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Non-Covered Loans and Lease Finance Receivables and Allowance for Loan Losses | 12 Months Ended
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Dec. 31, 2013
Text Block [Abstract] |
Non-Covered Loans and Lease Finance Receivables and Allowance for Loan Losses | 6. NON-COVERED LOANS AND LEASE FINANCE RECEIVABLES AND ALLOWANCE FOR LOAN LOSSES The following table provides a summary of the components of non-covered loan and lease finance receivables:
|  | December 31, 2013 |  |  | December 31, 2012 |
|  | (Dollars in thousands) |
Commercial and industrial |  | $ | 512,792 |  |  | $ | 547,422 |
Real estate: |  |  |  |  |  |  |  |
Commercial real estate |  |  | 2,207,515 |  |  |  | 1,990,107 |
Construction |  |  | 47,109 |  |  |  | 59,721 |
SFR mortgage |  |  | 189,233 |  |  |  | 159,288 |
Dairy & livestock and agribusiness |  |  | 294,292 |  |  |  | 336,660 |
Municipal lease finance receivables |  |  | 89,106 |  |  |  | 105,767 |
Consumer and other loans |  |  | 55,103 |  |  |  | 60,273 |
Gross non-covered loans |  |  | 3,395,150 |  |  |  | 3,259,238 |
Less: Deferred loan fees, net |  |  | (9,234 | ) |  |  | (6,925 | )
Gross loans, net of deferred loan fees |  |  | 3,385,916 |  |  |  | 3,252,313 |
Less: Allowance for non-covered loan losses |  |  | (75,235 | ) |  |  | (92,441 | )
Net non-covered loans |  | $ | 3,310,681 |  |  | $ | 3,159,872 |
As of December 31, 2013, 65.02% of the total non-covered loan portfolio consisted of commercial real estate loans and 1.39% of the total loan portfolio consisted of construction loans, respectively. Substantially all of the Company’s real estate loans and construction loans are secured by real properties located in California. At December 31, 2013, the Company held approximately $1.64 billion of non-covered fixed rate loans. At December 31, 2013 and December 31, 2012, loans totaling $2.31 billion and $2.32 billion, respectively, were pledged to secure the borrowings from the FHLB and the Federal Reserve Bank. Non-Covered Loans Held-for-Sale The following table provides a summary of the activity related to non-covered loans held-for-sale for the years ended December 31, 2013, and 2012:
|  | For the Year Ended December 31, |
|  | 2013 |  |  | 2012 |
|  | (Dollars in thousands) |
Balance, beginning of period |  | $ | — |  |  | $ | 348 |
Originations of mortgage loans |  |  | 485 |  |  |  | 25,489 |
Sales of mortgage loans |  |  | (485 | ) |  |  | (22,250 | )
Transfer of mortgage loans to held for investment |  |  | — |  |  |  | (3,587 | )
Sales of other loans |  |  | — |  |  |  | — |
Transfers of other loans to held for sale |  |  | 3,667 |  |  |  | — |
Write-down of loans held for sale |  |  | — |  |  |  | — |
Balance, end of period |  | $ | 3,667 |  |  | $ | — |
Credit Quality Indicators Central to our credit risk management is our loan risk rating system. The originating credit officer assigns borrowers an initial risk rating, which is reviewed and confirmed or changed, as appropriate, by Credit Management. Approvals are made based upon the amount of inherent credit risk specific to the transaction and are reviewed for appropriateness by senior line and credit management personnel. Credits are monitored by line and credit management personnel for deterioration in a borrower’s financial condition, which would impact the ability of the borrower to perform under the contract. Risk ratings are adjusted as necessary. Loans are risk rated into the following categories (Credit Quality Indicators): Pass, Pass Watch List, Special Mention, Substandard, Doubtful and Loss. Each of these groups is assessed for the proper amount to be used in determining the adequacy of our allowance for losses. These categories can be described as follows: Pass — These loans range from minimal credit risk to lower than average, but still acceptable, credit risk. Pass Watch List — Pass Watch list loans usually require more than normal management attention. Loans which qualify for the Pass Watch List may involve borrowers with adverse financial trends, higher debt/equity ratios, or weaker liquidity positions, but not to the degree of being considered a defined weakness or problem loan where risk of loss may be apparent. Special Mention — Loans assigned to this category are currently protected but are weak. Although concerns exist, the Company is currently protected and loss is unlikely. Such loans have potential weaknesses that may, if not checked or corrected, weaken the asset or inadequately protect the Company’s credit position at some future date. Substandard — Loans classified as substandard include poor liquidity, high leverage, and erratic earnings or losses. The primary source of repayment is no longer realistic, and asset or collateral liquidation may be the only source of repayment. Substandard loans are marginal and require continuing and close supervision by credit management. Substandard loans have the distinct possibility that the Company will sustain some loss if deficiencies are not corrected. Doubtful — Loans classified doubtful have all the weaknesses inherent in those classified substandard with the added provision that the weaknesses make collection or the liquidation, on the basis of currently existing facts, conditions and values, highly questionable and improbable. The possibility of loss is extremely high, but because of certain important and reasonable specific pending factors which may work to the advantage and strengthening of the assets, their classifications as losses are deferred until their more exact status may be determined. Loss — Loans classified as loss are considered uncollectible and of such little value that their continuance as active assets of the Company is not warranted. This classification does not mean that the loan has absolutely no recovery or salvage value, but rather it is not practical or desirable to defer writing off this basically worthless asset even though partial recovery may be achieved in the future. The following table summarizes each class of non-covered loans according to internal risk ratings as of December 31, 2013 and 2012:
|  | December 31, 2013 |
|  | Pass |  |  | Watch List |  |  | Special Mention |  |  | Substandard |  |  | Doubtful & Loss |  |  | Total |
|  | (Dollars in thousands) |
Commercial and industrial |  | $ | 312,927 |  |  | $ | 128,068 |  |  | $ | 53,417 |  |  | $ | 17,950 |  |  | $ | 430 |  |  | $ | 512,792 |
Real estate: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Commercial real estate |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Owner occupied |  |  | 449,853 |  |  |  | 147,165 |  |  |  | 74,999 |  |  |  | 57,934 |  |  |  | — |  |  |  | 729,951 |
Non-owner occupied |  |  | 1,104,065 |  |  |  | 242,431 |  |  |  | 81,088 |  |  |  | 49,980 |  |  |  | — |  |  |  | 1,477,564 |
Construction |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Speculative |  |  | 8,611 |  |  |  | 21 |  |  |  | 1,529 |  |  |  | 17,617 |  |  |  | — |  |  |  | 27,778 |
Non-speculative |  |  | 6,940 |  |  |  | 3,190 |  |  |  | — |  |  |  | 9,201 |  |  |  | — |  |  |  | 19,331 |
SFR mortgage |  |  | 152,500 |  |  |  | 20,485 |  |  |  | 3,302 |  |  |  | 12,946 |  |  |  | — |  |  |  | 189,233 |
Dairy & livestock and agribusiness |  |  | 43,588 |  |  |  | 86,580 |  |  |  | 92,514 |  |  |  | 69,005 |  |  |  | 2,605 |  |  |  | 294,292 |
Municipal lease finance receivables |  |  | 43,445 |  |  |  | 18,338 |  |  |  | 20,893 |  |  |  | 6,430 |  |  |  | — |  |  |  | 89,106 |
Consumer and other loans |  |  | 43,225 |  |  |  | 6,938 |  |  |  | 3,449 |  |  |  | 1,491 |  |  |  | — |  |  |  | 55,103 |
Total non-covered gross loans |  | $ | 2,165,154 |  |  | $ | 653,216 |  |  | $ | 331,191 |  |  | $ | 242,554 |  |  | $ | 3,035 |  |  | $ | 3,395,150 |
|  | December 31, 2012 |
|  | Pass |  |  | Watch List |  |  | Special Mention |  |  | Substandard |  |  | Doubtful & Loss |  |  | Total |
|  | (Dollars in thousands) |
Commercial and industrial |  | $ | 347,275 |  |  | $ | 131,186 |  |  | $ | 44,466 |  |  | $ | 22,901 |  |  | $ | 1,594 |  |  | $ | 547,422 |
Real estate: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Commercial real estate |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Owner occupied |  |  | 382,111 |  |  |  | 159,653 |  |  |  | 78,087 |  |  |  | 84,116 |  |  |  | — |  |  |  | 703,967 |
Non-owner occupied |  |  | 888,777 |  |  |  | 214,901 |  |  |  | 105,121 |  |  |  | 77,341 |  |  |  | — |  |  |  | 1,286,140 |
Construction |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Speculative |  |  | 1,417 |  |  |  | — |  |  |  | 15,163 |  |  |  | 21,314 |  |  |  | — |  |  |  | 37,894 |
Non-speculative |  |  | 9,841 |  |  |  | 2,767 |  |  |  | — |  |  |  | 9,219 |  |  |  | — |  |  |  | 21,827 |
SFR mortgage |  |  | 129,730 |  |  |  | 10,215 |  |  |  | 3,107 |  |  |  | 16,236 |  |  |  | — |  |  |  | 159,288 |
Dairy & livestock and agribusiness |  |  | 72,113 |  |  |  | 111,393 |  |  |  | 75,316 |  |  |  | 77,721 |  |  |  | 117 |  |  |  | 336,660 |
Municipal lease finance receivables |  |  | 72,432 |  |  |  | 20,237 |  |  |  | 11,124 |  |  |  | 1,974 |  |  |  | — |  |  |  | 105,767 |
Consumer and other loans |  |  | 49,321 |  |  |  | 6,763 |  |  |  | 2,714 |  |  |  | 1,421 |  |  |  | 54 |  |  |  | 60,273 |
Total non-covered gross loans |  | $ | 1,953,017 |  |  | $ | 657,115 |  |  | $ | 335,098 |  |  | $ | 312,243 |  |  | $ | 1,765 |  |  | $ | 3,259,238 |
Allowance for Loan Losses The Company’s Credit Management Division is responsible for regularly reviewing the ALLL methodology, including loss factors and economic risk factors. The Bank’s Director Loan Committee provides Board oversight of the ALLL process and approves the ALLL methodology on a quarterly basis. Our methodology for assessing the appropriateness of the allowance is conducted on a regular basis and considers the Bank’s overall loan portfolio. Refer to Note 3 – Summary of Significant Accounting Policies for a more detailed discussion concerning the allowance for loan losses. Management believes that the ALLL was appropriate at December 31, 2013 and 2012. No assurance can be given that economic conditions which adversely affect the Company’s service areas or other circumstances will not be reflected in increased provisions for loan losses in the future. The following tables present the balance and activity related to the allowance for loan losses for non-covered held-for-investment loans by portfolio segment as of December 31, 2013, 2012 and 2011:
|  | For the Year Ended December 31, 2013 |
|  | Ending Balance December 31, 2012 |  |  | Charge-offs |  |  | Recoveries |  |  | Provision for Loan Losses |  |  | Ending Balance December 31, 2013 |
|  | (Dollars in thousands) |
