v3.22.2.2

Portfolio Loans Receivable | 9 Months Ended
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Sep. 30, 2022
Receivables [Abstract] |
Portfolio Loans Receivable | Portfolio Loans Receivable Major classifications of portfolio loans as are as follows:
Portfolio Loan Categories |  |  |  |
(in thousands) |  | September 30, 2022 |  | December 31, 2021
Real estate: |  |  |  |
Residential |  | $ | 466,849 |  |  | $ | 401,607 |
Commercial |  | 626,030 |  |  | 556,339 |
Construction |  | 235,045 |  |  | 255,147 |
Commercial and Industrial |  | 192,207 |  |  | 175,956 |
Credit card |  | 136,658 |  |  | 141,120 |
Other consumer |  | 1,055 |  |  | 1,033 |
Portfolio loans receivable, gross |  | 1,657,844 |  |  | 1,531,202 |
Deferred origination fees, net |  | (9,843) |  |  | (7,220) |
Allowance for loan losses |  | (26,091) |  |  | (25,181) |
Portfolio loans receivable, net |  | $ | 1,621,910 |  |  | $ | 1,498,801 |
The Company makes loans to customers located primarily in the Washington, D.C. and Baltimore, Maryland metropolitan areas. Although the loan portfolio is diversified, its performance is influenced by the regional economy. The Company’s loan categories, excluding SBA-PPP loans, previously discussed in Note 4, are described below. Residential Real Estate Loans. One-to-four family mortgage loans are primarily secured by owner-occupied primary residences and, to a lesser extent, investor owned residences. Residential loans are originated through the commercial sales teams and Capital Bank Home Loans division. Residential loans also include home equity lines of credit. Owner-occupied residential real estate loans usually have fixed rates for five or seven years and adjust on an annual basis after the initial term based on a typical maturity of 30 years. Investor residential real estate loans are generally based on 25-year terms with a balloon payment due after five years. Generally, the required minimum debt service coverage ratio is 115%. Commercial Real Estate Loans. Commercial real estate loans are originated on owner-occupied and non-owner-occupied properties. These loans may be more adversely affected by conditions in the real estate markets or in the general economy. Commercial loans that are secured by owner-occupied commercial real estate and primarily collateralized by operating cash flows are also included in this category of loans. As of September 30, 2022, there were approximately $354.1 million of owner-occupied commercial real estate loans, representing approximately 57% of the commercial real estate portfolio. Commercial real estate loan terms are generally extended for 10 years or less and amortize generally over 25 years or less. The interest rates on commercial real estate loans generally have initial fixed rate terms that adjust typically at five years. Origination fees are routinely charged for services. Personal guarantees from the principal owners of the business are generally required, supported by a review of the principal owners’ personal financial statements and global debt service obligations. The properties securing the portfolio are diverse in type. This diversity may help reduce the exposure to adverse economic events that affect any single industry. Construction Loans. Construction loans are offered within the Company’s Washington, D.C. and Baltimore, Maryland metropolitan operating areas to builders primarily for the construction of single-family homes and condominium and townhouse conversions or renovations and, to a lesser extent, to individuals. Construction loans typically have terms of 12 to 18 months. The Company frequently transitions the end purchaser to permanent financing or re-underwriting and sale into the secondary market through Capital Bank Home Loans. According to underwriting standards, the ratio of loan principal to collateral value, as established by an independent appraisal, cannot exceed 75% for investor-owned and 80% for owner-occupied properties, although exceptions are sometimes made. Semi-annual stress testing of the construction loan portfolio is conducted, and underlying real estate conditions are monitored as well as trends in sales outcomes versus underwriting valuations as part of ongoing risk management efforts. The borrowers’ progress