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Loans

12 Months Ended

Dec. 31, 2024

Note E—Loans

The Company has several lending lines of business including: SBLs, 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. In 2024, the Company began making consumer fintech loans which consist of short-term extensions of credit including secured credit card loans made in conjunction with marketers and servicers. Prior to 2020, the Company also originated non-SBA commercial real estate bridge loans, primarily collateralized by multifamily properties (apartment buildings), and to a lesser extent, by hotel and retail properties, 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. In 2020, the Company decided to retain these loans on its balance sheet as interest-earning assets and currently intends to continue doing so. Therefore, these loans are no longer accounted for as held-for-sale, but the Company continues to present them at fair value. These loans are included in commercial loans, at fair value which, at December 31, 2024 and 2023, amounted to $223.1 million and $332.8 million, respectively, with an amortized cost of $223.5 million and $336.5 million, respectively. Those totals also include the guaranteed portion of certain SBA loans, also previously held for sale. Included in net realized and unrealized gains (losses) on commercial loans, at fair value in the consolidated statements of operations are changes in the fair value of such loans resulting in an unrealized loss of $683,000 in 2024, an unrealized loss of $3.1 million in 2023 and an unrealized loss of $6.1 million in 2022. These amounts include unrealized credit related losses of $867,000, $1.7 million and $7.7 million, respectively, in 2024, 2023 and 2022. Interest earned on loans held at fair value during the period held is recorded in “Interest Income – Loans, including fees” in the consolidated statements of operations. The $1.7 million credit related unrealized loss in 2023 resulted from a non-controlling participation in a multifamily apartment building. Included in the $6.1 million loss in 2022 was a $4.0 million third quarter unrealized loss to reflect a write-down to a September 2022 appraisal, less estimated disposition costs, of a $9.5 million loan. The loan, collateralized by a movie theater, had been current and performing but missed its August 2022 payment, and the tenant ceased operations in that month. The property was subsequently transferred to OREO, and the unrealized loss was realized in 2023 upon sale of the property. The loan represented the only movie theater loan in the Company’s portfolios and was originated in 2015, before non-SBA commercial loan originations were primarily comprised of apartment building loans. Of the $2.21 billion of non-SBA commercial (bridge) loans, at fair value and REBL loans which together comprise the non-SBA commercial real estate portfolios, $2.17 billion are comprised of apartment building loans. 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 has pledged the majority of its loans held for investment at amortized cost and commercial loans, at fair value to either the FHLB or the Federal Reserve Bank for lines of credit with those institutions. 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 December 31, 2024, $2.46 billion of loans were pledged to the Federal Reserve Bank and $2.22 billion of loans were pledged to the FHLB against lines of credit which provide a source of liquidity to the Bank. There were no amounts drawn against these lines at December 31, 2024.

Of the six securities purchased by the Bank from our securitizations, all have been repaid except one issued by CRE-2, which is included in the commercial mortgage-backed securities classification in investment securities. As of December 31, 2024, the balance of the Bank’s CRE-2-issued security was reduced from $12.6 million to $3.5 million as a result of the sale of one of the two remaining collateral properties. The $3.5 million remains in non-accrual status. While the appraised value of the remaining property allocable to the Bank’s security exceeds the principal and unpaid interest, there can be no assurance as to the amounts received upon the servicer’s disposition of these properties, which will reflect additional servicing fees, actual disposition prices and other disposition costs.

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. For SBLOC, the Company relies on the market value of the underlying securities collateral as adjusted by margin requirements, generally 50% for equities and 80% for investment grade securities. For IBLOC, the Company relies on the cash value of insurance policy collateral. Of the total $454.4 million of consumer fintech loans at December 31, 2024, $201.1 million consisted of secured credit card loans, with the balance consisting of other short-term extensions of credit. Consumers do not pay interest on the majority of consumer fintech loan balances, including secured credit card loans. The majority of the income on those loans is reflected in non-interest income under “Consumer credit fintech fees” and originate with the marketers and servicers for those loans. The secured credit card balances were

collateralized with deposits at the Bank, with related income statement impact reflected both in a lower cost of funds and fee income. The lower cost of funds results from balances required to be maintained to collateralize related card use. Related fee income is reflected in the “Consumer credit fintech fees” line of the income statement.

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


	December 31,		December 31,
	2024		2023

SBL non-real estate	$	190,322	$	137,752
SBL commercial mortgage		662,091		606,986
SBL construction		34,685		22,627
SBLs		887,098		767,365
Direct lease financing		700,553		685,657
SBLOC / IBLOC⁽¹⁾		1,564,018		1,627,285
Advisor financing⁽²⁾		273,896		221,612
Real estate bridge lending		2,109,041		1,999,782
Consumer fintech⁽³⁾		454,357		—
Other loans⁽⁴⁾		111,328		50,638
		6,100,291		5,352,339
Unamortized loan fees and costs		13,337		8,800
Total loans, net of unamortized loan fees and costs	$	6,113,628	$	5,361,139


	December 31,		December 31,
	2024		2023

SBLs, including costs net of deferred fees of $9,979 and $9,502 for December 31, 2024 and December 31, 2023, respectively	$	897,077	$	776,867
SBLs included in commercial loans, at fair value		89,902		119,287
Total SBLs⁽⁵⁾	$	986,979	$	896,154

^{(1 )}SBLOC are collateralized by marketable securities, while IBLOC are collateralized by the cash surrender value of insurance policies. At December 31, 2024 and December 31, 2023, IBLOC loans amounted to $548.1 million and $646.9 million, respectively.

