Loans and Lease Finance Receivables and Allowance for Credit Losses

3 Months Ended

Mar. 31, 2021

Loans and Lease Finance Receivables and Allowance for Credit Losses

5.	LOANS AND LEASE FINANCE RECEIVABLES AND ALLOWANCE FOR CREDIT LOSSES

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


	March 31, 2021			December 31, 2020
	(Dollars in thousands)
Commercial real estate	$	5,596,781		$	5,501,509
Construction		96,356			85,145
SBA		307,727			303,896
SBA - Paycheck Protection Program (PPP)		897,724			882,986
Commercial and industrial		753,708			812,062
Dairy & livestock and agribusiness		261,088			361,146
Municipal lease finance receivables		42,349			45,547
SFR mortgage		255,400			270,511
Consumer and other loans		81,924			86,006

Total loans, at amortized cost		8,293,057			8,348,808
Less: Allowance for credit losses		(71,805	)		(93,692	)

Total loans and lease finance receivables, net	$	8,221,252		$	8,255,116

As of March 31, 2021, 71.73% of the Company’s total loan portfolio consisted of real estate loans, with commercial real estate loans representing 67.49% of total loans. Substantially all of the Company’s real estate loans and construction loans are secured by real properties located in California. As of March 31, 2021, $327.4 million, or 5.85% of the total commercial real estate loans included loans secured by farmland, compared to $314.4 million, or 5.72%, at December 31, 2020. The loans secured by farmland included $129.2 million for loans secured by dairy & livestock land and $198.1 million for loans secured by agricultural land at March 31, 2021, compared to $132.9 million for loans secured by dairy & livestock land and $181.5 million for loans secured by agricultural land at December 31, 2020. As of March 31, 2021, dairy & livestock and agribusiness loans of $261.1 million were comprised of $229.1 million for dairy & livestock loans and $31.9 million for agribusiness loans, compared to $320.1 million for dairy & livestock loans and $41.0 million for agribusiness loans at December 31, 2020.

At March 31, 2021 and December 31, 2020, loans totaling $6.07 billion and $6.07 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 March 31, 2021 and December 31, 2020.

Credit Quality Indicators

We monitor credit quality by evaluating various risk attributes and utilize such information in our evaluation of the appropriateness of the allowance for credit losses. Internal credit risk ratings, within our loan risk rating system, are the credit quality indicators that we most closely monitor.

An important element of our approach to 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 or improvement 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: 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 and origination year, according to our internal risk ratings as of the dates presented.


		Origination Year												Revolving loans amortized cost basis		Revolving loans converted to term loans
March 31, 2021		2021		2020		2019		2018		2017		Prior		Revolving loans amortized cost basis		Revolving loans converted to term loans		Total
	(Dollars in thousands)
Commercial real estate loans:
Risk Rating:
Pass		$	282,950	$	981,750	$	678,640	$	588,405	$	569,006	$	2,063,996	$	180,542	$	35,794	$	5,381,083
Special Mention			10,420		9,254		11,441		25,826		50,811		66,570		4,609		9,890		188,821
Substandard			-		-		479		2,156		9,064		14,347		500		331		26,877
Doubtful & Loss			-		-		-		-		-		-		-		-		-

Total Commercial real estate loans:		$	293,370	$	991,004	$	690,560	$	616,387	$	628,881	$	2,144,913	$	185,651	$	46,015	$	5,596,781

Construction loans:
Risk Rating:
Pass		$	876	$	19,034	$	7,974	$	6,380	$	2,257	$	4	$	52,058	$	-	$	88,583
Special Mention			-		-		-		7,773		-		-		-		-		7,773
Substandard			-		-		-		-		-		-		-		-		-
Doubtful & Loss			-		-		-		-		-		-		-		-		-

Total Construction loans:		$	876	$	19,034	$	7,974	$	14,153	$	2,257	$	4	$	52,058	$	-	$	96,356

SBA loans:
Risk Rating:
Pass		$	20,599	$	44,593	$	12,742	$	43,163	$	55,759	$	104,385	$	-	$	2,976	$	284,217
Special Mention			-		-		-		-		5,408		6,864		-		-		12,272
Substandard			-		-		-		876		5,145		5,217		-		-		11,238
Doubtful & Loss			-		-		-		-		-		-		-		-		-

