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Loans Receivable and Allowance for Credit Losses
 3 Months Ended
Mar. 31, 2023
Loans and Leases Receivable Disclosure [Abstract]  
Loans Receivable and Allowance for Credit Losses Loans Receivable and Allowance for Credit LossesLoans Receivable and Allowance for Credit Losses
The following table presents the composition of the Company’s loans held-for-investment outstanding as of March 31, 2023 and December 31, 2022:
($ in thousands)March 31, 2023December 31, 2022
Commercial:
C&I$15,641,840 $15,711,095 
CRE:
CRE14,019,136 13,857,870 
Multifamily residential4,682,280 4,573,068 
Construction and land731,394 638,420 
Total CRE19,432,810 19,069,358 
Total commercial35,074,650 34,780,453 
Consumer:
Residential mortgage:
Single-family residential11,786,998 11,223,027 
HELOCs1,988,881 2,122,655 
Total residential mortgage13,775,879 13,345,682 
Other consumer67,519 76,295 
Total consumer13,843,398 13,421,977 
Total loans held-for-investment (1)
$48,918,048 $48,202,430 
Allowance for loan losses(619,893)(595,645)
Loans held-for-investment, net (1)
$48,298,155 $47,606,785 
(1)Includes $(75.4) million and $(70.4) million of net deferred loan fees and net unamortized premiums as of March 31, 2023 and December 31, 2022, respectively.

Loans held-for-investment accrued interest receivable was $221.6 million and $208.4 million as of March 31, 2023 and December 31, 2022, respectively, and was included in Other assets on the Consolidated Balance Sheet. The interest income reversed was insignificant for the three months ended March 31, 2023 and 2022. 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 — Loans Held-for-Investment to the Consolidated Financial Statements of the Company’s 2022 Form 10-K.

The Company’s FRBSF and FHLB borrowings are primarily secured by loans held-for-investment. Loans held-for-investment totaling $34.17 billion and $28.30 billion, respectively, were pledged to secure borrowings and provide additional borrowing capacity as of March 31, 2023 and December 31, 2022.

