Note 3 — Mortgage loans

Included on the Company’s consolidated balance sheet as of June 30, 2016 and December 31, 2015, are approximately $630.5 million and $554.9 million, respectively, of residential and small business commercial whole loans at carrying value. The carrying value reflects the original investment amount, plus accretion of interest income, less principal and interest cash flows received. The carrying value is decreased by the allowance for losses, if any. To date, the Company has not recorded an allowance for losses against its purchased mortgage loans.

The Company’s mortgage loans are secured by real estate. The Company categorizes mortgage loans as “re-performing” and as “non-performing” at acquisition and monitors the credit quality of the mortgage loans in its portfolio on an ongoing basis, principally by considering loan payment activity or delinquency status. In addition, the Company assesses the expected cash flows from the mortgage loans, the fair value of the underlying collateral and other factors, and evaluates whether and when it becomes probable that all amounts contractually due will not be collected.

The following table presents information regarding the accretable yield and non-accretable amount for loans acquired during the following periods. The Company’s loan acquisitions for the three and six months ended June 30, 2016 consisted entirely of re-performing loans; no non-performing loans were acquired in either of the 2016 periods ($ in thousands):

	Three months ended June 30, 2016					Three months ended June 30, 2015
Acquisitions	Re-performing loans			Non-performing loans		Re-performing loans			Non-performing loans
Contractually required principal and interest	$	120,524		$	-	$	332,571		$	31,827
Non-accretable amount		(48,244	)		-		(132,557	)		(18,598	)
Expected cash flows to be collected		72,280			-		200,014			13,229
Accretable yield		(20,152	)		-		(49,626	)		(4,185	)
Fair value at acquisition	$	52,128		$	-	$	150,388		$	9,044

	Six months ended June 30, 2016					Six months ended June 30, 2015
	Re-performing loans			Non-performing loans		Re-performing loans			Non-performing loans
Contractually required principal and interest	$	202,703		$	-	$	486,603		$	65,675
Non-accretable amount		(77,392	)		-		(198,704	)		(38,317	)
Expected cash flows to be collected		125,311			-		287,899			27,358
Accretable yield		(36,005	)		-		(73,680	)		(8,038	)
Fair value at acquisition	$	89,306		$	-	$	214,219		$	19,320

The following table presents the change in the accretable yield for the total loan portfolio for the following periods ($ in thousands):

Accretable yield	Three months ended June 30, 2016						Three months ended June 30, 2015
	Re-performing loans			Non-performing loans			Re-performing loans			Non-performing loans
Balance at beginning of period	$	138,768		$	16,151		$	74,045		$	22,604
Accretable yield additions		20,152						49,626			4,185
Accretion		(14,317	)		(2,057	)		(7,739	)		(3,054	)
Reclassification from (to) non-accretable amount, net		39,570			2,204			-			-
Balance at end of period	$	184,173		$	16,298		$	115,932		$	23,735

	Six months ended June 30, 2016						Six months ended June 30, 2015
	Re-performing loans			Non-performing loans			Re-performing loans			Non-performing loans
Balance at beginning of period	$	136,455		$	18,425		$	54,940		$	20,686
Accretable yield additions		36,005						73,680			8,038
Accretion		(27,857	)		(4,331	)		(12,688	)		(4,989	)
Reclassification from (to) non-accretable amount, net		39,570			2,204			-			-
Balance at end of period	$	184,173		$	16,298		$	115,932		$	23,735

For the three and six month periods ended June 30, 2016, and June 30, 2015, the Company recognized no provision for loan loss. For the three and six month periods ended June 30, 2016, the Company accreted $16.4 million and $32.2 million, respectively, into interest income with respect to its loan portfolio. For the three and six month periods ended and June 30, 2015, the Company accreted $10.8 million and $17.7 million, respectively, into interest income with respect to its loan portfolio.

During the three months ended June 30, 2016, the Company reclassified $39.6 million and $2.2 million from non-accretable amount to accretable yield for its re-performing and non-performing loans, respectively. The reclassification is based on an updated assessment of projected loan cash flows as compared to the projection at the acquisition date. Substantially fewer loans are defaulting than originally projected at acquisition, resulting in greater total cash flows being collected over a longer period of time. Performing loans have a longer duration than non-performing loans and generate higher cash flows over the expected life of the loan.

The following table sets forth the carrying value of the Company’s mortgage loans, and related UPB by delinquency status as of June 30, 2016 and December 31, 2015 ($ in thousands):

	June 30, 2016						December 31, 2015
	Number of loans		Carrying value		Unpaid principal balance		Number of loans		Carrying value		Unpaid principal balance
Current		1,539	$	274,302	$	349,329		1,161	$	212,469	$	272,577
30		578		107,919		135,930		479		83,936		107,873
60		298		55,254		67,888		338		55,573		70,781
90		733		119,174		152,253		867		127,435		167,177
Foreclosure		388		73,885		100,171		404		75,464		107,301
Mortgage loans		3,536	$	630,534	$	805,571		3,249	$	554,877	$	725,709