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Loans Receivable and Allowance for Credit Losses
 9 Months Ended
Sep. 30, 2021
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 September 30, 2021 and December 31, 2020:
($ in thousands)September 30, 2021December 31, 2020
Commercial:
C&I (1)
$13,831,649 $13,631,726 
CRE:
CRE11,818,065 11,174,611 
Multifamily residential3,340,378 3,033,998 
Construction and land376,921 599,692 
Total CRE15,535,364 14,808,301 
Total commercial29,367,013 28,440,027 
Consumer:
Residential mortgage:
Single-family residential9,021,801 8,185,953 
HELOCs1,963,622 1,601,716 
Total residential mortgage10,985,423 9,787,669 
Other consumer129,269 163,259 
Total consumer11,114,692 9,950,928 
Total loans held-for-investment (2)
$40,481,705 $38,390,955 
Allowance for loan losses(560,404)(619,983)
Loans held-for-investment, net (2)
$39,921,301 $37,770,972 
(1)Includes Paycheck Protection Program (“PPP”) loans of $807.3 million and $1.57 billion as of September 30, 2021 and December 31, 2020, respectively.
(2)Includes net deferred loan fees, unearned fees, unamortized premiums and unaccreted discounts of $(54.3) million and $(58.8) million as of September 30, 2021 and December 31, 2020, respectively. Net origination fees related to PPP loans were $(13.5) million and $(12.7) million as of September 30, 2021 and December 31, 2020, respectively.

Loans held-for-investment accrued interest receivable was $102.7 million and $107.5 million as of September 30, 2021 and December 31, 2020, respectively, and is presented in Other assets on the Consolidated Balance Sheet. For the Company’s accounting policy on accrued interest receivable related to loans held-for-investment, see Note 1 — Summary of Significant Accounting Policies — Significant Accounting Policies to the Consolidated Financial Statements of the Company’s 2020 Form 10-K.

Loans totaling $24.55 billion and $23.26 billion as of September 30, 2021 and December 31, 2020, respectively, were pledged to secure borrowings and provide additional borrowing capacity from the FRBSF and the FHLB.

