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Loans Receivable and Allowance for Loan Losses
 6 Months Ended
Jun. 30, 2019
Receivables [Abstract]  
Loans Receivable and Allowance for Loan Losses Loans Receivable and Allowance for Loan Losses
The following is a summary of loans receivable by major category:
 
June 30, 2019
 
December 31, 2018
Loan portfolio composition
(Dollars in thousands)
Real estate loans:
 
 
 
Residential
$
51,167

 
$
51,197

Commercial
8,301,315

 
8,395,327

Construction
278,370

 
275,076

Total real estate loans
8,630,852

 
8,721,600

Commercial business
2,265,287

 
2,127,630

Trade finance
166,781

 
197,190

Consumer and other
913,087

 
1,051,486

Total loans outstanding
11,976,007

 
12,097,906

Deferred loan costs, net
1,127

 
209

Loans receivable
11,977,134

 
12,098,115

Allowance for loan losses
(94,066
)
 
(92,557
)
Loans receivable, net of allowance for loan losses
$
11,883,068

 
$
12,005,558



The loan portfolio is made up of four segments: real estate loans, commercial business, trade finance, and consumer and other. Real estate loans are extended for the purchase and refinance of commercial real estate and are generally secured by first deeds of trust and are collateralized by residential or commercial properties. Commercial business loans are loans provided to businesses for various purposes such as for working capital, purchasing inventory, debt refinancing, business acquisitions and other business related financing needs. Trade finance loans generally serves businesses involved in international trade activities. Consumer and other loans consist mostly of single family residential mortgage loans but also includes home equity, credit cards, and other personal loans.
The four 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 date of acquisition and accounted for under ASC 310-30, or “PCI loans”), 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 PCI loans for the three and six months ended June 30, 2019 and 2018:
 
Three Months Ended June 30,

Six Months Ended June 30,

2019

2018

2019

2018

(Dollars in thousands)
Balance at beginning of period
$
47,364


$
54,846


$
49,697


$
55,002

Accretion
(6,848
)

(5,959
)

(12,682
)

(11,731
)
Reclassification from nonaccretable difference
2,846


4,686


6,347


10,302

Balance at end of period
$
43,362


$
53,573


$
43,362


$
53,573


On the acquisition date, the amount by which the undiscounted expected cash flows exceed the estimated fair value of PCI loans is considered the “accretable yield.” The accretable yield is 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 and six months ended June 30, 2019 and 2018:
 
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 June 30, 2019
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Balance, beginning of period
$
45,876

 
$
27,376

 
$
698

 
$
7,004

 
$
7,261

 
$
5,000

 
$
—

 
$
1,002

 
$
94,217

Provision (credit) for loan losses
1,195

 
183

 
311

 
14

 
(636
)
 
195

 
—

 
(62
)
 
1,200

Loans charged off
(182
)
 
(922
)
 
—

 
(343
)
 
—

 
(629
)
 
—

 
—

 
(2,076
)
Recoveries of charge offs
265

 
120

 
—

 
1

 
305

 
32

 
—

 
2

 
725

Balance, end of period
$
47,154

 
$
26,757

 
$
1,009

 
$
6,676

 
$
6,930

 
$
4,598

 
$
—

 
$
942

 
$
94,066

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Six Months Ended June 30, 2019
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Balance, beginning of period
$
49,446

 
$
21,826

 
$
719

 
$
6,269

 
$
7,321

 
$
5,939

 
$
—

 
$
1,037

 
$
92,557

Provision (credit) for loan losses
(3,463
)
 
6,804

 
290

 
952

 
(675
)
 
313

 
—

 
(21
)
 
4,200

Loans charged off
(216
)
 
(2,082
)
 
—

 
(553
)
 
(26
)
 
(877
)
 
—

 
(76
)
 
(3,830
)
Recoveries of charge offs
1,387

 
209

 
—

 
8

 
310

 
101

 
—

 
2

 
2,017

PCI allowance adjustment
—

 
—

 
—

 
—

 
—

 
(878
)
 
—

 
—

 
(878
)
Balance, end of period
$
47,154

 
$
26,757

 
$
1,009

 
$
6,676

 
$
6,930

 
$
4,598

 
$
—

 
$
942

 
$
94,066


 
 
 
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 June 30, 2018
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Balance, beginning of period
$
45,977

 
$
20,387

 
$
1,767

 
$
3,934

 
$
13,048

 
$
1,308

 
$
38

 
$
2

 
$
86,461

Provision (credit) for loan losses
1,776

 
487

 
(796
)
 
1,086

 
(141
)
 
(96
)
 
(35
)
 
19

 
2,300

Loans charged off
(144
)
 
(446
)
 
—

 
(229
)
 
(92
)
 
(352
)
 
—

 
—

 
(1,263
)
Recoveries of charge offs
626

 
1,603

 
12

 
8

 
1

 
131

 
—

 
2

 
2,383

Balance, end of period
$
48,235

 
$
22,031

 
$
983

 
$
4,799

 
$
12,816

 
$
991

 
$
3

 
$
23

 
$
89,881

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Six Months Ended June 30, 2018
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Balance, beginning of period
$
45,360

 
$
17,228

 
$
1,674

 
$
3,385

 
$
13,322

 
$
3,527

 
$
42

 
$
3

 
$
84,541

Provision (credit) for loan losses
2,255

 
3,776

 
(715
)
 
1,963

 
(314
)
 
(2,142
)
 
(39
)
 
16

 
4,800

Loans charged off
(207
)
 
(788
)
 
—

 
(576
)
 
(194
)
 
(566
)
 
—

 
—

 
(2,331
)
Recoveries of charge offs
827

 
1,815

 
24

 
27

 
2

 
172

 
—

 
4

 
2,871

Balance, end of period
$
48,235

 
$
22,031

 
$
983

 
$
4,799

 
$
12,816

 
$
991

 
$
3

 
$
23

 
$
89,881

The following tables break out the allowance for loan losses and the recorded investment of loans outstanding (not including accrued interest receivable and net deferred loan costs or fees) by individually impaired, general valuation, and PCI impairment, by portfolio segment at June 30, 2019 and December 31, 2018:
 
June 30, 2019
 
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
$
192

 
$
4,282

 
$
333

 
$
11

 
$
127

 
$
987

 
$
—

 
$
1

 
$
5,933

Collectively evaluated for impairment
46,962

 
22,475

 
676

 
6,665

 
1,682

 
574

 
—

 
16

 
79,050

PCI loans
—

 
—

 
—

 
—

 
5,121

 
3,037

 
—

 
925

 
9,083

Total
$
47,154

 
$
26,757

 
$
1,009

 
$
6,676

 
$
6,930

 
$
4,598

 
$
—

 
$
942

 
$
94,066

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Loans outstanding:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Individually evaluated for impairment
$
46,785

