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 the Company’s total loans and lease finance receivables, excluding PCI loans, by type. June 30, 2018 December 31, 2017 (Dollars in thousands) Commercial and industrial $ 509,188 $ 513,325 SBA 121,048 122,055 Real estate: Commercial real estate 3,454,030 3,376,713 Construction 84,400 77,982 SFR mortgage 237,154 236,202 Dairy & livestock and agribusiness 268,489 347,289 Municipal lease finance receivables 67,721 70,243 Consumer and other loans 60,875 64,229 Gross loans, excluding PCI loans 4,802,905 4,808,038 Less: Deferred loan fees, net (5,375 ) (6,289 ) Gross loans, excluding PCI loans, net of deferred loan fees 4,797,530 4,801,749 Less: Allowance for loan losses (59,367 ) (59,218 ) Net loans, excluding PCI loans 4,738,163 4,742,531 PCI Loans 19,426 30,908 Discount on PCI loans - (2,026 ) Less: Allowance for loan losses (216 ) (367 ) PCI loans, net 19,210 28,515 Total loans and lease finance receivables $ 4,757,373 $ 4,771,046 As of June 30, 2018, 78.61% of the Company’s total gross loan portfolio (excluding PCI loans) consisted of real estate loans, 71.92% 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, 2018, $212.5 million, or 6.15% of the total commercial real estate loans included loans secured by farmland, compared to $206.1 million, or 6.10%, at December 31, 2017. The loans secured by farmland included $123.7 million for loans secured by dairy & livestock land and $88.8 million for loans secured by agricultural land at June 30, 2018, compared to $118.2 million for loans secured by dairy & livestock land and $87.9 million for loans secured by agricultural land at December 31, 2017. As of June 30, 2018, dairy & livestock and agribusiness loans of $268.5 million were comprised of $231.5 million for dairy & livestock loans and $37.0 million for agribusiness loans, compared to $310.6 million for dairy & livestock loans and $36.7 million for agribusiness loans at December 31, 2017. At June 30, 2018, the Company held approximately $2.20 billion of total fixed rate loans, including PCI loans. At June 30, 2018 and December 31, 2017, loans totaling $3.73 billion and $3.68 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 Credit Quality Indicators An important element of our approach to 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 or improvement 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 affected 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, 2018 Pass Special Mention Substandard Doubtful & Loss Total (Dollars in thousands) Commercial and industrial $ 490,231 $ 16,415 $ 2,542 $ - $ 509,188 SBA 111,616 6,686 2,746 - 121,048 Real estate: Commercial real estate Owner occupied 1,063,163 61,509 19,102 - 1,143,774 Non-owner 2,290,652 13,880 5,724 - 2,310,256 Construction Speculative 74,785 - - - 74,785 Non-speculative 9,615 - - - 9,615 SFR mortgage 229,831 3,070 4,253 - 237,154 Dairy & livestock and agribusiness 244,408 19,581 4,500 - 268,489 Municipal lease finance receivables 67,153 568 - - 67,721 Consumer and other loans 59,076 921 878 - 60,875 Total gross loans, excluding PCI loans $ 4,640,530 $ 122,630 $ 39,745 $ - $ 4,802,905 December 31, 2017 Pass Special Mention Substandard Doubtful & Loss Total (Dollars in thousands) Commercial and industrial $ 483,641 $ 19,566 $ 10,118 $ - $ 513,325 SBA 112,835 5,358 3,862 - 122,055 Real estate: Commercial real estate Owner occupied 1,009,199 76,111 10,970 - 1,096,280 Non-owner 2,257,130 16,434 6,869 - 2,280,433 Construction Speculative 60,042 - - - 60,042 Non-speculative 17,940 - - - 17,940 SFR mortgage 229,032 3,124 4,046 - 236,202 Dairy & livestock and agribusiness 321,413 9,047 16,829 - 347,289 Municipal lease finance receivables 69,644 599 - - 70,243 Consumer and other loans 61,715 1,255 1,259 - 64,229 Total gross loans, excluding PCI loans $ 4,622,591 $ 131,494 $ 53,953 $ - $ 4,808,038 Allowance for Loan Losses (“ALLL”) The Bank’s Audit and Director Loan Committees provide Board oversight of the ALLL process and approves the ALLL 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 10-K Management believes that the ALLL was appropriate at June 30, 2018 and December 31, 2017. 