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. June 30, 2017 December 31, 2016 (Dollars in thousands) Commercial and industrial $ 537,347 $ 485,078 SBA 129,283 97,184 Real estate: Commercial real estate 3,265,858 2,930,141 Construction 77,294 85,879 SFR mortgage 249,933 250,605 Dairy & livestock and agribusiness 245,255 338,631 Municipal lease finance receivables 66,048 64,639 Consumer and other loans 73,909 78,274 Gross loans, excluding PCI loans 4,644,927 4,330,431 Less: Deferred loan fees, net (7,098) (6,952) Gross loans, excluding PCI loans, net of deferred loan fees 4,637,829 4,323,479 Less: Allowance for loan losses (59,542) (60,321) Net loans, excluding PCI loans 4,578,287 4,263,158 PCI Loans 50,877 73,093 Discount on PCI loans (1,008) (1,508) Less: Allowance for loan losses (659) (1,219) PCI loans, net 49,210 70,366 Total loans and lease finance receivables $ 4,627,497 $ 4,333,524 As of June 30, 2017, 77.36% of the total gross loan portfolio (excluding PCI loans) consisted of real estate loans, 70.31% 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 June 30, 2017, $156.5 million, or 4.79% of the total commercial real estate loans included loans secured by farmland, compared to $180.6 million, or 6.16%, at December 31, 2016. The loans secured by farmland included $99.7 million for loans secured by dairy & livestock land and $56.8 million for loans secured by agricultural land at June 30, 2017, compared to $127.1 million for loans secured by dairy & livestock land and $53.6 million for loans secured by agricultural land at December 31, 2016. As of June 30, 2017, dairy & livestock and agribusiness loans of $245.3 million were comprised of $208.7 million for dairy & livestock loans and $36.5 million for agribusiness loans, compared to $317.9 million for dairy & livestock loans and $20.7 million for agribusiness loans at December 31, 2016. At June 30, 2017, the Company held approximately $2.11 billion of total fixed rate loans, including PCI loans. At June 30, 2017 and December 31, 2016, loans totaling $3.50 billion and $3.11 billion, respectively, were pledged to secure the borrowings and available lines of credit from the FHLB and the Federal Reserve Bank. There were no outstanding loans held-for-sale as of June 30, 2017 and December 31, 2016. 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. June 30, 2017 Pass Special Substandard Doubtful & Total (Dollars in thousands) Commercial and industrial $ 497,714 $ 24,927 $ 14,706 $ - $ 537,347 SBA 117,400 5,477 6,400 6 129,283 Real estate: Commercial real estate Owner occupied 927,211 77,594 20,059 - 1,024,864 Non-owner occupied 2,207,442 18,217 15,335 - 2,240,994 Construction Speculative 53,698 6,745 - - 60,443 Non-speculative 16,851 - - - 16,851 SFR mortgage 241,269 4,961 3,703 - 249,933 Dairy & livestock and agribusiness 154,008 71,761 19,486 - 245,255 Municipal lease finance receivables 65,419 629 - - 66,048 Consumer and other loans 70,129 2,118 1,659 3 73,909 Total gross loans, excluding PCI loans $ 4,351,141 $ 212,429 $ 81,348 $ 9 $ 4,644,927 December 31, 2016 Pass Special Substandard Doubtful & Total (Dollars in thousands) Commercial and industrial $ 449,658 $ 21,610 $ 13,809 $ 1 $ 485,078 SBA 80,138 10,553 6,482 11 97,184 Real estate: Commercial real estate Owner occupied 842,992 87,781 19,046 - 949,819 Non-owner occupied 1,941,203 23,534 15,585 - 1,980,322 Construction Speculative 48,841 - - - 48,841 Non-speculative 37,038 - - - 37,038 SFR mortgage 243,374 4,930 2,301 - 250,605 Dairy & livestock and agribusiness 187,819 114,106 36,706 - 338,631 Municipal lease finance receivables 60,102 4,537 - - 64,639 Consumer and other loans 74,328 2,123 1,819 4 78,274 Total gross loans, excluding PCI loans $ 3,965,493 $ 269,174 $ 95,748 $ 16 $ 4,330,431 Allowance for Loan Losses (“ALLL”) 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 June 30, 2017 and December 31, 2016. 