LOANS & ALLOWANCE FOR CREDIT LOSSES

6 Months Ended

Dec. 31, 2023

The Company categorizes the loan portfolio into six segments: Single Family - Mortgage & Warehouse, Multifamily and Commercial Mortgage, Commercial Real Estate, Commercial & Industrial - Non Real Estate, Auto & Consumer and Other. For further detail of the segments of the Company’s loan portfolio, refer to Note 1—“Organizations and Summary of Significant Accounting Policies” in the 2023 Form 10-K.

The following table sets forth the composition of the loan portfolio:


(Dollars in thousands)	December 31, 2023		June 30, 2023
Single Family - Mortgage & Warehouse	$	4,092,104	$	4,173,833
Multifamily and Commercial Mortgage1	4,065,019		3,082,225
Commercial Real Estate1	6,043,400		6,199,818
Commercial & Industrial - Non-RE	4,177,461		2,639,650
Auto & Consumer	477,275		546,264
Other	5,150		10,236

Total gross loans	18,860,409		16,652,026
Allowance for credit losses - loans	(251,749)		(166,680)
Unaccreted premiums (discounts) and loan fees	(344,306)		(28,618)
Total net loans	$	18,264,354	$	16,456,728

1 Includes PCD loans of $296.7 million in Multifamily and Commercial Mortgage and $44.5 million in Commercial Real Estate as of December 31, 2023. For further detail on PCD loans refer to Note 1—“Summary of Significant Accounting Policies”.

Accrued interest receivable on loans held for investments totaled $107.7 million and $77.9 million as of December 31, 2023 and June 30, 2023, respectively.

At December 31, 2023 and June 30, 2023, the Company has pledged certain loans totaling $5,155.8 million and $5,128.4 million, respectively, to the Federal Home Loan Bank (“FHLB”) and $3,915.0 million and $3,689.5 million, respectively, to the Federal Reserve Bank of San Francisco (“FRBSF”).

The following table presents the components of the provision for credit losses:


	For the Three Months Ended				For the Six Months Ended
	December 31,				December 31,
(Dollars in thousands)	2023		2022		2023		2022
Provision for credit losses - loans	$	12,500	$	3,500	$	18,250	$	12,250
Provision for credit losses - unfunded lending commitments	1,000		(499)		2,250		(499)
Total provision for credit losses	$	13,500	$	3,001	$	20,500	$	11,751

The following tables summarize activity in the allowance for credit losses - loans by portfolio segment:


	For the Three Months Ended December 31, 2023
(Dollars in thousands)	Single Family-Mortgage & Warehouse		Multifamily and Commercial Mortgage		Commercial Real Estate		Commercial & Industrial - Non-RE		Auto & Consumer		Other		Total
Balance at October 1, 2023	$	17,426	$	15,874	$	71,355	$	54,592	$	11,614	$	9	$	170,870
Allowance for credit losses at acquisition of PCD loans	—		58,972		11,125		—		—		—		$	70,097
Provision (benefit) for credit losses - loans	(2,080)		3,507		(4,702)		14,695		1,080		—		12,500
Charge-offs	—		—		—		(86)		(2,321)		—		(2,407)
Recoveries	10		—		—		—		679		—		689
Balance at December 31, 2023	$	15,356	$	78,353	$	77,778	$	69,201	$	11,052	$	9	$	251,749


	For the Three Months Ended December 31, 2022
(Dollars in thousands)	Single Family-Mortgage & Warehouse		Multifamily and Commercial Mortgage		Commercial Real Estate		Commercial & Industrial - Non-RE		Auto & Consumer		Other		Total
Balance at October 1, 2022	$	18,039	$	14,649	$	73,776	$	34,383	$	14,595	$	30	$	155,472
Provision (benefit) for credit losses - loans	1,878		808		(1,608)		1,655		776		(9)		3,500
Charge-offs	(294)		—		—		—		(1,871)		—		(2,165)
Recoveries	8		—		—		—		403		—		411
Balance at December 31, 2022	$	19,631	$	15,457	$	72,168	$	36,038	$	13,903	$	21	$	157,218


	For the Six Months Ended December 31, 2023
(Dollars in thousands)	Single Family-Mortgage & Warehouse		Multifamily and Commercial Mortgage		Commercial Real Estate		Commercial & Industrial - Non-RE		Auto & Consumer		Other		Total
Balance at July 1, 2023	$	17,503	$	16,848	$	72,755	$	46,347	$	13,212	$	15	$	166,680
Allowance for credit losses at acquisition of PCD loans	—		58,972		11,125		—		—		—		70,097
Provision (benefit) for credit losses - loans	(2,090)		2,533		(6,102)		22,940		975		(6)		18,250
Charge-offs	(80)		—		—		(86)		(4,602)		—		(4,768)
Recoveries	23		—		—		—		1,467		—		1,490
Balance at December 31, 2023	$	15,356	$	78,353	$	77,778	$	69,201	$	11,052	$	9	$	251,749


