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Allowance for Credit Losses on Loans and Leases | 12 Months Ended
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Dec. 31, 2024
Credit Loss [Abstract] |
Allowance for Credit Losses on Loans and Leases | Allowance for Credit Losses on Loans and Leases Allowance for Credit Losses on Loans and Leases The following table summarizes activity in the allowance for credit losses for the periods indicated:
| Multi- Family |  | Commercial Real Estate |  | One-to-Four Family First Mortgage |  | Acquisition, Development, and Construction |  | Other |  | Total
Year Ended December 31, 2024 | (in millions)
Balance, beginning of period | $ | 307 |  |  | $ | 366 |  |  | $ | 47 |  |  | $ | 36 |  |  | $ | 236 |  |  | $ | 992 |
Charge-offs | (308) |  | (462) |  | (8) |  | (4) |  | (156) |  | (938) |
Recoveries | 5 |  | 8 |  | 5 |  | — |  | 28 |  | 46 |
Provision for (recovery of) credit losses on loans and leases | 635 |  | 348 |  | (5) |  | 12 |  | 111 |  | 1,101 |
Balance, end of period | $ | 639 |  |  | $ | 260 |  |  | $ | 39 |  |  | $ | 44 |  |  | $ | 219 |  |  | $ | 1,201 |
Year Ended December 31, 2023 |  |  |  |  |  |  |  |  |  |  |
Balance, beginning of period | $ | 178 |  |  | $ | 47 |  |  | $ | 46 |  |  | $ | 20 |  |  | $ | 102 |  |  | $ | 393 |
Adjustment for Purchased PCD Loans | — |  | — |  | — |  | — |  | 13 |  | 13 |
Charge-offs | (119) |  | (56) |  | (4) |  | — |  | (44) |  | (223) |
Recoveries | — |  | — |  | — |  | — |  | 15 |  | 15 |
Provision for (recovery of) credit losses on loans and leases | 248 |  | 375 |  | 5 |  | 16 |  | 150 |  | 794 |
Balance, end of period | $ | 307 |  |  | $ | 366 |  |  | $ | 47 |  |  | $ | 36 |  |  | $ | 236 |  |  | $ | 992 |
Balance at December 31, 2022 |  |  |  |  |  |  |  |  |  |  |
Balance, beginning of period | $ | 159 |  |  | $ | 17 |  |  | $ | — |  |  | $ | 3 |  |  | $ | 20 |  |  | $ | 199 |
Adjustment for Purchased PCD Loans | 9 |  | 18 |  | 17 |  | 7 |  | — |  | 51 |
Charge-offs | (1) |  | (4) |  | — |  | — |  | (2) |  | (7) |
Recoveries | — |  | 4 |  | — |  | — |  | 7 |  | 11 |
Provision for (recovery of) credit losses on loans and leases | 11 |  | 12 |  | 29 |  | 10 |  | 77 |  | 139 |
Balance, end of period | $ | 178 |  |  | $ | 47 |  |  | $ | 46 |  |  | $ | 20 |  |  | $ | 102 |  |  | $ | 393 |
At December 31, 2024, the allowance for credit losses on loans and leases was $1.2 billion compared to $992 million at December 31, 2023, an increase of $209 million. Interest rates remain persistently high which will put pressure on the ability for certain borrowers with interest rates resetting at current levels to cover debt service. When combined with inflationary pressure on operating costs and limits on the ability to increase rental rates, debt service levels may approach or exceed some properties' net operating income, which increases the risk of loss. We believe that higher interest rates for a longer period of time will have a more significant impact on our loans that will reprice during the reasonable and supportable forecast period. Although the short-term interest rate reduction announced by the Federal Reserve during the third and fourth quarters of 2024 does alleviate some pressure on our borrowers, rates remain high, and uncertainty remains for future potential rate reductions. Therefore, we have incorporated a higher probability of default related to those loans as they approach their scheduled repricing date in the measurement of our allowance for credit losses. Our allowance for credit losses is determined based on quantitative modeling that incorporates and weighs economic forecast scenarios. The key inputs to our quantitative allowance for credit losses models include borrowers' projected debt service based on the most recent financial information available and underlying collateral property values. Property values are particularly meaningful for our multi-family and commercial real estate portfolios. Our models consider the entire life of the loan, including both the interest only period of the loan, if applicable, and the amortization period, to assess the probability of default and the loss given default. For our multi-family portfolio, we obtain and utilize current and projected geography-specific market information in our forecasts. In