Loans Receivable and Allowance for Credit Losses

9 Months Ended

Sep. 30, 2020

Loans and Leases Receivable Disclosure [Abstract]

Loans Receivable and Allowance for Credit Losses

Loans Receivable and Allowance for Credit Losses

The following table presents the composition of the Company’s loans held-for-investment as of September 30, 2020 and December 31, 2019:

($ in thousands)	September 30, 2020		December 31, 2019
	Amortized Cost (1)		Non-PCI Loans (1)		PCI Loans		Total (1)
Commercial:
C&I (2)	$	13,305,024	$	12,149,121	$	1,810	$	12,150,931
CRE:
CRE	11,037,987		10,165,247		113,201		10,278,448
Multifamily residential	3,057,274		2,834,212		22,162		2,856,374
Construction and land	578,407		628,459		40		628,499
Total CRE	14,673,668		13,627,918		135,403		13,763,321
Total commercial	27,978,692		25,777,039		137,213		25,914,252
Consumer:
Residential mortgage:
Single-family residential	7,785,759		7,028,979		79,611		7,108,590
HELOCs	1,514,388		1,466,736		6,047		1,472,783
Total residential mortgage	9,300,147		8,495,715		85,658		8,581,373
Other consumer	158,290		282,914		—		282,914
Total consumer	9,458,437		8,778,629		85,658		8,864,287
Total loans held-for-investment	$	37,437,129	$	34,555,668	$	222,871	$	34,778,539
Allowance for loan losses	(618,252)		(358,287)		—		(358,287)
Loans held-for-investment, net	$	36,818,877	$	34,197,381	$	222,871	$	34,420,252

(1)Includes net deferred loan fees, unearned fees, unamortized premiums and unaccreted discounts of $(67.0) million and $(43.2) million as of September 30, 2020 and December 31, 2019, respectively.

(2)Includes PPP loans of $1.77 billion as of September 30, 2020.

Loans held-for-investments’ accrued interest receivable was $108.1 million and $121.8 million as of September 30, 2020 and December 31, 2019, respectively. Reversal of interest income related to nonaccrual loans was approximately $1.2 million and $2.6 million during the three and nine months ended September 30, 2020, respectively. Interest income recognized on nonaccrual loans was approximately $18 thousand and $29 thousand for the three and nine months ended September 30, 2020, respectively. For the accounting policy on accrued interest receivable related to loans held-for-investment, see Note 2 — Current Accounting Developments and Summary of Significant Accounting Policies to the Consolidated Financial Statements in this Form 10-Q.

Loans totaling $27.06 billion and $22.43 billion as of September 30, 2020 and December 31, 2019, respectively, were pledged to secure borrowings and provide additional borrowing capacity from the FRB and the FHLB.

Credit Quality Indicators

All loans are subject to the Company’s credit review and monitoring. For the commercial portfolio, loans are risk rated based on an analysis of the borrower’s current payment performance or delinquency, repayment sources, financial and liquidity factors, including industry and geographic considerations. For the majority of the consumer portfolio, payment performance or delinquency is the driving indicator for the risk ratings.

For the Company’s internal credit risk ratings, each individual loan is given a risk rating of 1 through 10. Loans risk rated 1 through 5 are assigned an internal risk rating of “Pass”, with loans risk rated 1 being fully secured by cash or U.S. government and its agencies. Pass loans have sufficient sources of repayment to repay the loan in full, in accordance with all terms and conditions. Loans assigned a risk rating of 6 have potential weaknesses that warrant closer attention by management; these are assigned an internal risk rating of “Special Mention”. Loans assigned a risk rating of 7 or 8 have well-defined weaknesses that may jeopardize the full and timely repayment of the loan; these are assigned an internal risk rating of “Substandard”. Loans assigned a risk rating of 9 have insufficient sources of repayment and a high probability of loss; these are assigned an internal risk rating of “Doubtful”. Loans assigned a risk rating of 10 are uncollectable and of such little value that they are no longer considered bankable assets; these are assigned an internal risk rating of “Loss”. The Company reviews the internal risk ratings of its loan portfolio on a regular and ongoing basis, and adjusts the ratings based on changes in the borrowers’ financial status and the collectability of the loans.

The following table summarizes the Company’s loans held-for-investment as of September 30, 2020, presented by loan portfolio segments, internal risk ratings and vintage year. The vintage year is the year of origination, renewal or major modification.

