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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

 

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the Quarterly Period Ended June 30, 2024

or

 

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the Transition Period From To

Commission File Number: 000-30421

HANMI FINANCIAL CORPORATION

(Exact Name of Registrant as Specified in its Charter)

 

Delaware

 

95-4788120

(State or Other Jurisdiction of

 

(I.R.S. Employer

Incorporation or Organization)

 

Identification No.)

 

900 Wilshire Boulevard, Suite 1250

 

Los Angeles, California

 

90017

(Address of Principal Executive Offices)

 

(Zip Code)

(213) 382-2200

(Registrant’s Telephone Number, Including Area Code)

Not Applicable

(Former Name, Former Address and Former Fiscal Year, If Changed Since Last Report)

Securities Registered Pursuant to Section 12(b) of the Act:

 

Title of each class

 

Trading

Symbol(s)

 

Name of each exchange on which registered

Common Stock, $0.001 par value

 

HAFC

 

Nasdaq Global Select Market

 

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes No

Indicate by check mark whether the Registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the Registrant was required to submit such files). Yes No

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer

 

Accelerated filer

Non-accelerated filer

 

Smaller reporting company

 

 

 

 

Emerging Growth Company

 

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes No

As of July 30, 2024, there were 30,268,376 outstanding shares of the Registrant’s Common Stock.

 

 


 

Hanmi Financial Corporation and Subsidiaries Quarterly Report on Form 10-Q

Three Months Ended June 30, 2024

Table of Contents

 

 

 

Part I – Financial Information

 

 

 

 

 

 

 

Item 1.

 

Financial Statements

 

3

 

 

 

 

 

 

 

Consolidated Balance Sheets at June 30, 2024 (unaudited) and December 31, 2023

 

3

 

 

 

 

 

 

 

Consolidated Statements of Income for the three and six months ended June 30, 2024 and 2023 (unaudited)

 

4

 

 

 

 

 

 

 

Consolidated Statements of Comprehensive Income for the three and six months ended June 30, 2024 and 2023 (unaudited)

 

5

 

 

 

 

 

 

 

Consolidated Statements of Changes in Stockholders’ Equity for the three and six months ended June 30, 2024 and 2023 (unaudited)

 

6

 

 

 

 

 

 

 

Consolidated Statements of Cash Flows for the six months ended June 30, 2024 and 2023 (unaudited)

 

8

 

 

 

 

 

 

 

Notes to Consolidated Financial Statements (unaudited)

 

9

 

 

 

 

 

Item 2.

 

Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

43

 

 

 

 

 

Item 3.

 

Quantitative and Qualitative Disclosures About Market Risk

 

64

 

 

 

 

 

Item 4.

 

Controls and Procedures

 

64

 

 

 

 

 

 

 

Part II – Other Information

 

 

 

 

 

 

 

Item 1.

 

Legal Proceedings

 

65

 

 

 

 

 

Item 1A.

 

Risk Factors

 

65

 

 

 

 

 

Item 2.

 

Unregistered Sales of Equity Securities, Use of Proceeds, and Issuer Purchases of Equity Securities

 

65

 

 

 

 

 

Item 3.

 

Defaults Upon Senior Securities

 

65

 

 

 

 

 

Item 4.

 

Mine Safety Disclosures

 

65

 

 

 

 

 

Item 5.

 

Other Information

 

65

 

 

 

 

 

Item 6.

 

Exhibits

 

66

 

 

 

Signatures

 

67

 

2


 

Part I — Financial Information

Item 1. Financial Statements

Hanmi Financial Corporation and Subsidiaries

Consolidated Balance Sheets

(in thousands, except share data)

 

 

 

June 30,

 

 

December 31,

 

 

 

2024

 

 

2023

 

 

 

(Unaudited)

 

 

 

 

Assets

 

 

 

 

 

 

Cash and due from banks

 

$

313,079

 

 

$

302,324

 

Securities available for sale, at fair value (amortized cost of $985,305 and $967,031 as of June 30, 2024 and December 31, 2023, respectively)

 

 

877,638

 

 

 

865,739

 

Loans held for sale, at the lower of cost or fair value

 

 

10,467

 

 

 

12,013

 

Loans receivable, net of allowance for credit losses of $67,729 and $69,462 as of June 30, 2024 and December 31, 2023, respectively

 

 

6,108,630

 

 

 

6,112,972

 

Accrued interest receivable

 

 

23,958

 

 

 

23,371

 

Premises and equipment, net

 

 

21,955

 

 

 

21,959

 

Customers' liability on acceptances

 

 

551

 

 

 

625

 

Servicing assets

 

 

6,836

 

 

 

7,070

 

Goodwill and other intangible assets, net

 

 

11,048

 

 

 

11,099

 

Federal Home Loan Bank ("FHLB") stock, at cost

 

 

16,385

 

 

 

16,385

 

Income tax assets

 

 

42,246

 

 

 

35,226

 

Bank-owned life insurance

 

 

56,534

 

 

 

56,335

 

Prepaid expenses and other assets

 

 

97,020

 

 

 

105,223

 

Total assets

 

$

7,586,347

 

 

$

7,570,341

 

 

 

 

 

 

 

 

Liabilities and Stockholders’ Equity

 

 

 

 

 

 

Liabilities:

 

 

 

 

 

 

Deposits:

 

 

 

 

 

 

Noninterest-bearing

 

$

1,959,963

 

 

$

2,003,596

 

Interest-bearing

 

 

4,369,377

 

 

 

4,276,978

 

Total deposits

 

 

6,329,340

 

 

 

6,280,574

 

Accrued interest payable

 

 

47,699

 

 

 

39,306

 

Bank's liability on acceptances

 

 

551

 

 

 

625

 

Borrowings

 

 

292,500

 

 

 

325,000

 

Subordinated debentures ($136,800 and $136,800 face amount less unamortized discount and debt issuance costs of $6,482 and $6,788 as of June 30, 2024 and December 31, 2023, respectively)

 

 

130,318

 

 

 

130,012

 

Accrued expenses and other liabilities

 

 

78,880

 

 

 

92,933

 

Total liabilities

 

 

6,879,288

 

 

 

6,868,450

 

Stockholders’ equity:

 

 

 

 

 

 

Preferred stock, $0.001 par value; authorized 10,000,000 shares; no shares issued as of June 30, 2024 and December 31, 2023

 

 

 

 

 

 

Common stock, $0.001 par value; authorized 62,500,000 shares; issued 34,124,910 shares (30,272,110 shares outstanding) and 33,918,035 shares (30,368,655 shares outstanding) as of June 30, 2024 and December 31, 2023, respectively

 

 

34

 

 

 

34

 

Additional paid-in capital

 

 

588,647

 

 

 

586,912

 

Accumulated other comprehensive loss, net of tax benefit of $31,854 and $29,058 as of June 30, 2024 and December 31, 2023, respectively

 

 

(78,000

)

 

 

(71,928

)

Retained earnings

 

 

333,392

 

 

 

319,048

 

Less treasury stock; 3,852,800 shares and 3,549,380 shares as of June 30, 2024 and December 31, 2023, respectively

 

 

(137,014

)

 

 

(132,175

)

Total stockholders’ equity

 

 

707,059

 

 

 

701,891

 

Total liabilities and stockholders’ equity

 

$

7,586,347

 

 

$

7,570,341

 

 

See Accompanying Notes to Consolidated Financial Statements (Unaudited)

3


 

Hanmi Financial Corporation and Subsidiaries

Consolidated Statements of Income (Unaudited)

(in thousands, except share and per share data)

 

 

 

Three Months Ended

 

 

Six Months Ended

 

 

 

June 30,

 

 

June 30,

 

 

 

2024

 

 

2023

 

 

2024

 

 

2023

 

Interest and dividend income:

 

 

 

 

 

 

 

 

 

 

 

 

Interest and fees on loans receivable

 

$

90,752

 

 

$

83,567

 

 

$

182,427

 

 

$

164,490

 

Interest on securities

 

 

5,238

 

 

 

4,126

 

 

 

10,193

 

 

 

8,152

 

Dividends on FHLB stock

 

 

357

 

 

 

283

 

 

 

719

 

 

 

572

 

Interest on deposits in other banks

 

 

2,313

 

 

 

2,794

 

 

 

4,914

 

 

 

4,859

 

Total interest and dividend income

 

 

98,660

 

 

 

90,770

 

 

 

198,253

 

 

 

178,073

 

Interest expense:

 

 

 

 

 

 

 

 

 

 

 

 

Interest on deposits

 

 

46,495

 

 

 

32,115

 

 

 

92,133

 

 

 

57,613

 

Interest on borrowings

 

 

1,896

 

 

 

1,633

 

 

 

3,551

 

 

 

4,002

 

Interest on subordinated debentures

 

 

1,649

 

 

 

1,600

 

 

 

3,295

 

 

 

3,182

 

Total interest expense

 

 

50,040

 

 

 

35,348

 

 

 

98,979

 

 

 

64,797

 

Net interest income before credit loss expense

 

 

48,620

 

 

 

55,422

 

 

 

99,274

 

 

 

113,276

 

Credit loss expense (recovery)

 

 

961

 

 

 

(77

)

 

 

1,188

 

 

 

2,056

 

Net interest income after credit loss expense (recovery)

 

 

47,659

 

 

 

55,499

 

 

 

98,086

 

 

 

111,220

 

Noninterest income:

 

 

 

 

 

 

 

 

 

 

 

 

Service charges on deposit accounts

 

 

2,429

 

 

 

2,571

 

 

 

4,878

 

 

 

5,151

 

Trade finance and other service charges and fees

 

 

1,277

 

 

 

1,173

 

 

 

2,691

 

 

 

2,431

 

Gain on sale of Small Business Administration ("SBA") loans

 

 

1,644

 

 

 

1,212

 

 

 

3,126

 

 

 

3,081

 

Other operating income

 

 

2,707

 

 

 

2,979

 

 

 

5,095

 

 

 

5,608

 

Total noninterest income

 

 

8,057

 

 

 

7,935

 

 

 

15,790

 

 

 

16,271

 

Noninterest expense:

 

 

 

 

 

 

 

 

 

 

 

 

Salaries and employee benefits

 

 

20,434

 

 

 

20,365

 

 

 

42,019

 

 

 

40,975

 

Occupancy and equipment

 

 

4,607

 

 

 

4,500

 

 

 

9,144

 

 

 

8,912

 

Data processing

 

 

3,686

 

 

 

3,465

 

 

 

7,237

 

 

 

6,718

 

Professional fees

 

 

1,749

 

 

 

1,376

 

 

 

3,642

 

 

 

2,710

 

Supplies and communications

 

 

570

 

 

 

638

 

 

 

1,172

 

 

 

1,314

 

Advertising and promotion

 

 

669

 

 

 

748

 

 

 

1,576

 

 

 

1,581

 

Other operating expenses

 

 

3,561

 

 

 

3,188

 

 

 

6,930

 

 

 

4,862

 

Total noninterest expense

 

 

35,276

 

 

 

34,280

 

 

 

71,720

 

 

 

67,072

 

Income before tax

 

 

20,440

 

 

 

29,154

 

 

 

42,156

 

 

 

60,419

 

Income tax expense

 

 

5,989

 

 

 

8,534

 

 

 

12,541

 

 

 

17,807

 

Net income

 

$

14,451

 

 

$

20,620

 

 

$

29,615

 

 

$

42,612

 

Basic earnings per share

 

$

0.48

 

 

$

0.68

 

 

$

0.98

 

 

$

1.40

 

Diluted earnings per share

 

$

0.48

 

 

$

0.67

 

 

$

0.97

 

 

$

1.39

 

Weighted-average shares outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

30,055,913

 

 

 

30,324,264

 

 

 

30,089,341

 

 

 

30,320,281

 

Diluted

 

 

30,133,646

 

 

 

30,387,041

 

 

 

30,166,181

 

 

 

30,383,226

 

 

See Accompanying Notes to Consolidated Financial Statements (Unaudited)

4


 

Hanmi Financial Corporation and Subsidiaries

Consolidated Statements of Comprehensive Income (Unaudited)

(in thousands)

 

 

 

Three Months Ended

 

 

Six Months Ended

 

 

 

June 30,

 

 

