Note 6. Loans

The following footnote disclosure reports the Company’s loan portfolio in segments and classes. Segments are groupings of similar loans at a level which the Company has adopted systematic methods of documentation for determining its allowance for loan and credit losses. Classes are a disaggregation of the portfolio segments. The Company’s loan portfolio segments are:

Construction loans — The Company originates loans to finance construction projects including one to four family residences, multifamily residences, senior housing, and industrial projects. Residential construction loans are due upon the sale of the completed project and are generally collateralized by first liens on the real estate and have floating interest rates. Construction loans are considered to have higher risks than other loans due to the ultimate repayment being sensitive to interest rate changes, governmental regulation of real property, and the availability of long-term financing. Economic conditions may also impact the Company’s ability to recover its investment in construction loans. Adverse economic conditions may negatively impact the real estate market which could affect the borrowers’ ability to complete and sell the project. Additionally, the fair value of the underlying collateral may fluctuate as market conditions change. As construction loans make up only a small percentage of the total loan portfolio, these loans are not further broken down into classes.

Real estate secured loans — We offer real estate secured loans to finance the acquisition of, or to refinance the existing mortgages on commercial properties. Real estate secured loans are further broken out into classes based on the type of loans and underlying collateral. These classes include SBA loans secured by real estate, residential real estate loans, gas station loans, carwash loans, hotel/motel loans, land loans, and loans secured by other types of properties.

Our commercial real estate loans are typically collateralized by first or junior deeds of trust on specific commercial properties, and, when possible, subject to corporate or individual guarantees from financially capable parties. The properties collateralizing real estate loans are principally located in the markets where our retail branches are located. Real estate loans typically bear an interest rate that floats with our base rate, the prime rate, or another established index. However, an increasing amount of new real estate secured loan originations bear fixed rather than floating interest rates due to the current competitive market environment and trends. Commercial real estate loans typically have 7-year maturities with up to 25-year amortization of principal and interest and loan-to-value ratios of 60-70% of the appraised value or purchase price, whichever is lower at origination. We usually impose a prepayment penalty on real estate secured loans, usually a period within three to five years of the date of the loan.

Commercial and industrial loans — We offer commercial and industrial loans to various business enterprises. These loans include business lines of credit and business term loans to finance operations, to provide working capital, or for specific purposes, such as to finance the purchase of assets, equipment, or inventory. Since a borrower’s cash flow from operations is generally the primary source of repayment, our policies provide specific guidelines regarding required debt coverage and other important financial ratios.

Lines of credit are extended to businesses or individuals based on the financial strength and integrity of the borrower. These lines of credit are secured primarily by business assets such as accounts receivable or inventory, and have a maturity of one year or less. Such lines of credit bear an interest rate that floats with our base rate, the prime rate, or another established index.

Business term loans are typically made to finance the acquisition of fixed assets, refinance short-term debts, or to finance the purchase of businesses. Business term loans generally have terms from one to seven years. They may be collateralized by the assets being acquired or other available assets and bear interest rates which either floats with our base rate, prime rate, another established index, or is fixed for the term of the loan.

Commercial and industrial loans are broken down further into two different classes, SBA loans and other commercial and industrial loans.

Consumer loans — The Company provides a broad range of consumer loans to customers, including personal lines of credit, cash secured loans, and automobile loans. Repayment of these loans is dependent on the borrowers’ ability to pay and the fair value of any underlying collateral.

The loans in the portfolio that we purchased in the Mirae Bank acquisition are covered by the FDIC loss-share agreement and are referred to herein as “covered loans.” All loans other than the covered loans are referred to herein as “non-covered loans.”

On October 1, 2013, the Company acquired BankAsiana and its loan portfolio at fair value and on November 20, 2013 acquired Saehan Bancorp and its loan portfolio also at fair value. The following table shows the carrying amount of loans acquired through acquisitions and legacy loans at March 31, 2014 and December 31, 2013:

	At March 31, 2014
	Loans Acquired From Former:									Legacy
(Dollars in Thousands)	Mirae Bank*			BankAsiana			Saehan Bancorp			Wilshire Loans			Total
Construction loans	$	—		$	5,772		$	—		$	37,505		$	43,277
Real estate secured loans	66,387			112,703			336,608			1,907,761			2,423,459
Commercial and industrial	4,847			33,183			32,544			354,274			424,848
Consumer loans	2			9			1,308			14,781			16,100
Gross Loans	71,236			151,667			370,460			2,314,321			2,907,684
Unearned Income	—			—			—			(8,254		)	(8,254		)
Total Loans	71,236			151,667			370,460			2,306,067			2,899,430
Allowance For Loan Losses	(1,926		)	(346		)	(229		)	(50,963		)	(53,464		)
Net Loans	$	69,310		$	151,321		$	370,231		$	2,255,104		$	2,845,966

Held-for-sale loans included above	$	—		$	257		$	189		$	27,345		$	27,791

	At December 31, 2013
	Loans Acquired From Former:							Legacy
(Dollars in Thousands)	Mirae Bank*			BankAsiana		Saehan Bancorp		Wilshire Loans			Total
Construction loans	$	—		$	5,030	$	—	$	35,337		$	40,367
Real estate secured loans	71,493			117,050		341,002		1,837,985			2,367,530
Commercial and industrial	6,316			39,550		36,356		367,450			449,672
Consumer loans	3			10		2,376		12,305			14,694
Gross Loans	77,812			161,640		379,734		2,253,077			2,872,263
Unearned Income	—			—		—		(7,864		)	(7,864		)
Total Loans	77,812			161,640		379,734		2,245,213			2,864,399
Allowance For Loan Losses	(3,943		)	—		—		(49,620		)	(53,563		)
Net Loans	$	73,869		$	161,640	$	379,734	$	2,195,593		$	2,810,836

