LOANS AND LEASES AND ALLOWANCE FOR LOAN AND LEASE LOSSES

The following table presents the balances in the Company’s loans and leases portfolio as of the dates indicated:



	Non-Traditional Mortgages (NTM)			Traditional Loans			Total NTM and Traditional Loans			Purchased Credit Impaired			Total Loans and Leases Receivable
	($ in thousands)
September 30, 2014:
Commercial:
Commercial and industrial	$	—		$	365,136		$	365,136		$	1,280		$	366,416
Commercial real estate	—			510,251			510,251			11,616			521,867
Multi-family	—			367,364			367,364			—			367,364
SBA	—			22,523			22,523			3,206			25,729
Construction	—			25,997			25,997			—			25,997
Lease financing	—			72,027			72,027			—			72,027
Consumer:
Single family residential mortgage	203,967			624,291			828,258			236,440			1,064,698
Green Loans (HELOC) - first liens	126,323			—			126,323			—			126,323
Green Loans (HELOC) - second liens	4,952			—			4,952			—			4,952
Other consumer	113			136,223			136,336			359			136,695
Total gross loans	$	335,355		$	2,123,812		$	2,459,167		$	252,901		$	2,712,068
Percentage to total gross loans	12.4		%	78.3		%	90.7		%	9.3		%	100.0		%
Allowance for loan and lease losses													(25,283		)
Loans and leases receivable, net													$	2,686,785
December 31, 2013:
Commercial:
Commercial and industrial	$	—		$	283,743		$	283,743		$	4,028		$	287,771
Commercial real estate	—			514,869			514,869			15,014			529,883
Multi-family	—			141,580			141,580			—			141,580
SBA	—			23,740			23,740			3,688			27,428
Construction	—			24,933			24,933			—			24,933
Lease financing	—			31,949			31,949			—			31,949
Consumer:
Single family residential mortgage	156,490			667,526			824,016			314,820			1,138,836
Green Loans (HELOC) - first liens	147,705			—			147,705			—			147,705
Green Loans (HELOC) - second liens	5,289			—			5,289			—			5,289
Other consumer	113			108,888			109,001			1,736			110,737
Total gross loans	$	309,597		$	1,797,228		$	2,106,825		$	339,286		$	2,446,111
Percentage to total gross loans	12.7		%	73.4		%	86.1		%	13.9		%	100.0		%
Allowance for loan and lease losses													(18,805		)
Loans and leases receivable, net													$	2,427,306

Non Traditional Mortgage Loans

The Company’s non-traditional mortgage (NTM) portfolio is comprised of three interest only products: Green Account Loans (Green Loans), fixed or adjustable hybrid interest only rate mortgage (Interest Only) loans and a small number of additional loans with the potential for negative amortization. As of September 30, 2014 and December 31, 2013, the non-traditional mortgage loans totaled $335.4 million, or 12.4 percent of the total gross loan portfolio, and $309.6 million, or 12.7 percent of the total gross loan portfolio, respectively. The total NTM portfolio increased by $25.8 million, or 8.3 percent, during the nine months ended September 30, 2014.

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



	September 30, 2014						December 31, 2013
	Count	Amount			Percent		Count	Amount			Percent
	($ in thousands)
Green Loans (HELOC) - first liens	152	$	126,323		37.7	%	173	$	147,705		47.6	%
Interest-only - first liens	200	190,734			56.8	%	244	139,867			45.2	%
Negative amortization	32	13,233			3.9	%	37	16,623			5.4	%
Total NTM - first liens	384	330,290			98.4	%	454	304,195			98.2	%
Green Loans (HELOC) - second liens	19	4,952			1.5	%	23	5,289			1.7	%
Interest-only - second liens	1	113			0.1	%	1	113			0.1	%
Total NTM - second liens	20	5,065			1.6	%	24	5,402			1.8	%
Total NTM loans	404	335,355			100.0	%	478	309,597			100.0	%
Total gross loan portfolio		$	2,712,068					$	2,446,111
% of NTM to total gross loan portfolio		12.4		%				12.7		%

Green Loans

Green Loans are single family residential first and second mortgage lines of credit with a linked checking account that allows all types of deposits and withdrawals to be performed. The loans are generally interest only with a 15 year balloon payment due at maturity. At September 30, 2014, Green Loans totaled $131.3 million, a decrease of $21.7 million, or 14.2 percent, from $153.0 million at December 31, 2013, primarily due to reductions in principal balance and payoffs. As of September 30, 2014 and December 31, 2013, $12.6 million and $5.7 million, respectively, of the Company’s Green Loans were non-performing. As a result of their unique payment feature, Green Loans possess higher credit risk due to the potential of negative amortization; however, management believes the risk is mitigated through the Company’s loan terms and underwriting standards, including its policies on loan-to-value ratios and the Company’s contractual ability to curtail loans when the value of the underlying collateral declines. The Company discontinued origination of the Green Loan products in 2011.