Commercial and industrial |  | $ | 11,652 |  |  | $ | (2,491 | ) |  | $ | 759 |  |  | $ | 914 |  |  | $ | 10,834 |
Real estate: |  |  |  |  |  |  |  |
Commercial real estate |  |  | 47,457 |  |  |  | — |  |  |  | 402 |  |  |  | (8,457 | ) |  |  | 39,402 |
Construction |  |  | 2,291 |  |  |  | — |  |  |  | 703 |  |  |  | (1,689 | ) |  |  | 1,305 |
SFR mortgage |  |  | 3,448 |  |  |  | (252 | ) |  |  | 367 |  |  |  | (845 | ) |  |  | 2,718 |
Dairy & livestock and agribusiness |  |  | 18,696 |  |  |  | — |  |  |  | 109 |  |  |  | (7,077 | ) |  |  | 11,728 |
Municipal lease finance receivables |  |  | 1,588 |  |  |  | — |  |  |  | — |  |  |  | 747 |  |  |  | 2,335 |
Consumer and other loans |  |  | 1,170 |  |  |  | (108 | ) |  |  | 55 |  |  |  | (157 | ) |  |  | 960 |
Unallocated |  |  | 6,139 |  |  |  | — |  |  |  | — |  |  |  | (186 | ) |  |  | 5,953 |
Total allowance for loan losses |  | $ | 92,441 |  |  | $ | (2,851 | ) |  | $ | 2,395 |  |  | $ | (16,750 | ) |  | $ | 75,235 |
|  | For the Year Ended December 31, 2012 |
|  | Ending Balance December 31, 2011 |  |  | Charge-offs |  |  | Recoveries |  |  | Provision for Loan Losses |  |  | Ending Balance December 31, 2012 |
|  | (Dollars in thousands) |
Commercial and industrial |  | $ | 10,654 |  |  | $ | (1,259 | ) |  | $ | 1,280 |  |  | $ | 977 |  |  | $ | 11,652 |
Real estate: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Commercial real estate |  |  | 47,841 |  |  |  | (1,873 | ) |  |  | 514 |  |  |  | 975 |  |  |  | 47,457 |
Construction |  |  | 4,947 |  |  |  | — |  |  |  | 1,139 |  |  |  | (3,795 | ) |  |  | 2,291 |
SFR mortgage |  |  | 4,032 |  |  |  | (642 | ) |  |  | (108 | ) |  |  | 166 |  |  |  | 3,448 |
Dairy & livestock and agribusiness |  |  | 17,278 |  |  |  | (1,150 | ) |  |  | 166 |  |  |  | 2,402 |  |  |  | 18,696 |
Municipal lease finance receivables |  |  | 2,403 |  |  |  | — |  |  |  | — |  |  |  | (815 | ) |  |  | 1,588 |
Consumer and other loans |  |  | 1,590 |  |  |  | (283 | ) |  |  | 36 |  |  |  | (173 | ) |  |  | 1,170 |
Unallocated |  |  | 5,219 |  |  |  | — |  |  |  | — |  |  |  | 920 |  |  |  | 6,139 |
Total allowance for loan losses |  | $ | 93,964 |  |  | $ | (5,207 | ) |  | $ | 3,027 |  |  | $ | 657 |  |  | $ | 92,441 |
|  | For the Year Ended December 31, 2011 |
|  | Ending Balance December 31, 2010 |  |  | Charge-offs |  |  | Recoveries |  |  | Provision for Loan Losses |  |  | Ending Balance December 31, 2011 |
|  | (Dollars in thousands) |
Commercial and industrial |  | $ | 11,472 |  |  | $ | (1,980 | ) |  | $ | 302 |  |  | $ | 860 |  |  | $ | 10,654 |
Real estate: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Commercial real estate |  |  | 40,234 |  |  |  | (4,766 | ) |  |  | 606 |  |  |  | 11,767 |  |  |  | 47,841 |
Construction |  |  | 10,188 |  |  |  | (7,976 | ) |  |  | 757 |  |  |  | 1,978 |  |  |  | 4,947 |
SFR mortgage |  |  | 3,295 |  |  |  | (1,104 | ) |  |  | 142 |  |  |  | 1,699 |  |  |  | 4,032 |
Dairy & livestock and agribusiness |  |  | 36,061 |  |  |  | (3,291 | ) |  |  | 151 |  |  |  | (15,643 | ) |  |  | 17,278 |
Municipal lease finance receivables |  |  | 2,172 |  |  |  | — |  |  |  | — |  |  |  | 231 |  |  |  | 2,403 |
Consumer and other loans |  |  | 1,034 |  |  |  | (511 | ) |  |  | 200 |  |  |  | 867 |  |  |  | 1,590 |
Unallocated |  |  | 803 |  |  |  | — |  |  |  | — |  |  |  | 4,416 |  |  |  | 5,219 |
Total allowance for loan losses |  | $ | 105,259 |  |  | $ | (19,628 | ) |  | $ | 2,158 |  |  | $ | 6,175 |  |  | $ | 93,964 |
The following tables present the recorded investment in non-covered loans held-for-investment, and the related allowance for loan losses by portfolio segment, based on the Company’s methodology for determining the allowance for loan losses as December 31, 2013 and 2012:
|  | December 31, 2013 |
|  | Recorded Investment in Loans |  |  | Allowance for Loan Losses |
|  | Individually Evaluated for Impairment |  |  | Collectively Evaluated for Impairment |  |  | Individually Evaluated for Impairment |  |  | Collectively Evaluated for Impairment |
|  | (Dollars in thousands) |
Commercial and industrial |  | $ | 5,033 |  |  | $ | 507,759 |  |  | $ | 365 |  |  | $ | 10,469 |
Real estate: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Commercial real estate |  |  | 33,440 |  |  |  | 2,174,075 |  |  |  | — |  |  |  | 39,402 |
Construction |  |  | 26,818 |  |  |  | 20,291 |  |  |  | — |  |  |  | 1,305 |
SFR mortgage |  |  | 11,405 |  |  |  | 177,828 |  |  |  | 103 |  |  |  | 2,615 |
Dairy & livestock and agribusiness |  |  | 29,812 |  |  |  | 264,480 |  |  |  | 2,702 |  |  |  | 9,026 |
Municipal lease finance receivables |  |  | — |  |  |  | 89,106 |  |  |  | — |  |  |  | 2,335 |
Consumer and other loans |  |  | 401 |  |  |  | 54,702 |  |  |  | 4 |  |  |  | 956 |
Unallocated |  |  |  |  |  |  |  |  |  |  |  |  |  |  | 5,953 |
Total |  | $ | 106,909 |  |  | $ | 3,288,241 |  |  | $ | 3,174 |  |  | $ | 72,061 |
|  | December 31, 2012 |
|  | Recorded Investment in Loans |  |  | Allowance for Loan Losses |
|  | Individually Evaluated for Impairment |  |  | Collectively Evaluated for Impairment |  |  | Individually Evaluated for Impairment |  |  | Collectively Evaluated for Impairment |
|  | (Dollars in thousands) |
Commercial and industrial |  | $ | 3,689 |  |  | $ | 543,733 |  |  | $ | 289 |  |  | $ | 11,363 |
