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Loans Receivable and Allowance for Loan Losses
 3 Months Ended
Mar. 31, 2017
Receivables [Abstract]  
Loans Receivable and Allowance for Loan Losses
7.    Loans Receivable and Allowance for Loan Losses
The following is a summary of loans receivable by major category:
 
March 31, 2017
 
December 31, 2016
 
(Dollars in thousands)
Loan portfolio composition
 
 
 
Real estate loans:
 
 
 
Residential
$
58,166

 
$
57,884

Commercial
7,948,844

 
7,842,573

Construction
284,178

 
254,113

Total real estate loans
8,291,188

 
8,154,570

Commercial business
1,696,895

 
1,832,021

Trade finance
143,298

 
154,928

Consumer and other
420,169

 
403,470

Total loans outstanding
10,551,550

 
10,544,989

      Deferred loan fees, net
(1,883
)
 
(1,657
)
Loans receivable
10,549,667

 
10,543,332

      Allowance for loan losses
(78,659
)
 
(79,343
)
Loans receivable, net of allowance for loan losses
$
10,471,008

 
$
10,463,989


The loan portfolio is made up of four segments: real estate loans, commercial business, trade finance and consumer and other. These segments are further segregated between loans accounted for under the amortized cost method (“Legacy Loans”) and previously acquired loans that were originally recorded at fair value with no carryover of the related pre-acquisition allowance for loan losses (“Acquired Loans”). Acquired Loans are further segregated between purchased credit impaired loans (loans with credit deterioration on the acquisition date and accounted for under ASC 310-30, or “PCIs”) and Acquired Performing Loans (loans that were pass graded on the acquisition date and the fair value adjustment is amortized over the contractual life under ASC 310-20, or “non-PCI loans”).
The following table presents changes in the accretable discount on the PCI loans for the three months ended March 31, 2017 and 2016:
 
Three Months Ended March 31,

2017

2016

(Dollars in thousands)
Balance at beginning of period
$
38,591


$
23,777

Accretion
(5,348
)

(3,029
)
Reclassification from nonaccretable difference
18,408


1,349

Balance at end of period
$
51,651


$
22,097


On the acquisition date, the amount by which the undiscounted expected cash flows exceed the estimated fair value of the PCI loans is the “accretable yield.” The accretable yield is then measured at each financial reporting date and represents the difference between the remaining undiscounted expected cash flows and the current carrying value of the loans. The accretable yield will change from period to period due to the following: 1) estimates of the remaining life of acquired loans will affect the amount of future interest income; 2) indices for variable rates of interest on PCI loans may change; and 3) estimates of the amount of the contractual principal and interest that will not be collected (nonaccretable difference) may change.
The following tables detail the activity in the allowance for loan losses by portfolio segment for the three months ended March 31, 2017 and 2016:
 
Legacy Loans
 
Acquired Loans
 
Total
 
Real Estate
 
Commercial Business
 
Trade Finance
 
Consumer
and Other
 
Real Estate
 
Commercial Business
 
Trade Finance
 
Consumer and Other
 
 
(Dollars in thousands)
Three Months Ended March 31, 2017
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Balance, beginning of period
$
38,956

 
$
23,430

 
$
1,897

 
$
2,116

 
$
12,791

 
$
117

 
$
—

 
$
36

 
$
79,343

Provision (credit) for loan losses
6,106

 
(2,884
)
 
303

 
184

 
975

 
748

 
187

 
(19
)
 
5,600

Loans charged off
(1,154
)
 
(3,190
)
 
(1,576
)
 
(279
)
 
(336
)
 
(70
)
 
—

 
—

 
(6,605
)
Recoveries
21

 
123

 
—

 
1

 
25

 
149

 
—

 
2

 
321

Balance, end of period
$
43,929

 
$
17,479

 
$
624

 
$
2,022

 
$
13,455

 
$
944

 
$
187

 
$
19

 
$
78,659


 
 
Legacy Loans
 
Acquired Loans
 
Total
 
Real Estate
 
Commercial Business
 
Trade Finance
 
Consumer
and Other
 
Real Estate
 
Commercial Business
 
Trade Finance
 
Consumer and Other
 
 
(Dollars in thousands)
Three Months Ended March 31, 2016
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Balance, beginning of period
$
42,829

 
$
16,332

 
$
3,592

 
$
556

 
$
12,823

 
$
214

 
$
—

 
$
62

 
$
76,408

Provision (credit) for loan losses
(1,218
)
 
3,147

 
(1,507
)
 
276

 
(82
)
 
(112
)
 
—

 
(4
)
 
500

Loans charged off
(19
)
 
(621
)
 
—

 
(65
)
 
(116
)
 
—

 
—

 
—

 
(821
)
Recoveries
523

 
190

 
—

 
1

 
1

 
52

 
—

 
2

 
769

Balance, end of period
$
42,115

 
$
19,048

 
$
2,085

 
$
768

 
$
12,626

 
$
154

 
$
—

 
$
60

 
$
76,856


The following tables break out the allowance for loan losses and the recorded investment of loans outstanding by individually impaired, general valuation, and PCI impairment, by portfolio segment, at March 31, 2017 and December 31, 2016:
 
March 31, 2017
 
Legacy Loans
 
Acquired Loans
 
Total
 
Real Estate
 
Commercial Business
 
Trade Finance
 
Consumer and Other
 
Real Estate
 
Commercial Business
 
Trade Finance
 
Consumer and Other
 
 
(Dollars in thousands)
Allowance for loan losses:
Individually evaluated for impairment
$
2,530

 
$
2,357

 
$
—

 
$
40

 
$
30

 
$
122

 
$
—

 
$
—

 
$
5,079

Collectively evaluated for impairment
41,399

 
15,122

 
624

 
1,982

 
1,289

 
822

 
187

 
19

 
61,444

PCI loans
—

 
—

 
—

 
—

 
12,136

 
—

 
—

 
—

 
12,136

Total
$
43,929

 
$
17,479

 
$
624

 
$
2,022

 
$
13,455

 
$
944

 
$
187

 
$
19

 
$
78,659

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Loans outstanding:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Individually evaluated for impairment
$
75,377

 
$
28,421

 
$
4,450

 
$
715

 
$
19,325

 
$
1,019

 
$
—

 
$
272

 
$
129,579

Collectively evaluated for impairment
5,474,703

 
1,065,952

 
59,131

 
206,933

 
2,538,765

 
541,586

 
76,541

 
198,095

 
10,161,706

PCI loans
—

 
—

 
—

 
—

 
183,018

 
59,917

 
3,176

 
14,154

 
260,265

Total
$
5,550,080

 
$
1,094,373

 
$
63,581

 
$
207,648

 
$
2,741,108

 
$
602,522

 
$
79,717

 
$
212,521

 
$
10,551,550


 
December 31, 2016
 
Legacy Loans
 
Acquired Loans
 
Total
 
Real Estate
 
Commercial Business
 
Trade Finance
 
Consumer and Other
 
Real Estate
 
Commercial Business
 
Trade Finance
 
Consumer and Other
 
 
(Dollars in thousands)
Allowance for loan losses:
Individually evaluated for impairment
$
1,889