Held-for-sale loans included above	$	—		$	2,052	$	—	$	45,505		$	47,557

* Loan covered by loss-sharing agreement with the FDIC

In accordance with ASC 310-30 (formerly AICPA Statement of Position “SOP 03-3”, Accounting for Certain Loans or Debt Securities Acquired in a Transfer), covered and acquired loans were divided into “ASC 310-30 loans” and “Non-ASC 310-30 loans”, at the time of acquisition. ASC 310-30 loans are acquired loans that had evidence of deterioration in credit quality and it was probable, at the time of acquisition, that the Bank would be unable to collect all contractually required payments receivable. In contrast, Non-ASC 310-30 loans are all other acquired loans that do not qualify as ASC 310-30 loans. Acquired loans are categorized into four different loan segments by loan type: construction, real estate secured, commercial and industrial, and consumer.

The difference between contractually required payments at the time of acquisition and the cash flows expected to be collected at the time of acquisition is referred to as the non-accretable difference which is included in the carrying amount of the loans. Subsequent declines to the expected cash flows will generally result in a provision for loan losses. Subsequent increases in cash flows result in a reversal of the provision for loan losses to the extent of prior charges, or a reversal of the non-accretable difference with a positive impact to interest income. Further, any excess of cash flows expected at acquisition over the estimated fair value is referred to as the accretable yield and is recognized as interest income over the remaining life of the loan when there is a reasonable expectation about the amount and timing of such cash flows.

The following table represents the carrying balance, net of discount, of ASC 310-30 and Non-ASC 310-30 loans at March 31, 2014 and December 31, 2013. The unpaid principal balance, before discount, of ASC 310-30 loans was $13.4 million at March 31, 2014 and $14.9 million at December 31, 2013.

(Dollars in Thousands)	March 31, 2014			December 31, 2013			March 31, 2013
Non-ASC 310-30 loans	$	590,912		$	616,500		$	107,193
ASC 310-30 loans	2,451			2,686			775
Total outstanding acquired loan balance	593,363			619,186			107,968
Allowance related to acquired loans	(2,501		)	(3,943		)	(4,326		)
Carrying amount, net of allowance	$	590,862		$	615,243		$	103,642

The following table represents by loan segment the current balance of ASC 310-30 loans acquired for which it was probable at the time of acquisition that all of the contractually required payments would not be collected for the periods indicated:

(Dollars in Thousands)	March 31, 2014		December 31, 2013		March 31, 2013
Breakdown of ASC 310-30 loans
Real Estate Secured	$	2,038	$	2,254	$	660
Commercial & Industrial	413		432		115
Total ASC 310-30 loans	$	2,451	$	2,686	$	775

Loans acquired from the acquisitions of Mirae Bank, BankAsiana, and Saehan Bancorp were discounted based on their estimated cash flows to be received on the acquisition dates. For the three months ended March 31, 2014 and March 31, 2013, changes to the total discount related to acquired loans were as follows:

	Three Months Ended
(Dollars in Thousands)	March 31, 2014			March 31, 2013
Balance at beginning of period	$	34,201		$	3,448
Discount accretion income recognized	(2,816		)	(228		)
Disposals related to charge-offs	(172		)	(74		)
Disposals related to loan sales	—			—
Balance at end of period	$	31,213		$	3,146

The following table is a breakdown of changes to the accretable portion of the discount related to acquired loans for the three months ended March 31, 2014 and March 31, 2013:

	Three Months Ended
(Dollars in Thousands)	March 31, 2014			March 31, 2013
Balance at beginning of period	$	31,450		$	3,275
Discount accretion income recognized	(2,791		)	(228		)
Disposals related to charge-offs	(2		)	(74		)
Balance at end of period	$	28,657		$	2,973

The table below summarizes for the periods indicated, changes to the allowance for loan losses and allowance for loan commitments arising from loans charged-off, recoveries on loans previously charged-off, credit for losses on loans and loan commitments, and certain ratios related to the allowance for loan losses:

Allowance for Losses on Loans and Loan Commitments
(Dollars in Thousands)

	Three Months Ended,
	March 31, 2014			December 31, 2013			March 31, 2013
Balances:
Allowance for loan losses:
Balances at beginning of period	$	53,563		$	52,397		$	63,285
Actual charge-offs: *
Real estate secured	672			552			4,405
Commercial and industrial	964			997			1,183
Consumer	1			2			1
Total charge-offs	1,637			1,551			5,589

Recoveries on loans previously charged off:
Real estate secured	1,028			2,038			215
Commercial and industrial	510			679			658
Consumer	—			—			8
Total recoveries	1,538			2,717			881

Net loan charge-offs	99			(1,166		)	4,708

Provision for losses on loans	—			—			—
Balances at end of period	$	53,464		$	53,563		$	58,577

Allowance for loan commitments:
Balances at beginning of year	$	1,023		$	1,023		$	1,023
Credit for losses on loan commitments	—			—			—
Balance at end of period	$	1,023		$	1,023		$	1,023

Ratios:
Net loan charge-offs to average total loans (annualized)	0.01		%	-0.18		%	0.89		%
Allowance for loan losses to gross loans at end of period (excluding loans held-for-sale)	1.86		%	1.90		%	2.85		%
Net loan charge-offs to allowance for loan losses at end of period	0.19		%	2.18		%	8.04		%
Net loan charge-offs to credit for loan losses and loan commitments	0.00		%	0.00		%	0.00		%

* Charge-off amount for the three months ended March 31, 2014 includes net charge-offs of covered loans amounting to $1.6 million which represents gross covered loan charge-offs of $2.4 million less FDIC receivable portions totaling $768,000.

