NOTE 5—LOANS AND LEASES AND THE ALLOWANCE FOR LOAN AND LEASE LOSSES

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


	Non-Traditional Mortgages (NTM)			Traditional Loans			Total NTM and Traditional Loans			Purchased Credit Impaired			Total Loans and Leases Receivable
	(In thousands)
December 31, 2013:
Commercial:
Commercial and industrial	$	—		$	283,743		$	283,743		$	4,028		$	287,771
Real estate mortgage		—			514,869			514,869			15,014			529,883
Multi-family		—			141,580			141,580			—			141,580
SBA		—			23,740			23,740			3,688			27,428
Construction		—			24,933			24,933			—			24,933
Lease financing		—			31,949			31,949			—			31,949
Consumer:
Real estate 1-4 family first mortgage		156,490			667,526			824,016			314,820			1,138,836
Green Loans (HELOC)—First Liens		147,705			—			147,705			—			147,705
Green Loans (HELOC)—Second Liens		5,289			—			5,289			—			5,289
Other HELOC’s, home equity loans, and other consumer installment credit		113			108,888			109,001			1,736			110,737

Total Gross Loans	$	309,597		$	1,797,228		$	2,106,825		$	339,286		$	2,446,111

Percentage to total gross loans		12.7	%		73.4	%		86.1	%		13.9	%		100.0	%
Allowance for loan losses														(18,805	)

Loans and leases receivable, net													$	2,427,306

December 31, 2012:
Commercial:
Commercial and industrial	$	—		$	73,579		$	73,579		$	6,808		$	80,387
Real estate mortgage		—			317,063			317,063			21,837			338,900
Multi-family		—			114,237			114,237			845			115,082
SBA		—			30,468			30,468			5,608			36,076
Construction		—			6,623			6,623			—			6,623
Lease financing		—			11,203			11,203			—			11,203
Consumer:
Real estate 1-4 family first mortgage		161,767			213,114			374,881			65,066			439,947
Green Loans (HELOC)—First Liens		198,720			—			198,720			—			198,720
Green Loans (HELOC)—Second Liens		7,659			—			7,659			—			7,659
Other HELOC’s, home equity loans, and other consumer installment credit		114			13,704			13,818			56			13,874

Total Gross Loans	$	368,260		$	779,991		$	1,148,251		$	100,220		$	1,248,471

Percentage to total gross loans		29.5	%		62.5	%		92.0	%		8.0	%		100.0	%
Allowance for loan losses														(14,448	)

Loans and leases receivable, net													$	1,234,023

Non Traditional Mortgage Loans

The Company’s non-traditional mortgage (NTM) portfolio is comprised of three interest only products: the Green Account Loans (Green Loans), the hybrid interest only fixed or adjustable rate mortgage (Interest Only) and a small number of loans with the potential for negative amortization. As of December 31, 2013 and 2012, the non-traditional mortgage loans totaled $309.6 million or 12.7 percent of the total gross loan portfolio and $368.3 million or 29.5 percent of the total gross loan portfolio, respectively. Total NTM portfolio decreased by $58.7 million, or 15.9 percent, during the year ended December 31, 2013.

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


	As of December 31,
	2013								2012
	Count		Amount			Percent			Count		Amount			Percent
	($ in thousands)
Green Loans (HELOC)—first liens		173	$	147,705			47.7	%		212	$	198,720			53.9	%
Interest-only—first liens		244		139,867			45.2	%		187		142,426			38.7	%
Negative amortization		37		16,623			5.4	%		40		19,341			5.3	%

Total NTM—first liens		454		304,195			98.3	%		439		360,487			97.9	%
Green Loans (HELOC)—second liens		23		5,289			1.7	%		27	$	7,659			2.1	%
Interest-only—second liens		1		113			0.0	%		1		114			0.0	%

Total NTM—second liens		24		5,402			1.7	%		28		7,773			2.1	%

Total NTM loans		478	$	309,597			100.0	%		467	$	368,260			100.0	%

Total gross loan portfolio			$	2,446,111							$	1,248,471
% of NTM to total gross loan portfolio				12.7	%							29.5	%

Green Account 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, 2013, Green Loans totaled $153.0 million, a decrease of $53.4 million, or 25.9 percent from $206.4 million at December 31, 2012, primarily due to reductions in principal balance and payoffs. As of December 31, 2013 and 2012, $5.7 million and $5.6 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 of negative amortization; however, management believes the risk is mitigated through the Company’s loan terms and underwriting standards, including its policies on loan-to-value ratios and the Company’s contractual ability to curtail loans when the value of 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 payment in initial periods before converting to fully amortizing payments. As of December 31, 2013, our interest only loans decreased by $2.6 million, or 1.8 percent, to $140.0 million from $142.5 million at December 31, 2012, primarily due to purchases of $57.0 million, acquired loans through PBOC acquisition of $22.5 million, and originations of $197.2 million, partially offset by sales of $115.8 million, payoffs and principal reductions of $43.2 million, loans transferred to held for sale of $91.6 million, and reclassification of $28.5 million from NTM interest only to traditional loans due to the expiration of the initial interest only period and conversion to a fully amortizing basis. As of December 31, 2013 and 2012, $752 thousand and $5.8 million, respectively, of the interest only loans were non-performing.

