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LOANS AND ALLOWANCE FOR CREDIT LOSSES

9 Months Ended

Sep. 30, 2024

LOANS AND ALLOWANCE FOR CREDIT LOSSES

LOANS AND ALLOWANCE FOR CREDIT LOSSES

NOTE 5 — LOANS AND ALLOWANCE FOR CREDIT LOSSES

Loans, net of deferred costs and fees, consist of the following (in thousands):


		At			At
		September 30,			December 31,
		2024			2023
Real estate
Commercial		$	4,172,690		$	3,857,711
Construction			176,277			153,512
Multi-family			389,124			467,536
One-to four-family			91,582			94,704
Total real estate loans			4,829,673			4,573,463
Commercial and industrial			1,069,676			1,051,463
Consumer			14,162			17,086
Total loans			5,913,511			5,642,012
Deferred fees, net of origination costs			(16,392)			(17,215)
Loans, net of deferred fees and costs			5,897,119			5,624,797
Allowance for credit losses			(62,493)			(57,965)
Net loans		$	5,834,626		$	5,566,832

At September 30, 2024, $3.5 billion of loans were pledged to support wholesale funding, of which $266.2 million were encumbered. At December 31, 2023, $3.3 billion of loans were pledged to support wholesale funding, of which $548.6 million were encumbered.

The following tables present the activity in the ACL for funded loans by segment. The portfolio segments represent the categories that the Company uses to determine its ACL (in thousands):


											Multi-			One-to four-
Three months ended September 30, 2024		CRE			C&I			Construction			family			family			Consumer			Total
Allowance for credit losses:
Beginning balance		$	38,484		$	11,282		$	1,759		$	7,827		$	131		$	525		$	60,008
Provision/(credit) for credit losses			2,965			(338)			(41)			(329)			282			66			2,605
Loans charged-off			—			—			—			—			—			(122)			(122)
Recoveries			—			—			—			—			—			2			2
Total ending allowance balance		$	41,449		$	10,944		$	1,718		$	7,498		$	413		$	471		$	62,493


											Multi-			One-to four-
Three months ended September 30, 2023		CRE			C&I			Construction			family			family			Consumer			Total
Allowance for credit losses:
Beginning balance		$	34,621		$	10,977		$	1,600		$	3,543		$	362		$	547		$	51,650
Provision/(credit) for credit losses			404			119			169			(54)			(11)			150			777
Loans charged-off			—			—			—			—			—			(129)			(129)
Recoveries			—			—			—			—			—			—			—
Total ending allowance balance		$	35,025		$	11,096		$	1,769		$	3,489		$	351		$	568		$	52,298


											Multi-			One-to four-
Nine months ended September 30, 2024		CRE			C&I			Construction			family			family			Consumer			Total
Allowance for credit losses:
Beginning balance		$	35,635		$	11,207		$	1,765		$	8,215		$	663		$	480		$	57,965
Provision/(credit) for credit losses			5,813			(263)			(47)			(717)			(250)			128			4,664
Loans charged-off			—			—			—			—			—			(140)			(140)
Recoveries			1			—			—			—			—			3			4
Total ending allowance balance		$	41,449		$	10,944		$	1,718		$	7,498		$	413		$	471		$	62,493


											Multi-			One-to four-
Nine months ended September 30, 2023		CRE			C&I			Construction			family			family			Consumer			Total
Allowance for credit losses:
Beginning balance		$	29,496		$	10,274		$	1,983		$	2,823		$	105		$	195		$	44,876
Cumulative effect of changes in accounting principle			48			471			424			705			181			421			2,250
Provision/(credit) for credit losses			5,481			351			(638)			(39)			65			225			5,445
Loans charged-off			—			—			—			—			—			(273)			(273)
Recoveries			—			—			—			—			—			—			—
Total ending allowance balance		$	35,025		$	11,096		$	1,769		$	3,489		$	351		$	568		$	52,298

Net charge-offs for the three and nine months ended September 30, 2024 were $120,000 and $136,000, respectively. Net charge-offs for the three and nine months ended September 30, 2023 were $129,000 and $273,000, respectively.

The following tables present the activity in the ACL for unfunded loan commitments (in thousands):


		Three months ended September 30,						Nine months ended September 30,
		2024			2023			2024			2023
Balance at the beginning of period		$	1,188		$	1,240		$	1,181		$	180
Cumulative effect of changes in accounting principle			—			—			—			777
Provision/(credit) for credit losses			86			14			93			297
Total ending allowance balance		$	1,274		$	1,254		$	1,274		$	1,254

The following tables present the recorded investment in non-accrual loans and loans past due 90 days and greater and still accruing, by class of loans (in thousands):


								Loans Past Due
					Non-accrual			90 Days and
					Without an			Greater and
At September 30, 2024		Non-accrual			ACL			Still Accruing
Commercial real estate		$	24,000		$	24,000		$	—
Commercial & industrial			6,989			6,989			—
Total		$	30,989		$	30,989		$	—


								Loans Past Due
					Non-accrual			90 Days and
					Without an			Greater and
At December 31, 2023		Non-accrual			ACL			Still Accruing
Commercial real estate		$	24,000		$	24,000		$	—
Commercial & industrial			6,934			6,934			—
Multi-family			20,939			—			—
Consumer			24			—			—
Total		$	51,897		$	30,934		$	—

Interest income on non-accrual loans recognized on a cash basis for the three and nine months ended September 30, 2024 and 2023 was immaterial.

