EAST WEST BANCORP INC - Quarter Report: 2021 March (Form 10-Q)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF

THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2021

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

THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number 000-24939

EAST WEST BANCORP, INC.

(Exact name of registrant as specified in its charter)

Delaware

(State or other jurisdiction of incorporation or organization)

95-4703316

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

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

(Address of principal executive offices) (Zip Code)

Registrant’s telephone number, including area code:

(626) 768-6000

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

Title of each class

Trading
Symbol(s)

Name of each exchange
on which registered

Common Stock, par value $0.001 per share

EWBC

The Nasdaq Global Select Market

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

Yes ☒ No ☐

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

Yes ☒ No ☐

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

Large accelerated filer

☒

Accelerated filer

☐

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

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

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

Yes ☐ No ☒

Number of shares outstanding of the issuer’s common stock on the latest practicable date: 141,863,399 shares as of April 30, 2021.

TABLE OF CONTENTS


			Page
PART I — FINANCIAL INFORMATION			3

	Item 1.	Consolidated Financial Statements	3
		Consolidated Balance Sheet (Unaudited)	3
		Consolidated Statement of Income (Unaudited)	4
		Consolidated Statement of Comprehensive Income (Unaudited)	5
		Consolidated Statement of Changes in Stockholders’ Equity (Unaudited)	6
		Consolidated Statement of Cash Flows (Unaudited)	7
		Notes to Consolidated Financial Statements (Unaudited)	9
		1 — Basis of Presentation	9
		2 — Current Accounting Developments	10
		3 — Fair Value Measurement and Fair Value of Financial Instruments	11
		4 — Assets Purchased under Resale Agreements and Sold under Repurchase Agreements	21
		5 — Securities	22
		6 — Derivatives	26
		7 — Loans Receivable and Allowance for Credit Losses	33
		8 — Investments in Qualified Affordable Housing Partnerships, Tax Credit and Other Investments, Net and Variable Interest Entities	43
		9 — Goodwill and Other Intangible Assets	45
		10 — Commitments and Contingencies	46


		11 — Stock Compensation Plans	47
		12 — Stockholders’ Equity and Earnings Per Share	49
		13 — Accumulated Other Comprehensive Income (Loss)	49
		14 — Business Segments	50
		15 — Subsequent Events	52

	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	53










	Item 3.	Quantitative and Qualitative Disclosures About Market Risk	104

	Item 4.	Controls and Procedures	104


PART II — OTHER INFORMATION			105

	Item 1.	Legal Proceedings	105
	Item 1A.	Risk Factors	105
	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	105



	Item 6.	Exhibits	106

GLOSSARY OF ACRONYMS			107

SIGNATURE			108

PART I — FINANCIAL INFORMATION

ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS

EAST WEST BANCORP, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEET

($ in thousands, except shares)

(Unaudited)



	March 31, 2021		December 31, 2020
	(Unaudited)
ASSETS
Cash and due from banks	$	582,270	$	592,117
Interest-bearing cash with banks	4,036,863		3,425,854
Cash and cash equivalents	4,619,133		4,017,971
Interest-bearing deposits with banks	741,923		809,728
Assets purchased under resale agreements (“resale agreements”)	2,160,038		1,460,000
Securities:
Available-for-sale (“AFS”) debt securities, at fair value (amortized cost of $7,904,546 in 2021 and $5,470,523 in 2020; includes assets pledged as collateral of $590,858 in 2021 and $588,484 in 2020)	7,789,213		5,544,658
Restricted equity securities, at cost	83,250		83,046
Loans held-for-sale	—		1,788
Loans held-for-investment (net of allowance for loan losses of $607,506 in 2021 and $619,983 in 2020; includes assets pledged as collateral of $23,591,704 in 2021 and $23,263,517 in 2020)	38,981,242		37,770,972
Investments in qualified affordable housing partnerships, net	284,862		213,555
Investments in tax credit and other investments, net	361,438		266,525
Premises and equipment (net of accumulated depreciation of $130,926 in 2021 and $127,884 in 2020)	102,120		103,251
Goodwill	465,697		465,697
Operating lease right-of-use assets	94,483		95,460
Other assets	1,190,747		1,324,262
TOTAL	$	56,874,146	$	52,156,913
LIABILITIES
Deposits:
Noninterest-bearing	$	18,919,298	$	16,298,301
Interest-bearing	30,627,838		28,564,451
Total deposits	49,547,136		44,862,752
Short-term borrowings	—		21,009

Federal Home Loan Bank (“FHLB”) advances	653,035		652,612
Assets sold under repurchase agreements (“repurchase agreements”)	300,000		300,000
Long-term debt and finance lease liabilities	152,195		151,739
Operating lease liabilities	101,828		102,830
Accrued expenses and other liabilities	834,925		796,796
Total liabilities	51,589,119		46,887,738
COMMITMENTS AND CONTINGENCIES (Note 10)
STOCKHOLDERS’ EQUITY
Common stock, $0.001 par value, 200,000,000 shares authorized; 167,716,333 and 167,240,600 shares issued in 2021 and 2020, respectively	168		167
Additional paid-in capital	1,865,933		1,858,352
Retained earnings	4,158,032		4,000,414
Treasury stock, at cost 25,873,297 shares in 2021 and 25,675,371 shares in 2020	(649,066)		(634,083)
Accumulated other comprehensive (loss) income (“AOCI”), net of tax	(90,040)		44,325
Total stockholders’ equity	5,285,027		5,269,175
TOTAL	$	56,874,146	$	52,156,913

See accompanying Notes to Consolidated Financial Statements.

EAST WEST BANCORP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF INCOME

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

(Unaudited)



	Three Months Ended March 31,
	2021		2020
INTEREST AND DIVIDEND INCOME
Loans receivable, including fees	$	342,008	$	411,869
AFS debt securities	29,100		20,142

Resale agreements	6,099		5,625
Restricted equity securities	547		446
Interest-bearing cash and deposits with banks	3,632		11,108
Total interest and dividend income	381,386		449,190
INTEREST EXPENSE
Deposits	21,822		76,403
Short-term borrowings	42		556
FHLB advances	3,069		4,166
Repurchase agreements	1,978		3,991
Long-term debt and finance lease liabilities	780		1,367
Total interest expense	27,691		86,483
Net interest income before provision for credit losses	353,695		362,707
Provision for credit losses	—		73,870
Net interest income after provision for credit losses	353,695		288,837
NONINTEREST INCOME
Lending fees	18,357		15,773
Deposit account fees	15,383		10,447
Interest rate contracts and other derivative income	16,997		7,073
Foreign exchange income	9,526		7,819
Wealth management fees	6,911		5,353
Net gains on sales of loans	1,781		950
Gains on sales of AFS debt securities	192		1,529


Other investment income	925		3,378
Other income	2,794		3,184
Total noninterest income	72,866		55,506
NONINTEREST EXPENSE
Compensation and employee benefits	107,808		101,960
Occupancy and equipment expense	15,922		17,076
Deposit insurance premiums and regulatory assessments	3,876		3,427
Deposit account expense	3,892		3,563
Data processing	4,478		3,826
Computer software expense	7,159		6,166
Consulting expense	1,475		1,217
Legal expense	1,502		3,197
Other operating expense	19,607		21,119
Amortization of tax credit and other investments	25,358		18,782

Total noninterest expense	191,077		180,333
INCOME BEFORE INCOME TAXES	235,484		164,010
INCOME TAX EXPENSE	30,490		19,186
NET INCOME	$	204,994	$	144,824
EARNINGS PER SHARE (“EPS”)
BASIC	$	1.45	$	1.00
DILUTED	$	1.44	$	1.00
WEIGHTED-AVERAGE NUMBER OF SHARES OUTSTANDING
BASIC	141,646		144,814
DILUTED	142,844		145,285

See accompanying Notes to Consolidated Financial Statements.

