Loans Receivable and Allowance for Credit Losses

12 Months Ended

Dec. 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 December 31, 2018 and 2017:




($ in thousands)	December 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:
C&I	$	12,054,818		$	2,152		$	12,056,970		$	10,685,436		$	11,795		$	10,697,231
CRE	9,284,583			165,252			9,449,835			8,659,209			277,688			8,936,897
Multifamily residential	2,246,506			34,526			2,281,032			1,855,128			61,048			1,916,176
Construction and land	538,752			42			538,794			659,326			371			659,697
Total commercial	24,124,659			201,972			24,326,631			21,859,099			350,902			22,210,001
Consumer:
Single-family residential	5,939,258			97,196			6,036,454			4,528,911			117,378			4,646,289
HELOCs	1,681,979			8,855			1,690,834			1,768,917			14,007			1,782,924
Other consumer	331,270			—			331,270			336,504			—			336,504
Total consumer	7,952,507			106,051			8,058,558			6,634,332			131,385			6,765,717
Total loans held-for-investment	$	32,077,166		$	308,023		$	32,385,189		$	28,493,431		$	482,287		$	28,975,718
Allowance for loan losses	(311,300		)	(22		)	(311,322		)	(287,070		)	(58		)	(287,128		)
Loans held-for-investment, net	$	31,765,866		$	308,001		$	32,073,867		$	28,206,361		$	482,229		$	28,688,590


(1)	Includes net deferred loan fees, unearned fees, unamortized premiums and unaccreted discounts of $(48.9) million and $(34.0) million as of December 31, 2018 and 2017, respectively.


(2)	Includes ASC 310-30 discount of $22.2 million and $35.3 million as of December 31, 2018 and 2017, respectively.

The commercial portfolio includes C&I, CRE, multifamily residential, and construction and land loans. The consumer 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 that are either owner occupied, or non-owner occupied where 50% or more of the debt service for the loan is primarily provided by unaffiliated rental income from a third party. The multifamily residential loan portfolio is largely comprised of loans secured by smaller multifamily properties ranging from 5 to 15 units in the Bank’s primary lending areas. Construction loans mainly provide construction financing for multifamily and residential condominiums, hotels, offices, industrial, as well as mixed use (residential and retail) structures.

In the consumer portfolio, the Company offers residential loans through a variety of mortgage loan programs. The consumer residential loan portfolio is largely comprised of single-family residential loans and HELOCs that were originated through a reduced documentation loan program, where a substantial down payment is required, resulting in a low loan-to-value ratio at origination, typically 60% or less. The Company is in a first lien position for many of these reduced documentation single-family residential loans and HELOCs. These loans have historically experienced low delinquency and default rates. Other consumer loans are mainly comprised of insurance premium financing loans.

As of December 31, 2018 and 2017, loans of $20.59 billion and $18.88 billion, respectively, were pledged to secure borrowings and to provide additional borrowing capacity from the Federal Reserve Bank and the FHLB.

Credit Quality Indicators

All loans are subject to the Company’s internal and external credit review and monitoring. For the commercial portfolio, 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 the majority of the consumer portfolio, 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 may jeopardize the full and timely repayment of the loan. Substandard loans have a distinct possibility of loss, if the deficiencies are not corrected. 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 December 31, 2018 and 2017:




($ in thousands)	December 31, 2018
($ in thousands)	Pass/Watch		Special Mention		Substandard		Doubtful		Total Non- PCI Loans
Commercial:
C&I	$	11,644,470	$	260,089	$	139,844	$	10,415	$	12,054,818
CRE	9,144,646		49,705		90,232		—		9,284,583
Multifamily residential	2,215,573		20,551		10,382		—		2,246,506
Construction and land	485,217		19,838		33,697		—		538,752
Total commercial	23,489,906		350,183		274,155		10,415		24,124,659
Consumer:
Single-family residential	5,925,584		6,376		7,298		—		5,939,258
HELOCs	1,669,300		1,576		11,103		—		1,681,979
Other consumer	328,767		1		2,502		—		331,270
Total consumer	7,923,651		7,953		20,903		—		7,952,507
Total	$	31,413,557	$	358,136	$	295,058	$	10,415	$	32,077,166




