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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 JuneSeptember 30, 2020
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) 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 filerAccelerated filer
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 


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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 August 3,November 2, 2020, the registrant had outstanding 49,754,33049,762,971 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
JuneSeptember 30, 2020
Table of Contents
Page
Item 1 –
Item 2 –
Item 3 –
Item 4 –
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Item 1A –
Item 2 –
Item 3 –
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Item 6 –

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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.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 anythe Company's 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.fluctuations in the demand for loans and fluctuations in commercial and residential real estate values in our market area;
viii.vi.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;fraud, any of which may lead to increased loan delinquencies, losses, and non-performingnonperforming assets in our loan portfolio, whichand 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.vii.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.viii.changes in general economic conditions, either nationally or in our market areas, or changes in financial markets;
xiii.ix.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.x.fluctuations in the demand for loans, and fluctuations in commercial and residential real estate values in our market area;
xi.our ability to develop and maintain a strong core deposit base or other low cost funding sources necessary to fund our activities;
xv.xii.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, restrict our ability to invest in certain assets, 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, or impose fines, penalties or sanctions, any of which could adversely affect our liquidity and earnings;
xvi.xiii.legislative or regulatory changes that adversely affect our business, including, without limitation, changes in tax laws and policies, changes in privacy laws, and changes in regulatory capital or other rules, and the availability of resources to address or respond to such changes;
xvii.xiv.our ability to control operating costs and expenses;
xviii.xv.staffing fluctuations in response to product demand or the implementation of corporate strategies that affect our work force and potential associated charges;
xix.xvi.the risk that our enterprise risk management framework may not be effective in mitigating risk and reducing the potential for losses;
xx.xvii.errors in estimates of the fair values of certain of our assets and liabilities, which may result in significant changes in valuation;
xviii.failures or security breaches with respect to the network and computer systems on which we depend;depend, including but not limited to, due to cybersecurity threats;
xxi.xix.our ability to attract and retain key members of our senior management team;
xxii.xx.increased competitive pressures among financial services companies;
xxiii.xxi.changes in consumer spending, borrowing and saving habits;
xxiv.xxii.the effects of severe weather, natural disasters, pandemics, acts of war or terrorism, civil unrest, and other external events on our business;
xxv.xxiii.the ability of key third-party providers to perform their obligations to us;
xxvi.xxiv.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.xxv.the continuing impact of 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;
xxvi.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;
xxvii.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 repurchases or redemption of depositary shares representing factional interests in our preferred stock; 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 isstatements are made, except as required by law.
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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)
June 30,
2020
December 31,
2019
September 30,
2020
December 31,
2019
ASSETSASSETSASSETS
Cash and due from banksCash and due from banks$23,394  $28,890  Cash and due from banks$40,330 $28,890 
Interest-earning deposits in financial institutionsInterest-earning deposits in financial institutions397,246  344,582  Interest-earning deposits in financial institutions252,160 344,582 
Total cash and cash equivalentsTotal cash and cash equivalents420,640  373,472  Total cash and cash equivalents292,490 373,472 
Securities available-for-sale, at fair valueSecurities available-for-sale, at fair value1,176,029  912,580  Securities available-for-sale, at fair value1,245,867 912,580 
Loans held-for-sale, carried at fair valueLoans held-for-sale, carried at fair value19,768  22,642  Loans held-for-sale, carried at fair value1,849 22,642 
Loans receivableLoans receivable5,627,696  5,951,885  Loans receivable5,678,002 5,951,885 
Allowance for credit losses - loansAllowance for credit losses - loans(90,370) (57,649) Allowance for credit losses - loans(90,927)(57,649)
Loans receivable, netLoans receivable, net5,537,326  5,894,236  Loans receivable, net5,587,075 5,894,236 
Federal Home Loan Bank and other bank stock, at costFederal Home Loan Bank and other bank stock, at cost46,585  59,420  Federal Home Loan Bank and other bank stock, at cost44,809 59,420 
Premises, equipment, netPremises, equipment, net125,247  128,021  Premises, equipment, net123,812 128,021 
Bank owned life insuranceBank owned life insurance110,487  109,819  Bank owned life insurance111,115 109,819 
Operating lease right-of-use assetsOperating lease right-of-use assets19,408  22,540  Operating lease right-of-use assets18,909 22,540 
Investments in alternative energy partnerships, netInvestments in alternative energy partnerships, net26,967  29,300  Investments in alternative energy partnerships, net27,786 29,300 
Deferred income taxes, netDeferred income taxes, net48,288  44,906  Deferred income taxes, net43,744 44,906 
Income tax receivableIncome tax receivable13,094  4,233  Income tax receivable10,701 4,233 
GoodwillGoodwill37,144  37,144  Goodwill37,144 37,144 
Other intangible assets, netOther intangible assets, net3,292  4,151  Other intangible assets, net2,939 4,151 
Other assetsOther assets185,863  185,946  Other assets189,866 185,946 
Total assetsTotal assets$7,770,138  $7,828,410  Total assets$7,738,106 $7,828,410 
LIABILITIES AND STOCKHOLDERS’ EQUITYLIABILITIES AND STOCKHOLDERS’ EQUITYLIABILITIES AND STOCKHOLDERS’ EQUITY
Noninterest-bearing depositsNoninterest-bearing deposits$1,391,504  $1,088,516  Noninterest-bearing deposits$1,450,744 $1,088,516 
Interest-bearing depositsInterest-bearing deposits4,645,961  4,338,651  Interest-bearing deposits4,581,522 4,338,651 
Total depositsTotal deposits6,037,465  5,427,167  Total deposits6,032,266 5,427,167 
Federal Home Loan Bank advances, netFederal Home Loan Bank advances, net617,170  1,195,000  Federal Home Loan Bank advances, net559,482 1,195,000 
Long-term debt, netLong-term debt, net173,537  173,421  Long-term debt, net173,623 173,421 
Reserve for loss on repurchased loansReserve for loss on repurchased loans5,567  6,201  Reserve for loss on repurchased loans5,487 6,201 
Operating lease liabilitiesOperating lease liabilities20,531  23,692  Operating lease liabilities19,938 23,692 
Accrued expenses and other liabilitiesAccrued expenses and other liabilities68,909  95,684  Accrued expenses and other liabilities73,056 95,684 
Total liabilitiesTotal liabilities6,923,179  6,921,165  Total liabilities6,863,852 6,921,165 
Commitments and contingent liabilitiesCommitments and contingent liabilitiesCommitments and contingent liabilities
Preferred stockPreferred stock185,037  189,825  Preferred stock184,878 189,825 
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, 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, 2019  
Common stock, $0.01 par value per share, 446,863,844 shares authorized; 52,171,507 shares issued and 49,760,543 shares outstanding at September 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; 52,171,507 shares issued and 49,760,543 shares outstanding at September 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 September 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 September 30, 2020 and at December 31, 2019
Additional paid-in capitalAdditional paid-in capital632,117  629,848  Additional paid-in capital633,409 629,848 
Retained earningsRetained earnings85,670  127,733  Retained earnings95,001 127,733 
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(15,565) (11,900) 
Treasury stock, at cost (2,410,964 and 1,583,380 shares at September 30, 2020 and December 31, 2019)Treasury stock, at cost (2,410,964 and 1,583,380 shares at September 30, 2020 and December 31, 2019)(40,827)(28,786)
Accumulated other comprehensive income (loss), netAccumulated other comprehensive income (loss), net1,266 (11,900)
Total stockholders’ equityTotal stockholders’ equity846,959  907,245  Total stockholders’ equity874,254 907,245 
Total liabilities and stockholders’ equityTotal liabilities and stockholders’ equity$7,770,138  $7,828,410  Total liabilities and stockholders’ equity$7,738,106 $7,828,410 
See accompanying notes to 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 EndedSix Months Ended
June 30,
Three Months EndedNine Months Ended
September 30,
June 30,
2020
March 31,
2020
June 30,
2019
20202019September 30,
2020
June 30,
2020
September 30,
2019
20202019
Interest and dividend incomeInterest and dividend incomeInterest and dividend income
Loans, including feesLoans, including fees$63,642  $65,534  $89,159  $129,176  $179,717  Loans, including fees$62,019 $63,642 $80,287 $191,195 $260,004 
SecuritiesSecurities7,816  7,820  12,457  15,636  30,298  Securities6,766 7,816 10,024 22,402 40,322 
Other interest-earning assetsOther interest-earning assets1,239  1,360  2,424  2,599  4,737  Other interest-earning assets881 1,239 2,346 3,480 7,083 
Total interest and dividend incomeTotal interest and dividend income72,697  74,714  104,040  147,411  214,752  Total interest and dividend income69,666 72,697 92,657 217,077 307,409 
Interest expenseInterest expenseInterest expense
DepositsDeposits10,205  14,611  28,598  24,816  60,041  Deposits7,564 10,205 22,811 32,380 82,852 
Federal Home Loan Bank advancesFederal Home Loan Bank advances4,818  5,883  8,289  10,701  17,370  Federal Home Loan Bank advances3,860 4,818 8,519 14,561 25,889 
Securities sold under repurchase agreementsSecurities sold under repurchase agreements —  16   34  Securities sold under repurchase agreements13 47 
Long-term debt and other interest-bearing liabilitiesLong-term debt and other interest-bearing liabilities2,357  2,359  2,357  4,716  4,719  Long-term debt and other interest-bearing liabilities2,385 2,357 2,399 7,101 7,118 
Total interest expenseTotal interest expense17,382  22,853  39,260  40,235  82,164  Total interest expense13,811 17,382 33,742 54,046 115,906 
Net interest incomeNet interest income55,315  51,861  64,780  107,176  132,588  Net interest income55,855 55,315 58,915 163,031 191,503 
Provision for (reversal of) credit losses11,826  15,761  (1,900) 27,587  198  
Net interest income after provision for (reversal of) credit losses43,489  36,100  66,680  79,589  132,390  
Provision for credit lossesProvision for credit losses1,141 11,826 38,607 28,728 38,805 
Net interest income after provision for credit lossesNet interest income after provision for credit losses54,714 43,489 20,308 134,303 152,698 
Noninterest incomeNoninterest incomeNoninterest income
Customer service feesCustomer service fees1,224  1,096  1,434  2,320  2,949  Customer service fees1,498 1,224 1,582 3,818 4,531 
Loan servicing incomeLoan servicing income95  75  121  170  239  Loan servicing income186 95 128 356 367 
Income from bank owned life insuranceIncome from bank owned life insurance591  578  580  1,169  1,105  Income from bank owned life insurance629 591 588 1,798 1,693 
Net gain on sale of securities available-for-sale2,011  —  —  2,011  208  
Impairment loss on investment securitiesImpairment loss on investment securities(731)(731)
Net gain (loss) on sale of securities available-for-saleNet gain (loss) on sale of securities available-for-sale2,011 (5,063)2,011 (4,855)
Fair value adjustment for loans held-for-saleFair value adjustment for loans held-for-sale25  (1,586) 59  (1,561) 60  Fair value adjustment for loans held-for-sale24 25 16 (1,537)76 
Net (loss) gain on sale of loans—  (27) 2,767  (27) 4,319  
Net gain on sale of loansNet gain on sale of loans272 4,310 245 8,629 
Other income (loss)Other income (loss)1,582  1,925  (7,251) 3,507  (4,875) Other income (loss)1,345 1,582 2,351 4,852 (2,524)
Total noninterest income (loss)5,528  2,061  (2,290) 7,589  4,005  
Total noninterest incomeTotal noninterest income3,954 5,528 3,181 11,543 7,186 
Noninterest expenseNoninterest expenseNoninterest expense
Salaries and employee benefitsSalaries and employee benefits24,260  23,436  27,506  47,696  55,945  Salaries and employee benefits23,277 24,260 25,934 70,973 81,879 
Naming rights terminationNaming rights termination26,769  —  —  26,769  —  Naming rights termination26,769 26,769 
Occupancy and equipmentOccupancy and equipment7,090  7,243  7,955  14,333  15,641  Occupancy and equipment7,457 7,090 7,767 21,790 23,408 
Professional feesProfessional fees4,596  5,964  (2,903) 10,560  8,138  Professional fees5,147 4,596 1,463 15,707 9,601 
Data processingData processing1,536  1,773  1,672  3,309  3,168  Data processing1,657 1,536 1,568 4,966 4,736 
Advertising and promotionAdvertising and promotion1,157  1,756  2,048  2,913  4,105  Advertising and promotion219 1,157 2,090 3,132 6,195 
Regulatory assessmentsRegulatory assessments725  484  2,136  1,209  4,618  Regulatory assessments784 725 1,239 1,993 5,857 
(Gain) loss on investments in alternative energy partnerships(Gain) loss on investments in alternative energy partnerships(167) 1,905  (355) 1,738  1,595  (Gain) loss on investments in alternative energy partnerships(1,430)(167)(940)308 655 
Reversal of provision for loan repurchasesReversal of provision for loan repurchases(34) (600) (61) (634) (177) Reversal of provision for loan repurchases(91)(34)(123)(725)(300)
Amortization of intangible assetsAmortization of intangible assets430  429  621  859  1,241  Amortization of intangible assets353 430 500 1,212 1,741 
Restructuring (reversal) expense—  —  (158) —  2,637  
Restructuring expenseRestructuring expense2,637 
All other expenseAll other expense6,408  4,529  5,039  10,937  8,838  All other expense3,021 6,408 3,742 13,958 12,580 
Total noninterest expenseTotal noninterest expense72,770  46,919  43,500  119,689  105,749  Total noninterest expense40,394 72,770 43,240 160,083 148,989 
(Loss) income from operations before income taxes(23,753) (8,758) 20,890  (32,511) 30,646  
Income tax (benefit) expense(5,304) (2,165) 4,308  (7,469) 7,027  
Income (loss) from operations before income taxesIncome (loss) from operations before income taxes18,274 (23,753)(19,751)(14,237)10,895 
Income tax expense (benefit)Income tax expense (benefit)2,361 (5,304)(5,619)(5,108)1,408 
Net (loss) income(18,449) (6,593) 16,582  (25,042) 23,619  
Net income (loss)Net income (loss)15,913 (18,449)(14,132)(9,129)9,487 
Preferred stock dividendsPreferred stock dividends3,442  3,533  4,308  6,975  8,616  Preferred stock dividends3,447 3,442 3,403 10,422 12,019 
Income allocated to participating securitiesIncome allocated to participating securities—  —  271  —  153  Income allocated to participating securities281 
Participating securities dividendsParticipating securities dividends94  94  94  188  295  Participating securities dividends94 94 94 282 390 
Impact of preferred stock redemptionImpact of preferred stock redemption(49) (526) —  (575) —  Impact of preferred stock redemption(49)5,093 (568)5,093 
Net (loss) income available to common stockholders$(21,936) $(9,694) $11,909  $(31,630) $14,555  
(Loss) earnings per common share:
Net income (loss) available to common stockholdersNet income (loss) available to common stockholders$12,084 $(21,936)$(22,722)$(19,265)$(8,015)
Earnings (loss) per common share:Earnings (loss) per common share:
BasicBasic$(0.44) $(0.19) $0.23  $(0.63) $0.29  Basic$0.24 $(0.44)$(0.45)$(0.38)$(0.16)
DilutedDiluted$(0.44) $(0.19) $0.23  $(0.63) $0.29  Diluted$0.24 $(0.44)$(0.45)$(0.38)$(0.16)
(Loss) earnings per class B common share:
Earnings (loss) per class B common share:Earnings (loss) per class B common share:
BasicBasic$(0.44) $(0.19) $0.23  $(0.63) $0.29  Basic$0.24 $(0.44)$(0.45)$(0.38)$(0.16)
DilutedDiluted$(0.44) $(0.19) $0.23  $(0.63) $0.29  Diluted$0.24 $(0.44)$(0.45)$(0.38)$(0.16)
See accompanying notes to consolidated financial statements (unaudited)

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Table of Contents
BANC OF CALIFORNIA, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(Amounts in thousands)
(Unaudited)
Three Months EndedSix Months Ended
June 30,
Three Months EndedNine Months Ended
September 30,
June 30,
2020
March 31,
2020
June 30,
2019
20202019September 30,
2020
June 30,
2020
September 30,
2019
20202019
Net (loss) income$(18,449) $(6,593) $16,582  $(25,042) $23,619  
Net income (loss)Net income (loss)$15,913 $(18,449)$(14,132)$(9,129)$9,487 
Other comprehensive income (loss), net of tax:Other comprehensive income (loss), net of tax:Other comprehensive income (loss), net of tax:
Unrealized gain (loss) on available-for-sale securities:Unrealized gain (loss) on available-for-sale securities:Unrealized gain (loss) on available-for-sale securities:
Unrealized gain (loss) arising during the periodUnrealized gain (loss) arising during the period40,002  (42,248) 5,423  (2,246) 11,596  Unrealized gain (loss) arising during the period16,831 40,002 (994)14,585 10,602 
Reclassification adjustment for (gain) loss included in net (loss) income(1,419) —  —  (1,419) (147) 
Reclassification adjustment for (gain) loss included in net income (loss)Reclassification adjustment for (gain) loss included in net income (loss)(1,419)3,575 (1,419)3,428 
Total change in unrealized gain (loss) on available-for-sale securitiesTotal change in unrealized gain (loss) on available-for-sale securities38,583  (42,248) 5,423  (3,665) 11,449  Total change in unrealized gain (loss) on available-for-sale securities16,831 38,583 3,097 13,166 14,546 
Total other comprehensive income (loss)38,583  (42,248) 5,423  (3,665) 11,449  
Total other comprehensive incomeTotal other comprehensive income16,831 38,583 3,097 13,166 14,546 
Comprehensive income (loss)Comprehensive income (loss)$20,134  $(48,841) $22,005  $(28,707) $35,068  Comprehensive income (loss)$32,744 $20,134 $(11,035)$4,037 $24,033 

See accompanying notes to 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' EquityPreferred StockCommon StockAdditional Paid-in CapitalRetained EarningsTreasury StockAccumulated Other Comprehensive Income (Loss)Total Stockholders' Equity
VotingClass B Non-VotingPreferred StockAccumulated Other Comprehensive Income (Loss)Total Stockholders' Equity
Three Months Ended June 30, 2020
Balance at March 31, 2020$187,687  $520  $ $631,125  $110,640  $(40,827) $(54,148) $835,002  
Three Months Ended September 30, 2020Three Months Ended September 30, 2020
Balance at June 30, 2020Balance at June 30, 2020$185,037 $522 $5 $632,117 $85,670 $(40,827)$(15,565)$846,959 
Comprehensive loss:
Net loss—  —  —  —  (18,449) —  —  (18,449) 
Comprehensive income:Comprehensive income:
Net incomeNet income— — — — 15,913 — — 15,913 
Other comprehensive income, netOther comprehensive income, net—  —  —  —  —  —  38,583  38,583  Other comprehensive income, net— — — — — — 16,831 16,831 
Issuance of common stock—   —  (2) —  —  —  —  
Redemption of preferred stockRedemption of preferred stock(2,650) —  —  —  49  —  —  (2,601) Redemption of preferred stock(159)— — — (7)— — (166)
Share-based compensation expenseShare-based compensation expense—  —  —  1,470  —  —  —  1,470  Share-based compensation expense— — — 1,346 — — — 1,346 
Restricted stock surrendered due to employee tax liabilityRestricted stock surrendered due to employee tax liability—  —  —  (476) —  —  —  (476) Restricted stock surrendered due to employee tax liability— — — (54)— — — (54)
Shares purchased under the Dividend Reinvestment PlanShares purchased under the Dividend Reinvestment Plan—  —  —  —  (28) —  —  (28) Shares purchased under the Dividend Reinvestment Plan— — — — (27)— — (27)
Stock appreciation right dividend equivalentsStock appreciation right dividend equivalents—  —  —  —  (94) —  —  (94) Stock appreciation right dividend equivalents— — — — (94)— — (94)
Dividends declared ($0.06 per common share)Dividends declared ($0.06 per common share)—  —  —  —  (3,006) —  —  (3,006) Dividends declared ($0.06 per common share)— — — — (3,007)— — (3,007)
Preferred stock dividendsPreferred stock dividends—  —  —  —  (3,442) —  —  (3,442) Preferred stock dividends— — — — (3,447)— — (3,447)
Balance at June 30, 2020$185,037  $522  $ $632,117  $85,670  $(40,827) $(15,565) $846,959  
Balance at September 30, 2020Balance at September 30, 2020$184,878 $522 $5 $633,409 $95,001 $(40,827)$1,266 $874,254 
Three Months Ended June 30, 2019
Balance at March 31, 2019$231,128  $518  $ $626,608  $136,943  $(28,786) $(18,091) $948,325  
Comprehensive income:
Net income—  —  —  —  16,582  —  —  16,582  
Three Months Ended September 30, 2019Three Months Ended September 30, 2019
Balance at June 30, 2019Balance at June 30, 2019$231,128 $520 $5 $627,306 $146,039 $(28,786)$(12,668)$963,544 
Comprehensive loss:Comprehensive loss:
Net lossNet loss— — — — (14,132)— — (14,132)
Other comprehensive income, netOther comprehensive income, net—  —  —  —  —  —  5,423  5,423  Other comprehensive income, net— — — — — — 3,097 3,097 
Issuance of common stock—   —  (2) —  —  —  —  
Redemption of preferred stockRedemption of preferred stock(41,303)— — — (5,093)— — (46,396)
Share-based compensation expenseShare-based compensation expense—  —  —  1,497  —  —  —  1,497  Share-based compensation expense— — — 1,494 — — — 1,494 
Restricted stock surrendered due to employee tax liabilityRestricted stock surrendered due to employee tax liability—  —  —  (797) —  —  —  (797) Restricted stock surrendered due to employee tax liability— — — (26)— — — (26)
Shares purchased under the Dividend Reinvestment PlanShares purchased under the Dividend Reinvestment Plan—  —  —  —  (26) —  —  (26) Shares purchased under the Dividend Reinvestment Plan— — — — (23)— — (23)
Stock appreciation right dividend equivalentsStock appreciation right dividend equivalents—  —  —  —  (94) —  —  (94) Stock appreciation right dividend equivalents— — — — (94)— — (94)
Dividends declared ($0.06 per common share)Dividends declared ($0.06 per common share)—  —  —  —  (3,058) —  —  (3,058) Dividends declared ($0.06 per common share)— — — — (3,073)— — (3,073)
Preferred stock dividendsPreferred stock dividends—  —  —  —  (4,308) —  —  (4,308) Preferred stock dividends— — — — (3,403)— — (3,403)
Balance at June 30, 2019$231,128  $520  $ $627,306  $146,039  $(28,786) $(12,668) $963,544  
Six Months Ended June 30, 2020
Balance at September 30, 2019Balance at September 30, 2019$189,825 $520 $5 $628,774 $120,221 $(28,786)$(9,571)$900,988 
Nine Months Ended September 30, 2020Nine Months Ended September 30, 2020
Balance at December 31, 2019Balance at December 31, 2019$189,825  $520  $ $629,848  $127,733  $(28,786) $(11,900) $907,245  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. 2016-13Impact of adoption of ASU No. 2016-13—  —  —  —  (4,503) —  —  (4,503) Impact of adoption of ASU No. 2016-13— — — — (4,503)— — (4,503)
Comprehensive loss:
Comprehensive income:Comprehensive income:
Net lossNet loss—  —  —  —  (25,042) —  —  (25,042) Net loss— — — — (9,129)— — (9,129)
Other comprehensive loss, net—  —  —  —  —  —  (3,665) (3,665) 
Other comprehensive income, netOther comprehensive income, net— — — — — — 13,166 13,166 
Issuance of common stockIssuance of common stock—   —  (2) —  —  —  —  Issuance of common stock— — (2)— — — 
Redemption of preferred stockRedemption of preferred stock(4,788) —  —  —  575  —  —  (4,213) Redemption of preferred stock(4,947)— — — 568 — — (4,379)
Purchase of 827,584 shares of treasury stockPurchase of 827,584 shares of treasury stock—  —  —  —  —  (12,041) —  (12,041) Purchase of 827,584 shares of treasury stock— — — — — (12,041)— (12,041)
Share-based compensation expenseShare-based compensation expense—  —  —  3,046  —  —  —  3,046  Share-based compensation expense— — — 4,392 — — — 4,392 
Restricted stock surrendered due to employee tax liabilityRestricted stock surrendered due to employee tax liability—  —  —  (775) —  —  —  (775) Restricted stock surrendered due to employee tax liability— — — (829)— — — (829)
Shares purchased under the Dividend Reinvestment PlanShares purchased under the Dividend Reinvestment Plan—  —  —  —  (47) —  —  (47) Shares purchased under the Dividend Reinvestment Plan— — — — (74)— — (74)
Stock appreciation right dividend equivalentsStock appreciation right dividend equivalents—  —  —  —  (188) —  —  (188) Stock appreciation right dividend equivalents— — — — (282)— — (282)
Dividends declared ($0.12 per common share)—  —  —  —  (5,883) —  —  (5,883) 
Dividends declared ($0.18 per common share)Dividends declared ($0.18 per common share)— — — — (8,890)— — (8,890)
Preferred stock dividendsPreferred stock dividends—  —  —  —  (6,975) —  —  (6,975) Preferred stock dividends— — — — (10,422)— — (10,422)
Balance at June 30, 2020$185,037  $522  $ $632,117  $85,670  $(40,827) $(15,565) $846,959  
Balance at September 30, 2020Balance at September 30, 2020$184,878 $522 $5 $633,409 $95,001 $(40,827)$1,266 $874,254 
Six Months Ended June 30, 2019
Nine Months Ended September 30, 2019Nine Months Ended September 30, 2019
Balance at December 31, 2018Balance at December 31, 2018$231,128  $518  $ $625,834  $140,952  $(28,786) $(24,117) $945,534  Balance at December 31, 2018$231,128 $518 $5 $625,834 $140,952 $(28,786)$(24,117)$945,534 
Comprehensive income:Comprehensive income:Comprehensive income:
Net incomeNet income—  —  —  —  23,619  —  —  23,619  Net income— — — — 9,487 — — 9,487 
Other comprehensive income, netOther comprehensive income, net—  —  —  —  —  —  11,449  11,449  Other comprehensive income, net— — — — — — 14,546 14,546 
Issuance of common stockIssuance of common stock—   —  (2) —  —  —  —  Issuance of common stock— — (2)— — — 
Redemption of preferred stockRedemption of preferred stock(41,303)— — — (5,093)— — (46,396)
Share-based compensation expenseShare-based compensation expense—  —  —  2,350  —  —  —  2,350  Share-based compensation expense— — — 3,844 — — — 3,844 
Restricted stock surrendered due to employee tax liabilityRestricted stock surrendered due to employee tax liability—  —  —  (876) —  —  —  (876) Restricted stock surrendered due to employee tax liability— — — (902)— — — (902)
Shares purchased under the Dividend Reinvestment PlanShares purchased under the Dividend Reinvestment Plan—  —  —  —  (76) —  —  (76) Shares purchased under the Dividend Reinvestment Plan— — — — (99)— — (99)
Stock appreciation right dividend equivalentsStock appreciation right dividend equivalents—  —  —  —  (296) —  —  (296) Stock appreciation right dividend equivalents— — — — (390)— — (390)
Dividends declared ($0.19 per common share)—  —  —  —  (9,544) —  —  (9,544) 
Dividends declared ($0.25 per common share)Dividends declared ($0.25 per common share)— — — — (12,617)— — (12,617)
Preferred stock dividendsPreferred stock dividends—  —  —  —  (8,616) —  —  (8,616) Preferred stock dividends— — — — (12,019)— — (12,019)
Balance at June 30, 2019$231,128  $520  $ $627,306  $146,039  $(28,786) $(12,668) $963,544  
Balance at September 30, 2019Balance at September 30, 2019$189,825 $520 $5 $628,774 $120,221 $(28,786)$(9,571)$900,988 

See accompanying notes to 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,
Nine Months Ended
September 30,
2020201920202019
Cash flows from operating activities:Cash flows from operating activities:Cash flows from operating activities:
Net (loss) incomeNet (loss) income$(25,042) $23,619  Net (loss) income$(9,129)$9,487 
Adjustments to reconcile net (loss) income to net cash (used in) provided by operating activitiesAdjustments to reconcile net (loss) income to net cash (used in) provided by operating activitiesAdjustments to reconcile net (loss) income to net cash (used in) provided by operating activities
Provision for credit lossesProvision for credit losses27,587  198  Provision for credit losses28,728 38,805 
Reversal of provision for loan repurchasesReversal of provision for loan repurchases(634) (177) Reversal of provision for loan repurchases(725)(300)
Depreciation on premises and equipmentDepreciation on premises and equipment8,404  5,290  Depreciation on premises and equipment12,378 7,800 
Amortization of intangible assetsAmortization of intangible assets859  1,241  Amortization of intangible assets1,212 1,741 
Amortization of debt issuance costsAmortization of debt issuance costs139  83  Amortization of debt issuance costs537 165 
Net amortization of premium on securitiesNet amortization of premium on securities258  649  Net amortization of premium on securities676 738 
Impairment loss on investment securitiesImpairment loss on investment securities731 
Net amortization of deferred loan costs and feesNet amortization of deferred loan costs and fees(553) 83  Net amortization of deferred loan costs and fees(2,007)479 
Accretion of discounts on purchased loansAccretion of discounts on purchased loans(355) (125) Accretion of discounts on purchased loans(361)(311)
Write-off of other assets related to naming rights termination, netWrite-off of other assets related to naming rights termination, net6,669  —  Write-off of other assets related to naming rights termination, net6,669 
Debt extinguishment feeDebt extinguishment fee2,515  —  Debt extinguishment fee2,515 
Deferred income tax (benefit) expense(71) 1,841  
Deferred income tax benefitDeferred income tax benefit(2,553)(2,600)
Bank owned life insurance incomeBank owned life insurance income(1,169) (1,105) Bank owned life insurance income(1,798)(1,693)
Share-based compensation expenseShare-based compensation expense3,046  2,350  Share-based compensation expense4,392 3,844 
Loss on interest rate swapsLoss on interest rate swaps288  9,583  Loss on interest rate swaps285 8,964 
Loss on investments in alternative energy partnerships and affordable housing investmentsLoss on investments in alternative energy partnerships and affordable housing investments4,033  2,785  Loss on investments in alternative energy partnerships and affordable housing investments4,327 3,308 
Impairment on capitalized software projectsImpairment on capitalized software projects157  835  Impairment on capitalized software projects157 986 
Fair value adjustment for loans held-for-saleFair value adjustment for loans held-for-sale1,561  (60) Fair value adjustment for loans held-for-sale1,537 (76)
Net loss (gain) on sale of loans27  (4,319) 
Net gain on sale of securities available-for-sale(2,011) (208) 
Net gain on sale of loansNet gain on sale of loans(245)(8,629)
Net gain (loss) on sale of securities available-for-saleNet gain (loss) on sale of securities available-for-sale(2,011)4,855 
Loss on sale or disposal of property and equipmentLoss on sale or disposal of property and equipment106   Loss on sale or disposal of property and equipment106 20 
Repurchase of mortgage loansRepurchase of mortgage loans—  (699) Repurchase of mortgage loans(1,929)
Proceeds from sales of and principal collected on loans held-for-saleProceeds from sales of and principal collected on loans held-for-sale613  3,849  Proceeds from sales of and principal collected on loans held-for-sale18,853 4,905 
Proceeds from sales of and principal collected on other loans held-for-saleProceeds from sales of and principal collected on other loans held-for-sale—  426  Proceeds from sales of and principal collected on other loans held-for-sale426 
Change in accrued interest receivable and other assetsChange in accrued interest receivable and other assets1,119  (14,593) Change in accrued interest receivable and other assets(1,175)(15,223)
Change in accrued interest payable and other liabilitiesChange in accrued interest payable and other liabilities(30,093) (5,341) Change in accrued interest payable and other liabilities(24,273)3,633 
Net cash (used in) provided by operating activities(2,547) 26,214  
Net cash provided by operating activitiesNet cash provided by operating activities38,095 60,126 
Cash flows from investing activities:Cash flows from investing activities:Cash flows from investing activities:
Proceeds from sales of securities available-for-saleProceeds from sales of securities available-for-sale22,728  782,019  Proceeds from sales of securities available-for-sale22,727 822,979 
Proceeds from maturities and calls of securities available-for-saleProceeds from maturities and calls of securities available-for-sale30,000  38,029  Proceeds from maturities and calls of securities available-for-sale30,000 38,029 
Proceeds from principal repayments of securities available-for-saleProceeds from principal repayments of securities available-for-sale2,971  20,538  Proceeds from principal repayments of securities available-for-sale5,075 35,337 
Purchases of securities available-for-salePurchases of securities available-for-sale(322,590) —  Purchases of securities available-for-sale(371,092)
Cash received from bank-owned life insuranceCash received from bank-owned life insurance501  —  Cash received from bank-owned life insurance502 
Loan originations and principal collections, netLoan originations and principal collections, net349,818  (149,182) Loan originations and principal collections, net427,308 151,655 
Purchase of loans and leases(25,839) —  
Purchase of loansPurchase of loans(154,864)
Redemption of Federal Home Loan Bank stockRedemption of Federal Home Loan Bank stock22,171  29,760  Redemption of Federal Home Loan Bank stock23,972 56,551 
Purchase of Federal Home Loan Bank and other bank stockPurchase of Federal Home Loan Bank and other bank stock(9,336) (38,039) Purchase of Federal Home Loan Bank and other bank stock(9,361)(60,136)
Proceeds from sale of loansProceeds from sale of loans—  558,021  Proceeds from sale of loans1,140,851 
Proceeds from sale of other real estate ownedProceeds from sale of other real estate owned—  551  Proceeds from sale of other real estate owned1,078 843 
Purchases of premises and equipmentPurchases of premises and equipment(3,467) (5,967) Purchases of premises and equipment(4,547)(8,391)
Payments of capital lease obligationsPayments of capital lease obligations(266) (259) Payments of capital lease obligations(398)(347)
Funding of equity investmentFunding of equity investment(14,201) (1,501) Funding of equity investment(17,346)(14,599)
(Increase) decrease in investments in alternative energy partnerships(Increase) decrease in investments in alternative energy partnerships(2,630) 760  (Increase) decrease in investments in alternative energy partnerships(2,019)1,294 
Net cash provided by investing activities49,860  1,234,730  
Net cash (used in) provided by investing activitiesNet cash (used in) provided by investing activities(48,965)2,164,066 
Cash flows provided by (used in) financing activities:
Cash flows from financing activities:Cash flows from financing activities:
Net increase (decrease) in depositsNet increase (decrease) in deposits610,298  (1,624,354) Net increase (decrease) in deposits605,099 (2,146,586)
Net (decrease) increase in short-term Federal Home Loan Bank advancesNet (decrease) increase in short-term Federal Home Loan Bank advances(447,000) 305,000  Net (decrease) increase in short-term Federal Home Loan Bank advances(505,000)155,000 
Repayment of long-term Federal Home Loan Bank advancesRepayment of long-term Federal Home Loan Bank advances(235,000) —  Repayment of long-term Federal Home Loan Bank advances(235,000)(25,000)
Proceeds from long-term Federal Home Loan Bank advancesProceeds from long-term Federal Home Loan Bank advances111,000  —  Proceeds from long-term Federal Home Loan Bank advances111,000 
Debt extinguishment and financing fees paidDebt extinguishment and financing fees paid(9,368) —  Debt extinguishment and financing fees paid(9,368)
Redemption of preferred stockRedemption of preferred stock(4,213) —  Redemption of preferred stock(4,379)(46,396)
Purchase of treasury stockPurchase of treasury stock(12,041) —  Purchase of treasury stock(12,041)
Purchase of restricted stock surrendered due to employee tax liabilityPurchase of restricted stock surrendered due to employee tax liability(775) (876) Purchase of restricted stock surrendered due to employee tax liability(829)(902)
Dividend equivalents paid on stock appreciation rightsDividend equivalents paid on stock appreciation rights(188) (296) Dividend equivalents paid on stock appreciation rights(282)(390)
Dividends paid on preferred stockDividends paid on preferred stock(6,975) (8,616) Dividends paid on preferred stock(10,422)(12,019)
Dividends paid on common stockDividends paid on common stock(5,883) (9,544) Dividends paid on common stock(8,890)(12,617)
Net cash used in financing activitiesNet cash used in financing activities(145) (1,338,686) Net cash used in financing activities(70,112)(2,088,910)
Net change in cash and cash equivalentsNet change in cash and cash equivalents47,168  (77,742) Net change in cash and cash equivalents(80,982)135,282 
Cash and cash equivalents at beginning of periodCash and cash equivalents at beginning of period373,472  391,592  Cash and cash equivalents at beginning of period373,472 391,592 
Cash and cash equivalents at end of periodCash and cash equivalents at end of period$420,640  $313,850  Cash and cash equivalents at end of period$292,490 $526,874 
Supplemental cash flow informationSupplemental cash flow informationSupplemental cash flow information
Interest paid on deposits and borrowed fundsInterest paid on deposits and borrowed funds40,626  85,733  Interest paid on deposits and borrowed funds52,577 120,042 
Income taxes paidIncome taxes paid62  2,822  Income taxes paid758 2,822 
Income taxes refunds receivedIncome taxes refunds received—   Income taxes refunds received142 
Supplemental disclosure of non-cash activitiesSupplemental disclosure of non-cash activitiesSupplemental disclosure of non-cash activities
Transfer from loans to other real estate owned, netTransfer from loans to other real estate owned, net—  276  Transfer from loans to other real estate owned, net1,116 276 
Transfer of loans held-for-investment to loans held-for-saleTransfer of loans held-for-investment to loans held-for-sale—  1,127,339  Transfer of loans held-for-investment to loans held-for-sale1,127,898 
Equipment acquired under capital leasesEquipment acquired under capital leases30  40  Equipment acquired under capital leases30 40 
Operating lease right-of-use assets recognizedOperating lease right-of-use assets recognized—  27,421  Operating lease right-of-use assets recognized(960)28,664 
Operating lease liabilities recognizedOperating lease liabilities recognized—  28,822  Operating lease liabilities recognized960 30,065 
Impact of adoption of ASU 2016-13 on retained earningsImpact of adoption of ASU 2016-13 on retained earnings(4,503) —  Impact of adoption of ASU 2016-13 on retained earnings(4,503)— 
Receivable on unsettled securities salesReceivable on unsettled securities sales334,769 

