XML 24 R13.htm IDEA: XBRL DOCUMENT v3.22.2.2
Note 5 - Loans and the Allowance for Credit Losses
 9 Months Ended
Sep. 30, 2022
Notes to Financial Statements  
Loans, Notes, Trade and Other Receivables Disclosure [Text Block]

Note 5. Loans and the Allowance for Credit Losses

 

Loans Receivable – The following table sets forth the composition of the Company’s loan portfolio segments, including net deferred loan fees, as of September 30, 2022 and December 31, 2021:

 

  September 30, 2022  December 31, 2021 
  

(dollars in thousands)

 

Commercial (1)

 $1,448,727  $1,299,428 

Commercial real estate

  5,666,848   4,741,590 

Commercial construction

  537,323   540,178 

Residential real estate

  256,085   255,269 

Consumer

  1,030   1,886 

Gross loans

  7,910,013   6,838,351 

Net deferred loan fees

  (9,563)  (9,729)

Total loans receivable

 $7,900,450  $6,828,622 

 

 

(1)

Includes PPP loans of $11.5 million and $93.1 million as of   September 30, 2022 and December 31, 2021 , respectively.

 

As of September 30, 2022 and December 31, 2021, loans totaling approximately $2.6 billion and $2.5 billion respectively, were pledged to secure borrowings from the FHLB of New York.

 

Loans held-for-sale - The following table sets forth the composition of the Company’s loans held-for-sale as of September 30, 2022 and December 31, 2021:

 

  September 30, 2022  December 31, 2021 
  

(dollars in thousands)

 

Commercial real estate

 $8,080  $- 

Residential real estate

  -   250 

Total carrying amount

 $8,080  $250 

 

Loans Receivable on Nonaccrual Status - The following tables present nonaccrual loans with an ACL and nonaccrual loans without an ACL as of September 30, 2022 and December 31, 2021:

 

  

September 30, 2022

 
  

Nonaccrual loans with ACL

  

Nonaccrual loans without ACL

  

Total nonaccrual loans

 
  

(dollars in thousands)

 

Commercial

 $25,657  $1,201  $26,858 

Commercial real estate

  21,511   6,627   28,138 

Residential real estate

  623   1,828   2,451 

Total

 $47,791  $9,656  $57,447 

 

 

  

December 31, 2021

 
  Nonaccrual loans with ACL  Nonaccrual loans without ACL  Total nonaccrual loans 
  

(dollars in thousands)

 

Commercial

 $28,746  $1,316  $30,062 

Commercial real estate

  15,362   10,031   25,393 

Commercial construction

  -   3,150   3,150 

Residential real estate

  1,239   1,856   3,095 

Total

 $45,347  $16,353  $61,700 

 

Nonaccrual loans include both smaller balance homogeneous loans that are collectively evaluated for impairment and loans individually evaluated for impairment.

 

Credit Quality Indicators - The Company continuously monitors the credit quality of its loans receivable. In addition to its internal monitoring, the Company utilizes the services of a third-party loan review firm to periodically validate the credit quality of its loans receivable on a sample basis. Credit quality is monitored by reviewing certain credit quality indicators. Assets classified “Pass” are deemed to possess average to superior credit quality, requiring no more than normal attention. Assets classified as “Special Mention” have generally acceptable credit quality yet possess higher risk characteristics/circumstances than satisfactory assets. Such conditions include strained liquidity, slow pay, stale financial statements, or other conditions that require more stringent attention from the lending staff. These conditions, if not corrected, may weaken the loan quality or inadequately protect the Company’s credit position at some future date. Assets are classified “Substandard” if the asset has a well-defined weakness that requires management’s attention to a greater degree than for loans classified special mention. Such weakness, if left uncorrected, could possibly result in the compromised ability of the loan to perform to contractual requirements. An asset is classified as “Doubtful” if it is inadequately protected by the net worth and/or paying capacity of the obligor or of the collateral, if any, that secures the obligation. Assets classified as doubtful include assets for which there is a “distinct possibility” that a degree of loss will occur if the inadequacies are not corrected.