 
$
4,420

 
$
864

 
$
50

 
$
113

 
$
73

 
$
—

 
$
—

 
$
7,409

Collectively evaluated for impairment
37,067

 
19,010

 
1,033

 
2,066

 
548

 
44

 
—

 
36

 
59,804

PCI loans
—

 
—

 
—

 
—

 
12,130

 
—

 
—

 
—

 
12,130

Total
$
38,956

 
$
23,430

 
$
1,897

 
$
2,116

 
$
12,791

 
$
117

 
$
—

 
$
36

 
$
79,343

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Loans outstanding:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Individually evaluated for impairment
$
74,085

 
$
34,783

 
$
6,029

 
$
733

 
$
23,865

 
$
435

 
$
—

 
$
431

 
$
140,361

Collectively evaluated for impairment
5,271,262

 
1,079,348

 
75,365

 
179,961

 
2,597,200

 
650,710

 
70,535

 
206,802

 
10,131,183

PCI loans
—

 
—

 
—

 
—

 
188,158

 
66,745

 
2,999

 
15,543

 
273,445

Total
$
5,345,347

 
$
1,114,131

 
$
81,394

 
$
180,694

 
$
2,809,223

 
$
717,890

 
$
73,534

 
$
222,776

 
$
10,544,989


As of March 31, 2017 and December 31, 2016, the reserve for unfunded commitments recorded in other liabilities was $3.4 million and $3.2 million, respectively. For the three months ended March 31, 2017 and 2016, the recognized provision (credit) for unfunded commitments recorded in credit related expense was $241 thousand and $(570) thousand, respectively.
The recorded investment of individually impaired loans was as follows:
 
March 31, 2017
 
December 31, 2016
 
(Dollars in thousands)
With allocated specific allowance
 
 
 
Without charge off
$
51,944

 
$
59,638

With charge off
196

 
1,120

With no allocated specific allowance
 
 
 
Without charge off
70,466

 
76,775

With charge off
6,973

 
2,828

Specific allowance on impaired loans
(5,079
)
 
(7,409
)
Impaired loans, net of specific allowance
$
124,500

 
$
132,952

        
The following tables detail the recorded investment of impaired loans (Legacy Loans and Acquired Loans that became impaired subsequent to being originated and acquired, respectfully) as of March 31, 2017 and December 31, 2016 and for the three months ended March 31, 2017 and 2016. Loans with no related allowance are believed by management to be adequately collateralized.
 
 
As of March 31, 2017
 
As of December 31, 2016
Total Impaired Loans
 
Recorded Investment*
 
Unpaid Contractual Principal Balance
 
Related
Allowance
 
Recorded Investment*
 
Unpaid Contractual Principal Balance
 
Related
Allowance
 
 
(Dollars in thousands)
With related allowance:
 
 
 
 
 
 
 
 
 
 
 
 
Real estate—residential
 
$
—

 
$
—

 
$
—

 
$
—

 
$
—

 
$
—

Real estate—commercial
 
 
 
 
 
 
 
 
 
 
 
 
Retail
 
581

 
581

 
9

 
2,095

 
2,384

 
90

Hotel & motel
 
6,395

 
6,433

 
403

 
6,387

 
6,387

 
337

Gas station & car wash
 
—

 
—

 
—

 
215

 
228

 
41

Mixed use
 
250

 
2,101

 
3

 
206

 
732

 
27

Industrial & warehouse
 
2,882

 
2,882

 
2

 
530

 
530

 
—

Other
 
22,412

 
22,657

 
2,143

 
22,580

 
22,825

 
1,507

Real estate—construction
 
—

 
—

 
—

 
—

 
—

 
—

Commercial business
 
19,538

 
19,698

 
2,479

 
26,543

 
27,161

 
4,493

Trade finance
 
—

 
—

 
—

 
2,111

 
2,156

 
864

Consumer and other
 
82

 
82

 
40

 
91

 
91

 
50

Subtotal
 
$
52,140

 
$
54,434

 
$
5,079

 
$
60,758

 
$
62,494

 
$
7,409

With no related allowance:
 
 
 
 
 
 
 
 
 
 
 
 
Real estate—residential
 
$
1,465

 
$
1,465

 
$
—

 
$
3,562

 
$
3,562

 
$
—

Real estate—commercial
 
 
 
 
 
 
 
 
 
 
 
 
Retail
 
16,752

 
17,724

 
—

 
12,753

 
13,290

 
—

Hotel & motel
 
6,273

 
12,221

 
—

 
6,122

 
11,735

 
—

Gas station & car wash
 
4,160

 
6,634

 
—

 
5,043

 
7,449

 
—

Mixed use
 
6,530

 
7,614

 
—

 
7,303

 
7,822

 
—

Industrial & warehouse
 
8,498

 
8,574

 
—

 
9,673

 
9,748

 
—

Other
 
15,648

 
16,911

 
—

 
20,181

 
21,492

 
—

Real estate—construction
 
2,856

 
2,996

 
—

 
1,300

 
1,441

 
—

Commercial business
 
9,902

 
13,509

 
—

 
8,675

 
9,472

 
—

Trade finance
 
4,450

 
4,450

 
—

 
3,918

 
3,918

 
—

Consumer and other
 
905

 
923

 
—

 
1,073

 
1,136

 
—

Subtotal
 
$
77,439

 
$
93,021

 
$
—

 
$
79,603

 
$
91,065

 
$
—

Total
 
$
129,579

 
$
147,455

 
$
5,079

 
$
140,361

 
$
153,559

 
$
7,409


__________________________________
*
Unpaid contractual principal balance less charge offs, interest collected applied to principal if on nonaccrual and purchase discounts.

 
 
For the Three Months Ended March 31, 2017
 
For the Three Months Ended March 31, 2016
Total Impaired Loans
 
Average Recorded Investment*
 
Interest Income Recognized during Impairment
 
Average Recorded Investment*
 
Interest Income Recognized during Impairment
 
 
(Dollars in thousands)
With related allowance:
 
 
 
 
 
 
 
 
Real estate—residential
 
$
—

 
$
—

 
$
—

 
$
—

Real estate—commercial
 
 
 
 
 
 
 
 
Retail
 
1,338

 
4

 
1,712

 
—

Hotel & motel
 
6,391

 
43

 
4,611

 
57

Gas station & car wash
 
108

 
—

 
1,050

 
—

Mixed use
 
228

 
2

 
563

 
2

Industrial & warehouse
 
1,706

 
32

 
560

 
6

Other
 
22,496

 
253

 
24,462

 
275

Real estate—construction
 
—

 
—

 
—

 
—

Commercial business
 
23,041

 
195

 
35,742

 
265

Trade finance
 
1,055

 
—

 
10,314

 
94

Consumer and other
 
87

 
1

 
128

 
1

Subtotal
 
$
56,450

 
$
530

 
$
79,142

 
$
700

With no related allowance:
 
