LOANS RECEIVABLE AND ALLOWANCE FOR CREDIT LOSSES

3 Months Ended

Mar. 31, 2016

Loans and Leases Receivable Disclosure [Abstract]

LOANS RECEIVABLE AND ALLOWANCE FOR CREDIT LOSSES

NOTE 7 — LOANS RECEIVABLE AND ALLOWANCE FOR CREDIT LOSSES

The Company’s held-for-investment loan portfolio includes originated and purchased loans. Originated and purchased loans with no evidence of credit deterioration at their acquisition date are referred to collectively as non-PCI loans. Purchased credit impaired (“PCI”) loans are purchased loans with evidence of credit deterioration at origination and it is probable at the acquisition date that the Company would be unable to collect all contractually required payments. PCI loans are accounted for under ASC Subtopic 310-30, Loans and Debt Securities Acquired with Deteriorated Credit Quality. The Company has elected to account for PCI loans on a pool level basis in accordance with ASC 310-30 at the time of acquisition.

The following table presents the composition of the Company’s non-PCI and PCI loans as of March 31, 2016 and December 31, 2015:




($ in thousands)	March 31, 2016									December 31, 2015
($ in thousands)	Non-PCI Loans			PCI Loans ⁽¹⁾			Total ⁽¹⁾			Non-PCI Loans			PCI Loans ⁽¹⁾			Total ⁽¹⁾
CRE:
Income producing	$	7,317,991		$	498,451		$	7,816,442		$	6,937,199		$	541,275		$	7,478,474
Construction	465,763			1,340			467,103			436,776			1,895			438,671
Land	165,071			2,862			167,933			187,409			6,195			193,604
Total CRE	7,948,825			502,653			8,451,478			7,561,384			549,365			8,110,749
C&I:
Commercial business	8,001,280			52,255			8,053,535			8,155,991			57,906			8,213,897
Trade finance	763,495			1,213			764,708			787,800			1,310			789,110
Total C&I	8,764,775			53,468			8,818,243			8,943,791			59,216			9,003,007
Residential:
Single-family	2,927,219			176,172			3,103,391			2,877,286			189,633			3,066,919
Multifamily	1,236,722			111,285			1,348,007			1,374,718			148,277			1,522,995
Total residential	4,163,941			287,457			4,451,398			4,252,004			337,910			4,589,914
Consumer	2,023,521			23,263			2,046,784			1,931,828			24,263			1,956,091
Total loans	$	22,901,062		$	866,841		$	23,767,903		$	22,689,007		$	970,754		$	23,659,761
Unearned fees, premiums, and discounts, net	(13,539		)	—			(13,539		)	(16,013		)	—			(16,013		)
Allowance for loan losses	(259,910		)	(328		)	(260,238		)	(264,600		)	(359		)	(264,959		)
Loans, net	$	22,627,613		$	866,513		$	23,494,126		$	22,408,394		$	970,395		$	23,378,789


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

The Company’s CRE segment provides financing for income producing properties, construction properties and land. Commercial business and trade finance in the C&I segment provide financing to small and middle market businesses in a wide spectrum of industries. This includes loans for working capital, accounts receivable and inventory lines of credit, Small Business Administration loans, lease financing and financing to international trade companies with trade financial services and products, including letters of credit, revolving lines of credit, import loans, bankers’ acceptances, working capital lines of credit, domestic purchase financing and pre-export financing.

The Company’s adjustable rate mortgage (“ARM”) single-family residential loans are comprised primarily of 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 comprised primarily of variable rate loans that have a six-month or three-year initial fixed period. As of March 31, 2016 and December 31, 2015, consumer loans were comprised primarily 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 March 31, 2016 and December 31, 2015, loans totaling $16.37 billion and $15.91 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 are the overall credit quality indicator for the Company and 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 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 based on changes in the borrowers’ financial status and collectability.

The following tables present the credit risk rating for non-PCI loans by portfolio segment as of March 31, 2016 and December 31, 2015:




($ in thousands)	Pass/Watch		Special Mention		Substandard		Doubtful		Total Non-PCI Loans
March 31, 2016
CRE:
Income producing	$	7,061,501	$	39,236	$	217,254	$	—	$	7,317,991
Construction	462,989		2,339		435		—		465,763
Land	150,149		—		14,922		—		165,071
C&I:
Commercial business	7,579,392		198,560		199,521		23,807		8,001,280
Trade finance	730,867		9,907		22,721		—		763,495
Residential:
Single-family	2,891,346		7,728		28,145		—		2,927,219
Multifamily	1,185,914		1,925		48,883		—		1,236,722
Consumer	2,015,809		2,650		5,062		—		2,023,521
Total	$	22,077,967	$	262,345	$	536,943	$	23,807	$	22,901,062




($ in thousands)	Pass/Watch		Special Mention		Substandard		Doubtful		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