 

We evaluate whether a modification, extension or renewal of a loan is a current period origination in accordance with GAAP. Generally, loans up for renewal are subject to a full credit evaluation before the renewal is granted and such loans are considered current period originations for purpose of the table below. The following table presents loans by origination and risk designation as of September 30, 2022 (dollars in thousands):

 

  

Term loans amortized cost basis by origination year

       
  

2022

  

2021

  

2020

  

2019

  

2018

  

Prior

  

Revolving Loans

  

Total Gross Loans

 

Commercial

                                

Pass

 $248,673  $311,005  $50,801  $31,402  $54,872  $164,539  $532,643  $1,393,935 

Special mention

  -   -   -   588   -   3,556   3,301   7,445 

Substandard

  7,636   152   17   2,023   11,190   22,639   3,690   47,347 

Doubtful

  -   -   -   -   -   -   -   - 

Total Commercial

 $256,309  $311,157  $50,818  $34,013  $66,062  $190,734  $539,634  $1,448,727 
                                 

Commercial Real Estate

                                

Pass

 $1,386,412  $1,617,355  $387,135  $364,220  $384,288  $1,033,994  $370,982  $5,544,386 

Special mention

  -   -   -   1,317   -   41,841   8,883   52,041 

Substandard

  -   1,939   4,500   12,517   19,314   23,984   8,167   70,421 

Doubtful

  -   -   -   -   -   -   -   - 

Total Commercial Real Estate

 $1,386,412  $1,619,294  $391,635  $378,054  $403,602  $1,099,819  $388,032  $5,666,848 
                                 

Commercial Construction

                                

Pass

 $2,056  $7,605  $7,320  $508  $-  $-  $512,107  $529,596 

Special mention

  -   -   -   -   -   -   -   - 

Substandard

  -   -   -   -   -   -   7,727   7,727 

Doubtful

  -   -   -   -   -   -   -   - 

Total Commercial Construction

 $2,056  $7,605  $7,320  $508  $-  $-  $519,834  $537,323 
                                 

Residential

                                

Pass

 $34,852  $25,487  $25,292  $21,732  $20,493  $80,042  $41,104  $249,002 

Special mention

  -   -   -   -   -   -   -   - 

Substandard

  -   -   -   -   -   3,509   3,574   7,083 

Doubtful

  -   -   -   -   -   -   -   - 

Total Residential Real Estate

 $34,852  $25,487  $25,292  $21,732  $20,493  $83,551  $44,678  $256,085 
                                 

Consumer

                                

Pass

 $903  $-  $10  $-  $5  $1  $111  $1,030 

Special mention

  -   -   -   -   -   -   -   - 

Substandard

  -   -   -   -   -   -   -   - 

Doubtful

  -   -   -   -   -   -   -   - 

Total Consumer

 $903  $-  $10  $-  $5  $1  $111  $1,030 
                                 

Total

                                

Pass

 $1,672,896  $1,961,452  $470,558  $417,862  $459,658  $1,278,576  $1,456,947  $7,717,949 

Special mention

  -   -   -   1,905   -   45,397   12,184   59,486 

Substandard

  7,636   2,091   4,517   14,540   30,504   50,132   23,158   132,578 

Doubtful

  -   -   -   -   -   -   -   - 

Grand Total

 $1,680,532  $1,963,543  $475,075  $434,307  $490,162  $1,374,105  $1,492,289  $7,910,013 
                                 
                                 
                                 

 

The following table presents loans by origination and risk designation as of December 31, 2021 (dollars in thousands):

 

  

Term loans amortized cost basis by origination year

       
  

2021

  

2020

  

2019

  

2018

  8.5  

Prior

  

Revolving Loans

  

Total Gross Loans

 

Commercial

                                

Pass

 $403,203  $58,534  $54,485  $60,409  $95,727  $86,556  $471,588  $1,230,502 

Special mention

  -   -   -   -   1   4,045   4,266   8,312 

Substandard

  170   -   1,842   13,298   9,740   21,024   14,540   60,614 

Doubtful

  -   -   -   -   -   -   -   - 

Total Commercial

 $403,373  $58,534  $56,327  $73,707  $105,468  $111,625  $490,394  $1,299,428 
                                 

Commercial Real Estate

                                

