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Loans | 9 Months Ended
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Sep. 30, 2014
Receivables [Abstract] |
Loans | Note 6 — Loans The loan portfolio includes originated and purchased loans. Originated loans and purchased loans for which there was no evidence of credit deterioration at their acquisition date and it was probable that we would be able to collect all contractually required payments, are referred to collectively as non-purchased credit impaired loans, or “Non-PCI loans.” Purchased loans for which there was, at the acquisition date, evidence of credit deterioration since their origination and it was probable that we would be unable to collect all contractually required payments are referred to as purchased credit impaired loans, or “PCI loans”. Non-PCI loans are carried at the principal amount outstanding, net of deferred fees and costs, and in the case of acquired loans, net of purchase discounts and premiums. Deferred fees and costs and purchase discounts and premiums on acquired non-impaired loans are recognized as an adjustment to interest income over the contractual life of the loans using the effective interest method or taken into income when the related loans are paid off or sold. PCI loans are accounted for in accordance with ASC 310-30, “Loans and Debt Securities Acquired with Deteriorated Credit Quality.” For PCI loans, at the time of acquisition, we (i) calculate the contractual amount and timing of undiscounted principal and interest payments (the “undiscounted contractual cash flows”) and (ii) estimate the amount and timing of undiscounted expected principal and interest payments (the “undiscounted expected cash flows”). The difference between the undiscounted contractual cash flows and the undiscounted expected cash flows is the nonaccretable difference. The difference between the undiscounted cash flows expected to be collected and the estimated fair value of the acquired loans is the accretable yield. The accretable yield is recorded as interest income over the estimated life of the loans using the effective yield method if the timing and amount of the future cash flows is reasonably estimable. PCI loans may be placed on nonaccrual status, including use of the cost recovery method or cash basis method of income recognition, if information is not available to reasonably estimate cash flows expected to be collected to compute its yield. The nonaccretable difference represents an estimate of the loss exposure of principal and interest related to PCI loans; such amount is subject to change over time based on the performance of such loans. The carrying value of PCI loans is reduced by payments received, both principal and interest, and increased by the portion of the accretable yield recognized as interest income. As part of the fair value process and the subsequent accounting, the Company aggregates PCI loans into pools having common credit risk characteristics such as type and risk rating. Increases in expected cash flows over those previously estimated increase the accretable yield and are recognized as interest income prospectively. Decreases in the amount and changes in the timing of expected cash flows compared to those previously estimated decrease the accretable yield and usually result in a provision for loan losses and the establishment of an allowance for loan losses. As the accretable yield increases or decreases from changes in cash flow expectations, the offset is a decrease or increase to the nonaccretable difference. The accretable yield is measured at each financial reporting date based on information then currently available and represents the difference between the remaining undiscounted expected cash flows and the current carrying value of the loans. PCI loans that are contractually past due are still considered to be accruing and performing as long as there is an expectation that the estimated cash flows will be received. If the timing and amount of cash flows is not reasonably estimable, the loans may be classified as nonaccrual with interest income recognized on either a cash basis or as a reduction of the principal amount outstanding. The Board of Directors and management review and approve the Bank’s loan policy and procedures on a regular basis to reflect issues such as regulatory and organizational structure changes, strategic planning revisions, concentrations of credit, loan delinquencies and nonperforming loans, problem loans, and policy adjustments. Real estate loans are loans secured by liens or interest in real estate, to provide purchase, construction, and refinance on real estate properties. Commercial and industrial loans consist of commercial term loans, commercial lines of credit, and Small Business Administration (“SBA”) loans. Consumer loans consist of auto loans, credit cards, personal loans, and home equity lines of credit. We maintain management loan review and monitoring functions that review and monitor pass graded loans as well as problem loans to prevent further deterioration. The majority of the Bank’s loan portfolio consists of commercial real estate and commercial and industrial loans. The Bank has been diversifying and monitoring commercial real estate loans based on property types, underwriting standards, and portfolio liquidity and management, and certain specified limits set forth in the Bank’s loan policy. To date, most of the Bank’s lending activity occurred within Southern California. With the acquisition of CBI, our lending activities in other areas of the country will increase. Loans Receivable Loans receivable consisted of the following as of the dates indicated:
|  | September 30, 2014 |  |  | December 31, |
|  | Non-PCI Loans |  |  | PCI Loans |  |  | Total |  |  | 2013 |
|  | (In thousands) |
Real estate loans: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Commercial property (1) |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Retail |  | $ | 635,861 |  |  | $ | 15,940 |  |  | $ | 651,801 |  |  | $ | 543,619 |
Hotel/Motel |  |  | 452,405 |  |  |  | 14,206 |  |  |  | 466,611 |  |  |  | 322,927 |
Gas station |  |  | 340,386 |  |  |  | 18,069 |  |  |  | 358,455 |  |  |  | 292,557 |
Other |  |  | 805,696 |  |  |  | 15,715 |  |  |  | 821,411 |  |  |  | 731,617 |
Construction |  |  | 4,146 |  |  |  | — |  |  |  | 4,146 |  |  |  | — |
Residential property |  |  | 106,044 |  |  |  | 2,686 |  |  |  | 108,730 |  |  |  | 79,078 |
Total real estate loans |  |  | 2,344,538 |  |  |  | 66,616 |  |  |  | 2,411,154 |  |  |  | 1,969,798 |
Commercial and industrial loans: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Commercial term |  |  | 119,175 |  |  |  | 350 |  |  |  | 119,525 |  |  |  | 124,391 |
Commercial lines of credit |  |  | 75,246 |  |  |  | — |  |  |  | 75,246 |  |  |  | 71,042 |
International loans |  |  | 41,127 |  |  |  | — |  |  |  | 41,127 |  |  |  | 36,353 |
Total commercial and industrial loans |  |  | 235,548 |  |  |  | 350 |  |  |  | 235,898 |  |  |  | 231,786 |
Consumer loans |  |  | 28,849 |  |  |  | 58 |  |  |  | 28,907 |  |  |  | 32,505 |
Total gross loans |  |  | 2,608,935 |  |  |  | 67,024 |  |  |  | 2,675,959 |  |  |  | 2,234,089 |
Allowance for loans losses |  |  | (51,179 | ) |  |  | — |  |  |  | (51,179 | ) |  |  | (57,555 | )
Deferred loan costs |  |  | 3,311 |  |  |  | — |  |  |  | 3,311 |  |  |  | 964 |
Loans receivable, net |  | $ | 2,561,067 |  |  | $ | 67,024 |  |  | $ | 2,628,091 |  |  | $ | 2,177,498 |
(1) | Includes owner-occupied property loans of $1.10 billion and $957.3 million as of September 30, 2014 and December 31, 2013, respectively.
