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East West Bancorp
EWBC
#1399
Rank
$16.21 B
Marketcap
๐Ÿ‡บ๐Ÿ‡ธ United States
Country
$117.83
Share price
0.50%
Change (1 day)
22.23%
Change (1 year)
๐Ÿฆ Banks๐Ÿ’ณ Financial services
Categories
  1. East West Bancorp
  2. Quarterly Reports (10-Q)
  3. Financial Year FY2024 Q2

East West Bancorp - 10-Q quarterly report FY2024 Q2


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

FORM 10-Q

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

For the quarterly period ended June 30, 2024

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 classTrading
Symbol(s)		Name of each exchange
 on which registered
Common Stock, par value $0.001 per shareEWBCThe Nasdaq Global Select Market

    Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes ☒ 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: 138,605,194 shares as of July 31, 2024.


TABLE OF CONTENTS
Page
3
4
4
Consolidated Balance Sheets (Unaudited)
4
Consolidated Statement of Income (Unaudited)
5
Consolidated Statement of Comprehensive Income (Unaudited)
6
Consolidated Statement of Changes in Stockholders’ Equity (Unaudited)
7
Consolidated Statement of Cash Flows (Unaudited)
8
10
  1 — Basis of Presentation
10
  2 — Current Accounting Developments and Summary of Significant Accounting Policies
10
  3 — Fair Value Measurement and Fair Value of Financial Instruments
11
  4 — Securities Purchased under Resale Agreements
21
  5 — Securities
22
  6 — Derivatives
28
  7 — Loans Receivable and Allowance for Credit Losses
35
  8 — Affordable Housing Partnership, Tax Credit and Community Reinvestment Act Investments, Net
51
  9 — Goodwill
52
10 — Short-Term Borrowings and Long-Term Debt
53
11 — Commitments and Contingencies
53
12 — Stock Compensation Plans
55
13 — Stockholders’ Equity and Earnings Per Share
56
14 — Accumulated Other Comprehensive Income (Loss)
56
15 — Business Segments
58
61
103
103
104
104
104
105
105
106
107
108
2

Forward-Looking Statements

Certain matters discussed in this Quarterly Report on Form 10-Q (this “Form 10-Q”) contain “forward-looking statements” that are intended to be covered by the safe harbor for such statements provided by the Private Securities Litigation Reform Act of 1995. East West Bancorp, Inc. (referred to herein on an unconsolidated basis as “East West” and on a consolidated basis as the “Company,” “we,” “us,” “our” 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.

Factors that might cause future results to differ materially from historical performance and any forward-looking statements include, but are not limited to:

•changes in local, regional and global business, economic and political conditions, and natural or geopolitical events;
•the soundness of other financial institutions and the impacts related to or resulting from bank failures and other industry volatility, including potential increased regulatory requirements, Federal Deposit Insurance Corporation insurance premiums and assessments, and deposit withdrawals;
•changes in laws or the regulatory environment, including trade, monetary and fiscal policies and laws and current or potential disputes between the U.S. and the People’s Republic of China;
•changes in the commercial and consumer real estate markets;
•changes in consumer or commercial spending, savings and borrowing habits, and patterns and behaviors;
•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;
•changes in key variable market interest rates, competition, regulatory requirements and product mix;
•changes in the Company’s costs of operation, compliance and expansion;
•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 the disclosure or misuse of confidential information;
•the adequacy of the Company’s risk management framework;
•future credit quality and performance, including expectations regarding future credit losses and allowance levels;
•adverse changes to the Company’s credit ratings;
•legal proceedings, regulatory investigations and their resolution;
•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; and
•any strategic acquisitions or divestitures and the introduction of new or expanded products and services 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, 2023, filed with the SEC on February 29, 2024 (the “Company’s 2023 Form 10-K”) under the heading Item 1A. Risk Factors. You should treat forward-looking statements as speaking only as of the date they are made and based only on information then actually known to the Company. The Company does not undertake, and specifically disclaims any obligation to update or revise any forward-looking statements to reflect the occurrence of events or circumstances after the date of such statements except as required by law.
3

PART I — FINANCIAL INFORMATION
ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS

EAST WEST BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
($ in thousands, except shares)
(Unaudited)
June 30,
2024		December 31,
2023
ASSETS
Cash and due from banks$460,611 $444,793 
Interest-bearing cash with banks3,905,080 4,170,191 
Cash and cash equivalents4,365,691 4,614,984 
Interest-bearing deposits with banks24,530 10,498 
Securities purchased under resale agreements (“resale agreements”)
485,000 785,000 
Securities:
Available-for-sale (“AFS”) debt securities, at fair value (amortized cost of $9,644,377 and $6,916,491)
8,923,528 6,188,337 
Held-to-maturity (“HTM”) debt securities, at amortized cost (fair value of $2,405,227 and $2,453,971)
2,938,250 2,956,040 
Loans held-for-sale18,909 116 
Loans held-for-investment (net of allowance for loan losses of $683,794 and $668,743)
52,084,115 51,542,039 
Affordable housing partnership, tax credit and Community Reinvestment Act (“CRA”) investments, net
956,428 905,036 
Premises and equipment (net of accumulated depreciation of $162,030 and $157,622)
81,675 86,370 
Goodwill465,697 465,697 
Operating lease right-of-use assets81,941 94,024 
Other assets2,042,508 1,964,743 
TOTAL$72,468,272 $69,612,884 
LIABILITIES
Deposits:
Noninterest-bearing$14,922,741 $15,539,872 
Interest-bearing45,077,044 40,552,566 
Total deposits59,999,785 56,092,438 
Bank Term Funding Program (“BTFP”) borrowings
— 4,500,000 
Federal Home Loan Bank (“FHLB”) advances3,500,000 — 
Long-term debt and finance lease liabilities36,141 153,011 
Operating lease liabilities89,644 102,353 
Accrued expenses and other liabilities1,627,588 1,814,248 
Total liabilities65,253,158 62,662,050 
COMMITMENTS AND CONTINGENCIES (Note 11)
STOCKHOLDERS’ EQUITY
Common stock, $0.001 par value, 200,000,000 shares authorized; 169,882,407 and 169,372,230 shares issued
170 169 
Additional paid-in capital2,007,388 1,980,818 
Retained earnings6,873,653 6,465,230 
Treasury stock, at cost 31,277,970 and 29,344,863 shares
(1,011,924)(874,787)
Accumulated other comprehensive loss (“AOCI”), net of tax(654,173)(620,596)
Total stockholders’ equity7,215,114 6,950,834 
TOTAL$72,468,272 $69,612,884 
See accompanying Notes to Consolidated Financial Statements.

4

EAST WEST BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME
($ and shares in thousands, except per share data)
(Unaudited)
Three Months Ended June 30,Six Months Ended June 30,
2024202320242023
INTEREST AND DIVIDEND INCOME
Loans receivable, including fees$868,441 $771,264 $1,734,830 $1,499,650 
Debt securities111,732 68,970 187,124 134,901 
Resale agreements1,885 3,969 8,000 8,472 
Restricted equity securities2,950 936 4,289 1,975 
Interest-bearing cash and deposits with banks49,406 60,995 123,788 96,642 
Total interest and dividend income1,034,414 906,134 2,058,031 1,741,640 
INTEREST EXPENSE
Deposits431,482 287,477 837,681 504,271 
Federal funds purchased and other short-term borrowings32 49,032 42,138 57,857 
FHLB advances
48,840 — 56,579 6,430 
Securities sold under repurchase agreements (“repurchase agreements”)58 211 93 1,263 
Long-term debt and finance lease liabilities773 2,668 3,172 5,212 
Total interest expense481,185 339,388 939,663 575,033 
Net interest income before provision for credit losses553,229 566,746 1,118,368 1,166,607 
Provision for credit losses37,000 26,000 62,000 46,000 
Net interest income after provision for credit losses516,229 540,746 1,056,368 1,120,607 
NONINTEREST INCOME
Deposit account fees25,649 23,369 50,597 46,423 
Lending fees24,340 20,901 47,265 41,487 
Foreign exchange income12,924 12,167 24,393 23,476 
Wealth management fees9,478 6,944 18,115 13,291 
Customer derivative income5,764 7,373 9,514 9,937 
Net gains (losses) on sales of loans
56 (7)15 (29)
Net gains (losses) on AFS debt securities1,785 — 1,834 (10,000)
Other investment income586 4,003 3,401 5,924 
Other income4,091 3,881 8,527 8,100 
Total noninterest income84,673 78,631 163,661 138,609 
NONINTEREST EXPENSE
Compensation and employee benefits133,588 124,937 275,400 254,591 
Occupancy and equipment expense15,031 16,088 30,261 31,675 
Deposit insurance premiums and regulatory assessments10,708 8,262 30,357 16,172 
Deposit account expense12,050 10,559 24,238 20,168 
Computer software and data processing expenses11,392 10,692 22,736 21,399 
Other operating expense37,613 35,337 71,058 70,207 
Amortization of tax credit and CRA investments
16,052 55,914 29,259 66,024 
Total noninterest expense236,434 261,789 483,309 480,236 
INCOME BEFORE INCOME TAXES364,468 357,588 736,720 778,980 
INCOME TAX EXPENSE76,238 45,557 163,415 144,510 
NET INCOME$288,230 $312,031 $573,305 $634,470 
EARNINGS PER SHARE (“EPS”)
BASIC$2.07 $2.21 $4.12 $4.49 
DILUTED$2.06 $2.20 $4.09 $4.47 
WEIGHTED-AVERAGE NUMBER OF SHARES OUTSTANDING
BASIC138,980 141,468 139,195 141,291 
DILUTED139,801 141,876 140,047 141,910 
See accompanying Notes to Consolidated Financial Statements.

5

EAST WEST BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
($ in thousands)
(Unaudited)
Three Months Ended June 30,Six Months Ended June 30,
2024202320242023
Net income$288,230 $312,031 $573,305 $634,470 
Other comprehensive income (loss), net of tax:
Net changes in unrealized gains (losses) on AFS debt securities
7,516 (43,618)5,199 7,701 
Amortization of unrealized losses on debt securities transferred from AFS to HTM
2,708 2,816 5,396 5,578 
Net changes in unrealized losses on cash flow hedges
(353)(53,887)(46,683)(25,274)
Foreign currency translation adjustments(1,311)(7,249)2,511 (4,308)
Other comprehensive income (loss)
8,560 (101,938)(33,577)(16,303)
COMPREHENSIVE INCOME
$296,790 $210,093 $539,728 $618,167 
See accompanying Notes to Consolidated Financial Statements.

6

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 CapitalRetained EarningsTreasury StockAOCI, Net of TaxTotal Stockholders’ Equity
SharesAmount
BALANCE, APRIL 1, 2023141,395,800 $1,947,687 $5,832,291 $(790,653)$(679,994)$6,309,331 
Net income— — 312,031 — — 312,031 
Other comprehensive loss— — — — (101,938)(101,938)
Issuance of common stock pursuant to various stock compensation plans and agreements111,097 12,097 — — — 12,097 
Repurchase of common stock pursuant to various stock compensation plans and agreements(23,229)— — (1,237)— (1,237)
Cash dividends on common stock ($0.48 per share)
— — (68,587)— — (68,587)
BALANCE, JUNE 30, 2023141,483,668 $1,959,784 $6,075,735 $(791,890)$(781,932)$6,461,697 
BALANCE, APRIL 1, 2024139,121,162 $1,993,976 $6,662,919 $(970,930)$(662,733)$7,023,232 
Net income— — 288,230 — — 288,230 
Other comprehensive income
— — — — 8,560 8,560 
Issuance of common stock pursuant to various stock compensation plans and agreements46,938 13,582 — — — 13,582 
Repurchase of common stock pursuant to various stock compensation plans and agreements(3,018)— — (214)— (214)
Repurchase of common stock pursuant to the stock repurchase program(560,645)— — (40,780)— (40,780)
Cash dividends on common stock ($0.55 per share)
— — (77,496)— — (77,496)
BALANCE, JUNE 30, 2024138,604,437 $2,007,558 $6,873,653 $(1,011,924)$(654,173)$7,215,114 
Common Stock and Additional Paid-in Capital
Retained EarningsTreasury Stock
AOCI, Net of Tax
Total Stockholders’ Equity
SharesAmount
BALANCE, JANUARY 1, 2023140,947,846 $1,936,557 $5,582,546 $(768,862)$(765,629)$5,984,612 
Cumulative-effect of change in accounting principle (1)
— — (4,262)— — (4,262)
Net income— — 634,470 — — 634,470 
Other comprehensive loss— — — — (16,303)(16,303)
Issuance of common stock pursuant to various stock compensation plans and agreements851,819 23,227 — — — 23,227 
Repurchase of common stock pursuant to various stock compensation plans and agreements(315,997)— — (23,028)— (23,028)
Cash dividends on common stock ($0.96 per share)
— — (137,019)— — (137,019)
BALANCE, JUNE 30, 2023141,483,668 $1,959,784 $6,075,735 $(791,890)$(781,932)$6,461,697 
BALANCE, JANUARY 1, 2024140,027,367 $1,980,987 $6,465,230 $(874,787)$(620,596)$6,950,834 
Cumulative-effect of change in accounting principle (2)
— — (9,482)— — (9,482)
Net income— — 573,305 — — 573,305 
Other comprehensive loss— — — — (33,577)(33,577)
Issuance of common stock pursuant to various stock compensation plans and agreements510,177 26,571 — — — 26,571 
Repurchase of common stock pursuant to various stock compensation plans and agreements(190,611)— — (13,916)— (13,916)
Repurchase of common stock pursuant to the stock repurchase plan
(1,742,496)— — (123,221)(123,221)
Cash dividends on common stock ($1.10 per share)
— — (155,400)— — (155,400)
BALANCE, JUNE 30, 2024138,604,437 $2,007,558 $6,873,653 $(1,011,924)$(654,173)$7,215,114 
(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.
(2)Represents the impact of the adoption of ASU 2023-02, Investments - Equity Method and Joint Ventures (Topic 323): Accounting for Investments in Tax Credit Structures Using the Proportional Amortization Method on January 1, 2024. 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.

7

EAST WEST BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
($ in thousands)
(Unaudited)
Six Months Ended June 30,
20242023
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $573,305 $634,470 
Adjustments to reconcile net income to net cash provided by operating activities:  
Provision for credit losses62,000 46,000 
Depreciation and amortization 100,372 106,579 
Amortization of premiums (accretion of discount), net
6,054 (10,489)
Stock compensation costs23,654 20,439 
Deferred income tax (benefit) expense
(8,963)1,098 
Net (gains) losses on sales of loans
(15)29 
Net (gains) losses on AFS debt securities
(1,834)10,000 
Impairment on other real estate owned (“OREO”) and other foreclosed assets2,576 — 
Net gains on sales of OREO and other foreclosed assets
— (3,071)
Loans held-for-sale:
Originations and purchases(850)— 
Proceeds from sales and paydowns/payoffs of loans originally classified as held-for-sale992 — 
Distributions received from equity method investees
3,556 2,696 
Net change in accrued interest receivable and other assets (6,640)(273,537)
Net change in accrued expenses and other liabilities(222,985)(55,634)
Other operating activities, net(5,811)1,225 
Total adjustments (47,894)(154,665)
Net cash provided by operating activities525,411 479,805 
CASH FLOWS FROM INVESTING ACTIVITIES  
Net (increase) decrease in:
  
Affordable housing partnership, tax credit and CRA investments
(150,217)(69,946)
Interest-bearing deposits with banks(14,226)121,774 
Assets purchased under resale agreements:
Proceeds from paydowns and maturities300,000 169,917 
Purchases— (12,725)
AFS debt securities:
Proceeds from sales1,252,859 — 
Proceeds from repayments, maturities and redemptions807,695 623,108 
Purchases(4,854,571)(594,214)
HTM debt securities:
Proceeds from repayments, maturities and redemptions25,577 33,882 
Loans held-for-investment:
Proceeds from sales of loans originally classified as held-for-investment376,456 302,811 
Purchases(390,440)(272,637)
Other changes in loans held-for-investment, net(562,088)(1,649,160)
Redemption of trust preferred securities
3,558 — 
Proceeds from sales of OREO and other foreclosed assets
7,648 3,341 
Distributions received from equity method investees
5,173 13,113 
Purchases of FHLB stock
(84,666)— 
Other investing activities, net(7,052)(9,511)
Net cash used in investing activities(3,284,294)(1,340,247)
See accompanying Notes to Consolidated Financial Statements.

8

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

Six Months Ended June 30,
20242023
CASH FLOWS FROM FINANCING ACTIVITIES  
Net change in deposits3,921,454 (262,287)
Net change in short-term borrowings(4,500,000)4,500,017 
FHLB advances:
Proceeds 3,500,000 6,000,000 
Repayment— (6,000,000)
Repurchase agreements:
Repayment
— (300,000)
Extinguishment cost
— (3,872)
Long-term debt and lease liabilities:
Repayment of junior subordinated debt and lease liabilities
(117,020)(421)
Common stock:
Proceeds from issuance pursuant to various stock compensation plans and agreements1,580 1,563 
Stock tendered for payment of withholding taxes(13,916)(23,028)
Repurchase of common stocks pursuant to the stock repurchase program
(123,221)— 
Cash dividends paid(155,867)(138,914)
Net cash provided by financing activities2,513,010 3,773,058 
Effect of exchange rate changes on cash and cash equivalents(3,420)(16,513)
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS
(249,293)2,896,103 
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD4,614,984 3,481,784 
CASH AND CASH EQUIVALENTS, END OF PERIOD$4,365,691 $6,377,887 
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid during the period for:
Interest$1,082,024 $504,774 
Income taxes, net$232,191 $255,432 
Noncash investing and financing activities:
Loans transferred from held-for-investment to held-for-sale$339,615 $280,026 
Loans transferred to OREO and other foreclosed assets
$31,863 $— 

See accompanying Notes to Consolidated Financial Statements.

9

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 Quarterly Report on Form 10-Q (this “Form 10-Q”) include the accounts of East West, East West Bank and East West’s subsidiaries. Intercompany transactions and accounts have been eliminated in consolidation. As of June 30, 2024, East West also has one wholly-owned subsidiary that is a statutory business trust (the “Trust”). In accordance with Financial Accounting Standards Board Accounting Standards Codification (“ASC”) Topic 810, Consolidation, the Trust is 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 Company’s 2023 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 2023 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. Certain items on the Consolidated Financial Statements and notes for the prior periods have been reclassified to conform to the current presentation. Events subsequent to the Consolidated Balance Sheet date have been evaluated through the date the Consolidated Financial Statements are issued for inclusion in the accompanying Consolidated Financial Statements.

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

Accounting Pronouncements Adopted in 2024
StandardRequired Date of AdoptionDescriptionEffect on Financial Statements
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
ASU 2023-02 expands the scope of the proportional amortization method (“PAM”) to equity tax credit investment programs if certain conditions are met. Previously, PAM 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 PAM 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 adopted ASU 2023-02 on January 1, 2024, for all tax credit investments under a modified retrospective basis. The impact of the adoption decreased opening retained earnings on January 1, 2024 by $9 million.

The following standards were also adopted on January 1, 2024, but they did not have a material impact on the Company’s Consolidated Financial Statements:

•ASU 2023-01, Leases (Topic 842): Common Control Arrangements
•ASU 2022-03, Fair Value Measurement (Topic 820) Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions

10

Significant Accounting Policies Update

Income Taxes — The Company has elected to apply PAM to qualifying affordable housing partnership, new markets, historic, production and renewable energy tax credit investments. Under PAM, the Company amortizes the initial cost of the investment in proportion to the income tax credits and other income tax benefits received, and recognizes the amortization in Income tax expense on the Consolidated Statement of Income.

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 2023 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. The valuations provided by the brokers incorporate information from their trading desks, research and other market data.

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 the 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. On an annual basis, the Company assesses the reasonableness of broker pricing by reviewing the related pricing methodologies. This review includes corroborating pricing with market data, performing pricing input reviews under current market-related conditions, and investigating security pricing by instrument as needed.

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.

Equity Securities — Equity securities consist of mutual funds and Visa Inc. (“Visa”) Class C common stock (“Visa C shares”). The Company invested in these mutual funds for 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.
11

As of December 31, 2023, the Company held Visa Class B common stock (“Visa B shares”), which were subject to certain transfer restrictions and held at cost. On January 24, 2024, Visa filed a Certificate of Amendment and an eighth Restated Certificate of Incorporation that redenominated the Visa B shares to Visa Class B-1 common stock (“Visa B-1 shares”). On April 8, 2024, Visa commenced a public offering to permit the exchange of Visa B-1 shares for a combination of shares of Visa Class B-2 common stock (“Visa B-2 shares”) and Visa C shares. In exchange for the Company’s 2,266 Visa B-1 shares, the Company received 1,133 Visa B-2 shares and 449 Visa C shares. The Visa B-2 shares remain subject to the same transfer restrictions and will continue to be held at cost. As the Visa C shares are convertible into Visa’s publicly traded Class A common stock (“Visa A shares”) following a lock-up period, the Company recognized the Visa C shares at fair value of $471 thousand as of June 30, 2024 and recorded a gain of $422 thousand for the three months ended June 30, 2024, based on the closing price of the Visa A shares. As the fair value of the Visa C shares is determined by quoted prices on an active exchange market, the Visa C shares are classified as Level 1.

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 will 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 applicable 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. In addition, the Bank managed its foreign currency exposure in the net investment in its China subsidiary, East West Bank (China) Limited, a non-U.S. dollar (“USD”) functional currency subsidiary, with foreign currency non-deliverable forward contracts. 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.

12

Equity Contracts — Equity contracts consist of warrants to purchase common or preferred stock of public and private companies, and any liability-classified contingently 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 equity 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 equity 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 equity 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 equity 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 349,138 performance-based restricted stock units (“RSUs”) as part of its consideration, in addition to $95 million in cash. The vesting of these equity contracts on September 1, 2028, is contingent on Rayliant meeting certain financial performance targets during the performance period. The fair value of liability-classified equity contracts varies based on the operating revenue and operating EBITDA of Rayliant to be achieved during the future performance period, and these performance-based RSUs are expected to vest into a variable number of the Company’s common stock, ranging from 20% to 200% of the target performance-based RSUs granted. 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 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.

13

The following tables present financial assets and liabilities that are measured at fair value on a recurring basis as of June 30, 2024 and December 31, 2023:
Assets and Liabilities Measured at Fair Value on a Recurring Basis
as of June 30, 2024
($ in thousands)
Level 1
Level 2
Level 3
Total
Fair Value
AFS debt securities:
U.S. Treasury securities$623,757 $— $— $623,757 
U.S. government agency and U.S. government-sponsored enterprise debt securities— 260,388 — 260,388 
U.S. government agency and U.S. government-sponsored enterprise mortgage-backed securities (1):
Commercial mortgage-backed securities— 444,847 — 444,847 
Residential mortgage-backed securities— 5,718,818 — 5,718,818 
Municipal securities— 256,563 — 256,563 
Non-agency mortgage-backed securities:
Commercial mortgage-backed securities— 320,637 — 320,637 
Residential mortgage-backed securities— 474,618 — 474,618 
Corporate debt securities— 507,130 — 507,130 
Foreign government bonds— 233,724 — 233,724 
Asset-backed securities— 38,593 — 38,593 
Collateralized loan obligations (“CLOs”)— 44,453 — 44,453 
Total AFS debt securities
$623,757 $8,299,771 $— $8,923,528 
Affordable housing partnership, tax credit and CRA investments, net:
Equity securities$20,443 $4,159 $— $24,602 
Total affordable housing partnership, tax credit and CRA investments, net
$20,443 $4,159 $— $24,602 
Other assets
Equity securities (2)
$471 $— $— $471 
Total other assets
$471 $— $— $471 
Derivative assets:
Interest rate contracts$— $459,590 $— $459,590 
Foreign exchange contracts— 33,684 — 33,684 
Equity contracts— — 240 240 
Commodity contracts— 60,946 — 60,946 
Gross derivative assets$— $554,220 $240 $554,460 
Netting adjustments (3)
$— $(441,810)$— $(441,810)
Net derivative assets$— $112,410 $240 $112,650 
Derivative liabilities:
Interest rate contracts$— $501,514 $— $501,514 
Foreign exchange contracts— 25,598 — 25,598 
Equity contracts (4)
— — 15,119 15,119 
Credit contracts— 14 — 14 
Commodity contracts— 70,900 — 70,900 
Gross derivative liabilities$— $598,026 $15,119 $613,145 
Netting adjustments (3)
$— $(109,190)$— $(109,190)
Net derivative liabilities$— $488,836 $15,119 $503,955 
Refer to footnotes on the following page.
14

Assets and Liabilities Measured at Fair Value on a Recurring Basis
as of December 31, 2023
($ in thousands)
Level 1
Level 2
Level 3
Total
Fair Value
AFS debt securities:
U.S. Treasury securities$1,060,375 $— $— $1,060,375 
U.S. government agency and U.S. government-sponsored enterprise debt securities— 364,446 — 364,446 
U.S. government agency and U.S. government-sponsored enterprise mortgage-backed securities (1):
Commercial mortgage-backed securities— 468,259 — 468,259 
Residential mortgage-backed securities— 1,727,594 — 1,727,594 
Municipal securities— 261,016 — 261,016 
Non-agency mortgage-backed securities:
Commercial mortgage-backed securities— 367,516 — 367,516 
Residential mortgage-backed securities— 553,671 — 553,671 
Corporate debt securities— 502,425 — 502,425 
Foreign government bonds— 227,874 — 227,874 
Asset-backed securities— 42,300 — 42,300 
CLOs— 612,861 — 612,861 
Total AFS debt securities
$1,060,375 $5,127,962 $— $6,188,337 
Affordable housing partnership, tax credit and CRA investments, net:
Equity securities$20,509 $4,150 $— $24,659 
Affordable housing partnership, tax credit and CRA investments, net
$20,509 $4,150 $— $24,659 
Derivative assets:
Interest rate contracts$— $473,907 $— $473,907 
Foreign exchange contracts— 57,072 — 57,072 
Credit contracts— 1 — 1 
Equity contracts— — 336 336 
Commodity contracts— 79,604 — 79,604 
Gross derivative assets$— $610,584 $336 $610,920 
Netting adjustments (3)
$— $(312,792)$— $(312,792)
Net derivative assets$— $297,792 $336 $298,128 
Derivative liabilities:
Interest rate contracts$— $433,936 $— $433,936 
Foreign exchange contracts— 42,564 — 42,564 
Equity contracts (4)
— — 15,119 15,119 
Credit contracts— 25 — 25 
Commodity contracts— 121,670 — 121,670 
Gross derivative liabilities$— $598,195 $15,119 $613,314 
Netting adjustments (3)
$— $(76,170)$— $(76,170)
Net derivative liabilities$— $522,025 $15,119 $537,144 
(1)Includes Government National Mortgage Association (“GNMA”) AFS debt securities totaling $5.2 billion and $1.2 billion of fair value as of June 30, 2024 and December 31, 2023, respectively.
(2)Represents the Visa C shares recognized at fair value in Other assets on the Consolidated Balance Sheet and recorded gain in Other investment income on the Consolidated Statement of Income. See Note 3 — Fair Value Measurement and Fair Value of Financial Instruments to the Consolidated Financial Statements in this Form 10-Q for additional information.
(3)Represents the 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.
(4)Equity contracts classified as derivative liabilities consist of performance-based RSUs granted as part of EWBC’s consideration in its investment in Rayliant.
15

For the three and six months ended June 30, 2024 and 2023, Level 3 fair value measurements that were measured on a recurring basis consisted of warrant equity contracts issued by private companies and liability-classified contingently 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 six months ended June 30, 2024 and 2023:
Three Months Ended June 30,Six Months Ended June 30,
($ in thousands)2024202320242023
Derivative assets:
Equity contracts
Beginning balance$330 $277 $336 $323 
Total losses included in earnings (1)
(90)(14)(96)(60)
Ending balance$240 $263 $240 $263 
Derivative liabilities:
Equity contracts (2)
Beginning balance$15,119 $— $15,119 $— 
Total gains (losses) included in earnings— — — — 
Ending balance$15,119 $— $15,119 $— 
(1)Includes unrealized losses recorded in Lending fees on the Consolidated Statement of Income.
(2)Equity contracts classified as derivative liabilities consist of performance-based RSUs 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 June 30, 2024 and December 31, 2023. 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 TechniqueUnobservable InputsRange of Inputs
Weighted-Average of Inputs
June 30, 2024
Derivative assets:
Equity contracts$240 
Black-Scholes option pricing model
Equity volatility
34% — 48%
44 %
(1)
Liquidity discount47%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, 2023
Derivative assets:
Equity contracts$336 
Black-Scholes option pricing model
Equity volatility
37% — 48%
45 %
(1)
Liquidity discount47%47 %
Derivative liabilities:
Equity contracts (2)
$15,119 
Internal model
Payout % designated based on operating revenue and operating EBITDA of investee
84%84 %
(1)Weighted-average of inputs is calculated based on the fair value of equity contracts as of both June 30, 2024 and December 31, 2023.
(2)Equity contracts classified as derivative liabilities consist of performance-based RSUs granted as part of EWBC’s consideration in its investment in Rayliant.
16

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, affordable housing partnership, tax credit and CRA investments, OREO, loans held-for-sale, and other nonperforming assets. Nonrecurring fair value adjustments result from the impairment on certain individually evaluated loans held-for-investment and affordable housing partnership, tax credit and CRA investments, from the 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 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.

