Annual report pursuant to Section 13 and 15(d)

Loans Receivable

v3.22.4
Loans Receivable
12 Months Ended
Dec. 31, 2022
Receivables [Abstract]  
Loans Receivable

Note 3 — Loans Receivable

The Board of Directors and management review and approve the Bank’s loan policy and procedures on a regular basis to reflect matters such as regulatory and organizational structure changes, strategic planning revisions, concentrations of credit, loan delinquencies and nonperforming loans, and problem loans.

Real estate loans are loans secured by liens or interest in real estate, to provide for the purchase, construction or refinance on real estate properties. Commercial and industrial loans consist of commercial term loans, commercial lines of credit and can include SBA loans. Alternatively, SBA loans can be real estate secured. Equipment financing agreements are typically secured by the business assets being financed. We maintain management loan review and monitoring departments that review and monitor pass graded loans as well as problem loans to prevent further deterioration.

Concentrations of Credit: The majority of the Bank’s loan portfolio consists of commercial real estate loans.

Loans receivable, net

Loans receivable consisted of the following as of the dates indicated:

 

 

 

December 31,

 

 

 

2022

 

 

2021

 

 

 

(in thousands)

 

Real estate loans:

 

 

 

 

 

 

Commercial property

 

 

 

 

 

 

Retail

 

$

1,023,608

 

 

$

970,134

 

Hospitality

 

 

646,893

 

 

 

717,692

 

Other (1)

 

 

2,053,675

 

 

 

1,919,033

 

Total commercial property loans

 

 

3,724,176

 

 

 

3,606,859

 

Construction

 

 

109,205

 

 

 

95,006

 

Residential (2)

 

 

734,472

 

 

 

400,546

 

Total real estate loans

 

 

4,567,853

 

 

 

4,102,411

 

Commercial and industrial loans (3)

 

 

804,492

 

 

 

561,831

 

Equipment financing agreements

 

 

594,788

 

 

 

487,299

 

Loans receivable

 

 

5,967,133

 

 

 

5,151,541

 

Allowance for credit losses

 

 

(71,523

)

 

 

(72,557

)

Loans receivable, net

 

$

5,895,610

 

 

$

5,078,984

 

 

(1)
Includes, among other property types, mixed-use, gas station, apartment, office, industrial, faith-based facilities and warehouse; the remaining real estate categories represent less than 1% of the Bank's total loans receivable.
(2)
Includes $2.4 million and $3.9 million of home equity loans and lines, and $4.6 million and $6.0 million of personal loans at December 31, 2022 and 2021, respectively.
(3)
At December 31, 2022 and 2021, PPP loans were $0.9 million and $3.0 million, respectively.

Accrued interest on loans was $16.0 million and $10.1 million at December 31, 2022 and 2021, respectively.

At December 31, 2022 and 2021, loans of $1.99 billion and $2.30 billion, respectively, were pledged to secure advances from the FHLB.

Loans Held for Sale

The following table details the information on SBA loans held for sale by portfolio segment for the years ended December 31, 2022 and 2021:

 

 

 

Real Estate

 

 

Commercial
and Industrial

 

 

Total

 

 

 

(in thousands)

 

December 31, 2022

 

 

 

 

 

 

 

 

 

Balance at beginning of period

 

$

6,954

 

 

$

6,388

 

 

$

13,342

 

Originations and transfers

 

 

99,547

 

 

 

51,278

 

 

 

150,825

 

Sales

 

 

(102,720

)

 

 

(53,389

)

 

 

(156,109

)

Principal paydowns and amortization

 

 

(6

)

 

 

(9

)

 

 

(15

)

Balance at end of period

 

$

3,775

 

 

$

4,268

 

 

$

8,043

 

 

 

 

 

 

 

 

 

 

 

December 31, 2021

 

 

 

 

 

 

 

 

 

Balance at beginning of period

 

$

8,042

 

 

$

526

 

 

$

8,568

 

Originations and transfers

 

 

87,775

 

 

 

177,968

 

 

 

265,743

 

Sales

 

 

(88,858

)

 

 

(172,995

)

 

 

(261,853

)

Principal paydowns and amortization

 

 

(5

)

 

 

889

 

 

 

884

 

Balance at end of period

 

$

6,954

 

 

$

6,388

 

 

$

13,342

 

 

Loans held for sale was comprised of $8.0 million and $13.3 million of the guaranteed portion of SBA 7(a) loans at December 31, 2022 and 2021, respectively. All second draw PPP loans were sold by the third quarter of 2021. For the year ended December 31, 2021, the Company recognized $3.0 million of gains on the sale of $132.7 million second draw PPP loans.

