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Loans and Allowance for Credit Losses on Loans

12 Months Ended

Dec. 31, 2023

Loans and Allowance for Credit Losses on Loans

Loans and Allowance for Credit Losses on Loans

Note 5: Loans and Allowance for Credit Losses on Loans

Loan Portfolio Summary

Loans receivable at December 31, 2023 and 2022, include:


	December 31,		December 31,
	2023		2022

	(In thousands)

Mortgage warehouse repurchase agreements	$	752,468	$	464,785
Residential real estate⁽¹⁾		1,324,305		1,178,401
Multi-family financing		4,006,160		3,135,535
Healthcare financing		2,356,689		1,604,341
Commercial and commercial real estate⁽²⁾⁽³⁾		1,643,081		978,661
Agricultural production and real estate		103,150		95,651
Consumer and margin loans		13,700		13,498
		10,199,553		7,470,872
Less:
ACL - Loans		71,752		44,014

Loans Receivable	$	10,127,801	$	7,426,858

(1)

Includes $1.2 billion and $1.1 billion of All-in-One first-lien home equity lines of credit at December 31, 2023 and 2022, respectively.

(2)

Includes $1.1 billion and $497.0 million of revolving lines of credit collateralized primarily by mortgage servicing rights as of December 31, 2023 and 2022, respectively.

(3)

Includes only $8.4 million and $12.8 million of non-owner occupied commercial real estate as of December 31, 2023 and 2022, respectively.

Risk characteristics applicable to each segment of the loan portfolio are described as follows.

Mortgage Warehouse Repurchase Agreements (MTG WHRA): Under its warehouse program, the Company provides warehouse financing arrangements to approved mortgage companies for the origination and sale of residential mortgage loans and to a lesser extent multi-family loans. Agency eligible, governmental and jumbo residential mortgage loans that are secured by mortgages placed on existing one-to-four family dwellings may be originated or purchased and placed on each mortgage warehouse facility.

As a secured repurchase agreement, collateral pledged to the Company secures each individual mortgage until the lender sells the loan in the secondary market. A traditional secured warehouse facility typically carries a base interest rate of the Federal Reserve’s Secured Overnight Financing Rate (“SOFR”), or mortgage note rate and a margin.

Risk is evident if there is a change in the fair value of mortgage loans originated by mortgage bankers in warehouse, the sale of which is the expected source of repayment under a warehouse facility. However, the warehouse customers are required to hedge the change in value of these loans to mitigate the risk, typically through forward sales contracts.

Residential Real Estate Loans (RES RE): Real estate loans are secured by owner-occupied 1-4 family residences. Repayment of residential real estate loans is primarily dependent on the personal income and credit rating of the borrowers. First-lien HELOC mortgages included in this segment typically carried a base rate of 30-day LIBOR, plus a margin. With the sunset of LIBOR, loans have been transitioned to the One-Year Constant Maturity Treasury (“CMT”), plus a margin.

Multi-Family Financing (MF FIN): The Company engages in multi-family financing, including construction loans, specializing in originating and servicing loans for multi-family rental properties. In addition, the Company originates loans secured by an assignment of federal income tax credits by partnerships invested in multi-family real estate projects. Construction and land loans are generally based upon estimates of costs and estimated value of the completed project and include independent appraisal reviews and a financial analysis of the developers and property owners. Sources of repayment of these loans are dependent on the cash flow of the property, and may include permanent loans, sales of developed property or an interim loan commitment from the Company until permanent agency-eligible financing is obtained. Credit risk in these loans may be impacted by the creditworthiness of a borrower, property values and the local economy in the Company’s market area. Repayment of these loans depends on the successful operation of a business or property and the borrower’s cash flows. Loans included in this segment typically carry a base rate of SOFR, that adjusts on a monthly basis, and a margin.

Healthcare Financing (HC FIN): The healthcare financing portfolio includes customized loan products for independent living, assisted living, memory care and skilled nursing projects. A variety of loan products are available to accommodate rehabilitation, acquisition, and refinancing of healthcare properties. Credit risk in these loans are primarily driven by local demographics and the expertise of the operators of the facilities. Repayment of these loans may include permanent loans, sales of developed property or an interim loan commitment from the Company until permanent agency-eligible financing is obtained, as well as successful operation of a business or property and the borrower’s cash flows. Loans included in this segment typically carry a base rate of SOFR, that adjusts on a monthly basis, and a margin.

