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Loans Held for Investment
 6 Months Ended
Jun. 30, 2022
Receivables [Abstract]  
Loans Held for Investment Loans Held for Investment
 
The Company’s loan portfolio is segmented according to loans that share similar attributes and risk characteristics.

Investor loans secured by real estate includes CRE non-owner-occupied, multifamily, construction, and land, as well as SBA loans secured by real estate, which are loans collateralized by hotel/motel real property.

Business loans secured by real estate are loans to businesses that are collateralized by real estate where the operating cash flow of the business is the primary source of repayment. This loan portfolio includes CRE owner-occupied, franchise loans secured by real estate, and SBA loans secured by real estate, which are collateralized by real property other than hotel/motel real property.

Commercial loans are loans to businesses where the operating cash flow of the business is the primary source of repayment. This loan portfolio includes commercial and industrial, franchise loans non-real estate secured, and SBA loans non-real estate secured.

Retail loans include single family residential and consumer loans. Single family residential includes home equity lines of credit, as well as second trust deeds.
The following table presents the composition of the loan portfolio for the periods indicated:
June 30,December 31,
(Dollars in thousands)20222021
Investor loans secured by real estate
CRE non-owner-occupied$2,788,715 $2,771,137 
Multifamily6,188,086 5,891,934 
Construction and land331,734 277,640 
SBA secured by real estate44,199 46,917 
Total investor loans secured by real estate9,352,734 8,987,628 
Business loans secured by real estate
CRE owner-occupied2,486,747 2,251,014 
Franchise real estate secured387,683 380,381 
SBA secured by real estate67,191 69,184 
Total business loans secured by real estate2,941,621 2,700,579 
Commercial loans
Commercial and industrial2,295,421 2,103,112 
Franchise non-real estate secured415,830 392,576 
SBA non-real estate secured11,008 11,045 
Total commercial loans2,722,259 2,506,733 
Retail loans
Single family residential77,951 95,292 
Consumer4,130 5,665 
Total retail loans82,081 100,957 
Loans held for investment before basis adjustment (1)
15,098,695 14,295,897 
Basis adjustment associated with fair value hedge (2)
(51,087)— 
Loans held for investment15,047,608 14,295,897 
Allowance for credit losses for loans held for investment(196,075)(197,752)
Loans held for investment, net$14,851,533 $14,098,145 
Total unfunded loan commitments$2,872,934 $2,507,911 
Loans held for sale, at lower of cost or fair value2,957 10,869 
______________________________
(1) Includes net deferred origination fees of $3.1 million and $3.5 million, and unaccreted fair value net purchase discounts of $63.6 million and $77.1 million as of June 30, 2022 and December 31, 2021, respectively.
(2) Represents the basis adjustment associated with the application of hedge accounting on certain loans. Refer to Note 11 – Derivative Instruments for additional information.



Loans Serviced for Others and Loan Securitization

The Company generally retains the servicing rights of the guaranteed portion of SBA loans sold, for which the Company initially records a servicing asset at fair value within its other assets category. Servicing assets are subsequently measured using the amortization method and amortized to noninterest income. Servicing assets are evaluated for impairment based on the fair value of the assets as compared to carrying amount. At June 30, 2022 and December 31, 2021, the servicing asset totaled $3.7 million and $3.8 million, respectively, and were included in other assets in the Company’s consolidated statement of financial condition. Servicing assets are evaluated for impairment based upon the fair value of the rights as compared to the carrying amount. Impairment is recognized through a valuation allowance, to the extent the fair value is less than the carrying amount. At June 30, 2022 and December 31, 2021, the Company determined that no valuation allowance was necessary.
    
