LOANS AND LEASES AND ALLOWANCE FOR LOAN AND LEASE LOSSES

6 Months Ended

Jun. 30, 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 Loans			Total Loans and Leases Receivable
	($ in thousands)
June 30, 2015
Commercial:
Commercial and industrial	$	—		$	771,112		$	771,112		$	365		$	771,477
Commercial real estate	—			796,142			796,142			11,004			807,146
Multi-family	—			696,768			696,768			—			696,768
SBA	—			53,866			53,866			3,021			56,887
Construction	—			32,022			32,022			—			32,022
Lease financing	—			131,189			131,189			—			131,189
Consumer:
Single family residential mortgage	597,554			873,507			1,471,061			251,982			1,723,043
Green Loans (HELOC) - first liens	117,881			—			117,881			—			117,881
Green Loans (HELOC) - second liens	4,773			—			4,773			—			4,773
Other consumer	113			131,796			131,909			—			131,909
Total gross loans and leases	$	720,321		$	3,486,402		$	4,206,723		$	266,372		$	4,473,095
Percentage to total gross loans and leases	16.1		%	77.9		%	94.0		%	6.0		%	100.0		%
Allowance for loan and lease losses													(34,787		)
Loans and leases receivable, net													$	4,438,308
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 June 30, 2015 and December 31, 2014, the NTM loans totaled $720.3 million, or 16.1 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 $369.7 million, or 105.5 percent, during the six months ended June 30, 2015, due mainly to interest only loans transferred from loans held for sale of $277.5 million.

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



	June 30, 2015						December 31, 2014
	Count	Amount			Percent		Count	Amount			Percent
	($ in thousands)
Green Loans (HELOC) - first liens	143	$	117,881		16.3	%	148	$	123,177		35.1	%
Interest-only - first liens	494	585,437			81.2	%	207	209,207			59.7	%
Negative amortization	31	12,117			1.7	%	32	13,099			3.7	%
Total NTM - first liens	668	715,435			99.2	%	387	345,483			98.5	%
Green Loans (HELOC) - second liens	17	4,773			0.7	%	19	4,979			1.4	%
Interest-only - second liens	1	113			0.1	%	1	113			0.1	%
Total NTM - second liens	18	4,886			0.8	%	20	5,092			1.5	%
Total NTM loans	686	$	720,321		100.0	%	407	$	350,575		100.0	%
Total gross loan portfolio		$	4,473,095					$	3,949,122
% of NTM to total gross loan portfolio		16.1		%				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 June 30, 2015 and December 31, 2014, Green Loans totaled $122.7 million and $128.2 million, respectively. At June 30, 2015 and December 31, 2014, $10.6 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 June 30, 2015 and December 31, 2014, interest only loans totaled $585.6 million and $209.3 million, respectively. At June 30, 2015 and December 31, 2014, $4.1 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 $12.1 million and $13.1 million at June 30, 2015 and December 31, 2014, respectively. The Company discontinued origination of negative amortization loans in 2007. At June 30, 2015 and December 31, 2014, none of the loans that had the potential for negative amortization were non-performing. 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 Fair Isaac Company (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 June 30, 2015 by FICO scores that were obtained during the quarter ended June 30, 2015, comparing to the FICO scores for those same loans that were obtained during the quarter ended December 31, 2014:



