Loans Receivable and Allowance for Loan Losses | Loans Receivable and Allowance for Loan Losses The following is a summary of loans receivable by major category: March 31, 2019 December 31, 2018 Loan portfolio composition (Dollars in thousands) Real estate loans: Residential $ 49,633 $ 51,197 Commercial 8,396,364 8,395,327 Construction 269,837 275,076 Total real estate loans 8,715,834 8,721,600 Commercial business 2,158,424 2,127,630 Trade finance 172,273 197,190 Consumer and other 1,007,067 1,051,486 Total loans outstanding 12,053,598 12,097,906 Deferred loan fees, net 406 209 Loans receivable 12,054,004 12,098,115 Allowance for loan losses (94,217 ) (92,557 ) Loans receivable, net of allowance for loan losses $ 11,959,787 $ 12,005,558 The loan portfolio is made up of four segments: real estate loans, commercial business, trade finance, and consumer and other. Real estate loans are extended for the purchase and refinance of commercial real estate and are generally secured by first deeds of trust and are collateralized by residential or commercial properties. Commercial business loans are loans provided to business for various purposes such as for working capital, purchasing inventory, debt refinancing, business acquisitions and other business related financing needs. Trade finance loans generally serves businesses involved in international trade activities. Consumer and other loans consist mostly of single family residential mortgage loans but also includes home equity, credit cards, and other personal loans. The four segments are further segregated between loans accounted for under the amortized cost method (“Legacy Loans”), and previously acquired loans that were originally recorded at fair value with no carryover of the related pre-acquisition allowance for loan losses (“Acquired Loans”). Acquired Loans are further segregated between purchased credit impaired loans (loans with credit deterioration on the date of acquisition and accounted for under ASC 310-30, or “PCI loans”), and Acquired Performing Loans (loans that were pass graded on the acquisition date and the fair value adjustment is amortized over the contractual life under ASC 310-20, or “non-PCI loans”). The following table presents changes in the accretable discount on PCI loans for the three months ended March 31, 2019 and 2018 : Three Months Ended March 31, 2019 2018 (Dollars in thousands) Balance at beginning of period $ 49,697 $ 55,002 Accretion (5,834 ) (5,772 ) Reclassification from nonaccretable difference 3,501 5,616 Balance at end of period $ 47,364 $ 54,846 On the acquisition date, the amount by which the undiscounted expected cash flows exceed the estimated fair value of PCI loans is considered the “accretable yield.” The accretable yield is measured at each financial reporting date and represents the difference between the remaining undiscounted expected cash flows and the current carrying value of the loans. The accretable yield will change from period to period due to the following: 1) estimates of the remaining life of acquired loans will affect the amount of future interest income; 2) indices for variable rates of interest on PCI loans may change; and 3) estimates of the amount of the contractual principal and interest that will not be collected (nonaccretable difference) may change. The following tables detail the activity in the allowance for loan losses by portfolio segment for the three months ended March 31, 2019 and 2018 : Legacy Loans Acquired Loans Total Real Estate Commercial Business Trade Finance Consumer and Other Real Commercial Business Trade Finance Consumer and Other (Dollars in thousands) Three Months Ended March 31, 2019 Balance, beginning of period $ 49,446 $ 21,826 $ 719 $ 6,269 $ 7,321 $ 5,939 $ — $ 1,037 $ 92,557 Provision (credit) for loan losses (4,658 ) 6,621 (21 ) 938 (39 ) 118 — 41 3,000 Loans charged off (34 ) (1,160 ) — (210 ) (26 ) (248 ) — (76 ) (1,754 ) Recoveries of charge offs 1,122 89 — 7 5 69 — — 1,292 PCI allowance adjustment — — — — — (878 ) — — (878 ) Balance, end of period $ 45,876 $ 