Loans and Leases | LOANS AND LEASES Our 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 included in the carrying amount of loans that are sold. Prior to January 1, 2018, our loan and lease portfolio consisted of Non-PCI loans and leases and PCI loans. Non-PCI loans and leases were those we originated or those we acquired that were not credit impaired at the dates of acquisition. PCI loans were purchased loans for which there was, at the acquisition date, evidence of credit deterioration since their origination and for which it was probable that collection of all contractually required payments was unlikely. As our gross PCI loan portfolio represented less than 0.4% of total loans as of the end of 2017, beginning in 2018 the PCI loans were accounted for as Non-PCI loans. Accordingly, in the credit quality tables below under " Loans and leases held for investment, " amounts related to the 2018 period are for total loans and leases, and amounts related to the 2017 period are for Non-PCI loans and leases. Loans Held for Sale In the fourth quarter of 2017, we sold $1.5 billion of cash flow loans and exited our CapitalSource Division origination operations related to general, technology, and healthcare cash flow loans. As of December 31, 2017, $1.0 billion of the loans sold had settled, while $481.1 million were classified as held for sale. In connection with the loan sale and transfer of loans to held for sale, we recognized $2.2 million in charge-offs during the fourth quarter of 2017 to record the loans at the lower of cost or fair value. The loans held for sale at December 31, 2017 settled in the first quarter of 2018 and we recorded a gain of $1.3 million . Loans and Leases Held for Investment The following table summarizes the composition of our loans and leases held for investment as of the dates indicated: March 31, 2018 December 31, 2017 Total Non-PCI Total Loans Loans PCI Loans and Leases and Leases Loans and Leases (In thousands) Real estate mortgage $ 7,570,526 $ 7,815,355 $ 53,658 $ 7,869,013 Real estate construction and land 1,699,630 1,611,287 — 1,611,287 Commercial 6,848,576 7,137,978 4,158 7,142,136 Consumer 397,895 409,551 234 409,785 Gross loans and leases held for investment 16,516,627 16,974,171 58,050 17,032,221 Deferred fees, net (61,342 ) (59,464 ) (14 ) (59,478 ) Loans and leases held for investment, net of deferred fees 16,455,285 16,914,707 58,036 16,972,743 Allowance for loan and lease losses (134,275 ) (133,012 ) (6,444 ) (139,456 ) Total loans and leases held for investment, net $ 16,321,010 $ 16,781,695 $ 51,592 $ 16,833,287 The following tables present an aging analysis of our loans and leases held for investment, net of deferred fees, by portfolio segment and class as of the dates indicated: March 31, 2018 30 - 89 90 or More Days Days Total Past Due Past Due Past Due Current Total (In thousands) Real estate mortgage: Commercial $ 26,262 $ 6,849 $ 33,111 $ 4,999,895 $ 5,033,006 Residential 1,512 1,976 3,488 2,517,749 2,521,237 Total real estate mortgage 27,774 8,825 36,599 7,517,644 7,554,243 Real estate construction and land: Commercial — — — 789,892 789,892 Residential 2,605 — 2,605 884,505 887,110 Total real estate construction and land 2,605 — 2,605 1,674,397 1,677,002 Commercial: Asset-based — 680 680 2,957,210 2,957,890 Venture capital 737 1,492 2,229 1,918,414 1,920,643 Other commercial 5,133 1,388 6,521 1,941,069 1,947,590 Total commercial 5,870 3,560 9,430 6,816,693 6,826,123 Consumer 1,000 — 1,000 396,917 397,917 Total $ 37,249 $ 12,385 $ 49,634 $ 16,405,651 $ 16,455,285 December 31, 2017 30 - 89 90 or More Days Days Total Past Due Past Due Past Due Current Total (In