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Note 5 - Loans | 12 Months Ended
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Dec. 31, 2014
Receivables [Abstract] |
Loans, Notes, Trade and Other Receivables Disclosure [Text Block] | 5. Loans Most of the Company’s business activity is predominately with Asian customers located in Southern and Northern California; New York City; Houston and Dallas, Texas; Seattle, Washington; Boston, Massachusetts; Chicago, Illinois; Edison, New Jersey; Nevada; and Hong Kong. The Company has no specific industry concentration, and generally its loans are collateralized with real property or other pledged collateral of the borrowers. Loans are generally expected to be paid off from the operating profits of the borrowers, refinancing by another lender, or through sale by the borrowers of the secured collateral. The components of loans in the Consolidated Balance Sheets as of December 31, 2014, and December 31, 2013, were as follows:
|  | As of December 31, |
|  | 2014 |  |  | 2013 |
|  | (In thousands) |
Type of Loans: |  |  |  |  |  |  |  |
Commercial loans |  | $ | 2,382,493 |  |  | $ | 2,298,724 |
Real estate construction loans |  |  | 298,654 |  |  |  | 221,701 |
Commercial mortgage loans |  |  | 4,486,443 |  |  |  | 4,023,051 |
Residential mortgage loans |  |  | 1,570,059 |  |  |  | 1,355,255 |
Equity lines |  |  | 172,879 |  |  |  | 171,277 |
Installment and other loans |  |  | 3,552 |  |  |  | 14,555 |
Gross loans |  |  | 8,914,080 |  |  |  | 8,084,563 |
Less: |  |  |  |  |  |  |  |
Allowance for loan losses |  |  | (161,420 | ) |  |  | (173,889 | )
Unamortized deferred loan fees |  |  | (12,392 | ) |  |  | (13,487 | )
Total loans and leases, net |  | $ | 8,740,268 |  |  | $ | 7,897,187 |
Loans held for sale |  | $ | 973 |  |  | $ | - |
The Company pledged real estate loans of $3.8 billion at December 31, 2014, and $1.6 billion at December 31, 2013, to the Federal Home Loan Bank of San Francisco under its specific pledge program. In addition, the Bank pledged $127.2 million at December 31, 2014, and $119.1 million at December 31, 2013, of its commercial loans to the Federal Reserve Bank’s Discount Window under the Borrower-in-Custody program. Loans serviced for others as of December 31, 2014, totaled $240.1 million and were comprised of $125.8 million of residential mortgages, $52.5 million of commercial loans, $31.2 million of commercial real estate loans, and $30.6 million of construction loans. The Company has entered into transactions with its directors, executive officers, or principal holders of its equity securities, or the associates of such persons (“Related Parties”). Such transactions were made in the ordinary course of business on substantially the same terms and conditions, including interest rates and collateral, as those prevailing at the same time for comparable transactions with customers who are not related parties. In management’s opinion, these transactions did not involve more than normal credit risk or present other unfavorable features. All loans to Related Parties were current as of December 31, 2014. An analysis of the activity with respect to loans to Related Parties for the years indicated is as follows:
|  | December 31, |
|  | 2014 |  |  | 2013 |
|  | (In thousands) |
Balance at beginning of year |  | $ | 126,985 |  |  | $ | 172,584 |
Additional loans made |  |  | 50,657 |  |  |  | 64,063 |
Payment received |  |  | (119,783 | ) |  |  | (109,662 | )
Balance at end of year |  | $ | 57,859 |  |  | $ | 126,985 |
At December 31, 2014, recorded investment in impaired loans totaled $174.5 million and was comprised of nonaccrual loans, excluding loans held for sale, of $70.2 million and accruing TDR’s of $104.3 million. At December 31, 2013, recorded investment in impaired loans totaled $200.8 million and was comprised of nonaccrual loans of $83.2 million and accruing TDR’s of $117.6 million. The average balance of impaired loans was $190.2 million in 2014 and $221.2 million in 2013. We considered all non-accrual loans and troubled debt restructurings ("TDR") to be impaired. Interest recognized on impaired loans totaled $5.3 million in 2014 and $5.6 million in 2013. The Bank recognizes interest income on impaired loans based on its existing method of recognizing interest income on non-accrual loans except accruing TDRs. For impaired loans, the amounts previously charged off represent 17.1% at December 31, 2014, and 23.9% at December 31, 2013, of the contractual balances for impaired loans. The following table presents impaired loans and the related allowance as of the dates indicated:
