Loans Receivable and Allowance for Credit Losses

12 Months Ended

Dec. 31, 2017

Loans and Leases Receivable Disclosure [Abstract]

Loans Receivable and Allowance for Credit Losses

The Company’s held-for-investment loan portfolio includes originated and purchased loans. Originated and purchased loans with no evidence of credit deterioration at their acquisition date are referred to collectively as non-PCI loans. PCI loans are loans acquired with evidence of credit deterioration since their origination and it is probable at the acquisition date that the Company would be unable to collect all contractually required payments. PCI loans are accounted for under ASC Subtopic 310-30, Loans and Debt Securities Acquired with Deteriorated Credit Quality. The Company has elected to account for PCI loans on a pool level basis under ASC 310-30 at the time of acquisition.

The following table presents the composition of the Company’s non-PCI and PCI loans as of December 31, 2017 and 2016:




($ in thousands)	December 31, 2017									December 31, 2016
($ in thousands)	Non-PCI Loans ⁽¹⁾			PCI Loans ⁽²⁾			Total ⁽¹⁾⁽²⁾			Non-PCI Loans ⁽¹⁾			PCI Loans ⁽²⁾			Total ⁽¹⁾⁽²⁾
Commercial lending:
C&I	$	10,685,436		$	11,795		$	10,697,231		$	9,602,176		$	38,387		$	9,640,563
CRE	8,659,209			277,688			8,936,897			7,667,661			348,448			8,016,109
Multifamily residential	1,855,128			61,048			1,916,176			1,490,285			95,654			1,585,939
Construction and land	659,326			371			659,697			672,836			1,918			674,754
Total commercial lending	21,859,099			350,902			22,210,001			19,432,958			484,407			19,917,365
Consumer lending:
Single-family residential	4,528,911			117,378			4,646,289			3,370,669			139,110			3,509,779
HELOCs	1,768,917			14,007			1,782,924			1,741,852			18,924			1,760,776
Other consumer	336,504			—			336,504			315,215			4			315,219
Total consumer lending	6,634,332			131,385			6,765,717			5,427,736			158,038			5,585,774
Total loans held-for-investment	$	28,493,431		$	482,287		$	28,975,718		$	24,860,694		$	642,445		$	25,503,139
Allowance for loan losses	(287,070		)	(58		)	(287,128		)	(260,402		)	(118		)	(260,520		)
Loans held-for-investment, net	$	28,206,361		$	482,229		$	28,688,590		$	24,600,292		$	642,327		$	25,242,619


(1)	Includes net deferred loan fees, unearned fees, unamortized premiums and unaccreted discounts of $(34.0) million and $1.2 million as of December 31, 2017 and 2016, respectively.


(2)	Includes ASC 310-30 discount of $35.3 million and $49.4 million as of December 31, 2017 and 2016, respectively.

Commercial lending portfolio includes C&I, CRE, multifamily residential, and construction and land loans. Consumer lending portfolio includes single-family residential, HELOC and other consumer loans.

C&I loan sector, which is comprised of commercial business and trade finance loans, provides financing to businesses in a wide spectrum of industries. CRE loan sector represents income producing real estate loans where the interest rates may be fixed, variable or hybrid. Included in the CRE loan sector are owner occupied and non-owner occupied loans (where 50% or more of the debt service for the loan is provided by rental income). Construction loans in the construction and land sector mainly provide financing for the construction of hotels, multifamily and residential condominiums, as well as mixed use (residential and retail) structures.

Residential loans are comprised of multifamily residential loans in the commercial lending portfolio and single-family residential loans in the consumer lending portfolio. The Company offers a variety of first lien mortgage loan programs, including fixed rate conforming loans as well as adjustable rate mortgage loans with interest rates that adjust annually after the initial fixed periods of one to seven years. The first lien mortgage loans are secured by one-to-four unit residential properties located in its primary lending areas.

The HELOC loan portfolio is secured by one-to-four unit residential properties located in its primary lending areas. It is largely comprised of loans originated through a reduced documentation loan program, where a substantial down payment is required, resulting in a low loan-to-value ratio, typically 60% or less at origination. The Company is in a first lien position for many of these reduced documentation HELOCs. These loans have historically experienced low delinquency and default rates. Other consumer loans are mainly comprised of insurance premium financing and credit card loans.

All loans originated are subject to the Company’s underwriting guidelines and loan origination standards. Management believes that the Company’s underwriting criteria and procedures adequately consider the unique risks associated with these products. The Company conducts a variety of quality control procedures and periodic audits, including the review of lending and legal requirements, to ensure that it is in compliance with these requirements.

