ALLOWANCE FOR CREDIT LOSSES

6 Months Ended

Jun. 30, 2025

4. ALLOWANCE FOR CREDIT LOSSES

The ACL on loans held for investment is the combination of the allowance for credit losses and the reserve for unfunded loan commitments. The ACL is reported as a reduction of the amortized cost basis of loans, while the reserve for unfunded loan commitments is included within "other liabilities" on the Consolidated Statements of Condition. The estimate of credit loss for unfunded commitments incorporates assumptions for both the likelihood and amount of funding over the estimated life of the commitments, including adjustments for current conditions and reasonable and supportable economic forecasts. Management periodically reviews and updates its assumptions for estimated funding rates. The "Provision for credit losses" on the Consolidated Statements of Income is a combination of the provision for credit losses and the provision for unfunded loan commitments.

The Company does not estimate expected credit losses on accrued interest receivable (“AIR”) on loans, as AIR is reversed or written off when the full collection of the AIR related to a loan becomes doubtful. AIR on loans totaled $29.7 million at June 30, 2025 and $26.2 million at December 31, 2024.

The following tables present the loan balances by segment, and the corresponding balances in the allowance as of June 30, 2025 and December 31, 2024. The allowance was based on the CECL methodology.


	June 30, 2025
			Ending ACL
			Attributable				Ending ACL
	Total		To		Total		Attributable
	Individually		Individually		Loans		To Loans				Total
	Evaluated		Evaluated		Collectively		Collectively		Total		Ending
(In thousands)	Loans		Loans		Evaluated		Evaluated		Loans		ACL
Primary residential mortgage	$	3,295	$	—	$	632,958	$	4,828	$	636,253	$	4,828
Junior lien loan on residence		111		—		54,939		209		55,050		209
Multifamily property		55,978		7,083		1,738,876		11,443		1,794,854		18,526
Owner-occupied commercial real estate		—		—		264,095		3,254		264,095		3,254
Investment commercial real estate		11,621		1,077		990,374		11,449		1,001,995		12,526
Commercial and industrial		42,909		11,920		1,587,917		25,625		1,630,826		37,545
Lease financing		1,044		121		271,986		2,083		273,030		2,204
Construction		—		—		17,928		190		17,928		190
Consumer and other loans		—		—		142,730		2,488		142,730		2,488
Total ACL	$	114,958	$	20,201	$	5,701,803	$	61,569	$	5,816,761	$	81,770


	December 31, 2024
			Ending ACL
			Attributable				Ending ACL
	Total		To		Total		Attributable
	Individually		Individually		Loans		To Loans				Total
	Evaluated		Evaluated		Collectively		Collectively		Total		Ending
(In thousands)	Loans		Loans		Evaluated		Evaluated		Loans		ACL
Primary residential mortgage	$	2,779	$	—	$	606,259	$	4,398	$	609,038	$	4,398
Junior lien loan on residence		92		—		45,215		180		45,307		180
Multifamily property		53,105		5,149		1,746,649		12,504		1,799,754		17,653
Owner-occupied commercial real estate		—		—		275,089		3,208		275,089		3,208
Investment commercial real estate		11,684		735		966,752		10,950		978,436		11,685
Commercial and industrial		30,881		6,678		1,458,585		26,397		1,489,466		33,075
Lease financing		1,234		121		221,263		1,367		222,497		1,488
Construction		—		—		11,204		121		11,204		121
Consumer and other loans		—		—		80,165		1,184		80,165		1,184
Total ACL	$	99,775	$	12,683	$	5,411,181	$	60,309	$	5,510,956	$	72,992

Individually evaluated loans included nonaccrual loans of $115.0 million at June 30, 2025 and $99.8 million at December 31, 2024. Individually evaluated loans did not include any performing modified loans at June 30, 2025. An allowance of $893,000 was allocated to modified loans at June 30, 2025.

