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Loans, Lease Receivables, and Allowance for Credit Losses
 3 Months Ended
Mar. 31, 2024
Receivables [Abstract]  
Loans, Lease Receivables, and Allowance for Credit Losses Loans, Lease Receivables, and Allowance for Credit Losses
Loan and lease receivables consist of the following:
March 31,
2024		December 31,
2023
 (In Thousands)
Commercial real estate:  
Commercial real estate — owner occupied
$263,748 $256,479 
Commercial real estate — non-owner occupied
792,858 773,494 
Construction202,382 193,080 
Multi-family
453,321 450,529 
1-4 family
27,482 26,289 
Total commercial real estate
1,739,791 1,699,871 
Commercial and industrial1,120,779 1,105,835 
Consumer and other50,020 44,312 
Total gross loans and leases receivable
2,910,590 2,850,018 
Less:  
   Allowance for loan losses32,799 31,275 
   Deferred loan fees and costs, net(274)(243)
Loans and leases receivable, net
$2,878,065 $2,818,986 
Loans transferred to third parties consist of the guaranteed portions of SBA loans which the Corporation sold in the secondary market and participation interests in other, non-SBA originated loans. The total principal amount of the guaranteed portions of SBA loans sold during the three months ended March 31, 2024, and 2023, was $2.1 million and $5.0 million, respectively. Each of the transfers of these financial assets met the qualifications for sale accounting, and therefore all of the loans transferred during the three months ended March 31, 2024, and 2023, have been derecognized in the unaudited Consolidated Financial Statements. The guaranteed portions of SBA loans were transferred at their fair value and the related gain was recognized upon the transfer as non-interest income in the unaudited Consolidated Financial Statements. The total outstanding balance of sold SBA loans at March 31, 2024, and December 31, 2023, was $80.8 million and $84.2 million, respectively.

The total principal amount of transferred participation interests in other, non-SBA originated loans during the three months ended March 31, 2024, and 2023, was $34.8 million and $22.6 million, respectively, all of which were treated as sales and derecognized under the applicable accounting guidance at the time of transfer. No gain or loss was recognized on participation interests in other, non-SBA originated loans as they were transferred at or near the date of loan origination and the payments received for servicing the portion of the loans participated represents adequate compensation. The total outstanding balance of these transferred loans at March 31, 2024, and December 31, 2023, was $302.8 million and $279.5 million, respectively. As of March 31, 2024, and December 31, 2023, the total amount of the Corporation’s partial ownership of these transferred loans on the unaudited Consolidated Balance Sheets was $376.8 million and $367.4 million, respectively. As of March 31, 2024 and December 31, 2023, the non-SBA originated participation portfolio contained no non-performing loans. The Corporation does not share in the participant’s portion of any potential charge-offs.
The following table illustrates ending balances of the Corporation’s loan and lease portfolio, including non-performing loans by class of receivable, and considering certain credit quality indicators:
March 31, 2024Term Loans Amortized Cost Basis by Origination Year
(In Thousands)20242023202220212020PriorRevolving Loans Amortized Cost BasisTotal
Commercial real estate — owner occupied
Category
I$4,587 $39,361 $46,629 $38,100 $44,415 $88,783 $1,118 $262,993 
II— — — — — 303 — 303 
III— — — — — 452 — 452 
IV— — — — — — — — 
Total$4,587 $39,361 $46,629 $38,100 $44,415 $89,538 $1,118 $263,748 
Commercial real estate — non-owner occupied
Category
I$14,263 $71,834 $76,485 $72,049 $87,338 $368,191 $34,705 $724,865 
II— — — 2,289 2,227 43,867 — 48,383 
III— 680 — — — 18,930 — 19,610 
IV— — — — — — — — 