 
 
 
 
 
 
 
Real estate—residential
 
$
2,513

 
$
28

 
$
—

 
$
—

Real estate—commercial
 
 
 
 
 
 
 
 
Retail
 
14,752

 
159

 
11,105

 
100

Hotel & motel
 
6,198

 
7

 
7,849

 
22

Gas station & car wash
 
4,602

 
10

 
4,665

 
34

Mixed use
 
6,916

 
63

 
2,364

 
12

Industrial & warehouse
 
9,086

 
75

 
9,888

 
85

Other
 
17,915

 
130

 
12,712

 
90

Real estate—construction
 
2,078

 
20

 
1,355

 
—

Commercial business
 
9,289

 
30

 
8,950

 
41

Trade finance
 
4,184

 
51

 
—

 
—

Consumer and other
 
989

 
7

 
1,228

 
7

Subtotal
 
$
78,522

 
$
580

 
$
60,116

 
$
391

Total
 
$
134,972

 
$
1,110

 
$
139,258

 
$
1,091

__________________________________
*
Unpaid contractual principal balance less charge offs, interest collected applied to principal if on nonaccrual and purchase discounts.


 
 
As of March 31, 2017
 
As of December 31, 2016
Impaired Acquired Loans
 
Recorded Investment*
 
Unpaid
Contractual Principal
Balance
 
Related
Allowance
 
Recorded Investment*
 
Unpaid
Contractual Principal
Balance
 
Related
Allowance
 
 
(Dollars in thousands)
With related allowance:
 
 
 
 
 
 
 
 
 
 
 
 
Real estate—residential
 
$
—

 
$
—

 
$
—

 
$
—

 
$
—

 
$
—

Real estate—commercial
 
 
 
 
 
 
 
 
 
 
 
 
Retail
 
311

 
311

 
—

 
1,826

 
2,114

 
85

Hotel & motel
 
92

 
89

 
2

 
—

 
—

 
—

Gas station & car wash
 
—

 
—

 
—

 
—

 
—

 
—

Mixed use
 
250

 
2,101

 
3

 
136

 
136

 
2

Industrial & warehouse
 
—

 
—

 
—

 
—

 
—

 
—

Other
 
333

 
337

 
25

 
337

 
341

 
26

Real estate—construction
 
—

 
—

 
—

 
—

 
—

 
—

Commercial business
 
774

 
828

 
122

 
294

 
339

 
73

Trade finance
 
—

 
—

 
—

 
—

 
—

 
—

Consumer and other
 
—

 
—

 
—

 
—

 
—

 
—

Subtotal
 
$
1,760

 
$
3,666

 
$
152

 
$
2,593

 
$
2,930

 
$
186

With no related allowance:
 
 
 
 
 
 
 
 
 
 
 
 
Real estate—residential
 
$
—

 
$
—

 
$
—

 
$
679

 
$
679

 
$
—

Real estate—commercial
 
 
 
 
 
 
 
 
 
 
 
 
Retail
 
4,351

 
4,831

 
—

 
3,148

 
3,214

 
—

Hotel & motel
 
4,840

 
7,352

 
—

 
4,767

 
7,171

 
—

Gas station & car wash
 
618

 
804

 
—

 
1,568

 
1,815

 
—

Mixed use
 
5,283

 
5,510

 
—

 
5,315

 
5,551

 
—

Industrial & warehouse
 
65

 
65

 
—

 
66

 
66

 
—

Other
 
3,182

 
3,853

 
—

 
6,023

 
6,752

 
—

Real estate—construction
 
—

 
—

 
—

 
—

 
—

 
—

Commercial business
 
245

 
313

 
—

 
141

 
386

 
—

Trade finance
 
—

 
—

 
—

 
—

 
—

 
—

Consumer and other
 
272

 
281

 
—

 
431

 
484

 
—

Subtotal
 
$
18,856

 
$
23,009

 
$
—

 
$
22,138

 
$
26,118

 
$
—

Total
 
$
20,616

 
$
26,675

 
$
152

 
$
24,731

 
$
29,048

 
$
186


__________________________________
*
Unpaid contractual principal balance less charge offs, interest collected applied to principal if on nonaccrual and purchase discounts.


 
 
For the Three Months Ended March 31, 2017
 
For the Three Months Ended March 31, 2016
Impaired Acquired Loans
 
Average
Recorded Investment*
 
Interest Income Recognized during Impairment
 
Average
Recorded Investment*
 
Interest Income Recognized during Impairment
 
 
(Dollars in thousands)
With related allowance:
 
 
 
 
 
 
 
 
Real estate—residential
 
$
—

 
$
—

 
$
—

 
$
—

Real estate—commercial
 
 
 
 
 
 
 
 
Retail
 
1,068

 
4

 
1,169

 
—

Hotel & motel
 
46

 
—

 
—

 
—

Gas station & car wash
 
—

 
—

 
509

 
—

Mixed use
 
193

 
2

 
493

 
2

Industrial & warehouse
 
—

 
—

 
—

 
—

Other
 
335

 
4

 
305

 
4

Real estate—construction
 
—

 
—

 
—

 
—

Commercial business
 
534

 
5

 
576

 
3

Trade finance
 
—

 
—

 
—

 
—

Consumer and other
 
—

 
—

 
—

 
—

Subtotal
 
$
2,176

 
$
15

 
$
3,052

 
$
9

With no related allowance:
 
 
 
 
 
 
 
 
Real estate—residential
 
$
339

 
$
—

 
$
—

 
$
—

Real estate—commercial
 
 
 
 
 
 
 
 
Retail
 
3,750

 
31

 
2,571

 
26

Hotel & motel
 
4,803

 
4

 
6,882

 
17

Gas station & car wash
 
1,093

 
10

 
1,392

 
25

Mixed use
 
5,299

 
63

 
273

 
3

Industrial & warehouse
 
66

 
1

 
1,111

 
2

Other
 
4,603

 
13

 
3,826

 
14

Real estate—construction
 
—

 
—

 
—

 
—

Commercial business
 
193

 
1

 
672

 
8

Trade finance
 
—

 
—

 
—

 
—

Consumer and other
 
351

 
2

 
557

 
2

Subtotal
 
$
20,497

 
$
125

 
$
17,284

 
$
97

Total
 
$
22,673

 
$
140

 
$
20,336

 
$
106


__________________________________
*
Unpaid contractual principal balance less charge offs, interest collected applied to principal if on nonaccrual and purchase discounts.





