Allowance for credit losses

The following table details the information on the allowance for credit losses by portfolio segment for the years ended December 31, 2022, 2021 and 2020:

 

 

 

Real
Estate

 

 

Commercial
and
Industrial

 

 

Equipment financing agreements

 

 

Total

 

 

 

(in thousands)

 

December 31, 2022

 

 

 

 

 

 

 

 

 

 

 

 

Allowance for credit losses:

 

 

 

 

 

 

 

 

 

 

 

 

Beginning balance

 

$

48,890

 

 

$

12,418

 

 

$

11,249

 

 

$

72,557

 

Chargeoffs

 

 

(1,886

)

 

 

(524

)

 

 

(2,312

)

 

 

(4,722

)

Recoveries

 

 

848

 

 

 

1,178

 

 

 

1,322

 

 

 

3,348

 

Provision (recovery) for credit losses

 

 

(3,826

)

 

 

2,195

 

 

 

1,971

 

 

 

340

 

Ending balance

 

$

44,026

 

 

$

15,267

 

 

$

12,230

 

 

$

71,523

 

 

 

 

 

 

 

 

 

 

 

 

 

 

December 31, 2021

 

 

 

 

 

 

 

 

 

 

 

 

Allowance for credit losses:

 

 

 

 

 

 

 

 

 

 

 

 

Beginning balance

 

$

51,876

 

 

$

21,410

 

 

$

17,140

 

 

$

90,426

 

Chargeoffs

 

 

(1,427

)

 

 

(546

)

 

 

(4,400

)

 

 

(6,373

)

Recoveries

 

 

10,807

 

 

 

897

 

 

 

946

 

 

 

12,650

 

Provision (recovery) for credit losses

 

 

(12,366

)

 

 

(9,343

)

 

 

(2,437

)

 

 

(24,146

)

Ending balance

 

$

48,890

 

 

$

12,418

 

 

$

11,249

 

 

$

72,557

 

 

 

 

 

 

 

 

 

 

 

 

 

 

December 31, 2020

 

 

 

 

 

 

 

 

 

 

 

 

Allowance for credit losses:

 

 

 

 

 

 

 

 

 

 

 

 

Beginning balance

 

$

36,435

 

 

$

16,206

 

 

$

8,767

 

 

$

61,408

 

Adjustment related to adoption of ASU 2016-13

 

 

14,028

 

 

 

(2,497

)

 

 

5,902

 

 

 

17,433

 

Adjusted balance

 

 

50,463

 

 

 

13,709

 

 

 

14,669

 

 

 

78,841

 

Chargeoffs

 

 

(15,567

)

 

 

(13,312

)

 

 

(5,073

)

 

 

(33,952

)

Recoveries

 

 

2,124

 

 

 

336

 

 

 

603

 

 

 

3,063

 

Provision (recovery) for credit losses

 

 

14,856

 

 

 

20,677

 

 

 

6,941

 

 

 

42,474

 

Ending balance

 

$

51,876

 

 

$

21,410

 

 

$

17,140

 

 

$

90,426

 

 

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 for the years ended December 31, 2022 and 2021:

 

 

 

December 31, 2022

 

 

December 31, 2021

 

 

 

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

 

$

7,872

 

 

 

11.0

%

 

$

1,023,608

 

 

 

17.2

%

 

$

6,579

 

 

 

9.1

%

 

$

970,134

 

 

 

18.8

%

Hospitality

 

 

13,407

 

 

 

18.7

 

 

 

646,893

 

 

 

10.8

 

