| Loans Receivable and Allowance for Credit Losses | Loans Receivable and Allowance for Credit Losses The following table presents the composition of the Company’s loans held-for-investment as of June 30, 2020 and December 31, 2019: ($ in thousands) June 30, 2020 December 31, 2019 Amortized Cost (1) Non-PCI Loans (1) PCI Loans Total (1) Commercial: C&I $ 13,422,691 $ 12,149,121 $ 1,810 $ 12,150,931 CRE: CRE 10,902,114 10,165,247 113,201 10,278,448 Multifamily residential 3,032,385 2,834,212 22,162 2,856,374 Construction and land 567,716 628,459 40 628,499 Total CRE 14,502,215 13,627,918 135,403 13,763,321 Total commercial 27,924,906 25,777,039 137,213 25,914,252 Consumer: Residential mortgage: Single-family residential 7,660,094 7,028,979 79,611 7,108,590 HELOCs 1,461,951 1,466,736 6,047 1,472,783 Total residential mortgage 9,122,045 8,495,715 85,658 8,581,373 Other consumer 182,461 282,914 — 282,914 Total consumer 9,304,506 8,778,629 85,658 8,864,287 Total loans held-for-investment $ 37,229,412 $ 34,555,668 $ 222,871 $ 34,778,539 Allowance for loan losses (632,071) (358,287) — (358,287) Loans held-for-investment, net $ 36,597,341 $ 34,197,381 $ 222,871 $ 34,420,252 (1) Includes net deferred loan fees, unearned fees, unamortized premiums and unaccreted discounts of $(72.1) million and $(43.2) million as of June 30, 2020 and December 31, 2019, respectively. L oans held-for-investments’ accrued interest receivable was $111.8 million and $121.8 million as of June 30, 2020 and December 31, 2019, respectively. Interest income related to nonaccrual loans of approximately $1.2 million and $1.6 million were reversed during the three and six months ended June 30, 2020, respectively. Interest income of approximately $10 thousand and $12 thousand were recognized on nonaccrual loans for the three and six months ended June 30, 2020, respectively. For the accounting policy on accrued interest receivable related to loans held-for-investment, see Note 2 — Current Accounting Developments and Summary of Significant Accounting Policies to the Consolidated Financial Statements in this Form 10-Q. Loans totaling $27.41 billion and $22.43 billion as of June 30, 2020 and December 31, 2019, respectively, were pledged to secure borrowings and provide additional borrowing capacity from the FRB and the FHLB. Credit Quality Indicators All loans are subject to the Company’s credit review and monitoring. For the commercial portfolio, loans are risk rated based on an analysis of the borrower’s current payment performance or delinquency, repayment sources, financial and liquidity factors, including industry and geographic considerations. For the majority of the consumer portfolio, payment performance or delinquency is the driving indicator for the risk ratings. For the Company’s internal credit risk ratings, each individual loan is given a risk rating of 1 through 10. Loans risk rated 1 through 5 are assigned an internal risk rating of “Pass”, with loans risk rated 1 being fully secured by cash or U.S. government securities. Pass loans have sufficient sources of repayment to repay the loan in full, in accordance with all terms and conditions. Loans assigned a risk rating of 6 have potential weaknesses that warrant closer attention by management; these are assigned an internal risk rating of “Special Mention”. Loans assigned a risk rating of 7 or 8 have well-defined weaknesses that may jeopardize the full and timely repayment of the loan; these are assigned an internal risk rating of “Substandard”. Loans assigned a risk rating of 9 have insufficient sources of repayment and a high probability of loss; these are assigned an internal risk rating of “Doubtful”. Loans assigned a risk rating of 10 are uncollectable and of such little value that they are no longer considered bankable assets; these are assigned an internal risk rating of “Loss”. The Company reviews the internal risk ratings for its loan portfolio on a regular and ongoing basis and make adjustments to the risk ratings based on changes in the borrowers’ financial status and the collectability of the