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Loans Receivable and Allowance for Credit Losses
 12 Months Ended
Dec. 31, 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 December 31, 2022 and 2021:
($ in thousands)December 31, 2022December 31, 2021
Commercial:
C&I (1)
$15,711,095 $14,150,608 
CRE:
CRE13,857,870 12,155,047 
Multifamily residential4,573,068 3,675,605 
Construction and land638,420 346,486 
Total CRE19,069,358 16,177,138 
Total commercial34,780,453 30,327,746 
Consumer:
Residential mortgage:
Single-family residential11,223,027 9,093,702 
HELOCs2,122,655 2,144,821 
Total residential mortgage13,345,682 11,238,523 
Other consumer76,295 127,512 
Total consumer13,421,977 11,366,035 
Total loans held-for-investment (2)
$48,202,430 $41,693,781 
Allowance for loan losses(595,645)(541,579)
Loans held-for-investment, net (2)
$47,606,785 $41,152,202 
(1)Includes Paycheck Protection Program loans of $99.0 million and $534.2 million as of December 31, 2022 and 2021, respectively.
(2)Includes $(70.4) million and $(50.7) million net deferred loan fees and net unamortized premiums as of December 31, 2022 and 2021, respectively.
Loans held-for-investment accrued interest receivable was $208.4 million and $107.4 million as of December 31, 2022 and 2021, respectively, and was included in Other assets on the Consolidated Balance Sheet. The interest income reversed was insignificant for the years ended December 31, 2022, 2021 and 2020. For the Company’s accounting policy on accrued interest receivable related to loans held-for-investment, see Note 1 — Summary of Significant Accounting Policies — Loans Held-for-Investment to the Consolidated Financial Statements in this Form 10-K.