 
$
26,159

 
$
2,825

 
$
2,266

 
$
19,578

 
$
4,228

 
$
3,318

 
$
811

 
$
105,970

Collectively evaluated for impairment
7,160,408

 
2,168,442

 
160,638

 
787,980

 
1,289,871

 
58,080

 
—

 
117,110

 
11,742,529

PCI loans
—

 
—

 
—

 
—

 
114,210

 
8,378

 
—

 
4,920

 
127,508

Total
$
7,207,193

 
$
2,194,601

 
$
163,463

 
$
790,246

 
$
1,423,659

 
$
70,686

 
$
3,318

 
$
122,841

 
$
11,976,007


 
December 31, 2018
 
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
$
176

 
$
4,221

 
$
—

 
$
3

 
$
261

 
$
130

 
$
—

 
$
—

 
$
4,791

Collectively evaluated for impairment
49,270

 
17,605

 
719

 
6,266

 
1,264

 
460

 
—

 
19

 
75,603

PCI loans
—

 
—

 
—

 
—

 
5,796

 
5,349

 
—

 
1,018

 
12,163

Total
$
49,446

 
$
21,826

 
$
719

 
$
6,269

 
$
7,321

 
$
5,939

 
$
—

 
$
1,037

 
$
92,557

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Loans outstanding:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Individually evaluated for impairment
$
39,976

 
$
29,624

 
$
5,887

 
$
441

 
$
18,080

 
$
5,734

 
$
3,124

 
$
1,141

 
$
104,007

Collectively evaluated for impairment
7,037,392

 
1,988,067

 
188,179

 
910,292

 
1,507,858

 
80,916

 
—

 
133,942

 
11,846,646

PCI loans
—

 
—

 
—

 
—

 
118,294

 
23,289

 
—

 
5,670

 
147,253

Total
$
7,077,368

 
$
2,017,691

 
$
194,066

 
$
910,733

 
$
1,644,232

 
$
109,939

 
$
3,124

 
$
140,753

 
$
12,097,906


At June 30, 2019 and December 31, 2018, the balance of PCI loans that had credit deterioration subsequent to acquisition was $36.4 million and $57.5 million, respectively. PCI loans with subsequent credit deterioration had an allowance for loan losses balance of $9.1 million and $12.2 million at June 30, 2019 and December 31, 2018, respectively.
As of June 30, 2019 and December 31, 2018, the reserve for unfunded loan commitments recorded in other liabilities was $736 thousand. For the three months ended June 30, 2019 and 2018, recognized provision for unfunded commitments recorded in credit related expense was $0 and $150 thousand, respectively. For the six months ended June 30, 2019 and 2018, recognized credit for unfunded commitments recorded in credit related expense was $0 and $50 thousand, respectively.
The recorded investment of individually impaired loans and the total impaired loans net of specific allowance is presented in the following table for the dates indicated:
 
June 30, 2019
 
December 31, 2018
 
(Dollars in thousands)
With allocated specific allowance
 
 
 
Without charge off
$
36,966

 
$
35,365

With charge off
1,233

 
681

With no allocated specific allowance
 
 
 
Without charge off
57,249

 
59,607

With charge off
10,522

 
8,354

Specific allowance on impaired loans
(5,933
)
 
(4,791
)
Impaired loans, net of specific allowance
$
100,037

 
$
99,216


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 June 30, 2019 and December 31, 2018, and the average recorded investment and interest income recognized for the three and six months ended June 30, 2019 and 2018. Impaired loans with no related allowance are believed by management to be adequately collateralized.
 
 
As of June 30, 2019
 
As of December 31, 2018
Total Impaired Loans (1)
 
Recorded Investment (2)
 
Unpaid Contractual Principal Balance
 
Related
Allowance
 
Recorded Investment (2)
 
Unpaid Contractual Principal Balance
 
Related
Allowance
 
 
(Dollars in thousands)
With related allowance:
 
 
 
 
 
 
 
 
 
 
 
 
Real estate – residential
 
$
—

 
$
—

 
$
—

 
$
—

 
$
—

 
$
—

Real estate – commercial
 
 
 
 
 
 
 
 
 
 
 
 
Retail
 
2,222

 
2,492

 
63

 
1,375

 
1,487

 
156

Hotel & motel
 
1,789

 
2,658

 
103

 
1,949

 
2,310

 
119

Gas station & car wash
 
61

 
1,967

 
—

 
—

 
—

 
—

Mixed use
 
836

 
924

 
25

 
881

 
947

 
43

Industrial & warehouse
 
6,908

 
8,671

 
121

 
1,305

 
2,139

 
93

Other
 
839

 
1,103

 
7

 
7,759

 
8,174

 
26

Real estate – construction
 
—

 
—

 
—

 
—

 
—

 
—

Commercial business
 
21,761

 
23,091

 
5,269

 
22,203

 
23,928

 
4,351

Trade finance
 
2,825

 
2,825

 
333

 
—

 
—

 
—

Consumer and other
 
958

 
966

 
12

 
575

 
575

 
3

Subtotal
 
$
38,199

 
$
44,697

 
$
5,933

 
$
36,047

 
$
39,560

 
$
4,791

With no related allowance:
 
 
 
 
 
 
 
 
 
 
 
 
Real estate – residential
 
$
—

 
$
—

 
$
—

 
$
—

 
$
—

 
$
—

Real estate – commercial
 
 
 
 
 
 
 
 
 
 
 
 
Retail
 
11,035

 
11,865

 
—

 
8,005

 
11,234

 
—

Hotel & motel
 
10,136

 
20,811

 
—

 
10,877

 
22,590

 
—

Gas station & car wash
 
456

 
1,660

 
—

 
545

 
3,653

 
—

Mixed use
 
3,473

 
3,576

 
—

 
7,048

 
7,058

 
—

Industrial & warehouse
 
11,944

 
12,531

 
—

 
12,343

 
13,467

 
—

Other
 
16,664

 
21,123

 
—

 
5,969

 
7,122

 
—

Real estate – construction
 
—

 
—

 
—

 
—

 
—

 
—

Commercial business
 
8,626

 
14,554

 
—

 
13,155

 
17,850

 
—

Trade finance
 
3,318

 
3,318

 
—

 
9,011

 
9,011

 
—

Consumer and other
 
2,119

 
2,204

 
—

 
1,007

 
1,156

 
—

Subtotal
 
$
67,771

 
$
91,642

 
$
—

 
$
67,960

 
$
93,141

 
$
—

Total
 
$
105,970

 
$
136,339

 
$
5,933

 
$
104,007

 
$
132,701

 
$
4,791


__________________________________
(1) Impaired loans exclude acquired PCI loans
(2) Unpaid contractual principal balance less charge offs, interest collected applied to principal if on nonaccrual and purchase discounts.
 