See accompanying notes to consolidated financial statements (unaudited)
8

Table of Contents
BANC OF CALIFORNIA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
JuneSeptember 30, 2020

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”) and its wholly-owned subsidiary, Banc of California, National Association (the Bank)“Bank”), operates under a national bank charter issued by the Office of the Comptroller of the Currency (“OCC”), the Bank's primary regulator. The Bank is a member of the Federal Home Loan Bank (“FHLB”) system, and maintains insurance on deposit accounts with the Federal Deposit Insurance Corporation (“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 31 full-service branches located throughout Southern California as of JuneSeptember 30, 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”) 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, 2019 filed by us with the SEC. The December 31, 2019 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, 2019 filed with the SEC. Certain prior period amounts have been reclassified to conform to current period presentation, including i) reclassification of the provision for 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 sixnine months ended JuneSeptember 30, 2020 are not necessarily indicative of the results that may be expected for the year ending December 31, 2020.
Principles of Consolidation: The accompanying unaudited consolidated financial statements include the accounts of the Company and its consolidated subsidiaries as of JuneSeptember 30, 2020 and December 31, 2019 and for the three and sixnine months ended JuneSeptember 30, 2020 and 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 (“AFS”) 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”)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. We have not made any significant changes in our critical accounting policies from those disclosed in our Annual Report on Form 10-K for the year ended December 31, 2019 filed with the SEC, except for the accounting for loans 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.
Allowance for Credit Losses (ACL): The ACL is a reserve 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 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 ACL consists of;of: (i) a specific allowance established for probable losses on individually identified impaired loans, (ii) a quantitative allowance for current expected loan losses based on the portfolio 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 prepayments, as appropriate. The contractual term excludes expected extensions and renewals unless those extension or renewal options are included in the underlying contract and we do not have the ability to unconditionally cancel. The contractual term also excludes expected modifications unless management has a 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 collect all amounts due according to the contractual terms of 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.
Factors considered by management in determining impairment include payment status, collateral value, and the probability of collecting scheduled principal and interest payments when due. Loans that experience insignificant payment delays and payment shortfalls, generally, are not classified as impaired. 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 delay, the borrower’s prior payment record, and the amount of the shortfall in relation to the principal and interest 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 also measured at the present value of estimated 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 JuneSeptember 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 JuneSeptember 30, 2020, we funded $240.7PPP loans totaled $255.8 million, net of $4.1 million in PPP loans.unamortized fees which are being amortized over their estimated life. During the three months ended JuneSeptember 30, 2020, we collected $7.5 million in fees onthe Company extended its estimate for the average life of our PPP loans funded during the quarter, which will be recognized over their estimated life of 9to twelve months from nine months. The 9 monthstwelve month estimated life of PPP loans is based on our understanding of our clients' 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 expect 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 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
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underwriting policy. 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-accrualnonaccrual status for a minimum period of 6 months. Commercial TDRs are evaluated on a case-by-case basis for determination of whether or not to place them on non-accrualnonaccrual 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.accounting on loans which qualify under section 4013 of the CARES Act or the “Interagency Statement on Loan Modifications and Reporting for Financial Institutions Working with Customers Affected by the Coronavirus” on March 22, 2020 and revised April 7, 2020. The main benefitsprovisions of TDR relief include 1) a capital benefitprovision in the form of reduced risk-weighted assets, as TDRs are more heavily risk-weighted for capital purposes; 2) a delinquency status benefit,provision, as the aging of loans are frozen, i.e., they will continue to be reported in the same delinquency bucketstatus they were in at the time of modification; and 3) a non-accrualnonaccrual status benefitprovision as the loans are generally not reported as non-accrualnonaccrual or TDRs 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 the 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 accrued expenses and 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 to determine whether impairment exists as of the reporting date and whether that impairment is due to credit 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-accrualnonaccrual when the contractual payment of principal or interest has become 90 days past due or management has serious doubts about the further collectability of principal or interest. When available-for-sale debt securities are placed on non-accrualnonaccrual status, unpaid interest recognized as interest income is reversed.
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 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, other derivatives, Hypothetical Liquidation at Book Value (“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.
Recent Accounting Guidance, Not Yet Effective: In December 2019, the FASBFinancial Accounting Standards Board (“FASB”) issued ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes (“ASU 2019-12”). The amendments in this UpdateASU 2019-12 simplify the accounting for income taxes by removing certain exceptions for investments, intra-period allocations, and interim calculations, and addadding guidance to reduce the complexity of applying Topic 740. This ASU 2019-12 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 adoption of these amendments will have a material effect on our consolidated financial statements.
In March 2020, the Financial Accounting Standards Board (“FASB”)FASB issued ASU 2020-04, Reference Rate Reform (Topic 848), which provides optional guidance, for a limited period of time, to ease the potential burden in accounting for (or recognizing the
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benefits of) reference rate reform on financial reporting. The amendments in ASU 2020-04 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 be applied. The amendments in ASU 2020-04 are effective for all entities as of March 12, 2020 through December 31, 2022. We are in the process of evaluating the potential impact the discontinuation of LIBOR will have on our contracts and expect to electhave elected the optional expedients and exceptions set forth in the amendments.

NOTE 2 – 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, we primarily employ 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. We employ procedures to monitor the pricing service's assumptions and establish 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 SBA loan pool securities, U.S. government agency and U.S. government sponsored enterprise 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 management's judgment and evaluation for valuation. We had 0 securities available-for-sale classified as Level 3 at JuneSeptember 30, 2020 or December 31, 2019.
Loans Held-for-Sale, Carried at Fair Value: The fair value of loans held-for-sale is based on commitments outstanding from investors and current offerings in the secondary market 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. 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 and any accrued interest.
Derivative Assets and Liabilities:
Interest Rate Swaps and Caps. We offer interest rate swap and cap products to certain loan clients to allow them to hedge the risk of rising interest rates on their variable rate loans. We originate a variable rate loan and enter into a variable-to-fixed interest rate swap with the client. We also enter into an offsetting swap with a correspondent bank. These back-to-back agreements are intended to offset each other and allow us to originate a variable rate loan while providing a contract for fixed interest payments for the client. The net cash flow for us is equal to the interest income received from a variable rate loan originated with the client plus a fee. The fair value of these derivatives is based on a discounted cash flow approach. Due to the
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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.
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Foreign Exchange Contracts. 
We offer short-term foreign exchange contracts to 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, we also enter into offsetting contracts with institutional counterparties to hedge the Company’s foreign exchange rate risk. These back-to-back contracts allow us to offer our customers foreign exchange products while minimizing 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 result 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.
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The following table presents our financial assets and liabilities measured at fair value on a recurring basis as of the dates indicated:
Fair Value Measurement LevelFair 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)
($ 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
September 30, 2020September 30, 2020
AssetsAssetsAssets
Securities available-for-sale:Securities available-for-sale:Securities available-for-sale:
SBA loan pools securitiesSBA loan pools securities$17,807 $$17,807 $
U.S. government agency and U.S. government sponsored enterprise residential mortgage-backed securitiesU.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 residential mortgage-backed securities107,431 107,431 
U.S. government agency and U.S. government sponsored enterprise collateralized mortgage obligationsU.S. government agency and U.S. government sponsored enterprise collateralized mortgage obligations201,136  —  201,136  —  U.S. government agency and U.S. government sponsored enterprise collateralized mortgage obligations218,396 218,396 
Municipal securitiesMunicipal securities57,174  —  57,174  —  Municipal securities69,233 69,233 
Non-agency residential mortgage-backed securitiesNon-agency residential mortgage-backed securities164  —  164  —  Non-agency residential mortgage-backed securities163 163 
Collateralized loan obligationsCollateralized loan obligations668,353  —  668,353  —  Collateralized loan obligations685,931 685,931 
Corporate debt securitiesCorporate debt securities143,647  —  143,647  —  Corporate debt securities146,906 146,906 
Loans held-for-sale, carried at fair valueLoans held-for-sale, carried at fair value19,768  —  3,083  16,685  Loans held-for-sale, carried at fair value1,849 466 1,383 
Derivative assets:Derivative assets:Derivative assets:
Interest rate swaps and caps (1)
Interest rate swaps and caps (1)
8,598  —  8,598  —  
Interest rate swaps and caps (1)
8,163 8,163 
Foreign exchange contracts (1)
Foreign exchange contracts (1)
137  —  137  —  
Foreign exchange contracts (1)
45 45 
LiabilitiesLiabilitiesLiabilities
Derivative liabilities:Derivative liabilities:Derivative liabilities:
Interest rate swaps and caps (2)
Interest rate swaps and caps (2)
9,239  —  9,239  —  
Interest rate swaps and caps (2)
8,749 8,749 
Foreign exchange contracts (2)
Foreign exchange contracts (2)
54  —  54  —  
Foreign exchange contracts (2)
14 14 
December 31, 2019December 31, 2019December 31, 2019
AssetsAssetsAssets
Securities available-for-sale:Securities available-for-sale:Securities available-for-sale:
U.S. government agency and U.S. government sponsored enterprise residential mortgage-backed securitiesU.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 residential mortgage-backed securities$36,456 $$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 obligations91,299  —  91,299  —  U.S. government agency and U.S. government sponsored enterprise collateralized mortgage obligations91,299 91,299 
Municipal securitiesMunicipal securities52,689  —  52,689  —  Municipal securities52,689 52,689 
Non-agency residential mortgage-backed securitiesNon-agency residential mortgage-backed securities196  —  196  —  Non-agency residential mortgage-backed securities196 196 
Collateralized loan obligationsCollateralized loan obligations718,361  —  718,361  —  Collateralized loan obligations718,361 718,361 
Corporate debt securitiesCorporate debt securities13,579  —  13,579  —  Corporate debt securities13,579 13,579 
Loans held-for-sale, carried at fair valueLoans held-for-sale, carried at fair value22,642  —  3,409  19,233  Loans held-for-sale, carried at fair value22,642 3,409 19,233 
Derivative assets:Derivative assets:Derivative assets:
Interest rate swaps and caps (1)
Interest rate swaps and caps (1)
3,445  —  3,445  —  
Interest rate swaps and caps (1)
3,445 3,445 
Foreign exchange contracts (1)
Foreign exchange contracts (1)
138  —  138  —  
Foreign exchange contracts (1)
138 138 
LiabilitiesLiabilitiesLiabilities
Derivative liabilities:Derivative liabilities:Derivative liabilities:
Interest rate swaps and caps (2)
Interest rate swaps and caps (2)
3,717  —  3,717  —  
Interest rate swaps and caps (2)
3,717 3,717 
Foreign exchange contracts (2)
Foreign exchange contracts (2)
136  —  136  —  
Foreign exchange contracts (2)
136 136 

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

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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,
Three Months Ended
September 30,
Nine Months Ended
September 30,
($ in thousands)($ in thousands)2020201920202019($ in thousands)2020201920202019
Loans repurchased from GNMA Loan PoolsLoans repurchased from GNMA Loan PoolsLoans repurchased from GNMA Loan Pools
Balance at beginning of periodBalance at beginning of period$17,127  $23,069  $19,233  $25,040  Balance at beginning of period$16,685 $21,075 $19,233 $25,040 
Total gains (losses) (realized/unrealized):Total gains (losses) (realized/unrealized):Total gains (losses) (realized/unrealized):
Included in earnings—fair value adjustmentIncluded in earnings—fair value adjustment22  (6) (1,369) (3) Included in earnings—fair value adjustment18 (1,351)(1)
AdditionsAdditions—  —  —  —  Additions406 406 
Sales, settlements, and otherSales, settlements, and other(464) (1,988) (1,179) (3,962) Sales, settlements, and other(15,320)(978)(16,499)(4,940)
Balance at end of periodBalance at end of period$16,685  $21,075  $16,685  $21,075  Balance at end of period$1,383 $20,505 $1,383 $20,505 

Loans repurchased from GNMA loan pools had aggregate unpaid principal balances of $18.6$1.5 million and $19.8 million as of JuneSeptember 30, 2020 and December 31, 2019. The significant unobservable inputs used in the fair value measurement of our loans repurchased from GNMA loan pools at JuneSeptember 30, 2020 and December 31, 2019 included an expected loss rate of 1.55% for insured loans and 20.00% for uninsured loans. There may be inherent weaknesses in any calculation technique, and changes in the underlying assumptions used, including discount rates and estimates of future cash flows, could significantly affect the results.
Fair Value Option
Loans Held-for-Sale, Carried at Fair Value: We elected the fair value option for certain SFR mortgage loans held-for-sale. Electing to measure SFR mortgage loans held-for-sale at fair value reduces certain timing differences and better matches changes in the value of these assets with changes in the value of derivatives used as economic hedges for these assets. We also elected to record loans repurchased from GNMA at fair value, as we intend to sell them after curing any defects and, accordingly, they are classified as held-for-sale. Loans previously sold to GNMA that are delinquent more than 90 days are subject to a repurchase option when that condition exists and typically are repurchased by us. To the extent loans are subject to a repurchase option and not repurchased, the loans are re-recognized at fair value and offset by a secured borrowing, as the loans are still legally owned by GNMA. As of June 30, 2020 and December 31, 2019, there were 0 loans subject to such repurchase option and accordingly 0 related secured borrowings.
The following table presents the fair value and aggregate principal balance of certain assets on a consolidated operations basis, under the fair value option:
June 30, 2020December 31, 2019September 30, 2020December 31, 2019
($ in thousands)($ in thousands)Fair ValueUnpaid Principal BalanceDifferenceFair ValueUnpaid Principal BalanceDifference($ 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:Loans held-for-sale, carried at fair value:
Total loansTotal loans$19,768  $22,208  $(2,440) $22,642  $23,455  $(813) Total loans$1,849 $2,149 $(300)$22,642 $23,455 $(813)
Non-accrual loans (1)
6,147  7,244  (1,097) 8,125  8,370  (245) 
Nonaccrual loans (1)
Nonaccrual loans (1)
651 750 (99)8,125 8,370 (245)
(1)    Includes loans guaranteed by the U.S. government of $4.4$0.2 million and $6.7 million at JuneSeptember 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 JuneSeptember 30, 2020 and December 31, 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
June 30,
Six Months Ended
June 30,
Three Months Ended
September 30,
Nine Months Ended
September 30,
($ in thousands)($ in thousands)2020201920202019($ in thousands)2020201920202019
Net (losses) gains from fair value changes:
Net gains (losses) from fair value changes:Net gains (losses) from fair value changes:
Fair value adjustment for loans held-for-saleFair value adjustment for loans held-for-sale$25  $59  $(1,561) $60  Fair value adjustment for loans held-for-sale$24 $17 $(1,537)$77 

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 in the consolidated statements of operations.
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Assets and Liabilities Measured on a Non-Recurring Basis
Impaired Loans: The fair value of impaired loans with specific allocations of the ACL based on collateral is generally based on recent real estate appraisals and automated valuation models (“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 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 our financial assets and liabilities measured at fair value on a non-recurring basis as of the dates indicated:
Fair Value Measurement LevelFair 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)
($ 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
September 30, 2020September 30, 2020
AssetsAssetsAssets
Impaired loans:Impaired loans:Impaired loans:
Single family residential mortgageSingle family residential mortgage$1,881 $$$1,881 
Commercial and industrialCommercial and industrial$10,049  $—  $—  $10,049  Commercial and industrial17,015 17,015 
SBASBA664  —  —  664  SBA3,299 3,299 
December 31, 2019December 31, 2019December 31, 2019
AssetsAssetsAssets
Impaired loans:Impaired loans:Impaired loans:
Single family residential mortgageSingle family residential mortgage$3,678  $—  $—  $3,678  Single family residential mortgage$3,678 $$$3,678 
Commercial and industrialCommercial and industrial15,409  —  —  15,409  Commercial and industrial15,409 15,409 
SBASBA1,711  —  —  1,711  SBA1,711 1,711 

The following table presents the 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) $(490) 
Commercial and industrial(6,090) —  (8,514) —  
SBA(670) —  (1,544) (46) 
Other consumer—  —  (4) (88) 
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Three Months Ended
September 30,
Nine Months Ended
September 30,
($ in thousands)2020201920202019
Impaired loans:
Single family residential mortgage$(191)$$(722)$(490)
Commercial and industrial(3,106)(11,620)
SBA(1,534)(3,078)(46)
Other consumer(4)(88)

Estimated Fair Values of Financial Instruments
The following table presents the carrying amounts and estimated fair values of financial assets and liabilities 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  $—  $—  $373,472  
Securities available-for-sale912,580  —  912,580  —  912,580  
Federal Home Loan Bank and other bank stock59,420  —  59,420  —  59,420  
Loans held-for-sale22,642  —  3,409  19,233  22,642  
Loans receivable, net of allowance for credit losses5,894,236  —  —  5,894,732  5,894,732  
Accrued interest receivable24,523  24,523  —  —  24,523  
Derivative assets3,583  —  3,583  —  3,583  
Financial liabilities
Deposits5,427,167  —  —  5,430,536  5,430,536  
Advances from Federal Home Loan Bank1,195,000  —  1,222,709  —  1,222,709  
Long-term debt173,421  —  180,213  —  180,213  
Derivative liabilities3,853  —  3,853  —  3,853  
Accrued interest payable4,687  4,687  —  —  4,687  
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Carrying AmountFair Value Measurement Level
($ in thousands)Level 1Level 2Level 3Total
September 30, 2020
Financial assets
Cash and cash equivalents$292,490 $292,490 $$$292,490 
Securities available-for-sale1,245,867 1,245,867 1,245,867 
Federal Home Loan Bank and other bank stock44,809 44,809 44,809 
Loans held-for-sale, carried at fair value1,849 466 1,383 1,849 
Loans receivable, net of allowance for loan losses5,587,075 5,716,880 5,716,880 
Accrued interest receivable32,416 32,416 32,416 
Derivative assets8,208 8,208 8,208 
Financial liabilities
Deposits6,032,266 6,035,348 6,035,348 
Advances from Federal Home Loan Bank559,482 608,081 608,081 
Long-term debt173,623 180,924 180,924 
Derivative liabilities8,763 8,763 8,763 
Accrued interest payable6,156 6,156 6,156 
December 31, 2019
Financial assets
Cash and cash equivalents$373,472 $373,472 $$$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 

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NOTE 3 – 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($ in thousands)Amortized CostGross Unrealized GainsGross Unrealized LossesFair Value
June 30, 2020
September 30, 2020September 30, 2020
Securities available-for-sale:Securities available-for-sale:Securities available-for-sale:
SBA loan pool securitiesSBA loan pool securities$17,853 $$(49)$17,807 
U.S. government agency and U.S. government sponsored enterprise residential mortgage-backed securitiesU.S. government agency and U.S. government sponsored enterprise residential mortgage-backed securities$100,128  $5,427  $—  $105,555  U.S. government agency and U.S. government sponsored enterprise residential mortgage-backed securities99,862 7,569 107,431 
U.S. government agency and U.S. government sponsored enterprise collateralized mortgage obligationsU.S. government agency and U.S. government sponsored enterprise collateralized mortgage obligations199,262  1,906  (32) 201,136  U.S. government agency and U.S. government sponsored enterprise collateralized mortgage obligations216,250 2,182 (36)218,396 
Municipal securitiesMunicipal securities52,973  4,201  —  57,174  Municipal securities64,373 4,890 (30)69,233 
Non-agency residential mortgage-backed securitiesNon-agency residential mortgage-backed securities161   —  164  Non-agency residential mortgage-backed securities159 163 
Collateralized loan obligationsCollateralized loan obligations703,605  —  (35,252) 668,353  Collateralized loan obligations703,605 (17,674)685,931 
Corporate debt securitiesCorporate debt securities141,962  2,387  (702) 143,647  Corporate debt securities141,968 5,220 (282)146,906 
Total securities available-for-saleTotal securities available-for-sale$1,198,091  $13,924  $(35,986) $1,176,029  Total securities available-for-sale$1,244,070 $19,868 $(18,071)$1,245,867 
December 31, 2019December 31, 2019December 31, 2019
Securities available-for-sale:Securities available-for-sale:Securities available-for-sale:
U.S. government agency and U.S. government sponsored enterprise residential mortgage-backed securitiesU.S. government agency and U.S. government sponsored enterprise residential mortgage-backed securities$37,613  $—  $(1,157) $36,456  U.S. government agency and U.S. government sponsored enterprise residential mortgage-backed securities$37,613 $$(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  U.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  Municipal securities52,997 51 (359)52,689 
Non-agency residential mortgage-backed securitiesNon-agency residential mortgage-backed securities191   —  196  Non-agency residential mortgage-backed securities191 196 
Collateralized loan obligationsCollateralized loan obligations733,605  —  (15,244) 718,361  Collateralized loan obligations733,605 (15,244)718,361 
Corporate debt securitiesCorporate debt securities13,500  79  —  13,579  Corporate debt securities13,500 79 13,579 
Total securities available-for-saleTotal securities available-for-sale$929,449  $151  $(17,020) $912,580  Total securities available-for-sale$929,449 $151 $(17,020)$912,580 

At JuneSeptember 30, 2020, our investment securities portfolio consisted of agency securities, municipal securities, mortgage-backed securities, collateralized loan 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.
There was 0 allowance for credit losses for debt securities as of JuneSeptember 30, 2020. Accrued interest receivable on debt securities available-for-sale totaled $5.5$6.0 million and $5.6 million at JuneSeptember 30, 2020 and December 31, 2019, and is included within other assets in the accompanying consolidated statements of financial condition. Accrued interest receivable is excluded from the estimate of expected credit losses.
At JuneSeptember 30, 2020 and December 31, 2019, there were no holdings of any one issuer, other than the U.S. Government and its agencies, in an amount greater than 10 percent of our stockholders’ equity.
The following table presents proceeds from sales and calls of securities available-for-sale and the associated gross gains and losses realized through earnings upon the sales and calls of securities available-for-sale for the periods indicated:
Three Months Ended
June 30,
Six Months Ended
June 30,
Three Months Ended
September 30,
Nine Months Ended
September 30,
($ in thousands)($ in thousands)2020201920202019($ in thousands)2020201920202019
Gross realized gains on sales and calls of securities available-for-saleGross realized gains on sales and calls of securities available-for-sale$2,011  $—  $2,011  $208  Gross realized gains on sales and calls of securities available-for-sale$$71 $2,011 $279 
Gross realized losses on sales and calls of securities available-for-saleGross realized losses on sales and calls of securities available-for-sale—  —  —  —  Gross realized losses on sales and calls of securities available-for-sale(5,134)(5,134)
Net realized gains on sales and calls of securities available-for-sale$2,011  $—  $2,011  $208  
Net realized (losses) gains on sales and calls of securities available-for-saleNet realized (losses) gains on sales and calls of securities available-for-sale$0 $(5,063)$2,011 $(4,855)
Proceeds from sales and calls of securities available-for-saleProceeds from sales and calls of securities available-for-sale$22,728  $298,156  $52,728  $820,048  Proceeds from sales and calls of securities available-for-sale$0 $43,252 $52,727 $861,008 

Investment securities with carrying values of $42.2$43.1 million and $44.0 million as of JuneSeptember 30, 2020 and December 31, 2019, were pledged to secure FHLB advances, public deposits and for other purposes as required or permitted by law.
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The following table summarizes the investment securities with unrealized losses by security type and length of time in a continuous, unrealized loss position as of the dates indicated:
Less Than 12 Months12 Months or LongerTotalLess Than 12 Months12 Months or LongerTotal
($ in thousands)($ in thousands)Fair
Value
Gross Unrealized LossesFair
Value
Gross Unrealized LossesFair
Value
Gross Unrealized Losses($ in thousands)Fair
Value
Gross Unrealized LossesFair
Value
Gross Unrealized LossesFair
Value
Gross Unrealized Losses
June 30, 2020
September 30, 2020September 30, 2020
Securities available-for-sale:Securities available-for-sale:Securities available-for-sale:
SBA loan pool securitiesSBA loan pool securities$13,351 $(49)$$$13,351 $(49)
U.S. government agency and U.S. government sponsored enterprise collateralized mortgage obligationsU.S. government agency and U.S. government sponsored enterprise collateralized mortgage obligations$9,416  $(32) $—  $—  $9,416  $(32) U.S. government agency and U.S. government sponsored enterprise collateralized mortgage obligations10,153 (36)10,153 (36)
Municipal securitiesMunicipal securities11,381 (30)11,381 (30)
Collateralized loan obligationsCollateralized loan obligations63,040  (1,960) 605,313  (33,292) 668,353  (35,252) Collateralized loan obligations64,372 (628)621,559 (17,046)685,931 (17,674)
Corporate debt securitiesCorporate debt securities31,798  (702) —  —  31,798  (702) Corporate debt securities17,218 (282)17,218 (282)
Total securities available-for-saleTotal securities available-for-sale$104,254  $(2,694) $605,313  $(33,292) $709,567  $(35,986) Total securities available-for-sale$116,475 $(1,025)$621,559 $(17,046)$738,034 $(18,071)
December 31, 2019December 31, 2019December 31, 2019
Securities available-for-sale:Securities available-for-sale:Securities available-for-sale:
U.S. government agency and U.S. government sponsored enterprise residential mortgage-backed securitiesU.S. government agency and U.S. government sponsored enterprise residential mortgage-backed securities$35,872  $(1,157) $—  $—  $35,872  $(1,157) U.S. government agency and U.S. government sponsored enterprise residential mortgage-backed securities$35,872 $(1,157)$$$35,872 $(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 obligations73,379  (260) —  —  73,379  (260) U.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) Municipal securities31,723 (359)31,723 (359)
Collateralized loan obligationsCollateralized loan obligations49,553  (447) 668,808  (14,797) 718,361  (15,244) Collateralized loan obligations49,553 (447)668,808 (14,797)718,361 (15,244)
Total securities available-for-saleTotal securities available-for-sale$190,527  $(2,223) $668,808  $(14,797) $859,335  $(17,020) Total securities available-for-sale$190,527 $(2,223)$668,808 $(14,797)$859,335 $(17,020)

At JuneSeptember 30, 2020, our securities available-for-sale portfolio consisted of 102104 securities, of which 5051 securities were in an unrealized loss position. At December 31, 2019, our securities available-for-sale portfolio consisted of 70 securities, of which 60 securities were in an unrealized loss position.
We monitor our securities portfolio to ensure it has adequate credit support. The majority of unrealized losses are related to our collateralized loan obligations. We also consider the lowest credit rating for identification of credit impairment for other securities. As of JuneSeptember 30, 2020, all of our collateralized loan obligations investment securities in an unrealized loss position received an investment grade credit rating. The decline in fair value was 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 currently intend to sell these 5051 securities in an unrealized loss position and further believe, it is more likely than not, that we will not be required to sell these securities before their anticipated recovery.
During the three and nine months ended September 30, 2020, 0 allowance for credit losses related to securities available-for-sale was recorded. During the three and nine months ended September 30, 2019, we recorded OTTI for our remaining portfolio of mortgage-backed securities of $731 thousand. This OTTI was recognized as a result of our strategic decision to liquidate this longer duration portfolio.
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The following table presents maturities,the fair value and yield information of the investment securities portfolio, based on the earlier of maturity dates or next repricing date, and yield information of the investment securities portfolio as of JuneSeptember 30, 2020:
One year or lessMore than One Year through Five YearsMore than Five Years through Ten YearsMore than Ten YearsTotalOne year or lessMore than One Year through Five YearsMore than Five Years through Ten YearsMore than Ten YearsTotal
($ in thousands)($ in thousands)Fair
Value
Weighted-Average YieldFair
Value
Weighted-Average YieldFair
Value
Weighted-Average YieldFair
Value
Weighted-Average YieldFair
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:Securities available-for-sale:
SBA loan pool securitiesSBA loan pool securities$17,807 1.79 %$%$%$%$17,807 1.79 %
U.S. government agency and U.S. government sponsored enterprise residential mortgage-backed securitiesU.S. government agency and U.S. government sponsored enterprise residential mortgage-backed securities$—  — %$—  — %$30,413  2.20 %$75,142  2.35 %$105,555  2.31 %U.S. government agency and U.S. government sponsored enterprise residential mortgage-backed securities%%30,575 2.20 %76,856 2.35 %107,431 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 %U.S. government agency and U.S. government sponsored enterprise collateralized mortgage obligations117,175 0.71 %11,499 2.01 %44,743 1.38 %44,979 0.39 %218,396 0.85 %
Municipal securitiesMunicipal securities—  — %—  — %—  — %57,174  2.79 %57,174  2.79 %Municipal securities%%9,526 2.60 %59,707 2.62 %69,233 2.62 %
Non-agency residential mortgage-backed securitiesNon-agency residential mortgage-backed securities—  — %—  — %—  — %164  6.14 %164  6.14 %Non-agency residential mortgage-backed securities%%%163 6.35 %163 6.35 %
Collateralized loan obligationsCollateralized loan obligations668,353  2.73 %—  — %—  — %—  — %668,353  2.73 %Collateralized loan obligations685,931 1.91 %%%%685,931 1.91 %
Corporate debt securitiesCorporate debt securities—  — %122,301  4.99 %21,346  5.64 %—  — %143,647  5.08 %Corporate debt securities%129,960 5.01 %16,946 5.73 %%146,906 5.08 %
Total securities available-for-saleTotal 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 %Total securities available-for-sale$820,913 1.74 %$141,459 4.77 %$101,790 2.41 %$181,705 1.93 %$1,245,867 2.16 %
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NOTE 4 – LOANS AND ALLOWANCE FOR CREDIT LOSSES
The following table presents the balances in our loan portfolio as of the dates indicated:
($ in thousands)($ in thousands)June 30,
2020
December 31,
2019
($ in thousands)September 30,
2020
December 31,
2019
Commercial:Commercial:Commercial:
Commercial and industrialCommercial and industrial$1,436,990  $1,691,270  Commercial and industrial$1,586,824 $1,691,270 
Commercial real estateCommercial real estate822,694  818,817  Commercial real estate826,683 818,817 
MultifamilyMultifamily1,434,071  1,494,528  Multifamily1,476,803 1,494,528 
SBA(1)
SBA(1)
310,784  70,981  
SBA(1)
320,573 70,981 
ConstructionConstruction212,979  231,350  Construction197,629 231,350 
Consumer:Consumer:Consumer:
Single family residential mortgageSingle family residential mortgage1,370,785  1,590,774  Single family residential mortgage1,234,479 1,590,774 
Other consumerOther consumer39,393  54,165  Other consumer35,011 54,165 
Total loans(2)
Total loans(2)
$5,627,696  $5,951,885  
Total loans(2)
$5,678,002 $5,951,885 
Allowance for loan lossesAllowance for loan losses(90,370) (57,649) Allowance for loan losses(90,927)(57,649)
Loans receivable, netLoans receivable, net$5,537,326  $5,894,236  Loans receivable, net$5,587,075 $5,894,236 
(1)Includes 1,0691,128 PPP loans totaling $240.7$255.8 million, which included $5.6 millionnet of net unamortized loan fees totaling $4.1 million at JuneSeptember 30, 2020.
(2)Total loans includeIncludes net deferred loan origination costs/(fees) and premiums/(discounts), net, of $6.0$6.2 million and $14.3 million respectively, at JuneSeptember 30, 2020 and December 31, 2019.

