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Loans and Leases | 3 Months Ended
--- | ---
Mar. 31, 2024
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 adjustments for acquired loans:
| March 31, 2024 |  | December 31, 2023
(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 | $ | 36,859 |  | 44.8 | % |  | $ | 37,265 |  | 44.0 | %
Commercial real estate | 10,323 | 12.5 | % |  | 10,470 | 12.4 | %
One-to-four family first mortgage | 5,807 | 7.1 | % |  | 6,061 | 7.2 | %
Acquisition, development, and construction | 3,207 | 3.9 | % |  | 2,912 | 3.4 | %
Total mortgage loans held for investment (1) | $ | 56,196 |  | 68.3 | % |  | $ | 56,708 |  | 67.0 | %
Other Loans: |  |  |  |  |
Commercial and industrial | 21,428 | 26.0 | % |  | 22,065 | 26.1 | %
Lease financing, net of unearned income of $243 and $258, respectively | 2,990 | 3.6 | % |  | 3,189 | 3.8 | %
Total commercial and industrial loans (2) | 24,418 | 29.6 | % |  | 25,254 | 29.8 | %
Other | 1,713 | 2.1 | % |  | 2,657 | 3.1 | %
Total other loans held for investment | 26,131 | 31.7 | % |  | 27,911 | 33.0 | %
Total loans and leases held for investment (1) | $ | 82,327 |  | 100.0 | % |  | $ | 84,619 |  | 100.0 | %
Allowance for credit losses on loans and leases | (1,215) |  |  | (992) |
Total loans and leases held for investment, net | 81,112 |  |  | 83,627 |
Loans held for sale, at fair value | 981 |  |  |  | 1,182 |
Total loans and leases, net | $ | 82,093 |  |  |  | $ | 84,809 |  |
(1)Excludes accrued interest receivable of $410 million and $410 million at March 31, 2024 and December 31, 2023, respectively, which is included in other assets in the Consolidated Statements of Condition. (2)Includes specialty finance loans and leases of $4.8 billion and $5.2 billion at March 31, 2024 and December 31, 2023, respectively. Loans Held-for-Sale Loans held-for-sale at March 31, 2024 totaled $981 million, down from $1.2 billion at December 31, 2023. 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 loans with government guarantees that are insured by U.S government agencies. A s of March 31, 2024, these loans totaled $507 million. 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 March 31, 2024 and December 31, 2023 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 March 31, 2024:
(in millions) |  | Loans 30-89 Days Past Due |  | Non- Accrual Loans |  |  |  | Total Past Due Loans |  | Current Loans |  | Total Loans Receivable
Multi-family |  | $ | 103 |  |  | $ | 339 |  |  |  |  | $ | 442 |  |  | $ | 36,417 |  |  | $ | 36,859 |
Commercial real estate |  | 9 |  |  | 264 |  |  |  |  | 273 |  |  | 10,050 |  |  | 10,323 |
One-to-four family first mortgage |  | 26 |  |  | 98 |  |  |  |  | 124 |  |  | 5,683 |  |  | 5,807 |
Acquisition, development, and construction |  | 6 |  |  | 3 |  |  |  |  | 9 |  |  | 3,198 |  |  | 3,207 |
Commercial and industrial(1) |  | 60 |  |  | 73 |  |  |  |  | 133 |  |  | 24,285 |  |  | 24,418 |
Other |  | 8 |  |  | 21 |  |  |  |  | 29 |  |  | 1,684 |  |  | 1,713 |
Total |  | $ | 212 |  |  | $ | 798 |  |  |  |  | $ | 1,010 |  |  | $ | 81,317 |  |  | $ | 82,327 |