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 June 30, 2017 Ending Balance March 30, 2017 Charge-offs Recoveries (Recapture of) Provision for Loan Losses Ending Balance June 30, 2017 (Dollars in thousands) Commercial and industrial $ 7,956 $ - $ 42 $ 62 $ 8,060 SBA 871 - 38 4 913 Real estate: Commercial real estate 38,986 - 154 787 39,927 Construction 820 - 1,694 (1,455) 1,059 SFR mortgage 2,186 - - 183 2,369 Dairy & livestock and agribusiness 5,842 - 19 (421) 5,440 Municipal lease finance receivables 889 - - (37) 852 Consumer and other loans 937 - 42 (57) 922 PCI loans 725 - - (66) 659 Total allowance for loan losses $ 59,212 $ - $ 1,989 $ (1,000) $ 60,201 For the Three Months Ended June 30, 2016 Ending Balance March 31, 2016 Charge-offs Recoveries (Recapture of) Provision for Loan Losses Ending Balance June 30, 2016 (Dollars in thousands) Commercial and industrial $ 8,731 $ (24) $ 141 $ 539 $ 9,387 SBA 1,236 - 2 (61) 1,177 Real estate: Commercial real estate 38,286 - 496 1,137 39,919 Construction 1,151 - 875 (798) 1,228 SFR mortgage 2,202 - - 299 2,501 Dairy & livestock and agribusiness 5,176 - 107 (401) 4,882 Municipal lease finance receivables 1,165 - - (50) 1,115 Consumer and other loans 1,389 (1) 6 (975) 419 PCI loans - - - 310 310 Total allowance for loan losses $ 59,336 $ (25) $ 1,627 $ - $ 60,938 For the Six Months Ended June 30, 2017 Ending Balance December 31, 2016 Charge-offs Recoveries (Recapture of) Provision for Loan Losses Ending Balance June 30, 2017 (Dollars in thousands) Commercial and industrial $ 8,154 $ - $ 94 $ (188) $ 8,060 SBA 871 - 42 - 913 Real estate: Commercial real estate 37,443 - 154 2,330 39,927 Construction 1,096 - 3,719 (3,756) 1,059 SFR mortgage 2,287 - 64 18 2,369 Dairy & livestock and agribusiness 8,541 - 19 (3,120) 5,440 Municipal lease finance receivables 941 - - (89) 852 Consumer and other loans 988 (2) 71 (135) 922 PCI loans 1,219 - - (560) 659 Total allowance for loan losses $ 61,540 $ (2) $ 4,163 $ (5,500) $ 60,201 For the Six Months Ended June 30, 2016 Ending Balance December 31, 2015 Charge-offs Recoveries (Recapture of) Ending Balance June 30, 2016 (Dollars in thousands) Commercial and industrial $ 8,588 $ (85) $ 204 $ 680 $ 9,387 SBA 993 - 3 181 1,177 Real estate: Commercial real estate 36,995 - 635 2,289 39,919 Construction 2,389 - 884 (2,045) 1,228 SFR mortgage 2,103 (102) - 500 2,501 Dairy & livestock and agribusiness 6,029 - 206 (1,353) 4,882 Municipal lease finance receivables 1,153 - - (38) 1,115 Consumer and other loans 906 (1) 38 (524) 419 PCI loans - - - 310 310 Total allowance for loan losses $ 59,156 $ (188) $ 1,970 $ - $ 60,938 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. The Company’s ALLL methodology for the first six months of 2017 excludes the impact of the recent VCBP acquisition from certain of the Bank’s qualitative factors that are otherwise designed to capture incremental risk in the legacy loan portfolio. The VBB acquired loans are also supported by a credit mark established through the determination of fair value for the acquired loan portfolio. June 30, 2017 Recorded Investment in Loans Allowance for Loan Losses Individually Collectively Acquired with Individually Collectively Acquired with (Dollars in thousands) Commercial and industrial $ 1,605 $ 535,742 $ - $ 13 $ 8,047 $ - SBA 2,478 126,805 - 6 907 - Real estate: Commercial real estate 18,558 3,247,300 - - 39,927 - Construction - 77,294 - - 1,059 - SFR mortgage 4,195 245,738 - - 2,369 - Dairy & livestock and agribusiness 829 244,426 - - 5,440 - Municipal lease finance receivables - 66,048 - - 852 - Consumer and other loans 1,131 72,778 - 94 828 - PCI loans - - 49,869 - - 659 Total $ 28,796 $ 4,616,131 $ 49,869 $ 113 $ 59,429 $ 659 June 30, 2016 Recorded Investment in Loans Allowance for Loan Losses Individually Impairment Collectively Acquired with Individually Collectively Acquired with Credit Quality (Dollars in thousands) Commercial and industrial $ 1,447 $ 477,686 $ - $ 526 $ 8,861 $ - SBA 3,498 108,264 - 42 1,135 - Real estate: Commercial real estate 17,908 2,866,424 - 1 39,918 - Construction 7,651 86,358 - 45 1,183 - SFR mortgage 5,734 231,754 - 13 2,488 - Dairy & livestock and agribusiness 697 213,133 - - 4,882 - Municipal lease finance receivables - 71,929 - - 1,115 - Consumer and other loans 829 78,896 - 3 416 - PCI loans - - 76,022 - - 310 Total $ 37,764 $ 4,134,444 $ 76,022 $ 630 $ 59,998 $ 310 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, included in our Annual Report on Form 10-K for the year ended December 31, 2016, for additional discussion concerning the Bank’s policy for past due and nonperforming loans. A loan is reported as a Troubled Debt Restructuring (“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. June 30, 2017 30-59 Days 60-89 Days Total Past Due Nonaccrual (1) Current Total Loans (Dollars in thousands) Commercial and industrial $ - $ - $ - $ 1,058 $ 536,289 $ 537,347 SBA - - - 1,651 127,632 129,283 Real estate: Commercial real estate Owner occupied 218 - 218 4,401 1,020,245 1,024,864 Non-owner occupied - - - 2,549 2,238,445 2,240,994 Construction Speculative (2) - - - - 60,443 60,443 Non-speculative - - - - 16,851 16,851 SFR mortgage - 400 400 963 248,570 249,933 Dairy & livestock and agribusiness - - - 829 244,426 245,255 Municipal lease finance receivables - - - - 66,048 66,048 Consumer and other loans 1 - 1 771 73,137 73,909 Total gross loans, excluding PCI loans $ 219 $ 400 $ 619 $ 12,222 $ 4,632,086 $ 4,644,927 (1) As of June 30, 2017, $5.5 million of nonaccruing loans were current, $4.5 million were 30-59 days past due, and $2.2 million were 90+ days past due. (2) Speculative construction loans are generally for properties where there is no identified buyer or renter. December 31, 2016 30-59 Days 60-89 Days Total Past Due Nonaccrual Current Total Loans (Dollars in thousands) Commercial and industrial $ - $ - $ - $ 156 $ 484,922 $ 485,078 SBA 352 - 352 2,737 94,095 97,184 Real estate: Commercial real estate Owner occupied - - - 635 949,184 949,819 Non-owner occupied - - - 1,048 1,979,274 1,980,322 Construction Speculative (2) - - - - 48,841 48,841 Non-speculative - - - - 37,038 37,038 SFR mortgage - - - 2,207 248,398 250,605 Dairy & livestock and agribusiness - - - - 338,631 338,631 Municipal lease finance receivables - - - - 64,639 64,639 Consumer and other loans 84 - 84 369 77,821 78,274 Total gross loans, excluding PCI loans $ 436 $ - $ 436 $ 7,152 $ 4,322,843 $ 4,330,431 (1) As of December 31, 2016, $4.7 million of nonaccruing loans were current, $514,000 were 30-59 days past due, $435,000 were 60-89 days past due and $1.5 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 June 30, 2017, the Company had impaired loans, excluding PCI loans, of $28.8 million and included $4.6 million of loans acquired from VBB in the first quarter of 2017. Impaired loans included $7.0 million of nonaccrual commercial real estate loans, $1.7 million of nonaccrual Small Business Administration (“SBA”) loans, $1.1 million of nonaccrual commercial and industrial loans, $963,000 of nonaccrual single-family residential (“SFR”) mortgage loans, $829,000 of nonaccrual dairy & livestock and agribusiness loans, and $771,000 of nonaccrual consumer and other loans. These impaired loans included $21.0 million of loans whose terms were modified in a troubled debt restructuring, of which $4.4 million were classified as nonaccrual. The remaining balance of $16.6 million consisted of 24 loans performing according to the restructured terms. The impaired loans had a specific allowance of $113,000 at June 30, 2017. At December 31, 2016, the Company had classified as impaired, loans, excluding PCI loans, with a balance of $26.4 million with a related allowance of $141,000. 