 

 

22,670

 

 

 

31.2

 

 

 

717,692

 

 

 

13.9

 

Other

 

 

15,349

 

 

 

21.5

 

 

 

2,053,675

 

 

 

34.4

 

 

 

15,065

 

 

 

20.8

 

 

 

1,919,033

 

 

 

37.3

 

Total commercial property loans

 

 

36,628

 

 

 

51.2

 

 

 

3,724,176

 

 

 

62.4

 

 

 

44,314

 

 

 

61.1

 

 

 

3,606,859

 

 

 

70.0

 

Construction

 

 

4,022

 

 

 

5.7

 

 

 

109,205

 

 

 

1.8

 

 

 

4,078

 

 

 

5.6

 

 

 

95,006

 

 

 

1.8

 

Residential

 

 

3,376

 

 

 

4.7

 

 

 

734,472

 

 

 

12.4

 

 

 

498

 

 

 

0.7

 

 

 

400,546

 

 

 

7.8

 

Total real estate loans

 

 

44,026

 

 

 

61.6

 

 

 

4,567,853

 

 

 

76.6

 

 

 

48,890

 

 

 

67.4

 

 

 

4,102,411

 

 

 

79.6

 

Commercial and industrial loans

 

 

15,267

 

 

 

21.3

 

 

 

804,492

 

 

 

13.5

 

 

 

12,418

 

 

 

17.1

 

 

 

561,831

 

 

 

10.9

 

Equipment financing agreements

 

 

12,230

 

 

 

17.1

 

 

 

594,788

 

 

 

10.0

 

 

 

11,249

 

 

 

15.5

 

 

 

487,299

 

 

 

9.5

 

Total

 

$

71,523

 

 

 

100.0

%

 

$

5,967,133

 

 

 

100.0

%

 

$

72,557

 

 

 

100.0

%

 

$

5,151,541

 

 

 

100.0

%

 

The following table represents the amortized cost basis of collateral-dependent loans by class of loans as of December 31, 2022 and 2021, for which repayment is expected to be obtained through the sale of the underlying collateral and any collateral dependent loans that are still accruing but are considered nonperforming.

 

 

 

December 31,

 

 

 

2022

 

 

2021

 

 

 

(in thousands)

 

Real estate loans:

 

 

 

 

 

 

Commercial property

 

 

 

 

 

 

Retail

 

$

1,930

 

 

$

1,917

 

Hospitality

 

 

 

 

 

 

Other (1)

 

 

256

 

 

 

499

 

Total commercial property loans

 

 

2,186

 

 

 

2,416

 

Residential

 

 

508

 

 

 

982

 

Total real estate loans

 

 

2,694

 

 

 

3,398

 

Total

 

$

2,694

 

 

$

3,398

 

 

(1)
Includes, among other property types, mixed-use, gas station, apartment, office, industrial, faith-based facilities and warehouse; the remaining real estate categories represent less than one percent of the Bank's total loans receivable.

Loan Quality Indicators

As part of the on-going monitoring of the quality of our loan 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. A third-party loan review is required on an annual 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” 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.

As of December 31, 2022 and 2021, the recorded investment in pass/pass-watch, special mention and classified (substandard, doubtful and loss) loans, disaggregated by loan class, were as follows:

 

 

 

Pass/Pass-
Watch

 

 

Special
Mention

 

 

Classified

 

 

Total

 

 

 

(in thousands)

 

December 31, 2022

 

 

 

 

 

 

 

 

 

 

 

 

Real estate loans:

 

 

 

 

 

 

 

 

 

 

 

 

Commercial property

 

 

 

 

 

 

 

 

 

 

 

 

Retail

 

$

1,016,442

 

 

$

5,236

 

 

$

1,930

 

 

$

1,023,608

 

Hospitality

 

 

628,698

 

 

 

 

 

 

18,195

 

 

 

646,893

 

Other

 

 

2,006,464

 

 

 

29,748

 

 

 

17,463

 

 

 

2,053,675

 

Total commercial property loans

 

 

3,651,604

 

 

 

34,984

 

 

 

37,588

 

