7.	LOANS AND LEASE FINANCE RECEIVABLES AND ALLOWANCE FOR LOAN LOSSES

The following table provides a summary of total loans and lease finance receivables, excluding PCI loans, by type.


	December 31,
	2017		2016
	(Dollars in thousands)

Commercial and industrial	$	513,325	$	485,078
SBA		122,055		97,184
Real estate:
Commercial real estate		3,376,713		2,930,141
Construction		77,982		85,879
SFR mortgage		236,202		250,605
Dairy & livestock and agribusiness		347,289		338,631
Municipal lease finance receivables		70,243		64,639
Consumer and other loans		64,229		78,274

Gross loans, excluding PCI loans		4,808,038		4,330,431
Less: Deferred loan fees, net		(6,289)		(6,952)

Gross loans, excluding PCI loans, net of deferred loan fees		4,801,749		4,323,479
Less: Allowance for loan losses		(59,218)		(60,321)

Net loans, excluding PCI loans		4,742,531		4,263,158

PCI Loans		30,908		73,093
Discount on PCI loans		(2,026)		(1,508)
Less: Allowance for loan losses		(367)		(1,219)

PCI loans, net		28,515		70,366

Total loans and lease finance receivables	$	4,771,046	$	4,333,524

As of December 31, 2017, 76.77% of the total gross loan portfolio (excluding PCI loans) consisted of real estate loans, 70.23% of which consisted of commercial real estate loans. Substantially all of the Company’s real estate loans and construction loans are secured by real properties located in California. As of December 31, 2017, $206.1 million, or 6.10% of the total commercial real estate loans included loans secured by farmland, compared to $180.6 million, or 6.16%, at December 31, 2016. The loans secured by farmland included $118.2 million for loans secured by dairy & livestock land and $87.9 million for loans secured by agricultural land at December 31, 2017, compared to $127.1 million for loans secured by dairy & livestock land and $53.6 million for loans secured by agricultural land at December 31, 2016. As of December 31, 2017, dairy & livestock and agribusiness loans of $347.3 million were comprised of $310.6 million for dairy & livestock loans and $36.7 million for agribusiness loans, compared to $317.9 million for dairy & livestock loans and $20.7 million for agribusiness loans at December 31, 2016.

At December 31, 2017, the Company held approximately $2.17 billion of total fixed rate loans, including PCI loans.

At December 31, 2017 and 2016, loans totaling $3.68 billion and $3.11 billion, respectively, were pledged to secure the borrowings and available lines of credit from the FHLB and the Federal Reserve Bank.

There were no outstanding loans held-for-sale as of December 31, 2017 and 2016.

Credit Quality Indicators

Central to our credit risk management is our loan risk rating system. The originating officer assigns each loan 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, 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, including loans on the Bank’s internal watch list, range from minimal credit risk to lower than average, but still acceptable, credit risk. Watch list loans usually require more than normal management attention. Loans on the 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 have potential weaknesses that deserve management’s close attention. If left uncorrected, these potential weaknesses may result in the deterioration of the repayment prospects for the asset or the Company’s credit position at some future date. Special mention assets are not adversely classified and do not expose the Company to sufficient risk to warrant adverse classification.

Substandard — Loans classified as substandard are inadequately protected by the current sound worth and paying capacity of the obligor or of the collateral pledged, if any. Assets so classified must have a well-defined weakness, or weaknesses, that jeopardize the liquidation of the debt. Substandard loans are characterized by the distinct possibility that the Company will sustain some loss if deficiencies are not corrected.

Doubtful — Loans classified as doubtful have all the weaknesses inherent in those classified substandard with the added characteristic that the weaknesses make collection or the liquidation in full, on the basis of currently existing facts, conditions and values, highly questionable and improbable.

Loss — Loans classified as loss are considered uncollectible and of such little value that their continuance as bankable assets is not warranted. This classification does not mean that the loan has absolutely no recovery or salvage value, but rather that it is not practical or desirable to defer writing off this asset with insignificant value even though partial recovery may be affected in the future.

The following table summarizes loans by type, excluding PCI loans, according to our internal risk ratings for the periods presented.