The following tables present the aging of the recorded investment in past due loans by class of loans (in thousands):


								90
		30-59			60-89			Days and			Total Past			Current
At September 30, 2024		Days			Days			Greater			Due			Loans			Total
Commercial real estate		$	—		$	4,882		$	24,000		$	28,882		$	4,143,808		$	4,172,690
Commercial & industrial			8,697			—			6,989			15,686			1,053,990			1,069,676
Construction			—			—			—			—			176,277			176,277
Multi-family			—			—			—			—			389,124			389,124
One-to four-family			1,100			2,061			—			3,161			88,421			91,582
Consumer			222			2			—			224			13,938			14,162
Total		$	10,019		$	6,945		$	30,989		$	47,953		$	5,865,558		$	5,913,511


								90
		30-59			60-89			Days and			Total Past			Current
At December 31, 2023		Days			Days			Greater			Due			Loans			Total
Commercial real estate		$	—		$	—		$	24,000		$	24,000		$	3,833,711		$	3,857,711
Commercial & industrial			20			18			6,934			6,973			1,044,490			1,051,463
Construction			—			—			—			—			153,512			153,512
Multi-family			—			—			20,939			20,939			446,597			467,536
One-to four-family			612			—			—			612			94,092			94,704
Consumer			—			—			24			24			17,062			17,086
Total		$	632		$	18		$	51,897		$	52,548		$	5,589,464		$	5,642,012

Credit Quality Indicators

The Company aggregates 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, among other factors. Except for one-to four-family loans and consumer loans, the Company analyzes loans individually by classifying the loans as to credit risk ratings at least annually. For one-to four-family loans and consumer loans, the Company evaluates credit quality based on the aging status of the loan. An analysis is performed on a quarterly basis for loans classified as special mention, substandard or doubtful. The Company uses the following definitions for risk ratings. Loans not meeting these definitions are considered to be pass-rated loans.

Special Mention - Loans classified as special mention have a potential weakness that deserves management’s attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the loan or of the Company’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 Company will sustain some loss if the deficiencies are not corrected.

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 loan balances by credit quality indicator and year of origination at September 30, 2024 and charge-offs for the nine months ended September 30, 2024 (in thousands):


																	2019
		2024			2023			2022			2021			2020			& Prior			Revolving			Total
CRE
Pass		$	1,159,644		$	1,218,106		$	1,044,044		$	318,293		$	127,205		$	176,208		$	25,908		$	4,069,408
Special Mention			47,539			—			5,000			14,332			—			12,411			—			79,282
Substandard			—			—			24,000			—			—			—			—			24,000
Total		$	1,207,183		$	1,218,106		$	1,073,044		$	332,625		$	127,205		$	188,619		$	25,908		$	4,172,690

Construction
Pass		$	57,323		$	53,558		$	38,386		$	—		$	—		$	—		$	27,010		$	176,277
Total		$	57,323		$	53,558		$	38,386		$	—		$	—		$	—		$	27,010		$	176,277

Multi-family
Pass		$	101,438		$	47,969		$	74,277		$	60,882		$	23,123		$	26,867		$	3,329		$	337,885
Substandard			—			—			30,300			20,939			—			—			—			51,239
Total		$	101,438		$	47,969		$	104,577		$	81,821		$	23,123		$	26,867		$	3,329		$	389,124

One-to four-family
Current		$	—		$	45,000		$	3,493		$	—		$	9,578		$	30,350		$	—		$	88,421
Past Due			—			—			—			—			—			3,161			—			3,161
Total		$	—		$	45,000		$	3,493		$	—		$	9,578		$	33,511		$	—		$	91,582

C&I
Pass		$	196,924		$	114,913		$	146,239		$	67,353		$	15,931		$	10,441		$	460,563		$	1,012,364
Special Mention			—			—			9,319			—			—			—			1,500			10,819
Substandard			—			7,643			20,968			4,697			—			—			13,185			46,493
Total		$	196,924		$	122,556		$	176,526		$	72,050		$	15,931		$	10,441		$	475,248		$	1,069,676

Consumer
Current		$	—		$	—		$	—		$	—		$	—		$	13,938		$	—		$	13,938
Past due			—			—			—			—			—			224			—			224
Total		$	—		$	—		$	—		$	—		$	—		$	14,162		$	—		$	14,162

Total
Pass/Current		$	1,515,329		$	1,479,546		$	1,306,439		$	446,528		$	175,837		$	257,804		$	516,810		$	5,698,293
Special Mention			47,539			—			14,319			14,332			—			12,411			1,500			90,101
Substandard/Past due			—			7,643			75,268			25,636			—			3,385			13,185			125,117
Total		$	1,562,868		$	1,487,189		$	1,396,026		$	486,496		$	175,837		$	273,600		$	531,495		$	5,913,511

Charge-offs
Consumer		$	—		$	—		$	—		$	—		$	—		$	140		$	—		$	140

At September 30, 2024, there were $51.2 million and $24.0 million of collateral dependent Multi-family and CRE loans classified as substandard, respectively.