Accrued interest on loans receivable was $5.8 million and $5.4 million at September 30, 2014 and December 31, 2013, respectively. At September 30, 2014 and December 31, 2013, loans receivable totaling $872.2 million and $568.7 million, respectively, were pledged to secure advances from the FHLB and the Federal Reserve Bank’s (“FRB”) federal discount window. The following table details the information on the sales and reclassifications of loans receivable to loans held for sale (excluding PCI loans) by portfolio segment for the three months ended September 30, 2014 and 2013:
|  | Real Estate |  |  | Commercial and Industrial |  |  | Consumer |  |  | Total Non-PCI |
|  | (In thousands) |
September 30, 2014 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Balance at beginning of period |  | $ | 2,568 |  |  | $ | 1,274 |  |  | $ | — |  |  | $ | 3,842 |
Origination of loans held for sale |  |  | 15,198 |  |  |  | 3,031 |  |  |  | — |  |  |  | 18,229 |
Sales of loans held for sale |  |  | (12,135 | ) |  |  | (2,133 | ) |  |  | — |  |  |  | (14,268 | )
Principal payoffs and amortization |  |  | (20 | ) |  |  | (26 | ) |  |  | — |  |  |  | (46 | )
Balance at end of period |  | $ | 5,611 |  |  | $ | 2,146 |  |  | $ | — |  |  | $ | 7,757 |
September 30, 2013 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Balance at beginning of period |  | $ | 2,137 |  |  | $ | 416 |  |  | $ | — |  |  | $ | 2,553 |
Origination of loans held for sale |  |  | 15,634 |  |  |  | 1,501 |  |  |  | — |  |  |  | 17,135 |
Reclassification from loans held for sale to loans receivable |  |  | (2,118 | ) |  |  | (416 | ) |  |  | — |  |  |  | (2,534 | )
Sales of loans held for sale |  |  | (10,725 | ) |  |  | (1,181 | ) |  |  | — |  |  |  | (11,906 | )
Principal payoffs and amortization |  |  | (20 | ) |  |  | — |  |  |  | — |  |  |  | (20 | )
Balance at end of period |  | $ | 4,908 |  |  | $ | 320 |  |  | $ | — |  |  | $ | 5,228 |
For the three months ended September 30, 2014, there was no reclassification of Non-PCI loans receivable as Non-PCI loans held for sale, and Non-PCI loans held for sale of $14.3 million were sold. In addition, there was no reclassification from Non-PCI loans held for sale to Non-PCI loans receivable. For the three months ended September 30, 2013, there was no reclassification of Non-PCI loans receivable as Non-PCI loans held for sale, and Non-PCI loans held for sale of $11.9 million were sold. The following table details the information on the sales and reclassifications of loans receivable to loans held for sale (excluding PCI loans) by portfolio segment for the nine months ended September 30, 2014 and 2013:
|  | Real Estate |  |  | Commercial and Industrial |  |  | Consumer |  |  | Total Non-PCI |
|  | (In thousands) |
September 30, 2014 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Balance at beginning of period |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |
Origination of loans held for sale |  |  | 29,591 |  |  |  | 5,207 |  |  |  | — |  |  |  | 34,798 |
Sales of loans held for sale |  |  | (23,953 | ) |  |  | (3,033 | ) |  |  | — |  |  |  | (26,986 | )
Principal payoffs and amortization |  |  | (27 | ) |  |  | (28 | ) |  |  | — |  |  |  | (55 | )
Balance at end of period |  | $ | 5,611 |  |  | $ | 2,146 |  |  | $ | — |  |  | $ | 7,757 |
September 30, 2013 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Balance at beginning of period |  | $ | 7,977 |  |  | $ | 329 |  |  | $ | — |  |  | $ | 8,306 |
Origination of loans held for sale |  |  | 58,725 |  |  |  | 4,387 |  |  |  | — |  |  |  | 63,112 |
Reclassification from loans receivable to loans held for sale |  |  | 7,593 |  |  |  | 416 |  |  |  | — |  |  |  | 8,009 |
Reclassification from loans held for sale to loans receivable |  |  | (2,118 | ) |  |  | (416 | ) |  |  | — |  |  |  | (2,534 | )
Sales of loans held for sale |  |  | (67,235 | ) |  |  | (4,391 | ) |  |  | — |  |  |  | (71,626 | )
Principal payoffs and amortization |  |  | (34 | ) |  |  | (5 | ) |  |  | — |  |  |  | (39 | )
Balance at end of period |  | $ | 4,908 |  |  | $ | 320 |  |  | $ | — |  |  | $ | 5,228 |
For the nine months ended September 30, 2014, there was no reclassification of Non-PCI loans receivable as Non-PCI loans held for sale, and Non-PCI loans held for sale of $27.0 million were sold. In addition, there was no reclassification from Non-PCI loans held for sale to Non-PCI loans receivable. For the nine months ended September 30, 2013, Non-PCI loans receivable of $8.0 million were reclassified as Non-PCI loans held for sale, and Non-PCI loans held for sale of $71.6 million were sold. Allowance for Loan Losses and Allowance for Off-Balance Sheet Items Activity in the allowance for loan losses and allowance for off-balance sheet items was as follows for the periods indicated:
|  | As of and for the Three Months Ended |  |  | As of and for the Nine Months Ended |
|  | September 30, 2014 |  |  | September 30, 2013 |  |  | September 30, 2014 |  |  | September 30, 2013 |
|  | (In thousands) |
Allowance for loan losses: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Balance at beginning of period |  | $ | 51,886 |  |  | $ | 59,876 |  |  | $ | 57,555 |  |  | $ | 63,305 |
Charge-offs |  |  | (1,418 | ) |  |  | (4,610 | ) |  |  | (5,569 | ) |  |  | (11,124 | )
Recoveries on loans previously charged off |  |  | 663 |  |  |  | 2,383 |  |  |  | 6,656 |  |  |  | 4,964 |
Net loan (charge-offs) recoveries |  |  | (755 | ) |  |  | (2,227 | ) |  |  | 1,087 |  |  |  | (6,160 | )
Provision (negative provision) charged to operating expense |  |  | 48 |  |  |  | (10 | ) |  |  | (7,463 | ) |  |  | 494 |
Balance at end of period |  | $ | 51,179 |  |  | $ | 57,639 |  |  | $ | 51,179 |  |  | $ | 57,639 |
Allowance for off-balance sheet items: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Balance at beginning of period |  | $ | 1,592 |  |  | $ | 1,320 |  |  | $ | 1,247 |  |  | $ | 1,824 |
(Negative provision) provision charged to operating expense |  |  | (48 | ) |  |  | 10 |  |  |  | 297 |  |  |  | (494 | )
Balance at end of period |  | $ | 1,544 |  |  | $ | 1,330 |  |  | $ | 1,544 |  |  | $ | 1,330 |
There was no allowance for loan losses on our PCI loans as of September 30, 2014. The allowance for off-balance sheet items is maintained at a level believed to be sufficient to absorb estimated probable losses related to these unfunded credit facilities. The determination of the allowance adequacy is based on periodic evaluations of the unfunded credit facilities including an assessment of the probability of commitment usage, credit risk factors for loans outstanding to these same customers, and the terms and expiration dates of the unfunded credit facilities. As of September 30, 2014 and 2013, the allowance for off-balance sheet items amounted to $1.5 million and $1.3 million, respectively. Net adjustments to the allowance for off-balance sheet items are included in the provision for credit losses. The following table details the information on the allowance for loan losses by portfolio segment for the three months ended September 30, 2014 and 2013:
|  | Real Estate |  |  | Commercial and Industrial |  |  | Consumer |  |  | Unallocated |  |  | Total |
|  | (In thousands) |
September 30, 2014 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Allowance for loan losses: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Beginning balance |  | $ | 40,303 |  |  | $ | 9,738 |  |  | $ | 540 |  |  | $ | 1,305 |  |  | $ | 51,886 |
Charge-offs |  |  | (884 | ) |  |  | (499 | ) |  |  | (35 | ) |  |  | — |  |  |  | (1,418 | )