June 30,

 

 

 

2024

 

 

2023

 

 

2024

 

 

2023

 

Net income

 

$

14,451

 

 

$

20,620

 

 

$

29,615

 

 

$

42,612

 

Other comprehensive income (loss), net of tax:

 

 

 

 

 

 

 

 

 

 

 

 

Unrealized gain (loss):

 

 

 

 

 

 

 

 

 

 

 

 

Unrealized holding gain (loss) on available for sale securities

 

 

(1,277

)

 

 

(9,730

)

 

 

(6,375

)

 

 

3,877

 

Unrealized loss on cash flow hedges

 

 

(746

)

 

 

 

 

 

(2,953

)

 

 

 

Unrealized gain (loss)

 

 

(2,023

)

 

 

(9,730

)

 

 

(9,328

)

 

 

3,877

 

Income tax benefit (expense) related to other comprehensive income items

 

 

588

 

 

 

2,827

 

 

 

2,933

 

 

 

(849

)

Other comprehensive income (loss), net of tax

 

 

(1,435

)

 

 

(6,903

)

 

 

(6,395

)

 

 

3,028

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Reclassification adjustment for losses included in net income

 

 

460

 

 

 

1,871

 

 

 

460

 

 

 

1,871

 

Income tax benefit related to reclassification adjustment

 

 

(135

)

 

 

(548

)

 

 

(137

)

 

 

(553

)

Reclassification adjustment for losses included in net income, net of tax

 

 

325

 

 

 

1,323

 

 

 

323

 

 

 

1,318

 

Other comprehensive income (loss) net of tax

 

 

(1,110

)

 

 

(5,580

)

 

 

(6,072

)

 

 

4,346

 

Total comprehensive income

 

$

13,341

 

 

$

15,040

 

 

$

23,543

 

 

$

46,958

 

 

See Accompanying Notes to Consolidated Financial Statements (Unaudited)

5


 

Hanmi Financial Corporation and Subsidiaries

Consolidated Statements of Changes in Stockholders’ Equity (Unaudited)

For the Three Months Ended June 30, 2024 and 2023

(in thousands, except share data)

 

 

 

Common Stock - Number of Shares

 

 

Stockholders' Equity

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Additional

 

 

Other

 

 

 

 

 

Treasury

 

 

Total

 

 

 

Shares

 

 

Treasury

 

 

Shares

 

 

Common

 

 

Paid-in

 

 

Comprehensive

 

 

Retained

 

 

Stock,

 

 

Stockholders'

 

 

 

Issued

 

 

Shares

 

 

Outstanding

 

 

Stock

 

 

Capital

 

 

Loss

 

 

Earnings

 

 

at Cost

 

 

Equity

 

Balance at April 1, 2023

 

 

33,827,801

 

 

 

(3,272,514

)

 

 

30,555,287

 

 

$

33

 

 

$

584,884

 

 

$

(79,059

)

 

$

283,910

 

 

$

(127,603

)

 

$

662,165

 

Issuance of awards pursuant to equity incentive plans, net of forfeitures

 

 

35,620

 

 

 

 

 

 

35,620

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Share-based compensation expense

 

 

 

 

 

 

 

 

 

 

 

 

 

 

507

 

 

 

 

 

 

 

 

 

 

 

 

507

 

Shares surrendered to satisfy tax liability upon vesting of equity awards

 

 

 

 

 

(5,119

)

 

 

(5,119

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(79

)

 

 

(79

)

Repurchase of common stock

 

 

 

 

 

(100,000

)

 

 

(100,000

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1,444

)

 

 

(1,444

)

Cash dividends paid (common stock, $0.25/share)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(7,629

)

 

 

 

 

 

(7,629

)

Net income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

20,620

 

 

 

 

 

 

20,620

 

Change in unrealized gain (loss) on securities available for sale, net of income taxes

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(5,580

)

 

 

 

 

 

 

 

 

(5,580

)

Balance at June 30, 2023

 

 

33,863,421

 

 

 

(3,377,633

)

 

 

30,485,788

 

 

$

33

 

 

$

585,391

 

 

$

(84,639

)

 

$

296,901

 

 

$

(129,126

)

 

$

668,560

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at April 1, 2024

 

 

33,957,284

 

 

 

(3,680,926

)

 

 

30,276,358

 

 

$

34

 

 

$

587,687

 

 

$

(76,890

)

 

$

326,526

 

 

$

(134,257

)

 

$

703,100

 

Issuance of awards pursuant to equity incentive plans, net of forfeitures

 

 

167,626

 

 

 

 

 

 

167,626

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Share-based compensation expense

 

 

 

 

 

 

 

 

 

 

 

 

 

 

960

 

 

 

 

 

 

 

 

 

 

 

 

960

 

Shares surrendered to satisfy tax liability upon vesting of equity awards

 

 

 

 

 

(1,874

)

 

 

(1,874

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(28

)

 

 

(28

)

Repurchase of common stock

 

 

 

 

 

(170,000

)

 

 

(170,000

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(2,729

)

 

 

(2,729

)

Cash dividends paid (common stock, $0.25/share)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(7,585

)

 

 

 

 

 

(7,585

)

Net income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

14,451

 

 

 

 

 

 

14,451

 

Change in unrealized gain (loss) on securities available for sale, net of income taxes

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(906

)

 

 

 

 

 

 

 

 

(906

)

Change in unrealized gain (loss) on cash flow hedge, net of income taxes

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(204

)

 

 

 

 

 

 

 

 

(204

)

Balance at June 30, 2024

 

 

34,124,910

 

 

 

(3,852,800

)

 

 

30,272,110

 

 

$

34

 

 

$

588,647

 

 

$

(78,000

)

 

$

333,392

 

 

$

(137,014

)

 

$

707,059

 

 

See Accompanying Notes to Consolidated Financial Statements (Unaudited)

 

6


 

Hanmi Financial Corporation and Subsidiaries

Consolidated Statements of Changes in Stockholders’ Equity (Unaudited)

For the Six Months Ended June 30, 2024 and 2023

(in thousands, except share data)

 

 

 

Common Stock - Number of Shares

 

 

Stockholders' Equity

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Additional

 

 

Other

 

 

 

 

 

Treasury

 

 

Total

 

 

 

Shares

 

 

Treasury

 

 

Shares

 

 

Common

 

 

Paid-in

 

 

Comprehensive

 

 

Retained

 

 

Stock,

 

 

Stockholders'

 

 

 

Issued

 

 

Shares

 

 

Outstanding

 

 

Stock

 

 

Capital

 

 

Loss

 

 

Earnings

 

 

at Cost

 

 

Equity

 

Balance at January 1, 2023

 

 

33,708,234

 

 

 

(3,222,613

)

 

 

30,485,621

 

 

$

33

 

 

$

583,410

 

 

$

(88,985

)

 

$

269,542

 

 

$

(126,485

)

 

$

637,515

 

Stock options exercised

 

 

50,000

 

 

 

 

 

 

50,000

 

 

 

 

 

 

821

 

 

 

 

 

 

 

 

 

 

 

 

821

 

Issuance of awards pursuant to equity incentive plans, net of forfeitures

 

 

105,187

 

 

 

 

 

 

105,187

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Share-based compensation expense

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,160

 

 

 

 

 

 

 

 

 

 

 

 

1,160

 

Shares surrendered to satisfy tax liability upon vesting of equity awards

 

 

 

 

 

(55,020

)

 

 

(55,020

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1,197

)

 

 

(1,197

)

Repurchase of common stock

 

 

 

 

 

(100,000

)

 

 

(100,000

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1,444

)

 

 

(1,444

)

Cash dividends paid (common stock, $0.50/share)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(15,253

)

 

 

 

 

 

(15,253

)

Net income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

42,612

 

 

 

 

 

 

42,612

 

Change in unrealized gain (loss) on securities available for sale, net of income taxes

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

4,346

 

 

 

 

 

 

 

 

 

4,346

 

Balance at June 30, 2023

 

 

33,863,421

 

 

 

(3,377,633

)

 

 

30,485,788

 

 

$

33

 

 

$

585,391

 

 

$

(84,639

)

 

$

296,901

 

 

$

(129,126

)

 

$

668,560

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at January 1, 2024

 

 

33,918,035

 

 

 

(3,549,380

)

 

 

30,368,655

 

 

$

34

 

 

$

586,912

 

 

$

(71,928

)

 

$

319,048

 

 

$

(132,175

)

 

$

701,891

 

Issuance of awards pursuant to equity incentive plans, net of forfeitures

 

 

206,875

 

 

 

 

 

 

206,875

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Share-based compensation expense

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,735

 

 

 

 

 

 

 

 

 

 

 

 

1,735

 

Shares surrendered to satisfy tax liability upon vesting of equity awards

 

 

 

 

 

(33,420

)

 

 

(33,420

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(518

)

 

 

(518

)

Repurchase of common stock

 

 

 

 

 

(270,000

)

 

 

(270,000

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(4,321

)

 

 

(4,321

)

Cash dividends paid (common stock, $0.50/share)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(15,271

)

 

 

 

 

 

(15,271

)

Net income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

29,615

 

 

 

 

 

 

29,615

 

Change in unrealized gain (loss) on securities available for sale, net of income taxes

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(4,298

)

 

 

 

 

 

 

 

 

(4,298

)

Change in unrealized gain (loss) on cash flow hedge, net of income taxes

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1,774

)

 

 

 

 

 

 

 

 

(1,774

)

Balance at June 30, 2024

 

 

34,124,910

 

 

 

(3,852,800

)

 

 

30,272,110

 

 

$

34

 

 

$

588,647

 

 

$

(78,000

)

 

$

333,392

 

 

$

(137,014

)

 

$

707,059

 

 

7


 

Hanmi Financial Corporation and Subsidiaries

Consolidated Statements of Cash Flows (Unaudited)

(in thousands)

 

 

 

Six Months Ended June 30,

 

 

 

2024

 

 

2023

 

Cash flows from operating activities:

 

 

 

 

 

 

Net income

 

$

29,615

 

 

$

42,612

 

Adjustments to reconcile net income to net cash provided by operating activities:

 

 

 

 

 

 

Depreciation and amortization

 

 

3,214

 

 

 

3,467

 

Amortization of servicing assets - net

 

 

1,366

 

 

 

1,223

 

Share-based compensation expense

 

 

1,735

 

 

 

1,160

 

Credit loss expense

 

 

1,188

 

 

 

2,056

 

Loss on sales of securities

 

 

 

 

 

1,871

 

(Gain) loss on sales of SBA loans

 

 

(3,126

)

 

 

(3,081

)

Origination of SBA loans held for sale

 

 

(47,595

)

 

 

(48,904

)

Proceeds from sales of SBA loans

 

 

51,070

 

 

 

51,710

 

(Gain) loss on sales of residential loans

 

 

(808

)

 

 

 

Change in bank-owned life insurance

 

 

131

 

 

 

(541

)

Change in prepaid expenses and other assets

 

 

4,730

 

 

 

(1,417

)

Change in income tax assets

 

 

(4,087

)

 

 

7,091

 

Valuation adjustment on servicing assets

 

 

 

 

 

(385

)

Change in accrued interest payable and other liabilities

 

 

(5,399

)

 

 

13,269

 

Net cash provided by operating activities

 

 

32,034

 

 

 

70,131

 

Cash flows from investing activities:

 

 

 

 

 

 

Purchases of securities available for sale

 

 

(78,454

)

 

 

(32,928

)

Proceeds from matured, called and repayment of securities

 

 

58,848

 

 

 

44,347

 

Proceeds from sales of securities available for sale

 

 

 

 

 

8,149

 

Purchases of loans receivable

 

 

(24,656

)

 

 

 

Proceeds from sales of mortgage loans

 

 

50,352

 

 

 

 

Purchases of premises and equipment

 

 

(1,563

)

 

 

(1,663

)

Change in loans receivable, excluding purchases

 

 

(21,956

)

 

 

(1,173

)

Net cash provided by (used in) investing activities

 

 

(17,429

)

 

 

16,732

 

Cash flows from financing activities:

 

 

 

 

 

 

Change in deposits

 

 

48,765

 

 

 

147,696

 

Change in borrowings

 

 

(32,500

)

 

 

(225,000

)

Cash paid for employee vested shares surrendered due to employee tax liability

 

 

(518

)

 

 

(376

)

Repurchase of common stock

 

 

(4,326

)

 

 

(1,444

)

Cash dividends paid

 

 

(15,271

)

 

 

(15,253

)

Net cash used in financing activities

 

 

(3,850

)

 

 

(94,377

)

Net increase (decrease) in cash and due from banks

 

 

10,755

 

 

 

(7,514

)

Cash and due from banks at beginning of year

 

 

302,324

 

 

 

352,421

 

Cash and due from banks at end of period

 

$

313,079

 

 

$

344,907

 

Supplemental disclosures of cash flow information:

 

 

 

 

 

 

Interest paid

 

$

90,586

 

 

$

37,968

 

Income taxes paid

 

$

22,365

 

 

$

9,994

 

Non-cash activities:

 

 

 

 

 

 

Transfer of fixed assets to other real estate owned

 

$

655

 

 

$

 

Income tax benefit (expense) related to other comprehensive income items

 

$

2,796

 

 

$

(1,402

)

Change in right-of-use asset obtained in exchange for lease liability

 

$

(1,932

)

 

$

1,089

 

Cashless exercise of stock options

 

$

 

 

$

821

 

 

See Accompanying Notes to Consolidated Financial Statements (Unaudited)

8


 

Hanmi Financial Corporation and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

Note 1 — Organization and Basis of Presentation

Hanmi Financial Corporation (“Hanmi Financial,” the “Company,” “we,” “us” or “our”) is a bank holding company whose primary subsidiary is Hanmi Bank (the “Bank”). Our primary operations are related to traditional banking activities, including the acceptance of deposits and the lending and investing of money by the Bank.

