Quarterly report pursuant to Section 13 or 15(d)

Loans and Leases

v3.8.0.1
Loans and Leases
 3 Months Ended
Mar. 31, 2018
Receivables [Abstract]  
Loans and Leases
Loans and leases

Loans and Leases Receivable, Net

Loans and leases receivable consisted of the following as of the dates indicated:
 
March 31, 2018
 
December 31, 2017
 
(in thousands)
Real estate loans:
 
 
 
Commercial property
 
 
 
Retail
$
909,414

 
$
915,273

Hospitality
731,531

 
681,325

Other (1)
1,423,903

 
1,417,273

Total commercial property loans
3,064,848

 
3,013,871

Construction
57,896

 
55,190

Residential property
545,053

 
521,853

Total real estate loans
3,667,797

 
3,590,914

Commercial and industrial loans:
 
 
 
Commercial term
184,083

 
182,685

Commercial lines of credit
190,255

 
181,894

International loans
35,042

 
34,622

Total commercial and industrial loans
409,380

 
399,201

Leases receivable
321,481

 
297,284

Consumer loans (2)
14,899

 
17,059

Loans and leases receivable
4,413,557

 
4,304,458

Allowance for loan and lease losses
(31,777
)
 
(31,043
)
Loans and leases receivable, net
$
4,381,780

 
$
4,273,415


(1) 
Includes, among other types, mixed-use, apartment, office, industrial, gas stations, faith-based facilities and warehouse; all other property types represent less than one percent of total loans and leases receivable.
(2) 
Consumer loans include home equity lines of credit of $12.7 million and $14.2 million as of March 31, 2018 and December 31, 2017, respectively.

Accrued interest on loans and leases receivable was $10.3 million and $10.2 million at March 31, 2018 and December 31, 2017, respectively. At March 31, 2018 and December 31, 2017, loans receivable of $1.1 billion were pledged to secure borrowing facilities from the FHLB.

Loans Held for Sale

The following is the activity for SBA loans held for sale for the three months ended March 31, 2018 and 2017:
 
SBA Loans Held for Sale
 
Real Estate
 
Commercial and Industrial
 
Total
 
(in thousands)
March 31, 2018
 
 
 
 
 
Balance at beginning of period
$
3,746

 
$
2,648

 
$
6,394

Originations
10,433

 
8,372

 
18,805

Sales
(12,028
)
 
(7,159
)
 
(19,187
)
Principal payoffs and amortization
—

 
(4
)
 
(4
)
Balance at end of period
$
2,151

 
$
3,857

 
$
6,008

 
 
 
 
 
 
March 31, 2017
 
 
 
 
 
Balance at beginning of period
$
7,410

 
$
1,906

 
$
9,316

Originations
12,633

 
6,559

 
19,192

Sales
(12,254
)
 
(7,389
)
 
(19,643
)
Principal payoffs and amortization
—

 
(16
)
 
(16
)
Balance at end of period
$
7,789

 
$
1,060

 
$
8,849



Allowance for Loan and Lease Losses

Activity in the allowance for loan and lease losses was as follows for the periods indicated:
 
As of and for the Three Months Ended
 
March 31, 2018
 
March 31, 2017
 
(in thousands)
Allowance for loan and lease losses:
 
 
 
Balance at beginning of period
$
31,043

 
$
32,429

Charge-offs
(1,632
)
 
(186
)
Recoveries on loans and leases previously charged off
1,717

 
989

Net recoveries
85

 
803

Loan and lease loss provision (income)
649

 
(80
)
Balance at end of period
$
31,777

 
$
33,152



Management believes the allowance for loan and lease losses is appropriate to provide for probable losses inherent in the loan and lease portfolio. However, the allowance is an estimate that is inherently uncertain and depends on the outcome of future events. Management’s estimates are based on previous loss experience; volume, growth and composition of the loan and lease portfolio; the value of collateral; and current economic conditions. Our lending is concentrated generally in real estate, commercial, SBA and trade finance lending to small and middle market businesses primarily in California, Texas, Illinois, Virginia, New Jersey, New York, Colorado, Georgia and Washington State.
The following table details the information on the allowance for loan and lease losses by portfolio segment as of and for the three months ended March 31, 2018 and 2017:
 
Real Estate
 
Commercial
and Industrial
 
Leases
Receivable
 
Consumer
 
Unallocated
 
Total
 
(In thousands)
As of and for the Three Months Ended March 31, 2018
 
 
 
