Loans Receivable and Allowance for Credit Losses

12 Months Ended

Dec. 31, 2023

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, 2023 and 2022:

($ in thousands)	December 31, 2023		December 31, 2022
Commercial:
C&I	$	16,581,079	$	15,711,095
CRE:
CRE	14,777,081		13,857,870
Multifamily residential	5,023,163		4,573,068
Construction and land	663,868		638,420
Total CRE	20,464,112		19,069,358
Total commercial	37,045,191		34,780,453
Consumer:
Residential mortgage:
Single-family residential	13,383,060		11,223,027
HELOCs	1,722,204		2,122,655
Total residential mortgage	15,105,264		13,345,682
Other consumer	60,327		76,295
Total consumer	15,165,591		13,421,977
Total loans held-for-investment (1)	$	52,210,782	$	48,202,430
Allowance for loan losses	(668,743)		(595,645)
Loans held-for-investment, net (1)	$	51,542,039	$	47,606,785

(1)Includes $71 million and $70 million of net deferred loan fees and net unamortized premiums as of December 31, 2023 and 2022, respectively.

Accrued interest receivable on loans held-for-investment was $267 million and $208 million as of December 31, 2023 and 2022, respectively, and was included in Other assets on the Consolidated Balance Sheet. The interest income reversed was insignificant for the years ended December 31, 2023, 2022 and 2021. 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 also has loans held-for-sale. For the Company’s accounting policy on loans held-for-sale, refer to Note 1 — Summary of Significant Accounting Policies — Loans Held-for-Sale 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 $37.2 billion and $28.3 billion, respectively, were pledged to secure borrowings and provide additional borrowing capacity as of December 31, 2023 and 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 year-to-date gross write-offs by loan portfolio segments, internal risk ratings and vintage year as of December 31, 2023 and 2022. 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.

	December 31, 2023
	Term Loans by Origination Year
($ in thousands)	2023		2022		2021		2020		2019		Prior		Revolving Loans			Revolving Loans Converted to Term Loans (1)		Total
Commercial:
C&I:
Pass	$	2,314,463	$	1,628,560	$	1,296,936	$	331,982	$	245,173	$	164,159	$	10,053,757		$	20,143	$	16,055,173
Criticized (accrual)	105,119		67,899		120,574		15,064		40,920		22,098		117,196			—		488,870
Criticized (nonaccrual)	2,104		7,916		131		4,819		2,979		18,137		950			—		37,036
Total C&I	2,421,686		1,704,375		1,417,641		351,865		289,072		204,394		10,171,903			20,143		16,581,079
YTD gross write-offs (2)	350		10,454		424		3,758		9,748		2,648		1,593			—		28,975
CRE:
Pass	2,492,915		4,086,385		2,216,257		1,428,724		1,600,844		2,494,382		92,851			62,771		14,475,129
Criticized (accrual)	36,855		34,485		30,336		48,250		24,437		104,340		—			—		278,703
Criticized (nonaccrual)	—		—		—		—		444		22,805		—			—		23,249
Subtotal CRE	2,529,770		4,120,870		2,246,593		1,476,974		1,625,725		2,621,527		92,851			62,771		14,777,081
YTD gross write-offs (2)	—		—		—		—		—		1,329		—			—		1,329
Multifamily residential:
Pass	665,780		1,481,161		808,333		612,408		498,491		857,713		8,690			1,281		4,933,857
Criticized (accrual)	—		3,356		54,614		—		693		25,974		—			—		84,637
Criticized (nonaccrual)	—		—		—		—		—		4,669		—			—		4,669
Subtotal multifamily residential	665,780		1,484,517		862,947		612,408		499,184		888,356		8,690			1,281		5,023,163
YTD gross write-offs	—		—		—		—		—		3		—			—		3
Construction and land:
Pass	209,775		280,151		120,724		39,928		808		5,501		6,981		$	—		663,868
Criticized (accrual)	—		—		—		—		—		—		—			—		—
Criticized (nonaccrual)	—		—		—		—		—		—		—			—		—
Subtotal construction and land	209,775		280,151		120,724		39,928		808		5,501		6,981			—		663,868
YTD gross write-offs (2)	—		—		—		—		—		—		—			—		—
Total CRE	3,405,325		5,885,538		3,230,264		2,129,310		2,125,717		3,515,384		108,522			64,052		20,464,112
YTD gross write-offs (2)	—		—		—		—		—		1,332		—			—		1,332
Total commercial	$	5,827,011	$	7,589,913	$	4,647,905	$	2,481,175	$	2,414,789	$	3,719,778	$	10,280,425		$	84,195	$	37,045,191
YTD total commercial gross write-offs (2)	$	350	$	10,454	$	424	$	3,758	$	9,748	$	3,980	$	1,593		$	—	$	30,307