Credit Quality Indicators

All loans are subject to the Company’s credit review and monitoring process. 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 a majority of the consumer portfolio, payment performance or delinquency is the driving indicator for the risk ratings. The Company utilizes internal credit risk ratings to assign each individual loan a risk rating of one through ten. Loans risk rated one through five are assigned an internal risk rating category of “Pass.” Loans risk rated one are typically loans fully secured by cash. 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 six have potential weaknesses that warrant closer attention by management; these are assigned an internal risk rating category of “Special Mention.” Loans assigned a risk rating of seven or eight have well-defined weaknesses that may jeopardize the full and timely repayment of the loan; these are assigned an internal risk rating category of “Substandard.” Loans assigned a risk rating of nine have insufficient sources of repayment and a high probability of loss; these are assigned an internal risk rating category of “Doubtful.” Loans assigned a risk rating of ten are uncollectible and of such little value that they are no longer considered bankable assets; these are assigned an internal risk rating category of “Loss.” Exposures categorized as criticized consist of special mention, substandard, doubtful and loss categories. The Company reviews the internal risk ratings of its loan portfolio on a regular basis, and adjusts the ratings based on changes in the borrowers’ financial status and the collectability of the loans.
The following tables summarize the Company’s loans held-for-investment as of September 30, 2021 and December 31, 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)September 30, 2021
Term LoansRevolving Loans
Amortized Cost Basis		Revolving Loans Converted to Term Loans Amortized Cost BasisTotal
Amortized Cost Basis by Origination Year
20212020201920182017Prior
Commercial:
C&I:
Pass$3,136,513 $1,454,547 $787,238 $279,254 $175,669 $244,616 $7,069,657 $29,053 $13,176,547 
Criticized (accrual)75,943 168,029 110,500 13,700 1,475 4,489 183,809 — 557,945 
Criticized (nonaccrual)5,171 338 17,889 20,148 12,538 1,356 39,717 — 97,157 
Total C&I3,217,627 1,622,914 915,627 313,102 189,682 250,461 7,293,183 29,053 13,831,649 
CRE:
CRE:
Pass1,956,957 2,181,275 2,288,701 1,965,724 1,181,060 1,869,183 148,077 6,427 11,597,404 
Criticized (accrual)77,286 8,095 9,206 31,093 25,136 55,609 — — 206,425 
Criticized (nonaccrual)4,425 — — 4,648 4,752 411 — — 14,236 
Subtotal CRE2,038,668 2,189,370 2,297,907 2,001,465 1,210,948 1,925,203 148,077 6,427 11,818,065 
Multifamily residential:
Pass611,439 752,178 692,580 432,959 316,412 451,180 19,420 — 3,276,168 
Criticized (accrual)— — 725 23,512 7,121 31,729 — — 63,087 
Criticized (nonaccrual)— — — — — 1,123 — — 1,123 
Subtotal multifamily residential611,439 752,178 693,305 456,471 323,533 484,032 19,420 — 3,340,378 
Construction and land:
Pass102,619 99,857 111,607 16,986 — 1,252 — — 332,321 
Criticized (accrual)3,398 — — 22,156 — 19,046 — — 44,600 
Criticized (nonaccrual)— — — — — — — — — 
Subtotal construction and land106,017 99,857 111,607 39,142 — 20,298 — — 376,921 
Total CRE2,756,124 3,041,405 3,102,819 2,497,078 1,534,481 2,429,533 167,497 6,427 15,535,364 
Total commercial
5,973,751 4,664,319 4,018,446 2,810,180 1,724,163 2,679,994 7,460,680 35,480 29,367,013 
Consumer:
Residential mortgage:
Single-family residential:
Pass (1)
2,131,943 2,214,125 1,465,612 1,169,483 825,120 1,203,031 — — 9,009,314 
Criticized (accrual)— — 374 490 1,633 1,214 — — 3,711 
Criticized (nonaccrual) (1)
— 397 2,178 1,712 1,168 3,321 — — 8,776 
Subtotal single-family residential2,131,943 2,214,522 1,468,164 1,171,685 827,921 1,207,566 — — 9,021,801 
HELOCs:
Pass20 1,799 258 1,295 3,343 12,578 1,710,540 223,057 1,952,890 
Criticized (accrual)7 — — 200 — 222 2 1,570 2,001 
Criticized (nonaccrual)— — 151 188 3,523 1,579 — 3,290 8,731 
Subtotal HELOCs27 1,799 409 1,683 6,866 14,379 1,710,542 227,917 1,963,622 
Total residential mortgage
2,131,970 2,216,321 1,468,573 1,173,368 834,787 1,221,945 1,710,542 227,917 10,985,423 
Other consumer:
Pass16,737 5,382 — — 1,741 51,529 51,389 — 126,778 
Criticized (accrual)— — — — — — — — — 
Criticized (nonaccrual)— — — — 2,491 — — — 2,491 
Total other consumer
16,737 5,382 — — 4,232 51,529 51,389 — 129,269 
Total consumer2,148,707 2,221,703 1,468,573 1,173,368 839,019 1,273,474 1,761,931 227,917 11,114,692 
Total
$8,122,458 $6,886,022 $5,487,019 $3,983,548 $2,563,182 $3,953,468 $9,222,611 $263,397 $40,481,705 
($ in thousands)December 31, 2020
Term LoansRevolving Loans
Amortized Cost Basis		Revolving Loans Converted to Term Loans Amortized Cost BasisTotal
Amortized Cost Basis by Origination Year
20202019201820172016Prior
Commercial:
C&I:
Pass$3,912,147 $1,477,740 $483,725 $245,594 $69,482 $245,615 $6,431,003 $29,487 $12,894,793 
Criticized (accrual)120,183 74,601 56,785 19,426 1,487 5,872 324,640 — 602,994 
Criticized (nonaccrual)2,125 25,267 22,240 18,787 4,964 1,592 58,964 — 133,939 
Total C&I4,034,455 1,577,608 562,750 283,807 75,933 253,079 6,814,607 29,487 13,631,726 
CRE:
CRE:
Pass2,296,649 2,402,136 2,310,748 1,328,251 732,694 1,529,681 173,267 19,064 10,792,490 
Criticized (accrual)47,459 63,654 43,447 98,259 2,094 80,662 — — 335,575 
Criticized (nonaccrual)— — 42,067 1,115 — 3,364 — — 46,546 
Subtotal CRE2,344,108 2,465,790 2,396,262 1,427,625 734,788 1,613,707 173,267 19,064 11,174,611 
Multifamily residential:
Pass783,671 783,589 479,959 411,945 181,213 348,751 5,895 — 2,995,023 
Criticized (accrual)— 735 22,330 6,101 264 5,877 — — 35,307 
Criticized (nonaccrual)— — 1,475 — — 2,193 — — 3,668 
Subtotal multifamily residential783,671 784,324 503,764 418,046 181,477 356,821 5,895 — 3,033,998 
Construction and land:
Pass224,924 172,707 156,712 — 20,897 1,028 — — 576,268 
Criticized (accrual)3,524 — — — — 19,900 — — 23,424 
Criticized (nonaccrual)— — — — — — — — — 
Subtotal construction and land228,448 172,707 156,712 — 20,897 20,928 — — 599,692 
Total CRE3,356,227 3,422,821 3,056,738 1,845,671 937,162 1,991,456 179,162 19,064 14,808,301 
Total commercial
7,390,682 5,000,429 3,619,488 2,129,478 1,013,095 2,244,535 6,993,769 48,551 28,440,027 
Consumer:
Residential mortgage:
Single-family residential:
Pass (1)
2,385,853 1,813,200 1,501,660 1,021,707 523,170 921,714 — — 8,167,304 
Criticized (accrual)— 1,429 — — 119 1,034 — — 2,582 
Criticized (nonaccrual) (1)
— 226 812 1,789 1,994 11,246 — — 16,067 
Subtotal single-family residential2,385,853 1,814,855 1,502,472 1,023,496 525,283 933,994 — — 8,185,953 
HELOCs:
Pass1,131 880 2,879 5,363 8,433 13,475 1,328,919 225,810 1,586,890 
Criticized (accrual)— — 200 — 996 — 1,328 606 3,130 
Criticized (nonaccrual)— 151 285 4,617 164 1,962 — 4,517 11,696 
Subtotal HELOCs1,131 1,031 3,364 9,980 9,593 15,437 1,330,247 230,933 1,601,716 
Total residential mortgage
2,386,984 1,815,886 1,505,836 1,033,476 534,876 949,431 1,330,247 230,933 9,787,669 
Other consumer:
Pass9,531 — — 1,830 — 83,255 66,136 — 160,752 
Criticized (accrual)16 — — — — — — — 16 
Criticized (nonaccrual)— — — 2,491 — — — — 2,491 
Total other consumer
9,547 — — 4,321 — 83,255 66,136 — 163,259 
Total consumer2,396,531 1,815,886 1,505,836 1,037,797 534,876 1,032,686 1,396,383 230,933 9,950,928 
Total
$9,787,213 $6,816,315 $5,125,324 $3,167,275 $1,547,971 $3,277,221 $8,390,152 $279,484 $38,390,955 
(1)As of September 30, 2021 and December 31, 2020, $647 thousand and $747 thousand of nonaccrual loans whose payments were guaranteed by the Federal Housing Administration, respectively, were classified with a “Pass” rating.
Revolving loans converted to term loans presented in the table above are excluded from the term loans by vintage year columns. During the three and nine months ended September 30, 2021, HELOCs totaling $4.1 million and $62.7 million, respectively, were converted to term loans. In comparison, during the three and nine months ended September 30, 2020, HELOCs totaling $59.8 million and $118.2 million, respectively, were converted to term loans. During the three and nine months ended September 30, 2021, one C&I revolving loan of $82 thousand was converted to a term loan. In comparison, during the three and nine months ended September 30, 2020, one C&I revolving loan of $250 thousand was converted to a term loan. One CRE revolving loan of $1.4 million was converted to a term loan during the three months ended September 30, 2021. Three CRE revolving loans totaling $6.4 million were converted to term loans during the nine months ended September 30, 2021. In comparison, there were no conversions of CRE revolving loans to term loans during both the three and nine months ended September 30, 2020.

