LOANS AND LEASES AND ALLOWANCE FOR LOAN AND LEASE LOSSES

9 Months Ended

Sep. 30, 2016

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		PCI Loans		Total Loans and Leases Receivable
	($ in thousands)
September 30, 2016
Commercial:
Commercial and industrial	$	—	$	1,526,245	$	1,526,245	$	4,796	$	1,531,041
Commercial real estate	—		719,420		719,420		2,418		721,838
Multi-family	—		1,199,207		1,199,207		—		1,199,207
SBA	—		64,977		64,977		2,760		67,737
Construction	—		99,086		99,086		—		99,086
Lease financing	—		234,540		234,540		—		234,540
Consumer:
Single family residential mortgage	789,926		1,081,608		1,871,534		632,393		2,503,927
Green Loans (HELOC) - first liens	97,448		—		97,448		—		97,448
Green Loans (HELOC) - second liens	3,709		—		3,709		—		3,709
Other consumer	—		110,258		110,258		—		110,258
Total loans and leases	$	891,083	$	5,035,341	$	5,926,424	$	642,367	$	6,568,791
Allowance for loan and lease losses									(40,233		)
Loans and leases receivable, net									$	6,528,558
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
Allowance for loan and lease losses									(35,533		)
Loans and leases receivable, net									$	5,148,861

Non-Traditional Mortgage Loans

The Company’s NTM portfolio is comprised of three interest only products: Green Account Loans (Green Loans), fixed or adjustable rate hybrid interest only mortgage (Interest Only) loans and a small number of additional loans with the potential for negative amortization. As of September 30, 2016 and December 31, 2015, the NTM loans totaled $891.1 million, or 13.6 percent of total loans and leases, and $785.9 million, or 15.2 percent of total loans and leases, respectively. The total NTM portfolio increased by $105.2 million, or 13.4 percent, during the nine months ended September 30, 2016.

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



	September 30, 2016						December 31, 2015
	Count	Amount			Percent		Count	Amount			Percent
	($ in thousands)
Green Loans (HELOC) - first liens	112	$	97,448		10.9	%	121	$	105,131		13.4	%
Interest-only - first liens	550	780,069			87.6	%	521	664,358			84.4	%
Negative amortization	22	9,857			1.1	%	30	11,602			1.5	%
Total NTM - first liens	684	887,374			99.6	%	672	781,091			99.3	%
Green Loans (HELOC) - second liens	13	3,709			0.4	%	16	4,704			0.6	%
Interest-only - second liens	—	—			—	%	1	113			0.1	%
Total NTM - second liens	13	3,709			0.4	%	17	4,817			0.7	%
Total NTM loans	697	$	891,083		100.0	%	689	$	785,908		100.0	%
Total loans and leases		$	6,568,791					$	5,184,394
% of NTM to total loans and leases		13.6		%				15.2		%

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. At September 30, 2016 and December 31, 2015, Green Loans totaled $101.2 million and $109.8 million, respectively. At September 30, 2016 and December 31, 2015, $8.7 million and $10.1 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 (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. At September 30, 2016 and December 31, 2015, interest only loans totaled $780.1 million and $664.5 million, respectively. As of September 30, 2016 and December 31, 2015, $2.7 million and $4.6 million of the interest only loans were non-performing, respectively.

Loans with the Potential for Negative Amortization

Negative amortization loans other than Green Loans totaled $9.9 million and $11.6 million at September 30, 2016 and December 31, 2015, respectively. The Company discontinued origination of negative amortization loans in 2007. At September 30, 2016 and December 31, 2015, 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 LTV ratios.

Risk Management of Non-Traditional Mortgages

The Company has determined that significant performance indicators for NTMs are LTV ratios and Fair Isaac Corporation (FICO) scores. Accordingly, the Company manages credit risk in the NTM portfolio through periodic review of the loan portfolio that includes refreshing FICO scores on the Green Loans and other home equity lines of credit (HELOCs), as needed in conjunction with portfolio management, and ordering third party automated valuation models (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 periodic 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 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 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. Individual loans are monitored for possible downgrading of risk rating.