Pass

 $1,692,098  $533,315  $420,995  $452,262  $497,065  $842,244  $170,721  $4,608,700 

Special mention

  -   -   -   -   5,142   50,438   6,601   62,181 

Substandard

  1,968   9,039   4,006   20,624   -   26,108   8,964   70,709 

Doubtful

  -   -   -   -   -   -   -   - 

Total Commercial Real Estate

 $1,694,066  $542,354  $425,001  $472,886  $502,207  $918,790  $186,286  $4,741,590 
                                 

Commercial Construction

                                

Pass

 $8,018  $7,370  $12,625  $2,600  $2,339  $-  $490,119  $523,071 

Special mention

  -   -   -   -   350   -   1,443   1,793 

Substandard

  -   -   -   -   -   -   15,314   15,314 

Doubtful

  -   -   -   -   -   -   -   - 

Total Commercial Construction

 $8,018  $7,370  $12,625  $2,600  $2,689  $-  $506,876  $540,178 
                                 

Residential Real Estate

                                

Pass

 $27,081  $29,539  $23,611  $25,070  $28,701  $66,249  $44,221  $244,472 

Special mention

  -   -   -   -   -   -   -   - 

Substandard

  -   -   -   -   -   7,262   3,535   10,797 

Doubtful

  -   -   -   -   -   -   -   - 

Total Residential Real Estate

 $27,081  $29,539  $23,611  $25,070  $28,701  $73,511  $47,756  $255,269 
                                 

Consumer

                                

Pass

 $1,590  $85  $39  $21  $28  $-  $123  $1,886 

Special mention

  -   -   -   -   -   -   -   - 

Substandard

  -   -   -   -   -   -   -   - 

Doubtful

  -   -   -   -   -   -   -   - 

Total Consumer

 $1,590  $85  $39  $21  $28  $-  $123  $1,886 
                                 

Total

                                

Pass

 $2,131,990  $628,843  $511,755  $540,362  $623,860  $995,049  $1,176,772  $6,608,631 

Special mention

  -   -   -   -   5,493   54,483   12,310   72,286 

Substandard

  2,138   9,039   5,848   33,922   9,740   54,394   42,353   157,434 

Doubtful

  -   -   -   -   -   -   -   - 

Grand Total

 $2,134,128  $637,882  $517,603  $574,284  $639,093  $1,103,926  $1,231,435  $6,838,351 

    

Collateral Dependent Loans: Loans which meet certain criteria are individually evaluated as part of the process of calculating the allowance for credit losses. The evaluation is determined on an individual basis using the fair value of the collateral as of the reporting date. The following table presents collateral dependent loans that were individually evaluated for impairment as of September 30, 2022 and December 31, 2021:

 

  

September 30, 2022

 
  Real Estate  

Other

  

Total

 
  

(dollars in thousands)

 

Commercial

 $5,446  $23,449  $28,895 

Commercial real estate

  64,718   -   64,718 

Commercial construction

  7,727   -   7,727 

Residential real estate

  5,634   -   5,634 

Consumer

  -   -   - 

Total

 $83,525  $23,449  $106,974 

 

  

December 31, 2021

 
  Real Estate  

Other

  

Total

 
  

(dollars in thousands)

 

Commercial

 $6,385  $26,182  $32,567 

Commercial real estate

  55,244   -   55,244 

Commercial construction

  13,196   -   13,196 

Residential real estate

  8,856   -   8,856 

Consumer

  -   -   - 

Total

 $83,681  $26,182  $109,863 

 

Aging Analysis - The following table provides an analysis of the aging of the loans by class, excluding net deferred fees, that are past due as of September 30, 2022 and December 31, 2021:

 

  

September 30, 2022

 
  

30-59 Days Past Due

  

60-89 Days Past Due

  

90 Days or Greater Past Due and Still Accruing

  

Nonaccrual

  

Total Past Due and Nonaccrual

  

Current

  

Gross Loans

 
  

(dollars in thousands)

 