	By FICO Scores Obtained During the Quarter Ended June 30, 2015					By FICO Scores Obtained During the Quarter Ended December 31, 2014					Change
	Count	Amount		Percent		Count	Amount		Percent		Count		Amount			Percent
	($ in thousands)
June 30, 2015
FICO Score
800+	24	$	15,720	13.3	%	28	$	19,274	16.4	%	(4	)	$	(3,554	)	(3.1	)%
700-799	74	59,367		50.4	%	69	49,543		41.9	%	5		9,824			8.5	%
600-699	26	18,189		15.4	%	28	30,408		25.8	%	(2	)	(12,219		)	(10.4	)%
<600	7	7,848		6.7	%	8	11,867		10.1	%	(1	)	(4,019		)	(3.4	)%
No FICO	12	16,757		14.2	%	10	6,789		5.8	%	2		9,968			8.4	%
Totals	143	$	117,881	100.0	%	143	$	117,881	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 ratio (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⁾
June 30, 2015
< 61%	82	$	58,054	49.2	%	120	$	173,343	29.6	%	16	$	6,649	54.9	%	218	$	238,046	33.2	%
61-80%	36	42,145		35.8	%	277	377,324		64.5	%	11	4,508		37.2	%	324	423,977		59.3	%
81-100%	19	12,519		10.6	%	38	16,094		2.7	%	3	574		4.7	%	60	29,187		4.1	%
> 100%	6	5,163		4.4	%	59	18,676		3.2	%	1	386		3.2	%	66	24,225		3.4	%
Total	143	$	117,881	100.0	%	494	$	585,437	100.0	%	31	$	12,117	100.0	%	668	$	715,435	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 June 30, 2015 and December 31, 2014, the reserve for unfunded loan commitments was $2.1 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 June 30,						Six Months Ended June 30,
	2015			2014			2015			2014
	(In thousands)
Balance at beginning of period	$	29,345		$	20,003		$	29,480		$	18,805
Loans and leases charged off	(79		)	(383		)	(436		)	(586		)
Recoveries of loans and leases previously charged off	47			641			269			1,076
Transfer of loans from (to) held-for-sale	—			258			—			(705		)
Provision for loan and lease losses	5,474			2,108			5,474			4,037
Balance at end of period	$	34,787		$	22,627		$	34,787		$	22,627

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 six months ended June 30, 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 March 31, 2015	$	6,484		$	3,904		$	7,164		$	566		$	695		$	1,195		$	6,960	$	2,013		$	364	$	29,345
Charge-offs	(23		)	—			—			(55		)	—			(1		)	—		—			—		(79		)
Recoveries	5			—			—			41			—			—			—		1			—		47
Provision	418			541			(3,484		)	122			(116		)	452			5,990		(328		)	1,879		5,474
Balance at June 30, 2015	$	6,884		$	4,445		$	3,680		$	674		$	579		$	1,646		$	12,950	$	1,686		$	2,243	$	34,787
Balance at December 31, 2014	$	6,910		$	3,840		$	7,179		$	335		$	846		$	873		$	7,192	$	2,305		$	—	$	29,480
Charge-offs	(33		)	(260		)	—			(55		)	—			(88		)	—		—			—		(436		)
Recoveries	8			132			3			113			—			—			—		13			—		269
Provision	(1		)	733			(3,502		)	281			(267		)	861			5,758		(632		)	2,243		5,474
Balance at June 30, 2015	$	6,884		$	4,445		$	3,680		$	674		$	579		$	1,646		$	12,950	$	1,686		$	2,243	$	34,787
Individually evaluated for impairment	$	253		$	—		$	—		$	—		$	—		$	—		$	433	$	—		$	—	$	686
Collectively evaluated for impairment	6,573			4,333			3,680			655			579			1,646			12,500		1,686			2,243		33,895
Acquired with deteriorated credit quality	58			112			—			19			—			—			17		—			—		206
Total ending allowance balance	$	6,884		$	4,445		$	3,680		$	674		$	579		$	1,646		$	12,950	$	1,686		$	2,243	$	34,787
Loans:
Individually evaluated for impairment	$	5,125		$	353		$	—		$	8		$	—		$	—		$	26,019	$	294		$	—	$	31,799
Collectively evaluated for impairment	765,987			795,789			696,768			53,858			32,022			131,189			1,562,923		136,388			—		4,174,924
Acquired with deteriorated credit quality	365			11,004			—			3,021			—			—			251,982		—			—		266,372
Total ending loan balances	$	771,477		$	807,146		$	696,768		$	56,887		$	32,022		$	131,189		$	1,840,924	$	136,682		$	—	$	4,473,095

The increase in ALLL on single family residential (SFR) mortgage loans was mainly due to SFR mortgage loans transferred from held for sale of $476.9 million. The decrease in ALLL on multi-family loans was mainly due to sales of $242.6 million of such loans and a higher composition of loans acquired at fair value through business acquisitions in multi-family loans. At June 30, 2015, a large portion of multi-family loans were acquired from the BPNA Branch Acquisition, which included purchase discounts that led to a lower level of ALLL.



