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Loans and Allowance for Loan Losses
 3 Months Ended
Mar. 31, 2022
Receivables [Abstract]  
Loans and Allowance for Loan Losses Loans and Allowance for Credit Losses
Loans
The following table provides a summary of the Company’s loan portfolio as of the dates indicated:
At March 31,At December 31,
20222021
(In thousands)
Commercial and industrial$2,886,560 $2,960,527 
Commercial real estate4,609,824 4,522,513 
Commercial construction246,093 222,328 
Business banking1,201,007 1,334,694 
Residential real estate1,936,182 1,926,810 
Consumer home equity1,099,211 1,100,153 
Other consumer203,326 214,485 
Gross loans before unamortized premiums, unearned discounts and deferred fees12,182,203 12,281,510 
Allowance for loan losses (1)(124,166)(97,787)
Unamortized premiums, net of unearned discounts and deferred fees(24,434)(26,442)
Loans after the allowance for loan losses, unamortized premiums, unearned discounts and deferred fees$12,033,603 $12,157,281 
(1)The Company adopted ASU 2016-13 on January 1, 2022 with a modified retrospective approach. Accordingly, at March 31, 2022 the allowance for loan losses at was determined in accordance with ASC 326, “Financial Instruments-Credit Losses” and ASC 310, “Receivables,” as amended. At December 31, 2021 the allowance for loan losses was determined in accordance with ASC 450, “Contingencies” and ASC 310, “Receivables.”
There are no other loan categories that exceed 10% of total loans not already reflected in the preceding table.
The Company’s lending activities are conducted principally in the New England area with the exception of its Shared National Credit Program (“SNC Program”) portfolio. The Company participates in the SNC Program in an effort to improve its industry and geographical diversification. The SNC Program portfolio is included in the Company’s commercial and industrial portfolio. The SNC Program portfolio is defined as loan syndications with exposure over $100 million and with three or more lenders participating.
Most loans originated by the Company are either collateralized by real estate or other assets or guaranteed by federal and local governmental authorities. The ability and willingness of the single-family residential and consumer borrowers to honor their repayment commitments is generally dependent on the level of overall economic activity within the borrowers’ geographic areas and real estate values. The ability and willingness of commercial real estate, commercial and industrial, and construction loan borrowers to honor their repayment commitments is generally dependent on the health of the real estate economy in the borrowers’ geographic areas and the general economy.
Loans Pledged as Collateral
The carrying value of loans pledged to secure advances from the Federal Home Loan Bank (“FHLB”) of Boston (“FHLBB”) were $3.0 billion and $2.6 billion March 31, 2022 and December 31, 2021, respectively. The balance of funds borrowed from the FHLBB were $13.7 million and $14.0 million at March 31, 2022 and December 31, 2021, respectively.
The carrying value of loans pledged to secure advances from the Federal Reserve Bank (“FRB”) were $799.9 million and $784.0 million at March 31, 2022 and December 31, 2021, respectively. There were no funds borrowed from the FRB outstanding at March 31, 2022 and December 31, 2021.
Serviced Loans
At March 31, 2022 and December 31, 2021, mortgage loans partially or wholly-owned by others and serviced by the Company amounted to approximately $91.2 million and $95.8 million, respectively.
Allowance for Loan Losses
The allowance for loan losses is established to provide for management’s estimate of expected lifetime credit losses on loans measured at amortized cost at the balance sheet date and is established through a provision for loan losses charged to net income. Charge-offs, net of recoveries, are charged directly to the allowance. Commercial and residential loans are charged-off in the period in which they are deemed uncollectible. Delinquent loans in these product types are subject to ongoing review and analysis to determine if a charge-off in the current period is appropriate. For consumer loans, policies and procedures exist that require charge-off consideration upon a certain triggering event depending on the product type.
The following table summarizes the change in the allowance for loan losses by loan category for the three months ended March 31, 2022:
Three Months Ended March 31, 2022
Commercial
and
Industrial		Commercial
Real Estate		Commercial
Construction		Business
Banking		Residential
Real
Estate		Consumer
Home
Equity		Other
Consumer		OtherTotal
(In thousands)
Allowance for loan losses:
Beginning balance, prior to adoption of ASU 2016-13$18,018 $52,373 $2,585 $10,983 $6,556 $3,722 $3,308 $242 $97,787 
Cumulative effect of change in accounting principle (1)11,533 (6,655)1,485 6,160 13,489 1,857 (541)(242)27,086 
Charge-offs(1)— — (945)— — (661)— (1,607)
Recoveries250 14 — 928 10 4 179 — 1,385 
(Release of) provision(2,959)(1,120)344 143 2,188 435 484 — (485)
Ending balance (2)$26,841 $44,612 $4,414 $17,269 $22,243 $6,018 $2,769 $— $124,166 
(1)Represents the adjustment needed to reflect the cumulative day one impact pursuant to the Company’s adoption of ASU 2016-13 (i.e., cumulative effect adjustment related the adoption of ASU 2016-13 as of January 1, 2022). The adjustment represents a $27.1 million increase to the allowance attributable to the change in accounting methodology for estimating the allowance for loan losses resulting from the Company’s adoption of the standard. The adjustment also includes the adjustment needed to reflect the day one reclassification of the Company’s PCI loan balances to PCD and the associated gross-up of $0.1 million, pursuant to the Company’s adoption of ASU 2016-13.
