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Loans Receivable and Allowance for Credit Losses
 6 Months Ended
Jun. 30, 2022
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 outstanding as of June 30, 2022 and December 31, 2021:
($ in thousands)June 30, 2022December 31, 2021
Commercial:
C&I (1)
$15,377,117 $14,150,608 
CRE:
CRE13,566,748 12,155,047 
Multifamily residential4,443,704 3,675,605 
Construction and land515,857 346,486 
Total CRE18,526,309 16,177,138 
Total commercial33,903,426 30,327,746 
Consumer:
Residential mortgage:
Single-family residential10,234,473 9,093,702 
HELOCs2,280,080 2,144,821 
Total residential mortgage12,514,553 11,238,523 
Other consumer84,097 127,512 
Total consumer12,598,650 11,366,035 
Total loans held-for-investment (2)
$46,502,076 $41,693,781 
Allowance for loan losses(563,270)(541,579)
Loans held-for-investment, net (2)
$45,938,806 $41,152,202 
(1)Includes Paycheck Protection Program loans of $153.3 million and $534.2 million as of June 30, 2022 and December 31, 2021, respectively.
(2)Includes $(56.2) million and $(50.7) million of net deferred loan fees and net unamortized premiums as of June 30, 2022 and December 31, 2021, respectively.

Loans held-for-investment accrued interest receivable was $132.3 million and $107.4 million as of June 30, 2022 and December 31, 2021, respectively, and is included in Other assets on the Consolidated Balance Sheet. Interest income reversed for the three and six months ended June 30, 2022 and 2021 was insignificant. 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 2021 Form 10-K.

The Company’s FRBSF and FHLB borrowings are primarily secured by loans held-for-investment. Loans held-for-investment totaling $26.78 billion and $27.67 billion, respectively, were pledged to secure borrowings and provide additional borrowing capacity as of June 30, 2022 and December 31, 2021.

Credit Quality Indicators

All loans are subject to the Company’s credit review and monitoring process. For the commercial loan 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 consumer loan portfolio, payment performance or delinquency is typically the driving indicator for risk ratings.