	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 March 31, 2014	$	2,367	$	6,449		$	2,720		$	211		$	352	$	622	$	6,147		$	782		$	353		$	20,003
Charge-offs	—		—			(3		)	—			—		—		(206		)	(174		)	—			(383		)
Recoveries	27		438			—			175			—		—		—			1			—			641
Transfer of loans to held-for-sale	—		—			—			—			—		—		258			—			—			258
Provision	613		(1,272		)	691			(125		)	893		108		1,090			463			(353		)	2,108
Balance at June 30, 2014	$	3,007	$	5,615		$	3,408		$	261		$	1,245	$	730	$	7,289		$	1,072		$	—		$	22,627
Balance at December 31, 2013	$	1,822	$	5,484		$	2,566		$	235		$	244	$	428	$	7,044		$	532		$	450		$	18,805
Charge-offs	—		—			(3		)	(17		)	—		—		(357		)	(209		)	—			(586		)
Recoveries	53		754			—			267			—		—		—			2			—			1,076
Transfer of loans to held-for-sale	—		—			—			—			—		—		(705		)	—			—			(705		)
Provision	1,132		(623		)	845			(224		)	1,001		302		1,307			747			(450		)	4,037
Balance at June 30, 2014	$	3,007	$	5,615		$	3,408		$	261		$	1,245	$	730	$	7,289		$	1,072		$	—		$	22,627
Individually evaluated for impairment	$	—	$	—		$	—		$	—		$	—	$	—	$	309		$	—		$	—		$	309
Collectively evaluated for impairment	3,007		5,615			3,408			261			1,245		730		6,659			1,072			—			21,997
Acquired with deteriorated credit quality	—		—			—			—			—		—		321			—			—			321
Total ending allowance balance	$	3,007	$	5,615		$	3,408		$	261		$	1,245	$	730	$	7,289		$	1,072		$	—		$	22,627
Loans:
Individually evaluated for impairment	$	4,507	$	3,148		$	1,651		$	6		$	—	$	—	$	26,413		$	211		$	—		$	35,936
Collectively evaluated for impairment	362,604		518,020			232,528			25,258			30,761		57,754		902,317			131,978			—			2,261,220
Acquired with deteriorated credit quality	1,429		14,576			—			3,420			—		—		284,083			1,549			—			305,057
Total ending loan balances	$	368,540	$	535,744		$	234,179		$	28,684		$	30,761	$	57,754	$	1,212,813		$	133,738		$	—		$	2,602,213

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.



	June 30, 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	$	—	$	—	$	—	$	4,803	$	4,708	$	—
Commercial real estate	1,220		353		—		1,910		1,017		—
Multi-family	—		—		—		1,747		1,594		—
SBA	22		8		—		24		6		—
Consumer:
Single family residential mortgage	21,527		20,748		—		15,729		15,131		—
Other consumer	294		294		—		507		503		—
With an allowance recorded:
Commercial:
Commercial and industrial	5,208		5,125		253		4,310		4,313		788
Consumer:
Single family residential mortgage	5,453		5,271		433		6,422		6,206		500
Total	$	33,724	$	31,799	$	686	$	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						Six Months Ended
	Average Recorded Investment		Interest Income Recognized		Cash Basis Interest Recognized		Average Recorded Investment		Interest Income Recognized		Cash Basis Interest Recognized
	(In thousands)
June 30, 2015
Commercial:
Commercial and industrial	$	5,197	$	68	$	64	$	6,698	$	187	$	194
Commercial real estate	363		7		7		373		17		17
Multi-family	—		—		—		790		13		15
SBA	9		—		—		8		—		—
Consumer:
Single family residential mortgage	26,111		210		210		23,989		389		386
Other consumer	294		2		2		294		4		5
Total	$	31,974	$	287	$	283	$	32,152	$	610	$	617
June 30, 2014
Commercial:
Commercial and industrial	$	4,315	$	60	$	50	$	2,158	$	60	$	50
Commercial real estate	3,220		63		60		3,319		112		117
Multi-family	1,662		40		19		1,673		53		32
SBA	8		—		—		4		—		—
Consumer:
Single family residential mortgage	26,630		191		226		18,450		256		291
Other consumer	212		1		1		213		2		2
Total	$	36,047	$	355	$	356	$	25,817	$	483	$	492