loans. The following table summarizes the Company’s loans held-for-investment as of June 30, 2020, presented by loan portfolio segments, internal risk ratings and vintage year. The vintage year is the year of origination, renewal or major modification. ($ in thousands) June 30, 2020 Revolving Loans Amortized Cost Basis Revolving Loans Converted to Term Loans Amortized Cost Basis Term Loans Total Amortized Cost Basis by Origination Year 2020 2019 2018 2017 2016 Prior Commercial: C&I: Pass $ 2,922,977 $ 2,010,048 $ 818,374 $ 328,471 $ 85,000 $ 380,727 $ 6,007,247 $ 9,830 $ 12,562,674 Special mention 525 80,449 54,144 22,757 150 6,105 251,461 — 415,591 Substandard 8,102 82,574 52,383 7,979 6,313 2,515 283,335 — 443,201 Doubtful — — — — 964 261 — — 1,225 Total C&I 2,931,604 2,173,071 924,901 359,207 92,427 389,608 6,542,043 9,830 13,422,691 CRE: Pass 1,249,819 2,859,844 2,410,797 1,380,086 794,228 1,722,081 170,556 10,716 10,598,127 Special mention 13,072 — 49,860 22,468 1,611 45,309 — — 132,320 Substandard 8,303 51,944 7,711 43,914 17,213 42,582 — — 171,667 Total CRE 1,271,194 2,911,788 2,468,368 1,446,468 813,052 1,809,972 170,556 10,716 10,902,114 Multifamily residential: Pass 489,855 1,045,053 507,413 414,771 181,265 357,680 5,809 — 3,001,846 Special mention — 20,433 — — 262 1,228 — — 21,923 Substandard — 744 2,150 — — 5,722 — — 8,616 Total multifamily residential 489,855 1,066,230 509,563 414,771 181,527 364,630 5,809 — 3,032,385 Construction and land: Pass 46,378 283,670 185,570 5,982 21,636 1,170 — — 544,406 Substandard 3,618 — — — — 19,692 — — 23,310 Total construction and land 49,996 283,670 185,570 5,982 21,636 20,862 — — 567,716 Total CRE 1,811,045 4,261,688 3,163,501 1,867,221 1,016,215 2,195,464 176,365 10,716 14,502,215 Total commercial 4,742,649 6,434,759 4,088,402 2,226,428 1,108,642 2,585,072 6,718,408 20,546 27,924,906 Consumer: Single-family residential: Pass 1,150,786 1,987,025 1,694,022 1,162,434 593,501 1,047,965 — — 7,635,733 Special mention — 637 1,601 836 305 1,834 — — 5,213 Substandard — 1,393 3,256 3,382 1,349 9,768 — — 19,148 Total single-family residential mortgage 1,150,786 1,989,055 1,698,879 1,166,652 595,155 1,059,567 — — 7,660,094 HELOCs: Pass 185 836 4,417 7,949 7,511 18,097 1,239,458 168,658 1,447,111 Special mention — — 200 — — 380 2 190 772 Substandard — 151 788 4,632 1,308 4,038 — 3,151 14,068 Total HELOCs 185 987 5,405 12,581 8,819 22,515 1,239,460 171,999 1,461,951 Total residential mortgage 1,150,971 1,990,042 1,704,284 1,179,233 603,974 1,082,082 1,239,460 171,999 9,122,045 Other consumer: Pass 3,236 4,272 3,358 1,838 — 131,825 35,372 — 179,901 Special mention 51 — — — — — — — 51 Substandard 2 — — 2,491 — 3 13 — 2,509 Total other consumer 3,289 4,272 3,358 4,329 — 131,828 35,385 — 182,461 Total consumer 1,154,260 1,994,314 1,707,642 1,183,562 603,974 1,213,910 1,274,845 171,999 9,304,506 Total $ 5,896,909 $ 8,429,073 $ 5,796,044 $ 3,409,990 $ 1,712,616 $ 3,798,982 $ 7,993,253 $ 192,545 $ 37,229,412 Revolving loans that are converted to term loans presented in the table above are excluded from the term loans by vintage year columns. HELOCS totaling $12.1 million and $43.4 million converted to term loans during the three and six months ended June 30, 2020, respectively. There were no conversions of C&I or CRE revolving loans to term loans during the three and six months ended June 30, 2020. The following tables present the credit risk ratings for non-PCI and PCI loans by portfolio segments as of December 31, 2019: ($ in thousands) December 31, 2019 Pass Special Substandard Doubtful Total Commercial: C&I $ 11,423,094 $ 406,543 $ 302,509 $ 16,975 $ 12,149,121 CRE: CRE 10,003,749 83,683 77,815 — 10,165,247 Multifamily residential 2,806,475 20,406 7,331 — 2,834,212 Construction and land 603,447 — 25,012 — 628,459 Total CRE 13,413,671 104,089 110,158 — 13,627,918 Total commercial 24,836,765 510,632 412,667 16,975 25,777,039 Consumer: Residential mortgage: Single-family residential 7,012,522 2,278 14,179 — 7,028,979 HELOCs 1,453,207 2,787 10,742 — 1,466,736 Total residential mortgage 8,465,729 5,065 