Loans and Leases | Loans and leases Loans and Leases Receivable, Net Loans and leases receivable consisted of the following as of the dates indicated: March 31, 2018 December 31, 2017 (in thousands) Real estate loans: Commercial property Retail $ 909,414 $ 915,273 Hospitality 731,531 681,325 Other (1) 1,423,903 1,417,273 Total commercial property loans 3,064,848 3,013,871 Construction 57,896 55,190 Residential property 545,053 521,853 Total real estate loans 3,667,797 3,590,914 Commercial and industrial loans: Commercial term 184,083 182,685 Commercial lines of credit 190,255 181,894 International loans 35,042 34,622 Total commercial and industrial loans 409,380 399,201 Leases receivable 321,481 297,284 Consumer loans (2) 14,899 17,059 Loans and leases receivable 4,413,557 4,304,458 Allowance for loan and lease losses (31,777 ) (31,043 ) Loans and leases receivable, net $ 4,381,780 $ 4,273,415 (1) Includes, among other types, mixed-use, apartment, office, industrial, gas stations, faith-based facilities and warehouse; all other property types represent less than one percent of total loans and leases receivable. (2) Consumer loans include home equity lines of credit of $12.7 million and $14.2 million as of March 31, 2018 and December 31, 2017 , respectively. Accrued interest on loans and leases receivable was $10.3 million and $10.2 million at March 31, 2018 and December 31, 2017 , respectively. At March 31, 2018 and December 31, 2017 , loans receivable of $1.1 billion were pledged to secure borrowing facilities from the FHLB. Loans Held for Sale The following is the activity for SBA loans held for sale for the three months ended March 31, 2018 and 2017 : SBA Loans Held for Sale Real Estate Commercial and Industrial Total (in thousands) March 31, 2018 Balance at beginning of period $ 3,746 $ 2,648 $ 6,394 Originations 10,433 8,372 18,805 Sales (12,028 ) (7,159 ) (19,187 ) Principal payoffs and amortization — (4 ) (4 ) Balance at end of period $ 2,151 $ 3,857 $ 6,008 March 31, 2017 Balance at beginning of period $ 7,410 $ 1,906 $ 9,316 Originations 12,633 6,559 19,192 Sales (12,254 ) (7,389 ) (19,643 ) Principal payoffs and amortization — (16 ) (16 ) Balance at end of period $ 7,789 $ 1,060 $ 8,849 Allowance for Loan and Lease Losses Activity in the allowance for loan and lease losses was as follows for the periods indicated: As of and for the Three Months Ended March 31, 2018 March 31, 2017 (in thousands) Allowance for loan and lease losses: Balance at beginning of period $ 31,043 $ 32,429 Charge-offs (1,632 ) (186 ) Recoveries on loans and leases previously charged off 1,717 989 Net recoveries 85 803 Loan and lease loss provision (income) 649 (80 ) Balance at end of period $ 31,777 $ 33,152 Management believes the allowance for loan and lease losses is appropriate to provide for probable losses inherent in the loan and lease portfolio. However, the allowance is an estimate that is inherently uncertain and depends on the outcome of future events. Management’s estimates are based on previous loss experience; volume, growth and composition of the loan and lease portfolio; the value of collateral; and current economic conditions. Our lending is concentrated generally in real estate, commercial, SBA and trade finance lending to small and middle market businesses primarily in California, Texas, Illinois, Virginia, New Jersey, New York, Colorado, Georgia and Washington State. The following table details the information on the allowance for loan and lease losses by portfolio segment as of and for the three months ended March 31, 2018 and 2017 : Real Estate Commercial and Industrial Leases Receivable Consumer Unallocated Total (In thousands) As of and for the Three Months Ended March 31, 2018 Allowance for loan and lease losses on loans and leases: Beginning balance $ 17,012 $ 7,400 6,279 $ 122 $ 230 $ 31,043 Charge-offs (989 ) (279 ) (364 ) — — (1,632 ) Recoveries on loans and leases previously charged off 885 736 95 1 — 1,717 Loan and lease loss provision (income) 732 (967 ) 1,100 2 (218 ) 649 Ending balance $ 17,640 $ 6,890 $ 7,110 $ 125 $ 12 $ 31,777 Individually evaluated for impairment $ 1,549 $ 357 $ 1,110 $ — $ — $ 3,016 Collectively evaluated for impairment $ 16,091 $ 6,533 $ 6,000 $ 125 $ 12 $ 28,761 Loans and leases receivable $ 3,667,797 $ 409,380 $ 321,481 $ 14,899 $ — $ 4,413,557 Individually evaluated for impairment $ 18,513 $ 2,843 $ 4,200 $ 894 $ — $ 26,450 Collectively evaluated for impairment $ 3,649,284 $ 406,537 $ 317,281 $ 14,005 $ — $ 4,387,107 As of and for the Three Months Ended March 31, 2017 Allowance for loan and lease losses on loans and leases: Beginning balance $ 26,134 $ 5,623 307 $ 199 $ 166 $ 32,429 Charge-offs (104 ) (40 ) (42 ) — — (186 ) Recoveries on loans and leases previously charged off 712 277 — — — 989 Loan and lease loss provision (income) (1,140 ) 95 715 (69 ) 319 (80 ) Ending balance $ 25,602 $ 5,955 $ 980 $ 130 $ 485 $ 33,152 Individually evaluated for impairment $ 3,756 $ 791 $ — $ — $ — $ 4,547 Collectively evaluated for impairment $ 21,846 $ 5,164 $ 980 $ — $ 130 $ 485 $ 28,605 Loans and leases receivable $ 3,348,875 $ 317,682 $ 259,591 $ 17,803 $ — $ 3,943,951 Individually evaluated for impairment $ 20,795 $ 3,828 $ — $ 321 $ — $ 24,944 Collectively evaluated for impairment $ 3,328,080 $ 313,854 $ 259,591 $ 17,482 $ — $ 3,919,007 Loan and Lease Quality Indicators As part of the on-going monitoring of the credit quality of our loan and lease portfolio, we utilize an internal loan and lease grading system to identify credit risk and assign an appropriate grade, from 0 to 8 , for each loan or lease in our loan and lease portfolio. Third party loan reviews are performed throughout the year. Additional adjustments are made when determined to be necessary. The loan and lease grade definitions are as follows: Pass and Pass-Watch: Pass and pass-watch loans and leases, grades 0-4, are in compliance in all respects with the Bank’s credit policy and regulatory requirements, and do not exhibit any potential or defined weaknesses as defined under Special Mention, Substandard or Doubtful. This category is the strongest level of the Bank’s loan and lease grading system. It incorporates all performing loans and leases with no credit weaknesses. It includes cash and stock/security secured loans or other investment grade loans. Special Mention: A special mention credit, grade 5, has potential weaknesses that deserve management’s close attention. If not corrected, these potential weaknesses may result in deterioration of the repayment prospects of the debt and result in a Substandard classification. Loans and leases that have significant actual, not potential, weaknesses are considered more severely classified. Substandard: A substandard credit, grade 6, has a well-defined weakness that jeopardizes the liquidation of the debt. A credit graded Substandard is not protected by the sound worth and paying capacity of the borrower, or of the value and type of collateral pledged. With a Substandard loan or lease, there is a distinct possibility that the Bank will sustain some loss if the weaknesses or deficiencies are not corrected. Doubtful: A doubtful credit, grade 7, is one that has critical weaknesses that would make the collection or liquidation of the full amount due improbable. However, there may be pending events which may work to strengthen the credit, and therefore the amount or timing of a possible loss cannot be determined at the current time. Loss: A loan or lease classified as loss, grade 8, is considered uncollectible and of such little value that its continuance as an active bank asset is not warranted. This classification does not mean that the loan or lease has absolutely no recovery or salvage value, but rather it is not practical or desirable to defer writing off this asset even though partial recovery may be possible in the future. Loans and leases classified as loss are charged off in a timely manner. Under regulatory guidance, loans and leases graded special mention or worse are considered criticized loans and leases, and loans and leases graded substandard or worse are considered classified loans and leases. As of March 31, 2018 and December 31, 2017 , pass/pass-watch, special mention and classified loans and leases, disaggregated by loan class, were as follows: Pass/Pass-Watch