| Loans Receivable and Allowance for Credit Losses | Loans Receivable and Allowance for Credit Losses The following table presents the composition of the Company’s loans held-for-investment outstanding as of September 30, 2024 and December 31, 2023: ($ in thousands) September 30, 2024 December 31, 2023 Commercial: C&I $ 17,068,002 $ 16,581,079 CRE: CRE 14,568,209 14,777,081 Multifamily residential 5,141,481 5,023,163 Construction and land 693,775 663,868 Total CRE 20,403,465 20,464,112 Total commercial 37,471,467 37,045,191 Consumer: Residential mortgage: Single-family residential 13,963,097 13,383,060 HELOCs 1,760,716 1,722,204 Total residential mortgage 15,723,813 15,105,264 Other consumer 57,901 60,327 Total consumer 15,781,714 15,165,591 Total loans held-for-investment (1) $ 53,253,181 $ 52,210,782 Allowance for loan losses (696,485) (668,743) Loans held-for-investment, net (1) $ 52,556,696 $ 51,542,039 (1) Includes Accrued interest receivable on loans held-for-investment was $262 million and $267 million as of September 30, 2024 and December 31, 2023, respectively, and was included in Other assets on the Consolidated Balance Sheet. The interest income reversed was insignificant for both the three and nine months ended September 30, 2024 and 2023. For the Company’s accounting policy on accrued interest receivable related to loans held-for-investment, see Note 1 — Summary of Significant Accounting Policies — Significant Accounting Policies — Loans Held-for-Investment to the Consolidated Financial Statements of the Company’s 2023 Form 10-K. The Company also has loans held-for-sale. For the Company’s accounting policy on loans held-for-sale, refer to Note 1 — Summary of Significant Accounting Policies — Significant Accounting Policies — Loans Held-for-Sale to the Consolidated Financial Statements in the Company’s 2023 Form 10-K. The Company’s FRB and FHLB borrowings are primarily secured by loans held-for-investment. Loans held-for-investment totaling $37.4 billion and $37.2 billion, respectively, were pledged to secure borrowings and provide additional borrowing capacity as of September 30, 2024 and December 31, 2023. Credit Quality Indicators All loans are subject to the Company’s credit review and monitoring process. For the commercial loan portfolio, loans are risk rated based on an analysis of the borrower’s current payment performance or delinquency, repayment sources, financial and liquidity factors, including industry and geographic considerations. For the consumer loan portfolio, payment performance or delinquency is typically the driving indicator for risk ratings. The Company utilizes internal credit risk ratings to assign each individual loan a risk rating of 1 through 10: • Pass — loans risk rated 1 through 5 are assigned an internal risk rating category of “Pass.” Loans risk rated 1 are typically loans fully secured by cash. Pass loans have sufficient sources of repayment to repay the loan in full, in accordance with all terms and conditions. • Special mention — loans assigned a risk rating of 6 have potential weaknesses that warrant closer attention by management; these are assigned an internal risk rating category of “Special Mention.” • Substandard — loans assigned a risk rating of 7 or 8 have well-defined weaknesses that may jeopardize the full and timely repayment of the loan; these are assigned an internal risk rating category of “Substandard.” • Doubtful — loans assigned a risk rating of 9 have insufficient sources of repayment and a high probability of loss; these are assigned an internal risk rating category of “Doubtful.” • Loss — loans assigned a risk rating of 10 are uncollectible and of such little value that they are no longer considered bankable assets; these are assigned an internal risk rating category of “Loss.” Loan exposures categorized as criticized consist of special mention, substandard, doubtful and loss categories. The Company reviews the internal risk ratings of its loan portfolio on a regular basis, and adjusts the ratings based on changes in the borrowers’ financial status and the