EAST WEST BANCORP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

($ in thousands)

(Unaudited)



	Three Months Ended March 31,
	2021		2020
Net income	$	204,994	$	144,824
Other comprehensive (loss) income, net of tax:
Net changes in unrealized (losses) gains on AFS debt securities	(133,448)		27,453
Net changes in unrealized gains on cash flow hedges	432		—
Foreign currency translation adjustments	(1,349)		(2,164)
Other comprehensive (loss) income	(134,365)		25,289
COMPREHENSIVE INCOME	$	70,629	$	170,113

See accompanying Notes to Consolidated Financial Statements.

EAST WEST BANCORP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY

($ in thousands, except shares)

(Unaudited)



	Common Stock and Additional Paid-in Capital			Retained Earnings		Treasury Stock		AOCI, Net of Tax		Total Stockholders’ Equity
	Shares	Amount
BALANCE, JANUARY 1, 2020	145,625,385	$	1,826,512	$	3,689,377	$	(479,864)	$	(18,408)	$	5,017,617
Cumulative-effect of change in accounting principle related to credit losses (1)	—	—		(97,967)		—		—		(97,967)
Net income	—	—		144,824		—		—		144,824
Other comprehensive income	—	—		—		—		25,289		25,289



Net activity of common stock pursuant to various stock compensation plans and agreements	281,396	7,272		—		(7,609)		—		(337)
Repurchase of common stock pursuant to the Stock Repurchase Program	(4,471,682)	—		—		(145,966)		—		(145,966)
Cash dividends on common stock ($0.275 per share)	—	—		(40,475)		—		—		(40,475)
BALANCE, MARCH 31, 2020	141,435,099	$	1,833,784	$	3,695,759	$	(633,439)	$	6,881	$	4,902,985
BALANCE, JANUARY 1, 2021	141,565,229	$	1,858,519	$	4,000,414	$	(634,083)	$	44,325	$	5,269,175

Net income	—	—		204,994		—		—		204,994
Other comprehensive income	—	—		—		—		(134,365)		(134,365)



Net activity of common stock pursuant to various stock compensation plans and agreements	277,807	7,582		—		(14,983)		—		(7,401)

Cash dividends on common stock ($0.330 per share)	—	—		(47,376)		—		—		(47,376)
BALANCE, MARCH 31, 2021	141,843,036	$	1,866,101	$	4,158,032	$	(649,066)	$	(90,040)	$	5,285,027

(1)Represents the impact of the adoption of Accounting Standards Update (“ASU”) 2016-13, Financial Instruments — Credit Losses (Topic 326) on January 1, 2020.

See accompanying Notes to Consolidated Financial Statements.

EAST WEST BANCORP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF CASH FLOWS

($ in thousands)

(Unaudited)



	Three Months Ended March 31,
	2021		2020
CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$	204,994	$	144,824
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	37,490		31,186
Amortization of premiums and accretion of discount , net	5,770		(4,519)
Stock compensation costs	7,817		7,209
Deferred income tax benefit	224		28
Provision for credit losses	—		73,870
Net gains on sales of loans	(1,781)		(950)
Gains on sales of AFS debt securities	(192)		(1,529)


Loans held-for-sale:
Originations and purchases	(5,718)		(5,802)
Proceeds from sales and paydowns/payoffs of loans originally classified as held-for-sale	7,644		4,657


Proceeds from distributions received from equity method investees	2,505		973
Net change in accrued interest receivable and other assets	185,677		(462,766)
Net change in accrued expenses and other liabilities	(72,935)		304,680
Other net operating activities	20		(158)
Total adjustments	166,521		(53,121)
Net cash provided by operating activities	371,515		91,703
CASH FLOWS FROM INVESTING ACTIVITIES
Net (increase) decrease in:
Investments in qualified affordable housing partnerships, tax credit and other investments	(52,756)		(27,581)
Interest-bearing deposits with banks	29,000		(115,419)
Resale agreements:
Proceeds from paydowns and maturities	223,952		250,000
Purchases	(923,990)		—
AFS debt securities:
Proceeds from sales	46,397		306,463
Proceeds from repayments, maturities and redemptions	473,808		308,620
Purchases	(2,969,640)		(987,130)
Loans held-for-investment:
Proceeds from sales of loans originally classified as held-for-investment	147,115		110,945
Purchases	(311,030)		(133,185)
Other changes in loans held-for-investment, net	(1,046,727)		(1,116,358)


Purchases of premises and equipment	(1,563)		(916)




Proceeds from distributions received from equity method investees	2,832		374

Other net investing activities	(1,307)		(1,143)
Net cash used in investing activities	(4,383,909)		(1,405,330)

See accompanying Notes to Consolidated Financial Statements.

EAST WEST BANCORP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF CASH FLOWS

($ in thousands)

(Unaudited)

(Continued)



	Three Months Ended March 31,
	2021		2020

















































CASH FLOWS FROM FINANCING ACTIVITIES
Net increase in deposits	4,559,929		1,374,287
Net (decrease) increase in short-term borrowings	(21,143)		39,962



Repayment of FHLB advances	—		(99,999)






Repayment of long-term debt and lease liabilities	(315)		(289)
Common stock:
Repurchase of common stocks pursuant to the Stock Repurchase Program	—		(145,966)

Stocks tendered for payment of withholding taxes	(14,983)		(7,609)
Cash dividends paid	(48,213)		(41,358)
Net cash provided by financing activities	4,475,275		1,119,028
Effect of exchange rate changes on cash and cash equivalents	138,281		13,492
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS	601,162		(181,107)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD	4,017,971		3,261,149
CASH AND CASH EQUIVALENTS, END OF PERIOD	$	4,619,133	$	3,080,042

SUPPLEMENTAL CASH FLOW INFORMATION
Cash paid during the period for:
Interest	$	29,680	$	88,520
Income taxes, net	$	—	$	2,904
Noncash investing and financing activities:

Loans transferred from held-for-investment to held-for-sale	$	145,872	$	110,223




Loans transferred to other real estate owned (“OREO”) and other nonperforming assets	$	10,360	$	23,394

See accompanying Notes to Consolidated Financial Statements.