Generally, loans are placed on nonaccrual status if the principal and/or interest payments become 90 days past due and/or management deems the collectibility of the principal and/or interest to be in question, as well as when required by regulatory requirements. Loans to customers whose financial condition has deteriorated are considered for nonaccrual status whether or not the loan is 90 days or more past due. Generally, payments received on nonaccrual loans are recorded as principal reductions. Loans are returned to accrual status only when all the principal and interest amounts contractually due are brought current and future payments are reasonably assured. The Company did not recognize any cash basis interest income for the three months ended March 31, 2017 or 2016.
The following tables present the recorded investment of past due loans by the number of days past due as of March 31, 2017 and December 31, 2016 by class of loans:
 
As of March 31, 2017
 
Past Due and Accruing
 
 
 
 
 
30-59
Days 
 
60-89 
Days
 
90 or More Days 
 
Total
 
Nonaccrual Loans (2)
 
Total Delinquent and Nonaccrual Loans
 
(Dollars in thousands)
Legacy Loans:
 
Real estate—residential
$
—

 
$
—

 
$
—

 
$
—

 
$
—

 
$
—

Real estate—commercial
 
 
 
 
 
 
 
 
 
 
 
Retail
938

 
—

 
—

 
938

 
2,657

 
3,595

Hotel & motel
3,341

 
1,187

 
—

 
4,528

 
4,216

 
8,744

Gas station & car wash
947

 
—

 
—

 
947

 
3,542

 
4,489

Mixed use
—

 
—

 
—

 
—

 
1,247

 
1,247

Industrial & warehouse
57

 
1,028

 
—

 
1,085

 
1,922

 
3,007

Other
4,046

 
1,031

 
—

 
5,077

 
3,114

 
8,191

Real estate—construction
—

 
—

 
—

 
—

 
1,300

 
1,300

Commercial business
640

 
666

 
—

 
1,306

 
9,155

 
10,461

Trade finance
—

 
—

 
—

 
—

 
528

 
528

Consumer and other
229

 
66

 
275

 
570

 
228

 
798

     Subtotal
$
10,198

 
$
3,978

 
$
275

 
$
14,451

 
$
27,909

 
$
42,360

Acquired Loans: (1)
 
 
 
 
 
 
 
 
 
 
 
Real estate—residential
$
—

 
$
—

 
$
—

 
$
—

 
$
—

 
$
—

Real estate—commercial
 
 
 
 
 
 
 
 
 
 
 
Retail
1,156

 
653

 
—

 
1,809

 
1,578

 
3,387

Hotel & motel
1,546

 
—

 
—

 
1,546

 
4,668

 
6,214

Gas station & car wash
—

 
—

 
—

 
—

 
47

 
47

Mixed use
—

 
354

 
—

 
354

 
162

 
516

Industrial & warehouse
1,406

 
—

 
—

 
1,406

 
—

 
1,406

Other
97

 
—

 
—

 
97

 
2,096

 
2,193

Real estate—construction
—

 
—

 
—

 
—

 
—

 
—

Commercial business
360

 
—

 
—

 
360

 
435

 
795

Trade finance
—

 
—

 
—

 
—

 
—

 
—

Consumer and other
684

 
—

 
—

 
684

 
114

 
798

     Subtotal
$
5,249

 
$
1,007

 
$
—

 
$
6,256

 
$
9,100

 
$
15,356

TOTAL
$
15,447

 
$
4,985

 
$
275

 
$
20,707

 
$
37,009

 
$
57,716


__________________________________
(1) 
Acquired Loans exclude PCI loans.
(2) 
Nonaccrual loans exclude guaranteed portion of delinquent SBA loans that are in liquidation totaling $15.2 million. Includes nonaccrual loans less than 30 days past due totaling $15.6 million.

 
As of December 31, 2016
 
Past Due and Accruing
 
 
 
 
 
30-59
Days 
 
60-89 
Days
 
90 or More Days 
 
Total
 
Nonaccrual Loans (2)
 
Total Delinquent and Nonaccrual Loans
 
(Dollars in thousands)
Legacy Loans:
 
Real estate—residential
$
—

 
$
—

 
$
—

 
$
—

 
$
—

 
$
—

Real estate—commercial
 
 
 
 
 
 
 
 
 
 
 
Retail
480

 
—

 
—

 
480

 
3,672

 
4,152

Hotel & motel
1,836

 
3,137

 
—

 
4,973

 
1,392

 
6,365

Gas station & car wash
362

 
—

 
—

 
362

 
3,690

 
4,052

Mixed use
—

 
—

 
—

 
—

 
1,305

 
1,305

Industrial & warehouse
—

 
697

 
—

 
697

 
1,922

 
2,619

Other
2,871

 
—

 
—

 
2,871

 
4,007

 
6,878

Real estate—construction
—

 
1,513

 
—

 
1,513

 
1,300

 
2,813

Commercial business
558

 
815

 
—

 
1,373

 
9,371

 
10,744

Trade finance
—

 
500

 
—

 
500

 
2,056

 
2,556

Consumer and other
146

 
58

 
305

 
509

 
229

 
738

     Subtotal
$
6,253

 
$
6,720

 
$
305

 
$
13,278

 
$
28,944

 
$
42,222

Acquired Loans: (1)
 
 
 
 
 
 
 
 
 
 
 
Real estate—residential
$
—

 
$
—

 
$
—

 
$
—

 
$
679

 
$
679

Real estate—commercial
 
 
 
 
 
 
 
 
 
 
 
Retail
1,611

 
—

 
—

 
1,611

 
1,871

 
3,482

Hotel & motel
95

 
—

 
—

 
95

 
4,501

 
4,596

Gas station & car wash
68

 
340

 
—

 
408

 
993

 
1,401

Mixed use
—

 
—

 
—

 
—

 
48

 
48

Industrial & warehouse
257

 
—

 
—

 
257

 
—

 
257

Other
350

 
—

 
—

 
350

 
2,144

 
2,494

Real estate—construction
—

 
—

 
—

 
—

 
—

 
—

Commercial business
1,303

 
684

 
—

 
1,987

 
345

 
2,332

Trade finance
—

 
—

 
—

 
—

 
—

 
—

Consumer and other
331

 
25

 
—

 
356

 
549

 
905

     Subtotal
$
4,015

 
$
1,049

 
$
—

 
$
5,064

 
$
11,130

 
$
16,194

TOTAL
$
10,268

 
$
7,769

 
$
305

 
$
18,342

 
$
40,074

 
$
58,416

__________________________________
(1) 
Acquired Loans exclude PCI loans.
(2) 
Nonaccrual loans exclude guaranteed portion of delinquent SBA loans that are in liquidation totaling $15.9 million. Includes nonaccrual loans less than 30 days past due totaling $18.3 million.