The allowance for credit losses was $81.8 million as of June 30, 2025, compared to $73.0 million at December 31, 2024. The increase in the ACL was primarily driven by deterioration in key economic model drivers and an increase in specific reserves for one equipment financing relationship of $5.8 million. The ACL as a percentage of loans was 1.41 percent at June 30, 2025, compared to 1.32 percent at December 31, 2024. The increase in the ratio was primarily due to increases in specific reserves of $5.2 million

and $1.9 million related to C&I and multifamily loans as expected recoveries from operations and collateral values have worsened during the six months ended June 30, 2025.

Under Topic 326, the Company's methodology for determining the ACL on loans is based upon key assumptions, including historic net charge-offs, economic forecasts, reversion periods, prepayments and qualitative adjustments. The allowance is measured on a collective, or pool, basis when similar risk characteristics exist. Loans that do not share common risk characteristics are evaluated on an individual basis and are excluded from the collective evaluation.

The following tables present collateral dependent loans individually evaluated by segment as of June 30, 2025 and December 31, 2024:


	June 30, 2025
							Average
	Unpaid						Individually
	Principal		Recorded		Related		Evaluated
(In thousands)	Balance		Investment		Allowance		Loans
With no related allowance recorded:
Primary residential mortgage (A)	$	3,486	$	3,295	$	—	$	2,838
Junior lien loan on residence (A)		119		111		—		109
Multifamily property (B)		19,692		19,341		—		20,541
Investment commercial real estate (C)		12,500		9,691		—		9,712
Commercial and industrial (A)(C)(D)		17,821		17,731		—		5,875
Lease financing (E)		343		244		—		318
Total loans with no related allowance	$	53,961	$	50,413	$	—	$	39,393
With related allowance recorded:
Multifamily property (B)	$	36,744	$	36,637	$	7,083	$	32,672
Investment commercial real estate (C)		1,930		1,930		1,077		1,930
Commercial and industrial (A)(C)(D)(E)		29,508		25,178		11,920		22,324
Lease financing (E)		849		800		121		800
Total loans with related allowance	$	69,031	$	64,545	$	20,201	$	57,726
Total loans individually evaluated	$	122,992	$	114,958	$	20,201	$	97,119

(A) Secured by residential real estate.

(B) Secured by multifamily residential properties.

(D) Secured by all business assets.

(E) Secured by machinery and equipment.


	December 31, 2024
							Average
	Unpaid						Individually
	Principal		Recorded		Related		Evaluated
(In thousands)	Balance		Investment		Allowance		Loans
With no related allowance recorded:
Primary residential mortgage (A)	$	2,935	$	2,779	$	—	$	1,851
Junior lien loan on residence (A)		97		92		—		101
Multifamily property (B)		15,320		15,295		—		16,968
Investment commercial real estate (C)		12,500		9,754		—		9,810
Commercial and industrial (A)(C)(D)		3,885		2,738		—		3,558
Lease financing (E)		542		434		—		1,363
Total loans with no related allowance	$	35,279	$	31,092	$	—	$	33,651
With related allowance recorded:
Multifamily property (B)	$	37,874	$	37,810	$	5,149	$	17,020
Investment commercial real estate (C)		1,930		1,930		735		1,126
Commercial and industrial (C)(D)(E)		31,145		28,143		6,678		27,962
Lease financing (E)		845		800		121		867
Total loans with related allowance	$	71,794	$	68,683	$	12,683	$	46,975
Total loans individually evaluated for impairment	$	107,073	$	99,775	$	12,683	$	80,626

(A) Secured by residential real estate.

(B) Secured by multifamily residential properties.

(D) Secured by all business assets.

(E) Secured by machinery and equipment.

Interest income recognized on individually evaluated loans for the three and six months ended June 30, 2025 and 2024 was not material. The Company did not recognize any income on non-accruing loans for the three and six months ended June 30, 2025 and 2024.