Interest Only Loans

Interest only loans are primarily single family residential first mortgage loans with payment features that allow interest only payments in initial periods before converting to a fully amortizing loan. As of September 30, 2014, our interest only loans increased by $50.9 million, or 36.3 percent, to $190.8 million from $140.0 million at December 31, 2013, primarily due to originations of $45.6 million and transfers from loans held for sale of $77.1 million, partially offset by transfers to loans held for sale of $25.3 million and net amortization of $46.5 million. As of September 30, 2014 and December 31, 2013, $1.1 million and $752 thousand of the interest only loans were non-performing, respectively.

Loans with the Potential for Negative Amortization

Negative amortization loans decreased by $3.4 million, or 20.4 percent, to $13.2 million at September 30, 2014 from $16.6 million at December 31, 2013. The Company discontinued origination of negative amortization loans in 2007. As of September 30, 2014 and December 31, 2013, $0 and $1.2 million of the loans that had the potential for negative amortization were non-performing, respectively. These loans pose a potentially higher credit risk because of the lack of principal amortization and potential for negative amortization; however, management believes the risk is mitigated through the loan terms and underwriting standards, including the Company’s policies on loan-to-value ratios.

Risk Management of Non-Traditional Mortgages

The Company has determined that the most significant performance indicators for non-traditional mortgages are loan-to-value (LTV) and FICO scores. Accordingly, the Company manages credit risk in the NTM portfolio through semi-annual review of the loan portfolio that includes refreshing FICO scores on the Green Loans and home equity lines of credit, as needed in conjunction with portfolio management, and ordering third party automated valuation models. The loan review is designed to provide a method of identifying borrowers who may be experiencing financial difficulty before they actually fail to make a loan payment. Upon receipt of the updated FICO scores, an exception report is run to identify loans with a decrease in FICO of 10 percent or more and/or a resulting FICO of 620 or less. The loans are then further analyzed to determine if the risk rating should be downgraded which will increase the reserves the Company will establish for potential losses. A report of the semi-annual loan review is published and regularly monitored.

As these loans are revolving lines of credit, the Company, based on the loan agreement and loan covenants of the particular loan, as well as applicable rules and regulations, could suspend the borrowing privileges or reduce the credit limit at any time the Company reasonably believes that the borrower will be unable to fulfill their repayment obligations under the agreement or certain other conditions are met. In many cases, the decrease in FICO is the first indication that the borrower may have difficulty in making their future payment obligations.

As a result, the Company proactively manages the portfolio by performing detailed analysis on its portfolio with emphasis on the NTM portfolio. The Company’s Internal Asset Review Committee (IARC) conducts meetings on at least a quarterly basis to review the loans classified as special mention, substandard, or doubtful and determines whether a suspension or reduction in credit limit is warranted. If the line has been suspended and the borrower would like to have their credit privileges reinstated, they would need to provide updated financials showing their ability to meet their payment obligations.

On the interest only loans, the Company projects future payment changes to determine if there will be a material increase in the required payment and then monitors the loans for possible delinquency. The individual loans are monitored for possible downgrading of risk rating, and trends within the portfolio are identified that could affect other interest only loans scheduled for payment changes in the near future.

Non-Traditional Mortgage Performance Indicators

The following table presents the Company’s non-traditional single family residential mortgage Green Loans first lien portfolio at September 30, 2014 by FICO scores that were obtained during the second quarter of 2014, comparing to the FICO scores for those same loans that were obtained during the fourth quarter of 2013:



	By FICO Scores Obtained During the Quarter Ended June 30, 2014					By FICO Scores Obtained During the Quarter Ended December 31, 2013					Change
	Count	Amount		Percent		Count	Amount		Percent		Count		Amount			Percent
	($ in thousands)
September 30, 2014:
FICO Score
800+	21	$	13,095	10.4	%	13	$	7,307	5.8	%	8		$	5,788		4.6	%
700-799	74	56,628		44.8	%	89	68,877		54.6	%	(15	)	(12,249		)	(9.8	)%
600-699	33	29,172		23.1	%	32	28,097		22.2	%	1		1,075			0.9	%
<600	9	10,536		8.3	%	8	7,003		5.5	%	1		3,533			2.8	%
No FICO	15	16,892		13.4	%	10	15,039		11.9	%	5		1,853			1.5	%
Totals	152	$	126,323	100.0	%	152	$	126,323	100.0	%	—		$	—		—	%

The Company updates FICO scores on a semi-annual basis, typically in the second and fourth quarters or as needed in conjunction with proactive portfolio management.