Credit Quality Indicators
We categorize loans into risk categories based on relevant information about the ability of borrowers to repay their debt such as current financial information, historical payment experience, credit documentation, public information, and current economic trends, among other factors. We perform a historical loss analysis that is combined with a comprehensive loan to value analysis to analyze the associated risks in the current loan portfolio. We analyze loans individually and 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. We use the following definitions for credit risk ratings:
Pass: Loans risk 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 risk 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 of our credit position at some future date.
Substandard: Loans risk 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 risk rated have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. They are characterized by the distinct possibility that we 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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The following table presents the risk categories for total loans by class of loans and origination year as of JuneSeptember 30, 2020:
Term Loans Amortized Cost Basis by Origination YearTerm Loans Amortized Cost Basis by Origination Year
($ in thousands)($ in thousands)20202019201820172016PriorRevolving Loans Amortized Cost BasisRevolving Loans Amortized Cost Basis
Converted to Term
Total($ in thousands)20202019201820172016PriorRevolving Loans Amortized Cost BasisRevolving Loans Amortized Cost Basis
Converted to Term
Total
June 30, 2020
September 30, 2020September 30, 2020
Commercial:Commercial:Commercial:
Commercial and industrialCommercial and industrialCommercial and industrial
PassPass$59,122  $111,437  $104,299  $63,923  $41,163  $111,761  $851,369  $4,252  $1,347,326  Pass$78,237 $103,445 $65,134 $62,783 $47,497 $98,676 $1,053,219 $10,546 $1,519,537 
Special mentionSpecial mention—  6,382  5,988  —  —  1,379  812  189  14,750  Special mention473 4,605 1,367 6,445 
SubstandardSubstandard2,117  16,658  —  4,864  20,677  9,632  10,752  10,214  74,914  Substandard1,332 13,946 1,204 4,650 11,224 9,420 13,803 4,669 60,248 
DoubtfulDoubtful—  —  —  —  —  —  —  —  —  Doubtful594 594 
Commercial and industrialCommercial and industrial61,239  134,477  110,287  68,787  61,840  122,772  862,933  14,655  1,436,990  Commercial and industrial79,569 117,864 70,943 67,433 58,721 109,463 1,067,616 15,215 1,586,824 
Commercial real estateCommercial real estateCommercial real estate
PassPass15,261  153,017  215,385  72,949  102,465  198,242  36,628  1,586  795,533  Pass30,740 152,605 214,445 68,904 100,223 193,518 5,791 31,191 797,417 
Special mentionSpecial mention—  1,829  9,570  —  —  6,732  —  —  18,131  Special mention1,857 9,512 5,943 17,312 
SubstandardSubstandard—  —  —  —  —  9,030  —  —  9,030  Substandard11,954 11,954 
DoubtfulDoubtful—  —  —  —  —  —  —  —  —  Doubtful
Commercial real estateCommercial real estate15,261  154,846  224,955  72,949  102,465  214,004  36,628  1,586  822,694  Commercial real estate30,740 154,462 223,957 68,904 100,223 211,415 5,791 31,191 826,683 
MultifamilyMultifamilyMultifamily
PassPass84,873  421,045  334,029  272,657  131,646  187,823  —  —  1,432,073  Pass216,104 420,664 318,417 233,685 108,405 176,740 1,474,015 
Special mentionSpecial mention—  —  —  —  —  —  —  —  —  Special mention803 803 
SubstandardSubstandard—  —  —  —  —  1,998  —  —  1,998  Substandard1,985 1,985 
DoubtfulDoubtful—  —  —  —  —  —  —  —  —  Doubtful
MultifamilyMultifamily84,873  421,045  334,029  272,657  131,646  189,821  —  —  1,434,071  Multifamily216,104 420,664 318,417 233,685 108,405 179,528 0 0 1,476,803 
SBASBASBA
PassPass241,305  16,021  1,359  5,195  14,975  19,479  3,238  797  302,369  Pass256,444 15,949 1,327 4,258 11,855 19,136 3,021 445 312,435 
Special mentionSpecial mention—  —  —  226  417  948  —   1,597  Special mention219 417 914 1,556 
SubstandardSubstandard—  —  —  1,009  1,513  1,440  320  1,126  5,408  Substandard1,722 701 1,260 304 1,185 5,172 
DoubtfulDoubtful—  —  390  —  —  633  —  387  1,410  Doubtful391 632 387 1,410 
SBASBA241,305  16,021  1,749  6,430  16,905  22,500  3,558  2,316  310,784  SBA256,444 15,949 1,718 6,199 12,973 21,942 3,325 2,023 320,573 
ConstructionConstructionConstruction
PassPass14,139  33,423  63,217  86,787  —  —  —  —  197,566  Pass31,662 30,008 45,230 70,171 177,071 
Special mentionSpecial mention—  —  10,526  —  4,887  —  —  —  15,413  Special mention13,733 667 6,158 20,558 
SubstandardSubstandard—  —  —  —  —  —  —  —  —  Substandard
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DoubtfulDoubtful—  —  —  —  —  —  —  —  —  Doubtful
ConstructionConstruction14,139  33,423  73,743  86,787  4,887  —  —  —  212,979  Construction31,662 30,008 58,963 70,838 6,158 0 0 0 197,629 
Consumer:Consumer:Consumer:
Single family residential mortgageSingle family residential mortgageSingle family residential mortgage
PassPass31,007  166,668  329,175  204,392  297,182  281,160  20,844  —  1,330,428  Pass29,067 155,695 294,764 178,386 264,039 254,219 17,548 1,193,718 
Special mentionSpecial mention—  —  1,152  668  4,416  3,503  —  —  9,739  Special mention1,842 668 4,589 5,249 12,348 
SubstandardSubstandard—  1,064  1,697  3,414  3,900  20,543  —  —  30,618  Substandard1,040 493 1,018 5,394 20,468 28,413 
DoubtfulDoubtful—  —  —  —  —  —  —  —  —  Doubtful
Single family residential mortgageSingle family residential mortgage31,007  167,732  332,024 ��208,474  305,498  305,206  20,844  —  1,370,785  Single family residential mortgage29,067 156,735 297,099 180,072 274,022 279,936 17,548 0 1,234,479 
Other consumerOther consumerOther consumer
PassPass26  93  72  —   2,485  31,303  2,577  36,564  Pass43 60 1,929 29,453 2,326 33,811 
Special mentionSpecial mention—  —  27  —  —  33  248  147  455  Special mention20 31 314 365 
SubstandardSubstandard—  —  —  —  —  2,016  281  77  2,374  Substandard480 279 76 835 
DoubtfulDoubtful—  —  —  —  —  —  —  —  —  Doubtful
Other consumerOther consumer26  93  99  —   4,534  31,832  2,801  39,393  Other consumer43 0 80 0 0 2,440 30,046 2,402 35,011 
Total loansTotal loans$447,850  $927,637  $1,076,886  $716,084  $623,249  $858,837  $955,795  $21,358  $5,627,696  Total loans$643,629 $895,682 $971,177 $627,131 $560,502 $804,724 $1,124,326 $50,831 $5,678,002 

The following table presents the risk categories for total loans by class of loans as of December 31, 2019:
($ in thousands)($ in thousands)PassSpecial MentionSubstandardDoubtfulTotal($ in thousands)PassSpecial MentionSubstandardDoubtfulTotal
December 31, 2019December 31, 2019December 31, 2019
Commercial:Commercial:Commercial:
Commercial and industrialCommercial and industrial1,580,269  45,323  65,678  —  1,691,270  Commercial and industrial$1,580,269 $45,323 $65,678 $$1,691,270 
Commercial real estateCommercial real estate813,846  2,532  2,439  —  818,817  Commercial real estate813,846 2,532 2,439 818,817 
MultifamilyMultifamily1,484,931  4,256  5,341  —  1,494,528  Multifamily1,484,931 4,256 5,341 1,494,528 
SBASBA60,982  2,760  5,621  1,618  70,981  SBA60,982 2,760 5,621 1,618 70,981 
ConstructionConstruction229,771  1,579  —  —  231,350  Construction229,771 1,579 231,350 
Consumer:Consumer:Consumer:
Single family residential mortgageSingle family residential mortgage1,559,253  10,735  20,269  517  1,590,774  Single family residential mortgage1,559,253 10,735 20,269 517 1,590,774 
Other consumerOther consumer53,331  346  488  —  54,165  Other consumer53,331 346 488 54,165 
TotalTotal$5,782,383  $67,531  $99,836  $2,135  $5,951,885  Total$5,782,383 $67,531 $99,836 $2,135 $5,951,885 

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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)($ in thousands)30 - 59 Days Past Due60 - 89 Days Past DueGreater than 89 Days Past dueTotal Past DueCurrentTotal($ in thousands)30 - 59 Days Past Due60 - 89 Days Past DueGreater than 89 Days Past dueTotal Past DueCurrentTotal
June 30, 2020
September 30, 2020September 30, 2020
Non-Traditional Mortgage (NTM) loans:Non-Traditional Mortgage (NTM) loans:Non-Traditional Mortgage (NTM) loans:
Single family residential mortgageSingle family residential mortgage$9,262  $647  $18,552  $28,461  $481,144  $509,605  Single family residential mortgage$8,344 $1,080 $19,004 $28,428 $438,460 $466,888 
Other consumerOther consumer—  —  —  —  1,598  1,598  Other consumer1,608 1,608 
Total NTM loansTotal NTM loans9,262  647  18,552  28,461  482,742  511,203  Total NTM loans8,344 1,080 19,004 28,428 440,068 468,496 
Traditional loans:Traditional loans:Traditional loans:
Commercial:Commercial:Commercial:
Commercial and industrialCommercial and industrial891  28  13,072  13,991  1,422,999  1,436,990  Commercial and industrial142 18 5,641 5,801 1,581,023 1,586,824 
Commercial real estateCommercial real estate—  1,464  2,189  3,653  819,041  822,694  Commercial real estate826,683 826,683 
MultifamilyMultifamily664  —  —  664  1,433,407  1,434,071  Multifamily803 803 1,476,000 1,476,803 
SBASBA1,517  —  2,627  4,144  306,640  310,784  SBA845 910 2,535 4,290 316,283 320,573 
ConstructionConstruction—  —  —  —  212,979  212,979  Construction197,629 197,629 
Consumer:Consumer:Consumer:
Single family residential mortgageSingle family residential mortgage29,281  4,286  8,252  41,819  819,361  861,180  Single family residential mortgage33,387 4,628 4,629 42,644 724,947 767,591 
Other consumerOther consumer285  1,485  692  2,462  35,333  37,795  Other consumer846 226 1,072 32,331 33,403 
Total traditional loansTotal traditional loans32,638  7,263  26,832  66,733  5,049,760  5,116,493  Total traditional loans35,220 6,585 12,805 54,610 5,154,896 5,209,506 
TotalTotal$41,900  $7,910  $45,384  $95,194  $5,532,502  $5,627,696  Total$43,564 $7,665 $31,809 $83,038 $5,594,964 $5,678,002 
December 31, 2019December 31, 2019December 31, 2019
NTM loans:NTM loans:NTM loans:
Single family residential mortgageSingle family residential mortgage$3,973  $3,535  $13,019  $20,527  $577,830  $598,357  Single family residential mortgage$3,973 $3,535 $13,019 $20,527 $577,830 $598,357 
Other consumerOther consumer—  —  —  —  2,299  2,299  Other consumer2,299 2,299 
Total NTM loansTotal NTM loans3,973  3,535  13,019  20,527  580,129  600,656  Total NTM loans3,973 3,535 13,019 20,527 580,129 600,656 
Traditional loans:Traditional loans:Traditional loans:
Commercial:Commercial:Commercial:
Commercial and industrialCommercial and industrial780  5,670  3,862  10,312  1,680,958  1,691,270  Commercial and industrial780 5,670 3,862 10,312 1,680,958 1,691,270 
Commercial real estateCommercial real estate—  —  —  —  818,817  818,817  Commercial real estate818,817 818,817 
MultifamilyMultifamily—  —  —  —  1,494,528  1,494,528  Multifamily1,494,528 1,494,528 
SBASBA586  842  2,152  3,580  67,401  70,981  SBA586 842 2,152 3,580 67,401 70,981 
ConstructionConstruction—  —  —  —  231,350  231,350  Construction231,350 231,350 
Consumer:Consumer:Consumer:
Single family residential mortgageSingle family residential mortgage13,752  3,496  5,606  22,854  969,563  992,417  Single family residential mortgage13,752 3,496 5,606 22,854 969,563 992,417 
Other consumerOther consumer199  40  95  334  51,532  51,866  Other consumer199 40 95 334 51,532 51,866 
Total traditional loansTotal traditional loans15,317  10,048  11,715  37,080  5,314,149  5,351,229  Total traditional loans15,317 10,048 11,715 37,080 5,314,149 5,351,229 
TotalTotal$19,290  $13,583  $24,734  $57,607  $5,894,278  $5,951,885  Total$19,290 $13,583 $24,734 $57,607 $5,894,278 $5,951,885 
In accordance with regulatory guidance, borrowers that received forbearance or deferment, which were current prior to becoming affected by the global pandemic generally should not be reported as past due. At June 30, 2020, 0 loans that received forbearance or deferment were considered past due and, accordingly, are not included in the table above.
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Non-accrualNonaccrual Loans
The following table presents non-accrualnonaccrual loans as of the dates indicated:
June 30, 2020December 31, 2019September 30, 2020December 31, 2019
($ in thousands)($ 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($ in thousands)NTM LoansTraditional LoansTotal
Nonaccrual Loans
Nonaccrual Loans with no ACLNTM LoansTraditional LoansTotal
Nonaccrual Loans
Nonaccrual Loans with no ACL
Non-accrual loans
Nonaccrual loansNonaccrual loans
Commercial:Commercial:Commercial:
Commercial and industrialCommercial and industrial$—  $30,398  $30,398  $10,728  $—  $19,114  $19,114  $337  Commercial and industrial$$28,042 $28,042 $11,027 $$19,114 $19,114 $337 
Commercial real estateCommercial real estate—  6,633  6,633  6,632  —  —  —  —  Commercial real estate6,471 6,471 6,471 
SBASBA—  5,026  5,026  1,485  —  5,230  5,230  1,474  SBA4,919 4,919 1,621 5,230 5,230 1,474 
ConstructionConstruction—  —  —  —  —  —  —  —  Construction
Consumer:Consumer:Consumer:
Single family residential mortgageSingle family residential mortgage19,199  9,271  28,470  28,470  13,019  5,606  18,625  14,373  Single family residential mortgage20,619 5,648 26,267 24,385 13,019 5,606 18,625 14,373 
Other consumerOther consumer—  2,176  2,176  2,177  —  385  385  380  Other consumer638 638 638 385 385 380 
Total non-accrual loans$19,199  $53,504  $72,703  $49,492  $13,019  $30,335  $43,354  $16,564  
Total nonaccrual loansTotal nonaccrual loans$20,619 $45,718 $66,337 $44,142 $13,019 $30,335 $43,354 $16,564 

At JuneSeptember 30, 2020 and December 31, 2019, there were 0$547 thousand of loans that were past due 90 days or more and still accruing.
The non-traditional mortgage (“NTM”) loans on non-accrualnonaccrual status included $4.6$4.5 million of Green Loans and $14.6$16.1 million of interest-only loans at JuneSeptember 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 JuneSeptember 30, 2020 and December 31, 2019, consumer mortgage loans of $6.3$3.7 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”("MEVs"). As of June 30, 2020, we used economic forecasts released by our model provider during JuneSeptember 2020. SimilarIn contrast to the late MarchJune 2020 forecasts, these June 2020September forecasts reflect the onseta more favorable view of the economy (i.e. higher GDP growth rates and lower unemployment rates). Despite this, the Company-specific economic view recognizes that the foreseeable future is uncertain with respect to the search for a vaccine and effective treatments for COVID-19; the lack of clarity regarding the timing and amount of a potential government stimulus; the unknown impact of the COVID-19 pandemic its impact on MEVsthe economy and industry segments; and the future economic recovery. These forecasts published by our model provider have deteriorated sinceunknown benefit from Federal Reserve and other government actions. Accordingly, the end of the first quarter of 2020, with June baseline unemployment rate forecasts for 2020ACL level and 2021 increasing and real gross domestic product growth rates decreasing. Similar to our methodology used in the first quarter of 2020, weresulting provision reflect these uncertainties. The ACL also incorporated qualitative factors to account for certain loan portfolio characteristics that are not taken into consideration by ourthe third-party model including underlying strengths and weaknesses in the loan portfolio. As is the case with all estimates, we expect the ACL is expected to be impacted in future periods by economic volatility, changing economic forecasts, actual and projected credit experience, and underlying model assumptions;assumptions, and asset quality metrics, all of which may be better than or worse than our current estimate.estimates.
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-accrualnonaccrual 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 JuneSeptember 30, 2020 and December 31, 2019, the reserve for unfunded loan commitments was $4.2$3.2 million and $4.1 million, respectively, and was included in accrued expenses and other liabilities on the consolidated statements of financial condition.
The credit risk monitoring system is designed to identify impaired and potential problem loans, perform periodic evaluation of impairment, and determine the adequacy of the allowance for credit losses in a timely manner. In addition, management has adopted a credit policy that includes a credit review and control system that it believes should be effective in ensuring that we maintain an adequate allowance for credit losses. Further, the Board of Directors provides oversight and guidance for management’s allowance evaluation process.
The following table presents a summary of activity in the ACL for the periods indicated:
Three Months Ended June 30,Three Months Ended September 30,
($ in thousands)($ in thousands)20202019($ 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
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 periodBalance at beginning of period$78,243  $3,888  $82,131  $63,885  $4,208  $68,093  Balance at beginning of period$90,370 $4,195 $94,565 $59,523 $4,295 $63,818 
Loans charged offLoans charged off—  —  —  (2,451) —  (2,451) Loans charged off(1,821)(1,821)(35,546)(35,546)
Recoveries of loans previously charged offRecoveries of loans previously charged off608  —  608  76  —  76  Recoveries of loans previously charged off248 248 410 410 
Net charge-offsNet charge-offs608  —  608  (2,375) —  (2,375) Net charge-offs(1,573)(1,573)(35,136)(35,136)
Provision for (reversal of) credit lossesProvision for (reversal of) credit losses11,519  307  11,826  (1,987) 87  (1,900) Provision for (reversal of) credit losses2,130 (989)1,141 38,540 67 38,607 
Balance at end of periodBalance at end of period$90,370  $4,195  $94,565  $59,523  $4,295  $63,818  Balance at end of period$90,927 $3,206 $94,133 $62,927 $4,362 $67,289 

Six Months Ended June 30,Nine Months Ended September 30,
($ in thousands)($ in thousands)20202019($ 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
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 periodBalance at beginning of period$57,649  $4,064  $61,713  $62,192  $4,622  $66,814  Balance at beginning of period$57,649 $4,064 $61,713 $62,192 $4,622 $66,814 
Impact of adopting ASU 2016-13Impact of adopting ASU 2016-137,609  (1,226) 6,383  —  —  —  Impact of adopting ASU 2016-137,609 (1,226)6,383 
Loans charged offLoans charged off(2,076) —  (2,076) (3,514) —  (3,514) Loans charged off(3,897)(3,897)(39,060)(39,060)
Recoveries of loans previously charged offRecoveries of loans previously charged off958  —  958  320  —  320  Recoveries of loans previously charged off1,206 1,206 730 730 
Net charge-offsNet charge-offs(1,118) —  (1,118) (3,194) —  (3,194) Net charge-offs(2,691)(2,691)(38,330)(38,330)
Provision for (reversal of) credit lossesProvision for (reversal of) credit losses26,230  1,357  27,587  525  (327) 198  Provision for (reversal of) credit losses28,360 368 28,728 39,065 (260)38,805 
Balance at end of periodBalance at end of period$90,370  $4,195  $94,565  $59,523  $4,295  $63,818  Balance at end of period$90,927 $3,206 $94,133 $62,927 $4,362 $67,289 

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. Included in the 2019 loan loss provision was $3.0 million due to this charge-off increasing the loss factor for commercial and industrial loans used in our allowance for loan loss calculation.
On October 22, 2019, in connection with this matter, the Bank filed a complaint in the 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
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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. On October 1, 2020, the case was re-filed in the Superior Court of the State of California, Count of San Diego (Case No. 37-2020-00034947), asserting claims for Fraud, Aiding and Abetting Fraud, Conspiracy to Defraud, Negligent Misrepresentation, Breach of Fiduciary Duty, Negligence, Money Had And Received, and Conversion. 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, we undertook an extensive collateral review of all commercial lending relationships $5.0 million and above not secured by real estate, consisting of 53 loans representing $536.0 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 did not identify 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.

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Accrued interest receivable on loans receivable, net totaled $23.8$25.8 million and $18.9 million at JuneSeptember 30, 2020 and December 31, 2019, and is included within other assets in the accompanying consolidated statements of financial condition. Accrued interest receivable is excluded from the estimate of expected credit losses.
The following table presents the activity and balance in the ALL and the recorded investment, excluding accrued interest, in loans based on the impairment methodology as of or for the three and sixnine months ended JuneSeptember 30, 2020:
($ in thousands)($ in thousands)Commercial and IndustrialCommercial Real EstateMultifamilySBAConstructionSingle Family Residential MortgageOther ConsumerTotal($ in thousands)Commercial and IndustrialCommercial Real EstateMultifamilySBAConstructionSingle Family Residential MortgageOther ConsumerTotal
ALL:ALL:ALL:
Balance at March 31, 2020$23,573  $13,620  $20,072  $3,652  $7,052  $9,593  $681  $78,243  
Balance at June 30, 2020Balance at June 30, 2020$26,618 $17,372 $25,105 $4,184 $6,675 $9,665 $751 $90,370 
Charge-offsCharge-offs—  —  —  —  —  —  —  —  Charge-offs(1,597)(224)(1,821)
RecoveriesRecoveries119  —  —  —  —  488   608  Recoveries116 132 248 
Net recoveries (charge-offs)119  —  —  —  —  488   608  
Net charge-offsNet charge-offs(1,481)(92)(1,573)
Provision for (reversal of) credit lossesProvision for (reversal of) credit losses2,926  3,752  5,033  532  (377) (416) 69  11,519  Provision for (reversal of) credit losses1,454 2,001 454 (535)(470)(689)(85)2,130 
Balance at June 30, 2020$26,618  $17,372  $25,105  $4,184  $6,675  $9,665  $751  $90,370  
Balance at September 30, 2020Balance at September 30, 2020$26,591 $19,373 $25,559 $3,557 $6,205 $8,976 $666 $90,927 
Balance at December 31, 2019Balance at December 31, 2019$22,353  $5,941  $11,405  $3,120  $3,906  $10,486  $438  $57,649  Balance at December 31, 2019$22,353 $5,941 $11,405 $3,120 $3,906 $10,486 $438 $57,649 
Impact of adopting ASC 326Impact of adopting ASC 326662  4,847  1,809  388  103  (420) 220  7,609  Impact of adopting ASC 326662 4,847 1,809 388 103 (420)220 7,609 
Charge-offsCharge-offs(1,164) —  —  (356) —  (552) (4) (2,076) Charge-offs(2,761)(580)(552)(4)(3,897)
RecoveriesRecoveries149  —  —  121  —  639  49  958  Recoveries265 253 639 49 1,206 
Net (charge-offs) recoveriesNet (charge-offs) recoveries(1,015) —  —  (235) —  87  45  (1,118) Net (charge-offs) recoveries(2,496)(327)87 45 (2,691)
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  
Provision for (reversal of) credit lossesProvision for (reversal of) credit losses6,072 8,585 12,345 376 2,196 (1,177)(37)28,360 
Balance at September 30, 2020Balance at September 30, 2020$26,591 $19,373 $25,559 $3,557 $6,205 $8,976 $666 $90,927 
Individually evaluated for impairmentIndividually evaluated for impairment$9,697  $—  $—  $2,878  $—  $—  $—  $12,575  Individually evaluated for impairment$11,162 $$$2,409 $$191 $$13,762 
Collectively evaluated for impairmentCollectively evaluated for impairment16,921  17,372  25,105  1,306  6,675  9,665  751  77,795  Collectively evaluated for impairment15,429 19,373 25,559 1,148 6,205 8,785 666 77,165 
Total ending ALL balanceTotal ending ALL balance$26,618  $17,372  $25,105  $4,184  $6,675  $9,665  $751  $90,370  Total ending ALL balance$26,591 $19,373 $25,559 $3,557 $6,205 $8,976 $666 $90,927 
Loans:Loans:Loans:
Individually evaluated for impairmentIndividually evaluated for impairment$31,129  $5,168  $—  $4,959  $—  $32,999  $970  $75,225  Individually evaluated for impairment$28,475 $6,471 $$4,865 $$31,055 $638 $71,504 
Collectively evaluated for impairmentCollectively evaluated for impairment1,405,861  817,526  1,434,071  305,825  212,979  1,337,786  38,423  5,552,471  Collectively evaluated for impairment1,558,349 820,212 1,476,803 315,708 197,629 1,203,424 34,373 5,606,498 
Total ending loan balancesTotal ending loan balances$1,436,990  $822,694  $1,434,071  $310,784  $212,979  $1,370,785  $39,393  $5,627,696  Total ending loan balances$1,586,824 $826,683 $1,476,803 $320,573 $197,629 $1,234,479 $35,011 $5,678,002 

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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 sixnine months ended JuneSeptember 30, 2019:
($ in thousands)($ in thousands)Commercial and IndustrialCommercial Real EstateMultifamilySBAConstructionLease FinancingSingle Family Residential MortgageOther ConsumerTotal($ in thousands)Commercial and IndustrialCommercial Real EstateMultifamilySBAConstructionLease FinancingSingle Family Residential MortgageOther ConsumerTotal
ALL:ALL:ALL:
Balance at March 31, 2019$18,893  $6,838  $18,898  $3,057  $3,453  $—  $12,142  $604  $63,885  
Balance at June 30, 2019Balance at June 30, 2019$21,529 $6,877 $12,625 $3,120 $3,715 $$11,072 $585 $59,523 
Charge-offsCharge-offs(2,022) —  (6)  —  —  (425) (6) (2,451) Charge-offs(34,673)(738)(135)(35,546)
RecoveriesRecoveries11  —  —  60  —   —   76  Recoveries59 50 298 410 
Net (charge-offs) recoveriesNet (charge-offs) recoveries(2,011) —  (6) 68  —   (425) (4) (2,375) Net (charge-offs) recoveries(34,614)(688)(135)298 (35,136)
Provision for (reversal of) credit losses4,647  39  (6,267) (5) 262  (3) (645) (15) (1,987) 
Balance at June 30, 2019$21,529  $6,877  $12,625  $3,120  $3,715  $—  $11,072  $585  $59,523  
Provision (reversal)Provision (reversal)37,660 (298)(660)1,686 165 (3)342 (352)38,540 
Balance at September 30, 2019Balance at September 30, 2019$24,575 $6,579 $11,965 $4,118 $3,880 $0 $11,279 $531 $62,927 
Balance at December 31, 2018Balance at December 31, 2018$18,191  $6,674  $17,970  $1,827  $3,461  $—  $13,128  $941  $62,192  Balance at December 31, 2018$18,191 $6,674 $17,970 $1,827 $3,461 $$13,128 $941 $62,192 
Charge-offsCharge-offs(2,115) —  (6) (348) —  —  (951) (94) (3,514) Charge-offs(36,788)(6)(1,086)(1,086)(94)(39,060)
RecoveriesRecoveries44  —  —  101  —   150  19  320  Recoveries103 151 150 317 730 
Net (charge-offs) recoveriesNet (charge-offs) recoveries(2,071) —  (6) (247) —   (801) (75) (3,194) Net (charge-offs) recoveries(36,685)(6)(935)(936)223 (38,330)
Provision (reversal)Provision (reversal)5,409  203  (5,339) 1,540  254  (6) (1,255) (281) 525  Provision (reversal)43,069 (95)(5,999)3,226 419 (9)(913)(633)39,065 
Balance at June 30, 2019$21,529  $6,877  $12,625  $3,120  $3,715  $—  $11,072  $585  $59,523  
Balance at September 30, 2019Balance at September 30, 2019$24,575 $6,579 $11,965 $4,118 $3,880 $0 $11,279 $531 $62,927 
Individually evaluated for impairmentIndividually evaluated for impairment$1,239  $—  $—  $1,563  $—  $—  $—  $22  $2,824  Individually evaluated for impairment$4,614 $$$2,858 $$$$21 $7,493 
Collectively evaluated for impairmentCollectively evaluated for impairment20,290  6,877  12,625  1,557  3,715  —  11,072  563  56,699  Collectively evaluated for impairment19,961 6,579 11,965 1,260 3,880 11,279 510 55,434 
Total ending ALL balanceTotal ending ALL balance$21,529  $6,877  $12,625  $3,120  $3,715  $—  $11,072  $585  $59,523  Total ending ALL balance$24,575 $6,579 $11,965 $4,118 $3,880 $0 $11,279 $531 $62,927 
Loans:Loans:Loans:
Individually evaluated for impairmentIndividually evaluated for impairment$20,429  $—  $—  $3,262  $2,519  $—  $21,021  $1,169  $48,400  Individually evaluated for impairment$22,042 $$$5,696 $2,519 $$20,641 $822 $51,720 
Collectively evaluated for impairmentCollectively evaluated for impairment1,931,278  856,497  1,598,978  77,667  206,510  —  1,940,044  60,196  6,671,170  Collectively evaluated for impairment1,767,436 891,029 1,563,757 69,663 226,042 1,755,312 58,300 6,331,539 
Total ending loan balancesTotal ending loan balances$1,951,707  $856,497  $1,598,978  $80,929  $209,029  $—  $1,961,065  $61,365  $6,719,570  Total ending loan balances$1,789,478 $891,029 $1,563,757 $75,359 $228,561 $0 $1,775,953 $59,122 $6,383,259 
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The following table presents loans individually evaluated for impairment by class of loans as of the dates indicated. The recorded investment, excluding accrued interest, presents customer balances net of any partial charge-offs recognized on the loans and net of any deferred fees and costs and any purchase premium or discount.
June 30, 2020December 31, 2019September 30, 2020December 31, 2019
($ in thousands)($ in thousands)Unpaid Principal BalanceRecorded InvestmentAllowance for Loan LossesUnpaid Principal BalanceRecorded InvestmentAllowance for Loan Losses($ in thousands)Unpaid Principal BalanceRecorded InvestmentAllowance for Loan LossesUnpaid Principal BalanceRecorded InvestmentAllowance for Loan Losses
With no related ALL recorded:With no related ALL recorded:With no related ALL recorded:
Commercial:Commercial:Commercial:
Commercial and industrialCommercial and industrial$11,455  $11,383  $—  $1,471  $1,460  $—  Commercial and industrial$11,533 $11,460 $— $1,471 $1,460 $— 
Commercial real estateCommercial real estate5,418  5,168  —  —  —  —  Commercial real estate6,741 6,471 — — 
SBASBA1,474  1,417  —  1,439  1,379  —  SBA1,622 1,566 — 1,439 1,379 — 
Consumer:Consumer:Consumer:
Single family residential mortgageSingle family residential mortgage32,849  32,999  —  19,319  19,405  —  Single family residential mortgage29,048 29,174 — 19,319 19,405 — 
Other consumerOther consumer1,431  970  —  671  675  —  Other consumer1,093 638 — 671 675 — 
With an ALL recorded:With an ALL recorded:With an ALL recorded:
Commercial:Commercial:Commercial:
Commercial and industrialCommercial and industrial19,739  19,746  9,697  18,776  18,776  3,367  Commercial and industrial17,020 17,015 11,162 18,776 18,776 3,367 
SBASBA3,731  3,542  2,878  3,921  3,757  2,045  SBA3,482 3,299 2,409 3,921 3,757 2,045 
Consumer:Consumer:Consumer:
Single family residential mortgageSingle family residential mortgage—  —  —  4,213  4,252  574  Single family residential mortgage1,869 1,881 191 4,213 4,252 574 
Other consumerOther consumer—  —  —     Other consumer
TotalTotal$76,097  $75,225  $12,575  $49,814  $49,708  $5,990  Total$72,408 $71,504 $13,762 $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 EndedThree Months EndedNine Months Ended
($ in thousands)($ in thousands)Average Recorded InvestmentInterest Income RecognizedCash Basis Interest RecognizedAverage Recorded InvestmentInterest Income RecognizedCash Basis Interest Recognized($ in thousands)Average Recorded InvestmentInterest Income RecognizedCash Basis Interest RecognizedAverage Recorded InvestmentInterest Income RecognizedCash Basis Interest Recognized
June 30, 2020
September 30, 2020September 30, 2020
Commercial:Commercial:Commercial:
Commercial and industrialCommercial and industrial$29,992  $16  $18  $26,452  $37  $39  Commercial and industrial$22,016 $10 $11 $24,973 $47 $50 
Commercial real estateCommercial real estate5,210  —  —  3,992  —  —  Commercial real estate6,593 4,859 
SBASBA5,172    5,293    SBA5,235 5,274 10 
Consumer:Consumer:Consumer:
Single family residential mortgageSingle family residential mortgage33,356  56  34  31,420  110  79  Single family residential mortgage31,457 72 20 31,432 182 99 
Other consumerOther consumer2,084  —  —  1,351    Other consumer1,775 1,492 
TotalTotal$75,814  $75  $56  $68,508  $156  $128  Total$67,076 $85 $34 $68,030 $241 $162 
June 30, 2019
September 30, 2019September 30, 2019
Commercial:Commercial:Commercial:
Commercial and industrialCommercial and industrial$20,794  $255  $254  $12,921  $255  $254  Commercial and industrial$22,619 $40 $32 $16,154 $295 $286 
Commercial real estateCommercial real estate—  —  —  289  —  —  Commercial real estate193 
SBASBA3,297    3,571    SBA5,843 4,328 12 12 
ConstructionConstruction2,519  —  —  2,519  —  —  Construction2,519 2,519 
Consumer:Consumer:Consumer:
Single family residential mortgageSingle family residential mortgage21,092  58  48  20,208  116  97  Single family residential mortgage20,706 59 53 20,374 175 150 
Other consumerOther consumer1,177    1,011    Other consumer827 950 10 10 
TotalTotal$48,879  $321  $309  $40,519  $386  $365  Total$52,514 $106 $93 $44,518 $492 $458 
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Troubled Debt Restructurings
A modification of a loan constitutes a TDR when we, for economic or legal reasons related to a borrower’s financial difficulties, grant a concession to the borrower that we would not otherwise consider. A concession or concessions may be granted in various forms, including a below-market change in the stated interest rate, a reduction in the loan balance or accrued interest, an extension of the maturity date, or a note split with principal forgiveness. In order to determine whether a borrower is experiencing financial difficulty, an evaluation is performed of the probability that the borrower will be in payment default on any of its debt in the foreseeable future without the modification. This evaluation is performed under our internal underwriting policy.
TDR loans consisted of the following as of the dates indicated:
June 30, 2020December 31, 2019September 30, 2020December 31, 2019
($ in thousands)($ in thousands)NTM
Loans
Traditional LoansTotalNTM
Loans
Traditional LoansTotal($ in thousands)NTM
Loans
Traditional LoansTotalNTM
Loans
Traditional LoansTotal
Commercial:Commercial:Commercial:
Commercial and industrialCommercial and industrial$—  $20,808  $20,808  $—  $16,245  $16,245  Commercial and industrial$$20,355 $20,355 $$16,245 $16,245 
SBASBA—  266  266  —  266  266  SBA266 266 266 266 
Consumer:Consumer:Consumer:
Single family residential mortgageSingle family residential mortgage2,628  2,170  4,798  2,638  2,394  5,032  Single family residential mortgage2,620 2,169 4,789 2,638 2,394 5,032 
Other consumerOther consumer—  —  —  294  —  294  Other consumer294 294 
TotalTotal$2,628  $23,244  $25,872  $2,932  $18,905  $21,837  Total$2,620 $22,790 $25,410 $2,932 $18,905 $21,837 

