LOANS

12 Months Ended

Dec. 31, 2023

3. LOANS

The following table presents loans outstanding, by type of loan, as of December 31:


			% of Total					% of Total
(Dollars in thousands)	2023		Loans			2022		Loans
Residential mortgage	$	578,327		10.65	%	$	525,756		9.95	%
Multifamily mortgage		1,836,390		33.82			1,863,915		35.27
Commercial mortgage		637,625		11.74			624,625		11.82
Commercial loans (including equipment financing)		2,260,524		41.64			2,194,094		41.51
Commercial construction		17,721		0.33			4,042		0.07
Home equity lines of credit		36,464		0.67			34,496		0.65
Consumer loans, including fixed rate home equity loans		62,036		1.14			38,014		0.72
Other loans		238		0.01			304		0.01
Total loans	$	5,429,325		100.00	%	$	5,285,246		100.00	%

In determining an appropriate amount for the allowance, the Bank segments and aggregated the loan portfolio based on common characteristics. The following pool segments identified as of December 31, 2023 and 2022 are based on the CECL methodology:


			% of Total					% of Total
(Dollars in thousands)	2023		Loans			2022		Loans
Primary residential mortgage	$	585,126		10.78	%	$	527,784		9.99	%
Junior lien loan on residence		40,203		0.74			38,265		0.73
Multifamily property		1,836,390		33.85			1,863,915		35.29
Owner-occupied commercial real estate		255,110		4.70			272,009		5.15
Investment commercial real estate		1,061,197		19.56			1,044,125		19.77
Commercial and industrial		1,314,781		24.23			1,194,662		22.62
Lease financing		251,423		4.63			288,566		5.46
Construction		17,987		0.33			9,936		0.19
Consumer and other		63,906		1.18			42,319		0.80
Total loans	$	5,426,123		100.00	%	$	5,281,581		100.00	%
Net deferred costs		3,202					3,665
Total loans including net deferred costs	$	5,429,325				$	5,285,246

The Company, through the Bank, may extend credit to officers, directors and their associates. These loans are subject to the Company’s normal lending policy and Federal Reserve Bank Regulation O.

The following table shows the changes in loans to officers, directors and their associates:


(In thousands)	2023			2022
Balance, beginning of year	$	4,480		$	4,337
New loans		3			448
Repayments		(1,186	)		(305	)
Balance, at end of year	$	3,297		$	4,480

The following tables present the recorded investment in nonaccrual and loans past due over 90 days still on accrual by class of loans as of December 31, 2023 and 2022:


	2023
			Loans Past Due Over
			90 Days and Still
(In thousands)	Nonaccrual		Accruing Interest
Primary residential mortgage	$	1,263	$	—
Junior lien loan on residence		100		—
Multifamily property		16,645		—
Investment commercial real estate		9,881		—
Commercial and industrial		31,430		—
Lease financing		2,002		—
Consumer and other		3		—
Total	$	61,324	$	—


	2022
			Loans Past Due Over
			90 Days and Still
(In thousands)	Nonaccrual		Accruing Interest
Primary residential mortgage	$	2,339	$	—
Investment commercial real estate		11,208		—
Commercial and industrial		3,662		—
Lease financing		1,765		—
Total	$	18,974	$	—

The following tables present the recorded investment in past due loans as of December 31, 2023 and 2022 by class of loans, excluding nonaccrual loans:


	2023
	30-59		60-89		Greater Than
	Days		Days		90 Days		Total
(In thousands)	Past Due		Past Due		Past Due		Past Due
Primary residential mortgage	$	2,448	$	1,061	$	—	$	3,509
Junior lien loan on residence		84		—		—		84
Multifamily property		11,814		—		—		11,814
Commercial and industrial		7,297		11,498		—		18,795
Consumer and other		387		—		—		387
Total	$	22,030	$	12,559	$	—	$	34,589


	2022
	30-59		60-89		Greater Than
	Days		Days		90 Days		Total
(In thousands)	Past Due		Past Due		Past Due		Past Due
Primary residential mortgage	$	1,145	$	—	$	—	$	1,145
Multifamily property		882		—		—		882
Commercial and industrial		4,884		681		—		5,565
Total	$	6,911	$	681	$	—	$	7,592

Credit Quality Indicators:

The Bank places all commercial loans into various credit risk rating categories based on an assessment of the expected ability of the borrowers to properly service their debt. The assessment considers numerous factors including, but not limited to, current financial information on the borrower, historical payment experience, strength of any guarantor, nature of and value of any collateral, acceptability of the loan structure and documentation, relevant public information and current economic trends. This credit risk rating analysis is performed when the loan is initially underwritten and then annually based on set criteria in the loan policy.