($ in thousands)	September 30, 2020
	Term Loans												Revolving Loans Amortized Cost Basis		Revolving Loans Converted to Term Loans Amortized Cost Basis		Total
	Amortized Cost Basis by Origination Year
	2020		2019		2018		2017		2016		Prior
Commercial:
C&I:
Pass	$	3,445,214	$	1,746,325	$	674,022	$	361,648	$	72,914	$	140,094	$	5,954,875	$	9,735	$	12,404,827
Special mention	5,466		55,742		103,052		11,576		129		2,085		234,394		—		412,444
Substandard	42,386		95,152		30,772		24,972		6,254		6,004		281,302		—		486,842
Doubtful	6		—		—		—		905		—		—		—		911
Total C&I	3,493,072		1,897,219		807,846		398,196		80,202		148,183		6,470,571		9,735		13,305,024
CRE:
Pass	1,774,436		2,718,564		2,268,952		1,260,364		784,464		1,559,165		188,182		19,065		10,573,192
Special mention	3,593		51,598		56,943		84,362		1,600		81,431		—		—		279,527
Substandard	25,431		58,561		14,289		43,895		509		42,583		—		—		185,268
Total CRE	1,803,460		2,828,723		2,340,184		1,388,621		786,573		1,683,179		188,182		19,065		11,037,987
Multifamily residential:
Pass	692,581		956,657		493,769		386,329		146,346		318,675		5,342		—		2,999,699
Special mention	—		—		—		—		24,602		986		—		—		25,588
Substandard	—		739		23,807		—		—		7,441		—		—		31,987
Total multifamily residential	692,581		957,396		517,576		386,329		170,948		327,102		5,342		—		3,057,274
Construction and land:
Pass	118,823		253,079		155,371		5,248		21,371		1,158		—		—		555,050
Substandard	3,565		—		—		—		—		19,792		—		—		23,357
Total construction and land	122,388		253,079		155,371		5,248		21,371		20,950		—		—		578,407
Total CRE	2,618,429		4,039,198		3,013,131		1,780,198		978,892		2,031,231		193,524		19,065		14,673,668
Total commercial	6,111,501		5,936,417		3,820,977		2,178,394		1,059,094		2,179,414		6,664,095		28,800		27,978,692
Consumer:
Single-family residential:
Pass	1,619,709		1,916,265		1,603,227		1,086,999		561,422		978,167		—		—		7,765,789
Special mention	—		227		347		351		324		3,474		—		—		4,723
Substandard	—		—		1,474		2,159		858		10,756		—		—		15,247
Total single-family residential mortgage	1,619,709		1,916,492		1,605,048		1,089,509		562,604		992,397		—		—		7,785,759
HELOCs:
Pass	7		454		2,823		5,993		4,666		18,891		1,260,001		208,520		1,501,355
Special mention	—		—		—		—		—		—		3		637		640
Substandard	—		—		488		4,625		1,266		2,785		—		3,229		12,393
Total HELOCs	7		454		3,311		10,618		5,932		21,676		1,260,004		212,386		1,514,388
Total residential mortgage	1,619,716		1,916,946		1,608,359		1,100,127		568,536		1,014,073		1,260,004		212,386		9,300,147
Other consumer:
Pass	18,282		3,625		34		1,838		—		84,179		47,837		—		155,795
Substandard	—		—		—		2,491		—		—		4		—		2,495
Total other consumer	18,282		3,625		34		4,329		—		84,179		47,841		—		158,290
Total consumer	1,637,998		1,920,571		1,608,393		1,104,456		568,536		1,098,252		1,307,845		212,386		9,458,437
Total	$	7,749,499	$	7,856,988	$	5,429,370	$	3,282,850	$	1,627,630	$	3,277,666	$	7,971,940	$	241,186	$	37,437,129

Revolving loans that are converted to term loans presented in the table above are excluded from the term loans by vintage year columns. During the three and nine months ended September 30, 2020, HELOCs totaling $59.8 million and $118.2 million, respectively, were converted to term loans. One C&I revolving loan of $250 thousand was converted to a term loan during the three and nine months ended September 30, 2020 and there were no conversions of CRE revolving loans to term loans during the three and nine months ended September 30, 2020.

The following tables present the credit risk ratings for non-PCI and PCI loans by portfolio segments as of December 31, 2019:

($ in thousands)	December 31, 2019
	Pass		Special Mention		Substandard		Doubtful		Total Non-PCI Loans
Commercial:
C&I	$	11,423,094	$	406,543	$	302,509	$	16,975	$	12,149,121
CRE:
CRE	10,003,749		83,683		77,815		—		10,165,247
Multifamily residential	2,806,475		20,406		7,331		—		2,834,212
Construction and land	603,447		—		25,012		—		628,459
Total CRE	13,413,671		104,089		110,158		—		13,627,918
Total commercial	24,836,765		510,632		412,667		16,975		25,777,039
Consumer:
Residential mortgage:
Single-family residential	7,012,522		2,278		14,179		—		7,028,979
HELOCs	1,453,207		2,787		10,742		—		1,466,736
Total residential mortgage	8,465,729		5,065		24,921		—		8,495,715
Other consumer	280,392		5		2,517		—		282,914
Total consumer	8,746,121		5,070		27,438		—		8,778,629
Total	$	33,582,886	$	515,702	$	440,105	$	16,975	$	34,555,668

($ in thousands)	December 31, 2019
	Pass		Special Mention		Substandard		Doubtful		Total PCI Loans
Commercial:
C&I	$	1,810	$	—	$	—	$	—	$	1,810
CRE:
CRE	102,257		—		10,944		—		113,201
Multifamily residential	22,162		—		—		—		22,162
Construction and land	40		—		—		—		40
Total CRE	124,459		—		10,944		—		135,403
Total commercial	126,269		—		10,944		—		137,213
Consumer:
Residential mortgage:
Single-family residential	79,517		—		94		—		79,611
HELOCs	5,849		—		198		—		6,047
Total residential mortgage	85,366		—		292		—		85,658
Total consumer	85,366		—		292		—		85,658
Total (1)	$	211,635	$	—	$	11,236	$	—	$	222,871

(1)Loans net of ASC 310-10 discount.