27,376 $ 698 $ 7,004 $ 7,261 $ 5,000 $ — $ 1,002 $ 94,217 Legacy Loans Acquired Loans Total Real Commercial Business Trade Finance Consumer and Other Real Commercial Business Trade Finance Consumer and Other (Dollars in thousands) Three Months Ended March 31, 2018 Balance, beginning of period $ 45,360 $ 17,228 $ 1,674 $ 3,385 $ 13,322 $ 3,527 $ 42 $ 3 $ 84,541 Provision (credit) for loan losses 479 3,289 81 877 (173 ) (2,046 ) (4 ) (3 ) 2,500 Loans charged off (63 ) (342 ) — (347 ) (102 ) (214 ) — — (1,068 ) Recoveries of charge offs 201 212 12 19 1 41 — 2 488 Balance, end of period $ 45,977 $ 20,387 $ 1,767 $ 3,934 $ 13,048 $ 1,308 $ 38 $ 2 $ 86,461 The following tables break out the allowance for loan losses and the recorded investment of loans outstanding (not including accrued interest receivable and net deferred loan costs or fees) by individually impaired, general valuation, and PCI impairment, by portfolio segment at March 31, 2019 and December 31, 2018 : March 31, 2019 Legacy Loans Acquired Loans Total Real Commercial Business Trade Finance Consumer and Other Real Commercial Business Trade Finance Consumer and Other (Dollars in thousands) Allowance for loan losses: Individually evaluated for impairment $ 211 $ 5,842 $ — $ 8 $ 245 $ 490 $ — $ 1 $ 6,797 Collectively evaluated for impairment 45,665 21,534 698 6,996 1,786 408 — 17 77,104 PCI loans — — — — 5,230 4,102 — 984 10,316 Total $ 45,876 $ 27,376 $ 698 $ 7,004 $ 7,261 $ 5,000 $ — $ 1,002 $ 94,217 Loans outstanding: Individually evaluated for impairment $ 59,938 $ 33,756 $ 5,343 $ 817 $ 23,264 $ 5,048 $ 3,066 $ 918 $ 132,150 Collectively evaluated for impairment 7,122,309 2,026,111 163,864 872,171 1,394,669 72,810 — 127,583 11,779,517 PCI loans — — — — 115,654 20,699 — 5,578 141,931 Total $ 7,182,247 $ 2,059,867 $ 169,207 $ 872,988 $ 1,533,587 $ 98,557 $ 3,066 $ 134,079 $ 12,053,598 December 31, 2018 Legacy Loans Acquired Loans Total Real Commercial Business Trade Finance Consumer and Other Real Commercial Business Trade Finance Consumer and Other (Dollars in thousands) Allowance for loan losses: Individually evaluated for impairment $ 176 $ 4,221 $ — $ 3 $ 261 $ 130 $ — $ — $ 4,791 Collectively evaluated for impairment 49,270 17,605 719 6,266 1,264 460 — 19 75,603 PCI loans — — — — 5,796 5,349 — 1,018 12,163 Total $ 49,446 $ 21,826 $ 719 $ 6,269 $ 7,321 $ 5,939 $ — $ 1,037 $ 92,557 Loans outstanding: Individually evaluated for impairment $ 39,976 $ 29,624 $ 5,887 $ 441 $ 18,080 $ 5,734 $ 3,124 $ 1,141 $ 104,007 Collectively evaluated for impairment 7,037,392 1,988,067 188,179 910,292 1,507,858 80,916 — 133,942 11,846,646 PCI loans — — — — 118,294 23,289 — 5,670 147,253 Total $ 7,077,368 $ 2,017,691 $ 194,066 $ 910,733 $ 1,644,232 $ 109,939 $ 3,124 $ 140,753 $ 12,097,906 At March 31, 2019 and December 31, 2018 , the balance of PCI loans that had credit deterioration subsequent to acquisition was $49.1 million and $57.9 million , respectively. PCI loans with subsequent credit deterioration had an allowance for loan losses balance of $10.3 million and $12.2 million at March 31, 2019 and December 31, 2018 , respectively. As of March 31, 2019 and December 31, 2018 , the reserve for unfunded loan commitments recorded in other liabilities was $736 thousand and $736 thousand , respectively. For the three months ended March 31, 2019 and 2018 , recognized credit for unfunded commitments recorded in credit related expense was $0 and $200 thousand , respectively. The recorded investment of individually impaired loans and the total impaired loans net of specific allowance is presented in the following table for the dates indicated: March 31, 2019 December 31, 2018 (Dollars in thousands) With allocated specific allowance Without charge off $ 42,912 $ 35,365 With charge off 1,101 681 With no allocated specific allowance Without charge off 77,619 59,607 With charge off 10,518 8,354 Specific allowance on impaired loans (6,797 ) (4,791 ) Impaired loans, net of specific allowance $ 125,353 $ 99,216 The following tables detail the recorded investment of impaired