collectability of the loans. The following tables summarize the Company’s loans held-for-investment and year-to-date gross write-offs by loan portfolio segments, internal risk ratings and vintage year as of the periods presented. The vintage year is the year of loan origination, renewal or major modification. Gross write-offs in the following tables are for the nine months ended September 30, 2024, and year ended December 31, 2023. Revolving loans that are converted to term loans presented in the tables below are excluded from the term loans by vintage year columns. September 30, 2024 Term Loans by Origination Year ($ in thousands) 2024 2023 2022 2021 2020 Prior Revolving Loans Revolving Loans Converted to Term Loans (1) Total Commercial: C&I: Pass $ 1,946,732 $ 1,801,612 $ 1,114,871 $ 769,040 $ 273,186 $ 325,092 $ 10,315,519 $ 23,293 $ 16,569,345 Criticized (accrual) 21,119 28,030 77,472 102,837 10,538 46,264 137,125 — 423,385 Criticized (nonaccrual) 3,798 25,150 21,639 10,010 3,278 10,325 1,072 — 75,272 Total C&I 1,971,649 1,854,792 1,213,982 881,887 287,002 381,681 10,453,716 23,293 17,068,002 Gross write-offs (2) — 13,852 16,197 13,671 1,212 3,012 9,812 — 57,756 CRE: Pass 1,189,109 2,315,579 3,772,545 1,979,487 1,353,082 3,382,589 81,109 49,591 14,123,091 Criticized (accrual) 10,981 44,631 50,011 50,984 67,643 202,811 — 14,784 441,845 Criticized (nonaccrual) — — — — 1,773 1,500 — — 3,273 Subtotal CRE 1,200,090 2,360,210 3,822,556 2,030,471 1,422,498 3,586,900 81,109 64,375 14,568,209 Gross write-offs (2) — — — — — 2 — — 2 Multifamily residential: Pass 275,321 668,357 1,448,005 756,812 619,627 1,279,498 18,063 1,261 5,066,944 Criticized (accrual) — — 34,984 32,032 — 2,935 — — 69,951 Criticized (nonaccrual) — — — — — 4,586 — — 4,586 Subtotal multifamily residential 275,321 668,357 1,482,989 788,844 619,627 1,287,019 18,063 1,261 5,141,481 Gross write-offs — — — — — 6 — — 6 Construction and land: Pass 68,565 335,119 197,019 75,503 — 6,253 — — 682,459 Criticized (nonaccrual) — — 11,316 — — — — — 11,316 Subtotal construction and land 68,565 335,119 208,335 75,503 — 6,253 — — 693,775 Gross write-offs — — 2,289 — — — — — 2,289 Total CRE 1,543,976 3,363,686 5,513,880 2,894,818 2,042,125 4,880,172 99,172 65,636 20,403,465 Total CRE gross write-offs (2) — — 2,289 — — 8 — — 2,297 Total commercial $ 3,515,625 $ 5,218,478 $ 6,727,862 $ 3,776,705 $ 2,329,127 $ 5,261,853 $ 10,552,888 $ 88,929 $ 37,471,467 Total commercial gross write-offs (2) $ — $ 13,852 $ 18,486 $ 13,671 $ 1,212 $ 3,020 $ 9,812 $ — $ 60,053 September 30, 2024 Term Loans by Origination Year ($ in thousands) 2024 2023 2022 2021 2020 Prior Revolving Loans Revolving Loans Converted to Term Loans (1) Total Consumer: Residential mortgage: Single-family residential: Pass (3) $ 1,754,930 $ 2,864,585 $ 3,149,135 $ 2,128,715 $ 1,457,386 $ 2,554,887 $ — $ — $ 13,909,638 Criticized (accrual) 1,158 4,416 5,476 520 692 6,220 — — 18,482 Criticized (nonaccrual) (3) 2,375 10,968 1,721 3,011 3,236 13,666 — — 34,977 Subtotal single-family residential mortgage 1,758,463 2,879,969 3,156,332 2,132,246 1,461,314 2,574,773 — — 13,963,097 Gross write-offs (2) 9 — — — — — — — 9 HELOCs: Pass 5,486 3,599 5,338 2,338 4,102 9,369 1,593,145 113,294 1,736,671 Criticized (accrual) 1,794 1,679 1,158 680 — 293 769 1,096 7,469 Criticized (nonaccrual) 517 1,905 3,444 — 476 5,839 — 4,395 16,576 Subtotal HELOCs 7,797 7,183 9,940 3,018 4,578 15,501 1,593,914 118,785 1,760,716 Gross write-offs — 10 — — — — — — 10 Total residential mortgage 1,766,260 2,887,152 3,166,272 2,135,264 1,465,892 2,590,274 1,593,914 118,785 15,723,813 Total residential mortgage gross write-offs (2) 9 10 — — — — — — 19 Other consumer: Pass 3,616 36 22,982 132 — 6,804 21,228 — 54,798 Criticized (accrual) 1 — — — — — 3,000 — 3,001 Criticized (nonaccrual) — — — — — — 102 — 102 Total other consumer 3,617 36 22,982 132 — 6,804 24,330 — 57,901 Gross write-offs (2) — — — — — — 25 — 25 Total consumer $ 1,769,877 $ 2,887,188 $ 3,189,254 $ 2,135,396 $ 1,465,892 $ 2,597,078 $ 1,618,244 $ 118,785 $ 15,781,714 Total consumer gross write-offs (2) $ 9 $ 