NOTE 9 — NON-COVERED LOANS AND ALLOWANCE FOR LOAN LOSSES

The following table presents the composition of loans receivable, excluding covered loans (“non-covered loans”) as of June 30, 2014 and December 31, 2013.

	June 30,			December 31,
	2014			2013
	(In thousands)
Residential:
Single-family	$	3,316,581		$	3,192,875
Multifamily	1,133,146			992,434
Total residential	4,449,727			4,185,309
Commercial Real Estate (“CRE”):
Income producing	5,358,710			4,301,030
Construction	233,105			140,186
Land	206,488			143,861
Total CRE	5,798,303			4,585,077
Commercial and Industrial (“C&I”):
Commercial business	5,956,607			4,637,056
Trade finance	716,696			723,137
Total C&I	6,673,303			5,360,193
Consumer:
Student loans	139,736			679,220
Other consumer	1,216,699			868,518
Total consumer	1,356,435			1,547,738
Total loans receivable, excluding covered loans (1)	18,277,768			15,678,317
Unearned fees, premiums, and discounts, net	(5,589		)	(23,672		)
Allowance for loan losses, excluding covered loans	(246,468		)	(241,930		)
Loans receivable, excluding covered loans, net	$	18,025,711		$	15,412,715

(1) Loans net of ASC 310-30 discount.

Accrued interest on covered and non-covered loans receivable amounted to $79.5 million and $94.5 million as of June 30, 2014 and December 31, 2013, respectively.

At June 30, 2014 and December 31, 2013, covered and non-covered loans receivable totaling $12.98 billion and $10.57 billion, respectively, were pledged to secure borrowings from the FHLB and the Federal Reserve Bank.

The Bank offers adjustable rate (“ARM”) first mortgage loans secured by one-to-four unit residential properties located in its primary lending areas. The Bank offers ARM single-family loan programs with one-year or three-year initial fixed periods. The Bank offered in 2013 and prior years, a low documentation program for single family residential loans. These loans require a large down payment and a low loan to value ratio, typically 60% or less. These loans have historically experienced low delinquency and default rates. A majority of the single family residential loan originations in 2013 were originated under this program. In 2014, this program was modified to require not only a large down payment, but additional income or asset information to determine the borrower’s ability to repay. The Bank originated $229.8 million and $413.4 million in new residential single-family loans during the three months ended June 30, 2014 and 2013, respectively. For the six months ended June 30, 2014 and 2013, the Bank originated $411.4 million and $676.5 million, respectively, in new residential single-family loans.

The Bank also offers ARM home equity lines of credit (“HELOC”) secured by one-to-four unit residential properties located in its primary lending areas. The program is a low documentation program that requires low loan to value ratios, typically 60% or less. These loans have historically experienced low delinquency and default rates. The Bank originated $244.5 million and $195.4 million in new HELOCs during the three months ended June 30, 2014 and 2013, respectively. For the six months ended June 30, 2014 and 2013, the Bank originated $493.4 million and $284.6 million, respectively, in new HELOCs.

In addition, the Bank offers ARM residential multifamily loan programs. The Bank originated $154.7 million and $104.2 million in new multifamily residential loans during the six months ended June 30, 2014 and 2013, respectively. The Bank primarily offers ARM multifamily loan programs that have six-month, three-year, or five-year initial fixed periods. In addition to residential lending, the Bank’s lending activities also include CRE, commercial and industrial, and consumer lending. The Bank’s CRE lending activities include loans to finance income-producing properties, construction and land loans. The Bank’s C&I lending activities include commercial business financing for small and middle-market businesses in a wide spectrum of industries. Included in commercial business loans are loans for working capital, accounts receivable lines, inventory lines, small business administration loans and lease financing. The Bank also offers a variety of international trade finance services and products, including letters of credit, revolving lines of credit, import loans, bankers’ acceptances, working capital lines, domestic purchase financing and pre-export financing. Consumer loans are primarily comprised of fully guaranteed student loans, home equity lines of credit, auto loans and insurance premium financing loans.

All of the loans that the Bank originates are subject to its underwriting guidelines and loan origination standards. Management believes that the Bank’s underwriting criteria and procedures adequately consider the unique risks which may come from these products. The Bank conducts a variety of quality control procedures and periodic audits to ensure compliance with its origination standards, including criteria for lending and legal requirements.

Credit Risk and Concentrations — The Company has a concentration of real estate loans in California. As of June 30, 2014, the Company had $5.80 billion in non-covered commercial real estate loans and $4.45 billion in non-covered residential loans, of which approximately 80% are secured by real properties located in California. Deterioration in the real estate market generally, including residential and commercial real estate, could result in additional loan charge-offs and provisions for loan losses in the future, which could have a material adverse effect on the Company’s financial condition, net income and capital. In addition, although most of the Company’s trade finance loans relate to trade with Asian countries and the majority of our loans are made to companies domiciled in the United States. A substantial portion of this business involves California based customers engaged in import and export activities. The Company also offers export-import financing to various domestic and foreign customers. Certain trade finance loans may be guaranteed by the Export-Import Bank of the United States or the Export-Import Bank of China.

