Loans Receivable and Allowance for Credit Losses

6 Months Ended

Jun. 30, 2020

Loans and Leases Receivable Disclosure [Abstract]

Loans Receivable and Allowance for Credit Losses

Loans Receivable and Allowance for Credit Losses

The following table presents the composition of the Company’s loans held-for-investment as of June 30, 2020 and December 31, 2019:

($ in thousands)	June 30, 2020		December 31, 2019
	Amortized Cost (1)		Non-PCI Loans (1)		PCI Loans		Total (1)
Commercial:
C&I	$	13,422,691	$	12,149,121	$	1,810	$	12,150,931
CRE:
CRE	10,902,114		10,165,247		113,201		10,278,448
Multifamily residential	3,032,385		2,834,212		22,162		2,856,374
Construction and land	567,716		628,459		40		628,499
Total CRE	14,502,215		13,627,918		135,403		13,763,321
Total commercial	27,924,906		25,777,039		137,213		25,914,252
Consumer:
Residential mortgage:
Single-family residential	7,660,094		7,028,979		79,611		7,108,590
HELOCs	1,461,951		1,466,736		6,047		1,472,783
Total residential mortgage	9,122,045		8,495,715		85,658		8,581,373
Other consumer	182,461		282,914		—		282,914
Total consumer	9,304,506		8,778,629		85,658		8,864,287
Total loans held-for-investment	$	37,229,412	$	34,555,668	$	222,871	$	34,778,539
Allowance for loan losses	(632,071)		(358,287)		—		(358,287)
Loans held-for-investment, net	$	36,597,341	$	34,197,381	$	222,871	$	34,420,252

(1)Includes net deferred loan fees, unearned fees, unamortized premiums and unaccreted discounts of $(72.1) million and $(43.2) million as of June 30, 2020 and December 31, 2019, respectively.

Loans held-for-investments’ accrued interest receivable was $111.8 million and $121.8 million as of June 30, 2020 and December 31, 2019, respectively. Interest income related to nonaccrual loans of approximately $1.2 million and $1.6 million were reversed during the three and six months ended June 30, 2020, respectively. Interest income of approximately $10 thousand and $12 thousand were recognized on nonaccrual loans for the three and six months ended June 30, 2020, respectively. For the accounting policy on accrued interest receivable related to loans held-for-investment, see Note 2 — Current Accounting Developments and Summary of Significant Accounting Policies to the Consolidated Financial Statements in this Form 10-Q.

Loans totaling $27.41 billion and $22.43 billion as of June 30, 2020 and December 31, 2019, respectively, were pledged to secure borrowings and provide additional borrowing capacity from the FRB and the FHLB.

Credit Quality Indicators

All loans are subject to the Company’s credit review and monitoring. For the commercial portfolio, loans are risk rated based on an analysis of the borrower’s current payment performance or delinquency, repayment sources, financial and liquidity factors, including industry and geographic considerations. For the majority of the consumer portfolio, payment performance or delinquency is the driving indicator for the risk ratings.

For the Company’s internal credit risk ratings, each individual loan is given a risk rating of 1 through 10. Loans risk rated 1 through 5 are assigned an internal risk rating of “Pass”, with loans risk rated 1 being fully secured by cash or U.S. government securities. Pass loans have sufficient sources of repayment to repay the loan in full, in accordance with all terms and conditions. Loans assigned a risk rating of 6 have potential weaknesses that warrant closer attention by management; these are assigned an internal risk rating of “Special Mention”. Loans assigned a risk rating of 7 or 8 have well-defined weaknesses that may jeopardize the full and timely repayment of the loan; these are assigned an internal risk rating of “Substandard”. Loans assigned a risk rating of 9 have insufficient sources of repayment and a high probability of loss; these are assigned an internal risk rating of “Doubtful”. Loans assigned a risk rating of 10 are uncollectable and of such little value that they are no longer considered bankable assets; these are assigned an internal risk rating of “Loss”. The Company reviews the internal risk ratings for its loan portfolio on a regular and ongoing basis and make adjustments to the risk ratings based on changes in the borrowers’ financial status and the collectability of the loans.

The following table summarizes the Company’s loans held-for-investment as of June 30, 2020, presented by loan portfolio segments, internal risk ratings and vintage year. The vintage year is the year of origination, renewal or major modification.