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 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. Payment deferral activities instituted in response to the COVID-19 pandemic could delay the recognition of delinquencies for customers who otherwise would have moved into nonaccrual status. The following tables present the aging analysis of total loans held-for-investment as of September 30, 2021 and December 31, 2020:
($ in thousands)September 30, 2021
Current
Accruing
Loans (1)
Accruing
Loans
30-59  Days
Past Due		Accruing
Loans
60-89  Days
Past Due		Total
Accruing
Past Due
Loans		Total
Nonaccrual
Loans		Total
Loans
Commercial:
C&I$13,717,788 $6,597 $10,107 $16,704 $97,157 $13,831,649 
CRE:
CRE11,803,236 438 155 593 14,236 11,818,065 
Multifamily residential3,337,341 1,914 — 1,914 1,123 3,340,378 
Construction and land376,921 — — — — 376,921 
Total CRE15,517,498 2,352 155 2,507 15,359 15,535,364 
Total commercial29,235,286 8,949 10,262 19,211 112,516 29,367,013 
Consumer:
Residential mortgage:
Single-family residential8,995,226 13,442 3,711 17,153 9,422 9,021,801 
HELOCs1,950,594 2,298 1,999 4,297 8,731 1,963,622 
Total residential mortgage10,945,820 15,740 5,710 21,450 18,153 10,985,423 
Other consumer126,594 180 4 184 2,491 129,269 
Total consumer11,072,414 15,920 5,714 21,634 20,644 11,114,692 
Total$40,307,700 $24,869 $15,976 $40,845 $133,160 $40,481,705 
($ in thousands)December 31, 2020
Current
Accruing
Loans (1)
Accruing
Loans
30-59 Days
Past Due		Accruing
Loans
60-89 Days
Past Due		Total
Accruing
Past Due
Loans		Total
Nonaccrual
Loans		Total
Loans
Commercial:
C&I$13,488,070 $8,993 $724 $9,717 $133,939 $13,631,726 
CRE:
CRE11,127,690 375 — 375 46,546 11,174,611 
Multifamily residential3,028,512 1,818 — 1,818 3,668 3,033,998 
Construction and land579,792 19,900 — 19,900 — 599,692 
Total CRE14,735,994 22,093 — 22,093 50,214 14,808,301 
Total commercial28,224,064 31,086 724 31,810 184,153 28,440,027 
Consumer:
Residential mortgage:
Single-family residential8,156,645 9,911 2,583 12,494 16,814 8,185,953 
HELOCs1,583,968 2,922 3,130 6,052 11,696 1,601,716 
Total residential mortgage
9,740,613 12,833 5,713 18,546 28,510 9,787,669 
Other consumer160,534 217 17 234 2,491 163,259 
Total consumer9,901,147 13,050 5,730 18,780 31,001 9,950,928 
Total$38,125,211 $44,136 $6,454 $50,590 $215,154 $38,390,955 
(1)As of September 30, 2021 and December 31, 2020, loans in payment deferral programs offered in response to the COVID-19 pandemic that are performing according to their modified terms are generally not considered delinquent, and are included in the “Current Accruing Loans” column.

