Loans and Lease Finance Receivables and Allowance for Loan Losses | 7. LOANS AND LEASE FINANCE RECEIVABLES AND ALLOWANCE FOR LOAN LOSSES The following table provides a summary of total loans and lease finance receivables, excluding PCI loans, by type. September 30, 2016 December 31, 2015 (Dollars in thousands) Commercial and industrial $ 494,483 $ 434,099 SBA 104,043 106,867 Real estate: Commercial real estate 2,911,765 2,643,184 Construction 90,710 68,563 SFR mortgage 241,490 233,754 Dairy & livestock and agribusiness 239,242 305,509 Municipal lease finance receivables 68,309 74,135 Consumer and other loans 79,664 69,278 Gross loans, excluding PCI loans 4,229,706 3,935,389 Less: Deferred loan fees, net (7,574 ) (8,292 ) Gross loans, excluding PCI loans, net of deferred loan fees 4,222,132 3,927,097 Less: Allowance for loan losses (60,401 ) (59,156 ) Net loans, excluding PCI loans 4,161,731 3,867,941 PCI Loans 74,929 93,712 Discount on PCI loans (1,894 ) (3,872 ) Less: Allowance for loan losses (600 ) - PCI loans, net 72,435 89,840 Total loans and lease finance receivables $ 4,234,166 $ 3,957,781 As of September 30, 2016, 76.69% of the total gross loan portfolio (excluding PCI loans) consisted of real estate loans, 68.84% of which consisted of commercial real estate loans. Substantially all of the Company’s real estate loans and construction loans are secured by real properties located in California. As of September 30, 2016, $178.0 million, or 6.11% of the total commercial real estate loans included loans secured by farmland, compared to $173.0 million, or 6.54%, at December 31, 2015. The loans secured by farmland included $128.8 million for loans secured by dairy & livestock land and $49.2 million for loans secured by agricultural land at September 30, 2016, compared to $128.4 million for loans secured by dairy & livestock land and $44.6 million for loans secured by agricultural land at December 31, 2015. As of September 30, 2016, dairy & livestock and agribusiness loans of $239.2 million were comprised of $220.8 million for dairy & livestock loans and $18.4 million for agribusiness loans, compared to $287.0 million for dairy & livestock loans and $18.5 million for agribusiness loans at December 31, 2015. At September 30, 2016, the Company held approximately $2.02 billion of total fixed rate loans, including PCI loans. At September 30, 2016 and December 31, 2015, loans totaling $3.15 billion and $2.91 billion, respectively, were pledged to secure the borrowings and available lines of credit from the FHLB and the Federal Reserve Bank. Credit Quality Indicators Central to our credit risk management is our loan risk rating system. The originating officer assigns each loan an initial risk rating, which is reviewed and confirmed or changed, as appropriate, by credit management. Approvals are made based upon the amount of inherent credit risk specific to the transaction and are reviewed for appropriateness by senior line and credit management personnel. Credits are monitored by line and credit management personnel for deterioration in a borrower’s financial condition, which would impact the ability of the borrower to perform under the contract. Risk ratings are adjusted as necessary. Loans are risk rated into the following categories (Credit Quality Indicators): Pass, Special Mention, Substandard, Doubtful and Loss. Each of these groups is assessed for the proper amount to be used in determining the adequacy of our allowance for losses. These categories can be described as follows: Pass – These loans, including loans on the Bank’s internal watch list, range from minimal credit risk to lower than average, but still acceptable, credit risk. Watch list loans usually require more than normal management attention. Loans on the watch list may involve borrowers with adverse financial trends, higher debt/equity ratios, or weaker liquidity positions, but not to the degree of being considered a defined weakness or problem loan where risk of loss may be apparent. Special Mention — Loans assigned to this category have potential weaknesses that deserve management’s close attention. If left uncorrected, these potential weaknesses may result in the deterioration of the repayment