EAST WEST BANCORP INC - Quarter Report: 2022 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, 2022

☐ 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: 141,908,444 shares as of April 30, 2022.

TABLE OF CONTENTS


			Page
PART I — FINANCIAL INFORMATION			3

	Item 1.	Consolidated Financial Statements	3
		Consolidated Balance Sheet (Unaudited)	3
		Consolidated Statement of Income (Unaudited)	4
		Consolidated Statement of Comprehensive Income (Unaudited)	5
		Consolidated Statement of Changes in Stockholders’ Equity (Unaudited)	6
		Consolidated Statement of Cash Flows (Unaudited)	7
		Notes to Consolidated Financial Statements (Unaudited)	9
		1 — Basis of Presentation	9
		2 — Current Accounting Developments and Summary of Significant Accounting Policies	9
		3 — Fair Value Measurement and Fair Value of Financial Instruments	10
		4 — Assets Purchased under Resale Agreements and Sold under Repurchase Agreements	20
		5 — Securities	22
		6 — Derivatives	28
		7 — Loans Receivable and Allowance for Credit Losses	35
		8 — Investments in Qualified Affordable Housing Partnerships, Tax Credit and Other Investments, Net and Variable Interest Entities	45
		9 — Goodwill	47
		10 — Commitments and Contingencies	47


		11 — Stock Compensation Plans	49
		12 — Stockholders’ Equity and Earnings Per Share	51
		13 — Accumulated Other Comprehensive Income (Loss)	51
		14 — Business Segments	52


	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	55










	Item 3.	Quantitative and Qualitative Disclosures About Market Risk	97

	Item 4.	Controls and Procedures	97


PART II — OTHER INFORMATION			98

	Item 1.	Legal Proceedings	98
	Item 1A.	Risk Factors	98
	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	98



	Item 6.	Exhibits	99

GLOSSARY OF ACRONYMS			100

SIGNATURE			101

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, 2022		December 31, 2021
	(Unaudited)
ASSETS
Cash and due from banks	$	571,571	$	527,317
Interest-bearing cash with banks	3,277,129		3,385,618
Cash and cash equivalents	3,848,700		3,912,935
Interest-bearing deposits with banks	816,125		736,492
Assets purchased under resale agreements (“resale agreements”)	1,956,822		2,353,503
Securities:
Available-for-sale (“AFS”) debt securities, at fair value (amortized cost of $7,091,581 and $10,087,179)	6,729,431		9,965,353
Held-to-maturity (“HTM”) debt securities, at amortized cost (fair value of $2,815,968)	2,997,702		—

Loans held-for-sale	631		635
Loans held-for-investment (net of allowance for loan losses of $545,685 and $541,579)	42,944,997		41,152,202
Investments in qualified affordable housing partnerships, tax credit and other investments, net	607,985		628,263

Premises and equipment (net of accumulated depreciation of $141,422 and $139,358)	95,898		97,302
Goodwill	465,697		465,697
Operating lease right-of-use assets	102,491		98,632
Other assets	1,674,977		1,459,687
TOTAL	$	62,241,456	$	60,870,701
LIABILITIES
Deposits:
Noninterest-bearing	$	24,927,768	$	22,845,464
Interest-bearing	30,010,593		30,505,068
Total deposits	54,938,361		53,350,532


Federal Home Loan Bank (“FHLB”) advances	74,619		249,331
Assets sold under repurchase agreements (“repurchase agreements”)	300,000		300,000
Long-term debt and finance lease liabilities	152,227		151,997
Operating lease liabilities	109,656		105,534
Accrued expenses and other liabilities	963,137		876,089
Total liabilities	56,538,000		55,033,483
COMMITMENTS AND CONTINGENCIES (Note 10)
STOCKHOLDERS’ EQUITY
Common stock, $0.001 par value, 200,000,000 shares authorized; 168,375,288 and 167,790,645 shares issued	168		168
Additional paid-in capital	1,902,874		1,893,557
Retained earnings	4,863,721		4,683,659
Treasury stock, at cost 26,118,768 and 25,882,691 shares	(668,382)		(649,785)
Accumulated other comprehensive loss (“AOCI”), net of tax	(394,925)		(90,381)
Total stockholders’ equity	5,703,456		5,837,218
TOTAL	$	62,241,456	$	60,870,701

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,
	2022		2021
INTEREST AND DIVIDEND INCOME
Loans receivable, including fees	$	377,110	$	342,008
Debt securities	42,667		29,100

Resale agreements	8,383		6,099
Restricted equity securities	609		547
Interest-bearing cash and deposits with banks	3,260		3,632
Total interest and dividend income	432,029		381,386
INTEREST EXPENSE
Deposits	12,989		21,822
Short-term borrowings	9		42
FHLB advances	578		3,069
Repurchase agreements	2,016		1,978
Long-term debt and finance lease liabilities	824		780
Total interest expense	16,416		27,691
Net interest income before provision for credit losses	415,613		353,695
Provision for credit losses	8,000		—
Net interest income after provision for credit losses	407,613		353,695
NONINTEREST INCOME
Lending fees	19,438		18,357
Deposit account fees	20,315		15,383
Interest rate contracts and other derivative income	11,133		16,997
Foreign exchange income	12,699		9,526
Wealth management fees	6,052		6,911
Net gains on sales of loans	2,922		1,781
Gains on sales of AFS debt securities	1,278		192


Other investment income	1,627		925
Other income	4,279		2,794
Total noninterest income	79,743		72,866
NONINTEREST EXPENSE
Compensation and employee benefits	116,269		107,808
Occupancy and equipment expense	15,464		15,922
Deposit insurance premiums and regulatory assessments	4,717		3,876
Deposit account expense	4,693		3,892
Data processing	3,665		4,478
Computer software expense	7,294		7,159
Consulting expense	1,833		1,475
Legal expense	718		1,502
Other operating expense	20,897		19,607
Amortization of tax credit and other investments	13,900		25,358

Total noninterest expense	189,450		191,077
INCOME BEFORE INCOME TAXES	297,906		235,484
INCOME TAX EXPENSE	60,254		30,490
NET INCOME	$	237,652	$	204,994
EARNINGS PER SHARE (“EPS”)
BASIC	$	1.67	$	1.45
DILUTED	$	1.66	$	1.44
WEIGHTED-AVERAGE NUMBER OF SHARES OUTSTANDING
BASIC	142,025		141,646
DILUTED	143,223		142,844

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,
	2022		2021
Net income	$	237,652	$	204,994
Other comprehensive (loss) income, net of tax:
Net changes in unrealized losses on AFS debt securities	(169,270)		(133,448)
Net changes in unrealized losses on securities transferred from AFS to HTM	(110,680)		—
Net changes in unrealized (losses) gains on cash flow hedges	(24,723)		432
Foreign currency translation adjustments	129		(1,349)
Other comprehensive loss	(304,544)		(134,365)
COMPREHENSIVE (LOSS) INCOME	$	(66,892)	$	70,629

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, 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 loss	—	—		—		—		(134,365)		(134,365)



Issuance of common stock pursuant to various stock compensation plans and agreements	475,733	7,582		—		—		—		7,582
Repurchase of common stock pursuant to various stock compensation plans and agreements	(197,926)	—		—		(14,983)		—		(14,983)