Loans with the Potential for Negative Amortization

Negative amortization loans decreased by $2.7 million, or 14.1 percent, to $16.6 million as of December 31, 2013 from $19.3 million as of December 31, 2012. The Company discontinued origination of negative amortization loans in 2007. As of December 31, 2013 and 2012, $1.2 million and none, respectively, 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 its policies on loan-to-value ratios. Negative amortization loans of $16.0 million, or 96.2 percent, had begun amortizing and a loan of $627 thousand, or 3.8 percent of total negative amortization loans, was subject to negative amortization as of December 31, 2013.

Risk Management of Non-Traditional Mortgages

The Company has assessed that the most significant performance indicators for non-traditional mortgages are loan-to-value (LTV) 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 home equity lines of credit, as needed in conjunction with portfolio management, and ordering third party automated valuation models. The loan review is designed to provide a method of identifying borrowers who may be experiencing financial difficulty before they actually fail to make a loan payment. Upon receipt of the updated FICO scores, an exception report is run to identify loans with a decrease in FICO of 10 percent or more and/or a resulting FICO of 620 or less. The loans are then further analyzed to determine if the risk rating should be downgraded which will increase the reserves the Company will establish for potential losses. A report of the semi-annual loan review is published and regularly monitored.

As these loans are revolving lines of credit, the Company, based on the loan agreement and loan covenants of the particular loan, as well as applicable rules and regulations, could suspend the borrowing privileges or reduce the credit limit at any time the Company reasonably believes that the borrower will be unable to fulfill their repayment obligations under the agreement or certain other conditions are met. In many cases, the decrease in FICO is the first red flag that the borrower may have difficulty in making their future payment obligations.

As a result, the Company proactively manages the portfolio by performing detailed analysis on its portfolio with emphasis on the NTM portfolio. The Company’s Internal Asset Review Committee (IARC) conducts monthly meetings to review the loans classified as special mention, substandard, or doubtful and determines whether suspension or reduction in credit limit is warranted. If the line has been suspended and the borrower would like to have their credit privileges reinstated, they would need to provide updated financials showing their ability to meet their payment obligations.

On the Interest Only loans, the Company projects future payment changes to determine if there will be an increase in payment of 3.50 percent or greater and then monitors the loans for possible delinquency. The individual loans are monitored for possible downgrading of risk rating, and trends within the portfolio are identified that could affect other interest only loans scheduled for payment changes in the near future.

Non Traditional Mortgage Performance Indicators

The table below presents the Company’s non-traditional one-to-four family residential mortgage Green Loans first lien portfolio at December 31, 2013 by FICO scores that were obtained during the fourth quarter of 2013, comparing to the FICO scores for those same loans that were obtained during the fourth quarter of 2012:


	As of December 31, 2013
	2013							2012							Changes
	Count		Amount		Percent			Count		Amount		Percent			Count			Amount			Percent
	($ in thousands)
FICO Score
800+		7	$	1,382		0.9	%		7	$	7,183		4.9	%		—		$	(5,801	)		-4.0	%
700-799		94		74,876		50.8	%		98		75,556		51.2	%		(4	)		(680	)		-0.4	%
600-699		44		42,739		28.9	%		44		37,718		25.5	%		—			5,021			3.4	%
<600		14		11,965		8.1	%		14		12,122		8.2	%		—			(157	)		-0.1	%
No FICO		14		16,743		11.3	%		10		15,126		10.2	%		4			1,617			1.1	%

Totals		173	$	147,705		100.0	%		173	$	147,705		100.0	%		—		$	—			0.0	%

At December 31, 2013 and December 31, 2012, the Company had updated the FICO scores on real estate one-to-four family residential mortgage Green Account loans. The 700-799 category was 50.8 percent and 51.2 percent for FICO scores at December 31, 2013 and December 31, 2012, respectively.

