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 December 31, 2015:
Loans individually evaluated for impairment	$	—	$	—	$	—
Loans collectively evaluated for impairment		122,712		22,484		145,196
Acquired loans with deteriorated credit quality		14,583		18,740		33,323

Total	$	137,295	$	41,224	$	178,519


(in thousands)	Mortgage		Other		Total
Allowances for Loan Losses at December 31, 2014:
Loans individually evaluated for impairment	$	26	$	—	$	26
Loans collectively evaluated for impairment		122,590		17,241		139,831
Acquired loans with deteriorated credit quality		23,538		21,943		45,481

Total	$	146,154	$	39,184	$	185,338

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 December 31, 2015:
Loans individually evaluated for impairment	$	47,480	$	4,474	$	51,954
Loans collectively evaluated for impairment		34,209,870		1,470,321		35,680,191
Acquired loans with deteriorated credit quality		1,924,255		144,178		2,068,433

Total	$	36,181,605	$	1,618,973	$	37,800,578


(in thousands)	Mortgage		Other		Total
Loans Receivable at December 31, 2014:
Loans individually evaluated for impairment	$	81,574	$	6,806	$	88,380
Loans collectively evaluated for impairment		31,781,623		1,134,358		32,915,981
Acquired loans with deteriorated credit quality		2,227,572		201,050		2,428,622

Total	$	34,090,769	$	1,342,214	$	35,432,983

Allowance for Losses on Non-Covered Loans

The following table summarizes activity in the allowance for losses on non-covered loans for the twelve months ended December 31, 2015 and 2014:


	December 31,
	2015									2014
(in thousands)	Mortgage			Other			Total			Mortgage			Other			Total
Balance, beginning of period	$	122,616		$	17,241		$	139,857		$	123,991		$	17,955		$	141,946
Charge-offs		(1,315	)		(1,273	)		(2,588	)		(2,780	)		(5,296	)		(8,076	)
Recoveries		5,765			5,008			10,773			1,405			4,582			5,987
Transfer from the allowance for losses on covered loans ⁽¹⁾		2,250			166			2,416			—			—			—
(Recovery of) provision for non-covered loan losses		(4,838	)		1,504			(3,334	)		—			—			—

Balance, end of period	$	124,478		$	22,646		$	147,124		$	122,616		$	17,241		$	139,857

(1)

Represents the allowance associated with $14.2 million of loans acquired in the Desert Hills transaction that were transferred from covered loans to non-covered loans upon expiration of the related FDIC loss sharing agreement in March 2015.

Please see Note 2, “Summary of Significant Accounting Polices” 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 December 31, 2015:


(in thousands)	Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment		Interest Income Recognized
Impaired loans with no related allowance:
Multi-family	$	27,464	$	29,379	$	—	$	30,965	$	1,320
Commercial real estate		13,995		15,480		—		25,066		383
One-to-four family		3,384		8,929		—		2,302		75
Acquisition, development, and construction		2,637		3,035		—		1,086		148
Other		4,474		4,794		—		8,386		118

Total impaired loans with no related allowance	$	51,954	$	61,617	$	—	$	67,805	$	2,044

Impaired loans with an allowance recorded:
Multi-family	$	—	$	—	$	—	$	—	$	—
Commercial real estate		—		—		—		—		—
One-to-four family		—		—		—		—		—
Acquisition, development, and construction		—		—		—		—		—
Other		—		—		—		—		—

Total impaired loans with an allowance recorded	$	—	$	—	$	—	$	—	$	—

Total impaired loans:
Multi-family	$	27,464	$	29,379	$	—	$	30,965	$	1,320
Commercial real estate		13,995		15,480		—		25,066		383
One-to-four family		3,384		8,929		—		2,302		75
Acquisition, development, and construction		2,637		3,035		—		1,086		148
Other		4,474		4,794		—		8,386		118

Total impaired loans	$	51,954	$	61,617	$	—	$	67,805	$	2,044

The following table presents additional information about the Company’s impaired non-covered loans at December 31, 2014:


(in thousands)	Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment		Interest Income Recognized
Impaired loans with no related allowance:
Multi-family	$	45,383	$	52,593	$	—	$	54,051	$	1,636
Commercial real estate		30,370		32,460		—		29,935		1,629
One-to-four family		2,028		2,069		—		1,254		—
Acquisition, development, and construction		654		1,024		—		505		218
Commercial and industrial		6,806		12,155		—		7,749		307

Total impaired loans with no related allowance	$	85,241	$	100,301	$	—	$	93,494	$	3,790

Impaired loans with an allowance recorded:
Multi-family	$	3,139	$	3,139	$	26	$	628	$	72
Commercial real estate		—		—		—		490		—
One-to-four family		—		—		—		61		—
Acquisition, development, and construction		—		—		—		—		—
Commercial and industrial		—		—		—		—		—

Total impaired loans with an allowance recorded	$	3,139	$	3,139	$	26	$	1,179	$	72

Total impaired loans:
Multi-family	$	48,522	$	55,732	$	26	$	54,679	$	1,708
Commercial real estate		30,370		32,460		—		30,425		1,629
One-to-four family		2,028		2,069		—		1,315		—
Acquisition, development, and construction		654		1,024		—		505		218
Commercial and industrial		6,806		12,155		—		7,749		307

Total impaired loans	$	88,380	$	103,440	$	26	$	94,673	$	3,862

Allowance for Losses on Covered Loans

Covered loans are reported exclusive of the FDIC loss share receivable and are reviewed for collectability based on the expectations of cash flows from these loans. Covered loans have been aggregated into pools of loans with common characteristics. In determining the allowance for losses on covered loans, the Company periodically performs an analysis to estimate the expected cash flows for each of the pools of loans. The Company records a recovery of, or provision for, losses on covered loans to the extent that the expected cash flows from a loan pool have increased, or decreased, since the acquisition date.

Accordingly, if there is 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 is recorded as a recovery of the prior-period impairment charged to earnings, and the allowance for covered loan losses is reduced. A related debit to non-interest income and a decrease in the FDIC loss share receivable is recognized at the same time, and measured based on the applicable loss sharing agreement percentage.

If there is 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 is recorded as a provision for covered loan losses charged to earnings, and an allowance for covered loan losses is established. A related credit to non-interest income and an increase in the FDIC loss share receivable is recognized at the same time, and measured based on the applicable loss sharing agreement percentage.

The following table summarizes activity in the allowance for losses on covered loans for the years ended December 31, 2015 and 2014:


	December 31,
(in thousands)	2015			2014
Balance, beginning of period	$	45,481		$	64,069
Recovery of losses on covered loans		(11,670	)		(18,588	)
Transfer to the allowance for losses on covered loans⁽¹⁾		(2,416	)		—

Balance, end of period	$	31,395		$	45,481

(1)