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Loans and Leases | 9 Months Ended
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Sep. 30, 2023
Receivables [Abstract] |
Loans and Leases | Loans and Leases The Company classifies loans that we have the intent and ability to hold for the foreseeable future or until maturity as LHFI. We report LHFI loans at their amortized cost, which includes the outstanding principal balance adjusted for any unamortized premiums, discounts, deferred fees and unamortized fair value for acquired loans:
| September 30, 2023 |  | December 31, 2022
(dollars in millions) | Amount | Percent of Loans Held for Investment |  | Amount | Percent of Loans Held for Investment
Loans and Leases Held for Investment: |  |  |  |  |
Mortgage Loans: |  |  |  |  |
Multi-family | $ | 37,698 |  | 44.9 | % |  | $ | 38,130 |  | 55.3 | %
Commercial real estate | 10,486 | 12.5 | % |  | 8,526 | 12.4 | %
One-to-four family first mortgage | 5,882 | 7.0 | % |  | 5,821 | 8.4 | %
Acquisition, development, and construction | 2,910 | 3.5 | % |  | 1,996 | 2.8 | %
Total mortgage loans held for investment (1) | $ | 56,976 |  | 67.9 | % |  | $ | 54,473 |  | 78.9 | %
Other Loans: |  |  |  |  |
Commercial and industrial | 21,275 | 25.3 | % |  | 10,597 | 15.4 | %
Lease financing, net of unearned income of $243 and $85, respectively | 3,148 | 3.7 | % |  | 1,679 | 2.4 | %
Total commercial and industrial loans (2) | 24,423 | 29.0 | % |  | 12,276 | 17.8 | %
Other | 2,596 | 3.1 | % |  | 2,252 | 3.3 | %
Total other loans held for investment | 27,019 | 32.1 | % |  | 14,528 | 21.1 | %
Total loans and leases held for investment (1) | $ | 83,995 |  | 100.0 | % |  | $ | 69,001 |  | 100.0 | %
Allowance for credit losses on loans and leases | (619) |  |  | (393) |
Total loans and leases held for investment, net | 83,376 |  |  | 68,608 |
Loans held for sale, at fair value | 1,926 |  |  |  | 1,115 |
Total loans and leases, net | $ | 85,302 |  |  |  | $ | 69,723 |  |
(1)Excludes accrued interest receivable of $405 million and $292 million at September 30, 2023 and December 31, 2022, respectively, which is included in other assets in the Consolidated Statements of Condition. (2)Includes specialty finance loans and leases of $5.2 billion and $4.4 billion at September 30, 2023 and December 31, 2022, respectively. Loans with Government Guarantees Substantially all LGG are insured or guaranteed by the FHA or the U.S. Department of Veterans Affairs. Nonperforming repurchased loans in this portfolio earn interest at a rate based upon the 10-year U.S. Treasury note rate from the time the underlying loan becomes 60 days delinquent until the loan is conveyed to HUD (if foreclosure timelines are met), which is not paid by the FHA until claimed. The Bank has a unilateral option to repurchase loans sold to GNMA if the loan is due, but unpaid, for three consecutive months (typically referred to as 90 days past due) and can recover losses through a claims process from the guarantor. These loans are recorded in loans held for investment and the liability to repurchase the loans is recorded in other liabilities on the Consolidated Statements of Condition. Certain loans within our portfolio may be subject to indemnifications and insurance limits which expose us to limited credit risk. As of September 30, 2023, LGG loans totaled $563 million and the repurchase liability was $362 million. Repossessed assets and the associated net claims related to government guaranteed loans are recorded in other assets and was $12 million at September 30, 2023. Loans Held-for-Sale Loans held-for-sale at September 30, 2023 totaled $1.9 billion, up from $1.1 billion at December 31, 2022. The Signature Transaction contributed $360 million in Small Business Administration ("SBA") loans to this increase. We classify loans as held for sale when we originate or purchase loans that we intend to sell. We have elected the fair value option for nearly all of this portfolio, except the SBA loans. We estimate the fair value of mortgage loans based on quoted market prices for securities backed by similar types of loans, where available, or by discounting estimated cash flows using observable inputs inclusive of interest rates, prepayment speeds and loss assumptions