Cash dividends on common stock ($0.33 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
BALANCE, JANUARY 1, 2022	141,907,954	$	1,893,725	$	4,683,659	$	(649,785)	$	(90,381)	$	5,837,218

Net income	—	—		237,652		—		—		237,652
Other comprehensive loss	—	—		—		—		(304,544)		(304,544)



Issuance of common stock pursuant to various stock compensation plans and agreements	588,114	9,317		—		—		—		9,317
Repurchase of common stock pursuant to various stock compensation plans and agreements	(239,548)	—		—		(18,597)		—		(18,597)

Cash dividends on common stock ($0.40 per share)	—	—		(57,590)		—		—		(57,590)
BALANCE, MARCH 31, 2022	142,256,520	$	1,903,042	$	4,863,721	$	(668,382)	$	(394,925)	$	5,703,456

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,
	2022		2021
CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$	237,652	$	204,994
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	26,555		37,490
Amortization of premiums and accretion of discount, net	11,824		5,770
Stock compensation costs	8,433		7,817
Deferred income tax (expense) benefit	(7,083)		224
Provision for credit losses	8,000		—
Net gains on sales of loans	(2,922)		(1,781)
Gains on sales of AFS debt securities	(1,278)		(192)


Loans held-for-sale:
Originations and purchases	(447)		(5,718)
Proceeds from sales and paydowns/payoffs of loans originally classified as held-for-sale	461		7,644


Proceeds from distributions received from equity method investees	3,227		2,505
Net change in accrued interest receivable and other assets	(81,628)		185,503
Net change in accrued expenses and other liabilities	83,042		(101,574)
Other net operating activities	49		20
Total adjustments	48,233		137,708
Net cash provided by operating activities	285,885		342,702
CASH FLOWS FROM INVESTING ACTIVITIES
Net (increase) decrease in:
Investments in qualified affordable housing partnerships, tax credit and other investments	(32,853)		(52,756)
Interest-bearing deposits with banks	(79,633)		67,793
Resale agreements:
Proceeds from paydowns and maturities	554,932		223,952
Purchases	(158,251)		(923,990)
AFS debt securities:
Proceeds from sales	103,945		46,397
Proceeds from repayments, maturities and redemptions	446,301		473,808
Purchases	(746,855)		(2,969,640)
HTM debt securities:
Proceeds from repayments, maturities and redemptions	15,448		—
Loans held-for-investment:
Proceeds from sales of loans originally classified as held-for-investment	135,517		147,115
Purchases	(225,065)		(311,030)
Other changes in loans held-for-investment, net	(1,697,590)		(1,047,557)







Proceeds from distributions received from equity method investees	4,348		2,832

Other net investing activities	(2,758)		(2,870)
Net cash used in investing activities	(1,682,514)		(4,345,946)

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,
	2022		2021



















































CASH FLOWS FROM FINANCING ACTIVITIES
Net increase in deposits	1,584,344		4,690,658
Net decrease in short-term borrowings	(31)		(21,143)

FHLB advances:
Proceeds	100		—
Repayment	(175,100)		—




Long-term debt and lease liabilities:

Repayment of long-term debt and lease liabilities	(229)		(315)
Common stock:


Stocks tendered for payment of withholding taxes	(18,597)		(14,983)
Cash dividends paid	(58,900)		(48,213)
Net cash provided by financing activities	1,331,587		4,606,004
Effect of exchange rate changes on cash and cash equivalents	807		(1,598)
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS	(64,235)		601,162
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD	3,912,935		4,017,971
CASH AND CASH EQUIVALENTS, END OF PERIOD	$	3,848,700	$	4,619,133

SUPPLEMENTAL CASH FLOW INFORMATION
Cash paid during the period for:
Interest	$	20,881	$	29,680
Income tax refund	$	581	$	—
Noncash investing and financing activities:

Securities transferred from AFS to HTM debt securities	$	3,010,003	$	—
Loans transferred from held-for-investment to held-for-sale	$	133,217	$	145,872




Loans transferred to other real estate owned (“OREO”) and other foreclosed assets	$	—	$	10,360

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, 2022, East West also has six wholly-owned subsidiaries that are statutory business trusts (the “Trusts”). In accordance with Financial Accounting Standards Board Accounting Standards Codification (“ASC”) Topic 810, Consolidation, the Trusts are not included on the Consolidated Financial Statements.

The unaudited interim Consolidated Financial Statements are presented in accordance with United States (“U.S.”) Generally Accepted Accounting Principles (“GAAP”), applicable guidelines prescribed by regulatory authorities and general practices in the banking industry. While the unaudited interim Consolidated Financial Statements reflect all adjustments that, in the opinion of management, are necessary for fair presentation, they primarily serve to update the most recently filed annual report on Form 10-K, and may not include all the information and notes necessary to constitute a complete set of financial statements. Accordingly, they should be read in conjunction with the audited Consolidated Financial Statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021, filed with the U.S. Securities and Exchange Commission on February 28, 2022 (the “Company’s 2021 Form 10-K”). In addition, certain items on the Consolidated Financial Statements and notes for the prior periods have been reclassified to conform to the current period presentation.

The preparation of the Consolidated Financial Statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the Consolidated Financial Statements, income and expenses during the reporting period, and the related disclosures. Although our current estimates contemplate current conditions and how we expect them to change in the future, it is reasonably possible that actual results could be materially different from those estimates. Hence, the current period’s results of operations are not necessarily indicative of results that may be expected for any future interim period or for the year as a whole. Events subsequent to the Consolidated Balance Sheet date have been evaluated through the date the Consolidated Financial Statements are issued for inclusion in the accompanying Consolidated Financial Statements.

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

Recent Accounting Pronouncements


Standard	Required Date of Adoption	Description	Effect on Financial Statements
Standards Not Yet Adopted
Accounting Standards Update (“ASU”) 2022-02, Financial Instruments - Credit Losses (Topic 326): Trouble Debt Restructurings and the Vintage Disclosures	January 1, 2023	ASU 2022-02 eliminates the troubled debt restructuring (“TDRs”) accounting model for creditors and requires companies to apply the general loan modification guidance under ASC 310-20-35-9 through 35-11 to determine whether a modification made to a borrower results in a new loan or a continuation of the existing loan. In addition, companies are no longer required to use a discounted cash flow method to measure the allowance for credit losses as a result of a modification or restructuring with a borrower experiencing financial difficulty. The guidance also introduces new disclosure requirements related to restructuring of financing receivables made to debtors experiencing financial difficulty, and requires public companies to prospectively begin disclosing current-period gross write-off information by year of origination in the vintage disclosures.	The Company does not expect the adoption of this guidance to have a material impact on the Company’s Consolidated Financial Statements. The Company expects to adopt ASU 2022-02 on January 1, 2023.

Significant Accounting Policies Update

During the three months ended March 31, 2022, the Company transferred $3.01 billion in fair value of debt securities from AFS to HTM.

Transfer between Categories of Debt Securities — Upon transfer of a debt security from the AFS to HTM category, the security’s new amortized cost is reset to fair value, reduced by any previous write-offs but excluding any allowance for credit losses. Unrealized gains or losses at the date of transfer of these securities continue to be reported in AOCI and are amortized into interest income over the remaining life of the securities as effective yield adjustments, in a manner consistent with the amortization or accretion of the original purchase premium or discount on the associated security. For transfers of securities from the AFS to HTM category, any allowance for credit losses that was previously recorded under the AFS model is reversed and an allowance for credit losses is subsequently recorded under the HTM debt security model. The reversal and re-establishment of the allowance for credit losses are recorded in provision for credit losses.