Commercial Lending and Commercial Real Estate Loans (CML & CRE): The commercial lending and commercial real estate portfolio includes loans to commercial customers for use in financing working capital needs, equipment purchases and expansions, as well as loans to commercial customers to finance land and improvements. It also includes lines of credit collateralized by servicing rights. The loans in this category are repaid primarily from the cash flow of a borrower’s principal business operation. Credit risk in these loans is driven by creditworthiness of a borrower and the economic conditions that impact the cash flow stability from business operations. Small Business Administration (“SBA”) loans are included in this category. Less than 1% of total commercial and commercial real estate loans are made up of non-owner occupied commercial real estate loans. The Company strategically focuses on loan classes that are government backed or can be sold in the secondary market.

Agricultural Production and Real Estate Loans (AG & AGRE): Agricultural production loans are generally comprised of seasonal operating lines of credit to grain farmers to plant and harvest corn and soybeans and term loans to fund the purchase of equipment. The Company also offers long term financing to purchase agricultural real estate. Specific underwriting standards have been established for agricultural-related loans including the establishment of projections for each operating year based on industry-developed estimates of farm input costs and expected commodity yields and prices. Operating lines are typically written for one year and secured by the crop and other farm assets as considered necessary. The Company is approved to sell agricultural loans in the secondary market through the Federal Agricultural Mortgage Corporation and uses this relationship to manage interest rate risk within the portfolio. Agricultural real estate loans included in this segment are typically structured with a one-year adjustable rate mortgage (“ARM”), 3-year ARM or 5-year ARM CMT and a margin. Agriculture production, livestock, and equipment loans are structured with variable rates that are indexed to prime or fixed for terms not exceeding 5 years.

Consumer and Margin Loans (CON & MAR): Consumer loans are those loans secured by household assets. Margin loans are those loans secured by marketable securities. The term and maximum amount for these loans are determined by considering the purpose of the loan, the margin (advance percentage against value) in all collateral, the primary source of repayment, and the borrower’s other related cash flow.

The following table presents, by loan portfolio segment, the activity in the ACL-Loans for the year ended December 31, 2023 and 2022:


	At or For the Year Ended December 31, 2023
	MTG WHRA		RES RE		MF FIN		HC FIN		CML & CRE		AG & AGRE		CON & MAR		TOTAL

	(In thousands)
ACL - Loans
Balance, beginning of period	$	1,249	$	7,029	$	16,781	$	9,882	$	8,326	$	565	$	182	$	44,014
Provision for credit losses		821		328		18,493		12,572		5,232		54		(12)		37,488
Loans charged to the allowance		—		(34)		(8,400)		—		(1,356)		—		(1)		(9,791)
Recoveries of loans previously charged off		—		—		—		—		41		—		—		41
Balance, end of period	$	2,070	$	7,323	$	26,874	$	22,454	$	12,243	$	619	$	169	$	71,752

The Company recorded a total provision for credit losses of $40.2 million for the year ended December 31, 2023. The $40.2 million provision for credit losses consisted of $37.5 million for the ACL-Loans as shown above and $2.7 million for the ACL-OBCEs.


	At or For the Year Ended December 31, 2022
	MTG WHRA		RES RE		MF FIN		HC FIN		CML & CRE		AG & AGRE		CON & MAR		TOTAL

	(In thousands)
ACL - Loans
Balance, beginning of period	$	1,955	$	4,170	$	14,084	$	4,461	$	5,879	$	657	$	138	$	31,344
Impact of adopting CECL		41		275		520		139		(1,277)		(18)		21		(299)
Provision for credit losses		(747)		2,588		2,177		5,282		4,216		(74)		31		13,473
Loans charged to the allowance		—		(4)		—		—		(1,238)		—		(15)		(1,257)
Recoveries of loans previously charged off		—		—		—		—		746		—		7		753
Balance, end of period	$	1,249	$	7,029	$	16,781	$	9,882	$	8,326	$	565	$	182	$	44,014

The Company recorded a total provision for credit losses of $17.3 million for the year ended December 31, 2022. The $17.3 million provision for credit losses consisted of $13.5 million for the ACL-Loans as shown above, $2.6 million for the ACL-OBCEs, and $1.2 million for the ACL-Guarantees, contingent reserve related to the Freddie Mac-sponsored Q-series securitization transaction.

Prior to the adoption of CECL, the Company maintained an allowance for loan losses in accordance with the incurred loss model as disclosed in the Company’s 2021 Annual Report on Form 10-K.