for similar collateral. Asset Quality All asset quality information excludes LGG that are insured by U.S government agencies. A loan generally is classified as a non-accrual loan when it is 90 days or more past due or when it is deemed to be impaired because the Company no longer expects to collect all amounts due according to the contractual terms of the loan agreement. When a loan is placed on non-accrual status, management ceases the accrual of interest owed, and previously accrued interest is charged against interest income. A loan is generally returned to accrual status when the loan is current and management has reasonable assurance that the loan will be fully collectible. Interest income on non-accrual loans is recorded when received in cash. At September 30, 2023 and December 31, 2022 we had no loans that were nonperforming and still accruing. The following table presents information regarding the quality of the Company’s loans held for investment at September 30, 2023:
(in millions) |  | Loans 30-89 Days Past Due |  | Non- Accrual Loans |  |  |  | Total Past Due Loans |  | Current Loans |  | Total Loans Receivable
Multi-family |  | $ | 60 |  |  | $ | 102 |  |  |  |  | $ | 162 |  |  | $ | 37,536 |  |  | $ | 37,698 |
Commercial real estate |  | 26 |  |  | 157 |  |  |  |  | 183 |  |  | 10,303 |  |  | 10,486 |
One-to-four family first mortgage |  | 19 |  |  | 90 |  |  |  |  | 109 |  |  | 5,773 |  |  | 5,882 |
Acquisition, development, and construction |  | 1 |  |  | 1 |  |  |  |  | 2 |  |  | 2,908 |  |  | 2,910 |
Commercial and industrial(1) |  | 43 |  |  | 65 |  |  |  |  | 108 |  |  | 24,315 |  |  | 24,423 |
Other |  | 20 |  |  | 19 |  |  |  |  | 39 |  |  | 2,557 |  |  | 2,596 |
Total |  | $ | 169 |  |  | $ | 434 |  |  |  |  | $ | 603 |  |  | $ | 83,392 |  |  | $ | 83,995 |
(1)Includes lease financing receivables, all of which were current. The following table presents information regarding the quality of the Company’s loans held for investment at December 31, 2022:
(in millions) |  | Loans 30-89 Days Past Due |  | Non- Accrual Loans |  |  |  | Total Past Due Loans |  | Current Loans |  | Total Loans Receivable
Multi-family |  | $ | 34 |  |  | $ | 13 |  |  |  |  | $ | 47 |  |  | $ | 38,083 |  |  | $ | 38,130 |
Commercial real estate |  | 2 |  |  | 20 |  |  |  |  | 22 |  |  | 8,504 |  |  | 8,526 |
One-to-four family first mortgage |  | 21 |  |  | 92 |  |  |  |  | 113 |  |  | 5,708 |  |  | 5,821 |
Acquisition, development, and construction |  | — |  |  | — |  |  |  |  | — |  |  | 1,996 |  |  | 1,996 |
Commercial and industrial(1) |  | 2 |  |  | 3 |  |  |  |  | 5 |  |  | 12,271 |  |  | 12,276 |
Other |  | 11 |  |  | 13 |  |  |  |  | 24 |  |  | 2,228 |  |  | 2,252 |
Total |  | $ | 70 |  |  | $ | 141 |  |  |  |  | $ | 211 |  |  | $ | 68,790 |  |  | $ | 69,001 |
(1)Includes lease financing receivables, all of which were current. The following table summarizes the Company’s portfolio of loans held for investment by credit quality indicator at September 30, 2023:
| Mortgage Loans |  | Other Loans
(in millions) | Multi- Family |  | Commercial Real Estate |  | One-to- Four Family |  | Acquisition, Development, and Construction |  | Total Mortgage Loans |  | Commercial and Industrial(1) |  | Other |  | Total Other Loans
Credit Quality Indicator: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Pass(2) | $ | 36,027 |  |  | $ | 9,248 |  |  | $ | 5,780 |  |  | $ | 2,894 |  |  | $ | 53,949 |  |  | $ | 24,162 |  |  | $ | 2,572 |  |  | $ | 26,734 |
Special mention | 776 |  |  | 425 |  |  | 3 |  |  | 15 |  |  | 1,219 |  |  | 94 |  |  | — |  |  | 94 |
Substandard | 895 |  |  | 813 |  |  | 99 |  |  | 1 |  |  | 1,808 |  |  | 160 |  |  | 24 |  |  | 184 |
Doubtful | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 7 |  |  | — |  |  | 7 |
Total | $ | 37,698 |  |  | $ | 10,486 |  |  | $ | 5,882 |  |  | $ | 2,910 |  |  | $ | 56,976 |  |  | $ | 24,423 |  |  | $ | 2,596 |  |  | $ | 27,019 |
(1)Includes lease financing receivables, all of which were classified as Pass. (2)Pass includes 1-6W. The following table summarizes the Company’s portfolio of loans held for investment by credit quality indicator at December 31, 2022:
| Mortgage Loans |  | Other Loans
