Loans

9 Months Ended

Sep. 30, 2021

Loans [Abstract]

Loans

Note 6. Loans

The Company has several lending lines of business including small business comprised primarily of SBA loans, direct lease financing, SBLOC, IBLOC, real estate bridge lending, investment advisor financing and other specialty and consumer lending. Prior to 2020, the Company also originated real estate bridge loans for sale into commercial mortgage-backed securitizations or to secondary government guaranteed loan markets. At origination, the Company elected fair value treatment for these loans as they were originally held-for-sale, to better reflect the economics of the transactions. Currently, the Company intends to hold these loans on its balance sheet, and thus no longer accounts for these loans as held-for-sale. The Company continues to present these loans at fair value. At September 30, 2021, the fair value of these loans was $1.55 billion, and their amortized cost was $1.55 billion. Included in “Net realized and unrealized gains (losses) on commercial loans, at fair value” in the consolidated statements of operations are changes in the estimate in fair value of such loans. For the nine months ended September 30, 2021, net unrealized gains recognized for such changes in fair value were $285,000, which reflected $15,000 of loss attributable to credit weaknesses. For the nine months ended September 30, 2020, unrealized losses recognized for such changes in fair value were $3.1 million of which $490,000 was attributable to credit weaknesses. The Bank also pledged the majority of its loans held for investment at amortized cost and commercial loans at fair value to the Federal Home Loan Bank and to the Federal Reserve Bank for lines of credit. The Federal Home Loan Bank line is periodically utilized to manage liquidity, but the Federal Reserve line has not generally been used. However, in light of the impact of the COVID-19 pandemic, the Federal Reserve has encouraged banks to utilize their lines to maximize the amount of funding available for credit markets. Accordingly, the Bank has periodically borrowed against its Federal Reserve line on an overnight basis. The amount of loans pledged varies and the collateral may be unpledged at any time to the extent the collateral exceeds advances. The lines are maintained consistent with the Bank’s liquidity policy which maximizes potential liquidity. At September 30, 2021, $1.80 billion of loans were pledged to the Federal Reserve and $891.6 million of loans were pledged to the Federal Home Loan Bank. At September 30, 2021, there were $300 million of advances outstanding against the Federal Reserve line and no amount outstanding against the Federal Home Loan Bank line.

Prior to 2020, the Company periodically sponsored the structuring of commercial mortgage loan securitizations. The Company has sponsored six of these securitizations since 2017 which are described in the 2020 Form 10-K. The loans previously sold to the commercial mortgage-backed securitizations, and now originated and held on the balance sheet at fair value, are transitional commercial mortgage loans which are made to improve and rehabilitate existing properties which are already cash flowing. Servicing rights are not retained. Each of the securitizations is considered a variable interest entity of which the Company is not the primary beneficiary and therefore are not consolidated in its financial statements. Further, true sale accounting has been applicable to each of the securitizations, as supported by a review performed by an independent third-party consultant. In each of the securitizations, the Company has obtained a tranche of certificates which are accounted for as available-for-sale debt securities. The securities are recorded at fair value at acquisition, which is determined by an independent third-party based on the discounted cash flow method using unobservable (level 3) inputs. The loans securitized are structured with some prepayment protection and with extension options which are common for rehabilitation loans. It was expected such prepayment protection and extension options would generally offset the impact of prepayments which would therefore not be significant. Accordingly, prepayments on CRE securities were not originally assumed in the first four securitizations. However, as a result of higher than expected prepayments on CRE2 annual prepayments of 15% on CRE5 were assumed, beginning after the first-year anniversary of the CRE5 securitization. For CRE6, there was no premium or discount associated with the tranche purchased and prepayments were accordingly not estimated. During the third quarter of 2021, the remaining principal balances of certificates owned by the Company from the CRE1 and CRE4 securitizations which respectively amounted to $7.1 million and $25.6 million at June 30, 2021, were fully repaid.

Because of credit enhancements for each security, cash flows were not reduced by expected losses. For each of the securitizations, the Company has recorded a gain which is comprised of (i) the excess of consideration received by the Company in the transaction over the carrying value of the loans at securitization, less related transactions costs incurred; and (ii) the recognition of previously deferred origination and exit fees.

In 2020, the Company decided to not pursue securitizations and no future securitizations are currently planned. The loans currently retained total approximately $1.3 billion and are mostly comprised of multi-family loans, specifically apartment buildings. The $1.3 billion comprises the majority of the commercial loans, at fair value on the September 30, 2021 balance sheet, with the balance of that category comprised of the government guaranteed portion of SBA loans.

The Company analyzes credit risk prior to making loans on an individual loan basis. The Company considers relevant aspects of the borrowers’ financial position and cash flow, past borrower performance, management’s knowledge of market conditions, collateral and the ratio of loan amounts to estimated collateral value in making its credit determinations.