The following tables presents the allowance for loan losses as of December 31, 2021:


	For the Year Ended December 31, 2021
	MTG WHRA		RES RE		MF FIN		HC FIN		CML & CRE		AG & AGRE		CON & MAR		TOTAL

	(In thousands)
Allowance for loan losses
Balance, beginning of year	$	4,018	$	3,334	$	12,140	$	2,591	$	4,641	$	636	$	140	$	27,500
Provision (credit) for loan losses		(2,063)		838		1,944		1,870		2,422		21		(20)		5,012
Loans charged to the allowance		—		(2)		—		—		(1,184)		—		(6)		(1,192)
Recoveries of loans previously charged off		—		—		—		—		—		—		24		24
Balance, end of year	$	1,955	$	4,170	$	14,084	$	4,461	$	5,879	$	657	$	138	$	31,344

The below tables present the amortized cost basis and ACL-Loans allocated for collateral dependent loans, which are individually evaluated to determine expected credit losses as of December 31, 2023 and 2022:


	December 31, 2023
	Real Estate		Accounts Receivable / Equipment		Other		Total		ACL-Loans Allocation

	(In thousands)
RES RE	$	1,557	$	—	$	3	$	1,560	$	21
MF FIN		46,575		—		—		46,575		521
HC FIN		73,909		—		—		73,909		6,289
CML & CRE		146		3,603		2,684		6,433		1,132
AG & AGRE		147		—		—		147		1
CON & MAR		—		—		3		3		—
Total collateral dependent loans	$	122,334	$	3,603	$	2,690	$	128,627	$	7,964

There were no significant changes in the types of collateral securing the Company’s collateral dependent loans compared to December 31, 2022.


	December 31, 2022
	Real Estate		Accounts Receivable / Equipment		Other		Total		ACL-Loans Allocation

	(In thousands)
RES RE	$	237	$	—	$	9	$	246	$	31
MF FIN		36,760		—		—		36,760		173
HC FIN		21,783		—		—		21,783		134
CML & CRE		—		4,917		966		5,883		842
AG & AGRE		147		—		—		147		1
CON & MAR		—		—		6		6		—
Total collateral dependent loans	$	58,927	$	4,917	$	981	$	64,825	$	1,181

Internal Risk Categories

The Company evaluates the loan risk grading system definitions and ACL-Loans methodology on an ongoing basis. As of December 31, 2023, the Company created a newly defined special mention risk rating category to be consistent with industry practices. Loans with a Watch classification are now included in the Pass risk rating category as of December 31, 2023. This updated policy was approved by the Company’s Asset-Liability Committee (“ALCO”), to be effective as of December 31, 2023 on a prospective basis.

In adherence with policy, the Company uses the following internal risk grading categories and definitions for loans as of December 31, 2023:

Pass - Loans that are considered to be of acceptable credit quality, and not classified as Special Mention, Substandard or Doubtful. Also included are loans classified as watch loans, which represent loans that remain sound and collectible but contain elevated risk that requires management’s attention.

Special Mention – Loans classified as special mention have potential weaknesses that deserve management’s close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the asset or in the institution’s credit position at some future date. Special mention loans are not adversely classified and do not warrant adverse classification. Loans with questions or concerns regarding collateral, adverse market conditions impacting future performance, and declining financial trends would be considered for special mention.

Substandard - Loans classified as substandard are inadequately protected by the current net worth and paying capacity of the borrower or of the collateral pledged, if any. Loans so classified must 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. When a loan in the form of a line of credit is downgraded to substandard, future draws under the line of credit require the approval of an officer of Senior Credit Officer or above.

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 following table presents the credit risk profile of the Company’s loan portfolio based on internal risk rating categories as of December 31, 2023:


	December 31, 2023
	2023		2022		2021		2020		2019		Prior		Revolving Loans		TOTAL

	(In thousands)
MTG WHRA
Pass	$	—	$	—	$	—	$	—	$	—	$	—	$	752,468	$	752,468
Total	$	—	$	—	$	—	$	—	$	—	$	—	$	752,468	$	752,468
Charge-offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
RES RE
Pass		31,011		10,086		6,573		22,725		3,298		9,340		1,239,161		1,322,194
Special Mention		—		—		—		—		59		492		—		551
Substandard		—		—		—		—		—		288		1,272		1,560
Total	$	31,011	$	10,086	$	6,573	$	22,725	$	3,357	$	10,120	$	1,240,433	$	1,324,305
Charge-offs	$	—	$	—	$	—	$	—	$	—	$	21	$	13	$	34
MF FIN
Pass		1,094,698		762,448		208,343		77,340		29,764		8,455		1,646,445		3,827,493
Special Mention		94,973		3,189		8,400		—		—		1,477		24,052		132,091
Substandard		11,682		28,360		6,534		—		—		—		—		46,576
Total	$	1,201,353	$	793,997	$	223,277	$	77,340	$	29,764	$	9,932	$	1,670,497	$	4,006,160
Charge-offs	$	—	$	8,400	$	—	$	—	$	—	$	—	$	—	$	8,400
HC FIN
Pass		752,591		996,273		110,197		—		14,563		—		351,110		2,224,734
Special Mention		35,869		9,520		—		—		—		—		12,658		58,047
Substandard		25,600		10,625		28,783		—		—		—		8,900		73,908
Total	$	814,060	$	1,016,418	$	138,980	$	—	$	14,563	$	—	$	372,668	$	2,356,689
Charge-offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
CML & CRE
Pass		51,110		119,386		77,316		21,154		21,088		17,066		1,328,980		1,636,100
Special Mention		—		—		292		172		—		84		—		548
Substandard		—		70		1,701		878		62		—		3,672		6,383
Doubtful		—		—		—		—		—		50		—		50
Total	$	51,110	$	119,456	$	79,309	$	22,204	$	21,150	$	17,200	$	1,332,652	$	1,643,081
Charge-offs	$	—	$	496	$	274	$	586	$	—	$	—	$	—	$	1,356
AG & AGRE
Pass		16,850		9,825		6,490		14,267		5,237		16,606		33,728		103,003
Special Mention		—		—		—		—		—		—		—		—
Substandard		—		—		—		—		—		147		—		147
Total	$	16,850	$	9,825	$	6,490	$	14,267	$	5,237	$	16,753	$	33,728	$	103,150
Charge-offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
CON & MAR
Pass		748		4,329		247		115		27		4,339		3,862		13,667
Special Mention		—		—		—		15		15		—		—		30
Substandard		—		—		—		—		—		3		—		3
Total	$	748	$	4,329	$	247	$	130	$	42	$	4,342	$	3,862	$	13,700
Charge-offs	$	—	$	—	$	—	$	—	$	—	$	1	$	—	$	1

Total Pass	$	1,947,008	$	1,902,347	$	409,166	$	135,601	$	73,977	$	55,806	$	5,355,754	$	9,879,659
Total Special Mention	$	130,842	$	12,709	$	8,692	$	187	$	74	$	2,053	$	36,710	$	191,267
Total Substandard	$	37,282	$	39,055	$	37,018	$	878	$	62	$	438	$	13,844	$	128,577
Total Doubtful	$	—	$	—	$	—	$	—	$	—	$	50	$	—	$	50
Total Loans	$	2,115,132	$	1,954,111	$	454,876	$	136,666	$	74,113	$	58,347	$	5,406,308	$	10,199,553
Total Charge-offs	$	—	$	8,896	$	274	$	586	$	—	$	22	$	13	$	9,791

The Company did not have any material revolving loans converted to term loans at December 31, 2023.

Prior to the updated policy described above, the Company used the following internal risk grading categories and definitions for loans as of December 31, 2022:

Pass – Loans that are considered to be of acceptable credit quality, and not classified as Special Mention, Substandard or Doubtful.

Special Mention (Watch) – This is a loan that is sound and collectable but contains potential risk. 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.

The following table presents the credit risk profile of the Company’s loan portfolio based on internal risk rating categories as of December 31, 2022:


	December 31, 2022
	2022		2021		2020		2019		2018		Prior		Revolving Loans		TOTAL

	(In thousands)
MTG WHRA
Pass		—		—		—		—		—		—		464,785		464,785
Total	$	—	$	—	$	—	$	—	$	—	$	—	$	464,785	$	464,785
RES RE
Pass		13,344		8,192		24,708		3,498		1,722		11,166		1,114,705		1,177,335
Special Mention (Watch)		—		—		—		61		—		668		91		820
Substandard		—		—		—		—		74		172		—		246
Total	$	13,344	$	8,192	$	24,708	$	3,559	$	1,796	$	12,006	$	1,114,796	$	1,178,401
MF FIN
Pass		1,212,008		544,823		200,829		32,349		4,416		7,229		1,042,024		3,043,678
Special Mention (Watch)		32,919		—		8,000		—		—		—		14,178		55,097
Substandard		36,760		—		—		—		—		—		—		36,760
Total	$	1,281,687	$	544,823	$	208,829	$	32,349	$	4,416	$	7,229	$	1,056,202	$	3,135,535
HC FIN
Pass		987,676		301,103		78,792		13,770		—		—		123,888		1,505,229
Special Mention (Watch)		52,022		25,307		—		—		—		—		—		77,329
Substandard		—		21,783		—		—		—		—		—		21,783
Total	$	1,039,698	$	348,193	$	78,792	$	13,770	$	—	$	—	$	123,888	$	1,604,341
CML & CRE
Pass		123,757		86,282		23,803		24,730		12,335		8,765		690,114		969,786
Special Mention (Watch)		43		164		963		119		99		228		1,376		2,992
Substandard		—		2,017		591		72		—		666		2,537		5,883
Total	$	123,800	$	88,463	$	25,357	$	24,921	$	12,434	$	9,659	$	694,027	$	978,661
AG & AGRE
Pass		12,112		7,485		15,660		5,808		3,137		20,176		29,566		93,944
Special Mention (Watch)		14		55		462		421		163		389		56		1,560
Substandard		—		—		—		—		—		147		—		147
Total	$	12,126	$	7,540	$	16,122	$	6,229	$	3,300	$	20,712	$	29,622	$	95,651
CON & MAR
Pass		4,673		463		307		101		4,589		9		3,328		13,470
Special Mention (Watch)		—		—		20		—		—		2		—		22
Substandard		—		—		—		—		—		6		—		6
Total	$	4,673	$	463	$	327	$	101	$	4,589	$	17	$	3,328	$	13,498

Total Pass	$	2,353,570	$	948,348	$	344,099	$	80,256	$	26,199	$	47,345	$	3,468,410	$	7,268,227
Total Special Mention (Watch)	$	84,998	$	25,526	$	9,445	$	601	$	262	$	1,287	$	15,701	$	137,820
Total Substandard	$	36,760	$	23,800	$	591	$	72	$	74	$	991	$	2,537	$	64,825
Total Loans	$	2,475,328	$	997,674	$	354,135	$	80,929	$	26,535	$	49,623	$	3,486,648	$	7,470,872

Delinquent Loans

The following tables present the Company’s loan portfolio aging analysis of the recorded investment in loans as of December 31, 2023 and 2022.


	December 31, 2023
	30-59 Days		60-89 Days		Greater Than		Total				Total
	Past Due		Past Due		90 Days		Past Due		Current		Loans

	(In thousands)
MTG WHRA	$	—	$	—	$	—	$	—	$	752,468	$	752,468
RES RE		4,557		—		2,379		6,936		1,317,369		1,324,305
MF FIN		38,218		11,055		39,609		88,882		3,917,278		4,006,160
HC FIN		—		47,275		35,999		83,274		2,273,415		2,356,689
CML & CRE		172		393		3,665		4,230		1,638,851		1,643,081
AG & AGRE		27		11		147		185		102,965		103,150
CON & MAR		1		3		18		22		13,678		13,700
	$	42,975	$	58,737	$	81,817	$	183,529	$	10,016,024	$	10,199,553


	December 31, 2022
	30-59 Days		60-89 Days		Greater Than		Total				Total
	Past Due		Past Due		90 Days		Past Due		Current		Loans

	(In thousands)
MTG WHRA	$	—	$	—	$	—	$	—	$	464,785	$	464,785
RES RE		4,053		152		272		4,477		1,173,924		1,178,401
MF FIN		—		—		—		—		3,135,535		3,135,535
HC FIN		—		—		21,783		21,783		1,582,558		1,604,341
CML & CRE		4,759		—		3,778		8,537		970,124		978,661
AG & AGRE		4,903		—		—		4,903		90,748		95,651
CON & MAR		6		24		22		52		13,446		13,498
	$	13,721	$	176	$	25,855	$	39,752	$	7,431,120	$	7,470,872

The above tables do not include one delinquent loan that was classified as held for sale at December 31, 2023, totaling $16.5 million.