As of December 31, 2017 and 2016, loans of $18.88 billion and $16.44 billion, respectively, were pledged to secure borrowings and to provide additional borrowing capacity from the Federal Reserve Bank and the FHLB.

Credit Quality Indicators

All loans are subject to the Company’s internal and external credit review and monitoring. Loans are risk rated based on an 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. Risk ratings are the overall credit quality indicator for the Company and the credit quality indicator utilized for estimating the appropriate allowance for loan losses. The Company utilizes a risk rating system, which classifies loans within 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 loans that have sufficient sources of repayment in order to repay the loan in full in accordance with all terms and conditions. Special Mention loans are loans that have potential weaknesses that warrant closer attention by management. Special Mention is a transitory grade. If 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 indicate that the repayment sources may become inadequate, the loan is downgraded to a Substandard grade. Substandard loans are loans that 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 loans that are uncollectible and of such little value that they are no longer considered bankable assets. These internal risk ratings are reviewed routinely and adjusted based on changes in the borrowers’ financial status and the loans’ collectability.

The following tables present the credit risk ratings for non-PCI loans by portfolio segment as of December 31, 2017 and 2016:




($ in thousands)	December 31, 2017
($ in thousands)	Pass/Watch		Special Mention		Substandard		Doubtful		Loss		Total Non- PCI Loans
Commercial lending:
C&I	$	10,369,516	$	114,769	$	180,269	$	20,882	$	—	$	10,685,436
CRE	8,484,635		65,616		108,958		—		—		8,659,209
Multifamily residential	1,839,958		—		15,170		—		—		1,855,128
Construction and land	614,441		4,590		40,295		—		—		659,326
Total commercial lending	21,308,550		184,975		344,692		20,882		—		21,859,099
Consumer lending:
Single-family residential	4,490,672		16,504		21,735		—		—		4,528,911
HELOCs	1,744,903		11,900		12,114		—		—		1,768,917
Other consumer	333,895		111		2,498		—		—		336,504
Total consumer lending	6,569,470		28,515		36,347		—		—		6,634,332
Total	$	27,878,020	$	213,490	$	381,039	$	20,882	$	—	$	28,493,431




($ in thousands)	December 31, 2016
($ in thousands)	Pass/Watch		Special Mention		Substandard		Doubtful		Loss		Total Non- PCI Loans
Commercial lending:
C&I	$	9,194,701	$	164,711	$	237,599	$	5,157	$	8	$	9,602,176
CRE	7,476,804		29,005		161,852		—		—		7,667,661
Multifamily residential	1,462,522		2,268		25,495		—		—		1,490,285
Construction and land	659,536		—		13,290		10		—		672,836
Total commercial lending	18,793,563		195,984		438,236		5,167		8		19,432,958
Consumer lending:
Single-family residential	3,341,015		10,179		19,475		—		—		3,370,669
HELOCs	1,728,254		6,717		6,881		—		—		1,741,852
Other consumer	315,151		47		17		—		—		315,215
Total consumer lending	5,384,420		16,943		26,373		—		—		5,427,736
Total	$	24,177,983	$	212,927	$	464,609	$	5,167	$	8	$	24,860,694

The following tables present the credit risk ratings for PCI loans by portfolio segment as of December 31, 2017 and 2016:




($ in thousands)	December 31, 2017
($ in thousands)	Pass/Watch		Special Mention		Substandard		Doubtful		Loss		Total PCI Loans
Commercial lending:
C&I	$	10,712	$	57	$	1,026	$	—	$	—	$	11,795
CRE	238,605		531		38,552		—		—		277,688
Multifamily residential	56,720		—		4,328		—		—		61,048
Construction and land	44		—		327		—		—		371
Total commercial lending	306,081		588		44,233		—		—		350,902
Consumer lending:
Single-family residential	113,905		1,543		1,930		—		—		117,378
HELOCs	12,642		—		1,365		—		—		14,007
Other consumer	—		—		—		—		—		—
Total consumer lending	126,547		1,543		3,295		—		—		131,385
Total ⁽¹⁾	$	432,628	$	2,131	$	47,528	$	—	$	—	$	482,287