Total SBA loans:		$	20,599	$	44,593	$	12,742	$	44,039	$	66,312	$	116,466	$	-	$	2,976	$	307,727

SBA - PPP loans:
Risk Rating:
Pass		$	314,940	$	581,281	$	-	$	-	$	-	$	-	$	-	$	-	$	896,221
Special Mention			-		-		-		-		-		-		-		-		-
Substandard			-		1,503		-		-		-		-		-		-		1,503
Doubtful & Loss			-		-		-		-		-		-		-		-		-

Total SBA - PPP loans:		$	314,940	$	582,784	$	-	$	-	$	-	$	-	$	-	$	-	$	897,724

Commercial and industrial loans:
Risk Rating:
Pass		$	31,474	$	100,585	$	147,772	$	59,414	$	50,335	$	97,792	$	219,271	$	6,303	$	712,946
Special Mention			486		1,781		1,881		1,732		856		4,798		10,485		247		22,266
Substandard			2,643		1,611		808		3,467		2,039		355		6,183		1,390		18,496
Doubtful & Loss			-		-		-		-		-		-		-		-		-

Total Commercial and industrial loans:		$	34,603	$	103,977	$	150,461	$	64,613	$	53,230	$	102,945	$	235,939	$	7,940	$	753,708


		Origination Year												Revolving loans amortized cost basis		Revolving loans converted to term loans
March 31, 2021		2021		2020		2019		2018		2017		Prior		Revolving loans amortized cost basis		Revolving loans converted to term loans		Total
	(Dollars in thousands)
Dairy & livestock and agribusiness loans:
Risk Rating:
Pass		$	-	$	2,216	$	1,660	$	1,102	$	256	$	391	$	227,667	$	387	$	233,679
Special Mention			-		-		-		347		-		1,684		11,029		7,342		20,402
Substandard			-		-		-		259		-		-		-		6,748		7,007
Doubtful & Loss			-		-		-		-		-		-		-		-		-

Total Dairy & livestock and agribusiness loans:		$	-	$	2,216	$	1,660	$	1,708	$	256	$	2,075	$	238,696	$	14,477	$	261,088

Municipal lease finance receivables loans:
Risk Rating:
Pass		$	-	$	8,217	$	-	$	2,556	$	10,248	$	20,916	$	-	$	-	$	41,937
Special Mention			-		-		-		-		-		412		-		-		412
Substandard			-		-		-		-		-		-		-		-		-
Doubtful & Loss			-		-		-		-		-		-		-		-		-

Total Municipal lease finance receivables loans:		$	-	$	8,217	$	-	$	2,556	$	10,248	$	21,328	$	-	$	-	$	42,349

SFR mortgage loans:
Risk Rating:
Pass		$	7,745	$	61,021	$	53,148	$	27,117	$	20,857	$	81,721	$	2	$	-	$	251,611
Special Mention			-		-		-		-		-		195		-		-		195
Substandard			-		-		-		-		-		3,168		-		426		3,594
Doubtful & Loss			-		-		-		-		-		-		-		-		-

Total SFR mortgage loans:		$	7,745	$	61,021	$	53,148	$	27,117	$	20,857	$	85,084	$	2	$	426	$	255,400

Consumer and other loans:
Risk Rating:
Pass		$	2,618	$	7,558	$	1,833	$	778	$	878	$	2,157	$	61,735	$	1,791	$	79,348
Special Mention			975		-		-		-		-		90		516		-		1,581
Substandard			-		-		-		-		-		170		149		676		995
Doubtful & Loss			-		-		-		-		-		-		-		-		-

Total Consumer and other loans:		$	3,593	$	7,558	$	1,833	$	778	$	878	$	2,417	$	62,400	$	2,467	$	81,924

Total Loans:
Risk Rating:
Pass		$	661,202	$	1,806,255	$	903,769	$	728,915	$	709,596	$	2,371,362	$	741,275	$	47,251	$	7,969,625
Special Mention			11,881		11,035		13,322		35,678		57,075		80,613		26,639		17,479		253,722
Substandard			2,643		3,114		1,287		6,758		16,248		23,257		6,832		9,571		69,710
Doubtful & Loss			-		-		-		-		-		-		-		-		-

