Loans Receivable, Net

6 Months Ended

Jun. 30, 2022

Loans receivable, net at June 30, 2022 and December 31, 2021 consisted of the following (in thousands):


	June 30,		December 31,
	2022		2021
Commercial:
Commercial real estate – investor	$	4,808,965	$	4,378,061
Commercial real estate – owner occupied	1,020,873		1,055,065
Commercial and industrial (1)	584,464		449,224
Total commercial	6,414,302		5,882,350
Consumer:
Residential real estate	2,758,269		2,479,701

Home equity loans and lines and other consumer (“other consumer”)	252,314		260,819

Total consumer	3,010,583		2,740,520
Total loans receivable	9,424,885		8,622,870
Deferred origination costs, net of fees	7,864		9,332
Allowance for loan credit losses	(52,061)		(48,850)
Total loans receivable, net	$	9,380,688	$	8,583,352

(1) The commercial and industrial loans balance at June 30, 2022 and December 31, 2021 includes Paycheck Protection Program loans of $6.5 million and $22.9 million, respectively.

The Company categorizes all loans 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, and current economic trends, among other factors. The Company evaluates risk ratings on an ongoing basis. The Company uses the following definitions for risk ratings:

Pass: Loans classified as Pass are well protected by the paying capacity and net worth of the borrower.

Special Mention: Loans 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 of the Bank’s credit position at some future date.

Substandard: Loans classified as Substandard are inadequately protected by the current net worth and paying capacity of the borrower or of the collateral pledged, if any. Loans so classified have a well-defined weakness or weaknesses that jeopardize the collection or 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 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 tables summarize total loans by year of origination, internally assigned credit grades and risk characteristics (in thousands):


	2022		2021		2020		2019		2018		2017 and prior		Revolving lines of credit		Total
June 30, 2022

Commercial real estate - investor
Pass	$	736,901	$	1,361,548	$	591,183	$	511,811	$	221,225	$	993,374	$	296,251	$	4,712,293
Special Mention	—		—		195		19,413		9,349		14,228		2,187		45,372
Substandard	—		—		—		22,432		2		27,271		1,595		51,300
Total commercial real estate - investor	736,901		1,361,548		591,378		553,656		230,576		1,034,873		300,033		4,808,965
Commercial real estate - owner occupied
Pass	55,822		119,096		68,901		128,781		88,826		499,529		9,703		970,658
Special Mention	—		—		—		—		3,226		5,611		—		8,837
Substandard	—		—		—		4,577		5,366		31,435		—		41,378
Total commercial real estate - owner occupied	55,822		119,096		68,901		133,358		97,418		536,575		9,703		1,020,873
Commercial and industrial
Pass	40,999		30,167		16,758		17,695		12,796		51,537		404,641		574,593
Special Mention	—		—		—		167		247		274		2,947		3,635
Substandard	—		—		133		1,676		666		1,866		1,895		6,236
Total commercial and industrial	40,999		30,167		16,891		19,538		13,709		53,677		409,483		584,464


Residential real estate (1)
Pass	459,564		865,089		440,402		257,136		108,117		622,819		—		2,753,127
Special Mention	—		—		—		1,482		—		1,208		—		2,690
Substandard	—		—		—		505		288		1,659		—		2,452
Total residential real estate	459,564		865,089		440,402		259,123		108,405		625,686		—		2,758,269
Other consumer (1)
Pass	20,361		26,050		17,043		16,790		44,473		125,391		—		250,108
Special Mention	—		—		—		71		—		207		—		278
Substandard	—		—		—		—		18		1,910		—		1,928
Total other consumer	20,361		26,050		17,043		16,861		44,491		127,508		—		252,314

Total loans	$	1,313,647	$	2,401,950	$	1,134,615	$	982,536	$	494,599	$	2,378,319	$	719,219	$	9,424,885

(1)For residential real estate and other consumer loans, the Company evaluates credit quality based on the aging status of the loan and by payment activity.