loans (Legacy Loans and Acquired Loans that became impaired subsequent to being originated and acquired, respectfully) as of March 31, 2019 and December 31, 2018 , and the average recorded investment and interest income recognized for the three months ended March 31, 2019 and 2018 . Impaired loans with no related allowance are believed by management to be adequately collateralized. As of March 31, 2019 As of December 31, 2018 Total Impaired Loans (1) Recorded Investment (2) Unpaid Contractual Principal Balance Related Allowance Recorded Investment* Unpaid Contractual Principal Balance Related Allowance (Dollars in thousands) With related allowance: Real estate—residential $ — $ — $ — $ — $ — $ — Real estate—commercial Retail 2,045 2,299 171 1,375 1,487 156 Hotel & motel 1,834 2,185 112 1,949 2,310 119 Gas station & car wash — — — — — — Mixed use 858 934 34 881 947 43 Industrial & warehouse 7,589 8,556 124 1,305 2,139 93 Other 4,355 4,794 15 7,759 8,174 26 Real estate—construction — — — — — — Commercial business 26,278 28,739 6,332 22,203 23,928 4,351 Trade finance 101 101 — — — — Consumer and other 953 953 9 575 575 3 Subtotal $ 44,013 $ 48,561 $ 6,797 $ 36,047 $ 39,560 $ 4,791 With no related allowance: Real estate—residential $ — $ — $ — $ — $ — $ — Real estate—commercial Retail 24,581 27,047 — 8,005 11,234 — Hotel & motel 9,756 20,349 — 10,877 22,590 — Gas station & car wash 532 3,640 — 545 3,653 — Mixed use 7,216 7,329 — 7,048 7,058 — Industrial & warehouse 10,052 11,335 — 12,343 13,467 — Other 14,384 15,570 — 5,969 7,122 — Real estate—construction — — — — — — Commercial business 12,526 17,863 — 13,155 17,850 — Trade finance 8,308 8,308 — 9,011 9,011 — Consumer and other 782 876 — 1,007 1,156 — Subtotal $ 88,137 $ 112,317 $ — $ 67,960 $ 93,141 $ — Total $ 132,150 $ 160,878 $ 6,797 $ 104,007 $ 132,701 $ 4,791 __________________________________ (1) Impaired loans excludes acquired PCI loans (2) Unpaid contractual principal balance less charge offs, interest collected applied to principal if on nonaccrual and purchase discounts. For the Three Months Ended March 31, 2019 2018 Total Impaired Loans (1) Average Recorded Investment (2) Interest Income Recognized During Impairment Average Recorded Investment* Interest Income Recognized During Impairment (Dollars in thousands) With related allowance: Real estate—residential $ — $ — $ — $ — Real estate—commercial Retail 1,710 6 3,458 — Hotel & motel 1,891 — 2,878 18 Gas station & car wash — — — — Mixed use 870 1 1,635 36 Industrial & warehouse 4,447 92 1,575 23 Other 6,057 26 6,894 68 Real estate—construction — — — — Commercial business 24,241 164 24,603 149 Trade finance 50 1 3,229 58 Consumer and other 764 2 508 — Subtotal $ 40,030 $ 292 $ 44,780 $ 352 With no related allowance: Real estate—residential $ — $ — $ — $ — Real estate—commercial Retail 16,293 35 12,880 110 Hotel & motel 10,317 — 2,940 — Gas station & car wash 538 5 670 — Mixed use 7,132 51 1,101 — Industrial & warehouse 11,198 51 10,518 64 Other 10,177 84 17,225 125 Real estate—construction — — 1,300 — Commercial business 12,840 44 18,204 94 Trade finance 8,659 97 3,221 44 Consumer and other 895 — 1,597 6 Subtotal $ 78,049 $ 367 $ 69,656 $ 443 Total $ 118,079 $ 659 $ 114,436 $ 795 __________________________________ (1) Impaired loans excludes acquired PCI loans (2) Unpaid contractual principal balance less charge offs, interest collected applied to principal if on nonaccrual and purchase discounts. As of March 31, 2019 As of December 31, 2018 Impaired Acquired Loans (1) Recorded Investment (2) Unpaid Contractual Principal Balance Related Allowance Recorded Investment* Unpaid Contractual Principal Balance Related Allowance (Dollars in thousands) With related allowance: Real estate—residential $ — $ — $ — $ — $ — $ — Real estate—commercial Retail 574 599 125 198 220 118 Hotel & motel 73 345 4 72 345 4 Gas station & car wash — — — — — — Mixed use 303 305 30 312 312 38 Industrial & warehouse 236 1,033 82 230 1,050 88 Other 543 543 4 3,454 3,454 13 Real estate—construction — — — — — — Commercial