($ in thousands)	December 31, 2017
($ in thousands)	Pass/Watch		Special Mention		Substandard		Doubtful		Total Non- PCI Loans
Commercial:
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	21,308,550		184,975		344,692		20,882		21,859,099
Consumer:
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	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 December 31, 2018 and 2017:




($ in thousands)	December 31, 2018
($ in thousands)	Pass/Watch		Special Mention		Substandard		Doubtful		Total PCI Loans
Commercial:
C&I	$	1,996	$	—	$	156	$	—	$	2,152
CRE	146,057		—		19,195		—		165,252
Multifamily residential	33,003		—		1,523		—		34,526
Construction and land	42		—		—		—		42
Total commercial	181,098		—		20,874		—		201,972
Consumer:
Single-family residential	95,789		1,021		386		—		97,196
HELOCs	8,314		256		285		—		8,855
Total consumer	104,103		1,277		671		—		106,051
Total ⁽¹⁾	$	285,201	$	1,277	$	21,545	$	—	$	308,023




($ in thousands)	December 31, 2017
($ in thousands)	Pass/Watch		Special Mention		Substandard		Doubtful		Total PCI Loans
Commercial:
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	306,081		588		44,233		—		350,902
Consumer:
Single-family residential	113,905		1,543		1,930		—		117,378
HELOCs	12,642		—		1,365		—		14,007
Total consumer	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 December 31, 2018 and 2017:




($ in thousands)	December 31, 2018
($ 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
Commercial:
C&I	$	21,032	$	19,170	$	40,202	$	17,097	$	26,743	$	43,840	$	11,970,776	$	12,054,818
CRE	7,740		—		7,740		3,704		20,514		24,218		9,252,625		9,284,583
Multifamily residential	4,174		—		4,174		1,067		193		1,260		2,241,072		2,246,506
Construction and land	207		—		207		—		—		—		538,545		538,752
Total commercial	33,153		19,170		52,323		21,868		47,450		69,318		24,003,018		24,124,659
Consumer:
Single-family residential	14,645		7,850		22,495		509		4,750		5,259		5,911,504		5,939,258
HELOCs	2,573		1,816		4,389		1,423		7,191		8,614		1,668,976		1,681,979
Other consumer	11		12		23		—		2,502		2,502		328,745		331,270
Total consumer	17,229		9,678		26,907		1,932		14,443		16,375		7,909,225		7,952,507
Total	$	50,382	$	28,848	$	79,230	$	23,800	$	61,893	$	85,693	$	31,912,243	$	32,077,166




($ in thousands)	December 31, 2017
($ 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
Commercial:
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	39,982		562		40,544		34,256		67,633		101,889		21,716,666		21,859,099
Consumer:
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	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.

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 December 31, 2018 and 2017, PCI loans on nonaccrual status totaled $4.0 million and $5.3 million, respectively.

Loans in Process of Foreclosure

The Company commences the foreclosure process on consumer mortgage loans when a borrower becomes 120 days delinquent in accordance with Consumer Finance Protection Bureau Guidelines. As of December 31, 2018 and 2017, consumer mortgage loans of $3.0 million and $6.6 million, respectively, were secured by residential real estate properties, for which formal foreclosure proceedings were in process in accordance with local requirements of the applicable jurisdictions. As of December 31, 2018, no foreclosed residential real estate property was included in total net OREO of $133 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 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.