Recoveries on loans previously charged off |  |  | 293 |  |  |  | 365 |  |  |  | 5 |  |  |  | — |  |  |  | 663 |
(Negative provision) provision |  |  | 179 |  |  |  | 260 |  |  |  | (186 | ) |  |  | (205 | ) |  |  | 48 |
Ending balance |  | $ | 39,891 |  |  | $ | 9,864 |  |  | $ | 324 |  |  | $ | 1,100 |  |  | $ | 51,179 |
Ending balance: individually evaluated for impairment |  | $ | 2,027 |  |  | $ | 3,757 |  |  | $ | — |  |  | $ | — |  |  | $ | 5,784 |
Ending balance: collectively evaluated for impairment |  | $ | 37,864 |  |  | $ | 6,107 |  |  | $ | 324 |  |  | $ | 1,100 |  |  | $ | 45,395 |
Loans receivable: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Ending balance |  | $ | 2,411,154 |  |  | $ | 235,898 |  |  | $ | 28,907 |  |  | $ | — |  |  | $ | 2,675,959 |
Ending balance: individually evaluated for impairment |  | $ | 35,654 |  |  | $ | 11,970 |  |  | $ | 1,758 |  |  | $ | — |  |  | $ | 49,382 |
Ending balance: collectively evaluated for impairment |  | $ | 2,308,884 |  |  | $ | 223,578 |  |  | $ | 27,091 |  |  | $ | — |  |  | $ | 2,559,553 |
Ending balance: acquired with deteriorated credit quality |  | $ | 66,616 |  |  | $ | 350 |  |  | $ | 58 |  |  | $ | — |  |  | $ | 67,024 |
|  | Real Estate |  |  | Commercial and Industrial |  |  | Consumer |  |  | Unallocated |  |  | Total |
|  | (In thousands) |
September 30, 2013 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Allowance for loan losses: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Beginning balance |  | $ | 46,396 |  |  | $ | 11,118 |  |  | $ | 1,884 |  |  | $ | 478 |  |  | $ | 59,876 |
Charge-offs |  |  | (1,017 | ) |  |  | (3,575 | ) |  |  | (18 | ) |  |  | — |  |  |  | (4,610 | )
Recoveries on loans previously charged off |  |  | 1,641 |  |  |  | 737 |  |  |  | 5 |  |  |  | — |  |  |  | 2,383 |
Provision (negative provision) |  |  | (1,795 | ) |  |  | 388 |  |  |  | (232 | ) |  |  | 1,629 |  |  |  | (10 | )
Ending balance |  | $ | 45,225 |  |  | $ | 8,668 |  |  | $ | 1,639 |  |  | $ | 2,107 |  |  | $ | 57,639 |
Ending balance: individually evaluated for impairment |  | $ | 564 |  |  | $ | 1,475 |  |  | $ | 330 |  |  | $ | — |  |  | $ | 2,369 |
Ending balance: collectively evaluated for impairment |  | $ | 44,661 |  |  | $ | 7,193 |  |  | $ | 1,309 |  |  | $ | 2,107 |  |  | $ | 55,270 |
Loans receivable: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Ending balance |  | $ | 1,921,659 |  |  | $ | 203,547 |  |  | $ | 34,065 |  |  | $ | — |  |  | $ | 2,159,271 |
Ending balance: individually evaluated for impairment |  | $ | 29,424 |  |  | $ | 12,468 |  |  | $ | 1,574 |  |  | $ | — |  |  | $ | 43,466 |
Ending balance: collectively evaluated for impairment |  | $ | 1,892,235 |  |  | $ | 191,079 |  |  | $ | 32,491 |  |  | $ | — |  |  | $ | 2,115,805 |
The following table details the information on the allowance for loan losses by portfolio segment for the nine months ended September 30, 2014 and 2013:
|  | Real Estate |  |  | Commercial and Industrial |  |  | Consumer |  |  | Unallocated |  |  | Total |
|  | (In thousands) |
September 30, 2014 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Allowance for loan losses: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Beginning balance |  | $ | 43,550 |  |  | $ | 11,287 |  |  | $ | 1,427 |  |  | $ | 1,291 |  |  | $ | 57,555 |
Charge-offs |  |  | (2,073 | ) |  |  | (3,394 | ) |  |  | (102 | ) |  |  | — |  |  |  | (5,569 | )
Recoveries on loans previously charged off |  |  | 3,298 |  |  |  | 3,338 |  |  |  | 20 |  |  |  | — |  |  |  | 6,656 |
(Negative provision) provision |  |  | (4,884 | ) |  |  | (1,367 | ) |  |  | (1,021 | ) |  |  | (191 | ) |  |  | (7,463 | )
Ending balance |  | $ | 39,891 |  |  | $ | 9,864 |  |  | $ | 324 |  |  | $ | 1,100 |  |  | $ | 51,179 |
Ending balance: individually evaluated for impairment |  | $ | 2,027 |  |  | $ | 3,757 |  |  | $ | — |  |  | $ | — |  |  | $ | 5,784 |
Ending balance: collectively evaluated for impairment |  | $ | 37,864 |  |  | $ | 6,107 |  |  | $ | 324 |  |  | $ | 1,100 |  |  | $ | 45,395 |
Loans receivable: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Ending balance |  | $ | 2,411,154 |  |  | $ | 235,898 |  |  | $ | 28,907 |  |  | $ | — |  |  | $ | 2,675,959 |
Ending balance: individually evaluated for impairment |  | $ | 35,654 |  |  | $ | 11,970 |  |  | $ | 1,758 |  |  | $ | — |  |  | $ | 49,382 |
Ending balance: collectively evaluated for impairment |  | $ | 2,308,884 |  |  | $ | 223,578 |  |  | $ | 27,091 |  |  | $ | — |  |  | $ | 2,559,553 |
Ending balance: acquired with deteriorated credit quality |  | $ | 66,616 |  |  | $ | 350 |  |  | $ | 58 |  |  | $ | — |  |  | $ | 67,024 |
|  | Real Estate |  |  | Commercial and Industrial |  |  | Consumer |  |  | Unallocated |  |  | Total |
|  | (In thousands) |
September 30, 2013 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Allowance for loan losses: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Beginning balance |  | $ | 49,472 |  |  | $ | 10,636 |  |  | $ | 2,280 |  |  | $ | 917 |  |  | $ | 63,305 |
Charge-offs |  |  | (4,592 | ) |  |  | (6,314 | ) |  |  | (218 | ) |  |  | — |  |  |  | (11,124 | )
Recoveries on loans previously charged off |  |  | 2,923 |  |  |  | 1,981 |  |  |  | 60 |  |  |  | — |  |  |  | 4,964 |
Provision (negative provision) |  |  | (2,578 | ) |  |  | 2,365 |  |  |  | (483 | ) |  |  | 1,190 |  |  |  | 494 |
Ending balance |  | $ | 45,225 |  |  | $ | 8,668 |  |  | $ | 1,639 |  |  | $ | 2,107 |  |  | $ | 57,639 |
Ending balance: individually evaluated for impairment |  | $ | 564 |  |  | $ | 1,475 |  |  | $ | 330 |  |  | $ | — |  |  | $ | 2,369 |
Ending balance: collectively evaluated for impairment |  | $ | 44,661 |  |  | $ | 7,193 |  |  | $ | 1,309 |  |  | $ | 2,107 |  |  | $ | 55,270 |
Loans receivable: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Ending balance |  | $ | 1,921,659 |  |  | $ | 203,547 |  |  | $ | 34,065 |  |  | $ | — |  |  | $ | 2,159,271 |
Ending balance: individually evaluated for impairment |  | $ | 29,424 |  |  | $ | 12,468 |  |  | $ | 1,574 |  |  | $ | — |  |  | $ | 43,466 |
Ending balance: collectively evaluated for impairment |  | $ | 1,892,235 |  |  | $ | 191,079 |  |  | $ | 32,491 |  |  | $ | — |  |  | $ | 2,115,805 |
Credit Quality Indicators As part of the on-going monitoring of the credit quality of our loan portfolio, we utilize an internal loan grading system to identify credit risk and assign an appropriate grade (from (0) to (8)) for each and every loan in our loan portfolio. A third party loan review is required on an annual basis. Additional adjustments are made when determined to be necessary. The loan grade definitions are as follows: Pass and Pass-Watch: Pass and Pass-Watch loans, grades (0-4), are in compliance in all respects with the Bank’s credit policy and regulatory requirements, and do not exhibit any potential or defined weaknesses as defined under “Special Mention,” “Substandard” or “Doubtful.” This category is the strongest level of the Bank’s loan grading system. It incorporates all performing loans with no credit weaknesses. It includes cash and stock/security secured loans or other investment grade loans. Special Mention: A Special Mention credit, grade (5), has potential weaknesses that deserve management’s close attention. If not corrected, these potential weaknesses may result in deterioration of the repayment of the debt and result in a Substandard classification. Loans that have significant actual, not potential, weaknesses are considered more severely