in construction buildout is monitored to enforce the original underwriting guidelines for construction milestones and completion timelines. Commercial and Industrial. In addition to other loan products, general commercial loans, including commercial lines of credit, working capital loans, term loans, equipment financing, letters of credit and other loan products are offered, primarily in target markets, and underwritten based on each borrower’s ability to service debt from income. These loans are primarily made based on the identified cash flows of the borrower and secondarily, on the underlying collateral provided by the borrower. Most commercial business loans are secured by a lien on general business assets including, among other things, available real estate, accounts receivable, promissory notes, inventory and equipment. Personal guaranties from the borrower or other principal are generally obtained. Credit Cards. Through the OpenSky® credit card division, the Company offers secured, partially secured, and unsecured credit cards on a nationwide basis to under-banked populations and those looking to rebuild their credit scores through a fully digital and mobile platform. The secured lines of credit are secured by a noninterest bearing demand account at the Bank in an amount equal to the full credit limit of the credit card. For the partially secured lines of credit, the Bank offers certain customers an unsecured line in excess of their secured line of credit by using a proprietary scoring model, which considers credit score and repayment history (typically a minimum of six months of on-time repayments, but ultimately determined on a case-by-case basis). Partially secured and unsecured credit cards are only extended to existing secured card customers who have demonstrated sound credit behaviors. Approximately $116.5 million and $126.8 million of the $132.0 million and $140.2 million in secured and partially secured credit card balances were protected by savings deposits held by the Company as of September 30, 2022 and December 31, 2021, respectively. Unsecured balances were $27.3 million and $17.7 million, respectively, for the same periods. Other Consumer Loans. To a limited extent and typically as an accommodation to existing customers, personal consumer loans, such as term loans, car loans and boat loans are offered. Loans acquired through acquisitions are recorded at estimated fair value on their purchase date with no carryover of the related allowance for loan losses. In estimating the fair value of loans acquired, certain factors were considered, including the remaining lives of the acquired loans, payment history, estimated prepayments, estimated loss ratios, estimated value of the underlying collateral and the net present value of cash flows expected. Discounts on loans that were not considered impaired at acquisition were recorded as an accretable discount, which will be recognized in interest income over the terms of the related loans. For loans considered to be impaired at acquisition, the difference between the contractually required payments and expected cash flows are recorded as a non-accretable discount. The remaining non-accretable discounts on loans acquired was $285 thousand as of September 30, 2022 and December 31, 2021. Loans with non-accretable discounts had carrying values of $793 thousand and $818 thousand as of September 30, 2022 and December 31, 2021, respectively. Accretable discounts on loans acquired is summarized as follows:
Accretable Discounts on Loans Acquired |  |  |  |  |  |  |  |  |
|  | For the Three Months Ended |  | For the Nine Months Ended
(in thousands) |  | September 30, 2022 |  | September 30, 2021 |  | September 30, 2022 |  |  | September 30, 2021
Accretable discount at beginning of period |  | $ | 159 |  |  | $ | 212 |  |  | $ | 166 |  |  |  | $ | 221 |
Less: Accretion and payoff of loans |  | (11) |  |  | (23) |  |  | (18) |  |  |  | (32) |
Accretable discount at end of period |  | $ | 148 |  |  | $ | 189 |  |  | $ | 148 |  |  |  | $ | 189 |
The following tables set forth the changes in the allowance for loan losses and an allocation of the allowance for loan losses by class for the three and nine months ended September 30, 2022 and September 30, 2021.