Held-to-Maturity Debt Securities — Debt securities that the Company has the intent and ability to hold until maturity are classified as HTM and are carried at amortized cost, net of allowance for credit losses. HTM debt securities are generally placed on nonaccrual status using factors similar to those described for loans. The amortized cost of the Company’s HTM debt securities excludes accrued interest, which is included in Other assets on the Consolidated Balance Sheet. The Company has made an accounting policy election not to recognize an allowance for credit losses for accrued interest receivables on HTM debt securities, as the Company reverses any accrued interest against interest income if a debt security is placed on nonaccrual status. Any cash collected on nonaccrual HTM securities is applied to reduce the security’s amortized cost basis and not as interest income. Generally, the Company returns an HTM security to accrual status when all delinquent interest and principal become current under the contractual terms of the security, and the collectability of remaining principal and interest is no longer doubtful.

Allowance for Credit Losses on Held-to-Maturity Debt Securities — For each major HTM debt security type, the allowance for credit losses is estimated collectively for groups of securities with similar risk characteristics. For securities that do not share similar risk characteristics, the losses are estimated individually. Debt securities that are either guaranteed or issued by the U.S. government or government-sponsored enterprises, are highly rated by major rating agencies, and have a long history of no credit losses are an example of such securities to which the Company applies a zero credit loss assumption. Any expected credit loss is provided through the allowance for credit losses on HTM debt securities and deducted from the amortized cost basis of the security, so that the balance sheet reflects the net amount the Company expects to collect.

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

Fair Value Determination

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

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

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

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

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

Assets and Liabilities Measured at Fair Value on a Recurring Basis

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

Available-for-Sale Debt Securities — The fair value of AFS debt securities is generally determined by independent external pricing service providers who have experience in valuing these securities or by taking the average quoted market prices obtained from independent external brokers. The valuations provided by the third-party pricing service providers are based on observable market inputs, which include benchmark yields, reported trades, issuer spreads, benchmark securities, bids, offers, prepayment 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 available, the Company uses quoted market prices to determine the fair value of AFS debt securities that are classified as Level 1. Level 1 AFS debt securities consist of U.S. Treasury securities. When pricing is unavailable from third-party pricing service providers for certain securities, the Company requests market quotes from various independent external brokers and utilizes the average quoted market prices. In addition, the Company obtains market quotes from other official published sources. As these valuations are based on observable inputs in the current marketplace, they are classified as Level 2. The Company periodically communicates with the independent external brokers to validate their pricing methodology. Information such as pricing sources, pricing assumptions, data inputs and valuation techniques are reviewed periodically.

Equity Securities — Equity securities consisted of mutual funds as of both March 31, 2022 and December 31, 2021. The Company invested in these mutual funds for Community Reinvestment Act (“CRA”) purposes. The Company uses net asset value (“NAV”) information to determine the fair value of these equity securities. When NAV is available periodically and the equity securities can be put back to the transfer agents at the publicly available NAV, the fair value of the equity securities is classified as Level 1. When NAV is available periodically but the equity securities may not be readily marketable at its periodic NAV in the secondary market, the fair value of these equity securities is classified as Level 2.

Interest Rate Contracts — The Company enters into interest rate swap and option contracts that are not designated as hedging instruments with its borrowers to lock in attractive intermediate and long-term interest rates, resulting in the customer obtaining a synthetic fixed-rate loan. To economically hedge against the interest rate risks in the products offered to its customers, the Company enters into mirrored offsetting interest rate contracts with third-party financial institutions. The Company also enters into interest rate swap contracts with institutional counterparties to hedge against certain variable interest rate borrowings and variable interest rate loans. 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 and the respective counterparty’s nonperformance risk in the fair value measurements of its derivatives. The credit valuation adjustments associated with the Company’s derivatives utilize model-derived credit spreads, which are Level 3 inputs. Considering the observable nature of all other significant inputs utilized, the Company classifies these derivative instruments as Level 2.

Foreign Exchange Contracts — The Company enters into foreign exchange contracts to accommodate the business needs of its customers. For a majority of the foreign exchange contracts with its customers, the Company entered into offsetting foreign exchange contracts with third-party financial institutions to manage its exposure. The Company also utilizes foreign exchange contracts that are not designated as hedging instruments to mitigate the economic effect of fluctuations in certain foreign currency on-balance sheet assets and liabilities, primarily foreign currency denominated deposits that it offers to its customers. The fair value of foreign exchange contracts is determined at each reporting period based on changes in the foreign exchange rates. These are over-the-counter contracts where quoted market prices are not readily available. Valuation is measured using conventional valuation methodologies with observable market data. Due to the short-term nature of the majority of these contracts, the counterparties’ credit risks are considered nominal and result in no adjustments to the valuation of the foreign exchange contracts. Due to the observable nature of the inputs used in deriving the fair value of these contracts, the valuation of foreign exchange contracts is classified as Level 2. As of March 31, 2022 and December 31, 2021, the Bank held foreign currency non-deliverable forward contracts to hedge its net investment in its China subsidiary, East West Bank (China) Limited, a non-U.S. dollar (“USD”) functional currency subsidiary in China. These foreign currency non-deliverable forward contracts were designated as net investment hedges. The fair value of foreign currency non-deliverable forward contracts is determined by comparing the contracted foreign exchange rate to the current market foreign exchange rate. Key inputs of the current market exchange rate include spot rates and forward rates of the contractual currencies. Foreign exchange forward curves are used to determine which forward rate pertains to a specific maturity. Due to the observable nature of the inputs used in deriving the estimated fair value, these instruments are classified as Level 2.

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

Equity Contracts — As part of the loan origination process, the Company 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, 2022 and December 31, 2021, the warrants included on the Consolidated Financial Statements were from both public and private companies. The Company values these warrants based on the Black-Scholes option pricing model. For warrants from public companies, the model uses the underlying stock price, stated strike price, warrant expiration date, risk-free interest rate based on a duration-matched U.S. Treasury rate, and market-observable company-specific option volatility as inputs to value the warrants. Due to the observable nature of the inputs used in deriving the estimated fair value, warrants from public companies are classified as Level 2. For warrants from private companies, the model uses inputs such as the offering price observed in the most recent round of funding, stated strike price, warrant expiration date, risk-free interest rate based on duration-matched U.S. Treasury rate and option volatility. The Company applies proxy volatilities based on the industry sectors of the private companies. The model values are then adjusted for a general lack of liquidity due to the private nature of the underlying companies. Since both option volatility and liquidity discount assumptions are subject to management’s judgment, measurement uncertainty is inherent in the valuation of private company warrants. Due to the unobservable nature of the option volatility and liquidity discount assumptions used in deriving the estimated fair value, warrants from private companies are classified as Level 3. On a quarterly basis, the changes in the fair value of warrants from private companies are reviewed for reasonableness, and a measurement of uncertainty analysis on the option volatility and liquidity discount assumptions is performed.

Commodity Contracts — The Company enters into energy commodity contracts in the form of swaps and options with its oil and gas 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 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.