 
 
 
 
 
 
 
 
Allowance for loan and lease losses on loans and leases:
 
 
 
 
 
 
 
 
 
 
 
Beginning balance
$
17,012

 
$
7,400

 
6,279

 
$
122

 
$
230

 
$
31,043

Charge-offs
(989
)
 
(279
)
 
(364
)
 
—

 
—

 
(1,632
)
Recoveries on loans and leases previously charged off
885

 
736

 
95

 
1

 
—

 
1,717

Loan and lease loss provision (income)
732

 
(967
)
 
1,100

 
2

 
(218
)
 
649

Ending balance
$
17,640

 
$
6,890

 
$
7,110

 
$
125

 
$
12

 
$
31,777

Individually evaluated for impairment
$
1,549

 
$
357

 
$
1,110

 
$
—

 
$
—

 
$
3,016

Collectively evaluated for impairment
$
16,091

 
$
6,533

 
$
6,000

 
$
125

 
$
12

 
$
28,761

 
 
 
 
 
 
 
 
 
 
 
 
Loans and leases receivable
$
3,667,797

 
$
409,380

 
$
321,481

 
$
14,899

 
$
—

 
$
4,413,557

Individually evaluated for impairment
$
18,513

 
$
2,843

 
$
4,200

 
$
894

 
$
—

 
$
26,450

Collectively evaluated for impairment
$
3,649,284

 
$
406,537

 
$
317,281

 
$
14,005

 
$
—

 
$
4,387,107


As of and for the Three Months Ended March 31, 2017
 
 
 
 
 
 
 
 
 
 
 
Allowance for loan and lease losses on loans and leases:
 
 
 
 
 
 
 
 
 
 
 
Beginning balance
$
26,134

 
$
5,623

 
307

 
$
199

 
$
166

 
$
32,429

Charge-offs
(104
)
 
(40
)
 
(42
)
 
—

 
—

 
(186
)
Recoveries on loans and leases previously charged off
712

 
277

 
—

 
—

 
—

 
989

Loan and lease loss provision (income)
(1,140
)
 
95

 
715

 
(69
)
 
319

 
(80
)
Ending balance
$
25,602

 
$
5,955

 
$
980

 
$
130

 
$
485

 
$
33,152

Individually evaluated for impairment
$
3,756

 
$
791

 
$
—

 
$
—

 
$
—

 
$
4,547

Collectively evaluated for impairment
$
21,846

 
$
5,164

 
$
980

$
—

$
130

 
$
485

 
$
28,605

 
 
 
 
 
 
 
 
 
 
 
 
Loans and leases receivable
$
3,348,875

 
$
317,682

 
$
259,591

 
$
17,803

 
$
—

 
$
3,943,951

Individually evaluated for impairment
$
20,795

 
$
3,828

 
$
—

 
$
321

 
$
—

 
$
24,944

Collectively evaluated for impairment
$
3,328,080

 
$
313,854

 
$
259,591

 
$
17,482

 
$
—

 
$
3,919,007






    
Loan and Lease Quality Indicators

As part of the on-going monitoring of the credit quality of our loan and lease portfolio, we utilize an internal loan and lease grading system to identify credit risk and assign an appropriate grade, from 0 to 8, for each loan or lease in our loan and lease portfolio. Third party loan reviews are performed throughout the year. Additional adjustments are made when determined to be necessary. The loan and lease grade definitions are as follows:
Pass and Pass-Watch: Pass and pass-watch loans and leases, grades 0-4, are in compliance in all respects with the Bank’s credit policy and regulatory requirements, and do not exhibit any potential or defined weaknesses as defined under Special Mention, Substandard or Doubtful. This category is the strongest level of the Bank’s loan and lease grading system. It incorporates all performing loans and leases with no credit weaknesses. It includes cash and stock/security secured loans or other investment grade loans.
Special Mention: A special mention credit, grade 5, has potential weaknesses that deserve management’s close attention. If not corrected, these potential weaknesses may result in deterioration of the repayment prospects of the debt and result in a Substandard classification. Loans and leases that have significant actual, not potential, weaknesses are considered more severely classified.
Substandard: A substandard credit, grade 6, has a well-defined weakness that jeopardizes the liquidation of the debt. A credit graded Substandard is not protected by the sound worth and paying capacity of the borrower, or of the value and type of collateral pledged. With a Substandard loan or lease, there is a distinct possibility that the Bank will sustain some loss if the weaknesses or deficiencies are not corrected.
Doubtful: A doubtful credit, grade 7, is one that has critical weaknesses that would make the collection or liquidation of the full amount due improbable. However, there may be pending events which may work to strengthen the credit, and therefore the amount or timing of a possible loss cannot be determined at the current time.
Loss: A loan or lease classified as loss, grade 8, is considered uncollectible and of such little value that its continuance as an active bank asset is not warranted. This classification does not mean that the loan or lease has absolutely no recovery or salvage value, but rather it is not practical or desirable to defer writing off this asset even though partial recovery may be possible in the future. Loans and leases classified as loss are charged off in a timely manner.