(1)Includes lease financing receivables. The following table presents information regarding the quality of the Company’s loans held for investment at December 31, 2023:
(in millions) |  | Loans 30-89 Days Past Due |  | Non- Accrual Loans |  |  |  | Total Past Due Loans |  | Current Loans(2) |  | Total Loans Receivable
Multi-family |  | $ | 121 |  |  | $ | 138 |  |  |  |  | $ | 259 |  |  | $ | 37,006 |  |  | $ | 37,265 |
Commercial real estate |  | 28 |  |  | 128 |  |  |  |  | 156 |  |  | 10,314 |  |  | 10,470 |
One-to-four family first mortgage |  | 40 |  |  | 95 |  |  |  |  | 135 |  |  | 5,926 |  |  | 6,061 |
Acquisition, development, and construction |  | 2 |  |  | 2 |  |  |  |  | 4 |  |  | 2,908 |  |  | 2,912 |
Commercial and industrial(1) |  | 37 |  |  | 43 |  |  |  |  | 80 |  |  | 25,174 |  |  | 25,254 |
Other |  | 22 |  |  | 22 |  |  |  |  | 44 |  |  | 2,613 |  |  | 2,657 |
Total |  | $ | 250 |  |  | $ | 428 |  |  |  |  | $ | 678 |  |  | $ | 83,941 |  |  | $ | 84,619 |
(1)Includes lease financing receivables. The Company conducted a thorough review of its largest 350 real estate loans at the end of the first quarter of 2024. This review included both internal collateral valuation analysis, and obtaining third-party estimates of collateral values, given the potential reliance on the underlying assets as part of the Borrower’s ability to repay debt. The review also included analysis of the most currently available borrower financial information to evaluate the ability of the underlying collateral to generate sufficient cash flow as the primary source of repayment. The Company downgraded certain loans in the first quarter of 2024 as a result of this review. The downgrades were principally related to loans with upcoming maturities or repricing where the estimated property net operating income would not be sufficient to fully cover pro-forma debt service when applying current market rates and terms, and the underlying collateral values are estimated to have declined to at or below the loan carrying amount. These downgrades increased loans classified as substandard or worse by $2.3 billion. Downgrades to substandard or below reflect the potential a loss may occur if deficiencies in the primary source of repayment for these loans are unable to be corrected. The following table summarizes the Company’s portfolio of loans held for investment by credit quality indicator at March 31, 2024: `
(in millions) | Multi- Family |  | Commercial Real Estate |  | One-to- Four Family |  | Acquisition, Development, and Construction |  | Commercial and Industrial |  | Other |  | Total Loans(1)
Credit Quality Indicator: |  |  |  |  |  |  |  |  |  |  |  |  |
Pass | $ | 32,209 |  |  | $ | 8,417 |  |  | $ | 4,985 |  |  | $ | 3,081 |  |  | $ | 23,816 |  |  | $ | 1,682 |  |  | $ | 74,190 |
Special mention | 702 |  |  | 237 |  |  | — |  |  | 72 |  |  | 148 |  |  | — |  |  | 1,159 |
Substandard | 3,948 |  |  | 1,669 |  |  | 822 |  |  | 54 |  |  | 454 |  |  | 31 |  |  | 6,978 |
Total | $ | 36,859 |  |  | $ | 10,323 |  |  | $ | 5,807 |  |  | $ | 3,207 |  |  | $ | 24,418 |  |  | $ | 1,713 |  |  | $ | 82,327 |