⁽²⁾In 2020, the Bank began originating loans to investment advisors for purposes of debt refinancing, acquisition of another firm or internal succession. Maximum loan amounts are subject to loan-to-value ratios of 70% of the business enterprise value based on a third-party valuation but may be increased depending upon the debt service coverage ratio. Personal guarantees and blanket business liens are obtained as appropriate.

⁽³⁾Consumer fintech loans included $201.1 million of secured credit card loans, with the balance consisting of other short-term extensions of credit.

⁽⁴⁾Includes demand deposit overdrafts reclassified as loan balances totaling $1.2 million and $1.7 million at December 31, 2024 and December 31, 2023, respectively. Estimated overdraft charge-offs and recoveries are reflected in the ACL and have been immaterial.

⁽⁵⁾The SBLs held at fair value are comprised of the government guaranteed portion of 7(a) Program (as defined below) loans at the dates indicated.

‎

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

The following table summarizes non-accrual loans with and without an ACL as of the periods indicated (dollars in thousands):


	December 31, 2024								December 31, 2023
	Non-accrual loans with a related ACL		Related ACL		Non-accrual loans without a related ACL		Total non-accrual loans		Non-accrual loans with a related ACL		Related ACL		Non-accrual loans without a related ACL		Total non-accrual loans
SBL non-real estate	$	1,308	$	351	$	1,327	$	2,635	$	1,320	$	598	$	522	$	1,842
SBL commercial mortgage		1,922		1,039		2,963		4,885		834		343		1,547		2,381
SBL construction		1,585		118		—		1,585		3,385		44		—		3,385
Direct leasing		5,561		2,377		465		6,026		3,618		1,827		167		3,785
IBLOC		503		413		—		503		—		—		—		—
Real estate bridge loans⁽¹⁾		—		—		12,300		12,300		—		—		—		—
Other loans		—		—		—		—		132		4		—		132
	$	10,879	$	4,298	$	17,055	$	27,934	$	9,289	$	2,816	$	2,236	$	11,525

⁽¹⁾The $12.3 million REBL shown for 2023 was repaid on January 2, 2025 without loss of principal.

The Company had $62.0 million of OREO at December 31, 2024, and $16.9 million of OREO at December 31, 2023. The following table summarizes the Company’s non-accrual loans, loans past due 90 days or more, and OREO at December 31, 2024, and 2023, respectively:


	December 31,
	2024		2023
		(Dollars in thousands)
Non-accrual loans
SBL non-real estate	$	2,635	$	1,842
SBL commercial mortgage		4,885		2,381
SBL construction		1,585		3,385
Direct leasing		6,026		3,785
IBLOC		503		—
Real estate bridge loans⁽¹⁾		12,300		—
Other loans		—		132
Total non-accrual loans		27,934		11,525

Loans past due 90 days or more and still accruing⁽²⁾		5,830		1,744
Total non-performing loans		33,764		13,269
OREO⁽³⁾		62,025		16,949
Total non-performing assets	$	95,789	$	30,218

⁽¹⁾The $12.3 million REBL shown for 2023 was repaid on January 2, 2025 without loss of principal.

⁽²⁾ The majority of the increase in Loans past due 90 days or more in 2024 compared to the prior year resulted from a $3.3 million IBLOC loan secured by the cash value of insurance, the payoff of which was subject to an administrative delay by the related insurance company.

⁽³⁾In the first quarter of 2024, a $39.4 million apartment building rehabilitation bridge loan was transferred to nonaccrual status. On April 2, 2024, the same loan was transferred from nonaccrual status to OREO, and comprised the majority of our OREO at December 31, 2024, with a balance at that date of $41.1 million. We intend to continue to manage the capital improvements on the underlying apartment complex. As the units become available for lease, the property manager will be tasked with leasing these units at market rents. That property is under agreement of sale with a sales price that is expected to cover the Company’s current balance plus the forecasted cost of improvements to the property. The purchaser has increased the total of earnest money deposits to $1.6 million, from $500,000, in consideration of extending the closing date to March 21, 2025. The Company believes that the purpose for the extension is to allow time for this sale to be included in a larger transaction. There can be no assurance that the purchaser will consummate the sale of the property, but if not consummated, the earnest money deposits of $1.6 million would accrue to the Company. The nonaccrual balances in this table as of December 31, 2024, are also reflected in the substandard loan totals.

Interest which would have been earned on loans classified as non-accrual at December 31, 2024 and 2023, was $1.1 million and $738,000, respectively. No income on non-accrual loans was recognized during 2024 or 2023. In 2024, $1.0 million of REBL, $161,000 of direct leasing, $130,000 of SBL commercial real estate, $38,000 of SBL non-real estate, and $14,000 of IBLOC were reversed from interest income, which represented interest accrued on loans placed into non-accrual status during the period. In 2023, $89,000 of legacy commercial real estate, $89,000 of SBL commercial real estate, $44,000 of SBL non-real estate, $13,000 of IBLOC, and $110,000 of direct leasing were reversed from interest income, which represented interest accrued on loans placed into non-accrual status during the period. In the third quarter of 2024 $815,000 of interest was reversed from interest income as a result of REBL loan modifications. In the fourth quarter of 2024, approximately $1.3 million was reversed in connection with a loan sale.

