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Loans and the Allowance for Credit Losses
 3 Months Ended
Mar. 31, 2022
Receivables [Abstract]  
Loans and the Allowance for Credit Losses

Note 5. Loans and the Allowance for Credit Losses

 

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

 

   March 31,
2022		   December 31,
2021		 
   (dollars in thousands) 
Commercial  (1)  $1,278,477   $1,299,428 
Commercial real estate   4,919,093    4,741,590 
Commercial construction   539,058    540,178 
Residential real estate   250,205    255,269 
Consumer   1,140    1,886 
Gross loans   6,987,973    6,838,351 
Net deferred loan fees   (8,378)   (9,729)
Total loans receivable  $6,979,595   $6,828,622 

 

(1)Included in commercial loans as of March 31, 2022 and December 31, 2021 are PPP loans of $54.3 million and $93.1 million, respectively.

 

As of both March 31, 2022 and December 31, 2021, loan balances of approximately $2.5 billion were pledged to secure borrowings from the FHLB of New York.

 

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

 

   March 31,
2022		  

December 31,

2021

 
   (dollars in thousands) 
Commercial real estate  $2,390   $
-
 
Residential real estate   352    250 
   Total carrying amount  $2,742   $250 

 

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

 

   March 31, 2022 
   Nonaccrual
loans with
ACL		   Nonaccrual
loans
without ACL		   Total
Nonaccrual
loans		 
   (dollars in thousands) 
Commercial  $29,148   $1,193   $30,341 
Commercial real estate   17,497    8,819    26,316 
Commercial construction   
-
    
-
    
-
 
Residential real estate   1,172    1,574    2,746 
Consumer   
-
    
-
    
-
 
Total  $47,817   $11,586   $59,403 

 

   December 31, 2021 
   Nonaccrual loans with ACL   Nonaccrual loans without ACL   Total Nonaccrual loans 
   (dollars in thousands) 
Commercial  $28,746   $1,316   $30,062 
Commercial real estate   15,362    10,031    25,393 
Commercial construction   
-
    3,150    3,150 
Residential real estate   1,239    1,856    3,095 
Consumer   
-
    
-
    
-
 
    Total  $45,347   $16,353   $61,700 

 

Nonaccrual loans and loans 90 days or greater past due and still accruing include both smaller balance homogeneous loans that are collectively evaluated for impairment and loans individually evaluated for impairment.

 

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

 

We evaluate whether a modification, extension or renewal of a loan is a current period origination in accordance with GAAP. Generally, loans up for renewal are subject to a full credit evaluation before the renewal is granted and such loans are considered current period originations for purpose of the table below. The following table presents loans by origination and risk designation as of March 31, 2022 (dollars in thousands):

 

   Term loans amortized cost basis by origination year   Revolving   Total 
   2022   2021   2020   2019   2018   Prior   Loans   Gross Loans 
Commercial                                
Pass  $38,767   $371,431   $56,980   $41,829   $58,230   $175,970   $471,742   $1,214,949 
Special mention   
-
    
-
    
-
    
-
    632    9,656    4,310    14,598 
Substandard   448    164    
-
    1,649    12,203    20,388    14,078    48,930 
Doubtful   
-
    
-
    
-
    
-
    
-
    
-
    
-
    
-
 
Total Commercial  $39,215   $371,595   $56,980   $43,478   $71,065   $206,014   $490,130   $1,278,477 
                                         
Commercial Real Estate                                        
Pass  $371,604   $1,655,013   $507,117   $389,017   $452,309   $1,241,085   $166,342   $4,782,487 
Special mention   
-
    
-
    
-
    3,340    
-
    53,982    15,537    72,859 
Substandard   
-
    1,958    4,500    7,302    20,445    21,117    8,425    63,747 
Doubtful   
-
    
-
    
-
    
-
    
-
    
-
    
-
    
-
 
Total Commercial Real Estate  $371,604   $1,656,971   $511,617   $399,659   $472,754   $1,316,184   $190,304   $4,919,093 
                                         