Loan to Value

The table below represents the Company’s single family residential NTM first lien portfolio by loan-to-value (LTV) as of the dates indicated:



	Green					Interest Only					Negative Amortization					Total
	Count	Amount		Percent		Count	Amount		Percent		Count	Amount		Percent		Count	Amount		Percent
	($ in thousands)
September 30, 2014:
LTV’s (1)
< 61	79	$	73,361	58.1	%	62	$	88,103	46.2	%	15	$	7,362	55.6	%	156	$	168,826	51.1	%
61-80	46	35,799		28.3	%	45	70,502		37.0	%	10	4,113		31.1	%	101	110,414		33.4	%
81-100	22	12,710		10.1	%	32	11,860		6.2	%	6	1,361		10.3	%	60	25,931		7.9	%
> 100	5	4,453		3.5	%	61	20,269		10.6	%	1	397		3.0	%	67	25,119		7.6	%
Total	152	$	126,323	100.0	%	200	$	190,734	100.0	%	32	$	13,233	100.0	%	384	$	330,290	100.0	%
December 31, 2013:
LTV’s (1)
< 61	90	$	78,807	53.3	%	80	$	65,181	46.6	%	13	$	4,930	29.7	%	183	$	148,918	49.0	%
61-80	38	33,604		22.8	%	51	28,999		20.7	%	13	7,643		45.9	%	102	70,246		23.1	%
81-100	26	14,917		10.1	%	43	21,474		15.4	%	8	3,277		19.7	%	77	39,668		13.0	%
> 100	19	20,377		13.8	%	70	24,213		17.3	%	3	773		4.7	%	92	45,363		14.9	%
Total	173	$	147,705	100.0	%	244	$	139,867	100.0	%	37	$	16,623	100.0	%	454	$	304,195	100.0	%


(1)	LTV represents estimated current loan to value ratio, determined by dividing current unpaid principal balance by latest estimated property value received per the Company policy.

The decrease in Green Loans was due to reductions in principal balance and payoffs and the increase in interest only was due to increased originations. During 2014, overall improvement on LTV of the Company’s single family residential NTM first lien portfolio was due to the improvement in the real estate market and the economy in Southern California. The Company updates LTV on a semi-annual basis, typically in the second and fourth quarters or as needed in conjunction with proactive portfolio management.

Allowance for Loan and Lease Losses

The Company has an established credit risk management process that includes regular management review of the loan and lease portfolio to identify problem loans and leases. During the ordinary course of business, management becomes aware of borrowers and lessees that may not be able to meet the contractual requirements of the loan and lease agreements. Such loans and leases are subject to increased monitoring. Consideration is given to placing the loan or lease on non-accrual status, assessing the need for additional allowance for loan and lease losses, and partial or full charge-off. The Company maintains the allowance for loan and lease losses at a level that is considered adequate to cover the estimated and known inherent risks in the loan and lease portfolio.

The Company also maintains a reserve for unfunded loan commitments at a level that is considered adequate to cover the estimated and known inherent risks. The probability of usage of the unfunded loan commitments and credit risk factors determined based on outstanding loan balance of the same customer or outstanding loans that shares similar credit risk exposure are used to determine the adequacy of the reserve. As of September 30, 2014 and December 31, 2013, the reserve for unfunded loan commitments was $1.8 million and $1.4 million, respectively.

The credit risk monitoring system is designed to identify impaired and potential problem loans, and to permit periodic evaluation of impairment and the adequacy of the allowance for credit losses in a timely manner. In addition, the Board of Directors of the Bank has adopted a credit policy that includes a credit review and control system which it believes should be effective in ensuring that the Company maintains an adequate allowance for credit losses. The Board of Directors provides oversight and guidance for management’s allowance evaluation process, including quarterly valuations, and consideration of management’s determination of whether the allowance is adequate to absorb losses in the loan and lease portfolio. During the three months ended September 30, 2014, the Company enhanced the current methodologies, processes and controls over the allowance for loan and lease losses (ALLL), due to the Company's rapid organic and acquisitive growth and rapidly changing profile. These enhancements will update and upgrade how each component of the ALLL are quantified, their relationship to each other, and their overall relevance to the Company's new profile and strategic direction. See Note 1 for a summary of the enhancements made to the ALLL methodology. The determination of the amount of the allowance for loan and lease losses and the provision for loan and lease losses is based on management’s current judgment about the credit quality of the loan and lease portfolio and takes into consideration known relevant internal and external factors that affect collectability when determining the appropriate level for the allowance for loan and lease losses. Additions to the allowance for loan and lease losses are made by charges to the provision for loan and lease losses. Identified credit exposures that are determined to be uncollectible are charged against the allowance for loan and lease losses. Recoveries of previously charged off amounts, if any, are credited to the allowance for loan and lease losses.