classified. Substandard: A Substandard credit, grade (6), has a well-defined weakness that jeopardizes the liquidation of the debt. A credit graded Substandard is not protected by the sound worth and paying capacity of the borrower, or of the value and type of collateral pledged. With a Substandard loan, there is a distinct possibility that the Bank will sustain some loss if the weaknesses or deficiencies are not corrected. Doubtful: A Doubtful credit, grade (7), is one that has critical weaknesses that would make the collection or liquidation of the full amount due improbable. However, there may be pending events which may work to strengthen the credit, and therefore the amount or timing of a possible loss cannot be determined at the current time. Loss: A loan classified as Loss, grade (8), is considered uncollectible and of such little value that their continuance as active bank assets is not warranted. This classification does not mean that the loan has absolutely no recovery or salvage value, but rather it is not practical or desirable to defer writing off this asset even though partial recovery may be possible in the future. Loans classified as Loss will be charged off in a timely manner. As of September 30, 2014 and December 31, 2013, pass/pass-watch (grade 0-4), criticized (grade 5) and classified (grade 6-7) loans (excluding PCI loans), disaggregated by loan class, were as follows:
|  | As of September 30, 2014 |
|  | Pass/Pass-Watch (Grade 0-4) |  |  | Criticized (Grade 5) |  |  | Classified (Grade 6-7) |  |  | Total |
|  | (In thousands) |
Real estate loans: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Commercial property |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Retail |  | $ | 620,511 |  |  | $ | 12,821 |  |  | $ | 2,529 |  |  | $ | 635,861 |
Hotel/Motel |  |  | 399,006 |  |  |  | 48,995 |  |  |  | 4,404 |  |  |  | 452,405 |
Gas station |  |  | 320,501 |  |  |  | 10,054 |  |  |  | 9,831 |  |  |  | 340,386 |
Other |  |  | 780,400 |  |  |  | 13,599 |  |  |  | 11,697 |  |  |  | 805,696 |
Construction |  |  | 4,146 |  |  |  | — |  |  |  | — |  |  |  | 4,146 |
Residential property |  |  | 103,812 |  |  |  | 122 |  |  |  | 2,110 |  |  |  | 106,044 |
Commercial and industrial loans: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Commercial term |  |  | 108,908 |  |  |  | 1,315 |  |  |  | 8,952 |  |  |  | 119,175 |
Commercial lines of credit |  |  | 74,286 |  |  |  | — |  |  |  | 960 |  |  |  | 75,246 |
International loans |  |  | 38,676 |  |  |  | — |  |  |  | 2,451 |  |  |  | 41,127 |
Consumer loans |  |  | 26,626 |  |  |  | 140 |  |  |  | 2,083 |  |  |  | 28,849 |
Total Non-PCI loans |  | $ | 2,476,872 |  |  | $ | 87,046 |  |  | $ | 45,017 |  |  | $ | 2,608,935 |
|  | As of December 31, 2013 |
|  | Pass/Pass-Watch (Grade 0-4) |  |  | Criticized (Grade 5) |  |  | Classified (Grade 6-7) |  |  | Total |
|  | (In thousands) |
Real estate loans: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Commercial property |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Retail |  | $ | 531,014 |  |  | $ | 5,309 |  |  | $ | 7,296 |  |  | $ | 543,619 |
Hotel/Motel |  |  | 308,483 |  |  |  | 1,796 |  |  |  | 12,648 |  |  |  | 322,927 |
Gas station |  |  | 279,636 |  |  |  | 3,104 |  |  |  | 9,817 |  |  |  | 292,557 |
Other |  |  | 690,481 |  |  |  | 8,524 |  |  |  | 32,612 |  |  |  | 731,617 |
Residential property |  |  | 77,422 |  |  |  | — |  |  |  | 1,656 |  |  |  | 79,078 |
Commercial and industrial loans: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Commercial term |  |  | 107,712 |  |  |  | 2,007 |  |  |  | 14,672 |  |  |  | 124,391 |
Commercial lines of credit |  |  | 69,823 |  |  |  | — |  |  |  | 1,219 |  |  |  | 71,042 |
International loans |  |  | 35,777 |  |  |  | 576 |  |  |  | — |  |  |  | 36,353 |
Consumer loans |  |  | 30,044 |  |  |  | 163 |  |  |  | 2,298 |  |  |  | 32,505 |
Total Non-PCI loans |  | $ | 2,130,392 |  |  | $ | 21,479 |  |  | $ | 82,218 |  |  | $ | 2,234,089 |
The following is an aging analysis of past due loans (excluding PCI loans), disaggregated by loan class, as of the dates indicated:
|  | As of September 30, 2014 |
|  | 30-59 Days Past Due |  |  | 60-89 Days Past Due |  |  | 90 Days or More Past Due |  |  | Total Past Due |  |  | Current |  |  | Total |  |  | Accruing 90 Days or More Past Due |
|  | (In thousands) |
Real estate loans: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Commercial property |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Retail |  | $ | 1,927 |  |  | $ | 146 |  |  | $ | 182 |  |  | $ | 2,255 |  |  | $ | 633,606 |  |  | $ | 635,861 |  |  | $ | — |
Hotel/Motel |  |  | 52 |  |  |  | 733 |  |  |  | 1,203 |  |  |  | 1,988 |  |  |  | 450,417 |  |  |  | 452,405 |  |  |  | — |
Gas station |  |  | 4,781 |  |  |  | 794 |  |  |  | 544 |  |  |  | 6,119 |  |  |  | 334,267 |  |  |  | 340,386 |  |  |  | — |
Other |  |  | 1,867 |  |  |  | 67 |  |  |  | 380 |  |  |  | 2,314 |  |  |  | 803,382 |  |  |  | 805,696 |  |  |  | 15 |
Construction |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 4,146 |  |  |  | 4,146 |  |  |  | — |
Residential property |  |  | 113 |  |  |  | 121 |  |  |  | 486 |  |  |  | 720 |  |  |  | 105,324 |  |  |  | 106,044 |  |  |  | — |
Commercial and industrial loans: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Commercial term |  |  | 1,410 |  |  |  | 587 |  |  |  | 2,873 |  |  |  | 4,870 |  |  |  | 114,305 |  |  |  | 119,175 |  |  |  | — |
Commercial lines of credit |  |  | 274 |  |  |  | 197 |  |  |  | — |  |  |  | 471 |  |  |  | 74,775 |  |  |  | 75,246 |  |  |  | — |
International loans |  |  | 251 |  |  |  | — |  |  |  | — |  |  |  | 251 |  |  |  | 40,876 |  |  |  | 41,127 |  |  |  | — |
Consumer loans |  |  | — |  |  |  | — |  |  |  | 248 |  |  |  | 248 |  |  |  | 28,601 |  |  |  | 28,849 |  |  |  | — |
Total Non-PCI loans |  | $ | 10,675 |  |  | $ | 2,645 |  |  | $ | 5,916 |  |  | $ | 19,236 |  |  | $ | 2,589,699 |  |  | $ | 2,608,935 |  |  | $ | 15 |
|  | As of December 31, 2013 |
|  | 30-59 Days Past Due |  |  | 60-89 Days Past Due |  |  | 90 Days or More Past Due |  |  | Total Past Due |  |  | Current |  |  | Total |  |  | Accruing 90 Days or More Past Due |
|  | (In thousands) |
Real estate loans: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Commercial property |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Retail |  | $ | 202 |  |  | $ | 426 |  |  | $ | 2,196 |  |  | $ | 2,824 |  |  | $ | 540,794 |  |  | $ | 543,618 |  |  | $ | — |
Hotel/Motel |  |  | 1,087 |  |  |  | — |  |  |  | 1,532 |  |  |  | 2,619 |  |  |  | 320,308 |  |  |  | 322,927 |  |  |  | — |
Gas station |  |  | 141 |  |  |  | 410 |  |  |  | 153 |  |  |  | 704 |  |  |  | 291,853 |  |  |  | 292,557 |  |  |  | — |
Other |  |  | 423 |  |  |  | 2,036 |  |  |  | 839 |  |  |  | 3,298 |  |  |  | 728,320 |  |  |  | 731,618 |  |  |  | — |
Residential property |  |  | — |  |  |  | 122 |  |  |  | 279 |  |  |  | 401 |  |  |  | 78,677 |  |  |  | 79,078 |  |  |  | — |
Commercial and industrial loans: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Commercial term |  |  | 1,443 |  |  |  | 886 |  |  |  | 3,269 |  |  |  | 5,598 |  |  |  | 118,793 |  |  |  | 124,391 |  |  |  | — |
Commercial lines of credit |  |  | — |  |  |  | 150 |  |  |  | 250 |  |  |  | 400 |  |  |  | 70,642 |  |  |  | 71,042 |  |  |  | — |
International loans |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 36,353 |  |  |  | 36,353 |  |  |  | — |
Consumer loans |  |  | 311 |  |  |  | 42 |  |  |  | 77 |  |  |  | 430 |  |  |  | 32,075 |  |  |  | 32,505 |  |  |  | — |