Loans which are experiencing financial stress are reviewed by the loan review department, which is independent of the lending lines. The review includes an analysis for a potential specific reserve allocation in the ACL. For REBLs, updated appraisals are generally obtained in conjunction with modifications.

During the year to date periods ended December 31, 2024, and December 31, 2023, loans modified and related information are as follows (dollars in thousands):


	Year ended December 31, 2024										Year ended December 31, 2023
	Payment delay as a result of a payment deferral		Interest rate reduction and payment deferral		Term extension		Total		Percent of total loan category		Payment delay as a result of a payment deferral		Payment delay and term extension		Total		Percent of total loan category
SBL non-real estate	$	2,421	$	—	$	—	$	2,421		1.27%	$	651	$	—	$	651		0.47%
SBL commercial mortgage		3,255		—		—		3,255		0.49%		—		—		—		—
Direct lease financing		—		—		2,477		2,477		0.35%		—		127		127		0.02%
Real estate bridge lending⁽¹⁾		—		67,575		—		67,575		3.20%		—		12,300		12,300		0.62%
Total	$	5,676	$	67,575	$	2,477	$	75,728		1.24%	$	651	$	12,427	$	13,078		0.24%

⁽¹⁾ For the year ended December 31, 2024, the “as is” weighted average LTV of the real estate bridge lending balances was less than 73%, and the “as stabilized” LTV was approximately 63% based upon recent appraisals. “As stabilized” LTVs reflect the third-party appraiser’s estimated value after the rehabilitation is complete. The balances for both periods were also classified as either special mention or substandard as of December 31, 2024. The $12.3 million REBL shown for 2023 was repaid on January 2, 2025 without loss of principal.

The following table shows an analysis of loans that were modified during the year to date periods ended December 31, 2024, and December 31, 2023 presented by loan classification (dollars in thousands):


	Year ended December 31, 2024
	Payment Status (Amortized Cost Basis)
	30-59 days		60-89 days		90+ days				Total
	past due		past due		still accruing		Non-accrual		delinquent		Current		Total
SBL non-real estate	$	—	$	—	$	—	$	1,022	$	1,022	$	1,399	$	2,421
SBL commercial mortgage		—		—		—		—		—		3,255		3,255
Direct lease financing		—		2,477		—		—		2,477		—		2,477
Real estate bridge lending⁽¹⁾		—		—		—		—		—		67,575		67,575
	$	—	$	2,477	$	—	$	1,022	$	3,499	$	72,229	$	75,728

	Year ended December 31, 2023
	Payment Status (Amortized Cost Basis)
	30-59 days		60-89 days		90+ days				Total
	past due		past due		still accruing		Non-accrual		delinquent		Current		Total
SBL non-real estate	$	—	$	—	$	—	$	156	$	156	$	495	$	651
SBL commercial mortgage		—		—		—		—		—		—		—
Direct lease financing		—		—		—		127		127		—		127
Real estate bridge lending⁽¹⁾		—		—		—		—		—		12,300		12,300
	$	—	$	—	$	—	$	283	$	283	$	12,795	$	13,078

⁽¹⁾ For the year ended December 31, 2024, the “as is” weighted average LTV of the real estate bridge lending balances was less than 73%, and the “as stabilized” LTV was approximately 63% based upon recent appraisals. “As stabilized” LTVs reflect the third-party appraiser’s estimated value after the rehabilitation is complete. The balances for both periods were also classified as either special mention or substandard as of December 31, 2024. While the borrower for the $12.3 million REBL shown for 2023 ceased making payments in 2024, the loan was repaid on January 2, 2025 without loss of principal.

The following table describes the financial effect of the modifications made during the year to date periods ended December 31, 2024, and December 31, 2023 (dollars in thousands):


	Year ended December 31, 2024			Year ended December 31, 2023
	Combined Rate and Maturity			Combined Rate and Maturity
	Weighted average interest rate reduction	Weighted average term extension (in months)	More-than-insignificant-payment delay⁽²⁾	Weighted average interest rate reduction	Weighted average term extension (in months)	More-than-insignificant-payment delay⁽²⁾
SBL non-real estate	—	—	1.27%	—	—	0.47%
SBL commercial mortgage	—	—	0.49%	—	—	—
Direct lease financing	—	12.0	—	—	3.0	—
Real estate bridge lending⁽¹⁾	1.08%	—	1.28%	—	12.0	—

⁽²⁾Percentage represents the principal of loans deferred divided by the principal of the total loan portfolio.

There were no loans that received a term extension modification which had a payment default during the period and were modified in the twelve months before default.

The Company had no commitments to extend additional credit to loans classified as modified as of either December 31, 2024 or 2023.

As of December 31, 2024, there were $75.7 million of loans classified as modified with specific reserves of $768,000, while there were $13.1 million of loans classified as modified as of December 31, 2023 with specific reserves of $127,000.

Management estimates the ACL quarterly and for most loan categories uses relevant available internal and external historical loan performance information to determine the quantitative component of the reserve and current economic conditions, and reasonable and supportable forecasts and other factors to determine the qualitative component of the reserve. Reserves on specific credit-deteriorated loans comprise the third and final component of the reserve. Historical credit loss experience provides the quantitative basis for the estimation of expected credit losses over the estimated remaining life of the loans. The qualitative component of the ACL is designed to be responsive to changes in portfolio credit quality and the impact of current and future economic conditions on loan performance, and is subjective. The review of the appropriateness of the ACL is performed by the Chief Credit Officer and presented to the Audit Committee of the Company’s Board of Directors for review. With the exception of SBLOC and IBLOC, which utilize probability of default/loss given default, and the other loan category, which uses discounted cash flow to determine a reserve, the quantitative components for remaining 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 collateral, a reserve for deficiency is established within the ACL. Those reserves are estimated based on the difference between loan principal and the estimated fair value of the collateral, adjusted for estimated disposition costs.