Total Loans:		$	675,726	$	1,820,404	$	918,378	$	771,351	$	782,919	$	2,475,232	$	774,746	$	74,301	$	8,293,057


		Origination Year												Revolving loans amortized cost basis		Revolving loans converted to term loans
December 31, 2020		2020		2019		2018		2017		2016		Prior		Revolving loans amortized cost basis		Revolving loans converted to term loans		Total
	(Dollars in thousands)
Commercial real estate loans:
Risk Rating:
Pass		$	979,499	$	691,091	$	607,753	$	617,640	$	550,105	$	1,646,876	$	192,583	$	24,548	$	5,310,095
Special Mention			9,332		7,162		30,049		43,870		17,398		49,840		5,720		994		164,365
Substandard			-		491		2,157		7,382		2,528		13,790		360		341		27,049
Doubtful & Loss			-		-		-		-		-		-		-		-		-
Total Commercial real estate loans:		$	988,831	$	698,744	$	639,959	$	668,892	$	570,031	$	1,710,506	$	198,663	$	25,883	$	5,501,509
Construction loans:
Risk Rating:
Pass		$	14,511	$	9,350	$	14,945	$	2,258	$	-	$	4	$	44,077	$	-	$	85,145
Special Mention			-		-		-		-		-		-		-		-		-
Substandard			-		-		-		-		-		-		-		-		-
Doubtful & Loss			-		-		-		-		-		-		-		-		-
Total Construction loans:		$	14,511	$	9,350	$	14,945	$	2,258	$	-	$	4	$	44,077	$	-	$	85,145
SBA loans:
Risk Rating:
Pass		$	47,901	$	12,821	$	44,950	$	58,839	$	26,136	$	86,085	$	-	$	2,976	$	279,708
Special Mention			-		-		-		5,446		1,336		5,648		-		-		12,430
Substandard			-		-		904		5,503		1,554		3,797		-		-		11,758
Doubtful & Loss			-		-		-		-		-		-		-		-		-
Total SBA loans:		$	47,901	$	12,821	$	45,854	$	69,788	$	29,026	$	95,530	$	-	$	2,976	$	303,896
SBA - PPP loans:
Risk Rating:
Pass		$	882,986	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	882,986
Special Mention			-		-		-		-		-		-		-		-		-
Substandard			-		-		-		-		-		-		-		-		-
Doubtful & Loss			-		-		-		-		-		-		-		-		-
Total SBA - PPP loans:		$	882,986	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	882,986
Commercial and industrial loans:
Risk Rating:
Pass		$	104,478	$	168,050	$	62,453	$	56,043	$	32,149	$	76,019	$	257,250	$	6,058	$	762,500
Special Mention			1,995		1,081		1,892		1,028		95		4,882		17,395		1,132		29,500
Substandard			4,346		860		3,996		2,282		285		94		6,677		1,522		20,062
Doubtful & Loss			-		-		-		-		-		-		-		-		-
Total Commercial and industrial loans:		$	110,819	$	169,991	$	68,341	$	59,353	$	32,529	$	80,995	$	281,322	$	8,712	$	812,062


		Origination Year												Revolving loans amortized cost basis		Revolving loans converted to term loans
December 31, 2020		2020		2019		2018		2017		2016		Prior		Revolving loans amortized cost basis		Revolving loans converted to term loans		Total
	(Dollars in thousands)
Dairy & livestock and agribusiness loans:
Risk Rating:
Pass		$	1,041	$	1,765	$	1,199	$	5,680	$	120	$	320	$	319,211	$	363	$	329,699
Special Mention			878		-		364		-		-		-		13,255		1,511		16,008
Substandard			-		-		784		693		2,285		-		-		11,677		15,439
Doubtful & Loss			-		-		-		-		-		-		-		-		-

Total Dairy & livestock and agribusiness loans:		$	1,919	$	1,765	$	2,347	$	6,373	$	2,405	$	320	$	332,466	$	13,551	$	361,146

Municipal lease finance receivables loans:
Risk Rating:
Pass		$	8,478	$	-	$	2,556	$	10,249	$	3,586	$	20,266	$	-	$	-	$	45,135
Special Mention			-		-		-		-		-		412		-		-		412
Substandard			-		-		-		-		-		-		-		-		-
Doubtful & Loss			-		-		-		-		-		-		-		-		-