($ in thousands)	June 30, 2020
													Revolving Loans Amortized Cost Basis		Revolving Loans Converted to Term Loans Amortized Cost Basis
	Term Loans																Total
	Amortized Cost Basis by Origination Year
	2020		2019		2018		2017		2016		Prior
Commercial:
C&I:
Pass	$	2,922,977	$	2,010,048	$	818,374	$	328,471	$	85,000	$	380,727	$	6,007,247	$	9,830	$	12,562,674
Special mention	525		80,449		54,144		22,757		150		6,105		251,461		—		415,591
Substandard	8,102		82,574		52,383		7,979		6,313		2,515		283,335		—		443,201
Doubtful	—		—		—		—		964		261		—		—		1,225
Total C&I	2,931,604		2,173,071		924,901		359,207		92,427		389,608		6,542,043		9,830		13,422,691
CRE:
Pass	1,249,819		2,859,844		2,410,797		1,380,086		794,228		1,722,081		170,556		10,716		10,598,127
Special mention	13,072		—		49,860		22,468		1,611		45,309		—		—		132,320
Substandard	8,303		51,944		7,711		43,914		17,213		42,582		—		—		171,667
Total CRE	1,271,194		2,911,788		2,468,368		1,446,468		813,052		1,809,972		170,556		10,716		10,902,114
Multifamily residential:
Pass	489,855		1,045,053		507,413		414,771		181,265		357,680		5,809		—		3,001,846
Special mention	—		20,433		—		—		262		1,228		—		—		21,923
Substandard	—		744		2,150		—		—		5,722		—		—		8,616
Total multifamily residential	489,855		1,066,230		509,563		414,771		181,527		364,630		5,809		—		3,032,385
Construction and land:
Pass	46,378		283,670		185,570		5,982		21,636		1,170		—		—		544,406
Substandard	3,618		—		—		—		—		19,692		—		—		23,310
Total construction and land	49,996		283,670		185,570		5,982		21,636		20,862		—		—		567,716
Total CRE	1,811,045		4,261,688		3,163,501		1,867,221		1,016,215		2,195,464		176,365		10,716		14,502,215
Total commercial	4,742,649		6,434,759		4,088,402		2,226,428		1,108,642		2,585,072		6,718,408		20,546		27,924,906
Consumer:
Single-family residential:
Pass	1,150,786		1,987,025		1,694,022		1,162,434		593,501		1,047,965		—		—		7,635,733
Special mention	—		637		1,601		836		305		1,834		—		—		5,213
Substandard	—		1,393		3,256		3,382		1,349		9,768		—		—		19,148
Total single-family residential mortgage	1,150,786		1,989,055		1,698,879		1,166,652		595,155		1,059,567		—		—		7,660,094
HELOCs:
Pass	185		836		4,417		7,949		7,511		18,097		1,239,458		168,658		1,447,111
Special mention	—		—		200		—		—		380		2		190		772
Substandard	—		151		788		4,632		1,308		4,038		—		3,151		14,068
Total HELOCs	185		987		5,405		12,581		8,819		22,515		1,239,460		171,999		1,461,951
Total residential mortgage	1,150,971		1,990,042		1,704,284		1,179,233		603,974		1,082,082		1,239,460		171,999		9,122,045
Other consumer:
Pass	3,236		4,272		3,358		1,838		—		131,825		35,372		—		179,901
Special mention	51		—		—		—		—		—		—		—		51
Substandard	2		—		—		2,491		—		3		13		—		2,509
Total other consumer	3,289		4,272		3,358		4,329		—		131,828		35,385		—		182,461
Total consumer	1,154,260		1,994,314		1,707,642		1,183,562		603,974		1,213,910		1,274,845		171,999		9,304,506
Total	$	5,896,909	$	8,429,073	$	5,796,044	$	3,409,990	$	1,712,616	$	3,798,982	$	7,993,253	$	192,545	$	37,229,412

Revolving loans that are converted to term loans presented in the table above are excluded from the term loans by vintage year columns. HELOCS totaling $12.1 million and $43.4 million converted to term loans during the three and six months ended June 30, 2020, respectively. There were no conversions of C&I or CRE revolving loans to term loans during the three and six months ended June 30, 2020.

The following tables present the credit risk ratings for non-PCI and PCI loans by portfolio segments as of December 31, 2019:

($ in thousands)	December 31, 2019
	Pass		Special Mention		Substandard		Doubtful		Total Non-PCI Loans
Commercial:
C&I	$	11,423,094	$	406,543	$	302,509	$	16,975	$	12,149,121
CRE:
CRE	10,003,749		83,683		77,815		—		10,165,247
Multifamily residential	2,806,475		20,406		7,331		—		2,834,212
Construction and land	603,447		—		25,012		—		628,459
Total CRE	13,413,671		104,089		110,158		—		13,627,918
Total commercial	24,836,765		510,632		412,667		16,975		25,777,039
Consumer:
Residential mortgage:
Single-family residential	7,012,522		2,278		14,179		—		7,028,979
HELOCs	1,453,207		2,787		10,742		—		1,466,736
Total residential mortgage	8,465,729		5,065		24,921		—		8,495,715
Other consumer	280,392		5		2,517		—		282,914
Total consumer	8,746,121		5,070		27,438		—		8,778,629
Total	$	33,582,886	$	515,702	$	440,105	$	16,975	$	34,555,668

($ in thousands)	December 31, 2019
	Pass		Special Mention		Substandard		Doubtful		Total PCI Loans
Commercial:
C&I	$	1,810	$	—	$	—	$	—	$	1,810
CRE:
CRE	102,257		—		10,944		—		113,201
Multifamily residential	22,162		—		—		—		22,162
Construction and land	40		—		—		—		40
Total CRE	124,459		—		10,944		—		135,403
Total commercial	126,269		—		10,944		—		137,213
Consumer:
Residential mortgage:
Single-family residential	79,517		—		94		—		79,611
HELOCs	5,849		—		198		—		6,047
Total residential mortgage	85,366		—		292		—		85,658
Total consumer	85,366		—		292		—		85,658
Total (1)	$	211,635	$	—	$	11,236	$	—	$	222,871

(1)Loans net of ASC 310-10 discount.