prospects for the asset or the Company’s credit position at some future date. Special mention assets are not adversely classified and do not expose the Company to sufficient risk to warrant adverse classification. Substandard – Loans classified as substandard are inadequately protected by the current sound worth and paying capacity of the obligor or of the collateral pledged, if any. Assets so classified must have a well-defined weakness, or weaknesses, that jeopardize the liquidation of the debt. Substandard loans are characterized by the distinct possibility that the Company will sustain some loss if deficiencies are not corrected. Doubtful – Loans classified as doubtful have all the weaknesses inherent in those classified substandard with the added characteristic that the weaknesses make collection or the liquidation in full, on the basis of currently existing facts, conditions and values, highly questionable and improbable. Loss — Loans classified as loss are considered uncollectible and of such little value that their continuance as bankable assets is not warranted. This classification does not mean that the loan has absolutely no recovery or salvage value, but rather that it is not practical or desirable to defer writing off this asset with insignificant value even though partial recovery may be effected in the future. The following table summarizes loans by type, excluding PCI loans, according to our internal risk ratings for the periods presented. September 30, 2016 Pass Special Substandard Doubtful & Total (Dollars in thousands) Commercial and industrial $ 458,131 $ 21,547 $ 14,801 $ 4 $ 494,483 SBA 86,269 10,641 6,942 191 104,043 Real estate: Commercial real estate Owner occupied 828,798 95,259 14,419 - 938,476 Non-owner occupied 1,933,610 24,375 15,304 - 1,973,289 Construction Speculative 49,338 - 7,651 - 56,989 Non-speculative 33,721 - - - 33,721 SFR mortgage 234,058 5,093 2,339 - 241,490 Dairy & livestock and agribusiness 127,137 83,930 28,175 - 239,242 Municipal lease finance receivables 63,743 4,566 - - 68,309 Consumer and other loans 75,558 1,770 2,324 12 79,664 Total gross loans, excluding PCI loans $ 3,890,363 $ 247,181 $ 91,955 $ 207 $ 4,229,706 December 31, 2015 Pass Special Substandard Doubtful & Total (Dollars in thousands) Commercial and industrial $ 398,651 $ 33,000 $ 2,403 $ 45 $ 434,099 SBA 87,441 13,169 4,854 1,403 106,867 Real estate: Commercial real estate Owner occupied 772,114 54,758 11,481 - 838,353 Non-owner occupied 1,741,615 26,170 37,046 - 1,804,831 Construction Speculative 38,186 - 7,651 - 45,837 Non-speculative 22,726 - - - 22,726 SFR mortgage 227,207 3,556 2,991 - 233,754 Dairy & livestock and agribusiness 285,647 19,862 - - 305,509 Municipal lease finance receivables 69,194 4,941 - - 74,135 Consumer and other loans 64,844 1,618 2,708 108 69,278 Total gross loans, excluding PCI loans $ 3,707,625 $ 157,074 $ 69,134 $ 1,556 $ 3,935,389 Allowance for Loan Losses The Company’s Credit Management Division is responsible for regularly reviewing the ALLL methodology, including loss factors and economic risk factors. The Bank’s Director Loan Committee provides Board oversight of the ALLL process and approves the ALLL methodology on a quarterly basis. Our methodology for assessing the appropriateness of the allowance is conducted on a regular basis and considers the Bank’s overall loan portfolio. Refer to Note 3 – Summary of Significant Accounting Policies Management believes that the ALLL was appropriate at September 30, 2016 and December 31, 2015. No assurance can be given that economic conditions which adversely affect the Company’s service areas or other circumstances will not be reflected in increased provisions for loan losses in the future. The following tables present the balance and activity related to the allowance for loan losses for held-for-investment loans by type for the periods presented. For the Three Months Ended September 30, 2016 Ending Balance June 30, 2016 Charge-offs Recoveries (Recapture of) Provision for Loan Losses Ending Balance September 30, 2016 (Dollars in thousands) Commercial and industrial $ 9,387 $ - $ 49 $ (30 ) $ 9,466 SBA 1,177 - 6 (179 ) 1,004 Real estate: Commercial real estate 39,919 - 156 (1,267 ) 38,808 Construction 1,228 - 1,731 (1,851 ) 1,108 SFR mortgage 2,501 - - 70 2,571 Dairy & livestock and agribusiness 4,882 - - 1,089 5,971 Municipal lease finance receivables 1,115 - - (82 ) 1,033 Consumer and other loans 419 (7 ) 128 (100 ) 440 PCI loans 310 - - 290 600 Unallocated (1) - - - - - Total allowance for loan losses $ 60,938 $ (7 ) $ 2,070 $ (2,000 ) $ 61,001 For the Three Months Ended September 30, 2015 Ending Balance June 30, 2015 Charge-offs Recoveries (Recapture of) Provision for Loan Losses Ending Balance September 30, (Dollars in thousands) Commercial and industrial $ 7,185 $ (82 ) $ 50 $ (620 ) $ 6,533 SBA 2,085 - 2 (122 ) 1,965 Real estate: Commercial real estate 35,414 (10 ) 2,018 (2,811 ) 34,611 Construction 746 - 8 119 873 SFR mortgage 2,564 - - 75 2,639 Dairy & livestock and agribusiness 3,974 - 98 796 4,868 Municipal lease finance receivables 1,014 - - 17 1,031 Consumer and other loans 834 - 11 (16 ) 829 Unallocated (1) 5,738 - - 62 5,800 Total allowance for loan losses $ 59,554 $ (92 ) $ 2,187 $ (2,500 ) $ 59,149 For the Nine Months Ended September 30, 2016 Ending Balance December 31, 2015 Charge-offs Recoveries (Recapture of) Provision for Loan Losses Ending Balance September 30, (Dollars in thousands) Commercial and industrial $ 8,588 $ (85 ) $ 253 $ 710 $ 9,466 SBA 993 - 9 2 1,004 Real estate: Commercial real estate 36,995 - 791 1,022 38,808 Construction 2,389 - 2,615 (3,896 ) 1,108 SFR mortgage 2,103 (102 ) - 570 2,571 Dairy & livestock and agribusiness 6,029 - 206 (264 ) 5,971 Municipal lease finance receivables 1,153 - - (120 ) 1,033 Consumer and other loans 906 (8 ) 166 (624 ) 440 PCI loans - - - 600 600 Unallocated (1) - - - - - Total allowance for loan losses $ 59,156 $ (195 ) $ 4,040 $ (2,000 ) $ 61,001 For the Nine Months Ended September 30, 2015 Ending Balance December 31, 2014 Charge-offs Recoveries (Recapture of) Ending Balance (Dollars in thousands) Commercial and industrial $ 7,074 $ (216 ) $ 282 $ (607 ) $ 6,533 SBA 2,557 (33 ) 39 (598 ) 1,965 Real estate: Commercial real estate 33,373 (117 ) 3,658 (2,303 ) 34,611 Construction 988 - 58 (173 ) 873 SFR mortgage 2,344 (215 ) 185 325 2,639 Dairy & livestock and agribusiness 5,479 - 308 (919 ) 4,868 Municipal lease finance receivables 1,412 - - (381 ) 1,031 Consumer and other loans 1,262 (197 ) 72 (308 ) 829 Unallocated (1) 5,336 - - 464 5,800 Total allowance for loan losses $ 59,825 $ (778 ) $ 4,602 $ (4,500 ) $ 59,149 (1) Based upon changes to our ALLL methodology, as described in Note 3 – Summary of Significant Accounting Policies The following tables present the recorded investment in loans held-for-investment and the related allowance for loan losses by loan type, based on the Company’s methodology for determining the allowance for loan losses for the periods presented. September 30, 2016 Recorded Investment in Loans Allowance for Loan Losses Individually Collectively Acquired with Individually Collectively Acquired with (Dollars in thousands) Commercial and industrial $ 1,349 $ 493,134 $ - $ 493 $ 8,973 $ - SBA 3,867 100,176 - 33 971 - Real estate: Commercial real estate 15,806 2,895,959 - - 38,808 - Construction 7,651 83,059 - 4 1,104 - SFR mortgage 5,502 235,988 - 6 2,565 - Dairy & livestock and agribusiness 659 238,583 - - 5,971 - Municipal lease finance receivables - 68,309 - - 1,033 - Consumer and other loans 850 78,814 - 12 428 - PCI loans - - 73,035 - - 600 Unallocated (1) - - - - - - Total $ 35,684 $ 4,194,022 $ 73,035 $ 548 $ 59,853 $ 600 September 30, 2015 Recorded Investment in Loans Allowance for Loan Losses Individually Evaluated for Impairment Collectively Evaluated for Impairment Acquired with Individually Collectively Acquired with (Dollars in thousands) Commercial and industrial $ 1,687 $ 412,022 $ - $ 607 $ 5,926 $ - SBA 3,319 112,807 - 4 1,961 - Real estate: Commercial real estate 43,647 2,525,481 - - 34,611 - Construction 7,651 49,927 - 23 850 - SFR mortgage 6,389 215,307 - 22 2,617 - Dairy & livestock and agribusiness 5,262 207,408 - - 4,868 - Municipal lease finance receivables - 75,839 - - 1,031 - Consumer and other loans 906 68,724 - 6 823 - PCI loans - - 94,431 - - - Unallocated (1) - - - - 5,800 - Total $ 68,861 $ 3,667,515 $ 94,431 $ 662 $ 