Nonaccrual and Past Due Loans

Loans that are 90 or more days past due are generally placed on nonaccrual status, unless the loan is well-collateralized or guaranteed by government agencies, and in the process of collection. Loans that are less than 90 days past due but have identified deficiencies, such as when the full collection of principal or interest becomes uncertain, are also placed on nonaccrual status. The following table presents the aging analysis of total loans held-for-investment as of September 30, 2020:

($ in thousands)	September 30, 2020
	Current Accruing Loans		Accruing Loans 30-59  Days Past Due		Accruing Loans 60-89  Days Past Due		Total Accruing Past Due Loans		Nonaccrual Loans Less Than 90  Days Past Due		Nonaccrual Loans 90 or More Days  Past Due		Total Nonaccrual Loans		Total Loans
Commercial:
C&I	$	13,105,895	$	6,024	$	47,119	$	53,143	$	110,068	$	35,918	$	145,986	$	13,305,024
CRE:
CRE	10,973,345		8,646		—		8,646		1,338		54,658		55,996		11,037,987
Multifamily residential	3,049,683		3,504		359		3,863		2,404		1,324		3,728		3,057,274
Construction and land	578,407		—		—		—		—		—		—		578,407
Total CRE	14,601,435		12,150		359		12,509		3,742		55,982		59,724		14,673,668
Total commercial	27,707,330		18,174		47,478		65,652		113,810		91,900		205,710		27,978,692
Consumer:
Residential mortgage:
Single-family residential	7,755,878		9,076		4,911		13,987		1,149		14,745		15,894		7,785,759
HELOCs	1,497,315		4,038		640		4,678		580		11,815		12,395		1,514,388
Total residential mortgage	9,253,193		13,114		5,551		18,665		1,729		26,560		28,289		9,300,147
Other consumer	155,120		672		3		675		—		2,495		2,495		158,290
Total consumer	9,408,313		13,786		5,554		19,340		1,729		29,055		30,784		9,458,437
Total	$	37,115,643	$	31,960	$	53,032	$	84,992	$	115,539	$	120,955	$	236,494	$	37,437,129

The following table presents amortized cost of loans on nonaccrual status for which there was no related allowance for loan losses as of September 30, 2020:

($ in thousands)	September 30, 2020
Commercial:
C&I	$	95,475
CRE:
CRE	54,659
Multifamily residential	2,550
Total CRE	57,209
Total commercial	152,684
Consumer:
Residential mortgage:
Single-family residential	6,014
HELOCs	8,339
Total residential mortgage	14,353
Other consumer	2,491
Total consumer	16,844
Total nonaccrual loans with no related allowance for loan losses	$	169,528

The following table presents the aging analysis of non-PCI loans as of December 31, 2019:

($ in thousands)	December 31, 2019
	Current Accruing Loans		Accruing Loans 30-59 Days Past Due		Accruing Loans 60-89 Days Past Due		Total Accruing Past Due Loans		Nonaccrual Loans Less Than 90  Days Past Due		Nonaccrual Loans 90 or More Days  Past Due		Total Nonaccrual Loans		Total Non-PCI Loans
Commercial:
C&I	$	12,026,131	$	31,121	$	17,034	$	48,155	$	31,084	$	43,751	$	74,835	$	12,149,121
CRE:
CRE	10,123,999		22,830		1,977		24,807		540		15,901		16,441		10,165,247
Multifamily residential	2,832,664		198		531		729		534		285		819		2,834,212
Construction and land	628,459		—		—		—		—		—		—		628,459
Total CRE	13,585,122		23,028		2,508		25,536		1,074		16,186		17,260		13,627,918
Total commercial	25,611,253		54,149		19,542		73,691		32,158		59,937		92,095		25,777,039
Consumer:
Residential mortgage:
Single-family residential	6,993,597		15,443		5,074		20,517		1,964		12,901		14,865		7,028,979
HELOCs	1,448,930		4,273		2,791		7,064		1,448		9,294		10,742		1,466,736
Total residential mortgage	8,442,527		19,716		7,865		27,581		3,412		22,195		25,607		8,495,715
Other consumer	280,386		6		5		11		—		2,517		2,517		282,914
Total consumer	8,722,913		19,722		7,870		27,592		3,412		24,712		28,124		8,778,629
Total	$	34,334,166	$	73,871	$	27,412	$	101,283	$	35,570	$	84,649	$	120,219	$	34,555,668

PCI loans were excluded from the above aging analysis table as of December 31, 2019, as the Company elected to account for these loans on a pool level basis under ASC 310-30 at the time of acquisition. As of December 31, 2019, PCI loans on nonaccrual status totaled $297 thousand.

Foreclosed Assets

Foreclosed assets, consisting of OREO and other nonperforming assets, are included in Other assets on the Consolidated Balance Sheet. The Company had $23.4 million in foreclosed assets as of September 30, 2020 compared with $1.3 million as of December 31, 2019. The Company commences the foreclosure process on consumer mortgage loans when a borrower becomes 120 days delinquent in accordance with the Consumer Finance Protection Bureau guidelines. The carrying values of consumer real estate loans that were in the process of active or suspended foreclosure were $3.5 million and $7.2 million as of September 30, 2020 and December 31, 2019, respectively. The Company has suspended certain mortgage foreclosure activities in connection with our actions to support our customers during the COVID-19 pandemic.

Troubled Debt Restructurings

TDRs are individually evaluated, and the type of restructuring is selected based on the loan type and the circumstances of the borrower’s financial difficulty. A TDR is a modification of the terms of a loan when the Company, for economic or legal reasons related to the borrower’s financial difficulties, grants a concession to the borrower that it would not have otherwise considered. The Company has implemented various commercial and consumer loan modification programs to provide its borrowers relief from the economic impacts of the COVID-19 pandemic that are not considered TDRs. For additional details related to the COVID-19 pandemic, see Note 2 — Current Accounting Developments and Summary of Significant Accounting Policies — Summary of Significant Accounting Policies — Troubled Debt Restructurings to the Consolidated Financial Statements.