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 and current-period gross write-offs by loan portfolio segments, internal risk ratings and vintage year as of the periods presented. The vintage year is the year of loan 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.
March 31, 2023
Term Loans by Origination Year
($ in thousands)20232022202120202019PriorRevolving Loans
Revolving Loans Converted to Term Loans (1)
Total
Commercial:
C&I:
Pass$674,825 $2,578,285 $1,783,684 $521,410 $333,681 $253,687 $9,060,947 $20,446 $15,226,965 
Criticized (accrual)2 76,947 90,595 30,558 33,825 9,511 129,690 — 371,128 
Criticized (nonaccrual)300 18,197 1,773 10,335 — 13,142 — — 43,747 
Total C&I675,127 2,673,429 1,876,052 562,303 367,506 276,340 9,190,637 20,446 15,641,840 
YTD gross write-offs (3)
185 68 72 — — 1,553 — — 1,878 
CRE:
Pass468,751 4,143,097 2,386,362 1,470,520 1,724,371 3,216,726 163,308 54,385 13,627,520 
Criticized (accrual)— — 53,948 155,649 55,225 106,071 1,455 — 372,348 
Criticized (nonaccrual)— 171 18,692 — — 405 — — 19,268 
Subtotal CRE468,751 4,143,268 2,459,002 1,626,169 1,779,596 3,323,202 164,763 54,385 14,019,136 
YTD gross write-offs— — — — — 6 — — 6 
Multifamily residential:
Pass159,286 1,498,094 882,113 633,118 515,423 951,669 9,253 1,301 4,650,257 
Criticized (accrual)— — — — 704 31,160 — — 31,864 
Criticized (nonaccrual)— — — — — 159 — — 159 
Subtotal multifamily residential159,286 1,498,094 882,113 633,118 516,127 982,988 9,253 1,301 4,682,280 
Construction and land:
Pass47,883 329,458 268,980 34,007 1,245 3,011 12,087 — 696,671 
Criticized (accrual)— 13,151 — — — 21,572 — — 34,723 
Criticized (nonaccrual)— — — — — — — — — 
Subtotal construction and land47,883 342,609 268,980 34,007 1,245 24,583 12,087 — 731,394 
Total CRE675,920 5,983,971 3,610,095 2,293,294 2,296,968 4,330,773 186,103 55,686 19,432,810 
YTD gross write-offs
— — — — — 6 — — 6 
Total commercial$1,351,047 $8,657,400 $5,486,147 $2,855,597 $2,664,474 $4,607,113 $9,376,740 $76,132 $35,074,650 
YTD total commercial gross write-offs (3)
$185 $68 $72 $— $— $1,559 $— $— $1,884 
March 31, 2023
Term Loans by Origination Year
($ in thousands)20232022202120202019PriorRevolving Loans
Revolving Loans Converted to Term Loans (1)
Total
Consumer:
Residential mortgage:
Single-family residential:
Pass (2)
$789,902 $3,504,956 $2,414,724 $1,728,663 $1,075,516 $2,246,626 $— $— $11,760,387 
Criticized (accrual)— — 629 733 2,436 3,100 — — 6,898 
Criticized (nonaccrual) (2)
— 142 676 1,006 3,240 14,649 — — 19,713 
Subtotal single-family residential mortgage789,902 3,505,098 2,416,029 1,730,402 1,081,192 2,264,375 — — 11,786,998 
HELOCs:
Pass— 1,683 1,183 4,240 2,351 10,592 1,835,459 119,520 1,975,028 
Criticized (accrual)— — 223 655 — 2,905 488 537 4,808 
Criticized (nonaccrual)— — 6 183 69 4,965 191 3,631 9,045 
Subtotal HELOCs— 1,683 1,412 5,078 2,420 18,462 1,836,138 123,688 1,988,881 
Total residential mortgage789,902 3,506,781 2,417,441 1,735,480 1,083,612 2,282,837 1,836,138 123,688 13,775,879 
Other consumer:
Pass889 16,824 137 5,356 — 7,229 36,715 — 67,150 
Criticized (accrual)3 — — — — — — — 3 
Criticized (nonaccrual)— — — — — — 366 — 366 
Total other consumer892 16,824 137 5,356 — 7,229 37,081 — 67,519 
YTD gross write-offs— — — — — — 40 — 40 
Total consumer$790,794 $3,523,605 $2,417,578 $1,740,836 $1,083,612 $2,290,066 $1,873,219 $123,688 $13,843,398 
YTD total consumer gross write-offs (3)
$— $— $— $— $— $— $40 $— $40 
Total loans held-for-investment:
Pass$2,141,536 $12,072,397 $7,737,183 $4,397,314 $3,652,587 $6,689,540 $11,117,769 $195,652 $48,003,978 
Criticized (accrual)5 90,098 145,395 187,595 92,190 174,319 131,633 537 821,772 
Criticized (nonaccrual)300 18,510 21,147 11,524 3,309 33,320 557 3,631 92,298 
Total$2,141,841 $12,181,005 $7,903,725 $4,596,433 $3,748,086 $6,897,179 $11,249,959 $199,820 $48,918,048 
YTD total loans held-for-investment gross write-offs (3)
$185 $68 $72 $— $— $1,559 $40 $— $1,924 
December 31, 2022
Term Loans by Origination Year
($ in thousands)20222021202020192018PriorRevolving Loans
Revolving Loans Converted to Term Loans (1)
Total
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 commercial
$8,898,251 $5,745,996 $3,020,575 $2,761,676 $2,111,867 $2,719,920 $9,462,895 $59,273 $34,780,453 
Consumer:
Residential mortgage:
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 
Subtotal 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 consumer
17,091 137 5,356 — — 15,808 37,903 — 76,295 
Total consumer$3,566,646 $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:
Pass$12,365,799 $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 
(1)$12.2 million of total commercial loans, primarily comprised of CRE revolving loans and $5.1 million of total consumer loans, comprised of HELOC revolving loans converted to term loans during the three months ended March 31, 2023. In comparison, no commercial or consumer loans were converted to term loans during the three months ended March 31, 2022.
(2)As of March 31, 2023 and December 31, 2022, $827 thousand and $818 thousand, respectively, of nonaccrual loans whose payments are guaranteed by the Federal Housing Administration were classified with a “Pass” rating.
(3)Excludes current-period gross write-offs associated with loans the Company sold or settled.
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 loans held-for-investment as of March 31, 2023 and December 31, 2022:
March 31, 2023
($ in thousands)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$15,589,505 $4,758 $3,830 $8,588 $43,747 $15,641,840 
CRE:
CRE13,998,080 1,304 484 1,788 19,268 14,019,136 
Multifamily residential4,681,411 391 319 710 159 4,682,280 
Construction and land723,240 — 8,154 8,154 — 731,394 
Total CRE19,402,731 1,695 8,957 10,652 19,427 19,432,810 
Total commercial34,992,236 6,453 12,787 19,240 63,174 35,074,650 
Consumer:
Residential mortgage:
Single-family residential11,740,953 17,964 7,541 25,505 20,540 11,786,998 
HELOCs1,969,546 5,485 4,805 10,290 9,045 1,988,881 
Total residential mortgage13,710,499 23,449 12,346 35,795 29,585 13,775,879 
Other consumer67,008 89 56 145 366 67,519 
Total consumer13,777,507 23,538 12,402 35,940 29,951 13,843,398 
Total$48,769,743 $29,991 $25,189 $55,180 $93,125 $48,918,048 
December 31, 2022
($ in thousands)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 mortgage
13,285,657 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 $48,202,430 
The following table presents the amortized cost of loans on nonaccrual status for which there was no related allowance for loan losses as of both March 31, 2023 and December 31, 2022. Nonaccrual loans may not have an allowance for credit losses if the loan balances are well-secured by the collateral value and there is no loss expectation.
($ in thousands)March 31, 2023December 31, 2022
Commercial:
C&I$16,227 $11,398 
CRE18,693 22,944 
Total commercial34,920 34,342 
Consumer:
Single-family residential7,206 2,998 
HELOCs5,050 7,245 
Total consumer12,256 10,243 
Total nonaccrual loans with no related allowance for loan losses$47,176 $44,585 