 
For the Three Months Ended June 30,
 
For the Six Months Ended June 30,
 
 
2019
 
2018
 
2019
 
2018
Total Impaired Loans (1)
 
Average Recorded Investment(2)
 
Interest Income Recognized During Impairment
 
Average Recorded Investment(2)
 
Interest Income Recognized During Impairment
 
Average Recorded Investment(2)
 
Interest Income Recognized During Impairment
 
Average Recorded Investment(2)
 
Interest Income Recognized During Impairment
 
 
(Dollars in thousands)
With related allowance:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Real estate – residential
 
$
—

 
$
—

 
$
125

 
$
—

 
$
—

 
$
—

 
$
84

 
$
—

Real estate – commercial
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Retail
 
2,133

 
6

 
7,088

 
7

 
1,880

 
11

 
4,902

 
15

Hotel & motel
 
1,812

 
—

 
2,792

 
—

 
1,857

 
—

 
2,838

 
—

Gas station & car wash
 
61

 
—

 
—

 
—

 
31

 
—

 
—

 
—

Mixed use
 
847

 
2

 
2,985

 
39

 
859

 
3

 
2,094

 
75

Industrial & warehouse
 
7,249

 
90

 
2,616

 
36

 
5,267

 
170

 
2,002

 
67

Other
 
2,597

 
5

 
6,655

 
24

 
4,318

 
11

 
5,902

 
47

Real estate – construction
 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

Commercial business
 
24,019

 
139

 
27,487

 
168

 
23,414

 
295

 
24,435

 
331

Trade finance
 
1,463

 
1

 
3,146

 
63

 
975

 
2

 
3,384

 
121

Consumer and other
 
956

 
—

 
748

 
6

 
829

 
—

 
673

 
6

Subtotal
 
$
41,137

 
$
243

 
$
53,642

 
$
343

 
$
39,430

 
$
492

 
$
46,314

 
$
662

With no related allowance:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Real estate – residential
 
$
—

 
$
—

 
$
—

 
$
—

 
$
—

 
$
—

 
$
—

 
$
—

Real estate – commercial
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Retail
 
17,808

 
35

 
10,917

 
36

 
14,540

 
70

 
11,209

 
71

Hotel & motel
 
9,946

 
—

 
3,713

 
—

 
10,256

 
—

 
3,423

 
—

Gas station & car wash
 
494

 
4

 
542

 
—

 
511

 
9

 
558

 
—

Mixed use
 
5,345

 
51

 
2,475

 
50

 
5,912

 
102

 
2,017

 
100

Industrial & warehouse
 
10,998

 
64

 
11,886

 
56

 
11,447

 
127

 
10,733

 
112

Other
 
15,524

 
82

 
13,587

 
112

 
12,339

 
166

 
15,819

 
233

Real estate – construction
 
—

 
—

 
650

 
—

 
—

 
—

 
867

 
—

Commercial business
 
10,576

 
62

 
20,530

 
37

 
11,436

 
121

 
19,752

 
63

Trade finance
 
5,813

 
52

 
3,165

 
47

 
6,879

 
102

 
3,134

 
90

Consumer and other
 
1,450

 
—

 
1,807

 
—

 
1,303

 
—

 
1,718

 
—

Subtotal
 
$
77,954

 
$
350

 
$
69,272

 
$
338

 
$
74,623

 
$
697

 
$
69,230

 
$
669

Total
 
$
119,091

 
$
593

 
$
122,914

 
$
681

 
$
114,053

 
$
1,189

 
$
115,544

 
$
1,331

__________________________________
(1) Impaired loans exclude acquired PCI loans
(2) Unpaid contractual principal balance less charge offs, interest collected applied to principal if on nonaccrual and purchase discounts.
 
 
As of June 30, 2019
 
As of December 31, 2018
Impaired Acquired Loans (1)
 
Recorded Investment (2)
 
Unpaid
Contractual Principal
Balance
 
Related
Allowance
 
Recorded Investment (2)
 
Unpaid
Contractual Principal
Balance
 
Related
Allowance
 
 
(Dollars in thousands)
With related allowance:
 
 
 
 
 
 
 
 
 
 
 
 
Real estate – residential
 
$
—

 
$
—

 
$
—

 
$
—

 
$
—

 
$
—

Real estate – commercial
 
 
 
 
 
 
 
 
 
 
 
 
Retail
 
810

 
843

 
22

 
198

 
220

 
118

Hotel & motel
 
73

 
345

 
3

 
72

 
345

 
4

Gas station & car wash
 
61

 
1,967

 
—

 
—

 
—

 
—

Mixed use
 
293

 
297

 
22

 
312

 
312

 
38

Industrial & warehouse
 
328

 
1,920

 
80

 
230

 
1,050

 
88

Other
 
—

 
—

 
—

 
3,454

 
3,454

 
13

Real estate – construction
 
—

 
—

 
—

 
—

 
—

 
—

Commercial business
 
2,022

 
2,294

 
987

 
4,064

 
5,041

 
130

Trade finance
 
—

 
—

 
—

 
—

 
—

 
—

Consumer and other
 
131

 
131

 
1

 
144

 
144

 
—

Subtotal
 
$
3,718

 
$
7,797

 
$
1,115

 
$
8,474

 
$
10,566

 
$
391

With no related allowance:
 
 
 
 
 
 
 
 
 
 
 
 
Real estate – residential
 
$
—

 
$
—

 
$
—

 
$
—

 
$
—

 
$
—

Real estate – commercial
 
 
 
 
 
 
 
 
 
 
 
 
Retail
 
7,155

 
7,246

 
—

 
3,285

 
4,151

 
—

Hotel & motel
 
5,350

 
6,790

 
—

 
5,428

 
6,874

 
—

Gas station & car wash
 
183

 
706

 
—

 
247

 
2,673

 
—

Mixed use
 
194

 
285

 
—

 
3,722

 
3,726

 
—

Industrial & warehouse
 
—

 
—

 
—

 
119

 
894

 
—

Other
 
5,131

 
8,448

 
—

 
1,013

 
1,326

 
—

Real estate – construction
 
—

 
—

 
—

 
—

 
—

 
—

Commercial business
 
2,206

 
3,843

 
—

 
1,670

 
2,681

 
—

Trade finance
 
3,318

 
3,318

 
—

 
3,124

 
3,124

 
—

Consumer and other
 
680

 
765

 
—

 
997

 
1,144

 
—

Subtotal
 
$
24,217

 
$
31,401

 
$
—

 
$
19,605

 
$
26,593

 
$
—

Total
 
$
27,935

 
$
39,198

 
$
1,115

 
$
28,079

 
$
37,159

 
$
391


__________________________________
(1) Impaired loans exclude acquired PCI loans
(2) Unpaid contractual principal balance less charge offs, interest collected applied to principal if on nonaccrual and purchase discounts.
 