estimating the qualitative component of our allowance for credit losses, we have adjusted key inputs used by the model on an average basis for certain loans, most notably net operating income and property values, to reflect weaknesses in the underlying data, including the recency of appraisal values, and the lack of significant loss history in available data, particularly for office and multi-family loans and, most notably, rent-regulated multi-family loans. As of December 31, 2024 and December 31, 2023, the allowance for unfunded commitments totaled $50 million and $52 million, respectively. The allowance for credit losses on loans and leases to total loans held for investment ratio increased to 1.76 percent at December 31, 2024, compared to 1.17 percent at December 31, 2023. Excluding loans with government guarantees and warehouse loans, the allowance for credit losses was 1.77 percent at December 31, 2024, compared to 1.26 percent at December 31, 2023. The Company charges-off loans, or portions of loans, in the period that such loans, or portions thereof, are deemed uncollectible. The collectability of individual loans is determined through an assessment of the financial condition and repayment capacity of the borrower and/or through an estimate of the fair value of any underlying collateral. For non-real estate-related consumer credits, the following past-due time periods determine when charge-offs are typically recorded: (1) closed-end credits are charged off in the quarter that the loan becomes 120 days past due; (2) open-end credits are charged off in the quarter that the loan becomes 180 days past due; and (3) both closed-end and open-end credits are typically charged off in the quarter that the credit is 60 days past the date the Company received notification that the borrower has filed for bankruptcy. The following table presents additional information about the Company’s non-accrual loans at December 31, 2024:
(in millions) | Recorded Investment |  | Related Allowance
Non-accrual loans with no related allowance: |  |  |
Multi-family | $ | 1,092 |  |  | $ | — |
Commercial real estate | 418 |  | —
One-to-four family first mortgage | 61 |  | —
Acquisition, development, and construction | 11 |  | —
Other (includes commercial and industrial) | 54 |  | —
Total non-accrual loans with no related allowance | $ | 1,636 |  |  | $ | — |
Non-accrual loans with an allowance recorded: |  |  |
Multi-family | $ | 663 |  |  | $ | 77 |
Commercial real estate | 128 |  | 28
One-to-four family first mortgage | 9 |  | 1
Acquisition, development, and construction | 7 |  | 3
Other (includes commercial and industrial) | 172 |  | 55
Total non-accrual loans with an allowance recorded | $ | 979 |  |  | $ | 164 |
Total non-accrual loans: |  |  |
Multi-family | $ | 1,755 |  |  | $ | 77 |
Commercial real estate | 546 |  | 28
One-to-four family first mortgage | 70 |  | 1
Acquisition, development, and construction | 18 |  | 3
Other (includes commercial and industrial) | 226 |  | 55
Total non-accrual loans | $ | 2,615 |  |  | $ | 164 |
The following table presents additional information about the Company’s non-accrual loans at December 31, 2023:
(in millions) | Recorded Investment |  | Related Allowance
Non-accrual loans with no related allowance: |  |  |
Multi-family | $ | 134 |  |  | $ | — |
Commercial real estate | 53 |  | —
One-to-four family first mortgage | 85 |  | —
Acquisition, development, and construction | — |  | —
Other (includes commercial and industrial) | 22 |  | —
Total non-accrual loans with no related allowance | $ | 294 |  |  | $ | — |
Non-accrual loans with an allowance recorded: |  |  |
Multi-family | $ | 4 |  |  | $ | — |
Commercial real estate | 75 |  |  | 17 |
One-to-four family first mortgage | 11 |  | 2
Acquisition, development, and construction | — |  | —
Other (includes commercial and industrial) | 44 |  | 28
Total non-accrual loans with an allowance recorded | $ | 134 |  |  | $ | 47 |
Total non-accrual loans: |  |  |
Multi-family | $ | 138 |  |  | $ | — |
Commercial real estate | 128 |  | 17
One-to-four family first mortgage | 96 |  | 2
Acquisition, development, and construction | — |  | —
Other (includes commercial and industrial) | 66 |  | 28
Total non-accrual loans | $ | 428 |  |  | $ | 47 |

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