In management’s opinion, the accompanying unaudited consolidated financial statements of Hanmi Financial and its subsidiaries reflect all adjustments of a normal and recurring nature that are necessary for a fair presentation of the results for the interim period ended June 30, 2024. Certain information and footnote disclosures normally included in annual financial statements prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) have been condensed or omitted. The unaudited consolidated financial statements are prepared in conformity with GAAP and in accordance with the instructions to Form 10-Q pursuant to the rules and regulations of the Securities and Exchange Commission. Operating results for the three-month or six-month periods ended June 30, 2024 are not necessarily indicative of the results that may be expected for the year ended December 31, 2024 or for any other period. The interim information should be read in conjunction with our Annual Report on Form 10-K for the year ended December 31, 2023 (the “2023 Annual Report on Form 10-K”).

The preparation of interim unaudited consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. These estimates and assumptions affect the amounts reported in the unaudited financial statements and disclosures provided, and actual results could differ.

 

Recently Issued Accounting Standards Not Yet Effective

 

Accounting Standards Update (“ASU”) 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures: In December 2023, the Financial Accounting Standards Board (“FASB”) issued ASU 2023-09 to enhance the transparency and usefulness of income tax disclosures primarily related to income tax rate reconciliation and income taxes information. The amendments in ASU 2023-09 are effective for fiscal years beginning after December 15, 2024. The adoption of ASU 2023-09 is not expected to have material effect on the Company’s operating results or financial condition.

 

ASU 2023-07, Segment Reporting (Topic 280): Segment Reporting: In November 2023, FASB issued ASU 2023-07 to provide updates that improve reportable segment disclosure requirements, primarily through enhanced disclosures on significant segment expenses. The amendments in ASU 2023-07 are effective for fiscal years beginning after December 15, 2024. The adoption of ASU 2023-07 is not expected to have material effect on the Company’s operating results or financial condition.

 

9


 

Note 2 — Securities

The following is a summary of securities available for sale as of the dates indicated:

 

 

 

 

 

 

Gross

 

 

Gross

 

 

Estimated

 

 

 

Amortized

 

 

Unrealized

 

 

Unrealized

 

 

Fair

 

 

 

Cost

 

 

Gain

 

 

Loss

 

 

Value

 

 

 

(in thousands)

 

June 30, 2024

 

 

 

 

 

 

 

 

 

 

 

 

U.S. Treasury securities

 

$

101,003

 

 

$

24

 

 

$

(1,031

)

 

$

99,996

 

U.S. government agency and sponsored agency obligations:

 

 

 

 

 

 

 

 

 

 

 

 

Mortgage-backed securities - residential

 

 

480,881

 

 

 

162

 

 

 

(66,175

)

 

 

414,868

 

Mortgage-backed securities - commercial

 

 

65,402

 

 

 

21

 

 

 

(12,551

)

 

 

52,872

 

Collateralized mortgage obligations

 

 

134,155

 

 

 

116

 

 

 

(10,059

)

 

 

124,212

 

Debt securities

 

 

127,258

 

 

 

 

 

 

(6,656

)

 

 

120,602

 

Total U.S. government agency and sponsored agency obligations

 

 

807,696

 

 

 

299

 

 

 

(95,441

)

 

 

712,554

 

Municipal bonds-tax exempt

 

 

76,606

 

 

 

 

 

 

(11,518

)

 

 

65,088

 

Total securities available for sale

 

$

985,305

 

 

$

323

 

 

$

(107,990

)

 

$

877,638

 

 

 

 

 

 

 

 

 

 

 

 

 

 

December 31, 2023

 

 

 

 

 

 

 

 

 

 

 

 

U.S. Treasury securities

 

$

86,355

 

 

$

173

 

 

$

(1,040

)

 

$

85,488

 

U.S. government agency and sponsored agency obligations:

 

 

 

 

 

 

 

 

 

 

 

 

Mortgage-backed securities - residential

 

 

504,544

 

 

 

481

 

 

 

(62,697

)

 

 

442,328

 

Mortgage-backed securities - commercial

 

 

59,973

 

 

 

 

 

 

(11,982

)

 

 

47,991

 

Collateralized mortgage obligations

 

 

106,823

 

 

 

237

 

 

 

(9,649

)

 

 

97,411

 

Debt securities

 

 

132,215

 

 

 

 

 

 

(7,590

)

 

 

124,625

 

Total U.S. government agency and sponsored agency obligations

 

 

803,555

 

 

 

718

 

 

 

(91,918

)

 

 

712,355

 

Municipal bonds-tax exempt

 

 

77,121

 

 

 

 

 

 

(9,225

)

 

 

67,896

 

Total securities available for sale

 

$

967,031

 

 

$

891

 

 

$

(102,183

)

 

$

865,739

 

 

The amortized cost and estimated fair value of securities as of June 30, 2024 and December 31, 2023, by contractual or expected maturity, are shown below. Collateralized mortgage obligations are included in the table shown below based on their expected maturities. All other securities are included based on their contractual maturities.

 

 

 

June 30, 2024

 

 

December 31, 2023

 

 

 

Available for Sale

 

 

Available for Sale

 

 

 

Amortized

 

 

Estimated

 

 

Amortized

 

 

Estimated

 

 

 

Cost

 

 

Fair Value

 

 

Cost

 

 

Fair Value

 

 

 

(in thousands)

 

Within one year

 

$

103,597

 

 

$

101,624

 

 

$

62,521

 

 

$

61,828

 

Over one year through five years

 

 

138,045

 

 

 

131,977

 

 

 

169,176

 

 

 

160,983

 

Over five years through ten years

 

 

89,869

 

 

 

80,840

 

 

 

83,720

 

 

 

77,608

 

Over ten years

 

 

653,794

 

 

 

563,197

 

 

 

651,614

 

 

 

565,320

 

Total

 

$

985,305

 

 

$

877,638

 

 

$

967,031

 

 

$

865,739

 

 

10


 

 

The following table summarizes debt securities available for sale in an unrealized loss position for which an allowance for credit losses has not been recorded at June 30, 2024 or December 31, 2023, aggregated by major security type and length of time in a continuous unrealized loss position:

 

 

 

Holding Period

 

 

 

Less than 12 Months

 

 

12 Months or More

 

 

Total

 

 

 

Gross

 

 

Estimated

 

 

Number

 

 

Gross

 

 

Estimated

 

 

Number

 

 

Gross

 

 

Estimated

 

 

Number

 

 

 

Unrealized

 

 

Fair

 

 

of

 

 

Unrealized

 

 

Fair

 

 

of

 

 

Unrealized

 

 

Fair

 

 

of

 

 

 

Loss

 

 

Value

 

 

Securities

 

 

Loss

 

 

Value

 

 

Securities

 

 

Loss

 

 

Value

 

 

Securities

 

 

 

(in thousands, except number of securities)

 

June 30, 2024

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. Treasury securities

 

$

(204

)

 

$

53,200

 

 

 

17

 

 

$

(827

)

 

$

33,383

 

 

 

11

 

 

$

(1,031

)

 

$

86,583

 

 

 

28

 

U.S. government agency and sponsored agency obligations:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Mortgage-backed securities - residential

 

 

(223

)

 

 

26,217

 

 

 

11

 

 

 

(65,952

)

 

 

379,731

 

 

 

117

 

 

 

(66,175

)

 

 

405,948

 

 

 

128

 

Mortgage-backed securities - commercial

 

 

(4

)

 

 

4,380

 

 

 

1

 

 

 

(12,547

)

 

 

46,487

 

 

 

15

 

 

 

(12,551

)

 

 

50,867

 

 

 

16

 

Collateralized mortgage obligations

 

 

(259

)

 

 

37,445

 

 

 

10

 

 

 

(9,800

)

 

 

64,784

 

 

 

26

 

 

 

(10,059

)

 

 

102,229

 

 

 

36

 

Debt securities

 

 

 

 

 

 

 

 

 

 

 

(6,656

)

 

 

120,602

 

 

 

25

 

 

 

(6,656

)

 

 

120,602

 

 

 

25

 

Total U.S. government agency and sponsored agency obligations

 

 

(486

)

 

 

68,042

 

 

 

22

 

 

 

(94,955

)

 

 

611,604

 

 

 

183

 

 

 

(95,441

)

 

 

679,646

 

 

 

205

 

Municipal bonds-tax exempt

 

 

 

 

 

 

 

 

 

 

 

(11,518

)

 

 

65,088

 

 

 

19

 

 

 

(11,518

)

 

 

65,088

 

 

 

19

 

Total

 

$

(690

)

 

$

121,242

 

 

 

39

 

 

$

(107,300

)

 

$

710,075

 

 

 

213

 

 

$

(107,990

)

 

$

831,317

 

 

 

252

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

December 31, 2023

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. Treasury securities

 

$

(57

)

 

$

21,024

 

 

 

7

 

 

$

(983

)

 

$

32,449

 

 

 

11

 

 

$

(1,040

)

 

$

53,473

 

 

 

18

 

U.S. government agency and sponsored agency obligations:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Mortgage-backed securities - residential

 

 

(11

)

 

 

2,324

 

 

 

5

 

 

 

(62,686

)

 

 

411,417

 

 

 

118

 

 

 

(62,697

)

 

 

413,741

 

 

 

123

 

Mortgage-backed securities - commercial

 

 

 

 

 

 

 

 

 

 

 

(11,982

)

 

 

47,991

 

 

 

15

 

 

 

(11,982

)

 

 

47,991

 

 

 

15

 

Collateralized mortgage obligations

 

 

(38

)

 

 

7,074

 

 

 

2

 

 

 

(9,611

)

 

 

63,610

 

 

 

24

 

 

 

(9,649

)

 

 

70,684

 

 

 

26

 

Debt securities

 

 

 

 

 

 

 

 

 

 

 

(7,590

)

 

 

124,625

 

 

 

26

 

 

 

(7,590

)

 

 

124,625

 

 

 

26

 

Total U.S. government agency and sponsored agency obligations

 

 

(49

)

 

 

9,398

 

 

 

7

 

 

 

(91,869

)

 

 

647,643

 

 

 

183

 

 

 

(91,918

)

 

 

657,041

 

 

 

190

 

Municipal bonds-tax exempt

 

 

 

 

 

 

 

 

 

 

 

(9,225

)

 

 

67,896

 

 

 

19

 

 

 

(9,225

)

 

 

67,896

 

 

 

19

 

Total

 

$

(106

)

 

$

30,422

 

 

 

14

 

 

$

(102,077

)

 

$

747,988

 

 

 

213

 

 

$

(102,183

)

 

$

778,410

 

 

 

227

 

 

The Company evaluates its available for sale securities portfolio for impairment on a quarterly basis. The Company did not recognize unrealized losses in income because it has the ability and the intent to hold and does not expect to be required to sell these securities until the recovery of their cost basis. The quarterly impairment assessment takes into account the changes in the credit quality of these debt securities since acquisition and the likelihood of a credit loss occurring over the life of the securities. In the event that a credit loss is expected to occur in the future, an allowance is established and a corresponding credit loss is recognized. Based on this analysis, as of June 30, 2024, the Company determined that no credit losses were expected to be realized on the tax-exempt municipal bond portfolio. The remainder of the portfolio consists of U.S. Treasury obligations, U.S. government agency securities, and U.S. government sponsored agency securities, all of which have the backing of the U.S. government, and are therefore not expected to incur credit losses.