The following tables present the additions to TDRs for the three and nine months ended September 30, 2020 and 2019:

($ in thousands)	Loans Modified as TDRs During the Three Months Ended September 30,
	2020							2019
	Number of Loans	Pre- Modification Outstanding Recorded Investment		Post- Modification Outstanding Recorded    Investment (1)		Financial    Impact (2)		Number of Loans	Pre- Modification Outstanding Recorded Investment		Post- Modification Outstanding Recorded    Investment (1)		Financial    Impact (2)
Commercial:
C&I	6	$	43,378	$	35,568	$	12,108	1	$	7,933	$	6,000	$	2,396
CRE:
CRE	2	21,429		21,242		21		—	—		—		—
Multifamily residential	1	1,220		1,226		—		—	—		—		—
Total CRE	3	22,649		22,468		21		—	—		—		—
Total commercial	9	66,027		58,036		12,129		1	7,933		6,000		2,396
Consumer:
Residential mortgage:
Single-family residential	—	—		—		—		1	903		893		—
HELOCs	—	—		—		—		1	139		136		—
Total residential mortgage	—	—		—		—		2	1,042		1,029		—
Total consumer	—	—		—		—		2	1,042		1,029		—
Total	9	$	66,027	$	58,036	$	12,129	3	$	8,975	$	7,029	$	2,396

($ in thousands)	Loans Modified as TDRs During the Nine Months Ended September 30,
	2020							2019
	Number of Loans	Pre- Modification Outstanding Recorded Investment		Post- Modification Outstanding Recorded    Investment (1)		Financial    Impact (2)		Number of Loans	Pre- Modification Outstanding Recorded Investment		Post- Modification Outstanding Recorded    Investment (1)		Financial    Impact (2)
Commercial:
C&I	11	$	93,235	$	79,713	$	12,507	9	$	85,073	$	81,038	$	9,231
CRE:
CRE	2	21,429		21,242		21		—	—		—		—
Multifamily residential	1	1,220		1,226		—		—	—		—		—
Total CRE	3	22,649		22,468		21		—	—		—		—
Total commercial	14	115,884		102,181		12,528		9	85,073		81,038		9,231
Consumer:
Residential mortgage:
Single-family residential	—	—		—		—		2	1,123		1,109		2
HELOCs	—	—		—		—		1	139		136		—
Total residential mortgage	—	—		—		—		3	1,262		1,245		2
Total consumer	—	—		—		—		3	1,262		1,245		2
Total	14	$	115,884	$	102,181	$	12,528	12	$	86,335	$	82,283	$	9,233

(1)Includes subsequent payments after modification and reflects the balance as of September 30, 2020 and 2019.

(2)Includes charge-offs and specific reserves recorded since the modification date.

The following tables present the TDR post-modification outstanding balances for the three and nine months ended September 30, 2020 and 2019 by modification type:

($ in thousands)	Modification Type During the Three Months Ended September 30,
	2020								2019
	Principal (1)		Principal and Interest		Interest Deferments		Total		Principal (1)		Interest Deferments		Other		Total
Commercial:
C&I	$	19,025	$	—	$	16,543	$	35,568	$	6,000	$	—	$	—	$	6,000
CRE:
CRE	21,242		—		—		21,242		—		—		—		—
Multifamily residential	1,226		—		—		1,226		—		—		—		—
Total CRE	22,468		—		—		22,468		—		—		—		—
Total commercial	41,493		—		16,543		58,036		6,000		—		—		6,000
Consumer:
Residential mortgage:
Single-family residential	—		—		—		—		—		893		—		893
HELOCs	—		—		—		—		—		—		136		136
Total residential mortgage	—		—		—		—		—		893		136		1,029
Total consumer	—		—		—		—		—		893		136		1,029
Total	$	41,493	$	—	$	16,543	$	58,036	$	6,000	$	893	$	136	$	7,029

($ in thousands)	Modification Type During the Nine Months Ended September 30,
	2020								2019
	Principal (1)		Principal   and Interest (2)		Interest Deferments		Total		Principal (1)		Interest Deferments		Other (3)		Total
Commercial:
C&I	$	36,043	$	10,819	$	32,851	$	79,713	$	44,271	$	—	$	36,767	$	81,038
CRE:
CRE	21,242		—		—		21,242		—		—		—		—
Multifamily residential	1,226		—		—		1,226		—		—		—		—
Total CRE	22,468		—		—		22,468		—		—		—		—
Total commercial	58,511		10,819		32,851		102,181		44,271		—		36,767		81,038
Consumer:
Residential mortgage:
Single-family residential	—		—		—		—		—		1,109		—		1,109
HELOCs	—		—		—		—		—		—		136		136
Total residential mortgage	—		—		—		—		—		1,109		136		1,245
Total consumer	—		—		—		—		—		1,109		136		1,245
Total	$	58,511	$	10,819	$	32,851	$	102,181	$	44,271	$	1,109	$	36,903	$	82,283

(1)Includes forbearance payments, term extensions and principal deferments that modify the terms of the loan from principal and interest payments to interest payments only.

(2)Includes principal and interest deferments or reductions.

(3)Includes funding to secure additional collateral and provides liquidity to collateral-dependent C&I loans.

A TDR may become delinquent and result in payment default (generally 90 days past due) subsequent to restructuring. The following tables present information on loans for which a subsequent payment default occurred during the three and nine months ended September 30, 2020 and 2019, respectively, which had been modified as TDR within the previous 12 months of its default, and were still in default as of September 30, 2020 and 2019:

($ in thousands)	Loans Modified as TDRs that Subsequently Defaulted During the Three Months Ended September 30,
	2020			2019
	Number of Loans	Recorded Investment		Number of Loans	Recorded Investment
Commercial:
C&I	—	$	—	4	$	27,040
Total commercial	—	—		4	27,040
Total	—	$	—	4	$	27,040

($ in thousands)	Loans Modified as TDRs that Subsequently Defaulted During the Nine Months Ended September 30,
	2020			2019
	Number of Loans	Recorded Investment		Number of Loans	Recorded Investment
Commercial:
C&I	1	$	16,309	5	$	28,415
Total commercial	1	16,309		5	28,415
Total	1	$	16,309	5	$	28,415

The amount of additional funds committed to lend to borrowers whose terms have been modified as TDRs was $5.0 million and $2.2 million as of September 30, 2020 and December 31, 2019, respectively.

