Loans and Leases | NOTE 7. LOANS AND LEASES The Company’s loan and lease portfolio includes originated and purchased loans and leases. Originated loans and leases and purchased loans and leases for which there was no evidence of credit deterioration at their acquisition date and it was probable that we would be able to collect all contractually required payments, are referred to collectively as non-purchased credit impaired loans, or "Non-PCI loans." Purchased loans for which there was, at the acquisition date, evidence of credit deterioration since their origination and it was probable that collection of all contractually required payments was unlikely are referred to as purchased credit impaired loans, or "PCI loans". Non-PCI loans are carried at the principal amount outstanding, net of deferred fees and costs, and in the case of acquired loans, net of purchase discounts and premiums. Deferred fees and costs and purchase discounts and premiums on acquired non-impaired loans are recognized as an adjustment to interest income over the contractual life of the loans primarily using the effective interest method or taken into income when the related loans are paid off or sold. PCI loans are accounted for in accordance with ASC Subtopic 310‑30, “ Loans and Debt Securities Acquired with Deteriorated Credit Quality .” For PCI loans, at the time of acquisition we (i) calculate the contractual amount and timing of undiscounted principal and interest payments (the "undiscounted contractual cash flows") and (ii) estimate the amount and timing of undiscounted expected principal and interest payments (the "undiscounted expected cash flows"). The difference between the undiscounted contractual cash flows and the undiscounted expected cash flows is the nonaccretable difference. The difference between the undiscounted cash flows expected to be collected and the estimated fair value of the acquired loans is the accretable yield. The nonaccretable difference represents an estimate of the loss exposure of principal and interest related to the PCI loan portfolios; such amount is subject to change over time based on the performance of such loans. The carrying value of PCI loans is reduced by payments received, both principal and interest, and increased by the portion of the accretable yield recognized as interest income. The following table summarizes the composition of our loan and lease portfolio as of the dates indicated: December 31, 2015 December 31, 2014 Non-PCI Non-PCI Loans PCI Loans PCI and Leases Loans Total and Leases Loans Total (In thousands) Real estate mortgage $ 5,706,903 $ 168,725 $ 5,875,628 $ 5,347,197 $ 256,489 $ 5,603,686 Real estate construction and land 534,307 2,656 536,963 312,792 6,924 319,716 Commercial 7,977,067 17,415 7,994,482 5,852,420 27,155 5,879,575 Consumer 120,793 299 121,092 101,423 284 101,707 Total gross loans and leases 14,339,070 189,095 14,528,165 11,613,832 290,852 11,904,684 Deferred fees and costs (49,861 ) (50 ) (49,911 ) (22,191 ) (61 ) (22,252 ) Total loans and leases, net of deferred fees 14,289,209 189,045 14,478,254 11,591,641 290,791 11,882,432 Allowance for loan and lease losses (105,534 ) (9,577 ) (115,111 ) (70,456 ) (13,999 ) (84,455 ) Total net loans and leases $ 14,183,675 $ 179,468 $ 14,363,143 $ 11,521,185 $ 276,792 $ 11,797,977 Non‑Purchased Credit Impaired (Non‑PCI) Loans and Leases The following tables present an aging analysis of our Non‑PCI loans and leases by portfolio segment and class as of the dates indicated: December 31, 2015 30-89 Days Past Due 90 or More Days Past