Loans accounted for under ASC 310-30 are generally considered accruing and performing loans and the accretable discount is accreted to interest income over the estimated life of the loan when cash flows are reasonably estimable. Accordingly, PCI loans that are contractually past due are still considered to be accruing and performing loans. The loans may be classified as nonaccrual if the timing and amount of future cash flows is not reasonably estimable.
The Company categorizes loans into risk categories based on relevant information about the ability of borrowers to service their debt, including, but not limited to, current financial information, historical payment experience, credit documentation, public information, and current economic trends. The Company analyzes loans individually by classifying the loans as to credit risk. This analysis includes all non-homogeneous loans. This analysis is performed at least on a quarterly basis. The definitions for risk ratings are as follows:
•
Pass: Loans that meet a preponderance or more of the Company’s underwriting criteria and evidence an acceptable level of risk.
•
Special Mention: Loans that have potential weaknesses that deserves management’s close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the loan or of the institution’s credit position at some future date.
•
Substandard: Loans that are inadequately protected by the current net worth and paying capacity of the borrower or by the collateral pledged, if any. Loans in this classification have a well-defined weakness or weaknesses that jeopardize the repayment of the debt. They are characterized by the distinct possibility that the institution will sustain some loss if the deficiencies are not corrected.
•
Doubtful: Loans that have all the weaknesses inherent in those classified as substandard, with the added characteristic that the weaknesses make collection or repayment in full, on the basis of currently existing facts, conditions, and values, highly questionable and improbable.
The following tables present the recorded investment of risk ratings for Legacy and Acquired Loans as of March 31, 2017 and December 31, 2016 by class of loans:
 
As of March 31, 2017
 
Pass
 
Special
Mention
 
Substandard
 
Doubtful
 
Total
 
(Dollars in thousands)
Legacy Loans:
 
 
 
Real estate—residential
$
36,883

 
$
219

 
$
1,465

 
$
—

 
$
38,567

Real estate—commercial
 
 
 
 
 
 
 
 
 
Retail
1,373,943

 
19,057

 
17,634

 
—

 
1,410,634

Hotel & motel
1,171,476

 
15,238

 
9,010

 
—

 
1,195,724

Gas station & car wash
637,755

 
10,280

 
3,542

 
—

 
651,577

Mixed use
396,870

 
957

 
1,408

 
—

 
399,235

Industrial & warehouse
515,640

 
21,839

 
14,970

 
—

 
552,449

Other
1,050,557

 
22,967

 
35,864

 
—

 
1,109,388

Real estate—construction
175,895

 
13,755

 
2,856

 
—

 
192,506

Commercial business
1,000,577

 
18,973

 
74,590

 
233

 
1,094,373

Trade finance
53,839

 
4,142

 
5,600

 
—

 
63,581

Consumer and other
206,835

 
4

 
809

 
—

 
207,648

Subtotal
$
6,620,270

 
$
127,431

 
$
167,748

 
$
233

 
$
6,915,682

Acquired Loans:
 
 
 
 
 
 
 
 
 
Real estate—residential
$
19,330

 
$
269

 
$
—

 
$
—

 
$
19,599

Real estate—commercial
 
 
 
 
 
 
 
 
 
Retail
750,436

 
11,996

 
17,642

 
—

 
780,074

Hotel & motel
316,099

 
11,955

 
17,562

 
—

 
345,616

Gas station & car wash
243,494

 
8,918

 
9,190

 
—

 
261,602

Mixed use
117,453

 
3,578

 
11,599

 
8

 
132,638

Industrial & warehouse
314,060

 
14,694

 
16,453

 
298

 
345,505

Other
712,484

 
28,529

 
23,389

 
—

 
764,402

Real estate—construction
91,672

 
—

 
—

 
—

 
91,672

Commercial business
549,059

 
17,666

 
35,700

 
97

 
602,522

Trade finance
76,541

 
17

 
3,159

 
—

 
79,717

Consumer and other
204,689

 
914

 
5,270

 
1,648

 
212,521

Subtotal
$
3,395,317

 
$
98,536

 
$
139,964

 
$
2,051

 
$
3,635,868

Total
$
10,015,587

 
$
225,967

 
$
307,712

 
$
2,284

 
$
10,551,550


 
 
As of December 31, 2016
 
Pass
 
Special
Mention
 
Substandard
 
Doubtful
 
Total
 
(Dollars in thousands)
Legacy Loans:
 
 
 
Real estate—residential
$
34,283

 
$
223

 
$
2,883

 
$
—

 
$
37,389

Real estate—commercial
 
 
 
 
 
 
 
 
 
Retail
1,303,452

 
18,929

 
15,430

 
—

 
1,337,811

Hotel & motel
1,187,709

 
12,763

 
9,026

 
—

 
1,209,498

Gas station & car wash
643,282

 
7,259

 
3,690

 
—

 
654,231

Mixed use
375,312

 
—

 
1,467

 
—

 
376,779

Industrial & warehouse
478,528

 
29,830

 
13,745

 
—

 
522,103

Other
969,024

 
22,220

 
41,017

 
—

 
1,032,261

Real estate—construction
159,230

 
14,745

 
1,300

 
—

 
175,275

Commercial business
1,032,232

 
15,919

 
65,885

 
95

 
1,114,131

Trade finance
68,051

 
5,673

 
7,670

 
—

 
81,394

Consumer and other
179,864

 
1

 
829

 
—

 
180,694

Subtotal
$
6,430,967

 
$
127,562

 
$
162,942

 
$
95

 
$
6,721,566

Acquired Loans:
 
 
 
Real estate—residential
$
18,007

 
$
1,809

 
$
679

 
$
—

 
$
20,495

Real estate—commercial
 
 
 
 
 
 
 
 
 
Retail
772,465

 
9,860

 
21,110

 
—

 
803,435

Hotel & motel
328,396

 
5,419

 
18,233

 
—

 
352,048

Gas station & car wash
249,379

 
8,437

 
11,338

 
—

 
269,154

Mixed use
118,643

 
3,105

 
12,505

 
8

 
134,261

Industrial & warehouse
321,040

 
31,819

 
9,048

 
315

 
362,222

Other
736,385

 
23,286

 
29,099

 
—

 
788,770

Real estate—construction
78,838

 
—

 
—

 
—

 
78,838

Commercial business
649,186

 
31,340

 
37,265

 
99

 
717,890

Trade finance
70,535

 
61

 
2,938

 
—

 
73,534

Consumer and other
214,437

 
958

 
5,949

 
1,432

 
222,776

Subtotal
$
3,557,311

 
$
116,094

 
$
148,164

 
$
1,854

 
$
3,823,423

Total
$
9,988,278

 
$
243,656

 
$
311,106

 
$
1,949

 
$
10,544,989



The Company reclassifies loans held for investment to loans held for sale in the event that the Company plans to sell loans that were originated with the intent to hold to maturity. Loans transferred from held to investment to held for sale are carried at the lower of cost or fair value. The breakdown of loans by type that were reclassified from held to investment to held for sale for the three months ended March 31, 2017 and 2016 is presented in the following table:
 