Allowance for Loan Losses |  | Beginning Balance |  | Provision for Loan Losses |  | Charge-Offs |  | Recoveries |  | Ending Balance
(in thousands) |  |  |  |  |
Three Months Ended September 30, 2022 |  |  |  |  |
Real estate: |  |  |  |  |  |  |  |  |  |
Residential |  | $ | 5,863 |  |  | $ | 106 |  |  | $ | — |  |  | $ | — |  |  | $ | 5,969 |
Commercial |  | 8,857 |  |  | (489) |  |  | — |  |  | — |  |  | 8,368 |
Construction |  | 4,473 |  |  | (468) |  |  | — |  |  | — |  |  | 4,005 |
Commercial and Industrial |  | 2,457 |  |  | (262) |  |  | — |  |  | — |  |  | 2,195 |
Credit card |  | 4,759 |  |  | 2,373 |  |  | (1,596) |  |  | 8 |  |  | 5,544 |
Other consumer |  | 10 |  |  | — |  |  | — |  |  | — |  |  | 10 |
Total |  | $ | 26,419 |  |  | $ | 1,260 |  |  | $ | (1,596) |  |  | $ | 8 |  |  | $ | 26,091 |
Nine Months Ended September 30, 2022 |  |  |  |  |  |  |  |  |  |
Real estate: |  |  |  |  |  |  |  |  |  |
Residential |  | $ | 5,612 |  |  | $ | 357 |  |  | $ | — |  |  | $ | — |  |  | $ | 5,969 |
Commercial |  | 8,566 |  |  | (198) |  |  | — |  |  | — |  |  | 8,368 |
Construction |  | 4,699 |  |  | (694) |  |  | — |  |  | — |  |  | 4,005 |
Commercial and Industrial |  | 2,637 |  |  | (442) |  |  | — |  |  | — |  |  | 2,195 |
Credit card |  | 3,655 |  |  | 5,226 |  |  | (3,375) |  |  | 38 |  |  | 5,544 |
Other consumer |  | 12 |  |  | (2) |  |  | — |  |  | — |  |  | 10 |
Total |  | $ | 25,181 |  |  | $ | 4,247 |  |  | $ | (3,375) |  |  | $ | 38 |  |  | $ | 26,091 |
Allowance for Loan Losses |  |  |  |  |  |  |  |  |  |
(in thousands) |  | Beginning Balance |  | Provision for Loan Losses |  | Charge-Offs |  | Recoveries |  | Ending Balance
Three Months Ended September 30, 2021 |  |  |  |  |
Real estate: |  |  |  |  |  |  |  |  |  |
Residential |  | $ | 6,709 |  |  | $ | (289) |  |  | $ | — |  |  | $ | — |  |  | $ | 6,420 |
Commercial |  | 7,777 |  |  | 315 |  |  | — |  |  | — |  |  | 8,092 |
Construction |  | 4,542 |  |  | 330 |  |  | — |  |  | — |  |  | 4,872 |
Commercial and Industrial |  | 2,536 |  |  | (409) |  |  | — |  |  | 1 |  |  | 2,128 |
Credit card |  | 2,502 |  |  | 1,024 |  |  | (305) |  |  | 3 |  |  | 3,224 |
Other consumer |  | 13 |  |  | 4 |  |  | — |  |  | — |  |  | 17 |
Total |  | $ | 24,079 |  |  | $ | 975 |  |  | $ | (305) |  |  | $ | 4 |  |  | $ | 24,753 |
Nine Months Ended September 30, 2021 |  |  |  |  |  |  |  |  |  |
Real estate: |  |  |  |  |  |  |  |  |  |
Residential |  | $ | 7,153 |  |  | $ | (733) |  |  | $ | — |  |  | $ | — |  |  | $ | 6,420 |
Commercial |  | 6,786 |  |  | 1,467 |  |  | (161) |  |  | — |  |  | 8,092 |
Construction |  | 4,595 |  |  | 276 |  |  | — |  |  | 1 |  |  | 4,872 |
Commercial and Industrial |  | 2,417 |  |  | (256) |  |  | (39) |  |  | 6 |  |  | 2,128 |
Credit card |  | 2,462 |  |  | 1,509 |  |  | (777) |  |  | 30 |  |  | 3,224 |
Other consumer |  | 21 |  |  | (4) |  |  | — |  |  | — |  |  | 17 |
Total |  | $ | 23,434 |  |  | $ | 2,259 |  |  | $ | (977) |  |  | $ | 37 |  |  | $ | 24,753 |
As mentioned in Note 1, the allowance for loan losses is believed to adequately provide for probable future losses on existing loans. A major consideration in the determination of the allowance for loan loss on the credit card portfolio is based on historical loss experience in that portfolio and is calculated using both secured and unsecured loan balances. The following tables present, by class and reserving methodology, the allocation of the allowance for loan losses and the gross investment in loans. The allowance for loan losses consists of specific and general components. The specific component relates to loans that are individually classified as impaired. The general component covers non-impaired loans and is based on historical loss experience adjusted for current economic factors.