Due Total Past Due Current Total Loans (In thousands) Real estate mortgage: Commercial $ 3,947 $ 13,075 $ 17,022 $ 4,534,936 $ 4,551,958 Residential 3,391 905 4,296 1,131,809 1,136,105 Total real estate mortgage 7,338 13,980 21,318 5,666,745 5,688,063 Real estate construction and land: Commercial — — — 343,360 343,360 Residential — — — 184,360 184,360 Total real estate construction and land — — — 527,720 527,720 Commercial: Cash flow 2,048 1,427 3,475 3,058,793 3,062,268 Asset-based 1 — 1 2,547,532 2,547,533 Equipment finance 359 94 453 889,896 890,349 Venture capital 250 700 950 1,451,477 1,452,427 Total commercial 2,658 2,221 4,879 7,947,698 7,952,577 Consumer 626 1,307 1,933 118,916 120,849 Total Non-PCI loans and leases $ 10,622 $ 17,508 $ 28,130 $ 14,261,079 $ 14,289,209 December 31, 2014 30-89 Days Past Due 90 or More Days Past Due Total Past Due Current Total Loans (In thousands) Real estate mortgage: Commercial $ 9,014 $ 10,856 $ 19,870 $ 4,410,016 $ 4,429,886 Residential 2,614 1,131 3,745 903,299 907,044 Total real estate mortgage 11,628 11,987 23,615 5,313,315 5,336,930 Real estate construction and land: Commercial — 715 715 213,322 214,037 Residential — — — 96,728 96,728 Total real estate construction and land — 715 715 310,050 310,765 Commercial: Cash flow 274 1,639 1,913 2,637,023 2,638,936 Asset-based 878 965 1,843 2,232,195 2,234,038 Equipment finance 6,525 366 6,891 962,598 969,489 Venture capital — — — — — Total commercial 7,677 2,970 10,647 5,831,816 5,842,463 Consumer 101 3,146 3,247 98,236 101,483 Total Non-PCI loans and leases $ 19,406 $ 18,818 $ 38,224 $ 11,553,417 $ 11,591,641 It is the Company’s policy to discontinue accruing interest when principal or interest payments are past due 90 days or more unless the loan is both well secured and in the process of collection or when, in the opinion of management, there is a reasonable doubt as to the collectability of a loan or lease in the normal course of business. The amount of interest income that would have been recorded on nonaccrual loans and leases at December 31, 2015 and 2014 had such loans and leases been current in accordance with their original terms was $6.4 million and $7.5 million for 2015 and 2014 , respectively. The following table presents our nonaccrual and performing Non‑PCI loans and leases by portfolio segment and class as of the dates indicated: December 31, 2015 December 31, 2014 Nonaccrual Performing Total Nonaccrual Performing Total (In thousands) Real estate mortgage: Commercial $ 52,363 $ 4,499,595 $ 4,551,958 $ 32,223 $ 4,397,663 $ 4,429,886 Residential 4,914 1,131,191 1,136,105 5,389 901,655 907,044 Total real estate mortgage 57,277 5,630,786 5,688,063 37,612 5,299,318 5,336,930 Real estate construction and land: Commercial — 343,360 343,360 1,178 212,859 214,037 Residential 372 183,988 184,360 381 96,347 96,728 Total real estate construction and land 372 527,348 527,720 1,559 309,206 310,765 Commercial: Cash flow 15,800 3,046,468 3,062,268 19,810 2,619,126 2,638,936 Asset-based 2,505 2,545,028 2,547,533 10,024 2,224,014 2,234,038 Equipment finance 51,410 838,939 890,349 11,131 958,358 969,489 Venture capital 124 1,452,303 1,452,427 — — — Total commercial 69,839 7,882,738 7,952,577 40,965 5,801,498 5,842,463 Consumer 1,531 119,318 120,849 3,485 97,998 101,483 Total Non-PCI loans and leases $ 129,019 $ 14,160,190 $ 14,289,209 $ 83,621 $ 11,508,020 $ 11,591,641 At December 31, 2015 , nonaccrual loans and leases totaled $129.0 million . Nonaccrual loans and leases included $16.8 million of loans and leases 90 or more