Major classifications of loans, excluding commercial loans at fair value, are as follows (in thousands):

	September 30,		December 31,
	2021		2020
SBL non-real estate	$	171,845	$	255,318
SBL commercial mortgage		367,272		300,817
SBL construction		23,117		20,273
Small business loans *		562,234		576,408
Direct lease financing		514,068		462,182
SBLOC / IBLOC **		1,834,523		1,550,086
Advisor financing ***		81,143		48,282
Real estate bridge lending		128,699		—
Other loans ****		4,917		6,426
		3,125,584		2,643,384
Unamortized loan fees and costs		11,078		8,939
Total loans, net of unamortized loan fees and costs	$	3,136,662	$	2,652,323

	September 30,		December 31,
	2021		2020
SBL loans, net of deferred costs of $4,238 and $1,536
for September 30, 2021 and December 31, 2020, respectively	$	566,472	$	577,944
SBL loans included in commercial loans, at fair value		214,301		243,562
Total small business loans	$	780,773	$	821,506

* The preceding table shows small business loans and small business loans held at fair value. The small business loans held at fair value are comprised of the government guaranteed portion of SBA 7a loans at the dates indicated. A reduction in SBL non-real estate loans from $229.0 million at June 30, 2021 to $171.8 million at September 30, 2021 resulted from U.S. government repayments of $58.2 million of Paycheck Protection Program (“PPP”) loans authorized by The Consolidated Appropriations Act, 2021. PPP loans totaled $71.3 million at September 30, 2021 and $165.7 million at December 31, 2020, respectively.

** Securities Backed Lines of Credit, or SBLOC, are collateralized by marketable securities, while Insurance Backed Lines of Credit, or IBLOC, are collateralized by the cash surrender value of insurance policies. At September 30, 2021 and December 31, 2020, respectively, IBLOC loans amounted to $686.8 million and $437.2 million.

*** In 2020, the Company began originating loans to investment advisors for purposes of debt refinance, acquisition of another firm or internal succession. Maximum loan amounts are subject to loan-to-value ratios of 70%, based on third-party business appraisals, but may be increased depending upon the debt service coverage ratio. Personal guarantees and blanket business liens are obtained as appropriate.

**** Included in the table above under Other loans are demand deposit overdrafts reclassified as loan balances totaling $272,000 and $663,000 at September 30, 2021 and December 31, 2020, respectively. Estimated overdraft charge-offs and recoveries are reflected in the allowance for credit losses and have been immaterial.

The following table provides information about loans individually evaluated for credit loss at September 30, 2021 and December 31, 2020 (in thousands):

	September 30, 2021
	Recorded ‎investment		Unpaid ‎principal ‎balance		Related ‎allowance		Average ‎recorded ‎investment		Interest ‎income ‎recognized
Without an allowance recorded
SBL non-real estate	$	408	$	3,497	$	—	$	413	$	—
SBL commercial mortgage		2,183		2,206		—		2,091		—
Direct lease financing		289		289		—		474		—
Consumer - home equity		325		325		—		493		7
With an allowance recorded
SBL non-real estate		1,825		1,825		(1,163)		2,464		12
SBL commercial mortgage		984		984		(510)		3,145		—
SBL construction		711		711		(34)		711		—
Direct lease financing		141		141		(91)		165		—
Consumer - other		14		14		(14)		6		—
Total
SBL non-real estate		2,233		5,322		(1,163)		2,877		12
SBL commercial mortgage		3,167		3,190		(510)		5,236		—
SBL construction		711		711		(34)		711		—
Direct lease financing		430		430		(91)		639		—
Consumer - other		14		14		(14)		6		—
Consumer - home equity		325		325		—		493		7
	$	6,880	$	9,992	$	(1,812)	$	9,962	$	19

	December 31, 2020
	Recorded ‎investment		Unpaid ‎principal ‎balance		Related ‎allowance		Average ‎recorded ‎investment		Interest ‎income ‎recognized
Without an allowance recorded
SBL non-real estate	$	387	$	2,836	$	—	$	370	$	3
SBL commercial mortgage		2,037		2,037		—		1,253		—
Direct lease financing		299		299		—		3,352		—
Consumer - home equity		557		557		—		554		10
With an allowance recorded
SBL non-real estate		3,044		3,044		(2,129)		3,257		15
SBL commercial mortgage		5,268		5,268		(1,010)		2,732		—
SBL construction		711		711		(34)		711		—
Direct lease financing		452		452		(4)		716		—
Consumer - home equity		—		—		—		24		—
Total
SBL non-real estate		3,431		5,880		(2,129)		3,627		18
SBL commercial mortgage		7,305		7,305		(1,010)		3,985		—
SBL construction		711		711		(34)		711		—
Direct lease financing		751		751		(4)		4,068		—
Consumer - home equity		557		557		—		578		10
	$	12,755	$	15,204	$	(3,177)	$	12,969	$	28

The loan review department recommends non-accrual status for loans to the surveillance committee, where interest income appears to be uncollectible or a protracted delay in collection becomes evident. The surveillance committee further vets and approves the non-accrual status.

The following table summarizes non-accrual loans with and without an allowance for credit losses (“ACL”) as of the periods indicated

(in thousands):

	September 30, 2021						December 31, 2020
	Non-accrual loans with a related ACL		Non-accrual loans without a related ACL		Total non-accrual loans		Total non-accrual loans
SBL non-real estate	$	1,300	$	408	$	1,708	$	3,159
SBL commercial mortgage		984		2,183		3,167		7,305
SBL construction		711		—		711		711
Direct leasing		141		289		430		751
Consumer - home equity		—		76		76		301
Consumer - other		14		—		14		—
	$	3,150	$	2,956	$	6,106	$	12,227

The Company had $2.1 million of other real estate owned at September 30, 2021 and no other real estate owned at December 31, 2020 in continuing operations. The following table summarizes the Company’s non-accrual loans, loans past due 90 days or more, and other real estate owned at September 30, 2021 and December 31, 2020, respectively:

	September 30,		December 31,
	2021		2020
	(in thousands)
Non-accrual loans
SBL non-real estate	$	1,708	$	3,159
SBL commercial mortgage		3,167		7,305
SBL construction		711		711
Direct leasing		430		751
Consumer - home equity		76		301
Consumer - other		14		—
Total non-accrual loans		6,106		12,227
Loans past due 90 days or more and still accruing		1,569		497
Total non-performing loans		7,675		12,724
Other real estate owned		2,145		—
Total non-performing assets	$	9,820	$	12,724

Interest which would have been earned on loans classified as non-accrual for the nine months ended September 30, 2021 and 2020, was $247,000 and $459,000, respectively. No income on non-accrual loans was recognized during the nine months ended September 30, 2021. In the nine months ended September 30, 2021 and 2020 a total of $39,000 and $361,000, respectively, was reversed from interest income, which represented interest accrued on loans placed into non-accrual status during the period.

The Company’s loans that were modified as of September 30, 2021 and December 31, 2020 and considered troubled debt restructurings are as follows (dollars in thousands):

	September 30, 2021						December 31, 2020
	Number		Pre-modification recorded investment		Post-modification recorded investment		Number		Pre-modification recorded investment		Post-modification recorded investment
SBL non-real estate		8	$	1,190	$	1,190		8	$	911	$	911
Direct lease financing		—		—		—		1		251		251
Consumer - home equity		1		249		249		2		469		469
Total(1)		9	$	1,439	$	1,439		11	$	1,631	$	1,631

(1) Troubled debt restructurings include non-accrual loans of $665,000 and $1.1 million at September 30, 2021 and December 31, 2020, respectively.

The balances below provide information as to how the loans were modified as troubled debt restructuring loans as of September 30, 2021 and December 31, 2020 (in thousands):

	September 30, 2021						December 31, 2020
	Adjusted interest rate		Extended maturity		Combined rate and maturity		Adjusted interest rate		Extended maturity		Combined rate and maturity
SBL non-real estate	$	—	$	—	$	1,190	$	—	$	16	$	895
Direct lease financing		—		—		—		—		251		—
Consumer - home equity		—		—		249		—		—		469
Total(1)	$	—	$	—	$	1,439	$	—	$	267	$	1,364

(1) Troubled debt restructurings include non-accrual loans of $665,000 and $1.1 million at September 30, 2021 and December 31, 2020, respectively.

The Company had no commitments to extend additional credit to loans classified as troubled debt restructurings as of September 30, 2021 or December 31, 2020.

When loans are classified as troubled debt restructurings, the Company estimates the value of underlying collateral and repayment sources. A specific reserve in the allowance for credit losses is established if the collateral valuation, less disposition costs, is lower than the recorded loan value. The amount of the specific reserve serves to increase the provision for credit losses in the quarter the loan is classified as a troubled debt restructuring. As of September 30, 2021, there were 9 troubled debt restructured loans with a balance of $1.4 million which had specific reserves of $626,000. Substantially all of these reserves related to the non-guaranteed portion of SBA loans for start-up businesses.

The following table summarizes loans that were restructured within the 12 months ended September 30, 2021 that have subsequently defaulted (in thousands):

	September 30, 2021
	Number	Pre-modification recorded investment
SBL non-real estate	1	$	205
Total	1	$	205

The SBA began, in April 2020, to make six months of principal and interest payments on SBA 7a loans, which are generally 75% guaranteed by the U.S. government. As of September 30, 2021, the Company had $369.7 million of related guaranteed balances, and additionally had $71.3 million of PPP loan balances which were also guaranteed. The majority of the six months of support expired in the fourth quarter of 2020, and the Company generally approved COVID-19 pandemic-related deferrals for principal and interest payments as requested by borrowers. Additionally, the Company granted such deferrals for certain other loans. The Consolidated Appropriations Act, 2021, became law in December 2020, provide for at least an additional two months of principal and interest payments on SBA 7a loans, with up to five months of payments for hotel, restaurant and other more highly impacted loans. Unlike the six months of COVID-19 Aid, Relief, and Economic Security Act (“CARES Act”) payments, these additional payments are capped at $9,000 per month. Per section 4013 of the CARES Act, accounting and banking regulators have determined that loans with COVID-19 pandemic-related deferrals of principal and interest payments will not, during the deferral period, be classified as restructured. Such treatment is temporary and will terminate after the earlier of the end of the national emergency, or December 31, 2021. As of September

30, 2021, substantially all borrowers with prior COVID-19 deferrals had resumed making their payments, with $1.3 million of principal remaining in deferral status as of that date.

Effective January 1, 2020, current expected credit loss (“CECL”) accounting replaced the prior incurred loss model that recognized losses when it became probable that a credit loss would be incurred, with a new requirement to recognize lifetime expected credit losses immediately when a financial asset is originated or purchased. The allowance for credit losses is a valuation account that is deducted from the amortized cost basis of loans to present the net amount expected to be collected on the loans. Loans, or portions thereof, are charged off against the allowance when they are deemed uncollectible. Loans are deemed uncollectible based on individual facts and circumstances including the quality of repayment sources, the length of collection efforts and the probability and timing of recoveries. During the first quarter of 2020, upon adoption of the guidance, the allowance for credit losses was increased by $2.6 million. Additionally, $569,000 was established as an allowance for off-balance sheet credit losses (for unfunded loan commitments) and recorded in other liabilities. These amounts did not impact our Consolidated Statement of Operations, as the guidance required these cumulative differences between the two accounting conventions to flow through retained earnings, net of their income tax benefit. The following table shows the effect of the adoption of CECL as of January 1, 2020 and the September 30, 2021 allowance for credit loss (in thousands).

