Loans

12 Months Ended

Dec. 31, 2020

Receivables [Abstract]

Loans

Loans

The company’s loan portfolio is segmented according to loans that share similar attributes and risk characteristics.

Investor loans secured by real estate includes CRE non-owner-occupied, multifamily, construction, and land, as well as SBA loans secured by real estate, which are loans collateralized by hotel/motel real property.

Business loans secured by real estate are loans to businesses that are collateralized by real estate where the operating cash flow of the business is the primary source of repayment. This loan portfolio includes CRE owner-occupied, franchise loans secured by real estate, and SBA loans secured by real estate, which are collateralized by real property other than hotel/motel real property.

Commercial loans are loans to businesses where the operating cash flow of the business is the primary source of repayment. This loan portfolio includes commercial and industrial loans, franchise loans non-real estate secured, and SBA loans non-real estate secured.

Retail loans portfolio includes single family residential and consumer loans. Single family residential loans include home equity lines of credit, as well as second trust deeds.    

The following table presents the composition of the loan portfolio as of the dates indicated:

	December 31,
	2020		2019
	(Dollars in thousands)
Investor loans secured by real estate
CRE non-owner-occupied	$	2,675,085	$	2,070,141
Multifamily	5,171,356		1,575,726
Construction and land	321,993		438,786
SBA secured by real estate	57,331		68,431
Total investor loans secured by real estate	8,225,765		4,153,084
Business loans secured by real estate
CRE owner-occupied	2,114,050		1,846,554
Franchise real estate secured	347,932		353,240
SBA secured by real estate	79,595		88,381
Total business loans secured by real estate	2,541,577		2,288,175
Commercial loans
Commercial and industrial	1,768,834		1,393,270
Franchise non-real estate secured	444,797		564,357
SBA non-real estate secured	15,957		17,426
Total commercial loans	2,229,588		1,975,053
Retail loans
Single family residential	232,574		255,024
Consumer	6,929		50,975
Total retail loans	239,503		305,999
Gross loans held for investment (1)	13,236,433		8,722,311
Allowance for credit losses for loans held for investment (2)	(268,018)		(35,698)
Loans held for investment, net	$	12,968,415	$	8,686,613
Loans held for sale, at lower of cost or fair value	$	601	$	1,672

______________________________

(1) Includes unaccreted fair value net purchase discounts of $113.8 million and $40.7 million as of December 31, 2020 and December 31, 2019 respectively.

(2) The allowance for credit losses as of December 31, 2019 was accounted for under ASC 450 and ASC 310, which is reflective of probable incurred losses as of the balance sheet date. Effective January 1, 2020, the allowance for credit losses is accounted for under ASC 326, which is reflective of estimated expected lifetime credit losses.

The Company originates SBA loans with the intent to sell the guaranteed portion of the loan prior to maturity and, therefore, designates them as held for sale. From time to time, the Company may purchase or sell other types of loans in order to manage concentrations, maximize interest income, change risk profiles, improve returns, and generate liquidity.

The Company participated in the SBA PPP program under the CARES Act during the second quarter of 2020 and originated SBA PPP loans. At June 30, 2020, the Company’s SBA PPP loan balance was $1.13 billion. In July 2020, the Company concluded the sale of its entire SBA PPP loan portfolio with an aggregate amortized cost of $1.13 billion to a seasoned and experienced non-bank lender and servicer of SBA loans, resulting in improved balance sheet liquidity and a gain on sale of approximately of $18.9 million, net of net deferred origination fees and net purchase discounts.

Loans Serviced for Others

The Company generally retains the servicing rights of the guaranteed portion of SBA loans sold, for which the Company records a servicing asset at fair value within its other assets category. Servicing assets are subsequently measured using the amortization method and amortized to noninterest income. Servicing assets are evaluated for impairment based on the fair value of the assets as compared to carrying amount. At December 31, 2020 and 2019, the servicing asset totaled $5.3 million and $7.7 million, respectively, and was included in other assets on the Company’s consolidated statement of financial condition. Servicing rights are evaluated for impairment based upon the fair value of the rights as compared to the carrying amount. Impairment is recognized through a valuation allowance, to the extent the fair value is less than the carrying amount. The fair value of retained servicing rights is generally evaluated at the loan level using a discounted cash flow analysis utilizing current market assumptions derived from the secondary market. Key modeling assumptions include interest rates, prepayment assumptions, discount rate, and estimated cash flows. At December 31, 2020, and 2019, the Company determined that no valuation allowance was necessary.