Total$14,263 $72,514 $76,485 $74,338 $89,565 $430,988 $34,705 $792,858 
Construction
Category
I$10,982 $85,216 $64,039 $8,845 $739 $6,148 $10,688 $186,657 
II— — — — — — — — 
III— — 454 9,289 5,713 269 — 15,725 
IV— — — — — — — — 
Total$10,982 $85,216 $64,493 $18,134 $6,452 $6,417 $10,688 $202,382 
Multi-family
Category
I$19,964 $77,049 $42,927 $69,755 $103,163 $137,451 $3,012 $453,321 
II— — — — — — — — 
III— — — — — — — — 
IV— — — — — — — — 
Total$19,964 $77,049 $42,927 $69,755 $103,163 $137,451 $3,012 $453,321 
1-4 family
Category
I$599 $4,231 $7,395 $2,642 $2,340 $3,004 $7,251 $27,462 
II— — — — — — — — 
III— — — — — — — — 
IV— — — — — 20 — 20 
Total$599 $4,231 $7,395 $2,642 $2,340 $3,024 $7,251 $27,482 
March 31, 2024Term Loans Amortized Cost Basis by Origination Year
(In Thousands)20242023202220212020PriorRevolving Loans Amortized Cost BasisTotal
Commercial and industrial
Category
I$62,280 $281,217 $128,662 $76,007 $34,882 $41,167 $434,523 $1,058,738 
II4,161 1,778 5,952 839 255 264 5,287 18,536 
III— 1,277 7,612 1,802 1,403 4,989 6,613 23,696 
IV— 2,593 6,366 1,221 523 1,627 7,479 19,809 
Total$66,441 $286,865 $148,592 $79,869 $37,063 $48,047 $453,902 $1,120,779 
Consumer and other
Category
I$6,738 $5,873 $8,182 $3,068 $12,139 $5,989 $8,031 $50,020 
II— — — — — — — — 
III— — — — — — — — 
IV— — — — — — — — 
Total$6,738 $5,873 $8,182 $3,068 $12,139 $5,989 $8,031 $50,020 
Total Loans
Category
I$119,413 $564,781 $374,319 $270,466 $285,016 $650,733 $499,328 $2,764,056 
II4,161 1,778 5,952 3,128 2,482 44,434 5,287 67,222 
III— 1,957 8,066 11,091 7,116 24,640 6,613 59,483 
IV— 2,593 6,366 1,221 523 1,647 7,479 $19,829 
Total$123,574 $571,109 $394,703 $285,906 $295,137 $721,454 $518,707 $2,910,590 
December 31, 2023Term Loans Amortized Cost Basis by Origination Year
(In Thousands)20232022202120202019PriorRevolving Loans Amortized Cost BasisTotal
Commercial real estate — owner occupied
Category
I$31,637 $43,156 $38,803 $44,704 $22,078 $72,774 $451 $253,603 
II— — — 260 — — — 260 
III— — — — — 2,616 — 2,616 
IV— — — — — — — — 
Total$31,637 $43,156 $38,803 $44,964 $22,078 $75,390 $451 $256,479 
Commercial real estate — non-owner occupied
Category
I$71,857 $76,689 $72,660 $78,212 $66,262 $314,970 $32,478 $713,128 
II— — 2,302 2,252 19,838 16,274 — 40,666 
III— — — — — 19,700 — 19,700 
IV— — — — — — — — 
Total$71,857 $76,689 $74,962 $80,464 $86,100 $350,944 $32,478 $773,494 
Construction
Category
I$63,660 $83,161 $8,542 $744 $433 $6,528 $15,011 $178,079 
II— — 9,289 5,712 — — — 15,001 
III— — — — — — — — 
IV— — — — — — — — 
Total$63,660 $83,161 $17,831 $6,456 $433 $6,528 $15,011 $193,080 
Multi-family
Category
I$84,932 $41,068 $70,054 $113,294 $22,925 $115,243 $3,013 $450,529 
II— — — — — — — — 
III— — — — — — — — 
IV— — — — — — — — 
Total$84,932 $41,068 $70,054 $113,294 $22,925 $115,243 $3,013 $450,529 
1-4 family
Category
I$4,242 $7,684 $2,672 $2,359 $443 $2,805 $6,062 $26,267 
II— — — — — — — — 
III— — — — — — — — 
IV— — — — — 22 — 22 
Total$4,242 $7,684 $2,672 $2,359 $443 $2,827 $6,062 $26,289 
December 31, 2023Term Loans Amortized Cost Basis by Origination Year
(In Thousands)20232022202120202019PriorRevolving Loans Amortized Cost BasisTotal
Commercial and industrial
Category
I$302,612 $144,167 $85,504 $38,164 $20,151 $26,490 $415,301 $1,032,389 
II1,496 5,280 785 353 94 219 5,706 13,933 
III1,093 7,168 1,882 5,919 3,861 3,957 15,058 38,938 
IV1,482 6,519 1,319 321 133 1,644 9,157 20,575 
Total$306,683 $163,134 $89,490 $44,757 $24,239 $32,310 $445,222 $1,105,835 
Consumer and other
Category
I$5,920 $8,786 $3,167 $12,193 $2,049 $3,485 $8,712 $44,312 
II— — — — — — — — 
III— — — — — — — — 
IV— — — — — — — — 
Total$5,920 $8,786 $3,167 $12,193 $2,049 $3,485 $8,712 $44,312 
Total Loans
Category
I$564,860 $404,711 $281,402 $289,670 $134,341 $542,295 $481,028 $2,698,307 
II1,496 5,280 12,376 8,577 19,932 16,493 5,706 69,860 
III1,093 7,168 1,882 5,919 3,861 26,273 15,058 61,254 
IV1,482 6,519 1,319 321 133 1,666 9,157 $20,597 