The Company’s FRBSF and FHLB borrowings are primarily secured by loans held-for-investment. Loans held-for-investment totaling $28.30 billion and $27.67 billion, respectively, were pledged to secure borrowings and provide additional borrowing capacity as of December 31, 2022 and 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 December 31, 2022 and 2021. The vintage year is the year of origination, renewal or major modification. Revolving loans that are converted to term loans presented in the tables below are excluded from term loans by vintage year columns.
December 31, 2022
Term Loans by Origination YearRevolving Loans
Revolving Loans Converted to Term Loans (1)
Total
($ in thousands)20222021202020192018Prior
Commercial:
C&I:
Pass$2,831,834 $2,053,215 $623,026 $392,013 $143,970 $97,605 $9,177,401 $20,548 $15,339,612 
Criticized (accrual) 72,210 34,296 48,761 34,221 20,646 12,933 97,988 — 321,055 
Criticized (nonaccrual)18,722 4,797 10,733 243 5,618 10,315 — — 50,428 
Total C&I2,922,766 2,092,308 682,520 426,477 170,234 120,853 9,275,389 20,548 15,711,095 
CRE:
Pass4,178,780 2,404,634 1,505,150 1,771,679 1,471,710 1,909,925 165,653 22,009 13,429,540 
Criticized (accrual)3,518 60,573 159,424 40,095 91,132 32,173 1,455 16,716 405,086 
Criticized (nonaccrual)— 19,044 — — — 4,200 — — 23,244 
Subtotal CRE4,182,298 2,484,251 1,664,574 1,811,774 1,562,842 1,946,298 167,108 38,725 13,857,870 
Multifamily residential:
Pass1,500,289 892,598 641,677 519,614 350,044 625,293 11,325 — 4,540,840 
Criticized (accrual)— — — 707 4,276 27,076 — — 32,059 
Criticized (nonaccrual)— — — — — 169 — — 169 
Subtotal multifamily residential1,500,289 892,598 641,677 520,321 354,320 652,538 11,325 — 4,573,068 
Construction and land:
Pass288,394 276,839 31,804 3,104 2,805 231 9,073 — 612,250 
Criticized (accrual)4,504 — — — 21,666 — — — 26,170 
Criticized (nonaccrual)— — — — — — — — — 
Subtotal construction and land292,898 276,839 31,804 3,104 24,471 231 9,073 — 638,420 
Total CRE5,975,485 3,653,688 2,338,055 2,335,199 1,941,633 2,599,067 187,506 38,725 19,069,358 
Total commercial8,898,251 5,745,996 3,020,575 2,761,676 2,111,867 2,719,920 9,462,895 59,273 34,780,453 
Consumer:
Single-family residential:
Pass (2)
3,548,894 2,453,717 1,775,696 1,101,965 817,164 1,500,359 — — 11,197,795 
Criticized (accrual)— 1,275 785 1,463 4,352 3,935 — — 11,810 
Criticized (Nonaccrual) (2)
141 — 204 3,202 1,721 8,154 — — 13,422 
Subtotal single-family residential mortgage3,549,035 2,454,992 1,776,685 1,106,630 823,237 1,512,448 — — 11,223,027 
HELOCs:
Pass520 3,583 7,336 3,203 525 8,960 1,958,692 127,401 2,110,220 
Criticized (accrual)— 6 — — — — 4 1,079 1,089 
Criticized (nonaccrual)— — 483 231 1,017 4,844 1,001 3,770 11,346 
Subtotal HELOCs520 3,589 7,819 3,434 1,542 13,804 1,959,697 132,250 2,122,655 
Total residential mortgage3,549,555 2,458,581 1,784,504 1,110,064 824,779 1,526,252 1,959,697 132,250 13,345,682 
Other consumer:
Pass17,088 137 5,356 — — 15,808 37,804 — 76,193 
Criticized (accrual)3 — — — — — — — 3 
Criticized (nonaccrual)— — — — — — 99 — 99 
Total other consumer17,091 137 5,356 — — 15,808 37,903 — 76,295 
Total consumer3,566,646 2,458,718 1,789,860 1,110,064 824,779 1,542,060 1,997,600 132,250 13,421,977 
Total by risk rating:
Pass12,365,799 8,084,723 4,590,045 3,791,578 2,786,218 4,158,181 11,359,948 169,958 47,306,450 
Criticized (accrual)80,235 96,150 208,970 76,486 142,072 76,117 99,447 17,795 797,272 
Criticized (nonaccrual)18,863 23,841 11,420 3,676 8,356 27,682 1,100 3,770 98,708 
Total$12,464,897 $8,204,714 $4,810,435 $3,871,740 $2,936,646 $4,261,980 $11,460,495 $191,523 $48,202,430 
December 31, 2021
Term Loans by Origination YearRevolving Loans
Revolving Loans Converted to Term Loans (1)
Total
($ in thousands)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 commercial8,046,445 4,177,452 3,721,211 2,590,956 1,622,234 2,486,373 7,647,844 35,231 30,327,746 
Consumer:
Single-family residential:
Pass (2)
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) (2)
— — 1,751 3,889 4,295 4,231 — — 14,166 
Subtotal single-family residential mortgage2,616,958 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 
Subtotal HELOCs648 3,277 4,696 1,535 6,811 12,559 1,913,485 201,810 2,144,821 
Total residential mortgage2,617,606 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 consumer16,833 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)$26.2 million, $6.5 million and $23.9 million of total commercial loans, primarily comprised of CRE and C&I revolving loans, were converted to term loans during the years ended December 31, 2022, 2021 and 2020, respectively. For the year ended December 31, 2022, no consumer loans were converted to term loans. $54.1 million and $145.0 million of total consumer loans, comprised of HELOCs, were converted to term loans during the years ended December 31, 2021 and 2020, respectively.
(2)As of December 31, 2022 and 2021, $818 thousand and $1.6 million, respectively, of nonaccrual loans whose payments are guaranteed by the Federal Housing Administration were classified with a “Pass” rating.
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 December 31, 2022 and 2021:
($ in thousands)December 31, 2022
Current
Accruing
Loans		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$15,651,312 $6,482 $2,873 $9,355 $50,428 $15,711,095 
CRE:
CRE13,820,441 14,185 — 14,185 23,244 13,857,870 
Multifamily residential4,571,899 678 322 1,000 169 4,573,068 
Construction and land638,420 — — — — 638,420 
Total CRE19,030,760 14,863 322 15,185 23,413 19,069,358 
Total commercial34,682,072 21,345 3,195 24,540 73,841 34,780,453 
Consumer:
Residential mortgage:
Single-family residential11,183,134 13,523 12,130 25,653 14,240 11,223,027 
HELOCs2,102,523 7,700 1,086 8,786 11,346 2,122,655 
Total residential mortgage13,285,657 21,223 13,216 34,439 25,586 13,345,682 
Other consumer73,004 109 3,083 3,192 99 76,295 
Total consumer13,358,661 21,332 16,299 37,631 25,685 13,421,977 
Total$48,040,733 $42,677 $19,494 $62,171 $99,526 $48,202,430 
($ in thousands)December 31, 2021
Current
Accruing
Loans		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 $41,693,781 
The following table presents the amortized cost of loans on nonaccrual status for which there was no related allowance for loan losses as of both December 31, 2022 and 2021. Nonaccrual loans may not have an allowance for credit losses if the loan balances are well secured by the collateral value and there is no loss expectation.
($ in thousands)December 31, 2022December 31, 2021
Commercial:
C&I$11,398 $22,967 
CRE22,944 9,102 
Total commercial34,342 32,069 
Consumer:
Single-family residential2,998 5,785 
HELOCs7,245 5,033 
Total consumer10,243 10,818 
Total nonaccrual loans with no related allowance for loan losses$44,585 $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 $270 thousand in foreclosed assets as of December 31, 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 an active or suspended foreclosure process was $7.5 million and $7.3 million as of December 31, 2022 and 2021, respectively.
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 1, 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 — Troubled Debt Restructurings to the Consolidated Financial Statements in this Form 10-K for additional information on TDR relief.