EAST WEST BANCORP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 1 — Basis of Presentation

East West Bancorp, Inc. (referred to herein on an unconsolidated basis as “East West” and on a consolidated basis as the “Company”) is a registered bank holding company that offers a full range of banking services to individuals and businesses through its subsidiary bank, East West Bank and its subsidiaries (“East West Bank” or the “Bank”). The unaudited interim Consolidated Financial Statements in this Quarterly Report on Form 10-Q (“this Form 10-Q”) include the accounts of East West, East West Bank and East West’s subsidiaries. Intercompany transactions and accounts have been eliminated in consolidation. As of March 31, 2021, East West also has six wholly owned subsidiaries that are statutory business trusts (the “Trusts”). In accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 810, Consolidation, the Trusts are not included on the Consolidated Financial Statements.

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

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

Note 2 — Current Accounting Developments

New Accounting Pronouncements Adopted


Standard	Required Date of Adoption	Description	Effect on Financial Statements
Standards Adopted in 2021
ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting and subsequent related ASU 2021-01, Reference Rate Reform (Topic 848): Scope	Effective for all entities from the dates of issuance through December 31, 2022.	In March 2020, the FASB issued an ASU related to contracts or hedging relationships that reference London Interbank Offered Rate (“LIBOR”) or other reference rates that are expected to be discontinued due to reference rate reform. This ASU provides temporary optional expedients and exceptions regarding the accounting requirements related to the modification of certain contracts, hedging relationships and other transactions that are affected by the reference rate reform. The guidance permits the Company to make a one-time election to sell and/or transfer qualifying held-to-maturity securities, and not to apply modification accounting or remeasure lease payments in lease contracts if the changes to the contract are related to the discontinuation of the reference rate. If certain criteria are met, the amendments also allow exceptions to the de-designation criteria of the hedging relationships and the assessment of hedge effectiveness during the transition period. This one time election may be made at any time after March 12, 2020, but no later than December 31, 2022. In January 2021, the FASB issued ASU 2021-01 as subsequent amendments, which expanded the scope of Topic 848 to include all affected derivatives and clarified certain optional expedients and exceptions regarding the hedge accounting for derivative contracts affected by the discounting transition. The amendments of this guidance could be elected retrospectively or prospectively to new modifications made on or after the date of issuance of this ASU, January 7, 2021.	The Company adopted this guidance on a prospective basis in January 2021. At the time of adoption, the guidance did not have a material impact on the Company’s Consolidated Financial Statements. The Company will continue to track the exposure as of each reporting period and to assess the impact as the reference rate transition occurs through the cessation of LIBOR.
ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes	January 1, 2021 Early adoption is permitted on January 1, 2020.	This ASU simplifies the accounting for income taxes by removing certain exceptions to the existing guidance. This includes removing exceptions to: 1) the incremental approach for intraperiod tax allocation, 2) the requirement to recognize a deferred tax liability for equity method investments when a foreign subsidiary becomes an equity method investment, 3) the ability not to recognize a deferred tax liability when a foreign equity method investment becomes a subsidiary, and 4) the general methodology for calculating income taxes in an interim period when a year-to-date loss exceeds the anticipated loss for the year. In addition, this ASU simplifies the accounting for income taxes related to franchise taxes, the tax basis of goodwill and the method for recognizing an enacted change in tax laws. This ASU also specifies that an entity is not required to allocate the consolidated amount of tax expense to a legal entity that is not subject to tax in its separate financial statements. This ASU also makes improvements in the accounting for income taxes related to employee stock ownership plans and equity method investments in qualified affordable housing projects. This guidance should be applied on either a retrospective, modified retrospective or prospective basis depending on the amendments.	The Company adopted this guidance in January 2021 using the transition guidance prescribed by this ASU. At the time of adoption, this guidance did not have a material impact on the Company’s Consolidated Financial Statements.

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

Fair Value Determination

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

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

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

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

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

Assets and Liabilities Measured at Fair Value on a Recurring Basis

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

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

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

When pricing is unavailable from third-party pricing service providers for certain securities, the Company requests market quotes from various independent external brokers and utilizes the average quoted market prices. These valuations are based on observable inputs in the current marketplace and are classified as Level 2. The Company periodically communicates with the independent external brokers to validate their pricing methodology. Information such as pricing sources, pricing assumptions, data inputs and valuation technique are reviewed.

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

Interest Rate Contracts — The Company enters into interest rate swap and option contracts that are not designated as hedging instruments with its borrowers to lock in attractive intermediate and long-term interest rates, resulting in the customer obtaining a synthetic fixed-rate loan. To economically hedge against the interest rate risks in the products offered to its customers, the Company enters into mirrored offsetting interest rate contracts with third-party financial institutions. The Company also enters into interest rate swap contracts with institutional counterparties to hedge against certain variable interest rate borrowings. These interest rate swap contracts with institutional counterparties were designated as cash flow hedges. The fair value of the interest rate swaps is determined using the market standard methodology of netting the discounted future fixed cash payments (or receipts) and the discounted expected variable cash receipts (or payments). The fair value of the interest rate options, which consist of floors and caps, is determined using the market standard methodology of discounting the future expected cash receipts that would occur if variable interest rates fall below (rise above) the strike rate of the floors (caps). In addition, to comply with the provisions of ASC 820, Fair Value Measurement, the Company incorporates credit valuation adjustments to appropriately reflect both its own nonperformance risk and the respective counterparty’s nonperformance risk in the fair value measurements of its derivatives. The credit valuation adjustments associated with the Company’s derivatives utilize model-derived credit spreads, which are Level 3 inputs. As of March 31, 2021 and December 31, 2020, the Company has assessed the significance of the impact of the credit valuation adjustments on the overall valuation of these interest rate contracts and has determined that the credit valuation adjustments were not significant to the overall valuation of its derivative portfolios. The Company classifies these derivative instruments as Level 2 due to the observable nature of the significant inputs utilized.

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

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

Equity Contracts — As part of the loan origination process, the Company periodically obtains warrants to purchase preferred and/or common stock of technology and life sciences companies to which it provides loans. As of March 31, 2021, the warrants included on the Consolidated Financial Statements were only from private companies. As of December 31, 2020, the warrants included on the Consolidated Financial Statements were from both public and private companies. The Company values these warrants based on the Black-Scholes option pricing model. For warrants from public companies, the model uses the underlying stock price, stated strike price, warrant expiration date, risk-free interest rate based on a duration-matched U.S. Treasury rate, and market-observable company-specific option volatility as inputs to value the warrants. Due to the observable nature of the inputs used in deriving the estimated fair value, warrants from public companies are classified as Level 2. For warrants from private companies, the model uses inputs such as the offering price observed in the most recent round of funding, stated strike price, warrant expiration date, risk-free interest rate based on duration-matched U.S. Treasury rate and option volatility. The Company applies proxy volatilities based on the industry sectors of the private companies. The model values are then adjusted for a general lack of liquidity due to the private nature of the underlying companies. Since both option volatility and liquidity discount assumptions are subject to management’s judgment, measurement uncertainty is inherent in the valuation of private companies’ warrants. Due to the unobservable nature of the option volatility and liquidity discount assumptions used in deriving the estimated fair value, warrants from private companies are classified as Level 3. Given that the Company holds long positions in all warrants, an increase in volatility assumption would generally result in an increase in fair value. A higher liquidity discount would generally result in a decrease in fair value. On a quarterly basis, the changes in the fair value of warrants from private companies are reviewed for reasonableness, and a measurement uncertainty analysis on the option volatility and liquidity discount assumptions is performed.