Purchased Loans — During the six months ended June 30, 2014, the Company purchased approximately $86.3 million of student loans. These loans are guaranteed by the U.S. Department of Education.

Acquired Loans — In January 2014, the Company acquired $1.19 billion of loans through its acquisition of MetroCorp, as discussed in Note 3 of the Company’s consolidated financial statements. As of the acquisition date, approximately 6% of the acquired loans were credit impaired and accounted for in accordance with ASC 310-30. As of June 30, 2014, there were $58.9 million PCI loans acquired from MetroCorp.

Loans Held for Sale — Loans held for sale totaled $450.9 million and $205.0 million as of June 30, 2014 and December 31, 2013, respectively. Loans held for sale are recorded at the lower of cost or fair value. Fair value is derived from current market prices. As of June 30, 2014, the majority of the loans held for sale were student loans, which are guaranteed by the U.S. Department of Education. During the three months and six months ended June 30, 2014, net loans receivable of $27.0 million and $460.8 million were reclassified to loans held for sale. These loans were purchased by the Company with the intent to be held for investment; however, subsequent to their purchase, the Company’s intent for these loans changed and they were consequently reclassified to loans held for sale. Proceeds from sales of loans held for sale were $190.5 million and $326.3 million for the three months and six months ended June 30, 2014, respectively, resulting in net gains of $5.0 million and $8.5 million, respectively. Proceeds from sales of loans held for sale were $6.3 million for the six months ended June 30, 2013, resulting in net gains of $1 thousand. There were no sales of loans held for sale for the three months ended June 30, 2013.

Credit Quality Indicators

Loans are risk rated based on analysis of the current state of the borrower’s credit quality. The analysis of credit quality includes a review of all repayment sources, the borrower’s current payment performance/delinquency, current financial and liquidity status and all other relevant information. For single family residential loans, payment performance/delinquency is the driving indicator for the risk ratings. However, the risk ratings remain the overall credit quality indicator for the Company as well as the credit quality indicator utilized for estimating the appropriate allowance for loan losses. The Company utilizes an eight grade risk rating system, where a higher grade represents a higher level of credit risk. The eight grade risk rating system can be generally classified by the following categories: Pass, Watch, Special Mention, Substandard, Doubtful and Loss. The risk ratings reflect the relative strength of the repayment sources.

Pass and Watch loans are generally considered to have sufficient sources of repayment in order to repay the loan in full in accordance with all terms and conditions. These borrowers may have some credit risk that requires monitoring, but full repayment is expected. Special Mention loans are considered to have potential weaknesses that warrant closer attention by management. Special Mention is considered a transitory grade. If any potential weaknesses are resolved, the loan is upgraded to a Pass or Watch grade. If negative trends in the borrower’s financial status or other information is presented that indicates the repayment sources may become inadequate, the loan is downgraded to a Substandard grade. Substandard loans are considered to have well-defined weaknesses that jeopardize the full and timely repayment of the loan. Substandard loans have a distinct possibility of loss if the deficiencies are not corrected. Additionally, when management has assessed a potential for loss but a distinct possibility of loss is not recognizable, the loan is still classified as Substandard. Doubtful loans have insufficient sources of repayment and a high probability of loss. Loss loans are considered to be uncollectible and of such little value that they are no longer considered bankable assets. These internal risk ratings are reviewed routinely and adjusted due to changes in borrower status and likelihood of loan repayment.

The following tables present the credit risk rating categories for the non-covered loans by portfolio segment as of June 30, 2014 and December 31, 2013.

			Special
	Pass/Watch		Mention		Substandard		Doubtful		Total
	(In thousands)
June 30, 2014
Residential:
Single-family	$	3,297,111	$	7,708	$	11,762	$	—	$	3,316,581
Multifamily	1,075,296		—		57,850		—		1,133,146
CRE:
Income producing	5,056,988		74,904		225,774		1,044		5,358,710
Construction	220,057		6,160		6,888		—		233,105
Land	178,005		6,438		22,045		—		206,488
C&I:
Commercial business	5,627,827		101,399		226,993		388		5,956,607
Trade finance	650,525		53,821		12,350		—		716,696
Consumer:
Student loans	136,553		643		2,540		—		139,736
Other consumer	1,213,739		368		2,592		—		1,216,699
Total	$	17,456,101	$	251,441	$	568,794	$	1,432	$	18,277,768