We had commitments to lend to customers with outstanding loans that were classified as TDRs of $157 thousand and $135 thousand as of JuneSeptember 30, 2020 and December 31, 2019. Accruing TDRs were $5.6$5.4 million and non-accrualnonaccrual TDRs were $20.3$20.0 million at JuneSeptember 30, 2020, compared to accruing TDRs of $6.6 million and non-accrualnonaccrual TDRs of $15.2 million at December 31, 2019. The increase in TDRs during the sixnine months ended JuneSeptember 30, 2020 was primarily due to one commercial and industrial relationship.
The following table summarizes the pre-modification and post-modification balances of the new TDRs for the periods indicated:
Three Months EndedSix Months EndedThree Months EndedNine Months Ended
($ in thousands)($ in thousands)Number of LoansPre-Modification Outstanding Recorded InvestmentPost-Modification Outstanding Recorded InvestmentNumber of LoansPre-Modification Outstanding Recorded InvestmentPost-Modification Outstanding Recorded Investment($ 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
September 30, 2020September 30, 2020
Commercial:Commercial:Commercial:
Commercial and industrialCommercial and industrial—  $—  $—   $5,000  $5,000  Commercial and industrial$$$5,000 $5,000 
TotalTotal—  —  —   $5,000  $5,000  Total$5,000 $5,000 
June 30, 2019
September 30, 2019September 30, 2019
Commercial:Commercial:Commercial:
Commercial and industrialCommercial and industrial10  $17,339  $17,020  10  $17,339  $17,020  Commercial and industrial$$10 $17,339 $17,020 
SBASBA $3,214  $869   $3,214  $869  SBA$$$3,214 $869 
TotalTotal12  $20,553  $17,889  12  $20,553  $17,889  Total$$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 sixnine months ended JuneSeptember 30, 2020, there was 0 and 1 loan that was modified as a TDR during the past 12 months that had subsequent payment defaults. During each of the three and sixnine months ended JuneSeptember 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  
SBA $869  —  $—   $869  
Total12  $17,889  —  $—  12  $17,889  
Three Months Ended
Modification Type
Change in Principal Payments and Interest RatesChange in Principal PaymentsTotal
($ in thousands)CountAmountCountAmountCountAmount
September 30, 2020
Total0 $0 0 $0 0 $0 
September 30, 2019
Total0 $0 0 $0 0 $0 

Six Months EndedNine Months Ended
Modification TypeModification Type
Change in Principal Payments and Interest RatesChange in Principal PaymentsTotalChange in Principal Payments and Interest RatesChange in Principal PaymentsTotal
($ in thousands)($ in thousands)CountAmountCountAmountCountAmount($ in thousands)CountAmountCountAmountCountAmount
June 30, 2020
September 30, 2020September 30, 2020
Commercial:Commercial:Commercial:
Commercial and industrialCommercial and industrial $5,000  —  $—   $5,000  Commercial and industrial$5,000 $$5,000 
TotalTotal $5,000  —  $—   $5,000  Total1 $5,000 0 $0 1 $5,000 
June 30, 2019
September 30, 2019September 30, 2019
Commercial:Commercial:Commercial:
Commercial and industrialCommercial and industrial10  $17,020  —  $—  10  $17,020  Commercial and industrial10 $17,020 $10 $17,020 
SBASBA 869  —  —   869  SBA869 869 
Consumer:
Single family residential mortgage—  —  —  —  —  —  
TotalTotal12  $17,889  —  $—  12  $17,889  Total12 $17,889 0 $0 12 $17,889 


Purchases, Sales, and Transfers
From time to time, we purchase and sell 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 credit losses. During the three and sixnine months ended JuneSeptember 30, 2020 we purchased $25.8loans aggregating $129.0 million of single family residential mortgage loans.and $154.9 million. There were 0 purchases of loans during the three and sixnine months ended JuneSeptember 30, 2019.
The following table presents loans transferred from (to) loans held-for-sale by portfolio segment for the periods indicated:
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Three Months EndedSix Months Ended
($ 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) 

There were 0 sales of loans during the three and six months ended June 30, 2020. Loss on sale of loans during the three and six months ended June 30, 2020 totaled 0 and $27 thousand and related to certain adjustments for previously sold loans.
Three Months EndedNine Months Ended
($ in thousands)Transfers from Held-For-SaleTransfers (to) Held-For-SaleTransfers from Held-For-SaleTransfers (to) Held-For-Sale
September 30, 2020
Total$0 $0 $0 $0 
September 30, 2019
Commercial:
Commercial real estate$$$$(573)
Multifamily(752,087)
SBA(559)(559)
Consumer:
Single family residential mortgage(374,679)
Total$0 $(559)$0 $(1,127,898)

During the three and sixnine months ended JuneSeptember 30, 2019,2020, we sold $131.5 million and $374.7$17.6 million in single family residential mortgage loans resulting in a gain of $297 thousand.

Included in transfers to 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.

During the three and nine months ended September 30, 2019, we 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.

During the three and nine months ended September 30, 2019, we sold $144 thousand and $374.8 million in single family residential mortgage loans, resulting in gains of $125$8 thousand and $1.8 million.

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 confirm 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 of the dates indicated:
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 amortization 2,335  0.5 % 3,027  0.5 %
Total NTM - first liens398  509,605  99.7 %454  598,357  99.6 %
Other consumer:
Green Loans (HELOC) - second liens 1,598  0.3 % 2,299  0.4 %
Total NTM - second liens 1,598  0.3 % 2,299  0.4 %
Total NTM loans403  $511,203  100.0 %461  $600,656  100.0 %
Total loans receivable$5,627,696  $5,951,885  
% of total NTM loans to total loans receivable9.1 %10.1 %
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September 30, 2020December 31, 2019
($ in thousands)CountAmountPercentCountAmountPercent
Consumer:
Single family residential mortgage:
Green Loans (HELOC) - first liens57 $39,180 8.4 %69 $49,959 8.3 %
Interest-only - first liens295 425,406 90.8 %376 545,371 90.8 %
Negative amortization2,302 0.5 %3,027 0.5 %
Total NTM - first liens360 466,888 99.7 %454 598,357 99.6 %
Other consumer:
Green Loans (HELOC) - second liens1,608 0.3 %2,299 0.4 %
Total NTM - second liens1,608 0.3 %2,299 0.4 %
Total NTM loans365 $468,496 100.0 %461 $600,656 100.0 %
Total loans receivable$5,678,002 $5,951,885 
% of total NTM loans to total loans receivable8.3 %10.1 %

NOTE 5 – GOODWILL AND OTHER INTANGIBLE ASSETS, NET
At JuneSeptember 30, 2020 and December 31, 2019, we had goodwill of $37.1 million. We evaluate goodwill impairment as of August 31st each year, and more frequently if events or circumstances indicate that there may be impairment. We completed our most recent annual goodwill impairment test as of August 31, 20192020 and determined that 0 goodwill impairment existed. As a
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result of the economic volatility caused by COVID-19 pandemic in both the second and first quarters of 2020, we analyzed the risk indicators related to potential goodwill impairment. Based on these analyses, we did 0t identify any impairment to goodwill during the first six months of 2020, however, there can be no assurance that prolonged market volatility resulting from the COVID-19 pandemic or other factors will not result in impairments to goodwill or other intangibles in future periods.
Core deposit intangibles are amortized over their useful lives ranging from four to ten years. As of JuneSeptember 30, 2020, the weighted average remaining amortization period for core deposit intangibles was approximately 4.34.1 years.
($ in thousands)($ in thousands)Gross Carrying ValueAccumulated AmortizationNet Carrying Value($ in thousands)Gross Carrying ValueAccumulated AmortizationNet Carrying Value
June 30, 2020
September 30, 2020September 30, 2020
Core deposit intangiblesCore deposit intangibles$30,904  $27,612  $3,292  Core deposit intangibles$30,904 $27,965 $2,939 
December 31, 2019December 31, 2019December 31, 2019
Core deposit intangiblesCore deposit intangibles$30,904  $26,753  $4,151  Core deposit intangibles$30,904 $26,753 $4,151 

Aggregate amortization of intangible assets was $430$353 thousand and $621$500 thousand for the three months ended JuneSeptember 30, 2020 and 2019 and $859 thousand$1.2 million and $1.2$1.7 million for the sixnine months ended JuneSeptember 30, 2020 and 2019. The following table presents estimated future amortization expenses as of JuneSeptember 30, 2020:
($ in thousands)($ in thousands)Remainder of 20202021202220232024Total($ in thousands)Remainder of 20202021202220232024Total
Estimated future amortization expenseEstimated future amortization expense$659  $1,082  $799  $517  $235  $3,292  Estimated future amortization expense$306 $1,082 $799 $517 $235 $2,939 

NOTE 6 – FEDERAL HOME LOAN BANK ADVANCES AND OTHER BORROWINGS
The following table presents advances from the FHLB as of the dates indicated:
($ in thousands)June 30,
2020
December 31,
2019
Fixed rate:
Outstanding balance$624,000  
(1)
$730,000  
Interest rates ranging from— %
(2)
1.82 %
Interest rates ranging to3.32 %3.32 %
Weighted average interest rate2.24 %2.66 %
Variable rate:
Outstanding balance—  465,000  
Weighted average interest rate— %1.66 %
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($ in thousands)September 30,
2020
December 31,
2019
Fixed rate:
Outstanding balance$566,000 (1)$730,000 
Interest rates ranging from%(2)1.82 %
Interest rates ranging to3.32 %3.32 %
Weighted average interest rate2.39 %2.66 %
Variable rate:
Outstanding balance$$465,000 
Weighted average interest rate%1.66 %
(1)Excludes $6.8$6.5 million of unamortized debt issuance costs at JuneSeptember 30, 2020.    
(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 early 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 that is included in other noninterest expense.expense in the consolidated statements of operations. 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 the end of the secondthird quarter of 2020, FHLB advances included 0 overnight borrowings, $58.0$105.0 million maturing within three months, and $566.0$461.0 million maturing beyond three months with a weighted average life of 4.14.7 years and weighted average interest rate of 2.39%2.51%.
At JuneSeptember 30, 2020 and December 31, 2019, the Bank’s advances from the FHLB were collateralized by certain real estate loans with an aggregate unpaid principal balance of $2.66$2.41 billion and $3.05 billion. Based on this collateral, the Bank was eligible to borrow an additional $1.06 billion$890.0 million at JuneSeptember 30, 2020.
The Bank’s investment in capital stock of the FHLB of San Francisco totaled $19.4$17.6 million and $32.3 million at JuneSeptember 30, 2020 and December 31, 2019.
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During the second quarter of 2020, we expanded our existing secured borrowing capacity with the Federal Reserve 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 $370.4$427.7 million at JuneSeptember 30, 2020. Prior to participating in the BIC program, the Bank only pledged securities as collateral for access to the discount window. At JuneSeptember 30, 2020, the Bank has pledged certain qualifying loans with an unpaid principal balance of $870.1$879.9 million and securities with a carrying value of $23.0$23.5 million as collateral for this line of credit. Borrowings under thisthe BIC program are overnight advances with interest chargeable at the discount window (“primary credit”) borrowing rate. There were 0 borrowings under this arrangement for the three and sixnine months ended JuneSeptember 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 JuneSeptember 30, 2020.
The Bank also maintained repurchase agreements and had 0 outstanding securities sold under agreements to repurchase at JuneSeptember 30, 2020 and December 31, 2019. Availabilities and terms on repurchase agreements are subject to the counterparties' discretion and the pledging of additional investment securities.

NOTE 7 – LONG-TERM DEBT
The following table presents our long-term debt as of the dates indicated:
June 30, 2020December 31, 2019September 30, 2020December 31, 2019
($ in thousands)($ in thousands)Par ValueUnamortized Debt Issuance Cost and DiscountPar ValueUnamortized 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, 20255.25% senior notes due April 15, 2025$175,000  $(1,463) $175,000  $(1,579) 5.25% senior notes due April 15, 2025$175,000 $(1,377)$175,000 $(1,579)
TotalTotal$175,000  $(1,463) $175,000  $(1,579) Total$175,000 $(1,377)$175,000 $(1,579)

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We were in compliance with all covenants under our 5.25% senior notes due April 15, 2025 at JuneSeptember 30, 2020.

NOTE 8 – INCOME TAXES
For the three and sixnine months ended JuneSeptember 30, 2020, income tax benefitexpense (benefit) was $5.3$2.4 million and $7.5$(5.1) million, resulting in an effective tax rate of 12.9% and 35.9%. For the three and nine months ended September 30, 2019, income tax (benefit) expense was $(5.6) million and $1.4 million and the effective tax rate was 22.3%28.4% and 23.0%. For the three and six months ended June 30, 2019, income tax expense was $4.3 million and $7.0 million and the effective tax rate was 20.6% and 22.9%12.9%. Our effective tax rate of 22.3% and 23.0% for the three and sixnine months ended JuneSeptember 30, 2020 differs from the 21% federal statutory rate due to the impact of state taxes as well as various permanent tax credits.differences.
For interim periods, we generally utilize the estimated annual effective tax rate method under which we determine our provision (benefit) for income taxes based on the current estimate of our annual effective tax rate. For the three and nine months ended September 30, 2020, we utilized the discrete effective tax rate method for recording income taxes. We believe the use of the discrete effective tax rate method is more appropriate than the annual effective tax rate method as minor changes in the Company's estimated ordinary income for the entire year would have a significant effect on the estimated annual effective tax rate and would result in sizable variations in the customary relationship between income tax expense (benefit) and pretax accounting income (loss). Based on our actual and projected level of earnings and permanent tax differences for 2020, our estimated effective tax rate for the full year was refined this quarter to a negative tax rate ranging from approximately 10% to 15%. As a result of the change, we expect our fourth quarter effective tax rate to be approximately 25%.
We account 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 existing taxable temporary differences, future taxable income exclusive of reversing temporary differences and carryforwards, taxable income in prior carryback year(s), and future tax planning strategies. Based on this analysis, management determined, 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 $48.3$43.7 million and $44.9 million at JuneSeptember 30, 2020 and December 31, 2019, respectively. The overall increase in net deferred tax assets was primarily due to an increase in deferred tax assets of $1.5 million from the increase in net unrealized loss on securities available-for-sale and $1.9 million from the adoption of 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. We had unrecognized tax benefits of $1.0$1.1 million and $977 thousand at JuneSeptember 30, 2020 and December 31, 2019, respectively. We do not believe that the unrecognized tax benefits will change materially in the next twelve months. As of JuneSeptember 30, 2020, the total unrecognized tax benefit that, if recognized, would impact the effective tax rate was $820$846 thousand.
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At JuneSeptember 30, 2020 and December 31, 2019, we had 0 accrued interest or penalties. In the event we 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.
We are subject to U.S. federal income tax as well as income tax in multiple state jurisdictions. We are no longer subject to examination by U.S. federal taxing authorities for years before 2016. The statute of limitations for the assessment of California franchise taxes has expired for tax years before 2014 (other state income and franchise tax statutes of limitations vary by state).

NOTE 9 – DERIVATIVE INSTRUMENTS
We use derivative instruments and other risk management techniques to reduce our exposure to adverse fluctuations in interest rates and foreign currency exchange rates in accordance with our risk management policies.
During the three and sixnine months ended JuneSeptember 30, 2020, changes in fair value onof interest rate swaps and caps on loans and foreign exchange contracts were $(107)a gain of $3 thousand and $(288)loss of $285 thousand, respectively, compared to $(9.7) milliona gain of $517 thousand and $(9.8)a loss of $9.3 million for the three and sixnine months ended JuneSeptember 30, 2019, respectively, and were included in other income on the consolidated statements of operations.
For the three and nine months ended September 30, 2019, other income included 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 loss on these interest rate swaps was due to a decline in interest rates since their execution and was offset by the $8.9 million gross gain realized on the loans sold into the securitization in the third quarter of 2019.
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The following table presents the notional amount and fair value of derivative instruments included in the consolidated statements of financial condition as of the dates indicated.
June 30, 2020December 31, 2019September 30, 2020December 31, 2019
($ in thousands)($ in thousands)Notional AmountFair
Value(1)
Notional AmountFair
Value(1)
($ in thousands)Notional AmountFair
Value(1)
Notional AmountFair
Value(1)
Derivative assets:Derivative assets:Derivative assets:
Interest rate swaps and caps on loansInterest rate swaps and caps on loans$69,266  $8,598  $70,674  $3,445  Interest rate swaps and caps on loans$68,556 $8,163 $70,674 $3,445 
Foreign exchange contractsForeign exchange contracts3,657  137  4,643  138  Foreign exchange contracts3,548 45 4,643 138 
TotalTotal$72,923  $8,735  $75,317  $3,583  Total$72,104 $8,208 $75,317 $3,583 
Derivative liabilities:Derivative liabilities:Derivative liabilities:
Interest rate swaps and caps on loansInterest rate swaps and caps on loans$69,266  $9,239  $70,674  3,717  Interest rate swaps and caps on loans$68,556 $8,749 $70,674 3,717 
Foreign exchange contractsForeign exchange contracts3,657  54  4,643  136  Foreign exchange contracts3,548 14 4,643 136 
TotalTotal$72,923  $9,293  $75,317  $3,853  Total$72,104 $8,763 $75,317 $3,853 
(1)The fair value of interest rate swaps and caps on loans are included in other assets and accrued expenses and other liabilities, respectively, in the accompanying consolidated statements of financial condition.
We have entered into agreements with counterparty financial institutions, which include master netting agreements that provide for the net settlement of all contracts with a single counterparty in the event of default. We elect, however, to account for all derivatives with counterparty institutions on a gross basis.
NOTE 10 – EMPLOYEE STOCK COMPENSATION
On May 31, 2018, our stockholders approved the Company's 2018 Omnibus Stock Incentive Plan (“2018 Omnibus Plan”). The 2018 Omnibus Plan provides that the maximum number of shares available for awards is 4,417,882. As of JuneSeptember 30, 2020, 3,359,9223,372,588 shares were available for future awards.
Stock-based Compensation Expense
The following table presents stock-based compensation expense and the related tax benefits for the periods indicated:
Three Months Ended
June 30,
Six Months Ended
June 30,
Three Months Ended
September 30,
Nine Months Ended
September 30,
($ in thousands)($ in thousands)2020201920202019($ in thousands)2020201920202019
Stock optionsStock options$ $(24) $ $(16) Stock options$$$$(13)
Restricted stock awards and unitsRestricted stock awards and units1,468  1,521  3,042  2,366  Restricted stock awards and units1,346 1,491 4,388 3,857 
Total share-based compensation expenseTotal share-based compensation expense$1,470  $1,497  $3,046  $2,350  Total share-based compensation expense$1,346 $1,494 $4,392 $3,844 
Related tax benefitsRelated tax benefits$433  $440  $897  $691  Related tax benefits$396 $439 $1,293 $1,130 

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The following table presents unrecognized stock-based compensation expense as of JuneSeptember 30, 2020:
($ in thousands)Unrecognized ExpenseWeighted-Average Remaining Expected Recognition Period
Restricted stock awards and restricted stock units9,530 $8,189 2.32.1 years
Total$9,530 8,189 2.32.1 years
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Stock Options
We issued stock options to certain employees, officers, and directors. Stock options are issued at the closing market price immediately before the grant date and generally have a three to five year vesting period and contractual terms of seven to ten years. We recognize an income tax deduction upon exercise of a stock option to the extent taxable income is recognized by the option holder. In the case of a non-qualified stock option, the option holder recognizes taxable income based on the fair market value of the shares acquired at the time of exercise less the exercise price.
The following table represents stock option activity for the three months ended JuneSeptember 30, 2020:
Three Months Ended June 30, 2020Three Months Ended September 30, 2020
($ in thousands except per share data)($ in thousands except per share data)Number of SharesWeighted-Average Exercise Price Per ShareWeighted-Average Remaining Contract TermAggregated 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 periodOutstanding at beginning of period55,069  $13.96  4.0 yearsOutstanding at beginning of period55,069 $13.96 3.7 years
Outstanding at end of periodOutstanding at end of period55,069  $13.96  3.7 years$(194) Outstanding at end of period55,069 $13.96 3.5 years$(210)
Exercisable at end of periodExercisable at end of period52,821  $13.97  3.6 years$(187) Exercisable at end of period55,069 $13.96 3.5 years$(210)

The following table represents stock option activity for the sixnine months ended JuneSeptember 30, 2020:
Six Months Ended June 30, 2020Nine Months Ended September 30, 2020
($ in thousands except per share data)($ in thousands except per share data)Number of SharesWeighted-Average Exercise Price Per ShareWeighted-Average Remaining Contract TermAggregated 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 periodOutstanding at beginning of period62,521  $13.85  4.3 yearsOutstanding at beginning of period62,521 $13.85 4.3 years
ExercisedExercised(7,452) $13.05  5.2 yearsExercised(7,452)$13.05 5.2 years
Outstanding at end of periodOutstanding at end of period55,069  $13.96  3.7 years$(194) Outstanding at end of period55,069 $13.96 3.5 years$(210)
Exercisable at end of periodExercisable at end of period52,821  $13.97  3.6 years$(187) Exercisable at end of period55,069 $13.96 3.5 years$(210)

The following table sets forth information regarding unvested stock options for the three and sixnine months ended JuneSeptember 30, 2020:
Three Months Ended
June 30, 2020
Six Months Ended
June 30, 2020
Three Months Ended
September 30, 2020
Nine Months Ended
September 30, 2020
Number of SharesWeighted-Average Exercise Price Per ShareNumber of SharesWeighted-Average
Exercise Price
Per Share
Number of SharesWeighted-Average Exercise Price Per ShareNumber of SharesWeighted-Average
Exercise Price
Per Share
Outstanding at beginning of periodOutstanding at beginning of period2,248  $13.75  2,248  $13.75  Outstanding at beginning of period2,248 $13.75 2,248 $13.75 
VestedVested—  $—  —  $—  Vested(2,248)$13.75 (2,248)$13.75 
ForfeitedForfeited—  $—  —  $—  Forfeited$$
Outstanding at end of periodOutstanding at end of period2,248  $13.75  2,248  $13.75  Outstanding at end of period0 $0 0 $0 


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Restricted Stock Awards and Restricted Stock Units
We also have 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 our 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 our profitability and regulatory standing. The actual amounts of stock released upon vesting will be determined by the Compensation Committee of our Board of Directors upon the Committee's certification of the satisfaction of the target level of performance. We recognize an income tax deduction in an amount equal to the taxable income reported by the holders of the
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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 sixnine months ended JuneSeptember 30, 2020:
Three Months Ended
June 30, 2020
Six Months Ended
June 30, 2020
Three Months Ended
September 30, 2020
Nine Months Ended
September 30, 2020
Number of SharesWeighted Average Grant Date Fair Value Per ShareNumber of SharesWeighted
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 periodOutstanding at beginning of period1,083,107  $15.65  923,482  $15.74  Outstanding at beginning of period912,670 $14.91 923,482 $15.74 
Granted (1)
Granted (1)
84,998  $8.76  354,136  $13.79  
Granted (1)
4,457 $11.22 358,593 $13.76 
Vested (2)
Vested (2)
(231,362) $16.09  (293,695) $15.95  
Vested (2)
(15,881)$15.42 (309,576)$15.92 
Forfeited (3)
Forfeited (3)
(24,073) $18.20  (71,253) $16.85  
Forfeited (3)
(18,005)$16.09 (89,258)$16.69 
Outstanding at end of periodOutstanding at end of period912,670  $14.91  912,670  $14.91  Outstanding at end of period883,241 $14.86 883,241 $14.86 
(1)There were 0 and 78,771 performance-based shares/units included in shares granted for the three and sixnine months ended JuneSeptember 30, 2020.
(2)There were 13,0740 and 18,473 performance-based shares/units included in vested shares for the three and sixnine months ended JuneSeptember 30, 2020.
(3)The number of forfeited shares includes aggregate performance-based shares/units of 1,7820 and 17,404 for the three and sixnine months ended JuneSeptember 30, 2020.