Total Non-PCI loans |  | $ | 3,607 |  |  | $ | 4,072 |  |  | $ | 8,595 |  |  | $ | 16,274 |  |  | $ | 2,217,815 |  |  | $ | 2,234,089 |  |  | $ | — |
Impaired Loans Loans are considered impaired when nonaccrual and principal or interest payments have been contractually past due for 90 days or more, unless the loan is both well-collateralized and in the process of collection; or they are classified as Troubled Debt Restructuring (“TDR”) loans to offer terms not typically granted by the Bank; or when current information or events make it unlikely to collect in full according to the contractual terms of the loan agreements; or there is a deterioration in the borrower’s financial condition that raises uncertainty as to timely collection of either principal or interest; or full payment of both interest and principal is in doubt according to the original contractual terms. We evaluate loan impairment in accordance with applicable GAAP. Impaired loans are measured based on the present value of expected future cash flows discounted at the loan’s effective interest rate or, as a practical expedient, at the loan’s observable market price or the fair value of the collateral if the loan is collateral dependent, less costs to sell. If the measure of the impaired loan is less than the recorded investment in the loan, the deficiency will be charged off against the allowance for loan losses or, alternatively, a specific allocation will be established. Additionally, loans that are considered impaired are specifically excluded from the quarterly migration analysis when determining the amount of the allowance for loan losses required for the period. The allowance for collateral-dependent loans is determined by calculating the difference between the outstanding loan balance and the value of the collateral as determined by recent appraisals. The allowance for collateral-dependent loans varies from loan to loan based on the collateral coverage of the loan at the time of designation as nonperforming. We continue to monitor the collateral coverage, using recent appraisals, on these loans on a quarterly basis and adjust the allowance accordingly. The following tables provide information on impaired loans (excluding PCI loans), disaggregated by loan class, as of the dates indicated:
|  | Recorded Investment |  |  | Unpaid Principal Balance |  |  | With No Related Allowance Recorded |  |  | With an Allowance Recorded |  |  | Related Allowance |
|  | (In thousands) |
September 30, 2014 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Real estate loans: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Commercial property |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Retail |  | $ | 4,443 |  |  | $ | 4,543 |  |  | $ | 1,940 |  |  | $ | 2,503 |  |  | $ | 256 |
Hotel/Motel |  |  | 4,042 |  |  |  | 4,855 |  |  |  | 4,042 |  |  |  | — |  |  |  | 1,261 |
Gas station |  |  | 14,152 |  |  |  | 14,681 |  |  |  | 13,692 |  |  |  | 460 |  |  |  | 166 |
Other |  |  | 9,856 |  |  |  | 11,266 |  |  |  | 8,518 |  |  |  | 1,338 |  |  |  | 344 |
Residential property |  |  | 3,161 |  |  |  | 3,292 |  |  |  | 3,161 |  |  |  | — |  |  |  | — |
Commercial and industrial loans: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Commercial term |  |  | 7,958 |  |  |  | 8,408 |  |  |  | 1,914 |  |  |  | 6,044 |  |  |  | 3,469 |
Commercial lines of credit |  |  | 2,874 |  |  |  | 2,976 |  |  |  | 2,692 |  |  |  | 182 |  |  |  | 183 |
International loans |  |  | 1,138 |  |  |  | 1,138 |  |  |  | 460 |  |  |  | 678 |  |  |  | 105 |
Consumer loans |  |  | 1,758 |  |  |  | 1,910 |  |  |  | 1,758 |  |  |  | — |  |  |  | — |
Total Non-PCI loans |  | $ | 49,382 |  |  | $ | 53,069 |  |  | $ | 38,177 |  |  | $ | 11,205 |  |  | $ | 5,784 |
December 31, 2013 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Real estate loans: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Commercial property |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Retail |  | $ | 6,244 |  |  | $ | 6,332 |  |  | $ | 3,767 |  |  | $ | 2,477 |  |  | $ | 305 |
Hotel/Motel |  |  | 6,200 |  |  |  | 6,940 |  |  |  | 4,668 |  |  |  | 1,532 |  |  |  | 1,183 |
Gas station |  |  | 9,389 |  |  |  | 9,884 |  |  |  | 8,592 |  |  |  | 797 |  |  |  | 209 |
Other |  |  | 11,451 |  |  |  | 12,882 |  |  |  | 9,555 |  |  |  | 1,896 |  |  |  | 351 |
Residential property |  |  | 2,678 |  |  |  | 2,773 |  |  |  | 2,678 |  |  |  | — |  |  |  | — |
Commercial and industrial loans: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Commercial term |  |  | 13,834 |  |  |  | 14,308 |  |  |  | 2,929 |  |  |  | 10,905 |  |  |  | 3,806 |
Commercial lines of credit |  |  | 614 |  |  |  | 686 |  |  |  | 173 |  |  |  | 441 |  |  |  | 252 |
International loans |  |  | 1,087 |  |  |  | 1,087 |  |  |  | 286 |  |  |  | 801 |  |  |  | 78 |
Consumer loans |  |  | 1,569 |  |  |  | 1,671 |  |  |  | 644 |  |  |  | 925 |  |  |  | 284 |
Total Non-PCI loans |  | $ | 53,066 |  |  | $ | 56,563 |  |  | $ | 33,292 |  |  | $ | 19,774 |  |  | $ | 6,468 |
|  | Average Recorded Investment for the Three Months Ended |  |  | Interest Income Recognized for the Three Months Ended |  |  | Average Recorded Investment for the Nine Months Ended |  |  | Interest Income Recognized for the Nine Months Ended |
|  | (In thousands) |
September 30, 2014 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Real estate loans: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Commercial property |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Retail |  | $ | 4,456 |  |  | $ | 36 |  |  | $ | 5,682 |  |  | $ | 215 |
Hotel/Motel |  |  | 4,206 |  |  |  | 102 |  |  |  | 4,149 |  |  |  | 232 |
Gas station |  |  | 14,181 |  |  |  | 218 |  |  |  | 12,023 |  |  |  | 587 |
Other |  |  | 9,898 |  |  |  | 232 |  |  |  | 10,716 |  |  |  | 682 |
Residential property |  |  | 3,173 |  |  |  | 30 |  |  |  | 2,853 |  |  |  | 87 |
Commercial and industrial loans: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Commercial term |  |  | 8,118 |  |  |  | 126 |  |  |  | 10,007 |  |  |  | 443 |
Commercial lines of credit |  |  | 2,884 |  |  |  | 36 |  |  |  | 1,447 |  |  |  | 61 |
International loans |  |  | 1,146 |  |  |  | — |  |  |  | 1,136 |  |  |  | — |
Consumer loans |  |  | 1,765 |  |  |  | 16 |  |  |  | 1,619 |  |  |  | 46 |
Total Non-PCI loans |  | $ | 49,827 |  |  | $ | 796 |  |  | $ | 49,632 |  |  | $ | 2,353 |
September 30, 2013 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Real estate loans: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Commercial property |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Retail |  | $ | 2,723 |  |  | $ | 27 |  |  | $ | 3,703 |  |  | $ | 105 |
Hotel/Motel |  |  | 6,377 |  |  |  | 127 |  |  |  | 4,752 |  |  |  | 384 |
Gas station |  |  | 8,777 |  |  |  | 229 |  |  |  | 8,775 |  |  |  | 569 |
Other |  |  | 8,699 |  |  |  | 243 |  |  |  | 9,512 |  |  |  | 779 |
Residential property |  |  | 2,992 |  |  |  | 33 |  |  |  | 3,026 |  |  |  | 92 |
Commercial and industrial loans: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Commercial term |  |  | 10,581 |  |  |  | 191 |  |  |  | 12,751 |  |  |  | 692 |
Commercial lines of credit |  |  | 840 |  |  |  | 23 |  |  |  | 1,137 |  |  |  | 47 |
International loans |  |  | 1,197 |  |  |  | — |  |  |  | 1,342 |  |  |  | — |
Consumer loans |  |  | 1,581 |  |  |  | 27 |  |  |  | 1,624 |  |  |  | 54 |
Total Non-PCI loans |  | $ | 43,767 |  |  | $ | 900 |  |  | $ | 46,622 |  |  | $ | 2,722 |
The following is a summary of interest foregone on impaired loans (excluding PCI loans) for the periods indicated:
|  | Three Months Ended |  |  | Nine Months Ended |
|  | September 30, 2014 |  |  | September 30, 2013 |  |  | September 30, 2014 |  |  | September 30, 2013 |
|  | (In thousands) |
Interest income that would have been recognized had impaired loans performed in accordance with their original terms |  | $ | 1,063 |  |  | $ | 1,058 |  |  | $ | 3,490 |  |  | $ | 3,183 |
Less: Interest income recognized on impaired loans |  |  | (796 | ) |  |  | (900 | ) |  |  | (2,353 | ) |  |  | (2,722 | )
Interest foregone on impaired loans |  | $ | 267 |  |  | $ | 158 |  |  | $ | 1,137 |  |  | $ | 461 |
There were no commitments to lend additional funds to borrowers whose loans are included above. Nonaccrual Loans Loans are placed on nonaccrual status when, in the opinion of management, the full timely collection of principal or interest is in doubt. Generally, the accrual of interest is discontinued when principal or interest payments become more than 90 days past due, unless management believes the loan is adequately collateralized and in the process of collection. However, in certain instances, we may place a particular loan on nonaccrual status earlier, depending upon the individual circumstances surrounding the loan’s delinquency. When a loan is placed on nonaccrual status, previously accrued but unpaid interest is reversed against current income. Subsequent collections of cash are applied as principal reductions when received, except when the ultimate collectability of principal is probable, in which case interest payments are credited to income. Nonaccrual loans may be restored to accrual status when principal and interest payments become current and full repayment is expected. The following table details nonaccrual loans (excluding PCI loans), disaggregated by loan class, as of the dates indicated:
|  | September 30, 2014 |  |  | December 31, 2013 |
|  | (In thousands) |
Real estate loans: |  |  |  |  |  |  |  |
Commercial property |  |  |  |  |  |  |  |
Retail |  | $ | 2,062 |  |  | $ | 2,946 |
Hotel/Motel |  |  | 3,051 |  |  |  | 5,200 |
Gas station |  |  | 5,208 |  |  |  | 2,492 |
Other |  |  | 3,674 |  |  |  | 4,808 |
Residential property |  |  | 1,516 |  |  |  | 1,365 |
Commercial and industrial loans: |  |  |  |  |  |  |  |
Commercial term |  |  | 6,060 |  |  |  | 7,146 |
Commercial lines of credit |  |  | 674 |  |  |  | 423 |
Consumer loans |  |  | 1,758 |  |  |  | 1,497 |
Total nonaccrual Non-PCI loans |  | $ | 24,003 |  |  | $ | 25,877 |
The following table details nonperforming assets (excluding PCI loans) as of the dates indicated:
|  | September 30, 2014 |  |  | December 31, 2013 |
|  | (In thousands) |
Nonaccrual Non-PCI loans |  | $ | 24,003 |  |  | $ | 25,877 |
Loans 90 days or more past due and still accruing |  |  | 15 |  |  |  | — |
Total nonperforming Non-PCI loans |  |  | 24,018 |  |  |  | 25,877 |
Other real estate owned |  |  | 24,781 |  |  |  | 756 |
Total nonperforming assets |  | $ | 48,799 |  |  | $ | 26,633 |
Loans on nonaccrual status, excluding loans held for sale, totaled $24.0 million as of September 30, 2014, compared to $25.9 million as of December 31, 2013, representing a 7.2 percent decrease. Delinquent loans (defined as 30 days or more past due), excluding loans held for sale, were $19.2 million as of September 30, 2014, compared to $16.3 million as of December 31, 2013, representing a 18.2 percent increase. As of September 30, 2014, other real estate owned (“OREO”) consisted of forty properties, of which $20.2 million and $4.6 million were commercial and residential properties, respectively, with a combined carrying value of $24.8 million and no valuation adjustment. Of $24.8 million, $22.3 million was OREOs assumed in the CBI acquisition. As of December 31, 2013, there were three OREOs with a combined carrying value of $756,000 and a valuation adjustment of $56,000. Troubled Debt Restructuring In April 2011, the FASB issued ASU 2011-02, A Creditor’s Determination of Whether a Restructuring is a Troubled Debt Restructuring, which clarifies the guidance for evaluating whether a restructuring constitutes a TDR. This guidance is effective for the first interim or annual period beginning on or after June 15, 2011, and should be applied retrospectively to the beginning of the annual period of adoption. For the purposes of measuring impairment of loans that are newly considered impaired, the guidance should be applied prospectively for the first interim or annual period beginning on or after June 15, 2011. As a result of the amendments in ASU 2011-02, we reassessed all restructurings that occurred on or after the beginning of the annual period and identified certain receivables as TDRs. Upon identifying those receivables as TDRs, we considered them impaired and applied the impairment measurement guidance prospectively for those receivables newly identified as impaired. The following table details troubled debt restructurings (excluding PCI loans), disaggregated by concession type and by loan type, as of September 30, 2014 and December 31, 2013:
|  | Nonaccrual TDRs |  |  | Accrual TDRs |
|  | Deferral of Principal |  |  | Deferral of Principal and Interest |  |  | Reduction of Principal and Interest |  |  | Extension of Maturity |  |  | Total |  |  | Deferral of Principal |  |  | Deferral of Principal and Interest |  |  | Reduction of Principal and Interest |  |  | Extension of Maturity |  |  | Total |
|  | (In thousands) |
September 30, 2014 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Real estate loans: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Commercial property |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Retail |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | 1,856 |  |  | $ | 1,856 |  |  | $ | 307 |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | 307 |
Hotel/Motel |  |  | 1,158 |  |  |  | 727 |  |  |  | — |  |  |  | — |  |  |  | 1,885 |  |  |  | 991 |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 991 |
Gas station |  |  | 1,106 |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 1,106 |  |  |  | 2,351 |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 2,351 |
Other |  |  | — |  |  |  | 1,532 |  |  |  | 465 |  |  |  | 59 |  |  |  | 2,056 |  |  |  | 3,310 |  |  |  | — |  |  |  | 792 |  |  |  | 1,378 |  |  |  | 5,480 |
Residential property |  |  | 755 |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 755 |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 311 |  |  |  | 311 |
Commercial and industrial loans: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Commercial term |  |  | 118 |  |  |  | 2 |  |  |  | 1,007 |  |  |  | 1,567 |  |  |  | 2,694 |  |  |  | 61 |  |  |  | 227 |  |  |  | 2,118 |  |  |  | 1,176 |  |  |  | 3,582 |
Commercial lines of credit |  |  | 230 |  |  |  | — |  |  |  | 316 |  |  |  | 128 |  |  |  | 674 |  |  |  | 2,200 |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 2,200 |
Consumer loans |  |  | — |  |  |  | — |  |  |  | 135 |  |  |  | — |  |  |  | 135 |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |
Total Non-PCI loans |  | $ | 3,367 |  |  | $ | 2,261 |  |  | $ | 1,923 |  |  | $ | 3,610 |  |  | $ | 11,161 |  |  | $ | 9,220 |  |  | $ | 227 |  |  | $ | 2,910 |  |  | $ | 2,865 |  |  | $ | 15,222 |
December 31, 2013 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Real estate loans: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Commercial property |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Retail |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | 750 |  |  | $ | 750 |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | 474 |  |  | $ | 474 |