business 3,974 5,924 490 4,064 5,041 130 Trade finance — — — — — — Consumer and other 136 136 1 144 144 — Subtotal $ 5,839 $ 8,885 $ 736 $ 8,474 $ 10,566 $ 391 With no related allowance: Real estate—residential $ — $ — $ — $ — $ — $ — Real estate—commercial Retail 7,533 8,350 — 3,285 4,151 — Hotel & motel 5,392 6,853 — 5,428 6,874 — Gas station & car wash 246 2,673 — 247 2,673 — Mixed use 3,903 4,008 — 3,722 3,726 — Industrial & warehouse 93 894 — 119 894 — Other 4,368 4,690 — 1,013 1,326 — Real estate—construction — — — — — — Commercial business 1,074 2,096 — 1,670 2,681 — Trade finance 3,066 3,066 — 3,124 3,124 — Consumer and other 782 876 — 997 1,144 — Subtotal $ 26,457 $ 33,506 $ — $ 19,605 $ 26,593 $ — Total $ 32,296 $ 42,391 $ 736 $ 28,079 $ 37,159 $ 391 __________________________________ (1) Impaired loans excludes acquired PCI loans (2) Unpaid contractual principal balance less charge offs, interest collected applied to principal if on nonaccrual and purchase discounts. For the Three Months Ended March 31, 2019 2018 Impaired Acquired Loans (1) Average Recorded Investment (2) Interest Income Recognized During Impairment Average Recorded Investment* Interest Income Recognized During Impairment (Dollars in thousands) With related allowance: Real estate—residential $ — $ — $ — $ — Real estate—commercial Retail 386 — 384 — Hotel & motel 73 — 85 — Gas station & car wash — — — — Mixed use 307 1 1,544 36 Industrial & warehouse 233 — 243 — Other 1,999 3 2,817 68 Real estate—construction — — — — Commercial business 4,019 40 6,911 30 Trade finance — — — — Consumer and other 140 2 — — Subtotal $ 7,157 $ 46 $ 11,984 $ 134 With no related allowance: Real estate—residential $ — $ — $ — $ — Real estate—commercial Retail 5,409 30 3,355 34 Hotel & motel 5,410 — 483 — Gas station & car wash 246 — 100 — Mixed use 3,813 — 76 — Industrial & warehouse 106 — 454 — Other 2,690 66 6,785 57 Real estate—construction — — — — Commercial business 1,372 17 3,916 13 Trade finance 3,095 51 3,176 44 Consumer and other 890 — 1,216 2 Subtotal $ 23,031 $ 164 $ 19,561 $ 150 Total $ 30,188 $ 210 $ 31,545 $ 284 __________________________________ (1) Impaired loans excludes acquired PCI loans (2) Unpaid contractual principal balance less charge offs, interest collected applied to principal if on nonaccrual and purchase discounts. Generally, loans are placed on nonaccrual status if the principal and/or interest payments become 90 days or more past due and/or management deems the collectability of the principal and/or interest to be in question, as well as when required by regulatory requirements. Loans to customers whose financial condition has deteriorated are considered for nonaccrual status whether or not the loan is 90 days or more past due. Generally, payments received on nonaccrual loans are recorded as principal reductions. Loans are returned to accrual status only when all the principal and interest amounts contractually due are brought current and future payments are reasonably assured. The Company did not recognize any cash basis interest income for the three months ended March 31, 2019 or 2018 . The following table represent the recorded investment of nonaccrual loans and loans past due 90 or more days and still on accrual status by class of loans as of March 31, 2019 and December 31, 2018 . Nonaccrual Loans (1) Accruing Loans Past Due 90 or More Days March 31, 2019 December 31, 2018 March 31, 2019 December 31, 2018 (Dollars in thousands) Legacy Loans: Real estate—residential $ — $ — $ — $ — Real estate—commercial Retail 17,879 5,153 — — Hotel & motel 6,125 7,325 — — Gas station & car wash 31 31 — — Mixed use 734 749 — — Industrial & warehouse 5,998 6,111 — — Other 10,946 5,940 — — Real estate—construction — — — — Commercial business 22,867 14,837 — — Trade finance 2,521 1,661 — — Consumer and other 783 441 387 243 Subtotal $ 67,884 $ 42,248 $ 387 $ 243 Acquired Loans: (2) Real estate—residential $ — $ — $ — $ — Real estate—commercial Retail 5,472 829 — — Hotel & motel 5,464 5,500 — 1,286 Gas station & car wash 246 247 — — Mixed