The table below summarizes for the end of the periods indicated, the balance of our allowance for losses by loan type and the percentage of allowance for loan losses to gross loans receivable balance by loan segment:

Distribution and Percentage Composition of Allowance for Loan Losses

(Dollars in Thousands)

	March 31, 2014						December 31, 2013
	Reserve		Loans Receivable		(%)		Reserve		Loans Receivable		(%)
Construction	$	791	$	43,277	1.83	%	$	814	$	40,367	2.02	%
Real estate secured	39,164		2,401,203		1.63	%	41,401		2,332,121		1.78	%
Commercial and industrial	13,353		419,313		3.18	%	11,238		437,524		2.57	%
Consumer	156		16,100		0.97	%	110		14,694		0.75	%
Total Gross Loans Receivable *	$	53,464	$	2,879,893	1.86	%	$	53,563	$	2,824,706	1.90	%

* Held-for-sale loans of $27.8 million and $47.6 million at March 31, 2014 and December 31, 2013, respectively, were excluded from the total.

Our real estate secured loans and commercial and industrial loans are further broken down into classes as follows when measuring for impairment and historical losses:

	March 31, 2014						December 31, 2013
Real Estate Secured Loans (Dollars In Thousands)	Reserve		Loans Receivable		(%)		Reserve		Loans Receivable		(%)
Residential real estate	$	2,772	$	156,849	1.77	%	$	2,617	$	147,544	1.77	%
SBA real estate	1,944		171,773		1.13	%	2,164		168,447		1.28	%
Gas station secured	1,986		132,502		1.50	%	2,335		132,094		1.77	%
Carwash secured	2,748		55,764		4.93	%	3,282		57,117		5.75	%
Hotel/motel secured	5,071		187,078		2.71	%	6,185		184,632		3.35	%
Land secured	750		25,118		2.99	%	959		25,031		3.83	%
Other secured	23,893		1,672,119		1.43	%	23,859		1,617,256		1.48	%
Total real estate secured	$	39,164	$	2,401,203	1.63	%	$	41,401	$	2,332,121	1.78	%

	March 31, 2014						December 31, 2013
Commercial & Industrial Loans (Dollars In Thousands)	Reserve		Loans Receivable		(%)		Reserve		Loans Receivable		(%)
SBA commercial	$	2,214	$	44,867	4.93	%	$	2,263	$	47,901	4.72	%
Other commercial & industrial	11,139		374,446		2.97	%	8,975		389,623		2.30	%
Total commercial & industrial	$	13,353	$	419,313	3.18	%	$	11,238	$	437,524	2.57	%

The allowance for loan losses is comprised of general valuation allowance (“GVA”) based on quantitative and qualitative analyses and specific valuation allowances (“SVA”) for impaired loans.

A loan is impaired when, based on current information and events, it is probable that the Company will be unable to collect all amounts due according to the contractual terms of the loan agreement or if a concession was granted to the borrower current undergoing financial difficulties. At March 31, 2014, the outstanding balance of impaired loans totaled $77.9 million, of which $20.1 million had specific reserves of $8.3 million. At December 31, 2013, the outstanding balance of impaired loans totaled $72.8 million, of which $17.3 million had specific reserves of $3.8 million. The increase in impaired loans is largely due to the impairment of three loans totaling $8.9 million during the three months ended March 31, 2014.

On a quarterly basis, we utilize a classification migration model combined with individual loan impairment as starting points for determining the adequacy of our allowance for losses on loans. Our loss migration analysis tracks a certain number of quarters of individual loan loss history to determine historical losses by classification category for different loan types, except for certain loans (i.e., home mortgage loans, home equity lines of credit, overdraft loans, express business loans, and automobile loans), which are analyzed as homogeneous loan pools. These calculated loss factors are then applied to outstanding non-impaired loan balances. The Company also records a reserve for loan commitments based on historical loss rates and an internally defined utilization rate of exposure for unused off-balance sheet loan commitments.

To establish an adequate allowance, we must be able to recognize when loans initially become a problem. A risk grade of either pass, watch, special mention, substandard, or doubtful, is assigned to every loan in the portfolio, with the exception of homogeneous loans, or loans that are evaluated together in pools of similar loans. The following is a brief description of the loan classifications or risk grades used in our allowance calculation:

Pass Loans — Loans that are past due less than 30 days that do not exhibit signs of credit deterioration. The financial condition of the borrower is sound as well as the status of any collateral. Loans secured by cash (principal and interest) also fall within this classification.