Opus entered into securitization sales on December 23, 2016 with the Federal Home Loan Mortgage Corporation (“Freddie Mac”). The transaction involved the sale of $509 million in originated multifamily loans through a Freddie Mac-sponsored transaction. One class of Freddie Mac guaranteed structured pass-through certificates was issued and purchased entirely by Opus. In connection with the Opus acquisition, the Company's continuing involvement includes sub-servicing responsibilities, general representations and warranties, and reimbursement obligations. Servicing responsibilities on loan sales generally include obligations to collect and remit payments of principal and interest, provide foreclosure services, manage payments of taxes and insurance premiums, and otherwise administer the underlying loans. In connection with the securitization transaction, Freddie Mac was designated as the master servicer and appointed the Company to perform sub-servicing responsibilities, which generally include the servicing responsibilities described above with the exception of the servicing of foreclosed or defaulted loans. The overall management, servicing, and resolution of defaulted loans and foreclosed loans are separately designated to the special servicer, a third-party institution that is independent of the master servicer and the Company. The master servicer has the right to terminate the Company in its role as sub-servicer and direct such responsibilities accordingly.

General representations and warranties associated with loan sales and securitization sales require the Company to uphold various assertions that pertain to the underlying loans at the time of the transaction, including, but not limited to, compliance with relevant laws and regulations, absence of fraud, enforcement of liens, no environmental damages, and maintenance of relevant environmental insurance. Such representations and warranties are limited to those that do not meet the quality represented at the transaction date and do not pertain to a decline in value or future payment defaults. In circumstances where the Company breaches its representations and warranties, the Company would generally be required to cure such instances through a repurchase or substitution of the subject

loan(s).

To the extent the ultimate resolution of defaulted loans results in contractual principal and interest payments that are deficient, the Company is obligated to reimburse Freddie Mac for such amounts, not to exceed 10% of the original principal amount of the loans comprising the securitization pool at the closing date of December 23, 2016. The liability recorded for Company’s exposure to the reimbursement agreement with Freddie Mac was $448,000 as of December 31, 2020.

Loans sold and serviced for others are not included in the accompanying consolidated statements of financial condition. The unpaid principal balance of loans and participations serviced for others were $686.0 million at December 31, 2020 and $633.8 million at December 31, 2019, including multifamily loans transferred through securitization with Freddie Mac of $99.4 million and SBA participations serviced for others totaling $421.7 million at December 31, 2020 and $475.3 million at December 31, 2019.

Concentration of Credit Risk

As of December 31, 2020, the Company’s loan portfolio was primarily collateralized by various forms of real estate and business assets located principally in California. The Company’s loan portfolio contains concentrations of credit in commercial non-owner occupied real estate, multifamily real estate, commercial owner occupied business loans and commercial and industrial business loans. The Company maintains policies approved by the Bank’s Board of Directors (the “Bank Board”) that address these concentrations and diversifies its loan portfolio through loan originations, purchases, and sales of loans to meet approved concentration levels. While management believes that the collateral presently securing these loans is adequate, there can be no assurances that significant deterioration in the California real estate market or economy would not expose the Company to significantly greater credit risk.

Under applicable laws and regulations, the Bank may not make secured loans to one borrower in excess of 25% of the Bank’s unimpaired capital plus surplus and likewise in excess of 15% of the Bank’s unimpaired capital plus surplus for unsecured loans. These loans-to-one borrower limitations result in a dollar limitation of $821.3 million for secured loans and $492.8 million for unsecured loans at December 31, 2020. In order to manage concentration risk, the Bank maintains a house lending limit well below these statutory maximums. At December 31, 2020, the Bank’s largest aggregate outstanding balance of loans to one borrower was $165.4 million secured by multifamily properties.

Credit Quality and Credit Risk

The Company’s credit quality and credit risk is managed in two distinct areas. The first is the loan origination process, wherein the Bank underwrites credit and chooses which types and levels of risk it is willing to accept. The Company maintains a credit policy which addresses many related topics, sets forth maximum tolerances for key elements of loan risk, and indicates appropriate protocols for identifying and analyzing these risk elements. The policy sets forth specific guidelines for analyzing each of the loan products the Company offers from both an individual and portfolio-wide basis. The credit policy is reviewed annually by the Bank Board. The Bank’s underwriters ensure all key risk factors are analyzed with nearly all underwriting including a global cash flow analysis of the prospective borrowers. 

The second area is in the ongoing oversight of the loan portfolio, where existing credit risk is measured and monitored, and where performance issues are dealt with in a timely and appropriate fashion. Credit risk is monitored and managed within the loan portfolio by the Company’s portfolio managers based on both the credit policy and a credit and portfolio review policy. This latter policy requires a program of financial data collection and analysis, thorough loan reviews, property and/or business inspections, monitoring of portfolio concentrations and trends, and incorporation of current business and economic conditions. The portfolio managers also monitor asset-based lines of credit, loan covenants, and other conditions associated with the Company’s business loans as a means to help identify potential credit risk. Most individual loans, excluding the homogeneous loan portfolio, are reviewed at least annually, including the assignment or confirmation of a risk grade.