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:



	June 30, 2015						December 31, 2014
	NTM Loans		Traditional Loans and Leases		Total		NTM Loans		Traditional Loans and Leases		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 $164 in 2015 and $478 in 2014	14,716		27,992		42,708		14,592		23,789		38,381

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



	June 30, 2015						December 31, 2014
	NTM Loans		Traditional Loans and Leases		Total		NTM Loans		Traditional Loans and Leases		Total
	(In thousands)
Commercial:
Commercial and industrial	$	—	$	3,732	$	3,732	$	—	$	7,143	$	7,143
Commercial real estate	—		680		680		—		1,017		1,017
Multi-family	—		854		854		—		1,834		1,834
SBA	—		338		338		—		285		285
Construction	—		—		—		—		—		—
Lease financing	—		924		924		—		100		100
Consumer:
Single family residential mortgage	4,123		21,425		25,548		2,049		13,370		15,419
Green Loans (HELOC) - first liens	10,593		—		10,593		12,334		—		12,334
Green Loans (HELOC) - second liens	—		—		—		209		—		209
Other consumer	—		39		39		—		40		40
Total nonaccrual loans and leases	$	14,716	$	27,992	$	42,708	$	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 June 30, 2015, excluding accrued interest receivable (which is not considered to be material), by class of loans and leases:



	June 30, 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	$	5,637	$	170	$	4,014	$	9,821	$	587,733	$	597,554
Green Loans (HELOC) - first liens	8,072		2,222		—		10,294		107,587		117,881
Green Loans (HELOC) - second liens	—		—		—		—		4,773		4,773
Other consumer	—		—		—		—		113		113
Total NTM loans	13,709		2,392		4,014		20,115		700,206		720,321
Traditional loans and leases:
Commercial:
Commercial and industrial	1,053		14		169		1,236		769,876		771,112
Commercial real estate	2,900		358		—		3,258		792,884		796,142
Multi-family	335		—		—		335		696,433		696,768
SBA	30		—		230		260		53,606		53,866
Construction	—		—		—		—		32,022		32,022
Lease financing	447		243		924		1,614		129,575		131,189
Consumer:
Single family residential mortgage	18,509		6,698		17,491		42,698		830,809		873,507
Other consumer	132		—		27		159		131,637		131,796
Total traditional loans and leases	23,406		7,313		18,841		49,560		3,436,842		3,486,402
Purchased Credit Impaired (PCI) loans:
Commercial:
Commercial and industrial	—		—		184		184		181		365
Commercial real estate	—		—		691		691		10,313		11,004
SBA	372		191		619		1,182		1,839		3,021
Consumer:
Single family residential mortgage	13,257		3,531		7,154		23,942		228,040		251,982
Total PCI loans	13,629		3,722		8,648		25,999		240,373		266,372
Total	$	50,744	$	13,427	$	31,503	$	95,674	$	4,377,421	$	4,473,095

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 six months ended June 30, 2015, there were 2 modifications through bankruptcy discharges. There were no modifications for the three and six months ended June 30, 2014. The following table summarizes the pre-modification and post-modification balances of the new TDRs for the three and six months ended June 30, 2015:



	Three Months Ended					Six 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)
June 30, 2015
Consumer:
Single family residential mortgage	—	$	—	$	—	2	$	1,430	$	1,430
Total	—	$	—	$	—	2	$	1,430	$	1,430

For the three and six months ended June 30, 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.