Watch Loans — Performing loans with borrowers that have experienced adverse financial trends, higher debt/equity ratio, or weak liquidity positions, but not to the degree that the loan is considered a problem.

Special Mention — Loans that are currently protected but exhibit an increasing degree of risk based on weakening credit strength and/or repayment sources. Contingent or remedial plans to improve the Bank’s risk exposure should be documented.

Substandard — Loans inadequately protected by the current worth and paying capacity of the borrower or pledged collateral, if any. This grade is assigned when inherent credit weakness is apparent.

Doubtful — Loans having all the weakness inherent in a “substandard” classification but collection or liquidation is highly questionable with the possibility of loss at some future date.

The total allowance for loan losses at March 31, 2014 was $53.5 million, compared to $53.6 million at December 31, 2013. Allowance coverage of gross loans receivable (gross loans excluding loans held-for-sale) at the end of the first quarter of 2014 was 1.86%, compared to 1.90% at the end of the fourth quarter of 2013. The allowance coverage ratio of loans legacy Wilshire loans (excluding acquired loans) at March 31, 2014 was 2.23% compared to 2.24% at December 31, 2013. Total GVA at March 31, 2014 totaled $45.2 million, or 84.5% of total allowance for loan losses, and SVA on impaired loans totaled $8.3 million, or 15.5% of the total allowance for loan losses. At December 31, 2013, the GVA portion of the allowance for loan losses totaled $49.7 million, or 92.9% of total allowance, while specific reserve on impaired loan totaled $3.8 million, or 7.1% of the total allowance for loan losses.

Allowance coverage ratio of construction and real estate secured loans receivable declined in the first quarter of 2013 from the fourth quarter of 2013, while commercial and industrial and consumer loan coverage ratios increased during the same period. The allowance coverage ratio for construction and real estate secured loans declined due to an increase in loan balance and a decline in allowance due to a reduction in historical loss rates. The increase in commercial and industrial loan allowance coverage ratios was largely due to one impaired loan that had an impairment of $2.2 million during the first quarter of 2014. Consumer loan coverage ratio was increased due to an increase in historical loss rates.

Impaired loan net principal balances are broken down by those with and without specific reserves as shown in the following table for March 31, 2014 and December 31, 2013:

	For Quarter Ended
(Dollars in Thousands)	March 31, 2014			December 31, 2013
With Specific Reserves
Without Charge-Offs	$	17,838		$	17,265
With Charge-Offs	2,264			8
Without Specific Reserves
Without Charge-Off	43,130			36,781
With Charge-Offs	14,716			18,760
Total Impaired Loans*	77,948			72,814
Allowance on Impaired Loans	(8,291		)	(3,815		)
Impaired Loans Net of Allowance	$	69,657		$	68,999

* Balances net of SBA guaranteed portions and discount on acquired loans totaled $72.5 million and $65.9 million at March 31, 2014 and December 31, 2013, respectively.

Net principal balance and average quarterly balances for impaired loans with specific reserves, and those without specific reserves, at March 31, 2014 and December 31, 2013 are presented in the following tables by loan class:

	March 31, 2014						December 31, 2013
			Related		Average				Related		Average
(Dollars In Thousands)	Balance		Allowance		Balance		Balance		Allowance		Balance
With Specific Reserves:
Construction	$	—	$	—	$	—	$	—	$	—	$	—
Real Estate Secured:
Residential Real Estate	451		2		458		—		—		—
SBA Real Estate	2,103		485		2,165		1,668		675		1,858
Gas Station	787		81		787		1,339		160		1,359
Carwash	—		—		—		—		—		—
Hotel/Motel	—		—		—		—		—		—
Land	—		—		—		266		7		270
Other	10,885		2,343		10,905		8,373		1,015		8,528
Commercial & Industrial:
SBA Commercial	834		701		897		846		507		1,205
Commercial	5,042		4,679		7,249		4,781		1,451		5,261
Consumer	—		—		—		—		—		—
Total With Related Allowance	20,102		8,291		22,461		17,273		3,815		18,481

Without Specific Reserves:
Construction	$	—	$	—	$	—	$	2,471	$	—	$	2,452
Real Estate Secured:
Residential Real Estate	640		—		653		1,265		—		1,567
SBA Real Estate	6,938		—		7,570		8,659		—		19,511
Gas Station	6,841		—		6,863		5,584		—		8,282
Carwash	5,781		—		5,797		5,810		—		6,753
Hotel/Motel	4,908		—		4,924		5,640		—		9,032
Land	264		—		265		—		—		—
Other	28,303		—		28,454		24,758		—		31,851
Commercial & Industrial:
SBA Commercial	367		—		385		371		—		932
Commercial	3,804		—		3,954		983		—		1,535
Consumer	—		—		—		—		—		—
Total Without Related Allowance	57,846		$	—	58,865		55,541		—		81,915
Total Impaired Loans	$	77,948	$	8,291	$	81,326	$	72,814	$	3,815	$	100,396

Income recognized from payments received for impaired loans is recorded on a cash basis and not accrued. The cash basis income recognized from impaired loans for the quarters ended March 31, 2014, December 31, 2013, and March 31, 2013 totaled $465,000, $411,000, and $469,000, respectively.

