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Table of Contents

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q
(Mark One)
☒QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended SeptemberJune 30, 20192020
or
☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from             to             
Commission file number 001-35522
BANC OF CALIFORNIA, INC.
(Exact name of registrant as specified in its charter)
Maryland
(State or other jurisdiction of
incorporation or organization)
04-3639825
(IRS Employer Identification No.)
3 MacArthur Place,, Santa Ana,, California
(Address of principal executive offices)
92707
(Zip Code)
(855) (855) 361-2262
(Registrant’s telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  ☒    No  ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (Section 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes  ☒    No  ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer☒Accelerated filer☐
Large acceleratedNon-accelerated filer☒
☐
Accelerated filerSmaller reporting company☐
Non-accelerated filer
☐
Smaller reporting company☐
Emerging growth company☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act.)  Yes ☐ No ☒


Table of Contents
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common Stock, par value $0.01 per shareBANCNew York Stock Exchange
Depositary Shares each representing a 1/40th interest in a share of 7.375% Non-Cumulative Perpetual Preferred Stock, Series DBANC PRDNew York Stock Exchange
Depositary Shares each representing a 1/40th interest in a share of 7.00% Non-Cumulative Perpetual Preferred Stock, Series EBANC PRENew York Stock Exchange
Indicate the number of shares outstanding of each of the issuer’s classes of common stock as of the latest practicable date.
As of November 5, 2019,August 3, 2020, the registrant had outstanding 50,406,68349,754,330 shares of voting common stock and 477,321 shares of Class B non-voting common stock.


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BANC OF CALIFORNIA, INC.
FORM 10-Q QUARTERLY REPORT
SeptemberJune 30, 20192020
Table of Contents
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Forward-Looking Statements
When used in this report and in public stockholder communications, in other documents of Banc of California, Inc. (the Company, we, us and our) filed with or furnished to the Securities and Exchange Commission (the SEC), or in oral statements made with the approval of an authorized executive officer, the words or phrases “believe,” “will,” “should,” “will likely result,” “are expected to,” “will continue,” “is anticipated,” “estimate,” “project,” “plans,” “guidance” or similar expressions are intended to identify “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. You are cautioned not to place undue reliance on any forward-looking statements, which speak only as of the date made. These statements may relate to our future financial performance, strategic plans or objectives, revenue, expense or earnings projections, or other financial items of Banc of California Inc. and its affiliates (the "Company", "we", "us" or "our")., as well as the continuing effects of the COVID-19 pandemic on the Company’s business, operations, financial performance and prospects. By their nature, these statements are subject to numerous uncertainties that could cause actual results to differ materially from those anticipated in the statements.
Factors that could cause actual results to differ materially from the results anticipated or projected include, but are not limited to, the following:
i.an ongoing investigation by the SEC as well as any related litigation or other litigation may result in adverse findings, reputational damage, the imposition of sanctions, increased costs, the diversion of management time and resources, and other negative consequences;
ii.the costs and effects of litigation generally, including legal fees and other expenses, settlements and judgments;
iii.the risk that our performance may be adversely affected by the CEO transition we have recently undergone;
iv.the risk that the benefits we realize from exiting the third party mortgage origination and brokered single-family residential lending business will be less than anticipated and that the costs we incur from exiting that business will be greater than anticipated;
v.the risk that we will not be successful in the implementation of our capital utilization strategy and our other strategies for transitioning to a traditional community bank;
vi.
i.the costs and effects of litigation, including legal fees and other expenses, settlements and judgments;
ii.the effect of the novel coronavirus (COVID-19) pandemic and steps taken by governmental and other authorities to contain, mitigate, and combat the pandemic on our business, operations, loan portfolio, financial performance, and prospects;
iii.the risk that the benefits we realize from exiting the third party mortgage origination and brokered single family residential lending business will be less than anticipated and that the costs we incur from exiting that business will be greater than anticipated;
iv.the risk that we will not be successful in the implementation of our capital utilization strategy and our other strategies for transitioning to a traditional community bank;
v.our ability to obtain regulatory approvals or non-objection to take various capital actions, including the payment of dividends by us or our bank subsidiary or repurchases of our common or preferred stock;
vi.risks that any merger and acquisition transactions of the Company may disrupt current plans and operations and lead to difficulties in customer and employee retention, risks that the costs, fees, expenses and charges related to these transactions could be significantly higher than anticipated and risks that the expected revenues, cost savings, synergies and other benefits of these transactions might not be realized to the extent anticipated, within the anticipated timetables, or at all;
vii.the credit risks of lending activities, which may be affected by deterioration in real estate markets and the financial condition of borrowers, and the operational risk of lending activities, including but not limited to the effectiveness of our underwriting practices and the risk of fraud, any of which credit and operational risks may lead to increased loan and lease delinquencies, losses and nonperforming assets in our loan and lease portfolio, and may result in our allowance for loan losses not being adequate to cover actual losses and require us to materially increase our loan and lease loss reserves;
viii.the transition to a new accounting standard adopted by the Financial Accounting Standards Board, referred to as Current Expected Credit Loss, which will require financial institutions to determine periodic estimates of lifetime expected credit losses on loans, and provide for the expected credit losses as allowances for loan losses;
ix.the quality and composition of our securities portfolio;
x.changes in general economic conditions, either nationally or in our market areas, or changes in financial markets;
xi.continuation of or changes in the short-term interest rate environment, changes in the levels of general interest rates, volatility in the interest rate environment, the relative differences between short- and long-term interest rates, deposit interest rates, our net interest margin and funding sources;
xii.fluctuations in the demand for loans, the number of unsold homes and other properties and fluctuations in commercial and residential real estate values in our market area;
xiii.our ability to develop and maintain a strong core deposit base or other low cost funding sources necessary to fund our activities;
xiv.results of examinations of us by regulatory authorities and the possibility that any such regulatory authority may, among other things, limit our business activities, require us to change our business mix, increase our allowance for loan losses, write-down asset values, or increase our capital levels, or affect our ability to borrow funds or maintain or increase deposits, any of which could adversely affect our liquidity and earnings;
xv.legislative or regulatory changes that adversely affect our business, including, without limitation, changes in tax laws and policies and changes in regulatory capital or other rules, and the availability of resources to address or respond to such changes;
xvi.our ability to control operating costs and expenses;
xvii.staffing fluctuations in response to product demand or the implementation of corporate strategies that affect our work force and potential associated charges;
xviii.the risk that our enterprise risk management framework may not be effective in mitigating risk and reducing the potential for losses;
xix.errors in estimates of the fair values of certain of our assets and liabilities, which may result in significant changes in valuation;
xx.the network and computer systems on which we depend could fail or experience a security breach;
xxi.our ability to attract and retain key members of our senior management team;
xxii.increased competitive pressures among financial services companies;
xxiii.changes in consumer spending, borrowing and saving habits;
xxiv.the effects of severe weather, natural disasters, acts of war or terrorism and other external events on our business;
xxv.the ability of key third-party providers to perform their obligations to us;
xxvi.changes in accounting policies and practices, as may be adopted by the financial institution regulatory agencies or the Financial Accounting Standards Board or their application to our business, including additional guidance and interpretation on accounting issues and details of the implementation of new accounting methods;
xxvii.share price volatility and reputational risks, related to, among other things, speculative trading and certain traders shorting our common shares and attempting to generate negative publicity about us; and
xxviii.other economic, competitive, governmental, regulatory, and technological factors affecting our operations, pricing, products and services and the other risks described in this report and from time to time in other documents that we file with or furnish to the SEC, including, without limitation, the risks described under “Part I. Item 1A. Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2018 and under “Part II. Item 1A. Risk Factors” of this Quarterly Report on Form 10-Q.
The Company undertakesmay disrupt current plans and operations and lead to difficulties in customer and employee retention, risks that the costs, fees, expenses and charges related to these transactions could be significantly higher than anticipated and risks that the expected revenues, cost savings, synergies, and other benefits of these transactions might not be realized to the extent anticipated, within the anticipated timetables, or at all;
vii.fluctuations in the demand for loans and fluctuations in commercial and residential real estate values in our market area;
viii.the credit risks of lending activities, which may be affected by deterioration in real estate markets, the financial condition of borrowers, and the operational risk of lending activities, including but not limited to, the effectiveness of our underwriting practices and the risk of fraud; any of which may lead to increased loan delinquencies, losses, and non-performing assets in our loan portfolio which may result in our allowance for credit losses not being adequate and require us to materially increase our credit loss reserves;
ix.the Financial Accounting Standards Board's Current Expected Credit Loss accounting standard, which requires financial institutions to determine periodic estimates of lifetime expected credit losses on loans, and provide for the expected credit losses as allowances for loan losses;
x.the quality and composition of our securities portfolio, particularly the credit risks within our collateralized loan obligation investment portfolio and other asset classes;
xi.errors in estimates of the fair values of certain of our assets and liabilities, which may result in significant changes in valuation;
xii.changes in general economic conditions, either nationally or in our market areas, or changes in financial markets;
xiii.continuation of, or changes in, the short-term interest rate environment, changes in the levels of general interest rates, volatility in the interest rate environment, the relative differences between short- and long-term interest rates, deposit interest rates, our net interest margin, and funding sources;
xiv.our ability to develop and maintain a strong core deposit base or other low cost funding sources necessary to fund our activities;
xv.results of examinations of us by regulatory authorities and the possibility that any such regulatory authority may, among other things, limit our business activities, require us to change our business mix, increase our allowance for credit losses, write-down asset values, increase our capital levels, or affect our ability to borrow funds or maintain or increase deposits, any of which could adversely affect our liquidity and earnings;
xvi.legislative or regulatory changes that adversely affect our business, including, without limitation, changes in tax laws and policies and changes in regulatory capital or other rules, and the availability of resources to address or respond to such changes;
xvii.our ability to control operating costs and expenses;
xviii.staffing fluctuations in response to product demand or the implementation of corporate strategies that affect our work force and potential associated charges;
xix.the risk that our enterprise risk management framework may not be effective in mitigating risk and reducing the potential for losses;
xx.failures or security breaches with respect to the network and computer systems on which we depend;
xxi.our ability to attract and retain key members of our senior management team;
xxii.increased competitive pressures among financial services companies;
xxiii.changes in consumer spending, borrowing and saving habits;
xxiv.the effects of severe weather, natural disasters, pandemics, acts of war or terrorism and other external events on our business;
xxv.the ability of key third-party providers to perform their obligations to us;
xxvi.changes in accounting policies and practices, as may be adopted by the financial institution regulatory agencies or the Financial Accounting Standards Board or their application to our business, including additional guidance and interpretation on accounting issues and details of the implementation of new accounting methods;
xxvii.share price volatility and reputational risks, related to, among other things, speculative trading and certain traders shorting our common shares and attempting to generate negative publicity about us; and
xxviii.other economic, competitive, governmental, regulatory, and technological factors affecting our operations, pricing, products and services and the other risks described in this report and from time to time in other documents that we file with or furnish to the SEC, including, without limitation, the risks described under Part I. Item 1A. “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2019 and under Part II. Item 1A. “Risk Factors” of our Quarterly Report on Form 10-Q for the quarter ended March 31, 2020.

Further, statements about the continuing effects of the COVID-19 pandemic on our business, operations, financial performance, and prospects may constitute forward-looking statements and are subject to the risk that the actual effects may differ, possibly materially, from what is reflected in those forward-looking statements due to factors and future developments that are uncertain, unpredictable, and in many cases beyond our control, including the scope and duration of the pandemic, actions taken by governmental authorities in response to the pandemic, and the direct and indirect impact of the pandemic on our clients, third parties, and us.
We undertake no obligation to update any such statement to reflect circumstances or events that occur after the date, on which the forward-looking statement is made, except as required by law.

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Table of Contents
PART I – FINANCIAL INFORMATION
ITEM 1 – FINANCIAL STATEMENTS
BANC OF CALIFORNIA, INC.
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(Amounts in thousands, except share and per share data)
(Unaudited)
September 30,
2019		 December 31,
2018		June 30,
2020		December 31,
2019
ASSETS   ASSETS
Cash and due from banks$22,760
 $21,875
Cash and due from banks$23,394  $28,890  
Interest-earning deposits in financial institutions504,114
 369,717
Interest-earning deposits in financial institutions397,246  344,582  
Total cash and cash equivalents526,874
 391,592
Total cash and cash equivalents420,640  373,472  
Securities available-for-sale, at fair value775,662
 1,992,500
Securities available-for-sale, at fair value1,176,029  912,580  
Loans held-for-sale, carried at fair value23,936
 7,690
Loans held-for-sale, carried at fair value19,768  22,642  
Loans held-for-sale, carried at lower of cost or fair value—
 426
Loans receivable6,383,259
 7,700,873
Loans receivable5,627,696  5,951,885  
Allowance for loan losses(62,927) (62,192)
Allowance for credit losses - loansAllowance for credit losses - loans(90,370) (57,649) 
Loans receivable, net6,320,332
 7,638,681
Loans receivable, net5,537,326  5,894,236  
Federal Home Loan Bank and other bank stock, at cost71,679
 68,094
Federal Home Loan Bank and other bank stock, at cost46,585  59,420  
Premises, equipment, and capital leases, net128,979
 129,394
Premises, equipment, netPremises, equipment, net125,247  128,021  
Bank owned life insurance108,720
 107,027
Bank owned life insurance110,487  109,819  
Operating lease right of use assets23,907
 —
Goodwill37,144
 37,144
Operating lease right-of-use assetsOperating lease right-of-use assets19,408  22,540  
Investments in alternative energy partnerships, net27,039
 28,988
Investments in alternative energy partnerships, net26,967  29,300  
Deferred income taxes, net45,950
 49,404
Deferred income taxes, net48,288  44,906  
Income tax receivable4,459
 2,695
Income tax receivable13,094  4,233  
GoodwillGoodwill37,144  37,144  
Other intangible assets, net4,605
 6,346
Other intangible assets, net3,292  4,151  
Receivable on unsettled securities sales334,769
 —
Other assets191,282
 150,596
Other assets185,863  185,946  
Assets of discontinued operations—
 19,490
Total assets$8,625,337
 $10,630,067
Total assets$7,770,138  $7,828,410  
LIABILITIES AND STOCKHOLDERS’ EQUITY   LIABILITIES AND STOCKHOLDERS’ EQUITY
Noninterest-bearing deposits$1,107,442
 $1,023,360
Noninterest-bearing deposits$1,391,504  $1,088,516  
Interest-bearing deposits4,662,616
 6,893,284
Interest-bearing deposits4,645,961  4,338,651  
Total deposits5,770,058
 7,916,644
Total deposits6,037,465  5,427,167  
Advances from Federal Home Loan Bank1,650,000
 1,520,000
Long term debt, net173,339
 173,174
Federal Home Loan Bank advances, netFederal Home Loan Bank advances, net617,170  1,195,000  
Long-term debt, netLong-term debt, net173,537  173,421  
Reserve for loss on repurchased loansReserve for loss on repurchased loans5,567  6,201  
Operating lease liabilities25,210
 —
Operating lease liabilities20,531  23,692  
Accrued expenses and other liabilities105,742
 74,715
Accrued expenses and other liabilities68,909  95,684  
Total liabilities7,724,349
 9,684,533
Total liabilities6,923,179  6,921,165  
Commitments and contingent liabilities

 

Commitments and contingent liabilities
Preferred stock189,825
 231,128
Preferred stock185,037  189,825  
Common stock, $0.01 par value per share, 446,863,844 shares authorized; 51,990,143 shares issued and 50,406,763 shares outstanding at September 30, 2019; 51,755,398 shares issued and 50,172,018 shares outstanding at December 31, 2018520
 518
Class B non-voting non-convertible common stock, $0.01 par value per share, 3,136,156 shares authorized; 477,321 shares issued and outstanding at September 30, 2019 and 477,321 shares issued and outstanding at December 31, 20185
 5
Common stock, $0.01 par value per share, 446,863,844 shares authorized; 52,161,922 shares issued and 49,750,958 shares outstanding at June 30, 2020; 51,997,061 shares issued and 50,413,681 shares outstanding at December 31, 2019Common stock, $0.01 par value per share, 446,863,844 shares authorized; 52,161,922 shares issued and 49,750,958 shares outstanding at June 30, 2020; 51,997,061 shares issued and 50,413,681 shares outstanding at December 31, 2019522  520  
Class B non-voting non-convertible common stock, $0.01 par value per share, 3,136,156 shares authorized; 477,321 shares issued and outstanding at June 30, 2020 and at December 31, 2019Class B non-voting non-convertible common stock, $0.01 par value per share, 3,136,156 shares authorized; 477,321 shares issued and outstanding at June 30, 2020 and at December 31, 20195  5  
Additional paid-in capital628,774
 625,834
Additional paid-in capital632,117  629,848  
Retained earnings120,221
 140,952
Retained earnings85,670  127,733  
Treasury stock, at cost (1,583,380 shares at September 30, 2019 and December 31, 2018)(28,786) (28,786)
Treasury stock, at cost (2,410,964 and 1,583,380 shares at June 30, 2020 and December 31, 2019)Treasury stock, at cost (2,410,964 and 1,583,380 shares at June 30, 2020 and December 31, 2019)(40,827) (28,786) 
Accumulated other comprehensive loss, net(9,571) (24,117)Accumulated other comprehensive loss, net(15,565) (11,900) 
Total stockholders’ equity900,988
 945,534
Total stockholders’ equity846,959  907,245  
Total liabilities and stockholders’ equity$8,625,337
 $10,630,067
Total liabilities and stockholders’ equity$7,770,138  $7,828,410  
See Accompanying Notesaccompanying notes to Consolidated Financial Statements (Unaudited)consolidated financial statements (unaudited)

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BANC OF CALIFORNIA, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Amounts in thousands, except per share data)
(Unaudited)
Three Months Ended Nine Months Ended September 30,Three Months EndedSix Months Ended
June 30,
September 30,
2019		 June 30,
2019		 September 30,
2018		 2019 2018June 30,
2020		March 31,
2020		June 30,
2019		20202019
Interest and dividend income         Interest and dividend income
Loans, including fees$80,287
 $89,159
 $84,795
 $260,004
 $241,014
Loans, including fees$63,642  $65,534  $89,159  $129,176  $179,717  
Securities10,024
 12,457
 20,599
 40,322
 63,685
Securities7,816  7,820  12,457  15,636  30,298  
Other interest-earning assets2,346
 2,424
 2,380
 7,083
 6,967
Other interest-earning assets1,239  1,360  2,424  2,599  4,737  
Total interest and dividend income92,657
 104,040
 107,774
 307,409
 311,666
Total interest and dividend income72,697  74,714  104,040  147,411  214,752  
Interest expense         Interest expense
Deposits22,811
 28,598
 25,154
 82,852
 62,264
Deposits10,205  14,611  28,598  24,816  60,041  
Federal Home Loan Bank advances8,519
 8,289
 8,996
 25,889
 25,927
Federal Home Loan Bank advances4,818  5,883  8,289  10,701  17,370  
Securities sold under repurchase agreements13
 16
 47
 47
 1,008
Securities sold under repurchase agreements2  —  16  2  34  
Long term debt and other interest-bearing liabilities2,399
 2,357
 2,385
 7,118
 7,073
Long-term debt and other interest-bearing liabilitiesLong-term debt and other interest-bearing liabilities2,357  2,359  2,357  4,716  4,719  
Total interest expense33,742
 39,260
 36,582
 115,906
 96,272
Total interest expense17,382  22,853  39,260  40,235  82,164  
Net interest income58,915
 64,780
 71,192
 191,503
 215,394
Net interest income55,315  51,861  64,780  107,176  132,588  
Provision for (reversal of) loan losses38,540
 (1,987) 1,410
 39,065
 23,562
Net interest income after provision for loan losses20,375
 66,767
 69,782
 152,438
 191,832
Provision for (reversal of) credit lossesProvision for (reversal of) credit losses11,826  15,761  (1,900) 27,587  198  
Net interest income after provision for (reversal of) credit lossesNet interest income after provision for (reversal of) credit losses43,489  36,100  66,680  79,589  132,390  
Noninterest income         Noninterest income
Customer service fees1,582
 1,434
 1,446
 4,531
 4,529
Customer service fees1,224  1,096  1,434  2,320  2,949  
Loan servicing income128
 121
 439
 367
 3,698
Loan servicing income95  75  121  170  239  
Income from bank owned life insurance588
 580
 551
 1,693
 1,617
Income from bank owned life insurance591  578  580  1,169  1,105  
Impairment loss on investment securities(731) —
 —
 (731) —
Net (loss) gain on sale of securities available-for-sale(5,063) —
 13
 (4,855) 5,532
Net gain on sale of loans4,326
 2,826
 279
 8,705
 1,059
Net gain (loss) on sale of mortgage servicing rights—
 —
 24
 —
 (2,426)
Net gain on sale of securities available-for-saleNet gain on sale of securities available-for-sale2,011  —  —  2,011  208  
Fair value adjustment for loans held-for-saleFair value adjustment for loans held-for-sale25  (1,586) 59  (1,561) 60  
Net (loss) gain on sale of loansNet (loss) gain on sale of loans—  (27) 2,767  (27) 4,319  
Other income (loss)2,351
 (7,251) 2,072
 (2,524) 7,458
Other income (loss)1,582  1,925  (7,251) 3,507  (4,875) 
Total noninterest income (loss)3,181
 (2,290) 4,824
 7,186
 21,467
Total noninterest income (loss)5,528  2,061  (2,290) 7,589  4,005  
Noninterest expense         Noninterest expense
Salaries and employee benefits25,934
 27,506
 24,832
 81,879
 85,387
Salaries and employee benefits24,260  23,436  27,506  47,696  55,945  
Naming rights terminationNaming rights termination26,769  —  —  26,769  —  
Occupancy and equipment7,767
 7,955
 8,213
 23,408
 23,783
Occupancy and equipment7,090  7,243  7,955  14,333  15,641  
Professional fees (reimbursement)1,463
 (2,903) 11,966
 9,601
 27,446
Outside service fees520
 489
 954
 1,412
 3,913
Professional feesProfessional fees4,596  5,964  (2,903) 10,560  8,138  
Data processing1,568
 1,672
 1,884
 4,736
 5,218
Data processing1,536  1,773  1,672  3,309  3,168  
Advertising and promotion2,090
 2,048
 3,152
 6,195
 9,293
Advertising and promotion1,157  1,756  2,048  2,913  4,105  
Regulatory assessments1,239
 2,136
 2,138
 5,857
 6,426
Regulatory assessments725  484  2,136  1,209  4,618  
(Gain) loss on investments in alternative energy partnerships(940) (355) 2,484
 655
 4,258
(Gain) loss on investments in alternative energy partnerships(167) 1,905  (355) 1,738  1,595  
Reversal of provision for loan repurchases(123) (61) (360) (300) (2,366)Reversal of provision for loan repurchases(34) (600) (61) (634) (177) 
Amortization of intangible assets500
 621
 693
 1,741
 2,363
Amortization of intangible assets430  429  621  859  1,241  
Restructuring (reversal) expense—
 (158) 553
 2,637
 4,536
Restructuring (reversal) expense—  —  (158) —  2,637  
All other expense3,289
 4,637
 4,368
 10,908
 12,959
All other expense6,408  4,529  5,039  10,937  8,838  
Total noninterest expense43,307
 43,587
 60,877
 148,729
 183,216
Total noninterest expense72,770  46,919  43,500  119,689  105,749  
(Loss) income from continuing operations before income taxes(19,751) 20,890
 13,729
 10,895
 30,083
(Loss) income from operations before income taxes(Loss) income from operations before income taxes(23,753) (8,758) 20,890  (32,511) 30,646  
Income tax (benefit) expense(5,619) 4,308
 3,301
 1,408
 (1,273)Income tax (benefit) expense(5,304) (2,165) 4,308  (7,469) 7,027  
(Loss) income from continuing operations(14,132) 16,582
 10,428
 9,487
 31,356
Income from discontinued operations before income taxes (including net gain on disposal of $0, $0 and $0 for the three months ended September 30, 2019, June 30, 2019 and September 30, 2018, respectively, and $0 and $1,275 for the nine months ended September 30, 2019 and 2018, respectively)—
 —
 924
 —
 4,249
Income tax expense—
 —
 256
 —
 1,171
Income from discontinued operations—
 —
 668
 —
 3,078
Net (loss) income(14,132) 16,582
 11,096
 9,487
 34,434
Net (loss) income(18,449) (6,593) 16,582  (25,042) 23,619  
Preferred stock dividends3,403
 4,308
 4,970
 12,019
 15,196
Preferred stock dividends3,442  3,533  4,308  6,975  8,616  
Income allocated to participating securities—
 271
 —
 —
 —
Income allocated to participating securities—  —  271  —  153  
Participating securities dividends94
 94
 202
 390
 608
Participating securities dividends94  94  94  188  295  
Impact of preferred stock redemption5,093
 —
 2,307
 5,093
 2,307
Impact of preferred stock redemption(49) (526) —  (575) —  
Net (loss) income available to common stockholders$(22,722) $11,909
 $3,617
 $(8,015) $16,323
Net (loss) income available to common stockholders$(21,936) $(9,694) $11,909  $(31,630) $14,555  
Basic (loss) earnings per common share         
(Loss) income from continuing operations$(0.45) $0.23
 $0.06
 $(0.16) $0.26
Income from discontinued operations—
 —
 0.01
 —
 0.06
Net (loss) income$(0.45) $0.23
 $0.07
 $(0.16) $0.32
Diluted (loss) earnings per common share         
(Loss) income from continuing operations$(0.45) $0.23
 $0.06
 $(0.16) $0.26
Income from discontinued operations—
 —
 0.01
 —
 0.06
Net (loss) income$(0.45) $0.23
 $0.07
 $(0.16) $0.32
Basic (loss) earnings per class B common share         
(Loss) income from continuing operations$(0.45) $0.23
 $0.06
 $(0.16) $0.26
Income from discontinued operations—
 —
 0.01
 —
 0.06
Net (loss) income$(0.45) $0.23
 $0.07
 $(0.16) $0.32
Diluted (loss) earnings per class B common share         
(Loss) income from continuing operations$(0.45) $0.23
 $0.06
 $(0.16) $0.26
Income from discontinued operations—
 —
 0.01
 —
 0.06
Net (loss) income$(0.45) $0.23
 $0.07
 $(0.16) $0.32
(Loss) earnings per common share:(Loss) earnings per common share:
BasicBasic$(0.44) $(0.19) $0.23  $(0.63) $0.29  
DilutedDiluted$(0.44) $(0.19) $0.23  $(0.63) $0.29  
(Loss) earnings per class B common share:(Loss) earnings per class B common share:
BasicBasic$(0.44) $(0.19) $0.23  $(0.63) $0.29  
DilutedDiluted$(0.44) $(0.19) $0.23  $(0.63) $0.29  
See Accompanying Notesaccompanying notes to Consolidated Financial Statements (Unaudited)consolidated financial statements (unaudited)


5
Table of Contents
BANC OF CALIFORNIA, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) INCOME
(Amounts in thousands)
(Unaudited)
Three Months EndedSix Months Ended
June 30,
June 30,
2020		March 31,
2020		June 30,
2019		20202019
Net (loss) income$(18,449) $(6,593) $16,582  $(25,042) $23,619  
Other comprehensive income (loss), net of tax:
Unrealized gain (loss) on available-for-sale securities:
Unrealized gain (loss) arising during the period40,002  (42,248) 5,423  (2,246) 11,596  
Reclassification adjustment for (gain) loss included in net (loss) income(1,419) —  —  (1,419) (147) 
Total change in unrealized gain (loss) on available-for-sale securities38,583  (42,248) 5,423  (3,665) 11,449  
Total other comprehensive income (loss)38,583  (42,248) 5,423  (3,665) 11,449  
Comprehensive income (loss)$20,134  $(48,841) $22,005  $(28,707) $35,068  
 Three Months Ended Nine Months Ended September 30,
 September 30,
2019		 June 30,
2019		 September 30,
2018		 2019 2018
Net (loss) income$(14,132) $16,582
 $11,096
 $9,487
 $34,434
Other comprehensive income (loss), net of tax:         
Unrealized (loss) gain on available-for-sale securities:         
Unrealized (loss) gain arising during the period(994) 5,423
 (2,568) 10,602
 (23,760)
Reclassification adjustment for OTTI loss included in net (loss) income516
 —
 —
 516
 —
Reclassification adjustment for loss (gain) included in net (loss) income3,575
 —
 (9) 3,428
 (3,910)
Total change in unrealized gain (loss) on available-for-sale securities3,097
 5,423
 (2,577) 14,546
 (27,670)
Total other comprehensive income (loss)3,097
 5,423
 (2,577) 14,546
 (27,670)
Comprehensive (loss) income$(11,035) $22,005
 $8,519
 $24,033
 $6,764

See Accompanying Notesaccompanying notes to Consolidated Financial Statements (Unaudited)consolidated financial statements (unaudited)


6
Table of Contents
BANC OF CALIFORNIA, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(Amounts in thousands)
(Unaudited)
Preferred StockCommon StockAdditional Paid-in CapitalRetained EarningsTreasury StockAccumulated Other Comprehensive LossTotal Stockholders' Equity
VotingClass B Non-Voting
Three Months Ended June 30, 2020
Balance at March 31, 2020$187,687  $520  $5  $631,125  $110,640  $(40,827) $(54,148) $835,002  
Comprehensive loss:
Net loss—  —  —  —  (18,449) —  —  (18,449) 
Other comprehensive income, net—  —  —  —  —  —  38,583  38,583  
Issuance of common stock—  2  —  (2) —  —  —  —  
Redemption of preferred stock(2,650) —  —  —  49  —  —  (2,601) 
Share-based compensation expense—  —  —  1,470  —  —  —  1,470  
Restricted stock surrendered due to employee tax liability—  —  —  (476) —  —  —  (476) 
Shares purchased under the Dividend Reinvestment Plan—  —  —  —  (28) —  —  (28) 
Stock appreciation right dividend equivalents—  —  —  —  (94) —  —  (94) 
Dividends declared ($0.06 per common share)—  —  —  —  (3,006) —  —  (3,006) 
Preferred stock dividends—  —  —  —  (3,442) —  —  (3,442) 
Balance at June 30, 2020$185,037  $522  $5  $632,117  $85,670  $(40,827) $(15,565) $846,959  
Three Months Ended June 30, 2019
Balance at March 31, 2019$231,128  $518  $5  $626,608  $136,943  $(28,786) $(18,091) $948,325  
Comprehensive income:
Net income—  —  —  —  16,582  —  —  16,582  
Other comprehensive income, net—  —  —  —  —  —  5,423  5,423  
Issuance of common stock—  2  —  (2) —  —  —  —  
Share-based compensation expense—  —  —  1,497  —  —  —  1,497  
Restricted stock surrendered due to employee tax liability—  —  —  (797) —  —  —  (797) 
Shares purchased under the Dividend Reinvestment Plan—  —  —  —  (26) —  —  (26) 
Stock appreciation right dividend equivalents—  —  —  —  (94) —  —  (94) 
Dividends declared ($0.06 per common share)—  —  —  —  (3,058) —  —  (3,058) 
Preferred stock dividends—  —  —  —  (4,308) —  —  (4,308) 
Balance at June 30, 2019$231,128  $520  $5  $627,306  $146,039  $(28,786) $(12,668) $963,544  
Six Months Ended June 30, 2020
Balance at December 31, 2019$189,825  $520  $5  $629,848  $127,733  $(28,786) $(11,900) $907,245  
Impact of adoption of ASU No. 2016-13—  —  —  —  (4,503) —  —  (4,503) 
Comprehensive loss:
Net loss—  —  —  —  (25,042) —  —  (25,042) 
Other comprehensive loss, net—  —  —  —  —  —  (3,665) (3,665) 
Issuance of common stock—  2  —  (2) —  —  —  —  
Redemption of preferred stock(4,788) —  —  —  575  —  —  (4,213) 
Purchase of 827,584 shares of treasury stock—  —  —  —  —  (12,041) —  (12,041) 
Share-based compensation expense—  —  —  3,046  —  —  —  3,046  
Restricted stock surrendered due to employee tax liability—  —  —  (775) —  —  —  (775) 
Shares purchased under the Dividend Reinvestment Plan—  —  —  —  (47) —  —  (47) 
Stock appreciation right dividend equivalents—  —  —  —  (188) —  —  (188) 
Dividends declared ($0.12 per common share)—  —  —  —  (5,883) —  —  (5,883) 
Preferred stock dividends—  —  —  —  (6,975) —  —  (6,975) 
Balance at June 30, 2020$185,037  $522  $5  $632,117  $85,670  $(40,827) $(15,565) $846,959  
Six Months Ended June 30, 2019
Balance at December 31, 2018$231,128  $518  $5  $625,834  $140,952  $(28,786) $(24,117) $945,534  
Comprehensive income:
Net income—  —  —  —  23,619  —  —  23,619  
Other comprehensive income, net—  —  —  —  —  —  11,449  11,449  
Issuance of common stock—  2  —  (2) —  —  —  —  
Share-based compensation expense—  —  —  2,350  —  —  —  2,350  
Restricted stock surrendered due to employee tax liability—  —  —  (876) —  —  —  (876) 
Shares purchased under the Dividend Reinvestment Plan—  —  —  —  (76) —  —  (76) 
Stock appreciation right dividend equivalents—  —  —  —  (296) —  —  (296) 
Dividends declared ($0.19 per common share)—  —  —  —  (9,544) —  —  (9,544) 
Preferred stock dividends—  —  —  —  (8,616) —  —  (8,616) 
Balance at June 30, 2019$231,128  $520  $5  $627,306  $146,039  $(28,786) $(12,668) $963,544  
 Preferred Stock Common Stock Additional Paid-in Capital Retained Earnings Treasury Stock Accumulated Other Comprehensive Income (Loss) Total Stockholders' Equity
  Voting Class B Non-Voting     
Balance at December 31, 2017$269,071
 $517
 $5
 $621,435
 $144,839
 $(28,786) $5,227
 $1,012,308
Reclassification of stranded tax effects to retained earnings—
 —
 —
 —
 (496) —
 496
 —
Adjusted Balance at December 31, 2017269,071
 517
 5
 621,435
 144,343
 (28,786) 5,723
 1,012,308
Comprehensive income (loss):               
Net income—
 —
 —
 —
 8,558
 —
 —
 8,558
Other comprehensive loss, net—
 —
 —
 —
 —
 —
 (17,265) (17,265)
Share-based compensation expense—
 —
 —
 2,087
 —
 —
 —
 2,087
Restricted stock surrendered due to employee tax liability—
 —
 —
 (97) —
 —
 —
 (97)
Shares purchased under the Dividend Reinvestment Plan—
 —
 —
 58
 (74) —
 —
 (16)
Stock appreciation right dividend equivalents—
 —
 —
 —
 (203) —
 —
 (203)
Dividends declared ($0.13 per common share)—
 —
 —
 —
 (6,503) —
 —
 (6,503)
Preferred stock dividends—
 —
 —
 —
 (5,113) —
 —
 (5,113)
Balance at March 31, 2018$269,071
 $517
 $5
 $623,483
 $141,008
 $(28,786) $(11,542) $993,756
                
Comprehensive income (loss):               
Net income—
 —
 —
 —
 14,780
 —
 —
 14,780
Other comprehensive loss, net—
 —
 —
 —
 —
 —
 (7,828) (7,828)
Issuance of common stock—
 1
 (1) —
 —
 —
 —
 —
Share-based compensation expense—
 —
 —
 1,788
 —
 —
 —
 1,788
Restricted stock surrendered due to employee tax liability—
 (1) —
 (1,973) —
 —
 —
 (1,974)
Shares purchased under the Dividend Reinvestment Plan—
 —
 —
 74
 (68) —
 —
 6
Stock appreciation right dividend equivalents—
 —
 —
 —
 (203) —
 —
 (203)
Dividends declared ($0.13 per common share)—
 —
 —
 —
 (6,524) —
 —
 (6,524)
Preferred stock dividends—
 —
 —
 —
 (5,113) —
 —
 (5,113)
Balance at June 30, 2018$269,071
 $517
 $4
 $623,372
 $143,880
 $(28,786) $(19,370)—
$988,688
                
Comprehensive income (loss):               
Net income—
 —
 —
 —
 11,096
 —
 —
 11,096
Other comprehensive loss, net—
 —
 —
 —
 —
 —
 (2,577) (2,577)
Issuance of common stock—
 1
 1
 (2) —
 —
 —
 —
Redemption of preferred stock(37,943) —
 —
 —
 (2,307) —
 —
 (40,250)
Share-based compensation expense—
 —
 —
 1,398
 —
 —
 —
 1,398
Restricted stock surrendered due to employee tax liability—
 —
 —
 (48) —
 —
 —
 (48)
Shares purchased under the Dividend Reinvestment Plan—
 —
 —
 69
 (61) —
 —
 8
Stock appreciation right dividend equivalents—
 —
 —
 —
 (202) —
 —
 (202)
Dividends declared ($0.13 per common share)—
 —
 —
 —
 (6,465) —
 —
 (6,465)
Preferred stock dividends—
 —
 —
 —
 (4,970) —
 —
 (4,970)
Balance at September 30, 2018$231,128
 $518
 $5
 $624,789
 $140,971
 $(28,786) $(21,947)—
$946,678
Balance at December 31, 2018$231,128
 $518
 $5
 $625,834
 $140,952
 $(28,786) $(24,117) $945,534
Comprehensive income:               
Net income—
 —
 —
 —
 7,037
 —
 —
 7,037
Other comprehensive income, net—
 —
 —
 —
 —
 —
 6,026
 6,026
Share-based compensation expense—
 —
 —
 853
 —
 —
 —
 853
Restricted stock surrendered due to employee tax liability—
 —
 —
 (79) —
 —
 —
 (79)
Shares purchased under the Dividend Reinvestment Plan—
 —
 —
 —
 (50) —
 —
 (50)
Stock appreciation right dividend equivalents—
 —
 —
 —
 (202) —
 —
 (202)
Dividends declared ($0.13 per common share)—
 —
 —
 —
 (6,486) —
 —
 (6,486)
Preferred stock dividends—
 —
 —
 —
 (4,308) —
 —
 (4,308)
Balance at March 31, 2019$231,128
 $518
 $5
 $626,608
 $136,943
 $(28,786) $(18,091) $948,325
                
Comprehensive income:               
Net income—
 —
 —
 —
 16,582
 —
 —
 16,582
Other comprehensive income, net—
 —
 —
 —
 —
 —
 5,423
 5,423
Issuance of common stock—
 2
 —
 (2) —
 —
 —
 —
Share-based compensation expense—
 —
 —
 1,497
 —
 —
 —
 1,497
Restricted stock surrendered due to employee tax liability—
 —
 —
 (797) —
 —
 —
 (797)
Shares purchased under the Dividend Reinvestment Plan—
 —
 —
 —
 (26) —
 —
 (26)
Stock appreciation right dividend equivalents—
 —
 —
 —
 (94) —
 —
 (94)
Dividends declared ($0.06 per common share)—
 —
 —
 —
 (3,058) —
 —
 (3,058)
Preferred stock dividends—
 —
 —
 —
 (4,308) —
 —
 (4,308)
Balance at June 30, 2019$231,128
 $520
 $5
 $627,306
 $146,039
 $(28,786) $(12,668) $963,544
                
Comprehensive (loss) income:               
Net loss—
 —
 —
 —
 (14,132) —
 —
 (14,132)
Other comprehensive income, net—
 —
 —
 —
 —
 —
 3,097
 3,097
Redemption of preferred stock(41,303) —
 —
 —
 (5,093) —
 —
 (46,396)
Share-based compensation expense—
 —
 —
 1,494
 —
 —
 —
 1,494
Restricted stock surrendered due to employee tax liability—
 —
 —
 (26) —
 —
 —
 (26)
Shares purchased under the Dividend Reinvestment Plan—
 —
 —
 —
 (23) —
 —
 (23)
Stock appreciation right dividend equivalents—
 —
 —
 —
 (94) —
 —
 (94)
Dividends declared ($0.06 per common share)—
 —
 —
 —
 (3,073) —
 —
 (3,073)
Preferred stock dividends—
 —
 —
 —
 (3,403) —
 —
 (3,403)
Balance at September 30, 2019$189,825
 $520
 $5
 $628,774
 $120,221
 $(28,786) $(9,571) $900,988

See Accompanying Notesaccompanying notes to Consolidated Financial Statements (Unaudited)consolidated financial statements (unaudited)

7
Table of Contents
BANC OF CALIFORNIA, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in thousands)
(Unaudited)
Six Months Ended
June 30,
20202019
Cash flows from operating activities:
Net (loss) income$(25,042) $23,619  
Adjustments to reconcile net (loss) income to net cash (used in) provided by operating activities
Provision for credit losses27,587  198  
Reversal of provision for loan repurchases(634) (177) 
Depreciation on premises and equipment8,404  5,290  
Amortization of intangible assets859  1,241  
Amortization of debt issuance costs139  83  
Net amortization of premium on securities258  649  
Net amortization of deferred loan costs and fees(553) 83  
Accretion of discounts on purchased loans(355) (125) 
Write-off of other assets related to naming rights termination, net6,669  —  
Debt extinguishment fee2,515  —  
Deferred income tax (benefit) expense(71) 1,841  
Bank owned life insurance income(1,169) (1,105) 
Share-based compensation expense3,046  2,350  
Loss on interest rate swaps288  9,583  
Loss on investments in alternative energy partnerships and affordable housing investments4,033  2,785  
Impairment on capitalized software projects157  835  
Fair value adjustment for loans held-for-sale1,561  (60) 
Net loss (gain) on sale of loans27  (4,319) 
Net gain on sale of securities available-for-sale(2,011) (208) 
Loss on sale or disposal of property and equipment106  9  
Repurchase of mortgage loans—  (699) 
Proceeds from sales of and principal collected on loans held-for-sale613  3,849  
Proceeds from sales of and principal collected on other loans held-for-sale—  426  
Change in accrued interest receivable and other assets1,119  (14,593) 
Change in accrued interest payable and other liabilities(30,093) (5,341) 
Net cash (used in) provided by operating activities(2,547) 26,214  
Cash flows from investing activities:
Proceeds from sales of securities available-for-sale22,728  782,019  
Proceeds from maturities and calls of securities available-for-sale30,000  38,029  
Proceeds from principal repayments of securities available-for-sale2,971  20,538  
Purchases of securities available-for-sale(322,590) —  
Cash received from bank-owned life insurance501  —  
Loan originations and principal collections, net349,818  (149,182) 
Purchase of loans and leases(25,839) —  
Redemption of Federal Home Loan Bank stock22,171  29,760  
Purchase of Federal Home Loan Bank and other bank stock(9,336) (38,039) 
Proceeds from sale of loans—  558,021  
Proceeds from sale of other real estate owned—  551  
Purchases of premises and equipment(3,467) (5,967) 
Payments of capital lease obligations(266) (259) 
Funding of equity investment(14,201) (1,501) 
(Increase) decrease in investments in alternative energy partnerships(2,630) 760  
Net cash provided by investing activities49,860  1,234,730  
Cash flows provided by (used in) financing activities:
Net increase (decrease) in deposits610,298  (1,624,354) 
Net (decrease) increase in short-term Federal Home Loan Bank advances(447,000) 305,000  
Repayment of long-term Federal Home Loan Bank advances(235,000) —  
Proceeds from long-term Federal Home Loan Bank advances111,000  —  
Debt extinguishment and financing fees paid(9,368) —  
Redemption of preferred stock(4,213) —  
Purchase of treasury stock(12,041) —  
Purchase of restricted stock surrendered due to employee tax liability(775) (876) 
Dividend equivalents paid on stock appreciation rights(188) (296) 
Dividends paid on preferred stock(6,975) (8,616) 
Dividends paid on common stock(5,883) (9,544) 
Net cash used in financing activities(145) (1,338,686) 
Net change in cash and cash equivalents47,168  (77,742) 
Cash and cash equivalents at beginning of period373,472  391,592  
Cash and cash equivalents at end of period$420,640  $313,850  
Supplemental cash flow information
Interest paid on deposits and borrowed funds40,626  85,733  
Income taxes paid62  2,822  
Income taxes refunds received—  7  
Supplemental disclosure of non-cash activities
Transfer from loans to other real estate owned, net—  276  
Transfer of loans held-for-investment to loans held-for-sale—  1,127,339  
Equipment acquired under capital leases30  40  
Operating lease right-of-use assets recognized—  27,421  
Operating lease liabilities recognized—  28,822  
Impact of adoption of ASU 2016-13 on retained earnings(4,503) —  
 Nine Months Ended September 30,
 2019 2018
Cash flows from operating activities:   
Net income$9,487
 $34,434
Adjustments to reconcile net income to net cash provided by operating activities   
Provision for loan losses39,065
 23,562
(Reversal of) provision for unfunded loan commitments(260) 532
Reversal of provision for loan repurchases(300) (2,366)
Depreciation on premises and equipment7,800
 8,061
Amortization of intangible assets1,741
 2,363
Amortization of debt issuance cost165
 155
Net amortization of premium and discount on securities738
 908
Impairment loss on investment securities731
 —
Net amortization (accretion) of deferred loan costs and fees479
 (551)
Accretion of discounts on purchased loans(311) (583)
Deferred income tax benefit(2,600) (5,314)
Bank owned life insurance income(1,693) (1,617)
Share-based compensation expense3,844
 5,273
Loss on interest rate swaps8,964
 —
Loss on investments in alternative energy partnerships655
 4,258
Impairment on capitalized software projects986
 1,975
Net revenue from mortgage banking activities—
 (396)
Net gain on sale of loans(8,705) (1,059)
Net loss (gain) on sale of securities available for sale4,855
 (5,532)
Loss from change of fair value of mortgage servicing rights—
 1,274
Loss on sale or disposal of property and equipment20
 61
Loss on sale of mortgage servicing rights—
 2,426
Net gain on disposal of discontinued operations—
 (1,275)
Repurchase of mortgage loans(1,929) (12,666)
Originations of other loans held-for-sale—
 (6,274)
Proceeds from sales of and principal collected on loans held-for-sale from mortgage banking4,905
 27,535
Proceeds from sales of and principal collected on other loans held-for-sale426
 7,044
Change in accrued interest receivable and other assets(12,570) 15,295
Change in accrued interest payable and other liabilities3,633
 (1,070)
Net cash provided by operating activities60,126
 96,453
Cash flows from investing activities:   
Proceeds from sales of securities available-for-sale822,979
 417,870
Proceeds from maturities and calls of securities available-for-sale38,029
 478,200
Proceeds from principal repayments of securities available-for-sale35,337
 33,118
Purchases of securities available-for-sale—
 (425,076)
Loan and lease originations and principal collections, net151,655
 (839,121)
Redemption of Federal Home Loan Bank stock56,551
 51,975
Purchase of Federal Home Loan Bank and other bank stock(60,136) (47,629)
Proceeds from sale of loans1,140,851
 230,291
Proceeds from sale of other real estate owned843
 1,795
Proceeds from sale of mortgage servicing rights—
 30,056
Proceeds from sale of premises and equipment—
 19
Purchases of premises and equipment(8,391) (7,546)
Payments of capital lease obligations(347) (339)
Funding of equity investment(14,599) (2,874)
Decrease in investments in alternative energy partnerships1,294
 1,027
Net cash provided by (used in) investing activities2,164,066
 (78,234)
Cash flows from financing activities:   
Net (decrease) increase in deposits(2,146,586) 108,839
Net increase (decrease) in short-term Federal Home Loan Bank advances155,000
 (410,000)
Repayment of long-term Federal Home Loan Bank advances(25,000) (25,000)
Proceeds from long-term Federal Home Loan Bank advances—
 380,000
Redemption of preferred stock(46,396) (40,250)
Purchase of restricted stock surrendered due to employee tax liability(902) (2,119)
Dividend equivalents paid on stock appreciation rights(390) (607)
Dividends paid on preferred stock(12,019) (18,308)
Dividends paid on common stock(12,617) (26,252)
Net cash used in financing activities(2,088,910) (33,697)
Net change in cash and cash equivalents135,282
 (15,478)
Cash and cash equivalents at beginning of period391,592
 387,699
Cash and cash equivalents at end of period$526,874
 $372,221
Supplemental cash flow information   
Interest paid on deposits and borrowed funds120,042
 90,365
Income taxes paid2,822
 4,435
Income taxes refunds received142
 4,502
Supplemental disclosure of non-cash activities   
Transfer from loans to other real estate owned, net276
 434
Transfer of loans held-for-investment to loans held-for-sale1,127,898
 231,844
Equipment acquired under capital leases40
 41
Operating lease right of use assets recognized28,664
 —
Operating lease liabilities recognized30,065
  
Receivable on unsettled securities sales334,769
 —
Reclassification of stranded tax effects to retained earnings—
 496
Due on unsettled securities purchases—
 17,500

See Accompanying Notesaccompanying notes to Consolidated Financial Statements (Unaudited)consolidated financial statements (unaudited)

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BANC OF CALIFORNIA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
SeptemberJune 30, 20192020

NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Operations: Banc of California, Inc. (collectively, with its consolidated subsidiaries, the Company, we, us, and our) is a financial holding company under the Bank Holding Company Act of 1956, as amended, headquartered in Santa Ana, California and incorporated under the laws of Maryland. Banc of California, Inc. is subject to regulation by the Board of Governors of the Federal Reserve System (FRB)(“FRB”) and its wholly-owned subsidiary, Banc of California, National Association (the Bank), operates under a national bank charter issued by the Office of the Comptroller of the Currency (OCC)(“OCC”), the Bank's primary regulator. The Bank is a member of the Federal Home Loan Bank (FHLB)(“FHLB”) system, and maintains insurance on deposit accounts with the Federal Deposit Insurance Corporation (FDIC)(“FDIC”).
The Bank offers a variety of financial services to meet the banking and financial needs of the communities it serves, with operations conducted through 32 banking offices, serving San Diego, Los Angeles, Santa Barbara, and Orange counties in31 full-service branches located throughout Southern California as of SeptemberJune 30, 2019.2020.
Basis of Presentation: The accompanying unaudited interim consolidated financial statements have been prepared pursuant to Article 10 of SEC Regulation S-X and other SEC rules and regulations for reporting on the Quarterly Report on Form 10-Q. Accordingly, certain disclosures required by U.S. generally accepted accounting principles (GAAP)(“GAAP”) are not included herein. These interim statements should be read in conjunction with the consolidated financial statements and notes included in the Annual Report on Form 10-K for the year ended December 31, 20182019 filed by the Companyus with the SEC. The December 31, 20182019 consolidated statements of financial condition presented herein has been derived from the audited financial statements included in the Annual Report on Form 10-K for the year ended December 31, 20182019 filed with the SEC, but does not include allSEC. Certain prior period amounts have been reclassified to conform to current period presentation, including i) reclassification of the disclosures required by GAAPprovision for complete financial statements.losses on unfunded loan commitments from being included in other noninterest expense to being included within provision for credit losses, ii) showing the unrealized fair value adjustment for loans held-for-sale separate from the realized net (loss) gain on sale of loans, and iii) reclassification of outside services expense from "outside services fees" to "all other expense" in the consolidated statements of operations.
In the opinion of management of the Company, the accompanying unaudited interim consolidated financial statements reflect all of the adjustments (consisting of normal recurring adjustments) necessary for a fair presentation of the consolidated financial condition and consolidated results of operations as of the dates and for the periods presented. The results of operations for the three and ninesix months ended SeptemberJune 30, 20192020 are not necessarily indicative of the results that may be expected for the year ending December 31, 2019.2020.
Principles of Consolidation: The accompanying unaudited consolidated financial statements include the accounts of the Company and its consolidated subsidiaries as of SeptemberJune 30, 20192020 and December 31, 20182019 and for the three and ninesix months ended SeptemberJune 30, 20192020 and 2018.2019. Significant intercompany accounts and transactions have been eliminated in consolidation. Unless the context requires otherwise, all references to the Company include its then wholly-owned subsidiaries.
Adopted Accounting Pronouncements:
On January 1, 2020, we adopted Accounting Standards Update (“ASU”) 2016-13, Financial Instruments-Credit Losses (Topic 326) (“ASU 2016-13”), which replaces the incurred loss impairment methodology with a methodology that reflects current expected credit losses (“CECL”) and requires consideration of a broader range of reasonable and supportable information to estimate expected credit losses. The measurement of expected credit losses under the CECL model is applicable to financial assets measured at amortized cost, including loan receivables, held-to-maturity debt securities and off-balance sheet credit exposures. ASU 2016-13 also requires credit losses relating to available-for-sale debt securities to be recorded through an allowance for credit losses. In addition, ASU 2016-13 modifies the other-than-temporary impairment (“OTTI”) model for available-for-sale (“AFS”) debt securities to require an allowance for credit impairment instead of a direct write-down, which allows for reversal of credit impairments in future periods based on improvements in credit quality.
We adopted ASU 2016-13 using the modified retrospective method for our financial assets measured at cost, including loans receivable and off-balance sheet credit exposures. Results for reporting periods beginning January 1, 2020 are reported under ASU 2016-13 (or Accounting Standards Codification 326), while prior period results continue to be reported under the previously applicable GAAP. The adoption of ASU 2016-13 on January 1, 2020 resulted in an increase of $6.4 million to our allowance for credit losses and an after-tax net decrease in retained earnings of $4.5 million. This transition adjustment reflects the development of our models to estimate lifetime expected credit losses on our loans, unfunded commitments, and other off-balance sheet credit exposure primarily using a lifetime loss methodology.
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The following table presents the impact of adopting ASU 2016-13 on January 1, 2020:
($ in thousands)As Reported
Under
ASC 326		Pre-
ASC 326
Adoption		Impact of
ASC 326
Adoption
Assets:
Allowance for credit losses - loans
Commercial:
Commercial and industrial$23,015  $22,353  $662  
Commercial real estate10,788  5,941  4,847  
Multifamily13,214  11,405  1,809  
SBA3,508  3,120  388  
Construction4,009  3,906  103  
Consumer:
Single family residential mortgage10,066  10,486  (420) 
Other consumer658  438  220  
Total65,258  57,649  7,609  
Liabilities:
Allowance for credit losses - unfunded loan commitments$2,838  $4,064  $(1,226) 
Significant Accounting Policies: The accounting and reporting policies of the Company are based upon GAAP and conform to predominant practices within the banking industry. The Company hasWe have not made any significant changes in itsour critical accounting policies from those disclosed in itsour Annual Report on Form 10-K for the year ended December 31, 20182019 filed with the SEC, except for the accounting for leasesloans and the allowance for credit losses, the allowance for credit losses on unfunded loan commitments, troubled debt restructurings, and available-for-sale debt securities as described below.
Leases.Allowance for Credit Losses (ACL): The Company determines if an arrangementACL is a leasereserve established through a provision for credit loss expense and represents management’s best estimate of the net amount expected to be collected from loans receivable as of the date of the consolidated statements of financial condition. Confirmed losses are charged against the ACL. Subsequent recoveries, if any, are credited to the ACL. We perform an analysis of the adequacy of the ACL at inception.least quarterly. Management estimates the required ACL balance using past loan loss experience, the nature and volume of the portfolio, information about specific borrower situations, estimated collateral values, economic conditions, and other factors. The Company’s operating lease agreements are primarilyACL consists of; (i) a specific allowance established for real estate space and are included within right of use (ROU) assets and lease liabilitiesprobable losses on the September 30, 2019 consolidated balance sheet. The ROU asset isindividually identified impaired loans, (ii) a quantitative allowance for current expected loan losses based on the operating lease liabilitiesportfolio and expected economic conditions over a reasonable and supportable forecast period that reverts back to long-term trends to cover the life of loan; and (iii) a qualitative allowance to capture factors and trends that are not adequately reflected in the quantitative allowance, including an evaluation of our underwriting, other credit-related processes, and other credit risk factors such as concentration risk. Accrued interest is excluded from our expected credit loss estimates.
Expected credit losses are estimated over the contractual term of the loans, adjusted for any prepaidprepayments, as appropriate. The contractual term excludes expected extensions and renewals unless those extension or deferred rent.renewal options are included in the underlying contract and we do not have the ability to unconditionally cancel. The Companycontractual term also excludes expected modifications unless management has elected nota reasonable expectation, at the reporting period, that a troubled debt restructuring will be executed.
A loan is deemed impaired when, based on current information and events, it is probable that we will be unable to recognize on its consolidated balance sheet leases withcollect all amounts due according to the contractual terms of one-year or less.the loan agreement. We measure expected credit losses on all impaired loans individually under the guidance of ASC 326, Receivables, primarily through the evaluation of collateral values and estimated cash flows expected to be collected. Cash receipts on impaired loans for which the accrual of interest has been discontinued are applied first to principal and then to interest income. Loans for which the terms have been modified by granting a concession that normally would not be provided and where the borrower is experiencing financial difficulties are considered troubled debt restructurings (“TDRs”) and classified as impaired.
ROU assets represent our right to use an underlying assetFactors 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. Management determines the significance of payment delays and payment shortfalls on a case-by-case basis, taking into consideration all of the circumstances surrounding the loan and the
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borrower, including the length of the delay, the reasons for the lease termdelay, the borrower’s prior payment record, and lease liabilities represent our obligationthe amount of the shortfall in relation to make lease payments arising from the lease. ROU assetsprincipal and lease liabilitiesinterest owed. The impairment amount on a collateral dependent loan is generally charged-off to the ACL and the impairment amount on a loan, that is not collateral dependent, is set-up as a specific reserve. TDRs are recognizedalso measured at the commencement date based on the present value of leaseestimated future cash flows using the loan’s effective rate at inception or at the fair value of collateral, less costs to sell, if repayment is expected solely from the collateral. For TDRs that subsequently default, we determine the amount of reserve in accordance with the accounting policy for the ACL.
At June 30, 2020, the following loan portfolio segments have been identified:
•Commercial and industrial (general commercial and industrial, warehouse lending, and indirect/direct leveraged lending)
•Commercial real estate
•Multifamily
•Small Business Administration (“SBA”)
•Construction
•SFR - 1st deeds of trust (generally SFR mortgage and other)
•Other consumer (HELOC and other)
We categorize loans into risk categories based on relevant information about the ability of borrowers to service their obligations such as current financial information, historical payment experience, credit documentation, public information, and current economic trends, among other factors. We analyze loans individually by classifying the loans as to credit risk.
Loans secured by multifamily and commercial real estate properties generally involve a greater degree of credit risk than SFR mortgage loans. Because payments on loans secured by multifamily and commercial real estate properties are often dependent on the successful operation or management of the properties, repayment of these loans may be subject to adverse conditions in the real estate market or the economy. Commercial and industrial loans are also considered to have a greater degree of credit risk than SFR mortgage loans due to the fact commercial and industrial loans are typically made on the basis of the borrower’s ability to make repayment from the cash flow of the borrower’s business. As a result, the availability of funds for the repayment of commercial and industrial loans may be substantially dependent on the success of the business itself (which, in turn, is often dependent, in part, upon general economic conditions). SBA loans are similar to commercial and industrial loans, however, they have additional credit enhancement in the form of a guaranty provided by the U.S. Small Business Administration, for up to 85% of the loan amount for loans up to $150 thousand and 75% of the loan amount for loans of more than $150 thousand. SBA loans originated as part of the Paycheck Protection Program (“PPP”) established by the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) have additional credit enhancement provided by the U.S. Small Business Administration for up to 100% of the loan amount. As of June 30, 2020, we funded $240.7 million in PPP loans. During the three months ended June 30, 2020, we collected $7.5 million in fees on PPP loans funded during the quarter, which will be recognized over the lease term. As mosttheir estimated life of 9 months. The 9 months estimated life of PPP loans is based on our understanding of our leasesclients' cash use, expected forgiveness probability, and loan forgiveness process. The availability of funds for the repayment of financing may be substantially dependent on the success of the business itself which is often dependent, in part, upon general economic conditions. Consumer loans may have greater risk than SFR mortgage loans given that collection of these loans is dependent on the borrower’s continuing financial stability and, thus, are more likely to be adversely affected by job loss, divorce, illness, or personal bankruptcy.
Green Loans are considered to carry a higher degree of credit risk due to their unique cash flows. Credit risk on this asset class is also managed through the completion of regular third party automated valuation models (“AVMs”) of the underlying collateral and monitoring of the borrower’s usage of this account to determine if the borrower is making monthly payments from external sources or “drawdowns” on their line. In cases where the property values have declined to levels less than the original loan to value (“LTV”) ratios, or other levels deemed prudent by us, we may curtail the line and/or require monthly payments or principal reductions to bring the loan in balance.
On interest only loans, we project future payment changes to determine if there will be a material increase in the required payment and then monitor the loans for possible delinquency. Individual loans are monitored for possible downgrading of risk rating.
Troubled Debt Restructurings: A loan is identified as a TDR when a borrower is experiencing financial difficulties and, for economic or legal reasons related to these difficulties, we grant a concession to the borrower in the restructuring that we would not otherwise consider. We have granted a concession when, as a result of the restructuring to a troubled borrower, we do not provideexpect to collect all amounts due, including principal and/or interest accrued at the original terms of the loan. The concessions may be granted in various forms, including a below-market change in the stated interest rate, a reduction in the loan balance or accrued interest, an implicitextension of the maturity date, or a note split with principal forgiveness. Loans for which the borrower has been discharged under Chapter 7 bankruptcy are considered collateral dependent TDRs, impaired at the date of discharge, and
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charged down to the fair value of collateral less cost to sell. A restructuring executed at an interest rate that is at market interest rates based on the current credit characteristics of the borrower is not a TDR.
Our policy is to place consumer loan TDRs, except those that were performing prior to TDR status, on non-accrual status for a minimum period of 6 months. Commercial TDRs are evaluated on a case-by-case basis for determination whether or not to place them on non-accrual status. Loans qualify for return to accrual status once they have demonstrated performance under the restructured terms of the loan for a minimum of 6 months. Initially, all TDRs are reported as impaired. Generally, TDRs are classified as impaired loans and reported as TDRs for the remaining life of the loan. Impaired and TDR classification may be removed if the borrower demonstrates compliance with the modified terms for a minimum of 6 months, through one fiscal year-end and the restructuring agreement specifies a market rate of interest equal to that which would be provided to a borrower with similar credit at the time of restructuring. In the limited circumstance that a loan is removed from TDR classification, it is our policy to continue to base our measure of loan impairment on the contractual terms specified by the loan agreement.
Troubled Debt Restructuring (TDR) Relief: Under U.S. GAAP, banks are required to assess modifications to a loan’s terms for potential classification as a TDR. A loan to a borrower experiencing financial difficulty is classified as a TDR when a lender grants a concession that it would otherwise not consider, such as a payment deferral or interest concession. In order to encourage banks to work with impacted borrowers, the CARES Act and U.S. banking regulatory agencies have provided relief from TDR accounting. The main benefits of TDR relief include 1) a capital benefit in the form of reduced risk-weighted assets, as TDRs are more heavily risk-weighted for capital purposes; 2) a delinquency status benefit, as the aging of loans are frozen, i.e., they will continue to be reported in the same delinquency bucket they were in at the time of modification; and 3) a non-accrual status benefit as the loans are generally not reported as non-accrual during the modification period.
Reserve for Unfunded Loan Commitments: The reserve for unfunded loan commitments provides for estimated credit losses for the unused portion of lending commitments expected to be funded, except for unconditionally cancellable commitments for which no reserve is required under ASC 326. The reserve for unfunded loan commitments includes factors that are consistent with ACL methodology for loans using the expected loss factors and a draw down factor applied to the underlying borrower risk and facility grades. Changes in the reserve for unfunded loan commitments are reported as a component of provision for credit losses in the consolidated statements of operations and the reserve for unfunded loan commitments is included in other liabilities in the consolidated statements of financial condition.
Available-for-Sale Debt Securities:Available-for-sale debt securities are analyzed for credit losses under ASC 326, which requires the Company uses its incremental borrowing rate, which is the rate incurred to borrow on a collateralized basis over a similar term an amount equal to the lease payments in a similar economic environment, at lease commencement date in determining the present value of lease payments. Manydetermine whether impairment exists as of the Company’s lessee agreements include optionsreporting date and whether that impairment is due to extendcredit losses. An allowance for credit losses is established for losses on available-for-sale debt securities due to credit losses and is reported as a component of provision for credit losses. Accrued interest is excluded from our expected credit loss estimates. Available-for-sale debt securities are typically classified as non-accrual when the lease, whichcontractual payment of principal or interest has become 90 days past due or management has serious doubts about the Company does not include in its minimum lease terms unless theyfurther collectability of principal or interest. When available-for-sale debt securities are reasonably certain to be exercised. The Company elected the practical expedient to combine its lease and related nonlease components for the Company’s building leases. Rental expense for lease payments related to operating leasesplaced on non-accrual status, unpaid interest recognized as interest income is recognized on a straight-line basis over the lease termreversed.
Use of Estimates in the Preparation of Financial Statements: The preparation of financial statements, in conformity with GAAP, requires management to make estimates and assumptions based on available information. These estimates and assumptions affect the amounts reported in the consolidated financial statements and disclosures provided, and actual results could differ. The allowance for loan losses (ALLL),ACL, reserve for loss on repurchased loans, reserve for unfunded loan

commitments, realization of deferred tax assets, the valuation of goodwill and other intangible assets, mortgage banking, and other derivatives, Hypothetical Liquidation at Book Value (HLBV)(“HLBV”) of investments in alternative energy partnerships, and the fair value measurement of financial instruments are particularly subject to change and such change could have a material effect on the consolidated financial statements.
Discontinued Operations:Recent Accounting Guidance, Not Yet Effective: DuringIn December 2019, the three months ended March 31, 2017,FASB issued ASU 2019-12, Income Taxes (Topic 740): Simplifying the Company completedAccounting for Income Taxes (“ASU 2019-12”). The amendments in this Update simplify the saleaccounting for income taxes by removing certain exceptions for investments, intra-period allocations, and interim calculations, and add guidance to reduce the complexity of its Banc Home Loans division, which largely represented the Company's Mortgage Banking segment. In accordance with Accounting Standards Codification (ASC) 205-20, the Company determinedapplying Topic 740. This ASU will be effective for fiscal years and interim periods within those fiscal years beginning after December 15, 2020. We will adopt this guidance on January 1, 2021. We do not expect that the saleadoption of the Banc Home Loans division and certain other mortgage banking related assets and liabilities that would be sold or settled separately within one year met the criteria to be classified asthese amendments will have a discontinued operation and the related operating results and financial condition have been presented as discontinued operationsmaterial effect on theour consolidated financial statements. See Note 2 for additional information. Unless otherwise indicated, information included in these notes to the consolidated financial statements is presented on a consolidated operations basis, which includes results from both continuing and discontinued operations, as of December 31, 2018 and for the three and nine months ended September 30, 2018. There were no material assets, liabilities or operating income as of and for the three and nine months ended September 30, 2019 related to discontinued operations.
Restructuring Expense: During the three and nine months ended September 30, 2019, the Company continued to implement its strategic objective to de-emphasize the production of low margin loan products through its exit from the third-party mortgage origination ("TPMO") and brokered single family lending business. The Company recognized 0 restructuring costs for the three months ended September 30, 2019 and $2.6 million for the nine months ended September 30, 2019, associated with the exit from the TPMO and brokered single family lending business and CEO transition.
Adopted Accounting Pronouncements: During the nine months ended September 30, 2019, the following pronouncements applicable to the Company were adopted:
In February 2016,March 2020, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (ASU) 2016-02 Topic 842, “Leases”ASU 2020-04, Reference Rate Reform (Topic 848), which increases transparency and comparability among organizations by requiringprovides optional guidance, for a limited period of time, to ease the recognition of right of use (ROU) assets and lease liabilities on the balance sheet. Most prominent among the changespotential burden in the standard is the recognition of ROU assets and lease liabilities by lessees for those leases classified as operating leases. Under the standard, disclosures are required to meet the objective of enabling users of financial statements to assess the amount, timing, and uncertainty of cash flows arising from leases. The Company adopted Topic 842 and related updates effective January 1, 2019 and used the effective date as the date of initial application, and therefore, periods prior to January 1, 2019 were not restated. The Company elected the package of practical expedients, which permits us not to reassess prior conclusions about lease identifications, lease classification and initial direct costs under the new standard. The Company did not elect to apply the hindsight practical expedient pertaining to using hindsight knowledge as of the effective date when determining lease terms and impairment. The Company also has elected the short-term lease recognition exemption (leases with terms 12 months or less) for all leases that qualify, and thus will not recognize ROU assets or lease liabilities for those leases. In addition, the Company elected the practical expedient to not separate lease and non-lease components for all of our leases. Upon adoption, the Company recognized on its consolidated balance sheet ROU assets of approximately $23.3 million (inclusive of an adjustment to remove the Company's existing deferred rent liability of approximately $1.4 million) with a corresponding operating lease liability of approximately $24.7 million. The standard did not have an impact on our consolidated statements of operations. In addition, the Company's accounting for finance leases remained substantially unchanged.
In January 2017,(or recognizing the FASB issued ASU 2017-04, "Simplifying the Test for Goodwill Impairment," which amended ASC 350 "Intangibles-Goodwill and Other."benefits of) reference rate reform on financial reporting. The amendments in this ASU simplify how an entity is2020-04 are elective and apply to all entities, subject to meeting certain criteria, that have contracts, hedging relationships, and other transactions that reference London Interbank Offered Rate (“LIBOR”) or another reference rate expected to be discontinued because of reference rate reform. ASU 2020-04 provides optional expedients and exceptions for applying GAAP to contract modifications and hedging relationships, subject to meeting certain criteria. When elected, the optional expedients for contract modifications must be applied consistently for all eligible contracts or eligible transactions within the relevant topic or industry subtopic within the
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codification that contains the guidance that otherwise would be required to test goodwill for impairment by eliminating Step 2 from the goodwill impairment test. Step 2 measures a goodwill impairment loss by comparing the implied fair value of a reporting unit’s goodwill with the carrying amount of that goodwill. Instead, under thebe applied. The amendments in this ASU an entity should perform its annual, or interim, goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount. An entity still has the option to perform the qualitative assessment for a reporting unit to determine if the quantitative impairment test is necessary. ASU 2017-04 is2020-04 are effective for annual or interim goodwill impairment tests in fiscal years beginning after December 15, 2019. Early adoption is permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. The Company has early adopted this guidance prospectivelyall entities as of AugustMarch 12, 2020 through December 31, 2019, and2022. We are in the adoption did notprocess of evaluating the potential impact the discontinuation of LIBOR will have a material impact on our financial statements.
NOTE 2 – SALE OF BUSINESS UNIT (DISCONTINUED OPERATIONS)
Banc Home Loans Sale
On March 30, 2017,contracts and expect to elect the Company completed the sale of specific assetsoptional expedients and activities related to its Banc Home Loans division to Caliber Home Loans, Inc. (Caliber). The Banc Home Loans division largely represented the Company's Mortgage Banking segment, the activities of which related to originating, servicing, underwriting, funding and selling single family residential (SFR) mortgage loans. Assets sold to Caliber included mortgage servicing rights (MSRs) on certain conventional agency SFR

mortgage loans. The Banc Home Loans division, along with certain other mortgage banking related assets and liabilities that were sold or settled separately within one year, was classified as discontinued operationsexceptions set forth in the accompanying Consolidated Statements of Financial Condition and Consolidated Statements of Income at December 31, 2018 and for the three and nine months ended September 30, 2018. Certain components of the Company’s Mortgage Banking segment, including MSRs on certain conventional agency SFR mortgage loans that were not sold as part of the Banc Home Loans sale and repurchase reserves related to previously sold loans, have been classified as continuing operations in the consolidated financial statements as they remain part of the Company’s ongoing operations. Refer to Note 2 of the Consolidated Financial Statements in the Company's Annual Report on Form 10-K for the year ended December 31, 2018 for additional information related to this sale.amendments.
There were 0 gains related to the disposal during the three and nine months ended September 30, 2019. For the three and nine months ended September 30, 2018, the Company recognized gains related to the disposal of $0 thousand and $1.3 million, respectively.
During the three months ended September 30, 2019 and 2018, the Company recognized earn-out income of $881 thousand and $786 thousand, respectively, related to the sale to Caliber, which is included in other noninterest income. During the nine months ended September 30, 2019 and 2018, the Company recognized earn-out income of $2.1 million and $2.2 million, respectively. At September 30, 2019 there were no material assets or liabilities associated with discontinued operations. At December 31, 2018, assets and liabilities of discontinued operations totaled $19.5 million and 0, respectively.
NOTE 32 – FAIR VALUES OF FINANCIAL INSTRUMENTS
Fair Value Hierarchy
ASC 820-10 establishes a fair value hierarchy which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The topic describes three levels of inputs that may be used to measure fair value:
•Level 1: Quoted prices (unadjusted) for identical assets or liabilities in active markets that the entity has the ability to access as of the measurement date.
•Level 2: Significant observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data.
•Level 3: Significant unobservable inputs that reflect a reporting entity’s own assumptions about the assumptions that market participants would use in pricing an asset or liability.
Categorization within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement.
Assets and Liabilities Measured on a Recurring Basis
Securities Available-for-Sale: The fair values of securities available-for-sale are generally determined by quoted market prices in active markets, if available (Level 1). If quoted market prices are not available, the Companywe primarily employsemploy independent pricing services that utilize pricing models to calculate fair value. Such fair value measurements consider observable data such as dealer quotes, market spreads, cash flows, yield curves, live trading levels, trade execution data, market consensus prepayment speeds, credit information, and respective terms and conditions for debt instruments. The Company employsWe employ procedures to monitor the pricing service's assumptions and establishesestablish processes to challenge the pricing service's valuations that appear unusual or unexpected. Multiple quotes or prices may be obtained in this process and we determine which fair value is most appropriate based on market information and analysis. Quotes obtained through this process are generally non-binding. We follow established procedures to ensure that assets and liabilities are properly classified in the fair value hierarchy. Level 2 securities include U.S. Small Business Administration (SBA)SBA loan pool securities, U.S. government agency and U.S. government sponsored enterprise (GSE) residential mortgage-backed securities, non-agency residential mortgage-backed securities, non-agency commercial mortgage-backed securities, collateralized loan obligations, and corporate debt securities. When a market is illiquid or there is a lack of transparency around the inputs to valuation, including at least one unobservable input, the securities are classified as Level 3 and reliance is placed upon internally developed models and managementmanagement's judgment and evaluation for valuation. The CompanyWe had no0 securities available-for-sale classified as Level 3 at SeptemberJune 30, 20192020 or December 31, 2018.2019.
Loans Held-for-Sale, Carried at Fair Value: The fair value of loans held-for-sale is based on commitments outstanding from investors as well as whatand current offerings in the secondary market investors are currently offering for portfolios with similar characteristics, except for loans that are repurchased out of GNMA loan pools that become severely delinquent which are valued based on an internal model that estimates the expected loss the Company will incur on these loans. Loans previously sold to GNMA that are delinquent more than 90 days are subject to a repurchase option when that condition exists. These loans are re-recognized at fair value and offset by a secured borrowing, as the loans are still legally owned by GNMA but failed sale accounting treatment under GAAP due to the repurchase option.model. Loans held-for-sale subject to recurring fair value adjustments are classified as Level 2, or in the case of loans repurchased, Level 3. The fair value includes the servicing value of the loans as well asand any

accrued interest. As of September 30, 2019 and December 31, 2018, there were 0 loans that were delinquent more than 90 days and eligible to be repurchased out of GNMA loan pools.
Derivative Assets and LiabilitiesLiabilities::
Interest Rate Swaps and Caps.
The Company offers We offer interest rate swapsswap and capscap products to certain loan customersclients to allow them to hedge the risk of rising interest rates on their variable rate loans. The Company originatesWe originate a variable rate loan and entersenter into a variable-to-fixed interest rate swap with the customer. The Companyclient. We also entersenter into an offsetting swap with a correspondent bank. These back-to-back agreements are intended to offset each other and allow the Companyus to originate a variable rate loan while providing a contract for fixed interest payments for the customer.client. The net cash flow for the Companyus is equal to the interest income received from a variable rate loan originated with the customer.client plus a fee. The fair value of these derivatives is based on a discounted cash flow approach. Due to the observable nature of the inputs used in deriving the fair value of these derivative contracts, the valuation of interest rate swaps is classified as Level 2.
The Company may use interest rate swaps to offset variability in the fair values
13
Table of investment securities resulting from changes in market interest rates. During the third quarter of 2019, the Company partially hedged the fair value of the MBS portfolio using interest rate swaps. At the end of the quarter, the Company took advantage of the decline in long-term interest rates and sold the majority of the MBS portfolio and unwound the majority of the interest rate swaps. Contents
Foreign Exchange Contracts. 
The Company offersWe offer short-term foreign exchange contracts to its customers to purchase and/or sell foreign currencies at set rates in the future. These products allow customers to hedge the foreign exchange rate risk of their deposits and loans denominated in foreign currencies. In conjunction with these products, the Companywe also entersenter into offsetting contracts with institutional counterparties to hedge the Company’s foreign exchange rate risk. These back-to-back contracts allow the Companyus to offer itsour customers foreign exchange products while minimizing its exposure to foreign exchange rate fluctuations. The fair value of these instruments is determined at each reporting period based on the change in the foreign exchange rate. Given the short-term nature of the contracts, the counterparties’ credit risks are considered nominal and resultedresult in no adjustments to the valuation of the short-term foreign exchange contracts. Due to the observable nature of the inputs used in deriving the fair value of these derivative contracts, the valuation of these contracts is classified as Level 2.

14
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The following table presents the Company’sour financial assets and liabilities measured at fair value on a recurring basis as of the dates indicated:
Fair Value Measurement Level
($ in thousands)Carrying ValueQuoted Prices in Active Markets for Identical Assets
(Level 1)		Significant Other Observable Inputs
(Level 2)		Significant Unobservable Inputs
(Level 3)
June 30, 2020
Assets
Securities available-for-sale:
U.S. government agency and U.S. government sponsored enterprise residential mortgage-backed securities$105,555  $—  $105,555  $—  
U.S. government agency and U.S. government sponsored enterprise collateralized mortgage obligations201,136  —  201,136  —  
Municipal securities57,174  —  57,174  —  
Non-agency residential mortgage-backed securities164  —  164  —  
Collateralized loan obligations668,353  —  668,353  —  
Corporate debt securities143,647  —  143,647  —  
Loans held-for-sale, carried at fair value19,768  —  3,083  16,685  
Derivative assets:
Interest rate swaps and caps (1)
8,598  —  8,598  —  
Foreign exchange contracts (1)
137  —  137  —  
Liabilities
Derivative liabilities:
Interest rate swaps and caps (2)
9,239  —  9,239  —  
Foreign exchange contracts (2)
54  —  54  —  
December 31, 2019
Assets
Securities available-for-sale:
U.S. government agency and U.S. government sponsored enterprise residential mortgage-backed securities$36,456  $—  $36,456  $—  
U.S. government agency and U.S. government sponsored enterprise collateralized mortgage obligations91,299  —  91,299  —  
Municipal securities52,689  —  52,689  —  
Non-agency residential mortgage-backed securities196  —  196  —  
Collateralized loan obligations718,361  —  718,361  —  
Corporate debt securities13,579  —  13,579  —  
Loans held-for-sale, carried at fair value22,642  —  3,409  19,233  
Derivative assets:
Interest rate swaps and caps (1)
3,445  —  3,445  —  
Foreign exchange contracts (1)
138  —  138  —  
Liabilities
Derivative liabilities:
Interest rate swaps and caps (2)
3,717  —  3,717  —  
Foreign exchange contracts (2)
136  —  136  —  

(1)Included in Other assets in the Consolidated Statements of Financial Condition.
(2)Included in Accrued expenses and Other liabilities in the Consolidated Statements of Financial Condition.

15
    Fair Value Measurement Level
($ in thousands) Carrying Value Quoted Prices in Active Markets for Identical Assets
(Level 1)		 Significant Other Observable Inputs
(Level 2)		 Significant Unobservable Inputs
(Level 3)
September 30, 2019        
Assets        
Securities available-for-sale:        
SBA loan pools securities $—
 $—
 $—
 $—
U.S. government agency and U.S. government sponsored enterprise residential mortgage-backed securities 40,374
 —
 40,374
 —
Non-agency residential mortgage-backed securities 277
 —
 277
 —
Collateralized loan obligations 735,011
 —
 735,011
 —
Loans held-for-sale, carried at fair value 23,936
 —
 3,431
 20,505
Derivative assets:        
Interest rate swaps and caps (1)
 4,773
 —
 4,773
 —
Foreign exchange contracts (1)
 36
 —
 36
 —
Liabilities        
Derivative liabilities:        
Interest rate swaps and caps (2)
 5,198
 —
 5,198
 —
Interest rate swaps and caps - mortgage-backed securities(3)
 325
 —
 325
 —
Foreign exchange contracts (2)
 30
 —
 30
 —
December 31, 2018        
Assets        
Securities available-for-sale:        
SBA loan pools securities $910
 $—
 $910
 $—
U.S. government agency and U.S. government sponsored enterprise residential mortgage-backed securities 437,442
 —
 437,442
 —
Non-agency residential mortgage-backed securities 427
 —
 427
 —
Non-agency commercial mortgage-backed securities 132,199
 —
 132,199
 —
Collateralized loan obligations 1,421,522
 —
 1,421,522
 —
Loans held-for-sale, carried at fair value (4)
 27,180
 —
 2,140
 25,040
Derivative assets:        
Interest rate swaps and caps (1)
 1,534
 —
 1,534
 —
Liabilities        
Derivative liabilities:        
Interest rate swaps and caps (2)
 1,600
 —
 1,600
 —
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(1)Included in Other assets in the Consolidated Statements of Financial Condition.
(2)Included in Accrued expenses and Other liabilities in the Consolidated Statements of Financial Condition.
(3)Included in Securities available-for-sale in the Consolidated Statements of Financial Condition.
(4)Includes loans held-for-sale carried at fair value of $19.5 million ($2.1 million at Level 2 and $17.4 million at Level 3) of discontinued operations, which are included in Assets of Discontinued Operations in the Consolidated Statements of Financial Condition.
The following table presents a reconciliation of assets measured at fair value on a recurring basis using significant unobservable inputs (Level 3), on a consolidated operations basis, for the periods indicated:

Three Months Ended
June 30,		Six Months Ended
June 30,
($ in thousands)2020201920202019
Loans repurchased from GNMA Loan Pools
Balance at beginning of period$17,127  $23,069  $19,233  $25,040  
Total gains (losses) (realized/unrealized):
Included in earnings—fair value adjustment22  (6) (1,369) (3) 
Additions—  —  —  —  
Sales, settlements, and other(464) (1,988) (1,179) (3,962) 
Balance at end of period$16,685  $21,075  $16,685  $21,075  

  Three Months Ended September 30, Nine Months Ended September 30,
($ in thousands) 2019 2018 2019 2018
Loans repurchased from GNMA Loan Pools (1)
        
Balance at beginning of period $21,075
 $33,234
 $25,040
 $98,940
Total gains (losses) (realized/unrealized):        
Included in earnings—fair value adjustment 2
 (22) (1) (276)
Additions 406
 711
 406
 28,096
Sales, settlements, and other (978) (8,167) (4,940) (101,004)
Balance at end of period $20,505
 $25,756
 $20,505
 $25,756

(1)Includes loans repurchased from GNMA Loan Pools of discontinued operations, which is included in Assets of Discontinued Operations in the Consolidated Statements of Financial Condition, of 0 and $20.9 million, respectively, for the three months ended September 30, 2019 and 2018 and $17.3 million and $32.3 million for the nine months ended September 30, 2019 and 2018 in balance at beginning of period, and 0 and $17.7 million, respectively, for both the three and nine months ended September 30, 2019 and 2018 in balance at end of period.
Loans repurchased from GNMA loan pools had aggregate unpaid principal balances of $18.6 million and $19.8 million as of June 30, 2020 and December 31, 2019. The significant unobservable inputs used in the fair value measurement of the Company'sour loans repurchased from GNMA loan pools at SeptemberJune 30, 20192020 and December 31, 20182019 included an expected loss rate of 1.55 percent1.55% for insured loans and 20.00 percent20.00% for uninsured loans. There may be inherent weaknesses in any calculation technique, and changes in the underlying assumptions used, including discount rates and estimates of future cash flows, could significantly affect the results.
Fair Value Option
Loans Held-for-Sale, Carried at Fair Value: The CompanyWe elected the fair value option for certain SFR mortgage loans held-for-sale. Electing to measure SFR mortgage loans held-for-sale at fair value reduces certain timing differences and better matches changes in the value of these assets with changes in the value of derivatives used as economic hedges for these assets. The CompanyWe also elected to record loans repurchased from GNMA at fair value, as the Company intendswe intend to sell them after curing any defects and, accordingly, they are classified as held-for-sale. Loans previously sold to GNMA that are delinquent more than 90 days are subject to a repurchase option when that condition exists. Theseexists and typically are repurchased by us. To the extent loans are subject to a repurchase option and not repurchased, the loans are re-recognized at fair value and offset by a secured borrowing, as the loans are still legally owned by GNMA. As of June 30, 2020 and December 31, 2019, there were 0 loans subject to such repurchase option and accordingly 0 related secured borrowings.
The following table presents the fair value and aggregate principal balance of certain assets, on a consolidated operations basis, under the fair value option:
June 30, 2020December 31, 2019
($ in thousands)($ in thousands)Fair ValueUnpaid Principal BalanceDifferenceFair ValueUnpaid Principal BalanceDifference
Loans held-for-sale, carried at fair value:Loans held-for-sale, carried at fair value:
Total loansTotal loans$19,768  $22,208  $(2,440) $22,642  $23,455  $(813) 
Non-accrual loans (1)
Non-accrual loans (1)
6,147  7,244  (1,097) 8,125  8,370  (245) 
 September 30, 2019 December 31, 2018
($ in thousands) Fair Value Unpaid Principal Balance Difference Fair Value Unpaid Principal Balance Difference
Loans held-for-sale, carried at fair value in continuing operations:            
Total loans $23,936
 $24,746
 $(810) $7,690
 $7,906
 $(216)
Non-accrual loans (1)
 8,203
 8,436
 (233) 2,427
 2,538
 (111)
Loans held-for-sale, carried at fair value in discontinued operations:            
Total loans $—
 $—
 $—
 $19,490
 $20,027
 $(537)
Non-accrual loans (2)
 —
 —
 —
 8,430
 8,496
 (66)
(1)Includes loans guaranteed by the U.S. government of $7.2 million and $1.6 million, respectively, at September 30, 2019 and December 31, 2018.
(2)Includes loans guaranteed by the U.S. government of 0 and $7.6 million, respectively, at September 30, 2019 and December 31, 2018.
(1) Includes loans guaranteed by the U.S. government of $4.4 million and $6.7 million at June 30, 2020 and December 31, 2019.

There were 0 loans held-for-sale that were 90 days or more past due and still accruing interest as of SeptemberJune 30, 20192020 and December 31, 2018.2019.
The assets accounted for under the fair value option are initially measured at fair value. Gains and losses from initial measurement and subsequent changes in fair value are recognized in earnings. The following table presents changes in fair value related to initial measurement and subsequent changes in fair value included in earnings for these assets measured at fair

value for the periods indicated:
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  Three Months Ended September 30, Nine Months Ended September 30,
($ in thousands) 2019 2018 2019 2018
Net gains from fair value changes:        
Net gain on sale of loans (continuing operations) $17
 $11
 $77
 $198
Net revenue on mortgage banking activities (discontinued operations) —
 30
 —
 127
Three Months Ended
June 30,		Six Months Ended
June 30,
($ in thousands)2020201920202019
Net (losses) gains from fair value changes:
Fair value adjustment for loans held-for-sale$25  $59  $(1,561) $60  

Changes in fair value due to instrument-specific credit risk were immaterial for the three and nine months ended September 30, 2019 and 2018. Interest income on loans held-for-sale under the fair value option is measured based on the contractual interest rate and reported in interest income on loans, including fees and income from discontinued operations in the consolidated statements of operations.
Assets and Liabilities Measured on a Non-Recurring Basis
Impaired Loans: The fair value of impaired loans with specific allocations of the ALLLACL based on collateral is generally based on recent real estate appraisals and automated valuation models (AVMs)(“AVMs”). These appraisals may utilize a single valuation approach or a combination of approaches including comparable sales and the income approach. Adjustments are routinely made in the appraisal process by the appraisers to adjust for differences between the comparable sales and income data available. Such adjustments are typically deemed significant unobservable inputs used for determining fair value and result in a Level 3 classification.
The following table presents the Company’sour financial assets and liabilities measured at fair value on a non-recurring basis as of the dates indicated:
Fair Value Measurement Level
($ in thousands)($ in thousands)Carrying ValueQuoted Prices in Active Markets for Identical Assets
(Level 1)		Significant Other Observable Inputs
(Level 2)		Significant Unobservable Inputs
(Level 3)
June 30, 2020June 30, 2020
AssetsAssets
Impaired loans:Impaired loans:
Commercial and industrialCommercial and industrial$10,049  $—  $—  $10,049  
   Fair Value Measurement Level
($ in thousands) Carrying Value Quoted Prices in Active Markets for Identical Assets
(Level 1)		 Significant Other Observable Inputs
(Level 2)		 Significant Unobservable Inputs
(Level 3)
September 30, 2019        
SBASBA664  —  —  664  
December 31, 2019December 31, 2019
Assets        Assets
Impaired loans:        Impaired loans:
Single family residential mortgageSingle family residential mortgage$3,678  $—  $—  $3,678  
Commercial and industrial $15,690
 —
 —
 $15,690
Commercial and industrial15,409  —  —  15,409  
SBA 1,518
 —
 —
 1,518
SBA1,711  —  —  1,711  
December 31, 2018        
Assets        
Impaired loans:        
SBA $226
 —
 —
 $226

The following table presents the gain (losses)losses recognized on assets measured at fair value on a non-recurring basis for the periods indicated:
Three Months Ended
June 30,		Six Months Ended
June 30,
($ in thousands)2020201920202019
Impaired loans:
Single family residential mortgage$—  $—  $(531) $(490) 
Commercial and industrial(6,090) —  (8,514) —  
SBA(670) —  (1,544) (46) 
Other consumer—  —  (4) (88) 
  Three Months Ended September 30, Nine Months Ended September 30,
($ in thousands) 2019 2018 2019 2018
Impaired loans:        
Single family residential mortgage $—
 $—
 $(490) $(115)
Commercial and industrial —
 (219) —
 (511)
SBA —
 1
 (46) (379)
Other consumer —
 —
 (88) (141)
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Estimated Fair Values of Financial Instruments

The following table presents the carrying amounts and estimated fair values of financial assets and liabilities on a consolidated operations basis, as of the dates indicated:
Carrying AmountFair Value Measurement Level
($ in thousands)Level 1Level 2Level 3Total
June 30, 2020
Financial assets
Cash and cash equivalents$420,640  $420,640  $—  $—  $420,640  
Securities available-for-sale1,176,029  —  1,176,029  —  1,176,029  
Federal Home Loan Bank and other bank stock46,585  —  46,585  —  46,585  
Loans held-for-sale, carried at fair value19,768  —  3,083  16,685  19,768  
Loans receivable, net of allowance for loan losses5,537,326  —  —  5,642,634  5,642,634  
Accrued interest receivable29,515  29,515  —  —  29,515  
Derivative assets8,735  —  8,735  —  8,735  
Financial liabilities
Deposits6,037,465  —  —  6,042,349  6,042,349  
Advances from Federal Home Loan Bank617,170  —  666,177  —  666,177  
Long-term debt173,537  —  178,030  —  178,030  
Derivative liabilities9,293  —  9,293  —  9,293  
Accrued interest payable4,297  4,297  —  —  4,297  
December 31, 2019
Financial assets
Cash and cash equivalents$373,472  $373,472  $—  $—  $373,472  
Securities available-for-sale912,580  —  912,580  —  912,580  
Federal Home Loan Bank and other bank stock59,420  —  59,420  —  59,420  
Loans held-for-sale22,642  —  3,409  19,233  22,642  
Loans receivable, net of allowance for credit losses5,894,236  —  —  5,894,732  5,894,732  
Accrued interest receivable24,523  24,523  —  —  24,523  
Derivative assets3,583  —  3,583  —  3,583  
Financial liabilities
Deposits5,427,167  —  —  5,430,536  5,430,536  
Advances from Federal Home Loan Bank1,195,000  —  1,222,709  —  1,222,709  
Long-term debt173,421  —  180,213  —  180,213  
Derivative liabilities3,853  —  3,853  —  3,853  
Accrued interest payable4,687  4,687  —  —  4,687  

18
  Carrying Amount Fair Value Measurement Level
($ in thousands)  Level 1 Level 2 Level 3 Total
September 30, 2019          
Financial assets          
Cash and cash equivalents $526,874
 $526,874
 $—
 $—
 $526,874
Securities available-for-sale 775,662
 —
 775,662
 —
 775,662
Federal Home Loan Bank and other bank stock 71,679
 —
 71,679
 —
 71,679
Loans held-for-sale, carried at fair value 23,936
 —
 3,431
 20,505
 23,936
Loans receivable, net of ALLL 6,320,332
 —
 —
 6,280,331
 6,280,331
Accrued interest receivable 27,598
 27,598
 —
 —
 27,598
Derivative assets 4,809
 —
 4,809
 —
 4,809
Financial liabilities          
Deposits 5,770,058
 —
 —
 5,700,325
 5,700,325
Advances from Federal Home Loan Bank 1,650,000
 —
 1,681,331
 —
 1,681,331
Long term debt 173,339
 —
 182,457
 —
 182,457
Derivative liabilities 5,553
 —
 5,553
 —
 5,553
Accrued interest payable 9,112
 9,112
 —
 —
 9,112
December 31, 2018          
Financial assets          
Cash and cash equivalents $391,592
 $391,592
 $—
 $—
 $391,592
Securities available-for-sale 1,992,500
 —
 1,992,500
 —
 1,992,500
Federal Home Loan Bank and other bank stock 68,094
 —
 68,094
 —
 68,094
Loans held-for-sale (1)
 27,606
 —
 2,566
 25,040
 27,606
Loans receivable, net of allowance 7,638,681
 —
 —
 7,513,910
 7,513,910
Accrued interest receivable 38,807
 38,807
 —
 —
 38,807
Derivative assets 1,534
 —
 1,534
 —
 1,534
Financial liabilities          
Deposits 7,916,644
 —
 —
 7,689,324
 7,689,324
Advances from Federal Home Loan Bank 1,520,000
 —
 1,517,761
 —
 1,517,761
Long-term debt 173,174
 —
 174,059
 —
 174,059
Derivative liabilities 1,600
 —
 1,600
 —
 1,600
Accrued interest payable 13,253
 13,253
 —
 —
 13,253
(1)Includes loans held-for-sale carried at fair value of $19.5 million ($2.1 million at Level 2 and $17.4 million at Level 3) of discontinued operations.

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NOTE 43 – INVESTMENT SECURITIES
The following table presents the amortized cost and fair value of the investment securities portfolio as of the dates indicated:
($ in thousands)($ in thousands)Amortized CostGross Unrealized GainsGross Unrealized LossesFair Value
June 30, 2020June 30, 2020
($ in thousands) Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Fair Value
September 30, 2019        
Securities available-for-sale:        Securities available-for-sale:
U.S. government agency and U.S. government sponsored enterprise residential mortgage-backed securities $40,374
 $—
 $—
 $40,374
U.S. government agency and U.S. government sponsored enterprise residential mortgage-backed securities$100,128  $5,427  $—  $105,555  
U.S. government agency and U.S. government sponsored enterprise collateralized mortgage obligationsU.S. government agency and U.S. government sponsored enterprise collateralized mortgage obligations199,262  1,906  (32) 201,136  
Municipal securitiesMunicipal securities52,973  4,201  —  57,174  
Non-agency residential mortgage-backed securities 267
 10
 —
 277
Non-agency residential mortgage-backed securities161  3  —  164  
Collateralized loan obligations 748,605
 —
 (13,594) 735,011
Collateralized loan obligations703,605  —  (35,252) 668,353  
Corporate debt securitiesCorporate debt securities141,962  2,387  (702) 143,647  
Total securities available-for-sale $789,246
 $10
 $(13,594) $775,662
Total securities available-for-sale$1,198,091  $13,924  $(35,986) $1,176,029  
December 31, 2018        
December 31, 2019December 31, 2019
Securities available-for-sale:        Securities available-for-sale:
SBA loan pool securities $911
 $—
 $(1) $910
U.S. government agency and U.S. government sponsored enterprise residential mortgage-backed securities 461,987
 —
 (24,545) 437,442
U.S. government agency and U.S. government sponsored enterprise residential mortgage-backed securities$37,613  $—  $(1,157) $36,456  
U.S. government agency and U.S. government sponsored enterprise collateralized mortgage obligationsU.S. government agency and U.S. government sponsored enterprise collateralized mortgage obligations91,543  16  (260) 91,299  
Municipal securitiesMunicipal securities52,997  51  (359) 52,689  
Non-agency residential mortgage-backed securities 418
 9
 —
 427
Non-agency residential mortgage-backed securities191  5  —  196  
Non-agency commercial mortgage-backed securities 132,199
 —
 —
 132,199
Collateralized loan obligations 1,431,171
 141
 (9,790) 1,421,522
Collateralized loan obligations733,605  —  (15,244) 718,361  
Corporate debt securitiesCorporate debt securities13,500  79  —  13,579  
Total securities available-for-sale $2,026,686
 $150
 $(34,336) $1,992,500
Total securities available-for-sale$929,449  $151  $(17,020) $912,580  

As of December 31, 2018, the Company changed its intent and decided to sell its non-agency commercial mortgage-backed securities in an unrealized loss position due to its strategy to reposition its securities profile and recognized $3.3 million of other-than-temporary impairment (OTTI) losses during the fourth quarter of 2018. During the first quarter of 2019, the Company completed the sale of all remaining non-agency commercial mortgage-backed securities totaling $132.2 million resulting in a gain of $9 thousand. During the three and nine months ended SeptemberAt June 30, 2019, the Company sold $380.9 million and $385.8 million, respectively, in mortgage-backed securities resulting in a loss of $5.1 million and $5.0 million, respectively. Additionally, during the three and nine months ended September 30, 2019, the Company sold 0 and $644.5 million, respectively, in collateralized loan obligations resulting in a gain of 0 and $143 thousand, respectively. During the first quarter of 2018, the Company completed the sale of all remaining corporate debt securities, totaling $76.8 million resulting in a gain of $4.9 million.
At September 30, 2019, the Company's2020, our investment securities portfolio consisted of agency securities, municipal securities, mortgage-backed securities, and collateralized loan obligations.obligations, and corporate debt securities. The expected maturities of these types of securities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.
At SeptemberThere was 0 allowance for credit losses for debt securities as of June 30, 20192020. Accrued interest receivable on debt securities available-for-sale totaled $5.5 million and $5.6 million at June 30, 2020 and December 31, 2018,2019, and is included within other assets in the accompanying consolidated statements of financial condition. Accrued interest receivable is excluded from the estimate of expected credit losses.
At June 30, 2020 and December 31, 2019, there were no holdings of any one issuer, other than the U.S. Government and its agencies, in an amount greater than 10 percent of the Company'sour stockholders’ equity.
The following table presents proceeds from sales and calls of securities available-for-sale and the associated gross gains and losses realized through earnings upon the sales and calls of securities available-for-sale for the periods indicated:
 Three Months Ended September 30, Nine Months Ended September 30,Three Months Ended
June 30,		Six Months Ended
June 30,
($ in thousands) 2019 2018 2019 2018($ in thousands)2020201920202019
Gross realized gains on sales and calls of securities available-for-sale $71
 $13
 $279
 $5,532
Gross realized gains on sales and calls of securities available-for-sale$2,011  $—  $2,011  $208  
Gross realized losses on sales and calls of securities available-for-sale (5,134) —
 (5,134) —
Gross realized losses on sales and calls of securities available-for-sale—  —  —  —  
Net realized (losses) gains on sales and calls of securities available-for-sale $(5,063) $13
 $(4,855) $5,532
Net realized gains on sales and calls of securities available-for-saleNet realized gains on sales and calls of securities available-for-sale$2,011  $—  $2,011  $208  
Proceeds from sales and calls of securities available-for-sale $43,252
 $283,114
 $861,008
 $896,070
Proceeds from sales and calls of securities available-for-sale$22,728  $298,156  $52,728  $820,048  

Investment securities with carrying values of $64.6$42.2 million and $163.0$44.0 million as of SeptemberJune 30, 20192020 and December 31, 2018, respectively,2019, were pledged to secure FHLB advances, public deposits and for other purposes as required or permitted by law.

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The following table summarizes the investment securities with unrealized losses by security type and length of time in a continuous, unrealized loss position as of the dates indicated:
Less Than 12 Months12 Months or LongerTotal
($ in thousands)($ in thousands)Fair
Value		Gross Unrealized LossesFair
Value		Gross Unrealized LossesFair
Value		Gross Unrealized Losses
June 30, 2020June 30, 2020
 Less Than 12 Months 12 Months or Longer Total
($ in thousands) Fair Value Gross Unrealized Losses Fair Value Gross Unrealized Losses Fair Value Gross Unrealized Losses
September 30, 2019            
Securities available-for-sale:            Securities available-for-sale:
U.S. government agency and U.S. government sponsored enterprise collateralized mortgage obligationsU.S. government agency and U.S. government sponsored enterprise collateralized mortgage obligations$9,416  $(32) $—  $—  $9,416  $(32) 
Collateralized loan obligations $435,191
 $(6,539) $299,820
 $(7,055) $735,011
 $(13,594)Collateralized loan obligations63,040  (1,960) 605,313  (33,292) 668,353  (35,252) 
Corporate debt securitiesCorporate debt securities31,798  (702) —  —  31,798  (702) 
Total securities available-for-sale $435,191
 $(6,539) $299,820
 $(7,055) $735,011
 $(13,594)Total securities available-for-sale$104,254  $(2,694) $605,313  $(33,292) $709,567  $(35,986) 
December 31, 2018            
December 31, 2019December 31, 2019
Securities available-for-sale:            Securities available-for-sale:
SBA loan pool securities $—
 $—
 $910
 $(1) $910
 $(1)
U.S. government agency and U.S. government sponsored enterprise residential mortgage-backed securities 13,494
 (133) 423,916
 (24,412) 437,410
 (24,545)U.S. government agency and U.S. government sponsored enterprise residential mortgage-backed securities$35,872  $(1,157) $—  $—  $35,872  $(1,157) 
Non-agency residential mortgage-backed securities 90
 —
 16
 —
 106
 —
U.S. government agency and U.S. government sponsored enterprise collateralized mortgage obligationsU.S. government agency and U.S. government sponsored enterprise collateralized mortgage obligations73,379  (260) —  —  73,379  (260) 
Municipal securitiesMunicipal securities31,723  (359) —  —  31,723  (359) 
Collateralized loan obligations 1,364,317
 (9,480) 32,790
 (310) 1,397,107
 (9,790)Collateralized loan obligations49,553  (447) 668,808  (14,797) 718,361  (15,244) 
Total securities available-for-sale $1,377,901
 $(9,613) $457,632
 $(24,723) $1,835,533
 $(34,336)Total securities available-for-sale$190,527  $(2,223) $668,808  $(14,797) $859,335  $(17,020) 

During the three and nine months ended SeptemberAt June 30, 2019, the Company recorded OTTI for its remaining portfolio of mortgage-backed securities of $731 thousand and $731 thousand, respectively. The OTTI was recognized as a result of the Company's ongoing strategic decision to liquidate this longer duration portfolio. During the three and nine months ended September 30, 2018, no OTTI was recorded.
At September 30, 2019, the Company’s2020, our securities available-for-sale portfolio consisted of 57102 securities, 45 of which 50 securities were in an unrealized loss position. At December 31, 2018, the Company’s2019, our securities available-for-sale portfolio consisted of 14570 securities, 118 of which 60 securities were in an unrealized loss position.
The Company monitors itsWe monitor our securities portfolio to ensure it has adequate credit support. The majority of unrealized losses are related to the Company'sour collateralized loan obligations. The CompanyWe also considersconsider the lowest credit rating for identification of potential OTTIcredit impairment for other securities. As of SeptemberJune 30, 2019, nearly2020, all of the Company's non-agency mortgage-backed securities orour collateralized loan obligations investment securities in an unrealized loss position received an investment grade credit rating. The decline in fair value iswas attributable to a combination of changes in interest rates and general volatility in the credit market conditions in response to the economic uncertainty caused by the global pandemic. We do not credit quality. Except for the remaining portfolio of 9 mortgage-backed securities which the Company intendscurrently intend to sell the Company believes there was no further OTTI as of September 30, 2019. The Company does not have the intent to sell the remaining 45these 50 securities in an unrealized loss position and further believesbelieve, it is more likely than not, likely that itwe will not be required to sell these securities before their anticipated recovery.

