LOANS AND LEASES

9 Months Ended

Sep. 30, 2024

3. LOANS AND LEASES

Loans outstanding, excluding those held for sale, by general ledger classification, as of September 30, 2024 and December 31, 2023, consisted of the following:


			% of					% of
	September 30,		Totals			December 31,		Total
(Dollars in thousands)	2024		Loans			2023		Loans
Residential mortgage	$	590,813		11.12	%	$	578,327		10.65	%
Multifamily mortgage		1,784,861		33.58			1,836,390		33.82
Commercial mortgage		578,559		10.88			637,625		11.74
Commercial loans (including equipment financing)		2,221,243		41.79			2,260,524		41.64
Commercial construction		22,421		0.42			17,721		0.33
Home equity lines of credit		38,971		0.73			36,464		0.67
Consumer loans, including fixed rate home equity loans		78,160		1.47			62,036		1.14
Other loans		389		0.01			238		0.01
Total loans	$	5,315,417		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 September 30, 2024 and December 31, 2023 are based on the CECL methodology:


			% of					% of
	September 30,		Totals			December 31,		Total
(Dollars in thousands)	2024		Loans			2023		Loans
Primary residential mortgage	$	590,681		11.12	%	$	585,126		10.78	%
Junior lien loan on residence		42,159		0.79			40,203		0.74
Multifamily property		1,784,861		33.59			1,836,390		33.85
Owner-occupied commercial real estate		269,743		5.08			255,110		4.70
Investment commercial real estate		979,188		18.43			1,061,197		19.56
Commercial and industrial		1,306,170		24.58			1,314,781		24.23
Lease financing		231,284		4.35			251,423		4.63
Construction		28,578		0.54			17,987		0.33
Consumer and other		80,795		1.52			63,906		1.18
Total loans		5,313,459		100.00	%		5,426,123		100.00	%
Net deferred costs		1,958					3,202
Total loans including net deferred costs	$	5,315,417				$	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 September 30, 2024 and December 31, 2023:


			September 30, 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	$	2,136	$	2,136	$	—
Junior lien loan on residence		96		96		—
Multifamily property		15,294		33,337		—
Investment commercial real estate		—		11,715		—
Commercial and industrial		3,641		29,810		—
Lease financing		2,555		3,355		—
Consumer and other		4		4		—
Total	$	23,726	$	80,453	$	—


			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 September 30, 2024 and December 31, 2023 by class of loans, excluding nonaccrual loans:


	September 30, 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	$	2,170	$	1,144	$	—	$	3,314
Junior lien loan on residence		52		—		—		52
Multifamily property		—		28,080		—		28,080
Total	$	2,222	$	29,224	$	—	$	31,446


	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

There were several loan modifications made during the first nine months of 2024, which included one investment commercial real estate loan, one commercial loan and one equipment finance of $17.3 million, $11.7 million and $10.5 million, respectively, that were completed during the third quarter of 2024. Loans past due 30 through 89 days at September 30, 2024 included $19.7 million of multifamily loans to two sponsors. Subsequent to September 30, 2024 these loans have been placed on nonaccrual status and downgraded to substandard.

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 September 30, 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 September 30, 2024 for Loans Originated During
											2019				Revolving-
(In thousands)	2024		2023		2022		2021		2020		and Prior		Revolving		Term		Total
Primary residential mortgage:
Pass	$	41,801	$	90,809	$	110,932	$	76,105	$	53,790	$	208,748	$	—	$	5,680	$	587,865
Special mention		—		—		—		—		—		—		—		—		—
Substandard		—		1,087		97		—		450		1,182		—		—		2,816
Doubtful		—		—		—		—		—		—		—		—		—
Total primary residential mortgages		41,801		91,896		111,029		76,105		54,240		209,930		—		5,680		590,681
Current period gross charge-offs		—		43		—		—		—		—		—		—		43

Junior lien loan on residence:
Pass		—		819		1,188		103		—		1,080		32,410		6,463		42,063
Special mention		—		—		—		—		—		—		—		—		—
Substandard		—		—		—		—		—		—		95		1		96
Doubtful		—		—		—		—		—		—		—		—		—
Total junior lien loan on residence		—		819		1,188		103		—		1,080		32,505		6,464		42,159
Current period gross charge-offs		—		—		—		—		—		—		—		—		—