The following table presents the amortized cost of loans on nonaccrual status for which there was no related allowance for loan losses as of both September 30, 2021 and December 31, 2020. Nonaccrual loans may not have an allowance for credit losses if the loss expectation is zero because the loan balances are supported by the collateral value.
($ in thousands)September 30, 2021December 31, 2020
Commercial:
C&I$15,270 $62,040 
CRE:
CRE13,826 45,537 
Multifamily residential— 2,519 
Total CRE13,826 48,056 
Total commercial29,096 110,096 
Consumer:
Residential mortgage:
Single-family residential1,534 6,013 
HELOCs5,608 8,076 
Total residential mortgage7,142 14,089 
Other consumer— 2,491 
Total consumer7,142 16,580 
Total nonaccrual loans with no related allowance for loan losses$36,238 $126,676 

Foreclosed Assets

Foreclosed assets, consisting of OREO and other nonperforming assets, are included in Other assets on the Consolidated Balance Sheet. The Company had $39.5 million in foreclosed assets as of September 30, 2021, compared with $19.7 million as of December 31, 2020. The Company commences the foreclosure process on consumer mortgage loans after a borrower becomes more than 120 days delinquent in accordance with the Consumer Financial Protection Bureau guidelines. The carrying value of consumer real estate loans that were in the process of active or suspended foreclosure was $8.7 million and $4.1 million as of September 30, 2021 and December 31, 2020, respectively. The Company suspended certain mortgage foreclosure activities in connection with its actions to support its customers during the COVID-19 pandemic. In addition, certain other foreclosures are awaiting for the end of government-mandated foreclosure moratoriums in certain states.
Troubled Debt Restructurings

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 difficulties. 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. Since March 2020, the Company has implemented various commercial and consumer loan modification programs to provide its borrowers relief from the economic impacts of the COVID-19 pandemic. These COVID-related modifications are generally not classified as TDRs due to the relief under the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) and the Interagency Statement on Loan Modifications and Reporting for Financial Institutions Working with Customers Affected by the Coronavirus (Revised), and therefore are not included in the discussion below. Assistance provided in response to the COVID-19 pandemic could delay the recognition of delinquencies, nonaccrual status, and net charge-offs for those borrowers who would have otherwise moved into past due or nonaccrual status. See Note 1 — Summary of Significant Accounting Policies — Significant Accounting Policies to the Consolidated Financial Statements of the Company’s 2020 Form 10-K.