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Table of Contents
The following table presents maturities, based on the composition and theearlier of maturity dates or next repricing date, and yield information of the investment securities portfolio as of SeptemberJune 30, 2019:2020:
 One year or less More than One Year through Five Years More than Five Years through Ten Years More than Ten Years TotalOne year or lessMore than One Year through Five YearsMore than Five Years through Ten YearsMore than Ten YearsTotal
($ in thousands) 
Fair
Value
 Weighted-Average Yield 
Fair
Value
 Weighted-Average Yield 
Fair
Value
 Weighted-Average Yield 
Fair
Value
 Weighted-Average Yield 
Fair
Value
 Weighted-Average Yield($ in thousands)Fair
Value		Weighted-Average YieldFair
Value		Weighted-Average YieldFair
Value		Weighted-Average YieldFair
Value		Weighted-Average YieldFair
Value		Weighted-Average Yield
Securities available-for-sale:                    Securities available-for-sale:
U.S. government agency and U.S. government sponsored enterprise residential mortgage-backed securities $—
 —% $—
 —% $—
 —% $40,374
 2.56% $40,374
 2.56%U.S. government agency and U.S. government sponsored enterprise residential mortgage-backed securities$—  — %$—  — %$30,413  2.20 %$75,142  2.35 %$105,555  2.31 %
U.S. government agency and U.S. government sponsored enterprise collateralized mortgage obligationsU.S. government agency and U.S. government sponsored enterprise collateralized mortgage obligations118,163  0.74 %11,608  2.02 %25,579  1.63 %45,786  0.93 %201,136  0.96 %
Municipal securitiesMunicipal securities—  — %—  — %—  — %57,174  2.79 %57,174  2.79 %
Non-agency residential mortgage-backed securities 65
 2.68% —
 —% —
 —% 212
 5.79% 277
 5.06%Non-agency residential mortgage-backed securities—  — %—  — %—  — %164  6.14 %164  6.14 %
Collateralized loan obligations 735,011
 3.52% —
 —% —
 —% —
 —% 735,011
 3.52%Collateralized loan obligations668,353  2.73 %—  — %—  — %—  — %668,353  2.73 %
Corporate debt securitiesCorporate debt securities—  — %122,301  4.99 %21,346  5.64 %—  — %143,647  5.08 %
Total securities available-for-sale $735,076
 3.52% $—
 —% $—
 —% $40,586
 2.58% $775,662
 3.47%Total securities available-for-sale$786,516  2.45 %$133,909  4.74 %$77,338  2.96 %$178,266  2.11 %$1,176,029  2.68 %
21

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NOTE 54 – LOANS AND ALLOWANCE FOR LOANCREDIT LOSSES
The following table presents the balances in the Company’sour loan portfolios as of the dates indicated:
($ in thousands) September 30,
2019		 December 31,
2018
Commercial:    
Commercial and industrial $1,789,478
 $1,944,142
Commercial real estate 891,029
 867,013
Multifamily 1,563,757
 2,241,246
SBA 75,359
 68,741
Construction 228,561
 203,976
Consumer:    
Single family residential mortgage 1,775,953
 2,305,490
Other consumer 59,122
 70,265
Total loans(1)
 $6,383,259
 $7,700,873
Allowance for loan losses (62,927) (62,192)
Loans receivable, net $6,320,332
 $7,638,681

(1)Total loans include deferred loan origination costs/(fees) and premiums/(discounts), net of $15.3 million and $17.7 million, respectively, at September 30, 2019 and December 31, 2018.
Non-Traditional Mortgage Loans ("NTM")
The following table presents the composition of the NTM portfolio as of the dates indicated:
($ in thousands)June 30,
2020		December 31,
2019
Commercial:
Commercial and industrial$1,436,990  $1,691,270  
Commercial real estate822,694  818,817  
Multifamily1,434,071  1,494,528  
SBA(1)
310,784  70,981  
Construction212,979  231,350  
Consumer:
Single family residential mortgage1,370,785  1,590,774  
Other consumer39,393  54,165  
Total loans(2)
$5,627,696  $5,951,885  
Allowance for loan losses(90,370) (57,649) 
Loans receivable, net$5,537,326  $5,894,236  
(1)
  September 30, 2019 December 31, 2018
($ in thousands) Count Amount Percent Count Amount Percent
Consumer:            
Single family residential mortgage:

            
Green Loans (HELOC) - first liens(1)
 76
 $59,538
 9.1% 88
 $67,729
 8.2%
Interest-only - first liens(2)
 409
 588,567
 90.1% 519
 753,061
 91.1%
Negative amortization(3)
 9
 3,062
 0.5% 11
 3,528
 0.4%
Total NTM - first liens 494
 651,167
 99.6% 618
 824,318
 99.7%
Other consumer:            
Green Loans (HELOC) - second liens(1)
 7
 2,308
 0.4% 10
 2,413
 0.3%
Total NTM - second liens 7
 2,308
 0.4% 10
 2,413
 0.3%
Total NTM loans 501
 $653,475
 100.0% 628
 $826,731
 100.0%
Total loans receivable   $6,383,259
     $7,700,873
  
% of total NTM loans to total loans receivable   10.2%     10.7%  

Includes 1,069 PPP loans totaling $240.7 million, which included $5.6 million of net unamortized loan fees at June 30, 2020.
Green Loans
Green Loans are single family residential first(2)Total loans include deferred loan origination costs/(fees) and second mortgage linespremiums/(discounts), net, of credit with a linked checking account that allows all types of deposits$6.0 million and withdrawals to be performed. These loans are generally interest only for a 15-year term with a balloon payment due$14.3 million, respectively, at maturity. At SeptemberJune 30, 20192020 and December 31, 2018, $286 thousand and $0, respectively, of the Company's Green Loans were non-performing. As a result of their unique payment feature, Green Loans possess higher credit risk; however, management believes the risk is mitigated through the Company’s loan terms and underwriting standards, including its policies on LTV ratios and the Company’s contractual ability to curtail loans when the value of the underlying collateral declines. The Company discontinued origination of Green Loans in 2011.2019.
Interest Only Loans
Interest only loans are primarily single family residential first mortgage loans with payment features that allow interest only payments in initial periods before converting to a fully amortizing loan. At September 30, 2019 and December 31, 2018, interest only loans totaled $588.6 million and $753.1 million, respectively. At September 30, 2019 and December 31, 2018, $827 thousand and $0, respectively, of the interest only loans were non-performing.
Loans with the Potential for Negative Amortization

Negative amortization loans totaled $3.1 million and $3.5 million at September 30, 2019 and December 31, 2018, respectively. The Company discontinued origination of negative amortization loans in 2007. At September 30, 2019 and December 31, 2018, none of the loans with the potential for negative amortization were non-performing. These loans pose a potentially higher credit risk because of the lack of principal amortization and potential for negative amortization; however, management believes the credit risk associated with these loans is mitigated through the loan terms and underwriting standards, including the Company’s policies on LTV ratios.
Allowance for Loan Losses
The Company has established credit risk management processes that include regular management review of the loan portfolio to identify problem loans. During the ordinary course of business, management may become aware of borrowers and lessees who may not be able to fulfill the contractual payment requirements of the loan agreements. Such loans are subject to increased monitoring. Consideration is given to placing the loan or lease on non-accrual status, assessing the need for additional ALLL, and partial or full charge off the principal balance. The Company maintains the ALLL at a level that is considered adequate to cover the estimated incurred losses in the loan portfolio.
The Company also maintains a separate reserve for unfunded loan commitments at a level that is considered adequate to cover the estimated incurred loss. The estimated funding of the loan commitments and credit risk factors are determined based on outstanding loans that share similar credit risk exposure are used to determine the adequacy of the reserve. At September 30, 2019 and December 31, 2018, the reserve for unfunded loan commitments was $4.4 million and $4.6 million, respectively, which are included in Accrued expenses and Other liabilities on the Consolidated Statements of Financial Condition.
The credit risk monitoring system is designed to identify impaired and potential problem loans, and to perform periodic evaluation of impairment and the adequacy of the allowance for credit losses in a timely manner. In addition, the Board of Directors of the Bank has adopted a credit policy that includes a credit review and control system that it believes should be effective in ensuring that the Company maintains an adequate allowance for loan losses. The Board of Directors also provides oversight and guidance for management’s allowance evaluation process.
The following table presents a summary of activity in the ALLL for the periods indicated:
  Three Months Ended September 30, Nine Months Ended September 30,
($ in thousands) 2019 2018 2019 2018
Balance at beginning of period $59,523
 $56,678
 $62,192
 $49,333
Loans charged off (35,546) (388) (39,060) (15,977)
Recoveries of loans previously charged off 410
 82
 730
 864
Net charge-offs (35,136) (306) (38,330) (15,113)
Provision for loan losses 38,540
 1,410
 39,065
 23,562
Balance at end of period $62,927
 $57,782
 $62,927
 $57,782

During the three months ended September 30, 2019, the Company recorded a $35.1 million charge-off of a line of credit originated in November 2017 to a borrower purportedly the subject of a fraudulent scheme. In addition, the charge-off increased the loss factor used in our allowance for loan loss for commercial and industrial loans, resulting in an additional loan loss provision of $3.0 million. On October 22, 2019, in connection with this matter, the Bank filed a complaint in U.S. District Court for the Southern District of California (Case CV '19 02031 GPC KSC) seeking to recover its losses and other monetary damages against Chicago Title Insurance Company and Chicago Title Company, asserting claims under RICO, 18 U.S.C § 1962 and for RICO Conspiracy, Fraud, Aiding and Abetting Fraud, Negligent Misrepresentation, Breach of Fiduciary Duty and Negligence. We are actively considering and pursuing available sources of recovery and other potential means of mitigating the loss; however, no assurance can be given that we will be successful in that regard.
During the third quarter of 2019, the Company undertook an extensive collateral review of all commercial lending relationships $5 million and above not secured by real estate, consisting of 53 loans representing $536 million in commitments. The collateral review focused on security and collateral documentation and confirmation of the Bank's collateral interest. The review was performed within the Bank's Internal Audit division and the work was validated by an independent third party. Our review and outside validation have not identified any other instances of apparent fraud for the credits reviewed or concerns over the existence of collateral held by the Bank or on our behalf at third parties; however, there are no assurances that our internal review and third party validation will be sufficient to identify all such issues.
During the three months ended March 31, 2018, the Company recorded a charge-off of $13.9 million, which reflected the outstanding balance under a $15.0 million line of credit that was originated during the three months ended March 31, 2018. Subsequent to the granting of the line of credit, representations from the borrower in applying for the line of credit were determined by the Bank to be false, and third party bank account statements provided by the borrower to secure the line of

credit were found to be fraudulent. The line of credit was granted after the borrower appeared to have satisfied a pre-condition that the line of credit be fully cash collateralized and secured by a bank account at a third party financial institution pledged to the Bank. As part of the Bank’s credit review and portfolio management process, the line of credit and disbursements were reviewed subsequent to closing and compliance with the borrower’s covenants was monitored. As part of this process, on March 9, 2018, the Bank received information that caused it to believe the existence of the pledged bank account had been misrepresented by the borrower and that the account had previously been closed. The Bank filed an action in Federal court pursuing the borrower and other parties. That action was voluntarily dismissed by the Bank without prejudice, and a substantially similar action was filed in Los Angeles County Superior Court. The Bank is also considering other available sources of collection and other potential means of mitigating the loss; however, no assurance can be given that it will be successful in this regard.


The following table presents the activity and balance in the ALLL and the recorded investment, excluding accrued interest, in loans based on the impairment methodology as of or for the three and nine months ended September 30, 2019:
($ in thousands) Commercial and Industrial Commercial Real Estate Multifamily SBA Construction Lease Financing Single Family Residential Mortgage Other Consumer Total
ALLL:                  
Balance at June 30, 2019 $21,529
 $6,877
 $12,625
 $3,120
 $3,715
 $—
 $11,072
 $585
 $59,523
Charge-offs (34,673) —
 —
 (738) —
 —
 (135) —
 (35,546)
Recoveries 59
 —
 —
 50
 —
 3
 —
 298
 410
Net (charge-offs) recoveries (34,614) —
 —
 (688) —
 3
 (135) 298
 (35,136)
Provision (reversal) 37,660
 (298) (660) 1,686
 165
 (3) 342
 (352) 38,540
Balance at September 30, 2019 $24,575
 $6,579
 $11,965
 $4,118
 $3,880
 $—
 $11,279
 $531
 $62,927
                   
Balance at December 31, 2018 $18,191
 $6,674
 $17,970
 $1,827
 $3,461
 $—
 $13,128
 $941
 $62,192
Charge-offs (36,788) —
 (6) (1,086) —
 —
 (1,086) (94) (39,060)
Recoveries 102
 —
 —
 152
 —
 9
 150
 317
 730
Net (charge-offs) recoveries (36,686) —
 (6) (934) —
 9
 (936) 223
 (38,330)
Provision (reversal) 43,070
 (95) (5,999) 3,225
 419
 (9) (913) (633) 39,065
Balance at September 30, 2019 $24,575
 $6,579
 $11,965
 $4,118
 $3,880
 $—
 $11,279
 $531
 $62,927
                   
Individually evaluated for impairment $4,614
 $—
 $—
 $2,858
 $—
 $—
 $—
 $21
 $7,493
Collectively evaluated for impairment 19,961
 6,579
 11,965
 1,260
 3,880
 —
 11,279
 510
 55,434
Total ending ALLL balance $24,575
 $6,579
 $11,965
 $4,118
 $3,880
 $—
 $11,279
 $531
 $62,927
Loans:                  
Individually evaluated for impairment $22,042
 $—
 $—
 $5,696
 $2,519
 $—
 $20,641
 $822
 $51,720
Collectively evaluated for impairment 1,767,436
 891,029
 1,563,757
 69,663
 226,042
 —
 1,755,312
 58,300
 6,331,539
Total ending loan balances $1,789,478
 $891,029
 $1,563,757
 $75,359
 $228,561
 $—
 $1,775,953
 $59,122
 $6,383,259

The following table presents the activity and balance in the ALLL and the recorded investment, excluding accrued interest, in loans based on the impairment methodology as of or for the three and nine months ended September 30, 2018:
($ in thousands) Commercial and Industrial Commercial Real Estate Multifamily SBA Construction Lease Financing Single Family Residential Mortgage Other Consumer Total
ALLL:                  
Balance at June 30, 2018 $16,864
 $5,732
 $14,630
 $1,840
 $3,419
 $—
 $13,236
 $957
 $56,678
Charge-offs (342) —
 —
 —
 —
 —
 (45) (1) (388)
Recoveries 61
 —
 —
 8
 —
 3
 —
 10
 82
Net (charge-offs) recoveries (281) —
 —
 8
 —
 3
 (45) 9
 (306)
Provision (reversal) (40) 280
 843
 22
 (172) (3) 407
 73
 1,410
Balance at September 30, 2018 $16,543
 $6,012
 $15,473
 $1,870
 $3,247
 $—
 $13,598
 $1,039
 $57,782
                   
Balance at December 31, 2017 $14,280
 $4,971
 $13,265
 $1,701
 $3,318
 $—
 $10,996
 $802
 $49,333
Charge-offs (689) —
 (8) (683) —
 —
 (524) (14,073) (15,977)
Recoveries 158
 —
 —
 240
 —
 12
 436
 18
 864
Net (charge-offs) recoveries (531) —
 (8) (443) —
 12
 (88) (14,055) (15,113)
Provision (reversal) 2,794
 1,041
 2,216
 612
 (71) (12) 2,690
 14,292
 23,562
Balance at September 30, 2018 $16,543
 $6,012
 $15,473
 $1,870
 $3,247
 $—
 $13,598
 $1,039
 $57,782
                   
Individually evaluated for impairment $122
 $—
 $—
 $133
 $—
 $—
 $640
 $7
 $902
Collectively evaluated for impairment 16,421
 6,012
 15,473
 1,737
 3,247
 —
 12,958
 1,032
 56,880
Total ending ALLL balance $16,543
 $6,012
 $15,473
 $1,870
 $3,247
 $—
 $13,598
 $1,039
 $57,782
Loans:                  
Individually evaluated for impairment $5,614
 $—
 $—
 $1,834
 $—
 $—
 $22,364
 $739
 $30,551
Collectively evaluated for impairment 1,667,441
 823,193
 2,112,190
 69,660
 200,294
 —
 2,277,705
 72,259
 7,222,742
Total ending loan balances $1,673,055
 $823,193
 $2,112,190
 $71,494
 $200,294
 $—
 $2,300,069
 $72,998
 $7,253,293


The following table presents loans individually evaluated for impairment by class of loans as of the dates indicated. The recorded investment, excluding accrued interest, presents customer balances net of any partial charge-offs recognized on the loans and net of any deferred fees and costs and any purchase premium or discount.
  September 30, 2019 December 31, 2018
($ in thousands) Unpaid Principal Balance Recorded Investment Allowance for Loan Losses Unpaid Principal Balance Recorded Investment Allowance for Loan Losses
With no related ALLL recorded:            
Commercial:            
Commercial and industrial $1,749
 $1,738
 $—
 $5,491
 $5,455
 $—
Commercial real estate —
 —
 —
 —
 —
 —
SBA 1,387
 1,321
 —
 1,668
 1,588
 —
Construction 2,519
 2,519
 —
 —
 —
 —
Consumer:            
Single family residential mortgage 20,544
 20,641
 —
 12,115
 12,161
 —
Other consumer 821
 801
 —
 469
 469
 —
With an ALLL recorded:            
Commercial:            
Commercial and industrial 20,310
 20,304
 4,614
 —
 —
 —
SBA 4,572
 4,375
 2,858
 823
 788
 562
Consumer:            
Single family residential mortgage —
 —
 —
 5,993
 6,032
 161
Other consumer 21
 21
 21
 468
 452
 106
Total $51,923
 $51,720
 $7,493
 $27,027
 $26,945
 $829
The following table presents information on impaired loans, disaggregated by class, for the periods indicated:
   
  Three Months Ended Nine Months Ended
($ in thousands) Average Recorded Investment Interest Income Recognized Cash Basis Interest Recognized Average Recorded Investment Interest Income Recognized Cash Basis Interest Recognized
September 30, 2019            
Commercial:            
Commercial and industrial $22,619
 $40
 $32
 $16,154
 $295
 $286
Commercial real estate —
 —
 —
 193
 —
 —
SBA 5,843
 4
 4
 4,328
 12
 12
Construction 2,519
 —
 —
 2,519
 —
 —
Consumer:            
Single family residential mortgage 20,706
 59
 53
 20,374
 175
 150
Other consumer 827
 3
 4
 950
 10
 10
Total $52,514
 $106
 $93
 $44,518
 $492
 $458
September 30, 2018            
Commercial:            
Commercial and industrial $5,423
 $—
 $—
 $5,552
 $4
 $4
SBA 1,240
 —
 —
 756
 —
 —
Consumer:            
Single family residential mortgage 20,908
 60
 50
 20,299
 175
 146
Other consumer 744
 3
 4
 751
 9
 9
Total $28,315
 $63
 $54
 $27,358
 $188
 $159



Past Due Loans
The following table presents the aging of the recorded investment in past due loans, excluding accrued interest receivable (which is not considered to be material), by class of loans as of dates indicated:
($ in thousands) 30 - 59 Days Past Due 60 - 89 Days Past Due Greater than 89 Days Past due Total Past Due Current Total
September 30, 2019            
NTM loans:            
Single family residential mortgage $9,821
 $11,112
 $827
 $21,760
 $629,407
 $651,167
Other consumer —
 —
 —
 —
 2,308
 2,308
Total NTM loans 9,821
 11,112
 827
 21,760
 631,715
 653,475
Traditional loans:            
Commercial:            
Commercial and industrial 776
 2,890
 1,577
 5,243
 1,784,235
 1,789,478
Commercial real estate —
 —
 ���
 —
 891,029
 891,029
Multifamily —
 —
 —
 —
 1,563,757
 1,563,757
SBA 377
 230
 1,762
 2,369
 72,990
 75,359
Construction —
 —
 2,519
 2,519
 226,042
 228,561
Consumer:            
Single family residential mortgage 11,999
 1,370
 10,318
 23,687
 1,101,099
 1,124,786
Other consumer 547
 —
 217
 764
 56,050
 56,814
Total traditional loans 13,699
 4,490
 16,393
 34,582
 5,695,202
 5,729,784
Total $23,520
 $15,602
 $17,220
 $56,342
 $6,326,917
 $6,383,259
December 31, 2018            
NTM loans:            
Single family residential mortgage $7,430
 $617
 $—
 $8,047
 $816,271
 $824,318
Other consumer —
 —
 —
 —
 2,413
 2,413
Total NTM loans 7,430
 617
 —
 8,047
 818,684
 826,731
Traditional loans:            
Commercial:            
Commercial and industrial 350
 1,596
 3,340
 5,286
 1,938,856
 1,944,142
Commercial real estate —
 582
 —
 582
 866,431
 867,013
Multifamily 356
 —
 —
 356
 2,240,890
 2,241,246
SBA 551
 77
 862
 1,490
 67,251
 68,741
Construction —
 939
 —
 939
 203,037
 203,976
Consumer:            
Single family residential mortgage 7,321
 3,160
 9,198
 19,679
 1,461,493
 1,481,172
Other consumer 3,132
 573
 446
 4,151
 63,701
 67,852
Total traditional loans 11,710
 6,927
 13,846
 32,483
 6,841,659
 6,874,142
Total $19,140
 $7,544
 $13,846
 $40,530
 $7,660,343
 $7,700,873


Non-accrual Loans
The following table presents non-accrual loans as of the dates indicated:
 September 30, 2019 December 31, 2018
($ in thousands)NTM Loans Traditional Loans Total NTM Loans Traditional Loans Total
Non-accrual loans           
Commercial:           
Commercial and industrial$—
 $20,762
 $20,762
 $—
 $5,455
 $5,455
Commercial real estate—
 —
 —
 —
 —
 —
SBA—
 5,773
 5,773
 —
 2,574
 2,574
Construction—
 2,519
 2,519
 —
 —
 —
Consumer:           
Single family residential mortgage1,110
 14,477
 15,587
 —
 12,929
 12,929
Other consumer—
 528
 528
 —
 627
 627
Total non-accrual loans$1,110
 $44,059
 $45,169
 $—
 $21,585
 $21,585

At September 30, 2019 and December 31, 2018, 0 and $470 thousand of loans were past due 90 days or more and still accruing.
Loans in Process of Foreclosure
At September 30, 2019 and December 31, 2018, consumer mortgage loans of $10.6 million and $5.1 million, respectively, were secured by residential real estate properties for which formal foreclosure proceedings were in process according to local requirements of the applicable jurisdiction.
Troubled Debt Restructurings
A modification of a loan constitutes a troubled debt restructuring (TDR) when the Company, for economic or legal reasons related to a borrower’s financial difficulties, grants a concession to the borrower that it would not otherwise consider. The concessions may be granted in various forms, including reduction in the stated interest rate, reduction in the amount of principal amortization, forgiveness of a portion of the loan balance or accrued interest, or extension of the maturity date. In order to determine whether a borrower is experiencing financial difficulty, an evaluation is performed of the probability that the borrower will be in payment default on any of its debt in the foreseeable future without the modification. This evaluation is performed under the Company’s internal underwriting policy.
TDR loans consisted of the following as of the dates indicated:
  September 30, 2019 December 31, 2018
($ in thousands) NTM Loans Traditional Loans Total NTM Loans Traditional Loans Total
Commercial:            
Commercial and industrial $—
 $15,790
 $15,790
 $—
 $2,276
 $2,276
SBA —
 266
 266
 —
 187
 187
Consumer:            
Single family residential mortgage 2,646
 2,408
 5,054
 2,668
 2,596
 5,264
Other consumer 294
 —
 294
 294
 —
 294
Total $2,940
 $18,464
 $21,404
 $2,962
 $5,059
 $8,021

The Company had commitments to lend to customers with outstanding loans that were classified as TDRs of $135 thousand and 0 as of September 30, 2019 or December 31, 2018, respectively. Accruing TDRs were $6.8 million and non-accrual TDRs were $14.6 million at September 30, 2019 compared to accruing TDRs of $5.7 million and non-accrual TDRs of $2.3 million at December 31, 2018. The increase in TDRs during the three months ended September 30, 2019 was primarily due to one commercial and industrial relationship.

The following table summarizes the pre-modification and post-modification balances of the new TDRs for the periods indicated:
  Three Months Ended Nine Months Ended
($ in thousands) 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
September 30, 2019            
Commercial:            
Commercial and industrial(1)
 —
 $—
 $—
 10
 $17,339
 $14,692
SBA —
 —
 —
 2
 3,214
 869
Consumer:            
Single family residential mortgage —
 —
 —
 —
 —
 —
Other consumer —
 $—
 $—
 —
 $—
 $—
Total —
 —
 —
 12
 $20,553
 $15,561
September 30, 2018            
Commercial:            
Commercial and industrial —
 $—
 $—
 2
 $171
 $163
Total —
 $—
 $—
 2
 $171
 $163
(1)
Post-modification outstanding recorded investment reflects a $2.3 million principal repayment by the borrower, which was a condition precedent to the modification.
The Company considers a TDR to be in payment default once it becomes 30 days or more past due following a modification.During the nine months ended September 30, 2019 and 2018, there were 0 loans that were modified as TDRs during the past 12 months that had subsequent payment defaults during the periods.
The following table summarizes TDRs by modification type for the periods indicated:
Three Months Ended
Modification Type
Change in Principal Payments and Interest RatesChange in Principal PaymentsTotal
($ in thousands)CountAmountCountAmountCountAmount
September 30, 2019
Total—
$—
—
$—
—
$—
September 30, 2018
Total—
$—
—
$—
—
$—


  Nine Months Ended
  Modification Type
  Change in Principal Payments and Interest Rates Change in Principal Payments Total
($ in thousands) Count Amount Count Amount Count Amount
September 30, 2019            
Commercial:            
Commercial and industrial 10
 $14,692
 —
 $—
 10
 $14,692
SBA 2
 $869
 —
 $—
 2
 $869
Total 12
 $15,561
 —
 $—
 12
 $15,561
             
September 30, 2018            
Commercial:            
Commercial and industrial —
 $—
 2
 $163
 2
 $163
Total —
 $—
 2
 $163
 2
 $163

Credit Quality Indicators
The Company categorizesWe categorize loans into risk categories based on relevant information about the ability of borrowers to servicerepay their debt such as:as current financial information, historical payment experience, credit documentation, public information, and current economic trends, among other factors. The Company performsWe perform a historical loss analysis that is combined with a comprehensive loan or lease to value analysis to analyze the associated risks in the current loan and lease portfolio. The Company analyzesWe analyze loans individually by classifying the loans as toand grade each loan for credit risk. This analysis includes all loans delinquent over 60 days and non-homogeneous loans such as commercial and commercial real estate loans. The Company usesWe use the following definitions for credit risk ratings:
Pass: Loans classifiedrisk rated as pass are in compliance in all respects with the Bank’s credit policy and regulatory requirements, and do not exhibit any potential or defined weakness as defined under “Special Mention”, “Substandard” or “Doubtful”.
Special Mention: Loans classifiedrisk rated as special mention have a potential weakness that deserves management’s close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the loan or lease or of the Company’sour credit position at some future date.
Substandard: Loans classifiedrisk rated as substandard are inadequately protected by the current net worth and paying capacity of the obligor or of the collateral pledged, if any. Loans so classifiedrisk rated have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. They are characterized by the distinct possibility that the Companywe will sustain some loss if the deficiencies are not corrected.
Doubtful: Loans classified as doubtful have all the weaknesses inherent in those classified as substandard, with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions, and values, highly questionable and improbable.




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Table of Contents
The following table presents the risk categories for total loans by class of loans and origination year as of June 30, 2020:
Term Loans Amortized Cost Basis by Origination Year
($ in thousands)20202019201820172016PriorRevolving Loans Amortized Cost BasisRevolving Loans Amortized Cost Basis
Converted to Term		Total
June 30, 2020
Commercial:
Commercial and industrial
Pass$59,122  $111,437  $104,299  $63,923  $41,163  $111,761  $851,369  $4,252  $1,347,326  
Special mention—  6,382  5,988  —  —  1,379  812  189  14,750  
Substandard2,117  16,658  —  4,864  20,677  9,632  10,752  10,214  74,914  
Doubtful—  —  —  —  —  —  —  —  —  
Commercial and industrial61,239  134,477  110,287  68,787  61,840  122,772  862,933  14,655  1,436,990  
Commercial real estate
Pass15,261  153,017  215,385  72,949  102,465  198,242  36,628  1,586  795,533  
Special mention—  1,829  9,570  —  —  6,732  —  —  18,131  
Substandard—  —  —  —  —  9,030  —  —  9,030  
Doubtful—  —  —  —  —  —  —  —  —  
Commercial real estate15,261  154,846  224,955  72,949  102,465  214,004  36,628  1,586  822,694  
Multifamily
Pass84,873  421,045  334,029  272,657  131,646  187,823  —  —  1,432,073  
Special mention—  —  —  —  —  —  —  —  —  
Substandard—  —  —  —  —  1,998  —  —  1,998  
Doubtful—  —  —  —  —  —  —  —  —  
Multifamily84,873  421,045  334,029  272,657  131,646  189,821  —  —  1,434,071  
SBA
Pass241,305  16,021  1,359  5,195  14,975  19,479  3,238  797  302,369  
Special mention—  —  —  226  417  948  —  6  1,597  
Substandard—  —  —  1,009  1,513  1,440  320  1,126  5,408  
Doubtful—  —  390  —  —  633  —  387  1,410  
SBA241,305  16,021  1,749  6,430  16,905  22,500  3,558  2,316  310,784  
Construction
Pass14,139  33,423  63,217  86,787  —  —  —  —  197,566  
Special mention—  —  10,526  —  4,887  —  —  —  15,413  
Substandard—  —  —  —  —  —  —  —  —  
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Doubtful—  —  —  —  —  —  —  —  —  
Construction14,139  33,423  73,743  86,787  4,887  —  —  —  212,979  
Consumer:
Single family residential mortgage
Pass31,007  166,668  329,175  204,392  297,182  281,160  20,844  —  1,330,428  
Special mention—  —  1,152  668  4,416  3,503  —  —  9,739  
Substandard—  1,064  1,697  3,414  3,900  20,543  —  —  30,618  
Doubtful—  —  —  —  —  —  —  —  —  
Single family residential mortgage31,007  167,732  332,024 ��208,474  305,498  305,206  20,844  —  1,370,785  
Other consumer
Pass26  93  72  —  8  2,485  31,303  2,577  36,564  
Special mention—  —  27  —  —  33  248  147  455  
Substandard—  —  —  —  —  2,016  281  77  2,374  
Doubtful—  —  —  —  —  —  —  —  —  
Other consumer26  93  99  —  8  4,534  31,832  2,801  39,393  
Total loans$447,850  $927,637  $1,076,886  $716,084  $623,249  $858,837  $955,795  $21,358  $5,627,696  

The following table presents the risk categories for total loans by class of loans as of December 31, 2019:
($ in thousands)PassSpecial MentionSubstandardDoubtfulTotal
December 31, 2019
Commercial:
Commercial and industrial1,580,269  45,323  65,678  —  1,691,270  
Commercial real estate813,846  2,532  2,439  —  818,817  
Multifamily1,484,931  4,256  5,341  —  1,494,528  
SBA60,982  2,760  5,621  1,618  70,981  
Construction229,771  1,579  —  —  231,350  
Consumer:
Single family residential mortgage1,559,253  10,735  20,269  517  1,590,774  
Other consumer53,331  346  488  —  54,165  
Total$5,782,383  $67,531  $99,836  $2,135  $5,951,885  

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Table of Contents
Past Due Loans
The following table presents the aging of the recorded investment in past due loans, excluding accrued interest receivable (which is not considered to be material), by class of loans as of the dates indicated:
($ in thousands)30 - 59 Days Past Due60 - 89 Days Past DueGreater than 89 Days Past dueTotal Past DueCurrentTotal
June 30, 2020
Non-Traditional Mortgage (NTM) loans:
Single family residential mortgage$9,262  $647  $18,552  $28,461  $481,144  $509,605  
Other consumer—  —  —  —  1,598  1,598  
Total NTM loans9,262  647  18,552  28,461  482,742  511,203  
Traditional loans:
Commercial:
Commercial and industrial891  28  13,072  13,991  1,422,999  1,436,990  
Commercial real estate—  1,464  2,189  3,653  819,041  822,694  
Multifamily664  —  —  664  1,433,407  1,434,071  
SBA1,517  —  2,627  4,144  306,640  310,784  
Construction—  —  —  —  212,979  212,979  
Consumer:
Single family residential mortgage29,281  4,286  8,252  41,819  819,361  861,180  
Other consumer285  1,485  692  2,462  35,333  37,795  
Total traditional loans32,638  7,263  26,832  66,733  5,049,760  5,116,493  
Total$41,900  $7,910  $45,384  $95,194  $5,532,502  $5,627,696  
December 31, 2019
NTM loans:
Single family residential mortgage$3,973  $3,535  $13,019  $20,527  $577,830  $598,357  
Other consumer—  —  —  —  2,299  2,299  
Total NTM loans3,973  3,535  13,019  20,527  580,129  600,656  
Traditional loans:
Commercial:
Commercial and industrial780  5,670  3,862  10,312  1,680,958  1,691,270  
Commercial real estate—  —  —  —  818,817  818,817  
Multifamily—  —  —  —  1,494,528  1,494,528  
SBA586  842  2,152  3,580  67,401  70,981  
Construction—  —  —  —  231,350  231,350  
Consumer:
Single family residential mortgage13,752  3,496  5,606  22,854  969,563  992,417  
Other consumer199  40  95  334  51,532  51,866  
Total traditional loans15,317  10,048  11,715  37,080  5,314,149  5,351,229  
Total$19,290  $13,583  $24,734  $57,607  $5,894,278  $5,951,885  
In accordance with regulatory guidance, borrowers that received forbearance or deferment, which were current prior to becoming affected by the global pandemic, generally should not be reported as past due. At June 30, 2020, 0 loans that received forbearance or deferment were considered past due and, accordingly, are not included in the table above.
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($ in thousands) Pass Special Mention Substandard Doubtful Total
September 30, 2019          
NTM loans:          
Single family residential mortgage $633,950
 $5,173
 $12,044
 $—
 $651,167
Other consumer 2,308
 —
 —
 —
 2,308
Total NTM loans 636,258
 5,173
 12,044
 —
 653,475
Traditional loans:          
Commercial:          
Commercial and industrial 1,673,655
 77,431
 38,392
 —
 1,789,478
Commercial real estate 887,232
 2,520
 1,277
 —
 891,029
Multifamily 1,551,231
 8,428
 4,098
 —
 1,563,757
SBA 63,543
 3,120
 7,894
 802
 75,359
Construction 219,056
 6,986
 2,519
 —
 228,561
Consumer:          
Single family residential mortgage 1,100,990
 4,291
 18,988
 517
 1,124,786
Other consumer 55,947
 317
 550
 —
 56,814
Total traditional loans 5,551,654
 103,093
 73,718
 1,319
 5,729,784
Total $6,187,912
 $108,266
 $85,762
 $1,319
 $6,383,259
           
December 31, 2018          
NTM loans:          
Single family residential mortgage $811,056
 $10,966
 $2,296
 $—
 $824,318
Other consumer 2,413
 —
 —
 —
 2,413
Total NTM loans 813,469
 10,966
 2,296
 —
 826,731
Traditional loans:          
Commercial:          
Commercial and industrial 1,859,569
 41,302
 43,271
 —
 1,944,142
Commercial real estate 851,604
 11,376
 4,033
 —
 867,013
Multifamily 2,239,301
 —
 1,945
 —
 2,241,246
SBA 53,433
 6,114
 8,340
 854
 68,741
Construction 197,851
 3,606
 2,519
 —
 203,976
Consumer:          
Single family residential mortgage 1,461,721
 2,602
 16,849
 —
 1,481,172
Other consumer 66,228
 979
 645
 —
 67,852
Total traditional loans 6,729,707
 65,979
 77,602
 854
 6,874,142
Total $7,543,176
 $76,945
 $79,898
 $854
 $7,700,873
Non-accrual Loans
The following table presents non-accrual loans as of the dates indicated:
June 30, 2020December 31, 2019
($ in thousands)NTM LoansTraditional LoansTotal
Non-accrual Loans		Non-accrual Loans with no ACLNTM LoansTraditional LoansTotal
Non-accrual Loans		Non-accrual Loans with no ACL
Non-accrual loans
Commercial:
Commercial and industrial$—  $30,398  $30,398  $10,728  $—  $19,114  $19,114  $337  
Commercial real estate—  6,633  6,633  6,632  —  —  —  —  
SBA—  5,026  5,026  1,485  —  5,230  5,230  1,474  
Construction—  —  —  —  —  —  —  —  
Consumer:
Single family residential mortgage19,199  9,271  28,470  28,470  13,019  5,606  18,625  14,373  
Other consumer—  2,176  2,176  2,177  —  385  385  380  
Total non-accrual loans$19,199  $53,504  $72,703  $49,492  $13,019  $30,335  $43,354  $16,564  


At June 30, 2020 and December 31, 2019, there were 0loans that were past due 90 days or more and still accruing.

The non-traditional mortgage (“NTM”) loans on non-accrual status included $4.6 million of Green Loans and $14.6 million of interest-only loans at June 30, 2020 compared to $1.5 million of Green Loans and $11.5 million of interest-only loans at December 31, 2019.


Loans in Process of Foreclosure
At June 30, 2020 and December 31, 2019, consumer mortgage loans of $6.3 million and $15.7 million, respectively, were secured by residential real estate properties for which formal foreclosure proceedings were in process according to local requirements of the applicable jurisdiction.

Allowance for Credit Losses
Our ACL is comprised of our allowance for loan losses (“ALL”) and reserve for unfunded loan commitments. Our ACL methodology and resulting provision continues to be impacted by the current economic uncertainty and volatility caused by the COVID-19 pandemic. Our ACL methodology uses a nationally recognized, third-party model that includes many assumptions based on our historical and peer loss data, our current loan portfolio risk profile including risk ratings, and economic forecasts including macroeconomic variables (“MEVs”). As of June 30, 2020, we used economic forecasts released by our model provider during June 2020. Similar to the late March 2020 forecasts, these June 2020 forecasts reflect the onset of the pandemic, its impact on MEVs and the future economic recovery. These forecasts published by our model provider have deteriorated since the end of the first quarter of 2020, with June baseline unemployment rate forecasts for 2020 and 2021 increasing and real gross domestic product growth rates decreasing. Similar to our methodology used in the first quarter of 2020, we incorporated qualitative factors to account for certain loan portfolio characteristics that are not taken into consideration by our third-party model, including underlying strengths and weaknesses in the loan portfolio. As is the case with all estimates, we expect the ACL to be impacted in future periods by economic volatility, changing economic forecasts, actual and projected credit experience, and underlying model assumptions; all of which may be better than or worse than our current estimate.
The ACL process involves subjective and complex judgments as well as adjustments for numerous factors including those described in the federal banking agencies' joint interagency policy statement on ALL, which include underwriting experience and collateral value changes, among others. We evaluate all impaired loans individually using guidance from ASC 310 primarily through the evaluation of cash flows or collateral values.


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We have established credit risk management processes that include regular management review of the loan portfolio to identify problem loans. During the ordinary course of business, management may become aware of borrowers who may not be able to fulfill their contractual payment requirements within the loan agreements. Such loans are subject to increased monitoring. Consideration is given to placing these loans on non-accrual status, assessing the need for additional allowance for loan loss, and partially or fully charging off the principal balance. We maintain the allowance for loan losses at a level that is considered adequate to cover the expected credit losses in the loan portfolio.
The reserve for unfunded loan commitments is established to cover the expected credit losses for the estimated level of funding of these loan commitments, except for unconditionally cancellable commitments for which no reserve is required under ASC 326. At June 30, 2020 and December 31, 2019, the reserve for unfunded loan commitments was $4.2 million and $4.1 million, respectively, and was included in accrued expenses and other liabilities on the consolidated statements of financial condition.
The credit risk monitoring system is designed to identify impaired and potential problem loans, perform periodic evaluation of impairment, and determine the adequacy of the allowance for credit losses in a timely manner. In addition, management has adopted a credit policy that includes a credit review and control system that it believes should be effective in ensuring that we maintain an adequate allowance for credit losses. Further, the Board of Directors provides oversight and guidance for management’s allowance evaluation process.
The following table presents a summary of activity in the ACL for the periods indicated:
Three Months Ended June 30,
($ in thousands)20202019
Allowance
for
Loan Losses		Reserve for Unfunded Loan CommitmentsAllowance
for
Credit Losses		Allowance
for
Loan Losses		Reserve for Unfunded Loan CommitmentsAllowance
for
Credit Losses
Balance at beginning of period$78,243  $3,888  $82,131  $63,885  $4,208  $68,093  
Loans charged off—  —  —  (2,451) —  (2,451) 
Recoveries of loans previously charged off608  —  608  76  —  76  
Net charge-offs608  —  608  (2,375) —  (2,375) 
Provision for (reversal of) credit losses11,519  307  11,826  (1,987) 87  (1,900) 
Balance at end of period$90,370  $4,195  $94,565  $59,523  $4,295  $63,818  

Six Months Ended June 30,
($ in thousands)20202019
Allowance
for
Loan Losses		Reserve for Unfunded Loan CommitmentsAllowance
for
Credit Losses		Allowance
for
Loan Losses		Reserve for Unfunded Loan CommitmentsAllowance
for
Credit Losses
Balance at beginning of period$57,649  $4,064  $61,713  $62,192  $4,622  $66,814  
Impact of adopting ASU 2016-137,609  (1,226) 6,383  —  —  —  
Loans charged off(2,076) —  (2,076) (3,514) —  (3,514) 
Recoveries of loans previously charged off958  —  958  320  —  320  
Net charge-offs(1,118) —  (1,118) (3,194) —  (3,194) 
Provision for (reversal of) credit losses26,230  1,357  27,587  525  (327) 198  
Balance at end of period$90,370  $4,195  $94,565  $59,523  $4,295  $63,818  



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Accrued interest receivable on loans receivable, net totaled $23.8 million and $18.9 million at June 30, 2020 and December 31, 2019, and is included within other assets in the accompanying consolidated statements of financial condition. Accrued interest receivable is excluded from the estimate of expected credit losses.
The following table presents the activity and balance in the ALL and the recorded investment, excluding accrued interest, in loans based on the impairment methodology as of or for the three and six months ended June 30, 2020:
($ in thousands)Commercial and IndustrialCommercial Real EstateMultifamilySBAConstructionSingle Family Residential MortgageOther ConsumerTotal
ALL:
Balance at March 31, 2020$23,573  $13,620  $20,072  $3,652  $7,052  $9,593  $681  $78,243  
Charge-offs—  —  —  —  —  —  —  —  
Recoveries119  —  —  —  —  488  1  608  
Net recoveries (charge-offs)119  —  —  —  —  488  1  608  
Provision for (reversal of) credit losses2,926  3,752  5,033  532  (377) (416) 69  11,519  
Balance at June 30, 2020$26,618  $17,372  $25,105  $4,184  $6,675  $9,665  $751  $90,370  
Balance at December 31, 2019$22,353  $5,941  $11,405  $3,120  $3,906  $10,486  $438  $57,649  
Impact of adopting ASC 326662  4,847  1,809  388  103  (420) 220  7,609  
Charge-offs(1,164) —  —  (356) —  (552) (4) (2,076) 
Recoveries149  —  —  121  —  639  49  958  
Net (charge-offs) recoveries(1,015) —  —  (235) —  87  45  (1,118) 
Provision (reversal)4,618  6,584  11,891  911  2,666  (488) 48  26,230  
Balance at June 30, 2020$26,618  $17,372  $25,105  $4,184  $6,675  $9,665  $751  $90,370  
Individually evaluated for impairment$9,697  $—  $—  $2,878  $—  $—  $—  $12,575  
Collectively evaluated for impairment16,921  17,372  25,105  1,306  6,675  9,665  751  77,795  
Total ending ALL balance$26,618  $17,372  $25,105  $4,184  $6,675  $9,665  $751  $90,370  
Loans:
Individually evaluated for impairment$31,129  $5,168  $—  $4,959  $—  $32,999  $970  $75,225  
Collectively evaluated for impairment1,405,861  817,526  1,434,071  305,825  212,979  1,337,786  38,423  5,552,471  
Total ending loan balances$1,436,990  $822,694  $1,434,071  $310,784  $212,979  $1,370,785  $39,393  $5,627,696  

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The following table presents the activity and balance in the ALL and the recorded investment, excluding accrued interest, in loans based on the impairment methodology as of or for the three and six months ended June 30, 2019:
($ in thousands)Commercial and IndustrialCommercial Real EstateMultifamilySBAConstructionLease FinancingSingle Family Residential MortgageOther ConsumerTotal
ALL:
Balance at March 31, 2019$18,893  $6,838  $18,898  $3,057  $3,453  $—  $12,142  $604  $63,885  
Charge-offs(2,022) —  (6) 8  —  —  (425) (6) (2,451) 
Recoveries11  —  —  60  —  3  —  2  76  
Net (charge-offs) recoveries(2,011) —  (6) 68  —  3  (425) (4) (2,375) 
Provision for (reversal of) credit losses4,647  39  (6,267) (5) 262  (3) (645) (15) (1,987) 
Balance at June 30, 2019$21,529  $6,877  $12,625  $3,120  $3,715  $—  $11,072  $585  $59,523  
Balance at December 31, 2018$18,191  $6,674  $17,970  $1,827  $3,461  $—  $13,128  $941  $62,192  
Charge-offs(2,115) —  (6) (348) —  —  (951) (94) (3,514) 
Recoveries44  —  —  101  —  6  150  19  320  
Net (charge-offs) recoveries(2,071) —  (6) (247) —  6  (801) (75) (3,194) 
Provision (reversal)5,409  203  (5,339) 1,540  254  (6) (1,255) (281) 525  
Balance at June 30, 2019$21,529  $6,877  $12,625  $3,120  $3,715  $—  $11,072  $585  $59,523  
Individually evaluated for impairment$1,239  $—  $—  $1,563  $—  $—  $—  $22  $2,824  
Collectively evaluated for impairment20,290  6,877  12,625  1,557  3,715  —  11,072  563  56,699  
Total ending ALL balance$21,529  $6,877  $12,625  $3,120  $3,715  $—  $11,072  $585  $59,523  
Loans:
Individually evaluated for impairment$20,429  $—  $—  $3,262  $2,519  $—  $21,021  $1,169  $48,400  
Collectively evaluated for impairment1,931,278  856,497  1,598,978  77,667  206,510  —  1,940,044  60,196  6,671,170  
Total ending loan balances$1,951,707  $856,497  $1,598,978  $80,929  $209,029  $—  $1,961,065  $61,365  $6,719,570  
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The following table presents loans individually evaluated for impairment by class of loans as of the dates indicated. The recorded investment, excluding accrued interest, presents customer balances net of any partial charge-offs recognized on the loans and net of any deferred fees and costs and any purchase premium or discount.
June 30, 2020December 31, 2019
($ in thousands)Unpaid Principal BalanceRecorded InvestmentAllowance for Loan LossesUnpaid Principal BalanceRecorded InvestmentAllowance for Loan Losses
With no related ALL recorded:
Commercial:
Commercial and industrial$11,455  $11,383  $—  $1,471  $1,460  $—  
Commercial real estate5,418  5,168  —  —  —  —  
SBA1,474  1,417  —  1,439  1,379  —  
Consumer:
Single family residential mortgage32,849  32,999  —  19,319  19,405  —  
Other consumer1,431  970  —  671  675  —  
With an ALL recorded:
Commercial:
Commercial and industrial19,739  19,746  9,697  18,776  18,776  3,367  
SBA3,731  3,542  2,878  3,921  3,757  2,045  
Consumer:
Single family residential mortgage—  —  —  4,213  4,252  574  
Other consumer—  —  —  4  4  4  
Total$76,097  $75,225  $12,575  $49,814  $49,708  $5,990  

The following table presents information on impaired loans, disaggregated by class, for the periods indicated:
Three Months EndedSix Months Ended
($ in thousands)Average Recorded InvestmentInterest Income RecognizedCash Basis Interest RecognizedAverage Recorded InvestmentInterest Income RecognizedCash Basis Interest Recognized
June 30, 2020
Commercial:
Commercial and industrial$29,992  $16  $18  $26,452  $37  $39  
Commercial real estate5,210  —  —  3,992  —  —  
SBA5,172  3  4  5,293  6  7  
Consumer:
Single family residential mortgage33,356  56  34  31,420  110  79  
Other consumer2,084  —  —  1,351  3  3  
Total$75,814  $75  $56  $68,508  $156  $128  
June 30, 2019
Commercial:
Commercial and industrial$20,794  $255  $254  $12,921  $255  $254  
Commercial real estate—  —  —  289  —  —  
SBA3,297  4  4  3,571  8  8  
Construction2,519  —  —  2,519  —  —  
Consumer:
Single family residential mortgage21,092  58  48  20,208  116  97  
Other consumer1,177  4  3  1,011  7  6  
Total$48,879  $321  $309  $40,519  $386  $365  
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Troubled Debt Restructurings
A modification of a loan constitutes a TDR when we, for economic or legal reasons related to a borrower’s financial difficulties, grant a concession to the borrower that we would not otherwise consider. A concession or concessions may be granted in various forms, including a below-market change in the stated interest rate, a reduction in the loan balance or accrued interest, an extension of the maturity date, or a note split with principal forgiveness. In order to determine whether a borrower is experiencing financial difficulty, an evaluation is performed of the probability that the borrower will be in payment default on any of its debt in the foreseeable future without the modification. This evaluation is performed under our internal underwriting policy.
TDR loans consisted of the following as of the dates indicated:
June 30, 2020December 31, 2019
($ in thousands)NTM
Loans		Traditional LoansTotalNTM
Loans		Traditional LoansTotal
Commercial:
Commercial and industrial$—  $20,808  $20,808  $—  $16,245  $16,245  
SBA—  266  266  —  266  266  
Consumer:
Single family residential mortgage2,628  2,170  4,798  2,638  2,394  5,032  
Other consumer—  —  —  294  —  294  
Total$2,628  $23,244  $25,872  $2,932  $18,905  $21,837  

We had commitments to lend to customers with outstanding loans that were classified as TDRs of $135 thousand as of June 30, 2020 and December 31, 2019. Accruing TDRs were $5.6 million and non-accrual TDRs were $20.3 million at June 30, 2020 compared to accruing TDRs of $6.6 million and non-accrual TDRs of $15.2 million at December 31, 2019. The increase in TDRs during the six months ended June 30, 2020 was primarily due to one commercial and industrial relationship.
The following table summarizes the pre-modification and post-modification balances of the new TDRs for the periods indicated:
Three Months EndedSix Months Ended
($ in thousands)Number of LoansPre-Modification Outstanding Recorded InvestmentPost-Modification Outstanding Recorded InvestmentNumber of LoansPre-Modification Outstanding Recorded InvestmentPost-Modification Outstanding Recorded Investment
June 30, 2020
Commercial:
Commercial and industrial—  $—  $—  1  $5,000  $5,000  
Total—  —  —  1  $5,000  $5,000  
June 30, 2019
Commercial:
Commercial and industrial10  $17,339  $17,020  10  $17,339  $17,020  
SBA2  $3,214  $869  2  $3,214  $869  
Total12  $20,553  $17,889  12  $20,553  $17,889  

We consider a TDR to be in payment default once it becomes 30 days or more past due following a modification. During each of the three and six months ended June 30, 2020, there was 1 loan that was modified as a TDR during the past 12 months that had subsequent payment defaults. During each of the three and six months ended June 30, 2019, there were 0 loans that were modified as TDRs during the past 12 months that had subsequent payment defaults.
The following table summarizes TDRs by modification type for the periods indicated:
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Three Months Ended
Modification Type
Change in Principal Payments and Interest RatesChange in Principal PaymentsTotal
($ in thousands)CountAmountCountAmountCountAmount
June 30, 2020
Commercial:
Commercial and industrial—  $—  —  $—  —  $—  
Total—  $—  —  $—  —  $—  
June 30, 2019
Commercial:
Commercial and industrial10  $17,020  —  $—  10  $17,020  
SBA2  $869  —  $—  2  $869  
Total12  $17,889  —  $—  12  $17,889  

Six Months Ended
Modification Type
Change in Principal Payments and Interest RatesChange in Principal PaymentsTotal
($ in thousands)CountAmountCountAmountCountAmount
June 30, 2020
Commercial:
Commercial and industrial1  $5,000  —  $—  1  $5,000  
Total1  $5,000  —  $—  1  $5,000  
June 30, 2019
Commercial:
Commercial and industrial10  $17,020  —  $—  10  $17,020  
SBA2  869  —  —  2  869  
Consumer:
Single family residential mortgage—  —  —  —  —  —  
Total12  $17,889  —  $—  12  $17,889  


Purchases, Sales, and Transfers
From time to time, the Company purchaseswe purchase and sellssell loans in the secondary market. Certain loans are transferred from held-for-investment to held-for-sale at the lower of cost or fair value and any reductions in value on transfer are reflected as write-downs to allowance for loancredit losses. The Company hadDuring the three and six months ended June 30, 2020 we purchased $25.8 million of single family residential mortgage loans. There were 0 purchases of loans excluding loans held-for-sale, forduring the three and ninesix months ended SeptemberJune 30, 2019 and 2018.2019. The following table presents loans transferred from (to) loans held-for-sale by portfolio segment for the periods indicated:
  Three Months Ended Nine Months Ended
($ in thousands) Transfers from Held-For-Sale Transfers (to) Held-For-Sale Transfers from Held-For-Sale Transfers (to) Held-For-Sale
September 30, 2019        
Commercial:        
Commercial real estate $—
 $—
 $—
 $(573)
Multifamily —
 —
 —
 (752,087)
SBA —
 (559) —
 (559)
Consumer:        
Single family residential mortgage —
 —
 —
 (374,679)
Total $—
 $(559) $—
 $(1,127,898)
September 30, 2018        
Commercial:        
Commercial and industrial $—
 $(1,133) $—
 $(1,133)
Multifamily —
 —
 —
 (71,449)
Consumer:        
Single family residential mortgage —
 (18,886) —
 (154,899)
Other consumer —
 —
 —
 (4,362)
Total $—
 $(20,019) $—
 $(231,843)
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Three Months EndedSix Months Ended
($ in thousands)Transfers from Held-For-SaleTransfers (to) Held-For-SaleTransfers from Held-For-SaleTransfers (to) Held-For-Sale
June 30, 2020
Total$—  $—  $—  $—  
June 30, 2019
Commercial:
Commercial real estate$—  $(573) $—  $(573) 
Multifamily—  (752,087) —  (752,087) 
Consumer:
Single family residential mortgage—  (131,315) —  (374,679) 
Total$—  $(883,975) $—  $(1,127,339) 


Included in transfers toThere were 0 sales of loans held for sale for the nine months ended September 30, 2019 is $573.9 million in multifamily loans from loans held-for-investment related to our completed Freddie Mac multifamily securitization which closed during the third quarter of 2019. The loans included in the securitization had a weighted average coupon of 3.79% and a weighted average term to initial reset of 3.5 years. The related mortgage servicing rights were also sold.

In connection with the securitization, during the second quarter of 2019, the Company entered into interest rate swap agreements with a combined notional value of $543.4 million to offset variability in the fair value of the related loans as a result of changes in market interest rates. During the three and ninesix months ended SeptemberJune 30, 2019,2020. Loss on sale of loans during the Company recognized a gain of $603three and six months ended June 30, 2020 totaled 0 and $27 thousand and loss of $9.0 million, respectively, related to these swap agreements. The $9.0 million loss on these interest rate swap agreements was due to a decline in interest rates since their execution and was offset by the $8.9 million gross gain realized on the loanscertain adjustments for previously sold into the securitization during the third quarter of 2019.loans.

During the three and ninesix months ended SeptemberJune 30, 2019, the Companywe sold $144 thousand$131.5 million and $374.8$374.7 million respectively, in single family residential loans, resulting in a (loss) gaingains of $(150)$125 thousand and $1.6 million, respectively.$1.8 million.

During the three and nine months ended September 30, 2019, the Company sold $573.5 million and $751.6 million, respectively, in multifamily residential loans, resulting in a gross gain of $8.9 million and $11.7 million, respectively.
NOTE 6 – LEASES

The Company has operating leases for corporate offices, branches and loan production offices. The Company’s leases have remaining lease terms of one month to twenty years, some of which include options to extend the leases generally for periods of three years to five years. Our lease agreements do not contain any material residual value guarantees or material restrictive covenants.