	December 31, 2019				January 1, 2020				September 30, 2021
	Incurred loss method				CECL (day 1 adoption)				CECL
	Amount		% of Segment		Amount		% of Segment		Amount		% of Segment
Allowance for credit losses on loans and leases
SBL non real estate	$	4,985		5.89%	$	4,765		5.63%	$	5,378		3.13%
SBL commercial mortgage		1,472		0.67%		2,009		0.92%		2,795		0.76%
SBL construction		432		0.95%		571		1.26%		370		1.60%
Direct lease financing		2,426		0.56%		4,788		1.10%		5,637		1.10%
SBLOC		440		0.05%		440		0.05%		574		0.05%
IBLOC		113		0.08%		72		0.05%		343		0.05%
Advisor financing		—		—		—		—		609		0.75%
Real estate bridge lending		—		—		—		—		245		0.19%
Other loans (1)		52		0.68%		230		3.02%		208		4.23%
Unallocated		318				—				—
	$	10,238		0.56%	$	12,875		0.71%	$	16,159		0.52%
Liabilities:
Allowance for credit losses on off-balance sheet credit exposures		—				569				1,088
Total allowance for credit losses	$	10,238			$	13,444			$	17,247

(1)Included in Other loans are $25.0 million of SBA loans purchased for Community Reinvestment Act (“CRA”) purposes as of September 30, 2021. These loans are classified as SBL in our loan tables.

Management estimates the allowance using relevant available internal and external historical loan performance information, current economic conditions and reasonable and supportable forecasts. Historical credit loss experience provides the initial basis for the estimation of expected credit losses over the estimated remaining life of the loans. The methodology used in the estimation of the allowance, which is performed at least quarterly, is designed to be responsive to changes in portfolio credit quality and the impact of current and future economic conditions on loan performance. The review of the appropriateness of the allowance is performed by the Chief Credit Officer and presented to the audit committee for their review. The allowance for credit losses includes reserves on loan pools with similar risk characteristics based on a lifetime loss-rate model, or vintage analysis, as described in the following paragraph. Loans that do not share risk characteristics are evaluated on an individual basis. If foreclosure is believed to be probable or repayment is expected from the sale of the collateral, a reserve for deficiency is established within the allowance. Expected credit losses for such collateral dependent loans are based on the difference between loan principal and the estimated fair value of the collateral, adjusted for estimated disposition costs as appropriate.

For purposes of determining the pool-basis reserve, the loans not assigned an individual reserve are segregated by product type, to recognize differing risk characteristics within portfolio segments. A historical loss rate is calculated for each product type, except SBLOC, IBLOC, real estate bridge lending and investment advisor financing, based upon historical net charge-offs for that product. The loss rate is determined by classifying charge-off losses according to the year the related loans were originated, which is referred to as vintage analysis. The loss rate is then projected over the estimated remaining loan lives unique to each loan pool, to determine estimated lifetime losses. For SBLOC and IBLOC, since losses have not been incurred, probability of loss/loss given default considerations are utilized. For real estate bridge lending, industry loss rate statistics were utilized. Due to the specialized nature of investment advisor financing, industry loss rate statistics are not available. Accordingly, factors based upon the nature of the underlying collateral were utilized, namely the income streams resulting from investment portfolios which represent the primary repayment source

for such loans. For all loan pools the Company adds to the allowance a component for each pool based upon qualitative factors such as the Company’s current loan performance statistics as determined by pool. These qualitative factors adjust for asset specific differences between historical loss experience and the current portfolio for each pool. The qualitative factors are intended to address factors that may not be reflected in historical loss rates and otherwise unaccounted for in the quantitative process. A similar process is employed to calculate an allowance assigned to off-balance sheet commitments, which are comprised of unfunded loan commitments and letters of credit. That allowance is recorded in other liabilities. These qualitative factors may increase the allowance compared to historical loss rates. Expected losses provided for in the allowance are based on applying historical loss rates over the estimated remaining lives of the loans, when historical loss rate information is available. The qualitative factor percentages are applied against the portfolio balance as of the end of the period. Even though portions of the allowance may be allocated to loans that have been individually measured for credit deterioration, the entire allowance is available for any credit that, in management’s judgment, should be charged off.

The Company ranks its qualitative factors in five levels: minimal risk, low, moderate, moderate-high and high. When the Company adopted CECL as of January 1, 2020, the management assumption was that some degree of economic slowdown should be considered over the next eighteen months. That belief reflected the length of the current economic expansion and the relatively high level of unsustainable deficit spending. Accordingly, certain of the Company’s qualitative factors were set at moderate as of January 1, 2020. Based on the uncertainty as to how the COVID-19 pandemic would impact the Company’s loan pools, the Company increased other qualitative factors to moderate and moderate high in 2020. In the second quarter of 2021, the Company reassessed these factors and reversed increases to moderate-high for certain pools, based upon increased vaccination rates and significant reopening of the economy. The economic qualitative factor is based on the estimated impact of economic conditions on the loan pools, as distinguished from the economic factors themselves, for the following reasons. The Company’s charge-offs in its lines of business have been non-existent for SBLOC and IBLOC, notwithstanding stressed economic periods. Additionally, the charge-off histories for SBL and leasing have not correlated with economic conditions. While specific groups of economic factors did not correlate with actual historical losses, multiple economic factors are considered. For the non-guaranteed portion of SBA loans and leasing, the Company’s loss forecasting analysis included a review of industry statistics. However, the Company’s own charge-off history was the primary quantitative element in the forecasts.

