LOANS AND LEASES AND ALLOWANCE FOR LOAN AND LEASE LOSSES

3 Months Ended

Mar. 31, 2015

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)
March 31, 2015
Commercial:
Commercial and industrial	$	—		$	488,150		$	488,150		$	1,079		$	489,229
Commercial real estate	—			965,302			965,302			10,432			975,734
Multi-family	—			940,053			940,053			—			940,053
SBA	—			45,118			45,118			3,136			48,254
Construction	—			38,081			38,081			—			38,081
Lease financing	—			102,012			102,012			—			102,012
Consumer:
Single family residential mortgage	229,006			593,019			822,025			227,151			1,049,176
Green Loans (HELOC) - first liens	119,958			—			119,958			—			119,958
Green Loans (HELOC) - second liens	4,748			—			4,748			—			4,748
Other consumer	113			166,357			166,470			—			166,470
Total gross loans and leases	$	353,825		$	3,338,092		$	3,691,917		$	241,798		$	3,933,715
Percentage to total gross loans and leases	9.0		%	84.9		%	93.9		%	6.1		%	100.0		%
Allowance for loan and lease losses													(29,345		)
Loans and leases receivable, net													$	3,904,370
December 31, 2014
Commercial:
Commercial and industrial	$	—		$	489,766		$	489,766		$	1,134		$	490,900
Commercial real estate	—			988,330			988,330			11,527			999,857
Multi-family	—			955,683			955,683			—			955,683
SBA	—			32,998			32,998			3,157			36,155
Construction	—			42,198			42,198			—			42,198
Lease financing	—			85,749			85,749			—			85,749
Consumer:
Single family residential mortgage	222,306			595,100			817,406			231,079			1,048,485
Green Loans (HELOC) - first liens	123,177			—			123,177			—			123,177
Green Loans (HELOC) - second liens	4,979			—			4,979			—			4,979
Other consumer	113			161,826			161,939			—			161,939
Total gross loans and leases	$	350,575		$	3,351,650		$	3,702,225		$	246,897		$	3,949,122
Percentage to total gross loans and leases	8.9		%	84.8		%	93.7		%	6.3		%	100.0		%
Allowance for loan and lease losses													(29,480		)
Loans and leases receivable, net													$	3,919,642

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 March 31, 2015 and December 31, 2014, the NTM loans totaled $353.8 million, or 9.0 percent of the total gross loan portfolio, and $350.6 million, or 8.9 percent of the total gross loan portfolio, respectively. The total NTM portfolio increased by $3.3 million, or 0.9 percent, during the three months ended March 31, 2015.

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



	March 31, 2015						December 31, 2014
	Count	Amount			Percent		Count	Amount			Percent
	($ in thousands)
Green Loans (HELOC) - first liens	147	$	119,958		33.9	%	148	$	123,177		35.1	%
Interest-only - first liens	204	216,765			61.2	%	207	209,207			59.7	%
Negative amortization	31	12,241			3.5	%	32	13,099			3.7	%
Total NTM - first liens	382	348,964			98.6	%	387	345,483			98.5	%
Green Loans (HELOC) - second liens	19	4,748			1.3	%	19	4,979			1.4	%
Interest-only - second liens	1	113			0.1	%	1	113			0.1	%
Total NTM - second liens	20	4,861			1.4	%	20	5,092			1.5	%
Total NTM loans	402	$	353,825		100.0	%	407	$	350,575		100.0	%
Total gross loan portfolio		$	3,933,715					$	3,949,122
% of NTM to total gross loan portfolio		9.0		%				8.9		%

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 March 31, 2015 and December 31, 2014, Green Loans totaled $124.7 million and $128.2 million, respectively. At March 31, 2015 and December 31, 2014, $10.7 million and $12.5 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 for 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 March 31, 2015 and December 31, 2014, interest only loans totaled $216.9 million and $209.3 million, respectively. At March 31, 2015 and December 31, 2014, $3.0 million and $2.0 million of the interest only loans were non-performing, respectively.