Allowance for Loan Loss Composition |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
(in thousands) |  |  |  |  |  |  |  |  |  |  |  | Allowance for Loan Losses Ending Balance Evaluated for Impairment: |  | Outstanding Portfolio Loan Balances Evaluated for Impairment:
September 30, 2022 |  |  |  |  |  |  |  | Individually |  | Collectively |  | Individually |  | Collectively
Real estate: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Residential |  |  |  |  |  |  |  |  |  |  |  | $ | — |  |  | $ | 5,969 |  |  | $ | 3,165 |  |  | $ | 463,684 |
Commercial |  |  |  |  |  |  |  |  |  |  |  | — |  |  | 8,368 |  |  | 1,560 |  |  | 624,470 |
Construction |  |  |  |  |  |  |  |  |  |  |  | — |  |  | 4,005 |  |  | 2,852 |  |  | 232,193 |
Commercial and Industrial |  |  |  |  |  |  |  |  |  |  |  | 159 |  |  | 2,036 |  |  | 843 |  |  | 191,364 |
Credit card |  |  |  |  |  |  |  |  |  |  |  | — |  |  | 5,544 |  |  | — |  |  | 136,658 |
Other consumer |  |  |  |  |  |  |  |  |  |  |  | — |  |  | 10 |  |  | — |  |  | 1,055 |
Total |  |  |  |  |  |  |  |  |  |  |  | $ | 159 |  |  | $ | 25,932 |  |  | $ | 8,420 |  |  | $ | 1,649,424 |
December 31, 2021 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Real estate: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Residential |  |  |  |  |  |  |  |  |  |  |  | $ | — |  |  | $ | 5,612 |  |  | $ | 2,835 |  |  | $ | 398,772 |
Commercial |  |  |  |  |  |  |  |  |  |  |  | — |  |  | 8,566 |  |  | 25 |  |  | 556,314 |
Construction |  |  |  |  |  |  |  |  |  |  |  | — |  |  | 4,699 |  |  | 7,803 |  |  | 247,344 |
Commercial and Industrial |  |  |  |  |  |  |  |  |  |  |  | 218 |  |  | 2,419 |  |  | 676 |  |  | 175,280 |
Credit card |  |  |  |  |  |  |  |  |  |  |  | — |  |  | 3,655 |  |  | — |  |  | 141,120 |
Other consumer |  |  |  |  |  |  |  |  |  |  |  | — |  |  | 12 |  |  | — |  |  | 1,033 |
Total |  |  |  |  |  |  |  |  |  |  |  | $ | 218 |  |  | $ | 24,963 |  |  | $ | 11,339 |  |  | $ | 1,519,863 |
Past due loans, segregated by age and class of loans, as of September 30, 2022 and December 31, 2021 were as follows:
Portfolio Loans Past Due |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
|  | Loans 30-89 Days Past Due |  | Loans 90 or More Days Past Due |  | Total Past Due Loans |  | Current Loans |  | Total Portfolio Loans |  | Accruing Loans 90 or More Days Past Due |  | Non-accrual Loans |  |
(in thousands) |  |  |  |  |  |  |  |  |
September 30, 2022 |  |  |  |  |  |  |  |  |
Real estate: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Residential |  | $ | 1,238 |  |  | $ | 2,869 |  |  | $ | 4,107 |  |  | $ | 462,742 |  |  | $ | 466,849 |  |  | $ | — |  |  | $ | 3,165 |  |  |
Commercial |  | — |  |  | 957 |  |  | 957 |  |  | 625,073 |  |  | 626,030 |  |  | — |  |  | 1,560 |  |  |
Construction |  | 843 |  |  | 2,852 |  |  | 3,695 |  |  | 231,350 |  |  | 235,045 |  |  | — |  |  | 2,852 |  |  |
Commercial and Industrial |  | 480 |  |  | 634 |  |  | 1,114 |  |  | 191,093 |  |  | 192,207 |  |  | — |  |  | 843 |  |  |
Credit card |  | 18,453 |  |  | 174 |  |  | 18,627 |  |  | 118,031 |  |  | 136,658 |  |  | 174 |  |  | — |  |  |
Other consumer |  | — |  |  | — |  |  | — |  |  | 1,055 |  |  | 1,055 |  |  | — |  |  | — |  |  |
Total |  | $ | 21,014 |  |  | $ | 7,486 |  |  | $ | 28,500 |  |  | $ | 1,629,344 |  |  | $ | 1,657,844 |  |  | $ | 174 |  |  | $ | 8,420 |  |  |