Commercial

 $171  $13  $4,392  $26,858  $31,434  $1,417,293  $1,448,727 

Commercial real estate

  -   -   5,676   28,138   33,814   5,633,034   5,666,848 

Commercial construction

  -   -   -   -   -   537,323   537,323 

Residential real estate

  671   -   -   2,451   3,122   252,963   256,085 

Consumer

  -   -   -   -   -   1,030   1,030 

Total

 $842  $13  $10,068  $57,447  $68,370  $7,841,643  $7,910,013 

 

  

December 31, 2021

 
  

30-59 Days Past Due

  

60-89 Days Past Due

  

90 Days or Greater Past Due and Still Accruing

  

Nonaccrual

  

Total Past Due and Nonaccrual

  

Current

  

Gross Loans

 
  

(dollars in thousands)

 

Commercial

 $4,305  $729  $4,457  $30,062  $39,553  $1,259,875  $1,299,428 

Commercial real estate

  1,622   1,009   5,935   25,393   33,959   4,707,631   4,741,590 

Commercial construction

  -   -   -   3,150   3,150   537,028   540,178 

Residential real estate

  1,437   292   3,139   3,095   7,963   247,306   255,269 

Consumer

  -   -   -   -   -   1,886   1,886 

Total

 $7,364  $2,030  $13,531  $61,700  $84,625  $6,753,726  $6,838,351 

 

The following tables detail, at the period-end presented, the amount of gross loans (excluding loans held-for-sale) that are evaluated individually, and collectively, for impairment, those acquired with deteriorated quality, and the related portion of the allowance for credit losses that are allocated to each loan portfolio segment:

 

  

September 30, 2022

 
  

Commercial

  Commercial real estate  

Commercial construction

  Residential real estate  

Consumer

  

Total

 
  

(dollars in thousands)

 

Allowance for credit losses - loans

                        

Individually evaluated impairment

 $10,600  $3,235  $-  $76  $-  $13,911 

Collectively evaluated impairment

  16,812   49,370   3,444   3,977   5   73,608 

Acquired with deteriorated credit quality individually analyzed

  2,277   1,921   -   -   -   4,198 

Total

 $29,689  $54,526  $3,444  $4,053  $5  $91,717 
                         

Gross loans

                        

Individually evaluated impairment

 $29,482  $59,042  $7,727  $5,634  $-  $101,885 

Collectively evaluated impairment

  1,414,286   5,602,130   529,596   250,451   1,030   7,797,493 

Acquired with deteriorated credit quality individually analyzed

  4,959   5,676   -   -   -   10,635 

Total

 $1,448,727  $5,666,848  $537,323  $256,085  $1,030  $7,910,013 

 

  

December 31, 2021

 
  

Commercial

  

Commercial real estate

  

Commercial construction

  

Residential real estate

  

Consumer

  

Total

 
  

(dollars in thousands)

 

Allowance for credit losses - loans

                        

Individually evaluated impairment

 $15,131  $955  $-  $131  $-  $16,217 

Collectively evaluated impairment

  8,561   42,713   3,580   3,497   7   58,358 

Acquired with deteriorated credit quality individually analyzed

  2,277   1,921   -   -   -   4,198 

Total

 $25,969  $45,589  $3,580  $3,628  $7  $78,773 
                         

Gross loans

                        

Individually evaluated impairment

 $33,726  $49,310  $13,196  $5,717  $-  $101,949 

Collectively evaluated impairment

  1,260,537   4,686,346   526,982   246,413   1,886   6,722,164 

Acquired with deteriorated credit quality individually analyzed

  5,165   5,934   -   3,139   -   14,238 

Total

 $1,299,428  $4,741,590  $540,178  $255,269  $1,886  $6,838,351 

 

Activity in the Company’s ACL for loans for the three and nine months ended September 30, 2022 is summarized in the tables below.