(1)Includes loans carried under the fair value option The following table summarizes the Company’s portfolio of loans held for investment by credit quality indicator at December 31, 2023:
(in millions) | Multi- Family |  | Commercial Real Estate |  | One-to- Four Family |  | Acquisition, Development, and Construction |  | Commercial and Industrial(2) |  | Other |  | Total Loans
Credit Quality Indicator: |  |  |  |  |  |  |  |  |  |  |  |  |
Pass | $ | 34,170 |  |  | $ | 8,734 |  |  | $ | 5,328 |  |  | $ | 2,825 |  |  | $ | 24,683 |  |  | $ | 2,634 |  |  | $ | 78,374 |
Special mention | 768 |  |  | 367 |  |  | — |  |  | 57 |  |  | 335 |  |  | — |  |  | 1,527 |
Substandard | 2,327 |  |  | 1,369 |  |  | 733 |  |  | 30 |  |  | 236 |  |  | 23 |  |  | 4,718 |
Total | $ | 37,265 |  |  | $ | 10,470 |  |  | $ | 6,061 |  |  | $ | 2,912 |  |  | $ | 25,254 |  |  | $ | 2,657 |  |  | $ | 84,619 |
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 March 31, 2024:
| Vintage Year
(in millions) | 2024 |  | 2023 |  | 2022 |  | 2021 |  | 2020 |  | Prior To 2020 |  | Revolving Loans |  | Revolving Loans Converted to Term Loans |  | Total
Pass | $ | 281 |  |  | $ | 3,425 |  |  | $ | 12,524 |  |  | $ | 9,987 |  |  | $ | 8,571 |  |  | $ | 11,760 |  |  | $ | 2,128 |  |  | $ | 15 |  |  | $ | 48,691 |
Special Mention | 4 |  |  | — |  |  | 139 |  |  | 85 |  |  | 74 |  |  | 631 |  |  | 78 |  |  | — |  |  | 1,011 |
Substandard | — |  |  | 65 |  |  | 401 |  |  | 351 |  |  | 436 |  |  | 5,235 |  |  | 6 |  |  | — |  |  | 6,494 |
Total mortgage loans | $ | 285 |  |  | $ | 3,490 |  |  | $ | 13,064 |  |  | $ | 10,423 |  |  | $ | 9,081 |  |  | $ | 17,626 |  |  | $ | 2,212 |  |  | $ | 15 |  |  | $ | 56,196 |
Current-period gross write-offs | — |  |  | — |  |  | — |  |  | (6) |  |  | (3) |  |  | (66) |  |  | — |  |  | — |  |  | (75) |
Pass | $ | 5,662 |  |  | $ | 3,548 |  |  | $ | 3,326 |  |  | $ | 1,401 |  |  | $ | 896 |  |  | $ | 1,599 |  |  | $ | 8,901 |  |  | $ | 166 |  |  | $ | 25,499 |
Special Mention | 18 |  |  | 4 |  |  | 48 |  |  | 17 |  |  | 13 |  |  | 5 |  |  | 43 |  |  | — |  |  | 148 |
Substandard | 10 |  |  | 13 |  |  | 189 |  |  | 42 |  |  | 40 |  |  | 79 |  |  | 110 |  |  | 1 |  |  | 484 |
Total other loans | $ | 5,690 |  |  | $ | 3,565 |  |  | $ | 3,563 |  |  | $ | 1,460 |  |  | $ | 949 |  |  | $ | 1,683 |  |  | $ | 9,054 |  |  | $ | 167 |  |  | $ | 26,131 |
Current-period gross write-offs | $ | — |  |  | $ | (1) |  |  | $ | (8) |  |  | $ | (5) |  |  | $ | — |  |  | $ | (2) |  |  | $ | — |  |  | $ | — |  |  | $ | (16) |
Total | $ | 5,975 |  |  | $ | 7,055 |  |  | $ | 16,627 |  |  | $ | 11,883 |  |  | $ | 10,030 |  |  | $ | 19,309 |  |  | $ | 11,266 |  |  | $ | 182 |  |  | $ | 82,327 |
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 March 31, 2024:
| Collateral Type
(in millions) | Real Property |  | Other
Multi-family | $ | 457 |  |  | $ | — |
Commercial real estate | 412 |  |  | — |
One-to-four family first mortgage | 107 |  |  | — |
Acquisition, development, and construction | 5 |  |  | — |
Commercial and industrial | — |  |  | 78 |
Other | — |  |  | — |
Total collateral-dependent loans held for investment | $ | 981 |  |  | $ | 78 |