10 $ — $ — $ — $ — $ 25 $ — $ 44 Total loans held-for-investment: Pass $ 5,243,759 $ 7,988,887 $ 9,709,895 $ 5,712,027 $ 3,707,383 $ 7,564,492 $ 12,029,064 $ 187,439 $ 52,142,946 Criticized (accrual) 35,053 78,756 169,101 187,053 78,873 258,523 140,894 15,880 964,133 Criticized (nonaccrual) 6,690 38,023 38,120 13,021 8,763 35,916 1,174 4,395 146,102 Total $ 5,285,502 $ 8,105,666 $ 9,917,116 $ 5,912,101 $ 3,795,019 $ 7,858,931 $ 12,171,132 $ 207,714 $ 53,253,181 Total loans held-for-investment gross write-offs (2) $ 9 $ 13,862 $ 18,486 $ 13,671 $ 1,212 $ 3,020 $ 9,837 $ — $ 60,097 December 31, 2023 Term Loans by Origination Year ($ in thousands) 2023 2022 2021 2020 2019 Prior Revolving Loans Revolving Loans Converted to Term Loans (1) Total Commercial: C&I: Pass $ 2,314,463 $ 1,628,560 $ 1,296,936 $ 331,982 $ 245,173 $ 164,159 $ 10,053,757 $ 20,143 $ 16,055,173 Criticized (accrual) 105,119 67,899 120,574 15,064 40,920 22,098 117,196 — 488,870 Criticized (nonaccrual) 2,104 7,916 131 4,819 2,979 18,137 950 — 37,036 Total C&I 2,421,686 1,704,375 1,417,641 351,865 289,072 204,394 10,171,903 20,143 16,581,079 Gross write-offs (2) 350 10,454 424 3,758 9,748 2,648 1,593 — 28,975 CRE: Pass 2,492,915 4,086,385 2,216,257 1,428,724 1,600,844 2,494,382 92,851 62,771 14,475,129 Criticized (accrual) 36,855 34,485 30,336 48,250 24,437 104,340 — — 278,703 Criticized (nonaccrual) — — — — 444 22,805 — — 23,249 Subtotal CRE 2,529,770 4,120,870 2,246,593 1,476,974 1,625,725 2,621,527 92,851 62,771 14,777,081 Gross write-offs (2) — — — — — 1,329 — — 1,329 Multifamily residential: Pass 665,780 1,481,161 808,333 612,408 498,491 857,713 8,690 1,281 4,933,857 Criticized (accrual) — 3,356 54,614 — 693 25,974 — — 84,637 Criticized (nonaccrual) — — — — — 4,669 — — 4,669 Subtotal multifamily residential 665,780 1,484,517 862,947 612,408 499,184 888,356 8,690 1,281 5,023,163 Gross write-offs — — — — — 3 — — 3 Construction and land: Pass 209,775 280,151 120,724 39,928 808 5,501 6,981 — 663,868 Subtotal construction and land 209,775 280,151 120,724 39,928 808 5,501 6,981 — 663,868 Total CRE 3,405,325 5,885,538 3,230,264 2,129,310 2,125,717 3,515,384 108,522 64,052 20,464,112 Total CRE gross write-offs (2) — — — — — 1,332 — — 1,332 Total commercial $ 5,827,011 $ 7,589,913 $ 4,647,905 $ 2,481,175 $ 2,414,789 $ 3,719,778 $ 10,280,425 $ 84,195 $ 37,045,191 Total commercial gross write-offs (2) $ 350 $ 10,454 $ 424 $ 3,758 $ 9,748 $ 3,980 $ 1,593 $ — $ 30,307 December 31, 2023 Term Loans by Origination Year ($ in thousands) 2023 2022 2021 2020 2019 Prior Revolving Loans Revolving Loans Converted to Term Loans (1) Total Consumer: Residential mortgage: Single-family residential: Pass (4) $ 3,188,830 $ 3,340,789 $ 2,279,802 $ 1,594,525 $ 980,686 $ 1,959,974 $ — $ — $ 13,344,606 Criticized (accrual) 2,680 4,471 566 1,440 1,503 4,167 — — 14,827 Criticized (nonaccrual) (3) 4,466 837 3,902 2,081 3,626 8,715 — — 23,627 Subtotal single-family residential mortgage 3,195,976 3,346,097 2,284,270 1,598,046 985,815 1,972,856 — — 13,383,060 HELOCs: Pass 3,641 3,882 1,734 3,153 729 9,251 1,551,074 126,280 1,699,744 Criticized (accrual) 565 1,219 1,872 101 185 1,470 2,548 1,089 9,049 Criticized (nonaccrual) 815 856 413 72 584 6,863 279 3,529 13,411 Subtotal HELOCs 5,021 5,957 4,019 3,326 1,498 17,584 1,553,901 130,898 1,722,204 Gross write-offs (2) — — — — — 41 — 6 47 Total residential mortgage 3,200,997 3,352,054 2,288,289 1,601,372 987,313 1,990,440 1,553,901 130,898 15,105,264 Total residential mortgage gross write-offs (2) — — — — — 41 — 6 47 Other consumer: Pass 2,286 18,098 135 — — 13,244 26,432 — 60,195 Criticized (nonaccrual) — — — — — — 132 — 132 Total other consumer 2,286 18,098 135 — — 13,244 26,564 — 60,327 Total consumer $ 3,203,283 $ 3,370,152 $ 2,288,424 $ 1,601,372 $ 987,313 $ 2,003,684 $ 1,580,465 $ 130,898 $ 15,165,591 Total consumer gross write-offs (2) $ — $ — $ — $ — $ — $ 41 $ — $ 6 $ 47 Total by Risk Rating: Pass $ 8,877,690 $ 10,839,026 $ 6,723,921 $ 4,010,720 $ 3,326,731 $ 5,504,224 $ 11,739,785 $ 210,475 $ 51,232,572 Criticized (accrual) 145,219 111,430 