use 4,087 1,224 — — Industrial & warehouse 329 349 — — Other 719 259 — — Real estate—construction — — — — Commercial business 1,654 1,632 — — Trade finance — — — — Consumer and other 782 998 — — Subtotal $ 18,753 $ 11,038 $ — $ 1,286 Total $ 86,637 $ 53,286 $ 387 $ 1,529 __________________________________ (1) Total nonaccrual loans exclude guaranteed portion of delinquent SBA loans that are in liquidation totaling $30.5 million and $29.2 million , at March 31, 2019 and December 31, 2018 , respectively. (2) Acquired Loans exclude PCI loans. The following tables present the recorded investment of past due loans, including nonaccrual loans past due 30 or more days, by the number of days past due as of March 31, 2019 and December 31, 2018 by class of loans: As of March 31, 2019 As of December 31, 2018 30-59 Days Past Due 60-89 Days Past Due 90 or More Days Past Due Total Past Due 30-59 Days 60-89 Days 90 or More Days Past Due Total (Dollars in thousands) Legacy Loans: Real estate—residential $ — $ — $ — $ — $ — $ — $ — $ — Real estate—commercial Retail 1,101 12,947 428 14,476 733 — 809 1,542 Hotel & motel 1,761 736 3,241 5,738 153 — 5,215 5,368 Gas station & car wash — — 31 31 — — 31 31 Mixed use — 178 — 178 — — — — Industrial & warehouse 2,407 601 1,922 4,930 1,465 — 1,922 3,387 Other 3,395 5,097 2,558 11,050 1,837 — 2,405 4,242 Real estate—construction 6,960 — — 6,960 — — — — Commercial business 4,436 6,870 6,112 17,418 5,500 435 7,003 12,938 Trade finance — 1,253 1,623 2,876 1,036 — 1,661 2,697 Consumer and other 17,067 96 753 17,916 16,413 140 247 16,800 Subtotal $ 37,127 $ 27,778 $ 16,668 $ 81,573 $ 27,137 $ 575 $ 19,293 $ 47,005 Acquired Loans: (1) Real estate—residential $ — $ — $ — $ — $ — $ — $ — $ — Real estate—commercial Retail 28 4,378 772 5,178 347 — 602 949 Hotel & motel — — 4,470 4,470 — — 5,206 5,206 Gas station & car wash — — 221 221 154 — 221 375 Mixed use 437 2,688 1,216 4,341 107 — 1,034 1,141 Industrial & warehouse 377 — 93 470 142 — 119 261 Other 868 472 133 1,473 183 219 — 402 Real estate—construction — — — — — — — — Commercial business 554 — 797 1,351 397 613 253 1,263 Trade finance — — — — — — — — Consumer and other 972 — 268 1,240 — — 334 334 Subtotal $ 3,236 $ 7,538 $ 7,970 $ 18,744 $ 1,330 $ 832 $ 7,769 $ 9,931 Total Past Due $ 40,363 $ 35,316 $ 24,638 $ 100,317 $ 28,467 $ 1,407 $ 27,062 $ 56,936 __________________________________ (1) Acquired Loans exclude PCI loans. Loans accounted for under ASC 310-30 are generally considered accruing and performing and the accretable discount is accreted to interest income over the estimated life of the loan when cash flows are reasonably estimable. Accordingly, PCI loans that are contractually past due can still considered to be accruing and performing loans. The loans may be classified as nonaccrual if the timing and amount of future cash flows is not reasonably estimable. The Company categorizes loans into risk categories based on relevant information about the ability of borrowers to service their debt, including, but not limited to, current financial information, historical payment experience, credit documentation, public information, and current economic trends. The Company analyzes loans individually by classifying the loans as to credit risk. This analysis includes all all loans with the exception of homogeneous loans, or loans that are evaluated together in pools of similar loans (i.e., home mortgage loans, home equity lines of credit, overdraft loans, express business loans, and automobile loans). Homogeneous loans are not risk rated and credit risk is analyzed largely by the number of days past due. This analysis is performed at least on a quarterly basis. The definitions for risk ratings are as follows: • Pass: Loans that meet a preponderance or more of the Company’s underwriting criteria and evidence an acceptable level of risk. • Special Mention: Loans that have potential weaknesses that deserve management’s close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the loan or of the institution’s credit position at some future