|  | Impaired Loans |
|  | As of December 31, 2014 |  |  | As of December 31, 2013 |
|  | Unpaid Principal Balance |  |  | Recorded Investment |  |  | Allowance |  |  | Unpaid Principal Balance |  |  | Recorded Investment |  |  | Allowance |
|  | (Dollars in thousands) |
With no allocated allowance |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Commercial loans |  | $ | 19,479 |  |  | $ | 18,452 |  |  | $ | - |  |  | $ | 20,992 |  |  | $ | 18,905 |  |  | $ | - |
Real estate construction loans |  |  | 32,924 |  |  |  | 17,025 |  |  |  | - |  |  |  | 25,401 |  |  |  | 15,097 |  |  |  | - |
Commercial mortgage loans |  |  | 77,474 |  |  |  | 75,172 |  |  |  | - |  |  |  | 105,593 |  |  |  | 78,930 |  |  |  | - |
Residential mortgage and equity lines |  |  | 2,518 |  |  |  | 2,518 |  |  |  | - |  |  |  | 4,892 |  |  |  | 4,892 |  |  |  | - |
Subtotal |  | $ | 132,395 |  |  | $ | 113,167 |  |  | $ | - |  |  | $ | 156,878 |  |  | $ | 117,824 |  |  | $ | - |
With allocated allowance |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Commercial loans |  | $ | 7,003 |  |  | $ | 5,037 |  |  | $ | 1,263 |  |  | $ | 22,737 |  |  | $ | 13,063 |  |  | $ | 2,519 |
Real estate construction loans |  |  | 19,006 |  |  |  | 8,703 |  |  |  | 1,077 |  |  |  | 28,475 |  |  |  | 19,323 |  |  |  | 3,460 |
Commercial mortgage loans |  |  | 38,197 |  |  |  | 34,022 |  |  |  | 8,993 |  |  |  | 39,223 |  |  |  | 35,613 |  |  |  | 6,584 |
Residential mortgage and equity lines |  |  | 14,019 |  |  |  | 13,590 |  |  |  | 465 |  |  |  | 16,535 |  |  |  | 14,957 |  |  |  | 721 |
Subtotal |  | $ | 78,225 |  |  | $ | 61,352 |  |  | $ | 11,798 |  |  | $ | 106,970 |  |  | $ | 82,956 |  |  | $ | 13,284 |
Total impaired loans |  | $ | 210,620 |  |  | $ | 174,519 |  |  | $ | 11,798 |  |  | $ | 263,848 |  |  | $ | 200,780 |  |  | $ | 13,284 |
The following table presents the average balance and interest income recognized related to impaired loans for the periods indicated:
|  | For the year ended December 31, |
|  | 2014 |  |  | 2013 |  |  | 2012 |  |  | 2014 |  |  | 2013 |  |  | 2012 |
|  | Average Recorded Investment |  |  | Interest Income Recognized |
|  | (In thousands) |
Commercial loans |  | $ | 26,128 |  |  | $ | 27,123 |  |  | $ | 31,798 |  |  | $ | 878 |  |  | $ | 770 |  |  | $ | 580 |
Real estate construction loans |  |  | 32,439 |  |  |  | 37,875 |  |  |  | 49,094 |  |  |  | 264 |  |  |  | 284 |  |  |  | 265 |
Commercial mortgage loans |  |  | 114,248 |  |  |  | 138,121 |  |  |  | 178,822 |  |  |  | 3,735 |  |  |  | 4,256 |  |  |  | 8,221 |
Residential mortgage and equity lines |  |  | 17,411 |  |  |  | 18,033 |  |  |  | 18,062 |  |  |  | 462 |  |  |  | 289 |  |  |  | 239 |
Subtotal |  | $ | 190,226 |  |  | $ | 221,152 |  |  | $ | 277,776 |  |  | $ | 5,339 |  |  | $ | 5,599 |  |  | $ | 9,305 |
The following is a summary of non-accrual loans as of December 31, 2014, 2013, and 2012 and the related net interest foregone for the years then ended:
|  | 2014 |  |  | 2013 |  |  | 2012 |
|  | (In thousands) |
Non-accrual portfolio loans |  | $ | 70,163 |  |  | $ | 83,183 |  |  | $ | 103,902 |
Non-accrual loans held-for-sale |  |  | 973 |  |  |  | - |  |  |  | - |
Total non-accrual loans |  | $ | 71,136 |  |  | $ | 83,183 |  |  | $ | 103,902 |
Contractual interest due |  | $ | 6,663 |  |  | $ | 5,851 |  |  | $ | 6,621 |
Interest recognized |  |  | 217 |  |  |  | 22 |  |  |  | 1,006 |
Net interest foregone |  | $ | 6,446 |  |  | $ | 5,829 |  |  | $ | 5,615 |
The following tables present the aging of the loan portfolio by type as of December 31, 2014, and December 31, 2013:
|  | As of December 31, 2014 |
|  | 30-59 Days Past Due |  |  | 60-89 Days Past Due |  |  | Greater than 90 Days Past Due |  |  | Non-accrual Loans |  |  | Total Past Due |  |  | Loans Not Past Due |  |  | Total |
Type of Loans: |  | (In thousands) |
Commercial loans |  | $ | 11,595 |  |  | $ | 1,238 |  |  | $ | - |  |  | $ | 6,983 |  |  | $ | 19,816 |  |  | $ | 2,362,677 |  |  | $ | 2,382,493 |
Real estate construction loans |  |  | 1,416 |  |  |  | - |  |  |  | - |  |  |  | 19,963 |  |  |  | 21,379 |  |  |  | 277,275 |  |  |  | 298,654 |
Commercial mortgage loans |  |  | 17,654 |  |  |  | 3,909 |  |  |  | - |  |  |  | 35,606 |  |  |  | 57,169 |  |  |  | 4,429,274 |  |  |  | 4,486,443 |
Residential mortgage loans |  |  | 5,634 |  |  |  | 732 |  |  |  | - |  |  |  | 7,611 |  |  |  | 13,977 |  |  |  | 1,728,961 |  |  |  | 1,742,938 |
Installment and other loans |  |  | 60 |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 60 |  |  |  | 3,492 |  |  |  | 3,552 |
Total loans |  | $ | 36,359 |  |  | $ | 5,879 |  |  | $ | - |  |  | $ | 70,163 |  |  | $ | 112,401 |  |  | $ | 8,801,679 |  |  | $ | 8,914,080 |
|  | As of December 31, 2013 |
|  | 30-59 Days Past Due |  |  | 60-89 Days Past Due |  |  | Greater than 90 Days Past Due |  |  | Non-accrual Loans |  |  | Total Past Due |  |  | Loans Not Past Due |  |  | Total |
Type of Loans: |  | (In thousands) |
Commercial loans |  | $ | 7,170 |  |  | $ | 16,562 |  |  | $ | - |  |  | $ | 21,232 |  |  | $ | 44,964 |  |  | $ | 2,253,760 |  |  | $ | 2,298,724 |
Real estate construction loans |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 28,586 |  |  |  | 28,586 |  |  |  | 193,115 |  |  |  | 221,701 |
Commercial mortgage loans |  |  | 20,043 |  |  |  | 7,862 |  |  |  | 982 |  |  |  | 19,621 |  |  |  | 48,508 |  |  |  | 3,974,543 |  |  |  | 4,023,051 |
Residential mortgage loans |  |  | 3,508 |  |  |  | 832 |  |  |  | - |  |  |  | 13,744 |  |  |  | 18,084 |  |  |  | 1,508,448 |  |  |  | 1,526,532 |
Installment and other loans |  |  | 100 |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 100 |  |  |  | 14,455 |  |  |  | 14,555 |
Total loans |  | $ | 30,821 |  |  | $ | 25,256 |  |  | $ | 982 |  |  | $ | 83,183 |  |  | $ | 140,242 |  |  | $ | 7,944,321 |  |  | $ | 8,084,563 |
The determination of the amount of the allowance for credit losses for problem loans is based on management’s current judgment about the credit quality of the loan portfolio and takes into consideration known relevant internal and external factors that affect collectibility when determining the appropriate level for the allowance for credit losses. The nature of the process by which the Bank determines the appropriate allowance for credit losses requires the exercise of considerable judgment. This allowance evaluation process is also applied to TDRs since TDRs are considered to be impaired loans. At December 31, 2014, accruing TDRs were $104.3 million and non-accrual TDRs were $41.6 million compared to accruing TDRs of $117.6 million and non-accrual TDRs of $38.8 million at December 31, 2013. The Company has allocated specific reserves of $6.5 million to accruing TDRs and $4.9 million to non-accrual TDRs at December 31, 2014, and $6.9 million to accruing TDRs and $2.2 million to non-accrual TDRs at December 31, 2013. The following table presents TDRs that were modified during 2014, their specific reserve at December 31, 2014, and charge-offs during 2014:
|  | No. of Contracts |  |  | Pre-Modification Outstanding Recorded Investment |  |  | Post-Modification Outstanding Recorded Investment |  |  | Specific Reserve |  |  | Charge-offs |
|  | (Dollars in thousands) |
Commercial loans |  |  | 4 |  |  | $ | 10,539 |  |  | $ | 10,539 |  |  | $ | 21 |  |  | $ | - |
Commercial mortgage loans |  |  | 3 |  |  |  | 11,817 |  |  |  | 11,817 |  |  |  | 5,550 |  |  |  | - |
Residential mortgage and equity lines |  |  | 7 |  |  |  | 2,715 |  |  |  | 2,715 |  |  |  | 29 |  |  |  | - |
Total |  |  | 14 |  |  | $ | 25,071 |  |  | $ | 25,071 |  |  | $ | 5,600 |  |  | $ | - |