The table below presents the Company’s one-to-four family residential NTM first lien portfolio by LTV as of the dates indicated:


	Green							Interest-Only							Negative Amortization							Total
	Count		Amount		Percent			Count		Amount		Percent			Count		Amount		Percent			Count		Amount		Percent
	($ in thousands)
December 31, 2013:
LTV’s (1)
< 61		90	$	78,807		53.3	%		80	$	65,181		44.6	%		13	$	4,930		29.7	%		183	$	148,918		49.0	%
61-80		38		33,604		22.8	%		51		28,999		20.7	%		13		7,643		45.9	%		102		70,246		23.1	%
81-100		26		14,917		10.1	%		43		21,474		15.4	%		8		3,277		19.7	%		77		39,668		13.0	%
> 100		19		20,377		13.8	%		70		24,213		17.3	%		3		773		4.7	%		92		45,363		14.9	%

Totals		173	$	147,705		100.0	%		244	$	139,867		100.0	%		37	$	16,623		100.0	%		454	$	304,195		100.0	%

December 31, 2012:
LTV’s (1)
< 61		51	$	59,679		30.0	%		59	$	47,368		33.3	%		11	$	2,450		12.7	%		121	$	109,497		30.4	%
61-80		63		52,107		26.2	%		72		58,972		41.3	%		4		1,228		6.3	%		139		112,307		31.1	%
81-100		60		62,335		31.4	%		26		17,478		12.3	%		9		6,568		34.0	%		95		86,381		24.0	%
> 100		38		24,599		12.4	%		30		18,608		13.1	%		16		9,095		47.0	%		84		52,302		14.5	%

		212	$	198,720		100.0	%		187	$	142,426		100.0	%		40	$	19,341		100.0	%		439	$	360,487		100.0	%

(1)	LTV represents estimated current loan to value as current unpaid principal balance divided by estimated property value.

The decrease in Green Loans was primarily due to reductions in principal balance and payoffs. During 2013, overall improvement on LTV of the Company’s one-to-four family residential NTM first lien portfolio was due to the improvement in the real estate market and the economy in Southern California.

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 portfolio and off-balance sheet unfunded credit commitments. The allowance for loan and lease losses includes allowances for loan, lease, and off-balance sheet unfunded credit commitment losses.

The credit risk monitoring system is designed to identify impaired and potential problem loans, and to permit periodic evaluation of impairment and the adequacy level 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. The nature of the process by which the Company determines the appropriate allowance for loan and lease losses requires the exercise of considerable judgment. 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 and ending balances of loans evaluated for impairment for the periods indicated:


	Year ended December 31,
	2013			2012			2011
	(In thousands)
Balance at beginning of year	$	14,448		$	12,780		$	14,637
Loans and leases charged off		(3,013	)		(4,071	)		(7,512	)
Recoveries of loans and leases previously charged off		850			239			267
Transfer of loans to held-for-sale		(1,443	)		—			—
Provision for loan and lease losses		7,963			5,500			5,388

Balance at end of year	$	18,805		$	14,448		$	12,780

The following table presents the activity and balance in the allowance for loan and lease losses and the recorded investment in loans and leases by portfolio segment and is based on the impairment method as of or for the years ended as of dates indicated:


	Commercial and Industrial		Commercial Real Estate Mortgage			Multi- Family			SBA			Construction		Lease Financing			Real Estate 1-4 family First Mortgage			HELOC’s, Home Equity Loans, and Other Consumer Credit			Unallocated		TOTAL
	(In thousands)
December 31, 2013:
Allowance for loan and lease losses:
Balance as of December 31, 2012	$	263	$	3,178		$	1,478		$	118		$	21	$	261		$	8,855		$	274		$	—	$	14,448
Charge-offs		—		(472	)		(553	)		(648	)		—		(23	)		(1,302	)		(15	)		—		(3,013	)
Recoveries		98		268			88			285			—		11			92			8			—		850
Transfer of loans to held-for-sale		—		—			—			—			—		—			(1,443	)		—			—		(1,443	)
Provision		1,461		2,510			1,553			480			223		179			842			265			450		7,963

Balance as of December 31, 2013	$	1,822	$	5,484		$	2,566		$	235		$	244	$	428		$	7,044		$	532		$	450	$	18,805

Individually evaluated for impairment	$	—	$	—		$	60		$	—		$	—	$	—		$	34		$	2		$	—	$	96
Collectively evaluated for impairment		1,822		5,484			2,506			235			244		428			6,814			530			450		18,513
Acquired with deteriorated credit quality		—		—			—			—			—		—			196			—			—		196

Total ending allowance balance	$	1,822	$	5,484		$	2,566		$	235		$	244	$	428		$	7,044		$	532		$	450	$	18,805

