LOANS AND ALLOWANCE FOR CREDIT LOSSES

6 Months Ended

Jun. 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
	June 30,		December 31,
	2024		2023
Real estate
Commercial	$	4,056,013	$	3,857,711
Construction		146,596		153,512
Multi-family		440,124		467,536
One-to four-family		92,431		94,704
Total real estate loans		4,735,164		4,573,463
Commercial and industrial		1,105,294		1,051,463
Consumer		15,074		17,086
Total loans		5,855,532		5,642,012
Deferred fees, net of origination costs		(16,640)		(17,215)
Loans, net of deferred fees and costs		5,838,892		5,624,797
Allowance for credit losses		(60,008)		(57,965)
Net loans	$	5,778,884	$	5,566,832

Included in C&I loans at June 30, 2024 and December 31, 2023 were $38,000 and $54,000, respectively, of PPP loans. At June 30, 2024, $3.7 billion of loans were pledged to support wholesale funding, of which $264.3 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 June 30, 2024	CRE		C&I		Construction		family		family		Consumer		Total
Allowance for credit losses:
Beginning balance	$	36,704	$	10,937	$	1,712	$	8,171	$	521	$	493	$	58,538
Provision/(credit) for credit losses		1,780		345		47		(344)		(390)		48		1,486
Loans charged-off		—		—		—		—		—		(16)		(16)
Recoveries		—		—		—		—		—		—		—
Total ending allowance balance	$	38,484	$	11,282	$	1,759	$	7,827	$	131	$	525	$	60,008

							Multi-		One-to four-
Three months ended June 30, 2023	CRE		C&I		Construction		family		family		Consumer		Total
Allowance for credit losses:
Beginning balance	$	31,836	$	10,757	$	1,261	$	2,871	$	407	$	620	$	47,752
Provision/(credit) for credit losses		2,785		220		339		672		(45)		(29)		3,942
Loans charged-off		—		—		—		—		—		(44)		(44)
Recoveries		—		—		—		—		—		—		—
Total ending allowance balance	$	34,621	$	10,977	$	1,600	$	3,543	$	362	$	547	$	51,650

							Multi-		One-to four-
Six months ended June 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		2,848		75		(6)		(388)		(532)		62		2,059
Loans charged-off		—		—		—		—		—		(18)		(18)
Recoveries		1		—		—		—		—		1		2
Total ending allowance balance	$	38,484	$	11,282	$	1,759	$	7,827	$	131	$	525	$	60,008

							Multi-		One-to four-
Six months ended June 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		5,077		232		(807)		15		76		74		4,667
Loans charged-off		—		—		—		—		—		(143)		(143)
Recoveries		—		—		—		—		—		—		—
Total ending allowance balance	$	34,621	$	10,977	$	1,600	$	3,543	$	362	$	547	$	51,650

Net charge-offs for the three and six months ended June 30, 2024 were $16,000. Net charge-offs for the three and six months ended June 30, 2023 were $44,000 and $143,000, respectively.

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

	Three months ended June 30,				Six months ended June 30,
	2024		2023		2024		2023
Balance at the beginning of period	$	1,136	$	877	$	1,181	$	180
Cumulative effect of changes in accounting principle		—		—		—		777
Provision/(credit) for credit losses		52		363		7		283
Total ending allowance balance	$	1,188	$	1,240	$	1,188	$	1,240

The following tables present the balance in the ACL and the recorded investment in loans by portfolio segment based on allowance measurement methodology (in thousands):

									One-to four-
At June 30, 2024	CRE		C&I		Construction		Multi-family		family		Consumer		Total
Allowance for credit losses:
Individually assessed	$	—	$	2,800	$	—	$	5,002	$	—	$	206	$	8,008
Collectively assessed		38,484		8,482		1,759		2,825		131		319		52,000
Total ending allowance balance	$	38,484	$	11,282	$	1,759	$	7,827	$	131	$	525	$	60,008
Loans:
Individually assessed	$	24,000	$	45,644	$	—	$	51,239	$	—	$	388	$	121,271
Collectively assessed		4,032,013		1,059,650		146,596		388,885		92,431		14,686		5,734,261
Total ending loan balance	$	4,056,013	$	1,105,294	$	146,596	$	440,124	$	92,431	$	15,074	$	5,855,532

									One-to four-
At December 31, 2023	CRE		C&I		Construction		Multi-family		family		Consumer		Total
Allowance for credit losses:
Individually assessed	$	—	$	—	$	—	$	5,002	$	—	$	64	$	5,066
Collectively assessed		35,635		11,207		1,765		3,213		663		416		52,899
Total ending allowance balance	$	35,635	$	11,207	$	1,765	$	8,215	$	663	$	480	$	57,965
Loans:
Individually assessed	$	40,955	$	6,934	$	—	$	20,939	$	—	$	104	$	68,932
Collectively assessed		3,816,756		1,044,529		153,512		446,597		94,704		16,982		5,573,080
Total ending loan balance	$	3,857,711	$	1,051,463	$	153,512	$	467,536	$	94,704	$	17,086	$	5,642,012