The following table presents TDRs that were modified during 2013, their specific reserve at December 31, 2013, and charge-offs during 2013:
|  | No. of Contracts |  |  | Pre-Modification Outstanding Recorded Investment |  |  | Post-Modification Outstanding Recorded Investment |  |  | Specific Reserve |  |  | Charge-offs |
|  | (Dollars in thousands) |
Commercial loans |  |  | 9 |  |  | $ | 12,026 |  |  | $ | 10,860 |  |  | $ | 550 |  |  | $ | 1,166 |
Commercial mortgage loans |  |  | 5 |  |  |  | 13,090 |  |  |  | 13,090 |  |  |  | 329 |  |  |  | - |
Residential mortgage and equity lines |  |  | 11 |  |  |  | 3,736 |  |  |  | 3,658 |  |  |  | 103 |  |  |  | 78 |
Total |  |  | 25 |  |  | $ | 28,852 |  |  | $ | 27,608 |  |  | $ | 982 |  |  | $ | 1,244 |
The following table presents TDRs that were modified during 2012, their specific reserve at December 31, 2012, and charge-offs during 2012:
|  | No. of Contracts |  |  | Pre-Modification Outstanding Recorded Investment |  |  | Post-Modification Outstanding Recorded Investment |  |  | Specific Reserve |  |  | Charge-off |
|  | (Dollars in thousands) |
Commercial loans |  |  | 9 |  |  | $ | 3,646 |  |  | $ | 3,646 |  |  | $ | 1,213 |  |  | $ | - |
Commercial mortgage loans |  |  | 20 |  |  |  | 62,118 |  |  |  | 58,393 |  |  |  | 27 |  |  |  | 3,725 |
Residential mortgage and equity lines |  |  | 14 |  |  |  | 4,305 |  |  |  | 4,223 |  |  |  | 162 |  |  |  | 82 |
Total |  |  | 43 |  |  | $ | 70,069 |  |  | $ | 66,262 |  |  | $ | 1,402 |  |  | $ | 3,807 |
A summary of TDRs by type of concession and by type of loans as of December 31, 2014, and December 31, 2013, are shown below:
|  |  |  |  |  | December 31, 2014 |
Accruing TDRs |  | Interest Deferral |  |  | Principal Deferral |  |  | Rate Reduction |  |  | Rate Reduction and Forgiveness of Principal |  |  | Rate Reduction and Payment Deferral |  |  | Total |
|  | (In thousands) |
Commercial loans |  | $ | - |  |  | $ | 11,572 |  |  | $ | - |  |  | $ | - |  |  | $ | 4,934 |  |  | $ | 16,506 |
Real estate construction loans |  |  | - |  |  |  | 5,765 |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 5,765 |
Commercial mortgage loans |  |  | 436 |  |  |  | 20,107 |  |  |  | 26,694 |  |  |  | - |  |  |  | 26,351 |  |  |  | 73,588 |
Residential mortgage loans |  |  | - |  |  |  | 3,316 |  |  |  | - |  |  |  | 410 |  |  |  | 4,771 |  |  |  | 8,497 |
Total accruing TDRs |  | $ | 436 |  |  | $ | 40,760 |  |  | $ | 26,694 |  |  | $ | 410 |  |  | $ | 36,056 |  |  | $ | 104,356 |
|  | December 31, 2014 |
Non-accrual TDRs |  | Interest Deferral |  |  | Principal Deferral |  |  | Rate Reduction |  |  | Rate Reduction and Payment Deferral |  |  | Total |
|  | (In thousands) |
Commercial loans |  | $ | 1,184 |  |  | $ | 239 |  |  | $ | 860 |  |  | $ | 1,269 |  |  | $ | 3,552 |
Real estate construction loans |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 19,462 |  |  |  | 19,462 |
Commercial mortgage loans |  |  | - |  |  |  | 15,917 |  |  |  | - |  |  |  | 973 |  |  |  | 16,890 |
Residential mortgage loans |  |  | - |  |  |  | 1,026 |  |  |  | - |  |  |  | 688 |  |  |  | 1,714 |
Total non-accrual TDRs |  | $ | 1,184 |  |  | $ | 17,182 |  |  | $ | 860 |  |  | $ | 22,392 |  |  | $ | 41,618 |
|  | As of December 31, 2013 |
Accruing TDRs |  | Principal Deferral |  |  | Rate Reduction |  |  | Rate Reduction and Forgiveness of Principal |  |  | Rate Reduction and Payment Deferral |  |  | Total |
|  | (In thousands) |
Commercial loans |  | $ | 9,112 |  |  | $ | 2,916 |  |  | $ | - |  |  | $ | 2,708 |  |  | $ | 14,736 |
Real estate construction loans |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 5,834 |  |  |  | 5,834 |
Commercial mortgage loans |  |  | 11,333 |  |  |  | 9,389 |  |  |  | - |  |  |  | 70,200 |  |  |  | 90,922 |
Residential mortgage loans |  |  | 1,564 |  |  |  | 1,024 |  |  |  | - |  |  |  | 3,517 |  |  |  | 6,105 |
Total accruing TDRs |  | $ | 22,009 |  |  | $ | 13,329 |  |  | $ | - |  |  | $ | 82,259 |  |  | $ | 117,597 |
|  | As of December 31,2013 |
Non-accrual TDRs |  | Interest Deferral |  |  | Principal Deferral |  |  | Rate Reduction and Forgiveness of Principal |  |  | Rate Reduction and Payment Deferral |  |  | Total |