NTM Performance Indicators

The following table presents the Company’s NTM Green Loans first lien portfolio at September 30, 2016 by FICO scores that were obtained during the quarter ended September 30, 2016, comparing to the FICO scores for those same loans that were obtained during the quarter ended December 31, 2015:



	September 30, 2016
	By FICO Scores Obtained During the Quarter Ended September 30, 2016					By FICO Scores Obtained During the Quarter Ended December 31, 2015					Change
	Count	Amount		Percent		Count	Amount		Percent		Count		Amount			Percent
	($ in thousands)
FICO Score
800+	17	$	11,070	11.4	%	21	$	14,041	14.4	%	(4	)	$	(2,971	)	(3.0	)%
700-799	58	38,137		39.2	%	56	44,924		46.1	%	2		(6,787		)	(6.9	)%
600-699	30	33,560		34.4	%	21	21,032		21.6	%	9		12,528			12.8	%
<600	2	2,257		2.3	%	5	4,036		4.1	%	(3	)	(1,779		)	(1.8	)%
No FICO	5	12,424		12.7	%	9	13,415		13.8	%	(4	)	(991		)	(1.1	)%
Totals	112	$	97,448	100.0	%	112	$	97,448	100.0	%	—		$	—		—	%

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 presents the Company’s SFR 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)
September 30, 2016
< 61%	45	$	39,237	40.3	%	193	$	332,619	42.6	%	13	$	5,785	58.7	%	251	$	377,641	42.6	%
61-80%	52	47,442		48.6	%	298	415,283		53.3	%	9	4,072		41.3	%	359	466,797		52.5	%
81-100%	15	10,769		11.1	%	29	21,009		2.7	%	—	—		—	%	44	31,778		3.6	%
> 100%	—	—		—	%	30	11,158		1.4	%	—	—		—	%	30	11,158		1.3	%
Total	112	$	97,448	100.0	%	550	$	780,069	100.0	%	22	$	9,857	100.0	%	684	$	887,374	100.0	%
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	%

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 ALLL, and partial or full charge-off. The Company maintains the ALLL 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 September 30, 2016 and December 31, 2015, the reserve for unfunded loan commitments was $2.3 million and $2.1 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 loan and lease 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 appropriate to absorb losses in the loan and lease portfolio. The determination of the amount of the ALLL 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 considers known relevant internal and external factors that affect collectability when determining the appropriate level for the ALLL. Additions to the ALLL 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 ALLL. Recoveries of previously charged off amounts, if any, are credited to the ALLL.

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



	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2016			2015			2016			2015
	(In thousands)
Balance at beginning of period	$	37,483		$	34,787		$	35,533		$	29,480
Loans and leases charged off	(393		)	(788		)	(1,267		)	(1,224		)
Recoveries of loans and leases previously charged off	551			40			1,285			309
Provision for loan and lease losses	2,592			735			4,682			6,209
Balance at end of period	$	40,233		$	34,774		$	40,233		$	34,774

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 nine months ended September 30, 2016:



	Commercial and Industrial			Commercial Real Estate		Multi- family		SBA			Construction		Lease Financing			Single Family Residential Mortgage			Other Consumer			Unallocated		Total
	(In thousands)
ALLL:
Balance at June 30, 2016	$	8,004		$	3,554	$	6,914	$	697		$	1,677	$	2,540		$	13,143		$	954		$	—	$	37,483
Charge-offs	—			—		—		—			—		(393		)	—			—			—		(393		)
Recoveries	224			—		—		67			—		98			157			5			—		551
Provision	(2		)	1,472		1,795		144			40		722			(1,573		)	(6		)	—		2,592
Balance at September 30, 2016	$	8,226		$	5,026	$	8,709	$	908		$	1,717	$	2,967		$	11,727		$	953		$	—	$	40,233
Balance at December 31, 2015	$	5,850		$	4,252	$	6,012	$	683		$	1,530	$	2,195		$	13,854		$	1,157		$	—	$	35,533
Charge-offs	(137		)	—		—		—			—		(974		)	(149		)	(7		)	—		(1,267		)
Recoveries	224			371		—		343			—		183			157			7			—		1,285
Provision	2,289			403		2,697		(118		)	187		1,563			(2,135		)	(204		)	—		4,682
Balance at September 30, 2016	$	8,226		$	5,026	$	8,709	$	908		$	1,717	$	2,967		$	11,727		$	953		$	—	$	40,233
Individually evaluated for impairment	$	—		$	—	$	—	$	—		$	—	$	—		$	665		$	—		$	—	$	665
Collectively evaluated for impairment	8,169			5,015		8,709		889			1,717		2,967			11,045			953			—		39,464
Acquired with deteriorated credit quality	57			11		—		19			—		—			17			—			—		104
Total ending ALLL balance	$	8,226		$	5,026	$	8,709	$	908		$	1,717	$	2,967		$	11,727		$	953		$	—	$	40,233
Loans:
Individually evaluated for impairment	$	3,397		$	—	$	—	$	—		$	—	$	—		$	28,593		$	294		$	—	$	32,284
Collectively evaluated for impairment	1,522,848			719,420		1,199,207		64,977			99,086		234,540			1,940,389			113,673			—		5,894,140
Acquired with deteriorated credit quality	4,796			2,418		—		2,760			—		—			632,393			—			—		642,367
Total ending loan balances	$	1,531,041		$	721,838	$	1,199,207	$	67,737		$	99,086	$	234,540		$	2,601,375		$	113,967		$	—	$	6,568,791



