Loans Receivable and Allowance for Credit Losses

3 Months Ended

Mar. 31, 2018

Loans and Leases Receivable Disclosure [Abstract]

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. PCI loans are loans acquired with evidence of credit deterioration since their origination and for which 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 March 31, 2018 and December 31, 2017:




($ in thousands)	March 31, 2018									December 31, 2017
($ in thousands)	Non-PCI Loans ⁽¹⁾			PCI Loans ⁽²⁾			Total ⁽¹⁾⁽²⁾			Non-PCI Loans ⁽¹⁾			PCI Loans ⁽²⁾			Total ⁽¹⁾⁽²⁾
Commercial lending:
C&I	$	10,807,262		$	11,042		$	10,818,304		$	10,685,436		$	11,795		$	10,697,231
CRE	8,762,910			259,836			9,022,746			8,659,209			277,688			8,936,897
Multifamily residential	1,898,517			56,338			1,954,855			1,855,128			61,048			1,916,176
Construction and land	669,296			44			669,340			659,326			371			659,697
Total commercial lending	22,137,985			327,260			22,465,245			21,859,099			350,902			22,210,001
Consumer lending:
Single-family residential	4,818,094			112,486			4,930,580			4,528,911			117,378			4,646,289
Home equity lines of credit (“HELOCs”)	1,762,786			12,657			1,775,443			1,768,917			14,007			1,782,924
Other consumer	383,980			—			383,980			336,504			—			336,504
Total consumer lending	6,964,860			125,143			7,090,003			6,634,332			131,385			6,765,717
Total loans held-for-investment	$	29,102,845		$	452,403		$	29,555,248		$	28,493,431		$	482,287		$	28,975,718
Allowance for loan losses	(297,607		)	(47		)	(297,654		)	(287,070		)	(58		)	(287,128		)
Loans held-for-investment, net	$	28,805,238		$	452,356		$	29,257,594		$	28,206,361		$	482,229		$	28,688,590


(1)	Includes net deferred loan fees, unearned fees, unamortized premiums and unaccreted discounts of $(36.6) million and $(34.0) million as of March 31, 2018 and December 31, 2017, respectively.


(2)	Includes ASC 310-30 discount of $32.2 million and $35.3 million as of March 31, 2018 and December 31, 2017, respectively.

The commercial lending portfolio includes C&I, CRE, multifamily residential, and construction and land loans. Consumer lending portfolio includes single-family residential, HELOC and other consumer loans.

The C&I loan portfolio, which is comprised of commercial business and trade finance loans, provides financing to businesses in a wide spectrum of industries. The CRE loan portfolio includes income producing real estate loans where the interest rates may be fixed, variable or hybrid. Included in the CRE loan portfolio are owner occupied and non-owner occupied loans (where 50% or more of the debt service for the loan is provided by rental income). Construction loans in the construction and land loan portfolio mainly provide financing for the construction of hotels, multifamily and residential condominiums, as well as mixed use (residential and retail) structures.

Residential loans are comprised of multifamily residential loans in the commercial lending portfolio and single-family residential loans in the consumer lending portfolio. The Company offers a variety of first lien mortgage loan programs, including fixed rate conforming loans as well as adjustable rate mortgage loans with interest rates that adjust annually after the initial fixed rate periods of one to seven years.

The HELOC 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 at origination. 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. Other consumer loans are mainly comprised of insurance premium financing and credit card loans.

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 associated with these products. The Company conducts a variety of quality control procedures and periodic audits, including the review of lending and legal requirements, to ensure that it is in compliance with these requirements.

As of March 31, 2018 and December 31, 2017, loans totaling $19.50 billion and $18.88 billion, respectively, were pledged to secure borrowings and to provide additional borrowing capacity from the FRB and the FHLB.