days past due, $3.6 million of loans 30 to 89 days past due and $108.6 million of current loans that were placed on nonaccrual status based on management’s judgment regarding their collectability. Nonaccrual loans and leases totaled $83.6 million at December 31, 2014 , including $18.8 million of loans and leases 90 or more days past due, $8.7 million of loans 30 to 89 days past due and $56.1 million of current loans that were placed on nonaccrual status based on management’s judgment regarding their collectability. The increase in nonaccrual loans and leases generally, and equipment finance loans and leases specifically, was due to three relationships totaling $47.1 million that are related to the oil and gas industry and which have been adversely impacted by continued low oil prices. The following table presents the credit risk rating categories for Non‑PCI loans and leases by portfolio segment and class as of the dates indicated. Nonclassified loans and leases are those with a credit risk rating of either pass or special mention, while classified loans and leases are those with a credit risk rating of either substandard or doubtful. December 31, 2015 December 31, 2014 Classified Nonclassified Total Classified Nonclassified Total (In thousands) Real estate mortgage: Commercial $ 98,436 $ 4,453,522 $ 4,551,958 $ 86,573 $ 4,343,313 $ 4,429,886 Residential 12,627 1,123,478 1,136,105 10,413 896,631 907,044 Total real estate mortgage 111,063 5,577,000 5,688,063 96,986 5,239,944 5,336,930 Real estate construction and land: Commercial 571 342,789 343,360 3,346 210,691 214,037 Residential 1,395 182,965 184,360 402 96,326 96,728 Total real estate construction and land 1,966 525,754 527,720 3,748 307,017 310,765 Commercial: Cash flow 183,726 2,878,542 3,062,268 87,851 2,551,085 2,638,936 Asset-based 19,340 2,528,193 2,547,533 33,980 2,200,058 2,234,038 Equipment finance 54,054 836,295 890,349 15,973 953,516 969,489 Venture capital 19,105 1,433,322 1,452,427 — — — Total commercial 276,225 7,676,352 7,952,577 137,804 5,704,659 5,842,463 Consumer 2,500 118,349 120,849 4,073 97,410 101,483 Total Non-PCI loans and leases $ 391,754 $ 13,897,455 $ 14,289,209 $ 242,611 $ 11,349,030 $ 11,591,641 In addition to our internal risk rating process, our federal and state banking regulators, as an integral part of their examination process, periodically review the Company’s loan risk rating classifications. Our regulators may require the Company to recognize rating downgrades based on their judgments related to information available to them at the time of their examinations. Risk rating downgrades generally result in increases in the provisions for credit losses and the allowance for credit losses. Non‑PCI nonaccrual loans and leases and performing restructured loans are considered impaired for reporting purposes. The following table presents the composition of our impaired loans and leases as of the dates indicated: December 31, 2015 December 31, 2014 Performing Total Performing Total Nonaccrual Restructured Impaired Nonaccrual Restructured Impaired Loans/Leases Loans Loans/Leases Loans/Leases Loans Loans/Leases (In thousands) Real estate mortgage $ 57,277 $ 27,133 $ 84,410 $ 37,612 $ 20,245 $ 57,857 Real estate construction and land 372 7,631 8,003 1,559 8,996 10,555 Commercial 69,839 5,221 75,060 40,965 5,744 46,709 Consumer 1,531 197 1,728 3,485 259 3,744 Total $ 129,019 $ 40,182 $ 169,201 $ 83,621 $ 35,244 $ 118,865 At December 31, 2015 and 2014 , we had unfunded commitments related to Non-PCI performing restructured loans of $2.9 million