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 For the Three Months Ended June 30, 2018 Ending Balance Charge-offs Recoveries (Recapture of) Ending Balance (Dollars in thousands) Commercial and industrial $ 7,499 $ - $ 27 $ (556 ) $ 6,970 SBA 884 - 5 (48 ) 841 Real estate: Commercial real estate 41,863 - - 734 42,597 Construction 987 - 596 (580 ) 1,003 SFR mortgage 2,202 - - (47 ) 2,155 Dairy & livestock and agribusiness 4,666 - 19 (334 ) 4,351 Municipal lease finance receivables 834 - - (26 ) 808 Consumer and other loans 688 (2 ) 3 (47 ) 642 PCI loans 312 - - (96 ) 216 Total allowance for loan losses $ 59,935 $ (2 ) $ 650 $ (1,000 ) $ 59,583 For the Three Months Ended June 30, 2017 Ending Balance Charge-offs Recoveries (Recapture of) Ending Balance (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 Six Months Ended June 30, 2018 Ending Balance Charge-offs Recoveries (Recapture of) Ending Balance (Dollars in thousands) Commercial and industrial $ 7,280 $ - $ 37 $ (347 ) $ 6,970 SBA 869 - 10 (38 ) 841 Real estate: Commercial real estate 41,722 - - 875 42,597 Construction 984 - 1,930 (1,911 ) 1,003 SFR mortgage 2,112 - - 43 2,155 Dairy & livestock and agribusiness 4,647 - 19 (315 ) 4,351 Municipal lease finance receivables 851 - - (43 ) 808 Consumer and other loans 753 (9 ) 11 (113 ) 642 PCI loans 367 - - (151 ) 216 Total allowance for loan losses $ 59,585 $ (9 ) $ 2,007 $ (2,000 ) $ 59,583 For the Six Months Ended June 30, 2017 Ending Balance Charge-offs Recoveries (Recapture of) Ending Balance (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 The following tables present the recorded investment in loans held-for-investment June 30, 2018 Recorded Investment in Loans Allowance for Loan Losses Individually Evaluated for Impairment Collectively Evaluated for Impairment Acquired with Deterioriated Credit Quality Individually Evaluated for Impairment Collectively Evaluated for Impairment Acquired with Deterioriated Credit Quality (Dollars in thousands) Commercial and industrial $ 355 $ 508,833 $ - $ - $ 6,970 $ - SBA 1,174 119,874 - - 841 - Real estate: Commercial real estate 7,741 3,446,289 - - 42,597 - Construction - 84,400 - - 1,003 - SFR mortgage 4,133 233,021 - 13 2,142 - Dairy & livestock and agribusiness 800 267,689 - - 4,351 - Municipal lease finance receivables - 67,721 - - 808 - Consumer and other loans 509 60,366 - 3 639 - PCI loans - - 19,426 - - 216 Total $ 14,712 $ 4,788,193 $ 19,426 $ 16 $ 59,351 $ 216 June 30, 2017 Recorded Investment in Loans Allowance for Loan Losses Individually Evaluated for Impairment Collectively Evaluated for Impairment Acquired with Deterioriated Credit Quality Individually Evaluated for Impairment Collectively Evaluated for Impairment Acquired with Deterioriated Credit Quality (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 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 10-K 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 one or more of these concessions, restructured loans are classified as impaired. Impairment reserves on non-collateral 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, 2018 30-59 Days Past Due 60-89 Days Past Due Total Past Due and Accruing Nonaccrual Current Total Loans and Financing Receivables (Dollars in thousands) Commercial and industrial $ - $ - $ - $ 204 $ 508,984 $ 509,188 SBA - - - 574 120,474 121,048 Real estate: Commercial real estate Owner occupied - - - 4,294 1,134,706 1,139,000 Non-owner - - - 2,223 2,312,807 2,315,030 Construction Speculative (2) - - - - 74,785 74,785 Non-speculative - - - - 9,615 9,615 SFR mortgage - - - 1,578 235,576 237,154 Dairy & livestock and agribusiness - - - 800 267,689 268,489 Municipal lease finance receivables - - - - 67,721 67,721 Consumer and other loans 47 - 47 509 60,319 60,875 Total gross loans, excluding PCI loans $ 47 $ - $ 47 $ 10,182 $ 4,792,676 $ 4,802,905 (1) As of June 30, 2018, $3.2 million of nonaccruing loans were current, $164,000 were 30-59 60-89 (2) Speculative construction loans are generally for properties where there is no identified buyer or renter. December 31, 2017 30-59 Days Past Due 60-89 Days Past Due Total Past Due and Accruing Nonaccrual Current Total Loans and Financing Receivables (Dollars in thousands) Commercial and industrial $ 768 $ - $ 768 $ 250 $ 512,307 $ 513,325 SBA 403 - 403 906 120,746 122,055 Real estate: Commercial real estate Owner