			Special
	Pass/Watch		Mention		Substandard		Doubtful		Total
	(In thousands)
December 31, 2013
Residential:
Single-family	$	3,167,337	$	8,331	$	17,207	$	—	$	3,192,875
Multifamily	923,697		1,634		67,103		—		992,434
CRE:
Income producing	4,032,269		56,752		212,009		—		4,301,030
Construction	127,138		6,160		6,888		—		140,186
Land	116,000		9,304		18,557		—		143,861
C&I:
Commercial business	4,400,847		92,315		143,894		—		4,637,056
Trade finance	681,345		22,099		19,693		—		723,137
Consumer:
Student loans	677,094		445		1,681		—		679,220
Other consumer	865,752		244		2,522		—		868,518
Total	$	14,991,479	$	197,284	$	489,554	$	—	$	15,678,317

Nonaccrual and Past Due Loans

The following tables below present an aging analysis of the Company’s non-covered loans and loans held for sale, segregated by portfolio segment, as of June 30, 2014 and December 31, 2013.

	Accruing		Accruing		Total		Nonaccrual		Nonaccrual		Total
	Loans		Loans		Accruing		Loans Less		Loans		Nonaccrual		Current
	30-59 Days		60-89 Days		Past Due		Than 90 Days		90 or More		Past Due		Accruing
	Past Due		Past Due		Loans		Past Due		Days Past Due		Loans		Loans		Total
	(In thousands)
June 30, 2014
Residential:
Single-family	$	8,223	$	743	$	8,966	$	2,844	$	5,637	$	8,481	$	3,299,134	$	3,316,581
Multifamily	4,514		932		5,446		14,385		11,113		25,498		1,102,202		1,133,146
CRE:
Income producing	18,072		7,619		25,691		31,025		12,121		43,146		5,289,873		5,358,710
Construction	—		—		—		—		6,888		6,888		226,217		233,105
Land	2,125		96		2,221		1,467		5,970		7,437		196,830		206,488
C&I:
Commercial business	3,047		4,590		7,637		7,600		16,151		23,751		5,925,219		5,956,607
Trade finance	—		—		—		—		222		222		716,474		716,696
Consumer:
Student loans	599		643		1,242		—		2,540		2,540		135,954		139,736
Other consumer	1,798		11		1,809		2		957		959		1,213,931		1,216,699
Loans held for sale	—		—		—		—		—		—		450,864		450,864
Total (1)	$	38,378	$	14,634	$	53,012	$	57,323	$	61,599	$	118,922	$	18,556,698	18,728,632
Unearned fees, premiums and discounts, net															(5,589		)
Total recorded investment in non-covered loans and loans held for sale															$	18,723,043

(1) Loans net of ASC 310-30 discount.

	Accruing		Accruing		Total		Nonaccrual		Nonaccrual		Total
	Loans		Loans		Accruing		Loans Less		Loans		Nonaccrual		Current
	30-59 Days		60-89 Days		Past Due		Than 90 Days		90 or More		Past Due		Accruing
	Past Due		Past Due		Loans		Past Due		Days Past Due		Loans		Loans		Total
	(In thousands)
December 31, 2013
Residential:
Single-family	$	4,694	$	922	$	5,616	$	—	$	11,218	$	11,218	$	3,176,041	$	3,192,875
Multifamily	8,580		531		9,111		19,661		7,972		27,633		955,690		992,434
CRE:
Income producing	12,746		1,798		14,544		13,924		22,549		36,473		4,250,013		4,301,030
Construction	—		—		—		—		6,888		6,888		133,298		140,186
Land	—		—		—		265		3,223		3,488		140,373		143,861
C&I:
Commercial business	3,428		6,259		9,687		6,437		15,486		21,923		4,605,446		4,637,056
Trade finance	—		—		—		—		909		909		722,228		723,137
Consumer:
Student loans	541		445		986		—		1,681		1,681		676,553		679,220
Other consumer	293		1		294		175		1,263		1,438		866,786		868,518
Loans held for sale	—		—		—		—		—		—		204,970		204,970
Total	$	30,282	$	9,956	$	40,238	$	40,462	$	71,189	$	111,651	$	15,731,398	15,883,287
Unearned fees, premiums and discounts, net															(23,672		)
Total recorded investment in non-covered loans and loans held for sale															$	15,859,615

Loans 90 or more days past due are generally placed on nonaccrual status, at which point interest accrual is discontinued and all unpaid accrued interest is reversed against interest income. Additionally, loans that are not 90 or more days past due but have identified deficiencies, including delinquent troubled debt restructurings, are also placed on nonaccrual status.

