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Fair Value Measurement and Fair Value of Financial Instruments (Tables)

6 Months Ended

Jun. 30, 2024

Schedule Of Financial Assets (Liabilities) Measured At Fair Value On a Recurring Basis

The following tables present financial assets and liabilities that are measured at fair value on a recurring basis as of June 30, 2024 and December 31, 2023:



	Assets and Liabilities Measured at Fair Value on a Recurring Basis as of June 30, 2024
($ in thousands)	Level 1		Level 2		Level 3		Total Fair Value
AFS debt securities:
U.S. Treasury securities	$	623,757	$	—	$	—	$	623,757
U.S. government agency and U.S. government-sponsored enterprise debt securities	—		260,388		—		260,388
U.S. government agency and U.S. government-sponsored enterprise mortgage-backed securities (1):
Commercial mortgage-backed securities	—		444,847		—		444,847
Residential mortgage-backed securities	—		5,718,818		—		5,718,818
Municipal securities	—		256,563		—		256,563
Non-agency mortgage-backed securities:
Commercial mortgage-backed securities	—		320,637		—		320,637
Residential mortgage-backed securities	—		474,618		—		474,618
Corporate debt securities	—		507,130		—		507,130
Foreign government bonds	—		233,724		—		233,724
Asset-backed securities	—		38,593		—		38,593
Collateralized loan obligations (“CLOs”)	—		44,453		—		44,453
Total AFS debt securities	$	623,757	$	8,299,771	$	—	$	8,923,528

Affordable housing partnership, tax credit and CRA investments, net:
Equity securities	$	20,443	$	4,159	$	—	$	24,602
Total affordable housing partnership, tax credit and CRA investments, net	$	20,443	$	4,159	$	—	$	24,602

Other assets
Equity securities (2)	$	471	$	—	$	—	$	471
Total other assets	$	471	$	—	$	—	$	471

Derivative assets:
Interest rate contracts	$	—	$	459,590	$	—	$	459,590
Foreign exchange contracts	—		33,684		—		33,684

Equity contracts	—		—		240		240
Commodity contracts	—		60,946		—		60,946
Gross derivative assets	$	—	$	554,220	$	240	$	554,460
Netting adjustments (3)	$	—	$	(441,810)	$	—	$	(441,810)
Net derivative assets	$	—	$	112,410	$	240	$	112,650

Derivative liabilities:
Interest rate contracts	$	—	$	501,514	$	—	$	501,514
Foreign exchange contracts	—		25,598		—		25,598
Equity contracts (4)	—		—		15,119		15,119
Credit contracts	—		14		—		14
Commodity contracts	—		70,900		—		70,900
Gross derivative liabilities	$	—	$	598,026	$	15,119	$	613,145
Netting adjustments (3)	$	—	$	(109,190)	$	—	$	(109,190)
Net derivative liabilities	$	—	$	488,836	$	15,119	$	503,955

Refer to footnotes on the following page.



	Assets and Liabilities Measured at Fair Value on a Recurring Basis as of December 31, 2023
($ in thousands)	Level 1		Level 2		Level 3		Total Fair Value
AFS debt securities:
U.S. Treasury securities	$	1,060,375	$	—	$	—	$	1,060,375
U.S. government agency and U.S. government-sponsored enterprise debt securities	—		364,446		—		364,446
U.S. government agency and U.S. government-sponsored enterprise mortgage-backed securities (1):
Commercial mortgage-backed securities	—		468,259		—		468,259
Residential mortgage-backed securities	—		1,727,594		—		1,727,594
Municipal securities	—		261,016		—		261,016
Non-agency mortgage-backed securities:
Commercial mortgage-backed securities	—		367,516		—		367,516
Residential mortgage-backed securities	—		553,671		—		553,671
Corporate debt securities	—		502,425		—		502,425
Foreign government bonds	—		227,874		—		227,874
Asset-backed securities	—		42,300		—		42,300
CLOs	—		612,861		—		612,861
Total AFS debt securities	$	1,060,375	$	5,127,962	$	—	$	6,188,337

Affordable housing partnership, tax credit and CRA investments, net:
Equity securities	$	20,509	$	4,150	$	—	$	24,659
Affordable housing partnership, tax credit and CRA investments, net	$	20,509	$	4,150	$	—	$	24,659