Nonaccrual and Past Due Loans

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. 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 table presents the aging analysis of total loans held-for-investment as of June 30, 2020:

($ in thousands)	June 30, 2020
	Current Accruing Loans		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		Total Loans
Commercial:
C&I	$	13,277,732	$	46,774	$	13,362	$	60,136	$	54,555	$	30,268	$	84,823	$	13,422,691
CRE:
CRE	10,836,810		7,452		1,275		8,727		1,210		55,367		56,577		10,902,114
Multifamily residential	3,025,648		3,655		2,308		5,963		774		—		774		3,032,385
Construction and land	567,716		—		—		—		—		—		—		567,716
Total CRE	14,430,174		11,107		3,583		14,690		1,984		55,367		57,351		14,502,215
Total commercial	27,707,906		57,881		16,945		74,826		56,539		85,635		142,174		27,924,906
Consumer:
Residential mortgage:
Single-family residential	7,619,333		15,739		4,952		20,691		1,713		18,357		20,070		7,660,094
HELOCs	1,444,945		2,165		773		2,938		443		13,625		14,068		1,461,951
Total residential mortgage	9,064,278		17,904		5,725		23,629		2,156		31,982		34,138		9,122,045
Other consumer	165,258		14,636		59		14,695		—		2,508		2,508		182,461
Total consumer	9,229,536		32,540		5,784		38,324		2,156		34,490		36,646		9,304,506
Total	$	36,937,442	$	90,421	$	22,729	$	113,150	$	58,695	$	120,125	$	178,820	$	37,229,412

The following table presents amortized cost of loans on nonaccrual status for which there was no related allowance for loan losses as of June 30, 2020:

($ in thousands)	June 30, 2020
Commercial:
C&I	$	66,109
CRE:
CRE	54,879
Total CRE	54,879
Total commercial	120,988
Consumer:
Residential mortgage:
Single-family residential	8,642
HELOCs	8,898
Total residential mortgage	17,540
Other consumer	2,491
Total consumer	20,031
Total nonaccrual loans with no related allowance for loan losses	$	141,019

The following table presents the aging analysis of non-PCI loans as of December 31, 2019:

($ in thousands)	December 31, 2019
	Current Accruing Loans		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		Total Non-PCI Loans
Commercial:
C&I	$	12,026,131	$	31,121	$	17,034	$	48,155	$	31,084	$	43,751	$	74,835	$	12,149,121
CRE:
CRE	10,123,999		22,830		1,977		24,807		540		15,901		16,441		10,165,247
Multifamily residential	2,832,664		198		531		729		534		285		819		2,834,212
Construction and land	628,459		—		—		—		—		—		—		628,459
Total CRE	13,585,122		23,028		2,508		25,536		1,074		16,186		17,260		13,627,918
Total commercial	25,611,253		54,149		19,542		73,691		32,158		59,937		92,095		25,777,039
Consumer:
Residential mortgage:
Single-family residential	6,993,597		15,443		5,074		20,517		1,964		12,901		14,865		7,028,979
HELOCs	1,448,930		4,273		2,791		7,064		1,448		9,294		10,742		1,466,736
Total residential mortgage	8,442,527		19,716		7,865		27,581		3,412		22,195		25,607		8,495,715
Other consumer	280,386		6		5		11		—		2,517		2,517		282,914
Total consumer	8,722,913		19,722		7,870		27,592		3,412		24,712		28,124		8,778,629
Total	$	34,334,166	$	73,871	$	27,412	$	101,283	$	35,570	$	84,649	$	120,219	$	34,555,668

PCI loans were excluded from the above aging analysis table as of December 31, 2019, as the Company elected to account for these loans on a pool level basis under ASC 310-30 at the time of acquisition. As of December 31, 2019, PCI loans on nonaccrual status totaled $297 thousand.

Foreclosed Assets

The Company had $23.4 million in foreclosed assets as of June 30, 2020 compared with $1.3 million as of December 31, 2019. The Company commences the foreclosure process on consumer mortgage loans when a borrower becomes 120 days delinquent in accordance with the Consumer Finance Protection Bureau guidelines. The carrying value of consumer real estate loans that were in the process of active or suspended foreclosure was $6.3 million and $7.2 million as of June 30, 2020 and December 31, 2019, respectively. The foreclosure proceedings for these consumer real estate loans were initiated prior to the CARES Act passed by Congress in March 2020. The Company has suspended certain mortgage foreclosure activities in connection with our actions to support our customers during the COVID-19 pandemic.

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. The Company has implemented various consumer and commercial loan modification programs to provide its borrowers relief from the economic impacts of COVID-19 that are not considered TDRs. For additional details related to COVID-19 loan modifications, see Note 2 — Current Accounting Developments and Summary of Significant Accounting Policies — Summary of Significant Accounting Policies — Troubled Debt Restructurings to the Consolidated Financial Statements.