 
For the Three Months Ended June 30,
 
For the Six Months Ended June 30,
 
 
2019
 
2018
 
2019
 
2018
Impaired Acquired Loans (1)
 
Average
Recorded Investment(2)
 
Interest Income Recognized During Impairment
 
Average
Recorded Investment(2)
 
Interest Income Recognized During Impairment
 
Average
Recorded Investment(2)
 
Interest Income Recognized During Impairment
 
Average
Recorded Investment(2)
 
Interest Income Recognized During Impairment
 
 
(Dollars in thousands)
With related allowance:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Real estate – residential
 
$
—

 
$
—

 
$
125

 
$
—

 
$
—

 
$
—

 
$
84

 
$
—

Real estate – commercial
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Retail
 
692

 
—

 
800

 
—

 
527

 
—

 
621

 
—

Hotel & motel
 
73

 
—

 
79

 
—

 
73

 
—

 
81

 
—

Gas station & car wash
 
30

 
—

 
—

 
—

 
20

 
—

 
—

 
—

Mixed use
 
298

 
2

 
2,899

 
39

 
303

 
3

 
1,976

 
75

Industrial & warehouse
 
282

 
—

 
266

 
—

 
264

 
—

 
251

 
1

Other
 
544

 
—

 
3,314

 
19

 
1,999

 
—

 
2,316

 
37

Real estate – construction
 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

Commercial business
 
2,998

 
24

 
8,243

 
41

 
3,353

 
49

 
6,158

 
80

Trade finance
 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

Consumer and other
 
133

 
—

 
76

 
2

 
137

 
—

 
51

 
2

Subtotal
 
$
5,050

 
$
26

 
$
15,802

 
$
101

 
$
6,676

 
$
52

 
$
11,538

 
$
195

With no related allowance:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Real estate – residential
 
$
—

 
$
—

 
$
—

 
$
—

 
$
—

 
$
—

 
$
—

 
$
—

Real estate – commercial
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Retail
 
7,344

 
30

 
3,108

 
31

 
5,991

 
60

 
3,209

 
61

Hotel & motel
 
5,371

 
—

 
1,029

 
—

 
5,390

 
—

 
847

 
—

Gas station & car wash
 
215

 
—

 
193

 
—

 
225

 
—

 
129

 
—

Mixed use
 
2,049

 
—

 
36

 
—

 
2,607

 
—

 
74

 
—

Industrial & warehouse
 
93

 
—

 
491

 
—

 
106

 
—

 
342

 
—

Other
 
4,749

 
67

 
4,475

 
60

 
3,504

 
133

 
6,027

 
117

Real estate – construction
 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

Commercial business
 
1,640

 
31

 
8,380

 
24

 
1,650

 
64

 
6,660

 
38

Trade finance
 
3,192

 
52

 
3,165

 
47

 
3,169

 
102

 
3,104

 
90

Consumer and other
 
731

 
—

 
1,618

 
—

 
820

 
—

 
1,463

 
—

Subtotal
 
$
25,384

 
$
180

 
$
22,495

 
$
162

 
$
23,462

 
$
359

 
$
21,855

 
$
306

Total
 
$
30,434

 
$
206

 
$
38,297

 
$
263

 
$
30,138

 
$
411

 
$
33,393

 
$
501


__________________________________
(1) Impaired loans exclude acquired PCI loans
(2) 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 principal and/or interest payments become 90 days or more past due and/or management deems the collectability 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 and six months ended June 30, 2019 or 2018.
The following table represents the recorded investment of nonaccrual loans and loans past due 90 or more days and still on accrual status by class of loans as of June 30, 2019 and December 31, 2018.
 
Nonaccrual Loans(1)
 
Accruing Loans Past Due 90 or More Days
 
June 30, 2019
 
December 31, 2018
 
June 30, 2019
 
December 31, 2018
 
(Dollars in thousands)
Legacy Loans:
 
 
 
 
 
 
 
Real estate – residential
$
—

 
$
—

 
$
—

 
$
—

Real estate – commercial
 
 
 
 
 
 
 
Retail
4,682

 
5,153

 
—

 
—

Hotel & motel
6,503

 
7,325

 
—

 
—

Gas station & car wash
31

 
31

 
—

 
—

Mixed use
717

 
749

 
—

 
—

Industrial & warehouse
7,278

 
6,111

 
—

 
—

Other
10,794

 
5,940

 
—

 
—

Real estate – construction
—

 
—

 
—

 
—

Commercial business
15,318

 
14,837

 
—

 
—

Trade finance
2,721

 
1,661

 
—

 
—

Consumer and other
2,205

 
441

 
353

 
243

Subtotal
$
50,249

 
$
42,248

 
$
353

 
$
243

Acquired Loans: (2)
 

 
 

 
 
 
 
Real estate – residential
$
—

 
$
—

 
$
—

 
$
—

Real estate – commercial
 
 
 
 
 
 
 
Retail
5,350

 
829

 
—

 
—

Hotel & motel
5,423

 
5,500

 
—

 
1,286

Gas station & car wash
245

 
247

 
—

 
—

Mixed use
370

 
1,224

 
—

 
—

Industrial & warehouse
328

 
349

 
—

 
—

Other
1,201

 
259

 
—

 
—

Real estate – construction
—

 
—

 
—

 
—

Commercial business
958

 
1,632

 
—

 
—

Trade finance
—

 
—

 
—

 
—

Consumer and other
810

 
998

 
—

 
—

Subtotal
$
14,685

 
$
11,038

 
$
—

 
$
1,286

Total
$
64,934

 
$
53,286

 
$
353

 
$
1,529


__________________________________
(1) 
Total nonaccrual loans exclude guaranteed portion of delinquent SBA loans that are in liquidation totaling $32.1 million and $29.2 million, at June 30, 2019 and December 31, 2018, respectively.
(2) 
Acquired Loans exclude PCI loans.
The following tables present the recorded investment of past due loans, including nonaccrual loans past due 30 or more days, by the number of days past due as of June 30, 2019 and December 31, 2018 by class of loans:
 
As of June 30, 2019
 
As of December 31, 2018
 
30-59 Days
Past Due 
 
60-89 Days 
Past Due
 
90 or More Days
Past Due 
 
Total
Past Due
 
30-59 Days
Past Due 
 
60-89 Days 
Past Due
 
90 or More Days
Past Due 
 
Total
Past Due
 
(Dollars in thousands)
Legacy Loans:
 
 
 
 
 
 
 
 
 
Real estate – residential
$
—

 
$
—

 
$
—

 
$
—

 
$
—

 
$
—

 
$
—

 
$
—

Real estate – commercial
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Retail
—

