LOANS RECEIVABLE AND ALLOWANCE FOR CREDIT LOSSES

12 Months Ended

Dec. 31, 2015

Loans and Leases Receivable Disclosure [Abstract]

LOANS RECEIVABLE AND ALLOWANCE FOR CREDIT LOSSES

NOTE 8 — LOANS RECEIVABLE AND ALLOWANCE FOR CREDIT LOSSES

The Company’s loan portfolio includes originated and purchased loans. Originated and purchased loans, for which there was no evidence of credit deterioration at their acquisition date, are referred to collectively as non-PCI loans. PCI loans are accounted for in accordance with ASC Subtopic 310-30, Loans and Debt Securities Acquired with Deteriorated Credit Quality. PCI loans consist of loans acquired from the United Commercial Bank (“UCB”) FDIC assisted acquisition on November 6, 2009, the Washington First International Bank (“WFIB”) FDIC assisted acquisition on June 11, 2010 and, to a lesser extent, a small portion of loans acquired from the MetroCorp acquisition on January 17, 2014. The Company has elected to account for these acquired PCI loans on a pool level basis in accordance with ASC 310-30 at the time of acquisition. Please refer to Note 2 — Business Combination to the Consolidated Financial Statements, included in this report, for further details on the MetroCorp acquisition and Note 8 — Covered Assets and FDIC Indemnification Asset to the Consolidated Financial Statements of the Company’s 2014 Form 10-K for additional details related to the UCB and WFIB acquisitions.

The following table presents the composition of the Company’s non-PCI and PCI loans as of December 31, 2015 and 2014:




($ in thousands)	December 31, 2015									December 31, 2014
($ in thousands)	Non-PCI Loans			PCI Loans ⁽¹⁾			Total ⁽¹⁾			Non-PCI Loans			PCI Loans ⁽¹⁾			Total ⁽¹⁾
CRE:
Income producing	$	6,937,199		$	541,275		$	7,478,474		$	5,568,046		$	688,013		$	6,256,059
Construction	436,776			1,895			438,671			319,843			12,444			332,287
Land	187,409			6,195			193,604			214,327			16,840			231,167
Total CRE	7,561,384			549,365			8,110,749			6,102,216			717,297			6,819,513
C&I:
Commercial business	8,155,991			57,906			8,213,897			7,097,853			83,336			7,181,189
Trade finance	787,800			1,310			789,110			889,728			6,284			896,012
Total C&I	8,943,791			59,216			9,003,007			7,987,581			89,620			8,077,201
Residential:
Single-family	2,877,286			189,633			3,066,919			3,647,262			219,519			3,866,781
Multifamily	1,374,718			148,277			1,522,995			1,184,017			265,891			1,449,908
Total residential	4,252,004			337,910			4,589,914			4,831,279			485,410			5,316,689
Consumer	1,931,828			24,263			1,956,091			1,483,956			29,786			1,513,742
Total loans	$	22,689,007		$	970,754		$	23,659,761		$	20,405,032		$	1,322,113		$	21,727,145
Unearned fees, premiums, and discounts, net	(16,013		)	—			(16,013		)	2,804			—			2,804
Allowance for loan losses	(264,600		)	(359		)	(264,959		)	(260,965		)	(714		)	(261,679		)
Loans, net	$	22,408,394		$	970,395		$	23,378,789		$	20,146,871		$	1,321,399		$	21,468,270


(1)	Loans net of ASC 310-30 discount.

The Company’s CRE lending activities include loans to finance income-producing properties, construction and land loans. The Company’s C&I lending activities include commercial business financing for small and middle-market businesses in a wide spectrum of industries. Included in commercial business loans are loans for working capital, accounts receivable lines, inventory lines, Small Business Administration loans and lease financing. The Company also offers a variety of international trade finance services and products, including letters of credit, revolving lines of credit, import loans, bankers’ acceptances, working capital lines, domestic purchase financing and pre-export financing.