The following tables present the additions to TDRs for the three and nine months ended September 30, 2021 and 2020:
($ in thousands)Loans Modified as TDRs During the Three Months Ended September 30,
20212020
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&I7$26,248 $27,111 $5,688 6$43,378 $35,568 $12,108 
CRE:
CRE—— — — 221,429 21,242 21 
Multifamily residential11,101 1,118 — 11,220 1,226 — 
Total CRE11,101 1,118 — 322,649 22,468 21 
Total commercial827,349 28,229 5,688 966,027 58,036 12,129 
Total8$27,349 $28,229 $5,688 9$66,027 $58,036 $12,129 
($ in thousands)Loans Modified as TDRs During the Nine Months Ended September 30,
20212020
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&I11$46,144 $45,954 $7,662 11$93,235 $79,713 $12,507 
CRE:
CRE—— — — 221,429 21,242 21 
Multifamily residential11,101 1,118 — 11,220 1,226 — 
Total CRE11,101 1,118 — 322,649 22,468 21 
Total commercial1247,245 47,072 7,662 14115,884 102,181 12,528 
Total12$47,245 $47,072 $7,662 14$115,884 $102,181 $12,528 
(1)Includes subsequent payments after modification and reflects the balance as of September 30, 2021 and 2020.
(2)Includes charge-offs and specific reserves recorded since the modification date.
The following tables present the TDR post-modification outstanding balances for the three and nine months ended September 30, 2021 and 2020 by modification type:
($ in thousands)Modification Type During the Three Months Ended September 30,
20212020
Principal (1)
Principal
  and Interest		Interest
Deferments		Interest Rate ReductionTotal
Principal (1)
Principal
  and Interest (2)
Interest
Deferments		Interest Rate ReductionTotal
Commercial:
C&I$27,111 $— $— $— $27,111 $19,025 $— $16,543 $— $35,568 
CRE:
CRE— — — — — 21,242 — — — 21,242 
Multifamily residential1,118 — — — 1,118 1,226 — — — 1,226 
Total CRE1,118 — — 1,118 22,468 — — — 22,468 
Total commercial28,229 — — — 28,229 41,493 — 16,543 — 58,036 
Total$28,229 $— $— $— $28,229 $41,493 $— $16,543 $— $58,036 
($ in thousands)Modification Type During the Nine Months Ended September 30,
20212020
Principal (1)
Principal
  and Interest		Interest
Deferments		Interest Rate ReductionTotal
Principal (1)
Principal
  and Interest (2)
Interest
Deferments		Interest Rate ReductionTotal
Commercial:
C&I$28,780 $— $— $17,174 $45,954 $36,043 $10,819 $32,851 $— $79,713 
CRE:
CRE— — — — — 21,242 — — — 21,242 
Multifamily residential1,118 — — — 1,118 1,226 — — — 1,226 
Total CRE1,118 — — — 1,118 22,468 — — — 22,468 
Total commercial29,898 — — 17,174 47,072 58,511 10,819 32,851 — 102,181 
Total$29,898 $— $— $17,174 $47,072 $58,511 $10,819 $32,851 $— $102,181 
(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)Include principal and interest deferments or reductions.

After a loan is modified as a TDR, the Company continues to monitor its performance under its most recent restructured terms. A TDR may become delinquent and result in payment default (generally 90 days past due) subsequent to restructuring. The following table presents the information on loans that entered into payment default during the three and nine months ended September 30, 2021 and 2020 that were modified in as TDRs during the 12 months preceding payment default:
($ in thousands)Loans Modified as TDRs that Subsequently Defaulted
Three Months Ended September 30,Nine Months Ended September 30,
2021202020212020
Loan CountRecorded
Investment		Loan CountRecorded
Investment		Loan CountRecorded
Investment		Loan CountRecorded
Investment
Commercial:
C&I— $— — $— 1 $11,431 1 $16,309 
Total— $— — $— 1 $11,431 1 $16,309 

As of September 30, 2021 and December 31, 2020, the remaining commitments to lend additional funds to borrowers whose terms of their outstanding owed balances were modified as TDRs was $6.8 million and $3.0 million, respectively.
Allowance for Credit Losses

The Company has an allowance framework under ASU 2016-13 for all financial assets measured at amortized cost and certain off-balance sheet credit exposures. The measurement of the allowance for credit losses is based on management’s best estimate of lifetime expected credit losses inherent in the Company’s relevant financial assets.

The allowance for credit losses is deducted from the amortized cost basis of a financial asset or a group of financial assets so that the balance sheet reflects the net amount the Company expects to collect. Amortized cost is the principal balance outstanding, net of purchase premiums and discounts, deferred fees and costs, and escrow advances. Subsequent changes in expected credit losses are recognized in net income as a provision for, or a reversal of, credit loss expense.

The allowance for credit losses estimation involves procedures to consider the unique risk characteristics of the portfolio segments. The majority of the Company’s credit exposures share risk characteristics with other similar exposures and are collectively evaluated. The collectively evaluated loans cover performing risk-rated loans and unfunded credit commitments. If an exposure does not share risk characteristics with other exposures, the Company generally estimates expected credit losses on an individual basis. These individually assessed loans include TDR and nonaccrual loans.

Allowance for Collectively Evaluated Loans

The allowance for collectively evaluated loans consists of a quantitative component that assesses the different risk factors considered in our models and a qualitative component that considers risk factors external to the models. Each of these components are described below.
•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, and an economic outlook over the life of the loan. The Company incorporates forward-looking information using macroeconomic scenarios applied over the forecasted life of the loans. The forward-looking information is limited to the reasonable and supportable period. 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, and downside or upside scenarios reflecting possible worsening or improving economic conditions. The quantitative models incorporate a probability-weighted calculation of these macroeconomic scenarios over a reasonable and supportable forecast period. If the life of the loans extends beyond the reasonable and supportable forecast period, the Company will consider historical experience or long-run macroeconomic trends over the remaining lives of the loans to estimate the allowance for loan losses.