December 31, 2021 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Real estate: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Residential |  | $ | 469 |  |  | $ | 2,494 |  |  | $ | 2,963 |  |  | $ | 398,644 |  |  | $ | 401,607 |  |  | $ | 72 |  |  | $ | 2,835 |  |  |
Commercial |  | 367 |  |  | 25 |  |  | 392 |  |  | 555,947 |  |  | 556,339 |  |  | — |  |  | 25 |  |  |
Construction |  | — |  |  | 7,803 |  |  | 7,803 |  |  | 247,344 |  |  | 255,147 |  |  | — |  |  | 7,803 |  |  |
Commercial and Industrial |  | 183 |  |  | 593 |  |  | 776 |  |  | 175,180 |  |  | 175,956 |  |  | — |  |  | 676 |  |  |
Credit card |  | 19,022 |  |  | 10 |  |  | 19,032 |  |  | 122,088 |  |  | 141,120 |  |  | 10 |  |  | — |  |  |
Other consumer |  | — |  |  | — |  |  | — |  |  | 1,033 |  |  | 1,033 |  |  | — |  |  | — |  |  |
Total |  | $ | 20,041 |  |  | $ | 10,925 |  |  | $ | 30,966 |  |  | $ | 1,500,236 |  |  | $ | 1,531,202 |  |  | $ | 82 |  |  | $ | 11,339 |  |  |
There were $1.4 million and $6 thousand of loans secured by one-to-four family residential properties in the process of foreclosure as of September 30, 2022 and December 31, 2021, respectively. Impaired portfolio loans were as follows:
Impaired Portfolio Loans |  |  |  |  |  |  |  |  |  |  |  |  |  |
|  | Unpaid Contractual Principal Balance |  | Recorded Investment With No Allowance |  | Recorded Investment With Allowance |  | Total Recorded Investment |  | Related Allowance |  |  |  |
(in thousands) |  |  |  |  |  |  |
September 30, 2022 |  |  |  |  |  |  |
Real estate: |  |  |  |  |  |  |  |  |  |  |  |  |  |
Residential |  | $ | 3,329 |  |  | $ | 3,165 |  |  | $ | — |  |  | $ | 3,165 |  |  | $ | — |  |  |  |  |
Commercial |  | 1,643 |  |  | 1,560 |  |  | — |  |  | 1,560 |  |  | — |  |  |  |  |
Construction |  | 2,939 |  |  | 2,852 |  |  | — |  |  | 2,852 |  |  | — |  |  |  |  |
Commercial and Industrial |  | 1,028 |  |  | 575 |  |  | 268 |  |  | 843 |  |  | 159 |  |  |  |  |
Total |  | $ | 8,939 |  |  | $ | 8,152 |  |  | $ | 268 |  |  | $ | 8,420 |  |  | $ | 159 |  |  |  |  |
December 31, 2021 |  |  |  |  |  |  |  |  |  |  |  |  |  |
Real estate: |  |  |  |  |  |  |  |  |  |  |  |  |  |
Residential |  | $ | 3,022 |  |  | $ | 2,835 |  |  | $ | — |  |  | $ | 2,835 |  |  | $ | — |  |  |  |  |
Commercial |  | 90 |  |  | 25 |  |  | — |  |  | 25 |  |  | — |  |  |  |  |
Construction |  | 7,885 |  |  | 7,803 |  |  | — |  |  | 7,803 |  |  | — |  |  |  |  |
Commercial and Industrial |  | 832 |  |  | 340 |  |  | 336 |  |  | 676 |  |  | 218 |  |  |  |  |
Total |  | $ | 11,829 |  |  | $ | 11,003 |  |  | $ | 336 |  |  | $ | 11,339 |  |  | $ | 218 |  |  |  |  |
The following tables summarize interest recognized on impaired loans:
Interest Recognized on Impaired Portfolio Loans |  |  |
| For the Three Months Ended September 30, 2022 |  | For the Nine Months Ended September 30, 2022
(in thousands) | Average Recorded Investment |  | Interest Recognized |  | Average Recorded Investment |  | Interest Recognized
Real estate: |  |  |  |  |  |  |
Residential | $ | 3,329 |  |  | $ | — |  |  | $ | 3,341 |  |  | $ | — |
Commercial | 1,643 |  |  | — |  |  | 1,650 |  |  | — |
Construction | 2,939 |  |  | — |  |  | 2,938 |  |  | — |
Commercial and Industrial | 1,242 |  |  | — |  |  | 1,267 |  |  | — |
Total | $ | 9,153 |  |  | $ | — |  |  | $ | 9,196 |  |  | $ | — |
Interest Recognized on Impaired Portfolio Loans |  |  |
| For the Three Months Ended September 30, 2021 |  | For the Nine Months Ended September 30, 2021
