LOANS AND LEASES AND ALLOWANCE FOR LOAN AND LEASE LOSSES

12 Months Ended

Dec. 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			Traditional Loans			Total NTM and Traditional Loans			Purchased Credit Impaired			Total Loans and Leases Receivable
	($ in thousands)
December 31, 2015
Commercial:
Commercial and industrial	$	—		$	876,146		$	876,146		$	853		$	876,999
Commercial real estate	—			718,108			718,108			9,599			727,707
Multi-family	—			904,300			904,300			—			904,300
SBA	—			54,657			54,657			3,049			57,706
Construction	—			55,289			55,289			—			55,289
Lease financing	—			192,424			192,424			—			192,424
Consumer:
Single family residential mortgage	675,960			775,263			1,451,223			699,230			2,150,453
Green Loans (HELOC) - first liens	105,131			—			105,131			—			105,131
Green Loans (HELOC) - second liens	4,704			—			4,704			—			4,704
Other consumer	113			109,568			109,681			—			109,681
Total loans and leases	$	785,908		$	3,685,755		$	4,471,663		$	712,731		$	5,184,394
Percentage to total loans and leases	15.2		%	71.1		%	86.3		%	13.7		%	100.0		%
Allowance for loan and lease losses													(35,533		)
Loans and leases receivable, net													$	5,148,861
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 loans and leases	$	350,575		$	3,351,650		$	3,702,225		$	246,897		$	3,949,122
Percentage to total 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 NTM portfolio is comprised of three interest only products: 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 December 31, 2015 and 2014, the NTM loans totaled $785.9 million, or 15.2 percent of total loans and leases, and $350.6 million, or 8.9 percent of total loans and leases, respectively. The total NTM portfolio increased by $435.3 million, or 124.2 percent, during the year ended December 31, 2015.

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



	December 31,
	2015						2014
	Count	Amount			Percent		Count	Amount			Percent
	($ in thousands)
Green Loans (HELOC) - first liens	121	$	105,131		13.4	%	148	$	123,177		35.1	%
Interest only - first liens	521	664,358			84.4	%	207	209,207			59.7	%
Negative amortization	30	11,602			1.5	%	32	13,099			3.7	%
Total NTM - first liens	672	781,091			99.3	%	387	345,483			98.5	%
Green Loans (HELOC) - second liens	16	4,704			0.6	%	19	4,979			1.4	%
Interest only - second liens	1	113			0.1	%	1	113			0.1	%
Total NTM - second liens	17	4,817			0.7	%	20	5,092			1.5	%
Total NTM loans	689	785,908			100.0	%	407	350,575			100.0	%
Total loans and leases		$	5,184,394					$	3,949,122
% of NTM to total loans and leases		15.2		%				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 December 31, 2015 and 2014, Green Loans totaled $109.8 million and $128.2 million, respectively. At December 31, 2015 and 2014, $10.1 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 LTV 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. At December 31, 2015 and 2014, interest only loans totaled $664.5 million and $209.3 million, respectively. At December 31, 2015 and 2014, $4.6 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 $11.6 million and $13.1 million at December 31, 2015 and 2014, respectively. The Company discontinued origination of negative amortization loans in 2007. At December 31, 2015 and 2014, no 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 LTV ratios.

Risk Management of Non-Traditional Mortgages

The Company has determined that significant performance indicators for NTMs are LTV ratios 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 HELOCs, as needed in conjunction with portfolio management, and ordering third party AVMs. 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 score of 10 percent or more and/or a resulting FICO score 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 score is the first indication that the borrower may have difficulty in making their future payment obligations.

The Company proactively manages the NTM portfolio by performing detailed analyses on the portfolio. The Company’s 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 a 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.

Non-Traditional Mortgage Performance Indicators

The following table presents the Company’s NTM Green Loans first lien portfolio at December 31, 2015 by FICO scores that were obtained during the quarter ended December 31, 2015, comparing to the FICO scores for those same loans that were obtained during the quarter ended December 31, 2014:



	December 31, 2015
	By FICO Scores Obtained During the Quarter Ended December 31, 2015					By FICO Scores Obtained During the Quarter Ended December 31, 2014					Change
	Count	Amount		Percent		Count	Amount		Percent		Count		Amount			Percent
	($ in thousands)
FICO Score
800+	22	$	14,438	13.7	%	24	$	16,587	15.8	%	(2	)	$	(2,149	)	(2.1	)%
700-799	60	48,775		46.5	%	58	44,678		42.5	%	2		4,097			4.0	%
600-699	23	23,600		22.4	%	24	26,768		25.5	%	(1	)	(3,168		)	(3.1	)%
<600	5	4,030		3.8	%	8	11,817		11.2	%	(3	)	(7,787		)	(7.4	)%
No FICO score	11	14,288		13.6	%	7	5,281		5.0	%	4		9,007			8.6	%
Totals	121	$	105,131	100.0	%	121	$	105,131	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 Ratio

LTV ratio 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 table below represents the Company’s single family residential NTM first lien portfolio by LTV ratios 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)
December 31, 2015
< 61	70	$	51,221	48.7	%	141	$	208,120	31.3	%	17	$	5,271	45.4	%	228	$	264,612	33.9	%
61-80	33	42,075		40.0	%	291	408,662		61.6	%	12	6,106		52.7	%	336	456,843		58.4	%
81-100	12	6,836		6.5	%	37	30,167		4.5	%	1	225		1.9	%	50	37,228		4.8	%
> 100	6	4,999		4.8	%	52	17,409		2.6	%	—	—		—	%	58	22,408		2.9	%
Total	121	$	105,131	100.0	%	521	$	664,358	100.0	%	30	$	11,602	100.0	%	672	$	781,091	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	%

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. The Company updates LTV ratios 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 share similar credit risk exposure are used to determine the adequacy of the reserve. At December 31, 2015 and 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:



	Year Ended December 31,
	2015			2014			2013
	(In thousands)
Balance at beginning of year	$	29,480		$	18,805		$	14,448
Loans and leases charged-off	(1,942		)	(923		)	(3,013		)
Recoveries of loans and leases previously charged off	526			1,235			850
Transfer of loans to held-for-sale	—			(613		)	(1,443		)
Provision for loan and lease losses	7,469			10,976			7,963
Balance at end of year	$	35,533		$	29,480		$	18,805

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 year ended December 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	(33		)	(259		)	—			(106		)	—		(1,541		)	—		(3		)	—		(1,942		)
Recoveries	8			132			3			288			—		79			—		16			—		526
Provision	(1,035		)	539			(1,170		)	166			684		2,784			6,662		(1,161		)	—		7,469
Balance at December 31, 2015	$	5,850		$	4,252		$	6,012		$	683		$	1,530	$	2,195		$	13,854	$	1,157		$	—	$	35,533
Individually evaluated for impairment	$	38		$	—		$	—		$	—		$	—	$	—		$	331	$	—		$	—	$	369
Collectively evaluated for impairment	5,754			4,140			6,012			664			1,530		2,195			13,506		1,157			—		34,958
Acquired with deteriorated credit quality	58			112			—			19			—		—			17		—			—		206
Total ending allowance balance	$	5,850		$	4,252		$	6,012		$	683		$	1,530	$	2,195		$	13,854	$	1,157		$	—	$	35,533
Loans:
Individually evaluated for impairment	$	7,159		$	312		$	—		$	3		$	—	$	—		$	26,256	$	553		$	—	$	34,283
Collectively evaluated for impairment	868,987			717,796			904,300			54,654			55,289		192,424			1,530,098		113,832			—		4,437,380
Acquired with deteriorated credit quality	853			9,599			—			3,049			—		—			699,230		—			—		712,731
Total ending loan balances	$	876,999		$	727,707		$	904,300		$	57,706		$	55,289	$	192,424		$	2,255,584	$	114,385		$	—	$	5,184,394



	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	—		(65		)	(3		)	(17		)	—		(244		)	(374		)	(220		)	—			(923		)
Recoveries	56		842			—			314			—		20			—			3			—			1,235
Transfer of loans to held-for-sale	—		—			—			—			—		—			(613		)	—			—			(613		)
Provision	5,032		(2,421		)	4,616			(197		)	602		669			1,135			1,990			(450		)	10,976
Balance at December 31, 2014	$	6,910	$	3,840		$	7,179		$	335		$	846	$	873		$	7,192		$	2,305		$	—		$	29,480
Individually evaluated for impairment	$	788	$	—		$	—		$	—		$	—	$	—		$	500		$	—		$	—		$	1,288
Collectively evaluated for impairment	6,122		3,834			7,179			335			846		873			6,675			2,305			—			28,169
Acquired with deteriorated credit quality	—		6			—			—			—		—			17			—			—			23
Total ending allowance balance	$	6,910	$	3,840		$	7,179		$	335		$	846	$	873		$	7,192		$	2,305		$	—		$	29,480
Loans:
Individually evaluated for impairment	$	9,021	$	1,017		$	1,594		$	6		$	—	$	—		$	21,337		$	503		$	—		$	33,478
Collectively evaluated for impairment	480,745		987,313			954,089			32,992			42,198		85,749			919,246			166,415			—			3,668,747
Acquired with deteriorated credit quality	1,134		11,527			—			3,157			—		—			231,079			—			—			246,897
Total ending loan balances	$	490,900	$	999,857		$	955,683		$	36,155		$	42,198	$	85,749		$	1,171,662		$	166,918		$	—		$	3,949,122