(2)The balance of accrued interest receivable excluded from amortized cost and the calculation of the allowance for loan losses amounted to $31.4 million at March 31, 2022.
Reserve for Unfunded Commitments
Management evaluates the need for a reserve on unfunded lending commitments in a manner consistent with loans held for investment. Upon adoption of ASU 2016-13 on January 1, 2022, the Company recorded a transition adjustment related to the reserve for unfunded lending commitments of $1.0 million, resulting in a total reserve for unfunded lending commitments of $11.1 million as of January 1, 2022. As of March 31, 2022, the Company’s reserve for unfunded commitments was $10.4 million which is recorded within other liabilities.
Portfolio Segmentation
Management uses a methodology to systematically estimate the amount of expected losses in the portfolio. Commercial and industrial business banking, investment commercial real estate, and commercial and industrial loans are evaluated based upon loan-level risk characteristics, historical losses and other factors which form the basis for estimating expected losses. Other portfolios, including owner occupied commercial real estate, which includes commercial and industrial and business banking owner occupied commercial real estate, commercial construction, residential mortgages, home equity and consumer loans, are analyzed as groups taking into account delinquency ratios, and the Company’s and peer banks’ historical loss experience. For the purposes of estimating the allowance for loan losses, management segregates the loan portfolio into loan categories that share similar risk characteristics such as the purpose of the loan, repayment source, and collateral. These characteristics are considered when determining the appropriate level of the allowance for each category. Some examples of these risk characteristics unique to each loan category include:
Commercial Lending
Commercial and industrial: The primary risk associated with commercial and industrial loans is the ability of borrowers to achieve business results consistent with those projected at origination. Collateral frequently consists of a first lien position on business assets including, but not limited to accounts receivable, inventory, aircraft and equipment. The primary repayment source is operating cash flow and, secondarily, the liquidation of assets. Under its lending guidelines, the Company generally requires a corporate or personal guarantee from individuals that hold material ownership in the borrowing entity when the loan-to-value of a commercial and industrial loan is in excess of a specified threshold.
Commercial real estate: Collateral values are established by independent third-party appraisals and evaluations. Primary repayment sources include operating income generated by the real estate, permanent debt refinancing, sale of the real estate and, secondarily, liquidation of the collateral. Under its lending guidelines, the Company generally requires a corporate or personal guarantee from individuals that hold material ownership in the borrowing entity when the loan-to-value of a commercial real estate loan is in excess of a specified threshold.
Commercial construction: These loans are generally considered to present a higher degree of risk than other real estate loans and may be affected by a variety of factors, such as adverse changes in interest rates and the borrower’s ability to control costs and adhere to time schedules. Construction loans are underwritten utilizing feasibility studies, independent appraisal reviews, sensitivity analysis of absorption and lease rates and financial analysis of the developers and property owners. Construction loans are generally based upon estimates of costs and value associated with the completed project. Construction loan repayment is substantially dependent on the ability of the borrower to complete the project and obtain permanent financing.
Business banking: These loans are typically secured by all business assets or commercial real estate. Business banking originations include traditionally underwritten loans as well as partially automated scored loans. Business banking scored loans are determined by utilizing the Company’s proprietary decision matrix that has a number of quantitative factors including, but not limited to, a guarantor’s credit score, industry risk, and time in business. The Company also engages in Small Business Association (“SBA”) lending, both in the business banking and commercial banking divisions. The SBA guarantees reduce the Company’s loss due to default and are considered a credit enhancement to the loan structure.
Residential Lending
These loans are made to borrowers who demonstrate the ability to repay principal and interest on a monthly basis. Underwriting considerations include, among others, income sources and their reliability, willingness to repay as evidenced by credit repayment history, financial resources (including cash reserves) and the value of the collateral. The Company maintains policy standards for minimum credit score and cash reserves and maximum loan to value consistent with a “prime” portfolio. Collateral consists of mortgage liens on 1-4 family residential dwellings. The Company does not originate or purchase sub-prime or other high-risk loans. Residential loans are originated either for sale to investors or retained in the Company’s loan portfolio. Decisions about whether to sell or retain residential loans are made based on the interest rate characteristics, pricing for loans in the secondary mortgage market, competitive factors and the Company’s capital needs.
Consumer Lending
Consumer home equity: Home equity lines of credit are granted for ten years with monthly interest-only repayment requirements. Full principal repayment is required at the end of the ten-year draw period. Home equity loans are term loans that require the monthly payment of principal and interest such that the loan will be fully amortized at maturity. Underwriting considerations are materially consistent with those utilized in residential real estate. Collateral consists of a senior or subordinate lien on owner-occupied residential property.
Other consumer: The Company’s policy and underwriting in this category, which is comprised primarily of home improvement, automobile loans and aircraft loans, include the following factors, among others: income sources and reliability, credit histories, term of repayment, and collateral value, as applicable. These are typically granted on an unsecured basis, with the exception of aircraft and automobile loans.
Credit Quality
Commercial Lending Credit Quality
The credit quality of the Company’s commercial loan portfolio is actively monitored and supported by a comprehensive credit approval process and all large dollar transactions are sent for approval to a committee of seasoned business line and credit professionals. The Company maintains an independent credit risk review function that reports directly
to the Risk Management Committee of the Board of Directors. Credits that demonstrate significant deterioration in credit quality are transferred to a specialized group of experienced officers for individual attention.
