Loans Receivable and Allowance for Credit Losses | Loans Receivable and Allowance for Credit Losses Loans receivable at September 30, 2022 and December 31, 2021 are summarized as follows (in thousands): September 30, 2022 December 31, 2021 Mortgage loans: Residential $ 1,169,368 1,202,638 Commercial 4,237,534 3,827,370 Multi-family 1,478,402 1,364,397 Construction 666,740 683,166 Total mortgage loans 7,552,044 7,077,571 Commercial loans 2,190,584 2,188,866 Consumer loans 316,547 327,442 Total gross loans 10,059,175 9,593,879 Premiums on purchased loans 1,376 1,451 Net deferred fees (14,022) (13,706) Total loans $ 10,046,529 9,581,624 The following tables summarize the aging of loans receivable by portfolio segment and class of loans (in thousands): September 30, 2022 30-59 Days 60-89 Days Non-accrual Recorded Total Past Current Total Loans Non-accrual loans with no related allowance Mortgage loans: Residential $ 2,922 302 3,120 — 6,344 1,163,024 1,169,368 3,120 Commercial 848 — 35,352 — 36,200 4,201,334 4,237,534 17,055 Multi-family 798 — 1,583 — 2,381 1,476,021 1,478,402 1,583 Construction 1,058 — 1,878 — 2,936 663,804 666,740 1,878 Total mortgage loans 5,626 302 41,933 — 47,861 7,504,183 7,552,044 23,636 Commercial loans 2,101 1,135 17,181 — 20,417 2,170,167 2,190,584 13,000 Consumer loans 401 379 387 — 1,167 315,380 316,547 387 Total gross loans $ 8,128 1,816 59,501 — 69,445 9,989,730 10,059,175 37,023 December 31, 2021 30-59 Days 60-89 Days Non-accrual Recorded Total Past Current Total Loans Receivable Non-accrual loans with no related allowance Mortgage loans: Residential $ 7,229 1,131 6,072 — 14,432 1,188,206 1,202,638 6,072 Commercial 720 3,960 16,887 — 21,567 3,805,803 3,827,370 16,887 Multi-family — — 439 — 439 1,363,958 1,364,397 439 Construction — — 2,365 — 2,365 680,801 683,166 2,365 Total mortgage loans 7,949 5,091 25,763 — 38,803 7,038,768 7,077,571 25,763 Commercial loans 7,229 1,289 20,582 — 29,100 2,159,766 2,188,866 14,453 Consumer loans 649 228 1,682 — 2,559 324,883 327,442 1,682 Total gross loans $ 15,827 6,608 48,027 — 70,462 9,523,417 9,593,879 41,898 Included in loans receivable are loans for which the accrual of interest income has been discontinued due to deterioration in the financial condition of the borrowers. The principal amounts of these non-accrual loans were $59.5 million and $48.0 million at September 30, 2022 and December 31, 2021, respectively. Included in non-accrual loans were $39.3 million and $23.0 million of loans which were less than 90 days past due at September 30, 2022 and December 31, 2021, respectively. There were no loans 90 days or greater past due and still accruing interest at September 30, 2022 and December 31, 2021. The Company defines an impaired loan as a non-homogeneous loan greater than $1.0 million, for which, based on current information, it is not expected to collect all amounts due under the contractual terms of the loan agreement. Impaired loans also include all loans modified as troubled debt restructurings (“TDRs”). An allowance for collateral-dependent impaired loans that have been modified in a TDR is measured based on the present value of expected future cash flows discounted at the loan’s effective interest rate, the loan’s observable market price, or the estimated fair value of the collateral, less any selling costs. The Company uses third-party appraisals to determine the fair value of the underlying collateral in its analysis of collateral-dependent loans. A third-party appraisal is generally ordered as soon as a loan is designated as a collateral-dependent loan and updated annually, or more frequently if required. A financial asset is considered collateral-dependent when the debtor is experiencing financial difficulty and repayment is expected to be provided substantially through the sale or operation of the collateral. For all classes of loans deemed collateral-dependent, the Company estimates expected credit losses based on the collateral’s fair value less any selling costs. A specific allocation of the allowance for