Stock Appreciation Rights
On August 21, 2012, we granted to the then, and now former, chief executive officer, a ten-year stock appreciation right (“SAR”).
The following table represents SARs activity and the weighted average exercise price per share as of and for the three months ended JuneSeptember 30, 2020:
Three Months Ended June 30, 2020Three Months Ended September 30, 2020
($ in thousands except per share data)($ in thousands except per share data)Number of SharesWeighted-Average Exercise Price Per ShareWeighted-Average Remaining Contract TermAggregated 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 periodOutstanding at beginning of period1,559,012  $11.60  2.4 years$(5,616) Outstanding at beginning of period1,559,012 $11.60 2.1 years$(1,812)
Outstanding at end of periodOutstanding at end of period1,559,012  $11.60  2.1 years$(1,812) Outstanding at end of period1,559,012 $11.60 1.9 years$(2,264)
Exercisable at end of periodExercisable at end of period1,559,012  $11.60  2.1 years$(1,812) Exercisable at end of period1,559,012 $11.60 1.9 years$(2,264)

The following table represents SARs activity and the weighted average exercise price per share as of and for the sixnine months ended JuneSeptember 30, 2020:
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Six Months Ended June 30,Nine Months Ended September 30,
($ in thousands except per share data)($ in thousands except per share data)Number of SharesWeighted-Average Exercise Price Per ShareWeighted-Average Remaining Contract TermAggregated 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 periodOutstanding at beginning of period1,559,012  $11.60  2.6 years$8,508  Outstanding at beginning of period1,559,012 $11.60 2.6 years$8,508 
Outstanding at end of periodOutstanding at end of period1,559,012  $11.60  2.1 years$(1,812) Outstanding at end of period1,559,012 $11.60 1.9 years$(2,264)
Exercisable at end of periodExercisable at end of period1,559,012  $11.60  2.1 years$(1,812) Exercisable at end of period1,559,012 $11.60 1.9 years$(2,264)

NOTE 11 – STOCKHOLDERS’ EQUITY
Preferred Stock
We 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 our
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outstanding shares of preferred stock have a $1,000 per share liquidation preference. The following table presents our total outstanding preferred stock as of the dates indicated:
June 30, 2020December 31, 2019
($ 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 $189,825 
September 30, 2020December 31, 2019
($ in thousands)Shares OutstandingLiquidation PreferenceCarrying ValueShares OutstandingLiquidation PreferenceCarrying Value
Series D
7.375% non-cumulative perpetual
93,270 $93,270 $89,922 96,629 $96,629 $93,162 
Series E
7.00% non-cumulative perpetual
98,702 98,702 94,956 100,477 100,477 96,663 
Total191,972 $191,972 $184,878 197,106 $197,106 $189,825 

Series D Preferred Stock
During the three and sixnine months ended JuneSeptember 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 53,006100 and 134,310134,410 outstanding Series D Depositary Shares and the related retirement of 1,3253 and 3,3573,360 outstanding shares of Series D Preferred Stock. The repurchase price aggregated to $1.2 millionDuring the three and nine months ended September 30, 2020 we paid $2 thousand and $2.7 million. The $40 thousandmillion to repurchase Series D Preferred Stock, resulting in a $0 and $541 thousand difference between the consideration paid and the repurchased shares' carrying value. When the consideration paid to repurchase shares exceeds the repurchased shares' carrying value, the difference reduces net income allocated to common shareholders. When the consideration paid to repurchase shares is less than the repurchased shares' carrying value, the difference increases net income allocated to common shareholders.
On August 23, 2019, the Company completed a tender offer for Series D Depositary Shares, resulting in the repurchase of 734,823 outstanding Series D Depository Shares and the related retirement of 18,371 outstanding shares of Series D Preferred Stock. During the nine-month period ended September 30, 2019 we paid $19.4 million to repurchase Series D Preferred Stock, was reclassified to retained earningsresulting in a $1.7 million difference between the consideration paid and resulted in an increase to net (loss) income allocated to common stockholders.the repurchased shares' carrying value.
Series E Preferred Stock
During the three and sixnine months ended JuneSeptember 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 57,0656,502 and 64,46570,967 outstanding Series E Depositary Shares and the related retirement of 1,427163 and 1,6121,774 outstanding shares of Series E Preferred Stock. The repurchase price aggregated to $1.4 millionDuring the three and $1.5 million. The $9nine months ended September 30, 2020, we paid $163 thousand and $34$1.7 million to repurchase Series E Preferred Stock, resulting in a $6 thousand and $27 thousand difference between the consideration paid and the repurchased shares' carrying valuevalue.
On August 23, 2019, the Company completed a tender offer for Series E Depositary Shares, resulting in the repurchase of 980,928 outstanding Series E Depository Shares and the related retirement of 24,523 outstanding shares of Series E Preferred Stock. During the nine months ended September 30, 2019. we paid $26.6 million to repurchase Series E Preferred Stock, was reclassified to retained earningsresulting in a $3.4 million difference between the consideration paid and resulted in an increase to net (loss) income allocated to common stockholders.the repurchased shares' carrying value.
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 JuneSeptember 30, 2020. During the sixnine months ended JuneSeptember 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 $12.0 million. Purchases may be made in open-market transactions, in block transactions on or off an exchange, in privately negotiated transactions, or by other means as determined by our management and in accordance with the regulations of the Securities and Exchange Commission. The timing of purchases and the number of shares repurchased under the program will depend on a variety of factors including price, trading volume, corporate and regulatory requirements, and market conditions.
Change in Accumulated Other Comprehensive (Loss) Income ("AOCI")
Our AOCI includes unrealized gain (loss) on securities available-for-sale. Changes to AOCI are presented net of the tax effect as a component of stockholders' equity. Reclassifications from AOCI occur when a security is sold, called or matures and are recorded on the consolidated statements of operations either as a gain or loss. The following table presents changes to AOCI for the periods indicated:
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Three Months Ended
June 30,
Six Months Ended
June 30,
Three Months Ended
September 30,
Nine Months Ended
September 30,
($ in thousands)($ in thousands)2020201920202019($ in thousands)2020201920202019
Unrealized(loss) gain on securities available-for-sale
Unrealized (loss) gain on securities available-for-saleUnrealized (loss) gain on securities available-for-sale
Balance at beginning of periodBalance at beginning of period$(54,148) $(18,091) $(11,900) $(24,117) Balance at beginning of period$(15,565)$(12,668)$(11,900)$(24,117)
Unrealized gain (loss) arising during the periodUnrealized gain (loss) arising during the period56,701  7,678  (3,182) 16,422  Unrealized gain (loss) arising during the period23,859 (1,408)20,677 15,014 
Unrealized gain arising from the reclassification of securities held-to-maturity to securities available-for-saleUnrealized gain arising from the reclassification of securities held-to-maturity to securities available-for-sale
Impairment loss on investment securitiesImpairment loss on investment securities731 731 
Reclassification adjustment from other comprehensive incomeReclassification adjustment from other comprehensive income(2,011) —  (2,011) (208) Reclassification adjustment from other comprehensive income5,063 (2,011)4,855 
Tax effect of current period changesTax effect of current period changes(16,107) (2,255) 1,528  (4,765) Tax effect of current period changes(7,028)(1,289)(5,500)(6,054)
Total changes, net of taxesTotal changes, net of taxes38,583  5,423  (3,665) 11,449  Total changes, net of taxes16,831 3,097 13,166 14,546 
Balance at end of periodBalance at end of period$(15,565) $(12,668) $(15,565) $(12,668) Balance at end of period$1,266 $(9,571)$1,266 $(9,571)

NOTE 12 – VARIABLE INTEREST ENTITIES
We hold ownership interests in alternative energy partnerships and qualified affordable housing partnerships and have a variable interest in a multifamily securitization trust. We evaluate our interests in these entities to determine whether they meet the definition of a variable interest entity (VIE) and whether we 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 we hold could potentially be significant to the VIE, we consider both qualitative and quantitative factors regarding the nature, size, and form of our involvement with the VIE. We have determined that our interests in these entities meet the definition of variable interests.
Unconsolidated VIEs
Multifamily Securitization
During the third quarter of 2019, we 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. We determined that we are not the primary beneficiary of this VIE as we 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, we have the obligation to guarantee credit losses up to 12% 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 us in the event that all of the assets in the securitization trust are deemed worthless is $68.8 million, which represents the aforementioned obligation to guarantee credit losses up to 12%. We believe that the loss exposure on the 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 JuneSeptember 30, 2020, we have a $3.5 million repurchase reserve related to this VIE.
Alternative Energy Partnerships
We 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 newly established residential and commercial solar leases and power purchase agreements. As a result of our investments, we 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 individual consumers for a fixed period of time. While our interest in the alternative energy partnerships meets the definition of a VIE in accordance with ASC 810, we have determined that we are not the primary beneficiary because we 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 we are not the primary beneficiary, we did not consolidate the entities.
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We use the Hypothetical Liquidation at Book Value (HLBV) method to account for our 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 our 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, we 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. Investments in alternative energy partnerships totaled $27.0$27.8 million and $29.3 million at JuneSeptember 30, 2020 and December 31, 2019.
The following table presents information regarding activity in our alternative energy partnerships for the periods indicated:
Three Months Ended
June 30,
Six Months Ended
June 30,
Three Months Ended
September 30,
Nine Months Ended
September 30,
($ in thousands)($ in thousands)2020201920202019($ in thousands)2020201920202019
FundingsFundings$—  $235  $3,631  $235  Fundings$$$3,631 $235 
Cash distribution from investmentCash distribution from investment547  535  1,001  995  Cash distribution from investment611 534 1,612 1,529 
Gain (loss) on investments in alternative energy partnershipsGain (loss) on investments in alternative energy partnerships167  355  (1,738) (1,595) Gain (loss) on investments in alternative energy partnerships1,430 940 (308)(655)
Income tax credits recognizedIncome tax credits recognized—  1,723  —  1,723  Income tax credits recognized862 2,585 
Tax (expense) benefit recognized from HLBV application(38) 380  398  380  
Tax expense (benefit) recognized from HLBV applicationTax expense (benefit) recognized from HLBV application185 254 (111)(177)

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)($ in thousands)June 30,
2020
December 31,
2019
($ in thousands)September 30,
2020
December 31,
2019
CashCash$2,958  $4,224  Cash$3,101 $4,224 
Equipment, net of depreciationEquipment, net of depreciation244,961  248,920  Equipment, net of depreciation242,988 248,920 
Other assetsOther assets6,751  6,301  Other assets7,291 6,301 
Total unconsolidated assetsTotal unconsolidated assets$254,670  $259,445  Total unconsolidated assets$253,380 $259,445 
Total unconsolidated liabilitiesTotal unconsolidated liabilities$6,326  $7,143  Total unconsolidated liabilities$6,048 $7,143 
Maximum loss exposureMaximum loss exposure$26,967  $32,525  Maximum loss exposure$27,786 $32,525 

The maximum loss exposure that would be absorbed by us in the event that all of the assets in alternative energy partnerships are deemed worthless is $27.0$27.8 million, which is our recorded investment amount at JuneSeptember 30, 2020.
We believe that the loss exposure on our investments is reduced considering our return on our investment is provided not only by the cash flows of the underlying client leases and power purchase agreements, but also through the significant tax benefits, including federal tax credits generated from the investments. In addition, our exposure is further limited as the arrangements include a transition manager to support any transition of the solar company sponsor, whose role includes that of the servicer and operation and maintenance provider, in the event the sponsor would be required to be removed from its responsibilities (e.g., bankruptcy, breach of contract, etc.), thereby further limiting our exposure..
Qualified Affordable Housing Partnerships
We invest in limited partnerships that operate qualified affordable housing projects. The returns on these investments are generated primarily through allocated Federal tax credits and other tax benefits. In addition, these investments contribute to our compliance with the Community Reinvestment Act. These limited partnerships are considered to be VIEs, because either (i) they do not have sufficient equity investment at risk or (ii) the limited partners with equity at risk do not have substantive kick-out rights through voting rights or substantive participating rights over the general partner. As a limited partner, we are not the primary beneficiary because the general partner has the ability to direct the activities of the VIEs that most significantly impact their economic performance. As a result, we do not consolidate these partnerships.
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The following table presents information regarding balances in our qualified affordable housing partnerships for the periods indicated:
($ in thousands)($ in thousands)June 30,
2020
December 31,
2019
($ in thousands)September 30,
2020
December 31,
2019
Ending balance(1)
Ending balance(1)
$46,167  $36,462  
Ending balance(1)
$44,443 $36,462 
Aggregate funding commitmentAggregate funding commitment61,278  49,278  Aggregate funding commitment61,278 49,278 
Total amount fundedTotal amount funded40,776  26,905  Total amount funded42,378 26,905 
Unfunded commitmentUnfunded commitment20,502  22,373  Unfunded commitment18,900 22,373 
Maximum loss exposureMaximum loss exposure46,167  36,462  Maximum loss exposure44,443 36,462 
(1)Included in other assets in the accompanying consolidated statementsConsolidated Statements of financial condition.Financial Condition.
The following table presents information regarding activity in our qualified affordable housing partnerships for the periods indicated:
Three Months Ended
June 30,
Six Months Ended
June 30,
Three Months Ended
September 30,
Nine Months Ended
September 30,
($ in thousands)($ in thousands)2020201920202019($ in thousands)2020201920202019
FundingsFundings$9,312  $—  $13,871  $454  Fundings$1,602 $8,325 $15,473 $8,779 
Proportional amortization recognizedProportional amortization recognized1,148  553  2,295  1,190  Proportional amortization recognized1,724 1,464 4,019 2,654 
Income tax credits recognizedIncome tax credits recognized1,152  554  2,208  1,109  Income tax credits recognized1,007 724 3,215 1,833 

NOTE 13 – EARNINGS (LOSS) EARNINGS PER COMMON SHARE
The following table presents computations of basic and diluted earnings (loss) earnings per common share ("EPS") for the three and sixnine months ended JuneSeptember 30, 2020:
Three Months Ended June 30, 2020Six Months Ended June 30, 2020Three Months Ended September 30, 2020Nine Months Ended September 30, 2020
($ in thousands except per share data)($ in thousands except per share data)Common StockClass B
Common Stock
Common StockClass B Common Stock($ in thousands except per share data)Common StockClass B
Common Stock
Common StockClass B Common Stock
Loss from operations$(18,273) $(176) $(24,804) $(238) 
Net income (loss)Net income (loss)$15,761 $152 $(9,043)$(86)
Less: Income allocated to participating securitiesLess: Income allocated to participating securities(278)(3)
Less: participating securities dividendsLess: participating securities dividends(93) (1) (186) (2) Less: participating securities dividends(93)(1)(279)(3)
Less: preferred stock dividendsLess: preferred stock dividends(3,409) (33) (6,909) (66) Less: preferred stock dividends(3,414)(33)(10,323)(99)
Less: preferred stock redemptionLess: preferred stock redemption49  —  570   Less: preferred stock redemption(7)563 
Net loss allocated to common stockholders$(21,726) $(210) $(31,329) $(301) 
Net income (loss) allocated to common stockholdersNet income (loss) allocated to common stockholders$11,969 $115 $(19,082)$(183)
Weighted average common shares outstandingWeighted average common shares outstanding49,553,598  477,321  49,770,527  477,321  Weighted average common shares outstanding49,631,334 477,321 49,723,791 477,321 
Dilutive effects of restricted shares/unitsDilutive effects of restricted shares/units—  —  —  —  Dilutive effects of restricted shares/units82,278 
Dilutive effects of stock optionsDilutive effects of stock options—  —  —  —  Dilutive effects of stock options
Average shares and dilutive common sharesAverage shares and dilutive common shares49,553,598  477,321  49,770,527  477,321  Average shares and dilutive common shares49,713,612 477,321 49,723,791 477,321 
Basic loss per common share$(0.44) $(0.44) $(0.63) $(0.63) 
Basic earnings (loss) per common shareBasic earnings (loss) per common share$0.24 $0.24 $(0.38)$(0.38)
Diluted loss per common share$(0.44) $(0.44) $(0.63) $(0.63) 
Diluted earnings (loss) per common shareDiluted earnings (loss) per common share$0.24 $0.24 $(0.38)$(0.38)

For the three and sixnine months ended JuneSeptember 30, 2020, there were 960,090643,901 and 960,883938,526 of restricted shares/units and 55,069 and 55,43855,314 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 sixnine months ended JuneSeptember 30, 2019:
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Three Months Ended June 30, 2019Six Months Ended June 30, 2019Three Months Ended September 30, 2019Nine Months Ended September 30, 2019
($ in thousands except per share data)($ in thousands except per share data)Common StockClass B Common StockCommon StockClass B Common Stock($ in thousands except per share data)Common StockClass B Common StockCommon StockClass B Common Stock
Income from operations$16,426  $156  $23,397  $222  
Net (loss) incomeNet (loss) income$(13,999)$(133)$9,398 $89 
Less: income allocated to participating securitiesLess: income allocated to participating securities(268) (3) (152) (1) Less: income allocated to participating securities
Less: participating securities dividendsLess: participating securities dividends(93) (1) (292) (3) Less: participating securities dividends(93)(1)(386)(4)
Less: preferred stock dividendsLess: preferred stock dividends(4,268) (40) (8,535) (81) Less: preferred stock dividends(3,371)(32)(11,906)(113)
Less: preferred stock redemptionLess: preferred stock redemption(5,045)(48)(5,045)(48)
Net income allocated to common stockholders$11,797  $112  $14,418  $137  
Net loss allocated to common stockholdersNet loss allocated to common stockholders$(22,508)$(214)$(7,939)$(76)
Weighted average common shares outstandingWeighted average common shares outstanding50,379,816  477,321  50,290,107  477,321  Weighted average common shares outstanding50,404,906 477,321 50,327,108 477,321 
Dilutive effects of stock unitsDilutive effects of stock units103,677  —  119,967  —  Dilutive effects of stock units
Dilutive effects of stock optionsDilutive effects of stock options4,142  —  7,795  —  Dilutive effects of stock options
Average shares and dilutive common sharesAverage shares and dilutive common shares50,487,635  477,321  50,417,869  477,321  Average shares and dilutive common shares50,404,906 477,321 50,327,108 477,321 
Basic earnings per common shareBasic earnings per common share$0.23  $0.23  $0.29  $0.29  Basic earnings per common share$(0.45)$(0.45)$(0.16)$(0.16)
Diluted earnings per common shareDiluted earnings per common share$0.23  $0.23  $0.29  $0.29  Diluted earnings per common share$(0.45)$(0.45)$(0.16)$(0.16)

For the three and sixnine months ended JuneSeptember 30, 2019, there were 517,8331,062,826 and 484,163,967,376, respectively, of stock restricted shares/units and 58,85960,956 and 33,013,127,212, respectively, of stock options that were not considered in computing diluted earnings per common share, because they were anti-dilutive.

NOTE 14 – 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 as of the periods indicated:
June 30, 2020December 31, 2019September 30, 2020December 31, 2019
($ in thousands)($ in thousands)Fixed RateVariable RateFixed RateVariable Rate($ in thousands)Fixed RateVariable RateFixed RateVariable Rate
Commitments to extend credit
Commitments to extend credit
$6,249  $73,844  $473  $129,495  
Commitments to extend credit
$20,181 $49,274 $473 $129,495 
Unused lines of creditUnused lines of credit590  1,391,625  703  1,049,632  Unused lines of credit1,778 1,334,060 703 1,049,632 
Letters of creditLetters of credit336  3,243  134  5,316  Letters of credit157 9,202 134 5,316 

Other Commitments
At JuneSeptember 30, 2020, we had unfunded commitments of $20.5$18.9 million, $7.1$5.6 million, and $501 thousand$10.5 million for affordable housing fund investments, Small Business Investment Company (SBIC) investments, and other investments, respectively.

NOTE 15 – 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:
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Three Months Ended
June 30,
Six Months Ended
June 30,
Three Months Ended
September 30,
Nine Months Ended
September 30,
($ in thousands)($ in thousands)2020201920202019($ in thousands)2020201920202019
Noninterest income (loss)
Noninterest incomeNoninterest income
In scope of Topic 606In scope of Topic 606In scope of Topic 606
Deposit service feesDeposit service fees$420  $575  $959  $1,242  Deposit service fees$648 $599 $1,607 $1,841 
Debit card feesDebit card fees380  178  557  291  Debit card fees384 138 941 429 
Investment commissionsInvestment commissions—  260  —  539  Investment commissions146 685 
OtherOther59  109  108  216  Other49 93 157 309 
Noninterest income (in-scope of Topic 606)Noninterest income (in-scope of Topic 606)859  1,122  1,624  2,288  Noninterest income (in-scope of Topic 606)1,081 976 2,705 3,264 
Noninterest income (out-of-scope of Topic 606)Noninterest income (out-of-scope of Topic 606)4,669  (3,412) 5,965  1,717  Noninterest income (out-of-scope of Topic 606)2,873 2,205 8,838 3,922 
Total noninterest income (loss)$5,528  $(2,290) $7,589  $4,005  
Total noninterest incomeTotal noninterest income$3,954 $3,181 $11,543 $7,186 

We do not typically enter into long-term revenue contracts with customers. As of JuneSeptember 30, 2020 and December 31, 2019, we did not have any significant contract balances. As of JuneSeptember 30, 2020, we did not capitalize any contract acquisition costs.

NOTE 16 – RELATED-PARTY TRANSACTIONS
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. These loans do not involve more than the normal risk of collectability or present other unfavorable features. As of JuneSeptember 30, 2020, no related party loans were categorized as non-accrual,nonaccrual, past due, restructured, or potential problem loans.

Transactions with 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.
As previously disclosed, the Company’s Board of Directors has 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 Special Committee of the Company’s Board of Directors, (ii) a formal order of investigation issued by the SEC on January 4, 2017 (since resolved), and (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”).
During the three and nine months ended September 30, 2020, indemnification costs paid by the Company included $298 thousand and $302 thousand incurred by the Company’s former Interim Chief Financial Officer and Chief Strategy Officer, J. Francisco A. Turner. Indemnification costs paid by the Company for the Company's former Chair, President, and Chief Executive Officer, Steven A. Sugarman were $198 thousand for the nine months ended September 30, 2020. Indemnification costs were also paid on behalf of certain current and former executive officers and directors in amounts less than $120 thousand for the three and sixnine months ended JuneSeptember 30, 2020.
During the three and sixnine months ended JuneSeptember 30, 2019, indemnification costs paid by the Company included $4.7$3.5 million and $6.9$10.5 million incurred by the Company’s former Chair, President, and Chief Executive Officer, Steven A. Sugarman; $186and $497 thousand and $741$646 thousand jointly incurred by the Company's former General Counsel Emeritus John Grosvenor. Indemnification costs for the Company’s former Interim Chief Financial Officer and Chief Strategy Officer, J. Francisco A. Turner;Turner and the Company’s former Chief Financial Officer, James J. McKinney;McKinney were $769 thousand, jointly incurred for the nine months ended September 30, 2019; and $139$180 thousand and $142 thousand incurred byfor the Bank’s former director, Cynthia Abercrombie. Indemnification costsAbercrombie for the Company's former General Counsel Emeritus John Grosvenor were $149 thousand for the sixnine months ended JuneSeptember 30, 2019. Indemnification costs were also paid on behalf of othercertain current and former executive officers and other former directors in lesser amounts less than $120 thousand for the three and sixnine months ended JuneSeptember 30, 2019.
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NOTE 17 – 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, we establish an accrued liability when those matters present loss contingencies that are both probable and estimable. We continue to monitor the matters for further developments that could affect the amount of the accrued liability that has been previously established.

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While the ultimate liability with respect to legal actions cannot be determined at this time, we believe that damages, if any, and other amounts relating to pending matters are not likely to be material to the consolidated financial statements.

NOTE 18 – SUBSEQUENT EVENTS
On October 30, 2020, we completed the issuance and sale of $85.0 million aggregate principal amount of 4.375% Fixed-to-Floating Rate Subordinated Notes due 2030 (the “Notes”), at a public offering price equal to 100% of the aggregate principal amount of the Notes. The Notes will mature on October 30, 2030. From and including the issue date to, but excluding, October 30, 2025 or the date of earlier redemption, the Notes will bear interest at an initial fixed rate of 4.375% per annum, payable semi-annually in arrears. From and including October 30, 2025 to, but excluding, the maturity date or the date of earlier redemption, the Notes will bear interest at a floating rate per annum equal to a benchmark rate, which is expected to be Three-Month Term Secured Overnight Financing Rate (SOFR) (as defined in the Indenture), plus a spread. The Notes are subordinated in right of payment to the payment of the Company’s existing and future Senior Debt and structurally subordinated to all of the Company’s subsidiaries’ existing and future indebtedness and other obligations. The Company may, at its option, redeem the Notes in whole or in part on October 30, 2025 and on any interest payment date thereafter.
We have evaluated events from the date of the consolidated financial statements on JuneSeptember 30, 2020 through the issuance of these consolidated financial statements included in this Quarterly Report on Form 10-Q.
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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 sixnine months ended JuneSeptember 30, 2020. This analysis should be read in conjunction with our Annual Report on Form 10-K for the year ended December 31, 2019 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 JuneSeptember 30, 2020.

For a discussion of the risk factors, please also refer to Part II, Item 1A. "Risk Factors" in our Quarterly Report on Form 10-Q for the quarter ended March 31, 2020.
CRITICAL ACCOUNTING POLICIES
Our consolidated financial statements are prepared in accordance with GAAP and general practices within the banking industry. As certain accounting policies require significant estimates and assumptions that have a material impact on the carrying value of assets and liabilities, we have established critical accounting policies to facilitate making the judgment necessary to prepare financial statements. Our 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, 2019 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 the 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 JuneSeptember 30, 2020, the ACL totaled $94.6$94.1 million resulting in an ACL to total loans coverage ratio of 1.68%1.66%, up from 1.04% at December 31, 2019. Excluding PPP loans, the ACL to total loans coverage ratio was 1.76%1.74% at JuneSeptember 30, 2020. The ACL and provision for credit losses include amounts and changes from both the allowance for theloan losses ("ALL") and reserve for unfunded loan commitments.

Recent Accounting Pronouncements Not Yet Adopted
Our recent accounting pronouncements not yet adopted are described in Note 1 to Consolidated Financial Statements in the Company's Annual Report on Form 10-K for the year ended December 31, 2019 and in Note 1 Consolidated Financial Statements (unaudited) included in Part I of this Quarterly Report on Form 10-Q.

Executive Overview
We 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 our 31 full service branches in Orange, Los Angeles, San Diego, and Santa Barbara Counties. Through our over 600 dedicated professionals, we are committed to servicing and building enduring relationships by providing a higher standard of banking. We offer a variety of financial products and services designed around our target clients in order to serve all of their banking and financial needs. We 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 credit quality and serving businesses, entrepreneurs and individuals within our footprint.

Financial Highlights
For the three months ended June 30, 2020 and 2019, net (loss) income was $(18.4) million and $16.6 million. Diluted (loss) earnings from operations per common share were $(0.44) and $0.23 for the three months ended June 30, 2020 and 2019. Financial results for the second quarter of 2020 included a one-time pre-tax charge of
$26.8 million related to the restructuring of the Company’s relationship with the Los Angeles Football Club (“LAFC”). The restructuring of the relationship will result in estimated pre-tax cost savings of approximately $89 million over the next 12.5 years, or approximately $7.1 million per year.
Significant financial highlights during the three months ended June 30, 2020 included:
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Financial Highlights
For the three months ended September 30, 2020 and 2019, net income (loss) was $15.9 million and $(14.1) million. Diluted earnings (loss) from operations per common share were $0.24 and $(0.45) for the three months ended September 30, 2020 and 2019. Financial results for the third quarter of 2020 included:
Noninterest-bearing deposit balances increased $135.4$59.2 million during the quarter and represented 23%24% of total deposits at JuneSeptember 30, 2020, up from 16%19% a year earlier
Total checking balances increased $409.7$257.7 million during the quarter and represented 54%58% of total deposits at JuneSeptember 30, 2020, up from 40%45% a year earlier
Net interest margin increased 12remained stable at 3.09% on a linked-quarter basis points from the prior quarter to 3.09%
Average cost of total deposits declined 4020 basis points on a linked-quarter basis to 0.51%, with period-end cost of deposits at 0.39%
Total deferrals/forbearances declined to $282.5 million at September 30, 2020 from the prior quarter to 0.71%$604.2 million at June 30, 2020
Allowance for credit losses strengthened to 1.68%remained strong at 1.66% of total loans
Common Equity Tier 1 capital at 11.68%11.59%

COVID-19 Operational Update
The markets in which we operate are markedimpacted 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 transformation of our balance sheet. We continue to operate 25 of our 31 branches as we temporarily consolidated some overlapping areas at the beginning of the pandemic 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 iswas 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 beenwas 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 JuneSeptember 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. DuringWe continue to work through 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 numberour clients, all of clients andwhich we expect this will be substantially complete earlyby the first half of 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
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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 related to COVID-19, 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 JuneSeptember 30, 2020:
Deferment & Forbearances(1)(2)
Deferment & Forbearances(1)(2)
June 30, 2020September 30, 2020June 30, 2020
($ in thousands)($ in thousands)Number of Loans
Amount(1)(2)
% of
Loan Category
($ in thousands)Number of Loans
Amount(1)(2)
% of
Loan Category
Number of Loans
Amount(1)(2)
% of
Loan Category
Commercial:Commercial:Commercial:
Commercial and industrialCommercial and industrial55  $53,255  3.7 %Commercial and industrial12 $19,175 1.2 %55 $53,255 3.7 %
Commercial real estateCommercial real estate53  218,537  26.6 %Commercial real estate15 89,127 10.8 %53 218,537 26.6 %
MultifamilyMultifamily30  114,296  8.0 %Multifamily17,988 1.2 %30 114,296 8.0 %
SBASBA 21,819  7.0 %SBA17,841 5.6 %21,819 7.0 %
ConstructionConstruction 31,544  14.8 %Construction— — — %31,544 14.8 %
Total commercialTotal commercial152  439,451  10.4 %Total commercial32 144,131 3.3 %152 439,451 10.4 %
Consumer:Consumer:Consumer:
Single family residential mortgageSingle family residential mortgage142  163,815  12.0 %Single family residential mortgage123 137,510 11.1 %142 163,815 12.0 %
Other consumerOther consumer 969  2.5 %Other consumer905 2.6 %969 2.5 %
Total consumerTotal consumer146  164,784  11.7 %Total consumer126 138,415 10.9 %146 164,784 11.7 %
TotalTotal298  $604,235  10.7 %Total158 $282,546 5.0 %298 $604,235 10.7 %
(1)Excludes loans in forbearance that are current
(2)Excludes loans delinquent prior to COVID-19

With respectDuring the three months ended September 30, 2020, commercial deferments decreased from $439.5 million to our$144.1 million and consumer deferments, consisting primarily of SFR forbearances, decreased from $164.8 million to $138.4 million. Of these balances, at September 30, 2020, the majority of the loans are on a second deferment or forbearance period.

Of the total commercial portfolio,deferments 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,September 30, 2020, 18 loans totaling $121.3$45.3 million have requested an additional 90-day deferral period, of which 5 loans totaling $35.2 million have been approved.were under review and pending approval for a second deferral. We continue to reviewactively monitor and manage all lending relationships in a manner that supports our clients and protects 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. Bank.

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)("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
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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
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 for the three months ended September 30, 2020, June 30, 2020 March 31, 2020 and JuneSeptember 30, 2019:
Three Months EndedThree Months Ended
June 30, 2020March 31, 2020June 30, 2019September 30, 2020June 30, 2020September 30, 2019
($ in thousands)($ in thousands)Average BalanceInterest and DividendsYield/CostAverage BalanceInterest and DividendsYield/
Cost
Average BalanceInterest and DividendsYield/Cost($ in thousands)Average BalanceInterest and DividendsYield/CostAverage BalanceInterest and DividendsYield/
Cost
Average BalanceInterest and DividendsYield/Cost
Interest-earning assets:Interest-earning assets:Interest-earning assets:
Total loans(1)
Total loans(1)
$5,707,619  $63,642  4.48 %$5,780,810  $65,534  4.56 %$7,445,704  $89,159  4.80 %
Total loans(1)
$5,533,576 $62,019 4.46 %$5,707,619 $63,642 4.48 %$6,699,312 $80,287 4.75 %
SecuritiesSecurities1,063,941  7,816  2.95 %952,966  7,820  3.30 %1,304,876  12,457  3.83 %Securities1,190,765 6,766 2.26 %1,063,941 7,816 2.95 %1,105,499 10,024 3.60 %
Other interest-earning assets (2)
Other interest-earning assets (2)
424,776  1,239  1.17 %297,444  1,360  1.84 %342,908  2,424  2.84 %
Other interest-earning assets (2)
457,558 881 0.77 %424,776 1,239 1.17 %362,613 2,346 2.57 %
Total interest-earning assetsTotal interest-earning assets7,196,336  72,697  4.06 %7,031,220  74,714  4.27 %9,093,488  104,040  4.59 %Total interest-earning assets7,181,899 69,666 3.86 %7,196,336 72,697 4.06 %8,167,424 92,657 4.50 %
ACLACL(78,528) (60,470) (63,046) ACL(89,679)(78,528)(55,976)
BOLI and noninterest-earning assets (3)
BOLI and noninterest-earning assets (3)
622,398  592,192  580,133  
BOLI and noninterest-earning assets (3)
594,885 622,398 584,190 
Total assetsTotal assets$7,740,206  $7,562,942  $9,610,575  Total assets$7,687,105 $7,740,206 $8,695,638 
Interest-bearing liabilities:Interest-bearing liabilities:Interest-bearing liabilities:
SavingsSavings$905,997  2,718  1.21 %$890,830  3,296  1.49 %$1,083,571  4,950  1.83 %Savings$948,898 2,353 0.99 %$905,997 2,718 1.21 %$1,055,086 4,722 1.78 %
Interest-bearing checkingInterest-bearing checking1,710,038  2,186  0.51 %1,520,922  3,728  0.99 %1,580,165  4,554  1.16 %Interest-bearing checking1,919,327 1,660 0.34 %1,710,038 2,186 0.51 %1,511,432 4,483 1.18 %
Money marketMoney market592,872  850  0.58 %608,926  1,760  1.16 %853,007  3,902  1.83 %Money market681,421 645 0.38 %592,872 850 0.58 %755,114 3,093 1.63 %
Certificates of depositCertificates of deposit1,214,939  4,451  1.47 %1,151,518  5,827  2.04 %2,537,060  15,192  2.40 %Certificates of deposit1,030,829 2,906 1.12 %1,214,939 4,451 1.47 %1,750,970 10,513 2.38 %
Total interest-bearing depositsTotal interest-bearing deposits4,423,846  10,205  0.93 %4,172,196  14,611  1.41 %6,053,803  28,598  1.89 %Total interest-bearing deposits4,580,475 7,564 0.66 %4,423,846 10,205 0.93 %5,072,602 22,811 1.78 %
FHLB advancesFHLB advances819,166  4,818  2.37 %1,039,055  5,883  2.28 %1,287,121  8,289  2.58 %FHLB advances608,169 3,860 2.52 %819,166 4,818 2.37 %1,333,739 8,519 2.53 %
Securities sold under repurchase agreementsSecurities sold under repurchase agreements1,024   0.79 %—  —  — %2,173  16  2.95 %Securities sold under repurchase agreements1,309 0.61 %1,024 0.79 %1,922 13 2.68 %
Long-term debt and other interest-bearing liabilitiesLong-term debt and other interest-bearing liabilities173,977  2,357  5.45 %174,056  2,359  5.45 %174,161  2,357  5.43 %Long-term debt and other interest-bearing liabilities173,911 2,385 5.46 %173,977 2,357 5.45 %174,111 2,399 5.47 %
Total interest-bearing liabilitiesTotal interest-bearing liabilities5,418,013  17,382  1.29 %5,385,307  22,853  1.71 %7,517,258  39,260  2.09 %Total interest-bearing liabilities5,363,864 13,811 1.02 %5,418,013 17,382 1.29 %6,582,374 33,742 2.03 %
Noninterest-bearing depositsNoninterest-bearing deposits1,349,735  1,133,306  1,034,205  Noninterest-bearing deposits1,357,411 1,349,735 1,047,858 
Noninterest-bearing liabilitiesNoninterest-bearing liabilities118,208  128,282  96,179  Noninterest-bearing liabilities100,424 118,208 103,667 
Total liabilitiesTotal liabilities6,885,956  6,646,895  8,647,642  Total liabilities6,821,699 6,885,956 7,733,899 
Total stockholders’ equityTotal stockholders’ equity854,250  916,047  962,933  Total stockholders’ equity865,406 854,250 961,739 
Total liabilities and stockholders’ equityTotal liabilities and stockholders’ equity$7,740,206  $7,562,942  $9,610,575  Total liabilities and stockholders’ equity$7,687,105 $7,740,206 $8,695,638 
Net interest income/spreadNet interest income/spread$55,315  2.77 %$51,861  2.56 %$64,780  2.50 %Net interest income/spread$55,855 2.84 %$55,315 2.77 %$58,915 2.47 %
Net interest margin (4)
Net interest margin (4)
3.09 %2.97 %2.86 %
Net interest margin (4)
3.09 %3.09 %2.86 %
Ratio of interest-earning assets to interest-bearing liabilitiesRatio of interest-earning assets to interest-bearing liabilities132.82 %130.56 %120.97 %Ratio of interest-earning assets to interest-bearing liabilities133.89 %132.82 %124.08 %
Total deposits(5)
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 deposits(5)
5,937,886 7,564 0.51 %5,773,581 10,205 0.71 %6,120,460 22,811 1.48 %
Total funding (6)
Total funding (6)
6,767,748  17,382  1.03 %6,518,613  22,853  1.41 %8,551,463  39,260  1.84 %
Total funding (6)
6,721,275 13,811 0.82 %6,767,748 17,382 1.03 %7,630,232 33,742 1.75 %
(1)Total loans are net of deferred fees, related direct costs and discounts. Non-accrualNonaccrual loans are included in the average balance. Net accretion (amortization) of deferred loan fees (costs) of $1.5 million, $1.1 million $(587) thousand and $106$323 thousand and accretion of discount on purchased loans of $6 thousand, $347 thousand $8 thousand and $28$186 thousand for the three months ended September 30, 2020, June 30, 2020 March 31, 2020 and JuneSeptember 30, 2019, respectively, are included in interest income.
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(2)Includes average balance of FHLB, FRB and other bank stock at cost and average time deposits with other financial institutions.
(3)Includes average balance of bank-owned life insurance of $110.7 million, $110.4 million $110.0 million and $107.8$108.3 million for the three months ended September 30, 2020, June 30, 2020 March 31, 2020 and JuneSeptember 30, 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.