The Company monitors credit quality indicators and utilizes portfolio scorecards to assess the risk of its commercial portfolio. Specifically, the Company utilizes a 15-point credit risk-rating system to manage risk and identify potential problem loans. Under this point system, risk-rating assignments are based upon a number of quantitative and qualitative factors that are under continual review. Factors include cash flow, collateral coverage, liquidity, leverage, position within the industry, internal controls and management, financial reporting, and other considerations. Commercial loan risk ratings are (re)evaluated for each loan at least once-per-year. The risk-rating categories under the credit risk-rating system are defined as follows:
0 Risk Rating - Unrated
Certain segments of the portfolios are not rated. These segments include aircraft loans, business banking scored loan products, and other commercial loans managed by exception. Loans within this unrated loan segment are monitored by delinquency status; and for lines of credit greater than $100,000 in exposure, an annual review is conducted which includes the review of the business score and loan and deposit account performance. The Company supplements performance data with current business credit scores for the business banking portfolio on a quarterly basis. Unrated commercial and business banking loans are generally restricted to commercial exposure of less than $1 million. Loans included in this category generally are not required to provide regular financial reporting or regular covenant monitoring.
For purposes of estimating the allowance for loan losses, unrated loans are considered in the same manner as pass rated loans.
1-10 Risk Rating – Pass
Loans with a risk rating of 1-10 are classified as “Pass” and are comprised of loans that range from “substantially risk free” which indicates borrowers of unquestioned credit standing, well-established national companies with a very strong financial condition, and loans fully secured by policy conforming cash levels, through “low pass” which indicates acceptable rated loans that may be experiencing weak cash flow, impending lease rollover or minor liquidity concerns.
11 Risk Rating – Special Mention (Potential Weakness)
Loans to borrowers in this category exhibit potential weaknesses or downward trends deserving management’s close attention. While potentially weak, no loss of principal or interest is envisioned. Included in this category are borrowers who are performing as agreed, are weak when compared to industry standards, may be experiencing an interim loss and may be in declining industries. An element of asset quality, financial flexibility or management is below average. The Company does not consider borrowers within this category as new business prospects. Borrowers rated special mention may find it difficult to obtain alternative financing from traditional bank sources.
12 Risk Rating – Substandard (Well-Defined Weakness)
Loans with a risk-rating of 12 exhibit well-defined weaknesses that, if not corrected, may jeopardize the orderly liquidation of the debt. A loan is classified as substandard if it is inadequately protected by the repayment capacity of the obligor or by the collateral pledged. Specifically, repayment under market rates and terms, or by the requirements under the existing loan documents, is in jeopardy, but no loss of principal or interest is envisioned. There is a possibility that a partial loss of principal and/or interest will occur in the future if the deficiencies are not corrected. Loss potential, while existing in the aggregate portfolio of substandard assets, does not have to exist in individual assets classified as substandard. Non-accrual is possible, but not mandatory, in this class.
13 Risk Rating – Doubtful (Loss Probable)
Loans classified as doubtful have comparable weaknesses as found in the loans classified as substandard, with the added provision that such weaknesses make collection of the debt in full (based on currently existing facts, conditions and values) highly questionable and improbable. Serious problems exist such that a partial loss of principal is likely. The probability of loss exists, but because of reasonably specific pending factors that may work to strengthen the credit, estimated losses are deferred until a more exact status can be determined. Specific reserves will be the amount identified after specific review. Non-accrual is mandatory in this class.
14 Risk Rating – Loss
Loans to borrowers in this category are deemed incapable of repayment. Loans to such borrowers are considered uncollectible and of such little value that continuance as active assets of the Company is not warranted. This classification does not mean that the loans have no recovery or salvage value, but rather, it is not practical or desirable to defer writing off these assets even though partial recovery may occur in the future. Loans in this category have a recorded investment of $0 at the time of the downgrade.
Residential and Consumer Lending Credit Quality
For the Company’s residential and consumer portfolios, the quality of the loan is best indicated by the repayment performance of an individual borrower. Updated appraisals, broker opinions of value and other collateral valuation methods are employed in the residential and consumer portfolios, typically for credits that are deteriorating. Delinquency status is determined using payment performance, while accrual status may be determined using a combination of payment performance, expected borrower viability and collateral value. Delinquent consumer loans are handled by a team of seasoned collection specialists.