24,921 — 8,495,715 Other consumer 280,392 5 2,517 — 282,914 Total consumer 8,746,121 5,070 27,438 — 8,778,629 Total $ 33,582,886 $ 515,702 $ 440,105 $ 16,975 $ 34,555,668 ($ in thousands) December 31, 2019 Pass Special Substandard Doubtful Total Commercial: C&I $ 1,810 $ — $ — $ — $ 1,810 CRE: CRE 102,257 — 10,944 — 113,201 Multifamily residential 22,162 — — — 22,162 Construction and land 40 — — — 40 Total CRE 124,459 — 10,944 — 135,403 Total commercial 126,269 — 10,944 — 137,213 Consumer: Residential mortgage: Single-family residential 79,517 — 94 — 79,611 HELOCs 5,849 — 198 — 6,047 Total residential mortgage 85,366 — 292 — 85,658 Total consumer 85,366 — 292 — 85,658 Total (1) $ 211,635 $ — $ 11,236 $ — $ 222,871 (1) Loans net of ASC 310-10 discount. Nonaccrual and Past Due Loans Loans that are 90 or more days past due are generally placed on nonaccrual status, unless the loan is well-collateralized or guaranteed by government agencies, and in the process of collection. Loans that are less than 90 days past due but have identified deficiencies, such as when the full collection of principal or interest becomes uncertain, are also placed on nonaccrual status. The following table presents the aging analysis of total loans held-for-investment as of June 30, 2020: ($ in thousands) June 30, 2020 Current Accruing Accruing Total Nonaccrual Nonaccrual Total Total Commercial: C&I $ 13,277,732 $ 46,774 $ 13,362 $ 60,136 $ 54,555 $ 30,268 $ 84,823 $ 13,422,691 CRE: CRE 10,836,810 7,452 1,275 8,727 1,210 55,367 56,577 10,902,114 Multifamily residential 3,025,648 3,655 2,308 5,963 774 — 774 3,032,385 Construction and land 567,716 — — — — — — 567,716 Total CRE 14,430,174 11,107 3,583 14,690 1,984 55,367 57,351 14,502,215 Total commercial 27,707,906 57,881 16,945 74,826 56,539 85,635 142,174 27,924,906 Consumer: Residential mortgage: Single-family residential 7,619,333 15,739 4,952 20,691 1,713 18,357 20,070 7,660,094 HELOCs 1,444,945 2,165 773 2,938 443 13,625 14,068 1,461,951 Total residential mortgage 9,064,278 17,904 5,725 23,629 2,156 31,982 34,138 9,122,045 Other consumer 165,258 14,636 59 14,695 — 2,508 2,508 182,461 Total consumer 9,229,536 32,540 5,784 38,324 2,156 34,490 36,646 9,304,506 Total $ 36,937,442 $ 90,421 $ 22,729 $ 113,150 $ 58,695 $ 120,125 $ 178,820 $ 37,229,412 The following table presents amortized cost of loans on nonaccrual status for which there was no related allowance for loan losses as of June 30, 2020: ($ in thousands) June 30, 2020 Commercial: C&I $ 66,109 CRE: CRE 54,879 Total CRE 54,879 Total commercial 120,988 Consumer: Residential mortgage: Single-family residential 8,642 HELOCs 8,898 Total residential mortgage 17,540 Other consumer 2,491 Total consumer 20,031 Total nonaccrual loans with no related allowance for loan losses $ 141,019 The following table presents the aging analysis of non-PCI loans as of December 31, 2019: ($ in thousands) December 31, 2019 Current Accruing Accruing Total Nonaccrual Nonaccrual Total Total Commercial: C&I $ 12,026,131 $ 31,121 $ 17,034 $ 48,155 $ 31,084 $ 43,751 $ 74,835 $ 12,149,121 CRE: CRE 10,123,999 22,830 1,977 24,807 540 15,901 16,441 10,165,247 Multifamily residential 2,832,664 198 531 729 534 285 819 2,834,212 Construction and land 628,459 — — — — — — 628,459 Total CRE 13,585,122 23,028 2,508 25,536 1,074 16,186 17,260 13,627,918 Total commercial 25,611,253 54,149 19,542 73,691 32,158 59,937 92,095 25,777,039 Consumer: Residential mortgage: Single-family residential 6,993,597 15,443 5,074 20,517 1,964 12,901 14,865 7,028,979 HELOCs 1,448,930 4,273 2,791 7,064 1,448 9,294 10,742 1,466,736 Total residential mortgage 8,442,527 19,716 7,865 27,581 3,412 22,195 25,607 8,495,715 Other consumer 280,386 6 5 11 — 2,517 2,517 282,914 Total consumer 8,722,913 19,722 7,870 27,592 3,412 24,712 28,124 8,778,629 Total $ 34,334,166 $ 73,871 $ 27,412 $ 101,283 $ 35,570 $ 84,649 $ 120,219 $ 34,555,668 PCI loans were excluded from the above aging analysis table as of December 31, 2019, as the Company elected to account for these loans on a pool level basis under ASC 310-30 at the time