Under regulatory guidance, loans and leases graded special mention or worse are considered criticized loans and leases, and loans and leases graded substandard or worse are considered classified loans and leases.

     As of March 31, 2018 and December 31, 2017, pass/pass-watch, special mention and classified loans and leases, disaggregated by loan class, were as follows:
 
Pass/Pass-Watch
 
Special Mention
 
Classified
 
Total
 
(in thousands)
March 31, 2018
 
 
 
 
 
 
 
Real estate loans:
 
 
 
 
 
 
 
Commercial property
 
 
 
 
 
 
 
Retail
$
903,510

 
$
375

 
$
5,529

 
$
909,414

Hospitality
717,252

 
4,220

 
10,059

 
731,531

Other
1,407,438

 
9,040

 
7,425

 
1,423,903

Construction
57,896

 
—

 
—

 
57,896

Residential property
544,516

 
301

 
236

 
545,053

Total real estate loans
3,630,612

 
13,936

 
23,249

 
3,667,797

Commercial and industrial loans:
 
 
 
 
 
 

Commercial term
180,355

 
757

 
2,971

 
184,083

Commercial lines of credit
189,514

 
741

 
—

 
190,255

International loans
35,042

 
—

 
—

 
35,042

Total commercial and industrial loans
404,911

 
1,498

 
2,971

 
409,380

Leases receivable
317,281

 
—

 
4,200

 
321,481

Consumer loans
13,864

 
202

 
833

 
14,899

Total loans and leases
$
4,366,668

 
$
15,636

 
$
31,253

 
$
4,413,557

 
 
 
 
 
 
 
 
December 31, 2017
 
 
 
 
 
 
 
Real estate loans:
 
 
 
 
 
 
 
Commercial property
 
 
 
 
 
 
 
Retail
$
909,682

 
$
454

 
$
5,137

 
$
915,273

Hospitality
667,254

 
4,976

 
9,095

 
681,325

Other
1,397,658

 
11,045

 
8,570

 
1,417,273

Construction
55,190

 
—

 
—

 
55,190

Residential property
521,261

 
305

 
287

 
521,853

Total real estate loans
3,551,045

 
16,780

 
23,089

 
3,590,914

Commercial and industrial loans:
 
 
 
 
 
 
 
Commercial term
179,835

 
439

 
2,411

 
182,685

Commercial lines of credit
181,462

 
250

 
182

 
181,894

International loans
34,622

 
—

 
—

 
34,622

Total commercial and industrial loans
395,919

 
689

 
2,593

 
399,201

Leases receivable
292,832

 
—

 
4,452

 
297,284

Consumer loans
15,995

 
—

 
1,064

 
17,059

Total loans and leases
$
4,255,791

 
$
17,469

 
$
31,198

 
$
4,304,458


 
The following is an aging analysis of loans and leases, disaggregated by loan class, as of the dates indicated:
 
30-59 Days Past Due
 
60-89 Days Past Due
 
90 Days or More Past Due
 
Total Past Due
 
Current
 
Total
 
(in thousands)
March 31, 2018
 
 
 
 
 
 
 
 
 
 
 
Real estate loans:
 
 
 
 
 
 
 
 
 
 
 
Commercial property
 
 
 
 
 
 
 
 
 
 
 
Retail
$
295

 
$
—

 
$
689

 
$
984

 
$
908,430

 
$
909,414

Hospitality
5,585

 
—

 
819

 
6,404

 
725,127

 
731,531

Other
348

 
—

 
683

 
1,031

 
1,422,872

 
1,423,903

Construction
—

 
—

 
—

 
—

 
57,896

 
57,896

Residential property
1,715

 
—

 
—

 
1,715

 
543,338

 
545,053

Total real estate loans
7,943

 
—

 
2,191

 
10,134

 
3,657,663

 
3,667,797

Commercial and industrial loans:
 