Loans:
Individually evaluated for impairment	$	33	$	3,868		$	1,972		$	10		$	—	$	—		$	12,814		$	249		$	—	$	18,946
Collectively evaluated for impairment		283,710		511,001			139,608			23,730			24,933		31,949			958,907			114,041			—		2,087,879
Acquired with deteriorated credit quality		4,028		15,014			—			3,688			—		—			314,820			1,736			—		339,286

Total ending loan balances	$	287,771	$	529,883		$	141,580		$	27,428		$	24,933	$	31,949		$	1,286,541		$	116,026		$	—	$	2,446,111

December 31, 2012:
Allowance for loan and lease losses:
Balance as of December 31, 2011	$	128	$	2,234		$	1,541		$	—		$	—	$	—		$	8,635		$	242		$	—	$	12,780
Charge-offs		—		(987	)		—			(64	)		—		—			(3,006	)		(14	)		—		(4,071	)
Recoveries		—		—			—			14			—		—			221			4			—		239
Provision		135		1,931			(63	)		168			21		261			3,005			42			—		5,500

Balance as of December 31, 2012	$	263	$	3,178		$	1,478		$	118		$	21	$	261		$	8,855		$	274		$	—	$	14,448

Individually evaluated for impairment	$	—	$	—		$	590		$	53		$	—	$	—		$	597		$	—		$	—	$	1,240
Collectively evaluated for impairment		263		3,178			888			65			21		261			8,258			274			—		13,208
Acquired with deteriorated credit quality		—		—			—			—			—		—			—			—			—		—

Total ending allowance balance	$	263	$	3,178		$	1,478		$	118		$	21	$	261		$	8,855		$	274		$	—	$	14,448

Loans:
Individually evaluated for impairment	$	1,879	$	3,988		$	5,442		$	438		$	—	$	—		$	21,778		$	3		$	—	$	33,528
Collectively evaluated for impairment		71,700		313,075			108,795			30,030			6,623		11,203			551,823			21,474			—		1,114,723
Acquired with deteriorated credit quality		6,808		21,837			845			5,608			—		—			65,066			56			—		100,220

Total ending loan balances	$	80,387	$	338,900		$	115,082		$	36,076		$	6,623	$	11,203		$	638,667		$	21,533		$	—	$	1,248,471

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 presents customer balances net of any partial charge-offs recognized on the loans and leases and net of any deferred fees and costs.


	As of December 31, 2013						As of December 31, 2012
	Unpaid Principal Balance		Recorded Investment		Allowance for Loan Losses Allocated		Unpaid Principal Balance		Recorded Investment		Allowance for Loan Losses Allocated
	(In thousands)
As of and for the year ended December 31, 2013:
With no related allowance recorded:
Commercial:
Commercial and industrial	$	50	$	33	$	—	$	2,168	$	1,879	$	—
Real estate mortgage		4,951		3,868		—		5,748		3,988		—
Multi-family		487		270		—		—		—		—
SBA		26		10		—		457		30		—
Consumer:
Real estate 1-4 family first mortgage		10,765		9,487		—		8,681		8,156		—
HELOC’s, home equity loans, and other consumer installment credit		248		247		—		3		3		—
With an allowance recorded:
Commercial:
Multi-family		1,797		1,702		60		5,441		5,442		590
SBA		—		—		—		439		408		53
Consumer:
Real estate 1-4 family first mortgage		3,378		3,327		34		13,567		13,622		597
HELOC’s, home equity loans, and other consumer installment credit		2		2		2		—		—		—

Total	$	21,704	$	18,946	$	96	$	36,504	$	33,528	$	1,240


	For the year ended December 31,
	2013						2012						2011
	Average Recorded Investment		Interest Income Recognized		Cash Basis Interest Recognized		Average Recorded Investment		Interest Income Recognized		Cash Basis Interest Recognized		Average Recorded Investment		Interest Income Recognized		Cash Basis Interest Recognized
	(In thousands)
Commercial:
Commercial and industrial	$	67	$	10	$	10	$	1,879	$	21	$	60	$	—	$	—	$	—
Real estate mortgage		3,554		163		171		4,743		170		217		2,101		28		28
Multi-family		1,345		35		37		5,468		256		266		5,030		134		43
SBA		12		1		1		438		10		16		—		—		—
Consumer:
Real estate 1-4 family first mortgage		12,562		304		308		21,912		299		599		20,703		494		257
HELOC’s, home equity loans, and other consumer installment credit		693		2		2		3		—		—		74		19		—

Total	$	18,233	$	515	$	529	$	34,443	$	756	$	1,158	$	27,908	$	675	$	328

The following table presents information for impaired loans and leases for the periods indicated:


	For the year ended December 31,
	2013		2012		2011
	(In thousands)
Average of individually impaired loans during the period	$	18,233	$	34,443	$	27,908
Interest income recognized during impairment		515		756		675
Cash-basis interest income recognized		529		1,158		328

The following table presents nonaccrual loans and leases and loans past due 90 days still on accrual as of the dates indicated:


	As of December 31,
	2013						2012
	Traditional Loans		NTM Loans		Total		Traditional Loans		NTM Loans		Total
	(In thousands)
Loans past due 90 days or more still on accrual	$	—	$	—	$	—	$	—	$	—	$	—
Nonaccrual loans
The Company maintains specific allowance allocations for these loans of $95 in 2013 and $1,517 in 2012		23,950		7,698		31,648		11,538		11,361		22,993

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


	As of December 31,
	2013						2012
	Traditional Loans		NTM Loans		Total		Traditional Loans		NTM Loans		Total
	(In thousands)
Commercial:
Commercial and industrial	$	33	$	—	$	33	$	—	$	—	$	—
Real estate mortgage		3,868		—		3,868		2,906		—		2,906
Multi-family		1,972		—		1,972		5,442		—		5,442
SBA		10		—		10		141		—		141
Construction		—		—		—		—		—		—
Lease financing		—		—		—		—		—		—
Consumer:
Real estate 1-4 family first mortgage		18,032		2,000		20,032		3,142		5,797		8,939
Green Loans (HELOC)—First Liens		—		5,482		5,482		—		5,564		5,564
Green Loans (HELOC)—Second Liens		—		216		216		—		—		—
Other HELOC’s, home equity loans, and other consumer installment credit		35		—		35		1		—		1

Total	$	23,950	$	7,698	$	31,648	$	11,632	$	11,361	$	22,993

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, 2013, excluding accrued interest receivable which is not considered to be material by class of loans and leases:


	As of December 31, 2013
	30—59 Days Past Due		60—89 Days Past Due		Greater than 89 Days Past Due		Total Past Due		Current		Gross Loans and Leases Receivables
	(In thousands)
NTM loans:
Real estate 1-4 family first mortgage	$	1,003	$	1,854	$	769	$	3,626	$	152,864	$	156,490
Green Loans (HELOC)—First Liens		653		—		437		1,090		146,615		147,705
Green Loans (HELOC)—Second Liens		—		—		—		—		5,289		5,289
HELOC’s, home equity loans, and other consumer installment credit		—		—		—		—		113		113

Total NTM loans	$	1,656	$	1,854	$	1,206	$	4,716	$	304,881	$	309,597

Traditional loans:
Commercial:
Commercial and industrial	$	52	$	235	$	—	$	287	$	283,456	$	283,743
Real estate mortgage		5,554		194		—		5,748		509,121		514,869
Multi-family		602		—		—		602		140,978		141,580
SBA		14		48		—		62		23,678		23,740
Construction		—		—		—		—		24,933		24,933
Lease financing		271		92		19		382		31,567		31,949
Consumer:
Real estate 1-4 family first mortgage		20,684		6,124		12,181		38,989		628,537		667,526
HELOC’s, home equity loans, and other consumer installment credit		209		110		35		354		108,534		108,888

Total traditional loans	$	27,386	$	6,803	$	12,235	$	46,424	$	1,750,804	$	1,797,228

PCI loans:
Commercial:
Commercial and industrial	$	—	$	—	$	—	$	—	$	4,028	$	4,028
Real estate mortgage		—		—		—		—		15,014		15,014
Multi-family		—		—		—		—		—		—
SBA		45		1		106		152		3,536		3,688
Construction		—		—		—		—		—		—
Lease financing		—		—		—		—		—		—
Consumer:
Real estate 1-4 family first mortgage		21,888		8,580		12,099		42,567		272,253		314,820
HELOC’s, home equity loans, and other consumer installment credit		—		—		—		—		1,736		1,736

Total PCI loans	$	21,933	$	8,581	$	12,205	$	42,719	$	296,567	$	339,286

Total	$	50,975	$	17,238	$	25,646	$	93,859	$	2,352,252	$	2,446,111

The following table presents the aging of the recorded investment in past due loans and leases as of December 31, 2012, excluding accrued interest receivable which is not considered to be material by class of loans and leases:


	As of December 31, 2012
	30—59 Days Past Due		60—89 Days Past Due		Greater than 89 Days Past Due		Total Past Due		Current		Gross Loans and Leases Receivables
	(In thousands)
NTM loans:
Real estate 1-4 family first mortgage	$	631	$	424	$	911	$	1,966	$	159,801	$	161,767
Green Loans (HELOC)—First Liens		1,411		2,507		5,564		9,482		189,238		198,720
Green Loans (HELOC)—Second Liens		—		—		—		—		7,659		7,659
HELOC’s, home equity loans, and other consumer installment credit		—		—		—		—		114		114