In connection with the acquisition of Opus Bank (“Opus”), the Company acquired Federal Home Loan Mortgage Corporation (“Freddie Mac”) guaranteed structured pass-through certificates, which were issued as a result of Opus’s securitization sale of $509 million in originated multifamily loans through a Freddie Mac-sponsored transaction in December 2016. The Company's continuing involvement includes sub-servicing responsibilities, general representations and warranties, and reimbursement obligations. Servicing responsibilities on loan sales generally include obligations to collect and remit payments of principal and interest, provide foreclosure services, manage payments of taxes and insurance premiums, and otherwise administer the underlying loans. In connection with the securitization transaction, Freddie Mac was designated as the master servicer and appointed the Company to perform sub-servicing responsibilities, which generally include the servicing responsibilities described above with the exception of the servicing of foreclosed or defaulted loans. The overall management, servicing, and resolution of defaulted loans and foreclosed loans are separately designated to the special servicer, a third-party institution that is independent of the master servicer and the Company. The master servicer has the right to terminate the Company in its role as sub-servicer and direct such responsibilities accordingly.

General representations and warranties associated with loan sales and securitization sales require the Company to uphold various assertions that pertain to the underlying loans at the time of the transaction, including, but not limited to, compliance with relevant laws and regulations, absence of fraud, enforcement of liens, no environmental damages, and maintenance of relevant environmental insurance. Such representations and warranties are limited to those that do not meet the quality represented at the transaction date and do not pertain to a decline in value or future payment defaults. In circumstances where the Company breaches its representations and warranties, the Company would generally be required to cure such instances through a repurchase or substitution of the subject loan(s).

To the extent the ultimate resolution of defaulted loans results in contractual principal and interest payments that are deficient, the Company is obligated to reimburse Freddie Mac for such amounts, not to exceed 10% of the original principal amount of the loans comprising the securitization pool at the closing date of December 23, 2016. The liability recorded for Company’s exposure to the reimbursement agreement with Freddie Mac was $338,000 as of June 30, 2022 and December 31, 2021.

Loans sold and serviced for others are not included in the accompanying consolidated statements of financial condition. The unpaid principal balance of loans and participations serviced for others were $528.3 million at June 30, 2022 and $565.8 million at December 31, 2021. Included in those totals are multifamily loans transferred through securitization with Freddie Mac of $64.0 million and $78.1 million at June 30, 2022 and December 31, 2021, respectively, and SBA participations serviced for others of $338.9 million and $365.6 million at June 30, 2022 and December 31, 2021, respectively.
Concentration of Credit Risk
 
As of June 30, 2022, the Company’s loan portfolio was primarily collateralized by various forms of real estate and business assets located predominately in California. The Company’s loan portfolio contains concentrations of credit in multifamily, CRE non-owner-occupied, CRE owner-occupied, and C&I business loans. The Bank maintains policies approved by the Bank’s Board of Directors (the “Bank Board”) that address these concentrations and diversifies its loan portfolio through loan originations, purchases, and sales to meet approved concentration levels.

Under applicable laws and regulations, the Bank may not make secured loans to one borrower in excess of 25% of the Bank’s unimpaired capital plus surplus, and likewise in excess of 15% of the Bank’s unimpaired capital plus surplus for unsecured loans. These loans-to-one borrower limitations result in a dollar limitation of $817.0 million for secured loans and $490.2 million for unsecured loans at June 30, 2022. In order to manage concentration risk, the Bank maintains a house lending limit well below these statutory maximums. At June 30, 2022, the Bank’s largest aggregate outstanding balance of loans to one borrower was $296.6 million primarily comprised of an asset-based line of credit.
 
Credit Quality and Credit Risk Management
 
The Company’s credit quality and credit risk are controlled in two distinct areas. The first is the loan origination process, wherein the Bank underwrites credit and chooses which types and levels of risk it is willing to accept. The Company maintains a credit policy which addresses many related topics, sets forth maximum tolerances for key elements of loan risk, and indicates appropriate protocols for identifying and analyzing these risk elements. The policy sets forth specific guidelines for analyzing each of the loan products the Company offers from both an individual and portfolio-wide basis. The credit policy is reviewed annually by the Bank Board. The Bank’s underwriters ensure all key risk factors are analyzed, with most underwriting including a global cash flow analysis of the prospective borrowers. 
    
The second area is in the ongoing oversight of the loan portfolio, where existing credit risk is measured and monitored, and where performance issues are dealt with in a timely and appropriate fashion. Credit risk is monitored and managed within the loan portfolio by the Company’s portfolio managers based on both the credit policy and a credit and portfolio review policy. This latter policy requires a program of financial data collection and analysis, thorough loan reviews, property and/or business inspections, monitoring of portfolio concentrations and trends, and incorporation of current business and economic conditions. The portfolio managers also monitor asset-based lines of credit, loan covenants, and other conditions associated with the Company’s business loans as a means to help identify potential credit risk. Most individual loans, excluding the homogeneous loan portfolio, are reviewed at least annually, including the assignment or confirmation of a risk grade.
 