thousands) Real estate mortgage: Commercial $ 29,070 $ 9,107 $ 38,177 $ 5,323,310 $ 5,361,487 Residential 6,999 2,022 9,021 2,428,483 2,437,504 Total real estate mortgage 36,069 11,129 47,198 7,751,793 7,798,991 Real estate construction and land: Commercial — — — 769,075 769,075 Residential 2,081 — 2,081 820,073 822,154 Total real estate construction and land 2,081 — 2,081 1,589,148 1,591,229 Commercial: Asset-based 344 690 1,034 2,923,837 2,924,871 Venture capital 6,533 760 7,293 2,115,418 2,122,711 Other commercial 2,846 1,586 4,432 2,062,906 2,067,338 Total commercial 9,723 3,036 12,759 7,102,161 7,114,920 Consumer 562 — 562 409,005 409,567 Total (1) $ 48,435 $ 14,165 $ 62,600 $ 16,852,107 $ 16,914,707 ________________________ (1) Excludes loans held for sale carried at lower of cost or fair value and PCI loans. It is our 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. Interest income on nonaccrual loans is recognized only to the extent cash is received and the principal balance of the loan is deemed collectable. The following table presents our nonaccrual and performing loans and leases held for investment, net of deferred fees, by portfolio segment and class as of the dates indicated: March 31, 2018 December 31, 2017 (1) Nonaccrual Performing Total Nonaccrual Performing Total (In thousands) Real estate mortgage: Commercial $ 19,116 $ 5,013,890 $ 5,033,006 $ 65,563 $ 5,295,924 $ 5,361,487 Residential 5,225 2,516,012 2,521,237 3,350 2,434,154 2,437,504 Total real estate mortgage 24,341 7,529,902 7,554,243 68,913 7,730,078 7,798,991 Real estate construction and land: Commercial — 789,892 789,892 — 769,075 769,075 Residential — 887,110 887,110 — 822,154 822,154 Total real estate construction and land — 1,677,002 1,677,002 — 1,591,229 1,591,229 Commercial: Asset-based 32,838 2,925,052 2,957,890 33,553 2,891,318 2,924,871 Venture capital 21,861 1,898,782 1,920,643 29,424 2,093,287 2,122,711 Other commercial 24,434 1,923,156 1,947,590 23,874 2,043,464 2,067,338 Total commercial 79,133 6,746,990 6,826,123 86,851 7,028,069 7,114,920 Consumer 251 397,666 397,917 20 409,547 409,567 Total $ 103,725 $ 16,351,560 $ 16,455,285 $ 155,784 $ 16,758,923 $ 16,914,707 ________________________ (1) Excludes loans held for sale carried at lower of cost or fair value and PCI loans. At March 31, 2018 , nonaccrual loans and leases totaled $103.7 million and included $11.9 million of loans and leases 90 or more days past due, $8.7 million of loans and leases 30 to 89 days past due, and $83.1 million of loans and leases current with respect to contractual payments that were placed on nonaccrual status based on management’s judgment regarding their collectability. Nonaccrual loans and leases totaled $155.8 million at December 31, 2017 , including $14.2 million of the loans and leases 90 or more days past due, $3.2 million of loans and leases 30 to 89 days past due, and $138.4 million of current loans and leases that were placed on nonaccrual status based on management’s judgment regarding their collectability. As of March 31, 2018 , our ten largest loan relationships on nonaccrual status had an aggregate carrying value of $68.8 million and represented 66.3% of total nonaccrual loans and leases. The following table presents the credit risk rating categories for loans and leases held for investment, net of deferred fees, by portfolio segment and class as of the dates indicated. Classified loans and leases are those with a credit risk rating of either substandard or doubtful. March 31, 2018 Classified Special Mention Pass Total (In thousands) Real estate mortgage: Commercial $ 44,635 $ 158,496 $ 4,829,875 $ 5,033,006 Residential 12,436 