For both the three and nine months ended September 30, 2021 and 2020, there were no changes to the reasonable and supportable forecast period, except to the C&I segment, which changed from eight to 11 quarters, and no changes to the reversion to historical loss experience method. The change in the reasonable and supportable period for the C&I segment was due to model enhancement, including updates to certain macroeconomic variable inputs. There was no change to the overall model methodology.

The following table provides key credit risk characteristics and macroeconomic variables that the Company uses to estimate the expected credit losses by portfolio segment:
Portfolio SegmentRisk CharacteristicsMacroeconomic Variables
C&I
Age (1), size and spread at origination, and internal risk rating
Volatility Index (“VIX”) and BBB yield to 10-year U.S. Treasury spread (“BBB Spread”) (1)
CRE, Multifamily residential, and Construction and landDelinquency status, maturity date, collateral value, property type, and geographic locationUnemployment rate, Gross Domestic Product (“GDP”), and U.S. Treasury rates
Single-family residential and HELOCsFICO score, delinquency status, maturity date, collateral value, and geographic locationUnemployment rate, GDP, and home price index
Other consumerHistorical loss experience
Immaterial (2)
(1)Due to model enhancements, risk characteristic related to “time-to-maturity” was changed to “age”; while macroeconomic variables related to “unemployment rate and two- and ten-year U.S. Treasury spread” were changed to “VIX and BBB Spread” during the three months ended September 30, 2021.
(2)Macroeconomic variables are included in the qualitative estimate.
Allowance for Loan Losses for the Commercial Loan Portfolio

The Company’s C&I loan 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 receivable, to determine expected credit losses. The lifetime loss rate model’s reasonable and supportable period spans eleven quarters, thereafter immediately reverting to the historical average loss rate, expressed through the loan-level lifetime loss rate.

For CRE, multifamily residential, and construction and land loans, projected probability of defaults (“PDs”) and loss given defaults (“LGDs”) are applied to the estimated exposure at default, considering the term and payment structure of the loan, to generate estimates of expected loss at the loan level. The forecast of future economic conditions returns to long-run historical economic trends after the reasonable and supportable period.

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

Allowance for Loan Losses for the Consumer Loan Portfolio

For single-family residential and HELOC loans, projected PDs and LGDs are applied to the estimated exposure at default, considering the term and payment structure of the loan, to generate estimates of expected loss at the loan level. The forecast of future economic conditions returns to long-run historical economic trends after the reasonable and supportable period. In order to estimate the life of a loan for the single-family residential and HELOC portfolio, the contractual term of the loan is adjusted for estimated prepayments based on historical prepayment experience. For other consumer loans, the Company uses a loss rate approach.

•Qualitative Component — The Company also considers the following qualitative factors in the determination of the collectively evaluated allowance, if these factors have not already been captured by the quantitative model. Such qualitative factors may include, but are not limited to:
–Loan growth trends;
–The volume and severity of past due financial assets, and the volume and severity of adversely classified financial assets;
–The Company’s lending policies and procedures, including changes in lending strategies, underwriting standards, collection, write-off and recovery practices;
–Knowledge of a borrower’s operations;
–The quality of the Company’s credit review system;
–The experience, ability and depth of the Company’s management, lending associates and other relevant associates;
–The effect of other external factors such as the regulatory and legal environments and changes in technology;
–Actual and expected changes in international, national, regional, and local economic and business conditions in which the Company operates; and
–Risk factors in certain industry sectors not captured by the quantitative models.

The magnitude of the impact of these factors on the Company’s qualitative assessment of the allowance for credit losses changes from period to period according to changes made by management in its assessment of these factors. The extent to which these factors change may be dependent on whether they are already reflected in quantitative loss estimates during the current period and the extent to which changes in these factors diverge from period to period.

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 qualitative reserves that are designed to provide coverage for losses attributable to such risk.
Allowance for Individually Evaluated Loans

When a loan no longer shares similar risk characteristics with other loans, such as in the case of 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 fair value of collateral less costs to sell; (2) the present value of expected future cash flows; 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 not to be collateral dependent, the Company uses the present value of future cash flows or the observable market value of the loan.