Affordable Housing Partnership, Tax Credit and CRA Investments, Net — The Company conducts due diligence and secures applicable internal and external approval on its affordable housing partnership, tax credit and CRA investments prior to the closing date and initial funding date and through the placed-in-service date. Subsequent to closing, 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 financial statements, production reports 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 amount 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 such as an acceptance of a deed-in-lieu of foreclosure. 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, loans held-for-sale are classified as Level 2.

17

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 June 30, 2024 and December 31, 2023:
Assets Measured at Fair Value on a Nonrecurring Basis
as of June 30, 2024
($ in thousands)
Level 1
Level 2
Level 3
Fair Value Measurements
Loans held-for-investment:
Commercial:
Commercial and industrial (“C&I”)$— $— $44,605 $44,605 
Commercial real estate (“CRE”):
CRE— — 17,069 17,069 
Construction and land— — 11,316 11,316 
Total commercial— — 72,990 72,990 
Consumer:
Residential mortgage:
Single-family residential— — 92 92 
Total consumer— — 92 92 
Total loans held-for-investment$— $— $73,082 $73,082 
OREO (1)
$— $— $8,565 $8,565 
(1)Represents the carrying value of OREO property that was written down subsequent to its initial classification as OREO and includes in Other assets on the Consolidated Balance Sheet.

Assets Measured at Fair Value on a Nonrecurring Basis
as of December 31, 2023
($ in thousands)
Level 1
Level 2
Level 3
Fair Value Measurements
Loans held-for-investment:
Commercial:
C&I$— $— $22,035 $22,035 
CRE:
CRE— — 22,653 22,653 
Total commercial— — 44,688 44,688 
Consumer:
Residential mortgage:
Home equity lines of credit (“HELOCs”)
— — 1,204 1,204 
Total consumer— — 1,204 1,204 
Total loans held-for-investment$— $— $45,892 $45,892 
Affordable housing partnership, tax credit and CRA investments, net
$— $— $868 $868 

18

The following table presents the 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 six months ended June 30, 2024 and 2023:
Three Months Ended June 30,Six Months Ended June 30,
($ in thousands)2024202320242023
Loans held-for-investment:
Commercial:
C&I$(14,764)$(10,419)$(24,769)$(11,674)
CRE:
CRE(2,260)(2,252)(2,260)(2,252)
Construction and land(920)— (2,144)— 
Total CRE(3,180)(2,252)(4,404)(2,252)
Total commercial(17,944)(12,671)(29,173)(13,926)
Consumer:
Residential mortgage:
Single-family residential(23)— (1,407)— 
Total consumer(23)— (1,407)— 
Total loans held-for-investment$(17,967)$(12,671)$(30,580)$(13,926)
Affordable housing partnership, tax credit and CRA investments, net
$— $(961)$— $(787)
OREO$(2,576)$— $(2,576)$— 

The following table presents the quantitative information about the significant unobservable inputs used in the valuation of Level 3 fair value measurements that are measured on a nonrecurring basis as of June 30, 2024 and December 31, 2023:
($ in thousands)Fair Value Measurements (Level 3)Valuation TechniquesUnobservable InputsRange of InputsWeighted-Average of Inputs
June 30, 2024
Loans held-for-investment$7,219 Fair value of collateralDiscount
20% — 50%
24%
(1)
$13,793 Fair value of collateralContract value
NM
NM
$52,070 Fair value of propertySelling cost
8% — 20%
10%
(1)
OREO$8,565 Fair value of propertySelling cost8%8%
December 31, 2023
Loans held-for-investment$16,328 Fair value of collateralDiscount
15% — 75%
45%
(1)
$3,009 Fair value of collateralContract valueNMNM
$26,555 Fair value of propertySelling cost
8%
8%
Affordable housing partnership, tax credit and CRA investments, net
$868 Individual analysis of each investmentExpected future tax benefits and distributionsNMNM
NM — Not meaningful.
(1)Weighted-average of inputs is based on the relative fair value of the respective assets as of June 30, 2024 and December 31, 2023.

19

Disclosures about the Fair Value of Financial Instruments

The following tables present the fair value estimates for financial instruments as of June 30, 2024 and December 31, 2023, 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.
June 30, 2024
($ in thousands)Carrying AmountLevel 1Level 2Level 3Estimated Fair Value
Financial assets:
Cash and cash equivalents$4,365,691 $4,365,691 $— $— $4,365,691 
Interest-bearing deposits with banks$24,530 $— $24,530 $— $24,530 
Resale agreements$485,000 $— $390,522 $— $390,522 
HTM debt securities$2,938,250 $487,707 $1,917,520 $— $2,405,227 
Restricted equity securities, at cost$165,164 $— $165,164 $— $165,164 
Loans held-for-sale$18,909 $— $18,909 $— $18,909 
Loans held-for-investment, net$52,084,115 $— $— $50,340,499 $50,340,499 
Mortgage servicing rights$5,903 $— $— $10,385 $10,385 
Accrued interest receivable$329,442 $— $329,442 $— $329,442 
Financial liabilities:
Demand, checking, savings and money market deposits$38,229,098 $— $38,229,098 $— $38,229,098 
Time deposits$21,770,687 $— $21,726,174 $— $21,726,174 
FHLB advances$3,500,000 $— $3,504,276 $— $3,504,276 
Long-term debt$31,844 $— $30,316 $— $30,316 
Accrued interest payable$63,078 $— $63,078 $— $63,078 
December 31, 2023
($ in thousands)Carrying AmountLevel 1Level 2Level 3Estimated Fair Value
Financial assets:
Cash and cash equivalents$4,614,984 $4,614,984 $— $— $4,614,984 
Interest-bearing deposits with banks$10,498 $— $10,498 $— $10,498 
Resale agreements$785,000 $— $699,056 $— $699,056 
HTM debt securities$2,956,040 $488,551 $1,965,420 $— $2,453,971 
Restricted equity securities, at cost$79,811 $— $79,811 $— $79,811 
Loans held-for-sale$116 $— $116 $— $116 
Loans held-for-investment, net$51,542,039 $— $— $50,256,565 $50,256,565 
Mortgage servicing rights$6,602 $— $— $9,470 $9,470 
Accrued interest receivable$331,490 $— $331,490 $— $331,490 
Financial liabilities:
Demand, checking, savings and money market deposits$38,048,974 $— $38,048,974 $— $38,048,974 
Time deposits$18,043,464 $— $18,004,951 $— $18,004,951 
BTFP borrowings
$4,500,000 $— $4,500,000 $— $4,500,000 
Long-term debt$148,249 $— $150,896 $— $150,896 
Accrued interest payable$205,430 $— $205,430 $— $205,430 

20

Note 4 — Securities Purchased under Resale Agreements

The Company’s resale agreements expose it to credit risk from 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 the Company’s policy to take possession, where possible, of the assets underlying resale agreements. As a result of the Company’s credit risk mitigation practices with respect to resale agreements as described above, the Company did not hold any reserves for credit impairment with respect to these agreements as of both June 30, 2024 and December 31, 2023.

Securities Purchased under Resale Agreements — Total securities purchased under resale agreements were $485 million and $785 million as of June 30, 2024 and December 31, 2023, respectively. The weighted-average yields were 1.56% and 2.42% for the three months ended June 30, 2024 and 2023, respectively; and 2.66% and 2.46% for the six months ended June 30, 2024 and 2023, respectively.

Balance Sheet Offsetting

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

The following table presents the resale agreements included on the Consolidated Balance Sheet as of June 30, 2024 and December 31, 2023:
Gross Amounts of Recognized Assets
Gross Amounts Offset on the Consolidated Balance Sheet
Net Amounts of Assets Presented on the Consolidated Balance Sheet
Gross Amounts Not Offset on the Consolidated Balance Sheet
($ in thousands)
Collateral Received (1)
Net Amount
Resale agreements as of June 30, 2024
$485,000 $— $485,000 $(402,645)$82,355 
Resale agreements as of December 31, 2023
$785,000 $— $785,000 $(715,358)$69,642 
(1)Represents the fair value of assets the Company has received under resale agreements, limited for table presentation purposes to the amount of the recognized asset due from each counterparty. The application of collateral cannot reduce the net position below zero. Therefore, excess collateral, if any, is not reflected above.

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

21

Note 5 — Securities

The following tables present the amortized cost, gross unrealized gains and losses and fair value by major categories of AFS and HTM debt securities as of June 30, 2024 and December 31, 2023:
June 30, 2024
($ in thousands)
Amortized Cost (1)
Gross Unrealized GainsGross Unrealized LossesFair Value
AFS debt securities:
U.S. Treasury securities$676,291 $— $(52,534)$623,757 
U.S. government agency and U.S. government-sponsored enterprise debt securities309,956 — (49,568)260,388 
U.S. government agency and U.S. government-sponsored enterprise mortgage-backed securities (2):
Commercial mortgage-backed securities498,281 113 (53,547)444,847 
Residential mortgage-backed securities5,956,800 3,109 (241,091)5,718,818 
Municipal securities295,437 34 (38,908)256,563 
Non-agency mortgage-backed securities:
Commercial mortgage-backed securities360,613 — (39,976)320,637 
Residential mortgage-backed securities564,414 — (89,796)474,618 
Corporate debt securities653,501 — (146,371)507,130 
Foreign government bonds245,523 1,101 (12,900)233,724 
Asset-backed securities39,061 — (468)38,593 
CLOs44,500 — (47)44,453 
Total AFS debt securities9,644,377 4,357 (725,206)8,923,528 
HTM debt securities:
U.S. Treasury securities532,294 — (44,587)487,707 
U.S. government agency and U.S. government-sponsored enterprise debt securities1,003,094 — (200,199)802,895 
U.S. government agency and U.S. government-sponsored enterprise mortgage-backed securities (3):
Commercial mortgage-backed securities490,502 — (90,358)400,144 
Residential mortgage-backed securities724,039 — (151,928)572,111 
Municipal securities188,321 — (45,951)142,370 
Total HTM debt securities2,938,250 — (533,023)2,405,227 
Total debt securities$12,582,627 $4,357 $(1,258,229)$11,328,755 

22

December 31, 2023
($ in thousands)
Amortized Cost (1)
Gross Unrealized GainsGross Unrealized LossesFair Value
AFS debt securities:
U.S. Treasury securities$1,112,587 $101 $(52,313)$1,060,375 
U.S. government agency and U.S. government-sponsored enterprise debt securities412,086 — (47,640)364,446 
U.S. government agency and U.S. government-sponsored enterprise mortgage-backed securities (2):
Commercial mortgage-backed securities531,377 158 (63,276)468,259 
Residential mortgage-backed securities1,956,927 380 (229,713)1,727,594 
Municipal securities297,283 75 (36,342)261,016 
Non-agency mortgage-backed securities:
Commercial mortgage-backed securities409,578 — (42,062)367,516 
Residential mortgage-backed securities643,335 — (89,664)553,671 
Corporate debt securities653,501 — (151,076)502,425 
Foreign government bonds239,333 69 (11,528)227,874 
Asset-backed securities43,234 — (934)42,300 
CLOs617,250 — (4,389)612,861 
Total AFS debt securities 6,916,491 783 (728,937)6,188,337 
HTM debt securities:
U.S. Treasury securities529,548 — (40,997)488,551 
U.S. government agency and U.S. government-sponsored enterprise debt securities1,001,836 — (186,904)814,932 
U.S. government agency and U.S. government-sponsored enterprise mortgage-backed securities (3):
Commercial mortgage-backed securities493,348 — (88,968)404,380 
Residential mortgage-backed securities742,436 — (142,119)600,317 
Municipal securities188,872 — (43,081)145,791 
Total HTM debt securities2,956,040 — (502,069)2,453,971 
Total debt securities$9,872,531 $783 $(1,231,006)$8,642,308 
(1)Amortized cost excludes accrued interest receivables which are presented within Other assets on the Consolidated Balance Sheet. As of both June 30, 2024 and December 31, 2023, the accrued interest receivables were $44 million. For the Company’s accounting policy related to debt securities’ accrued interest receivables, 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 2023 Form 10-K.
(2)Includes GNMA AFS debt securities totaling $5.2 billion of both amortized cost and fair value as of June 30, 2024, and $1.3 billion of amortized cost and $1.2 billion of fair value as of December 31, 2023.
(3)Includes GNMA HTM debt securities totaling $89 million of amortized cost and $71 million of fair value as of June 30, 2024, and $92 million of amortized cost and $75 million of fair value of as of December 31, 2023.

23

Unrealized Losses of Available-for-Sale Debt Securities

The following tables present the fair value and the associated gross unrealized losses of the Company’s AFS debt securities, aggregated by investment category and the length of time that the securities have been in a continuous unrealized loss position as of June 30, 2024 and December 31, 2023.
June 30, 2024
Less Than 12 Months12 Months or MoreTotal
($ in thousands)Fair ValueGross Unrealized LossesFair Value
Gross Unrealized Losses
Fair ValueGross Unrealized Losses
AFS debt securities:
U.S. Treasury securities$— $— $623,757 $(52,534)$623,757 $(52,534)
U.S. government agency and U.S. government sponsored enterprise debt securities— — 260,388 (49,568)260,388 (49,568)
U.S. government agency and U.S. government-sponsored enterprise mortgage-backed securities:
Commercial mortgage-backed securities— — 440,214 (53,547)440,214 (53,547)
Residential mortgage-backed securities2,778,124 (5,016)1,570,970 (236,075)4,349,094 (241,091)
Municipal securities3,337 (32)250,949 (38,876)254,286 (38,908)
Non-agency mortgage-backed securities:
Commercial mortgage-backed securities— — 320,637 (39,976)320,637 (39,976)
Residential mortgage-backed securities— — 474,618 (89,796)474,618 (89,796)
Corporate debt securities— — 507,130 (146,371)507,130 (146,371)
Foreign government bonds18,768 (66)87,166 (12,834)105,934 (12,900)
Asset-backed securities— — 38,593 (468)38,593 (468)
CLOs— — 44,453 (47)44,453 (47)
Total AFS debt securities$2,800,229 $(5,114)$4,618,875 $(720,092)$7,419,104 $(725,206)
December 31, 2023
Less Than 12 Months12 Months or MoreTotal
($ in thousands)Fair ValueGross Unrealized LossesFair ValueGross Unrealized LossesFair ValueGross Unrealized Losses
AFS debt securities:
U.S. Treasury securities$— $— $623,978 $(52,313)$623,978 $(52,313)
U.S. government agency and U.S. government-sponsored enterprise debt securities— — 364,446 (47,640)364,446 (47,640)
U.S. government agency and U.S. government-sponsored enterprise mortgage-backed securities:
Commercial mortgage-backed securities— — 463,572 (63,276)463,572 (63,276)
Residential mortgage-backed securities9,402 (558)1,661,112 (229,155)1,670,514 (229,713)
Municipal securities2,825 (15)254,773 (36,327)257,598 (36,342)
Non-agency mortgage-backed securities:
Commercial mortgage-backed securities2,742 (4)364,774 (42,058)367,516 (42,062)
Residential mortgage-backed securities— — 553,671 (89,664)553,671 (89,664)
Corporate debt securities— — 502,425 (151,076)502,425 (151,076)
Foreign government bonds110,955 (144)88,616 (11,384)199,571 (11,528)
Asset-backed securities— — 42,300 (934)42,300 (934)
CLOs— — 612,861 (4,389)612,861 (4,389)
Total AFS debt securities$125,924 $(721)$5,532,528 $(728,216)$5,658,452 $(728,937)

24

As of June 30, 2024, the Company had 567 AFS debt securities in a gross unrealized loss position with no credit impairment, primarily consisting of 304 U.S. government agency and U.S. government-sponsored enterprise mortgage-backed securities, 66 corporate debt securities and 91 non-agency mortgage-backed securities. In comparison, as of December 31, 2023, the Company had 547 AFS debt securities in a gross unrealized loss position with no credit impairment, primarily consisting of 255 U.S. government agency and U.S. government-sponsored enterprise mortgage-backed securities, 66 corporate debt securities, and 99 non-agency mortgage-backed 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 2023 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 June 30, 2024 were mainly comprised of the following:

•Corporate debt securities — The market value decline as of June 30, 2024 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 2023, these securities are nearly all rated investment grade by nationally recognized statistical rating organizations (“NRSROs”) and 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.
•Non-agency mortgage-backed securities — The market value decline as of June 30, 2024 was primarily due to interest rate movement and spread widening. Since these securities are rated investment grade by NRSROs, or have high priority in the cash flow waterfall within the securitization structure, and the contractual payments have historically been on time, the Company believes the risk of credit losses on these securities is low.

As of both June 30, 2024 and December 31, 2023, 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 June 30, 2024 and December 31, 2023. In addition, there was no provision for credit losses recognized for the three and six months ended June 30, 2024 and 2023.

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 2023 Form 10-K.

The Company monitors the credit quality of the HTM debt securities using external credit ratings. As of June 30, 2024, 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 June 30, 2024 and December 31, 2023. Overall, the Company believes that the credit support levels of the debt securities are strong, and based on current assessments and macroeconomic forecasts, expects that full contractual cash flows will be received.

25

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 six months ended June 30, 2024 and 2023:
Three Months Ended June 30,Six Months Ended June 30,
($ in thousands)2024202320242023
Gross realized gains from sales
$1,785 $— $1,834 $— 
Impairment write-off (1)
$— $— $— $(10,000)
Related tax expense (benefit)
$528 $— $542 $(2,956)
(1)During the first quarter of 2023, the Company recognized a $10 million impairment write-off on a subordinated debt security 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 six months ended June 30, 2024 and 2023:
Three Months Ended June 30,Six Months Ended June 30,
($ in thousands)2024202320242023
Taxable interest$106,690 $64,139 $177,018 $125,188 
Nontaxable interest5,042 4,831 10,106 9,713 
Total interest income on debt securities$111,732 $68,970 $187,124 $134,901 

26

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

The following tables present the contractual maturities, amortized cost, fair value and weighted-average yields of AFS and HTM debt securities as of June 30, 2024. 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$34,929 $641,362 $— $— $676,291 
Fair value34,182 589,575 — — 623,757 
Weighted-average yield (1)
1.83 %1.17 %— %— %1.21 %
U.S. government agency and U.S. government-sponsored enterprise debt securities
Amortized cost1,238 44,158 127,831 136,729 309,956 
Fair value1,208 41,133 107,143 110,904 260,388 
Weighted-average yield (1)
2.52 %1.07 %1.59 %2.33 %1.85 %
U.S. government agency and U.S. government-sponsored enterprise mortgage-backed securities
Amortized cost3,565 41,983 126,229 6,283,304 6,455,081 
Fair value3,483 39,915 116,502 6,003,765 6,163,665 
Weighted-average yield (1) (2)
2.74 %2.98 %2.82 %5.46 %5.39 %
Municipal securities
Amortized cost3,605 33,531 9,619 248,682 295,437 
Fair value3,543 31,354 8,793 212,873 256,563 
Weighted-average yield (1) (2)
2.43 %2.29 %3.22 %2.23 %2.27 %
Non-agency mortgage-backed securities
Amortized cost75,391 20,848 — 828,788 925,027 
Fair value74,622 20,385 — 700,248 795,255 
Weighted-average yield (1)
6.89 %4.00 %— %2.50 %2.89 %
Corporate debt securities
Amortized cost— — 349,501 304,000 653,501 
Fair value— — 297,135 209,995 507,130 
Weighted-average yield (1)
— %— %3.50 %1.97 %2.79 %
Foreign government bonds
Amortized cost18,834 126,689 50,000 50,000 245,523 
Fair value18,768 127,790 49,782 37,384 233,724 
Weighted-average yield (1)
3.61 %2.22 %5.72 %1.50 %2.89 %
Asset-backed securities
Amortized cost— — — 39,061 39,061 
Fair value— — — 38,593 38,593 
Weighted-average yield (1)
— %— %— %6.06 %6.06 %
CLOs
Amortized cost— — 44,500 — 44,500 
Fair value— — 44,453 — 44,453 
Weighted-average yield (1)
— %— %6.79 %— %6.79 %
Total AFS debt securities
Amortized cost$137,562 $908,571 $707,680 $7,890,564 $9,644,377 
Fair value$135,806 $850,152 $623,808 $7,313,762 $8,923,528 
Weighted-average yield (1)
4.89 %1.50 %3.39 %4.84 %4.42 %
27

($ in thousands)Within One Year
After One Year through Five Years
After Five Years through Ten YearsAfter Ten YearsTotal
HTM debt securities:
U.S. Treasury securities
Amortized cost$—$532,294$—$—$532,294
Fair value—487,707——487,707
Weighted-average yield (1)
— %1.05 %— %— %1.05 %
U.S. government agency and U.S. government-sponsored enterprise debt securities
Amortized cost——367,841635,2531,003,094
Fair value——311,312491,583802,895
Weighted-average yield (1)
— %— %1.89 %1.90 %1.90 %
U.S. government agency and U.S. government-sponsored enterprise mortgage-backed securities
Amortized cost—4,77794,4991,115,2651,214,541
Fair value—4,33979,701888,215972,255
Weighted-average yield (1) (2)
— %1.41 %1.61 %1.70 %1.69 %
Municipal securities
Amortized cost———188,321188,321
Fair value———142,370142,370
Weighted-average yield (1) (2)
— %— %— %2.00 %2.00 %
Total HTM debt securities
Amortized cost$—$537,071$462,340$1,938,839$2,938,250
Fair value$—$492,046$391,013$1,522,168$2,405,227
Weighted-average yield (1)
— %1.05 %1.83 %1.79 %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 June 30, 2024 and December 31, 2023, AFS and HTM debt securities with carrying values of $5.6 billion and $7.0 billion, respectively, were pledged to secure borrowings, public deposits and for other purposes required or permitted by law.

Restricted Equity Securities

The following table presents the restricted equity securities included in Other assets on the Consolidated Balance Sheet as of June 30, 2024 and December 31, 2023:
($ in thousands)June 30, 2024December 31, 2023
Federal Reserve Bank of San Francisco (“FRBSF”) stock
$63,248 $62,561 
FHLB stock101,916 17,250 
Total restricted equity securities$165,164 $79,811 

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 2023 Form 10-K.
28

The following table presents the notional amounts and fair values of the Company’s derivatives as of June 30, 2024 and December 31, 2023. 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 $28 million and $37 million, respectively, as of June 30, 2024. In comparison, applying variation margin payments as settlement to LCH- and CME-cleared derivative transactions resulted in reductions in both the derivative asset and liability fair values by $43 million as of December 31, 2023. Total derivative asset and liability fair values are adjusted to reflect the effects of legally enforceable master netting agreements and cash collateral received or paid. The resulting net derivative asset and liability fair values are included in Other assets and Accrued expenses and other liabilities, respectively, on the Consolidated Balance Sheet.
June 30, 2024December 31, 2023
Fair ValueFair Value
($ in thousands)Notional Amount
Assets 
Liabilities 
Notional Amount
Assets 
Liabilities 
Derivatives designated as hedging instruments:
Cash flow hedges:
Interest rate contracts
$5,250,000 $11,484 $54,557 $5,250,000 $50,421 $13,124 
Net investment hedges:
Foreign exchange contracts
— — — 81,480 3,394 — 
Total derivatives designated as hedging instruments
$5,250,000 $11,484 $54,557 $5,331,480 $53,815 $13,124 
Derivatives not designated as hedging instruments:
Interest rate contracts
$16,927,202 $448,106 $446,957 $17,387,909 $423,486 $420,812 
Commodity contracts (1)
— 60,946 70,900 — 79,604 121,670 
Foreign exchange contracts3,865,583 33,684 25,598 5,827,149 53,678 42,564 
Credit contracts (2)
117,751 — 14 118,391 1 25 
Equity contracts
— 240 (3)15,119 (4)— 336 (3)15,119 (4)
Total derivatives not designated as hedging instruments$20,910,536 $542,976 $558,588 $23,333,449 $557,105 $600,190 
Gross derivative assets/liabilities$554,460 $613,145 $610,920 $613,314 
Less: Master netting agreements(106,525)(106,525)(75,534)(75,534)
Less: Cash collateral received(335,285)(2,665)(237,258)(636)
Net derivative assets/liabilities$112,650 $503,955 $298,128 $537,144 
(1)The notional amount of the Company’s commodity contracts totaled 18,230 thousand barrels of crude oil and 421,525 thousand units of natural gas, measured in million British thermal units (“MMBTUs”) as of June 30, 2024. In comparison, the notional amount of the Company’s commodity contracts totaled 18,631 thousand barrels of crude oil and 328,844 thousand MMBTUs of natural gas as of December 31, 2023.
(2)The notional amount of the credit contracts reflects the Company’s pro-rata share of the underlying derivative instruments’ notional amount in RPAs.
(3)The Company held warrant equity contracts in 10 private companies and one public company as of June 30, 2024, and 11 private companies and one public company as of December 31, 2023.
(4)Equity contracts classified as derivative liabilities consist of 349,138 performance-based RSUs 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 the interest amount received on certain floating-rate commercial loans, or paid on certain floating-rate borrowings due to changes in contractually specified interest rates. As of June 30, 2024, interest rate contracts in notional amounts of $5.3 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 June 30, 2024, the Company expects to reclassify an estimated $43 million of after-tax net losses on derivative instruments designated as cash flow hedges from AOCI into earnings during the next 12 months.