and $214,000 . The following tables present information regarding our Non‑PCI impaired loans and leases by portfolio segment and class as of and for the years indicated: December 31, 2015 December 31, 2014 Recorded Investment Unpaid Principal Balance Related Allowance Recorded Investment Unpaid Principal Balance Related Allowance (In thousands) With An Allowance Recorded: Real estate mortgage: Commercial $ 17,967 $ 19,219 $ 777 $ 11,082 $ 11,178 $ 693 Residential 2,278 2,435 681 — — — Real estate construction and land: Commercial — — — 1,128 4,934 23 Residential 747 747 26 763 763 46 Commercial: Cash flow 14,072 20,312 7,079 16,490 18,894 3,466 Asset-based 3,901 4,423 2,511 4,767 5,493 3,908 Equipment finance 11,193 11,894 8,032 6,956 7,268 2,601 Consumer 365 372 157 143 142 37 With No Related Allowance Recorded: Real estate mortgage: Commercial $ 58,678 $ 68,333 $ — $ 46,775 $ 62,944 $ — Residential 5,487 11,406 — — — — Real estate construction and land: Commercial 7,256 7,256 — 8,643 8,749 — Residential — — — 21 19 — Commercial: Cash flow 2,825 5,121 — 4,319 6,648 — Asset-based 2,729 2,726 — 10,002 12,292 — Equipment finance 40,216 44,194 — 4,175 7,528 — Venture capital 124 125 — — — — Consumer 1,363 1,945 — 3,601 3,768 — Total Non-PCI Loans and Leases With and Without an Allowance Recorded: Real estate mortgage $ 84,410 $ 101,393 $ 1,458 $ 57,857 $ 74,122 $ 693 Real estate construction and land 8,003 8,003 26 10,555 14,465 69 Commercial 75,060 88,795 17,622 46,709 58,123 9,975 Consumer 1,728 2,317 157 3,744 3,910 37 Total $ 169,201 $ 200,508 $ 19,263 $ 118,865 $ 150,620 $ 10,774 Year Ended December 31, 2015 2014 2013 Weighted Average Balance (1) Interest Income Recognized Weighted Average Balance (1) Interest Income Recognized Weighted Average Balance (1) Interest Income Recognized (In thousands) With An Allowance Recorded: Real estate mortgage: Commercial $ 17,833 $ 1,130 $ 10,670 $ 475 $ 20,158 $ 680 Residential 2,143 33 412 1 406 — Real estate construction and land: Commercial — — 1,027 17 1,250 63 Residential 747 15 763 15 778 14 Commercial: Cash flow 12,590 32 8,498 21 1,908 89 Asset-based 3,204 56 4,214 27 3,850 29 Equipment finance 8,475 — 3,802 — — — Consumer 355 15 132 8 425 10 With No Related Allowance Recorded: Real estate mortgage: Commercial $ 28,366 $ 345 $ 29,405 $ 348 $ 31,149 $ 985 Residential 4,643 41 5,223 44 2,377 75 Real estate construction and land: Commercial 7,053 240 8,642 244 4,866 11 Residential — — 4 — — — Commercial: Cash flow 2,752 89 2,289 99 2,728 — Asset-based 1,746 130 6,139 170 3,410 20 Equipment finance 30,363 — 2,534 — 245 — Venture capital 124 — — — — — Consumer 1,363 — 3,027 2 161 — Total Non-PCI Loans and Leases With and Without an Allowance Recorded: Real estate mortgage $ 52,985 $ 1,549 $ 45,710 $ 868 $ 54,090 $ 1,740 Real estate construction and land 7,800 255 10,436 276 6,894 88 Commercial 59,254 307 27,476 317 12,141 138 Consumer 1,718 15 3,159 10 586 10 Total $ 121,757 $ 2,126 $ 86,781 $ 1,471 $ 73,711 $ 1,976 _________________________ (1) For the loans and leases (excluding PCI loans) reported as impaired at December 31, 2015 , 2014 and 2013 , amounts were calculated based on the period of time such loans and leases were impaired during the reported period. Troubled debt restructurings are a result of rate reductions, term extensions, fee concessions and debt forgiveness or a combination thereof. The following table presents new and defaulted troubled debt restructurings of Non-PCI loans for the years indicated: Troubled Debt Restructurings Troubled Debt Restructurings