Three Months Ended JuneSeptember 30, 2020 Compared to Three Months Ended March 31,June 30, 2020
Net interest incomeincome increased $3.5$0.5 million to $55.3$55.9 million forfor the secondthird quarter of 2020 due mostly to lower funding costs, and higher average interest-earning assets, offset by a lower yieldyields on suchinterest-earning assets. Compared to the prior quarter, average interest-earning assets increasedassets declined by $165.1$14.4 million to $7.20$7.18 billion, due to lower average loans of $174.0 million, offset by higher average securities of $111.0$126.8 million and other interest-earning assets of $127.3$32.8 million. During the third quarter, average deposits increased $164.3 million, offset by lowerconsisting of higher average loansinterest-bearing deposits of $73.2 million. The average interest-earning assets growth was funded by$156.6 million and higher average noninterest-bearing deposits of $216.4 million and interest-bearing deposits of $251.7 million, partially offset by lower average$7.7 million. Average FHLB advances decreased $211.0 million due to current quarter deposit growth and the impact of $219.9 million.the early payoff of $100.0 million in FHLB advances at the end of the second quarter.
The net interest margin increased 12remained unchanged compared to the prior quarter at 3.09% for the third quarter as the average cost of funds decreased 21 basis points, offset by a 20 basis point decrease in the average earning-assets yield. The yield on average interest-earning assets decreased to 3.09% 3.86% for the third quarter from 4.06% 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 yieldsaverage yield on total loans securitiesdeclined only 2 basis points to 4.46% during the third quarter as higher prepayment penalty fees and other interest-earning assets wasPPP fee income helped to offset the decrease in the overall loan yield due to originating new business and repricing variable ratethe mix of 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%.environment. The secondthird quarter includes $1.7$2.1 million of PPP fee income, which increased the net interest margin by 11 basis points, compared to $1.7 million in the second quarter which increased the net interest margin by 310 basis points.points. The loweraverage yield on securities yield isdecreased 69 basis points to 2.26% due mostly to a 38106 basis point decrease in the collateralized loan obligations (“CLOs”)(CLOs) yield to 2.16% for the third quarter from 3.22% for the second quarter from 3.60% for the first quarter as these CLOssecurities reprice quarterly.
The average cost of funds decreased 3921 basis points to 0.82% for the third quarter from 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.deposits during the third quarter. We have reducedcontinue to reduce 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 theThe average cost of interest-bearing liabilities decreased 27 basis points to 1.02% for the third quarter from 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 responsethe cost of interest-bearing deposits into the current rate environment. The average cost of interest-bearing deposits also declined 27 basis points to 0.66% for the interest rate cuts bythird quarter from 0.93% for the Federal Reserve in March 2020.prior quarter. Additionally, average noninterest-bearing deposits increased by $216.4 million anddeposits represented 23.4%22.9% of total average deposits in the secondthird quarter compared to 21.4%23.4% of total average deposits for the firstsecond quarter. Our total cost of average depositsdeposits decreased 4020 basis points to 0.71%0.51% for the secondthird quarter. The spot rate of total deposits at the end of the secondthird quarter of 2020 was 0.59%0.39%.

Three Months Ended JuneSeptember 30, 2020 Compared to Three Months Ended JuneSeptember 30, 2019
Net interest income was $55.3$55.9 million for the three months ended JuneSeptember 30, 2020, a decrease of $9.5$3.1 million, or 14.6%5.2%, from $64.8$58.9 million for the three months ended JuneSeptember 30, 2019. The decrease in net interest income from the priorsame period in 2019 was due to lower average interest-earning assets, as a result of targeted loans 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 three months ended JuneSeptember 30, 2020, average interest-earning assets declined $1.90 billiondeclined $985.5 million to $7.20$7.18 billion and the net interest margin increased 23 basis points to 3.09% for the three months ended JuneSeptember 30, 2020 compared to 2.86% for the same 2019 period.
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Our average yield on interest-earning assets decreased 53decreased 64 basis points to 4.06%3.86% for the three months ended JuneSeptember 30, 2020, as compared to 4.59%4.50% 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%4.46% for the three months ended JuneSeptember 30, 2020, compared to 4.80%4.75% for the same 2019 period, primarily due to lower market interest rates andas a lower percentageresult of higher-yielding commercial and industrial balances in the portfolio due to theFederal Reserve cutting market interest rate cuts totalingrates 225 basis points by the Federal Reserve in the third quarter of 2019 through March of 2020. Our average yield on securities decreased 88134 basis points due mostly to CLOs repricing into the lower rate environment and a decrease in average CLO balances.balances.
The average cost of funds decreased to 1.03%0.82% for the three months ended JuneSeptember 30, 2020 from 1.84%1.75% 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 decreased 101 basis point to 1.29%1.02% for the three months ended JuneSeptember 30, 2020 from 2.09%2.03% for the same 2019 period was driven bydue to the lower average cost of interest-bearing deposits and rates paid on our FHLB term advances. The average cost of interest-bearing deposits declined 96112 basis points to 0.93%0.66% 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$309.6 million when compared to the same 2019 period. Our cost of average total deposits decreased 9197 basis points to 0.71%0.51% for the three months ended JuneSeptember 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%22.9% of total average deposits for the three months ended JuneSeptember 30, 2020 compared to 14.6%17.1% of total average deposits for the firstthird 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 sixnine months ended JuneSeptember 30, 2020 and 2019:
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Six Months Ended June 30,Nine Months Ended September 30,
2020201920202019
($ in thousands)($ in thousands)Average BalanceInterest and DividendsYield/CostAverage BalanceInterest and DividendsYield/Cost($ in thousands)Average BalanceInterest and DividendsYield/CostAverage BalanceInterest and DividendsYield/Cost
Interest-earning assets:Interest-earning assets:Interest-earning assets:
Total loans (1)
Total loans (1)
$5,744,214  $129,176  4.52 %$7,579,485  $179,717  4.78 %
Total loans (1)
$5,673,488 $191,195 4.50 %$7,282,869 $260,004 4.77 %
SecuritiesSecurities1,008,454  15,636  3.12 %1,526,959  30,298  4.00 %Securities1,069,668 22,402 2.80 %1,384,928 40,322 3.89 %
Other interest-earning assets (2)
Other interest-earning assets (2)
361,110  2,599  1.45 %332,424  4,737  2.87 %
Other interest-earning assets (2)
393,495 3,480 1.18 %342,597 7,083 2.76 %
Total interest-earning assetsTotal interest-earning assets7,113,778  147,411  4.17 %9,438,868  214,752  4.59 %Total interest-earning assets7,136,651 217,077 4.06 %9,010,394 307,409 4.56 %
ACLACL(69,499) (62,488) ACL(76,275)(60,294)
BOLI and non-interest earning assets (3)
607,296  577,858  
BOLI and noninterest-earning assets (3)
BOLI and noninterest-earning assets (3)
603,128 579,992 
Total assetsTotal assets$7,651,575  $9,954,238  Total assets$7,663,504 $9,530,092 
Interest-bearing liabilities:Interest-bearing liabilities:Interest-bearing liabilities:
SavingsSavings$898,414  6,013  1.35 %$1,142,360  10,429  1.84 %Savings$915,364 8,366 1.22 %$1,112,949 15,152 1.82 %
Interest-bearing checkingInterest-bearing checking1,615,480  5,915  0.74 %1,567,575  9,079  1.17 %Interest-bearing checking1,717,483 7,575 0.59 %1,548,655 13,562 1.17 %
Money marketMoney market600,899  2,610  0.87 %870,177  8,031  1.86 %Money market627,927 3,255 0.69 %831,401 11,124 1.79 %
Certificates of depositCertificates of deposit1,183,229  10,278  1.75 %2,758,789  32,502  2.38 %Certificates of deposit1,132,058 13,184 1.56 %2,419,158 43,014 2.38 %
Total interest-bearing depositsTotal interest-bearing deposits4,298,022  24,816  1.16 %6,338,901  60,041  1.91 %Total interest-bearing deposits4,392,832 32,380 0.98 %5,912,163 82,852 1.87 %
FHLB advancesFHLB advances929,110  10,701  2.32 %1,354,238  17,370  2.59 %FHLB advances821,349 14,561 2.37 %1,347,330 25,889 2.57 %
Securities sold under repurchase agreementsSecurities sold under repurchase agreements512   0.79  2,261  34  3.03 %Securities sold under repurchase agreements779 0.69 2,146 47 2.93 %
Long-term debt and other interest-bearing liabilitiesLong-term debt and other interest-bearing liabilities174,017  4,716  5.45 %174,195  4,719  5.46 %Long-term debt and other interest-bearing liabilities173,981 7,101 5.45 %174,167 7,118 5.46 %
Total interest-bearing liabilitiesTotal interest-bearing liabilities5,401,661  40,235  1.50 %7,869,595  82,164  2.11 %Total interest-bearing liabilities5,388,941 54,046 1.34 %7,435,806 115,906 2.08 %
Noninterest-bearing depositsNoninterest-bearing deposits1,241,521  1,028,008  Noninterest-bearing deposits1,280,461 1,034,697 
Noninterest-bearing liabilitiesNoninterest-bearing liabilities123,244  96,801  Noninterest-bearing liabilities115,582 99,113 
Total liabilitiesTotal liabilities6,766,426  8,994,404  Total liabilities6,784,984 8,569,616 
Total stockholders’ equityTotal stockholders’ equity885,149  959,834  Total stockholders’ equity878,520 960,476 
Total liabilities and stockholders’ equityTotal liabilities and stockholders’ equity$7,651,575  $9,954,238  Total liabilities and stockholders’ equity$7,663,504 $9,530,092 
Net interest income/spreadNet interest income/spread$107,176  2.67 %$132,588  2.48 %Net interest income/spread$163,031 2.72 %$191,503 2.48 %
Net interest margin (4)
Net interest margin (4)
3.03 %2.83 %
Net interest margin (4)
3.05 %2.84 %
Ratio of interest-earning assets to interest-bearing liabilitiesRatio of interest-earning assets to interest-bearing liabilities131.70 %119.94 %Ratio of interest-earning assets to interest-bearing liabilities132.43 %121.18 %
Total deposits(5)
Total deposits(5)
5,539,543  24,816  0.90 %7,366,909  60,041  1.64 %
Total deposits(5)
5,673,293 32,380 0.76 %6,946,860 82,852 1.59 %
Total funding (6)
Total funding (6)
6,643,182  40,235  1.22 %8,897,603  82,164  1.86 %
Total funding (6)
6,669,402 54,046 1.08 %8,470,503 115,906 1.83 %
(1)Total loans are net of deferred fees, related direct costs and discounts, but exclude the allowance for credit losses. Non-accrualNonaccrual loans are included in the average balance. Net accretion (amortization) of deferred loan fees (costs) of $553 thousand$2.0 million and $(83)$(479) thousand and accretion of discount on purchased loans of $355$361 thousand and $125$311 thousand for the sixnine months ended JuneSeptember 30, 2020 and 2019, respectively, are included in interest income.
(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$110.4 million and $107.5$107.8 million for the sixnine months ended JuneSeptember 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.

SixNine Months Ended JuneSeptember 30, 2020 Compared to SixNine Months Ended JuneSeptember 30, 2019
Net interest income for the sixnine months ended JuneSeptember 30, 2020 decreased $25.4$28.5 million to $107.2$163.0 million from $132.6 $191.5 million for the same 2019 period. ThisNet interest income was impacted by the overall decrease was due toin market interest rates between periods and 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, partiallyrelationship-based business lending, offset by a higher net interest margin. For the sixnine months ended JuneSeptember 30, 2020, average interest-earning assets declined $2.33declined $1.87 billion to $7.11$7.14 billion, and the net interest margin increased 2021 basis points to 3.03%3.05% for the six nine months ended JuneSeptember 30, 2020 compared to 2.83%2.84% for the same 2019 period.
Our average yield on interest-earning assetsassets decreased 4250 basis points to 4.17%4.06% for the sixnine months ended JuneSeptember 30, 2020 as compared to 4.59%4.56% 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 mixdue primarily to impact of loans versus securities.the Federal Reserve cutting market interest rates 225 basis points as previously described. Our average yield on loans was 4.52%4.50% for the sixnine months ended JuneSeptember 30, 2020, compared to 4.78%4.77% 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.period. Our average yield on securities decreased 88109 basis points to 2.80% due mostly to CLOs repricing into the lower rate environment and a decrease in average CLO balances.balances.
The average cost of funds decreased to 1.22%1.08% for the sixnine months ended JuneSeptember 30, 2020 from 1.86%1.83% 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 decreased 74 basis points to 1.50%1.34% for the sixnine months ended JuneSeptember 30, 2020 from 2.11%2.08% for the same 2019 period was driven bydue to the lower average cost of interest-bearing deposits as they repriced into the lower interest rate environment and rates paid on ourthe lower average cost and volume of FHLB term advances. resulting from maturities, early repayments and refinancing of such advances since the end of the third quarter of 2019. The average cost of interest-bearing deposits declined 7589 basis points to 1.16%0.98% for the nine months ended September 30, 2020 from the priorsame 2019 period due to actively managing down deposit rates in response to the previously described market interest rate cuts by the Federal Reserve in March of 2020 and a lower reliance on brokered deposits. Additionally, average noninterest-bearing deposits increased by $213.5$245.8 million when compared to the same 2019 period. Our cost of average total deposits decreased 7483 basis points to 0.90%0.76% for the sixnine months ended JuneSeptember 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. The information provided presents 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
June 30, 2020 vs. 2019
Six Months Ended
June 30, 2020 vs. 2019
Three Months Ended
September 30, 2020 vs. 2019
Nine Months Ended
September 30, 2020 vs. 2019
Increase (Decrease) Due toNet Increase (Decrease)Increase (Decrease) Due toNet
Increase (Decrease)
Increase (Decrease) Due toNet Increase (Decrease)Increase (Decrease) Due toNet
Increase (Decrease)
($ In thousands)($ In thousands)VolumeRateVolumeRateNet
Increase (Decrease)
($ In thousands)VolumeRateNet Increase (Decrease)VolumeRateNet
Increase (Decrease)
Interest and dividend income:Interest and dividend income:Interest and dividend income:
Total loansTotal loans$(19,848) $(5,669) $(25,517) $(41,270) $(9,271) $(50,541) Total loans$(13,523)$(4,745)$(18,268)$(54,778)$(14,031)$(68,809)
SecuritiesSecurities(2,068) (2,573) (4,641) (8,897) (5,765) (14,662) Securities719 (3,977)(3,258)(8,033)(9,887)(17,920)
Other interest-earning assetsOther interest-earning assets480  (1,665) (1,185) 379  (2,517) (2,138) Other interest-earning assets494 (1,959)(1,465)928 (4,531)(3,603)
Total interest and dividend incomeTotal interest and dividend income$(21,436) $(9,907) $(31,343) $(49,788) $(17,553) $(67,341) Total interest and dividend income$(12,310)$(10,681)$(22,991)$(61,883)$(28,449)$(90,332)
Interest expense:Interest expense:Interest expense:
SavingsSavings$(728) $(1,504) $(2,232) $(1,965) $(2,451) $(4,416) Savings$(438)$(1,931)$(2,369)$(2,375)$(4,411)$(6,786)
Interest-bearing checkingInterest-bearing checking351  (2,719) (2,368) 272  (3,436) (3,164) Interest-bearing checking979 (3,802)(2,823)1,345 (7,332)(5,987)
Money marketMoney market(942) (2,110) (3,052) (1,993) (3,428) (5,421) Money market(276)(2,172)(2,448)(2,241)(5,628)(7,869)
Certificates of depositCertificates of deposit(6,161) (4,580) (10,741) (15,186) (7,038) (22,224) Certificates of deposit(3,326)(4,281)(7,607)(18,105)(11,725)(29,830)
FHLB advancesFHLB advances(2,837) (634) (3,471) (5,007) (1,662) (6,669) FHLB advances(4,625)(34)(4,659)(9,445)(1,883)(11,328)
Securities sold under repurchase agreementsSecurities sold under repurchase agreements(6) (8) (14) (16) (16) (32) Securities sold under repurchase agreements(4)(7)(11)(20)(23)(43)
Long-term debt and other interest-bearing liabilitiesLong-term debt and other interest-bearing liabilities(2)  —  (1) (2) (3) Long-term debt and other interest-bearing liabilities(5)(9)(14)(6)(11)(17)
Total interest expenseTotal interest expense(10,325) (11,553) (21,878) (23,896) (18,033) (41,929) Total interest expense(7,695)(12,236)(19,931)(30,847)(31,013)(61,860)
Net interest incomeNet interest income$(11,111) $1,646  $(9,465) $(25,892) $480  $(25,412) Net interest income$(4,615)$1,555 $(3,060)$(31,036)$2,564 $(28,472)

Provision for (Reversal of) Credit Losses
The provision for (reversal of) credit losses is charged to operations to adjust the allowance for credit losses to the level required to cover current estimatedexpected credit losses in our loan portfolio and unfunded commitments. The following table presents the components of our provision for credit losses:
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  $198  
Three Months EndedNine Months Ended September 30,
($ in thousands)September 30,
2020
June 30,
2020
September 30,
2019
20202019
Provision for loan losses$2,130 $11,519 $38,540 $28,360 $39,065 
(Reversal of) provision for credit losses - unfunded loan commitments(989)307 67 368 (260)
Total provision for credit losses$1,141 $11,826 $38,607 $28,728 $38,805 

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We recognized a provision for credit losses of $1.1 million during the third quarter of 2020, compared to $11.8 million during the second quarter of 2020 compared to $15.8 million during the first quarter of 2020 and a reversal of credit losses of $1.9$38.6 million for the secondthird quarter of 2019. Our provision for credit losses during the secondthird 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$0.9 million ofin general reserves and $6.8$1.2 million related to specific reserves, primarilyoffset by provision release of $1.0 million related to a previously reported non-accrual, shared national credit.unfunded commitments. The general provision isfor the third quarter of 2020 was due to a continued deteriorationchanges in key macro-economic forecast variables, such as unemployment and gross domestic product, improved credit quality metrics, and loan risk rating downgrades, offset by lowerhigher period end loan balances.balances of $50.3 million.
During the sixnine months ended JuneSeptember 30, 2020, we recognized a provision for credit losses of $27.6$28.7 million under the CECL model, compared to $198 thousand$38.8 million under the incurred loss model during 2019. Our provision for credit losses included $1.4 million related to unfunded commitments during the six months ended June 30, 2020, compared to provision reversal of $327 thousand during the six months ended June 30, 2019. The higherlower provision for credit losses was drivenprimarily the result of lower net charge-offs and lower period end loan balances of $705.3 million, offset by increases from using the new CECL model, the estimated future impact of the health crisis on our loans, net charge-offs, and an increasehigher specific reserves.
During the three and nine months ended September 30, 2019, the Company recorded a $38.6 million and $38.8 million provision for credit losses. The provision for credit losses was driven by a $35.1 million charge-off of a line of credit originated in specific reserves, partially offset by lower period endNovember 2017 to a borrower purportedly the subject of a fraudulent scheme. Included in the 2019 loan balances of $1.09 billion as comparedloss provision was $3.0 million due to June 30, 2019.this charge-off increasing the loss factor for commercial and industrial loans used in our allowance for loan loss calculation.
See further discussion in "Allowance for Credit Losses."

Noninterest Income (Loss)
The following table presents the components of noninterest income for the periods indicated:
Three Months EndedSix Months Ended June 30,Three Months EndedNine Months Ended September 30,
($ in thousands)($ in thousands)June 30,
2020
March 31,
2020
June 30,
2019
20202019($ in thousands)September 30,
2020
June 30,
2020
September 30,
2019
20202019
Customer service feesCustomer service fees$1,224  $1,096  $1,434  $2,320  $2,949  Customer service fees$1,498 $1,224 $1,582 $3,818 $4,531 
Loan servicing incomeLoan servicing income95  75  121  170  239  Loan servicing income186 95 128 356 367 
Income from bank owned life insuranceIncome from bank owned life insurance591  578  580  1,169  1,105  Income from bank owned life insurance629 591 588 1,798 1,693 
Impairment loss on investment securitiesImpairment loss on investment securities— — (731)— (731)
Net gain (loss) on sale of securities available-for-saleNet gain (loss) on sale of securities available-for-sale— 2,011 (5,063)2,011 (4,855)
Fair value adjustment on loans held-for-saleFair value adjustment on loans held-for-sale24 25 16 (1,537)76 
Net gain on sale of loansNet gain on sale of loans272 — 4,310 245 8,629 
Net gain on sale of securities available-for-sale2,011  —  —  2,011  208  
Fair value adjustment on loans held-for-sale25  (1,586) 59  (1,561) 60  
Net (loss) gain on sale of loans—  (27) 2,767  (27) 4,319  
Other income1,582  1,925  (7,251) 3,507  (4,875) 
Total noninterest income (loss)$5,528  $2,061  $(2,290) $7,589  $4,005  
Other income (loss)Other income (loss)1,345 1,582 2,351 4,852 (2,524)
Total noninterest incomeTotal noninterest income$3,954 $5,528 $3,181 $11,543 $7,186 

Three Months Ended JuneSeptember 30, 2020 Compared to Three Months Ended March 31,June 30, 2020
Noninterest income was $4.0 million for the three months ended September 30, 2020, a decrease of $1.6 million, or 28.5%, from $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 increasedecrease was primarily due to a decrease of $2.0 million in gain on the sale of securities to zero as there were no sales of $2.0 million compared to $0 insecurities during the prior quarter and lower net unrealized losses of $1.6 million for the change in fair value adjustment on loans held-for sale.period. 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. Other income decreased $237 thousand due mostly to the conclusion in the second quarter of the three-year earn-out from the sale of the our mortgage banking division, which contributed $791 thousand in the prior quarter. This decrease was offset in part by higher sublease income of $210 thousand.
Offsetting these decreases was an increase in customer service fees of $274 thousand due mostly to higher depositor and loan-related fees. Additionally, the third quarter included a $272 thousand gain on sale of $17.6 million in SFR mortgage loans held for sale. There were no sales of securitiesloans during the prior quarter.second quarter of 2020.
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
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Three Months Ended JuneSeptember 30, 2020 Compared to Three Months Ended JuneSeptember 30, 2019
Noninterest income was $5.5$4.0 million for the three months ended JuneSeptember 30, 2020, an increase of $7.8 million,$773 thousand, or 341.4%24.3%, from $(2.3)$3.2 million for the three months ended JuneSeptember 30, 2019. The increase in noninterest income during the three months ended JuneSeptember 30, 2020 was mainly due to the aforementioned 2020lower losses on sale of securities of $5.1 million and the 2019 second quarter $9.6 million unrealizeda lower impairment loss from interest rate swap agreements entered into in order to offset the variability in the fair valueon investment securities of the Freddie Mac securitization completed during the third quarter of 2019,$731 thousand, partially offset by lower net gaingains on sale of loans of $2.8$4.0 million.
Customer service fees decreased $210 thousand, or 14.6%, during the three months ended June 30, 2020 due mostly to lower borrower loan fees, such as extension and exit fees, offset by higher deposit-related transactional fees.
Net gains on sale of securities available-for-sale increasedwas zero during the three months ended September 30, 2020, compared to $2.0$5.1 million during the three months ended JuneSeptember 30, 2020 from zero2019. During the three months ended September 30, 2019, the Company sold securities available-for-sale of $380.9 million and recognized $731 thousand of OTTI on certain MBS securities that were ultimately liquidated in the fourth quarter of 2019. There were no securities sales during the three months ended JuneSeptember 30, 2019. The increase between periods was due to the aforementioned $20.7 million
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sale of securities during the three months ended June 30, 2020, primarily consisting of corporate securities. There were no securities sales in the first quarter of 2019.2020.
Net lossgain on sale of loans, which includes premium recapture of previously sold loans, was zero$272 thousand from the sale of $17.6 million in SFR mortgage loans held for sale during the three months ended JuneSeptember 30, 2020 compared to $2.8a $4.3 million duringnet gain primarily from the comparable 2019 period. There were no salessale of loans during the second 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$573.5 million of multifamily residential loans resulting in a gain of $2.9 million.during the comparable 2019 period.
Other income was $1.6$1.3 million for the three months ended JuneSeptember 30, 2020, compared to a loss of $7.3$2.4 million in the comparable 2019 period. The $8.8$1.0 million decrease was primarily attributable to the 2019 period including the aforementioned $9.6 million unrealized loss from interest rate swap agreements entered into in order to offset variability in the fair value of the Freddie Mac securitization completed during the third quarter of 2019.2020 not including income associated with the three-year earn-out from the sale of the bank’s mortgage banking division. This income, which provided an average quarterly fee income contribution of approximately $800 thousand, concluded during the second quarter of 2020.

SixNine Months Ended JuneSeptember 30, 2020 Compared to SixNine Months Ended JuneSeptember 30, 2019
Noninterest income was $7.6$11.5 million for the sixnine months ended JuneSeptember 30, 2020, an increase of $3.6$4.4 million, or 89.5%60.6%, from $4.0$7.2 million for the sixnine months ended JuneSeptember 30, 2019. The increase in noninterest income was mainly due to the $1.8$6.9 million increase in net gain on the securities available-for-sale, coupled with a $8.4$7.4 million decreaseincrease in other income (loss), and a $731 thousand decrease in impairment loss on investment securities, partially offset by lower customer service fees of $713 thousand, higher unrealized net losses on loans held-for-sale of $1.6 million and lower net gains on sale of loans of between periods of $4.3$8.4 million.
Customer service fees decreased $629$713 thousand, or 21.3%15.7%, during the three months ended JuneSeptember 30, 2020 due mostly to lower borrower loan fees, such as extension and exit fees.
Net gain on sale of securities available-for-sale was $2.0 million for the sixnine months ended JuneSeptember 30, 2020, compared to $208 thousanda loss of $4.9 million for the sixnine months ended JuneSeptember 30, 2019. During the sixnine months ended JuneSeptember 30, 2020, we sold $20.7 million in securities, primarily consisting of corporate securities, resulting in a gain of $2.0 million. During the sixnine months ended JuneSeptember 30, 2019, we sold securities available-for-sale of $1.16 billion, which included $132.2 million of non-agency commercial mortgage-backed securities resulting insold for a gain of $9 thousand and $644.5$385.8 million in agency mortgage-backed securities sold for a loss of $5.0 million. During the nine months ended September 30, 2019, $731 thousand of OTTI was recognized on certain MBS securities that were ultimately liquidated in the fourth quarter of 2019. Additionally, during the nine months ended September 30, 2019, we reduced our collateralized loan obligations resulting inexposure by selling $644.5 million of these investments for a net gain of $143 thousand.
Net (loss) gain on sale of loans, which includes premium recapture of previously sold loans, was $27$245 thousand for the sixnine months ended JuneSeptember 30, 2020, compared to a gain of $4.3$8.6 million for the sixnine months ended JuneSeptember 30, 2019. There were no sales of loans duringDuring the sixnine months ended JuneSeptember 30, 2020.2020, we sold $17.6 million in single-family residential mortgage loans held for sale, resulting in a gain of $297 thousand. During the sixnine months ended JuneSeptember 30, 2019, we sold jumbo SFR mortgage loans of $374.7$374.8 million resulting in a gain of $1.8$1.6 million and $178.2$751.6 million of multifamily residential loans resulting in a gain of $2.9$7.3 million.
Other income (loss) was $3.5$4.9 million for the sixnine months ended JuneSeptember 30, 2020, compared to $(4.9)a loss of $2.5 million for the sixnine months ended JuneSeptember 30, 2019. The $8.4$7.4 million increase was primarily attributable to the aforementioned $9.6nine months ended September 30, 2019 including a $9.0 million unrealizedrealized loss fromon interest rate swap agreements entered into in orderswaps related to offset variability in the fair value of the Freddie Mac multifamily securitization which was completed during the third quarter of 2019, offset by lower2019. We realized a gross gain on fair value of the associated loans sold into the securitization of $8.9 million, which is included in net gain on sale of loans. Excluding the $9.0 million realized loss on interest rate swaps, noninterest income decreased $1.6 million due to a $0.5 million decrease in the earn-out income related to the sale of our mortgage banking division which concluded during the second quarter of 2020, a $0.5 million decrease in sublease income of $312 thousand.and a $0.6 million decrease in other miscellaneous income.

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Noninterest Expense
The following table presents the breakdown of noninterest expense for the periods indicated:
Three Months EndedSix Months Ended June 30,Three Months EndedNine Months Ended September 30,
($ in thousands)($ in thousands)June 30,
2020
March 31,
2020
June 30,
2019
20202019($ in thousands)September 30,
2020
June 30,
2020
September 30,
2019
20202019
Salaries and employee benefitsSalaries and employee benefits$24,260  $23,436  $27,506  $47,696  $55,945  Salaries and employee benefits$23,277 $24,260 $25,934 $70,973 $81,879 
Naming rights terminationNaming rights termination26,769  —  —  26,769  —  Naming rights termination— 26,769 — 26,769 — 
Occupancy and equipmentOccupancy and equipment7,090  7,243  7,955  14,333  15,641  Occupancy and equipment7,457 7,090 7,767 21,790 23,408 
Professional feesProfessional fees4,596  5,964  (2,903) 10,560  8,138  Professional fees5,147 4,596 1,463 15,707 9,601 
Data processingData processing1,536  1,773  1,672  3,309  3,168  Data processing1,657 1,536 1,568 4,966 4,736 
AdvertisingAdvertising1,157  1,756  2,048  2,913  4,105  Advertising219 1,157 2,090 3,132 6,195 
Regulatory assessmentsRegulatory assessments725  484  2,136  1,209  4,618  Regulatory assessments784 725 1,239 1,993 5,857 
Reversal of provision for loan repurchasesReversal of provision for loan repurchases(34) (600) (61) (634) (177) Reversal of provision for loan repurchases(91)(34)(123)(725)(300)
Amortization of intangible assetsAmortization of intangible assets430  429  621  859  1,241  Amortization of intangible assets353 430 500 1,212 1,741 
Restructuring expenseRestructuring expense—  —  (158) —  2,637  Restructuring expense— — — — 2,637 
All other expenseAll other expense6,408  4,529  5,039  10,937  8,838  All other expense3,021 6,408 3,742 13,958 12,580 
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  Noninterest expense before loss on investments in alternative energy partnerships41,824 72,937 44,180 159,775 148,334 
(Gain) loss on investments in alternative energy partnerships(Gain) loss on investments in alternative energy partnerships(167) 1,905  (355) 1,738  1,595  (Gain) loss on investments in alternative energy partnerships(1,430)(167)(940)308 655 
Total noninterest expenseTotal noninterest expense$72,770  $46,919  $43,500  $119,689  $105,749  Total noninterest expense$40,394 $72,770 $43,240 $160,083 $148,989 

Three Months Ended JuneSeptember 30, 2020 Compared to Three Months Ended March 31,June 30, 2020
Noninterest expense was $40.4 million for the three months ended September 30, 2020, a decrease of $32.4 million, or 44.5%, from $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 increasedecrease was mainly due to the aforementionedprevious quarter including a $26.8 million one-time charge related to the termination of our LAFC naming rights agreements and a $2.5 million debt extinguishment fee, included in all other expenses, associated with the early repayment of certain FHLB term advances. There were no similar charges in any ofduring the other periods presented.third quarter. When these previous quarter charges are excluded, noninterest expense decreased $3.4$3.1 million, due to (i) lower professional feessalaries and benefits expense of $1.4$1.0 million as a result of the timing of certain indemnified legal costsdue mostly to lower headcount and recoveries compared to the prior quarter,incentive accruals, (ii) higher net gains on investments in alternative energy partnerships of $2.1$1.3 million anddue to lower loss sharing allocations, (iii) lower advertising costs of $599$938 thousand due to the termination of the LAFC agreement and overall reductions in associated events and media spending, and (iv) lower all other expense of $872 thousand. These decreases were partially offset by (iv) higher salaries and benefits expenseprofessional fees of $824 thousand due mostly to higher incentive accruals, (v) lower reversals of loan repurchases, and (vi) higher regulatory assessments of $241$551 thousand.
Professional fees were $5.1 million for the three months ended September 30, 2020, an increase of $551 thousand, or 12.0%, from $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 decreaseincrease included lower$297 thousand in higher indemnified legal costs and recoveries as the current quarter included $875 thousand$1.2 million of such legal costs compared to $1.7 million$875 thousand for the prior quarter. When these indemnified legal costs and recoveries are excluded, professional fees would have decreased $565increased $254 thousand from the prior quarter. The remaining decrease relatesquarter due to lower audit feeshigher other legal costs 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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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.professional service fees.