58,487 $ - (1) Based upon changes to our ALLL methodology, as described in Note 3 – Summary of Significant Accounting Policies Past Due and Nonperforming Loans We seek to manage asset quality and control credit risk through diversification of the loan portfolio and the application of policies designed to promote sound underwriting and loan monitoring practices. The Bank’s Credit Management Division is in charge of monitoring asset quality, establishing credit policies and procedures and enforcing the consistent application of these policies and procedures across the Bank. Reviews of nonperforming, past due loans and larger credits, designed to identify potential charges to the allowance for loan losses, and to determine the adequacy of the allowance, are conducted on an ongoing basis. These reviews consider such factors as the financial strength of borrowers and any guarantors, the value of the applicable collateral, loan loss experience, estimated loan losses, growth in the loan portfolio, prevailing economic conditions and other factors. Refer to Note 3 – Summary of Significant Accounting Policies, A loan is reported as a Troubled Debt Restructured (“TDR”) when the Bank grants a concession(s) to a borrower experiencing financial difficulties that the Bank would not otherwise consider. Examples of such concessions include a reduction in the interest rate, deferral of principal or accrued interest, extending the payment due dates or loan maturity date(s), or providing a lower interest rate than would be normally available for new debt of similar risk. As a result of these concessions, restructured loans are classified as impaired. Impairment reserves on non-collateral dependent restructured loans are measured by comparing the present value of expected future cash flows on the restructured loans discounted at the interest rate of the original loan agreement to the loan’s carrying value. These impairment reserves are recognized as a specific component to be provided for in the allowance for loan losses. Generally, when loans are identified as impaired they are moved to our Special Assets Department. When we identify a loan as impaired, we measure the loan for potential impairment using discounted cash flows, unless the loan is determined to be collateral dependent. In these cases, we use the current fair value of collateral, less selling costs. Generally, the determination of fair value is established through obtaining external appraisals of the collateral. The following tables present the recorded investment in, and the aging of, past due and nonaccrual loans, excluding PCI loans, by type of loans for the periods presented. September 30, 2016 30-59 Days 60-89 Days Total Past Nonaccrual (1) Current Total Loans (Dollars in thousands) Commercial and industrial $ - $ - $ - $ 543 $ 493,940 $ 494,483 SBA - - - 3,013 101,030 104,043 Real estate: Commercial real estate Owner occupied - - - 1,502 936,974 938,476 Non-owner occupied 228 - 228 894 1,972,167 1,973,289 Construction Speculative (2) - - - - 56,989 56,989 Non-speculative - - - - 33,721 33,721 SFR mortgage - - - 2,244 239,246 241,490 Dairy & livestock and agribusiness - - - - 239,242 239,242 Municipal lease finance receivables - - - - 68,309 68,309 Consumer and other loans 94 200 294 470 78,900 79,664 Total gross loans, excluding PCI loans $ 322 $ 200 $ 522 $ 8,666 $ 4,220,518 $ 4,229,706 (1) As of September 30, 2016, $5.4 million of nonaccruing loans were current, $1.2 million were 30-59 days past due, $440,000 were 60-89 days past due and $1.6 million were 90+ days past due. (2) Speculative construction loans are generally for properties where there is no identified buyer or renter. December 31, 2015 30-59 Days 60-89 Days Total Past Nonaccrual (1) Current Total Loans (Dollars in thousands) Commercial and industrial $ - $ - $ - $ 704 $ 433,395 $ 434,099 SBA - - - 2,567 104,300 106,867 Real estate: Commercial real estate Owner occupied - - - 4,174 834,179 838,353 Non-owner occupied 354 - 354 10,367 1,794,110 1,804,831 Construction Speculative (2) - - - - 45,837 45,837 Non-speculative - - - - 22,726 22,726 SFR mortgage 1,082 - 1,082 2,688 229,984 233,754 Dairy & livestock and agribusiness - - - - 305,509 305,509 Municipal