	December 31, 2023
	Term Loans by Origination Year
($ in thousands)	2023		2022		2021		2020		2019		Prior		Revolving Loans			Revolving Loans Converted to Term Loans (1)		Total
Consumer:
Residential mortgage:
Single-family residential:
Pass (3)	$	3,188,830	$	3,340,789	$	2,279,802	$	1,594,525	$	980,686	$	1,959,974	$	—		$	—	$	13,344,606
Criticized (accrual)	2,680		4,471		566		1,440		1,503		4,167		—			—		14,827
Criticized (nonaccrual) (3)	4,466		837		3,902		2,081		3,626		8,715		—			—		23,627
Subtotal single-family residential mortgage	3,195,976		3,346,097		2,284,270		1,598,046		985,815		1,972,856		—			—		13,383,060
YTD gross write-offs	—		—		—		—		—		—		—			—		—
HELOCs:
Pass	3,641		3,882		1,734		3,153		729		9,251		1,551,074			126,280		1,699,744
Criticized (accrual)	565		1,219		1,872		101		185		1,470		2,548			1,089		9,049
Criticized (nonaccrual)	815		856		413		72		584		6,863		279			3,529		13,411
Subtotal HELOCs	5,021		5,957		4,019		3,326		1,498		17,584		1,553,901			130,898		1,722,204
YTD gross write-offs (2)	—		—		—		—		—		41		—			6		47
Total residential mortgage	3,200,997		3,352,054		2,288,289		1,601,372		987,313		1,990,440		1,553,901			130,898		15,105,264
YTD gross write-offs (2)	—		—		—		—		—		41		—			6		47
Other consumer:
Pass	2,286		18,098		135		—		—		13,244		26,432		$	—		60,195
Criticized (accrual)	—		—		—		—		—		—		—			—		—
Criticized (nonaccrual)	—		—		—		—		—		—		132			—		132
Total other consumer	2,286		18,098		135		—		—		13,244		26,564			—		60,327
YTD gross write-offs (2)	—		—		—		—		—		—		—			—		—
Total consumer	$	3,203,283	$	3,370,152	$	2,288,424	$	1,601,372	$	987,313	$	2,003,684	$	1,580,465		$	130,898	$	15,165,591
YTD total consumer gross write-offs (2)	$	—	$	—	$	—	$	—	$	—	$	41	$	—		$	6	$	47
Total loans held-for-investment:
Pass	$	8,877,690	$	10,839,026	$	6,723,921	$	4,010,720	$	3,326,731	$	5,504,224	$	11,739,785		$	210,475	$	51,232,572
Criticized (accrual)	145,219		111,430		207,962		64,855		67,738		158,049		119,744			1,089		876,086
Criticized (nonaccrual)	7,385		9,609		4,446		6,972		7,633		61,189		1,361			3,529		102,124
Total	$	9,030,294	$	10,960,065	$	6,936,329	$	4,082,547	$	3,402,102	$	5,723,462	$	11,860,890		$	215,093	$	52,210,782
YTD total loans held-for-investment gross write-offs (2)	$	350	$	10,454	$	424	$	3,758	$	9,748	$	4,021	$	1,593		$	6	$	30,354