Commercial Construction                                        
Pass  $
-
   $1,518   $7,370   $6,508   $2,600   $
-
   $510,174   $528,170 
Special mention   
-
    
-
    
-
    
-
    350    
-
    1,443    1,793 
Substandard   
-
    
-
    
-
    
-
    
-
    
-
    9,095    9,095 
Doubtful   
-
    
-
    
-
    
-
    
-
    
-
    
-
    
-
 
Total Commercial Construction  $
-
   $1,518   $7,370   $6,508   $2,950   $
-
   $520,712   $539,058 
                                         
Residential Real Estate                                        
Pass  $9,604   $25,905   $27,697   $23,056   $23,589   $88,610   $42,361   $240,822 
Special mention   
-
    
-
    
-
    
-
    
-
    
-
    
-
    
-
 
Substandard   
-
    
-
    
-
    
-
    
-
    5,919    3,464    9,383 
Doubtful   
-
    
-
    
-
    
-
    
-
    
-
    
-
    
-
 
Total Residential Real Estate  $9,604   $25,905   $27,697   $23,056   $23,589   $94,529   $45,825   $250,205 
                                         
Consumer                                        
Pass  $908   $
-
   $75   $35   $17   $4   $101   $1,140 
Special mention   
-
    
-
    
-
    
-
    
-
    
-
    
-
    
-
 
Substandard   
-
    
-
    
-
    
-
    
-
    
-
    
-
    
-
 
Doubtful   
-
    
-
    
-
    
-
    
-
    
-
    
-
    
-
 
Total Consumer  $908   $
-
   $75   $35   $17   $4   $101   $1,140 
                                         
Total                                        
Pass  $420,883   $2,053,867   $599,239   $460,445   $536,745   $1,505,669   $1,190,720   $6,767,568 
Special mention   
-
    
-
    
-
    3,340    982    63,638    21,290    89,250 
Substandard   448    2,122    4,500    8,951    32,648    47,424    35,062    131,155 
Doubtful   
-
    
-
    
-
    
-
    
-
    
-
    
-
    
-
 
Grand Total  $421,331   $2,055,989   $603,739   $472,736   $570,375   $1,616,731   $1,247,072   $6,987,973 

 

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

 

   Term loans amortized cost basis by origination year   Revolving   Total 
   2021   2020   2019   2018   8.5   Prior   Loans   Gross Loans 
Commercial                                
Pass  $403,203   $58,534   $54,485   $60,409   $95,727   $86,556   $471,588   $1,230,502 
Special mention   
-
    
-
    
-
    
-
    1    4,045    4,266    8,312 
Substandard   170    
-
    1,842    13,298    9,740    21,024    14,540    60,614 
Doubtful   
-
    
-
    
-
    
-
    
-
    
-
    
-
    
-
 
Total Commercial  $403,373   $58,534   $56,327   $73,707   $105,468   $111,625   $490,394   $1,299,428 
                                         
Commercial Real Estate                                        
Pass  $1,692,098   $533,315   $420,995   $452,262   $497,065   $842,244   $170,721   $4,608,700 
Special mention   
-
    
-
    
-
    
-
    5,142    50,438    6,601    62,181 
Substandard   1,968    9,039    4,006    20,624    
-
    26,108    8,964    70,709 
Doubtful   
-
    
-
    
-
    
-
    
-
    
-
    
-
    
-
 
Total Commercial Real Estate  $1,694,066   $542,354   $425,001   $472,886   $502,207   $918,790   $186,286   $4,741,590 
                                         
Commercial Construction                                        
Pass  $8,018   $7,370   $12,625   $2,600   $2,339   $
-
   $490,119   $523,071 
Special mention   
-
    