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 classifies loans 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 loans that have sufficient sources of repayment in order to repay the loan in full in accordance with all terms and conditions. Special Mention loans are loans that have potential weaknesses that warrant closer attention by management. Special Mention is 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 indicate that the repayment sources may become inadequate, the loan is downgraded to a Substandard grade. Substandard loans are loans that 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 remains classified as Substandard grade. Doubtful loans have insufficient sources of repayment and a high probability of loss. Loss loans are loans that are 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 ratings for non-PCI loans by portfolio segment as of March 31, 2018 and December 31, 2017:




($ in thousands)	March 31, 2018
($ in thousands)	Pass/Watch		Special Mention		Substandard		Doubtful		Total Non-PCI Loans
Commercial lending:
C&I	$	10,464,618	$	164,161	$	150,565	$	27,918	$	10,807,262
CRE	8,614,575		41,942		106,393		—		8,762,910
Multifamily residential	1,884,434		—		14,083		—		1,898,517
Construction and land	614,481		684		54,131		—		669,296
Total commercial lending	21,578,108		206,787		325,172		27,918		22,137,985
Consumer lending:
Single-family residential	4,803,472		7,563		7,059		—		4,818,094
HELOCs	1,753,398		2,451		6,937		—		1,762,786
Other consumer	381,487		2		2,491		—		383,980
Total consumer lending	6,938,357		10,016		16,487		—		6,964,860
Total	$	28,516,465	$	216,803	$	341,659	$	27,918	$	29,102,845




($ in thousands)	December 31, 2017
($ in thousands)	Pass/Watch		Special Mention		Substandard		Doubtful		Total Non-PCI Loans
Commercial lending:
C&I	$	10,369,516	$	114,769	$	180,269	$	20,882	$	10,685,436
CRE	8,484,635		65,616		108,958		—		8,659,209
Multifamily residential	1,839,958		—		15,170		—		1,855,128
Construction and land	614,441		4,590		40,295		—		659,326
Total commercial lending	21,308,550		184,975		344,692		20,882		21,859,099
Consumer lending:
Single-family residential	4,490,672		16,504		21,735		—		4,528,911
HELOCs	1,744,903		11,900		12,114		—		1,768,917
Other consumer	333,895		111		2,498		—		336,504
Total consumer lending	6,569,470		28,515		36,347		—		6,634,332
Total	$	27,878,020	$	213,490	$	381,039	$	20,882	$	28,493,431

The following tables present the credit risk ratings for PCI loans by portfolio segment as of March 31, 2018 and December 31, 2017:




($ in thousands)	March 31, 2018
($ in thousands)	Pass/Watch		Special Mention		Substandard		Doubtful		Total PCI Loans
Commercial lending:
C&I	$	10,071	$	23	$	948	$	—	$	11,042
CRE	219,255		2,525		38,056		—		259,836
Multifamily residential	52,426		—		3,912		—		56,338
Construction and land	44		—		—		—		44
Total commercial lending	281,796		2,548		42,916		—		327,260
Consumer lending:
Single-family residential	111,567		748		171		—		112,486
HELOCs	12,435		212		10		—		12,657
Total consumer lending	124,002		960		181		—		125,143
Total ⁽¹⁾	$	405,798	$	3,508	$	43,097	$	—	$	452,403




($ in thousands)	December 31, 2017
($ in thousands)	Pass/Watch		Special Mention		Substandard		Doubtful		Total PCI Loans
Commercial lending:
C&I	$	10,712	$	57	$	1,026	$	—	$	11,795
CRE	238,605		531		38,552		—		277,688
Multifamily residential	56,720		—		4,328		—		61,048
Construction and land	44		—		327		—		371
Total commercial lending	306,081		588		44,233		—		350,902
Consumer lending:
Single-family residential	113,905		1,543		1,930		—		117,378
HELOCs	12,642		—		1,365		—		14,007
Total consumer lending	126,547		1,543		3,295		—		131,385
Total ⁽¹⁾	$	432,628	$	2,131	$	47,528	$	—	$	482,287


(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, unless the loan is well-collateralized or guaranteed by government agencies, and in the process of collection. Non-PCI loans that are less than 90 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 March 31, 2018 and December 31, 2017:




($ in thousands)	March 31, 2018
($ in thousands)	Accruing Loans 30-59 Days Past Due		Accruing Loans 60-89 Days Past Due		Accruing Loans 90 or More 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
Commercial lending:
C&I	$	16,767	$	1,649	$	2,381	$	20,797	$	38,609	$	42,198	$	80,807	$	10,705,658	$	10,807,262
CRE	6,872		2,095		—		8,967		5,321		21,175		26,496		8,727,447		8,762,910
Multifamily residential	2,958		14		—		2,972		1,000		1,050		2,050		1,893,495		1,898,517
Construction and land	1,804		—		—		1,804		—		3,973		3,973		663,519		669,296
Total commercial lending	28,401		3,758		2,381		34,540		44,930		68,396		113,326		21,990,119		22,137,985
Consumer lending:
Single-family residential	8,230		7,733		—		15,963		6		7,459		7,465		4,794,666		4,818,094
HELOCs	4,421		2,369		—		6,790		26		6,909		6,935		1,749,061		1,762,786
Other consumer	24		2		—		26		—		2,491		2,491		381,463		383,980
Total consumer lending	12,675		10,104		—		22,779		32		16,859		16,891		6,925,190		6,964,860
Total	$	41,076	$	13,862	$	2,381	$	57,319	$	44,962	$	85,255	$	130,217	$	28,915,309	$	29,102,845




($ in thousands)	December 31, 2017
($ in thousands)	Accruing Loans 30-59 Days Past Due		Accruing Loans 60-89 Days Past Due		Accruing Loans 90 or More 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
Commercial lending:
C&I	$	30,964	$	82	$	—	$	31,046	$	27,408	$	41,805	$	69,213	$	10,585,177	$	10,685,436
CRE	3,414		466		—		3,880		5,430		21,556		26,986		8,628,343		8,659,209
Multifamily residential	4,846		14		—		4,860		1,418		299		1,717		1,848,551		1,855,128
Construction and land	758		—		—		758		—		3,973		3,973		654,595		659,326
Total commercial lending	39,982		562		—		40,544		34,256		67,633		101,889		21,716,666		21,859,099
Consumer lending:
Single-family residential	13,269		5,355		—		18,624		6		5,917		5,923		4,504,364		4,528,911
HELOCs	4,286		4,186		—		8,472		89		3,917		4,006		1,756,439		1,768,917
Other consumer	14		23		—		37		—		2,491		2,491		333,976		336,504
Total consumer lending	17,569		9,564		—		27,133		95		12,325		12,420		6,594,779		6,634,332
Total	$	57,551	$	10,126	$	—	$	67,677	$	34,351	$	79,958	$	114,309	$	28,311,445	$	28,493,431

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 of the Company’s 2017 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 under ASC 310-30 at the time of acquisition. Refer to the discussion on PCI loans within this note for additional details on interest income recognition. As of March 31, 2018 and December 31, 2017, PCI loans on nonaccrual status totaled $5.2 million and $5.3 million, respectively.

Loans in Process of Foreclosure

As of March 31, 2018 and December 31, 2017, residential and consumer mortgage loans of $8.3 million and $6.6 million, respectively, were secured by residential real estate properties, for which formal foreclosure proceedings were in process according to local requirements of the applicable jurisdictions. As of March 31, 2018, there were no foreclosed residential real estate properties included in total net OREO of $734 thousand. In comparison, a foreclosed residential real estate property with a carrying amount of $188 thousand was included in total net OREO of $830 thousand as of December 31, 2017.

Troubled Debt Restructurings

Potential troubled debt restructurings (“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. 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 that it would not have otherwise considered.

There were no non-PCI TDR additions during the three months ended March 31, 2018. The following table presents the additions to non-PCI TDRs for the three months ended March 31, 2017:




($ in thousands)	Number of Loans	Pre- Modification Outstanding Recorded Investment		Post- Modification Outstanding Recorded Investment ⁽¹⁾		Financial Impact ⁽²⁾
Commercial lending:
C&I	2	$	6,448	$	4,914	$	1,273
CRE	1	1,526		1,505		—
Construction and land	2	86		—		—
Total	5	$	8,060	$	6,419	$	1,273


(1)	Includes subsequent payments after modification and reflects the balance as of March 31, 2017.


