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LOANS RECEIVABLE AND ALLOWANCE FOR CREDIT LOSSES | 9 Months Ended
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Sep. 30, 2016
Loans and Leases Receivable Disclosure [Abstract] |
LOANS RECEIVABLE AND ALLOWANCE FOR CREDIT LOSSES | NOTE 7 — 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. Purchased credit impaired (“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 in accordance with 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 September 30, 2016 and December 31, 2015:
($ in thousands) |  | September 30, 2016 |  | December 31, 2015
| Non-PCI Loans |  | PCI Loans (1) |  | Total (1) |  | Non-PCI Loans |  | PCI Loans (1) |  | Total (1)
CRE: |  |  |  |  |  |  |  |  |  |  |  |
Income producing |  | $ | 7,387,777 |  |  | $ | 392,998 |  |  | $ | 7,780,775 |  |  | $ | 6,937,199 |  |  | $ | 541,275 |  |  | $ | 7,478,474 |
Construction |  | 600,803 |  |  | — |  |  | 600,803 |  |  | 436,776 |  |  | 1,895 |  |  | 438,671 |
Land |  | 130,989 |  |  | 2,512 |  |  | 133,501 |  |  | 187,409 |  |  | 6,195 |  |  | 193,604 |
Total CRE |  | 8,119,569 |  |  | 395,510 |  |  | 8,515,079 |  |  | 7,561,384 |  |  | 549,365 |  |  | 8,110,749 |
C&I: |  |  |  |  |  |  |  |  |  |  |  |
Commercial business |  | 8,640,569 |  |  | 42,873 |  |  | 8,683,442 |  |  | 8,155,991 |  |  | 57,906 |  |  | 8,213,897 |
Trade finance |  | 674,591 |  |  | 12 |  |  | 674,603 |  |  | 787,800 |  |  | 1,310 |  |  | 789,110 |
Total C&I |  | 9,315,160 |  |  | 42,885 |  |  | 9,358,045 |  |  | 8,943,791 |  |  | 59,216 |  |  | 9,003,007 |
Residential: |  |  |  |  |  |  |  |  |  |  |  |
Single-family |  | 3,201,245 |  |  | 150,622 |  |  | 3,351,867 |  |  | 2,877,286 |  |  | 189,633 |  |  | 3,066,919 |
Multifamily |  | 1,311,858 |  |  | 108,268 |  |  | 1,420,126 |  |  | 1,374,718 |  |  | 148,277 |  |  | 1,522,995 |
Total residential |  | 4,513,103 |  |  | 258,890 |  |  | 4,771,993 |  |  | 4,252,004 |  |  | 337,910 |  |  | 4,589,914 |
Consumer |  | 2,059,178 |  |  | 20,296 |  |  | 2,079,474 |  |  | 1,931,828 |  |  | 24,263 |  |  | 1,956,091 |
Total loans |  | $ | 24,007,010 |  |  | $ | 717,581 |  |  | $ | 24,724,591 |  |  | $ | 22,689,007 |  |  | $ | 970,754 |  |  | $ | 23,659,761 |
Unearned fees, premiums, and discounts, net |  | 7,371 |  |  | — |  |  | 7,371 |  |  | (16,013 | ) |  | — |  |  | (16,013 | )
Allowance for loan losses |  | (255,656 | ) |  | (156 | ) |  | (255,812 | ) |  | (264,600 | ) |  | (359 | ) |  | (264,959 | )
Loans, net |  | $ | 23,758,725 |  |  | $ | 717,425 |  |  | $ | 24,476,150 |  |  | $ | 22,408,394 |  |  | $ | 970,395 |  |  | $ | 23,378,789 |
(1) | Loans net of ASC 310-30 discount.
The Company’s CRE segment provides financing for income producing properties, construction properties and land. Commercial business and trade finance in the C&I segment provide financing to small and middle market businesses in a wide spectrum of industries. This includes loans for working capital, accounts receivable and inventory lines of credit, Small Business Administration loans, lease financing and financing to international trade companies with trade financial services and products, including letters of credit, revolving lines of credit, import loans, bankers’ acceptances, working capital lines of credit, domestic purchase financing and pre-export financing. The Company’s adjustable rate mortgage (“ARM”) single-family residential loans are primarily comprised of first mortgage loans secured by one-to-four unit residential properties. The Company’s ARM single-family residential loan programs generally have a one- to five-year initial fixed period. The Company’s multifamily residential loan programs include variable rate loans that have a six-month floating ARM, or a three- to seven-year initial fixed period. As of September 30, 2016 and December 31, 2015, consumer loans were comprised primarily of home equity lines of credit. 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 which may come from these products. The Company conducts a variety of quality control procedures and periodic audits, including review of criteria for lending and legal requirements, to ensure it is in compliance with its origination standards. As of September 30, 2016 and December 31, 2015, loans totaling $15.62 billion and $15.91 billion, respectively, were pledged to secure borrowings and to provide additional borrowing capacity from the FHLB and the Federal Reserve Bank. 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 can be classified 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 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 risks that require monitoring, but full repayments are expected. Special Mention loans are considered to have potential weaknesses that warrant closer attention by management. Special Mention is considered 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 indicates that 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 based on changes in the borrowers’ financial status and collectability. The following tables present the credit risk rating for non-PCI loans by portfolio segment as of September 30, 2016 and December 31, 2015:
|  | September 30, 2016
($ in thousands) |  | Pass/Watch |  | Special Mention |  | Substandard |  | Doubtful |  | Total Non-PCI Loans
CRE: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Income producing |  | $ | 7,175,508 |  |  | $ | 28,052 |  |  | $ | 184,217 |  |  | $ | — |  |  | $ | 7,387,777 |
Construction |  | 595,106 |  |  | 5,697 |  |  | — |  |  | — |  |  | 600,803 |
Land |  | 117,194 |  |  | — |  |  | 13,785 |  |  | 10 |  |  | 130,989 |
C&I: |  |  |  |  |  |  |  |  |  |  |  |
Commercial business |  | 8,263,325 |  |  | 132,512 |  |  | 228,368 |  |  | 16,364 |  |  | 8,640,569 |
Trade finance |  | 640,016 |  |  | 18,524 |  |  | 14,115 |  |  | 1,936 |  |  | 674,591 |
Residential: |  |  |  |  |  |  |  |  |  |  |  |
Single-family |  | 3,176,832 |  |  | 7,161 |  |  | 17,252 |  |  | — |  |  | 3,201,245 |
Multifamily |  | 1,264,586 |  |  | — |  |  | 47,272 |  |  | — |  |  | 1,311,858 |
Consumer |  | 2,048,988 |  |  | 3,879 |  |  | 6,311 |  |  | — |  |  | 2,059,178 |
Total |  | $ | 23,281,555 |  |  | $ | 195,825 |  |  | $ | 511,320 |  |  | $ | 18,310 |  |  | $ | 24,007,010 |
|  | December 31, 2015
($ in thousands) |  | Pass/Watch |  | Special Mention |  | Substandard |  | Doubtful |  | Total Non-PCI Loans
CRE: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Income producing |  | $ | 6,672,951 |  |  | $ | 59,309 |  |  | $ | 204,939 |  |  | $ | — |  |  | $ | 6,937,199 |
Construction |  | 435,112 |  |  | 1,194 |  |  | 470 |  |  | — |  |  | 436,776 |
Land |  | 172,189 |  |  | — |  |  | 15,220 |  |  | — |  |  | 187,409 |
C&I: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Commercial business |  | 7,794,735 |  |  | 201,280 |  |  | 135,449 |  |  | 24,527 |  |  | 8,155,991 |
Trade finance |  | 750,144 |  |  | 13,812 |  |  | 23,844 |  |  | — |  |  | 787,800 |
Residential: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Single-family |  | 2,841,722 |  |  | 8,134 |  |  | 27,430 |  |  | — |  |  | 2,877,286 |
Multifamily |  | 1,317,550 |  |  | 2,918 |  |  | 54,250 |  |  | — |  |  | 1,374,718 |
Consumer |  | 1,926,418 |  |  | 883 |  |  | 4,527 |  |  | — |  |  | 1,931,828 |
Total |  | $ | 21,910,821 |  |  | $ | 287,530 |  |  | $ | 466,129 |  |  | $ | 24,527 |  |  | $ | 22,689,007 |
The following tables present the credit risk rating for PCI loans by portfolio segment as of September 30, 2016 and December 31, 2015:
|  | September 30, 2016
($ in thousands) |  | Pass/Watch |  | Special Mention |  | Substandard |  | Total PCI Loans
CRE: |  |  |  |  |  |  |  |  |  |  |  |
Income producing |  | $ | 333,342 |  |  | $ | 3,474 |  |  | $ | 56,182 |  |  | $ | 392,998 |
Construction |  | — |  |  | — |  |  | — |  |  | — |
Land |  | 2,134 |  |  | — |  |  | 378 |  |  | 2,512 |
C&I: |  |  |  |  |  |  |  |
Commercial business |  | 34,023 |  |  | 4,590 |  |  | 4,260 |  |  | 42,873 |
Trade finance |  | 12 |  |  | — |  |  | — |  |  | 12 |
Residential: |  |  |  |  |  |  |  |  |
Single-family |  | 147,768 |  |  | 1,216 |  |  | 1,638 |  |  | 150,622 |
Multifamily |  | 93,379 |  |  | — |  |  | 14,889 |  |  | 108,268 |
Consumer |  | 18,795 |  |  | 317 |  |  | 1,184 |  |  | 20,296 |
Total (1) |  | $ | 629,453 |  |  | $ | 9,597 |  |  | $ | 78,531 |  |  | $ | 717,581 |
|  | December 31, 2015
($ in thousands) |  | Pass/Watch |  | Special Mention |  | Substandard |  | Total PCI Loans
CRE: |  |  |  |  |  |  |  |  |  |  |  |
Income producing |  | $ | 440,100 |  |  | $ | 4,987 |  |  | $ | 96,188 |  |  | $ | 541,275 |
Construction |  | — |  |  | — |  |  | 1,895 |  |  | 1,895 |
Land |  | 4,285 |  |  | — |  |  | 1,910 |  |  | 6,195 |
C&I: |  |  |  |  |  |  |  |  |  |  |  |
Commercial business |  | 52,212 |  |  | 819 |  |  | 4,875 |  |  | 57,906 |
Trade finance |  | 1,310 |  |  | — |  |  | — |  |  | 1,310 |
Residential: |  |  |  |  |  |  |  |  |  |  |  |
Single-family |  | 184,092 |  |  | 1,293 |  |  | 4,248 |  |  | 189,633 |
Multifamily |  | 130,770 |  |  | — |  |  | 17,507 |  |  | 148,277 |
Consumer |  | 23,121 |  |  | 452 |  |  | 690 |  |  | 24,263 |
Total (1) |  | $ | 835,890 |  |  | $ | 7,551 |  |  | $ | 127,313 |  |  | $ | 970,754 |