	2021		2020		2019		2018		2017		2016 and prior		Revolving lines of credit		Total
December 31, 2021
Commercial real estate - investor
Pass	$	1,387,753	$	609,916	$	535,551	$	274,662	$	375,646	$	800,089	$	255,613	$	4,239,230
Special Mention	—		—		23,794		9,400		2,731		28,663		582		65,170
Substandard	—		4,267		28,802		468		8,495		28,228		3,401		73,661
Total commercial real estate - investor	1,387,753		614,183		588,147		284,530		386,872		856,980		259,596		4,378,061
Commercial real estate - owner occupied
Pass	116,355		71,196		125,212		91,531		109,232		449,966		10,913		974,405
Special Mention	—		—		1,365		3,829		479		14,371		2		20,046
Substandard	—		—		14,166		8,549		5,606		31,576		717		60,614
Total commercial real estate - owner occupied	116,355		71,196		140,743		103,909		115,317		495,913		11,632		1,055,065
Commercial and industrial
Pass	42,955		22,573		22,878		16,404		8,671		50,887		271,818		436,186
Special Mention	—		—		231		350		85		172		3,645		4,483
Substandard	—		457		2,281		813		198		2,029		2,777		8,555
Total commercial and industrial	42,955		23,030		25,390		17,567		8,954		53,088		278,240		449,224
Residential real estate (1)
Pass	876,135		475,134		288,699		127,756		105,385		602,331		—		2,475,440
Special Mention	—		212		—		61		—		1,313		—		1,586
Substandard	—		—		—		—		351		2,324		—		2,675
Total residential real estate	876,135		475,346		288,699		127,817		105,736		605,968		—		2,479,701
Other consumer (1)
Pass	26,512		19,168		18,179		51,954		17,955		123,783		—		257,551
Special Mention	—		—		—		—		—		322		—		322
Substandard	—		—		—		18		—		2,928		—		2,946
Total other consumer	26,512		19,168		18,179		51,972		17,955		127,033		—		260,819
Total loans	$	2,449,710	$	1,202,923	$	1,061,158	$	585,795	$	634,834	$	2,138,982	$	549,468	$	8,622,870

(1) For residential real estate and other consumer loans, the Company evaluates credit quality based on the aging status of the loan and by payment activity.

An analysis of the allowance for credit losses on loans for the three and six months ended June 30, 2022 and 2021 is as follows (in thousands):


	Commercial Real Estate – Investor		Commercial Real Estate – Owner Occupied		Commercial and Industrial		Residential Real Estate		Other Consumer		Total
For the three months ended June 30, 2022
Allowance for credit losses on loans
Balance at beginning of period	$	23,637	$	5,053	$	4,649	$	16,277	$	982	$	50,598
Credit loss (benefit) expense	(1,080)		(116)		572		1,966		130		1,472
Charge-offs	—		(14)		—		(56)		(217)		(287)
Recoveries	51		98		19		9		101		278
Balance at end of period	$	22,608	$	5,021	$	5,240	$	18,196	$	996	$	52,061
For the three months ended June 30, 2021
Allowance for credit losses on loans
Balance at beginning of period	$	36,922	$	7,827	$	2,541	$	11,280	$	1,406	$	59,976
Credit loss (benefit) expense	(3,583)		(1,483)		1,871		(2,462)		(219)		(5,876)
Charge-offs	(311)		—		(33)		—		(76)		(420)
Recoveries	9		6		25		—		156		196
Balance at end of period	$	33,037	$	6,350	$	4,404	$	8,818	$	1,267	$	53,876
For the six months ended June 30, 2022
Allowance for credit losses on loans
Balance at beginning of period	$	25,504	$	5,884	$	5,039	$	11,155	$	1,268	$	48,850
Credit loss (benefit) expense	(2,947)		(956)		166		6,994		(129)		3,128
Charge-offs	—		(18)		—		(56)		(356)		(430)
Recoveries	51		111		35		103		213		513
Balance at end of period	$	22,608	$	5,021	$	5,240	$	18,196	$	996	$	52,061
For the six months ended June 30, 2021
Allowance for credit losses on loans
Balance at beginning of period	$	26,703	$	15,054	$	5,390	$	11,818	$	1,770	$	60,735
Credit loss expense (benefit)	6,566		(8,740)		(1,004)		(2,797)		(940)		(6,915)
Charge-offs	(345)		—		(33)		(242)		(156)		(776)
Recoveries	113		36		51		39		593		832
Balance at end of period	$	33,037	$	6,350	$	4,404	$	8,818	$	1,267	$	53,876

A loan is considered collateral dependent when the borrower is experiencing financial difficulty and repayment is expected to be provided substantially through the operation or sale of the collateral and therefore, non-accruing. At June 30, 2022 and December 31, 2021, the Company had collateral dependent loans with an amortized cost balance as follows: commercial real estate - investor of $2.6 million and $3.6 million, respectively, commercial real estate - owner occupied of $2.2 million and $11.9 million, respectively, and commercial and industrial of $364,000 and $277,000, respectively. In addition, the Company had residential and consumer loans collateralized by residential real estate, which are in the process of foreclosure, with an amortized cost balance of $261,000 and $438,000 at June 30, 2022 and December 31, 2021, respectively. At June 30, 2022 and December 31, 2021, the amount of foreclosed residential real estate property held by the Company was $0 and $106,000, respectively.