The following table presents a summary of activity in the allowance for loan and lease losses for the periods indicated:



	Three Months Ended September 30,						Nine Months Ended September 30,
	2014			2013			2014			2013
	(In thousands)
Balance at beginning of period	$	22,627		$	16,979		$	18,805		$	14,448
Loans and leases charged off	(312		)	(211		)	(898		)	(2,145		)
Recoveries of loans and leases previously charged off	96			253			1,172			632
Transfer of loans from (to) held-for-sale	92			—			(613		)	—
Provision for loan and lease losses	2,780			2,109			6,817			6,195
Balance at end of period	$	25,283		$	19,130		$	25,283		$	19,130

The following table presents the activity and balance in the allowance for loan and lease losses and the recorded investment, excluding accrued interest, in loans and leases by portfolio segment and is based on the impairment method as of or for the three and nine months ended September 30, 2014:



	Commercial and Industrial		Commercial Real Estate			Multi- family			SBA			Construction			Lease Financing			Single Family Residential Mortgage			Other Consumer			Unallocated			Total
	(In thousands)
Allowance for loan and lease losses:
Balance at June 30, 2014	$	3,007	$	5,615		$	3,408		$	261		$	1,245		$	730		$	7,289		$	1,072		$	—		$	22,627
Charge-offs	—		(65		)	—			—			—			(227		)	(18		)	(2		)	—			(312		)
Recoveries	—		88			—			7			—			—			—			1			—			96
Transfer of loans from held-for-sale	—		—			—			—			—			—			92			—			—			92
Provision	1,878		(1,767		)	2,676			44			(762		)	233			(463		)	941			—			2,780
Balance at September 30, 2014	$	4,885	$	3,871		$	6,084		$	312		$	483		$	736		$	6,900		$	2,012		$	—		$	25,283
Balance at December 31, 2013	$	1,822	$	5,484		$	2,566		$	235		$	244		$	428		$	7,044		$	532		$	450		$	18,805
Charge-offs	—		(65		)	(3		)	(17		)	—			(227		)	(375		)	(211		)	—			(898		)
Recoveries	53		843			—			273			—			—			—			3			—			1,172
Transfer of loans to held-for-sale	—		—			—			—			—			—			(613		)	—			—			(613		)
Provision	3,010		(2,391		)	3,521			(179		)	239			535			844			1,688			(450		)	6,817
Balance at September 30, 2014	$	4,885	$	3,871		$	6,084		$	312		$	483		$	736		$	6,900		$	2,012		$	—		$	25,283
Individually evaluated for impairment	$	7	$	—		$	80		$	—		$	—		$	—		$	437		$	—		$	—		$	524
Collectively evaluated for impairment	4,878		3,871			6,004			312			483			736			6,463			2,012			—			24,759
Acquired with deteriorated credit quality	—		—			—			—			—			—			—			—			—			—
Total ending allowance balance	$	4,885	$	3,871		$	6,084		$	312		$	483		$	736		$	6,900		$	2,012		$	—		$	25,283
Loans:
Individually evaluated for impairment	$	7,333	$	3,572		$	1,622		$	6		$	—		$	—		$	23,119		$	1,382		$	—		$	37,034
Collectively evaluated for impairment	357,803		506,679			365,742			22,517			25,997			72,027			931,462			139,906			—			2,422,133
Acquired with deteriorated credit quality	1,280		11,616			—			3,206			—			—			236,440			359			—			252,901
Total ending loan balances	$	366,416	$	521,867		$	367,364		$	25,729		$	25,997		$	72,027		$	1,191,021		$	141,647		$	—		$	2,712,068



	Commercial and Industrial		Commercial Real Estate			Multi- family			SBA			Construction			Lease Financing			Single Family Residential Mortgage			Other Consumer			Unallocated			Total
	(In thousands)
Allowance for loan and lease losses:
Balance at June 30, 2013	$	816	$	4,508		$	1,449		$	179		$	503		$	244		$	8,751		$	225		$	304		$	16,979
Charge-offs	—		(12		)	—			(199		)	—			—			—			—			—			(211		)
Recoveries	—		153			—			97			—			2			1			—			—			253
Provision	636		1,047			266			373			(194		)	66			12			102			(199		)	2,109
Balance at September 30, 2013	$	1,452	$	5,696		$	1,715		$	450		$	309		$	312		$	8,764		$	327		$	105		$	19,130
Balance at December 31, 2012	$	263	$	3,178		$	1,478		$	118		$	21		$	261		$	8,855		$	274		$	—		$	14,448
Charge-offs	—		(372		)	(553		)	(592		)	—			(23		)	(591		)	(14		)	—			(2,145		)
Recoveries	—		173			88			264			—			8			92			7			—			632
Provision	1,189		2,717			702			660			288			66			408			60			105			6,195
Balance at September 30, 2013	$	1,452	$	5,696		$	1,715		$	450		$	309		$	312		$	8,764		$	327		$	105		$	19,130
Individually evaluated for impairment	$	2	$	276		$	—		$	—		$	—		$	—		$	1,089		$	32		$	—		$	1,399
Collectively evaluated for impairment	1,450		5,420			1,715			450			309			312			7,363			295			105			17,419
Acquired with deteriorated credit quality	—		—			—			—			—			—			312			—			—			312
Total ending allowance balance	$	1,452	$	5,696		$	1,715		$	450		$	309		$	312		$	8,764		$	327		$	105		$	19,130
Loans:
Individually evaluated for impairment	$	70	$	5,896		$	—		$	11		$	—		$	—		$	13,202		$	1,055		$	—		$	20,234
Collectively evaluated for impairment	247,079		457,377			130,449			23,857			22,838			21,340			1,215,788			108,098			—			2,226,826
Acquired with deteriorated credit quality	3,600		18,987			831			3,801			—			—			321,078			831			—			349,128
Total ending loan balances	$	250,749	$	482,260		$	131,280		$	27,669		$	22,838		$	21,340		$	1,550,068		$	109,984		$	—		$	2,596,188

