LOANS AND LEASES AND ALLOWANCE FOR LOAN AND LEASE LOSSES

6 Months Ended

Jun. 30, 2018

LOANS AND LEASES AND ALLOWANCE FOR LOAN AND LEASE LOSSES

The Company's loan and lease portfolio includes Non-Traditional Mortgage (NTM) loans. The Company’s NTM portfolio is comprised of three interest only products: Green Account Loans (Green Loans), which are a type of home equity lines of credit (HELOCs), fixed or adjustable rate hybrid interest only mortgage (Interest Only) loans and a small number of additional loans with the potential for negative amortization.

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



($ in thousands)	NTM Loans		Traditional Loans and Leases		Total Loans and Leases Receivable
June 30, 2018
Commercial:
Commercial and industrial	$	—	$	1,742,559	$	1,742,559
Commercial real estate	—		793,855		793,855
Multifamily	—		1,959,965		1,959,965
SBA	—		78,092		78,092
Construction	—		211,110		211,110
Lease financing	—		—		—
Consumer:
Single family residential mortgage	815,374		1,358,809		2,174,183
Other consumer	3,502		72,738		76,240
Total loans and leases	$	818,876	$	6,217,128	$	7,036,004
Allowance for loan and lease losses					(56,678		)
Loans and leases receivable, net					$	6,979,326
December 31, 2017
Commercial:
Commercial and industrial	$	—	$	1,701,951	$	1,701,951
Commercial real estate	—		717,415		717,415
Multifamily	—		1,816,141		1,816,141
SBA	—		78,699		78,699
Construction	—		182,960		182,960
Lease financing	—		13		13
Consumer:
Single family residential mortgage	803,355		1,252,294		2,055,649
Other consumer	3,578		103,001		106,579
Total loans and leases	$	806,933	$	5,852,474	$	6,659,407
Allowance for loan and lease losses					(49,333		)
Loans and leases receivable, net					$	6,610,074

Non-Traditional Mortgage Loans

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



	June 30, 2018						December 31, 2017
($ in thousands)	Count	Amount			Percent		Count	Amount			Percent
Green Loans (HELOC) - first liens	96	$	72,720		8.9	%	101	$	82,197		10.2	%
Interest-only - first liens	495	739,053			90.3	%	468	717,484			88.9	%
Negative amortization	11	3,601			0.4	%	11	3,674			0.5	%
Total NTM - first liens	602	815,374			99.6	%	580	803,355			99.6	%
Green Loans (HELOC) - second liens	12	3,502			0.4	%	12	3,578			0.4	%
Total NTM - second liens	12	3,502			0.4	%	12	3,578			0.4	%
Total NTM loans	614	$	818,876		100.0	%	592	$	806,933		100.0	%
Total loans and leases		$	7,036,004					$	6,659,407
% of NTM to total loans and leases		11.6		%				12.1		%

Green Loans

Green Loans are SFR 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. 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 (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 SFR first mortgage loans with payment features that allow interest only payments in initial periods before converting to a fully amortizing loan.

Loans with the Potential for Negative Amortization

The Company discontinued origination of negative amortization loans in 2007. Negative amortization loans other than Green 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.

Allowance for Loan and Lease Losses

The Company has established credit risk management processes that include 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 who may not be able to fulfill the contractual payment 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 ALLL, and partially or fully charging off of the principal balance. The Company maintains the ALLL at a level that is considered adequate to cover the estimated inherent risks in the loan and lease portfolio.

The Company also maintains a separate reserve for unfunded loan commitments at a level that is considered adequate to cover the estimated inherent risks. The estimated funding of the loan commitments and credit risk factors determined based on outstanding loans that share similar credit risk exposure are used to determine the adequacy of the reserve. At June 30, 2018 and December 31, 2017, the reserve for unfunded loan commitments was $4.0 million and $3.7 million, respectively.

The credit risk monitoring system is designed to identify impaired and potential problem loans and to perform 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 that it believes is effective in ensuring that the Company maintains an adequate allowance for loan and lease losses. The Board of Directors also provides oversight and guidance for management’s allowance evaluation process.