29

The following table presents the pre-tax changes in AOCI from cash flow hedges for the three and six months ended June 30, 2024 and 2023. 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 June 30,Six Months Ended June 30,
($ in thousands)2024202320242023
 Gains (losses) recognized in AOCI:
Interest rate contracts$25,095 $(96,457)$115,471 $(66,614)
 Gains (losses) reclassified from AOCI into earnings:
Interest expense (for cash flow hedges on borrowings)$— $— $— $696 
Interest and dividend income (for cash flow hedges on loans)(24,594)(20,252)(49,199)(33,206)
Noninterest income— — — 1,614 
(1)
Total$(24,594)$(20,252)$(49,199)$(30,896)
(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 net investment hedge in place as of December 31, 2023 expired during the three months ended March 31, 2024. No new net investment hedge was entered during the three months ended June 30, 2024. The following table presents the pre-tax gains or losses recognized in AOCI on net investment hedges for the three and six months ended June 30, 2024 and 2023:
Three Months Ended June 30,Six Months Ended June 30,
($ in thousands)2024202320242023
Gains recognized in AOCI
$— $3,899 $586 $2,823 

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 June 30, 2024 and December 31, 2023.

30

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 June 30, 2024 and December 31, 2023:
June 30, 2024December 31, 2023
Fair ValueFair Value
($ in thousands)Notional AmountAssetsLiabilitiesNotional AmountAssetsLiabilities
Customer-related positions:
Interest rate contracts:
Swaps$6,826,308 $9,729 $423,880 $6,835,822 $25,649 $377,388 
Written options1,369,229 — 9,929 1,522,531 — 12,756 
Collars and corridors259,081 96 2,496 322,732 440 4,481 
Subtotal8,454,618 9,825 436,305 8,681,085 26,089 394,625 
Foreign exchange contracts:
Forwards and spot535,153 5,897 3,428 956,618 9,466 6,756 
Swaps1,197,938 7,515 10,558 1,588,491 5,801 18,118 
Purchased options
88,000 2,051 — 136,000 1,839 — 
Subtotal1,821,091 15,463 13,986 2,681,109 17,106 24,874 
Total$10,275,709 $25,288 $450,291 $11,362,194 $43,195 $419,499 
Economic hedges:
Interest rate contracts:
Swaps$6,844,274 $425,796 $10,552 $6,861,561 $380,123 $25,731 
Purchased options1,369,229 9,981 — 1,522,531 12,783 — 
Collars and corridors259,081 2,504 100 322,732 4,491 456 
Subtotal8,472,584 438,281 10,652 8,706,824 397,397 26,187 
Foreign exchange contracts:
Forwards and spot66,546 52 128 148,003 292 94 
Swaps1,889,946 18,169 9,433 2,862,037 36,280 15,757 
Written options
88,000 — 2,051 136,000 — 1,839 
Subtotal2,044,492 18,221 11,612 3,146,040 36,572 17,690 
Total$10,517,076 $456,502 $22,264 $11,852,864 $433,969 $43,877 

31

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 June 30, 2024 and December 31, 2023:
June 30, 2024December 31, 2023
Fair ValueFair Value
($ and unit in thousands)Notional UnitsAssetsLiabilitiesNotional UnitsAssetsLiabilities
Customer-related positions:
Commodity contracts:
Crude oil:
Swaps3,907 Barrels$13,897 $857 3,277 Barrels$3,735 $15,445 
Collars5,180 Barrels8,366 43 5,966 Barrels1,820 5,103 
Subtotal9,087 Barrels22,263 900 9,243 Barrels5,555 20,548 
Natural gas:
Swaps148,337 MMBTUs1,796 43,998 118,325 MMBTUs438 73,793 
Collars62,277 MMBTUs1,297 12,005 45,854 MMBTUs21 20,400 
Written options1,710 MMBTUs124 — 1,874 MMBTUs— 233 
Subtotal212,324 MMBTUs3,217 56,003 166,053 MMBTUs459 94,426 
Total$25,480 $56,903 $6,014 $114,974 
Economic hedges:
Commodity contracts:
Crude oil:
Swaps3,963 Barrels$1,308 $10,871 3,422 Barrels$9,166 $4,924 
Collars5,180 Barrels3 1,983 5,966 Barrels1,685 1,467 
Subtotal9,143 Barrels1,311 12,854 9,388 Barrels10,851 6,391 
Natural gas:
Swaps145,824 MMBTUs28,395 391 116,463 MMBTUs49,941 305 
Collars61,667 MMBTUs5,760 648 44,454 MMBTUs12,565 — 
Purchased options1,710 MMBTUs— 104 1,874 MMBTUs233 — 
Subtotal209,201 MMBTUs34,155 1,143 162,791 MMBTUs62,739 305 
Total$35,466 $13,997 $73,590 $6,696 

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 2.3 years and 2.8 years as of June 30, 2024 and December 31, 2023, respectively. Assuming the underlying borrowers referenced in the interest rate contracts defaulted, the maximum exposure in the protection sold RPAs would be $63 thousand and $177 thousand as of June 30, 2024 and December 31, 2023, respectively.

As of both June 30, 2024 and December 31, 2023, the Company had one outstanding protection purchased RPA with notional amount of $25 million and minimal fair value.

32

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 performance-based RSUs 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 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 six months ended June 30, 2024 and 2023:
Three Months Ended June 30,Six Months Ended June 30,
($ in thousands)
Classification on Consolidated Statement of Income
2024202320242023
Derivatives not designated as hedging instruments:
Interest rate contracts
Customer derivative income
$1,099 $1,222 $1,583 $(1,261)
Foreign exchange contractsForeign exchange income14,349 19,898 27,129 30,340 
Credit contracts
Customer derivative income
2 12 (3)7 
Equity contracts - warrants
Lending fees(90)(14)(96)(60)
Commodity contracts
Customer derivative income
433 160 567 166 
Net gains$15,793 $21,278 $29,180 $29,192 

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 grade. As of June 30, 2024, the aggregate fair value amounts of all derivative instruments with credit risk-related contingent features that were in a net liability position totaled $2 million, for which $2 million collateral was posted to cover these positions. In comparison, as of December 31, 2023, the aggregate fair value amounts of all derivative instruments with credit risk-related contingent features that were in a net liability position totaled $9 thousand, for which no collateral was posted to cover these positions. In the event that the credit rating of East West Bank had been downgraded to below investment grade, the Company would have been required to post minimal additional collateral as of both June 30, 2024 and December 31, 2023.

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 June 30, 2024
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
Gross Amounts Recognized (1)
Master Netting Arrangements
Cash Collateral Received (3)
Security Collateral Received (5)
Net Amount
Derivative assets$554,460 $(106,525)$(335,285)$112,650 $(78,411)$34,239 
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
 Gross Amounts Recognized (2)
Master Netting Arrangements
Cash Collateral Pledged (4)
Security Collateral Pledged (5)
Net Amount
Derivative liabilities$613,145 $(106,525)$(2,665)$503,955 $— $503,955 
33

($ in thousands)As of December 31, 2023
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
 Gross Amounts Recognized (1)
Master Netting Arrangements
Cash Collateral Received (3)
Security Collateral Received (5)
Net Amount
Derivative assets$610,920 $(75,534)$(237,258)$298,128 $(246,259)$51,869 
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
 Gross Amounts Recognized (2)
Master Netting Arrangements
Cash Collateral Pledged (4)
Security Collateral Pledged (5)
Net Amount
Derivative liabilities$613,314 $(75,534)$(636)$537,144 $— $537,144 
(1)Includes $3 million of gross fair value assets with counterparties that were not subject to enforceable master netting arrangements or similar agreements as of both June 30, 2024 and December 31, 2023.
(2)Includes $17 million and $16 million of gross fair value liabilities with counterparties that were not subject to enforceable master netting arrangements or similar agreements as of June 30, 2024 and December 31, 2023, respectively.
(3)Gross cash collateral received under master netting arrangements or similar agreements was $356 million and $244 million as of June 30, 2024 and December 31, 2023, respectively. Of the gross cash collateral received, $335 million and $237 million were used to offset derivative assets as of June 30, 2024 and December 31, 2023, respectively.
(4)Gross cash collateral pledged under master netting arrangements or similar agreements was $3 million and $1 million as of June 30, 2024 and December 31, 2023, respectively. Of the gross cash collateral pledged, $3 million and $1 million were used to offset derivative liabilities as of June 30, 2024 and December 31, 2023, respectively.
(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 agreements. Refer to Note 4 — Securities Purchased under Resale Agreements to the Consolidated Financial Statements in this Form 10-Q for additional information. Refer to Note 3 — Fair Value Measurement and Fair Value of Financial Instruments to the Consolidated Financial Statements in this Form 10-Q for fair value measurement disclosures on derivatives.
34

Note 7 — Loans Receivable and Allowance for Credit Losses

The following table presents the composition of the Company’s loans held-for-investment outstanding as of June 30, 2024 and December 31, 2023:
($ in thousands)June 30, 2024December 31, 2023
Commercial:
C&I$16,875,009 $16,581,079 
CRE:
CRE14,562,595 14,777,081 
Multifamily residential5,100,210 5,023,163 
Construction and land664,793 663,868 
Total CRE20,327,598 20,464,112 
Total commercial37,202,607 37,045,191 
Consumer:
Residential mortgage:
Single-family residential13,747,769 13,383,060 
HELOCs1,761,379 1,722,204 
Total residential mortgage15,509,148 15,105,264 
Other consumer56,154 60,327 
Total consumer15,565,302 15,165,591 
Total loans held-for-investment (1)
$52,767,909 $52,210,782 
Allowance for loan losses(683,794)(668,743)
Loans held-for-investment, net (1)
$52,084,115 $51,542,039 
(1)Includes $53 million and $71 million of net deferred loan fees and net unamortized premiums as of June 30, 2024 and December 31, 2023, respectively.

Accrued interest receivable on loans held-for-investment was $266 million and $267 million as of June 30, 2024 and December 31, 2023, respectively, and was included in Other assets on the Consolidated Balance Sheet. The interest income reversed was insignificant for both the three and six months ended June 30, 2024 and 2023. 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 2023 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 2023 Form 10-K.

The Company’s FRBSF and FHLB borrowings are primarily secured by loans held-for-investment. Loans held-for-investment totaling $37.0 billion and $37.2 billion, respectively, were pledged to secure borrowings and provide additional borrowing capacity as of June 30, 2024 and December 31, 2023.

Credit Quality Indicators

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

The Company utilizes internal credit risk ratings to assign each individual loan a risk rating of 1 through 10:
•Pass — loans risk rated 1 through 5 are assigned an internal risk rating category of “Pass.” Loans risk rated 1 are typically loans fully secured by cash. Pass loans have sufficient sources of repayment to repay the loan in full, in accordance with all terms and conditions.
•Special mention — loans assigned a risk rating of 6 have potential weaknesses that warrant closer attention by management; these are assigned an internal risk rating category of “Special Mention.”
•Substandard — loans assigned a risk rating of 7 or 8 have well-defined weaknesses that may jeopardize the full and timely repayment of the loan; these are assigned an internal risk rating category of “Substandard.”
•Doubtful — loans assigned a risk rating of 9 have insufficient sources of repayment and a high probability of loss; these are assigned an internal risk rating category of “Doubtful.”
35

•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 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.
June 30, 2024
Term Loans by Origination Year
($ in thousands)20242023202220212020PriorRevolving Loans
Revolving Loans Converted to Term Loans (1)
Total
Commercial:
C&I:
Pass$1,053,645 $2,013,510 $1,248,640 $1,047,295 $286,440 $352,329 $10,369,005 $23,548 $16,394,412 
Criticized (accrual)511 30,279 115,671 80,715 1,908 60,126 124,427 — 413,637 
Criticized (nonaccrual)3,911 14,606 22,752 9,484 3,335 11,929 943 — 66,960 
Total C&I1,058,067 2,058,395 1,387,063 1,137,494 291,683 424,384 10,494,375 23,548 16,875,009 
Gross write-offs for the six months ended June 30, 2024 (2)
— 337 11,753 14,342 1,212 1,528 19 — 29,191 
CRE:
Pass726,897 2,337,637 3,885,787 2,053,076 1,371,437 3,573,736 100,131 49,863 14,098,564 
Criticized (accrual)11,005 66,071 55,768 31,633 67,955 185,529 — 14,790 432,751 
Criticized (nonaccrual)— 1,750 — 11,020 469 18,041 — — 31,280 
Subtotal CRE737,902 2,405,458 3,941,555 2,095,729 1,439,861 3,777,306 100,131 64,653 14,562,595 
Gross write-offs for the six months ended June 30, 2024 (2)
— — — — — 2,261 — — 2,261 
Multifamily residential:
Pass162,350 671,221 1,480,502 792,114 624,947 1,297,867 17,263 1,268 5,047,532 
Criticized (accrual)— — 13,380 31,723 — 2,968 — — 48,071 
Criticized (nonaccrual)— — — — — 4,607 — — 4,607 
Subtotal multifamily residential162,350 671,221 1,493,882 823,837 624,947 1,305,442 17,263 1,268 5,100,210 
Gross write-offs for the six months ended June 30, 2024
— — — — — 6 — — 6 
Construction and land:
Pass15,157 314,253 228,865 88,236 — 6,271 — — 652,782 
Criticized (accrual)— — 695 — — — — — 695 
Criticized (nonaccrual)— — 11,316 — — — — — 11,316 
Subtotal construction and land15,157 314,253 240,876 88,236 — 6,271 — — 664,793 
Gross write-offs for the six months ended June 30, 2024
— — 2,144 — — — — — 2,144 
Total CRE915,409 3,390,932 5,676,313 3,007,802 2,064,808 5,089,019 117,394 65,921 20,327,598 
Total CRE gross write-offs for the six months ended June 30, 2024 (2)
— — 2,144 — — 2,267 — — 4,411 
Total commercial$1,973,476 $5,449,327 $7,063,376 $4,145,296 $2,356,491 $5,513,403 $10,611,769 $89,469 $37,202,607 
Total commercial gross write-offs for the six months ended June 30, 2024 (2)
$— $337 $13,897 $14,342 $1,212 $3,795 $19 $— $33,602 
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June 30, 2024
Term Loans by Origination Year
($ in thousands)20242023202220212020PriorRevolving Loans
Revolving Loans Converted to Term Loans (1)
Total
Consumer:
Residential mortgage:
Single-family residential:
Pass (3)
$1,162,393 $2,965,129 $3,214,153 $2,175,945 $1,504,722 $2,676,170 $— $— $13,698,512 
Criticized (accrual)353 1,166 1,701 1,589 1,120 6,077 — — 12,006 
Criticized (nonaccrual) (3)
2,028 11,293 5,201 3,067 2,179 13,483 — — 37,251 
Subtotal single-family residential mortgage1,164,774 2,977,588 3,221,055 2,180,601 1,508,021 2,695,730 — — 13,747,769 
Gross write-offs for the six months ended June 30, 2024 (2)
— — — — — 9 — — 9 
HELOCs:
Pass4,382 3,797 4,712 2,576 3,847 8,253 1,589,193 126,170 1,742,930 
Criticized (accrual)— 1,221 1,072 339 603 993 503 488 5,219 
Criticized (nonaccrual)517 1,208 2,095 930 — 4,513 — 3,967 13,230 
Subtotal HELOCs4,899 6,226 7,879 3,845 4,450 13,759 1,589,696 130,625 1,761,379 
Total residential mortgage1,169,673 2,983,814 3,228,934 2,184,446 1,512,471 2,709,489 1,589,696 130,625 15,509,148 
Total residential mortgage gross write-offs for the six months ended June 30, 2024 (2)
— — — — — 9 — — 9 
Other consumer:
Pass3,886 37 19,907 133 — 6,858 22,113 — 52,934 
Criticized (accrual)15 — — — — — 3,000 — 3,015 
Criticized (nonaccrual)— — — — — — 205 — 205 
Total other consumer3,901 37 19,907 133 — 6,858 25,318 — 56,154 
Gross write-offs for the six months ended June 30, 2024 (2)
— — — — — — 22 — 22 
Total consumer$1,173,574 $2,983,851 $3,248,841 $2,184,579 $1,512,471 $2,716,347 $1,615,014 $130,625 $15,565,302 
Total consumer gross write-offs for the six months ended June 30, 2024 (2)
$— $— $— $— $— $9 $22 $— $31 
Total loans held-for-investment:
Pass$3,128,710 $8,305,584 $10,082,566 $6,159,375 $3,791,393 $7,921,484 $12,097,705 $200,849 $51,687,666 
Criticized (accrual)11,884 98,737 188,287 145,999 71,586 255,693 127,930 15,278 915,394 
Criticized (nonaccrual)6,456 28,857 41,364 24,501 5,983 52,573 1,148 3,967 164,849 
Total$3,147,050 $8,433,178 $10,312,217 $6,329,875 $3,868,962 $8,229,750 $12,226,783 $220,094 $52,767,909 
Total loans held-for-investment gross write-offs for the six months ended June 30, 2024 (2)
$— $337 $13,897 $14,342 $1,212 $3,804 $41 $— $33,633 












37

December 31, 2023
Term Loans by Origination Year
($ in thousands)20232022202120202019PriorRevolving Loans
Revolving Loans Converted to Term Loans (1)
Total
Commercial:
C&I:
Pass$2,314,463 $1,628,560 $1,296,936 $331,982 $245,173 $164,159 $10,053,757 $20,143 $16,055,173 
Criticized (accrual)105,119 67,899 120,574 15,064 40,920 22,098 117,196 — 488,870 
Criticized (nonaccrual)2,104 7,916 131 4,819 2,979 18,137 950 — 37,036 
Total C&I2,421,686 1,704,375 1,417,641 351,865 289,072 204,394 10,171,903 20,143 16,581,079 
Gross write-offs for the year ended December 31, 2023 (2)
350 10,454 424 3,758 9,748 2,648 1,593 — 28,975 
CRE:
Pass2,492,915 4,086,385 2,216,257 1,428,724 1,600,844 2,494,382 92,851 62,771 14,475,129 
Criticized (accrual)36,855 34,485 30,336 48,250 24,437 104,340 — — 278,703 
Criticized (nonaccrual)— — — — 444 22,805 — — 23,249 
Subtotal CRE2,529,770 4,120,870 2,246,593 1,476,974 1,625,725 2,621,527 92,851 62,771 14,777,081 
Gross write-offs for the year ended December 31, 2023 (2)
— — — — — 1,329 — — 1,329 
Multifamily residential:
Pass665,780 1,481,161 808,333 612,408 498,491 857,713 8,690 1,281 4,933,857 
Criticized (accrual)— 3,356 54,614 — 693 25,974 — — 84,637 
Criticized (nonaccrual)— — — — — 4,669 — — 4,669 
Subtotal multifamily residential665,780 1,484,517 862,947 612,408 499,184 888,356 8,690 1,281 5,023,163 
Gross write-offs for the year ended December 31, 2023
— — — — — 3 — — 3 
Construction and land:
Pass209,775 280,151 120,724 39,928 808 5,501 6,981 — 663,868 
Subtotal construction and land209,775 280,151 120,724 39,928 808 5,501 6,981 — 663,868 
Total CRE3,405,325 5,885,538 3,230,264 2,129,310 2,125,717 3,515,384 108,522 64,052 20,464,112 
Total CRE gross write-offs for the year ended December 31, 2023 (2)
— — — — — 1,332 — — 1,332 
Total commercial$5,827,011 $7,589,913 $4,647,905 $2,481,175 $2,414,789 $3,719,778 $10,280,425 $84,195 $37,045,191 
Total commercial gross write-offs for the year ended December 31, 2023 (2)
$350 $10,454 $424 $3,758 $9,748 $3,980 $1,593 $— $30,307 
38

December 31, 2023
Term Loans by Origination Year
($ in thousands)20232022202120202019PriorRevolving Loans
Revolving Loans Converted to Term Loans (1)
Total
Consumer:
Residential mortgage:
Single-family residential:
Pass (4)
$3,188,830 $3,340,789 $2,279,802 $1,594,525 $980,686 $1,959,974 $— $— $13,344,606 
Criticized (accrual)2,680 4,471 566 1,440 1,503 4,167 — — 14,827 
Criticized (nonaccrual) (3)
4,466 837 3,902 2,081 3,626 8,715 — — 23,627 
Subtotal single-family residential mortgage3,195,976 3,346,097 2,284,270 1,598,046 985,815 1,972,856 — — 13,383,060 
HELOCs:
Pass3,641 3,882 1,734 3,153 729 9,251 1,551,074 126,280 1,699,744 
Criticized (accrual)565 1,219 1,872 101 185 1,470 2,548 1,089 9,049 
Criticized (nonaccrual)815 856 413 72 584 6,863 279 3,529 13,411 
Subtotal HELOCs5,021 5,957 4,019 3,326 1,498 17,584 1,553,901 130,898 1,722,204 
Gross write-offs for the year ended December 31, 2023 (2)
— — — — — 41 — 6 47 
Total residential mortgage3,200,997 3,352,054 2,288,289 1,601,372 987,313 1,990,440 1,553,901 130,898 15,105,264 
Total residential mortgage gross write-offs for the year ended December 31, 2023 (2)
— — — — — 41 — 6 47 
Other consumer:
Pass2,286 18,098 135 — — 13,244 26,432 — 60,195 
Criticized (nonaccrual)— — — — — — 132 — 132 
Total other consumer
2,286 18,098 135 — — 13,244 26,564 — 60,327 
Total consumer$3,203,283 $3,370,152 $2,288,424 $1,601,372 $987,313 $2,003,684 $1,580,465 $130,898 $15,165,591 
Total consumer gross write-offs for the year ended December 31, 2023 (2)
$— $— $— $— $— $41 $— $6 $47 
Total by Risk Rating:
Pass$8,877,690 $10,839,026 $6,723,921 $4,010,720 $3,326,731 $5,504,224 $11,739,785 $210,475 $51,232,572 
Criticized (accrual)145,219 111,430 207,962 64,855 67,738 158,049 119,744 1,089 876,086 
Criticized (nonaccrual)7,385 9,609 4,446 6,972 7,633 61,189 1,361 3,529 102,124 
Total
$9,030,294 $10,960,065 $6,936,329 $4,082,547 $3,402,102 $5,723,462 $11,860,890 $215,093 $52,210,782 
Total loans held-for-investment gross write-offs for the year ended December 31, 2023 (2)
$350 $10,454 $424 $3,758 $9,748 $4,021 $1,593 $6 $30,354 
(1)$1 million and $8 million of total commercial loans, comprised of C&I and CRE revolving loans, converted to term loans during the three and six months ended June 30, 2024, respectively. In comparison, $1 million and $14 million of total commercial loans, primarily comprised of CRE revolving loans converted to term loans during the three and six months ended June 30, 2023, respectively. $18 million and $28 million of total consumer loans, comprised of HELOCs, converted to term loans during the three and six months ended June 30, 2024, respectively. In comparison, $10 million and $14 million of total consumer loans, comprised of HELOCs, converted to term loans during the three and six months ended June 30, 2023, respectively.
(2)Excludes gross write-offs associated with loans the Company sold or settled.
(3)As of both June 30, 2024 and December 31, 2023, $1 million of nonaccrual loans whose payments were guaranteed by the Federal Housing Administration were classified with a “Pass” rating.
39

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 June 30, 2024 and December 31, 2023:
June 30, 2024
($ 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$16,785,688 $12,851 $9,510 $22,361 $66,960 $16,875,009 
CRE:
CRE14,518,793 11,627 895 12,522 31,280 14,562,595 
Multifamily residential5,094,712 891 — 891 4,607 5,100,210 
Construction and land653,477 — — — 11,316 664,793 
Total CRE20,266,982 12,518 895 13,413 47,203 20,327,598 
Total commercial37,052,670 25,369 10,405 35,774 114,163 37,202,607 
Consumer:
Residential mortgage:
Single-family residential13,667,351 29,993 12,141 42,134 38,284 13,747,769 
HELOCs1,729,694 13,236 5,219 18,455 13,230 1,761,379 
Total residential mortgage15,397,045 43,229 17,360 60,589 51,514 15,509,148 
Other consumer55,706 158 85 243 205 56,154 
Total consumer15,452,751 43,387 17,445 60,832 51,719 15,565,302 
Total$52,505,421 $68,756 $27,850 $96,606 $165,882 $52,767,909 
December 31, 2023
($ in thousands)
Current Accruing Loans
Accruing Loans 30-59 Days Past Due
Accruing Loans 60-89 Days Past Due
Total Accruing Past Due Loans
Total Nonaccrual Loans
Total Loans
Commercial:
C&I$16,508,394 $28,550 $7,099 $35,649 $37,036 $16,581,079 
CRE:
CRE14,750,315 1,719 1,798 3,517 23,249 14,777,081 
Multifamily residential5,017,897 597 — 597 4,669 5,023,163 
Construction and land650,617 13,251 — 13,251 — 663,868 
Total CRE20,418,829 15,567 1,798 17,365 27,918 20,464,112 
Total commercial36,927,223 44,117 8,897 53,014 64,954 37,045,191 
Consumer:
Residential mortgage:
Single-family residential13,313,455 29,285 15,943 45,228 24,377 13,383,060 
HELOCs1,687,301 12,266 9,226 21,492 13,411 1,722,204 
Total residential mortgage
15,000,756 41,551 25,169 66,720 37,788 15,105,264 
Other consumer56,930 3,123 142 3,265 132 60,327 
Total consumer15,057,686 44,674 25,311 69,985 37,920 15,165,591 
Total$51,984,909 $88,791 $34,208 $122,999 $102,874 $52,210,782 

40

The following table presents the amortized cost of loans on nonaccrual status for which there was no related allowance for loan losses as of both June 30, 2024 and December 31, 2023. Nonaccrual loans may not have an allowance for credit losses if the loan balances are well secured by collateral values and there is no loss expectation.
($ in thousands)June 30, 2024December 31, 2023
Commercial:
C&I$50,808 $33,089 
CRE30,674 22,653 
Multifamily residential4,210 4,235 
Construction and land11,316 — 
Total commercial97,008 59,977 
Consumer:
Single-family residential14,461 4,852 
HELOCs7,057 7,256 
Total consumer21,518 12,108 
Total nonaccrual loans with no related allowance for loan losses$118,526 $72,085 

Foreclosed Assets

The Company acquires assets from borrowers through loan restructurings, workouts, or foreclosures. Assets acquired may include real properties (e.g., 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 $30 million of foreclosed assets as of June 30, 2024, compared with $11 million as of December 31, 2023. The Company commences the foreclosure process on consumer mortgage loans after a borrower becomes more than 120 days delinquent in accordance with the Consumer Financial Protection Bureau guidelines. The carrying value of the consumer real estate loans that were in an active or suspended foreclosure process was $8 million as of both June 30, 2024 and December 31, 2023.