Risk grades are based on a six-grade Pass scale, along with Special Mention, Substandard, Doubtful, and Loss classifications, as such classifications are defined by the federal banking regulatory agencies. The assignment of risk grades allows the Company to, among other things, identify the risk associated with each credit in the portfolio and to provide a basis for estimating credit losses inherent in the portfolio. Risk grades are reviewed regularly with the Company’s Credit and Portfolio Review Committee, and the portfolio management and risk grading process is reviewed on an ongoing basis by an independent loan review function, as well as by regulatory agencies during scheduled examinations.
 
The following provides brief definitions for risk grades assigned to loans in the portfolio:
 
•Pass classifications represent assets with an acceptable level of credit quality that contains no well-defined deficiencies or weaknesses.
•Special Mention assets do not currently expose the Bank to a sufficient risk to warrant classification in one of the adverse categories, but possess correctable deficiencies or potential weaknesses deserving management’s close attention.
•Substandard assets are inadequately protected by the current net worth and paying capacity of the obligor or of the collateral pledged, if any. These assets are characterized by the distinct possibility that the Bank will sustain some loss if the deficiencies are not corrected. OREO acquired through foreclosure is also classified as substandard assets.
•Doubtful credits have all the weaknesses inherent in substandard credits, with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions, and values, highly questionable and improbable.
•Loss assets are those that are considered uncollectible and of such little value that their continuance as assets is not warranted. Amounts classified as loss are promptly charged off.

The Bank’s portfolio managers also manage loan performance risks, collections, workouts, bankruptcies, and foreclosures. A special department, whose portfolio managers have professional expertise in these areas, typically handles or advises on these types of matters. Loan performance risks are mitigated by our portfolio managers acting promptly and assertively to address problem credits when they are identified. Collection efforts commence immediately upon non-payment, and the portfolio managers seek to promptly determine the appropriate steps to minimize the Company’s risk of loss. When foreclosure will maximize the Company’s recovery for a non-performing loan, the portfolio managers will take appropriate action to initiate the foreclosure process.
 