 
 
 
 
 
 
 
 
 
 
Commercial term
496

 
406

 
259

 
1,161

 
182,922

 
184,083

Commercial lines of credit
—

 
—

 
—

 
—

 
190,255

 
190,255

International loans
—

 
—

 
—

 
—

 
35,042

 
35,042

Total commercial and industrial loans
496

 
406

 
259

 
1,161

 
408,219

 
409,380

Leases receivable
2,211

 
816

 
3,089

 
6,116

 
315,365

 
321,481

Consumer loans
6

 
2

 
—

 
8

 
14,891

 
14,899

Total loans and leases
$
10,656

 
$
1,224

 
$
5,539

 
$
17,419

 
$
4,396,138

 
$
4,413,557

 
 
 
 
 
 
 
 
 
 
 
 
December 31, 2017
 
 
 
 
 
 
 
 
 
 
 
Real estate loans:
 
 
 
 
 
 
 
 
 
 
 
Commercial property
 
 
 
 
 
 
 
 
 
 
 
Retail
$
96

 
$
15

 
$
630

 
$
741

 
$
914,532

 
$
915,273

Hospitality
3,421

 
168

 
398

 
3,987

 
677,338

 
681,325

Other
1,245

 
1,333

 
563

 
3,141

 
1,414,132

 
1,417,273

Construction
—

 
—

 
—

 
—

 
55,190

 
55,190

Residential property
609

 
—

 
—

 
609

 
521,244

 
521,853

Total real estate loans
5,371

 
1,516

 
1,591

 
8,478

 
3,582,436

 
3,590,914

Commercial and industrial loans:
 
 
 
 
 
 


 
 
 


Commercial term
430

 
567

 
829

 
1,826

 
180,859

 
182,685

Commercial lines of credit
250

 
—

 
182

 
432

 
181,462

 
181,894

International loans
—

 
—

 
—

 
—

 
34,622

 
34,622

Total commercial and industrial loans
680

 
567

 
1,011

 
2,258

 
396,943

 
399,201

Leases receivable
2,295

 
944

 
3,554

 
6,793

 
290,491

 
297,284

Consumer loans
—

 
—

 
—

 
—

 
17,059

 
17,059

Total loans and leases
$
8,346

 
$
3,027

 
$
6,156

 
$
17,529

 
$
4,286,929

 
$
4,304,458



There was $17,000 of loans that were 90 days or more past due and accruing interest as of March 31, 2018 and no loans that were 90 days or more past due and accruing interest as of December 31, 2017.

Impaired Loans and Leases

Loans and leases are considered impaired when the Bank will be unable to collect all interest and principal payments per the contractual terms of the loan and lease agreement, unless the loan is well-collateralized and in the process of collection; or they are classified as Troubled Debt Restructurings (“TDRs”) because, due to the financial difficulties of the borrowers, we have granted concessions to the borrowers we would not otherwise consider; or when current information or events make it unlikely to collect in full according to the contractual terms of the loan or lease agreements; or there is a deterioration in the borrower’s financial condition that raises uncertainty as to timely collection of either principal or interest; or full payment of both interest and principal is in doubt according to the original contractual terms.
We evaluate loan and lease impairment in accordance with applicable GAAP. Impaired loans and leases are measured based on the present value of expected future cash flows discounted at the receivable's effective interest rate or, as a practical expedient, at the receivable's observable market price or the fair value of the collateral if the loan or lease is collateral dependent, less estimated costs to sell. If the measure of the impaired loan or lease is less than the recorded investment in the loan or lease, the deficiency is either charged off against the allowance for loan and lease losses or we establish a specific allocation in the allowance for loan and lease losses. Additionally, loans and leases that are considered impaired are specifically excluded from the quarterly migration analysis when determining the amount of the allowance for loan and lease losses required for the period.
The allowance for collateral-dependent loans is determined by calculating the difference between the outstanding loan balance and the value of the collateral as determined by recent appraisals. The allowance for collateral-dependent loans varies from loan to loan based on the collateral coverage of the loan at the time of designation as nonperforming. We continue to monitor the collateral coverage, using recent appraisals, on these loans on a quarterly basis and adjust the allowance accordingly.