During the three months ended March 31, 2017, the Company, as part of its continuous evaluation of the ALLL methodology and assumptions, determined that it was appropriate to change from a rolling 28-quarter look-back period to a cumulative look-back period with a pegged (fixed) starting point (the quarter ended March 31, 2008). The Company believes that an extended period of observed credit loss stability warranted the review of a longer historical period that captured a full credit cycle. The Company further enhanced the methodology in the areas of qualitative adjustments and loan segmentation during the second quarter of 2017, and performed an annual update of the loss emergence period during the third quarter of 2017. These updates were designed to be systematic, transparent, and repeatable. The updates on qualitative adjustments and loan segmentation did not have a material impact.

The following table presents a summary of activity in the ALLL for the periods indicated:



	Three Months Ended June 30,						Six Months Ended June 30,
($ in thousands)	2018			2017			2018			2017
Balance at beginning of period	$	54,763		$	42,736		$	49,333		$	40,444
Loans and leases charged off	(950		)	(2,898		)	(15,589		)	(3,255		)
Recoveries of loans and leases previously charged off	212			44			782			110
Provision for loan and lease losses	2,653			2,503			22,152			5,086
Balance at end of period	$	56,678		$	42,385		$	56,678		$	42,385

During the three months ended March 31, 2018, the Company recorded a charge-off of $13.9 million, which reflected the outstanding balance under a $15.0 million line of credit that was originated during the three months ended March 31, 2018. Subsequent to the granting of the line of credit, representations from the borrower in applying for the line of credit were determined by the Bank to be false, and third party bank account statements provided by the borrower to secure the line of credit were found to be fraudulent. The line of credit was granted after the borrower appeared to have satisfied a pre-condition that the line of credit be fully cash collateralized and secured by a bank account at a third party financial institution pledged to the Bank. As part of the Bank’s credit review and portfolio management process, the line of credit and disbursements were reviewed subsequent to closing and compliance with the borrower’s covenants was monitored. As part of this process, on March 9, 2018, the Bank received information that caused it to believe the existence of the pledged bank account had been misrepresented by the borrower and that the account had previously been closed. The Bank filed an action in federal court pursuing the borrower and other parties and is also considering other available sources of collection and other potential means of mitigating the loss; however, no assurance can be given that it will be successful in this regard. Upon extensive review of the underwriting process for this loan, the Bank determined that this loan was the result of an isolated event of external fraud.

The following table presents the activity and balance in the ALLL and the recorded investment, excluding accrued interest, in loans and leases based on the impairment methodology as of or for the three and six months ended June 30, 2018:



($ in thousands)	Commercial and Industrial			Commercial Real Estate		Multifamily			SBA			Construction		Lease Financing			Single Family Residential Mortgage			Other Consumer			Total
ALLL:
Balance at March 31, 2018	$	17,571		$	5,417	$	14,219		$	1,577		$	3,220	$	—		$	11,969		$	790		$	54,763
Charge-offs	(276		)	—		(8		)	(302		)	—		—			(364		)	—			(950		)
Recoveries	36			—		—			167			—		5			—			4			212
Provision	(467		)	315		419			398			199		(5		)	1,631			163			2,653
Balance at June 30, 2018	$	16,864		$	5,732	$	14,630		$	1,840		$	3,419	$	—		$	13,236		$	957		$	56,678
Balance at December 31, 2017	$	14,280		$	4,971	$	13,265		$	1,701		$	3,318	$	—		$	10,996		$	802		$	49,333
Charge-offs	(347		)	—		(8		)	(683		)	—		—			(479		)	(14,072		)	(15,589		)
Recoveries	97			—		—			232			—		9			436			8			782
Provision	2,834			761		1,373			590			101		(9		)	2,283			14,219			22,152
Balance at June 30, 2018	$	16,864		$	5,732	$	14,630		$	1,840		$	3,419	$	—		$	13,236		$	957		$	56,678
Individually evaluated for impairment	$	595		$	—	$	—		$	124		$	—	$	—		$	461		$	8		$	1,188
Collectively evaluated for impairment	16,269			5,732		14,630			1,716			3,419		—			12,775			949			55,490
Total ending ALLL balance	$	16,864		$	5,732	$	14,630		$	1,840		$	3,419	$	—		$	13,236		$	957		$	56,678
Loans:
Individually evaluated for impairment	$	5,829		$	—	$	—		$	646		$	—	$	—		$	20,140		$	750		$	27,365
Collectively evaluated for impairment	1,736,730			793,855		1,959,965			77,446			211,110		—			2,154,043			75,490			7,008,639
Total ending loan balances	$	1,742,559		$	793,855	$	1,959,965		$	78,092		$	211,110	$	—		$	2,174,183		$	76,240		$	7,036,004