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

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



($ in thousands)	Assets and Liabilities Measured at Fair Value on a Recurring Basis as of March 31, 2021
	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total Fair Value
AFS debt securities:
U.S. Treasury securities	$	826,342	$	—	$	—	$	826,342
U.S. government agency and U.S. government-sponsored enterprise debt securities	—		1,194,005		—		1,194,005
U.S. government agency and U.S. government-sponsored enterprise mortgage-backed securities:
Commercial mortgage-backed securities	—		1,169,391		—		1,169,391
Residential mortgage-backed securities	—		2,247,406		—		2,247,406
Municipal securities	—		420,065		—		420,065
Non-agency mortgage-backed securities:
Commercial mortgage-backed securities	—		281,027		—		281,027
Residential mortgage-backed securities	—		523,500		—		523,500
Corporate debt securities	—		496,643		—		496,643
Foreign government bonds	—		276,328		—		276,328
Asset-backed securities	—		63,040		—		63,040
Collateralized loan obligations (“CLOs”)	—		291,466		—		291,466
Total AFS debt securities	$	826,342	$	6,962,871	$	—	$	7,789,213

Investments in tax credit and other investments:
Equity securities (1)	$	22,233	$	4,460	$	—	$	26,693
Total investments in tax credit and other investments	$	22,233	$	4,460	$	—	$	26,693

Derivative assets:
Interest rate contracts	$	—	$	319,049	$	—	$	319,049
Foreign exchange contracts	—		39,562		—		39,562
Credit contracts	—		5		—		5
Equity contracts	—		—		272		272
Commodity contracts	—		98,429		—		98,429
Gross derivative assets	$	—	$	457,045	$	272	$	457,317
Netting adjustments (2)	$	—	$	(108,235)	$	—	$	(108,235)
Net derivative assets	$	—	$	348,810	$	272	$	349,082

Derivative liabilities:
Interest rate contracts	$	—	$	230,290	$	—	$	230,290
Foreign exchange contracts	—		27,287		—		27,287
Credit contracts	—		153		—		153
Commodity contracts	—		86,405		—		86,405
Gross derivative liabilities	$	—	$	344,135	$	—	$	344,135
Netting adjustments (2)	$	—	$	(186,687)	$	—	$	(186,687)
Net derivative liabilities	$	—	$	157,448	$	—	$	157,448

(1)Equity securities consist of mutual funds with readily determinable fair values. The Company invested in these mutual funds for CRA purposes.

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



($ in thousands)	Assets and Liabilities Measured at Fair Value on a Recurring Basis as of December 31, 2020
	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total Fair Value
AFS debt securities:
U.S. Treasury securities	$	50,761	$	—	$	—	$	50,761
U.S. government agency and U.S. government-sponsored enterprise debt securities	—		814,319		—		814,319
U.S. government agency and U.S. government-sponsored enterprise mortgage-backed securities:
Commercial mortgage-backed securities	—		1,153,770		—		1,153,770
Residential mortgage-backed securities	—		1,660,894		—		1,660,894
Municipal securities	—		396,073		—		396,073
Non-agency mortgage-backed securities:
Commercial mortgage-backed securities	—		239,842		—		239,842
Residential mortgage-backed securities	—		289,775		—		289,775
Corporate debt securities	—		405,968		—		405,968
Foreign government bonds	—		182,531		—		182,531
Asset-backed securities	—		63,231		—		63,231
CLOs	—		287,494		—		287,494
Total AFS debt securities	$	50,761	$	5,493,897	$	—	$	5,544,658

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

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

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

(1)Equity securities consist of mutual funds with readily determinable fair values. The Company invested in these mutual funds for CRA purposes.

For the three months ended March 31, 2021 and 2020, Level 3 fair value measurements that were measured on a recurring basis consisted of warrants issued by private companies. The following table provides a reconciliation of the beginning and ending balances of these equity warrants for the three months ended March 31, 2021 and 2020:



($ in thousands)	Three Months Ended March 31,
	2021		2020
Equity Contracts
Beginning balance	$	273	$	421

Total (losses) gains included in earnings (1)	(1)		292








Ending balance	$	272	$	713

(1)Includes unrealized (losses) gains of $(1) thousand and $292 thousand for the three months ended March 31, 2021 and 2020, respectively. The realized/unrealized gains (losses) of equity warrants are included in Lending fees on the Consolidated Statement of Income.

The following table presents quantitative information about the significant unobservable inputs used in the valuation of Level 3 fair value measurements as of March 31, 2021 and December 31, 2020, respectively. The significant unobservable inputs presented in the table below are those that the Company considers significant to the fair value of the Level 3 assets. The Company considers unobservable inputs to be significant if, by their exclusion, the fair value of the Level 3 assets would be impacted by a predetermined percentage change.



($ in thousands)	Fair Value Measurements (Level 3)		Valuation Technique	Unobservable Inputs	Range of Inputs	Weighted- Average (1)
March 31, 2021
Derivative assets:
Equity contracts	$	272	Black-Scholes option pricing model	Equity volatility	48% — 56%	52%
				Liquidity discount	47%	47%
December 31, 2020
Derivative assets:
Equity contracts	$	273	Black-Scholes option pricing model	Equity volatility	46% — 61%	53%
				Liquidity discount	47%	47%

(1)Weighted-average is calculated based on the fair value of equity warrants as of March 31, 2021 and December 31, 2020.

Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis

Assets measured at fair value on a nonrecurring basis include certain individually evaluated loans held-for-investment, investments in qualified affordable housing partnerships, tax credit and other investments, OREO, loans held-for-sale, and other nonperforming assets. Nonrecurring fair value adjustments result from impairment on certain individually evaluated loans held-for-investment and investments in qualified affordable housing partnerships, tax credit and other investments, write-downs of OREO and other nonperforming assets, or from the application of lower of cost or fair value on loans held-for-sale.

Individually Evaluated Loans Held-For-Investment — Individually evaluated loans held-for-investment are classified as Level 3 assets. The following two methods are used to derive the fair value of individually evaluated loans held-for-investment:

•Discounted cash flow valuation techniques that consist of developing an expected stream of cash flows over the life of the loans, and then calculating the present value of the loans by discounting the expected cash flows at a designated discount rate.