The following tables present the additions to TDRs for the three and six months ended June 30, 2020 and 2019:

($ in thousands)	Loans Modified as TDRs During the Three Months Ended June 30,
	2020							2019
	Number of Loans	Pre- Modification Outstanding Recorded Investment		Post- Modification Outstanding Recorded    Investment (1)		Financial Impact (2)		Number of Loans	Pre- Modification Outstanding Recorded Investment		Post- Modification Outstanding Recorded    Investment (1)		Financial    Impact (2)
Commercial:
C&I	3	$	35,260	$	28,926	$	872	6	$	48,099	$	48,054	$	5,869
Total commercial	3	35,260		28,926		872		6	48,099		48,054		5,869
Consumer:
Residential mortgage:
Single-family residential	—	—		—		—		1	220		219		—
Total residential mortgage	—	—		—		—		1	220		219		—
Total consumer	—	—		—		—		1	220		219		—
Total	3	$	35,260	$	28,926	$	872	7	$	48,319	$	48,273	$	5,869

($ in thousands)	Loans Modified as TDRs During the Six Months Ended June 30,
	2020							2019
	Number of Loans	Pre- Modification Outstanding Recorded Investment		Post- Modification Outstanding Recorded    Investment (1)		Financial    Impact (2)		Number of Loans	Pre- Modification Outstanding Recorded Investment		Post- Modification Outstanding Recorded    Investment (1)		Financial    Impact (2)
Commercial:
C&I	6	$	51,708	$	43,833	$	1,000	9	$	77,250	$	77,486	$	5,929
Total commercial	6	51,708		43,833		1,000		9	77,250		77,486		5,929
Consumer:
Residential mortgage:
Single-family residential	—	—		—		—		1	220		219		—
Total residential mortgage	—	—		—		—		1	220		219		—
Total consumer	—	—		—		—		1	220		219		—
Total	6	$	51,708	$	43,833	$	1,000	10	$	77,470	$	77,705	$	5,929

(1)Includes subsequent payments after modification and reflects the balance as of June 30, 2020 and 2019.

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

The following tables present the TDR post-modification outstanding balances for the three and six months ended June 30, 2020 and 2019 by modification type:

($ in thousands)	Modification Type During the Three Months Ended June 30,
	2020						2019
	Principal (1)		Interest Deferments		Total		Principal (1)		Other (2)		Total
Commercial:
C&I	$	11,766	$	17,160	$	28,926	$	9,909	$	38,145	$	48,054
Total commercial	11,766		17,160		28,926		9,909		38,145		48,054
Consumer:
Residential mortgage:
Single-family residential	—		—		—		—		219		219
Total residential mortgage	—		—		—		—		219		219
Total consumer	—		—		—		—		219		219
Total	$	11,766	$	17,160	$	28,926	$	9,909	$	38,364	$	48,273

($ in thousands)	Modification Type During the Six Months Ended June 30,
	2020								2019
	Principal (1)		Principal   and Interest (3)		Interest Deferments		Total		Principal (1)		Other (2)		Total
Commercial:
C&I	$	15,898	$	10,775	$	17,160	$	43,833	$	39,341	$	38,145	$	77,486
Total commercial	15,898		10,775		17,160		43,833		39,341		38,145		77,486
Consumer:
Residential mortgage:
Single-family residential	—		—		—		—		—		219		219
Total residential mortgage	—		—		—		—		—		219		219
Total consumer	—		—		—		—		—		219		219
Total	$	15,898	$	10,775	$	17,160	$	43,833	$	39,341	$	38,364	$	77,705

(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 funding to secure additional collateral and provides liquidity to collateral-dependent C&I loans.

(3)Includes principal and interest deferments or reductions.

Subsequent to restructuring, if a TDR that becomes delinquent, generally beyond 90 days past due, it is considered to be in default. TDRs are individually evaluated for impairment. Subsequent defaults do not generally have a significant additional impact on the allowance for loan losses. The following tables present information on loans for which a subsequent payment default occurred during the three and six months ended June 30, 2020 and 2019, respectively, which had been modified as TDR within the previous 12 months of its default, and were still in default as of June 30, 2020 and 2019:

($ in thousands)	Loans Modified as TDRs that Subsequently Defaulted During the Three Months Ended June 30,
	2020			2019
	Number of Loans	Recorded Investment		Number of Loans		Recorded Investment
Commercial:
C&I	1	$	17,160	$	1	$	1,484
Total commercial	1	17,160		1		1,484
Total	1	$	17,160	$	1	$	1,484

($ in thousands)	Loans Modified as TDRs that Subsequently Defaulted During the Six Months Ended June 30,
	2020			2019
	Number of Loans	Recorded Investment		Number of Loans		Recorded Investment
Commercial:
C&I	1	$	17,160	$	1	$	1,484
Total commercial	1	17,160		1		1,484
Total	1	$	17,160	$	1	$	1,484

The amount of additional funds committed to lend to borrowers whose terms have been modified as TDRs was $4.5 million and $2.2 million as of June 30, 2020 and December 31, 2019, respectively.

Impaired Loans

In connection with the adoption of ASU 2016-13 on January 1, 2020, the Company no longer provides information on impaired loans. The Company had retained impaired loans information for the period ended December 31, 2019. The following table presents information on non-PCI impaired loans as of December 31, 2019:

($ in thousands)	December 31, 2019
	Unpaid Principal Balance		Recorded Investment With No Allowance		Recorded Investment With Allowance		Total Recorded Investment		Related Allowance
Commercial:
C&I	$	174,656	$	73,956	$	40,086	$	114,042	$	2,881
CRE:
CRE	27,601		20,098		1,520		21,618		97
Multifamily residential	4,965		1,371		3,093		4,464		55
Construction and land	19,696		19,691		—		19,691		—
Total CRE	52,262		41,160		4,613		45,773		152
Total commercial	226,918		115,116		44,699		159,815		3,033
Consumer:
Residential mortgage:
Single-family residential	23,626		8,507		13,704		22,211		35
HELOCs	13,711		6,125		7,449		13,574		8
Total residential mortgage	37,337		14,632		21,153		35,785		43
Other consumer	2,517		—		2,517		2,517		2,517
Total consumer	39,854		14,632		23,670		38,302		2,560
Total non-PCI impaired loans	$	266,772	$	129,748	$	68,369	$	198,117	$	5,593