	December 31, 2017
	Pass		Special Mention		Substandard		Doubtful & Loss		Total
	(Dollars in thousands)
Commercial and industrial	$	483,641	$	19,566	$	10,118	$	-	$	513,325
SBA		112,835		5,358		3,862		-		122,055
Real estate:
Commercial real estate
Owner occupied		1,009,199		76,111		10,970		-		1,096,280
Non-owner occupied		2,257,130		16,434		6,869		-		2,280,433
Construction
Speculative		60,042		-		-		-		60,042
Non-speculative		17,940		-		-		-		17,940
SFR mortgage		229,032		3,124		4,046		-		236,202
Dairy & livestock and agribusiness		321,413		9,047		16,829		-		347,289
Municipal lease finance receivables		69,644		599		-		-		70,243
Consumer and other loans		61,715		1,255		1,259		-		64,229

Total gross loans, excluding PCI loans	$	4,622,591	$	131,494	$	53,953	$	-	$	4,808,038


	December 31, 2016
	Pass		Special Mention		Substandard		Doubtful & Loss		Total
	(Dollars in thousands)
Commercial and industrial	$	449,658	$	21,610	$	13,809	$	1	$	485,078
SBA		80,138		10,553		6,482		11		97,184
Real estate:
Commercial real estate
Owner occupied		842,992		87,781		19,046		-		949,819
Non-owner occupied		1,941,203		23,534		15,585		-		1,980,322
Construction
Speculative		48,841		-		-		-		48,841
Non-speculative		37,038		-		-		-		37,038
SFR mortgage		243,374		4,930		2,301		-		250,605
Dairy & livestock and agribusiness		187,819		114,106		36,706		-		338,631
Municipal lease finance receivables		60,102		4,537		-		-		64,639
Consumer and other loans		74,328		2,123		1,819		4		78,274

Total gross loans, excluding PCI loans	$	3,965,493	$	269,174	$	95,748	$	16	$	4,330,431

Allowance for Loan Losses

The Bank’s Audit and Director Loan Committee provide 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, 2017 and 2016. 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 held-for-investment loans by type for the periods presented.


	For the Year Ended December 31, 2017
	Ending Balance December 31, 2016		Charge-offs		Recoveries		(Recapture of) Provision for Loan Losses		Ending Balance December 31, 2017
	(Dollars in thousands)
Commercial and industrial		$ 8,154		$ (138)	$	118	$	(854)	$	7,280
SBA		871		-		78		(80)		869
Real estate:
Commercial real estate		37,443		-		154		4,125		41,722
Construction		1,096		-		6,036		(6,148)		984
SFR mortgage		2,287		-		212		(387)		2,112
Dairy & livestock and agribusiness		8,541		-		19		(3,913)		4,647
Municipal lease finance receivables		941		-		-		(90)		851
Consumer and other loans		988		(13)		79		(301)		753
PCI loans		1,219		-		-		(852)		367

Total allowance for loan losses		$ 61,540	$	(151)	$	6,696	$	(8,500)	$	59,585


	For the Year Ended December 31, 2016
	Ending Balance December 31, 2015		Charge-offs		Recoveries		(Recapture of) Provision for Loan Losses		Ending Balance December 31, 2016
	(Dollars in thousands)
Commercial and industrial	$	8,588	$	(120)	$	630	$	(944)	$	8,154
SBA		993		-		40		(162)		871
Real estate:
Commercial real estate		36,995		-		792		(344)		37,443
Construction		2,389		-		7,174		(8,467)		1,096
SFR mortgage		2,103		(102)		-		286		2,287
Dairy & livestock and agribusiness		6,029		-		216		2,296		8,541
Municipal lease finance receivables		1,153		-		-		(212)		941
Consumer and other loans		906		(16)		170		(72)		988
PCI loans		-		-		-		1,219		1,219

Total allowance for loan losses	$	59,156	$	(238)	$	9,022	$	(6,400)	$	61,540


	For the Year Ended December 31, 2015
	Ending Balance December 31, 2014		Charge-offs		Recoveries		(Recapture of) Provision for Loan Losses (1)		Ending Balance December 31, 2015
	(Dollars in thousands)
Commercial and industrial	$	7,074	$	(411)	$	319	$	1,606	$	8,588
SBA		2,557		(37)		41		(1,568)		993
Real estate:
Commercial real estate		33,373		(117)		4,330		(591)		36,995
Construction		988		-		581		820		2,389
SFR mortgage		2,344		(215)		186		(212)		2,103
Dairy & livestock and agribusiness		5,479		-		407		143		6,029
Municipal lease finance receivables		1,412		-		-		(259)		1,153
Consumer and other loans		1,262		(229)		76		(203)		906
Unallocated (1)		5,336		-		-		(5,336)		-

Total allowance for loan losses	$	59,825	$	(1,009)	$	5,940	$	(5,600)	$	59,156

(1)

Based upon changes to our ALLL methodology, as described earlier in this document, beginning with the fourth quarter of 2015 and coinciding with the implementation of the new ALLL methodology, the Bank’s previous “unallocated reserve” was absorbed into the qualitative component of the allowance.