-
    
-
    
-
    350    
-
    1,443    1,793 
Substandard   
-
    
-
    
-
    
-
    
-
    
-
    15,314    15,314 
Doubtful   
-
    
-
    
-
    
-
    
-
    
-
    
-
    
-
 
Total Commercial Construction  $8,018   $7,370   $12,625   $2,600   $2,689   $
-
   $506,876   $540,178 
                                         
Residential Real Estate                                        
Pass  $27,081   $29,539   $23,611   $25,070   $28,701   $66,249   $44,221   $244,472 
Special mention   
-
    
-
    
-
    
-
    
-
    
-
    
-
    
-
 
Substandard   
-
    
-
    
-
    
-
    
-
    7,262    3,535    10,797 
Doubtful   
-
    
-
    
-
    
-
    
-
    
-
    
-
    
-
 
Total Residential Real Estate  $27,081   $29,539   $23,611   $25,070   $28,701   $73,511   $47,756   $255,269 
                                         
Consumer                                        
Pass  $1,594   $85   $39   $21   $28   $(4)  $123   $1,886 
Special mention   
-
    
-
    
-
    
-
    
-
    
-
    
-
    
-
 
Substandard   
-
    
-
    
-
    
-
    
-
    
-
    
-
    
-
 
Doubtful   
-
    
-
    
-
    
-
    
-
    
-
    
-
    
-
 
Total Consumer  $1,594   $85   $39   $21   $28   $(4)  $123   $1,886 
                                         
Total                                        
Pass  $2,131,994   $628,843   $511,755   $540,362   $623,860   $995,045   $1,176,772   $6,608,631 
Special mention   
-
    
-
    
-
    
-
    5,493    54,483    12,310    72,286 
Substandard   2,138    9,039    5,848    33,922    9,740    54,394    42,353    157,434 
Doubtful   
-
    
-
    
-
    
-
    
-
    
-
    
-
    
-
 
Grand Total  $2,134,132   $637,882   $517,603   $574,284   $639,093   $1,103,922   $1,231,435   $6,838,351 

  

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

 

   March 31, 2022 
   Real
Estate		   Other   Total 
   (dollars in thousands) 
Commercial  $6,120   $25,982   $32,102 
Commercial real estate   62,753    
-
    62,753 
Commercial construction   7,042    
-
    7,042 
Residential real estate   7,528    
-
    7,528 
Consumer   
-
    
-
    
-
 
Total  $83,443   $25,982   $109,425 

 

   December 31, 2021 
   Real
Estate		   Other   Total 
   (dollars in thousands) 
Commercial  $6,385   $26,182   $32,567 
Commercial real estate   55,244    
-
    55,244 
Commercial construction   13,196    
-
    13,196 
Residential real estate   8,856    
-
    8,856 
Consumer   
-
    
-
    
-
 
Total  $83,681   $26,182   $109,863 

 

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

 

   March 31, 2022 
   30-59 Days
Past Due		   60-89 Days
Past Due		   90 Days or
Greater Past
Due and Still
Accruing		   Nonaccrual   Total Past
Due and
Nonaccrual		   Current   Gross Loans 
   (dollars in thousands) 
Commercial  $3,561   $
        -
   $4,420   $30,341   $38,322   $1,240,155   $1,278,477 
Commercial real Estate   3,098    
-
    5,848    26,316    35,262    4,883,831    4,919,093 
Commercial construction   123    
-
    
-
    
-
    123    538,935    539,058 
Residential real Estate   1,970    
-
    1,487    2,746    6,203    244,002    250,205 
Consumer   
-
    
-
    625    
-
    625    515    1,140 
Total  $8,752   $
-
   $12,380   $59,403   $80,535   $6,907,438   $6,987,973 

 

   December 31, 2021 
   30-59 Days
Past Due		   60-89 Days
Past Due		   90 Days or Greater Past Due and Still Accruing   Nonaccrual   Total Past Due and Nonaccrual   Current   Gross Loans 
   (dollars in thousands) 
Commercial  $4,305   $729   $4,457   $30,062   $39,553   $1,259,875   $1,299,428 
Commercial real Estate   1,622    1,009    5,935    25,393    33,959    4,707,631    4,741,590 
Commercial construction   
-
    