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 Six Months Ended June 30, 2017 Recorded Investment Unpaid Principal Balance Related Allowance Average Recorded Investment Interest Income Recognized (Dollars in thousands) With no related allowance recorded: Commercial and industrial $ 1,465 $ 1,939 $ - $ 1,572 $ 13 SBA 2,472 2,750 - 2,538 32 Real estate: Commercial real estate Owner occupied 5,541 5,866 - 5,240 69 Non-owner occupied 13,017 15,469 - 12,908 798 Construction Speculative - - - - - Non-speculative - - - - - SFR mortgage 4,195 4,983 - 4,242 73 Dairy & livestock and agribusiness 829 1,091 - 1,123 1 Municipal lease finance receivables - - - - - Consumer and other loans 734 941 - 752 9 Total 28,253 33,039 - 28,375 995 With a related allowance recorded: Commercial and industrial 140 187 13 157 1 SBA 6 23 6 9 - Real estate: Commercial real estate Owner occupied - - - - - Non-owner occupied - - - - - Construction Speculative - - - - - Non-speculative - - - - - SFR mortgage - - - - - Dairy & livestock and agribusiness - - - - - Municipal lease finance receivables - - - - - Consumer and other loans 397 402 94 399 - Total 543 612 113 565 1 Total impaired loans $ 28,796 $ 33,651 $ 113 $ 28,940 $ 996 As of and For the Six Months Ended June 30, 2016 Recorded Investment Unpaid Principal Balance Related Allowance Average Recorded Investment Interest Income Recognized (Dollars in thousands) With no related allowance recorded: Commercial and industrial $ 840 $ 1,727 $ - $ 904 $ 14 SBA 3,266 4,026 - 3,347 25 Real estate: Commercial real estate Owner occupied 4,386 5,573 - 4,623 87 Non-owner occupied 12,522 15,110 - 12,760 83 Construction Speculative - - - - - Non-speculative - - - - - SFR mortgage 5,464 6,331 - 5,591 60 Dairy & livestock and agribusiness 697 697 - 709 17 Municipal lease finance receivables - - - - - Consumer and other loans 816 1,373 - 845 8 Total 27,991 34,837 - 28,779 294 With a related allowance recorded: Commercial and industrial 607 668 526 638 6 SBA 232 250 42 238 6 Real estate: Commercial real estate Owner occupied 1,000 1,000 1 392 28 Non-owner occupied - - - - - Construction Speculative 7,651 7,651 45 7,651 193 Non-speculative - - - - - SFR mortgage 270 270 13 277 3 Dairy & livestock and agribusiness - - - - - Municipal lease finance receivables - - - - - Consumer and other loans 13 13 3 13 - Total 9,773 9,852 630 9,209 236 Total impaired loans $ 37,764 $ 44,689 $ 630 $ 37,988 $ 530 As of December 31, 2016 Recorded Investment Unpaid Principal Balance Related Allowance (Dollars in thousands) With no related allowance recorded: Commercial and industrial $ 730 $ 1,646 $ - SBA 3,386 4,189 - Real estate: Commercial real estate Owner occupied 1,797 2,276 - Non-owner occupied 13,331 15,842 - Construction Speculative - - - Non-speculative - - - SFR mortgage 5,174 6,075 - Dairy & livestock and agribusiness 747 747 - Municipal lease finance receivables - - - Consumer and other loans 853 1,423 - Total 26,018 32,198 - With a related allowance recorded: Commercial and industrial 171 171 114 SBA 196 212 27 Real estate: Commercial real estate Owner occupied - - - Non-owner occupied - - - Construction Speculative - - - Non-speculative - - - SFR mortgage - - - Dairy & livestock and agribusiness - - - Municipal lease finance receivables - - - Consumer and other loans - - - Total 367 383 141 Total impaired loans $ 26,385 $ 32,581 $ 141 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 June 30, 2017 and December 31, 2016 have already been written down to the estimated net realizable value. An allowance is recorded on impaired loans for the following: nonaccrual loans where a charge-off is not yet processed, nonaccrual SFR mortgage loans where there is a potential modification in process, or 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 six months ended June 30, 2017 and 2016. As of June 30, 2017 and December 31, 2016, the balance in this reserve was $6.7 million and was included in other liabilities. Troubled Debt Restructurings 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 10-K As of June 30, 2017, there were $21.0 million of loans classified as a TDR, of which $4.4 million were nonperforming and $16.6 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 June 30, 2017, performing TDRs were comprised of five commercial real estate loans of $11.6 million, 11 SFR mortgage loans of $3.2 million, two SBA loans of $827,000, five commercial and industrial loans of $547,000, and one consumer loan of $360,000. 