The following tables present the recorded investment in loans held-for-investment and the related allowance for loan losses by loan type, based on the Company’s methodology for determining the allowance for loan losses for the periods presented. The Company’s ALLL methodology for the year ended December 31, 2017 excludes the impact of the recent acquisitions from certain of the Bank’s qualitative factors that are otherwise designed to capture incremental risk in the legacy loan portfolio. The acquired loans are also supported by a credit discount established through the determination of fair value for the acquired loan portfolio.


	December 31, 2017
	Recorded Investment in Loans						Allowance for Loan Losses
	Individually Evaluated for Impairment		Collectively Evaluated for Impairment		Acquired with Deterioriated Credit Quality		Individually Evaluated for Impairment		Collectively Evaluated for Impairment		Acquired with Deterioriated Credit Quality
	(Dollars in thousands)
Commercial and industrial	$	440	$	512,885	$	-	$	-	$	7,280	$	-
SBA		1,531		120,524		-		1		868		-
Real estate:
Commercial real estate		8,133		3,368,580		-		-		41,722		-
Construction		-		77,982		-		-		984		-
SFR mortgage		4,040		232,162		-		-		2,112		-
Dairy & livestock and agribusiness		829		346,460		-		-		4,647		-
Municipal lease finance receivables		-		70,243		-		-		851		-
Consumer and other loans		552		63,677		-		74		679		-
PCI loans		-		-		28,882		-		-		367

Total	$	15,525	$	4,792,513	$	28,882	$	75	$	59,143	$	367


	December 31, 2016
	Recorded Investment in Loans						Allowance for Loan Losses
	Individually Evaluated for Impairment		Collectively Evaluated for Impairment		Acquired with Deterioriated Credit Quality		Individually Evaluated for Impairment		Collectively Evaluated for Impairment		Acquired with Deterioriated Credit Quality
	(Dollars in thousands)
Commercial and industrial	$	901	$	484,177	$	-	$	114	$	8,040	$	-
SBA		3,582		93,602		-		27		844		-
Real estate:
Commercial real estate		15,128		2,915,013		-		-		37,443		-
Construction		-		85,879		-		-		1,096		-
SFR mortgage		5,174		245,431		-		-		2,287		-
Dairy & livestock and agribusiness		747		337,884		-		-		8,541		-
Municipal lease finance receivables		-		64,639		-		-		941		-
Consumer and other loans		853		77,421		-		-		988		-
PCI loans		-		-		71,585		-		-		1,219

Total	$	26,385	$	4,304,046	$	71,585	$	141	$	60,180	$	1,219

Past Due and Nonperforming Loans

We seek to manage asset quality and control credit risk through diversification of the 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 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.

A loan is reported as a TDR 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.

The following tables present the recorded investment in, and the aging of, past due and nonaccrual loans, excluding PCI loans, by type of loans for the periods presented.


	December 31, 2017
	30-59 Days Past Due		60-89 Days Past Due		Total Past Due and Accruing		Nonaccrual (1)		Current		Total Loans and Financing Receivables
	(Dollars in thousands)
Commercial and industrial	$	768	$	-	$	768	$	250	$	512,307	$	513,325
SBA		403		-		403		906		120,746		122,055
Real estate:
Commercial real estate
Owner occupied		-		-		-		4,365		1,091,915		1,096,280
Non-owner occupied		-		-		-		2,477		2,277,956		2,280,433
Construction
Speculative (2)		-		-		-		-		60,042		60,042
Non-speculative		-		-		-		-		17,940		17,940
SFR mortgage		-		-		-		1,337		234,865		236,202
Dairy & livestock and agribusiness		-		-		-		829		346,460		347,289
Municipal lease finance receivables		-		-		-		-		70,243		70,243
Consumer and other loans		1		-		1		552		63,676		64,229

Total gross loans, excluding PCI loans	$	1,172	$	-	$	1,172	$	10,716	$	4,796,150	$	4,808,038

(1)

As of December 31, 2017, $3.6 million of nonaccruing loans were current, $376,000 were 60-89 days past due and $6.8 million were 90+ days past due.