Troubled debt restructurings

A troubled debt restructuring (“TDR”) is a modification of the terms of a loan when the lender, for economic or legal reasons related to the borrower’s financial difficulties, grants a concession to the borrower. The concessions may be granted in various forms, including a below-market change in the stated interest rate, reduction in the loan balance or accrued interest, extension of the maturity date with a stated interest rate lower than the current market rate or note splits referred to as A/B notes. In A/B note restructurings, the original note is bifurcated into two notes where the A note represents the portion of the original loan which allows for acceptable loan-to-value and debt coverage on the collateral and is expected to be collected in full and the B note represents the portion of the original loan where there is a shortfall in value and is fully charged-off. The A/B note balance is comprised of the A note balances only. A notes are not disclosed as TDRs in subsequent years after the year of restructuring if the restructuring agreement specifies an interest rate equal to or greater than the rate that the Bank was willing to accept at the time of the restructuring for a new loan with comparable risk, the loan is not impaired based on the terms specified by the restructuring agreement and has demonstrated a period of sustained performance under the modified terms.

TDRs may be designated as performing or nonperforming. A TDR may be designated as performing if the loan has demonstrated sustained performance under the modified terms. The period of sustained performance may include the periods prior to modification if prior performance met or exceeded the modified terms. A loan will remain on nonaccrual status until the borrower demonstrates a sustained period of performance, generally six consecutive months of payments. The Company had $66.2 million and $71.8 million in total performing restructured loans as of June 30, 2014 and December 31, 2013, respectively. Nonperforming restructured loans were $25.7 million and $11.1 million as of June 30, 2014 and December 31, 2013, respectively. Included as TDRs were $3.4 million and $4.3 million of performing A/B notes as of June 30, 2014 and December 31, 2013, respectively.

The following tables summarize new TDR modifications on non-covered loans portfolio and include the financial effects of these modifications for the periods presented.

	Loans Modified as TDRs During the Three Months Ended June 30,
	2014							2013
		Pre-Modification		Post-Modification					Pre-Modification		Post-Modification
	Number	Outstanding		Outstanding				Number	Outstanding		Outstanding
	of	Recorded		Recorded		Financial		of	Recorded		Recorded		Financial
	Contracts	Investment		Investment (1)		Impact (2)		Contracts	Investment		Investment (1)		Impact (2)
	($ in thousands)
Residential:
Single-family	1	$	1,032	$	1,030	$	—	—	$	—	$	—	$	—
Multifamily	1	$	2,513	$	2,973	$	—	1	$	1,093	$	1,093	$	—
CRE:
Income producing	2	$	5,318	$	5,254	$	—	4	$	23,167	$	22,934	$	102
Construction	—	$	—	$	—	$	—	—	$	—	$	—	$	—
Land	—	$	—	$	—	$	—	—	$	—	$	—	$	—
C&I:
Commercial business	2	$	1,165	$	1,155	$	563	3	$	1,204	$	1,201	$	86
Trade finance	—	$	—	$	—	$	—	—	$	—	$	—	$	—
Consumer:
Student loans	—	$	—	$	—	$	—	—	$	—	$	—	$	—
Other consumer	—	$	—	$	—	$	—	—	$	—	$	—	$	—

	Loans Modified as TDRs During the Six Months Ended June 30,
	2014							2013
		Pre-Modification		Post-Modification					Pre-Modification		Post-Modification
	Number	Outstanding		Outstanding				Number	Outstanding		Outstanding
	of	Recorded		Recorded		Financial		of	Recorded		Recorded		Financial
	Contracts	Investment		Investment (1)		Impact (2)		Contracts	Investment		Investment (1)		Impact (2)
	($ in thousands)
Residential:
Single-family	4	$	6,855	$	5,105	$	—	—	$	—	$	—	$	—
Multifamily	1	$	2,513	$	2,973	$	—	1	$	1,093	$	1,093	$	—
CRE:
Income producing	2	$	5,318	$	5,254	$	—	4	$	23,167	$	22,934	$	102
Construction	—	$	—	$	—	$	—	—	$	—	$	—	$	—
Land	—	$	—	$	—	$	—	—	$	—	$	—	$	—
C&I:
Commercial business	7	$	2,886	$	2,828	$	1,811	4	$	1,246	$	1,241	$	86
Trade finance	—	$	—	$	—	$	—	—	$	—	$	—	$	—
Consumer:
Student loans	—	$	—	$	—	$	—	—	$	—	$	—	$	—
Other consumer	—	$	—	$	—	$	—	1	$	651	$	649	$	—

(1) Includes subsequent payments after modification and reflects the balance as of June 30, 2014 and June 30, 2013.

(2) The financial impact includes charge-offs and specific reserves recorded at modification date.