Loan Modifications to Borrowers Experiencing Financial Difficulty

As part of the Company’s loss mitigation efforts, the Company may agree to modify the contractual terms of a loan to 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.

41

The following tables present the amortized cost of loans that were modified during the three and six months ended June 30, 2024 and 2023 by loan class and modification type:
Three Months Ended June 30, 2024
Modification Type
($ in thousands)Term ExtensionPayment Delay
Combination: Term Extension/ Payment Delay
Combination: Rate Reduction/ Payment Delay
Total
Modification as a % of Loan Class
Commercial:
C&I$11,901 $5,658 $2,951 $— $20,510 0.12 %
CRE— — — 11,020 11,020 0.05 %
Total commercial11,901 5,658 2,951 11,020 31,530 
Consumer:
Single-family residential— 4,791 — — 4,791 0.03 %
HELOCs— 2,053 — — 2,053 0.12 %
Other consumer3,000 — — — 3,000 5.34 %
Total consumer3,000 6,844 — — 9,844 
Total$14,901 $12,502 $2,951 $11,020 $41,374 
Three Months Ended June 30, 2023
Modification Type
($ in thousands)Term ExtensionPayment Delay
Combination: Term Extension/ Payment Delay
Combination: Rate Reduction/ Term Extension
Combination: Principal Forgiveness/ Rate Reduction/ Term Extension
Total
Modification as a % of Loan Class
Commercial:
C&I$13,475 $12,788 $— $— $298 $26,561 0.17 %
CRE— — — 32,791 — 32,791 0.16 %
Total commercial13,475 12,788 — 32,791 298 59,352 
Consumer:
Single-family residential
— 5,085 551 — — 5,636 0.05 %
HELOCs— 978 — — — 978 0.05 %
Total consumer— 6,063 551 — — 6,614 
Total$13,475 $18,851 $551 $32,791 $298 $65,966 
42

Six Months Ended June 30, 2024
Modification Type
($ in thousands)Term ExtensionPayment DelayCombination: Term Extension/ Payment Delay
Combination: Rate Reduction/ Payment Delay
TotalModification as a % of Loan Class
Commercial:
C&I$15,601 $25,886 $2,951 $— $44,438 0.26 %
CRE24,321 — — 30,570 54,891 0.27 %
Total commercial39,922 25,886 2,951 30,570 99,329 
Consumer:
Single-family residential— 8,528 — — 8,528 0.06 %
HELOCs— 6,881 — 517 7,398 0.42 %
Other consumer3,000 — — — 3,000 5.34 %
Total consumer3,000 15,409 — 517 18,926 
Total$42,922 $41,295 $2,951 $31,087 $118,255 
Six Months Ended June 30, 2023
Modification Type
($ in thousands)Term ExtensionPayment Delay
Combination: Term Extension/ Payment Delay
Combination: Rate Reduction/ Term Extension
Combination: Principal Forgiveness/ Rate Reduction/ Term Extension
Total
Modification as a % of Loan Class
Commercial:
C&I$33,098 $26,799 $— $— $298 $60,195 0.38 %
CRE526 — — 32,791 — 33,317 0.17 %
Total commercial33,624 26,799 — 32,791 298 93,512 
Consumer:
Single-family residential— 5,085 551 — — 5,636 0.05 %
HELOCs— 978 726 — — 1,704 0.09 %
Total consumer— 6,063 1,277 — — 7,340 
Total$33,624 $32,862 $1,277 $32,791 $298 $100,852 

The following tables present the financial effects of the loan modifications for the three and six months ended June 30, 2024 and 2023 by loan class and modification type:
Financial Effects of Loan Modifications for the Three Months Ended June 30,
20242023
($ in thousands)Weighted-Average Interest Rate Reduction
Weighted-Average Term Extension (in years)
Weighted-Average Payment Delay
(in years)
Principal Forgiveness
Weighted-Average Interest Rate Reduction
Weighted-Average Term Extension (in years)
Weighted-Average Payment Delay (in years)
Commercial:
C&I— %2.02.0$345 
(1)
8.50 %
(1)
1.70.6
CRE2.50 %0.01.2— 3.00 %2.50.0
Consumer:
Single-family residential— %0.00.8— — %9.70.9
HELOCs— %0.00.7— — %0.00.6
Other consumer— %0.80.0— — %0.00.0
43

Financial Effects of Loan Modifications for the Six Months Ended June 30,
20242023
($ in thousands)Weighted-Average Interest Rate Reduction
Weighted-Average Term Extension (in years)
Weighted-Average Payment Delay
(in years)		Principal ForgivenessWeighted-Average Interest Rate Reduction
Weighted-Average Term Extension (in years)
Weighted-Average Payment Delay (in years)
Commercial:
C&I— %2.01.5$345 
(1)
8.50 %
(1)
1.50.8
CRE2.66 %1.51.0— 3.00 %2.50.0
Consumer:
Single-family residential— %0.00.8— — %9.70.9
HELOCs0.25 %0.02.8— — %14.80.5
Other consumer— %0.80.0— — %0.00.0
(1)Comprised of a C&I loan modified during the three and six months ended June 30, 2023 where the interest is waived in addition to principal forgiveness.

A modified loan may become delinquent and result in a payment default (generally 90 days past due) subsequent to modification. The following table presents information on loans that defaulted during the three and six months ended June 30, 2024 that received modifications during the 12 months preceding payment default:
Loans Modified Subsequently Defaulted During Three Months Ended June 30, 2024
($ in thousands)Term Extension
Payment Delay
Combination: Rate Reduction/ Payment Delay
Combination: Term Extension/ Payment Delay
Total
Commercial:
C&I$— $5,658 $— $— $5,658 
Total commercial— 5,658 — — 5,658 
Consumer:
Single-family residential— 3,613 — 2,438 6,051 
HELOCs— 941 1,149 — 2,090 
Total consumer— 4,554 1,149 2,438 8,141 
Total$— $10,212 $1,149 $2,438 $13,799 
Loans Modified Subsequently Defaulted During the Six Months Ended June 30, 2024
($ in thousands)Term ExtensionPayment Delay
Combination: Rate Reduction/ Payment Delay
Combination: Term Extension/ Payment Delay
Total
Commercial:
C&I$7,829 $5,658 $— $— $13,487 
Total commercial7,829 5,658 — — 13,487 
Consumer:
Single-family residential— 7,575 — 2,823 10,398 
HELOCs— 941 1,149 — 2,090 
Total consumer— 8,516 1,149 2,823 12,488 
Total$7,829 $14,174 $1,149 $2,823 $25,975 

In comparison, there were no loans that received modifications and subsequently defaulted during both the three and six months ended June 30, 2023.

44

The Company monitors the performance of modified loans to borrowers experiencing financial difficulty to understand the effectiveness of its modification efforts. The following tables present the performance of loans that were modified in the twelve months ended June 30, 2024. For the comparative period, the amounts represent the performance of loans that were modified in the six months ended June 30, 2023, subsequent to the adoption of ASU 2022-02 on January 1, 2023:
Payment Performance as of June 30, 2024
($ in thousands)Current30 - 89 Days Past Due90+ Days Past DueTotal
Commercial:
C&I$67,004 $— $7,829 $74,833 
CRE
54,892 — — 54,892 
Total commercial121,896 — 7,829 129,725 
Consumer:
Single-family residential8,261 1,325 8,240 17,826 
HELOCs6,396 3,296 1,210 10,902 
Other consumer3,000 — — 3,000 
Total consumer17,657 4,621 9,450 31,728 
Total$139,553 $4,621 $17,279 $161,453 
Payment Performance as of June 30, 2023
($ in thousands)Current30 - 89 Days Past Due
90+ Days Past Due
Total
Commercial:
C&I$48,206 $7,000 $4,989 $60,195 
CRE
33,317 — — 33,317 
Total commercial81,523 7,000 4,989 93,512 
Consumer:
Single-family residential5,045 591 — 5,636 
HELOCs1,704 — — 1,704 
Total consumer6,749 591 — 7,340 
Total$88,272 $7,591 $4,989 $100,852 

Commitments outstanding to lend additional funds to borrowers experiencing financial difficulty whose loans were modified were $12 million and $4 million, as of June 30, 2024 and December 31, 2023, respectively.

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, 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.
45

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.

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 six months ended June 30, 2024 and 2023. 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 SegmentRisk CharacteristicsMacroeconomic Variables
C&IAge percentage, size at origination, delinquency status, sector and risk rating
Unemployment rate, Gross Domestic Product (“GDP”), and U.S. Treasury rates (1)
CRE, Multifamily residential, and Construction and landDelinquency status, maturity date, collateral value, property type, and geographic locationUnemployment rate, GDP, and U.S. Treasury rates
Single-family residential and HELOCsFICO score, delinquency status, maturity date, collateral value, and geographic locationUnemployment rate, GDP, and Home Price Indices
Other consumerLoss 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.
46

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

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

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

Allowance for Individually Evaluated Loans

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

•Collateral-Dependent Loans — The allowance of a collateral-dependent loan is limited to the difference between the recorded value and fair value of the collateral less cost of disposal or sale. As of June 30, 2024, collateral-dependent commercial and consumer loans totaled $75 million and $23 million, respectively. In comparison, collateral-dependent commercial and consumer loans totaled $30 million and $12 million, respectively, as of December 31, 2023. The Company's collateral-dependent loans were secured by real estate. As of both June 30, 2024 and December 31, 2023, the collateral value of the properties securing the collateral-dependent loans, net of selling costs, exceeded the recorded value of the majority of the loans.

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The following tables summarize the activity in the allowance for loan losses by portfolio segments for the three and six months ended June 30, 2024 and 2023:
Three Months Ended June 30, 2024
CommercialConsumer
CREResidential Mortgage
($ in thousands)C&ICREMultifamily ResidentialConstruction and LandSingle-Family ResidentialHELOCsOther ConsumerTotal
Allowance for loan losses, beginning of period$373,631 $187,460 $37,418 $10,819 $55,922 $3,563 $1,467 $670,280 
Provision for (reversal of) credit losses on loans
(a)17,783 18,287 2,628 4,422 (6,366)(232)240 36,762 
Gross charge-offs(13,134)(11,103)— (920)(35)— (130)(25,322)
Gross recoveries1,817 150 208 1 2 9 — 2,187 
Total net (charge-offs) recoveries(11,317)(10,953)208 (919)(33)9 (130)(23,135)
Foreign currency translation adjustment(113)— — — — — — (113)
Allowance for loan losses, end of period$379,984 $194,794 $40,254 $14,322 $49,523 $3,340 $1,577 $683,794 
Three Months Ended June 30, 2023
CommercialConsumer
CREResidential Mortgage
($ in thousands)C&ICREMultifamily ResidentialConstruction and LandSingle-Family ResidentialHELOCsOther ConsumerTotal
Allowance for loan losses, beginning of period$376,325 $155,067 $24,526 $9,322 $48,007 $4,971 $1,675 $619,893 
Provision for (reversal of) credit losses on loans(a)5,259 15,685 (1,604)1,995 3,501 (444)(367)24,025 
Gross charge-offs(7,335)(2,366)— — — (6)(48)(9,755)
Gross recoveries2,065 119 16 8 5 5 — 2,218 
Total net (charge-offs) recoveries (5,270)(2,247)16 8 5 (1)(48)(7,537)
Foreign currency translation adjustment(981)— — — — — — (981)
Allowance for loan losses, end of period$375,333 $168,505 $22,938 $11,325 $51,513 $4,526 $1,260 $635,400 
Six Months Ended June 30, 2024
CommercialConsumer
CREResidential Mortgage
($ in thousands)C&ICREMultifamily ResidentialConstruction and LandSingle-Family ResidentialHELOCsOther ConsumerTotal
Allowance for loan losses, beginning of period$392,685 $170,592 $34,375 $10,469 $55,018 $3,947 $1,657 $668,743 
Provision for (reversal of) credit losses on loans(a)18,057 37,419 5,660 5,803 (5,467)(664)108 60,916 
Gross charge-offs(34,132)(13,501)(6)(2,144)(35)— (188)(50,006)
Gross recoveries3,527 284 225 194 7 57 — 4,294 
Total net (charge-offs) recoveries(30,605)(13,217)219 (1,950)(28)57 (188)(45,712)
Foreign currency translation adjustment(153)— — — — — — (153)
Allowance for loan losses, end of period$379,984 $194,794 $40,254 $14,322 $49,523 $3,340 $1,577 $683,794 
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Six Months Ended June 30, 2023
CommercialConsumer
CREResidential Mortgage
($ in thousands)C&ICREMultifamily ResidentialConstruction and LandSingle-Family ResidentialHELOCsOther ConsumerTotal
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 adoption5,683 337 6 — 1 1 — 6,028 
Allowance for loan losses, beginning of period377,383 150,201 23,379 9,109 35,565 4,476 1,560 601,673 
Provision for (reversal of) credit losses on loans(a)4,581 20,361 (469)2,205 15,943 136 (212)42,545 
Gross charge-offs(9,235)(2,372)— — — (97)(88)(11,792)
Gross recoveries3,276 315 28 11 5 11 — 3,646 
Total net (charge-offs) recoveries(5,959)(2,057)28 11 5 (86)(88)(8,146)
Foreign currency translation adjustment(672)— — — — — — (672)
Allowance for loan losses, end of period$375,333 $168,505 $22,938 $11,325 $51,513 $4,526 $1,260 $635,400 

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 six months ended June 30, 2024 and 2023:
Three Months Ended June 30,Six Months Ended June 30,
($ in thousands)2024202320242023
Unfunded credit facilities
Allowance for unfunded credit commitments, beginning of period$38,544 $27,741 $37,698 $26,264 
Provision for credit losses on unfunded credit commitments(b)238 1,975 1,084 3,455 
Foreign currency translation adjustment1 12 1 9 
Allowance for unfunded credit commitments, end of period$38,783 $29,728 $38,783 $29,728 
Provision for credit losses(a) + (b)$37,000 $26,000 $62,000 $46,000 

The allowance for credit losses was $723 million as of June 30, 2024, an increase of $17 million, compared with $706 million as of December 31, 2023. The slight increase in the allowance for credit losses was primarily driven by the Company’s net loan growth, qualitative risk assessment and economic forecasts that reflected continued caution regarding 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, and downside or upside scenarios that reflect possible worsening or improving economic conditions. As of June 30, 2024, the Company assigned the same weightings to its baseline, upside and downside scenarios as compared with December 31, 2023. The current baseline economic forecast continues to reflect key risks such as high inflation, high interest rates, concerns over global conflicts and oil prices. Compared to December 2023, the June 2024 baseline forecast for GDP growth showed some improvement in the near term (full years 2024 and 2025) and a slight worsening for longer-term (2026 and beyond). Unemployment rate has remained low with the June 2024 forecast showing a small uptick for the remainder of 2024, compared to the December 2023 forecast for the same periods. The downside scenario assumed the economy falls into recession in the third quarter of 2024 as a result of still-elevated interest rates, global and domestic political tensions, and concerns about bank failures. The upside scenario assumed a more optimistic economic outlook, including stronger growth, stable financial market, and full employment starting in the fourth quarter of 2024.
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Loan Transfers, Sales and Purchases

The Company’s primary business focus is on directly originated loans. The Company also purchases loans from 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 six months ended June 30, 2024 and 2023:
Three Months Ended June 30, 2024
CommercialConsumer
CREResidential Mortgage
($ in thousands)C&ICREConstruction and LandSingle-Family ResidentialTotal
Loans transferred from held-for-investment to held-for-sale (1)
$138,923 $— $718 $— $139,641 
Sales (2)(3)
$133,906 $— $718 $— $134,624 
Purchases$170,175 
(4)
$— $— $111,864 $282,039 
Three Months Ended June 30, 2023
CommercialConsumer
CREResidential Mortgage
($ in thousands)C&ICREConstruction
and Land		Single-Family ResidentialTotal
Loans transferred from held-for-investment to held-for-sale (1)
$111,396 $— $8,154 $— $119,550 
Sales (2)(3)
$115,735 $— $8,154 $— $123,889 
Purchases$38,279 
(4)
$— $— $79,137 $117,416 
Six Months Ended June 30, 2024
CommercialConsumerTotal
CREResidential Mortgage
($ in thousands)C&ICREConstruction
and Land
Single-Family Residential
Loans transferred from held-for-investment to held-for-sale (1)
$338,897 $— $718 $— $339,615 
Sales (2)(3)
$321,108 $— $718 $965 $322,791 
Purchases$203,519 
(4)
$— $— $186,600 $390,119 
Six Months Ended June 30, 2023
Commercial ConsumerTotal
CREResidential Mortgage
($ in thousands)C&ICRE
Construction and Land
Single-Family Residential
Loans transferred from held-for-investment to held-for-sale (1)
$268,272 $3,600 $8,154 $— $280,026 
Sales (2)(3)
$291,667 $3,600 $8,154 $— $303,421 
Purchases$60,962 
(4)
$— $— $211,136 $272,098 
(1)Includes write-downs of $1 million to the allowance for loan losses related to loans transferred from held-for-investment to held-for-sale for both the three and six months ended June 30, 2024, and $308 thousand and $1 million for the three and six months ended June 30, 2023, respectively.
(2)Includes originated loans sold of $95 million and $187 million for the three and six months ended June 30, 2024, respectively, and $92 million and $203 million for the three and six months ended June 30, 2023, respectively. Originated loans sold consisted primarily of C&I loans for each of the three and six months ended June 30, 2024 and 2023.
(3)Includes $40 million and $136 million of purchased loans sold in the secondary market for the three and six months ended June 30, 2024, respectively, and $32 million and $100 million for the three and six months ended June 30, 2023, respectively.
(4)C&I loan purchases were comprised of syndicated C&I term loans.

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Note 8 — Affordable Housing Partnership, Tax Credit and Community Reinvestment Act Investments, Net

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 affordable housing regulatory requirements for a 15-year minimum compliance period. The Company also invests in small business investment companies and new markets tax credit projects that qualify for CRA consideration, as well as eligible projects that qualify for production, historic and renewable energy tax credits. Investments in new markets tax credits promote development in low-income communities, investments in production and 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.

The majority of affordable housing partnership, tax credit and CRA investments discussed above are variable interest entities where the Company is a limited partner in these investments, 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.

The Company records its investments in qualifying affordable housing partnerships, net, using PAM. Following the adoption of ASU 2023-02 on January 1, 2024, the Company elects to account for its tax credit investments using PAM on a program-by-program basis if certain conditions are met. For the Company’s accounting policies on PAM, see Note 2 — Current Accounting Developments and Summary of Significant Accounting Policies — Significant Accounting Policies Update — Income Taxes to the Consolidated Financial Statements in this Form 10-Q. For 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 — Affordable Housing Partnership, Tax Credit and CRA Investments, Net to the Consolidated Financial Statements in this Form 10-Q.

The following table presents the investments and unfunded commitments of the Company’s affordable housing partnership, tax credit, and CRA investments, net as of June 30, 2024 and December 31, 2023:
June 30, 2024December 31, 2023
($ in thousands)Assets
Liabilities - Unfunded Commitments (1)
Assets
Liabilities - Unfunded Commitments (1)
PAM:
Affordable housing partnership investments
$475,751 $293,387 $419,785 $251,746 
Tax credit and CRA investments
211,591 107,010 — — 
Equity method of accounting and other:
Tax credits and CRA investments
269,086 152,123 485,251 298,990 
Total$956,428 $552,520 $905,036 $550,736 
(1)Included in Accrued expenses and other liabilities on the Consolidated Balance Sheet.

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The following table presents additional information related to the investments in affordable housing partnership, tax credit and CRA investments for the three and six months ended June 30, 2024 and 2023:
Three Months Ended June 30,Six Months Ended June 30,
($ in thousands)2024202320242023
Tax credits and benefits (1):
PAM:
Affordable housing partnership investments
$15,612 $15,304 $34,031 $31,398 
Tax credit and CRA investments
26,304 — 53,453 — 
Equity method of accounting and other:
Tax credit and CRA investments21,543 58,404 34,137 72,902 
Total tax credits and benefits
$63,459 $73,708 $121,621 $104,300 
Amortization:
PAM:
Affordable housing partnership investments (2)
$9,774 $10,506 $23,643 $23,172 
Tax credit and CRA investments (3)
20,015 — 43,316 — 
Equity method of accounting and other:
Tax credit and CRA investments (4) (5)
16,052 55,914 29,259 66,024 
Total amortization
$45,841 $66,420 $96,218 $89,196 
(1)Included in Income tax expense on the Consolidated Statement of Income for the three and six months ended June 30, 2024 and 2023.
(2)Amortization related to investments in qualified affordable housing partnerships under PAM was recorded in Income tax expense on the Consolidated Statement of Income for the three and six months ended June 30, 2024 and 2023.
(3)Due to the adoption of ASU 2023-02 on January 1, 2024, amortization related to qualifying tax credit investments under PAM was recorded in Income tax expense on the Consolidated Statement of Income for the three and six months ended June 30, 2024.
(4)Amortization related to tax credit and CRA investments was recognized in Amortization of tax credit and CRA investments as part of noninterest expense on the Consolidated Statement Income for the three and six months ended June 30, 2024 and 2023.
(5)Includes net impairment recoveries of $1 million and $2 million for the three and six months ended June 30, 2023, respectively, primarily related to historic tax credits. In comparison, there were no impairment recoveries or losses for three or six months ended June 30, 2024.

The Company also held equity securities without readily determinable fair values totaling $148 million and $146 million as of June 30, 2024 and December 31, 2023, respectively. Equity securities without readily determinable fair values are included in Other Assets and Affordable housing partnership, tax credit and CRA investments, net on the Consolidated Balance Sheet.

Note 9 — Goodwill

Total goodwill was $466 million as of both June 30, 2024 and December 31, 2023. 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, 2023, 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 2023 Form 10-K. The Company performed an analysis of goodwill during the second quarter of 2024 that consisted of a qualitative assessment to determine if it was 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 June 30, 2024.

The Company has an equity method investment in Rayliant and its carrying value was $110 million as of June 30, 2024, of which $101 million was comprised of equity method goodwill. For additional information on this investment, Note 7 - Investments in Qualified Affordable Housing Partnerships, Tax Credit and Other Investments, Net and Variable Interest Entities to the Consolidated Financial Statements in the Company’s 2023 Form 10-K.

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Note 10 — Short-Term Borrowings and Long-Term Debt

The following table presents details of the Company’s short-term and BTFP borrowings, FHLB advances, and long-term debt as of June 30, 2024 and December 31, 2023:
June 30, 2024December 31, 2023
($ in thousands)
Interest Rates
Maturity Dates
AmountAmount
Bank
BTFP borrowings
4.37%3/19/2024$— $4,500,000 
FHLB advances (1) — floating (2)
5.51% — 5.58%
2024 — 2025
$3,500,000 $— 
Parent company
Junior subordinated debt (3) — floating (2)
 7.15%
12/15/2035$31,844 $148,249 
(1)The weighted-average interest rate for FHLB advances was 5.54% as of June 30, 2024.
(2)Floating interest rates are based on the Secured Overnight Financing Rate plus the established spread.
(3)The weighted-average interest rates for junior subordinated debt were 7.15% and 6.87% as of June 30, 2024 and December 31, 2023, respectively.

The Bank’s available borrowing capacity from FHLB advances totaled $8.3 billion as of June 30, 2024. The Bank’s available borrowing capacity from the FHLB is derived from its portfolio of loans that are pledged to the FHLB, reduced by any outstanding FHLB advances. As of June 30, 2024, all advances were secured by real estate loans.

During the first quarter of 2024, the Company redeemed approximately $117 million of junior subordinated debt and repaid $4.5 billion of BTFP borrowings upon maturity. For additional information on the BTFP and junior subordinated debt, refer to Note 10 — Short-Term Borrowings and Long-Term Debt to the Consolidated Financial Statements in the Company’s 2023 Form 10-K.

Note 11 — Commitments and Contingencies

Commitments to Extend Credit — In the normal course of business, the Company provides loan commitments and letters of credit 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.

The following table presents the Company’s credit-related commitments as of June 30, 2024 and December 31, 2023:
June 30, 2024December 31, 2023
($ 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 YearsTotalTotal
Loan commitments$4,769,476 $3,376,989 $632,152 $143,822 $8,922,439 $9,141,447 
Commercial letters of credit and standby letters of credit (“SBLCs”)
1,206,498 357,450 150,329 1,122,720 2,836,997 2,610,761 
Total$5,975,974 $3,734,439 $782,481 $1,266,542 $11,759,436 $11,752,208 

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.

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Commercial letters of credit are issued to facilitate domestic and foreign trade transactions, while SBLCs are generally contingent upon the failure of the customers to perform according to the terms of the underlying contract with the third party. As a result, the total contractual amounts do not necessarily represent future funding requirements. The Company’s historical experience is that SBLCs typically expire without being funded. Additionally, in many cases, the Company holds collateral in various forms against these SBLCs. As part of its risk management activities, the Company monitors the creditworthiness of customers in conjunction with its SBLC exposure. Customers are obligated to reimburse the Company for any payment made on the customers’ behalf. If the customers fail to pay, the Company would, as applicable, liquidate the collateral and/or offset existing accounts. As of June 30, 2024, total letters of credit of $2.8 billion consisted of SBLCs of $2.8 billion and commercial letters of credit of $31 million. In comparison, as of December 31, 2023, total letters of credit of $2.6 billion consisted of SBLCs of $2.6 billion and commercial letters of credit of $24 million. As of both June 30, 2024 and December 31, 2023, substantially all letters of credit were graded “Pass” using the Bank’s internal credit risk rating system.

The Company applies the same credit underwriting criteria to extend loans, commitments, and conditional obligations to customers. Each customer’s creditworthiness is evaluated on a case-by-case basis. Collateral and financial guarantees may be obtained based on management’s assessment of a customer’s credit risk. Collateral may include cash, accounts receivable, inventory, 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 $39 million and $38 million as of June 30, 2024 and December 31, 2023, 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 maximum potential future payments and carrying value of loans sold or securitized with recourse as of June 30, 2024 and December 31, 2023:
Maximum Potential Future Payments
Carrying Value (1)
June 30, 2024December 31, 2023June 30, 2024December 31, 2023
($ 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 YearsTotalTotalTotalTotal
Single-family residential loans sold or securitized with recourse$3 $15 $25 $4,698 $4,741 $5,888 $4,741 $5,888 
Multifamily residential loans sold or securitized with recourse— — 155 14,841 14,996 14,996 18,445 19,020 
Total $3 $15 $180 $19,539 $19,737 $20,884 $23,186 $24,908 
(1)Represents the unpaid principal balance.