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. Increases in substandard loans do not necessarily require increased provisions for credit losses or allowance allocations on the basis of loan-to-value and other considerations based upon assessments by the loan review department which is independent of the lending lines. A summary of the Company’s primary portfolio pools and loans accordingly classified, by year of origination, at December 31, 2024 and December 31, 2023 is as follows (dollars in thousands):


As of December 31, 2024	2024		2023		2022		2021		2020		Prior		Revolving loans at amortized cost		Total
SBL non real estate
Pass	$	46,766	$	74,772	$	27,794	$	18,103	$	5,321	$	5,353	$	—	$	178,109
Special mention		—		—		—		—		—		130		—		130
Substandard		—		2,437		2,480		1,234		573		1,097		—		7,821
Total SBL non-real estate		46,766		77,209		30,274		19,337		5,894		6,580		—		186,060

SBL commercial mortgage
Pass		140,314		84,538		130,233		84,026		58,524		140,165		—		637,800
Special mention		—		—		528		1,104		—		7,690		—		9,322
Substandard		—		—		1,380		4,942		163		4,104		—		10,589
Total SBL commercial mortgage		140,314		84,538		132,141		90,072		58,687		151,959		—		657,711

SBL construction
Pass		12,392		13,846		2,899		3,609		—		—		—		32,746
Substandard		—		—		—		1,229		—		710		—		1,939
Total SBL construction		12,392		13,846		2,899		4,838		—		710		—		34,685

Direct lease financing
Non-rated		5,184		—		—		—		—		—		—		5,184
Pass		271,791		193,663		136,601		45,594		15,846		4,269		—		667,764
Special mention		1,866		2,294		2,618		1,783		73		83		—		8,717
Substandard		3,892		6,657		6,462		1,733		92		52		—		18,888
Total direct lease financing		282,733		202,614		145,681		49,110		16,011		4,404		—		700,553

SBLOC
Non-rated		—		—		—		—		—		—		3,466		3,466
Pass		—		—		—		—		—		—		1,012,418		1,012,418
Total SBLOC		—		—		—		—		—		—		1,015,884		1,015,884

IBLOC
Pass		—		—		—		—		—		—		547,196		547,196
Substandard		—		—		—		—		—		—		938		938
Total IBLOC		—		—		—		—		—		—		548,134		548,134

Advisor financing
Pass		84,414		84,908		54,064		22,560		18,588		—		—		264,534
Special mention		—		—		1,021		8,341		—		—		—		9,362
Total advisor financing		84,414		84,908		55,085		30,901		18,588		—		—		273,896

Real estate bridge loans
Pass		432,609		418,326		761,331		278,031		—		—		—		1,890,297
Special mention⁽¹⁾		16,913		—		36,318		31,153		—		—		—		84,384
Substandard⁽¹⁾		54,485		—		55,947		23,928		—		—		—		134,360
Total real estate bridge lending		504,007		418,326		853,596		333,112		—		—		—		2,109,041

Other loans
Non-rated		455,331		—		—		—		—		10,394		—		465,725
Pass		66,267		163		256		351		2,606		37,133		1,381		108,157
Special mention		—		—		—		—		—		232		—		232
Substandard		213		—		—		—		—		—		—		213
Total other loans⁽²⁾		521,811		163		256		351		2,606		47,759		1,381		574,327

	$	1,592,437	$	881,604	$	1,219,932	$	527,721	$	101,786	$	211,412	$	1,565,399	$	6,100,291

Unamortized loan fees and costs		—		—		—		—		—		—		—		13,337
Total															$	6,113,628

⁽¹⁾For the special mention and substandard real estate bridge loans, recent appraisals reflect a respective weighted average “as is” LTV of 77% and a further estimated 68% “as stabilized” LTV. The “as stabilized” LTV reflects the third-party appraiser’s estimate of value after rehabilitation is complete. The special mention and

substandard real estate bridge loans shown in 2024 reflected loans to new borrowers with greater financial capacity, with their original financing in the 2021 and 2022 vintages.

⁽²⁾Included in Other loans are $8.6 million of SBA loans purchased for Community Reinvestment Act (“CRA”) purposes as of December 31, 2024. These loans are classified as SBL in the Company’s loan table, which classifies loans by type, as opposed to risk characteristics.


As of December 31, 2023	2023		2022		2021		2020		2019		Prior		Revolving loans at amortized cost		Total
SBL non real estate
Non-rated	$	507	$	—	$	—	$	—	$	—	$	—	$	—	$	507
Pass		47,066		32,512		26,919		9,662		4,334		5,357		—		125,850
Special mention		460		—		258		1,101		119		337		—		2,275
Substandard		—		495		632		564		250		562		—		2,503
Total SBL non-real estate		48,033		33,007		27,809		11,327		4,703		6,256		—		131,135

SBL commercial mortgage
Pass		128,375		138,281		93,399		67,635		58,550		98,704		—		584,944
Special mention		375		—		10,764		—		595		1,363		—		13,097
Substandard		—		—		—		452		1,853		1,928		—		4,233
Total SBL commercial mortgage		128,750		138,281		104,163		68,087		60,998		101,995		—		602,274