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.



	December 31,
	2015						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	$	6,244	$	6,086	$	—	$	4,803	$	4,708	$	—
Commercial real estate	1,200		312		—		1,910		1,017		—
Multi-family	—		—		—		1,747		1,594		—
SBA	22		3		—		24		6		—
Consumer:
Single family residential mortgage	24,224		22,671		—		15,729		15,131		—
Other consumer	553		553		—		507		503		—
With an allowance recorded:
Commercial:
Commercial and industrial	1,072		1,073		38		4,310		4,313		788
Consumer:
Single family residential mortgage	3,575		3,585		331		6,422		6,206		500
Total	$	36,890	$	34,283	$	369	$	35,452	$	33,478	$	1,288

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



	Year Ended
	Average Recorded Investment		Interest Income Recognized		Cash Basis Interest Recognized
	(In thousands)
December 31, 2015
Commercial:
Commercial and industrial	$	6,750	$	305	$	302
Commercial real estate	353		37		37
Multi-family	395		13		15
SBA	7		2		—
Consumer:
Single family residential mortgage	25,093		869		885
Other consumer	424		12		13
Total	$	33,022	$	1,238	$	1,252
December 31, 2014
Commercial:
Commercial and industrial	$	4,166	$	92	$	133
Commercial real estate	2,865		110		125
Multi-family	1,653		43		43
SBA	3		—		—
Consumer:
Single family residential mortgage	16,285		390		405
Other consumer	580		25		24
Total	$	25,552	$	660	$	730
December 31, 2013
Commercial:
Commercial and industrial	$	67	$	10	$	10
Commercial real estate	3,554		163		171
Multi-family	1,345		35		37
SBA	12		1		1
Consumer:
Single family residential mortgage	12,562		304		308
Other consumer	693		2		2
Total	$	18,233	$	515	$	529

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:



	December 31,
	2015						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:
The Company maintains specific allowances for these loans of $0 in 2015 and $478 in 2014	14,703		30,426		45,129		14,592		23,789		38,381

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



	December 31,
	2015						2014
	NTM Loans		Traditional Loans		Total		NTM Loans		Traditional Loans		Total
	(In thousands)
Commercial:
Commercial and industrial	$	—	$	4,383	$	4,383	$	—	$	7,143	$	7,143
Commercial real estate	—		1,552		1,552		—		1,017		1,017
Multi-family	—		642		642		—		1,834		1,834
SBA	—		422		422		—		285		285
Construction	—		—		—		—		—		—
Lease financing	—		598		598		—		100		100
Consumer:
Single family residential mortgage	4,615		22,615		27,230		2,049		13,370		15,419
Green Loans (HELOC) - first liens	10,088		—		10,088		12,334		—		12,334
Green Loans (HELOC) - second liens	—		—		—		209		—		209
Other consumer	—		214		214		—		40		40
Total nonaccrual loans and leases	$	14,703	$	30,426	$	45,129	$	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 December 31, 2015, excluding accrued interest receivable (which is not considered to be material), by class of loans and leases:



	December 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	$	3,935	$	—	$	3,447	$	7,382	$	668,578	$	675,960
Green Loans (HELOC) - first liens	7,913		—		—		7,913		97,218		105,131
Green Loans (HELOC) - second liens	—		—		—		—		4,704		4,704
Other consumer	—		—		—		—		113		113
Total NTM loans	11,848		—		3,447		15,295		770,613		785,908
Traditional loans:
Commercial:
Commercial and industrial	23		4,984		544		5,551		870,595		876,146
Commercial real estate	—		—		911		911		717,197		718,108
Multi-family	223		—		432		655		903,645		904,300
SBA	—		162		173		335		54,322		54,657
Construction	—		—		—		—		55,289		55,289
Lease financing	2,005		1,041		394		3,440		188,984		192,424
Consumer:
Single family residential mortgage	15,762		3,887		17,226		36,875		738,388		775,263
Other consumer	—		11		211		222		109,346		109,568
Total traditional loans	18,013		10,085		19,891		47,989		3,637,766		3,685,755
PCI loans:
Commercial:
Commercial and industrial	—		—		176		176		677		853
Commercial real estate	—		—		1,425		1,425		8,174		9,599
SBA	386		163		621		1,170		1,879		3,049
Consumer:
Single family residential mortgage	33,507		6,235		4,672		44,414		654,816		699,230
Other consumer	—		—		—		—		—		—
Total PCI loans	33,893		6,398		6,894		47,185		665,546		712,731
Total	$	63,754	$	16,483	$	30,232	$	110,469	$	5,073,925	$	5,184,394

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:
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	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
Other consumer	—		—		—		—		—		—
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 year ended December 31, 2015, there were 14 modifications through bankruptcy discharges. There were six modifications through extensions of maturities for the year ended December 31, 2014. There were two modifications through extensions of maturities for the year ended December 31, 2013. The following table summarizes the pre-modification and post-modification balances of the new TDRs for the periods indicated:



	Year Ended
	Number of Loans	Pre- Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment
	($ in thousands)
December 31, 2015
Consumer:
Single family residential mortgage	13	4,571		4,493
Other consumer	1	261		259
Total	14	$	4,832	$	4,752
December 31, 2014
Consumer:
Single family residential mortgage	5	1,245		1,229
Other consumer	1	294		294
Total	6	$	1,539	$	1,523
December 31, 2013
Consumer:
Other consumer	2	435		435
Total	2	$	435	$	435

For the years ended December 31, 2015, 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:



	December 31,
	2015						2014
	NTM Loans		Traditional Loans		Total		NTM Loans		Traditional Loans		Total
	(In thousands)
Commercial:
Commercial real estate	$	—	$	—	$	—	$	—	$	—	$	—
SBA	—		3		3		—		6		6
Consumer:
Single family residential mortgage	1,015		5,841		6,856		—		4,269		4,269
Green Loans (HELOC) - first liens	2,400		—		2,400		3,442		—		3,442
Green Loans (HELOC) - second liens	553		—		553		294		—		294
Total	$	3,968	$	5,844	$	9,812	$	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 December 31, 2015 and 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 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, LTV ratios, 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 December 31, 2015:



	December 31, 2015
	Pass		Special Mention		Substandard		Doubtful		Not-Rated		Total
	(In thousands)
NTM loans:
Single family residential mortgage	$	660,683	$	11,731	$	3,546	$	—	$	—	$	675,960
Green Loans (HELOC) - first liens	87,967		2,329		14,835		—		—		105,131
Green Loans (HELOC) - second liens	4,704		—		—		—		—		4,704
Other consumer	113		—		—		—		—		113
Total NTM loans	753,467		14,060		18,381		—		—		785,908
Traditional loans:
Commercial:
Commercial and industrial	860,993		3,175		11,978		—		—		876,146
Commercial real estate	707,238		4,788		6,082		—		—		718,108
Multi-family	901,578		403		2,319		—		—		904,300
SBA	53,078		1,132		447		—		—		54,657
Construction	55,289		—		—		—		—		55,289
Lease financing	190,976		—		1,448		—		—		192,424
Consumer:
Single family residential mortgage	738,196		12,301		24,766		—		—		775,263
Other consumer	109,206		148		214		—		—		109,568
Total traditional loans	3,616,554		21,947		47,254		—		—		3,685,755
PCI loans:
Commercial:
Commercial and industrial	54		—		799		—		—		853
Commercial real estate	5,621		523		3,455		—		—		9,599
SBA	988		—		2,061		—		—		3,049
Consumer:
Single family residential mortgage	—		—		139		—		699,091		699,230
Other consumer	—		—		—		—		—		—
Total PCI loans	6,663		523		6,454		—		699,091		712,731
Total	$	4,376,684	$	36,530	$	72,089	$	—	$	699,091	$	5,184,394

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:
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	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
Other consumer	—		—		—		—		—		—
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, 2015, 2014, and 2013, 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:



	December 31,
	2015				2014
	Outstanding Balance		Carrying Amount		Outstanding Balance		Carrying Amount
	(In thousands)
Commercial:
Commercial and industrial	$	1,001	$	853	$	1,767	$	1,134
Commercial real estate	11,255		9,599		13,708		11,527
SBA	4,033		3,049		4,220		3,157
Consumer:
Single family residential mortgage	764,814		699,230		283,067		231,079
Total	$	781,103	$	712,731	$	302,762	$	246,897

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



	Year Ended December 31,
	2015			2014			2013
	(In thousands)
Balance at beginning of year	$	92,301		$	126,336		$	32,206
New loans or leases purchased	138,046			—			155,416
Accretion of income	(23,441		)	(25,335		)	(19,177		)
Increase (decrease) in expected cash flows	19,852			29,267			(17,358		)
Disposals	(21,209		)	(37,967		)	(24,751		)
Balance at end of year	$	205,549		$	92,301		$	126,336

The following table presents loans and leases purchased and acquired through business acquisitions at acquisition dates for which it was probable at acquisition that all contractually required payments would not be collected for the periods indicated:



	Year Ended December 31,
	2015		2014		2013
	(In thousands)
Commercial:
Commercial and industrial	$	—	$	—	$	2,721
Commercial real estate	—		—		3,226
Construction	—		—		4,333
Consumer:
Single family residential mortgage	571,245		—		473,942
Other consumer	—		—		844
Outstanding unpaid principal balance at acquisition	$	571,245	$	—	$	485,066
Cash flows expected to be collected at acquisitions	$	667,224	$	—	$	504,197
Fair value of acquired loans at acquisition	529,178		—		348,569

The Company completed seven bulk loan acquisitions with unpaid principal balances and fair values of $622.1 million and $578.7 million, respectively, at the respective acquisition dates during the year ended December 31, 2015. The Company determined that unpaid principal balance and fair value of $571.2 million and $529.2 million of these loans displayed evidence of credit quality deterioration since origination and it was probable, at acquisition that all contractually required payments would not be collected. The Company sold a portion of PCI loans with unpaid principal balances and carrying values of $52.4 million and $32.5 million, respectively, during the year ended December 31, 2015. The Company recognized net gain on sale of $9.4 million from these transactions for the year ended December 31, 2015, and the gain was included in Net Gain on Sale of Loans on the Consolidated Statements of Operations.

The Company did not purchase any PCI loans during the year ended December 31, 2014. The Company sold a portion of PCI loans with unpaid principal balances and carrying values as of the respective sale dates of $91.9 million and $56.7 million, respectively, during the year ended December 31, 2014. The Company recognized net gain on sale loans of $11.8 million from these transactions for the year ended December 31, 2014, and the gain was included in Net Gain on Sale of Loans on the Consolidated Statements of Operations.

The Company completed five bulk loan acquisitions with unpaid principal balances and fair values of $1.02 billion and $849.9 million, respectively, at the respective acquisition dates during the year ended December 31, 2013. The Company determined that unpaid principal balance and fair value of $485.1 million and $348.6 million of these loans displayed evidence of credit quality deterioration since origination and it was probable, at acquisition that all contractually required payments would not be collected. The Company sold a portion of PCI loans with unpaid principal balances and carrying values of $141.7 million and $80.5 million, respectively, during the year ended December 31, 2013. The Company recognized net gain on sale of $2.4 million from these transactions for the year ended December 31, 2013, and the gain was included in Net Gain on Sale of Loans on the Consolidated Statements of Operations.

Purchases and Sales

The following table presents loans and leases purchased and/or sold by portfolio segment, excluding loans held-for-sale, loans and leases acquired in business combinations and PCI loans for the periods indicated:



	Year Ended December 31,
	2015				2014				2013
	Purchases		Sales		Purchases		Sales		Purchases		Sales
	(In thousands)
Commercial:
Multi-family	$	—	$	242,580	$	—	$	—	$	—	$	—
SBA	—		3,599		—		7,838		—		2,507
Lease financing	127,043		—		38,572		—		7,850		—
Consumer:
Single family residential mortgage	49,488		165,915		—		82,552		507,736		186,140
Total	$	176,531	$	412,094	$	38,572	$	90,390	$	515,586	$	188,647

The Company purchased the above loans and leases at a net discount of $1.4 million, $0, and $43.4 million for the years ended December 31, 2015, 2014, and 2013, respectively. For the purchased loans and leases disclosed above, the Company did not incur any specific allowances for loan and lease losses during the years ended December 31, 2015, 2014, and 2013. The Company determined that it was probable at acquisition that all contractually required payments would be collected.