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



($ in thousands)	Assets and Liabilities Measured at Fair Value on a Recurring Basis as of March 31, 2022
	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total Fair Value
AFS debt securities:
U.S. Treasury securities	$	637,974	$	—	$	—	$	637,974
U.S. government agency and U.S. government-sponsored enterprise debt securities	—		304,395		—		304,395
U.S. government agency and U.S. government-sponsored enterprise mortgage-backed securities:
Commercial mortgage-backed securities	—		600,323		—		600,323
Residential mortgage-backed securities	—		2,068,485		—		2,068,485
Municipal securities	—		298,659		—		298,659
Non-agency mortgage-backed securities:
Commercial mortgage-backed securities	—		445,325		—		445,325
Residential mortgage-backed securities	—		806,782		—		806,782
Corporate debt securities	—		630,512		—		630,512
Foreign government bonds	—		253,811		—		253,811
Asset-backed securities	—		71,362		—		71,362
Collateralized loan obligations (“CLOs”)	—		611,803		—		611,803
Total AFS debt securities	$	637,974	$	6,091,457	$	—	$	6,729,431

Investments in tax credit and other investments:
Equity securities	$	21,137	$	4,357	$	—	$	25,494
Total investments in tax credit and other investments	$	21,137	$	4,357	$	—	$	25,494

Derivative assets:
Interest rate contracts	$	—	$	188,101	$	—	$	188,101
Foreign exchange contracts	—		16,122		—		16,122

Equity contracts	—		5		309		314
Commodity contracts	—		484,563		—		484,563
Gross derivative assets	$	—	$	688,791	$	309	$	689,100
Netting adjustments (1)	$	—	$	(190,316)	$	—	$	(190,316)
Net derivative assets	$	—	$	498,475	$	309	$	498,784

Derivative liabilities:
Interest rate contracts	$	—	$	236,569	$	—	$	236,569
Foreign exchange contracts	—		12,035		—		12,035
Credit contracts	—		67		—		67
Commodity contracts	—		443,358		—		443,358
Gross derivative liabilities	$	—	$	692,029	$	—	$	692,029
Netting adjustments (1)	$	—	$	(435,081)	$	—	$	(435,081)
Net derivative liabilities	$	—	$	256,948	$	—	$	256,948



($ in thousands)	Assets and Liabilities Measured at Fair Value on a Recurring Basis as of December 31, 2021
	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total Fair Value
AFS debt securities:
U.S. Treasury securities	$	1,032,681	$	—	$	—	$	1,032,681
U.S. government agency and U.S. government-sponsored enterprise debt securities	—		1,301,971		—		1,301,971
U.S. government agency and U.S. government-sponsored enterprise mortgage-backed securities:
Commercial mortgage-backed securities	—		1,228,980		—		1,228,980
Residential mortgage-backed securities	—		2,928,283		—		2,928,283
Municipal securities	—		523,158		—		523,158
Non-agency mortgage-backed securities:
Commercial mortgage-backed securities	—		496,443		—		496,443
Residential mortgage-backed securities	—		881,931		—		881,931
Corporate debt securities	—		649,665		—		649,665
Foreign government bonds	—		257,733		—		257,733
Asset-backed securities	—		74,558		—		74,558
CLOs	—		589,950		—		589,950
Total AFS debt securities	$	1,032,681	$	8,932,672	$	—	$	9,965,353

Investments in tax credit and other investments:
Equity securities	$	22,130	$	4,474	$	—	$	26,604
Total investments in tax credit and other investments	$	22,130	$	4,474	$	—	$	26,604

Derivative assets:
Interest rate contracts	$	—	$	240,222	$	—	$	240,222
Foreign exchange contracts	—		21,033		—		21,033

Equity contracts	—		5		215		220
Commodity contracts	—		222,709		—		222,709
Gross derivative assets	$	—	$	483,969	$	215	$	484,184
Netting adjustments (1)	$	—	$	(100,953)	$	—	$	(100,953)
Net derivative assets	$	—	$	383,016	$	215	$	383,231

Derivative liabilities:
Interest rate contracts	$	—	$	179,962	$	—	$	179,962
Foreign exchange contracts	—		15,501		—		15,501
Credit contracts	—		141		—		141
Commodity contracts	—		194,567		—		194,567
Gross derivative liabilities	$	—	$	390,171	$	—	$	390,171
Netting adjustments (1)	$	—	$	(232,727)	$	—	$	(232,727)
Net derivative liabilities	$	—	$	157,444	$	—	$	157,444

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

For the three months ended March 31, 2022 and 2021, 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 contracts for the three months ended March 31, 2022 and 2021:



($ in thousands)	Three Months Ended March 31,
	2022		2021
Equity contracts
Beginning balance	$	215	$	273

Total gains (losses) included in earnings (1)	3		(1)




Issuances	91		—




Ending balance	$	309	$	272

(1)Includes unrealized gains (losses) recorded in Lending fees on the Consolidated Statement of Income.

The following table presents quantitative information about the significant unobservable inputs used in the valuation of Level 3 fair value measurements as of March 31, 2022 and December 31, 2021. The significant unobservable inputs presented in the table below are those that the Company considers significant to the fair value of the Level 3 assets. The Company considers unobservable inputs to be significant if, by their exclusion, the fair value of the Level 3 assets would be impacted by a predetermined percentage change.



($ in thousands)	Fair Value Measurements (Level 3)		Valuation Technique	Unobservable Inputs	Range of Inputs	Weighted- Average of Inputs (1)
March 31, 2022
Derivative assets:
Equity contracts	$	309	Black-Scholes option pricing model	Equity volatility	41% — 57%	48%
				Liquidity discount	47%	47%
December 31, 2021
Derivative assets:
Equity contracts	$	215	Black-Scholes option pricing model	Equity volatility	44% — 54%	49%
				Liquidity discount	47%	47%

(1)Weighted-average of inputs is calculated based on the fair value of equity contracts as of March 31, 2022 and December 31, 2021.

Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis

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

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

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

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

Investments in Qualified Affordable Housing Partnerships, Tax Credit and Other Investments, Net — The Company conducts due diligence on its investments in qualified affordable housing partnerships, tax credit and other investments prior to the initial investment date and through the placed-in-service date. After these investments are either acquired or placed into service, the Company continues its periodic monitoring process to ensure book values are realizable and that there is no significant tax credit recapture risk. This monitoring process includes the quarterly review of the financial statements, the annual review of tax returns of the investment entity, the annual review of the financial statements of the guarantor (if any) and a comparison of the actual performance of the investment against the financial projections prepared at the time when the investment was made. The Company assesses its tax credit and other investments for possible other-than-temporary impairment (“OTTI”) on an annual basis or when events or circumstances suggest that the carrying amount of the investments may not be realizable. These circumstances can include, but are not limited to the following factors:

•expected future cash flows that are less than the carrying 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 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, 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. The fair value measurement of other nonperforming assets is classified within one of the three levels in a valuation hierarchy based upon the observability of inputs to the valuation as of the measurement date.