Real estate: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Commercial real estate |  |  | 42,136 |  |  |  | 1,947,971 |  |  |  | 2 |  |  |  | 47,455 |
Construction |  |  | 30,533 |  |  |  | 29,188 |  |  |  | — |  |  |  | 2,291 |
SFR mortgage |  |  | 14,845 |  |  |  | 144,443 |  |  |  | 434 |  |  |  | 3,014 |
Dairy & livestock and agribusiness |  |  | 16,709 |  |  |  | 319,951 |  |  |  | 1,596 |  |  |  | 17,100 |
Municipal lease finance receivables |  |  | 263 |  |  |  | 105,504 |  |  |  | — |  |  |  | 1,588 |
Consumer and other loans |  |  | 215 |  |  |  | 60,058 |  |  |  | 11 |  |  |  | 1,159 |
Unallocated |  |  |  |  |  |  |  |  |  |  |  |  |  |  | 6,139 |
Total |  | $ | 108,390 |  |  | $ | 3,150,848 |  |  | $ | 2,332 |  |  | $ | 90,109 |
Past Due and Nonperforming Loans We seek to manage asset quality and control credit risk through diversification of the non-covered loan portfolio and the application of policies designed to promote sound underwriting and loan monitoring practices. The Bank’s Credit Management Division is in charge of monitoring asset quality, establishing credit policies and procedures and enforcing the consistent application of these policies and procedures across the Bank. Reviews of nonperforming, past due non-covered loans and larger credits, designed to identify potential charges to the allowance for loan losses, and to determine the adequacy of the allowance, are conducted on an ongoing basis. These reviews consider such factors as the financial strength of borrowers and any guarantors, the value of the applicable collateral, loan loss experience, estimated loan losses, growth in the loan portfolio, prevailing economic conditions and other factors. Refer to Note 3 – Summary of Significant Accounting Policies for additional discussion concerning the Bank’s policy for past due and nonperforming loans. Loans are reported as a troubled debt restructuring when the Bank grants a concession(s) to a borrower experiencing financial difficulties that the Bank would not otherwise consider. Examples of such concessions include a reduction in the interest rate, deferral of principal or accrued interest, extending the payment due dates or loan maturity date(s), or providing a lower interest rate than would be normally available for new debt of similar risk. As a result of these concessions, restructured loans are classified as impaired. Impairment reserves on non-collateral dependent restructured loans are measured by comparing the present value of expected future cash flows on the restructured loans discounted at the interest rate of the original loan agreement to the loan’s carrying value. These impairment reserves are recognized as a specific component to be provided for in the allowance for loan losses. Generally, when loans are identified as impaired they are moved to our Special Assets Department. When we identify a loan as impaired, we measure the loan for potential impairment using discounted cash flows, unless the loan is determined to be collateral dependent. In these cases, we use the current fair value of collateral, less selling costs. Generally, the determination of fair value is established through obtaining external appraisals of the collateral. Speculative construction loans are generally for properties where there is no identified buyer or renter. The following tables present the recorded investment in, and the aging of, non-covered past due and nonaccrual loans by class of loans as of December 31, 2013 and 2012:
|  | December 31, 2013 |
|  | 30-59 Days Past Due |  |  | 60-89 Days Past Due |  |  | 90+ Days Past Due and Accruing |  |  | Total Past Due and Accruing |  |  | Nonaccrual (1) |  |  | Current |  |  | Total Loans and Financing Receivables |
|  | (Dollars in thousands) |
Commercial and industrial |  | $ | 900 |  |  | $ | 93 |  |  | $ | — |  |  | $ | 993 |  |  | $ | 3,861 |  |  | $ | 507,938 |  |  | $ | 512,792 |
Real estate: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Commercial real estate |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Owner occupied |  |  | 220 |  |  |  | — |  |  |  | — |  |  |  | 220 |  |  |  | 4,105 |  |  |  | 725,626 |  |  |  | 729,951 |
Non-owner occupied |  |  | 303 |  |  |  | — |  |  |  | — |  |  |  | 303 |  |  |  | 8,305 |  |  |  | 1,468,956 |  |  |  | 1,477,564 |
Construction |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Speculative |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 9,966 |  |  |  | 17,812 |  |  |  | 27,778 |
Non-speculative |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 19,331 |  |  |  | 19,331 |
SFR mortgage |  |  | 773 |  |  |  | 935 |  |  |  | — |  |  |  | 1,708 |  |  |  | 7,577 |  |  |  | 179,948 |  |  |  | 189,233 |
Dairy & livestock and agribusiness |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 5,739 |  |  |  | 288,553 |  |  |  | 294,292 |
Municipal lease finance receivables |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 89,106 |  |  |  | 89,106 |
Consumer and other loans |  |  | 75 |  |  |  | — |  |  |  | — |  |  |  | 75 |  |  |  | 401 |  |  |  | 54,627 |  |  |  | 55,103 |
Total non-covered gross loans |  | $ | 2,271 |  |  | $ | 1,028 |  |  | $ | — |  |  | $ | 3,299 |  |  | $ | 39,954 |  |  | $ | 3,351,897 |  |  | $ | 3,395,150 |
(1) | As of December 31, 2013, $23.9 million of nonaccruing loans were current, $473,000 were 30-59 days past due, $854,000 were 60-89 days past due, and $14.7 million were 90+ days past due.
