Loans | Note 3 — Loans Loans Receivable Loans consisted of the following as of the dates indicated: March 31, 2023 December 31, 2022 (in thousands) Real estate loans: Commercial property Retail $ 1,052,353 $ 1,023,608 Hospitality 669,012 646,893 Office 533,703 499,946 Other (1) 1,415,748 1,553,729 Total commercial property loans 3,670,816 3,724,176 Construction 113,360 109,205 Residential (2) 817,917 734,472 Total real estate loans 4,602,093 4,567,853 Commercial and industrial loans (3) 778,149 804,492 Equipment financing agreements 600,216 594,788 Loans receivable 5,980,458 5,967,133 Allowance for credit losses ( 72,249 ) ( 71,523 ) Loans receivable, net $ 5,908,209 $ 5,895,610 (1) Includes mixed-use, multifamily, industrial, gas stations, faith-based facilities, medical and warehouse; all other property types represent less than one percent of total loans receivable. (2) Includes $ 2.4 million and $ 2.4 million of home equity loans and lines, and $ 6.7 million and $ 4.6 of personal loans at March 31, 2023 and December 31, 2022, respectively. (3) At March 31, 2023 and December 31, 2022, Paycheck Protection Program loans were $ 0.7 million and $ 0.9 million, respectively. Accrued interest on loans was $ 16.4 million and $ 16.0 million at March 31, 2023 and December 31, 2022, respectively. At March 31, 2023 and December 31, 2022, loans of $ 2.43 billion and $ 1.99 billion, respectively, were pledged to secure advances from the FHLB. Loans Held for Sale The following is the activity for loans held for sale for the three months ended March 31, 2023 and 2022: Real Estate Commercial and Industrial Total (in thousands) March 31, 2023 Balance at beginning of period $ 3,775 $ 4,268 $ 8,043 Originations and transfers 16,387 8,929 25,316 Sales ( 19,781 ) ( 9,918 ) ( 29,699 ) Principal paydowns and amortization ( 2 ) ( 6 ) ( 8 ) Balance at end of period $ 379 $ 3,273 $ 3,652 March 31, 2022 Balance at beginning of period $ 6,954 $ 6,388 $ 13,342 Originations and transfers 20,164 11,689 31,853 Sales ( 15,293 ) ( 14,284 ) ( 29,577 ) Principal paydowns and amortization — ( 1 ) ( 1 ) Balance at end of period $ 11,825 $ 3,792 $ 15,617 Loans held for sale was comprised of $ 3.7 million and $ 8.0 million of the guaranteed portion of SBA 7(a) loans at March 31, 2023 and December 31, 2022, respectively. Allowance for Credit Losses The following table details the information on the allowance for credit losses by portfolio segment as of and for the three months ended March 31, 2023 and 2022: Real Estate Commercial and Industrial Equipment Financing Agreements Total (in thousands) March 31, 2023 Balance at beginning of period $ 44,026 $ 15,267 $ 12,230 $ 71,523 Charge-offs ( 412 ) ( 210 ) ( 1,616 ) ( 2,238 ) Recoveries 68 235 480 783 Provision (recovery) for credit losses ( 151 ) 41 2,291 2,181 Ending balance $ 43,531 $ 15,333 $ 13,385 $ 72,249 March 31, 2022 Balance at beginning of period $ 48,890 $ 12,418 $ 11,249 $ 72,557 Charge-offs ( 530 ) ( 58 ) ( 247 ) ( 835 ) Recoveries 197 317 423 937 Provision (recovery) for credit losses ( 2,202 ) 267 788 ( 1,147 ) Ending balance $ 46,355 $ 12,944 $ 12,213 $ 71,512 The table below illustrates the allowance for credit losses by loan portfolio segment and each loan portfolio segment as a percentage of total loans. March 31, 2023 December 31, 2022 Allowance Amount Percentage Total Loans Percentage of Total Loans Allowance Amount Percentage Total Loans Percentage of Total Loans (dollars in thousands) Real estate