•When an individually evaluated loan is collateral-dependent, the fair value of the loan is determined based on the fair value of the underlying collateral, which may take the form of real estate, inventory, equipment, contracts or guarantees. The fair value of the underlying collateral is generally based on third-party appraisals, or an internal valuation if a third-party appraisal is not required by regulations, or unavailable. An internal valuation utilizes one or more valuation techniques such as the income, market and/or cost approaches.

Investments in Qualified Affordable Housing Partnerships, Tax Credit and Other Investments, Net — The Company conducts due diligence on its investments in qualified affordable housing partnerships, tax credit and other investments prior to the initial investment date and through the placed-in-service date. After these investments are either acquired or placed into service, the Company continues its periodic monitoring process, which includes the quarterly review of the financial statements, the annual review of tax returns of the investment entity, the annual review of the financial statements of the guarantor (if any) and a comparison of the actual performance of the investment against the financial projections prepared at the time when the investment was made. The Company assesses its tax credit and other investments for possible other-than-temporary impairment (“OTTI”) on an annual basis or when events or circumstances suggest that the carrying amount of the investments may not be realizable. These circumstances can include, but are not limited to the following factors:

•expected future cash flows that are less than the carrying amount of the investment;

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

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

All available evidence is considered in assessing whether a decline in value is other-than-temporary. Generally, none of the aforementioned factors are individually conclusive and the relative importance placed on individual facts may vary depending on the situation. In accordance with ASC 323-10-35-32, an impairment charge would only be recognized in earnings for a decline in value that is determined to be other-than-temporary.

Other Real Estate Owned — The Company’s OREO represents properties acquired through foreclosure, or through full or partial satisfaction of loans held-for-investment. These OREO properties are recorded at estimated fair value less the costs to sell at the time of foreclosure and at the lower of cost or estimated fair value less the costs to sell subsequent to acquisition. On a monthly basis, the current fair market value of each OREO property is reviewed to ensure that the current carrying value is appropriate. OREO properties are classified as Level 3.

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

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



($ in thousands)	Assets Measured at Fair Value on a Nonrecurring Basis as of March 31, 2021
	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Fair Value Measurements
Loans held-for-investment:
Commercial:
Commercial and industrial (“C&I”)	$	—	$	—	$	143,630	$	143,630
Commercial real estate (“CRE”):
CRE	—		—		47,639		47,639
Multifamily residential	—		—		2,332		2,332
Construction and land	—		—		4,191		4,191

Total commercial	—		—		197,792		197,792
Consumer:
Residential mortgage:

Home equity lines of credit (“HELOCs”)	—		—		4,791		4,791


Total consumer	—		—		4,791		4,791
Total loans held-for-investment	$	—	$	—	$	202,583	$	202,583



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



Total commercial	—		—		186,225		186,225
Consumer:
Residential mortgage:

HELOCs	—		—		1,146		1,146

Other consumer	—		—		2,491		2,491
Total consumer	—		—		3,637		3,637
Total loans held-for-investment	$	—	$	—	$	189,862	$	189,862
Investments in tax credit and other investments, net	$	—	$	—	$	3,140	$	3,140
OREO (1)	$	—	$	—	$	15,824	$	15,824

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

The following table presents the increase (decrease) in fair value of assets for which a nonrecurring fair value adjustment has been recognized for the three months ended March 31, 2021 and 2020:



($ in thousands)	Three Months Ended March 31,
	2021		2020

Loans held-for-investment:
Commercial:
C&I	$	(5,309)	$	(21,501)
CRE:
CRE	(7,062)		(5)
Multifamily residential	(16)		—
Construction and land	(71)		—

Total commercial	(12,458)		(21,506)
Consumer:
Residential mortgage:

HELOCs	(37)		(193)

Other consumer	—		2,491
Total consumer	(37)		2,298
Total loans held-for-investment	$	(12,495)	$	(19,208)
Investments in tax credit and other investments, net	$	—	$	150

Other nonperforming assets	$	(3,890)	$	(300)

The following table presents the quantitative information about the significant unobservable inputs used in the valuation of Level 3 fair value measurements that are measured on a nonrecurring basis as of March 31, 2021 and December 31, 2020:



($ in thousands)	Fair Value Measurements (Level 3)		Valuation Techniques	Unobservable Inputs	Range of Inputs	Weighted- Average of Inputs (1)
March 31, 2021
Loans held-for-investment	$	108,918	Discounted cash flows	Discount	4% — 15%	11%
	$	24,356	Fair value of collateral	Discount	10% — 20%	15%
	$	9,902	Fair value of collateral	Contract value	NM	NM
	$	59,407	Fair value of property	Selling cost	8% — 26%	9%




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

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

NM — Not meaningful.

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

Disclosures about Fair Value of Financial Instruments

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



($ in thousands)	March 31, 2021
	Carrying Amount		Level 1		Level 2		Level 3		Estimated Fair Value
Financial assets:
Cash and cash equivalents	$	4,619,133	$	4,619,133	$	—	$	—	$	4,619,133
Interest-bearing deposits with banks	$	741,923	$	—	$	741,923	$	—	$	741,923
Resale agreements	$	2,160,038	$	—	$	2,152,392	$	—	$	2,152,392

Restricted equity securities, at cost	$	83,250	$	—	$	83,250	$	—	$	83,250

Loans held-for-investment, net	$	38,981,242	$	—	$	—	$	38,922,550	$	38,922,550
Mortgage servicing rights	$	5,506	$	—	$	—	$	8,740	$	8,740
Accrued interest receivable	$	149,953	$	—	$	149,953	$	—	$	149,953
Financial liabilities:
Demand, checking, savings and money market deposits	$	40,748,303	$	—	$	40,748,303	$	—	$	40,748,303
Time deposits	$	8,798,833	$	—	$	8,811,048	$	—	$	8,811,048


FHLB advances	$	653,035	$	—	$	657,460	$	—	$	657,460
Repurchase agreements	$	300,000	$	—	$	316,099	$	—	$	316,099
Long-term debt	$	147,445	$	—	$	151,015	$	—	$	151,015
Accrued interest payable	$	9,966	$	—	$	9,966	$	—	$	9,966



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

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

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

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

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

Assets Purchased under Resale Agreements

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

Securities Purchased under Resale Agreements — Total securities purchased under resale agreements were $1.31 billion and $1.16 billion as of March 31, 2021 and December 31, 2020, respectively. The weighted-average yields were 1.57% and 2.50% for the three months ended March 31, 2021 and 2020, respectively.

Loans Purchased under Resale Agreements — The Company participated in resale agreements collateralized with loans with multiple counterparties starting in the fourth quarter of 2020. Total loans purchased under resale agreements were $850.0 million and $300.0 million as of March 31, 2021 and December 31, 2020, respectively. The weighted-average yield was 2.02% for the three months ended March 31, 2021.