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



($ in thousands)	Assets Measured at Fair Value on a Nonrecurring Basis as of March 31, 2022
	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Fair Value Measurements
Loans held-for-investment:
Commercial:
Commercial and industrial (“C&I”)	$	—	$	—	$	78,354	$	78,354
Commercial real estate (“CRE”):
CRE	—		—		24,186		24,186



Total commercial	—		—		102,540		102,540
Consumer:
Residential mortgage:

Home equity lines of credit (“HELOCs”)	—		—		1,097		1,097


Total consumer	—		—		1,097		1,097
Total loans held-for-investment	$	—	$	—	$	103,637	$	103,637



($ in thousands)	Assets Measured at Fair Value on a Nonrecurring Basis as of December 31, 2021
	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Fair Value Measurements
Loans held-for-investment:
Commercial:
C&I	$	—	$	—	$	102,349	$	102,349
CRE:
CRE	—		—		21,891		21,891



Total commercial	—		—		124,240		124,240
Consumer:
Residential mortgage:

HELOCs	—		—		2,744		2,744


Total consumer	—		—		2,744		2,744
Total loans held-for-investment	$	—	$	—	$	126,984	$	126,984

Other nonperforming assets	$	391	$	—	$	—	$	391

The following table presents the increase (decrease) in fair value of certain assets held at the end of the respective reporting periods, for which a nonrecurring fair value adjustment was recognized for the three months ended March 31, 2022 and 2021:



($ in thousands)	Three Months Ended March 31,
	2022		2021
Loans held-for-investment:
Commercial:
C&I	$	(10,424)	$	(5,309)
CRE:
CRE	2,864		(7,062)
Multifamily residential	—		(16)
Construction and land	—		(71)

Total commercial	(7,560)		(12,458)
Consumer:
Residential mortgage:

HELOCs	3		(37)


Total consumer	3		(37)
Total loans held-for-investment	$	(7,557)	$	(12,495)


Other nonperforming assets	$	—	$	(3,890)

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



($ in thousands)	Fair Value Measurements (Level 3)		Valuation Techniques	Unobservable Inputs	Range of Inputs	Weighted- Average of Inputs (1)
March 31, 2022
Loans held-for-investment	$	44,881	Discounted cash flows	Discount	4% — 6%	4%
	$	34,570	Fair value of collateral	Discount	15% — 77%	30%

	$	24,186	Fair value of property	Selling cost	8%	8%




December 31, 2021
Loans held-for-investment	$	64,919	Discounted cash flows	Discount	4% — 15%	7%

	$	38,537	Fair value of collateral	Discount	15% — 75%	41%

	$	23,528	Fair value of property	Selling cost	8%	8%

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

Disclosures about Fair Value of Financial Instruments

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



($ in thousands)	March 31, 2022
	Carrying Amount		Level 1		Level 2		Level 3		Estimated Fair Value
Financial assets:
Cash and cash equivalents	$	3,848,700	$	3,848,700	$	—	$	—	$	3,848,700
Interest-bearing deposits with banks	$	816,125	$	—	$	816,125	$	—	$	816,125
Resale agreements	$	1,956,822	$	—	$	1,906,530	$	—	$	1,906,530
HTM debt securities	$	2,997,702	$	499,275	$	2,316,693	$	—	$	2,815,968
Restricted equity securities, at cost	$	77,682	$	—	$	77,682	$	—	$	77,682
Loans held-for-sale	$	631	$	—	$	631	$	—	$	631
Loans held-for-investment, net	$	42,944,997	$	—	$	—	$	42,698,185	$	42,698,185
Mortgage servicing rights	$	5,927	$	—	$	—	$	9,853	$	9,853
Accrued interest receivable	$	155,730	$	—	$	155,730	$	—	$	155,730
Financial liabilities:
Demand, checking, savings and money market deposits	$	46,708,274	$	—	$	46,708,274	$	—	$	46,708,274
Time deposits	$	8,230,087	$	—	$	8,202,829	$	—	$	8,202,829


FHLB advances	$	74,619	$	—	$	75,265	$	—	$	75,265
Repurchase agreements	$	300,000	$	—	$	309,225	$	—	$	309,225
Long-term debt	$	147,729	$	—	$	148,298	$	—	$	148,298
Accrued interest payable	$	6,970	$	—	$	6,970	$	—	$	6,970



($ in thousands)	December 31, 2021
	Carrying Amount		Level 1		Level 2		Level 3		Estimated Fair Value
Financial assets:
Cash and cash equivalents	$	3,912,935	$	3,912,935	$	—	$	—	$	3,912,935
Interest-bearing deposits with banks	$	736,492	$	—	$	736,492	$	—	$	736,492
Resale agreements	$	2,353,503	$	—	$	2,335,901	$	—	$	2,335,901

Restricted equity securities, at cost	$	77,434	$	—	$	77,434	$	—	$	77,434
Loans held-for-sale	$	635	$	—	$	635	$	—	$	635
Loans held-for-investment, net	$	41,152,202	$	—	$	—	$	41,199,599	$	41,199,599

Mortgage servicing rights	$	5,706	$	—	$	—	$	9,104	$	9,104
Accrued interest receivable	$	159,833	$	—	$	159,833	$	—	$	159,833
Financial liabilities:

Demand, checking, savings and money market deposits	$	45,388,550	$	—	$	45,388,550	$	—	$	45,388,550
Time deposits	$	7,961,982	$	—	$	7,966,116	$	—	$	7,966,116

FHLB advances	$	249,331	$	—	$	250,372	$	—	$	250,372
Repurchase agreements	$	300,000	$	—	$	310,525	$	—	$	310,525
Long-term debt	$	147,658	$	—	$	151,020	$	—	$	151,020
Accrued interest payable	$	11,435	$	—	$	11,435	$	—	$	11,435

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 the counterparties and the underlying collateral. The Company manages credit exposure from certain transactions by entering into master netting agreements and collateral arrangements with the counterparties. The relevant agreements allow for the efficient closeout of the transaction, liquidation and set-off of collateral against the net amount owed by the counterparty following a default. It is also the Company’s policy to take possession, where possible, of the assets underlying resale agreements. As a result of the Company’s credit risk mitigation practices with respect to resale agreements as described above, the Company did not hold any reserves for credit impairment with respect to these agreements as of both March 31, 2022 and December 31, 2021.

Securities Purchased under Resale Agreements — Total securities purchased under resale agreements were $1.33 billion as of both March 31, 2022 and December 31, 2021. The weighted-average yields were 1.63% and 1.57% for the three months ended March 31, 2022 and 2021, respectively.

Loans Purchased under Resale Agreements — Total loans purchased under resale agreements were $621.8 million and $1.02 billion as of March 31, 2022 and December 31, 2021, respectively. The weighted-average yields were 1.60% and 2.02% for the three months ended March 31, 2022 and 2021, respectively.

Assets Sold under Repurchase Agreements — As of March 31, 2022, securities sold under the repurchase agreements consisted of U.S. Treasury securities and U.S. government agency and U.S. government-sponsored enterprise mortgage-backed securities. Gross repurchase agreements were $300.0 million as of both March 31, 2022 and December 31, 2021. The weighted-average interest rates were 2.62% and 2.67% for the three months ended March 31, 2022 and 2021, respectively. As of March 31, 2022, 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 and loans that are not recognized on the Consolidated Balance Sheet. Collateral pledged consists of securities that are not netted on the Consolidated Balance Sheet against the related collateralized liability. Securities received or pledged as collateral in resale and repurchase agreements with other financial institutions may also be sold or re-pledged by the secured party, and are usually delivered to and held by the third-party trustees.