Delinquent loans, including non-accrual loans 30 days or more past due, at March 31, 2014 and December 31, 2013, are presented in the following table by loan class:

	March 31, 2014								December 31, 2013
(Dollars In Thousands) (Balances are net of SBA guaranteed portions)	30-59 Days Past Due		60-89 Days Past Due		90 Days or More Past Due		Total Past Due*		30-59 Days Past Due		60-89 Days Past Due		90 Days or More Past Due		Total Past Due*
Legacy Wilshire:
Construction	$	—	$	—	$	—	$	—	$	—	$	—	$	2,471	$	2,471
Real Estate Secured:
Residential Real Estate	177		—		451		628		—		179		617		796
SBA Real Estate	350		14		363		727		394		437		597		1,428
Gas Station	—		—		842		842		176		—		849		1,025
Carwash	—		—		770		770		—		—		769		769
Hotel/Motel	—		—		1,262		1,262		—		810		1,962		2,772
Other	3,268		881		11,941		16,090		945		4,221		9,536		14,702
Commercial & Industrial:
SBA Commercial	378		—		8		386		458		16		—		474
Commercial	633		1,935		675		3,243		41		—		39		80
Consumer	—		—		—		—		—		41		—		41
Total Legacy Loans	4,806		2,830		16,312		23,948		2,014		5,704		16,840		24,558
Acquired Loans:
Construction	—		—		—		—		—		—		—		—
Real Estate Secured:
Residential Real Estate	—		—		—		—		147		—		—		147
SBA Real Estate	422		533		1,227		2,182		225		—		528		753
Gas Station	—		—		787		787		—		—		—		—
Carwash	—		—		—		—		—		—		168		168
Hotel/Motel	—		—		—		—		—		—		—		—
Other	1,413		1,245		1,309		3,967		1,656		388		853		2,897
Commercial & Industrial:
SBA Commercial	270		—		16		286		287		267		17		571
Commercial	858		1,080		431		2,369		344		143		178		665
Consumer	—		9		—		9		10		—		—		10
Total Acquired Loans	2,963		2,867		3,770		9,600		2,669		798		1,744		5,211
Total Delinquencies	$	7,769	$	5,697	$	20,082	$	33,548	$	4,683	$	6,502	$	18,584	$	29,769

Non-Accrual Loans 30 Days or More Past Due:
Legacy Loans	$	1,062	$	2,649	$	16,312	$	20,023	$	615	$	3,572	$	16,841	$	21,028
Acquired Loans	951		1,522		3,770		6,243		1,222		403		1,576		3,201
Non-Accrual Loans Listed Above	$	2,013	$	4,171	$	20,082	$	26,266	$	1,837	$	3,975	$	18,417	$	24,229

* Total past due balances are net of SBA guaranteed portions totaling $10.8 million and $12.6 million at March 31, 2014 and December 31, 2013, respectively.

Non-performing loans consisting of non-accrual loans and loans past due 90 days or more and still accruing at March 31, 2014 and December 31, 2013 are presented in the following table by loan class:

	March 31, 2014						December 31, 2013
			90 Days		Total				90 Days		Total
	Total		or More		Non-		Total		or More		Non-
(Dollars In Thousands)	Non-Accrual		Past Due and		Performing		Non-Accrual		Past Due and		Performing
(Balances are net of SBA guaranteed portions)	Loans		Still Accruing		Loans*		Loans		Still Accruing		Loans*
Legacy Wilshire:
Construction	$	—	$	—	$	—	$	2,471	$	—	$	2,471
Real Estate Secured:
Residential Real Estate	1,030		—		1,030		1,050		—		1,050
SBA Real Estate	1,129		—		1,129		958		—		958
Gas Station	1,018		—		1,018		1,026		—		1,026
Carwash	770		—		770		770		—		770
Hotel/Motel	1,414		—		1,414		2,117		—		2,117
Land	—		—		—		—		—		—
Other	20,528		—		20,528		19,518		—		19,518
Commercial & Industrial:
SBA Commercial	133		—		133		137		—		137
Other Commercial	5,417		—		5,417		580		—		580
Consumer	—		—		—		—		—		—
Total Legacy Loans	31,439		—		31,439		28,627		—		28,627
Acquired Loans:
Construction	—		—		—		—		—		—
Real Estate Secured:
Residential Real Estate	61		—		61		215		—		215
SBA Real Estate	2,048		—		2,048		811		—		811
Gas Station	3,032		—		3,032		2,264		—		2,264
Carwash	—		—		—		—		168		168
Hotel/Motel	752		—		752		760		—		760
Land	—		—		—		—		—		—
Other	4,206		—		4,206		3,912		—		3,912
Commercial & Industrial:
SBA Commercial	58		—		58		69		—		69
Other Commercial	1,513		—		1,513		410		—		410
Consumer	—		—		—		—		—		—
Total Acquired Loans	11,670		—		11,670		8,441		168		8,609
Total	$	43,109	$	—	$	43,109	$	37,068	$	168	$	37,236

* Balances are net of SBA guaranteed portions totaling $10.2 million and $12.4 million at March 31, 2014 and December 31, 2013, respectively.

No interest income related to non-accrual loans was included in interest income for the three months ended March 31, 2014 and March 31, 2013. Additional income of approximately $419,000 and $199,000 would have been recorded during the three months ended March 31, 2014 and March 31, 2013, respectively, had these loans been paid in accordance with their original terms throughout the period indicated.