 

Realized gains and losses on sales of securities and proceeds from sales of securities were as follows for the periods indicated:

 

 

 

Three Months Ended

 

 

Six Months Ended

 

 

 

June 30,

 

 

June 30,

 

 

 

2024

 

 

2023

 

 

2024

 

 

2023

 

 

 

(in thousands)

 

Gross realized gains on sales of securities

 

$

 

 

$

 

 

$

 

 

$

 

Gross realized losses on sales of securities

 

 

 

 

 

(1,871

)

 

 

 

 

 

(1,871

)

Net realized gains (losses) on sales of securities

 

$

 

 

$

(1,871

)

 

$

 

 

$

(1,871

)

Proceeds from sales of securities

 

$

 

 

$

8,149

 

 

$

 

 

$

8,149

 

 

There were no sales of securities during the three and six months ended June 30, 2024. During the three and six months ended June 30, 2023, there were $1.9 million in net losses in earnings resulting from the sale of $8.1 million of securities previously recorded with $1.7 million unrealized losses in accumulated other comprehensive income.

Securities available for sale with market values of $31.4 million and $24.8 million as of June 30, 2024 and December 31, 2023, respectively, were pledged to secure borrowings from the Federal Reserve Bank (“FRB”) Discount Window.

At June 30, 2024, there were no holdings of securities of any one issuer, other than the U.S. government and its agencies, in an amount greater than 10% of stockholders’ equity.

11


 

Note 3 — Loans

Loans Receivable

Loans consisted of the following as of the dates indicated:

 

 

 

June 30, 2024

 

 

December 31, 2023

 

 

 

(in thousands)

 

Real estate loans:

 

 

 

 

 

 

Commercial property

 

 

 

 

 

 

Retail

 

$

1,094,728

 

 

$

1,107,360

 

Hospitality

 

 

754,600

 

 

 

740,519

 

Office

 

 

572,532

 

 

 

574,981

 

Other (1)

 

 

1,360,139

 

 

 

1,366,534

 

Total commercial property loans

 

 

3,781,999

 

 

 

3,789,394

 

Construction

 

 

106,506

 

 

 

100,345

 

Residential (2)

 

 

954,209

 

 

 

962,661

 

Total real estate loans

 

 

4,842,714

 

 

 

4,852,400

 

Commercial and industrial loans (3)

 

 

802,372

 

 

 

747,819

 

Equipment financing agreements

 

 

531,273

 

 

 

582,215

 

Loans receivable

 

 

6,176,359

 

 

 

6,182,434

 

Allowance for credit losses

 

 

(67,729

)

 

 

(69,462

)

Loans receivable, net

 

$

6,108,630

 

 

$

6,112,972

 

 

(1)
Includes mixed-use, multifamily, industrial, gas stations, faith-based facilities, and medical; all other property types represent less than one percent of total loans receivable.
(2)
Includes $1.5 million and $1.9 million of home equity loans and lines, and $4.9 million and $4.5 million of personal loans at June 30, 2024 and December 31, 2023, respectively.
(3)
At June 30, 2024 and December 31, 2023, Paycheck Protection Program loans were $0.1 million and $0.2 million, respectively.

Accrued interest on loans was $20.0 million and $19.8 million at June 30, 2024 and December 31, 2023, respectively.

At June 30, 2024 and December 31, 2023, loans with carrying values of $2.41 billion and $2.36 billion, respectively, were pledged to secure advances from the FHLB.

Loans Held for Sale

The following is the activity for loans held for sale for the following periods:

 

 

 

Real Estate

 

 

Commercial and Industrial

 

 

Total

 

 

 

(in thousands)

 

Three months ended June 30, 2024

 

 

 

 

 

 

 

 

 

Balance at beginning of period

 

$

1,454

 

 

$

2,545

 

 

$

3,999

 

Originations and transfers

 

 

20,572

 

 

 

9,391

 

 

 

29,963

 

Sales

 

 

(14,877

)

 

 

(8,613

)

 

 

(23,490

)

Principal paydowns and amortization

 

 

 

 

 

(5

)

 

 

(5

)

Balance at end of period

 

$

7,149

 

 

$

3,318

 

 

$

10,467

 

 

 

 

 

 

 

 

 

 

 

Three months ended June 30, 2023

 

 

 

 

 

 

 

 

 

Balance at beginning of period

 

$

379

 

 

$

3,273

 

 

$

3,652

 

Originations and transfers

 

 

14,494

 

 

 

9,094

 

 

 

23,588

 

Sales

 

 

(9,329

)

 

 

(10,614

)

 

 

(19,943

)

Principal paydowns and amortization

 

 

 

 

 

(4

)

 

 

(4

)

Balance at end of period

 

$

5,544

 

 

$

1,749

 

 

$

7,293

 

 

12


 

 

 

 

Real Estate

 

 

Commercial and Industrial

 

 

Total

 

 

 

(in thousands)

 

Six months ended June 30, 2024

 

 

 

 

 

 

 

 

 

Balance at beginning of period

 

$

8,792

 

 

$

3,221

 

 

$

12,013

 

Originations and transfers

 

 

30,186

 

 

 

17,409

 

 

 

47,595

 

Sales

 

 

(31,775

)

 

 

(17,301

)

 

 

(49,076

)

Principal payoffs and amortization

 

 

(54

)

 

 

(11

)

 

 

(65

)

Balance at end of period

 

$

7,149

 

 

$

3,318

 

 

$

10,467

 

 

 

 

 

 

 

 

 

 

 

Six months ended June 30, 2023

 

 

 

 

 

 

 

 

 

Balance at beginning of period

 

$

3,775

 

 

$

4,268

 

 

$

8,043

 

Originations and transfers

 

 

30,881

 

 

 

18,023

 

 

 

48,904

 

Sales

 

 

(29,111

)

 

 

(20,532

)

 

 

(49,643

)

Principal payoffs and amortization

 

 

(1

)

 

 

(10

)

 

 

(11

)

Balance at end of period

 

$

5,544

 

 

$

1,749

 

 

$

7,293

 

 

The following table presents loans purchased by portfolio segment for the following periods:

 

 

 

Three Months Ended

 

 

Six Months Ended

 

 

 

June 30,

 

 

June 30,

 

 

 

2024

 

 

2023

 

 

2024

 

 

2023

 

 

 

(in thousands)

 

Commercial real estate

 

$

6,060

 

 

$

 

 

$

6,334

 

 

$

 

Commercial and industrial

 

 

8,398

 

 

 

 

 

 

18,322

 

 

 

 

Residential real estate

 

 

5,178

 

 

 

 

 

 

5,178

 

 

 

 

Total

 

$

19,636

 

 

$

 

 

$

29,834

 

 

$

 

 

Allowance for Credit Losses

 

The following table details the information on the allowance for credit losses by portfolio segment for the following periods:

 

 

 

Real Estate

 

 

Commercial and Industrial

 

 

Equipment Financing Agreements

 

 

Total

 

 

 

(in thousands)

 

Three months ended June 30, 2024

 

 

 

 

 

 

 

 

 

 

 

 

Balance at beginning of period

 

$

42,584

 

 

$

11,836

 

 

$

13,850

 

 

$

68,270

 

Charge-offs

 

 

(93

)

 

 

(93

)

 

 

(2,152

)

 

 

(2,338

)

Recoveries

 

 

64

 

 

 

166

 

 

 

318

 

 

 

548

 

Credit loss expense (recovery)

 

 

(403

)

 

 

(1,346

)

 

 

2,998

 

 

 

1,249

 

Ending balance

 

$

42,152

 

 

$

10,563

 

 

$

15,014

 

 

$

67,729

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three months ended June 30, 2023

 

 

 

 

 

 

 

 

 

 

 

 

Balance at beginning of period

 

$

43,531

 

 

$

15,333

 

 

$

13,385

 

 

$

72,249

 

Charge-offs

 

 

 

 

 

(103

)

 

 

(2,604

)

 

 

(2,707

)

Recoveries

 

 

62

 

 

 

555

 

 

 

350

 

 

 

967

 

Credit loss expense (recovery)

 

 

(539

)

 

 

244

 

 

 

810

 

 

 

515

 

Ending balance

 

$

43,054

 

 

$

16,029

 

 

$

11,941

 

 

$

71,024

 

 

13


 

 

 

 

Real Estate

 

 

Commercial and Industrial

 

 

Equipment Financing Agreements

 

 

Total

 

 

 

(in thousands)

 

Six months ended June 30, 2024

 

 

 

 

 

 

 

 

 

 

 

 

Balance at beginning of period

 

$

45,499

 

 

$

10,257

 

 

$

13,706

 

 

$

69,462

 

Charge-offs

 

 

(93

)

 

 

(248

)

 

 

(4,120

)

 

 

(4,461

)

Recoveries

 

 

111

 

 

 

224

 

 

 

741

 

 

 

1,076

 

Credit loss expense (recovery)

 

 

(3,365

)

 

 

330

 

 

 

4,687

 

 

 

1,652

 

Ending balance

 

$

42,152

 

 

$

10,563

 

 

$

15,014

 

 

$

67,729

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Six months ended June 30, 2023

 

 

 

 

 

 

 

 

 

 

 

 

Balance at beginning of period

 

$

44,026

 

 

$

15,267

 

 

$

12,230

 

 

$

71,523

 

Charge-offs

 

 

(412

)

 

 

(312

)

 

 

(4,220

)

 

 

(4,944

)

Recoveries

 

 

130

 

 

 

791

 

 

 

829

 

 

 

1,750

 

Credit loss expense (recovery)

 

 

(690

)

 

 

283

 

 

 

3,102

 

 

 

2,695

 

Ending balance

 

$

43,054

 

 

$

16,029

 

 

$

11,941

 

 

$

71,024

 

 

The table below presents the allowance for credit losses by portfolio segment as a percentage of the total allowance for credit losses and loans by portfolio segment as a percentage of the aggregate investment of loans receivable as of:

 

 

 

June 30, 2024

 

 

December 31, 2023

 

 

 

Allowance Amount

 

 

Percentage of Total Allowance

 

 

Total Loans

 

 

Percentage of Total Loans

 

 

Allowance Amount

 

 

Percentage of Total Allowance

 

 

Total Loans

 

 

Percentage of Total Loans

 

 

 

(dollars in thousands)

 

Real estate loans:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial property

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Retail

 

$

10,126

 

 

 

15.0

%

 

$

1,094,728

 

 

 

17.7

%

 

$

10,264

 

 

 

14.8

%

 

$

1,107,360

 

 

 

17.9

%

Hospitality

 

 

11,995

 

 

 

17.7

 

 

 

754,600

 

 

 

12.2

 

 

 

15,534

 

 

 

22.4

 

 

 

740,519

 

 

 

12.0

 

Office

 

 

3,712

 

 

 

5.5

 

 

 

572,532

 

 

 

9.3

 

 

 

3,024

 

 

 

4.4

 

 

 

574,981

 

 

 

9.3

 

Other

 

 

7,889

 

 

 

11.6

 

 

 

1,360,139

 

 

 

22.0

 

 

 

8,663

 

 

 

12.4

 

 

 

1,366,534

 

 

 

22.1

 

Total commercial property loans

 

 

33,722

 

 

 

49.8

 

 

 

3,781,999

 

 

 

61.2

 

 

 

37,485

 

 

 

54.0

 

 

 

3,789,394

 

 

 

61.3

 

Construction

 

 