The Company utilizes internal credit risk ratings to assign each individual loan a risk rating of 1 through 10:
•Pass — loans risk rated 1 through 5 are assigned an internal risk rating category of “Pass.” Loans risk rated 1 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.
•Special mention — loans assigned a risk rating of 6 have potential weaknesses that warrant closer attention by management; these are assigned an internal risk rating category of “Special Mention.”
•Substandard — 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 category of “Substandard.”
•Doubtful — 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 category of “Doubtful.”
•Loss — loans assigned a risk rating of 10 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.”
Loan 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 by loan portfolio segments, internal risk ratings and vintage year as of June 30, 2022 and December 31, 2021. The vintage year is the year of origination, renewal or major modification.
($ in thousands)June 30, 2022
Term Loans by Origination YearRevolving LoansRevolving Loans Converted to Term Loans Total
20222021202020192018Prior
Commercial:
C&I:
Pass$1,632,575 $2,948,526 $769,887 $524,311 $170,119 $270,405 $8,656,225 $28,475 $15,000,523 
Criticized (accrual)64,608 43,748 50,746 32,574 24,206 19,222 101,437 — 336,541 
Criticized (nonaccrual)3,242 4,129 15,356 — 5,630 11,660 36 — 40,053 
Total C&I1,700,425 2,996,403 835,989 556,885 199,955 301,287 8,757,698 28,475 15,377,117 
CRE:
Pass2,638,027 2,565,665 1,815,298 1,907,721 1,598,242 2,358,965 150,983 14,498 13,049,399 
Criticized (accrual)5,023 109,974 69,751 99,541 101,188 102,333 1,455 16,808 506,073 
Criticized (nonaccrual)— 4,201 — — — 7,075 — — 11,276 
Subtotal CRE2,643,050 2,679,840 1,885,049 2,007,262 1,699,430 2,468,373 152,438 31,306 13,566,748 
Multifamily residential:
Pass1,091,403 967,791 687,577 591,961 371,378 661,082 13,301 — 4,384,493 
Criticized (accrual)— — 714 20,454 36,577 — — 57,745 
Criticized (nonaccrual)— — — — — 1,466 — — 1,466 
Subtotal multifamily residential1,091,403 967,791 687,577 592,675 391,832 699,125 13,301 — 4,443,704 
Construction and land:
Pass94,071 232,421 98,608 60,928 3,332 236 — — 489,596 
Criticized (accrual)— 4,405 — 21,856 — — — 26,261 
Criticized (nonaccrual)— — — — — — — — — 
Subtotal construction and land94,071 232,421 103,013 60,928 25,188 236 — — 515,857 
Total CRE3,828,524 3,880,052 2,675,639 2,660,865 2,116,450 3,167,734 165,739 31,306 18,526,309 
Total commercial5,528,949 6,876,455 3,511,628 3,217,750 2,316,405 3,469,021 8,923,437 59,781 33,903,426 
Consumer:
Residential mortgage:
Single-family residential:
Pass (1)
1,983,527 2,565,374 1,903,821 1,194,265 898,768 1,655,824 — — 10,201,579 
Criticized (accrual)— — 2,146 1,087 2,159 1,301 — — 6,693 
Criticized (nonaccrual) (1)
— — 753 2,778 8,504 14,166 — — 26,201 
Total single-family residential mortgage1,983,527 2,565,374 1,906,720 1,198,130 909,431 1,671,291 — — 10,234,473 
HELOCs:
Pass929 6,114 6,859 1,253 2,088 13,340 2,081,521 157,658 2,269,762 
Criticized (accrual)— — — — — 2 613 615 
Criticized (nonaccrual)— 1,008 815 220 463 1,640 1,692 3,865 9,703 
Total HELOCs929 7,122 7,674 1,473 2,551 14,980 2,083,215 162,136 2,280,080 
Total residential mortgage
1,984,456 2,572,496 1,914,394 1,199,603 911,982 1,686,271 2,083,215 162,136 12,514,553 
Other consumer:
Pass1,211 13,072 5,258 — — 15,173 49,369 — 84,083 
Criticized (accrual)3 — — — — — — — 3 
Criticized (nonaccrual)— — — — — — 11 — 11 
Total other consumer1,214 13,072 5,258 — — 15,173 49,380 — 84,097 
Total consumer1,985,670 2,585,568 1,919,652 1,199,603 911,982 1,701,444 2,132,595 162,136 12,598,650 
Total by Risk Rating:
Pass7,441,743 9,298,963 5,287,308 4,280,439 3,043,927 4,975,025 10,951,399 200,631 45,479,435 
Criticized (accrual)69,634 153,722 127,048 133,916 169,863 159,433 102,894 17,421 933,931 
Criticized (nonaccrual)3,242 9,338 16,924 2,998 14,597 36,007 1,739 3,865 88,710 
Total$7,514,619 $9,462,023 $5,431,280 $4,417,353 $3,228,387 $5,170,465 $11,056,032 $221,917 $46,502,076 
($ in thousands)December 31, 2021
Term Loans by Origination YearRevolving LoansRevolving Loans Converted to Term LoansTotal
20212020201920182017Prior
Commercial:
C&I:
Pass$3,911,722 $1,133,085 $629,007 $187,195 $132,392 $225,326 $7,383,485 $28,842 $13,631,054 
Criticized (accrual)85,036 117,357 72,277 51,553 15,136 4,005 115,167 — 460,531 
Criticized (nonaccrual)29,456 2,792 513 517 9,301 16,444 — — 59,023 
Total C&I4,026,214 1,253,234 701,797 239,265 156,829 245,775 7,498,652 28,842 14,150,608 
CRE:
Pass2,792,193 2,090,503 2,230,520 1,863,481 1,120,682 1,727,862 128,668 6,389 11,960,298 
Criticized (accrual)71,055 3,200 9,176 21,077 24,851 55,892 — — 185,251 
Criticized (nonaccrual)4,350 — — — 4,752 396 — — 9,498 
Subtotal CRE2,867,598 2,093,703 2,239,696 1,884,558 1,150,285 1,784,150 128,668 6,389 12,155,047 
Multifamily residential:
Pass1,026,295 726,772 688,453 419,319 308,087 424,947 20,524 — 3,614,397 
Criticized (accrual)— — 721 22,344 7,033 30,666 — — 60,764 
Criticized (nonaccrual)— — — — — 444 — — 444 
Subtotal multifamily residential1,026,295 726,772 689,174 441,663 315,120 456,057 20,524 — 3,675,605 
Construction and land:
Pass122,983 103,743 90,544 3,412 — 391 — — 321,073 
Criticized (accrual)3,355 — — 22,058 — — — — 25,413 
Criticized (nonaccrual)— — — — — — — — — 
Subtotal construction and land126,338 103,743 90,544 25,470 — 391 — — 346,486 
Total CRE4,020,231 2,924,218 3,019,414 2,351,691 1,465,405 2,240,598 149,192 6,389 16,177,138 
Total commercial
8,046,445 4,177,452 3,721,211 2,590,956 1,622,234 2,486,373 7,647,844 35,231 30,327,746 
Consumer:
Residential mortgage:
Single-family residential:
Pass (1)
2,616,958 2,108,370 1,375,929 1,079,030 763,351 1,127,516 — — 9,071,154 
Criticized (accrual)— — 458 2,813 1,899 3,212 — — 8,382 
Criticized (nonaccrual) (1)
— — 1,751 3,889 4,295 4,231 — — 14,166 
Total single-family residential mortgage
2,616,958 2,108,370 1,378,138 1,085,732 769,545 1,134,959 — — 9,093,702 
HELOCs:
Pass648 3,277 4,644 1,347 3,268 11,215 1,913,478 197,414 2,135,291 
Criticized (accrual)— — — — — 371 7 708 1,086 
Criticized (nonaccrual)— — 52 188 3,543 973 — 3,688 8,444 
Total HELOCs648 3,277 4,696 1,535 6,811 12,559 1,913,485 201,810 2,144,821 
Total residential mortgage
2,617,606 2,111,647 1,382,834 1,087,267 776,356 1,147,518 1,913,485 201,810 11,238,523 
Other consumer:
Pass16,831 5,258 — — 1,741 52,147 51,481 — 127,458 
Criticized (accrual)2 — — — — — — — 2 
Criticized (nonaccrual)— — — — — — 52 — 52 
Total other consumer
16,833 5,258 — — 1,741 52,147 51,533 — 127,512 
Total consumer2,634,439 2,116,905 1,382,834 1,087,267 778,097 1,199,665 1,965,018 201,810 11,366,035 
Total by Risk Rating:
Pass10,487,630 6,171,008 5,019,097 3,553,784 2,329,521 3,569,404 9,497,636 232,645 40,860,725 
Criticized (accrual)159,448 120,557 82,632 119,845 48,919 94,146 115,174 708 741,429 
Criticized (nonaccrual)33,806 2,792 2,316 4,594 21,891 22,488 52 3,688 91,627 
Total
$10,680,884 $6,294,357 $5,104,045 $3,678,223 $2,400,331 $3,686,038 $9,612,862 $237,041 $41,693,781 
(1)As of June 30, 2022 and December 31, 2021, $1.2 million and $1.6 million, respectively, of nonaccrual loans whose payments are guaranteed by the Federal Housing Administration were classified with a “Pass” rating.
Revolving loans that are converted to term loans presented in the tables above are excluded from the term loans by vintage year columns. During the three and six months ended June 30, 2022, there were no conversions of HELOC revolving loans to term loans. Two CRE revolving loans of $26.4 million were converted to term loans during the three and six months ended June 30, 2022. In comparison, HELOC revolving loans of $20.9 million and $57.6 million were converted to term loans during the three and six months ended June 30, 2021, respectively. There were no conversions of CRE revolving loans to term loans during the three months ended June 30, 2021. Two CRE revolving loans of $5.0 million were converted to term loans during the six months ended June 30, 2021.