Loans with the Potential for Negative Amortization

Negative amortization loans totaled $12.2 million and $13.1 million at March 31, 2015 and December 31, 2014, respectively. The Company discontinued origination of negative amortization loans in 2007. At March 31, 2015 and December 31, 2014, $0 and $0 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. While Green Loans have the potential for negative amortization, they are excluded from the loans with the potential for negative amortization discussed in this paragraph.

Risk Management of Non-Traditional Mortgages

The Company has determined that the most significant performance indicators for NTMs 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.

NTM Performance Indicators

The following table presents the Company’s NTM Green Loans first lien portfolio at March 31, 2015 and December 31, 2014 by FICO scores:



	March 31, 2015					December 31, 2014					Change
	Count	Amount		Percent		Count	Amount		Percent		Count		Amount			Percent
	($ in thousands)
FICO Score
800+	28	$	19,448	16.2	%	28	$	20,248	16.4	%	—		$	(800	)	(0.2	)%
700-799	72	50,769		42.3	%	72	52,532		42.7	%	—		(1,763		)	(0.4	)%
600-699	28	30,431		25.4	%	29	31,053		25.2	%	(1	)	(622		)	0.2	%
<600	8	11,873		9.9	%	8	11,893		9.7	%	—		(20		)	0.2	%
No FICO	11	7,437		6.2	%	11	7,451		6.0	%	—		(14		)	0.2	%
Totals	147	$	119,958	100.0	%	148	$	123,177	100.0	%	(1	)	$	(3,219	)	—	%

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)
LTV’s ⁽¹⁾
March 31, 2015
< 61	77	$	56,136	46.7	%	60	$	99,152	45.8	%	15	$	5,960	48.7	%	152	$	161,248	46.2	%
61-80	45	46,129		38.5	%	52	83,480		38.5	%	12	5,312		43.4	%	109	134,921		38.7	%
81-100	18	11,833		9.9	%	33	15,463		7.1	%	3	579		4.7	%	54	27,875		8.0	%
> 100	7	5,860		4.9	%	59	18,670		8.6	%	1	390		3.2	%	67	24,920		7.1	%
Total	147	$	119,958	100.0	%	204	$	216,765	100.0	%	31	$	12,241	100.0	%	382	$	348,964	100.0	%
December 31, 2014
< 61	77	$	58,856	47.8	%	60	$	93,254	44.7	%	15	$	6,023	46.0	%	152	$	158,133	45.8	%
61-80	45	46,177		37.5	%	54	81,472		38.9	%	12	5,901		45.0	%	111	133,550		38.6	%
81-100	18	11,846		9.6	%	33	14,927		7.1	%	4	781		6.0	%	55	27,554		8.0	%
> 100	8	6,298		5.1	%	60	19,554		9.3	%	1	394		3.0	%	69	26,246		7.6	%
Total	148	$	123,177	100.0	%	207	$	209,207	100.0	%	32	$	13,099	100.0	%	387	$	345,483	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.

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 March 31, 2015 and December 31, 2014, the reserve for unfunded loan commitments was $1.9 million and $1.9 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. 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 March 31,
	2015			2014
	(In thousands)
Balance at beginning of period	$	29,480		$	18,805
Loans and leases charged off	(357		)	(203		)
Recoveries of loans and leases previously charged off	222			435
Transfer of loans from (to) held-for-sale	—			(963		)
Provision for loan and lease losses	—			1,929
Balance at end of period	$	29,345		$	20,003

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 months ended March 31, 2015:



	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 December 31, 2014	$	6,910		$	3,840		$	7,179		$	335	$	846		$	873		$	7,192		$	2,305		$	—	$	29,480
Charge-offs	(11		)	(259		)	—			—		—			(87		)	—			—			—		(357		)
Recoveries	3			132			3			72		—			—			—			12			—		222
Provision	(418		)	191			(18		)	159		(151		)	409			(232		)	(304		)	364		—
Balance at March 31, 2015	$	6,484		$	3,904		$	7,164		$	566	$	695		$	1,195		$	6,960		$	2,013		$	364	$	29,345
Individually evaluated for impairment	$	749		$	—		$	—		$	—	$	—		$	—		$	450		$	—		$	—	$	1,199
Collectively evaluated for impairment	5,677			3,792			7,164			547		695			1,195			6,493			2,013			364		27,940
Acquired with deteriorated credit quality	58			112			—			19		—			—			17			—			—		206
Total ending allowance balance	$	6,484		$	3,904		$	7,164		$	566	$	695		$	1,195		$	6,960		$	2,013		$	364	$	29,345
Loans:
Individually evaluated for impairment	$	8,087		$	373		$	1,566		$	9	$	—		$	—		$	21,790		$	294		$	—	$	32,119
Collectively evaluated for impairment	480,063			964,929			938,487			45,109		38,081			102,012			920,193			170,924			—		3,659,798
Acquired with deteriorated credit quality	1,079			10,432			—			3,136		—			—			227,151			—			—		241,798
Total ending loan balances	$	489,229		$	975,734		$	940,053		$	48,254	$	38,081		$	102,012		$	1,169,134		$	171,218		$	—	$	3,933,715



	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 December 31, 2013	$	1,822	$	5,484	$	2,566	$	235		$	244	$	428	$	7,044		$	532		$	450		$	18,805
Charge-offs	—		—		—		(17		)	—		—		(151		)	(35		)	—			(203		)
Recoveries	26		316		—		92			—		—		—			1			—			435
Transfer of loans to held-for-sale	—		—		—		—			—		—		(963		)	—			—			(963		)
Provision	519		649		154		(99		)	108		194		217			284			(97		)	1,929
Balance at March 31, 2014	$	2,367	$	6,449	$	2,720	$	211		$	352	$	622	$	6,147		$	782		$	353		$	20,003
Individually evaluated for impairment	$	—	$	—	$	37	$	—		$	—	$	—	$	25		$	—		$	—		$	62
Collectively evaluated for impairment	2,367		6,449		2,683		211			352		622		5,926			782			353			19,745
Acquired with deteriorated credit quality	—		—		—		—			—		—		196			—			—			196
Total ending allowance balance	$	2,367	$	6,449	$	2,720	$	211		$	352	$	622	$	6,147		$	782		$	353		$	20,003
Loans:
Individually evaluated for impairment	$	—	$	3,218	$	1,674	$	—		$	—	$	—	$	10,160		$	212		$	—		$	15,264
Collectively evaluated for impairment	297,646		542,750		153,708		23,064			25,144		48,537		856,664			120,795			—			2,068,308
Acquired with deteriorated credit quality	1,538		14,613		—		3,477			—		—		292,039			1,756			—			313,423
Total ending loan balances	$	299,184	$	560,581	$	155,382	$	26,541		$	25,144	$	48,537	$	1,158,863		$	122,763		$	—		$	2,396,995

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.



	March 31, 2015						December 31, 2014
	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	$	4,085	$	3,953	$	—	$	4,803	$	4,708	$	—
Commercial real estate	1,233		373		—		1,910		1,017		—
Multi-family	1,732		1,566		—		1,747		1,594		—
SBA	23		9		—		24		6		—
Consumer:
Single family residential mortgage	17,396		16,725		—		15,729		15,131		—
Other consumer	294		294		—		507		503		—
With an allowance recorded:
Commercial:
Commercial and industrial	4,179		4,134		749		4,310		4,313		788
Commercial real estate	—		—		—		—		—		—
Multi-family	—		—		—		—		—		—
Consumer:
Single family residential mortgage	5,243		5,065		450		6,422		6,206		500
Other consumer	—		—		—		—		—		—
Total	$	34,185	$	32,119	$	1,199	$	35,452	$	33,478	$	1,288

