LOANS AND LEASES

3 Months Ended

Mar. 31, 2024

3. LOANS AND LEASES

Loans outstanding, excluding those held for sale, by general ledger classification, as of March 31, 2024 and December 31, 2023, consisted of the following:


			% of					% of
	March 31,		Totals			December 31,		Total
(Dollars in thousands)	2024		Loans			2023		Loans
Residential mortgage	$	579,381		10.82	%	$	578,327		10.65	%
Multifamily mortgage		1,827,165		34.11			1,836,390		33.82
Commercial mortgage		615,964		11.50			637,625		11.74
Commercial loans (including equipment financing)		2,210,749		41.27			2,260,524		41.64
Commercial construction		20,573		0.38			17,721		0.33
Home equity lines of credit		35,542		0.66			36,464		0.67
Consumer loans, including fixed rate home equity loans		66,827		1.25			62,036		1.14
Other loans		184		0.01			238		0.01
Total loans	$	5,356,385		100.00	%	$	5,429,325		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 March 31, 2024 and December 31, 2023 are based on the CECL methodology:


			% of					% of
	March 31,		Totals			December 31,		Total
(Dollars in thousands)	2024		Loans			2023		Loans
Primary residential mortgage	$	586,234		10.95	%	$	585,126		10.78	%
Junior lien loan on residence		39,012		0.73			40,203		0.74
Multifamily property		1,827,165		34.13			1,836,390		33.85
Owner-occupied commercial real estate		253,411		4.73			255,110		4.70
Investment commercial real estate		1,035,726		19.35			1,061,197		19.56
Commercial and industrial		1,284,101		23.98			1,314,781		24.23
Lease financing		238,861		4.46			251,423		4.63
Construction		20,658		0.39			17,987		0.33
Consumer and other		68,357		1.28			63,906		1.18
Total loans		5,353,525		100.00	%		5,426,123		100.00	%
Net deferred costs		2,860					3,202
Total loans including net deferred costs	$	5,356,385				$	5,429,325

The following tables present the recorded investment in nonaccrual and loans past due 90 days or over still on accrual by class of loans as of March 31, 2024 and December 31, 2023:


			March 31, 2024
	Nonaccrual				Loans Past Due
	With No				90 Days or Over
	Allowance				And Still
(In thousands)	for Credit Loss		Nonaccrual		Accruing Interest
Primary residential mortgage	$	1,240	$	1,832	$	—
Junior lien loan on residence		120		120		—
Multifamily property		21,073		24,648		—
Investment commercial real estate		—		9,850		—
Commercial and industrial		5,032		31,597		—
Lease financing		1,760		1,760		35
Consumer and other		4		4		—
Total	$	29,229	$	69,811	$	35


			December 31, 2023
	Nonaccrual				Loans Past Due
	With No				90 Days or Over
	Allowance				And Still
(In thousands)	for Credit Loss		Nonaccrual		Accruing Interest
Primary residential mortgage	$	1,263	$	1,263	$	—
Junior lien loan on residence		100		100		—
Multifamily property		16,645		16,645		—
Investment commercial real estate		9,881		9,881		—
Commercial and industrial		3,965		31,430		—
Lease financing		946		2,002		—
Consumer and other		3		3		—
Total	$	32,803	$	61,324	$	—

The following tables present the aging of the recorded investment in past due loans as of March 31, 2024 and December 31, 2023 by class of loans, excluding nonaccrual loans:


	March 31, 2024
	30-59		60-89		90 Days or
	Days		Days		Greater		Total
(In thousands)	Past Due		Past Due		Past Due		Past Due
Primary residential mortgage	$	2,740	$	—	$	—	$	2,740
Multifamily property		28,873		—		—		28,873
Investment commercial real estate		693		—		—		693
Commercial and industrial		11,308		22,157		—		33,465
Lease financing		7,858		69		35		7,962
Consumer and other		1		—		—		1
Total	$	51,473	$	22,226	$	35	$	73,734