Three Months Ended March 31,
 
2017
 
2016
Transfer of loans receivable to held for sale
(Dollars in thousands)
Real estate - commercial
$
8,699

 
$
—

Commercial business
752

 
—

Consumer
—

 
450

     Total
$
9,451

 
$
450



The adequacy of the allowance for loan losses is determined by management based upon an evaluation and review of the credit quality of the loan portfolio, consideration of historical loan loss experience, relevant internal and external factors that affect the collection of a loan, and other pertinent factors.
Migration analysis is a formula methodology derived from the Bank’s actual historical net charge off experience for each loan class (type) or pool and risk grade. The migration analysis is centered on the Bank’s internal credit risk rating system. Management’s internal loan review and external contracted credit review examinations are used to determine and validate loan risk grades. This credit review system takes into consideration factors such as: borrower’s background and experience; historical and current financial condition; credit history and payment performance; economic conditions and their impact on various industries; type, fair value and volatility of the fair value of collateral; lien position; and the financial strength of any guarantors.
A general loan loss allowance is provided on loans not specifically identified as impaired (“non-impaired loans”). The Bank’s general loan loss allowance has two components: quantitative and qualitative risk factors. The quantitative risk factors are based on the migration analysis methodology described above. The loans are classified by class and risk grade, and the historical loss migration is tracked for the various classes. Loss experience is quantified for a specified period and then weighted to place more significance on the most recent losses. That loss experience is then applied to the stratified portfolio at the end of each quarter. For PCI loans, a general loan loss allowance is provided to the extent that there has been credit deterioration since the date of acquisition. 
Additionally, in order to systematically quantify the credit risk impact of other trends and changes within the loan portfolio, the Bank utilizes qualitative adjustments to the migration analysis within established parameters. The parameters for making adjustments are established under a Credit Risk Matrix that provides seven possible scenarios for each of the factors below. The matrix allows for up to three positive (Major, Moderate, and Minor), three negative (Major, Moderate, and Minor), and one neutral credit risk scenarios within each factor for each loan type or pool. However, if information exists to warrant adjustment to the migration analysis, changes are made in accordance with the established parameters supported by narrative and/or statistical analysis. The Credit Risk Matrix and the nine possible scenarios enable the Bank to qualitatively adjust the Loss Migration Ratio by as much as 50 basis points in either direction (positive or negative) for each loan type pool. This matrix considers the following nine factors, which are patterned after the guidelines provided under the FFIEC Interagency Policy Statement on the Allowance for Loan and Lease Losses:
•
Changes in lending policies and procedures, including underwriting standards and collection, charge off, and recovery practices;
•
Changes in national and local economic and business conditions and developments, including the condition of various market segments;
•
Changes in the nature and volume of the loan portfolio;
•
Changes in the experience, ability and depth of lending management and staff;
•
Changes in the trends of the volume and severity of past due loans, classified loans, nonaccrual loans, troubled debt restructurings and other loan modifications;
•
Changes in the quality of our loan review system and the degree of oversight by the Directors;
•
Changes in the value of underlying collateral for collateral-dependent loans;
•
The existence and effect of any concentrations of credit and changes in the level of such concentrations; and
•
The effect of external factors, such as competition and legal and regulatory requirements, on the level of estimated losses in our loan portfolio.
The Company also establishes specific loss allowances for loans that have identified potential credit risk conditions or circumstances related to a specific individual credit. The specific allowance amounts are determined in accordance with ASC 310-10-35-22, “Measurement of Impairment.” The loans identified as impaired will be accounted for in accordance with one of the three acceptable valuation methods: 1) the present value of future cash flows discounted at the loan’s effective interest rate; 2) the loan’s observable market price; or 3) the fair value of the collateral, if the loan is collateral dependent. For the collateral dependent impaired loans, management obtains a new appraisal to determine the amount of impairment as of the date that the loan became impaired. The appraisals are based on an “as is” valuation. To ensure that appraised values remain current, management either obtains updated appraisals every twelve months from a qualified independent appraiser or an internal evaluation of the collateral is performed by qualified personnel. If the third party market data indicates that the value of the collateral property has declined since the most recent valuation date, management adjusts the value of the property downward to reflect current market conditions. If the fair value of the collateral is less than the recorded amount of the loan, management recognizes impairment by creating or adjusting an existing valuation allowance with a corresponding charge to the provision for loan losses. If an impaired loan is expected to be collected through liquidation of the underlying collateral, the loan is deemed to be collateral dependent and the amount of impairment is charged off against the allowance for loan losses.
The Company considers a loan to be impaired when it is probable that not all amounts due (principal and interest) will be collectible in accordance with the contractual terms of the loan agreement. Factors considered by management in determining impairment include payment status, collateral value, and the probability of collecting scheduled principal and interest payments when due. Loans that experience insignificant payment delays and payment shortfalls generally are not classified as impaired. The significance of payment delays and payment shortfalls is determined on a case-by-case basis by taking into consideration all of the circumstances surrounding the loan and the borrower, including the length of the delay, the reasons for the delay, the borrower’s prior payment record, and the amount of the shortfall in relation to the principal and interest owed.
For commercial business loans, real estate loans, and certain consumer loans, management bases the measurement of loan impairment on the present value of the expected future cash flows, discounted at the loan’s effective interest rate, or on the fair value of the loan’s collateral if the loan is collateral dependent. Management evaluates most consumer loans for impairment on a collective basis because these loans generally have smaller balances and are homogeneous in the underwriting of terms and conditions and in the types of collateral.
For PCI loans, the allowance for loan losses is based upon expected cash flows for these loans. To the extent that a deterioration in borrower’s credit quality results in a decrease in expected cash flows subsequent to the acquisition of the loans, an allowance for loan losses would be established based on an estimate of future credit losses over the remaining life of the loans. Provision for loan losses on acquired loans for the three months ended March 31, 2017 was $1.9 million of which $734 thousand was related to PCI loans.
The following table presents breakdown of loans by impairment method at March 31, 2017 and December 31, 2016:
 