The components of lease expense were as follows:
  Three Months Ended September 30, Nine Months Ended September 30,
($ in thousands) 2019 2019
Operating Lease Expense $1,557
 $5,053
Variable Lease Expense 89
 267
Sublease Income —
 (250)
Total Lease Expense $1,646
 $5,070
Supplemental cash flow information related to leases was as follows:
  Three Months Ended September 30, Nine Months Ended September 30,
($ in thousands) 2019 2019
Cash paid for amounts included in the measurement of lease liabilities for operating leases:    
Operating cash flows $1,673
 $5,292
ROU assets obtained in the exchange for lease liabilities:    
ROU assets obtained in exchange for lease liabilities $1,243
 $5,332
ROU assets recognized upon adoption of new lease standard $—
 $23,332

Supplemental balance sheet information related
Non-Traditional Mortgage Loans (“NTM”)
Our NTM portfolio is comprised of 3 interest only products: Green Loans, Interest Only loans and a small number of additional loans with the potential for negative amortization. The initial credit guidelines for the NTM portfolio were established based on the borrower's Fair Isaac Corporation (“FICO”) score, LTV ratio, property type, occupancy type, loan amount, and geography. Additionally, from an ongoing credit risk management perspective, we have determined that the most significant performance indicators for NTMs are LTV ratios and FICO scores. We review the NTM loan portfolio periodically by refreshing FICO scores on the Green Loans and HELOCs and ordering third party automated valuation models (AVMs) to leases wasconfirm collateral values. We no longer originate NTM loans.
The following table presents the composition of the NTM portfolio, which are included in the single family residential mortgage portfolio, as follows:
of the dates indicated:
($ in thousands) September 30,
2019
Operating Leases:  
Operating lease right-of-use assets $23,907
Operating lease liabilities 25,210
June 30, 2020December 31, 2019
($ in thousands)CountAmountPercentCountAmountPercent
Consumer:
Single family residential mortgage:
Green Loans (HELOC) - first liens61  $43,604  8.5 %69  $49,959  8.3 %
Interest-only - first liens329  463,666  90.7 %376  545,371  90.8 %
Negative amortization8  2,335  0.5 %9  3,027  0.5 %
Total NTM - first liens398  509,605  99.7 %454  598,357  99.6 %
Other consumer:
Green Loans (HELOC) - second liens5  1,598  0.3 %7  2,299  0.4 %
Total NTM - second liens5  1,598  0.3 %7  2,299  0.4 %
Total NTM loans403  $511,203  100.0 %461  $600,656  100.0 %
Total loans receivable$5,627,696  $5,951,885  
% of total NTM loans to total loans receivable9.1 %10.1 %
September 30, 2019
Weighted-average remaining lease term (in years):
Operating leases6.74 years
Weighted-average discount rate:
Operating leases2.90%


Maturities of lease liabilities at September 30, 2019 were as follows:
($ in thousands) 
Operating
Leases
Remainder of 2019 $1,697
2020 6,727
2021 4,965
2022 3,387
2023 2,578
2024 1,710
Thereafter 7,046
Total lease payments 28,110
Less: present value discount (2,900)
Total Lease Liability $25,210


NOTE 75 – GOODWILL AND OTHER INTANGIBLE ASSETS, NET
At SeptemberJune 30, 20192020 and December 31, 2018, the Company2019, we had goodwill of $37.1 million. The Company evaluatesWe evaluate goodwill impairment as of August 31st each year, and more frequently if events or circumstances indicate that there may be impairment. The CompanyWe completed itsour most recent annual goodwill impairment test as of August 31, 2019 and determined that 0 goodwill impairment existed. As a
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result of the economic volatility caused by COVID-19 pandemic in both the second and first quarters of 2020, we analyzed the risk indicators related to potential goodwill impairment. Based on these analyses, we did 0t identify any impairment to goodwill during the first six months of 2020, however, there can be no assurance that prolonged market volatility resulting from the COVID-19 pandemic or other factors will not result in impairments to goodwill or other intangibles in future periods.
Core deposit intangibles are amortized over their useful lives ranging from four to ten years. As of SeptemberJune 30, 2019,2020, the weighted average remaining amortization period for core deposit intangibles was approximately 4.94.3 years.
($ in thousands)($ in thousands)Gross Carrying ValueAccumulated AmortizationNet Carrying Value
June 30, 2020June 30, 2020
Core deposit intangiblesCore deposit intangibles$30,904  $27,612  $3,292  
($ in thousands) Gross Carrying Value Accumulated Amortization Net Carrying Value
September 30, 2019      
December 31, 2019December 31, 2019
Core deposit intangibles $30,904
 $26,299
 $4,605
Core deposit intangibles$30,904  $26,753  $4,151  
December 31, 2018      
Core deposit intangibles $30,904
 $24,558
 $6,346

Aggregate amortization of intangible assets was $500$430 thousand and $693$621 thousand for the three months ended SeptemberJune 30, 2020 and 2019 and 2018, respectively$859 thousand and $1.7 million and $2.4$1.2 million for the ninesix months ended SeptemberJune 30, 20192020 and 2018, respectively.2019. The following table presents estimated future amortization expenses as of SeptemberJune 30, 2019:2020:
($ in thousands) Remainder of 2019 2020 2021 2022 2023 2024 and After Total($ in thousands)Remainder of 20202021202220232024Total
Estimated future amortization expense $454
 $1,518
 $1,082
 $799
 $517
 $235
 $4,605
Estimated future amortization expense$659  $1,082  $799  $517  $235  $3,292  

NOTE 86 – FEDERAL HOME LOAN BANK ADVANCES AND OTHER BORROWINGS
The following table presents the Company's advances from the FHLB as of the dates indicated:
($ in thousands)June 30,
2020		December 31,
2019
Fixed rate:
Outstanding balance$624,000  
(1)
$730,000  
Interest rates ranging from— %
(2)
1.82 %
Interest rates ranging to3.32 %3.32 %
Weighted average interest rate2.24 %2.66 %
Variable rate:
Outstanding balance—  465,000  
Weighted average interest rate— %1.66 %
(1)Excludes $6.8 million of unamortized debt issuance costs at June 30, 2020. 
($ in thousands) September 30,
2019		 December 31,
2018
Fixed rate:    
Outstanding balance $980,000
 $805,000
Interest rates ranging from 1.81% 1.61%
Interest rates ranging to 3.32% 3.32%
Weighted average interest rate 2.51% 2.58%
Variable rate:    
Outstanding balance 670,000
 715,000
Weighted average interest rate 2.08% 2.56%
(2)Includes $10.0 million in FHLB recovery advances with an interest rate of 0.00%, consisting of $5.0 million with a maturity date of November 27, 2020 and $5.0 million with a maturity date of May 27, 2021.

Each advance is payable at its maturity date. Advances paid early are subject to a prepayment penalty. In June 2020, we repaid a $100.0 million FHLB term advance with a weighted average interest rate of 2.07% and incurred a $2.5 million extinguishment fee that is included in other noninterest expense. Additionally, in June 2020 we refinanced $111.0 million of FHLB term advances to take advantage of the rapid decline in market interest rates. As a result of this refinancing, our weighted average effective interest rate on such FHLB term advances changed from 2.81% to 2.02% and the weighted average life extended from 2.52 years to 5.18 years. At Septemberthe end of the second quarter, FHLB advances included 0 overnight borrowings, $58.0 million maturing within three months, and $566.0 million maturing beyond three months with a weighted average life of 4.1 years and weighted average interest rate of 2.39%.
At June 30, 20192020 and December 31, 2018,2019, the Bank’s advances from the FHLB were collateralized by certain real estate loans with an aggregate unpaid principal balance of $3.13$2.66 billion and $4.05$3.05 billion. Based on this collateral, the Bank was eligible to borrow an additional $1.06 billion respectively. at June 30, 2020.
The Bank’s investment in capital stock of the FHLB of San Francisco totaled $44.6$19.4 million and $41.0$32.3 million at SeptemberJune 30, 20192020 and December 31, 2018, respectively. Based on this collateral and2019.
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During the Bank’s holdingssecond quarter of FHLB stock, the Bank was eligible to borrow an additional $874.6 million at September 30, 2019.
The Bank maintained a line of credit of $21.0 million from2020, we expanded our existing secured borrowing capacity with the Federal Reserve Discount Window,Bank of San Francisco (“Federal Reserve”) by participating in its Borrower-in-Custody (“BIC”) program. As a result, our borrowing capacity with the Federal Reserve increased to which$370.4 million at June 30, 2020. Prior to participating in the BIC program, the Bank only pledged securities as collateral for access to the discount window. At June 30, 2020, the Bank has pledged certain qualifying loans with an unpaid principal balance of $870.1 million and securities with a carrying value of $28.3$23.0 million as collateral for this line of credit. Borrowings under this BIC program are overnight advances with interest chargeable at the discount window (“primary credit”) borrowing rate. There were 0 outstanding borrowings at Septemberunder this arrangement for the three and six months ended June 30, 2020 and 2019.
The Bank maintained available unsecured federal funds lines with 5 correspondent banks totaling $185.0 million, with 0 outstanding borrowings at SeptemberJune 30, 2019.2020.
The Bank also maintained repurchase agreements and had 0 outstanding securities sold under agreements to repurchase at SeptemberJune 30, 20192020 and December 31, 2018.2019. Availabilities and terms on repurchase agreements are subject to the counterparties' discretion and the pledging of additional investment securities.
On February 14, 2019, the Company entered into a new line of credit for $15.0 million, which bears interest at LIBOR plus 2.00% and has a maturity date of February 13, 2020. At September 30, 2019, total borrowings under the line of credit were $0.

NOTE 97 – LONG-TERM DEBT
The following table presents the Company'sour long-term debt as of the dates indicated:
 September 30, 2019 December 31, 2018June 30, 2020December 31, 2019
($ in thousands) Par Value Unamortized Debt Issuance Cost and Discount Par Value Unamortized Debt Issuance Cost and Discount($ in thousands)Par ValueUnamortized Debt Issuance Cost and DiscountPar ValueUnamortized Debt Issuance Cost and Discount
5.25% senior notes due April 15, 2025 $175,000
 $(1,661) $175,000
 $(1,826)5.25% senior notes due April 15, 2025$175,000  $(1,463) $175,000  $(1,579) 
Total $175,000
 $(1,661) $175,000
 $(1,826)Total$175,000  $(1,463) $175,000  $(1,579) 

Senior Notes
On April 6, 2015, the Company completed the issuance and sale of $175.0 million aggregate principal amount of its 5.25 percentWe were in compliance with all covenants under our 5.25% senior notes due April 15, 2025 (the Senior Notes). Net proceeds after discount were approximately $172.8 million.at June 30, 2020.
The Senior Notes are the Company’s senior unsecured debt obligations and rank equally with all of the Company’s other present and future unsecured unsubordinated obligations. The Company makes interest payments on the Senior Notes semi-annually in arrears.
The Company may, at its option, on or after January 15, 2025 (i.e., 90 days prior to the maturity date of the Senior Notes), redeem the Senior Notes in whole at any time or in part from time to time, in each case on not less than 30 nor more than 60 days’ prior notice. The Senior Notes will be redeemable at a redemption price equal to 100 percent of the principal amount of the Senior Notes to be redeemed plus accrued and unpaid interest to the date of redemption.
The Senior Notes were issued under the Senior Debt Securities Indenture, dated as of April 23, 2012 (the Base Indenture), as supplemented by the Second Supplemental Indenture dated as of April 6, 2015 (the Supplemental Indenture and together with the Base Indenture, the Indenture). The Indenture contains several covenants which, among other things, restrict the Company’s ability and the ability of the Company’s subsidiaries to dispose of or incur liens on the voting stock of certain subsidiaries and also contains customary events of default. The Company was in compliance with all covenants under the Indenture at September 30, 2019.
NOTE 108 – INCOME TAXES
For the three and ninesix months ended SeptemberJune 30, 20192020, income tax (benefit) expense, on a consolidated operations basis,benefit was $(5.6)$5.3 million and $1.4$7.5 million respectively, and the effective tax rate was 28.4%22.3% and 12.9%, respectively.23.0%. For the three and ninesix months ended SeptemberJune 30, 20182019, income tax expense (benefit), on a consolidated operations basis, was $3.6$4.3 million and $(102) thousand, respectively,$7.0 million and the effective tax rate was 24.3%20.6% and (0.3)%, respectively. During 2019, the Company had a reduction in the recognition22.9%. Our effective tax rate of year-to-date tax credits from the investments in alternative energy partnerships of $412 thousand22.3% and $9.6 million23.0% for the three and ninesix months ended SeptemberJune 30, 2018, respectively, compared2020 differs from the 21% federal statutory rate due to $0.9 million and $2.6 million, respectively,the impact of state taxes as well as various tax credits recognized for the three and nine months ended September 30, 2019, respectively. The Company uses the flow-through income statement method tocredits.
We account for the investment tax credits earned on the solar investments. Under this method, investment tax credits are recognized as a reduction to income tax expense and the initial book-tax difference in the basis of the investments are recognized as additional tax expense in the year they are earned.
The Company accounts for income taxes by recognizing deferred tax assets and liabilities based upon temporary differences between the amounts for financial reporting purposes and tax basis of its assets and liabilities. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion, or all, of the deferred tax asset will not be realized. In assessing the realization of deferred tax assets, management will continue to evaluate both positive and negative evidence on a quarterly basis, including considering the four possible sources of future taxable income, such as future reversal of itsexisting taxable temporary differences, the existencefuture taxable income exclusive of its historical earnings, the amounts ofreversing temporary differences and carryforwards, taxable income in prior carryback year(s), and future projected earnings as well as the tax expiration periods of its income tax credits.planning strategies. Based on this analysis, management determined, that it was more likely than not, that all of the deferred tax assets would be realized; therefore, 0 valuation allowance was provided against the net deferred tax assets of $46.0$48.3 million and $49.4$44.9 million at SeptemberJune 30, 20192020 and December 31, 2018,2019, respectively. The overall decreaseincrease in net deferred tax assets was primarily due to increases of $2.0 millionan increase in deferred tax liabilities resulting from year-to-date temporary book-tax differences and an increaseassets of $6.1$1.5 million in deferred tax liabilities from the decrease ofincrease in net unrealized loss on securities available-for-sale as well as a $4.6and $1.9 million reclassfrom the adoption of tax credit to deferred tax assets.ASU 2016-13.
ASC 740-10-25 relates to the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements. ASC 740-10-25 prescribes a threshold and a measurement process for recognizing in the financial statements a tax position taken or expected to be taken in a tax return and also provides guidance on de-recognition, classification, interest and penalties, accounting in interim periods, disclosure and transition. The CompanyWe had unrecognized tax benefits of $1.3$1.0 million and $1.2 million$977 thousand at SeptemberJune 30, 20192020 and December 31, 2018,2019, respectively. The Company doesWe do not expectbelieve that the total amount of

unrecognized tax benefits to significantlywill change materially in the next twelve months. As of SeptemberJune 30, 2019,2020, the total unrecognized tax benefit that, if recognized, would impact the effective tax rate was $1.1 million. $820 thousand.
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At SeptemberJune 30, 20192020 and December 31, 2018, the Company2019, we had 0 accrued interest or penalties. In the event the Company iswe are assessed interest and/or penalties by federal or state tax authorities, such amounts will be classified in the consolidated financial statements as income tax expense.
The Company and its subsidiariesWe are subject to U.S. Federalfederal income tax as well as income tax in multiple state jurisdictions. The Company isWe are no longer subject to the assessment ofexamination by U.S. federal income taxtaxing authorities for years before 2015.2016. The statute of limitations for the assessment of California Franchisefranchise taxes has expired for tax years before 2014 (other state income and franchise tax statutes of limitations vary by state).

NOTE 119 – DERIVATIVE INSTRUMENTS
The Company usesWe use derivative instruments and other risk management techniques to reduce itsour exposure to adverse fluctuations in interest rates and foreign currency exchange rates in accordance with itsour risk management policies.
Interest Rate SwapsDuring the three and Caps on Loans:The Company offers interest rate swap and cap products to certain loan customers to allow them to hedge the risk of rising interest rates on their variable rate loans. When such products are issued, the Company also enters into an offsetting swap with institutional counterparties to eliminate the interest rate risk. These back-to-back derivative agreements, which generate fee income for the Company, are intended to offset each other. The Company retains the credit risk of the original loan. The net cash flow for the Company is equal to the interest income received from a variable rate loan originated with the customer plus the fee. These swaps and caps are not designated as accounting hedges and are recorded at fair value in Other Assets and Accrued Expenses and Other Liabilities in the Consolidated Statements of Financial Condition. Thesix months ended June 30, 2020, changes in fair value are recorded in Other Income in the Consolidated Statements of Operations. For the three and nine months ended September 30, 2018, changes in fair value recorded through Other Income in the Consolidated Statements of Operations were immaterial.
For the three and nine months ended September 30, 2019, other income also includes a $603 thousand gain and $9.0 million loss on interest rate swaps related to the Freddie Mac multifamily securitization in which we sold the associated mortgage servicing rights. The $9.0 million unrealized lossand caps on these interest rate swaps was due to a decline in interest rates since their executionloans and was offset by the $8.9 million gross gain realized on the loans sold into the securitization in the third quarter of 2019. 
Interest Rate Swaps and Caps on Mortgage-backed Securities:During the third quarter, the Company partially hedged the fair value of the MBS portfolio using interest rate swaps. At the end of the quarter, the Company took advantage of the decline in long term interest rates and sold the majority of the MBS portfolio and unwound the majority of the interest rate swaps. The remaining balance of the MBS portfolio and the related interest rate swap is expected to be sold and unwound in the fourth quarter 2019. The unsold portion of the MBS portfolio has been deemed other–than–temporarily impaired and, along with the fair value adjustment on the swap, has been recorded as a loss in noninterest income with a net impact of $731 thousand and is included in the carrying value of MBS.
Foreign Exchange Contracts: The Company offers short-term foreign exchange contracts were $(107) thousand and $(288) thousand, respectively, compared to its customers to purchase and/or sell foreign currencies at set rates in the future. These products allow customers to hedge the foreign exchange rate risk of their deposits$(9.7) million and loans denominated in foreign currencies. In conjunction with these products the Company also enters into offsetting contracts with institutional counterparties to hedge the Company’s foreign exchange rate risk. These back-to-back contracts allow the Company to offer its customers foreign exchange products while minimizing its exposure to foreign exchange rate fluctuations. These foreign exchange contracts are not designated as hedging instruments and are recorded at fair value in Other Assets and Accrued Expenses and Other Liabilities on the Consolidated Statements of Financial Condition. For$(9.8) million for the three and ninesix months ended SeptemberJune 30, 2019, respectively, and 2018, changeswere included in fair value recorded through Other Income inother income on the Consolidated Statementsconsolidated statements of Operations were immaterial.operations.

The following table presents the notional amount and fair value of derivative instruments included in the Consolidated Statementsconsolidated statements of Financial Conditionfinancial condition as of the dates indicated.
June 30, 2020December 31, 2019
($ in thousands)Notional AmountFair
Value(1)		Notional AmountFair
Value(1)
Derivative assets:
Interest rate swaps and caps on loans$69,266  $8,598  $70,674  $3,445  
Foreign exchange contracts3,657  137  4,643  138  
Total$72,923  $8,735  $75,317  $3,583  
Derivative liabilities:
Interest rate swaps and caps on loans$69,266  $9,239  $70,674  3,717  
Foreign exchange contracts3,657  54  4,643  136  
Total$72,923  $9,293  $75,317  $3,853  
(1)
  September 30, 2019 December 31, 2018
($ in thousands) Notional Amount Fair Value(1) Notional Amount Fair Value(1)
Derivative assets:        
Interest rate swaps and caps on loans $101,253
 $4,773
 $103,812
 $1,534
Foreign exchange contracts 494
 36
 —
 —
Total $101,747
 $4,809
 $103,812
 $1,534
Derivative liabilities:        
Interest rate swaps and caps on loans $101,253
 $5,198
 $103,812
 1,600
Interest rate swaps on mortgage-backed securities 14,469
 325
 —
 —
Foreign exchange contracts 494
 30
 —
 —
Total $116,216
 $5,553
 $103,812
 $1,600

The fair value of interest rate swaps and caps on loans are included in other assets and accrued expenses and other liabilities, respectively, in the accompanying consolidated statements of financial condition.
(1)The fair value of interest rate swaps and cap on loans are included in other assets and accrued expenses and other liabilities, respectively, in the accompanying consolidated balance sheets. The fair value of interest rate swaps on mortgage-backed securities are include in the carrying value of mortgage-backed securities in the accompanying consolidated balance sheets.
The Company hasWe have entered into agreements with counterparty financial institutions, which include master netting agreements that provide for the net settlement of all contracts with a single counterparty in the event of default. However, the Company electedWe elect, however, to account for all derivatives with counterparty institutions on a gross basis. Due to clearinghouse rule changes, variation margin payments are treated as settlements of derivative exposure rather than as collateral.
NOTE 1210 – EMPLOYEE STOCK COMPENSATION
On May 31, 2018, (the Effective Date), the Company'sour stockholders approved the Company's 2018 Omnibus Stock Incentive Plan (2018 Omnibus Plan). As of the Effective Date, the Company discontinued granting awards under the Company’s 2013 Omnibus Incentive Plan (2013 Omnibus Plan) or any prior equity incentive plans and future stock-based compensation awards to its directors and employees will be made pursuant to the (“2018 Omnibus Plan.Plan”). The 2018 Omnibus Plan provides that the maximum number of shares that will be available for awards is 4,417,882, which represents the number of shares that were available for new awards under the 2013 Omnibus Plan immediately prior to the Effective Date.4,417,882. As of SeptemberJune 30, 2019, 3,623,6972020, 3,359,922 shares were available for future awards.
Stock-based Compensation Expense
The following table presents stock-based compensation expense and the related tax benefits for the periods indicated:
 Three Months Ended September 30, Nine Months Ended September 30,Three Months Ended
June 30,		Six Months Ended
June 30,
($ in thousands) 2019 2018 2019 2018($ in thousands)2020201920202019
Stock options $3
 $32
 $(13) $145
Stock options$2  $(24) $4  $(16) 
Restricted stock awards and units 1,491
 1,366
 3,857
 5,128
Restricted stock awards and units1,468  1,521  3,042  2,366  
Total share-based compensation expense $1,494
 $1,398
 $3,844
 $5,273
Total share-based compensation expense$1,470  $1,497  $3,046  $2,350  
Related tax benefits $439
 $410
 $1,130
 $1,546
Related tax benefits$433  $440  $897  $691  

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The following table presents unrecognized stock-based compensation expense as of SeptemberJune 30, 2019:2020:
($ in thousands) Unrecognized Expense Weighted-Average Remaining Expected Recognition Period
Stock option awards $9
 0.8 years
Restricted stock awards and restricted stock units 11,399
 2.3 years
Total $11,408
 2.3 years
($ in thousands)Unrecognized ExpenseWeighted-Average Remaining Expected Recognition Period
Restricted stock awards and restricted stock units9,530 2.3 years
Total$9,530 2.3 years

Stock Options

The Company hasWe issued stock options to certain employees, officers, and directors. Stock options are issued at the closing market price immediately before the grant date and generally have a three to five year vesting period and contractual terms of seven to ten years. The Company recognizesWe recognize an income tax deduction upon exercise of a stock option to the extent taxable income is recognized by the option holder. In the case of a non-qualified stock option, the option holder recognizes taxable income based on the fair market value of the shares acquired at the time of exercise less the exercise price.
The following table represents stock option activity for the three months ended SeptemberJune 30, 2019:2020:
 Three Months Ended September 30, 2019Three Months Ended June 30, 2020
($ in thousands except per share data) Number of Shares Weighted-Average Exercise Price Per Share Weighted-Average Remaining Contract Term Aggregated Intrinsic Value($ in thousands except per share data)Number of SharesWeighted-Average Exercise Price Per ShareWeighted-Average Remaining Contract TermAggregated Intrinsic Value
Outstanding at beginning of period 135,521
 $13.65
 5.1 years  Outstanding at beginning of period55,069  $13.96  4.0 years
Exercised (73,000) $13.47
 5.6 years  
Forfeited —
 $—
 0.0 years  
Outstanding at end of period 62,521
 $13.85
 4.6 years $18
Outstanding at end of period55,069  $13.96  3.7 years$(194) 
Exercisable at end of period 59,149
 $13.86
 4.5 years $17
Exercisable at end of period52,821  $13.97  3.6 years$(187) 

The following table represents stock option activity for the ninesix months ended SeptemberJune 30, 2019:2020:
 Nine Months Ended September 30, 2019Six Months Ended June 30, 2020
($ in thousands except per share data) Number of Shares Weighted-Average Exercise Price Per Share Weighted-Average Remaining Contract Term Aggregated Intrinsic Value($ in thousands except per share data)Number of SharesWeighted-Average Exercise Price Per ShareWeighted-Average Remaining Contract TermAggregated Intrinsic Value
Outstanding at beginning of period 186,973
 $13.54
 5.8 years 


Outstanding at beginning of period62,521  $13.85  4.3 years
Exercised (74,836) $13.41
 5.2 years  Exercised(7,452) $13.05  5.2 years
Forfeited (49,616) $13.34
 6.1 years 

Outstanding at end of period 62,521
 $13.85
 4.6 years $18
Outstanding at end of period55,069  $13.96  3.7 years$(194) 
Exercisable at end of period 59,149
 $13.86
 4.5 years $17
Exercisable at end of period52,821  $13.97  3.6 years$(187) 

The following table sets forth information regarding unvested stock options for the three and ninesix months ended SeptemberJune 30, 2019:2020:
Three Months Ended
June 30, 2020		Six Months Ended
June 30, 2020
Number of SharesWeighted-Average Exercise Price Per ShareNumber of SharesWeighted-Average
Exercise Price
Per Share
Outstanding at beginning of period2,248  $13.75  2,248  $13.75  
Vested—  $—  —  $—  
Forfeited—  $—  —  $—  
Outstanding at end of period2,248  $13.75  2,248  $13.75  


  Three Months Ended September 30, 2019 Nine Months Ended September 30, 2019
  Number of Shares Weighted-Average Exercise Price Per Share Number of Shares Weighted-Average
Exercise Price
Per Share
Outstanding at beginning of period 7,848
 $13.35
 63,848
 $13.30
Vested (4,476) $13.05
 (16,476) $13.22
Forfeited —
 $—
 (44,000) $13.29
Outstanding at end of period 3,372
 $13.75
 3,372
 $13.75
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Restricted Stock Awards and Restricted Stock Units
The CompanyWe also hashave granted restricted stock awards and restricted stock units to certain employees, officers, and directors. The restricted stock awards and units are valued at the closing price of the Company’sour stock on the measurement date. The restricted stock awards and units fully vest after a specified period (generally ranging from one to five years) of continued service from the date of grant plus, in some cases, the satisfaction of performance conditions. These performance targets include conditions relating to the Company’sour profitability and regulatory standing. The actual amounts of stock released upon vesting will be determined by the Compensation Committee of the Company'sour Board of Directors upon the Committee's certification of the satisfaction of the target level of performance. The Company recognizesWe recognize an income tax deduction in an amount equal to the taxable income reported by the holders of the restricted stock, generally upon vesting or, in the case of restricted stock units, when settled. The following table presents unvested restricted stock awards and restricted stock units

activity for the three and ninesix months ended SeptemberJune 30, 2019:2020:
 Three Months Ended September 30, 2019 Nine Months Ended September 30, 2019Three Months Ended
June 30, 2020		Six Months Ended
June 30, 2020
 Number of Shares Weighted Average Grant Date Fair Value Per Share Number of Shares 
Weighted
Average Grant
Date Fair Value
Per Share
Number of SharesWeighted Average Grant Date Fair Value Per ShareNumber of SharesWeighted
Average Grant
Date Fair Value
Per Share
Outstanding at beginning of period 1,106,854
 $15.93
 833,601
 $19.02
Outstanding at beginning of period1,083,107  $15.65  923,482  $15.74  
Granted (1)
 49,191
 $14.84
 772,589
 $14.36
Granted (1)
84,998  $8.76  354,136  $13.79  
Vested (2)
 (25,522) $15.11
 (240,779) $18.54
Vested (2)
(231,362) $16.09  (293,695) $15.95  
Forfeited (3)
 (63,512) $16.62
 (298,400) $18.64
Forfeited (3)
(24,073) $18.20  (71,253) $16.85  
Outstanding at end of period 1,067,011
 $15.86
 1,067,011
 $15.86
Outstanding at end of period912,670  $14.91  912,670  $14.91  
(1)There were 0 and 78,771 performance-based shares/units included in shares granted for the three and six months ended June 30, 2020.
(2)There were 13,074 and 18,473 performance-based shares/units included in vested shares for the three and six months ended June 30, 2020.
(3)The number of forfeited shares includes aggregate performance-based shares/units of 1,782 and 17,404 for the three and six months ended June 30, 2020.

(1)There were 23,540 and 174,935 performance-based shares/units included in shares granted for the three and nine months ended September 30, 2019, respectively.
(2)There were 0 and 37,572 performance-based shares/units included in vested shares for the three and nine months ended September 30, 2019, respectively.
(3)The number of forfeited shares includes aggregate performance-based shares/units of 28,617 and 171,150 for the three and nine months ended September 30, 2019, respectively.
Stock Appreciation Rights
On August 21, 2012, the Companywe granted to the then-actingthen, and now former, chief executive officer, Steven A. Sugarman, a ten-yearten-year stock appreciation right (SAR)(“SAR”).
The following table represents SARs activity and the weighted average exercise price per share as of and for the three months ended SeptemberJune 30, 2019:2020:
 Three Months Ended September 30, 2019Three Months Ended June 30, 2020
($ in thousands except per share data) Number of Shares Weighted-Average Exercise Price Per Share Weighted-Average Remaining Contract Term Aggregated Intrinsic Value($ in thousands except per share data)Number of SharesWeighted-Average Exercise Price Per ShareWeighted-Average Remaining Contract TermAggregated Intrinsic Value
Outstanding at beginning of period 1,559,012
 $11.60
 3.2 years $3,691
Outstanding at beginning of period1,559,012  $11.60  2.4 years$(5,616) 
Outstanding at end of period 1,559,012
 $11.60
 2.9 years $3,956
Outstanding at end of period1,559,012  $11.60  2.1 years$(1,812) 
Exercisable at end of period 1,559,012
 $11.60
 2.9 years $3,956
Exercisable at end of period1,559,012  $11.60  2.1 years$(1,812) 

The following table represents SARs activity and the weighted average exercise price per share as of and for the ninesix months ended SeptemberJune 30, 2019:2020:
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 Nine Months Ended September 30,Six Months Ended June 30,
($ in thousands except per share data) Number of Shares Weighted-Average Exercise Price Per Share Weighted-Average Remaining Contract Term Aggregated Intrinsic Value($ in thousands except per share data)Number of SharesWeighted-Average Exercise Price Per ShareWeighted-Average Remaining Contract TermAggregated Intrinsic Value
Outstanding at beginning of period 1,559,012
 $11.60
 3.6 years $2,662
Outstanding at beginning of period1,559,012  $11.60  2.6 years$8,508  
Outstanding at end of period 1,559,012
 $11.60
 2.9 years $3,956
Outstanding at end of period1,559,012  $11.60  2.1 years$(1,812) 
Exercisable at end of period 1,559,012
 $11.60
 2.9 years $3,956
Exercisable at end of period1,559,012  $11.60  2.1 years$(1,812) 

NOTE 1311 – STOCKHOLDERS’ EQUITY
Warrants
On November 1, 2010, the Company issued warrants to COR Advisors LLC (COR Advisors), an entity controlled by Steven A. Sugarman, who became a director of the Company on that date and later became President and Chief Executive Officer of the Company (and resigned from those and all other positions with the Company and the Bank on January 23, 2017). The warrants entitled COR Advisors to purchase up to 1,395,000 shares of non-voting common stock at an exercise price of $11.00 per share, subject to certain adjustments to the number of shares underlying the warrants as well as certain adjustments to the warrant exercise price as applicable. On August 3, 2011, COR Advisors transferred warrants for the right to purchase 960,000 shares of non-voting common stock to COR Capital Holdings LLC (COR Capital Holdings), an entity controlled by Steven A.

Sugarman, and transferred warrants for the right to purchase the remaining 435,000 shares of non-voting common stock to Jeffrey T. Seabold, the Company's then- (now former) Executive Vice President and Management Vice-Chair.
On August 22, 2012, COR Capital Holdings transferred its warrants for the right to purchase 960,000 shares of non-voting common stock to a living trust for Steven A. Sugarman and his spouse. These warrants vested in tranches, with each tranche being exercisable for 5 years after the tranche's vesting date. With respect to the warrants transferred by COR Capital Holdings to the living trust for Steven A. Sugarman and his spouse, warrants to purchase 50,000 shares vested on October 1, 2011 and the remainder vested in seven equal quarterly installments beginning January 1, 2012 and ending on July 1, 2013. With respect to the warrants transferred by COR Advisors to Mr. Seabold, warrants to purchase 95,000 shares vested on January 1, 2011; warrants to acquire 130,000 shares vested on each of April 1 and July 1, 2011, and warrants to purchase 80,000 shares vested on October 1, 2011.
On August 17, 2016, the living trust for Steven A. Sugarman and his spouse transferred warrants to purchase 480,000 shares to Steven A. Sugarman's brother, Jason Sugarman. These transferred warrants were last exercisable on September 30, 2016, December 31, 2016, March 31, 2017, June 30, 2017 and September 30, 2017 for 50,000, 130,000, 130,000, 130,000, and 40,000 shares, respectively. On August 17, 2016, Jason Sugarman irrevocably elected to fully exercise each tranche of the transferred warrants. Under his irrevocable election, Jason Sugarman directed that each such exercise would occur on the last exercisable date for each tranche using a cashless (net) exercise method and also directed that each exercise be for either non-voting common stock, or, if allowed under the terms of the warrant, for voting common stock. At September 30, 2016, December 31, 2016, March 31, 2017, June 30, 2017 and September 30, 2017, in accordance with Jason Sugarman’s irrevocable election, warrants to purchase 50,000, 130,000, 130,000,130,000, and 40,000 shares, respectively, had been exercised, resulting in issuances of 25,051 and 64,962 shares of the Company's voting common stock and 75,875, 77,376 and 23,237 shares of the Company's non-voting common stock, respectively. Based on automatic adjustments to the original $11.00 exercise price, the exercise price at the time of exercise was $8.80, $8.72, $8.66, $8.61 and $8.55 per share, respectively. As a result of these exercises, Jason Sugarman no longer holds any warrants to purchase shares of the Company’s stock. During the three months ended June 30, 2018, based on additional documentation received from Jason Sugarman, it was determined that Jason Sugarman was eligible to receive voting common stock under the terms of the transferred warrant for the exercises that previously occurred on March 31, 2017, June 30, 2017 and September 30, 2017. Accordingly, on June 6, 2018, an aggregate of 176,488 shares of the Company's non-voting common stock owned by Jason Sugarman were canceled and he was issued 176,488 shares of the Company's voting common stock in lieu thereof.
On August 16, 2016, the living trust for Steven A. Sugarman and his spouse irrevocably elected to exercise its warrants to purchase 480,000 shares. Under its irrevocable election, the living trust for Steven A. Sugarman and his spouse directed that each such exercise would occur on the last exercisable date for each tranche of such warrants (September 30, 2017, December 31, 2017, March 31, 2018 and June 30, 2018 with respect to 90,000, 130,000, 130,000, and 130,000 shares, respectively) using a cashless net exercise method and also directed that each exercise be for non-voting common stock. On September 30, 2017, in accordance with its irrevocable election, warrants to purchase 90,000 shares were exercised by the living trust for Steven A. Sugarman and his spouse, resulting in the issuance of 52,284 shares of the Company's non-voting common stock. Based on an automatic adjustment to the original $11.00 exercise price, the exercise price at the time of exercise was $8.55 per share.
On each of December 27, 2017, March 30, 2018 and June 29, 2018, the Company was notified that the living trust for Steven A. Sugarman and his spouse purportedly transferred warrants with respect to 130,000 shares, with a last exercisable date of December 31, 2017, 130,000 shares with a last exercisable date of March 31, 2018 and 130,000 shares with a last exercisable date of June 30, 2018, respectively, to a separate entity, Sugarman Family Partners. In accordance with the irrevocable election to exercise previously submitted by the living trust for Steven A. Sugarman and his spouse, the Company considered these transferred warrants to have been exercised with respect to 130,000 shares on December 31, 2017, 130,000 shares on March 31, 2018 and 130,000 shares on June 30, 2018, respectively, resulting in the issuance of 77,413, 72,159, and 73,543 shares of the Company's non-voting common stock, respectively, on December 31, 2017, April 2, 2018 and July 2, 2018, respectively. Based on an automatic adjustment to the original $11.00 exercise price, the exercise price at the time of exercise was $8.49 per share, $8.44 per share and $8.38 per share, respectively. As a result of these exercises, NaN of these warrants remain outstanding.
On December 8, 2015, March 9, 2016, June 17, 2016, and September 30, 2016, Mr. Seabold exercised his warrants with respect to 95,000, 130,000, 130,000, and 80,000 shares, respectively, using cashless (net) exercises, resulting in a net number of shares of non-voting common stock issued in the aggregate of 37,355, 53,711, 70,775, and 40,081, respectively. Based on automatic adjustments to the original $11.00 exercise price, the exercise price at the time of exercise was $9.04, $8.90, $8.84, and $8.80 per share, respectively. As a result of these exercises, Mr. Seabold 0 longer holds any warrants to purchase shares of the Company's stock.
Under the terms of the respective warrants, the warrants were exercisable for voting common stock in lieu of non-voting common stock following a transfer of the warrants under certain circumstances described in the terms of the warrants. The

terms and issuance of the foregoing warrants were approved by the Company's stockholders at a special meeting held on October 25, 2010.
Preferred Stock
The Company isWe are authorized to issue 50,000,000 shares of preferred stock with par value of $0.01 per share. Preferred shares outstanding rank senior to common shares both as to dividends and liquidation preference but generally have no voting rights. All of the Company'sour outstanding shares of preferred stock have a $1,000 per share liquidation preference. The following table presents the Company'sour total outstanding preferred stock as of the dates indicated:
  September 30, 2019 December 31, 2018
($ in thousands) Shares Outstanding Liquidation Preference Carrying Value Shares Outstanding Liquidation Preference Carrying Value
Series D
7.375% non-cumulative perpetual
 96,629
 $96,629
 $93,162
 115,000
 $115,000
 $110,873
Series E
7.00% non-cumulative perpetual
 100,477
 100,477
 96,663
 125,000
 125,000
 120,255
Total 197,106
 $197,106
 $189,825
 240,000
 $240,000
 $231,128
June 30, 2020December 31, 2019
($ in thousands)Shares OutstandingLiquidation PreferenceCarrying ValueShares OutstandingLiquidation PreferenceCarrying Value
Series D 
7.375% non-cumulative perpetual
93,272 $93,272 $89,924 96,629 $96,629 $93,162 
Series E 
7.00% non-cumulative perpetual
98,865 98,865 95,113 100,477 100,477 96,663 
Total192,137 $192,137 $185,037 197,106 $197,106 $189,825 

On September 17, 2018,During the Company completed the redemption of all 40,250 outstanding shares of the Company's 8.00 percent Series C Non-Cumulative Perpetual Preferred Stock (Series C Preferred Stock), which resulted in the simultaneous redemption of all 1,610,000 of the outstanding related depositary shares (Series C Depository Shares), each representing a 1/40th interest in a share of Series C Preferred Stock, at a redemption price of the liquidation amount of $1,000 per share of Series C Preferred Stock (equivalent to $25 per Series C Depository Share). The redemption price represented an aggregate amount of $40.3 millionthree and did not accrue interest from and following the regularly scheduled dividend payment date of September 15, 2018. Deferred stock issuance costs of $2.3 million originally recorded as a reduction to preferred stock upon issuance of the Series C Preferred Stock were reclassified to retained earnings and resulted in a non-cash reduction to net income allocated to common stockholders.
On August 23, 2019, the Company completed a tender offer forsix months ended June 30, 2020, we repurchased depositary shares (Series D Depositary Shares), each representing a 1/40th interest in a share of Series D Preferred Stock, liquidation amount of $1,000 per share of Series D Preferred Stock, resulting in the repurchase of 734,82353,006 and 134,310 outstanding Series D DepositoryDepositary Shares and the related retirement of 18,3711,325 and 3,357 outstanding shares of Series D Preferred Stock. The repurchase price aggregated to $19.4$1.2 million and $2.7 million. The $1.7 million$40 thousand and $541 thousand difference between the consideration paid and the carrying value of the Series D Preferred Stock was reclassified to retained earnings and resulted in a non-cash reductionan increase to net (loss) income allocated to common stockholders.
On August 23, 2019,During the Company completed a tender offer forthree and six months ended June 30, 2020, we repurchased depositary shares (Series E Depositary Shares), each representing a 1/40th interest in a share of Series E Preferred Stock, liquidation amount of $1,000 per share of Series E Preferred Stock, resulting in the repurchase of 980,92857,065 and 64,465 outstanding Series E DepositoryDepositary Shares and the related retirement of 24,5231,427 and 1,612 outstanding shares of Series E Preferred Stock. The repurchase price aggregated $26.6to $1.4 million and $1.5 million. The $3.4 million$9 thousand and $34 thousand difference between the consideration paid and the carrying value of the Series E Preferred Stock was reclassified to retained earnings and resulted in a non-cash reductionan increase to net (loss) income allocated to common stockholders.

Share Repurchase Program
On February 10, 2020, we announced that our Board of Directors (the “Board”) authorized the repurchase of up to $45 million of our common stock. The repurchase authorization expires in February 2021, however given current macroeconomic conditions and the COVID-19 pandemic, we have suspended common stock repurchases for the immediate future. There were 0 repurchases of common stock for the three months ended June 30, 2020. During the six months ended June 30, 2020, we repurchased 827,584 shares of common stock at a weighted average price of $14.50 per share and an aggregate amount of $12.0 million. Purchases may be made in open-market transactions, in block transactions on or off an exchange, in privately negotiated transactions, or by other means as determined by our management and in accordance with the regulations of the Securities and Exchange Commission. The timing of purchases and the number of shares repurchased under the program will depend on a variety of factors including price, trading volume, corporate and regulatory requirements, and market conditions.
Change in Accumulated Other Comprehensive (Loss) Income ("AOCI")
The Company’sOur AOCI includes unrealized gain (loss) on securities available-for-sale. Changes to AOCI are presented net of tax effect as a component of stockholders' equity. Reclassifications from AOCI are recorded on the Consolidated Statementsconsolidated statements of

Operationsoperations either as a gain or loss. The following table presents changes to AOCI for the periods indicated:
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 Three Months Ended September 30, Nine Months Ended September 30,Three Months Ended
June 30,		Six Months Ended
June 30,
($ in thousands) 2019 2018 2019 2018($ in thousands)2020201920202019
Unrealized gain (loss) on securities available-for-sale        
Unrealized(loss) gain on securities available-for-saleUnrealized(loss) gain on securities available-for-sale
Balance at beginning of period $(12,668) $(19,370) $(24,117) $5,227
Balance at beginning of period$(54,148) $(18,091) $(11,900) $(24,117) 
Unrealized gain (loss) arising during the period (1,408) (3,633) 15,014
 (34,111)Unrealized gain (loss) arising during the period56,701  7,678  (3,182) 16,422  
Impairment loss on investment securities 731
 —
 731
 —
Reclassification adjustment from other comprehensive income 5,063
 (13) 4,855
 (5,532)Reclassification adjustment from other comprehensive income(2,011) —  (2,011) (208) 
Tax effect of current period changes (1,289) 1,069
 (6,054) 11,973
Tax effect of current period changes(16,107) (2,255) 1,528  (4,765) 
Total changes, net of taxes 3,097
 (2,577) 14,546
 (27,670)Total changes, net of taxes38,583  5,423  (3,665) 11,449  
Reclassification of stranded tax effects to retained earnings —
 —
 —
 496
Balance at end of period $(9,571) $(21,947) $(9,571) $(21,947)Balance at end of period$(15,565) $(12,668) $(15,565) $(12,668) 

NOTE 1412 – VARIABLE INTEREST ENTITIES
The Company holdsWe hold ownership interests in alternative energy partnerships and qualified affordable housing partnerships and hashave a variable interest in a multifamily securitization trust. The Company evaluates itsWe evaluate our interests in these entities to determine whether they meet the definition of a variable interest entity (VIE) and whether the Company iswe are required to consolidate these entities. A VIE is consolidated by its primary beneficiary, which is the party that has both (i) the power to direct the activities that most significantly impact the economic performance of the VIE and (ii) a variable interest that could potentially be significant to the VIE. To determine whether or not a variable interest the Company holdswe hold could potentially be significant to the VIE, the Company considerswe consider both qualitative and quantitative factors regarding the nature, size, and form of the Company'sour involvement with the VIE. The Company hasWe have determined that itsour interests in these entities meet the definition of variable interests.
Unconsolidated VIEs
Multifamily Securitization
During the third quarter of 2019, the Companywe transferred $573.5 million of multifamily loans, through a two-step process, to a third-party depositor which placed the multifamily loans into a third-party trust (a VIE) that issued structured pass-through certificates to investors. The transfer of these loans was accounted for as a sale for financial reporting purposes, in accordance with ASC 860. The CompanyWe determined that it iswe are not the primary beneficiary of this VIE as it doeswe do not have the power to direct the activities that will have the most significant economic impact on the entity. Our continuing involvement in this securitization is limited to customary obligations associated with the securitization of loans, including the obligation to cure, repurchase, or substitute loans in the event of a material breach in representations. Additionally, the Company haswe have the obligation to guarantee credit losses up to 12 percent12% of the aggregate unpaid principal balances at cut-off date of the securitization. This obligation is supported by a $68.8 million letter of credit between the Freddie Mac and the FHLB.
The maximum loss exposure that would be absorbed by the Companyus in the event that all of the assets in the securitization trust are deemed worthless is $68.8 million, which represents the aforementioned Company’s obligation to guarantee credit losses up to 12 percent. The Company believes12%. We believe that the loss exposure on itsthe multifamily securitization is reduced by both loan-to-value ratios of the underlying collateral balances and the overcollateralization that exists within the securitization trust. At SeptemberJune 30, 2019, the Company has recognized2020, we have a $4.4$3.5 million repurchase liabilityreserve related to this VIE.
Alternative Energy Partnerships
The Company investsWe invest in certain alternative energy partnerships (limited liability companies) formed to provide sustainable energy projects that are designed to generate a return primarily through the realization of federal tax credits (energy tax credits). These entities were formed to invest in either newly installedestablished residential rooftopand commercial solar leases and power purchase agreements or newly installed ground mount solar power purchase agreements. As a result of itsour investments, the Company haswe have the right to certain investment tax credits and tax depreciation benefits (recognized on the flow through and income statement method in accordance with ASC 740), and to a lesser extent, cash flows generated from the installed solar systems leased to customersindividual consumers for a fixed period of time.
While the Company'sour interest in the alternative energy partnerships meets the definition of a VIE in accordance with ASC 810, the Company haswe have determined that the Company iswe are not the primary beneficiary because the Company doeswe do not have the power to direct the activities that most significantly impact the economic performance of the entities including operational and credit risk management activities. As the Company iswe are not the primary beneficiary, the Companywe did not consolidate the entities. The

Company usesWe use the Hypothetical Liquidation at Book Value (HLBV) method to account for theseour investments in energy tax credits as an equity investment under ASC 970-323-25-17. Under the HLBV method, an equity method investor determines its share of an investee's earnings by comparing its claim on the investee's book value at the beginning and end of the period, assuming the investee were to liquidate all assets at their U.S. GAAP amounts and distribute the resulting cash to creditors and investors
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under their respective priorities. The difference between the calculated liquidation distribution amounts at the beginning and the end of the reporting period, after adjusting for capital contributions and distributions, is the Company’sour share of the earnings or losses from the equity investment for the period. To account for the tax credits earned on investments in alternative energy partnerships, the Company useswe use the flow-through income statement method. Under this method, the tax credits are recognized as a reduction to income tax expense and the initial book-tax differences in the basis of the investments are recognized as additional tax expense in the year they are earned.
During the three and nine months ended September 30, 2019, the Company funded 0 and $235 thousand for its Investments in alternative energy partnerships and did not receive any return of capital from its alternative energy partnerships. During the three months ended September 30, 2018, the Company received a return of capital of 0 and funded 0, respectively, from and into these partnerships. During the nine months ended September 30, 2018, the Company received a return of capital of $1.0 million and funded 0, respectively, from and into these partnerships.
During the three months ended September 30, 2019 and 2018, the Company recognized a (gain) loss on investment of $(0.9) million and $2.5 million, respectively, through its HLBV application. During the nine months ended September 30, 2019 and 2018, the Company recognized a loss on investment of $0.7 million and $4.3 million, respectively, through its HLBV application. As a result, the balance of these investments wastotaled $27.0 million and $41.8$29.3 million at SeptemberJune 30, 20192020 and 2018, respectively. From an income tax benefit perspective, the Company recognized investment tax credits of $862 thousand and $412 thousandDecember 31, 2019.
The following table presents information regarding activity in our alternative energy partnerships for the three months ended September 30, 2019 and 2018, respectively, and $2.6 million and $9.6 million during the nine months ended September 30, 2019 and 2018, respectively, as well as income tax benefits (expense) relating to the recognition of its loss (gain) through its HLBV application during these periods.periods indicated:
Three Months Ended
June 30,		Six Months Ended
June 30,
($ in thousands)2020201920202019
Fundings$—  $235  $3,631  $235  
Cash distribution from investment547  535  1,001  995  
Gain (loss) on investments in alternative energy partnerships167  355  (1,738) (1,595) 
Income tax credits recognized—  1,723  —  1,723  
Tax (expense) benefit recognized from HLBV application(38) 380  398  380  

The following table represents the carrying value of the associated unconsolidated assets and liabilities and the associated maximum loss exposure for alternative energy partnerships as of the dates indicated:
($ in thousands) September 30,
2019		 December 31,
2018		($ in thousands)June 30,
2020		December 31,
2019
Cash $3,871
 $3,012
Cash$2,958  $4,224  
Equipment, net of depreciation 250,892
 259,464
Equipment, net of depreciation244,961  248,920  
Other assets 5,728
 4,470
Other assets6,751  6,301  
Total unconsolidated assets $260,491
 $266,946
Total unconsolidated assets$254,670  $259,445  
Total unconsolidated liabilities $6,692
 $6,269
Total unconsolidated liabilities$6,326  $7,143  
Maximum loss exposure $30,835
 $28,988
Maximum loss exposure$26,967  $32,525  

The maximum loss exposure that would be absorbed by the Companyus in the event that all of the assets in alternative energy partnerships are deemed worthless is $30.8$27.0 million, which is the Company'sour recorded investment amount and remaining unfunded commitment at SeptemberJune 30, 2019.2020.
The Company believesWe believe that the loss exposure on its investmentour investments is reduced considering that theour return on itsour investment is provided not only by the cash flows of the underlying customerclient leases and power purchase agreements, but also through the significant tax benefits, including federal tax credits generated from the investments. In addition, the management arrangements include a transition manager to support any transition of the solar company sponsor whose role includes that of the servicer and operation and maintenance provider, in the event the sponsor would be required to be removed from its responsibilities (e.g., bankruptcy, breach of contract, etc.), thereby further limiting the Company’sour exposure.
Qualified Affordable Housing Partnerships
The Company also investsWe invest in limited partnerships that operate qualified affordable housing projects. The returns on these investments are generated primarily through allocated Federal tax credits and other tax benefits. In addition, these investments contribute to the Company'sour compliance with the Community Reinvestment Act. These limited partnerships are considered to be VIEs, because either (i) they do not have sufficient equity investment at risk or (ii) the limited partners with equity at risk do not have substantive kick-out rights through voting rights or substantive participating rights over the general partner. As a limited partner, the Company iswe are not the primary beneficiary because the general partner has the ability to direct the activities of the VIEs that most significantly impact their economic performance. Therefore, the Company doesAs a result, we do not consolidate these partnerships.
At September 30, 2019 and December 31, 2018, the Company had a total investment
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The following table presents information regarding balances in qualified affordable housing projects of $37.3 million and $20.0 million, respectively. During the three and nine months ended September 30, 2019, the Company

funded $8.3 million and $8.8 million, respectively, and recognized proportional amortization expense of $1.5 million and $2.7 million, respectively. The Company has funded $26.5 million of its $49.3 million aggregated funding commitments and had an unfunded commitment of $22.7 million at September 30, 2019. During the three and nine months ended September 30, 2018, the Company funded $384 thousand and $2.0 million, respectively, into qualified affordable housing projects and recognized proportional amortization expense of $498 thousand and $1.5 million, respectively. From an income tax benefit perspective, the Company recognized investment tax credits of $724 thousand and $470 thousand, respectively, during the three months ended September 30, 2019 and 2018 and $1.8 million and $1.4 million for the nine months ended September 30, 2019 and 2018, respectively. At September 30, 2019 and December 31, 2018, the maximum loss exposure that would be absorbed by the Company in the event that all of the assets in this investment are deemed worthless is $37.3 million and $20.0 million, respectively, which is the Company's recorded investment amount. The recorded investment amount is included in Other Assets in the Consolidated Statements of Financial Condition and the proportional amortization expense is recorded in Income Tax Expense (Benefit) in the Consolidated Statements of Operations.
As the investments in alternative energy partnerships andour qualified affordable housing partnerships represent unconsolidated VIEs tofor the Company,periods indicated:
($ in thousands)June 30,
2020		December 31,
2019
Ending balance(1)
$46,167  $36,462  
Aggregate funding commitment61,278  49,278  
Total amount funded40,776  26,905  
Unfunded commitment20,502  22,373  
Maximum loss exposure46,167  36,462  
(1)Included in other assets in the assets and liabilitiesaccompanying consolidated statements of financial condition.
The following table presents information regarding activity in our qualified affordable housing partnerships for the investments themselves are not recorded on the Company's Statements of Financial Condition.periods indicated:
Three Months Ended
June 30,		Six Months Ended
June 30,
($ in thousands)2020201920202019
Fundings$9,312  $—  $13,871  $454  
Proportional amortization recognized1,148  553  2,295  1,190  
Income tax credits recognized1,152  554  2,208  1,109  

NOTE 1513 – (LOSS) EARNINGS PER COMMON SHARE
The following table presents computations of basic and diluted (loss) earnings per common share ("EPS") for the three and ninesix months ended SeptemberJune 30, 2019:2020:
 Three Months Ended September 30, 2019 Nine Months Ended September 30, 2019Three Months Ended June 30, 2020Six Months Ended June 30, 2020
($ in thousands except per share data) Common Stock Class B Common Stock Total Common Stock Class B Common Stock Total($ in thousands except per share data)Common StockClass B
Common Stock		Common StockClass B Common Stock
(Loss) income from continuing operations $(13,999) $(133) $(14,132) $9,398
 $89
 $9,487
Less: (loss) income allocated to participating securities —
 —
 —
 —
 —
 —
Loss from operationsLoss from operations$(18,273) $(176) $(24,804) $(238) 
Less: participating securities dividends (93) (1) (94) (386) (4) (390)Less: participating securities dividends(93) (1) (186) (2) 
Less: preferred stock dividends (3,371) (32) (3,403) (11,906) (113) (12,019)Less: preferred stock dividends(3,409) (33) (6,909) (66) 
Less: preferred stock redemption (5,045) (48) (5,093) (5,045) (48) (5,093)Less: preferred stock redemption49  —  570  5  
Net loss allocated to common stockholders $(22,508) $(214) $(22,722) $(7,939) $(76) $(8,015)Net loss allocated to common stockholders$(21,726) $(210) $(31,329) $(301) 
Weighted average common shares outstanding 50,404,906
 477,321
 50,882,227
 50,327,108
 477,321
 50,804,429
Weighted average common shares outstanding49,553,598  477,321  49,770,527  477,321  
Dilutive effects of restricted shares/units —
 —
 —
 —
 —
 —
Dilutive effects of restricted shares/units—  —  —  —  
Dilutive effects of stock options —
 —
 —
 —
 —
 —
Dilutive effects of stock options—  —  —  —  
Average shares and dilutive common shares 50,404,906
 477,321
 50,882,227
 50,327,108
 477,321
 50,804,429
Average shares and dilutive common shares49,553,598  477,321  49,770,527  477,321  
            
Basic loss per common share $(0.45) $(0.45) $(0.45) $(0.16) $(0.16) $(0.16)Basic loss per common share$(0.44) $(0.44) $(0.63) $(0.63) 
Diluted loss per common share $(0.45) $(0.45) $(0.45) $(0.16) $(0.16) $(0.16)Diluted loss per common share$(0.44) $(0.44) $(0.63) $(0.63) 

For the three and ninesix months ended SeptemberJune 30, 2019,2020, there were 1,062,826960,090 and 967,376, respectively,960,883 of restricted shares/units and 60,95655,069 and 127,212, respectively,55,438 of stock options that were not considered in computing diluted earnings per common share, because they were anti-dilutive.
The following table presents computations of basic and diluted EPS for the three and ninesix months ended SeptemberJune 30, 2018:

2019:
  Three Months Ended September 30, 2018 Nine Months Ended September 30, 2018
($ in thousands except per share data) Common Stock Class B Common Stock Total Common Stock Class B Common Stock Total
Income from continuing operations $10,330
 $98
 $10,428
 $31,043
 $313
 $31,356
Less: participating securities dividends (200) (2) (202) (602) (6) (608)
Less: preferred stock dividends (4,923) (47) (4,970) (15,044) (152) (15,196)
Less: preferred stock redemption (2,285) (22) (2,307) (2,284) (23) (2,307)
Income from continuing operations allocated to common stockholders 2,922
 27
 2,949
 13,113
 132
 13,245
Income from discontinued operations 662
 6
 668
 3,047
 31
 3,078
Net income allocated to common stockholders $3,584
 $33
 $3,617
 $16,160
 $163
 $16,323
Weighted average common shares outstanding 50,179,555
 476,521
 50,656,076
 50,108,501
 505,089
 50,613,590
Dilutive effects of stock units 195,508
 —
 195,508
 140,200
 —
 140,200
Dilutive effects of stock options 47,068
 —
 47,068
 44,856
 —
 44,856
Dilutive effects of warrants 812
 —
 812
 74,356
 —
 74,356
Average shares and dilutive common shares 50,422,943
 476,521
 50,899,464
 50,367,913
 505,089
 50,873,002
Basic earnings per common share            
Income from continuing operations $0.06
 $0.06
 $0.06
 $0.26
 $0.26
 $0.26
Income from discontinued operations 0.01
 0.01
 0.01
 0.06
 0.06
 0.06
Net income $0.07
 $0.07
 $0.07
 $0.32
 $0.32
 $0.32
Diluted earnings per common share            
Income from continuing operations $0.06
 $0.06
 $0.06
 $0.26
 $0.26
 $0.26
Income from discontinued operations 0.01
 0.01
 0.01
 0.06
 0.06
 0.06
Net income $0.07
 $0.07
 $0.07
 $0.32
 $0.32
 $0.32
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Three Months Ended June 30, 2019Six Months Ended June 30, 2019
($ in thousands except per share data)Common StockClass B Common StockCommon StockClass B Common Stock
Income from operations$16,426  $156  $23,397  $222  
Less: income allocated to participating securities(268) (3) (152) (1) 
Less: participating securities dividends(93) (1) (292) (3) 
Less: preferred stock dividends(4,268) (40) (8,535) (81) 
Net income allocated to common stockholders$11,797  $112  $14,418  $137  
Weighted average common shares outstanding50,379,816  477,321  50,290,107  477,321  
Dilutive effects of stock units103,677  —  119,967  —  
Dilutive effects of stock options4,142  —  7,795  —  
Average shares and dilutive common shares50,487,635  477,321  50,417,869  477,321  
Basic earnings per common share$0.23  $0.23  $0.29  $0.29  
Diluted earnings per common share$0.23  $0.23  $0.29  $0.29  

For the three and ninesix months ended SeptemberJune 30, 2018,2019, there were 17,495517,833 and 279,249,484,163, respectively, of stock units and 58,859 and 33,013, respectively, of stock options that were not considered in computing diluted earnings per common share, because they were anti-dilutive. There were 0 stock options that were anti-dilutive during the three and nine months ended September 30, 2018.