(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 not 90 or more 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 September 30, 2016 and December 31, 2015:
|  | September 30, 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
CRE: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Income producing |  | $ | 99 |  |  | $ | 930 |  |  | $ | 1,029 |  |  | $ | 16,164 |  |  | $ | 12,920 |  |  | $ | 29,084 |  |  | $ | 7,357,664 |  |  | $ | 7,387,777 |
Construction |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 600,803 |  |  | 600,803 |
Land |  | — |  |  | — |  |  | — |  |  | 5,706 |  |  | 10 |  |  | 5,716 |  |  | 125,273 |  |  | 130,989 |
C&I: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Commercial business |  | 12,667 |  |  | 3,871 |  |  | 16,538 |  |  | 44,514 |  |  | 17,783 |  |  | 62,297 |  |  | 8,561,734 |  |  | 8,640,569 |
Trade finance |  | — |  |  | — |  |  | — |  |  | — |  |  | 1,936 |  |  | 1,936 |  |  | 672,655 |  |  | 674,591 |
Residential: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Single-family |  | 7,116 |  |  | 1,557 |  |  | 8,673 |  |  | 2,302 |  |  | 3,483 |  |  | 5,785 |  |  | 3,186,787 |  |  | 3,201,245 |
Multifamily |  | 4,642 |  |  | 382 |  |  | 5,024 |  |  | 6,743 |  |  | 6,804 |  |  | 13,547 |  |  | 1,293,287 |  |  | 1,311,858 |
Consumer |  | 1,408 |  |  | 1,086 |  |  | 2,494 |  |  | 121 |  |  | 3,390 |  |  | 3,511 |  |  | 2,053,173 |  |  | 2,059,178 |
Total |  | $ | 25,932 |  |  | $ | 7,826 |  |  | $ | 33,758 |  |  | $ | 75,550 |  |  | $ | 46,326 |  |  | $ | 121,876 |  |  | $ | 23,851,376 |  |  | $ | 24,007,010 |
|  | December 31, 2015
($ 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
CRE: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Income producing |  | $ | 3,465 |  |  | $ | 25,256 |  |  | $ | 28,721 |  |  | $ | 11,359 |  |  | $ | 17,870 |  |  | $ | 29,229 |  |  | $ | 6,879,249 |  |  | $ | 6,937,199 |
Construction |  | — |  |  | — |  |  | — |  |  | 14 |  |  | — |  |  | 14 |  |  | 436,762 |  |  | 436,776 |
Land |  | 1,124 |  |  | — |  |  | 1,124 |  |  | 277 |  |  | 406 |  |  | 683 |  |  | 185,602 |  |  | 187,409 |
C&I: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Commercial business |  | 1,992 |  |  | 1,185 |  |  | 3,177 |  |  | 50,726 |  |  | 14,009 |  |  | 64,735 |  |  | 8,088,079 |  |  | 8,155,991 |
Trade finance |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 787,800 |  |  | 787,800 |
Residential: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Single-family |  | 7,657 |  |  | 2,927 |  |  | 10,584 |  |  | 92 |  |  | 8,634 |  |  | 8,726 |  |  | 2,857,976 |  |  | 2,877,286 |
Multifamily |  | 6,320 |  |  | 981 |  |  | 7,301 |  |  | 6,486 |  |  | 9,758 |  |  | 16,244 |  |  | 1,351,173 |  |  | 1,374,718 |
Consumer |  | 2,078 |  |  | 209 |  |  | 2,287 |  |  | 233 |  |  | 1,505 |  |  | 1,738 |  |  | 1,927,803 |  |  | 1,931,828 |
Total |  | $ | 22,636 |  |  | $ | 30,558 |  |  | $ | 53,194 |  |  | $ | 69,187 |  |  | $ | 52,182 |  |  | $ | 121,369 |  |  | $ | 22,514,444 |  |  | $ | 22,689,007 |
For information on the policy for recording payments received and resuming accrual of interest on non-PCI loans that are placed on nonaccrual status, please see Note 1 — Summary of Significant Accounting Policies to the Consolidated Financial Statements of the Company’s 2015 Form 10-K. 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 in accordance with ASC 310-30 at the time of acquisition. Please refer to the discussion on PCI loans within this note for additional details on interest income recognition. As of September 30, 2016 and December 31, 2015, PCI loans on nonaccrual status totaled $17.6 million and $37.7 million, respectively. Loans in Process of Foreclosure As of September 30, 2016 and December 31, 2015, the Company had $8.8 million and $18.0 million, respectively, of recorded investment in consumer mortgage loans 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. Foreclosed residential real estate properties with a carrying amount of $1.7 million were included in total net OREO of $8.6 million as of September 30, 2016. In comparison, foreclosed residential real estate properties with a carrying amount of $912 thousand were included in total net OREO of $7.0 million as of December 31, 2015. Troubled Debt Restructurings (“TDRs”) Potential TDRs are individually evaluated and the type of restructuring is selected based on the loan type and the circumstances of the borrower’s financial difficulty in order to maximize the Company’s recovery. A TDR is a modification of the terms of a loan when the Company, for economic or legal reasons related to the borrower’s financial difficulties, grants a concession to the borrower, it would not otherwise consider. The following tables present the additions to non-PCI TDRs for the three and nine months ended September 30, 2016 and 2015:
|  | Loans Modified as TDRs During the Three Months Ended September 30,
($ in thousands) |  | 2016 |  | 2015
| Number of Loans |  | Pre- Modification Outstanding Recorded Investment |  | Post- Modification Outstanding Recorded Investment (1) |  | Financial Impact (2) |  | Number of Loans |  | Pre- Modification Outstanding Recorded Investment |  | Post- Modification Outstanding Recorded Investment (1) |  | Financial Impact (2)
CRE: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Income producing |  | — |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | 1 |  | $ | 451 |  |  | $ | 403 |  |  | $ | — |
Land |  | — |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | 1 |  | $ | 2,056 |  |  | $ | 788 |  |  | $ | — |
C&I: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Commercial business |  | 3 |  | $ | 493 |  |  | $ | 459 |  |  | $ | 93 |  |  | 3 |  | $ | 4,596 |  |  | $ | 4,423 |  |  | $ | 1,229 |
|  | Loans Modified as TDRs During the Nine Months Ended September 30,
($ in thousands) |  | 2016 |  | 2015
| Number of Loans |  | Pre- Modification Outstanding Recorded Investment |  | Post- Modification Outstanding Recorded Investment (1) |  | Financial Impact (2) |  | Number of Loans |  | Pre- Modification Outstanding Recorded Investment |  | Post- Modification Outstanding Recorded Investment (1) |  | Financial Impact (2)
CRE: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Income producing |  | 3 |  | $ | 15,899 |  |  | $ | 15,722 |  |  | $ | 43 |  |  | 2 |  | $ | 1,279 |  |  | $ | 1,209 |  |  | $ | — |
Land |  | 1 |  | $ | 5,522 |  |  | $ | 5,226 |  |  | $ | — |  |  | 2 |  | $ | 2,227 |  |  | $ | 881 |  |  | $ | 102 |
C&I: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Commercial business |  | 8 |  | $ | 22,182 |  |  | $ | 9,088 |  |  | $ | 2,711 |  |  | 16 |  | $ | 42,686 |  |  | $ | 35,365 |  |  | $ | 6,726 |
Trade finance |  | 2 |  | $ | 7,901 |  |  | $ | 3,025 |  |  | $ | — |  |  | — |  | $ | — |  |  | $ | — |  |  | $ | — |
Residential: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Single-family |  | 2 |  | $ | 1,071 |  |  | $ | 1,058 |  |  | $ | — |  |  | 1 |  | $ | 281 |  |  | $ | 279 |  |  | $ | 2 |
Consumer: |  | 1 |  | $ | 344 |  |  | $ | 335 |  |  | $ | 1 |  |  | — |  | $ | — |  |  | $ | — |  |  | $ | — |
(1) | Includes subsequent payments after modification and reflects the balance as of September 30, 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 three and nine months ended September 30, 2016 and 2015 by modification type:
($ in thousands) |  | Modification Type
| 2016 |  | 2015
| Principal (1) |  | Interest Rate Reduction |  | Interest Deferments |  | Other |  | Total |  | Principal (1) |  | Principal and Interest (2) |  | Interest Deferments |  | Other |  | Total
Three Months Ended September 30, |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
CRE |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | 788 |  |  | $ | — |  |  | $ | 403 |  |  | $ | 1,191 |
C&I |  | 427 |  |  | — |  |  | 32 |  |  | — |  |  | 459 |  |  | 4,423 |  |  | — |  |  | — |  |  | — |  |  | 4,423 |
Total |  | $ | 427 |  |  | $ | — |  |  | $ | 32 |  |  | $ | — |  |  | $ | 459 |  |  | $ | 4,423 |  |  | $ | 788 |  |  | $ | — |  |  | $ | 403 |  |  | $ | 5,614 |
($ in thousands) |  | Modification Type
| 2016 |  | 2015
| Principal (1) |  | Interest Rate Reduction |  | Interest Deferments |  | Other |  | Total |  | Principal (1) |  | Principal and Interest (2) |  | Interest Deferments |  | Other |  | Total
Nine Months Ended September 30, |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
CRE |  | $ | 19,800 |  |  | $ | — |  |  | $ | — |  |  | $ | 1,148 |  |  | $ | 20,948 |  |  | $ | — |  |  | $ | 1,593 |  |  | $ | — |  |  | $ | 497 |  |  | $ | 2,090 |
C&I |  | 10,193 |  |  | 1,288 |  |  | 32 |  |  | 600 |  |  | 12,113 |  |  | 17,241 |  |  | 18,124 |  |  | — |  |  | — |  |  | 35,365 |
Residential |  | 267 |  |  | 791 |  |  | — |  |  | — |  |  | 1,058 |  |  | 279 |  |  | — |  |  | — |  |  | — |  |  | 279 |
Consumer |  | 335 |  |  | — |  |  | — |  |  | — |  |  | 335 |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |
Total |  | $ | 30,595 |  |  | $ | 2,079 |  |  | $ | 32 |  |  | $ | 1,748 |  |  | $ | 34,454 |  |  | $ | 17,520 |  |  | $ | 19,717 |  |  | $ | — |  |  | $ | 497 |  |  | $ | 37,734 |
(1) | Principal modification 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) | Principal and interest modification includes principal and interest deferments or reductions.