Special Mention Classified Total (in thousands) March 31, 2018 Real estate loans: Commercial property Retail $ 903,510 $ 375 $ 5,529 $ 909,414 Hospitality 717,252 4,220 10,059 731,531 Other 1,407,438 9,040 7,425 1,423,903 Construction 57,896 — — 57,896 Residential property 544,516 301 236 545,053 Total real estate loans 3,630,612 13,936 23,249 3,667,797 Commercial and industrial loans: Commercial term 180,355 757 2,971 184,083 Commercial lines of credit 189,514 741 — 190,255 International loans 35,042 — — 35,042 Total commercial and industrial loans 404,911 1,498 2,971 409,380 Leases receivable 317,281 — 4,200 321,481 Consumer loans 13,864 202 833 14,899 Total loans and leases $ 4,366,668 $ 15,636 $ 31,253 $ 4,413,557 December 31, 2017 Real estate loans: Commercial property Retail $ 909,682 $ 454 $ 5,137 $ 915,273 Hospitality 667,254 4,976 9,095 681,325 Other 1,397,658 11,045 8,570 1,417,273 Construction 55,190 — — 55,190 Residential property 521,261 305 287 521,853 Total real estate loans 3,551,045 16,780 23,089 3,590,914 Commercial and industrial loans: Commercial term 179,835 439 2,411 182,685 Commercial lines of credit 181,462 250 182 181,894 International loans 34,622 — — 34,622 Total commercial and industrial loans 395,919 689 2,593 399,201 Leases receivable 292,832 — 4,452 297,284 Consumer loans 15,995 — 1,064 17,059 Total loans and leases $ 4,255,791 $ 17,469 $ 31,198 $ 4,304,458 The following is an aging analysis of loans and leases, disaggregated by loan class, as of the dates indicated: 30-59 Days Past Due 60-89 Days Past Due 90 Days or More Past Due Total Past Due Current Total (in thousands) March 31, 2018 Real estate loans: Commercial property Retail $ 295 $ — $ 689 $ 984 $ 908,430 $ 909,414 Hospitality 5,585 — 819 6,404 725,127 731,531 Other 348 — 683 1,031 1,422,872 1,423,903 Construction — — — — 57,896 57,896 Residential property 1,715 — — 1,715 543,338 545,053 Total real estate loans 7,943 — 2,191 10,134 3,657,663 3,667,797 Commercial and industrial loans: Commercial term 496 406 259 1,161 182,922 184,083 Commercial lines of credit — — — — 190,255 190,255 International loans — — — — 35,042 35,042 Total commercial and industrial loans 496 406 259 1,161 408,219 409,380 Leases receivable 2,211 816 3,089 6,116 315,365 321,481 Consumer loans 6 2 — 8 14,891 14,899 Total loans and leases $ 10,656 $ 1,224 $ 5,539 $ 17,419 $ 4,396,138 $ 4,413,557 December 31, 2017 Real estate loans: Commercial property Retail $ 96 $ 15 $ 630 $ 741 $ 914,532 $ 915,273 Hospitality 3,421 168 398 3,987 677,338 681,325 Other 1,245 1,333 563 3,141 1,414,132 1,417,273 Construction — — — — 55,190 55,190 Residential property 609 — — 609 521,244 521,853 Total real estate loans 5,371 1,516 1,591 8,478 3,582,436 3,590,914 Commercial and industrial loans: Commercial term 430 567 829 1,826 180,859 182,685 Commercial lines of credit 250 — 182 432 181,462 181,894 International loans — — — — 34,622 34,622 Total commercial and industrial loans 680 567 1,011 2,258 396,943 399,201 Leases receivable 2,295 944 3,554 6,793 290,491 297,284 Consumer loans — — — — 17,059 17,059 Total loans and leases $ 8,346 $ 3,027 $ 6,156 $ 17,529 $ 4,286,929 $ 4,304,458 There was $17,000 of loans that were 90 days or more past due and accruing interest as of March 31, 2018 and no loans that were 90 days or more past due and accruing interest as of December 31, 2017 . Impaired Loans and Leases Loans and leases are considered impaired when the Bank will be unable to collect all interest and principal payments per the contractual terms of the loan and lease agreement, unless the loan is well-collateralized and in the process of collection; or they are classified as Troubled Debt Restructurings (“TDRs”) because, due to the financial difficulties of the borrowers, we have granted concessions to the borrowers we would not otherwise consider; or when current information or events make it unlikely to collect in full according to the contractual terms of the loan or lease agreements; or there is a deterioration in the borrower’s financial condition that raises uncertainty as to timely collection of either principal or interest; or full payment of both interest and