Assets Sold under Repurchase Agreements — As of March 31, 2021, the collateral for the repurchase agreements were comprised of U.S. government agency and U.S. government-sponsored enterprise mortgage-backed securities and U.S. Treasury securities. Gross repurchase agreements were $300.0 million as of both March 31, 2021 and December 31, 2020. The weighted-average interest rates were 2.67% and 4.10% for the three months ended March 31, 2021 and 2020, respectively. As of March 31, 2021, all repurchase agreements will mature in 2023.

Balance Sheet Offsetting

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

The following tables present the resale and repurchase agreements included on the Consolidated Balance Sheet as of March 31, 2021 and December 31, 2020:



($ in thousands)	March 31, 2021

	Gross Amounts of Recognized Assets		Gross Amounts Offset on the Consolidated Balance Sheet		Net Amounts of Assets Presented on the Consolidated Balance Sheet		Gross Amounts Not Offset on the Consolidated Balance Sheet
Assets										Net Amount
							Collateral Received
Resale agreements	$	2,160,038	$	—	$	2,160,038	$	(2,138,721)	(1)	$	21,317

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



($ in thousands)	December 31, 2020

	Gross Amounts of Recognized Assets		Gross Amounts Offset on the Consolidated Balance Sheet		Net Amounts of Assets Presented on the Consolidated Balance Sheet		Gross Amounts Not Offset on the Consolidated Balance Sheet
Assets										Net Amount
							Collateral Received
Resale agreements	$	1,460,000	$	—	$	1,460,000	$	(1,458,700)	(1)	$	1,300

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

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

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

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

Note 5 — Securities

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



($ in thousands)	March 31, 2021
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
AFS debt securities:
U.S. Treasury securities	$	841,711	$	328	$	(15,697)	$	826,342
U.S. government agency and U.S. government-sponsored enterprise debt securities	1,236,446		5,145		(47,586)		1,194,005
U.S. government agency and U.S. government-sponsored enterprise mortgage-backed securities:
Commercial mortgage-backed securities	1,178,238		16,407		(25,254)		1,169,391
Residential mortgage-backed securities	2,271,645		17,026		(41,265)		2,247,406
Municipal securities	417,676		7,348		(4,959)		420,065
Non-agency mortgage-backed securities:
Commercial mortgage-backed securities	281,099		4,311		(4,383)		281,027
Residential mortgage-backed securities	525,560		1,599		(3,659)		523,500
Corporate debt securities	517,309		4,677		(25,343)		496,643
Foreign government bonds	278,100		320		(2,092)		276,328
Asset-backed securities	62,762		292		(14)		63,040
CLOs	294,000		—		(2,534)		291,466
Total AFS debt securities	$	7,904,546	$	57,453	$	(172,786)	$	7,789,213



($ in thousands)	December 31, 2020
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
AFS debt securities:
U.S. Treasury securities	$	50,310	$	451	$	—	$	50,761
U.S. government agency and U.S. government-sponsored enterprise debt securities	806,814		8,765		(1,260)		814,319
U.S. government agency and U.S. government-sponsored enterprise mortgage-backed securities:
Commercial mortgage-backed securities	1,125,174		34,306		(5,710)		1,153,770
Residential mortgage-backed securities	1,634,553		27,952		(1,611)		1,660,894
Municipal securities	382,573		13,588		(88)		396,073
Non-agency mortgage-backed securities:
Commercial mortgage-backed securities	234,965		6,107		(1,230)		239,842
Residential mortgage-backed securities	288,520		1,761		(506)		289,775
Corporate debt securities	406,323		3,493		(3,848)		405,968
Foreign government bonds	183,828		163		(1,460)		182,531
Asset-backed securities	63,463		10		(242)		63,231
CLOs	294,000		—		(6,506)		287,494
Total AFS debt securities	$	5,470,523	$	96,596	$	(22,461)	$	5,544,658

As of March 31, 2021 and December 31, 2020, the amortized cost of AFS debt securities excluded accrued interest receivables of $22.9 million and $22.3 million, respectively, which are included in Other assets on the Consolidated Balance Sheet. For the Company’s accounting policy related to AFS debt securities’ accrued interest receivable, see Note 1 — Summary of Significant Accounting Policies — Allowance for Credit Losses on Available-for-Sale Debt Securities to the Consolidated Financial Statements in the Company’s 2020 Form 10-K.

Unrealized Losses

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



($ in thousands)	March 31, 2021
	Less Than 12 Months				12 Months or More				Total
	Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses
AFS debt securities:
U.S. Treasury securities	$	775,801	$	(15,697)	$	—	$	—	$	775,801	$	(15,697)
U.S. government agency and U.S. government sponsored enterprise debt securities	954,894		(47,586)		—		—		954,894		(47,586)
U.S. government agency and U.S. government-sponsored enterprise mortgage-backed securities:
Commercial mortgage-backed securities	615,193		(25,203)		3,474		(51)		618,667		(25,254)
Residential mortgage-backed securities	1,464,574		(41,264)		358		(1)		1,464,932		(41,265)
Municipal securities	199,225		(4,959)		—		—		199,225		(4,959)
Non-agency mortgage-backed securities:
Commercial mortgage-backed securities	114,971		(4,374)		15,578		(9)		130,549		(4,383)
Residential mortgage-backed securities	391,444		(3,659)		—		—		391,444		(3,659)
Corporate debt securities	347,934		(25,316)		9,974		(27)		357,908		(25,343)
Foreign government bonds	155,299		(2,092)		—		—		155,299		(2,092)
Asset-backed securities	11,904		(14)		—		—		11,904		(14)
CLOs	—		—		291,466		(2,534)		291,466		(2,534)
Total AFS debt securities	$	5,031,239	$	(170,164)	$	320,850	$	(2,622)	$	5,352,089	$	(172,786)



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

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

As of March 31, 2021, the Company had a total of 291 AFS debt securities in a gross unrealized loss position with no credit impairment that were comprised primarily of 112 U.S. government agency and U.S. government sponsored enterprise mortgage-backed securities, 41 U.S. government agency and U.S. government sponsored enterprise debt securities and 26 corporate debt securities. In comparison, as of December 31, 2020, the Company had a total of 104 AFS debt securities in a gross unrealized loss position with no credit impairment that were comprised primarily of 46 U.S. government agency and U.S. government-sponsored enterprise mortgage-backed securities and 17 corporate debt securities.

Allowance for Credit Losses

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

The gross unrealized losses presented in the above tables were primarily attributable to yield curve movements and widened spreads. Securities that were in unrealized loss positions as of March 31, 2021 were mainly comprised of the following:

•U.S. government agency and U.S. government-sponsored enterprise mortgage-backed securities — The market value decline as of March 31, 2021 was primarily due to interest rate movement. Since these securities (issued by Fannie Mae, Ginnie Mae and Freddie Mac) are guaranteed or sponsored by agencies of the U.S. government, and the credit profiles are strong (rated Aaa, AA+ and AAA by Moody’s Investors Service (“Moody’s”), Standard and Poor's (“S&P”) and Fitch Ratings (“Fitch”), respectively), the Company expects to receive all contractual interest payments on-time, and believes the risk of credit losses on these securities is remote.

