LOANS & ALLOWANCE FOR CREDIT LOSSES

3 Months Ended

Sep. 30, 2024

The Company categorizes the loan portfolio into five segments: Single Family - Mortgage & Warehouse, Multifamily and Commercial Mortgage, Commercial Real Estate, Commercial & Industrial - Non Real Estate (“Non-RE”) and Auto & Consumer. For further detail of the segments of the Company’s loan portfolio, see Note 1—“Organizations and Summary of Significant Accounting Policies” in the 2024 Form 10-K.

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


(Dollars in thousands)	September 30, 2024		June 30, 2024
Single Family - Mortgage & Warehouse	$	4,151,583	$	4,178,832
Multifamily and Commercial Mortgage1	3,647,469		3,861,931
Commercial Real Estate1	6,256,265		6,088,622
Commercial & Industrial - Non-RE	5,354,752		5,241,766
Auto & Consumer	415,765		431,660

Total gross loans	19,825,834		19,802,811
Allowance for credit losses - loans	(263,854)		(260,542)
Unaccreted premiums (discounts) and loan fees	(281,371)		(310,884)
Total net loans	$	19,280,609	$	19,231,385

1 Includes purchased credit deteriorated (“PCD”) loans of $282.6 million and $284.0 million in Multifamily and Commercial Mortgage and $44.5 million and $44.5 million in Commercial Real Estate as of September 30, 2024 and June 30, 2024, respectively. For further detail on PCD loans, see Note 1—“Organizations and Summary of Significant Accounting Policies” in the 2024 Form 10-K.

Accrued interest receivable on loans held for investments totaled $120.1 million and $119.8 million as of September 30, 2024 and June 30, 2024, respectively.

At September 30, 2024 and June 30, 2024, the Company has pledged certain loans totaling $4,680.7 million and $4,942.8 million, respectively, to the FHLB and $8,194.2 million and $8,197.2 million, respectively, to the Federal Reserve Bank of San Francisco (“FRBSF”).

The following table presents loan-to-value (“LTV”) for the Company’s real estate loans outstanding as of September 30, 2024:


	Total Real Estate Loans		Single Family - Mortgage & Warehouse		Multifamily and Commercial Mortgage		Commercial Real Estate
Weighted-Average LTV	47.9	%	55.8	%	52.1	%	40.1	%
Median LTV	52.0	%	54.0	%	50.0	%	43.5	%

The Company’s effective weighted-average LTV was 50.9% for loans within its real estate portfolio originated during the three months ended September 30, 2024.

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


	September 30,
(Dollars in thousands)		2024		2023
Provision for credit losses - loans		$	11,500	$	5,750
Provision for credit losses - unfunded lending commitments		2,500		1,250
Total provision for credit losses		$	14,000	$	7,000

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



	For the Three Months Ended September 30, 2024
(Dollars in thousands)	Single Family-Mortgage & Warehouse		Multifamily and Commercial Mortgage		Commercial Real Estate		Commercial & Industrial - Non-RE		Auto & Consumer		Total
Balance at July 1, 2024	$	16,943	$	70,771	$	87,780	$	76,032	$	9,016	$	260,542

Provision (benefit) for credit losses - loans	464		(1,806)		7,252		3,555		2,035		11,500
Charge-offs	—		(3,357)		—		(3,032)		(2,849)		(9,238)
Recoveries	46		—		—		—		1,004		1,050
Balance at September 30, 2024	$	17,453	$	65,608	$	95,032	$	76,555	$	9,206	$	263,854



	For the Three Months Ended September 30, 2023
(Dollars in thousands)	Single Family-Mortgage & Warehouse		Multifamily and Commercial Mortgage		Commercial Real Estate		Commercial & Industrial - Non-RE		Auto & Consumer		Total
Balance at July 1, 2023	$	17,503	$	16,848	$	72,755	$	46,347	$	13,227	$	166,680

Provision (benefit) for credit losses - loans	(10)		(974)		(1,400)		8,245		(111)		5,750
Charge-offs	(80)		—		—		—		(2,281)		(2,361)
Recoveries	13		—		—		—		788		801
Balance at September 30, 2023	$	17,426	$	15,874	$	71,355	$	54,592	$	11,623	$	170,870

For the three months ended September 30, 2024, the allowance for credit losses for loans increased as a result of the provision for credit losses, partially offset by net charge-offs. The provision for credit losses was primarily due to the quantitative impact of macroeconomic variables in the allowance for credit losses model, primarily the U.S. unemployment rate, and increases in specific reserves, mainly in the commercial & industrial - non-RE portfolio.