TDR loans and leases consist of the following as of the dates indicated:



	June 30, 2015						December 31, 2014
	NTM Loans		Traditional Loans		Total		NTM Loans		Traditional Loans		Total
	(In thousands)
Commercial:
Commercial real estate	$	—	$	—	$	—	$	—	$	—	$	—
SBA	—		8		8		—		6		6
Consumer:
Single family residential mortgage	—		4,495		4,495		—		4,269		4,269
Green Loans (HELOC) - first liens	4,542		—		4,542		3,442		—		3,442
Green Loans (HELOC) - second liens	294		—		294		294		—		294
Total	$	4,836	$	4,503	$	9,339	$	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 TDRs as of June 30, 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 June 30, 2015:



	June 30, 2015
	Pass		Special Mention		Substandard		Doubtful		Not-Rated		Total
	(In thousands)
NTM loans:
Single family residential mortgage	$	581,334	$	12,097	$	4,123	$	—	$	—	$	597,554
Green Loans (HELOC) - first liens	99,179		398		18,006		298		—		117,881
Green Loans (HELOC) - second liens	4,773		—		—		—		—		4,773
Other consumer	113		—		—		—		—		113
Total NTM loans	685,399		12,495		22,129		298		—		720,321
Traditional loans and leases:
Commercial:
Commercial and industrial	746,236		3,065		21,811		—		—		771,112
Commercial real estate	774,529		10,041		11,572		—		—		796,142
Multi-family	680,912		4,778		11,078		—		—		696,768
SBA	53,107		—		759		—		—		53,866
Construction	32,022		—		—		—		—		32,022
Lease financing	129,492		138		1,559		—		—		131,189
Consumer:
Single family residential mortgage	833,492		18,593		21,422		—		—		873,507
Other consumer	131,696		61		39		—		—		131,796
Total traditional loans and leases	3,381,486		36,676		68,240		—		—		3,486,402
PCI loans:
Commercial:
Commercial and industrial	80		—		285		—		—		365
Commercial real estate	5,662		968		4,374		—		—		11,004
SBA	347		283		2,391		—		—		3,021
Consumer:
Single family residential mortgage	—		—		143		—		251,839		251,982
Total PCI loans	6,089		1,251		7,193		—		251,839		266,372
Total	$	4,072,974	$	50,422	$	97,562	$	298	$	251,839	$	4,473,095

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 three months ended June 30, 2015 and 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:



	June 30, 2015				December 31, 2014
	Outstanding Balance		Carrying Amount		Outstanding Balance		Carrying Amount
	(In thousands)
Commercial:
Commercial and industrial	$	443	$	365	$	1,767	$	1,134
Commercial real estate	13,012		11,004		13,708		11,527
SBA	4,021		3,021		4,220		3,157
Consumer:
Single family residential mortgage	301,291		251,982		283,067		231,079
Total	$	318,767	$	266,372	$	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 June 30,						Six Months Ended June 30,
	2015			2014			2015			2014
	(In thousands)
Balance at beginning of period	$	85,295		$	108,348		$	92,301		$	126,336
New loans or leases purchased	(74		)	—			(74		)	—
Accretion of income	(4,894		)	(6,615		)	(9,942		)	(13,784		)
Changes in expected cash flows	(128		)	27,595			(153		)	27,726
Disposals	(1,659		)	(2,486		)	(3,592		)	(13,436		)
Balance at end of period	$	78,540		$	126,842		$	78,540		$	126,842

The Company completed one bulk loan acquisition during the three and six months ended June 30, 2015 with unpaid principal balances and fair values of $82.5 million and $79.9 million, respectively, at the acquisition date. 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. The unpaid principal balances and fair values of PCI loans in this transaction, at the date of acquisition, were $31.6 million and $30.4 million, respectively. The Company did not purchase any PCI loans during the three and six months ended June 30, 2014.

During the three and six months ended June 30, 2015, the Company did not sell any PCI loans. During the three months ended June 30, 2014, the Company sold a portion of PCI loans with unpaid principal balances and carrying values of $2.5 million and $1.5 million, respectively, and recognized no net gain or loss on sale of loans from the transaction. During the six months ended June 30, 2014, the Company sold a portion of PCI loans with unpaid principal balances and carrying values of $30.2 million and $17.6 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.

+ References + Details