($ in thousands)	Commercial and Industrial			Commercial Real Estate			Multifamily			SBA			Construction			Lease Financing			Single Family Residential Mortgage			Other Consumer			Total
ALLL:
Balance at March 31, 2017	$	10,888		$	4,543		$	11,029		$	1,146		$	3,018		$	5		$	11,240		$	867		$	42,736
Charge-offs	(132		)	(113		)	—			(293		)	(29		)	—			(2,331		)	—			(2,898		)
Recoveries	—			—			—			31			—			10			—			3			44
Provision	(261		)	696			(343		)	200			(15		)	(12		)	2,100			138			2,503
Balance at June 30, 2017	$	10,495		$	5,126		$	10,686		$	1,084		$	2,974		$	3		$	11,009		$	1,008		$	42,385
Balance at December 31, 2016	$	7,584		$	5,467		$	11,376		$	939		$	2,015		$	6		$	12,075		$	982		$	40,444
Charge-offs	(382		)	(113		)	—			(293		)	(29		)	—			(2,412		)	(26		)	(3,255		)
Recoveries	—			—			—			74			—			29			1			6			110
Provision	3,293			(228		)	(690		)	364			988			(32		)	1,345			46			5,086
Balance at June 30, 2017	$	10,495		$	5,126		$	10,686		$	1,084		$	2,974		$	3		$	11,009		$	1,008		$	42,385
Individually evaluated for impairment	$	—		$	—		$	—		$	—		$	—		$	—		$	424		$	—		$	424
Collectively evaluated for impairment	10,495			5,121			10,686			1,065			2,974			3			10,585			1,008			41,937
Acquired with deteriorated credit quality	—			5			—			19			—			—			—			—			24
Total ending ALLL balance	$	10,495		$	5,126		$	10,686		$	1,084		$	2,974		$	3		$	11,009		$	1,008		$	42,385
Loans:
Individually evaluated for impairment	$	—		$	—		$	—		$	—		$	—		$	—		$	9,971		$	873		$	10,844
Collectively evaluated for impairment	1,560,264			715,650			1,545,888			74,726			156,246			173			1,768,565			119,680			5,941,192
Acquired with deteriorated credit quality	652			1,121			—			2,528			—			—			—			—			4,301
Total ending loan balances	$	1,560,916		$	716,771		$	1,545,888		$	77,254		$	156,246		$	173		$	1,778,536		$	120,553		$	5,956,337

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 and any purchase premium or discount.



	June 30, 2018						December 31, 2017
($ in thousands)	Unpaid Principal Balance		Recorded Investment		Allowance for Loan and Lease Losses		Unpaid Principal Balance		Recorded Investment		Allowance for Loan and Lease Losses
With no related ALLL recorded:
Commercial:
Commercial and industrial	$	5,270	$	5,234	$	—	$	471	$	453	$	—
SBA	554		522		—		342		335		—
Consumer:
Single family residential mortgage	3,989		3,995		—		7,521		7,553		—
Other consumer	554		557		—		4,664		4,663		—
With an ALLL recorded:
Commercial:
Commercial and industrial	596		595		595		3,146		3,129		498
SBA	137		124		124		635		609		435
Consumer:
Single family residential mortgage	16,042		16,145		461		7,090		7,146		277
Other consumer	220		193		8		157		162		7
Total	$	27,362	$	27,365	$	1,188	$	24,026	$	24,050	$	1,217