When a loan is graded as special mention, substandard, or doubtful, the Company obtains an updated valuation of the underlying collateral. Collateral generally consists of accounts receivable, inventory, fixed assets, real estate properties, and cash. If, through the Company’s credit risk management process, it is determined the ultimate repayment of a loan will come from the foreclosure upon and ultimate sale of the underlying collateral, the loan is deemed collateral dependent and evaluated individually to determine an appropriate ACL for the loan. The ACL for such loans is measured as the amount by which the fair value of the underlying collateral, less estimated costs to sell, is less than the amortized cost of the loan. The Company typically continues to obtain or confirm updated valuations of underlying collateral for special mention and classified loans on an annual or biennial basis in order to have the most current indication of fair value of the underlying collateral securing the loan. Additionally, once a loan is identified as collateral dependent, due to the likelihood of foreclosure, and repayment of the loan is expected to come from the eventual sale of the underlying collateral, an analysis of the underlying collateral is performed at least quarterly. Changes in the estimated fair value of the collateral are reflected in the lifetime ACL for the loan. Balances deemed to be uncollectable are promptly charged-off. However, if a loan is not considered collateral dependent and management determines that the loan no longer possesses risk characteristics similar to other loans in the loan portfolio, the loan is individually evaluated, and the associated ACL is determined through the use of a discounted cash flow analysis.
The following table stratifies the loans held for investment portfolio by the Company’s internal risk grading, and by year of origination, as of June 30, 2022:
Term Loans by Vintage
(Dollars in thousands)20222021202020192018PriorRevolvingRevolving Converted to Term During the PeriodTotal
June 30, 2022
Investor loans secured by real estate
CRE non-owner-occupied
Pass$407,555 $647,131 $229,618 $370,339 $331,235 $754,385 $5,333 $— $2,745,596 
Special mention— — — — 7,585 6,359 — — 13,944 
Substandard— — — 25,773 — 2,914 — 488 29,175 
Multifamily
Pass1,012,086 2,245,091 809,115 976,171 314,160 821,575 261 — 6,178,459 
Substandard— 6,074 — 2,799 — 754 — — 9,627 
Construction and land
Pass95,161 152,872 44,555 26,790 5,063 7,293 — — 331,734 
SBA secured by real estate
Pass6,616 130 495 5,476 7,653 15,870 — — 36,240 
Substandard— — — — 2,432 5,527 — — 7,959 
Total investor loans secured by real estate1,521,418 3,051,298 1,083,783 1,407,348 668,128 1,614,677 5,594 488 9,352,734 
Business loans secured by real estate
CRE owner-occupied
Pass506,736 760,398 255,275 255,040 131,615 551,125 4,720 — 2,464,909 
Substandard— — 4,655 2,479 4,761 9,943 — — 21,838 
Franchise real estate secured
Pass43,571 152,200 35,617 53,647 34,819 67,829 — — 387,683 
SBA secured by real estate
Pass8,493 7,265 2,342 6,507 5,214 30,616 — — 60,437 
Substandard— — — — 1,377 5,377 — — 6,754 
Total loans secured by business real estate558,800 919,863 297,889 317,673 177,786 664,890 4,720 — 2,941,621 
Commercial loans
Commercial and industrial
Pass194,470 361,430 65,403 170,883 100,744 152,008 1,232,369 2,801 2,280,108 
Special mention— — 323 — — — 530 — 853 
Substandard893 2,122 — 3,527 674 1,687 5,557 — 14,460 
Franchise non-real estate secured
Pass74,199 152,765 22,624 72,220 37,442 41,084 780 — 401,114 
Substandard— — — — 2,151 12,565 — — 14,716 
SBA non-real estate secured
Pass1,952 453 522 1,817 732 3,955 — — 9,431 
Substandard— — — 137 237 579 — 624 1,577 
Total commercial loans271,514 516,770 88,872 248,584 141,980 211,878 1,239,236 3,425 2,722,259 
Term Loans by Vintage
(Dollars in thousands)20222021202020192018PriorRevolvingRevolving Converted to Term During the PeriodTotal
June 30, 2022
Retail loans
Single family residential
Pass$— $306 $181 $— $29 $52,537 $24,854 $— $77,907 
Substandard— — — — — 44 — — 44 
Consumer loans
Pass— 9 22 27 9 1,173 2,887 — 4,127 
Substandard— — — 3 — — — — 3 
Total retail loans— 315 203 30 38 53,754 27,741 — 82,081 
Loans held for investment before basis adjustment (1)
$2,351,732 $4,488,246 $1,470,747 $1,973,635 $987,932 $2,545,199 $1,277,291 $3,913 $15,098,695 
______________________________
(1) Excludes the basis adjustment of $51.1 million to the carrying amount of certain loans included in fair value hedging relationships. Refer to Note 11 – Derivative Instruments for additional information.

