Loans Receivable, Net

12 Months Ended

Dec. 31, 2022

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


	December 31,
	2022		2021
Commercial:
Commercial real estate - investor	$	5,171,952	$	4,378,061
Commercial real estate - owner occupied	997,367		1,055,065
Commercial and industrial (1)	622,372		449,224
Total commercial	6,791,691		5,882,350
Consumer:
Residential real estate	2,861,991		2,479,701

Home equity loans and lines and other consumer (“other consumer”)	264,372		260,819

Total consumer	3,126,363		2,740,520


Total loans receivable	9,918,054		8,622,870

Deferred origination costs, net of fees	7,488		9,332
Allowance for loan credit losses	(56,824)		(48,850)
Total loans receivable, net	$	9,868,718	$	8,583,352

(1)The commercial and industrial loans balance at December 31, 2022 and 2021 includes Paycheck Protection Program (“PPP”) loans of $1.6 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
December 31, 2022
Commercial real estate - investor
Pass	$	1,144,763	$	1,339,289	$	555,937	$	524,428	$	220,999	$	881,344	$	450,787	$	5,117,547
Special Mention	—		2,508		192		17,094		—		12,818		2,188		34,800
Substandard	—		—		—		893		—		18,180		532		19,605
Total commercial real estate - investor	1,144,763		1,341,797		556,129		542,415		220,999		912,342		453,507		5,171,952
Commercial real estate - owner occupied
Pass	119,912		110,440		59,952		115,385		88,204		458,708		14,932		967,533
Special Mention	—		—		—		—		748		5,679		—		6,427
Substandard	—		—		3,750		2,037		4,817		12,803		—		23,407
Total commercial real estate - owner occupied	119,912		110,440		63,702		117,422		93,769		477,190		14,932		997,367
Commercial and industrial
Pass	60,078		23,724		14,072		17,175		10,992		47,370		443,211		616,622
Special Mention	—		7		—		—		—		250		1,680		1,937
Substandard	—		21		76		1,083		301		2,212		120		3,813
Total commercial and industrial	60,078		23,752		14,148		18,258		11,293		49,832		445,011		622,372


Residential real estate (1)
Pass	919,364		591,745		419,712		247,387		99,945		577,392		—		2,855,545
Special Mention	—		193		1,514		204		59		2,407		—		4,377
Substandard	—		—		—		656		286		1,127		—		2,069
Total residential real estate	919,364		591,938		421,226		248,247		100,290		580,926		—		2,861,991
Other consumer (1)
Pass	24,069		24,111		15,440		15,471		39,057		108,818		34,851		261,817
Special Mention	—		—		—		75		—		598		—		673
Substandard	—		—		—		157		18		1,707		—		1,882
Total other consumer	24,069		24,111		15,440		15,703		39,075		111,123		34,851		264,372

Total loans	$	2,268,186	$	2,092,038	$	1,070,645	$	942,045	$	465,426	$	2,131,413	$	948,301	$	9,918,054

(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 years ended December 31, 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 Year Ended December 31, 2022
Allowance for credit losses on loans
Balance at beginning of year	$	25,504	$	5,884	$	5,039	$	11,155	$	1,268	$	48,850
Credit loss (benefit) expense	(4,481)		(1,569)		561		13,275		(152)		7,634
Charge-offs	(8)		(62)		(60)		(56)		(387)		(573)
Recoveries	55		170		155		156		377		913
Balance at end of year	$	21,070	$	4,423	$	5,695	$	24,530	$	1,106	$	56,824
For the Year Ended December 31, 2021
Allowance for credit losses on loans
Balance at beginning of year	$	26,703	$	15,054	$	5,390	$	11,818	$	1,770	$	60,735
Credit loss benefit	(974)		(9,190)		(321)		(761)		(1,100)		(12,346)
Charge-offs	(345)		(65)		(154)		(254)		(213)		(1,031)
Recoveries	120		85		124		352		811		1,492
Balance at end of year	$	25,504	$	5,884	$	5,039	$	11,155	$	1,268	$	48,850

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, is classified as non-accruing. At December 31, 2022 and 2021, the Company had collateral dependent loans with an amortized cost balance as follows: commercial real estate - investor of $4.6 million and $3.6 million, respectively; commercial real estate - owner occupied of $4.0 million and $11.9 million, respectively; and commercial and industrial of $160,000 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 $858,000 and $438,000 at December 31, 2022 and 2021, respectively. At December 31, 2022 and 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 December 31, 2022 and 2021 (in thousands):


	December 31,
	2022		2021
Commercial real estate – investor	$	10,483	$	3,614
Commercial real estate – owner occupied	4,025		11,904
Commercial and industrial	331		277
Residential real estate	5,969		6,114
Other consumer	2,457		3,585
Total non-accrual loans	$	23,265	$	25,494

At December 31, 2022 and 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 December 31, 2022, there was one PPP loan for $14,000 that was past due greater than 90 days and still accruing interest. Per SBA guidelines, the SBA will pay accrued interest through the deferral period up to a maximum of 120 days past due. Given these servicing guidelines, PPP loans that are 90 to 120 days past due will be reported as accruing loans. 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 December 31, 2022 and 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
December 31, 2022
Commercial real estate – investor	$	217	$	875	$	3,700	$	4,792	$	5,167,160	$	5,171,952
Commercial real estate – owner occupied	143		80		3,750		3,973		993,394		997,367
Commercial and industrial	159		47		180		386		621,986		622,372
Residential real estate	7,003		4,377		2,069		13,449		2,848,542		2,861,991
Other consumer	573		673		1,882		3,128		261,244		264,372
	$	8,095	$	6,052	$	11,581	$	25,728	$	9,892,326	$	9,918,054
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 TDRs 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 December 31, 2022 and 2021, TDR loans totaled $13.9 million and $23.6 million, respectively. At December 31, 2022 and 2021, there were $6.4 million and $11.3 million, respectively, of TDR loans included in the non-accrual loan totals. At December 31, 2022, the Company had a $590,000 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 TDRs. Non-accrual loans which become TDRs 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 $7.5 million and $12.3 million at December 31, 2022 and 2021, respectively.

The following table presents information about TDRs which occurred during the years ended December 31, 2022 and 2021 (dollars in thousands):


	Number of Loans	Pre-modification Recorded Investment		Post-modification Recorded Investment
For the Year Ended December 31, 2022
Troubled debt restructurings:



Commercial and industrial	1	$	65	$	65
Other consumer	8	1,237		1,378
For the Year Ended December 31, 2021
Troubled debt restructurings:
Commercial real estate – investor	1	$	4,903	$	4,903
Commercial real estate – owner occupied	2	6,406		6,423
Residential real estate	3	244		336
Other consumer	3	39		49

There were no TDR loans that defaulted during the year ended December 31, 2022, which were modified within the preceding year. There was one TDR consumer loan and one TDR commercial real estate - investor loan for $15,000 and $923,000, respectively, that defaulted during the year ended December 31, 2021 which were modified within the preceding year. The TDR consumer loan is no longer in default as of December 31, 2022 and the TDR commercial real estate - investor loan was subsequently paid in full as of June 30, 2022.