Below are the portfolio segments used to pool loans with similar risk characteristics and align with the Company’s methodology for measuring expected credit losses. These pools have similar risk and collateral characteristics, and certain of these pools are broken down further in determining and applying the vintage loss estimates previously discussed. For instance, within the direct lease financing pool, government and public institution leases are considered separately. Additionally, the Company evaluates its loans under an internal loan risk rating system as a means of identifying problem loans. The special mention classification indicates weaknesses that may, if not cured, threaten the borrower’s future repayment ability. A substandard classification reflects an existing weakness indicating the possible inadequacy of net worth and other repayment sources. These classifications are used both by regulators and peers, as they have been correlated with an increased probability of credit losses. A summary of the Company’s primary portfolio pools and loans accordingly classified, by year of origination, at September 30, 2021 and December 31, 2020 are as follows (in thousands):

As of September 30, 2021	2021		2020		2019		2018		2017		Prior		Revolving loans at amortized cost		Total
SBL non real estate
Non-rated*	$	66,244	$	8,844	$	—	$	—	$	—	$	—	$	—	$	75,088
Pass		21,814		17,432		9,180		9,563		5,534		12,934		—		76,457
Special mention		79		—		—		687		—		873		—		1,639
Substandard		—		—		—		18		574		1,282		—		1,874
Total SBL non-real estate		88,137		26,276		9,180		10,268		6,108		15,089		—		155,058
SBL commercial mortgage
Non-rated		9,707		—		4,500		—		—		—		—		14,207
Pass		62,268		55,850		77,930		46,916		38,465		58,177		—		339,606
Special mention		—		—		1,853		—		—		249		—		2,102
Substandard		—		—		—		—		—		3,167		—		3,167
Total SBL commercial mortgage		71,975		55,850		84,283		46,916		38,465		61,593		—		359,082
SBL construction
Pass		3,194		13,958		1,411		3,844		—		—		—		22,407
Substandard		—		—		—		—		—		711		—		711
Total SBL construction		3,194		13,958		1,411		3,844		—		711		—		23,118
Direct lease financing
Non-rated		44,973		14,486		2,088		1,291		474		126		—		63,438
Pass		168,932		166,215		65,411		32,392		11,573		2,956		—		447,479
Substandard		792		2,170		39		58		78		14		—		3,151
Total direct lease financing		214,697		182,871		67,538		33,741		12,125		3,096		—		514,068
SBLOC
Non-rated		—		—		—		—		—		—		4,465		4,465
Pass		—		—		—		—		—		—		1,143,291		1,143,291
Total SBLOC		—		—		—		—		—		—		1,147,756		1,147,756
IBLOC
Non-rated		—		—		—		—		—		—		277,567		277,567
Pass		—		—		—		—		—		—		409,200		409,200
Total IBLOC		—		—		—		—		—		—		686,767		686,767
Advisor financing
Non-rated		1,847		264		—		—		—		—		—		2,111
Pass		34,452		44,580		—		—		—		—		—		79,032
Total advisor financing		36,299		44,844		—		—		—		—		—		81,143
Real estate bridge lending
Pass		128,699		—		—		—		—		—		—		128,699
Total real estate bridge lending		128,699		—		—		—		—		—		—		128,699
Other loans
Non-rated		428		184		—		—		4		217		677		1,510
Pass		101		114		3,323		4,820		5,632		12,977		1,278		28,245
Substandard		—		14		—		—		48		—		76		138
Total other loans**		529		312		3,323		4,820		5,684		13,194		2,031		29,893
	$	543,530	$	324,111	$	165,735	$	99,589	$	62,382	$	93,683	$	1,836,554	$	3,125,584
Unamortized loan fees and costs		—		—		—		—		—		—		—		11,078
Total															$	3,136,662

*Included in the SBL non real estate non-rated total of $75.1 million, were $71.3 million of PPP loans which are government guaranteed.

**Included in Other loans are $25.0 million of SBA loans purchased for CRA purposes as of September 30, 2021. These loans are classified as SBL in the Company’s loan table which classify loans by type, as opposed to risk characteristics.

