| Loans | Note 6. Loans The Company has several lending lines of business including: small business comprised primarily of SBA loans; direct lease financing primarily for commercial vehicles and to a lesser extent equipment; SBLOC collateralized by marketable securities; IBLOC collateralized by the cash value of eligible life insurance policies; and investment advisor financing for purposes of debt refinance, acquisition of another firm or internal succession. Prior to 2020, the Company also originated commercial real estate bridge loans for sale into securitizations. At origination, the Company elected fair value treatment for these loans as they were originally held-for-sale, to better reflect the economics of the transactions. Currently, the Company intends to hold these loans on its balance sheet, and thus no longer accounts for these loans as held-for-sale. The Company continues to present these loans at fair value. At March 31, 2022, the fair value of these loans was $ 1.18 billion, and the unpaid principal balance was $ 1.18 billion. Included in “Net realized and unrealized gains (losses) on commercial loans, at fair value” in the consolidated statements of operations were changes in the fair value of such loans. For the three months ended March 31, 2022, net unrealized losses recognized for such changes in fair value were $ 1.20 million, which reflected $ 164,000 of loss attributable to credit weaknesses. For the three months ended March 31, 2021, unrealized losses recognized for such changes in fair value were $ 478,000 of which $ 246,000 was attributable to credit weaknesses. In the third quarter of 2021, the Company resumed the origination of such loans which it also intends to hold for investment and which are accounted for at amortized cost. They are captioned as REBLs as they are transitional commercial mortgage loans which are made to improve and rehabilitate existing properties which already have cash flow. The Bank pledged the majority of its loans held for investment at amortized cost and commercial loans at fair value to either the Federal Home Loan Bank or the Federal Reserve Bank for lines of credit with those institutions. The Federal Home Loan Bank line is periodically utilized to manage liquidity, but the Federal Reserve line has not generally been used. However, in light of the impact of the COVID-19 pandemic, the Federal Reserve has encouraged banks to utilize their lines to maximize the amount of funding available for credit markets. Accordingly, the Bank has periodically borrowed against its Federal Reserve line on an overnight basis. The amount of loans pledged varies and the collateral may be unpledged at any time to the extent the collateral exceeds advances. The lines are maintained consistent with the Bank’s liquidity policy which maximizes potential liquidity. At March 31, 2022, $ 1.81 billion of loans were pledged to the Federal Reserve and $ 1.39 billion of loans were pledged to the Federal Home Loan Bank. At March 31, 2022, there were no amounts outstanding against the Federal Reserve line and Federal Home Loan Bank line. Prior to 2020, the Company sponsored the structuring of commercial mortgage loan securitizations, and in 2020, the Company decided not to pursue additional securitizations. The loans previously sold to the commercial mortgage-backed securitizations were transitional commercial mortgage loans made to improve and rehabilitate existing properties which already have cash flow. Servicing rights were not retained. Each of the securitizations is considered a variable interest entity of which the Company is not the primary beneficiary. Further, true sale accounting has been applicable to each of the securitizations, as supported by a review performed by an independent third-party consultant. In each of the securitizations, the Company obtained a tranche of certificates which are accounted for as available-for-sale debt securities. The securities were recorded at fair value at acquisition, which was determined by an independent third-party based on the discounted cash flow method using unobservable (level 3) inputs. The securitized loans were structured with some prepayment protection and with extension options which are common for rehabilitation loans. It was expected that those factors would generally offset the impact of prepayments which would therefore not be significant. Accordingly, prepayments on CRE securities were not originally assumed in the first four securitizations. However, as a result of higher than expected prepayments on CRE2, annual prepayments of 15 % on CRE5 were assumed, beginning after the first-year anniversary of the CRE5 