credit losses is established for each collateral-dependent loan with a carrying balance greater than the collateral’s fair value, less estimated selling costs. In most cases, the Company records a partial charge-off to reduce the loan’s carrying value to the collateral’s fair value less estimated selling costs. At each fiscal quarter end, if a loan is designated as collateral-dependent and the third-party appraisal has not yet been received, an evaluation of all available collateral is made using the best information available at the time, including rent rolls, borrower financial statements and tax returns, prior appraisals, management’s knowledge of the market and collateral, and internally prepared collateral valuations based upon market assumptions regarding vacancy and capitalization rates, each as and where applicable. Once the appraisal is received and reviewed, the specific reserves are adjusted to reflect the appraised value and evaluated for charge offs. The Company believes there have been no significant time lapses resulting from this process. At September 30, 2022, there were 131 impaired loans totaling $65.7 million, of which 123 totaling $26.8 million were TDRs. Included in this total were 100 TDRs related to 97 borrowers totaling $17.2 million that were performing in accordance with their restructured terms and which continued to accrue interest at September 30, 2022. At December 31, 2021, there were 155 impaired loans totaling $52.3 million, of which 132 loans totaling $30.6 million were TDRs. Included in this total were 115 TDRs related to 111 borrowers totaling $21.9 million that were performing in accordance with their restructured terms and which continued to accrue interest at December 31, 2021. At September 30, 2022 and December 31, 2021, the Company had $29.3 million and $18.2 million related to the fair value of underlying collateral-dependent impaired loans, respectively. These collateral-dependent impaired loans at September 30, 2022 consisted of $28.3 million in commercial loans, $895,000 in residential real estate loans, and $63,000 in consumer loans. The collateral for these impaired loans was primarily real estate. The activity in the allowance for credit losses by portfolio segment for the three and nine months ended September 30, 2022 and 2021 was as follows (in thousands): Three months ended September 30, Mortgage loans Commercial loans Consumer loans Total 2022 Balance at beginning of period $ 55,064 21,387 2,566 79,017 Provision charge (benefit) to operations 4,991 3,381 28 8,400 Recoveries of loans previously charged-off 167 1,421 129 1,717 Loans charged-off — (410) (91) (501) Balance at end of period $ 60,222 25,779 2,632 88,633 2021 Balance at beginning of period $ 55,469 21,262 4,228 80,959 Provision charge (benefit) to operations 626 963 (589) 1,000 Recoveries of loans previously charged-off 71 336 140 547 Loans charged-off (2,110) (263) (100) (2,473) Balance at end of period $ 54,056 22,298 3,679 80,033 Nine months ended September 30, Mortgage loans Commercial loans Consumer loans Total 2022 Balance at beginning of period $ 52,104 26,343 2,293 80,740 Provision charge (benefit) to operations 8,589 (3,734) 145 5,000 Recoveries of loans previously charged-off 539 3,725 404 4,668 Loans charged-off (1,010) (555) (210) (1,775) Balance at end of period $ 60,222 25,779 2,632 88,633 2021 Balance at beginning of period $ 68,307 27,084 6,075 101,466 Provision benefit to operations (11,760) (10,319) (2,621) (24,700) Recoveries of loans previously charged-off 538 6,654 640 7,832 Loans charged-off (3,029) (1,121) (415) (4,565) Balance at end of period $ 54,056 22,298 3,679 80,033 For the three and nine months ended September 30, 2022, the Company recorded an $8.4 million and a $5.0 million provision for credit losses on loans, respectively. The increase in the provision was largely a function of the weakened economic forecast, combined with an increase in total loans outstanding. The increase in the period-over-period provision for credit losses was largely a function of