The following tables present the credit risk rating for PCI loans by portfolio segment as of March 31, 2016 and December 31, 2015:




($ in thousands)	Pass/Watch		Special Mention		Substandard		Doubtful		Total PCI Loans
March 31, 2016
CRE:
Income producing	$	402,651	$	13,013	$	82,787	$	—	$	498,451
Construction	—		—		1,340		—		1,340
Land	2,272		—		590		—		2,862
C&I:
Commercial business	46,426		1,185		4,644		—		52,255
Trade finance	1,213		—		—		—		1,213
Residential:
Single-family	170,788		1,013		4,371		—		176,172
Multifamily	97,447		—		13,838		—		111,285
Consumer	21,880		452		931		—		23,263
Total ⁽¹⁾	$	742,677	$	15,663	$	108,501	$	—	$	866,841




($ in thousands)	Pass/Watch		Special Mention		Substandard		Doubtful		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.

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 March 31, 2016 and December 31, 2015:




($ 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
March 31, 2016
CRE:
Income producing	$	8,580	$	5,853	$	14,433	$	12,939	$	39,927	$	52,866	$	7,250,692	$	7,317,991
Construction	—		—		—		—		—		—		465,763		465,763
Land	1,849		121		1,970		6,182		—		6,182		156,919		165,071
C&I:
Commercial business	5,687		3,531		9,218		56,380		7,984		64,364		7,927,698		8,001,280
Trade finance	—		—		—		8,375		—		8,375		755,120		763,495
Residential:
Single-family	5,117		2,683		7,800		2,521		8,850		11,371		2,908,048		2,927,219
Multifamily	6,164		1,097		7,261		5,641		9,149		14,790		1,214,671		1,236,722
Consumer	1,522		619		2,141		3,504		1,174		4,678		2,016,702		2,023,521
Total	$	28,919	$	13,904	$	42,823	$	95,542	$	67,084	$	162,626	$	22,695,613	$	22,901,062




($ 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

For information on the policy for recording payments received and resuming accrual of interest on non-PCI loans that are placed on nonaccrual status, please see Note 1 — Summary of Significant Accounting Policies to the Consolidated Financial Statements of the Company’s 2015 Form 10-K.

PCI loans are excluded from the above aging analysis tables 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 on PCI loans within this note for additional details on interest income recognition. As of March 31, 2016 and December 31, 2015, PCI loans on nonaccrual status totaled $34.3 million and $37.7 million, respectively.

Loans in Process of Foreclosure

As of March 31, 2016 and December 31, 2015, the Company had $15.2 million and $18.0 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 $628 thousand were included in total net OREO of $6.1 million as of March 31, 2016. In comparison, 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.

Troubled Debt Restructurings (“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 three months ended March 31, 2016 and 2015:




($ in thousands)	Loans Modified as TDRs During the Three Months Ended March 31, 2016
($ in thousands)	Number of Loans	Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment ⁽¹⁾		Financial Impact ⁽²⁾
CRE:
Income producing	2	$	13,775	$	13,753	$	—
C&I:
Commercial business	4	$	21,614	$	18,632	$	97
Trade finance	2	$	7,901	$	8,083	$	—
Residential:
Single-family	1	$	276	$	273	$	—
Consumer:	1	$	344	$	343	$	1




	Loans Modified as TDRs During the Three Months Ended March 31, 2015
($ in thousands)	Number of Loans	Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment ⁽¹⁾		Financial Impact ⁽²⁾
CRE:
Income producing	1	$	828	$	833	$	—
C&I:
Commercial business	1	$	167	$	164	$	32
Residential:
Single-family	1	$	281	$	281	$	2


(1)	Includes subsequent payments after modification and reflects the balance as of March 31, 2016 and 2015.


(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 three months ended March 31, 2016 and 2015 by modification type:




($ in thousands)	Modification Type
($ in thousands)	Principal ⁽¹⁾		Principal and Interest⁽²⁾		Interest Rate Reduction		Other		Total
March 31, 2016
CRE	$	13,725	$	—	$	—	$	28	$	13,753
C&I	19,166		—		3,615		3,934		26,715
Residential	273		—		—		—		273
Consumer	343		—		—		—		343
Total	$	33,507	$	—	$	3,615	$	3,962	$	41,084




($ in thousands)	Modification Type
($ in thousands)	Principal ⁽¹⁾		Principal and Interest⁽²⁾		Interest Rate Reduction		Other		Total
March 31, 2015
CRE	$	—	$	833	$	—	$	—	$	833
C&I	164		—		—		—		164
Residential	281		—		—		—		281
Consumer	—		—		—		—		—
Total	$	445	$	833	$	—	$	—	$	1,278


(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 three months ended March 31, 2016 and 2015, and are still in default at period end:




	Loans Modified as TDRs that Subsequently Defaulted During the Three Months Ended March 31,
	2016			2015
($ in thousands)	Number of Loans	Recorded Investment		Number of Loans	Recorded Investment
C&I:
Commercial business	4	$	954	—	$	—

The amount of additional funds committed to lend to borrowers whose terms have been modified was $2.5 million as of March 31, 2016. The amount of additional funds committed to lend to borrowers whose terms have been modified was immaterial as of December 31, 2015.

