SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
|☑||ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934|
For the Fiscal Year Ended December 31, 2021 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 No. 001-36441
Investors Bancorp, Inc.
(Exact name of registrant as specified in its charter)
|(State or other jurisdiction of|
incorporation or organization)
| ||(I.R.S. Employer|
|101 JFK Parkway,||Short Hills,||New Jersey|| ||07078|
|(Address of Principal Executive Offices)|| ||Zip Code|
(Registrant’s telephone number)
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||ISBC||The NASDAQ Stock Market|
Securities Registered Pursuant to Section 12(g) of the Act:
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☑ No ☐
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☑
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 twelve months (or for such shorter period that the Registrant was required to file such reports) and (2) has been subject to such 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 has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☑
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☑
As of February 17, 2022, the registrant had 361,869,872 shares of common stock, par value $0.01 per share, issued and 249,038,728 shares outstanding.
The aggregate market value of the voting and non-voting common equity held by non-affiliates of the registrant, computed by reference to the last sale price on June 30, 2021, as reported by the NASDAQ Global Select Market, was approximately $3.23 billion.
DOCUMENTS INCORPORATED BY REFERENCE
INVESTORS BANCORP, INC.
2021 ANNUAL REPORT ON FORM 10-K
TABLE OF CONTENTS
PRIVATE SECURITIES LITIGATION REFORM ACT SAFE HARBOR STATEMENT
This Annual Report on Form 10-K contains a number of forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, or the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act. These statements may be identified by the use of the words “anticipate,” “believe,” “could,” “estimate,” “expect,” “intend,” “may,” “outlook,” “plan,” “potential,” “predict,” “project,” “should,” “will,” “would” and similar terms and phrases, including references to assumptions.
Forward-looking statements are based on various assumptions and analyses made by us in light of our management’s experience and its perception of historical trends, current conditions and expected future developments, as well as other factors we believe are appropriate under the circumstances. These statements are not guarantees of future performance and are subject to risks, uncertainties and other factors (many of which are beyond our control) that could cause actual results to differ materially from future results expressed or implied by such forward-looking statements. These factors are outlined in Item 1A. Risk Factors herein and include, without limitation, the following:
•the timing and occurrence or non-occurrence of events may be subject to circumstances beyond our control;
•there may be increases in competitive pressure among financial institutions or from non-financial institutions;
•changes in the interest rate environment may reduce interest margins, net income or affect the value of our investments or derivative instruments;
•changes in deposit flows, loan demand or real estate values may adversely affect our business;
•changes in accounting principles, policies or guidelines may cause our financial condition to be perceived differently;
•general economic conditions, either nationally or locally in some or all areas in which we do business, or conditions in the real estate or securities markets or the banking industry may be less favorable than we currently anticipate;
•legislative or regulatory changes may adversely affect our business;
•technological changes may be more difficult or expensive than we anticipate;
•the COVID-19 pandemic may continue to adversely impact the local and national economy and our business and results of operations may continue to be adversely affected;
•success or consummation of new business initiatives may be more difficult or expensive than we anticipate;
•litigation or other matters before regulatory agencies, whether currently existing or commencing in the future, may be determined adverse to us or may delay the occurrence or non-occurrence of events longer than we anticipate;
•the risks associated with continued diversification and growth of assets and adverse changes to credit quality;
•difficulties associated with achieving expected future financial results;
•impact on our financial performance associated with the effective deployment of capital; and
•the risk of an economic slowdown that would adversely affect credit quality and loan originations.
We have no obligation to update any forward-looking statements to reflect events or circumstances after the date of this document.
As used in this Form 10-K, “we,” “us” and “our” refer to Investors Bancorp, Inc. and its consolidated subsidiary, Investors Bank. Investors Bancorp, Inc.’s electronic filings with the SEC, including the Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and amendments to these reports filed or furnished pursuant to Sections 13(a) or 15(d) of the Exchange Act, as amended, are made available at no cost in the Investor Relations section of the Company’s website, www.investorsbank.com, as soon as reasonably practicable after the Company files such material with, or furnishes it to, the SEC. The Company’s SEC filings are also available through the SEC’s website at www.sec.gov.
Investors Bancorp, Inc. (the “Company”) is a Delaware corporation and the holding company for Investors Bank (the “Bank”). At December 31, 2021, the Company had 361,869,872 common stock issued and 247,997,266 outstanding.
The Company is subject to regulation as a bank holding company by the Federal Reserve Board. The Company neither owns nor leases any property, but instead uses the premises, equipment and furniture of the Bank. The Company currently employs as officers only certain persons who are also officers of the Bank and uses the support staff of the Bank from time to time. These persons are not separately compensated by the Company. The Company may hire additional employees, as appropriate.
The Bank is a New Jersey-chartered commercial bank headquartered in Short Hills, New Jersey. Originally founded in 1926 as a New Jersey-chartered mutual savings and loan association, it has grown through acquisitions and internal growth, including de novo branching. In 1992, the charter was converted to a mutual savings bank and in 1997 the charter was converted to a New Jersey-chartered stock savings bank in connection with a reorganization into the mutual holding company structure. In 2019, the charter was converted to a New Jersey-chartered commercial bank.
The Bank is in the business of attracting deposits from the public through its branch network and a secure online channel and borrowing funds in the wholesale markets to originate loans and to invest in securities. The Bank originates multi-family loans, commercial real estate loans, commercial and industrial (“C&I”) loans, one-to four- family residential mortgage loans secured by one- to four-family residential real estate, construction loans and consumer loans, the majority of which are cash surrender value lending on life insurance contracts, home equity loans and home equity lines of credit. Securities, primarily mortgage-backed securities, U.S. Government and Federal Agency obligations, and other securities represented 14.4% of consolidated assets at December 31, 2021. The Bank is subject to comprehensive regulation and examination by the New Jersey Department of Banking and Insurance (“NJDOBI”), the Federal Deposit Insurance Corporation (“FDIC”) and the Consumer Financial Protection Bureau (“CFPB”).
Citizens Financial Group, Inc. Merger Agreement
On July 28, 2021, Citizens Financial Group, Inc. (“Citizens”) and the Company announced that they entered into a definitive agreement and plan of merger under which Citizens will acquire all of the outstanding shares of the Company for a combination of stock and cash. Under the terms of the agreement and plan of merger, shareholders of the Company will receive 0.297 of a share of Citizens common stock and $1.46 in cash for each share of the Company they own. Following completion of the transaction, former shareholders of the Company will collectively own approximately 14% of the combined company. The implied total transaction value based on closing prices on July 27, 2021was approximately $3.5 billion. The agreement and plan of merger has been unanimously approved by the boards of directors of each company. On November 19, 2021, Investors’ shareholders approved the planned merger with Citizens at a special meeting. Citizens and Investors are targeting a transaction close in the second quarter of 2022, subject to the receipt of required regulatory approvals and other customary closing conditions.
The COVID-19 pandemic has caused significant economic dislocation in the United States. Since March 2020, many state and local governments, including New Jersey, have from time to time ordered non-essential businesses to close and residents to shelter in place at home, or placed other restrictions on businesses and individuals, resulting in a slow-down in economic activity and increases in unemployment. Certain industries have been particularly hard-hit, including the travel and hospitality industry, the restaurant industry and the retail industry. In response to the COVID-19 outbreak, the Federal Reserve reduced the benchmark federal funds rate to a target range of 0% to 0.25%, and the yields on 10 and 30-year treasury notes declined to historic lows. Various state governments and federal agencies required lenders to provide forbearance and other relief to borrowers (e.g., waiving late payment and other fees). From time to time, the spread of the coronavirus has caused us to modify our business practices, including employee travel, employee work locations, and cancellation of physical participation in meetings, events and conferences. Government actions and business practices continue to evolve in response to the advent of COVID-19 variants.