The following tables present the additions to TDRs for the years ended December 31, 2022, 2021 and 2020:
($ in thousands)
Loans Modified as TDRs During the Year Ended December 31, 2022
Number
of
Loans		Pre-Modification
Outstanding
Recorded
Investment
Post-Modification
Outstanding
Recorded
Investment (1)
Financial
Impact (2)
Commercial:
C&I7 $69,050 $38,415 $12,638 
Total commercial7 69,050 38,415 12,638 
Consumer:
Residential mortgage:
HELOCs2 662 697 2 
Total residential mortgage2 662 697 2 
Total consumer2 662 697 2 
Total9 $69,712 $39,112 $12,640 
($ in thousands)
Loans Modified as TDRs During the Year Ended December 31, 2021
Number
of
Loans		Pre-Modification
Outstanding
Recorded
Investment
Post-Modification
Outstanding
Recorded
Investment (1)
Financial
Impact (2)
Commercial:
C&I5 $24,155 $20,263 $1,108 
CRE:
Multifamily residential1 1,101 1,066 — 
Total CRE1 1,101 1,066 — 
Total commercial6 25,256 21,329 1,108 
Total6 $25,256 $21,329 $1,108 
($ in thousands)
Loans Modified as TDRs During the Year Ended December 31, 2020
Number
of
Loans		Pre-Modification
Outstanding
Recorded
Investment
Post-Modification
Outstanding
Recorded
Investment (1)
Financial
Impact (2)
Commercial:
C&I14 $152,249 $134,467 $19,555 
CRE:
CRE2 21,429 21,221 18 
Multifamily residential1 1,220 1,226 — 
Total CRE3 22,649 22,447 18 
Total commercial17 174,898 156,914 19,573 
Total17 $174,898 $156,914 $19,573 
(1)Includes subsequent payments after modification and reflects the balance as of December 31, 2022, 2021 and 2020.
(2)Includes charge-offs and specific reserves recorded since the modification date. Loans modified more than once are reported in the period they were first modified.

The following tables present the TDR post-modification outstanding balances by the primary modification type for the years ended December 31, 2022, 2021 and 2020:
($ in thousands)
Modification Type During the Year Ended December 31, 2022
Principal (1)
Principal
and
Interest (2)
Interest
Rate
Reduction		Interest
Deferments
Other (3)
Total
Commercial:
C&I$24,238 $— $— $— $14,177 $38,415 
Total commercial24,238 — — — 14,177 38,415 
Consumer:
Residential mortgage:
HELOCs697 — — — — 697 
Total residential mortgage697 — — — — 697 
Total consumer697 — — — — 697 
Total$24,935 $— $— $— $14,177 $39,112 
($ in thousands)
Modification Type During the Year Ended December 31, 2021
Principal (1)
Principal
and
Interest (2)
Interest
Rate
Reduction		Interest
Deferments
Other (3)
Total
Commercial:
C&I$4,679 $— $15,584 $— $— $20,263 
CRE:
Multifamily residential1,066 — — — — 1,066 
Total CRE1,066 — — — — 1,066 
Total commercial5,745 — 15,584 — — 21,329 
Total$5,745 $— $15,584 $— $— $21,329 
($ in thousands)
Modification Type During the Year Ended December 31, 2020
Principal (1)
Principal
and
Interest (2)
Interest
Rate
Reduction		Interest
Deferments
Other (3)
Total
Commercial:
C&I$59,134 $10,863 $31,913 $32,557 $— $134,467 
CRE:
CRE21,221 — — — — 21,221 
Multifamily residential1,226 — — — — 1,226 
Total CRE22,447 — — — — 22,447 
Total commercial81,581 10,863 31,913 32,557 — 156,914 
Total$81,581 $10,863 $31,913 $32,557 $— $156,914 
(1)Includes forbearance payments, term extensions and principal deferments that modify the terms of the loan from principal and interest payments to interest payments only.
(2)Includes principal and interest deferments or reductions.
(3)Includes primarily funding to secure additional collateral and provide liquidity to collateral-dependent and term extension to C&I loans.