2,371

 

 

 

3.5

 

 

 

106,506

 

 

 

1.7

 

 

 

2,756

 

 

 

4.0

 

 

 

100,345

 

 

 

1.6

 

Residential

 

 

6,060

 

 

 

8.9

 

 

 

954,209

 

 

 

15.5

 

 

 

5,258

 

 

 

7.5

 

 

 

962,661

 

 

 

15.6

 

Total real estate loans

 

 

42,153

 

 

 

62.2

 

 

 

4,842,714

 

 

 

78.4

 

 

 

45,499

 

 

 

65.5

 

 

 

4,852,400

 

 

 

78.5

 

Commercial and industrial loans

 

 

10,563

 

 

 

15.6

 

 

 

802,372

 

 

 

13.0

 

 

 

10,257

 

 

 

14.8

 

 

 

747,819

 

 

 

12.1

 

Equipment financing agreements

 

 

15,013

 

 

 

22.2

 

 

 

531,273

 

 

 

8.6

 

 

 

13,706

 

 

 

19.7

 

 

 

582,215

 

 

 

9.4

 

Total

 

$

67,729

 

 

 

100.0

%

 

$

6,176,359

 

 

 

100.0

%

 

$

69,462

 

 

 

100.0

%

 

$

6,182,434

 

 

 

100.0

%

The following table represents the amortized cost basis of collateral-dependent loans by class of loans, for which repayment is expected to be obtained through the sale of the underlying collateral, as of:

 

 

 

June 30, 2024

 

 

December 31, 2023

 

 

 

(in thousands)

 

Real estate loans:

 

 

 

 

 

 

Commercial property

 

 

 

 

 

 

Retail

 

$

560

 

 

$

1,530

 

Hospitality

 

 

282

 

 

 

338

 

Other

 

 

2,950

 

 

 

305

 

Total commercial property loans

 

 

3,792

 

 

 

2,173

 

Construction

 

 

1,225

 

 

 

 

Residential

 

 

813

 

 

 

1

 

Total real estate loans

 

 

5,830

 

 

 

2,174

 

Commercial and industrial loans

 

 

3,927

 

 

 

5,178

 

Total

 

$

9,757

 

 

$

7,352

 

Loan Quality Indicators

As part of the on-going monitoring of the quality of our loans portfolio, we utilize an internal loan grading system to identify credit risk and assign an appropriate grade (from 1 to 8) for each loan in our portfolio. Third-party loan reviews are conducted annually on a sample basis. Additional adjustments are made when determined to be necessary. The loan grade definitions are as follows:

Pass and Pass-Watch: Pass and Pass-Watch loans, grades (1-4), are in compliance with the Bank’s credit policy and regulatory requirements, and do not exhibit any potential or defined weaknesses as defined under “Special Mention”, “Substandard”

14


 

or “Doubtful.” This category is the strongest level of the Bank’s loan grading system. It consists of all performing loans with no identified credit weaknesses. It includes cash and stock/security secured loans or other investment grade loans.

Special Mention: A Special Mention loan, grade (5), has potential weaknesses that deserve management’s close attention. If not corrected, these potential weaknesses may result in deterioration of the repayment of the debt and result in a Substandard classification. Loans that have significant actual, not potential, weaknesses are considered more severely classified.

Substandard: A Substandard loan, grade (6), has a well-defined weakness that jeopardizes the liquidation of the debt. A loan graded Substandard is not protected by the sound worth and paying capacity of the borrower, or of the value and type of collateral pledged. With a Substandard loan, there is a distinct possibility that the Bank will sustain some loss if the weaknesses or deficiencies are not corrected.

Doubtful: A Doubtful loan, grade (7), is one that has critical weaknesses that would make the collection or liquidation of the full amount due improbable. However, there may be pending events which may work to strengthen the loan, and therefore the amount or timing of a possible loss cannot be determined at the current time.

Loss: A loan classified as Loss, grade (8), is considered uncollectible and of such little value that their continuance as active bank assets is not warranted. This classification does not mean that the loan has absolutely no recovery or salvage value, but rather it is not practical or desirable to defer writing off this asset even though partial recovery may be possible in the future. Loans classified as Loss will be charged off in a timely manner.

Under regulatory guidance, loans graded special mention or worse are considered criticized loans, and loans graded substandard or worse are considered classified loans.

15


 

Loans by Vintage Year and Risk Rating

 

 

 

Term Loans

 

 

 

 

 

 

 

 

 

Amortized Cost Basis by Origination Year (1)

 

 

 

 

 

 

 

 

 

2024

 

 

2023

 

 

2022

 

 

2021

 

 

2020

 

 

Prior

 

 

Revolving
Loans
Amortized
Cost Basis

 

 

Total

 

 

 

(in thousands)

 

June 30, 2024

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Real estate loans:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial property

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Risk Rating

 

 

 

 

 

 

 

 

 

 

`

 

 

 

 

 

 

 

 

 

 

 

 

 

Pass / Pass-Watch

 

$

275,556

 

 

$

591,728

 

 

$

969,146

 

 

$

835,446

 

 

$

566,215

 

 

$

482,632

 

 

$

35,069

 

 

$

3,755,792

 

Special Mention

 

 

6,168

 

 

 

 

 

 

 

 

 

 

 

 

1,312

 

 

 

260

 

 

 

 

 

 

7,740

 

Classified

 

 

190

 

 

 

 

 

 

6,146

 

 

 

3,212

 

 

 

 

 

 

8,919

 

 

 

 

 

 

18,467

 

Total commercial property

 

 

281,914

 

 

 

591,728

 

 

 

975,292

 

 

 

838,658

 

 

 

567,527

 

 

 

491,811

 

 

 

35,069

 

 

 

3,781,999

 

YTD gross charge-offs

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

93

 

 

 

 

 

 

93

 

YTD net charge-offs (recoveries)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(13

)

 

 

(3

)

 

 

 

 

 

(16

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Construction

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Risk Rating

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Pass / Pass-Watch

 

 

50,939

 

 

 

26,024

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

76,963

 

Special Mention

 

 

 

 

 

 

 

 

28,318

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

28,318

 

Classified

 

 

1,225

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,225

 

Total construction

 

 

52,164

 

 

 

26,024

 

 

 

28,318

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

106,506

 

YTD gross charge-offs

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

YTD net charge-offs (recoveries)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Residential

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Risk Rating

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Pass / Pass-Watch

 

 

68,358

 

 

 

239,937

 

 

 

361,458

 

 

 

153,374

 

 

 

12,387

 

 

 

111,714

 

 

 

5,461

 

 

 

952,689

 

Special Mention

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

250

 

 

 

250

 

Classified

 

 

 

 

 

1,270

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,270

 

Total residential

 

 

68,358

 

 

 

241,207

 

 

 

361,458

 

 

 

153,374

 

 

 

12,387

 

 

 

111,714

 

 

 

5,711

 

 

 

954,209

 

YTD gross charge-offs

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

YTD net charge-offs (recoveries)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(2

)

 

 

 

 

 

(2

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total real estate loans

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Risk Rating

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Pass / Pass-Watch

 

 

394,853

 

 

 

857,689

 

 

 

1,330,604

 

 

 

988,820

 

 

 

578,602

 

 

 

594,346

 

 

 

40,530

 

 

 

4,785,444

 

Special Mention

 

 

6,168

 

 

 

 

 

 

 

 

 

28,318

 

 

 

1,312

 

 

 

260

 

 

 

250

 

 

 

36,308

 

Classified

 

 

1,415

 

 

 

1,270

 

 

 

6,146

 

 

 

3,212

 

 

 

 

 

 

8,919

 

 

 

 

 

 

20,962

 

Total real estate loans

 

 

402,436

 

 

 

858,959

 

 

 

1,336,750

 

 

 

1,020,350

 

 

 

579,914

 

 

 

603,525

 

 

 

40,780

 

 

 

4,842,714

 

YTD gross charge-offs

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

93

 

 

 

 

 

 

93

 

YTD net charge-offs (recoveries)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(13

)

 

 

(5

)

 

 

 

 

 

(18

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial and industrial loans:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Risk Rating

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Pass / Pass-Watch

 

 

131,352

 

 

 

80,571

 

 

 

138,965

 

 

 

46,328

 

 

 

16,075

 

 

 

17,018

 

 

 

367,024

 

 

 

797,333

 

Special Mention

 

 

294

 

 

 

 

 

 

 

 

 

 

 

 

97

 

 

 

23

 

 

 

200

 

 

 

614

 

Classified

 

 

 

 

 

 

 

 

93

 

 

 

 

 

 

13

 

 

 

392

 

 

 

3,927

 

 

 

4,425

 

Total commercial and industrial loans

 

 

131,646

 

 

 

80,571

 

 

 

139,058

 

 

 

46,328

 

 

 

16,185

 

 

 

17,433

 

 

 

371,151

 

 

 

802,372

 

YTD gross charge-offs

 

 

 

 

 

64

 

 

 

155

 

 

 

 

 

 

 

 

 

29

 

 

 

 

 

 

248

 

YTD net charge-offs (recoveries)

 

 

 

 

 

64

 

 

 

153

 

 

 

 

 

 

 

 

 

(20

)

 

 

(173

)

 

 

24

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Equipment financing agreements:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Risk Rating

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Pass / Pass-Watch

 

 

73,866

 

 

 

179,004

 

 

 

169,734

 

 

 

75,420

 

 

 

15,330

 

 

 

9,360

 

 

 

 

 

 

522,714

 

Special Mention

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Classified

 

 

 

 

 

1,534

 

 

 

4,113

 

 

 

2,256

 

 

 

239

 

 

 

417

 

 

 

 

 

 

8,559

 

Total equipment financing agreements

 

 

73,866

 

 

 

180,538

 

 

 

173,847

 

 

 

77,676

 

 

 

15,569

 

 

 

9,777

 

 

 

 

 

 

531,273

 

YTD gross charge-offs

 

 

 

 

 

347

 

 

 

2,525

 

 

 

874

 

 

 

262

 

 

 

112

 

 

 

 

 

 

4,120

 

YTD net charge-offs (recoveries)

 

 

 

 

 

315

 

 

 

2,302

 

 

 

685

 

 

 

219

 

 

 

(142

)

 

 

 

 

 

3,379

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total loans receivable:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Risk Rating

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Pass / Pass-Watch

 

 

600,071

 

 

 

1,117,264

 

 

 

1,639,303

 

 

 

1,110,568

 

 

 

610,007

 

 

 

620,724

 

 

 

407,554

 

 

 

6,105,491

 

Special Mention

 

 

6,462

 

 

 

 

 

 

 

 

 

28,318

 

 

 

1,409

 

 

 

283

 

 

 

450

 

 

 

36,922

 

Classified

 

 

1,415

 

 

 

2,804

 

 

 

10,352

 

 

 

5,468

 

 

 

252

 

 

 

9,728

 

 

 

3,927

 

 

 

33,946

 

Total loans receivable

 

$

607,948

 

 

$

1,120,068

 

 

$

1,649,655

 

 

$

1,144,354

 

 

$

611,668

 

 

$

630,735

 

 

$

411,931

 

 

$

6,176,359

 

YTD gross charge-offs

 

 

 

 

 

411

 

 

 

2,680

 

 

 

874

 

 

 

262

 

 

 

234

 

 

 

 

 

 

4,461

 

YTD net charge-offs (recoveries)

 

 

 

 

 

379

 

 

 

2,455

 

 

 

685

 

 

 

206

 

 

 

(167

)

 

 

(173

)

 

 

3,385

 

 

(1)
Includes extensions, renewals, or modifications of credit contracts, which consist of a new credit decision.