(in thousands) | Average Recorded Investment |  | Interest Recognized |  | Average Recorded Investment |  | Interest Recognized
Real estate: |  |  |  |  |  |  |
Residential | $ | 5,222 |  |  | $ | 45 |  |  | $ | 5,334 |  |  | $ | 67 |
Commercial | 90 |  |  | 5 |  |  | 90 |  |  | 22 |
Construction | 7,885 |  |  | 127 |  |  | 7,779 |  |  | 127 |
Commercial and Industrial | 1,056 |  |  | 16 |  |  | 1,058 |  |  | 49 |
Total | $ | 14,253 |  |  | $ | 193 |  |  | $ | 14,261 |  |  | $ | 265 |
Impaired portfolio loans include loans acquired on which management has recorded a nonaccretable discount. Credit quality indicators As part of the ongoing monitoring of the credit quality of the Company’s loan portfolio, management tracks certain credit quality indicators including trends related to the risk grade of loans, the level of classified loans, net charge-offs, nonperforming loans, and general economic conditions in the Company’s market. The Company utilizes a risk grading matrix to assign a risk grade to each of its loans. A description of the general characteristics of loans characterized as classified is as follows: Special mention A special mention loan has potential weaknesses that deserve management’s close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the asset or in the Company’s credit position at some future date. Special mention loans are not adversely classified and do not expose the Company to sufficient risk to warrant adverse classification. Borrowers may exhibit poor liquidity and leverage positions resulting from generally negative cash flow or negative trends in earnings. Access to alternative financing may be limited to finance companies for business borrowers and may be unavailable for commercial real estate borrowers. Substandard A substandard loan is inadequately protected by the current financial condition and paying capacity of the obligor or of the collateral pledged, if any. Substandard loans have a well-defined weakness, or weaknesses, that jeopardize the liquidation of the debt. They are characterized by the distinct possibility that the Company will sustain some loss if the deficiencies are not corrected. Borrowers may exhibit recent or unexpected unprofitable operations, an inadequate debt service coverage ratio, or marginal liquidity and capitalization. These loans require more intense supervision by Company management. Doubtful A doubtful loan has all the weaknesses associated with a substandard loan with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions, and values, highly questionable and improbable. The following table presents the balances of classified loans based on the risk grade. Classified loans include Special Mention, Substandard, and Doubtful loans:
Portfolio Loan Classifications |  |  |  |  |  |  |  |  |  |
(in thousands) |  | Pass(1) |  | Special Mention |  | Substandard |  | Doubtful |  | Total
September 30, 2022 |  |  |  |  |  |  |  |  |  |
Real estate: |  |  |  |  |  |  |  |  |  |
Residential |  | $ | 451,471 |  |  | $ | 9,751 |  |  | $ | 5,627 |  |  | $ | — |  |  | $ | 466,849 |
Commercial |  | 618,461 |  |  | 6,009 |  |  | 1,560 |  |  | — |  |  | 626,030 |
Construction |  | 232,193 |  |  | — |  |  | 2,852 |  |  | — |  |  | 235,045 |
Commercial and Industrial |  | 186,448 |  |  | 4,216 |  |  | 1,543 |  |  | — |  |  | 192,207 |
Credit card |  | 136,658 |  |  | — |  |  | — |  |  | — |  |  | 136,658 |
Other consumer |  | 1,055 |  |  | — |  |  | — |  |  | — |  |  | 1,055 |