NOTE 1614 – LOAN COMMITMENTS AND OTHER RELATED ACTIVITIES
Some financial instruments, such as unfunded loan commitments, credit lines, letters of credit, and overdraft protection, are issued to meet customer financing needs. These are agreements to provide credit or to support the credit of others, as long as conditions established in the contract are met, and usually have expiration dates. Commitments may expire without being used. Risk of credit loss exists up to the face amount of these instruments. The same credit policies are used to make such commitments as are used for originating loans, including obtaining collateral at exercise of the commitment.
The following table presents the contractual amount of financial instruments with off-balance-sheet risk was as follows forof the datesperiods indicated:
 September 30, 2019 December 31, 2018June 30, 2020December 31, 2019
($ in thousands) Fixed Rate Variable Rate Fixed Rate Variable Rate($ in thousands)Fixed RateVariable RateFixed RateVariable Rate
Commitments to extend credit (1)
 $60
 $185,869
 $2,167
 $288,770
Commitments to extend credit
Commitments to extend credit
$6,249  $73,844  $473  $129,495  
Unused lines of credit 828
 1,069,930
 1,514
 1,119,158
Unused lines of credit590  1,391,625  703  1,049,632  
Letters of credit 894
 8,075
 1,266
 8,561
Letters of credit336  3,243  134  5,316  

(1)Included 0 commitments to extend credit related to discontinued operations at December 31, 2018.
Other Commitments
During the three months ended March 31, 2017, the Bank entered into certain definitive agreements which grant the Bank the exclusive naming rights to the Banc of California Stadium, a soccer stadium of The Los Angeles Football Club (LAFC), as well as the right to be the official bank of LAFC. In exchange for the Bank’s rights as set forth in the agreements, the Bank agreed to pay LAFC $100.0 million over a period of 15 years, beginning in 2017 and ending in 2032. The advertising benefits of such rights are amortized on a straight-line basis and recorded as advertising and promotion expense beginning in 2018. During the three months ended SeptemberAt June 30, 2019 and 2018, advertising and promotion expense related to the LAFC commitment was

$1.7 million. During the nine months ended September 30, 2019 and 2018, advertising and promotion expense related to the LAFC commitment was $5.0 million. As of September 30, 2019, the Bank has paid $19.4 million of the $100.0 million commitment. The prepaid commitment balance, net of amortization, was $7.7 million as of September 30, 2019, which was recognized as a prepaid asset and included in Other Assets in the Consolidated Statements of Financial Condition.
At September 30, 2019, the Company2020, we had unfunded commitments of $22.7$20.5 million, $7.6$7.1 million, and $501 thousand for affordable housing fund investments, Small Business Investment Company (SBIC) investments, and other investments, respectively.

NOTE 1715 – REVENUE RECOGNITION
The following presents noninterest income, segregated by revenue streams, in-scope and out-of-scope of Topic 606 - Revenue From Contracts With Customers, for the periods indicated.indicated:
  Three Months Ended September 30, Nine Months Ended September 30,
($ in thousands) 2019 2018 2019 2018
Noninterest income        
In scope of Topic 606        
Deposit service fees $599
 $783
 $1,841
 $2,269
Debit card fees 138
 127
 429
 529
Investment commissions 146
 380
 685
 1,322
Other 93
 51
 309
 206
Noninterest income (in-scope of Topic 606) 976
 1,341
 3,264
 4,326
Noninterest income (out-of-scope of Topic 606) 2,205
 3,483
 3,922
 17,141
Total noninterest income $3,181
 $4,824
 $7,186
 $21,467
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Three Months Ended
June 30,		Six Months Ended
June 30,
($ in thousands)2020201920202019
Noninterest income (loss)
In scope of Topic 606
Deposit service fees$420  $575  $959  $1,242  
Debit card fees380  178  557  291  
Investment commissions—  260  —  539  
Other59  109  108  216  
Noninterest income (in-scope of Topic 606)859  1,122  1,624  2,288  
Noninterest income (out-of-scope of Topic 606)4,669  (3,412) 5,965  1,717  
Total noninterest income (loss)$5,528  $(2,290) $7,589  $4,005  

The Company doesWe do not typically enter into long-term revenue contracts with customers. As of SeptemberJune 30, 20192020 and December 31, 2018, the Company2019, we did not have any significant contract balances. As of SeptemberJune 30, 2019, the Company2020, we did not capitalize any contract acquisition costs.

NOTE 1816 – RELATED-PARTY TRANSACTIONS
General. Certain of our executive officers and directors, and their related interests, are customers of, or have had transactions with, the Bank in the ordinary course of business, including deposits, loans and other financial services related transactions. From time to time, the Bank may make loans to executive officers and directors, and their related interests, in the ordinary course of business and on substantially the same terms and conditions, including interest rates and collateral, as those of comparable transactions with non-insiders prevailing at the time, in accordance with the Bank’s underwriting guidelines, andguidelines. These loans do not involve more than the normal risk of collectability or present other unfavorable features. As of the date of this filing,June 30, 2020, no related party loans were categorized as nonaccrual,non-accrual, past due, restructured, or potential problem loans.
The Bank also has an Employee Loan Program which is available to all employees and offers executive officers, directors and principal stockholders that meet the eligibility requirements the opportunity to participate on the same terms as employees generally, provided that any loan to an executive officer, director or principal stockholder must be approved by the Bank’s Board of Directors. The sole benefit provided under the Employee Loan Program is a reduction in loan fees.
Transactions with Current Related Parties
The Company and the Bank have engaged in transactions described below with the Company’s current or former directors, executive officers, and beneficial owners of more than 5 percent of the outstanding shares of the Company’s voting common stock and certain persons related to them.
Indemnification for Costs of Counsel in Connection with Special Committee Investigation, SEC Investigation and Related Matters. On November 3, 2016, in connection with an investigation by the Special Committee ofAs previously disclosed, the Company’s Board of Directors the Company Boardhas authorized and directed the Company to provide indemnification, advancement, and/or reimbursement for the costs of separate, independent counsel retained by any then-current officer or director, in their individual capacity, with respect to matters related to (i) an investigation by the investigation, and to advise them on their rights and obligations with respect to the investigation. At the directionSpecial Committee of the CompanyCompany’s Board this indemnification, advancement and/or reimbursement is, to the extent applicable, subject to the indemnification agreement that each officer and director previously entered into with the Company, which includes an undertaking to repay any expenses advanced if it is ultimately determined that the officer or director was not entitled to indemnification under such agreements and applicable law. In addition, the Company is providing

indemnification, advancement and/or reimbursement for costs related to (i)of Directors, (ii) a formal order of investigation issued by the SEC on January 4, 2017 directed primarily at certain of the issues that the Special Committee reviewed(since resolved), and (ii)(iii) any related civil or administrative proceedings against the Company as well as officers and directors currently or previously associated with the Company (collectively, the “Indemnity Matters”).
Indemnification costs were paid on behalf of certain current and former executive officers and directors in amounts less than $120 thousand for the three and ninesix months ended SeptemberJune 30, 2019.
2020. During the three and ninesix months ended September 30, 2018, indemnification costs paid by the Company included $290 thousand and $562 thousand, respectively, incurred by director Halle J. Benett; $290 thousand and $562 thousand, respectively, incurred by director Jonah F. Schnel; and $290 thousand and $562 thousand, respectively, incurred by director Robert Sznewajs. Indemnification costs were paid on behalf of other executive officers and directors in lesser amounts for the three and nine months ended September 30, 2018.
Sabal Loan. On September 5, 2017, John A. Bogler became the Chief Financial Officer of the Company and the Bank. Mr. Bogler is a founding member, and since 2015 and up until his employment with the Company, was a board member and Chief Financial Officer, of Sabal Capital Partners, LLC and Sabal Investment Advisors, LLC. Sabal Capital Partners, LLC is the sole owner of Sabal Opportunities Fund I, LLC, which in turn is the sole owner of Sabal TL1, LLC; Sabal Investment Advisors, LLC is the investment manager of SIA Debt Opportunities Fund, LP. SDOF GP, LLC is the general partner of Sabal Investment Advisors, LLC (together, Sabal). As of September 1, 2018, Mr. Bogler had completely divested his ownership in Sabal, except for an investment in SDOF GP, LLC that represents only a right of Mr. Bogler to receive his pro-rata share of pass through distributions (net of expenses) by SIA Debt Opportunities Fund, LP with respect to underlying investments that were made by the fund. Effective June 26, 2015, the Bank provided a $35.0 million committed revolving repurchase facility, which was increased to $40.0 million effective June 11, 2017, to Sabal TL1, LLC, with a maximum funding amount of $100.0 million in certain situations. On June 6, 2018, the revolving repurchase facility was extended for 90 days beyond its original maturity date of June 10, 2018. The repurchase facility's outstanding balance was $3.5 million before it was completely paid off in August 2018. The extension was not renewed and expired on September 10, 2018.
Under the Sabal repurchase facility, commercial mortgage loans originated by Sabal were purchased from Sabal by the Bank, together with a simultaneous agreement by Sabal to repurchase the commercial mortgage loans from the Bank at a future date. The advances under the Sabal repurchase facility were secured by commercial mortgage loans that had a market value in excess of the balance of the advances under the facility. During the year ended December 31, 2018, the largest aggregate amount of principal outstanding under the Sabal repurchase facility was $32.5 million. The Sabal repurchase facility was paid off during the year ended December 31, 2018.
Interest on the outstanding balance under the Sabal repurchase facility accrued at the six month LIBOR rate plus a margin. $210.4 million in principal and $370 thousand in interest were paid by Sabal on the facility to the Bank during the year ended December 31, 2018.
Transactions with Former Related Parties
In addition to the transactions described above with the Company’s current directors, executive officers, and 5% or greater stockholders, and related persons, the Company and the Bank have engaged in transactions described below with the Company’s then (now former) directors and executive officers, and certain persons related to them.
Indemnification for Costs of Counsel for Former Executive Officers and Former Directors in Connection with the Indemnity Matters.
During the three and nine months ended September 30, 2019, indemnification costs paid by the Company in connection with the Indemnity Matters included $3.5$4.7 million and $10.5$6.9 million respectively, incurred by the Company’s former Chair, President, and Chief Executive Officer, Steven A. Sugarman; $28$186 thousand and $769$741 thousand respectively,jointly incurred by the Company’s former Interim Chief Financial Officer and Chief Strategy Officer, J. Francisco A. Turner; $497and the Company’s former Chief Financial Officer, James J. McKinney; and $139 thousand and $646$142 thousand respectively, incurred by the Bank’s former director, Cynthia Abercrombie. Indemnification costs for the Company's former General Counsel Emeritus John Grosvenor who retired from that position effective April 15, 2019; and $38were $149 thousand and $180 thousand, incurred byfor the Bank’s former director Cynthia Abercrombie.six months ended June 30, 2019. Indemnification costs were paid on behalf of other former executive officers and other former directors in lesser amounts for the three and ninesix months ended SeptemberJune 30, 2019.
During the three and nine months ended September 30, 2018, indemnification costs paid by the Company included $1.1 million and $3.1 million, respectively, incurred by the Company’s former Chair, President and Chief Executive Officer Steven A. Sugarman; $251 thousand and $387 thousand, respectively, incurred by the Bank’s former Management Vice Chair Jeffrey T. Seabold; $197 thousand and $244 thousand, respectively, jointly incurred by the Company's former Interim Chief Financial Officer and Chief Strategy Officer J. Francisco A. Turner and the Company’s former Chief Financial Officer James J. McKinney; $3 thousand and $289 thousand, respectively, incurred by the Bank’s former director Cynthia Abercrombie; and $290 thousand and $562 thousand, respectively, incurred by the Company’s former director Jeffrey Karish. Indemnification

costs were paid on behalf of other former executive officers and other former directors in lesser amounts for the three and nine months ended September 30, 2018.
Settlement Agreement. On September 5, 2017, Jeffrey T. Seabold, the Bank’s former Management Vice Chair, submitted a notice of termination of employment pursuant to his employment agreement with the Bank and, that same day, filed a complaint in the Superior Court of the State of California, County of Los Angeles, against the Company and the Bank and multiple unnamed defendants asserting claims for breach of contract, wrongful termination, retaliation and unfair business practices. On January 19, 2018, the parties reached a settlement in principle through mediation and a final settlement agreement was entered into by the Company, the Bank and Mr. Seabold on February 14, 2018 (the "Settlement Agreement"). Under the Settlement Agreement, which provided for a mutual release of claims and the dismissal of Mr. Seabold’s complaint with prejudice, Mr. Seabold received lump sum cash payments from the Company and the Bank aggregating $4.3 million, less applicable withholdings for the portions of such payments representing employee compensation. Included within this amount were cash payments totaling $576 thousand representing a benefit with respect to Mr. Seabold's unvested stock options and restricted stock awards. Mr. Seabold also received a cash payment of $38 thousand as reimbursement for his premiums for health care coverage for the period October 1, 2017 through March 2019. In addition, in accordance with the Settlement Agreement the Bank paid $650 thousand of attorneys’ fees incurred by Mr. Seabold in connection with his lawsuit and the Settlement Agreement. All the cash payments to Mr. Seabold under the Settlement Agreement were made during the three months ended March 31, 2018. The Settlement Agreement contains certain standstill provisions that, prior to December 31, 2018, generally restricted Mr. Seabold and his affiliates from, among other things, acquiring beneficial ownership of any shares of the Company’s common stock or common stock equivalents to the extent this would result in Mr. Seabold beneficially owning in excess of 4.99 percent of the total number of shares of common stock outstanding, soliciting proxies in opposition to any matter not recommended by the Company’s Board of Directors or in favor of any matter not approved by the Company’s Board of Directors or initiating any stockholder proposal.
NOTE 1917 – LITIGATION
From time to time, we are involved as plaintiff or defendant in various legal actions arising in the normal course of business. In accordance with applicable accounting guidance, the Company establisheswe establish an accrued liability when those matters present loss contingencies that are both probable and estimable. The Company continuesWe continue to monitor the matters for further developments that could affect the amount of the accrued liability that has been previously established. As

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While the Company accrued $20.3 million for various litigation filed against the Companyultimate liability with respect to legal actions cannot be determined at this time, we believe that damages, if any, and the Bank, including an accrual for $19.75 million relatedother amounts relating to pending matters are not likely to be material to the settlement of the securities litigation previously announced by the Company and described below. There is no expected impact to earnings as a result of the settlement, as the settlement payments will be paid directly by the Company's insurance carriers and the Company has recorded an insurance receivable for $19.75 million related to this matter.consolidated financial statements.
On September 16, 2019, the Company entered into a Memorandum of Understanding (“MOU”) with the lead plaintiff to settle class action lawsuits that were previously consolidated in the United District Court for the Central District of California (the “Court”) under the caption In re Banc of California Securities Litigation, Case No. SACV 17-00118 AG, consolidated with SACV 17-00138 AG. Under the terms of the MOU, the Company’s insurance carriers would pay $19.75 million, which would be distributed to shareholders who purchased Company stock between April 15, 2016 and January 20, 2017, after payment of attorney’s fees and costs, to be determined by the Court. The Company would not be required to contribute any cash to the settlement payments. Pursuant to the settlement, the action against the Company would be dismissed with prejudice. Plaintiff would also dismiss its claims against the Company’s former Chief Executive Officer and Chairman Steven Sugarman. While the Company does not believe the plaintiff’s claims are meritorious, the Company believes that ending the costs and distraction of the litigation is in the best interests of the Company and its shareholders. The settlement and the dismissals are subject to approval by the Court and meeting certain conditions, and there are no assurances that Court approval will be obtained or that those conditions will be satisfied. If the Court preliminarily approves the settlement, members of the class will be provided notice and an opportunity to object or opt out. Following the notice and opportunity for objections and opt outs, the Court will schedule a fairness hearing at which the Court will determine whether the settlement shall be finally approved. The foregoing description of the settlement does not purport to be complete and is subject to, and is qualified in its entirety by reference to, the complete text of the settlement stipulation that will be filed with the Court.

NOTE 2018 – SUBSEQUENT EVENTS
The CompanyWe have evaluated events from the date of the consolidated financial statements on SeptemberJune 30, 20192020 through the issuance of these consolidated financial statements included in this Quarterly Report on Form 10-Q.
Subsequent to September 30, 2019, the Company terminated its $15 million line
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Table of credit entered into on February 14, 2019.Contents

ITEM 2 – MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following is management’s discussion and analysis of the major factors that influenced our results of operations and financial condition as of and for the three and ninesix months ended SeptemberJune 30, 2019.2020. This analysis should be read in conjunction with our Annual Report on Form 10-K for the year ended December 31, 20182019 and with the unaudited consolidated financial statements and notes thereto set forth in this Quarterly Report on Form 10-Q for the quarterly period ended SeptemberJune 30, 2019.2020.

CRITICAL ACCOUNTING POLICIES
The Company'sOur consolidated financial statements are prepared in accordance with GAAP and general practices within the banking industry. Within these financial statements, certain financial information contains approximate measurements of financial effects of transactions and impacts at the consolidated statements of financial condition dates and our results of operations for the reporting periods. As certain accounting policies require significant estimates and assumptions that have a material impact on the carrying value of assets and liabilities, the Company haswe have established critical accounting policies to facilitate making the judgment necessary to prepare financial statements. The Company'sOur critical accounting policies are described in Note 1 to Consolidated Financial Statements and in the “Critical Accounting Policies” section of Management’s Discussion and Analysis of Financial Condition and Results of Operations in the Company's Annual Report on Form 10-K for the year ended December 31, 20182019 and in Note 1 Consolidated Financial Statements (unaudited) included in Part I of this Quarterly Report on Form 10-Q.

Adoption of the Current Expected Credit Loss (CECL) Model
On January 1, 2020, we adopted the new accounting standard, commonly known as CECL, which uses a current expected credit loss model for determining allowance for credit losses (ACL). Upon adoption, we recognized a Day 1 increase in the ACL of $6.4 million and a related after-tax decrease to retained earnings of $4.5 million. Our Day 1 ACL under the new CECL model totaled $68.1 million compared to $61.7 million under the incurred loss model at December 31, 2019, and represented 1.14% of total loans. At June 30, 2020, the ACL totaled $94.6 million resulting in an ACL to total loans coverage ratio of 1.68%, up from 1.04% at December 31, 2019. Excluding PPP loans, the ACL to total loans coverage ratio was 1.76% at June 30, 2020. The ACL and provision for credit losses include amounts for the reserve for unfunded loan commitments.

Recent Accounting Pronouncements Not Yet Adopted:Adopted The following are recently issued
Our recent accounting pronouncements applicable to the Company that have not yet been adopted:
In June 2016, the FASB issued ASU 2016-13, adopted are described in Note 1 to Consolidated Financial Instruments-Credit Losses (Topic 326) ("ASU 2016-13"). This guidance is intended to provide financial statement users with more decision-useful information about the expected credit losses on financial instruments and other commitments to extend credit held by a reporting entity at each reporting date. To achieve this objective, the amendments in this guidance replace the incurred loss impairment methodology in current US GAAP with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to credit loss estimates. This ASU will be effective for fiscal years beginning after December 15, 2019. Early adoption is available for fiscal years beginning after December 15, 2018.

Significant progress has been madeStatements in the implementation efforts, which include model development, documentation,Company's Annual Report on Form 10-K for the year ended December 31, 2019 and validation; identificationin Note 1 Consolidated Financial Statements (unaudited) included in Part I of data sources; processes and internal controls; and establishment of formal governing policies and standards. Currently, the Company is conducting parallel runs as well as continuing to review and refine its models and methodologies. Basedthis Quarterly Report on current expectations of future economic conditions, the Company expects, upon adoption on January 1, 2020, its allowance for credit losses may increase up to approximately 25 percent from its allowance for credit losses as of September 30, 2019, as disclosed herein, with a large portion of that increase driven by the Company's C&I and CRE portfolios. The actual impact upon adoption will depend on the characteristics of the Company's portfolios which may be affected by events that may occur until that time; macroeconomic conditions and forecasts; and finalized models, methodologies, and other management judgments.Form 10-Q.
In August 2018, the FASB issued ASU No. 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework-Changes to the Disclosure Requirements for Fair Value Measurement ("ASU 2018-13"). The primary objective of ASU 2018-13 is to improve the effectiveness of disclosures in the notes to financial statements. ASU 2018-13 is effective for interim and annual reporting periods beginning after December 15, 2019, although early adoption is permitted. The Company plans to adopt the ASU on January 1, 2020. The adoption of ASU 2018-13 is not expected to significantly impact the Company's consolidated financial statements.
Executive Overview
The Company isWe are focused on providing core banking products and services, including customized and innovative banking and lending solutions, designed to cater to the unique needs of California's diverse businesses, entrepreneurs and communities through its 32our 31 full service branches in Orange, Los Angeles, San Diego, Orange,and Santa Barbara and Los Angeles Counties. Through our 700+over 600 dedicated professionals, the Company iswe are committed to serviceservicing and building enduring relationships by providing a higher standard of banking. The Company offersWe offer a variety of financial products and services designed around itsour target clients in order to serve all of their banking and financial needs. The Company continuesWe continue to focus on three main initiatives designed to improve our franchise and profitability on an ongoing basis: reducing our cost of deposits while adding value, optimizing the balance sheet to focus on higher-margin products while managing credit risk, and appropriately managing down expenses to the size and complexity of the business. Through these efforts, we continue to transform our franchise into a relationship-focused community bank, maintaining our high credit quality and serving businesses, entrepreneurs and individuals within our footprint.


Financial Highlights
For the three months ended SeptemberJune 30, 20192020 and 2018,2019, net (loss) income from continuing operations was $(14.1)$(18.4) million and $10.4 million, respectively.$16.6 million. Diluted (loss) earnings from continuing operations per common share were $(0.45)$(0.44) and $0.06, respectively,$0.23 for the three months ended SeptemberJune 30, 20192020 and 2018. The decrease in net income from continuing operations2019. Financial results for the three months ended September 30, 2019 compared to same period last year is largely the resultsecond quarter of 2020 included a $37.1one-time pre-tax charge of $26.8 million increase in our loan loss provision, primarily attributable to a $35.1 million charge-off and its related impacts, or $0.60 per diluted common share, related to a loan originated in November 2017 to a borrower purportedly the subjectrestructuring of a fraudulent scheme.
Total assets were $8.63 billion at September 30, 2019, a decrease of $2.00 billion from $10.63 billion at December 31, 2018. The decrease was mainly due to the Company’s continued progress towards transitioning to a core commercial banking platform. As partrelationship with the Los Angeles Football Club (“LAFC”). The restructuring of this transition, the Company is de-emphasizingrelationship will result in estimated pre-tax cost savings of approximately $89 million over the production of lower margin loan products and is opportunistically reducing its holdings of certain investment securities.next 12.5 years, or approximately $7.1 million per year.
Significant financial highlights during the three months ended SeptemberJune 30, 20192020 included:
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•Noninterest-bearing deposit balances increased $135.4 million during the quarter and represented 23% of total deposits at June 30, 2020, up from 16% a year earlier
•Total checking balances increased $114$409.7 million during the quarter and represented 54% of total deposits at June 30, 2020, up from 40% a year earlier
•
Cost of deposits decreased by 14 basis points to 1.48%
Noninterest expense was $43.3 million•Net interest margin increased 12 basis points from the prior quarter to 3.09%
•
Executed on the sale of $371 million of low-yielding and long duration mortgage-backed securities, furthering the ability to remix the investment portfolio
Completed tender offer•Average cost of deposits declined 40 basis points from the prior quarter to 0.71%
•Allowance for $46.0 millioncredit losses strengthened to 1.68% of preferred stock, inclusive of premium and accrued dividendstotal loans
•Common Equity Tier 1 capital at 11.68%

COVID-19 Operational Update
The total risk-based capital ratio was 14.31%markets in which we operate are marked by continuing uncertainty about the pace and strength of reopening and recovering from the impacts of the global pandemic. Despite the challenges created by the coronavirus, we continue to execute on our strategic initiatives and the tier 1 leverage ratio was 9.84%transformation of our balance sheet. We continue to operate 25 of our 31 branches as we temporarily consolidated some overlapping areas at the endbeginning of the quarterpandemic to ensure an adequate balance between employee and client safety and business continuity to meet our clients' banking needs. The majority of our employees outside of our branches are working offsite with only essential employees onsite. We are classified as an 'essential' business and we have implemented social and physical safeguards for our customers and employees within all of our locations.

CARES Act Response Efforts
On March 27, 2020, the U.S. federal government signed the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) into law. The CARES Act provides emergency assistance and health care response for individuals, families, and businesses affected by the COVID-19 pandemic and includes numerous measures which we are utilizing to support our customers, including the Paycheck Protection Program (“PPP”).

The CARES Act initially allocated nearly $350 billion for the PPP, with an additional $310 billion added through an amendment bill several weeks later. This program is intended to assist small businesses affected by the pandemic and economic downturn with funds to pay payroll and other expenses through June 30, 2020. The program has been extended through August 8, 2020. The loans are 100% guaranteed by the Small Business Administration (“SBA”) and the full principal amount of the loans may qualify for loan forgiveness if certain conditions are met.

Within seven business days of the announcement of PPP, we redeployed resources to this program in support of our clients and others seeking financial relief under the program. As of June 30, 2020, we estimate we helped businesses that represent an aggregate workforce of more than 25,000 jobs through approvals of $262 million in PPP funds. We served existing clients with our high touch business framework in addition to successfully attracting many new clients by using the PPP opportunity to differentiate ourselves by demonstrating how true service can make a meaningful difference. As a result, we added many new clients who are consistent with the type of commercial customers that we target in our traditional business development efforts. During the three months ended June 30, 2020, we collected $7.5 million in fees on the 1,069 PPP loans funded, which will be recognized over their estimated life of nine months. We have started the loan forgiveness process with a number of clients and we expect this will be complete early next year.

Borrower Payment Relief Efforts
We are committed to supporting our existing borrowers and customers during this period of economic uncertainty.  We actively engaged with our borrowers seeking payment relief and waived certain fees for impacted clients.  One method we deployed was to offer forbearance and deferments to qualified clients.  For single family residential (“SFR”) loans, the forbearance period is 90 days in length and is patterned after the U.S. Department of Housing and Urban Development (“HUD”) guidelines where applicable.  With respect to our non-SFR loan portfolio, deferments are 90 days in length. 

Many of our deferred loans have recently reached the expiration of their initial 90-day deferral period and we are reviewing their current financial condition as we evaluate extension requests of deferral periods. For those commercial borrowers that demonstrate a continuing need for a deferral, we generally expect to obtain credit enhancements such as additional collateral, personal guarantees, and/or reserve requirements in order to grant an additional deferral period. We expect the legacy SFR loans to continue with a higher percentage of forbearances due to the applicable consumer regulations, however, the SFR portfolio is well secured with an average portfolio LTV below 70%.

For a discussion of the related risk factors, please refer to Part II, Item 1A. "Risk Factors" in our Quarterly Report on Form 10-Q for the quarter ended March 31, 2020.

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The following table presents the composition of our loan portfolio for borrowers that received payment relief as of June 30, 2020:
Deferment & Forbearances(1)(2)
June 30, 2020
($ in thousands)Number of Loans
Amount(1)(2)
% of
Loan Category
Commercial:
Commercial and industrial55  $53,255  3.7 %
Commercial real estate53  218,537  26.6 %
Multifamily30  114,296  8.0 %
SBA6  21,819  7.0 %
Construction8  31,544  14.8 %
Total commercial152  439,451  10.4 %
Consumer:
Single family residential mortgage142  163,815  12.0 %
Other consumer4  969  2.5 %
Total consumer146  164,784  11.7 %
Total298  $604,235  10.7 %
(1)Excludes loans in forbearance that are current
(2)Excludes loans delinquent prior to COVID-19

With respect to our commercial portfolio, as of July 31, 2020, 67 loans totaling $192.8 million have reached expiration of their initial deferral period and have not requested an additional 90-day deferral period as of that date. As of July 31, 2020, 18 loans totaling $121.3 million have requested an additional 90-day deferral period, of which 5 loans totaling $35.2 million have been approved. We continue to review the remaining requests and will evaluate additional requests from commercial borrowers that have or will soon reach expiration of their initial deferral period as described above.

With respect to our consumer portfolio, consisting primarily of single family residential mortgage loans, as of July 31, 2020, the number of loans on forbearance remained relatively unchanged compared to June 30, 2020.

Other Efforts
To support our community, we partnered with Food Finders to provide over 300,000 meals to our most vulnerable neighbors in Southern California. We also made a donation to the Los Angeles Fire Department to help supply critical personal protective equipment to these first-responders. We developed online financial literacy classes for young adults and we sponsored five LAFC blood drives in partnership with the American Red Cross and Banc of California Stadium.

Termination of LAFC Agreement
On May 22, 2020, we entered into an agreement (the “Termination Agreement”) with the Los Angeles Football Club (LAFC) to amend and terminate certain agreements that we previously entered into with LAFC in 2017 (the “LAFC Agreements”). Among other things, the LAFC Agreements granted us the exclusive naming rights to the Banc of California Stadium, a soccer stadium of LAFC, as well as the right to be the official bank of LAFC. Pursuant to the LAFC Agreements, we agreed to pay LAFC $100 million over a period of 15 years, of which $15.9 million had been recognized as expense from January 1, 2018 through May 22, 2020. In addition to the stated contract amount of $100 million, the LAFC Agreements obligated us to pay for other annual expenses, which have averaged approximately $500 thousand per year.
Under the Termination Agreement, we agreed to restructure our partnership to allow LAFC to expand its roster of sponsors and partners into categories that were previously exclusive to us under the LAFC Agreements and we stepped away from our naming-rights position on LAFC’s soccer stadium. We will continue to serve as LAFC’s primary banking partner, subject to any new sponsor in the financial services space that offers banking services, and remain as a partner on a number of other collaborations. As part of the Termination Agreement, we agreed to pay LAFC a $20.1 million termination fee. The LAFC Agreements will be terminated on December 31, 2020, unless otherwise terminated earlier by LAFC pursuant to the Termination Agreement (the “Termination Date”). We will not have any continuing payment obligations to LAFC following the Termination Date. With respect to the remainder of 2020, we do not expect to have any additional payment obligations except in certain specified circumstances set forth in the Termination Agreement, which amount would not exceed $2.8 million.
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The pre-tax impact from our entry into the Termination Agreement was a one-time charge to operations of $26.8 million during the second quarter of 2020. The charge to operations includes the write-off of all of a prepaid advertising asset. As a result of the Termination Agreement, the Bank estimates an aggregate pre-tax cost savings of approximately $89.1 million, or approximately $7.1 million per year, over the remaining 12 ½ year life of the original LAFC Agreements.

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RESULTS OF OPERATIONS
Condensed Statements of Continuing Operations, Discontinued Operations and Consolidated Operations
The following table presents condensed statements of continuing operations, discontinued operations and consolidated operations for the three and nine months ended September 30, 2018. Operating income for discontinued operations in 2019 was immaterial.
  Three Months Ended September 30, 2018 Nine Months Ended September 30, 2018
($ in thousands) Continuing Operations Discontinued Operations Consolidated Operations Continuing Operations Discontinued Operations Consolidated Operations
Interest and dividend income $107,774
 $130
 $107,904
 $311,666
 $505
 $312,171
Interest expense 36,582
 —
 36,582
 96,272
 —
 96,272
Net interest income 71,192
 130
 71,322
 215,394
 505
 215,899
Provision for loan losses 1,410
 —
 1,410
 23,562
 —
 23,562
Noninterest income 4,824
 894
 5,718
 21,467
 3,871
 25,338
Noninterest expense 60,877
 100
 60,977
 183,216
 127
 183,343
Income from continuing operations before income taxes 13,729
 924
 14,653
 30,083
 4,249
 34,332
Income tax (benefit) expense 3,301
 256
 3,557
 (1,273) 1,171
 (102)
Net income $10,428
 $668
 $11,096
 $31,356
 $3,078
 $34,434

Net Interest Income
The following table presents interest income, average interest-earning assets, interest expense, average interest-bearing liabilities, and their corresponding yields and costs expressed both in dollars and rates on a consolidated operations basis, for the three months ended SeptemberJune 30, 2019,2020, March 31, 2020 and June 30, 2019:
Three Months Ended
June 30, 2020March 31, 2020June 30, 2019
($ in thousands)Average BalanceInterest and DividendsYield/CostAverage BalanceInterest and DividendsYield/
Cost		Average BalanceInterest and DividendsYield/Cost
Interest-earning assets:
Total loans(1)
$5,707,619  $63,642  4.48 %$5,780,810  $65,534  4.56 %$7,445,704  $89,159  4.80 %
Securities1,063,941  7,816  2.95 %952,966  7,820  3.30 %1,304,876  12,457  3.83 %
Other interest-earning assets (2)
424,776  1,239  1.17 %297,444  1,360  1.84 %342,908  2,424  2.84 %
Total interest-earning assets7,196,336  72,697  4.06 %7,031,220  74,714  4.27 %9,093,488  104,040  4.59 %
ACL(78,528) (60,470) (63,046) 
BOLI and noninterest-earning assets (3)
622,398  592,192  580,133  
Total assets$7,740,206  $7,562,942  $9,610,575  
Interest-bearing liabilities:
Savings$905,997  2,718  1.21 %$890,830  3,296  1.49 %$1,083,571  4,950  1.83 %
Interest-bearing checking1,710,038  2,186  0.51 %1,520,922  3,728  0.99 %1,580,165  4,554  1.16 %
Money market592,872  850  0.58 %608,926  1,760  1.16 %853,007  3,902  1.83 %
Certificates of deposit1,214,939  4,451  1.47 %1,151,518  5,827  2.04 %2,537,060  15,192  2.40 %
Total interest-bearing deposits4,423,846  10,205  0.93 %4,172,196  14,611  1.41 %6,053,803  28,598  1.89 %
FHLB advances819,166  4,818  2.37 %1,039,055  5,883  2.28 %1,287,121  8,289  2.58 %
Securities sold under repurchase agreements1,024  2  0.79 %—  —  — %2,173  16  2.95 %
Long-term debt and other interest-bearing liabilities173,977  2,357  5.45 %174,056  2,359  5.45 %174,161  2,357  5.43 %
Total interest-bearing liabilities5,418,013  17,382  1.29 %5,385,307  22,853  1.71 %7,517,258  39,260  2.09 %
Noninterest-bearing deposits1,349,735  1,133,306  1,034,205  
Noninterest-bearing liabilities118,208  128,282  96,179  
Total liabilities6,885,956  6,646,895  8,647,642  
Total stockholders’ equity854,250  916,047  962,933  
Total liabilities and stockholders’ equity$7,740,206  $7,562,942  $9,610,575  
Net interest income/spread$55,315  2.77 %$51,861  2.56 %$64,780  2.50 %
Net interest margin (4)
3.09 %2.97 %2.86 %
Ratio of interest-earning assets to interest-bearing liabilities132.82 %130.56 %120.97 %
Total deposits(5)
5,773,581  10,205  0.71 %5,305,502  14,611  1.11 %7,088,008  28,598  1.62 %
Total funding (6)
6,767,748  17,382  1.03 %6,518,613  22,853  1.41 %8,551,463  39,260  1.84 %
(1)Total loans are net of deferred fees, related direct costs and discounts. Non-accrual loans are included in the average balance. Net accretion (amortization) of deferred loan fees (costs) of $1.1 million, $(587) thousand and $106 thousand and accretion of discount on purchased loans of $347 thousand, $8 thousand and $28 thousand for the three months ended June 30, 2020, March 31, 2020 and June 30, 2019, and September 30, 2018:respectively, are included in interest income.
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  Three Months Ended
  September 30, 2019 June 30, 2019 September 30, 2018
($ in thousands) Average Balance Interest and Dividends Yield/Cost Average Balance Interest and Dividends 
Yield/
Cost
 Average Balance Interest and Dividends Yield/Cost
Interest-earning assets:                  
Total loans(1)
 $6,699,312
 $80,287
 4.75% $7,445,704
 $89,159
 4.80% $7,166,373
 $84,925
 4.70%
Securities 1,105,499
 10,024
 3.60% 1,304,876
 12,457
 3.83% 2,163,037
 20,599
 3.78%
Other interest-earning assets (2)
 362,613
 2,346
 2.57% 342,908
 2,424
 2.84% 335,160
 2,380
 2.82%
Total interest-earning assets 8,167,424
 92,657
 4.50% 9,093,488
 104,040
 4.59% 9,664,570
 107,904
 4.43%
ALLL (55,976)     (63,046)     (56,730)    
BOLI and non-interest earning assets (3)
 584,190
     580,133
     554,636
    
Total assets $8,695,638
     $9,610,575
     $10,162,476
    
Interest-bearing liabilities:                  
Savings $1,055,086
 4,722
 1.78% $1,083,571
 4,950
 1.83% $1,231,696
 5,122
 1.65%
Interest-bearing checking 1,511,432
 4,483
 1.18% 1,580,165
 4,554
 1.16% 1,789,679
 5,054
 1.12%
Money market 755,114
 3,093
 1.63% 853,007
 3,902
 1.83% 966,165
 3,455
 1.42%
Certificates of deposit 1,750,970
 10,513
 2.38% 2,537,060
 15,192
 2.40% 2,332,181
 11,523
 1.96%
Total interest-bearing deposits 5,072,602
 22,811
 1.78% 6,053,803
 28,598
 1.89% 6,319,721
 25,154
 1.58%
FHLB advances 1,333,739
 8,519
 2.53% 1,287,121
 8,289
 2.58% 1,528,674
 8,996
 2.33%
Securities sold under repurchase agreements 1,922
 13
 2.68% 2,173
 16
 2.95% 6,418
 47
 2.91%
Long term debt and other interest-bearing liabilities 174,111
 2,399
 5.47% 174,161
 2,357
 5.43% 174,361
 2,385
 5.43%
Total interest-bearing liabilities 6,582,374
 33,742
 2.03% 7,517,258
 39,260
 2.09% 8,029,174
 36,582
 1.81%
Noninterest-bearing deposits 1,047,858
     1,034,205
     1,023,890
    
Non-interest-bearing liabilities 103,667
     96,179
     108,593
    
Total liabilities 7,733,899
     8,647,642
     9,161,657
    
Total stockholders’ equity 961,739
     962,933
     1,000,819
    
Total liabilities and stockholders’ equity $8,695,638
     $9,610,575
     $10,162,476
    
Net interest income/spread   $58,915
 2.47%   $64,780
 2.50%   $71,322
 2.62%
Net interest margin (4)
     2.86%     2.86%     2.93%
(2)Includes average balance of FHLB, FRB and other bank stock at cost and average time deposits with other financial institutions.
(1)For the three months ended September 30, 2018, total loans includes average loans and related interest income from discontinued operations. Total loans are net of deferred fees, related direct costs and discounts, but exclude the allowance for loan losses. Non-accrual loans are included in the average balance. Net accretion of deferred loan fees and costs of $323 thousand, $106 thousand and $323 thousand and accretion of discount on purchased loans of $186 thousand, $28 thousand and $20 thousand for the three months ended September 30, 2019, June 30, 2019 and September 30, 2018, respectively, are included in interest income.
(2)Includes average balance of FHLB and other bank stock at cost and average time deposits with other financial institutions.

(3)Includes average balance of bank-owned life insurance of $110.4 million, $110.0 million and $107.8 million for the three months ended June 30, 2020, March 31, 2020 and June 30, 2019.
(3)Includes average balance of bank-owned life insurance of $108.3 million, $107.8 million and $106.1 million for the three months ended September 30, 2019, June 30, 2019 and September 30, 2018, respectively.
(4)Annualized net interest income divided by average interest-earning assets.
(4)Annualized net interest income divided by average interest-earning assets.
(5)Total deposits is the sum of interest-bearing deposits and noninterest-bearing deposits. The cost of total deposits is calculated as annualized total interest expense on deposits divided by average total deposits.
(6)Total funding is the sum of interest-bearing liabilities and noninterest-bearing deposits. The cost of total funding is calculated as annualized total interest expense divided by average total funding.
Three Months Ended June 30, 2020 Compared to Three Months Ended March 31, 2020
Net interest income increased $3.5 million to $55.3 million for the second quarter of 2020 due mostly to lower funding costs and higher average interest-earning assets, offset by a lower yield on such assets. Compared to the prior quarter, average interest-earning assets increased by $165.1 million to $7.20 billion, due to higher average securities of $111.0 million and other interest-earning assets of $127.3 million, offset by lower average loans of $73.2 million. The average interest-earning assets growth was funded by higher average noninterest-bearing deposits of $216.4 million and interest-bearing deposits of $251.7 million, partially offset by lower average FHLB advances of $219.9 million.
The net interest margin increased 12 basis points to 3.09% for the second quarter from 2.97% for the prior quarter. The increase was due to the 42 basis point decline on the average cost of interest-bearing liabilities outpacing the 21 basis point decline in the average yield on interest-earning assets. The decrease in the average interest-earning asset yield to 4.06% for the second quarter from 4.27% for the first quarter was due to lower yields on most interest-earning asset classes and the change in the mix of interest-earning assets. The lower yields on total loans, securities and other interest-earning assets was due to originating new business and repricing variable rate loans and investments in the lower interest rate environment given the rate cuts by the Federal Reserve in March 2020. Our average yield on loans declined 8 basis points to 4.48% and our average yield on securities decreased 35 basis points to 2.95%. The second quarter includes $1.7 million of PPP fee income, which increased the net interest margin by 3 basis points. The lower securities yield is due mostly to a 38 basis point decrease in the collateralized loan obligations (“CLOs”) yield to 3.22% for the second quarter from 3.60% for the first quarter as these CLOs reprice quarterly.
The average cost of funds decreased 39 basis points to 1.03% for the second quarter from 1.41% for the first quarter. This decrease was driven by the lower average cost of interest-bearing liabilities and improved funding mix, including higher average noninterest-bearing deposits. We have reduced our reliance on high cost transaction accounts, non-brokered certificates of deposits, and wholesale funds as we continue to execute on our relationship-focused business banking strategy. The 42 basis point decline in the average cost of interest-bearing liabilities to 1.29% for the second quarter, from 1.71% for the first quarter, was driven by the lower average cost of interest-bearing deposits. The average cost of interest-bearing deposits declined 48 basis points to 0.93% from the prior quarter due to actively managing down deposit rates in response to the interest rate cuts by the Federal Reserve in March 2020. Additionally, average noninterest-bearing deposits increased by $216.4 million and represented 23.4% of total average deposits in the second quarter compared to 21.4% of total average deposits for the first quarter. Our total cost of average deposits decreased 40 basis points to 0.71% for the second quarter. The spot rate of total deposits at the end of the second quarter of 2020 was 0.59%.

Three Months Ended June 30, 2020 Compared to Three Months Ended June 30, 2019
Net interest income was $55.3 million for the three months ended June 30, 2020, a decrease of $9.5 million, or 14.6%, from $64.8 million for the three months ended June 30, 2019. The decrease in net interest income from the prior period was due to lower average interest-earning assets, as a result of targeted sales of securities and loans during 2019, in line with our strategy of remixing the loan portfolio towards relationship based-lending, offset by a higher net interest margin. For the three months ended June 30, 2020, average interest-earning assets declined $1.90 billion to $7.20 billion and the net interest margin increased 23 basis points to 3.09% for the three months ended June 30, 2020 compared to 2.86% for the same 2019 period.
Our average yield on interest-earning assets decreased 53 basis points to 4.06% for the three months ended June 30, 2020, as compared to 4.59% during the same 2019 period. The decrease in yield was primarily attributable to lower average yields on the loan and securities portfolios, partially offset by an increased mix of loans versus
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securities. Our average yield on loans was 4.48% for the three months ended June 30, 2020, compared to 4.80% for the same 2019 period, primarily due to lower market interest rates and a lower percentage of higher-yielding commercial and industrial balances in the portfolio due to the market interest rate cuts totaling 225 basis points by the Federal Reserve in the third quarter of 2019 through March of 2020. Our average yield on securities decreased 88 basis points due mostly to CLOs repricing into the lower rate environment and a decrease in average CLO balances.
The average cost of funds decreased to 1.03% for the three months ended June 30, 2020 from 1.84% for the same 2019 period. This decrease was driven by the lower average cost of interest-bearing liabilities and the improved funding mix, including higher average noninterest-bearing deposits. The 80 basis point decline in the average cost of interest-bearing liabilities to 1.29% for the three months ended June 30, 2020 from 2.09% for the same 2019 period was driven by the lower average cost of interest-bearing deposits and rates paid on our FHLB term advances. The average cost of interest-bearing deposits declined 96 basis points to 0.93% from the prior period due to actively managing down deposit rates in response to the previously described interest rate cuts by the Federal Reserve and a lower reliance on brokered deposits. Additionally, average noninterest-bearing deposits increased by $315.5 million when compared to the same 2019 period. Our cost of average total deposits decreased 91 basis points to 0.71% for the three months ended June 30, 2020 when compared to the same 2019 period due to the lower cost of interest-bearing deposits and a higher mix of noninterest-bearing deposits. Average noninterest-bearing deposits represented 23.4% of total average deposits for the three months ended June 30, 2020 compared to 14.6% of total average deposits for the first quarter of 2019.

The following table presents interest income, average interest-earning assets, interest expense, average interest-bearing liabilities, and their corresponding yields and costs expressed both in dollars and rates, on a consolidated operations basis, for the ninesix months ended SeptemberJune 30, 20192020 and 2018:2019:
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  Nine Months Ended September 30,
  2019 2018
($ in thousands) Average Balance Interest and Dividends Yield/Cost Average Balance Interest and Dividends Yield/Cost
Interest-earning assets:            
Total loans (1)
 $7,282,869
 $260,004
 4.77% $7,010,232
 $241,519
 4.61%
Securities 1,384,928
 40,322
 3.89% 2,321,231
 63,685
 3.67%
Other interest-earning assets (2)
 342,597
 7,083
 2.76% 377,925
 6,967
 2.46%
Total interest-earning assets 9,010,394
 307,409
 4.56% 9,709,388
 312,171
 4.30%
ALLL (60,294)     (53,657)    
BOLI and non-interest earning assets (3)
 579,992
     564,856
    
Total assets $9,530,092
     $10,220,587
    
Interest-bearing liabilities:            
Savings $1,112,949
 15,152
 1.82% $1,114,888
 12,308
 1.48%
Interest-bearing checking 1,548,655
 13,562
 1.17% 1,862,215
 13,345
 0.96%
Money market 831,401
 11,124
 1.79% 1,058,451
 9,978
 1.26%
Certificates of deposit 2,419,158
 43,014
 2.38% 2,107,782
 26,633
 1.69%
Total interest-bearing deposits 5,912,163
 82,852
 1.87% 6,143,336
 62,264
 1.36%
FHLB advances 1,347,330
 25,889
 2.57% 1,688,355
 25,927
 2.05%
Securities sold under repurchase agreements 2,146
 47
 2.93% 51,542
 1,008
 2.61%
Long term debt and other interest-bearing liabilities 174,167
 7,118
 5.46% 174,360
 7,073
 5.42%
Total interest-bearing liabilities 7,435,806
 115,906
 2.08% 8,057,593
 96,272
 1.60%
Noninterest-bearing deposits 1,034,697
     1,028,245
    
Non-interest-bearing liabilities 99,113
     127,607
    
Total liabilities 8,569,616
     9,213,445
    
Total stockholders’ equity 960,476
     1,007,142
    
Total liabilities and stockholders’ equity $9,530,092
     $10,220,587
    
Net interest income/spread   $191,503
 2.48%   $215,899
 2.70%
Net interest margin (4)
     2.84%     2.97%
(1)For the nine months ended September 30, 2018, total loans includes average loans and related interest income from discontinued operations. Total loans are net of deferred fees, related direct costs and discounts, but exclude the allowance for loan losses. Non-accrual loans are included in the average balance. Net (amortization) accretion of deferred loan fees

Six Months Ended June 30,
20202019
($ in thousands)Average BalanceInterest and DividendsYield/CostAverage BalanceInterest and DividendsYield/Cost
Interest-earning assets:
Total loans (1)
$5,744,214  $129,176  4.52 %$7,579,485  $179,717  4.78 %
Securities1,008,454  15,636  3.12 %1,526,959  30,298  4.00 %
Other interest-earning assets (2)
361,110  2,599  1.45 %332,424  4,737  2.87 %
Total interest-earning assets7,113,778  147,411  4.17 %9,438,868  214,752  4.59 %
ACL(69,499) (62,488) 
BOLI and non-interest earning assets (3)
607,296  577,858  
Total assets$7,651,575  $9,954,238  
Interest-bearing liabilities:
Savings$898,414  6,013  1.35 %$1,142,360  10,429  1.84 %
Interest-bearing checking1,615,480  5,915  0.74 %1,567,575  9,079  1.17 %
Money market600,899  2,610  0.87 %870,177  8,031  1.86 %
Certificates of deposit1,183,229  10,278  1.75 %2,758,789  32,502  2.38 %
Total interest-bearing deposits4,298,022  24,816  1.16 %6,338,901  60,041  1.91 %
FHLB advances929,110  10,701  2.32 %1,354,238  17,370  2.59 %
Securities sold under repurchase agreements512  2  0.79  2,261  34  3.03 %
Long-term debt and other interest-bearing liabilities174,017  4,716  5.45 %174,195  4,719  5.46 %
Total interest-bearing liabilities5,401,661  40,235  1.50 %7,869,595  82,164  2.11 %
Noninterest-bearing deposits1,241,521  1,028,008  
Noninterest-bearing liabilities123,244  96,801  
Total liabilities6,766,426  8,994,404  
Total stockholders’ equity885,149  959,834  
Total liabilities and stockholders’ equity$7,651,575  $9,954,238  
Net interest income/spread$107,176  2.67 %$132,588  2.48 %
Net interest margin (4)
3.03 %2.83 %
Ratio of interest-earning assets to interest-bearing liabilities131.70 %119.94 %
Total deposits(5)
5,539,543  24,816  0.90 %7,366,909  60,041  1.64 %
Total funding (6)
6,643,182  40,235  1.22 %8,897,603  82,164  1.86 %
(1)Total loans are net of deferred fees, related direct costs and costsdiscounts, but exclude the allowance for credit losses. Non-accrual loans are included in the average balance. Net accretion (amortization) of $(479)deferred loan fees (costs) of $553 thousand and $551$(83) thousand and accretion of discount on purchased loans of $311$355 thousand and $583$125 thousand for the ninesix months ended SeptemberJune 30, 20192020 and 2018,2019, respectively, are included in interest income.
(2)Includes average balance of FHLB and other bank stock at cost and average time deposits with other financial institutions.
(3)Includes average balance of bank-owned life insurance of $107.8 million and $105.6 million for the nine months ended September 30, 2019 and 2018, respectively.
(4)Annualized net interest income divided by average interest-earning assets.
(2)Includes average balance of FHLB, FRB and other bank stock at cost and average time deposits with other financial institutions.
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(3)Includes average balance of bank-owned life insurance of $110.2 million and $107.5 million for the six months ended June 30, 2020 and 2019.
(4)Annualized net interest income divided by average interest-earning assets.
(5)Total deposits is the sum of interest-bearing deposits and noninterest-bearing deposits. The cost of total deposits is calculated as annualized total interest expense on deposits divided by average total deposits.
(6)Total funding is the sum of interest-bearing liabilities and noninterest-bearing deposits. The cost of total funding is calculated as annualized total interest expense divided by average total funding.