207,962 64,855 67,738 158,049 119,744 1,089 876,086 Criticized (nonaccrual) 7,385 9,609 4,446 6,972 7,633 61,189 1,361 3,529 102,124 Total $ 9,030,294 $ 10,960,065 $ 6,936,329 $ 4,082,547 $ 3,402,102 $ 5,723,462 $ 11,860,890 $ 215,093 $ 52,210,782 Total loans held-for-investment gross write-offs (2) $ 350 $ 10,454 $ 424 $ 3,758 $ 9,748 $ 4,021 $ 1,593 $ 6 $ 30,354 (1) No revolving commercial loans were converted to term loans during the three months ended September 30, 2024 . $8 million of total commercial loans, comprised o f C&I and CRE revolving loans, were c onverted to term loans during the nine months ended September 30, 2024 . In comparison, $11 million and $25 million of total commercial loans, primarily comprised of CRE revolving loans were converted to term loans during the three and nine months ended September 30, 2023, respectively. $2 million and $26 million of total consumer loans, comprised of HELOCs, were converted to term loans during the three and nine months ended September 30, 2024, respectively. In comparison, $21 million and $28 million of total consumer loans, comprised of HELOCs, were converted to term loans during the three and nine months ended September 30, 2023, respectively. (2) Excludes gross write-offs associated with loans the Company sold or settled. (3) As of both September 30, 2024 and December 31, 2023, $1 million of nonaccrual loans whose payments were guaranteed by the Federal Housing Administration were classified with a “Pass” rating. Nonaccrual and Past Due Loans Loans that are 90 or more days past due are generally placed on nonaccrual status unless the loan is well-collateralized and in the process of collection. Loans that are less than 90 days past due but have identified deficiencies, such as when the full collection of principal or interest becomes uncertain, are also placed on nonaccrual status. September 30, 2024 ($ in thousands) Current Accruing Loans Accruing Loans 30-59 Days Past Due Accruing Loans 60-89 Days Past Due Total Accruing Past Due Loans Total Nonaccrual Loans Total Loans Commercial: C&I $ 16,978,259 $ 10,974 $ 3,497 $ 14,471 $ 75,272 $ 17,068,002 CRE: CRE 14,562,360 1,751 825 2,576 3,273 14,568,209 Multifamily residential 5,133,784 2,620 491 3,111 4,586 5,141,481 Construction and land 682,459 — — — 11,316 693,775 Total CRE 20,378,603 4,371 1,316 5,687 19,175 20,403,465 Total commercial 37,356,862 15,345 4,813 20,158 94,447 37,471,467 Consumer: Residential mortgage: Single-family residential 13,883,243 24,890 19,229 44,119 35,735 13,963,097 HELOCs 1,717,377 19,309 7,454 26,763 16,576 1,760,716 Total residential mortgage 15,600,620 44,199 26,683 70,882 52,311 15,723,813 Other consumer 54,697 78 3,024 3,102 102 57,901 Total consumer 15,655,317 44,277 29,707 73,984 52,413 15,781,714 Total $ 53,012,179 $ 59,622 $ 34,520 $ 94,142 $ 146,860 $ 53,253,181 December 31, 2023 ($ in thousands) Current Accruing Loans Accruing Loans 30-59 Days Past Due Accruing Loans 60-89 Days Past Due Total Accruing Past Due Loans Total Nonaccrual Loans Total Loans Commercial: C&I $ 16,508,394 $ 28,550 $ 7,099 $ 35,649 $ 37,036 $ 16,581,079 CRE: CRE 14,750,315 1,719 1,798 3,517 23,249 14,777,081 Multifamily residential 5,017,897 597 — 597 4,669 5,023,163 Construction and land 650,617 13,251 — 13,251 — 663,868 Total CRE 20,418,829 15,567 1,798 17,365 27,918 20,464,112 Total commercial 36,927,223 44,117 8,897 53,014 64,954 37,045,191 Consumer: Residential mortgage: Single-family residential 13,313,455 29,285 15,943 45,228 24,377 13,383,060 HELOCs 1,687,301 12,266 9,226 21,492 13,411 1,722,204 Total residential mortgage 15,000,756 41,551 25,169 66,720 37,788 15,105,264 Other consumer 56,930 3,123 142 3,265 132 60,327 Total consumer 15,057,686 44,674 25,311 69,985 37,920 15,165,591 Total $ 51,984,909 $ 88,791 $ 34,208 $ 122,999 $ 102,874 $ 52,210,782 The following table presents the amortized cost of loans on nonaccrual status for which there was no related allowance for loan losses as of both September 30, 2024 and December 31, 2023. ($ in thousands) September 30, 2024 December 31, 2023 Commercial: C&I $ 67,821 $ 33,089 CRE 2,591 22,653 Multifamily residential — 4,235 Construction and land 11,316 — Total commercial 81,728 59,977 Consumer: Single-family residential 6,520 4,852 HELOCs 10,085 7,256 Total consumer 16,605 12,108 Total nonaccrual loans with no related allowance for loan losses $ 98,333 $ 72,085 Foreclosed Assets The Company acquires assets from borrowers through loan restructurings, workouts, or foreclosures. Assets acquired may include real properties (e.g., real estate, land, and buildings) and commercial and personal properties. The Company recognizes foreclosed assets upon receiving assets in satisfaction of a loan (e.g., taking legal title or physical possession). Foreclosed assets, consisting of OREO and other nonperforming assets, are included in Other assets on the Consolidated Balance Sheet. The Company had $49 million of foreclosed assets as of September 30, 2024, compared with $11 million as of December 31, 2023. The Company commences the foreclosure process on consumer mortgage loans after a borrower becomes more than 120 days delinquent in accordance with the Consumer Financial Protection Bureau guidelines. The carrying value of the consumer real estate loans that were in an active or suspended foreclosure process was $14 million and $8 million as of September 30, 2024 and December 31, 2023, respectively. Loan Modifications to Borrowers Experiencing Financial Difficulty As part of the Company’s loss mitigation efforts, the Company may agree to modify the contractual terms of a loan to assist borrowers experiencing financial difficulty. The Company negotiates loan modifications on a case-by-case basis to achieve mutually agreeable terms that maximize loan collectability and meet the borrower’s financial needs. The Company considers various factors to identify borrowers experiencing financial difficulty. The primary factor for consumer borrowers is delinquency status. For commercial loan borrowers, these factors include credit risk ratings, the probability of loan risk rating downgrades, and overall risk profile changes. The modification may include, but is not limited to, payment deferrals, interest rate reductions, term extensions, principal forgiveness, or a combination of such modifications. Commercial loan borrowers that require immaterial modifications such as insignificant interest rate changes, short-term extensions (90 days or less) from the original maturity date, or temporary waivers or extensions of financial covenants which would not constitute material credit actions, are generally not considered to be experiencing financial difficulty and are not included in the disclosure. Insignificant payment deferrals (three months or less in the last 12 months) are also not included in the disclosure. The following tables present the amortized cost of loans that were modified during the three and nine months ended September 30, 2024 and 2023 by loan class and modification type: Three Months Ended September 30, 2024 Modification Type ($ in thousands) Term Extension Payment Delay Combination: Term Extension/ Payment Delay Combination: Rate Reduction/ Payment Delay Total Modification as a % of Loan Class Commercial: C&I $ 15,848 $ — $ — $ — $ 15,848 0.09 % CRE 23,735 — — — 23,735 0.16 % Total commercial 39,583 — — — 39,583 Consumer: Single-family residential — 4,718 219 141 5,078 0.04 % HELOCs — 3,763 — — 3,763 0.21 % Total consumer — 8,481 219 141 8,841 Total $ 39,583 $ 8,481 $ 219 $ 141 $ 48,424 Three Months Ended September 30, 2023 Modification Type ($ in thousands) Term Extension Payment Delay Combination: Term Extension/ Payment Delay Combination: Rate Reduction/ Payment Delay Total Modification as a % of Loan Class Commercial: C&I $ 1,682 $ 11,603 $ — $ — $ 13,285 0.08 % CRE 13,469 — — — 13,469 0.07 % Total commercial 15,151 11,603 — — 26,754 Consumer: Single-family residential — 2,944 1,260 — 4,204 0.03 % HELOCs — — 334 183 517 0.03 % Total consumer — 2,944 1,594 183 4,721 Total $ 15,151 $ 14,547 $ 1,594 $ 183 $ 31,475 Nine Months Ended September 30, 2024 Modification Type ($ in thousands) Term