16


 

 

 

 

Term Loans

 

 

 

 

 

 

 

 

 

Amortized Cost Basis by Origination Year (1)

 

 

 

 

 

 

 

 

 

2023

 

 

2022

 

 

2021

 

 

2020

 

 

2019

 

 

Prior

 

 

Revolving
Loans
Amortized
Cost Basis

 

 

Total

 

 

 

 

 

December 31, 2023

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Real estate loans:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial property

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Risk Rating

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Pass / Pass-Watch

 

$

683,819

 

 

$

986,822

 

 

$

858,821

 

 

$

572,950

 

 

$

378,067

 

 

$

238,400

 

 

$

30,236

 

 

$

3,749,115

 

Special Mention

 

 

4,400

 

 

 

3,997

 

 

 

3,271

 

 

 

5,670

 

 

 

711

 

 

 

2,310

 

 

 

1,406

 

 

 

21,765

 

Classified

 

 

3,065

 

 

 

1,080

 

 

 

4,899

 

 

 

 

 

 

5,578

 

 

 

3,892

 

 

 

 

 

 

18,514

 

Total commercial property

 

 

691,284

 

 

 

991,899

 

 

 

866,991

 

 

 

578,620

 

 

 

384,356

 

 

 

244,602

 

 

 

31,642

 

 

 

3,789,394

 

YTD gross charge-offs

 

 

 

 

 

 

 

 

 

 

 

411

 

 

 

 

 

 

216

 

 

 

 

 

 

627

 

YTD net charge-offs (recoveries)

 

 

 

 

 

 

 

 

 

 

 

403

 

 

 

 

 

 

(81

)

 

 

 

 

 

322

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Construction

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Risk Rating

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Pass / Pass-Watch

 

 

72,039

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

72,039

 

Special Mention

 

 

 

 

 

 

 

 

28,306

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

28,306

 

Classified

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total construction

 

 

72,039

 

 

 

 

 

 

28,306

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

100,345

 

YTD gross charge-offs

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

YTD net charge-offs (recoveries)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Residential

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Risk Rating

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Pass / Pass-Watch

 

 

290,196

 

 

 

375,712

 

 

 

158,618

 

 

 

12,656

 

 

 

217

 

 

 

119,736

 

 

 

5,025

 

 

 

962,160

 

Special Mention

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

500

 

 

 

500

 

Classified

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1

 

 

 

 

 

 

1

 

Total residential

 

 

290,196

 

 

 

375,712

 

 

 

158,618

 

 

 

12,656

 

 

 

217

 

 

 

119,737

 

 

 

5,525

 

 

 

962,661

 

YTD gross charge-offs

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

YTD net charge-offs (recoveries)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(7

)

 

 

 

 

 

(7

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total real estate loans

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Risk Rating

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Pass / Pass-Watch

 

 

1,046,054

 

 

 

1,362,534

 

 

 

1,017,439

 

 

 

585,606

 

 

 

378,284

 

 

 

358,136

 

 

 

35,261

 

 

 

4,783,314

 

Special Mention

 

 

4,400

 

 

 

3,997

 

 

 

31,577

 

 

 

5,670

 

 

 

711

 

 

 

2,310

 

 

 

1,906

 

 

 

50,571

 

Classified

 

 

3,065

 

 

 

1,080

 

 

 

4,899

 

 

 

 

 

 

5,578

 

 

 

3,893

 

 

 

 

 

 

18,515

 

Total real estate loans

 

 

1,053,519

 

 

 

1,367,611

 

 

 

1,053,915

 

 

 

591,276

 

 

 

384,573

 

 

 

364,339

 

 

 

37,167

 

 

 

4,852,400

 

YTD gross charge-offs

 

 

 

 

 

 

 

 

 

 

 

411

 

 

 

 

 

 

216

 

 

 

 

 

 

627

 

YTD net charge-offs (recoveries)

 

 

 

 

 

 

 

 

 

 

 

403

 

 

 

 

 

 

(88

)

 

 

 

 

 

315

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial and industrial loans:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Risk Rating

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Pass / Pass-Watch

 

 

177,864

 

 

 

169,209

 

 

 

84,198

 

 

 

31,348

 

 

 

9,971

 

 

 

12,920

 

 

 

242,044

 

 

 

727,554

 

Special Mention

 

 

 

 

 

14,578

 

 

 

 

 

 

102

 

 

 

 

 

 

65

 

 

 

(1

)

 

 

14,744

 

Classified

 

 

329

 

 

 

 

 

 

 

 

 

 

 

 

79

 

 

 

174

 

 

 

4,939

 

 

 

5,521

 

Total commercial and industrial loans

 

 

178,193

 

 

 

183,787

 

 

 

84,198

 

 

 

31,450

 

 

 

10,050

 

 

 

13,159

 

 

 

246,982

 

 

 

747,819

 

YTD gross charge-offs

 

 

 

 

 

17

 

 

 

 

 

 

 

 

 

110

 

 

 

410

 

 

 

6,120

 

 

 

6,657

 

YTD net charge-offs (recoveries)

 

 

 

 

 

5

 

 

 

(7

)

 

 

 

 

 

101

 

 

 

(6,621

)

 

 

6,090

 

 

 

(432

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Equipment financing agreements:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Risk Rating

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Pass / Pass-Watch

 

 

215,670

 

 

 

211,228

 

 

 

101,622

 

 

 

24,340

 

 

 

18,832

 

 

 

3,192

 

 

 

 

 

 

574,884

 

Special Mention

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Classified

 

 

392

 

 

 

4,171

 

 

 

1,945

 

 

 

365

 

 

 

401

 

 

 

57

 

 

 

 

 

 

7,331

 

Total equipment financing agreements

 

 

216,062

 

 

 

215,399

 

 

 

103,567

 

 

 

24,705

 

 

 

19,233

 

 

 

3,249

 

 

 

 

 

 

582,215

 

YTD gross charge-offs

 

 

178

 

 

 

3,944

 

 

 

3,267

 

 

 

386

 

 

 

799

 

 

 

232

 

 

 

 

 

 

8,806

 

YTD net charge-offs (recoveries)

 

 

178

 

 

 

3,744

 

 

 

2,858

 

 

 

244

 

 

 

250

 

 

 

(114

)

 

 

 

 

 

7,160

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total loans receivable:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Risk Rating

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Pass / Pass-Watch

 

 

1,439,588

 

 

 

1,742,971

 

 

 

1,203,259

 

 

 

641,294

 

 

 

407,087

 

 

 

374,248

 

 

 

277,305

 

 

 

6,085,752

 

Special Mention

 

 

4,400

 

 

 

18,575

 

 

 

31,577

 

 

 

5,772

 

 

 

711

 

 

 

2,375

 

 

 

1,905

 

 

 

65,315

 

Classified

 

 

3,786

 

 

 

5,251

 

 

 

6,844

 

 

 

365

 

 

 

6,058

 

 

 

4,124

 

 

 

4,939

 

 

 

31,367

 

Total loans receivable

 

$

1,447,774

 

 

$

1,766,797

 

 

$

1,241,680

 

 

$

647,431

 

 

$

413,856

 

 

$

380,747

 

 

$

284,149

 

 

$

6,182,434

 

YTD gross charge-offs

 

 

178

 

 

 

3,961

 

 

 

3,267

 

 

 

797

 

 

 

909

 

 

 

858

 

 

 

6,120

 

 

 

16,090

 

YTD net charge-offs (recoveries)

 

 

178

 

 

 

3,749

 

 

 

2,851

 

 

 

647

 

 

 

351

 

 

 

(6,823

)

 

 

6,090

 

 

 

7,043

 

 

(1)
Includes extensions, renewals, or modifications of credit contracts, which consist of a new credit decision.

17


 

Loans by Vintage Year and Payment Performance

 

 

 

Term Loans

 

 

 

 

 

 

 

 

 

Amortized Cost Basis by Origination Year (1)

 

 

 

 

 

 

 

 

 

2024

 

 

2023

 

 

2022

 

 

2021

 

 

2020

 

 

Prior

 

 

Revolving
Loans
Amortized
Cost Basis

 

 

Total

 

 

 

(in thousands)

 

June 30, 2024

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Real estate loans:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial property

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Payment performance

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Performing

 

$

281,724

 

 

$

591,728

 

 

$

975,172

 

 

$

838,658

 

 

$

567,527

 

 

$

487,487

 

 

$

35,069

 

 

$

3,777,365

 

Nonperforming

 

 

190

 

 

 

 

 

 

120

 

 

 

 

 

 

 

 

 

4,324

 

 

 

 

 

 

4,634

 

Total commercial property

 

 

281,914

 

 

 

591,728

 

 

 

975,292

 

 

 

838,658

 

 

 

567,527

 

 

 

491,811

 

 

 

35,069

 

 

 

3,781,999

 

YTD gross charge-offs

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

93

 

 

 

 

 

 

93

 

YTD net charge-offs (recoveries)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(13

)

 

 

(3

)

 

 

 

 

 

(16

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Construction

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Payment performance

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Performing

 

 

50,939

 

 

 

26,024

 

 

 

 

 

 

28,318

 

 

 

 

 

 

 

 

 

 

 

 

105,281

 

Nonperforming

 

 

1,225

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,225

 

Total construction

 

 

52,164

 

 

 

26,024

 

 

 

 

 

 

28,318

 

 

 

 

 

 

 

 

 

 

 

 

106,506

 

YTD gross charge-offs

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

YTD net charge-offs (recoveries)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Residential

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Payment performance

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Performing

 

 

68,358

 

 

 

241,207

 

 

 

361,458

 

 

 

153,374

 

 

 

12,053

 

 

 

111,235

 

 

 

5,711

 

 

 

953,396

 

Nonperforming

 

 

 

 

 

 

 

 

 

 

 

 

 

 

334

 

 

 

479

 

 

 

 

 

 

813

 

Total residential

 

 

68,358

 

 

 

241,207

 

 

 

361,458

 

 

 

153,374

 

 

 

12,387

 

 

 

111,714

 

 

 

5,711

 

 

 

954,209

 

YTD gross charge-offs

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

YTD net charge-offs (recoveries)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(2

)

 

 

 

 

 

(2

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total real estate loans

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Payment performance

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Performing

 

 

401,021

 

 

 

858,959

 

 

 

1,336,630

 

 

 

1,020,350

 

 

 

579,580

 

 

 

598,722

 

 

 

40,780

 

 

 

4,836,042

 

Nonperforming

 

 

1,415

 

 

 

 

 

 

120

 

 

 

 

 

 

334

 

 

 

4,803

 

 

 

 

 

 

6,672

 

Total real estate loans

 

 

402,436

 

 

 

858,959

 

 

 

1,336,750

 

 

 

1,020,350

 

 

 

579,914

 

 

 

603,525

 

 

 

40,780

 

 

 

4,842,714

 

YTD gross charge-offs

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

93

 

 

 

 

 

 

93

 

YTD net charge-offs (recoveries)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(13

)

 

 

(5

)

 

 

 

 

 

(18

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial and industrial loans:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Payment performance

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Performing

 

 

131,646

 

 

 

80,571

 

 

 

139,058

 

 

 

46,328

 

 

 

16,185

 

 

 

17,346

 

 

 

367,224

 

 

 

798,358

 

Nonperforming

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

87

 

 

 

3,927

 

 

 

4,014

 

Total commercial and industrial loans

 

 

131,646

 

 

 

80,571

 

 

 

139,058

 

 

 

46,328

 

 

 

16,185

 

 

 

17,433

 

 

 

371,151

 

 

 

802,372

 

YTD gross charge-offs

 

 

 

 

 

64

 

 

 

155

 

 

 

 

 

 

 

 

 

29

 

 

 

 

 

 

248

 

YTD net charge-offs (recoveries)

 

 

 

 

 

64

 

 

 

153

 

 

 

 

 

 

 

 

 

(20

)

 

 

(173

)

 

 

24

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Equipment financing agreements:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Payment performance

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Performing

 

 

73,866

 

 

 

179,004

 

 

 

169,734

 

 

 

75,420

 

 

 

15,330

 

 

 

9,360

 

 

 

 

 

 

522,714

 

Nonperforming

 

 

 

 

 

1,534

 

 

 

4,113

 

 

 

2,256

 

 

 

239

 

 

 

417

 

 

 

 

 

 

8,559

 

Total equipment financing agreements

 

 

73,866

 

 

 

180,538

 

 

 

173,847

 

 

 

77,676

 

 

 

15,569

 

 

 

9,777

 

 

 

 

 

 

531,273

 

YTD gross charge-offs

 

 

 

 

 

347

 

 

 

2,525

 

 

 

874

 

 

 

262

 

 

 

112

 

 

 

 

 

 

4,120

 

YTD net charge-offs (recoveries)

 

 

 

 

 

315

 

 

 

2,302

 

 

 

685

 

 

 

219

 

 

 

(142

)

 

 

 

 

 

3,379

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total loans receivable:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Payment performance

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Performing

 

 

606,533

 

 

 

1,118,534

 

 

 

1,645,422

 

 

 

1,142,098

 

 

 

611,095

 

 

 

625,428

 

 

 

408,004

 

 

 

6,157,114

 

Nonperforming

 

 

1,415

 

 

 

1,534

 

 

 

4,233

 

 

 

2,256

 

 

 

573

 

 

 

5,307

 

 

 

3,927

 

 

 

19,245

 

Total loans receivable

 

$

607,948

 

 

$

1,120,068

 

 

$

1,649,655

 

 

$

1,144,354

 

 

$

611,668

 

 

$

630,735

 

 

$

411,931

 

 

$

6,176,359

 

YTD gross charge-offs

 

 

 

 

 

411

 

 

 

2,680

 

 

 

874

 

 

 

262

 

 

 

234

 

 

 

 

 

 

4,461

 

YTD net charge-offs (recoveries)

 

 

 

 

 

379

 

 

 

2,455

 

 

 

685

 

 

 

206

 

 

 

(167

)

 

 

(173

)

 

 

3,385

 

 

(1)
Includes extensions, renewals, or modifications of credit contracts, which consist of a new credit decision.