Total$568,931 $423,678 $296,979 $304,487 $158,267 $586,727 $510,949 $2,850,018 
Each credit is evaluated for proper risk rating upon origination, at the time of each subsequent renewal, upon receipt and evaluation of updated financial information from the Corporation’s borrowers, or as other circumstances dictate. The Corporation primarily uses a nine grade risk rating system to monitor the ongoing credit quality of its loans and leases. The risk rating grades follow a consistent definition and are then applied to specific loan types based on the nature of the loan. Each risk rating is subjective and, depending on the size and nature of the credit, subject to various levels of review and concurrence on the stated risk rating. In addition to its nine grade risk rating system, the Corporation groups loans into four loan and related risk categories which determine the level and nature of review by management.
Category I — Loans and leases in this category are performing in accordance with the terms of the contract and generally exhibit no immediate concerns regarding the security and viability of the underlying collateral, financial stability of the borrower, integrity or strength of the borrowers’ management team, or the industry in which the borrower operates. The Corporation monitors Category I loans and leases through payment performance, continued maintenance of its personal relationships with such borrowers, and continued review of such borrowers’ compliance with the terms of their respective agreements.
Category II — Loans and leases in this category are beginning to show signs of deterioration in one or more of the Corporation’s core underwriting criteria such as financial stability, management strength, industry trends, or collateral values. Management will place credits in this category to allow for proactive monitoring and resolution with the borrower to possibly mitigate the area of concern and prevent further deterioration or risk of loss to the Corporation. Category II loans are considered performing but are monitored frequently by the assigned business development officer and by asset quality review committees.
Category III — Loans and leases in this category are identified by management as warranting special attention. However, the balance in this category is not intended to represent the amount of adversely classified assets held by the Bank. Category III
loans and leases generally exhibit undesirable characteristics, such as evidence of adverse financial trends and conditions, managerial problems, deteriorating economic conditions within the related industry, or evidence of adverse public filings and may exhibit collateral shortfall positions. Management continues to believe that it will collect all contractual principal and interest in accordance with the original terms of the contracts relating to the loans and leases in this category, and therefore Category III loans are considered performing with no specific reserves established for this category. Category III loans are monitored by management and asset quality review committees on a monthly basis.
Category IV — Loans and leases in this category are non-performing loans. Management has determined that it is unlikely that the Bank will receive the contractual principal and interest in accordance with the original terms of the agreement. Non-performing loans are individually evaluated to assess the need for the establishment of specific reserves or charge-offs. When analyzing the adequacy of collateral, the Corporation obtains external appraisals at least annually. External appraisals are obtained from the Corporation’s approved appraiser listing and are independently reviewed to monitor the quality of such appraisals. To the extent a collateral shortfall position is present, a specific reserve or charge-off will be recorded. Loans and leases in this category are monitored by management and asset quality review committees on a monthly basis.