Extension Payment Delay Combination: Term Extension/ Payment Delay Combination: Rate Reduction/ Payment Delay Total Modification as a % of Loan Class Commercial: C&I $ 26,191 $ 24,768 $ — $ — $ 50,959 0.30 % CRE 47,969 — — — 47,969 0.33 % Total commercial 74,160 24,768 — — 98,928 Consumer: Single-family residential — 13,278 219 141 13,638 0.10 % HELOCs — 10,708 — 517 11,225 0.64 % Other consumer 3,000 — — — 3,000 5.18 % Total consumer 3,000 23,986 219 658 27,863 Total $ 77,160 $ 48,754 $ 219 $ 658 $ 126,791 Nine Months Ended September 30, 2023 Modification Type ($ in thousands) Term Extension Payment Delay Combination: Term Extension/ Payment Delay Combination: Rate Reduction/ Term Extension Combination: Rate Reduction/ Payment Delay Total Modification as a % of Loan Class Commercial: C&I $ 44,120 $ 20,793 $ — $ — $ — $ 64,913 0.41 % CRE 13,979 — — 32,724 — 46,703 0.23 % Total commercial 58,099 20,793 — 32,724 — 111,616 Consumer: Single-family residential — 7,276 1,809 — — 9,085 0.07 % HELOCs — 741 1,053 — 183 1,977 0.11 % Total consumer — 8,017 2,862 — 183 11,062 Total $ 58,099 $ 28,810 $ 2,862 $ 32,724 $ 183 $ 122,678 The following tables present the financial effects of the loan modifications for the three and nine months ended September 30, 2024 and 2023 by loan class and modification type: Financial Effects of Loan Modifications for the Three Months Ended September 30, 2024 2023 ($ in thousands) Weighted-Average Interest Rate Reduction Weighted-Average Term Extension (in years) Weighted-Average Payment Delay Principal Forgiveness Weighted-Average Interest Rate Reduction Weighted-Average Term Extension (in years) Weighted-Average Payment Delay (in years) Commercial: C&I — % 0.8 0.0 $ 26 (1) — % (1) 3.0 1.5 CRE — % 3.3 0.0 — — % 1.1 0.0 Consumer: Single-family residential 1.63 % 10.0 2.6 — — % 10.0 1.0 HELOCs — % 0.0 0.6 — 0.50 % 16.7 0.7 Financial Effects of Loan Modifications for the Nine Months Ended September 30, 2024 2023 ($ in thousands) Weighted-Average Interest Rate Reduction Weighted-Average Term Extension (in years) Weighted-Average Payment Delay Principal Forgiveness Weighted-Average Interest Rate Reduction Weighted-Average Term Extension (in years) Weighted-Average Payment Delay (in years) Commercial: C&I — % 1.6 1.6 $ 371 (1) — % (1) 1.4 1.2 CRE — % 2.4 0.0 — 3.00 % 2.1 0.0 Consumer: Single-family residential 1.63 % 10.0 1.4 — — % 9.9 1.0 HELOCs 0.25 % 0.0 2.0 — 0.50 % 15.4 0.5 Other consumer — % 0.8 0.0 — — % 0.0 0.0 (1) Comprised of a C&I loan modified during the three and nine months ended September 30, 2023 where the interest was waived in addition to principal forgiveness. A modified loan may become delinquent and result in a payment default (generally 90 days past due) subsequent to modification. The following tables present information on loans that defaulted during the three and nine months ended September 30, 2024 that received modifications during the 12 months preceding payment default. There were no loans that received modifications and subsequently defaulted during both the three and nine months ended September 30, 2023. Loans Modified Subsequently Defaulted During the Three Months Ended September 30, 2024 ($ in thousands) Term Extension Payment Delay Combination: Rate Reduction/ Payment Delay Combination: Term Extension/ Payment Delay Total Consumer: Single-family residential $ — $ 573 $ — $ — $ 573 HELOCs — 2,762 — — 2,762 Total consumer — 3,335 — — 3,335 Total $ — $ 3,335 $ — $ — $ 3,335 Loans Modified Subsequently Defaulted During the Nine Months Ended September 30, 2024 ($ in thousands) Term Extension Payment Delay Combination: Rate Reduction/ Payment Delay Combination: Term Extension/ Payment Delay Total Commercial: C&I $ 7,829 $ 5,280 $ — $ — $ 13,109 Total commercial 7,829 5,280 — — 13,109 Consumer: Single-family residential — 7,995 141 2,828 10,964 HELOCs — 3,240 1,149 — 4,389 Total consumer — 11,235 1,290 2,828 15,353 Total $ 7,829 $ 16,515 $ 1,290 $ 2,828 $ 28,462 The Company monitors the performance of modified loans to borrowers experiencing financial difficulty to understand the