occupied - - - 4,365 1,091,915 1,096,280 Non-owner - - - 2,477 2,277,956 2,280,433 Construction Speculative (2) - - - - 60,042 60,042 Non-speculative - - - - 17,940 17,940 SFR mortgage - - - 1,337 234,865 236,202 Dairy & livestock and agribusiness - - - 829 346,460 347,289 Municipal lease finance receivables - - - - 70,243 70,243 Consumer and other loans 1 - 1 552 63,676 64,229 Total gross loans, excluding PCI loans $ 1,172 $ - $ 1,172 $ 10,716 $ 4,796,150 $ 4,808,038 (1) As of December 31, 2017, $3.6 million of nonaccruing loans were current, $376,000 were 60-89 (2) Speculative construction loans are generally for properties where there is no identified buyer or renter. Impaired Loans At June 30, 2018, the Company had impaired loans, excluding PCI loans, of $14.7 million. Impaired loans included $6.5 million of nonaccrual commercial real estate loans, $1.6 million of nonaccrual single-family residential (“SFR”) mortgage loans, $800,000 of nonaccrual dairy & livestock and agribusiness loans, $574,000 of nonaccrual Small Business Administration (“SBA”) loans, $509,000 of nonaccrual consumer and other loans, and $204,000 of nonaccrual commercial and industrial loans. These impaired loans included $8.4 million of loans whose terms were modified in a troubled debt restructuring, of which $3.9 million were classified as nonaccrual. The remaining balance of $4.5 million consisted of 15 loans performing according to the restructured terms. The impaired loans had a specific allowance of $16,000 at June 30, 2018. At December 31, 2017, the Company had classified as impaired, loans, excluding PCI loans, with a balance of $15.5 million with a related allowance of $75,000. The following tables present information for held-for-investment As of and For the Six Months Ended June 30, 2018 Recorded Unpaid Related Average Interest (Dollars in thousands) With no related allowance recorded: Commercial and industrial $ 355 $ 864 $ - $ 378 $ 4 SBA 1,174 1,302 - 1,204 23 Real estate: Commercial real estate Owner occupied 4,294 4,747 - 4,331 - Non-owner 3,447 4,894 - 3,565 44 Construction Speculative - - - - - Non-speculative - - - - - SFR mortgage 4,120 4,860 - 4,159 55 Dairy & livestock and agribusiness 800 1,091 - 819 - Municipal lease finance receivables - - - - - Consumer and other loans 506 716 - 568 - Total 14,696 18,474 - 15,024 126 With a related allowance recorded: Commercial and industrial - - - - - SBA - - - - - Real estate: Commercial real estate Owner occupied - - - - - Non-owner - - - - - Construction Speculative - - - - - Non-speculative - - - - - SFR mortgage 13 13 13 13 - Dairy & livestock and agribusiness - - - - - Municipal lease finance receivables - - - - - Consumer and other loans 3 3 3 3 - Total 16 16 16 16 - Total impaired loans $ 14,712 $ 18,490 $ 16 $ 15,040 $ 126 As of and For the Six Months Ended June 30, 2017 Recorded Unpaid Related Average Interest (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 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 - - - - - 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 December 31, 2017 Recorded Unpaid Related (Dollars in thousands) With no related allowance recorded: Commercial and industrial $ 440 $ 980 $ - SBA 1,530 1,699 - Real estate: Commercial real estate Owner occupied 4,365 4,763 - Non-owner 3,768 5,107 - Construction Speculative - - - Non-speculative - - - SFR mortgage 4,040 4,692 - Dairy & livestock and agribusiness 829 1,091 - Municipal lease finance receivables - - - Consumer and other loans 174 370 - Total 15,146 18,702 - With a related allowance recorded: Commercial and industrial - - - SBA 1 18 1 Real estate: Commercial real estate Owner occupied - - - Non-owner - - - Construction Speculative - - - Non-speculative - - - SFR mortgage - - - Dairy & livestock and agribusiness - - - Municipal lease finance receivables - - - Consumer and other loans 378 391 74 Total 379 409 75 Total impaired loans $ 15,525 $ 19,111 $ 75 The Company recognizes the charge-off charge-off non-collateral Reserve for Unfunded Loan Commitments The allowance for off-balance off-balance Troubled Debt Restructurings (“TDRs”) Loans that are reported as TDRs are considered impaired and charge-off Summary of Significant Accounting Policies 10-K As of June 30, 2018, there were $8.4 million of loans classified as a TDR, of which $3.9 million were nonperforming and $4.5 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, 2018, performing TDRs were comprised of 10 SFR mortgage loans of $2.6 million, two commercial real estate loans of $1.2 million, one SBA loan of $600,000, and two commercial and industrial loans of $151,000. 