The following table details the amortized cost balances of the Company’s loan portfolios, presented by credit quality indicator and origination year as of March 31, 2022:
20222021202020192018PriorRevolving LoansRevolving Loans Converted to Term Loans (1)Total
(In thousands)
Commercial and industrial
Pass$117,534 $566,764 $498,791 $231,968 $142,428 $689,728 $504,127 $686 $2,752,026 
Special Mention— 886 — 514 278 4,459 51,581 — 57,718 
Substandard— 11,302 3,756 340 23,031 8,275 790 346 47,840 
Doubtful— 4,996 — — — 114 3,384 — 8,494 
Loss— — — — — — — — — 
Total commercial and industrial117,534 583,948 502,547 232,822 165,737 702,576 559,882 1,032 2,866,078 
Commercial real estate
Pass378,744 845,405 641,300 676,903 495,084 1,304,769 43,970 3,478 4,389,653 
Special Mention26,613 — 16,142 3,796 19,562 19,776 — — 85,889 
Substandard29,903 58 4,663 1,654 38,038 49,327 8,000 — 131,643 
Doubtful— — — — — — — — — 
Loss— — — — — — — — — 
Total commercial real estate435,260 845,463 662,105 682,353 552,684 1,373,872 51,970 3,478 4,607,185 
Commercial construction
Pass3,623 124,777 59,181 32,857 — — 15,760 — 236,198 
Special Mention— — 2,097 — — — — — 2,097 
Substandard— — — 6,743 — — — — 6,743 
Doubtful— — — — — — — — — 
Loss— — — — — — — — — 
Total commercial construction3,623 124,777 61,278 39,600 — — 15,760 — 245,038 
Business banking
Pass54,881 309,961 200,726 141,974 69,341 285,849 77,782 3,436 1,143,950 
Special Mention2,174 2,176 3,219 9,152 7,181 14,498 1,908 — 40,308 
Substandard— 464 1,617 4,993 564 9,542 1,244 680 19,104 
Doubtful— — — 203 — 103 — — 306 
Loss— — — — — — — — — 
Total business banking57,055 312,601 205,562 156,322 77,086 309,992 80,934 4,116 1,203,668 
Residential real estate
Current and accruing81,889 740,106 406,401 112,976 78,320 505,432 — — 1,925,124 
30-89 days past due and accruing— 2,553 1,387 201 1,513 6,808 — — 12,462 
Accruing loans past 90 days due— — — — — — — — — 
Non-accrual— — 129 582 784 6,761 — — 8,256 
Total residential real estate81,889 742,659 407,917 113,759 80,617 519,001 — — 1,945,842 
Consumer home equity
Current and accruing15,321 12,792 6,903 6,448 26,582 91,599 929,383 1,788 1,090,816 
30-89 days past due and accruing— 33 31 — 170 1,490 2,004 67 3,795 
Accruing loans past 90 days due— — — — — — — — — 
Non-accrual— — 74 679 1,293 1,948 3,147 — 7,141 
Total consumer home equity15,321 12,825 7,008 7,127 28,045 95,037 934,534 1,855 1,101,752 
Other consumer
Current and accruing15,652 39,868 22,534 25,531 33,967 33,664 15,295 — 186,511 
30-89 days past due and accruing12 107 76 117 449 429 — — 1,190 
Accruing loans past 90 days due— — — — — — — — — 
Non-accrual— 95 27 37 174 172 — — 505 
Total other consumer15,664 40,070 22,637 25,685 34,590 34,265 15,295 — 188,206 
Total$726,346 $2,662,343 $1,869,054 $1,257,668 $938,759 $3,034,743 $1,658,375 $10,481 $12,157,769 
(1)The amounts presented represent the amortized cost as of March 31, 2022 of revolving loans that were converted to term loans during the three months ended March 31, 2022.
Paycheck Protection Program (“PPP”) loans are included within the unrated category of the commercial and industrial and business banking portfolios in the tables above. Commercial and industrial PPP loans and business banking PPP loans amounted to $51.7 million and $89.5 million, respectively, at March 31, 2022 and $112.8 million and $218.6 million, respectively, at December 31, 2021 on a recorded investment basis. The Company does not have an allowance for loan losses for PPP loans as they are 100% guaranteed by the SBA.
Asset Quality
The Company manages its loan portfolio with careful monitoring. As a general rule, loans more than 90 days past due with respect to principal and interest are classified as non-accrual loans. Exceptions may be made if management believes that collateral held by the Company is clearly sufficient and in full satisfaction of both principal and interest. The Company may also use discretion regarding other loans over 90 days delinquent if the loan is well secured and in the process of collection. Non-accrual loans and loans that are more than 90 days past due but still accruing interest are considered non-performing loans.
Non-accrual loans may be returned to an accrual status when principal and interest payments are no longer delinquent, and the risk characteristics of the loan have improved to the extent that there no longer exists a concern as to the collectability of principal and interest. Loans are considered past due based upon the number of days delinquent according to their contractual terms.
A loan is expected to remain on non-accrual status until it becomes current with respect to principal and interest, the loan is liquidated, or the loan is determined to be uncollectible and is charged-off against the allowance for loan losses.
The following tables show the age analysis of past due loans as of the dates indicated:
As of March 31, 2022
30-59
Days Past
Due		60-89
Days Past
Due		90 or More
Days Past
Due		Total Past
Due		CurrentTotal
Loans
(In thousands)
Commercial and industrial$146 $— $1,994 $2,140 $2,863,938 $2,866,078 
Commercial real estate600 — 501 1,101 4,606,084 4,607,185 
Commercial construction6,743 — — 6,743 238,295 245,038 
Business banking4,599 875 3,294 8,768 1,194,900 1,203,668 
Residential real estate10,384 2,162 6,379 18,925 1,926,917 1,945,842 
Consumer home equity2,517 1,348 6,726 10,591 1,091,161 1,101,752 
Other consumer971 219 505 1,695 186,511 188,206 
Total$25,960 $4,604 $19,399 $49,963 $12,107,806 $12,157,769 
As of December 31, 2021
30-59
Days Past
Due		60-89
Days Past
Due		90 or More
Days Past
Due		Total Past
Due		CurrentTotal
Loans
(In thousands)
Commercial and industrial$45 $31 $1,672 $1,748 $2,958,779 $2,960,527 
Commercial real estate25,931 — 1,196 27,127 4,495,386 4,522,513 
Commercial construction— — — — 222,328 222,328 
Business banking5,043 1,793 4,640 11,476 1,323,218 1,334,694 
Residential real estate17,523 3,511 5,543 26,577 1,900,233 1,926,810 
Consumer home equity3,774 1,510 4,571 9,855 1,090,298 1,100,153 
Other consumer1,194 548 889 2,631 211,854 214,485 
Total (1)$53,510 $7,393 $18,511 $79,414 $12,202,096 $12,281,510 
(1)The amounts presented in the table above represent the recorded investment balance of loans as of December 31, 2021.