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



	Three Months Ended March 31,
	2015						2014
	Average Recorded Investment		Interest Income Recognized		Cash Basis Interest Recognized		Average Recorded Investment		Interest Income Recognized		Cash Basis Interest Recognized
	(In thousands)
Commercial:
Commercial and industrial	$	8,199	$	119	$	130	$	—	$	—	$	—
Commercial real estate	383		10		10		3,417		49		57
Multi-family	1,580		13		15		1,684		13		13
SBA	7		—		—		—		—		—
Consumer:
Single family residential mortgage	21,866		179		176		10,270		65		65
Other consumer	294		2		3		213		1		1
Total	$	32,329	$	323	$	334	$	15,584	$	128	$	136

Non-accrual Loans and Leases

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



	March 31, 2015						December 31, 2014
	NTM Loans		Traditional Loans		Total		NTM Loans		Traditional Loans		Total
	(In thousands)
Loans past due 90 days or more and still accruing	$	—	$	—	$	—	$	—	$	—	$	—
Nonaccrual loans and leases:
The Company maintains specific allowances for these loans of $584 in 2015 and $478 in 2014	13,635		29,119		42,754		14,592		23,789		38,381

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



	March 31, 2015						December 31, 2014
	NTM Loans		Traditional Loans		Total		NTM Loans		Traditional Loans		Total
	(In thousands)
Commercial:
Commercial and industrial	$	—	$	6,676	$	6,676	$	—	$	7,143	$	7,143
Commercial real estate	—		1,026		1,026		—		1,017		1,017
Multi-family	—		2,005		2,005		—		1,834		1,834
SBA	—		342		342		—		285		285
Construction	—		—		—		—		—		—
Lease financing	—		663		663		—		100		100
Consumer:
Single family residential mortgage	2,957		18,371		21,328		2,049		13,370		15,419
Green Loans (HELOC) - first liens	10,678		—		10,678		12,334		—		12,334
Green Loans (HELOC) - second liens	—		—		—		209		—		209
Other consumer	—		36		36		—		40		40
Total nonaccrual loans and leases	$	13,635	$	29,119	$	42,754	$	14,592	$	23,789	$	38,381

Past Due Loans and Leases

The following table presents the aging of the recorded investment in past due loans and leases as of March 31, 2015, excluding accrued interest receivable (which is not considered to be material), by class of loans and leases:



	March 31, 2015
	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	$	1,121	$	419	$	2,957	$	4,497	$	224,509	$	229,006
Green Loans (HELOC) - first liens	9,076		—		—		9,076		110,882		119,958
Green Loans (HELOC) - second liens	—		—		—		—		4,748		4,748
Other consumer	—		—		—		—		113		113
Total NTM loans	10,197		419		2,957		13,573		340,252		353,825
Traditional loans and leases:
Commercial:
Commercial and industrial	601		16		170		787		487,363		488,150
Commercial real estate	3,230		495		653		4,378		960,924		965,302
Multi-family	629		2,487		207		3,323		936,730		940,053
SBA	6		—		314		320		44,798		45,118
Construction	—		—		—		—		38,081		38,081
Lease financing	1,033		64		663		1,760		100,252		102,012
Consumer:
Single family residential mortgage	17,453		2,765		15,574		35,792		557,227		593,019
Other consumer	1,150		96		—		1,246		165,111		166,357
Total traditional loans and leases	24,102		5,923		17,581		47,606		3,290,486		3,338,092
Purchased Credit Impaired (PCI) loans:
Commercial:
Commercial and industrial	736		—		—		736		343		1,079
Commercial real estate	—		—		1,055		1,055		9,377		10,432
SBA	668		8		616		1,292		1,844		3,136
Consumer:
Single family residential mortgage	11,863		3,100		5,315		20,278		206,873		227,151
Total PCI loans	13,267		3,108		6,986		23,361		218,437		241,798
Total	$	47,566	$	9,450	$	27,524	$	84,540	$	3,849,175	$	3,933,715