The following table presents loans and leases individually evaluated for impairment by class of loans and leases as of the dates indicated. The recorded investment, excluding accrued interest, presents customer balances net of any partial charge-offs recognized on the loans and leases and net of any deferred fees and costs.



	September 30, 2014						December 31, 2013
	Unpaid Principal Balance		Recorded Investment		Allowance for Loan and Lease Losses		Unpaid Principal Balance		Recorded Investment		Allowance for Loan and Lease Losses
	(In thousands)
With no related allowance recorded:
Commercial:
Commercial and industrial	$	4,249	$	4,238	$	—	$	50	$	33	$	—
Commercial real estate	3,707		2,655		—		4,951		3,868		—
Multi-family	296		273		—		487		270		—
SBA	24		6		—		26		10		—
Consumer:
Single family residential mortgage	18,189		17,459		—		10,765		9,487		—
Other consumer	1,947		1,382		—		248		247		—
With an allowance recorded:
Commercial:
Commercial and industrial	3,097		3,095		7		—		—		—
Commercial real estate	915		917		—		—		—		—
Multi-family	1,461		1,349		80		1,797		1,702		60
Consumer:
Single family residential mortgage	5,642		5,660		437		3,378		3,327		34
Other consumer	—		—		—		2		2		2
Total	$	39,527	$	37,034	$	524	$	21,704	$	18,946	$	96

The following table presents information on impaired loans and leases, disaggregated by class, for the periods indicated:



	Three Months Ended						Nine Months Ended
	Average Recorded Investment		Interest Income Recognized		Cash Basis Interest Recognized		Average Recorded Investment		Interest Income Recognized		Cash Basis Interest Recognized
	(In thousands)
September 30, 2014:
Commercial:
Commercial and industrial	$	7,295	$	31	$	56	$	2,432	$	31	$	56
Commercial real estate	3,595		44		51		3,476		93		108
Multi-family	1,637		12		12		1,668		25		25
SBA	6		—		—		2		—		—
Consumer:
Single family residential mortgage	23,201		182		194		14,580		247		259
Other consumer	1,393		22		22		606		23		23
Total	$	37,127	$	291	$	335	$	22,764	$	419	$	471
September 30, 2013
Commercial:
Commercial and industrial	$	137	$	8	$	8	$	69	$	8	$	8
Commercial real estate	$	6,021	$	71	$	79	$	3,391	$	94	$	102
Multi-family	—		—		—		1,106		16		18
SBA	11		1		1		12		1		1
Consumer:
Single family residential mortgage	13,218		73		76		12,265		165		169
Other consumer	1,051		—		—		843		—		—
Total	$	20,438	$	153	$	164	$	17,686	$	284	$	298

Non-accrual Loans

The following table presents nonaccrual loans and leases, and loans past due 90 days or more and still accruing as of the dates indicated:



	September 30, 2014						December 31, 2013
	NTM Loans		Traditional Loans		Total		NTM Loans		Traditional Loans		Total
	(In thousands)
Loans past due 90 days or more and still accruing	$	—	$	—	$	—	$	—	$	—	$	—
Nonaccrual loans:
The Company maintains specific allowances for these loans of $80 in 2014 and $95 in 2013	13,683		24,650		38,333		7,698		23,950		31,648

The following table presents the composition of nonaccrual loans and leases as of the dates indicated:



	September 30, 2014						December 31, 2013
	NTM Loans		Traditional Loans		Total		NTM Loans		Traditional Loans		Total
	(In thousands)
Commercial:
Commercial and industrial	$	—	$	5,226	$	5,226	$	—	$	33	$	33
Commercial real estate	—		2,656		2,656		—		3,868		3,868
Multi-family	—		2,285		2,285		—		1,972		1,972
SBA	—		263		263		—		10		10
Construction	—		—		—		—		—		—
Lease financing	—		40		40		—		—		—
Consumer:
Single family residential mortgage	1,060		12,938		13,998		2,000		18,032		20,032
Green Loans (HELOC) - first liens	12,414		—		12,414		5,482		—		5,482
Green Loans (HELOC) - second liens	209		—		209		216		—		216
Other consumer	—		1,242		1,242		—		35		35
Total nonaccrual loans and leases	$	13,683	$	24,650	$	38,333	$	7,698	$	23,950	$	31,648