(2)

Speculative construction loans are generally for properties where there is no identified buyer or renter.


	December 31, 2016
	30-59 Days Past Due		60-89 Days Past Due		Total Past Due and Accruing		Nonaccrual (1)		Current		Total Loans and Financing Receivables
	(Dollars in thousands)
Commercial and industrial	$	-	$	-	$	-	$	156	$	484,922	$	485,078
SBA		352		-		352		2,737		94,095		97,184
Real estate:
Commercial real estate
Owner occupied		-		-		-		635		949,184		949,819
Non-owner occupied		-		-		-		1,048		1,979,274		1,980,322
Construction
Speculative (2)		-		-		-		-		48,841		48,841
Non-speculative		-		-		-		-		37,038		37,038
SFR mortgage		-		-		-		2,207		248,398		250,605
Dairy & livestock and agribusiness		-		-		-		-		338,631		338,631
Municipal lease finance receivables		-		-		-		-		64,639		64,639
Consumer and other loans		84		-		84		369		77,821		78,274

Total gross loans, excluding PCI loans	$	436	$	-	$	436	$	7,152	$	4,322,843	$	4,330,431

(1)

As of December 31, 2016, $4.7 million of nonaccruing loans were current, $514,000 were 30-59 days past due, $435,000 were 60-89 days past due and $1.5 million were 90+ days past due.

(2)

Speculative construction loans are generally for properties where there is no identified buyer or renter.

Impaired Loans

At December 31, 2017, the Company had impaired loans, excluding PCI loans, of $15.5 million and included $3.7 million of loans acquired from VBB in the first quarter of 2017. Impaired loans included $6.8 million of nonaccrual commercial real estate loans, $1.3 million of nonaccrual SFR mortgage loans, $906,000 million of nonaccrual SBA loans, $829,000 of nonaccrual dairy & livestock and agribusiness loans, $552,000 of nonaccrual consumer and other loans, and $250,000 of nonaccrual commercial and industrial loans. These impaired loans included $9.0 million of loans whose terms were modified in a troubled debt restructuring, of which $4.2 million are classified as nonaccrual. The remaining balance of $4.8 million consisted of 16 loans performing according to the restructured terms. The impaired loans had a specific allowance of $75,000 at December 31, 2017. At December 31, 2016, the Company had classified as impaired, loans, excluding PCI loans, with a balance of $26.4 million with a related allowance of $141,000.

The following tables present information for held-for-investment loans, excluding PCI loans, individually evaluated for impairment by type of loans, as and for the periods presented.


	As of and For the Year Ended
	December 31, 2017
	Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment		Interest Income Recognized
	(Dollars in thousands)
With no related allowance recorded:
Commercial and industrial	$	440	$	980	$	-	$	548	$	10
SBA		1,530		1,699		-		1,598		47
Real estate:
Commercial real estate
Owner occupied		4,365		4,763		-		4,414		36
Non-owner occupied		3,768		5,107		-		3,951		94
Construction
Speculative		-		-		-		-		-
Non-speculative		-		-		-		-		-
SFR mortgage		4,040		4,692		-		4,119		118
Dairy & livestock and agribusiness		829		1,091		-		988		1
Municipal lease finance receivables		-		-		-		-		-
Consumer and other loans		174		370		-		202		-

Total		15,146		18,702		-		15,820		306

With a related allowance recorded:
Commercial and industrial		-		-		-		-		-
SBA		1		18		1		6		-
Real estate:
Commercial real estate
Owner occupied		-		-		-		-		-
Non-owner occupied		-		-		-		-		-
Construction
Speculative		-		-		-		-		-
Non-speculative		-		-		-		-		-
SFR mortgage		-		-		-		-		-
Dairy & livestock and agribusiness		-		-		-		-		-
Municipal lease finance receivables		-		-		-		-		-
Consumer and other loans		378		391		74		385		-

