Loans Receivable and Allowance for Credit Losses | Loans Receivable and Allowance for Credit Losses Loans receivable at March 31, 2023 and December 31, 2022 are summarized as follows (in thousands): March 31, 2023 December 31, 2022 Mortgage loans: Commercial $ 4,292,853 $ 4,316,185 Multi-family 1,580,297 1,513,818 Construction 658,902 715,494 Residential 1,174,035 1,177,698 Total mortgage loans 7,706,087 7,723,195 Commercial loans 2,228,207 2,233,670 Consumer loans 301,672 304,780 Total gross loans 10,235,966 10,261,645 Premiums on purchased loans 1,364 1,380 Net deferred fees and unearned discounts (13,116) (14,142) Total loans $ 10,224,214 $ 10,248,883 The following tables summarize the aging of loans receivable by portfolio segment and class of loans (in thousands): March 31, 2023 30-59 Days 60-89 Days Non-accrual Recorded Total Past Current Total Loans Non-accrual loans with no specific allowance Mortgage loans: Commercial $ 3,000 $ 1,528 $ 6,815 $ — $ 11,343 $ 4,281,510 $ 4,292,853 $ 3,812 Multi-family 3,875 785 1,548 — 6,208 1,574,089 1,580,297 1,548 Construction — — 1,874 — 1,874 657,028 658,902 1,874 Residential 2,064 639 1,744 — 4,447 1,169,588 1,174,035 1,744 Total mortgage loans 8,939 2,952 11,981 — 23,872 7,682,215 7,706,087 8,978 Commercial loans 1,070 3,028 23,129 — 27,227 2,200,980 2,228,207 20,270 Consumer loans 2,106 150 346 — 2,602 299,070 301,672 346 Total gross loans $ 12,115 $ 6,130 $ 35,456 $ — $ 53,701 $ 10,182,265 $ 10,235,966 $ 29,594 December 31, 2022 30-59 Days 60-89 Days Non-accrual Recorded Total Past Current Total Loans Receivable Non-accrual loans with no specific allowance Mortgage loans: Commercial $ 2,300 $ 412 $ 28,212 $ — $ 30,924 $ 4,285,261 $ 4,316,185 $ 22,961 Multi-family 790 — 1,565 — 2,355 1,511,463 1,513,818 1,565 Construction 905 1,097 1,878 — 3,880 711,614 715,494 1,878 Residential 1,411 1,114 1,928 — 4,453 1,173,245 1,177,698 1,928 Total mortgage loans 5,406 2,623 33,583 — 41,612 7,681,583 7,723,195 28,332 Commercial loans 964 1,014 24,188 — 26,166 2,207,504 2,233,670 21,156 Consumer loans 885 147 738 — 1,770 303,010 304,780 739 Total gross loans $ 7,255 $ 3,784 $ 58,509 $ — $ 69,548 $ 10,192,097 $ 10,261,645 $ 50,227 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 $35.5 million and $58.5 million at March 31, 2023 and December 31, 2022, respectively. Included in non-accrual loans were $11.9 million and $42.9 million of loans which were less than 90 days past due at March 31, 2023 and December 31, 2022, respectively. There were no loans 90 days or greater past due and still accruing interest at March 31, 2023 and December 31, 2022. Generally, accrued interest is written off by reversing interest income during the quarter the loan is moved from an accrual to a non-accrual status. The activity in the allowance for credit losses by portfolio segment for the three months ended March 31, 2023 and 2022 was as follows (in thousands): Three months ended March 31, Mortgage loans Commercial loans Consumer loans Total 2023 Balance at beginning of period $ 58,218 $ 27,413 $ 2,392 $ 88,023 Cumulative effect of adopting Accounting Standards Update ("ASU") No. 2022-02 (510) (43) (41) (594) Provision charge (benefit) to operations 6,212 (308) 96 6,000 Recoveries of loans previously charged-off 3 168 85 256 Loans charged-off (728) (113) (86) (927) Balance at end of period $ 63,195 $ 27,117 $ 2,446 $ 92,758 2022 Balance at beginning of period $ 52,104 $ 26,343 $ 2,293 $ 80,740 Provision benefit to operations (1,995) (4,404) (1) (6,400) Recoveries of loans previously charged-off 10 1,860 166 2,036 Loans charged-off (23) — (78) (101) Balance at end of period $ 50,096 $ 23,799 $ 2,380 $ 76,275 For the three months ended March 31, 2023, the Company recorded a $6.0 million provision for credit losses on loans, compared to a $6.4 million benefit for credit losses for the same period in 2022. The increase in provision was attributable to a worsening economic forecast and related deterioration in the projected commercial property price index over the expected life of the loan portfolio. The following table summarizes the Company's gross charge-offs recorded during the three months ended March 31, 2023 by year of origination (in thousands): 2023 2022 2021 2020 2019 Prior to 2019 Total Loans Mortgage loans: Commercial $ — $ — $ — $ — $ — $ 707 $ 707 Residential — — — — — 21 21 Total mortgage loans — — — — — 728 728 Commercial loans — — — — — 113 113 Consumer loans (1) 5 — — — — 10 15 Total gross loans $ 5 $ — $ — $ — $ — $ 850 $ 855 (1) During the three months ended March 31, 2023, charge-offs on consumer overdraft accounts totaled $72,000, which is not included in the table above. 