•Collateral-Dependent Loans — The allowance of a collateral-dependent loan is limited to the difference between the recorded value and fair value of the collateral less cost of disposal or sale. As of September 30, 2021, collateral-dependent commercial and consumer loans totaled $45.4 million and $10.4 million, respectively. In comparison, collateral-dependent commercial and consumer loans totaled $97.2 million and $17.3 million, respectively, as of December 31, 2020. The Company's commercial collateral-dependent loans were secured by real estate or other collateral. The Company's consumer collateral-dependent loans were all residential mortgage loans, secured by the underlying real estate. As of both September 30, 2021 and December 31, 2020, the collateral value of the properties securing each of these collateral-dependent loans, net of selling costs, exceeded the recorded value of the individual loans.
The following tables summarize the activity in the allowance for loan losses by portfolio segments for the three and nine months ended September 30, 2021 and 2020:
($ in thousands)Three Months Ended September 30, 2021
CommercialConsumerTotal
C&ICREResidential MortgageOther
Consumer
CREMultifamily
Residential		Construction
and Land		Single-
Family
Residential		HELOCs
Allowance for loan losses, beginning of period
$362,528 $161,962 $21,925 $15,643 $16,530 $2,938 $4,198 $585,724 
(Reversal of) provision for credit losses on loans(a)(23,365)2,129 (2,660)9,058 2,537 435 130 (11,736)
Gross charge-offs(1,154)(14,229)— (2,674)(912)— (10)(18,979)
Gross recoveries4,203 187 652 267 137 19 — 5,465 
Total net recoveries (charge-offs)3,049 (14,042)652 (2,407)(775)19 (10)(13,514)
Foreign currency translation adjustment(70)— — — — — — (70)
Allowance for loan losses, end of period$342,142 $150,049 $19,917 $22,294 $18,292 $3,392 $4,318 $560,404 
($ in thousands)Three Months Ended September 30, 2020
CommercialConsumerTotal
C&ICREResidential MortgageOther
Consumer
CREMultifamily
Residential		Construction
and Land		Single-
Family
Residential		HELOCs
Allowance for loan losses, beginning of period
$380,723 $176,040 $25,058 $18,551 $25,314 $3,867 $2,518 $632,071 
Provision for (reversal of) credit losses on loans
(a)31,691 (8,301)(1,916)(8,180)(2,692)(637)(76)9,889 
Gross charge-offs(25,111)(1,414)— — — — (124)(26,649)
Gross recoveries1,218 485 665 30 — 43 — 2,441 
Total net (charge-offs) recoveries(23,893)(929)665 30 — 43 (124)(24,208)
Foreign currency translation adjustment500 — — — — — — 500 
Allowance for loan losses, end of period$389,021 $166,810 $23,807 $10,401 $22,622 $3,273 $2,318 $618,252 
($ in thousands)Nine Months Ended September 30, 2021
CommercialConsumerTotal
C&ICREResidential MortgageOther
Consumer
CREMultifamily
Residential		Construction
and Land		Single-
Family
Residential		HELOCs
Allowance for loan losses, beginning of period
$398,040 $163,791 $27,573 $10,239 $15,520 $2,690 $2,130 $619,983 
(Reversal of) provision for credit losses on loans(a)(42,112)11,227 (9,436)14,407 3,522 707 2,226 (19,459)
Gross charge-offs(20,162)(25,558)(130)(2,954)(1,046)(45)(43)(49,938)
Gross recoveries6,301 589 1,910 602 296 40 5 9,743 
Total net (charge-offs) recoveries(13,861)(24,969)1,780 (2,352)(750)(5)(38)(40,195)
Foreign currency translation adjustment75 — — — — — — 75 
Allowance for loan losses, end of period$342,142 $150,049 $19,917 $22,294 $18,292 $3,392 $4,318 $560,404 
($ in thousands)Nine Months Ended September 30, 2020
CommercialConsumerTotal
C&ICREResidential MortgageOther
Consumer
CREMultifamily
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 adoption74,237 72,169 (8,112)(9,889)(3,670)(1,798)2,221 125,158 
Allowance for loan losses, January 1, 2020312,613 112,678 14,714 9,515 24,857 3,467 5,601 483,445 
Provision for (reversal of) credit losses on loans
(a)130,171 46,449 7,273 828 (2,659)(20)(3,197)178,845 
Gross charge-offs(57,466)(2,688)— — — (221)(180)(60,555)
Gross recoveries3,395 10,371 1,820 58 424 47 94 16,209 
Total net (charge-offs) recoveries(54,071)7,683 1,820 58 424 (174)(86)(44,346)
Foreign currency translation adjustment308 — — — — — — 308 
Allowance for loan losses, end of period$389,021 $166,810 $23,807 $10,401 $22,622 $3,273 $2,318 $618,252 