Total		379		409		75		391		-

Total impaired loans	$	15,525	$	19,111	$	75	$	16,211	$	306


	As of and For the Year Ended
	December 31, 2016
	Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment		Interest Income Recognized
	(Dollars in thousands)
With no related allowance recorded:
Commercial and industrial	$	730	$	1,646	$	-	$	832	$	26
SBA		3,386		4,189		-		3,709		50
Real estate:
Commercial real estate
Owner occupied		1,797		2,276		-		1,410		70
Non-owner occupied		13,331		15,842		-		13,517		592
Construction
Speculative		-		-		-		-		-
Non-speculative		-		-		-		-		-
SFR mortgage		5,174		6,075		-		5,327		135
Dairy & livestock and agribusiness		747		747		-		692		47
Municipal lease finance receivables		-		-		-		-		-
Consumer and other loans		853		1,423		-		919		18

Total		26,018		32,198		-		26,406		938

With a related allowance recorded:
Commercial and industrial		171		171		114		233		9
SBA		196		212		27		206		14
Real estate:
Commercial real estate
Owner occupied		-		-		-		-		-
Non-owner occupied		-		-		-		-		-
Construction
Speculative		-		-		-		-		-
Non-speculative		-		-		-		-		-
SFR mortgage		-		-		-		-		-
Dairy & livestock and agribusiness		-		-		-		-		-
Municipal lease finance receivables		-		-		-		-		-
Consumer and other loans		-		-		-		-		-

Total		367		383		141		439		23

Total impaired loans	$	26,385	$	32,581	$	141	$	26,845	$	961


	As of and For the Year Ended
	December 31, 2015
	Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment		Interest Income Recognized
	(Dollars in thousands)
With no related allowance recorded:
Commercial and industrial	$	1,017	$	1,894	$	-	$	1,122	$	38
SBA		3,207		3,877		-		3,333		51
Real estate:
Commercial real estate
Owner occupied		6,252		7,445		-		6,718		97
Non-owner occupied		34,041		37,177		-		34,639		1,787
Construction
Speculative		-		-		-		-		-
Non-speculative		-		-		-		-		-
SFR mortgage		5,665		6,453		-		5,771		109
Dairy & livestock and agribusiness		3,685		3,684		-		3,687		177
Municipal lease finance receivables		-		-		-		-		-
Consumer and other loans		890		1,454		-		922		17

Total		54,757		61,984		-		56,192		2,276

With a related allowance recorded:
Commercial and industrial		626		695		626		637		-
SBA		41		47		10		45		-
Real estate:
Commercial real estate
Owner occupied		-		-		-		-		-
Non-owner occupied		-		-		-		-		-
Construction
Speculative		7,651		7,651		13		7,651		388
Non-speculative		-		-		-		-		-
SFR mortgage		588		640		20		607		12
Dairy & livestock and agribusiness		-		-		-		-		-
Municipal lease finance receivables		-		-		-		-		-
Consumer and other loans		43		45		-		45		-

Total		8,949		9,078		669		8,985		400

Total impaired loans	$	63,706	$	71,062	$	669	$	65,177	$	2,676

The Company recognizes the charge-off of the 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, 2017 and 2016 have already been written down to the estimated net realizable value. An allowance is recorded on impaired loans for the following: nonaccrual loans where a charge-off is not yet processed, nonaccrual SFR mortgage loans where there is a potential modification in process, or on smaller balance non-collateral dependent loans.

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 recapture of the reserve for unfunded loan commitments of $400,000 for the year ended December 31, 2017, compared with a recapture of provision for unfunded loan commitments of $450,000 for the year ended December 31, 2016 and a recapture of provision for unfunded loan commitments of $500,000 for the year ended December 31, 2015. As of December 31, 2017 and December 31, 2016, the balance in this reserve was $6.3 million and $6.7 million, respectively, and was included in other liabilities.

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, 2017, there were $9.0 million of loans classified as a TDR, of which $4.2 million were nonperforming and $4.8 million were 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, 2017, performing TDRs were comprised of 10 SFR mortgage loans of $2.7 million, two commercial real estate loans of $1.3 million, one SBA loan of $625,000, and three commercial and industrial loans of $190,000.

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 $1,000 and $141,000 of specific allowance to TDRs as of December 31, 2017 and December 31, 2016, respectively.

The following table provides a summary of the activity related to TDRs for the periods presented.