|  | (In thousands) |
Commercial loans |  | $ | - |  |  | $ | 2,866 |  |  | $ | 1,352 |  |  | $ | - |  |  | $ | 4,218 |
Real estate construction loans |  |  | - |  |  |  | 16,009 |  |  |  | - |  |  |  | 9,263 |  |  |  | 25,272 |
Commercial mortgage loans |  |  | 1,443 |  |  |  | 2,168 |  |  |  | - |  |  |  | 1,843 |  |  |  | 5,454 |
Residential mortgage loans |  |  | 241 |  |  |  | 2,206 |  |  |  | - |  |  |  | 1,378 |  |  |  | 3,825 |
Total non-accrual TDRs |  | $ | 1,684 |  |  | $ | 23,249 |  |  | $ | 1,352 |  |  | $ | 12,484 |  |  | $ | 38,769 |
Troubled debt restructurings on accrual status totaled $104.3 million at December 31, 2014, and were comprised of 60 loans, a decrease of $13.3 million, compared to 64 loans totaling $117.6 million at December 31, 2013. TDRs at December 31, 2014, were comprised of nine commercial loans of $16.5 million, three hotel loans of $15.7 million, 31 single family residential loans of $13.6 million, two industrial and manufactural use building loans of $12.2 million, two land loans for residential purpose of $10.2 million, four commercial condos loans of $10.1 million, three retail shopping and commercial use building loans of $9.0 million, one multi-family residential loan of $6.1 million, one shopping center construction loan of $5.8 million, three office buildings loans of $3.5 million, and one warehouse loan of $1.6 million. We expect that the troubled debt restructuring loans on accruing status as of December 31, 2014, which are all performing in accordance with their restructured terms, will continue to comply with the restructured terms because of the reduced principal or interest payments on these loans. The comparable TDRs at December 31, 2013, were comprised of 13 retail shopping and commercial use building loans of $44.2 million, ten office and commercial use building loans of $28.6 million, four hotel loans of $17.2 million, 25 single family residential loans of $20.0 million, two warehouses of $1.6 million, five commercial loans of $5.3 million, and five multi-family residential loans of $748,000. The activity within our TDR loans for 2014, 2013, and 2012 are shown below:
Accruing TDRs |  | 2014 |  |  | 2013 |  |  | 2012 |
|  | (In thousands) |
Beginning balance |  | $ | 117,597 |  |  | $ | 144,695 |  |  | $ | 120,016 |
New restructurings |  |  | 23,740 |  |  |  | 21,382 |  |  |  | 53,958 |
Restructured loans restored to accrual status |  |  | 962 |  |  |  | 6,851 |  |  |  | 8,356 |
Charge-offs |  |  | - |  |  |  | (78 | ) |  |  | (251 | )
Payments |  |  | (13,256 | ) |  |  | (52,362 | ) |  |  | (5,159 | )
Restructured loans placed on non-accrual |  |  | (24,687 | ) |  |  | (2,891 | ) |  |  | (32,225 | )
Ending balance |  | $ | 104,356 |  |  | $ | 117,597 |  |  | $ | 144,695 |
Non-accrual TDRs |  | 2014 |  |  | 2013 |  |  | 2012 |
|  | (In thousands) |
Beginning balance |  | $ | 38,769 |  |  | $ | 47,731 |  |  | $ | 50,870 |
New restructurings |  |  | 1,331 |  |  |  | 6,226 |  |  |  | 12,304 |
Restructured loans placed on non-accrual |  |  | 24,687 |  |  |  | 2,891 |  |  |  | 32,225 |
Charge-offs |  |  | (8,937 | ) |  |  | (2,124 | ) |  |  | (4,182 | )
Payments |  |  | (11,710 | ) |  |  | (4,295 | ) |  |  | (33,931 | )
Foreclosures |  |  | (1,560 | ) |  |  | (4,809 | ) |  |  | (1,199 | )
Restructured loans restored to accrual status |  |  | (962 | ) |  |  | (6,851 | ) |  |  | (8,356 | )
Ending balance |  | $ | 41,618 |  |  | $ | 38,769 |  |  | $ | 47,731 |
