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.