The following tables provide information on impaired loans and leases, disaggregated by loan class, as of the dates indicated:
 
Recorded
Investment
 
Unpaid 
Principal
Balance
 
With No
Related
Allowance
Recorded
 
With an
Allowance
Recorded
 
Related
Allowance
 
(in thousands)
March 31, 2018
 
 
 
 
 
 
 
 
 
Real estate loans:
 
 
 
 
 
 
 
 
 
Commercial property
 
 
 
 
 
 
 
 
 
Retail
$
1,394

 
$
1,417

 
$
1,336

 
$
58

 
$
5

Hospitality
7,413

 
8,962

 
3,671

 
3,742

 
1,543

Other
7,255

 
7,778

 
7,140

 
116

 
1

Residential property
2,450

 
2,596

 
2,450

 
—

 
—

Total real estate loans
18,512

 
20,753

 
14,597

 
3,916

 
1,549

Commercial and industrial loans
2,843

 
2,934

 
1,344

 
1,499

 
357

Leases receivable
4,200

 
4,324

 
934

 
3,265

 
1,110

Consumer loans
894

 
1,087

 
895

 
—

 
—

Total loans and leases
$
26,449

 
$
29,098

 
$
17,770

 
$
8,680

 
$
3,016

 
 
 
 
 
 
 
 
 
 
December 31, 2017
 
 
 
 
 
 
 
 
 
Real estate loans:
 
 
 
 
 
 
 
 
 
Commercial property
 
 
 
 
 
 
 
 
 
Retail
$
1,403

 
$
1,423

 
$
1,246

 
$
157

 
$
1

Hospitality
6,184

 
7,220

 
2,144

 
4,040

 
1,677

Other
8,513

 
9,330

 
7,569

 
944

 
394

Residential property
2,563

 
2,728

 
824

 
1,739

 
21

Total real estate loans
18,663

 
20,701

 
11,783

 
6,880

 
2,093

Commercial and industrial loans
3,039

 
3,081

 
1,068

 
1,971

 
441

Leases receivable
4,452

 
4,626

 
455

 
3,997

 
3,334

Consumer loans
1,029

 
1,215

 
919

 
110

 
10

Total loans and leases
$
27,183

 
$
29,623

 
$
14,225

 
$
12,958

 
$
5,878

 
Three Months Ended
 
Average Recorded Investment
 
Interest
Income
Recognized
 
(in thousands)
March 31, 2018
 
 
 
Real estate loans:
 
 
 
Commercial property
 
 
 
Retail
$
1,409

 
$
22

Hospitality
8,105

 
141

Other
7,843

 
110

Residential property
2,580

 
30

Total real estate loans
19,937

 
303

Commercial and industrial loans
2,914

 
40

Leases receivable
4,603

 
10

Consumer loans
1,048

 
14

Total loans and leases
$
28,502

 
$
367

 
 
 
 
March 31, 2017
 
 
 
Real estate loans:
 
 
 
Commercial property
 
 
 
Retail
$
1,667

 
$
31

Hospitality
6,254

 
67

Other
10,160

 
183

Residential property
2,773

 
33

Total real estate loans
20,854

 
314

Commercial and industrial loans
3,892

 
59

Consumer loans
324

 
3

Total loans and leases
$
25,070

 
$
376




The following is a summary of interest foregone on impaired loans and leases for the periods indicated:

 
Three Months Ended 
 March 31,
 
2018
 
2017
 
(in thousands)
Interest income that would have been recognized had impaired loans and leases performed in accordance with their original terms
$
654

 
$
591

Less: Interest income recognized on impaired loans and leases
(367
)
 
(376
)
Interest foregone on impaired loans and leases
$
287

 
$
215


    
There were no commitments to lend additional funds to borrowers whose loans are included in the table above.

Nonaccrual Loans and Leases and Nonperforming Assets

Loans and leases are placed on nonaccrual status when, in the opinion of management, the full timely collection of principal or interest is in doubt. Generally, the accrual of interest is discontinued when principal or interest payments become more than 90 days past due, unless management believes the receivable is adequately collateralized and in the process of collection. However, in certain instances, we may place a particular loan or lease receivable on nonaccrual status earlier, depending upon the individual circumstances surrounding the delinquency. When a receivable is placed on nonaccrual status, previously accrued but unpaid interest is reversed against current income. Subsequent collections of cash are applied as principal reductions when received, except when the ultimate collectability of principal is probable, in which case interest payments are credited to income. Nonaccrual loans and leases may be restored to accrual status when principal and interest payments become current and full repayment is expected.
    