The following table presents the average recorded investment and interest income recognized on non-PCI impaired loans for the three and six months ended June 30, 2019:

($ in thousands)	Three Months Ended June 30, 2019				Six Months Ended June 30, 2019
	Average Recorded Investment		Recognized Interest    Income (1)		Average Recorded Investment		Recognized Interest    Income (1)
Commercial:
C&I	$	182,689	$	1,081	$	189,553	$	1,816
CRE:
CRE	29,241		135		31,456		249
Multifamily residential	5,852		61		5,883		121
Total CRE	35,093		196		37,339		370
Total commercial	217,782		1,277		226,892		2,186
Consumer:
Residential mortgage:
Single-family residential	23,247		129		24,865		258
HELOCs	13,564		38		15,321		56
Total residential mortgage	36,811		167		40,186		314
Other consumer	2,515		—		2,526		—
Total consumer	39,326		167		42,712		314
Total non-PCI impaired loans	$	257,108	$	1,444	$	269,604	$	2,500

(1)Includes interest income 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 Loan Losses

On January 1, 2020, the Company adopted ASU 2016-13 that establishes a single allowance framework for all financial assets measured at amortized cost and certain off-balance sheet credit exposures. It requires the measurement of the allowance for loan losses to be based on management’s best estimate of lifetime expected credit losses inherent in the Company’s relevant financial assets. Balance sheet information and results for reporting periods beginning with January 1, 2020 are presented under ASC 326, while prior period comparisons continue to be presented under legacy GAAP.

The process of the allowance for loan losses involves procedures to consider the unique risk characteristics of the portfolio segments. For each loan portfolio segment, the expected credit losses are estimated collectively for groups of loans with similar risk characteristics. For loans that do not share similar risk characteristics, the expected credit losses are estimated individually, which includes impaired loans.

Allowance for Collectively Evaluated Loans

Quantitative Component — The allowance for loan losses is estimated using quantitative methods that consider a variety of factors such as historical loss experience, the current credit quality of the portfolio as well as an economic outlook over the life of the loan. The Company incorporates forward-looking information through the use of macroeconomic scenarios applied over the forecasted life of the loans. These macroeconomic scenarios include variables that are considered key drivers of increases and decreases in credit losses. The Company utilizes a probability-weighted multiple scenario forecast approach. These scenarios may consist of a base forecast representing management's view of the most likely outcome, combined with and downside and upside scenarios reflecting possible worsening or improving economic conditions, respectively. A weighted average of these macroeconomic scenarios over a reasonable and supportable forecast period is incorporated into the quantitative models. If the loan’s life extends beyond the reasonable and supportable forecast period, then historical experience is considered over the remaining life of the loans in the allowance for loan losses.

Qualitative Component — The Company also considers the following qualitative factors in the determination of collectively evaluated allowance if they have not already been captured by the quantitative model. Such qualitative factors may include, but not limited to:

•Loan growth trends.

•The volume and severity of past due financial assets and the volume and severity of adversely classified or rated financial assets.

•The Company’s lending policies and procedures, including changes in lending strategies, underwriting standards, collection, write-off and recovery practices, as well as knowledge of the borrower’s operations or the borrower’s standing in the community.

•The quality of the Company’s credit review system.

•The experience, ability and depth of the Company’s management, lending staff and relevant staff.

•The effect of other external factors such as the regulatory, legal and technological environments.

•Actual and expected changes in international, national, regional, and local economic and business conditions and developments in which the Company operates, including the actual and expected condition of various market segments.

The following table provides key credit risk characteristics and macroeconomic variables that the Company uses to estimate the expected credit losses by portfolio segments and methodologies:

Portfolio Segment	Risk Characteristics	Macroeconomic Variables
C&I	Internal risk rating, size and credit spread at origination and time to maturity	Unemployment rate and two and ten year treasury spread
CRE, Multifamily residential, and Construction and land	Delinquency status, maturity date, collateral value, property type and geographic location	Unemployment rate, GDP and U.S. Treasury rates
Single-family residential and HELOCs	FICO, delinquency status, maturity date, collateral value and geographic location	Unemployment rate, GDP and home price index
Other consumer	Historical loss experience	Immaterial (1)

(1)Macroeconomic variables were measured in the qualitative estimate.

In light of the recessionary economic conditions and forecasts during the quarter, management updated its macroeconomic forecast used in the credit loss estimation process to reflect the sudden sharp and continued recession caused by the COVID-19 global pandemic, U.S. monetary and fiscal responses to the outbreak, oil price declines and other assumptions. The macroeconomic forecast used in the credit loss estimation for the quarter ended June 30, 2020 was more adverse compared to the prior quarter, as expectations for the unemployment rate and real GDP growth deteriorated and a slower recovery was expected. For the three and six months ended June 30, 2020, there were no changes to the reasonable and supportable forecast period, and reversion to historical loss experience method.

Allowance for Loan Losses for the Commercial Loan Portfolio — The Company’s C&I lifetime loss rate model estimates credit losses by estimating a loss rate expected over the life of a loan. This loss rate is applied to the amortized cost basis, excluding accrued interest receivables, to determine expected credit losses. The lifetime loss rate model’s reasonable and supportable period spans eight quarters, thereafter immediately reverting to the historical average loss rate, expressed implicitly through the loan-level lifetime loss rate.