	December 31, 2022
	Term Loans by Origination Year
($ in thousands)	2022		2021		2020		2019		2018		Prior		Revolving 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&I	2,922,766		2,092,308		682,520		426,477		170,234		120,853		9,275,389		20,548		15,711,095
CRE:
Pass	4,178,780		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 CRE	4,182,298		2,484,251		1,664,574		1,811,774		1,562,842		1,946,298		167,108		38,725		13,857,870
Multifamily residential:
Pass	1,500,289		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 residential	1,500,289		892,598		641,677		520,321		354,320		652,538		11,325		—		4,573,068
Construction and land:
Pass	288,394		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 land	292,898		276,839		31,804		3,104		24,471		231		9,073		—		638,420
Total CRE	5,975,485		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:
Single-family residential:
Pass (3)	$	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) (3)	141		—		204		3,202		1,721		8,154		—		—		13,422
Subtotal single-family residential mortgage	3,549,035		2,454,992		1,776,685		1,106,630		823,237		1,512,448		—		—		11,223,027
HELOCs:
Pass	520		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 HELOCs	520		3,589		7,819		3,434		1,542		13,804		1,959,697		132,250		2,122,655
Total residential mortgage	3,549,555		2,458,581		1,784,504		1,110,064		824,779		1,526,252		1,959,697		132,250		13,345,682
Other consumer:
Pass	17,088		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)$29 million, $26 million and $6 million of total commercial loans, primarily comprised of CRE revolving loans, converted to term loans during the years ended December 31, 2023, 2022 and 2021, respectively. During the years ended December 31, 2023 and 2021, respectively, $44 million and $54 million of total consumer loans, comprised of HELOCs, converted to term loans. For the year ended December 31, 2022, no consumer loans converted to term loans.

(2)Excludes gross write-offs associated with loans the Company sold or settled.

(3)As of each of December 31, 2023 and 2022, $1 million of nonaccrual loans whose payments were 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 loans held-for-investment as of December 31, 2023 and 2022:

	December 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	$	16,508,394	$	28,550	$	7,099	$	35,649	$	37,036	$	16,581,079
CRE:
CRE	14,750,315		1,719		1,798		3,517		23,249		14,777,081
Multifamily residential	5,017,897		597		—		597		4,669		5,023,163
Construction and land	650,617		13,251		—		13,251		—		663,868
Total CRE	20,418,829		15,567		1,798		17,365		27,918		20,464,112
Total commercial	36,927,223		44,117		8,897		53,014		64,954		37,045,191
Consumer:
Residential mortgage:
Single-family residential	13,313,455		29,285		15,943		45,228		24,377		13,383,060
HELOCs	1,687,301		12,266		9,226		21,492		13,411		1,722,204
Total residential mortgage	15,000,756		41,551		25,169		66,720		37,788		15,105,264
Other consumer	56,930		3,123		142		3,265		132		60,327
Total consumer	15,057,686		44,674		25,311		69,985		37,920		15,165,591
Total	$	51,984,909	$	88,791	$	34,208	$	122,999	$	102,874	$	52,210,782

	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:
CRE	13,820,441		14,185		—		14,185		23,244		13,857,870
Multifamily residential	4,571,899		678		322		1,000		169		4,573,068
Construction and land	638,420		—		—		—		—		638,420
Total CRE	19,030,760		14,863		322		15,185		23,413		19,069,358
Total commercial	34,682,072		21,345		3,195		24,540		73,841		34,780,453
Consumer:
Residential mortgage:
Single-family residential	11,183,134		13,523		12,130		25,653		14,240		11,223,027
HELOCs	2,102,523		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 consumer	73,004		109		3,083		3,192		99		76,295
Total consumer	13,358,661		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 December 31, 2023 and 2022. Nonaccrual loans may not have an allowance for credit losses if the loan balances are well secured by collateral values and there is no loss expectation.