date. • Substandard: Loans that are inadequately protected by the current net worth and paying capacity of the borrower or by the collateral pledged, if any. Loans in this classification have a well-defined weakness or weaknesses that jeopardize the repayment of the debt. They are characterized by the distinct possibility that the institution will sustain some loss if the deficiencies are not corrected. • Doubtful: Loans that have all the weaknesses inherent in those classified as substandard, with the added characteristic that the weaknesses make collection or repayment in full, on the basis of currently existing facts, conditions, and values, highly questionable and improbable. The following tables present the recorded investment of risk ratings for Legacy and Acquired Loans as of March 31, 2019 and December 31, 2018 by class of loans: As of March 31, 2019 Pass/ Not Rated Special Mention Substandard Doubtful Total (Dollars in thousands) Legacy Loans: Real estate—residential $ 43,214 $ — $ 542 $ — $ 43,756 Real estate—commercial Retail 1,787,236 38,536 46,468 — 1,872,240 Hotel & motel 1,393,791 19,920 17,351 — 1,431,062 Gas station & car wash 816,235 2,785 2,152 — 821,172 Mixed use 554,637 12,401 13,200 — 580,238 Industrial & warehouse 716,760 1,655 37,160 — 755,575 Other 1,358,796 29,603 42,319 — 1,430,718 Real estate—construction 228,815 18,671 — — 247,486 Commercial business 1,970,125 31,097 58,294 351 2,059,867 Trade finance 163,965 — 5,242 — 169,207 Consumer and other 872,202 3 783 — 872,988 Subtotal $ 9,905,776 $ 154,671 $ 223,511 $ 351 $ 10,284,309 Acquired Loans: Real estate—residential $ 5,151 $ 390 $ 336 $ — $ 5,877 Real estate—commercial Retail 434,314 3,691 25,042 — 463,047 Hotel & motel 173,408 300 18,051 — 191,759 Gas station & car wash 134,400 218 6,054 — 140,672 Mixed use 76,806 20,674 8,327 — 105,807 Industrial & warehouse 167,852 4,256 19,820 218 192,146 Other 372,168 11,201 28,559 — 411,928 Real estate—construction 13,049 9,302 — — 22,351 Commercial business 81,554 640 16,363 — 98,557 Trade finance — — 3,066 — 3,066 Consumer and other 130,545 30 3,504 — 134,079 Subtotal $ 1,589,247 $ 50,702 $ 129,122 $ 218 $ 1,769,289 Total $ 11,495,023 $ 205,373 $ 352,633 $ 569 $ 12,053,598 As of December 31, 2018 Pass/ Special Mention Substandard Doubtful Total (Dollars in thousands) Legacy Loans: Real estate—residential $ 44,066 $ — $ 546 $ — $ 44,612 Real estate—commercial Retail 1,815,170 18,072 30,686 — 1,863,928 Hotel & motel 1,389,349 21,932 15,869 — 1,427,150 Gas station & car wash 814,291 2,810 2,464 — 819,565 Mixed use 510,021 12,480 13,292 — 535,793 Industrial & warehouse 711,236 1,665 38,332 — 751,233 Other 1,326,795 35,539 34,618 — 1,396,952 Real estate—construction 227,231 10,904 — — 238,135 Commercial business 1,944,783 18,220 54,688 — 2,017,691 Trade finance 191,508 — 2,558 — 194,066 Consumer and other 910,292 — 441 — 910,733 Subtotal $ 9,884,742 $ 121,622 $ 193,494 $ — $ 10,199,858 Acquired Loans: Real estate—residential $ 5,812 $ 393 $ 380 $ — $ 6,585 Real estate—commercial Retail 483,939 4,651 17,332 35 505,957 Hotel & motel 186,761 807 19,472 — 207,040 Gas station & car wash 148,702 274 6,032 — 155,008 Mixed use 77,100 3,986 8,151 — 89,237 Industrial & warehouse 171,574 9,451 18,071 223 199,319 Other 402,247 12,902 28,996 — 444,145 Real estate—construction 29,058 7,883 — — 36,941 Commercial business 89,611 1,083 19,237 8 109,939 Trade finance — — 3,124 — 3,124 Consumer and other 136,944 37 3,626 146 140,753 Subtotal $ 1,731,748 $ 41,467 $ 124,421 $ 412 $ 1,898,048 Total $ 11,616,490 $ 163,089 $ 317,915 $ 412 $ 12,097,906 The Company may reclassify loans held for investment to loans held for sale in the event that the Company plans to sell loans that were originated with the intent to hold to maturity. Loans transferred from held for investment to held for sale are carried at the lower of cost or fair value. The breakdown of loans by type that were reclassified from held for investment to held for sale for the three months ended March 31, 2019 and 2018 is presented in the following