effectiveness of its modification efforts. The following tables present the performance of loans that were modified in the twelve months ended September 30, 2024. For the comparative period, the amounts represent the performance of loans that were modified in the first nine months ended September 30, 2023, subsequent to the adoption of ASU 2022-02 on January 1, 2023: Payment Performance as of September 30, 2024 ($ in thousands) Current 30 - 89 Days Past Due 90+ Days Past Due Total Commercial: C&I $ 62,107 $ 8,848 $ 7,828 $ 78,783 CRE 47,969 — — 47,969 Total commercial 110,076 8,848 7,828 126,752 Consumer: Single-family residential 9,610 3,237 6,686 19,533 HELOCs 8,922 3,736 1,270 13,928 Other consumer — 3,000 — 3,000 Total consumer 18,532 9,973 7,956 36,461 Total $ 128,608 $ 18,821 $ 15,784 $ 163,213 Payment Performance as of September 30, 2023 ($ in thousands) Current 30 - 89 Days Past Due 90+ Days Past Due Total Commercial: C&I $ 58,481 $ — $ 6,432 $ 64,913 CRE 46,703 — — 46,703 Total commercial 105,184 — 6,432 111,616 Consumer: Single-family residential 7,430 1,190 465 9,085 HELOCs 1,236 741 — 1,977 Total consumer 8,666 1,931 465 11,062 Total $ 113,850 $ 1,931 $ 6,897 $ 122,678 Commitments outstanding to lend additional funds to borrowers experiencing financial difficulty whose loans were modified were $4 million as of both September 30, 2024 and December 31, 2023. Allowance for Credit Losses The Company has a current expected credit losses framework for all financial assets measured at amortized cost and certain off-balance sheet credit exposures. The Company’s allowance for credit losses, which includes both the allowance for loan losses and the allowance for unfunded credit commitments, is calculated with the objective of maintaining a reserve sufficient to absorb losses inherent in our credit portfolios. The measurement of the allowance for credit losses is based on management’s best estimate of lifetime expected credit losses, periodic evaluation of the loan portfolio, lending-related commitments and other relevant factors. The allowance for credit losses is deducted from the amortized cost basis of a financial asset or a group of financial assets so that the balance sheet reflects the net amount the Company expects to collect. Amortized cost is the principal balance outstanding, net of purchase premiums and discounts, deferred fees and costs, and escrow advances. Subsequent changes in expected credit losses are recognized in net income as a provision for, or a reversal of, credit loss expense. The allowance for credit losses estimation involves procedures to consider the unique risk characteristics of the portfolio segments. The majority of the Company’s credit exposures that share risk characteristics with other similar exposures are collectively evaluated. The collectively evaluated loans include performing loans and unfunded credit commitments. If an exposure does not share risk characteristics with other exposures, the Company generally estimates expected credit losses on an individual basis. Allowance for Collectively Evaluated Loans The allowance for collectively evaluated loans consists of a quantitative component that assesses the different risk factors considered in our models and a qualitative component that considers risk factors external to the models. Each of these components are described below. Quantitative Component — The Company applies quantitative methods to estimate loan losses by considering a variety of factors such as historical loss experience, the current credit quality of the portfolio, and an economic outlook over the life of the loan. The Company incorporates forward-looking information using macroeconomic scenarios which include variables that are considered key drivers of increases and decreases in credit losses. The Company utilizes a probability-weighted, multiple-scenario forecast approach. These scenarios may consist of a base forecast representing management's view of the most likely outcome, combined with downside or upside scenarios reflecting possible worsening or improving economic