The Company’s single-family residential loans are primarily comprised of adjustable rate (“ARM”) first mortgage loans secured by one-to-four unit residential properties. The Company’s ARM single-family residential loan programs generally have a one-year, three-year or five-year initial fixed period. The Company’s multifamily residential loans are primarily comprised of variable rate loans that have a six-month or three-year initial fixed period. As of December 31, 2015 and 2014, consumer loans were primarily composed of home equity lines of credit.

All loans originated are subject to the Company’s underwriting guidelines and loan origination standards. Management believes that the Company’s underwriting criteria and procedures adequately consider the unique risks which may come from these products. The Company conducts a variety of quality control procedures and periodic audits, including review of criteria for lending and legal requirements, to ensure it is in compliance with its origination standards.

As of December 31, 2015 and 2014, loans totaling $15.91 billion and $14.66 billion, respectively, were pledged to secure borrowings and to provide additional borrowing capacity from the FHLB and the Federal Reserve Bank.

Credit Quality Indicators

All loans are subject to the Company’s internal and external credit review and monitoring. Loans are risk rated based on an analysis of the current state of the borrower’s credit quality. The analysis of credit quality includes a review of all repayment sources, the borrower’s current payment performance/delinquency, current financial and liquidity status and all other relevant information. For single-family residential loans, payment performance/delinquency is the driving indicator for the risk ratings. Risk ratings remain the overall credit quality indicator for the Company, as well as the credit quality indicator utilized for estimating the appropriate allowance for loan losses. The Company utilizes a risk rating system, which can be classified within the following categories: Pass, Watch, Special Mention, Substandard, Doubtful and Loss. The risk ratings reflect the relative strength of the repayment sources.

Pass and Watch loans are generally considered to have sufficient sources of repayment in order to repay the loan in full in accordance with all terms and conditions. These borrowers may have some credit risks that require monitoring, but full repayments are expected. Special Mention loans are considered to have potential weaknesses that warrant closer attention by management. Special Mention is considered a transitory grade. If any potential weaknesses are resolved, the loan is upgraded to a Pass or Watch grade. If negative trends in the borrower’s financial status or other information indicates that the repayment sources may become inadequate, the loan is downgraded to a Substandard grade. Substandard loans are considered to have well-defined weaknesses that jeopardize the full and timely repayment of the loan. Substandard loans have a distinct possibility of loss, if the deficiencies are not corrected. Additionally, when management has assessed a potential for loss but a distinct possibility of loss is not recognizable, the loan is still classified as Substandard. Doubtful loans have insufficient sources of repayment and a high probability of loss. Loss loans are considered to be uncollectible and of such little value that they are no longer considered bankable assets. These internal risk ratings are reviewed routinely and adjusted due to changes in the borrowers’ status and likelihood of loan repayment.

The following tables present the credit risk rating for non-PCI loans by portfolio segment as of December 31, 2015 and 2014:




($ in thousands)	Pass/Watch		Special Mention		Substandard		Doubtful		Loss		Total Non-PCI Loans
December 31, 2015
CRE:
Income producing	$	6,672,951	$	59,309	$	204,939	$	—	$	—	$	6,937,199
Construction	435,112		1,194		470		—		—		436,776
Land	172,189		—		15,220		—		—		187,409
C&I:
Commercial business	7,794,735		201,280		135,449		24,527		—		8,155,991
Trade finance	750,144		13,812		23,844		—		—		787,800
Residential:
Single-family	2,841,722		8,134		27,430		—		—		2,877,286
Multifamily	1,317,550		2,918		54,250		—		—		1,374,718
Consumer	1,926,418		883		4,527		—		—		1,931,828
Total	$	21,910,821	$	287,530	$	466,129	$	24,527	$	—	$	22,689,007




($ in thousands)	Pass/Watch		Special Mention		Substandard		Doubtful		Loss		Total Non-PCI Loans
December 31, 2014
CRE:
Income producing	$	5,243,640	$	54,673	$	269,733	$	—	$	—	$	5,568,046
Construction	310,259		11		9,573		—		—		319,843
Land	185,220		5,701		23,406		—		—		214,327
C&I:
Commercial business	6,836,914		130,319		130,032		533		55		7,097,853
Trade finance	845,889		13,031		30,808		—		—		889,728
Residential:
Single-family	3,627,491		3,143		16,628		—		—		3,647,262
Multifamily	1,095,982		5,124		82,911		—		—		1,184,017
Consumer	1,480,208		1,005		2,743		—		—		1,483,956
Total	$	19,625,603	$	213,007	$	565,834	$	533	$	55	$	20,405,032