In addition, the Bank has engaged an independent loan review firm to validate risk ratings and to ensure compliance with our policies and procedures. This review of the following types of loans is performed quarterly:

•

A large sample of relationships or new lending to existing relationships greater than $1,000,000 originated since the prior review;

•

All criticized and classified rated borrowers with relationship exposure of more than $500,000;

•

A large sample of Pass-rated (including Pass Watch) borrowers with total relationships in excess of $1,000,000 and a small sample of Pass related relationships less than $1,000,000;

•

All leveraged loans of $1,000,000 or greater;

•

At least two borrowing relationships managed by each commercial banker;

•

Any new Federal Reserve Bank Regulation “O” loan commitments over $1,000,000; and

•

Any other credits requested by Bank senior management or a member of the Board of Directors and any borrower for which the reviewer determines a review is warranted based upon knowledge of the portfolio, local events, industry stresses, etc.

The review excludes borrowers with commitments of less than $500,000.

The Bank uses the following regulatory definitions for criticized and classified risk ratings:

Special Mention: These loans have a potential weakness that deserves Management’s close attention. If left uncorrected, the potential weaknesses may result in deterioration of the repayment prospects for the loans or of the institution’s credit position at some future date.

Substandard: These loans are inadequately protected by the current net worth and paying capacity of the obligor or of the collateral pledged, if any. Loans so classified have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. They are characterized by the distinct possibility that the institution will sustain some loss if the deficiencies are not corrected.

Doubtful: These loans have all the weaknesses inherent in those classified as substandard, with the added characteristic that the weaknesses make collection or liquidation in full highly questionable and improbable, based on currently existing facts, conditions and values.

Loans not meeting the criteria above that are analyzed individually as part of the above described process are considered to be pass-rated loans.

With the adoption of CECL, loans that are in the process of or expected to be in foreclosure are deemed to be collateral dependent with respect to measuring potential loss and allowance adequacy and are individually evaluated by Management. Loans that do not share common risk characteristics are also evaluated on an individual basis. All other loans are evaluated using a linear discounted cashflow methodology for measuring potential loss and allowance adequacy.

The following is a summary of the credit risk profile of loans by internally assigned grade as of December 31, 2023 and 2022 based on originations for the periods indicated; the years represent the year of origination for non-revolving loans:


	Grade as of December 31, 2023 for Loans Originated During
											2018				Revolving-
(In thousands)	2023		2022		2021		2020		2019		and Prior		Revolving		Term		Total
Primary residential mortgage:
Pass	$	94,688	$	114,532	$	80,175	$	56,191	$	35,418	$	196,251	$	—	$	5,535	$	582,790
Special mention		—		—		—		—		—		—		—		—		—
Substandard		—		—		—		473		935		928		—		—		2,336
Doubtful		—		—		—		—		—		—		—		—		—
Total primary residential mortgages		94,688		114,532		80,175		56,664		36,353		197,179		—		5,535		585,126
Current period gross charge-offs		—		—		—		—		—		—		—		—		—

Junior lien loan on residence:
Pass		872		1,394		135		—		530		808		29,620		6,680		40,039
Special mention		—		—		—		—		—		—		—		—		—
Substandard		—		—		—		—		—		—		163		1		164
Doubtful		—		—		—		—		—		—		—		—		—
Total junior lien loan on residence		872		1,394		135		—		530		808		29,783		6,681		40,203
Current period gross charge-offs		—		—		—		—		—		—		—		—		—

Multifamily property:
Pass		52,072		476,972		645,093		119,934		209,299		295,226		8,451		—		1,807,047
Special mention		—		—		—		—		—		1,650		—		—		1,650
Substandard		—		1,572		7,491		—		10,370		8,260		—		—		27,693
Doubtful		—		—		—		—		—		—		—		—		—
Total multifamily property		52,072		478,544		652,584		119,934		219,669		305,136		8,451		—		1,836,390
Current period gross charge-offs		—		—		2,223		—		—		—		—		—		2,223

Owner-occupied commercial real estate:
Pass		4,333		23,590		39,563		19,457		11,788		126,430		17,559		10,731		253,451
Special mention		—		—		1,197		—		—		—		462		—		1,659
Substandard		—		—		—		—		—		—		—		—		—
Doubtful		—		—		—		—		—		—		—		—		—
Total owner-occupied commercial real estate		4,333		23,590		40,760		19,457		11,788		126,430		18,021		10,731		255,110
Current period gross charge-offs		—		—		—		—		—		—		—		—		—