the significant favorable impact of the post-pandemic recovery resulting in a large negative provision taken in the prior year period, the current weakened economic forecast and an increase in total loans outstanding. Loan modifications for borrowers experiencing financial difficulties that are considered TDRs primarily involve lowering the monthly payments on such loans through either a reduction in interest rate below a market rate, an extension of the term of the loan without a corresponding adjustment to the risk premium reflected in the interest rate, or a combination of these two methods. These modifications generally do not result in the forgiveness of principal or accrued interest. In addition, management attempts to obtain additional collateral or guarantor support when modifying such loans. If the borrower has demonstrated performance under the previous terms and our underwriting process shows the borrower has the capacity to continue to perform under the restructured terms, the loan will continue to accrue interest. Non-accruing restructured loans may be returned to accrual status when there has been a sustained period of repayment performance (generally six consecutive months of payments) and both principal and interest are deemed collectible. The following tables present the number of loans modified as TDRs during the three and nine months ended September 30, 2022 and 2021, along with their balances immediately prior to the modification date and post-modification as of September 30, 2022 and 2021 (in thousands): For the three months ended September 30, 2022 September 30, 2021 Troubled Debt Restructurings Number of Pre-Modification Post-Modification Number of Pre-Modification Post-Modification Mortgage loans: Residential — $ — $ — 2 $ 375 $ 369 Total mortgage loans — — — 2 375 369 Consumer loans 1 108 88 — — Total restructured loans 1 $ 108 $ 88 2 $ 375 $ 369 For the nine months ended September 30, 2022 September 30, 2021 Troubled Debt Restructurings Number of Pre-Modification Post-Modification Number of Pre-Modification Post-Modification Mortgage loans: Residential 2 $ 265 $ 204 3 $ 546 $ 538 Multi-Family 1 1,618 1,583 — — — Total mortgage loans 3 1,883 1,787 3 546 538 Commercial loans 2 378 273 4 2,940 2,318 Consumer loans 1 108 88 — — — Total restructured loans 6 $ 2,369 $ 2,148 7 $ 3,486 $ 2,856 All TDRs are impaired loans, which are individually evaluated for impairment. During the nine months ended September 30, 2022, $921,000 of charge-offs were recorded on collateral-dependent impaired loans. During the three and nine months ended September 30, 2021, $2.1 million and $3.5 million of charge-offs were recorded on collateral-dependent impaired loans. For the three and nine months ended September 30, 2022, the TDRs presented in the preceding tables had a weighted average modified interest rate of 8.25% and 4.42%, respectively, compared to a weighted average rate of 6.75% and 4.41%, respectively, prior to modification. There was one loan totaling $209,000 which had a payment default (90 days or more past due) which was modified as a TDR within the 12 month period ending September 30, 2022. For TDRs that subsequently default, the Company determines the amount of the allowance for the respective loans in accordance with the accounting policy for the allowance for credit losses on loans individually evaluated for impairment. As allowed by CECL, loans acquired by the Company that experience more-than-insignificant deterioration in credit quality after origination, are classified as Purchased Credit Deteriorated ("PCD") loans. At September 30, 2022, the balance of PCD loans totaled $207.4 million with a related allowance for credit losses of $2.4 million. The balance of PCD loans at December 31, 2021 was $246.9 million with a related allowance for credit losses of $2.8 million. The following table presents loans individually evaluated for impairment by class and loan category (in thousands): September 30, 2022 December 31, 2021 Unpaid Principal Balance Recorded Investment Related