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

There were no non-PCI TDR modifications during the three months ended March 31, 2018. The following table presents the non-PCI TDR modifications for the three months ended March 31, 2017 by modification type:




($ in thousands)	Principal ⁽¹⁾		Principal and Interest ⁽²⁾		Total
Commercial lending:
C&I	$	—	$	4,914	$	4,914
CRE	1,505		—		1,505
Total	$	1,505	$	4,914	$	6,419


(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 on loans modified as TDRs within the previous 12 months that have subsequently defaulted during the three months ended March 31, 2018 and 2017, and were still in default at the respective period end:




($ in thousands)	Loans Modified as TDRs that Subsequently Defaulted During the Three Months Ended March 31,
	2018			2017
	Number of Loans	Recorded Investment		Number of Loans	Recorded Investment
Commercial lending:
C&I	—	$	—	1	$	2,718
Consumer lending:
HELOCs	1	$	155	—	$	—

The amount of additional funds committed to lend to borrowers whose terms have been modified was $2.0 million and $5.1 million as of March 31, 2018 and December 31, 2017, respectively.

Impaired Loans

The following tables present information on non-PCI impaired loans as of March 31, 2018 and December 31, 2017:




($ in thousands)	March 31, 2018
($ in thousands)	Unpaid Principal Balance		Recorded Investment With No Allowance		Recorded Investment With Allowance		Total Recorded Investment		Related Allowance
Commercial lending:
C&I	$	123,336	$	43,192	$	55,789	$	98,981	$	28,564
CRE	40,935		27,210		7,706		34,916		615
Multifamily residential	9,819		6,483		2,934		9,417		103
Construction and land	4,691		3,973		—		3,973		—
Total commercial lending	178,781		80,858		66,429		147,287		29,282
Consumer lending:
Single-family residential	16,983		2,600		13,219		15,819		541
HELOCs	8,277		4,774		3,360		8,134		5
Other consumer	2,491		—		2,491		2,491		2,491
Total consumer lending	27,751		7,374		19,070		26,444		3,037
Total non-PCI impaired loans	$	206,532	$	88,232	$	85,499	$	173,731	$	32,319




($ in thousands)	December 31, 2017
($ in thousands)	Unpaid Principal Balance		Recorded Investment With No Allowance		Recorded Investment With Allowance		Total Recorded Investment		Related Allowance
Commercial lending:
C&I	$	130,773	$	36,086	$	62,599	$	98,685	$	16,094
CRE	41,248		28,699		6,857		35,556		684
Multifamily residential	11,164		8,019		2,617		10,636		88
Construction and land	4,781		3,973		—		3,973		—
Total commercial lending	187,966		76,777		72,073		148,850		16,866
Consumer lending:
Single-family residential	15,501		—		14,338		14,338		534
HELOCs	5,484		2,287		2,921		5,208		4
Other consumer	2,491		—		2,491		2,491		2,491
Total consumer lending	23,476		2,287		19,750		22,037		3,029
Total non-PCI impaired loans	$	211,442	$	79,064	$	91,823	$	170,887	$	19,895

The following table presents the average recorded investment and interest income recognized on non-PCI impaired loans for the three months ended March 31, 2018 and 2017:




($ in thousands)	Three Months Ended March 31,
	2018				2017
	Average Recorded Investment		Recognized Interest Income ⁽¹⁾		Average Recorded Investment		Recognized Interest Income ⁽¹⁾
Commercial lending:
C&I	$	99,457	$	1,900	$	143,214	$	221
CRE	35,166		868		44,772		35
Multifamily residential	9,458		116		9,269		38
Construction and land	3,973		69		4,717		—
Total commercial lending	148,054		2,953		201,972		294
Consumer lending:
Single-family residential	15,628		206		15,096		22
HELOCs	8,141		111		4,532		12
Other consumer	2,491		45		1		—
Total consumer lending	26,260		362		19,629		34
Total non-PCI impaired loans	$	174,314	$	3,315	$	221,601	$	328


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

Allowance for Credit Losses

The following table presents a summary of activities in the allowance for loan losses by portfolio segment for the three months ended March 31, 2018 and 2017:




($ in thousands)	Three Months Ended March 31,
($ in thousands)	2018			2017
Non-PCI Loans
Allowance for non-PCI loans, beginning of period	$	287,070		$	260,402
Provision for loan losses on non-PCI loans	19,933			8,046
Gross charge-offs:
Commercial lending:
C&I	(18,445		)	(7,057		)
Construction and land	—			(148		)
Consumer lending:
Single-family residential	(1		)	—
Other consumer	(17		)	(4		)
Total gross charge-offs	(18,463		)	(7,209		)
Gross recoveries:
Commercial lending:
C&I	7,687			455
CRE	427			569
Multifamily residential	333			567
Construction and land	435			24
Consumer lending:
Single-family residential	184			11
HELOCs	—			24
Other consumer	1			118
Total gross recoveries	9,067			1,768
Net charge-offs	(9,396		)	(5,441		)
Allowance for non-PCI loans, end of period	297,607			263,007

PCI Loans
Allowance for PCI loans, beginning of period	58			118
Reversal of loan losses on PCI loans	(11		)	(31		)
Allowance for PCI loans, end of period	47			87
Allowance for loan losses	$	297,654		$	263,094

For further information on accounting policies and the methodologies 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 of the Company’s 2017 Form 10-K.

The following table presents a summary of activities in the allowance for unfunded credit reserves for the three months ended March 31, 2018 and 2017:




($ in thousands)	Three Months Ended March 31,
($ in thousands)	2018		2017
Allowance for unfunded credit reserves, beginning of period	$	13,318	$	16,121
Provision for (reversal of) unfunded credit reserves	296		(947		)
Allowance for unfunded credit reserves, end of period	$	13,614	$	15,174

The allowance for unfunded credit reserves is maintained at a level management believes 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 Sheet. See Note 11 — 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, 2018 and December 31, 2017:




($ in thousands)	March 31, 2018
	Commercial Lending								Consumer Lending
	C&I		CRE		Multifamily Residential		Construction and Land		Single- Family Residential		HELOCs		Other Consumer		Total
Allowance for loan losses
Individually evaluated for impairment	$	28,564	$	615	$	103	$	—	$	541	$	5	$	2,491	$	32,319
Collectively evaluated for impairment	141,131		39,056		18,396		32,220		25,416		7,036		2,033		265,288
Acquired with deteriorated credit quality	—		47		—		—		—		—		—		47
Total	$	169,695	$	39,718	$	18,499	$	32,220	$	25,957	$	7,041	$	4,524	$	297,654

Recorded investment in loans
Individually evaluated for impairment	$	98,981	$	34,916	$	9,417	$	3,973	$	15,819	$	8,134	$	2,491	$	173,731
Collectively evaluated for impairment	10,708,281		8,727,994		1,889,100		665,323		4,802,275		1,754,652		381,489		28,929,114
Acquired with deteriorated credit quality ⁽¹⁾	11,042		259,836		56,338		44		112,486		12,657		—		452,403
Total ⁽¹⁾	$	10,818,304	$	9,022,746	$	1,954,855	$	669,340	$	4,930,580	$	1,775,443	$	383,980	$	29,555,248




($ in thousands)	December 31, 2017
	Commercial Lending								Consumer Lending
	C&I		CRE		Multifamily Residential		Construction and Land		Single- Family Residential		HELOCs		Other Consumer		Total
Allowance for loan losses
Individually evaluated for impairment	$	16,094	$	684	$	88	$	—	$	534	$	4	$	2,491	$	19,895
Collectively evaluated for impairment	146,964		40,495		19,021		26,881		25,828		7,350		636		267,175
Acquired with deteriorated credit quality	—		58		—		—		—		—		—		58
Total	$	163,058	$	41,237	$	19,109	$	26,881	$	26,362	$	7,354	$	3,127	$	287,128