($ in thousands)	December 31, 2023		December 31, 2022
Commercial:
C&I	$	33,089	$	11,398
CRE	22,653		22,944
Multifamily residential	4,235		—
Total commercial	59,977		34,342
Consumer:
Single-family residential	4,852		2,998
HELOCs	7,256		7,245
Total consumer	12,108		10,243
Total nonaccrual loans with no related allowance for loan losses	$	72,085	$	44,585

Foreclosed Assets

The Company acquires assets from borrowers through loan restructurings, workouts, or foreclosures. Assets acquired may include real properties (e.g., 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 $11 million in foreclosed assets as of December 31, 2023, compared with $270 thousand as of 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 Consumer Financial Protection Bureau guidelines. The carrying value of the consumer real estate loans that were in an active or suspended foreclosure process was $8 million and $7 million as of December 31, 2023 and 2022, respectively.

Loan Modifications to Borrowers Experiencing Financial Difficulty

Effective January 1, 2023, the Company adopted ASU 2022-02, which in part eliminated the accounting for TDR and enhanced disclosure requirements for loan modifications to borrowers experiencing financial difficulty. See Note 1 — Summary of Significant Accounting Policies — Loan Modifications to the Consolidated Financial Statements in this Form 10-K for additional information. As part of the Company’s loss mitigation efforts, the Company may agree to modify the contractual terms of a loan to assist borrowers experiencing financial difficulty. The Company negotiates loan modifications on a case-by-case basis to achieve mutually agreeable terms that maximize loan collectability and meet the borrower’s financial needs. The Company considers various factors to identify borrowers experiencing financial difficulty. The primary factor for consumer borrowers is delinquency status. For commercial loan borrowers, these factors include credit risk ratings, the probability of loan risk rating downgrades, and overall risk profile changes. The modification may include, but is not limited to, payment delays, interest rate reductions, term extensions, principal forgiveness, or a combination of such modifications. Commercial loan borrowers that require immaterial modifications such as insignificant interest rate changes, short-term extensions (90 days or less) from the original maturity date, or temporary waivers or extensions of financial covenants which would not constitute material credit actions, are generally not considered to be experiencing financial difficulty and are not included in the disclosure. Insignificant payment deferrals (three months or less in the last 12 months) are also not included in the disclosure.

The following table presents the amortized cost of loans that were modified during the year ended December 31, 2023 by loan class and modification type:

	Year Ended December 31, 2023
	Modification Type
($ in thousands)	Term Extension		Payment Delay		Combination: Term Extension/ Payment Delay		Combination: Rate Reduction/ Term Extension		Combination: Rate Reduction/ Payment Delay		Total		Modification as a % of Loan Class
Commercial:
C&I	$	62,704	$	6,842	$	—	$	—	$	—	$	69,546	0.42	%
CRE:
CRE	13,939		—		—		32,470		—		46,409		0.23	%
Total CRE	13,939		—		—		32,470		—		46,409
Total commercial	76,643		6,842		—		32,470		—		115,955
Consumer:
Residential mortgage:
Single-family residential:	—		10,202		3,967		—		—		14,169		0.11	%
HELOCs	—		3,148		1,170		—		815		5,133		0.30	%
Total residential mortgage	—		13,350		5,137		—		815		19,302
Total consumer	—		13,350		5,137		—		815		19,302
Total	$	76,643	$	20,192	$	5,137	$	32,470	$	815	$	135,257

The following table presents the financial effects of the loan modifications for the year ended December 31, 2023 by loan class and modification type:

	Financial Effects of Loan Modifications
	Year Ended December 31, 2023
($ in thousands)	Principal Forgiveness			Weighted-Average Interest Rate Reduction			Weighted-Average Term Extension (in years)	Weighted-Average Payment Delay (in years)
Commercial:
C&I	$	371	(1)	—	%	(1)	1.3 years	0.9 years
CRE	—			3.00	%		2.1 years	—
Consumer:
Single-family residential	—			—	%		9.3 years	1.8 years
HELOCs	—			0.11	%		14.2 years	4.6 years
Total	$	371

(1)Comprised of C&I loans modified during the year ended December 31, 2023 where the interest rate is waived in addition to principal forgiveness. No recorded investment was outstanding as of December 31, 2023.