As of December 31, 2020	2020		2019		2018		2017		2016		Prior		Revolving loans at amortized cost		Total
SBL non real estate
Non-rated*	$	170,910	$	—	$	—	$	—	$	—	$	—	$	—	$	170,910
Pass		10,775		10,943		12,002		5,454		7,153		9,964		—		56,291
Special mention		—		—		731		—		499		767		—		1,997
Substandard		—		—		20		1,489		1,347		1,491		—		4,347
Total SBL non-real estate		181,685		10,943		12,753		6,943		8,999		12,222		—		233,545
SBL commercial mortgage
Non-rated		17,592		2,758		—		—		—		—		—		20,350
Pass		26,971		76,975		46,099		39,219		32,505		35,298		—		257,067
Special mention		—		1,852		—		—		—		257		—		2,109
Substandard		—		—		—		—		77		7,605		—		7,682
Total SBL commercial mortgage		44,563		81,585		46,099		39,219		32,582		43,160		—		287,208
SBL construction
Non-rated		566		—		—		—		—		—		—		566
Pass		6,769		1,146		11,081		—		—		—		—		18,996
Substandard		—		—		—		—		711		—		—		711
Total SBL construction		7,335		1,146		11,081		—		711		—		—		20,273
		.
Direct lease financing
Non-rated		23,273		2,888		2,189		1,093		447		7		—		29,897
Pass		249,946		90,156		53,638		23,944		9,091		1,106		—		427,881
Substandard		3,536		45		97		152		536		38		—		4,404
Total direct lease financing		276,755		93,089		55,924		25,189		10,074		1,151		—		462,182
SBLOC
Non-rated		—		—		—		—		—		—		3,772		3,772
Pass		—		—		—		—		—		—		1,109,161		1,109,161
Total SBLOC		—		—		—		—		—		—		1,112,933		1,112,933
IBLOC
Non-rated		—		—		—		—		—		—		132,777		132,777
Pass		—		—		—		—		—		—		304,376		304,376
Total IBLOC		—		—		—		—		—		—		437,153		437,153
Advisor financing
Non-rated		22,341		—		—		—		—		—		—		22,341
Pass		25,941		—		—		—		—		—		—		25,941
Total advisor financing		48,282		—		—		—		—		—		—		48,282
Other loans
Non-rated		1,221		—		—		14		—		1,558		—		2,793
Pass		376		3,569		6,225		7,320		7,228		13,996		—		38,714
Substandard		—		—		—		—		—		301		—		301
Total other loans**		1,597		3,569		6,225		7,334		7,228		15,855		—		41,808
Total	$	560,217	$	190,332	$	132,082	$	78,685	$	59,594	$	72,388	$	1,550,086	$	2,643,384
Unamortized loan fees and costs		—		—		—		—		—		—		—		8,939
Total															$	2,652,323

*Included in the SBL non real estate non-rated total of $170.9 million, were $165.7 million of PPP loans which are government guaranteed.

**Included in Other loans are $35.4 million of SBA loans purchased for CRA purposes as of December 31, 2020. These loans are classified as SBL in the Company’s loan table which classify loans by type, as opposed to risk characteristics.

SBL. Substantially all small business loans consist of SBA loans. The Bank participates in loan programs established by the SBA, including the 7(a) Loan Guarantee Program and the 504 Fixed Asset Financing Program and a temporary program, the PPP. The 7(a) Loan Guarantee Program is designed to help small business borrowers start or expand their businesses by providing partial guarantees of loans made by banks and non-bank lending institutions for specific business purposes, including long or short term working capital; funds for the purchase of equipment, machinery, supplies and materials; funds for the purchase, construction or renovation of real estate; and funds to acquire, operate or expand an existing business or refinance existing debt, all under conditions established by the SBA. The 504 Fixed Asset Financing Program includes the financing of real estate and commercial mortgages. In 2020 and 2021, the Company also participated in PPP, which provides short-term loans to small businesses. PPP loans are fully guaranteed by the U.S. government. This program was a specific response to the COVID-19 pandemic, and these loans are expected to be reimbursed by the U.S. government within one year of their origination. The Company segments the SBL portfolio into four pools: non real estate, commercial mortgage and construction to capture the risk characteristics of each pool, and the PPP loans discussed above. In the table above, the PPP loans are included in non-rated SBL non real estate. The qualitative factors for SBL loans focus on pool loan performance, underlying collateral for collateral dependent loans and changes in economic conditions. Additionally, the construction segment adds a qualitative factor for general construction risk, such as construction delays. The U.S. government guaranteed portion of 7a loans and PPP loans, which are fully guaranteed, are not included in the risk pools because they have inherently different risk characteristics, because of the U.S. government guarantee.

Direct lease financing. The Company provides lease financing for commercial and government vehicle fleets and, to a lesser extent, provides lease financing for other equipment. Leases are either open-end or closed-end. An open-end lease is one in which, at the end of the lease term, the lessee must pay the difference between the amount at which the Company sells the leased asset and the stated termination value. Termination value is a contractual value agreed to by the parties at the inception of a lease as to the value of the leased asset at the end of the lease term. A closed-end lease is one for which no such payment is due on lease termination. In a closed-end lease, the risk that the amount received on a sale of the leased asset will be less than the residual value is assumed by the Bank, as lessor. The qualitative factors for direct lease financing focus on underlying collateral for collateral dependent loans, portfolio loan performance, loan concentrations and changes in economic conditions.

SBLOC. SBLOC loans are made to individuals, trusts and entities and are secured by a pledge of marketable securities maintained in one or more accounts with respect to which the Company obtains a securities account control agreement. The securities pledged may be either debt or equity securities or a combination thereof, but all such securities must be listed for trading on a national securities exchange or automated inter-dealer quotation system. SBLOCs are typically payable on demand. Maximum SBLOC line amounts are calculated by applying a standard ‘advance rate’ calculation against the eligible security type depending on asset class: typically, up to 50% for equity securities and mutual fund securities and 80% for investment grade (Standard & Poor’s rating of BBB- or higher, or Moody’s rating of Baa3 or higher) municipal or corporate debt securities. Substantially all SBLOCs have full recourse to the borrower. The underlying securities collateral for SBLOC loans is monitored on a daily basis to confirm the composition of the client portfolio and its daily market value. The primary qualitative factor in the SBLOC analysis is the ratio of loans outstanding to market value. This factor has been maintained at low levels, which has remained appropriate as losses have not materialized despite the historic declines in the equity markets during 2020, during which there were no losses. Significant losses have not been incurred since inception of this line of business. Additionally, the advance rates noted above were established to provide the Company with protection from declines in market conditions from the origination date of the lines of credit.