The following tables present the additions to non-PCI TDRs for the years ended December 31, 2018, 2017 and 2016:




($ in thousands)	Loans Modified as TDRs During the Year Ended December 31, 2018
($ in thousands)	Number of Loans	Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment ⁽¹⁾		Financial Impact ⁽²⁾
Commercial:
C&I	8	$	11,366	$	9,520	$	699
CRE	1	$	750	$	752	$	—
Consumer:
Single-family residential	2	$	405	$	391	$	(28	)
HELOCs	2	$	1,546	$	1,418	$	—




($ in thousands)	Loans Modified as TDRs During the Year Ended December 31, 2017
($ in thousands)	Number of Loans	Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment ⁽¹⁾		Financial Impact ⁽²⁾
Commercial:
C&I	16	$	43,884	$	37,900	$	11,520
CRE	4	$	2,675	$	2,627	$	157
Multifamily residential	1	$	3,655	$	2,969	$	—
Consumer:
HELOCs	1	$	152	$	155	$	—




($ 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⁾
Commercial:
C&I	18	$	65,991	$	40,405	$	20,574
CRE	6	$	19,275	$	18,824	$	701
Construction and land	1	$	5,522	$	4,883	$	—
Consumer:
Single-family residential	3	$	1,291	$	1,268	$	—
HELOCs	3	$	491	$	382	$	1


(1)	Includes subsequent payments after modification and reflects the balance as of December 31, 2018, 2017 and 2016.


(2)	The financial impact includes increases (decreases) in 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, 2018, 2017 and 2016 by modification type:




($ in thousands)	Modification Type During the Year Ended December 31, 2018
($ in thousands)	Principal ⁽¹⁾		Principal and Interest⁽²⁾		Interest Rate Reduction		Interest Deferments		Other		Total
Commercial:
C&I	$	5,472	$	—	$	—	$	—	$	4,048	$	9,520
CRE	—		—		752		—		—		752
Total commercial	5,472		—		752		—		4,048		10,272
Consumer:
Single-family residential	66		—		—		—		325		391
HELOCs	1,353		—		—		—		65		1,418
Total consumer	1,419		—		—		—		390		1,809
Total	$	6,891	$	—	$	752	$	—	$	4,438	$	12,081




($ in thousands)	Modification Type During the Year Ended December 31, 2017
($ in thousands)	Principal ⁽¹⁾		Principal and Interest⁽²⁾		Interest Rate Reduction		Interest Deferments		Other		Total
Commercial:
C&I	$	13,568	$	7,848	$	—	$	—	$	16,484	$	37,900
CRE	2,627		—		—		—		—		2,627
Multifamily residential	2,969		—		—		—		—		2,969
Total commercial	19,164		7,848		—		—		16,484		43,496
Consumer:
HELOCs	—		155		—		—		—		155
Total consumer	—		155		—		—		—		155
Total	$	19,164	$	8,003	$	—	$	—	$	16,484	$	43,651




($ 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
Commercial:
C&I	$	34,499	$	—	$	5,876	$	30	$	—	$	40,405
CRE	17,750		—		—		—		1,074		18,824
Construction and land	4,883		—		—		—		—		4,883
Total commercial	57,132		—		5,876		30		1,074		64,112
Consumer:
Single-family residential	264		—		797		207		—		1,268
HELOCs	333		—		49		—		—		382
Total consumer	597		—		846		207		—		1,650
Total	$	57,729	$	—	$	6,722	$	237	$	1,074	$	65,762


(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 be in default. 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 years ended December 31, 2018, 2017 and 2016, and were still in default at the respective period end:




($ in thousands)	Loans Modified as TDRs that Subsequently Defaulted During the Year Ended December 31,
	2018			2017			2016
	Number of Loans	Recorded Investment		Number of Loans	Recorded Investment		Number of Loans	Recorded Investment
Commercial:
C&I	4	$	1,890	3	$	8,659	—	$	—
CRE	1	$	186	—	$	—	2	$	3,150
Construction and land	—	$	—	—	$	—	1	$	4,883
Consumer:
HELOCs	1	$	150	—	$	—	—	$	—

The amount of additional funds committed to lend to borrowers whose terms have been modified was $3.9 million and $5.1 million as of December 31, 2018 and 2017, respectively.