The Company’s recourse reserve related to these guarantees is included in the allowance for unfunded credit commitments and totaled $43 thousand and $40 thousand as of June 30, 2024 and December 31, 2023, 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.

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While it is impossible to ascertain the ultimate resolution or range of financial liability, based on information known to the Company as of June 30, 2024, the Company does not believe there are any pending legal proceedings 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.

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, 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 East West and its subsidiaries. The Company has granted RSUs as its primary incentive awards. There were no outstanding awards other than RSUs as of both June 30, 2024 and December 31, 2023.

The following table presents a summary of the total share-based compensation expense and the related net tax benefits associated with the Company’s various employee share-based compensation plans for the three and six months ended June 30, 2024 and 2023:
Three Months Ended June 30,Six Months Ended June 30,
($ in thousands)2024202320242023
Stock compensation costs$10,666 $9,364 $23,654 $20,439 
Related net tax benefits for stock compensation plans$9 $525 $792 $8,815 

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 additional specified performance goals, referred to as “performance-based RSUs.” Performance-based RSUs are granted annually upon approval by the Company’s Compensation and Management Development 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 2023 Form 10-K.

The following table presents a summary of the activities for the Company’s time- and performance-based RSUs that were settled in shares for the six months ended June 30, 2024. The number of performance-based RSUs stated below reflects the number of awards granted on the grant date.
Time-Based RSUsPerformance-Based RSUs
SharesWeighted-Average Grant Date Fair ValueSharesWeighted-Average Grant Date Fair Value
Outstanding, January 1, 2024
1,206,518 $74.29 276,223 $78.59 
Granted522,454 75.77 97,798 80.28 
Vested(305,954)71.68 (91,960)77.67 
Forfeited(36,948)74.89 — — 
Outstanding, June 30, 2024
1,386,070 $75.41 282,061 $79.48 

As of June 30, 2024, there were $45 million of unrecognized compensation costs related to unvested time-based RSUs expected to be recognized over a weighted-average period of 2.1 years, and $22 million of unrecognized compensation costs related to unvested performance-based RSUs expected to be recognized over a weighted-average period of 2.1 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 six months ended June 30, 2024 and 2023. 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 2023 Form 10-K.
($ and shares in thousands, except per share data)Three Months Ended June 30,Six Months Ended June 30,
2024202320242023
Basic:
Net income$288,230 $312,031 $573,305 $634,470 
Weighted-average number of shares outstanding138,980 141,468 139,195 141,291 
Basic EPS$2.07 $2.21 $4.12 $4.49 
Diluted:
Net income$288,230 $312,031 $573,305 $634,470 
Weighted-average number of shares outstanding138,980 141,468 139,195 141,291 
Add: Dilutive impact of unvested RSUs
821 408 852 619 
Diluted weighted-average number of shares outstanding139,801 141,876 140,047 141,910 
Diluted EPS$2.06 $2.20 $4.09 $4.47 

For both the three and six months ended June 30, 2024, approximately 3 thousand weighted-average shares of anti-dilutive RSUs were excluded from the diluted EPS computations. In comparison, approximately 1 million and 439 thousand weighted-average shares of anti-dilutive RSUs were excluded from the diluted EPS computations for the three and six months ended June 30, 2023, respectively.

Stock Repurchase Program — In 2020, the Company’s Board of Directors authorized a stock repurchase program to buy back up to $500 million of the Company’s common stock. For the three months ended June 30, 2024, the Company repurchased 560,645 shares at an average price of $72.74 per share at a total cost of $41 million. For the six months ended June 30, 2024, the Company repurchased 1,742,496 shares at an average price of $70.72 per share at a total cost of $123 million. The Company did not repurchase any shares during the three and six months ended June 30, 2023. As of June 30, 2024, the Company had approximately $49 million available for repurchases under its stock repurchase program.

Note 14 — Accumulated Other Comprehensive Income (Loss)

The following table presents the changes in the components of AOCI balances for the three and six months ended June 30, 2024 and 2023:
($ in thousands)
Debt Securities (1)
Cash Flow Hedges
Foreign Currency Translation Adjustments (2)
Total
Balance, April 1, 2023$(640,734)$(20,918)$(18,342)$(679,994)
Net unrealized losses arising during the period(43,618)(68,207)(7,249)(119,074)
Amounts reclassified from AOCI2,816 14,320 — 17,136 
Changes, net of tax(40,802)(53,887)(7,249)(101,938)
Balance, June 30, 2023
$(681,536)$(74,805)$(25,591)$(781,932)
Balance, April 1, 2024$(601,510)$(43,706)$(17,517)$(662,733)
Net unrealized gains (losses) arising during the period
8,773 (17,678)(1,311)(10,216)
Amounts reclassified from AOCI1,451 17,325 — 18,776 
Changes, net of tax10,224 (353)(1,311)8,560 
Balance, June 30, 2024
$(591,286)

$(44,059)$(18,828)$(654,173)
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($ in thousands)
Debt Securities (1)
Cash Flow Hedges
Foreign Currency Translation Adjustments (2)
Total
Balance, January 1, 2023$(694,815)$(49,531)$(21,283)$(765,629)
Net unrealized gains (losses) arising during the period
657 (47,121)(4,308)(50,772)
Amounts reclassified from AOCI12,622 21,847 — 34,469 
Changes, net of tax13,279 (25,274)(4,308)(16,303)
Balance, June 30, 2023
$(681,536)$(74,805)$(25,591)$(781,932)
Balance, January 1, 2024
$(601,881)$2,624 $(21,339)$(620,596)
Net unrealized gains (losses) arising during the period
6,491 (81,340)2,511 (72,338)
Amounts reclassified from AOCI4,104 34,657 — 38,761 
Changes, net of tax10,595 (46,683)2,511 (33,577)
Balance, June 30, 2024
$(591,286)$(44,059)$(18,828)$(654,173)
(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 was RMB and USD, respectively.

The following table presents the components of other comprehensive income (loss), reclassifications to net income and the related tax effects for the three and six months ended June 30, 2024 and 2023:
Three Months Ended June 30,
20242023
($ in thousands)Before-TaxTax EffectNet-of-TaxBefore-TaxTax EffectNet-of-Tax
Debt securities:
Net unrealized gains (losses) on AFS debt securities arising during the period
$12,421 $(3,648)$8,773 $(61,939)$18,321 $(43,618)
Reclassification adjustments:
Net realized gains on AFS debt securities reclassified into net income (1)
(1,785)528 (1,257)— — — 
Amortization of unrealized losses on transferred debt securities (2)
3,845 (1,137)2,708 3,998 (1,182)2,816 
Net change14,481 (4,257)10,224 (57,941)17,139 (40,802)
Cash flow hedges:
Net unrealized losses arising during the period(25,095)7,417 (17,678)(96,457)28,250 (68,207)
Net realized losses reclassified into net income (3)
24,594 (7,269)17,325 20,252 (5,932)14,320 
Net change(501)148 (353)(76,205)22,318 (53,887)
Foreign currency translation adjustments, net of hedges:
Net unrealized losses arising during the period(1,311)— (1,311)(6,107)(1,142)(7,249)
Net change(1,311)— (1,311)(6,107)(1,142)(7,249)
Other comprehensive income (loss)
$12,669 $(4,109)$8,560 $(140,253)$38,315 $(101,938)
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Six Months Ended June 30,
20242023
($ in thousands)Before-TaxTax EffectNet-of-TaxBefore-TaxTax EffectNet-of-Tax
Debt securities:
Net unrealized gains arising during the period$9,139 $(2,648)$6,491 $921 $(264)$657 
Reclassification adjustments:
Net realized (gains) losses on AFS debt securities reclassified into net income (1)
(1,834)542 (1,292)10,000 
(4)
(2,956)7,044 
Amortization of unrealized losses on transferred securities (2)
7,661 (2,265)5,396 7,919 (2,341)5,578 
Net change14,966 (4,371)10,595 18,840 (5,561)13,279 
Cash flow hedges:
Net unrealized losses arising during the period(115,471)34,131 (81,340)(66,614)19,493 (47,121)
Net realized losses reclassified into net income (3)
49,199 (14,542)34,657 30,896 (9,049)21,847 
Net change(66,272)19,589 (46,683)(35,718)10,444 (25,274)
Foreign currency translation adjustments, net of hedges:
Net unrealized gains (losses) arising during the period
2,684 (173)2,511 (3,481)(827)(4,308)
Net change2,684 (173)2,511 (3,481)(827)(4,308)
Other comprehensive loss$(48,622)$15,045 $(33,577)$(20,359)$4,056 $(16,303)
(1)Pre-tax amounts were reported in Net gains (losses) on AFS debt securities on the Consolidated Statement of Income.
(2)Represents unrealized losses amortized over the remaining lives of securities that were transferred from the AFS to HTM portfolio in 2022.
(3)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. In the first quarter of 2023, the pre-tax amount also included the terminated cash flow hedge where the forecasted cash flows were no longer probable to occur and was reported in Noninterest income on the Consolidated Statement of Income.
(4)Represents the loss related to an AFS debt security that was written off in 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 platforms. 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.

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

The corporate treasury function within the Other segment is responsible for the Company’s liquidity and interest rate management, 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 six months ended June 30, 2024 and 2023:
($ in thousands)Consumer and Business BankingCommercial BankingOtherTotal
Three Months Ended June 30, 2024
Net interest income (loss) before provision for credit losses
$293,292 $260,780 $(843)$553,229 
(Reversal of) provision for credit losses
(3,245)40,245 — 37,000 
Noninterest income26,769 50,720 7,184 84,673 
Noninterest expense108,124 92,064 36,246 236,434 
Segment income (loss) before income taxes
215,182 179,191 (29,905)364,468 
Segment net income$151,578 $126,441 $10,211 $288,230 
As of June 30, 2024
Segment assets$19,909,978 $35,510,954 $17,047,340 $72,468,272 
($ in thousands)Consumer and Business BankingCommercial BankingOtherTotal
Three Months Ended June 30, 2023
Net interest income (loss) before provision for credit losses
$307,522 $263,040 $(3,816)$566,746 
Provision for credit losses5,524 20,476 — 26,000 
Noninterest income
27,120 42,538 8,973 78,631 
Noninterest expense107,027 88,333 66,429 261,789 
Segment income (loss) before income taxes
222,091 196,769 (61,272)357,588 
Segment net income$156,853 $139,030 $16,148 $312,031 
As of June 30, 2023
Segment assets$18,411,209 $33,754,957 $16,366,515 $68,532,681 
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($ in thousands)
Consumer and Business Banking
Commercial Banking
OtherTotal
Six Months Ended June 30, 2024
Net interest income before provision for credit losses
$585,056 $521,129 $12,183 $1,118,368 
(Reversal of) provision for credit losses
(680)62,680 — 62,000 
Noninterest income52,311 97,186 14,164 163,661 
Noninterest expense227,424 198,371 57,514 483,309 
Segment income (loss) before income taxes410,623 357,264 (31,167)736,720 
Segment net income
$289,250 $252,022 $32,033 $573,305 
As of June 30, 2024
Segment assets$19,909,978 $35,510,954 $17,047,340 $72,468,272 
($ in thousands)
Consumer and Business Banking
Commercial Banking
OtherTotal
Six Months Ended June 30, 2023
Net interest income before reversal of credit losses$611,764 $499,763 $55,080 $1,166,607 
Provision for credit losses
20,536 25,464 — 46,000 
Noninterest income (loss)
53,122 86,137 (650)138,609 
Noninterest expense220,850 175,581 83,805 480,236 
Segment income (loss) before income taxes423,500 384,855 (29,375)778,980 
Segment net income$299,100 $273,487 $61,883 $634,470 
As of June 30, 2023
Segment assets$18,411,209 $33,754,957 $16,366,515 $68,532,681 
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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
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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” “our” 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 Quarterly Report on Form 10-Q (this “Form 10-Q”), and the Company’s Annual Report on Form 10-K for the year ended December 31, 2023, filed with the United States (“U.S.”) Securities and Exchange Commission (“SEC”) on February 29, 2024 (the “Company’s 2023 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 110 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 shareholder 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 June 30, 2024, the Company had $72.5 billion in total 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 2023 Form 10-K.

Current Developments

Economic Developments

Recent external data indicate that inflation is heading closer to the Board of Governors of the Federal Reserve System’s (“Federal Reserve”) 2% target. The inflation readings have shown consistent improvement in recent months, which has led to expectations of rate cuts in September 2024. However, the higher-for-longer interest rate environment continues to negatively impact the market value of banking organizations’ investment securities, while the commercial real estate (“CRE”) market remains under pressure from tighter credit conditions and decreased demand for office space. Factors such as the economic impacts of unrest, wars, and acts of terrorism could lead to higher energy and food prices, contributing to increased inflationary pressures, which may result in the likelihood that the Federal Reserve will cut interest rates slower than anticipated. The Company monitors 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 the higher interest rate environment has been provided in Item 1A. — Risk Factors — Risks Related to Financial Matters in the Company’s 2023 Form 10-K.

Federal Deposit Insurance Corporation Special Assessment

In November 2023, the Federal Deposit Insurance Corporation (“FDIC”) approved a final rule to implement a special deposit insurance assessment to recover losses to the Deposit Insurance Fund (“DIF”) arising from the protection of uninsured depositors following the receiverships of failed institutions in the spring of 2023. Under the final rule, the assessment base for the special assessment is equal to an insured depository institution’s estimated uninsured deposits, reported for the quarter ended December 31, 2022, minus the first $5 billion in estimated uninsured deposits. The FDIC will collect the special assessment over eight quarterly assessment periods starting with the first quarter of 2024, at a quarterly rate of 3.36 basis points (“bps”). The Company recognized the entire assessment expense of approximately $70 million in the fourth quarter of 2023. In addition, the FDIC retained the ability to make further adjustments to the special assessment depending on subsequent adjustments to the DIF’s estimated loss.
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As of the date of the publication of the final rule, the FDIC estimated that losses to the DIF totaled $16.3 billion. The FDIC has subsequently updated its estimate of the DIF’s losses that are recoverable through the special assessment, which as of June 2024 totaled $19.2 billion. The FDIC also projected that the special assessment would be collected for an additional two quarters beyond the initial eight-quarter collection period, at an estimated quarterly rate of 2.34 bps. As a result, in addition to the $10 million of FDIC special assessment charge (“FDIC charge”) recorded in the first quarter of 2024, an additional $2 million of FDIC charge was recorded in the second quarter of 2024.

Climate Accountability

On March 6, 2024, the SEC adopted final rules requiring registrants to disclose certain climate-related information in registration statements and Annual Reports on Form 10-K. The final rules include disclosures related to climate-related risks and risk management as well as the board and management’s governance of such risks. The rules also incorporate requirements to disclose the financial effects of certain severe weather events and other natural conditions in the audited financial statements. Larger registrants would be required to disclose information about greenhouse gas (“GHG”) emissions, to the extent material, which would be subject to a phased-in third-party assurance requirement. The compliance date for the majority of the disclosures would be required starting with the 2025 Form 10-K. The compliance date for disclosures over material expenditures and their impact on a company’s financial statements, and Scope 1 and Scope 2 GHG emissions would be required starting with the 2026 Form 10-K. The attestation requirements would be phased in as limited assurance for the 2029 Form 10-K and reasonable assurance for the 2033 Form 10-K.

On April 4, 2024, the SEC voluntarily stayed implementation of the rules pending the completion of judicial review of consolidated legal challenges to the rules by the United States Court of Appeals for the Eighth Circuit. As such, the compliance dates listed in the final rule are tentative. The Company is evaluating the impact of the climate disclosure rules and monitoring the outcome of the litigation regarding their adoption.

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”). On June 28, 2024, the Newsom administration released proposed amendments to the CCDAA and CRFRA, which could delay the implementation deadlines under each of these laws by two years from their respective initial compliance dates. If so amended, the reporting requirements under the CCDAA related to Scope 1 and 2 emissions will begin in 2028, the reporting requirements of Scope 3 emissions will begin in 2029, and the initial round of the climate risk disclosure reports under the CRFRA will be due by January 1, 2028. The Company is monitoring the status of these proposed amendments and their effect on any reporting requirements. For additional information on the California climate bills, see Item 1. — Business — Supervision and Regulation — Climate-Related Risk Management in the Company’s 2023 Form 10-K.

Regulatory Update

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 (“CRA”). The updates to the final rule strengthened and modernized the regulations implementing the CRA to better achieve the purposes of the law. On March 21, 2024, the agencies issued an interim final rule that extended the applicability date of certain provisions in the CRA final rule and requested comment on the extension. The Agencies extended the applicability date of the facility-based assessment areas and public file provisions from April 1, 2024 to January 1, 2026. Therefore, banks will not have to make changes to their assessment areas or their public files as a result of the 2023 CRA final rule until January 1, 2026. In addition, the Agencies also issued technical, non-substantive amendments to the CRA final rule and related agency regulations that reference it. For example, one of these technical amendments clarified that banks do not need to make changes to their public notices until January 1, 2026. The Company is evaluating impact of the interim final rule. For additional information on the CRA final rule, refer to Item 1. — Business — Supervision and Regulation — Community Reinvestment Act in the Company’s 2023 Form 10-K.

On June 20, 2024, the FDIC released a final rule that requires 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 are required to submit full resolution plans, and IDIs with total assets between $50 billion and $100 billion, including the Bank, are required to submit more limited informational filings. The first informational filings required under the final rule will be due no earlier than October 1, 2025. Under the final rule, if the FDIC deemed a resolution plan or informational filing not credible and the IDI failed to resubmit a credible plan, the IDI could become subject to an enforcement action. The Company has established a working group with senior executive management to prepare and complete a credible resolution plan for timely submission as part of the initial informational filing required by the final rule.
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On July 19, 2024, the federal banking agencies jointly released a statement on a proposed rule to update anti-money laundering and countering the financing of terrorism (“AML/CFT”) program requirements for the institutions they supervise, including the Bank. The proposed rule sets forth the minimum requirements of an AML/CFT program, codifies longstanding supervisory expectations, and conforms to changes made by the Anti-Money Laundering Act of 2020. Under the proposed rule an institution would be required to have an effective, risk-based, and reasonably designed AML/CFT program and to perform AML/CFT risk assessments. The Company is evaluating the impact of this proposed rule.

Financial Review

Three Months Ended June 30,Six Months Ended June 30,
($ and shares in thousands, except per share, and ratio data)2024202320242023
Summary of operations:
Net interest income before provision for credit losses$553,229 $566,746 $1,118,368 $1,166,607 
Noninterest income84,673 78,631 163,661 138,609 
Total revenue637,902 645,377 1,282,029 1,305,216 
Provision for credit losses37,000 26,000 62,000 46,000 
Noninterest expense236,434 261,789 483,309 480,236 
Income before income taxes364,468 357,588 736,720 778,980 
Income tax expense76,238 45,557 163,415 144,510 
Net income $288,230 $312,031 $573,305 $634,470 
Per share:
Basic earnings$2.07 $2.21 $4.12 $4.49 
Diluted earnings$2.06 $2.20 $4.09 $4.47 
Adjusted diluted earnings (1)
$2.07 $2.20 $4.15 $4.52 
Dividends declared$0.55 $0.48 $1.10 $0.96 
Weighted-average number of shares outstanding:
Basic138,980 141,468 139,195 141,291 
Diluted139,801 141,876 140,047 141,910 
Performance metrics:
Return on average assets (“ROA”)1.63 %1.85 %1.61 %1.93 %
Return on average common equity (“ROE”)16.36 %19.43 %16.38 %20.27 %
Return on average tangible common equity (“TCE”) (1)
17.54 %21.01 %17.57 %21.95 %
Common dividend payout ratio26.89 %21.98 %27.11 %21.60 %
Net interest margin3.27 %3.55 %3.30 %3.75 %
Efficiency ratio (2)
37.06 %40.56 %37.70 %36.79 %
Adjusted efficiency ratio (1)
34.25 %31.83 %34.47 %31.13 %
At period end:June 30, 2024December 31, 2023
Total assets$72,468,272 $69,612,884 
Total loans$52,786,818 $52,210,898 
Total deposits$59,999,785 $56,092,438 
Common shares outstanding at period-end138,604 140,027 
Book value per share$52.06 $49.64 
Tangible book value per share (1)
$48.65 $46.27 
(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 Form 10-Q.
(2)Efficiency ratio is calculated as noninterest expense divided by total revenue.

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The Company’s second quarter 2024 net income was $288 million, a decrease of $24 million or 8%, from second quarter 2023 net income of $312 million. The decrease was primarily due to lower net interest income, higher provision for credit losses and the impacts related to the expanded application of the proportional amortization method (“PAM”) to its tax credit investments portfolio during the quarter. Net income for the first half of 2024 was $573 million, a decrease of $61 million or 10%, from first half of 2023 net income of $634 million. The decrease was primarily due to lower net interest income, higher income tax expense and provision for credit losses, partially offset by higher noninterest income. Noteworthy items about the Company’s performance for the second quarter and first half of 2024 included:

•Net interest income and net interest margin. Second quarter 2024 net interest income before provision for credit losses was $553 million, a decrease of $14 million or 2% from the second quarter of 2023. Second quarter 2024 net interest margin of 3.27% declined by 28 bps year-over-year. For the first half of 2024, net interest income before provision for credit losses was $1.1 billion, a decrease of $48 million or 4% year-over-year. The net interest margin for the first half of 2024 was 3.30%, down 45 bps year-over-year.

•Profitability ratios. Second quarter 2024 ROA, ROE and the return on average TCE of 1.63%, 16.36% and 17.54%, respectively, were down year-over-year. ROA, ROE and the return on average TCE of 1.61%, 16.38% and 17.57%, respectively, for the first half of 2024, were also down year-over-year. 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.

•Efficiency ratios. Second quarter 2024 efficiency ratio of 37.06% improved 350 bps from 40.56% for the second quarter of 2023. For the first half of 2024, the efficiency ratio was 37.70%, compared with 36.79% for the first half of 2023. Adjusted efficiency ratios were 34.25% and 34.47% for the second quarter and first half of 2024, respectively, compared with 31.83% and 31.13%, respectively, for the same year-ago periods. Adjusted efficiency ratio 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 $72.5 billion as of June 30, 2024, an increase of $2.9 billion or 4%, from December 31, 2023, primarily driven by a $2.7 billion or 44% increase in available-for-sale (“AFS”) debt securities.

•Deposit growth. Total deposits were $60.0 billion as of June 30, 2024, an increase of $3.9 billion or 7%, from $56.1 billion as of December 31, 2023, primarily reflecting growth across the Consumer and Business Banking and Commercial Banking segments.

•Strong capital levels. Stockholders’ equity was $7.2 billion as of June 30, 2024, up 4% from $7.0 billion as of December 31, 2023. Book value and tangible book value per share of $52.06 and $48.65, respectively, as of June 30, 2024, were both up 5% from $49.64 and $46.27, respectively, compared with December 31, 2023. 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.

65

726

Net interest income and net interest margin for the second quarter and first half of 2024 decreased year-over-year. The decreases in net interest income and net interest margin were primarily due to higher deposit funding costs and shifts in the deposit mix to higher cost time and money market deposits and higher Federal Home Loan Bank (“FHLB”) advances, partially offset by higher loan yields and loan growth, a decrease in Bank Term Funding Program (“BTFP”) average balances, and increases in AFS debt securities’ yield and volumes. The changes in yields and rates primarily reflected the impact of the higher benchmark interest rates.

1200

Average interest-earning assets were $68.1 billion for the second quarter of 2024, an increase of $4.0 billion or 6% from $64.1 billion for the second quarter of 2023. The year-over-year increase in average interest-earning assets primarily reflected loan growth, an increase in AFS debt securities, and a decrease in interest-bearing cash and deposits with banks. For the first half of 2024, the average interest-earning assets were $68.1 billion, an increase of $5.3 billion or 8% from $62.8 billion for the first half of 2023. The year-over-year increase in average interest-earning assets primarily reflected loan growth and increases in AFS debt securities and interest-bearing cash and deposits with banks.

The yield on average interest-earning assets for the second quarter of 2024 was 6.11%, an increase of 44 bps from 5.67% for the second quarter of 2023. The yield on average interest-earning assets for the first half of 2024 was 6.08%, an increase of 49 bps from 5.59% for the first half of 2023. The year-over-year increases in the yield on average interest-earning assets primarily resulted from higher benchmark interest rates.

66

1735

The average loan yield for the second quarter of 2024 was 6.73%, an increase of 40 bps from 6.33% for the second quarter of 2023. The average loan yield for the first half of 2024 was 6.72%, an increase of 48 bps from 6.24% for the first half of 2023. The year-over-year increases in the average loan yield reflected the loan portfolio’s sensitivity to higher benchmark interest rates and loan growth. Approximately 58% and 60% of loans held-for-investment were variable rate as of June 30, 2024 and 2023, respectively.

Noninterest-_and_Interest-bearing_Deposit_Mix_($_in_billions) (11).jpg
2199023263476

Deposits are an important source of funding for the Company. Average deposits were $58.7 billion for the second quarter of 2024, which increased $4.4 billion or 8% from $54.3 billion for the second quarter of 2023. For the first half of 2024, average deposits were $58.1 billion, which increased $3.5 billion or 6% from $54.6 billion for the first half of 2023.
67

Average noninterest-bearing deposits were $14.7 billion for the second quarter of 2024, a decrease of $2.2 billion or 13% from $16.9 billion for the second quarter of 2023. For the first half of 2024, average noninterest-bearing deposits were $14.8 billion, a decrease of $3.5 billion or 19% from $18.3 billion for the first half of 2023. The year-over-year decreases in noninterest-bearing deposits reflected the deposit mix shift to time and money market deposits. Average noninterest-bearing deposits made up 25% and 31% of average deposits for the second quarters of 2024 and 2023, respectively, and 26% and 34% for the first halves of 2024 and 2023, respectively.

The average cost of deposits was 2.96% for the second quarter of 2024, an 84 bp increase from 2.12% for the second quarter of 2023. The average cost of interest-bearing deposits was 3.94% for the second quarter of 2024, an 85 bp increase from 3.09% for the second quarter of 2023. The average cost of deposits was 2.90% for the first half of 2024, a 104 bp increase from 1.86% for the first half of 2023. The average cost of interest-bearing deposits was 3.89% for the first half of 2024, a 109 bp increase from 2.80% for the first half of 2023. These year-over-year increases primarily reflected shifts in the deposit mix to time and money market deposits, and rising deposit costs in response to the higher interest rate environment.