As of March 31, 2017
 
Real Estate -
Residential
 
Real Estate -
Commercial
 
Real Estate -
Construction
 
Commercial
Business
 
Trade
Finance
 
Consumer
and Other
 
Total
 
(Dollars in thousands)
Impaired loans (gross carrying value)
$
1,465

 
$
90,381

 
$
2,856

 
$
29,440

 
$
4,450

 
$
987

 
$
129,579

Specific allowance
$
—

 
$
2,560

 
$
—

 
$
2,479

 
$
—

 
$
40

 
$
5,079

Allowance coverage ratio
N/A

 
2.83
%
 
N/A

 
8.42
%
 
N/A

 
4.05
%
 
3.92
%
Other loans
$
56,701

 
$
7,858,463

 
$
281,322

 
$
1,667,455

 
$
138,848

 
$
419,182

 
$
10,421,971

General allowance
$
287

 
$
52,827

 
$
1,710

 
$
15,944

 
$
811

 
$
2,001

 
$
73,580

Allowance coverage ratio
0.51
%
 
0.67
%
 
0.61
%
 
0.96
%
 
0.58
%
 
0.48
%
 
0.71
%
Total loans
$
58,166

 
$
7,948,844

 
$
284,178

 
$
1,696,895

 
$
143,298

 
$
420,169

 
$
10,551,550

Total allowance for loan losses
$
287

 
$
55,387

 
$
1,710

 
$
18,423

 
$
811

 
$
2,041

 
$
78,659

Allowance coverage ratio
0.49
%
 
0.70
%
 
0.60
%
 
1.09
%
 
0.57
%
 
0.49
%
 
0.75
%

 
As of December 31, 2016
 
Real Estate -
Residential
 
Real Estate -
Commercial
 
Real Estate -
Construction
 
Commercial
Business
 
Trade
Finance
 
Consumer
and Other
 
Total
 
(Dollars in thousands)
Impaired loans (gross carrying value)
$
3,562

 
$
93,088

 
$
1,300

 
$
35,218

 
$
6,029

 
$
1,164

 
$
140,361

Specific allowance
$
—

 
$
2,002

 
$
—

 
$
4,493

 
$
864

 
$
50

 
$
7,409

Allowance coverage ratio
N/A

 
2.15
%
 
N/A

 
12.76
%
 
14.33
%
 
4.30
%
 
5.28
%
Other loans
$
54,322

 
$
7,749,485

 
$
252,813

 
$
1,796,803

 
$
148,899

 
$
402,306

 
$
10,404,628

General allowance
$
209

 
$
47,915

 
$
1,621

 
$
19,054

 
$
1,033

 
$
2,102

 
$
71,934

Allowance coverage ratio
0.38
%
 
0.62
%
 
0.64
%
 
1.06
%
 
0.69
%
 
0.52
%
 
0.69
%
Total loans
$
57,884

 
$
7,842,573

 
$
254,113

 
$
1,832,021

 
$
154,928

 
$
403,470

 
$
10,544,989

Total allowance for loan losses
$
209

 
$
49,917

 
$
1,621

 
$
23,547

 
$
1,897

 
$
2,152

 
$
79,343

Allowance coverage ratio
0.36
%
 
0.64
%
 
0.64
%
 
1.29
%
 
1.22
%
 
0.53
%
 
0.75
%

Under certain circumstances, the Company provides borrowers relief through loan modifications. These modifications are either temporary in nature (“temporary modifications”) or are more substantive. At March 31, 2017, total modified loans were $66.1 million, compared to $70.9 million at December 31, 2016. The temporary modifications generally consist of interest only payments for a three to six month period, whereby principal payments are deferred. At the end of the modification period, the remaining principal balance is re-amortized based on the original maturity date. Loans subject to temporary modifications are generally downgraded to Special Mention or Substandard. At the end of the modification period, the loan either 1) returns to the original contractual terms; 2) is further modified and accounted for as a troubled debt restructuring in accordance with ASC 310-10-35; or 3) is disposed of through foreclosure or liquidation.
 
Troubled Debt Restructurings (“TDRs”) of loans are defined by ASC 310-40, “Troubled Debt Restructurings by Creditors” and evaluated for impairment in accordance with ASC 310-10-35. The concessions may be granted in various forms, including reduction in the stated interest rate, reduction in the amount of principal amortization, forgiveness of a portion of a loan balance or accrued interest, or extension of the maturity date. In order to determine whether a borrower is experiencing financial difficulty, an evaluation is performed on the probability that the borrower will be in payment default on any of its debt in the foreseeable future without the modification. This evaluation is performed under the Bank’s internal underwriting policy.
A summary of the recorded investment of TDRs on accrual and nonaccrual status by type of concession as of March 31, 2017 and December 31, 2016 is presented below:
 
As of March 31, 2017
 
TDRs on Accrual Status
 
TDRs on Nonaccrual Status
 
Total
 
Real Estate
 
Commercial Business
 
Other
 
Total
 
Real Estate
 
Commercial Business
 
Other
 
Total
 
 
(Dollars in thousands)
Payment concession
$
16,249

 
$
233

 
$
—

 
$
16,482

 
$
2,503

 
$
1,270

 
$
—

 
$
3,773

 
$
20,255

Maturity / amortization concession
2,302

 
17,969

 
4,499

 
24,770

 
1,774

 
4,789

 
853

 
7,416

 
32,186

Rate concession
6,068

 
1,579

 
85

 
7,732

 
5,567

 
365

 
—

 
5,932

 
13,664

Total
$
24,619

 
$
19,781

 
$
4,584

 
$
48,984

 
$
9,844

 
$
6,424

 
$
853

 
$
17,121

 
$
66,105

 
As of December 31, 2016
 
TDRs on Accrual Status
 
TDRs on Nonaccrual Status
 
Total
 
Real Estate
 
Commercial Business
 
Other
 
Total
 
Real Estate
 
Commercial Business
 
Other
 
Total
 
 
(Dollars in thousands)
Payment concession
$
16,358

 
$
29

 
$
—

 
$
16,387

 
$
4,417

 
$
1,717

 
$
—

 
$
6,134

 
$
22,521

Maturity / amortization concession
1,840

 
17,471

 
4,600

 
23,911

 
1,313

 
6,130

 
2,287

 
9,730

 
33,641

Rate concession
6,856

 
1,665

 
55

 
8,576

 
5,590

 
387

 
155

 
6,132

 
14,708

Total
$
25,054

 
$
19,165

 
$
4,655

 
$
48,874

 
$
11,320

 
$
8,234

 
$
2,442

 
$
21,996

 
$
70,870


TDRs on accrual status are comprised of loans that were accruing at the time of restructuring and for which the Bank anticipates full repayment of both principal and interest under the restructured terms. TDRs that are on nonaccrual status can be returned to accrual status after a period of sustained performance, generally determined to be six months of timely payments as modified.  Sustained performance includes the periods prior to the modification if the prior performance met or exceeded the modified terms. TDRs on accrual status at March 31, 2017 were comprised of 20 commercial real estate loans totaling $24.6 million, 24 commercial business loans totaling $19.8 million, and 24 other loans totaling $4.6 million. TDRs on accrual status at December 31, 2016 were comprised of 20 commercial real estate loans totaling $25.1 million, 23 commercial business loans totaling $19.2 million and 19 other loans totaling $4.7 million. The Company expects that TDRs on accrual status as of March 31, 2017, which were all performing in accordance with their restructured terms, to continue to comply with the restructured terms because of the reduced principal or interest payments on these loans. TDRs that were restructured at market interest rates and had sustained performance as agreed under the modified loan terms may be reclassified as non-TDRs after each year end but are reserved for under ASC 310-10.
 