	December 31, 2023
	30-59		60-89		90 Days or
	Days		Days		Greater		Total
(In thousands)	Past Due		Past Due		Past Due		Past Due
Primary residential mortgage	$	2,448	$	1,061	$	—	$	3,509
Junior lien 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

Credit Quality Indicators:

The Company 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 booked 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 Board 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 Company 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 non-linear discounted cash flow 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 March 31, 2024 and December 31, 2023 based on originations for the periods indicated; the years represent the year of origination for non-revolving loans:


	Grade as of March 31, 2024 for Loans Originated During
											2019				Revolving-
(In thousands)	2024		2023		2022		2021		2020		and Prior		Revolving		Term		Total
Primary residential mortgage:
Pass	$	11,660	$	93,475	$	113,623	$	78,568	$	55,086	$	225,233	$	—	$	5,714	$	583,359
Special mention		—		—		—		—		—		—		—		—		—
Substandard		—		591		—		—		465		1,819		—		—		2,875
Doubtful		—		—		—		—		—		—		—		—		—
Total primary residential mortgages		11,660		94,066		113,623		78,568		55,551		227,052		—		5,714		586,234
Current period gross charge-offs		—		—		—		—		—		—		—		—		—

Junior lien loan on residence:
Pass		—		855		1,259		125		—		1,234		28,258		7,097		38,828
Special mention		—		—		—		—		—		—		—		—		—
Substandard		—		—		—		—		—		—		163		21		184
Doubtful		—		—		—		—		—		—		—		—		—
Total junior lien loan on residence		—		855		1,259		125		—		1,234		28,421		7,118		39,012
Current period gross charge-offs		—		—		—		—		—		—		—		—		—

Multifamily property:
Pass		1,898		51,993		463,177		641,672		119,308		499,607		8,456		—		1,786,111
Special mention		—		—		3,791		—		—		1,642		—		—		5,433
Substandard		—		—		9,575		7,491		—		18,555		—		—		35,621
Doubtful		—		—		—		—		—		—		—		—		—
Total multifamily property		1,898		51,993		476,543		649,163		119,308		519,804		8,456		—		1,827,165


	Grade as of March 31, 2024 for Loans Originated During
											2019				Revolving-
(In thousands)	2024		2023		2022		2021		2020		and Prior		Revolving		Term		Total
Current period gross charge-offs		—		—		—		—		—		—		—		—		—

Owner-occupied commercial real estate:
Pass		5,851		4,300		23,401		39,233		19,328		126,567		21,556		10,637		250,873
Special mention		—		—		—		1,185		—		1,353		—		—		2,538
Substandard		—		—		—		—		—		—		—		—		—
Doubtful		—		—		—		—		—		—		—		—		—
Total owner-occupied commercial real estate		5,851		4,300		23,401		40,418		19,328		127,920		21,556		10,637		253,411
Current period gross charge-offs		—		—		—		—		—		—		—		—		—

Investment commercial real estate:
Pass		20,061		125,166		172,573		146,053		57,389		427,783		18,092		17,175		984,292
Special mention		—		—		—		—		—		25,563		—		14,087		39,650
Substandard		—		—		9,850		—		—		1,934		—		—		11,784
Doubtful		—		—		—		—		—		—		—		—		—
Total investment commercial real estate		20,061		125,166		182,423		146,053		57,389		455,280		18,092		31,262		1,035,726
Current period gross charge-offs		—		—		—		—		—		—		—		—		—

Commercial and industrial:
Pass		51,937		195,332		206,073		170,717		20,556		38,595		504,811		18,610		1,206,631
Special mention		—		—		—		8,199		—		1,350		2,099		181		11,829
Substandard		12,311		1,212		20,962		2,052		2,064		3,400		20,933		2,707		65,641
Doubtful		—		—		—		—		—		—		—		—		—
Total commercial and industrial		64,248		196,544		227,035		180,968		22,620		43,345		527,843		21,498		1,284,101
Current period gross charge-offs		—		—		—		—		241		—		—		—		241