table: Three Months Ended March 31, 2019 2018 Transfer of loans held for investment to held for sale (Dollars in thousands) Consumer $ 33,390 $ 6,155 The adequacy of the allowance for loan losses is determined by management based upon an evaluation and review of the credit quality of the loan portfolio, consideration of historical loan loss experience, relevant internal and external factors that affect the collection of loans, and other pertinent factors. Migration analysis is a formula methodology derived from the Bank’s actual historical net charge off experience for each loan class (type) or pool and risk grade. The migration analysis is centered on the Bank’s internal credit risk rating system. Management’s internal loan review and externally contracted credit review examinations are used to determine and validate loan risk grades. This credit review system takes into consideration factors such as: borrower’s background and experience; historical and current financial conditions; credit history and payment performance; economic conditions and their impact on various industries; type, fair value and volatility of the fair value of collateral; lien positions; and the financial strength of any guarantors. A general loan loss allowance is provided on loans that are not specifically identified as impaired (“non-impaired loans”). The Bank’s general loan loss allowance has two components: quantitative and qualitative risk factors. The quantitative risk factors are based on the migration analysis methodology described above. Loans are classified by class and risk grade, and the historical loss migration is tracked for the various classes. Loss experience is quantified for a specified period and then weighted to place more significance on the most recent losses. That loss experience is then applied to the stratified portfolio at the end of each quarter. The Company utilizes nineteen non-homogeneous loan pools in the quantitative analysis process. The non-impaired commercial real estate loan portfolio is stratified into fourteen different loan pools based on property types and the non-impaired commercial and industrial and consumer loans are stratified into five different loan pools based on loan type in order to allocate historic loss experience on a more granular basis. Additionally, in order to systematically quantify the credit risk impact of other trends and changes within the loan portfolio, the Bank utilizes qualitative adjustments to the migration analysis within established parameters. The parameters for making adjustments are established under a Credit Risk Matrix that provides seven possible scenarios for each of the factors below. The matrix allows for up to three positive (Major, Moderate, and Minor), three negative (Major, Moderate, and Minor), and one neutral credit risk scenarios within each factor for each loan type or pool. However, if information exists to warrant adjustment to the migration analysis, changes are made in accordance with the established parameters supported by narrative and/or statistical analysis. The Credit Risk Matrix and the nine possible scenarios enable the Bank to qualitatively adjust the Loss Migration Ratio by as much as 50 basis points in either direction (positive or negative) for each loan type pool. This matrix considers the following nine factors, which are patterned after the guidelines provided under the FFIEC Interagency Policy Statement on the Allowance for Loan and Lease Losses: • Changes in lending policies and procedures, including underwriting standards and collection, charge off, and recovery practices; • Changes in national and local economic and business conditions and developments, including the condition of various market segments; • Changes in the nature and volume of the loan portfolio; • Changes in the experience, ability, and depth of lending management and staff; • Changes in the trends of the volume and severity of past due loans, classified loans, nonaccrual loans, troubled debt restructurings, and other loan modifications; • Changes in the