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. At March 31, 2023, there were 15 impaired loans totaling $27.5 million, compared to 10 impaired loans totaling $42.8 million at December 31, 2022. 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. 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. 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 March 31, 2023 and December 31, 2022, the fair value of the assets securing collateral-dependent impaired loans totaled $5.2 million and $24.0 million, respectively. These collateral-dependent impaired loans at March 31, 2023 consisted of $5.2 million in commercial loans. Loan modifications to borrowers experiencing financial difficulty may include interest rate reductions, principal or interest forgiveness, forbearance, term extensions, and other actions intended to minimize economic loss and to avoid foreclosure or repossession of collateral. 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 illustrates the most common loan modifications by loan classes offered by the Company that are required to be disclosed pursuant to the requirements of ASU 2022-02: Loan Classes Modification types Commercial Term extension, interest rate reductions, payment delay, or combination thereof. These modifications extend the term of the loan, lower the payment amount, or otherwise delay payments during a defined period for the purpose of providing borrowers additional time to return to compliance with the original loan term. Residential Mortgage/ Home Equity Forbearance period greater than six months. These modifications require reduced or no payments during the forbearance period for the purpose of providing borrowers additional time to return to compliance with the original loan term. As well as, term extension and rate adjustment. These modifications extend the term of the loan and provides for an adjustment to the interest rate, which reduces the monthly payment requirement. Automobile/ Direct Installment Term extension greater than three months. These modifications extend the term of the loan, which reduces the monthly payment requirement. Effective January 1, 2023, the Company adopted ASU 2022-02, “Financial Instruments - Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures” (“ASU 2022-02”), which eliminated the accounting guidance for troubled debt restructurings (“TDRs”) while enhancing disclosure requirements for certain loan refinancing and restructurings by creditors when a borrower is experiencing financial difficulty. This guidance was applied on a modified retrospective basis. Upon adoption of this guidance, the Company no longer establishes a specific reserve for loan modifications to borrowers experiencing financial difficulty. Instead, these loan modifications are included in their respective pool and a historical loss rate is applied to the current loan balance to arrive at the quantitative and qualitative baseline portion of the allowance for credit losses. As a result, The Company recorded a $594,000 reduction to the allowance for credit losses, which resulted in a $433,000 cumulative effect adjustment increase, net of tax to retained earnings. The following table presents the amortized cost basis of loan modifications made to borrowers experiencing financial difficulty during the three months ended March 31, 2023 (in thousands): As of March 31, 2023 Term Extension Interest Rate Reduction Interest Rate Reduction and Term Extension % of Total Class of Loans and Leases Commercial loans $ 3,771 $ — $ 1,250 0.23 % Total gross loans $ 3,771 $ — $ 1,250 0.05 % The following table presents the financial effect of loan modifications made to borrowers experiencing financial difficulty during the three months ended March 31, 2023 (in thousands): As of March 31, 2023 Weighted-Average Months of Term Extension Weight-Average Rate Change Commercial loans 10 0.28 % Total gross loans 10 0.28 % There were no loan modifications made to borrowers experiencing financial difficulty during the three months ended March 31, 2023, that subsequently defaulted. The following table presents the aging analysis of loan modifications made to borrowers experiencing financial difficulty during the three months ended March 31, 2023 (in thousands): As of March 31, 2023 Current 30-59 Days Past Due 