Allowance Average Recorded Investment Interest Income Recognized Unpaid Principal Balance Recorded Investment Related Allowance Average Recorded Investment Interest Income Recognized Loans with no related allowance Mortgage loans: Residential $ 10,047 7,755 — 8,134 281 12,326 9,814 — 9,999 423 Commercial 16,799 14,604 — 13,617 48 15,310 14,685 — 15,064 63 Multi-family 1,618 1,583 — 1,617 12 — — — — — Construction 1,101 1,101 — 1,101 — 1,656 1,588 — 1,643 30 Total 29,565 25,043 — 24,469 341 29,292 26,087 — 26,706 516 Commercial loans 8,338 8,113 — 8,355 18 9,845 7,254 — 7,714 33 Consumer loans 1,310 760 — 880 38 1,389 853 — 1,613 115 Total impaired loans $ 39,213 33,916 — 33,704 397 40,526 34,194 — 36,033 664 Loans with an allowance recorded Mortgage loans: Residential $ 7,155 6,843 743 6,926 197 7,994 7,652 858 7,742 278 Commercial 19,143 19,143 2,134 19,162 35 871 871 17 894 48 Multi-family — — — — — — — — — — Total 26,298 25,986 2,877 26,088 232 8,865 8,523 875 8,636 326 Commercial loans 6,163 5,452 1,275 8,651 87 9,498 9,166 3,358 8,304 257 Consumer loans 325 306 46 312 9 391 371 51 379 18 Total impaired loans $ 32,786 31,744 4,198 35,051 328 18,754 18,060 4,284 17,319 601 Total impaired loans Mortgage loans: Residential $ 17,202 14,598 743 15,060 478 20,320 17,466 858 17,741 701 Commercial 35,942 33,747 2,134 32,779 83 16,181 15,556 17 15,958 111 Multi-family 1,618 1,583 — 1,617 12 — — — — — Construction 1,101 1,101 — 1,101 — 1,656 1,588 — 1,643 30 Total 55,863 51,029 2,877 50,557 573 38,157 34,610 875 35,342 842 Commercial loans 14,501 13,565 1,275 17,006 105 19,343 16,420 3,358 16,018 290 Consumer loans 1,635 1,066 46 1,192 47 1,780 1,224 51 1,992 133 Total impaired loans $ 71,999 65,660 4,198 68,755 725 59,280 52,254 4,284 53,352 1,265 Specific allocations of the allowance for credit losses attributable to impaired loans totaled $4.2 million at September 30, 2022 and $4.3 million at December 31, 2021. At September 30, 2022 and December 31, 2021, impaired loans for which there was no related allowance for credit losses totaled $33.9 million and $34.2 million, respectively. The average balance of impaired loans for the nine months ended September 30, 2022 and the twelve months ended December 31, 2021 was $68.8 million and $53.4 million, respectively. Management utilizes an internal nine-point risk rating system to summarize its loan portfolio into categories with similar risk characteristics. Loans deemed to be “acceptable quality” are rated 1 through 4, with a rating of 1 established for loans with minimal risk. Loans that are deemed to be of “questionable quality” are rated 5 (watch) or 6 (special mention). Loans with adverse classifications (substandard, doubtful or loss) are rated 7, 8 or 9, respectively. Commercial mortgage, commercial, multi-family and construction loans are rated individually, and each lending officer is responsible for risk rating loans in their portfolio. These risk ratings are then reviewed by the department manager and/or the Chief Lending Officer and by the Credit Department. The risk ratings are also reviewed periodically through loan review examinations which are currently performed by an independent third-party. Reports by the independent third-party are presented to the Audit Committee of the Board of Directors. The Company participated in the Paycheck Protection Program (“PPP”) through the United States Department of the Treasury and Small Business Administration ("SBA"). The PPP loans are fully guaranteed by the SBA and may be eligible for forgiveness by the SBA to the extent that the proceeds are used to cover eligible payroll costs, interest costs, rent, and utility costs over a period of up to 24 weeks after the loan was made as long as certain conditions are met regarding employee retention and compensation levels. PPP loans deemed eligible for forgiveness by the SBA will be repaid by the SBA to the Company. For both the initial round and second round of PPP, the Company had secured 2,067 PPP loans for its customers totaling $682.0 million. As of September 