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 information on loans that entered into default during the years ended December 31, 2022, 2021 and 2020 that were modified as TDRs during the 12 months preceding payment default:
($ in thousands)Loans Modified as TDRs that Subsequently Defaulted
During the Year Ended December 31,
202220212020
Number of
Loans		Recorded
Investment		Number of
Loans		Recorded
Investment		Number of
Loans		Recorded
Investment
Commercial:
C&I2 $10,296 1 $11,431 1 $15,852 
Total commercial2 10,296 1 11,431 1 15,852 
Total2 $10,296 1 $11,431 1 $15,852 

As of December 31, 2022 and 2021, the remaining commitments to lend to borrowers whose terms of their outstanding owed balances were modified as TDRs were $16.2 million and $5.0 million, respectively.
Allowance for Credit Losses

The Company has a current expected credit losses (“CECL”) framework 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 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.

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.

There were no changes to the overall model methodology in 2022 and 2021 and no changes to the reasonable and supportable forecast period, and reversion to the historical loss experience method in 2022. In 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.

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 the 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.
To generate estimates of expected loss at the loan level 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. 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. 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 and associates;
–the effect of other external factors such as the regulatory and legal environments, or 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 December 31, 2022, collateral-dependent commercial and consumer loans totaled $47.4 million and $13.4 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 collateral-dependent loans were secured by real estate. As of both December 31, 2022 and 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 activity in the allowance for loan losses by portfolio segments for the years ended December 31, 2022, 2021 and 2020:
($ in thousands)Year Ended December 31, 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)37,604 8,212 15,651 (6,433)18,867 1,124 (258)74,767 
Gross charge-offs(18,738)(10,871)(7,237)— (775)(193)(106)(37,920)
Gross recoveries16,824 1,583 559 74 312 109 — 19,461 
Total net (charge-offs) recoveries(1,914)(9,288)(6,678)74 (463)(84)(106)(18,459)
Foreign currency translation adjustment(2,242)— — — — — — (2,242)
Allowance for loan losses, end of period$371,700 $149,864 $23,373 $9,109 $35,564 $4,475 $1,560 $595,645 
($ in thousands)Year Ended December 31, 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)(39,732)14,282 (15,076)7,576 1,965 745 1,286 (28,954)
Gross charge-offs
(32,490)(28,430)(130)(2,954)(1,046)(45)(1,497)(66,592)
Gross recoveries
11,906 1,297 2,033 607 721 45 5 16,614 
Total net (charge-offs) recoveries
(20,584)(27,133)1,903 (2,347)(325)— (1,492)(49,978)
Foreign currency translation adjustment528 — — — — — — 528 
Allowance for loan losses, end of period$338,252 $150,940 $14,400 $15,468 $17,160 $3,435 $1,924 $541,579 
($ in thousands)Year Ended December 31, 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 
Provision for (reversal of) credit losses on loans(a)145,212 55,864 10,879 644 (9,922)(605)(3,381)198,691 
Gross charge-offs(66,225)(15,206)— — — (221)(185)(81,837)
Gross recoveries5,428 10,455 1,980 80 585 49 95 18,672 
Total net (charge-offs) recoveries(60,797)(4,751)1,980 80 585 (172)(90)(63,165)
Foreign currency translation adjustment1,012 — — — — — — 1,012 
Allowance for loan losses, end of period$398,040 $163,791 $27,573 $10,239 $15,520 $2,690 $2,130 $619,983 

The allowance for unfunded credit commitments is maintained at a level that management believes to be sufficient to absorb expected credit losses related to unfunded credit facilities. See Note 12 — Commitments and Contingencies to the Consolidated Financial Statements in this Form 10-K for additional information related to unfunded credit commitments. The following table summarizes the activities in the allowance for unfunded credit commitments for the years ended December 31, 2022, 2021 and 2020:
($ in thousands)Year Ended December 31,
202220212020
Unfunded credit facilities
Allowance for unfunded credit commitments, beginning of period$27,514 $33,577 $11,158 
Impact of ASU 2016-13 adoption— — 10,457 
(Reversal of) provision for credit losses on unfunded credit commitments(b)(1,267)(6,046)11,962 
Foreign currency translation adjustments17 (17)— 
Allowance for unfunded credit commitments, end of period26,264 27,514 33,577 
Provision for (reversal of) credit losses(a) + (b)$73,500 $(35,000)$210,653 

The allowance for credit losses was $621.9 million as of December 31, 2022, an increase of $52.8 million, compared with $569.1 million as of December 31, 2021. The increase in the allowance for credit losses was primarily driven by the current economic outlook, which reflected ongoing concerns with inflation, global supply chain disruptions and rising interest rates, as well as loan growth.