The following table presents the recorded investment in non-accrual loans, by loan portfolio segment as of June 30, 2022 and December 31, 2021 (in thousands):


	June 30,		December 31,
	2022		2021
Commercial real estate – investor	$	2,609	$	3,614
Commercial real estate – owner occupied	8,233		11,904
Commercial and industrial	364		277
Residential real estate	5,846		6,114
Other consumer	3,701		3,585
	$	20,753	$	25,494

At June 30, 2022 and December 31, 2021, the non-accrual loans were included in the allowance for credit loss calculation and the Company did not recognize or accrue interest income on these loans. At June 30, 2022, there were no loans that were 90 days or greater past due and still accruing. At December 31, 2021, there was one loan for $46,000 that was 90 days or greater past due and still accruing interest that was fully paid on January 14, 2022.

The following table presents the aging of the recorded investment in past due loans as of June 30, 2022 and December 31, 2021 by loan portfolio segment (in thousands):


	30-59 Days Past Due		60-89 Days Past Due		90 Days or Greater Past Due		Total Past Due		Loans Not Past Due		Total
June 30, 2022
Commercial real estate – investor	$	1,667	$	978	$	1,582	$	4,227	$	4,804,738	$	4,808,965
Commercial real estate – owner occupied	181		1,883		85		2,149		1,018,724		1,020,873
Commercial and industrial	1,112		138		—		1,250		583,214		584,464
Residential real estate	—		2,690		2,452		5,142		2,753,127		2,758,269
Other consumer	631		278		1,928		2,837		249,477		252,314
	$	3,591	$	5,967	$	6,047	$	15,605	$	9,409,280	$	9,424,885
December 31, 2021
Commercial real estate – investor	$	1,717	$	102	$	1,709	$	3,528	$	4,374,533	$	4,378,061
Commercial real estate – owner occupied	599		—		575		1,174		1,053,891		1,055,065
Commercial and industrial	25		151		277		453		448,771		449,224
Residential real estate	9,705		1,586		2,675		13,966		2,465,735		2,479,701
Other consumer	339		322		2,946		3,607		257,212		260,819
	$	12,385	$	2,161	$	8,182	$	22,728	$	8,600,142	$	8,622,870

The Company classifies certain loans as troubled debt restructuring (“TDR”) loans when credit terms to a borrower in financial difficulty are modified. The modifications may include a reduction in rate, an extension in term, the capitalization of past due amounts and/or the restructuring of scheduled principal payments. Residential real estate and consumer loans where the borrower’s debt is discharged in a bankruptcy filing are also considered TDR loans. For these loans, the Bank retains its security interest in the real estate collateral. At June 30, 2022 and December 31, 2021, TDR loans totaled $17.4 million and $23.6 million, respectively. At June 30, 2022 and December 31, 2021, there were $10.5 million and $11.3 million, respectively, of TDR loans included in the non-accrual loan totals. At June 30, 2022 the Company had a $744,000 specific reserve allocated to a loan that was classified as a TDR loan. At December 31, 2021, the Company had no specific reserves allocated to loans that were classified as TDR loans. Non-accrual loans which become TDR loans are generally returned to accrual status after six months of performance. In addition to the TDR loans included in non-accrual loans, the Company also has TDR loans classified as accruing loans, which totaled $6.9 million and $12.3 million at June 30, 2022 and December 31, 2021, respectively.

The following table presents information about TDR loans which occurred during the three and six months ended June 30, 2022 and 2021 (dollars in thousands):


	Number of Loans	Pre-modification Recorded Investment		Post-modification Recorded Investment
Three months ended June 30, 2022
Troubled debt restructurings:	None	None		None





Three months ended June 30, 2021
Troubled debt restructurings:

Commercial real estate – investor	1	$	4,903	$	4,903
Residential real estate	3	244		336

Six months ended June 30, 2022
Troubled debt restructurings:



Commercial and industrial	1	$	65	$	65
Other consumer	3	991		1,109
Six months ended June 30, 2021
Troubled debt restructurings:

Commercial real estate – investor	1	$	4,903	$	4,903
Residential real estate	3	244		336
Other consumer	2	26		33

There were no TDR loans that defaulted during the three and six months ended June 30, 2022, which were modified within the preceding year. There was one TDR commercial real estate - investor loan for $923,000 that defaulted during the three and six months ended June 30, 2021, which was modified within the preceding year and the loan was subsequently paid in full as of June 30, 2022.