Risk grades are based on a six-grade Pass scale, along with Special Mention, Substandard, Doubtful, and Loss classifications, as such classifications are defined by the federal banking regulatory agencies. The assignment of risk grades allows the Company to, among other things, identify the risk associated with each credit in the portfolio, and to provide a basis for measuring risk to determine the estimated valuation allowance for groups and individual assets at a point in time. Risk grades are reviewed regularly by the Company’s Credit and Portfolio Review committee, and the portfolio management and risk grading process is reviewed on an on-going basis by an independent loan review function, as well as by regulatory agencies during scheduled examinations.

The following provides brief definitions for risk grades assigned to loans in the portfolio:

•Pass classifications represent assets with an acceptable level of credit quality that contains no well-defined deficiencies or weaknesses.

•Special Mention assets do not currently expose the Bank to a sufficient risk to warrant classification in one of the adverse categories, but possess correctable deficiencies or potential weaknesses deserving management’s close attention.

•Substandard assets are inadequately protected by the current net worth and paying capacity of the obligor or of the collateral pledged, if any. These assets are characterized by the distinct possibility that the Bank will sustain some loss if the deficiencies are not corrected. OREO acquired through foreclosure are also classified as substandard assets.

•Doubtful credits have all the weaknesses inherent in substandard credits, with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions, and values, highly questionable and improbable.

•Loss assets are those that are considered uncollectible and of such little value that their continuance as assets is not warranted. Amounts classified as loss are promptly charged off.

The Bank’s portfolio managers also manage loan performance risks, collections, workouts, bankruptcies, and foreclosures. A special department, whose portfolio managers have professional expertise in these areas, typically handles or advises on these types of matters. Loan performance risks are mitigated by our portfolio managers acting promptly and assertively to address problem credits when they are identified. Collection efforts commence immediately upon non-payment, and the portfolio managers seek to promptly determine the appropriate steps to minimize the Company’s risk of loss. When foreclosure will maximize the Company’s recovery for a non-performing loan, the portfolio managers will take appropriate action to initiate the foreclosure process.

When a loan is graded as special mention, substandard, or doubtful, the Company obtains an updated valuation of the underlying collateral. If, through the Company’s credit risk management process, it is determined the ultimate repayment of a loan will come from the foreclosure upon and ultimate sale of the underlying collateral, the loan is deemed collateral dependent and evaluated individually to determine an appropriate ACL for the loan. The ACL for such loans is measured as the amount by which the fair value of the underlying collateral, less estimated costs to sell, is less than the amortized cost of the loan. The Company typically continues to obtain or confirm updated valuations of underlying collateral for special mention and classified loans on an annual or biennial basis in order to have the most current indication of fair value of the underlying collateral securing the loan. Additionally, once a loan is identified as collateral dependent, due to the likelihood of foreclosure, and repayment of the loan is expected to come from the eventual sale of the underlying collateral, an analysis of the underlying collateral is performed at least quarterly. Changes in the estimated fair value of the collateral are reflected in the lifetime ACL for the loan. Balances deemed to be uncollectable are promptly charged-off.

The following table stratifies the loans held for investment portfolio by the Company’s internal risk grading, and by year of origination, as of December 31, 2020:

	Term Loans by Vintage
	2020		2019		2018		2017		2016		Prior		Revolving		Revolving Converted to Term During the Period		Total
December 31, 2020	(Dollars in thousands)
Investor loans secured by real estate
CRE non-owner-occupied
Pass	$	265,901	$	541,994	$	440,351	$	287,580	$	279,238	$	791,477	$	11,114	$	—	$	2,617,655
Special mention	—		—		6,669		437		2,516		29,738		—		—		39,360
Substandard	—		9,732		2,045		—		516		5,218		559		—		18,070
Multifamily
Pass	1,027,644		1,677,716		899,123		665,939		354,859		531,287		420		—		5,156,988
Special mention	—		1,758		2,630		—		8,649		—		—		—		13,037
Substandard	—		—		—		559		772		—		—		—		1,331
Construction and land
Pass	57,309		144,759		73,313		18,625		20,531		6,672		784		—		321,993
SBA secured by real estate
Pass	—		8,306		9,029		13,418		6,305		7,696		—		—		44,754
Special mention	496		1,032		1,159		1,000		373		306		—		—		4,366
Substandard	—		1,220		2,959		1,091		400		2,541		—		—		8,211
Total investor loans secured by real estate	$	1,351,350	$	2,386,517	$	1,437,278	$	988,649	$	674,159	$	1,374,935	$	12,877	$	—	$	8,225,765
Business loans secured by real estate
CRE owner-occupied
Pass	$	293,324	$	409,758	$	332,672	$	327,475	$	225,098	$	469,704	$	14,268	$	246	$	2,072,545
Special mention	2,190		15,917		3,802		—		4,153		201		—		—		26,263
Substandard	—		—		3,636		4,214		1,169		5,973		250		—		15,242
Franchise real estate secured
Pass	44,413		81,438		66,241		96,999		24,673		27,020		—		—		340,784
Special mention	878		1,650		2,652		—		—		—		—		—		5,180
Substandard	—		—		—		—		1,968		—		—		—		1,968
SBA secured by real estate
Pass	3,253		7,637		12,608		16,058		8,488		23,624		—		—		71,668
Special mention	—		—		1,200		—		137		—		—		—		1,337
Substandard	—		—		184		1,987		1,376		3,043		—		—		6,590
Total loans secured by business real estate	$	344,058	$	516,400	$	422,995	$	446,733	$	267,062	$	529,565	$	14,518	$	246	$	2,541,577
Commercial Loans
Commercial and industrial
Pass	$	127,082	$	260,368	$	159,001	$	210,163	$	51,800	$	82,291	$	801,752	$	9,315	$	1,701,772
Special mention	735		—		2,331		185		1,320		243		17,890		37		22,741
Substandard	—		3,310		2,737		610		1,333		2,446		32,858		1,027		44,321
Franchise non-real estate secured
Pass	27,607		164,025		94,494		46,174		40,829		27,745		1,361		502		402,737
Special mention	—		7,267		2,037		230		480		2,321		—		—		12,335
Substandard	—		6,690		3,706		18,425		700		204		—		—		29,725
SBA non-real estate secured
Pass	407		2,257		1,558		2,674		610		4,449		—		259		12,214
Special mention	—		—		—		1,574		—		—		—		—		1,574
Substandard	—		83		357		282		340		400		707		—		2,169
Total commercial loans	$	155,831	$	444,000	$	266,221	$	280,317	$	97,412	$	120,099	$	854,568	$	11,140	$	2,229,588

	Term Loans by Vintage
	2020		2019		2018		2017		2016		Prior		Revolving		Revolving Converted to Term During the Period		Total
December 31, 2020	(Dollars in thousands)
Retail Loans
Single family residential
Pass	$	10,794	$	7,714	$	13,982	$	14,039	$	33,968	$	124,248	$	27,172	—		$	231,917
Substandard	—		—		—		—		—		657		—		—		657
Consumer loans
Pass	52		112		37		25		2		3,145		3,508		—		6,881
Substandard	—		7		—		—		—		41		—		—		48
Total retail loans	$	10,846	$	7,833	$	14,019	$	14,064	$	33,970	$	128,091	$	30,680	$	—	$	239,503
Totals gross loans	$	1,862,085	$	3,354,750	$	2,140,513	$	1,729,763	$	1,072,603	$	2,152,690	$	912,643	$	11,386	$	13,236,433

The following table stratifies the loan portfolio by the Company’s internal risk rating as of December 31, 2019:

	Credit Risk Grades
	Pass		Special Mention		Substandard		Total Gross Loans
	(Dollars in thousands)
December 31, 2019
Investor loans secured by real estate
CRE non-owner-occupied	$	2,067,875	$	1,178	$	1,088	$	2,070,141
Multifamily	1,575,510		—		216		1,575,726
Construction and land	438,769		—		17		438,786
SBA secured by real estate	65,835		973		1,623		68,431
Total investor loans secured by real estate	4,147,989		2,151		2,944		4,153,084
Business loans secured by real estate
CRE owner-occupied	1,831,853		11,167		3,534		1,846,554
Franchise real estate secured	352,319		921		—		353,240
SBA secured by real estate	83,106		1,842		3,433		88,381
Total business loans secured by real estate	2,267,278		13,930		6,967		2,288,175
Commercial loans
Commercial and industrial	1,359,662		13,226		20,382		1,393,270
Franchise non-real estate secured	546,594		6,930		10,833		564,357
SBA not secured by real estate	13,933		485		3,008		17,426
Total commercial loans	1,920,189		20,641		34,223		1,975,053
Retail loans
Single family residential	254,463		—		561		255,024
Consumer loans	50,921		—		54		50,975
Total retail loans	305,384		—		615		305,999
Total gross loans	$	8,640,840	$	36,722	$	44,749	$	8,722,311

The following tables stratify loans held for investment by delinquencies in the Company’s loan portfolio as of the periods indicated:

			Days Past Due
	Current		30-59		60-89		90+		Total
	(Dollars in thousands)
December 31, 2020
Investor loans secured by real estate
CRE non-owner-occupied	$	2,674,328	$	—	$	—	$	757	$	2,675,085
Multifamily	5,171,355		1		—		—		5,171,356
Construction and land	321,993		—		—		—		321,993
SBA secured by real estate	56,074		—		—		1,257		57,331
Total investor loans secured by real estate	8,223,750		1		—		2,014		8,225,765
Business loans secured by real estate
CRE owner-occupied	2,108,746		—		—		5,304		2,114,050
Franchise real estate secured	347,932		—		—		—		347,932
SBA secured by real estate	78,036		486		—		1,073		79,595
Total business loans secured by real estate	2,534,714		486		—		6,377		2,541,577
Commercial loans
Commercial and industrial	1,765,451		428		57		2,898		1,768,834
Franchise non-real estate secured	444,797		—		—		—		444,797
SBA not secured by real estate	14,912		338		—		707		15,957
Total commercial loans	2,225,160		766		57		3,605		2,229,588
Retail loans
Single family residential	232,559		15		—		—		232,574
Consumer loans	6,928		1		—		—		6,929
Total retail loans	239,487		16		—		—		239,503
Totals	$	13,223,111	$	1,269	$	57	$	11,996	$	13,236,433

			Days Past Due
	Current		30-59		60-89		90+		Total
	(Dollars in thousands)
December 31, 2019
Investor loans secured by real estate
CRE non-owner-occupied	$	2,067,874	$	1,179	$	—	$	1,088	$	2,070,141
Multifamily	1,575,726		—		—		—		1,575,726
Construction and land	438,786		—		—		—		438,786
SBA secured by real estate	68,041		—		—		390		68,431
Total investor loans secured by real estate	4,150,427		1,179		—		1,478		4,153,084
Business loans secured by real estate
CRE owner-occupied	1,846,223		331		—		—		1,846,554
Franchise real estate secured	353,240		—		—		—		353,240
SBA secured by real estate	86,946		—		589		846		88,381
Total business loans secured by real estate	2,286,409		331		589		846		2,288,175
Commercial loans
Commercial and industrial	1,389,026		422		826		2,996		1,393,270
Franchise non-real estate secured	555,215		—		9,142		—		564,357
SBA not secured by real estate	16,141		167		—		1,118		17,426
Total commercial loans	1,960,382		589		9,968		4,114		1,975,053
Retail loans
Single family residential	255,024		—		—		—		255,024
Consumer loans	50,967		5		2		1		50,975
Total retail loans	305,991		5		2		1		305,999
Totals	$	8,703,209	$	2,104	$	10,559	$	6,439	$	8,722,311

Individually Evaluated Loans

Beginning on January 1, 2020, the Company evaluates loans collectively for purposes of determining the ACL in accordance with ASC 326. Collective evaluation is based on aggregating loans deemed to possess similar risk characteristics. In certain instances the Company may identify loans that it believes no longer possess risk characteristics similar to other loans in the loan portfolio. These loans are typically identified from those that have exhibited deterioration in credit quality, since the specific attributes and risks associated with such loans tend to become unique as the credit deteriorates. Such loans are typically nonperforming, modified through a TDR, downgraded to substandard or worse, and/or are deemed collateral dependent, where the ultimate repayment of the loan is expected to come from the operation of or eventual sale of the collateral. Loans that are deemed by management to no longer possess risk characteristics similar to other loans in the portfolio, or that have been identified as collateral dependent, are evaluated individually for purposes of determining an appropriate lifetime ACL. The Company uses a discounted cash flow approach, using the loan’s effective interest rate, for determining the ACL on individually evaluated loans, unless the loan is deemed collateral dependent, which requires evaluation based on the estimated fair value of the underlying collateral, less estimated costs to sell. The Company may increase or decrease the ACL for collateral dependent loans based on changes in the estimated fair value of the collateral. Changes in the ACL for all other individually evaluated loans is based substantially on the Company’s evaluation of cash flows expected to be received from such loans.

As of December 31, 2020, $29.2 million of loans were individually evaluated, and the ACL attributed to such loans was $126,000. At December 31, 2020, $15.2 million of individually evaluated loans were evaluated using a discounted cash flow approach and $14.0 million of individually evaluated loans were evaluated based on the underlying value of the collateral.

The Company had individually evaluated loans on nonaccrual status of $29.2 million at December 31, 2020.

Impaired Loans

Prior to the adoption of ASC 326 on January 1, 2020, the Company classified loans as impaired when, based on current information and events, it was probable that the Company would be unable to collect all amounts due according to the contractual terms of the loan agreement or it was determined that the likelihood of the Company receiving all scheduled payments, including interest, when due was remote. Credit losses on impaired loans were determined separately based on the guidance in ASC 310. Beginning January 1, 2020, the Company accounts for credit losses on all loans in accordance with ASC 326, which eliminates the concept of an impaired loan within the context of determining credit losses, and requires all loans to be evaluated for credit losses collectively based on similar risk characteristics. Loans are only evaluated individually when they are deemed to no longer possess similar risk characteristics with other loans in the loan portfolio.