Impaired Loans

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




($ in thousands)	December 31, 2018
($ in thousands)	Unpaid Principal Balance		Recorded Investment With No Allowance		Recorded Investment With Allowance		Total Recorded Investment		Related Allowance
Commercial:
C&I	$	82,963	$	48,479	$	8,609	$	57,088	$	1,219
CRE	36,426		28,285		2,067		30,352		208
Multifamily residential	6,031		2,949		2,611		5,560		75
Total commercial	125,420		79,713		13,287		93,000		1,502
Consumer:
Single-family residential	14,670		2,552		10,908		13,460		34
HELOCs	10,035		5,547		4,409		9,956		5
Other consumer	2,502		—		2,502		2,502		2,491
Total consumer	27,207		8,099		17,819		25,918		2,530
Total non-PCI impaired loans	$	152,627	$	87,812	$	31,106	$	118,918	$	4,032




($ 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:
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	187,966		76,777		72,073		148,850		16,866
Consumer:
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	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 years ended December 31, 2018, 2017 and 2016:




($ in thousands)	Year Ended December 31,
	2018				2017				2016
	Average Recorded Investment		Recognized Interest Income ⁽¹⁾		Average Recorded Investment		Recognized Interest Income ⁽¹⁾		Average Recorded Investment		Recognized Interest Income ⁽¹⁾
Commercial:
C&I	$	143,430	$	1,046	$	110,662	$	1,517	$	148,986	$	2,612
CRE	35,049		491		36,003		578		47,064		1,253
Multifamily residential	11,742		249		11,455		422		15,763		302
Construction and land	3,973		—		4,382		—		6,388		34
Total commercial	194,194		1,786		162,502		2,517		218,201		4,201
Consumer:
Single-family residential	22,350		474		14,994		417		14,323		447
HELOCs	14,134		70		5,494		55		3,703		63
Other consumer	2,502		—		2,142		—		—		—
Total consumer	38,986		544		22,630		472		18,026		510
Total non-PCI impaired loans	$	233,180	$	2,330	$	185,132	$	2,989	$	236,227	$	4,711


(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 years ended December 31, 2018, 2017 and 2016:




($ in thousands)	Year Ended December 31,
($ in thousands)	2018			2017			2016
Non-PCI Loans
Allowance for non-PCI loans, beginning of period	$	287,070		$	260,402		$	264,600
Provision for loan losses on non-PCI loans	65,043			49,129			31,959
Gross charge-offs:
Commercial:
C&I	(59,244		)	(38,118		)	(47,739		)
CRE	—			—			(464		)
Multifamily residential	—			(635		)	(29		)
Construction and land	—			(149		)	(117		)
Consumer:
Single-family residential	(1		)	(1		)	(137		)
HELOCs	—			(55		)	(9		)
Other consumer	(188		)	(17		)	(13		)
Total gross charge-offs	(59,433		)	(38,975		)	(48,508		)
Gross recoveries:
Commercial:
C&I	10,417			11,371			9,003
CRE	5,194			2,111			1,488
Multifamily residential	1,757			1,357			1,476
Construction and land	740			259			203
Consumer:
Single-family residential	1,214			546			401
HELOCs	38			24			7
Other consumer	3			152			323
Total gross recoveries	19,363			15,820			12,901
Net charge-offs	(40,070		)	(23,155		)	(35,607		)
Foreign currency translation adjustments	(743		)	694			(550		)
Allowance for non-PCI loans, end of period	311,300			287,070			260,402
PCI Loans
Allowance for PCI loans, beginning of period	58			118			359
Reversal of loan losses on PCI loans	(36		)	(60		)	(241		)
Allowance for PCI loans, end of period	22			58			118
Allowance for loan losses	$	311,322		$	287,128		$	260,520

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.