The following table stratifies the loans held for investment portfolio by the Company’s internal risk grading, and by year of origination, as of December 31, 2021:
Term Loans by Vintage
(Dollars in thousands)20212020201920182017PriorRevolvingRevolving Converted to Term During the PeriodTotal
December 31, 2021
Investor loans secured by real estate
CRE non-owner-occupied
Pass$708,560 $269,944 $393,097 $387,923 $218,388 $730,736 $9,353 $— $2,718,001 
Special mention— — 16,166 7,682 — — — — 23,848 
Substandard— — 25,777 — — 2,998 513 — 29,288 
Multifamily
Pass2,260,708 952,127 1,199,505 444,904 479,029 554,067 286 — 5,890,626 
Substandard— — — 543 — 765 — — 1,308 
Construction and land
Pass119,532 97,721 40,556 12,415 3,857 3,559 — — 277,640 
SBA secured by real estate
Pass130 497 6,259 9,074 12,070 9,198 — — 37,228 
Special mention— — — 957 — 544 — — 1,501 
Substandard— — — 2,343 3,679 2,166 — — 8,188 
Total investor loans secured by real estate3,088,930 1,320,289 1,681,360 865,841 717,023 1,304,033 10,152 — 8,987,628 
Term Loans by Vintage
(Dollars in thousands)20212020201920182017PriorRevolvingRevolving Converted to Term During the PeriodTotal
December 31, 2021
Business loans secured by real estate
CRE owner-occupied
Pass$853,044 $273,469 $287,249 $161,636 $187,130 $464,271 $6,738 $292 $2,233,829 
Substandard— — 2,553 6,074 2,966 5,592 — — 17,185 
Franchise real estate secured
Pass156,381 36,335 55,091 40,047 56,288 34,878 1,361 — 380,381 
SBA secured by real estate
Pass6,379 2,364 7,331 9,125 10,734 24,627 — — 60,560 
Special mention— — — — — 62 — — 62 
Substandard— — — 2,062 2,690 3,810 — — 8,562 
Total loans secured by business real estate1,015,804 312,168 352,224 218,944 259,808 533,240 8,099 292 2,700,579 
Commercial loans
Commercial and industrial
Pass425,683 79,635 200,234 117,471 123,345 70,789 1,032,053 3,371 2,052,581 
Special mention— — 146 — — 152 14,814 178 15,290 
Substandard1,772 — 14 2,683 863 1,150 27,684 1,075 35,241 
Franchise non-real estate secured
Pass163,865 23,943 85,206 45,061 23,672 31,163 — — 372,910 
Substandard— — 1,589 3,627 13,346 1,104 — — 19,666 
SBA non-real estate secured
Pass474 564 1,292 666 2,806 2,148 — — 7,950 
Special mention— — 681 114 — — — — 795 
Substandard— — 76 339 685 547 653 — 2,300 
Total commercial loans591,794 104,142 289,238 169,961 164,717 107,053 1,075,204 4,624 2,506,733 
Retail loans
Single family residential
Pass313 211 — 32 2,008 68,759 23,920 — 95,243 
Substandard— — — — — 49 — — 49 
Consumer loans
Pass11 28 49 19 11 1,394 4,113 — 5,625 
Substandard— — 5 — — 35 — — 40 
Total retail loans324 239 54 51 2,019 70,237 28,033 — 100,957 
Loans held for investment$4,696,852 $1,736,838 $2,322,876 $1,254,797 $1,143,567 $2,014,563 $1,121,488 $4,916 $14,295,897 
The following tables stratify loans held for investment by delinquencies in the Company’s loan portfolio at the dates indicated:
Days Past Due
(Dollars in thousands)Current30-5960-8990+Total
June 30, 2022
Investor loans secured by real estate
CRE non-owner-occupied$2,772,126 $6,359 $— $10,230 $2,788,715 
Multifamily6,179,213 — — 8,873 6,188,086 
Construction and land331,734 — — — 331,734 
SBA secured by real estate44,199 — — — 44,199 
Total investor loans secured by real estate9,327,272 6,359 — 19,103 9,352,734 
Business loans secured by real estate
CRE owner-occupied2,481,858 — — 4,889 2,486,747 
Franchise real estate secured387,683 — — — 387,683 
SBA secured by real estate67,108 83 — — 67,191 
Total business loans secured by real estate2,936,649 83 — 4,889 2,941,621 
Commercial loans
Commercial and industrial2,290,204 473 — 4,744 2,295,421 
Franchise non-real estate secured415,830 — — — 415,830 
SBA not secured by real estate10,384 — — 624 11,008 
Total commercial loans2,716,418 473 — 5,368 2,722,259 
Retail loans
Single family residential77,951 — — — 77,951 
Consumer loans4,130 — — — 4,130 
Total retail loans82,081 — — — 82,081 
Loans held for investment before basis adjustment (1)
$15,062,420 $6,915 $— $29,360 $15,098,695 