The following table presents information regarding non-accrual loans as of the dates indicated:
As of and for the Three Months Ended March 31, 2022As of December 31, 2021
Non-Accrual Loans With ACLNon-Accrual Loans Without ACL (4)Total Non-Accrual LoansAmortized Cost of Loans >90 DPD and Still Accruing (2)Total Non-Accrual Loans (1)Recorded Investment >90 DPD and Still Accruing
(In thousands)
Commercial and industrial$3,496 $6,990 $10,486 $— $12,400 $— 
Commercial real estate— 501 501 — — 1,196 
Commercial construction— — — — — — 
Business banking6,410 522 6,932 — 8,230 — 
Residential real estate8,256 — 8,256 — 6,681 769 
Consumer home equity7,141 — 7,141 — 4,732 25 
Other consumer505 — 505 — 950 — 
Total non-accrual loans$25,808 $8,013 $33,821 $— $32,993 $1,990 
(1)The amounts presented represent the recorded investment balance of loans as of December 31, 2021.
(2)“DPD” indicated in the table above refers to “days past due.”
(3)The amount of interest income recognized on non-accrual loans during the three months ended March 31, 2022 was not significant.
(4)The loans on non-accrual status and without an ACL as of March 31, 2022, were primarily comprised of collateral dependent loans for which the fair value of the underlying loan collateral exceeded the loan carrying value.
It is the Company’s policy to reverse any accrued interest when a loan is put on non-accrual status, and, as such, the Company did not record any interest income on non-accrual loans during the three months ended March 31, 2022. Accrued interest reversed against interest income for the three months ended March 31, 2022 was insignificant.
For collateral values for residential mortgage and home equity loans, the Company relies primarily upon third-party valuation information from certified appraisers and values are generally based upon recent appraisals of the underlying collateral, brokers’ opinions based upon recent sales of comparable properties, estimated equipment auction or liquidation values less estimated costs to sell. As of March 31, 2022 and December 31, 2021, the Company had collateral-dependent residential mortgage and home equity loans totaling $0.8 million and $0.6 million, respectively.
For collateral-dependent commercial loans, the amount of the allowance for loan losses is individually assessed based upon the fair value of the collateral. Various types of collateral are used, including real estate, inventory, equipment, accounts receivable, securities and cash, among others. For commercial real estate loans, the Company relies primarily upon third-party valuation information from certified appraisers and values are generally based upon recent appraisals of the underlying collateral, brokers’ opinions based upon recent sales of comparable properties, estimated equipment auction or liquidation values, income capitalization, or a combination of income capitalization and comparable sales. As of March 31, 2022 and December 31, 2021, the Company had collateral-dependent commercial loans totaling $11.6 million and $13.1 million, respectively.
Appraisals for all loan types are obtained at the time of loan origination as part of the loan approval process and are updated at the time of a loan modification and/or refinance and as considered necessary by management for impairment review purposes. In addition, appraisals are updated as required by regulatory pronouncements.
As of both March 31, 2022 and December 31, 2021, the Company had no residential real estate held in other real estate owned (“OREO”). As of both March 31, 2022 and December 31, 2021, there were no mortgage loans collateralized by residential real estate property for which formal foreclosure proceedings were in-process.
In the normal course of business, the Company may become aware of possible credit problems in which borrowers exhibit potential for the inability to comply with the contractual terms of their loans, but which currently do not yet meet the criteria for classification as non-performing loans (which consist of non-accrual loans and loans that are more than 90 days past due but still accruing interest). Based upon the Company’s past experiences, some of the loans with potential weaknesses will ultimately be restructured or placed in non-accrual status. As of both March 31, 2022 and December 31, 2021, management is unable to reasonably estimate the amount of these loans that will be restructured or placed on non-accrual status.
Troubled Debt Restructurings
As described above in Note 2, “Summary of Significant Accounting Policies,” in cases where a borrower experiences financial difficulty and the Company makes certain concessionary modifications to contractual terms, the loan is classified as a TDR. The process through which management identifies loans as TDR loans, the methodology employed to record any loan losses, and the calculation of any shortfall on collateral dependent loans, is also described above.