($ in thousands)	December 31, 2016
($ in thousands)	Pass/Watch		Special Mention		Substandard		Doubtful		Loss		Total PCI Loans
Commercial lending:
C&I	$	33,885	$	772	$	3,730	$	—	$	—	$	38,387
CRE	293,529		3,239		51,680		—		—		348,448
Multifamily residential	86,190		—		9,464		—		—		95,654
Construction and land	1,562		—		356		—		—		1,918
Total commercial lending	415,166		4,011		65,230		—		—		484,407
Consumer lending:
Single-family residential	136,245		1,239		1,626		—		—		139,110
HELOCs	17,429		316		1,179		—		—		18,924
Other consumer	4		—		—		—		—		4
Total consumer lending	153,678		1,555		2,805		—		—		158,038
Total ⁽¹⁾	$	568,844	$	5,566	$	68,035	$	—	$	—	$	642,445


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

Nonaccrual and Past Due Loans

Non-PCI loans that are 90 or more days past due are generally placed on nonaccrual status. Additionally, non-PCI 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 on non-PCI loans as of December 31, 2017 and 2016:




($ in thousands)	December 31, 2017
($ in thousands)	Accruing Loans 30-59 Days Past Due		Accruing Loans 60-89 Days Past Due		Total Accruing Past Due Loans		Nonaccrual Loans Less Than 90 Days Past Due		Nonaccrual Loans 90 or More Days Past Due		Total Nonaccrual Loans		Current Accruing Loans		Total Non- PCI Loans
Commercial lending:
C&I	$	30,964	$	82	$	31,046	$	27,408	$	41,805	$	69,213	$	10,585,177	$	10,685,436
CRE	3,414		466		3,880		5,430		21,556		26,986		8,628,343		8,659,209
Multifamily residential	4,846		14		4,860		1,418		299		1,717		1,848,551		1,855,128
Construction and land	758		—		758		—		3,973		3,973		654,595		659,326
Total commercial lending	39,982		562		40,544		34,256		67,633		101,889		21,716,666		21,859,099
Consumer lending:
Single-family residential	13,269		5,355		18,624		6		5,917		5,923		4,504,364		4,528,911
HELOCs	4,286		4,186		8,472		89		3,917		4,006		1,756,439		1,768,917
Other consumer	14		23		37		—		2,491		2,491		333,976		336,504
Total consumer lending	17,569		9,564		27,133		95		12,325		12,420		6,594,779		6,634,332
Total	$	57,551	$	10,126	$	67,677	$	34,351	$	79,958	$	114,309	$	28,311,445	$	28,493,431




($ in thousands)	December 31, 2016
($ in thousands)	Accruing Loans 30-59 Days Past Due		Accruing Loans 60-89 Days Past Due		Total Accruing Past Due Loans		Nonaccrual Loans Less Than 90 Days Past Due		Nonaccrual Loans 90 or More Days Past Due		Total Nonaccrual Loans		Current Accruing Loans		Total Non- PCI Loans
Commercial lending:
C&I	$	45,052	$	2,279	$	47,331	$	60,519	$	20,737	$	81,256	$	9,473,589	$	9,602,176
CRE	6,233		14,080		20,313		14,872		12,035		26,907		7,620,441		7,667,661
Multifamily residential	3,951		374		4,325		2,790		194		2,984		1,482,976		1,490,285
Construction and land	4,994		—		4,994		433		4,893		5,326		662,516		672,836
Total commercial lending	60,230		16,733		76,963		78,614		37,859		116,473		19,239,522		19,432,958
Consumer lending:
Single-family residential	9,595		8,076		17,671		—		4,214		4,214		3,348,784		3,370,669
HELOCs	2,845		2,606		5,451		165		1,965		2,130		1,734,271		1,741,852
Other consumer	482		622		1,104		—		—		—		314,111		315,215
Total consumer lending	12,922		11,304		24,226		165		6,179		6,344		5,397,166		5,427,736
Total	$	73,152	$	28,037	$	101,189	$	78,779	$	44,038	$	122,817	$	24,636,688	$	24,860,694

For information on the policy for recording payments received and resuming accrual of interest on non-PCI loans that are placed on nonaccrual status, see Note 1 — Summary of Significant Accounting Policies to the Consolidated Financial Statements.

PCI loans are excluded from the above aging analysis tables as the Company has elected to account for these loans on a pool level basis under ASC 310-30 at the time of acquisition. Refer to the discussion on PCI loans within this note for additional details on interest income recognition. As of December 31, 2017 and 2016, PCI loans on nonaccrual status totaled $5.3 million and $11.7 million, respectively.