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, see Note 1—“Organizations and Summary of Significant Accounting Policies” in the 2024 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 September 30,
(Dollars in thousands)	2024		2023
Balance at July 1,	$	10,223	$	10,473
Provision for credit losses - unfunded lending commitments	2,500		1,250
Balance at September 30,	$	12,723	$	11,723

The increase in the allowance for off-balance sheet lending commitments for the three months ended September 30, 2024, was primarily driven by unfunded lending commitment growth, primarily in the commercial & industrial - non-RE portfolio.

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


	September 30, 2024
(Dollars in thousands)	Single Family-Mortgage & Warehouse		Multifamily and Commercial Mortgage		Commercial Real Estate		Commercial & Industrial - Non-RE		Auto & Consumer		Total
Performing	$	4,092,504	$	3,616,032	$	6,215,663	$	5,311,156	$	413,781	$	19,649,136
Nonaccrual	59,079		31,437		40,602		43,596		1,984		176,698
Total	$	4,151,583	$	3,647,469	$	6,256,265	$	5,354,752	$	415,765	$	19,825,834
Nonaccrual loans to total loans											0.89		%


	June 30, 2024
(Dollars in thousands)	Single Family-Mortgage & Warehouse		Multifamily and Commercial Mortgage		Commercial Real Estate		Commercial & Industrial - Non-RE		Auto & Consumer		Total
Performing	$	4,133,121	$	3,826,877	$	6,062,520	$	5,237,746	$	429,188	$	19,689,452
Nonaccrual	45,711		35,054		26,102		4,020		2,472		113,359
Total	$	4,178,832	$	3,861,931	$	6,088,622	$	5,241,766	$	431,660	$	19,802,811
Nonaccrual loans to total loans											0.57		%

There were no nonaccrual loans without an allowance for credit losses as of September 30, 2024 and June 30, 2024. There was no interest income recognized on nonaccrual loans in the three months ended September 30, 2024 and 2023. Loans reaching 90 days past due are generally placed on nonaccrual status and risk rated as substandard or doubtful. Loans not yet reaching 90 days past due may be placed on nonaccrual status based on management’s assessment of the aging of contractual principal amounts due, among other factors.

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. In addition to the borrower’s primary source of repayment, in its risk rating process the Company considers all available sources of repayment, including obligor guaranties and liquidations of pledged collateral, where individually or together such sources would fully repay the loan on a timely basis. The Company analyzes loans individually by classifying the loans based on credit risk. The Company uses the following internally-defined risk ratings.

Pass. Loans where repayment in full is expected through any of the borrower’s sources of repayment.

Special Mention. Loans where any credit risk is not considered significant yet require management’s attention given certain currently identified characteristics of the borrower, collateral securing the loan and the obligor’s net worth and paying capacity. If the identified credit risks are not adequately monitored or mitigated, the loan may weaken and the Company’s credit position with respect to the loan may deteriorate in the future.

Substandard. Loans where currently identified characteristics of the borrower, collateral securing the loan and the obligor’s net worth and paying capacity, taken together, could jeopardize the repayment of the debt. A loan not fully supported by at least one available source of repayment and involves a distinct possibility that the Company will sustain some loss in that loan if the weakness is not cured. A loan supported by a guaranty, collateral sufficient to incentivize a sale or refinance, or cash flow that is sufficient for timely repayment in full will not be classified as substandard even if the loan has a well-defined weakness in other sources of repayment.

Doubtful. Loans reflecting the same characteristics as those classified as substandard, but for which repayment in full in accordance with the contractual terms is currently considered highly unlikely.

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 present the composition of loans by portfolio segment, fiscal year of origination and credit quality indicator, and the amount of year-to-date gross charge-offs.