Recorded investment in loans
Individually evaluated for impairment	$	98,685	$	35,556	$	10,636	$	3,973	$	14,338	$	5,208	$	2,491	$	170,887
Collectively evaluated for impairment	10,586,751		8,623,653		1,844,492		655,353		4,514,573		1,763,709		334,013		28,322,544
Acquired with deteriorated credit quality ⁽¹⁾	11,795		277,688		61,048		371		117,378		14,007		—		482,287
Total ⁽¹⁾	$	10,697,231	$	8,936,897	$	1,916,176	$	659,697	$	4,646,289	$	1,782,924	$	336,504	$	28,975,718


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

Purchased Credit Impaired 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 flows expectation. The cash flows expected over the life of the pools are estimated by an internal cash flows 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 three months ended March 31, 2018 and 2017:




($ in thousands)	Three Months Ended March 31,
($ in thousands)	2018			2017
Accretable yield for PCI loans, beginning of period	$	101,977		$	136,247
Accretion	(9,134		)	(10,279		)
Changes in expected cash flows	3,021			2,022
Accretable yield for PCI loans, end of period	$	95,864		$	127,990

Loans Held-for-Sale

As of March 31, 2018, loans held-for-sale of $46.2 million were comprised of C&I and single-family residential loans. In comparison, as of December 31, 2017, loans held-for-sale of $85 thousand were comprised of single-family residential loans. 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 and credit risk management. When the Company subsequently changes its intent to hold certain loans, the loans are transferred from held-for-investment to held-for-sale at the lower of cost or fair value. From time to time, the Company purchases and sells loans in the secondary market. Certain purchased loans are transferred from held-for-investment to held-for-sale; and write-downs to allowance for loan losses are recorded, when appropriate.

The following tables present information on the loans transferred from held-for-investment to held-for-sale, and sales and purchases of loans, during the three months ended March 31, 2018 and 2017:




($ in thousands)	Three Months Ended March 31, 2018
	Commercial Lending						Consumer Lending
	C&I		CRE		Multifamily Residential		Single-Family Residential		Other Consumer		Total
Loans transferred from held-for-investment to held-for-sale	$	146,391	$	9,376	$	—	$	—	$	—	$	155,767	⁽¹⁾
Sales	$	102,365	$	9,376	$	—	$	2,546	$	—	$	114,287	^(2)(3)(4)
Purchases	$	64,747	$	—	$	186	$	15,113	$	—	$	80,046	⁽⁵⁾




($ in thousands)	Three Months Ended March 31, 2017
	Commercial Lending						Consumer Lending
	C&I		CRE		Multifamily Residential		Single-Family Residential		Other Consumer		Total
Loans transferred from held-for-investment to held-for-sale	$	265,259	$	12,765	$	—	$	—	$	—	$	278,024	⁽¹⁾
Sales	$	236,679	$	12,765	$	—	$	4,310	$	22,191	$	275,945	^(2)(3)(4)
Purchases	$	147,116	$	—	$	126	$	—	$	—	$	147,242	⁽⁵⁾


(1)	The Company recorded $85 thousand and $92 thousand in write-downs to the allowance for loan losses related to loans transferred from held-for-investment to held-for-sale for the three months ended March 31, 2018 and 2017, respectively.


(2)	Includes originated loans sold of $89.7 million and $29.3 million for the three months ended March 31, 2018 and 2017, respectively. Originated loans sold were primarily comprised of C&I and CRE loans for each of the three months ended March 31, 2018, and 2017.


(3)	Includes purchased loans sold in the secondary market of $24.6 million and $246.6 million for the three months ended March 31, 2018 and 2017, respectively.

(4)

Net gains on sales of loans, excluding the lower of cost or fair value adjustments, were $1.6 million and $2.8 million for the three months ended March 31, 2018 and 2017, respectively. No lower of cost or fair value adjustments were recorded for the three months ended March 31, 2018. In comparison, the lower of cost or fair value adjustment of $69 thousand was recorded in Net gains on sales of loans on the Consolidated Statement of Income for the three months ended March 31, 2017.


(5)	C&I loan purchases for each of the three months ended March 31, 2018 and 2017 mainly represent C&I syndicated loans.

- Definition

The entire disclosure for claims held for amounts due a entity, excluding financing receivables. Examples include, but are not limited to, trade accounts receivables, notes receivables, loans receivables. Includes disclosure for allowance for credit losses.

+ References + Details