The following table summarizes the activities in the allowance for unfunded credit commitments for the three and nine months ended September 30, 2021 and 2020:
($ in thousands)Three Months Ended
September 30,		Nine Months Ended
September 30,
2021202020212020
Unfunded credit facilities
Allowance for unfunded credit commitments, beginning of period$26,300 $28,972 $33,577 $11,158 
Impact of ASU 2016-13 adoption— — — 10,457 
Provision for (reversal of) credit losses on unfunded credit commitments(b)1,736 111 (5,541)7,468 
Allowance for unfunded credit commitments, end of period$28,036 $29,083 $28,036 $29,083 
(Reversal of) provision for credit losses(a) + (b)$(10,000)$10,000 $(25,000)$186,313 
The allowance for credit losses as of September 30, 2021, was $588.4 million, a decrease of $65.2 million compared with $653.6 million as of December 31, 2020. The change in the allowance for credit losses was comprised of a net decrease of $59.6 million in the allowance for loan losses and a $5.6 million decrease in the allowance for unfunded credit commitments. An improved macroeconomic outlook resulted in the overall decrease in the required allowance for credit losses as of September 30, 2021, leading to a $10.0 million and $25.0 million reversal of credit losses for the three and nine months ended September 30, 2021, respectively.

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 9 — Commitments and Contingencies to the Consolidated Financial Statements in this Form 10-Q for additional information related to unfunded credit commitments.
Loans Held-for-Sale

As of September 30, 2021, the Company had no loans held-for-sale. As of December 31, 2020, loans held-for-sale of $1.8 million 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 2020 Form 10-K for additional details related to the Company’s loans held-for-sale.

Loan Transfers, Sales and Purchases

The Company purchases and sells loans in the secondary market in the ordinary course of business. 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 transferred, loans sold and purchased for the held-for-investment portfolio, during the three and nine months ended September 30, 2021 and 2020:
($ in thousands)Three Months Ended September 30, 2021
CommercialConsumerTotal
C&ICREResidential Mortgage
CREConstruction
and Land		Single-Family
Residential
Loans transferred from held-for-investment to held-for-sale (1)
$117,196 $24,120 $17,226 $5,238 $163,780 
Sales (2)(3)(4)
$118,851 $24,120 $19,900 $6,959 $169,830 
Purchases (5)
$65,354 $— $— $137,937 $203,291 
($ in thousands)Three Months Ended September 30, 2020
CommercialConsumerTotal
C&ICREResidential Mortgage
Multifamily
Residential		Single-Family
Residential
Loans transferred from held-for-investment to held-for-sale (1)
$89,394 $— $— $89,394 
Sales (2)(3)(4)
$92,237 $— $31,847 $124,084 
Purchases (5)
$— $838 $17,294 $18,132 
($ in thousands)Nine Months Ended September 30, 2021
CommercialConsumer
CREResidential Mortgage
C&ICREMultifamily
Residential		Construction
and Land		Single-Family
Residential		Total
Loans transferred from held-for-investment to held-for-sale (1)
$327,781 $61,171 $— $17,226 $5,238 $411,416 
Sales (2)(3)(4)
$329,233 $61,171 $— $19,900 $17,123 $427,427 
Purchases (5)
$310,447 $— $370 $— $434,900 $745,717 
($ in thousands)Nine Months Ended September 30, 2020
CommercialConsumer
CREResidential Mortgage
C&ICREMultifamily
Residential		Single-Family
Residential		Total
Loans transferred from held-for-investment to held-for-sale (1)
$246,052 $7,250 $— $— $253,302 
Sales (2)(3)(4)
$248,895 $7,250 $— $50,197 $306,342 
Purchases (5)
$143,086 $— $2,358 $18,378 $163,822 
(1)Includes write-downs of $3.6 million and $4.9 million to the allowance for loan losses related to loans transferred from held-for-investment to held-for-sale for the three and nine months ended September 30, 2021, respectively. There were $2.8 million of write-downs for each of the three and nine months ended September 30, 2020.
(2)Includes originated loans sold of $143.3 million and $341.9 million for the three and nine months ended September 30, 2021, respectively, and $112.3 million and $294.6 million for the three and nine months ended September 30, 2020, respectively. Originated loans sold consisted primarily of C&I and CRE loans during the three and nine months ended September 30, 2021. In comparison, originated loans sold consisted primarily of C&I and single-family residential loans for the three and nine months ended September 30, 2020.
(3)Includes $26.5 million and $85.5 million of purchased loans sold in the secondary market for the three and nine months ended September 30, 2021, respectively. There were $11.8 million of purchased loans sold in the secondary market for each of the three and nine months ended September 30, 2020.
(4)Net gains on sales of loans were $3.3 million and $6.6 million for the three and nine months ended September 30, 2021, respectively, and $361 thousand and $1.4 million for the three and nine months ended September 30, 2020, respectively.
(5)C&I loan purchases were comprised primarily of syndicated C&I term loans.