The Company’s CRE probability of default (“PD”)/loss given default (“LGD”) models estimate the probability that a loan will default and, in the event of default, estimate the expected credit losses upon default. The product of the PD/LGD determines the Company’s CECL. The PD/LGD model assumptions and variable inputs span the entire contractual life of the loans, adjusted for expected prepayments. After a reasonable and supportable period, the forecast of future economic conditions reverts to long-run historical economic trends. The loan-specific variables apply over the lifetime of a loan.

In order to estimate the life of a loan under both models, the contractual term of the loan is adjusted for estimated prepayments, which are based on historical prepayment experience.

Allowance for Loan Losses for the Consumer Loan Portfolio — For single-family residential and HELOC loans, PD/LGD model assumptions and variable inputs span the entire contractual life of the loans, adjusted for expected prepayments. After a reasonable and supportable period, the forecast of future economic conditions reverts to long-run historical economic trends. The loan-specific variables apply over the lifetime of a loan.

For other consumer loans, the Company uses a loss rate approach. In order to estimate the life of a loan, the contractual term of the loan is adjusted for estimated prepayments, which are based on historical prepayment experience.

While the Company’s allowance methodologies strive to reflect all relevant credit risk factors, there continues to be uncertainty associated with, but not limited to, potential imprecision in the estimation process due to the inherent time lag of obtaining information and normal variations between expected and actual outcomes. The Company may hold additional reserves that are designed to provide coverage for losses attributable to such risk. The allowance for loan losses as of June 30, 2020 also included qualitative adjustments for certain industry sectors, such as oil & gas, which are included as part of the C&I loan portfolio, that the Company views as higher risk, where quantitative models may not have captured the additional exposure related to such industry sectors.

Allowance for Individually Assessed Loans When a loan no longer shares similar risk characteristics with other loans, such as in the case for certain nonaccrual or TDR loans, the Company estimates the allowance for loan losses on an individual loan basis. The allowance for loan losses for individually evaluated loans is measured as the difference between the recorded value of the loans and their fair value. For loans evaluated individually, the Company uses one of three different asset valuation measurement methods: (1) the present value of expected future cash flows; (2) the fair value of collateral less costs to sell; and (3) the loan's observable market price. If an individually evaluated loan is determined to be collateral dependent, the Company applies the fair value of the collateral less costs to sell method. If an individually evaluated loan is determined to not be collateral dependent, the Company uses the present value of future cash flows or the observable market value of the loan.

Collateral-Dependent Loans — When a loan is collateral dependent, the allowance is measured on an individual loan basis and is limited to the difference between the recorded value and fair value of the collateral less cost of disposal or sale. As of June 30, 2020, collateral-dependent commercial and consumer loans totaled $88.1 million and $23.8 million, respectively. The Company's commercial collateral-dependent loans were secured by real estate or other collateral. The Company's consumer collateral-dependent loans were all residential mortgage loans, secured by the underlying real estate. As of June 30, 2020, the collateral value of the properties securing each of these collateral dependent loans, net of selling costs, exceeded the recorded value of the individual loans, except for two loans, one C&I loan and one HELOC loan, against which there was a recorded allowance of $756 thousand and $76 thousand, respectively. For the three and six months ended June 30, 2020, there was no significant deterioration or changes in the collateral securing these loans.

The following tables present summaries of activities in the allowance for loan losses by portfolio segment for the three and six months ended June 30, 2020 and 2019:

($ in thousands)		Three Months Ended June 30, 2020
		Commercial								Consumer						Total
		C&I		CRE						Residential Mortgage				Other Consumer
				CRE		Multi-Family Residential		Construction and Land		Single- Family Residential		HELOCs
Allowance for loan losses, beginning of period		$	362,629	$	132,819	$	16,530	$	11,018	$	26,822	$	3,881	$	3,304	$	557,003
Provision for (reversal of) credit losses on loans	(a)	37,862		43,315		7,908		7,526		(1,667)		205		(849)		94,300
Gross charge-offs		(20,378)		(320)		—		—		—		(221)		(30)		(20,949)
Gross recoveries		602		226		620		7		159		2		93		1,709
Total net (charge-offs) recoveries		(19,776)		(94)		620		7		159		(219)		63		(19,240)
Foreign currency translation adjustments		8		—		—		—		—		—		—		8
Allowance for loan losses, end of period		$	380,723	$	176,040	$	25,058	$	18,551	$	25,314	$	3,867	$	2,518	$	632,071

($ in thousands)		Three Months Ended June 30, 2019
		Commercial								Consumer						Total
		C&I		CRE						Residential Mortgage				Other Consumer
				CRE		Multi-Family Residential		Construction and Land		Single- Family Residential		HELOCs
Allowance for loan losses, beginning of period		$	189,757	$	39,224	$	19,169	$	22,349	$	35,759	$	7,401	$	4,235	$	317,894
Provision for (reversal of) credit losses on loans	(a)	26,140		(1,250)		58		173		(3,068)		(1,224)		(98)		20,731
Gross charge-offs		(11,745)		—		—		—		—		—		(14)		(11,759)
Gross recoveries		1,713		1,837		53		439		72		—		7		4,121
Total net (charge-offs) recoveries		(10,032)		1,837		53		439		72		—		(7)		(7,638)
Foreign currency translation adjustments		(362)		—		—		—		—		—		—		(362)
Allowance for loan losses, end of period		$	205,503	$	39,811	$	19,280	$	22,961	$	32,763	$	6,177	$	4,130	$	330,625