In response to the novel coronavirus (“COVID-19”) pandemic, the Company has granted loan modifications to allow deferral of payments for borrowers negatively impacted by the COVID-19 pandemic. Modifications granted to customers allowed for full payment deferrals (principal and interest) or deferral of only principal payments. The balance of loans which underwent a modification and have not yet resumed payment as of March 31, 2022 and December 31, 2021 was $49.0 million and $106.7 million, respectively. The Company defines a modified loan to have resumed payment if it is one month past the modification end date and not more than 30 days past due. These modifications with active deferrals met the criteria of either Section 4013 of the CARES Act or the Interagency Statement on Loan Modifications and Reporting for Financial Institutions Working with Customers Affected by the Coronavirus (Revised) and therefore are not deemed troubled debt restructurings, or TDRs. Additionally, loans that are performing in accordance with the contractual terms of the modification are not reflected as being past due and therefore are not impacting non-accrual or delinquency totals as of March 31, 2022 and December 31, 2021. The Company continued to accrue interest on these COVID-19 modified loans and evaluated the deferred interest for collectability as of March 31, 2022 and December 31, 2021.
The Consolidated Appropriations Act, which was enacted on December 27, 2020, extended certain provisions related to the COVID-19 pandemic in the United States (which were due to expire) and provided additional emergency relief to individuals and businesses. Included within the provisions of the Consolidated Appropriations Act is the extension to January 1, 2022 of Section 4013 of the CARES Act, which provides relief from a requirement to evaluate loans that had received a COVID-19 modification to determine if the loans required TDR treatment, provided certain criteria were met. As such, the
Company applied the TDR relief granted pursuant to such section to any qualifying loan modification executed during the allowable time period.
The Company’s policy is to have any TDR loan which is on non-accrual status prior to being modified remain on non-accrual status for approximately six months subsequent to being modified before management considers its return to accrual status. If the TDR loan is on accrual status prior to being modified, it is reviewed to determine if the modified loan should remain on accrual status.
TDR loan information as of December 31, 2021 and the period then ended was prepared in accordance with U.S. GAAP effective for the Company as of December 31, 2021, or prior to our adoption of ASU 2016-13.
The following tables show the TDR loans on accrual and non-accrual status as of the dates indicated:
As of March 31, 2022
TDRs on Accrual StatusTDRs on Non-Accrual StatusTotal TDRs
Number of LoansBalance of
Loans		Number of
Loans		Balance of
Loans		Number of
Loans		Balance of
Loans
(Dollars in thousands)
Commercial and industrial1 $3,894 7 $8,381 8 $12,275 
Commercial real estate1 3,520 — — 1 3,520 
Business banking5 3,771 8 814 13 4,585 
Residential real estate116 17,786 29 3,583 145 21,369 
Consumer home equity66 3,028 15 859 81 3,887 
Other consumer2 17 — — 2 17 
Total191 $32,016 59 $13,637 250 $45,653 
As of December 31, 2021
TDRs on Accrual StatusTDRs on Non-Accrual StatusTotal TDRs
Number of LoansBalance of
Loans		Number of LoansBalance of
Loans		Number of LoansBalance of
Loans
(Dollars in thousands)
Commercial and industrial1 $3,745 6 $9,983 7 $13,728 
Commercial real estate1 3,520 — — 1 3,520 
Business banking5 3,830 3 383 8 4,213 
Residential real estate121 19,119 27 3,015 148 22,134 
Consumer home equity67 3,104 16 818 83 3,922 
Other consumer2 18 — — 2 18 
Total (1)197 $33,336 52 $14,199 249 $47,535 
(1)The amounts presented in the table above represent the recorded investment balance of loans as of December 31, 2021.
The amount of allowance for loan losses associated with the TDR loans was $2.5 million and $3.4 million at March 31, 2022 and December 31, 2021, respectively. There were no additional commitments to lend to borrowers who have been a party to a TDR loan as of both March 31, 2022 and December 31, 2021.
The following tables show the modifications which occurred during the periods and the change in the recorded investment subsequent to the modifications occurring:
For the Three Months Ended March 31, 2022For the Three Months Ended March 31, 2021
Number
of
Contracts		Pre-
Modification
Outstanding
Recorded
Investment		Post-
Modification
Outstanding
Recorded
Investment (1)		Number
of
Contracts		Pre-Modification
Outstanding
Recorded
Investment		Post-
Modification
Outstanding
Recorded
Investment (1)
(Dollars in thousands)
Business banking5 $440 $448 — $— $— 
Residential real estate1 134 134 1 295 295 
Consumer home equity1 210 210 — — — 
Total7 $784 $792 1 $295 $295 
(1)The post-modification balances represent the balance of the loan on the date of modification. These amounts may show an increase when modification includes capitalization of interest.
At March 31, 2022 and December 31, 2021, the outstanding recorded investment of loans that were new TDR loans during both the three months ended March 31, 2022 and the year ended December 31, 2021 was $0.8 million.
The following table shows the Company’s post-modification balance of TDRs listed by type of modification during the periods indicated:
For the Three Months Ended March 31,
20222021
(In thousands)
Extended maturity$402 $— 
Adjusted interest rate and extended maturity390 — 
Court-ordered concession— 295 
Total$792 $295 
The following table shows the number of loans and the recorded investment amount of those loans, as of the respective date, that have been modified during the prior 12 months which have subsequently defaulted during the periods indicated. The Company considers a loan to have defaulted when it reaches 90 days past due or is transferred to non-accrual:
For the Three Months Ended March 31,
20222021
Number of
Contracts		Recorded
Investment		Number of
Contracts		Recorded
Investment
(Dollars in thousands)
Troubled debt restructurings that subsequently defaulted (1):
Business banking— $— 1 $419 
Consumer home equity— — 1 59 
Total— $— 2 $478 
(1)This table does not reflect any TDR loans which were fully charged off, paid off, or otherwise settled during the period.