30, 2022, 2,052 PPP loans totaling $676.4 million were forgiven. At September 30, 2022, PPP loans totaled $5.6 million, and are included in the commercial loan portfolio. The following table summarizes the Company's gross loans held for investment by year of origination and internally assigned credit grades as of September 30, 2022 and December 31, 2021 (in thousands): Gross Loans Held by Investment by Year of Origination 2022 2021 2020 2019 2018 Prior to 2018 Revolving Loans Revolving loans to term loans Total Loans Residential (1) Special mention $ — — — — — 302 — — 302 Substandard — — — — 271 5,403 — — 5,674 Doubtful — — — — — — — — — Loss — — — — — — — — — Total criticized and classified — — — — 271 5,705 — — 5,976 Pass/Watch 120,003 215,512 215,111 98,249 59,352 455,165 — — 1,163,392 Total residential $ 120,003 215,512 215,111 98,249 59,623 460,870 — — 1,169,368 Commercial Mortgage Special mention $ — — 827 28,404 47,425 14,639 — — 91,295 Substandard — — — — 25,552 18,782 720 — 45,054 Doubtful — — — — — — — — — Loss — — — — — — — — — Total criticized and classified — — 827 28,404 72,977 33,421 720 — 136,349 Pass/Watch 764,406 636,635 584,856 559,283 236,897 1,208,073 95,448 15,587 4,101,185 Total commercial mortgage $ 764,406 636,635 585,683 587,687 309,874 1,241,494 96,168 15,587 4,237,534 Multi-family Special mention $ — — — — — 1,654 — — 1,654 Substandard — — — — — 2,381 — — 2,381 Doubtful — — — — — — — — — Loss — — — — — — — — — Total criticized and classified — — — — — 4,035 — — 4,035 Pass/Watch 125,035 150,711 283,823 201,311 188,765 522,717 854 1,151 1,474,367 Total multi-family $ 125,035 150,711 283,823 201,311 188,765 526,752 854 1,151 1,478,402 Construction Special mention $ — — — — 19,466 905 — — 20,371 Substandard — — — 2,197 777 — — — 2,974 Doubtful — — — — — — — — — Loss — — — — — — — — — Gross Loans Held by Investment by Year of Origination 2022 2021 2020 2019 2018 Prior to 2018 Revolving Loans Revolving loans to term loans Total Loans Total criticized and classified — — — 2,197 20,243 905 — — 23,345 Pass/Watch 108,427 337,461 91,180 81,115 18,101 92 — 7,019 643,395 Total construction $ 108,427 337,461 91,180 83,312 38,344 997 — 7,019 666,740 Total Mortgage Special mention $ — — 827 28,404 66,891 17,500 — — 113,622 Substandard — — — 2,197 26,600 26,566 720 — 56,083 Doubtful — — — — — — — — — Loss — — — — — — — — — Total criticized and classified — — 827 30,601 93,491 44,066 720 — 169,705 Pass/Watch 1,117,871 1,340,319 1,174,970 939,958 503,115 2,186,047 96,302 23,757 7,382,339 Total Mortgage $ 1,117,871 1,340,319 1,175,797 970,559 596,606 2,230,113 97,022 23,757 7,552,044 Commercial Special mention $ — 7,697 374 220 13,712 5,596 5,117 217 32,933 Substandard — — 10,877 4,422 5,228 15,507 9,641 364 46,039 Doubtful — — — — — — — — — Loss — — — — — — — — — Total criticized and classified — 7,697 11,251 4,642 18,940 21,103 14,758 581 78,972 Pass/Watch 286,447 321,957 177,100 167,784 109,828 542,716 472,645 33,135 2,111,612 Total commercial $ 286,447 329,654 188,351 172,426 128,768 563,819 487,403 33,716 2,190,584 Consumer (1) Special mention $ — — — — — 149 208 22 379 Substandard — — — — 111 188 5 — 304 Doubtful — — — — — — — — — Loss — — — — — — — — — Total criticized and classified — — — — 111 337 213 22 683 Pass/Watch 26,454 21,940 2,494 17,411 16,861 91,749 124,067 14,888 315,864 Total consumer $ 26,454 21,940 2,494 17,411 16,972 92,086 124,280 14,910 316,547 Total Loans Special mention $ — 7,697 1,201 28,624 80,603 23,245 5,325 239 146,934 Substandard — — 10,877 6,619 31,939 42,261 10,366 364 102,426 Doubtful — — — — — — — — — Loss — — — — — — — — — Total criticized and classified — 7,697 12,078 35,243 112,542 65,506 15,691 603 249,360 Pass/Watch 1,430,772 1,684,216 1,354,564 1,125,153 629,804 2,820,512 693,014 71,780 9,809,815 Gross Loans Held by Investment by Year of Origination 2022 2021 2020 2019 2018 Prior to 2018 Revolving Loans Revolving loans to term loans Total Loans Total gross loans $ 1,430,772 1,691,913 1,366,642 1,160,396 742,346 2,886,018 708,705 72,383 