securitization. For CRE6, there was no premium or discount associated with the tranche purchased and prepayments were accordingly not estimated. Of the six securities resulting from our securitizations all have been repaid except those from CRE-2 and CRE-6. Payments on CRE-6 are on schedule. As of March 31, 2022, the principal balance of the security we own issued by CRE-2 was $ 12.6 million. Repayment is expected from the workout or disposition of commercial real estate collateral, after repayment of more senior tranches. The Company’s $ 12.6 million security has 47 % excess credit support; thus, losses of 47 % of remaining security balances would have to be incurred, prior to any loss on our security. Additionally, the commercial real estate collateral supporting three of the remaining four loans was re-appraised in 2020 and 2021. The updated appraised value is approximately $ 70.3 million, which is net of $ 3.5 million due to the servicer. The remaining principal to be repaid on all securities is approximately $ 66.2 million and, as noted, the Company’s security is scheduled to be repaid prior to 47 % of the outstanding securities. However, any future reappraisals could result in further decreases in collateral valuation. While available information indicates that the value of existing collateral will be adequate to repay the Company’s security, there can be no assurance that such valuations will be realized upon loan resolutions, and that deficiencies will not exceed the 47 % credit support . Because of credit enhancements for each security, cash flows were not reduced by expected losses. For each of the securitizations, the Company has recorded a gain which is comprised of (i) the excess of consideration received by the Company in the transaction over the carrying value of the loans at securitization, less related transactions costs incurred; and (ii) the recognition of previously deferred origination and exit fees. The Company analyzes credit risk prior to making loans on an individual loan basis. The Company considers relevant aspects of the borrowers’ financial position and cash flow, past borrower performance, management’s knowledge of market conditions, collateral and the ratio of loan amounts to estimated collateral value in making its credit determinations. Major classifications of loans, excluding commercial loans at fair value, are as follows (in thousands): March 31, December 31, 2022 2021 SBL non-real estate $ 122,387 $ 147,722 SBL commercial mortgage 385,559 361,171 SBL construction 31,432 27,199 Small business loans 539,378 536,092 Direct lease financing 538,616 531,012 SBLOC / IBLOC * 2,067,233 1,929,581 Advisor financing ** 146,461 115,770 Real estate bridge loans 803,477 621,702 Other loans *** 61,096 5,014 4,156,261 3,739,171 Unamortized loan fees and costs 8,037 8,053 Total loans, including unamortized loan fees and costs $ 4,164,298 $ 3,747,224 March 31, December 31, 2022 2021 SBL loans, including costs net of deferred fees of $ 6,084 and $ 5,345 for March 31, 2022 and December 31, 2021, respectively $ 545,462 $ 541,437 SBL loans included in commercial loans, at fair value 183,408 199,585 Total small business loans **** $ 728,870 $ 741,022 * Securities Backed Lines of Credit, or SBLOC, are collateralized by marketable securities, while Insurance Backed Lines of Credit, or IBLOC, are collateralized by the cash surrender value of insurance policies. At March 31, 2022 and December 31, 2021, respectively, IBLOC loans amounted to $ 907.1 million and $ 788.3 million. ** In 2020 the Company began originating loans to investment advisors for purposes of debt refinance, acquisition of another firm or internal succession. Maximum loan amounts are subject to loan-to-value ratios of 70 %, based on third-party business appraisals, but may be increased depending upon the debt service coverage ratio. Personal guarantees and blanket business liens are obtained as appropriate. *** Includes demand deposit overdrafts reclassified as loan balances totaling $ 310,000 and $ 322,000 at March 31, 2022 and December 31, 2021, respectively. Estimated overdraft charge-offs and recoveries are reflected in the allowance for credit losses and have been immaterial . **** The small business loans held at fair value are comprised of the government guaranteed portion of SBA 7a loans at the dates indicated. A reduction in SBL non-real estate from $ 147.7 million to $ 122.4 million in the first quarter of 2022 resulted from U.S. government repayments of $ 21.1 million of Paycheck Protection Program (“PPP”) loans authorized by The Consolidated Appropriations Act, 2021. PPP loans totaled $ 23.7 million at March 