Impaired Loans

The Company’s loans are grouped into heterogeneous and homogeneous (mostly consumer loans) categories. Classified loans in the heterogeneous category are identified and evaluated for impairment on an individual basis. A loan is considered impaired when, based on current information and events, it is probable that the Company will not be able to collect all scheduled payments of principal or interest due in accordance with the original contractual terms. Impaired loans are measured based on the present value of expected future cash flows discounted at the loan’s effective interest rate or, as expedient, at the loan’s observable market price or the fair value of the collateral, if the loan is collateral dependent, less costs to sell. When the value of an impaired loan is less than the recorded investment and the loan is classified as nonperforming and uncollectible, the deficiency is charged-off against the allowance for loan losses. Impaired loans exclude the homogeneous consumer loan portfolio, which is evaluated collectively for impairment. The Company’s impaired loans include predominantly non-PCI loans held-for-investment on nonaccrual status and any non-PCI loans modified in a TDR, which may be on accrual or nonaccrual status.

The following tables present information on impaired non-PCI loans as of March 31, 2016 and December 31, 2015:




($ in thousands)	Unpaid Principal Balance		Recorded Investment With No Allowance		Recorded Investment With Allowance		Total Recorded Investment		Related Allowance
March 31, 2016
CRE:
Income producing	$	78,858	$	63,561	$	7,725	$	71,286	$	351
Land	7,062		5,522		1,279		6,801		111
C&I:
Commercial business	105,973		31,716		61,401		93,117		16,888
Trade finance	12,425		8,083		4,318		12,401		43
Residential:
Single-family	19,759		6,085		12,077		18,162		548
Multifamily	23,968		16,129		6,082		22,211		267
Consumer	1,630		—		1,628		1,628		57
Total	$	249,675	$	131,096	$	94,510	$	225,606	$	18,265




($ 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

The following table presents the average recorded investment and interest income recognized on non-PCI impaired loans during the three months ended March 31, 2016 and 2015:




($ in thousands)	Three Months Ended March 31,
	2016				2015
	Average Recorded Investment		Recognized Interest Income ⁽¹⁾		Average Recorded Investment		Recognized Interest Income ⁽¹⁾
CRE:
Income producing	$	72,248	$	391	$	44,195	$	141
Construction	—		—		3,902		—
Land	6,908		9		3,438		10
C&I:
Commercial business	92,707		369		39,310		202
Trade finance	13,756		66		245		3
Residential:
Single-family	18,318		65		15,423		68
Multifamily	22,338		77		26,987		203
Consumer	1,635		16		1,258		12
Total impaired non-PCI loans	$	227,910	$	993	$	134,758	$	639


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

Allowance for Credit Losses

The following tables present a summary of activities in the allowance for loan losses by portfolio segment for the three months ended March 31, 2016 and 2015:




($ in thousands)	Non-PCI Loans															PCI Loans
($ in thousands)	CRE			C&I			Residential			Consumer			Total			PCI Loans			Total
Three Months Ended March 31, 2016
Beginning balance	$	81,191		$	134,597		$	39,292		$	9,520		$	264,600		$	359		$	264,959
Provision for (reversal of) loan losses	1,306			4,654			(5,317		)	(226		)	417			(31		)	386
Charge-offs	(56		)	(5,860		)	(137		)	(1		)	(6,054		)	—			(6,054		)
Recoveries	97			686			97			67			947			—			947
Net recoveries (charge-offs)	41			(5,174		)	(40		)	66			(5,107		)	—			(5,107		)
Ending balance	$	82,538		$	134,077		$	33,935		$	9,360		$	259,910		$	328		$	260,238




($ in thousands)	Non-PCI Loans															PCI Loans
($ in thousands)	CRE			C&I			Residential			Consumer			Total			PCI Loans			Total
Three Months Ended March 31, 2015
Beginning balance	$	72,263		$	134,598		$	43,856		$	10,248		$	260,965		$	714		$	261,679
(Reversal of) provision for loan losses	(2,333		)	5,378			(1,571		)	664			2,138			(71		)	2,067
Charge-offs	(1,002		)	(6,589		)	(746		)	(463		)	(8,800		)	—			(8,800		)
Recoveries	812			527			1,451			2			2,792			—			2,792
Net (charge-offs) recoveries	(190		)	(6,062		)	705			(461		)	(6,008		)	—			(6,008		)
Ending balance	$	69,740		$	133,914		$	42,990		$	10,451		$	257,095		$	643		$	257,738

For further information on accounting policies and the methodology used to estimate the allowance for credit losses and loan charge-offs, please see Note 1 — Summary of Significant Accounting Policies to the Consolidated Financial Statements of the Company’s 2015 Form 10-K.