The delinquency aging of the loan and lease portfolio by class of receivable was as follows:
March 31, 2024
30-59
Days Past Due		60-89
Days Past Due		Greater
Than 90
Days Past Due		Total Past DueCurrentTotal Loans and Leases
 (Dollars in Thousands)
Total loans and leases      
Commercial real estate:      
Owner occupied$— $— $— $— $263,748 $263,748 
Non-owner occupied— — — — 792,858 792,858 
Construction— — — — 202,382 202,382 
Multi-family— — — — 453,321 453,321 
1-4 family— — — — 27,482 27,482 
Commercial and industrial2,071 480 16,745 19,296 1,101,483 1,120,779 
Consumer and other— — — — 50,020 50,020 
Total$2,071 $480 $16,745 $19,296 $2,891,294 $2,910,590 
Percent of portfolio0.07 %0.02 %0.57 %0.66 %99.34 %100.00 %
December 31, 2023
30-59
Days Past Due		60-89
Days Past Due		Greater
Than 90
Days Past Due		Total Past DueCurrentTotal Loans and Leases
 (Dollars in Thousands)
Total loans and leases      
Commercial real estate:      
Owner occupied$— $— $— $— $256,479 $256,479 
Non-owner occupied— — — — 773,494 773,494 
Construction— — — — 193,080 193,080 
Multi-family— — — — 450,529 450,529 
1-4 family— — — — 26,289 26,289 
Commercial and industrial3,430 1,041 18,347 22,818 1,083,017 1,105,835 
Consumer and other— — — — 44,312 44,312 
Total$3,430 $1,041 $18,347 $22,818 $2,827,200 $2,850,018 
Percent of portfolio0.12 %0.04 %0.64 %0.80 %99.20 %100.00 %
The following tables present the amortized cost basis of loans on non-accrual status and loans past due over 89 days still accruing as of:
March 31, 2024
Non-accrual With No Allowance for Credit Loss
Non-accrual With Allowance for Credit Loss
Loans Past Due Over 89 Days Still Accruing
 (In Thousands)
Commercial real estate:  
Commercial real estate — owner occupied$— $— $— 
Commercial real estate — non-owner occupied— — — 
Construction— — — 
Multi-family— — — 
1-4 family20 — — 
Total commercial real estate
20 — — 
Commercial and industrial9,305 10,504 — 
Consumer and other— — — 
Total non-accrual loans and leases
$9,325 $10,504 $— 
December 31, 2023
Non-accrual With No Allowance for Credit Loss
Non-accrual
Loans Past Due Over 89 Days Still Accruing
 (In Thousands)
Commercial real estate:  
Commercial real estate — owner occupied$— $— $— 
Commercial real estate — non-owner occupied— — — 
Construction— — — 
Multi-family— — — 
1-4 family— 22 — 
Total commercial real estate
— 22 — 
Commercial and industrial9,690 10,885 — 
Consumer and other— — — 
Total non-accrual loans and leases
$9,690 $10,907 $— 
March 31,
2024		December 31,
2023
Total non-accrual loans and leases to gross loans and leases
0.68 %0.72 %
Allowance for credit losses to gross loans and leases1.19 1.16 
Allowance for credit losses to non-accrual loans and leases
174.64 160.21 
The following table presents the amortized cost basis of the non-accrual, collateral-dependent commercial and industrial loans as of:
March 31,
2024		December 31,
2023
(In Thousands)
Inventory$1,120 $8,879 
Equipment4,753 3,740 
Real Estate140 46 
Accounts Receivable6,359 278 
Other1,191 1,348 
Total$13,563 $14,291 
Occasionally, the Corporation modifies loans to borrowers in financial distress. There were six commercial and industrial loans for a total of $1.1 million and two commercial real estate non-owner occupied loans for a total of $5.9 million modified during the three months ended March 31, 2024. The modifications consisted of payment deferrals and modified loan repayment schedules. Of these modified loans, two are included in total non-performing loans and are currently between zero and 300 days past due as of March 31, 2024. No loans were modified during the three months ended March 31, 2023. There was one commercial and industrial loan to borrowers experiencing financial distress for a total of $283,000 that was modified during the previous 12 months and which subsequently defaulted during three months ended March 31, 2024. There were no loans to borrowers experiencing financial distress that were modified during the previous 12 months and which subsequently defaulted during the three months ended March 31, 2023. There were no unfunded commitments associated with loans modified for borrowers experiencing financial distress as of March 31, 2024.
