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LOANS & ALLOWANCE FOR CREDIT LOSSES
 9 Months Ended
Mar. 31, 2023
Receivables [Abstract]  
LOANS & ALLOWANCE FOR CREDIT LOSSES LOANS & ALLOWANCE FOR CREDIT LOSSES
The composition of the loan portfolio was:
(Dollars in thousands)March 31, 2023June 30, 2022
Single Family - Mortgage & Warehouse$4,087,525 $3,988,462 
Multifamily and Commercial Mortgage3,082,801 2,877,680 
Commercial Real Estate5,794,304 4,781,044 
Commercial & Industrial - Non-RE2,454,839 2,028,128 
Auto & Consumer594,596 567,228 
Other6,240 11,134 
Total gross loans and leases16,020,305 14,253,676 
Allowance for credit losses - loans(161,293)(148,617)
Unaccreted premiums (discounts) and loan and lease fees(22,757)(13,998)
Total net loans and leases$15,836,255 $14,091,061 
At March 31, 2023, the Company has pledged $9,308.2 million of loans to the Federal Reserve Bank of San Francisco and to the FHLB.
The provision for credit losses for the three and nine months ended March 31, 2023 was primarily driven by loan growth, changes in the macroeconomic environment, and changes in loan product mix.
Changes in the forecasts of macroeconomic variables drove improvements in the calculations relevant to the probability of default for the Multifamily and Commercial Real Estate portfolios. Loan growth and changes in the product mix within the Commercial and Industrial–Non RE portfolio resulted in an increased allowance.
Loan products within each portfolio contain varying collateral types which impact the estimate of the loss given default utilized in the calculation of the allowance. For further discussion of the model method of estimating expected lifetime credit losses to Note 1—“Organizations and Summary of Significant Accounting Policies” contained in the 2022 Form 10-K.
Activity in the allowance for credit losses by portfolio classes is as follows.
For the Three Months Ended March 31, 2023
(Dollars in thousands)Single Family-Mortgage & WarehouseMultifamily and Commercial MortgageCommercial Real EstateCommercial & Industrial - Non-REAuto & ConsumerOtherTotal
Balance at January 1, 2023$19,631 $15,457 $72,168 $36,038 $13,903 $21 $157,218 
Provision (benefit) for credit losses - loans(1,583)(1,156)(3,782)10,698 1,329 (6)5,500 
Charge-offs(9)— — — (2,413)— (2,422)
Recoveries413 — — — 584 — 997 
Balance at March 31, 2023$18,452 $14,301 $68,386 $46,736 $13,403 $15 $161,293 
For the Three Months Ended March 31, 2022
(Dollars in thousands)Single Family-Mortgage & WarehouseMultifamily and Commercial MortgageCommercial Real EstateCommercial & Industrial - Non-REAuto & ConsumerOtherTotal
Balance at January 1, 2022$25,580 $13,628 $67,581 $22,716 $10,921 $63 $140,489 
Provision (benefit) for credit losses - loans(3,797)190 2,248 3,525 2,352 (18)4,500 
Charge-offs— — — — (1,892)— (1,892)
Recoveries6 — — 27 242 — 275 
Balance at March 31, 2022$21,789 $13,818 $69,829 $26,268 $11,623 $45 $143,372 
For the Nine Months Ended March 31, 2023
(Dollars in thousands)Single Family-Mortgage & WarehouseMultifamily and Commercial MortgageCommercial Real EstateCommercial & Industrial - Non-REAuto & ConsumerOtherTotal
Balance at July 1, 2022$19,670 $14,655 $69,339 $30,808 $14,114 $31 $148,617 
Provision (benefit) for credit losses - loans(1,347)(354)(953)15,910 4,510 (16)17,750 
Charge-offs(307)— — — (6,646)— (6,953)
Recoveries436 — — 18 1,425 — 1,879 
Balance at March 31, 2023$18,452 $14,301 $68,386 $46,736 $13,403 $15 $161,293 
For the Nine Months Ended March 31, 2022
(Dollars in thousands)Single Family-Mortgage & WarehouseMultifamily and Commercial MortgageCommercial Real EstateCommercial & Industrial - Non-REAuto & ConsumerOtherTotal
Balance at July 1, 2021$26,604 $13,146 $57,928 $28,460 $6,519 $301 $132,958 
Provision (benefit) for credit losses - loans(4,966)495 11,901 (1,951)7,277 (256)12,500 
Charge-offs— — — (322)(2,926)— (3,248)
Recoveries151 177 — 81 753 — 1,162 
Balance at March 31, 2022$21,789 $13,818 $69,829 $26,268 $11,623 $45 $143,372 
Credit Quality Disclosures. Nonaccrual loans consisted of the following as of the dates indicated:
(Dollars in thousands)As of March 31, 2023
Single Family - Mortgage & Warehouse$36,158 
Multifamily and Commercial Mortgage37,378 
Commercial Real Estate14,852 