Hotel/Motel |  |  | 1,272 |  |  |  | 758 |  |  |  | — |  |  |  | — |  |  |  | 2,030 |  |  |  | 1,000 |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 1,000 |
Gas station |  |  | 1,291 |  |  |  | — |  |  |  | 729 |  |  |  | — |  |  |  | 2,020 |  |  |  | 365 |  |  |  | — |  |  |  | — |  |  |  | 2,609 |  |  |  | 2,974 |
Other |  |  | 403 |  |  |  | 1,279 |  |  |  | 555 |  |  |  | — |  |  |  | 2,237 |  |  |  | 2,956 |  |  |  | — |  |  |  | 1,253 |  |  |  | 2,027 |  |  |  | 6,236 |
Residential property |  |  | 795 |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 795 |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |
Commercial and industrial loans: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Commercial term |  |  | 25 |  |  |  | 206 |  |  |  | 1,449 |  |  |  | 851 |  |  |  | 2,531 |  |  |  | 1,203 |  |  |  | — |  |  |  | 2,286 |  |  |  | 3,817 |  |  |  | 7,306 |
Commercial lines of credit |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 173 |  |  |  | 173 |  |  |  | — |  |  |  | — |  |  |  | 191 |  |  |  | — |  |  |  | 191 |
International loans |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 1,087 |  |  |  | — |  |  |  | 1,087 |
Consumer loans |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 149 |  |  |  | — |  |  |  | 149 |
Total Non-PCI loans |  | $ | 3,786 |  |  | $ | 2,243 |  |  | $ | 2,733 |  |  | $ | 1,774 |  |  | $ | 10,536 |  |  | $ | 5,524 |  |  | $ | — |  |  | $ | 4,966 |  |  | $ | 8,927 |  |  | $ | 19,417 |
As of September 30, 2014 and December 31, 2013, total TDRs, excluding loans held for sale, were $26.4 million and $30.0 million, respectively. A debt restructuring is considered a TDR if we grant a concession that we would not have otherwise considered to the borrower, for economic or legal reasons related to the borrower’s financial difficulties. Loans are considered to be TDRs if they were restructured through payment structure modifications such as reducing the amount of principal and interest due monthly and/or allowing for interest only monthly payments for six months or less. All TDRs are impaired and are individually evaluated for specific impairment using one of these three criteria: (1) the present value of expected 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. At September 30, 2014 and December 31, 2013, TDRs, excluding loans held for sale, were subjected to specific impairment analysis, and $3.7 million and $2.8 million, respectively, of reserves relating to these loans were included in the allowance for loan losses. The following table details troubled debt restructurings (excluding PCI loans), disaggregated by loan class, for the three months ended September 30, 2014 and 2013:
|  | September 30, 2014 |  |  | September 30, 2013 |
|  | Number of Loans |  |  | Pre- Modification Outstanding Recorded Investment |  |  | Post- Modification Outstanding Recorded Investment |  |  | Number of Loans |  |  | Pre- Modification Outstanding Recorded Investment |  |  | Post- Modification Outstanding Recorded Investment |
|  | (In thousands, except number of loans) |
Real estate loans: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Commercial property |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Hotel/Motel (1) |  |  | — |  |  | $ | — |  |  | $ | — |  |  |  | 1 |  |  | $ | 1,000 |  |  | $ | 1,000 |
Gas station (2) |  |  | 1 |  |  |  | 2,014 |  |  |  | 1,991 |  |  |  | 1 |  |  |  | 107 |  |  |  | 91 |
Other (3) |  |  | 1 |  |  |  | 395 |  |  |  | 385 |  |  |  | 2 |  |  |  | 1,011 |  |  |  | 1,014 |
Commercial and industrial loans: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Commercial term (4) |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 8 |  |  |  | 1,015 |  |  |  | 1,002 |
Commercial lines of credit (5) |  |  | 1 |  |  |  | 2,092 |  |  |  | 2,200 |  |  |  | — |  |  |  | — |  |  |  | — |
Total Non-PCI loans |  |  | 3 |  |  | $ | 4,501 |  |  | $ | 4,576 |  |  |  | 12 |  |  | $ | 3,133 |  |  | $ | 3,107 |
(1) | Includes a modification of $1.0 million through a payment deferral for the three months ended September 30, 2013.
(2) | Includes a modification of $2.0 million through a payment deferral for the three months ended September 30, 2014, and a modification of $91,000 through a payment deferral for the three months ended September 30, 2013.
(3) | Includes a modification of $385,000 through a payment deferral for the three months ended September 30, 2014, and modifications of $365,000 through a payment deferral and reduction of principal or accrued interest and $649,000 through an extension of maturity for the three months ended September 30, 2013.
(4) | Includes modifications of $381,000 through payment deferrals and $621,000 through extensions of maturity for the three months ended September 30, 2013.
(5) | Includes a modification of $2.2 million through a payment deferral for the three months ended September 30, 2014.
During the three months ended September 30, 2014, we restructured monthly payments on three loans, with a net carrying value of $4.6 million as of September 30, 2014, through temporary payment structure modifications or re-amortization. For the restructured loans on accrual status, we determined that, based on the financial capabilities of the borrowers at the time of the loan restructuring and the borrowers’ past performance in the payment of debt service under the previous loan terms, performance and collection under the revised terms are probable. The following table details troubled debt restructurings (excluding PCI loans), disaggregated by loan class, for the nine months ended September 30, 2014 and 2013:
|  | September 30, 2014 |  |  | September 30, 2013 |
|  | Number of Loans |  |  | Pre- Modification Outstanding Recorded Investment |  |  | Post- Modification Outstanding Recorded Investment |  |  | Number of Loans |  |  | Pre- Modification Outstanding Recorded Investment |  |  | Post- Modification Outstanding Recorded Investment |
|  | (In thousands, except number of loans) |
Real estate loans: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Commercial property |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Retail (1) |  |  | 1 |  |  | $ | 2,002 |  |  | $ | 1,856 |  |  |  | — |  |  | $ | — |  |  | $ | — |
Hotel/Motel (2) |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 1 |  |  |  | 1,000 |  |  |  | 1,000 |
Gas station (3) |  |  | 1 |  |  |  | 2,040 |  |  |  | 1,991 |  |  |  | 1 |  |  |  | 113 |  |  |  | 91 |
Other (4) |  |  | 3 |  |  |  | 1,422 |  |  |  | 1,386 |  |  |  | 3 |  |  |  | 1,176 |  |  |  | 1,144 |
Residential property (5) |  |  | 1 |  |  |  | 317 |  |  |  | 311 |  |  |  | — |  |  |  | — |  |  |  | — |
Commercial and industrial loans: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Commercial term (6) |  |  | 5 |  |  |  | 327 |  |  |  | 263 |  |  |  | 15 |  |  |  | 1,787 |  |  |  | 1,625 |
Commercial lines of credit (7) |  |  | 3 |  |  |  | 2,366 |  |  |  | 2,563 |  |  |  | — |  |  |  | — |  |  |  | — |
International loans (8) |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 2 |  |  |  | 1,584 |  |  |  | 1,180 |
Consumer loans (9) |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 1 |  |  |  | 149 |  |  |  | 149 |
Total Non-PCI loans |  |  | 14 |  |  | $ | 8,474 |  |  | $ | 8,370 |  |  |  | 23 |  |  | $ | 5,809 |  |  | $ | 5,189 |
(1) | Includes a modification of $1.9 million through an extension of maturity for the nine months ended September 30, 2014.