of acquisition. As of December 31, 2019, PCI loans on nonaccrual status totaled $297 thousand. Foreclosed Assets The Company had $23.4 million in foreclosed assets as of June 30, 2020 compared with $1.3 million as of December 31, 2019. The Company commences the foreclosure process on consumer mortgage loans when a borrower becomes 120 days delinquent in accordance with the Consumer Finance Protection Bureau guidelines. The carrying value of consumer real estate loans that were in the process of active or suspended foreclosure was $6.3 million and $7.2 million as of June 30, 2020 and December 31, 2019, respectively. The foreclosure proceedings for these consumer real estate loans were initiated prior to the CARES Act passed by Congress in March 2020. The Company has suspended certain mortgage foreclosure activities in connection with our actions to support our customers during the COVID-19 pandemic. Troubled Debt Restructurings TDRs are individually evaluated and the type of restructuring is selected based on the loan type and the circumstances of the borrower’s financial difficulty. A TDR is a modification of the terms of a loan when the Company, for economic or legal reasons related to the borrower’s financial difficulties, grants a concession to the borrower that it would not have otherwise considered. The Company has implemented various consumer and commercial loan modification programs to provide its borrowers relief from the economic impacts of COVID-19 that are not considered TDRs. For additional details related to COVID-19 loan modifications, see Note 2 — Current Accounting Developments and Summary of Significant Accounting Policies — Summary of Significant Accounting Policies — Troubled Debt Restructurings to the Consolidated Financial Statements. The following tables present the additions to TDRs for the three and six months ended June 30, 2020 and 2019: ($ in thousands) Loans Modified as TDRs During the Three Months Ended June 30, 2020 2019 Number Pre- Post- Modification Outstanding Recorded Investment (1) Financial
Impact (2) Number Pre- Post- Modification Outstanding Recorded Investment (1) Financial Impact (2) Commercial: C&I 3 $ 35,260 $ 28,926 $ 872 6 $ 48,099 $ 48,054 $ 5,869 Total commercial 3 35,260 28,926 872 6 48,099 48,054 5,869 Consumer: Residential mortgage: Single-family residential — — — — 1 220 219 — Total residential mortgage — — — — 1 220 219 — Total consumer — — — — 1 220 219 — Total 3 $ 35,260 $ 28,926 $ 872 7 $ 48,319 $ 48,273 $ 5,869 ($ in thousands) Loans Modified as TDRs During the Six Months Ended June 30, 2020 2019 Number Pre- Post- Modification Outstanding Recorded Investment (1) Financial Impact (2) Number Pre- Post- Modification Outstanding Recorded Investment (1) Financial Impact (2) Commercial: C&I 6 $ 51,708 $ 43,833 $ 1,000 9 $ 77,250 $ 77,486 $ 5,929 Total commercial 6 51,708 43,833 1,000 9 77,250 77,486 5,929 Consumer: Residential mortgage: Single-family residential — — — — 1 220 219 — Total residential mortgage — — — — 1 220 219 — Total consumer — — — — 1 220 219 — Total 6 $ 51,708 $ 43,833 $ 1,000 10 $ 77,470 $ 77,705 $ 5,929 (1) Includes subsequent payments after modification and reflects the balance as of June 30, 2020 and 2019. (2) The financial impact includes charge-offs and specific reserves recorded since the modification date. The following tables present the TDR post-modification outstanding balances for the three and six months ended June 30, 2020 and 2019 by modification type: ($ in thousands) Modification Type During the Three Months Ended June 30, 2020 2019 Principal (1) Interest Deferments Total Principal (1) Other (2) Total Commercial: C&I $ 11,766 $ 17,160 $ 28,926 $ 9,909 $ 38,145 $ 48,054 Total commercial 11,766 17,160 28,926 9,909 38,145 48,054 Consumer: Residential mortgage: Single-family residential — — — — 219 219 Total residential mortgage — — — — 219 219 Total consumer — — — — 219 219 Total $ 11,766 $ 17,160 $ 28,926 $ 9,909 $ 38,364 $ 48,273 ($ in thousands) Modification Type During the Six Months Ended June 30, 2020 2019 Principal (1) Principal and Interest (3) Interest Deferments Total Principal (1) Other (2) Total Commercial: C&I $ 15,898 $ 10,775 $ 17,160 $ 43,833 $ 39,341 $ 38,145 $ 77,486 Total commercial 15,898 10,775 17,160 43,833 39,341 38,145 77,486 Consumer: Residential mortgage: Single-family residential — — — — — 219 219 Total residential mortgage — — — — — 219 219 Total consumer — — — — — 219 219 Total $ 15,898 $ 10,775 $ 17,160 $ 43,833 $ 39,341 $ 38,364 $ 77,705 (1) Includes forbearance payments, term extensions and principal deferments that modify the terms of the loan from principal and interest payments to interest payments only. (2) Includes funding to secure additional collateral and provides liquidity to collateral-dependent C&I loans. (3) Includes principal and interest deferments or reductions. Subsequent to restructuring, if a TDR that becomes delinquent, generally beyond 90 days past due, it is considered to be in default. TDRs are individually evaluated for impairment. Subsequent defaults do not generally have a significant additional impact on the allowance for loan losses. The following tables present information on loans for which a subsequent payment default occurred during the three and six months ended June 30, 2020 and 2019, respectively, which had been modified as TDR within the previous 12 months of its default, and were still in default as of June 30, 2020 and 2019: ($ in thousands) Loans Modified as TDRs that Subsequently Defaulted 2020 2019 Number of Recorded Number of Recorded Commercial: C&I 1 $ 17,160 $ 1 $ 1,484 Total commercial 1 17,160 1 1,484 Total 1 $ 17,160 $ 1 $ 1,484 ($ in thousands) Loans Modified as TDRs that Subsequently Defaulted 2020 2019 Number of Recorded Number of Recorded Commercial: C&I 1 $ 17,160 $ 1 $ 1,484 Total commercial 1 17,160 1 1,484 Total 1 $ 17,160 $ 1 $ 1,484 The amount of additional funds committed to lend to borrowers whose terms have been modified as TDRs was $4.5 million and $2.2 million as of June 30, 2020 and December 31, 2019, respectively. Impaired Loans In connection with the adoption of ASU 2016-13 on January 1, 2020, the Company no longer provides information on impaired loans. The Company had retained impaired loans information for the period ended December 31, 2019. The following table presents information on non-PCI impaired loans as of December 31, 2019: ($ in thousands) December 31, 2019 Unpaid Recorded Recorded Total Related Commercial: C&I $ 174,656 $ 73,956 $ 40,086 $ 114,042 $ 2,881 CRE: CRE 27,601 20,098 1,520 21,618 97 Multifamily residential 4,965 1,371 3,093 4,464 55 Construction and land 19,696 19,691 — 19,691 — Total CRE 52,262 41,160 4,613 45,773 152 Total commercial 226,918 115,116 44,699 159,815 3,033 Consumer: Residential mortgage: Single-family residential 23,626 8,507 13,704 22,211 35 HELOCs 13,711 6,125 7,449 13,574 8 Total residential mortgage 37,337 14,632 21,153 35,785 43 Other consumer 2,517 — 2,517 2,517 2,517 Total consumer 39,854 14,632 23,670 38,302 2,560 Total non-PCI impaired loans $ 266,772 $ 129,748 $ 68,369 $ 198,117 $ 5,593 The following table presents the average recorded investment and interest income recognized on non-PCI impaired loans for the three and six months ended June 30, 2019: ($ in thousands) Three Months Ended June 30, 2019 Six Months Ended June 30, 2019 Average Recognized Interest Income (1) Average Recognized Interest Income (1) Commercial: C&I $ 182,689 $ 1,081 $ 189,553 $ 1,816 CRE: CRE 29,241 135 31,456 249 Multifamily residential 5,852 61 5,883 121 Total CRE 35,093 196 37,339 370 Total commercial 217,782 1,277 226,892 2,186 Consumer: Residential mortgage: Single-family residential 23,247 129 24,865 258 HELOCs 13,564 38 15,321 56 Total residential mortgage 36,811 167 40,186 314 Other consumer 2,515 — 2,526 — Total consumer 39,326 167 42,712 314 Total non-PCI impaired loans $ 257,108 $ 1,444 $ 269,604 $ 2,500 (1) Includes interest income recognized on accruing non-PCI TDRs. Interest payments received on nonaccrual non-PCI loans are reflected as a reduction to principal, not as interest income. Allowance for Loan Losses On January 1, 2020 , the