31, 2022 and $ 44.8 million at December 31, 2021, respectively. The following table provides information about loans individually evaluated for credit loss at March 31, 2022 and December 31, 2021 (in thousands): March 31, 2022 Recorded investment Unpaid principal balance Related allowance Average recorded investment Interest income recognized Without an allowance recorded SBL non-real estate $ 529 $ 3,278 $ — $ 469 $ 2 SBL commercial mortgage — — — 111 — Direct lease financing 8 8 — 131 — Other loans 4,171 4,171 — 4,171 29 Consumer - home equity 312 312 — 316 3 With an allowance recorded SBL non-real estate 1,817 1,817 ( 1,338 ) 1,648 10 SBL commercial mortgage 589 589 ( 116 ) 589 — SBL construction 710 710 ( 34 ) 710 — Total SBL non-real estate 2,346 5,095 ( 1,338 ) 2,117 12 SBL commercial mortgage 589 589 ( 116 ) 700 — SBL construction 710 710 ( 34 ) 710 — Direct lease financing 8 8 — 131 — Other loans 4,171 4,171 — 4,171 29 Consumer - home equity 312 312 — 316 3 $ 8,136 $ 10,885 $ ( 1,488 ) $ 8,145 $ 44 December 31, 2021 Recorded investment Unpaid principal balance Related allowance Average recorded investment Interest income recognized Without an allowance recorded SBL non-real estate $ 409 $ 3,414 $ — $ 412 $ 5 SBL commercial mortgage 223 246 — 1,717 — Direct lease financing 254 254 — 430 — Consumer - home equity 320 320 — 458 8 With an allowance recorded SBL non-real estate 1,478 1,478 ( 829 ) 2,267 13 SBL commercial mortgage 589 589 ( 115 ) 2,634 — SBL construction 710 710 ( 34 ) 711 — Direct lease financing — — — 132 — Consumer - other — — — 5 — Total SBL non-real estate 1,887 4,892 ( 829 ) 2,679 18 SBL commercial mortgage 812 835 ( 115 ) 4,351 — SBL construction 710 710 ( 34 ) 711 — Direct lease financing 254 254 — 562 — Consumer - other — — — 5 — Consumer - home equity 320 320 — 458 8 $ 3,983 $ 7,011 $ ( 978 ) $ 8,766 $ 26 The l oan r eview department recommend s n on-accrual status for loans to the surveillance committee, where interest income appears to be uncollectible or a protracted delay in collection becomes evident. The surveillance committee further vets and approves the non-accrual status. The following table summarizes non-accrual loans with and without an allowance for credit losses (“ACL”) as of the periods indicated (in thousands): March 31, 2022 December 31, 2021 Non-accrual loans with a related ACL Non-accrual loans without a related ACL Total non-accrual loans Total non-accrual loans SBL non-real estate $ 1,251 $ 388 $ 1,639 $ 1,313 SBL commercial mortgage 589 — 589 812 SBL construction 710 — 710 710 Direct leasing — 8 8 254 Consumer - home equity — 68 68 72 Other loans — 607 607 — $ 2,550 $ 1,071 $ 3,621 $ 3,161 The Company had $ 18.9 million of other real estate owned at March 31, 2022 and $ 18.9 million of other real estate owned at December 31, 2021. The following table summarizes the Company’s non-accrual loans, loans past due 90 days or more, and other real estate owned at March 31, 2022 and December 31, 2021, respectively: March 31, December 31, 2022 2021 (in thousands) Non-accrual loans SBL non-real estate $ 1,639 $ 1,313 SBL commercial mortgage 589 812 SBL construction 710 710 Direct leasing 8 254 Other loans 607 — Consumer - home equity 68 72 Total non-accrual loans 3,621 3,161 Loans past due 90 days or more and still accruing 4,597 461 Total non-performing loans 8,218 3,622 Other real estate owned 18,873 18,873 Total non-performing assets $ 27,091 $ 22,495 Interest which would have been earned on loans classified as non-accrual for the three months ended March 31, 2022 and 2021, was $ 41,000 and $ 162,000 , respectively. No income on non-accrual loans was recognized during the three months ended March 31, 2022. In the three months ended March 31, 2022 and 2021 a total of $ 55,000 and $ 10,000 , respectively, was reversed from interest income, which represented interest accrued on loans placed into non-accrual status during the period. The Company’s loans that were modified as of March 31, 2022 and December 31, 2021 and considered troubled debt restructurings are as follows (dollars in thousands): March 31, 2022 December 31, 2021 Number Pre-modification recorded investment Post-modification recorded investment Number Pre-modification recorded investment Post-modification recorded investment SBL non-real estate 12 $ 1,451 $ 1,451 9 $ 1,231 $ 1,231 Other loans 1 3,564 3,564 — — — Consumer - home equity 1 245 245 1 248 248 Total (1) 14 $ 5,260 $ 5,260 10 $ 1,479 $ 1,479 (1) Troubled debt restructurings include non-accrual loans of $ 745,000 and $ 656,000 at March 31, 2022 and December 31, 2021, respectively. The balances below provide information as to how the loans