Investment commercial real estate:
Pass		125,568		173,660		150,026		57,811		144,447		314,411		30,124		13,379		1,009,426
Special mention		—		—		—		—		21,936		3,834		—		14,172		39,942
Substandard		—		9,881		—		—		1,948		—		—		—		11,829
Doubtful		—		—		—		—		—		—		—		—		—
Total investment commercial real estate		125,568		183,541		150,026		57,811		168,331		318,245		30,124		27,551		1,061,197
Current period gross charge-offs		—		1,199		—		—		—		—		—		—		1,199

Commercial and industrial:
Pass		226,699		216,864		191,389		39,003		26,570		16,845		516,844		23,687		1,257,901
Special mention		—		—		758		—		1,161		190		14,232		194		16,535
Substandard		1,212		22,297		1,467		1,865		953		2,524		7,571		2,456		40,345
Doubtful		—		—		—		—		—		—		—		—		—
Total commercial and industrial		227,911		239,161		193,614		40,868		28,684		19,559		538,647		26,337		1,314,781
Current period gross charge-offs		—		—		—		—		—		—		—		—		—

Lease financing:
Pass		50,706		42,447		61,547		39,710		24,113		19,287		—		—		237,810
Special mention		—		9,631		511		—		1,375		94		—		—		11,611


Substandard		1,056		—		—		—		946		—		—		—		2,002
Doubtful		—		—		—		—		—		—		—		—		—
Total lease financing		51,762		52,078		62,058		39,710		26,434		19,381		—		—		251,423
Current period gross charge-offs		—		4,800		—		—		—		794		—		—		5,594

Construction loans:
Pass		—		—		—		—		—		—		17,987		—		17,987
Special mention		—		—		—		—		—		—		—		—		—
Substandard		—		—		—		—		—		—		—		—		—
Doubtful		—		—		—		—		—		—		—		—		—
Total commercial construction loans		—		—		—		—		—		—		17,987		—		17,987
Current period gross charge-offs		—		—		—		—		—		—		—		—		—

Consumer and other loans:
Pass		3,934		—		301		158		—		4,141		51,788		3,581		63,903
Special mention		—		—		—		—		—		—		—		—		—
Substandard		—		—		—		—		—		—		3		—		3
Doubtful		—		—		—		—		—		—		—		—		—
Total consumer and other loans		3,934		—		301		158		—		4,141		51,791		3,581		63,906
Current period gross charge-offs		—		—		—		—		—		—		139		—		139

Total:
Pass		558,872		1,049,459		1,168,229		332,264		452,165		973,399		672,373		63,593		5,270,354
Special mention		—		9,631		2,466		—		24,472		5,768		14,694		14,366		71,397
Substandard		2,268		33,750		8,958		2,338		15,152		11,712		7,737		2,457		84,372
Doubtful		—		—		—		—		—		—		—		—		—
Total Loans	$	561,140	$	1,092,840	$	1,179,653	$	334,602	$	491,789	$	990,879	$	694,804	$	80,416	$	5,426,123


	Grade as of December 31, 2022 for Loans Originated During
											2017				Revolving-
(In thousands)	2022		2021		2020		2019		2018		and Prior		Revolving		Term		Total
Primary residential mortgage:
Pass	$	118,864	$	87,312	$	62,540	$	37,902	$	27,209	$	190,834	$	—	$	691	$	525,352
Special mention		—		—		—		—		—		—		—		—		—
Substandard		—		—		547		1,044		141		700		—		—		2,432
Doubtful		—		—		—		—		—		—		—		—		—
Total primary residential mortgages		118,864		87,312		63,087		38,946		27,350		191,534		—		691		527,784

Junior lien loan on residence:
Pass		1,631		177		42		639		326		953		33,996		—		37,764
Special mention		—		—		—		—		—		—		—		—		—
Substandard		—		—		—		—		—		—		501		—		501
Doubtful		—		—		—		—		—		—		—		—		—
Total junior lien loan on residence		1,631		177		42		639		326		953		34,497		—		38,265

Multifamily property:
Pass		488,657		678,507		118,220		224,129		33,884		305,628		1,246		1,425		1,851,696
Special mention		—		—		—		—		—		1,696		—		—		1,696
Substandard		—		—		—		2,846		—		7,677		—		—		10,523
Doubtful		—		—		—		—		—		—		—		—		—
Total multifamily property		488,657		678,507		118,220		226,975		33,884		315,001		1,246		1,425		1,863,915