1,672 2,507,129 2,521,237 Total real estate mortgage 57,071 160,168 7,337,004 7,554,243 Real estate construction and land: Commercial 453 — 789,439 789,892 Residential — 30,626 856,484 887,110 Total real estate construction and land 453 30,626 1,645,923 1,677,002 Commercial: Asset-based 49,913 54,882 2,853,095 2,957,890 Venture capital 31,364 124,303 1,764,976 1,920,643 Other commercial 68,813 43,681 1,835,096 1,947,590 Total commercial 150,090 222,866 6,453,167 6,826,123 Consumer 428 1,456 396,033 397,917 Total $ 208,042 $ 415,116 $ 15,832,127 $ 16,455,285 December 31, 2017 (1) Classified Special Mention Pass Total (In thousands) Real estate mortgage: Commercial $ 93,795 $ 122,488 $ 5,145,204 $ 5,361,487 Residential 8,425 4,582 2,424,497 2,437,504 Total real estate mortgage 102,220 127,070 7,569,701 7,798,991 Real estate construction and land: Commercial — — 769,075 769,075 Residential — 619 821,535 822,154 Total real estate construction and land — 619 1,590,610 1,591,229 Commercial: Asset-based 51,000 37,256 2,836,615 2,924,871 Venture capital 49,671 114,210 1,958,830 2,122,711 Other commercial 75,251 21,883 1,970,204 2,067,338 Total commercial 175,922 173,349 6,765,649 7,114,920 Consumer 263 1,130 408,174 409,567 Total $ 278,405 $ 302,168 $ 16,334,134 $ 16,914,707 ________________________ (1) Excludes loans held for sale carried at lower of cost or fair value and PCI loans. 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 and lease 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. Nonaccrual loans and leases and performing troubled debt restructured loans are considered impaired for reporting purposes. Troubled debt restructurings are a result of rate reductions, term extensions, fee concessions, and debt forgiveness, or a combination thereof. The following table presents the composition of our impaired loans and leases held for investment, net of deferred fees, by portfolio segment as of the dates indicated: March 31, 2018 December 31, 2017 (1) Performing Total Performing Total Nonaccrual Troubled Impaired Nonaccrual Troubled Impaired Loans Debt Loans Loans Debt Loans and Restructured and and Restructured and Leases Loans Leases Leases Loans Leases (In thousands) Real estate mortgage $ 24,341 $ 51,031 $ 75,372 $ 68,913 $ 47,560 $ 116,473 Real estate construction and land — 5,670 5,670 — 5,690 5,690 Commercial 79,133 3,349 82,482 86,851 3,488 90,339 Consumer 251 123 374 20 100 120 Total $ 103,725 $ 60,173 $ 163,898 $ 155,784 $ 56,838 $ 212,622 ________________________ (1) Excludes loans held for sale carried at lower of cost or fair value and PCI loans. The following tables present information regarding our impaired loans and leases held for investment, net of deferred fees, by portfolio segment and class as of and for the dates indicated: March 31, 2018 December 31, 2017 (1) Unpaid Unpaid Recorded Principal Related Recorded Principal Related Impaired Loans and Leases Investment Balance Allowance Investment Balance Allowance (In thousands) With An Allowance Recorded: Real estate mortgage: Commercial $ 13,884 $ 14,690 $ 576 $ 15,750 $ 16,548 $ 628 Residential 4,295 4,926 512 2,787 2,957 342 Commercial: Venture capital 17,367 18,312 4,970 16,565 17,203 4,267 Other commercial 18,048 31,672 8,171 20,404 29,951 8,368 Consumer 295 355 16 100 100 16 With No Related Allowance Recorded: Real estate mortgage: Commercial $ 48,729 $ 63,283 $ 93,827 $ 105,923 Residential 8,464 10,674 4,109 4,481 Real estate construction and land: Commercial 5,670 5,670 5,690 5,689 Commercial: Asset-based 32,838 55,890 33,553 54,911 Venture capital 6,129 29,786 14,534 40,029 Other commercial 8,100 27,819 5,283 9,351 Consumer 79 