We continue to monitor developments related to COVID-19, including, but not limited to, its impact on our employees, customers, communities and results of operations. All of our branches have normal operating hours and all lobbies have re-opened for our clients. In addition, the majority of our corporate workforce has returned to our corporate offices in some capacity while the remainder continue to work remotely in an effective manner. Proper protocols have been put in place in our branches and corporate offices to ensure the continued safety of our employees and customers and compliance with current regulations.
As a result of the pandemic, certain borrowers were unable to meet their contractual payment obligations. While we have continued to support our customers by granting payment deferrals in 2020 and 2021 for those experiencing continued hardship because of the pandemic, we have also worked diligently with our customers to ensure a return to current payment status. As of December 31, 2021, COVID-19 Cares Act related loan payment deferrals decreased to $279 million, or 1.2% of loans, compared to $790.0 million, or 3.8% of loans as of December 31, 2020. All the commercial deferments under the Cares Act are scheduled to expire in the first quarter of 2022. As of February 8, 2022, residential and consumer loans deferring principal and interest payments under the Cares Act totaled $4.5 million.
At the onset of the pandemic we offered increased mobile deposit limits and increased customer support through our call center and bankers to further support our customers. Our continued focus on digital transformation and implementation of online account opening has also benefited our customers. During 2020 we participated in government-sponsored programs including PPP and Main Street Lending, originating approximately $335 million of PPP loans and subsequently sold the majority of these loans to a well-established SBA lender that could continue to assist our customers in the forgiveness process.
We will continue to support our customers as necessary, to ensure they are able to participate in government-sponsored economic relief programs.
Our Business Strategy
Since the Company’s initial public offering in 2005, we have transitioned from a wholesale thrift business to a retail commercial bank. This transition has been primarily accomplished by increasing the amount of our commercial loans and core deposits (savings, checking and money market accounts). Our transformation can be attributed to a number of factors, including organic growth, de novo branch openings, bank and branch acquisitions, as well as product expansion. We believe the attractive markets we operate in, namely, New Jersey and the greater New York metropolitan area, will continue to provide us with growth opportunities. In addition, the Bank has national exposure through our Investors eAccess online deposit platform and our equipment finance, healthcare and leveraged lending portfolios. Our primary focus is to build and develop profitable customer relationships across all lines of business, both consumer and commercial.
Opportunities through Our Attractive Markets
The primary markets in which we have a retail presence are considered attractive banking markets within the United States, and we believe they will continue to provide us with opportunities to grow. In addition to our strong presence in our historic markets throughout New Jersey, we have expanded our retail franchise to include the suburbs of Philadelphia and the boroughs of New York City as well as Nassau and Suffolk Counties on Long Island. With the August 2021 acquisition of eight branches from Berkshire Bank, we have expanded our branch footprint into Pennsylvania. We accomplished this expansion through de novo growth and select bank and branch acquisitions. As a result of this growth, the Bank is one of the largest banks headquartered in the state of New Jersey as measured by New Jersey deposits as of June 30, 2021. The markets in which we operate are desirable from an economic and demographic perspective as they are characterized by large and dense population centers, areas of high income households and centers of robust business and commercial activity. Our competition in these markets tends to be from out-of-state headquartered money centers and super-regional financial institutions as well as smaller, local community banks. We believe that as a locally headquartered institution, situated between these extremes, we can compete and capitalize on opportunities that exist in our market area. We also examine our branch network to optimize our market presence, which may include branch rationalization plans.
Many of the counties we serve are projected to experience moderate to strong household income growth through 2027. Though slower population growth is projected for many of the counties we serve, it is important to note that these counties are densely populated. All of the counties we serve have a strong mature market and nearly all have median household incomes greater than the national median.
We face intense competition in making loans as well as attracting deposits in our market area. Our competition for loans and deposits comes principally from commercial banks, savings institutions, mortgage banking firms, credit unions, insurance companies and new technology-driven market entrants. We face additional competition for deposits from short-term money market funds, brokerage firms and mutual funds. Some of our competitors offer products and services that we currently do not offer, such as trust services and private banking. As of June 30, 2021, the latest date for which statistics are available, our market share of deposits was ranked in the top 10 of total deposits in the State of New Jersey and in the top 20 within the New York metropolitan area for all institutions.
Diversifying the Loan Portfolio
To further diversify our loan portfolio, we have increased C&I lending by building relationships with small to medium sized companies. In recent years, we have hired a number of experienced C&I lending teams, including a team specializing in the healthcare industry, and in 2018, we acquired an equipment finance team and portfolio. For the year ended December 31, 2021, we originated $1.26 billion in C&I loans. A significant portion of our C&I loans are secured by commercial real estate and are primarily on properties and businesses located in New Jersey and New York. In addition, we have national exposure through our equipment finance, healthcare and leveraged lending portfolios. Our Equipment Finance Group originates equipment finance loans and leases which are primarily secured by critical use assets. We have diversified our loan portfolio, as evidenced by the fact that C&I loans represent approximately 18.2% of our loan portfolio at December 31, 2021 as compared to December 31, 2017, when C&I loans were approximately 8% of total loans. We have been focused on diversifying our loan portfolio which has been a focus of our business strategy, however, we are mindful of concentrations as it pertains to capital.
We are focused on generating relationship-based core deposits (savings, checking and money market accounts). As of December 31, 2021, we had core deposits of $18.73 billion, representing approximately 89.9% of total deposits. Core deposits are an attractive funding alternative because they are generally a more stable source of low cost funding and are less sensitive to changes in market interest rates. The percent of non-interest bearing deposits to total deposits has grown to 22.4% at December 31, 2021. Despite intense competition for deposits, we continue to pursue a customer-centric model to meeting their financial needs and continue to invest in branch staff training, product development, de novo branch growth based on existing market presence and acquired branches, as well as commercial deposit gathering efforts. Over the past few years we have developed a suite of commercial deposit and treasury management products, designed to appeal to small and mid-sized businesses and non-profit organizations including electronic deposit services such as mobile and remote deposit capture.
Our deposit business has become more commercial oriented over the past few years as we attract more deposits from commercial entities, including businesses that borrow from us. The Bank is one of the largest depositories for government and municipal deposits in New Jersey, which provides us with an additional funding source. Government and municipal deposits were 27.2% of our total deposits at December 31, 2021. Our branch network, concentrated in markets with attractive demographics and a high-density population, provide us with opportunities to grow and improve our deposit base.
Digital Capabilities and Strategy
In addition to our branch network, we offer online banking capabilities for consumers and small businesses. We are always looking to enhance our mobile and online banking services which allow us to serve our customers’ needs in an omnichannel environment. We offer account opening capabilities on our website and also offer online-exclusive deposit accounts through Investors eAccess, a secure online channel to attract consumer deposits nationwide. Other capabilities include Zelle® for real-time person to person payments, the ability to view personal credit scores, and online alerts. For our commercial customers, we have Small Business Online Banking and Commercial Online Banking, including robust online treasury management services. We continue to enhance our digital capabilities as a way to enhance the customer experience and deliver our products and services in a safe and secure manner.
A significant portion of our historic growth can be attributed to our acquisition strategy. Although management evaluates a number of factors when considering an acquisition, we have maintained a fundamental focus on preserving tangible book value per share. Acquisitions have provided us with the opportunity to grow our business, expand our geographic footprint and improve our financial performance.
On August 27, 2021, the Company completed its acquisition of eight New Jersey and eastern Pennsylvania branches of Berkshire Bank, the wholly-owned subsidiary of Berkshire Hills Bancorp, Inc. pursuant to the definitive purchase and assumption agreement dated as of December 2, 2020 by and between the Company and Berkshire Bank. The acquisition included the assumption and acquisition of $632 million of deposits and $219 million of consumer and commercial loans, together with the related operations. The Company assumed a net liability of $413.0 million and received consideration of $391.3 million from Berkshire Bank.