SBL construction
Pass		2,848		5,966		1,877		927		4,534		—		—		16,152
Special mention		—		—		3,090		—		—		—		—		3,090
Substandard		—		—		2,675		—		—		710		—		3,385
Total SBL construction		2,848		5,966		7,642		927		4,534		710		—		22,627
		.
Direct lease financing
Non-rated		1,273		—		—		—		—		—		—		1,273
Pass		302,362		221,768		92,945		37,664		17,469		4,349		—		676,557
Special mention		—		666		202		125		146		—		—		1,139
Substandard		135		3,898		1,998		372		184		101		—		6,688
Total direct lease financing		303,770		226,332		95,145		38,161		17,799		4,450		—		685,657

SBLOC
Non-rated		—		—		—		—		—		—		3,261		3,261
Pass		—		—		—		—		—		—		977,158		977,158
Total SBLOC		—		—		—		—		—		—		980,419		980,419

IBLOC
Pass		—		—		—		—		—		—		646,230		646,230
Substandard		—		—		—		—		—		—		636		636
Total IBLOC		—		—		—		—		—		—		646,866		646,866

Advisor financing
Pass		92,273		63,083		40,994		24,321		—		—		—		220,671
Special mention		—		—		—		941		—		—		—		941
Total advisor financing		92,273		63,083		40,994		25,262		—		—		—		221,612

Real estate bridge loans
Pass		397,073		1,013,199		461,474		—		—		—		—		1,871,746
Special mention		—		59,423		16,913		—		—		—		—		76,336
Substandard		—		—		51,700		—		—		—		—		51,700
Total real estate bridge lending		397,073		1,072,622		530,087		—		—		—		—		1,999,782

Other loans
Non-rated		2,555		—		—		—		—		11,513		—		14,068
Pass		165		260		363		2,609		2,314		40,101		1,593		47,405
Special mention		—		—		—		—		—		362		—		362
Substandard		—		—		—		—		—		132		—		132
Total other loans⁽¹⁾		2,720		260		363		2,609		2,314		52,108		1,593		61,967

Total	$	975,467	$	1,539,551	$	806,203	$	146,373	$	90,348	$	165,519	$	1,628,878	$	5,352,339

Unamortized loan fees and costs		—		—		—		—		—		—		—		8,800
Total															$	5,361,139

⁽¹⁾Included in Other loans are $11.3 million of SBA loans purchased for CRA purposes as of December 31, 2023. These loans are classified as SBL in the Company’s loan table, which classifies loans by type, as opposed to risk characteristics.

A description of major loan categories is as follows.

SBL. Substantially all SBLs consist of SBA loans. The Bank participates in loan programs established by the SBA, including the 7(a) Loan Guarantee Program (the “7(a) Program”), the 504 Fixed Asset Financing Program (the “504 Program”), and the discontinued PPP. The 7(a) 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 Program includes the financing of real estate and commercial mortgages. In 2020 and 2021, the Company also participated in the PPP, which provided 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 the vast majority of these loans have been reimbursed by the U.S. government, with $1.5 million remaining to be reimbursed as of December 31, 2024. 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. PPP loans are not included in the risk pools because they have inherently different risk characteristics due to the U.S. government guarantee. In the table above, the PPP loans are included in non-rated SBL non-real estate.

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.

SBLOC. SBLOC loans are made to individuals, trusts and other 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 basis to confirm the composition of the client portfolio and its daily market value.

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

Investment advisor financing. In 2020, the Company began originating loans to investment advisors for purposes of debt refinancing, acquisition of another firm or internal succession. Maximum loan amounts are subject to 70% of the estimated business enterprise value, based on a third-party valuation, but may be increased depending upon the debt service coverage ratio. Personal guarantees and blanket business liens are obtained as appropriate. Loan repayment is highly dependent on fee streams from advisor clientele. Accordingly, loss of fee-based investment advisory clients or negative market performance may reduce fees and pose a risk to these credits.

Real estate bridge loans. Real estate bridge loans are transitional commercial mortgage loans which are made to improve and rehabilitate existing properties which already have cash flow, and which are collateralized by those properties. Prior to 2020, such loans were originated for securitization and loans which had been originated but not securitized continue to be accounted for at fair value in “Commercial loans, at fair value”, on the balance sheet. In 2021, originations resumed and are being held for investment in “Loans, net of deferred fees and costs”, on the balance sheet. The Bancorp has minimal exposure to non-multifamily commercial real

estate such as office buildings, and instead has a portfolio largely comprised of rehabilitation bridge loans for apartment buildings. These loans generally have three-year terms with two one-year extensions to allow for the rehabilitation work to be completed and rentals stabilized for an extended period, before being refinanced at lower rates through U.S. Government Sponsored Entities or other lenders. The rehabilitation real estate lending portfolio consists primarily of workforce housing, which the Company considers to be working class apartments at more affordable rental rates.

Consumer fintech loans. Consumer fintech loans consist of short-term extensions of credit including secured credit card loans made in conjunction with marketers and servicers. The majority of secured credit card balances are collateralized with deposits at the Bank, with related income statement impact reflected both in a lower cost of funds and fee income. The lower cost of funds results from balances required to be maintained to collateralize related card use. Fee income for consumer fintech loans is reflected in the “Consumer credit fintech fees” line of the income statement. As a result of credit enhancements on consumer fintech loans, $19.6 million of related charge-offs correlated with $19.6 million of non-interest income. Year-to-date through February 28, 2025, $28.6 million of delinquent consumer fintech loans were fully participated and no charge-offs were recorded.