|  | December 31, 2012 |
|  | 30-59 Days Past Due |  |  | 60-89 Days Past Due |  |  | 90+ Days Past Due and Accruing |  |  | Total Past Due and Accruing |  |  | Nonaccrual (1) |  |  | Current |  |  | Total Loans and Financing Receivables |
|  | (Dollars in thousands) |
Commercial and industrial |  | $ | 233 |  |  | $ | 457 |  |  | $ | — |  |  | $ | 690 |  |  | $ | 3,136 |  |  | $ | 543,596 |  |  | $ | 547,422 |
Real estate: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Commercial real estate |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Owner occupied |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 5,415 |  |  |  | 698,552 |  |  |  | 703,967 |
Non-owner occupied |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 15,624 |  |  |  | 1,270,516 |  |  |  | 1,286,140 |
Construction |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Speculative |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 10,663 |  |  |  | 27,231 |  |  |  | 37,894 |
Non-speculative |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 21,827 |  |  |  | 21,827 |
SFR mortgage |  |  | 107 |  |  |  | — |  |  |  | — |  |  |  | 107 |  |  |  | 13,102 |  |  |  | 146,079 |  |  |  | 159,288 |
Dairy & livestock and agribusiness |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 9,842 |  |  |  | 326,818 |  |  |  | 336,660 |
Municipal lease finance receivables |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 105,767 |  |  |  | 105,767 |
Consumer and other loans |  |  | 82 |  |  |  | 8 |  |  |  | — |  |  |  | 90 |  |  |  | 215 |  |  |  | 59,968 |  |  |  | 60,273 |
Total non-covered gross loans |  | $ | 422 |  |  | $ | 465 |  |  | $ | — |  |  | $ | 887 |  |  | $ | 57,997 |  |  | $ | 3,200,354 |  |  | $ | 3,259,238 |
(1) | As of December 31, 2012, $40.1 million of nonaccruing loans were current, $2.6 million were 30-59 days past due, and $15.3 million were 90+ days past due.
Non-Covered Impaired Loans At December 31, 2013, the Company had non-covered impaired loans of $106.9 million. Of this amount, there was $10.0 million in nonaccrual commercial construction loans, $7.6 million of nonaccrual SFR mortgage loans, $12.4 million of nonaccrual commercial real estate loans, $3.9 million of nonaccrual commercial and industrial loans, $5.7 million of nonaccrual dairy & livestock and agribusiness loans and $401,000 of consumer and other loans. These non-covered impaired loans included $92.1 million of loans whose terms were modified in a troubled debt restructuring, of which $25.1 million are classified as nonaccrual. The remaining balance of $67.0 million consists of 46 loans performing according to the restructured terms. The impaired loans had a specific allowance of $3.2 million at December 31, 2013. At December 31, 2012, the Company had classified as impaired, non-covered loans with a balance of $108.4 million with a related allowance of $2.3 million. The following tables present held-for-investment loans individually evaluated for impairment by class of loans, as of December 31, 2013, 2012 and 2011:
|  | December 31, 2013 |
|  | Recorded Investment |  |  | Unpaid Principal Balance |  |  | Related Allowance |  |  | Average Recorded Investment |  |  | Interest Income Recognized |
|  | (Dollars in thousands) |
With no related allowance recorded: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Commercial and industrial |  | $ | 4,668 |  |  | $ | 5,927 |  |  | $ | — |  |  | $ | 4,965 |  |  | $ | 66 |
Real estate: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Commercial real estate |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Owner occupied |  |  | 13,041 |  |  |  | 14,133 |  |  |  | — |  |  |  | 13,463 |  |  |  | 548 |
Non-owner occupied |  |  | 20,399 |  |  |  | 26,155 |  |  |  | — |  |  |  | 21,313 |  |  |  | 817 |
Construction |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Speculative |  |  | 17,617 |  |  |  | 18,408 |  |  |  | — |  |  |  | 18,043 |  |  |  | 310 |
Non-speculative |  |  | 9,201 |  |  |  | 9,201 |  |  |  | — |  |  |  | 9,217 |  |  |  | 572 |
SFR mortgage |  |  | 10,919 |  |  |  | 12,516 |  |  |  | — |  |  |  | 10,408 |  |  |  | 103 |
Dairy & livestock and agribusiness |  |  | 17,702 |  |  |  | 17,702 |  |  |  | — |  |  |  | 19,205 |  |  |  | 434 |
Municipal lease finance receivables |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |
Consumer and other loans |  |  | 385 |  |  |  | 445 |  |  |  | — |  |  |  | 389 |  |  |  | — |
Total |  |  | 93,932 |  |  |  | 104,487 |  |  |  | — |  |  |  | 97,003 |  |  |  | 2,850 |
With a related allowance recorded: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Commercial and industrial |  |  | 365 |  |  |  | 379 |  |  |  | 365 |  |  |  | 386 |  |  |  | — |
Real estate: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Commercial real estate |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Owner occupied |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |
Non-owner occupied |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |
Construction |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Speculative |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |
Non-speculative |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |
SFR mortgage |  |  | 486 |  |  |  | 489 |  |  |  | 103 |  |  |  | 479 |  |  |  | — |
Dairy & livestock and agribusiness |  |  | 12,110 |  |  |  | 12,783 |  |  |  | 2,702 |  |  |  | 13,377 |  |  |  | 209 |
Municipal lease finance receivables |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |
Consumer and other loans |  |  | 16 |  |  |  | 19 |  |  |  | 4 |  |  |  | 18 |  |  |  | — |
Total |  |  | 12,977 |  |  |  | 13,670 |  |  |  | 3,174 |  |  |  | 14,260 |  |  |  | 209 |
Total non-covered impaired loans |  | $ | 106,909 |  |  | $ | 118,157 |  |  | $ | 3,174 |  |  | $ | 111,263 |  |  | $ | 3,059 |
|  | December 31, 2012 |
|  | Recorded Investment |  |  | Unpaid Principal Balance |  |  | Related Allowance |  |  | Average Recorded Investment |  |  | Interest Income Recognized |
