A Portfolio Loan differs from a conventional or traditional loan in that the bank is not selling this loan on the open market, but servicing it and holding it in-house. The reason that banks typically do this, is that a portfolio loan does not fall into standard cookie-cutter loan parameters and the bank wouldn't be able to bundle it with other loans and sell it on the market. 

That being said, portfolio loans are not necessarily bad or even risky loans.  What they are is just unique. For example, take someone who wanted to buy a 4th or 5th home. Most banks won't lend past a 3rd house. With this particular loan however, the buyers can put 50% down and have impeccable credit. Hardly a risky loan, but nonetheless a unique loan that doesn't fit into standard loan parameters. So the bank decides, we'll take this one and handles the paperwork in-house.  

Portfolio loans are more prevalent with small community type banks, where they have a better understanding of the local real estate market. A small bank vs. a Goliath like B of A can analyze a particular loan more carefully, given their loan volume is smaller.