18


 

 

 

 

Term Loans

 

 

 

 

 

 

 

 

 

Amortized Cost Basis by Origination Year (1)

 

 

 

 

 

 

 

 

 

2023

 

 

2022

 

 

2021

 

 

2020

 

 

2019

 

 

Prior

 

 

Revolving
Loans
Amortized
Cost Basis

 

 

Total

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

December 31, 2023

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Real estate loans:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial property

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Payment performance

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Performing

 

$

689,449

 

 

$

991,899

 

 

$

866,841

 

 

$

578,620

 

 

$

384,275

 

 

$

243,819

 

 

$

31,642

 

 

$

3,786,545

 

Nonperforming

 

 

1,835

 

 

 

 

 

 

150

 

 

 

 

 

 

81

 

 

 

783

 

 

 

 

 

 

2,849

 

Total commercial property

 

 

691,284

 

 

 

991,899

 

 

 

866,991

 

 

 

578,620

 

 

 

384,356

 

 

 

244,602

 

 

 

31,642

 

 

 

3,789,394

 

YTD gross charge-offs

 

 

 

 

 

 

 

 

 

 

 

411

 

 

 

 

 

 

216

 

 

 

 

 

 

627

 

YTD net charge-offs (recoveries)

 

 

 

 

 

 

 

 

 

 

 

403

 

 

 

 

 

 

(81

)

 

 

 

 

 

322

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Construction

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Payment performance

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Performing

 

 

72,039

 

 

 

 

 

 

28,306

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

100,345

 

Nonperforming

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total construction

 

 

72,039

 

 

 

 

 

 

28,306

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

100,345

 

YTD gross charge-offs

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

YTD net charge-offs (recoveries)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Residential

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Payment performance

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Performing

 

 

290,196

 

 

 

375,712

 

 

 

158,618

 

 

 

12,656

 

 

 

217

 

 

 

119,736

 

 

 

5,525

 

 

 

962,660

 

Nonperforming

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1

 

 

 

 

 

 

1

 

Total residential

 

 

290,196

 

 

 

375,712

 

 

 

158,618

 

 

 

12,656

 

 

 

217

 

 

 

119,737

 

 

 

5,525

 

 

 

962,661

 

YTD gross charge-offs

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

YTD net charge-offs (recoveries)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(7

)

 

 

 

 

 

(7

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total real estate loans

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Payment performance

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Performing

 

 

1,051,684

 

 

 

1,367,611

 

 

 

1,053,765

 

 

 

591,276

 

 

 

384,492

 

 

 

363,555

 

 

 

37,167

 

 

 

4,849,550

 

Nonperforming

 

 

1,835

 

 

 

 

 

 

150

 

 

 

 

 

 

81

 

 

 

784

 

 

 

 

 

 

2,850

 

Total real estate loans

 

 

1,053,519

 

 

 

1,367,611

 

 

 

1,053,915

 

 

 

591,276

 

 

 

384,573

 

 

 

364,339

 

 

 

37,167

 

 

 

4,852,400

 

YTD gross charge-offs

 

 

 

 

 

 

 

 

 

 

 

411

 

 

 

 

 

 

216

 

 

 

 

 

 

627

 

YTD net charge-offs (recoveries)

 

 

 

 

 

 

 

 

 

 

 

403

 

 

 

 

 

 

(88

)

 

 

 

 

 

315

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial and industrial loans:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Payment performance

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Performing

 

 

177,864

 

 

 

183,787

 

 

 

84,198

 

 

 

31,415

 

 

 

10,050

 

 

 

13,066

 

 

 

242,134

 

 

 

742,514

 

Nonperforming

 

 

329

 

 

 

 

 

 

 

 

 

35

 

 

 

 

 

 

93

 

 

 

4,848

 

 

 

5,305

 

Total commercial and industrial loans

 

 

178,193

 

 

 

183,787

 

 

 

84,198

 

 

 

31,450

 

 

 

10,050

 

 

 

13,159

 

 

 

246,982

 

 

 

747,819

 

YTD gross charge-offs

 

 

 

 

 

17

 

 

 

 

 

 

 

 

 

110

 

 

 

410

 

 

 

6,120

 

 

 

6,657

 

YTD net charge-offs (recoveries)

 

 

 

 

 

5

 

 

 

(7

)

 

 

 

 

 

101

 

 

 

(6,621

)

 

 

6,090

 

 

 

(432

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Equipment financing agreements:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Payment performance

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Performing

 

 

215,670

 

 

 

211,228

 

 

 

101,622

 

 

 

24,340

 

 

 

18,844

 

 

 

3,192

 

 

 

 

 

 

574,896

 

Nonperforming

 

 

392

 

 

 

4,171

 

 

 

1,945

 

 

 

365

 

 

 

389

 

 

 

57

 

 

 

 

 

 

7,319

 

Total equipment financing agreements

 

 

216,062

 

 

 

215,399

 

 

 

103,567

 

 

 

24,705

 

 

 

19,233

 

 

 

3,249

 

 

 

 

 

 

582,215

 

YTD gross charge-offs

 

 

178

 

 

 

3,944

 

 

 

3,267

 

 

 

386

 

 

 

799

 

 

 

232

 

 

 

 

 

 

8,806

 

YTD net charge-offs (recoveries)

 

 

178

 

 

 

3,744

 

 

 

2,858

 

 

 

244

 

 

 

250

 

 

 

(114

)

 

 

 

 

 

7,160

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total loans receivable:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Payment performance

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Performing

 

 

1,445,218

 

 

 

1,762,626

 

 

 

1,239,585

 

 

 

647,031

 

 

 

413,386

 

 

 

379,813

 

 

 

279,301

 

 

 

6,166,960

 

Nonperforming

 

 

2,556

 

 

 

4,171

 

 

 

2,095

 

 

 

400

 

 

 

470

 

 

 

934

 

 

 

4,848

 

 

 

15,474

 

Total loans receivable

 

$

1,447,774

 

 

$

1,766,797

 

 

$

1,241,680

 

 

$

647,431

 

 

$

413,856

 

 

$

380,747

 

 

$

284,149

 

 

$

6,182,434

 

YTD gross charge-offs

 

 

178

 

 

 

3,961

 

 

 

3,267

 

 

 

797

 

 

 

909

 

 

 

858

 

 

 

6,120

 

 

 

16,090

 

YTD net charge-offs (recoveries)

 

 

178

 

 

 

3,749

 

 

 

2,851

 

 

 

647

 

 

 

351

 

 

 

(6,823

)

 

 

6,090

 

 

 

7,043

 

 

(1)
Includes extensions, renewals, or modifications of credit contracts, which consist of a new credit decision.

 

19


 

The following is an aging analysis of loans, including loans on nonaccrual status, disaggregated by loan class, as of:

 

 

 

30-59
Days
Past Due

 

 

60-89
Days
Past Due

 

 

90 Days
or More
Past Due

 

 

Total
Past Due

 

 

Current

 

 

Total

 

 

 

(in thousands)

 

June 30, 2024

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Real estate loans:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial property

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Retail

 

$

833

 

 

$

 

 

$

560

 

 

$

1,393

 

 

$

1,093,335

 

 

$

1,094,728

 

Hospitality

 

 

(24

)

 

 

 

 

 

 

 

 

(24

)

 

 

754,624

 

 

 

754,600

 

Office

 

 

816

 

 

 

 

 

 

 

 

 

816

 

 

 

571,716

 

 

 

572,532

 

Other

 

 

350

 

 

 

14

 

 

 

2,950

 

 

 

3,314

 

 

 

1,356,825

 

 

 

1,360,139

 

Total commercial property loans

 

 

1,975

 

 

 

14

 

 

 

3,510

 

 

 

5,499

 

 

 

3,776,500

 

 

 

3,781,999

 

Construction

 

 

 

 

 

 

 

 

 

 

 

 

 

 

106,506

 

 

 

106,506

 

Residential

 

 

824

 

 

 

2,366

 

 

 

812

 

 

 

4,002

 

 

 

950,207

 

 

 

954,209

 

Total real estate loans

 

 

2,799

 

 

 

2,380

 

 

 

4,322

 

 

 

9,501

 

 

 

4,833,213

 

 

 

4,842,714

 

Commercial and industrial loans

 

 

752

 

 

 

301

 

 

 

3,931

 

 

 

4,984

 

 

 

797,388

 

 

 

802,372

 

Equipment financing agreements

 

 

6,823

 

 

 

2,515

 

 

 

5,191

 

 

 

14,529

 

 

 

516,744

 

 

 

531,273

 

Total loans receivable

 

$

10,374

 

 

$

5,196

 

 

$

13,444

 

 

$

29,014

 

 

$

6,147,345

 

 

$

6,176,359

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

December 31, 2023

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Real estate loans:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial property

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Retail

 

$

632

 

 

$

 

 

$

 

 

$

632

 

 

$

1,106,728

 

 

$

1,107,360

 

Hospitality

 

 

 

 

 

150

 

 

 

22

 

 

 

172

 

 

 

740,347

 

 

 

740,519

 

Office

 

 

 

 

 

 

 

 

 

 

 

 

 

 

574,981

 

 

 

574,981

 

Other

 

 

592

 

 

 

 

 

 

 

 

 

592

 

 

 

1,365,942

 

 

 

1,366,534

 

Total commercial property loans

 

 

1,224

 

 

 

150

 

 

 

22

 

 

 

1,396

 

 

 

3,787,998

 

 

 

3,789,394

 

Construction

 

 

 

 

 

 

 

 

 

 

 

 

 

 

100,345

 

 

 

100,345

 

Residential

 

 

521

 

 

 

336

 

 

 

1

 

 

 

858

 

 

 

961,803

 

 

 

962,661

 

Total real estate loans

 

 

1,745

 

 

 

486

 

 

 

23

 

 

 

2,254

 

 

 

4,850,146

 

 

 

4,852,400

 

Commercial and industrial loans

 

 

76

 

 

 

120

 

 

 

5,178

 

 

 

5,374

 

 

 

742,445

 

 

 

747,819

 

Equipment financing agreements

 

 

7,138

 

 

 

2,134

 

 

 

4,551

 

 

 

13,823

 

 

 

568,392

 

 

 

582,215

 

Total loans receivable

 

$

8,959

 

 

$

2,740

 

 

$

9,752

 

 

$

21,451

 

 

$

6,160,983

 

 

$

6,182,434

 

 

20


 

Nonaccrual Loans and Nonperforming Assets

 

The following tables represent the amortized cost basis of loans on nonaccrual status and loans past due 90 days and still accruing as of:

 

 

 

June 30, 2024

 

 

 

Nonaccrual Loans
With
No Allowance for
Credit Losses

 

 

Nonaccrual Loans
With
Allowance for
Credit Losses

 

 

Loans
Past Due
90 Days Still
Accruing

 

 

Total
Nonperforming
Loans

 

 

 

(in thousands)

 

Real estate loans:

 

 

 

 

 

 

 