The following table presents the aging of the recorded investment in past due loans and leases as of December 31, 2014, excluding accrued interest receivable (which is not considered to be material), by class of loans and leases:



	December 31, 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	$	1,415	$	165	$	2,049	$	3,629	$	218,677	$	222,306
Green Loans (HELOC) - first liens	8,853		—		437		9,290		113,887		123,177
Green Loans (HELOC) - second liens	294		—		209		503		4,476		4,979
Other consumer	—		—		—		—		113		113
Total NTM loans	10,562		165		2,695		13,422		337,153		350,575
Traditional loans and leases:
Commercial:
Commercial and industrial	79		37		3,370		3,486		486,280		489,766
Commercial real estate	2,237		—		—		2,237		986,093		988,330
Multi-family	1,072		208		—		1,280		954,403		955,683
SBA	82		—		254		336		32,662		32,998
Construction	—		—		—		—		42,198		42,198
Lease financing	1,055		36		100		1,191		84,558		85,749
Consumer:
Single family residential mortgage	17,185		7,878		10,411		35,474		559,626		595,100
Other consumer	9		89		5		103		161,723		161,826
Total traditional loans and leases	21,719		8,248		14,140		44,107		3,307,543		3,351,650
PCI loans:
Commercial:
Commercial and industrial	—		—		—		—		1,134		1,134
Commercial real estate	—		—		951		951		10,576		11,527
SBA	878		—		300		1,178		1,979		3,157
Consumer:
Single family residential mortgage	13,262		3,501		4,510		21,273		209,806		231,079
Total PCI loans	14,140		3,501		5,761		23,402		223,495		246,897
Total	$	46,421	$	11,914	$	22,596	$	80,931	$	3,868,191	$	3,949,122

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 months ended March 31, 2015, there were 2 modifications through bankruptcy discharges. There were no modifications for the three ended March 31, 2014. The following table summarizes the pre-modification and post-modification balances of the new TDRs for the three months ended March 31, 2015 and 2014:



	Three Months Ended March 31,
	2015					2014
	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)
Consumer:
Single family residential mortgage	2	$	1,430	$	1,430	—	$	—	$	—
Total	2	$	1,430	$	1,430	—	$	—	$	—

For the three months ended March 31, 2015 and 2014, 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:



	March 31, 2015						December 31, 2014
	NTM Loans		Traditional Loans		Total		NTM Loans		Traditional Loans		Total
	(In thousands)
Commercial:
Commercial real estate	$	—	$	—	$	—	$	—	$	—	$	—
SBA	—		9		9		—		6		6
Consumer:
Single family residential mortgage	—		4,543		4,543		—		4,269		4,269
Green Loans (HELOC) - first liens	4,549		—		4,549		3,442		—		3,442
Green Loans (HELOC) - second liens	294		—		294		294		—		294
Total	$	4,843	$	4,552	$	9,395	$	3,736	$	4,275	$	8,011

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 March 31, 2015 and December 31, 2014.

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 March 31, 2015:



	March 31, 2015
	Pass		Special Mention		Substandard		Doubtful		Not-Rated		Total
	(In thousands)
NTM loans:
Single family residential mortgage	$	224,683	$	2,041	$	2,282	$	—	$	—	$	229,006
Green Loans (HELOC) - first liens	100,428		3,056		16,173		301		—		119,958
Green Loans (HELOC) - second liens	4,748		—		—		—		—		4,748
Other consumer	113		—		—		—		—		113
Total NTM loans	329,972		5,097		18,455		301		—		353,825
Traditional loans and leases:
Commercial:
Commercial and industrial	476,344		106		11,700		—		—		488,150
Commercial real estate	926,109		14,099		25,094		—		—		965,302
Multi-family	919,956		5,974		14,123		—		—		940,053
SBA	44,301		—		817		—		—		45,118
Construction	38,081		—		—		—		—		38,081
Lease financing	101,285		64		663		—		—		102,012
Consumer:
Single family residential mortgage	557,947		15,848		19,224		—		—		593,019
Other consumer	166,243		78		36		—		—		166,357
Total traditional loans and leases	3,230,266		36,169		71,657		—		—		3,338,092
PCI loans:
Commercial:
Commercial and industrial	92		—		987		—		—		1,079
Commercial real estate	5,700		974		3,758		—		—		10,432
SBA	364		346		2,426		—		—		3,136
Consumer:
Single family residential mortgage	—		—		255		—		226,896		227,151
Total PCI loans	6,156		1,320		7,426		—		226,896		241,798
Total	$	3,566,394	$	42,586	$	97,538	$	301	$	226,896	$	3,933,715

