LOANS RECEIVABLE AND ALLOWANCE FOR CREDIT LOSSES

12 Months Ended

Dec. 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 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. PCI loans are loans acquired with evidence of credit deterioration since their 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 under 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 December 31, 2016 and 2015:




($ in thousands)	December 31, 2016									December 31, 2015
($ in thousands)	Non-PCI Loans⁽¹⁾			PCI Loans⁽²⁾			Total⁽¹⁾⁽²⁾			Non-PCI Loans⁽¹⁾			PCI Loans⁽²⁾			Total⁽¹⁾⁽²⁾
CRE:
Income producing	$	7,667,661		$	348,448		$	8,016,109		$	6,930,537		$	541,275		$	7,471,812
Construction	551,560			—			551,560			432,728			1,895			434,623
Land	121,276			1,918			123,194			187,442			6,195			193,637
Total CRE	8,340,497			350,366			8,690,863			7,550,707			549,365			8,100,072
C&I:
Commercial business	8,921,246			38,387			8,959,633			8,143,858			57,906			8,201,764
Trade finance	680,930			—			680,930			788,461			1,310			789,771
Total C&I	9,602,176			38,387			9,640,563			8,932,319			59,216			8,991,535
Residential:
Single-family	3,370,669			139,110			3,509,779			2,880,336			189,633			3,069,969
Multifamily	1,490,285			95,654			1,585,939			1,376,090			148,277			1,524,367
Total residential	4,860,954			234,764			5,095,718			4,256,426			337,910			4,594,336
Consumer	2,057,067			18,928			2,075,995			1,933,542			24,263			1,957,805
Total loans	$	24,860,694		$	642,445		$	25,503,139		$	22,672,994		$	970,754		$	23,643,748
Allowance for loan losses	(260,402		)	(118		)	(260,520		)	(264,600		)	(359		)	(264,959		)
Loans, net	$	24,600,292		$	642,327		$	25,242,619		$	22,408,394		$	970,395		$	23,378,789


(1)	Includes $1.2 million and $(16.0) million as of December 31, 2016 and 2015, respectively, of unearned fees, net deferred loan fees and unamortized premiums and unaccreted discounts.


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

CRE loans include income producing real estate, construction and land loans where the interest rates may be fixed, variable or hybrid. Included in CRE loans are owner occupied CRE loans, and also non-owner occupied CRE loans where the borrowers rely on income from tenants to debt service the loan. Commercial business and trade finance in the C&I segment provide financing to businesses in a wide spectrum of industries.

Residential loans are comprised of single-family and multifamily loans. The Company offers first lien mortgage loans secured by one-to-four unit residential properties located in its primary lending areas. The Company offers a variety of first lien mortgage loan programs, including fixed rate conforming loans and adjustable rate mortgage (“ARM”) loans with initial fixed periods of one to five years, which adjust annually thereafter.

Consumer loans are comprised of home equity lines of credit (“HELOCs”), auto loans, and insurance premium financing loans. As of December 31, 2016 and 2015, the Company’s HELOCs are the largest component of the consumer loan portfolio, and are secured by one-to-four unit residential properties located in its primary lending areas. The HELOCs loan portfolio is largely comprised of loans originated through a reduced documentation loan program, where a substantial down payment is required, resulting in a low loan to value ratio, typically 60% or less. The Company is in a first lien position for many of these reduced documentation HELOCs. These loans have historically experienced low delinquency and default rates.

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, 2016 and 2015, loans totaling $16.44 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 the loans’ collectability.

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




($ in thousands)	December 31, 2016
($ in thousands)	Pass/Watch		Special Mention		Substandard		Doubtful		Loss		Total Non- PCI Loans
CRE:
Income producing	$	7,476,804	$	29,005	$	161,852	$	—	$	—	$	7,667,661
Construction	551,560		—		—		—		—		551,560
Land	107,976		—		13,290		10		—		121,276
C&I:
Commercial business	8,559,674		155,276		201,139		5,157		—		8,921,246
Trade finance	635,027		9,435		36,460		—		8		680,930
Residential:
Single-family	3,341,015		10,179		19,475		—		—		3,370,669
Multifamily	1,462,522		2,268		25,495		—		—		1,490,285
Consumer	2,043,405		6,764		6,898		—		—		2,057,067
Total	$	24,177,983	$	212,927	$	464,609	$	5,167	$	8	$	24,860,694