Total Municipal lease finance receivables loans:		$	8,478	$	-	$	2,556	$	10,249	$	3,586	$	20,678	$	-	$	-	$	45,547

SFR mortgage loans:
Risk Rating:
Pass		$	65,463	$	59,596	$	29,142	$	22,452	$	27,192	$	62,593	$	3	$	-	$	266,441
Special Mention			-		-		-		-		-		452		-		-		452
Substandard			-		-		-		-		229		2,957		-		432		3,618
Doubtful & Loss			-		-		-		-		-		-		-		-		-

Total SFR mortgage loans:		$	65,463	$	59,596	$	29,142	$	22,452	$	27,421	$	66,002	$	3	$	432	$	270,511

Consumer and other loans:
Risk Rating:
Pass		$	8,557	$	2,077	$	871	$	969	$	1,586	$	961	$	67,774	$	1,688	$	84,483
Special Mention			-		-		-		-		-		91		517		22		630
Substandard			-		-		-		-		-		172		-		721		893
Doubtful & Loss			-		-		-		-		-		-		-		-		-

Total Consumer and other loans:		$	8,557	$	2,077	$	871	$	969	$	1,586	$	1,224	$	68,291	$	2,431	$	86,006

Total Loans:
Risk Rating:
Pass		$	2,112,914	$	944,750	$	763,869	$	774,130	$	640,874	$	1,893,124	$	880,898	$	35,633	$	8,046,192
Special Mention			12,205		8,243		32,305		50,344		18,829		61,325		36,887		3,659		223,797
Substandard			4,346		1,351		7,841		15,860		6,881		20,810		7,037		14,693		78,819
Doubtful & Loss			-		-		-		-		-		-		-		-		-

Total Loans:		$	2,129,465	$	954,344	$	804,015	$	840,334	$	666,584	$	1,975,259	$	924,822	$	53,985	$	8,348,808

Allowance for Credit Losses

Our allowance for credit losses is based upon lifetime loss rate models developed from an estimation framework that uses historical lifetime loss experiences to derive loss rates at a collective pool level. We measure the expected credit losses on a collective (pooled) basis for those loans that share similar risk characteristics. We have three collective loan pools: Commercial Real Estate, Commercial and Industrial, and Consumer. Our ACL amounts are largely driven by portfolio characteristics, including loss history and various risk attributes, and the economic outlook for certain macroeconomic variables. Risk attributes for commercial real estate loans include OLTV, origination year, loan seasoning, and macroeconomic variables that include GDP growth, commercial real estate price index and unemployment rate. Risk attributes for commercial and industrial loans include internal risk ratings, borrower industry sector, loan credit spreads and macroeconomic variables that include unemployment rate and BBB spread. The macroeconomic variables for Consumer include unemployment rate and GDP. The Commercial Real Estate methodology is applied over commercial real estate loans, a portion of construction loans, and a portion of SBA loans (excluding Payment Protection Program loans). The Commercial and Industrial methodology is applied over a substantial portion of the Company’s commercial and industrial loans, all dairy & livestock and agribusiness loans, municipal lease receivables, as well as the remaining portion of SBA loans (excluding Payment Protection Program loans). The Consumer methodology is applied to SFR mortgage loans, consumer loans, as well as the remaining construction loans. In addition to determining the quantitative life of loan loss rate to be applied against the amortized cost basis of the portfolio segments, management reviews current conditions and forecasts to determine whether adjustments are needed to ensure that the life of loan loss rates reflect both the current state of the portfolio, and expectations for macroeconomic changes. Our methodology for assessing the appropriateness of the allowance is reviewed on a regular basis and considers overall risks in the Bank’s loan portfolio. Refer to Note 3 – Summary of Significant Accounting Policies contained herein for a more detailed discussion concerning the allowance for credit losses.