principal is in doubt according to the original contractual terms. We evaluate loan and lease impairment in accordance with applicable GAAP. Impaired loans and leases are measured based on the present value of expected future cash flows discounted at the receivable's effective interest rate or, as a practical expedient, at the receivable's observable market price or the fair value of the collateral if the loan or lease is collateral dependent, less estimated costs to sell. If the measure of the impaired loan or lease is less than the recorded investment in the loan or lease, the deficiency is either charged off against the allowance for loan and lease losses or we establish a specific allocation in the allowance for loan and lease losses. Additionally, loans and leases that are considered impaired are specifically excluded from the quarterly migration analysis when determining the amount of the allowance for loan and lease losses required for the period. The allowance for collateral-dependent loans is determined by calculating the difference between the outstanding loan balance and the value of the collateral as determined by recent appraisals. The allowance for collateral-dependent loans varies from loan to loan based on the collateral coverage of the loan at the time of designation as nonperforming. We continue to monitor the collateral coverage, using recent appraisals, on these loans on a quarterly basis and adjust the allowance accordingly. The following tables provide information on impaired loans and leases, disaggregated by loan class, as of the dates indicated: Recorded Unpaid With No With an Related (in thousands) March 31, 2018 Real estate loans: Commercial property Retail $ 1,394 $ 1,417 $ 1,336 $ 58 $ 5 Hospitality 7,413 8,962 3,671 3,742 1,543 Other 7,255 7,778 7,140 116 1 Residential property 2,450 2,596 2,450 — — Total real estate loans 18,512 20,753 14,597 3,916 1,549 Commercial and industrial loans 2,843 2,934 1,344 1,499 357 Leases receivable 4,200 4,324 934 3,265 1,110 Consumer loans 894 1,087 895 — — Total loans and leases $ 26,449 $ 29,098 $ 17,770 $ 8,680 $ 3,016 December 31, 2017 Real estate loans: Commercial property Retail $ 1,403 $ 1,423 $ 1,246 $ 157 $ 1 Hospitality 6,184 7,220 2,144 4,040 1,677 Other 8,513 9,330 7,569 944 394 Residential property 2,563 2,728 824 1,739 21 Total real estate loans 18,663 20,701 11,783 6,880 2,093 Commercial and industrial loans 3,039 3,081 1,068 1,971 441 Leases receivable 4,452 4,626 455 3,997 3,334 Consumer loans 1,029 1,215 919 110 10 Total loans and leases $ 27,183 $ 29,623 $ 14,225 $ 12,958 $ 5,878 Three Months Ended Average Recorded Investment Interest Income Recognized (in thousands) March 31, 2018 Real estate loans: Commercial property Retail $ 1,409 $ 22 Hospitality 8,105 141 Other 7,843 110 Residential property 2,580 30 Total real estate loans 19,937 303 Commercial and industrial loans 2,914 40 Leases receivable 4,603 10 Consumer loans 1,048 14 Total loans and leases $ 28,502 $ 367 March 31, 2017 Real estate loans: Commercial property Retail $ 1,667 $ 31 Hospitality 6,254 67 Other 10,160 183 Residential property 2,773 33 Total real estate loans 20,854 314 Commercial and industrial loans 3,892 59 Consumer loans 324 3 Total loans and leases $ 25,070 $ 376 The following is a summary of interest foregone on impaired loans and leases for the periods indicated: Three Months Ended 2018 2017 (in thousands) Interest income that would have been recognized had impaired loans and leases performed in accordance with their original terms $ 654 $ 591 Less: Interest income recognized on impaired loans and leases (367 ) (376 ) Interest foregone on impaired loans and leases $ 287 $ 215 There were no commitments to lend additional funds to borrowers whose loans are included in the table above. Nonaccrual Loans and Leases and Nonperforming Assets Loans and leases are placed on nonaccrual status when, in the opinion of management, the full timely collection of principal or interest is in doubt. Generally, the accrual of interest is discontinued when principal or interest payments become more than 90 days past due, unless management believes the receivable is