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 of foreclosed assets as of both March 31, 2023 and December 31, 2022. The Company commences the foreclosure process on consumer mortgage loans after a borrower becomes more than 120 days delinquent in accordance with the CFPB guidelines. The carrying value of consumer real estate loans that were in an active or suspended foreclosure process was $8.4 million and $7.5 million as of March 31, 2023 and December 31, 2022, respectively.
Loan Modifications to Borrowers Experiencing Financial Difficulty

As part of the Company’s loss mitigation efforts, the Company may agree to modify the contractual terms of a loan to a borrower experiencing financial difficulty. In addition to loan modifications, the Company also provides other loss mitigation options to assist borrowers who are experiencing financial difficulties. The Company offers restructurings mainly in the form of payment deferrals and term extensions. Upon the adoption of ASU 2022-02, which was effective as of January 1, 2023, the Company applies the loan refinancing and restructuring guidance provided in ASU 310-20 to determine whether a modification made to a borrower results in a new loan or a continuation of an existing loan. See Note 2 — Current Accounting Developments and Summary of Significant Accounting Policies — Significant Accounting Policies Update — Loan Modifications to the Consolidated Financial Statements in this Form 10-Q for additional information. The disclosures below provide information on loan modifications to borrowers experiencing financial difficulty. Loans that were both modified and paid off or charged-off during the period, resulting in an amortized cost balance of zero at the end of each period, were excluded from the disclosures below.
The following table presents the amortized cost of modified loans and the financial effects of the modifications for the three months ended March 31, 2023 by loan class and modification type:
For the Three Months Ended March 31, 2023
Modification TypeFinancial Effects of
Loan Modifications
($ in thousands)Term ExtensionPayment DelayTotalModification as a % of Loan ClassWeighted-Average Term Extension
(in years)		Weighted-Average Payment Delay
(in years)
Commercial:
C&I$19,974 $14,364 $34,338 0.22 %0.9 years1.0 year
CRE:
CRE543 — 543 0.00 %2.0 years
Total commercial20,517 14,364 34,881 
Consumer:
Residential mortgage:
HELOCs738 — 738 0.04 %14.8 years
Total consumer738 — 738 
Total$21,255 $14,364 $35,619 

The Company tracks the performance of modified loans. A modified loan may become delinquent and may result in a payment default (generally 90 days past due) subsequent to modification. There were no loans that received a modification during the three months ended March 31, 2023 that subsequently defaulted.

The following table presents the performance of loans that were modified during the three months ended March 31, 2023.
Payment Performance as of March 31, 2023
($ in thousands)Current30 - 89 Days
Past Due		90+ Days
Past Due		Total
Commercial:
C&I$27,393 $6,945 $— $34,338 
CRE:
CRE543 — — 543 
Total commercial27,936 6,945 — 34,881 
Consumer:
Residential mortgage:
HELOCs738 — — 738 
Total consumer738 — — 738 
Total$28,674 $6,945 $— $35,619 

As of March 31, 2023, there were no additional commitments to lend to borrowers whose loans were modified.