Other loans. Other loans include commercial and HELOC which the Company generally no longer offers.

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

The Company does not measure an ACL on accrued interest receivable balances, because these balances are written off in a timely manner as a reduction to interest income when loans are placed on non-accrual status. The Company does not expect material amounts of accrued interest receivable for prior year periods to be reversed.

ACL on off-balance sheet credit exposures. The Company estimates expected credit losses over the contractual period in which the Company is exposed to credit risk via a contractual obligation to extend credit, unless that obligation is unconditionally cancellable by the Company. The ACL on off-balance sheet credit exposures is adjusted through the provision for credit losses. The estimate considers the likelihood that funding will occur over the estimated life of the commitment. The amount of the ACL in the liability account as of December 31, 2024 was $2.0 million.

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


	December 31, 2024
	SBL non-real estate		SBL commercial mortgage		SBL construction		Direct lease financing		SBLOC / IBLOC		Advisor financing		Real estate bridge lending		Consumer fintech		Other loans		Deferred fees and costs		Total
Beginning balance 1/1/2024	$	6,059	$	2,820	$	285	$	10,454	$	813	$	1,662	$	4,740	$	—	$	545	$	—	$	27,378
Charge-offs⁽¹⁾		(708)		—		—		(4,575)		—		—		—		(19,619)		(18)		—		(24,920)
Recoveries		229		—		—		318		—		—		—		—		1		—		548
Provision (credit)⁽¹⁾		(608)		383		57		6,928		382		392		1,863		19,619		(78)		—		28,938
Ending balance	$	4,972	$	3,203	$	342	$	13,125	$	1,195	$	2,054	$	6,603	$	—	$	450	$	—	$	31,944

Ending balance: Individually evaluated for expected credit loss	$	403	$	1,039	$	118	$	2,377	$	413	$	—	$	—	$	—	$	—	$	—	$	4,350

Ending balance: Collectively evaluated for expected credit loss	$	4,569	$	2,164	$	224	$	10,748	$	782	$	2,054	$	6,603	$	—	$	450	$	—	$	27,594

Loans:
Ending balance	$	190,322	$	662,091	$	34,685	$	700,553	$	1,564,018	$	273,896	$	2,109,041	$	454,357	$	111,328	$	13,337	$	6,113,628

Ending balance: Individually evaluated for expected credit loss	$	2,693	$	4,885	$	1,585	$	6,026	$	503	$	—	$	12,300	$	—	$	219	$	—	$	28,211

Ending balance: Collectively evaluated for expected credit loss	$	187,629	$	657,206	$	33,100	$	694,527	$	1,563,515	$	273,896	$	2,096,741	$	454,357	$	111,109	$	13,337	$	6,085,417

⁽¹⁾ Lending agreements related to consumer fintech loans had certain provisions accounted for as freestanding credit enhancements which resulted in the company recording a $19.6 million provision for credit losses and a correlated amount in non-interest income resulting in no impact to net income.


	December 31, 2023
	SBL non-real estate		SBL commercial mortgage		SBL construction		Direct lease financing		SBLOC / IBLOC		Advisor financing		Real estate bridge lending		Other loans		Deferred fees and costs		Total
Beginning balance 1/1/2023	$	5,028	$	2,585	$	565	$	7,972	$	1,167	$	1,293	$	3,121	$	643	$	—	$	22,374
Charge-offs		(871)		(76)		—		(3,666)		(24)		—		—		(3)		—		(4,640)
Recoveries		475		75		—		330		—		—		—		299		—		1,179
Provision (credit)		1,427		236		(280)		5,818		(330)		369		1,619		(394)		—		8,465
Ending balance	$	6,059	$	2,820	$	285	$	10,454	$	813	$	1,662	$	4,740	$	545	$	—	$	27,378

Ending balance: Individually evaluated for expected credit loss	$	670	$	343	$	44	$	1,827	$	—	$	—	$	—	$	4	$	—	$	2,888

Ending balance: Collectively evaluated for expected credit loss	$	5,389	$	2,477	$	241	$	8,627	$	813	$	1,662	$	4,740	$	541	$	—	$	24,490

Loans:
Ending balance	$	137,752	$	606,986	$	22,627	$	685,657	$	1,627,285	$	221,612	$	1,999,782	$	50,638	$	8,800	$	5,361,139

Ending balance: Individually evaluated for expected credit loss	$	1,919	$	2,381	$	3,385	$	3,785	$	—	$	—	$	—	$	362	$	—	$	11,832

Ending balance: Collectively evaluated for expected credit loss	$	135,833	$	604,605	$	19,242	$	681,872	$	1,627,285	$	221,612	$	1,999,782	$	50,276	$	8,800	$	5,349,307


	December 31, 2022
	SBL non-real estate		SBL commercial mortgage		SBL construction		Direct lease financing		SBLOC / IBLOC		Advisor financing		Real estate bridge lending		Other loans		Deferred fees and costs		Total
Beginning balance 1/1/2022	$	5,415	$	2,952	$	432	$	5,817	$	964	$	868	$	1,181	$	177	$	—	$	17,806
Charge-offs		(885)		—		—		(576)		—		—		—		—		—		(1,461)
Recoveries		140		—		—		124		—		—		—		24		—		288
Provision (credit)		358		(367)		133		2,607		203		425		1,940		442		—		5,741
Ending balance	$	5,028	$	2,585	$	565	$	7,972	$	1,167	$	1,293	$	3,121	$	643	$	—	$	22,374