Company adopted ASU 2016-13 that establishes a single allowance framework for all financial assets measured at amortized cost and certain off-balance sheet credit exposures. It requires the measurement of the allowance for loan losses to be based on management’s best estimate of lifetime expected credit losses inherent in the Company’s relevant financial assets. Balance sheet information and results for reporting periods beginning with January 1, 2020 are presented under ASC 326, while prior period comparisons continue to be presented under legacy GAAP. The process of the allowance for loan losses involves procedures to consider the unique risk characteristics of the portfolio segments. For each loan portfolio segment, the expected credit losses are estimated collectively for groups of loans with similar risk characteristics. For loans that do not share similar risk characteristics, the expected credit losses are estimated individually, which includes impaired loans . Allowance for Collectively Evaluated Loans Quantitative Component — The allowance for loan losses is estimated using quantitative methods that consider a variety of factors such as historical loss experience, the current credit quality of the portfolio as well as an economic outlook over the life of the loan. The Company incorporates forward-looking information through the use of macroeconomic scenarios applied over the forecasted life of the loans. These macroeconomic scenarios include variables that are considered key drivers of increases and decreases in credit losses. The Company utilizes a probability-weighted multiple scenario forecast approach. These scenarios may consist of a base forecast representing management's view of the most likely outcome, combined with and downside and upside scenarios reflecting possible worsening or improving economic conditions, respectively. A weighted average of these macroeconomic scenarios over a reasonable and supportable forecast period is incorporated into the quantitative models. If the loan’s life extends beyond the reasonable and supportable forecast period, then historical experience is considered over the remaining life of the loans in the allowance for loan losses . Qualitative Component — The Company also considers the following qualitative factors in the determination of collectively evaluated allowance if they have not already been captured by the quantitative model. Such qualitative factors may include, but not limited to: • Loan growth trends. • The volume and severity of past due financial assets and the volume and severity of adversely classified or rated financial assets. • The Company’s lending policies and procedures, including changes in lending strategies, underwriting standards, collection, write-off and recovery practices, as well as knowledge of the borrower’s operations or the borrower’s standing in the community. • The quality of the Company’s credit review system. • The experience, ability and depth of the Company’s management, lending staff and relevant staff. • The effect of other external factors such as the regulatory, legal and technological environments. • Actual and expected changes in international, national, regional, and local economic and business conditions and developments in which the Company operates, including the actual and expected condition of various market segments. The following table provides key credit risk characteristics and macroeconomic variables that the Company uses to estimate the expected credit losses by portfolio segments and methodologies: Portfolio Segment Risk Characteristics Macroeconomic Variables C&I Internal risk rating, size and credit spread at origination and time to maturity Unemployment rate and two and ten year treasury spread CRE, Multifamily residential, and Construction and land Delinquency status, maturity date, collateral value, property type and geographic location Unemployment rate, GDP and U.S. Treasury rates Single-family residential and HELOCs FICO, delinquency status, maturity date, collateral value and geographic location Unemployment