Prior to the adoption of ASC 326, the Company reviewed loans for impairment when the loan was classified as substandard or worse, delinquent 90 days, determined by management to be collateral dependent, when the borrower filed for bankruptcy, or was granted a loan modification in a TDR. Measurement of impairment was based on the loan’s expected future cash flows discounted at the loan’s effective interest rate, measured by reference to an observable market value, if one existed, or the fair value of the collateral if the loan was deemed collateral dependent. Valuation allowances were determined on a loan-by-loan basis or by aggregating loans with similar risk characteristics.

The following tables provide a summary of the Company’s investment in impaired loans as of and for the periods indicated:

	Impaired Loans
	Recorded Investment		Unpaid Principal Balance		With Specific Allowance		Without Specific Allowance		Specific Allowance for Impaired Loans		Average Recorded Investment		Interest Income Recognized
	(Dollars in thousands)
December 31, 2019
Investor loans secured by real estate
CRE non-owner occupied	$	1,088	$	1,184	$	—	$	1,088	$	—	$	317	$	—
Construction and land	—		—		—		—		—		120		—
SBA secured by real estate	390		772		—		390		—		1,002		—
Business loans secured by real estate
CRE owner-occupied	—		—		—		—		—		777		—
Franchise real estate secured	—		—		—		—		—		1,887		—
SBA secured by real estate	1,517		1,743		—		1,517		—		872		16
Commercial loans
Commercial and industrial	7,529		7,755		—		7,529		—		10,251		385
Franchise non-real estate secured	10,834		10,835		—		10,834		—		1,192		151
SBA non-real estate secured	1,118		1,555		—		1,118		—		1,122		—
Retail loans
Single family residential	366		412		—		366		—		379		—
Consumer	—		—		—		—		—		19		—
Totals	$	22,842	$	24,256	$	—	$	22,842	$	—	$	17,938	$	552
December 31, 2018
Investor loans secured by real estate
CRE non-owner occupied	$	—	$	—	$	—	$	—	$	—	$	538	$	—
Multifamily	—		—		—		—		—		500		—
Construction and land	—		—		—		—		—		5		—
SBA secured by real estate	1,600		6,077		488		1,140		466		1,280		—
Business loans secured by real estate
CRE owner-occupied	599		628		—		599		—		1,565		—
Commercial loans
Commercial and industrial	8,523		8,571		550		7,973		118		1,782		36
Franchise non-real estate secured	190		190		—		190		—		119		—
SBA non-real estate secured	1,110		1,521		—		1,110		—		534		—
Retail loans
Single family residential	408		453		—		408		—		1,206		—
Consumer	—		—		—		—		—		33		—
Totals	$	12,430	$	17,440	$	1,038	$	11,420	$	584	$	7,562	$	36

The Company had impaired loans on nonaccrual status of $8.5 million at December 31, 2019. The Company had no loans 90 days or more past due and still accruing at December 31, 2019.

Troubled Debt Restructurings

We sometimes modify or restructure loans when the borrower is experiencing financial difficulties by making a concession to the borrower in the form of changes in the amortization terms, reductions in the interest rates, the acceptance of interest only payments, and, in limited cases, concessions to the outstanding loan balances. These loans are classified as TDRs. TDRs are loans modified for the purpose of alleviating temporary impairments to the borrower’s financial condition or cash flows. A workout plan between us and the borrower is designed to provide a bridge for borrower cash flow shortfalls in the near term. In most cases, the Company initially places TDRs on nonaccrual status, and may be returned to accrual status when the loan is brought current, has performed in accordance with the restructured contractual terms for a period of at least six months, and the ultimate collectability of the total contractual restructured principal and interest is no longer in doubt. At December 31, 2020, the Company had no TDR loans. During the year ended December 31, 2020, there were no loans modified as TDRs. At December 31, 2019, the Company had two TDRs aggregating to $3.0 million, consisting of a franchise non-real estate secured loan of $1.7 million and a commercial and industrial loan of $1.3 million with each’s terms being modified to extend the maturity date for 24 months or less. The modifications did not have a financial impact on the recorded investments. These two TDRs were both current and on accrual status as of December 31, 2019. During the year ended December 31, 2020, both TDRs experienced payment defaults after modifications within the previous 12 months and the remaining balance, which were $1.3 million for commercial and industrial loan and $344,000 for franchise non-real estate secured loan, were charged off in 2020. During the year ended December 31, 2019, there were no TDRs that experienced payment defaults after modifications within the previous 12 months.