The following tables present the credit risk rating for PCI loans by portfolio segment as of December 31, 2015 and 2014:




($ in thousands)	Pass/Watch		Special Mention		Substandard		Doubtful		Loss		Total PCI Loans
December 31, 2015
CRE:
Income producing	$	440,100	$	4,987	$	96,188	$	—	$	—	$	541,275
Construction	—		—		1,895		—		—		1,895
Land	4,285		—		1,910		—		—		6,195
C&I:
Commercial business	52,212		819		4,875		—		—		57,906
Trade finance	1,310		—		—		—		—		1,310
Residential:
Single-family	184,092		1,293		4,248		—		—		189,633
Multifamily	130,770		—		17,507		—		—		148,277
Consumer	23,121		452		690		—		—		24,263
Total ⁽¹⁾	$	835,890	$	7,551	$	127,313	$	—	$	—	$	970,754


(1)	Loans net of ASC 310-30 discount.




($ in thousands)	Pass/Watch		Special Mention		Substandard		Doubtful		Loss		Total PCI Loans
December 31, 2014
CRE:
Income producing	$	534,015	$	9,960	$	144,038	$	—	$	—	$	688,013
Construction	589		1,744		10,111		—		—		12,444
Land	7,012		5,391		4,437		—		—		16,840
C&I:
Commercial business	70,586		1,103		11,647		—		—		83,336
Trade finance	4,620		—		1,664		—		—		6,284
Residential:
Single-family	213,829		374		5,316		—		—		219,519
Multifamily	230,049		—		35,842		—		—		265,891
Consumer	29,026		116		644		—		—		29,786
Total ⁽¹⁾	$	1,089,726	$	18,688	$	213,699	$	—	$	—	$	1,322,113


(1)	Loans net of ASC 310-30 discount.

Nonaccrual and Past Due Loans

Non-PCI loans that are 90 or more days past due are generally placed on nonaccrual status. Additionally, non-PCI loans that are not 90 or more days past due but have identified deficiencies are also placed on nonaccrual status. The following tables present the aging analysis on non-PCI loans as of December 31, 2015 and 2014:




($ in thousands)	Accruing Loans 30-59 Days Past Due		Accruing Loans 60-89 Days Past Due		Total Accruing Past Due Loans		Nonaccrual Loans Less Than 90 Days Past Due		Nonaccrual Loans 90 or More Days Past Due		Total Nonaccrual Loans		Current Accruing Loans		Total Non-PCI Loans
December 31, 2015
CRE:
Income producing	$	3,465	$	25,256	$	28,721	$	11,359	$	17,870	$	29,229	$	6,879,249	$	6,937,199
Construction	—		—		—		14		—		14		436,762		436,776
Land	1,124		—		1,124		277		406		683		185,602		187,409
C&I:
Commercial business	1,992		1,185		3,177		50,726		14,009		64,735		8,088,079		8,155,991
Trade finance	—		—		—		—		—		—		787,800		787,800
Residential:
Single-family	7,657		2,927		10,584		92		8,634		8,726		2,857,976		2,877,286
Multifamily	6,320		981		7,301		6,486		9,758		16,244		1,351,173		1,374,718
Consumer	2,078		209		2,287		233		1,505		1,738		1,927,803		1,931,828
Total	$	22,636	$	30,558	$	53,194	$	69,187	$	52,182	$	121,369	$	22,514,444	$	22,689,007