	Commercial and Industrial			Commercial Real Estate			Multi- family			SBA			Construction		Lease Financing			Single Family Residential Mortgage		Other Consumer			Unallocated			Total
	(In thousands)
ALLL:
Balance at June 30, 2015	$	6,884		$	4,445		$	3,680		$	674		$	579	$	1,646		$	12,950	$	1,686		$	2,243		$	34,787
Charge-offs	—			—			—			(29		)	—		(759		)	—		—			—			(788		)
Recoveries	—			—			—			40			—		—			—		—			—			40
Provision	(904		)	(526		)	2,030			(70		)	612		1,196			1,051		(411		)	(2,243		)	735
Balance at September 30, 2015	$	5,980		$	3,919		$	5,710		$	615		$	1,191	$	2,083		$	14,001	$	1,275		$	—		$	34,774
Balance at December 31, 2014	$	6,910		$	3,840		$	7,179		$	335		$	846	$	873		$	7,192	$	2,305		$	—		$	29,480
Charge-offs	(33		)	(259		)	—			(84		)	—		(848		)	—		—			—			(1,224		)
Recoveries	8			132			3			153			—		—			—		13			—			309
Provision	(905		)	206			(1,472		)	211			345		2,058			6,809		(1,043		)	—			6,209
Balance at September 30, 2015	$	5,980		$	3,919		$	5,710		$	615		$	1,191	$	2,083		$	14,001	$	1,275		$	—		$	34,774
Individually evaluated for impairment	$	76		$	—		$	—		$	—		$	—	$	—		$	436	$	—		$	—		$	512
Collectively evaluated for impairment	5,846			3,807			5,710			596			1,191		2,083			13,548		1,275			—			34,056
Acquired with deteriorated credit quality	58			112			—			19			—		—			17		—			—			206
Total ending ALLL balance	$	5,980		$	3,919		$	5,710		$	615		$	1,191	$	2,083		$	14,001	$	1,275		$	—		$	34,774
Loans:
Individually evaluated for impairment	$	5,980		$	333		$	—		$	8		$	—	$	—		$	25,837	$	554		$	—		$	32,712
Collectively evaluated for impairment	816,254			680,039			823,415			49,854			39,475		162,504			1,629,125		124,142			—			4,324,808
Acquired with deteriorated credit quality	456			10,490			—			3,123			—		—			358,488		—			—			372,557
Total ending loan balances	$	822,690		$	690,862		$	823,415		$	52,985		$	39,475	$	162,504		$	2,013,450	$	124,696		$	—		$	4,730,077

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.