 
811

 
297

 
1,108

 
733

 
—

 
809

 
1,542

Hotel & motel
1,716

 
347

 
3,680

 
5,743

 
153

 
—

 
5,215

 
5,368

Gas station & car wash
658

 
—

 
31

 
689

 
—

 
—

 
31

 
31

Mixed use
—

 
174

 
184

 
358

 
—

 
—

 
—

 
—

Industrial & warehouse
74

 
849

 
3,387

 
4,310

 
1,465

 
—

 
1,922

 
3,387

Other
8,576

 
133

 
7,359

 
16,068

 
1,837

 
—

 
2,405

 
4,242

Real estate – construction
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

Commercial business
1,450

 
121

 
10,671

 
12,242

 
5,500

 
435

 
7,003

 
12,938

Trade finance
—

 
—

 
2,721

 
2,721

 
1,036

 
—

 
1,661

 
2,697

Consumer and other
5,721

 
250

 
1,796

 
7,767

 
16,413

 
140

 
247

 
16,800

Subtotal
$
18,195

 
$
2,685

 
$
30,126

 
$
51,006

 
$
27,137

 
$
575

 
$
19,293

 
$
47,005

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

 
$
—

 
$
—

 
$
—

 
$
—

 
$
—

 
$
—

 
$
—

Real estate – commercial
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Retail
—

 
38

 
5,001

 
5,039

 
347

 
—

 
602

 
949

Hotel & motel
—

 
—

 
4,462

 
4,462

 
—

 
—

 
5,206

 
5,206

Gas station & car wash
—

 
—

 
221

 
221

 
154

 
—

 
221

 
375

Mixed use
—

 
—

 
194

 
194

 
107

 
—

 
1,034

 
1,141

Industrial & warehouse
94

 
120

 
328

 
542

 
142

 
—

 
119

 
261

Other
791

 
—

 
203

 
994

 
183

 
219

 
—

 
402

Real estate – construction
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

Commercial business
84

 
—

 
237

 
321

 
397

 
613

 
253

 
1,263

Trade finance
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

Consumer and other
1,337

 
709

 
268

 
2,314

 
—

 
—

 
334

 
334

Subtotal
$
2,306

 
$
867

 
$
10,914

 
$
14,087

 
$
1,330

 
$
832

 
$
7,769

 
$
9,931

Total Past Due
$
20,501

 
$
3,552

 
$
41,040

 
$
65,093

 
$
28,467

 
$
1,407

 
$
27,062

 
$
56,936


__________________________________
(1) 
Acquired Loans exclude PCI loans.
Loans accounted for under ASC 310-30 are generally considered accruing and performing 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 can 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 loans with the exception of homogeneous loans, or loans that are evaluated together in pools of similar loans (i.e., home mortgage loans, home equity lines of credit, overdraft loans, express business loans, and automobile loans). Homogeneous loans are not risk rated and credit risk is analyzed largely by the number of days past due. 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 deserve 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 Company 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 June 30, 2019 and December 31, 2018 by class of loans:
 
As of June 30, 2019
 
Pass/
Not Rated
 
Special
Mention
 
Substandard
 
Doubtful
 
Total
 
(Dollars in thousands)
Legacy Loans:
 
 
 
Real estate – residential
$
45,944

 
$
—

 
$
145

 
$
—

 
$
46,089

Real estate – commercial
 
 
 
 
 
 
 
 
 
Retail
1,784,344

 
35,150

 
36,712

 
—

 
1,856,206

Hotel & motel
1,389,821

 
10,341

 
31,870

 
—

 
1,432,032

Gas station & car wash
818,660

 
2,761

 
2,122

 
—

 
823,543

Mixed use
550,044

 
12,967

 
13,559

 
—

 
576,570

Industrial & warehouse
721,166

 
945

 
34,497

 
—

 
756,608

Other
1,375,120

 
32,591

 
39,753

 
—

 
1,447,464

Real estate – construction
252,432

 
16,249

 
—

 
—

 
268,681

Commercial business
2,119,781

 
35,789

 
39,031

 
—

 
2,194,601

Trade finance
160,669

 
73

 
2,721

 
—

 
163,463

Consumer and other
787,796

 
184

 
2,266

 
—

 
790,246

Subtotal
$
10,005,777

 
$
147,050

 
$
202,676

 
$
—

 
$
10,355,503

Acquired Loans:
 
 
 
 
 
 
 
 
 
Real estate – residential
$
4,362

 
$
387

 
$
329

 
$
—

 
$
5,078

Real estate – commercial
 
 
 
 
 
 
 
 
 
Retail
401,670

 
5,844

 
22,187

 
—

 
429,701

Hotel & motel
166,101

 
298

 
19,161

 
—

 
185,560

Gas station & car wash
121,640

 
—

 
5,039

 
—

 
126,679

Mixed use
87,781

 
7,225

 
4,511

 
—

 
99,517

Industrial & warehouse
153,008

 
4,132

 
19,708

 
—

 
176,848

Other
351,841

 
10,066

 
28,680

 
—

 
390,587

Real estate – construction
—

 
9,689

 
—

 
—

 
9,689

Commercial business
53,607

 
1,778

 
15,300

 
1

 
70,686

Trade finance
—

 
—

 
3,318

 
—

 
3,318

Consumer and other
119,893

 
16

 
2,932

 
—

 
122,841

Subtotal
$
1,459,903

 
$
39,435

 
$
121,165

 
$
1

 
$
1,620,504

Total
$
11,465,680

 
$
186,485

 
$
323,841

 
$
1

 
$
11,976,007

 
As of December 31, 2018
 
Pass/
Not Rated
 
Special
Mention
 
Substandard
 
Doubtful
 
Total
 
(Dollars in thousands)
Legacy Loans:
 
 
 
Real estate – residential
$
44,066

 
$
—

 
$
546

 
$
—

 
$
44,612

Real estate – commercial
 
 
 
 
 
 
 
 
 
Retail
1,815,170

 
18,072

 
30,686

 
—

 
1,863,928

Hotel & motel
1,389,349

 
21,932

 
15,869

 
—

 
1,427,150

Gas station & car wash
814,291

 
2,810

 
2,464

 
—

 
819,565

Mixed use
510,021

 
12,480

 
13,292

 
—

 
535,793

Industrial & warehouse
711,236

 
1,665

 
38,332

 
—

 
751,233

Other
1,326,795

 
35,539

 
34,618

 
—

 
1,396,952

Real estate – construction
227,231

 
10,904

 
—

 
—

 
238,135

Commercial business
1,944,783

 
18,220

 
54,688

 
—

 
2,017,691

Trade finance
191,508

 
—

 
2,558

 
—

 
194,066

Consumer and other
910,292

 
—

 
441

 
—

 
910,733

Subtotal
$
9,884,742

 
$
121,622

 
$
193,494

 
$
—

 
$
10,199,858

Acquired Loans:
 
 
 
Real estate – residential
$
5,812

 
$
393

 
$
380

 
$
—

 
$
6,585

Real estate – commercial
 
 
 
 
 
 
 
 
 