($ in thousands)	Accruing Loans 30-59 Days Past Due		Accruing Loans 60-89 Days Past Due		Total Accruing Past Due Loans		Nonaccrual Loans Less Than 90 Days Past Due		Nonaccrual Loans 90 or More Days Past Due		Total Nonaccrual Loans		Current Accruing Loans		Total Non-PCI Loans
December 31, 2014
CRE:
Income producing	$	14,171	$	3,593	$	17,764	$	19,348	$	9,165	$	28,513	$	5,521,769	$	5,568,046
Construction	—		—		—		15		6,898		6,913		312,930		319,843
Land	—		—		—		221		2,502		2,723		211,604		214,327
C&I:
Commercial business	3,187		4,361		7,548		6,623		21,813		28,436		7,061,869		7,097,853
Trade finance	—		—		—		73		292		365		889,363		889,728
Residential:							0
Single-family	6,381		1,294		7,675		2,861		5,764		8,625		3,630,962		3,647,262
Multifamily	4,425		507		4,932		12,460		8,359		20,819		1,158,266		1,184,017
Consumer	2,154		162		2,316		169		3,699		3,868		1,477,772		1,483,956
Total	$	30,318	$	9,917	$	40,235	$	41,770	$	58,492	$	100,262	$	20,264,535	$	20,405,032

PCI loans are excluded from the above aging analysis table as the Company has elected to account for these loans on a pool level basis in accordance with ASC 310-30 at the time of acquisition. Please refer to the discussion of PCI Loans within this note for additional details on interest income recognition of PCI loans. As of December 31, 2015 and 2014, $37.7 million and $63.4 million of PCI loans, respectively, were on nonaccrual status.

Loans in Process of Foreclosure

As of December 31, 2015 and 2014, the Company had $18.0 million and $16.9 million, respectively, of recorded investment in consumer mortgage loans secured by residential real estate properties, for which formal foreclosure proceedings were in process according to local requirements of the applicable jurisdictions, which were not included in OREO. Foreclosed residential real estate properties with a carrying amount of $912 thousand were included in total net OREO of $7.0 million as of December 31, 2015. In comparison, foreclosed residential real estate properties with a carrying amount of $3.6 million were included in total net OREO of $32.1 million as of December 31, 2014.

TDRs

Potential TDRs are individually evaluated and the type of restructuring is selected based on the loan type and the circumstances of the borrower’s financial difficulty in order to maximize the Company’s recovery. A TDR is a modification of the terms of a loan when the Company, for economic or legal reasons related to the borrower’s financial difficulties, grants a concession to the borrower, it would not otherwise consider.

The following tables present the additions to non-PCI TDRs for the years ended December 31, 2015, 2014 and 2013:




($ in thousands)	Loans Modified as TDRs During the Year Ended December 31, 2015
($ in thousands)	Number of Loans	Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment ⁽¹⁾		Financial Impact ⁽²⁾
CRE:
Income producing	3	$	1,802	$	1,705	$	—
Land	2	$	2,227	$	83	$	102
C&I:
Commercial business	18	$	42,816	$	34,124	$	6,726
Residential:
Single-family	1	$	281	$	279	$	2




	Loans Modified as TDRs During the Year Ended December 31, 2014
($ in thousands)	Number of Loans	Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment ⁽¹⁾		Financial Impact ⁽²⁾
CRE:
Income producing	6	$	8,829	$	8,624	$	43
C&I:
Commercial business	13	$	4,379	$	3,089	$	2,205
Trade finance	1	$	190	$	73	$	14
Residential:
Single-family	9	$	11,454	$	8,269	$	—
Multifamily	6	$	5,471	$	3,705	$	7
Consumer	1	$	509	$	504	$	—




	Loans Modified as TDRs During the Year Ended December 31, 2013
($ in thousands)	Number of Loans	Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment ⁽¹⁾		Financial Impact ⁽²⁾
CRE:
Income producing	6	$	26,021	$	17,456	$	219
C&I:
Commercial business	6	$	16,220	$	15,624	$	4,274
Residential:
Multifamily	1	$	1,093	$	1,071	$	—
Consumer	1	$	651	$	639	$	—


(1)	Includes subsequent payments after modification and reflects the balance as of December 31, 2015, 2014 and 2013.


(2)	The financial impact includes charge-offs and specific reserves recorded at the modification date.