A modified loan may become delinquent and may result in a payment default (generally 90 days past due) subsequent to modification. During the year ended December 31, 2023, two residential mortgage loans that were modified as payment delay totaling $1 million subsequently defaulted.

The Company closely monitors the performance of modified loans to borrowers experiencing financial difficulty to understand the effectiveness of its modification efforts. The following table presents the performance of loans that were modified as of December 31, 2023 since the adoption of ASU 2022-02 on January 1, 2023:

	Payment Performance as of December 31, 2023
($ in thousands)	Current		30-89 Days Past Due		90+ Days Past Due		Total
Commercial:
C&I	$	52,087	$	8,153	$	9,306	$	69,546
CRE:
CRE	46,409		—		—		46,409
Total CRE	46,409		—		—		46,409
Total commercial	98,496		8,153		9,306		115,955
Consumer:
Residential mortgage:
Single-family residential	11,197		2,425		547		14,169
HELOCs	4,207		177		749		5,133
Total residential mortgage	15,404		2,602		1,296		19,302
Total consumer	15,404		2,602		1,296		19,302
Total	$	113,900	$	10,755	$	10,602	$	135,257

As of December 31, 2023, commitments to lend additional funds to borrowers whose loans were modified were $4 million.

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 years ended December 31, 2022, and 2021:

	Loans Modified as TDRs During the Year Ended
	December 31, 2022							December 31, 2021
($ in thousands)	Number of Loans	Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment (1)		Financial Impact (2)		Number of Loans	Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment (1)		Financial Impact (2)
Commercial:
C&I	7	$	69,050	$	38,415	$	12,638	5	$	24,155	$	20,263	$	1,108
CRE:
Multifamily residential	—	—		—		—		1	1,101		1,066		—
Total CRE	—	—		—		—		1	1,101		1,066		—
Total commercial	7	69,050		38,415		12,638		6	25,256		21,329		1,108
Consumer:
Residential mortgage:
HELOCs	2	662		697		2		—	—		—		—
Total residential mortgage	2	662		697		2		—	—		—		—
Total consumer	2	662		697		2		—	—		—		—
Total	9	$	69,712	$	39,112	$	12,640	6	$	25,256	$	21,329	$	1,108

(1)Includes subsequent payments after modification and reflects the balance as of December 31, 2022 and 2021.

(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 table presents the TDR post-modification outstanding balances by the primary modification type for the years ended December 31, 2022 and 2021:

	Modification Type During the Year Ended
	December 31, 2022								December 31, 2021
($ in thousands)	Principal (1)		Interest Rate Reduction		Other (2)		Total		Principal (1)		Interest Rate Reduction		Other		Total
Commercial:
C&I	$	24,238	$	—	$	14,177	$	38,415	$	4,679	$	15,584	$	—	$	20,263
CRE:
Multifamily residential	—		—		—		—		1,066		—		—		1,066
Total CRE	—		—		—		—		1,066		—		—		1,066
Total commercial	24,238		—		14,177		38,415		5,745		15,584		—		21,329
Consumer:
Residential mortgage:
HELOCs	697		—		—		697		—		—		—		—
Total residential mortgage	697		—		—		697		—		—		—		—
Total consumer	697		—		—		697		—		—		—		—
Total	$	24,935	$	—	$	14,177	$	39,112	$	5,745	$	15,584	$	—	$	21,329

(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 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 and 2021 that were modified as TDRs during the 12 months preceding payment default:

	Loans Modified as TDRs that Subsequently Defaulted During the Year Ended December 31,
	2022			2021
($ in thousands)	Number of Loans	Recorded Investment		Number of Loans	Recorded Investment
Commercial:
C&I	2	$	10,296	1	$	11,431
Total commercial	2	10,296		1	11,431
Total	2	$	10,296	1	$	11,431

As of December 31, 2022, the remaining commitments to lend to borrowers whose terms of their outstanding owed balances were modified as TDRs was $16 million.