The following table presents the risk categories for loans and leases as of December 31, 2014:



	December 31, 2014
	Pass		Special Mention		Substandard		Doubtful		Not-Rated		Total
	(In thousands)
NTM loans:
Single family residential mortgage	$	219,747	$	279	$	2,280	$	—	$	—	$	222,306
Green Loans (HELOC) - first liens	104,640		399		18,138		—		—		123,177
Green Loans (HELOC) - second liens	4,770		—		209		—		—		4,979
Other consumer	113		—		—		—		—		113
Total NTM loans	329,270		678		20,627		—		—		350,575
Traditional loans and leases:
Commercial:
Commercial and industrial	477,319		117		12,330		—		—		489,766
Commercial real estate	943,645		14,281		30,404		—		—		988,330
Multi-family	932,438		6,684		16,561		—		—		955,683
SBA	32,171		—		827		—		—		32,998
Construction	42,198		—		—		—		—		42,198
Lease financing	85,613		36		100		—		—		85,749
Consumer:
Single family residential mortgage	569,871		10,395		14,834		—		—		595,100
Other consumer	161,701		85		40		—		—		161,826
Total traditional loans and leases	3,244,956		31,598		75,096		—		—		3,351,650
PCI loans:
Commercial:
Commercial and industrial	104		—		1,030		—		—		1,134
Commercial real estate	6,676		985		3,866		—		—		11,527
SBA	677		351		2,129		—		—		3,157
Consumer:
Single family residential mortgage	—		—		268		—		230,811		231,079
Total PCI loans	7,457		1,336		7,293		—		230,811		246,897
Total	$	3,581,683	$	33,612	$	103,016	$	—	$	230,811	$	3,949,122

Purchased Credit Impaired Loans

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:



	March 31, 2015				December 31, 2014
	Outstanding Balance		Carrying Amount		Outstanding Balance		Carrying Amount
	(In thousands)
Commercial:
Commercial and industrial	$	1,700	$	1,079	$	1,767	$	1,134
Commercial real estate	12,052		10,432		13,708		11,527
SBA	4,175		3,136		4,220		3,157
Consumer:
Single family residential mortgage	277,253		227,151		283,067		231,079
Total	$	295,180	$	241,798	$	302,762	$	246,897

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



	Three Months Ended March 31,
	2015			2014
	(In thousands)
Balance at beginning of period	$	92,301		$	126,336
New loans or leases purchased	—			—
Accretion of income	(5,048		)	(7,169		)
Changes in expected cash flows	(25		)	131
Disposals	(1,933		)	(10,950		)
Balance at end of period	$	85,295		$	108,348

The Company did not purchase any PCI loans during the three months ended March 31, 2015 or 2014. During the three months ended March 31, 2015, the Company did not sell any PCI loans. During the three months ended March 31, 2014, the Company sold a portion of PCI loans with unpaid principal balances and carrying values of $27.7 million and $16.1 million, respectively, and recognized net gain on sale of loans of $2.3 million from the transaction.

- Definition

The entire disclosure for claims held for amounts due a entity, excluding financing receivables. Examples include, but are not limited to, trade accounts receivables, notes receivables, loans receivables. Includes disclosure for allowance for credit losses.

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