loans: Commercial property Retail $ 9,405 13.0 % $ 1,052,353 17.6 % $ 7,872 11.0 % $ 1,023,608 17.2 % Hospitality 14,138 19.6 669,012 11.2 13,407 18.7 646,893 10.8 Office 2,509 3.5 533,703 8.9 2,293 3.2 499,946 8.4 Other 9,186 12.7 1,415,748 23.7 13,056 18.3 1,553,729 26.0 Total commercial property loans 35,238 48.8 3,670,816 61.4 36,628 51.2 3,724,176 62.4 Construction 4,003 5.5 113,360 1.9 4,022 5.7 109,205 1.8 Residential 4,290 6.0 817,917 13.7 3,376 4.7 734,472 12.4 Total real estate loans 43,531 60.3 4,602,093 77.0 44,026 61.6 4,567,853 76.6 Commercial and industrial loans 15,333 21.2 778,149 13.0 15,267 21.3 804,492 13.4 Equipment financing agreements 13,385 18.5 600,216 10.0 12,230 17.1 594,788 10.0 Total $ 72,249 100.0 % $ 5,980,458 100.0 % $ 71,523 100.0 % $ 5,967,133 100.0 % The following table represents the amortized cost basis of collateral-dependent loans by class of loans as of March 31, 2023 and December 31, 2022, for which repayment is expected to be obtained through the sale of the underlying collateral. March 31, 2023 December 31, 2022 Amortized Cost Amortized Cost (in thousands) Real estate loans: Commercial property Retail $ 1,883 $ 1,930 Hospitality — — Office — — Other (1) 259 256 Total commercial property loans 2,142 2,186 Residential 487 508 Total real estate loans 2,629 2,694 Commercial and industrial loans 10,002 — Total $ 12,631 $ 2,694 (1) Includes mixed-use, multifamily, industrial, gas stations, faith-based facilities, medical and warehouse; all other property types represent less than one percent of total loans receivable. Loan Quality Indicators As part of the on-going monitoring of the quality of our loans portfolio, we utilize an internal loan grading system to identify credit risk and assign an appropriate grade (from 0 to 8) for each loan in our portfolio. A third-party loan review is performed at least on an annual basis. Additional adjustments are made when determined to be necessary. The loan grade definitions are as follows: Pass and Pass-Watch: Pass and Pass-Watch loans, grades (0-4), are in compliance with the Bank’s credit policy and regulatory requirements, and do not exhibit any potential or defined weaknesses as defined under “Special Mention,” “Substandard” or “Doubtful.” This category is the strongest level of the Bank’s loan grading system. It consists of all performing loans with no identified credit weaknesses. It includes cash and stock/security secured loans or other investment grade loans. Special Mention: A Special Mention loan, grade (5), has potential weaknesses that deserve management’s close attention. If not corrected, these potential weaknesses may result in deterioration of the repayment of the debt and result in a Substandard classification. Loans that have significant actual, not potential, weaknesses are considered more severely classified. Substandard: A Substandard loan, grade (6), has a well-defined weakness that jeopardizes the liquidation of the debt. A loan graded Substandard is not protected by the sound worth and paying capacity of the borrower, or of the value and type of collateral pledged. With a Substandard loan, there is a distinct possibility that the Bank will sustain some loss if the weaknesses or deficiencies are not corrected. Doubtful: A Doubtful loan, grade (7), is one that has critical weaknesses that would make the collection or liquidation of the full amount due improbable. However, there may be pending events which may work to strengthen the