 

  

Three Months Ended September 30, 2022

 
  

Commercial

  

Commercial real estate

  

Commercial construction

  

Residential real estate

  

Consumer

  

Unallocated

  

Total

 
  

(dollars in thousands)

 

Balance as of June 30, 2022

 $28,135  $47,562  $3,413  $3,625  $4  $-  $82,739 

Charge-offs

  (410)  -   -   -   (3)  -   (413)

Recoveries

  53   -   -   -   -   -   53 

Provision for credit losses - loans

  1,911   6,964   31   428   4   -   9,338 
                             

Balance as of September 30, 2022

 $29,689  $54,526  $3,444  $4,053  $5  $-  $91,717 

 

  

Nine Months Ended September 30, 2022

 
  

Commercial

  

Commercial real estate

  

Commercial construction

  

Residential real estate

  

Consumer

  

Unallocated

  

Total

 
  

(dollars in thousands)

 

Balance as of December 31, 2021

 $25,969  $45,589  $3,580  $3,628  $7  $-  $78,773 

Charge-offs

  (751)  (226)  -   (9)  (3)  -   (989)

Recoveries

  54   -   -   63   -   -   117 

Provision for credit losses - loans

  4,417   9,163   (136)  371   1   -   13,816 
                             

Balance as of September 30, 2022

 $29,689  $54,526  $3,444  $4,053  $5  $-  $91,717 

 

Activity in the Company’s ACL for loans for the three and nine months ended September 30, 2021 is summarized in the table below. The CECL Day 1 row in the table for the nine months ended September 30, 2021 presents adjustments recorded through retained earnings to adopt the CECL standard and the increase to the ACL for loans associated with nonaccretable purchase accounting marks on loans that were classified as purchased credit-impaired as of December 31, 2020.

 

  

Three Months Ended September 30, 2021

 
  

Commercial

  

Commercial real estate

  

Commercial construction

  

Residential real estate

  

Consumer

  

Unallocated

  

Total

 
  

(dollars in thousands)

 

Balance as of June 30, 2021

 $25,567  $43,815  $4,927  $4,366  $9  $-  $78,684 

Charge-offs

  (254)  (1,473)  -   -   -   -   (1,727)

Recoveries

  1   85   -   20   7   -   113 

(Reversal of) provision for credit losses - loans

  2,022   915   (1,225)  (788)  (8)  -   916 
                             

Balance as of September 30, 2021

 $27,336  $43,342  $3,702  $3,598  $8  $-  $77,986 

 

 

  

Nine Months Ended September 30, 2021

 
  

Commercial

  

Commercial real estate

  

Commercial construction

  

Residential real estate

  

Consumer

  

Unallocated

  

Total

 
  

(dollars in thousands)

 

Balance as of December 31, 2020

 $28,443  $39,330  $8,194  $2,687  $4  $568  $79,226 

Day 1 effect of CECL

  (4,225)  9,605   (961)  2,697   9   (568)  6,557 
                             

Balance as of January 1, 2021 as adjusted for changes in accounting principle

  24,218   48,935   7,233   5,384   13   -   85,783 
                             

Charge-offs

  (304)  (1,628)  -   (7)  -   -   (1,939)
                             

Recoveries

  74   85   -   20   9   -   188 

(Reversal of) provision for credit losses - loans

  3,348   (4,050)  (3,531)  (1,799)  (14)  -   (6,046)
                             

Balance as of September 30, 2021

 $27,336  $43,342  $3,702  $3,598  $8  $-  $77,986 

 

Troubled Debt Restructurings

 

Loans are considered to have been modified in a troubled debt restructuring (“TDRs”) when, except as discussed below, due to a borrower’s financial difficulties, the Company makes certain concessions to the borrower that it would not otherwise consider. Modifications may include interest rate reductions, principal or interest forgiveness, forbearance, and other actions intended to minimize economic loss and to avoid foreclosure or repossession of collateral. Generally, a nonaccrual loan that has been modified in a troubled debt restructuring remains on nonaccrual status for a period of six months to demonstrate that the borrower is able to meet the terms of the modified loan. However, performance prior to the modification, or significant events that coincide with the modification, are included in assessing whether the borrower can meet the new terms and may result in the loan being returned to accrual status at the time of loan modification or after a shorter performance period. If the borrower’s ability to meet the revised payment schedule is uncertain, the loan remains on nonaccrual status.

 

As of September 30, 2022, there were no commitments to lend additional funds to borrowers whose loans were on nonaccrual status or were contractually past due 90 days or greater and still accruing interest, or whose terms have been modified in troubled debt restructurings.