Loans classified as special mention, substandard, and doubtful at March 31, 2014 and December 31, 2013 are presented in the following table by classes of loans:

	March 31, 2014								December 31, 2013
(Dollars In Thousands) (Balances are net of SBA guaranteed portions)	Special Mention		Sub- standard		Doubtful		Total*		Special Mention		Sub- standard		Doubtful		Total*
Legacy Loans:
Construction	$	—	$	—	$	—	$	—	$	—	$	2,471	$	—	$	2,471
Real Estate Secured:
Residential Real Estate	—		2,459		604		3,063		—		2,342		166		2,508
SBA Real Estate	2,586		5,165		335		8,086		4,314		5,100		510		9,924
Gas Station	1,149		6,068		842		8,059		1,158		6,115		849		8,122
Carwash	—		10,370		770		11,140		—		10,437		770		11,207
Hotel/Motel	1,875		2,593		1,414		5,882		2,508		4,571		155		7,234
Land	264		658		—		922		266		662		—		928
Other	34,422		43,529		13,390		91,341		33,886		53,089		4,179		91,154
Commercial & Industrial:
SBA Commercial	1,451		1,806		—		3,257		1,364		1,774		—		3,138
Other Commercial	23,617		12,616		38		36,271		16,128		19,349		39		35,516
Consumer	—		2		—		2		—		2		—		2
Total Legacy Loans	65,364		85,266		17,393		168,023		59,624		105,912		6,668		172,204
Acquired Loans:
Construction	—		—		—		—		—		—		—		—
Real Estate Secured:
Residential Real Estate	—		1,071		—		1,071		—		1,228		—		1,228
SBA Real Estate	2,483		4,488		1,132		8,103		3,587		2,894		274		6,755
Gas Station	2,418		3,845		—		6,263		2,434		3,867		—		6,301
Carwash	11,469		1,428		—		12,897		12,256		1,435		—		13,691
Hotel/Motel	1,100		7,047		752		8,899		2,432		7,443		760		10,635
Land	—		—		—		—		—		—		—		—
Other	16,502		13,602		638		30,742		15,912		12,968		297		29,177
Commercial & Industrial:
SBA Commercial	1,019		867		16		1,902		950		1,609		16		2,575
Other Commercial	1,130		10,373		—		11,503		3,448		12,123		—		15,571
Consumer	142		9		—		151		155		—		—		155
Total Acquired Loans	36,263		42,730		2,538		81,531		41,174		43,567		1,347		86,088
Total Loans	$	101,627	$	127,996	$	19,931	$	249,554	$	100,798	$	149,479	$	8,015	$	258,292

* Balances are net of SBA guaranteed portions totaling $14.3 million and $16.4 million at March 31, 2014 and December 31, 2013, respectively.

The following tables show the allowance for loan losses roll-forward and breakdown by loan segment for the three months ended March 31, 2014, and March 31, 2013:

	March 31, 2014
(Dollars in Thousands)	Construction			Real Estate Secured			Commercial & Industrial			Consumer			Total
Balance at beginning of quarter	$	814		$	41,401		$	11,238		$	110		$	53,563
Total charge-offs	—			(672		)	(964		)	(1		)	(1,637		)
Total recoveries	—			1,028			510			—			1,538
Provision for losses on loans	(23		)	(2,593		)	2,569			47			—
Balance at end of quarter	$	791		$	39,164		$	13,353		$	156		$	53,464

	March 31, 2013
(Dollars in Thousands)	Construction		Real Estate Secured			Commercial & Industrial			Consumer			Total
Balance at beginning of quarter	$	453	$	49,956		$	12,737		$	139		$	63,285
Total charge-offs	—		(4,405		)	(1,183		)	(1		)	(5,589		)
Total recoveries	—		215			658			8			881
Provision (credit) for losses on loans and loan commitments	241		(1,468		)	1,252			(25		)	—
Balance at end of quarter	$	694	$	44,298		$	13,464		$	121		$	58,577

The tables below represent the breakdown of the allowance for loan losses and gross loans receivable (gross loans excluding loans held-for-sale) balances by SVA and GVA at March 31, 2014 and December 31, 2013:

	March 31, 2014
(Dollars in Thousands)	Construction			Real Estate Secured			Commercial & Industrial			Consumer			Gross Loans Receivable
Impaired loans	$	—		$	67,900		$	10,048		$	—		$	77,948
Specific valuation allowance	$	—		$	2,911		$	5,380		$	—		$	8,291
Coverage ratio	0.00		%	4.29		%	53.54		%	0.00		%	10.64		%

Non-impaired loans	$	43,277		$	2,333,303		$	409,265		$	16,100		$	2,801,945
General valuation allowance	$	791		$	36,253		$	7,973		$	156		$	45,173
Coverage ratio	1.83		%	1.55		%	1.95		%	0.97		%	1.61		%

Gross loans receivable	$	43,277		$	2,401,203		$	419,313		$	16,100		$	2,879,893
Allowance for loan losses	$	791		$	39,164		$	13,353		$	156		$	53,464
Allowance coverage ratio	1.83		%	1.63		%	3.18		%	0.97		%	1.86		%

	December 31, 2013
(Dollars in Thousands)	Construction			Real Estate Secured			Commercial & Industrial			Consumer			Gross Loans Receivable
Impaired loans	$	2,471		$	63,363		$	6,980		$	—		$	72,814
Specific valuation allowance	$	—		$	1,857		$	1,958		$	—		$	3,815
Coverage ratio	0.00		%	2.93		%	28.05		%	0.00		%	5.24		%