Owner-occupied commercial real estate:
Pass		25,315		43,916		20,679		12,244		22,422		126,237		608		20,588		272,009
Special mention		—		—		—		—		—		—		—		—		—
Substandard		—		—		—		—		—		—		—		—		—
Doubtful		—		—		—		—		—		—		—		—		—
Total owner-occupied commercial real estate		25,315		43,916		20,679		12,244		22,422		126,237		608		20,588		272,009

Investment commercial real estate:
Pass		189,829		154,715		59,444		155,995		93,330		305,219		6,590		23,487		988,609
Special mention		—		—		—		13,015		—		13,309		—		14,507		40,831
Substandard		11,208		—		—		3,477		—		—		—		—		14,685
Doubtful		—		—		—		—		—		—		—		—		—
Total investment commercial real estate		201,037		154,715		59,444		172,487		93,330		318,528		6,590		37,994		1,044,125

Commercial and industrial:
Pass		421,072		217,887		76,307		80,359		26,792		5,559		303,526		29,750		1,161,252
Special mention		14,405		—		826		—		193		—		258		—		15,682
Substandard		1,553		1,892		2,148		3,894		277		71		7,893		—		17,728
Doubtful		—		—		—		—		—		—		—		—		—
Total commercial and industrial		437,030		219,779		79,281		84,253		27,262		5,630		311,677		29,750		1,194,662

Lease financing:
Pass		73,155		71,925		58,262		48,942		24,408		8,125		—		—		284,817
Special mention		1,984		—		—		—		—		—		—		—		1,984
Substandard		—		—		—		1,765		—		—		—		—		1,765
Doubtful		—		—		—		—		—		—		—		—		—
Total lease financing		75,139		71,925		58,262		50,707		24,408		8,125		—		—		288,566

Construction loans:
Pass		—		—		—		1,439		—		—		4,064		4,433		9,936
Special mention		—		—		—		—		—		—		—		—		—
Substandard		—		—		—		—		—		—		—		—		—
Doubtful		—		—		—		—		—		—		—		—		—
Total commercial construction loans		—		—		—		1,439		—		—		4,064		4,433		9,936

Consumer and other loans:
Pass		—		381		194		—		—		5,753		31,287		4,704		42,319
Special mention		—		—		—		—		—		—		—		—		—
Substandard		—		—		—		—		—		—		—		—		—
Doubtful		—		—		—		—		—		—		—		—		—
Total consumer and other loans		—		381		194		—		—		5,753		31,287		4,704		42,319

Total:
Pass		1,318,523		1,254,820		395,688		561,649		228,371		948,308		381,317		85,078		5,173,754
Special mention		16,389		—		826		13,015		193		15,005		258		14,507		60,193
Substandard		12,761		1,892		2,695		13,026		418		8,448		8,394		—		47,634
Doubtful		—		—		—		—		—		—		—		—		—
Total Loans	$	1,347,673	$	1,256,712	$	399,209	$	587,690	$	228,982	$	971,761	$	389,969	$	99,585	$	5,281,581

At December 31, 2023, $60.6 million of substandard loans were individually evaluated as compared to $14.7 million at December 31, 2022. The increase in individually evaluated substandard loans was primarily due to one freight credit totaling

$23.5 million and three multifamily credits totaling $16.6 million that were graded as substandard during the year ended December 31, 2023.

Loan Modifications: On January 1, 2023, the Company adopted Accounting Standards Update 2022-02, which replaced the accounting and recognition of TDRs. The Company will provide modifications, which may include other than insignificant delays in payment of amounts due, extension of the terms of the notes or reduction in the interest rates on the notes. In certain instances, the Company may grant more than one type of modification. The following tables provide information related to the modifications during the year ended December 31, 2023 by pool segment and type of concession granted:


	Significant Payment Delay
	Year ended December 31, 2023
			% of Total
	Amortized		Class of
	Cost Basis		Financing
(Dollars in thousands)	at Period End		Receivable
Commercial and industrial	$	248		0.02	%
Total	$	248		0.02	%


	Interest Rate Reduction
	Year Ended December 31, 2023
			% of Total
	Amortized		Class of
	Cost Basis		Financing
(Dollars in thousands)	at Period End		Receivable
Commercial and industrial	$	3,006		0.23	%
Total	$	3,006		0.23	%

The following table depicts the payment status of the loans that were modified to a borrower experiencing financial difficulties on or after January 1, 2023, the date we adopted ASU 2022-02, through December 31, 2023:


	Payment Status at December 31, 2023
			30-89 Days		90+ Days
(Dollars in thousands)	Current		Past Due		Past Due
Commercial and industrial	$	3,254	$	—	$	—
Total	$	3,254	$	—	$	—

The Company has not committed to lend additional amounts as of December 31, 2023 to customers with outstanding loans that are classified as modified loans.