Impaired Loans

In connection with the adoption of ASU 2016-13 on January 1, 2020, the Company no longer provides information on impaired loans. Information on non-PCI impaired loans as of December 31, 2019 is presented as follows:

($ in thousands)	December 31, 2019
	Unpaid Principal Balance		Recorded Investment With No Allowance		Recorded Investment With Allowance		Total Recorded Investment		Related Allowance
Commercial:
C&I	$	174,656	$	73,956	$	40,086	$	114,042	$	2,881
CRE:
CRE	27,601		20,098		1,520		21,618		97
Multifamily residential	4,965		1,371		3,093		4,464		55
Construction and land	19,696		19,691		—		19,691		—
Total CRE	52,262		41,160		4,613		45,773		152
Total commercial	226,918		115,116		44,699		159,815		3,033
Consumer:
Residential mortgage:
Single-family residential	23,626		8,507		13,704		22,211		35
HELOCs	13,711		6,125		7,449		13,574		8
Total residential mortgage	37,337		14,632		21,153		35,785		43
Other consumer	2,517		—		2,517		2,517		2,517
Total consumer	39,854		14,632		23,670		38,302		2,560
Total non-PCI impaired loans	$	266,772	$	129,748	$	68,369	$	198,117	$	5,593

The following table presents the average recorded investment and interest income recognized on non-PCI impaired loans for the three and nine months ended September 30, 2019:

($ in thousands)	Three Months Ended September 30, 2019				Nine Months Ended September 30, 2019
	Average Recorded Investment		Recognized Interest    Income (1)		Average Recorded Investment		Recognized Interest    Income (1)
Commercial:
C&I	$	150,063	$	340	$	198,024	$	2,156
CRE:
CRE	28,846		114		33,329		363
Multifamily residential	5,226		58		5,856		179
Total CRE	34,072		172		39,185		542
Total commercial	184,135		512		237,209		2,698
Consumer:
Residential mortgage:
Single-family residential	23,779		124		27,758		382
HELOCs	15,382		37		19,529		93
Total residential mortgage	39,161		161		47,287		475
Other consumer	2,504		—		2,526		—
Total consumer	41,665		161		49,813		475
Total non-PCI impaired loans	$	225,800	$	673	$	287,022	$	3,173

(1)Includes interest income recognized on accruing non-PCI TDRs. Interest payments received on nonaccrual non-PCI loans are reflected as a reduction to principal, not as interest income.

Allowance for Loan Losses

On January 1, 2020, the Company adopted ASU 2016-13 that establishes a single allowance framework for all financial assets measured at amortized cost and certain off-balance sheet credit exposures. It requires the measurement of the allowance for loan losses to be based on management’s best estimate of lifetime expected credit losses inherent in the Company’s relevant financial assets. Balance sheet information and results of operations for reporting periods beginning with January 1, 2020 are presented under ASC 326, while prior period comparisons continue to be presented under legacy GAAP.

The process of the allowance for loan losses involves procedures to consider the unique risk characteristics of the portfolio segments. For each loan portfolio segment, the expected credit losses are estimated collectively for groups of loans with similar risk characteristics. For loans that do not share similar risk characteristics, the expected credit losses are estimated individually.

Allowance for Collectively Evaluated Loans

Quantitative Component — The allowance for loan losses is estimated using quantitative methods that consider a variety of factors such as historical loss experience, the current credit quality of the portfolio, as well as an economic outlook over the life of the loan. The Company incorporates forward-looking information using macroeconomic scenarios applied over the forecasted life of the loans. The forward-looking information is limited to the reasonable and supportable period. These macroeconomic scenarios include variables that are considered key drivers of increases and decreases in credit losses. The Company utilizes a probability-weighted multiple scenario forecast approach. These scenarios may consist of a base forecast representing management's view of the most likely outcome, combined with downside and upside scenarios reflecting possible worsening or improving economic conditions. A probability-weighted average of these macroeconomic scenarios over a reasonable and supportable forecast period is incorporated into the quantitative models. If the loans’ life extends beyond the reasonable and supportable forecast period, then historical experience is considered over the remaining life of the loans in estimation of the allowance for loan losses.

Qualitative Component — The Company also considers the following qualitative factors in the determination of the collectively evaluated allowance, if these factors have not already been captured by the quantitative model. Such qualitative factors may include, but not limited to:

•Loan growth trends;

•The volume and severity of past due financial assets, and the volume and severity of adversely classified or rated financial assets;

•The Company’s lending policies and procedures, including changes in lending strategies, underwriting standards, collection, write-off and recovery practices,

•Knowledge of the borrower’s operations or the borrower’s standing in the community;

•The quality of the Company’s credit review system;

•The experience, ability and depth of the Company’s management, lending staff and other relevant staff;

•The effect of other external factors such as the regulatory, legal and technological environments; and

•Actual and expected changes in international, national, regional, and local economic and business conditions in which the Company operates, including the actual and expected conditions of various market segments.

The following table provides key credit risk characteristics and macroeconomic variables that the Company uses to estimate the expected credit losses by portfolio segment:

Portfolio Segment	Risk Characteristics	Macroeconomic Variables
C&I	Internal risk rating; size and credit spread at origination, and time to maturity	Unemployment rate, and two and ten year treasury spread
CRE, Multifamily residential, and Construction and land	Delinquency status; maturity date; collateral value; property type, and geographic location	Unemployment rate; GDP, and U.S. Treasury rates
Single-family residential and HELOCs	FICO; delinquency status; maturity date; collateral value, and geographic location	Unemployment rate; GDP, and home price index
Other consumer	Historical loss experience	Immaterial (1)

(1)Macroeconomic variables are included in the qualitative estimate.