adequately collateralized and in the process of collection. However, in certain instances, we may place a particular loan or lease receivable on nonaccrual status earlier, depending upon the individual circumstances surrounding the delinquency. When a receivable is placed on nonaccrual status, previously accrued but unpaid interest is reversed against current income. Subsequent collections of cash are applied as principal reductions when received, except when the ultimate collectability of principal is probable, in which case interest payments are credited to income. Nonaccrual loans and leases may be restored to accrual status when principal and interest payments become current and full repayment is expected. The following table details nonaccrual loans and leases, excluding nonaccrual PCI loans of $1.0 million and $0.9 million as of March 31, 2018 and December 31, 2017, respectively, disaggregated by loan class, as of the dates indicated: March 31, 2018 December 31, 2017 (in thousands) Real estate loans: Commercial property Retail $ 237 $ 224 Hospitality 6,495 5,263 Other 1,292 2,462 Residential property 451 591 Total real estate loans 8,475 8,540 Commercial and industrial loans: Commercial term 1,881 1,710 Commercial lines of credit — 182 Total commercial and industrial loans 1,881 1,892 Leases receivable 4,200 4,452 Consumer loans 789 921 Total nonaccrual loans and leases $ 15,345 $ 15,805 The following table details nonperforming assets as of the dates indicated: March 31, 2018 December 31, 2017 (in thousands) Nonaccrual loans and leases $ 15,345 $ 15,805 Loans and leases 90 days or more past due and still accruing 17 — Total nonperforming loans and leases 15,362 15,805 Other real estate owned ("OREO") 1,660 1,946 Total nonperforming assets $ 17,022 $ 17,751 OREO is included in prepaid expenses and other assets in the accompanying Consolidated Balance Sheets as of March 31, 2018 and December 31, 2017. Troubled Debt Restructurings The following table details TDRs as of March 31, 2018 and December 31, 2017 : Nonaccrual TDRs Accrual TDRs Deferral Deferral Reduction Extension Total Deferral Deferral Reduction Extension Total (in thousands) March 31, 2018 Real estate loans $ 1,479 $ 3,709 $ 15 $ — $ 5,203 $ 3,408 $ — $ 1,356 $ 1,230 5,994 Commercial and industrial loans 128 107 740 484 1,459 177 471 369 1,017 Consumer loans 789 — — — 789 — — 104 — 104 Total TDR loans $ 2,396 $ 3,816 $ 755 $ 484 $ 7,451 $ 3,408 $ 177 $ 1,931 $ 1,599 $ 7,115 December 31, 2017 Real estate loans $ 1,935 $ 3,761 $ 64 $ — $ 5,760 $ 3,409 $ — $ 1,387 $ 1,237 $ 6,033 Commercial and industrial loans 131 123 1,173 102 1,529 6 182 503 427 1,118 Consumer loans 811 — — — 811 — — 108 — 108 Total TDR loans $ 2,877 $ 3,884 $ 1,237 $ 102 $ 8,100 $ 3,415 $ 182 $ 1,998 $ 1,664 $ 7,259 As of March 31, 2018 and December 31, 2017 , total TDRs were $14.6 million and $15.4 million , respectively. A debt restructuring is considered a TDR if we grant a concession, that we would not have otherwise considered, to the borrower for economic or legal reasons related to the borrower’s financial difficulties. Loans are considered to be TDRs if they were restructured through payment structure modifications such as reducing the amount of principal and interest due monthly and/or allowing for interest only monthly payments for three months or more. All TDRs are impaired and are individually evaluated for specific impairment using one of these three criteria: (1) the present value of expected future cash flows discounted at the loan’s effective interest rate; (2) the loan’s observable market price; or (3) the fair value of the collateral if the loan is collateral dependent. At March 31, 2018 and December 31, 2017 , $1.7 million and $2.2 million , respectively, of allowance relating to these loans were included in the allowance for loan and lease losses. For the restructured loans on accrual status, we determined that, based on the financial capabilities of the borrowers at the time of the loan restructuring and the borrowers’ past performance in the payment of debt service under the previous loan terms, performance and collection under the revised terms are probable. |