Allowance for Credit Losses
The ACL is an estimate of the expected credit losses on financial assets measured at amortized cost, which is measured using relevant information about past events, including historical credit loss experience on financial assets with similar risk characteristics, current conditions, and reasonable and supportable forecasts that affect the collectability of the remaining cash flows over the contractual term of the financial assets. A provision for credit losses is charged to operations based on management’s periodic evaluation of these and other pertinent factors as discussed within Note 1 – Nature of Operations and Summary of Significant Accounting Policies included in the Corporation’s Form 10-K for the year ended December 31, 2023.
Quantitative Considerations
The ACL is primarily calculated utilizing a discounted cash flow (“DCF”) model. Key inputs and assumptions used in this model are discussed below:
•Forecast model - For each portfolio segment, a loss driver analysis (“LDA”) was performed in order to identify appropriate loss drivers and create a regression model for use in forecasting cash flows. The LDA analysis utilized peer FFIEC Call Report data for all pools. The Corporation plans to update the LDA annually.
•Probability of default – PD is the probability that an asset will be in default within a given time frame. The Corporation has defined default as when a charge-off has occurred, a loan goes to non-accrual status, or a loan is greater than 90 days past due. The forecast model is utilized to estimate PDs.
•Loss given default – LGD is the percentage of the asset not expected to be collected due to default. The LGD is derived from using a method referred to as Frye Jacobs which uses industry data.
•Prepayments and curtailments – Prepayments and curtailments are calculated based on the Corporation’s own data. This analysis is updated semi-annually.
•Forecast and reversion – the Corporation has established a one-year reasonable and supportable forecast period with a one-year straight line reversion to the long-term historical average.
•Economic forecast – the Corporation utilizes a third party to provide economic forecasts under various scenarios, which are assessed against economic indicators and management’s observations in the market. As of December 31, 2023, the Corporation selected a forecast which estimates unemployment between 3.89% and 4.04% and GDP growth change between 1.29% and 2.32% over the next four quarters. As of March 31, 2024, the Corporation selected a forecast which estimates unemployment between 3.96% and 4.10% and GDP growth change between 1.43% and 2.99% over the next four quarters. Following the forecast period, the model reverts to long-term averages over four
quarters. Management believes that the resulting quantitative reserve appropriately balances economic indicators with identified risks.

Qualitative Considerations
In addition to the quantitative model, management considers the need for qualitative adjustment for risks not considered in the DCF. Factors that are considered by management in determining loan collectability and the appropriate level of the ACL are listed below:
•The Corporation’s lending policies and procedures, including changes in lending strategies, underwriting standards and practices for collections, write-offs, and recoveries;
•Actual and expected changes in international, national, regional, and local economic and business conditions and developments in which the Corporation operates that affect the collectability of financial assets;
•The experience, ability, and depth of the Corporation’s lending, investment, collection, and other relevant management and staff;
•The volume of past due financial assets, the volume of non-performing assets, and the volume and severity of adversely classified or graded assets;
•The existence and effect of industry concentrations of credit;
•The nature and volume of the portfolio segment or class;
•The quality of the Corporation’s credit review function; and
•The effect of other external factors such as the regulatory, legal and technological environments, competition, and events such as natural disasters or pandemics.