The average cost of funds calculation includes deposits, BTFP, short-term borrowings and federal funds purchased, FHLB advances, securities sold under repurchase agreements (“repurchase agreements”), and long-term debt and finance lease liabilities. For the second quarter of 2024, the average cost of funds was 3.11%, an 80 bp increase from 2.31% for the second quarter of 2023. For the first half of 2024, the average cost of funds was 3.04%, a 103 bp increase from 2.01% for the first half of 2023. The year-over year increases were mainly driven by the increased cost of deposits as 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.
68

The following table presents the interest spread, net interest margin, average balances, interest income and expense, and the average yield/rate by asset and liability component for the second quarters of 2024 and 2023:
Three Months Ended June 30,
20242023
($ in thousands)Average BalanceInterest
Average Yield/
Rate (1)
Average BalanceInterest
Average Yield/
Rate (1)
ASSETS
Interest-earning assets:
Interest-bearing cash and deposits with banks$4,058,515 $49,406 4.90 %$5,247,755 $60,995 4.66 %
Assets purchased under resale agreements (2)
485,000 1,885 1.56 %641,939 3,969 2.48 %
Debt securities:
AFS debt securities (3)(4)
8,481,948 99,242 4.71 %6,257,397 56,292 3.61 %
Held-to-maturity (“HTM”) debt securities (3)
2,941,150 12,490 1.71 %2,983,780 12,678 1.70 %
Total debt securities (3)
11,423,098 111,732 3.93 %9,241,177 68,970 2.99 %
Loans:
Commercial and industrial (“C&I”)
16,209,659 322,648 8.01 %15,244,826 287,799 7.57 %
CRE20,270,816 323,106 6.41 %19,599,138 300,721 6.15 %
Residential mortgage15,386,858 221,966 5.80 %13,942,721 182,035 5.24 %
Other consumer51,455 721 5.64 %65,035 709 4.37 %
Total loans (5)(6)
51,918,788 868,441 6.73 %48,851,720 771,264 6.33 %
Restricted equity securities164,649 2,950 7.21 %78,978 936 4.75 %
Total interest-earning assets$68,050,050 $1,034,414 6.11 %$64,061,569 $906,134 5.67 %
Noninterest-earning assets:
Cash and due from banks468,374 569,227 
Allowance for loan losses(675,346)(619,868)
Other assets3,346,122 3,486,439 
Total assets$71,189,200 $67,497,367 
LIABILITIES AND STOCKHOLDERS’ EQUITY
Interest-bearing liabilities:
Checking deposits$7,467,801 $52,680 2.84 %$8,434,655 $49,571 2.36 %
Money market deposits13,724,230 135,405 3.97 %10,433,839 86,419 3.32 %
Savings deposits1,795,242 5,004 1.12 %2,200,124 3,963 0.72 %
Time deposits21,028,737 238,393 4.56 %16,289,320 147,524 3.63 %
BTFP, short-term borrowings and federal funds purchased2,889 32 4.45 %4,500,566 49,032 4.37 %
Short-term repurchase agreements
4,104 58 5.68 %15,579 211 5.43 %
FHLB advances3,500,001 48,840 5.61 %1 — — %
Long-term debt and finance lease liabilities36,335 773 8.56 %152,760 2,668 7.01 %
Total interest-bearing liabilities$47,559,339 $481,185 4.07 %$42,026,844 $339,388 3.24 %
Noninterest-bearing liabilities and stockholders’ equity:
Demand deposits14,664,789 16,926,937 
Accrued expenses and other liabilities1,877,572 2,102,590 
Stockholders’ equity7,087,500 6,440,996 
Total liabilities and stockholders’ equity$71,189,200 $67,497,367 
Interest rate spread2.04 %2.43 %
Net interest income and net interest margin$553,229 3.27 %$566,746 3.55 %
(1)Annualized.
(2)Includes securities purchased under resale agreements for the second quarter of 2024. Includes both securities and loans purchased under resale agreements for the second quarter of 2023.
(3)Yields on tax-exempt securities are not presented on a tax-equivalent basis.
(4)Includes the amortization of net premiums on AFS debt securities of $10 million and $7 million for the second quarters of 2024 and 2023, respectively.
(5)Average balances include nonperforming loans and loans held-for-sale.
(6)Loans include the accretion of net deferred loan fees and amortization of net premiums, which totaled $14 million and $13 million for the second quarters of 2024 and 2023, respectively.
69

The following table presents the interest spread, net interest margin, average balances, interest income and expense, and the average yield/rate by asset and liability component for the first halves of 2024 and 2023:
Six Months Ended June 30,
20242023
($ in thousands)Average BalanceInterest
Average Yield/
Rate (1)
Average BalanceInterest
Average Yield/
Rate (1)
ASSETS
Interest-earning assets:
Interest-bearing cash and deposits with banks$4,960,016 $123,788 5.02 %$4,353,658 $96,642 4.48 %
Assets purchased under resale agreements (2)
605,330 8,000 2.66 %665,229 8,472 2.57 %
Debt securities:
AFS debt securities (3)(4)
7,524,158 162,100 4.33 %6,183,522 109,489 3.57 %
HTM debt securities (3)
2,945,918 25,024 1.71 %2,989,695 25,412 1.71 %
Total debt securities (3)
10,470,076 187,124 3.59 %9,173,217 134,901 2.97 %
Loans:
C&I16,230,641 648,458 8.03 %15,322,480 563,372 7.41 %
CRE20,342,200 647,193 6.40 %19,404,599 583,185 6.06 %
Residential mortgage15,294,601 437,640 5.75 %13,706,798 351,529 5.17 %
Other consumer54,372 1,539 5.69 %68,840 1,564 4.58 %
Total loans (5)(6)
51,921,814 1,734,830 6.72 %48,502,717 1,499,650 6.24 %
Restricted equity securities128,812 4,289 6.70 %84,852 1,975 4.69 %
Total interest-earning assets$68,086,048 $2,058,031 6.08 %$62,779,673 $1,741,640 5.59 %
Noninterest-earning assets:
Cash and due from banks457,070 595,022 
Allowance for loan losses(677,231)(611,358)
Other assets3,567,911 3,548,733 
Total assets$71,433,798 $66,312,070 
LIABILITIES AND STOCKHOLDERS’ EQUITY
Interest-bearing liabilities:
Checking deposits$7,581,615 $106,501 2.82 %$7,469,621 $72,745 1.96 %
Money market deposits13,680,220 270,066 3.97 %10,844,992 162,521 3.02 %
Savings deposits1,802,405 9,124 1.02 %2,317,702 7,632 0.66 %
Time deposits20,187,490 451,990 4.50 %15,674,457 261,373 3.36 %
BTFP, short-term borrowings and federal funds purchased1,933,707 42,138 4.38 %2,666,249 57,857 4.38 %
FHLB advances2,027,474 56,579 5.61 %248,619 6,430 5.22 %
Repurchase agreements3,327 93 5.62 %60,931 1,263 4.18 %
Long-term debt and finance lease liabilities81,076 3,172 7.87 %152,591 5,212 6.89 %
Total interest-bearing liabilities$47,297,314 $939,663 4.00 %$39,435,162 $575,033 2.94 %
Noninterest-bearing liabilities and stockholders’ equity:
Demand deposits14,809,871 18,310,770 
Accrued expenses and other liabilities2,286,584 2,253,266 
Stockholders’ equity7,040,029 6,312,872 
Total liabilities and stockholders’ equity$71,433,798 $66,312,070 
Interest rate spread2.08 %2.65 %
Net interest income and net interest margin$1,118,368 3.30 %$1,166,607 3.75 %
(1)Annualized.
(2)Includes securities purchased under resale agreements for the first half of 2024. Includes both securities and loans purchased under resale agreements for the first half of 2023.
(3)Yields on tax-exempt securities are not presented on a tax-equivalent basis.
(4)Includes the amortization of net premiums on AFS debt securities of $17 million and $16 million for the first halves of 2024 and 2023, respectively.
(5)Average balances include nonperforming loans and loans held-for-sale.
(6)Loans include the accretion of net deferred loan fees and amortization of net premiums, which totaled $28 million and $27 million for the first halves of 2024 and 2023, respectively.
70

The following table summarizes the extent to which changes in (1) interest rates, and (2) volume of average interest-earning assets and average interest-bearing liabilities affected the Company’s net interest income for the periods presented. The total change for each category of interest-earning assets and interest-bearing liabilities is segmented into changes attributable to variations in volume and yield/rate. Changes that are not solely due to either volume or yield/rate are allocated proportionally based on the absolute value of the change related to average volume and average yield/rate.
Three Months Ended June 30,Six Months Ended June 30,
2024 vs. 20232024 vs. 2023
Changes Due toChanges Due to
($ in thousands)Total ChangeVolumeYield/RateTotal ChangeVolumeYield/Rate
Interest-earning assets:
Interest-bearing cash and deposits with banks$(11,589)$(14,488)$2,899 $27,146 $14,515 $12,631 
Assets purchased under resale agreements (1)
(2,084)(830)(1,254)(472)(767)295 
Debt securities:
AFS debt securities42,950 23,146 19,804 52,611 26,517 26,094 
HTM debt securities(188)(211)23 (388)(315)(73)
Total debt securities
42,762 22,935 19,827 52,223 26,202 26,021 
Loans:
C&I34,849 18,298 16,551 85,086 35,294 49,792 
CRE22,385 10,100 12,285 64,008 29,740 34,268 
Residential mortgage39,931 19,553 20,378 86,111 43,661 42,450 
Other consumer12 (166)178 (25)(365)340 
Total loans
97,177 47,785 49,392 235,180 108,330 126,850 
Restricted equity securities2,014 1,365 649 2,314 1,269 1,045 
Total interest and dividend income$128,280 $56,767 $71,513 $316,391 $149,549 $166,842 
Interest-bearing liabilities:
Checking deposits$3,109 $(6,131)$9,240 $33,756 $1,116 $32,640 
Money market deposits48,986 30,302 18,684 107,545 48,887 58,658 
Savings deposits1,041 (830)1,871 1,492 (1,962)3,454 
Time deposits90,869 48,410 42,459 190,617 87,546 103,071 
BTFP, short-term borrowings and federal funds purchased
(49,000)(49,003)3 (15,719)(15,803)84 
FHLB advances48,840 48,840 — 50,149 49,622 527 
Repurchase agreements(153)(162)9 (1,170)(1,497)327 
Long-term debt and finance lease liabilities(1,895)(2,381)486 (2,040)(2,706)666 
Total interest expense$141,797 $69,045 $72,752 $364,630 $165,203 $199,427 
Change in net interest income$(13,517)$(12,278)$(1,239)$(48,239)$(15,654)$(32,585)
(1)Includes the impact of securities purchased under resale agreements for the second quarter and first half of 2024. Includes the impact of securities and loans purchased under resale agreements for the second quarter and first half of 2023.

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Noninterest Income

The following table presents the components of noninterest income for the second quarters and first halves of 2024 and 2023:
Three Months Ended June 30,Six Months Ended June 30,
($ in thousands)20242023% Change20242023% Change
Deposit account fees
$25,649 $23,369 10 %$50,597 $46,423 9 %
Lending fees24,340 20,901 16 %47,265 41,487 14 %
Foreign exchange income12,924 12,167 6 %24,393 23,476 4 %
Wealth management fees9,478 6,944 36 %18,115 13,291 36 %
Customer derivative income5,764 7,373 (22)%9,514 9,937 (4)%
Net gains (losses) on sales of loans
56 (7)NM15 (29)NM
Net gains (losses) on AFS debt securities
1,785 — 100 %1,834 (10,000)NM
Other investment income586 4,003 (85)%3,401 5,924 (43)%
Other income4,091 3,881 5 %8,527 8,100 5 %
Total noninterest income
$84,673 $78,631 8 %$163,661 $138,609 18 %
NM — Not meaningful.

Noninterest income comprised 13% of total revenue for both the second quarter and first half of 2024, compared with 12% and 11% for the second quarter and first half of 2023, respectively. Noninterest income for the second quarter of 2024 was $85 million, an increase of $6 million or 8%, compared with $79 million for the second quarter of 2023. The increase was primarily due to increases in lending, wealth management and deposit account fees, partially offset by lower other investment income. Noninterest income for the first half of 2024 was $164 million, an increase of $25 million or 18%, compared with $139 million for the same period in 2023. The increase was primarily due to net gains on AFS debt securities, and increases in lending, wealth management and deposit account fees.

Deposit account fees were $26 million for the second quarter of 2024, an increase of $3 million or 10%, compared with $23 million for the second quarter of 2023. For the first half of 2024, deposit account fees were $51 million, an increase of $5 million or 9%, compared with $46 million for the same period in 2023. The increases were primarily related to analysis service fees, which reflected customer growth and fee increases.

Lending fees were $24 million for the second quarter of 2024, an increase of $3 million or 16%, compared with $21 million for the second quarter of 2023. For the first half of 2024, lending fees were $47 million, an increase of $6 million or 14%, compared with $41 million for the same period in 2023. The increases were primarily due to higher trade finance and unused commitment fees driven by customer growth.

Wealth management fees were $9 million for the second quarter of 2024, an increase of $2 million or 36%, compared with $7 million for the second quarter of 2023. For the first half of 2024, wealth management fees were $18 million, an increase of $5 million or 36%, compared with $13 million for the same period in 2023. The increases reflected customer demand for higher-yielding products in response to the interest rate environment.

Net gains on AFS debt securities were $2 million for both the second quarter and first half of 2024, which primarily reflected the sale of mortgage-backed securities. In comparison, net losses on AFS debt securities were $10 million for the first half of 2023, due to the write-off of an impaired subordinated debt security during the first quarter of 2023.

Other investment income was $1 million for the second quarter of 2024, a decrease of $3 million or 85%, compared with $4 million for the same period in 2023. For the first half of 2024, other investment income was $3 million, a decrease of $3 million or 43%, compared with $6 million for the same period in 2023. The decreases primarily reflected reduced earnings from the Company’s equity method CRA investments in 2024, compared with the same year-ago periods.
72

Noninterest Expense

The following table presents the components of noninterest expense for the second quarters and first halves of 2024 and 2023:
Three Months Ended June 30,Six Months Ended June 30,
($ in thousands)20242023% Change20242023% Change
Compensation and employee benefits$133,588 $124,937 7 %$275,400 $254,591 8 %
Occupancy and equipment expense15,031 16,088 (7)%30,261 31,675 (4)%
Deposit insurance premiums and regulatory assessments10,708 8,262 30 %30,357 16,172 88 %
Deposit account expense12,050 10,559 14 %24,238 20,168 20 %
Computer software and data processing expenses
11,392 10,692 7 %22,736 21,399 6 %
Other operating expense37,613 35,337 6 %71,058 70,207 1 %
Amortization of tax credit and CRA investments
16,052 55,914 (71)%29,259 66,024 (56)%
Total noninterest expense
$236,434 $261,789 (10)%$483,309 $480,236 1 %

Second quarter 2024 noninterest expense of $236 million decreased $26 million or 10%, compared with $262 million for the second quarter of 2023. The decrease was primarily due to a decrease in amortization of tax credit and CRA investments, partially offset by an increase in compensation and employee benefits. For the first half of 2024, noninterest expense of $483 million increased $3 million or 1%, compared with $480 million for the same period in 2023, primarily due to increases in compensation and employee benefits, deposit insurance premiums and regulatory assessments and deposit account expense, partially offset by a decrease in amortization of tax credit and CRA investments.

Compensation and employee benefits were $134 million for the second quarter of 2024, an increase of $9 million or 7%, compared with $125 million for the second quarter of 2023. For the first half of 2024, compensation and employee benefits were $275 million, an increase of $20 million or 8%, compared with $255 million for the same period in 2023. The increases were primarily driven by annual merit increases and staffing growth.

Deposit insurance premiums and regulatory assessments were $11 million for the second quarter of 2024, an increase of $3 million or 30%, compared with $8 million for the same period in 2023. Deposit insurance premiums and regulatory assessments were $30 million for the first half of 2024, an increase of $14 million or 88%, compared with $16 million for the same period in 2023. The increases were primarily due to additional FDIC charges of $2 million and $12 million recorded during the second quarter and first half of 2024, respectively. For additional information about the FDIC special assessment, refer to Item 2. MD&A — Overview — Current Developments in this Form 10-Q.

Deposit account expense was $12 million for the second quarter of 2024, an increase of $1 million or 14%, compared with $11 million for the same period in 2023. The increase was primarily due to higher commercial vendor payments, which were driven by an increase in program participants; and deposit referral fees, which were driven by higher deposit balances. For the first half of 2024, deposit account expense was $24 million, an increase of $4 million or 20%, compared with $20 million for the same period in 2023. The increases were primarily due to higher deposit referral fees driven by higher deposit balances, and higher commercial vendor payments due to an increase in program participants. The increase in the first half of 2024 was further impacted by higher insured cash sweep product fees driven by higher deposit balances.

Amortization of tax credit and CRA investments was $16 million for the second quarter of 2024, a decrease of $40 million or 71%, compared with $56 million for the second quarter of 2023. For the first half of 2024, amortization of tax credit and CRA investments was $29 million, a decrease of $37 million or 56%, compared with $66 million for the same period in 2023. The decreases were primarily due to the impacts related to the expanded application of PAM since the adoption of Accounting Standards Update (“ASU”) 2023-02, Investments — Equity Method and Joint Ventures on January 1, 2024, and the timing of tax credit investments that closed in a given period. For additional information on the PAM, see Note 2 — Current Accounting Developments and Summary of Significant Accounting Policies and Note 8 — Affordable Housing Partnership, Tax Credit and Community Reinvestment Act Investments, Net.

73

Income Taxes
Three Months Ended June 30,Six Months Ended June 30,
($ in thousands)20242023% Change20242023% Change
Income before income taxes
$364,468 $357,588 2 %$736,720 $778,980 (5)%
Income tax expense$76,238 $45,557 67 %$163,415 $144,510 13 %
Effective tax rate20.9 %12.7 %22.2 %18.6 %

Second quarter 2024 income tax expense was $76 million and the effective tax rate was 20.9%, compared with second quarter 2023 income tax expense of $46 million and an effective tax rate of 12.7%. For the first half of 2024, income tax expense was $163 million and the effective tax rate was 22.2%, compared with income tax expense of $145 million and an effective tax rate of 18.6% for the same period in 2023. The year-over-year increases in income tax expense and effective tax rate were primarily due to the impacts related to the expanded application of PAM on the Company’s tax credit investments since the adoption of ASU 2023-02 on January 1, 2024 and the timing of tax credit investments that closed in a given period. For additional information on the PAM, see Note 2 — Current Accounting Developments and Summary of Significant Accounting Policies and Note 8 — Affordable Housing Partnership, Tax Credit and Community Reinvestment Act Investments, Net.

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. For a description of the Company’s internal management reporting process, including the segment cost allocation methodology, see Note 15 — Business Segments to the Consolidated Financial Statements in this Form 10-Q.

Segment net interest income represents the difference between actual interest earned on assets and interest incurred on liabilities of the segment, adjusted for funding charges or credits through the Company’s internal funds transfer pricing (“FTP”) process.

The following tables present the results by operating segment for the periods indicated:
Three Months Ended June 30,
Consumer and Business BankingCommercial BankingOther
($ in thousands)202420232024202320242023
Total revenue$320,061 $334,642 $311,500 $305,578 $6,341 $5,157 
(Reversal of) provision for credit losses
(3,245)5,524 40,245 20,476 — — 
Noninterest expense108,124 107,027 92,064 88,333 36,246 66,429 
Segment income (loss) before income taxes
215,182 222,091 179,191 196,769 (29,905)(61,272)
Segment net income$151,578 $156,853 $126,441 $139,030 $10,211 $16,148 
($ in thousands)Six Months Ended June 30,
Consumer and Business Banking
Commercial Banking
Other
202420232024202320242023
Total revenue$637,367 $664,886 $618,315 $585,900 $26,347 $54,430 
(Reversal of) provision for credit losses(680)20,536 62,680 25,464 — — 
Noninterest expense227,424 220,850 198,371 175,581 57,514 83,805 
Segment income (loss) before income taxes410,623 423,500 357,264 384,855 (31,167)(29,375)
Segment net income
$289,250 $299,100 $252,022 $273,487 $32,033 $61,883 

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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 June 30,
Change from 2023
($ in thousands)20242023$%
Net interest income before provision for credit losses$293,292 $307,522 $(14,230)(5)%
Noninterest income26,769 27,120 (351)(1)%
Total revenue320,061 334,642 (14,581)(4)%
(Reversal of) provision for credit losses
(3,245)5,524 (8,769)(159)%
Noninterest expense 108,124 107,027 1,097 1 %
Segment income before income taxes215,182 222,091 (6,909)(3)%
Income tax expense63,604 65,238 (1,634)(3)%
Segment net income$151,578 $156,853 $(5,275)(3)%
Average loans$19,324,850 $17,622,260 $1,702,590 10 %
Average deposits$34,852,127 $33,265,827 $1,586,300 5 %
($ in thousands)Six Months Ended June 30,
Change from 2023
20242023$%
Net interest income before provision for credit losses$585,056 $611,764 $(26,708)(4)%
Noninterest income52,311 53,122 (811)(2)%
Total revenue637,367 664,886 (27,519)(4)%
(Reversal of) provision for credit losses
(680)20,536 (21,216)(103)%
Noninterest expense227,424 220,850 6,574 3 %
Segment income before income taxes410,623 423,500 (12,877)(3)%
Income tax expense121,373 124,400 (3,027)(2)%
Segment net income$289,250 $299,100 $(9,850)(3)%
Average loans$19,231,071 $17,368,001 $1,863,070 11 %
Average deposits$34,319,472 $33,555,330 $764,142 2 %

Consumer and Business Banking segment net income decreased $5 million or 3% year-over-year to $152 million for the second quarter of 2024, and $10 million or 3% year-over-year to $289 million for the first half of 2024. The decreases in both periods were primarily driven by a decrease in net interest income, partially offset by a decrease in provision for credit losses. Net interest income before provision for credit losses decreased $14 million or 5% year-over-year to $293 million for the second quarter of 2024, and $27 million or 4% year-over-year to $585 million for the first half of 2024. These decreases were primarily driven by a higher cost of interest-bearing deposits and a continued shift to interest-bearing products in the deposit mix. Provision for credit losses decreased $9 million or 159% year-over-year to $3 million in reversal of provision for credit losses for the second quarter of 2024, and $21 million or 103% year-over-year to $1 million in reversal of provision for credit losses for the first half of 2024. These decreases were primarily driven by the improvement in the macroeconomic outlook in the residential mortgage loan sector in the second quarter of 2024.

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Commercial Banking

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

The following tables present additional financial information for the Commercial Banking segment for the periods indicated:
Three Months Ended June 30,
Change from 2023
($ in thousands)20242023$%
Net interest income before provision for credit losses$260,780 $263,040 $(2,260)(1)%
Noninterest income50,720 42,538 8,182 19 %
Total revenue311,500 305,578 5,922 2 %
Provision for credit losses40,245 20,476 19,769 97 %
Noninterest expense 92,064 88,333 3,731 4 %
Segment income before income taxes179,191 196,769 (17,578)(9)%
Income tax expense52,750 57,739 (4,989)(9)%
Segment net income$126,441 $139,030 $(12,589)(9)%
Average loans$32,593,938 $31,229,460 $1,364,478 4 %
Average deposits$21,454,905 $16,788,456 $4,666,449 28 %
($ in thousands)Six Months Ended June 30,
Change from 2023
20242023$%
Net interest income before provision for credit losses$521,129 $499,763 $21,366 4 %
Noninterest income97,186 86,137 11,049 13 %
Total revenue618,315 585,900 32,415 6 %
Provision for credit losses62,680 25,464 37,216 146 %
Noninterest expense198,371 175,581 22,790 13 %
Segment income before income taxes357,264 384,855 (27,591)(7)%
Income tax expense105,242 111,368 (6,126)(6)%
Segment net income$252,022 $273,487 $(21,465)(8)%
Average loans$32,690,743 $31,134,716 $1,556,027 5 %
Average deposits$21,254,547 $17,034,343 $4,220,204 25 %

Commercial Banking segment net income decreased $13 million or 9% year-over-year to $126 million for the second quarter of 2024. This decrease was primarily due to higher provision for credit losses, partially offset by higher noninterest income. Provision for credit losses increased $20 million or 97% year-over-year to $40 million for the second quarter of 2024, primarily driven by higher net charge-offs in the C&I and CRE portfolios. Noninterest income increased $8 million or 19% year-over-year to $51 million for the second quarter of 2024, primarily driven by higher deposit account fees, foreign exchange income and lending fees.

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Commercial Banking segment net income decreased $21 million or 8% year-over-year to $252 million for the first half of 2024. This decrease was primarily due to higher provision for credit losses and noninterest expense, partially offset by revenue growth. Net interest income before provision for credit losses increased $21 million or 4% year-over-year to $521 million for the first half of 2024. This increase was primarily driven by higher loan interest income from commercial loan growth. Provision for credit losses increased $37 million or 146% year-over-year to $63 million for the first half of 2024, primarily driven by higher net charge-offs in the C&I and CRE portfolios. Noninterest income increased $11 million or 13% year-over-year to $97 million for the first half of 2024, mainly driven by higher deposit account fees and lending fees. Noninterest expense increased $23 million or 13% year-over-year to $198 million for the first half of 2024, primarily due to higher compensation and employee benefits, deposit account expense, and deposit insurance premiums and regulatory assessments.

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 June 30,
Change from 2023
($ in thousands)20242023$%
Net interest loss before provision for credit losses
$(843)$(3,816)$2,973 78 %
Noninterest income
7,184 8,973 (1,789)(20)%
Total revenue6,341 5,157 1,184 23 %
Noninterest expense 36,246 66,429 (30,183)(45)%
Segment loss before income taxes
(29,905)(61,272)31,367 51 %
Income tax benefit40,116 77,420 (37,304)(48)%
Segment net income$10,211 $16,148 $(5,937)(37)%
Average deposits$2,373,767 $4,230,592 $(1,856,825)(44)%
($ in thousands)Six Months Ended June 30,
Change from 2023
20242023$%
Net interest income before provision for credit losses
$12,183 $55,080 $(42,897)(78)%
Noninterest income14,164 (650)14,814 NM
Total revenue
26,347 54,430 (28,083)(52)%
Noninterest expense 57,514 83,805 (26,291)(31)%
Segment loss before income taxes (31,167)(29,375)(1,792)(6)%
Income tax benefit63,200 91,258 (28,058)(31)%
Segment net income
$32,033 $61,883 $(29,850)(48)%
Average deposits$2,487,582 $4,027,869 $(1,540,287)(38)%
NM — Not meaningful.

The Other segment reported segment loss before income taxes of $30 million and segment net income of $10 million, reflecting an income tax benefit of $40 million for the second quarter of 2024. The decrease in segment net income was primarily driven by lower income tax benefit, partially offset by lower noninterest expense. Noninterest expense decreased $30 million, primarily due to lower amortization of tax credit and CRA investments from the expanded use of PAM since the adoption of ASU 2022-02 on January 1, 2024. For additional information on the PAM, see Note 2 — Current Accounting Developments and Summary of Significant Accounting Policies and Note 8 — Affordable Housing Partnership, Tax Credit and Community Reinvestment Act Investments, Net.