During both the three months ended March 31, 2022 and 2021, no amounts were charged-off on TDR loans modified in the prior 12 months.
Loan Participations
The Company occasionally purchases commercial loan participations, or participates in syndications through the SNC Program. These participations meet the same underwriting, credit and portfolio management standards as the Company’s other loans and are applied against the same criteria to determine the allowance for loan losses as other loans.
The following table summarizes the Company’s loan participations:
As of and for the Three Months Ended March 31, 2022As of and for the Year Ended December 31, 2021
Balance (1)Non-performing
Loan Rate
(%)		Gross
Charge-offs		Balance (1)Non-performing
Loan Rate
(%)		Gross
Charge-offs
(Dollars in thousands)
Commercial and industrial
$744,231 1.13 %$— $732,425 1.36 %$— 
Commercial real estate390,540 0.00 %— 362,898 0.00 %— 
Commercial construction42,661 0.00 %— 37,081 0.00 %— 
Business banking143 0.00 %— 98 0.00 %— 
Total loan participations
$1,177,575 0.71 %$— $1,132,502 0.88 %$— 
(1)The balance of loan participations as of March 31, 2022 represents the amortized cost basis and the balance as of December 31, 2021 represents the recorded investment balance. The difference between amortized cost basis and recorded investment basis as of March 31, 2022 is not material.
Loans and Allowance for Loan Losses
Allowance for Loan Losses
As disclosed in Note 2, “Summary of Significant Accounting Policies,” the Company adopted ASU 2016-13 effective January 1, 2022. As required by U.S. GAAP, the Company has included comparative prior period disclosures of its allowance for loan losses which were prepared in accordance with ASC 450, “Contingencies” and ASC 310, “Receivables” (i.e., prior to the Company’s adoption of ASU 2016-13). Refer to the Company’s 2021 Form 10-K for significant accounting policies related to the Company’s allowance for loan losses as of December 31, 2021. A discussion of the Company’s calculation of its allowance for loan losses for such prior periods follows.
The allowance for loan losses was established to provide for probable losses incurred in the Company’s loan portfolio at the balance sheet date and was established through a provision for loan losses charged to net income. Charge-offs, net of recoveries, were charged directly to the allowance. Commercial and residential loans were charged-off in the period in which they are deemed uncollectible. Delinquent loans in these product types were subject to ongoing review and analysis to determine if a charge-off in the current period was appropriate. For consumer loans, policies and procedures existed that required charge-off consideration upon a certain triggering event depending on the product type.
Management used a methodology to systematically estimate the amount of loss incurred in the portfolio. Commercial real estate, commercial and industrial, commercial construction and business banking loans were evaluated using a loan rating system, historical losses and other factors which formed the basis for estimating incurred losses. Portfolios of more homogeneous populations of loans, including residential mortgages and consumer loans, were analyzed as groups taking into account delinquency ratios, historical loss experience and charge-offs. For the purpose of estimating the allowance for loan losses, management segregated the loan portfolio into the categories noted in the credit quality tables presented in the “Credit Quality” section below. Each of these loan categories possesses unique risk characteristics such as the purpose of the loan, repayment source, and collateral. These characteristics were considered when determining the appropriate level of the allowance for each category. The Company’s historical approach to loan portfolio segmentation by risk characteristics and monitoring of credit quality for commercial loans under previous accounting guidance was consistent with that applied under the newly adopted CECL standard. See Note 4, “Loans and Allowance for Credit Losses” for further discussion regarding the Company’s policies for loan segmentation and credit monitoring.