179 20 93 Total Loans and Leases With and Without an Allowance Recorded: Real estate mortgage $ 75,372 $ 93,573 $ 1,088 $ 116,473 $ 129,909 $ 970 Real estate construction and land 5,670 5,670 — 5,690 5,689 — Commercial 82,482 163,479 13,141 90,339 151,445 12,635 Consumer 374 534 16 120 193 16 Total $ 163,898 $ 263,256 $ 14,245 $ 212,622 $ 287,236 $ 13,621 ________________________ (1) Excludes loans held for sale carried at lower of cost or fair value and PCI loans. Three Months Ended March 31, 2018 2017 Weighted Interest Weighted Interest Average Income Average Income Impaired Loans and Leases Balance (1) Recognized Balance (1) Recognized (In thousands) With An Allowance Recorded: Real estate mortgage: Commercial $ 13,884 $ 201 $ 14,350 $ 206 Residential 4,295 23 3,501 12 Commercial: Venture capital 14,598 — 4,693 — Other commercial 16,851 15 44,333 15 Consumer 295 2 187 — With No Related Allowance Recorded: Real estate mortgage: Commercial $ 46,782 $ 765 $ 92,753 $ 560 Residential 8,464 45 5,216 15 Real estate construction and land: Commercial 5,670 89 6,111 67 Residential — — 572 2 Commercial: Asset-based 32,838 — 30,739 — Venture capital 4,474 — 2,429 — Other commercial 7,859 1,147 4,750 30 Consumer 79 — 127 2 Total Loans and Leases With and Without an Allowance Recorded: Real estate mortgage $ 73,425 $ 1,034 $ 115,820 $ 793 Real estate construction and land 5,670 89 6,683 69 Commercial 76,620 1,162 86,944 45 Consumer 374 2 314 2 Total $ 156,089 $ 2,287 $ 209,761 $ 909 _________________________ (1) For loans and leases reported as impaired at March 31, 2018 and 2017 , amounts were calculated based on the period of time such loans and leases were impaired during the reported period. The following table presents our troubled debt restructurings of loans held for investment by portfolio segment and class for the periods indicated: Three Months Ended March 31, 2018 2017 Pre- Post- Pre- Post- Modification Modification Modification Modification Outstanding Outstanding Outstanding Outstanding Number Recorded Recorded Number Recorded Recorded Troubled Debt Restructurings of Loans Investment Investment of Loans Investment Investment (Dollars in thousands) Real estate mortgage: Commercial — $ — $ — 1 $ 64 $ — Residential — — — 2 42 42 Commercial: Venture capital — — — 3 13,065 13,065 Other commercial 2 11,783 11,783 4 719 719 Consumer — — — 1 97 97 Total 2 $ 11,783 $ 11,783 11 $ 13,987 $ 13,923 The following table presents troubled debt restructurings of loans held for investment by portfolio segment and class that subsequently defaulted for the periods indicated: Three Months Ended March 31, 2018 2017 Troubled Debt Restructurings Number Recorded Number Recorded That Subsequently Defaulted of Loans Investment (1) of Loans Investment (1) (Dollars in thousands) Commercial: Other commercial 1 $ 2,250 — $ — Consumer — — 1 28 Total 1 $ 2,250 (2) 1 $ 28 (3) _________________________ (1) The population of defaulted restructured loans for the period indicated includes only those loans restructured during the preceding 12-month period. For example, for the 12-month period ended March 31, 2018 , the population of defaulted restructured loans includes only those loans restructured after March 31, 2017 . The table excludes defaulted troubled debt restructurings in those classes for which the recorded investment was zero at the end of the period. (2) Represents the balance at March 31, 2018 , and there were no charge-offs. (3) Represents the balance at March 31, 2017 , and there were no charge-offs. Allowance for Loan and Lease Losses The following tables present a summary of the activity in the allowance for loan and lease losses