A loan is considered to be in payment default once it is 60 to 90 days contractually past due under the modified terms. There were no loans modified as TDRs during the previous twelve months that subsequently defaulted as of December 31, 2014. Under the Company’s internal underwriting policy, an evaluation is performed of the probability that the borrower will be in payment default on any of its debt in the foreseeable future without the modification in order to determine whether a borrower is experiencing financial difficulty. As of December 31, 2014, there were no commitments to lend additional funds to those borrowers whose loans have been restructured, were considered impaired, or were on non-accrual status. As part of the on-going monitoring of the credit quality of our loan portfolio, t he Company utilizes a risk grading matrix to assign a risk grade to each loan. Loans are risk rated based on analysis of the current state of the borrower’s credit quality. The analysis of credit quality includes a review of all sources of repayment, the borrower’s current financial and liquidity status and all other relevant information. The risk rating categories can be generally described by the following grouping for non-homogeneous loans:
● | Pass/Watch – These loans range from minimal credit risk to lower than average, but still acceptable, credit risk.
● | Special Mention – Borrower is fundamentally sound and the loan is currently protected but adverse trends are apparent that, if not corrected, may affect ability to repay. Primary source of loan repayment remains viable but there is increasing reliance on collateral or guarantor support.
● | Substandard – These loans are inadequately protected by current sound worth, paying capacity or pledged collateral. Well-defined weaknesses exist that could jeopardize repayment of debt. Loss may not be imminent, but if weaknesses are not corrected, there is a good possibility of some loss.
● | Doubtful – The possibility of loss is extremely high, but due to identifiable and important pending events (which may strengthen the loan) a loss classification is deferred until the situation is better defined.
● | Loss – These loans are considered uncollectible and of such little value that to continue to carry the loans as an active asset is no longer warranted.
The following tables present loan portfolio by risk rating as of December 31, 2014, and as of December 31, 2013:
|  | As of December 31, 2014 |
|  | Pass/Watch |  |  | Special Mention |  |  | Substandard |  |  | Doubtful |  |  | Total |
Commercial loans |  | $ | 2,260,474 |  |  | $ | 47,619 |  |  | $ | 72,561 |  |  | $ | 1,839 |  |  | $ | 2,382,493 |
Real estate construction loans |  |  | 272,927 |  |  |  | - |  |  |  | 25,227 |  |  |  | 500 |  |  |  | 298,654 |
Commercial mortgage loans |  |  | 4,213,453 |  |  |  | 105,970 |  |  |  | 167,020 |  |  |  | - |  |  |  | 4,486,443 |
Residential mortgage and equity lines |  |  | 1,733,248 |  |  |  | - |  |  |  | 9,690 |  |  |  | - |  |  |  | 1,742,938 |
Installment and other loans |  |  | 3,552 |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 3,552 |
Total gross loans |  | $ | 8,483,654 |  |  | $ | 153,589 |  |  | $ | 274,498 |  |  | $ | 2,339 |  |  | $ | 8,914,080 |
Loans held for sale |  | $ | - |  |  | $ | - |  |  | $ | 973 |  |  | $ | - |  |  | $ | 973 |
|  | As of December 31, 2013 |
|  | Pass/Watch |  |  | Special Mention |  |  | Substandard |  |  | Doubtful |  |  | Total |
Commercial loans |  | $ | 2,108,191 |  |  | $ | 84,786 |  |  | $ | 102,088 |  |  | $ | 3,659 |  |  | $ | 2,298,724 |
Real estate construction loans |  |  | 184,449 |  |  |  | - |  |  |  | 33,939 |  |  |  | 3,313 |  |  |  | 221,701 |
Commercial mortgage loans |  |  | 3,686,788 |  |  |  | 127,436 |  |  |  | 208,827 |  |  |  | - |  |  |  | 4,023,051 |
Residential mortgage and equity lines |  |  | 1,510,647 |  |  |  | - |  |  |  | 15,885 |  |  |  | - |  |  |  | 1,526,532 |
Installment and other loans |  |  | 14,555 |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 14,555 |
Total gross loans |  | $ | 7,504,630 |  |  | $ | 212,222 |  |  | $ | 360,739 |  |  | $ | 6,972 |  |  | $ | 8,084,563 |
The allowance for loan losses and the reserve for off-balance sheet credit commitments are significant estimates that can and do change based on management’s process in analyzing the loan portfolio and on management’s assumptions about specific borrowers, underlying collateral, and applicable economic and environmental conditions, among other factors. The following table presents the balance in the allowance for loan losses by portfolio segment and based on impairment method as of December 31, 2014, and as of December 31, 2013.