On April 3, 2020, we completed the acquisition of Gold Coast Bancorp, Inc. (“Gold Coast Bancorp”) under which we acquired Gold Coast Bancorp. The acquisition included six branches in Nassau and Suffolk counties in suburban Long Island and one branch in Brooklyn, NY, as well as total assets of $535.3 million and deposits of $489.9 million.
Capital management is a key component of our business strategy. As of December 31, 2021, our tangible equity to asset ratio was 10.14%. We continue to manage our capital through a combination of organic growth, stock repurchases, dividends and acquisitions. Effective capital management and prudent growth allows us to effectively leverage our capital, while being mindful of tangible book value for stockholders. Since March 2015, we have repurchased 130.5 million shares totaling $1.58 billion at an average price per share of $12.08.
We have paid continuous quarterly dividends since September 2012. For the year ended December 31, 2021, our dividend payout ratio per share was approximately 42%. We have recently increased our quarterly dividend to $0.16 per share.
Involvement in Our Communities
The Bank proudly promotes a higher quality of life in the communities it serves in New Jersey, New York and Pennsylvania through employee volunteer efforts and our Charitable Foundations. Employees are continually encouraged to become leaders in their communities and use the Bank’s support to help others. Through the Investors Charitable Foundation, established in 2005, and the Roma Charitable Foundation, which we acquired in December 2013, the Bank has contributed or
committed $47.9 million in donations to enrich the lives of New Jersey, New York and Pennsylvania citizens by supporting initiatives in the arts, education, youth development, affordable housing, financial education, and health and human services.
Community involvement is one of the principal values of the Bank and provides our staff with a meaningful ability to help others. We believe these efforts contribute to creating a culture at the Bank that promotes high employee morale while enhancing the presence of the Bank in our local markets. We always look for opportunities to help the communities we serve.
Our loan portfolio is comprised of multi-family loans, commercial real estate loans, C&I loans, construction loans, residential mortgage loans and consumer and other loans. At December 31, 2021, multi-family loans totaled $7.87 billion, or 34.8% of our total loan portfolio, commercial real estate loans totaled $5.37 billion, or 23.8% of our total loan portfolio, C&I loans totaled $4.11 billion, or 18.2% of our total loan portfolio, and construction loans totaled $551.0 million, or 2.4% of our total loan portfolio. Residential mortgage loans represented $3.93 billion, or 17.4% of our total loans at December 31, 2021. We also offer consumer loans, which consist primarily of cash surrender value lending on life insurance contracts, home equity loans and home equity lines of credit. At December 31, 2021, consumer and other loans totaled $766.8 million, or 3.4% of our total loan portfolio.
Net loans increased $1.76 billion from December 31, 2020 to December 31, 2021, which was driven by an increase in multi-family, C&I, commercial real estate and construction loans of $742.8 million, $538.2 million and $424.5 million and $146.6 million respectively.
Loan Portfolio Composition. The following table sets forth the composition of our loan portfolio by type of loan. Commercial loans are comprised of multi-family loans, commercial real estate loans, C&I loans and construction loans. Our primary focus over recent years has been on the origination of commercial loans.
| ||December 31,|
| ||(Dollars in thousands)|
|Commercial loans: |
|Multi-family loans||$||7,865,592 ||34.8||%||$||7,122,840 ||34.1||%|
|Commercial real estate loans ||5,371,758 ||23.8||4,947,212 ||23.7|
|Commercial and industrial loans ||4,113,792 ||18.2||3,575,641 ||17.1|
|Construction loans||550,950 ||2.4||404,367 ||2.0|
|Total commercial loans ||17,902,092 ||79.2||16,050,060 ||76.9|
|Residential mortgage loans||3,929,170 ||17.4||4,119,894 ||19.7|
|Consumer and other loans:|
|Cash surrender value||490,803 ||2.2||411,734 ||2.0|
|Home equity credit lines||214,550 ||0.9||216,451 ||1.0|
|Home equity loans||60,005 ||0.3||70,801 ||0.3|
|Other||1,427 ||—||3,815 ||—|
|Total consumer and other loans||766,785 ||3.4||702,801 ||3.4|
|Total loans||$||22,598,047 ||100.0||%||$||20,872,755 ||100.0||%|
Deferred fees, premiums and other, net (1)
|Allowance for credit losses||(240,681)||(282,986)|
|Net loans||$||22,342,612 ||$||20,580,451 |
(1) Included in deferred fees and premiums are accretable purchase accounting adjustments in connection with loans acquired and an adjustment to the carrying amount of the residential loans hedged when applicable.
The following table presents the Company’s loan portfolio at December 31, 2021 by industry sector:
|% of Total Segment|
|Commercial and industrial:|
|Accommodation and food service||$||290 ||7.0 ||%|
|Administrative and support and waste management||151 ||3.7 ||%|
|Agriculture, forestry, fishing and hunting||23 ||0.6 ||%|
|Arts, entertainment, and recreation||86 ||2.1 ||%|
|Construction||355 ||8.6 ||%|
|Educational service||140 ||3.4 ||%|
|Finance and insurance||263 ||6.4 ||%|
|Health care and social assistance||529 ||12.9 ||%|
|Information||144 ||3.5 ||%|
|Management of companies and enterprises||6 ||0.1 ||%|
|Manufacturing||223 ||5.4 ||%|
|Mining, quarrying, and oil and gas extraction||48 ||1.2 ||%|
|Professional, scientific, and technical services||138 ||3.4 ||%|
|Public administration||1 ||0.0 ||%|
|Real estate and rental||720 ||17.5 ||%|
|Retail trade - clothing, home, gasoline, health||158 ||3.8 ||%|
|Retail trade - sporting, hobby, vending, e-commerce||12 ||0.3 ||%|
|Transportation - air, rail, truck, water, pipeline||331 ||8.0 ||%|
|Utilities||2 ||0.0 ||%|
|Wholesale trade||250 ||6.1 ||%|
|Other||244 ||6.0 ||%|
|Total commercial and industrial||$||4,114 ||100.0 ||%|
|Commercial real estate:|
|Accommodation and food service||$||150 ||2.8 ||%|
|Arts, entertainment, and recreation||16 ||0.3 ||%|
|Health care and social assistance ||253 ||4.7 ||%|
|Mixed use property ||493 ||9.2 ||%|
|Office||1,271 ||23.7 ||%|
|Retail store ||934 ||17.4 ||%|
|Shopping center||1,159 ||21.6 ||%|
|Warehouse ||586 ||10.9 ||%|
|Other ||510 ||9.4 ||%|
|Total commercial real estate||$||5,372 ||100.0 ||%|
|Residential and consumer||4,695 |
|Total loans||$||22,598 |
Portfolio Maturities. The following table summarizes the scheduled repayments of our loan portfolio based on contractual maturity at December 31, 2021. Overdraft loans are reported as being due in one year or less.
| ||At December 31, 2021|
| ||Multi-Family Loans||Commercial|
Real Estate Loans
| ||(In thousands)|
|In one year or less||$||102,670 ||$||234,857 ||$||532,564 ||$||306,923 ||$||1,501 ||$||90,926 ||$||1,269,441 |
|After one year:|
|After one through five years||1,571,835 ||1,425,684 ||1,627,707 ||244,027 ||46,081 ||190,044 ||5,105,378 |
|After five through fifteen years||6,036,110 ||3,552,060 ||1,817,663 ||— ||743,819 ||313,031 ||12,462,683 |
|After fifteen years||154,977 ||159,157 ||135,858 ||— ||3,137,769 ||172,784 ||3,760,545 |
|Total due after one year||7,762,922 ||5,136,901 ||3,581,228 ||244,027 ||3,927,669 ||675,859 ||21,328,606 |
|Total loans||$||7,865,592 ||$||5,371,758 ||$||4,113,792 ||$||550,950 ||$||3,929,170 ||$||766,785 ||$||22,598,047 |
|Deferred fees, premiums and other, net ||(14,754)|
|Allowance for credit losses||(240,681)|
|Net loans||$||22,342,612 |
The following table sets forth fixed- and adjustable-rate loans at December 31, 2021 that are contractually due after December 31, 2022.