Portfolio loans receivable, gross |  | $ | 1,626,286 |  |  | $ | 19,976 |  |  | $ | 11,582 |  |  | $ | — |  |  | $ | 1,657,844 |
December 31, 2021 |  |  |  |  |  |  |  |  |  |
Real estate: |  |  |  |  |  |  |  |  |  |
Residential |  | $ | 394,488 |  |  | $ | 2,540 |  |  | $ | 4,579 |  |  | $ | — |  |  | $ | 401,607 |
Commercial |  | 548,244 |  |  | 8,070 |  |  | 25 |  |  | — |  |  | 556,339 |
Construction |  | 243,848 |  |  | 3,496 |  |  | 7,803 |  |  | — |  |  | 255,147 |
Commercial and Industrial |  | 164,066 |  |  | 10,417 |  |  | 1,473 |  |  | — |  |  | 175,956 |
Credit card |  | 141,120 |  |  | — |  |  | — |  |  | — |  |  | 141,120 |
Other consumer |  | 1,033 |  |  | — |  |  | — |  |  | — |  |  | 1,033 |
Portfolio loans receivable, gross |  | $ | 1,492,799 |  |  | $ | 24,523 |  |  | $ | 13,880 |  |  | $ | — |  |  | $ | 1,531,202 |
________________________ (1) Pass includes loans graded exceptional, very good, good, satisfactory and pass/watch, in addition to credit cards and consumer credits that are not individually graded. Impaired loans also include certain loans that have been modified in TDRs where economic concessions have been granted to borrowers who have experienced or are expected to experience financial difficulties. These concessions typically result from the Company’s loss mitigation activities and could include reductions in the interest rate, payment extensions, forgiveness of principal, forbearance or other actions. Certain TDRs are classified as nonperforming at the time of restructure and may only be returned to performing status after confirmation of the borrower’s sustained repayment performance for a reasonable period, generally six months. Modifications such as payment deferrals through September 30, 2022 have been short term in nature and are included in the population of loans deferred and have not impacted TDRs. The status of TDRs is as follows:
Troubled Debt Restructurings |  |  |  |  |  |  |  |
(in thousands) |  | Number of Contracts |  | Recorded Investment
September 30, 2022 |  | Performing |  | Nonperforming |  | Total
Real estate: |  |  |  |  |  |  |  |
Residential |  | 4 |  |  | $ | — |  |  | $ | 437 |  |  | $ | 437 |
Commercial and Industrial |  | 1 |  |  | — |  |  | 70 |  |  | 70 |
Total |  | 5 |  |  | $ | — |  |  | $ | 507 |  |  | $ | 507 |
December 31, 2021 |  |  |  |  |  |  |  |
Real estate: |  |  |  |  |  |  |  |
Residential |  | 4 |  |  | $ | — |  |  | $ | 450 |  |  | $ | 450 |
Commercial and Industrial |  | 1 |  |  | — |  |  | 83 |  |  | 83 |
Total |  | 5 |  |  | $ | — |  |  | $ | 533 |  |  | $ | 533 |
During the three and nine months ended September 30, 2022 the Company did not have any new TDRs and no TDRs defaulted during the same periods. There were no new TDRs added during the three months ended September 30, 2021. There was one new residential TDR during the nine months ended September 30, 2021 for $319 thousand in which the borrower was granted a rate reduction and payment recast. There was one commercial and industrial TDR that was paid off during the nine months ended September 30, 2021 for $200 thousand. Outstanding loan commitments were as follows:
Loan Commitments |  |  |  |
(in thousands) |  | September 30, 2022 |  | December 31, 2021
Unused lines of credit |  |  |  |
Real Estate: |  |  |  |
Residential |  | $ | 24,997 |  |  | $ | 15,747 |
Residential - Home Equity |  | 39,957 |  |  | 37,640 |
Commercial |  | 33,382 |  |  | 17,225 |