(in millions) | Multi- Family |  | Commercial Real Estate |  | One-to- Four Family |  | Acquisition, Development, and Construction |  | Total Mortgage Loans |  | Commercial and Industrial(1) |  | Other |  | Total Other Loans
Credit Quality Indicator: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Pass(2) | $ | 36,622 |  |  | $ | 7,871 |  |  | $ | 5,710 |  |  | $ | 1,992 |  |  | $ | 52,195 |  |  | $ | 12,208 |  |  | $ | 2,238 |  |  | $ | 14,446 |
Special mention | 864 |  |  | 230 |  |  | 8 |  |  | 4 |  |  | 1,106 |  |  | 18 |  |  | — |  |  | 18 |
Substandard | 644 |  |  | 425 |  |  | 103 |  |  | — |  |  | 1,172 |  |  | 50 |  |  | 14 |  |  | 64 |
Doubtful | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |
Total | $ | 38,130 |  |  | $ | 8,526 |  |  | $ | 5,821 |  |  | $ | 1,996 |  |  | $ | 54,473 |  |  | $ | 12,276 |  |  | $ | 2,252 |  |  | $ | 14,528 |
(1)Includes lease financing receivables, all of which were classified as Pass. (2) Pass includes 1-6W. The preceding classifications are the most current ones available and generally have been updated within the last twelve months. In addition, they follow regulatory guidelines and can generally be described as follows: pass loans are of satisfactory quality; special mention loans have potential weaknesses that deserve management’s close attention; substandard loans are inadequately protected by the current net worth and paying capacity of the borrower or of the collateral pledged (these loans have a well-defined weakness and there is a possibility that the Company will sustain some loss); and doubtful loans, based on existing circumstances, have weaknesses that make collection or liquidation in full highly questionable and improbable. In addition, one-to-four family loans are classified based on the duration of the delinquency. The following table presents, by credit quality indicator, loan class, and year of origination, the amortized cost basis of the Company’s loans and leases as of September 30, 2023:
| Vintage Year
(in millions) | 2023 |  | 2022 |  | 2021 |  | 2020 |  | 2019 |  | Prior To 2019 |  | Revolving Loans |  | Revolving Loans Converted to Term Loans |  | Total
Pass(1) | $ | 2,218 |  |  | $ | 13,695 |  |  | $ | 10,148 |  |  | $ | 9,547 |  |  | $ | 5,247 |  |  | $ | 11,115 |  |  | $ | 1,972 |  |  | $ | 7 |  |  | $ | 53,949 |
Special Mention | 2 |  |  | 46 |  |  | 26 |  |  | 176 |  |  | 211 |  |  | 758 |  |  | — |  |  | — |  |  | 1,219 |
Substandard | 44 |  |  | 18 |  |  | 32 |  |  | 38 |  |  | 331 |  |  | 1,342 |  |  | — |  |  | 3 |  |  | 1,808 |
Doubtful | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |
Total mortgage loans | $ | 2,264 |  |  | $ | 13,759 |  |  | $ | 10,206 |  |  | $ | 9,761 |  |  | $ | 5,789 |  |  | $ | 13,215 |  |  | $ | 1,972 |  |  | $ | 10 |  |  | $ | 56,976 |
Current-period gross writeoffs | — |  |  | — |  |  | — |  |  | — |  |  | (2) |  |  | (17) |  |  | — |  |  | — |  |  | (19) |
Pass(1) | $ | 8,458 |  |  | $ | 3,924 |  |  | $ | 1,980 |  |  | $ | 1,619 |  |  | $ | 993 |  |  | $ | 1,021 |  |  | $ | 8,418 |  |  | $ | 321 |  |  | $ | 26,734 |
Special Mention | 7 |  |  | 24 |  |  | 6 |  |  | 3 |  |  | 37 |  |  | 13 |  |  | 4 |  |  | — |  |  | 94 |
Substandard | 16 |  |  | 28 |  |  | 21 |  |  | 16 |  |  | 5 |  |  | 46 |  |  | 42 |  |  | 10 |  |  | 184 |
Doubtful | — |  |  | — |  |  | 7 |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 7 |
Total other loans | $ | 8,481 |  |  | $ | 3,976 |  |  | $ | 2,014 |  |  | $ | 1,638 |  |  | $ | 1,035 |  |  | $ | 1,080 |  |  | $ | 8,464 |  |  | $ | 331 |  |  | $ | 27,019 |
Current-period gross writeoffs | $ | (6) |  |  | $ | (2) |  |  | $ | (1) |  |  | $ | (1) |  |  | $ | (2) |  |  | $ | (3) |  |  | $ | — |  |  | $ | — |  |  | $ | (15) |
Total | $ | 10,745 |  |  | $ | 17,735 |  | $ | — |  | $ | 12,220 |  |  | $ | 11,399 |  |  | $ | 6,824 |  |  | $ | 14,295 |  |  | $ | 10,436 |  |  | $ | 341 |  |  | $ | 83,995 |