loan, and therefore the amount or timing of a possible loss cannot be determined at the current time. Loss: A loan classified as Loss, grade (8), is considered uncollectible and of such little value that their continuance as active bank assets is not warranted. This classification does not mean that the loan has absolutely no recovery or salvage value, but rather it is not practical or desirable to defer writing off this asset even though partial recovery may be possible in the future. Loans classified as Loss will be charged off in a timely manner. Under regulatory guidance, loans graded special mention or worse are considered criticized loans, and loans graded substandard or worse are considered classified loans. Loans by Vintage Year and Risk Rating Term Loans Amortized Cost Basis by Origination Year (1) 2023 2022 2021 2020 2019 Prior Revolving Total (in thousands) March 31, 2023 Real estate loans: Commercial property Risk Rating ` Pass / Pass-Watch $ 194,981 $ 1,064,796 $ 882,494 $ 587,432 $ 393,738 $ 443,388 $ 40,472 $ 3,607,301 Special Mention — 1,579 20,228 5,820 1,596 3,793 1,700 34,716 Classified 1,272 9,401 4,846 261 4,289 8,730 — 28,799 Total commercial property 196,253 1,075,776 907,568 593,513 399,623 455,911 42,172 3,670,816 YTD gross charge-offs — — — 412 — — — 412 YTD net charge-offs — — — 412 — ( 67 ) — 345 Construction Risk Rating Pass / Pass-Watch 61,150 5,549 46,661 — — — — 113,360 Special Mention — — — — — — — — Classified — — — — — — — — Total construction 61,150 5,549 46,661 — — — — 113,360 YTD gross charge-offs — — — — — — — — YTD net charge-offs — — — — — — — — Residential Risk Rating Pass / Pass-Watch 94,413 400,059 169,111 13,007 228 132,970 7,624 817,412 Special Mention — — — — — — 500 500 Classified — — — — — 5 — 5 Total residential 94,413 400,059 169,111 13,007 228 132,975 8,124 817,917 YTD gross charge-offs — — — — — — — — YTD net charge-offs — — — — — ( 1 ) — ( 1 ) Total real estate loans Risk Rating Pass / Pass-Watch 350,544 1,470,404 1,098,266 600,439 393,966 576,358 48,096 4,538,073 Special Mention — 1,579 20,228 5,820 1,596 3,793 2,200 35,216 Classified 1,272 9,401 4,846 261 4,289 8,735 — 28,804 Total real estate loans 351,816 1,481,384 1,123,340 606,520 399,851 588,886 50,296 4,602,093 YTD gross charge-offs — — — 412 — — — 412 YTD net charge-offs — — — 412 — ( 68 ) — 344 Commercial and industrial loans: Risk Rating Pass / Pass-Watch 134,247 224,285 102,649 37,591 22,070 17,962 198,428 737,232 Special Mention — — 8,998 — — 126 20,000 29,124 Classified — 940 — — 85 273 10,495 11,793 Total commercial and industrial loans 134,247 225,225 111,647 37,591 22,155 18,361 228,923 778,149 YTD gross charge-offs — — — — 20 190 — 210 YTD net charge-offs — ( 13 ) ( 2 ) — 20 ( 30 ) — ( 25 ) Equipment financing agreements: Risk Rating Pass / Pass-Watch 65,243 285,484 146,563 40,374 42,570 13,292 — 593,526 Special Mention — — — — — — — — Classified — 1,484 3,130 451 1,143 482 — 6,690 Total equipment financing agreements 65,243 286,968 149,693 40,825 43,713 13,774 — 600,216 YTD gross charge-offs — 176 935 — 358 147 — 1,616 YTD net charge-offs — 176 840 ( 6 ) 154 ( 28 ) — 1,136 Total loans receivable: Risk Rating Pass / Pass-Watch 550,034 1,980,173 1,347,478 678,404 458,606 607,612 246,524 5,868,831 Special Mention — 1,579 29,226 5,820 1,596 3,919 22,200 64,340 Classified 1,272 11,825 7,976 712 5,517 9,490 10,495 47,287 Total loans receivable $ 551,306 $ 1,993,577 $ 1,384,680 $ 684,936 $ 465,719 $ 621,021 $ 279,219 $ 5,980,458 YTD gross charge-offs — 176 935 412 378 337 — 2,238 YTD net charge-offs — 163 838 406 174 ( 126 ) — 1,455 (1) Includes extensions, renewals, or modifications of credit contracts, which consist of a new credit decision. Term Loans Amortized Cost Basis by Origination Year (1) 2022 2021 2020 2019 2018 Prior Revolving Total December 31, 2022 Real estate loans: Commercial property Risk Rating Pass / Pass-Watch $ 1,184,361 $ 901,029 $ 600,740 $ 404,786 $ 301,950 $ 207,861 $ 50,877 $ 3,651,604 Special Mention 847 13,384 5,857 7,115 — 6,080 1,701 34,984 Classified — — 412 4,312 12,304 20,560 — 37,588 Total commercial property 1,185,208 914,413 607,009 416,213 314,254 234,501 52,578 3,724,176 Construction Risk Rating Pass / Pass-Watch 41,662 67,543 — — — — — 109,205 Special Mention — — — — — — — — Classified — — — — — — — — Total construction 41,662 67,543 — — — — — 109,205 Residential Risk Rating Pass / Pass-Watch 405,975 173,236 13,102 232 731 134,766 5,422 733,464 Special Mention — — — — — — 500 500 Classified 12 — — — — 496 — 508 Total residential 405,987 173,236 13,102 232 731 135,262 5,922 734,472 Total real estate loans Risk Rating Pass / Pass-Watch 1,631,998 1,141,808 613,842 405,018 302,681 342,627 56,299 4,494,273 Special Mention 847 13,384 5,857 7,115 — 6,080 2,201 35,484 Classified 12 — 412 4,312 12,304 21,056 — 38,096 Total real estate loans 1,632,857 1,155,192 620,111 416,445 314,985 369,763 58,500 4,567,853 Commercial and industrial loans: Risk Rating Pass / Pass-Watch 368,778 100,537 39,577 24,117 7,342 12,282 205,951 758,584 Special Mention — 9,285 — — 29 102 34,113 43,529 Classified — — 171 1,097 81 391 639 2,379 Total commercial and industrial loans 368,778 109,822 39,748 25,214 7,452 12,775 240,703 804,492 Equipment financing agreements: Risk Rating Pass / Pass-Watch 305,249 165,313 46,970 52,133 17,608 1,798 — 589,071 Special Mention — — — — — — — — Classified 630 2,542 311 1,581 565 88 — 5,717 Total equipment financing agreements 305,879 167,855 47,281 53,714 18,173 1,886 — 594,788 Total loans receivable: Risk Rating Pass / Pass-Watch 2,306,025 1,407,658 700,389 481,268 327,631 356,707 262,250 5,841,928 Special Mention 847 22,669 5,857 7,115 29 6,182 36,314 79,013 Classified 642 2,542 894 6,990 12,950 21,535 639 46,192 Total loans receivable $ 2,307,514 $ 1,432,869 $ 707,140 $ 495,373 $ 340,610 $ 384,424 $ 299,203 $ 5,967,133 (1) Includes extensions, renewals, or modifications of credit contracts, which consist of a new credit decision. Loans by Vintage Year and Payment Performance Term Loans Amortized Cost Basis by Origination Year (1) 2023 2022 2021 2020 2019 Prior Revolving Total (in thousands) March 31, 2023 Real estate loans: Commercial property Payment performance Performing $ 196,253 $ 1,075,696 $ 907,568 $ 593,252 $ 399,623 $ 453,511 $ 42,172 $ 3,668,075 Nonperforming — 80 — 261 — 2,400 — 2,741 Total commercial property 196,253 1,075,776 907,568 593,513 399,623 455,911 42,172 3,670,816 YTD gross charge-offs — — — 412 — — — 412 YTD net charge-offs — — — 412 — ( 67 ) — 345 Construction Payment performance Performing 61,150 5,549 46,661 — — — — 113,360 Nonperforming — — — — — — — — Total construction 61,150 5,549 46,661 — — — — 113,360 YTD gross charge-offs — — — — — — — — YTD net charge-offs — — — — — — — — Residential Payment performance Performing 94,413 400,059 169,111 13,007 228 132,483 8,124 817,425 Nonperforming — — — — — 492 — 492 Total residential 94,413 400,059 169,111 13,007 228 132,975 