Three Months Ended JuneSeptember 30, 2020 Compared to Three Months Ended JuneSeptember 30, 2019
Noninterest expense was $72.8$40.4 million for the three months ended JuneSeptember 30, 2020, an increasea decrease of $29.3$2.8 million, or 67.3%6.6%, from $43.5$43.2 million for the three months ended JuneSeptember 30, 2019. The increasedecrease 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$2.7 million, andlower advertising costs of $1.9 million, lower regulatory assessments of $1.4$0.5 million and lower other expenses of $721 thousand, partially offset by higher professional fees of $3.7 million.
Salaries and employee benefits expense was $24.3$23.3 million for the three months ended JuneSeptember 30, 2020, a decrease of $3.2$2.7 million, or 11.8%10.2%, from $27.5$25.9 million for the three months ended JuneSeptember 30, 2019. The decrease was primarily due to overall reductions in headcount between periods.periods and resulting decreases in salaries, benefits and incentives.
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 10.9% from $8.0Professional fees were $5.1 million for the three months ended JuneSeptember 30, 2019. The decrease was primarily due to overall reductions in costs between periods as a result2020, an increase of exiting the TPMO and brokered single family lending businesses during the first quarter of 2019.
Professional fees were $4.6$3.7 million, or 251.8%, from $1.5 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 JuneSeptember 30, 2019. The increase was mainly due the 2019 period including net
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recoveries of legal fees of $6.4$2.6 million due to the timing of insurance recoveries related to securities litigation, indemnification and investigation and other legal expenses compared to legal fees of $1.7$1.2 million during the 2020 period. Offsetting thisAdditionally, there were decreases in other legal fees of $0.4 million, offset by a $0.2 million 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 reductions in overall events and media spending due in part to the termination of the LAFC Agreement on May 22, 2020.
Regulatory assessments were $725$219 thousand for the three months ended JuneSeptember 30, 2020, a decrease of $1.4$1.9 million, or 66.1%89.5%, from $2.1 million for the three months ended JuneSeptember 30, 2019. The decrease was mainly due to the termination of the LAFC Agreement and resulting reductions in overall events and media spending.
Regulatory assessments were $784 thousand for the three months ended September 30, 2020, a decrease of $455 thousand, or 36.7%, from $1.2 million for the three months ended September 30, 2019. The decrease was mainly due to a reduction in our FDIC assessment rate given the decrease in our asset size.
All other expense was $6.4$3.0 million for the three months ended JuneSeptember 30, 2020, an increasea decrease of $1.4 million,$721 thousand, or 27.2%19.3%, from $5.0$3.7 million for the three months ended JuneSeptember 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 the second quarter of 2020. All other expense during the same 2019 period included a $797$151 thousand impairment of capitalized software projects. There were no similar impairment charges during the three months ended JuneSeptember 30, 2020. Additionally, we had decreases in various other expense categories, including travel, supplies and other miscellaneous expenses.

SixNine Months Ended JuneSeptember 30, 2020 Compared to SixNine Months Ended JuneSeptember 30, 2019
Noninterest expense was $119.7$160.1 million for the sixnine months ended JuneSeptember 30, 2020, an increase of $13.9$11.1 million, or 13.2%7.4%, from $105.7$149.0 million for the sixnine months ended JuneSeptember 30, 2019. The increase was mainly due toto: (i) the $26.8 million LAFC naming rights termination, coupled(ii) a $2.5 million debt extinguishment fee, included in all other expenses, associated with the early repayment of certain FHLB term advances, and (iii) a $2.4$6.1 million increase in professional fees due to overall reductions in recoveries of $18.4 million related to indemnified legal fees for resolved legal proceedings and $2.1 million increase in allvarious other expense,litigation. These increases were offset byby: (i) a $8.2$10.9 million decrease in salaries and employee benefits, (ii) a $3.4$1.6 million decrease in occupancy and equipment, (iii) a $3.1 million decrease in advertising expenses, (iv) a $3.9 million decrease in regulatory assessments, and(v) a $2.6 million decrease in restructuring expense, as well asand, to a lesser extent, (vi) decreases in occupancy and equipment, and advertising expenses.among several other noninterest expense categories.
Salaries and employee benefits expense was $47.7$71.0 million for the sixnine months ended JuneSeptember 30, 2020, a decrease of $8.2$10.9 million, or 14.7%13.3%, from $55.9$81.9 million for the sixnine months ended JuneSeptember 30, 2019. The decrease was mainly due to decreases in number of employees, commissions, and temporary staff expenses, including overall reductions in headcount between periods as a result of exiting the TPMOthird-party mortgage origination (“TPMO”) and brokered single family lending businesses during the first quarter of 2019.

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Occupancy and equipment was $14.3$21.8 million for the three months ended JuneSeptember 30, 2020, a decrease of $1.3$1.6 million or 8.4%6.9% from $15.6$23.4 million for the sixnine months ended JuneSeptember 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 $10.6$15.7 million for the sixnine months ended JuneSeptember 30, 2020, an increase of $2.4$6.1 million, or 29.8%63.6%, from $8.1$9.6 million for the sixnine months ended JuneSeptember 30, 2019. The increase in fees was primarily the result of $9.7 million in higher legal fees (net of recoveries of $2.5 million) due to the timing of insurance recoveries related to securities litigation, indemnification and investigation and an increase in other legal expenses of $6.6$1.7 million, offset by lower other professional fees of $2.4$3.9 million.
Advertising costs were $2.9$3.1 million for the sixnine months ended JuneSeptember 30, 2020, a decrease of $1.2$3.1 million, or 29.0%49.4%, from $4.1$6.2 million for the sixnine months ended JuneSeptember 30, 2019. The decrease was mainly due to overall reductions in reductions in overall events and media spending, as well as a decrease inand lower advertising costs related to the now-terminated LAFC naming rights commitment. Advertising costs for the sixnine months ended JuneSeptember 30, 2020 included $2.6 million related to the now-terminated LAFC naming rights agreement compared to $3.3$5.0 million during sixthe nine months ended JuneSeptember 30, 2019.
Regulatory assessments were $1.2$2.0 million for the sixnine months ended JuneSeptember 30, 2020, a decrease of $3.4$3.9 million, or 73.8%66.0%, from $4.6$5.9 million for the sixnine months ended JuneSeptember 30, 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.
Restructuring expense was zero for the sixnine months ended JuneSeptember 30, 2020. For the sixnine months ended JuneSeptember 30, 2019, restructuring expense was $2.6 million and consisted of severance and retention costs associated with our exit from the TPMO and brokered single family lending businesses and CEO transition during the first quarter of 2019.
All other expenses were $10.9$14.0 million for the sixnine months ended JuneSeptember 30, 2020, an increase of $2.1$1.4 million, or 23.7%11.0%, from $8.8$12.6 million for the sixnine months ended JuneSeptember 30, 2019. The increase 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 $850an
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$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 thousanddecreased due to lower impairment charges of capitalized software projects, compared towhich totaled $157 thousand during the sixnine months ended JuneSeptember 30, 2020. Offsetting these increases2020 compared to $986 thousand for the comparable 2019 period. In addition, there were overall expense reductions during the nine months ended September 30, 2020 from our efforts to manage expenses on supplies, business travel, directors' fees, and other administrative expenditures.

Income Tax (Benefit) Expense
For the three months ended September 30, 2020, June 30, 2020 March 31, 2020 and JuneSeptember 30, 2019, income tax (benefit) expense was $2.4 million, $(5.3) million, $(2.2) million, and $4.3$(5.6) million, resulting in an effective tax rate of 22.3%12.9%, 24.7%22.3% and 20.6%28.4%. Our 22.3%12.9% effective tax rate for the three months ended JuneSeptember 30, 2020 differs from the 21% federal statutory rate was due to the impact of state taxes offset byas well as various permanent tax credits. The full year estimated effective tax rate for 2020 is expected to be approximately 23%.differences.
For the sixnine months ended JuneSeptember 30, 2020 and 2019, the income tax benefit was $7.5$5.1 million and the income tax expense was $7.0$1.4 million, resulting in an effective tax rate of 23.0%35.9% and 22.9%12.9%, respectively.
We useFor interim periods, we generally utilize the flow-throughestimated annual effective tax rate method under which we determine our provision (benefit) for income statement method to account for the annual investment tax credits forecasted to be earnedtaxes based on the solar investments incurrent estimate of our annual effective tax rate. Under thisFor the three and nine months ended September 30, 2019, we utilized the discrete effective tax rate method for recording income taxes. We believe the investmentuse of the discrete effective tax credits are recognizedrate method is more appropriate than the annual effective tax rate method as minor changes in the Company's estimated ordinary income for the entire year would have a reduction tosignificant effect on the estimated annual effective tax rate and would result in sizable variations in the customary relationship between income tax expense (benefit) and pretax accounting income (loss). Based on our actual and projected level of earnings and permanent tax differences for 2020, our estimated effective tax rate for the initial book-tax difference in the basisfull year was refined this quarter to a negative tax rate ranging from approximately 10% to 15%. As a result of the investments are recognized as additionalchange, we expect our fourth quarter effective tax expense in the year they are earned.rate to be approximately 25%.
For additional information, see Note 8 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 JuneSeptember 30, 2020, all of our 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, Federal Reserve Discount Window capacity, repurchase agreements, and certain public deposits.
The following table presents the amortized cost and fair value 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:
June 30, 2020December 31, 2019September 30, 2020December 31, 2019
($ in thousands)($ in thousands)Amortized CostFair ValueUnrealized Gain (Loss)Amortized CostFair ValueUnrealized Gain (Loss)($ in thousands)Amortized CostFair ValueUnrealized Gain (Loss)Amortized CostFair ValueUnrealized Gain (Loss)
Securities available-for-sale:Securities available-for-sale:Securities available-for-sale:
SBA loan pool securitiesSBA loan pool securities$17,853 $17,807 $(46)$— $— $— 
U.S. government agency and U.S. government sponsored enterprise residential mortgage-backed securitiesU.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 residential mortgage-backed securities99,862 107,431 7,569 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) U.S. government agency and U.S. government sponsored enterprise collateralized mortgage obligations216,250 218,396 2,146 91,543 91,299 (244)
Municipal securitiesMunicipal securities52,973  57,174  4,201  52,997  52,689  (308) Municipal securities64,373 69,233 4,860 52,997 52,689 (308)
Non-agency residential mortgage-backed securitiesNon-agency residential mortgage-backed securities161  164   191  196   Non-agency residential mortgage-backed securities159 163 191 196 
Collateralized loan obligationsCollateralized loan obligations703,605  668,353  (35,252) 733,605  718,361  (15,244) Collateralized loan obligations703,605 685,931 (17,674)733,605 718,361 (15,244)
Corporate debt securitiesCorporate debt securities141,962  143,647  1,685  13,500  13,579  79  Corporate debt securities141,968 146,906 4,938 13,500 13,579 79 
Total securities available-for-saleTotal securities available-for-sale$1,198,091  $1,176,029  $(22,062) $929,449  $912,580  $(16,869) Total securities available-for-sale$1,244,070 $1,245,867 $1,797 $929,449 $912,580 $(16,869)

Securities available-for-sale were $1.18$1.25 billion at JuneSeptember 30, 2020, an increase of $263.4$333.3 million, or 28.9%36.5%, from $912.6 million at December 31, 2019. The increase was mainly due to purchases of $322.6$371.1 million, including $174.0$193.2 million in U.S. government agency securities, $17.9 million in SBA loan pool securities, $11.4 million in municipal securities and $148.6 million in corporate debt securities, and higher net unrealized gains of $18.6 million, offset by principal reductions of $5.1 million, a $30.0 million pay-off of one CLO holding and $20.7 million in sales, and higher net unrealized losses of $5.2 million.sales.
CLOs totaled $668.4$685.9 million and $718.4 million at JuneSeptember 30, 2020 and December 31, 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-rated to equity-grade tranches. At JuneSeptember 30, 2020, all of our CLO holdings were AAA and AA rated. We also perform pre-purchase due diligence and ongoing credit quality review of our CLO holdings, which includes monitoring performance factors such as external credit ratings, collateralization levels, collateral concentration levels, and other performance factors. We only acquire CLOs that we believe are Volcker Rule compliant.
We did not record credit impairment for any investment securities for the three and sixnine months ended JuneSeptember 30, 2020 or 2019. We monitor our securities portfolio to ensure it has adequate credit support. As of JuneSeptember 30, 2020, we believe there was no credit impairment and we did not have the current intent to sell securities with a fair value below amortized cost at JuneSeptember 30, 2020, 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 credit impairment. As of JuneSeptember 30, 2020, all of our investment securities in an unrealized loss position received an investment grade credit rating. Credit spreads for CLOs widened during the first quarter of 2020 and have since narrowed duringthrough the secondthird quarter. The overall net decline in fair value during 2020 was attributable to a combination of changes in interest rates and general volatility in the credit market conditions.
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The following table presents maturities, based on the earlier of maturity dates or next repricing dates, and yield information of the investment securities portfolio as of JuneSeptember 30, 2020:
One Year or LessMore than One Year through Five YearsMore than Five Years through Ten YearsMore than Ten YearsTotalOne Year or LessMore than One Year through Five YearsMore than Five Years through Ten YearsMore than Ten YearsTotal
($ in thousands)($ in thousands)Fair
Value
Weighted Average YieldFair
Value
Weighted Average YieldFair
Value
Weighted Average YieldFair
Value
Weighted Average YieldFair
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:Securities available-for-sale:
SBA loan pools securitiesSBA loan pools securities$17,807 1.79 %$— — %$— — %$— — %$17,807 1.79 %
U.S. government agency and U.S. government sponsored enterprise residential mortgage-backed securitiesU.S. government agency and U.S. government sponsored enterprise residential mortgage-backed securities$—  — %$—  — %$30,413  2.20 %$75,142  2.35 %$105,555  2.31 %U.S. government agency and U.S. government sponsored enterprise residential mortgage-backed securities— — %— — %30,575 2.20 %76,856 2.35 %107,431 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 %U.S. government agency and U.S. government sponsored enterprise collateralized mortgage obligations117,175 0.71 %11,499 2.01 %44,743 1.38 %44,979 0.39 %218,396 0.85 %
Municipal securitiesMunicipal securities—  — %—  — %—  — %57,174  2.79 %57,174  2.79 %Municipal securities— — %— — %9,526 2.60 %59,707 2.62 %69,233 2.62 %
Non-agency residential mortgage-backed securitiesNon-agency residential mortgage-backed securities—  — %—  — %—  — %164  6.14 %164  6.14 %Non-agency residential mortgage-backed securities— — %— — %— — %163 6.35 %163 6.35 %
Collateralized loan obligationsCollateralized loan obligations668,353  2.73 %—  — %—  — %—  — %668,353  2.73 %Collateralized loan obligations685,931 1.91 %— — %— — %— — %685,931 1.91 %
Corporate debt securitiesCorporate debt securities—  — %122,301  4.99 %21,346  5.64 %—  — %143,647  5.08 %Corporate debt securities— — %129,960 5.01 %16,946 5.73 %— — %146,906 5.08 %
Total securities available-for-saleTotal 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 %Total securities available-for-sale$820,913 1.74 %$141,459 4.77 %$101,790 2.41 %$181,705 1.93 %$1,245,867 2.16 %

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Loans Held-for-Sale
Total loans held-for-sale carried at fair value were $19.8$1.8 million and $22.6 million respectively, at JuneSeptember 30, 2020 and December 31, 2019 and consisted mainly of repurchased conforming SFR mortgage loans that were previously sold and repurchased GNMA loans that were previously sold to GNMA that wereand became delinquent more than 90 days and subject to a repurchase option by us.days. The $2.9$20.8 million, or 12.7%91.8%, decrease was mainly due to sales and payoffs of $613 thousand$18.6 million and a decrease in fair value of $1.6$1.5 million.

Loans Receivable, Net
The following table presents the composition of our loan and lease portfolio as of the dates indicated:
($ in thousands)($ in thousands)June 30,
2020
December 31, 2019Amount ChangePercentage Change($ in thousands)September 30,
2020
December 31, 2019Amount ChangePercentage Change
Commercial:Commercial:Commercial:
Commercial and industrialCommercial and industrial$1,436,990  $1,691,270  $(254,280) (15.0)%Commercial and industrial$1,586,824 $1,691,270 $(104,446)(6.2)%
Commercial real estateCommercial real estate822,694  818,817  3,877  0.5 %Commercial real estate826,683 818,817 7,866 1.0 %
MultifamilyMultifamily1,434,071  1,494,528  (60,457) (4.0)%Multifamily1,476,803 1,494,528 (17,725)(1.2)%
SBA(1)
SBA(1)
310,784  70,981  239,803  337.8 %
SBA(1)
320,573 70,981 249,592 351.6 %
ConstructionConstruction212,979  231,350  (18,371) (7.9)%Construction197,629 231,350 (33,721)(14.6)%
Consumer:Consumer:Consumer:
Single family residential mortgageSingle family residential mortgage1,370,785  1,590,774  (219,989) (13.8)%Single family residential mortgage1,234,479 1,590,774 (356,295)(22.4)%
Other consumerOther consumer39,393  54,165  (14,772) (27.3)%Other consumer35,011 54,165 (19,154)(35.4)%
Total loans(2)
Total loans(2)
5,627,696  5,951,885  (324,189) (5.4)%
Total loans(2)
5,678,002 5,951,885 (273,883)(4.6)%
Allowance for loan lossesAllowance for loan losses(90,370) (57,649) (32,721) 56.8 %Allowance for loan losses(90,927)(57,649)(33,278)57.7 %
Total loans receivable, netTotal loans receivable, net$5,537,326  $5,894,236  $(356,910) (6.1)%Total loans receivable, net$5,587,075 $5,894,236 $(307,161)(5.2)%
(1)Includes PPP loans totaling $240.7$255.8 million, which included $5.6$4.1 million of net unamortized loan fees at JuneSeptember 30, 2020. There were no PPP loans outstanding at December 31, 2019.
(2)Total loans include net deferred loan origination costs/(fees) and premiums/(discounts), net of $6.0$6.2 million and $14.3 million respectively, at JuneSeptember 30, 2020 and December 31, 2019.

Gross loans decreased $324.2$273.9 million to $5.63$5.68 billion during the year, due mostly to lower single family residential mortgage loans of $220.0$356.3 million, lower commercial and industrial (“C&I“&I”) loans of $254.3$104.4 million, and lower multifamily loans of $60.5$17.7 million, and lower construction loans of $33.7 million. The decline in single family residential mortgage loans was attributed to payoffs as the loans refinance away in the lower rate environment and these proceeds are invested in other core business loans.we no longer originate this loan type. 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. The decline in multifamily and construction loans is attributed to general fluctuations in volume and certain payoffs. These decreases werewere partially offset by a $239.8$249.6 million increase in SBA loans attributable to the funding of loans under the SBA's PPP. At September 30, 2020, SBA loans included $255.8 million of PPP loans, net of fees. Our focus on processing PPP loans, in addition to the impact of the COVID-19, pandemic tempered other loan production; additionally,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 commercial real estate loans. Single family residential mortgage and multifamily loans comprised 49.9%47.7% of the total held-for-investment loan portfolio as compared to 53.0%52.3% one year ago. Commercial real estate loans comprised 14.6% of the loan portfolio and commercial and industrial loans constituted 25.5%28.0%. As of JuneSeptember 30, 2020, loans secured by residential real estate (single family, multifamily, single family construction, and warehouse credit facilities) represent approximately 66%67% of our total loans outstanding.

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The C&I portfolio has limited exposure to certain business sectors undergoing severe stress as demonstrateda result of the pandemic. The following table summarizes the balances of the C&I portfolio by industry concentration and the following (as a percentage of total outstanding C&I loan balances):balances:
June 30, 2020September 30, 2020
($ in thousands)($ in thousands)Amount% of Portfolio($ in thousands)Amount% of Portfolio
C&I Portfolio by IndustryC&I Portfolio by IndustryC&I Portfolio by Industry
Finance and insurance (includes Warehouse lending)Finance and insurance (includes Warehouse lending)$777,015  54 %Finance and insurance (includes Warehouse lending)$932,887 59 %
Real estate and rental leasingReal estate and rental leasing201,630  14 %Real estate and rental leasing204,182 13 %
Gas stationsGas stations76,510  %Gas stations70,630 %
ManufacturingManufacturing60,128  %Manufacturing50,747 %
HealthcareHealthcare43,256  %Healthcare67,789 %
Wholesale tradeWholesale trade39,740  %Wholesale trade40,232 %
Other retail tradeOther retail trade37,699  %Other retail trade37,157 %
Television/motion picturesTelevision/motion pictures33,590  %Television/motion pictures31,310 %
Food servicesFood services30,216  %Food services29,835 %
Professional servicesProfessional services14,975  %Professional services13,878 %
TransportationTransportation5,363  — %Transportation5,480 — %
AccommodationsAccommodations1,496  — %Accommodations1,473 — %
All otherAll other115,372  %All other101,224 %
TotalTotal$1,436,990  100 %Total$1,586,824 100 %

Non-Traditional Mortgage Portfolio ("NTM")
Our 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 JuneSeptember 30, 2020 and December 31, 2019, the NTM portfolio totaled $511.2$468.5 million, or 9.1%8.3% of the total gross loan portfolio, and $600.7 million, or 10.1% of the total gross loan portfolio. The total NTM portfolio decreased by $89.5$132.2 million, or 14.9%22.0% during the sixnine months ended JuneSeptember 30, 2020. The decrease was primarily due to principal paydowns and payoffs.payoffs with no new production as we longer originate NTM loans.
The initial credit guidelines for the NTM portfolio were established based on the borrower's Fair Isaac Corporation (“FICO”) score, LTVloan-to-value ("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, which includes refreshing FICO scores on the Green Loans and HELOCs and ordering third party automated valuation models (“AVMs”) to confirm collateral values. We no longer originate NTM loans.
Green Loans totaled $45.2$40.8 million at JuneSeptember 30, 2020, a decrease of $7.1$11.5 million, or 13.5%21.9% from $52.3 million at December 31, 2019, primarily due to principal paydowns and payoffs. The NTM loans on non-accrualnonaccrual status included $4.6$4.5 million of Green Loans and $14.6$16.1 million of interest-only loans at JuneSeptember 30, 2020 compared to $1.5 million of Green Loans and $11.5 million of interest-only loans at December 31, 2019.
The following table presents our Green Loans first lien portfolio at JuneSeptember 30, 2020 by FICO scores that were obtained during the quarter ended JuneSeptember 30, 2020, compared to the FICO scores for those same loans that were obtained during the quarter ended MarchDecember 31, 2020:2019:
By FICO Scores Obtained During the Quarter Ended June 30, 2020By FICO Scores Obtained During the Quarter Ended December 31, 2019Change
By FICO Scores Obtained
During the Quarter Ended
September 30, 2020
By FICO Scores Obtained
During the Quarter Ended
December 31, 2019
Change
($ in thousands)($ in thousands)CountAmountPercentCountAmountPercentCountAmountPercent($ in thousands)CountAmountPercentCountAmountPercentCountAmountPercent
FICO ScoreFICO ScoreFICO Score
800+800+12  $2,870  6.6 %13  $3,509  7.0 %(1) $(639) (18.2)%800+11 $5,239 13.4 %13 $3,499 8.9 %(2)$1,740 49.7 %
700-799700-79931  21,756  49.9 %38  27,011  54.1 %(7) (5,255) (19.5)%700-79932 21,814 55.7 %30 22,156 56.6 %(342)(1.5)%
600-699600-69910  11,974  27.4 %10  12,400  24.8 %—  (426) (3.4)%600-69910,019 25.6 %10,422 26.6 %(403)(3.9)%
<600<600 3,253  7.5 % 3,286  6.6 %—  (33) (1.0)%<6001,580 4.0 %2,575 6.6 %(1)(995)(38.6)%
No FICONo FICO 3,751  8.6 % 3,753  7.5 %—  (2) (0.1)%No FICO528 1.3 %528 1.3 %— — — %
TotalsTotals61  $43,604  100.0 %69  $49,959  100.0 %(8) $(6,355) (12.7)%Totals57 $39,180 100.0 %57 $39,180 100.0 % $  %

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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 our policy. The table below represents our single family residential NTM first lien portfolio by LTV ratio ranges as of the dates indicated:
GreenInterest OnlyNegative AmortizationTotal
($ in thousands)($ in thousands)CountAmountPercentCountAmountPercentCountAmountPercentCountAmountPercent($ in thousands)GreenInterest OnlyNegative AmortizationTotal
June 30, 2020
LTV ratio rangeLTV ratio rangeCountAmountPercentCountAmountPercentCountAmountPercentCountAmountPercent
September 30, 2020September 30, 2020
< 61%< 61%49  $32,547  74.7 %208  $294,171  63.4 % $2,335  100.0 %265  $329,053  64.6 %< 61%48 $31,651 80.8 %193 $281,688 66.2 %$2,302 100.0 %249 $315,641 67.6 %
61-80%61-80%10  9,257  21.2 %116  158,111  34.1 %—  —  — %126  167,368  32.8 %61-80%6,903 17.6 %96 131,097 30.8 %— — — %104 138,000 29.6 %
81-100%81-100% 1,800  4.1 % 4,875  1.1 %—  —  — % 6,675  1.3 %81-100%626 1.6 %6,862 1.6 %— — — %7,488 1.6 %
> 100%> 100%—  —  — % 6,509  1.4 %—  —  — % 6,509  1.3 %> 100%— — — %5,759 1.4 %— — — %5,759 1.2 %
TotalTotal61  $43,604  100.0 %329  $463,666  100.0 % $2,335  100.0 %398  $509,605  100.0 %Total57 $39,180 100.0 %295 $425,406 100.0 %8 $2,302 100.0 %360 $466,888 100.0 %
December 31, 2019December 31, 2019December 31, 2019
< 61%< 61%54  $37,804  75.6 %231  $346,899  63.6 % $3,027  100.0 %294  $387,730  64.8 %< 61%54 $37,804 75.6 %231 $346,899 63.6 %$3,027 100.0 %294 $387,730 64.8 %
61-80%61-80%12  8,531  17.1 %136  183,664  33.7 %—  —  — %148  192,195  32.1 %61-80%12 8,531 17.1 %136 183,664 33.7 %— — — %148 192,195 32.1 %
81-100%81-100% 3,624  7.3 % 7,081  1.3 %—  —  — % 10,705  1.8 %81-100%3,624 7.3 %7,081 1.3 %— — — %10,705 1.8 %
> 100%> 100%—  —  — % 7,727  1.4 %—  —  — % 7,727  1.3 %> 100%— — — %7,727 1.4 %— — — %7,727 1.3 %
TotalTotal69  $49,959  100.0 %376  $545,371  100.0 % $3,027  100.0 %454  $598,357  100.0 %Total69 $49,959 100.0 %376 $545,371 100.0 %9 $3,027 100.0 %454 $598,357 100.0 %

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Non-PerformingNonperforming Assets
The following table presents a summary of total non-performingnonperforming assets, excluding loans held-for-sale, as of the dates indicated:
($ in thousands)June 30,
2020
December 31, 2019Amount ChangePercentage Change
Loans past due 90 days or more still on accrual$—  $—  $—  — %
Non-accrual loans72,703  43,354  29,349  67.7 %
Total non-performing loans72,703  43,354  29,349  67.7 %
Other real estate owned—  —  —  — %
Total non-performing assets$72,703  $43,354  $29,349  67.7 %
Performing restructured loans (1)
$5,597  $6,621  $(1,024) (15.5)%
Total non-performing loans to total loans1.29 %0.73 %
Total non-performing assets to total assets0.94 %0.55 %
ALL to non-performing loans124.30 %132.97 %
ACL to non-performing loans130.07 %142.35 %
($ in thousands)September 30,
2020
December 31, 2019Amount ChangePercentage Change
Loans past due 90 days or more still on accrual$547 $— $547 — %
Nonaccrual loans66,337 43,354 22,983 53.0 %
Total nonperforming loans66,884 43,354 23,530 54.3 %
Other real estate owned— — — — %
Total nonperforming assets$66,884 $43,354 $23,530 54.3 %
Performing restructured loans (1)
$5,408 $6,621 $(1,213)(18.3)%
Total nonperforming loans to total loans1.18 %0.73 %
Total nonperforming assets to total assets0.86 %0.55 %
ALL to nonperforming loans135.95 %132.97 %
ACL to nonperforming loans140.74 %142.35 %
(1) Excluded from non-performingnonperforming loans

Loans are generally placed on non-accrualnonaccrual 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 $952 thousand$1.2 million and $1.7$2.8 million would have been recorded during the three and sixnine months ended JuneSeptember 30, 2020, had these loans been paid in accordance with their original terms throughout the periods indicated.
Non-performingNonperforming loans totaled $66.9 million as of September 30, 2020, compared to $72.7 million as of June 30, 2020 and $43.4 million as of which $21.9December 31, 2019. The $5.8 million decrease during the third quarter was primarily due to $10.2 million in cured loans and payoffs, offset by $4.4 million of loans placed on nonaccrual status. As of September 30, 2020, $31.5 million, or 30%47% of the balancenonperforming loans relates to loans in a current payment status. The $16.2 million increase duringAs of September 30, 2020, the second quarter was primarily due to $18.6 million of loans being placed on non-accrual status, offset by cured loans and payoffs. The quarter-end balance included three large loan relationships totaling $36.9$34.9 million, or 51%52% of our total non-performingnonperforming loans, which consist of one $16.4$16.1 million legacy shared national credit, a $9.1 million single familysingle-family mortgage residential loan with a loan-to-value ratioratio of 58%, and an $11.5 a $9.6 million legacy relationship well-secured by commercial realreal estate and single familysingle-family residential properties with an average loan-to-value ratio of 51%. Aside from those three loan relationships, non-performing single familynonperforming single-family residential loans totaled $19.4$17.7 million and the remaining non-performingnonperforming loans totaled $16.4$14.3 million. The $16.1 million legacy shared national credit was resolved subsequent to quarter end at its carrying value. Additionally, subsequent to quarter end, our second largest nonperforming loan, a $9.1 million loan secured by a first trust deed on a single family residence in Malibu, CA, was foreclosed upon by the second trust deed holder, subject to our first lien. We believe that the loan is fully secured and intend to continue foreclosure proceedings. Before the end of the fourth quarter, we expect to resolve this loan with no loss related to the carrying value of our note either through the loan being reinstated prior to completion of the foreclosure, or by a completed foreclosure sale.

Troubled Debt Restructurings
Loans that we modify or restructure where the debtor is experiencing financial difficulties and makes a concession to the borrower in 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 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 us 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 JuneSeptember 30, 2020 and December 31, 2019, we had 2627 and 25 loans, respectively, with an aggregate balance of $25.9$25.4 million and $21.8 million, respectively, classified as TDRs. When a loan becomes a TDR, we cease accruing interest, and classify it as non-accrualnonaccrual until the borrower demonstrates that the loan is again performing. The increase in TDRs during the
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three and sixnine months ended JuneSeptember 30, 2020 was primarily due to one commercial and industrial relationship totaling $3.7 million.
At JuneSeptember 30, 2020, of the 2627 loans classified as TDRs, 12 loans totaling $5.6$5.4 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, 2019, of the 25 loans classified as TDRs, 14 loans totaling $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-accrualnonaccrual status benefit as the loans are generally not reported as non-accrualnonaccrual during the modification period. Refer to "Borrower Payment Relief Efforts" above for additional information regarding CARES Act deferrals.