lease finance receivables - - - - 74,135 74,135 Consumer and other loans - - - 519 68,759 69,278 Total gross loans, excluding PCI loans $ 1,436 $ - $ 1,436 $ 21,019 $ 3,912,934 $ 3,935,389 (1) As of December 31, 2015, $7.9 million of nonaccruing loans were current, $456,000 were 30-59 days past due, $9.1 million were 60-89 days past due and $3.5 million were 90+ days past due. (2) Speculative construction loans are generally for properties where there is no identified buyer or renter. Impaired Loans At September 30, 2016, the Company had impaired loans, excluding PCI loans, of $35.7 million. Of this amount, there was $3.0 million of nonaccrual Small Business Administration (“SBA”) loans, $2.4 million of nonaccrual commercial real estate loans, $2.2 million of nonaccrual single-family residential (“SFR”) mortgage loans, $543,000 of nonaccrual commercial and industrial loans, and $470,000 of nonaccrual consumer and other loans. These impaired loans included $30.0 million of loans whose terms were modified in a troubled debt restructuring, of which $3.0 million were classified as nonaccrual. The remaining balance of $27.0 million consisted of 29 loans performing according to the restructured terms. The impaired loans had a specific allowance of $548,000 at September 30, 2016. At December 31, 2015, the Company had classified as impaired, loans, excluding PCI loans, with a balance of $63.7 million with a related allowance of $669,000. The following tables present information for held-for-investment loans, excluding PCI loans, individually evaluated for impairment by type of loans, as and for the periods presented. As of and For the Nine Months Ended Recorded Unpaid Related Average Interest (Dollars in thousands) With no related allowance recorded: Commercial and industrial $ 786 $ 1,687 $ - $ 858 $ 20 SBA 3,665 4,452 - 3,770 38 Real estate: Commercial real estate Owner occupied 2,773 3,786 - 3,039 63 Non-owner occupied 13,033 15,764 - 13,386 130 Construction Speculative - - - - - Non-speculative - - - - - SFR mortgage 5,239 6,118 - 5,370 93 Dairy & livestock and agribusiness 659 722 - 695 24 Municipal lease finance receivables - - - - - Consumer and other loans 838 1,409 - 896 11 Total 26,993 33,938 - 28,014 379 With a related allowance recorded: Commercial and industrial 563 625 493 671 8 SBA 202 217 33 209 10 Real estate: Commercial real estate Owner occupied - - - - - Non-owner occupied - - - - - Construction Speculative 7,651 7,651 4 7,651 291 Non-speculative - - - - - SFR mortgage 263 263 6 273 4 Dairy & livestock and agribusiness - - - - - Municipal lease finance receivables - - - - - Consumer and other loans 12 12 12 12 - Total 8,691 8,768 548 8,816 313 Total impaired loans $ 35,684 $ 42,706 $ 548 $ 36,830 $ 692 As of and For the Nine Months Ended Recorded Unpaid Related Average Interest (Dollars in thousands) With no related allowance recorded: Commercial and industrial $ 1,067 $ 1,926 $ - $ 1,166 $ 23 SBA 3,273 3,911 - 3,385 39 Real estate: Commercial real estate Owner occupied 7,665 8,806 - 7,935 178 Non-owner occupied 35,982 40,591 - 36,490 1,338 Construction Speculative - - - - - Non-speculative - - - - - SFR mortgage 5,788 6,739 - 6,392 82 Dairy & livestock and agribusiness 5,262 5,650 - 5,569 180 Municipal lease finance receivables - - - - - Consumer and other loans 852 1,379 - 881 12 Total 59,889 69,002 - 61,818 1,852 With a related allowance recorded: Commercial and industrial 620 694 607 637 - SBA 46 47 4 58 - Real estate: Commercial real estate Owner occupied - - - - - Non-owner occupied - - - - - Construction Speculative 7,651 7,651 23 7,651 290 Non-speculative - - - - - SFR mortgage 601 653 22 612 9 Dairy & livestock and agribusiness - - - - - Municipal lease finance receivables - - - - - Consumer and other loans 54 59 6 56 - Total 8,972 9,104 662 9,014 299 Total impaired loans $ 68,861 $ 78,106 $ 662 $ 70,832 $ 2,151 As of December 31, 2015 Recorded Unpaid Related (Dollars in thousands) With no related allowance recorded: Commercial and industrial $ 1,017 $ 1,894 $ - SBA 3,207 3,877 - Real estate: Commercial real estate Owner occupied 6,252 7,445 - Non-owner occupied 34,041 37,177 - Construction Speculative - - - Non-speculative - - - SFR mortgage 