•U.S. government agency and U.S. government-sponsored enterprise debt securities — The market value decline as of March 31, 2021 was primarily due to interest rate movement. The securities consisted of the debt securities issued by:

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

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

As these securities are guaranteed or sponsored by the U.S. government and the credit profiles are strong, the Company expects to receive all contractual interest payments on time, and believes the risk of credit losses on these securities is remote.

•Corporate debt securities — The market value decline as of March 31, 2021 was primarily due to interest rate movement and the widening in spreads. Since credit profiles of the securities are strong (rated BBB- or higher by Moody’s, S&P, Kroll Bond Rating Agency and Fitch), and the contractual payments from these bonds have been and are expected to be received on time, the Company believes that the risk of credit losses on these securities is remote.

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

As of March 31, 2021 and December 31, 2020, the Company had the intent to hold the AFS debt securities with unrealized losses through the anticipated recovery period and it was more-likely-than-not that the Company will not have to sell these securities before recovery of their amortized cost. The issuers of these securities have not, to the Company’s knowledge, established any cause for default on these securities. As a result, the Company expects to recover the entire amortized cost basis of these securities. Accordingly, there was no allowance for credit losses as of March 31, 2021 and December 31, 2020 provided against these securities. In addition, there was no provision for credit losses recognized for the three months ended March 31, 2021 and 2020.

Realized Gains and Losses

The following table presents the gross realized gains and tax expense related to the sales of AFS debt securities for the three months ended March 31, 2021 and 2020:



($ in thousands)	Three Months Ended March 31,
	2021		2020

Gross realized gains	$	192	$	1,529
Related tax expense	$	57	$	452

Contractual Maturities of Available-for-Sale Debt Securities

The following table presents the contractual maturities of AFS debt securities as of March 31, 2021. Expected maturities will differ from contractual maturities on certain securities as the issuers and borrowers of the underlying collateral may have the right to call or prepay obligations with or without prepayment penalties.



($ in thousands)	Amortized Cost		Fair Value
Due within one year	$	1,403,404	$	1,347,808
Due after one year through five years	688,387		681,602
Due after five years through ten years	1,427,893		1,414,362
Due after ten years	4,384,862		4,345,441
Total AFS debt securities	$	7,904,546	$	7,789,213

As of March 31, 2021 and December 31, 2020, AFS debt securities with fair value of $590.9 million and $588.5 million, respectively, were pledged to secure public deposits, repurchase agreements and for other purposes required or permitted by law.

Restricted Equity Securities

The following table presents the restricted equity securities on the Consolidated Balance Sheet as of March 31, 2021 and December 31, 2020:



($ in thousands)	March 31, 2021		December 31, 2020
Federal Reserve Bank of San Francisco (“FRBSF”) stock	$	59,453	$	59,249
FHLB stock	23,797		23,797
Total restricted equity securities	$	83,250	$	83,046

Note 6 — Derivatives

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

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



($ in thousands)	March 31, 2021						December 31, 2020
	Notional Amount		Fair Value				Notional Amount		Fair Value
			Derivative Assets		Derivative Liabilities				Derivative Assets		Derivative Liabilities
Derivatives designated as hedging instruments:


Cash flow hedges:
Interest rate contracts	$	275,000	$	—	$	1,258	$	275,000	$	—	$	1,864
Net investment hedges:
Foreign exchange contracts	83,936		908		—		84,269		—		235
Total derivatives designated as hedging instruments	$	358,936	$	908	$	1,258	$	359,269	$	—	$	2,099
Derivatives not designated as hedging instruments:
Interest rate contracts	$	17,891,960	$	319,049	$	229,032	$	18,155,678	$	489,132	$	315,834
Foreign exchange contracts	4,036,958		38,654		27,287		3,108,488		30,300		22,524
Credit contracts	76,992		5		153		76,992		13		206
Equity contracts	—		272		—		—		858		—
Commodity contracts	—		98,429		86,405		—		82,451		84,165
Total derivatives not designated as hedging instruments	$	22,005,910	$	456,409	$	342,877	$	21,341,158	$	602,754	$	422,729
Gross derivative assets/liabilities			$	457,317	$	344,135			$	602,754	$	424,828
Less: Master netting agreements			(100,454)		(100,454)				(93,063)		(93,063)
Less: Cash collateral received/paid			(7,781)		(86,233)				(8,449)		(91,634)
Net derivative assets/liabilities			$	349,082	$	157,448			$	501,242	$	240,131

(1)The Company held equity contracts in 18 private companies as of March 31, 2021. In comparison, the Company held equity contracts in two public companies and 17 private companies as of December 31, 2020.

(2)The notional amount of the Company’s commodity contracts entered with its customers totaled 8,258 thousand barrels of crude oil and 102,996 thousand units of natural gas, measured in million British thermal units (“MMBTUs”) as of March 31, 2021. In comparison, the notional amount of the Company’s commodity contracts entered with its customers totaled 6,321 thousand barrels of crude oil and 109,635 thousand MMBTUs of natural gas as of December 31, 2020. The Company simultaneously entered into the offsetting commodity contracts with mirrored terms with third-party financial institutions.

Derivatives Designated as Hedging Instruments

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

As of both March 31, 2021 and December 31, 2020, there were no fair value hedges or hedged certificates of deposit outstanding. There were no gains or losses recognized on the Consolidated Statement of Income related to the derivatives designated as fair value hedges for the three months ended March 31, 2021. The net gains recognized on interest rate swaps were $2.0 million and the net losses recognized on certificates of deposit were $1.4 million, both recorded in interest expense on the Consolidated Statement of Income for the three months ended March 31, 2020.

Cash Flow Hedges — The Company entered into interest rate swaps that were designated and qualified as cash flow hedges to limit the exposure to the variability in interest payments on certain floating rate borrowings. For cash flow hedges, the entire change in the fair value of the hedging instruments is recognized in AOCI and reclassified to earnings in the same period when the hedged cash flows impact earnings. Reclassified gains and losses on interest rate swaps are recorded in the same line item as the interest payments of the hedged long-term borrowings within Interest expense in the Consolidated Statements of Income. Considering the interest rates, yield curve and notional amounts as of March 31, 2021, the Company expected to reclassify an estimated $560 thousand of after-tax net losses on derivative instruments designated as cash flow hedges from AOCI into earnings during the next 12 months.

The following table presents the pre-tax changes in AOCI from cash flow hedges for the three months ended March 31, 2021 and 2020. The after-tax impact of cash flow hedges on AOCI is shown in Note 13 — Accumulated Other Comprehensive Income (Loss) to the Consolidated Financial Statements in this Form-10-Q.