Subsequent to restructuring, a TDR that becomes delinquent, generally beyond 90 days, is considered to have defaulted. The following table presents information for loans modified as TDRs within the previous 12 months that have subsequently defaulted during the three and nine months ended September 30, 2016 and 2015, and are still in default at period end:
|  | Loans Modified as TDRs that Subsequently Defaulted During the Three Months Ended September 30,
|  | 2016 |  | 2015
($ in thousands) |  | Number of Loans |  | Recorded Investment |  | Number of Loans |  | Recorded Investment
CRE: |  |  |  |  |  |  |  |  |  |  |  |
Income producing |  | 1 |  |  | $ | 995 |  |  | 1 |  |  | $ | 2,088 |
|  | Loans Modified as TDRs that Subsequently Defaulted During the Nine Months Ended September 30,
|  | 2016 |  | 2015
($ in thousands) |  | Number of Loans |  | Recorded Investment |  | Number of Loans |  | Recorded Investment
CRE: |  |  |  |  |  |  |  |  |  |  |  |
Income producing |  | 1 |  |  | $ | 995 |  |  | 1 |  |  | $ | 2,088 |
C&I: |  |  |  |  |  |  |  |  |  |  |  |
Commercial business |  | 2 |  |  | $ | 113 |  |  | — |  |  | $ | — |
The amount of additional funds committed to lend to borrowers whose terms have been modified was $2.9 million as of September 30, 2016. In comparison, the amount of additional funds committed to lend to borrowers whose terms have been modified was immaterial as of December 31, 2015. Impaired Loans The Company’s loans are grouped into heterogeneous and homogeneous (mostly consumer loans) categories. Classified loans in the heterogeneous category are identified and evaluated for impairment on an individual basis. A loan is considered impaired when, based on current information and events, it is probable that the Company will not be able to collect all scheduled payments of principal or interest due in accordance with the original contractual terms. Impaired loans are measured based on the present value of expected future cash flows discounted at the loan’s effective interest rate or, as expedient, at the loan’s observable market price or the fair value of the collateral, if the loan is collateral dependent, less costs to sell. When the value of an impaired loan is less than the recorded investment and the loan is classified as nonperforming and uncollectible, the deficiency is charged-off against the allowance for loan losses. Impaired loans exclude the homogeneous consumer loan portfolio, which is evaluated collectively for impairment. The Company’s impaired loans include predominantly non-PCI loans held-for-investment on nonaccrual status and any non-PCI loans modified in a TDR, which may be on accrual or nonaccrual status. The following tables present information on impaired non-PCI loans as of September 30, 2016 and December 31, 2015:
|  | September 30, 2016
($ in thousands) |  | Unpaid Principal Balance |  | Recorded Investment With No Allowance |  | Recorded Investment With Allowance |  | Total Recorded Investment |  | Related Allowance
CRE: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Income producing |  | $ | 59,227 |  |  | $ | 31,493 |  |  | $ | 19,703 |  |  | $ | 51,196 |  |  | $ | 507 |
Construction |  | — |  |  | — |  |  | — |  |  | — |  |  | — |
Land |  | 6,886 |  |  | 5,226 |  |  | 1,081 |  |  | 6,307 |  |  | 72 |
C&I: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Commercial business |  | 109,416 |  |  | 28,316 |  |  | 53,453 |  |  | 81,769 |  |  | 3,798 |
Trade finance |  | 6,080 |  |  | 4,361 |  |  | 655 |  |  | 5,016 |  |  | 3 |
Residential: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Single-family |  | 14,825 |  |  | 1,842 |  |  | 11,439 |  |  | 13,281 |  |  | 310 |
Multifamily |  | 22,894 |  |  | 15,649 |  |  | 5,208 |  |  | 20,857 |  |  | 217 |
Consumer |  | 1,556 |  |  | — |  |  | 1,556 |  |  | 1,556 |  |  | 43 |
Total |  | $ | 220,884 |  |  | $ | 86,887 |  |  | $ | 93,095 |  |  | $ | 179,982 |  |  | $ | 4,950 |
|  | December 31, 2015
($ in thousands) |  | Unpaid Principal Balance |  | Recorded Investment With No Allowance |  | Recorded Investment With Allowance |  | Total Recorded Investment |  | Related Allowance
CRE: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Income producing |  | $ | 47,043 |  |  | $ | 24,347 |  |  | $ | 15,720 |  |  | $ | 40,067 |  |  | $ | 3,148 |
Construction |  | 66 |  |  | — |  |  | 14 |  |  | 14 |  |  | 1 |
Land |  | 1,537 |  |  | 632 |  |  | 683 |  |  | 1,315 |  |  | 118 |
C&I: |  |  |  |  |  |  |  |  |  |  |  |  |  |
Commercial business |  | 81,720 |  |  | 31,045 |  |  | 40,111 |  |  | 71,156 |  |  | 15,993 |
Trade finance |  | 10,675 |  |  | — |  |  | 10,675 |  |  | 10,675 |  |  | 95 |
Residential: |  |  |  |  |  |  |  |  |  |  |  |  |  |
Single-family |  | 16,486 |  |  | 4,401 |  |  | 10,611 |  |  | 15,012 |  |  | 584 |
Multifamily |  | 25,634 |  |  | 16,944 |  |  | 6,783 |  |  | 23,727 |  |  | 339 |
Consumer |  | 1,240 |  |  | — |  |  | 1,240 |  |  | 1,240 |  |  | 60 |
Total |  | $ | 184,401 |  |  | $ | 77,369 |  |  | $ | 85,837 |  |  | $ | 163,206 |  |  | $ | 20,338 |
The following table presents the average recorded investment and interest income recognized on non-PCI impaired loans during the three and nine months ended September 30, 2016 and 2015:
($ in thousands) |  | Three Months Ended September 30, |  | Nine Months Ended September 30,
| 2016 |  | 2015 |  | 2016 |  | 2015
| 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)
CRE: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Income producing |  | $ | 52,020 |  |  | $ | 464 |  |  | $ | 43,227 |  |  | $ | 130 |  |  | $ | 52,130 |  |  | $ | 1,368 |  |  | $ | 45,154 |  |  | $ | 393 |
Construction |  | — |  |  | — |  |  | 759 |  |  | — |  |  | — |  |  | — |  |  | 695 |  |  | — |
Land |  | 6,562 |  |  | 9 |  |  | 3,957 |  |  | 10 |  |  | 6,721 |  |  | 26 |  |  | 4,796 |  |  | 30 |
C&I: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Commercial business |  | 91,015 |  |  | 258 |  |  | 75,655 |  |  | 161 |  |  | 92,531 |  |  | 648 |  |  | 75,951 |  |  | 489 |
Trade finance |  | 9,004 |  |  | 33 |  |  | 11,285 |  |  | 50 |  |  | 10,028 |  |  | 166 |  |  | 11,584 |  |  | 185 |
Residential: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Single-family |  | 13,410 |  |  | 72 |  |  | 18,192 |  |  | 68 |  |  | 13,489 |  |  | 220 |  |  | 18,338 |  |  | 205 |
Multifamily |  | 20,594 |  |  | 77 |  |  | 24,338 |  |  | 178 |  |  | 20,654 |  |  | 231 |  |  | 24,546 |  |  | 530 |
Consumer |  | 1,567 |  |  | 16 |  |  | 1,248 |  |  | 12 |  |  | 1,572 |  |  | 48 |  |  | 1,253 |  |  | 35 |
Total impaired non-PCI loans |  | $ | 194,172 |  |  | $ | 929 |  |  | $ | 178,661 |  |  | $ | 609 |  |  | $ | 197,125 |  |  | $ | 2,707 |  |  | $ | 182,317 |  |  | $ | 1,867 |
(1) | Includes interest recognized on accruing non-PCI TDRs. Interest payments received on nonaccrual non-PCI loans are reflected as a reduction to principal and not as interest income.