	September 30, 2024
	Loans Held for Investment by Fiscal Year of Origination												Revolving Loans		Total
(Dollars in thousands)	2025		2024		2023		2022		2021		Prior
Single Family-Mortgage & Warehouse
Pass	$	123,052	$	434,335	$	550,071	$	1,171,584	$	476,230	$	912,453	$	345,288	$	4,013,013
Special Mention	—		31,000		—		7,374		5,394		34,621		—		78,389
Substandard	—		—		1,085		9,668		—		49,428		—		60,181
Doubtful	—		—		—		—		—		—		—		—
Total	123,052		465,335		551,156		1,188,626		481,624		996,502		345,288		4,151,583
Year-to-date gross charge-offs	—		—		—		—		—		—		—		—
Multifamily and Commercial Mortgage
Pass	6,410		30,848		652,262		1,023,889		493,090		1,221,788		—		3,428,287
Special Mention	—		—		23,774		41,030		8,975		52,624		—		126,403
Substandard	—		—		9,166		7,435		29,396		46,782		—		92,779
Doubtful	—		—		—		—		—		—		—		—
Total	6,410		30,848		685,202		1,072,354		531,461		1,321,194		—		3,647,469
Year-to-date gross charge-offs	—		—		—		—		—		3,357		—		3,357
Commercial Real Estate
Pass	725,167		1,939,760		1,144,414		1,234,466		143,009		45,487		871,853		6,104,156
Special Mention	—		63,389		—		—		—		—		—		63,389
Substandard	—		—		14,608		43,700		11,650		14,852		3,910		88,720
Doubtful	—		—		—		—		—		—		—		—
Total	725,167		2,003,149		1,159,022		1,278,166		154,659		60,339		875,763		6,256,265
Year-to-date gross charge-offs	—		—		—		—		—		—		—		—
Commercial & Industrial - Non-RE
Pass	201,920		923,047		465,232		151,653		42,580		31,291		3,299,654		5,115,377
Special Mention	—		13,500		386		678		3,893		—		4,284		22,741
Substandard	—		243		32,942		128,295		—		2,989		42,165		206,634
Doubtful	—		—		—		10,000		—		—		—		10,000
Total	201,920		936,790		498,560		290,626		46,473		34,280		3,346,103		5,354,752
Year-to-date gross charge-offs	—		—		—		—		1,032		—		2,000		3,032
Auto & Consumer
Pass	28,400		62,125		103,149		158,952		38,274		21,978		—		412,878
Special Mention	—		34		275		390		69		26		—		794
Substandard	—		9		567		1,108		234		175		—		2,093
Doubtful	—		—		—		—		—		—		—		—
Total	28,400		62,168		103,991		160,450		38,577		22,179		—		415,765
Year-to-date gross charge-offs	—		197		626		1,354		494		178		—		2,849
Total
Pass	1,084,949		3,390,115		2,915,128		3,740,544		1,193,183		2,232,997		4,516,795		19,073,711
Special Mention	—		107,923		24,435		49,472		18,331		87,271		4,284		291,716
Substandard	—		252		58,368		190,206		41,280		114,226		46,075		450,407
Doubtful	—		—		—		10,000		—		—		—		10,000
Total	$	1,084,949	$	3,498,290	$	2,997,931	$	3,990,222	$	1,252,794	$	2,434,494	$	4,567,154	$	19,825,834
As a % of total gross loans	5.5%		17.6%		15.1%		20.1%		6.3%		12.3%		23.1%		100.0%
Total year-to-date gross charge-offs	$	—	$	197	$	626	$	1,354	$	1,526	$	3,535	$	2,000	$	9,238