The Company has allocated $3.8 million and $5.3 million of specific reserves to TDRs as of March 31, 2017 and December 31, 2016, respectively. 
The following table presents the recorded investment of loans modified as TDRs during the three months ended March 31, 2017 and March 31, 2016 by class of loans:
 
Three Months Ended March 31, 2017
 
Three Months Ended March 31, 2016
 
Number of
Loans 
 
Pre-
Modification
 
Post-
Modification 
 
Number of
Loans 
 
Pre-
Modification
 
Post-
Modification 
 
(Dollars in thousands)
Legacy Loans:
 
 
 
 
 
 
 
 
 
 
 
Real estate—commercial
 
 
 

 
 

 
 
 
 
 
 
Retail
—

 
$
—

 
$
—

 
—

 
$
—

 
$
—

Hotel & motel
—

 
—

 
—

 
—

 
—

 
—

Gas station & car wash
—

 
—

 
—

 
—

 
—

 
—

Mixed use
—

 
—

 
—

 
—

 
—

 
—

Industrial & warehouse
—

 
—

 
—

 
—

 
—

 
—

Other
1

 
482

 
482

 
—

 
—

 
—

Real estate - construction
—

 
—

 
—

 
—

 
—

 
—

Commercial business
2

 
1,681

 
1,218

 
6

 
11,088

 
7,039

Trade finance
—

 
—

 
—

 
1

 
2,199

 
1,586

Consumer and other
—

 
—

 
—

 
—

 
—

 
—

Subtotal
3

 
$
2,163

 
$
1,700

 
7

 
$
13,287

 
$
8,625

Acquired Loans:
 
 
 
 
 
 
 
 
 
 
 
Real estate—commercial
 
 
 

 
 

 
 
 
 

 
 

Retail
—

 
$
—

 
$
—

 
—

 
$
—

 
$
—

Hotel & motel
—

 
—

 
—

 
—

 
—

 
—

Gas station & car wash
—

 
—

 
—

 
—

 
—

 
—

Mixed use
—

 
—

 
—

 
—

 
—

 
—

Industrial & warehouse
—

 
—

 
—

 
—

 
—

 
—

Other
1

 
93

 
97

 
—

 
—

 
—

Real estate—construction
—

 
—

 
—

 
—

 
—

 
—

Commercial business
2

 
649

 
561

 
—

 
—

 
—

Trade finance
—

 
—

 
—

 
—

 
—

 
—

Consumer and other
—

 
—

 
—

 
1

 
30

 
29

Subtotal
3

 
$
742

 
$
658

 
1

 
$
30

 
$
29

Total
6

 
$
2,905

 
$
2,358

 
8

 
$
13,317

 
$
8,654


For TDRs modified during the three months ended March 31, 2017, the Company recorded totaled $2 thousand in specific reserves. Total charge offs of TDR loans modified during the three months ended March 31, 2017 totaled $131 thousand. TDR loans modified during the three months ended March 31, 2016 had specific reserves of $2.1 million. There were no charge-offs for TDR loans modified during the three months ended March 31, 2016.





 
The following table presents loans modified as TDRs within the previous twelve months and have subsequently had a payment default during the three months ended March 31, 2017:
 
Three Months Ended March 31, 2017
 
Three Months Ended March 31, 2016
 
Number of Loans
 
Balance
 
Number of Loans
 
Balance
 
(Dollars In thousands)
Legacy Loans:
 
 
 
 
 
 
 
Real estate—commercial
 
 
 
 
 
 
 
Retail
—

 
$
—

 
—

 
$
—

Hotel & motel
—

 
—

 
—

 
—

Gas station & car wash
—

 
—

 
2

 
729

Mixed Use
—

 
—

 
—

 
—

Industrial & warehouse
—

 
—

 
—

 
—

Other
—

 
—

 
—

 
—

Real estate—construction
—

 
—

 
—

 
—

Commercial business
1

 
102

 
6

 
2,272

Trade finance
—

 
—

 
—

 
—

Consumer and other
—

 
—

 
—

 
—

Subtotal
1

 
$
102

 
8

 
$
3,001

Acquired Loans:
 
 
 
 
 
 
 
Real estate—commercial
 

 
 

 
 
 
 
Retail
—

 
$
—

 
—

 
$
—

Hotel & motel
—

 
—

 
—

 
—

Gas station & car wash
—

 
—

 
—

 
—

Mixed Use
—

 
—

 
1

 
62

Industrial & warehouse
—

 
—

 
—

 
—

Other
—

 
—

 
—

 
—

Real estate—construction
—

 
—

 
—

 
—

Commercial business
1

 
11

 
—

 
—

Trade finance
—

 
—

 
—

 
—

Consumer and other
—

 
—

 
—

 
—

Subtotal
1

 
$
11

 
1

 
$
62

Total
2

 
$
113

 
9

 
$
3,063


A loan is considered to be in payment default once it is 30 days contractually past due under the modified terms. As of March 31, 2017, the specific reserves totaled $10 thousand for the TDRs that had payment defaults during the three months ended March 31, 2017. The total charge offs for the TDRs that had payment defaults during the three months ended March 31, 2017 was $0.
There was one commercial business Legacy Loan totaling $102 thousand that subsequently defaulted during the three months ended March 31, 2017 that was modified through payment concession. There was one commercial business Acquired Loan totaling $11 thousand that subsequently defaulted during the three months ended March 31, 2017 that was modified through payment concession.
As of March 31, 2016, the specific reserves totaled $144 thousand for the TDRs that had payment defaults during the three months ended March 31, 2016. The total charge offs for the TDRs that had payment defaults during the three months ended March 31, 2016 were $30 thousand.
There were eight Legacy Loans that subsequently defaulted during the three months ended March 31, 2016 that were modified as follows: four Commercial Business loans totaling $2.0 million were modified through payment concessions, two Commercial Business loans totaling $249 thousand were modified through maturity concessions, and two Real Estate Commercial loans totaling $729 thousand were modified through maturity concessions. There was one Acquired Loan totaling $62 thousand that defaulted during the three months ended March 31, 2016 that was modified through payment concession.

Covered Assets
On April 16, 2010, the Department of Financial Institutions closed Innovative Bank, California, and appointed the FDIC as its receiver. On the same date, the Company assumed the banking operations of Innovative Bank from the FDIC under a purchase and assumption agreement and two related loss sharing agreements with the FDIC. These agreements provide for the sharing of losses and recoveries on the covered assets. The loss sharing provisions of the agreements expired on June 30, 2015, however, the Company will continue to reimburse the FDIC for recoveries on its covered assets until June 30, 2018. In addition, recently acquired Wilshire Bank had a loss sharing agreement with the FDIC related to loans acquired from Mirae Bank which was assumed by the Company in the acquisition of Wilshire in July 2016. The loss sharing agreement related to Wilshire with respect to losses on loans acquired from Mirae Bank expired in June 2014, however, the Company continued to reimburse the FDIC for recoveries on former Mirae Bank loans until June 2017. Under the terms of the agreements, the Company’s FDIC clawback liability was $2.0 million as of March 31, 2017.
Covered nonperforming assets totaled $1.6 million and $2.5 million at March 31, 2017 and December 31, 2016, respectively. These covered nonperforming assets are subject to the loss sharing agreements with the FDIC. The covered nonperforming assets at March 31, 2017 and December 31, 2016 were as follows:
 
March 31, 2017
 
December 31, 2016
 
(Dollars in thousands)
Covered loans on nonaccrual status
$
181

 
$
189

Covered OREO
1,400

 
2,306

     Total covered nonperforming assets
$
1,581

 
$
2,495

 
 
 
 
Acquired covered loans
$
32,010

 
$
32,367