Derivative assets:
Interest rate contracts	$	—	$	473,907	$	—	$	473,907
Foreign exchange contracts	—		57,072		—		57,072
Credit contracts	—		1		—		1
Equity contracts	—		—		336		336
Commodity contracts	—		79,604		—		79,604
Gross derivative assets	$	—	$	610,584	$	336	$	610,920
Netting adjustments (3)	$	—	$	(312,792)	$	—	$	(312,792)
Net derivative assets	$	—	$	297,792	$	336	$	298,128

Derivative liabilities:
Interest rate contracts	$	—	$	433,936	$	—	$	433,936
Foreign exchange contracts	—		42,564		—		42,564
Equity contracts (4)	—		—		15,119		15,119
Credit contracts	—		25		—		25
Commodity contracts	—		121,670		—		121,670
Gross derivative liabilities	$	—	$	598,195	$	15,119	$	613,314
Netting adjustments (3)	$	—	$	(76,170)	$	—	$	(76,170)
Net derivative liabilities	$	—	$	522,025	$	15,119	$	537,144

(1)Includes Government National Mortgage Association (“GNMA”) AFS debt securities totaling $5.2 billion and $1.2 billion of fair value as of June 30, 2024 and December 31, 2023, respectively.

(2)Represents the Visa C shares recognized at fair value in Other assets on the Consolidated Balance Sheet and recorded gain in Other investment income on the Consolidated Statement of Income. See Note 3 — Fair Value Measurement and Fair Value of Financial Instruments to the Consolidated Financial Statements in this Form 10-Q for additional information.

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

(4)Equity contracts classified as derivative liabilities consist of performance-based RSUs granted as part of EWBC’s consideration in its investment in Rayliant.

Schedule Of Reconciliation Of The Beginning And Ending Balances Of Equity Contracts Measured At Fair Value On a Recurring Basis Using Significant Unobservable Inputs (Level 3)

The following table provides a reconciliation of the beginning and ending balances of these equity contracts for the three and six months ended June 30, 2024 and 2023:



	Three Months Ended June 30,				Six Months Ended June 30,
($ in thousands)	2024		2023		2024		2023
Derivative assets:
Equity contracts
Beginning balance	$	330	$	277	$	336	$	323

Total losses included in earnings (1)	(90)		(14)		(96)		(60)









Ending balance	$	240	$	263	$	240	$	263
Derivative liabilities:
Equity contracts (2)
Beginning balance	$	15,119	$	—	$	15,119	$	—
Total gains (losses) included in earnings	—		—		—		—

Ending balance	$	15,119	$	—	$	15,119	$	—

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

(2)Equity contracts classified as derivative liabilities consist of performance-based RSUs granted as part of EWBC’s consideration in its investment in Rayliant.

Schedule Of Quantitative Information About Significant Unobservable Inputs Used In The Valuation Of Level 3 Fair Value Measurements

The following table presents quantitative information about the significant unobservable inputs used in the valuation of Level 3 fair value measurements as of June 30, 2024 and December 31, 2023. The significant unobservable inputs presented in the table below are those that the Company considers significant to the fair value of the Level 3 assets. The Company considers unobservable inputs to be significant if, by their exclusion, the fair value of the Level 3 assets would be impacted by a predetermined percentage change.



($ in thousands)	Fair Value Measurements (Level 3)		Valuation Technique	Unobservable Inputs	Range of Inputs	Weighted-Average of Inputs
June 30, 2024
Derivative assets:
Equity contracts	$	240	Black-Scholes option pricing model	Equity volatility	34% — 48%	44	%	(1)
				Liquidity discount	47%	47	%
Derivative liabilities:
Equity contracts (2)	$	15,119	Internal model	Payout % designated based on operating revenue and operating EBITDA of investee	84%	84	%
December 31, 2023
Derivative assets:
Equity contracts	$	336	Black-Scholes option pricing model	Equity volatility	37% — 48%	45	%	(1)
				Liquidity discount	47%	47	%
Derivative liabilities:
Equity contracts (2)	$	15,119	Internal model	Payout % designated based on operating revenue and operating EBITDA of investee	84%	84	%

(1)Weighted-average of inputs is calculated based on the fair value of equity contracts as of both June 30, 2024 and December 31, 2023.

(2)Equity contracts classified as derivative liabilities consist of performance-based RSUs granted as part of EWBC’s consideration in its investment in Rayliant.