Nonperforming Loans

Nonaccrual loans, including modified loans to borrowers experiencing financial difficulty that have not met the six-month minimum performance criterion, are reported as nonperforming loans. For all loan classes, it is the Company’s policy to have any modified loans which are on nonaccrual status prior to being modified remain on nonaccrual status until six months of satisfactory borrower performance, at which time management would consider its return to accrual status. A loan is generally classified as nonaccrual when the Company believes that receipt of principal and interest is doubtful under the terms of the loan agreement. Most generally, this is at 90 or more days past due. The amount of interest income recognized on nonaccrual financial assets during the year ended December 31, 2023 was inconsequential.

The following table presents the Company’s nonaccrual loans and loans past due 90 days or more and still accruing at December 31, 2023 and 2022.


	December 31,				December 31,
	2023				2022
			Total Loans >				Total Loans >
			90 Days &				90 Days &
	Nonaccrual		Accruing		Nonaccrual		Accruing

	(In thousands)
RES RE	$	1,486	$	894	$	245	$	96
MF FIN		39,608		—		—		—
HC FIN		28,783		7,216		21,783		—
CML & CRE		3,820		43		4,390		—
AG & AGRE		147		—		147		—
CON & MAR		3		15		6		16
	$	73,847	$	8,168	$	26,571	$	112

The Company did not have any nonperforming loans without an estimated ACL at December 31, 2023.

Modifications to Borrowers Experiencing Financial Difficulty

On January 1, 2023, the Company adopted FASB Accounting Standards Update (“ASU”) No. 2022-02, Financial Instruments – Credit Losses (Topic 326) Troubled Debt Restructurings and Vintage Disclosures, which eliminates the recognition and measurement of a troubled debt restructuring (“TDR”). The Company adopted the prospective approach for this new guidance.

Occasionally, the Company modifies loans to borrowers in financial distress by providing principal forgiveness, term extension, an other-than-insignificant payment delay or interest rate reduction. In some cases, the Company provides multiple types of concessions on one loan. Typically, one type of concession, such as a term extension, is granted initially. If the borrower continues to experience financial difficulty, another concession, such as principal forgiveness, may be granted. For the loans included in the “combination” columns below, multiple types of modifications have been made on the same loan within the current reporting period.

The following table presents the amortized cost basis of loans at December 31, 2023 that were both experiencing financial difficulty and modified during the year ended December 31, 2023, by class and by type of modification. There were no new loans modified for borrowers experiencing financial difficulty during the year ended December 31, 2023. The percentage of the amortized cost basis of loans that were modified to borrowers in financial distress as compared to the amortized cost basis of each class of financing receivable is also presented below:


	December 31, 2023
	Principal Forgiveness		Payment Delay		Term Extension		Interest Rate Reduction		Combination Term Extension and Principal Forgiveness		Combination Term Extension Interest Rate Reduction		Total Class of Financing Receivable

	(In thousands)

Commercial and commercial real estate	$	—	$	3,553	$	—	$	—	$	—	$	—		N/M	%
Total	$	—	$	3,553	$	—	$	—	$	—	$	—		N/M	%

The financial effects of the modifications in the table above include an increase in the weighted average term for commercial and commercial real estate loans of twelve months. As part of our ACL analysis, these loans were individually evaluated for impairment and no specific reserve was recorded. The Company has committed to lend no additional amounts to the borrowers included in the table above.

The Company closely monitors the performance of loans that are modified to borrowers experiencing financial difficulty to understand the effectiveness of its modification efforts. The following table presents the performance of such loans that have been modified in the last twelve months:


	30 - 59 Days		60 - 89 Days		Greater Than		Total
	Past Due		Past Due		90 Days		Past Due

	(In thousands)

Commercial and commercial real estate	$	—	$	—	$	3,553	$	3,553
Total	$	—	$	—	$	3,553	$	3,553

Foreclosures

There were no residential loans in process of foreclosures as of December 31, 2023 and 2022.

Significant Loan Sales

Freddie Mac Q Series Securitization – 2023 Activity

On August 31, 2023, the Company completed a $303.6 million securitization of 11 multi-family mortgage loans through a Freddie Mac-sponsored Q-Series transaction. The transfer of these loans was accounted for as a sale for financial reporting purposes, in accordance with ASC 860, and a $60,000 loss on sale was recognized. The Company was retained as the mortgage sub-servicer for Freddie Mac on the entire $303.6 million pool of loans. Beyond sub-servicing the loans, the Company’s ongoing involvement in this transaction is limited to customary obligations of loan sales, including any material breach in representation. In connection with this transaction, a mortgage servicing right of $1.5 million was established.