 

 

3,724,176

 

Construction

 

 

109,205

 

 

 

 

 

 

 

 

 

109,205

 

Residential

 

 

733,464

 

 

 

500

 

 

 

508

 

 

 

734,472

 

Total real estate loans

 

 

4,494,273

 

 

 

35,484

 

 

 

38,096

 

 

 

4,567,853

 

Commercial and industrial loans

 

 

758,584

 

 

 

43,529

 

 

 

2,379

 

 

 

804,492

 

Equipment financing agreements

 

 

589,071

 

 

 

 

 

 

5,717

 

 

 

594,788

 

Total loans receivable

 

$

5,841,928

 

 

$

79,013

 

 

$

46,192

 

 

$

5,967,133

 

 

 

 

 

 

 

 

 

 

 

 

 

 

December 31, 2021

 

 

 

 

 

 

 

 

 

 

 

 

Real estate loans:

 

 

 

 

 

 

 

 

 

 

 

 

Commercial property

 

 

 

 

 

 

 

 

 

 

 

 

Retail

 

$

952,651

 

 

$

5,949

 

 

$

11,534

 

 

$

970,134

 

Hospitality

 

 

662,834

 

 

 

36,248

 

 

 

18,610

 

 

 

717,692

 

Other

 

 

1,891,877

 

 

 

9,846

 

 

 

17,310

 

 

 

1,919,033

 

Total commercial property loans

 

 

3,507,362

 

 

 

52,043

 

 

 

47,454

 

 

 

3,606,859

 

Construction

 

 

74,439

 

 

 

20,567

 

 

 

 

 

 

95,006

 

Residential

 

 

396,007

 

 

 

3,557

 

 

 

982

 

 

 

400,546

 

Total real estate loans

 

 

3,977,808

 

 

 

76,167

 

 

 

48,436

 

 

 

4,102,411

 

Commercial and industrial loans

 

 

537,652

 

 

 

19,127

 

 

 

5,052

 

 

 

561,831

 

Equipment financing agreements

 

 

480,154

 

 

 

 

 

 

7,145

 

 

 

487,299

 

Total loans receivable

 

$

4,995,614

 

 

$

95,294

 

 

$

60,633

 

 

$

5,151,541

 

 

Loans by Vintage Year and Risk Rating

 

 

 

Term Loans

 

 

 

 

 

 

 

 

 

Amortized Cost Basis by Origination Year (1)

 

 

 

 

 

 

 

 

 

2022

 

 

2021

 

 

2020

 

 

2019

 

 

2018

 

 

Prior

 

 

Revolving
Loans
Amortized
Cost Basis

 

 

Total

 

 

 

(in thousands)

 

December 31, 2022

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Real estate loans:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial property

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Risk Rating

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Pass / Pass Watch

 

$

1,184,361

 

 

$

901,029

 

 

$

600,740

 

 

$

404,786

 

 

$

301,950

 

 

$

207,861

 

 

$

50,877

 

 

$

3,651,604

 

Special Mention

 

 

847

 

 

 

13,384

 

 

 

5,857

 

 

 

7,115

 

 

 

 

 

 

6,080

 

 

 

1,701

 

 

 

34,984

 

Classified

 

 

 

 

 

 

 

 

412

 

 

 

4,312

 

 

 

12,304

 

 

 

20,560

 

 

 

 

 

 

37,588

 

Total commercial property

 

 

1,185,208

 

 

 

914,413

 

 

 

607,009

 

 

 

416,213

 

 

 

314,254

 

 

 

234,501

 

 

 

52,578

 

 

 

3,724,176

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Construction

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Risk Rating

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Pass / Pass Watch

 

 

41,662

 

 

 

67,543

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

109,205

 

Special Mention

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Classified

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total construction

 

 

41,662

 

 

 

67,543

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

109,205

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Residential

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Risk Rating

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Pass / Pass Watch

 

 

405,975

 

 

 

173,236

 

 

 

13,102

 

 

 

232

 

 

 

731

 

 

 

134,766

 

 

 

5,422

 

 

 

733,464

 

Special Mention