Past Due Loans and Leases

The following table presents the aging of the recorded investment in past due loans and leases as of September 30, 2014, excluding accrued interest receivable (which is not considered to be material), by class of loans and leases:



	September 30, 2014
	30 - 59 Days Past Due		60 - 89 Days Past Due		Greater than 89 Days Past due		Total Past Due		Current		Total
	(In thousands)
NTM loans:
Single family residential mortgage	$	3,893	$	763	$	1,060	$	5,716	$	198,251	$	203,967
Green Loans (HELOC) - first liens	927		—		437		1,364		124,959		126,323
Green Loans (HELOC) - second liens	209		—		—		209		4,743		4,952
Other consumer	—		—		—		—		113		113
Total NTM loans	5,029		763		1,497		7,289		328,066		335,355
Traditional loans:
Commercial:
Commercial and industrial	4,052		1		4,238		8,291		356,845		365,136
Commercial real estate	3,745		—		—		3,745		506,506		510,251
Multi-family	755		—		—		755		366,609		367,364
SBA	57		11		226		294		22,229		22,523
Construction	—		—		—		—		25,997		25,997
Lease financing	253		39		40		332		71,695		72,027
Consumer:
Single family residential mortgage	17,011		3,780		9,662		30,453		593,838		624,291
Other consumer	34		1		9		44		136,179		136,223
Total traditional loans	25,907		3,832		14,175		43,914		2,079,898		2,123,812
Purchased Credit Impaired (PCI) loans:
Commercial:
Commercial and industrial	747		—		—		747		533		1,280
Commercial real estate	455		—		925		1,380		10,236		11,616
SBA	584		254		43		881		2,325		3,206
Consumer:
Single family residential mortgage	12,225		4,478		3,049		19,752		216,688		236,440
Other consumer	—		—		—		—		359		359
Total PCI loans	14,011		4,732		4,017		22,760		230,141		252,901
Total	$	44,947	$	9,327	$	19,689	$	73,963	$	2,638,105	$	2,712,068

The following table presents the aging of the recorded investment in past due loans and leases as of December 31, 2013, excluding accrued interest receivable (which is not considered to be material), by class of loans and leases:



	December 31, 2013
	30 - 59 Days Past Due		60 - 89 Days Past Due		Greater than 89 Days Past due		Total Past Due		Current		Total
	(In thousands)
NTM loans:
Single family residential mortgage	$	1,003	$	1,854	$	769	$	3,626	$	152,864	$	156,490
Green Loans (HELOC) - first liens	653		—		437		1,090		146,615		147,705
Green Loans (HELOC) - second liens	—		—		—		—		5,289		5,289
Other consumer	—		—		—		—		113		113
Total NTM loans	1,656		1,854		1,206		4,716		304,881		309,597
Traditional loans:
Commercial:
Commercial and industrial	52		235		—		287		283,456		283,743
Commercial real estate	5,554		194		—		5,748		509,121		514,869
Multi-family	602		—		—		602		140,978		141,580
SBA	14		48		—		62		23,678		23,740
Construction	—		—		—		—		24,933		24,933
Lease financing	271		92		19		382		31,567		31,949
Consumer:
Single family residential mortgage	20,684		6,124		12,181		38,989		628,537		667,526
Other consumer	209		110		35		354		108,534		108,888
Total traditional loans	27,386		6,803		12,235		46,424		1,750,804		1,797,228
PCI loans:
Commercial:
Commercial and industrial	—		—		—		—		4,028		4,028
Commercial real estate	—		—		—		—		15,014		15,014
SBA	45		1		106		152		3,536		3,688
Consumer:
Single family residential mortgage	21,888		8,580		12,099		42,567		272,253		314,820
Other consumer	—		—		—		—		1,736		1,736
Total PCI loans	21,933		8,581		12,205		42,719		296,567		339,286
Total	$	50,975	$	17,238	$	25,646	$	93,859	$	2,352,252	$	2,446,111

Troubled Debt Restructurings

Troubled Debt Restructurings (TDRs) of loans are defined by ASC 310-40, “Troubled Debt Restructurings by Creditors” and ASC 470-60, “Troubled Debt Restructurings by Debtors” and evaluated for impairment in accordance with ASC 310-10-35. The concessions may be granted in various forms, including reduction in the stated interest rate, reduction in the amount of principal amortization, forgiveness of a portion of a loan balance or accrued interest, or extension of the maturity date. In order to determine whether a borrower is experiencing financial difficulty, an evaluation is performed of the probability that the borrower will be in payment default on any of its debt in the foreseeable future without the modification. This evaluation is performed under the Company’s internal underwriting policy.