Loans in Process of Foreclosure

As of December 31, 2017 and 2016, residential and consumer mortgage loans of $6.6 million and $3.1 million, respectively, were secured by residential real estate properties, for which formal foreclosure proceedings were in process according to local requirements of the applicable jurisdictions, which were not included in OREO. A foreclosed residential real estate property with a carrying amount of $188 thousand was included in total net OREO of $830 thousand as of December 31, 2017. In comparison, foreclosed residential real estate properties with a carrying amount of $401 thousand were included in total net OREO of $6.7 million as of December 31, 2016.

Troubled Debt Restructurings

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. A TDR is a modification of the terms of a loan when the Company, for economic or legal reasons related to the borrower’s financial difficulties, grants a concession to the borrower that it would not have otherwise considered.

The following tables present the additions to non-PCI TDRs for the years ended December 31, 2017, 2016 and 2015:




($ in thousands)	Loans Modified as TDRs During the Year Ended December 31, 2017
($ in thousands)	Number of Loans	Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment ⁽¹⁾		Financial Impact ⁽²⁾
Commercial lending:
C&I	16	$	43,884	$	37,900	$	11,520
CRE	4	$	2,675	$	2,627	$	157
Multifamily residential	1	$	3,655	$	2,969	$	—
Consumer lending:
HELOCs	1	$	152	$	155	$	—




($ in thousands)	Loans Modified as TDRs During the Year Ended December 31, 2016
($ in thousands)	Number of Loans	Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment ⁽¹⁾		Financial Impact ⁽²⁾
Commercial lending:
C&I	18	$	65,991	$	40,405	$	20,574
CRE	6	$	19,275	$	18,824	$	701
Construction and land	1	$	5,522	$	4,883	$	—
Consumer lending:
Single-family residential	3	$	1,291	$	1,268	$	—
HELOCs	3	$	491	$	382	$	1




($ in thousands)	Loans Modified as TDRs During the Year Ended December 31, 2015
($ in thousands)	Number of Loans	Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment ⁽¹⁾		Financial Impact ⁽²⁾
Commercial lending:
C&I	18	$	42,816	$	34,165	$	6,726
CRE	3	$	1,802	$	1,727	$	—
Construction and land	2	$	2,227	$	83	$	102
Consumer lending:
Single-family residential	1	$	281	$	279	$	2


(1)	Includes subsequent payments after modification and reflects the balance as of December 31, 2017, 2016 and 2015.


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

The following tables present the non-PCI TDR modifications for the years ended December 31, 2017, 2016 and 2015 by modification type:




($ in thousands)	Modification Type During the Year Ended December 31, 2017
($ in thousands)	Principal ⁽¹⁾		Principal and Interest⁽²⁾		Interest Rate Reduction		Interest Deferments		Other		Total
Commercial lending:
C&I	$	13,568	$	7,848	$	—	$	—	$	16,484	$	37,900
CRE	2,627		—		—		—		—		2,627
Multifamily residential	2,969		—		—		—		—		2,969
Total commercial lending	19,164		7,848		—		—		16,484		43,496
Consumer lending:
HELOCs	—		155		—		—		—		155
Total consumer lending	—		155		—		—		—		155
Total	$	19,164	$	8,003	$	—	$	—	$	16,484	$	43,651




($ in thousands)	Modification Type During the Year Ended December 31, 2016
($ in thousands)	Principal ⁽¹⁾		Principal and Interest⁽²⁾		Interest Rate Reduction		Interest Deferments		Other		Total
Commercial lending:
C&I	$	34,499	$	—	$	5,876	$	30	$	—	$	40,405
CRE	17,750		—		—		—		1,074		18,824
Construction and land	4,883		—		—		—		—		4,883
Total commercial lending	57,132		—		5,876		30		1,074		64,112
Consumer lending:
Single-family residential	264		—		797		207		—		1,268
HELOCs	333		—		49		—		—		382
Total consumer lending	597		—		846		207		—		1,650
Total	$	57,729	$	—	$	6,722	$	237	$	1,074	$	65,762




($ in thousands)	Modification Type During the Year Ended December 31, 2015
($ in thousands)	Principal ⁽¹⁾		Principal and Interest ⁽²⁾		Interest Rate Reduction		Interest Deferments		Other		Total
Commercial lending:
C&I	$	16,364	$	17,801	$	—	$	—	$	—	$	34,165
CRE	548		787		—		—		392		1,727
Construction and land	—		—		—		—		83		83
Total commercial lending	16,912		18,588		—		—		475		35,975
Consumer lending:
Single-family residential	279		—		—		—		—		279
Total consumer lending	279		—		—		—		—		279
Total	$	17,191	$	18,588	$	—	$	—	$	475	$	36,254


(1)	Includes forbearance payments, term extensions and principal deferments that modify the terms of the loan from principal and interest payments to interest payments only.