The following table presents loan balances by credit quality indicator and year of origination at December 31, 2023 and charge-offs for the year ended December 31, 2023 (in thousands):


																	2018
		2023			2022			2021			2020			2019			& Prior			Revolving			Total
CRE
Pass		$	1,500,873		$	1,268,550		$	512,497		$	128,320		$	200,304		$	83,309		$	44,672		$	3,738,525
Special Mention			24,500			38,867			14,561			304			—			—			—			78,232
Substandard			—			40,954			—			—			—			—			—			40,954
Total		$	1,525,373		$	1,348,371		$	527,058		$	128,624		$	200,304		$	83,309		$	44,672		$	3,857,711

Construction
Pass		$	84,881		$	56,065		$	—		$	—		$	—		$	—		$	12,566		$	153,512
Total		$	84,881		$	56,065		$	—		$	—		$	—		$	—		$	12,566		$	153,512

Multi-family
Pass		$	115,761		$	114,652		$	51,768		$	23,655		$	34,533		$	69,510		$	6,415		$	416,294
Special Mention			—			30,303			—			—			—			—			—			30,303
Substandard			—			—			20,939			—			—			—			—			20,939
Total		$	115,761		$	144,955		$	72,707		$	23,655		$	34,533		$	69,510		$	6,415		$	467,536

One-to four-family
Current		$	45,000		$	4,081		$	—		$	9,784		$	12,157		$	23,682		$	—		$	94,704
Total		$	45,000		$	4,081		$	—		$	9,784		$	12,157		$	23,682		$	—		$	94,704

C&I
Pass		$	178,814		$	252,359		$	98,753		$	23,943		$	14,390		$	5,904		$	402,247		$	976,410
Special Mention			3,840			33,918			—			2,080			—			—			28,281			68,119
Substandard			3,435			—			—			—			—			—			3,499			6,934
Total		$	186,089		$	286,277		$	98,753		$	26,023		$	14,390		$	5,904		$	434,027		$	1,051,463

Consumer
Current		$	—		$	—		$	—		$	—		$	—		$	17,062		$	—		$	17,062
Past due			—			—			—			—			—			24			—			24
Total		$	—		$	—		$	—		$	—		$	—		$	17,086		$	—		$	17,086

Total
Pass/Current		$	1,925,329		$	1,695,707		$	663,018		$	185,702		$	261,384		$	199,467		$	465,900		$	5,396,507
Special Mention			28,340			103,088			14,561			2,384			—			—			28,281			176,654
Substandard/Past due			3,435			40,954			20,939			—			—			24			3,499			68,851
Total		$	1,957,104		$	1,839,749		$	698,518		$	188,086		$	261,384		$	199,491		$	497,680		$	5,642,012

Charge-offs
Commercial and industrial		$	—		$	—		$	915		$	—		$	—		$	31		$	—		$	946
Consumer			—			—			—			—			—			273			—			273
		$	—		$	—		$	915		$	—		$	—		$	304		$	—		$	1,219

At December 31, 2023, there were $41.0 million and $20.9 million of CRE and Multi-family substandard classified collateral dependent loans, respectively.

The following tables show the amortized cost basis of modified loans to borrowers experiencing financial difficulty (in thousands):


		Combination
		Term									Modifications
		Extension and			Interest Rate						as a % of
Three months ended September 30, 2024		Interest Rate			Reduction			Total			Loan Class
Commercial & industrial		$	—		$	—		$	—		—	%
Multi-family			—			—			—		—	%
Total		$	—		$	—		$	—


		Combination
		Term									Modifications
		Extension and			Interest Rate						as a % of
Nine months ended September 30, 2024		Interest Rate			Reduction			Total			Loan Class
Commercial & industrial		$	11,686		$	—		$	11,686		1.1	%
Multi-family			48,224			3,015			51,239		13.2	%
Total		$	59,910		$	3,015		$	62,925

The following table describes the types of modifications made to borrowers experiencing financial difficulty:


				Weighted
				Average
				Interest
		Term		Rate
		Extension		Reduction
Three months ended September 30, 2024
Commercial & industrial		None		None

Nine months ended September 30, 2024
Commercial & industrial		11-12 months		2.9%
Multi-family		6-12 months		4.1%

During the nine months ended September 30, 2024, $11.7 million of modified loans to borrowers experiencing financial difficulty were not in compliance with their modified terms. At September 30, 2024, there were no additional commitments to lend to borrowers experiencing financial difficulty whose loans have been modified. There were no modifications where the borrower was experiencing financial difficulty during the three and nine months ended September 30, 2023.