were modified as troubled debt restructuring loans as of March 31, 2022 and December 31, 2021 (in thousands): March 31, 2022 December 31, 2021 Adjusted interest rate Extended maturity Combined rate and maturity Adjusted interest rate Extended maturity Combined rate and maturity SBL non-real estate $ — $ — $ 1,451 $ — $ — $ 1,231 Other loans — — 3,564 — — — Consumer - home equity — — 245 — — 248 Total (1) $ — $ — $ 5,260 $ — $ — $ 1,479 (1) Troubled debt restructurings include non-accrual loans of $ 745,000 and $ 656,000 at March 31, 2022 and December 31, 2021, respectively. The Company had no commitments to extend additional credit to loans classified as troubled debt restructurings as of March 31, 2022 or December 31, 2021. When loans are classified as troubled debt restructurings, the Company estimates the value of underlying collateral and repayment sources. A specific reserve in the allowance for credit losses is established if the collateral valuation, less estimated disposition costs, is lower than the recorded loan value. The amount of the specific reserve serves to increase the provision for credit losses in the quarter the loan is classified as a troubled debt restructuring . As of March 31, 2022 , there were 14 troubled debt restructured loans with a balance of $ 5.3 million which had specific reserves of $ 655,000 . As of December 31, 2021, there were 10 troubled debt restructured loans with a balance of $ 1.5 million which had specific reserves of $ 476,000 . Substantially all of these reserves related to the non-guaranteed portion of SBA loans for start-up businesses. The following table summarizes loans that were restructured within the 12 months ended March 31, 2022 that have subsequently defaulted (in thousands): March 31, 2022 Number Pre-modification recorded investment SBL non-real estate 1 $ 334 Total 1 $ 334 Management estimates the allowance for credit losses using relevant available internal and external historical loan performance information, current economic conditions, and reasonable and supportable forecasts. Historical credit loss experience provides the initial basis for the estimation of expected credit losses over the estimated remaining life of the loans. The methodology used in the estimation of the allowance, which is performed at least quarterly, is designed to be responsive to changes in portfolio credit quality and the impact of current and future economic conditions on loan performance. The review of the appropriateness of the allowance is performed by the Chief Credit Officer and presented to the Audit Committee of the Company’s Board of Directors for their review. With the exception of the other loan category which uses discounted cash flow to determine a reserve, the allowances for other categories are determined by establishing reserves on loan pools with similar risk characteristics based on a lifetime loss-rate model, or vintage analysis, as described in the following paragraph. Loans that do not share risk characteristics are evaluated on an individual basis. If foreclosure is believed to be probable or repayment is expected from the sale of the collateral, a reserve for deficiency is established within the allowance. Those reserves are estimated based on the difference between loan principal and the estimated fair value of the collateral, adjusted for estimated disposition costs. For purposes of determining the pool-basis reserve, the loans not assigned an individual reserve are segregated by product type, to recognize differing risk characteristics within portfolio segments. An average historical loss rate is calculated for each product type, except SBLOC and IBLOC, which utilize probability of loss/loss given default considerations. Loss rates are computed by classifying net charge-offs by year of loan origin, and dividing into total originations for that specific year. This methodology is referred to as vintage analysis. The average loss rate is then projected over the estimated remaining loan lives unique to each loan pool, to determine estimated lifetime losses. For SBLOC and IBLOC, since losses have not been incurred, probability of loss/loss given default considerations are utilized. For all loan pools the Company considers the need for an additional allowance based upon qualitative factors such as the Company’s current loan performance statistics as determined by pool. These qualitative factors are intended to account for forward looking expectations over a twelve to eighteen month period not reflected in historical loss rates and otherwise unaccounted for in the quantitative process. Accordingly, such factors may increase or decrease the