The following table details nonaccrual loans and leases, excluding nonaccrual PCI loans of $1.0 million and $0.9 million as of March 31, 2018 and December 31, 2017, respectively, disaggregated by loan class, as of the dates indicated:
 
March 31, 2018
 
December 31, 2017
 
(in thousands)
Real estate loans:
 
 
 
Commercial property
 
 
 
Retail
$
237

 
$
224

Hospitality
6,495

 
5,263

Other
1,292

 
2,462

Residential property
451

 
591

Total real estate loans
8,475

 
8,540

Commercial and industrial loans:
 
 
 
Commercial term
1,881

 
1,710

Commercial lines of credit
—

 
182

Total commercial and industrial loans
1,881

 
1,892

Leases receivable
4,200

 
4,452

Consumer loans
789

 
921

Total nonaccrual loans and leases
$
15,345

 
$
15,805



The following table details nonperforming assets as of the dates indicated:
 
March 31, 2018
 
December 31, 2017
 
(in thousands)
Nonaccrual loans and leases
$
15,345

 
$
15,805

Loans and leases 90 days or more past due and still accruing
17

 
—

Total nonperforming loans and leases
15,362

 
15,805

Other real estate owned ("OREO")
1,660

 
1,946

Total nonperforming assets
$
17,022

 
$
17,751



OREO is included in prepaid expenses and other assets in the accompanying Consolidated Balance Sheets as of March 31, 2018 and December 31, 2017.

Troubled Debt Restructurings
    
The following table details TDRs as of March 31, 2018 and December 31, 2017:
 
Nonaccrual TDRs
 
Accrual TDRs
 
Deferral
of
Principal
 
Deferral
of
Principal
and
Interest
 
Reduction
of
Principal
and
Interest
 
Extension
of
Maturity
 
Total
 
Deferral
of
Principal
 
Deferral
of
Principal
and
Interest
 
Reduction
of
Principal
and
Interest
 
Extension
of
Maturity
 
Total
 
(in thousands)
March 31, 2018
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Real estate loans
$
1,479

 
$
3,709

 
$
15

 
$
—

 
$
5,203

 
$
3,408

 
$
—

 
$
1,356

 
$
1,230

 
5,994

Commercial and industrial loans
128

 
107

 
740

 
484

 
1,459

 


 
177

 
471

 
369

 
1,017

Consumer loans
789

 
—

 
—

 
—

 
789

 
—

 
—

 
104

 
—

 
104

Total TDR loans
$
2,396

 
$
3,816

 
$
755

 
$
484

 
$
7,451

 
$
3,408

 
$
177

 
$
1,931

 
$
1,599

 
$
7,115

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
December 31, 2017
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Real estate loans
$
1,935

 
$
3,761

 
$
64

 
$
—

 
$
5,760

 
$
3,409

 
$
—

 
$
1,387

 
$
1,237

 
$
6,033

Commercial and industrial loans
131

 
123

 
1,173

 
102

 
1,529

 
6

 
182

 
503

 
427

 
1,118

Consumer loans
811

 
—

 
—

 
—

 
811

 
—

 
—

 
108

 
—

 
108

Total TDR loans
$
2,877

 
$
3,884

 
$
1,237

 
$
102

 
$
8,100

 
$
3,415

 
$
182

 
$
1,998

 
$
1,664

 
$
7,259



As of March 31, 2018 and December 31, 2017, total TDRs were $14.6 million and $15.4 million, respectively. A debt restructuring is considered a TDR if we grant a concession, that we would not have otherwise considered, to the borrower for economic or legal reasons related to the borrower’s financial difficulties. Loans are considered to be TDRs if they were restructured through payment structure modifications such as reducing the amount of principal and interest due monthly and/or allowing for interest only monthly payments for three months or more. All TDRs are impaired and are individually evaluated for specific impairment using one of these three criteria: (1) the present value of expected future cash flows discounted at the loan’s effective interest rate; (2) the loan’s observable market price; or (3) the fair value of the collateral if the loan is collateral dependent. At March 31, 2018 and December 31, 2017, $1.7 million and $2.2 million, respectively, of allowance relating to these loans were included in the allowance for loan and lease losses.

For the restructured loans on accrual status, we determined that, based on the financial capabilities of the borrowers at the time of the loan restructuring and the borrowers’ past performance in the payment of debt service under the previous loan terms, performance and collection under the revised terms are probable.