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




	Three Months Ended						Six Months Ended
($ in thousands)	Average Recorded Investment		Interest Income Recognized		Cash Basis Interest Recognized		Average Recorded Investment		Interest Income Recognized		Cash Basis Interest Recognized
June 30, 2018
Commercial:
Commercial and industrial	$	5,900	$	1	$	1	$	5,616	$	4	$	4
SBA	654		—		—		514		—		—
Consumer:
Single family residential mortgage	20,274		58		47		19,994		115		96
Other consumer	760		3		3		755		6		5
Total	$	27,588	$	62	$	51	$	26,879	$	125	$	105
June 30, 2017
Commercial:
Construction	—		—		—		764		—		—
Consumer:
Single family residential mortgage	9,985		42		46		10,520		85		89
Other consumer	878		2		2		884		4		3
Total	$	10,863	$	44	$	48	$	12,168	$	89	$	92

Past Due Loans and Leases

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



($ in thousands)	30 - 59 Days Past Due		60 - 89 Days Past Due		Greater than 89 Days Past due		Total Past Due		Current		Total
June 30, 2018
NTM loans:
Single family residential mortgage	$	790	$	694	$	—	$	1,484	$	813,890	$	815,374
Other consumer	—		—		—		—		3,502		3,502
Total NTM loans	790		694		—		1,484		817,392		818,876
Traditional loans and leases:
Commercial:
Commercial and industrial	2,075		3,509		597		6,181		1,736,378		1,742,559
Commercial real estate	—		—		—		—		793,855		793,855
Multifamily	—		—		—		—		1,959,965		1,959,965
SBA	138		524		798		1,460		76,632		78,092
Construction	467		—		—		467		210,643		211,110
Consumer:
Single family residential mortgage	2,647		2,422		9,795		14,864		1,343,945		1,358,809
Other consumer	1,831		—		263		2,094		70,644		72,738
Total traditional loans and leases	7,158		6,455		11,453		25,066		6,192,062		6,217,128
Total	$	7,948	$	7,149	$	11,453	$	26,550	$	7,009,454	$	7,036,004
December 31, 2017
NTM loans:
Single family residential mortgage	$	9,060	$	1,879	$	1,171	$	12,110	$	791,245	$	803,355
Other consumer	—		—		—		—		3,578		3,578
Total NTM loans	9,060		1,879		1,171		12,110		794,823		806,933
Traditional loans and leases:
Commercial:
Commercial and industrial	136		3,595		948		4,679		1,697,272		1,701,951
Commercial real estate	—		—		—		—		717,415		717,415
Multifamily	—		—		—		—		1,816,141		1,816,141
SBA	3,578		—		1,319		4,897		73,802		78,699
Construction	—		—		—		—		182,960		182,960
Lease financing	—		—		—		—		13		13
Consumer:
Single family residential mortgage	6,862		3,370		6,012		16,244		1,236,050		1,252,294
Other consumer	3,194		413		92		3,699		99,302		103,001
Total traditional loans and leases	13,770		7,378		8,371		29,519		5,822,955		5,852,474
Total	$	22,830	$	9,257	$	9,542	$	41,629	$	6,617,778	$	6,659,407

Non-accrual Loans and Leases

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



	June 30, 2018						December 31, 2017
($ in thousands)	NTM Loans		Traditional Loans and Leases		Total		NTM Loans		Traditional Loans and Leases		Total
Non-accrual loans and leases ⁽¹⁾
Commercial:
Commercial and industrial	$	—	$	5,920	$	5,920	$	—	$	3,723	$	3,723
SBA	—		1,082		1,082		—		1,781		1,781
Consumer:
Single family residential mortgage	1,538		13,294		14,832		1,171		8,176		9,347
Other consumer	—		456		456		—		4,531		4,531
Total non-accrual loans and leases	$	1,538	$	20,752	$	22,290	$	1,171	$	18,211	$	19,382
Loans past due 90 days or more and still accruing	$	—	$	—	$	—	$	—	$	—	$	—

(1) The Company maintained specific reserves in ALLL for these loans, which were individually evaluated for impairment, of $1.1 million and $1.1 million at June 30, 2018 and December 31, 2017, respectively.