Potential TDRs are individually evaluated and the type of restructuring is selected based on the loan type and the circumstances of the borrower’s financial difficulty in order to maximize the Bank’s recovery. Residential TDRs were restructured through extensions, interest rate reductions, principal deferments, and other modified terms, for a total of $8.1 million as of June 30, 2014. Commercial real estate TDRs were restructured through principal and interest reductions and principal, for a total of $5.3 million as of June 30, 2014. Commercial and industrial TDRs were restructured through extensions, principal deferment, and other modified terms, for a total of $2.8 million as of June 30, 2014. These modifications had an impact of a reduction or deferment of principal and/or interest collected over the life of the loan, and/or an extended time period of collection of principal and/or interest.

Modifications of residential TDRs primarily included A/B note splits, which result in a partial charge-off or loss for the Bank at the modification date. Residential TDRs modified using A/B note splits totaled $1.1 million as of June 30, 2013. Commercial real estate TDRs were primarily modified through, A/B note splits, forbearance of payments and principal and/or interest deferment, for a total of $22.9 million as of June 30, 2013. Modifications of commercial and industrial TDRs were restructured through principal and interest reduction, for a total of $1.2 million as of June 30, 2013. Consumer TDRs were restructured through maturity extensions, for a total of $649 thousand as of June 30, 2013.

Performing TDRs at June 30, 2014 were comprised of $17.4 million in residential loans, $31.6 million in commercial real estate loans, $16.4 million in commercial and industrial loans, and $758 thousand in consumer loans. Performing TDRs at December 31, 2013 were comprised of $37.6 million in commercial real estate loans, $17.4 million in residential loans, $16.7 million in commercial and industrial loans and $108 thousand in consumer loans. Nonperforming TDRs at June 30, 2014 were comprised of $9.0 million in residential loans, $11.3 million in commercial real estate loans, $5.4 million in commercial and industrial loans and no consumer loans. Nonperforming TDRs at December 31, 2013 were comprised of $3.6 million in residential loans, $3.4 million in commercial real estate loans, $3.5 million in commercial and industrial loans, and $639 thousand in consumer loans.

	Loans Modified as TDRs that Subsequently Defaulted
	During the Three Months Ended June 30,
	2014			2013
	Number of	Recorded		Number of	Recorded
	Contracts	Investment		Contracts	Investment
	($ in thousands)
Residential:
Single-family	—	$	—	1	$	105
Multifamily	—	$	—	—	$	—
CRE:
Income producing	—	$	—	—	$	—
Construction	—	$	—	—	$	—
Land	—	$	—	—	$	—
C&I:
Commercial business	1	$	500	—	$	—
Trade finance	—	$	—	—	$	—
Consumer:
Student loans	—	$	—	—	$	—
Other consumer	—	$	—	—	$	—

	Loans Modified as TDRs that Subsequently Defaulted
	During the Six Months Ended June 30,
	2014			2013
	Number of	Recorded		Number of	Recorded
	Contracts	Investment		Contracts	Investment
	($ in thousands)
Residential:
Single-family	—	$	—	3	$	2,935
Multifamily	—	$	—	—	$	—
CRE:
Income producing	1	$	2,730	—	$	—
Construction	—	$	—	—	$	—
Land	—	$	—	—	$	—
C&I:
Commercial business	1	$	500	2	$	500
Trade finance	—	$	—	—	$	—
Consumer:
Student loans	—	$	—	—	$	—
Other consumer	—	$	—	—	$	—

TDRs are included in the impaired loan quarterly valuation allowance process. See the sections below Impaired Loans and Allowance for Loan Losses for the complete discussion. All portfolio segments of TDRs are reviewed for necessary specific reserves in the same manner as impaired loans of the same portfolio segment which have not been identified as TDRs. The modification of the terms of each TDR is considered in the current impairment analysis of the respective TDR. For all portfolio segments of delinquent TDRs, when the restructured loan is uncollectible and its fair value is less than the recorded investment in the loan, the deficiency is charged-off against the allowance for loan losses. If the loan is a performing TDR, the deficiency is included in the specific allowance, as appropriate. As of June 30, 2014, the allowance for loan losses associated with TDRs was $14.9 million for performing TDRs and $3.0 million for nonperforming TDRs. As of December 31, 2013, the allowance for loan losses associated with TDRs was $13.0 million for performing TDRs and $836 thousand for nonperforming TDRs.