rate, GDP and home price index Other consumer Historical loss experience Immaterial (1) (1) Macroeconomic variables were measured in the qualitative estimate. In light of the recessionary economic conditions and forecasts during the quarter, management updated its macroeconomic forecast used in the credit loss estimation process to reflect the sudden sharp and continued recession caused by the COVID-19 global pandemic, U.S. monetary and fiscal responses to the outbreak, oil price declines and other assumptions. The macroeconomic forecast used in the credit loss estimation for the quarter ended June 30, 2020 was more adverse compared to the prior quarter, as expectations for the unemployment rate and real GDP growth deteriorated and a slower recovery was expected. For the three and six months ended June 30, 2020, there were no changes to the reasonable and supportable forecast period, and reversion to historical loss experience method. Allowance for Loan Losses for the Commercial Loan Portfolio — The Company’s C&I lifetime loss rate model estimates credit losses by estimating a loss rate expected over the life of a loan. This loss rate is applied to the amortized cost basis, excluding accrued interest receivables, to determine expected credit losses. The lifetime loss rate model’s reasonable and supportable period spans eight quarters, thereafter immediately reverting to the historical average loss rate, expressed implicitly through the loan-level lifetime loss rate. The Company’s CRE probability of default (“PD”)/loss given default (“LGD”) models estimate the probability that a loan will default and, in the event of default, estimate the expected credit losses upon default. The product of the PD/LGD determines the Company’s CECL. The PD/LGD model assumptions and variable inputs span the entire contractual life of the loans, adjusted for expected prepayments. After a reasonable and supportable period, the forecast of future economic conditions reverts to long-run historical economic trends. The loan-specific variables apply over the lifetime of a loan. In order to estimate the life of a loan under both models, the contractual term of the loan is adjusted for estimated prepayments, which are based on historical prepayment experience. Allowance for Loan Losses for the Consumer Loan Portfolio — For single-family residential and HELOC loans, PD/LGD model assumptions and variable inputs span the entire contractual life of the loans, adjusted for expected prepayments. After a reasonable and supportable period, the forecast of future economic conditions reverts to long-run historical economic trends. The loan-specific variables apply over the lifetime of a loan. For other consumer loans, the Company uses a loss rate approach. In order to estimate the life of a loan, the contractual term of the loan is adjusted for estimated prepayments, which are based on historical prepayment experience. While the Company’s allowance methodologies strive to reflect all relevant credit risk factors, there continues to be uncertainty associated with, but not limited to, potential imprecision in the estimation process due to the inherent time lag of obtaining information and normal variations between expected and actual outcomes. The Company may hold additional reserves that are designed to provide coverage for losses attributable to such risk. The allowance for loan losses as of June 30, 2020 also included qualitative adjustments for certain industry sectors, such as oil & gas, which are included as part of the C&I loan portfolio, that the Company views as higher risk, where quantitative models may not have captured the additional exposure related to such industry sectors. Allowance for Individually Assessed Loans When a loan no longer shares similar risk characteristics with other loans, such as in the case for certain nonaccrual or TDR loans, the Company estimates the allowance for loan losses on an individual loan basis. The allowance for loan losses for individually evaluated loans is measured as the difference between the recorded value of the loans