|  | (Dollars in thousands) |
With no related allowance recorded: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Commercial and industrial |  | $ | 3,385 |  |  | $ | 4,215 |  |  | $ | — |  |  | $ | 3,766 |  |  | $ | 43 |
Real estate: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Commercial real estate |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Owner occupied |  |  | 13,478 |  |  |  | 14,569 |  |  |  | — |  |  |  | 14,459 |  |  |  | 397 |
Non-owner occupied |  |  | 28,639 |  |  |  | 38,633 |  |  |  | — |  |  |  | 29,801 |  |  |  | 670 |
Construction |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Speculative |  |  | 21,314 |  |  |  | 21,607 |  |  |  | — |  |  |  | 21,650 |  |  |  | 311 |
Non-speculative |  |  | 9,219 |  |  |  | 9,219 |  |  |  | — |  |  |  | 9,219 |  |  |  | 574 |
SFR mortgage |  |  | 11,079 |  |  |  | 14,342 |  |  |  | — |  |  |  | 11,292 |  |  |  | 54 |
Dairy & livestock and agribusiness |  |  | 12,406 |  |  |  | 13,756 |  |  |  | — |  |  |  | 11,834 |  |  |  | 173 |
Municipal lease finance receivables |  |  | 263 |  |  |  | 263 |  |  |  | — |  |  |  | 443 |  |  |  | 5 |
Consumer and other loans |  |  | 142 |  |  |  | 196 |  |  |  | — |  |  |  | 145 |  |  |  | — |
Total |  |  | 99,925 |  |  |  | 116,800 |  |  |  | — |  |  |  | 102,609 |  |  |  | 2,227 |
With a related allowance recorded: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Commercial and industrial |  |  | 304 |  |  |  | 327 |  |  |  | 289 |  |  |  | 387 |  |  |  | — |
Real estate: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Commercial real estate |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Owner occupied |  |  | 19 |  |  |  | 19 |  |  |  | 2 |  |  |  | 28 |  |  |  | — |
Non-owner occupied |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |
Construction |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Speculative |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |
Non-speculative |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |
SFR mortgage |  |  | 3,766 |  |  |  | 4,071 |  |  |  | 434 |  |  |  | 3,363 |  |  |  | — |
Dairy & livestock and agribusiness |  |  | 4,303 |  |  |  | 4,340 |  |  |  | 1,596 |  |  |  | 4,017 |  |  |  | 73 |
Municipal lease finance receivables |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |
Consumer and other loans |  |  | 73 |  |  |  | 74 |  |  |  | 11 |  |  |  | 75 |  |  |  | — |
Total |  |  | 8,465 |  |  |  | 8,831 |  |  |  | 2,332 |  |  |  | 7,870 |  |  |  | 73 |
Total non-covered impaired loans |  | $ | 108,390 |  |  | $ | 125,631 |  |  | $ | 2,332 |  |  | $ | 110,479 |  |  | $ | 2,300 |
|  | December 31, 2011 |
|  | Recorded Investment |  |  | Unpaid Principal Balance |  |  | Related Allowance |  |  | Average Recorded Investment |  |  | Interest Income Recognized |
|  | (Dollars in thousands) |
With no related allowance recorded: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Commercial and industrial |  | $ | 3,566 |  |  | $ | 4,630 |  |  | $ | — |  |  | $ | 4,649 |  |  | $ | 93 |
Real estate: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Commercial real estate |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Owner occupied |  |  | 13,567 |  |  |  | 14,013 |  |  |  | — |  |  |  | 11,941 |  |  |  | 449 |
Non-owner occupied |  |  | 16,435 |  |  |  | 23,656 |  |  |  | — |  |  |  | 21,096 |  |  |  | 67 |
Construction |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Speculative |  |  | 13,317 |  |  |  | 15,718 |  |  |  | — |  |  |  | 15,434 |  |  |  | — |
Non-speculative |  |  | 20,085 |  |  |  | 20,085 |  |  |  | — |  |  |  | 16,437 |  |  |  | 1,123 |
SFR mortgage |  |  | 14,069 |  |  |  | 17,411 |  |  |  | — |  |  |  | 15,120 |  |  |  | 47 |
Dairy & livestock and agribusiness |  |  | 8,879 |  |  |  | 10,358 |  |  |  | — |  |  |  | 10,535 |  |  |  | 446 |
Municipal lease finance receivables |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |
Consumer and other loans |  |  | 104 |  |  |  | 150 |  |  |  | — |  |  |  | 127 |  |  |  | — |
Total |  |  | 90,022 |  |  |  | 106,021 |  |  |  | — |  |  |  | 95,339 |  |  |  | 2,225 |
With a related allowance recorded: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Commercial and industrial |  |  | 1,388 |  |  |  | 1,410 |  |  |  | 165 |  |  |  | 1,554 |  |  |  | — |
Real estate: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Commercial real estate |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Owner occupied |  |  | 3,900 |  |  |  | 3,900 |  |  |  | 928 |  |  |  | 3,900 |  |  |  | — |
Non-owner occupied |  |  | 83 |  |  |  | 85 |  |  |  | 5 |  |  |  | 86 |  |  |  | — |
Construction |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Speculative |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |
Non-speculative |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |
SFR mortgage |  |  | 4,087 |  |  |  | 4,369 |  |  |  | 406 |  |  |  | 3,967 |  |  |  | — |
Dairy & livestock and agribusiness |  |  | 1,372 |  |  |  | 3,324 |  |  |  | 1,372 |  |  |  | 2,402 |  |  |  | — |
Municipal lease finance receivables |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |
Consumer and other loans |  |  | 374 |  |  |  | 388 |  |  |  | 92 |  |  |  | 417 |  |  |  | — |
Total |  |  | 11,204 |  |  |  | 13,476 |  |  |  | 2,968 |  |  |  | 12,326 |  |  |  | — |
Total non-covered impaired loans |  | $ | 101,226 |  |  | $ | 119,497 |  |  | $ | 2,968 |  |  | $ | 107,665 |  |  | $ | 2,225 |