Total NTM loans	$	2,042	$	2,931	$	6,475	$	11,448	$	356,812	$	368,260

Traditional loans:
Commercial:
Commercial and industrial	$	248	$	7	$	—	$	255	$	73,324	$	73,579
Real estate mortgage		257		518		375		1,150		315,913		317,063
Multi-family		—		—		—		—		114,237		114,237
SBA		26		110		—		136		30,332		30,468
Construction		—		—		—		—		6,623		6,623
Lease financing		118		—		—		118		11,085		11,203
Consumer:
Real estate 1-4 family first mortgage		1,314		1,510		2,272		5,096		208,018		213,114
HELOC’s, home equity loans, and other consumer installment credit		27		—		1		28		13,676		13,704

Total traditional loans	$	1,990	$	2,145	$	2,648	$	6,783	$	773,208	$	779,991

PCI loans:
Commercial:
Commercial and industrial	$	—	$	—	$	178	$	178	$	6,630	$	6,808
Real estate mortgage		1,080		377		445		1,902		19,935		21,837
Multi-family		—		—		—		—		845		845
SBA		317		63		687		1,067		4,541		5,608
Construction		—		—		—		—		—		—
Lease financing		—		—		—		—		—		—
Consumer:
Real estate 1-4 family first mortgage		1,008		1,082		2,080		4,170		60,896		65,066
HELOC’s, home equity loans, and other consumer installment credit		—		—		—		—		56		56

Total PCI loans	$	2,405	$	1,522	$	3,390	$	7,317	$	92,903	$	100,220

Total	$	6,437	$	6,598	$	12,513	$	25,548	$	1,222,923	$	1,248,471

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 years ended December 31, 2013, 2012 and 2011, there were 2, 4 and 4 loans, respectively, that were modified through extensions of maturities. The following table presents loans and leases by class, modified as TDRs that occurred for the periods indicated:


	For the year ended December 31,
	2013						2012						2011
	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		Number of Loans		Pre- Modification Outstanding Recorded Investment		Post- Modification Outstanding Recorded Investment
	($ in thousands)
NTM and Traditional loans:
Commercial:
Real estate mortgage		0	$	—	$	—		1	$	288	$	288		0	$	—	$	—
SBA		0		—		—		3		420		420		0		—		—
Consumer:
Real estate 1-4 family first mortgage		0		—		—		0		—		—		4		4,685		4,477
HELOC’s, home equity loans, and other consumer installment credit		2		435		435		0		—		—		0		—		—

Total		2	$	435	$	435		4	$	708	$	708		4	$	4,685	$	4,477

The following table presents loans and leases by class modified as TDRs for which there was a payment default within twelve months following the modification for the periods indicated:


	For the year ended December 31,
	2013				2012				2011
	Number of Loans		Recorded Investment		Number of Loans		Recorded Investment		Number of Loans		Recorded Investment
	($ in thousands)
TDRs that subsequently defaulted:
Real estate 1-4 family first mortgage		0		—		1		4		0		—

Total		0	$	—		1	$	4		0	$	—

The following table presents the composition of TDRs as of the dates indicated:


	As of December 31,
	2013						2012
	NTM Loans		Traditional Loans		PCI Loans		NTM Loans		Traditional Loans		PCI Loans
	(In thousands)
Commercial:
Commercial and industrial	$	—	$	—	$	85	$	—	$	—	$	1,236
Real estate mortgage		—		194		2,868		—		530		1,355
Multi-family		—		—		—		—		3,090		—
SBA		—		10		704		—		—		423
Consumer:
Real estate 1-4 family first mortgage		—		3,605		—		4,875		3,690		—
Green Loans (HELOC)—first liens		3,468		—		—		3,482
HELOC’s, home equity loans, and other consumer installment credit		—		—		1,736		—		1		—

Total	$	3,468	$	3,809	$	5,393	$	8,357	$	7,311	$	3,014

TDRs, excluding purchased credit impaired loans, were $7.3 million and $15.7 million at December 31, 2013 and 2012, respectively. The Company did not have any commitments to lend to customers with outstanding loans or leases that are classified as troubled debt restructurings as of December 31, 2013 and 2012.

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-homogenous 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-homogenous loans and leases is performed on a quarterly basis. The Company uses the following definitions for risk ratings:

Pass: Loans and leases classified as pass are in compliance in all respects with the Bank’s credit policy and regulatory requirements, and do not exhibit any potential or defined weakness as defined under “Special Mention”, “Substandard” or “Doubtful/Loss”.