	For the Six Months Ended December 31, 2022
(Dollars in thousands)	Single Family-Mortgage & Warehouse		Multifamily and Commercial Mortgage		Commercial Real Estate		Commercial & Industrial - Non-RE		Auto & Consumer		Other		Total
Balance at July 1, 2022	$	19,670	$	14,655	$	69,339	$	30,808	$	14,114	$	31	$	148,617
Provision (benefit) for credit losses - loans	236		802		2,829		5,212		3,181		(10)		12,250
Charge-offs	(298)		—		—		—		(4,233)		—		(4,531)
Recoveries	23		—		—		18		841		—		882
Balance at December 31, 2022	$	19,631	$	15,457	$	72,168	$	36,038	$	13,903	$	21	$	157,218

For the three and six months ended December 31, 2023, the allowance for credit losses for loans increased primarily due to loan growth in the Commercial & Industrial - Non-RE portfolio and the loans acquired in the FDIC Loan Purchase.

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” within the 2023 Form 10-K.

The following tables present a summary of the activity in the allowance for credit losses for off-balance sheet lending commitments:


	Three Months Ended December 31,
(Dollars in thousands)	2023		2022
Balance at October 1,	$	11,723	$	10,973
Provision for credit losses - unfunded lending commitments	1,000		(499)
Balance at December 31,	$	12,723	$	10,474

	Six Months Ended December 31,
(Dollars in thousands)	2023		2022
Balance at July 1,	$	10,473	$	10,973
Provision for credit losses - unfunded lending commitments	2,250		(499)
Balance at December 31,	$	12,723	$	10,474

The increase in the allowance for off-balance sheet lending commitments at December 31, 2023 compared to June 30, 2023, was primarily driven by an increase in the amount of Commercial Real Estate and Commercial and Industrial - Non-RE unfunded commitments.

The following table presents loan-to-value (“LTV”) for the Company’s real estate loans outstanding as of December 31, 2023:


	Total Real Estate Loans				Single Family - Mortgage & Warehouse		Multifamily and Commercial Mortgage		Commercial Real Estate
Weighted-Average LTV	47.8	%			56.4	%	53.3	%	38.8	%
Median LTV	53.0	%	—	%	55.0	%	50.0	%	35.0	%

The Company’s effective weighted-average LTV was 48.6% for real estate loans originated during the three months ended December 31, 2023.

Credit Quality Disclosures. The following tables provide the composition of loans that are performing and nonaccrual by portfolio segment:


	December 31, 2023
(Dollars in thousands)	Single Family-Mortgage & Warehouse		Multifamily and Commercial Mortgage		Commercial Real Estate		Commercial & Industrial - Non-RE		Auto & Consumer		Other		Total
Performing	$	4,037,817	$	4,027,695	$	6,017,298	$	4,174,472	$	475,505	$	5,114	$	18,737,901
Nonaccrual	$	54,287	$	37,324	$	26,102	$	2,989	$	1,770	$	36	$	122,508
Total	$	4,092,104	$	4,065,019	$	6,043,400	$	4,177,461	$	477,275	$	5,150	$	18,860,409
Nonaccrual loans to total loans													0.65		%


	June 30, 2023
(Dollars in thousands)	Single Family-Mortgage & Warehouse		Multifamily and Commercial Mortgage		Commercial Real Estate		Commercial & Industrial - Non-RE		Auto & Consumer		Other		Total
Performing	$	4,143,119	$	3,047,122	$	6,184,966	$	2,636,661	$	544,807	$	8,191	$	16,564,866
Nonaccrual	30,714		35,103		14,852		2,989		1,457		2,045		87,160
Total	$	4,173,833	$	3,082,225	$	6,199,818	$	2,639,650	$	546,264	$	10,236	$	16,652,026
Nonaccrual loans to total loans													0.52		%

There were no nonaccrual loans without an allowance for credit losses as of December 31, 2023 and June 30, 2023. There was no interest income recognized on nonaccrual loans in the three months ended December 31, 2023 and 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 following tables presents the composition of loans by portfolio segment, fiscal year of origination and credit quality indicator, and the amount of gross charge-offs for the six months ended December 31, 2023:


	December 31, 2023
	Loans Held for Investment by Fiscal Year of Origination												Revolving Loans		Total
(Dollars in thousands)	2024		2023		2022		2021		2020		Prior
Single Family-Mortgage & Warehouse
Pass	$	309,717	$	648,620	$	1,297,738	$	501,469	$	309,309	$	779,468	$	98,848	$	3,945,169
Special Mention	—		10,593		13,575		3,928		8,851		38,883		—		75,830
Substandard	—		285		4,292		3,910		14,999		47,619		—		71,105
Doubtful	—		—		—		—		—		—		—		—
Total	309,717		659,498		1,315,605		509,307		333,159		865,970		98,848		4,092,104
Gross charge-offs	—		—		—		—		—		80		—		80
Multifamily and Commercial Mortgage
Pass	22,417		758,825		1,089,359		664,917		562,656		880,855		—		3,979,029
Special Mention	—		9,096		1,985		—		459		1,085		—		12,625
Substandard	—		4,992		7,250		10,457		33,075		17,591		—		73,365
Doubtful	—		—		—		—		—		—		—		—
Total	22,417		772,913		1,098,594		675,374		596,190		899,531		—		4,065,019
Gross charge-offs	—		—		—		—		—		—		—		—
Commercial Real Estate
Pass	1,071,507		1,710,690		1,737,152		521,677		17,816		53,000		780,174		5,892,016
Special Mention	—		—		—		—		—		—		—		—
Substandard	—		18,657		52,338		34,250		15,000		31,139		—		151,384
Doubtful	—		—		—		—		—		—		—		—
Total	1,071,507		1,729,347		1,789,490		555,927		32,816		84,139		780,174		6,043,400
Gross charge-offs	—		—		—		—		—		—		—		—
Commercial & Industrial - Non-RE
Pass	486,830		411,930		322,969		43,934		7,630		4,427		2,752,431		4,030,151
Special Mention	—		37,404		35,179		—		10,554		—		45,528		128,665
Substandard	—		—		14,624		1,032		—		2,989		—		18,645
Doubtful	—		—		—		—		—		—		—		—
Total	486,830		449,334		372,772		44,966		18,184		7,416		2,797,959		4,177,461
Gross charge-offs	—		—		—		—		—		86		—		86
Auto & Consumer
Pass	27,105		136,439		215,435		55,732		18,658		20,624		—		473,993
Special Mention	—		462		644		100		34		46		—		1,286
Substandard	—		426		925		372		127		146		—		1,996
Doubtful	—		—		—		—		—		—		—		—
Total	27,105		137,327		217,004		56,204		18,819		20,816		—		477,275
Gross charge-offs	—		1,435		2,111		755		131		170		—		4,602
Other
Pass	3,061		—		—		1,071		—		982		—		5,114
Special Mention	—		—		—		—		—		—		—		—
Substandard	—		—		—		36		—		—		—		36
Doubtful	—		—		—		—		—		—		—		—
Total	3,061		—		—		1,107		—		982		—		5,150
Gross charge-offs	—		—		—		—		—		—		—		—






Total
Pass	1,920,637		3,666,504		4,662,653		1,788,800		916,069		1,739,356		3,631,453		18,325,472
Special Mention	—		57,555		51,383		4,028		19,898		40,014		45,528		218,406
Substandard	—		24,360		79,429		50,057		63,201		99,484		—		316,531
Doubtful	—		—		—		—		—		—		—		—
Total	$	1,920,637	$	3,748,419	$	4,793,465	$	1,842,885	$	999,168	$	1,878,854	$	3,676,981	$	18,860,409
As a % of total gross loans	10.18%		19.87%		25.42%		9.77%		5.30%		9.96%		19.50%		100.0%
Total gross charge-offs	$	—	$	1,435	$	2,111	$	755	$	131	$	336	$	—	$	4,768