Commercial & Industrial - Non-RE2,989 
Auto & Consumer2,029 
Other2,535 
     Total nonaccrual loans$95,941 
Nonaccrual loans to total loans0.60 %
(Dollars in thousands)As of June 30, 2022
Single Family - Mortgage & Warehouse$66,424 
Multifamily and Commercial Mortgage33,410 
Commercial Real Estate14,852 
Commercial & Industrial - Non-RE2,989 
Auto & Consumer439 
Other80 
     Total nonaccrual loans$118,194 
Nonaccrual loans to total loans0.83 %
No interest income was recognized on nonaccrual loans in the three and nine months ended March 31, 2023 and three and nine months ended March 31, 2022. There were no nonaccrual loans without an allowance for credit losses as of March 31, 2023 and June 30, 2022.
Approximately 1.30% of our nonaccrual loans at March 31, 2023 were considered troubled debt restructurings (“TDRs”), compared to 1.18% at June 30, 2022. Borrowers that make timely payments after TDRs are considered non-performing for at least six months. Generally, after six months of timely payments, those TDRs are reclassified from the nonaccrual loan category to the performing loan category and any previously deferred interest income is recognized.
The outstanding unpaid balance of loans that are either performing or nonaccrual by portfolio class was:
March 31, 2023
(Dollars in thousands)Single Family-Mortgage & WarehouseMultifamily and Commercial MortgageCommercial Real EstateCommercial & Industrial - Non-REAuto & ConsumerOtherTotal
Performing$4,051,367 $3,045,423 $5,779,452 $2,451,850 $592,567 $3,705 $15,924,364 
Nonaccrual36,158 37,378 14,852 2,989 2,029 2,535 95,941 
          Total$4,087,525 $3,082,801 $5,794,304 $2,454,839 $594,596 $6,240 $16,020,305 
June 30, 2022
(Dollars in thousands)Single Family-Mortgage & WarehouseMultifamily and Commercial MortgageCommercial Real EstateCommercial & Industrial - Non-REAuto & ConsumerOtherTotal
Performing$3,922,038 $2,844,270 $4,766,192 $2,025,139 $566,789 $11,054 $14,135,482 
Nonaccrual66,424 33,410 14,852 2,989 439 80 118,194 
          Total$3,988,462 $2,877,680 $4,781,044 $2,028,128 $567,228 $11,134 $14,253,676 
From time to time the Company modifies loan terms temporarily for borrowers who are experiencing financial stress. These loans are performing and accruing and generally return to the original loan terms after the modification term expires. The Company had no TDRs classified as performing loans at March 31, 2023 or June 30, 2022.
Credit Quality Indicators
The Company categorizes loans into risk categories based on relevant information about the ability of borrowers to service their debt such as: current financial information, historical payment experience, credit documentation, public information and current economic trends. The Company analyzes loans individually by classifying the loans based on credit risk. The Company uses the following definitions for risk ratings.
Pass. Loans classified as pass are well protected by the current net worth and paying capacity of the obligor or by the fair value of any underlying collateral, less cost to acquire and sell in a timely manner.
Special Mention. Loans classified as special mention have a potential weakness that deserves management’s close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the loan or of the institution’s credit position at some future date.
Substandard. Loans classified as substandard are inadequately protected by the current net worth and paying capacity of the obligor or of the collateral pledged, if any. Loans so classified have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. They are characterized by the distinct possibility that the institution will sustain some loss if the deficiencies are not corrected.
Doubtful. Loans classified as doubtful have all the weaknesses inherent in those classified as substandard, with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions, and values, highly questionable and improbable.
The Company reviews and grades loans following a continuous review process, featuring coverage of all loan types and business lines at least quarterly. Continuous reviewing provides more effective risk monitoring because it immediately tests for potential impacts caused by changes in personnel, policy, products or underwriting standards.