Impaired Loans

A loan is considered impaired when, based on current information and events, it is probable that the Company will be unable to collect all scheduled payments of principal or interest due according to the original contractual terms of the loan agreement. The Bank’s loans are grouped into heterogeneous and homogeneous (mostly consumer loans) categories. Classified loans (graded Substandard or Doubtful) in the heterogeneous category are selected and evaluated for impairment on an individual basis. The Bank considers loans individually reviewed to be impaired if, based on current information and events, it is probable the Bank will not be able to collect all amounts due according to the original contractual terms of the loan agreement. Impaired loans are measured based on the present value of expected future cash flows discounted at the loan’s effective interest rate or, as an expedient, at the loan’s observable market price or the fair value of the collateral if the loan is collateral dependent, less costs to sell. When the value of an impaired loan is less than the recorded investment in the loan and the loan is classified as nonperforming and uncollectible, the deficiency is charged-off against the allowance for loan losses. Impaired loans exclude the homogenous consumer loan portfolio which is evaluated collectively for impairment. Impaired loans include non-covered loans held for investment on nonaccrual status, regardless of the collateral coverage, and loans modified in a TDR.

At June 30, 2014 and December 31, 2013, impaired non-covered loans totaled $169.0 million and $183.5 million, respectively. Impaired non-covered loans as of June 30, 2014 and December 31, 2013 are set forth in the following tables.

			Recorded		Recorded
	Unpaid		Investment		Investment		Total
	Principal		With No		With		Recorded		Related
	Balance		Allowance		Allowance		Investment (1)		Allowance
	(In thousands)
As of June 30, 2014
Residential:
Single-family	$	16,220	$	13,427	$	1,067	$	14,494	$	192
Multifamily	39,108		27,617		9,139		36,756		1,185
CRE:
Income producing	65,663		39,638		18,135		57,773		2,555
Construction	6,888		6,888		—		6,888		—
Land	17,059		4,217		7,865		12,082		1,991
C&I:
Commercial business	54,236		10,497		29,182		39,679		18,645
Trade finance	529		256		273		529		273
Consumer:
Other consumer	763		763		—		763		—
Total	$	200,466	$	103,303	$	65,661	$	168,964	$	24,841

			Recorded		Recorded
	Unpaid		Investment		Investment		Total
	Principal		With No		With		Recorded		Related
	Balance		Allowance		Allowance		Investment (1)		Allowance
	(In thousands)
As of December 31, 2013
Residential:
Single-family	$	15,814	$	13,585	$	1,588	$	15,173	$	207
Multifamily	43,821		30,899		10,215		41,114		1,339
CRE:
Income producing	73,777		39,745		25,523		65,268		5,976
Construction	6,888		6,888		—		6,888		—
Land	17,390		4,372		7,908		12,280		2,082
C&I:
Commercial business	48,482		10,850		27,487		38,337		13,787
Trade finance	2,771		438		752		1,190		752
Consumer:
Student loans	1,749		1,681		—		1,681		—
Other consumer	1,945		1,546		—		1,546		—
Total	$	212,637	$	110,004	$	73,473	$	183,477	$	24,143

(1) Excludes $14.3 million and $17.7 million of covered non-accrual loans at June 30, 2014 and December 31, 2013, respectively, accounted for under ASC 310-10, of which some loans have additional partial balances accounted for under ASC 310-30.

The following tables provide the average recorded investment in impaired loans and the amount of interest income recognized on impaired loans by portfolio segment:

	Three Months Ended								Six Months Ended
	June 30,								June 30,
	2014				2013				2014				2013
	Average recorded investment		Recognized interest income (1)		Average recorded investment		Recognized interest income (1)		Average recorded investment		Recognized interest income (1)		Average recorded investment		Recognized interest income (1)
	(In thousands)								(In thousands)
Residential:
Single-family	$	15,131	$	65	$	11,219	$	38	$	14,034	$	115	$	11,497	$	77
Multifamily	36,683		184		45,230		247		36,817		360		45,407		456
CRE:
Income producing	59,121		303		57,105		1,529		59,917		627		58,098		1,738
Construction	6,888		—		6,888		—		6,888		—		6,888		—
Land	12,128		75		13,231		124		12,179		149		13,285		247
C&I:
Commercial business	41,592		211		23,448		59		42,682		414		24,200		104
Trade finance	546		4		2,052		4		559		8		2,367		7
Consumer:
Other consumer	755		13		1,555		7		752		14		1,597		14
Total impaired loans (excluding PCI)	$	172,844	$	855	$	160,728	$	2,008	$	173,828	$	1,687	$	163,339	$	2,643

(1) Includes interest recognized on accruing TDRs. Interest payments received on nonaccrual loans are generally reflected as a reduction of principal and not as interest income.

Allowance for Loan Losses

The allowance consists of specific reserves and a general reserve. The Bank’s loans fall into heterogeneous and homogeneous (mostly consumer loans) categories. Impaired loans are subject to specific reserves. Loans in the homogeneous category, as well as non-impaired loans in the heterogeneous category, are evaluated as part of the general reserve. The general reserve is calculated by utilizing both quantitative and qualitative factors. There are different qualitative risks for the loans in each portfolio segment. As of June 30, 2014, the Residential and CRE segments’ predominant risk characteristic is the collateral and the geographic location of the property collateralizing the loan. The risk is qualitatively assessed based on the change in the real estate market in those geographic areas. The C&I segment’s predominant risk characteristics are the global cash flows of the borrowers and guarantors, and economic and market conditions. Consumer loans, excluding the student loan portfolio guaranteed by the U.S. Department of Education, are largely comprised of home equity lines of credit, for which the predominant risk characteristic is the real estate collateral securing the loans.