For the three and nine months ended September 30, 2014, there was one modification through bankruptcy discharge. There were no modifications for the three and nine months ended September 30, 2013. The following table summarizes the pre-modification and post-modification balances of the new TDR for the three and nine months ended September 30, 2014:



	Three Months Ended					Nine Months Ended
	Number of Loans	Pre- Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment		Number of Loans	Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment
	($ in thousands)
September 30, 2014:
Consumer:
Single family residential mortgage	1	$	236	$	233	1	$	236	$	233
Total	1	236		233		1	236		233

For the nine months ended September 30, 2014 and 2013, there were no loans and leases that were modified as TDRs during the past 12 months that had payment defaults during the periods.

Troubled debt restructured loans and leases consist of the following as of the dates indicated:



	September 30, 2014						December 31, 2013
	NTM Loans		Traditional Loans		Total		NTM Loans		Traditional Loans		Total
	(In thousands)
Commercial:
Commercial real estate	$	—	$	—	$	—	$	—	$	194	$	194
SBA	—		6		6		—		10		10
Consumer:
Single family residential mortgage	—		3,301		3,301		—		3,605		3,605
Green Loans (HELOC) - first liens	3,451		—		3,451		3,468		—		3,468
Other consumer	—		1,173		1,173		—		—		—
Total	$	3,451	$	4,480	$	7,931	$	3,468	$	3,809	$	7,277

The Company did not have any commitments to lend to customers with outstanding loans or leases that were classified as troubled debt restructurings as of September 30, 2014 and December 31, 2013.

Credit Quality Indicators

The Company categorizes loans and leases into risk categories based on relevant information about the ability of borrowers to service their debt such as: current financial information, historical payment experience, credit documentation, public information, and current economic trends, among other factors. The Company performs historical loss analysis that is combined with a comprehensive loan or lease to value analysis to analyze the associated risks in the current loan and lease portfolio. The Company analyzes loans and leases individually by classifying the loans and leases as to credit risk. This analysis includes all loans and leases delinquent over 60 days and non-homogeneous loans and leases such as commercial and commercial real estate loans and leases. Classification of problem single family residential loans is performed on a monthly basis while analysis of non-homogeneous loans and leases is performed on a quarterly basis. The Company uses the following definitions for risk ratings:

Pass: Loans and leases classified as pass are in compliance in all respects with the Bank’s credit policy and regulatory requirements, and do not exhibit any potential or defined weakness as defined under “Special Mention”, “Substandard” or “Doubtful/Loss”.

Special Mention: Loans and leases classified as special mention have a potential weakness that deserves management’s close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the loan or lease or of the Company’s credit position at some future date.

Substandard: Loans and leases classified as substandard are inadequately protected by the current net worth and paying capacity of the obligor or of the collateral pledged, if any. Loans and leases so classified have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. They are characterized by the distinct possibility that the institution will sustain some loss if the deficiencies are not corrected.

Doubtful/Loss: Loans and leases classified as doubtful have all the weaknesses inherent in those classified as substandard, 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.

Not-Rated: When accrual of income on a pool of purchased credit impaired (PCI) loans with common risk characteristics is appropriate in accordance with ASC 310-30, individual loans in those pools are not risk-rated. The credit criteria evaluated are FICO scores, loan-to-value, delinquency, and actual cash flows versus expected cash flows of the loan pools.

Loans and leases not meeting the criteria above that are analyzed individually as part of the above described process are considered to be pass rated loans and leases.

The following table presents the risk categories for loans and leases as of September 30, 2014:



	September 30, 2014
	Pass		Special Mention		Substandard		Doubtful		Not-Rated		Total
	(In thousands)
NTM loans:
Single family residential mortgage	$	201,867	$	763	$	1,337	$	—	$	—	$	203,967
Green Loans (HELOC) - first liens	107,644		5,220		13,459		—		—		126,323
Green Loans (HELOC) - second liens	4,743		—		209		—		—		4,952
Other consumer	113		—		—		—		—		113
Total NTM loans	314,367		5,983		15,005		—		—		335,355
Traditional loans:
Commercial:
Commercial and industrial	357,245		2,998		4,893		—		—		365,136
Commercial real estate	505,088		1,591		3,572		—		—		510,251
Multi-family	364,252		1,243		1,869		—		—		367,364
SBA	22,236		—		287		—		—		22,523
Construction	25,997		—		—		—		—		25,997
Lease financing	71,987		—		40		—		—		72,027
Consumer:
Single family residential mortgage	598,515		8,940		16,836		—		—		624,291
Other consumer	134,888		102		1,233		—		—		136,223
Total traditional loans	2,080,208		14,874		28,730		—		—		2,123,812
PCI loans:
Commercial:
Commercial and industrial	—		115		1,165		—		—		1,280
Commercial real estate	9,084		—		2,532		—		—		11,616
SBA	693		582		1,931		—		—		3,206
Consumer:
Single family residential mortgage	—		—		266		—		236,174		236,440
Other consumer	—		—		359		—		—		359
Total PCI loans	9,777		697		6,253		—		236,174		252,901
Total	$	2,404,352	$	21,554	$	49,988	$	—	$	236,174	$	2,712,068