|  |  |  |  |  | Real Estate |  |  | Commercial |  |  | Residential |  |  |  |  |  |  |  |  |
|  | Commercial |  |  | Construction |  |  | Mortgage |  |  | Mortgage |  |  | Consumer |  |  |  |  |
|  | Loans |  |  | Loans |  |  | Loans |  |  | and Equity Lines |  |  | and Other |  |  | Total |
|  | (In thousands) |
December 31, 2014 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Loans individually evaluated for impairment |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Allowance |  | $ | 1,263 |  |  | $ | 1,077 |  |  | $ | 8,993 |  |  | $ | 465 |  |  | $ | - |  |  | $ | 11,798 |
Balance |  | $ | 23,489 |  |  | $ | 25,728 |  |  | $ | 109,194 |  |  | $ | 16,108 |  |  | $ | - |  |  | $ | 174,519 |
Loans collectively evaluated for impairment |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Allowance |  | $ | 46,238 |  |  | $ | 26,575 |  |  | $ | 65,680 |  |  | $ | 11,113 |  |  | $ | 16 |  |  | $ | 149,622 |
Balance |  | $ | 2,359,004 |  |  | $ | 272,926 |  |  | $ | 4,377,249 |  |  | $ | 1,726,830 |  |  | $ | 3,552 |  |  | $ | 8,739,561 |
Total allowance |  | $ | 47,501 |  |  | $ | 27,652 |  |  | $ | 74,673 |  |  | $ | 11,578 |  |  | $ | 16 |  |  | $ | 161,420 |
Total balance |  | $ | 2,382,493 |  |  | $ | 298,654 |  |  | $ | 4,486,443 |  |  | $ | 1,742,938 |  |  | $ | 3,552 |  |  | $ | 8,914,080 |
December 31, 2013 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Loans individually evaluated for impairment |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Allowance |  | $ | 2,519 |  |  | $ | 3,460 |  |  | $ | 6,584 |  |  | $ | 721 |  |  | $ | - |  |  | $ | 13,284 |
Balance |  | $ | 31,968 |  |  | $ | 34,420 |  |  | $ | 114,544 |  |  | $ | 19,848 |  |  | $ | - |  |  | $ | 200,780 |
Loans collectively evaluated for impairment |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Allowance |  | $ | 62,584 |  |  | $ | 8,539 |  |  | $ | 78,169 |  |  | $ | 11,284 |  |  | $ | 29 |  |  | $ | 160,605 |
Balance |  | $ | 2,266,756 |  |  | $ | 187,281 |  |  | $ | 3,908,507 |  |  | $ | 1,506,684 |  |  | $ | 14,555 |  |  | $ | 7,883,783 |
Total allowance |  | $ | 65,103 |  |  | $ | 11,999 |  |  | $ | 84,753 |  |  | $ | 12,005 |  |  | $ | 29 |  |  | $ | 173,889 |
Total balance |  | $ | 2,298,724 |  |  | $ | 221,701 |  |  | $ | 4,023,051 |  |  | $ | 1,526,532 |  |  | $ | 14,555 |  |  | $ | 8,084,563 |
The following table details activity in the allowance for loan losses by portfolio segment for the years ended December 31, 2014 and 2013. Allocation of a portion of the allowance to one category of loans does not preclude its availability to absorb losses in other categories.