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. The following tables present the aging analysis of total loans held-for-investment as of June 30, 2022 and December 31, 2021:
($ in thousands)June 30, 2022
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$15,326,934 $10,097 $33 $10,130 $40,053 $15,377,117 
CRE:
CRE13,554,820 451 201 652 11,276 13,566,748 
Multifamily residential4,441,408 830 — 830 1,466 4,443,704 
Construction and land515,857 — — — — 515,857 
Total CRE18,512,085 1,281 201 1,482 12,742 18,526,309 
Total commercial33,839,019 11,378 234 11,612 52,795 33,903,426 
Consumer:
Residential mortgage:
Single-family residential10,186,333 13,718 6,996 20,714 27,426 10,234,473 
HELOCs2,263,510 6,254 613 6,867 9,703 2,280,080 
Total residential mortgage12,449,843 19,972 7,609 27,581 37,129 12,514,553 
Other consumer83,988 92 6 98 11 84,097 
Total consumer12,533,831 20,064 7,615 27,679 37,140 12,598,650 
Total$46,372,850 $31,442 $7,849 $39,291 $89,935 $46,502,076 
($ in thousands)December 31, 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$14,080,516 $6,983 $4,086 $11,069 $59,023 $14,150,608 
CRE:
CRE12,141,827 3,722 — 3,722 9,498 12,155,047 
Multifamily residential3,669,819 5,320 22 5,342 444 3,675,605 
Construction and land346,486 — — — — 346,486 
Total CRE16,158,132 9,042 22 9,064 9,942 16,177,138 
Total commercial30,238,648 16,025 4,108 20,133 68,965 30,327,746 
Consumer:
Residential mortgage:
Single-family residential9,059,222 10,191 8,569 18,760 15,720 9,093,702 
HELOCs2,130,523 4,776 1,078 5,854 8,444 2,144,821 
Total residential mortgage
11,189,745 14,967 9,647 24,614 24,164 11,238,523 
Other consumer127,352 99 9 108 52 127,512 
Total consumer11,317,097 15,066 9,656 24,722 24,216 11,366,035 
Total$41,555,745 $31,091 $13,764 $44,855 $93,181 $41,693,781 
(1)As of both June 30, 2022 and December 31, 2021, loans in payment deferral programs offered in response to the Coronavirus Disease 2019 (“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 June 30, 2022 and December 31, 2021. Nonaccrual loans may not have an allowance for credit losses since there is no loss expectation when the loan balances are well-secured by the collateral value.
($ in thousands)June 30, 2022December 31, 2021
Commercial:
C&I$18,251 $22,967 
CRE10,956 9,102 
Multifamily residential1,055 — 
Total commercial30,262 32,069 
Consumer:
Single-family residential12,952 5,785 
HELOCs5,351 5,033 
Total consumer18,303 10,818 
Total nonaccrual loans with no related allowance for loan losses$48,565 $42,887 