Multifamily property:
Pass		17,512		51,742		455,228		598,057		118,001		438,991		4,939		3,524		1,687,994
Special mention		—		—		3,405		28,343		—		20,962		—		—		52,710
Substandard		—		—		13,366		—		—		30,791		—		—		44,157
Doubtful		—		—		—		—		—		—		—		—		—
Total multifamily property		17,512		51,742		471,999		626,400		118,001		490,744		4,939		3,524		1,784,861
Current period gross charge-offs		—		—		—		2,088		—		3,291		—		—		5,379

Owner-occupied commercial real estate:
Pass		26,172		4,233		23,033		43,842		19,096		125,011		15,315		10,546		267,248
Special mention		—		—		—		1,161		—		1,334		—		—		2,495
Substandard		—		—		—		—		—		—		—		—		—
Doubtful		—		—		—		—		—		—		—		—		—
Total owner-occupied commercial real estate		26,172		4,233		23,033		45,003		19,096		126,345		15,315		10,546		269,743
Current period gross charge-offs		—		—		—		—		—		—		—		—		—

Investment commercial real estate:
Pass		24,234		124,323		170,365		138,114		55,937		357,040		14,443		26,592		911,048
Special mention		—		—		—		—		—		25,189		—		13,910		39,099
Substandard		—		—		9,786		—		—		19,255		—		—		29,041
Doubtful		—		—		—		—		—		—		—		—		—
Total investment commercial real estate		24,234		124,323		180,151		138,114		55,937		401,484		14,443		40,502		979,188
Current period gross charge-offs		—		—		—		—		—		—		—		—		—

Commercial and industrial:
Pass		165,508		140,258		168,705		129,582		14,002		24,813		549,628		26,371		1,218,867
Special mention		—		210		—		10,983		—		1,350		6,193		615		19,351
Substandard		—		1,894		30,266		52		2,049		3,563		27,419		2,709		67,952
Doubtful		—		—		—		—		—		—		—		—		—
Total commercial and industrial		165,508		142,362		198,971		140,617		16,051		29,726		583,240		29,695		1,306,170
Current period gross charge-offs		—		—		—		—		241		—		—		—		241

Lease financing:
Pass		31,987		45,673		41,099		53,629		28,090		27,450		—		—		227,928
Special mention		—		—		—		—		—		—		—		—		—
Substandard		—		801		—		—		—		2,555		—		—		3,356
Doubtful		—		—		—		—		—		—		—		—		—
Total lease financing		31,987		46,474		41,099		53,629		28,090		30,005		—		—		231,284


	Grade as of September 30, 2024 for Loans Originated During
											2019				Revolving-
(In thousands)	2024		2023		2022		2021		2020		and Prior		Revolving		Term		Total
Current period gross charge-offs		—		—		—		—		—		—		—		—		—

Construction:
Pass		—		—		—		—		—		—		28,578		—		28,578
Special mention		—		—		—		—		—		—		—		—		—
Substandard		—		—		—		—		—		—		—		—		—
Doubtful		—		—		—		—		—		—		—		—		—
Total commercial construction loans		—		—		—		—		—		—		28,578		—		28,578
Current period gross charge-offs		—		—		—		—		—		—		—		—		—

Consumer and other loans:
Pass		29,855		3,063		—		238		129		3,678		40,947		2,881		80,791
Special mention		—		—		—		—		—		—		—		—		—
Substandard		—		—		—		—		—		—		4		—		4
Doubtful		—		—		—		—		—		—		—		—		—
Total consumer and other loans		29,855		3,063		—		238		129		3,678		40,951		2,881		80,795
Current period gross charge-offs		—		—		—		—		—		2		—		19		21

Total:
Pass		337,069		460,920		970,550		1,039,670		289,045		1,186,811		686,260		82,057		5,052,382
Special mention		—		210		3,405		40,487		—		48,835		6,193		14,525		113,655
Substandard		—		3,782		53,515		52		2,499		57,346		27,518		2,710		147,422
Doubtful		—		—		—		—		—		—		—		—		—
Total Loans	$	337,069	$	464,912	$	1,027,470	$	1,080,209	$	291,544	$	1,292,992	$	719,971	$	99,292	$	5,313,459
Total Current Period Gross Charge-offs	$	—	$	43	$	—	$	2,088	$	241	$	3,293	$	—	$	19	$	5,684


	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		—		—		—		—		—		—		—		—		—


	Grade as of December 31, 2023 for Loans Originated During
											2018				Revolving-
(In thousands)	2023		2022		2021		2020		2019		and Prior		Revolving		Term		Total
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 September 30, 2024, $80.0 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 six multifamily loans with a balance of $31.8 million that were graded as substandard during the nine months of 2024, offset by the sale of two multifamily individually evaluated loans totaling $15.1 million.