The following table presents loans by class modified that failed to comply with the modified terms in the year following modification and resulted in a payment default at December 31, 2023:


	Amortized Cost Basis of Modified Loans
	That Subsequently Defaulted
	Year Ended December 31, 2023
	Interest Only		Interest
(Dollars in thousands)	Period Extension		Rate Reduction
Commercial and industrial	$	248	$	3,006
Total	$	248	$	3,006

Upon the Company's determination that a modified loan (or portion of a loan) has subsequently been deemed uncollectible, the loan (or portion of the loan) is written off. Therefore, the amortized cost basis of the loan is reduced by the uncollectible amount and the allowance for credit losses is adjusted by the same amount.

Troubled Debt Restructurings: Prior to the adoption of ASU 2022-02 on January 1, 2023, the Company classified certain loans as troubled debt restructuring ("TDR") loans when credit terms to a borrower in financial difficulty were modified, in accordance with ASC 310-40. With the adoption of ASU 2022-02 as of January 1, 2023, the Company has ceased to recognize or measure new TDRs but those existing at December 31, 2022 will remain until settled.

The Company allocated $1.2 million of specific reserves to customers whose loan terms had been modified in troubled debt restructurings as of December 31, 2022.

During the years ended December 31, 2022 and 2021, the terms of certain loans were modified as troubled debt restructurings. The modification of the terms of such loans included one or a combination of the following: a reduction of the stated interest rate of the loan; or an extension of the maturity date at a stated rate of interest lower than the current market rate for new debt with similar risk.

The following table presents loans by class modified as troubled debt restructurings that occurred during the year ended December 31, 2022:


			Pre-Modification		Post-Modification
			Outstanding		Outstanding
	Number of		Recorded		Recorded
(Dollars in thousands)	Loans		Investment		Investment
Investment commercial real estate		1	$	11,208	$	11,208
Total		1	$	11,208	$	11,208

The following table presents loans by class modified as troubled debt restructurings that occurred during the year ended December 31, 2021:


			Pre-Modification		Post-Modification
			Outstanding		Outstanding
	Number of		Recorded		Recorded
(Dollars in thousands)	Loans		Investment		Investment
Primary residential mortgage		3	$	603	$	603
Junior lien loan on residence		1		18		18
Commercial and industrial		1		2,070		2,070
Total		5	$	2,691	$	2,691

The identification of the troubled debt restructured loans did not have a significant impact on the allowance for credit losses. In addition, there were no charge-offs as a result of the classification of these loans as troubled debt restructurings during the years ended December 31, 2022 or 2021.

There were no payment defaults on loans that were modified as troubled debt restructurings during the year ended December 31, 2022.

The following table presents loans by class modified as troubled debt restructurings during the year ended December 31, 2021 for which there was a payment default during the same period:


	Number of		Recorded
(Dollars in thousands)	Loans		Investment
Primary residential mortgage		1	$	218
Total		1	$	218

The defaults described above did not have a material impact on the allowance for credit losses or provisions during 2022 and 2021.

A loan is accounted for as a modification made to a borrower experiencing financial difficulty when a modification has been granted that is deemed concessionary and not temporary to a debtor experiencing financial difficulty. This evaluation is performed under the Company’s internal underwriting policy. The modification of the terms of such loans may include one or more of the following: (1) a reduction of the stated interest rate of the loan to a rate that is lower than the current market rate for new debt with similar risk; (2) an extension of an interest only period for a predetermined period of time; (3) an extension of the maturity date; or (4) an extension of the amortization period over which future payments will be computed. At the time a loan is modified, the Bank performs an underwriting analysis, which includes, at a minimum, obtaining current financial statements and tax returns, copies of all leases, and an updated independent appraisal of the property. A loan will continue to accrue interest if it can be reasonably determined that the borrower should be able to perform under the modified

terms, that the loan has not been chronically delinquent (both to debt service and real estate taxes) or in nonaccrual status since its inception, and that there have been no charge-offs on the loan. Restructured loans with previous charge-offs would not accrue interest at the time of the modification. At a minimum, six consecutive months of contractual payments would need to be made on a modified loan before returning it to accrual status.