Foreclosed Assets

The Company acquires assets from borrowers through loan restructurings, workouts, and foreclosures. Assets acquired may include real properties (e.g., residential real estate, land, and buildings) and commercial and personal properties. The Company recognizes foreclosed assets upon receiving assets in satisfaction of a loan (e.g., taking legal title or physical possession).

Foreclosed assets, consisting of OREO and other nonperforming assets, are included in Other assets on the Consolidated Balance Sheet. The Company had no foreclosed assets as of June 30, 2022, compared with $10.3 million as of December 31, 2021. 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 $12.9 million and $7.3 million as of June 30, 2022 and December 31, 2021, respectively.
As part of our actions to support customers during the COVID-19 pandemic, the Company temporarily suspended certain mortgage foreclosure activities through December 31, 2021. Beginning January 1, 2022, the Company resumed these mortgage foreclosure activities. The Company continues to take proactive measures to prevent avoidable foreclosures
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. The COVID-related modifications that occurred between March 2020 and January 1, 2022, were generally not classified as TDRs due to the relief under the Coronavirus Aid, Relief, and Economic Security Act, as amended by the Consolidated Appropriations Act, 2021, 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. See Note 1 — Summary of Significant Accounting Policies — Significant Accounting Policies — Troubled Debt Restructurings to the Consolidated Financial Statements in the Company’s 2021 Form 10-K for additional information.