| ||Due After December 31, 2022|
| ||(In thousands)|
|Multi-family loans ||$||3,881,477 ||$||3,881,445 ||$||7,762,922 |
|Commercial real estate loans ||2,051,572 ||3,085,329 ||5,136,901 |
|Commercial and industrial loans||2,145,582 ||1,435,646 ||3,581,228 |
|Construction loans||23,375 ||220,652 ||244,027 |
|Total commercial loans ||8,102,006 ||8,623,072 ||16,725,078 |
|Residential mortgage loans||3,007,209 ||920,460 ||3,927,669 |
|Consumer and other loans:|
|Cash surrender value||— ||433,710 ||433,710 |
|Home equity credit lines||13,924 ||170,244 ||184,168 |
|Home equity loans||57,043 ||34 ||57,077 |
|Other||844 ||60 ||904 |
|Total consumer and other loans||71,811 ||604,048 ||675,859 |
|Total loans||$||11,181,026 ||$||10,147,580 ||$||21,328,606 |
Multi-family Loans. At December 31, 2021, $7.87 billion, or 34.8%, of our total loan portfolio was comprised of multi-family loans. Our policy generally has been to originate multi-family loans in New York, New Jersey and surrounding states, which represent approximately 98% of total multi-family loans at December 31, 2021. The multi-family loans in our portfolio consist of both fixed-rate and adjustable-rate loans, which were originated at prevailing market rates. Multi-family loans are generally five to fifteen year term balloon loans amortized over fifteen to thirty years.
Commercial Real Estate Loans. At December 31, 2021, $5.37 billion, or 23.8%, of our total loan portfolio was commercial real estate loans. We originate commercial real estate loans which are generally secured by industrial properties, retail buildings, office buildings and other commercial properties. As of December 31, 2021, commercial real estate loans in New Jersey, New York and surrounding states represent approximately 90% of our commercial real estate loans. Commercial real estate loans in our portfolio consist of both fixed-rate and adjustable-rate loans which were originated at prevailing market rates. Commercial real estate loans are generally five to fifteen year term balloon loans amortized over fifteen to thirty years.
Commercial and Industrial Loans. At December 31, 2021, $4.11 billion, or 18.2%, of our total loan portfolio were classified as C&I loans. We offer a wide range of credit facilities to C&I clients throughout our geographic footprint and nationally. Our credit offerings are lines of credit, fixed-rate and adjustable-rate term loans, lease financing and letters of credit. A significant portion of our C&I loans are secured by commercial real estate and are primarily properties and businesses located in New Jersey and New York. Other collateral for these types of loans can be comprised of real estate, equipment and/or a lien on the general assets, including inventory and receivables of the underlying business, and in many cases are further supported by a personal guarantee of the owner. Our product offerings include certain C&I lending subspecialties that originate loans both locally and nationally, including leveraged lending, healthcare lending and equipment finance. Our equipment finance portfolio totaled $1.06 billion, or 25.8% of our C&I portfolio at December 31, 2021 and has grown substantially from the $345.8 million portfolio acquired in February 2018. Our equipment finance portfolio, comprised of both loans and leases throughout the U.S., is primarily secured by critical use assets. At December 31, 2021, approximately 33% of our C&I loans were to borrowers outside of New Jersey and New York.
Construction Loans. At December 31, 2021, we held $551.0 million in construction loans representing 2.4% of our total loan portfolio. We offer loans directly to owners and developers on income-producing properties and residential for-sale housing units. Generally, construction loans are structured to have a three-year term and are made in amounts of up to 70% of the appraised value of the completed property, or a maximum up to the cost of the improvements. Funds are disbursed based on inspections in accordance with a schedule reflecting the completion of portions of the project. Construction financing for units to be sold require a pre-sale contract or we will limit the amount of speculative building without a sales contract.
Residential Mortgage Loans. At December 31, 2021, $3.93 billion, or 17.4%, of our loan portfolio consisted of residential mortgage loans. We originate residential mortgage loans for our loan portfolio and for sale to third parties. During 2021, we also purchased mortgage loans from correspondent entities including other banks and mortgage brokers. Our agreements call for these correspondent entities to originate loans that adhere to our underwriting standards and we generally acquire the loans with servicing rights.
We offer various loan programs to provide financing for low-and moderate-income home buyers, some of which include down payment assistance for home purchases. Through these programs, qualified individuals receive a reduced rate of interest on most of our loan programs and have their application fee refunded at closing, as well as other incentives if certain conditions are met.
Consumer and Other Loans. At December 31, 2021, consumer loans totaled $766.8 million, or 3.4% of our total loan portfolio. We offer consumer loans, most of which consist of cash surrender value lending on life insurance contracts, home equity loans and home equity lines of credit. At December 31, 2021, cash surrender value loans totaled $490.8 million, or 64% of consumer and other loans. Acceptable credit history and FICO scores are reviewed along with the evaluation of the financial rating of the insurance carrier. Home equity loans and home equity lines of credit are secured by residences primarily located in New Jersey and New York. Home equity loans are generally offered with fixed rates of interest, with terms generally up to 20 years and to a maximum of $750,000. Home equity lines of credit generally have adjustable rates of interest, indexed to the prime rate.
Loan Originations and Purchases. The following table shows our loan originations, loan purchases and repayment activities with respect to our portfolio of loans receivable for the periods indicated. Origination, sale and repayment activities with respect to our loans-held-for-sale are excluded from the table.
| ||Years Ended December 31,|
| ||(In thousands)|
|Loan originations and purchases|
|Commercial loans: |
|Multi-family loans||$||2,434,819 ||1,026,593 |
|Commercial real estate loans||1,244,020 ||605,531 |
|Commercial and industrial loans||1,264,848 ||1,056,086 |
|Construction loans||170,571 ||129,595 |
|Total commercial loans ||5,114,258 ||2,817,805 |
|Residential mortgage loans||1,272,596 ||652,501 |
|Consumer and other loans:|
|Cash surrender value||63,322 ||73,023 |
|Home equity credit lines||42,907 ||26,802 |
|Home equity loans||11,953 ||2,704 |
|Total consumer and other loans||118,182 ||102,529 |
|Total loan originations||6,505,036 ||3,572,835 |
|Commercial loans: |
|Multi-family loans ||— ||42,500 |
|Commercial and industrial loans ||— ||115,920 |
|Total commercial loans ||— ||158,420 |
|Residential mortgage loans||103,686 ||— |
|Total loan purchases||103,686 ||158,420 |
Other items, net (1)
|Net loans acquired in acquisition||213,534 ||447,679 |
|Net increase (decrease) in loan portfolio||$||1,762,161 ||(895,605)|
(1) Other items include charge-offs and recoveries, impairment write-downs, loan loss provisions, loans transferred to other real estate owned, amortization and accretion of deferred fees and costs, discounts and premiums, purchase accounting adjustments, and an adjustment to the carrying amount of the residential loans hedged when applicable.