The following tables present the resale and repurchase agreements included on the Consolidated Balance Sheet as of March 31, 2022 and December 31, 2021:



($ in thousands)	March 31, 2022

Assets	Gross Amounts of Recognized Assets		Gross Amounts Offset on the Consolidated Balance Sheet		Net Amounts of Assets Presented on the Consolidated Balance Sheet		Gross Amounts Not Offset on the Consolidated Balance Sheet			Net Amount

							Collateral Received
Resale agreements	$	1,956,822	$	—	$	1,956,822	$	(1,918,204)	(1)	$	38,618

Liabilities	Gross Amounts of Recognized Liabilities		Gross Amounts Offset on the Consolidated Balance Sheet		Net Amounts of Liabilities Presented on the Consolidated Balance Sheet		Gross Amounts Not Offset on the Consolidated Balance Sheet			Net Amount

							Collateral Pledged
Repurchase agreements	$	300,000	$	—	$	300,000	$	(290,172)	(2)	$	9,828



($ in thousands)	December 31, 2021

	Gross Amounts of Recognized Assets		Gross Amounts Offset on the Consolidated Balance Sheet		Net Amounts of Assets Presented on the Consolidated Balance Sheet		Gross Amounts Not Offset on the Consolidated Balance Sheet
Assets										Net Amount
							Collateral Received
Resale agreements	$	2,353,503	$	—	$	2,353,503	$	(2,327,687)	(1)	$	25,816

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

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

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

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

Note 5 — Securities

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



($ in thousands)	March 31, 2022
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
AFS debt securities:
U.S. Treasury securities	$	676,330	$	64	$	(38,420)	$	637,974
U.S. government agency and U.S. government-sponsored enterprise debt securities	326,555		119		(22,279)		304,395
U.S. government agency and U.S. government-sponsored enterprise mortgage-backed securities:
Commercial mortgage-backed securities	632,660		1,185		(33,522)		600,323
Residential mortgage-backed securities	2,180,621		733		(112,869)		2,068,485
Municipal securities	317,952		749		(20,042)		298,659
Non-agency mortgage-backed securities:
Commercial mortgage-backed securities	468,203		647		(23,525)		445,325
Residential mortgage-backed securities	855,502		7		(48,727)		806,782
Corporate debt securities	683,502		2,107		(55,097)		630,512
Foreign government bonds	260,846		635		(7,670)		253,811
Asset-backed securities	72,160		—		(798)		71,362
CLOs	617,250		—		(5,447)		611,803
Total AFS debt securities	7,091,581		6,246		(368,396)		6,729,431
HTM debt securities:
U.S. Treasury securities	$	519,989	$	—	$	(20,714)	$	499,275
U.S. government agency and U.S. government-sponsored enterprise debt securities	946,763		—		(67,477)		879,286
U.S. government agency and U.S. government-sponsored enterprise mortgage-backed securities:
Commercial mortgage-backed securities	515,966		—		(31,678)		484,288
Residential mortgage-backed securities	824,713		—		(44,690)		780,023
Municipal securities	190,271		—		(17,175)		173,096
Total HTM debt securities	2,997,702		—		(181,734)		2,815,968
Total debt securities	$	10,089,283	$	6,246	$	(550,130)	$	9,545,399



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

During the first quarter of 2022, the Company transferred $3.01 billion in fair value of debt securities from AFS to HTM. At the time of the transfer, $113.0 million of unrealized losses, net of tax, was retained in AOCI.

As of March 31, 2022 and December 31, 2021, the amortized cost of debt securities excluded accrued interest receivables of $28.5 million and $33.1 million, respectively, which are included in Other assets on the Consolidated Balance Sheet. For the Company’s accounting policy related to debt securities’ accrued interest receivable, see Note 1 — Summary of Significant Accounting Policies — Significant Accounting Policies — Allowance for Credit Losses on Available-for-Sale Debt Securities to the Consolidated Financial Statements in the Company’s 2021 Form 10-K and Note 2 — Current Accounting Developments and Summary of Significant Accounting Policies to the Consolidated Financial Statements in this Form 10-Q.

Unrealized Losses of Available-for-Sale Debt Securities

The following tables present the fair value and the associated gross unrealized losses of the Company’s AFS debt securities, aggregated by investment category and the length of time that the securities have been in a continuous unrealized loss position as of March 31, 2022 and December 31, 2021.



($ in thousands)	March 31, 2022
	Less Than 12 Months				12 Months or More				Total
	Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses
AFS debt securities:
U.S. Treasury securities	$	452,031	$	(23,354)	$	162,785	$	(15,066)	$	614,816	$	(38,420)
U.S. government agency and U.S. government sponsored enterprise debt securities	283,790		(21,418)		13,639		(861)		297,429		(22,279)
U.S. government agency and U.S. government-sponsored enterprise mortgage-backed securities:
Commercial mortgage-backed securities	428,714		(22,960)		94,653		(10,562)		523,367		(33,522)
Residential mortgage-backed securities	1,651,592		(77,331)		363,817		(35,538)		2,015,409		(112,869)
Municipal securities	243,211		(20,042)		—		—		243,211		(20,042)
Non-agency mortgage-backed securities:
Commercial mortgage-backed securities	360,543		(17,424)		67,676		(6,101)		428,219		(23,525)
Residential mortgage-backed securities	724,439		(42,033)		81,681		(6,694)		806,120		(48,727)
Corporate debt securities	279,491		(16,008)		275,912		(39,089)		555,403		(55,097)
Foreign government bonds	19,022		(43)		77,195		(7,627)		96,217		(7,670)
Asset-backed securities	71,362		(798)		—		—		71,362		(798)
CLOs	320,603		(2,647)		291,200		(2,800)		611,803		(5,447)
Total AFS debt securities	$	4,834,798	$	(244,058)	$	1,428,558	$	(124,338)	$	6,263,356	$	(368,396)



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

As of March 31, 2022, the Company had a total of 497 AFS debt securities in a gross unrealized loss position with no credit impairment, consisting primarily of 223 U.S. government agency and U.S. government-sponsored enterprise mortgage-backed securities, 102 non-agency mortgage-backed securities, and 56 corporate debt securities. In comparison, as of December 31, 2021, the Company had a total of 431 AFS debt securities in a gross unrealized loss position with no credit impairment, consisting primarily of 180 U.S. government agency and U.S. government-sponsored enterprise mortgage-backed securities, 50 U.S. government agency and U.S. government-sponsored agency debt securities, 21 U.S. Treasury securities, and 30 corporate debt securities.

Allowance for Credit Losses on Available-for-Sale Debt Securities

Each reporting period, the Company assesses each AFS debt security that is in an unrealized loss position to determine whether the decline in fair value below the amortized cost basis resulted from a credit loss or other factors. For a discussion of the factors and criteria the Company uses in analyzing securities for impairment related to credit losses, see Note 1 — Summary of Significant Accounting Policies — Significant Accounting Policies — Allowance for Credit Losses on Available-for-Sale Debt Securities to the Consolidated Financial Statements in the Company’s 2021 Form 10-K.

The gross unrealized losses presented in the preceding tables were primarily attributable to interest rate movement and spread widening. Securities that were in unrealized loss positions as of March 31, 2022 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, 2022, was primarily due to interest rate movement. These securities (issued by Fannie Mae, Ginnie Mae and Freddie Mac) are guaranteed or sponsored by agencies of the U.S. government, and their credit profiles are strong (rated Aaa, AA+ and AAA by Moody’s Investors Service (“Moody’s”), S&P Global Ratings (“S&P”) and Fitch Ratings (“Fitch”), respectively). The Company expects to receive all contractual cash flows on time.