Allowance for Credit Losses The following tables present a summary of activities in the allowance for loan losses by portfolio segment for the three and nine months ended September 30, 2016 and 2015:
|  | Three Months Ended September 30, 2016
($ in thousands) |  | Non-PCI Loans |  | PCI Loans |  | Total
| CRE |  | C&I |  | Residential |  | Consumer |  | Total |  |
Beginning balance |  | $ | 78,102 |  |  | $ | 148,427 |  |  | $ | 31,561 |  |  | $ | 8,421 |  |  | $ | 266,511 |  |  | $ | 257 |  |  | $ | 266,768 |
(Reversal of) provision for loan losses |  | (6,598 | ) |  | 18,548 |  |  | 309 |  |  | (644 | ) |  | 11,615 |  |  | (101 | ) |  | 11,514 |
Charge-offs |  | (309 | ) |  | (23,696 | ) |  | (29 | ) |  | (13 | ) |  | (24,047 | ) |  | — |  |  | (24,047 | )
Recoveries |  | 634 |  |  | 165 |  |  | 654 |  |  | 124 |  |  | 1,577 |  |  | — |  |  | 1,577 |
Net recoveries (charge-offs) |  | 325 |  |  | (23,531 | ) |  | 625 |  |  | 111 |  |  | (22,470 | ) |  | — |  |  | (22,470 | )
Ending balance |  | $ | 71,829 |  |  | $ | 143,444 |  |  | $ | 32,495 |  |  | $ | 7,888 |  |  | $ | 255,656 |  |  | $ | 156 |  |  | $ | 255,812 |
|  | Three Months Ended September 30, 2015
($ in thousands) |  | Non-PCI Loans |  | PCI Loans |  | Total
| CRE |  | C&I |  | Residential |  | Consumer |  | Total |  |
Beginning balance |  | $ | 75,496 |  |  | $ | 133,962 |  |  | $ | 40,668 |  |  | $ | 10,491 |  |  | $ | 260,617 |  |  | $ | 612 |  |  | $ | 261,229 |
Provision for (reversal of) loan losses |  | 2,333 |  |  | 11,221 |  |  | (4,979 | ) |  | (70 | ) |  | 8,505 |  |  | (71 | ) |  | 8,434 |
Charge-offs |  | (135 | ) |  | (7,187 | ) |  | (35 | ) |  | (123 | ) |  | (7,480 | ) |  | — |  |  | (7,480 | )
Recoveries |  | 83 |  |  | 933 |  |  | 1,158 |  |  | 73 |  |  | 2,247 |  |  | — |  |  | 2,247 |
Net (charge-offs) recoveries |  | (52 | ) |  | (6,254 | ) |  | 1,123 |  |  | (50 | ) |  | (5,233 | ) |  | — |  |  | (5,233 | )
Ending balance |  | $ | 77,777 |  |  | $ | 138,929 |  |  | $ | 36,812 |  |  | $ | 10,371 |  |  | $ | 263,889 |  |  | $ | 541 |  |  | $ | 264,430 |
|  | Nine Months Ended September 30, 2016
($ in thousands) |  | Non-PCI Loans |  | PCI Loans |  |
| CRE |  | C&I |  | Residential |  | Consumer |  | Total |  |  | Total
Beginning balance |  | $ | 81,191 |  |  | $ | 134,597 |  |  | $ | 39,292 |  |  | $ | 9,520 |  |  | $ | 264,600 |  |  | $ | 359 |  |  | $ | 264,959 |
(Reversal of) provision for loan losses |  | (9,731 | ) |  | 38,549 |  |  | (7,679 | ) |  | (1,887 | ) |  | 19,252 |  |  | (203 | ) |  | 19,049 |
Charge-offs |  | (504 | ) |  | (31,770 | ) |  | (166 | ) |  | (17 | ) |  | (32,457 | ) |  | — |  |  | (32,457 | )
Recoveries |  | 873 |  |  | 2,068 |  |  | 1,048 |  |  | 272 |  |  | 4,261 |  |  | — |  |  | 4,261 |
Net recoveries (charge-offs) |  | 369 |  |  | (29,702 | ) |  | 882 |  |  | 255 |  |  | (28,196 | ) |  | — |  |  | (28,196 | )
Ending balance |  | $ | 71,829 |  |  | $ | 143,444 |  |  | $ | 32,495 |  |  | $ | 7,888 |  |  | $ | 255,656 |  |  | $ | 156 |  |  | $ | 255,812 |
|  | Nine Months Ended September 30, 2015
($ in thousands) |  | Non-PCI Loans |  | PCI Loans |  | Total
| CRE |  | C&I |  | Residential |  | Consumer |  | Total |  |
Beginning balance |  | $ | 72,263 |  |  | $ | 134,598 |  |  | $ | 43,856 |  |  | $ | 10,248 |  |  | $ | 260,965 |  |  | $ | 714 |  |  | $ | 261,679 |
Provision for (reversal of) loan losses |  | 5,739 |  |  | 13,883 |  |  | (9,868 | ) |  | 305 |  |  | 10,059 |  |  | (173 | ) |  | 9,886 |
Charge-offs |  | (1,486 | ) |  | (16,619 | ) |  | (782 | ) |  | (586 | ) |  | (19,473 | ) |  | — |  |  | (19,473 | )
Recoveries |  | 1,261 |  |  | 7,067 |  |  | 3,606 |  |  | 404 |  |  | 12,338 |  |  | — |  |  | 12,338 |
Net (charge-offs) recoveries |  | (225 | ) |  | (9,552 | ) |  | 2,824 |  |  | (182 | ) |  | (7,135 | ) |  | — |  |  | (7,135 | )