Retail
483,939

 
4,651

 
17,332

 
35

 
505,957

Hotel & motel
186,761

 
807

 
19,472

 
—

 
207,040

Gas station & car wash
148,702

 
274

 
6,032

 
—

 
155,008

Mixed use
77,100

 
3,986

 
8,151

 
—

 
89,237

Industrial & warehouse
171,574

 
9,451

 
18,071

 
223

 
199,319

Other
402,247

 
12,902

 
28,996

 
—

 
444,145

Real estate – construction
29,058

 
7,883

 
—

 
—

 
36,941

Commercial business
89,611

 
1,083

 
19,237

 
8

 
109,939

Trade finance
—

 
—

 
3,124

 
—

 
3,124

Consumer and other
136,944

 
37

 
3,626

 
146

 
140,753

Subtotal
$
1,731,748

 
$
41,467

 
$
124,421

 
$
412

 
$
1,898,048

Total
$
11,616,490

 
$
163,089

 
$
317,915

 
$
412

 
$
12,097,906


The Company may reclassify 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 for 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 for investment to held for sale for the three and six months ended June 30, 2019 and 2018 is presented in the following table:
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
2019
 
2018
 
2019
 
2018
Transfer of loans held for investment to held for sale
(Dollars in thousands)
Consumer
$
49,601

 
$
—

 
$
82,991

 
$
6,155



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 loans, 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 externally 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 conditions; credit history and payment performance; economic conditions and their impact on various industries; type, fair value, and valuation volatility of collateral; lien positions; and the financial strength of any guarantors.
A general loan loss allowance is provided on loans that are 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. 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. The Company utilizes nineteen non-homogeneous loan pools in the quantitative analysis process. The non-impaired commercial real estate loan portfolio is stratified into fourteen different loan pools based on property types and the non-impaired commercial and industrial and consumer loans are stratified into five different loan pools based on loan type in order to allocate historic loss experience on a more granular basis.
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 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 Federal Financial Institutions Examination Council (“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 the 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, legal requirements, and regulatory requirements on the level of estimated losses in the 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 or operation 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. The scope for evaluation of individual impairment includes all impaired loans greater than $500 thousand. The Company evaluates most loans of $500 thousand or less for impairment on a collective basis because these loans generally have smaller balances and are homogeneous in the underwriting of terms and conditions. If a loan is deemed to be impaired, the amount of the impairment is supported by a specific allowance which is included in the allowance for loan losses through a charge to the provision for loan losses.
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. Credit for loan losses for total acquired loans for the three months ended June 30, 2019 was $503 thousand which included $1.2 million in credit for loan losses related to PCI loans. Credit for loan losses on acquired loans for the six months ended June 30, 2019 was $383 thousand which included $2.2 million in credit for loan losses related to PCI loans. For the six months ended June 30, 2019, allowance for loan losses for PCI loans included an impairment credit adjustment of $878 thousand that resulted from a loan pool being paid off. Credit for loan losses for total acquired loans for the three months ended June 30, 2018 was $253 thousand which included $449 thousand in credit for loan losses related to PCI loans. Credit for loan losses on acquired loans for the six months ended June 30, 2018 was $2.5 million which included $637 thousand in credit for loan losses related to PCI loans.
The following table presents breakdown of loans by impairment method at June 30, 2019 and December 31, 2018:
 
As of June 30, 2019
 
Real Estate –
Residential
 
Real Estate –
Commercial
 
Real Estate –
Construction
 
Commercial
Business
 
Trade
Finance
 
Consumer
and Other
 
Total
 
(Dollars in thousands)
Impaired loans
(recorded investment)
$
—

 
$
66,363

 
$
—

 
$
30,387

 
$
6,143

 
$
3,077

 
$
105,970

Specific allowance
$
—

 
$
319

 
$
—

 
$
5,269

 
$
333

 
$
12

 
$
5,933

Specific allowance to impaired loans
N/A

 
0.48
%
 
N/A

 
17.34
%
 
5.42
%
 
0.39
%
 
5.60
%
Other loans
$
51,167

 
$
8,234,952

 
$
278,370

 
$
2,234,900

 
$
160,638

 
$
910,010

 
$
11,870,037

General allowance
$
88

 
$
52,433

 
$
1,244

 
$
26,086

 
$
676

 
$
7,606

 
$
88,133

General allowance to other loans
0.17
%
 
0.64
%
 
0.45
%
 
1.17
%
 
0.42
%
 
0.84
%
 
0.74
%
Total loans
$
51,167

 
$
8,301,315

 
$
278,370

 
$
2,265,287

 
$
166,781

 
$
913,087

 
$
11,976,007

Total allowance for loan losses
$
88

 
$
52,752

 
$
1,244

 
$
31,355

 
$
1,009

 
$
7,618

 
$
94,066

Total allowance to total loans
0.17
%
 
0.64
%
 
0.45
%
 
1.38
%
 
0.60
%
 
0.83
%
 
0.79
%
 
As of December 31, 2018
 
Real Estate –
Residential
 
Real Estate –
Commercial
 
Real Estate –
Construction
 
Commercial
Business
 
Trade
Finance
 
Consumer
and Other
 
Total
 
(Dollars in thousands)
Impaired loans
(recorded investment)
$
—

 
$
58,056

 
$
—

 
$
35,358

 
$
9,011

 
$
1,582

 
$
104,007

Specific allowance
$
—

 
$
437

 
$
—

 
$
4,351

 
$
—

 
$
3

 
$
4,791

Specific allowance to impaired loans
N/A

 
0.75
%
 
N/A

 
12.31
%
 
—
%
 
0.19
%
 
4.61
%
Other loans
$
51,197

 
$
8,337,271

 
$
275,076

 
$
2,092,272

 
$
188,179

 
$
1,049,904

 
$
11,993,899

General allowance
$
112

 
$
55,453

 
$
765

 
$
23,414

 
$
719

 
$
7,303

 
$
87,766

General allowance to other loans
0.22
%
 
0.67
%
 
0.28
%
 
1.12
%
 
0.38
%
 
0.70
%
 
0.73
%
Total loans
$
51,197

 
$
8,395,327

 
$
275,076

 
$
2,127,630

 
$
197,190

 
$
1,051,486

 
$
12,097,906

Total allowance for loan losses
$
112

 
$
55,890

 
$
765

 
$
27,765

 
$
719

 
$
7,306

 
$
92,557

Total allowance to total loans
0.22
%
 
0.67
%
 
0.28
%
 
1.30
%
 
0.36
%
 
0.69
%
 
0.77
%

Under certain circumstances, the Company provides borrowers relief through loan modifications. These modifications are either temporary in nature (“temporary modifications”) or are more substantive. 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.
TDR 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 their debt in the foreseeable future without the modification. This evaluation is performed under the Bank’s internal underwriting policy. At June 30, 2019, total TDR loans were $57.1 million, compared to $64.0 million at December 31, 2018.
 