	For the Year Ended December 31,
	2017		2016
	(Dollars in thousands)
Performing TDRs:
Beginning balance	$	19,233	$	42,687
New modifications		3,143		1,996
Payoffs/payments, net and other		(14,752)		(34,001)
TDRs returned to accrual status		329		8,551
TDRs placed on nonaccrual status		(3,144)		-

Ending balance	$	4,809	$	19,233

Nonperforming TDRs:
Beginning balance	$	1,626	$	12,622
New modifications		2,066		102
Charge-offs		-		(38)
Payoffs/payments, net and other		(2,307)		(2,509)
TDRs returned to accrual status		(329)		(8,551)
TDRs placed on nonaccrual status		3,144		-

Ending balance	$	4,200	$	1,626

Total TDRs	$	9,009	$	20,859

The following tables summarize loans modified as troubled debt restructurings for the periods presented.

Modifications (1)


	For the Year Ended December 31, 2017
	Number of Loans		Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment		Outstanding Recorded Investment at December 31, 2017		Financial Effect Resulting From Modifications (2)
	(Dollars in thousands)
Commercial and industrial:
Interest rate reduction		-	$	-	$	-	$	-	$	-
Change in amortization period or maturity		-		-		-		-		-
SBA:
Interest rate reduction		-		-		-		-		-
Change in amortization period or maturity		-		-		-		-		-
Real estate:
Commercial real estate:
Owner occupied
Interest rate reduction		-		-		-		-		-
Change in amortization period or maturity		1		3,143		3,143		3,143		-
Non-owner occupied
Interest rate reduction		-		-		-		-		-
Change in amortization period or maturity		-		-		-		-		-
Dairy & livestock and agribusiness:
Interest rate reduction		-		-		-		-		-
Change in amortization period or maturity		1		1,984		1,984		78		-
Consumer:
Interest rate reduction		-		-		-		-		-
Change in amortization period or maturity		-		-		-		-		-

Total loans		2	$	5,127	$	5,127	$	3,221	$	-


	For the Year Ended December 31, 2016
	Number of Loans		Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment		Outstanding Recorded Investment at December 31, 2016		Financial Effect Resulting From Modifications (2)
	(Dollars in thousands)
Commercial and industrial:
Interest rate reduction		1	$	112	$	112	$	103	$	-
Change in amortization period or maturity		-		-		-		-		-
SBA:
Interest rate reduction		-		-		-		-		-
Change in amortization period or maturity		2		214		214		196		28
Real estate:
Commercial real estate:
Owner occupied
Interest rate reduction		-		-		-		-		-
Change in amortization period or maturity		-		-		-		-		-
Non-owner occupied
Interest rate reduction		1		759		759		756		-
Change in amortization period or maturity		-		-		-		-		-
Dairy & livestock and agribusiness:
Interest rate reduction		-		-		-		-		-
Change in amortization period or maturity		-		-		-		-		-
Consumer:
Interest rate reduction		-		-		-		-		-
Change in amortization period or maturity		3		201		201		185		-

Total loans		7	$	1,286	$	1,286	$	1,240	$	28


	For the Year Ended December 31, 2015
	Number of Loans		Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment		Outstanding Recorded Investment at December 31, 2015		Financial Effect Resulting From Modifications (2)
	(Dollars in thousands)
Commercial and industrial:
Interest rate reduction		-	$	-	$	-	$	-	$	-
Change in amortization period or maturity		1		203		203		203		203
SBA:
Interest rate reduction		-		-		-		-		-
Change in amortization period or maturity		1		330		330		320		-
Real estate:
Commercial real estate:
Owner occupied
Interest rate reduction		-		-		-		-		-
Change in amortization period or maturity		2		823		823		821		-
Non-owner occupied
Interest rate reduction		1		2,376		2,376		2,316		-
Change in amortization period or maturity		1		280		280		280		-
Dairy & livestock and agribusiness:
Interest rate reduction		-		-		-		-		-
Change in amortization period or maturity		-		-		-		-		-
SFR mortgage:
Interest rate reduction		1		322		322		326		-
Change in amortization period or maturity		-		-		-		-		-

Total loans		7	$	4,334	$	4,334	$	4,266	$	203

(1)

The tables above 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.

As of December 31, 2017, there was one commercial real estate loan with an outstanding balance of $3.1 million that was modified as a TDR within the previous 12 months that subsequently defaulted. As of December 31, 2016 and 2015, there were no loans that were previously modified as a troubled debt restructuring within the previous 12 months that subsequently defaulted during each of the years ended December 31, 2016 and 2015, respectively.