($ in thousands)		Six Months Ended June 30, 2020
		Commercial								Consumer						Total
		C&I		CRE						Residential Mortgage				Other Consumer
				CRE		Multi-Family Residential		Construction and Land		Single- Family Residential		HELOCs
Allowance for loan losses, beginning of period		$	238,376	$	40,509	$	22,826	$	19,404	$	28,527	$	5,265	$	3,380	$	358,287
Impact of ASU 2016-13 adoption		74,237		72,169		(8,112)		(9,889)		(3,670)		(1,798)		2,221		125,158
Allowance for loan losses, January 1, 2020		312,613		112,678		14,714		9,515		24,857		3,467		5,601		483,445
Provision for (reversal of) credit losses on loans	(a)	98,480		54,750		9,189		9,008		33		617		(3,121)		168,956
Gross charge-offs		(32,355)		(1,274)		—		—		—		(221)		(56)		(33,906)
Gross recoveries		2,177		9,886		1,155		28		424		4		94		13,768
Total net (charge-offs) recoveries		(30,178)		8,612		1,155		28		424		(217)		38		(20,138)
Foreign currency translation adjustments		(192)		—		—		—		—		—		—		(192)
Allowance for loan losses, end of period		$	380,723	$	176,040	$	25,058	$	18,551	$	25,314	$	3,867	$	2,518	$	632,071

($ in thousands)		Six Months Ended June 30, 2019
		Commercial								Consumer						Total
		C&I		CRE						Residential Mortgage				Other Consumer
				CRE		Multi-Family Residential		Construction and Land		Single- Family Residential		HELOCs
Allowance for loan losses, beginning of period		$	189,117	$	40,666	$	19,885	$	20,290	$	31,340	$	5,774	$	4,250	$	311,322
Provision for (reversal of) credit losses on loans	(a)	41,404		(2,914)		(939)		2,169		1,349		401		(99)		41,371
Gross charge-offs		(28,989)		—		—		—		—		—		(28)		(29,017)
Gross recoveries		3,964		2,059		334		502		74		2		7		6,942
Total net (charge-offs) recoveries		(25,025)		2,059		334		502		74		2		(21)		(22,075)
Foreign currency translation adjustments		7		—		—		—		—		—		—		7
Allowance for loan losses, end of period		$	205,503	$	39,811	$	19,280	$	22,961	$	32,763	$	6,177	$	4,130	$	330,625

The following table presents a summary of activities in the allowance for unfunded credit commitments for the three and six months ended June 30, 2020 and 2019:

		Three Months Ended June 30,				Six Months Ended June 30,
($ in thousands)		2020		2019		2020		2019
Unfunded credit facilities
Allowance for unfunded credit commitments, beginning of period		$	20,829	$	14,505	$	11,158	$	12,566
Impact of ASU 2016-13 adoption		—		—		10,457		—
Provision for (reversal of) credit losses on unfunded credit  commitments	(b)	8,143		(1,486)		7,357		453
Allowance for unfunded credit commitments, end of period		$	28,972	$	13,019	$	28,972	$	13,019
Provision for credit losses	(a) + (b)	$	102,443	$	19,245	$	176,313	$	41,824

The allowance for loan losses as of June 30, 2020 was $632.1 million, an increase of $273.8 million compared with $358.3 million as of December 31, 2019. The overall increase in allowance for loan losses was primarily driven by deteriorating macroeconomic conditions and outlook as a result of the COVID-19 pandemic, which resulted in a provision for credit losses of $102.4 million and $176.3 million for the three and six months ended June 30, 2020, respectively, and the adoption of ASU 2016-13, which increased the allowance for loan losses by $125.2 million on January 1, 2020.

The allowance for unfunded credit commitments is maintained at a level that management believes to be sufficient to absorb estimated expected credit losses related to unfunded credit facilities. See Note 10 — Commitments and Contingencies to the Consolidated Financial Statements in this Form 10-Q for additional information related to unfunded credit commitments.

The following table presents the Company’s allowance for loan losses and recorded investments by portfolio segments and impairment methodology as of December 31, 2019. This is no longer relevant after December 31, 2019, given the adoption of ASU 2016-13 on January 1, 2020, which has a single impairment methodology:

($ in thousands)	December 31, 2019
	Commercial								Consumer						Total
	C&I		CRE						Residential Mortgage				Other Consumer
			CRE		Multifamily Residential		Construction and Land		Single- Family Residential		HELOCs
Allowance for loan losses
Individually evaluated for impairment	$	2,881	$	97	$	55	$	—	$	35	$	8	$	2,517	$	5,593
Collectively evaluated for impairment	235,495		40,412		22,771		19,404		28,492		5,257		863		352,694
Acquired with deteriorated credit quality	—		—		—		—		—		—		—		—
Total	$	238,376	$	40,509	$	22,826	$	19,404	$	28,527	$	5,265	$	3,380	$	358,287
Recorded investment in loans
Individually evaluated for impairment	$	114,042	$	21,618	$	4,464	$	19,691	$	22,211	$	13,574	$	2,517	$	198,117
Collectively evaluated for impairment	12,035,079		10,143,629		2,829,748		608,768		7,006,768		1,453,162		280,397		34,357,551
Acquired with deteriorated credit quality (1)	1,810		113,201		22,162		40		79,611		6,047		—		222,871
Total (1)	$	12,150,931	$	10,278,448	$	2,856,374	$	628,499	$	7,108,590	$	1,472,783	$	282,914	$	34,778,539

(1)Loans net of ASC 310-10 discount.