allowance compared to historical loss rates. Aside from the qualitative adjustments to account for forward looking expectations of loss over a twelve to eighteen month projection period, the balance of the allowance reverts directly to the Company’s quantitative analysis derived from its historical loss rates. A similar process is employed to calculate an allowance assigned to off-balance sheet commitments, which are comprised of unfunded loan commitments and letters of credit. That allowance for unfunded commitments is recorded in other liabilities. Even though portions of the allowance may be allocated to loans that have been individually measured for credit deterioration, the entire allowance is available for any credit that, in management’s judgment, should be charged off . The Company ranks its qualitative factors in five levels: minimal, low, moderate, moderate-high and high risk. The individual qualitative factors for each portfolio segment have their own scale based on an analysis of that segment. A high risk ranking has the greatest impact on the allowance calculation with each level below having a lesser impact on a sliding scale . The qualitative factors used for each portfolio are described below in the description of each portfolio segment. When the Compan y adopted CECL as of January 1, 2020, the management assumption was that some degree of economic slowdown should be considered over the next eighteen months. That belief reflected the length of the current economic expansion and the relatively high level of unsustainable U.S. government deficit spending. Accordingly, certain of the Company’s qualitative factors were set at moderate as of January 1, 2020. Based on the uncertainty as to how the COVID-19 pandemic would impact the Company’s loan pools, the Company increased other qualitative factors to moderate and moderate high in 2020. In the second quarter of 2021, the Company reassessed these factors and reversed increases to moderate-high for certain pools, based upon increased vaccination rates and significant reopening of the economy. The economic qualitative factor is based on the estimated impact of economic conditions on the loan pools, as distinguished from the economic factors themselves, for the following reasons. The Company has not experienced charge-offs for either real estate bridge lending or similarly underwritten loans in its predecessor commercial loans, at fair value portfolio, despite stressed economic conditions. Additionally, there have been no losses for multi-family (apartment buildings) in the Company’s securitizations. Accordingly, industry loss information for multi-family housing was utilized in the qualitative factors. Similarly, the Company’s charge-offs have been virtually non-existent for SBLOC and IBLOC notwithstanding stressed economic periods. Investment advisor loans were first offered in 2020 with limited performance history. For investment advisor loans, the nature of the underlying ultimate repayment source was considered, namely the fee-based advisory income streams resulting from investment portfolios under management and the impact changes in economic conditions would have on those payment streams. Additionally, the Company’s charge-off histories for small business loans, primarily SBA, and leases have not correlated with economic conditions. While specific economic factors did not correlate with actual historical losses, multiple economic factors are considered. For the non-guaranteed portion of SBA loans, leases, real estate bridge lending and investment advisor financing the Company’s loss forecasting analysis included a review of industry statistics. However, the Company’s own charge-off history and average life estimates, for categories in which the Company has experienced charge-offs, was the primary quantitatively derived element in the forecasts. The qualitative component results from management’s qualitative assessments. In the first quarter of 2022, the Company did not make significant changes to its qualitative factors. Below are the portfolio segments used to pool loans with similar risk characteristics and align with the Company’s methodology for measuring expected credit losses. These pools have similar risk and collateral characteristics, and certain of these pools are broken down further in determining and applying the vintage loss estimates previously discussed. For instance, within the direct lease financing pool, government and public institution leases are considered separately. Additionally, the Company evaluates its loans under an internal loan risk rating system as a means of identifying problem loans. The special mention