conditions. The quantitative models incorporate a probability-weighted calculation of these macroeconomic scenarios over a reasonable and supportable forecast period. If the life of the loans extends beyond the reasonable and supportable forecast period, the Company will consider historical experience or long-run macroeconomic trends over the remaining life of the loans to estimate the allowance for loan losses. There were no changes to the reasonable and supportable forecast period and reversion to the historical loss experience method for the three and nine months ended September 30, 2024 and 2023. The following table provides key credit risk characteristics and macroeconomic variables that the Company uses to estimate the expected credit losses by portfolio segment: Portfolio Segment Risk Characteristics Macroeconomic Variables C&I Age percentage, size at origination, delinquency status, sector and risk rating Unemployment rate, Gross Domestic Product (“GDP”), and U.S. Treasury rates CRE, multifamily residential, and construction and land Delinquency status, maturity date, collateral value, property type, and geographic location Unemployment rate, GDP, and U.S. Treasury rates Single-family residential and HELOCs FICO score, delinquency status, maturity date, collateral value, and geographic location Unemployment rate, GDP, and Home Price Indices Other consumer Loss rate approach Immaterial - Macroeconomic variables are included in the qualitative estimate. Quantitative Component — Allowance for Loan Losses for the Commercial Loan Portfolio The Company’s C&I lifetime loss rate model estimates the loss rate expected over the life of a loan. This loss rate is applied to the amortized cost basis, excluding accrued interest receivable, to determine expected credit losses. The lifetime loss rate model’s reasonable and supportable period spans eight quarters, thereafter, immediately reverting to the historical average loss rate, expressed through the loan-level lifetime loss rate. To generate estimates of expected loss at the loan level for CRE, multifamily residential, and construction and land loans, projected probabilities of default (“PDs”) and loss given defaults (“LGDs”) are applied to the estimated exposure at default, considering the term and payment structure of the loan. The forecast of future economic conditions returns to long-run historical economic trends within the reasonable and supportable period. To estimate the life of a loan under both models, the contractual term of the loan is adjusted for estimated prepayments based on historical prepayment experience. Quantitative Component — Allowance for Loan Losses for the Consumer Loan Portfolio For single-family residential and HELOC loans, projected PDs and LGDs are applied to the estimated exposure at default, considering the term and payment structure of the loan, to generate estimates of expected loss at the loan level. The forecast of future economic conditions returns to long-run historical economic trends after the reasonable and supportable period. To estimate the life of a loan for the single-family residential and HELOC loan portfolios, the contractual term of the loan is adjusted for estimated prepayments based on historical prepayment experience. For other consumer loans, the Company uses a loss rate approach. Qualitative Component — The Company considers the following qualitative factors in the determination of the collectively evaluated allowance if these factors have not already been captured by the quantitative model. Such qualitative factors may include, but are not limited to: • loan growth trends; • the volume and severity of past due financial assets, and criticized or adversely classified financial assets; • the Company’s lending policies and procedures, including changes in lending strategies, underwriting standards, collection, write-off and recovery practices; • knowledge of a borrower’s operations; • the quality of the Company’s credit review system; • the experience, ability and depth of the Company’s management and associates; • the effect of |
