6.	ACQUIRED SJB ASSETS AND FDIC LOSS SHARING ASSET

FDIC Assisted Acquisition

On October 16, 2009, the Bank acquired SJB and entered into a loss sharing agreements with the FDIC that is more fully discussed in Note 3 — Summary of Significant Accounting Policies included herein. The acquisition has been accounted for under the purchase method of accounting. The assets and liabilities were recorded at their estimated fair values as of the October 16, 2009 acquisition date. The acquired loans were accounted for as PCI loans.

At December 31, 2017, the remaining discount associated with the PCI loans approximated $2.0 million. The loss sharing agreement for commercial loans expired October 16, 2014 and will expire for single family residential loans on October 16, 2019.

The following table provides a summary of PCI loans and lease finance receivables by type and by internal risk ratings (credit quality indicators) for the periods presented.


	December 31,
	2017		2016
	(Dollars in thousands)

Commercial and industrial	$	934	$	2,309
SBA		1,383		327
Real estate:
Commercial real estate		27,431		67,594
Construction		-		-
SFR mortgage		162		178
Dairy & livestock and agribusiness		770		1,216
Municipal lease finance receivables		-		-
Consumer and other loans		228		1,469

Gross PCI loans		30,908		73,093
Less: Purchase accounting discount		(2,026)		(1,508)

Gross PCI loans, net of discount		28,882		71,585
Less: Allowance for PCI loan losses		(367)		(1,219)

Net PCI loans	$	28,515	$	70,366

Credit Quality Indicators

The following table summarizes gross PCI loans by internal risk ratings for the periods presented.


	December 31,
	2017		2016
	(Dollars in thousands)
Pass	$	26,439	$	59,409
Special mention		1,088		1,162
Substandard		3,381		12,522
Doubtful & loss		-		-

Total gross PCI loans	$	30,908	$	73,093

FDIC Loss Sharing Liability

The following table summarizes the activity related to the FDIC loss sharing liability for the periods presented.


	For the Year Ended December 31,
	2017		2016
	(Dollars in thousands)
Balance, beginning of period	$	(502)	$	(229)
FDIC share of recoveries, net of charge-offs		-		(5)
Cash paid to FDIC, net		519		514
Other		(124)		(782)

Balance, end of period	$	(107)	$	(502)

Through December 31, 2017, the Bank has submitted claims to the FDIC for net losses on PCI loans totaling $118.9 million.