Management updated the macroeconomic forecast used in its credit loss estimation process as of September 30, 2020, which reflected more stabilized economic conditions as a result of an improved macroeconomic forecast, compared with June 30, 2020. The improvements in the macroeconomic forecast used in the credit loss estimation reflected improvements in gross domestic product growth and unemployment rate forecasts. The Company also considered the economic uncertainty caused by the COVID-19 pandemic, U.S. monetary and fiscal responses to the pandemic, the expected impacts of lower oil prices and deteriorating credit trends on the oil & gas portfolio, among other assumptions. For the three and nine months ended September 30, 2020, there were no changes to the reasonable and supportable forecast period, and reversion to historical loss experience method.

Allowance for Loan Losses for the Commercial Loan Portfolio — The Company’s C&I loan lifetime loss rate model estimates credit losses by estimating a loss rate expected over the life of a loan. This loss rate is applied to the amortized cost basis, excluding accrued interest receivable, to determine expected credit losses. The lifetime loss rate model’s reasonable and supportable period spans eight quarters, thereafter immediately reverting to the historical average loss rate, expressed implicitly through the loan-level lifetime loss rate.

For CRE loans, projected probability of defaults (“PDs”) and loss given defaults (“LGDs”) are applied to the estimated exposure at default, considering the term and payment structure of the loan, to generate estimates of expected loss at the loan level. After a reasonable and supportable period, the forecast of future economic conditions reverts to long-run historical economic trends.

In order to estimate the life of a loan under both models, the contractual term of the loan is adjusted for estimated prepayments, which are based on historical prepayment experience.

Allowance for Loan Losses for the Consumer Loan Portfolio — For single-family residential and HELOC loans, projected PDs and LGDs are applied to the estimated exposure at default, considering the term and payment structure of the loan, to generate estimates of expected loss at the loan level. After a reasonable and supportable period, the forecast of future economic conditions reverts to long-run historical economic trends.

For other consumer loans, the Company uses a loss rate approach. In order to estimate the life of a loan, the contractual term of the loan is adjusted for estimated prepayments, which are based on historical prepayment experience.

Qualitative Allowance for Collectively Evaluated Loans — While the Company’s allowance methodologies strive to reflect all relevant credit risk factors, there continues to be uncertainty associated with, but not limited to, potential imprecision in the estimation process due to the inherent time lag of obtaining information and normal variations between expected and actual outcomes. The Company may hold additional qualitative reserves that are designed to provide coverage for losses attributable to such risk. The allowance for loan losses as of September 30, 2020 also included qualitative adjustments for certain industry sectors, such as oil & gas, included as part of the C&I loan portfolio.

Allowance for Individually Assessed Loans — When a loan no longer shares similar risk characteristics with other loans, such as in the case for certain nonaccrual or TDR loans, the Company estimates the allowance for loan losses on an individual loan basis. The allowance for loan losses for individually evaluated loans is measured as the difference between the recorded value of the loans and their fair value. For loans evaluated individually, the Company uses one of three different asset valuation measurement methods: (1) the fair value of collateral less costs to sell; (2) the present value of expected future cash flows; and (3) the loan's observable market price. If an individually evaluated loan is determined to be collateral dependent, the Company applies the fair value of the collateral less costs to sell method. If an individually evaluated loan is determined not to be collateral dependent, the Company uses the present value of future cash flows or the observable market value of the loan.

Collateral-Dependent Loans — When a loan is collateral dependent, the allowance is measured on an individual loan basis and is limited to the difference between the recorded value and fair value of the collateral less cost of disposal or sale. As of September 30, 2020, collateral-dependent commercial and consumer loans totaled $109.7 million and $17.6 million, respectively. The Company's commercial collateral-dependent loans were secured by real estates or other collateral. The Company's consumer collateral-dependent loans were all residential mortgage loans, secured by their underlying real estates. As of September 30, 2020, the collateral value of the properties securing each of these collateral dependent loans, net of selling costs, exceeded the recorded value of the individual loans. For the three and nine months ended September 30, 2020, there were no significant changes or deterioration in the collateral securing these loans.

The following tables summarize the activity in the allowance for loan losses by portfolio segments for the three and nine months ended September 30, 2020 and 2019:

($ in thousands)		Three Months Ended September 30, 2020
		Commercial								Consumer						Total
		C&I		CRE						Residential Mortgage				Other Consumer
				CRE		Multifamily Residential		Construction and Land		Single- Family Residential		HELOCs
Allowance for loan losses, beginning of period		$	380,723	$	176,040	$	25,058	$	18,551	$	25,314	$	3,867	$	2,518	$	632,071
Provision for (reversal of) credit losses on loans	(a)	31,691		(8,301)		(1,916)		(8,180)		(2,692)		(637)		(76)		9,889
Gross charge-offs		(25,111)		(1,414)		—		—		—		—		(124)		(26,649)
Gross recoveries		1,218		485		665		30		—		43		—		2,441
Total net (charge-offs) recoveries		(23,893)		(929)		665		30		—		43		(124)		(24,208)
Foreign currency translation adjustment		500		—		—		—		—		—		—		500
Allowance for loan losses, end of period		$	389,021	$	166,810	$	23,807	$	10,401	$	22,622	$	3,273	$	2,318	$	618,252