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, 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 the loans extends beyond the reasonable and supportable forecast period, the Company will consider historical experience or long-run macroeconomic trends over the remaining life of the loans to estimate the allowance for loan losses.

There were no changes to the reasonable and supportable forecast period, except to the C&I segment, and no changes to the reversion to the historical loss experience method in 2023 and 2022. The reasonable and supportable forecast period for the C&I segment changed from 11 quarters to eight quarters due to model redevelopment during the third quarter of 2023.

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 Segment	Risk Characteristics	Macroeconomic Variables
C&I	Age percentage, size at origination, delinquency status, sector and risk rating	Unemployment rate, Gross Domestic Product (“GDP”), and U.S. Treasury rates (1)
CRE, Multifamily residential, and Construction and land	Delinquency status, maturity date, collateral value, property type, and geographic location	Unemployment rate, GDP, and U.S. Treasury rates
Single-family residential and HELOCs	FICO score, delinquency status, maturity date, collateral value, and geographic location	Unemployment rate, GDP, and Home Price Indices
Other consumer	Loss rate approach	Immaterial (2)

(1)Macroeconomic variables were updated due to model redevelopment.

(2)Macroeconomic variables are included in the qualitative estimate.

Quantitative Component — 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 eight 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 PDs and 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.

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.

Quantitative Component — 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 loan 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 criticized or 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 December 31, 2023, collateral-dependent commercial and consumer loans totaled $30 million and $12 million, respectively. In comparison, collateral-dependent commercial and consumer loans totaled $47 million and $13 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 which eliminated TDR guidance. The Company's collateral-dependent loans were secured by real estate. As of both December 31, 2023 and 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 years ended December 31, 2023, 2022 and 2021:

		Year Ended December 31, 2023
		Commercial								Consumer
				CRE						Residential Mortgage
($ in thousands)		C&I		CRE		Multifamily Residential		Construction and Land		Single-Family Residential		HELOCs		Other Consumer		Total
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 adoption		5,683		337		6		—		1		1		—		6,028
Allowance for loan losses, beginning of period		377,383		150,201		23,379		9,109		35,565		4,476		1,560		601,673
Provision for (reversal of) credit losses on loans	(a)	45,319		27,007		10,454		11,537		19,384		(424)		294		113,571
Gross charge-offs		(36,573)		(7,048)		(3)		(10,413)		—		(138)		(197)		(54,372)
Gross recoveries		6,803		432		545		236		69		33		—		8,118
Total net (charge-offs) recoveries		(29,770)		(6,616)		542		(10,177)		69		(105)		(197)		(46,254)
Foreign currency translation adjustment		(247)		—		—		—		—		—		—		(247)
Allowance for loan losses, end of period		$	392,685	$	170,592	$	34,375	$	10,469	$	55,018	$	3,947	$	1,657	$	668,743

		Year Ended December 31, 2022
		Commercial								Consumer
				CRE						Residential Mortgage
($ in thousands)		C&I		CRE		Multifamily Residential		Construction and Land		Single-Family Residential		HELOCs		Other Consumer		Total
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 recoveries		16,824		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