Troubled Debt Restructurings Prior to the Adoption of ASU 2022-02

Prior to the adoption of ASU 2022-02, the Company accounted for a modification to the contractual terms of a loan that resulted in granting a concession to a borrower experiencing financial difficulties as a TDR. ASU 2022-02 eliminated TDR accounting prospectively for all restructurings occurring on or after January 1, 2023.
The following table presents the additions to TDRs for the three months ended March 31, 2022:
Loans Modified as TDRs During the three months ended March 31, 2022
($ in thousands)Number of LoansPre-Modification Outstanding Recorded Investment
Post-Modification Outstanding Recorded Investment (1)
Financial Impact (2)
Commercial:
C&I1 $17,179 $9,224 $7,545 
Total1 $17,179 $9,224 $7,545 
(1)Includes subsequent payments after modification and reflects the balance as of March 31, 2022.
(2)Includes charge-offs since the modification date.

The following table presents the TDR post-modification outstanding balances by the primary modification type for the three months ended March 31, 2022:
Modification Type
During the Three Months Ended March 31, 2022
($ in thousands)
Principal (1)
Total
Commercial:
C&I$9,224 $9,224 
Total$9,224 $9,224 
(1)Includes principal deferments that modify the terms of the loan from principal and interest payments to interest payments only.

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 three months ended March 31, 2022 that were modified as TDRs during the 12 months preceding payment default:
Loans Modified as TDRs that Subsequently Defaulted During the Three Months Ended March 31, 2022
($ in thousands)Number of LoansRecorded Investment
Commercial:
C&I1 $3,250 
Total1 $3,250 

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

The Company has a current expected credit losses 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 or the reasonable and supportable forecast period and reversion to the historical loss experience method for the three months ended March 31, 2023 and 2022.

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&IAge, size and spread at origination, and risk rating
Volatility Index and BBB yield to 10-year U.S. Treasury spread
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 consumerLoss rate approach
Immaterial (1)
(1)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 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; or (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 March 31, 2023, collateral-dependent commercial and consumer loans totaled $18.7 million and $12.3 million, respectively. In comparison, collateral-dependent commercial and consumer loans totaled $47.4 million and $13.4 million, respectively, as of December 31, 2022. The collateral-dependent loans decreased from December 31, 2022, predominantly driven by the adoption of ASU 2022-02 related to the elimination of TDR guidance. The Company's collateral-dependent loans were secured by real estate. As of both March 31, 2023 and December 31, 2022, the collateral value of the properties securing the collateral-dependent loans, net of selling costs, exceeded the recorded value of the loans.
The following tables summarize the activity in the allowance for loan losses by portfolio segments for the three months ended March 31, 2023 and 2022:
Three Months Ended March 31, 2023
CommercialConsumer
CREResidential Mortgage
($ in thousands)C&ICREMultifamily ResidentialConstruction and LandSingle-Family ResidentialHELOCsOther ConsumerTotal
Allowance for loan losses, December 31, 2022$371,700 $149,864 $23,373 $9,109 $35,564 $4,475 $1,560 $595,645 
Impact of ASU 2022-02 adoption5,683 337 6 — 1 1 — 6,028 
Allowance for loan losses, January 1, 2023377,383 150,201 23,379 9,109 35,565 4,476 1,560 601,673 
(Reversal of) provision for credit losses on loans(a)(678)4,676 1,135 210 12,442 580 155 18,520 
Gross charge-offs(1,900)(6)— — — (91)(40)(2,037)
Gross recoveries1,211 196 12 3 — 6 — 1,428 
Total net (charge-offs) recoveries(689)190 12 3 — (85)(40)(609)
Foreign currency translation adjustment309 — — — — — — 309 
Allowance for loan losses, end of period$376,325 $155,067 $24,526 $9,322 $48,007 $4,971 $1,675 $619,893 
Three Months Ended March 31, 2022
CommercialConsumer
CREResidential Mortgage
($ in thousands)C&ICREMultifamily ResidentialConstruction and LandSingle-Family ResidentialHELOCsOther ConsumerTotal
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)9,262 (3,493)9,657 (4,506)926 299 107 12,252 
Gross charge-offs(11,188)(398)(1)— — — (46)(11,633)
Gross recoveries3,002 55 120 54 124 14 — 3,369 
Total net (charge-offs) recoveries(8,186)(343)119 54 124 14 (46)(8,264)
Foreign currency translation adjustment118 — — — — — — 118 
Allowance for loan losses, end of period$339,446 $147,104 $24,176 $11,016 $18,210 $3,748 $1,985 $545,685 