on loans and leases held for investment by portfolio segment for the periods indicated: Three Months Ended March 31, 2018 Real Estate Real Estate Construction Mortgage and Land Commercial Consumer Total (In thousands) Allowance for Loan and Lease Losses: Balance, beginning of period $ 40,051 $ 13,055 $ 84,022 $ 2,328 $ 139,456 Charge-offs (2,598 ) — (9,524 ) (31 ) (12,153 ) Recoveries 1,657 9 5,487 45 7,198 Provision (negative provision) 1,048 5,126 (6,205 ) (195 ) (226 ) Balance, end of period $ 40,158 $ 18,190 $ 73,780 $ 2,147 $ 134,275 Ending Allowance by Impairment Methodology: Individually evaluated for impairment $ 1,088 $ — $ 13,141 $ 16 $ 14,245 Collectively evaluated for impairment $ 39,070 $ 18,190 $ 60,639 $ 2,131 $ 120,030 Ending Loans and Leases by Impairment Methodology: Individually evaluated for impairment $ 74,390 $ 5,670 $ 82,434 $ 324 $ 162,818 Collectively evaluated for impairment 7,479,853 1,671,332 6,743,689 397,593 16,292,467 Ending balance $ 7,554,243 $ 1,677,002 $ 6,826,123 $ 397,917 $ 16,455,285 Three Months Ended March 31, 2017 Real Estate Real Estate Construction Total Total Mortgage and Land Commercial Consumer Non-PCI PCI Total (In thousands) Allowance for Loan and Lease Losses: Balance, beginning of period $ 37,765 $ 10,045 $ 93,853 $ 2,092 $ 143,755 $ 13,483 $ 157,238 Charge-offs (1,544 ) — (19,285 ) (99 ) (20,928 ) (2,230 ) (23,158 ) Recoveries 230 8 2,448 53 2,739 — 2,739 Provision (negative provision) (1,083 ) 423 25,118 (198 ) 24,260 228 24,488 Balance, end of period $ 35,368 $ 10,476 $ 102,134 $ 1,848 $ 149,826 $ 11,481 $ 161,307 Ending Allowance by Impairment Methodology: Individually evaluated for impairment $ 1,070 $ — $ 12,267 $ 90 $ 13,427 Collectively evaluated for impairment $ 34,298 $ 10,476 $ 89,867 $ 1,758 $ 136,399 Acquired loans with deteriorated credit quality $ 11,481 Ending Loans and Leases by Impairment Methodology: Individually evaluated for impairment $ 118,275 $ 6,683 $ 103,221 $ 281 $ 228,460 Collectively evaluated for impairment 5,768,694 1,101,553 7,979,457 382,190 15,231,894 Acquired loans with deteriorated credit quality $ 96,335 Ending balance $ 5,886,969 $ 1,108,236 $ 8,082,678 $ 382,471 $ 15,460,354 $ 96,335 $ 15,556,689 Allowance for Credit Losses The allowance for credit losses is the combination of the allowance for loan and lease losses and the reserve for unfunded loan commitments. The reserve for unfunded loan commitments is included within "Accrued interest payable and other liabilities" on the condensed consolidated balance sheets. The following tables present a summary of the activity in the allowance for loan and lease losses, reserve for unfunded loan commitments for the periods indicated: Three Months Ended March 31, 2018 Allowance for Reserve for Total Loan and Unfunded Loan Allowance for Lease Losses Commitments Credit Losses (In thousands) Balance, beginning of period $ 139,456 $ 28,635 $ 168,091 Charge-offs (12,153 ) — (12,153 ) Recoveries 7,198 — 7,198 Net charge-offs (4,955 ) — (4,955 ) Provision (negative provision) (226 ) 4,226 4,000 Balance, end of period $ 134,275 $ 32,861 $ 167,136 Three Months Ended March 31, 2017 Non-PCI Allowance for Reserve for PCI Total Loan and Unfunded Loan Allowance for Allowance for Allowance for Lease Losses Commitments Credit Losses Loan Losses Credit Losses (In thousands) Balance, beginning of period $ 143,755 $ 17,523 $ 161,278 $ 13,483 $ 174,761 Charge-offs (20,928 ) — (20,928 ) (2,230 ) (23,158 ) Recoveries 2,739 — 2,739 — 2,739 Net charge-offs (18,189 ) — (18,189 ) (2,230 ) (20,419 ) Provision 24,260 240 24,500 228 24,728 Balance, end of period $ 149,826 $ 17,763 $ 167,589 $ 11,481 $ 179,070 |