	September 30, 2016						December 31, 2015
	Unpaid Principal Balance		Recorded Investment		ALLL		Unpaid Principal Balance		Recorded Investment		ALLL
	(In thousands)
With no related ALLL recorded:
Commercial:
Commercial and industrial	$	3,416	$	3,397	$	—	$	6,244	$	6,086	$	—
Commercial real estate	—		—		—		1,200		312		—
SBA	—		—		—		22		3		—
Consumer:
Single family residential mortgage	23,367		23,253		—		24,224		22,671		—
Other consumer	294		294		—		553		553		—
With an ALLL recorded:
Commercial:
Commercial and industrial	—		—		—		1,072		1,073		38
Consumer:
Single family residential mortgage	5,652		5,340		665		3,575		3,585		331
Total	$	32,729	$	32,284	$	665	$	36,890	$	34,283	$	369

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



	Three Months Ended						Nine Months Ended
	Average Recorded Investment		Interest Income Recognized		Cash Basis Interest Recognized		Average Recorded Investment		Interest Income Recognized		Cash Basis Interest Recognized
	(In thousands)
September 30, 2016
Commercial:
Commercial and industrial	$	3,434	$	65	$	65	$	3,843	$	183	$	208
Commercial real estate	—		—		—		197		24		24
Consumer:
Single family residential mortgage	28,678		213		221		32,655		808		784
Other consumer	294		2		1		294		6		6
Total	$	32,406	$	280	$	287	$	36,989	$	1,021	$	1,022
September 30, 2015
Commercial:
Commercial and industrial	$	6,379	$	60	$	64	$	6,592	$	247	$	258
Commercial real estate	343		10		10		363		27		27
Multi-family	—		—		—		527		13		15
SBA	8		—		—		8		—		—
Consumer:
Single family residential mortgage	26,028		317		315		24,668		706		701
Other consumer	554		4		4		381		8		9
Total	$	33,312	$	391	$	393	$	32,539	$	1,001	$	1,010

Nonaccrual 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:



	September 30, 2016						December 31, 2015
	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 $0 at September 30, 2016 and December 31, 2015	11,390		23,833		35,223		14,703		30,426		45,129

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



	September 30, 2016						December 31, 2015
	NTM Loans		Traditional Loans and Leases		Total		NTM Loans		Traditional Loans and Leases		Total
	(In thousands)
Commercial:
Commercial and industrial	$	—	$	4,577	$	4,577	$	—	$	4,383	$	4,383
Commercial real estate	—		—		—		—		1,552		1,552
Multi-family	—		—		—		—		642		642
SBA	—		334		334		—		422		422
Lease financing	—		2,295		2,295		—		598		598
Consumer:
Single family residential mortgage	2,701		15,394		18,095		4,615		22,615		27,230
Green Loans (HELOC) - first liens	8,689		—		8,689		10,088		—		10,088
Other consumer	—		1,233		1,233		—		214		214
Total nonaccrual loans and leases	$	11,390	$	23,833	$	35,223	$	14,703	$	30,426	$	45,129

Past Due Loans and Leases

The following table presents the aging of the recorded investment in past due loans and leases as of September 30, 2016, excluding accrued interest receivable (which is not considered to be material), by class of loans and leases:



	September 30, 2016
	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	$	5,882	$	332	$	2,701	$	8,915	$	781,011	$	789,926
Green Loans (HELOC) - first liens	—		7,694		—		7,694		89,754		97,448
Green Loans (HELOC) - second liens	—		—		—		—		3,709		3,709
Other consumer	—		—		—		—		—		—
Total NTM loans	5,882		8,026		2,701		16,609		874,474		891,083
Traditional loans and leases:
Commercial:
Commercial and industrial	2,015		50		3,436		5,501		1,520,744		1,526,245
Commercial real estate	—		—		—		—		719,420		719,420
Multi-family	—		—		—		—		1,199,207		1,199,207
SBA	2		6		267		275		64,702		64,977
Construction	—		—		—		—		99,086		99,086
Lease financing	3,624		1,094		2,184		6,902		227,638		234,540
Consumer:
Single family residential mortgage	11,826		2,735		13,113		27,674		1,053,934		1,081,608
Other consumer	3,687		107		1,126		4,920		105,338		110,258
Total traditional loans and leases	21,154		3,992		20,126		45,272		4,990,069		5,035,341
PCI loans:
Commercial:
Commercial and industrial	—		—		164		164		4,632		4,796
Commercial real estate	—		—		—		—		2,418		2,418
SBA	515		—		575		1,090		1,670		2,760
Consumer:
Single family residential mortgage	31,109		7,489		5,406		44,004		588,389		632,393
Total PCI loans	31,624		7,489		6,145		45,258		597,109		642,367
Total	$	58,660	$	19,507	$	28,972	$	107,139	$	6,461,652	$	6,568,791