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 $10,000 and $141,000 of specific allowance to TDRs as of June 30, 2017 and December 31, 2016, respectively. The following table provides a summary of the activity related to TDRs for the periods presented. For the Three Months Ended For the Six Months Ended 2017 2016 2017 2016 (Dollars in thousands) Performing TDRs: Beginning balance $ 19,702 $ 37,321 $ 19,233 $ 42,687 New modifications - 112 3,143 1,118 Payoffs/payments, net and other 16 (17,141) (2,987) (23,513) TDRs returned to accrual status - - 329 - TDRs placed on nonaccrual status (3,144) - (3,144) - Ending balance $ 16,574 $ 20,292 $ 16,574 $ 20,292 Nonperforming TDRs: Beginning balance $ 1,407 $ 12,360 $ 1,626 $ 12,622 New modifications - - 2,066 82 Charge-offs - - - (38) Payoffs/payments, net and other (160) (331) (2,116) (637) TDRs returned to accrual status - - (329) - TDRs placed on nonaccrual status 3,144 - 3,144 - Ending balance $ 4,391 $ 12,029 $ 4,391 $ 12,029 Total TDRs $ 20,965 $ 32,321 $ 20,965 $ 32,321 The following tables summarize loans modified as troubled debt restructurings for the periods presented. Modifications (1) For the Three Months Ended June 30, 2017 Number of Pre-Modification Post-Modification Investment Outstanding June 30, 2017 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 - - - - - Change in amortization period or maturity - - - - - Dairy & livestock and agribusiness: Interest rate reduction - - - - - Change in amortization period or maturity - - - - - Consumer: Interest rate reduction - - - - - Change in amortization period or maturity - - - - - Total loans - $ - $ - $ - $ - For the Three Months Ended June 30, 2016 Number of Pre-Modification Post-Modification Investment Outstanding June 30, 2016 Financial Effect (Dollars in thousands) Commercial and industrial: Interest rate reduction - $ - $ - $ - $ - Change in amortization period or maturity 1 112 112 110 - 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 - - - - - Change in amortization period or maturity - - - - - Consumer: Interest rate reduction - - - - - Change in amortization period or maturity - - - - - Total loans 1 $ 112 $ 112 $ 110 $ - For the Six Months Ended June 30, 2017 Number of Pre-Modification Post-Modification Investment Outstanding June 30, 2017 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 1 3,143 3,143 3,143 - Non-owner occupied Interest rate reduction - - - - - Change in amortization period or maturity - - - - - Dairy & livestock and agribusiness: Interest rate reduction - - - - - Change in amortization period or maturity 1 1,984 1,984 78 - Consumer: Interest rate reduction - - - - - Change in amortization period or maturity 1 82 82 78 - Total loans 3 $ 5,209 $ 5,209 $ 3,299 $ - For the Six Months Ended June 30, 2016 Number of Pre-Modification Post-Modification Investment Outstanding June 30, 2016 Financial Effect (Dollars in thousands) Commercial and industrial: Interest rate reduction - $ - $ - $ - $ - Change in amortization period or maturity 1 112 112 110 - SBA: Interest rate reduction - - - - - Change in amortization period or maturity 1 194 194 190 28 Real estate: Commercial real estate: Owner occupied Interest rate reduction - - - - - Change in amortization period or maturity 2 812 812 761 - Non-owner occupied Interest rate reduction - - - - - Change in amortization period or maturity - - - - - Consumer: Interest rate reduction - - - - - Change in amortization period or maturity 2 82 82 72 - Total loans 6 $ 1,200 $ 1,200 $ 1,133 $ 28 (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 June 30, 2017, there was one commercial real estate loan with an outstanding balance of $3.1 million that was modified as a TDR within the previous 12 months that subsequently defaulted during the three and six months ended June 30, 2017. |