SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies)

9 Months Ended

Sep. 30, 2024

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Subsequent Events

Subsequent Events—The Company has evaluated the effects of all events that have occurred subsequent to September 30, 2024 and before the date of this filing. The Company has made certain disclosures in the notes to the condensed consolidated financial statements of events that have occurred subsequent to September 30, 2024. There have been no other material subsequent events that would require recognition in the condensed consolidated financial statements.

Use of Estimates

Use of Estimates—The preparation of condensed consolidated financial statements in accordance with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, and expenses, including the allowance for risk-sharing obligations, initial and recurring fair value assessments of capitalized mortgage servicing rights, the initial fair value assessment of  goodwill, the periodic assessment of impairment of goodwill, initial fair value estimate of other intangible assets, and the initial and recurring fair value assessments of contingent consideration liabilities. Actual results may vary from these estimates.

Provision (Benefit) for Credit Losses

Provision (Benefit) for Credit Losses—The Company records the income statement impact of the changes in the allowance for loan losses, the allowance for risk-sharing obligations, and other credit losses within Provision (benefit) for credit losses in the Condensed Consolidated Statements of Income. NOTE 4 contains additional discussion related to the allowance for risk-sharing obligations. The Company has credit risk exclusively on loans secured by multifamily real estate, with no exposure to any other sector of commercial real estate, including office, retail, industrial and hospitality.

	For the three months ended				For the nine months ended
	September 30,				September 30,
Components of Provision (Benefit) for Credit Losses (in thousands)	2024		2023		2024		2023
Provision (benefit) for loan losses	$	—	$	(134)	$	(16)	$	4
Provision (benefit) for risk-sharing obligations		(150)		555		(1,274)		(11,092)
Provision (benefit) for other credit losses		3,000		—		7,600		—
Provision (benefit) for credit losses	$	2,850	$	421	$	6,310	$	(11,088)

Agency Loan Repurchases

Agency Loan Repurchases—The Company is obligated to repurchase loans that are originated for the GSEs or HUD (collectively, the “Agencies”) programs if certain representations and warranties that it provides in connection with the sale of the loans through these programs are or may have been breached. When the Company repurchases a loan from the Agencies, the loan is included as a component of Other assets on the Condensed Consolidated Balance Sheets and any related credit loss is included within Provision (benefit) for credit losses in the Condensed Consolidated Statements of Income.

Fannie Mae—During the first quarter of 2024, the Company repurchased a $17.9 million Fannie Mae loan, which consisted of a $4.4 million advance previously made to Fannie Mae in 2023 and a $13.5 million cash payment during the three months ended March 31, 2024. As of September 30, 2024, the Company had an immaterial allowance for credit loss related to this loan, as the Company expects to liquidate the underlying collateral for an amount slightly less than the Company’s cost basis in the loan. During the fourth quarter of 2024, the Company received repurchase demand letters from Fannie Mae for two additional loans with a total unpaid principal balance (“UPB”) of $25.6 million. The Company previously recorded collateral-based reserves for these two loans prior to receiving the repurchase demand letters that as of September 30, 2024, totaled $2.0 million.

Freddie Mac—The Company received repurchase requests from Freddie Mac related to two loans with UPBs of $11.4 million (“First loan”) and $34.8 million (“Second loan”). In March 2024, the Company entered into a forbearance and indemnification agreement with Freddie Mac that among other things delayed the repurchase of these loans for six and 12 months for the First and Second loans, respectively, and transferred the risk of loss for both loans from Freddie Mac to the Company. During the third quarter of 2024, the Company received a six-month extension related to the First loan. The fair value of the indemnification related to the First loan is de minimis due to the excess of fair value of the underlying collateral compared to the carrying value of the loan. With respect to the Second loan, as of September 30, 2024, the Company’s best estimate of the fair value of the indemnification was $7.6 million, which is included within Other liabilities on the Condensed Consolidated Balance Sheets, with a corresponding amount included in Provision (benefit) for credit losses in the Condensed Consolidated Statements of Income for the nine months ended September 30, 2024.

Loans Held for Investment ("LHFI"), net

Loans Held for Investment (“LHFI”), net—LHFI consist predominately of multifamily interim loans originated by the Company for properties that currently do not qualify for permanent Agency financing (“Interim Loan Program” or “ILP”). These loans have terms of up to three years and are all adjustable-rate, interest-only, multifamily loans with similar risk characteristics and no geographic concentration. The Company also has an immaterial amount of LHFI associated with the repurchased loan as discussed above. The loans are carried at their unpaid principal balances, adjusted for net unamortized loan fees and costs, and net of any allowance for loan losses. LHFI are included as a component of Other assets in the Condensed Consolidated Financial Statements.

As of September 30, 2024 and December 31, 2023, the balance of the Interim Loan Program portfolio consisted of a small number of loans with a balance of $38.0 million and $40.1 million, respectively, including an immaterial amount of net unamortized deferred fees and costs and allowance for loan losses. There were no ILP loans delinquent and in non-accrual status as of both September 30, 2024 and December 31, 2023. The amortized cost basis of loans that were current was $38.0 million and $40.1 million as of September 30, 2024 and December 31, 2023, respectively. As of September 30, 2024, ILP loans were originated in 2019 and 2024.

Statement of Cash Flows

Statement of Cash Flows—For presentation in the Condensed Consolidated Statements of Cash Flows, the Company considers pledged cash and cash equivalents (as detailed in NOTE 9) to be restricted cash and restricted cash equivalents. The following table presents a reconciliation of the total cash, cash equivalents, restricted cash, and restricted cash equivalents as presented in the Condensed Consolidated Statements of Cash Flows to the related captions in the Condensed Consolidated Balance Sheets as of September 30, 2024 and 2023, and December 31, 2023 and 2022.