December 31, 2021
Investor loans secured by real estate
CRE non-owner-occupied$2,760,882 $— $— $10,255 $2,771,137 
Multifamily5,890,704 1,230 — — 5,891,934 
Construction and land277,640 — — — 277,640 
SBA secured by real estate46,580 — — 337 46,917 
Total investor loans secured by real estate8,975,806 1,230 — 10,592 8,987,628 
Business loans secured by real estate
CRE owner-occupied2,246,062 — — 4,952 2,251,014 
Franchise real estate secured380,381 — — — 380,381 
SBA secured by real estate68,743 — — 441 69,184 
Total business loans secured by real estate2,695,186 — — 5,393 2,700,579 
Commercial loans
Commercial and industrial2,101,558 92 — 1,462 2,103,112 
Franchise non-real estate secured392,576 — — — 392,576 
SBA not secured by real estate10,319 73 — 653 11,045 
Total commercial loans2,504,453 165 — 2,115 2,506,733 
Retail loans
Single family residential95,292 — — — 95,292 
Consumer loans5,665 — — — 5,665 
Total retail loans100,957 — — — 100,957 
Loans held for investment $14,276,402 $1,395 $— $18,100 $14,295,897 
______________________________
(1) Excludes the basis adjustment of $51.1 million to the carrying amount of certain loans included in fair value hedging relationships. Refer to Note 11 – Derivative Instruments for additional information.
Individually Evaluated Loans

The Company evaluates loans collectively for purposes of determining the ACL in accordance with ASC 326. Collective evaluation is based on aggregating loans deemed to possess similar risk characteristics. In certain instances, the Company may identify loans that it believes no longer possess risk characteristics similar to other loans in the portfolio. These loans are typically identified from a substandard or worse internal risk grade, since the specific attributes and risks associated with such loans tend to become unique as the credit deteriorates. Such loans are typically nonperforming, modified through a TDR, and/or are deemed collateral dependent, where the ultimate repayment of the loan is expected to come from the operation of or eventual sale of the collateral. Loans that are deemed by management to no longer possess risk characteristics similar to other loans in the portfolio are evaluated individually for purposes of determining an appropriate lifetime ACL. The Company uses a discounted cash flow approach, using the loan’s effective interest rate, for determining the ACL on individually evaluated loans, unless the loan is deemed collateral dependent, which requires evaluation based on the estimated fair value of the underlying collateral, less estimated costs to sell. The Company may increase or decrease the ACL for collateral dependent individually evaluated loans based on changes in the estimated expected fair value of the collateral. Changes in the ACL for all other individually evaluated loans is based substantially on the Company’s evaluation of cash flows expected to be received from such loans.

As of June 30, 2022, $44.4 million of loans were individually evaluated with $1.8 million ACL attributed to such loans. At June 30, 2022, $11.5 million of individually evaluated loans were evaluated using a discounted cash flow approach, and $32.9 million of individually evaluated loans were evaluated based on the underlying value of the collateral. All individually evaluated loans were on nonaccrual status at June 30, 2022.

As of December 31, 2021, $31.3 million of loans were individually evaluated, and the ACL attributed to such loans totaled $1.5 million. At December 31, 2021, $12.4 million of individually evaluated loans were evaluated using a discounted cash flow approach, and $18.9 million of individually evaluated loans were evaluated based on the underlying value of the collateral. All individually evaluated loans were on nonaccrual status at December 31, 2021.

Troubled Debt Restructurings

We sometimes modify or restructure loans when the borrower is experiencing financial difficulties by making a concession to the borrower in the form of changes in the amortization terms, reductions in the interest rates, the acceptance of interest-only payments, and, in limited cases, concessions to the outstanding loan balances. These loans are classified as TDRs. TDRs are loans modified for the purpose of alleviating temporary impairments to the borrower’s financial condition or cash flows. A workout plan between us and the borrower is designed to provide a bridge for borrower cash flow shortfalls in the near term. In most cases, the Company initially places TDRs on nonaccrual status, and they may return to accrual status when the loans are brought current, have performed in accordance with the restructured contractual terms for a period of at least six months, and the ultimate collectability of the total contractual restructured principal and interest payments are no longer in doubt. At June 30, 2022 and December 31, 2021, the Company had five and six loans totaling $16.6 million and $16.9 million, respectively, modified as TDRs, which are comprised of three CRE owner-occupied loans and one C&I loan totaling $5.1 million and $5.1 million, respectively, belonging to one borrower relationship with the terms modified due to bankruptcy, and one franchise non-real estate secured loan of $11.5 million and two franchise non-real estate secured loans totaling $12.1 million, respectively, belonging to another borrower relationship with the terms modified for payment deferral.