($ in thousands)	December 31, 2015
($ in thousands)	Pass/Watch		Special Mention		Substandard		Doubtful		Loss		Total Non- PCI Loans
CRE:
Income producing	$	6,665,994	$	59,290	$	205,238	$	—	$	15	$	6,930,537
Construction	431,100		1,158		470		—		—		432,728
Land	172,093		—		15,349		—		—		187,442
C&I:
Commercial business	7,780,686		201,016		137,740		24,416		—		8,143,858
Trade finance	750,770		13,836		23,847		—		8		788,461
Residential:
Single-family	2,844,758		8,092		27,486		—		—		2,880,336
Multifamily	1,318,896		2,928		54,266		—		—		1,376,090
Consumer	1,927,755		1,246		4,541		—		—		1,933,542
Total	$	21,892,052	$	287,566	$	468,937	$	24,416	$	23	$	22,672,994

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




($ in thousands)	December 31, 2016
($ in thousands)	Pass/Watch		Special Mention		Substandard		Doubtful		Loss		Total PCI Loans
CRE:
Income producing	$	293,529	$	3,239	$	51,680	$	—	$	—	$	348,448
Construction	—		—		—		—		—		—
Land	1,562		—		356		—		—		1,918
C&I:
Commercial business	33,885		772		3,730		—		—		38,387
Trade finance	—		—		—		—		—		—
Residential:
Single-family	136,245		1,239		1,626		—		—		139,110
Multifamily	86,190		—		9,464		—		—		95,654
Consumer	17,433		316		1,179		—		—		18,928
Total ⁽¹⁾	$	568,844	$	5,566	$	68,035	$	—	$	—	$	642,445




($ in thousands)	December 31, 2015
($ in thousands)	Pass/Watch		Special Mention		Substandard		Doubtful		Loss		Total PCI Loans
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, such as when the full collection of principal or interest becomes uncertain, are also placed on nonaccrual status. The following tables present the aging analysis on non-PCI loans as of December 31, 2016 and 2015:




($ in thousands)	December 31, 2016
($ 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
CRE:
Income producing	$	6,233	$	14,080	$	20,313	$	14,872	$	12,035	$	26,907	$	7,620,441	$	7,667,661
Construction	4,994		—		4,994		—		—		—		546,566		551,560
Land	—		—		—		433		4,893		5,326		115,950		121,276
C&I:
Commercial business	45,052		2,279		47,331		60,511		20,737		81,248		8,792,667		8,921,246
Trade finance	—		—		—		8		—		8		680,922		680,930
Residential:
Single-family	9,595		8,076		17,671		—		4,214		4,214		3,348,784		3,370,669
Multifamily	3,951		374		4,325		2,790		194		2,984		1,482,976		1,490,285
Consumer	3,327		3,228		6,555		165		1,965		2,130		2,048,382		2,057,067
Total	$	73,152	$	28,037	$	101,189	$	78,779	$	44,038	$	122,817	$	24,636,688	$	24,860,694




($ in thousands)	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
CRE:
Income producing	$	3,481	$	25,254	$	28,735	$	11,393	$	17,952	$	29,345	$	6,872,457	$	6,930,537
Construction	—		—		—		14		—		14		432,714		432,728
Land	1,124		—		1,124		280		406		686		185,632		187,442
C&I:
Commercial business	2,029		1,203		3,232		50,747		14,128		64,875		8,075,751		8,143,858
Trade finance	—		—		—		8		—		8		788,453		788,461
Residential:
Single-family	7,649		2,919		10,568		104		8,655		8,759		2,861,009		2,880,336
Multifamily	6,339		983		7,322		6,473		9,795		16,268		1,352,500		1,376,090
Consumer	2,174		268		2,442		232		1,511		1,743		1,929,357		1,933,542
Total	$	22,796	$	30,627	$	53,423	$	69,251	$	52,447	$	121,698	$	22,497,873	$	22,672,994

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

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 under 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 December 31, 2016 and 2015, PCI loans on nonaccrual status totaled $11.7 million and $37.7 million, respectively.

Loans in Process of Foreclosure

As of December 31, 2016 and 2015, the Company had $3.1 million and $17.4 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 $401 thousand were included in total net OREO of $6.7 million as of December 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.