Ending balance |  | $ | 77,777 |  |  | $ | 138,929 |  |  | $ | 36,812 |  |  | $ | 10,371 |  |  | $ | 263,889 |  |  | $ | 541 |  |  | $ | 264,430 |
For further information on accounting policies and the methodology used to estimate the allowance for credit losses and loan charge-offs, please see Note 1 — Summary of Significant Accounting Policies to the Consolidated Financial Statements of the Company’s 2015 Form 10-K. The following table presents a summary of activities in the allowance for unfunded credit reserves during the three and nine months ended September 30, 2016 and 2015:
($ in thousands) |  | Three Months Ended September 30, |  | Nine Months Ended September 30,
| 2016 |  | 2015 |  | 2016 |  | 2015
Beginning balance |  | $ | 20,318 |  |  | $ | 19,741 |  |  | $ | 20,360 |  |  | $ | 12,712 |
(Reversal of) provision for unfunded credit reserves |  | (1,989 | ) |  | (698 | ) |  | (2,031 | ) |  | 6,331 |
Ending balance |  | $ | 18,329 |  |  | $ | 19,043 |  |  | $ | 18,329 |  |  | $ | 19,043 |
The allowance for unfunded credit reserves is maintained at a level believed by management to be sufficient to absorb estimated probable losses related to unfunded credit facilities. The allowance for unfunded credit reserves is included in Accrued expense and other liabilities on the Consolidated Balance Sheets. Please refer to Note 10 — Commitments And Contingencies 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 September 30, 2016 and December 31, 2015:
|  | September 30, 2016
($ in thousands) |  | CRE |  | C&I |  | Residential |  | Consumer |  | Total
Allowance for loan losses |  |  |  |  |  |  |  |  |  |
Individually evaluated for impairment |  | $ | 579 |  |  | $ | 3,801 |  |  | $ | 527 |  |  | $ | 43 |  |  | $ | 4,950 |
Collectively evaluated for impairment |  | 71,250 |  |  | 139,643 |  |  | 31,968 |  |  | 7,845 |  |  | 250,706 |
Acquired with deteriorated credit quality |  | 148 |  |  | 3 |  |  | 5 |  |  | — |  |  | 156 |
Ending balance |  | $ | 71,977 |  |  | $ | 143,447 |  |  | $ | 32,500 |  |  | $ | 7,888 |  |  | $ | 255,812 |
Recorded investment in loans |  |  |  |  |  |  |  |  |  |
Individually evaluated for impairment |  | $ | 57,503 |  |  | $ | 86,785 |  |  | $ | 34,138 |  |  | $ | 1,556 |  |  | $ | 179,982 |
Collectively evaluated for impairment |  | 8,062,066 |  |  | 9,228,375 |  |  | 4,478,965 |  |  | 2,057,622 |  |  | 23,827,028 |
Acquired with deteriorated credit quality (1) |  | 395,510 |  |  | 42,885 |  |  | 258,890 |  |  | 20,296 |  |  | 717,581 |
Ending balance (1) |  | $ | 8,515,079 |  |  | $ | 9,358,045 |  |  | $ | 4,771,993 |  |  | $ | 2,079,474 |  |  | $ | 24,724,591 |
|  | December 31, 2015
($ in thousands) |  | CRE |  | C&I |  | Residential |  | Consumer |  | Total
Allowance for loan losses |  |  |  |  |  |  |  |  |  |
Individually evaluated for impairment |  | $ | 3,267 |  |  | $ | 16,088 |  |  | $ | 923 |  |  | $ | 60 |  |  | $ | 20,338 |
Collectively evaluated for impairment |  | 77,924 |  |  | 118,509 |  |  | 38,369 |  |  | 9,460 |  |  | 244,262 |
Acquired with deteriorated credit quality |  | 347 |  |  | 9 |  |  | 3 |  |  | — |  |  | 359 |
Ending balance |  | $ | 81,538 |  |  | $ | 134,606 |  |  | $ | 39,295 |  |  | $ | 9,520 |  |  | $ | 264,959 |
Recorded investment in loans |  |  |  |  |  |  |  |  |  |
Individually evaluated for impairment |  | $ | 41,396 |  |  | $ | 81,831 |  |  | $ | 38,739 |  |  | $ | 1,240 |  |  | $ | 163,206 |
Collectively evaluated for impairment |  | 7,519,988 |  |  | 8,861,960 |  |  | 4,213,265 |  |  | 1,930,588 |  |  | 22,525,801 |
Acquired with deteriorated credit quality (1) |  | 549,365 |  |  | 59,216 |  |  | 337,910 |  |  | 24,263 |  |  | 970,754 |
Ending balance (1) |  | $ | 8,110,749 |  |  | $ | 9,003,007 |  |  | $ | 4,589,914 |  |  | $ | 1,956,091 |  |  | $ | 23,659,761 |
(1) | Loans net of ASC 310-30 discount.