(1) Pass includes 1-6W. When management determines that foreclosure is probable, for loans that are individually evaluated the expected credit losses are based on the fair value of the collateral adjusted for selling costs. When the borrower is experiencing financial difficulty at the reporting date and repayment is expected to be provided substantially through the operation or sale of the collateral, the collateral-dependent practical expedient has been elected and expected credit losses are based on the fair value of the collateral at the reporting date, adjusted for selling costs as appropriate. For CRE loans, collateral properties include office buildings, warehouse/distribution buildings, shopping centers, apartment buildings, residential and commercial tract development. The primary source of repayment on these loans is expected to come from the sale, permanent financing or lease of the real property collateral. CRE loans are impacted by fluctuations in collateral values, as well as the ability of the borrower to obtain permanent financing. The following table summarizes the extent to which collateral secures the Company’s collateral-dependent loans held for investment by collateral type as of September 30, 2023:
| Collateral Type
(in millions) | Real Property |  | Other
Multi-family | $ | 102 |  |  | $ | — |
Commercial real estate | 170 |  |  | — |
One-to-four family first mortgage | 100 |  |  | — |
Commercial and industrial | — |  |  | 33 |
Other | — |  |  | — |
Total collateral-dependent loans held for investment | $ | 372 |  |  | $ | 33 |
Other collateral type consists of taxi medallions, cash, accounts receivable and inventory. There were no significant changes in the extent to which collateral secures the Company’s collateral-dependent financial assets during the three and nine months ended September 30, 2023. At September 30, 2023 and December 31, 2022, the Company had $92 million and $121 million of residential mortgage loans in the process of foreclosure and no residential mortgage loans in the process of foreclosure, respectively. Modifications to Borrowers Experiencing Financial Difficulty Effective January 1, 2023, the Company adopted ASU 2022-02- Financial Instruments - Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures. For additional information on the adoption, refer to Note 1 - Organization and Basis of Presentation. When borrowers are experiencing financial difficulty, the Company may make certain loan modifications as part of loss mitigation strategies to maximize expected payment. Modifications in the form of principal forgiveness, an interest rate reduction, or an other-than-insignificant payment delay or a term extension that have occurred in the current reporting period to a borrower experiencing financial difficulty are disclosed along with the financial impact of the modifications. The following table summarizes the amortized cost basis of loans modified during the reporting period to borrowers experiencing financial difficulty, disaggregated by class of financing receivable and type of modification:
| Amortized Cost |  |
(dollars in millions) | Interest Rate Reduction |  | Term Extension |  | Combination - Interest Rate Reduction & Term Extension |  | Total |  | Percent of Total Loan class
Three months ended September 30, 2023 |  |  |  |  |  |  |  |  |
Multi-family | $ | 100 |  |  | $ | — |  |  | $ | — |  |  | $ | 100 |  |  | 0.95 | %
Commercial real estate | 67 |  |  | — |  |  | — |  |  | 67 |  |  | 0.64 | %
One-to-four family first mortgage | 3 |  |  | 1 |  |  | 2 |  |  | 6 |  |  | 0.10 | %
Commercial and Industrial | 1 |  |  | 11 |  |  | 2 |  |  | 14 |  |  | 0.07 | %
Other Consumer | — |  |  | — |  |  | 1 |  |  | 1 |  |  | 0.04 | %
Total | $ | 171 |  |  | $ | 12 |  |  | $ | 5 |  |  | $ | 188 |  |  |
Nine months ended September 30, 2023 |  |  |  |  |  |  |  |  |
Multi-family | $ | 100 |  |  | $ | — |  |  | $ | — |  |  | $ | 100 |  |  | 0.95 | %
Commercial real estate | 119 |  |  | — |  |  | — |  |  | 119 |  |  | 1.13 | %
One-to-four family first mortgage | 3 |  |  | 4 |  |  | 5 |  |  | 12 |  |  | 0.20 | %
Commercial and Industrial | 1 |  |  | 18 |  |  | 2 |  |  | 21 |  |  | 0.09 | %
Other Consumer | $ | — |  |  | $ | — |  |  | $ | 1 |  |  | 1 |  |  | 0.04 | %
Total | $ | 223 |  |  | $ | 22 |  |  | $ | 8 |  |  | $ | 253 |  |  |
The following table describes the financial effect of the modification made to borrowers experiencing financial difficulty:
| Interest Rate Reduction |  | Term Extension
| Weighted-average contractual interest rate |  |
| From |  | To |  | Weighted-average Term (in years)
Three months ended September 30, 2023 |  |  |  |  |