The following table presents a summary of activities in the allowance for unfunded credit reserves for the years ended December 31, 2018, 2017 and 2016:




($ in thousands)	Year Ended December 31,
($ in thousands)	2018			2017			2016
Allowance for unfunded credit reserves, beginning of period	$	13,318		$	16,121		$	20,360
Reversal of unfunded credit reserves	(752		)	(2,803		)	(4,239		)
Allowance for unfunded credit reserves, end of period	$	12,566		$	13,318		$	16,121

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 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 by portfolio segment and impairment methodology as of December 31, 2018 and 2017:




($ in thousands)	December 31, 2018
	Commercial								Consumer						Total
	C&I		CRE		Multifamily Residential		Construction and Land		Single-Family Residential		HELOCs		Other Consumer		Total
Allowance for loan losses
Individually evaluated for impairment	$	1,219	$	208	$	75	$	—	$	34	$	5	$	2,491	$	4,032
Collectively evaluated for impairment	190,121		38,823		19,208		20,282		31,306		5,769		1,759		307,268
Acquired with deteriorated credit quality	—		22		—		—		—		—		—		22
Total	$	191,340	$	39,053	$	19,283	$	20,282	$	31,340	$	5,774	$	4,250	$	311,322
Recorded investment in loans
Individually evaluated for impairment	$	57,088	$	30,352	$	5,560	$	—	$	13,460	$	9,956	$	2,502	$	118,918
Collectively evaluated for impairment	11,997,730		9,254,231		2,240,946		538,752		5,925,798		1,672,023		328,768		31,958,248
Acquired with deteriorated credit quality ⁽¹⁾	2,152		165,252		34,526		42		97,196		8,855		—		308,023
Total ⁽¹⁾	$	12,056,970	$	9,449,835	$	2,281,032	$	538,794	$	6,036,454	$	1,690,834	$	331,270	$	32,385,189




($ in thousands)	December 31, 2017
	Commercial								Consumer						Total
	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. Projected loss rates and prepayment speeds 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 collected at acquisition, considering the impact of prepayments, is referred to as the “nonaccretable difference.”

The following table presents the changes in accretable yield on PCI loans for the years ended December 31, 2018, 2017 and 2016:




($ in thousands)	Year Ended December 31,
($ in thousands)	2018			2017			2016
Accretable yield for PCI loans, beginning of period	$	101,977		$	136,247		$	214,907
Accretion	(34,662		)	(42,487		)	(68,708		)
Changes in expected cash flows	7,555			8,217			(9,952		)
Accretable yield for PCI loans, end of period	$	74,870		$	101,977		$	136,247

Loans Held-for-Sale

At the time of commitment to originate or purchase a loan, the loan is determined to be held for investment if it is the Company’s intent to hold the loan to maturity or for the “foreseeable future,” subject to periodic reviews under the Company’s evaluation processes, including asset/liability 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. As of December 31, 2018, loans held-for-sale of $275 thousand consisted of single-family residential loans. In comparison, as of December 31, 2017, loans held-for-sale amounted to $78.2 million, which was comprised primarily of loans related to the then pending sale of the DCB branches of $78.1 million included in Branch assets held-for-sale on the Consolidated Balance Sheet. The sale was completed in March 2018. For additional information on this pending sale, see Note 2 — Dispositions and Held-for-Sale to the Consolidated Financial Statements. The remaining loans held-for-sale, which amounted to $85 thousand, were comprised of single-family residential loans.

Loan Purchases, Transfers and Sales

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 loan securitization, loan purchases into held-for-investment portfolio, reclassification of loans held-for-investment to/from held-for-sale, and sales during the years ended December 31, 2018, 2017 and 2016:




($ in thousands)	Year Ended December 31, 2018
	Commercial								Consumer
	C&I		CRE		Multifamily Residential		Construction and Land		Single-Family Residential		HELOCs		Other Consumer		Total
Loans transferred from held-for-investment to held-for-sale ⁽¹⁾	$	404,321	$	62,291	$	—	$	—	$	14,981	$	—	$	—	$	481,593
Loans transferred from held-for-sale to held-for-investment	$	2,306	$	—	$	—	$	—	$	—	$	—	$	—	$	2,306
Sales ^(2)(3)(4)	$	413,844	$	62,291	$	—	$	—	$	34,966	$	—	$	—	$	511,101
Purchases ⁽⁶⁾	$	525,767	$	—	$	7,389	$	—	$	63,781	$	—	$	—	$	596,937