Six Months Ended June 30, 2020 Compared to Six Months Ended June 30, 2019
Net interest income for the six months ended June 30, 2020 decreased $25.4 million to $107.2 million from $132.6 million for the same 2019 period. This decrease was due to lower average interest-earning assets, as a result of targeted sales of securities and loans during 2019, in line with our strategy of remixing the loan portfolio towards relationship based-lending, partially offset by a higher net interest margin. For the six months ended June 30, 2020, average interest-earning assets declined $2.33 billion to $7.11 billion, and the net interest margin increased 20 basis points to 3.03% for the six months ended June 30, 2020 compared to 2.83% for the same 2019 period.
Our average yield on interest-earning assets decreased 42 basis points to 4.17% for the six months ended June 30, 2020 as compared to 4.59% during the same 2019 period. The decrease in yield was primarily attributable to lower average yields on the loan and securities portfolios, partially offset by an increased mix of loans versus securities. Our average yield on loans was 4.52% for the six months ended June 30, 2020, compared to 4.78% for the same 2019 period, primarily due to lower market interest rates and a lower percentage of higher-yielding commercial and industrial balances in the portfolio. Our average yield on securities decreased 88 basis points due mostly to CLOs repricing into the lower rate environment and a decrease in average CLO balances.
The average cost of funds decreased to 1.22% for the six months ended June 30, 2020 from 1.86% for the same 2019 period. This decrease was driven by the lower average cost of interest-bearing liabilities and the improved funding mix, including higher average noninterest-bearing deposits. The 61 basis point decline in the average cost of interest-bearing liabilities to 1.50% for the six months ended June 30, 2020 from 2.11% for the same 2019 period was driven by the lower average cost of interest-bearing deposits and rates paid on our FHLB term advances. The average cost of interest-bearing deposits declined 75 basis points to 1.16% from the prior period due to actively managing down deposit rates in response to the previously described market interest rate cuts by the Federal Reserve and a lower reliance on brokered deposits. Additionally, average noninterest-bearing deposits increased by $213.5 million when compared to the same 2019 period. Our cost of average total deposits decreased 74 basis points to 0.90% for the six months ended June 30, 2020 when compared to the same 2019 period due to the lower cost of interest-bearing deposits and higher noninterest-bearing deposits. Average noninterest-bearing deposits represented 22.4% of total average deposits for the six months ended June 30, 2020 compared to 14.0% of total average deposits for the same 2019 period.



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Rate/Volume Analysis
The following table presents the changes in interest income and interest expense for the major components of interest-earning assets and interest-bearing liabilities. Information isThe information provided onpresents the changes attributable to: (i) changes in volume multiplied by the prior rate; and (ii) changes in rate multiplied by the prior volume. Changes attributable to both rate and volume which cannot be segregated have been allocated proportionately to the change due to volume and the change due to rate.
  
Three Months Ended
September 30, 2019 vs. 2018
 
Nine Months Ended
September 30, 2019 vs. 2018
  Increase (Decrease) Due to Net Increase (Decrease) Increase (Decrease) Due to Net
Increase (Decrease)
($ In thousands) Volume Rate  Volume Rate 
Interest and dividend income:            
Total loans (1)
 $(5,540) $902
 $(4,638) $9,768
 $8,717
 $18,485
Securities (9,637) (938) (10,575) (26,991) 3,628
 (23,363)
Other interest-earning assets 185
 (219) (34) (686) 802
 116
Total interest and dividend income $(14,992) $(255) $(15,247) $(17,909) $13,147
 $(4,762)
Interest expense:            
Savings $(780) $380
 $(400) $(21) $2,865
 $2,844
Interest-bearing checking (827) 256
 (571) (2,450) 2,667
 217
Money market (825) 463
 (362) (2,447) 3,593
 1,146
Certificates of deposit (3,197) 2,187
 (1,010) 4,352
 12,029
 16,381
FHLB advances (1,186) 709
 (477) (5,839) 5,801
 (38)
Securities sold under repurchase agreements (28) (6) (34) (1,070) 109
 (961)
Long term debt and other interest-bearing liabilities (4) 18
 14
 (8) 53
 45
Total interest expense (6,847) 4,007
 (2,840) (7,483) 27,117
 19,634
Net interest income $(8,145) $(4,262) $(12,407) $(10,426) $(13,970) $(24,396)
(1)For the three and nine months ended September 30, 2018, total loans includes interest income from discontinued operations.

Three Months Ended
June 30, 2020 vs. 2019
Six Months Ended
June 30, 2020 vs. 2019
Increase (Decrease) Due toNet Increase (Decrease)Increase (Decrease) Due toNet
Increase (Decrease)
($ In thousands)VolumeRateVolumeRate
Interest and dividend income:
Total loans$(19,848) $(5,669) $(25,517) $(41,270) $(9,271) $(50,541) 
Securities(2,068) (2,573) (4,641) (8,897) (5,765) (14,662) 
Other interest-earning assets480  (1,665) (1,185) 379  (2,517) (2,138) 
Total interest and dividend income$(21,436) $(9,907) $(31,343) $(49,788) $(17,553) $(67,341) 
Interest expense:
Savings$(728) $(1,504) $(2,232) $(1,965) $(2,451) $(4,416) 
Interest-bearing checking351  (2,719) (2,368) 272  (3,436) (3,164) 
Money market(942) (2,110) (3,052) (1,993) (3,428) (5,421) 
Certificates of deposit(6,161) (4,580) (10,741) (15,186) (7,038) (22,224) 
FHLB advances(2,837) (634) (3,471) (5,007) (1,662) (6,669) 
Securities sold under repurchase agreements(6) (8) (14) (16) (16) (32) 
Long-term debt and other interest-bearing liabilities(2) 2  —  (1) (2) (3) 
Total interest expense(10,325) (11,553) (21,878) (23,896) (18,033) (41,929) 
Net interest income$(11,111) $1,646  $(9,465) $(25,892) $480  $(25,412) 
Three Months Ended September 30, 2019 Compared to Three Months Ended June 30, 2019
Net interest income was $58.9 million for the three months ended September 30, 2019, a decrease of $5.9 million, or 9.1 percent, from $64.8 million for the three months ended June 30, 2019. The decrease in net interest income from the prior period was largely due to an overall decrease in average interest earning assets, partially offset by a decrease in average cost of interest-bearing liabilities.
Interest income on total loans was $80.3 million for the three months ended September 30, 2019, a decrease of $8.9 million, or 10.0 percent, from $89.2 million for the three months ended June 30, 2019. The decrease in interest income on loans was primarily due to a $746.4 million decrease in the average balance of total loans and a 5 basis points (bps) decrease in average yield. The decrease in average balance was due mainly to the sale of $573.5 million in multifamily residential loans coupled with loan payments partially offset by loan originations. The decrease in average yield was primarily attributable to variable rate loans repricing in a declining rate environment and lower average balance of higher yielding commercial and industrial loans, partially offset by the settlement of the Freddie Mac multifamily securitization which consisted of lower yielding loans.
Interest income on securities was $10.0 million for the three months ended September 30, 2019, a decrease of $2.4 million, or 19.5 percent, from $12.5 million for the three months ended June 30, 2019. The decrease in interest income on securities was due to a $199.4 million decrease in average balance and a 23 bps decrease in average yield. The decrease in average yield is primarily as a result of the quarterly interest rate resets on our collateralized loan obligations (“CLO”) and the sales of CLOs that occurred during the second quarter of 2019. We sold a significant amount of CLOs during the second quarter, with the full impact of the second quarter sales reflected in the third quarter.
Dividends and interest income on other interest-earning assets was $2.3 million for the three months ended September 30, 2019, a decrease of $78 thousand, or 3.2 percent, from $2.4 million for the three months ended June 30, 2019. The decrease in dividends and interest income on other interest-earning assets was due to a $19.7 million increase in average balance, partially offset by a 27 bps decrease in average yield. The decrease in average yield was mainly due to lower interest rates on deposits with financial institutions. The increase in average balance was mainly due to increases in interest-bearing deposits in financial institutions as a result of sales of investment securities and loans.
Interest expense on interest-bearing deposits was $22.8 million for the three months ended September 30, 2019, a decrease of $5.8 million, or 20.2 percent, from $28.6 million for the three months ended June 30, 2019. The decrease in interest expense on interest-bearing deposits was due to a 11 bps decrease in average cost, coupled with a $981.2 million decrease in average balance. The decrease in our average balance and cost of deposits from the prior quarter primarily resulted from the continued execution of our deposit strategy to focus on relationship-based clients and de-emphasize high-rate transactional customers and brokered certificates of deposit.
Interest expense on FHLB advances was $8.5 million for the three months ended September 30, 2019, an increase of $230 thousand, or 2.8 percent, from $8.3 million for the three months ended June 30, 2019. The increase was due mainly to a $46.6 million increase in average balance for the quarter ended September 30, 2019, offset by a 5 bps decrease in average cost. The decrease in average cost was mainly due to a reduction in average overnight borrowing rates during the quarter ended September 30, 2019. The increase in average balance was mainly due to an increase in use of overnight borrowings.
Interest expense on long term debt and other interest-bearing liabilities was $2.4 million for the three months ended September 30, 2019, an increase of $42 thousand, or 1.8 percent, from $2.4 million for the three months ended June 30, 2019. The average balance and average cost remained relatively flat during the three months ended September 30, 2019 as compared to the previous quarter.

Three Months Ended September 30, 2019 Compared to Three Months Ended September 30, 2018
Net interest income was $58.9 million for the three months ended September 30, 2019, a decrease of $12.4 million, or 17.4 percent, from $71.3 million for the three months ended September 30, 2018. The decrease in net interest income from the prior period was largely due to higher average cost of interest-bearing liabilities outpacing the increase in average yield on interest-earning assets, coupled by a decrease in interest earning assets.
Interest income on total loans was $80.3 million for the three months ended September 30, 2019, a decrease of $4.6 million, or 5.5 percent, from $84.9 million for the three months ended September 30, 2018. The decrease in interest income on loans was primarily due to a $467.1 million decrease in the average balance of total loans offset by a

5 basis points (bps) increase in average yield. The decrease in average balance was due mainly to the aforementioned sale of multifamily residential loans, partially offset by loan originations. The increase in average yield was mainly due to higher interest rates on new loans and loans with variable interest rates increasing due to a higher interest rate environment between periods.
Interest income on securities was $10.0 million for the three months ended September 30, 2019, a decrease of $10.6 million, or 51.3 percent, from $20.6 million for the three months ended September 30, 2018. The decrease in interest income on securities was due to a $1.06 billion decrease in average balance, coupled with an 18 bps decrease in average yield. The decrease in average balance was mainly due to sales of certain longer-duration and fixed-rate mortgage-backed securities, corporate debt securities, collateralized loan obligations and commercial mortgage-backed securities between periods to navigate a volatile rate environment during 2018 and remix of our earning assets from investment securities to higher yielding loans. The decrease in average yield was due to quarterly interest rate resets on our CLOs and the sales of CLOs that occurred during 2019.
Dividends and interest income on other interest-earning assets was $2.3 million for the three months ended September 30, 2019, remaining consistent with the prior period amount. Between periods, there was a 25 bps decrease in average yield, offset by a $27.5 million increase in average balance. The decrease in average yield was mainly due to lower interest rates on deposits with financial institutions. The increase in average balance was mainly due to increases in interest-bearing deposits in financial institutions as a result of sales of investment securities and loans.
Interest expense on interest-bearing deposits was $22.8 million for the three months ended September 30, 2019, a decrease of $2.3 million, or 9.3 percent, from $25.2 million for the three months ended September 30, 2018. The decrease in interest expense on interest-bearing deposits was due to a $1.25 billion decrease in average balance, partially offset by a 20 bps increase in average cost. The increase in average cost was mainly due to a higher interest rate environment between periods. The decrease in average balance primarily related to the use of proceeds from the sale of loans and investments to redeem higher cost brokered certificates of deposits in 2019, coupled with the shift in our deposit strategy to focus on relationship-based customers and de-emphasize high-rate transactional customers.
Interest expense on FHLB advances was $8.5 million for the three months ended September 30, 2019, a decrease of $477 thousand, or 5.3 percent, from $9.0 million for the three months ended September 30, 2018. The decrease was due mainly to a $194.9 million decrease in average balance for the quarter ended September 30, 2019, partially offset by a 20 bps increase in average cost. The increase in average cost was mainly due to a higher interest rate environment between periods. The decrease in average balance was mainly due to reduced term advances, primarily three- to ten-year duration, based on available cash resulting from the Company's sales and calls of investment securities and loans during 2019.
Interest expense on long term debt and other interest-bearing liabilities was $2.4 million for the three months ended September 30, 2019, an increase of $14 thousand from $2.4 million for the three months ended September 30, 2018. The average balance and average cost remained relatively flat during the three months ended September 30, 2019 as compared to the same period last year.

Nine Months Ended September 30, 2019 Compared to Nine Months Ended September 30, 2018
Net interest income was $191.5 million for the nine months ended September 30, 2019, a decrease of $24.4 million, or 11.3 percent, from $215.9 million for the nine months ended September 30, 2018. The decrease in net interest income from the prior period was largely due to higher average cost of interest-bearing liabilities outpacing the increase in average yield on interest-earning assets, coupled with an decrease in interest earning assets.
Interest income on total loans was $260.0 million for the nine months ended September 30, 2019, an increase of $18.5 million, or 7.7 percent, from $241.5 million for the nine months ended September 30, 2018. The increase in interest income on loans was primarily due to a $272.6 million increase in the average balance of total loans and a 16 bps increase in average yield. The increase in average balance was due mainly to increased loan originations, partially offset by loan sales and principal paydowns and payoffs. The increase in average yield was mainly due to higher interest rates on new loans and loans with variable interest rates increasing due to a rising interest rate environment through the first half of 2019.
Interest income on securities was $40.3 million for the nine months ended September 30, 2019, a decrease of $23.4 million, or 36.7 percent, from $63.7 million for the nine months ended September 30, 2018. The decrease in interest income on securities was due to a $936.3 million decrease in average balance, partially offset by a 22 bps

increase in average yield. The decrease in average balance was mainly due to sales of certain longer-duration and fixed-rate mortgage-backed securities, corporate debt securities, collateralized loan obligations and commercial mortgage-backed securities between periods to navigate a volatile rate environment during 2018 and remix of our earning assets from investment securities to higher yielding loans. The increase in average yield was due to higher interest rates on purchased investment securities and investment securities with variable interest rates increasing due to a rising interest rate environment between periods.
Dividends and interest income on other interest-earning assets was $7.1 million for the nine months ended September 30, 2019, an increase of $116 thousand, or 1.7%, from $7.0 million for the nine months ended September 30, 2018. The increase in dividends and interest income on other interest-earning assets was due to a 30 bps increase in average yield, partially offset by a $35.3 million decrease in average balance. The increase in average yield was mainly due to higher interest rates on interest-earning deposits with financial institutions from a rising interest rate environment. The decrease in average balance was mainly due to decreases in interest-bearing deposits in financial institutions as a result of sales of investment securities and loans.
Interest expense on interest-bearing deposits was $82.9 million for the nine months ended September 30, 2019, an increase of $20.6 million, or 33.1%, from $62.3 million for the nine months ended September 30, 2018. The increase in interest expense on interest-bearing deposits was due to a 51 bps increase in average cost, partially offset by a $231.2 million decrease in average interest-bearing balances. The increase in average cost was mainly due to the rising interest rate environment between periods. The decrease in average interest-bearing balances was mainly due to shifts within interest-bearing deposit balances from savings and interest-bearing checking accounts to higher yielding certificates of deposit accounts as a result of increasing market interest rates between periods, partially offset by the shift in our deposit strategy to focus on relationship-based customers and de-emphasize high-rate transactional customers.
Interest expense on FHLB advances was $25.9 million for the nine months ended September 30, 2019, a decrease of $38 thousand, or 0.1%, from $25.9 million for the nine months ended September 30, 2018. The decrease was due mainly to a 52 bps increase in average cost, partially offset by a $341.0 million decrease in average balance for the nine months ended September 30, 2019. The increase in average cost was mainly due to a rising interest rate environment. The decrease in average balance was mainly due to reduced term advances, primarily three- to ten-year duration, based on available cash resulting from the Company's sales of investment securities and loans during the nine months ended September 30, 2019.
Interest expense on securities sold under repurchase agreements was $47 thousand for the nine months ended September 30, 2019, a decrease of $961 thousand, or 95.3% from $1.0 million for the nine months ended September 30, 2018. The Company utilized a reduced amount of repurchase agreements during the nine months ended September 30, 2019 as a result of cash received from sales of loans and securities over the past year used to redeem its higher yield borrowings, including securities sold under repurchase agreements.
Interest expense on long term debt and other interest-bearing liabilities was $7.1 million for the nine months ended September 30, 2019, an increase of $45 thousand, or 0.6%, from $7.1 million for the nine months ended September 30, 2018. The average balance and average cost remained relatively flat during the nine months ended September 30, 2019 as compared to the same period last year.


Provision for Loan(Reversal of) Credit Losses
The provision for loan(reversal of) credit losses is charged to operations to adjust the allowance for loancredit losses to the level required to cover current estimated credit losses inherent in our loan portfolio and unfunded commitments. The following table presents the loan and lease portfolio.components of our provision for credit losses:
The Company recorded
Three Months EndedSix Months Ended June 30,
($ in thousands)June 30,
2020		March 31,
2020		June 30,
2019		20202019
Provision for (reversal of) loan losses$11,519  $14,711  $(1,987) $26,230  $525  
Provision for (reversal of) credit losses - unfunded loan commitments307  1,050  87  1,357  (327) 
Total provision for (reversal of) credit losses$11,826  $15,761  $(1,900) $27,587  $198  

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We recognized a provision for (reversal of) loancredit losses of $38.5$11.8 million during the second quarter of 2020, compared to $15.8 million during the first quarter of 2020 and $(2.0)a reversal of credit losses of $1.9 million for the threesecond quarter of 2019. Our provision for credit losses during the second quarter of 2020 included $307 thousand related to unfunded commitments, compared to $1.1 million during the first quarter. The remaining second quarter of 2020 provision for credit losses was comprised of $5.0 million of general reserves and $6.8 million related to specific reserves, primarily related to a previously reported non-accrual, shared national credit. The general provision is due to a continued deterioration in key macro-economic forecast variables, such as unemployment and gross domestic product, and loan risk rating downgrades, offset by lower period end loan balances.
During the six months ended September 30, 2019 and June 30, 2019, respectively. During the third quarter, the $38.5 million provision for loan losses was primarily attributable to a $35.1 million charge-off of a line of credit originated in November 2017 to a borrower purportedly the subject of a fraudulent scheme. In addition, the charge-off increased the loss factor used in our allowance for loan loss for commercial and industrial loans, resulting in an additional loan loss provision of $3.0 million. On October 22, 2019, in connection with this matter, the Bank filed a complaint in U.S. District Court for the Southern District of California (Case CV '19 02031 GPC KSC) seeking to recover its losses and other monetary damages against Chicago Title Insurance Company and Chicago Title Company, asserting claims under RICO, 18 U.S.C § 1962 and for RICO Conspiracy, Fraud, Aiding and Abetting Fraud, Negligent Misrepresentation, Breach of Fiduciary Duty and Negligence. We are actively considering and pursuing available sources of recovery and other potential means of mitigating the loss; however, no assurance can be given that2020, we will be successful in that regard.
During the third quarter of 2019, the Company undertook an extensive collateral review of all commercial lending relationships $5 million and above not secured by real estate, consisting of 53 loans representing $536 million in commitments. The collateral review focused on security and collateral documentation and confirmation of the Bank's collateral interest. The review was performed within the Bank's Internal Audit division and the work was validated by an independent third party. Our review and outside validation have not identified any other instances of apparent fraud for the credits reviewed or concerns over the existence of collateral held by the Bank or on our behalf at third parties; however, there are no assurances that our internal review and third party validation will be sufficient to identify all such issues.
The Company recordedrecognized a provision for loancredit losses of $38.5$27.6 million andunder the CECL model, compared to $198 thousand under the incurred loss model during 2019. Our provision for credit losses included $1.4 million respectively, forrelated to unfunded commitments during the threesix months ended SeptemberJune 30, 2019 and 2018. The increase in the2020, compared to provision reversal of $327 thousand during the threesix months ended SeptemberJune 30, 2019 compared to same period in 2018 was mainly due to the aforementioned $35.1 million charge-off of a line of credit.
2019. The Company recorded ahigher provision for loancredit losses was driven by using the new CECL model, the estimated future impact of $39.1 millionthe health crisis on our loans, net charge-offs, and $23.6 million for the nine months ended September 30, 2019 and 2018, respectively. During the nine months ended September 30, 2019, the provision for loan losses primarily reflects the aforementioned $35.1 million charge-off of a line of credit, an increase of $3.0 million due to an increase in loss factors associated with this charge-off and increases in other qualitative provisions. For the nine months ended September 30, 2018, a provision for loans losses of $23.6 million was recorded, inclusive of $13.9 million on a line of credit determined to have been fraudulently obtained and an increase of $881 thousand in provision due to a downgrade of a commercial and industrial loan with a carrying value of $23.8 million from Special Mention to Substandard due to credit deterioration, as well as an increase inspecific reserves, partially offset by lower period end loan balances during the nine months ended Septemberof $1.09 billion as compared to June 30, 2018.2019.
See further discussion in "Allowance for LoanCredit Losses."

Noninterest Income (Loss)
The following table presents the breakdowncomponents of non-interest (loss)noninterest income for the periods indicated:
 Three Months Ended Nine Months Ended September 30,Three Months EndedSix Months Ended June 30,
($ in thousands) September 30,
2019		 June 30,
2019		 September 30,
2018		 2019 2018($ in thousands)June 30,
2020		March 31,
2020		June 30,
2019		20202019
Customer service fees $1,582
 $1,434
 $1,446
 $4,531
 $4,529
Customer service fees$1,224  $1,096  $1,434  $2,320  $2,949  
Loan servicing income 128
 121
 439
 367
 3,698
Loan servicing income95  75  121  170  239  
Income from bank owned life insurance 588
 580
 551
 1,693
 1,617
Income from bank owned life insurance591  578  580  1,169  1,105  
Impairment loss on investment securities (731) —
 —
 (731) —
Net (loss) gain on sale of securities available-for-sale (5,063) —
 13
 (4,855) 5,532
Net gain on sale of loans 4,326
 2,826
 279
 8,705
 1,059
Net gain (loss) on sale of mortgage servicing rights —
 —
 24
 —
 (2,426)
Other income (loss) 2,351
 (7,251) 2,072
 (2,524) 7,458
Net gain on sale of securities available-for-saleNet gain on sale of securities available-for-sale2,011  —  —  2,011  208  
Fair value adjustment on loans held-for-saleFair value adjustment on loans held-for-sale25  (1,586) 59  (1,561) 60  
Net (loss) gain on sale of loansNet (loss) gain on sale of loans—  (27) 2,767  (27) 4,319  
Other incomeOther income1,582  1,925  (7,251) 3,507  (4,875) 
Total noninterest income (loss) $3,181
 $(2,290) $4,824
 $7,186
 $21,467
Total noninterest income (loss)$5,528  $2,061  $(2,290) $7,589  $4,005  

Three Months Ended SeptemberJune 30, 20192020 Compared to Three Months Ended March 31, 2020
Noninterest income was $5.5 million for the three months ended June 30, 2020; an increase of $3.5 million, or 168.2%, from $2.1 million for the three months ended March 31, 2020. The increase was primarily due to a gain on the sale of securities of $2.0 million compared to $0 in the prior quarter and lower net unrealized losses of $1.6 million for the change in fair value adjustment on loans held-for sale. During the three months ended June 30, 2020, we sold $20.7 million in securities, primarily consisting of corporate securities, resulting in a gain of $2.0 million. There were no sales of securities during the prior quarter.
In addition, during the three months ended June 30, 2020, customer service fees increased $128 thousand due mostly to higher depositor-related fees. Other income increased $343 thousand due mostly to lower sublease income of $423 thousand.
Three Months Ended June 30, 2020 Compared to Three Months Ended June 30, 2019

Noninterest income (loss) was $3.2$5.5 million for the three months ended SeptemberJune 30, 2019,2020, an increase of $5.5$7.8 million, or 238.9 percent,341.4%, from $(2.3) million for the three months ended June 30, 2019. The increase in noninterest income during the three months ended June 30, 2020 was primarilymainly due to increasesthe aforementioned 2020 sale of securities and the 2019 second quarter $9.6 million unrealized loss from interest rate swap agreements entered into in order to offset the variability in the fair value of the Freddie Mac securitization completed during the third quarter of 2019, offset by lower net gain on sale of loans and other income of $1.5 million and $9.6 million, respectively, between periods. These increases were partially offset by net losses on the sale of investment securities totaling $5.1 million and impairment loss on investment securities of $731$2.8 million.
Customer service fees decreased $210 thousand, foror 14.6%, during the three months ended SeptemberJune 30, 2019.2020 due mostly to lower borrower loan fees, such as extension and exit fees, offset by higher deposit-related transactional fees.


Net lossgains on sale of securities available-for-sale was $5.1increased to $2.0 million forduring the three months ended SeptemberJune 30, 2019, compared to no gains for2020 from zero during the three months ended June 30, 2019. The Company sold securities available-for-saleincrease between periods was due to the aforementioned $20.7 million
56
Table of $380.9 million and $279.5 million, respectively, during the three months ended September 30, 2019 and June 30, 2019. During the three months ended September 30, 2019, the Company sold $380.9 million in agency residential mortgage-backed securities. In addition, $731 thousand of other-than-temporary impairment was recognized on the remaining $40.4 million MBS portfolio and reflected in impairment loss on investment securities in the accompanying consolidated statements of operations.Contents
Net gain on sale of loans was $4.3 million for the three months ended September 30, 2019, compared to $2.8 million forsecurities during the three months ended June 30, 2019. During2020, primarily consisting of corporate securities. There were no securities sales in the three months ended September 30, 2019, the Companyfirst quarter of 2019.
Net loss on sale of loans, which includes premium recapture of previously sold $573.5 million of multifamily residential loans, resulting in a net gain of $5.1 million. Duringwas zero during the three months ended June 30, 2020 compared to $2.8 million during the comparable 2019 period. There were no sales of loans during the Companysecond quarter of 2020. During the second quarter of 2019, we sold jumbo SFR mortgage loans of $131.5 million resulting in a gain of $125 thousand and $178.2 million of multifamily residential loans resulting in a gain of $2.9 million.
Other income (loss) was $2.4 million for the three months ended September 30, 2019, compared to $(7.3)$1.6 million for the three months ended June 30, 2019.2020, compared to a loss of $7.3 million in the comparable 2019 period. The $9.6$8.8 million increase isdecrease was primarily attributable to the previous quarter2019 period including athe aforementioned $9.6 million realizedunrealized loss onfrom interest rate swaps relatedswap agreements entered into in order to offset variability in the aforementionedfair value of the Freddie Mac multifamily securitization which was completed during the third quarter of 2019. The Company realized a gross gain in fair value of the associated loans sold into the securitization of $8.9 million, which is included in net gain on sale of loans.

ThreeSix Months Ended SeptemberJune 30, 20192020 Compared to ThreeSix Months Ended SeptemberJune 30, 20182019
Noninterest income was $3.2$7.6 million for the threesix months ended SeptemberJune 30, 2019, a decrease2020, an increase of $1.6$3.6 million, or 34.1 percent,89.5%, from $4.8$4.0 million for the threesix months ended SeptemberJune 30, 2018.2019. The decrease in noninterest income during the three months ended September 30, 2018 was mainly due to an impairment loss on investment securities of $731 thousand and a decrease in net gain on sale of investment securities of $5.1 million, partially offset by a $4.0 million increase in net gain on sale of loans.
Loan servicing income was $128 thousand for the three months ended September 30, 2019, a decrease of $311 thousand, or 70.8 percent, from $439 thousand for the three months ended September 30, 2018. The decrease between periods is attributable to reductions in serviced balances between the periods. Servicing fees were $287 thousand and $472 thousand for the three months ended September 30, 2019 and 2018, respectively. Additionally, servicing fee were offset by losses on fair value and runoff of servicing assets were $159 thousand and $33 thousand for the three months ended September 30, 2019 and 2018, respectively.
Net loss on sale of securities available-for-sale was $5.1 million for the three months ended September 30, 2019, compared to $13 thousand for the three months ended September 30, 2018. The Company sold agency mortgage-backed securities available-for-sale of $380.9 million and $25.3 million, respectively, during the three months ended September 30, 2019 and 2018. In addition, $731 thousand of other-than-temporary impairment was recognized on the remaining $40.4 million MBS portfolio and reflected in impairment loss on investment securities in the accompanying consolidated statements of operations. The Company sold securities available-for-sale of $25.3 million during the three months ended September 30, 2018 as it further repositioned its securities available-for-sale portfolio to reduce duration by selling longer-duration and fixed rate mortgage-backed securities.
Net gain on sale of loans was $4.3 million for the three months ended September 30, 2019, compared to $279 thousand for the three months ended September 30, 2018. During the three months ended September 30, 2019, the Company sold $573.5 million of multifamily residential loans resulting in a gross gain of $8.9 million. During the three months ended September 30, 2018, the Company sold jumbo SFR mortgage loans of $23.6 million with a gain of $229 thousand, and SBA loans of $1.0 million with a gain of $50 thousand.

Nine Months Ended September 30, 2019 Compared to Nine Months Ended September 30, 2018

Noninterest income was $7.2 million for the nine months ended September 30, 2019, a decrease of $14.3 million, or 66.5 percent, from $21.5 million for the nine months ended September 30, 2018. The decrease in noninterest income was mainly due to a $10.4the $1.8 million decreaseincrease in net (loss) gain on the sale of investment securities available-for-sale, coupled with a $10.0$8.4 million decrease in other income (loss), partially offset by an increase inhigher unrealized net gainlosses on loans held-for-sale of $1.6 million and lower net gains on sale of loans of $7.6 million between periods.periods of $4.3 million.
Loan servicing income was $367Customer service fees decreased $629 thousand, foror 21.3%, during the ninethree months ended SeptemberJune 30, 2019, a decrease of $3.3 million, or 90.1 percent, from $3.7 million for the nine months ended September 30, 2018. The decrease between periods is attributable2020 due mostly to the sale during the nine months ended September 30, 2018 of $28.5 million of mortgage servicing rights on $3.55 billion in unpaid principal balances of conventional mortgage loans. Servicinglower borrower loan fees, were $917 thousandsuch as extension and $4.6 million for the nine months ended September 30, 2019 and 2018, respectively. Offsetting these servicing fees were losses on fair value changes and runoff of servicing assets were $550 thousand and $914 thousand for the nine months ended September 30, 2019 and 2018, respectively.exit fees.
Net (loss) gain on sale of securities available-for-sale was $(4.9)$2.0 million for the ninesix months ended SeptemberJune 30, 2020, compared to $208 thousand for the six months ended June 30, 2019. During the six months ended June 30, 2020 we sold $20.7 million in securities, primarily consisting of corporate securities, resulting in a gain of $2.0 million. During the six months ended June 30, 2019, compared to $5.5 million for the nine months ended September 30, 2018. The Companywe sold securities available-for-sale of $1.16 billion and $406.8 million, respectively, during the nine months ended September 30, 2019 and 2018. Included in the $1.16 billion in securities available for sale sold during the nine months ended September 30, 2019 was $132.2 million of non-agency commercial mortgage-backed securities that were sold forresulting in a gain of $9 thousand. During the nine months ended September 30, 2019, the Company sold $385.8thousand and $644.5 million in agency mortgage-backed securities, resulting in a loss of $5.0 million. In addition, $731 thousand of other-than-temporary impairment was recognized on the remaining $40.4 million MBS portfolio and reflected in impairment loss on investment securities in the accompanying consolidated statements of operations. Additionally, during the nine months ended September 30, 2019, the Company continued to reduce its collateralized loan obligations exposure by selling $644.5 million of these investments resulting in a gain of $143 thousand.
Net (loss) gain on sale of loans, which includes premium recapture of previously sold loans, was $8.7$27 thousand for the six months ended June 30, 2020, compared to a gain of $4.3 million for the ninesix months ended SeptemberJune 30, 2019. There were no sales of loans during the six months ended June 30, 2020. During the six months ended June 30, 2019, compared to $1.1 million for the nine months ended September 30, 2018. During the nine months ended September 30, 2019, the Companywe sold jumbo SFR mortgage loans of $374.8$374.7 million resulting in a gain of $1.6$1.8 million and $751.6$178.2 million of multifamily residential loans resulting in a gain of $7.3$2.9 million. During the nine months ended September 30, 2018, the Company sold jumbo SFR mortgage loans of $158.9 million with a loss of $408 thousand, SBA loans of $6.3 million with a gain of $480 thousand and multifamily and other consumer loans of $75.7 million with a gain of $171 thousand.
Net loss on sale of mortgage servicing rightsOther income (loss) was zero for the nine months ended September 30, 2019, compared to $2.4$3.5 million for the ninesix months ended SeptemberJune 30, 2018. During the nine months ended September 30, 2018, the Company sold $28.5 million of MSRs on $3.55 billion in unpaid principal balances of conventional mortgage loans. These transactions resulted in a net loss on sale of MSRs of $2.4 million, primarily related2020, compared to transaction costs, provision for early repayments of loans and expected repurchase obligations under standard representations and warranties. There were no sales of MSRs during the nine months ended September 30, 2019.
Other (loss) income was $(2.5)$(4.9) million for the ninesix months ended SeptemberJune 30, 2019, compared to $7.52019. The $8.4 million for the nine months ended September 30, 2018. The $10.0 million decrease isincrease was primarily attributable to the aforementioned $9.6 million realizedunrealized loss onfrom interest rate swaps relatedswap agreements entered into in order to offset variability in the fair value of the Freddie Mac multifamily securitization which was completed during the third quarter of 2019. The Company realized a gross gain on fair value2019, offset by lower sublease income of the associated loans sold into the securitization$312 thousand.

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Table of $8.9 million, which is included in net gain on sale of loans.Contents

Noninterest Expense
The following table presents the breakdown of noninterest expense for the periods indicated:
 Three Months Ended Nine Months Ended September 30,Three Months EndedSix Months Ended June 30,
($ in thousands) September 30,
2019		 June 30,
2019		 September 30,
2018		 2019 2018($ in thousands)June 30,
2020		March 31,
2020		June 30,
2019		20202019
Salaries and employee benefits $25,934
 $27,506
 $24,832
 $81,879
 $85,387
Salaries and employee benefits$24,260  $23,436  $27,506  $47,696  $55,945  
Naming rights terminationNaming rights termination26,769  —  —  26,769  —  
Occupancy and equipment 7,767
 7,955
 8,213
 23,408
 23,783
Occupancy and equipment7,090  7,243  7,955  14,333  15,641  
Professional fees (reimbursement) 1,463
 (2,903) 11,966
 9,601
 27,446
Outside service fees 520
 489
 954
 1,412
 3,913
Professional feesProfessional fees4,596  5,964  (2,903) 10,560  8,138  
Data processing 1,568
 1,672
 1,884
 4,736
 5,218
Data processing1,536  1,773  1,672  3,309  3,168  
Advertising 2,090
 2,048
 3,152
 6,195
 9,293
Advertising1,157  1,756  2,048  2,913  4,105  
Regulatory assessments 1,239
 2,136
 2,138
 5,857
 6,426
Regulatory assessments725  484  2,136  1,209  4,618  
Reversal of provision for loan repurchases (123) (61) (360) (300) (2,366)Reversal of provision for loan repurchases(34) (600) (61) (634) (177) 
Amortization of intangible assets 500
 621
 693
 1,741
 2,363
Amortization of intangible assets430  429  621  859  1,241  
Restructuring (reversal) expense —
 (158) 553
 2,637
 4,536
Restructuring expenseRestructuring expense—  —  (158) —  2,637  
All other expense 3,289
 4,637
 4,368
 10,908
 12,959
All other expense6,408  4,529  5,039  10,937  8,838  
Noninterest expense before (gain) loss on investments in alternative energy partnerships 44,247
 43,942
 58,393
 148,074
 178,958
Noninterest expense before loss on investments in alternative energy partnershipsNoninterest expense before loss on investments in alternative energy partnerships72,937  45,014  43,855  117,951  104,154  
(Gain) loss on investments in alternative energy partnerships (940) (355) 2,484
 655
 4,258
(Gain) loss on investments in alternative energy partnerships(167) 1,905  (355) 1,738  1,595  
Total noninterest expense $43,307
 $43,587
 $60,877
 $148,729
 $183,216
Total noninterest expense$72,770  $46,919  $43,500  $119,689  $105,749  

Three Months Ended SeptemberJune 30, 20192020 Compared to Three Months Ended March 31, 2020
Noninterest expense was $72.8 million for the three months ended June 30, 2020, an increase of $25.9 million, or 55.1%, from $46.9 million for the three months ended March 31, 2020. The increase was mainly due to the aforementioned $26.8 million one-time charge related to the termination of our LAFC naming rights agreements and a $2.5 million debt extinguishment fee associated with the early repayment of certain FHLB term advances. There were no similar charges in any of the other periods presented. When these charges are excluded, noninterest expense decreased $3.4 million, due to (i) lower professional fees of $1.4 million as a result of the timing of certain indemnified legal costs and recoveries compared to the prior quarter, (ii) higher net gains on investments in alternative energy partnerships of $2.1 million, and (iii) lower advertising costs of $599 thousand, offset by (iv) higher salaries and benefits expense of $824 thousand due mostly to higher incentive accruals, (v) lower reversals of loan repurchases, and (vi) higher regulatory assessments of $241 thousand.
Professional fees were $4.6 million for the three months ended June 30, 2020, a decrease of $1.4 million, or 22.9%, from $6.0 million for the three months ended March 31, 2020. The decrease included lower indemnified legal costs and recoveries as the current quarter included $875 thousand of such legal costs compared to $1.7 million for the prior quarter. When these indemnified legal costs and recoveries are excluded, professional fees would have decreased $565 thousand from the prior quarter. The remaining decrease relates to lower audit fees and other legal costs.
Advertising costs were $1.2 million for the three months ended June 30, 2020, a decrease of $599 thousand, or 34.1%, from $1.8 million for the three months ended March 31, 2020. The decrease was mainly due to reductions in overall events and media spending due, in part, to the termination of the LAFC Agreement on May 22, 2020. Refer to the earlier discussion in the "Termination of LAFC Agreement" section.
Regulatory assessments were $725 thousand for the three months ended June 30, 2020, an increase of $241 thousand, or 49.8%, from $484 thousand for the three months ended March 31, 2020. The increase was mainly due to the first quarter of 2020 having a FDIC small bank assessment credit.
Reversal of provision for loan repurchases decreased $566 thousand and resulted in higher expenses. The reversal of provision for loan repurchases totaled $34 thousand for the three months ended June 30, 2020 compared to $600 thousand for the prior quarter. The decrease was due to changes in the credit quality of the previously sold loans resulting in a lower release of reserve amount.
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Table of Contents
The (gain) loss on investments in alternative energy partnerships was a gain of $167 thousand for the three months ended June 30, 2020, an increase of $2.1 million, from a loss of $1.9 million for the three months ended March 31, 2020. The gain between periods was mainly due to decreased loss sharing allocations and resulting lower HLBV losses.
All other expense for the three months ended June 30, 2020 increased $1.9 million or 41.5%, to $6.4 million from $4.5 million for the three months ended March 31, 2020.The increase was primarily attributable to a $2.5 million debt extinguishment fee, partially offset by decreases in other expenses such as legal settlements, business travel, and the write-off of certain capitalized software cost. During the three months ended June 30, 2020, we repaid a $100.0 million FHLB term advance with a weighted average interest rate of 2.07% and incurred a $2.5 million debt extinguishment fee. All other expense for the three months ended March 31, 2020 included an $850 thousand charge to settle and conclude a legacy loan sale claim from an acquired bank.

Three Months Ended June 30, 2020 Compared to Three Months Ended June 30, 2019
Noninterest expense was $43.3$72.8 million for the three months ended SeptemberJune 30, 2019,2020, an increase of $29.3 million, or 67.3%, from $43.5 million for the three months ended June 30, 2019. The increase was mainly due to the $26.8 million LAFC naming rights termination fee, coupled with higher professional fees of $7.5 million and other expenses of $1.4 million, offset by lower salaries and employee benefits of $3.2 million and lower regulatory assessments of $1.4 million.
Salaries and employee benefits expense was $24.3 million for the three months ended June 30, 2020, a decrease of $280$3.2 million, or 11.8%, from $27.5 million for the three months ended June 30, 2019. The decrease was primarily due to overall reductions in headcount between periods.
As discussed above, we terminated our naming rights agreements with LAFC and incurred a pre-tax, one-time charge to operations of $26.8 million. Refer to earlier discussion in "Termination of LAFC Agreement."
Occupancy and equipment was $7.1 million for the three months ended June 30, 2020, a decrease of $865 thousand or 0.6 percent,10.9% from $43.6$8.0 million for the three months ended June 30, 2019. The decrease was primarily due to overall reductions in costs between periods as a result of exiting the TPMO and brokered single family lending businesses during the first quarter of 2019.
Professional fees were $4.6 million for the three months ended June 30, 2020, an increase of $7.5 million, or 258.3%, from recoveries of $2.9 million for the three months ended June 30, 2019. The increase was mainly due the 2019 period including net recoveries of legal fees of $6.4 million due to the timing of insurance recoveries related to securities litigation, indemnification, investigation and other legal expenses compared to legal fees of $1.7 million during the 2020 period. Offsetting this increase was a $677 thousand decrease in other professional fees.
Advertising costs were $1.2 million for the three months ended June 30, 2020, a decrease of $891 thousand, or 43.5%, from $2.0 million for the three months ended June 30, 2019. The decrease was mainly due to decreasesreductions in salariesoverall events and employee benefits, regulatorymedia spending due in part to the termination of the LAFC Agreement on May 22, 2020.
Regulatory assessments (gain) loss on investments in alternative energy partnerships and other expenses, partially offset by increases in professional fees (reimbursement).
Salaries and employee benefits expense was $25.9 million for the three months ended September 30, 2019, a decrease of $1.6 million, or 5.7 percent, from $27.5 millionwere $725 thousand for the three months ended June 30, 2019. The decrease was mainly due to decreases in number of employees, incentives and commissions, and temporary staff expenses.
Professional fees (reimbursement) were $1.5 million for the three months ended September 30, 2019, an increase of $4.4 million, or 150.4 percent, from $(2.9) million for the three months ended June 30, 2019. The increase was primarily attributable to reductions in insurance recoveries net of expenses related to securities litigation, indemnification, investigation and other legal expenses in the third quarter of $2.6 million as compared to $6.2 million in the prior quarter.
Regulatory assessments were $1.2 million for the three months ended September 30, 2019,2020, a decrease of $897 thousand,$1.4 million, or 42.0 percent,66.1%, from $2.1 million for the three months ended June 30, 2019. The decrease was mainly due to ana reduction in our FDIC small bank assessment credit.rate given the decrease in our asset size.
All other expenses decreased $1.3expense was $6.4 million or 29.1 percent between periods, primarily as a result of reductions in other loan-related expenses and charges related to capitalized software projects during the three months ended September 30, 2019 as compared to the previous quarter.
Gain on investments in alternative energy partnerships was $940 thousand for the three months ended SeptemberJune 30, 2019,2020, an increase of $585 thousand,$1.4 million, or 27.2%, from a gain of $355 thousand$5.0 million for the three months ended June 30, 2019. The increase was primarily attributable to the aforementioned $2.5 million debt extinguishment fee associated with the early repayment of certain FHLB term advances in gains between periodsthe second quarter of 2020. All other expense during the same 2019 period included a $797 impairment of capitalized software projects. There were no similar impairment charges during the three months ended June 30, 2020.

Six Months Ended June 30, 2020 Compared to Six Months Ended June 30, 2019
Noninterest expense was $119.7 million for the six months ended June 30, 2020, an increase of $13.9 million, or 13.2%, from $105.7 million for the six months ended June 30, 2019. The increase was mainly due to decreased loss sharing allocations and resulting lower HLBV losses.

Three Months Ended September 30, 2019 Compared to Three Months Ended September 30, 2018
Noninterest expense was $43.3the $26.8 million for the three months ended September 30, 2019,LAFC naming rights termination, coupled with a decrease of $17.6$2.4 million or 28.9 percent, from $60.9 million for the three months ended September 30, 2018. The decrease was mainly due to decreasesincrease in professional fees (reimbursement), advertising, regulatory assessments, restructuring (reversal) expenses, and $2.1 million increase in all other expense, partially offset by increasesa $8.2 million decrease in salaries and employee benefits.

benefits, a $3.4 million decrease in regulatory assessments and a $2.6 million decrease in restructuring expense, as well as decreases in occupancy and equipment, and advertising expenses.
Salaries and employee benefits expense was $25.9$47.7 million for the threesix months ended SeptemberJune 30, 2019, an increase2020, a decrease of $1.1$8.2 million, or 4.4 percent,14.7%, from $24.8$55.9 million for the threesix months ended SeptemberJune 30, 2018. The increase was mainly due to increases in compensation, offset by reductions in contract labor and less salary deferrals based on lending activity.
Professional fees (reimbursement) were $1.5 million for the three months ended September 30, 2019, a decrease of $10.5 million, or 87.8 percent, from $12.0 million for the three months ended September 30, 2018. The decrease was mainly due to an increase in insurance recoveries for legal expenses related to the SEC investigation and various other litigation between periods.
Advertising costs were $2.1 million for the three months ended September 30, 2019, a decrease of $1.1 million, or 33.7 percent, from $3.2 million for the three months ended September 30, 2018. The decrease was mainly due to overall reductions in advertising expenses between periods due to a focus on digital rather than traditional marketing. Advertising costs include $1.7 million of the LAFC naming rights commitment during both the three months ended September 30, 2019 and 2018.
Regulatory assessments were $1.2 million for the three months ended September 30, 2019, a decrease of $899 thousand, or 42.0 percent, from $2.1 million for the three months ended September 30, 2018. The decrease was mainly due to an FDIC small bank assessment credit..
For the three months ended September 30, 2019, there were no restructuring (reversal) expenses. The comparable 2018 period included severance-related costs of $553 thousand as a result of the reduction in force by approximately 9% of total staffing.
(Gain) loss on investments in alternative energy partnerships was $(940) thousand for the three months ended September 30, 2019, a decrease in loss of $3.4 million, from a loss of $2.5 million for the three months ended September 30, 2018. The decrease in loss was mainly due to decreased loss sharing allocations and resulting lower HLBV losses.
All other expense was $3.3 million for the for the three months ended September 30, 2019, a decrease of $1.1 million, or 24.7 percent, from $4.4 million for the three months ended September 30, 2018. The decrease was mainly due to overall expense reductions from the Company's effort to manage its expenses on supplies, business travel, and other administrative expenditures, and insurance recoveries from previous accrued legal settlement expense, offset by impairment of capitalized software and an increase in provision for unfunded commitments.

Nine Months Ended September 30, 2019 Compared to Nine Months Ended September 30, 2018
Noninterest expense was $148.7 million for the nine months ended September 30, 2019, a decrease of $34.5 million, or 18.8 percent, from $183.2 million for the nine months ended September 30, 2018. The decrease was mainly due to decreases in salaries and employee benefits, professional fees (reimbursement), outside services, advertising, regulatory assessments, amortization of intangible assets, restructuring expense, all other expense and loss on investments in alternative energy partnerships, partially offset by a reduction in reversal of provision for loan repurchases.
Salaries and employee benefits expense was $81.9 million for the nine months ended September 30, 2019, a decrease of $3.5 million, or 4.1 percent, from $85.4 million for the nine months ended September 30, 2018.2019. The decrease was mainly due to decreases in number of employees, commissions, and temporary staff expenses.expenses, including overall reductions in headcount between periods as a result of exiting the TPMO and brokered single family lending businesses during the first quarter of 2019.

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Occupancy and equipment was $14.3 million for the three months ended June 30, 2020, a decrease of $1.3 million or 8.4% from $15.6 million for the six months ended June 30, 2019. The decrease was primarily due to overall reductions in costs between periods as a result of exiting the TPMO and brokered single family lending businesses during the first quarter of 2019.
Professional fees were $9.6$10.6 million for the ninesix months ended SeptemberJune 30, 2019, a decrease2020, an increase of $17.8$2.4 million, or 65.0 percent,29.8%, from $27.4$8.1 million for the ninesix months ended SeptemberJune 30, 2018. Professional2019. The increase in fees include $22.9 millionwas primarily the result of higher legal fees (net of recoveries of $2.5 million) due to the timing of insurance recoveries related to securities litigation, indemnification, investigation and other legal expenses during the 2019 period, compared to $8.2of $6.6 million, during 2018.
Outside serviceoffset by lower other professional fees were $1.4 million for the nine months ended September 30, 2019, a decrease of $2.5 million, or 63.9 percent, from $3.9 million for the nine months ended September 30, 2018. The decrease was primarily due to lower loan subservicing costs incurred during the nine months ended September 30, 2019 as a result of the aforementioned sale of mortgage servicing rights on $3.55 billion in unpaid principal balances of conventional mortgage loans during the comparable 2018 period.$2.4 million.
Advertising costs were $6.2$2.9 million for the ninesix months ended SeptemberJune 30, 2019,2020, a decrease of $3.1$1.2 million, or 33.3 percent,29.0%, from $9.3$4.1 million for the ninesix months ended SeptemberJune 30, 2018.2019. The decrease was mainly due to overall reductions in reductions in overall events and media spending, as well as a decrease in advertising expenses between periods duecosts related to a focus on digital rather than traditional marketing. Advertising costs include $5.0 million of the now-terminated LAFC naming rights commitment during bothcommitment. Advertising costs for the ninesix months ended SeptemberJune 30, 2019 and 2018.2020 included $2.6 million related to the now-terminated LAFC naming rights agreement compared to $3.3 million during six months ended June 30, 2019.
Regulatory assessments were $5.9$1.2 million for the ninesix months ended SeptemberJune 30, 2019,2020, a decrease of $569 thousand,$3.4 million, or 8.9 percent,73.8%, from $6.4$4.6 million for the ninesix months ended SeptemberJune 30, 2018.2019. The decrease was mainly due to a reduction in our FDIC assessment rate given the decrease in our asset size and an FDIC small bank assessment credit.