Multi-family | 7.73 | % |  | 6.17 | % |  |
Commercial real estate | 10.77 | % |  | 4.32 | % |  |
One-to-four family first mortgage | — | % |  | — | % |  | 9.9
Commercial and industrial | 8.02 | % |  | 7.74 | % |  | 0.36
Other Consumer | 9.28 | % |  | 4.75 | % |  | 4.8
Nine months ended September 30, 2023 |  |  |  |  |
Multi-family | 7.73 | % |  | 6.17 | % |  |
Commercial real estate | 10.48 | % |  | 4.18 | % |  |
One-to-four family first mortgage | — | % |  | — | % |  | 12.1
Commercial and industrial | 8.02 | % |  | 7.74 | % |  | 0.46
Other Consumer | 14.49 | % |  | 8.00 | % |  | 4.8
As of September 30, 2023, there were $3 million one-to-four family first mortgages that were modified for borrowers experiencing financial difficulty that received term extension and subsequently defaulted during the period and $5 million one-to-four family first mortgages that were combination modifications and subsequently defaulted during the period. The performance of loans made to borrowers experiencing financial difficulty in which modifications were made is closely monitored to understand the effectiveness of modification efforts. Loans are considered to be in payment default at 90 or more days past due. The following table depicts the performance of loans that have been modified during the reporting period:
|  | September 30, 2023
(dollars in millions) |  | Current |  | 30 - 89 Past Due |  | 90+ Past Due |  | Total
One-to-four family first mortgage |  | 1 |  | — |  | 9 |  | 10
Commercial and industrial |  | 21 |  | — |  | — |  | 21
Other Consumer |  | 1 |  | — |  | — |  | 1
Total |  | $ | 23 |  |  | $ | — |  |  | $ | 9 |  |  | $ | 32 |
Troubled Debt Restructurings Prior to Adoption of ASU 2022-02 Prior to the adoption of ASU 2022-02, the Company accounted for certain loan modifications and restructurings as TDRs. In general, a modification or restructuring of a loan constituted a TDR if the Company granted a concession to a borrower experiencing financial difficulty. A loan modified as a TDR was generally placed on non-accrual status until the Company determined that future collection of principal and interest is reasonably assured, which requires, among other things, that the borrower demonstrate performance according to the restructured terms for a period of at least six consecutive months. In determining the Company’s allowance for loan and lease losses, reasonably expected TDRs were individually evaluated and consist of criticized, classified, or maturing loans that will have a modification processed within the next three months. In an effort to proactively manage delinquent loans, the Company has selectively extended to certain borrowers concessions such as rate reductions, extension of maturity dates, and forbearance agreements. As of September 30, 2022, loans on which concessions were made with respect to rate reductions and/or extension of maturity dates amounted to $45 million. The following table presents information regarding the Company's TDRs as of September 30, 2022:
| September 30, 2022
(dollars in millions) | Accruing |  | Non- Accrual |  | Total
Loan Category: |  |  |  |  |
Multi-family | $ | — |  |  | $ | 6 |  |  | $ | 6 |
Commercial real estate | 16 |  | 19 |  | 35
Commercial and industrial (1) | — |  | 4 |  | 4
Total | $ | 16 |  |  | $ | 29 |  |  | $ | 45 |
(1) Includes $4 million of taxi medallion-related loans at September 30, 2022. The financial effects of the Company’s TDRs for the three and nine months ended September 30, 2022 are summarized as follows:
|  |  |  |  |  |  | Weighted Average Interest Rate |  |  |  |
(dollars in millions) | Number of Loans |  | Pre- Modification Recorded Investment |  | Post- Modification Recorded Investment |  | Pre- Modification |  | Post- Modification |  | Charge- off Amount |  | Capitalized Interest
Loan Category: |  |  |  |  |  |  |  |  |  |  |  |  |
Three Months Ended September 30, 2022 |  |  |  |  |  |  |  |  |  |  |  |  |
Commercial real estate | 0 |  | $ | — |  |  | $ | — |  |  | — | % |  | — | % |  | $ | — |  |  | $ | — |
Nine Months Ended September 30, 2022 |  |  |  |  |  |  |  |  |  |  |  |  |
Commercial real estate | 2 |  | $ | 22 |  |  | $ | 19 |  |  | 6.00 | % |  | 4.02 | % |  | $ | 3 |  |  | $ | — |

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