The following tables summarize the non-PCI TDR modifications for the years ended December 31, 2015, 2014 and 2013 by modification type:




($ in thousands)	Modification Type
($ in thousands)	Principal ⁽¹⁾		Principal and Interest⁽²⁾		Interest Rate Reduction		A/B Note		Other		Total
December 31, 2015
CRE	$	521	$	791	$	—	$	—	$	476	$	1,788
C&I	16,325		17,799		—		—		—		$	34,124
Residential	279		—		—		—		—		$	279
Total	$	17,125	$	18,590	$	—	$	—	$	476	$	36,191




($ in thousands)	Modification Type
($ in thousands)	Principal ⁽¹⁾		Principal and Interest⁽²⁾		Interest Rate Reduction		A/B Note		Other		Total
December 31, 2014
CRE	$	691	$	5,100	$	2,165	$	—	$	668	$	8,624
C&I	2,677		73		94		—		318		3,162
Residential	9,756		1,471		—		—		747		11,974
Consumer	—		—		—		—		504		504
Total	$	13,124	$	6,644	$	2,259	$	—	$	2,237	$	24,264




($ in thousands)	Modification Type
($ in thousands)	Principal ⁽¹⁾		Principal and Interest⁽²⁾		Interest Rate Reduction		A/B Note		Other		Total
December 31, 2013
CRE	$	15,923	$	540	$	—	$	884	$	109	$	17,456
C&I	15,488		136		—		—		—		15,624
Residential	—		—		—		1,071		—		1,071
Consumer	—		—		—		—		639		$	639
Total	$	31,411	$	676	$	—	$	1,955	$	748	$	34,790


(1)	Principal modification includes forbearance payments, term extensions and principal deferments that modify the terms of the loan from principal and interest payments to interest payments only.


(2)	Principal and interest modification includes principal and interest deferments or reductions.

Subsequent to restructuring, a TDR that becomes delinquent, generally beyond 90 days, is considered to have defaulted. The following table presents information for loans modified as TDRs within the previous 12 months that have subsequently defaulted during the years ended December 31, 2015, 2014 and 2013:




	Loans Modified as TDRs that Subsequently Defaulted During the Year Ended December 31,
	2015			2014			2013
($ in thousands)	Number of Loans	Recorded Investment		Number of Loans	Recorded Investment		Number of Loans	Recorded Investment
C&I:
Commercial business	—	$	—	1	$	957	1	$	570
Residential:
Single-family	1	$	279	—	$	—	—	$	—
Consumer	—	$	—	—	$	—	1	$	639

The amount of additional funds committed to lend to borrowers whose terms have been modified was immaterial as of December 31, 2015 and 2014.

Impaired Loans

The following tables present the non-PCI impaired loans as of December 31, 2015 and 2014:




($ in thousands)	Unpaid Principal Balance		Recorded Investment With No Allowance		Recorded Investment With Allowance		Total Recorded Investment		Related Allowance
December 31, 2015
CRE:
Income producing	$	47,043	$	24,347	$	15,720	$	40,067	$	3,148
Construction	66		—		14		14		1
Land	1,537		632		683		1,315		118
C&I:
Commercial business	81,720		31,045		40,111		71,156		15,993
Trade finance	10,675		—		10,675		10,675		95
Residential:
Single-family	16,486		4,401		10,611		15,012		584
Multifamily	25,634		16,944		6,783		23,727		339
Consumer	1,240		—		1,240		1,240		60
Total	$	184,401	$	77,369	$	85,837	$	163,206	$	20,338




($ in thousands)	Unpaid Principal Balance		Recorded Investment With No Allowance		Recorded Investment With Allowance		Total Recorded Investment		Related Allowance
December 31, 2014
CRE:
Income producing	$	58,900	$	35,495	$	15,646	$	51,141	$	1,581
Construction	6,913		6,913		—		6,913		—
Land	13,291		2,838		5,622		8,460		1,906
C&I:
Commercial business	44,569		12,723		25,717		38,440		15,174
Trade finance	12,967		6,431		274		6,705		28
Residential:
Single-family	18,908		6,003		11,398		17,401		461
Multifamily	37,649		21,523		12,890		34,413		313
Consumer	1,259		1,151		108		1,259		1
Total	$	194,456	$	93,077	$	71,655	$	164,732	$	19,464

