Allowances for Loan Losses

9 Months Ended

Sep. 30, 2017

Allowances for Loan Losses

Note 6. Allowances for Loan Losses

The following tables provide additional information regarding the Company’s allowances for losses on non-covered loans and covered loans, based upon the method of evaluating loan impairment:

(in thousands)	Mortgage		Other		Total
Allowances for Loan Losses at September 30, 2017:
Loans individually evaluated for impairment	$	—	$	—	$	—
Loans collectively evaluated for impairment		122,522		36,396		158,918
Total	$	122,522	$	36,396	$	158,918
(in thousands)	Mortgage		Other		Total
Allowances for Loan Losses at December 31, 2016:
Loans individually evaluated for impairment	$	—	$	577	$	577
Loans collectively evaluated for impairment		123,925		32,022		155,947
Acquired loans with deteriorated credit quality		11,984		13,483		25,467
Total	$	135,909	$	46,082	$	181,991

The following tables provide additional information regarding the methods used to evaluate the Company’s loan portfolio for impairment:

(in thousands)	Mortgage		Other		Total
Loans Receivable at September 30, 2017:
Loans individually evaluated for impairment	$	29,431	$	45,682	$	75,113
Loans collectively evaluated for impairment		35,465,464		1,940,127		37,405,591
Total	$	35,494,895	$	1,985,809	$	37,480,704
(in thousands)	Mortgage		Other		Total
Loans Receivable at December 31, 2016:
Loans individually evaluated for impairment	$	29,660	$	18,592	$	48,252
Loans collectively evaluated for impairment		35,402,029		1,900,158		37,302,187
Acquired loans with deteriorated credit quality		1,614,755		89,140		1,703,895
Total	$	37,046,444	$	2,007,890	$	39,054,334

Allowance for Losses on Non-Covered Loans

The following table summarizes activity in the allowance for losses on non-covered loans for the periods indicated:

	For the Nine Months Ended September 30,
	2017									2016
(in thousands)	Mortgage			Other			Total			Mortgage			Other			Total
Balance, beginning of period	$	125,416		$	32,874		$	158,290		$	124,478		$	22,646		$	147,124
Charge-offs		(375	)		(58,203	)		(58,578	)		(170	)		(1,155	)		(1,325	)
Recoveries		595			594			1,189			1,251			956			2,207
(Recovery of) provision for non-covered loan losses		(3,114	)		61,131			58,017			675			6,024			6,699
Balance, end of period	$	122,522			36,396		$	158,918		$	126,234		$	28,471		$	154,705

See “Critical Accounting Policies” for additional information regarding the Company’s allowance for losses on non-covered loans.

The following table presents additional information about the Company’s impaired non-covered loans at September 30, 2017:

(in thousands)	Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment		Interest Income Recognized
Impaired loans with no related allowance:
Multi-family	$	9,071	$	11,548	$	—	$	10,016	$	378
Commercial real estate		2,628		7,743		—		4,517		13
One-to-four family		1,980		2,086		—		2,898		38
Acquisition, development, and construction		15,752		25,952		—		8,588		435
Other		45,682		98,084		—		32,556		1,486
Total impaired loans with no related allowance	$	75,113	$	145,413	$	—	$	58,575	$	2,350
Impaired loans with an allowance recorded:
Multi-family	$	—	$	—	$	—	$	—	$	—
Commercial real estate		—		—		—		—		—
One-to-four family		—		—		—		—		—
Acquisition, development, and construction		—		—		—		—		—
Other		—		—		—		3,278		—
Total impaired loans with an allowance recorded	$	—	$	—	$	—	$	3,278	$	—
Total impaired loans:
Multi-family	$	9,071	$	11,548	$	—	$	10,016	$	378
Commercial real estate		2,628		7,743		—		4,517		13
One-to-four family		1,980		2,086		—		2,898		38
Acquisition, development, and construction		15,752		25,952		—		8,588		435
Other		45,682		98,084		—		35,834		1,486
Total impaired loans	$	75,113	$	145,413	$	—	$	61,853	$	2,350

The following table presents additional information about the Company’s impaired non-covered loans at December 31, 2016:

(in thousands)	Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment		Interest Income Recognized
Impaired loans with no related allowance:
Multi-family	$	10,742	$	13,133	$	—	$	11,431	$	627
Commercial real estate		9,117		14,868		—		10,461		143
One-to-four family		3,601		4,267		—		3,079		124
Acquisition, development, and construction		6,200		15,500		—		1,550		414
Other		6,739		7,955		—		8,261		92
Total impaired loans with no related allowance	$	36,399	$	55,723	$	—	$	34,782	$	1,400
Impaired loans with an allowance recorded:
Multi-family	$	—	$	—	$	—	$	—	$	—
Commercial real estate		—		—		—		—		—
One-to-four family		—		—		—		—		—
Acquisition, development, and construction		—		—		—		—		—
Other		11,853		13,529		577		4,574		213
Total impaired loans with an allowance recorded	$	11,853	$	13,529	$	577	$	4,574	$	213
Total impaired loans:
Multi-family	$	10,742	$	13,133	$	—	$	11,431	$	627
Commercial real estate		9,117		14,868		—		10,461		143
One-to-four family		3,601		4,267		—		3,079		124
Acquisition, development, and construction		6,200		15,500		—		1,550		414
Other		18,592		21,484		577		12,835		305
Total impaired loans	$	48,252	$	69,252	$	577	$	39,356	$	1,613

Allowance for Losses on Covered Loans

Covered loans were reported exclusive of the FDIC loss share receivable. The covered loans acquired in the AmTrust and Desert Hills acquisitions were reviewed for collectability based on the expectations of cash flows from these loans. Covered loans were aggregated into pools of loans with common characteristics. In determining the allowance for losses on covered loans, the Company periodically performed an analysis to estimate the expected cash flows for each of the pools of loans. The Company recorded a provision for (recovery of) losses on covered loans to the extent that the expected cash flows from a loan pool had decreased or increased since the acquisition date.

Accordingly, if there was a decrease in expected cash flows due to an increase in estimated credit losses (as compared to the estimates made at the respective acquisition dates), the decrease in the present value of expected cash flows was recorded as a provision for covered loan losses charged to earnings, and the allowance for covered loan losses was increased. A related credit to non-interest income and an increase in the LSA are recognized at the same time, and measured based on the applicable loss sharing agreement percentage.

If there was an increase in expected cash flows due to a decrease in estimated credit losses (as compared to the estimates made at the respective acquisition dates), the increase in the present value of expected cash flows was recorded as a recovery of the prior-period impairment charged to earnings, and the allowance for covered loan losses was reduced. A related debit to non-interest income and a decrease in the LSA was recognized at the same time, and measured based on the applicable Loss Share Agreement percentage.

The following table summarizes activity in the allowance for losses on covered loans for the periods indicated:

	For the Nine Months Ended September 30,
(in thousands)	2017			2016
Balance, beginning of period	$	23,701		$	31,395
Recovery of losses on covered loans(1)		(23,701	)		(6,035	)
Balance, end of period	$	—		$	25,360

(1) Due to the sale of the covered loan portfolio.