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 11 — 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 months ended March 31, 2023 and 2022:
Three Months Ended March 31,
($ in thousands)20232022
Unfunded credit facilities
Allowance for unfunded credit commitments, beginning of period$26,264 $27,514 
Provision for (reversal of) credit losses on unfunded credit commitments(b)1,480 (4,252)
Foreign currency translation adjustment(3)— 
Allowance for unfunded credit commitments, end of period$27,741 $23,262 
Provision for credit losses(a) + (b)$20,000 $8,000 
The allowance for credit losses was $647.6 million as of March 31, 2023, an increase of $25.7 million, compared with $621.9 million as of December 31, 2022. The increase in the allowance for credit losses was primarily driven by the current economic outlook as well as loan growth. The current economic outlook reflected ongoing concerns with inflation, global supply chain disruptions and rising interest rates.

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, respectively. As of March 31, 2023, the Company did not assign a weighting to its upside scenario. Instead, it assigned a slightly higher weighting to its downside scenario, while maintaining the same weighting to its baseline scenario, compared with the weightings assigned as of December 31, 2022. Management remains cautious regarding the economic outlook given the persistently high level of inflation, rising interest rates, the recent strain to the financial system, and continued concerns on global oil prices and supply-chain issues. The baseline GDP growth forecast for the first two quarters of 2023 rose to 2.5% and 1.0%, compared with 0.1% and 0.7% in the December 2022 forecast. Additionally, the GDP growth forecast for the second half of 2023 has been lowered compared with the December 2022 forecast. GDP growth for the full year 2024, was lowered to 1.9% from the previous 2.0% forecasted as of December 31, 2022, reflecting an expected GDP slow-down as interest-sensitive spending weakens amid elevated interest rates. Average unemployment rates are expected to remain stable at 3.5% for 2023. However, job market softening is expected in 2024 and 2025. Compared with the baseline scenario, the downside scenario assumes that the combination of increasing supply shortages, political tensions between China and Taiwan, recent bank failures, still-elevated inflation, and the Federal Reserve’s decision to keep the federal funds rate elevated will lead to a recession in the second quarter of 2023.
Loans Held-for-Sale

Loans held-for-sale consisted of $6.9 million and $25.6 million of C&I loans as of March 31, 2023 and December 31, 2022, 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 2022 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 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, sold and purchased for the held-for-investment portfolio, during the three months ended March 31, 2023 and 2022:
Three Months Ended March 31, 2023
CommercialConsumer
Residential Mortgage
($ in thousands)C&ICRESingle-Family ResidentialTotal
Loans transferred from held-for-investment to held-for-sale (1)
$156,876 $3,600 $— $160,476 
Sales (2)(3)(4)
$175,932 $3,600 $— $179,532 
Purchases (5)
$22,683 $— $131,999 $154,682 
Three Months Ended March 31, 2022
CommercialConsumer
Residential Mortgage
($ in thousands)C&ICRESingle-Family ResidentialTotal
Loans transferred from held-for-investment to held-for-sale (1)
$111,437 $21,780 $— $133,217 
Sales (2)(3)(4)
$107,474 $21,780 $451 $129,705 
Purchases (5)
$110,596 $— $114,375 $224,971 
(1)Includes write-downs of $273 thousand and $59 thousand to the allowance for loan losses related to loans transferred from held-for-investment to held-for-sale for the three months ended March 31, 2023 and 2022, respectively.
(2)Includes originated loans sold of $111.0 million and $112.3 million for the three months ended March 31, 2023 and 2022, respectively. Originated loans sold consisted primarily of C&I loans for both periods.
(3)Includes $68.5 million and $17.4 million of purchased loans sold in the secondary market for the three months ended March 31, 2023 and 2022, respectively.
(4)Net (losses) gains on sales of loans were $(22) thousand and $2.9 million for the three months ended March 31, 2023 and 2022, respectively.
(5)C&I loan purchases were comprised primarily of syndicated C&I term loans.