Credit Policy and Procedures
Loan Approval Procedures and Authority. The credit approval process provides for prompt and thorough underwriting and approval or decline of loan requests. The approval method used is a hierarchy of individual credit authorities for new credit requests and renewals according to the Bank’s credit policies. All commercial credit actions require a total of two signatures, one from the Bank’s business line and one from the Bank’s credit risk management group. Transactions exceeding certain thresholds are submitted to the Bank’s Credit Approval Committee for decision. Consumer and small business transactions are underwritten according to guidelines and policy approved by the Credit Risk Committee. Any exceptions are approved by a credit risk officer. Our credit authority standards and limits are reviewed periodically by the Board of Directors (the “Board”). Approval limits are established on criteria such as the risk associated with each credit action, amount, and aggregate credit exposure of a borrower. While the Bank’s Board has delegated credit authority and the responsibility to approve authorities for lending and credit personnel to the Chief Credit Officer, the Board regularly monitors credit authority. Credit authorities are based on position, capability, and experience of the individuals.
Loans to One Borrower. With certain specified exceptions, a New Jersey-chartered commercial bank may not make loans or extend credit to a single borrower or to entities related to the borrower in an aggregate amount that would exceed 15% of the Bank’s capital funds. As of December 31, 2021, our regulatory lending limit was $410.9 million. We may lend an additional 10% of the Bank’s capital funds if secured by collateral meeting the requirements of the New Jersey Banking Act. The Bank’s internal policy limit is $200.0 million, with exceptions to this policy communicated to the Board. The Bank reviews these group exposures on a regular basis. The Bank also sets additional limits on size of loans by loan type. At December 31, 2021, there were no relationships that exceeded the internal limit.
Asset Quality. One of our key operating objectives has been, and continues to be, maintaining a high level of asset quality. We maintain sound credit standards for new loan originations and purchases. We do not originate sub-prime loans, negative amortization loans or option ARM loans. Our portfolio contains interest-only and no income verification residential mortgage loans. We have not originated residential mortgage loans without verifying income in recent years. At December 31, 2021, these loans totaled $81.3 million. At December 31, 2021, interest-only residential and consumer loans totaled $20.0 million, which represented less than 1% of the residential and consumer portfolio. Although it is not a standard product offering for commercial real estate and multi-family loans, we originate interest-only in addition to amortizing loans in these segments. At December 31, 2021, interest-only loans in these segments totaled $2.56 billion. As part of our underwriting, these loans are evaluated as fully amortizing for risk classification purposes, with the interest-only period generally ranging from one to ten years. In addition, we evaluate our policy limits on a regular basis. We believe these criteria adequately control the potential risks of such loans and that adequate provisions for loan losses are provided for all known and inherent risks. At the request of commercial borrowers experiencing financial difficulty resulting from the pandemic, we temporarily deferred the payment of principal and/or interest for an agreed-upon period of time. As of December 31, 2021, there were approximately $267 million of commercial loans not included in the amount of interest-only loans disclosed in this section.
For leases, the Company records a residual value of the equipment based on an estimate of the equipment’s value at the end of the lease. On at least an annual basis, the Company reviews the residual values of leased assets and assets off-lease and recognizes an impairment charge if the equipment’s current market value has declined below the estimated value. For the year ended December 31, 2019, the Company recorded an impairment charge of $2.6 million as the fair value of certain equipment decreased at a rate greater than originally projected. An additional impairment charge of $2.2 million was recorded on the same equipment class during the year ended December 31, 2020 given the extended downturn in the market for these assets. For the year ended December 31, 2021, the Company recognized an impairment charge of $150,000 on the value of equipment coming off lease. The Company subsequently sold the equipment in 2021 resulting in the realization of a nominal gain in non-interest income.
The underlying credit quality of our loan portfolio is dependent primarily on each borrower’s continued ability to make required loan payments and, in the event a borrower is unable to do so, is dependent on the value of the collateral securing the loan, if any. A borrower’s ability to pay is typically dependent on employment and other sources of income in the case of one-to four-family mortgage loans and consumer loans. In the case of multi-family and commercial real estate loans, repayment is dependent on the cash flow generated by the property; in the case of C&I loans, on the cash flows generated by the business, which in turn is impacted by general economic conditions. Other factors, such as unanticipated expenditures or changes in interest rates or the financial markets, may also impact a borrower’s ability to pay. Collateral values, particularly real estate values, may also be impacted by a variety of factors including general economic conditions, demographics, interest rates, maintenance and collection or foreclosure delays, including delays resulting from local, state and federal laws.
Loan Deferrals. While we have continued to support our customers by granting payment deferrals for those experiencing continued hardship because of the pandemic, we have also worked diligently with our customers to ensure a return to current payment status for a significant portion of our clients who have ended their initial deferral period. At May 4, 2020, loans with an aggregated outstanding balance of $4.3 billion, or 20.1% of total loans, were in COVID-19 related deferment. Since then, customers representing approximately $4.0 billion in loan balances have ended their COVID-19 related deferrals and as of December 31, 2021, loans with an aggregate outstanding balance of approximately $279 million, or 1.2% of total loans, were in COVID-19 related deferment.
The following table presents the balance of deferred loans in the Company’s loan portfolio by loan segment, industry sector and type of deferral as of December 31, 2021.
|Segment and industry sector||Principal and Interest Deferral||Principal |
Deferred Loan % of Total Loans (1)
|(Dollars in millions)|
|Commercial and industrial|
|Accommodation and food service||$||— ||170 ||170 ||0.8 ||%|
|Arts, entertainment and recreation||— ||23 ||23 ||0.1 ||%|
|Real estate and rental||— ||1 ||1 ||— ||%|
|Total deferred commercial and industrial||— ||194 ||194 ||0.9 ||%|
|Commercial real estate|
|Accommodation and food service||— ||61 ||61 ||0.3 ||%|
|Other||— ||4 ||4 ||— ||%|
|Total deferred commercial real estate||— ||65 ||65 ||0.3 ||%|
|Construction||— ||— ||— ||— ||%|
|Multi-family||— ||8 ||8 ||— ||%|
|Total deferred commercial loans||— ||267 ||267 ||1.2 ||%|
|Residential and consumer||12||— ||12 ||— ||%|
Total deferred loans (2)
|$||12 ||267||279||1.2 ||%|
|(1) Percentage calculated using total loan balance as of December 31, 2021|
|(2) All of the commercial deferments are scheduled to expire in the first quarter of 2022.|
Given the continually evolving economic and social effects of the COVID-19 pandemic, the future direct and indirect impact on our business, results of operations and financial condition are highly uncertain. Should economic conditions deteriorate, the macroeconomic environment may have an adverse effect on our business and results of operations, including loan modification, delinquent loans and non-accrual loans. For more information on how the risks related to COVID-19 may adversely affect our business, results of operations and financial condition, see Item 1A. Risk Factors herein.
Purchased Financial Assets with Credit Deterioration - Loans. Loans purchased with credit deterioration (“PCD loans”) are loans acquired that, as of the date of acquisition, have experienced a more-than-insignificant deterioration in credit quality since origination. PCD loans are accounted for in accordance with Accounting Standards Codification (“ASC”) Subtopic 326-20 and are initially recorded at fair value with an allowance recognized on acquisition through a gross-up that increases the amortized cost basis of the asset with no effect on net income. As of December 31, 2021, PCD loans totaled $276.9 million as compared with $238.0 million as of December 31, 2020. The Company acquired PCD loans with a par value of $94.8 million and an allowance for credit losses of $1.0 million in the Berkshire Bank branch acquisition on August 27, 2021. The Company acquired PCD loans with a par value of $251.5 million and an allowance for credit losses of $4.2 million in its acquisition of Gold Coast on April 3, 2020. See Note 3, Business Combinations, of Notes to Consolidated Financial Statements in “Item 15 - Exhibits and Financial Statement Schedules.”