A summary of the recorded investment of TDR loans on accrual and nonaccrual status by type of concession as of June 30, 2019 and December 31, 2018 is presented below:
 
As of June 30, 2019
 
TDR Loans on Accrual Status
 
TDR Loans on Nonaccrual Status
 
Total
TDRs
 
Real Estate
 
Commercial Business
 
Other
 
Total
 
Real Estate
 
Commercial Business
 
Other
 
Total
 
 
(Dollars in thousands)
Payment concession
$
5,034

 
$
960

 
$
61

 
$
6,055

 
$
4,051

 
$
553

 
$
—

 
$
4,604

 
$
10,659

Maturity / amortization concession
13,556

 
10,791

 
3,319

 
27,666

 
—

 
8,437

 
2,905

 
11,342

 
39,008

Rate concession
4,547

 
2,359

 
104

 
7,010

 
373

 
—

 
—

 
373

 
7,383

Total
$
23,137

 
$
14,110

 
$
3,484

 
$
40,731

 
$
4,424

 
$
8,990

 
$
2,905

 
$
16,319

 
$
57,050

 
As of December 31, 2018
 
TDR Loans on Accrual Status
 
TDR Loans on Nonaccrual Status
 
Total
TDRs
 
Real Estate
 
Commercial Business
 
Other
 
Total
 
Real Estate
 
Commercial Business
 
Other
 
Total
 
 
(Dollars in thousands)
Payment concession
$
5,142

 
$
961

 
$
—

 
$
6,103

 
$
2,216

 
$
746

 
$
—

 
$
2,962

 
$
9,065

Maturity / amortization concession
14,012

 
17,257

 
7,391

 
38,660

 
—

 
10,166

 
73

 
10,239

 
48,899

Rate concession
4,872

 
672

 
103

 
5,647

 
401

 
—

 
—

 
401

 
6,048

Total
$
24,026

 
$
18,890

 
$
7,494

 
$
50,410

 
$
2,617

 
$
10,912

 
$
73

 
$
13,602

 
$
64,012


TDR loans on accrual status are comprised of loans that were accruing at the time of restructuring and for which the Company anticipates full repayment of both principal and interest under the restructured terms. TDR loans 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. TDR loans on accrual status at June 30, 2019 were comprised of 15 commercial real estate loans totaling $23.1 million, 33 commercial business loans totaling $14.1 million, and 14 consumer and other loans totaling $3.5 million. TDR loans on accrual status at December 31, 2018 were comprised of 20 commercial real estate loans totaling $24.0 million, 37 commercial business loans totaling $18.9 million and 6 consumer and other loans totaling $7.5 million. The Company expects that TDR loans on accrual status as of June 30, 2019, 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. TDR loans that were restructured at market interest rates and had sustained performance as agreed under the modified loan terms may be reclassified as non-TDR after each year end but are reserved for under ASC 310-10.
The Company has allocated $4.6 million and $3.0 million of specific reserves to TDR loans as of June 30, 2019 and December 31, 2018, respectively. 
The following tables present the recorded investment of loans classified as TDR during the three and six months ended June 30, 2019 and 2018 by class of loans:
 
Three Months Ended June 30, 2019
 
Three Months Ended June 30, 2018
 
Number of
Loans 
 
Pre-
Modification
 
Post-
Modification 
 
Number of
Loans 
 
Pre-
Modification
 
Post-
Modification 
 
(Dollars in thousands)
Legacy Loans:
 
 
 
 
 
 
 
 
 
 
 
Real estate – residential
—

 
$
—

 
$
—

 
—

 
$
—

 
$
—

Real estate – commercial
 
 
 

 
 

 
 
 
 
 
 
Retail
—

 
—

 
—

 
1

 
54

 
54

Hotel & motel
1

 
730

 
730

 
—

 
—

 
—

Gas station & car wash
—

 
—

 
—

 
—

 
—

 
—

Mixed use
—

 
—

 
—

 
—

 
—

 
—

Industrial & warehouse
—

 
—

 
—

 
—

 
—

 
—

Other
—

 
—

 
—

 
—

 
—

 
—

Real estate – construction
—

 
—

 
—

 
—

 
—

 
—

Commercial business
7

 
447

 
447

 
10

 
2,830

 
2,830

Trade finance
—

 
—

 
—

 
—

 
—

 
—

Consumer and other
7

 
30

 
30

 
1

 
70

 
70

Subtotal
15

 
$
1,207

 
$
1,207

 
12

 
$
2,954

 
$
2,954

Acquired Loans:
 
 
 
 
 
 
 
 
 
 
 
Real estate – residential
—

 
$
—

 
$
—

 
—

 
$
—

 
$
—

Real estate – commercial
 
 
 

 
 

 
 
 
 

 
 

Retail
1

 
27

 
27

 
—

 
—

 
—

Hotel & motel
—

 
—

 
—

 
—

 
—

 
—

Gas station & car wash
—

 
—

 
—

 
—

 
—

 
—

Mixed use
—

 
—

 
—

 
—

 
—

 
—

Industrial & warehouse
—

 
—

 
—

 
—

 
—

 
—

Other
2

 
961

 
961

 
—

 
—

 
—

Real estate – construction
—

 
—

 
—

 
—

 
—

 
—

Commercial business
1

 
132

 
132

 
2

 
1,348

 
1,348

Trade finance
—

 
—

 
—

 
—

 
—

 
—

Consumer and other
—

 
—

 
—

 
—

 
—

 
—

Subtotal
4

 
$
1,120

 
$
1,120

 
2

 
$
1,348

 
$
1,348

Total
19

 
$
2,327

 
$
2,327

 
14

 
$
4,302

 
$
4,302


 
 
 
 
 
 
 
 
 
 
 
 
 
Six Months Ended June 30, 2019
 
Six Months Ended June 30, 2018
 
Number of
Loans 
 
Pre-
Modification
 
Post-
Modification 
 
Number of
Loans 
 
Pre-
Modification
 
Post-
Modification 
 
(Dollars in thousands)
Legacy Loans:
 
 
 
 
 
 
 
 
 
 
 
Real estate – residential
—

 
$
—

 
$
—

 
—

 
$
—

 
$
—

Real estate – commercial
 
 
 

 
 

 
 
 
 
 
 
Retail
—

 
—

 
—

 
2

 
66

 
66

Hotel & motel
2

 
880

 
880

 
—

 
—

 
—

Gas station & car wash
—

 
—

 
—

 
—

 
—

 
—

Mixed use
—

 
—

 
—

 
—

 
—

 
—

Industrial & warehouse
—

 
—

 
—

 
1

 
2,093

 
2,093

Other
1

 
92

 
92

 
1

 
1,231

 
1,231

Real estate – construction
—

 
—

 
—

 
—

 
—

 
—

Commercial business
12

 
3,143

 
3,143

 
13

 
6,486

 
6,486

Trade finance
—

 
—

 
—

 
—

 
—

 
—

Consumer and other
13

 
62

 
62

 
1

 
70

 
70

Subtotal
28

 
$
4,177

 
$
4,177

 
18

 
$
9,946

 
$
9,946

Acquired Loans:
 