Our methodology to determine the overall appropriateness of the allowance is based on a classification migration model and qualitative considerations. The migration analysis examines pools of loans having similar characteristics and analyzes their loss rates over a historical period. We utilize historical loss factors derived from trends and losses associated with each pool over a specified period of time. Based on this process, we assign loss factors to each loan grade within each pool of loans. Loss rates derived by the migration model are based predominantly on historical loss trends that may not be entirely indicative of the actual or inherent loss potential. As such, we utilize qualitative and environmental factors as adjusting mechanisms to supplement the historical results of the classification migration model. Qualitative considerations include, but are not limited to, prevailing economic or market conditions, relative risk profiles of various loan segments, volume concentrations, growth trends, delinquency and nonaccrual status, problem loan trends, and geographic concentrations. Qualitative and environmental factors are reflected as percentage adjustments and are added to the historical loss rates derived from the classified asset migration model to determine the appropriate allowance for each loan pool.

When determined uncollectible, it is the Company’s policy to promptly charge-off the difference in the outstanding loan balance and the fair value of the collateral. Recoveries are recorded when payment is received on loans that were previously charged-off through the allowance for loan losses. Allocation of a portion of the allowance to one segment of the loan portfolio does not preclude its availability to absorb losses in other segments.

The following tables present a summary of the activity in the allowance for loan losses on the non-covered loans for the periods indicated.

	Residential			CRE			C&I			Consumer			Unallocated			Total
	(In thousands)
Three Months Ended June 30, 2014
Beginning balance	$	47,827		$	62,739		$	124,201		$	10,851		$	—		$	245,618
Provision for loan losses	(2,046		)	(1,376		)	10,784			753			829			8,944
Provision allocation for unfunded loan commitments and letters of credit	—			—			—			—			(829		)	(829		)
Charge-offs	(61		)	(1,314		)(1)	(6,899		)	(2		)	—			(8,276		)
Recoveries	63			551			393			4			—			1,011
Net recoveries/(charge-offs)	2			(763		)	(6,506		)	2			—			(7,265		)
Ending balance	$	45,783		$	60,600		$	128,479		$	11,606		$	—		$	246,468
Ending balance allocated to:
Individually evaluated for impairment	$	1,377		$	4,546		$	18,918		$	—		$	—		$	24,841
Collectively evaluated for impairment	44,406			55,684			109,561			11,606						221,257
Acquired with deteriorated credit quality	—			370			—			—			—			370
Ending balance	$	45,783		$	60,600		$	128,479		$	11,606		$	—		$	246,468

	Residential			CRE			C&I			Consumer			Unallocated			Total
	(In thousands)
Three Months Ended June 30, 2013
Beginning balance	$	46,880		$	72,958		$	102,346		$	6,612		$	—		$	228,796
Provision for loan losses	704			(426		)	6,241			2,190			(432		)	8,277
Provision allocation for unfunded loan commitments and letters of credit	—			—			—			—			432			432
Charge-offs	(550		)	(762		)	(3,816		)	(865		)	—			(5,993		)
Recoveries	303			1,060			605			—			—			1,968
Net (charge-offs)/recoveries	(247		)	298			(3,211		)	(865		)	—			(4,025		)
Ending balance	$	47,337		$	72,830		$	105,376		$	7,937		$	—		$	233,480
Ending balance allocated to:
Individually evaluated for impairment	$	1,508		$	7,931		$	3,708		$	—		$	—		$	13,147
Collectively evaluated for impairment	45,829			64,899			101,668			7,937			—			220,333
Ending balance	$	47,337		$	72,830		$	105,376		$	7,937		$	—		$	233,480

	Residential			CRE			C&I			Consumer			Unallocated			Total
	(In thousands)
Six Months Ended June 30, 2014
Beginning balance	$	50,717		$	64,677		$	115,184		$	11,352		$	—		$	241,930
Provision for loan losses	(4,790		)	(3,823		)	24,215			252			1,044			16,898
Allowance for unfunded loan commitments and letters of credit	—			—			—			—			(1,044		)	(1,044		)
Charge-offs	(343		)	(1,634		)(1)	(12,224		)	(5		)	—			(14,206		)
Recoveries	199			1,380			1,304			7			—			2,890
Net (charge-offs)/recoveries	(144		)	(254		)	(10,920		)	2			—			(11,316		)
Ending balance	$	45,783		$	60,600		$	128,479		$	11,606		$	—		$	246,468
Ending balance allocated to:
Individually evaluated for impairment	$	1,377		$	4,546		$	18,918		$	—		$	—		$	24,841
Collectively evaluated for impairment	44,406			55,684			109,561			11,606			—			221,257
Acquired with deteriorated credit quality	—			370			—			—			—			370
Ending balance	$	45,783		$	60,600		$	128,479		$	11,606		$	—		$	246,468