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, 2016, 2015 and 2014:




($ in thousands)	Loans Modified as TDRs During the Year Ended December 31, 2016
($ in thousands)	Number of Loans	Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment ⁽¹⁾		Financial Impact ⁽²⁾
CRE:
Income producing	6	$	19,275	$	18,824	$	701
Land	1	$	5,522	$	4,883	$	—
C&I:
Commercial business	17	$	62,024	$	35,278	$	20,549
Trade finance	1	$	3,967	$	5,127	$	25
Residential:
Single-family	3	$	1,291	$	1,268	$	—
Consumer	3	$	491	$	382	$	1




($ 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	$	1,727	$	—
Land	2	$	2,227	$	83	$	102
C&I:
Commercial business	18	$	42,816	$	34,165	$	6,726
Residential:
Single-family	1	$	281	$	279	$	2




($ in thousands)	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	$	—


(1)	Includes subsequent payments after modification and reflects the balance as of December 31, 2016, 2015 and 2014.


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

The following tables present the non-PCI TDR modifications for the years ended December 31, 2016, 2015 and 2014 by modification type:




($ in thousands)	Modification Type During the Year Ended December 31, 2016
($ in thousands)	Principal ⁽¹⁾		Principal and Interest⁽²⁾		Interest Rate Reduction		Interest Deferments		Other		Total
CRE	$	22,633	$	—	$	—	$	—	$	1,074	$	23,707
C&I	34,499		—		5,876		30		—		40,405
Residential	264		—		797		207		—		1,268
Consumer	333		—		49		—		—		382
Total	$	57,729	$	—	$	6,722	$	237	$	1,074	$	65,762




($ in thousands)	Modification Type During the Year Ended December 31, 2015
($ in thousands)	Principal ⁽¹⁾		Principal and Interest⁽²⁾		Interest Rate Reduction		Interest Deferments		Other		Total
CRE	$	548	$	787	$	—	$	—	$	475	$	1,810
C&I	16,364		17,801		—		—		—		34,165
Residential	279		—		—		—		—		279
Total	$	17,191	$	18,588	$	—	$	—	$	475	$	36,254




($ in thousands)	Modification Type During the Year Ended December 31, 2014
($ in thousands)	Principal ⁽¹⁾		Principal and Interest⁽²⁾		Interest Rate Reduction		Interest Deferments		Other		Total
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


(1)	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)	Includes principal and interest deferments or reductions.

Subsequent to restructuring, a TDR that becomes delinquent, generally beyond 90 days, is considered to have defaulted. As TDRs are individually evaluated for impairment under the specific reserve methodology, subsequent defaults do not generally have a significant additional impact on the allowance for loan losses. 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, 2016, 2015 and 2014, and were still in default at the respective years ended:




($ in thousands)	Loans Modified as TDRs that Subsequently Defaulted During the Year Ended December 31,
	2016			2015			2014
	Number of Loans	Recorded Investment		Number of Loans	Recorded Investment		Number of Loans	Recorded Investment
CRE:
Income producing	2	$	3,150	—	$	—	—	$	—
Land	1	$	4,883	—	$	—	—	$	—
C&I:
Commercial business	—	$	—	—	$	—	1	$	957
Residential:
Single-family	—	$	—	1	$	279	—	$	—

The amount of additional funds committed to lend to borrowers whose terms have been modified was $9.9 million as of December 31, 2016. In comparison, 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 following tables present information on non-PCI impaired loans as of December 31, 2016 and 2015:




($ in thousands)	December 31, 2016
($ in thousands)	Unpaid Principal Balance		Recorded Investment With No Allowance		Recorded Investment With Allowance		Total Recorded Investment		Related Allowance
CRE:
Income producing	$	50,718	$	32,507	$	14,001	$	46,508	$	1,263
Land	6,457		5,427		443		5,870		63
C&I:
Commercial business	162,239		78,316		42,137		120,453		10,443
Trade finance	5,227		—		5,166		5,166		34
Residential:
Single-family	15,435		—		14,335		14,335		687
Multifamily	11,181		5,684		4,357		10,041		180
Consumer	4,016		—		3,682		3,682		31
Total	$	255,273	$	121,934	$	84,121	$	206,055	$	12,701




($ in thousands)	December 31, 2015
($ in thousands)	Unpaid Principal Balance		Recorded Investment With No Allowance		Recorded Investment With Allowance		Total Recorded Investment		Related Allowance
CRE:
Income producing	$	47,043	$	24,416	$	15,800	$	40,216	$	3,197
Construction	66		—		14		14		1
Land	1,537		660		685		1,345		118
C&I:
Commercial business	81,720		31,071		40,328		71,399		16,005
Trade finance	10,675		8		10,681		10,689		95
Residential:
Single-family	16,486		4,406		10,636		15,042		584
Multifamily	25,634		16,946		6,805		23,751		339
Consumer	1,240		—		1,242		1,242		60
Total	$	184,401	$	77,507	$	86,191	$	163,698	$	20,399