 
 
 
 
 
 
 
 
 
 
Real estate – residential
—

 
$
—

 
$
—

 
—

 
$
—

 
$
498

Real estate – commercial
 
 
 

 
 

 
 
 
 

 
 

Retail
2

 
125

 
125

 
1

 
207

 
207

Hotel & motel
—

 
—

 
—

 
—

 
—

 
—

Gas station & car wash
—

 
—

 
—

 
—

 
—

 
—

Mixed use
—

 
—

 
—

 
1

 
2,714

 
2,714

Industrial & warehouse
—

 
—

 
—

 
—

 
—

 
—

Other
2

 
961

 
961

 
1

 
1,047

 
1,047

Real estate – construction
—

 
—

 
—

 
—

 
—

 
—

Commercial business
2

 
167

 
167

 
2

 
1,348

 
1,348

Trade finance
—

 
—

 
—

 
—

 
—

 
—

Consumer and other
—

 
—

 
—

 
—

 
—

 
—

Subtotal
6

 
$
1,253

 
$
1,253

 
5

 
$
5,316

 
$
5,814

Total
34

 
$
5,430

 
$
5,430

 
23

 
$
15,262

 
$
15,760


For TDRs modified during the three and six months ended June 30, 2019, the Company recorded $31 thousand and $52 thousand, respectively, in specific reserves. Total charge-offs of TDR loans modified during the three and six months ended June 30, 2019 totaled 33 thousand. For TDR loans modified during the three and six months ended June 30, 2018, the Company recorded $44 thousand and $1.1 million, respectively, in specific reserves. Total charge-offs of TDR loans modified during the three and six months ended June 30, 2018 totaled $131 thousand.
The following table presents loans modified as TDRs within the previous twelve months ended June 30, 2019 and June 30, 2018 that subsequently had payment defaults during the three and six months ended June 30, 2019 and June 30, 2018:
 
Three Months Ended June 30, 2019
 
Three Months Ended June 30, 2018
 
Number of Loans
 
Balance
 
Number of Loans
 
Balance
 
(Dollars in thousands)
Legacy Loans:
 
 
 
 
 
 
 
Real estate – commercial
 
 
 
 
 
 
 
Retail
—

 
$
—

 
—

 
$
—

Hotel & motel
—

 
—

 
—

 
—

Gas station & car wash
—

 
—

 
—

 
—

Mixed Use
—

 
—

 
—

 
—

Industrial & warehouse
—

 
—

 
—

 
—

Other
1

 
92

 
—

 
—

Real estate – construction
—

 
—

 
—

 
—

Commercial business
—

 
—

 
4

 
1,188

Trade finance
—

 
—

 
—

 
—

Consumer and other
6

 
39

 
—

 
—

Subtotal
7

 
$
131

 
4

 
$
1,188

Acquired Loans:
 
 
 
 
 
 
 
Real estate – commercial
 

 
 

 
 
 
 
Retail
—

 
$
—

 
—

 
$
—

Hotel & motel
1

 
73

 
—

 
—

Gas station & car wash
—

 
—

 
—

 
—

Mixed Use
—

 
—

 
—

 
—

Industrial & warehouse
1

 
234

 
—

 
—

Other
—

 
—

 
—

 
—

Real estate – construction
—

 
—

 
—

 
—

Commercial business
3

 
150

 
—

 
—

Trade finance
—

 
—

 
—

 
—

Consumer and other
—

 
—

 
—

 
—

Subtotal
5

 
$
457

 
—

 
$
—

Total
12

 
$
588

 
4

 
$
1,188


 
Six Months Ended June 30, 2019
 
Six Months Ended June 30, 2018
 
Number of Loans
 
Balance
 
Number of Loans
 
Balance
 
(Dollars in thousands)
Legacy Loans:
 
 
 
 
 
 
 
Real estate – commercial
 
 
 
 
 
 
 
Retail
—

 
$
—

 
—

 
$
—

Hotel & motel
—

 
—

 
—

 
—

Gas station & car wash
—

 
—

 
—

 
—

Mixed Use
—

 
—

 
—

 
—

Industrial & warehouse
—

 
—

 
—

 
—

Other
1

 
92

 
—

 
—

Real estate – construction
—

 
—

 
—

 
—

Commercial business
—

 
—

 
4

 
1,188

Trade finance
—

 
—

 
—

 
—

Consumer and other
6

 
39

 
—

 
—

Subtotal
7

 
$
131

 
4

 
$
1,188

Acquired Loans:
 
 
 
 
 
 
 
Real estate – commercial
 

 
 

 
 
 
 
Retail
—

 
$
—

 
—

 
$
—

Hotel & motel
1

 
73

 
—

 
—

Gas station & car wash
—

 
—

 
—

 
—

Mixed Use
—

 
—

 
—

 
—

Industrial & warehouse
1

 
234

 
—

 
—

Other
—

 
—

 
1

 
3,108

Real estate – construction
—

 
—

 
—

 
—

Commercial business
4

 
218

 
1

 
—

Trade finance
—

 
—

 
—

 
—

Consumer and other
—

 
—

 
—

 
—

Subtotal
6

 
$
525

 
2

 
$
3,108

Total
13

 
$
656

 
6

 
$
4,296

 
 
 
 
 
 
 
 

A loan is considered to be in payment default once it is 30 days contractually past due under the modified terms. The Company recorded $85 thousand and $119 thousand, respectively, in specific reserves for TDR loans that had payment defaults during the three and six months ended June 30, 2019. Total charge offs for TDR loans that had payment defaults during the three and six months ended June 30, 2019 was $67 thousand.
There were seven Legacy TDR loans and six Acquired TDR loans that subsequently defaulted during the six months ended June 30, 2019. Legacy TDR loans were modified as follows: one commercial real estate loan totaling $92 thousand was modified through a payment extension and six consumer loans totaling $39 thousand were modified through payment extensions. Acquired TDR loans that defaulted were modified as follows: two commercial real estate loans totaling $307 thousand was modified through payment extensions and four commercial business loans totaling $218 thousand were modified through payment extensions.
As of June 30, 2018, there were $33 thousand specific reserves for the TDR loans that had payment defaults during the three and six months ended June 30, 2018. There were $51 thousand charge offs for TDR loans that had payment defaults during the three and six months ended June 30, 2018.
There were four commercial business Legacy TDR loans totaling $1.2 million that subsequently defaulted during the six months ended June 30, 2018 that was modified through maturity extensions. There was one real estate commercial Acquired TDR loan totaling $3.1 million that subsequently defaulted during the six months ended June 30, 2018 that was modified through a payment concession.