The CARES Act, signed into law on March 27, 2020, permits financial institutions to suspend requirements under GAAP for loan modifications to borrowers affected by COVID-19 that would otherwise be characterized as TDRs and suspend any determination related thereto if (i) the loan modification is made between March 1, 2020 and the earlier of December 31, 2020 or 60 days after the end of the coronavirus emergency declaration and (ii) the applicable loan was not more than 30 days past due as of December 31, 2019. On April 7, 2020, federal bank regulators issued a joint interagency statement that allows lenders to conclude that a borrower is not experiencing financial difficulty if short-term (e.g., six months or less) modifications are made in response to the COVID-19 pandemic, such as payment deferrals, fee waivers, extensions of repayment terms, or other delays in payment that are insignificant related to loans in which the borrower is less than 30 days past due on its contractual payments at the time a modification program is implemented. The CAA, signed into law on December 27, 2020, extends the applicable period to include modification to loans held by financial institutions executed between March 1, 2020 and the earlier of (i) January 1, 2022, or (ii) 60 days after the date of termination of the COVID-19 national emergency.

For COVID-19 related loan modifications in the form of payment deferrals, the delinquency status will not advance and loans that were accruing at the time that the relief is provided will generally not be placed on nonaccrual status during the deferral period. Interest income will continue to be recognized over the contractual life of the loan. However, the Company, through its credit portfolio management activities, has continued to monitor facts and circumstances associated with the underlying credit quality of loans modified under the provisions of the CARES Act in an effort to identify any loans where the accrual of interest during the modification period is no longer appropriate. In such cases, the Company ceases the accrual of interest and all previously accrued and uncollected interest is promptly reversed against current period interest income. The Company has determined none of the COVID-19 related loan modifications need to be characterized as TDRs. As of December 31, 2020, 52 loans with an aggregate amortized cost of $79.5 million, of which 5 loans totaling $3.1 million were acquired in connection with the acquisition of Opus, remained under modification due to COVID-19 hardship under the CARES Act, which represent 0.60% of total loans held for investment as of that date. As of December 31, 2020, no loans were in-process for potential modification.

Purchased Credit Deteriorated and Purchased Credit Impaired Loans

Prior to the adoption of ASC 326, the Company accounted for PCI loans and associated income recognition in accordance with ASC Subtopic 310-30 - Receivables - Loans and Debt Securities Acquired with Deteriorated Credit Quality. PCI loans are loans that as of the date of their acquisition have experienced deterioration in credit quality between their date of origination and the point of acquisition and for which it was probable, at acquisition, that not all contractually required payments would be collected. Upon acquisition, the Company measured the amount by which the undiscounted expected cash future flows on PCI loans exceeded the estimated fair value of the loan as the “accretable yield,” representing the amount of estimated future interest income on the loan. The amount of accretable yield was re-measured at each financial reporting date, representing the difference between the remaining undiscounted expected cash flows and the current carrying value of the PCI loan. The accretable yield on PCI loans was recognized in interest income using the interest method.

Following the adoption of ASC 326 on January 1, 2020, the Company analyzes all acquired loans at the time of acquisition for more-than-insignificant deterioration in credit quality since their origination date. Such loans are classified as purchased credit deteriorated loans, also referred to as PCD loans. Acquired loans classified as PCD are recorded at an initial amortized cost, which is comprised of the purchase price of the loans and the initial ACL determined for the loans, which is added to the purchase price, and any resulting discount or premium related to factors other than credit. The Company had no such loans at the adoption of ASC 326 on January 1, 2020. The Company accounts for interest income on PCD loans using the interest method, whereby any purchase discounts or premiums are accreted or amortized into interest income as an adjustment of the loan’s yield. An accretable yield is not determined for PCD loans. Please also see Note 1 - Description of Business and Summary of Significant Accounting Policies for more information concerning the accounting for PCD loans.

The following table reconciles the par value, or initial amortized cost, of PCD loans acquired in the Opus acquisition as of the date of the acquisition with the purchase price (or initial fair value of the loans):

	June 1, 2020
	Investor Loans Secured by Real Estate		Business Loans Secured by Real Estate		Commercial Loans		Retail Loans		Total
Par value (unpaid principal balance)	$	704,441	$	105,578	$	80,184	$	6,280	$	896,483
Allowance for credit losses (1)	(13,786)		(4,083)		(25,635)		(381)		(43,885)
(Discount) premium related to factors other than credit	(8,696)		(2,512)		138		(294)		(11,364)
Purchase price (initial fair value)	$	681,959	$	98,983	$	54,687	$	5,605	$	841,234

______________________________

(1) The initial gross ACL determined for PCD loans was $43.9 million as of the acquisition date. Of this amount, approximately $22.7 million relates to net uncollectable balances such as loans that were fully or partially charged off prior to acquisition. Therefore, the net impact to the ACL related to PCD loans was an increase of $21.2 million.