That Subsequently Defaulted (1) Number of Loans Pre- Modification Outstanding Recorded Investment Post-Modification Outstanding Recorded Investment Number of Loans Recorded Investment (Dollars In thousands) Year Ended December 31, 2015 Real estate mortgage: Commercial 21 $ 43,536 $ 43,012 2 $ 2,670 Residential 18 3,128 2,961 1 155 Real estate construction and land: Commercial 8 23,881 23,881 — — Commercial: Cash flow 25 2,718 2,539 — — Asset-based 13 8,400 8,400 — — Equipment finance 10 93,868 93,868 — — Consumer 2 197 197 — — Total 97 $ 175,728 $ 174,858 3 $ 2,825 (2) Year Ended December 31, 2014 Real estate mortgage: Commercial 14 $ 14,659 $ 14,660 1 $ 55 Residential 11 4,794 4,794 — — Real estate construction and land: Commercial 4 5,507 4,965 — — Commercial: Cash flow 13 2,717 2,717 1 1,144 Asset-based 22 12,368 6,336 1 390 Equipment finance 1 518 518 — — Consumer 7 467 467 — — Total 72 $ 41,030 $ 34,457 3 $ 1,589 (3) Year Ended December 31, 2013 Real estate mortgage: Commercial 11 $ 15,391 $ 15,391 2 $ 1,844 Residential 3 832 832 — — Real estate construction and land: Residential 1 390 390 — — Commercial: Cash flow 9 658 658 2 66 Asset-based 12 7,650 7,650 2 1,489 Consumer 2 125 125 — — Total 38 $ 25,046 $ 25,046 6 $ 3,399 (4) _________________________ (1) The population of defaulted restructured loans for the period indicated includes only those loans restructured during the preceding 12-month period. The table excludes defaulted troubled restructurings in those classes for which the recorded investment was zero at the end of the period. (2) Represents the balance at December 31, 2015 , and is net of charge-offs of $96,900 . (3) Represents the balance at December 31, 2014 , and is net of charge-offs of $129,000 . (4) Represents the balance at December 31, 2013 , and is net of charge-offs of $1.6 million . Allowances for Loan and Lease Losses The following tables present a summary of the activity in the allowance for loan and lease losses on Non‑PCI loans and leases by portfolio segment and PCI loans for the years indicated: Year Ended December 31, 2015 Real Estate Mortgage Real Estate Construction and Land Commercial Consumer Total Non-PCI Total PCI Total (In thousands) Allowance for Loan and Lease Losses: Balance, beginning of year $ 25,097 $ 4,248 $ 39,858 $ 1,253 $ 70,456 $ 13,999 $ 84,455 Charge-offs (2,489 ) — (13,354 ) (156 ) (15,999 ) (1,772 ) (17,771 ) Recoveries 3,582 1,082 3,399 410 8,473 150 8,623 Provision (negative provision) 10,464 1,807 31,179 (846 ) 42,604 (2,800 ) 39,804 Balance, end of year $ 36,654 $ 7,137 $ 61,082 $ 661 $ 105,534 $ 9,577 $ 115,111 Amount of the allowance applicable to loans and leases: Individually evaluated for impairment $ 1,458 $ 26 $ 17,622 $ 157 $ 19,263 Collectively evaluated for impairment $ 35,196 $ 7,111 $ 43,460 $ 504 $ 86,271 Acquired loans with deteriorated credit quality $ 9,577 The ending balance of the loan and lease portfolio is composed of loans and leases: Individually evaluated for impairment $ 83,944 $ 8,003 $ 74,680 $ 1,672 $ 168,299 Collectively evaluated for impairment $ 5,604,119 $ 519,717 $ 7,877,897 $ 119,177 $ 14,120,910 Acquired loans with deteriorated credit quality $ 189,045 Ending balance of loans and leases $ 5,688,063 $ 527,720 $ 7,952,577 $ 120,849 $ 14,289,209 $ 189,045 $ 14,478,254 Year Ended December 31, 2014 Real Estate Mortgage Real Estate Construction and Land Commercial Consumer Total Non-PCI Total PCI Total (In thousands) Allowance for Loan and Lease Losses: Balance, beginning of year $ 26,078 $ 4,298 $ 26,921 $ 2,944 $ 60,241 $ 21,793 $ 82,034 Charge-offs (2,080 ) — (9,463 ) (332 ) (11,875 ) (9,577 ) (21,452 ) Recoveries 2,640 156 6,265 1,283 10,344 766 11,110 Provision (negative provision) (1,541 ) (206 ) 16,135 (2,642 ) 11,746 1,017 12,763 Balance, end of year $ 25,097 $ 4,248 $ 39,858 $ 1,253 $ 70,456 $ 13,999 $ 84,455 Amount of the allowance applicable to loans and leases: Individually evaluated for impairment $ 693 $ 69 $ 9,975 $ 37 $ 10,774 Collectively evaluated for impairment $ 24,404 $ 4,179 $ 29,883 $ 1,216 $ 59,682 Acquired loans with deteriorated credit quality $ 13,999 The ending balance of the loan and lease portfolio is composed of loans and leases: Individually evaluated for impairment $ 55,290 $ 10,555 $ 45,568 $ 3,510 $ 114,923 Collectively evaluated for impairment $ 5,285,270 $ 296,580 $ 5,796,895 $ 97,973 $ 11,476,718 Acquired loans with deteriorated credit quality $ 290,791 Ending balance $ 5,336,930 $ 310,765 $ 5,842,463 $ 101,483 $ 11,591,641 $ 290,791 $ 11,882,432 Purchased Credit Impaired (PCI) Loans The following table reflects the PCI loans by portfolio segment as of the dates indicated: December 31, 2015 December 31, 2014 (In thousands) Real estate mortgage $ 207,170 $ 299,660 Real estate construction and land 2,534 7,743 Commercial 30,658 32,904 Consumer 302 332 Total gross PCI loans 240,664 340,639 Discount (51,619 ) (49,848 ) Total PCI loans, net of discount 189,045 290,791 Allowance for loan losses (9,577 ) (13,999 ) Total net PCI loans $ 179,468 $ 276,792 The following table summarizes the changes in the carrying amount of PCI loans and accretable yield on those loans for the years indicated: Carrying Amount Accretable Yield (In thousands) Balance, December 31, 2012 $ 491,816 $ (196,022 ) Addition from the FCAL acquisition 44,146 (8,096 ) Accretion 46,680 46,680 Payments received (225,849 ) — Decrease in expected cash flows, net — 17,870 Negative provision for credit losses 4,210 — Balance, December 31, 2013 361,003 (139,568 ) Addition from the CapitalSource Inc. merger 79,234 (13,728 ) Accretion 57,213 57,213 Payments received (219,641 ) — Increase in expected cash flows, net — (10,773 ) Provision for credit losses (1,017 ) — Balance, December 31, 2014 276,792 (106,856 ) Addition from the Square 1 acquisition 16,455 (2,852 ) Accretion 31,857 31,857 Payments received (148,436 ) — Increase in expected cash flows, net — (7,785 ) Negative provision for credit losses 2,800 — Balance, December 31, 2015 $ 179,468 $ (85,636 ) The following table presents the credit risk rating categories for PCI loans by portfolio segment as of the dates indicated. Nonclassified loans are those with a credit risk rating of either pass or special mention, while classified loans are those with a credit risk rating of either substandard or doubtful. December 31, 2015 December 31, 2014 Classified Nonclassified Total Classified Nonclassified Total (In thousands) Real estate mortgage $ 43,554 $ 125,125 $ 168,679 $ 101,161 $ 155,281 $ 256,442 Real estate construction and land 1,230 1,423 2,653 3,901 3,010 6,911 Commercial 17,391 23 17,414 26,942 212 27,154 Consumer 299 — 299 284 — 284 Total PCI loans $ 62,474 $ 126,571 $ 189,045 $ 132,288 $ 158,503 $ 290,791 In addition to our internal risk rating process, our federal and state banking regulators, as an integral part of their examination process, periodically review the Company’s loan risk rating classifications. Our regulators may require the Company to recognize rating downgrades based on their judgments related to information available to them at the time of their examinations. |