Delinquent Loans. The following table sets forth our loan delinquencies by type and by amount at the dates indicated.
| ||Loans Delinquent For|| || |
| ||60-89 Days||90 Days and Over||Total|
| ||(Dollars in thousands)|
|At December 31, 2021|
|Multi-family loans||2 ||$||3,013 ||11 ||$||18,600 ||13 ||$||21,613 |
|Commercial real estate loans||2 ||1,751 ||7 ||2,806 ||9 ||4,557 |
|Commercial and industrial loans||2 ||133 ||8 ||2,175 ||10 ||2,308 |
|Construction loans||— ||— ||— ||— ||— ||— |
|Total commercial loans ||6 ||4,897 ||26 ||23,581 ||32 ||28,478 |
|Residential mortgage loans||15 ||2,624 ||107 ||25,521 ||122 ||28,145 |
|Consumer and other loans||6 ||201 ||21 ||822 ||27 ||1,023 |
|Total||27 ||$||7,722 ||154 ||$||49,924 ||181 ||$||57,646 |
|At December 31, 2020|
|Multi-family loans||— ||$||— ||11 ||$||32,884 ||11 ||$||32,884 |
|Commercial real estate loans||7 ||2,450 ||9 ||6,356 ||16 ||8,806 |
|Commercial and industrial loans||8 ||3,116 ||10 ||1,769 ||18 ||4,885 |
|Construction loans||— ||— ||— ||— ||— ||— |
|Total commercial loans ||15 ||5,566 ||30 ||41,009 ||45 ||46,575 |
|Residential mortgage loans||24 ||4,258 ||114 ||29,124 ||138 ||33,382 |
|Consumer and other loans||13 ||1,476 ||25 ||1,984 ||38 ||3,460 |
|Total||52 ||$||11,300 ||169 ||$||72,117 ||221 ||$||83,417 |
Non-Performing Assets. Non-performing assets include loans delinquent 90 days or more, non-accrual loans, performing troubled debt restructurings, real estate owned and other repossessed assets. Loans are classified as non-accrual when they are delinquent 90 days or more or if management has specific information that it is probable they will not collect all amounts due under the contractual terms of the loan agreement. We did not have any loans delinquent 90 days or more and still accruing interest at December 31, 2021 and 2020. Non-accrual loans decreased by $1.9 million to $105.2 million at December 31, 2021 from $107.1 million at December 31, 2020. Included in the amount of non-accrual loans at December 31, 2021 were $1.1 million of C&I loans, $1.2 million of commercial real estate loans and $850,000 of multi-family loans that were classified as non-accrual which were performing in accordance with their contractual terms. Included in the amount of non-accrual loans at December 31, 2020 were $4.8 million of commercial real estate loans, $3.7 million of commercial and industrial loans and $1.5 million of multi-family loans that were classified as non-accrual which were performing in accordance with their contractual terms.
During the year ended December 31, 2021, we sold three non-performing multi-family loans totaling $19.9 million and recognized a recovery of $1.4 million in the allowance for credit losses on the sale of one of the loans. During the year ended December 31, 2021, we also sold two non-performing commercial real estate loans totaling $1.6 million. During the year ended December 31, 2020, the Company sold a non-performing multi-family loan with a net book balance of $18.1 million. The Company recognized a recovery of $1.9 million in the allowance for credit losses on the sale.
The ratio of non-accrual loans to total loans decreased to 0.47% at December 31, 2021 from 0.51% at December 31, 2020. Our ratio of non-performing assets to total assets decreased to 0.42% at December 31, 2021 from 0.47% at December 31, 2020. The allowance for credit losses on loans as a percentage of total non-accrual loans decreased to 228.82% at December 31, 2021 from 264.17% at December 31, 2020. For further discussion of our non-performing assets and non-performing loans and the allowance for credit losses, see Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and Note 5, Loans Receivable, Net, of Notes to Consolidated Financial Statements in “Item 15 - Exhibits and Financial Statement Schedules.” The table below sets forth the amounts and categories of our non-performing assets at the dates indicated.
| ||December 31,|
| ||(Dollars in thousands)|
|Multi-family loans ||$||55,276 ||$||35,567 |
|Commercial real estate loans ||8,269 ||15,894 |
|Commercial and industrial loans||3,329 ||9,212 |
|Construction loans ||— ||— |
|Total commercial loans||66,874 ||60,673 |
|Residential mortgage loans ||37,170 ||43,958 |
|Consumer and other loans||1,140 ||2,494 |
|Total non-accrual loans||105,184 ||107,125 |
|Real estate owned and other repossessed assets||2,882 ||7,115 |
|Performing troubled debt restructurings||7,565 ||9,232 |
|Total non-performing assets||$||115,631 ||$||123,472 |
|Total non-accrual loans to total loans||0.47 ||%||0.51 ||%|
|Total non-performing assets to total assets||0.42 ||%||0.47 ||%|
The increase in Multi-family non-accrual loans for the year ended December 31, 2021 was driven by a previously disclosed Multi-family potential problem loan that was restructured and classified as a troubled debt restructuring. The borrower is performing in accordance with its modified terms.
Other Real Estate Owned and Other Repossessed Assets. Real estate and other assets we acquire as a result of foreclosure, by deed in lieu of foreclosure or repossession are classified as other real estate owned and other repossessed assets until sold. When property is acquired it is recorded at fair value at the date of foreclosure or repossession less estimated costs to sell the property. Holding costs and declines in fair value result in charges to expense after acquisition. At December 31, 2021, we had other real estate owned of $1.2 million, consisting of 6 residential properties and other repossessed assets of $1.7 million, consisting of 34 pieces of industrial equipment.
Classified Assets. Federal regulations provide that loans and other assets of lesser quality should be classified as “substandard,” “doubtful” or “loss” assets. An asset is considered “substandard” if it is inadequately protected by the current net worth and paying capacity of the obligor or by the collateral pledged, if any. “Substandard” assets include those characterized by the distinct possibility we will sustain some loss if the deficiencies are not corrected. An asset classified as “doubtful” has all the weaknesses inherent in one classified substandard with the added characteristic the weaknesses present make collection or liquidation in full highly questionable and improbable. An asset classified as “loss” is considered uncollectible and of such little value that its continuance on the institution’s books as an asset, without the establishment of a specific valuation allowance or charge-off, is not warranted. We classify an asset as “special mention” if the asset has potential weaknesses that deserve management’s close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the asset or in the institution’s credit position at some future date. Special mention assets are not adversely classified and do not expose an institution to sufficient risk to warrant adverse classification. See Note 5, Loans Receivable, Net, of Notes to Consolidated Financial Statements in “Item 15 - Exhibits and Financial Statement Schedules.”
We are required to establish an allowance for credit losses on loans in an amount that management considers prudent for loans classified substandard or doubtful, as well as for other problem loans. Expected losses are evaluated and calculated on a collective basis for those loans which share similar risk characteristics. Loans which do not share risk characteristics with other loans are evaluated for an allowance on an individual basis. When we classify problem assets as “loss,” we are required either to establish a specific allowance for losses equal to 100% of the amount of the asset so classified or to charge off such amount.
Our determination as to the classification of our assets and the amount of our valuation allowances is subject to review by the NJDOBI and the FDIC, which can require that we establish additional loss allowances.
We review the loan portfolio on a quarterly basis to determine whether any loans require classification in accordance with applicable regulations. Not all classified assets constitute non-performing assets.