The amortized cost basis of the Company’s loans by fiscal year of origination and credit quality indicator are:
March 31, 2023
Loans Held for Investment Origination YearRevolving Loans Total
(Dollars in thousands)20232022202120202019Prior
Single Family-Mortgage & Warehouse
Pass$620,354 $1,372,470 $544,804 $340,800 $263,386 $691,390 $162,377 $3,995,581 
Special Mention— 1,993 5,010 8,094 14,061 11,851 — 41,009 
Substandard— 3,240 783 17,572 3,166 26,174 — 50,935 
Doubtful— — — — — — — — 
Total620,354 1,377,703 550,597 366,466 280,613 729,415 162,377 4,087,525 
Multifamily and Commercial Mortgage
Pass505,162 973,106 504,075 329,470 225,553 435,306 — 2,972,672 
Special Mention— 15,695 4,653 1,894 8,249 — — 30,491 
Substandard— 3,146 5,715 31,439 7,399 31,939 — 79,638 
Doubtful— — — — — — — — 
Total505,162 991,947 514,443 362,803 241,201 467,245 — 3,082,801 
Commercial Real Estate
Pass1,100,680 2,500,719 828,507 124,981 118,000 4,000 946,724 5,623,611 
Special Mention— 11,250 26,305 9,618 800 15,000 62,973 
Substandard— 17,950 58,133 — 15,487 14,852 1,298 107,720 
Doubtful— — — — — — — 
Total1,100,680 2,529,919 912,945 134,599 134,287 33,852 948,022 5,794,304 
Commercial & Industrial - Non-RE
Pass398,508 367,212 31,722 23,784 2,898 5,575 1,599,806 2,429,505 
Special Mention— 8,348 — — — — 13,997 22,345 
Substandard— — — — — 2,989 — 2,989 
Doubtful— — — — — — — — 
Total398,508 375,560 31,722 23,784 2,898 8,564 1,613,803 2,454,839 
Auto & Consumer
Pass168,776 279,501 77,909 28,584 23,508 12,770 — 591,048 
Special Mention389 704 102 41 62 61 — 1,359 
Substandard368 1,007 403 200 204 7 — 2,189 
Doubtful— — — — — — — — 
Total169,533 281,212 78,414 28,825 23,774 12,838 — 594,596 
Other
Pass1,287 — 1,425 — — 940 — 3,652 
Special Mention— — 53 — — — — 53 
Substandard— 2,000 — — — 535 — 2,535 
Doubtful— — — — — — — — 
Total1,287 2,000 1,478 — — 1,475 — 6,240 
Total
Pass2,794,767 5,493,008 1,988,442 847,619 633,345 1,149,981 2,708,907 15,616,069 
Special Mention389 37,990 36,123 19,647 23,172 26,912 13,997 158,230 
Substandard368 27,343 65,034 49,211 26,256 76,496 1,298 246,006 
Doubtful— — — — — — — — 
Total$2,795,524 $5,558,341 $2,089,599 $916,477 $682,773 $1,253,389 $2,724,202 $16,020,305 
As a % of total gross loans17.46%34.70%13.04%5.72%4.26%7.82%17.00%100.0%
June 30, 2022
Loans Held for Investment Origination YearRevolving Loans Total
(Dollars in thousands)20222021202020192018Prior
Single Family-Mortgage & Warehouse
Pass$1,484,027 $600,054 $402,712 $303,999 $279,248 $548,703 $241,925 $3,860,668 
Special Mention— — 4,790 2,505 4,125 10,971 38,637 61,028 
Substandard— 2,288 3,928 18,407 5,955 36,188 — 66,766 
Doubtful— — — — — — — — 
Total1,484,027 602,342 411,430 324,911 289,328 595,862 280,562 3,988,462 
Multifamily and Commercial Mortgage
Pass999,819 569,486 429,247 259,161 219,548 316,013 — 2,793,274 
Special Mention1,200 — 534 539 — 968 — 3,241 
Substandard— 5,772 34,343 9,613 7,308 24,129 — 81,165 
Doubtful— — — — — — — — 
Total1,001,019 575,258 464,124 269,313 226,856 341,110 — 2,877,680 
Commercial Real Estate
Pass2,482,366 990,887 358,422 186,800 28,758 — 602,412 4,649,645 
Special Mention— 32,351 12,138 16,487 15,000 — — 75,976 
Substandard— — 12,575 18,043 23,507 — 1,298 55,423 
Doubtful— — — — — — — — 
Total2,482,366 1,023,238 383,135 221,330 67,265 — 603,710 4,781,044 
Commercial & Industrial - Non-RE