(2)	Includes principal and interest deferments or reductions.

Subsequent to restructuring, a TDR that becomes delinquent, generally beyond 90 days, is considered to have defaulted. As TDRs are individually evaluated for impairment under the specific reserve methodology, subsequent defaults do not generally have a significant additional impact on the allowance for loan losses. The following table presents information on loans modified as TDRs within the previous 12 months that have subsequently defaulted during the years ended December 31, 2017, 2016 and 2015, and were still in default at the respective period end:




($ in thousands)	Loans Modified as TDRs that Subsequently Defaulted During the Year Ended December 31,
	2017			2016			2015
	Number of Loans	Recorded Investment		Number of Loans	Recorded Investment		Number of Loans	Recorded Investment
Commercial lending:
C&I	3	$	8,659	—	$	—	—	$	—
CRE	—	$	—	2	$	3,150	—	$	—
Construction and land	—	$	—	1	$	4,883	—	$	—
Consumer lending:
Single-family residential	—	$	—	—	$	—	1	$	279

The amount of additional funds committed to lend to borrowers whose terms have been modified was $5.1 million and $9.9 million as of December 31, 2017 and 2016, respectively.

Impaired Loans

The following tables present information on non-PCI impaired loans as of December 31, 2017 and 2016:




($ in thousands)	December 31, 2017
($ in thousands)	Unpaid Principal Balance		Recorded Investment With No Allowance		Recorded Investment With Allowance		Total Recorded Investment		Related Allowance
Commercial lending:
C&I	$	98,889	$	36,086	$	62,599	$	98,685	$	16,094
CRE	35,550		28,699		6,857		35,556		684
Multifamily residential	10,625		8,019		2,617		10,636		88
Construction and land	3,973		3,973		—		3,973		—
Total commercial lending	149,037		76,777		72,073		148,850		16,866
Consumer lending:
Single-family residential	14,287		—		14,338		14,338		534
HELOCs	5,201		2,287		2,921		5,208		4
Other consumer	2,491		—		2,491		2,491		2,491
Total consumer lending	21,979		2,287		19,750		22,037		3,029
Total non-PCI impaired loans	$	171,016	$	79,064	$	91,823	$	170,887	$	19,895




($ in thousands)	December 31, 2016
($ in thousands)	Unpaid Principal Balance		Recorded Investment With No Allowance		Recorded Investment With Allowance		Total Recorded Investment		Related Allowance
Commercial lending:
C&I	$	167,466	$	78,316	$	47,303	$	125,619	$	10,477
CRE	50,718		32,507		14,001		46,508		1,263
Multifamily residential	11,181		5,684		4,357		10,041		180
Construction and land	6,457		5,427		443		5,870		63
Total commercial lending	235,822		121,934		66,104		188,038		11,983
Consumer lending:
Single-family residential	15,435		—		14,335		14,335		687
HELOCs	4,016		—		3,682		3,682		31
Total consumer lending	19,451		—		18,017		18,017		718
Total non-PCI impaired loans	$	255,273	$	121,934	$	84,121	$	206,055	$	12,701

The following table presents the average recorded investment and interest income recognized on non-PCI impaired loans for the years ended December 31, 2017, 2016 and 2015:




($ in thousands)	Year Ended December 31,
	2017				2016				2015
	Average Recorded Investment		Recognized Interest Income ⁽¹⁾		Average Recorded Investment		Recognized Interest Income ⁽¹⁾		Average Recorded Investment		Recognized Interest Income ⁽¹⁾
Commercial lending:
C&I	$	110,662	$	1,517	$	148,986	$	2,612	$	85,290	$	538
CRE	36,003		578		47,064		1,253		43,598		536
Multifamily residential	11,455		422		15,763		302		24,024		312
Construction and land	4,382		—		6,388		34		2,740		39
Total commercial lending	162,502		2,517		218,201		4,201		155,652		1,425
Consumer lending:
Single-family residential	14,994		417		14,323		447		15,365		242
HELOCs	5,494		55		3,703		63		1,252		47
Other consumer	2,142		—		—		—		—		—
Total consumer lending	22,630		472		18,026		510		16,617		289
Total non-PCI impaired loans	$	185,132	$	2,989	$	236,227	$	4,711	$	172,269	$	1,714


(1)	Includes interest recognized on accruing non-PCI TDRs. Interest payments received on nonaccrual non-PCI loans are reflected as a reduction to principal, not as interest income.