The following table presents the quantitative information about the significant unobservable inputs used in the valuation of Level 3 fair value measurements that are measured on a nonrecurring basis as of June 30, 2024 and December 31, 2023:



($ in thousands)	Fair Value Measurements (Level 3)		Valuation Techniques	Unobservable Inputs	Range of Inputs	Weighted-Average of Inputs
June 30, 2024

Loans held-for-investment	$	7,219	Fair value of collateral	Discount	20% — 50%	24%	(1)
	$	13,793	Fair value of collateral	Contract value	NM	NM
	$	52,070	Fair value of property	Selling cost	8% — 20%	10%	(1)
OREO	$	8,565	Fair value of property	Selling cost	8%	8%



December 31, 2023


Loans held-for-investment	$	16,328	Fair value of collateral	Discount	15% — 75%	45%	(1)
	$	3,009	Fair value of collateral	Contract value	NM	NM
	$	26,555	Fair value of property	Selling cost	8%	8%
Affordable housing partnership, tax credit and CRA investments, net	$	868	Individual analysis of each investment	Expected future tax benefits and distributions	NM	NM

NM — Not meaningful.

(1)Weighted-average of inputs is based on the relative fair value of the respective assets as of June 30, 2024 and December 31, 2023.

Schedule Of Carrying Amounts Of Assets That Were Still Held And Had Fair Value Adjustments Measured On a Nonrecurring Basis

The following tables present the carrying amounts of assets that were still held and had fair value adjustments measured on a nonrecurring basis as of June 30, 2024 and December 31, 2023:



	Assets Measured at Fair Value on a Nonrecurring Basis as of June 30, 2024
($ in thousands)	Level 1		Level 2		Level 3		Fair Value Measurements
Loans held-for-investment:
Commercial:
Commercial and industrial (“C&I”)	$	—	$	—	$	44,605	$	44,605
Commercial real estate (“CRE”):
CRE	—		—		17,069		17,069

Construction and land	—		—		11,316		11,316

Total commercial	—		—		72,990		72,990
Consumer:
Residential mortgage:
Single-family residential	—		—		92		92



Total consumer	—		—		92		92
Total loans held-for-investment	$	—	$	—	$	73,082	$	73,082

OREO (1)	$	—	$	—	$	8,565	$	8,565

(1)Represents the carrying value of OREO property that was written down subsequent to its initial classification as OREO and includes in Other assets on the Consolidated Balance Sheet.



	Assets Measured at Fair Value on a Nonrecurring Basis as of December 31, 2023
($ in thousands)	Level 1		Level 2		Level 3		Fair Value Measurements
Loans held-for-investment:
Commercial:
C&I	$	—	$	—	$	22,035	$	22,035
CRE:
CRE	—		—		22,653		22,653



Total commercial	—		—		44,688		44,688
Consumer:
Residential mortgage:

Home equity lines of credit (“HELOCs”)	—		—		1,204		1,204


Total consumer	—		—		1,204		1,204
Total loans held-for-investment	$	—	$	—	$	45,892	$	45,892
Affordable housing partnership, tax credit and CRA investments, net	$	—	$	—	$	868	$	868

Schedule Of Increase (Decrease) In Fair Value Of Assets For Which a Fair Value Adjustment Was Recognized, Nonrecurring Basis

The following table presents the decrease in the fair value of certain assets held at the end of the respective reporting periods, for which a nonrecurring fair value adjustment was recognized for the three and six months ended June 30, 2024 and 2023:



	Three Months Ended June 30,				Six Months Ended June 30,
($ in thousands)	2024		2023		2024		2023
Loans held-for-investment:
Commercial:
C&I	$	(14,764)	$	(10,419)	$	(24,769)	$	(11,674)
CRE:
CRE	(2,260)		(2,252)		(2,260)		(2,252)

Construction and land	(920)		—		(2,144)		—
Total CRE	(3,180)		(2,252)		(4,404)		(2,252)
Total commercial	(17,944)		(12,671)		(29,173)		(13,926)
Consumer:
Residential mortgage:
Single-family residential	(23)		—		(1,407)		—



Total consumer	(23)		—		(1,407)		—
Total loans held-for-investment	$	(17,967)	$	(12,671)	$	(30,580)	$	(13,926)

Affordable housing partnership, tax credit and CRA investments, net	$	—	$	(961)	$	—	$	(787)