ACL Activity
A summary of the activity in the allowance for credit losses by portfolio segment is as follows:
 As of and for the Three Months Ended March 31, 2024
Owner OccupiedNon-Owner OccupiedConstructionMulti-Family1-4 FamilyCommercial
and
Industrial		Consumer
and Other		Total
 (In Thousands)
Beginning balance$1,540 $5,636 $2,125 $3,571 $266 $19,408 $451 $32,997 
Charge-offs— — — — — (899)(22)(921)
Recoveries1 — — — 110 116 — 227 
Net recoveries (charge-offs)1 — — — 110 (783)(22)(694)
Provision for credit losses35 566 412 28 (64)1,289 60 2,326 
Ending balance$1,576 $6,202 $2,537 $3,599 $312 $19,914 $489 $34,629 
Components:
Allowance for credit losses on loans
1,562 6,164 1,515 3,588 282 19,250 438 32,799 
Allowance for credit losses on unfunded credit commitments
14 38 1,022 11 30 664 51 1,830 
Total ACL$1,576 $6,202 $2,537 $3,599 $312 $19,914 $489 $34,629 
 As of and for the Three Months Ended March 31, 2023
Owner OccupiedNon-Owner OccupiedConstructionMulti-Family1-4 FamilyCommercial
and
Industrial		Consumer and OtherTotal
 (In Thousands)
Beginning balance$1,766 $5,108 $1,646 $2,634 $207 $12,403 $466 $24,230 
Impact of adopting ASC 326(204)(242)796 (386)(45)1,873 26 1,818 
Charge-offs— — — — — (166)— (166)
Recoveries— 1 — — — 95 11 107 
Net recoveries (charge-offs)— 1 — — — (71)11 (59)
Provision for credit losses94 99 (155)653 59 700 111 1,561 
Ending balance$1,656 $4,966 $2,287 $2,901 $221 $14,905 $614 $27,550 
Components:
Allowance for credit losses on loans
$1,636 $4,915 $1,586 $2,892 $201 $14,348 $562 $26,140 
Allowance for credit losses on unfunded credit commitments
20 51 701 9 20 557 52 1,410 
Total ACL$1,656 $4,966 $2,287 $2,901 $221 $14,905 $614 $27,550 
ACL Summary
Loans collectively evaluated for credit losses in the following tables include all performing loans at March 31, 2024 and December 31, 2023. Loans individually evaluated for credit losses include all non-performing loans.

The following tables provide information regarding the allowance for credit losses and balances by type of allowance methodology.
 As of March 31, 2024
Owner OccupiedNon-Owner OccupiedConstructionMulti-Family1-4 FamilyCommercial
and
Industrial		Consumer
and Other		Total
 (In Thousands)
Allowance for credit losses:    
Collectively evaluated for credit losses$1,562 $6,164 $1,515 $3,588 $282 $12,632 $438 $26,181 
Individually evaluated for credit loss— — — — — 6,618 — 6,618 
Total$1,562 $6,164 $1,515 $3,588 $282 $19,250 $438 $32,799 
Loans and lease receivables:    
Collectively evaluated for credit losses$263,748 $792,858 $202,382 $453,321 $27,462 $1,100,970 $50,020 $2,890,761 
Individually evaluated for credit loss— — — — 20 19,809 — 19,829 
Total$263,748 $792,858 $202,382 $453,321 $27,482 $1,120,779 $50,020 $2,910,590 
 As of December 31, 2023
Owner OccupiedNon-Owner OccupiedConstructionMulti-Family1-4 FamilyCommercial
and
Industrial		Consumer
and Other		Total
 (In Thousands)
Allowance for credit losses:    
Collectively evaluated for credit losses$1,525 $5,596 $1,244 $3,562 $221 $12,743 $395 $25,286 
Individually evaluated for credit loss— — — — 22 5,967 — 5,989 
Total$1,525 $5,596 $1,244 $3,562 $243 $18,710 $395 $31,275 
Loans and lease receivables:    
Collectively evaluated for credit losses$256,479 $773,494 $193,080 $450,529 $26,267 $1,085,260 $44,312 $2,829,421 
Individually evaluated for credit loss— — — — 22 20,575 — 20,597 
Total$256,479 $773,494 $193,080 $450,529 $26,289 $1,105,835 $44,312 $2,850,018