Allowance for Credit Losses

The following table presents a summary of activities in the allowance for loan losses by portfolio segment for the years ended December 31, 2017, 2016 and 2015:




($ in thousands)	Year Ended December 31,
	2017			2016			2015
Non-PCI Loans
Allowance for non-PCI loans, beginning of period	$	260,402		$	264,600		$	260,965
Provision for loan losses on non-PCI loans	49,129			31,959			6,924
Gross charge-offs:
Commercial lending:
C&I	(38,118		)	(47,739		)	(20,423		)
CRE	—			(464		)	(1,052		)
Multifamily residential	(635		)	(29		)	(1,650		)
Construction and land	(149		)	(117		)	(493		)
Consumer lending:
Single-family residential	(1		)	(137		)	(36		)
HELOCs	(55		)	(9		)	(98		)
Other consumer	(17		)	(13		)	(502		)
Total gross charge-offs	(38,975		)	(48,508		)	(24,254		)
Gross recoveries:
Commercial lending:
C&I	12,065			8,453			8,782
CRE	2,111			1,488			2,488
Multifamily residential	1,357			1,476			4,298
Construction and land	259			203			4,647
Consumer lending:
Single-family residential	546			401			323
HELOCs	24			7			54
Other consumer	152			323			373
Total gross recoveries	16,514			12,351			20,965
Net charge-offs	(22,461		)	(36,157		)	(3,289		)
Allowance for non-PCI loans, end of period	287,070			260,402			264,600

PCI Loans
Allowance for PCI loans, beginning of period	118			359			714
Reversal of loan losses on PCI loans	(60		)	(241		)	(355		)
Allowance for PCI loans, end of period	58			118			359
Allowance for loan losses	$	287,128		$	260,520		$	264,959

For further information on accounting policies and the methodologies used to estimate the allowance for credit losses and loan charge-offs, see Note 1 — Summary of Significant Accounting Policies to the Consolidated Financial Statements.

The following table presents a summary of activities in the allowance for unfunded credit reserves for the years ended December 31, 2017, 2016 and 2015:




($ in thousands)	Year Ended December 31,
($ in thousands)	2017			2016			2015
Allowance for unfunded credit reserves, beginning of period	$	16,121		$	20,360		$	12,712
(Reversal of) provision for unfunded credit reserves	(2,803		)	(4,239		)	7,648
Allowance for unfunded credit reserves, end of period	$	13,318		$	16,121		$	20,360

The allowance for unfunded credit reserves is maintained at a level management believes to be sufficient to absorb estimated probable losses related to unfunded credit facilities. The allowance for unfunded credit reserves is included in Accrued expenses and other liabilities on the Consolidated Balance Sheet. See Note 13 — Commitments, Contingencies and Related Party Transactions to the Consolidated Financial Statements for additional information related to unfunded credit reserves.

The following tables present the Company’s allowance for loan losses and recorded investments by portfolio segment and impairment methodology as of December 31, 2017 and 2016:




($ in thousands)	December 31, 2017
	Commercial Lending								Consumer Lending
	C&I		CRE		Multifamily Residential		Construction and Land		Single-Family Residential		HELOCs		Other Consumer		Total
Allowance for loan losses
Individually evaluated for impairment	$	16,094	$	684	$	88	$	—	$	534	$	4	$	2,491	$	19,895
Collectively evaluated for impairment	146,964		40,495		19,021		26,881		25,828		7,350		636		267,175
Acquired with deteriorated credit quality	—		58		—		—		—		—		—		58
Total	$	163,058	$	41,237	$	19,109	$	26,881	$	26,362	$	7,354	$	3,127	$	287,128

Recorded investment in loans
Individually evaluated for impairment	$	98,685	$	35,556	$	10,636	$	3,973	$	14,338	$	5,208	$	2,491	$	170,887
Collectively evaluated for impairment	10,586,751		8,623,653		1,844,492		655,353		4,514,573		1,763,709		334,013		28,322,544
Acquired with deteriorated credit quality ⁽¹⁾	11,795		277,688		61,048		371		117,378		14,007		—		482,287
Total ⁽¹⁾	$	10,697,231	$	8,936,897	$	1,916,176	$	659,697	$	4,646,289	$	1,782,924	$	336,504	$	28,975,718