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 June 30, 2024	Non-accrual		ACL		Still Accruing
Commercial real estate	$	24,000	$	24,000	$	—
Commercial & industrial		6,989		6,989		—
Consumer		—		—		108
Total	$	30,989	$	30,989	$	108

					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 six months ended June 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 June 30, 2024	Days		Days		Greater		Due		Loans		Total
Commercial real estate	$	4,893	$	—	$	24,000	$	28,893	$	4,027,120	$	4,056,013
Commercial & industrial		9		—		6,989		6,998		1,098,296		1,105,294
Construction		—		—		—		—		146,596		146,596
Multi-family		—		—		—		—		440,124		440,124
One-to four-family		2,071		605		—		2,676		89,755		92,431
Consumer		216		64		108		388		14,686		15,074
Total	$	7,189	$	669	$	31,097	$	38,955	$	5,816,577	$	5,855,532

					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 June 30, 2024 and charge-offs for the six months ended June 30, 2024 (in thousands):

											2019
	2024		2023		2022		2021		2020		& Prior		Revolving		Total
CRE
Pass	$	778,621	$	1,279,002	$	1,144,603	$	380,807	$	128,203	$	203,136	$	27,156	$	3,941,528
Special Mention		—		24,500		38,785		14,408		294		12,498		—		90,485
Substandard		—		—		24,000		—		—		—		—		24,000
Total	$	778,621	$	1,303,502	$	1,207,388	$	395,215	$	128,497	$	215,634	$	27,156	$	4,056,013
Construction
Pass	$	45,227	$	45,221	$	32,701	$	—	$	—	$	—	$	23,447	$	146,596
Total	$	45,227	$	45,221	$	32,701	$	—	$	—	$	—	$	23,447	$	146,596
Multi-family
Pass	$	105,362	$	83,324	$	74,430	$	61,207	$	23,424	$	37,863	$	3,275	$	388,885
Substandard		—		—		30,300		20,939		—		—		—		51,239
Total	$	105,362	$	83,324	$	104,730	$	82,146	$	23,424	$	37,863	$	3,275	$	440,124
One-to four-family
Current	$	—	$	45,000	$	3,619	$	—	$	9,646	$	34,166	$	—	$	92,431
Total	$	—	$	45,000	$	3,619	$	—	$	9,646	$	34,166	$	—	$	92,431
C&I
Pass	$	145,914	$	116,860	$	201,757	$	79,865	$	19,999	$	14,270	$	445,731	$	1,024,396
Special Mention		—		—		19,754		—		—		—		15,500		35,254
Substandard		—		7,644		20,968		4,747		—		—		12,285		45,644
Total	$	145,914	$	124,504	$	242,479	$	84,612	$	19,999	$	14,270	$	473,516	$	1,105,294
Consumer
Current	$	—	$	—	$	—	$	—	$	—	$	14,686	$	—	$	14,686
Past due		—		—		—		—		—		388		—		388
Total	$	—	$	—	$	—	$	—	$	—	$	15,074	$	—	$	15,074
Total
Pass/Current	$	1,075,124	$	1,569,407	$	1,457,110	$	521,879	$	181,272	$	304,121	$	499,609	$	5,608,522
Special Mention		—		24,500		58,539		14,408		294		12,498		15,500		125,739
Substandard/Past due		—		7,644		75,268		25,686		—		388		12,285		121,271
Total	$	1,075,124	$	1,601,551	$	1,590,917	$	561,973	$	181,566	$	317,007	$	527,394	$	5,855,532
Charge-offs
Consumer	$	—	$	—	$	—	$	—	$	—	$	18	$	—	$	18

At June 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 June 30, 2024	Interest Rate		Reduction		Total		Loan Class
Commercial & industrial	$	4,747	$	—	$	4,747	0.4	%
Multi-family		48,224		3,015		51,239	11.6	%
Total	$	52,971	$	3,015	$	55,986
	Combination
	Term						Modifications
	Extension and		Interest Rate				as a % of
Six months ended June 30, 2024	Interest Rate		Reduction		Total		Loan Class
Commercial & industrial	$	11,736	$	—	$	11,736	1.1	%
Multi-family		48,224		3,015		51,239	11.6	%
Total	$	59,960	$	3,015	$	62,975

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

		Weighted
		Average
		Interest
	Term	Rate
	Extension	Reduction
Three months ended June 30, 2024
Commercial & industrial	11-12 months	3.8%
Six months ended June 30, 2024
Commercial & industrial	11-12 months	2.9%
Multi-family	6-12 months	4.1%

All loans to borrowers experiencing financial difficulty that have been modified during the three and six months ended June 30, 2024, were in compliance with their modified terms. At June 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 six months ended June 30, 2023.