60-89 Days Past Due 90 days or more Past Due Non- Accrual Total Commercial loans $ 5,021 $ — $ — $ — $ — $ 5,021 Total gross loans $ 5,021 $ — $ — $ — $ — $ 5,021 Prior to our adoption of ASU 2022-02, we accounted for a modification to the contractual terms of a loan that resulted in granting a concession to a borrower experiencing financial difficulties as a TDR. However, our TDR accounting described herein was suspended for most of our loss mitigation activities through our election to account for certain eligible loss mitigation activities occurring between March 2020 and January 1, 2022 under the COVID-19 relief granted pursuant to the CARES Act and the Consolidated Appropriations Act of 2021. Effective January 1, 2023, we adopted ASU 2022-02, which eliminated TDR accounting prospectively for all restructurings occurring on or after January 1, 2023. There were no loans modified as TDRs during the three months ended March 31, 2022. During the three months ended March 31, 2022, no charge-offs were recorded on collateral-dependent impaired loans. There were no loans which had a payment default (90 days or more past due) for loans modified as TDRs within the 12 month period ending March 31, 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 March 31, 2023, the balance of PCD loans totaled $176.8 million with a related allowance for credit losses of $1.6 million. The balance of PCD loans at December 31, 2022 was $193.0 million with a related allowance for credit losses of $1.7 million. 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. PPP loans were fully guaranteed by the SBA and were eligible for forgiveness by the SBA to the extent that the proceeds were 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 were met regarding employee retention and compensation levels. PPP loans deemed eligible for forgiveness by the SBA are to be repaid by the SBA to the Company. Eligibility ended for this program in May of 2021. PPP loans are included in our commercial loan portfolio. Under the PPP, the Company secured 2,067 PPP loans for its customers totaling $682.0 million. As of March 31, 2023, 2,054 PPP loans totaling $679.3 million were forgiven and repaid by the SBA. The balance of PPP loans at March 31, 2023 was $2.7 million. The following table summarizes the Company's gross loans held for investment by year of origination and internally assigned credit grades as of March 31, 2023 and December 31, 2022 (in thousands): Gross Loans Held for Investment by Year of Origination 2023 2022 2021 2020 2019 Prior to 2019 Revolving Loans Revolving loans to term loans Total Loans Commercial Mortgage Special mention $ — $ — $ — $ — $ 2,362 $ 62,927 $ — $ — $ 65,289 Substandard — — — 3,368 — 9,284 434 — 13,086 Doubtful — — — — — — — — — Loss — — — — — — — — — Total criticized and classified — — — 3,368 2,362 72,211 434 — 78,375 Pass/Watch 93,927 947,705 685,431 517,967 529,292 1,330,651 94,820 14,685 4,214,478 Total commercial mortgage 93,927 947,705 685,431 521,335 531,654 1,402,862 95,254 14,685 4,292,853 Multi-family Special mention — — — — — 9,675 — — 9,675 Substandard — — — — — 3,235 — — 3,235 Doubtful — — — — — — — — — Loss — — — — — — — — — Total criticized and classified — — — — — 12,910 — — 12,910 Pass/Watch 52,704 171,433 191,861 280,615 233,866 634,852 917 1,139 1,567,387 Total multi-family 52,704 171,433 191,861 280,615 233,866 647,762 917 1,139 1,580,297 Construction Special mention — — — — — — — — — Substandard — — — — 1,097 777 — — 1,874 Doubtful — — — — — — — — — Loss — — — — — — — — — Total criticized and classified — — — — 1,097 777 — — 1,874 Pass/Watch 537 219,556 278,128 110,832 32,349 13,616 2,010 657,028 Total construction 537 219,556 278,128 110,832 33,446 14,393 — 2,010 658,902 Residential (1) Special mention — — — — — — — — — Substandard — — — — — 639 — — 639 Gross Loans Held for Investment by Year of Origination 2023 2022 2021 2020 2019 Prior to 2019 Revolving Loans Revolving loans to term loans Total Loans Doubtful — — — — — 3,481 — — 3,481 Loss — — — — — — — — — Total criticized and classified — — — — — 4,120 — — 4,120 Pass/Watch 20,826 149,479 209,468 208,443 94,377 487,322 — — 1,169,915 Total residential 20,826 149,479 209,468 208,443 94,377 491,442 — — 1,174,035 Total Mortgage Special mention — — — — 2,362 72,602 — — 74,964 Substandard — — — 3,368 1,097 13,935 434 — 18,834 Doubtful — — — — — 3,481 — — 3,481 Loss — — — — — — — — — Total criticized and classified — — — 3,368 3,459 90,018 434 — 97,279 