Nonaccrual Loans

When loans are placed on nonaccrual status, previously accrued but unpaid interest is reversed from current period earnings. Payments received on nonaccrual loans are generally applied as a reduction to the loan principal balance. If the likelihood of further loss is remote, the Company may recognize interest income on a cash basis. Loans may be returned to accruing status if the Company believes that all remaining principal and interest is fully collectible and there has been at least three months of sustained repayment performance since the loan was placed on nonaccrual.

The Company typically does not accrue interest on loans 90 days or more past due or when, in the opinion of management, there is reasonable doubt as to the collection of interest. However, when such loans are well secured and in the process of collection, the Company may continue with the accrual of interest. The Company had loans on nonaccrual status of $29.2 million and $8.5 million at December 31, 2020 and 2019, respectively. The Company did not record income from the receipt of cash payments related to nonaccruing loans during the years ended December 31, 2020, 2019, and 2018. The Company had no loans 90 days or more past due and still accruing at December 31, 2020 and 2019.

The following table provides a summary of nonaccrual loans as of the date indicated:

	Nonaccrual Loans (1)
	Collateral Dependent Loans		ACL		Non-Collateral Dependent Loans		ACL		Total Nonaccrual Loans (2)		Nonaccrual Loans with No ACL
	(Dollars in thousands)
December 31, 2020
Investor loans secured by real estate
CRE non-owner-occupied	$	2,792	$	—	$	—	$	—	$	2,792	$	2,792
SBA secured by real estate	1,257		—		—		—		1,257		1,257
Total investor loans secured by real estate	4,049		—		—		—		4,049		4,049
Business loans secured by real estate
CRE owner-occupied	6,083		—		—		—		6,083		6,083
SBA secured by real estate	1,143		—		—		—		1,143		1,143
Total business loans secured by real estate	7,226		—		—		—		7,226		7,226
Commercial loans
Commercial and industrial	2,040		—		1,934		126		3,974		2,733
Franchise non-real estate secured	—		—		13,238		—		13,238		13,238
SBA non-real estate secured	707		—		—		—		707		707
Total commercial loans	2,747		—		15,172		126		17,919		16,678
Retail loans
Single family residential	15		—		—		—		15		15
Total retail loans	15		—		—		—		15		15
Totals nonaccrual loans	$	14,037	$	—	$	15,172	$	126	$	29,209	$	27,968

______________________________

(1) The ACL for nonaccrual loans is determined based on a discounted cash flow methodology unless the loan is considered collateral dependent. The ACL for collateral dependent loans is determined based on the estimated fair value of the underlying collateral.

(2) No interest income was recognized on nonaccrual loans during the year ended December 31, 2020.

Residential Real Estate Loans In Process of Foreclosure

The Company had no consumer mortgage loans collateralized by residential real estate property for which formal foreclosure proceedings were in process as of December 31, 2020 and 2019.

Collateral Dependent Loans

Loans that have been classified as collateral dependent are loans where substantially all repayment of the loan is expected to come from the operation of or eventual liquidation of the collateral. Collateral dependent loans are evaluated individually for purposes of determining the ACL, which is determined based on the estimated fair value of the collateral. Estimates for costs to sell are included in the determination of the ACL when liquidation of the collateral is anticipated. In cases where the loan is well secured and the estimated value of the collateral exceeds the amortized cost of the loan, no ACL is recorded.

The following table summarizes collateral dependent loans by collateral type as of December 31, 2020:

	December 31, 2020
	Office Properties		Industrial Properties		Retail Properties		Land Properties		Hotel Properties		Residential Properties		Business Assets		Total
	(Dollars in thousands)
Investor loan secured by real estate
CRE non-owner-occupied	$	—	$	—	$	2,594	$	—	$	198	$	—	$	—	$	2,792
SBA secured by real estate	—		—		—		—		1,257		—		—		1,257
Total investor loans secured by real estate	—		—		2,594		—		1,455		—		—		4,049
Business loans secured by real estate
CRE owner-occupied	—		779		—		5,304		—		—		—		6,083
SBA secured by real estate	288		757		—		—		—		98		—		1,143
Total business loans secured by real estate	288		1,536		—		5,304		—		98		—		7,226
Commercial loans
Commercial and industrial	—		—		—		—		—		—		2,040		2,040
SBA non-real estate secured	—		—		—		—		—		—		707		707
Total commercial loans	—		—		—		—		—		—		2,747		2,747
Retail loans
Single family residential	—		—		—		—		—		15		—		15
Total retail loans	—		—		—		—		—		15		—		15
Totals collateral dependent loans	$	288	$	1,536	$	2,594	$	5,304	$	1,455	$	113	$	2,747	$	14,037