Non-impaired loans	$	37,896		$	2,268,758		$	430,544		$	14,694		$	2,751,892
General valuation allowance	$	814		$	39,544		$	9,280		$	110		$	49,748
Coverage ratio	2.15		%	1.74		%	2.16		%	0.75		%	1.81		%

Gross loans receivable	$	40,367		$	2,332,121		$	437,524		$	14,694		$	2,824,706
Allowance for loan losses	$	814		$	41,401		$	11,238		$	110		$	53,563
Allowance coverage ratio	2.02		%	1.78		%	2.57		%	0.75		%	1.90		%

At March 31, 2014 and December 31, 2013, loans acquired with deteriorated credit quality (ASC 310-30 formerly SOP 03-3 loans) totaled $2.5 and $2.7 million, respectively. At March 31, 2014 loans acquired with deteriorated credit quality had an allowance of $386,000 and at December 31, 2013, there was no allowance recorded for these loans. The following is a breakdown of loan balances for loans acquired with deteriorated credit quality at March 31, 2014 and December 31, 2013:

	March 31, 2014
(Dollars in Thousands)	Construction		Real Estate Secured		Commercial & Industrial		Consumer		Total
Balance of Loans Acquired With Deteriorated Credit Quality	$	—	$	2,038	$	413	$	—	$	2,451
Total Allowance for Loans Acquired With Deteriorated Credit Quality	$	—	$	231	$	155	$	—	$	386

	December 31, 2013
(Dollars in Thousands)	Construction		Real Estate Secured		Commercial & Industrial		Consumer		Total
Balance of Loans Acquired With Deteriorated Credit Quality	$	—	$	2,254	$	432	$	—	$	2,686
Total Allowance for Loans Acquired With Deteriorated Credit Quality	$	—	$	—	$	—	$	—	$	—

A loan restructuring constitutes a troubled debt restructuring (“TDR”), if the Company for economic or legal reasons related to the borrower’s financial difficulties, grants a concession to the borrower that it would not otherwise consider. Restructured loans typically present an elevated level of credit risk as the borrowers are not able to perform according to the original contractual terms of the loan. Loans that are reported as TDRs are accounted for in accordance with ASC 310-10-35 and are considered impaired and measured for specific impairment.

Loans that are considered TDRs are classified as performing, unless they are on non-accrual status or greater than 90 days delinquent as of the end of the most recent quarter. All TDR loans are considered impaired by the Company regardless of whether it is performing or non-performing. At March 31, 2014, the balance of non-accrual TDR loans totaled $10.8 million, and TDR loans performing in accordance with their modified terms totaled $29.3 million. At December 31, 2013, the balance of non-accrual TDR loans totaled $8.2 million, and TDR loans performing in accordance with their modified terms totaled $28.0 million. New TDR loans did not have a material impact on the Company’s allowance for loan losses for the three months ended March 31, 2014 or December 31, 2013.

The following tables present the total balance of TDR loans by loan type and types of concessions made at March 31, 2014 and December 31, 2013:

	March 31, 2014
(Dollars In Thousands, Net of SBA Guarantee)	Balance		Term/Maturity		Interest Rate		Total*
Real Estate Secured	$	15,462	$	9,150	$	9,953	$	34,565
Commercial & Industrial	1,686		1,585		2,292		5,563
Total TDR Loans	$	17,148	$	10,735	$	12,245	$	40,128

	December 31, 2013
(Dollars In Thousands, Net of SBA Guarantee)	Balance		Term/Maturity		Interest Rate		Total*
Real Estate Secured	$	15,640	$	8,708	$	5,660	$	30,008
Commercial & Industrial	2,212		1,645		2,355		6,212
Total TDR Loans	$	17,852	$	10,353	$	8,015	$	36,220

* SBA guaranteed portions totaled $2.9 million and $2.8 million at March 31, 2014 and December 31, 2013, respectively.

The following table represents the roll-forward of TDR loans with addition and reductions for the quarters ended March 31, 2014, December 31, 2013, and March 31, 2013:

(Dollars in Thousands, Net of SBA Guarantee)	March 31, 2014			December 31, 2013			March 31, 2013
Balance at Beginning of Period	$	36,220		$	29,472		$	35,733
New TDR Loans Added	5,010			8,212			717
TDR Loans Paid Off	—			(463		)	(2,016		)
Reductions Due to Charge-Offs	(438		)	(412		)	(3,202		)
Other Changes (Payments, Amortization, & Other)	(664		)	(589		)	(365		)
Balance at End of Period	$	40,128		$	36,220		$	30,867

The following tables summarize the pre-modification and post-modification balances and types of concessions provided for new TDR loans for the quarters ended March 31, 2014, December 31, 2013, and March 31, 2013:

	March 31, 2014
(Dollars in Thousands, Net of SBA Guarantee)	Principal		Term/Maturity		Interest Rate		Total
Pre-Modification Balance:
Real Estate Secured	$	—	$	536	$	4,335	$	4,871
Commercial & Industrial	41		105		—		146
Total TDR Loans	$	41	$	641	$	4,335	$	5,017