Our allowance for credit losses at March 31, 2021 decreased from the prior quarter end by $21.9 million, as a result of a $19.5 million recapture of provision for credit losses and net charge-offs of $2.4 million. The recapture of provision for credit losses was primarily due to the forecasted improvements in macroeconomic variables, with the greatest impact reflected in an $18.9 million decline in the ACL for Commercial Real Estate loans. During the first quarter of 2020, we recorded a provision for credit losses of $12.0 million, due to the initial forecast of a severe economic downturn from the

COVID-19

pandemic. The provision in the first quarter of 2020 was followed by an additional $11.5 million provision for credit losses in the second quarter of 2020, as the forecasted economic impact from the pandemic increased in both severity and duration. Based on the magnitude of government economic stimulus and the wide availability of vaccines, our latest economic forecast reflects improvements in key macroeconomic variables, particularly the commercial real estate price index and the unemployment rate. Our economic forecast continues to be a blend of multiple forecasts produced by Moody’s, including Moody’s baseline forecast, as well as upside and downside forecasts. Our forecast at the end of the first quarter of 2021, assumes GDP will increase by 4.0% in 2021 and then grow by 3.2 % in 2022 and 2.8% in 2023. The forecast for the unemployment rate is 6.4% in 2021, 6.3% in 2022 and 5.5% in 2023. At March 31, 2021, the allowance for credit losses of $71.8 million was 0.87% of total loans, compared to 1.12% and 1.11% at December 31, 2020 and March 31, 2020, respectively.

Management believes that the ACL was appropriate at March 31, 2021 and December 31, 2020. As there is a high degree of uncertainty around the epidemiological assumptions and impact of government responses to the pandemic that impact our economic forecast, no assurance can be given that economic conditions that adversely affect the Company’s service areas or other circumstances will not be reflected in increased provisions for credit losses in the future.

The following tables present the balance and activity related to the allowance for credit losses for

held-for-investment

loans by type for the periods presented.


	Three Months Ended March 31, 2021
	Ending Balance December 31, 2020		Charge-offs			Recoveries		(Recapture of) Provision for Credit Losses			Ending Balance March 31, 2021
	(Dollars in thousands)
Commercial real estate	$	75,439	$	-		$	-	$	(18,867	)	$	56,572
Construction		1,934		-			3		(59	)		1,878
SBA		2,992		-			4		(484	)		2,512
SBA - PPP		-		-			-		-			-
Commercial and industrial		7,142		(2,475	)		2		1,770			6,439
Dairy & livestock and agribusiness		3,949		-			-		(1,227	)		2,722
Municipal lease finance receivables		74		-			-		(39	)		35
SFR mortgage		367		-			79		(148	)		298
Consumer and other loans		1,795		-			-		(446	)		1,349

Total allowance for credit losses	$	93,692	$	(2,475	)	$	88	$	(19,500	)	$	71,805


	Three Months Ended March 31, 2020
	Ending Balance, prior to adoption of ASU 2016-13 December 31, 2019	Impact of Adoption of ASU 2016-13			Charge-offs			Recoveries		Provision for (Recapture of) Credit Losses			Ending Balance March 31, 2020
	(Dollars in thousands)
Commercial real estate	$48,629	$	3,547		$	-		$	-	$	6,251		$	58,427
Construction	858		655			-			3		3,116			4,632
SBA	1,453		1,818			-			-		675			3,946
Commercial and industrial	8,880		(2,442	)		-			2		2,947			9,387
Dairy & livestock and agribusiness	5,255		(186	)		-			-		(803	)		4,266
Municipal lease finance receivables	623		(416	)		-			-		70			277
SFR mortgage	2,339		(2,043	)		-			206		(221	)		281
Consumer and other loans	623		907			(86	)		16		(35	)		1,425

Total allowance for credit losses	$68,660	$	1,840		$	(86	)	$	227	$	12,000		$	82,641

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 credit losses, 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 credit losses, growth in the loan portfolio, prevailing economic conditions and other factors. Refer to Note 3 –

Summary of Significant Accounting Policies

, included in our Annual Report on Form

10-K

for the year ended December 31, 2020, for additional discussion concerning the Bank’s policy for past due and nonperforming loans.

The following table presents the recorded investment in, and the aging of, past due loans (including nonaccrual loans), by type of loans as of the dates presented.