Ending balance: Individually evaluated for expected credit loss	$	525	$	441	$	153	$	933	$	—	$	—	$	—	$	15	$	—	$	2,067

Ending balance: Collectively evaluated for expected credit loss	$	4,503	$	2,144	$	412	$	7,039	$	1,167	$	1,293	$	3,121	$	628	$	—	$	20,307

Loans:
Ending balance	$	108,954	$	474,496	$	30,864	$	632,160	$	2,332,469	$	172,468	$	1,669,031	$	61,679	$	4,732	$	5,486,853

Ending balance: Individually evaluated for expected credit loss	$	1,374	$	1,423	$	3,386	$	3,550	$	—	$	—	$	—	$	4,539	$	—	$	14,272

Ending balance: Collectively evaluated for expected credit loss	$	107,580	$	473,073	$	27,478	$	628,610	$	2,332,469	$	172,468	$	1,669,031	$	57,140	$	4,732	$	5,472,581

‎

A summary of the Company’s 2024 net charge-offs, classified by the year of the related loan origination, is as follows (dollars in thousands):


As of December 31, 2024		2024		2023		2022		2021		2020		Prior		Total
SBL non-real estate
Current period charge-offs	$	(14)	$	(53)	$	(149)	$	(101)	$	(320)	$	(71)	$	(708)
Current period recoveries		—		7		—		7		63		152		229
Current period SBL non-real estate net charge-offs		(14)		(46)		(149)		(94)		(257)		81		(479)

SBL commercial mortgage
Current period charge-offs		—		—		—		—		—		—		—
Current period recoveries		—		—		—		—		—		—		—
Current period SBL commercial mortgage net charge-offs		—		—		—		—		—		—		—

SBL construction
Current period charge-offs		—		—		—		—		—		—		—
Current period recoveries		—		—		—		—		—		—		—
Current period SBL construction net charge-offs		—		—		—		—		—		—		—

Direct lease financing
Current period charge-offs		(3)		(744)		(2,739)		(1,015)		(61)		(13)		(4,575)
Current period recoveries		—		39		177		85		8		9		318
Current period direct lease financing net charge-offs		(3)		(705)		(2,562)		(930)		(53)		(4)		(4,257)

SBLOC
Current period charge-offs		—		—		—		—		—		—		—
Current period recoveries		—		—		—		—		—		—		—
Current period SBLOC net charge-offs		—		—		—		—		—		—		—

IBLOC
Current period charge-offs		—		—		—		—		—		—		—
Current period recoveries		—		—		—		—		—		—		—
Current period IBLOC net charge-offs		—		—		—		—		—		—		—

Advisor financing
Current period charge-offs		—		—		—		—		—		—		—
Current period recoveries		—		—		—		—		—		—		—
Current period advisor financing net charge-offs		—		—		—		—		—		—		—

Real estate bridge loans
Current period charge-offs		—		—		—		—		—		—		—
Current period recoveries		—		—		—		—		—		—		—
Current period real estate bridge loans net charge-offs		—		—		—		—		—		—		—

Other loans
Current period charge-offs		(19,619)		(6)		—		—		—		(12)		(19,637)
Current period recoveries		—		—		—		—		—		1		1
Current period other loans net charge-offs		(19,619)		(6)		—		—		—		(11)		(19,636)

Total
Current period charge-offs		(19,636)		(803)		(2,888)		(1,116)		(381)		(96)		(24,920)
Current period recoveries		—		46		177		92		71		162		548
Current period net charge-offs	$	(19,636)	$	(757)	$	(2,711)	$	(1,024)	$	(310)	$	66	$	(24,372)

A summary of the Company’s 2023 net charge-offs, classified by the year of the related loan origination, is as follows (dollars in thousands):


As of December 31, 2023		2023		2022		2021		2020		2019		Prior		Total
SBL non-real estate
Current period charge-offs	$	—	$	—	$	—	$	—	$	—	$	(871)	$	(871)
Current period recoveries		—		—		—		—		—		475		475
Current period SBL non-real estate net charge-offs		—		—		—		—		—		(396)		(396)

SBL commercial mortgage
Current period charge-offs		—		—		—		—		—		(76)		(76)
Current period recoveries		—		—		—		—		—		75		75
Current period SBL commercial mortgage net charge-offs		—		—		—		—		—		(1)		(1)

SBL construction
Current period charge-offs		—		—		—		—		—		—		—
Current period recoveries		—		—		—		—		—		—		—
Current period SBL construction net charge-offs		—		—		—		—		—		—		—

Direct lease financing
Current period charge-offs		(138)		(2,138)		(1,117)		(234)		(39)		—		(3,666)
Current period recoveries		—		48		168		96		—		18		330
Current period direct lease financing net charge-offs		(138)		(2,090)		(949)		(138)		(39)		18		(3,336)

SBLOC
Current period charge-offs		—		—		—		—		—		—		—
Current period recoveries		—		—		—		—		—		—		—
Current period SBLOC net charge-offs		—		—		—		—		—		—		—

IBLOC
Current period charge-offs		—		(12)		(12)		—		—		—		(24)
Current period recoveries		—		—		—		—		—		—		—
Current period IBLOC net charge-offs		—		(12)		(12)		—		—		—		(24)