 

As of September 30, 2022, TDRs totaled $74.5 million, of which $27.5 million were on nonaccrual status and $47.0 million were performing under their restructured terms. As of December 31, 2021, TDRs totaled $79.5 million, of which $35.9 million were on nonaccrual status and $43.6 million were performing under their restructured terms. The Company has allocated $7.5 million and $10.4 million of specific allowance related to TDRs as of September 30, 2022 and December 31, 2021, respectively.

 

The following table presents loans by class modified as TDRs that occurred during the nine months ended September 30, 2022:

 

      

Pre-Modification

  

Post-Modification

 
      

Outstanding

  

Outstanding

 
  

Number of

  

Recorded

  

Recorded

 
  

Loans

  

Investment

  

Investment

 
  

(dollars in thousands)

 

Troubled debt restructurings:

            

Commercial

  2  $633  $633 

Commercial real estate

  2   9,043   8,543 

Residential real estate

  2   399   399 

Total

  6  $10,075  $9,575 

 

The loans modified as a TDR during the nine months ended September 30, 2022 included five maturity extensions and one interest rate reduction.  The one loan that was an interest rate reduction was a commercial real estate loan that included a one-time $500,000 principal paydown. 

 

There were no TDRs for which there was a payment default within twelve months following the modification during the three and nine months ended September 30, 2022 and September 30, 2021.

 

The following table presents loans by class modified as TDRs that occurred during the nine months ended September 30, 2021:

 

      

Pre-Modification

  

Post-Modification

 
      

Outstanding

  

Outstanding

 
  

Number of

  

Recorded

  

Recorded

 
  

Loans

  

Investment

  

Investment

 
  

(dollars in thousands)

 

Troubled debt restructurings:

            

Commercial

  4  $1,276  $1,276 

Commercial real estate

  10   35,595   35,595 

Commercial construction

  1   1,641   1,641 

Residential real estate

  3   1,758   1,758 

Total

  18  $40,270  $40,270 

 

The loans modified as TDRs during the nine months ended September 30, 2021 included maturity extensions and interest rate reductions. 

 

Allowance for Credit Losses for Unfunded Commitments

 

The Company has recorded an ACL for unfunded credit commitments, which was recorded in other liabilities. The provision is recorded within the provision for (reversal of) credit losses on the Company’s income statement. The following table presents a rollforward of the allowance for credit losses for unfunded commitments for the three and nine months ended September 30, 2022 and 2021:

 

  

Three Months Ended

  

Three Months Ended

 
  

September 30,

  

September 30,

 
  

2022

  

2021

 
  

(dollars in thousands)

 

Balance at beginning of period

 $2,324  $2,380 

Provision for credit losses - unfunded commitments

  662   184 

Balance at end of period

 $2,986  $2,564 

 

  

Nine Months Ended

  

Nine Months Ended

 
  

September 30,

  

September 30,

 
  

2022

  

2021

 
  

(dollars in thousands)

 

Balance at beginning of period

 $2,352  $- 

Day 1 Effect of CECL

  -   2,833 

Provision for (reversal of) credit losses - unfunded commitments

  634   (269)

Balance at end of period

 $2,986  $2,564 

 

Components of (Reversal of) Provision for Credit Losses

 

The following table summarizes the provision for (reversal of) credit losses for the three and nine months ended September 30, 2022 and 2021 :

 

  

Three Months Ended

  

Three Months Ended

 
  

September 30,

  

September 30,

 
  

2022

  

2021

 
  

(dollars in thousands)

 

Provision for credit losses - loans

 $9,338  $916 

Provision for credit losses - unfunded commitments

  662   184 

Provision for credit losses

 $10,000  $1,100 

 

  

Nine Months Ended

  

Nine Months Ended

 
  

September 30,

  

September 30,

 
  

2022

  

2021

 
  

(dollars in thousands)

 

Provision for (reversal of) credit losses - loans

 $13,816  $(6,046)

Provision for (reversal of) credit losses - unfunded commitments

  634   (269)

Provision for (reversal of) credit losses

 $14,450  $(6,315)