Special Mention: Loans and leases classified as special mention have a potential weakness that deserves management’s close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the loan or lease or of the Company’s credit position at some future date.

Substandard: Loans and leases classified as substandard are inadequately protected by the current net worth and paying capacity of the obligor or of the collateral pledged, if any. Loans and leases so classified have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. They are characterized by the distinct possibility that the institution will sustain some loss if the deficiencies are not corrected.

Doubtful/Loss: Loans and leases classified as doubtful have all the weaknesses inherent in those classified as substandard, with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions, and values, highly questionable and improbable.

Not-Rated: When accrual of income on a pool of purchased credit impaired (PCI) loans with common risk characteristics is appropriate in accordance with ASC 310-30, individual loans in those pools are not risk-rated. The credit criteria evaluated are FICO scores, loan-to-value, delinquency, and actual cash flows versus expected cash flows of the loan pools.

Loans and leases not meeting the criteria above that are analyzed individually as part of the above described process are considered to be pass rated loans and leases.

The following table presents the risk categories for loans and leases as of December 31, 2013:


	As of December 31, 2013
	Pass		Special Mention		Substandard		Doubtful		Not-Rated		Gross Loans and Leases Receivables
	(In thousands)
NTM loans:
Real estate 1-4 family first mortgage	$	151,728	$	2,321	$	2,441	$	—	$	—	$	156,490
Green Loans (HELOC)—First Liens		129,679		11,470		6,556		—		—		147,705
Green Loans (HELOC)—Second Liens		5,073		—		216		—		—		5,289
HELOC’s, home equity loans, and other consumer installment credit		113		—		—		—		—		113

Total NTM loans	$	286,593	$	13,791	$	9,213	$	—	$	—	$	309,597

Traditional loans:
Commercial:
Commercial and industrial	$	280,527	$	1	$	3,215	$	—	$	—	$	283,743
Real estate mortgage		510,117		—		4,752		—		—		514,869
Multi-family		139,608		—		1,972		—		—		141,580
SBA		23,714		—		26		—		—		23,740
Construction		24,933		—		—		—		—		24,933
Lease financing		31,949		—		—		—		—		31,949
Consumer:
Real estate 1-4 family first mortgage		640,701		6,350		20,475		—		—		667,526
HELOC’s, home equity loans, and other consumer installment credit		108,745		108		33		2		—		108,888

Total traditional loans	$	1,760,294	$	6,459	$	30,473	$	2	$	—	$	1,797,228

PCI loans:
Commercial:
Commercial and industrial	$	—	$	969	$	3,059	$	—	$	—	$	4,028
Real estate mortgage		10,148		—		4,866		—		—		15,014
Multi-family		—		—		—		—		—		—
SBA		844		605		2,239		—		—		3,688
Construction		—		—		—		—		—		—
Lease financing		—		—		—		—		—		—
Consumer:
Real estate 1-4 family first mortgage		—		—		287		—		314,533		314,820
HELOC’s, home equity loans, and other consumer installment credit		—		—		1,736		—		—		1,736

Total PCI loans	$	10,992	$	1,574	$	12,187	$	—	$	314,533	$	339,286

Total	$	2,057,879	$	21,824	$	51,873	$	2	$	314,533	$	2,446,111

PCI loan pools are not risk rated.

The following table presents the risk categories for loans and leases as of December 31, 2012:


	As of December 31, 2012
	Pass		Special Mention		Substandard		Doubtful		Not-Rated		Gross Loans and Leases Receivables
	(In thousands)
NTM loans:
Real estate 1-4 family first mortgage	$	154,417	$	655	$	6,695	$	—	$	—	$	161,767
Green Loans (HELOC) -First Liens		184,970		7,140		6,610		—		—		198,720
Green Loans (HELOC) -Second Liens		7,659		—		—		—		—		7,659
HELOC’s, home equity loans, and other consumer installment credit		114		—		—		—		—		114

Total NTM loans	$	347,160	$	7,795	$	13,305	$	—	$	—	$	368,260

Traditional loans:
Commercial:
Commercial and industrial	$	73,579	$	—	$	—	$	—	$	—	$	73,579
Real estate mortgage		310,976		1,618		4,469		—		—		317,063
Multi-family		109,059		—		5,178		—		—		114,237
SBA		30,296		18		154		—		—		30,468
Construction		6,623		—		—		—		—		6,623
Lease financing		11,203		—		—		—		—		11,203
Consumer:												—
Real estate 1-4 family first mortgage		204,541		3,427		5,146		—		—		213,114
HELOC’s, home equity loans, and other consumer installment credit		13,298		193		213		—		—		13,704