The following table presents a summary of activities in the allowance for unfunded credit reserves during the three months ended March 31, 2016 and 2015:




($ in thousands)	Three Months Ended March 31,
($ in thousands)	2016		2015
Beginning balance	$	20,360	$	12,712
Provision for unfunded credit reserves	1,054		2,920
Ending balance	$	21,414	$	15,632

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 is included in Accrued expense and other liabilities in the Consolidated Balance Sheets. Please refer to Note 10 — Commitments And Contingencies 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 by portfolio segment and impairment methodology as of March 31, 2016 and December 31, 2015:




($ in thousands)	CRE		C&I		Residential		Consumer		Total
As of March 31, 2016
Allowance for loan losses
Individually evaluated for impairment	$	462	$	16,931	$	815	$	57	$	18,265
Collectively evaluated for impairment	82,076		117,146		33,120		9,303		241,645
Acquired with deteriorated credit quality	314		10		4		—		328
Ending balance	$	82,852	$	134,087	$	33,939	$	9,360	$	260,238

Recorded investment in loans
Individually evaluated for impairment	$	78,087	$	105,518	$	40,373	$	1,628	$	225,606
Collectively evaluated for impairment	7,870,738		8,659,257		4,123,568		2,021,893		22,675,456
Acquired with deteriorated credit quality ⁽¹⁾	502,653		53,468		287,457		23,263		866,841
Ending balance ⁽¹⁾	$	8,451,478	$	8,818,243	$	4,451,398	$	2,046,784	$	23,767,903




($ 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.

PCI Loans

At the date of acquisition, PCI loans are 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 represents 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 as the “nonaccretable difference.”

The following table presents the changes in accretable yield for PCI loans for the three months ended March 31, 2016 and 2015:




($ in thousands)	Three Months Ended March 31,
($ in thousands)	2016			2015
Beginning balance	$	214,907		$	311,688
Accretion	(22,429		)	(30,569		)
Changes in expected cash flows	(6,487		)	12,036
Ending balance	$	185,991		$	293,155

Loans Held for Sale

Loans held for sale are carried at the LOCOM. When a determination is made at the time of commitment to originate or purchase loans as held-for-investment, it is the Company’s intent to hold these loans to maturity or for the “foreseeable future,” subject to periodic review under the Company’s management evaluation processes, including asset/liability management. When the Company subsequently changes its intent to hold certain loans, the loans are transferred from the loans held-for-investment portfolio to the loans held for sale portfolio at LOCOM.

Loans held for sale of $28.8 million and $32.0 million as of March 31, 2016 and December 31, 2015, respectively, were comprised of consumer loans. Transfers of loans held-for-investment to loans held for sale for the three months ended March 31, 2016 and 2015 were $308.7 million and $820.5 million, respectively. Loans transferred during the three months ended March 31, 2016 were comprised of multifamily residential, C&I and CRE loans. During the three months ended March 31, 2015, loans transferred were comprised primarily of C&I and single-family residential loans. The Company recorded $1.8 million and $1.7 million in write-downs to the allowance for loan losses related to loans transferred from loans held-for-investment to loans held for sale for the three months ended March 31, 2016 and 2015, respectively.

For the three months ended March 31, 2016, the Company sold or securitized approximately $256.2 million in originated loans resulting in net gains of $4.3 million. Originated loans sold or securitized during the three months ended March 31, 2016 were primarily comprised of multifamily residential, C&I and CRE loans. During the three months ended March 31, 2016, the Company recorded $1.1 million in net gains and $641 thousand in mortgage servicing rights, and retained $160.1 million of the senior tranche of the resulting securities from the securitization of the $201.7 million of multifamily residential loans. For the three months ended March 31, 2015, the Company sold originated loans with carrying value of approximately $326.8 million, resulting in net gains of $8.6 million. Originated loans sold during the three months ended March 31, 2015 were primarily comprised of single-family residential and C&I loans.

The Company purchases loans (including participation loans) and sells loans in the secondary market. For the three months ended March 31, 2016, the Company sold approximately $53.9 million of loans and no gains or losses were recognized from these sales. For the three months ended March 31, 2015, the Company sold approximately $343.0 million of loans at net gains of $1.0 million.

The Company recorded $2.4 million in LOCOM adjustments related to the loans held for sale portfolio during the three months ended March 31, 2016. No LOCOM adjustment related to the loans held for sale portfolio was recorded during the three months ended March 31, 2015. LOCOM adjustments are recorded in Net gains on sales of loans in the Consolidated Statements of Income.