|  |  |  |  |  | Real Estate |  |  | Commercial |  |  | Residential |  |  | Installment |  |  |  |  |
|  | Commercial |  |  | Construction |  |  | Mortgage |  |  | Mortgage |  |  | and Other |  |  |  |  |
|  | Loans |  |  | Loans |  |  | Loans |  |  | and Equity Lines |  |  | Loans |  |  | Total |
|  | (In thousands) |
2013 Beginning Balance |  | $ | 66,101 |  |  | $ | 23,017 |  |  | $ | 82,473 |  |  | $ | 11,703 |  |  | $ | 28 |  |  | $ | 183,322 |
Provision/(reversal) for possible loan losses |  |  | 11,888 |  |  |  | (13,302 | ) |  |  | (2,500 | ) |  |  | 924 |  |  |  | (10 | ) |  |  | (3,000 | )
Charge-offs |  |  | (15,625 | ) |  |  | - |  |  |  | (3,945 | ) |  |  | (872 | ) |  |  | - |  |  |  | (20,442 | )
Recoveries |  |  | 2,739 |  |  |  | 2,284 |  |  |  | 8,725 |  |  |  | 250 |  |  |  | 11 |  |  |  | 14,009 |
Net Charge-offs |  |  | (12,886 | ) |  |  | 2,284 |  |  |  | 4,780 |  |  |  | (622 | ) |  |  | 11 |  |  |  | (6,433 | )
2013 Ending Balance |  | $ | 65,103 |  |  | $ | 11,999 |  |  | $ | 84,753 |  |  | $ | 12,005 |  |  | $ | 29 |  |  | $ | 173,889 |
Reserve to impaired loans |  | $ | 2,519 |  |  | $ | 3,460 |  |  | $ | 6,584 |  |  | $ | 721 |  |  | $ | - |  |  | $ | 13,284 |
Reserve to non-impaired loans |  | $ | 62,584 |  |  | $ | 8,539 |  |  | $ | 78,169 |  |  | $ | 11,284 |  |  | $ | 29 |  |  | $ | 160,605 |
Reserve for off-balance sheet credit commitments |  | $ | 909 |  |  | $ | 304 |  |  | $ | 111 |  |  | $ | 38 |  |  | $ | 1 |  |  | $ | 1,363 |
2014 Beginning Balance |  | $ | 65,103 |  |  | $ | 11,999 |  |  | $ | 84,753 |  |  | $ | 12,005 |  |  | $ | 29 |  |  | $ | 173,889 |
Provision/(reversal) for possible loan losses |  |  | (22,244 | ) |  |  | 19,853 |  |  |  | (8,197 | ) |  |  | (558 | ) |  |  | (26 | ) |  |  | (11,172 | )
Charge-offs |  |  | (7,875 | ) |  |  | (6,747 | ) |  |  | (7,458 | ) |  |  | (155 | ) |  |  | - |  |  |  | (22,235 | )
Recoveries |  |  | 12,517 |  |  |  | 2,547 |  |  |  | 5,575 |  |  |  | 286 |  |  |  | 13 |  |  |  | 20,938 |
Net Charge-offs |  |  | 4,642 |  |  |  | (4,200 | ) |  |  | (1,883 | ) |  |  | 131 |  |  |  | 13 |  |  |  | (1,297 | )
2014 Ending Balance |  | $ | 47,501 |  |  | $ | 27,652 |  |  | $ | 74,673 |  |  | $ | 11,578 |  |  | $ | 16 |  |  | $ | 161,420 |
Reserve to impaired loans |  | $ | 1,263 |  |  | $ | 1,077 |  |  | $ | 8,993 |  |  | $ | 465 |  |  | $ | - |  |  | $ | 11,798 |
Reserve to non-impaired loans |  | $ | 46,238 |  |  | $ | 26,575 |  |  | $ | 65,680 |  |  | $ | 11,113 |  |  | $ | 16 |  |  | $ | 149,622 |
Reserve for off-balance sheet credit commitments |  | $ | 923 |  |  | $ | 728 |  |  | $ | 259 |  |  | $ | 39 |  |  | $ | - |  |  | $ | 1,949 |
An analysis of the activity in the allowance for credit losses for the years ended December 31, 2014, 2013, and 2012 is as follows:
|  | December 31, |
|  | 2014 |  |  | 2013 |  |  | 2012 |
Allowance for Loan Losses |  | (In thousands) |
Balance at beginning of year |  | $ | 173,889 |  |  | $ | 183,322 |  |  | $ | 206,280 |
(Reversal)/provision for credit losses |  |  | (10,800 | ) |  |  | (3,000 | ) |  |  | (9,000 | )
Transfers (to)/from reserve for off-balance sheet credit commitments |  |  | (372 | ) |  |  | - |  |  |  | 706 |
Loans charged off |  |  | (22,235 | ) |  |  | (20,442 | ) |  |  | (32,791 | )
Recoveries of charged off loans |  |  | 20,938 |  |  |  | 14,009 |  |  |  | 18,127 |
Balance at end of year |  | $ | 161,420 |  |  | $ | 173,889 |  |  | $ | 183,322 |
Reserve for Off-balance Sheet Credit Commitments |  |  |  |  |  |  |  |  |  |  |  |
Balance at beginning of year |  | $ | 1,363 |  |  | $ | 1,363 |  |  | $ | 2,069 |
Provision for credit losses/transfers |  |  | 586 |  |  |  | - |  |  |  | (706 | )
Balance at end of year |  | $ | 1,949 |  |  | $ | 1,363 |  |  | $ | 1,363 |
Residential mortgage loans in process of formal foreclosure proceedings were $2.3 million at December 31, 2014, compared to $4.0 million at December 31, 2013.

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