The following table presents the risk categories for loans and leases as of December 31, 2013:



	December 31, 2013
	Pass		Special Mention		Substandard		Doubtful		Not-Rated		Total
	(In thousands)
NTM loans:
Single family residential mortgage	$	151,728	$	2,321	$	2,441	$	—	$	—	$	156,490
Green Loans (HELOC) - first liens	129,679		11,470		6,556		—		—		147,705
Green Loans (HELOC) - second liens	5,073		—		216		—		—		5,289
Other consumer	113		—		—		—		—		113
Total NTM loans	286,593		13,791		9,213		—		—		309,597
Traditional loans:
Commercial:
Commercial and industrial	280,527		1		3,215		—		—		283,743
Commercial real estate	510,117		—		4,752		—		—		514,869
Multi-family	139,608		—		1,972		—		—		141,580
SBA	23,714		—		26		—		—		23,740
Construction	24,933		—		—		—		—		24,933
Lease financing	31,949		—		—		—		—		31,949
Consumer:
Single family residential mortgage	640,701		6,350		20,475		—		—		667,526
Other consumer	108,745		108		33		2		—		108,888
Total traditional loans	1,760,294		6,459		30,473		2		—		1,797,228
PCI loans:
Commercial:
Commercial and industrial	—		969		3,059		—		—		4,028
Commercial real estate	10,148		—		4,866		—		—		15,014
SBA	844		605		2,239		—		—		3,688
Consumer:
Single family residential mortgage	—		—		287		—		314,533		314,820
Other consumer	—		—		1,736		—		—		1,736
Total PCI loans	10,992		1,574		12,187		—		314,533		339,286
Total	$	2,057,879	$	21,824	$	51,873	$	2	$	314,533	$	2,446,111

Purchased Credit Impaired Loans and Leases

During the years ended December 31, 2013 and 2012, the Company acquired loans and leases through business acquisitions and purchases of loan pools for which there was, at acquisition, evidence of deterioration of credit quality subsequent to origination and it was probable, at acquisition, that all contractually required payments would not be collected. The following table presents the outstanding balance and carrying amount of those loans and leases, which are sometimes collectively referred to as “PCI loans” as of the dates indicated:



	September 30, 2014				December 31, 2013
	Outstanding Balance		Carrying Amount		Outstanding Balance		Carrying Amount
	(In thousands)
Commercial:
Commercial and industrial	$	1,886	$	1,280	$	5,838	$	4,028
Commercial real estate	13,831		11,616		17,682		15,014
SBA	4,299		3,206		4,940		3,688
Consumer:
Single family residential mortgage	290,445		236,440		414,341		314,820
Other consumer	400		359		2,134		1,736
Total	$	310,861	$	252,901	$	444,935	$	339,286

The following table presents a summary of accretable yield, or income expected to be collected for the periods indicated:



	Three Months Ended September 30,						Nine Months Ended September 30,
	2014			2013			2014			2013
	(In thousands)
Balance at beginning of period	$	126,842		$	98,239		$	126,336		$	32,207
New loans or leases purchased	—			59,798			—			155,416
Accretion of income	(6,534		)	(4,684		)	(20,318		)	(12,195		)
Changes in expected cash flows	(834		)	154			26,892			(5,034		)
Disposals	(23,041		)	(5,881		)	(36,477		)	(22,768		)
Balance at end of period	$	96,433		$	147,626		$	96,433		$	147,626

The Company did not purchase any PCI loans during the nine months ended September 30, 2014. The Company sold a portion of PCI loans with unpaid principal balances and carrying values as of the respective sale dates of $61.7 million and $39.1 million, respectively, during the three months ended September 30, 2014 and $92.4 million and $56.9 million, respectively, during the nine months ended September 30, 2014. The Company recognized net gain on sale loans of $9.5 million and $11.8 million from these transactions for the three and nine months ended September 30, 2014, respectively.

The Company completed a bulk loan acquisition with unpaid principal balances and fair values of $237.4 million and $213.9 million, respectively, during the three months ended September 30, 2013, and five bulk loan acquisitions with unpaid principal balance and fair value of $473.9 million and $342.1 million, respectively, during the nine months ended September 30, 2013, at the respective acquisition dates. The Company determined that certain of the loans in the bulk acquisitions reflected evidence of credit quality deterioration since origination and it was probable, at acquisition, that all contractually required payments would not be collected (PCI loans). The Company sold a portion of PCI loans with unpaid principal balances and carrying values of $9.9 million and $6.0 million, respectively, during the three months ended September 30, 2013, and $134.9 million and $76.4 million, respectively, for the nine months ended September 30, 2013.