During the three and six months ended June 30, 2022, the three CRE owner-occupied loans and one C&I loan classified as TDRs experienced payment defaults after modifications within the previous 12 months and were in payment default. All TDRs were on nonaccrual status as of June 30, 2022 and December 31, 2021. During the three and six months ended June 30, 2021, there were six loans modified as TDRs, of which three CRE owner-occupied loans and one C&I loan classified experienced payment defaults after modifications within the previous 12 months.
Purchased Credit Deteriorated Loans
 
The Company analyzed acquired loans for more-than-insignificant deterioration in credit quality since their origination. Such loans are classified as purchased credit deteriorated loans. Please see Note 3 – Significant Accounting Policies for more information concerning the accounting for PCD loans. The Company had PCD loans of $477.2 million and $567.6 million at June 30, 2022 and December 31, 2021, respectively.

Acquired loans classified as PCD are recorded at an initial amortized cost, which is comprised of the purchase price of the loans (or initial fair value) and the initial ACL determined for the loans, which is added to the purchase price, as well as any resulting discount or premium related to factors other than credit. The Company accounts for interest income on PCD loans using the interest method, whereby any purchase discounts or premiums are accreted or amortized into interest income as an adjustment of the loan’s yield. Subsequent to acquisition, the ACL for PCD loans is measured in accordance with the Company’s ACL methodology. Please also see Note 6 – Allowance for Credit Losses for more information concerning the Company’s ACL methodology.

Nonaccrual Loans

When loans are placed on nonaccrual status, previously accrued but unpaid interest is reversed from current period earnings. Payments received on nonaccrual loans are generally applied as a reduction to the loan principal balance. If the likelihood of further loss is remote, the Company may recognize interest on a cash basis. Loans may be returned to accruing status if the Company believes that all remaining principal and interest is fully collectible and there has been at least three months of sustained repayment performance since the loan was placed on nonaccrual.

The Company typically does not accrue interest on loans 90 days or more past due or when, in the opinion of management, there is reasonable doubt as to the timely collection of principal or interest. However, when such loans are well secured and in the process of collection, the Company may continue with the accrual of interest. The Company had loans on nonaccrual status of $44.4 million at June 30, 2022 and $31.3 million at December 31, 2021. The Company did not record income from the receipt of cash payments related to nonaccruing loans during the three and six months ended June 30, 2022 and June 30, 2021. The Company had no loans 90 days or more past due and still accruing at June 30, 2022 and December 31, 2021, respectively.
The following tables provide a summary of nonaccrual loans as of the dates indicated:
Nonaccrual Loans (1)
(Dollars in thousands)Collateral Dependent LoansACLNon-Collateral Dependent LoansACLTotal Nonaccrual LoansNonaccrual Loans with No ACL
June 30, 2022
Investor loans secured by real estate
CRE non-owner-occupied$10,230 $1,835 $— $— $10,230 $2,615 
Multifamily8,873 — — — 8,873 8,873 
SBA secured by real estate562 — — — 562 562 
Total investor loans secured by real estate19,665 1,835 — — 19,665 12,050 
Business loans secured by real estate
CRE owner-occupied4,889 — — — 4,889 4,889 
SBA secured by real estate206 — — — 206 206 
Total business loans secured by real estate5,095 — — — 5,095 5,095 
Commercial loans
Commercial and industrial4,744 — — — 4,744 4,744 
Franchise non-real estate secured2,794 — 11,517 — 14,311 14,311 
SBA non-real estate secured624 — — — 624 624 
Total commercial loans8,162 — 11,517 — 19,679 19,679 
Retail loans
Single family residential6 — — — 6 6 
Total retail loans6 — — — 6 6 
Total nonaccrual loans$32,928 $1,835 $11,517 $— $44,445 $36,830 