(2) | Includes a modification of $1.0 million through an extension of maturity for the nine months ended September 30, 2013.
(3) | Includes a modification of $2.0 million through a payment deferral for the nine months ended September 30, 2014, and a modification of $91,000 a payment deferral for the nine months ended September 30, 2013.
(4) | Includes modifications of $1.3 million through payment deferrals and $59,000 through an extension of maturity for the nine months ended September 30, 2014, and modifications of $356,000 through a payment deferral, $130,000 through a reduction of principal or accrued interests and $649,000 through an extension of maturity for the nine months ended September 30, 2013.
(5) | Includes a modification of $311,000 through an extension of maturity for the nine months ended September 30, 2014.
(6) | Includes modifications of $39,000 through a payment deferral, $51,000 through reductions of principal or accrued interest and $173,000 through an extension of maturity for the nine months ended September 30, 2014, and modifications of $388,000 through payment deferrals and $1.2 million through extensions of maturity for the nine months ended September 30, 2013.
(7) | Includes modifications of $2.4 million through payment deferrals and $134,000 through a reduction of principal or accrued interest for the nine months ended September 30, 2014.
(8) | Includes modifications of $1.2 million through reductions of principal or accrued interest for the nine months ended September 30, 2013.
(9) | Includes a modification of $149,000 through a reduction of principal or accrued interest for the nine months ended September 30, 2013.
During the nine months ended September 30, 2014, we restructured monthly payments on 14 loans, with a net carrying value of $8.4 million as of September 30, 2014, through temporary payment structure modifications or re-amortization. For the restructured loans on accrual status, we determined that, based on the financial capabilities of the borrowers at the time of the loan restructuring and the borrowers’ past performance in the payment of debt service under the previous loan terms, performance and collection under the revised terms are probable. The following table details troubled debt restructurings, excluding PCI loans, that defaulted subsequent to the modifications occurring within the previous twelve months, disaggregated by loan class, for the three and nine months ended September 30, 2014 and 2013, respectively:
|  | Three Months Ended |  |  | Nine Months Ended |
|  | September 30, 2014 |  |  | September 30, 2013 |  |  | September 30, 2014 |  |  | September 30, 2013 |
|  | Number of Loans |  |  | Recorded Investment |  |  | Number of Loans |  |  | Recorded Investment |  |  | Number of Loans |  |  | Recorded Investment |  |  | Number of Loans |  |  | Recorded Investment |
|  | (In thousands, except number of loans) |
Real estate loans: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Commercial property |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Retail |  |  | 1 |  |  | $ | 1,856 |  |  |  | — |  |  | $ | — |  |  |  | 1 |  |  | $ | 1,856 |  |  |  | — |  |  | $ | — |
Other |  |  | — |  |  |  | — |  |  |  | 1 |  |  |  | 130 |  |  |  | — |  |  |  | — |  |  |  | 1 |  |  |  | 130 |
Commercial and industrial loans: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Commercial term |  |  | 2 |  |  |  | 47 |  |  |  | — |  |  |  | — |  |  |  | 2 |  |  |  | 47 |  |  |  | 1 |  |  |  | 29 |
Commercial lines of credit |  |  | 2 |  |  |  | 412 |  |  |  | — |  |  |  | — |  |  |  | 3 |  |  |  | 546 |  |  |  | — |  |  |  | — |
Total Non-PCI loans |  |  | 5 |  |  | $ | 2,315 |  |  |  | 1 |  |  | $ | 130 |  |  |  | 6 |  |  | $ | 2,449 |  |  |  | 2 |  |  | $ | 159 |
Purchased Credit Impaired Loans As part of the CBI acquisition during the third quarter ended September 30, 2014, the Company purchased loans for which there was, at acquisition, evidence of deterioration of credit quality subsequent to origination and it was probable, at acquisition, that all contractually required payments would not be collected. The following table presents the outstanding balance and carrying amount of those PCI loans as of the dates indicated:
|  | Carrying Amount |  |  | Accretable Yield |
|  | (In thousands) |
Balance at January 1, 2014 |  | $ | — |  |  | $ | — |
Additions from CBI acquisition at August 31, 2014 |  |  | 75,878 |  |  |  | (22,858 | )
Accretion |  |  | 491 |  |  |  | 491 |
Payment received |  |  | (5,892 | ) |  |  | — |
Disposals/transfers to OREO |  |  | (3,453 | ) |  |  | 212 |
Balance at September 30, 2014 |  | $ | 67,024 |  |  | $ | (22,155 | )
As of September 30, 2014, pass/pass-watch (grade 0-4), criticized (grade 5) and classified (grade 6-7) PCI loans, disaggregated by loan class, were as follows:
|  | As of September 30, 2014 |
|  | Pass/Pass-Watch (Grade 0-4) |  |  | Criticized (Grade 5) |  |  | Classified (Grade 6-7) |  |  | Total |
Real estate loans: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Commercial property |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Retail |  | $ | 2,939 |  |  | $ | 215 |  |  | $ | 12,786 |  |  | $ | 15,940 |
Hotel/Motel |  |  | 248 |  |  |  | — |  |  |  | 13,958 |  |  |  | 14,206 |
Gas station |  |  | 10,200 |  |  |  | 1,205 |  |  |  | 6,664 |  |  |  | 18,069 |
Other |  |  | 2,154 |  |  |  | — |  |  |  | 13,561 |  |  |  | 15,715 |
Residential property |  |  | — |  |  |  | — |  |  |  | 2,686 |  |  |  | 2,686 |
Commercial and industrial loans: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Commercial term |  |  | — |  |  |  | — |  |  |  | 350 |  |  |  | 350 |
Consumer loans |  |  | — |  |  |  | — |  |  |  | 58 |  |  |  | 58 |
Total PCI loans |  | $ | 15,541 |  |  | $ | 1,420 |  |  | $ | 50,063 |  |  | $ | 67,024 |
Servicing Assets The changes in servicing assets for the nine months ended September 30, 2014 and 2013 were as follows:
|  | Nine Months Ended September 30, |
|  | 2014 |  |  | 2013 |
|  | (In thousands) |
Balance at beginning of period |  | $ | 6,833 |  |  | $ | 5,542 |
Additions from CBI acquisition |  |  | 1,458 |  |  |  | — |
Addition related to sale of SBA loans |  |  | 871 |  |  |  | 1,996 |
Amortization |  |  | (1,318 | ) |  |  | (1,152 | )
Balance at end of period |  | $ | 7,844 |  |  | $ | 6,386 |
At September 30, 2014 and 2013, we serviced loans sold to unaffiliated parties in the amounts of $341.6 million and $330.4 million, respectively. These represented loans that have been sold for which the Bank continues to provide servicing. These loans are maintained off balance sheet and are not included in the loans receivable balance. All of the loans being serviced were SBA loans. FDIC Loss Sharing Asset The FDIC loss sharing asset related to the assumption of Single Family and Commercial Shared-Loss Agreement (“SLAs”) between CBI and the FDIC arising from the CBI’s acquisition of Mutual Bank. The loss sharing asset was measured at its fair value as of August 31, 2014 in conjunction with the CBI acquisition. There is a three-year recovery period which begins at the expiration of the Commercial SLA. During this period, 80% of any recoveries of previously charged-off and reimbursed Commercial SLA loans need to be reimbursed to the FDIC. As of September 30, 2014, the FDIC loss sharing asset was related to $7.7 million net receivable from the FDIC. Single-family loans under the Single family SLA as of September 30, 2014 were $3.7 million.

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