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 months ended March 31, 2024. At March 31, 2024 and December 31, 2023, the Company had $74 million and $81 million of residential mortgage loans in the process of foreclosure, respectively. Modifications to Borrowers Experiencing Financial Difficulty 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 March 31, 2024 |  |  |  |  |  |  |  |  |
Multi-family | $ | 8 |  |  | $ | — |  |  | $ | — |  |  | $ | 8 |  |  | 0.08 | %
Commercial real estate | 2 |  |  | — |  |  | — |  |  | 2 |  |  | 0.02 | %
One-to-four family first mortgage | — |  |  | 1 |  |  | 1 |  |  | 2 |  |  | 0.03 | %
Commercial and Industrial | — |  |  | 13 |  |  | — |  |  | 13 |  |  | 0.06 | %
Other Consumer | — |  |  | — |  |  | 1 |  |  | 1 |  |  | 0.06 | %
Total | $ | 10 |  |  | $ | 14 |  |  | $ | 2 |  |  | $ | 26 |  |  |
Three Months Ended March 31, 2023 |  |  |  |  |  |  |  |  |
Multi-family | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | — | %
Commercial real estate | 44 |  |  | — |  |  | — |  |  | 44 |  |  | 0.42 | %
One-to-four family first mortgage | — |  |  | 1 |  |  | 1 |  |  | 2 |  |  | 0.03 | %
Commercial and Industrial | — |  |  | — |  |  | — |  |  | — |  |  | — | %
Other Consumer | $ | — |  |  | $ | — |  |  | $ | — |  |  | — |  |  | — | %
Total | $ | 44 |  |  | $ | 1 |  |  | $ | 1 |  |  | $ | 46 |  |  |
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 March 31, 2024 |  |  |  |  |
Multi-family | 8.13 | % |  | 6.95 | % |  |
Commercial real estate | 8.08 | % |  | 6.00 | % |  |
One-to-four family first mortgage | 4.66 | % |  | 3.76 | % |  | 15.3
Commercial and industrial | 6.78 | % |  | 6.50 | % |  | 0.3
Other Consumer | 11.01 | % |  | 4.76 | % |  | 1.8
Three Months Ended March 31, 2023 |  |  |  |  |
Multi-family | — | % |  | — | % |  |
Commercial real estate | 10.50 | % |  | 4.00 | % |  |
One-to-four family first mortgage | 4.84 | % |  | 3.97 | % |  | 12.7
Commercial and industrial | — | % |  | — | % |  |
Other Consumer | — | % |  | — | % |  |
As of March 31, 2024, 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 $3 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. The following tables depict the performance of loans that have been modified during the twelve-month period ended March 31, 2024:
|  | March 31, 2024
(dollars in millions) |  | Current |  | 30 - 89 Past Due |  | 90+ Past Due |  | Total
Multi-family |  | $ | 8 |  |  | $ | — |  |  | $ | — |  |  | 8 |
Commercial real estate |  | 2 |  |  | — |  |  | — |  |  | 2 |
One-to-four family first mortgage |  | $ | 2 |  |  | $ | — |  |  | $ | 8 |  |  | $ | 10 |
Commercial and industrial |  | 12 |  | 2 |  | — |  | 14
Other Consumer |  | 1 |  | — |  | — |  | 1
Total |  | $ | 25 |  |  | $ | 2 |  |  | $ | 8 |  |  | $ | 35 |
|  | March 31, 2023
(dollars in millions) |  | Current |  | 30 - 89 Past Due |  | 90+ Past Due |  | Total
One-to-four family first mortgage |  | $ | — |  |  | $ | — |  |  | $ | 3 |  |  | $ | 3 |
Commercial and industrial |  | 44 |  | — |  | — |  | 44
Total |  | $ | 44 |  |  | $ | — |  |  | $ | 3 |  |  | $ | 47 |

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