classification indicates weaknesses that may, if not cured, threaten the borrower’s future repayment ability. A substandard classification reflects an existing weakness indicating the possible inadequacy of net worth and other repayment sources. These classifications are used both by regulators and peers, as they have been correlated with an increased probability of credit losses. A summary of the Company’s primary portfolio pools and loans accordingly classified, by year of origination, at March 31, 2022 and December 31, 2021 are as follows (in thousands): As of March 31, 2022 2022 2021 2020 2019 2018 Prior Revolving loans at amortized cost Total SBL non real estate Non-rated* $ — $ 20,020 $ 3,626 $ — $ — $ — $ — $ 23,646 Pass 1,526 33,779 15,256 8,242 8,505 12,974 — 80,282 Special mention — — — 99 645 491 — 1,235 Substandard — — 246 — 134 3,477 — 3,857 Total SBL non-real estate 1,526 53,799 19,128 8,341 9,284 16,942 — 109,020 SBL commercial mortgage Non-rated 15,426 2,091 — — — — — 17,517 Pass 12,224 91,308 56,969 74,628 43,139 80,528 — 358,796 Special mention — — 141 1,853 — 464 — 2,458 Substandard — — — — — 589 — 589 Total SBL commercial mortgage 27,650 93,399 57,110 76,481 43,139 81,581 — 379,360 SBL construction Pass — 9,119 14,183 2,000 5,419 — — 30,721 Substandard — — — — — 710 — 710 Total SBL construction — 9,119 14,183 2,000 5,419 710 — 31,431 Direct lease financing Non-rated 43,382 41,790 11,682 1,717 877 329 — 99,777 Pass 54,636 178,087 124,279 50,899 21,301 7,929 — 437,131 Special mention 8 — — — 12 35 — 55 Substandard 432 266 942 — 8 5 — 1,653 Total direct lease financing 98,458 220,143 136,903 52,616 22,198 8,298 — 538,616 SBLOC Non-rated — — — — — — 3,724 3,724 Pass — — — — — — 1,156,417 1,156,417 Total SBLOC — — — — — — 1,160,141 1,160,141 IBLOC Non-rated — — — — — — 412,878 412,878 Pass — — — — — — 494,214 494,214 Total IBLOC — — — — — — 907,092 907,092 Advisor financing Non-rated 23,156 969 — — — — — 24,125 Pass 10,413 69,728 42,195 — — — — 122,336 Total advisor financing 33,569 70,697 42,195 — — — — 146,461 Real estate bridge loans Pass 179,070 624,407 — — — — — 803,477 Total real estate bridge loans 179,070 624,407 — — — — — 803,477 Other loans Non-rated 478 63 118 — — 14,611 601 15,871 Pass — 371 113 2,895 4,253 51,717 1,204 60,553 Special mention — — — — — 3,564 — 3,564 Substandard — — — — — 607 68 675 Total other loans** 478 434 231 2,895 4,253 70,499 1,873 80,663 $ 340,329 $ 1,072,420 $ 269,750 $ 142,333 $ 84,293 $ 178,030 $ 2,069,106 $ 4,156,261 Unamortized loan fees and costs — — — — — — — 8,037 Total $ 4,164,298 * The SBL non real estate non-rated total of $ 23.6 million is substantially all comprised of PPP loans which are government guaranteed. ** Included in Other loans are $ 19 .6 million of SBA loans purchased for Community Reinvestment Act (“CRA”) purposes as of March 31, 2022. These loans are classified as SBL in the Company’s loan table which classify loans by type, as opposed to risk characteristics. As of December 31, 2021 2021 2020 2019 2018 2017 Prior Revolving loans at amortized cost Total SBL non real estate Non-rated* $ 39,318 $ 7,257 $ — $ — $ — $ — $ — $ 46,575 Pass 34,172 15,934 8,794 8,988 5,088 9,809 — 82,785 Special mention — — 99 666 — 859 — 1,624 Substandard — — — 18 848 895 — 1,761 Total SBL non-real estate 73,490 23,191 8,893 9,672 5,936 11,563 — 132,745 SBL commercial mortgage Non-rated 10,963 — — — — — — 10,963 Pass 79,166 57,554 75,290 43,820 37,607 46,016 — 339,453 Special mention — 141 1,853 — — 247 — 2,241 Substandard — — — — — 812 — 812 Total SBL commercial mortgage 90,129 57,695 77,143 43,820 37,607 47,075 — 353,469 SBL construction Pass 6,869 12,629 1,880 5,111 — — — 26,489 Substandard — — — — — 710 — 710 Total SBL construction 6,869 12,629 1,880 5,111 — 710 — 27,199 . Direct lease financing Non-rated 56,152 13,271 1,933 1,115 355 104 — 72,930 Pass 214,780 145,256 58,337 26,662 8,574 2,105 — 455,714 Special mention — — — 22 38 — — 60 Substandard 526 1,679 38 22 31 12 — 2,308 Total direct lease financing 271,458 160,206 60,308 27,821 8,998 2,221 — 531,012 SBLOC Non-rated — — — — — — 3,176 3,176 Pass — — — — — — 1,138,140 1,138,140 Total SBLOC — — — — — — 1,141,316 1,141,316 IBLOC Non-rated — — — — — — 346,604 346,604 Pass — — — — — — 441,661 441,661 Total IBLOC — — — — — — 788,265 788,265 Advisor financing Non-rated 38,330 258 — — — — — 38,588 Pass 33,776 43,406 — — — — — 77,182 Total advisor financing 72,106 43,664 — — — — — 115,770 Real estate bridge loans Pass 621,702 — — — — — — 621,702 Total real estate bridge loans 621,702 — — — — — — 621,702 Other loans Non-rated 396 152 — — — 216 656 1,420 Pass 373 113 3,081 4,553 5,212 11,604 