The following table presents the average recorded investment and interest income recognized on non-PCI impaired loans during the years ended December 31, 2016, 2015 and 2014:




($ in thousands)	Year Ended December 31,
	2016				2015				2014
	Average Recorded Investment		Recognized Interest Income ⁽¹⁾		Average Recorded Investment		Recognized Interest Income ⁽¹⁾		Average Recorded Investment		Recognized Interest Income ⁽¹⁾
CRE:
Income producing	$	47,064	$	1,253	$	43,598	$	536	$	54,509	$	1,249
Construction	—		—		14		—		6,884		—
Land	6,388		34		2,726		39		8,627		298
C&I:
Commercial business	144,807		2,464		73,886		315		36,504		833
Trade finance	4,179		148		11,404		223		336		15
Residential:
Single-family	14,323		447		15,365		242		16,402		342
Multifamily	15,763		302		24,024		312		37,104		830
Consumer	3,703		63		1,252		47		1,258		47
Total non-PCI impaired loans	$	236,227	$	4,711	$	172,269	$	1,714	$	161,624	$	3,614


(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 years ended December 31, 2016, 2015 and 2014:




($ in thousands)	Year Ended December 31, 2016
	Non-PCI Loans															PCI Loans			Total
	CRE			C&I			Residential			Consumer			Total			PCI Loans			Total
Beginning balance	$	81,191		$	134,597		$	39,292		$	9,520		$	264,600		$	359		$	264,959
(Reversal of) provision for loan losses	(9,497		)	46,855			(3,670		)	(1,729		)	31,959			(241		)	31,718
Charge-offs	(581		)	(47,739		)	(166		)	(22		)	(48,508		)	—			(48,508		)
Recoveries	1,691			8,453			1,877			330			12,351			—			12,351
Net recoveries (charge-offs)	1,110			(39,286		)	1,711			308			(36,157		)	—			(36,157		)
Ending balance	$	72,804		$	142,166		$	37,333		$	8,099		$	260,402		$	118		$	260,520




($ in thousands)	Year Ended December 31, 2015
	Non-PCI Loans															PCI Loans			Total
	CRE			C&I			Residential			Consumer			Total			PCI Loans			Total
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)	Year Ended December 31, 2014
	Non-PCI Loans															PCI Loans			Total
	CRE			C&I			Residential			Consumer			Total			PCI Loans			Total
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

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

The following table presents a summary of activities in the allowance for unfunded credit reserves during the years ended December 31, 2016, 2015 and 2014:




($ in thousands)	Year Ended December 31,
($ in thousands)	2016			2015		2014
Beginning balance	$	20,360		$	12,712	$	11,282
(Reversal of) provision for unfunded credit reserves	(4,239		)	7,648		1,575
Charge-offs	—			—		(145		)
Ending balance	$	16,121		$	20,360	$	12,712

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 expenses and other liabilities on the Consolidated Balance Sheets. See Note 13 — 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 by portfolio segment and impairment methodology as of December 31, 2016 and 2015:




($ in thousands)	December 31, 2016
($ in thousands)	CRE		C&I		Residential		Consumer		Total
Allowance for loan losses
Individually evaluated for impairment	$	1,326	$	10,477	$	867	$	31	$	12,701
Collectively evaluated for impairment	71,478		131,689		36,466		8,068		247,701
Acquired with deteriorated credit quality	112		1		5		—		118
Ending balance	$	72,916	$	142,167	$	37,338	$	8,099	$	260,520

Recorded investment in loans
Individually evaluated for impairment	$	52,378	$	125,619	$	24,376	$	3,682	$	206,055
Collectively evaluated for impairment	8,288,119		9,476,557		4,836,578		2,053,385		24,654,639
Acquired with deteriorated credit quality ⁽¹⁾	350,366		38,387		234,764		18,928		642,445
Ending balance ⁽¹⁾	$	8,690,863	$	9,640,563	$	5,095,718	$	2,075,995	$	25,503,139