($ in thousands)		Three Months Ended September 30, 2019
		Commercial								Consumer						Total
		C&I		CRE						Residential Mortgage				Other Consumer
				CRE		Multifamily Residential		Construction and Land		Single- Family Residential		HELOCs
Allowance for loan losses, beginning of period		$	205,503	$	39,811	$	19,280	$	22,961	$	32,763	$	6,177	$	4,130	$	330,625
Provision for (reversal of) credit losses on loans	(a)	37,281		(3,213)		985		6,189		(2,877)		(326)		(160)		37,879
Gross charge-offs		(25,098)		(1,021)		—		—		(11)		—		(12)		(26,142)
Gross recoveries		1,648		1,896		42		21		60		5		7		3,679
Total net (charge-offs) recoveries		(23,450)		875		42		21		49		5		(5)		(22,463)
Foreign currency translation adjustment		(465)		—		—		—		—		—		—		(465)
Allowance for loan losses, end of period		$	218,869	$	37,473	$	20,307	$	29,171	$	29,935	$	5,856	$	3,965	$	345,576

($ in thousands)		Nine Months Ended September 30, 2020
		Commercial								Consumer						Total
		C&I		CRE						Residential Mortgage				Other Consumer
				CRE		Multifamily Residential		Construction and Land		Single- Family Residential		HELOCs
Allowance for loan losses, beginning of period		$	238,376	$	40,509	$	22,826	$	19,404	$	28,527	$	5,265	$	3,380	$	358,287
Impact of ASU 2016-13 adoption		74,237		72,169		(8,112)		(9,889)		(3,670)		(1,798)		2,221		125,158
Allowance for loan losses, January 1, 2020		312,613		112,678		14,714		9,515		24,857		3,467		5,601		483,445
Provision for (reversal of) credit losses on loans	(a)	130,171		46,449		7,273		828		(2,659)		(20)		(3,197)		178,845
Gross charge-offs		(57,466)		(2,688)		—		—		—		(221)		(180)		(60,555)
Gross recoveries		3,395		10,371		1,820		58		424		47		94		16,209
Total net (charge-offs) recoveries		(54,071)		7,683		1,820		58		424		(174)		(86)		(44,346)
Foreign currency translation adjustment		308		—		—		—		—		—		—		308
Allowance for loan losses, end of period		$	389,021	$	166,810	$	23,807	$	10,401	$	22,622	$	3,273	$	2,318	$	618,252

($ in thousands)		Nine Months Ended September 30, 2019
		Commercial								Consumer						Total
		C&I		CRE						Residential Mortgage				Other Consumer
				CRE		Multifamily Residential		Construction and Land		Single- Family Residential		HELOCs
Allowance for loan losses, beginning of period		$	189,117	$	40,666	$	19,885	$	20,290	$	31,340	$	5,774	$	4,250	$	311,322
Provision for (reversal of) credit losses on loans	(a)	78,685		(6,127)		46		8,358		(1,528)		75		(259)		79,250
Gross charge-offs		(54,087)		(1,021)		—		—		(11)		—		(40)		(55,159)
Gross recoveries		5,612		3,955		376		523		134		7		14		10,621
Total net (charge-offs) recoveries		(48,475)		2,934		376		523		123		7		(26)		(44,538)
Foreign currency translation adjustment		(458)		—		—		—		—		—		—		(458)
Allowance for loan losses, end of period		$	218,869	$	37,473	$	20,307	$	29,171	$	29,935	$	5,856	$	3,965	$	345,576

The following table summarizes the activity in the allowance for unfunded credit commitments for the three and nine months ended September 30, 2020 and 2019:

($ in thousands)		Three Months Ended September 30,				Nine Months Ended September 30,
		2020		2019		2020		2019
Unfunded credit facilities
Allowance for unfunded credit commitments, beginning of period		$	28,972	$	13,019	$	11,158	$	12,566
Impact of ASU 2016-13 adoption		—		—		10,457		—
Provision for credit losses on unfunded credit commitments	(b)	111		405		7,468		858
Allowance for unfunded credit commitments, end of period		$	29,083	$	13,424	$	29,083	$	13,424
Provision for credit losses	(a) + (b)	$	10,000	$	38,284	$	186,313	$	80,108

The allowance for loan losses as of September 30, 2020 was $618.3 million, an increase of $260.0 million compared with $358.3 million as of December 31, 2019. The overall increase in allowance for loan losses and the provision for credit losses of $186.3 million for the nine months ended September 30, 2020 were primarily driven by the deteriorating macroeconomic conditions and outlook as a result of the COVID-19 pandemic. In addition, the adoption of ASU 2016-13 increased the allowance for loan losses by $125.2 million on January 1, 2020. For the three months ended September 30, 2020, the provision for loan losses was $10.0 million, largely reflecting the improvement in the macroeconomic conditions and outlook as compared to June 30, 2020.

The allowance for unfunded credit commitments is maintained at a level that management believes to be sufficient to absorb estimated expected credit losses related to unfunded credit facilities. See Note 10 — Commitments and Contingencies to the Consolidated Financial Statements in this Form 10-Q for additional information related to unfunded credit commitments.

The following table presents the Company’s allowance for loan losses and recorded investments by portfolio segments and impairment methodology as of December 31, 2019. This table is no longer presented after December 31, 2019, given the adoption of ASU 2016-13 on January 1, 2020, which has a single impairment methodology.