Loan Sale and Securitization - 2022 Activity

On September 22, 2022, the Company completed a private securitization by which a $1.2 billion portfolio of originated multi-family bridge loans was sold into a real estate mortgage investment conduit (“REMIC”) and ultimately sold to investors as securities. The Company purchased the senior security for a total of $1.0 billion and classified it as a held to maturity security at September 30, 2022. An unaffiliated, third-party institutional investor purchased the remaining subordinate interests and maintains the first-loss position on 13.4% of the losses in the loan portfolio. This transaction provided the Company an avenue to enhance capital efficiency and minimize credit risk on the balance sheet.

As part of the securitization transaction, the Company will be both Master Servicer and Special Servicer of the loans. As Master Servicer and Special Servicer, the Company will have obligations to collect and remit payments of principal and interest, manage payments of taxes and insurance, and otherwise administer the underlying loans.

Beyond servicing the loans, the Company’s ongoing involvement in this transaction is limited to customary obligations of loan sales, including any material breach in representation. In connection with the securitization, the Company received proceeds and accrued interest on loans, net of the acquired securities, of $150.6 million. No allowance for credit losses was recognized in connection with purchase of the security, in accordance with ASC 326. However, the $4.0 million allowance for credit losses associated with the loans sold was released through the provision for credit losses.

The transfer of these loans was accounted for as a sale for financial reporting purposes, in accordance with ASC 860, and a $525,000 net loss on sale was recognized. The net loss on sale included a $5.4 million pricing loss and $4.9 million in transaction expenses partially offset by a $6.7 million positive impact of capitalizing servicing rights associated with this transaction and a $3.2 million recognition of net deferred fee income on loans sold.

Freddie Mac Q Series Securitization - 2022 Activity

May 2022

On May 5, 2022, the Company entered into an arrangement through a third-party trust and Freddie Mac, by which a $214.0 million portfolio of multi-family loans were sold to the trust and ultimately securitized through Freddie Mac and sold to investors. The Company did not purchase any of the securities. The transfer of these loans was accounted for as a sale for financial reporting purposes, in accordance with ASC 860, and a $2.3 million net gain on sale was recognized, which included establishing a contingent and noncontingent reserve and servicing rights associated with this transaction.

The Company’s ongoing involvement in this transaction is limited to customary obligations of loan sales, including any material breach in representation. In connection with the securitization, the Company also entered into a reimbursement agreement for a first loss position in the underlying loan portfolio, not to exceed 12% of the unpaid principal amount of the loans comprising the securitization pool at settlement, or approximately $25.7 million. A contingent reserve of $1.2 million for estimated losses was established with respect to the first loss obligation on May 5, 2022, which was included in provision for credit losses on the consolidated statement of income and other liabilities on the consolidated balance sheet. A noncontingent reserve of $2.5 million related to the Company’s reimbursement obligation was included in other liabilities on the consolidated balance sheet and offset through gain on sale in the consolidated statement of income. The Company was also required to hold collateral against the reimbursement agreement. Accordingly, $27.0 million of U.S. Treasury securities were acquired as part of the transaction.

As part of the securitization transaction, the Company released all mortgage servicing obligations and rights to Freddie Mac, who was designated as the Master Servicer. Freddie Mac appointed the Company with sub-servicing obligations, which include obligations to collect and remit payments of principal and interest, manage payments of taxes and insurance, and otherwise administer the underlying loans. Accordingly, the Company recognized a mortgage servicing asset of $1.2 million on the sale date.

November 2022

On November 3, 2022, the Company completed a $284.2 million securitization of 16 multi-family mortgage loans through a Freddie Mac-sponsored Q-Series transaction. The Company did not purchase any of the securities as part of this transaction. The transfer of these loans was accounted for as a sale for financial reporting purposes, in accordance with ASC 860, and a $121,000 gain on sale was recognized, which included establishing servicing rights associated with this transaction.

The Company was retained as the mortgage sub-servicer for Freddie Mac on the entire $284.2 million pool of loans. Beyond sub-servicing the loans, the Company’s ongoing involvement in this transaction is limited to customary obligations of loan sales, including any material breach in representation. In connection with the transaction a mortgage servicing right of $1.3 million was established.

Loans Purchased

The Company purchased $358.5 million and $551.1 million of loans during the years ended December 31, 2023 and 2022, respectively.