December 31, 2021
Investor loans secured by real estate
CRE non-owner-occupied$10,255 $1,455 $— $— $10,255 $2,640 
SBA secured by real estate937 — — — 937 937 
Total investor loans secured by real estate11,192 1,455 — — 11,192 3,577 
Business loans secured by real estate
CRE owner-occupied4,952 — — — 4,952 4,952 
SBA secured by real estate589 — — — 589 589 
Total business loans secured by real estate5,541 — — — 5,541 5,541 
Commercial loans
Commercial and industrial1,462 — 336 — 1,798 1,797 
Franchise non-real estate secured— — 12,079 — 12,079 12,079 
SBA non-real estate secured653 — — — 653 653 
Total commercial loans2,115 — 12,415 — 14,530 14,529 
Retail loans
Single family residential10 — — — 10 10 
Total retail loans10 — — — 10 10 
Total nonaccrual loans$18,858 $1,455 $12,415 $— $31,273 $23,657 
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(1) The ACL for nonaccrual loans is determined based on a discounted cash flow methodology unless the loan is considered collateral dependent; otherwise, the ACL for collateral dependent nonaccrual loans is determined based on the estimated fair value of the underlying collateral.

Residential Real Estate Loans In Process of Foreclosure

The Company had no consumer mortgage loans collateralized by residential real estate property for which formal foreclosure proceedings were in process as of June 30, 2022 or December 31, 2021.
Collateral Dependent Loans

Loans that have been classified as collateral dependent are loans where substantially all repayment of the loan is expected to come from the operation of or eventual liquidation of the collateral. Collateral dependent loans are evaluated individually for purposes of determining the ACL, which is determined based on the estimated fair value of the collateral. Estimates for costs to sell are included in the determination of the ACL when liquidation of the collateral is anticipated. In cases where the loan is well secured and the estimated value of the collateral exceeds the amortized cost of the loan, no ACL is recorded.

The following tables summarize collateral dependent loans by collateral type as of the dates indicated:
(Dollars in thousands)Office PropertiesIndustrial PropertiesRetail PropertiesLand PropertiesHotel PropertiesMultifamily PropertiesResidential PropertiesBusiness AssetsTotal
June 30, 2022
Investor loan secured by real estate
CRE non-owner-occupied$— $— $488 $— $9,742 $— $— $— $10,230 
Multifamily— — — — — 8,873 — — 8,873 
SBA secured by real estate— — — — 562 — — — 562 
Total investor loans secured by real estate— — 488 — 10,304 8,873 — — 19,665 
Business loans secured by real estate
CRE owner-occupied— — — 4,889 — — — — 4,889 
SBA secured by real estate123 83 — — — — — — 206 
Total business loans secured by real estate123 83 — 4,889 — — — — 5,095 
Commercial loans
Commercial and industrial— — — 242 — — — 4,502 4,744 
Franchise non-real estate secured— — — — — — — 2,794 2,794 
SBA non-real estate secured— — — — — — — 624 624 
Total commercial loans— — — 242 — — — 7,920 8,162 
Retail loans
Single family residential— — — — — — 6 — 6 
Total retail loans— — — — — — 6 — 6 
Total collateral dependent loans$123 $83 $488 $5,131 $10,304 $8,873 $6 $7,920 $32,928 
(Dollars in thousands)Office PropertiesIndustrial PropertiesRetail PropertiesLand PropertiesHotel PropertiesResidential PropertiesBusiness AssetsTotal
December 31, 2021
Investor loan secured by real estate
CRE non-owner-occupied$— $— $513 $— $9,742 $— $— $10,255 
SBA secured by real estate— — — — 937 — — 937 
Total investor loans secured by real estate— — 513 — 10,679 — — 11,192 
Business loans secured by real estate
CRE owner-occupied— — — 4,952 — — — 4,952 
SBA secured by real estate148 441 — — — — — 589 
Total business loans secured by real estate148 441 — 4,952 — — — 5,541 
Commercial loans
Commercial and industrial— — — 245 — — 1,217 1,462 
SBA non-real estate secured— — — — — — 653 653 
Total commercial loans— — — 245 — — 1,870 2,115 
Retail loans
Single family residential— — — — — 10 — 10 
Total retail loans— — — — — 10 — 10 
Total collateral dependent loans$148 $441 $513 $5,197 $10,679 $10 $1,870 $18,858