	Residential			CRE			C&I			Consumer			Unallocated			Total
	(In thousands)
Six Months Ended June 30, 2013
Beginning balance	$	49,349		$	69,856		$	105,376		$	4,801		$	—		$	229,382
Provision for loan losses	(2,222		)	3,392			3,941			3,552			(1,148		)	7,515
Allowance for unfunded loan commitments and letters of credit	—			—			—			—			1,148			1,148
Charge-offs	(861		)	(1,767		)	(5,077		)	(1,211		)	—			(8,916		)
Recoveries	1,071			1,349			1,136			795			—			4,351
Net recoveries/(charge-offs)	210			(418		)	(3,941		)	(416		)	—			(4,565		)
Ending balance	$	47,337		$	72,830		$	105,376		$	7,937		$	—		$	233,480
Ending balance allocated to:
Individually evaluated for impairment	$	1,508		$	7,931		$	3,708		$	—		$	—		$	13,147
Collectively evaluated for impairment	45,829			64,899			101,668			7,937			—			220,333
Ending balance	$	47,337		$	72,830		$	105,376		$	7,937		$	—		$	233,480

(1) Includes charge-off of $523 thousand relating to PCI loans acquired from MetroCorp.

The Company’s recorded investments in total non-covered loans receivable as of June 30, 2014 and December 31, 2013 related to each balance in the allowance for loan losses by portfolio segment and disaggregated on the basis of the Company’s impairment methodology is as follows:

	Residential		CRE		C&I		Consumer		Total
	(In thousands)
June 30, 2014
Individually evaluated for impairment	$	51,250	$	76,743	$	40,208	$	763	$	168,964
Collectively evaluated for impairment	4,397,218		5,665,843		6,631,178		1,355,672		18,049,911
Acquired with deteriorated credit quality	1,259		55,717		1,917		—		58,893
Ending balance	$	4,449,727	$	5,798,303	$	6,673,303	$	1,356,435	$	18,277,768

	Residential		CRE		C&I		Consumer		Total
	(In thousands)
December 31, 2013
Individually evaluated for impairment	$	56,287	$	84,436	$	39,527	$	3,227	$	183,477
Collectively evaluated for impairment	4,129,022		4,500,641		5,320,666		1,544,511		15,494,840
Ending balance	$	4,185,309	$	4,585,077	$	5,360,193	$	1,547,738	$	15,678,317

Allowance for Unfunded Loan Commitments, Off-Balance Sheet Credit Exposures and Recourse Provisions

The allowance for unfunded loan commitments, off-balance sheet credit exposures, and recourse provisions is maintained at a level believed by management to be sufficient to absorb estimated probable losses related to these unfunded credit facilities. The determination of the adequacy of the allowance is based on periodic evaluations of the unfunded credit facilities including an assessment of the probability of commitment usage, credit risk factors for loans outstanding to these same customers, and the terms and expiration dates of the unfunded credit facilities. As of June 30, 2014 and December 31, 2013, the allowance for unfunded loan commitments, off-balance sheet credit exposures, and recourse provisions amounted to $12.3 million and $11.3 million, respectively. Net adjustments to the allowance for unfunded loan commitments, off-balance sheet credit exposures, and recourse provisions are included in the provision for loan losses.

Loans serviced for others amounted to $1.21 billion and $1.35 billion at June 30, 2014 and December 31, 2013, respectively. These represent loans that have either been sold or securitized for which the Bank continues to provide servicing or has limited recourse. The majority of these loans are residential and CRE at June 30, 2014 and December 31, 2013. Of the total allowance for unfunded loan commitments, off-balance sheet credit exposures, and recourse provisions, $2.6 million and $3.2 million pertain to these loans as of June 30, 2014 and December 31, 2013, respectively.

Accretable Yield

The following tables summarize the changes in the accretable yield for the PCI loans acquired from MetroCorp for the three and six months ended June 30, 2014.

	Three Months Ended			Six Months Ended
	June 30, 2014
	(In thousands)
Balance at beginning of period	$	6,452		$	—
Additions	—			6,745
Accretion	(1,509		)	(2,265		)
Changes in expected cash flows	824			1,287
Balance at end of period	$	5,767		$	5,767