IBLOC. IBLOC loans are collateralized by the cash surrender value of insurance policies. Should a loan default, the primary risks for IBLOCs are if the insurance company issuing the policy were to become insolvent, or if that company would fail to recognize the Bank’s assignment of policy proceeds. To mitigate these risks, insurance company ratings are periodically evaluated for compliance with Bank standards. Additionally, the Bank utilizes assignments of cash surrender value, which legal counsel has concluded are enforceable. The qualitative factors for IBLOC primarily focus on the concentration risk with insurance companies.

Advisor financing. In 2020, the Bank began originating loans to investment advisors for purposes of debt refinance, acquisition of another firm or internal succession. Maximum loan amounts are subject to loan-to-value ratios of 70%, based on third-party business appraisals, but may be increased depending upon the debt service coverage ratio. Personal guarantees and blanket business liens are obtained as appropriate. The qualitative factors for advisor financing focus on changes in lending policies and procedures, portfolio performance and economic conditions.

Real estate bridge lending. Real estate bridge loans are transitional commercial mortgage loans which are made to improve and rehabilitate existing properties which are already cash flowing, and which are securitized by those properties. The portfolio is comprised primarily of apartments. Prior to 2020, such loans were originated for securitization and loans which had been originated but not securitized continue to accounted for at fair value in commercial loans, at fair value, on the balance sheet. In 2021, originations resumed and are being held for investment in loans, net of deferred fees and cost, on the balance sheet.

Other specialty lending and consumer loans. Other specialty lending loans and consumer loans are categories of loans which the Company generally no longer offers. The loans primarily are consumer loans and home equity loans. The qualitative factors for all other specialty lending and consumer loans focus on changes in the underlying collateral for collateral dependent loans, portfolio loan performance, loan concentrations and changes in economic conditions.

Expected credit losses are estimated over the estimated remaining lives of loans. The estimate excludes possible extensions, renewals and modifications unless either of the following applies: management has a reasonable expectation that a loan will be restructured, or the extension or renewal options are included in the borrower contract and are not unconditionally cancellable by us.

The Company does not measure an allowance for credit losses on accrued interest receivable balances, because these balances are written off in a timely manner as a reduction to interest income when loans are placed on non-accrual status.

Allowance for credit losses on off-balance sheet credit exposures. The Company estimates expected credit losses over the contractual period in which the Company is exposed to credit risk via a contractual obligation to extend credit, unless that obligation is unconditionally cancellable by the Company. The allowance for credit losses on off-balance sheet credit exposures is adjusted through the provision for credit losses. The estimate considers the likelihood that funding will occur over the estimated life of the commitment. The amount of the allowance in the liability account as of September 30, 2021 was $1.1 million.

A detail of the changes in the allowance for credit losses by loan category and summary of loans evaluated individually and collectively for credit deterioration is as follows (in thousands):

	September 30, 2021
	SBL non-real estate		SBL commercial mortgage		SBL construction		Direct lease financing		SBLOC / IBLOC		Advisor financing		Real estate bridge lending		Other loans		Unallocated		Total
Beginning 1/1/2021	$	5,060	$	3,315	$	328	$	6,043	$	775	$	362	$	—	$	199	$	—	$	16,082
Charge-offs		(896)		(23)		—		(248)		(15)		—		—		(10)		—		(1,192)
Recoveries		18		9		—		50		—		—		—		—		—		77
Provision (credit)*		1,196		(506)		42		(208)		157		247		245		19		—		1,192
Ending balance	$	5,378	$	2,795	$	370	$	5,637	$	917	$	609	$	245	$	208	$	—	$	16,159
Ending balance: Individually evaluated for expected credit loss	$	1,163	$	510	$	34	$	91	$	—	$	—	$	—	$	14	$	—	$	1,812
Ending balance: Collectively evaluated for expected credit loss	$	4,215	$	2,285	$	336	$	5,546	$	917	$	609	$	245	$	194	$	—	$	14,347
Loans:
Ending balance**	$	171,845	$	367,272	$	23,117	$	514,068	$	1,834,523	$	81,143	$	128,699	$	4,917	$	11,078	$	3,136,662
Ending balance: Individually evaluated for expected credit loss	$	2,233	$	3,167	$	711	$	430	$	—	$	—	$	—	$	339	$	—	$	6,880
Ending balance: Collectively evaluated for expected credit loss	$	169,612	$	364,105	$	22,406	$	513,638	$	1,834,523	$	81,143	$	128,699	$	4,578	$	11,078	$	3,129,782