Allowance for Credit Losses (ACL)
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 JuneSeptember 2020. SimilarIn contrast to the late MarchJune 2020 forecasts, these June 2020September forecasts reflect the onseta more favorable view of the economy (i.e. higher GDP growth rates and lower unemployment rates). Despite this, the Company-specific economic view recognizes that the foreseeable future is uncertain with respect to the search for a vaccine and effective treatments for COVID-19; the lack of clarity regarding the timing and amount of a potential government stimulus; the unknown impact of the COVID-19 pandemic its impact on the MEVs,economy and industry segments; and the future economic recovery. These forecasts published by our model provider have deteriorated sinceunknown benefit from Federal Reserve and other government actions. Accordingly, the end of the first quarter, with June baseline unemployment rate forecasts for 2020ACL level and 2021 increasing and real gross domestic product growth rates decreasing. Similar to the first quarter of 2020, weresulting provision reflect these uncertainties. The ACL also incorporated qualitative factors to account for certain loan portfolio characteristics that are not taken into consideration by ourthe third-party model including underlying strengths and weaknesses in the loan portfolio. As is the case with all estimates, we expect the ACL is expected to be impacted in future periods by economic volatility, changing economic forecasts, actual and projected credit experience, and underlying model assumptions, and asset quality metrics, all of which may be better than or worse than our current estimate.estimates.
The ACL process involves subjective and complex judgments. In addition, we use 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. WeIn addition, we 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 $94.1 million, or 1.66% of total loans at September 30, 2020 compared to $94.6 million or 1.68% of total loans at June 30, 2020 compared to $82.1and $61.7 million or 1.45%1.04% at MarchDecember 31, 2020.2019. The $12.4$0.4 million increasedecrease in the allowance for expected credit lossesACL during the third quarter of 2020 was due to: (i) $6.8net charge-offs of $1.6 million providedand (ii) a negative provision for unfunded loan commitments of $1.0 million, offset by (iii) specific reserves primarily related to one previously reported non-accrual shared national credit, (ii) $5.0of $1.2 million, provided forand (iv) general reserves relatedof $0.9 million due to the continued deterioration in key macro-economic forecast variables, offset by the impact of lowerhigher loan balances, updated forecasts, and (iii) net recoveries of $608 thousand.improved credit quality metrics. The ACL coverage of non-performingnonperforming loans was 130%was 141% at JuneSeptember 30, 2020 compared to 145%130% at March 31,June 30, 2020 and 142% at December 31, 2019.
The reserve for unfunded loan commitments iswas established to cover the expected credit losses for the estimated level of funding of these loan commitments, except for unconditionally cancellable commitments for which no reserve is required under ASC 326. The reserve for unfunded loan commitments is included in accrued expenses and other liabilities on the consolidated statements of financial condition.
The following table provides a summary of components of the allowance for credit losses and related ratios as of the dates indicated:
($ 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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($ in thousands)September 30, 2020December 31, 2019
Allowance for credit losses:
Allowance for loan losses (ALL)$90,927 $57,649 
Reserve for unfunded loan commitments3,206 4,064 
Total allowance for credit losses (ACL)$94,133 $61,713 
ALL to total loans1.60 %0.97 %
ACL to total loans1.66 %1.04 %
ACL to total loans, excluding PPP loans1.74 %1.04 %

The following tables provide summaries of activity in the allowance for credit losses for the periods indicated:
Three Months Ended June 30,Three Months Ended September 30,
($ in thousands)($ in thousands)20202019($ 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
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 periodBalance at beginning of period$78,243  $3,888  $82,131  $63,885  $4,208  $68,093  Balance at beginning of period$90,370 $4,195 $94,565 $59,523 $4,295 $63,818 
Loans charged offLoans charged off—  —  —  (2,451) —  (2,451) Loans charged off(1,821)— (1,821)(35,546)— (35,546)
Recoveries of loans previously charged offRecoveries of loans previously charged off608  —  608  76  —  76  Recoveries of loans previously charged off248 — 248 410 — 410 
Net charge-offsNet charge-offs608  —  608  (2,375) —  (2,375) Net charge-offs(1,573)— (1,573)(35,136)— (35,136)
Provision for credit losses11,519  307  11,826  (1,987) 87  (1,900) 
Provision for (reversal of) credit lossesProvision for (reversal of) credit losses2,130 (989)1,141 38,540 67 38,607 
Balance at end of periodBalance at end of period$90,370  $4,195  $94,565  $59,523  $4,295  $63,818  Balance at end of period$90,927 $3,206 $94,133 $62,927 $4,362 $67,289 

Six Months Ended June 30,Nine Months Ended September 30,
($ in thousands)($ in thousands)20202019($ 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
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 periodBalance at beginning of period$57,649  $4,064  $61,713  $62,192  $4,622  $66,814  Balance at beginning of period$57,649 $4,064 $61,713 $62,192 $4,622 $66,814 
Impact of adopting ASU 2016-13(1)
Impact of adopting ASU 2016-13(1)
7,609  (1,226) 6,383  —  —  —  
Impact of adopting ASU 2016-13(1)
7,609 (1,226)6,383 — — — 
Loans charged offLoans charged off(2,076) —  (2,076) (3,514) —  (3,514) Loans charged off(3,897)— (3,897)(39,060)— (39,060)
Recoveries of loans previously charged offRecoveries of loans previously charged off958  —  958  320  —  320  Recoveries of loans previously charged off1,206 — 1,206 730 — 730 
Net charge-offsNet charge-offs(1,118) —  (1,118) (3,194) —  (3,194) Net charge-offs(2,691)— (2,691)(38,330)— (38,330)
Provision for (reversal of) credit lossesProvision for (reversal of) credit losses26,230  1,357  27,587  525  (327) 198  Provision for (reversal of) credit losses28,360 368 28,728 39,065 (260)38,805 
Balance at end of periodBalance at end of period$90,370  $4,195  $94,565  $59,523  $4,295  $63,818  Balance at end of period$90,927 $3,206 $94,133 $62,927 $4,362 $67,289 
(1)Represents the impact of adopting ASU 2016-13, Financial Instruments - Credit Losses on January 1, 2020. As a result of adopting ASU 2016-13, our methodology to compute our allowance for credit losses is based on a current expected credit loss methodology, rather that the previously applied incurred loss methodology.
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The following table provides a summary of the allocation of the allowance for loan losses by loan category as well as loans receivable for each category as of the dates indicated:
June 30, 2020December 31, 2019
($ 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  $5,951,885  100.0 %
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September 30, 2020December 31, 2019
($ 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$26,591 $1,586,824 28.0 %$22,353 $1,691,270 28.4 %
Commercial real estate19,373 826,683 14.6 %5,941 818,817 13.8 %
Multifamily25,559 1,476,803 26.0 %11,405 1,494,528 25.1 %
SBA3,557 320,573 5.6 %3,120 70,981 1.2 %
Construction6,205 197,629 3.5 %3,906 231,350 3.9 %
Consumer:
Single family residential mortgage8,976 1,234,479 21.7 %10,486 1,590,774 26.7 %
Other consumer666 35,011 0.6 %438 54,165 0.9 %
Total$90,927 $5,678,002 100.0 %$57,649 $5,951,885 100.0 %
The following table provides information regarding activity by loan class in the allowance for loan losses during the periods:periods indicated:
Three Months Ended
June 30,
Six Months Ended
June 30,
Three Months Ended
September 30,
Nine Months Ended
September 30,
($ in thousands)($ in thousands)2020201920202019($ in thousands)2020201920202019
ALL at beginning of periodALL at beginning of period$78,243  $63,885  $57,649  $62,192  ALL at beginning of period$90,370 $59,523 $57,649 $62,192 
Impact of adopting ASU 2016-13(1)
Impact of adopting ASU 2016-13(1)
—  —  7,609  —  
Impact of adopting ASU 2016-13(1)
— — 7,609 — 
Charge-offs:Charge-offs:Charge-offs:
Commercial and industrialCommercial and industrial—  (2,022) (1,164) (2,115) Commercial and industrial(1,597)(34,673)(2,761)(36,788)
MultifamilyMultifamily— — — (6)
SBASBA—   (356) (348) SBA(224)(738)(580)(1,086)
Single family residential mortgageSingle family residential mortgage—  (425) (552) (951) Single family residential mortgage— (135)(552)(1,086)
Other consumerOther consumer—  (6) (4) (94) Other consumer— — (4)(94)
Total charge-offsTotal charge-offs—  (2,451) (2,076) (3,514) Total charge-offs(1,821)(35,546)(3,897)(39,060)
Recoveries:Recoveries:Recoveries:
Commercial and industrialCommercial and industrial119  11  149  44  Commercial and industrial116 59 265 103 
SBASBA—  60  121  101  SBA132 50 253 151 
Lease financingLease financing—   —   Lease financing— — 
Single family residential mortgageSingle family residential mortgage488  —  639  150  Single family residential mortgage— — 639 150 
Other consumerOther consumer  49  19  Other consumer— 298 49 317 
Total recoveriesTotal recoveries608  76  958  320  Total recoveries248 410 1,206 730 
Net charge-offsNet charge-offs608  (2,375) (1,118) (3,194) Net charge-offs(1,573)(35,136)(2,691)(38,330)
Provision for credit losses11,519  (1,987) 26,230  525  
Provision for credit losses - loansProvision for credit losses - loans2,130 38,540 28,360 39,065 
ALL at end of periodALL at end of period$90,370  $59,523  $90,370  $59,523  ALL at end of period$90,927 $62,927 $90,927 $62,927 
Average total loans held-for-investmentAverage total loans held-for-investment$5,687,652  $7,398,471  $5,723,094  $7,540,145  Average total loans held-for-investment$5,514,032 $6,482,566 $5,652,897 $7,183,739 
Total loans held-for-investment at end of periodTotal loans held-for-investment at end of period$5,627,696  $6,719,570  $5,627,696  $6,719,570  Total loans held-for-investment at end of period$5,678,002 $6,383,259 $5,678,002 $6,383,259 
Ratios:Ratios:Ratios:
Annualized net charge-offs (recoveries) to average total loans held-for-investment(0.04)%0.13 %0.04 %0.08 %
Annualized net charge-offs to average total loans held-for-investmentAnnualized net charge-offs to average total loans held-for-investment0.11 %2.17 %0.06 %0.71 %
ALL to total loans held-for-investmentALL to total loans held-for-investment1.61 %0.89 %1.61 %0.89 %ALL to total loans held-for-investment1.60 %0.99 %1.60 %0.99 %
(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.
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Alternative Energy Partnerships
We 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 our respective investments in these entities are more than minor, we have significant influence, but not control, over the investee’s activities that most significantly impact its economic performance. As a result, we 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 our investment. As a result, we 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 we 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 our 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 our investment in alternative energy partnerships for the three and sixnine months ended JuneSeptember 30, 2020 and 2019:
Three Months Ended
June 30,
Six Months Ended
June 30,
Three Months Ended
September 30,
Nine Months Ended
September 30,
($ in thousands)($ in thousands)2020201920202019($ in thousands)2020201920202019
Balance at beginning of periodBalance at beginning of period$27,347  $26,578  $29,300  $28,988  Balance at beginning of period$26,967 $26,633 $29,300 $28,988 
New fundingNew funding—  235  3,631  235  New funding— — 3,631 235 
Change in unfunded commitmentsChange in unfunded commitments—  —  (3,225) —  Change in unfunded commitments— — (3,225)— 
Cash distribution from investmentsCash distribution from investments(547) (535) (1,001) (995) Cash distribution from investments(611)(534)(1,612)(1,529)
Gain (loss) on investments using HLBV methodGain (loss) on investments using HLBV method167  355  (1,738) (1,595) Gain (loss) on investments using HLBV method1,430 940 (308)(655)
Balance at end of periodBalance at end of period$26,967  $26,633  $26,967  $26,633  Balance at end of period$27,786 $27,039 $27,786 $27,039 
Unfunded equity commitments at end of periodUnfunded equity commitments at end of period$—  $3,796  $—  $3,796  Unfunded equity commitments at end of period$ $3,796 $ $3,796 

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$27.8 million and $29.3 million at JuneSeptember 30, 2020 and December 31, 2019.
During the three and sixnine months ended JuneSeptember 30, 2020, we funded zero and $3.6 million for our alternative energy partnerships and did not receive any return of capital from our alternative energy partnerships. During each of the three and sixnine months ended JuneSeptember 30, 2019, we did not receive any return of capital and funded zero and $235 thousand into these partnerships.
During the three months ended JuneSeptember 30, 2020 and 2019, we recognized a gain on investment of $167 thousand$1.4 million and a loss on investment of $355$940 thousand through its HLBV application. During the sixnine months ended JuneSeptember 30, 2020 and 2019, we recognized a loss on investment of $1.7 million$308 thousand and $1.6 million$655 thousand through our application of the HLBV method of accounting. The HLBV losses for the sixnine months ended JuneSeptember 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 benefit (expense) benefit related to these investments of $(38)$185 thousand and $398$(111) thousand for the three and sixnine months ended JuneSeptember 30, 2020 and $380$254 thousand and $(177) thousand for each of the three and sixnine months ended JuneSeptember 30, 2019.
For additional information, see Note 12 to Consolidated Financial Statements (unaudited) included in Part I of this Quarterly Report on Form 10-Q.
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Deposits
The following table shows the composition of deposits by type as of the dates indicated:
June 30, 2020December 31, 2019September 30, 2020December 31, 2019
($ in thousands)($ in thousands)Amount% of Total DepositsAmount% of Total DepositsAmount Change($ in thousands)Amount% of Total DepositsAmount% of Total DepositsAmount Change
Noninterest-bearing depositsNoninterest-bearing deposits$1,391,504  23.0 %$1,088,516  20.1 %$302,988  Noninterest-bearing deposits$1,450,744 24.1 %$1,088,516 20.1 %$362,228 
Interest-bearing demand depositsInterest-bearing demand deposits1,846,698  30.6 %1,533,882  28.3 %312,816  Interest-bearing demand deposits2,045,115 33.9 %1,533,882 28.3 %511,233 
Money market accountsMoney market accounts765,854  12.7 %715,479  13.2 %50,375  Money market accounts689,769 11.4 %715,479 13.2 %(25,710)
Savings accountsSavings accounts939,018  15.6 %885,246  16.3 %53,772  Savings accounts946,293 15.7 %885,246 16.3 %61,047 
Certificates of deposit of $250,000 or lessCertificates of deposit of $250,000 or less585,314  9.7 %582,772  10.7 %2,542  Certificates of deposit of $250,000 or less426,677 7.1 %582,772 10.7 %(156,095)
Certificates of deposit of more than $250,000Certificates of deposit of more than $250,000509,077  8.4 %621,272  11.4 %(112,195) Certificates of deposit of more than $250,000473,668 7.8 %621,272 11.4 %(147,604)
Total depositsTotal deposits$6,037,465  100.0 %$5,427,167  100.0 %$610,298  Total deposits$6,032,266 100.0 %$5,427,167 100.0 %$605,099 

Total deposits were $6.04$6.03 billion at JuneSeptember 30, 2020, an increase of $610.3$605.1 million, or 11.2%11.1%, from $5.43 billion at December 31, 2019. We continue to focus on growing relationship-based deposits, strategically supplemented by wholesale funding, as we proactively drive our funding costs down. Noninterest-bearing deposits totaled $1.39$1.45 billion and represented 23.0%24.1% of total deposits at JuneSeptember 30, 2020 compared to $1.09 billion and 20.1% at December 31, 2019.
During the sixnine months ended JuneSeptember 30, 2020, demand deposits increased by $615.8$873.5 million, consisting of increases of $303.0$362.2 million in noninterest-bearing deposits and $312.8$511.2 million in interest-bearing demand deposits. In addition, money market accounts increased $50.4 million and savings accounts increased $53.8$61.0 million, offset by a decrease of $109.7$25.7 million in money market accounts and $303.7 million in time deposits.
Brokered deposits were $179.8$89.8 million at JuneSeptember 30, 2020, an increase of $169.8$79.8 million from $10.0 million at December 31, 2019. The increase between periods related to brokered time deposits as we took advantage of attractive pricing in that market to reduce some of our remaining higher-cost interest bearing deposits.
The following table presents the scheduled maturities of certificates of deposit as of JuneSeptember 30, 2020:
($ in thousands)($ in thousands)Three Months or LessOver Three Months Through Six MonthsOver Six Months Through Twelve MonthsOver One YearTotal($ 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 lessCertificates of deposit of $250,000 or less$222,856  $169,487  $150,881  $42,090  $585,314  Certificates of deposit of $250,000 or less$179,027 $117,439 $92,054 $38,157 $426,677 
Certificates of deposit of more than $250,000Certificates of deposit of more than $250,000211,569  193,671  60,687  43,150  509,077  Certificates of deposit of more than $250,000348,435 50,241 32,261 42,731 473,668 
Total certificates of depositTotal certificates of deposit$434,425  $363,158  $211,568  $85,240  $1,094,391  Total certificates of deposit$527,462 $167,680 $124,315 $80,888 $900,345 

Borrowings
We utilized Federal Home Loan Bank (“FHLB”) advances to leverage our capital base, to provide funds for lending and investing activities, as a source of liquidity, and to enhance interest rate risk management. We also maintained additional borrowing availabilities from Federal Reserve Discount Window and unsecured federal funds lines of credit.
Advances from the FHLB decreased $577.8$635.5 million, or 48.4%53.2%, to $617.2$559.5 million, net of unamortized debt issuance costs of $6.5 million, as of JuneSeptember 30, 2020, primarily due to repayment of $447.0$505.0 million in short-term and overnight advances with the FHLB and $124.0 million in maturities and early repayments of long-term advances. During the three months endedIn June 30, 2020, we repaid a $100.0 million FHLB long-term advance with a weighted average interest rate of 2.07% and incurred a $2.5 million extinguishment fee. 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 JuneSeptember 30, 2020, FHLB advances included 0 overnight borrowings, $58.0$105.0 million maturing within three months, and $566.0$461.0 million maturing beyond three months with a weighted average life of 4.14.7 years and weighted average interest rate of 2.39%2.51%.
We did not utilize repurchase agreements at JuneSeptember 30, 2020 or December 31, 2019.

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For additional information, see Note 6 to Consolidated Financial Statements (unaudited) included in Part I of this Quarterly Report on Form 10-Q.

Long-term Debt
The following table presents our long-term debt as of the dates indicated:
June 30, 2020December 31, 2019September 30, 2020December 31, 2019
($ in thousands)($ in thousands)Par ValueUnamortized Debt Issuance Cost and DiscountPar ValueUnamortized 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, 20255.25% senior notes due April 15, 2025$175,000  $(1,463) $175,000  $(1,579) 5.25% senior notes due April 15, 2025$175,000 $(1,377)$175,000 $(1,579)
TotalTotal$175,000  $(1,463) $175,000  $(1,579) Total$175,000 $(1,377)$175,000 $(1,579)

We were in compliance with all covenants under our 5.25% senior notes due April 15, 2025 at JuneSeptember 30, 2020.

On October 30, 2020, we completed the issuance and sale of $85.0 million aggregate principal amount of 4.375% Fixed-to-Floating Rate Subordinated Notes due 2030, at a public offering price equal to 100% of the aggregate principal amount of the Notes.
Liquidity Management
We 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, we 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 haswe have 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 haswe have 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$427.7 million at JuneSeptember 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 JuneSeptember 30, 2020, the Bank has pledged certain qualifying loans with an unpaid principal balance of $870.1$879.9 million and securities with a carrying value of $23.0$23.5 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 sixnine months ended JuneSeptember 30, 2020 and 2019.
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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,as a secondary source of liquidity to provide funds for its lending activities as a source of liquidity, and to enhance its interest rate risk management. The Bank also has theadditional sources of secondary liquidity through its ability to obtain brokered deposits, use securities sold under repurchase agreements to leverage its capital base, and collect deposits through its wholesale and treasury operations as well asa pre-established secured borrowings advancesline of credit 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-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 sixnine months ended JuneSeptember 30, 2020, the Bank paid $25.0 million of dividends to Banc of California, Inc. At JuneSeptember 30, 2020, Banc of California, Inc. had $61.1$53.6 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 JuneSeptember 30, 2020. During the sixnine months ended JuneSeptember 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 JuneSeptember 30, 2020, we repurchased depositary shares representing shares of our Series D and Series E preferred stock. The aggregate total consideration for each Series D Depositary Share purchased was $1.2 million.$2 thousand. The aggregate total consideration for each Series E Depositary Share purchased was $1.4 million.$163 thousand. The $49$7 thousand difference between the consideration paid and the $2.7 million$159 thousand aggregate carrying value of the Series D Preferred Stock and Series E Preferred Stock was reclassified to retained earnings and resulted in an increasea decrease to net income allocated to common stockholders.
During the sixnine months ended JuneSeptember 30, 2020, we repurchased depositary shares representing shares of our Series D and Series E preferred stock. The aggregate total consideration for the Series D depositary shares purchased was $2.7 million. The aggregate total consideration for the Series E depositary shares purchased was $1.5$1.7 million. The $575$568 thousand difference between the consideration paid and the $4.8$4.9 million aggregate carrying value of the Series D Preferred Stock and Series E Preferred Stock was reclassified to retained earnings and resulted in an increase to net income allocated to common stockholders.
On a consolidated basis, we maintained $420.6$292.5 million of cash and cash equivalents, which was 5.4%3.8% of total assets at JuneSeptember 30, 2020. Our cash and cash equivalents increaseddecreased by $47.2$81.0 million or 12.6%, from $373.5 million, or 4.8% of total assets, at December 31, 2019. The increasedecrease was mainly due to the increase in deposits and runoff of our legacy single family residential mortgage portfolio, offset by reductions in FHLB advances.
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At JuneSeptember 30, 2020, we had available unused secured borrowing capacities of $1.06 billion$890.0 million from the FHLB and $370.4$427.7 million from the Federal Reserve, as well as $185.0 million from unsecured federal funds lines of credit. We also maintained repurchase agreements of which none were outstanding at JuneSeptember 30, 2020. Availabilities and terms on repurchase agreements are subject to the counterparties' discretion and pledging additional investment securities. We also had unpledged securities available-for-sale of $1.13$1.20 billion at JuneSeptember 30, 2020.
We believe that our liquidity sources are stable and are adequate to meet our day-to-day cash flow requirements as of JuneSeptember 30, 2020. However, in light of the ongoing COVID-19 pandemic, we cannot predict at this time the extent to which the pandemic will negatively affect our business, financial condition, liquidity, capital and results of operations. 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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Commitments and Contractual Obligations
The following table presents our commitments and contractual obligations as of JuneSeptember 30, 2020:
Commitments and Contractual ObligationsCommitments and Contractual Obligations
($ in thousands)($ in thousands)Total Amount CommittedWithin
One Year
More Than One Year Through Three YearsMore 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 creditCommitments to extend credit$80,093  $36,078  $36,785  $1,842  $5,388  Commitments to extend credit$69,455 $27,221 $29,089 $10,522 $2,623 
Unused lines of creditUnused lines of credit1,392,215  1,225,270  70,385  52,710  43,850  Unused lines of credit1,335,838 1,159,142 68,682 62,167 45,847 
Standby letters of creditStandby letters of credit3,579  3,258  210  111  —  Standby letters of credit9,359 8,992 147 220 — 
Total commitmentsTotal commitments$1,475,887  $1,264,606  $107,380  $54,663  $49,238  Total commitments$1,414,652 $1,195,355 $97,918 $72,909 $48,470 
FHLB advancesFHLB advances$624,000  $213,000  $—  $291,000  $120,000  FHLB advances$566,000 $155,000 $— $291,000 $120,000 
Long-term debtLong-term debt175,000  —  —  175,000  —  Long-term debt175,000 — — 175,000 — 
Operating and capital lease obligationsOperating and capital lease obligations23,274  6,461  6,787  3,805  6,221  Operating and capital lease obligations22,476 5,944 6,656 3,964 5,912 
Certificate of depositsCertificate of deposits1,094,391  1,009,151  80,783  4,457  —  Certificate of deposits900,345 819,457 77,033 3,855 — 
Total contractual obligationsTotal contractual obligations$1,916,665  $1,228,612  $87,570  $474,262  $126,221  Total contractual obligations$1,663,821 $980,401 $83,689 $473,819 $125,912 

At JuneSeptember 30, 2020, we had unfunded commitments of $20.5$18.9 million, $7.1$5.6 million, and $501 thousand$10.5 million for affordable housing fund investments, SBIC investments, and other investments, including investments in alternative energy partnerships, respectively. On October 30, 2020, we completed the issuance and sale of $85.0 million aggregate principal amount of 4.375% Fixed-to-Floating Rate Subordinated Notes due 2030, at a public offering price equal to 100% of the aggregate principal amount of the Notes.

Capital
In order to maintain adequate levels of capital, we continuously assess projected sources and uses of capital to support projected asset growth, operating needs and credit risk. We consider, among other things, earnings generated from operations and access to capital from financial markets. In addition, we perform capital stress tests on an annual basis to assess the impact of adverse changes in the economy on our 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 ProvisionsMinimum Capital RequirementsMinimum Required to Be Well-Capitalized Under Prompt Corrective Action Provisions
($ in thousands)($ in thousands)AmountRatioAmountRatioAmountRatio($ in thousands)AmountRatioAmountRatioAmountRatio
June 30, 2020
September 30, 2020September 30, 2020
Banc of California, Inc.Banc of California, Inc.Banc of California, Inc.
Total risk-based capitalTotal risk-based capital$884,558  16.35 %$432,780  8.00 % N/AN/ATotal risk-based capital$894,002 16.19 %$441,650 8.00 % N/AN/A
Tier 1 risk-based capitalTier 1 risk-based capital816,655  15.10 %324,585  6.00 % N/AN/ATier 1 risk-based capital824,724 14.94 %331,237 6.00 % N/AN/A
Common equity tier 1 capitalCommon equity tier 1 capital631,618  11.68 %243,439  4.50 % N/AN/ACommon equity tier 1 capital639,846 11.59 %248,428 4.50 % N/AN/A
Tier 1 leverageTier 1 leverage816,655  10.56 %309,388  4.00 % N/AN/ATier 1 leverage824,724 10.79 %305,662 4.00 % N/AN/A
Banc of California, NABanc of California, NABanc of California, NA
Total risk-based capitalTotal risk-based capital$981,477  18.17 %$432,124  8.00 %$540,155  10.00 %Total risk-based capital$1,001,050 18.14 %$441,388 8.00 %$551,735 10.00 %
Tier 1 risk-based capitalTier 1 risk-based capital913,785  16.92 %324,093  6.00 %432,124  8.00 %Tier 1 risk-based capital931,932 16.89 %331,041 6.00 %441,388 8.00 %
Common equity tier 1 capitalCommon equity tier 1 capital913,785  16.92 %243,070  4.50 %351,100  6.50 %Common equity tier 1 capital931,932 16.89 %248,281 4.50 %358,628 6.50 %
Tier 1 leverageTier 1 leverage913,785  11.84 %308,586  4.00 %385,732  5.00 %Tier 1 leverage931,932 12.21 %305,304 4.00 %381,630 5.00 %
December 31, 2019December 31, 2019December 31, 2019
Banc of California, Inc.Banc of California, Inc.Banc of California, Inc.
Total risk-based capitalTotal risk-based capital$921,892  15.90 %$463,950  8.00 % N/AN/ATotal risk-based capital$921,892 15.90 %$463,950 8.00 % N/AN/A
Tier 1 risk-based capitalTier 1 risk-based capital860,179  14.83 %347,963  6.00 % N/AN/ATier 1 risk-based capital860,179 14.83 %347,963 6.00 % N/AN/A
Common equity tier 1 capitalCommon equity tier 1 capital670,355  11.56 %260,972  4.50 % N/AN/ACommon equity tier 1 capital670,355 11.56 %260,972 4.50 % N/AN/A
Tier 1 leverageTier 1 leverage860,179  10.89 %315,825  4.00 % N/AN/ATier 1 leverage860,179 10.89 %315,825 4.00 % N/AN/A
Banc of California, NABanc of California, NABanc of California, NA
Total risk-based capitalTotal risk-based capital$1,007,762  17.46 %$461,843  8.00 %$577,304  10.00 %Total risk-based capital$1,007,762 17.46 %$461,843 8.00 %$577,304 10.00 %
Tier 1 risk-based capitalTier 1 risk-based capital946,049  16.39 %346,382  6.00 %461,843  8.00 %Tier 1 risk-based capital946,049 16.39 %346,382 6.00 %461,843 8.00 %
Common equity tier 1 capitalCommon equity tier 1 capital946,049  16.39 %259,787  4.50 %375,247  6.50 %Common equity tier 1 capital946,049 16.39 %259,787 4.50 %375,247 6.50 %
Tier 1 leverageTier 1 leverage946,049  12.02 %314,707  4.00 %393,383  5.00 %Tier 1 leverage946,049 12.02 %314,707 4.00 %393,383 5.00 %

On October 30, 2020, we completed the issuance and sale of $85.0 million aggregate principal amount of 4.375% Fixed-to-Floating Rate Subordinated Notes due 2030, at a public offering price equal to 100% of the aggregate principal amount of the Notes which qualifies as Tier II capital.
Dividend Restrictions
Payment 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. 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. As described below, any near term dividend by the Bank will require OCC approval. During the three and sixnine months ended JuneSeptember 30, 2020, the Bank received approval from the OCC and paid $25.0 million in dividends to Banc of California, Inc.
During the three and sixnine months ended JuneSeptember 30, 2020, we declared and paid dividends on our common stock of $0.06 and $0.12$0.18 per share in addition to dividends on our preferred stock. Last year, in April 2019, our Board of Directors approved a plan to reduce the quarterly dividend from $0.13 to $0.06 per common share.

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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”), 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”, together with Management ALCO, “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 monitormanagement monitors adherence to those guidelines.guidelines with oversight by the ALCOs. 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 no 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 our interest rate risk position within the asset/liability tolerance set forth by our 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 JuneSeptember 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 JuneSeptember 30, 2020 and net interest 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)($ in thousands)Economic Value of EquityNet Interest Income($ in thousands)Economic Value of EquityNet Interest Income
AmountAmount ChangePercentage ChangeAmountAmount ChangePercentage Change($ in thousands)AmountAmount ChangePercentage ChangeAmountAmount ChangePercentage Change
June 30, 2020
September 30, 2020September 30, 2020
+200 bps+200 bps$1,332,616  $196,900  17.3 %$222,391  $14,467  7.0 %+200 bps$1,429,698 $182,948 14.7 %$235,725 $12,650 5.7 %
+100 bps+100 bps1,249,336  113,620  10.0 %215,258  7,334  3.5 %+100 bps1,350,643 103,893 8.3 %228,486 5,411 2.4 %
0 bps0 bps1,135,716  207,924  0 bps1,246,750 223,075 
-100 bps-100 bps1,024,455  (111,261) (9.8)%205,107  (2,817) (1.4)%-100 bps1,142,019 (104,731)(8.4)%220,297 (2,778)(1.2)%
(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 us. Other types of market risk, such as foreign currency exchange risk and commodity price risk, do not arise in the normal course of our 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 JuneSeptember 30, 2020 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 JuneSeptember 30, 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 JuneSeptember 30, 2020 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 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 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,November 25, 2020.
In general, the consolidated complaint alleges that our board wrongfully refused demands that the plaintiffs made to our board of directors that we should initiate litigation against the various current and former officers and directors based on their alleged role in the purported concealment of the Company'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 by the named defendants to the Company, adoption of corporate governance reforms, and equitable and injunctive relief. We do not believe that the demands made by these shareholder derivative plaintiffs were wrongfully refused, and we 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 Part I, Item 1A. “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 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 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  $23.59  —  —  
Purchase of Equity Securities by the Issuer
($ in thousands, except per share data)Total Number of SharesAverage Price Paid Per ShareTotal Number of Shares Purchased as Part of Publicly Announced PlansTotal Number of Shares (or Approximate Dollar Value) That May Yet be Purchased Under the Plan
Common Stock:
From July 1, 2020 to July 31, 2020349 $10.83 — $33,000 
From August 1, 2020 to August 31, 20201,379 $11.24 — $33,000 
From September 1, 2020 to September 30, 20201,165 $11.47 — $33,000 
Total2,893 $11.28  
Preferred Stock (Depositary Shares):
From July 1, 2020 to July 31, 20206,602 $25.00 — — 
From August 1, 2020 to August 31, 2020— $— — — 
From September 1, 2020 to September 30, 2020— $— — — 
Total6,602 $25.00   

During the three months ended JuneSeptember 30, 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 our employee stock benefit plans. There were no purchases of shares of common stock during the three months ended JuneSeptember 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
NoneOn November 4, 2020, the Compensation, Nominating and Corporate Governance Committee of the Board of Directors (the “CNG Committee”) of the Company adopted the Banc of California, Inc. Executive Change in Control Severance Plan (the “Severance Plan”). The purpose of the Severance Plan is to retain officers and employees of the Company and its subsidiaries by providing appropriate severance benefits and to ensure their continued dedication to their duties, including in the event of a Change in Control (as such term is defined in the Severance Plan).
The participants under the Severance Plan (each, a “Participant”) include those initial Participants as specified in the Severance Plan and other officers and employees to be designated as Participants from time to time by CNG Committee in its sole discretion. The initial Participants in the Severance Plan include Ido Dotan (Executive Vice President, General Counsel and Corporate Secretary), Michael A. Smith (Chief Accounting Officer) and Lynn A. Sullivan (Executive Vice President and Chief Risk Officer). Jared M. Wolff (President and Chief Executive Officer) and Lynn M. Hopkins (Executive Vice President and Chief Financial Officer), who are parties to employment agreements with the Company that provide for severance benefits, are not Participants in the Severance Plan.

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Under the Severance Plan, the Company will provide a Participant with the payments and benefits set forth in the Severance Plan in the event of a qualifying termination during the period of twelve months following a Change in Control. Such qualifying termination generally includes a termination of a Participant’s employment by the Company other than for Cause (as such term is defined in the Severance Plan) or by the Participant for Good Reason (as such term is defined in the Severance Plan).
The payments and benefits under the Severance Plan include (i) a lump sum cash payment equal to the product of (y) a specified multiple (“Severance Multiple”) and (z) the sum of the Participant’s annual rate of base salary as in effect on the Participant’s date of termination or on the date of the Change in Control, whichever is greater, and the Participant’s target annual cash incentive bonus awarded to such Participant under the annual incentive plan by the Company or its affiliates for the fiscal year in which the date of termination occurs regardless of actual performance, which will generally be paid within 60 days following the date of termination; and (ii) in equal monthly installments for a period following the date of termination (the “COBRA Coverage Period”), an amount equal to the monthly COBRA premium less an amount equal to the portion of the monthly health-care premium the Participant was paying prior to the date of termination. However, such welfare benefits will cease prior to the expiration of the COBRA Coverage Period in the event the Participant becomes employed with another employer and becomes eligible to receive welfare benefits from such employer. The Severance Multiple and COBRA Coverage Period applicable to each of the initial Participants is set forth in the Severance Plan. With respect to other Participants, the Severance Multiple and COBRA Coverage Period will be determined by the CNG Committee on an individual basis.
A Participant’s right to receive the severance payments and benefits described above is subject to such Participant’s delivery and non-revocation of a general release and waiver in favor of the Company and the Participant’s continued compliance with any applicable restrictive covenants set forth in the Severance Plan. In addition, in the event that any payment under the Severance Plan, together with any other amounts paid to a Participant by us, would subject such Participant to an excise tax under Section 4999 of the Internal Revenue Code, such payments will be reduced to the amount that is one dollar less than the amount that would subject the Participant to the excise tax, but only if such reduction would result in the Participant receiving a higher net after-tax amount.
The foregoing description of the Severance Plan is qualified in its entirety by reference to the complete copy of the Severance Plan filed as Exhibit 10.1 to this Quarterly Report on Form 10-Q.



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ITEM 6 - EXHIBITS
3.1
3.2
10.1
31.1
31.2
32.0
101.0The following financial statements and footnotes from the Registrant’s Quarterly Report on Form 10-Q for the quarter ended JuneSeptember 30, 2020 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,November 6, 2020/s/ Jared Wolff
Jared Wolff
President/Chief Executive Officer
(Principal Executive Officer)
Date:August 7,November 6, 2020/s/ Lynn M. Hopkins
Lynn M. Hopkins
Executive Vice President/Chief Financial Officer
(Principal Financial Officer)
Date:August 7,November 6, 2020/s/ Mike Smith
Mike Smith
Senior Vice President/Chief Accounting Officer
(Principal Accounting Officer)

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