•Non-agency mortgage-backed securities — The market value decline as of March 31, 2022, was primarily due to interest rate movement and spread widening. Since these securities are rated AA or AAA by rating agencies (Moody’s, S&P, Kroll Bond Rating Agency, Fitch and Dominion Bond Rating Service Morningstar), or have high priority in the cash flow waterfall within the securitization structure, and the contractual payments have historically been on time, the Company believes the risk of credit losses on these securities is low.

•Corporate debt securities — The market value decline as of March 31, 2022, was primarily due to interest rate movement and spread widening. Since credit profiles of these 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 low.

As of March 31, 2022 and December 31, 2021, the Company had the intent to hold the AFS debt securities with unrealized losses through the anticipated recovery period and it was more-likely-than-not that the Company will not have to sell these securities before the recovery of their amortized cost. The issuers of these securities have not, to the Company’s knowledge, established any cause for default on these securities. As a result, the Company expects to recover the entire amortized cost basis of these securities. Accordingly, there was no allowance for credit losses as of March 31, 2022 and December 31, 2021 provided against these securities. In addition, there was no provision for credit losses recognized for the three months ended March 31, 2022 and 2021.

Allowance for Credit Losses on Held-to-Maturity Debt Securities

The Company separately evaluates its HTM debt securities for any credit losses, of which all qualify for the zero loss assumption as of March 31, 2022. For more information on the Company’s credit loss methodology, refer to Note 2 — Current Accounting Developments and Summary of Significant Accounting Policies to the Consolidated Financial Statements in this Form 10-Q. The Company monitors the credit quality of the HTM debt securities using external credit ratings. As of March 31, 2022, all HTM securities were highly rated (rated Aaa, AA+ and AAA by Moody’s, S&P and Fitch) and issued, guaranteed, or supported by U.S. government entities and agencies. The Company believes the history of no credit losses, current conditions as well as reasonable and supportable forecasts, indicate that all contractual payments will be received. Accordingly, the Company applied a zero credit loss assumption and no allowance for credit losses was recorded as of March 31, 2022.

Overall, the Company believes that the credit support levels of the debt securities are strong and, based on current assessments and macroeconomic forecasts, expects that full contractual cash flows will be received.

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, 2022 and 2021:



($ in thousands)	Three Months Ended March 31,
	2022		2021

Gross realized gains	$	1,278	$	192
Related tax expense	$	378	$	57

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

The following tables present the contractual maturities, amortized cost, fair value and weighted average yields of AFS and HTM debt securities as of March 31, 2022. Expected maturities will differ from contractual maturities on certain securities as the issuers and borrowers of the underlying collateral may have the right to call or prepay obligations with or without prepayment penalties.



($ in thousands)	Within One Year			After One Year through Five Years			After Five Years through Ten Years			After Ten Years			Total
AFS debt securities:
U.S. Treasury securities
Amortized cost	$	—		$	576,650		$	99,680		$	—		$	676,330
Fair value	—			547,431			90,543			—			637,974
Weighted-average yield (1)	—		%	1.28		%	0.74		%	—		%	1.20		%
U.S. government agency and U.S. government-sponsored enterprise debt securities
Amortized cost	—			29,199			125,000			172,356			326,555
Fair value	—			27,969			115,734			160,692			304,395
Weighted-average yield (1)	—		%	1.64		%	1.16		%	2.09		%	1.70		%
U.S. government agency and U.S. government-sponsored enterprise mortgage-backed securities:
Amortized cost	—			12,508			190,547			2,610,226			2,813,281
Fair value	—			12,538			185,605			2,470,665			2,668,808
Weighted-average yield (1)	—		%	3.08		%	2.62		%	1.78		%	1.85		%
Municipal securities
Amortized cost	1,841			36,444			18,691			260,976			317,952
Fair value	1,844			35,640			18,174			243,001			298,659
Weighted-average yield (1) (2)	2.72		%	2.41		%	2.60		%	2.23		%	2.28		%
Non-agency mortgage-backed securities
Amortized cost	10,807			202,260			45,103			1,065,535			1,323,705
Fair value	10,798			198,659			44,661			997,989			1,252,107
Weighted-average yield (1)	3.07		%	3.25		%	1.16		%	2.00		%	2.17		%
Corporate debt securities
Amortized cost	—			10,000			331,502			342,000			683,502
Fair value	—			9,848			322,115			298,549			630,512
Weighted average yield (1)	—		%	1.55		%	3.67		%	2.05		%	2.83		%
Foreign government bonds
Amortized cost	113,979			46,867			50,000			50,000			260,846
Fair value	113,864			47,315			50,131			42,501			253,811
Weighted-average yield (1)	1.88		%	3.01		%	0.42		%	1.50		%	1.73		%
Asset-backed securities:
Amortized cost	—			—			—			72,160			72,160
Fair value	—			—			—			71,362			71,362
Weighted-average yield (1)	—		%	—		%	—		%	1.50		%	1.50		%
CLOs
Amortized cost	—			—			—			617,250			617,250
Fair value	—			—			—			611,803			611,803
Weighted average yield (1)	—		%	—		%	—		%	1.41		%	1.41		%
Total AFS debt securities
Amortized cost	$	126,627		$	913,928		$	860,523		$	5,190,503		$	7,091,581
Fair value	$	126,506		$	879,400		$	826,963		$	4,896,562		$	6,729,431
Weighted-average yield (1)	1.99		%	1.89		%	2.39		%	1.83		%	1.91		%



($ in thousands)	Within One Year			After One Year through Five Years			After Five Years through Ten Years			After Ten Years			Total
HTM debt securities:
U.S. Treasury securities
Amortized cost	$	—		$	24,415		$	495,574		$	—		$	519,989
Fair value	—			23,492			475,783			—			499,275
Weighted-average yield (1)	—		%	0.76		%	1.06		%	—		%	1.05		%
U.S. government agency and U.S. government-sponsored enterprise debt securities
Amortized cost	—			—			162,903			783,860			946,763
Fair value	—			—			153,074			726,212			879,286
Weighted-average yield (1)	—		%	—		%	1.43		%	1.86		%	1.79		%
U.S. government agency and U.S. government-sponsored enterprise mortgage-backed securities
Amortized cost	—			—			88,114			1,252,565			1,340,679
Fair value	—			—			83,816			1,180,495			1,264,311
Weighted-average yield (1)	—		%	—		%	1.61		%	1.62		%	1.62		%
Municipal securities
Amortized cost	—			—			—			190,271			190,271
Fair value	—			—			—			173,096			173,096
Weighted-average yield (1) (2)	—		%	—		%	—		%	1.97		%	1.97		%
Total HTM debt securities
Amortized cost	$	—		$	24,415		$	746,591		$	2,226,696		$	2,997,702
Fair value	$	—		$	23,492		$	712,673		$	2,079,803		$	2,815,968
Weighted-average yield (1)	—		%	0.76		%	1.21		%	1.73		%	1.59		%

(1)Weighted-average yields are computed based on amortized cost balances.

(2)Yields on tax-exempt securities are not presented on a tax-equivalent basis.

As of March 31, 2022 and December 31, 2021, AFS and HTM debt securities with carrying values of $625.9 million and $803.9 million, respectively, were pledged to secure public deposits, repurchase agreements and for other purposes required or permitted by law.