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 and leases:
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 and leases	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
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

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 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 Company’s new TDRs, there was 1 modification through bankruptcy discharge for the three months ended September 30, 2016. For the nine months ended September 30, 2016, there were 17 modifications through interest rate changes, extension of maturities, and deferrals of principal payments for loans with an aggregate principal of $4.3 million, 17 modifications through interest rate changes and extension of maturities for loans with an aggregate principal of $4.3 million, 1 modification through extension of maturity and deferral of principal payments for a loan with a principal of $507 thousand, 2 modifications through interest rate change for a loan with an aggregate principal of $146 thousand, 3 modifications through extension of maturities for loans with an aggregate principal of $273 thousand, and 1 modification through bankruptcy discharge for a loan with a principal of $519 thousand. There were 13 and 15 modifications through bankruptcy discharges for the three and nine months ended September 30, 2015, respectively. The following table summarizes the pre-modification and post-modification balances of the new TDRs for the three and nine months ended September 30, 2016:



	Three Months Ended					Nine 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)
September 30, 2016
Consumer:
Single family residential mortgage	1	$	522	$	519	41	$	10,070	$	10,067
Total	1	$	522	$	519	41	$	10,070	$	10,067
September 30, 2015
Consumer:
Single family residential mortgage	12	$	4,258	$	4,205	14	$	5,688	$	5,635
Other consumer	1	261		260		1	261		260
Total	13	$	4,519	$	4,465	15	$	5,949	$	5,895

For the three and nine months ended September 30, 2016, there were 3 and 5 loans, respectively, with an aggregate principal of $789 thousand and $1.1 million, respectively, that were modified as TDRs during the past 12 months that had payment defaults during the period. For the three and nine months ended September 30, 2015, there were no loans that were modified as TDRs during the past 12 months that had payment defaults during the period.

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



	September 30, 2016						December 31, 2015
	NTM Loans		Traditional Loans		Total		NTM Loans		Traditional Loans		Total
	(In thousands)
Commercial:
SBA	$	—	$	—	$	—	$	—	$	3	$	3
Consumer:
Single family residential mortgage	862		8,281		9,143		1,015		5,841		6,856
Green Loans (HELOC) - first liens	2,243		—		2,243		2,400		—		2,400
Green Loans (HELOC) - second liens	294		—		294		553		—		553
Total	$	3,399	$	8,281	$	11,680	$	3,968	$	5,844	$	9,812

The Company did not have any commitments to lend to customers with outstanding loans that were classified as TDRs as of September 30, 2016 and December 31, 2015.

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 institution 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.

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 total loans and leases as of September 30, 2016:



	September 30, 2016
	Pass		Special Mention		Substandard		Doubtful		Not-Rated		Total
	(In thousands)
NTM loans:
Single family residential mortgage	$	785,419	$	1,806	$	2,701	$	—	$	—	$	789,926
Green Loans (HELOC) - first liens	86,749		2,010		8,689		—		—		97,448
Green Loans (HELOC) - second liens	3,709		—		—		—		—		3,709
Other consumer	—		—		—		—		—		—
Total NTM loans	875,877		3,816		11,390		—		—		891,083
Traditional loans and leases:
Commercial:
Commercial and industrial	1,514,194		852		11,118		81		—		1,526,245
Commercial real estate	714,884		1,791		2,745		—		—		719,420
Multi-family	1,199,207		—		—		—		—		1,199,207
SBA	64,596		—		381		—		—		64,977
Construction	97,557		1,529		—		—		—		99,086
Lease financing	232,186		—		2,354		—		—		234,540
Consumer:
Single family residential mortgage	1,059,199		4,855		17,554		—		—		1,081,608
Other consumer	108,976		49		1,233		—		—		110,258
Total traditional loans and leases	4,990,799		9,076		35,385		81		—		5,035,341
PCI loans:
Commercial:
Commercial and industrial	13		4,052		731		—		—		4,796
Commercial real estate	703		509		1,206		—		—		2,418
SBA	1,290		—		1,470		—		—		2,760
Consumer:
Single family residential mortgage	—		—		127		—		632,266		632,393
Total PCI loans	2,006		4,561		3,534		—		632,266		642,367
Total	$	5,868,682	$	17,453	$	50,309	$	81	$	632,266	$	6,568,791