($ in thousands)	December 31, 2016
	Commercial Lending								Consumer Lending
	C&I		CRE		Multifamily Residential		Construction and Land		Single-Family Residential		HELOCs		Other Consumer		Total
Allowance for loan losses
Individually evaluated for impairment	$	10,477	$	1,263	$	180	$	63	$	687	$	31	$	—	$	12,701
Collectively evaluated for impairment	131,689		46,552		17,363		24,926		19,103		7,475		593		247,701
Acquired with deteriorated credit quality	1		112		—		—		5		—		—		118
Total	$	142,167	$	47,927	$	17,543	$	24,989	$	19,795	$	7,506	$	593	$	260,520

Recorded investment in loans
Individually evaluated for impairment	$	125,619	$	46,508	$	10,041	$	5,870	$	14,335	$	3,682	$	—	$	206,055
Collectively evaluated for impairment	9,476,557		7,621,153		1,480,244		666,966		3,356,334		1,738,170		315,215		24,654,639
Acquired with deteriorated credit quality ⁽¹⁾	38,387		348,448		95,654		1,918		139,110		18,924		4		642,445
Total ⁽¹⁾	$	9,640,563	$	8,016,109	$	1,585,939	$	674,754	$	3,509,779	$	1,760,776	$	315,219	$	25,503,139


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

Purchased Credit Impaired Loans

At the date of acquisition, PCI loans are pooled and accounted for at fair value, which represents the discounted value of the expected cash flows of the loan portfolio. A pool is accounted for as a single asset with a single interest rate, cumulative loss rate and cash flows expectation. The cash flows expected over the life of the pools are estimated by an internal cash flows model that projects cash flows and calculates the carrying values of the pools, book yields, effective interest income and impairment, if any, based on pool level events. Assumptions as to cumulative loss rates, loss curves and prepayment speeds are utilized to calculate the expected cash flows. The amount of expected cash flows over the initial investment in the loan represents the “accretable yield,” which is recognized as interest income on a level yield basis over the life of the loan. Prepayments affect the estimated life of PCI loans, which may change the amount of interest income, and possibly principal, expected to be collected. The excess of total contractual cash flows over the cash flows expected to be received at origination is deemed to be the “nonaccretable difference.”

The following table presents the changes in accretable yield for PCI loans for the years ended December 31, 2017, 2016 and 2015:




($ in thousands)	Year Ended December 31,
($ in thousands)	2017			2016			2015
Accretable yield for PCI loans, beginning of period	$	136,247		$	214,907		$	311,688
Accretion	(42,487		)	(68,708		)	(107,442		)
Changes in expected cash flows	8,217			(9,952		)	10,661
Accretable yield for PCI loans, end of period	$	101,977		$	136,247		$	214,907

Loans Held-for-Sale

Loans held-for-sale are carried at the lower of cost or fair value. When a determination is made at the time of commitment to originate or purchase loans as held-for-investment, it is the Company’s intent to hold these loans to maturity or for the “foreseeable future,” subject to periodic reviews under the Company’s management evaluation processes, including asset/liability management and credit risk management. When the Company subsequently changes its intent to hold certain loans, the loans are transferred from held-for-investment to held-for-sale at the lower of cost or fair value. From time to time, the Company purchases and sells loans in the secondary market. Certain purchased loans are transferred from held-for-investment to held-for-sale; and write-downs to allowance for loan losses are recorded, when appropriate.

As of December 31, 2017, loans held-for-sale amounted to $78.2 million. This balance was comprised primarily of loans related to the pending sale of the DCB branches of $78.1 million, which is included in Branch assets held-for-sale on the Consolidated Balance Sheet. For additional information on this pending sale, see Note 2 — Dispositions and Held-for-Sale to the Consolidated Financial Statements. The remaining loans held-for-sale, which amounted to $85 thousand, were comprised of single-family residential loans. In comparison, as of December 31, 2016, loans held-for-sale, which amounted to $23.1 million, were primarily comprised of consumer loans.