Individually Evaluated Loans. A loan is individually evaluated when it is a collateral dependent commercial loan with an outstanding balance greater than $1.0 million and on non-accrual status, a loan modified in a troubled debt restructuring, or is a commercial loan with $1.0 million in outstanding principal if management has specific information that it is probable they will not collect all amounts due under the contractual terms of the loan agreement. When the Company determines that the loan no longer shares similar risk characteristics of other loans in the portfolio, the allowance will be determined on an individual basis using the present value of expected cash flows or, for loans secured by real estate, the fair value of the collateral as of the reporting date, less estimated selling costs, as applicable, to ensure that the credit loss is not delayed until actual loss. A collateral dependent loan is a loan for which repayment is expected to be provided substantially through the operation or sale of the collateral. If the fair value of the collateral is less than the amortized cost basis of the loan, the Company will charge off the difference between the fair value of the collateral, less costs to sell at the reporting date and the amortized cost basis of the loan. Smaller balance loans are evaluated collectively unless they are modified in a TDR. Such loans include residential mortgage loans, consumer loans, and loans not meeting the Company’s criteria for individual evaluation. At December 31, 2021, loans meeting the requirements to be individually evaluated totaled $74.6 million. For further detail on individually evaluated loans, see Note 1 and Note 5 of Notes to Consolidated Financial Statements in “Item 15 - Exhibits and Financial Statement Schedules.”
Allowance for Credit Losses - Loans
On January 1, 2020, the Company adopted ASU 2016-13, “Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments”, which replaces the incurred loss methodology with an expected loss methodology that is referred to as the CECL methodology. The Company adopted ASU 2016-13 using a modified retrospective approach. See Note 1, Summary of Significant Accounting Principles, of Notes to Consolidated Financial Statements in “Item 15 - Exhibits and Financial Statement Schedules.” Prior to the adoption of ASU 2016-13, the allowance for credit losses on loans was a contra-asset valuation account established through a provision for loan losses charged to expense, which represented management’s best estimate of inherent losses that had been incurred within the existing portfolio of loans. The allowance for credit losses on loans included allowance allocations calculated in accordance with ASC Topic 310, “Receivables” and allowance allocations calculated in accordance with ASC Topic 450, “Contingencies.”
A description of our methodology in establishing our allowance for credit losses is set forth in the section “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Critical Accounting Policies — Allowance for Credit Losses.”
Our allowance for credit losses is maintained at a level necessary to cover lifetime expected credit losses inherent in financial assets at the balance sheet date. For the year ended December 31, 2021 our allowance was impacted by improving economic and commercial real estate conditions and forecasts. The following table presents credit ratios, along with the components of their calculation, for the dates indicated.
| ||Years Ended December 31,|
| ||(Dollars in thousands)|
|Allowance for credit loss on loans ||$||240,681 ||282,986 ||228,120 |
|Nonaccrual loans||$||105,184 ||107,125 ||95,315 |
|Total loans outstanding||$||22,598,047 ||20,872,755 ||21,703,269 |
|Allowance for credit losses on loans as a percent of total loans outstanding||1.07 ||%||1.36 ||%||1.05 ||%|
|Nonaccrual loans to total loans outstanding||0.47 ||%||0.51 ||%||0.44 ||%|
|Allowance for credit losses on loans as a percent of nonaccrual loans||228.82 ||%||264.17 ||%||239.66 ||%|
The following table presents the ratio of net charge-offs (recovery) to average loans outstanding by loan category during the year ended December 31, 2021, along with the components of the ratio’s calculation, for the periods indicated.
|Years Ended December 31,|
|Net charge-offs (recovery)||Average balance outstanding||Net loans charged off as a percent of average balance outstanding||Net charge-offs (recovery) ||Average balance outstanding||Net loans charged off as a percent of average balance outstanding||Net charge-offs (recovery)||Average balance outstanding||Net loans charged off as a percent of average balance outstanding|
|(Dollars in thousands)|
|Multi-family loans||$||616 ||$||7,439,917 ||0.01 ||%||$||2,666 ||$||7,442,028 ||0.04 ||%||$||1,729 ||$||8,081,658 ||0.02 ||%|
|Commercial real estate loans||(125)||5,040,609 ||— ||109 ||4,838,859 ||— ||(2,053)||4,824,860 ||(0.04)|
|Commercial & industrial loans||(386)||3,751,881 ||(0.01)||7,546 ||3,282,290 ||0.23 ||5,630 ||2,557,374 ||0.22 |
|Construction loans||— ||462,165 ||— ||— ||304,619 ||— ||— ||255,894 ||— |
|Residential mortgage loans||(929)||3,967,173 ||(0.02)||513 ||4,753,163 ||0.01 ||793 ||5,395,645 ||0.01 |
|Consumer and other loans||283 ||714,961 ||0.04 ||(181)||685,839 ||(0.03)||598 ||695,921 ||0.09 |
|Total||$||(541)||$||21,376,706 ||— ||%||$||10,653 ||$||21,306,798 ||0.05 ||%||$||6,697 ||$||21,811,352 ||0.03 ||%|
Allocation of Allowance for Credit Losses on Loans. The following table sets forth the allowance for credit losses on loans allocated by loan category and the percent of loans in each category to total loans at the dates indicated. The allowance for credit losses allocated to each category is the estimated amount considered necessary to cover lifetime expected credit losses inherent in any particular category as of the balance sheet date and does not restrict the use of the allowance to absorb losses in other categories.
| ||December 31,|
| ||(Dollars in thousands)|
|End of period allocated to:|
|Multi-family loans ||$||39,346 ||34.8 ||%||$||56,731 ||34.1 ||%|
|Commercial real estate loans||81,186 ||23.8 ||115,918 ||23.7 |
|Commercial and industrial loans ||85,113 ||18.2 ||79,327 ||17.1 |
|Construction loans||11,539 ||2.4 ||7,267 ||2.0 |
|Residential mortgage loans||19,654 ||17.4 ||19,941 ||19.7 |
|Consumer and other loans||3,843 ||3.4 ||3,802 ||3.4 |
|Total allowance||$||240,681 ||100.0 ||%||$||282,986 ||100.0 ||%|
The allowance for credit losses on loans as of December 31, 2021 is maintained at a level that represents management’s best estimate of lifetime expected credit losses inherent in loans at the balance sheet date. However, this analysis process involves a high degree of judgment due to the subjectivity of assumptions used and the potential for changes in the forecasted economic environment. Although we believe we have established and maintained the allowance for credit losses at adequate levels, additions may be necessary if the future economic environment deteriorates from forecasted conditions.
As an integral part of their examination processes, the NJDOBI and the FDIC will periodically review our allowance for credit losses. Such agencies may require us to recognize additions to the allowance based on their judgments about information available to them at the time of their examination.
The Board has adopted our Investment Policy. This policy determines the types of securities in which we may invest. The Investment Policy is reviewed annually by management and changes to the policy are recommended to and subject to approval by the Board. The Board delegates operational responsibility for the implementation of the Investment Policy to the
Asset Liability Committee, which is primarily comprised of senior officers. While general investment strategies are developed by the Asset Liability Committee, the execution of specific actions rests primarily with our Treasurer. The Treasurer is responsible for ensuring the guidelines and requirements included in the Investment Policy are followed and all securities are considered prudent for investment. Investment transactions are reviewed and ratified by the Board at their regularly scheduled meetings.
Our Investment Policy requires that investment transactions conform to Federal and State investment regulations. Our investments purchased may include, but are not limited to, U.S. Treasury obligations, securities issued by various Federal Agencies, State and Municipal subdivisions, mortgage-backed securities, certain certificates of deposit of insured financial institutions, overnight and short-term loans to other banks, corporate debt instruments, and mutual funds. In addition, the Company may invest in equity securities subject to certain limitations.
The Investment Policy requires that securities transactions be conducted in a safe and sound manner. Purchase and sale decisions are based upon a thorough pre-transaction analysis of each instrument to determine if it conforms to our overall asset/liability management objectives. The analysis must consider its effect on our risk-based capital measurement, prospects for yield and/or appreciation and other risk factors.
In December 2013, regulatory agencies adopted a rule on the treatment of certain collateralized debt obligations backed by trust preferred securities as covered funds under the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”), known as the Volcker Rule. At December 31, 2021, none of our securities were deemed to be a covered fund under the Volcker Rule.