($ in thousands)	Year Ended December 31, 2017
	Commercial								Consumer
	C&I		CRE		Multifamily Residential		Construction and Land		Single-Family Residential		HELOCs		Other Consumer		Total
Loans transferred from held-for-investment to held-for-sale ⁽¹⁾	$	476,644	$	52,217	$	531	$	1,609	$	249	$	—	$	3,706	$	534,956
Loans of DCB branches transferred from held-for-investment to held-for-sale (included in Branch assets held-for-sale) ⁽¹⁾	$	17,590	$	36,783	$	12,448	$	241	$	6,416	$	4,309	$	345	$	78,132
Sales ^(2)(3)(4)	$	476,644	$	52,217	$	531	$	1,609	$	21,058	$	—	$	25,905	$	577,964
Purchases ⁽⁶⁾	$	503,359	$	—	$	2,311	$	—	$	29,060	$	—	$	—	$	534,730




($ in thousands)	Year Ended December 31, 2016
	Commercial								Consumer
	C&I		CRE		Multifamily Residential		Construction and Land		Single-Family Residential		HELOCs		Other Consumer		Total
Loans transferred from held-for-investment to held-for-sale ⁽¹⁾	$	434,137	$	110,927	$	269,791	$	4,245	$	—	$	—	$	—	$	819,100
Loans transferred from held-for-sale to held-for-investment	$	—	$	—	$	4,943	$	—	$	—	$	—	$	—	$	4,943
Sales ^(2)(3)(4)	$	434,137	$	110,927	$	61,268	$	4,245	$	18,092	$	—	$	—	$	628,669
Securitization of loans held-for-investment⁽⁵⁾	$	—	$	—	$	201,675	$	—	$	—	$	—	$	—	$	201,675
Purchases ⁽⁶⁾⁽⁷⁾	$	646,793	$	—	$	5,658	$	—	$	488,577	$	—	$	—	$	1,141,028


(1)	The Company recorded $14.6 million, $473 thousand and $1.9 million in write-downs to the allowance for loan losses related to loans transferred from held-for-investment to held-for-sale for the years ended December 31, 2018, 2017 and 2016, respectively.

(2)

Includes originated loans sold of $309.7 million, $178.2 million and $369.6 million for the years ended December 31, 2018, 2017 and 2016, respectively. Originated loans sold were primarily comprised of C&I loans for the year ended December 31, 2018; C&I, CRE and single-family residential loans for the year ended December 31, 2017; and C&I, CRE and multifamily residential loans for the year ended December 31, 2016.


(3)	Includes purchased loans sold in the secondary market of $201.4 million, $399.8 million and $259.1 million for the years ended December 31, 2018, 2017 and 2016, respectively.

(4)

Net gains on sales of loans, excluding the lower of cost or fair value adjustments, were $6.6 million, $8.9 million and $10.6 million for the years ended December 31, 2018, 2017 and 2016, respectively. No lower of cost or fair value adjustments were recorded for the year ended December 31, 2018. In comparison, lower of cost or fair value adjustments of $61 thousand and $5.6 million for the years ended December 31, 2017 and 2016, respectively, were recorded in Net gains on sales of loans on the Consolidated Statement of Income.


(5)	Represents multifamily residential loans securitized during the first quarter of 2016 that resulted in net gains of $1.1 million, mortgage servicing rights of $641 thousand and held-to-maturity investment security of $160.1 million.


(6)	C&I loan purchases for each of the year ended December 31, 2018, 2017 and 2016 were mainly comprised of C&I syndicated loans.


(7)	The higher loan purchases for the year ended December 31, 2016 was mainly due to $488.3 million of single-family residential loans purchased for CRA purposes.

- 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