The activity in the allowance for credit losses for the three months ended June 30, 2025 and June 30, 2024 is summarized below:


	April 1,										June 30,
	2025										2025
	Beginning							Provision			Ending
(In thousands)	ACL		Charge-offs			Recoveries		(Credit) (A)			ACL
Primary residential mortgage	$	4,469	$	—		$	—	$	359		$	4,828
Junior lien loan on residence		195		—			—		14			209
Multifamily property		17,730		—			—		796			18,526
Owner-occupied commercial real estate		3,464		—			—		(210	)		3,254
Investment commercial real estate		11,764		—			—		762			12,526
Commercial and industrial		32,980		—			24		4,541			37,545
Lease financing		1,816		—			—		388			2,204
Construction		158		—			—		32			190
Consumer and other loans		2,574		(20	)		39		(105	)		2,488
Total ACL	$	75,150	$	(20	)	$	63	$	6,577		$	81,770

(A) Provision to roll forward the ACL excludes a provision of $9,000 for off-balance sheet commitments.


	April 1,										June 30,
	2024										2024
	Beginning							Provision			Ending
(In thousands)	ACL		Charge-offs			Recoveries		(Credit) (A)			ACL
Primary residential mortgage	$	4,101	$	—		$	—	$	90		$	4,191
Junior lien loan on residence		178		—			—		9			187
Multifamily property		10,242		(5,379	)		—		7,738			12,601
Owner-occupied commercial real estate		4,906		—			—		(194	)		4,712
Investment commercial real estate		15,126		—			—		(674	)		14,452
Commercial and industrial		28,755		—			5		(192	)		28,568
Lease financing		1,431		—			3,210		(2,951	)		1,690
Construction		597		—			—		58			655
Consumer and other loans		915		(4	)		—		17			928
Total ACL	$	66,251	$	(5,383	)	$	3,215	$	3,901		$	67,984

(A) Provision to roll forward the ACL excludes a provision of $10,000 for off-balance sheet commitments.

The activity in the allowance for the six months ended June 30, 2025 and June 30, 2024 is summarized below:


	January 1,									June 30,
	2025									2025
	Beginning							Provision		Ending
(In thousands)	ACL		Charge-offs			Recoveries		(Credit) (A)		ACL
Primary residential mortgage	$	4,398	$	—		$	—	$	430	$	4,828
Junior lien loan on residence		180		—			—		29		209
Multifamily property		17,653		—			—		873		18,526
Owner-occupied commercial real estate		3,208		—			—		46		3,254
Investment commercial real estate		11,685		—			—		841		12,526
Commercial and industrial		33,075		(2,349	)		48		6,771		37,545
Lease financing		1,488		—			—		716		2,204
Construction		121		—			—		69		190
Consumer and other loans		1,184		(31	)		39		1,296		2,488
Total ACL	$	72,992	$	(2,380	)	$	87	$	11,071	$	81,770

(A) Provision to roll forward the ACL excludes a credit of $14,000 for off-balance sheet commitments.


	January 1,										June 30,
	2024										2024
	Beginning							Provision			Ending
(In thousands)	ACL		Charge-offs			Recoveries		(Credit) (A)			ACL
Primary residential mortgage	$	3,931	$	—		$	—	$	260		$	4,191
Junior lien loan on residence		177		—			—		10			187
Multifamily property		8,782		(5,379	)		—		9,198			12,601
Owner-occupied commercial real estate		4,840		—			—		(128	)		4,712
Investment commercial real estate		15,403		—			—		(951	)		14,452
Commercial and industrial		29,707		(241	)		5		(903	)		28,568
Lease financing		1,663		—			3,210		(3,183	)		1,690
Construction		516		—			—		139			655
Consumer and other loans		869		(17	)		2		74			928
Total ACL	$	65,888	$	(5,637	)	$	3,217	$	4,516		$	67,984

(A) Provision to roll forward the ACL excludes a provision of $22,000 for off-balance sheet commitments.

Allowance for Credit Losses on Off-Balance Sheet Commitments

The following tables present the activity in the ACL for off-balance sheet commitments for the six months ended June 30, 2025 and 2024:


	January 1,
	2025					June 30,
	Beginning		Provision			2025
(In thousands)	ACL		(Credit)			Ending ACL
Off balance sheet commitments	$	691	$	(14	)	$	677
Total ACL	$	691	$	(14	)	$	677


	January 1,
	2024				June 30,
	Beginning		Provision		2024
(In thousands)	ACL		(Credit)		Ending ACL
Off balance sheet commitments	$	687	$	22	$	709
Total ACL	$	687	$	22	$	709