8,124 817,917 YTD gross charge-offs — — — — — — — — YTD net charge-offs — — — — — ( 1 ) — ( 1 ) Total real estate loans Payment performance Performing 351,816 1,481,304 1,123,340 606,259 399,851 585,994 50,296 4,598,860 Nonperforming — 80 — 261 — 2,892 — 3,233 Total real estate loans 351,816 1,481,384 1,123,340 606,520 399,851 588,886 50,296 4,602,093 YTD gross charge-offs — — — 412 — — — 412 YTD net charge-offs — — — 412 — ( 68 ) — 344 Commercial and industrial loans: Payment performance Performing 134,247 225,225 111,647 37,591 22,149 18,242 218,921 768,022 Nonperforming — — — — 6 119 10,002 10,127 Total commercial and industrial loans 134,247 225,225 111,647 37,591 22,155 18,361 228,923 778,149 YTD gross charge-offs — — — — 20 190 — 210 YTD net charge-offs — ( 13 ) ( 2 ) — 20 ( 30 ) — ( 25 ) Equipment financing agreements: Payment performance Performing 65,243 285,484 146,563 40,374 42,570 13,292 — 593,526 Nonperforming — 1,484 3,130 451 1,143 482 — 6,690 Total equipment financing agreements 65,243 286,968 149,693 40,825 43,713 13,774 — 600,216 YTD gross charge-offs — 176 935 — 358 147 — 1,616 YTD net charge-offs — 176 840 ( 6 ) 154 ( 28 ) — 1,136 Total loans receivable: Payment performance Performing 551,306 1,992,013 1,381,550 684,224 464,570 617,528 269,217 5,960,408 Nonperforming — 1,564 3,130 712 1,149 3,493 10,002 20,050 Total loans receivable $ 551,306 $ 1,993,577 $ 1,384,680 $ 684,936 $ 465,719 $ 621,021 $ 279,219 $ 5,980,458 YTD gross charge-offs — 176 935 412 378 337 — 2,238 YTD net charge-offs — 163 838 406 174 ( 126 ) — 1,455 (1) Includes extensions, renewals, or modifications of credit contracts, which consist of a new credit decision. Term Loans Amortized Cost Basis by Origination Year (1) 2022 2021 2020 2019 2018 Prior Revolving Total December 31, 2022 Real estate loans: Commercial property Payment performance Performing $ 1,185,208 $ 914,413 $ 606,597 $ 416,213 $ 312,324 $ 233,643 $ 52,578 $ 3,720,976 Nonperforming — — 412 — 1,930 858 3,200 Total commercial property 1,185,208 914,413 607,009 416,213 314,254 234,501 52,578 3,724,176 Construction Payment performance Performing 41,662 67,543 — — — — — 109,205 Nonperforming — — — — — — — — Total construction 41,662 67,543 — — — — — 109,205 Residential Payment performance Performing 405,975 173,236 13,102 232 731 134,766 5,922 733,964 Nonperforming 12 — — — — 496 — 508 Total residential 405,987 173,236 13,102 232 731 135,262 5,922 734,472 Total real estate loans Payment performance Performing 1,632,845 1,155,192 619,699 416,445 313,055 368,409 58,500 4,564,145 Nonperforming 12 — 412 — 1,930 1,354 — 3,708 Total real estate loans 1,632,857 1,155,192 620,111 416,445 314,985 369,763 58,500 4,567,853 Commercial and industrial loans: Payment performance Performing 368,778 109,822 39,577 25,199 7,452 12,539 240,703 804,070 Nonperforming — — 171 15 — 236 — 422 Total commercial and industrial loans 368,778 109,822 39,748 25,214 7,452 12,775 240,703 804,492 Equipment financing agreements: Payment performance Performing 305,249 165,313 46,970 52,133 17,608 1,798 — 589,071 Nonperforming 630 2,542 311 1,581 565 88 — 5,717 Total equipment financing agreements 305,879 167,855 47,281 53,714 18,173 1,886 — 594,788 Total loans receivable: Payment performance Performing 2,306,872 1,430,327 706,246 493,777 338,115 382,746 299,203 5,957,286 Nonperforming 642 2,542 894 1,596 2,495 1,678 — 9,847 Total loans receivable $ 2,307,514 $ 1,432,869 $ 707,140 $ 495,373 $ 340,610 $ 384,424 $ 299,203 $ 5,967,133 (1) Includes extensions, renewals, or modifications of credit contracts, which consist of a new credit decision. The following is an aging analysis of loans, including loans on nonaccrual status, disaggregated by loan class, as of the dates indicated: 30-59 60-89 90 Days Total Current Total Accruing (in thousands) March 31, 2023 Real estate loans: Commercial property Retail $ — $ — $ — $ — $ 1,052,353 $ 1,052,353 $ — Hospitality 158 — — 158 668,854 669,012 — Office — — — — 533,703 533,703 — Other — — — — 1,415,748 1,415,748 — Total commercial property loans 158 — — 158 3,670,658 3,670,816 — Construction — — — — 113,360 113,360 — Residential 1,669 — — 1,669 816,248 817,917 — Total real estate loans 1,827 — — 1,827 4,600,266 4,602,093 — Commercial and industrial loans 7,038 1 — 7,039 771,110 778,149 — Equipment financing agreements 6,379 1,553 3,553 11,485 588,731 600,216 — Total loans receivable $ 15,244 $ 1,554 $ 3,553 $ 20,351 $ 5,960,107 $ 5,980,458 $ — December 31, 2022 Real estate loans: Commercial property Retail $ — $ — $ — $ — $ 1,023,608 $ 1,023,608 $ — Hospitality — — — — 646,893 646,893 — Office — — — — 499,946 499,946 — Other — 494 — 494 1,553,235 1,553,729 — Total commercial property loans — 494 — 494 3,723,682 3,724,176 — Construction — — — — 109,205 109,205 — Residential 313 804 7 1,124 733,348 734,472 — Total real estate loans 313 1,298 7 1,618 4,566,235 4,567,853 — Commercial and industrial loans 77 79 — 156 804,336 804,492 — Equipment financing agreements 5,825 1,271 2,949 10,045 584,743 594,788 — Total loans receivable $ 6,215 $ 2,648 $ 2,956 $ 11,819 $ 5,955,314 $ 5,967,133 $ — Nonaccrual Loans and Nonperforming Assets The following table represents the amortized cost basis of loans on nonaccrual status and loans past due 90 days and still accruing as of March 31, 2023 and December 31, 2022. March 31, 2023 Nonaccrual Loans Nonaccrual Loans Loans Total (in thousands) Real estate loans: Commercial property Retail $ 2,144 $ — $ — $ 2,144 Hospitality — 65 — 65 Office — — — — Other 259 273 — 532 Total commercial property loans 2,403 338 — 2,741 Residential 487 5 — 492 Total real estate loans 2,890 343 — 3,233 Commercial and industrial loans — 10,127 — 10,127 Equipment financing agreements 358 6,332 — 6,690 Total $ 3,248 $ 16,802 $ — $ 20,050 December 31, 2022 Nonaccrual Loans Nonaccrual Loans Loans Total (in thousands) Real estate loans: Commercial property Retail $ 1,929 $ — $ — $ 1,929 Office — — — — Other 540 731 — 1,271 Total commercial property loans 2,469 731 — 3,200 Residential 508 — — 508 Total real estate loans 2,977 731 — 3,708 Commercial and industrial loans — 422 — 422 Equipment financing agreements 215 5,501 — 5,716 Total $ 3,192 $ 6,654 $ — $ 9,846 The Company recognized $ 104,000 and $ 27,000 of interest income on nonaccrual loans for the three months ended March 31, 2023 and 2022, respectively. The following table details nonperforming assets as of the dates indicated: March 31, 2023 December 31, 2022 (in thousands) Nonaccrual loans $ 20,050 $ 9,846 Loans receivable 90 days or more past due and still accruing — — Total nonperforming loans receivable 20,050 9,846 Other real estate owned ("OREO") 117 117 Total nonperforming assets $ 20,167 $ 9,963 OREO is included in prepaid expenses and other assets in the accompanying Consolidated Balance Sheets as of March 31, 2023 and December 31, 2022. Loan Modifications No loans were modified during the three months ended March 31, 2023 or 2022 . |