	December 31, 2020
	SBL non-real estate		SBL commercial mortgage		SBL construction		Direct lease financing		SBLOC / IBLOC		Advisor financing		Other loans		Unallocated		Total
Beginning 12/31/2019	$	4,985	$	1,472	$	432	$	2,426	$	553	$	—	$	52	$	318	$	10,238
1/1 CECL adjustment		(220)		537		139		2,362		(41)		—		178		(318)		2,637
Charge-offs		(1,350)		—		—		(2,243)		—		—		—		—		(3,593)
Recoveries		103		—		—		570		—		—		—		—		673
Provision (credit)*		1,542		1,306		(243)		2,928		263		362		(31)		—		6,127
Ending balance	$	5,060	$	3,315	$	328	$	6,043	$	775	$	362	$	199	$	—	$	16,082
Ending balance: Individually evaluated for expected credit loss	$	2,129	$	1,010	$	34	$	4	$	—	$	—	$	—	$	—	$	3,177
Ending balance: Collectively evaluated for expected credit loss	$	2,931	$	2,305	$	294	$	6,039	$	775	$	362	$	199	$	—	$	12,905
Loans:
Ending balance**	$	255,318	$	300,817	$	20,273	$	462,182	$	1,550,086	$	48,282	$	6,426	$	8,939	$	2,652,323
Ending balance: Individually evaluated for expected credit loss	$	3,431	$	7,305	$	711	$	751	$	—	$	—	$	557	$	—	$	12,755
Ending balance: Collectively evaluated for expected credit loss	$	251,887	$	293,512	$	19,562	$	461,431	$	1,550,086	$	48,282	$	5,869	$	8,939	$	2,639,568

	September 30, 2020
	SBL non-real estate		SBL commercial mortgage		SBL construction		Direct lease financing		SBLOC / IBLOC		Advisor financing		Other loans		Unallocated		Total
Beginning 12/31/2019	$	4,985	$	1,472	$	432	$	2,426	$	553	$	—	$	52		318	$	10,238
1/1 CECL adjustment		(220)		537		139		2,362		(41)		—		178		(318)		2,637
Charge-offs		(1,350)		—		—		(2,178)		—		—		—		—		(3,528)
Recoveries		82		—		—		502		—		—		—		—		584
Provision (credit)*		1,304		1,543		(148)		2,735		202		199		(39)		—		5,796
Ending balance	$	4,801	$	3,552	$	423	$	5,847	$	714	$	199	$	191		—	$	15,727
Ending balance: Individually evaluated for expected credit loss	$	1,818	$	1,010	$	26	$	43	$	—	$	—	$	—	$	—	$	2,897
Ending balance: Collectively evaluated for expected credit loss	$	2,983	$	2,542	$	397	$	5,804	$	714	$	199	$	191	$	—	$	12,830
Loans:
Ending balance**	$	293,488	$	270,264	$	27,169	$	430,675	$	1,428,253	$	26,600	$	6,003	$	6,308	$	2,488,760
Ending balance: Individually evaluated for expected credit loss	$	3,220	$	7,517	$	711	$	804	$	—	$	—	$	567	$	—	$	12,819
Ending balance: Collectively evaluated for expected credit loss	$	290,268	$	262,747	$	26,458	$	429,871	$	1,428,253	$	26,600	$	5,436	$	6,308	$	2,475,941

*The amount shown as the provision for the period, reflects the provision on credit losses for loans, while the income statement provision for credit losses includes the provision for unfunded commitments.

** The ending balance for loans in the unallocated column represents deferred costs and fees.

The Company did not have loans acquired with deteriorated credit quality at either September 30, 2021 or December 31, 2020.

A detail of the Company’s delinquent loans by loan category is as follows (in thousands):

	September 30, 2021
	30-59 Days		60-89 Days		90+ Days				Total				Total
	past due		past due		still accruing		Non-accrual		past due		Current		loans
SBL non-real estate	$	1,622	$	848	$	1,085	$	1,708	$	5,263	$	166,582	$	171,845
SBL commercial mortgage		17		208		417		3,167		3,809		363,463		367,272
SBL construction		—		—		—		711		711		22,406		23,117
Direct lease financing		994		211		67		430		1,702		512,366		514,068
SBLOC / IBLOC		1,389		—		—		—		1,389		1,833,134		1,834,523
Advisor financing		—		—		—		—		—		81,143		81,143
Real estate bridge lending		—		—		—		—		—		128,699		128,699
Other loans		—		—		—		90		90		4,827		4,917
Unamortized loan fees and costs		—		—		—		—		—		11,078		11,078
	$	4,022	$	1,267	$	1,569	$	6,106	$	12,964	$	3,123,698	$	3,136,662

	December 31, 2020
	30-59 Days		60-89 Days		90+ Days				Total				Total
	past due		past due		still accruing		Non-accrual		past due		Current		loans
SBL non-real estate	$	1,760	$	805	$	110	$	3,159	$	5,834	$	249,484	$	255,318
SBL commercial mortgage		87		961		—		7,305		8,353		292,464		300,817
SBL construction		—		—		—		711		711		19,562		20,273
Direct lease financing		2,845		941		78		751		4,615		457,567		462,182
SBLOC / IBLOC		650		247		309		—		1,206		1,548,880		1,550,086
Advisor financing		—		—		—		—		—		48,282		48,282
Other loans		—		—		—		301		301		6,125		6,426
Unamortized loan fees and costs		—		—		—		—		—		8,939		8,939
	$	5,342	$	2,954	$	497	$	12,227	$	21,020	$	2,631,303	$	2,652,323

The scheduled maturities of the direct financing leases reconciled to the total lease receivables in the consolidated balance sheet, are as follows (in thousands):

Remaining 2021	$	47,882
2022		146,333
2023		111,954
2024		69,895
2025		34,726
2026 and thereafter		12,823
Total undiscounted cash flows		423,613
Residual value *		142,558
Difference between undiscounted cash flows and discounted cash flows		(52,103)
Present value of lease payments recorded as lease receivables	$	514,068

*Of the $142,558,000, $31,122,000 is not guaranteed by the lessee or other guarantors.