The following tables present information about the sales, purchases and securitization of loans, and reclassification of loans held-for-investment to/from loans held-for-sale during the years ended December 31, 2017, 2016 and 2015:




($ in thousands)	Year Ended December 31, 2017
	Commercial Lending								Consumer Lending
	C&I		CRE		Multifamily Residential		Construction and Land		Single-Family Residential		HELOCs		Other Consumer		Total
Loans transferred from held-for-investment to held-for-sale	$	476,644	$	52,217	$	531	$	1,609	$	249	$	—	$	3,706	$	534,956	⁽¹⁾
Loans of DCB branches transferred from held-for-investment to held-for-sale (included in Branch assets held-for-sale)	$	17,590	$	36,783	$	12,448	$	241	$	6,416	$	4,309	$	345	$	78,132	⁽¹⁾
Sales	$	476,644	$	52,217	$	531	$	1,609	$	21,058	$	—	$	25,905	$	577,964	^(2)(3)(4)
Purchases	$	503,359	$	—	$	2,311	$	—	$	29,060	$	—	$	—	$	534,730	⁽⁶⁾




($ in thousands)	Year Ended December 31, 2016
	Commercial Lending									Consumer Lending
	C&I		CRE		Multifamily Residential			Construction and Land		Single-Family Residential		HELOCs		Other Consumer		Total
Loans transferred from held-for-investment to held-for-sale	$	434,137	$	110,927	$	269,791		$	4,245	$	—	$	—	$	—	$	819,100		⁽¹⁾
Loans transferred from held-for-sale to held-for-investment	$	—	$	—	$	(4,943	)	$	—	$	—	$	—	$	—	$	(4,943	)
Sales	$	434,137	$	110,927	$	61,268		$	4,245	$	18,092	$	—	$	—	$	628,669		^(2)(3)(4)
Securitization of loans held-for-investment	$	—	$	—	$	201,675		$	—	$	—	$	—	$	—	$	201,675		⁽⁵⁾
Purchases	$	646,793	$	—	$	5,658		$	—	$	488,577	$	—	$	—	$	1,141,028		⁽⁶⁾⁽⁷⁾




($ in thousands)	Year Ended December 31, 2015
	Commercial Lending								Consumer Lending
	C&I		CRE		Multifamily Residential		Construction and Land		Single-Family Residential			HELOCs		Other Consumer		Total
Loans transferred from held-for-investment to held-for-sale	$	779,854	$	227	$	—	$	4,754	$	962,538		$	248	$	—	$	1,747,621		⁽¹⁾
Loans transferred from held-for-sale to held-for-investment	$	—	$	—	$	—	$	—	$	(53,376	)	$	—	$	—	$	(53,376	)
Sales	$	779,682	$	227	$	—	$	4,754	$	907,373		$	248	$	9,913	$	1,702,197		^(2)(3)(4)
Purchases	$	233,090	$	—	$	11,046	$	—	$	38,271		$	—	$	—	$	282,407		⁽⁶⁾


(1)	The Company recorded $473 thousand, $1.9 million and $5.1 million in write-downs to the allowance for loan losses related to loans transferred from held-for-investment to held-for-sale for the years ended December 31, 2017, 2016 and 2015, respectively.

(2)

Includes originated loans sold of $178.2 million, $369.6 million and $1.04 billion for the years ended December 31, 2017, 2016 and 2015, respectively. Originated loans sold were primarily comprised of C&I, CRE and single-family residential loans for the year ended December 31, 2017, C&I, CRE and multifamily residential loans for the year ended December 31, 2016, and single-family residential and C&I loans for the year ended December 31, 2015.


(3)	Includes purchased loans sold in the secondary market of $399.8 million, $259.1 million and $661.9 million for the years ended December 31, 2017, 2016 and 2015, respectively.

(4)

Net gains on sales of loans, excluding the lower of cost or fair value adjustments, were $8.9 million, $10.6 million and $27.8 million for the years ended December 31, 2017, 2016 and 2015, respectively. The lower of cost or fair value adjustments of $61 thousand, $5.6 million and $3.0 million for the years ended December 31, 2017, 2016 and 2015, respectively, were recorded in Net gains on sales of loans on the Consolidated Statement of Income.


(5)	Represents multifamily residential loans securitized during the first quarter of 2016 that resulted in net gains of $1.1 million, $641 thousand in mortgage servicing rights and $160.1 million of held-to-maturity investment security.


(6)	C&I loan purchases for each of the years ended December 31, 2017, 2016 and 2015 mainly represent C&I syndicated loans.


(7)	The higher loan purchases for the year ended December 31, 2016 was mainly due to $488.3 million of single-family residential loans purchased for Community Reinvestment Act (“CRA”) purposes.

- Definition

The entire disclosure for claims held for amounts due a entity, excluding financing receivables. Examples include, but are not limited to, trade accounts receivables, notes receivables, loans receivables. Includes disclosure for allowance for credit losses.

+ References + Details