Advisor financing
Current period charge-offs		—		—		—		—		—		—		—
Current period recoveries		—		—		—		—		—		—		—
Current period advisor financing net charge-offs		—		—		—		—		—		—		—

Real estate bridge loans
Current period charge-offs		—		—		—		—		—		—		—
Current period recoveries		—		—		—		—		—		—		—
Current period real estate bridge loans net charge-offs		—		—		—		—		—		—		—

Other loans
Current period charge-offs		—		—		—		—		—		(3)		(3)
Current period recoveries		—		—		—		—		—		299		299
Current period other loans net charge-offs		—		—		—		—		—		296		296

Total
Current period charge-offs		(138)		(2,150)		(1,129)		(234)		(39)		(950)		(4,640)
Current period recoveries		—		48		168		96		—		867		1,179
Current period net charge-offs	$	(138)	$	(2,102)	$	(961)	$	(138)	$	(39)	$	(83)	$	(3,461)

The Company did not have loans acquired with deteriorated credit quality at either December 31, 2024, or December 31, 2023. In 2024, the Company purchased $46.7 million of SBLs, none of which were credit deteriorated. Additionally, in 2024 the Company participated in SBLs with other institutions in the amount of $19.7 million. On December 31, 2024 the Company sold $82 million of REBL loans.

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


2025	$	216,481
2026		160,674
2027		125,350
2028		56,851
2029		18,977
2030 and thereafter		3,006
Total undiscounted cash flows		581,339
Residual value⁽¹⁾		220,342
Difference between undiscounted cash flows and discounted cash flows		(101,128)
Present value of lease payments recorded as lease receivables	$	700,553

⁽¹⁾Of the $220,342,000, $48,295,000 is not guaranteed by the lessee or other guarantors.

The non-accrual loans in the following table are treated as collateral dependent to the extent they have resulted from borrower financial difficulties (and not from administrative delays or other mitigating factors), and are not brought current. For non-accrual loans, the Company establishes a reserve in the ACL for deficiencies between estimated collateral and loan carrying values. During the twelve months ended December 31, 2024, the Company did not have any significant changes to the extent to which collateral secures its collateral dependent loans due to general collateral deterioration or from other factors. SBL non-real estate are collateralized by business assets, which may include certain real estate. SBL commercial mortgage and construction are collateralized by real estate for small businesses, while real estate bridge lending is primarily collateralized by apartment buildings, or other commercial real estate. SBLOC is collateralized by marketable investment securities while IBLOC is collateralized by the cash value of life insurance. Advisor financing is collateralized by investment advisors’ business franchises. Direct lease financing is collateralized primarily by vehicles, or equipment.

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


	December 31, 2024
	30-59 days		60-89 days		90+ days				Total past due				Total
	past due		past due		still accruing		Non-accrual		and non-accrual		Current		loans
SBL non-real estate	$	229	$	—	$	871	$	2,635	$	3,735	$	186,587	$	190,322
SBL commercial mortgage		—		—		336		4,885		5,221		656,870		662,091
SBL construction		—		—		—		1,585		1,585		33,100		34,685
Direct lease financing		7,069		1,923		1,088		6,026		16,106		684,447		700,553
SBLOC / IBLOC		20,991		1,808		3,322		503		26,624		1,537,394		1,564,018
Advisor financing		—		—		—		—		—		273,896		273,896
Real estate bridge lending⁽¹⁾		—		—		—		12,300		12,300		2,096,741		2,109,041
Consumer fintech		13,419		681		213		—		14,313		440,044		454,357
Other loans		49		—		—		—		49		111,279		111,328
Unamortized loan fees and costs		—		—		—		—		—		13,337		13,337
	$	41,757	$	4,412	$	5,830	$	27,934	$	79,933	$	6,033,695	$	6,113,628

	December 31, 2023
	30-59 days		60-89 days		90+ days				Total past due				Total
	past due		past due		still accruing		Non-accrual		and non-accrual		Current		loans
SBL non-real estate	$	84	$	333	$	336	$	1,842	$	2,595	$	135,157	$	137,752
SBL commercial mortgage		2,183		—		—		2,381		4,564		602,422		606,986
SBL construction		—		—		—		3,385		3,385		19,242		22,627
Direct lease financing		5,163		1,209		485		3,785		10,642		675,015		685,657
SBLOC / IBLOC		21,934		3,607		745		—		26,286		1,600,999		1,627,285
Advisor financing		—		—		—		—		—		221,612		221,612
Real estate bridge lending		—		—		—		—		—		1,999,782		1,999,782
Consumer fintech		—		—		—		—		—		—		—
Other loans		853		76		178		132		1,239		49,399		50,638
Unamortized loan fees and costs		—		—		—		—		—		8,800		8,800
	$	30,217	$	5,225	$	1,744	$	11,525	$	48,711	$	5,312,428	$	5,361,139
⁽¹⁾The $12.3 million shown in the non-accrual column for real estate bridge loans was repaid on January 2, 2025 without loss of principal. The table above does not include an $11.2 million loan accounted for at fair value, and, as such, not reflected in delinquency tables. In third quarter 2024, the borrower notified the Company that he would no longer be making payments on the loan, which is collateralized by a vacant retail property. Based upon a July 2024 appraisal, the “as is” LTV is 84% and the “as stabilized” LTV is 62%. Since 2021, real estate bridge lending originations have consisted of apartment buildings, while this loan was originated previously. In January 2025, two loans totaling $9.8 million were transferred to non-accrual and were accordingly classified as substandard.