and their fair value. For loans evaluated individually, the Company uses one of three different asset valuation measurement methods: (1) the present value of expected future cash flows; (2) the fair value of collateral less costs to sell; and (3) the loan's observable market price. If an individually evaluated loan is determined to be collateral dependent, the Company applies the fair value of the collateral less costs to sell method. If an individually evaluated loan is determined to not be collateral dependent, the Company uses the present value of future cash flows or the observable market value of the loan. Collateral-Dependent Loans — When a loan is collateral dependent, the allowance is measured on an individual loan basis and is limited to the difference between the recorded value and fair value of the collateral less cost of disposal or sale. As of June 30, 2020, collateral-dependent commercial and consumer loans totaled $88.1 million and $23.8 million, respectively. The Company's commercial collateral-dependent loans were secured by real estate or other collateral. The Company's consumer collateral-dependent loans were all residential mortgage loans, secured by the underlying real estate. As of June 30, 2020, the collateral value of the properties securing each of these collateral dependent loans, net of selling costs, exceeded the recorded value of the individual loans, except for two loans, one C&I loan and one HELOC loan , against which there was a recorded allowance of $756 thousand and $76 thousand, respectively. For the three and six months ended June 30, 2020, there was no significant deterioration or changes in the collateral securing these loans. The following tables present summaries of activities in the allowance for loan losses by portfolio segment for the three and six months ended June 30, 2020 and 2019: ($ in thousands) Three Months Ended June 30, 2020 Commercial Consumer Total C&I CRE Residential Mortgage Other CRE Multi-Family Construction Single- HELOCs Allowance for loan losses, beginning of period $ 362,629 $ 132,819 $ 16,530 $ 11,018 $ 26,822 $ 3,881 $ 3,304 $ 557,003 Provision for (reversal of) credit losses on loans (a) 37,862 43,315 7,908 7,526 (1,667) 205 (849) 94,300 Gross charge-offs (20,378) (320) — — — (221) (30) (20,949) Gross recoveries 602 226 620 7 159 2 93 1,709 Total net (charge-offs) recoveries (19,776) (94) 620 7 159 (219) 63 (19,240) Foreign currency translation adjustments 8 — — — — — — 8 Allowance for loan losses, end of period $ 380,723 $ 176,040 $ 25,058 $ 18,551 $ 25,314 $ 3,867 $ 2,518 $ 632,071 ($ in thousands) Three Months Ended June 30, 2019 Commercial Consumer Total C&I CRE Residential Mortgage Other CRE Multi-Family Construction Single- HELOCs Allowance for loan losses, beginning of period $ 189,757 $ 39,224 $ 19,169 $ 22,349 $ 35,759 $ 7,401 $ 4,235 $ 317,894 Provision for (reversal of) credit losses on loans (a) 26,140 (1,250) 58 173 (3,068) (1,224) (98) 20,731 Gross charge-offs (11,745) — — — — — (14) (11,759) Gross recoveries 1,713 1,837 53 439 72 — 7 4,121 Total net (charge-offs) recoveries (10,032) 1,837 53 439 72 — (7) (7,638) Foreign currency translation adjustments (362) — — — — — — (362) Allowance for loan losses, end of period $ 205,503 $ 39,811 $ 19,280 $ 22,961 $ 32,763 $ 6,177 $ 4,130 $ 330,625 ($ in thousands) Six Months Ended June 30, 2020 Commercial Consumer Total C&I CRE Residential Mortgage Other CRE Multi-Family Construction Single- HELOCs Allowance for loan losses, beginning of period $ 238,376 $ 40,509 $ 22,826 $ 19,404 $ 28,527 $ 5,265 $ 3,380 $ 358,287 Impact of ASU 2016-13 adoption 74,237 72,169 (8,112) (9,889) (3,670) (1,798) 2,221 125,158 Allowance for loan losses, January 1, 2020 312,613 112,678 14,714 9,515 24,857 3,467 5,601 483,445 Provision for (reversal of) credit losses on loans (a) 98,480 54,750 9,189 9,008 33 617 (3,121) 168,956 Gross charge-offs (32,355) (1,274) — — — (221) (56) (33,906) Gross recoveries 2,177 9,886 1,155 28 424 4 94 13,768 Total net (charge-offs) recoveries (30,178) 8,612 1,155 28 424 (217) 38 (20,138) Foreign curr |