Construction |  | 76,034 |  |  | 118,518 |
Commercial and Industrial |  | 48,184 |  |  | 45,135 |
Credit card(1) |  | 119,680 |  |  | 123,874 |
Other consumer |  | 274 |  |  | 2,247 |
Total |  | $ | 342,508 |  |  | $ | 360,386 |
Commitments to originate residential loans held for sale |  | $ | — |  |  | $ | 1,385 |
Letters of credit |  | $ | 5,085 |  |  | $ | 5,105 |
________________________ (1) Outstanding loan commitments in the credit card portfolio include $114.5 million and $121.7 million in secured balances as of September 30, 2022 and December 31, 2021, respectively. Lines of credit are agreements to lend to a customer as long as there is no violation of any condition of the contract. Lines of credit generally have variable interest rates. Such lines do not represent future cash requirements because it is unlikely that all customers will, at any given time, draw upon their lines in full. Loan commitments generally have variable interest rates, fixed expiration dates, and may require payment of a fee. The Company's maximum exposure to credit loss in the event of nonperformance by the customer is the contractual amount of the credit commitment. Loan commitments and lines of credit are generally made on the same terms, including with regard to collateral, as outstanding loans. Management is not aware of any accounting loss to be incurred by funding these loan commitments. The Company maintains an estimated reserve for off balance sheet items such as unfunded lines of credit, which is reflected in other liabilities, with increases or decreases in the reserve being charged to or released from operating expense. Activity for this account is as follows for the periods presented:
Off Balance Sheet Reserve |  |  |  |  |  |  |  |
|  | For the Three Months Ended |  | For the Nine Months Ended
(in thousands) |  | September 30, 2022 |  | September 30, 2021 |  | September 30, 2022 |  | September 30, 2021
Balance at beginning of period |  | $ | 1,631 |  |  | $ | 1,745 |  |  | $ | 1,736 |  |  | $ | 1,775 |
Provision for (reversal of) off balance sheet credit commitments |  | 51 |  |  | (9) |  |  | (54) |  |  | (39) |
Balance at end of period |  | $ | 1,682 |  |  | $ | 1,736 |  |  | $ | 1,682 |  |  | $ | 1,736 |
The Company makes representations and warranties that loans sold to investors meet the investors’ program guidelines and that the information provided by the borrowers is accurate and complete. In the event of a default on a loan sold, the investor may have the right to make a claim for losses due to document deficiencies, program non-compliance, early payment default, and fraud or borrower misrepresentations. The Company maintains a reserve for potential losses on mortgage loans sold, which is reflected in other liabilities, with changes being charged to or released from operating expense. Activity in this reserve is as follows for the periods presented:
Mortgage Loan Put-back Reserve |  |  |  |  |  |  |  |
|  | For the Three Months Ended |  | For the Nine Months Ended
(in thousands) |  | September 30, 2022 |  | September 30, 2021 |  | September 30, 2022 |  | September 30, 2021
Balance at beginning of period |  | $ | 1,166 |  |  | $ | 1,369 |  |  | $ | 1,164 |  |  | $ | 1,160 |
Provision for mortgage loan put backs |  | 4 |  |  | 70 |  |  | 6 |  |  | 279 |
Balance at end of period |  | $ | 1,170 |  |  | $ | 1,439 |  |  | $ | 1,170 |  |  | $ | 1,439 |

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