Reversal of provision for loan repurchasesRestructuring expense was $300 thousand and $2.4 millionzero for the ninesix months ended SeptemberJune 30, 2020. For the six months ended June 30, 2019, and 2018, respectively. The decrease was mainly due to the aforementioned sale of mortgage servicing rights on $3.55 billion in unpaid principal balances of conventional mortgage loans and reduced repurchase settlement activities as well as methodology and data enhancements that occurred during 2018.
Restructuringrestructuring expense was $2.6 million for the nine months ended September 30, 2019 and consisted of severance and retention costs associated with the Company'sour exit from its third-party mortgage originationthe TPMO and brokered single family lending businessbusinesses and CEO transition during the first quarter of 2019. For the nine months ended September 30, 2018, restructuring expense was $4.5 million and consisted of severance-related costs in the second and third quarters of 2018 of $4.5 million as a result of the reduction in force.
All other expenses were $10.9 million for the ninesix months ended SeptemberJune 30, 2019, a decrease2020, an increase of $2.1 million, or 15.8 percent,23.7%, from $13.0$8.8 million for the ninesix months ended SeptemberJune 30, 2018.2019. The decreaseincrease was mainly due to the aforementioned $2.5 million debt extinguishment fee associated with the early repayment of $100 million in FHLB term advances, combined with the aforementioned $850 thousand charge to settle and conclude a legacy loan sale claim from an acquired bank; All other expense during the comparable 2019 period included a $835 thousand impairment of capitalized software projects, compared to $157 thousand during the six months ended June 30, 2020. Offsetting these increases were overall expense reductions from the Company's effortour efforts to manage its expenses on supplies, business travel, directors' fees, and other administrative expenditures, a decrease in provision for unfunded loan commitments, and insurance recoveries from previous accrued legal settlement expense.expenditures.
Loss on investments in alternative energy partnerships was $655 thousand for the nine months ended September 30, 2019, a decrease of $3.6 million, from $4.3 million for the nine months ended September 30, 2018. The decrease in loss was mainly due to decreased loss sharing allocations and resulting lower HLBV losses.
Income Tax (Benefit) Expense
For the three months ended SeptemberJune 30, 2019,2020, March 31, 2020 and June 30, 2019, and September 30, 2018, income tax (benefit) expense on a consolidated operations basis was $(5.6)$(5.3) million, $4.3$(2.2) million, and $3.6 million, respectively, and the effective tax rate was 28.4 percent, 20.6 percent and 24.3 percent, respectively. During the third quarter of 2019, we had a pre-tax net loss of $19.8$4.3 million, resulting in approximately 13% reduction in the projected annual effective tax rate. For the full year, we expect our tax rate to normalize closer to 11%. The loweran effective tax rate of 11% is primarily driven by the loss the Company incurred22.3%, 24.7% and we expect the rate to normalize closer to 20% in 2020.
For the nine months ended September 30, 2019 and 2018, income tax expense (benefit), on a consolidated operation basis, was $1.4 million and $(102) thousand, respectively, and the effective tax rate was 12.9 percent and (0.3) percent, respectively. The increase in income tax expense and20.6%. Our 22.3% effective tax rate for the ninethree months ended SeptemberJune 30, 2019, primarily relates2020 differs from the 21% federal statutory rate was due to the significant reductionimpact of state taxes offset by various tax credits. The full year estimated effective tax rate for 2020 is expected to be approximately 23%.
For the six months ended June 30, 2020 and 2019, the income tax benefit was $7.5 million and the income tax expense was $7.0 million, resulting in an effective tax credits received by the Company on investments in alternative energy partnerships.rate of 23.0% and 22.9%, respectively.
The Company usesWe use the flow-through income statement method to account for the annual investment tax credits forecasted to be earned on the solar investments in the Company’sour annual Effective Tax Rate.effective tax rate. Under this method, 50% of the annual forecasted investment tax credits are recognized as a reduction to income tax expense and the initial book-tax difference in the basis of the investments are recognized as additional tax expense as of September 30, 2019.in the year they are earned.
For additional information, see Note 108 to Consolidated Financial Statements included in Part I of this Quarterly Report on Form 10-Q.


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FINANCIAL CONDITION
Investment Securities
At SeptemberJune 30, 2019,2020, all of the Company’sour investment securities were classified as available-for-sale.
The primary goal of our investment securities portfolio is to provide a relatively stable source of interest income while satisfactorily managing risk, including credit risk, reinvestment risk, liquidity risk, and interest rate risk. Certain investment securities provide a source of liquidity as collateral for FHLB advances, repurchase agreements, certain public funds deposits, and for Federal Reserve Discount Window availability.capacity, repurchase agreements, and certain public deposits.

The following table presents the amortized cost and fair value and unrealized gain (loss) of the investment securities portfolio and the corresponding amounts of gross unrealized gains and losses recognized in accumulated other comprehensive income (loss) as of the dates indicated:
 September 30, 2019 December 31, 2018June 30, 2020December 31, 2019
($ in thousands) Amortized Cost Fair Value Unrealized Gain (Loss) Amortized Cost Fair Value Unrealized Gain (Loss)($ in thousands)Amortized CostFair ValueUnrealized Gain (Loss)Amortized CostFair ValueUnrealized Gain (Loss)
Securities available-for-sale:            Securities available-for-sale:
SBA loan pool securities $���
 $—
 $—
 $911
 $910
 $(1)
U.S. government agency and U.S. government sponsored enterprise residential mortgage-backed securities 40,374
 40,374
 —
 461,987
 437,442
 (24,545)U.S. government agency and U.S. government sponsored enterprise residential mortgage-backed securities$100,128  $105,555  $5,427  $37,613  $36,456  $(1,157) 
U.S. government agency and U.S. government sponsored enterprise collateralized mortgage obligationsU.S. government agency and U.S. government sponsored enterprise collateralized mortgage obligations199,262  201,136  1,874  91,543  91,299  (244) 
Municipal securitiesMunicipal securities52,973  57,174  4,201  52,997  52,689  (308) 
Non-agency residential mortgage-backed securities 267
 277
 10
 418
 427
 9
Non-agency residential mortgage-backed securities161  164  3  191  196  5  
Non-agency commercial mortgage-backed securities —
 —
 —
 132,199
 132,199
 —
Collateralized loan obligations 748,605
 735,011
 (13,594) 1,431,171
 1,421,522
 (9,649)Collateralized loan obligations703,605  668,353  (35,252) 733,605  718,361  (15,244) 
Corporate debt securitiesCorporate debt securities141,962  143,647  1,685  13,500  13,579  79  
Total securities available-for-sale $789,246
 $775,662
 $(13,584) $2,026,686
 $1,992,500
 $(34,186)Total securities available-for-sale$1,198,091  $1,176,029  $(22,062) $929,449  $912,580  $(16,869) 

Securities available-for-sale were $775.7$1.18 billion at June 30, 2020, an increase of $263.4 million, at September 30, 2019, a decrease of $1.22 billion, or 61.1 percent,28.9%, from $1.99 billion$912.6 million at December 31, 2018.2019. The decreaseincrease was mainly due to purchases of $322.6 million, including $174.0 million in U.S. government agency securities and $148.6 million in corporate debt securities, offset by a $30.0 million pay-off of one CLO holding, $20.7 million in sales, of $1.16 billion, calls and payoffs of $38.1 million, principal payments of $35.3 million and decrease inhigher net unrealized losses of $20.9$5.2 million.
As of December 31, 2018, the Company changed its intent and decided to sell its non-agency commercial mortgage-backed securities in an unrealized loss position due to its strategy to reposition its securities profile and recognized $3.3 million of OTTI losses during the fourth quarter of 2018. During the first quarter of 2019, the Company completed the sale of its non-agency commercial mortgage-backed securities totaling $132.2 million.
During the nine months ended September 30, 2019, the Company continued to reduce its CLO exposure by selling $644.5 million of these investments resulting in $143 thousand gain. The net proceeds from the sale of securities and the run-off in CLOs were used to redeem $1.49 billion of high cost brokered deposits and pay down $130.0 million of higher yielding FHLB advances. Additionally, during the three and nine months ended September 30, 2019, the Company sold $380.9 million and $385.8 million, respectively, in MBS resulting in a loss of $5.1 million and $5.0 million, respectively. The remaining balance of MBS are expected to be sold in the fourth quarter of 2019 with all of the MBS sale proceeds expected to be reinvested into a mix of security classes, resulting in an overall shorter duration for the portfolio. During the three and nine months ended September 30, 2019, the Company recorded OTTI for its remaining portfolio of 9 MBS of $731 thousand and $731 thousand, respectively. The OTTI was recognized as a result of the Company's ongoing strategic decision to liquidate this longer duration portfolio.
CLOs totaled $748.6$668.4 million and $1.43 billion in amortized cost basis$718.4 million at SeptemberJune 30, 20192020 and December 31, 2018 respectively.2019. CLOs are floating rate debt securities backed by pools of senior secured commercial loans to a diverse group of companies across a broad spectrum of industries. Underlying loans are generally secured by a company’s assets such as inventory, equipment, property, and/or real estate. CLOs are structured to diversify exposure to a broad sector of industries. The payments on these commercial loans support interest and principal on the CLOs across classes that range from AAA ratedAAA-rated to equityequity-grade tranches. The Company believes that itsAt June 30, 2020, all of our CLO portfolio, consisting entirely of variable rate securities, supports the Company’s interest rate risk management strategy by lowering the extension risk and duration risk inherent to certain fixed rate investment securities. At September 30, 2019, the Company ownedholdings were AAA and AA rated CLOs and did not own CLOs rated below AA. As all CLOs arerated. We also rated above investment grade credit ratings and were diversified across issuers, the Company believes that these CLOs enhance the Company's liquidity position. The Company also maintainsperform pre-purchase due diligence and ongoing credit quality review processes by a dedicated credit administration team. The ongoing review processof our CLO holdings, which includes monitoring of performance factors includingsuch as external credit ratings, collateralization levels, collateral concentration levels, and other performance factors. The CompanyWe only acquiresacquire CLOs that it believeswe believe are Volcker Rule compliant.
The CompanyWe did not record OTTIcredit impairment for any other investment securities for the three and ninesix months ended SeptemberJune 30, 20192020 or 2018. The Company monitors its2019. We monitor our securities portfolio to ensure it has adequate credit support. As of SeptemberJune 30, 2019, the Company believed2020, we believe there was no further OTTIcredit impairment and we did not have the current intent to sell securities with a fair value below amortized cost at SeptemberJune 30, 2019. The Company considers2020, and it is more likely than not that we will not be required to sell such securities prior to the recovery of their amortized cost basis. We consider the lowest credit rating for identification of potential OTTI.credit impairment. As of SeptemberJune 30, 2019,2020, all of the Company'sour investment securities in an unrealized loss position received an investment grade credit rating. As partCredit spreads for CLOs widened during the first quarter of 2020 and have narrowed during the OTTI analysis performed, the Company believes the CLO securities are not OTTI, and thesecond quarter. The overall net decline in fair value is predominantly driven byduring 2020 was attributable to a combination of changes in interest rates.rates and general volatility in the credit market conditions.

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The following table presents maturities, based on the compositionearlier of thematurity dates or next repricing dates, and yield information of the investment securities portfolio as of SeptemberJune 30, 2019:2020:
One Year or LessMore than One Year through Five YearsMore than Five Years through Ten YearsMore than Ten YearsTotal
($ in thousands)Fair
Value		Weighted Average YieldFair
Value		Weighted Average YieldFair
Value		Weighted Average YieldFair
Value		Weighted Average YieldFair
Value		Weighted Average Yield
Securities available-for-sale:
U.S. government agency and U.S. government sponsored enterprise residential mortgage-backed securities$—  — %$—  — %$30,413  2.20 %$75,142  2.35 %$105,555  2.31 %
U.S. government agency and U.S. government sponsored enterprise collateralized mortgage obligations118,163  0.74 %11,608  2.02 %25,579  1.63 %45,786  0.93 %201,136  0.96 %
Municipal securities—  — %—  — %—  — %57,174  2.79 %57,174  2.79 %
Non-agency residential mortgage-backed securities—  — %—  — %—  — %164  6.14 %164  6.14 %
Collateralized loan obligations668,353  2.73 %—  — %—  — %—  — %668,353  2.73 %
Corporate debt securities—  — %122,301  4.99 %21,346  5.64 %—  — %143,647  5.08 %
Total securities available-for-sale$786,516  2.45 %$133,909  4.74 %$77,338  2.96 %$178,266  2.11 %$1,176,029  2.68 %

62
  One Year or Less More than One Year through Five Years More than Five Years through Ten Years More than Ten Years Total
($ in thousands) 
Fair
Value
 Weighted Average Yield 
Fair
Value
 Weighted Average Yield 
Fair
Value
 Weighted Average Yield 
Fair
Value
 Weighted Average Yield 
Fair
Value
 Weighted Average Yield
Securities available-for-sale:                    
U.S. government agency and U.S. government sponsored enterprise residential mortgage-backed securities $—
 —% $—
 —% $—
 —% $40,374
 2.56% $40,374
 2.56%
Non-agency residential mortgage-backed securities 65
 2.68% —
 —% —
 —% 212
 5.79% 277
 5.06%
Collateralized loan obligations 735,011
 3.52% —
 —% —
 —% —
 —% 735,011
 3.52%
Total securities available-for-sale $735,076
 3.52% $—
 —% $—
 —% $40,586
 2.58% $775,662
 3.47%

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Loans Held-for-Sale
Total loans held-for-sale on a consolidated operations basis were $23.9 million and $27.6 million, respectively, at September 30, 2019 and December 31, 2018.
During the second quarter of 2019, the Company transferred $573.9 million in multifamily loans from loans held-for-investment to loans held-for-sale, carried at lower of cost or fair value, related to our Freddie Mac multifamily securitization which was completed during the third quarter of 2019. The loans included in the securitization had a weighted average coupon of 3.79% and a weighted average term to initial reset of 3.5 years. The related mortgage servicing rights were also sold.
The Company realized a gross gain on fair value of the loans sold into the securitization of $8.9 million, offset by a $9.6 million loss from interest rate swap agreements entered into in order to offset variability in the fair value of the securitized loans as a result of changes in market interest rates. The $8.9 million gross gain was recognized during the three months ended September 30, 2019 when the securitization settled, while the corresponding loss, as previously disclosed, was recognized during the three months ended June 30, 2019 because the interest rate swap agreements were entered into during May 2019 in preparation for the securitization.
As of September 30, 2019, loans held-for-sale carried at fair value, with a balance of $23.9 million, consisted of mainly repurchased conforming SFR mortgage loans that were previously sold. As of December 31, 2018, loans held-for-sale carried at fair value were $19.8 million and $22.6 million, respectively, at June 30, 2020 and December 31, 2019 and consisted mainly of repurchased conforming SFR mortgage loans that were previously sold and loans previously sold to GNMA that were delinquent more than 90 days and subject to a repurchase option by the Company. Loans held-for-sale carried at fair value on a consolidated operations basis were $23.9 million and $27.2 million at September 30, 2019 and December 31, 2018, respectively.us. The $3.2$2.9 million, or 11.9 percent,12.7%, decrease was mainly due to sales and payoffs of $4.9 million, repurchases of $1.9 million$613 thousand and a transfer of one loan, totaling $276 thousand, to other real estate owned, which is includeddecrease in Other Assets in the Company's Consolidated Statements of Financial Condition.
Loans held-for-sale carried at fair value as a result of the sale of the Company's Banc Home Loans division (Refer to Note 2 - $1.6 million.
Sale of Business Unit (Discontinued Operations)), that are included Assets of Discontinued Operations on the Consolidated Statements of Financial Condition totaled zero and $19.5 million at September 30, 2019 and December 31, 2018, respectively.
Loans Receivable, Net
The following table presents the composition of the Company’sour loan and lease portfolio as of the dates indicated:
($ in thousands) September 30,
2019		 December 31, 2018 Amount Change Percentage Change($ in thousands)June 30,
2020		December 31, 2019Amount ChangePercentage Change
Commercial:        Commercial:
Commercial and industrial $1,789,478
 $1,944,142
 $(154,664) (8.0)%Commercial and industrial$1,436,990  $1,691,270  $(254,280) (15.0)%
Commercial real estate 891,029
 867,013
 24,016
 2.8 %Commercial real estate822,694  818,817  3,877  0.5 %
Multifamily 1,563,757
 2,241,246
 (677,489) (30.2)%Multifamily1,434,071  1,494,528  (60,457) (4.0)%
SBA 75,359
 68,741
 6,618
 9.6 %
SBA(1)
SBA(1)
310,784  70,981  239,803  337.8 %
Construction 228,561
 203,976
 24,585
 12.1 %Construction212,979  231,350  (18,371) (7.9)%
Consumer:        Consumer:
Single family residential mortgage 1,775,953
 2,305,490
 (529,537) (23.0)%Single family residential mortgage1,370,785  1,590,774  (219,989) (13.8)%
Other consumer 59,122
 70,265
 (11,143) (15.9)%Other consumer39,393  54,165  (14,772) (27.3)%
Total loans(1)
 6,383,259
 7,700,873
 (1,317,614) (17.1)%
Total loans(2)
Total loans(2)
5,627,696  5,951,885  (324,189) (5.4)%
Allowance for loan losses (62,927) (62,192) (735) 1.2 %Allowance for loan losses(90,370) (57,649) (32,721) 56.8 %
Total loans receivable, net $6,320,332
 $7,638,681
 $(1,318,349) (17.3)%Total loans receivable, net$5,537,326  $5,894,236  $(356,910) (6.1)%
(1)
(1)Includes PPP loans totaling $240.7 million, which included $5.6 million of net unamortized loan fees at June 30, 2020. There were no PPP loans outstanding at December 31, 2019.
(2)Total loans include deferred loan origination costs/(fees) and premiums/(discounts), net of $15.3 million and $17.7 million, respectively, at September 30, 2019 and December 31, 2018.
During the three and nine months ended September 30, 2019, the Company sold $144 thousandpremiums/(discounts), net of $6.0 million and $374.8$14.3 million, respectively, at June 30, 2020 and December 31, 2019.

Gross loans decreased $324.2 million to $5.63 billion during the year, due mostly to lower single family residential mortgage loans of $220.0 million, lower commercial and industrial (“C&I“) loans of $254.3 million, and lower multifamily loans of $60.5 million. The decline in single family residential mortgage loans resultingwas attributed to payoffs as the loans refinance away in the lower rate environment and these proceeds are invested in other core business loans. The decline in C&I loans was primarily in response to strategically reducing certain credit facilities in response to the changed economic landscape and corresponding lower outstanding balances. These decreases were partially offset by a (loss) gain$239.8 million increase in SBA loans attributable to the funding of $(150) thousandloans under the SBA's PPP. Our focus on processing PPP loans, in addition to the impact of the COVID-19, pandemic tempered other loan production; additionally, we did not experience any significant increase in credit line usage.
We continue to remix our real estate loan portfolio toward relationship-based multifamily, bridge, light infill construction, and $1.6 million, respectively.commercial real estate loans. Single family residential mortgage and multifamily loans comprised 49.9% of the total held-for-investment loan portfolio as compared to 53.0% one year ago. Commercial real estate loans comprised 14.6% of the loan portfolio and commercial and industrial loans constituted 25.5%. As of June 30, 2020, loans secured by residential real estate (single family, multifamily, single family construction, and warehouse credit facilities) represent approximately 66% of our total loans outstanding.
During
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The C&I portfolio has limited exposure to certain business sectors undergoing severe stress, as demonstrated by the three and nine months ended September 30, 2019, the Company sold $573.5 millionfollowing (as a percentage of multifamily residential loans resulting in a gross gain of $8.9 million.total outstanding C&I loan balances):
June 30, 2020
($ in thousands)Amount% of Portfolio
C&I Portfolio by Industry
Finance and insurance (includes Warehouse lending)$777,015  54 %
Real estate and rental leasing201,630  14 %
Gas stations76,510  5 %
Manufacturing60,128  4 %
Healthcare43,256  3 %
Wholesale trade39,740  3 %
Other retail trade37,699  3 %
Television/motion pictures33,590  2 %
Food services30,216  2 %
Professional services14,975  1 %
Transportation5,363  — %
Accommodations1,496  — %
All other115,372  8 %
Total$1,436,990  100 %

Non-Traditional Mortgage Portfolio ("NTM")
The Company’sOur NTM portfolio is comprised of three interest only products: Green Loans, Interest Only loans and a small number of additional loans with the potential for negative amortization. As of SeptemberJune 30, 20192020 and December 31, 2018,2019, the NTM portfolio totaled $653.5$511.2 million, or 10.2 percent9.1% of the total gross loan portfolio, and $826.7$600.7 million, or 10.7 percent10.1% of

the total gross loan portfolio, respectively.portfolio. The total NTM portfolio decreased by $173.3$89.5 million, or 21.0 percent.14.9% during the ninesix months ended SeptemberJune 30, 2019.2020. The decrease was primarily due to principal paydowns and amortization of $215.6 million, partially offset by originations of $57.8 million.payoffs.
The initial credit guidelines for the NTM portfolio were established based on the borrower's Fair Isaac Corporation (FICO)(“FICO”) score, LTV ratio, property type, occupancy type, loan amount, and geography. Additionally, from an ongoing credit risk management perspective, the Company haswe have determined that the most significant performance indicators for NTMs are LTV ratios and FICO scores. The Company reviewsWe review the NTM loan portfolio periodically, which includes refreshing FICO scores on the Green Loans and HELOCs and ordering third party automated valuation models (AVMs)(“AVMs”) to confirm collateral values.
Green Loans
The Company discontinued the origination of Green Loan products in 2011. Green Loans are SFR first and second mortgage lines of credit with a linked checking account that allows all types of deposits and withdrawals to be performed. The loans are generally interest only with a 15-year balloon payment due at maturity. The Company initiated the Green Loan products in 2005 and proactively refined underwriting and credit management practices and credit guidelines in response to changing economic environments, competitive conditions and portfolio performance. The Company continues to manage credit risk, to the extent possible, throughout the borrower’s credit cycle. We no longer originate NTM loans.
Green Loans totaled $61.8$45.2 million at SeptemberJune 30, 2019,2020, a decrease of $8.3$7.1 million, or 11.8 percent13.5% from $70.1$52.3 million at December 31, 2018,2019, primarily due to reductions in principal balancespaydowns and payoffs. At SeptemberThe NTM loans on non-accrual status included $4.6 million of Green Loans and $14.6 million of interest-only loans at June 30, 20192020 compared to $1.5 million of Green Loans and $11.5 million of interest-only loans at December 31, 2018, $286 thousand and zero, respectively, of the Company’s Green Loans were non-performing. As a result of their unique payment feature, Green Loans possess higher credit risk due to the potential of negative amortization; however, management believes the risk is mitigated through the Company’s loan terms and underwriting standards, including its policies on loan-to-value ratios and the Company’s contractual ability to curtail loans when the value of underlying collateral declines.2019.
The Green Loans are similar to HELOCs in that they are collateralized primarily by the equity in the borrower's home. However, some Green Loans differ from HELOCs relating to certain characteristics including one-action laws. Similar to Green Loans, HELOCs allow the borrower to draw down on the credit line based on an established loan amount for a period of time, typically 10 years, requiring an interest only payment with an option to pay principal at any time. A typical HELOC provides that at the end of the term the borrower can continue to make monthly principal and interest payments based on the loan balance until the maturity date. The Green Loan is an interest only loan with a maturity of 15 years, at which time the loan becomes due and payable with a balloon payment at maturity. The unique payment structure also differs from a traditional HELOC in that payments are made through the direct linkage of a personal checking account to the loan through a nightly sweep of funds into the Green Loan Account. This reduces any outstanding balance on the loan by the total amount deposited into the checking account. As a result, every time a deposit is made, effectively a payment to the Green Loan is made. HELOCs typically do not cause the loan to be paid down by a borrower’s depositing of funds into their checking account at the same bank.
Credit guidelines for Green Loans were established based on borrower FICO scores, property type, occupancy type, loan amount, and geography. Property types include single family residences and second trust deeds where the Company held the first liens, owner occupied as well as non-owner occupied properties. The Company utilized its underwriting guidelines for first liens to underwrite the Green Loan secured by second trust deeds as if the combined loans were a single Green Loan. For all Green Loans, the loan income was underwritten using either full income documentation or alternative income documentation.
The following table presents the Company’sour Green Loans first lien portfolio at SeptemberJune 30, 20192020 by FICO scores that were obtained during the quarter ended SeptemberJune 30, 2019,2020, compared to the FICO scores for those same loans that were obtained during the quarter ended June 30, 2019:March 31, 2020:
By FICO Scores Obtained During the Quarter Ended June 30, 2020By FICO Scores Obtained During the Quarter Ended December 31, 2019Change
($ in thousands)CountAmountPercentCountAmountPercentCountAmountPercent
FICO Score
800+12  $2,870  6.6 %13  $3,509  7.0 %(1) $(639) (18.2)%
700-79931  21,756  49.9 %38  27,011  54.1 %(7) (5,255) (19.5)%
600-69910  11,974  27.4 %10  12,400  24.8 %—  (426) (3.4)%
<6005  3,253  7.5 %5  3,286  6.6 %—  (33) (1.0)%
No FICO3  3,751  8.6 %3  3,753  7.5 %—  (2) (0.1)%
Totals61  $43,604  100.0 %69  $49,959  100.0 %(8) $(6,355) (12.7)%

64
  September 30, 2019
  By FICO Scores Obtained During the Quarter Ended September 30, 2019 By FICO Scores Obtained During the Quarter Ended June 30, 2019 Change
($ in thousands) Count Amount Percent Count Amount Percent Count Amount Percent
FICO Score                  
800+ 18
 $10,631
 17.9% 15
 $10,221
 16.6% 3
 $410
 4.0 %
700-799 38
 27,721
 46.5% 42
 28,744
 46.8% (4) (1,023) (3.6)%
600-699 12
 14,143
 23.8% 16
 17,948
 29.2% (4) (3,805) (21.2)%
<600 5
 3,286
 5.5% 2
 771
 1.3% 3
 2,515
 326.2 %
No FICO 3
 3,757
 6.3% 3
 3,755
 6.1% —
 2
 0.1 %
Totals 76
 $59,538
 100.0% 78
 $61,439
 100.0% (2) $(1,901) (3.1)%

Interest Only Loans
Interest only loans are primarily SFR mortgage loans with payment features that allow interest only payments in initial periods before converting to a fully amortizing loan. Interest only loans totaled $588.6 million at September 30, 2019, a decreaseTable of $164.5 million, or 21.8 percent, from $753.1 million at December 31, 2018. The decrease was primarily due to paydowns and amortization of $206.8 million, partially offset by originations of $57.8 million. As of September 30, 2019 and December 31, 2018, $827 thousand and $0, respectively, of the interest only loans were non-performing.Contents
Loans with the Potential for Negative Amortization
Negative amortization loans other than Green Loans totaled $3.1 million at September 30, 2019, a decrease of $466 thousand, or 13.2 percent, from $3.5 million as of December 31, 2018. The Company discontinued origination of negative amortization loans in 2007. At September 30, 2019 and December 31, 2018, none of the loans that had the potential for negative amortization were non-performing. These loans pose a potentially higher credit risk because of the lack of principal amortization and potential for negative amortization; however, management believes the risk is mitigated through the loan terms and underwriting standards, including the Company’s policies on loan-to-value ratios.
NTM Loan Credit Risk Management
The Company performs detailed reviews of collateral values on loans collateralized by residential real property including its NTM portfolio based on appraisals or estimates from third party AVMs to analyze property value trends periodically. AVMs are used to identify loans that have experienced potential collateral deterioration. Once a loan has been identified that may have experienced collateral deterioration, the Company will obtain updated drive by or full appraisals in order to confirm the valuation. This information is used to update key monitoring metrics such as LTV ratios. Additionally, FICO scores are obtained in conjunction with the collateral analysis. In addition to LTV ratios and FICO scores, the Company evaluates the portfolio on a specific loan basis through delinquency and portfolio charge-offs to determine whether any risk mitigation or portfolio management actions are warranted. The borrowers may be contacted as necessary to discuss material changes in loan performance or credit metrics.
The Company’s risk management policy and credit monitoring includes reviewing delinquency, FICO scores, and collateral values on the NTM loan portfolio. The Company also continuously monitors market conditions for our geographic lending areas. The Company has determined that the most significant performance indicators for NTM are LTV ratios and FICO scores. The loan review provides an effective method of identifying borrowers who may be experiencing financial difficulty before they fail to make a loan payment. Upon receipt of the updated FICO scores, an exception report is run to identify loans with a decrease in FICO score of 10 percent or more and a resulting FICO score of 620 or less. The loans are then further analyzed to determine if the risk rating should be downgraded, which may require an increase in the ALLL the Company needs to establish for potential losses. A report is prepared and regularly monitored.
As these Green loans are revolving lines of credit, the Company, based on the loan agreement and loan covenants of the particular loan, as well as applicable rules and regulations, could suspend the borrowing privileges or reduce the credit limit at any time the Company reasonably believes that the borrower will be unable to fulfill their repayment obligations under the agreement or certain other conditions are met. In many cases, the decrease in FICO score is the first red flag that the borrower may have difficulty in making their future payment obligations.
As a result, the Company proactively manages the portfolio by performing a detailed analysis with emphasis on the non-traditional mortgage portfolio. The Company’s Management Credit Committee (MCC) conducts regular meetings to review the loans classified as special mention, substandard, or doubtful and determines whether suspension of the line or reduction in the credit limit is warranted. If the line has been suspended and the borrower would like to have their credit privileges reinstated, they would need to provide updated financials showing their ability to meet their payment obligations. From the most recent review completed during the three months ended September 30, 2019, the Company made no curtailment in available commitments on Green Loans.
On the interest only loans, the Company projects future payment changes to determine if there will be an increase in payment of 3.50 percent or greater and then monitors the loans for possible delinquencies. The individual loans are monitored for possible downgrading of risk rating, and trends within the portfolio are identified that could affect other interest only loans scheduled for payment changes in the near future.
Consumer and NTM loans may entail greater risk than do traditional SFR mortgage loans, particularly in the case of consumer loans that are secured by rapidly depreciable assets, such as automobiles and recreational vehicles. In these cases, any repossessed collateral for a consumer and NTM loan are more dependent on the borrower‘s continued financial stability and, thus, are more likely to be adversely affected by job loss, divorce, illness, or personal bankruptcy.

Loan-to-Value Ratio
LTV ratio represents estimated current loan to value ratio, determined by dividing the current unpaid principal balance by the latest estimated property value received per the Companyour policy. The table below represents the Company’sour single family residential NTM first lien portfolio by LTV ratiosratio ranges as of the dates indicated:
GreenInterest OnlyNegative AmortizationTotal
($ in thousands)CountAmountPercentCountAmountPercentCountAmountPercentCountAmountPercent
June 30, 2020
< 61%49  $32,547  74.7 %208  $294,171  63.4 %8  $2,335  100.0 %265  $329,053  64.6 %
61-80%10  9,257  21.2 %116  158,111  34.1 %—  —  — %126  167,368  32.8 %
81-100%2  1,800  4.1 %3  4,875  1.1 %—  —  — %5  6,675  1.3 %
> 100%—  —  — %2  6,509  1.4 %—  —  — %2  6,509  1.3 %
Total61  $43,604  100.0 %329  $463,666  100.0 %8  $2,335  100.0 %398  $509,605  100.0 %
December 31, 2019
< 61%54  $37,804  75.6 %231  $346,899  63.6 %9  $3,027  100.0 %294  $387,730  64.8 %
61-80%12  8,531  17.1 %136  183,664  33.7 %—  —  — %148  192,195  32.1 %
81-100%3  3,624  7.3 %6  7,081  1.3 %—  —  — %9  10,705  1.8 %
> 100%—  —  — %3  7,727  1.4 %—  —  — %3  7,727  1.3 %
Total69  $49,959  100.0 %376  $545,371  100.0 %9  $3,027  100.0 %454  $598,357  100.0 %

65
  Green Interest Only Negative Amortization Total
($ in thousands) Count Amount Percent Count Amount Percent Count Amount Percent Count Amount Percent
September 30, 2019                        
< 61% 62
 $48,421
 81.3% 250
 $374,143
 63.6% 9
 $3,062
 100.0% 321
 $425,626
 65.4%
61-80% 11
 8,691
 14.6% 148
 194,710
 33.1% —
 —
 —% 159
 203,401
 31.2%
81-100% 3
 2,426
 4.1% 8
 13,802
 2.3% —
 —
 —% 11
 16,228
 2.5%
> 100% —
 —
 —% 3
 5,912
 1.0% —
 —
 —% 3
 5,912
 0.9%
Total 76
 $59,538
 100.0% 409
 $588,567
 100.0% 9
 $3,062
 100.0% 494
 $651,167
 100.0%
December 31, 2018                        
< 61% 69
 $51,827
 76.5% 312
 $495,930
 65.9% 11
 $3,528
 100.0% 392
 $551,285
 66.9%
61-80% 17
 13,476
 19.9% 201
 245,568
 32.6% —
 —
 —% 218
 259,044
 31.4%
81-100% 2
 2,426
 3.6% 5
 7,441
 1.0% —
 —
 —% 7
 9,867
 1.2%
> 100% —
 —
 —% 1
 4,122
 0.5% —
 —
 —% 1
 4,122
 0.5%
Total 88
 $67,729
 100.0% 519
 $753,061
 100.0% 11
 $3,528
 100.0% 618
 $824,318
 100.0%

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Non-Performing Assets
The following table presents a summary of total non-performing assets, excluding loans held-for-sale, as of the dates indicated:
($ in thousands) September 30,
2019		 December 31, 2018 Amount Change Percentage Change($ in thousands)June 30,
2020		December 31, 2019Amount ChangePercentage Change
Loans past due 90 days or more still on accrual $—
 $470
 $(470) (100.0)%Loans past due 90 days or more still on accrual$—  $—  $—  — %
Non-accrual loans 45,169
 21,585
 23,584
 109.3 %Non-accrual loans72,703  43,354  29,349  67.7 %
Total non-performing loans 45,169
 22,055
 23,114
 104.8 %Total non-performing loans72,703  43,354  29,349  67.7 %
Other real estate owned —
 672
 (672) (100.0)%Other real estate owned—  —  —  — %
Total non-performing assets $45,169
 $22,727
 $22,442
 98.7 %Total non-performing assets$72,703  $43,354  $29,349  67.7 %
Performing restructured loans (1)
 $6,800
 $5,745
 $1,055
 18.4 %
Performing restructured loans (1)
$5,597  $6,621  $(1,024) (15.5)%
Total non-performing loans to total loans 0.71% 0.29%    Total non-performing loans to total loans1.29 %0.73 %
Total non-performing assets to total assets 0.52% 0.21%    Total non-performing assets to total assets0.94 %0.55 %
ALLL to non-performing loans 139.31% 281.99%    
ALL to non-performing loansALL to non-performing loans124.30 %132.97 %
ACL to non-performing loansACL to non-performing loans130.07 %142.35 %
(1) Excluded from non-performing loans

Loans are generally placed on non-accrual status when they become 90 days past due, unless management believes the loan is well secured and in the process of collection. Past due loans may or may not be adequately collateralized, but collection efforts are continuously pursued. Loans may be restructured by management when a borrower experiences changes to their financial condition, causing an inability to meet the original repayment terms, and where we believe the borrower will eventually overcome those circumstances and repay the loan in full.
Additional interest income of approximately $509$952 thousand and $1.2$1.7 million would have been recorded during the three and ninesix months ended SeptemberJune 30, 2019, respectively,2020, had these loans been paid in accordance with their original terms throughout the periods indicated.
DuringNon-performing loans totaled $72.7 million as of June 30, 2020, of which $21.9 million, or 30% of the nine months ended September 30, 2019, non-accrualbalance relates to loans increased $23.6in a current payment status. The $16.2 million increase during the second quarter was primarily due to certain single family residential, SBA and construction$18.6 million of loans being placed on non-accrual status. During the nine months ended September 30, 2019, the provision for loan losses reflects the impact of the aforementioned $35.1 million charge-off of a line of credit originated in November 2017 to a borrower purportedly the subject of a fraudulent scheme. In addition, the charge-off increased the loss factor used in our allowance for loan loss for commercial and industrial loans, resulting in an additional loan loss provision of $3.0 million. The provision for loan losses during the nine months ended September 30, 2019 also reflects a $37.7 million increase in special mention, substandard and doubtful loans, coupled with increases in delinquencies and nonperforming loansstatus, offset by cured loans and payoffs. The quarter-end balance included three large loan relationships totaling $36.9 million, or 51% of our total non-performing loans, which consist of one $16.4 million legacy shared national credit, a $9.1 million single family mortgage residential loan with a loan-to-value ratio of 58%, and an $11.5 million legacy relationship well-secured by commercial real estate and single family residential properties with an average loan-to-value ratio of 51%. Aside from those three loan relationships, non-performing single family residential loans totaled $19.4 million and the $1.36 billion reduction in the pass-rated portfolio balances and overall decreases in average loan balances as a result of sales since December 31, 2018.remaining non-performing loans totaled $16.4 million.

Troubled Debt Restructurings
Loans that the Company modifieswe modify or restructuresrestructure where the debtor is experiencing financial difficulties and makes a concession to the borrower in the form of changesa below-market change in the amortization terms, reductionsstated interest rate, a reduction in the loan balance or accrued interest, rates,an extension of the acceptance of interest only payments and, in limited cases, reductions in the outstanding loan balancesmaturity date, or a note split with principal forgiveness are classified as troubled debt restructurings (“TDRs”). TDRs are loans modified for the purpose of alleviating temporary impairments to the borrower’s financial condition. A workout plan between a borrower and the Companyus is designed to provide a bridge for the cash flow shortfalls in the near term. If the borrower works through the near term issues, in most cases, the original contractual terms of the loan will be reinstated.
At SeptemberJune 30, 20192020 and December 31, 2018, the Company2019, we had 2326 and 1325 loans, respectively, with an aggregate balance of $21.4$25.9 million and $8.0$21.8 million, respectively, classified as TDRs. When a loan becomes a TDR, the Company ceaseswe cease accruing interest, and classifiesclassify it as non-accrual until the borrower demonstrates that the loan is again performing. The increase in TDRs during the three and six months ended SeptemberJune 30, 20192020 was primarily due to one commercial and industrial relationship.relationship totaling $3.7 million.
At SeptemberJune 30, 2019,2020, of the 2326 loans classified as TDRs, 1312 loans totaling $6.8$5.6 million were making payments according to their modified terms and were less than 90 days delinquent under the modified terms and, as such, were on accruing status. At December 31, 2018,2019, of the 1325 loans classified as TDRs, 1214 loans totaling $5.7$6.6 million were making payments according to their modified terms and were less than 90 days delinquent under the modified terms and, as such, were on accruing status.
Troubled Debt Restructuring (TDR) Relief: Under U.S. GAAP, banks are required to assess modifications to a loan’s terms for potential classification as a TDR. A loan to a borrower experiencing financial difficulty is classified as a TDR when a lender grants a concession that it would otherwise not consider, such as a payment deferral or interest concession. In order to encourage banks to work with impacted borrowers, the CARES Act and U.S. banking regulatory agencies have provided relief
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from TDR accounting. The main benefits of TDR relief include 1) a capital benefit in the form of reduced risk-weighted assets, as TDRs are more heavily risk-weighted for capital purposes; 2) a delinquency status benefit, as the aging of loans are frozen, i.e., they will continue to be reported in the same delinquency bucket they were in at the time of modification; and 3) a non-accrual status benefit as the loans are generally not reported as non-accrual during the modification period. Refer to "Borrower Payment Relief Efforts" above for additional information regarding CARES Act deferrals.

Allowance for LoanCredit Losses (ACL)
The Company maintains an ALLLOur ACL is comprised of our allowance for loan losses ("ALL") and reserve for unfunded loan commitments. Our ACL methodology and resulting provision continues to absorb probable incurred losses inherent inbe impacted by the current economic uncertainty and volatility caused by the COVID-19 pandemic. Our ACL methodology uses a nationally recognized third-party model that includes many assumptions based on our historical and peer loss data, our current loan portfolio atrisk profile including risk ratings, and economic forecasts including macroeconomic variables ("MEVs"). As of June 30, 2020, we used economic forecasts released by our model provider during June 2020. Similar to the balance sheet date. The ALLL is based on an ongoing assessmentlate March 2020 forecasts, these June 2020 forecasts reflect the onset of the estimated probable losses inherentpandemic, its impact on the MEVs, and the future economic recovery. These forecasts published by our model provider have deteriorated since the end of the first quarter, with June baseline unemployment rate forecasts for 2020 and 2021 increasing and real gross domestic product growth rates decreasing. Similar to the first quarter of 2020, we incorporated qualitative factors to account for certain loan portfolio characteristics that are not taken into consideration by our third-party model including underlying strengths and weaknesses in the loan portfolio. In evaluatingAs is the levelcase with all estimates, we expect the ACL to be impacted in future periods by economic volatility, changing economic forecasts, actual and projected credit experience, and underlying model assumptions, all of the ALLL, management considers the types of loans and the amount of loans in the portfolio, peer group information,which may be better than or worse than our current estimate.

historical loss experience, adverse situations that may affect the borrower’s ability to repay, estimated value of any underlying collateral, and prevailing economic conditions. This methodology takes into account many factors, including the Company’s own historical and peer loss trends, loan-level credit quality ratings, loan specific attributes along with a review of various credit metrics and trends. The ACL process involves subjective as well asand complex judgments. In addition, the Company useswe use adjustments for numerous factors including those founddescribed in the federal banking agencies' joint Interagency Policy Statementinteragency policy statement on ALLL,ALL, which include current economic conditions, loan seasoning, underwriting experience and collateral value changes, among others. The Company evaluatesWe evaluate all impaired loans individually using guidance from ASC 310 primarily through the evaluation of cash flows or collateral values.
The ACL, which includes the reserve for unfunded loan commitments, totaled $94.6 million, or 1.68% of total loans at June 30, 2020 compared to $82.1 million or 1.45% at March 31, 2020. The $12.4 million increase in the allowance for expected credit losses was due to: (i) $6.8 million provided for specific reserves, primarily related to one previously reported non-accrual shared national credit, (ii) $5.0 million provided for general reserves related to the continued deterioration in key macro-economic forecast variables, offset by the impact of lower loan balances, and (iii) net recoveries of $608 thousand. The ACL coverage of non-performing loans was 130% at June 30, 2020 compared to 145% at March 31, 2020 and 142% at December 31, 2019.
The reserve for unfunded loan commitments is established to cover the expected credit losses for the estimated level of funding of these loan commitments, except for unconditionally cancellable commitments for which no reserve is required under ASC 326. The reserve for unfunded loan commitments is included in accrued expenses and other liabilities on the consolidated statements of financial condition.
The following table provides a summary of components of the allowance for credit losses and related ratios as of the dates indicated:
($ in thousands)June 30, 2020December 31, 2019
Allowance for credit losses:
Allowance for loan losses (ALL)$90,370  $57,649  
Reserve for unfunded loan commitments4,195  4,064  
Total allowance for credit losses (ACL)$94,565  $61,713  
ALL to total loans1.61 %0.97 %
ACL to total loans1.68 %1.04 %

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The following tables provide summaries of activity in the allowance for credit losses for the periods indicated:
Three Months Ended June 30,
($ in thousands)20202019
Allowance
for
Loan Losses		Reserve for Unfunded Loan CommitmentsAllowance
for
Credit Losses		Allowance
for
Loan Losses		Reserve for Unfunded Loan CommitmentsAllowance
for
Credit Losses
Balance at beginning of period$78,243  $3,888  $82,131  $63,885  $4,208  $68,093  
Loans charged off—  —  —  (2,451) —  (2,451) 
Recoveries of loans previously charged off608  —  608  76  —  76  
Net charge-offs608  —  608  (2,375) —  (2,375) 
Provision for credit losses11,519  307  11,826  (1,987) 87  (1,900) 
Balance at end of period$90,370  $4,195  $94,565  $59,523  $4,295  $63,818  

Six Months Ended June 30,
($ in thousands)20202019
Allowance
for
Loan Losses		Reserve for Unfunded Loan CommitmentsAllowance
for
Credit Losses		Allowance
for
Loan Losses		Reserve for Unfunded Loan CommitmentsAllowance
for
Credit Losses
Balance at beginning of period$57,649  $4,064  $61,713  $62,192  $4,622  $66,814  
Impact of adopting ASU 2016-13(1)
7,609  (1,226) 6,383  —  —  —  
Loans charged off(2,076) —  (2,076) (3,514) —  (3,514) 
Recoveries of loans previously charged off958  —  958  320  —  320  
Net charge-offs(1,118) —  (1,118) (3,194) —  (3,194) 
Provision for (reversal of) credit losses26,230  1,357  27,587  525  (327) 198  
Balance at end of period$90,370  $4,195  $94,565  $59,523  $4,295  $63,818  
(1)Represents the impact of adopting ASU 2016-13, Financial Instruments - Credit Losses on January 1, 2020. As a result of adopting ASU 2016-13, our methodology to compute our allowance for credit losses is based on a current expected credit loss methodology, rather that the previously applied incurred loss methodology.
The following table provides a summary of the allocation of the ALLLallowance for loan losses by loan category as well as loans receivable for each category as of the dates indicated:
June 30, 2020December 31, 2019
($ in thousands)Allowance for Loan LossesLoans Receivable% of
Loans in Category to Total Loans		Allowance for Loan LossesLoans Receivable% of
Loans in Category to
Total Loans
Commercial:
Commercial and industrial$26,618  $1,436,990  25.5 %$22,353  $1,691,270  28.4 %
Commercial real estate17,372  822,694  14.6 %5,941  818,817  13.8 %
Multifamily25,105  1,434,071  25.5 %11,405  1,494,528  25.1 %
SBA4,184  310,784  5.5 %3,120  70,981  1.2 %
Construction6,675  212,979  3.8 %3,906  231,350  3.9 %
Consumer:
Single family residential mortgage9,665  1,370,785  24.4 %10,486  1,590,774  26.7 %
Other consumer751  39,393  0.7 %438  54,165  0.9 %
Total$90,370  $5,627,696  100.0 %$57,649  $5,951,885  100.0 %
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  September 30, 2019 December 31, 2018
($ in thousands) ALLL Loans Receivable 
% of
Loans in Category to Total Loans
 ALLL Loans Receivable 
% of
Loans in Category to
Total Loans
Commercial:            
Commercial and industrial $24,575
 $1,789,478
 28.0% $18,191
 $1,944,142
 25.2%
Commercial real estate 6,579
 891,029
 14.0% 6,674
 867,013
 11.3%
Multifamily 11,965
 1,563,757
 24.5% 17,970
 2,241,246
 29.2%
SBA 4,118
 75,359
 1.2% 1,827
 68,741
 0.9%
Construction 3,880
 228,561
 3.6% 3,461
 203,976
 2.6%
Consumer:            
Single family residential mortgage 11,279
 1,775,953
 27.8% 13,128
 2,305,490
 29.9%
Other consumer 531
 59,122
 0.9% 941
 70,265
 0.9%
Total $62,927
 $6,383,259
 100.0% $62,192
 $7,700,873
 100.0%
The following table presents the ALLL allocation among loan origination types as of the dates indicated:
($ in thousands) September 30,
2019		 December 31, 2018 Amount Change Percentage Change
Loan breakdown by origination type:        
Originated loans $5,888,647
 $7,105,171
 $(1,216,524) (17.1)%
Acquired loans not impaired at acquisition 494,612
 595,702
 (101,090) (17.0)%
Total loans $6,383,259
 $7,700,873
 $(1,317,614) (17.1)%
ALLL breakdown by origination type:        
Originated loans $61,306
 $61,255
 $51
 0.1 %
Acquired loans not impaired at acquisition 1,621
 937
 684
 73.0 %
Total ALLL $62,927
 $62,192
 $735
 1.2 %
Discount on purchased/acquired Loans:        
Acquired loans not impaired at acquisition $9,062
 $11,645
 $(2,583) (22.2)%
Total discount $9,062
 $11,645
 $(2,583) (22.2)%
Percentage of ALLL to:        
Originated loans 1.04% 0.86% 0.18%  
Originated loans and acquired loans not impaired at acquisition 0.99% 0.81% 0.18%  
Total loans 0.99% 0.81% 0.18%  


The following table provides information regarding activity by loan class in the ALLLallowance for loan losses during the periodsperiods: indicated:
 Three Months Ended September 30, Nine Months Ended September 30,Three Months Ended
June 30,		Six Months Ended
June 30,
($ in thousands) 2019 2018 2019 2018($ in thousands)2020201920202019
ALLL at beginning of period $59,523
 $56,678
 $62,192
 $49,333
ALL at beginning of periodALL at beginning of period$78,243  $63,885  $57,649  $62,192  
Impact of adopting ASU 2016-13(1)
Impact of adopting ASU 2016-13(1)
—  —  7,609  —  
Charge-offs:        Charge-offs:
Commercial and industrial (34,673) (342) (36,788) (689)Commercial and industrial—  (2,022) (1,164) (2,115) 
Multifamily —
 —
 (6) (8)
SBA (738) —
 (1,086) (683)SBA—  8  (356) (348) 
Single family residential mortgage (135) (45) (1,086) (524)Single family residential mortgage—  (425) (552) (951) 
Other consumer —
 (1) (94) (14,073)Other consumer—  (6) (4) (94) 
Total charge-offs (35,546) (388) (39,060) (15,977)Total charge-offs—  (2,451) (2,076) (3,514) 
Recoveries:        Recoveries:
Commercial and industrial 59
 61
 102
 158
Commercial and industrial119  11  149  44  
SBA 50
 8
 152
 240
SBA—  60  121  101  
Lease financing 3
 3
 9
 12
Lease financing—  3  —  6  
Single family residential mortgage —
 —
 150
 436
Single family residential mortgage488  —  639  150  
Other consumer 298
 10
 317
 18
Other consumer1  2  49  19  
Total recoveries 410
 82
 730
 864
Total recoveries608  76  958  320  
Net charge-offs (35,136) (306) (38,330) (15,113)Net charge-offs608  (2,375) (1,118) (3,194) 
Provision for loan losses 38,540
 1,410
 39,065
 23,562
ALLL at end of period $62,927
 $57,782
 $62,927
 $57,782
Provision for credit lossesProvision for credit losses11,519  (1,987) 26,230  525  
ALL at end of periodALL at end of period$90,370  $59,523  $90,370  $59,523  
Average total loans held-for-investment $6,482,566
 $7,123,619
 $7,183,761
 $6,945,551
Average total loans held-for-investment$5,687,652  $7,398,471  $5,723,094  $7,540,145  
Total loans held-for-investment at end of period $6,383,259
 $7,253,293
 $6,383,259
 $7,253,293
Total loans held-for-investment at end of period$5,627,696  $6,719,570  $5,627,696  $6,719,570  
Ratios:        Ratios:
Annualized net charge-offs to average total loans held-for-investment 2.17% 0.02% 0.71% 0.29%
ALLL to total loans held-for-investment 0.99% 0.80% 0.99% 0.80%
Annualized net charge-offs (recoveries) to average total loans held-for-investmentAnnualized net charge-offs (recoveries) to average total loans held-for-investment(0.04)%0.13 %0.04 %0.08 %
ALL to total loans held-for-investmentALL to total loans held-for-investment1.61 %0.89 %1.61 %0.89 %
During(1)Represents the three and nine months ended September 30, 2019, net charge-offs were $35.1 million and $38.3 million, respectively comparedimpact of adopting ASU 2016-13, Financial Instruments - Credit Losses on January 1, 2020. As a result of adopting ASU 2016-13, our methodology to $306 thousand and $15.1 million, respectively, during the comparable 2018 periods. Included in net charge-offs during the three months ended September 30, 2019 was the aforementioned $35.1 million charge-off of a line of credit originated in November 2017 to a borrower purportedly the subject of a fraudulent scheme. In addition, the charge-off increased the loss factor used incompute our allowance for loancredit losses is based on a current expected credit loss for commercial and industrial loans, resulting in an additional loan loss provision of $3.0 million. On October 22, 2019, in connection with this matter, the Bank filed a complaint in U.S. District Court for the Southern District of California (Case CV '19 02031 GPC KSC) seeking to recover its losses and other monetary damages against Chicago Title Insurance Company and Chicago Title Company, asserting claims under RICO, 18 U.S.C § 1962 and for RICO Conspiracy, Fraud, Aiding and Abetting Fraud, Negligent Misrepresentation, Breach of Fiduciary Duty and Negligence. We are actively considering and pursuing available sources of recovery and other potential means of mitigating the loss; however, no assurance can be given that we will be successful in that regard. Also included in charge-offs for the nine months ended September 30, 2019 was a $2.0 million charge-off related to a commercial and industrial loan.
During the third quarter of 2019, the Company undertook an extensive collateral review of all lending relationships $5 million and above not secured by real estate, consisting of 53 loans representing $536 million in commitments. The collateral review focused on security and collateral documentation and confirmation of the bank's collateral interest. The review was performed within the bank's Internal Audit division and the work was validated by an independent third party. While the review and outside validation is not yet complete, to date, we have not identified any other instances of apparent fraud for the credits reviewed or concerns over the existence of collateral held by the bank or on our behalf at third parties; however, there are no assurances that our internal review and third party validation will be sufficient to identify all such issues.
During the nine months ended September 30, 2018, the Company recorded a charge-off of $13.9 million, which reflected the outstanding balance under a $15.0 million line of credit that was originated during the three months ended March 31, 2018. Subsequent to the granting of the line of credit, representations from the borrower in applying for the line of credit were determined by the Bank to be false, and bank account statements provided by the borrower to secure the line of credit were found to be fraudulent. The line of credit was granted after the borrower appeared to have satisfied a pre-conditionmethodology, rather that the linepreviously applied incurred loss methodology.


of credit be fully cash collateralized and secured by a bank account at a third party financial institution pledged to the Bank. As part of the Bank’s credit review and portfolio management process, the line of credit and disbursements were reviewed subsequent to closing and compliance with the borrower’s covenants was monitored. As part of this process, on March 9, 2018, the Bank received information that caused it to believe the existence of the pledged bank account had been misrepresented by the borrower and that the account had previously been closed. The Bank filed an action in Federal court pursuing the borrower and other parties. That action was voluntarily dismissed by the Bank without prejudice, and a substantially similar action was filed in Los Angeles County Superior Court. The Bank is also considering other available sources of collection and other potential means of mitigating the loss; however, no assurance can be given that it will be successful in this regard.
Alternative Energy Partnerships
The Company investsWe invest in certain alternative energy partnerships (limited liability companies) formed to provide sustainable energy projects that are designed to generate a return primarily through the realization of federal tax credits (energy tax credits) and other tax benefits. The investment helps promote the development of renewable energy sources and help lower the cost of housing for residents by lowering homeowners’ monthly utility costs.
As the Company’sour respective investments in these entities are more than minor, the Company haswe have significant influence, but not control, over the investee’s activities that most significantly impact its economic performance. As a result, the Company iswe are required to apply the equity method of accounting, which generally prescribes applying the percentage ownership interest to the investee’s GAAP net income in order to determine the investor’s earnings or losses in a given period. However, because the liquidation rights, tax credit allocations and other benefits to investors can change upon the occurrence of specified events, application of the equity method based on the underlying ownership percentages would not accurately represent the Company’sour investment. As a result, the Company applieswe apply the Hypothetical Liquidation at Book Value (“HLBV”) method of the equity method of accounting.
The HLBV method is a balance sheet approach whereby a calculation is prepared at each balance sheet date to estimate the amount that the Companywe would receive if the equity investment entity were to liquidate all of its assets (as valued in accordance with GAAP) and distribute that cash to the investors based on the contractually defined liquidation priorities. The difference between the calculated liquidation distribution amounts at the beginning and the end of the reporting period, after adjusting for capital contributions and distributions, is the Company’sour share of the earnings or losses from the equity investment for the period.
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The following table presents the activity related to the Company’sour investment in alternative energy partnerships for the three and ninesix months ended SeptemberJune 30, 20192020 and 2018:
2019:
 Three Months Ended September 30, Nine Months Ended September 30,Three Months Ended
June 30,		Six Months Ended
June 30,
($ in thousands) 2019 2018 2019 2018($ in thousands)2020201920202019
Balance at beginning of period $26,633
 $44,806
 $28,988
 $48,826
Balance at beginning of period$27,347  $26,578  $29,300  $28,988  
New funding —
 —
 235
 —
New funding—  235  3,631  235  
Return of unused capital —
 —
 —
 (1,027)
Change in unfunded commitmentsChange in unfunded commitments—  —  (3,225) —  
Cash distribution from investments (534) (541) (1,529) (1,760)Cash distribution from investments(547) (535) (1,001) (995) 
Gain (loss) on investments using HLBV method 940
 (2,484) (655) (4,258)Gain (loss) on investments using HLBV method167  355  (1,738) (1,595) 
Balance at end of period $27,039
 $41,781
 $27,039
 $41,781
Balance at end of period$26,967  $26,633  $26,967  $26,633  
Unfunded equity commitments $3,796
 $—
 $3,796
 $—
Unfunded equity commitments at end of periodUnfunded equity commitments at end of period$—  $3,796  $—  $3,796  
The Company’s
Our returns on investments in alternative energy partnerships are primarily obtained through the realization of energy tax credits and other tax benefits rather than through distributions or through the sale of the investment. The balance of these investments was $27.0 million and $29.3 million at June 30, 2020 and December 31, 2019.
During the three and ninesix months ended SeptemberJune 30, 2019, the Company2020, we funded zero and $235 thousand, respectively,$3.6 million for itsour alternative energy partnerships and did not receive any return of capital from itsour alternative energy partnerships. During each of the three and six months ended SeptemberJune 30, 2018, the Company2019, we did not receive any return of capital and did not fund any amounts into these partnerships. During the nine months ended September 30, 2018, the Company received a return of capital of $1.0 million and funded zero, respectively, from and$235 thousand into these partnerships.
During the three months ended SeptemberJune 30, 2020 and 2019, and 2018, the Companywe recognized a gain on investment of $940$167 thousand and a loss on investment of $2.5 million, respectively,$355 thousand through its HLBV application. During the ninesix months ended SeptemberJune 30, 2020 and 2019, and 2018, the Companywe recognized a loss on investment of $655 thousand and a loss of $4.3 million, respectively, through its HLBV application. As a result, the balance of these investments was $27.0$1.7 million and $41.8$1.6 million at September 30, 2019 and 2018, respectively. From an income tax benefit perspective,through our application of the Company recognized investment

tax creditsHLBV method of $862 thousand and $412 thousand for the three months ended September 30, 2019 and 2018, respectively, and $2.6 million and $9.6 million during the nine months ended September 30, 2019 and 2018, respectively, as well as income tax expense (benefits) relating to the recognition of its gain (loss) through its HLBV application during these periods.
accounting. The HLBV losses for the periodssix months ended June 30, 2020 were largely driven by accelerated tax depreciation on equipment and the recognition of energy tax credits which reduces the amount distributable by the investee in a hypothetical liquidation under the contractual liquidation provisions. From an income tax benefit perspective, we recognized no investment tax credits during these periods; however, we recorded income tax (expense) benefit related to these investments of $(38) thousand and $398 thousand for the three and six months ended June 30, 2020 and $380 thousand for each of the three and six months ended June 30, 2019.
For additional information, see Note 1412 to Consolidated Financial Statements (unaudited) included in Part I of this Quarterly Report on Form 10-Q.