Loans in Process of Foreclosure

At June 30, 2018 and December 31, 2017, SFR mortgage loans of $2.6 million and $4.3 million, respectively, were in the process of foreclosure.

Troubled Debt Restructurings

A modification of a loan constitutes a troubled debt restructuring (TDR) when the Company, for economic or legal reasons related to a borrower’s financial difficulties, grants a concession to the borrower that it would not otherwise consider. 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 the 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.

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



	June 30, 2018						December 31, 2017
($ in thousands)	NTM Loans		Traditional Loans		Total		NTM Loans		Traditional Loans		Total
Commercial:
Commercial and industrial	$	—	$	2,746	$	2,746	$	—	$	2,675	$	2,675
Consumer:
Single family residential mortgage	2,683		2,626		5,309		2,699		2,653		5,352
Other consumer	294		—		294		294		—		294
Total	$	2,977	$	5,372	$	8,349	$	2,993	$	5,328	$	8,321

The Company had no commitments to lend to customers with outstanding loans that were classified as TDRs as of June 30, 2018 or December 31, 2017.

The following table summarizes the pre-modification and post-modification balances of the new TDRs for the periods indicated:



	Three Months Ended					Six Months Ended
($ in thousands)	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
June 30, 2018
Commercial:
Commercial and industrial	—	$	—	$	—	2	$	171	$	163
Total	—	—		—		2	$	171	$	163
June 30, 2017
Consumer:
Single family residential mortgage	1	1,150		1,160		3	2,416		2,433
Total	1	$	1,150	$	1,160	3	$	2,416	$	2,433

During the three months ended June 30, 2018, there were no new TDRs. The following table summarizes new TDRs by modification type for the three months ended June 30, 2017:



	Three Months Ended
	Modification Type
	Change in Principal Payments and Interest Rates			Change in Principal Payments			Total
($ in thousands)	Count	Amount		Count	Amount		Count	Amount
June 30, 2017
Consumer:
Single family residential mortgage	1	$	1,160	—	$	—	1	$	1,160
Total	1	$	1,160	—	$	—	1	$	1,160

The following table summarizes new TDRs by modification type for the six months ended June 30, 2018 and 2017:



	Six Months Ended
	Modification Type
	Change in Principal Payments and Interest Rates			Change in Principal Payments			Total
($ in thousands)	Count	Amount		Count	Amount		Count	Amount
June 30, 2018
Commercial:
Commercial and industrial	—	$	—	2	$	163	2	$	163
Total	—	—		2	$	163	2	163
June 30, 2017
Consumer:
Single family residential mortgage	2	$	1,290	1	$	1,143	3	$	2,433
Total	2	$	1,290	1	$	1,143	3	$	2,433

For the three and six months ended June 30, 2018, there was one loan with a principal balance of $100 thousand that was modified as a TDR during the past 12 months that had payment defaults during the period. For the three months ended June 30, 2017, there were no loans that were modified as TDRs during the past 12 months that had payment defaults during the period. For the six months ended June 30, 2017, there was one loan with a principal balance of $124 thousand that was modified as a TDR during the past 12 months that had payment defaults during the period.

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. 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”.

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 Company will sustain some loss if the deficiencies are not corrected.

Doubtful: 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.

The following table presents the risk categories for total loans and leases as of the dates indicated:



($ in thousands)	Pass		Special Mention		Substandard		Doubtful		Total
June 30, 2018
NTM loans:
Single family residential mortgage	$	811,273	$	1,577	$	2,524	$	—	$	815,374
Other consumer	3,502		—		—		—		3,502
Total NTM loans	814,775		1,577		2,524		—		818,876
Traditional loans and leases:
Commercial:
Commercial and industrial	1,680,576		16,618		45,365		—		1,742,559
Commercial real estate	778,948		10,798		4,109		—		793,855
Multifamily	1,958,352		—		1,613		—		1,959,965
SBA	70,266		934		6,612		280		78,092
Construction	208,017		2,498		595		—		211,110
Lease financing	—		—		—		—		—
Consumer:
Single family residential mortgage	1,338,747		3,846		16,216		—		1,358,809
Other consumer	71,949		315		474		—		72,738
Total traditional loans and leases	6,106,855		35,009		74,984		280		6,217,128
Total	$	6,921,630	$	36,586	$	77,508	$	280	$	7,036,004
December 31, 2017
NTM loans:
Single family residential mortgage	$	800,589	$	1,595	$	1,171	$	—	$	803,355
Other consumer	3,578		—		—		—		3,578
Total NTM loans	804,167		1,595		1,171		—		806,933
Traditional loans and leases:
Commercial:
Commercial and industrial	1,651,628		33,376		16,947		—		1,701,951
Commercial real estate	713,131		—		4,284		—		717,415
Multifamily	1,815,601		540		—		—		1,816,141
SBA	72,417		1,555		4,621		106		78,699
Construction	182,960		—		—		—		182,960
Lease financing	13		—		—		—		13
Consumer:
Single family residential mortgage	1,240,866		2,282		9,146		—		1,252,294
Other consumer	98,030		422		4,549		—		103,001
Total traditional loans and leases	5,774,646		38,175		39,547		106		5,852,474
Total	$	6,578,813	$	39,770	$	40,718	$	106	$	6,659,407

Purchases, Sales, and Transfers

From time to time, the Company purchases and sells loans in the secondary market. Certain loans are transferred from held-for-investment to held-for-sale at the lower of cost of fair value and any reductions in value on transfer are reflected as write-downs to allowance for loan losses. The Company had no purchases of loans and leases, excluding loans held-for-sale, for the three and six months ended June 30, 2018 and 2017. The following table presents loans and leases transferred from (to) loans held-for-sale by portfolio segment for the periods indicated:



	Three Months Ended					Six Months Ended
($ in thousands)	Transfers from Held-For-Sale		Transfers (to) Held-For-Sale			Transfers from Held-For-Sale		Transfers (to) Held-For-Sale
June 30, 2018
Commercial:
Multifamily	$	—	$	(71,449	)	$	—	$	(71,449	)
Consumer:
Single family residential mortgage	—		(133,829		)	—		(136,013		)
Other consumer	—		—			—		(4,362		)
Total	$	—	$	(205,278	)	$	—	$	(211,824	)
June 30, 2017
Commercial:
Commercial and industrial	$	—	$	(3,924	)	$	—	$	(3,924	)
Commercial real estate	—		(1,329		)	—		(1,329		)
Multifamily	$	—	$	—		$	—	$	(6,583	)
SBA	—		(1,865		)	—		(1,865		)
Construction	—		(1,528		)	—		(1,528		)
Consumer:
Single family residential mortgage	—		(168,043		)	—		(403,747		)
Total	$	—	$	(176,689	)	$	—	$	(418,976	)

Purchased Credit Impaired Loans

The Company had no PCI loans at June 30, 2018 or December 31, 2017, due mainly to the sale of seasoned SFR mortgage PCI loans during the year ended December 31, 2017. The Company had acquired loans through business combinations and purchases of loan pools for which there was 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 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,
($ in thousands)	2018		2017			2018		2017
Balance at beginning of period	$	—	$	38,691		$	—	$	41,181
Accretion of income	—		(1,884		)	—		(3,833		)
Changes in expected cash flows	—		—			—		(225		)
Disposals	—		(34,570		)	—		(34,886		)
Balance at end of period	$	—	$	2,237		$	—	$	2,237

During the three months ended June 30, 2017, the Company transferred seasoned SFR mortgage PCI loans with an aggregate unpaid principal balance and aggregate carrying value of $147.5 million and $128.4 million, respectively, to loans held-for-sale. The Company transferred these PCI loans at lower of cost or fair value and recorded a fair value adjustment of $274 thousand against its ALLL. During the three months ended September 30, 2017, all of the transferred seasoned SFR mortgage PCI loans were sold and the Company recognized a net gain on sale of loans of $3.7 million.

- 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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