	March 31, 2021
	30-59 Days Past Due		60-89 Days Past Due		Greater than 89 Days Past Due		Total Past Due		Loans Not Past Due		Total Loans and Financing Receivables
	(Dollars in thousands)
Commercial real estate
Owner occupied	$	-	$	211	$	6,934	$	7,145	$	2,165,178	$	2,172,323
Non-owner occupied		178		-		-		178		3,424,280		3,424,458
Construction
Speculative (1)		-		-		-		-		80,857		80,857
Non-speculative		-		-		-		-		15,499		15,499
SBA		258		-		1,028		1,286		306,441		307,727
SBA - PPP		-		-		-		-		897,724		897,724
Commercial and industrial		452		689		2,606		3,747		749,961		753,708
Dairy & livestock and agribusiness		-		-		259		259		260,829		261,088
Municipal lease finance receivables		-		-		-		-		42,349		42,349
SFR mortgage		266		-		229		495		254,905		255,400
Consumer and other loans		21		-		193		214		81,710		81,924

Total loans	$	1,175	$	900	$	11,249	$	13,324	$	8,279,733	$	8,293,057

(1)

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


	December 31, 2020
	30-59 Days Past Due		60-89 Days Past Due		Greater than 89 Days Past Due		Total Past Due		Loans Not Past Due		Total Loans and Financing Receivables
	(Dollars in thousands)
Commercial real estate
Owner occupied	$	-	$	-	$	7,208	$	7,208	$	2,136,051	$	2,143,259
Non-owner occupied		-		-		-		-		3,358,250		3,358,250
Construction
Speculative (1)		-		-		-		-		72,126		72,126
Non-speculative		-		-		-		-		13,019		13,019
SBA		531		2,415		1,025		3,971		299,925		303,896
SBA - PPP		-		-		-		-		882,986		882,986
Commercial and industrial		608		811		2,338		3,757		808,305		812,062
Dairy & livestock and agribusiness		-		-		784		784		360,362		361,146
Municipal lease finance receivables		-		-		-		-		45,547		45,547
SFR mortgage		-		-		229		229		270,282		270,511
Consumer and other loans		-		-		-		-		86,006		86,006

Total loans	$	1,139	$	3,226	$	11,584	$	15,949	$	8,332,859	$	8,348,808

(1)

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

Amortized cost of our finance receivables and loans that are on nonaccrual status, including loans with no allowance are presented as of March 31, 2021 and December 31, 2020 by type of loan.


	March 31, 2021
	Nonaccrual with No Allowance for Credit Losses		Total Nonaccrual (1)		Loans Past Due Over 89 Days Still Accruing
	(Dollars in thousands)
Commercial real estate
Owner occupied	$	7,395	$	7,395	$	-
Non-owner occupied		-		-		-
Construction
Speculative (2)		-		-		-
Non-speculative		-		-		-
SBA		2,076		2,412		-
SBA - PPP		-		-		-
Commercial and industrial		1,506		2,967		-
Dairy & livestock and agribusiness		-		259		-
Municipal lease finance receivables		-		-		-
SFR mortgage		424		424		-
Consumer and other loans		312		312		-

Total loans	$	11,713	$	13,769	$	-

(1)

As of March 31, 2021, $2.1 million of nonaccruing loans were current, $400,000 were

60-89

days past due, and $11.2 million were 90+ days past due.

(2)

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


	December 31, 2020
	Nonaccrual with No Allowance for Credit Losses		Total Nonaccrual (1)(3)		Loans Past Due Over 89 Days Still Accruing
	(Dollars in thousands)
Commercial real estate
Owner occupied	$	7,563	$	7,563	$	-
Non-owner occupied		-		-		-
Construction
Speculative (2)		-		-		-
Non-speculative		-		-		-
SBA		2,035		2,273		-
SBA - PPP		-		-		-
Commercial and industrial		1,576		3,129		-
Dairy & livestock and agribusiness		785		785		-
Municipal lease finance receivables		430		-		-
SFR mortgage		-		430		-
Consumer and other loans		167		167		-

Total loans	$	12,556	$	14,347	$	-

(1)

As of December 31, 2020, $1.4 million of nonaccruing loans were current, $2,000 were

30-59

days past due, $1.3 million were

60-89

days past due, and $11.6 million were 90+ days past due.

(2)

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

(3)

Excludes $184,000 of guaranteed portion of nonaccrual SBA loans that are in process of collection.

