $ | 551,809 |  |  | $ | 1,737,420 |  |  | $ | 1,440,374 |
Total noninterest income |  |  | 76,752 |  |  | 75,552 |  |  | 215,361 |  |  | 233,739 |
Total revenue | (b) |  | $ | 647,565 |  |  | $ | 627,361 |  |  | $ | 1,952,781 |  |  | $ | 1,674,113 |
Noninterest income |  |  | 76,752 |  |  | 75,552 |  |  | 215,361 |  |  | 233,739 |
Add: Write-off of AFS debt security (1) |  |  | — |  |  | — |  |  | 10,000 |  |  | — |
Adjusted noninterest income (non-GAAP) | (c) |  | 76,752 |  |  | 75,552 |  |  | 225,361 |  |  | 233,739 |
Adjusted revenue (non-GAAP) | (a)+(c)=(d) |  | $ | 647,565 |  |  | $ | 627,361 |  |  | $ | 1,962,781 |  |  | $ | 1,674,113 |
Total noninterest expense | (e) |  | $ | 252,014 |  |  | $ | 215,973 |  |  | $ | 732,250 |  |  | $ | 602,283 |
Less: Amortization of tax credit and other investments |  |  | (49,694) |  |  | (19,874) |  |  | (115,718) |  |  | (48,753) |
Amortization of core deposit intangibles |  |  | (441) |  |  | (485) |  |  | (1,322) |  |  | (1,484) |
Repurchase agreements’ extinguishment cost (1) |  |  | — |  |  | — |  |  | (3,872) |  |  | — |
Adjusted noninterest expense (non-GAAP) | (f) |  | $ | 201,879 |  |  | $ | 195,614 |  |  | $ | 611,338 |  |  | $ | 552,046 |
Efficiency ratio | (e)/(b) |  | 38.92 | % |  | 34.43 | % |  | 37.50 | % |  | 35.98 | %
Adjusted efficiency ratio (non-GAAP) | (f)/(d) |  | 31.18 | % |  | 31.18 | % |  | 31.15 | % |  | 32.98 | %

(1)During the first quarter of 2023, the Company recorded a $10.0 million pre-tax impairment write-off of an AFS debt security. In addition, the Company prepaid $300.0 million of repurchase agreements and incurred a debt extinguishment cost of $3.9 million.
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($ and shares in thousands, except per share data) |  |  | September 30, 2023 |  | December 31, 2022 |  |
Stockholders’ equity | (a) |  | $ | 6,596,706 |  |  | $ | 5,984,612 |  |  |
Less: Goodwill |  |  | (465,697) |  |  | (465,697) |  |  |
Other intangible assets (1) |  |  | (5,649) |  |  | (7,998) |  |  |
Tangible book value (non-GAAP) | (b) |  | $ | 6,125,360 |  |  | $ | 5,510,917 |  |  |
Number of common shares at period-end | (c) |  | 141,486 |  |  | 140,948 |  |  |
Book value per share | (a)/(c) |  | $ | 46.62 |  |  | $ | 42.46 |  |  |
Tangible book value per share (non-GAAP) | (b)/(c) |  | $ | 43.29 |  |  | $ | 39.10 |  |  |