 

 

 

 

 

Commercial property

 

 

 

 

 

 

 

 

 

 

 

 

Retail

 

$

697

 

 

$

525

 

 

$

 

 

$

1,222

 

Hospitality

 

 

259

 

 

 

 

 

 

 

 

 

259

 

Office

 

 

 

 

 

 

 

 

 

 

 

 

Other

 

 

2,949

 

 

 

204

 

 

 

 

 

 

3,153

 

Total commercial property loans

 

 

3,905

 

 

 

729

 

 

 

 

 

 

4,634

 

Construction

 

 

1,225

 

 

 

 

 

 

 

 

 

1,225

 

Residential

 

 

813

 

 

 

 

 

 

 

 

 

813

 

Total real estate loans

 

 

5,943

 

 

 

729

 

 

 

 

 

 

6,672

 

Commercial and industrial loans

 

 

4

 

 

 

4,010

 

 

 

 

 

 

4,014

 

Equipment financing agreements

 

 

678

 

 

 

7,881

 

 

 

 

 

 

8,559

 

Total

 

$

6,625

 

 

$

12,620

 

 

$

 

 

$

19,245

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

December 31, 2023

 

 

 

Nonaccrual Loans
With
No Allowance for
Credit Losses

 

 

Nonaccrual Loans
With
Allowance for
Credit Losses

 

 

Loans
Past Due
90 Days Still
Accruing

 

 

Total
Nonperforming
Loans

 

 

 

(in thousands)

 

Real estate loans:

 

 

 

 

 

 

 

 

 

 

 

 

Commercial property

 

 

 

 

 

 

 

 

 

 

 

 

Retail

 

$

1,717

 

 

$

321

 

 

$

 

 

$

2,038

 

Hospitality

 

 

338

 

 

 

150

 

 

 

 

 

 

488

 

Other

 

 

305

 

 

 

18

 

 

 

 

 

 

323

 

Total commercial property loans

 

 

2,360

 

 

 

489

 

 

 

 

 

 

2,849

 

Residential

 

 

1

 

 

 

 

 

 

 

 

 

1

 

Total real estate loans

 

 

2,361

 

 

 

489

 

 

 

 

 

 

2,850

 

Commercial and industrial loans

 

 

5,213

 

 

 

92

 

 

 

 

 

 

5,305

 

Equipment financing agreements

 

 

570

 

 

 

6,749

 

 

 

 

 

 

7,319

 

Total

 

$

8,144

 

 

$

7,330

 

 

$

 

 

$

15,474

 

 

The Company recognized $29,000 and $30,000 of interest income on nonaccrual loans for the three months ended June 30, 2024 and 2023, respectively. Interest income recognized on nonaccrual loans for the six months ended June 30, 2024 and 2023 was $38,000 and $134,000, respectively.

 

The following table details nonperforming assets as of the dates indicated:

 

 

 

June 30, 2024

 

 

December 31, 2023

 

 

 

(in thousands)

 

Nonaccrual loans

 

$

19,245

 

 

$

15,474

 

Loans receivable 90 days or more past due and still accruing

 

 

 

 

 

 

Total nonperforming loans receivable

 

 

19,245

 

 

 

15,474

 

Other real estate owned (“OREO”)

 

 

772

 

 

 

117

 

Total nonperforming assets

 

$

20,017

 

 

$

15,591

 

 

21


 

OREO of $0.8 million and $0.1 million is included in prepaid expenses and other assets in the accompanying Consolidated Balance Sheets as of June 30, 2024 and December 31, 2023, respectively.

 

Loan Modifications

 

The following table presents loan modifications made to borrowers experiencing financial difficulty, by type of modification, with related amortized cost balances, respective percentage shares of the total class of loans, and the related financial effect, for the periods indicated:

 

 

 

Term Extension

 

 

 

 

Amortized Cost Basis

 

 

% of Total Class of Loans

 

 

Financial Effect

 

 

 

 

(in thousands)

 

 

 

 

 

 

 

 

Three and six months ended June 30, 2024

 

 

 

 

 

 

 

 

 

 

Commercial and industrial loans

 

$

20,620

 

 

 

2.6

%

 

1 loan with term extension of 6 years

 

 

 

The modified loan above is current at June 30, 2024.

 

No loans were modified to borrowers experiencing financial difficulty during the three and six months ended June 30, 2023.

 

Note 4 — Servicing Assets

The activity in servicing assets was as follows for the periods indicated:

 

 

 

Three Months Ended June 30,

 

 

 

2024

 

 

2023

 

 

 

(in thousands)

 

 

 

 

 

 

 

 

Balance at beginning of period

 

$

6,890

 

 

$

7,542

 

Addition related to sale of SBA loans

 

 

482

 

 

 

399

 

Addition related to sale of residential loans

 

 

136

 

 

 

 

Amortization

 

 

(672

)

 

 

(589

)

Change in valuation allowance

 

 

 

 

 

 

Balance at end of period

 

$

6,836

 

 

$

7,352

 

 

 

 

Six Months Ended June 30,

 

 

 

2024

 

 

2023

 

 

 

(in thousands)

 

 

 

 

 

 

 

 

Balance at beginning of period

 

$

7,070

 

 

$

7,176

 

Addition related to sale of SBA loans

 

 

996

 

 

 

1,014

 

Addition related to sale of residential loans

 

 

136

 

 

 

 

Amortization

 

 

(1,366

)

 

 

(1,223

)

Change in valuation allowance

 

 

 

 

 

385

 

Balance at end of period

 

$

6,836

 

 

$

7,352

 

 

22


 

 

At June 30, 2024 and December 31, 2023, we serviced loans sold to unaffiliated parties of $536.1 million and $539.6 million, respectively. These represented loans that were sold for which the Bank continues to provide servicing. These loans are maintained off-balance sheet and are not included in the loans receivable balance. At June 30, 2024, all of the loans serviced were SBA loans, except for $19.5 million of residential mortgage loans.

The Company recorded servicing fee income of $1.4 million and $1.3 million for the three months ended June 30, 2024 and 2023, respectively and $2.7 million and $2.6 million for the six months ended June 30, 2024 and 2023, respectively. Servicing fee income, net of the amortization of servicing assets, is included in other operating income in the consolidated statements of income. Amortization expense was $0.7 million and $0.6 million for the three months ended June 30, 2024 and 2023, respectively, and $1.4 million and $1.2 million for the six months ended June 30, 2024 and 2023, respectively.

The fair value of servicing rights was $8.1 million at June 30, 2024 and was determined using discount rates ranging from 10.1% to 25.5% and prepayment speeds ranging from 11.4% to 21.4%, depending on the stratification of the specific right. The fair value of servicing rights was $7.7 million at December 31, 2023 and was determined using discount rates ranging from 14.4% to 24.7% and prepayment speeds ranging from 12.2% to 19.7%, depending on the stratification of the specific right.

 

Note 5 — Income Taxes

The Company’s income tax expense was $6.0 million and $8.5 million, representing an effective income tax rate of 29.3% and 29.3% for the three months ended June 30, 2024 and 2023, respectively. The Company’s income tax expense was $12.5 million and $17.8 million, representing an effective income tax rate of 29.7% and 29.5% for the six months ended June 30, 2024 and 2023, respectively.

Management concluded that as of June 30, 2024 and December 31, 2023, a valuation allowance of $1.8 million and $1.9 million, respectively, was appropriate against certain state net operating loss carry forwards. For all other deferred tax assets, management believes it was more likely than not these deferred tax assets will be realized principally through future taxable income and reversal of existing taxable temporary differences. Net deferred tax assets were $35.9 million and $35.2 million as of June 30, 2024 and December 31, 2023, respectively.

As of June 30, 2024, the Company was subject to examination by various taxing authorities for its federal tax returns for the periods ended after December 31, 2019 and state tax returns for the periods ended after December 31, 2018. During the quarter ended June 30, 2024, there was no material change to the Company’s uncertain tax positions. The Company does not expect its unrecognized tax positions to change significantly over the next twelve months.

Note 6 — Goodwill and other Intangibles

The goodwill of $11.0 million was recorded as a result of the acquisition of an equipment financing agreements portfolio in 2016. The core deposit intangible of $2.2 million was recognized for the core deposits acquired in a 2014 acquisition. The Company’s intangible assets were as follows for the periods indicated:

 

 

 

 

 

June 30, 2024

 

 

December 31, 2023

 

 

 

Amortization
Period

 

Gross
Carrying
Amount

 

 

Accumulated
Amortization

 

 

Net
Carrying
Amount

 

 

Gross
Carrying
Amount

 

 

Accumulated
Amortization

 

 

Net
Carrying
Amount

 

 

 

 

 

(in thousands)

 

Core deposit intangible

 

10 years

 

$

2,213

 

 

$

(2,196

)

 

$

17

 

 

$

2,213

 

 

$

(2,145

)

 

$

68

 

Third-party originator's intangible

 

7 years

 

 

 

 

 

 

 

 

 

 

 

483

 

 

 

(483

)

 

 

 

Goodwill

 

N/A

 

 

11,031

 

 

 

 

 

 

11,031

 

 

 

11,031

 

 

 

 

 

 

11,031

 

Total intangible assets

 

 

 

$

13,244

 

 

$

(2,196

)

 

$

11,048

 

 

$

13,727

 

 

$

(2,628

)

 

$

11,099

 

 

The Company performed an impairment analysis in the second quarter of 2024 and determined there was no impairment as of June 30, 2024. No triggering event occurred as of, or subsequent to June 30, 2024, that would require a reassessment of goodwill and other intangible assets.

23


 

Note 7 — Deposits

 

The scheduled maturities of time deposits are as follows for the periods indicated:

 

 

 

Time
Deposits More
Than $250,000

 

 

Other Time
Deposits

 

 

Total

 

 

 

(in thousands)

 

At June 30, 2024

 

 

 

 

 

 

 

 

 

2024

 

$

720,184

 

 

$

959,204

 

 

$

1,679,388

 

2025

 

 

282,055

 

 

 

483,676

 

 

 

765,731

 

2026

 

 

263

 

 

 

4,953

 

 

 

5,216

 

2027

 

 

 

 

 

955

 

 

 

955

 

2028 and thereafter

 

 

 

 

 

309

 

 

 

309

 

Total

 

$

1,002,502

 

 

$

1,449,097

 

 

$

2,451,599

 

 

 

 

 

 

 

 

 

 

 

At December 31, 2023

 

 

 

 

 

 

 

 

 

2024

 

$

995,830

 

 

$

1,444,509

 

 

$

2,440,339

 

2025

 

 

3,928

 

 

 

6,205

 

 

 

10,133

 

2026

 

 

263

 

 

 

3,142

 

 

 

3,405

 

2027

 

 

 

 

 

572

 

 

 

572

 

2028 and thereafter

 

 

 

 

 

418

 

 

 

418

 

Total

 

$

1,000,021

 

 

$

1,454,846

 

 

$

2,454,867

 

 

Accrued interest payable on deposits was $47.6 million and $39.2 million at June 30, 2024 and December 31, 2023, respectively. Total deposits reclassified to loans due to overdrafts at June 30, 2024 and December 31, 2023 were $1.4 million and $1.6 million, respectively.

Note 8 — Borrowings and Subordinated Debentures

At June 30, 2024, the Bank had $180.0 million of open advances and $112.5 million of term advances at the FHLB with a weighted average interest rate of 5.65% and 3.91%, respectively. At December 31, 2023, the Bank had $212.5 million of open advances and $112.5 million of term advances at the FHLB with a weighted average rate of 5.70% and 2.77%, respectively. Interest expense on borrowings for the six months ended June 30, 2024 and 2023 was $3.6 million and $4.0 million, respectively.

 

 

 

June 30, 2024

 

 

December 31, 2023

 

 

 

Outstanding
Balance

 

 

Weighted
Average Rate

 

 

Outstanding
Balance

 

 

Weighted
Average Rate

 

 

 

(dollars in thousands)

 

Open advances

 

$

180,000

 

 

 

5.65

%

 

$

212,500

 

 

 

5.70

%

Advances due within 12 months

 

 

50,000

 

 

 

3.33

 

 

 

37,500

 

 

 

0.40

 

Advances due over 12 months through 24 months

 

 

50,000