The Company considers multiple economic scenarios to develop the estimate of the allowance for loan losses. The scenarios may consist of a baseline forecast representing management's view of the most likely outcome, and downside or upside scenarios that reflect possible worsening or improving economic conditions. As of December 31, 2022, the Company assigned a lower weighting to its downside scenario and higher weightings to the baseline and upside scenarios, compared with the weightings assigned as of December 31, 2021. This was because the current baseline economic forecast better reflected, compared with a year ago, the impact of high inflation, lower than previously anticipated annual GDP growth, rising interest rates, and continued global oil and supply chain issues. Macroeconomic assumptions underlying the baseline forecast included a lower annual GDP growth from 1.9% for 2022 to 0.9% for 2023 and an increase in the average unemployment rate from 3.7% in 2022 to 4.0% for 2023. The downside scenario assumed that worsening supply chain issues and rising inflation would cause a broad economic recession in 2023 with the annual GDP growth rate dropping to an average decline of 1.3% and the average unemployment rate rising to 6.8% in 2023. The upside scenario assumed a more optimistic economic outlook for 2023, including higher GDP growth of 2.6%, the unemployment rate improving to 3.5%, and no recession concerns.
Loans Held-for-Sale

Loans held-for-sale consisted of $25.6 million of C&I loans and $635 thousand of single-family residential loans as of December 31, 2022 and 2021, respectively. Refer to Note 1 — Summary of Significant Accounting Policies — Significant Accounting Policies — Loans Held-for-Sale to the Consolidated Financial Statements in this 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, by selling 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 years ended December 31, 2022, 2021 and 2020:
Year Ended December 31, 2022
CommercialConsumer
CREResidential Mortgage
($ in thousands)C&ICREMultifamily
Residential		Construction
and Land		Single-Family
Residential		Total
Loans transferred from held-for-investment to held-for-sale (1)
$530,524 $88,075 $— $— $5,178 $623,777 
Loans transferred from held-for-sale to held-for-investment$— $— $— $— $631 $631 
Sales (2)(3)(4)
$501,289 $88,075 $— $— $6,403 $595,767 
Purchases (5)
$363,549 $— $— $— $293,721 $657,270 
Year Ended December 31, 2021
Commercial Consumer
CREResidential Mortgage
($ in thousands)C&ICREMultifamily
Residential		Construction
and Land		Single-Family
Residential		Total
Loans transferred from held-for-investment to held-for-sale (1)
$496,655 $78,834 $— $18,883 $5,238 $599,610 
Sales (2)(3)(4)
$502,694 $78,834 $— $21,557 $18,458 $621,543 
Purchases (5)
$479,690 $— $370 $— $564,651 $1,044,711 
Year Ended December 31, 2020
CommercialConsumer
CREResidential Mortgage
($ in thousands)C&ICREMultifamily
Residential		Construction
and Land		Single-Family
Residential		Total
Loans transferred from held-for-investment to held-for-sale (1)
$300,677 $26,994 $1,398 $— $— $329,069 
Sales (2)(3)(4)
$303,520 $26,994 $1,398 $— $80,309 $412,221 
Purchases (5)
$154,154 $— $2,358 $— $233,068 $389,580 
(1)Includes write-downs of $3.1 million, $12.2 million and $2.8 million to the allowance for loan losses related to loans transferred from held-for-investment to held-for-sale for the years ended December 31, 2022, 2021 and 2020, respectively.
(2)Includes originated loans sold of $387.5 million, $413.1 million and $400.4 million for the years ended December 31, 2022, 2021 and 2020, respectively. Originated loans sold consisted primarily of C&I and CRE loans for all periods.
(3)Includes $208.2 million, $208.4 million and $11.8 million of purchased loans sold in the secondary market for the years ended December 31, 2022, 2021 and 2020, respectively.
(4)Net gains on sales of loans were $6.4 million, $8.9 million and $4.5 million for the years ended December 31, 2022, 2021 and 2020, respectively.
(5)C&I loan purchases were comprised primarily of syndicated C&I term loans.