($ in thousands)	December 31, 2015
($ in thousands)	CRE		C&I		Residential		Consumer		Total
Allowance for loan losses
Individually evaluated for impairment	$	3,316	$	16,100	$	923	$	60	$	20,399
Collectively evaluated for impairment	77,875		118,497		38,369		9,460		244,201
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	$	41,575	$	82,088	$	38,793	$	1,242	$	163,698
Collectively evaluated for impairment	7,509,132		8,850,231		4,217,633		1,932,300		22,509,296
Acquired with deteriorated credit quality ⁽¹⁾	549,365		59,216		337,910		24,263		970,754
Ending balance ⁽¹⁾	$	8,100,072	$	8,991,535	$	4,594,336	$	1,957,805	$	23,643,748


(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. A pool is accounted for as a single asset with a single interest rate, cumulative loss rate and cash flow expectation. The cash flows expected over the life of the pools are estimated by an internal cash flow model that projects cash flows and calculates the carrying values of the pools, book yields, effective interest income and impairment, if any, based on pool level events. Assumptions as to cumulative loss rates, loss curves and prepayment speeds are utilized to calculate the expected cash flows. 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. Prepayments affect the estimated life of PCI loans, which may change the amount of interest income, and possibly principal, expected to be collected. The excess of total contractual cash flows over the cash flows expected to be received at origination is deemed to be the “nonaccretable difference.”

The following table presents the changes in accretable yield for PCI loans for the years ended December 31, 2016, 2015 and 2014:




($ in thousands)	Year Ended December 31,
($ in thousands)	2016			2015			2014
Beginning balance	$	214,907		$	311,688		$	461,545
Addition	—			—			6,745
Accretion	(68,708		)	(107,442		)	(219,169		)
Changes in expected cash flows	(9,952		)	10,661			62,567
Ending balance	$	136,247		$	214,907		$	311,688

Loans Held-for-Sale

Loans held-for-sale are carried at the lower of cost or fair value. 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 reviews 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 the lower of cost or fair value.

Loans held-for-sale amounted to $23.1 million and $32.0 million as of December 31, 2016 and 2015, respectively, and were comprised primarily of consumer loans. Transfers of loans held-for-investment to loans held-for-sale were $814.2 million for the year ended December 31, 2016. These loan transfers were comprised of C&I, multifamily residential and CRE loans. In comparison, $1.69 billion and $837.4 million of loans held-for-investment were transferred to loans held-for-sale during the years ended December 31, 2015 and 2014, respectively. These loan transfers were comprised primarily of single-family residential and C&I loans for the year ended December 31, 2015, and consumer and C&I loans for the year ended December 31, 2014. The Company recorded $1.9 million, $5.1 million and $5.2 million, respectively, 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 years ended December 31, 2016, 2015 and 2014.

During the year ended December 31, 2016, the Company sold or securitized $571.3 million in originated loans, which were primarily comprised of mutifamily, C&I and CRE loans, resulting in net gains of $11.5 million. During the same period, the Company also 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 $201.7 million of multifamily loans. In comparison, during the year ended December 31, 2015, the Company sold $1.04 billion in originated loans, which were comprised primarily of single-family residential and C&I loans, resulting in net gains of $26.1 million. During the year ended December 31, 2014, the Company sold $68.1 million in originated loans, which were comprised primarily of C&I loans, resulting in net gains of $7.2 million.

From time to time, the Company purchases and sells loans in the secondary market. During the year ended December 31, 2016, the Company purchased approximately $1.14 billion of loans, compared to $282.4 million and $865.2 million, respectively, during the years ended December 31, 2015 and 2014. The increase in the loans purchased in 2016, compared to 2015, was primarily due to the purchase of single-family residential loans that were made to low-to-moderate income borrowers. Other loan purchases were largely made within the Company’s syndicated loan portfolio. Certain purchased loans were transferred from loans held-for-investment to loans held-for-sale and a write-down to allowance for loan losses was recorded, where appropriate. During the year ended December 31, 2016, the Company sold $259.1 million of loans in the secondary market at net gains of $188 thousand. In comparison, the Company sold $661.9 million and $1.02 billion, respectively, of loans in the secondary market during the years ended December 31, 2015 and 2014, resulting in net gains of $1.7 million and $31.9 million, respectively, during the same periods.

For the years ended December 31, 2016 and 2015, the Company recorded valuation adjustments of $5.6 million and $3.0 million, respectively, in Net gains on sales of loans on the Consolidated Statements of Income to carry the loans held-for-sale portfolio at the lower of cost or fair value. No such valuation adjustment was recorded for the year ended December 31, 2014.