The following table presents the average recorded investment and the amount of interest income recognized on non-PCI impaired loans for the years ended December 31, 2015, 2014 and 2013:




($ in thousands)	Year Ended December 31,
	2015				2014				2013
	Average Recorded Investment		Recognized Interest Income ⁽¹⁾		Average Recorded Investment		Recognized Interest Income ⁽¹⁾		Average Recorded Investment		Recognized Interest Income ⁽¹⁾
CRE:
Income producing	$	44,043	$	536	$	54,544	$	1,249	$	71,856	$	2,480
Construction	14		—		6,888		—		6,888		—
Land	2,708		39		8,633		298		12,453		496
C&I:
Commercial business	73,513		315		36,528		833		38,294		735
Trade finance	11,402		223		336		15		1,603		11
Residential:
Single-family	15,347		242		16,413		342		15,322		154
Multifamily	24,001		312		37,128		830		35,799		850
Consumer	1,251		47		1,259		47		3,225		4
Total impaired non-PCI loans	$	172,279	$	1,714	$	161,729	$	3,614	$	185,440	$	4,730


(1)	Includes interest recognized on accruing non-PCI TDRs. Interest payments received on nonaccrual non-PCI loans are reflected as a reduction of principal and not as interest income.

Allowance for Credit Losses

The following tables present a summary of the activity in the allowance for loan losses by portfolio segment for the years ended December 31, 2015, 2014 and 2013:




($ in thousands)	Non-PCI Loans
($ in thousands)	CRE			C&I			Residential			Consumer			Total			PCI Loans			Total
Year Ended December 31, 2015
Beginning balance	$	72,263		$	134,598		$	43,856		$	10,248		$	260,965		$	714		$	261,679
Provision for (reversal of) loan losses	3,338			11,640			(7,499		)	(555		)	6,924			(355		)	6,569
Charge-offs	(1,545		)	(20,423		)	(1,686		)	(600		)	(24,254		)	—			(24,254		)
Recoveries	7,135			8,782			4,621			427			20,965			—			20,965
Net recoveries (charge-offs)	5,590			(11,641		)	2,935			(173		)	(3,289		)	—			(3,289		)
Ending balance	$	81,191		$	134,597		$	39,292		$	9,520		$	264,600		$	359		$	264,959




($ in thousands)	Non-PCI Loans
($ in thousands)	CRE			C&I			Residential			Consumer			Total			PCI Loans			Total
Year Ended December 31, 2014
Beginning balance	$	70,154		$	115,184		$	50,716		$	11,352		$	247,406		$	2,269		$	249,675
Provision for (reversal of) loan losses	3,264			49,200			(8,167		)	4,318			48,615			(1,032		)	47,583
Charge-offs	(3,137		)	(39,984		)	(1,103		)	(5,871		)	(50,095		)	(523		)	(50,618		)
Recoveries	1,982			10,198			2,410			449			15,039			—			15,039
Net (charge-offs) recoveries	(1,155		)	(29,786		)	1,307			(5,422		)	(35,056		)	(523		)	(35,579		)
Ending balance	$	72,263		$	134,598		$	43,856		$	10,248		$	260,965		$	714		$	261,679




($ in thousands)	Non-PCI Loans
($ in thousands)	CRE			C&I			Residential			Consumer			Total			PCI Loans		Total
Year Ended December 31, 2013
Beginning balance	$	72,385		$	107,719		$	49,436		$	4,995		$	234,535		$	—	$	234,535
(Reversal of) provision for loan losses	(3,287		)	11,534			2,473			7,218			17,938			2,269		20,207
Charge-offs	(3,737		)	(8,461		)	(3,197		)	(2,385		)	(17,780		)	—		(17,780		)
Recoveries	4,793			4,392			2,004			1,524			12,713			—		12,713
Net recoveries (charge-offs)	1,056			(4,069		)	(1,193		)	(861		)	(5,067		)	—		(5,067		)
Ending balance	$	70,154		$	115,184		$	50,716		$	11,352		$	247,406		$	2,269	$	249,675