Pass435,228 66,226 25,629 61,932 9,268 — 1,388,435 1,986,718 
Special Mention13 — — 186 710 — — 909 
Substandard2,988 28,359 9,154 — — — — 40,501 
Doubtful— — — — — — — — 
Total438,229 94,585 34,783 62,118 9,978 — 1,388,435 2,028,128 
Auto & Consumer
Pass352,468 107,882 43,377 37,008 16,147 8,891 — 565,773 
Special Mention204 188 24 110 — 1 — 527 
Substandard157 311 224 205 25 6 — 928 
Doubtful— — — — — — — — 
Total352,829 108,381 43,625 37,323 16,172 8,898 — 567,228 
Other
Pass3,057 6,185 — — 1,091 721 — 11,054 
Special Mention— — — — — — — — 
Substandard— — 46 — — 34 — 80 
Doubtful— — — — — — — — 
Total3,057 6,185 46 — 1,091 755 — 11,134 
Total
Pass5,756,965 2,340,720 1,259,387 848,900 554,060 874,328 2,232,772 13,867,132 
Special Mention1,417 32,539 17,486 19,827 19,835 11,940 38,637 141,681 
Substandard3,145 36,730 60,270 46,268 36,795 60,357 1,298 244,863 
Doubtful— — — — — — — — 
Total$5,761,527 $2,409,989 $1,337,143 $914,995 $610,690 $946,625 $2,272,707 $14,253,676 
As a % of total gross loans40.42%16.91%9.38%6.42%4.28%6.64%15.95%100.0%
The Company considers the performance of the loan portfolio and its impact on the allowance for credit losses and evaluates credit quality based on the aging status of its loans. Certain short-term loans do not have a fixed maturity date and are treated as delinquent if not paid in full 90 days after the origination date.
The outstanding unpaid balance of loans past due 30 days or more by portfolio class are:
March 31, 2023
(Dollars in thousands)30-59 Days Past Due60-89 Days Past Due90+ Days Past DueTotal
Single Family-Mortgage & Warehouse$13,976 $22,447 $34,203 $70,626 
Multifamily and Commercial Mortgage4,224 8,112 29,154 41,490 
Commercial Real Estate— — 14,852 14,852 
Auto & Consumer4,949 1,431 1,411 7,791 
Other90 53 2,535 2,678 
Total$23,239 $32,043 $82,155 $137,437 
As a % of total gross loans0.15 %0.20 %0.51 %0.86 %
June 30, 2022
(Dollars in thousands)30-59 Days Past Due60-89 Days Past Due90+ Days Past DueTotal
Single Family-Mortgage & Warehouse$5,167 $1,518 $63,286 $69,971 
Multifamily and Commercial Mortgage9,455 2,115 26,556 38,126 
Commercial Real Estate— 14,852 — 14,852 
Auto & Consumer4,865 1,009 466 6,340 
Other413 — 193 606 
Total$19,900 $19,494 $90,501 $129,895 
As a % of total gross loans0.14 %0.14 %0.63 %0.91 %
Loans reaching 90+ days past due are placed on non-accrual as required under Company policy. No loans 90+ days past due were still accruing interest as of March 31, 2023 and June 30, 2022.
Loans in process of foreclosure were $24.0 million and $20.7 million as of March 31, 2023 and June 30, 2022, respectively.
Unfunded Loan Commitment Reserves
Unfunded loan commitment reserves are included in “Accounts payable and other liabilities” in the unaudited Condensed Consolidated Balance Sheets. Provisions for the unfunded loan commitments are included in the unaudited Condensed Consolidated Statements of Income in “General and administrative expenses”.
The following tables present a summary of the activity in the unfunded loan commitment reserves for the periods indicated:
Three Months Ended March 31,
(Dollars in thousands)20232022
BALANCE—beginning January 1$10,474 $8,723 
Provision (benefit)— 1,000 
BALANCE—end March 31$10,474 $9,723 
Nine Months Ended March 31,
(Dollars in thousands)20232022
BALANCE—beginning July 1$10,973 $5,723 
Provision (benefit)(499)4,000 
BALANCE—end March 31$10,474 $9,723