($ in thousands)	December 31, 2019
	Commercial								Consumer						Total
	C&I		CRE						Residential Mortgage				Other Consumer
			CRE		Multifamily Residential		Construction and Land		Single- Family Residential		HELOCs
Allowance for loan losses
Individually evaluated for impairment	$	2,881	$	97	$	55	$	—	$	35	$	8	$	2,517	$	5,593
Collectively evaluated for impairment	235,495		40,412		22,771		19,404		28,492		5,257		863		352,694
Total	$	238,376	$	40,509	$	22,826	$	19,404	$	28,527	$	5,265	$	3,380	$	358,287
Recorded investment in loans
Individually evaluated for impairment	$	114,042	$	21,618	$	4,464	$	19,691	$	22,211	$	13,574	$	2,517	$	198,117
Collectively evaluated for impairment	12,035,079		10,143,629		2,829,748		608,768		7,006,768		1,453,162		280,397		34,357,551
Acquired with deteriorated credit quality (1)	1,810		113,201		22,162		40		79,611		6,047		—		222,871
Total (1)	$	12,150,931	$	10,278,448	$	2,856,374	$	628,499	$	7,108,590	$	1,472,783	$	282,914	$	34,778,539

(1)Loans net of ASC 310-10 discount.

Purchased Credit-Deteriorated Loans

On January 1, 2020, the amortized cost basis of PCD loans was adjusted to reflect the $1.2 million of allowance for loan losses. For the three and nine months ended September 30, 2020, the Company did not acquire any PCD loans. For information on PCD loans, see Note 2 — Current Accounting Developments and Summary of Significant Accounting Policies to the Consolidated Financial Statements in this Form 10-Q.

The following table presents the changes in the accretable yield on PCI loans for the three and nine months ended September 30, 2019:

($ in thousands)	Three Months Ended September 30, 2019		Nine Months Ended September 30, 2019
Accretable yield for PCI loans, beginning of period	$	64,053	$	74,870
Accretion	(6,198)		(18,205)
Changes in expected cash flows	(934)		256
Accretable yield for PCI loans, end of period	$	56,921	$	56,921

Loans Held-for-Sale

As of September 30, 2020 and December 31, 2019, loans held-for-sale of $4.1 million and $434 thousand, respectively, consisted of single-family residential loans. Refer to Note 1 — Summary of Significant Accounting Policies — Significant Accounting Policies — Loans Held-for-Sale to the Consolidated Financial Statements of the Company’s 2019 Form 10-K for additional details related to the Company’s loans held-for-sale.

Loan Transfers, Sales and Purchases

The Company purchases and sells loans in the secondary market in the ordinary course of business. Purchased loans may be transferred from held-for-investment to held-for-sale, and write-downs to allowance for loan losses are recorded, when appropriate. The following tables provide information about the carrying value of loans purchased for the held-for-investment portfolio, loans sold, and loans transferred from held-for-investment to held-for-sale at the lower of cost or fair value during the three and nine months ended September 30, 2020 and 2019:

($ in thousands)	Three Months Ended September 30, 2020
	Commercial								Consumer		Total
	C&I		CRE						Residential Mortgage
			CRE		Multifamily Residential		Construction and Land		Single-Family Residential
Loans transferred from held-for-investment to held-for-sale (1)	$	89,394	$	—	$	—	$	—	$	—	$	89,394
Sales (2)(3)(4)	$	92,237	$	—	$	—	$	—	$	31,847	$	124,084
Purchases	$	—	$	—	$	838	$	—	$	17,294	$	18,132

($ in thousands)	Three Months Ended September 30, 2019
	Commercial								Consumer		Total
	C&I		CRE						Residential Mortgage
			CRE		Multifamily Residential		Construction and Land		Single-Family Residential
Loans transferred from held-for-investment to held-for-sale (1)	$	34,071	$	14,969	$	—	$	—	$	—	$	49,040
Sales (2)(3)(4)	$	37,986	$	14,969	$	—	$	—	$	2,708	$	55,663
Purchases (5)	$	38,047	$	—	$	1,350	$	—	$	29,568	$	68,965

($ in thousands)	Nine Months Ended September 30, 2020
	Commercial								Consumer		Total
	C&I		CRE						Residential Mortgage
			CRE		Multifamily Residential		Construction and Land		Single-Family Residential
Loans transferred from held-for-investment to held-for-sale (1)	$	246,052	$	7,250	$	—	$	—	$	—	$	253,302
Sales (2)(3)(4)	$	248,895	$	7,250	$	—	$	—	$	50,197	$	306,342
Purchases (5)	$	143,086	$	—	$	2,358	$	—	$	18,378	$	163,822

($ in thousands)	Nine Months Ended September 30, 2019
	Commercial								Consumer		Total
	C&I		CRE						Residential Mortgage
			CRE		Multifamily Residential		Construction and Land		Single-Family Residential
Loans transferred from held-for-investment to held-for-sale (1)	$	189,237	$	31,624	$	—	$	1,573	$	—	$	222,434
Sales (2)(3)(4)	$	189,663	$	31,624	$	—	$	1,573	$	6,322	$	229,182
Purchases (5)	$	304,341	$	—	$	7,302	$	—	$	83,607	$	395,250

(1)The Company recorded write-downs of $2.8 million to the allowance for loan losses related to loans transferred from held-for-investment to held-for-sale for each of the three and nine months ended September 30, 2020, and $36 thousand and $426 thousand for the same periods in 2019, respectively.

(2)Includes originated loans sold of $112.3 million and $294.6 million for the three and nine months ended September 30, 2020, respectively, and $47.8 million and $180.0 million for the same periods in 2019, respectively. Originated loans sold consist primarily of C&I and single-family residential loans during the three and nine months ended September 30, 2020. In comparison, originated loans sold consist primarily of C&I loans for the same periods in 2019.

(3)Includes purchased loans of $11.8 million sold in the secondary market for each of the three and nine months ended September 30, 2020, and $7.9 million and $49.2 million for the same periods in 2019, respectively.

(4)Net gains on sales of loans were $361 thousand and $1.4 million for the three and nine months ended September 30, 2020, respectively, and $2.0 million and $3.0 million for the same periods in 2019, respectively.

(5)C&I loan purchases comprised primarily of syndicated C&I term loans.