The following table presents a summary of the activity in the allowance for unfunded credit reserves for the years ended December 31, 2015, 2014 and 2013:




($ in thousands)	Year Ended December 31,
($ in thousands)	2015		2014		2013
Beginning balance	$	12,712	$	11,282	$	9,437
Provision for unfunded credit reserves	7,648		1,575		2,157
Charge-offs	—		145		312
Ending balance	$	20,360	$	12,712	$	11,282

The allowance for unfunded credit reserves is maintained at a level believed by management to be sufficient to absorb estimated probable losses related to unfunded credit facilities. The allowance for unfunded credit reserves was included in accrued expense and other liabilities in the accompanying Consolidated Balance Sheets. Please refer to Note 14 — Commitments, Contingencies and Related Party Transactions to the Consolidated Financial Statements for additional information related to unfunded credit reserves.

The following tables present the Company’s allowance for loan losses and recorded investments in loans by portfolio segment as of December 31, 2015 and 2014 and disaggregated by the Company’s impairment methodology:




($ in thousands)	CRE		C&I		Residential		Consumer		Total
As of December 31, 2015
Allowance for loan losses
Individually evaluated for impairment	$	3,267	$	16,088	$	923	$	60	$	20,338
Collectively evaluated for impairment	77,924		118,509		38,369		9,460		244,262
Acquired with deteriorated credit quality	347		9		3		—		359
Ending balance	$	81,538	$	134,606	$	39,295	$	9,520	$	264,959

Recorded investment in loans
Individually evaluated for impairment	$	41,396	$	81,831	$	38,739	$	1,240	$	163,206
Collectively evaluated for impairment	7,519,988		8,861,960		4,213,265		1,930,588		22,525,801
Acquired with deteriorated credit quality ⁽¹⁾	549,365		59,216		337,910		24,263		970,754
Ending balance ⁽¹⁾	$	8,110,749	$	9,003,007	$	4,589,914	$	1,956,091	$	23,659,761


(1)	Loans net of ASC 310-30 discount.




($ in thousands)	CRE		C&I		Residential		Consumer		Total
As of December 31, 2014
Allowance for loan losses
Individually evaluated for impairment	$	3,487	$	15,202	$	774	$	1	$	19,464
Collectively evaluated for impairment	68,776		119,396		43,082		10,247		241,501
Acquired with deteriorated credit quality	714		—		—		—		714
Ending balance	$	72,977	$	134,598	$	43,856	$	10,248	$	261,679

Recorded investment in loans
Individually evaluated for impairment	$	66,514	$	45,145	$	51,814	$	1,259	$	164,732
Collectively evaluated for impairment	6,035,702		7,942,436		4,779,465		1,482,697		20,240,300
Acquired with deteriorated credit quality ⁽¹⁾	717,297		89,620		485,410		29,786		1,322,113
Ending balance ⁽¹⁾	$	6,819,513	$	8,077,201	$	5,316,689	$	1,513,742	$	21,727,145


(1)	Loans net of ASC 310-30 discount.

PCI Loans

As of the respective acquisition dates, PCI loans were pooled and accounted for at fair value, which represents the discounted value of the expected cash flows of the loan portfolio. The amount of expected cash flows over the initial investment in the loan represent the “accretable yield,” which is recognized as interest income on a level yield basis over the life of the loan. The excess of total contractual cash flows over the cash flows expected to be received at origination is deemed the “nonaccretable difference.”