Restricted Equity Securities

The following table presents the restricted equity securities included in Other assets on the Consolidated Balance Sheet as of March 31, 2022 and December 31, 2021:



($ in thousands)	March 31, 2022		December 31, 2021
Federal Reserve Bank of San Francisco (“FRBSF”) stock	$	60,432	$	60,184
FHLB stock	17,250		17,250
Total restricted equity securities	$	77,682	$	77,434

Note 6 — Derivatives

The Company uses derivatives to manage exposure to market risk, primarily interest rate or foreign currency risk, as well as to assist customers with their risk management objectives. The Company’s goal is to manage interest rate sensitivity and volatility 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 serve as economic hedges. For additional information on the Company’s derivatives and hedging activities, see Note 1 — Summary of Significant Accounting Policies — Significant Accounting Policies — Derivatives to the Consolidated Financial Statements of the Company’s 2021 Form 10-K.

The following table presents the notional amounts and gross fair values of the Company’s derivatives, as well as the balance sheet netting adjustments on an aggregate basis as of March 31, 2022 and December 31, 2021. The derivative assets and liabilities are presented on a gross basis prior to the application of bilateral collateral and master netting agreements, but after 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, 2022 and December 31, 2021. The resulting net derivative asset and liability fair values are included in Other assets and Accrued expenses and other liabilities, respectively, on the Consolidated Balance Sheet.



($ in thousands)	March 31, 2022							December 31, 2021
	Notional Amount			Fair Value				Notional Amount			Fair Value
				Derivative Assets		Derivative Liabilities					Derivative Assets		Derivative Liabilities
Derivatives designated as hedging instruments:


Cash flow hedges:
Interest rate contracts	$	1,275,000		$	385	$	—	$	275,000		$	—	$	57
Net investment hedges:
Foreign exchange contracts	86,751			—		490		86,531			—		225
Total derivatives designated as hedging instruments	$	1,361,751		$	385	$	490	$	361,531		$	—	$	282
Derivatives not designated as hedging instruments:
Interest rate contracts	$	17,771,724		$	187,716	$	236,569	$	17,575,420		$	240,222	$	179,905
Foreign exchange contracts	2,365,524			16,122		11,545		1,874,681			21,033		15,276
Credit contracts	122,560			—		67		72,560			—		141
Equity contracts	—		(1)	314		—		—		(1)	220		—
Commodity contracts	—		(2)	484,563		443,358		—		(2)	222,709		194,567
Total derivatives not designated as hedging instruments	$	20,259,808		$	688,715	$	691,539	$	19,522,661		$	484,184	$	389,889
Gross derivative assets/liabilities				$	689,100	$	692,029				$	484,184	$	390,171
Less: Master netting agreements				(108,782)		(108,782)					(58,679)		(58,679)
Less: Cash collateral received/paid				(81,534)		(326,299)					(42,274)		(174,048)
Net derivative assets/liabilities				$	498,784	$	256,948				$	383,231	$	157,444

(1)The Company held equity contracts in one public company and 13 private companies as of March 31, 2022. In comparison, the Company held equity contracts in one public company and 12 private companies as of December 31, 2021.

(2)The notional amount of the Company’s commodity contracts entered with its customers totaled 7,217 thousand barrels of crude oil and 83,460 thousand units of natural gas, measured in million British thermal units (“MMBTUs”) as of March 31, 2022. In comparison, the notional amount of the Company’s commodity contracts entered with its customers totaled 7,519 thousand barrels of crude oil and 83,274 thousand MMBTUs of natural gas as of December 31, 2021. The Company simultaneously entered into the offsetting commodity contracts with mirrored terms with third-party financial institutions.

Derivatives Designated as Hedging Instruments

Cash Flow Hedges — In 2020, the Company entered into $275.0 million in total notional amounts of interest rate swaps that were designated as cash flow hedges to limit the exposure to the variability in interest payments on certain floating rate borrowings. During the three months ended March 31, 2022, the Company entered into two new interest rate swaps in total notional amounts of $1.00 billion, which were designated as cash flow hedges to limit the exposure to the variability in interest receipts on certain variable rate CRE loans. Changes in the fair values of cash flow hedges are recognized in AOCI and reclassified to earnings in the same period when the hedged cash flows impact earnings. Reclassified gains and losses on these interest rate swaps are recorded either in the same line item as the interest payments of the hedged long-term borrowings within Interest expense, or in the same line items as the interest receipts of the hedged variable rate CRE loan pool within Interest and dividend income in the Consolidated Statements of Income. Considering the interest rates, yield curve and notional amounts as of March 31, 2022, the Company expected to reclassify an estimated $2.7 million 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, 2022 and 2021. The after-tax impact of cash flow hedges on AOCI is discussed in Note 13 — Accumulated Other Comprehensive Income (Loss) to the Consolidated Financial Statements in this Form-10-Q.



($ in thousands)	Three Months Ended March 31,
	2022		2021
(Losses) gains recognized in AOCI:
Interest rate swaps	$	(32,609)	$	426
Gains (losses) reclassified from AOCI into earnings:
Interest expense	$	(173)	$	(177)
Interest income	2,273		—
Total	$	2,100	$	(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 gains (losses) recognized in AOCI on net investment hedges for the three months ended March 31, 2022 and 2021:



($ in thousands)	Three Months Ended March 31,
	2022		2021
(Losses) gains recognized in AOCI	$	(1,119)	$	101

Derivatives Not Designated as Hedging Instruments

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

The following tables present the notional amounts and the gross fair values of interest rate derivative contracts outstanding as of March 31, 2022 and December 31, 2021:



($ in thousands)	March 31, 2022
	Customer Counterparty						($ in thousands)	Financial Counterparty
	Notional Amount		Fair Value					Notional Amount		Fair Value
			Assets		Liabilities					Assets		Liabilities
Written options	$	1,460,907	$	—	$	13,804	Purchased options	$	1,460,907	$	13,867	$	—
Sold collars and corridors	210,909		307		3,869		Collars and corridors	210,910		3,896		307
Swaps	7,199,663		40,246		193,683		Swaps	7,228,428		129,400		24,906
Total	$	8,871,479	$	40,553	$	211,356	Total	$	8,900,245	$	147,163	$	25,213



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

Included in the total notional amount of $8.90 billion of interest rate contracts entered into with financial counterparties as of March 31, 2022, was a notional amount of $2.59 billion of interest rate swaps that cleared through London Clearing House (“LCH”). Applying variation margin payments as settlement to LCH cleared derivative transactions resulted in a reduction in derivative asset fair value of $71.2 million and liability fair value of $16.2 million as of March 31, 2022. In comparison, included in the total notional amount of $8.80 billion of interest rate contracts entered into with financial counterparties as of December 31, 2021 was a notional amount of $2.79 billion of interest rate swaps that cleared through LCH. Applying variation margin payments as settlement to LCH cleared derivative transactions resulted in a reduction in derivative asset fair values of $18.1 million and liability fair values of $79.9 million as of December 31, 2021.

Foreign Exchange Contracts — The Company enters into foreign exchange contracts with its customers, consisting of 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, 2022 and December 31, 2021.

The following tables present the notional amounts and the gross fair values of foreign exchange derivative contracts outstanding as of March 31, 2022 and December 31, 2021:

($ in thousands)

March 31, 2022

Customer Counterparty

($ in thousands)