Collateral Dependent Loans

A loan is considered collateral-dependent when the borrower is experiencing financial difficulty and repayment is expected to be provided substantially through the operation or sale of the collateral. The following table presents the recorded investment in collateral-dependent loans by type of loans as of the dates presented.


	March 31, 2021						Number of Loans Dependent on Collateral
	Real Estate		Business Assets		Other		Number of Loans Dependent on Collateral
	(Dollars in thousands)
Commercial real estate	$	7,689	$	-	$	-		8
Construction		-		-		-		11
SBA		1,826		418		168		-
SBA - PPP		-		-		-		-
Commercial and industrial		421		7,708		143		21
Dairy & livestock and agribusiness		-		259		-		1
Municipal lease finance receivables		-		-		-		-
SFR mortgage		424		-		-		2
Consumer and other loans		312		-		-		3

Total collateral-dependent loans	$	10,672	$	8,385	$	311		46


	December 31, 2020						Number of Loans Dependent on Collateral
	Real Estate		Business Assets		Other		Number of Loans Dependent on Collateral
	(Dollars in thousands)
Commercial real estate	$	7,883	$	-	$	-		8
Construction		-		-		-		-
SBA		1,761		326		185		10
SBA - PPP		-		-		-		-
Commercial and industrial		470		5,542		95		18
Dairy & livestock and agribusiness		-		785		-		1
Municipal lease finance receivables		-		-		-		-
SFR mortgage		430		-		-		2
Consumer and other loans		168		-		-		2

Total collateral-dependent loans	$	10,712	$	6,653	$	280		41

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 in the same manner as it evaluates credit risk associated with the loan and lease portfolio. There was no provision or recapture of provision for unfunded commitments for the three months ended March 31, 2021 and 2020. As of March 31, 2021 and December 31, 2020, the balance in this reserve was $9.0 million and was included in other liabilities.

Troubled Debt Restructurings (“TDRs”)

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,

included in our Annual Report on Form

10-K

for the year ended December 31, 2020 for a more detailed discussion regarding TDRs.

As of March 31, 2021, there were $5.8 million of loans classified as a TDR, all of which 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 March 31, 2021, performing TDRs were comprised of three commercial and industrial loans of $4.5 million, five SFR mortgage loans of $1.0 million, and one commercial real estate loan of $294,000.

The majority of TDRs have no specific allowance allocated as any impairment amount is normally charged off at the time the loan is considered uncollectible. We have no

allocated allowance to TDRs as of March 31, 2021 and December 31, 2020.

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


	Three Months Ended
	March 31,
	2021			2020
	(Dollars in thousands)
Performing TDRs:
Beginning balance	$	2,159		$	3,112
New modifications		4,643			-
Payoffs/payments, net and other		(989	)		(299	)
TDRs returned to accrual status		-			-
TDRs placed on nonaccrual status		-			-

Ending balance	$	5,813		$	2,813

Nonperforming TDRs:
Beginning balance	$	-		$	244
New modifications		-			-
Charge-offs		-			-
Payoffs/payments, net and other		-			(244	)
TDRs returned to accrual status		-			-
TDRs placed on nonaccrual status		-			-

Ending balance	$	-		$	-

Total TDRs	$	5,813		$	2,813

The following table summarizes loans modified as TDRs for the period presented.

Modifications (1)


	For the Three Months Ended March 31, 2021
	Number of Loans		Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment		Outstanding Recorded Investment at March 31, 2021		Financial Effect Resulting From Modifications (2)
	(Dollars in thousands)
Commercial real estate:
Interest rate reduction		-	$	-	$	-	$	-	$	-
Change in amortization period or maturity		-		-		-		-		-
Commercial and industrial:
Interest rate reduction		-		-		-		-		-
Change in amortization period or maturity		2		4,643		4,643		4,443		-
SFR mortgage:
Interest rate reduction		-		-		-		-		-
Change in amortization period or maturity		-		-		-		-		-

Total loans		2	$	4,643	$	4,643	$	4,443	$	-

(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 current allowance for credit losses at modification date.

As of March 31, 2021 and 2020, there were no loans that were modified as a TDR within the previous 12 months that subsequently defaulted during the three months ended March 31, 2021 and 2020, respectively.