OREO	$	(2,576)	$	—	$	(2,576)	$	—

Schedule Of The Carrying And Fair Value Estimates Per The Fair Value Hierarchy Of Financial Instruments Measured On a Nonrecurring Basis

The following tables present the fair value estimates for financial instruments as of June 30, 2024 and December 31, 2023, excluding financial instruments recorded at fair value on a recurring basis as they are included in the tables presented elsewhere in this Note. The carrying amounts in the following tables are recorded on the Consolidated Balance Sheet under the indicated captions, except for accrued interest receivable, restricted equity securities, at cost, and mortgage servicing rights that are included in Other assets, and accrued interest payable which is included in Accrued expenses and other liabilities. These financial instruments are measured on an amortized cost basis on the Company’s Consolidated Balance Sheet.



	June 30, 2024
($ in thousands)	Carrying Amount		Level 1		Level 2		Level 3		Estimated Fair Value
Financial assets:
Cash and cash equivalents	$	4,365,691	$	4,365,691	$	—	$	—	$	4,365,691
Interest-bearing deposits with banks	$	24,530	$	—	$	24,530	$	—	$	24,530
Resale agreements	$	485,000	$	—	$	390,522	$	—	$	390,522
HTM debt securities	$	2,938,250	$	487,707	$	1,917,520	$	—	$	2,405,227
Restricted equity securities, at cost	$	165,164	$	—	$	165,164	$	—	$	165,164
Loans held-for-sale	$	18,909	$	—	$	18,909	$	—	$	18,909
Loans held-for-investment, net	$	52,084,115	$	—	$	—	$	50,340,499	$	50,340,499
Mortgage servicing rights	$	5,903	$	—	$	—	$	10,385	$	10,385
Accrued interest receivable	$	329,442	$	—	$	329,442	$	—	$	329,442
Financial liabilities:
Demand, checking, savings and money market deposits	$	38,229,098	$	—	$	38,229,098	$	—	$	38,229,098
Time deposits	$	21,770,687	$	—	$	21,726,174	$	—	$	21,726,174


FHLB advances	$	3,500,000	$	—	$	3,504,276	$	—	$	3,504,276

Long-term debt	$	31,844	$	—	$	30,316	$	—	$	30,316
Accrued interest payable	$	63,078	$	—	$	63,078	$	—	$	63,078



	December 31, 2023
($ in thousands)	Carrying Amount		Level 1		Level 2		Level 3		Estimated Fair Value
Financial assets:
Cash and cash equivalents	$	4,614,984	$	4,614,984	$	—	$	—	$	4,614,984
Interest-bearing deposits with banks	$	10,498	$	—	$	10,498	$	—	$	10,498
Resale agreements	$	785,000	$	—	$	699,056	$	—	$	699,056
HTM debt securities	$	2,956,040	$	488,551	$	1,965,420	$	—	$	2,453,971
Restricted equity securities, at cost	$	79,811	$	—	$	79,811	$	—	$	79,811
Loans held-for-sale	$	116	$	—	$	116	$	—	$	116
Loans held-for-investment, net	$	51,542,039	$	—	$	—	$	50,256,565	$	50,256,565

Mortgage servicing rights	$	6,602	$	—	$	—	$	9,470	$	9,470
Accrued interest receivable	$	331,490	$	—	$	331,490	$	—	$	331,490
Financial liabilities:

Demand, checking, savings and money market deposits	$	38,048,974	$	—	$	38,048,974	$	—	$	38,048,974
Time deposits	$	18,043,464	$	—	$	18,004,951	$	—	$	18,004,951


BTFP borrowings	$	4,500,000	$	—	$	4,500,000	$	—	$	4,500,000
Long-term debt	$	148,249	$	—	$	150,896	$	—	$	150,896
Accrued interest payable	$	205,430	$	—	$	205,430	$	—	$	205,430

- Definition

Tabular disclosure of the fair value measurement of assets using significant unobservable inputs (Level 3), a reconciliation of the beginning and ending balances, separately presenting changes during the period attributable to the following: (1) total gains or losses for the period (realized and unrealized), segregating those gains or losses included in earnings (or changes in net assets) and gains or losses recognized in other comprehensive income (loss), and a description of where those gains or losses included in earnings (or changes in net assets) are reported in the statement of income (or activities); (2) purchases, sales, issues, and settlements (each type disclosed separately); and (3) transfers in and transfers out of Level 3 (for example, transfers due to changes in the observability of significant inputs), by class of asset.

+ References + Details