5,665 6,453 - Dairy & livestock and agribusiness 3,685 3,684 - Municipal lease finance receivables - - - Consumer and other loans 890 1,454 - Total 54,757 61,984 - With a related allowance recorded: Commercial and industrial 626 695 626 SBA 41 47 10 Real estate: Commercial real estate Owner occupied - - - Non-owner occupied - - - Construction Speculative 7,651 7,651 13 Non-speculative - - - SFR mortgage 588 640 20 Dairy & livestock and agribusiness - - - Municipal lease finance receivables - - - Consumer and other loans 43 45 - Total 8,949 9,078 669 Total impaired loans $ 63,706 $ 71,062 $ 669 The Company recognizes the charge-off of the impairment allowance on impaired loans in the period in which a loss is identified for collateral dependent loans. Therefore, the majority of the nonaccrual loans as of September 30, 2016 and December 31, 2015 have already been written down to the estimated net realizable value. The impaired loans with a related allowance recorded are on nonaccrual loans where a charge-off is not yet processed, on nonaccrual SFR loans where there is a potential modification in process, or on smaller balance non-collateral dependent loans. Reserve for Unfunded Loan Commitments The allowance for off-balance sheet credit exposure relates to commitments to extend credit, letters of credit and undisbursed funds on lines of credit. The Company evaluates credit risk associated with the off-balance sheet loan commitments at the same time it evaluates credit risk associated with the loan and lease portfolio. There was no provision or recapture of provision for unfunded loan commitments for the three and nine months ended September 30, 2016, compared to zero and a $500,000 recapture of provision for unfunded loan commitments for the three and nine months ended September 30, 2015, respectively. As of September 30, 2016 and December 31, 2015, the balance in this reserve was $7.2 million and was included in other liabilities. Troubled Debt Restructurings (“TDRs”) Loans that are reported as TDRs are considered impaired and charge-off amounts are taken on an individual loan basis, as deemed appropriate. The majority of restructured loans are loans for which the terms of repayment have been renegotiated, resulting in a reduction in interest rate or deferral of principal. Refer to Note 3 – Summary of Significant Accounting Policies As of September 30, 2016, there were $30.0 million of loans classified as a TDR, of which $3.0 million were nonperforming and $27.0 million were performing. TDRs on accrual status are comprised of loans that were accruing interest at the time of restructuring or have demonstrated repayment performance in compliance with the restructured terms for a sustained period and for which the Company anticipates full repayment of both principal and interest. At September 30, 2016, performing TDRs were comprised of eight commercial real estate loans of $13.4 million, one construction loan of $7.7 million, 11 SFR mortgage loans of $3.3 million, two SBA loans of $854,000, five commercial and industrial loans of $806,000, one dairy & livestock and agribusiness loan of $659,000, and one consumer loan of $380,000. There were no loans removed from TDR classification during the three and nine months ended September 30, 2016 and 2015. The majority of TDRs have no specific allowance allocated as any impairment amount is normally charged off at the time a probable loss is determined. We have allocated $472,000 and $607,000 of specific allowance to TDRs as of September 30, 2016 and December 31, 2015, respectively. The following table provides a summary of the activity related to TDRs for the periods presented. For the Three Months Ended September 30, For the Nine Months Ended September 30, 2016 2015 2016 2015 (Dollars in thousands) Performing TDRs: Beginning balance $ 20,292 $ 45,166 $ 42,687 $ 53,589 New modifications 759 2,353 1,877 2,383 Payoffs and payments, net (2,584 ) (2,306 ) (26,097 ) (11,275 ) TDRs returned to accrual status 8,551 - 8,551 516 TDRs placed on nonaccrual status - - - - Ending balance 27,018 45,213 27,018 45,213 Nonperforming TDRs: Beginning balance 12,029 15,167 12,622 20,285 New modifications 20 330 102 661 Charge-offs - - (38 ) - Transfer to OREO - - - (842 ) Payoffs and payments, net (465 ) (349 ) (1,102 ) (4,440 ) TDRs returned to accrual status (8,551 ) - (8,551 ) (516 ) TDRs placed on nonaccrual status - - - - Ending balance 3,033 15,148 3,033 15,148 Total TDRs $ 30,051 $ 60,361 $ 30,051 $ 60,361 The following tables summarize loans modified as troubled debt restructurings for the periods presented. Modifications (1) For the Three Months Ended September 30, 2016 Number of Pre-Modification Post-Modification Outstanding Financial Effect (Dollars in thousands) Commercial and industrial: Interest rate reduction - $ - $ - $ - $ - Change in amortization period or maturity - - - - - SBA: Interest rate reduction - - - - - Change in amortization period or maturity 1 20 20 14 - Real estate: Commercial real estate: Owner occupied Interest rate reduction - - - - - Change in amortization period or maturity - - - - - Non-owner occupied Interest rate reduction - - - - - Change in amortization period or maturity 1 759 759 759 - SFR mortgage: Interest rate reduction - - - - - Change in amortization period or maturity - - - - - Consumer: Interest rate reduction - - - - - Change in amortization period or maturity - - - - - Total loans 2 $ 779 $ 779 $ 773 $ - For the Three Months Ended September 30, 2015 Number of Pre-Modification Post-Modification Outstanding Financial Effect (Dollars in thousands) Commercial and industrial: Interest rate reduction - $ - $ - $ - $ - Change in amortization period or maturity - - - - - SBA: Interest rate reduction - - - - - Change in amortization period or maturity - - - - - Real estate: Commercial real estate: Owner occupied Interest rate reduction - - - - - Change in amortization period or maturity - - - - - Non-owner occupied Interest rate reduction 1 2,376 2,376 2,353 - Change in amortization period or maturity - - - - - SFR mortgage: Interest rate reduction 1 322 322 330 - Change in amortization period or maturity - - - - - Consumer: Interest rate reduction - - - - - Change in amortization period or maturity - - - - - Total loans 2 $ 2,698 $ 2,698 $ 2,683 $ - For the Nine Months Ended September 30, 2016 Number of Pre-Modification Post-Modification Outstanding Financial Effect (Dollars in thousands) Commercial and industrial: Interest rate reduction - $ - $ - $ - $ - Change in amortization period or maturity 1 112 112 184 - SBA: Interest rate reduction - - - - - Change in amortization period or maturity 2 214 214 202 28 Real estate: Commercial real estate: Owner occupied Interest rate reduction - - - - - Change in amortization period or maturity - - - - - Non-owner occupied Interest rate reduction - - - - - Change in amortization period or maturity 1 759 759 759 - SFR mortgage: Interest rate reduction - - - - - Change in amortization period or maturity - - - - - Consumer: Interest rate reduction - - - - - Change in amortization period or maturity 1 24 24 22 - Total loans 5 $ 1,109 $ 1,109 $ 1,167 $ 28 For the Nine Months Ended September 30, 2015 Number of Pre-Modification Post-Modification Outstanding Financial Effect (Dollars in thousands) Commercial and industrial: Interest rate reduction - $ - $ - $ - $ - Change in amortization period or maturity 1 30 30 15 12 SBA: Interest rate reduction - - - - - Change in amortization period or maturity 1 330 330 325 - Real estate: Commercial real estate: Owner occupied Interest rate reduction - - - - - Change in amortization period or maturity - - - - - Non-owner occupied Interest rate reduction 1 2,376 2,376 2,353 - Change in amortization period or maturity - - - - - SFR mortgage: Interest rate reduction 1 322 322 330 - Change in amortization period or maturity - - - - - Consumer: Interest rate reduction - - - - - Change in amortization period or maturity - - - - - Total loans 4 $ 3,058 $ 3,058 $ 3,023 $ 12 (1) The tables above exclude modified loans that were paid off prior to the end of the period. (2) Financial effects resulting from modifications represent charge-offs and specific allowance recorded at modification date. As of September 30, 2016, there were no loans that were previously modified as a TDR within the previous 12 months that subsequently defaulted during the three and nine months ended September 30, 2016. |