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The Other segment reported segment loss before income taxes of $31 million and segment net income of $32 million, reflecting an income tax benefit of $63 million for the first half of 2024. The decrease in segment net income was primarily driven by lower net interest income and income tax benefit, partially offset by lower noninterest expense and higher noninterest income. The $43 million decrease in net interest income before provision for credit losses was primarily driven by lower FTP spread income absorbed by the Other segment, partially offset by higher yields on interest-bearing cash and deposits with banks and debt securities. Noninterest income increased $15 million for the first half of 2024, mainly due to a $10 million write-off of an impaired AFS debt security during the first quarter of 2023 and an increase in foreign exchange income. Noninterest expense decreased $26 million, primarily due to lower amortization of tax credit and CRA investments from the aforementioned adoption of ASU 2022-02 on January 1, 2024.

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 debt securities in response to changes in the balance sheet and related interest rate risk to meet liquidity, regulatory and strategic requirements.

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The following table presents the distribution of the Company’s AFS and HTM debt securities portfolio as of June 30, 2024 and December 31, 2023, and by credit ratings as of June 30, 2024:
June 30, 2024December 31, 2023
Ratings as of June 30, 2024 (1)
($ in thousands)Amortized CostFair Value% of Fair ValueAmortized CostFair Value% of Fair ValueAAA/AAABBBBB and Lower
No Rating (2)
AFS debt securities:
U.S. Treasury securities$676,291 $623,757 7 %$1,112,587 $1,060,375 17 %100 %— %— %— %— %
U.S. government agency and U.S. government-sponsored enterprise debt securities309,956 260,388 3 %412,086 364,446 6 %100 %— %— %— %— %
U.S. government agency and U.S. government-sponsored enterprise mortgage-backed securities (3)
6,455,081 6,163,665 69 %2,488,304 2,195,853 35 %100 %— %— %— %— %
Municipal securities295,437 256,563 3 %297,283 261,016 4 %98 %— %— %— %2 %
Non-agency mortgage-backed securities925,027 795,255 9 %1,052,913 921,187 15 %89 %— %— %— %11 %
Corporate debt securities653,501 507,130 6 %653,501 502,425 8 %— %31 %66 %3 %— %
Foreign government bonds245,523 233,724 3 %239,333 227,874 4 %45 %55 %— %— %— %
Asset-backed securities39,061 38,593 0 %43,234 42,300 1 %56 %44 %— %— %— %
Collateralized loan obligations44,500 44,453 0 %617,250 612,861 10 %100 %— %— %— %— %
Total AFS debt securities$9,644,377 $8,923,528 100 %$6,916,491 $6,188,337 100 %92 %3 %4 %0 %1 %
HTM debt securities:
U.S. Treasury securities$532,294 $487,707 20 %$529,548 $488,551 20 %100 %— %— %— %— %
U.S. government agency and U.S. government-sponsored enterprise debt securities1,003,094 802,895 33 %1,001,836 814,932 33 %100 %— %— %— %— %
U.S. government agency and U.S. government-sponsored enterprise mortgage-backed securities (4)
1,214,541 972,255 41 %1,235,784 1,004,697 41 %100 %— %— %— %— %
Municipal securities188,321 142,370 6 %188,872 145,791 6 %100 %— %— %— %— %
Total HTM debt securities$2,938,250 $2,405,227 100 %$2,956,040 $2,453,971 100 %100 %— %— %— %— %
Total debt securities$12,582,627 $11,328,755 $9,872,531 $8,642,308 
(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.
(3)Includes Government National Mortgage Association (“GNMA”) AFS debt securities totaling $5.2 billion of both amortized cost and fair value as of June 30, 2024, and $1.3 billion of amortized cost and $1.2 billion of fair value as of December 31, 2023.
(4)Includes GNMA HTM debt securities totaling $89 million of amortized cost and $71 million of fair value as of June 30, 2024, and $92 million of amortized cost and $75 million of fair value of as of December 31, 2023.

As of June 30, 2024, 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 2.8 and 7.2, respectively, compared with 3.6 and 7.5, respectively, as of December 31, 2023. The decrease in the AFS effective duration was primarily due to the purchases of floating rate GNMA securities. The decrease in the HTM effective duration was due to the portfolio seasoning. The Company estimated that the effective duration of its AFS debt securities was 3.4 for an instantaneous 100 bps parallel increase and 2.4 for an instantaneous 100 bps parallel decrease as of June 30, 2024.

Available-for-Sale Debt Securities

The fair value of AFS debt securities totaled $8.9 billion as of June 30, 2024, an increase of $2.7 billion or 44% from $6.2 billion as of December 31, 2023. The increase was primarily due to the purchases of GNMA securities, which were mainly funded by an increase in deposits. The Company’s AFS debt securities are carried at fair value with non-credit 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 $721 million as of June 30, 2024, compared with $728 million as of December 31, 2023.

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As of June 30, 2024 and December 31, 2023, 99% and 97%, respectively, 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 June 30, 2024 and December 31, 2023. There was no allowance for credit losses provided against the AFS debt securities as of each of June 30, 2024 and December 31, 2023. Additionally, there were no credit losses recognized in earnings for the three and six months ended June 30, 2024 and 2023.

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 June 30, 2024 and December 31, 2023.

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 2023 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 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 $52.8 billion and $52.2 billion as of June 30, 2024 and December 31, 2023, respectively, and the composition of the loan portfolio as of June 30, 2024 was similar to the composition as of December 31, 2023.

The following table presents the composition of the Company’s total loan portfolio by loan type as of June 30, 2024 and December 31, 2023:
June 30, 2024December 31, 2023
($ in thousands)Amount%Amount%
Commercial:
C&I
$16,875,009 32 %$16,581,079 32 %
CRE:
CRE14,562,595 28 %14,777,081 28 %
Multifamily residential5,100,210 10 %5,023,163 10 %
Construction and land664,793 1 %663,868 1 %
Total CRE20,327,598 39 %20,464,112 39 %
Total commercial 37,202,607 71 %37,045,191 71 %
Consumer:
Residential mortgage:
Single-family residential13,747,769 26 %13,383,060 26 %
HELOCs1,761,379 3 %1,722,204 3 %
Total residential mortgage15,509,148 29 %15,105,264 29 %
Other consumer56,154 0 %60,327 0 %
Total consumer 15,565,302 29 %15,165,591 29 %
Total loans held-for-investment (1)
52,767,909 100 %52,210,782 100 %
Allowance for loan losses
(683,794)(668,743)
Loans held-for-sale (2)
18,909 116 
Total loans, net$52,103,024 $51,542,155 
(1)Includes $53 million and $71 million of net deferred loan fees and net unamortized premiums as of June 30, 2024 and December 31, 2023, respectively.
(2)Consists of C&I loans as of June 30, 2024 and a single-family residential loan as of December 31, 2023.

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Commercial

The commercial loan portfolio comprised 71% of total loans as of both June 30, 2024 and December 31, 2023. The Company actively monitors the commercial lending portfolio for credit risk and reviews credit exposures for sensitivity to changing economic conditions.

Commercial — Commercial and Industrial Loans. Total C&I loan commitments were $24.8 billion and $24.6 billion as of June 30, 2024 and December 31, 2023, respectively, with a utilization rate of 68% as of June 30, 2024, compared with 67% as of December 31, 2023. Total C&I loans were $16.9 billion as of June 30, 2024, an increase of $294 million or 2% from $16.6 billion as of December 31, 2023. Total C&I loans made up 32% of total loans held-for-investment as of both June 30, 2024 and December 31, 2023. 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 $549 million and $645 million as of June 30, 2024 and December 31, 2023, respectively. The majority of the C&I loans had variable interest rates as of both June 30, 2024 and December 31, 2023.

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 June 30, 2024 and December 31, 2023:
June 30, 2024
December 31, 2023 (1)
($ in thousands)Amount%($ in thousands)Amount%
Industry:Industry:
Real estate investment & management$2,066,828 12 %Capital call lending$2,171,367 13 %
Capital call lending1,970,392 12 %Real estate investment & management1,970,713 12 %
Media & entertainment1,953,376 12 %Media & entertainment1,891,199 11 %
Financial services1,135,036 7 %Financial services1,136,731 7 %
Manufacturing & wholesale1,024,074 6 %Manufacturing & wholesale1,110,544 7 %
Infrastructure & clean energy1,016,207 6 %Infrastructure & clean energy1,023,662 6 %
Tech & telecom771,820 5 %Tech & telecom729,922 4 %
Healthcare714,998 4 %Food production & distribution655,340 4 %
Food production & distribution704,416 4 %Consumer finance586,468 4 %
Oil & gas587,657 3 %Hospitality & leisure576,328 3 %
Other4,930,205 29 %Other4,728,805 29 %
Total C&I$16,875,009 100 %Total C&I$16,581,079 100 %
(1)Revised segmentation to conform with the current presentation.

Commercial — Total Commercial Real Estate Loans. Total CRE loans totaled $20.3 billion and $20.5 billion as of June 30, 2024 and December 31, 2023, respectively, and accounted for 39% of total loans held-for-investment as of both June 30, 2024 and December 31, 2023. The total CRE portfolio consists of CRE, multifamily residential, and construction and land loans, and affordable housing lending. 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.

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The Company’s total CRE loan portfolio is well-diversified by property type with an average CRE loan size of $3 million as of both June 30, 2024 and December 31, 2023. The following table summarizes the Company’s total CRE loans by property type as of June 30, 2024 and December 31, 2023:
June 30, 2024December 31, 2023
($ in thousands)Amount%Amount%
Property types:
Multifamily$5,100,210 25 %$5,023,164 25 %
Retail (1)
4,217,637 21 %4,297,569 21 %
Industrial (1)
3,995,232 20 %3,997,764 20 %
Hotel (1)
2,458,129 12 %2,446,504 12 %
Office (1)
2,184,842 11 %2,271,508 11 %
Healthcare (1)
719,579 3 %852,362 4 %
Construction and land664,793 3 %663,868 3 %
Other (1)
987,176 5 %911,373 4 %
Total CRE loans$20,327,598 100 %$20,464,112 100 %
(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 50% as of both June 30, 2024 and December 31, 2023. 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 loan commitments had an LTV ratio of 65% or lower as of both June 30, 2024 and December 31, 2023.

The following tables provide a summary of the Company’s CRE, multifamily residential, and construction and land loans by geography as of June 30, 2024 and December 31, 2023. The distribution of the total CRE loan portfolio largely reflects the Company’s geographical branch footprint, which is primarily concentrated in California.
June 30, 2024
($ in thousands)CRE%Multifamily Residential%Construction and Land%Total CRE%
Geographic markets:
Southern California$7,555,495 52 %$2,312,020 45 %$243,138 36 %$10,110,653 50 %
Northern California2,705,815 19 %1,053,601 21 %178,766 27 %3,938,182 19 %
California10,261,310 71 %3,365,621 66 %421,904 63 %14,048,835 69 %
Texas1,082,669 7 %486,597 10 %85,312 13 %1,654,578 8 %
New York706,171 5 %259,052 5 %31,854 5 %997,077 5 %
Washington487,809 3 %162,064 3 %10,393 2 %660,266 3 %
Arizona361,844 2 %220,976 4 %14,978 2 %597,798 3 %
Nevada264,210 2 %154,265 3 %15,631 2 %434,106 2 %
Other markets1,398,582 10 %451,635 9 %84,721 13 %1,934,938 10 %
Total loans $14,562,595 100 %$5,100,210 100 %$664,793 100 %$20,327,598 100 %
82

December 31, 2023
($ in thousands)CRE%Multifamily Residential%Construction and Land%Total CRE%
Geographic markets:
Southern California
$7,604,053 51 %$2,295,592 46 %$294,879 44 %$10,194,524 50 %
Northern California
2,737,635 19 %1,055,852 21 %147,031 22 %3,940,518 19 %
California10,341,688 70 %3,351,444 67 %441,910 66 %14,135,042 69 %
Texas1,122,428 8 %445,391 9 %41,768 6 %1,609,587 8 %
New York696,950 5 %287,961 6 %43,227 7 %1,028,138 5 %
Washington495,577 3 %173,367 3 %10,375 2 %679,319 3 %
Arizona355,047 2 %148,970 3 %38,897 6 %542,914 3 %
Nevada257,105 2 %142,133 3 %6,325 1 %405,563 2 %
Other markets1,508,286 10 %473,897 9 %81,366 12 %2,063,549 10 %
Total loans$14,777,081 100 %$5,023,163 100 %$663,868 100 %$20,464,112 100 %

As of both June 30, 2024 and December 31, 2023, 69% of total CRE loans were concentrated in California. 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 economic and real estate markets, see Item 1A. Risk Factors — Risks Related to Geopolitical Uncertainties to the Company’s 2023 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 $14.6 billion as of June 30, 2024, compared with $14.8 billion as of December 31, 2023, and accounted for 28% of total loans held-for-investment as of both dates. Interest rates on CRE loans may be fixed, variable or hybrid. As of June 30, 2024, 58% of our CRE portfolio had variable rates, of which 52% had customer-level interest rate derivative contracts in place. These were hedging contracts offered by the Company to help our customers manage their interest rate risk while the Bank’s exposure remained variable rate. In comparison, as of December 31, 2023, 58% of our CRE portfolio had variable rates, of which 50% had customer-level interest rate derivative contracts in place. The Company seeks to underwrite loans with conservative standards for cash flows, debt service coverage and LTV.

Owner-occupied properties comprised 20% of the CRE loans as of both June 30, 2024 and December 31, 2023. 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 $5.1 billion and $5.0 billion as of June 30, 2024 and December 31, 2023, respectively, and accounted for 10% of total loans held-for-investment as of both dates. The Company offers a variety of first lien mortgages, including fixed- and variable-rate loans, as well as hybrid loans with interest rates that adjust annually after an initial fixed rate period of three to ten years. As of June 30, 2024, 49% of our multifamily residential portfolio had variable rates, of which 43% had customer-level interest rate derivative contracts in place. In comparison, as of December 31, 2023, 48% of our multifamily residential portfolio had variable rates, of which 40% had customer-level interest rate derivative contracts in place. These were hedging contracts offered by the Company to help our customers manage their interest rate risk while the Bank’s own exposure remained variable rate.

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 $665 million as of June 30, 2024, compared with $664 million as of December 31, 2023, and accounted for 1% of total loans held-for-investment as of both dates. Construction loan exposure was made up of $541 million in loans outstanding, plus $573 million in unfunded commitments as of June 30, 2024, compared with $526 million in loans outstanding, plus $672 million in unfunded commitments as of December 31, 2023. Land loans totaled $124 million as of June 30, 2024, compared with $138 million as of December 31, 2023.

83

Consumer

Residential mortgage loans are primarily originated through the Bank’s branch network. The average total residential loan size was $436 thousand as of both June 30, 2024 and December 31, 2023. The following tables summarize the Company’s single-family residential and HELOC loan portfolios by geography as of June 30, 2024 and December 31, 2023:
June 30, 2024
($ in thousands)Single-Family Residential%HELOCs%Total Residential Mortgage%
Geographic markets:
Southern California$5,158,542 38 %$828,546 47 %$5,987,088 39 %
Northern California1,735,596 13 %368,785 21 %2,104,381 13 %
California6,894,138 51 %1,197,331 68 %8,091,469 52 %
New York4,363,714 32 %249,954 14 %4,613,668 30 %
Washington709,522 5 %186,804 11 %896,326 6 %
Massachusetts430,399 3 %68,696 4 %499,095 3 %
Georgia451,756 3 %19,536 1 %471,292 3 %
Nevada
432,919 3 %33,970 2 %466,889 3 %
Texas
450,865 3 %— — %450,865 3 %
Other markets14,456 0 %5,088 0 %19,544 0 %
Total$13,747,769 100 %$1,761,379 100 %$15,509,148 100 %
Lien priority:
First mortgage$13,747,769 100 %$1,339,343 76 %$15,087,112 97 %
Junior lien mortgage— — %422,036 24 %422,036 3 %
Total$13,747,769 100 %$1,761,379 100 %$15,509,148 100 %
December 31, 2023
($ in thousands)Single-Family Residential%HELOCs%Total Residential Mortgage%
Geographic markets:
Southern California$4,990,848 37 %$799,571 46 %$5,790,419 38 %
Northern California1,650,905 13 %370,989 22 %2,021,894 13 %
California6,641,753 50 %1,170,560 68 %7,812,313 51 %
New York4,376,416 33 %247,202 14 %4,623,618 31 %
Washington696,028 5 %184,843 11 %880,871 6 %
Massachusetts391,666 3 %67,016 4 %458,682 3 %
Georgia432,258 3 %17,123 1 %449,381 3 %
Nevada404,837 3 %33,959 2 %438,796 3 %
Texas423,972 3 %— — %423,972 3 %
Other markets16,130 0 %1,501 0 %17,631 0 %
Total$13,383,060 100 %$1,722,204 100 %$15,105,264 100 %
Lien priority:
First mortgage$13,383,060 100 %$1,331,509 77 %$14,714,569 97 %
Junior lien mortgage— — %390,695 23 %390,695 3 %
Total $13,383,060 100 %$1,722,204 100 %$15,105,264 100 %

84

Consumer — Single-Family Residential Loans. Single-family residential loans totaled $13.7 billion as of June 30, 2024, compared with $13.4 billion as of December 31, 2023, and accounted for 26% of total loans held-for-investment as of both dates. The Company was in a first lien position for all of its single-family residential loans as of both June 30, 2024 and December 31, 2023. 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 52% as of June 30, 2024 and 53% as of December 31, 2023. 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 $5.2 billion as of both June 30, 2024 and December 31, 2023, with a utilization rate of 34% and 33% as of June 30, 2024 and December 31, 2023, respectively. Substantially all of the Company’s unfunded HELOC commitments are unconditionally cancellable. HELOCs outstanding totaled $1.8 billion as of June 30, 2024, compared with $1.7 billion as of December 31, 2023, and accounted for 3% of total loans held-for-investment as of both dates. The Company was in a first lien position for 76% and 77% of total outstanding HELOCs as of June 30, 2024 and December 31, 2023, respectively. The weighted-average LTV ratio was 47% and 48% on HELOC commitments as of June 30, 2024 and December 31, 2023, respectively. Weighted-average LTV ratio represents the loan’s balance divided by the estimated current property value. Combined LTV ratios are used for junior lien home equity loans. Many of these loans are reduced documentation loans, 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 June 30, 2024 and December 31, 2023.

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 quality control procedures and periodic audits, including the review of lending and legal requirements, to ensure that the Company is in compliance with these requirements.

Foreign Outstandings

The Company’s overseas offices, which include the branch in Hong Kong and the subsidiary bank in China, are subject to the general risks inherent in conducting business in foreign countries, such as regulatory, economic and political uncertainties. As such, the Company’s international operation risk exposure is largely concentrated in China and Hong Kong. In addition, the Company’s financial assets held in the Hong Kong branch and the subsidiary bank in China may be affected by fluctuations in currency exchange rates or other factors. The following table presents the major financial assets held in the Company’s overseas offices as of June 30, 2024 and December 31, 2023:
June 30, 2024December 31, 2023
($ in thousands)Amount% of Total Consolidated AssetsAmount% of Total Consolidated Assets
Hong Kong branch:
Cash and cash equivalents$545,580 1 %$631,487 1 %
AFS debt securities (1)
$587,380 1 %$546,495 1 %
Loans held-for-investment (2)
$890,583 1 %$934,734 1 %
Total assets$2,031,755 3 %$2,115,857 3 %
Subsidiary bank in China:
Cash and cash equivalents$751,476 1 %$719,058 1 %
AFS debt securities (3)
$127,790 0 %$120,167 0 %
Loans held-for-investment (2)
$1,251,788 2 %$1,328,383 2 %
Total assets$2,139,702 3 %$2,156,548 3 %
(1)Comprised of U.S. government agency and U.S. government-sponsored enterprise mortgage-backed securities, U.S. Treasury securities, and foreign government bonds as of June 30, 2024; comprised of foreign government bonds and U.S. Treasury securities as of December 31, 2023.
(2)Primarily comprised of C&I loans as of both June 30, 2024 and December 31, 2023.
(3)Comprised of foreign government bonds as of both June 30, 2024 and December 31, 2023.

85

The following table presents the total revenue generated by the Company’s overseas offices for the second quarters and first halves of 2024 and 2023:
Three Months Ended June 30,Six Months Ended June 30,
2024202320242023
($ in thousands)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$15,420 2 %$12,255 2 %$33,513 3 %$27,573 2 %
Subsidiary Bank in China:
Total revenue$7,320 1 %$11,425 2 %$14,764 1 %$19,310 2 %

Capital

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

On March 3, 2020, the Company’s Board of Directors authorized the repurchase of $500 million of the Company’s common stock. During the first half of 2024, the Company repurchased 1,742,496 shares at an average price of $70.72 per share at $123 million. The Company did not repurchase any shares during the first half of 2023. The total remaining available capital authorized for repurchase as of June 30, 2024 was $49 million.

The Company’s stockholders’ equity was $7.2 billion as of June 30, 2024, an increase of $264 million or 3.8% from $7.0 billion as of December 31, 2023. The increase in the Company’s stockholders’ equity was primarily due to $573 million of net income, partially offset by $155 million of cash dividends declared and $123 million of common stock repurchases. For other factors that contributed to the changes in stockholders’ equity, refer to Item 1. Consolidated Financial Statements — Consolidated Statement of Changes in Stockholders’ Equity in this Form 10-Q.

Book value per share was $52.06 as of June 30, 2024, an increase of 5% from $49.64 per share as of December 31, 2023, a result of the increase in the Company’s stockholders’ equity as described above. Tangible book value per share was $48.65 as of June 30, 2024, compared with $46.27 as of December 31, 2023. 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 $0.55 and $0.48 per share during the second quarters of 2024 and 2023, respectively. In July 2024, the Company’s Board of Directors declared a third quarter 2024 cash dividend of $0.55 per share. The dividend is payable on August 16, 2024, to stockholders of record as of August 2, 2024.

86

Deposits and Other Sources of Funding

Deposits are the Company’s primary source of funding, the cost of which has a significant impact on the Company’s net interest income and net interest margin. Additional funding is provided by short- and long-term borrowings, and long-term debt. See Item 2. MD&A — Risk Management — Liquidity Risk Management — Liquidity in this Form 10-Q for a discussion of the Company’s liquidity management. The following table summarizes the Company’s sources of funds as of June 30, 2024 and December 31, 2023:
June 30, 2024December 31, 2023Change
($ in thousands)Amount%Amount%$%
Deposits:
Noninterest-bearing demand$14,922,741 25 %$15,539,872 28 %$(617,131)(4)%
Interest-bearing checking7,758,081 13 %7,558,908 14 %199,173 3 %
Money market13,775,908 23 %13,108,727 23 %667,181 5 %
Savings1,772,368 3 %1,841,467 3 %(69,099)(4)%
Time deposits21,770,687 36 %18,043,464 32 %3,727,223 21 %
Total deposits$59,999,785 100 %$56,092,438 100 %$3,907,347 7 %
Other Funds:
BTFP borrowings
— — %4,500,000 97 %(4,500,000)(100)%
FHLB advances3,500,000 99 %— — %3,500,000 100 %
Long-term debt31,844 1 %148,249 3 %(116,405)(79)%
Total other funds$3,531,844 100 %$4,648,249 100 %$(1,116,405)(24)%
Total sources of funds$63,531,629 $60,740,687 $2,790,942 5 %

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, we believe our deposit base is seasoned, stable and well-diversified.

Total deposits were $60.0 billion as of June 30, 2024, an increase of $3.9 billion or 7% from $56.1 billion as of December 31, 2023. The increase in deposits was primarily driven by a shift in the deposit mix to time deposits and continued customer migration to higher yielding deposit products. Time deposits comprised 36% and 32% of total deposits as of June 30, 2024 and December 31, 2023, respectively. Noninterest-bearing demand deposits comprised 25% and 28% of total deposits as of June 30, 2024 and December 31, 2023, respectively.

Uninsured deposits represent the portion of deposit accounts in U.S. offices that exceed the FDIC insurance limit. Management believes that presenting uninsured domestic deposits as reported on Schedule RC-OM item 2 of the Bank’s Call Report, with an adjustment to exclude collateralized and affiliate deposits provides a more accurate view of the deposits at risk, given that collateralized deposits are secured, and affiliate deposits are not customer-facing and are eliminated in consolidation.

The following table summarizes the Company’s uninsured domestic deposit balances reported on Schedule RC-OM item 2 of the Bank’s Call Report as of June 30, 2024 and December 31, 2023, after certain adjustments:
($ in thousands)June 30, 2024December 31, 2023
Uninsured deposits, per regulatory reporting requirements$30,205,323 $27,592,714 
Less: Collateralized deposits(5,435,260)(4,631,047)
Affiliate deposits(369,150)(491,992)
Uninsured deposits, excluding collateralized and affiliate deposits(a)$24,400,913 $22,469,675 
Total domestic deposits per Call Report(b)$57,072,611 $53,486,990 
Uninsured deposits, excluding collateralized and affiliate deposits, ratio(a) / (b)43 %42 %

87

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 in Item 2. MD&A — Liquidity Risk Management — Liquidity in this Form 10-Q.

Other Sources of Funding

The Company had $4.5 billion of BTFP borrowings outstanding as of December 31, 2023. These borrowings were repaid upon maturity during the first quarter of 2024.

The Company had $3.5 billion of FHLB advances as of June 30, 2024, compared with no FHLB advances as of December 31, 2023. FHLB advances as of June 30, 2024 had floating interest rates of 5.51% to 5.58% with remaining maturities between three months and 1.2 years.

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. During the first quarter of 2024, the Company redeemed approximately $117 million of junior subordinated debt. 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 2023 Form 10-K for additional details.

The Company adopted ASU 2016-13 on January 1, 2020, which requires the measurement of the allowance for credit losses to be based on management’s best estimate of lifetime expected credit losses inherent in the Company’s relevant financial assets. The Company has elected the phase-in option provided by a final rule that delays an estimate of the current expected credit losses (“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 June 30, 2024 reflect a delay of 25% of the estimated impact of CECL on regulatory capital.