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 zero and $1,000 of specific allowance to TDRs as of June 30, 2018 and December 31, 2017, 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 June 30, June 30, 2018 2017 2018 2017 (Dollars in thousands) Performing TDRs: Beginning balance $ 4,285 $ 19,702 $ 4,809 $ 19,233 New modifications 311 - 311 3,143 Payoffs/payments, net and other (66 ) 16 (590 ) (2,987 ) TDRs returned to accrual status - - - 329 TDRs placed on nonaccrual status - (3,144 ) - (3,144 ) Ending balance $ 4,530 $ 16,574 $ 4,530 $ 16,574 Nonperforming TDRs: Beginning balance $ 3,909 $ 1,407 $ 4,200 $ 1,626 New modifications 38 - 38 2,066 Charge-offs - - - - Payoffs/payments, net and other (55 ) (160 ) (346 ) (2,116 ) TDRs returned to accrual status - - - (329 ) TDRs placed on nonaccrual status - 3,144 - 3,144 Ending balance $ 3,892 $ 4,391 $ 3,892 $ 4,391 Total TDRs $ 8,422 $ 20,965 $ 8,422 $ 20,965 The following table summarizes loans modified as troubled debt restructurings for the period presented. Modifications (1) For the Three Months Ended June 30, 2018 Number of Loans Pre-Modification Outstanding Recorded Investment Post-Modification Outstanding Recorded Investment Outstanding Recorded Investment at June 30, 2018 Financial Effect Resulting From Modifications (2) (Dollars in thousands) Commercial and industrial: Interest rate reduction - $ - $ - $ - $ - Change in amortization period or maturity 1 38 38 31 - Real estate: Commercial real estate: Owner occupied Interest rate reduction - - - - - Change in amortization period or maturity - - - - - Non-owner Interest rate reduction - - - - - Change in amortization period or maturity - - - - - SFR mortgage: Interest rate reduction 1 311 311 307 - 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 2 $ 349 $ 349 $ 338 $ - For the Three Months Ended June 30, 2017 Number of Loans Pre-Modification Outstanding Recorded Investment Post-Modification Outstanding Recorded Investment Outstanding Recorded Investment at Financial Effect Resulting From Modifications (2) (Dollars in thousands) Commercial and industrial: 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 Interest rate reduction - - - - - Change in amortization period or maturity - - - - - SFR mortgage: 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 Six Months Ended June 30, 2018 Number of Loans Pre-Modification Outstanding Recorded Investment Post-Modification Outstanding Recorded Investment Outstanding Recorded Investment at June 30, 2018 Financial Effect Resulting From Modifications (2) (Dollars in thousands) Commercial and industrial: Interest rate reduction - $ - $ - $ - $ - Change in amortization period or maturity 1 38 38 31 - Real estate: Commercial real estate: Owner occupied Interest rate reduction - - - - - Change in amortization period or maturity - - - - - Non-owner Interest rate reduction - - - - - Change in amortization period or maturity - - - - - SFR mortgage: Interest rate reduction - - - - - Change in amortization period or maturity 1 311 311 307 - 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 2 $ 349 $ 349 $ 338 $ - For the Six Months Ended June 30, 2017 Number of Loans Pre-Modification Outstanding Recorded Investment Post-Modification Outstanding Recorded Investment Outstanding Recorded Investment at June 30, 2017 Financial Effect Resulting From Modifications (2) (Dollars in thousands) Commercial and industrial: 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 Interest rate reduction - - - - - Change in amortization period or maturity - - - - - SFR mortgage: 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 $ - (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, 2018, there were no loans that were previously modified as a TDR within the previous 12 months that subsequently defaulted during the three and six months ended June 30, 2018. 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. |