The Company recognizes the charge-off of impairment allowance on impaired loans in the period in which a loss is identified for collateral dependent loans. Therefore, the majority of the nonaccrual loans as of December 31, 2013 and 2012 have already been written down to their estimated net realizable value. The impaired loans with a related allowance recorded are on nonaccrual loans where a charge-off is not yet processed, on nonaccrual SFR loans where there is a potential modification in process, or on smaller balance non-collateral dependent loans. Impaired construction speculative loans increased in the third quarter of 2012 due to a participating interest in the Company’s only Shared National Credit loan that was transferred to nonaccrual status. The outstanding balance was $10.0 million as December 31, 2013. Reserve for Unfunded Loan Commitments The allowance for off-balance sheet credit exposure relates to commitments to extend credit, letters of credit and undisbursed funds on lines of credit. The Company evaluates credit risk associated with the off-balance sheet loan commitments at the same time it evaluates credit risk associated with the loan and lease portfolio. The Company recorded a provision for unfunded loan commitments of $500,000 for the year ended December 31, 2013, compared to a $1.0 million recapture of the provision for the year ended December 31, 2012. As of December 31, 2013 and December 31, 2012, the balance in this reserve was $9.1 and $8.6 million, respectively, and was included in other liabilities. Troubled Debt Restructurings (“TDR”) As a result of adopting the amendments in ASU 2011-02, the Company reassessed all restructurings that occurred on or after January 1, 2011 for identification as troubled debt restructurings. Loans that are reported as TDRs are considered impaired and charge-off amounts are taken on an individual loan basis, as deemed appropriate. The majority of restructured loans are loans for which the terms of repayment have been renegotiated, resulting in a reduction in interest rate or deferral of principal. Refer to Note 3 – Summary of Significant Accounting Policies, Troubled Debt Restructurings, included herein. As of December 31 2013, there were $92.1 million of loans classified as a TDR of which $25.1 million were nonperforming and $67.0 million are performing. TDRs on accrual status are comprised of loans that were accruing interest at the time of restructuring or have demonstrated repayment performance in compliance with the restructured terms for a sustained period and for which the Company anticipates full repayment of both principal and interest. At December 31, 2013, performing TDRs were comprised of 15 commercial real estate loans of $21.0 million, two construction loans of $16.9 million, 11 dairy & livestock loans of $24.1 million, 11 SFR mortgage loans of $3.8 million, and seven commercial and industrial loans of $1.2 million. There were no loans removed from TDR classification for the year ended December 31, 2013 and 2012. The majority of TDRs have no specific allowance allocated as any impairment amount is normally charged off at the time a probable loss is determined. We have allocated $2.7 million and $1.7 million of specific allowance to TDRs as of December 31, 2013 and December 31, 2012, respectively. The following table provides a summary of the activity related to TDRs for the years ended December 31, 2013 and 2012:
|  | For the Year Ended December 31, |
|  | 2013 |  |  | 2012 |
|  | (Dollars in thousands) |
Performing TDRs: |  |  |  |  |  |  |  |
Beginning balance |  | $ | 50,392 |  |  | $ | 38,554 |
New modifications |  |  | 30,796 |  |  |  | 24,339 |
Payoffs and payments, net |  |  | (15,492 | ) |  |  | (8,536 | )
TDRs returned to accrual status |  |  | 1,259 |  |  |  | 1,215 |
TDRs placed on nonaccrual status |  |  | — |  |  |  | (5,180 | )
Ending balance |  | $ | 66,955 |  |  | $ | 50,392 |
|  | For the Year Ended December 31, |
|  | 2013 |  |  | 2012 |
|  | (Dollars in thousands) |
Nonperforming TDRs: |  |  |  |  |  |  |  |
Beginning balance |  | $ | 31,309 |  |  | $ | 23,844 |
New modifications |  |  | 4,187 |  |  |  | 18,094 |
Charge-offs |  |  | (92 | ) |  |  | (19 | )
Transfer to OREO |  |  | — |  |  |  | (4,897 | )
Payoffs and payments, net |  |  | (9,026 | ) |  |  | (9,678 | )
TDRs returned to accrual status |  |  | (1,259 | ) |  |  | (1,215 | )
TDRs placed on nonaccrual status |  |  | — |  |  |  | 5,180 |
Ending balance |  | $ | 25,119 |  |  | $ | 31,309 |
The following are the loans modified as troubled debt restructurings for the years ended December 31, 2013, 2012 and 2011: Modifications (1)
|  | For the Year Ended December 31, 2013 |
|  | Number of Loans |  |  | Pre-Modification Outstanding Recorded Investment |  |  | Post-Modification Outstanding Recorded Investment |  |  | Outstanding Recorded Investment at December 31, 2013 |  |  | Financial Effect Resulting From Modifications (2) |
|  | (Dollars in thousands) |
Commercial and industrial: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Interest rate reduction |  |  | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |
Change in amortization period or maturity |  |  | 4 |  |  |  | 621 |  |  |  | 621 |  |  |  | 570 |  |  |  | 95 |
Real estate: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Commercial real estate: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Owner occupied |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Interest rate reduction |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |
Change in amortization period or maturity |  |  | 1 |  |  |  | 168 |  |  |  | 168 |  |  |  | 138 |  |  |  | — |
SFR mortgage: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Interest rate reduction |  |  | 3 |  |  |  | 1,365 |  |  |  | 1,365 |  |  |  | 1,349 |  |  |  | — |
Change in amortization period or maturity |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |
Dairy & livestock and agribusiness: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Interest rate reduction |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |
Change in amortization period or maturity |  |  | 10 |  |  |  | 26,915 |  |  |  | 26,915 |  |  |  | 22,662 |  |  |  | 149 |
Total non-covered loans |  |  | 18 |  |  | $ | 29,069 |  |  | $ | 29,069 |  |  | $ | 24,719 |  |  | $ | 244 |
(1) | The tables exclude modified loans that were paid off prior to the end of the period.