PCI 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. 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. The excess of total contractual cash flows over the cash flows expected to be received at origination is deemed as the “nonaccretable difference.” The following table presents the changes in accretable yield for PCI loans for the three and nine months ended September 30, 2016 and 2015:
($ in thousands) |  | Three Months Ended September 30, |  | Nine Months Ended September 30,
| 2016 |  | 2015 |  | 2016 |  | 2015
Beginning balance |  | $ | 166,777 |  |  | $ | 271,862 |  |  | $ | 214,907 |  |  | $ | 311,688 |
Accretion |  | (14,827 | ) |  | (30,608 | ) |  | (53,510 | ) |  | (84,537 | )
Changes in expected cash flows |  | 311 |  |  | 1,518 |  |  | (9,136 | ) |  | 15,621 |
Ending balance |  | $ | 152,261 |  |  | $ | 242,772 |  |  | $ | 152,261 |  |  | $ | 242,772 |
Loans Held-for-Sale Loans held-for-sale are carried at the LOCOM. 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 review under the Company’s management evaluation processes, including asset/liability management. When the Company subsequently changes its intent to hold certain loans, the loans are transferred from the loans held-for-investment portfolio to the loans held-for-sale portfolio at LOCOM. Loans held-for-sale amounted to $47.7 million as of September 30, 2016, and were comprised primarily of consumer and multifamily residential loans. In comparison, loans held-for-sale, which were comprised of consumer loans, amounted to $32.0 million as of December 31, 2015. Transfers of loans held-for-investment to loans held-for-sale were $144.9 million and $720.7 million, respectively, for the three and nine months ended September 30, 2016. These loan transfers were comprised primarily of C&I, multifamily residential and CRE loans. In comparison, loans held-for-investment transferred to loans held-for-sale of $400.3 million and $1.56 billion, respectively, for the three and nine months ended September 30, 2015, were comprised primarily of single-family residential and C&I loans. For the three months ended September 30, 2016, no write-downs to the allowance for loan losses were recorded that related to loans transferred from loans held-for-investment to loans held-for-sale. For the nine months ended September 30, 2016, the Company recorded $1.9 million in write-downs to the allowance for loan losses related to loans transferred from loans held-for-investment to loans held-for-sale. In comparison, the Company recorded $968 thousand and $3.1 million in write-downs to the allowance for loan losses related to loans transferred from loans held-for-investment to loans held-for-sale for the three and nine months ended September 30, 2015, respectively. During the three months ended September 30, 2016 and 2015, the Company sold $107.3 million and $181.9 million, respectively, in originated loans resulting in net gains of $2.2 million and $5.1 million, respectively. During the nine months ended September 30, 2016, the Company sold or securitized $529.5 million in originated loans, resulting in net gains of $9.3 million. During the nine months ended September 30, 2016, the Company recorded $1.1 million in net gains and $641 thousand in mortgage servicing rights, and retained $160.1 million of the senior tranche of the resulting securities from the securitization of $201.7 million of multifamily residential loans. Originated loans sold or securitized during the nine months ended September 30, 2016 were primarily comprised of multifamily residential, C&I and CRE loans. In comparison, during the nine months ended September 30, 2015, the Company sold $741.0 million in originated loans, which were comprised primarily of single-family residential and C&I loans, resulting in net gains of $19.4 million. From time to time, the Company purchases loans (including participation loans) and sells loans in the secondary market. During the three and nine months ended September 30, 2016, the Company purchased approximately $456.9 million and $1.50 billion of loans, respectively, compared to $207.0 million and $572.5 million, respectively, for the same periods last year. The Company sold $45.8 million and $179.4 million of loans in the secondary market, respectively, during the three and nine months ended September 30, 2016. Such purchased loans were transferred from loans held-for-investment to loans held-for-sale and a write-down to allowance was recorded, as appropriate. No gains or losses on loans sold in the secondary market were recorded for the three months ended September 30, 2016. For the nine months ended September 30, 2016, the Company recorded $69 thousand in gains on loans sold in the secondary market. In comparison, the Company sold $64.0 million and $510.1 million of loans in the secondary market, respectively, during the three and nine months ended September 30, 2015. No gains or losses on loans sold in the secondary market were recorded for the three months ended September 30, 2015. For the nine months ended September 30, 2015, the Company recorded net gains of $1.0 million on loans sold in the secondary market. No LOCOM adjustments related to the loans held-for-sale portfolio were recorded for the three months ended September 30, 2016, compared to $211 thousand recorded for the three months ended September 30, 2015. For the nine months ended September 30, 2016 and 2015, the Company recorded $2.4 million and $728 thousand, respectively, in LOCOM adjustments related to the loans held-for-sale portfolio. LOCOM adjustments are recorded in Net gains on sales of loans on the Consolidated Statements of Income.

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- 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 Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 310 -SubTopic 10 -Section 50 -Paragraph 3 -URI http://asc.fasb.org/extlink&oid=49124121&loc=d3e5066-111524 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 210 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SX 210.5-02.3,4) -URI http://asc.fasb.org/extlink&oid=6877327&loc=d3e13212-122682 Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 310 -SubTopic 10 -Section 50 -Paragraph 11 -URI http://asc.fasb.org/extlink&oid=49124121&loc=d3e5162-111524 Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 235 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SX 210.4-08.(k)) -URI http://asc.fasb.org/extlink&oid=26873400&loc=d3e23780-122690 Reference 5: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 310 -SubTopic 10 -Section 50 -Paragraph 4 -URI http://asc.fasb.org/extlink&oid=49124121&loc=d3e5074-111524 Reference 6: http://www.xbrl.org/2003/role/presentationRef -Publisher SEC -Name Regulation S-X (SX) -Number 210 -Section 03 -Paragraph 7 -Article 9 + Details
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