The following tables present the additions to TDRs for the three and six months ended June 30, 2022 and 2021:
($ in thousands)Loans Modified as TDRs During the Three Months Ended June 30,
20222021
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&I2$12,955 $12,245 $2,111 4$20,375 $20,084 $2,162 
Total2$12,955 $12,245 $2,111 4$20,375 $20,084 $2,162 
($ in thousands)Loans Modified as TDRs During the Six Months Ended June 30,
20222021
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&I3$30,134 $21,428 $10,157 5$20,818 $20,499 $2,318 
Total3$30,134 $21,428 $10,157 5$20,818 $20,499 $2,318 
(1)Includes subsequent payments after modification and reflects the balance as of June 30, 2022 and 2021.
(2)Includes charge-offs and specific reserves recorded since the modification date.

The following tables present the TDR post-modification outstanding balances by the primary modification type for the three and six months ended June 30, 2022 and 2021:
($ in thousands)Modification Type During the Three Months Ended June 30,
20222021
Principal (1)
Interest Rate Reduction
Other (2)
Total
Principal (1)
Interest Rate ReductionOtherTotal
Commercial:
C&I$— $— $12,245 $12,245 $3,373 $16,711 $— $20,084 
Total$— $— $12,245 $12,245 $3,373 $16,711 $— $20,084 
($ in thousands)Modification Type During the Six Months Ended June 30,
20222021
Principal (1)
Interest Rate Reduction
Other (2)
Total
Principal (1)
Interest Rate ReductionOtherTotal
Commercial:
C&I$9,183 $— $12,245 $21,428 $3,788 $16,711 $— $20,499 
Total$9,183 $— $12,245 $21,428 $3,788 $16,711 $— $20,499 
(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 increase in new commitment.

After a loan is modified as 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 tables present information on loans that entered into default during the three and six months ended June 30, 2022 and 2021, that were modified as TDRs during the 12 months preceding payment default:
($ in thousands)Loans Modified as TDRs that Subsequently Defaulted
During the Three Months Ended June 30,
20222021
Number of
Loans		Recorded
Investment		Number of
Loans		Recorded
Investment
Commercial:
C&I1 $1,055 — $— 
Total1 $1,055 — $— 
($ in thousands)Loans Modified as TDRs that Subsequently Defaulted
During the Six Months Ended June 30,
20222021
Number of
Loans		Recorded
Investment		Number of
Loans		Recorded
Investment
Commercial:
C&I2 $4,305 1 $11,431 
Total2 $4,305 1 $11,431 

As of June 30, 2022 and December 31, 2021, the remaining commitments to lend to borrowers whose terms of their outstanding owed balances were modified as TDRs were $1.9 million and $5.0 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 Company’s allowance for credit losses, which includes both the allowance for loan losses and the allowance for unfunded credit commitments, is calculated with the objective of maintaining a reserve sufficient to absorb losses inherent in our credit portfolios. The measurement of the allowance for credit losses is based on management’s best estimate of lifetime expected credit losses, and periodic evaluation of the loan portfolio, lending-related commitments and other relevant factors.

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 that share risk characteristics with other similar exposures are collectively evaluated. The collectively evaluated loans include 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 Company applies quantitative methods to estimate loan losses by considering 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, which 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 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 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.

During the third quarter of 2021, the reasonable and supportable forecast period, key credit risk characteristics and macroeconomic variables to estimate the expected credit losses of the C&I segment were modified due to model enhancement. There were no changes to the overall model methodology. For the three and six months ended June 30, 2022, there were no changes to the reasonable and supportable forecast period and reversion to the historical loss experience method.

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 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 the model enhancements during the third quarter of 2021, the 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”.
(2)Macroeconomic variables are included in the qualitative estimate.