-
    
-
    3,150    3,150    537,028    540,178 
Residential real Estate   1,437    292    3,139    3,095    7,963    247,306    255,269 
Consumer   
-
    
-
    
-
    
-
    
-
    1,886    1,886 
Total  $7,364   $2,030   $13,531   $61,700   $84,625   $6,753,726   $6,838,351 

 

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

  

   March 31, 2022 
   Commercial   Commercial real estate   Commercial construction   Residential real estate   Consumer   Total 
   (dollars in thousands) 
Allowance for credit losses - loans                              
Individually evaluated impairment  $14,028   $1,859   $
-
   $94   $
-
   $15,981 
Collectively evaluated impairment   9,154    44,088    3,281    3,361    7    59,891 
Acquired with deteriorated credit quality individually analyzed   2,277    1,921    
-
    
-
    
-
    4,198 
Total  $25,459   $47,868   $3,281   $3,455   $7   $80,070 
                               
Gross loans                              
Individually evaluated impairment  $34,224   $56,905   $7,042   $5,415   $
-
   $103,586 
Collectively evaluated impairment   1,239,157    4,856,340    532,016    242,678    1,140    6,871,331 
Acquired with deteriorated credit quality individually analyzed   5,096    5,848    
-
    2,112    
-
    13,056 
Total  $1,278,477   $4,919,093   $539,058   $250,205   $1,140   $6,987,973 

 

  

December 31, 2021

 
   Commercial   Commercial real estate   Commercial construction   Residential real estate   Consumer   Total 
   (dollars in thousands) 
Allowance for credit losses - loans                        
Individually evaluated impairment  $15,131   $955   $
-
   $131   $
-
   $16,217 
Collectively evaluated impairment   8,561    42,713    3,580    3,497    7    58,358 
Acquired with deteriorated credit quality individually analyzed   2,277    1,921    
-
    
-
    
-
    4,198 
Total  $25,969   $45,589   $3,580   $3,628   $7   $78,773 
                               
Gross loans                              
Individually evaluated impairment  $33,726   $49,310   $13,196   $5,717   $
-
   $101,949 
Collectively evaluated impairment   1,260,537    4,686,346    526,982    246,413    1,886    6,722,164 
Acquired with deteriorated credit quality individually analyzed   5,165    5,934    
-
    3,139    
-
    14,238 
Total  $1,299,428   $4,741,590   $540,178   $255,269   $1,886   $6,838,351 

 

Activity in the Company’s ACL for loans for the three months ended March 31, 2022 is summarized in the table below.

 

   Three Months Ended March 31, 2022 
   Commercial   Commercial real estate   Commercial construction   Residential real estate   Consumer   Unallocated   Total 
   (dollars in thousands) 
Balance as of December 31, 2021  $25,969   $45,589   $3,580   $3,628   $7   $
-
   $78,773 
Charge-offs   (49)   (225)   
-
    
-
    
-
    
-
    (274)
Recoveries   1    
-
    
-
    31    
-
    
-
    32 
(Reversal of) provision for credit losses (loans)   (462)   2,504    (299)   (204)   
-
    
-
    1,539 
                                    
Balance as of March 31, 2022  $25,459   $47,868   $3,281   $3,455   $7   $
-
   $80,070 

 

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

 

   Three Months Ended March 31, 2021 
   Commercial   Commercial real estate   Commercial construction   Residential real estate   Consumer   Unallocated   Total 
   (dollars in thousands) 
Balance as of December 31, 2020  $28,443   $39,330   $8,194   $2,687   $4   $568   $79,226 
Day 1 effect of CECL   (4,225)   9,605    (961)   2,697    9    (568)   6,557 
                                    