Total traditional loans	$	759,575	$	5,256	$	15,160	$	—	$	—	$	779,991

PCI loans:
Commercial:
Commercial and industrial	$	—	$	189	$	6,619	$	—	$	—	$	6,808
Real estate mortgage		15,108		1,080		5,649		—		—		21,837
Multi-family		845		—		—		—		—		845
SBA		1,148		1,085		3,375		—		—		5,608
Construction		—		—		—		—		—		—
Lease financing		—		—		—		—		—		—
Consumer:
Real estate 1-4 family first mortgage		—		—		137		—		64,929		65,066
HELOC’s, home equity loans, and other consumer installment credit		—		—		56		—		—		56

Total PCI loans	$	17,101	$	2,354	$	15,836	$	—	$	64,929	$	100,220

Total	$	1,123,836	$	15,405	$	44,301	$	—	$	64,929	$	1,248,471

PCI loan pools are not risk rated.

Purchased Credit Impaired Loans and Leases

During the years ended December 31, 2013 and 2012, the Company purchased loans and leases 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:


	As of December 31,
	2013				2012
	Outstanding Balance		Carrying Amount		Outstanding Balance		Carrying Amount
	(In thousands)
Commercial:
Commercial and industrial	$	5,838	$	4,028	$	11,350	$	6,808
Real estate mortgage		17,682		15,014		22,698		21,837
Multi-family		—		—		1,208		845
SBA		4,940		3,688		7,967		5,608
Consumer:
Real estate 1-4 family first mortgage		414,341		314,820		108,428		65,066
HELOC’s, home equity loans, and other consumer installment credit		2,134		1,736		110		56

Total	$	444,935	$	339,286	$	151,761	$	100,220

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


	For the year ended December 31,
	2013			2012
	(In thousands)
Balance at beginning of year	$	32,206		$	—
New loans or leases purchased		155,416			36,000
Accretion of income		(19,177	)		(3,633	)
Changes in expected cash flows		(17,358	)		—
Disposals		(24,751	)		(161	)

Balance at end of year	$	126,336		$	32,206

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:


	For the year ended December 31,
	2013		2012
	(In thousands)
Commercial:
Commercial and industrial	$	2,721	$	12,542
Real estate mortgage		3,226		24,164
Multi-family		—		1,222
SBA		—		8,684
Construction		4,333		—
Lease financing		—		—
Consumer:
Real estate 1-4 family first mortgage		473,942		115,207
HELOC’s, home equity loans, and other consumer installment credit		844		—

Outstanding Balance	$	485,066	$	161,819

Cash flows expected to be collected at acquisitions		504,197		141,302
Fair value of acquired loans at acquisition		348,569		105,302

During the year ended December 31, 2013, the Company completed five seasoned SFR mortgage loan pool acquisitions with unpaid principal balances and fair values of $1.02 billion and $849.9 million, respectively, at the respective acquisition dates. The Company determined that unpaid principal balance and fair value of $473.9 million and $342.1 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 (2013 PCI Loans). During the year ended December 31, 2013, the Company sold a portion of 2013 PCI loans with unpaid principal balances and carrying values of $131.4 million and $74.2 million, respectively. The total unpaid principal balances and carrying values of the 2013 PCI Loans as of December 31 were $326.0 million and $261.3 million, respectively.

Purchases and Sales

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


	For the year ended December 31,
	2013				2012
	Purchases		Sales		Purchases		Sales
	(In thousands)
Commercial:
Commercial and industrial	$	—	$	—	$	—	$	—
Real estate mortgage		—		—		1,400		—
Multi-family		—		—		17,274		—
SBA		—		2,507		—		7,116
Construction		—		—		—		—
Lease financing		7,850		—		11,772		—
Consumer:
Real estate 1-4 family first mortgage		507,736		186,140		—		70,438
HELOC’s, home equity loans, and other consumer installment credit		—		—		—		—

Totals	$	515,586	$	188,647	$	30,446	$	77,554

The Company purchased the above loans and leases at a net discount of $43.4 million and 231 thousand for the years ended December 31, 2013 and 2012, respectively. For the purchased loans and leases disclosed above, the Company did not incur any specific allowances for loan and lease losses during the year ended December 31, 2013 and 2012. The Company determined that it was probable at acquisition that all contractually required payments would be collected.

During 2013, the Company also strategically transferred certain loans of $181.4 million, net of transfer of $1.4 million from allowance from loan and leases, from loans and leases held for investment to loans held for sale at lower of cost or fair value and sold them in pools, unlike the loans individually originated to be sold into the secondary market on a whole loan basis. Starting with the year ended December 31, 2013, the Company began originating these certain loans directly into the held for sale status.