1,264 26,200 Substandard — — — — — — 73 73 Total other loans** 769 265 3,081 4,553 5,212 11,820 1,993 27,693 Total $ 1,136,523 $ 297,650 $ 151,305 $ 90,977 $ 57,753 $ 73,389 $ 1,931,574 $ 3,739,171 Unamortized loan fees and costs — — — — — — — 8,053 Total $ 3,747,224 * Included in the SBL non real estate non-rated total of $ 46.6 million, were $ 44.8 million of PPP loans which are government guaranteed. ** Included in Other loans are $ 22.7 million of SBA loans purchased for CRA purposes as of December 31, 2021. These loans are classified as SBL in the Company’s loan table which classify loans by type, as opposed to risk characteristics. SBL. Substantially, all small business loans consist of SBA loans. The Bank participates in loan programs established by the SBA, including the 7(a) Loan Guarantee Program, the 504 Fixed Asset Financing Program, and a temporary program, the PPP . The 7(a) Loan Guarantee Program is designed to help small business borrowers start or expand their businesses by providing partial guarantees of loans made by banks and non-bank lending institutions for specific business purposes, including long or short term working capital; funds for the purchase of equipment, machinery, supplies and materials; funds for the purchase, construction or renovation of real estate; and funds to acquire, operate or expand an existing business or refinance existing debt, all under conditions established by the SBA. The 504 Fixed Asset Financing Program includes the financing of real estate and commercial mortgages. In 2020 and 2021, the Company also participated in PPP, which provides short-term loans to small businesses. PPP loans are fully guaranteed by the U.S. government. This program was a specific response to the COVID-19 pandemic, and these loans are expected to be reimbursed by the U.S. government within one year of their origination. The Company segments the SBL portfolio into four pools: non real estate, commercial mortgage and construction to capture the risk characteristics of each pool, and the PPP loans discussed above. In the table above, the PPP loans are included in non-rated SBL non real estate. The qualitative factors for SBL loans focus on pool loan performance, underlying collateral for collateral dependent loans and changes in economic conditions. Additionally, the construction segment adds a qualitative factor for general construction risk, such as construction delays. The U.S. government guaranteed portion of 7a loans and PPP loans, which are fully guaranteed, are not included in the risk pools because they have inherently different risk characteristics, because of the U.S. government guarantee. Direct lease financing. The Company provides lease financing for commercial and government vehicle fleets and, to a lesser extent, provides lease financing for other equipment. Leases are either open-end or closed-end. An open-end lease is one in which, at the end of the lease term, the lessee must pay the difference between the amount at which the Company sells the leased asset and the stated termination value. Termination value is a contractual value agreed to by the parties at the inception of a lease as to the value of the leased asset at the end of the lease term. A closed-end lease is one for which no such payment is due on lease termination. In a closed-end lease, the risk that the amount received on a sale of the leased asset will be less than the residual value is assumed by the Bank, as lessor. The qualitative factors for direct lease financing focus on underlying collateral for collateral dependent loans, portfolio loan performance, loan concentrations and changes in economic conditions. SBLOC. SBLOC loans are made to individuals, trusts and entities and are secured by a pledge of marketable securities maintained in one or more accounts for which the Company obtains a securities account control agreement. The securities pledged may be either debt or equity securities or a combination thereof, but all such securities must be listed for trading on a national securities exchange or automated inter-dealer quotation system. SBLOCs are typically payable on demand. Maximum SBLOC line amounts are calculated by applying a standard ‘advance rate’ calculation against the eligible security type depending on asset class: typically, up to 50 % for equity securities and mutual fund securities and 80 % for investment grade (Standard & Poor’s rating of BBB- or higher, or Moody’s rating of Baa3 or higher) municipal or corporate debt securities. Substantially all SBLOCs have full recourse to the borrower. The underlying securities collateral for SBLOC loans is monitored on a daily |