Balance as of January 1, 2021 as adjusted for changes in accounting principle   24,218    48,935    7,233    5,384    13    
-
    85,783 
                                    
Charge-offs   
-
    
-
    
-
    
-
    
-
    
-
    
-
 
                                    
Recoveries   60    
-
    
-
    
-
    1    
-
    61 
(Reversal of) provision for credit losses (loans)   2,157    (5,038)   (1,712)   (680)   (3)   
-
    (5,276)
                                    
Balance as of March 31, 2021  $26,435   $43,897   $5,521   $4,704   $11   $
-
   $80,568 

 

Troubled Debt Restructurings

 

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

 

As of March 31, 2022, there were no commitments to lend additional funds to borrowers whose loans were on nonaccrual status or were contractually past due 90 days or greater and still accruing interest, or whose terms have been modified in troubled debt restructurings.

 

As of March 31, 2022, TDRs totaled $76.5 million, of which $29.1 million were on nonaccrual status and $47.4 million were performing under their restructured terms. As of December 31, 2021, TDRs totaled $79.5 million, of which $35.9 million were on nonaccrual status and $43.6 million were performing under their restructured terms. The Company has allocated $9.1 million and $10.4 million of specific allowance related to TDRs as of March 31, 2022 and December 31, 2021, respectively.

 

The following table presents loans by class modified as TDRs that occurred during the three months ended March 31, 2022:

 

       Pre-Modification   Post-Modification 
       Outstanding   Outstanding 
   Number of   Recorded   Recorded 
   Loans   Investment   Investment 
  (dollars in thousands) 
Troubled debt restructurings:               
Commercial   1   $98   $98 
Commercial real estate   1    8,751    8,251 
Total   2   $8,849   $8,349 

 

The commercial loan modified as a TDR during the three months ended March 31, 2022 was a maturity extension, while the commercial real estate loan modified as a TDR during the three months ended March 31, 2022 was an interest rate reduction, that was commensurate with a one-time, $500,000, principal paydown.

 

The following table presents loans by class modified as TDRs that occurred during the three months ended March 31, 2021:

 

       Pre-Modification   Post-Modification 
       Outstanding   Outstanding 
   Number of   Recorded   Recorded 
   Loans   Investment   Investment 
   (dollars in thousands) 
Troubled debt restructurings:             
Commercial real estate   1   $1,658   $1,658 
Residential real estate   2    1,996    1,996 
Total   3   $3,654   $3,654 

 

The two residential real estate loans modified as TDRs during the three months ended March 31, 2021 were maturity extensions, while the one commercial real estate loan was a recast of a nonaccrual credit. 

 

There were no TDRs for which there was a payment default within twelve months following the modification during the three months ended March 31, 2022 and March 31, 2021.

 

Allowance for Credit Losses for Unfunded Commitments

 

The Company has recorded an ACL for unfunded credit commitments, which was recorded in other liabilities. The provision is recorded within the (reversal of) provision for credit losses on the Company’s income statement. The following table presents a rollforward of the allowance for credit losses for unfunded commitments for the three months ended March 31, 2022 and March 31, 2021:

 

   Three Months Ended
March 31,
2022		   Three Months Ended
March 31,
2021		 
   (dollars in thousands) 
Balance at beginning of period  $2,351   $
-
 
Day 1 Effect of CECL   
-
    2,833 
(Reversal of) provision for credit losses (unfunded commitments)   (89)   (490)
     Balance at end of period  $2,262   $2,343 

 

Components of (Reversal of) Provision for Credit Losses

 

The following table summarizes the (reversal of) provision for credit losses for the three months ended March 31, 2022 and March 31, 2021:

 

   Three Months Ended
March 31,
2022		   Three Months Ended
March 31,
2021		 
   (dollars in thousands) 
Provision for (Reversal of) credit losses (loans)  $1,539   $(5,276)
Reversal of credit losses (unfunded commitments)   (89)   (490)
     Provision for (Reversal of) credit losses  $1,450   $(5,766)