Loan Modifications:

On January 1, 2023, the Company adopted Accounting Standards Update 2022-02, which replaced the accounting and recognition of troubled debt restructurings. 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. All accruing modified loans were paying in accordance with their modified terms as of September 30, 2024. The Company has not committed to lend additional amounts as of September 30, 2024 to customers with outstanding loans that are classified as modified loans.

The following table provides information related to the modifications during the three months ended September 30, 2024 by pool segment and type of concession granted:


	Significant Payment Delay
	Three Months Ended September 30, 2024
			% of Total
	Amortized		Class of
	Cost Basis		Financing
(Dollars in thousands)	at Period End		Receivable
Primary residential mortgage	$	542		0.09	%
Investment commercial real estate		17,326		1.77	%
Commercial and industrial		68		0.01	%
Total	$	17,936		1.87	%


	Significant Payment Delay
	and Term Extension
	Three Months Ended September 30, 2024
			% of Total
	Amortized		Class of
	Cost Basis		Financing
(Dollars in thousands)	at Period End		Receivable
Commercial and industrial	$	10,521		0.81	%
Total	$	10,521		0.81	%

The following tables provide information related to the modifications during the nine months ended September 30, 2024 by pool segment and type of concession granted:


	Interest Rate Reduction and Term Extension
	Nine Months Ended September 30, 2024
			% of Total
	Amortized		Class of
	Cost Basis		Financing
(Dollars in thousands)	at Period End		Receivable
Commercial and industrial	$	12,169		0.93	%
Total	$	12,169		0.93	%


	Significant Payment Delay
	Nine Months Ended September 30, 2024
			% of Total
	Amortized		Class of
	Cost Basis		Financing
(Dollars in thousands)	at Period End		Receivable
Primary residential mortgage	$	542		0.09	%
Investment commercial real estate		17,326		1.77	%
Commercial and industrial		11,780		0.90	%
Total	$	29,648		2.76	%


	Significant Payment Delay
	and Term Extension
	Nine Months Ended September 30, 2024
			% of Total
	Amortized		Class of
	Cost Basis		Financing
(Dollars in thousands)	at Period End		Receivable
Commercial and industrial	$	10,521		0.81	%
Total	$	10,521		0.81	%

There were no modifications during the three months ended September 30, 2023.

The following tables provide information related to the modifications during the nine months ended September 30, 2023 by pool segment and type of concession granted:


	Significant Pay Delay
	Nine Months Ended September 30, 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
	Nine Months Ended September 30, 2023
			% of Total
	Amortized		Class of
	Cost Basis		Financing
(Dollars in thousands)	at Period End		Receivable
Commercial and industrial	$	3,077		0.23	%
Total	$	3,077		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 September 30, 2024:


	Payment Status at September 30, 2024
			30-89 Days		90+ Days
(Dollars in thousands)	Current		Past Due		Past Due
Primary residential mortgage	$	542	$	118	$	—
Investment commercial real estate		17,326		—		—
Commercial and industrial		34,470		2,799		248
Total	$	52,338	$	2,917	$	248

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 September 30, 2024:


	Amortized Cost Basis of Modified Loans
	That Subsequently Defaulted
	Nine Months Ended September 30, 2024
	Significant		Interest
(Dollars in thousands)	Pay Delay		Rate Reduction
Primary residential mortgage	$	118	$	—
Total	$	118	$	—

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 September 30, 2023:


	Amortized Cost Basis of Modified Loans
	That Subsequently Defaulted
	Nine Months Ended September 30, 2023
	Significant		Interest
(Dollars in thousands)	Pay Delay		Rate Reduction
Commercial and industrial	$	248	$	—
Total	$	248	$	—