Lease financing:
Pass		—		48,933		49,735		59,706		37,598		41,129		—		—		237,101
Special mention		—		—		—		—		—		—		—		—		—
Substandard		—		955		—		—		—		805		—		—		1,760
Doubtful		—		—		—		—		—		—		—		—		—
Total lease financing		—		49,888		49,735		59,706		37,598		41,934		—		—		238,861
Current period gross charge-offs		—		—		—		—		—		—		—		—		—

Construction:
Pass		—		—		—		—		—		—		20,658		—		20,658
Special mention		—		—		—		—		—		—		—		—		—
Substandard		—		—		—		—		—		—		—		—		—
Doubtful		—		—		—		—		—		—		—		—		—
Total commercial construction loans		—		—		—		—		—		—		20,658		—		20,658
Current period gross charge-offs		—		—		—		—		—		—		—		—		—

Consumer and other loans:
Pass		17,564		3,934		—		280		149		3,679		38,509		4,238		68,353
Special mention		—		—		—		—		—		—		—		—		—
Substandard		—		—		—		—		—		—		3		—		3
Doubtful		—		—		—		—		—		—		1		—		1
Total consumer and other loans		17,564		3,934		—		280		149		3,679		38,513		4,238		68,357
Current period gross charge-offs		—		—		—		—		—		1		—		12		13


	Grade as of March 31, 2024 for Loans Originated During
											2019				Revolving-
(In thousands)	2024		2023		2022		2021		2020		and Prior		Revolving		Term		Total
Total:
Pass		108,971		523,988		1,029,841		1,136,354		309,414		1,363,827		640,340		63,471		5,176,206
Special mention		—		—		3,791		9,384		—		29,908		2,099		14,268		59,450
Substandard		12,311		2,758		40,387		9,543		2,529		26,513		21,099		2,728		117,868
Doubtful		—		—		—		—		—		—		1		—		1
Total Loans	$	121,282	$	526,746	$	1,074,019	$	1,155,281	$	311,943	$	1,420,248	$	663,539	$	80,467	$	5,353,525
Total Current Period Gross Charge-offs	$	—	$	—	$	—	$	—	$	241	$	1	$	—	$	12	$	254


	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:
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
Total Current Period Gross Charge-offs	$	—	$	5,999	$	2,223	$	—	$	—	$	794	$	139	$	—	$	9,155

At March 31, 2024, $69.4 million of substandard loans were individually evaluated, compared to $60.6 million at December 31, 2023. The increase in individually evaluated substandard loans was primarily due to two multifamily loans with a balance of $8.0 million that were graded as substandard during the first quarter of 2024.

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 table provides information related to the modifications during the three months ended March 31, 2024 by pool segment and type of concession granted:


	Interest Rate Reduction and Term Extension
	Three Months Ended March 31, 2024
			% of Total
	Amortized		Class of
	Cost Basis		Financing
(Dollars in thousands)	at Period End		Receivable
Commercial and industrial	$	12,311		0.96	%
Total	$	12,311		0.96	%

The following table provides information related to the modification during the three months ended March 31, 2023 by pool segment and type of concession granted:


	Significant Pay Delay
	Three Months Ended March 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	%

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 March 31, 2024:


	Payment Status at March 31, 2024
			30-89 Days		90+ Days
(Dollars in thousands)	Current		Past Due		Past Due
Commercial and industrial	$	12,311	$	3,198	$	—
Total	$	12,311	$	3,198	$	—

The following table presents loans by class modified that failed to comply with the modified terms in the twelve months following modification and resulted in a payment default at March 31, 2024:


	Amortized Cost Basis of Modified Loans
	That Subsequently Defaulted
	Three Months Ended March 31, 2024
	Significant		Interest
(Dollars in thousands)	Pay Delay		Rate Reduction
Commercial and industrial	$	—	$	2,949
Total	$	—	$	2,949

There were no loans that failed to comply with their modified terms in the twelve months following modification and resulted in a payment default at March 31, 2023.