The following tables summarize the changes in the allowance for loan losses by loan category for the three months ended March 31, 2021:
For the Three Months Ended March 31, 2021
Commercial
and
Industrial		Commercial
Real Estate		Commercial
Construction		Business
Banking		Residential
Real Estate		Consumer
Home Equity		Other
Consumer		OtherTotal
(In thousands)
Allowance for loan losses:
Beginning balance$26,617 $54,569 $4,553 $13,152 $6,435 $3,744 $3,467 $494 $113,031 
Charge-offs— (234)— (1,384)— — (364)— (1,982)
Recoveries9 — — 365 10 71 156 — 611 
(Release of) Provision(1,220)803 (1,203)1,371 (210)(239)239 (121)(580)
Ending balance
$25,406 $55,138 $3,350 $13,504 $6,235 $3,576 $3,498 $373 $111,080 

The following tables bifurcate the amount of loans and the allowance for loan losses allocated to each loan category based on the type of impairment analysis as of December 31, 2021:
As of December 31, 2021
Commercial
and
Industrial		Commercial
Real Estate		Commercial
Construction		Business
Banking		Residential
Real Estate		Consumer
Home Equity		Other
Consumer		OtherTotal
(In thousands)
Allowance for loan losses ending balance:
Individually evaluated for impairment$1,540 $— $— $450 $1,549 $270 $161 $— $3,970 
Acquired with deteriorated credit quality5 298 — — 243 — — — 546 
Collectively evaluated for impairment16,473 52,075 2,585 10,533 4,764 3,452 3,147 242 93,271 
Total allowance for loan losses by group$18,018 $52,373 $2,585 $10,983 $6,556 $3,722 $3,308 $242 $97,787 
Loans ending balance:
Individually evaluated for impairment$16,145 $3,520 $— $12,060 $22,378 $3,922 $179 $— $58,204 
Acquired with deteriorated credit quality19,028 47,553 — — 3,058 — — — 69,639 
Collectively evaluated for impairment2,925,354 4,471,440 222,328 1,322,634 1,901,374 1,096,231 214,306 — 12,153,667 
Total loans by group$2,960,527 $4,522,513 $222,328 $1,334,694 $1,926,810 $1,100,153 $214,485 $— $12,281,510 
Credit Quality
The following tables detail the internal risk-rating categories for the Company’s commercial and industrial, commercial real estate, commercial construction and business banking portfolios:
As of December 31, 2021
CategoryCommercial and
Industrial		Commercial
Real Estate		Commercial
Construction		Business
Banking		Total
(In thousands)
Unrated$171,537 $4,378 $— $696,629 $872,544 
Pass2,656,873 4,199,803 213,744 569,956 7,640,376 
Special mention70,141 104,517 1,889 50,085 226,632 
Substandard50,339 213,815 6,695 17,814 288,663 
Doubtful11,637 — — 210 11,847 
Loss— — — — — 
Total$2,960,527 $4,522,513 $222,328 $1,334,694 $9,040,062 
PPP loans are included within the unrated category of the commercial and industrial and business banking portfolios in the table above. Commercial and industrial PPP loans and business banking PPP loans amounted to $112.8 million and $218.6 million, respectively, at December 31, 2021. The Company does not have an allowance for loan losses for PPP loans as they are 100% guaranteed by the SBA.
Impaired Loans
Under previous accounting guidance, impaired loans consisted of all loans for which management had determined it was probable that the Company would be unable to collect all amounts due according to the contractual terms of the loan agreements. Factors considered by management in determining impairment included payment status, collateral value, and the probability of collecting scheduled principal and interest payments when due.
The Company measured impairment of loans using a discounted cash flow method, the loan’s observable market price, or the fair value of the collateral if the loan was collateral dependent. The Company defined the population of impaired loans to include certain non-accrual loans, TDR loans, and residential and home equity loans that had been partially charged off.
The following table summarizes the Company’s impaired loans by loan portfolio as of December 31, 2021:
As of December 31, 2021
Recorded
Investment		Unpaid
Principal
Balance		Related
Allowance
(In thousands)
With no related allowance recorded:
Commercial and industrial$12,309 $13,212 $— 
Commercial real estate3,520 3,520 — 
Business banking4,199 5,069 — 
Residential real estate11,217 12,587 — 
Consumer home equity1,924 1,924 — 
Other consumer18 18 — 
Sub-total33,187 36,330 — 
With an allowance recorded:
Commercial and industrial3,836 4,226 1,540 
Commercial real estate— — — 
Business banking7,861 11,240 450 
Residential real estate11,161 11,161 1,549 
Consumer home equity1,998 1,998 270 
Other consumer161 161 161 
Sub-total25,017 28,786 3,970 
Total$58,204 $65,116 $3,970 
The following table displays information regarding interest income recognized on impaired loans, by portfolio, for the three months ended March 31, 2021:
For the Three Months Ended March 31, 2021
Average
Recorded
Investment		Total
Interest
Recognized
(In thousands)
With no related allowance recorded:
Commercial and industrial$9,899 $46 
Commercial real estate4,176 44 
Business banking5,024 26 
Residential real estate14,648 144 
Consumer home equity2,438 20 
Other consumer27 — 
Sub-total36,212 280 
With an allowance recorded:
Commercial and industrial7,965 — 
Commercial real estate657 — 
Business banking16,325 14 
Residential real estate12,248 127 
Consumer home equity2,150 18 
Sub-total39,345 159 
Total$75,557 $439 
Purchased Credit Impaired Loans
The following table displays the outstanding and carrying amounts of PCI loans as of December 31, 2021:
As of December 31, 2021
(In thousands)
Outstanding balance$78,074 
Carrying amount69,639 
Under previous accounting guidance, the excess of cash flows expected to be collected over the carrying amount of the loans, referred to as the “accretable yield,” was accreted into interest income over the life of the loans using the effective yield method. The following table summarizes activity in the accretable yield for the PCI loan portfolio:
For the Three Months Ended March 31, 2021
(In thousands)
Balance at beginning of period$2,495 
Accretion(216)
Other change in expected cash flows(248)
Balance at end of period$2,031 
The estimate of cash flows expected to be collected was regularly re-assessed subsequent to acquisition. A decrease in expected cash flows in subsequent periods may have indicated that the loan was impaired which would require the establishment of an allowance for loan losses by a charge to the provision for loan losses. An increase in expected cash flows in subsequent periods served, first, to reduce any previously established allowance for loan losses by the increase in the present value of cash flows expected to be collected, and resulted in a recalculation of the amount of accretable yield for the loan. The adjustment of accretable yield due to an increase in expected cash flows was accounted for as a change in estimate. The additional cash flows expected to be collected were reclassified from the non-accretable difference to the accretable yield, and the amount of periodic accretion was adjusted accordingly over the remaining life of the loans.