(2) | Financial effects resulting from modifications represent charge-offs and specific allowance recorded at modification date.
|  | For the Year Ended December 31, 2012 |
|  | Number of Loans |  |  | Pre-Modification Outstanding Recorded Investment |  |  | Post-Modification Outstanding Recorded Investment |  |  | Outstanding Recorded Investment at December 31, 2012 |  |  | Financial Effect Resulting From Modifications (2) |
|  | (Dollars in thousands) |
Commercial and industrial: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Interest rate reduction |  |  | 1 |  |  | $ | 80 |  |  | $ | 80 |  |  | $ | 66 |  |  | $ | — |
Change in amortization period or maturity |  |  | 8 |  |  |  | 2,301 |  |  |  | 2,301 |  |  |  | 1,817 |  |  |  | 3 |
Real estate: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Commercial real estate: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Owner occupied |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Interest rate reduction |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |
Change in amortization period or maturity |  |  | 6 |  |  |  | 4,225 |  |  |  | 4,225 |  |  |  | 3,903 |  |  |  | — |
Non-owner occupied |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Interest rate reduction |  |  | 1 |  |  |  | 3,378 |  |  |  | 3,378 |  |  |  | 3,359 |  |  |  | — |
Change in amortization period or maturity |  |  | 4 |  |  |  | 5,906 |  |  |  | 5,906 |  |  |  | 5,303 |  |  |  | — |
Construction: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Speculative |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Interest rate reduction |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |
Change in amortization period or maturity |  |  | 1 |  |  |  | 10,966 |  |  |  | 10,966 |  |  |  | 10,663 |  |  |  | — |
SFR mortgage: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Interest rate reduction |  |  | 1 |  |  |  | 399 |  |  |  | 399 |  |  |  | 398 |  |  |  | — |
Change in amortization period or maturity |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |
Dairy & livestock and agribusiness: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Interest rate reduction |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |
Change in amortization period or maturity |  |  | 7 |  |  |  | 9,447 |  |  |  | 9,447 |  |  |  | 9,184 |  |  |  | — |
Municipal lease finance receivables |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Interest rate reduction |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |
Change in amortization period or maturity |  |  | 2 |  |  |  | 519 |  |  |  | 519 |  |  |  | 263 |  |  |  | — |
Total non-covered loans |  |  | 31 |  |  | $ | 37,221 |  |  | $ | 37,221 |  |  | $ | 34,956 |  |  | $ | 3 |
(1) | The tables exclude modified loans that were paid off prior to the end of the period.
(2) | Financial effects resulting from modifications represent charge-offs and specific allowance recorded at modification date.
|  | For the Year Ended December 31, 2011 |
|  | Number of Loans |  |  | Pre-Modification Outstanding Recorded Investment |  |  | Post-Modification Outstanding Recorded Investment |  |  | Outstanding Recorded Investment at December 31, 2011 |
|  | (Dollars in thousands) |
Commercial and industrial: |  |  | 5 |  |  | $ | 1,673 |  |  | $ | 1,372 |  |  | $ | 1,224 |
Real estate: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Commercial real estate: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Owner occupied |  |  | 3 |  |  |  | 3,195 |  |  |  | 3,195 |  |  |  | 3,067 |
Non-owner occupied |  |  | 3 |  |  |  | 11,707 |  |  |  | 11,707 |  |  |  | 10,236 |
Construction: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Speculative |  |  | 2 |  |  |  | 16,886 |  |  |  | 16,886 |  |  |  | 15,394 |
Non-speculative |  |  | 1 |  |  |  | 9,219 |  |  |  | 9,219 |  |  |  | 9,219 |
SFR mortgage: |  |  | 6 |  |  |  | 2,162 |  |  |  | 2,161 |  |  |  | 2,049 |
Dairy & livestock and agribusiness: |  |  | 5 |  |  |  | 11,750 |  |  |  | 11,750 |  |  |  | 8,662 |
Total non-covered loans |  |  | 25 |  |  |  | 56,592 |  |  |  | 56,290 |  |  |  | 49,851 |
(1) | The tables exclude modified loans that were paid off prior to the end of the period.
As of December 31 2013, there was no loan that was previously modified as a troubled debt restructuring within the previous 12 months that subsequently defaulted during the year ended December 31, 2013. As of December 31, 2012, there was one construction loan with an outstanding balance of $10.7 million and one commercial real estate loan with an outstanding balance of $2.4 million that were previously modified as a troubled debt restructuring within the previous 12 months that subsequently defaulted during the year ended December 31, 2012. As of December 31, 2011, there were two dairy & livestock loans with a total outstanding balance of $886,000 and two commercial real estate loans with a total outstanding balance of $3.4 million modified as troubled debt restructurings within the previous 12 months that subsequently defaulted during the 12 months ended December 31, 2011.

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