10,059,175 (1) For residential and consumer loans, the Company assigns internal credit grades based on the delinquency status of each loan. Gross Loans Held by Investment by Year of Origination 2021 2020 2019 2018 2017 Prior to 2017 Revolving Loans Revolving loans to term loans Total Loans Residential (1) Special mention $ — — — — 697 434 — — 1,131 Substandard — — — 280 166 8,569 — — 9,015 Doubtful — — — — — — — — — Loss — — — — — — — — — Total criticized and classified — — — 280 863 9,003 — — 10,146 Pass/Watch 229,106 235,949 113,206 67,493 75,906 470,832 — — 1,192,492 Total residential $ 229,106 235,949 113,206 67,773 76,769 479,835 — — 1,202,638 Commercial Mortgage Special mention $ — 2,624 28,706 22,296 9,657 26,668 1,094 — 91,045 Substandard — — 18 34,260 7,352 34,356 799 — 76,785 Doubtful — — — — — — — — — Loss — — — — — — — — — Total criticized and classified — 2,624 28,724 56,556 17,009 61,024 1,893 — 167,830 Pass/Watch 655,105 600,030 589,578 298,665 430,947 952,746 101,618 30,851 3,659,540 Total commercial mortgage $ 655,105 602,654 618,302 355,221 447,956 1,013,770 103,511 30,851 3,827,370 Multi-family Special mention $ — — — — 3,053 271 — — 3,324 Substandard — 439 — — 945 — — 1,384 Doubtful — — — — — — — — — Loss — — — — — — — — — Total criticized and classified — 439 — — 3,053 1,216 — — 4,708 Pass/Watch 154,419 294,716 166,558 173,583 117,654 448,710 2,880 1,169 1,359,689 Total multi-family $ 154,419 295,155 166,558 173,583 120,707 449,926 2,880 1,169 1,364,397 Construction Special mention $ — 1,125 — — — — — — 1,125 Substandard — — — 2,365 — — — — 2,365 Doubtful — — — — — — — — — Loss — — — — — — — — — Gross Loans Held by Investment by Year of Origination 2021 2020 2019 2018 2017 Prior to 2017 Revolving Loans Revolving loans to term loans Total Loans Total criticized and classified — 1,125 — 2,365 — — — — 3,490 Pass/Watch 173,843 176,182 219,331 94,363 9,604 103 6,250 679,676 Total construction $ 173,843 177,307 219,331 96,728 9,604 103 — 6,250 683,166 Total Mortgage Special mention $ — 3,749 28,706 22,296 13,407 27,373 1,094 — 96,625 Substandard — 439 18 36,905 7,518 43,870 799 — 89,549 Doubtful — — — — — — — — — Loss — — — — — — — — — Total criticized and classified — 4,188 28,724 59,201 20,925 71,243 1,893 — 186,174 Pass/Watch 1,212,473 1,306,877 1,088,673 634,104 634,111 1,872,391 104,498 38,270 6,891,397 Total Mortgage $ 1,212,473 1,311,065 1,117,397 693,305 655,036 1,943,634 106,391 38,270 7,077,571 Commercial Special mention $ 1,232 2,662 2,816 3,263 24,418 40,561 8,389 2,155 85,496 Substandard — 736 5,517 5,860 5,747 64,807 13,622 1,821 98,110 Doubtful — — — — — — — — — Loss — — — — — — — — — Total criticized and classified 1,232 3,398 8,333 9,123 30,165 105,368 22,011 3,976 183,606 Pass/Watch 415,924 222,132 179,193 154,440 149,567 489,051 355,097 39,856 2,005,260 Total commercial $ 417,156 225,530 187,526 163,563 179,732 594,419 377,108 43,832 2,188,866 Consumer (1) Special mention $ — — — — — 109 25 94 228 Substandard — — — 116 2 1,514 6 — 1,638 Doubtful — — — — — — — — — Loss — — — — — — — — — Total criticized and classified — — — 116 2 1,623 31 94 1,866 Pass/Watch 25,140 4,503 24,272 21,046 15,804 99,106 119,347 16,358 325,576 Total consumer $ 25,140 4,503 24,272 21,162 15,806 100,729 119,378 16,452 327,442 Total Loans Special mention $ 1,232 6,411 31,522 25,559 37,825 68,043 9,508 2,249 182,349 Substandard — 1,175 5,535 42,881 13,267 110,191 14,427 1,821 189,297 Doubtful — — — — — — — — — Loss — — — — — — — — — Total criticized and classified 1,232 7,586 37,057 68,440 51,092 178,234 23,935 4,070 371,646 Pass/Watch 1,653,537 1,533,512 1,292,138 809,590 799,482 2,460,548 578,942 94,484 9,222,233 Gross Loans Held by Investment by Year of Origination 2021 2020 2019 2018 2017 Prior to 2017 Revolving Loans Revolving loans to term loans Total Loans Total gross loans $ 1,654,769 1,541,098 1,329,195 878,030 850,574 2,638,782 602,877 98,554 9,593,879 (1) For residential and consumer loans, the Company assigns internal credit grades based on the delinquency status of each loan. |