The following table presents the risk categories for total 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 and leases:
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 and leases	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
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

Purchases, Sales, and Transfers

The following table presents loans and leases purchased, sold and transferred from (to) held-for-sale by portfolio segment, excluding loans held-for-sale, loans and leases acquired in business combinations and PCI loans for the periods indicated:



	Three Months Ended								Nine Months Ended
	Purchases		Sales			Transfers from (to) Held-For-Sale			Purchases		Sales			Transfers from (to) Held-For-Sale
	(In thousands)
September 30, 2016
Commercial:
Commercial and industrial	$	—	$	—		$	(169	)	$	—	$	—		$	(169	)
Commercial real estate	—		—			(2,228		)	—		—			(2,228		)
Multi-family	—		—			(66,806		)	—		—			(66,806		)
Lease financing	23,639		(8,985		)	—			88,913		(19,741		)	—
Consumer:
Single family residential mortgage	—		(21,039		)	(30,988		)	—		(21,039		)	(85,283		)
Total	$	23,639	$	(30,024	)	$	(100,191	)	$	88,913	$	(40,780	)	$	(154,486	)
September 30, 2015
Commercial:
Commercial and industrial	$	—	$	—		$	(952	)	$	—	$	—		$	(4,992	)
Commercial real estate	—		—			(370		)	—		—			(39,997		)
Multi-family	—		—			—			—		(242,087		)	—
Lease financing	36,728		—			—			88,404		—			—
Consumer:
Single family residential mortgage	—		—			2,182			49,488		—			479,083
Total	$	36,728	$	—		$	860		$	137,891	$	(242,087	)	$	434,094

Purchased Credit Impaired Loans

The Company has 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 (referred to as PCI loans). The following table presents the outstanding balance and carrying amount of PCI loans as of the dates indicated:



	September 30, 2016				December 31, 2015
	Outstanding		Carrying		Outstanding		Carrying
	Balance		Amount		Balance		Amount
	(In thousands)
Commercial:
Commercial and industrial	$	5,088	$	4,796	$	1,001	$	853
Commercial real estate	3,531		2,418		11,255		9,599
SBA	3,839		2,760		4,033		3,049
Consumer:
Single family residential mortgage	687,689		632,393		764,814		699,230
Total	$	700,147	$	642,367	$	781,103	$	712,731

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



	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2016			2015			2016			2015
	(In thousands)
Balance at beginning of period	$	184,078		$	84,871		$	205,549		$	92,301
New loans purchased	—			30,066			23,568			36,397
Accretion of income	(9,645		)	(5,745		)	(29,125		)	(15,761		)
Changes in expected cash flows	(40		)	(134		)	(18,826		)	(287		)
Disposals	(27,693		)	(12,307		)	(34,466		)	(15,899		)
Balance at end of period	$	146,700		$	96,751		$	146,700		$	96,751

The decreases in expected cash flows for the three and nine months ended September 30, 2016 were not related to credit quality of PCI loans.

The Company completed one bulk loan acquisition during the nine months ended September 30, 2016 with unpaid principal balances and fair values of $103.8 million and $91.0 million, respectively, at the acquisition date. The Company determined that all loans in this acquisition reflected evidence of credit quality deterioration since origination and it was probable, at acquisition, that all contractually required payments would not be collected.

The Company completed two and three bulk loan acquisitions, respectively, during the three and nine months ended September 30, 2015 with unpaid principal balances and fair values of $145.5 million and $138.8 million, respectively, for the three months ended September 30, 2015, and $228.0 million and $218.6 million, respectively, for the nine months ended September 30, 2015, at the acquisition date. The Company determined that certain of the loans in this acquisition 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 $145.5 million and $138.8 million, respectively, for the three months ended September 30, 2015, and $177.1 million and $169.1 million, respectively, for the nine months ended September 30, 2015.

The Company sold a portion of PCI loans with unpaid principal balances and carrying values of $98.3 million and $82.4 million, respectively, and recognized $4.4 million net gain on sale of loans from the transaction during the three and nine months ended September 30, 2016. During the three and nine months ended September 30, 2015, the Company sold a portion of PCI loans with unpaid principal balances and carrying values of $40.9 million and $25.0 million, respectively, and recognized $5.9 million net gain on sale of loans 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