Post-Modification Balance:
Real Estate Secured	$	—	$	533	$	4,335	$	4,868
Commercial & Industrial	41		101		—		142
Total TDR Loans	$	41	$	634	$	4,335	$	5,010

Number of Loans:
Real Estate Secured	—		2		1		3
Commercial & Industrial	2		3		—		5
Total TDR Loans	2		5		1		8

	December 31, 2013
(Dollars in Thousands, Net of SBA Guarantee)	Principal		Term/Maturity		Interest Rate		Total*
Pre-Modification Balance:
Real Estate Secured	$	9,090	$	691	$	—	$	9,781
Commercial & Industrial	184		615		—		799
Total TDR Loans	$	9,274	$	1,306	$	—	$	10,580

Post-Modification Balance:
Real Estate Secured	$	6,868	$	680	$	—	$	7,548
Commercial & Industrial	157		507		—		664
Total TDR Loans	$	7,025	$	1,187	$	—	$	8,212

Number of Loans:
Real Estate Secured	13		1		—		14
Commercial & Industrial	3		2		—		5
Total TDR Loans	16		3		—		19

	March 31, 2013
(Dollars in Thousands, Net of SBA Guarantee)	Principal		Term/Maturity		Interest Rate		Total*
Pre-Modification Balance:
Real Estate Secured	$	267	$	354	$	—	$	621
Commercial & Industrial	28		100		—		128
Total TDR Loans	$	295	$	454	$	—	$	749

Post-Modification Balance:
Real Estate Secured	$	265	$	352	$	—	$	617
Commercial & Industrial	—		100		—		100
Total TDR Loans	$	265	$	452	$	—	$	717

Number of Loans:
Real Estate Secured	1		1		—		2
Commercial & Industrial	2		2		—		4
Total TDR Loans	3		3		—		6

* Balances are net of SBA guaranteed portions

At March 31, 2014, December 31, 2013, and March 31, 2013, all TDR loans were modified with principal or payment, term or maturity, or interest rate concessions. Principal concessions usually consist of loans restructured to reduce the monthly payment through a reduction in principal, interest, or a combination of principal and interest payments for a certain period of time. Most of these types of concessions are usually interest only payments for three to six months. Term or maturity concessions are loans that are restructured to extend the maturity date beyond the original contractual term of loan. Interest rate concessions consist of TDR loans that are restructured with a lower interest rate than the original contractual rate and the reduced rate is lower than the current market interest rate for loans with similar risk characteristics.

The tables below summarize TDR loans that were modified during the twelve months ended March 31, 2014, December 31, 2013, and March 31, 2013 that had payment defaults during period indicated. We consider a TDR loan to be in payment default if the loan has been transferred to non-accrual status. This usually means the loan is past due 90 days or more, but in certain cases a loan that is less than 90 days past due can be deemed a non-accrual loan, if there exists evidence that the borrower will not be able to fulfill a portion or all of the obligated contractual payments. Defaulted TDR loans did not have material impact to the allowance for loan losses for the three months ended March 31, 2014, December 31, 2013, and March 31, 2013.

	TDRs With Payment Defaults During the Three Months Ended March 31, 2014
(Dollars in Thousands, Net of SBA Guarantee)	Principal		Term/Maturity		Interest Rate		Total*
Pre-Modification Balance:
Real Estate Secured	$	417	$	—	$	—	$	417
Commercial & Industrial	3		—		—		3
Total TDRs Defaulted	$	420	$	—	$	—	$	420

Post-Modification Balance:
Real Estate Secured	$	414	$	—	$	—	$	414
Commercial & Industrial	3		—		—		3
Total TDRs Defaulted	$	417	$	—	$	—	$	417

Number of Loans:
Real Estate Secured	1		—		—		1
Commercial & Industrial	1		—		—		1
Total TDRs Defaulted Loans	2		—		—		2

	TDRs With Payment Defaults During the Three Months Ended December 31, 2013
(Dollars in Thousands, Net of SBA Guarantee)	Principal		Term/Maturity		Interest Rate		Total*
Pre-Modification Balance:
Real Estate Secured	$	427	$	374	$	—	$	801
Commercial & Industrial	77		—		—		77
Total TDRs Defaulted	$	504	$	374	$	—	$	878

Post-Modification Balance:
Real Estate Secured	$	241	$	334	$	—	$	575
Commercial & Industrial	55		—		—		55
Total TDRs Defaulted	$	296	$	334	$	—	$	630

Number of Loans:
Real Estate Secured	1		1		—		2
Commercial & Industrial	1		—		—		1
Total TDRs Defaulted Loans	2		1		—		3

	TDRs With Payment Defaults During the Three Months Ended March 31, 2013
(Dollars in Thousands, Net of SBA Guarantee)	Principal		Term/Maturity		Interest Rate		Total*
Pre-Modification Balance:
Real Estate Secured	$	158	$	—	$	—	$	158
Commercial & Industrial	98		—		—		98
Total TDRs Defaulted	$	256	$	—	$	—	$	256

Post-Modification Balance:
Real Estate Secured	$	126	$	—	$	—	$	126
Commercial & Industrial	58		—		—		58
Total TDRs Defaulted	$	184	$	—	$	—	$	184

Number of Loans:
Real Estate Secured	2		—		—		2
Commercial & Industrial	3		—		—		3
Total TDRs Defaulted Loans	5		—		—		5

* Balances are net of SBA guaranteed portions