The following table presents the Company’s and the Bank’s capital ratios as of June 30, 2024 and December 31, 2023 under the Basel III Capital Rules, and those required by regulatory agencies for capital adequacy and well-capitalized classification purposes:
Basel III Capital Rules
June 30, 2024December 31, 2023
CompanyBankCompanyBankMinimum Regulatory RequirementsMinimum Regulatory Requirements including Capital Conservation BufferWell-Capitalized Requirements
Risk-based capital ratios:
Common Equity Tier 1 capital (1)
13.7 %13.1 %13.3 %12.6 %4.5 %7.0 %6.5 %
Tier 1 capital (2)
13.7 %13.1 %13.3 %12.6 %6.0 %8.5 %8.0 %
Total capital15.1 %14.3 %14.8 %13.8 %8.0 %10.5 %10.0 %
Tier 1 leverage (1)
10.4 %9.9 %10.2 %9.6 %4.0 %4.0 %5.0 %
(1)The Common Equity Tier 1 capital and Tier 1 leverage well-capitalized requirements apply to the Bank only. There is no requirement on Common Equity Tier 1 capital ratio or Tier 1 leverage ratio for a well-capitalized bank holding company.
(2)The well-capitalized Tier 1 capital ratio requirements for the Company and the Bank are 6.0% and 8.0%, respectively.
88

The Company is committed to maintaining strong capital levels to assure its investors, customers and regulators that the Company and the Bank are financially sound. As of both June 30, 2024 and December 31, 2023, the Company and the Bank continued to exceed all “well-capitalized” capital requirements and the minimum capital requirements under the Basel III Capital Rules. Total risk-weighted assets were $54.0 billion as of June 30, 2024, an increase of $304 million from $53.7 billion as of December 31, 2023. The increase in the risk-weighted assets was mainly due to growth in loans.

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 (“ROC”) 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 ROC provides focused oversight of the Company’s identified enterprise risk categories on behalf of the full Board of Directors. Under the authority of the ROC, 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 major risk categories and/or risk subcategories. The third line of defense is comprised of the Internal Audit and Independent Asset Review (“IAR”) functions. 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 Audit Committee. IAR provides management and the Audit Committee with an objective and independent assessment of the Bank’s credit profile and credit risk management processes. Further discussion and analysis of selected primary risk areas are discussed in the following subsections of Risk Management.

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 ROC has primary oversight responsibility for the identified enterprise risk categories including credit risk. The ROC 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 also evaluates and reports the overall credit risk exposure to senior management and the ROC. Reporting directly to the Board’s Audit Committee, the IAR function provides additional validation of the Company’s robust 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 loan monitoring process.

The Company assesses the overall performance and credit quality 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.

89

Credit Quality

The Company utilizes a credit risk rating system to assist in monitoring credit quality. Loans are evaluated using the Company’s internal credit risk rating of 1 through 10. For more information on the Company’s credit quality indicators and internal credit risk ratings, refer to Note 7 — Loans Receivable and Allowance for Credit Losses to the Consolidated Financial Statements in this Form 10-Q.

The following table presents the Company’s criticized loans as of June 30, 2024 and December 31, 2023:
Change
($ in thousands)June 30, 2024December 31, 2023$%
Criticized loans:
Special mention loans$435,679 $404,241 $31,438 8 %
Classified loans (1)
644,564 573,969 70,595 12 %
Total criticized loans (2)
$1,080,243 $978,210 $102,033 10 %
Special mention loans to loans held-for-investment0.83 %0.77 %
Classified loans to loans held-for-investment1.22 %1.10 %
Criticized loans to loans held-for-investment2.05 %1.87 %
(1)Consists of substandard, doubtful and loss categories.
(2)Excludes loans held-for-sale.

Criticized loans were $1.1 billion as of June 30, 2024, an increase of $102 million or 10%, compared with $978 million as of December 31, 2023. The increase was primarily driven by higher criticized CRE loans, partially offset by lower criticized C&I and multifamily residential loans.

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 $196 million or 0.27% of total assets as of June 30, 2024, an increase of $82 million or 72%, compared with $114 million or 0.16% of total assets as of December 31, 2023.

90

The following table presents nonperforming assets information as of June 30, 2024 and December 31, 2023:
Change
($ in thousands)June 30, 2024December 31, 2023$%
Commercial:
C&I$66,960 $37,036 $29,924 81 %
CRE:
CRE31,280 23,249 8,031 35 %
Multifamily residential4,607 4,669 (62)(1)%
Construction and land11,316 — 11,316 100 %
Total CRE47,203 27,918 19,285 69 %
Consumer:
Residential mortgage:
Single-family residential38,284 24,377 13,907 57 %
HELOCs13,230 13,411 (181)(1)%
Total residential mortgage51,514 37,788 13,726 36 %
Other consumer205 132 73 55 %
Total nonaccrual loans165,882 102,874 63,008 61 %
OREO, net30,400 11,141 19,259 173 %
Total nonperforming assets$196,282 $114,015 $82,267 72 %
Nonperforming assets to total assets
0.27 %0.16 %
Nonaccrual loans to loans held-for-investment
0.31 %0.20 %
Allowance for loan losses to nonaccrual loans412.22 %650.06 %

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 2023 Form 10-K.

Nonaccrual loans were $166 million as of June 30, 2024, an increase of $63 million or 61% from $103 million as of December 31, 2023. This change reflects increases across C&I, single-family residential, construction and CRE nonaccrual loans. As of June 30, 2024, $52 million or 31% of nonaccrual loans were less than 90 days delinquent. In comparison, $40 million or 39% of nonaccrual loans were less than 90 days delinquent as of December 31, 2023.

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The following table presents the accruing loans past due by portfolio segment as of June 30, 2024 and December 31, 2023:
Total Accruing Past Due Loans (1)
ChangePercentage of Total Loans Outstanding
($ in thousands)June 30,
2024		December 31,
2023		$%June 30,
2024		December 31,
2023
Commercial:
C&I$22,361 $35,649 $(13,288)(37)%0.13 %0.21 %
CRE:
CRE12,522 3,517 9,005 256 %0.09 %0.02 %
Multifamily residential
891 597 294 49 %0.02 %0.01 %
Construction and land
— 13,251 (13,251)(100)%— %2.00 %
Total CRE
13,413 17,365 (3,952)(23)%0.07 %0.08 %
Total commercial
35,774 53,014 (17,240)(33)%0.10 %0.14 %
Consumer:
Residential mortgage:
Single-family residential
42,134 45,228 (3,094)(7)%0.31 %0.34 %
HELOCs18,455 21,492 (3,037)(14)%1.05 %1.25 %
Total residential mortgage
60,589 66,720 (6,131)(9)%0.39 %0.44 %
Other consumer243 3,265 (3,022)(93)%0.43 %5.41 %
Total consumer
60,832 69,985 (9,153)(13)%0.39 %0.46 %
Total
$96,606 $122,999 $(26,393)(21)%0.18 %0.24 %
(1)There were no accruing loans past due 90 days or more as of both June 30, 2024 and December 31, 2023.

Allowance for Credit Losses

The Company maintains its 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 2023 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 June 30, 2024 and December 31, 2023:
June 30, 2024December 31, 2023
($ in thousands)Allowance Allocation% of Loan Type to Total LoansAllowance Allocation% of Loan Type to Total Loans
Allowance for loan losses
Commercial:
C&I$379,984 32 %$392,685 32 %
CRE:
CRE194,794 28 %170,592 28 %
Multifamily residential40,254 10 %34,375 10 %
Construction and land14,322 1 %10,469 1 %
Total CRE249,370 39 %215,436 39 %
Total commercial629,354 71 %608,121 71 %
Consumer:
Residential mortgage:
Single-family residential49,523 26 %55,018 26 %
HELOCs3,340 3 %3,947 3 %
Total residential mortgage52,863 29 %58,965 29 %
Other consumer1,577 0 %1,657 0 %
Total consumer54,440 29 %60,622 29 %
Total allowance for loan losses$683,794 100 %$668,743 100 %
Allowance for unfunded credit commitments$38,783 $37,699 
Total allowance for credit losses$722,577 $706,442 
Loans held-for-investment$52,767,909 $52,210,782 
Allowance for loan losses to loans held-for-investment1.30 %1.28 %
Three Months Ended June 30,Six Months Ended June 30,
2024202320242023
Average loans held-for-investment$51,916,328 $48,849,453 $51,920,323 $48,498,735 
Annualized net charge-offs to average loans held-for-investment
0.18 %0.06 %0.18 %0.03 %

Second quarter of 2024 net charge-offs were $23 million, or annualized 0.18% of average loans held-for-investment, compared with net charge-offs of $8 million, or annualized 0.06% of average loans held-for-investment for the second quarter of 2023. First half of 2024 net charge-offs were $46 million, or annualized 0.18% of average loans held-for-investment, compared with net charge-offs of $8 million, or annualized 0.03% of average loans held-for-investment for the first half of 2023. These increases in net charge-offs were primarily driven by higher losses in the C&I and CRE portfolios.

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 ROC 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 liquidity management practices have been effective under normal operating and stressed market conditions.

The Company also maintains a Contingency Funding Plan that provides an early-warning methodology to detect liquidity problems and provide a timely response. The Contingency Funding 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 Contingency Funding Plan, which include metrics for measuring the Company’s internal liquidity status as well as company-specific and market-wide external factors. When early-warning signals are detected, the ALCO is informed, and the problem is evaluated for severity. The ALCO will approve 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 $60.0 billion as of June 30, 2024, compared with $56.1 billion as of December 31, 2023. The Company’s loan-to-deposit ratio was 88% as of June 30, 2024, compared with 93% as of December 31, 2023.

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”), 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 and the FRBSF discount window as collateral. The Company has established operational procedures to enable borrowing against these assets, including regular monitoring of the total pool of loans and debt securities eligible as collateral. Eligibility of collateral is defined in guidelines from the FHLB and FRBSF and is subject to change at their discretion. 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 collateralized borrowing capacity as of June 30, 2024 and December 31, 2023:
Change
($ in thousands)June 30, 2024December 31, 2023$%
Cash and cash equivalents$4,365,691 $4,614,984 $(249,293)(5)%
Interest-bearing deposits with banks24,530 10,498 14,032 134 %
Collateralized borrowing capacity:
FHLB8,301,613 12,373,002 (4,071,389)(33)%
FRBSF12,076,988 9,830,769 2,246,219 23 %
Unpledged available securities5,843,564 1,988,526 3,855,038 194 %
Total$30,612,386 $28,817,779 $1,794,607 6 %

The Company’s cash and cash equivalents and collateralized borrowing capacity totaled $30.6 billion as of June 30, 2024, compared with $28.8 billion as of December 31, 2023. The increase was primarily related to an increase in available borrowing capacity at the FRBSF due to the repayment of BTFP borrowings, and an increase in unpledged available securities. This increase was partially offset by a decrease in available borrowing capacity at the FHLB, primarily due to the increase in FHLB advances during the first quarter of 2024.

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Liquidity Risk — Cash Requirements. In the ordinary course of business, the Company enters contractual obligations that require future cash payments, including funding for customer deposit withdrawals, repayments for short- and long-term borrowings, and other cash commitments. For additional information on these obligations, see Note 9 — Deposits to the Consolidated Financial Statements in the Company’s 2023 Form 10-K, and Note 8 — Affordable Housing Partnership, Tax Credit and Community Reinvestment Act Investments, Net 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 June 30, 2024 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 six months ended June 30, 2024 and 2023. 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 2023 Form 10-K. East West held $303 million and $446 million in cash and cash equivalents as of June 30, 2024 and December 31, 2023, respectively. Management believes that East West has sufficient cash and cash equivalents to meet the projected cash obligations for the coming year.

Liquidity Risk — Liquidity Stress Testing. The Company utilizes liquidity stress analysis to determine the appropriate amounts of liquidity to maintain at the Company, foreign subsidiary and foreign branch to meet contractual and contingent cash outflows under a range of scenarios. Scenario analyses include assumptions about significant changes in key funding sources, market triggers, potential uses of funding and economic conditions in certain countries. In addition, Company specific events are incorporated into the stress testing. Liquidity stress tests are conducted to ascertain potential mismatches between liquidity sources and uses over various time horizons and under a variety of stressed conditions. Given the range of potential stresses, the Company maintains contingency funding plans on a consolidated basis and for individual entities.

As of June 30, 2024, 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 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 2023 Form 10-K.

Market Risk Management

Market risk refers to the risk of potential loss due to adverse movements in market risk factors, including interest rates, foreign exchange rates, commodity prices, and credit spreads. The Company is primarily exposed to interest rate risk through its core business activities of extending loans and acquiring deposits. There have been no significant changes in our risk management practices as described in Item 7. MD&A — Market Risk Management in the Company’s 2023 Form 10-K.

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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.

In June 2024, the Company assumed a weighted-average beta of 52.3% for total deposits, an increase of approximately 1.7% from December 31, 2023, which was due to deposit product mix changes as product level deposit beta assumptions were not updated. The Company updated the deposit mix assumptions in March 2024 to assume that noninterest-bearing deposits would migrate to interest-bearing certificates of deposit (“CDs”). The updated assumptions reduced the proportion of noninterest-bearing deposits for the base case and decreasing interest rate scenarios, and reduced the repricing speed of the CD portfolio to better reflect its maturity profile. In June 2024, the repricing speed of the CD portfolio was updated to maintain the existing maturity profile due to deposit mix changes from interest rate shocks.

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 2023, the Company updated its version of the vendor prepayment model to better support the transition from London Interbank Offered Rate to Secured Overnight Financing Rate (“SOFR”) indexed loans and updated tuning factors to slow prepayment speeds on single-family residential mortgages to better align them with actual and expected prepayments.

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 June 30, 2024 and December 31, 2023, 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.
Net Interest Income Volatility (1)
Change in Interest Rates (in bps)June 30, 2024December 31, 2023
+2000.3 %1.3 %
+1000.7 %1.2 %
-100(2.5)%(1.8)%
-200(5.1)%(4.1)%
(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 for rising rate scenarios and increased for decreasing rate scenarios as of June 30, 2024. This change reflects deposit product mix assumptions, which assume noninterest-bearing deposits decrease in higher interest rate environments and are replaced with term deposit products.

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.
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Net Interest Income Volatility
Change in Interest Rates (in bps)June 30, 2024December 31, 2023
+200 Rate Ramp1.8 %0.8 %
+100 Rate Ramp1.0 %0.5 %
-100 Rate Ramp(1.5)%(0.6)%
-200 Rate Ramp(3.2)%(1.3)%

As of June 30, 2024, 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 June 30, 2024, the Company designated interest rate contracts with a notional amount of $5.3 billion as cash flow hedges, which reduced net interest income volatility by approximately 1.5% of the base net interest income for every 100 bps change in interest rate.

A majority of the Company’s deposit portfolio is 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.

Economic Value of Equity at Risk

Economic value of equity (“EVE”) is a cash flow calculation that takes the present value of all asset cash flows and subtracts the present value of all liability cash flows. This calculation is used for asset/liability management and measures changes in the economic value of the bank’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 June 30, 2024 and December 31, 2023. The non-parallel shift scenarios were calibrated internally based on historical analysis.
EVE Volatility (1)
Change in Interest Rates (in bps)June 30, 2024December 31, 2023
+200 (11.1)%(10.3)%
+100(5.3)%(5.4)%
-1002.8 %3.0 %
-2005.8 %6.0 %
(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 June 30, 2024, the Company’s EVE is expected to decrease when interest rates rise. The change in EVE sensitivity was due to changes in the structure of the balance sheet as well as changes in the underlying valuations and durations of assets and liabilities.

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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 U.S. dollar equivalent value of a designated monetary amount of the Company’s net investment in East West Bank (China) Limited. Prior to entering any hedge accounting activity, the Company analyzes the costs and benefits of the hedge in comparison to alternative strategies. The Company also repositions its hedging derivatives portfolio based on the current assessment of economic and financial conditions, including the interest rate and foreign currency environments, balance sheet composition and trends, and the relative mix of its cash and derivative positions.

In addition, the Company enters into derivative transactions in order to accommodate its customers with their business needs or to assist customers with their risk management objectives, such as managing exposure to fluctuations in interest rates, foreign currencies and commodity prices. To economically hedge against the derivative contracts entered into with the Company’s customers, the Company enters into offsetting derivative contracts with third-party financial institutions, some of which are cleared through central clearing organizations. The exposures from derivative transactions are collateralized by cash and/or eligible securities based on limits as set forth in the respective agreements between the Company and counterparty financial institutions. The 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 third-party financial institutions 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 June 30, 2024, the Company anticipates performance by its counterparties and has not incurred any related credit losses.

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The following table summarizes certain information on derivative instruments designated as accounting hedges and utilized by the Company in its management of interest rate and foreign currency risks as of June 30, 2024 and December 31, 2023:
June 30, 2024December 31, 2023
($ in thousands)
Interest Rate Contracts Hedging Loans (1)(2)(3)
Interest Rate Contracts Hedging Loans (1)(2)(3)
Cash flow hedges
Notional amount$4,000,000 $4,000,000 
Weighted-average:
Receive rate4.95 %4.95 %
Pay rate7.31 %7.32 %
Remaining term (in months)29.8 35.8 
($ in thousands)Foreign Exchange ContractsForeign Exchange Contracts
Net investment hedges
Notional amount$— $81,480
Hedged percentage (4)
— %44 %
Remaining term (in months)— 2.7 
(1)Represents receive-fixed/pay-floating interest rate swaps and excludes interest rate collars. Floating rates paid are based on SOFR or Prime.
(2)Excludes interest rate collars in total notional amount of $250 million as of both June 30, 2024 and December 31, 2023.
(3)Excludes forward-starting swaps in total notional amount of $1.0 billion not effective as of both June 30, 2024 and December 31, 2023.
(4)Represents percentage between the notional of outstanding foreign exchange contracts and the net RMB exposure from East West Bank (China) Limited. The Company does not have active net investment hedges as of June 30, 2024.

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 2023 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 2023 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 2023 Form 10-K.

100

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 adjusted diluted EPS, return on average TCE, adjusted efficiency ratio, and tangible book value per share. Certain additional non-GAAP financial measures that are components of the foregoing non-GAAP financial measures are also set forth and reconciled in the table below. The Company believes these non-GAAP financial measures, when taken together with the corresponding U.S. GAAP financial measures, provide meaningful supplemental information regarding its performance, and allow comparability to prior periods. These non-GAAP financial measures may be different from non-GAAP financial measures used by other companies, limiting their usefulness for comparison purposes.

The following tables present the reconciliations of U.S. GAAP to non-GAAP financial measures for the periods presented:
Three Months Ended June 30,Six Months Ended June 30,
($ and shares in thousands, except per share data)2024202320242023
Net income(a)$288,230 $312,031 $573,305 $634,470 
Add: FDIC charge (1)
1,880 — 12,185 — 
 Write-off of AFS debt security (2)
— — — 10,000 
Tax effect of adjustment (3)
(556)— (3,602)(2,929)
Adjusted net income (non-GAAP)(b)$289,554 $312,031 $581,888 $641,541 
Diluted weighted-average number of shares outstanding(c)139,801 141,876 140,047 141,910 
Diluted EPS(a)/(c)2.06 2.20 4.09 4.47 
Add: FDIC charge (1)
0.01 — 0.06 — 
 Write-off of AFS debt security (2)
— — — 0.05 
Adjusted diluted EPS (non-GAAP)(b)/(c)$2.07 $2.20 $4.15 $4.52 
Three Months Ended June 30,Six Months Ended June 30,
($ in thousands)2024202320242023
Net income(a)$288,230 $312,031 $573,305 $634,470 
Add: Amortization of core deposit intangibles— 440 — 881 
  Amortization of mortgage servicing assets332 342 640 698 
Tax effect of amortization adjustments (3)
(98)(230)(189)(463)
Tangible net income (non-GAAP)(b)$288,464 $312,583 $573,756 $635,586 
Average stockholders’ equity(c)$7,087,500 $6,440,996 $7,040,029 $6,312,872 
Less: Average goodwill(465,697)(465,697)(465,697)(465,697)
  Average other intangible assets (4)
(6,110)(6,921)(6,292)(7,306)
Average tangible book value (non-GAAP)(d)$6,615,693 $5,968,378 $6,568,040 $5,839,869 
ROE (5)
(a)/(c)16.36 %19.43 %16.38 %20.27 %
Return on average TCE (5) (non-GAAP)
(b)/(d)17.54 %21.01 %17.57 %21.95 %
101

Three Months Ended June 30,Six Months Ended June 30,
($ in thousands)2024202320242023
Net interest income before provision for credit losses(a)$553,229 $566,746 $1,118,368 $1,166,607 
Total noninterest income84,673 78,631 163,661 138,609 
Total revenue(b)$637,902 $645,377 $1,282,029 $1,305,216 
Noninterest income84,673 78,631 163,661 138,609 
Add: Write-off of AFS debt security (2)
— — — 10,000 
Adjusted noninterest income (non-GAAP)(c)84,673 78,631 163,661 148,609 
Adjusted revenue (non-GAAP)(a)+(c)=(d)$637,902 $645,377 $1,282,029 $1,315,216 
Total noninterest expense
(e)$236,434 $261,789 $483,309 $480,236 
Less: Amortization of tax credit and CRA investments
(16,052)(55,914)(29,259)(66,024)
 Amortization of core deposit intangibles— (440)— (881)
 FDIC charge (1)
(1,880)— (12,185)— 
 Repurchase agreements’ extinguishment cost (6)
— — — (3,872)
Adjusted noninterest expense (non-GAAP)(f)$218,502 $205,435 $441,865 $409,459 
Efficiency ratio(e)/(b)37.06 %40.56 %37.70 %36.79 %
Adjusted efficiency ratio (non-GAAP)(f)/(d)34.25 %31.83 %34.47 %31.13 %
($ and shares in thousands, except per share data)June 30, 2024December 31, 2023
Stockholders’ equity(a)$7,215,114 $6,950,834 
Less: Goodwill
(465,697)(465,697)
  Other intangible assets (4)
(5,903)(6,602)
Tangible book value (non-GAAP)(b)$6,743,514 $6,478,535 
Number of common shares at period-end(c)138,604 140,027 
Book value per share(a)/(c)$52.06 $49.64 
Tangible book value per share (non-GAAP)(b)/(c)$48.65 $46.27 
(1)Represents the pre-tax FDIC charge recorded in Deposit insurance premiums and regulatory assessments on the Consolidated Statement of Income.
(2)Represents the pre-tax impairment related to an AFS debt security that was written-off in the first quarter of 2023.
(3)Applied statutory tax rate of 29.56% for the second quarter and first half of 2024 and 29.29% for the second quarter and first half of 2023.
(4)Includes core deposit intangibles and mortgage servicing assets.
(5)Annualized.
(6)Represents the debt extinguishment cost of $4 million on early prepayment of $300 million of repurchase agreements in the first quarter of 2023.

102

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

For quantitative and qualitative disclosures regarding market risk in the Company’s portfolio, see Note 6 — Derivatives to the Consolidated Financial Statements in this Form 10-Q and Item 2. MD&A — Risk Management — Market Risk Management in this Form 10-Q.

ITEM 4. CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

As of June 30, 2024, pursuant to Rule 13a-15(b) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), the Company conducted an evaluation, under the supervision and with the participation of the Company’s management, including the Chief Executive Officer and Chief Financial Officer, of the effectiveness of the Company’s disclosure controls and procedures (as defined in Rule 13a-15(e) of the Exchange Act). Based upon that evaluation, the Company’s Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures were effective as of June 30, 2024.

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

Change in Internal Control over Financial Reporting

There were no changes in the Company’s internal control over financial reporting (as defined in Rule 13a-15(f) of the Exchange Act) during the quarter ended June 30, 2024, that have materially affected or are reasonably likely to materially affect the Company’s internal control over financial reporting.

103

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 2023 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 2023 Form 10-K.
104

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

Repurchases of Equity Securities by the Issuer and Affiliated Purchasers

The following table summarizes the Company’s common stock repurchase activity during the second quarter of 2024:
Calendar Month
Total Number of Shares Purchased (1)
Average Price Paid per Share of Common StockTotal Number of Shares Purchased as Part of Publicly Announced Plans or Programs
Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs (in millions) (2)
April— $— — $89 
May350,725 $72.97 350,725 $64 
June209,920 $72.35 209,920 $49 
Second quarter560,645 $72.74 560,645 
(1)Excludes the repurchase of common stock pursuant to various stock compensation plans and agreements.
(2)On March 3, 2020, the Company’s Board of Directors authorized, and the Company announced, a stock repurchase program under which the Company may repurchase up to $500 million of its common stock. The stock repurchase authorization has no expiration date.

ITEM 5. OTHER INFORMATION
 
During the three months ended June 30, 2024, 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).

105

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 March 17, 2023 (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.INSThe instance document does not appear in the interactive data file because its XBRL tags are embedded within the inline XBRL document.
101.SCHInline XBRL Taxonomy Extension Schema Document. Filed herewith.
101.CALInline XBRL Taxonomy Extension Calculation Linkbase Document. Filed herewith.
101.DEFInline XBRL Taxonomy Extension Definition Linkbase Document. Filed herewith.
101.LABInline XBRL Taxonomy Extension Label Linkbase Document. Filed herewith.
101.PREInline XBRL Taxonomy Extension Presentation Linkbase Document. Filed herewith.
104Cover Page Interactive Data (formatted as Inline XBRL and contained in Exhibit 101 filed herewith). Filed herewith.
106

GLOSSARY OF ACRONYMS



AFSAvailable-for-saleGNMAGovernment National Mortgage Association
ALCOAsset/Liability CommitteeHELOCHome equity lines of credit
AML
Anti-money Laundering

HTMHeld-to-maturity
AOCIAccumulated other comprehensive incomeIARIndependent Asset Review
ASCAccounting Standards CodificationIDIInsured depository institution
ASUAccounting Standards UpdateLCHLondon Clearing House
BTFPBank Term Funding ProgramLGDLoss given default
C&ICommercial and industrialLTVLoan-to-value
CCDAAClimate Corporate Data Accountability ActMD&AManagement’s Discussion and Analysis of Financial Condition and Results of Operations
CDCertificate of depositMMBTUMillion British thermal unit
CECLCurrent expected credit lossesNAVNet asset value
CFT

Countering the Financing of Terrorism

NRSRONationally recognized statistical rating organizations
CLOCollateralized loan obligationsOREOOther real estate owned
CMEChicago Mercantile ExchangePAMProportional amortization method
CRACommunity Reinvestment ActPDProbability of default
CRFRAClimate-Related Financial Risk ActRMBChinese Renminbi
CRECommercial real estateROAReturn on average assets
DIFDeposit Insurance FundROCRisk Oversight Committee
EPSEarnings per shareROEReturn on average common equity
ERMEnterprise risk managementRPACredit risk participation agreement
EVEEconomic value of equityRSURestricted stock unit
FDICFederal Deposit Insurance CorporationSBLCStandby letters of credit
FHLBFederal Home Loan BankSECU.S. Securities and Exchange Commission
FRBSFFederal Reserve Bank of San FranciscoSOFRSecured Overnight Financing Rate
FTPFunds transfer pricingTCETangible Common Equity
GAAPGenerally Accepted Accounting PrinciplesU.S.United States
GDPGross Domestic ProductUSDU.S. dollar
GHGGreenhouse gas
__

107

SIGNATURE

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

Dated:August 8, 2024
EAST WEST BANCORP, INC.
(Registrant)
By
/s/ Christopher J. Del Moral-Niles
Christopher J. Del Moral-Niles
Executive Vice President and
Chief Financial Officer

108

What is the market capitalization of a company?

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In most cases it can be easily calculated by multiplying the share price with the amount of outstanding shares.

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