	September 30,				December 31,
(in thousands)	2024		2023		2023		2022
Cash and cash equivalents	$	179,759	$	236,321	$	328,698	$	225,949
Restricted cash		39,827		17,768		21,422		17,676
Pledged cash and cash equivalents (NOTE 9)		47,054		46,558		41,283		14,658
Total cash, cash equivalents, restricted cash, and restricted cash equivalents	$	266,640	$	300,647	$	391,403	$	258,283

Income Taxes

Income Taxes—The Company records the realizable excess tax benefits from stock-based compensation as a reduction to income tax expense. The realizable excess tax benefits were $0.7 million for both the three months ended September 30, 2024 and 2023 and $1.7 million and $2.2 million for the nine months ended September 30, 2024 and 2023, respectively.

Net Warehouse Interest Income (Expense)

Net Warehouse Interest Income (Expense)—The Company presents warehouse interest income net of warehouse interest expense. Warehouse interest income is the interest earned from loans held for sale and loans held for investment. Generally, a substantial portion of the Company’s loans is financed with matched borrowings under one of its warehouse facilities. The remaining portion of loans not funded with matched borrowings is financed with the Company’s own cash. Occasionally, the Company also fully funds a small number of loans held for sale or loans held for investment with its own cash. Warehouse interest expense is incurred on borrowings used to fund loans solely while they are held for sale or for investment. Warehouse interest income and expense are earned or incurred on loans held for sale after a loan is closed and before a loan is sold. Warehouse interest income and expense are earned or incurred on loans held for investment after a loan is closed and before a loan is repaid. Included in Net warehouse interest income (expense) for the three and nine months ended September 30, 2024 and 2023 are the following components:

	For the three months ended				For the nine months ended
(in thousands)	September 30,				September 30,
Components of Net Warehouse Interest Income (Expense)	2024		2023		2024		2023
Warehouse interest income	$	10,648	$	11,912	$	24,784	$	34,015
Warehouse interest expense		(12,795)		(13,943)		(29,631)		(37,571)
Net warehouse interest income (expense)	$	(2,147)	$	(2,031)	$	(4,847)	$	(3,556)

Co-broker Fees

Co-broker Fees—Third-party co-broker fees are netted against Loan origination and debt brokerage fees, net in the Condensed Consolidated Statements of Income and were $2.0 million and $2.5 million for the three months ended September 30, 2024 and 2023, respectively, and $6.6 million and $9.3 million for the nine months ended September 30, 2024 and 2023, respectively.

Contracts with Customers

Contracts with Customers—A majority of the Company’s revenues are derived from the following sources, all of which are excluded from the accounting provisions applicable to contracts with customers: (i) financial instruments, (ii) transfers and servicing, (iii) derivative transactions, and (iv) investments in debt securities/equity-method investments. The remaining portion of revenues is derived from contracts with customers.

Other than LIHTC asset management fees as described in the 2023 Form 10-K and presented as Investment management fees in the Condensed Consolidated Statements of Income, the Company’s contracts with customers generally do not require judgment or material estimates that affect the determination of the transaction price (including the assessment of variable consideration), the allocation of the transaction price to performance obligations, and the determination of the timing of the satisfaction of performance obligations. Additionally, the earnings process for the majority of the Company’s contracts with customers is not complicated and is generally completed in a short period of time. The following table presents information about the Company’s contracts with customers for the three and nine months ended September 30, 2024 and 2023:  

	For the three months ended				For the nine months ended
(in thousands)	September 30,				September 30,
Description	2024		2023		2024		2023		Statement of income line item
Certain loan origination fees	$	21,310	$	16,259	$	64,718	$	50,982	Loan origination and debt brokerage fees, net
Property sales broker fees		19,322		16,862		39,408		38,831	Property sales broker fees
Investment management fees		11,744		13,362		40,086		44,844	Investment management fees
Application fees, appraisal revenues, subscription revenues, syndication fees, and other revenues		12,014		15,138		41,008		56,602	Other revenues
Total revenues derived from contracts with customers	$	64,390	$	61,621	$	185,220	$	191,259

Litigation

Litigation—In the ordinary course of business, the Company may be party to various claims and litigation, none of which the Company believes is material. The Company cannot predict the outcome of any pending litigation and may be subject to consequences that could include fines, penalties, and other costs, and the Company’s reputation and business may be impacted. The Company believes that any liability that could be imposed on the Company in connection with the disposition of any pending lawsuits would not have a material adverse effect on its business, results of operations, liquidity, or financial condition.

Recently Adopted and Recently Announced Accounting Pronouncements

Recently Adopted and Recently Announced Accounting Pronouncements—The Company is currently evaluating Accounting Standards Updates (“ASU”) 2023-07, Improvements to Reportable Segment Disclosures and 2023-09, Improvements to Income Tax Disclosures. The annual disclosures required by ASU 2023-07 are effective for the Company’s Annual Report on Form 10-K for the year ending December 31, 2024. The interim disclosures required by ASU 2023-07 are effective in 2025. The disclosures for ASU 2023-09 are effective for the Company’s Annual Report on Form 10-K for the year ending December 31, 2025. The Company believes these ASUs will not materially impact the Company’s consolidated financial statements or disclosures. There were no other recently announced but not yet effective accounting pronouncements issued that have the potential to impact the Company’s condensed consolidated financial statements. The Company did not adopt any new accounting policies during the second quarter of 2024.

Reclassifications

Reclassifications—The Company has made immaterial reclassifications to prior-year balances to conform to current-year presentation.