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 receivable, to determine expected credit losses. The lifetime loss rate model’s reasonable and supportable period spans 11 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 probabilities of default (“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 within 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 portfolios, 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 June 30, 2022, collateral-dependent commercial and consumer loans totaled $38.9 million and $19.0 million, respectively. In comparison, collateral-dependent commercial and consumer loans totaled $37.0 million and $14.0 million, respectively, as of December 31, 2021. The Company's commercial collateral-dependent loans were secured by real estate, and its consumer collateral-dependent loans were all residential mortgage loans, secured by the underlying real estate. As of both June 30, 2022 and December 31, 2021, the collateral value of the properties securing the collateral-dependent loans, net of selling costs, exceeded the recorded value of the loans.
The following tables summarize the activities in the allowance for loan losses by portfolio segments for the three and six months ended June 30, 2022 and 2021:
($ in thousands)Three Months Ended June 30, 2022
CommercialConsumerTotal
C&ICREResidential MortgageOther
Consumer
CREMultifamily
Residential		Construction
and Land		Single-
Family
Residential		HELOCs
Allowance for loan losses, beginning of period
$339,446 $147,104 $24,176 $11,016 $18,210 $3,748 $1,985 $545,685 
Provision for (reversal of) credit losses on loans(a)19,030 (6,819)1,976 (4,338)3,461 (339)(502)12,469 
Gross charge-offs(240)(671)(8)— — (193)(34)(1,146)
Gross recoveries6,514 631 408 4 169 4 — 7,730 
Total net recoveries (charge-offs)6,274 (40)400 4 169 (189)(34)6,584 
Foreign currency translation adjustment(1,468)— — — — — — (1,468)
Allowance for loan losses, end of period
$363,282 $140,245 $26,552 $6,682 $21,840 $3,220 $1,449 $563,270 
($ in thousands)Three Months Ended June 30, 2021
CommercialConsumerTotal
C&ICREResidential MortgageOther
Consumer
CREMultifamily
Residential		Construction
and Land		Single-
Family
Residential		HELOCs
Allowance for loan losses, beginning of period
$394,084 $146,399 $27,407 $19,089 $15,839 $2,670 $2,018 $607,506 
(Reversal of) provision for credit losses on loans(a)(22,605)19,375 (5,385)(3,243)609 250 2,209 (8,790)
Gross charge-offs(10,572)(4,134)(113)(209)— — (32)(15,060)
Gross recoveries1,338 322 16 6 82 18 3 1,785 
Total net (charge-offs) recoveries(9,234)(3,812)(97)(203)82 18 (29)(13,275)
Foreign currency translation adjustment283 — — — — — — 283 
Allowance for loan losses, end of period
$362,528 $161,962 $21,925 $15,643 $16,530 $2,938 $4,198 $585,724 
($ in thousands)Six Months Ended June 30, 2022
CommercialConsumerTotal
C&ICREResidential MortgageOther
Consumer
CREMultifamily
Residential		Construction
and Land		Single-
Family
Residential		HELOCs
Allowance for loan losses, beginning of period
$338,252 $150,940 $14,400 $15,468 $17,160 $3,435 $1,924 $541,579 
Provision for (reversal of) credit losses on loans(a)28,292 (10,312)11,633 (8,844)4,387 (40)(395)24,721 
Gross charge-offs(11,428)(1,069)(9)— — (193)(80)(12,779)
Gross recoveries9,516 686 528 58 293 18 — 11,099 
Total net (charge-offs) recoveries(1,912)(383)519 58 293 (175)(80)(1,680)
Foreign currency translation adjustment(1,350)— — — — — — (1,350)
Allowance for loan losses, end of period
$363,282 $140,245 $26,552 $6,682 $21,840 $3,220 $1,449 $563,270 
($ in thousands)Six Months Ended June 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)(18,763)9,098 (6,776)5,349 985 272 2,096 (7,739)
Gross charge-offs(19,008)(11,329)(130)(280)(134)(45)(33)(30,959)
Gross recoveries2,098 402 1,258 335 159 21 5 4,278 
Total net (charge-offs) recoveries(16,910)(10,927)1,128 55 25 (24)(28)(26,681)
Foreign currency translation adjustment161 — — — — — — 161 
Allowance for loan losses, end of period
$362,528 $161,962 $21,925 $15,643 $16,530 $2,938 $4,198 $585,724 

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 summarizes the activities in the allowance for unfunded credit commitments for the three and six months ended June 30, 2022 and 2021:
($ in thousands)Three Months Ended June 30,Six Months Ended June 30,
2022202120222021
Unfunded credit facilities
Allowance for unfunded credit commitments, beginning of period$23,262 $32,529 $27,514 $33,577 
Provision for (reversal of) credit losses on unfunded credit commitments(b)1,031 (6,210)(3,221)(7,261)
Foreign currency translation adjustment11 (19)11 (16)
Allowance for unfunded credit commitments, end of period24,304 26,300 24,304 26,300 
Provision for (reversal of) credit losses(a) + (b)$13,500 $(15,000)$21,500 $(15,000)
The allowance for credit losses was $587.6 million as of June 30, 2022, an increase of $18.5 million, compared with $569.1 million as of December 31, 2021. The increase in the allowance for credit losses was primarily due to an increase in provision for credit losses, driven by loan growth across the segments and a weakening economic outlook, partially offset by lower net charge-offs in 2022 year-to-date.
Loans Held-for-Sale