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Deposits
The following table shows the composition of deposits by type as of the dates indicated:
June 30, 2020December 31, 2019
($ in thousands) September 30,
2019		 December 31,
2018		 Amount Change Percentage Change($ in thousands)Amount% of Total DepositsAmount% of Total DepositsAmount Change
Noninterest-bearing deposits $1,107,442
 $1,023,360
 $84,082
 8.2 %Noninterest-bearing deposits$1,391,504  23.0 %$1,088,516  20.1 %$302,988  
Interest-bearing demand deposits 1,503,208
 1,556,410
 (53,202) (3.4)%Interest-bearing demand deposits1,846,698  30.6 %1,533,882  28.3 %312,816  
Money market accounts 695,530
 873,153
 (177,623) (20.3)%Money market accounts765,854  12.7 %715,479  13.2 %50,375  
Savings accounts 1,042,162
 1,265,847
 (223,685) (17.7)%Savings accounts939,018  15.6 %885,246  16.3 %53,772  
Certificates of deposit of $250,000 or less 736,162
 2,388,592
 (1,652,430) (69.2)%Certificates of deposit of $250,000 or less585,314  9.7 %582,772  10.7 %2,542  
Certificates of deposit of more than $250,000 685,554
 809,282
 (123,728) (15.3)%Certificates of deposit of more than $250,000509,077  8.4 %621,272  11.4 %(112,195) 
Total deposits $5,770,058
 $7,916,644
 $(2,146,586) (27.1)%Total deposits$6,037,465  100.0 %$5,427,167  100.0 %$610,298  

Total deposits were $5.77$6.04 billion at SeptemberJune 30, 2019, a decrease2020, an increase of $2.15 billion,$610.3 million, or 27.1 percent,11.2%, from $7.92$5.43 billion at December 31, 2018. The decrease was mainly due2019. We continue to the Company's continuous effortsfocus on growing relationship-based deposits, strategically supplemented by wholesale funding, as we proactively drive our funding costs down. Noninterest-bearing deposits totaled $1.39 billion and represented 23.0% of total deposits at June 30, 2020 compared to build core deposits across the Company's business units, including strong growth from the community banking$1.09 billion and private banking channel, offset by the Company's strategic reduction of high-rate and high-volatility deposits during the nine months ended September 30,20.1% at December 31, 2019.
During the ninesix months ended SeptemberJune 30, 2019,2020, demand deposits increased by $30.9$615.8 million, consisting of $84.1increases of $303.0 million increase in noninterest-bearing deposits partiallyand $312.8 million in interest-bearing demand deposits. In addition, money market accounts increased $50.4 million and savings accounts increased $53.8 million, offset by a decrease of $53.2$109.7 million of interest-bearing demand deposits. In addition, during the nine months ended September 30, 2019, the Company used proceeds from the sale of loans and investments to redeem $1.49 billion of higher cost brokered certificates ofin time deposits.
Brokered deposits were $93.1$179.8 million at SeptemberJune 30, 2019, a decrease2020, an increase of $1.62 billion, or 94.6 percent,$169.8 million from $1.71 billion$10.0 million at December 31, 2018.2019. The decreaseincrease between periods is primarily related to the aforementioned $1.49 billion reductionbrokered time deposits as we took advantage of attractive pricing in higher cost brokered certificatesthat market to reduce some of our remaining higher-cost interest bearing deposits.
The following table presents the scheduled maturities of certificates of deposit as of SeptemberJune 30, 2019:
2020:
($ in thousands) Three Months or Less Over Three Months Through Six Months Over Six Months Through Twelve Months Over One Year Total($ in thousands)Three Months or LessOver Three Months Through Six MonthsOver Six Months Through Twelve MonthsOver One YearTotal
Certificates of deposit of $250,000 or less $217,649
 $169,958
 $255,854
 $92,701
 $736,162
Certificates of deposit of $250,000 or less$222,856  $169,487  $150,881  $42,090  $585,314  
Certificates of deposit of more than $250,000 301,411
 216,532
 116,098
 51,513
 685,554
Certificates of deposit of more than $250,000211,569  193,671  60,687  43,150  509,077  
Total certificates of deposit $519,060
 $386,490
 $371,952
 $144,214
 $1,421,716
Total certificates of deposit$434,425  $363,158  $211,568  $85,240  $1,094,391  

Borrowings
The Company utilizes FHLBWe utilized Federal Home Loan Bank (“FHLB”) advances and securities sold under repurchase agreements to leverage itsour capital base, to provide funds for its lending and investing activities, as a source of liquidity, and to enhance its interest rate risk management. The CompanyWe also maintainsmaintained additional borrowing availabilities from Federal Reserve Discount Window and unsecured federal funds lines of credit.
Advances from the Federal Home Loan Bank (“FHLB”) increased $130.0FHLB decreased $577.8 million, or 8.6%48.4%, to $1.7 billion$617.2 million as of SeptemberJune 30, 2019, as a result2020, due to repayment of a $155.0$447.0 million net increase in short-term and overnight advances with the FHLB offset by $25.0and $124.0 million in maturities and early repayments of long-term advances. AsDuring the three months ended June 30, 2020, we repaid a $100.0 million FHLB long-term advance with a weighted average interest rate of September 30, 2019, the maturity dates2.07% and incurred a $2.5 million extinguishment fee. Additionally, in June 2020 we refinanced $111.0 million of FHLB term advances consistedto take advantage of $670.0 millionthe rapid decline in market interest rates. As a result of this refinancing, our weighted average effective interest rate on such FHLB term advances changed from 2.81% to 2.02% and the weighted average life extended from 2.52 years to 5.18 years.
At June 30, 2020, FHLB advances included 0 overnight $300.0borrowings, $58.0 million maturing inwithin three months, or less, and $680.0$566.0 million maturing beyond three months. Asmonths with a weighted average life of the end of the quarter, the overnight advance4.1 years and weighted average interest rate was 2.08%of 2.39%. The Company
We did not utilize repurchase agreements at SeptemberJune 30, 20192020 or December 31, 2018.2019.

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For additional information, see Note 86 to Consolidated Financial Statements (unaudited) included in Part I of this Quarterly Report on Form 10-Q.



Long TermLong-term Debt
The following table presents the Company's long termour long-term debt as of the dates indicated:
  September 30, 2019 December 31, 2018
($ in thousands) Par Value Unamortized Debt Issuance Cost and Discount Par Value Unamortized Debt Issuance Cost and Discount
5.25% senior notes due April 15, 2025 $175,000
 $(1,661) $175,000
 $(1,826)
Total $175,000
 $(1,661) $175,000
 $(1,826)
For additional information, see Note 9 to Consolidated Financial Statements (unaudited) included Part I of this Quarterly Report on Form 10-Q.
Reserve for Unfunded Loan Commitments
The Company maintains a reserve for unfunded loan commitments at a level that is considered adequate to cover the estimated and known inherent risks. The probability of usage of the unfunded loan commitments and credit risk factors are determined based on outstanding loans that share similar credit risk exposure. As of September 30, 2019 and December 31, 2018, the reserve for unfunded loan commitments was $4.4 million and $4.6 million, respectively. The decrease was mainly due to a reduction in expected utilization of unfunded loan commitments.
June 30, 2020December 31, 2019
($ in thousands)Par ValueUnamortized Debt Issuance Cost and DiscountPar ValueUnamortized Debt Issuance Cost and Discount
5.25% senior notes due April 15, 2025$175,000  $(1,463) $175,000  $(1,579) 
Total$175,000  $(1,463) $175,000  $(1,579) 
The following table presents a summary of activity
We were in the reserve for unfunded loan commitments for the periods indicated:
compliance with all covenants under our 5.25% senior notes due April 15, 2025 at June 30, 2020.
  Three Months Ended September 30, Nine Months Ended September 30,
($ in thousands) 2019 2018 2019 2018
Balance at beginning of period $4,295
 $4,031
 $4,622
 $3,716
Provision for (reversal of) unfunded loan commitments 67
 217
 (260) 532
Balance at end of period $4,362
 $4,248
 $4,362
 $4,248

Liquidity Management
The Company isWe are required to maintain sufficient liquidity to ensure a safe and sound operation. Liquidity may increase or decrease depending upon availability of funds and comparative yields on investments in relation to the return on loans. Historically, the Company haswe have maintained liquid assets above levels believed to be adequate to meet the requirements of normal operations, including both expected and unexpected cash flow needs such as funding loan commitments, potential deposit outflows and dividend payments. Cash flow projections are regularly reviewed and updated to ensure that adequate liquidity is maintained.
As a result of current economic conditions, including government stimulus in response to the pandemic, the Company has participated in the elevated levels of liquidity in the marketplace. A portion of the additional liquidity is viewed as short-term as it is expected to be used by clients in the near term and, accordingly, the Company has maintained higher levels of liquid assets. We have not observed a change in the level of clients' credit line usage and as the Bank's PPP loans are expected to be forgiven over the next 9 to 12 months, we expect additional liquidity that will likely be used to lower wholesale funding as it matures.
Banc of California, N.A.
During the second quarter of 2020, we expanded our existing secured borrowing capacity with the Federal Reserve by participating in its Borrower-in-Custody (“BIC”) program. As a result, our borrowing capacity with the Federal Reserve increased to $370.4 million at June 30, 2020. Prior to participating in the BIC program, the Bank had only pledged certain securities as collateral for access to the discount window. At June 30, 2020, the Bank has pledged certain qualifying loans with an unpaid principal balance of $870.1 million and securities with a carrying value of $23.0 million as collateral for this line of credit. Borrowings under the BIC program are overnight advances with interest chargeable at the discount window (“primary credit”) borrowing rate. There were no borrowings under this arrangement for the three and six months ended June 30, 2020 and 2019.
The Bank's liquidity, represented by cash and cash equivalents and securities available-for-sale, is a product of its operating, investing, and financing activities. The Bank's primary sources of funds are deposits, payments and maturities of outstanding loans and investment securities; sales of loans and investment securities and other short-term investments and funds provided from operations. While scheduled payments from the amortization of loans and investment securities, and maturing investment securities and short-term investments are relatively predictable sources of funds, deposit flows and loan prepayments are greatly influenced by general interest rates, economic conditions, and competition. In addition, the Bank invests excess funds in short-term interest-earning assets, which provide liquidity to meet lending requirements. The Bank also generates cash through borrowings. The Bank mainly utilizes FHLB advances from pre-established secured lines of credit and securities sold under repurchase agreements to leverage its capital base, to provide funds for its lending activities, as a source of liquidity, and to enhance its interest rate risk management. The Bank also has the ability to obtain brokered deposits and collect deposits through its wholesale and treasury operations.operations as well as secured borrowings advances through the Federal Reserve BIC program. Liquidity management is both a daily and long-term function of business management. Any excess liquidity is typically invested in federal funds or investment securities. On a longer-term basis, the Bank maintains a strategy of investing in various lending products. The Bank uses its sources of funds primarily to meet its ongoing loan and other commitments, and to pay maturing certificates of deposit and savings withdrawals.
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Banc of California, Inc.
The primary sources of funds for Banc of California, Inc., on a stand-alone holding company basis, are dividends and intercompany tax payments from the Bank, outside borrowing, and its ability to raise capital and issue debt securities. Dividends from the Bank are largely dependent upon the Bank's earnings and are subject to restrictions under certain regulations that limit its ability to transfer funds to the holding company. OCC regulations impose various restrictions on the

ability of a bank to make capital distributions, which include dividends, stock redemptions or repurchases, and certain other items. Generally, a well-capitalized bank may make capital distributions during any calendar year equal to up to 100 percent of year-to-date net income plus retained net income for the two preceding years without prior OCC approval. However, any dividend paid by the Bank would be limited by the need to maintain its well capitalizedwell-capitalized status plus the capital buffer in order to avoid additional dividend restrictions (Refer to Capital - Dividend Restrictions below for additional information). Currently, the Bank does not have sufficient dividend-paying capacity to declare and pay such dividends to the holding company without obtaining prior approval from the OCC under the applicable regulations. During the ninesix months ended SeptemberJune 30, 2019,2020, the Bank paid dividends$25.0 million of $142.5 milliondividends to Banc of California, Inc. At SeptemberJune 30, 2019,2020, Banc of California, Inc. had $85.6$61.1 million in cash, all of which was on deposit at the Bank.
On February 10, 2020, we announced that our Board of Directors authorized the repurchase of up to $45 million of our common stock. The repurchase authorization expires in February 2021, however given current macroeconomic conditions and the COVID-19 pandemic, we have suspended common stock repurchases for the immediate future. There were no repurchases of common stock for the three months ended June 30, 2020. During the six months ended June 30, 2020, we repurchased 827,584 shares of common stock at a weighted average price of $14.50 per share and an aggregate amount of $12.0 million. Purchases may be made in open-market transactions, in block transactions on or off an exchange, in privately negotiated transactions, or by other means as determined by our management and in accordance with the regulations of the Securities and Exchange Commission. The timing of purchases and the number of shares repurchased under the program will depend on a variety of factors including price, trading volume, corporate and regulatory requirements, and market conditions.
During the three months ended SeptemberJune 30, 2019, the Company completed a tender offer for2020, we repurchased depositary shares representing shares of itsour Series D and Series E preferred stock. The aggregate total consideration for each Series D Depositary Share purchased was $1.2 million. The aggregate total consideration for each Series E Depositary Share tenderedpurchased was $1.4 million. The $49 thousand difference between the consideration paid and accepted for purchase pursuant to the offer equaled $27.13. The total consideration for each$2.7 million aggregate carrying value of the Series D Depositary Share tenderedPreferred Stock and accepted for purchase pursuantSeries E Preferred Stock was reclassified to retained earnings and resulted in an increase to net income allocated to common stockholders.
During the offer equaled $26.39.six months ended June 30, 2020, we repurchased depositary shares representing shares of our Series D and Series E preferred stock. The aggregate total consideration payable by the Company for the preferred stock acceptedSeries D depositary shares purchased was $2.7 million. The aggregate total consideration for purchasethe Series E depositary shares purchased was$46.0 $1.5 million. The $575 thousand difference between the consideration paid and the $4.8 million inclusive aggregate carrying value of premiumthe Series D Preferred Stock and Series E Preferred Stock was reclassified to parretained earnings and accrued dividends ($19.4 million of series D and $26.6 million series E depository shares). The tender resulted in a $5.1 million reductionan increase to net income availableallocated to common shareholders.stockholders.
On a consolidated basis, the Companywe maintained $526.9$420.6 million of cash and cash equivalents, which was 6.1 percent5.4% of total assets at SeptemberJune 30, 2019. The Company's2020. Our cash and cash equivalents increased by $135.3$47.2 million, or 34.5 percent,12.6%, from $391.6$373.5 million, or 3.7 percent4.8% of total assets, at December 31, 2018.2019. The increase was mainly due to the decreaseincrease in deposits and runoff of our legacy single family residential mortgage portfolio, offset by reductions in FHLB advances, offset by cash received from sales of investment securities and loans. The Company has benefited from completion during late 2018 of its exit from high-rate and high-volatility institutional deposits and reduced the reliance on brokered deposits by replacing them with core deposits to fund new loan originations. During the three and nine months ended September 30, 2019, the Company also strategically decreased its securities portfolio to navigate a volatile rate environment by completing the sale of its entire commercial mortgage-backed securities portfolio and reducing its collateralized loan obligations and mortgage-back securities exposure by selling $1.16 billion of these investments. All of these strategic actions were taken in order to expand core lending activities across the organization and reduce its reliance on higher costing brokered certificates of deposit, while attempting to reduce risk on the Company's balance sheet.advances.
At SeptemberJune 30, 2019, the Company2020, we had available unused secured borrowing capacities of $874.6$1.06 billion from the FHLB and $370.4 million from FHLB and $21.0 million fromthe Federal Reserve, Discount Window, as well as $185.0 million from unused unsecured federal funds lines of credit. The CompanyWe also maintained repurchase agreements and had noof which none were outstanding securities sold under repurchase agreements at SeptemberJune 30, 2019.2020. Availabilities and terms on repurchase agreements are subject to the counterparties' discretion and pledging additional investment securities. The CompanyWe also had unpledged securities available-for-sale of $711.1 million$1.13 billion at SeptemberJune 30, 2019. On February 14, 2019, the Company entered into a new line of credit for $15.0 million, which bears interest at LIBOR plus 2.00% and has a maturity date of February 13, 2020. Subsequent to September 30, 2019, the Company terminated this $15 million line of credit.
The Company believesWe believe that itsour liquidity sources are stable and are adequate to meet itsour day-to-day cash flow requirements. Asrequirements as of SeptemberJune 30, 2019,2020. However, in light of the Company believes that there are no events, uncertainties, material commitments, orongoing COVID-19 pandemic, we cannot predict at this time the extent to which the pandemic will negatively affect our business, financial condition, liquidity, capital expenditures that were reasonably likelyand results of operations. For a discussion of the related risk factors, please refer to have a material effectPart II, Item 1A. "Risk Factors" in our Quarterly Report on its liquidity position.Form 10-Q for the quarter ended March 31, 2020.

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Commitments and Contractual Obligations
The following table presents the Company’sour commitments and contractual obligations as of SeptemberJune 30, 2019:
2020:
 Commitments and Contractual ObligationsCommitments and Contractual Obligations
($ in thousands) Total Amount Committed 
Within
One Year
 More Than One Year Through Three Years More Than Three Year Through Five Years 
Over Five Years
($ in thousands)Total Amount CommittedWithin
One Year		More Than One Year Through Three YearsMore Than Three Year Through Five Years
Over Five Years
Commitments to extend credit $185,929
 $57,684
 $108,715
 $1,711
 $17,819
Commitments to extend credit$80,093  $36,078  $36,785  $1,842  $5,388  
Unused lines of credit 1,070,758
 831,159
 81,829
 100,832
 56,938
Unused lines of credit1,392,215  1,225,270  70,385  52,710  43,850  
Standby letters of credit 8,969
 7,697
 1,161
 91
 20
Standby letters of credit3,579  3,258  210  111  —  
Total commitments $1,265,656
 $896,540
 $191,705
 $102,634
 $74,777
Total commitments$1,475,887  $1,264,606  $107,380  $54,663  $49,238  
FHLB advances $1,650,000
 $994,000
 $291,000
 $65,000
 $300,000
FHLB advances$624,000  $213,000  $—  $291,000  $120,000  
Long-term debt 175,000
 —
 —
 —
 175,000
Long-term debt175,000  —  —  175,000  —  
Operating and capital lease obligations 28,930
 7,230
 13,887
 3,095
 4,718
Operating and capital lease obligations23,274  6,461  6,787  3,805  6,221  
Certificate of deposits 1,421,716
 1,277,501
 137,641
 6,574
 —
Certificate of deposits1,094,391  1,009,151  80,783  4,457  —  
Total contractual obligations $3,275,646
 $2,278,731
 $442,528
 $74,669
 $479,718
Total contractual obligations$1,916,665  $1,228,612  $87,570  $474,262  $126,221  

During the three months ended March 31, 2017, the Bank entered into certain definitive agreements which grant the Bank the exclusive naming rights to Banc of California Stadium, a soccer stadium of LAFC, as well as the right to be the official bank of LAFC. In exchange for the Bank’s rights as set forth in the agreements, the Bank agreed to pay LAFC $100.0 million over a period of 15 years, beginning in 2017 and ending in 2032. The advertising benefits of such rights are amortized on a straight-line basis and recorded as advertising and promotion expense beginning in 2018. As of September 30, 2019, the Bank has paid $19.4 million of the $100.0 million commitment. The prepaid commitment balance, net of amortization, was $7.7 million as of September 30, 2019, which was recognized as a prepaid asset and included in Other Assets in the Consolidated Statements of Financial Condition. See Note 18 of Notes to Consolidated Financial Statements (unaudited) for additional information.
At SeptemberJune 30, 2019, the Company2020, we had unfunded commitments of $22.7$20.5 million, $7.6$7.1 million, and $4.3 million$501 thousand for affordable housing fund investments, SBIC investments, and other investments, including investments in alternative energy partnerships, respectively.

Capital
In order to maintain adequate levels of capital, the Companywe continuously assessesassess projected sources and uses of capital to support projected asset growth, operating needs and credit risk. The Company considers,We consider, among other things, earnings generated from operations and access to capital from financial markets. In addition, the Company performswe perform capital stress tests on an annual basis to assess the impact of adverse changes in the economy on the Company'sour capital base.
Regulatory Capital
The Company and the Bank are subject to the regulatory capital adequacy guidelines that are established by the Federal banking regulators. In July 2013, the Federal banking regulators approved a final rule to implement the revised capital adequacy standards of the Basel III and to address relevant provisions of the Dodd-Frank Act. The final rule strengthens the definition of regulatory capital, increases risk-based capital requirements, makes selected changes to the calculation of risk-weighted assets, and adjusts the prompt corrective action thresholds. The Company and the Bank became subject to the new rule on January 1, 2015 and certain provisions of the new rule were phased in through January 1, 2019. Inclusive of the fully phased-in capital conservation buffer, the common equity Tier 1 capital, Tier 1 risk-based capital and total risk-based capital ratio minimums are 7.0%, 8.5% and 10.5%, respectively.
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The following table presents the regulatory capital amounts and ratios for the Company and the Bank as of dates indicated:

Minimum Capital RequirementsMinimum Required to Be Well-Capitalized Under Prompt Corrective Action Provisions
($ in thousands)AmountRatioAmountRatioAmountRatio
June 30, 2020
Banc of California, Inc.
Total risk-based capital$884,558  16.35 %$432,780  8.00 % N/AN/A
Tier 1 risk-based capital816,655  15.10 %324,585  6.00 % N/AN/A
Common equity tier 1 capital631,618  11.68 %243,439  4.50 % N/AN/A
Tier 1 leverage816,655  10.56 %309,388  4.00 % N/AN/A
Banc of California, NA
Total risk-based capital$981,477  18.17 %$432,124  8.00 %$540,155  10.00 %
Tier 1 risk-based capital913,785  16.92 %324,093  6.00 %432,124  8.00 %
Common equity tier 1 capital913,785  16.92 %243,070  4.50 %351,100  6.50 %
Tier 1 leverage913,785  11.84 %308,586  4.00 %385,732  5.00 %
December 31, 2019
Banc of California, Inc.
Total risk-based capital$921,892  15.90 %$463,950  8.00 % N/AN/A
Tier 1 risk-based capital860,179  14.83 %347,963  6.00 % N/AN/A
Common equity tier 1 capital670,355  11.56 %260,972  4.50 % N/AN/A
Tier 1 leverage860,179  10.89 %315,825  4.00 % N/AN/A
Banc of California, NA
Total risk-based capital$1,007,762  17.46 %$461,843  8.00 %$577,304  10.00 %
Tier 1 risk-based capital946,049  16.39 %346,382  6.00 %461,843  8.00 %
Common equity tier 1 capital946,049  16.39 %259,787  4.50 %375,247  6.50 %
Tier 1 leverage946,049  12.02 %314,707  4.00 %393,383  5.00 %
      Minimum Capital Requirements Minimum Required to Be Well-Capitalized Under Prompt Corrective Action Provisions
($ in thousands) Amount Ratio Amount Ratio Amount Ratio
September 30, 2019            
Banc of California, Inc.            
Total risk-based capital $917,368
 14.37% $510,593
 8.00%  N/A
 N/A
Tier 1 risk-based capital 850,079
 13.32% 382,945
 6.00%  N/A
 N/A
Common equity tier 1 capital 660,255
 10.34% 287,208
 4.50%  N/A
 N/A
Tier 1 leverage 850,079
 9.84% 345,406
 4.00%  N/A
 N/A
Banc of California, NA            
Total risk-based capital $995,039
 15.65% $508,486
 8.00% $635,608
 10.00%
Tier 1 risk-based capital 927,751
 14.60% 381,365
 6.00% 508,486
 8.00%
Common equity tier 1 capital 927,751
 14.60% 286,024
 4.50% 413,145
 6.50%
Tier 1 leverage 927,751
 10.75% 345,244
 4.00% 431,555
 5.00%
December 31, 2018            
Banc of California, Inc.            
Total risk-based capital $977,342
 13.71% $570,368
 8.00%  N/A
 N/A
Tier 1 risk-based capital 910,528
 12.77% 427,776
 6.00%  N/A
 N/A
Common equity tier 1 capital 679,400
 9.53% 320,832
 4.50%  N/A
 N/A
Tier 1 leverage 910,528
 8.95% 407,145
 4.00%  N/A
 N/A
Banc of California, NA            
Total risk-based capital $1,120,122
 15.71% $570,832
 8.00% $712,977
 10.00%
Tier 1 risk-based capital 1,053,308
 14.77% 427,786
 6.00% 570,382
 8.00%
Common equity tier 1 capital 1,053,308
 14.77% 320,840
 4.50% 463,435
 6.50%
Tier 1 leverage 1,053,308
 10.36% 406,694
 4.00% 508,368
 5.00%

Dividend Restrictions
ThePayment of dividends by the Company are subject to guidance provided by the Federal Reserve. That guidance provides that bank holding companies that plan to pay dividends that exceed net earnings for a given period should first consult with the Federal Reserve. Because the Company’s current and, for the near term, future quarterly dividends are expected to exceed the applicable quarterly net earnings, payment of dividends in respect of the Company’s common and preferred stock will be subject to prior consultation and non-objection from the Federal Reserve.
Our principal source of funds for dividend payments is dividends received from the Bank. Federal banking laws and regulations limit the amount of dividends that may be paid without prior approval of regulatory agencies. Under these regulations, in the case of the Bank, the amount of dividends that may be paid in any calendar year is limited to the current year’s net profits, combined with the retained net profits of the preceding two years, subject to the capital requirements described above. However,Accordingly, any dividend granted by the Bank would be limited by the need to maintain its well capitalized status plus the capital buffer in order to avoid additional dividend restrictions. In additionAs described below, any near term dividend by the Bank will require OCC approval. During the three and six months ended June 30, 2020, the Bank received approval from the OCC and paid $25.0 million in dividends to dividends on its preferred stock,Banc of California, Inc.
During the Companythree and six months ended June 30, 2020, we declared and paid dividends on itsour common stock of $0.06 and $0.12 per share for the three months ended September 30, 2019. Duringin addition to dividends on our preferred stock. Last year, in April 2019, the Company’sour Board of Directors approved a plan to reduce the quarterly dividend from $0.13 to $0.06 per common share. The Bank paid dividends

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Table of $142.5 million to Banc of California, Inc. during the nine months ended September 30, 2019. On August 23, 2019, the Company completed the repurchase of Series D and E Series preferred stock for total consideration of $19.4 million and $26.6 million, respectively. In connection with these repurchases, the OCC approved a dividend of $88.5 million from the Bank to Banc of California, Inc. The dividend exceeded the bank’s eligible amount pursuant to 12 USC 60, as of September 30, 2019. In exceeding the eligible amount, near term dividend payments will require prior OCC approval.Contents


ITEM 3 — QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Our Risk When Interest Rates Change. The rates of interest we earn on assets and pay on liabilities generally are established contractually for a period of time. Market interest rates change over time. Accordingly, our results of operations, like those of other financial institutions, are impacted by changes in interest rates and the interest rate sensitivity of our assets and liabilities. The risk associated with changes in interest rates and our ability to adapt to these changes is known as interest rate risk and is our most significant market risk.
How We Measure Our Risk of Interest Rate Changes. As part of our attempt to manage our exposure to changes in interest rates and comply with applicable regulations, we have established asset/liability committees to monitor our interest rate risk. In monitoring interest rate risk we continually analyze and manage assets and liabilities based on their payment streams and interest rates, the timing of their maturities and/or prepayments, and their sensitivity to actual or potential changes in market interest rates.
We maintain both a management asset/liability committee (Management ALCO)(“Management ALCO”), comprised of select members of senior management, and a joint asset/liability committee of the Boards of Directors of the Company and the Bank (Board ALCO,(“Board ALCO”, together with Management ALCO, ALCOs)“ALCOs”). In order to manage the risk of potential adverse effects of material and prolonged or volatile changes in interest rates on our results of operations, we have adopted asset/liability management policies to align maturities and repricing terms of interest-earning assets to interest-bearing liabilities. The asset/liability management policies establish guidelines for the volume and mix of assets and funding sources taking into account relative costs and spreads, interest rate sensitivity and liquidity needs, while the ALCOs monitor adherence to those guidelines. The objectives are to manage assets and funding sources to produce results that are consistent with liquidity, capital adequacy, growth, risk, and profitability goals. The ALCOs meet periodicallyno less than quarterly to review, among other things, economic conditions and interest rate outlook, current and projected liquidity needs and capital position, anticipated changes in the volume and mix of assets and liabilities and interest rate risk exposure limits versus current projections pursuant to our net present value of equity analysis.
In order to manage our assets and liabilities and achieve the desired liquidity, credit quality, interest rate risk, profitability and capital targets, we evaluate various strategies including:
•Originating and purchasing adjustable rate mortgage loans,
•Selling longer duration fixed or hybrid mortgage loans,
•Originating shorter-term consumer loans,
•Managing the duration of investment securities,
•Managing our deposits to establish stable deposit relationships,
•Using FHLB advances and/or certain derivatives such as swaps to align maturities and repricing terms, and
•Managing the percentage of fixed rate loans in our portfolio.
At times, depending on the level of general interest rates, the relationship between long- and short-term interest rates, market conditions and competitive factors, the ALCOs may decide to increase the Company’sour interest rate risk position within the asset/liability tolerance set forth by the Company'sour Board of Directors.
As part of its procedures, the ALCOs regularly review interest rate risk by forecasting the impact of alternative interest rate environments on net interest income and market value of portfolio equity, which is defined as the net present value of an institution’s existing assets, liabilities and off-balance sheet instruments, and evaluating such impacts against the maximum potential changes in net interest income and market value of portfolio equity.


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Interest Rate Sensitivity of Economic Value of Equity and Net Interest Income
Interest rate risk results from our banking activities and is the primary market risk for us. Interest rate risk is caused by the following factors:
•Repricing risk - timing differences in the repricing and maturity of interest-earning assets and interest-bearing liabilities;
•Option risk - changes in the expected maturities of assets and liabilities, such as borrowers’ ability to prepay loans and depositors’ ability to redeem certificates of deposit before maturity;
•Yield curve risk - changes in the yield curve where interest rates increase or decrease in a nonparallel fashion; and
•Basis risk - changes in spread relationships between different yield curves, such as U.S. Treasuries, U.S. Prime Rate and London Interbank Offered Rate.
Since our earnings are primarily dependent on our ability to generate net interest income, we focus on actively monitoring and managing the effects of adverse changes in interest rates on our net interest income. Management of our interest rate risk is overseen by the Board ALCO. Board ALCO delegates the day to day management of interest rate risk to the Management ALCO. Management ALCO ensures that the Bank is following the appropriate and current regulatory guidance in the formulation and implementation of our interest rate risk program. Board ALCO reviews the results of our interest rate risk modeling quarterly to ensure that we have appropriately measured our interest rate risk, mitigated our exposures appropriately and any residual risk is acceptable. In addition to our annual review of the Asset Liability Management policy, our Board of Directors periodically reviews the interest rate risk policy limits.
Interest rate risk management is an active process that encompasses monitoring loan and deposit flows complemented by investment and funding activities. Effective management of interest rate risk begins with understanding the dynamic repricing characteristics of our assets and liabilities and determining the appropriate interest rate risk posture given business forecasts, management objectives, market expectations, and policy constraints.
Our interest rate risk exposure is measured and monitored through various risk management tools, including a simulation model that performs interest rate sensitivity analysis under multiple scenarios. The simulation model is based on the actual maturities and re-pricing characteristics of the Bank’s interest-rate sensitive assets and liabilities. The simulated interest rate scenarios include an instantaneous parallel shift in the yield curve (“Rate Shock”). We then evaluate the simulation results using two approaches: Net Interest Income at Risk (“NII at Risk”), and Economic Value of Equity (“EVE”). Under NII at Risk, the impact on net interest income from changes in interest rates on interest-earning assets and interest-bearing liabilities is modeled utilizing various assumptions for assets, liabilities, and derivatives.
EVE measures the period end market value of assets minus the market value of liabilities. Asset liability management uses this value to measure the changes in the economic value of the Bank under various interest rate scenarios. In some ways, the economic value approach provides a broader scope than net income volatility approach since it captures all anticipated cash flows.
The balance sheet is considered “asset sensitive” when an increase in short-term interest rates is expected to expand our net interest margin, as rates earned on our interest-earning assets reprice higher at a pace faster than rates paid on our interest-bearing liabilities. Conversely, the balance sheet is considered “liability sensitive” when an increase in short-term interest rates is expected to compress our net interest margin, as rates paid on our interest-bearing liabilities reprice higher at a pace faster than rates earned on our interest-earning assets.
At June 30, 2020, our interest rate risk profile reflects an “asset sensitive” position. Given the uncertainty of the magnitude, timing and direction of future interest rate movements, as well as the shape of the yield curve, actual results may vary from those predicted by our model.
The following table presents the projected change in the Bank’s economic value of equity at June 30, 2020 and net portfolio value at September 30, 2019interest income over the next twelve months, that would occur upon an immediate change in interest rates based on independent analysis, but without giving effect to any steps that management might take to counteract that change:
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Change in Interest Rates in Basis Points (bps) (1)
Change in Interest Rates in Basis Points (bps) (1)
($ in thousands) Economic Value of Equity Net Interest Income($ in thousands)Economic Value of EquityNet Interest Income
Amount Amount Change Percentage Change Amount Amount Change Percentage ChangeAmountAmount ChangePercentage ChangeAmountAmount ChangePercentage Change
September 30, 2019            
June 30, 2020June 30, 2020
+200 bps $981,091
 $(19,428) (1.9)% $228,740
 $3,179
 1.4 %+200 bps$1,332,616  $196,900  17.3 %$222,391  $14,467  7.0 %
+100 bps 995,049
 (5,470) (0.5)% 227,246
 1,685
 0.7 %+100 bps1,249,336  113,620  10.0 %215,258  7,334  3.5 %
0 bp 1,000,519
     225,561
    
0 bps0 bps1,135,716  207,924  
-100 bps 989,303
 (11,216) (1.1)% 224,401
 (1,160) (0.5)%-100 bps1,024,455  (111,261) (9.8)%205,107  (2,817) (1.4)%
(1)Assumes an instantaneous uniform change in interest rates at all maturities.
(1)Assumes an instantaneous uniform change in interest rates at all maturities and no rate shock has a rate lower than zero percent.
As with any method of measuring interest rate risk, certain shortcomings are inherent in the method of analysis presented in the foregoing table. For example, although certain assets and liabilities may have similar maturities or periods to repricing, they may react in different degrees to changes in market interest rates. Also, the interest rates on certain types of assets and liabilities may fluctuate in advance of changes in market interest rates, while interest rates on other types may lag behind changes in market rates. Additionally, certain assets, such as adjustable rate mortgage loans, have features which restrict changes in interest rates on a short-term basis and over the life of the asset. Further, if interest rates change, expected rates of prepayments on loans and early withdrawals from certificates of deposit could deviate significantly from those assumed in calculating the table.
Interest rate risk is the most significant market risk affecting the Company.us. Other types of market risk, such as foreign currency exchange risk and commodity price risk, do not arise in the normal course of the Company’sour business activities and operations.

ITEM 4 - CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
An evaluation of the Company’s disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934 (the Act) as of SeptemberJune 30, 20192020 was carried out under the supervision and with the participation of the Company’s Principal Executive Officer, Principal Financial Officer and other members of the Company’s senior management. The Company’s Principal Executive Officer and Principal Financial Officer concluded that, as of SeptemberJune 30, 2019,2020, the Company’s disclosure controls and procedures were effective in ensuring that the information required to be disclosed by the Company in the reports it files or submits under the Act is: (i) accumulated and communicated to the Company’s management (including the Principal Executive Officer and Principal Financial Officer) to allow timely decisions regarding required disclosure; and (ii) recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms.
There were no changes in the Company’s internal control over financial reporting (as defined in Rule 13a-15(f) under the Act) that occurred during the three months ended SeptemberJune 30, 20192020 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.
The Company does not expect that its disclosure controls and procedures and internal control over financial reporting will prevent all errors and fraud. A control procedure, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control procedure are met. Because of the inherent limitations in all control procedures, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the control. The design of any control procedure also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions; over time, controls may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control procedure, misstatements due to error or fraud may occur and not be detected.

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PART II — OTHER INFORMATION
ITEM 1 - LEGAL PROCEEDINGS
From time to time we are involved as plaintiff or defendant in various legal actions arising in the normal course of business.
On September 16, 2019, the Company entered into a Memorandum of Understanding (“MOU”) with the lead plaintiff to settle class action lawsuits that were previously consolidated in the United District Court for the Central District of California (the “Court”) under the caption In re Banc of California Securities Litigation, Case No. SACV 17-00118 AG, consolidated with SACV 17-00138 AG. Under the terms of the MOU, the Company’s insurance carriers would pay $19.75 million, which would be distributed to shareholders who purchased Company stock between April 15, 2016 and January 20, 2017, after payment of attorney’s fees and costs, to be determined by the Court. The Company would not be required to contribute any cash to the settlement payments. Pursuant to the settlement, the action against the Company would be dismissed with prejudice. Plaintiff would also dismiss its claims against the Company’s former Chief Executive Officer and Chairman Steven Sugarman. While the Company does not believe the plaintiff’s claims are meritorious, the Company believes that ending the costs and distraction of the litigation is in the best interests of the Company and its shareholders. The settlement and the dismissals are subject to approval by the Court and meeting certain conditions, and there are no assurances that Court approval will be obtained or that those conditions will be satisfied. If the Court preliminarily approves the settlement, members of the class will be provided notice and an opportunity to object or opt out. Following the notice and opportunity for objections and opt outs, the Court will schedule a fairness hearing at which the Court will determine whether the settlement shall be finally approved. The foregoing description of the settlement does not purport to be complete and is subject to, and is qualified in its entirety by reference to, the complete text of the settlement stipulation that will be filed with the Court.
On December 7, 2017, Heather Endresen filed an action in the Los Angeles Superior Court, captioned Heather Endresen v. Banc of California, Inc.; Banc of California, N.A., Case No. BC685641. Ms. Endresen’s complaint purports to state claims for retaliation, wrongful termination, breach of contract, breach of the implied covenant of good faith and fair dealing, and various statutory claims. Ms. Endresen dismissed the action without prejudice. On May 23, 2018, Ms. Endresen filed an action in the United States District Court for the Central District of California, captioned Heather Endresen v. Banc of California, Inc. and Banc of California, N.A., Case No. 8:18-cv-00899, asserting the claims she had made in the state court action and adding a claim for violation of the Sarbanes-Oxley Act. The complaint does not specify any amount of alleged damages. On August 22, 2018, Banc of California, Inc. and Banc of California, N.A. moved to compel arbitration of all of Ms. Endresen’s claims except for the Sarbanes-Oxley Act claim, pursuant to Ms. Endresen’s binding arbitration agreement. On September 20, 2018, the court granted the motion to compel arbitration and stayed the litigation on the Sarbanes-Oxley Act claim pending arbitration. Ms. Endresen has commenced arbitration, and a hearing date has been set for May 3, 2021. The Company believes that the claims are without merit and intends to vigorously contest them.
On April 2, 2019, the first of three shareholder derivative actions, Gordon v. Benett, No. 8:19-cv-621, was filed against current and former officers and directors of Banc of California, Inc. in the United States District Court for the Central District of California. The Gordon action asserts claims for breach of fiduciary duty against Halle J. Benett, Jonah Schnel, Jeffrey Karish, Robert Sznewajs, Eric Holoman, Chad Brownstein, Steven Sugarman, Richard Lashley, Douglas Bowers and John Grosvenor. On June 10, 2019, a second shareholder derivative action, Johnston v. Sznewajs, No. 8:19-cv-01152, was filed against current and former officers and directors of Banc of California, Inc. in the United States District Court for the Central District of California. The Johnston action asserts claims for breach of fiduciary duty and unjust enrichment against Robert Sznewajs, Jonah Schnel, Halle Benett, Richard Lashley, Steven Sugarman, John Grosvenor, Chad Brownstein, Jeffrey Karish and Eric Holoman. On June 18, 2019, a third shareholder derivative action, Witmer v. Sugarman, No. 19STCV21088, was filed against current and former officers and directors of Banc of California, Inc. in Los Angeles County Superior Court. The Witmer action asserts claims for breach of fiduciary duty, unjust enrichment and corporate waste against Steven Sugarman, Ronald Nicolas, Jr., Robert Sznewajs, Chad Brownstein, Halle Benett, Douglas Bowers, Jeffrey Karish, Richard Lashley, Jonah Schel,Schnel, Eric Holoman and Jeffrey Seabold. On June 24, 2019, the Witmer Action was removed to the United States District Court for the Central District of California and assigned docket number 2:19-cv-5488. On September 23, 2019, the Court, ordered that the Gordon, Johnston, and Witmer actions are consolidated for all purposes, including pre-trial proceedings and trial. On November 22, 2019, plaintiffs filed a consolidated complaint. The Company’s motion to dismiss is currently due on August 14, 2020.
In general, all three shareholder derivative plaintiffs allegethe consolidated complaint alleges that the Company’sour board wrongfully refused demands that the plaintiffs made to the Company’sour board of directors that the Companywe should initiate litigation against the various current and former officers and directors based on their alleged role in the purported concealment of the Company’sCompany's alleged relationship with Jason Galanis and various statements made by the Company alleged to be false and misleading. The plaintiffs seek an unspecified amount of damages to be paid to the Company, adoption of corporate governance reforms, and equitable and injunctive relief. The Company doesWe do not believe that the demands made by these shareholder derivative plaintiffs were wrongfully refused, and it intendswe intend to vigorously contest these actions on that basis.

ITEM 1A - RISK FACTORS

There have been no material changes to the risk factors that appeared under “PartPart I, Item 1A. Risk“Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2018.2019 and Part II, Item 1A. “Risk Factors” in our Quarterly Report on Form 10-Q for the quarter ended March 31, 2020.

ITEM 2 - UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
Issuer Purchases of Equity Securities
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  Purchase of Equity Securities by the Issuer  
  Total Number of Shares Average Price Paid Per Share Total Number of Shares Purchased as Part of Publicly Announced Plans Total Number of Shares That May Yet be Purchased Under the Plan
From July 1, 2019 to July 31, 2019 499
 $13.97
 —
 —
From August 1, 2019 to August 31, 2019 365
 $15.63
 —
 —
From September 1, 2019 to September 30, 2019 933
 $14.34
 —
 —
Total 1,797
 $14.50
 —
  
Purchase of Equity Securities by the Issuer
Total Number of SharesAverage Price Paid Per ShareTotal Number of Shares Purchased as Part of Publicly Announced PlansTotal Number of Shares That May Yet be Purchased Under the Plan
Common Stock:
From April 1, 2020 to April 30, 202047,939  $8.19  —  —  
From May 1, 2020 to May 31, 20202,188  $11.40  —  —  
From June 1, 2020 to June 30, 20207,610  $10.62  —  —  
Total57,737  $8.63  —  —  
Preferred Stock (Depositary Shares):
From April 1, 2020 to April 30, 202094,813  $23.39  —  —  
From May 1, 2020 to May 31, 202012,269  $24.80  —  —  
From June 1, 2020 to June 30, 20202,989  $24.97  —  —  
Total110,071  $23.59  —  —  

During the three months ended SeptemberJune 30, 2019,2020, purchases of shares of common stock related to shares surrendered by employees in order to pay employee tax liabilities associated with vested awards under the Company'sour employee stock benefit plans. There were no purchases of shares of common stock during the three months ended June 30, 2020 related to the Company's previously announced stock repurchase program discussed below.
On February 10, 2020, we announced a repurchase program of up to $45 million of our common stock. The repurchase authorization expires in February 2021. Purchases may be made in open-market transactions, in block transactions on or off an exchange, in privately negotiated transactions or by other means as determined by our management and in accordance with the regulations of the Securities and Exchange Commission. The timing of purchases and the number of shares repurchased under the program will depend on a variety of factors including price, trading volume, corporate and regulatory requirements and market conditions.

ITEM 3 - DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4 MINE SAFETY DISCLOSURES
Not applicable
ITEM 5 - OTHER INFORMATION
None




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ITEM 6 - EXHIBITS
2.3
Asset Purchase Agreement, dated February 28, 2017, by and between Banc of California, N. A. and Caliber Home Loans, Inc. (Filed as an exhibit to the Registrant's Current Report on Form 8-K filed on April 5, 2017 and incorporated herein by reference.)
2.43.1
Bulk Servicing Rights Purchase and Sale Agreement, dated February 28, 2017, by and between Banc of California, N. A. and Caliber Home Loans, Inc. (Filed as an exhibit to the Registrant's Current Report on Form 8-K filed on April 5, 2017 and incorporated herein by reference.)
3.1
Second Articles of Restatement of the charter of the Registrant (Filed as an exhibit to the Registrant’s Current Report on Form 8-K filed on June 5, 2018 and incorporated herein by reference.)
3.2
Fifth Amended and Restated Bylaws of the Registrant (Filed as an exhibit to the Registrant’s Current Report on Form 8-K filed on June 30, 2017 and incorporated herein by reference.)
4.1
10.1
Warrant to purchase up to 1,395,000 sharesAmendment and Termination of the Registrant common stock originally issued on November 1, 2010 (Filed as an exhibit to the Registrant’s Current Report on Form 8-K/A filed on November 16, 2010 and incorporated herein by reference.)LAFC-Banc of California Agreements dated May 22, 2020
4.231.1
Senior Debt Securities Indenture, dated as of April 23, 2012, between the Registrant and U.S. Bank National Association, as Trustee (Filed as an exhibit to the Registrant’s Current Report on Form 8-K filed on April 23, 2012 and incorporated herein by reference.)
4.3
Supplemental Indenture, dated as of April 23, 2012, between the Registrant and U.S. Bank National Association, as Trustee, relating to the Registrant’s 7.50% Senior Notes due April 15, 2020 and form of 7.50% Senior Notes due April 15, 2020 (Filed as an exhibit to the Registrant’s Current Report on Form 8-K filed on April 23, 2012 and incorporated herein by reference.)
4.4
Second Supplemental Indenture, dated as of April 6, 2015, between the Registrant and U.S. Bank National Association, as Trustee, relating to the Registrant’s 5.25% Senior Notes due April 15, 2025 and form of 5.25% Senior Notes due April 15, 2025 (Filed as an exhibit to the Registrant's Current Report on Form 8-K filed on April 6, 2015 and incorporated herein by reference.)
4.5
Deposit Agreement, dated as of June 12, 2013, among the Registrant, Registrar and Transfer Company, as Depositary and the holders from time to time of the depositary receipts described therein (Filed as an exhibit to the Registrant’s Current Report on Form 8-K filed on June 12, 2013 and incorporated herein by reference.)
4.6
Deposit Agreement, dated as of April 8, 2015, among the Registrant, Computershare Inc. and Computershare Trust Company, N.A., collectively as Depositary, and the holders from time to time of the depositary receipts described therein (Filed as an exhibit to the Registrant's Current Report on Form 8-K filed on April 8, 2015 and incorporated herein by reference.)
4.7
Purchase Contract Agreement, dated May 21, 2014, between the Company and U.S. Bank National Association (Filed as an exhibit to the Registrant’s Current Report on Form 8-K filed on May 21, 2014 and incorporated herein by reference.)
4.8
Indenture, dated May 21, 2014, between the Company and U.S. Bank National Association (Filed as an exhibit to the Registrant’s Current Report on Form 8-K filed on May 21, 2014 and incorporated herein by reference.)
4.9
First Supplemental Indenture, dated May 21, 2014, between the Company and U.S. Bank National Association relating to the Registrant's 8% Tangible Equity Units due May 15, 2017 (Filed as an exhibit to the Registrant’s Current Report on Form 8-K filed on May 21, 2014 and incorporated herein by reference.)
4.10
Deposit Agreement, dated as of February 8, 2016, among the Registrant, Computershare Inc. and Computershare Trust Company, N.A., collectively as Depositary, and the holders from time to time of the depositary receipts described therein. (Filed as an exhibit to the Registrant's Current Report on Form 8-K filed on February 8, 2016 and incorporated herein by reference.)
31.1
Rule 13a-14(a) Certification (Principal Executive Officer)
31.2
Rule 13a-14(a) Certification (Principal Financial Officer)
32.0
Rule 13a-14(b) and 18 U.S.C. 1350 Certification
101.0The following financial statements and footnotes from the Registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 20192020 formatted in Extensible Business Reporting Language (XBRL): (i) Consolidated Statements of Financial Condition; (ii) Consolidated Statements of Operations; (iii) Consolidated Statements of Comprehensive Income (Loss); (iv) Consolidated Statements of Stockholders’ Equity; (v) Consolidated Statements of Cash Flows; and (vi) the Notes to Consolidated Financial Statements. The instance document does not appear in the interactive data file because its XBRL tags are embedded within the inline XBRL document.
104Cover Page Interactive Data File (embedded within the Inline XBRL document)


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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
BANC OF CALIFORNIA, INC.
Date:August 7, 2020BANC OF CALIFORNIA, INC.
Date:November 8, 2019/s/ Jared Wolff
Jared Wolff
President/Chief Executive Officer
(Principal Executive Officer)
Date:November 8, 2019August 7, 2020/s/ John A. BoglerLynn M. Hopkins
John A. BoglerLynn M. Hopkins
Executive Vice President/Chief Financial Officer
(Principal Financial Officer)
Date:November 8, 2019
Date:August 7, 2020/s/ Mike Smith
Mike Smith
Senior Vice President/Chief Accounting Officer and Director of Treasury
(Principal Accounting Officer)


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