	June 30, 2023
	Loans Held for Investment by Fiscal Year of Origination												Revolving Loans		Total
(Dollars in thousands)	2023		2022		2021		2020		2019		Prior
Single Family-Mortgage & Warehouse
Pass	$	730,498	$	1,346,804	$	522,873	$	324,458	$	255,547	$	639,401	$	243,175	$	4,062,756
Special Mention	—		7,280		7,026		8,303		12,942		18,244		6,614		60,409
Substandard	—		5,188		4,686		14,384		2,024		24,386		—		50,668
Doubtful	—		—		—		—		—		—		—		—
Total	730,498		1,359,272		534,585		347,145		270,513		682,031		249,789		4,173,833
Multifamily and Commercial Mortgage
Pass	558,787		975,186		498,744		314,383		224,592		404,222		—		2,975,914
Special Mention	—		9,691		4,636		1,360		7,705		—		—		23,392
Substandard	—		3,145		5,686		38,857		6,181		29,050		—		82,919
Doubtful	—		—		—		—		—		—		—		—
Total	558,787		988,022		509,066		354,600		238,478		433,272		—		3,082,225
Commercial Real Estate
Pass	1,867,476		2,323,095		631,500		87,059		117,928		—		960,024		5,987,082
Special Mention	29,000		43,427		—		8,457		800		15,062				96,746
Substandard	—		29,200		37,951		18,500		15,487		14,852		—		115,990
Doubtful	—		—		—		—		—		—		—		—
Total	1,896,476		2,395,722		669,451		114,016		134,215		29,914		960,024		6,199,818
Commercial & Industrial - Non-RE
Pass	488,120		358,214		29,777		14,794		2,098		—		1,707,619		2,600,622
Special Mention	—		8,221		—		11,413		—		—		600		20,234
Substandard	—		17,762		1,032		—		—		—		—		18,794
Doubtful	—		—		—		—		—		—		—		—
Total	488,120		384,197		30,809		26,207		2,098		—		1,708,219		2,639,650
Auto & Consumer
Pass	161,831		256,154		70,223		24,906		19,897		9,929		—		542,940
Special Mention	423		632		453		60		14		6		—		1,588
Substandard	350		785		233		133		162		73		—		1,736
Doubtful	—		—		—		—		—		—		—		—
Total	162,604		257,571		70,909		25,099		20,073		10,008		—		546,264
Other
Pass	5,721		—		1,306		—		—		1,164		—		8,191
Special Mention	—		—		—		—		—		—		—		—
Substandard	—		2,000		45		—		—		—		—		2,045
Doubtful	—		—		—		—		—		—		—		—
Total	5,721		2,000		1,351		—		—		1,164		—		10,236
Total
Pass	3,812,433		5,259,453		1,754,423		765,600		620,062		1,054,716		2,910,818		16,177,505
Special Mention	29,423		69,251		12,115		29,593		21,461		33,312		7,214		202,369
Substandard	350		58,080		49,633		71,874		23,854		68,361		—		272,152
Doubtful	—		—		—		—		—		—		—		—
Total	$	3,842,206	$	5,386,784	$	1,816,171	$	867,067	$	665,377	$	1,156,389	$	2,918,032	$	16,652,026
As a % of total gross loans	23.07%		32.35%		10.91%		5.21%		4.00%		6.94%		17.52%		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 following tables provide the aging of loans by portfolio segment:


	December 31, 2023
(Dollars in thousands)	Current			30-59 Days			60-89 Days			90+ Days			Total
Single Family-Mortgage & Warehouse	$	3,994,250		$	20,770		$	10,364		$	66,720		$	4,092,104
Multifamily and Commercial Mortgage	4,022,438			8,109			1,085			33,387			4,065,019
Commercial Real Estate	6,001,011			—			—			42,389			6,043,400
Commercial & Industrial - Non-RE	4,177,461			—			—			—			4,177,461
Auto & Consumer	468,133			6,805			1,311			1,026			477,275
Other	5,150			—			—			—			5,150

Total	$	18,668,443		$	35,684		$	12,760		$	143,522		$	18,860,409
As a % of total gross loans	98.98		%	0.19		%	0.07		%	0.76		%	100.00		%


	June 30, 2023
(Dollars in thousands)	Current			30-59 Days			60-89 Days			90+ Days			Total
Single Family-Mortgage & Warehouse	$	4,102,150		$	20,832		$	7,971		$	42,880		$	4,173,833
Multifamily and Commercial Mortgage	3,048,217			2,705			1,124			30,179			3,082,225
Commercial Real Estate	6,173,716			11,250			—			14,852			6,199,818
Commercial & Industrial - Non-RE	2,639,650			—			—			—			2,639,650
Auto & Consumer	537,181			6,529			1,707			847			546,264
Other	8,024			68			1			2,143			10,236
Total	$	16,508,938		$	41,384		$	10,803		$	90,901		$	16,652,026
As a % of total gross loans	99.14		%	0.25		%	0.06		%	0.55		%	100.00		%

Loans reaching 90+ days past due are generally placed on non-accrual. As of December 31, 2023 and June 30, 2023, there were loans of $31.3 million and $14.1 million, respectively, over 90 days past due and still accruing interest as the Company expects to collect the principal and interest amounts due.

Single family mortgage loans in process of foreclosure were $18.5 million and $17.7 million as of December 31, 2023 and June 30, 2023, respectively.

Loan Modifications to Borrowers Experiencing Financial Difficulty. The Company may grant certain modifications of loans to borrowers experiencing financial difficulty, which effective July 1, 2023, are reported as financial difficulty modifications (“FDMs”). The Company’s modification programs provide various modifications to borrowers experiencing financial difficulty which may include interest rate reductions, term extensions, payment delays and/or principal forgiveness. There were no FDMs during the three and six months ended December 31, 2023.

Prior to adoption of ASU 2022-02, the Company accounted for certain modifications as troubled debt restructurings (“TDRs”). Approximately 1.77% of our nonaccrual loans were considered TDRs at June 30, 2023. Borrowers that made timely payments after TDRs were considered non-performing for at least six months. Generally, after six months of timely payments, those TDRs were reclassified from the nonaccrual loan category to the performing loan category and any previously deferred interest income was recognized. The Company had no TDRs classified as performing loans at June 30, 2023.