The following table presents the changes in the accretable yield for the PCI loans for the years ended December 31, 2015, 2014 and 2013:




($ in thousands)	Year Ended December 31,
($ in thousands)	2015			2014			2013
Beginning balance	$	311,688		$	461,545		$	556,986
Addition	—			6,745			—
Accretion	(107,442		)	(219,169		)	(347,010		)
Changes in expected cash flows	10,661			62,567			251,569
Ending balance	$	214,907		$	311,688		$	461,545

Covered assets consist of loans receivable and OREO that were acquired in the UCB acquisition on November 6, 2009 and in the WFIB acquisition on June 11, 2010 for which the Company entered into shared-loss agreements with the FDIC. The shared-loss coverage of the UCB and WFIB commercial loans ended as of December 31, 2014 and June 30, 2015, respectively. In addition, during the year ended December 31, 2015 the Company reached an agreement with the FDIC to early terminate the WFIB and UCB shared-loss agreements and made a total payment of $125.5 million for the early termination. As a result, the Company has no remaining shared-loss agreements with the FDIC as of December 31, 2015. Of the total $1.32 billion in PCI loans as of December 31, 2014, $1.23 billion were covered under shared-loss agreements. As of December 31, 2014, $1.48 billion of total loans were covered under shared-loss agreements.

FDIC Indemnification Asset/Net Payable to FDIC

The Company amortizes the difference between the recorded amount of the FDIC indemnification asset and the expected reimbursement from the FDIC over the life of the indemnification asset. Due to the early termination of the shared-loss agreements entered with FDIC as previously discussed, the Company no longer has a FDIC indemnification asset/net payable to the FDIC as of December 31, 2015. As of December 31, 2014, a net payable to the FDIC of $96.1 million was included in accrued expenses and other liabilities on the Consolidated Balance Sheets.

The following table presents a summary of the FDIC indemnification asset/net payable to the FDIC for the years ended December 31, 2015, 2014 and 2013:




($ in thousands)	Year Ended December 31,
($ in thousands)	2015			2014			2013
Beginning balance	$	(96,106	)	$	74,708		$	316,313
Amortization	(3,906		)	(101,638		)	(99,055		)
Reductions ⁽¹⁾	(10,307		)	(33,595		)	(95,536		)
FDIC repayment ⁽²⁾	110,319			(35,581		)	(47,014		)
Ending balance	$	—		$	(96,106	)	$	74,708


(1)	Reductions relate to charge-offs, partial prepayments, loan payoffs and loan sales which result in a corresponding reduction of the indemnification asset.


(2)	Represents the change in the calculated estimate the Company will be required to pay the FDIC at the end of the FDIC shared-loss agreements, due to lower thresholds of losses, with the exception of the amount in the year ended December 31, 2015, which includes the final payments made to the FDIC due to the early termination of the shared-loss agreements.

Loans Held for Sale

Loans held for sale were $32.0 million and $46.0 million as of December 31, 2015 and 2014, respectively. $1.69 billion of loans held-for-investment were transferred to loans held for sale during the year ended December 31, 2015. These loans were primarily comprised of single-family residential and C&I loans. In comparison, $837.4 million and $97.1 million of loans held-for-investment were transferred to loans held for sale during the years ended December 31, 2014 and 2013, respectively. These loans were primarily comprised of student and C&I loans.

The Company recorded $5.1 million and $5.2 million in write-downs related to loans transferred from loans held-for-investment to loans held for sale to the allowance for loan losses for the years ended December 31, 2015 and 2014, respectively. The Company did not record any write-downs related to loans transferred from loans held-for-investment to loans held for sale for the year ended December 31, 2013.

For the year ended December 31, 2015, approximately $1.70 billion of loans were sold, resulting in net gains of $27.8 million. Loans sold during the year ended December 31, 2015 were primarily comprised of single-family residential and C&I loans. For the year ended December 31, 2014, approximately $1.09 billion of loans, mainly comprised of student and C&I loans, were sold, resulting in net gains of $39.1 million. For the year ended December 31, 2013, approximately $364.4 million of loans, mainly comprised of student and C&I loans, were sold, resulting in net gains of $7.8 million. In addition, the Company recorded a $3.0 million LOCOM adjustment related to the loans held for sale portfolio during the year ended December 31, 2015. The LOCOM adjustment was included in the net gains on sales of loans in the accompanying Consolidated Statements of Income. The Company did not record any LOCOM adjustment related to the loans held for sale portfolio during the years ended December 31, 2014 and 2013.