Purchased Credit-Deteriorated Loans

On January 1, 2020, the amortized cost basis of the PCD loans was adjusted to reflect the $1.2 million of allowance for loan losses. For the three and six months ended June 30, 2020, the Company did not acquire any PCD loans. For information on PCD loans, see Note 2 — Current Accounting Developments and Summary of Significant Accounting Policies to the Consolidated Financial Statements in this Form 10-Q. 

The following table presents the changes in accretable yield on PCI loans for the three and six months ended June 30, 2019:

($ in thousands)	Three Months Ended June 30, 2019		Six Months Ended June 30, 2019
Accretable yield for PCI loans, beginning of period	$	68,861	$	74,870
Accretion	(5,806)		(12,007)
Changes in expected cash flows	998		1,190
Accretable yield for PCI loans, end of period	$	64,053	$	64,053

Loans Held-for-Sale

As of June 30, 2020 and December 31, 2019, loans held-for-sale of $3.9 million and $434 thousand, respectively, consisted of single-family residential loans. Refer to Note 1 — Summary of Significant Accounting Policies — Significant Accounting Policies — Loans Held-for-Sale to the Consolidated Financial Statements of the Company’s 2019 Form 10-K for additional details related to the Company’s loans held-for-sale.

Loan Purchases, Transfers and Sales

The Company purchases and sells loans in the secondary market in the ordinary course of business. From time to time, purchased loans may be transferred from held-for-investment to held-for-sale, and write-downs to allowance for loan losses are recorded, when appropriate. The following tables provide information about the carrying value of loans purchased for the held-for-investment portfolio, loans sold and loans transferred from held-for-investment to held-for-sale at lower of cost or fair value during the three and six months ended June 30, 2020 and 2019:

($ in thousands)	Three Months Ended June 30, 2020
	Commercial								Consumer		Total
	C&I		CRE						Residential Mortgage
			CRE		Multifamily Residential		Construction and Land		Single-Family Residential
Loans transferred from held-for-investment to held-for-sale (1)	$	33,060	$	—	$	—	$	—	$	—	$	33,060
Sales (2)(3)(4)	$	33,060	$	—	$	—	$	—	$	13,708	$	46,768
Purchases (5)	$	12,503	$	—	$	7	$	—	$	—	$	12,510

($ in thousands)	Three Months Ended June 30, 2019
	Commercial								Consumer		Total
	C&I		CRE						Residential Mortgage
			CRE		Multifamily Residential		Construction and Land		Single-Family Residential
Loans transferred from held-for-investment to held-for-sale (1)	$	79,593	$	—	$	—	$	1,573	$	—	$	81,166
Sales (2)(3)(4)	$	76,031	$	—	$	—	$	1,573	$	1,172	$	78,776
Purchases (5)	$	159,100	$	—	$	1,734	$	—	$	17,637	$	178,471

($ in thousands)	Six Months Ended June 30, 2020
	Commercial								Consumer		Total
	C&I		CRE						Residential Mortgage
			CRE		Multifamily Residential		Construction and Land		Single-Family Residential
Loans transferred from held-for-investment to held-for-sale (1)	$	136,033	$	7,250	$	—	$	—	$	—	$	143,283
Sales (2)(3)(4)	$	136,033	$	7,250	$	—	$	—	$	18,350	$	161,633
Purchases (5)	$	143,086	$	—	$	1,520	$	—	$	1,084	$	145,690

($ in thousands)	Six Months Ended June 30, 2019
	Commercial								Consumer		Total
	C&I		CRE						Residential Mortgage
			CRE		Multifamily Residential		Construction and Land		Single-Family Residential
Loans transferred from held-for-investment to held-for-sale (1)	$	155,166	$	16,655	$	—	$	1,573	$	—	$	173,394
Sales (2)(3)(4)	$	151,677	$	16,655	$	—	$	1,573	$	3,614	$	173,519
Purchases (5)	$	266,294	$	—	$	5,952	$	—	$	54,039	$	326,285

(1)The Company recorded no write-downs to the allowance for loan losses related to loans transferred from held-for-investment to held-for-sale for both the three and six months ended June 30, 2020 and $317 thousand and $390 thousand for the same periods in 2019, respectively.

(2)Includes originated loans sold of $46.8 million and $161.6 million for the three and six months ended June 30, 2020, respectively, and $55.7 million and $132.2 million for the same periods in 2019, respectively. Originated loans sold were primarily C&I and single-family residential loans during the three and six months ended June 30, 2020. In comparison, originated loans sold were primarily C&I loans for the same periods in 2019.

(3)Includes none of the purchased loans sold in the secondary market for both the three and six months ended June 30, 2020 and $23.1 million and $41.3 million for the same periods in 2019, respectively.

(4)Net gains on sales of loans were $132 thousand and $1.1 million for the three and six months ended June 30, 2020, respectively, and $15 thousand and $930 thousand for the same periods in 2019, respectively.

(5)C&I loan purchases for each of the three and six months ended June 30, 2020 and 2019 were comprised primarily of syndicated C&I term loans.