(1)Includes core deposit intangibles and mortgage servicing assets.
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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 September 30, 2023, pursuant to Rule 13a-15(b) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), the Company conducted an evaluation, under the supervision and with the participation of the Company’s management, including the Chief Executive Officer and Chief Financial Officer, of the effectiveness of the Company’s disclosure controls and procedures (as defined in Rule 13a-15(e) of the Exchange Act). Based upon that evaluation, the Company’s Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures were effective as of September 30, 2023.
The Company’s disclosure controls and procedures are designed to ensure that information required to be disclosed by the Company in the reports that the Company files or submits under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the rules and forms of the SEC. The Company’s disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by the Company in the reports that the Company files under the Exchange Act is accumulated and communicated to the Company’s management, including the Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.
Change in Internal Control over Financial Reporting
There were no changes in the Company’s internal control over financial reporting (as defined in Rule 13a-15(f) of the Exchange Act) during the quarter ended September 30, 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.
Financial services institutions are interrelated as a result of trading, clearing, counterparty, or other relationships. We execute transactions with various counterparties in the financial industry, including broker-dealers, commercial banks, and investment banks. Defaults or failures of financial services institutions and instability in the financial services industry in general can lead to market-wide liquidity problems, increased credit risk and withdrawals of uninsured deposits. The failures of Silicon Valley Bank, Signature Bank, and First Republic Bank in the first half of 2023 resulted in significant disruption in the financial services industry and negative media attention, which has also adversely impacted the volatility and market prices of the securities of financial institutions and resulted in outflows of deposits for us and many other financial institutions. These events have adversely impacted and could continue to adversely affect our business, results of operations, and financial condition, as well as the market price and volatility of our common stock.
The cost of resolving the recent bank failures is expected to lead to special assessments by the FDIC to replenish the DIF, pursuant to a rule the FDIC proposed on May 11, 2023. Such events may also increase the risk of a recession or lead to regulatory changes and initiatives that could adversely impact the Company. Changes to laws or regulations, or the impositions of additional restrictions through supervisory or enforcement activities, could have a material impact on our business. Regulatory changes could also adversely impact our ability to access funding, increase the cost of funding, limit our access to capital markets, and negatively impact our overall financial condition.
The proportion of our deposit account balances that exceed FDIC insurance limits may expose us to enhanced liquidity risk.
A significant factor in the bank failures in the first half of 2023 appears to have been the proportion of the deposits held by each institution that exceeded applicable FDIC insurance limits, and the withdrawal of such deposits over a short period of time. The ease and speed of the electronic withdrawals may accelerate this process. If a significant portion of our deposits were to be withdrawn within a short period of time such that additional sources of funding would be required to meet withdrawal demands, we may be unable to obtain funding on favorable terms, which may have an adverse effect on our net interest margin. Moreover, obtaining adequate funding to meet our deposit obligations may be more challenging during periods of elevated interest rates and financial industry instability. Our ability to attract depositors during a time of actual or perceived distress or instability in the marketplace may be limited. Further, interest rates paid for borrowing generally exceed the interest rates paid on deposits. This spread may be exacerbated by higher prevailing interest rates. In addition, because our AFS debt securities lose value when interest rates rise, our ability to cover liquidity needs from sale or pledging of these securities may be negatively impacted during periods of elevated interest rates. Under these circumstances, we may be required to access additional funding from other sources in order to manage our liquidity risk.
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ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
Unregistered Issuances of Equity Securities
On July 3, 2023, the Company acquired a 49.99% equity interest in Rayliant Global Advisors Limited (“Rayliant”). As consideration for this purchase, the Company paid $94.7 million in cash and granted 349,138 (target) performance restricted stock units (“PRSUs”) to the sellers of the Rayliant shares, each of whom was an “accredited investor” as such term is defined in Rule 501(a) of Regulation D (“Regulation D”) promulgated under the Securities Act of 1933, as amended (the “Securities Act”). The PRSUs vest on September 1, 2028 into a variable number of shares of the Company’s common stock, ranging from 20% to 200% of the target PRSUs granted based on certain financial performance targets achieved by Rayliant during the future performance period. The Company issued the PRSUs in reliance upon the exemptions from registration available under Section 4(a)(2) of the Securities Act and Rule 506(b) of Regulation D.
ITEM 5. OTHER INFORMATION
During the three months ended September 30, 2023, none of the Company’s directors or Section 16 reporting officers adopted or terminated any Rule 10b5-1 trading arrangement or non-Rule 10b5-1 trading arrangement (as such terms are defined in Item 408 of the SEC’s Regulation S-K).
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ITEM 6. EXHIBITS
The following exhibit index lists Exhibits filed, or in the case of Exhibits 32.1 and 32.2 furnished, with this report:

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

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GLOSSARY OF ACRONYMS

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

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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: | November 8, 2023 |
|  | EAST WEST BANCORP, INC. (Registrant)
|  | By | /s/ Christopher J. Del Moral-Niles |
|  |  | Christopher J. Del Moral-Niles
|  |  | Executive Vice President and Chief Financial Officer

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