Loans held-for-sale consisted of $28.5 million C&I loans and $635 thousand single-family residential loans as of June 30, 2022 and December 31, 2021, respectively. Refer to Note 1 — Summary of Significant Accounting Policies — Significant Accounting Policies — Loans Held-for-Sale to the Consolidated Financial Statements in the Company’s 2021 Form 10-K for additional details.
Loan Transfers, Sales and Purchases

The Company’s primary business focus is on directly originated loans. The Company also purchases loans and participates in loans with other banks. In the normal course of doing business, the Company also provides other financial institutions with the ability to participate in commercial loans that it originates and sells loans to such institutions. 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 on the carrying value of loans transferred, loans sold and purchased for the held-for-investment portfolio, during the three and six months ended June 30, 2022 and 2021:
($ in thousands)Three Months Ended June 30, 2022
CommercialConsumerTotal
C&ICREResidential Mortgage
CREMultifamily
Residential		Single-Family
Residential
Loans transferred from held-for-investment to held-for-sale (1)
$208,335 $9,854 $— $— $218,189 
Loans transferred from held-for-sale to held-for-investment$— $— $— $631 $631 
Sales (2)(3)(4)
$180,029 $9,854 $— $— $189,883 
Purchases (5)
$194,066 $— $— $122,723 $316,789 
($ in thousands)Three Months Ended June 30, 2021
CommercialConsumerTotal
C&ICREResidential Mortgage
CREMultifamily
Residential		Single-Family
Residential
Loans transferred from held-for-investment to held-for-sale (1)
$84,745 $17,019 $— $— $101,764 
Sales (2)(3)(4)
$84,503 $17,019 $— $2,658 $104,180 
Purchases (5)
$66,415 $— $— $165,163 $231,578 
($ in thousands)Six Months Ended June 30, 2022
CommercialConsumerTotal
C&ICREResidential Mortgage
CREMultifamily
Residential		Single-Family
Residential
Loans transferred from held-for-investment to held-for-sale (1)
$319,772 $31,634 $— $— $351,406 
Loans transferred from held-for-sale to held-for-investment$— $— $— $631 $631 
Sales (2)(3)(4)
$287,503 $31,634 $— $451 $319,588 
Purchases (5)
$304,662 $— $— $237,098 $541,760 
($ in thousands)Six Months Ended June 30, 2021
CommercialConsumerTotal
C&ICREResidential Mortgage
CREMultifamily
Residential		Single-Family
Residential
Loans transferred from held-for-investment to held-for-sale (1)
$210,585 $37,051 $— $— $247,636 
Sales (2)(3)(4)
$210,382 $37,051 $— $10,164 $257,597 
Purchases (5)
$245,093 $— $370 $296,963 $542,426 
(1)Includes write-downs of $158 thousand and $217 thousand to the allowance for loan losses related to loans transferred from held-for-investment to held-for-sale for the three and six months ended June 30, 2022 and $1.3 million for the three and six months ended June 30, 2021.
(2)Includes originated loans sold of $55.4 million and $167.7 million for the three and six months ended June 30, 2022, respectively, and $67.6 million and $198.6 million for the three and six months ended June 30, 2021, respectively. Originated loans sold consisted primarily of C&I loans for each of the three and six months ended June 30, 2022 and 2021.
(3)Includes $134.5 million and $151.9 million of purchased loans sold in the secondary market for the three and six months ended June 30, 2022, respectively and $36.6 million and $59.0 million for the three and six months ended June 30, 2021, respectively.
(4)Net gains on sales of loans were $917 thousand and $3.8 million for the three and six months ended June 30, 2022, respectively, and $1.5 million and $3.3 million for the three and six months ended June 30, 2021, respectively.
(5)C&I loan purchases were comprised primarily of syndicated C&I term loans.