quality of the loan review system and the degree of oversight by the Directors; • Changes in the value of underlying collateral for collateral-dependent loans; • The existence and effect of any concentrations of credit and changes in the level of such concentrations; and • The effect of external factors, such as competition, legal requirements, and regulatory requirements on the level of estimated losses in the loan portfolio. The Company also establishes specific loss allowances for loans that have identified potential credit risk conditions or circumstances related to a specific individual credit. The specific allowance amounts are determined in accordance with ASC 310-10-35-22, “Measurement of Impairment.” The loans identified as impaired will be accounted for in accordance with one of the three acceptable valuation methods: 1) the present value of 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. For the collateral dependent impaired loans, management obtains a new appraisal to determine the amount of impairment as of the date that the loan became impaired. The appraisals are based on an “as is” valuation. To ensure that appraised values remain current, management either obtains updated appraisals every twelve months from a qualified independent appraiser or an internal evaluation of the collateral is performed by qualified personnel. If the third party market data indicates that the value of the collateral property has declined since the most recent valuation date, management adjusts the value of the property downward to reflect current market conditions. If the fair value of the collateral is less than the recorded amount of the loan, management recognizes impairment by creating or adjusting an existing valuation allowance with a corresponding charge to the provision for loan losses. If an impaired loan is expected to be collected through liquidation or operation of the underlying collateral, the loan is deemed to be collateral dependent and the amount of impairment is charged off against the allowance for loan losses. The Company considers a loan to be impaired when it is probable that not all amounts due (principal and interest) will be collectible in accordance with the contractual terms of the loan agreement. Factors considered by management in determining impairment include payment status, collateral value, and the probability of collecting scheduled principal and interest payments when due. Loans that experience insignificant payment delays and payment shortfalls generally are not classified as impaired. The significance of payment delays and payment shortfalls is determined on a case-by-case basis by taking into consideration all of the circumstances surrounding the loan and the borrower, including the length of the delay, the reasons for the delay, the borrower’s prior payment record, and the amount of the shortfall in relation to the principal and interest owed. For commercial business loans, real estate loans, and certain consumer loans, management bases the measurement of loan impairment on the present value of the expected future cash flows, discounted at the loan’s effective interest rate, or on the fair value of the loan’s collateral if the loan is collateral dependent. The scope for evaluation of individual impairment includes all impaired loans greater than $500 thousand . The Company evaluates most loans of $500 thousand or less for impairment on a collective basis because these loans generally have smaller balances and are homogeneous in the underwriting of terms and conditions. If a loan is deemed to be impaired, the amount of the impairment is supported by a specific allowance which is included in the allowance for loan losses through a charge to the provision for loan losses. For PCI loans, the allowance for loan losses is based upon expected cash flows for these loans. To the extent that a deterioration in borrower’s credit quality results in a decrease in expected cash flows subsequent to the acquisition of the loans, an allowance for loan losses would be establishe |