		Year Ended December 31, 2021
		Commercial								Consumer
				CRE						Residential Mortgage
($ in thousands)		C&I		CRE		Multifamily Residential		Construction and Land		Single-Family Residential		HELOCs		Other Consumer		Total
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 adjustment		528		—		—		—		—		—		—		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 addition to the allowance for loan losses, the Company maintains an allowance for unfunded credit commitments. The Company has three general areas for which it provides the allowance for unfunded credit commitments: (1) recourse obligations for loans sold, (2) letters of credit, and (3) unfunded lending commitments. 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 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, 2023, 2022 and 2021:

		Year Ended December 31,
($ in thousands)		2023		2022		2021
Unfunded credit facilities
Allowance for unfunded credit commitments, beginning of period		$	26,264	$	27,514	$	33,577
Provision for (reversal of) credit losses on unfunded credit commitments	(b)	11,429		(1,267)		(6,046)
Foreign currency translation adjustments		6		17		(17)
Allowance for unfunded credit commitments, end of period		37,699		26,264		27,514
Provision for (reversal of) credit losses	(a) + (b)	$	125,000	$	73,500	$	(35,000)

The allowance for credit losses was $706 million as of December 31, 2023, compared with $622 million as of December 31, 2022. The increase in the allowance for credit losses was primarily driven by net loan growth and economic forecasts that reflect continued caution regarding inflation, the high interest rate environment and the CRE market outlook.

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 both December 31, 2023 and 2022, the Company assigned the same weightings to its baseline, upside, and downside scenarios. The current baseline economic forecast continues to reflect key risks such as high inflation, high interest rates, concerns over global conflicts and oil prices. Compared with the December 2022 forecast, the 2023 baseline forecast projected lower annual GDP growth for 2023 and beyond, and a similarly higher unemployment rate for 2023 and beyond. The downside scenario assumed the economy falls into recession in the first quarter of 2024 as a result of an extended federal government shutdown, global and domestic political tensions, high inflation, and increased unemployment. The upside scenario assumed a more optimistic economic outlook for 2024, including stronger growth, stable financial market, and full employment starting in the first quarter of 2024.

Loan Transfers, Sales and Purchases

The Company’s primary business focus is on directly originated loans. The Company also purchases loans and participates in loan financing 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, sold and purchased for the held-for-investment portfolio, during the years ended December 31, 2023, 2022 and 2021:

	Year Ended December 31, 2023
	Commercial								Consumer
			CRE						Residential Mortgage
($ in thousands)	C&I		CRE		Multifamily Residential		Construction and Land		Single-Family Residential		Total
Loans transferred from held-for-investment to held-for-sale (1)	$	647,943	$	83,282	$	—	$	8,154	$	—	$	739,379
Sales (2)(3)	$	674,919	$	86,749	$	—	$	8,154	$	—	$	769,822
Purchases (4)	$	106,493	$	—	$	—	$	—	$	493,282	$	599,775

	Year Ended December 31, 2022
	Commercial								Consumer
			CRE						Residential Mortgage
($ in thousands)	C&I		CRE		Multifamily 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)	$	501,289	$	88,075	$	—	$	—	$	6,403	$	595,767
Purchases (4)	$	363,549	$	—	$	—	$	—	$	293,721	$	657,270

	Year Ended December 31, 2021
	Commercial								Consumer
			CRE						Residential Mortgage
($ in thousands)	C&I		CRE		Multifamily 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)	$	502,694	$	78,834	$	—	$	21,557	$	18,458	$	621,543
Purchases (4)	$	476,690	$	—	$	370	$	—	$	564,651	$	1,041,711

(1)Includes write-downs of $5 million, $3 million and $12 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, 2023, 2022 and 2021, respectively.

(2)Includes originated loans sold of $513 million, $388 million and $413 million for the years ended December 31, 2023, 2022 and 2021, respectively. Originated loans sold consisted primarily of C&I and CRE loans for all periods.

(3)Includes $256 million of purchased loans sold in the secondary market for the year ended December 31, 2023, compared with $208 million for each of the years ended December 31, 2022 and 2021.

(4)C&I loan purchases were comprised primarily of syndicated C&I term loans.