On January 1, 2020, the Company adopted ASU 2016-13, which requires the measurement of expected credit losses for financial assets, including debt securities. See Note 1, Summary of Significant Accounting Principles, of Notes to Consolidated Financial Statements in “Item 15 - Exhibits and Financial Statement Schedules.”
At December 31, 2021, our securities portfolio totaled $4.00 billion representing 14.4% of our total assets. At December 31, 2021, equity securities reported at fair value totaled $8.2 million. Debt securities are classified as held-to-maturity or available-for-sale when purchased. At December 31, 2021, $1.59 billion of our debt securities were classified as held-to-maturity and reported at amortized cost less allowance for credit losses and $2.39 billion were classified as available-for-sale and reported at fair value.
Mortgage-Backed Securities. We purchase mortgage-backed pass through and collateralized mortgage obligation (“CMO”) securities insured or guaranteed by Fannie Mae, Freddie Mac (government-sponsored enterprises) and Ginnie Mae (government agency), and to a lesser extent, a variety of federal and state housing authorities (collectively referred to below as “agency-issued mortgage-backed securities”). At December 31, 2021, agency-issued mortgage-backed securities including CMOs, totaled $3.51 billion, or 87.8%, of our total securities portfolio.
Actual cash flows on mortgage-backed securities may differ from estimated cash flows over the life of the security, which may require adjustments to the amortization of any premium or accretion of any discount relating to such instruments that can change the yield on such securities. There is reinvestment risk associated with the cash flows from such securities. The fair value of such securities may be adversely affected by changes in interest rates and/or other market variables.
Our mortgage-backed securities portfolio had a weighted average yield of 1.71% for the year ended December 31, 2021. The estimated fair value of our mortgage-backed securities at December 31, 2021 was $3.52 billion, which is $28.2 million more than the carrying value. At December 31, 2021, we had no allowance for credit losses on mortgage-backed securities.
We also may invest in securities issued by non-agency or private mortgage originators, provided those securities are rated AAA by nationally recognized rating agencies and satisfactorily pass an internal credit review at the time of purchase. Currently, the Company does not hold any non-agency mortgage-backed securities in its portfolio.
Corporate and Other Debt Securities. Our corporate and other debt securities portfolio primarily consists of subordinated debt issued by other financial institutions. In addition, our corporate and other debt securities portfolio contains collateralized debt obligations (“CDOs”) backed by pooled trust preferred securities (“TruPS”), principally issued by banks and to a lesser extent insurance companies and real estate investment trusts. These securities have been classified in the held-to-maturity portfolio since their purchase. At December 31, 2021, corporate and other debt securities totaled $128.2 million, or 3.2%, of our total securities portfolio.
At December 31, 2021, the TruPS portfolio had a carrying value of $50.6 million, or 1.3% of our total securities portfolio, and a fair value of $83.1 million. None of the TruPS were in an unrealized loss position at December 31, 2021. Throughout the year we engage an independent valuation firm to assist us in valuing our TruPS portfolio. As a result of the
adoption of ASU 2016-13 on January 1, 2020, our TruPS and other held-to-maturity debt securities are evaluated for expected credit losses. At December 31, 2021, our allowance for credit losses on corporate and other debt securities was $1.8 million. Prior to January 1, 2020, an other-than temporary impairment (“OTTI”) analysis was performed. We did not recognize any OTTI charges for the year ended December 31, 2019. We continue to closely monitor the performance of our CDO portfolio.
Municipal Bonds. At December 31, 2021, we had $214.3 million in municipal bonds which represents 5.3% of our total securities portfolio. These bonds are comprised of $30.7 million in short-term Bond Anticipation or Tax Anticipation notes and $183.6 million of longer term bonds. At December 31, 2021, our allowance for credit losses on municipal bonds was $22,000.
Government Sponsored Enterprises. At December 31, 2021, debt securities issued by Government Sponsored Enterprises held in our security portfolio totaled $136.7 million representing 3.4% of our total securities portfolio. At December 31, 2021, we had no allowance for credit losses on debt securities issued by Government Sponsored Enterprises.
Equity Securities. At December 31, 2021, the fair value of equity securities was $8.2 million, representing 0.2% of our total securities portfolio. Equity securities are not insured or guaranteed investments and are affected by market interest rates and other factors. Such investments are carried at their fair value with fluctuations in the fair value of such investments reflected in the consolidated income statement.
Securities Portfolios. The following table sets forth the composition of our investment securities portfolios at the dates indicated.
| ||At December 31,|
| ||Carrying Value||Estimated|
| ||(In thousands) |
|Equity securities||$||7,750 ||8,194 ||34,801 ||36,000 |
|Government sponsored enterprises||$||3,434 ||3,586 ||4,260 ||4,482 |
|Federal National Mortgage Association||1,022,851 ||1,034,336 ||1,167,057 ||1,205,426 |
|Federal Home Loan Mortgage Corporation||1,242,073 ||1,250,043 ||1,286,195 ||1,317,052 |
|Government National Mortgage Association||105,289 ||105,575 ||225,810 ||231,477 |
|Total mortgage-backed securities available-for-sale||2,370,213 ||2,389,954 ||2,679,062 ||2,753,955 |
|Total debt securities available-for-sale||$||2,373,647 ||2,393,540 ||2,683,322 ||2,758,437 |
|Government sponsored enterprises||$||133,128 ||132,056 ||109,016 ||112,414 |
|Municipal bonds||214,298 ||226,944 ||246,601 ||261,591 |
|Corporate and other debt securities||128,174 ||163,930 ||130,565 ||149,713 |
|Total debt securities||475,600 ||522,930 ||486,182 ||523,718 |
|Federal National Mortgage Association||619,954 ||628,779 ||413,426 ||434,331 |
|Federal Home Loan Mortgage Corporation||478,654 ||477,743 ||308,219 ||317,686 |
|Government National Mortgage Association||21,444 ||22,052 ||43,290 ||45,137 |
|Total mortgage-backed securities held-to-maturity||1,120,052 ||1,128,574 ||764,935 ||797,154 |
|Total debt securities held-to-maturity||1,595,652 ||1,651,504 ||1,251,117 ||1,320,872 |
|Allowance for credit losses||1,867 ||— ||3,264 ||— |
|Total debt securities held-to-maturity, net of allowance for credit losses||$||1,593,785 ||1,651,504 ||1,247,853 ||1,320,872 |
|Total securities||$||3,975,182 ||4,053,238 ||3,965,976 ||4,115,309 |
At December 31, 2021, except for our investments in Fannie Mae and Freddie Mac securities, we had no investment in the securities of any issuer that had an aggregate book value in excess of 10% of our equity.
Portfolio Maturities and Coupon. The composition, maturities and weighted average coupon rate of the securities portfolio at December 31, 2021 are summarized in the following table. Maturities are based on the final contractual payment dates, and do not reflect the impact of prepayments or early redemptions that may occur. Municipal securities coupons have not been adjusted to a tax-equivalent basis.
| ||One Year or Less||More than One Year|
through Five Years
|More than Five Years|
through Ten Years
|More than Ten Years||Total Securities|
| ||Carrying Value ||Weighted|
|Carrying Value ||Weighted|
|Carrying Value ||Weighted|
|Carrying Value ||Weighted|
|Carrying Value ||Fair|
| ||(Dollars in thousands)|
|Equity securities||$||— ||— ||%||$||— ||— ||%||$||2,500 ||7.00 ||%||$||5,250 ||— ||%||$||7,750 ||$||8,194 ||2.26 ||%|
|Government sponsored enterprises||$||— ||— ||%||$||— ||— ||%||$||1,129 ||2.90 ||%||$||2,305 ||2.79 ||%||$||3,434 ||$||3,586 ||2.83 ||%|
|Federal Home Loan Mortgage Corporation||— ||— ||34,465 ||0.61 ||664,312 ||0.62 ||543,296 |