($ in thousands)	Three Months Ended March 31,
	2021		2020
Gains recognized in AOCI	$	426	$	—
(Losses) reclassified from AOCI to interest expense	$	(177)	$	—

Net Investment Hedges — ASC 830-20, Foreign Currency Matters — Foreign Currency Transactions and ASC 815, Derivatives and Hedging, allow hedging of the foreign currency risk of a net investment in a foreign operation. The Company enters into foreign currency forward contracts to hedge a portion of the Bank’s investment in East West Bank (China) Limited, a non-USD functional currency subsidiary in China. The hedging instruments designated as net investment hedges involve hedging the risk of changes in the USD equivalent value of a designated monetary amount of the Bank’s net investment in East West Bank (China) Limited, against the risk of adverse changes in the foreign currency exchange rate of the Chinese Renminbi (“RMB”). The Company may de-designate the net investment hedges when the Company expects the hedge will cease to be highly effective.

The following table presents the after-tax (losses) gains recognized in AOCI on net investment hedges for the three months ended March 31, 2021 and 2020:



($ in thousands)	Three Months Ended March 31,
	2021		2020
Gains recognized in AOCI	$	101	$	1,004

Derivatives Not Designated as Hedging Instruments

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

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



($ in thousands)	March 31, 2021
	Customer Counterparty						($ in thousands)	Financial Counterparty
	Notional Amount		Fair Value					Notional Amount		Fair Value
			Assets		Liabilities					Assets		Liabilities
Written options	$	800,962	$	—	$	544	Purchased options	$	800,962	$	551	$	—
Sold collars and corridors	531,840		5,849		158		Collars and corridors	531,840		160		5,888
Swaps	7,597,856		279,361		53,975		Swaps	7,628,500		33,128		168,467
Total	$	8,930,658	$	285,210	$	54,677	Total	$	8,961,302	$	33,839	$	174,355



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

In January 2018, the London Clearing House (“LCH”) amended its rulebook to legally characterize variation margin payments made to and received from LCH as settlements of derivatives, and not as collateral against derivatives. Included in the total notional amount of $8.96 billion of interest rate contracts entered into with financial counterparties as of March 31, 2021, was a notional amount of $2.93 billion of interest rate swaps that cleared through LCH. Applying variation margin payments as settlement to LCH cleared derivative transactions resulted in a reduction in derivative asset fair value of $27.2 million and liability fair values of $116.2 million as of March 31, 2021. In comparison, included in the total notional amount of $9.09 billion of interest rate contracts entered into with financial counterparties as of December 31, 2020, was a notional amount of $2.98 billion of interest rate swaps that cleared through LCH. Applying variation margin payments as settlement to LCH cleared derivative transactions resulted in a reduction in derivative asset fair values of $1.3 million and liability fair values of $187.4 million as of December 31, 2020.

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

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



($ in thousands)	March 31, 2021
	Customer Counterparty						($ in thousands)	Financial Counterparty
	Notional Amount		Fair Value					Notional Amount		Fair Value
			Assets		Liabilities					Assets		Liabilities
Forwards and spot	$	2,468,974	$	27,803	$	21,835	Forwards and spot	$	168,942	$	869	$	494
Swaps	184,584		1,902		247		Swaps	974,974		7,733		4,364
Written options	116,575		—		336		Purchased options	116,575		336		—
Collars	3,167		—		11		Collars	3,167		11		—
Total	$	2,773,300	$	29,705	$	22,429	Total	$	1,263,658	$	8,949	$	4,858



($ in thousands)	December 31, 2020
	Customer Counterparty						($ in thousands)	Financial Counterparty
	Notional Amount		Fair Value					Notional Amount		Fair Value
			Assets		Liabilities					Assets		Liabilities
Forwards and spot	$	1,522,888	$	17,575	$	17,928	Forwards and spot	$	145,197	$	1,230	$	273
Swaps	13,590		872		91		Swaps	1,191,355		10,049		3,658
Written options	117,729		—		574		Purchased options	117,729		574		—

Total	$	1,654,207	$	18,447	$	18,593	Total	$	1,454,281	$	11,853	$	3,931

Credit Contracts — The Company may periodically enter into RPA contracts with institutional counterparties to manage the credit exposure on interest rate contracts associated with syndicated loans. The Company may enter into protection sold or protection purchased RPAs. Under the RPAs, the Company will make or receive a payment if a borrower defaults on the related interest rate contract. Credit risk on RPAs is managed by monitoring the credit worthiness of the borrowers and institutional counterparties, which is based on the normal credit review process. The majority of the reference entities of the protection sold RPAs were investment grade as of March 31, 2021, while all were investment grade as of December 31, 2020. Assuming the underlying borrower referenced in the interest rate contracts defaulted as of March 31, 2021 and December 31, 2020, the maximum exposure of protection sold RPAs would be $4.9 million and $6.0 million, respectively. As of March 31, 2021 and December 31, 2020, the weighted-average remaining maturities of the outstanding protection sold RPAs were 3.3 years and 3.5 years, respectively.

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



($ in thousands)	March 31, 2021						December 31, 2020
	Notional Amount		Fair Value				Notional Amount		Fair Value
			Assets		Liabilities				Assets		Liabilities
RPAs - protection sold	$	66,278	$	—	$	153	$	66,278	$	—	$	206
RPAs - protection purchased	10,714		5		—		10,714		13		—
Total RPAs	$	76,992	$	5	$	153	$	76,992	$	13	$	206

Equity Contracts — Periodically, as part of the Company’s loan origination process, the Company obtains warrants to purchase preferred and/or common stock of technology and life sciences companies to which it provides loans. Warrants grant the Company the right to buy a certain class of the underlying company’s equity at a certain price before expiration. The Company held warrants in 18 private companies as of March 31, 2021, and held warrants in two public companies and 17 private companies as of December 31, 2020. The total fair value of the warrants held in both public and private companies was $272 thousand and $858 thousand as of March 31, 2021 and December 31, 2020, respectively.

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

The following tables present the notional amounts and fair values of the commodity derivative positions outstanding as of March 31, 2021 and December 31, 2020:



($ and units in thousands)	March 31, 2021
	Customer Counterparty						($ and units in thousands)	Financial Counterparty
	Notional Unit		Fair Value					Notional Unit		Fair Value
			Assets		Liabilities					Assets		Liabilities
Crude oil:							Crude oil:
Written options	248	Barrels	$	211	$	25	Purchased options	248	Barrels	$	—	$	48
Collars	2,361	Barrels	11,181		219		Collars	2,361	Barrels	219		10,989
Swaps	5,649	Barrels	37,076		1,206		Swaps	5,649	Barrels	1,058		28,624
Total	8,258		$	48,468	$	1,450	Total	8,258		$	1,277	$	39,661

Natural gas:							Natural gas:
Written options	8,065	MMBTUs	$	52	$	319	Purchased options	8,065	MMBTUs	$	319	$	52
Collars	10,823	MMBTUs	879		—		Collars	14,023	MMBTUs	—		555
Swaps	84,108	MMBTUs	28,878		18,449		Swaps	91,790	MMBTUs	18,556		25,919
Total	102,996		$	29,809	$	18,768	Total	113,878		$	18,875	$	26,526

Total			$	78,277	$	20,218	Total			$	20,152	$	66,187



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

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