	June 30, 2024
	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	$	491,822	$	590,060	$	1,200,230	$	487,132	$	291,047	$	720,049	$	256,778	$	4,037,118
Special Mention	31,000		—		24,489		665		6,591		26,873		—		89,618
Substandard	—		283		6,728		—		14,720		30,365		—		52,096
Doubtful	—		—		—		—		—		—		—		—
Total	522,822		590,343		1,231,447		487,797		312,358		777,287		256,778		4,178,832
Year-to-date gross charge-offs	—		—		—		—		—		172		—		172
Multifamily and Commercial Mortgage
Pass	36,058		700,163		994,004		595,299		510,341		811,184		—		3,647,049
Special Mention	—		29,325		46,194		17,478		9,011		10,277		—		112,285
Substandard	—		13,489		12,509		15,507		41,013		20,079		—		102,597
Doubtful	—		—		—		—		—		—		—		—
Total	36,058		742,977		1,052,707		628,284		560,365		841,540		—		3,861,931
Year-to-date gross charge-offs	—		—		—		—		640		—		—		640
Commercial Real Estate
Pass	1,952,001		1,419,399		1,456,643		221,061		7,741		53,000		866,686		5,976,531
Special Mention	—		—		27,452		—		—		—		—		27,452
Substandard	—		5,600		43,700		5,000		—		30,339		—		84,639
Doubtful	—		—		—		—		—		—		—		—
Total	1,952,001		1,424,999		1,527,795		226,061		7,741		83,339		866,686		6,088,622
Year-to-date gross charge-offs	—		—		—		—		—		—		—		—
Commercial & Industrial - Non-RE
Pass	991,497		458,454		238,397		44,923		10,422		12,867		3,295,425		5,051,985
Special Mention	—		1,613		731		1,818		—		—		5,349		9,511
Substandard	—		34,433		122,729		1,031		—		2,988		19,089		180,270
Doubtful	—		—		—		—		—		—		—		—
Total	991,497		494,500		361,857		47,772		10,422		15,855		3,319,863		5,241,766
Year-to-date gross charge-offs	—		—		—		—		—		84		—		84
Auto & Consumer
Pass	65,766		114,615		177,043		43,287		13,402		14,056		—		428,169
Special Mention	33		213		422		176		—		61		—		905
Substandard	142		547		1,264		410		114		109		—		2,586
Doubtful	—		—		—		—		—		—		—		—
Total	65,941		115,375		178,729		43,873		13,516		14,226		—		431,660
Year-to-date gross charge-offs	202		3,471		5,212		1,556		303		269		—		11,013
Total
Pass	3,537,144		3,282,691		4,066,317		1,391,702		832,953		1,611,156		4,418,889		19,140,852
Special Mention	31,033		31,151		99,288		20,137		15,602		37,211		5,349		239,771
Substandard	142		54,352		186,930		21,948		55,847		83,880		19,089		422,188
Doubtful	—		—		—		—		—		—		—		—
Total	$	3,568,319	$	3,368,194	$	4,352,535	$	1,433,787	$	904,402	$	1,732,247	$	4,443,327	$	19,802,811
As a % of total gross loans	18.0%		17.0%		22.0%		7.2%		4.6%		8.8%		22.4%		100.0%
Total year-to-date gross charge-offs	$	202	$	3,471	$	5,212	$	1,556	$	943	$	525	$	—	$	11,909

The following tables provide the aging of loans by portfolio segment:


	September 30, 2024
(Dollars in thousands)	Current			30-59 Days			60-89 Days			90+ Days			Total
Single Family-Mortgage & Warehouse	$	4,059,299		$	20,107		$	13,715		$	58,462		$	4,151,583
Multifamily and Commercial Mortgage	3,572,637			29,631			9,648			35,553			3,647,469
Commercial Real Estate	6,179,503			7,610			5,000			64,152			6,256,265
Commercial & Industrial - Non-RE	5,348,357			6,395			—			—			5,354,752
Auto & Consumer	408,728			4,992			1,043			1,002			415,765


Total	$	19,568,524		$	68,735		$	29,406		$	159,169		$	19,825,834
As a % of total gross loans	98.70		%	0.35		%	0.15		%	0.80		%	100		%


	June 30, 2024
(Dollars in thousands)	Current			30-59 Days			60-89 Days			90+ Days			Total
Single Family-Mortgage & Warehouse	$	4,070,186		$	46,387		$	18,401		$	43,858		$	4,178,832
Multifamily and Commercial Mortgage	3,795,387			13,074			8,554			44,916			3,861,931
Commercial Real Estate	6,024,470			—			25,950			38,202			6,088,622
Commercial & Industrial - Non-RE	5,240,734			—			—			1,032			5,241,766
Auto & Consumer	424,555			4,644			996			1,465			431,660

Total	$	19,555,332		$	64,105		$	53,901		$	129,473		$	19,802,811
As a % of total gross loans	98.75		%	0.33		%	0.27		%	0.65		%	100		%

Loans reaching 90 or more days past due are generally placed on nonaccrual. As of September 30, 2024 and June 30, 2024, there were loans of $34.1 million and $20.2 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 $23.0 million and $20.1 million as of September 30, 2024 and June 30, 2024, respectively.

Loan Modifications to Borrowers Experiencing Financial Difficulty. The Company may grant certain modifications of loans to borrowers experiencing financial difficulty, which effective following the adoption of ASU 2022-02, 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. For the three months ended September 30, 2024 and 2023, there were no FDMs.