Pass/Watch 167,994 1,488,173 1,364,888 1,117,857 889,884 2,466,441 95,737 17,834 7,608,808 Total Mortgage $ 167,994 $ 1,488,173 $ 1,364,888 $ 1,121,225 $ 893,343 $ 2,556,459 $ 96,171 $ 17,834 $ 7,706,087 Commercial Special mention — 73 839 449 187 14,616 14,587 129 30,880 Substandard — — 15,318 10,734 3,994 14,440 13,356 364 58,206 Doubtful — — — — — — — — — Loss — — — — — — — — — Total criticized and classified — 73 16,157 11,183 4,181 29,056 27,943 493 89,086 Pass/Watch 75,026 371,929 310,565 158,684 156,110 568,436 470,309 28,062 2,139,121 Total commercial 75,026 372,002 326,722 169,867 160,291 597,492 498,252 28,555 2,228,207 Consumer (1) Special mention — — — — — — 150 — 150 Substandard — — — — — 260 6 3 269 Doubtful — — — — — — — — — Loss — — — — — — — — — Total criticized and classified — — — — — 260 156 3 419 Pass/Watch 8,096 29,746 20,155 2,955 16,029 98,746 112,826 12,700 301,253 Total consumer 8,096 29,746 20,155 2,955 16,029 99,006 112,982 12,703 301,672 Total Loans Special mention — 73 839 449 2,549 87,218 14,737 129 105,994 Substandard — — 15,318 14,102 5,091 28,635 13,796 367 77,309 Doubtful — — — — — 3,481 — — 3,481 Loss — — — — — — — — — Total criticized and classified — 73 16,157 14,551 7,640 119,334 28,533 496 186,784 Gross Loans Held for Investment by Year of Origination 2023 2022 2021 2020 2019 Prior to 2019 Revolving Loans Revolving loans to term loans Total Loans Pass/Watch 251,116 1,889,848 1,695,608 1,279,496 1,062,023 3,133,623 678,872 58,596 10,049,182 Total gross loans $ 251,116 $ 1,889,921 $ 1,711,765 $ 1,294,047 $ 1,069,663 $ 3,252,957 $ 707,405 $ 59,092 $ 10,235,966 (1) For residential and consumer loans, the Company assigns internal credit grades based on the delinquency status of each loan. Gross Loans Held for Investment by Year of Origination 2022 2021 2020 2019 2018 Prior to 2018 Revolving Loans Revolving loans to term loans Total Loans Commercial Mortgage Special mention $ — $ — $ 3,071 $ 26,809 $ 52,509 $ 14,740 $ — $ — $ 97,129 Substandard — — — — 18,020 11,774 434 — 30,228 Doubtful — — — — — — — — — Loss — — — — — — — — — Total criticized and classified — — 3,071 26,809 70,529 26,514 434 — 127,357 Pass/Watch 951,367 630,584 567,448 546,474 218,620 1,164,854 94,716 14,765 4,188,828 Total commercial mortgage 951,367 630,584 570,519 573,283 289,149 1,191,368 95,150 14,765 4,316,185 Multi-family Special mention — — — — — 9,730 — — 9,730 Substandard — — — — — 2,356 — — 2,356 Doubtful — — — — — — — — — Loss — — — — — — — — — Total criticized and classified — — — — — 12,086 — — 12,086 Pass/Watch 142,550 150,293 282,228 234,953 187,499 502,177 887 1,145 1,501,732 Total multi-family 142,550 150,293 282,228 234,953 187,499 514,263 887 1,145 1,513,818 Construction Special mention — — — — 19,728 905 — — 20,633 Substandard — — — 2,197 777 — — — 2,974 Doubtful — — — — — — — — — Loss — — — — — — — — — Total criticized and classified — — — 2,197 20,505 905 — — 23,607 Pass/Watch 168,674 362,542 103,067 38,639 16,917 62 1,986 691,887 Total construction 168,674 362,542 103,067 40,836 37,422 967 — 1,986 715,494 Residential (1) Special mention — — — — — 1,114 — — 1,114 Substandard — — — — 264 4,417 — — 4,681 Doubtful — — — — — — — — — Gross Loans Held for Investment by Year of Origination 2022 2021 2020 2019 2018 Prior to 2018 Revolving Loans Revolving loans to term loans Total Loans Loss — — — — — — — — — Total criticized and classified — — — — 264 5,531 — — 5,795 Pass/Watch 151,077 212,697 211,445 95,872 58,226 442,586 — — 1,171,903 Total residential 151,077 212,697 211,445 95,872 58,490 448,117 — — 1,177,698 Total Mortgage Special mention $ — — 3,071 26,809 72,237 26,489 — — 128,606 Substandard — — — 2,197 19,061 18,547 434 — 40,239 Doubtful — — — — — — — — — Loss — — — — — — — — — Total criticized and classified — — 3,071 29,006 91,298 45,036 434 — 168,845 Pass/Watch 1,413,668 1,356,116 1,164,188 915,938 481,262 2,109,679 95,603 17,896 7,554,350 Total Mortgage $ 1,413,668 $ 1,356,116 $ 1,167,259 $ 944,944 $ 572,560 $ 2,154,715 $ 96,037 $ 17,896 $ 7,723,195 Commercial Special mention 75 1,148 444 201 10,156 4,379 14,530 140 31,073 Substandard — 7,605 10,230 4,391 3,561 13,734 7,604 364 47,489 Doubtful — — — — — — — — — Loss — — — — — — — — — Total criticized and classified 75 8,753 10,674 4,592 13,717 18,113 22,134 504 78,562 Pass/Watch 377,662 320,334 162,175 161,150 87,396 522,798 492,717 30,876 2,155,108 Total commercial 377,737 329,087 172,849 165,742 101,113 540,911 514,851 31,380 2,233,670 Consumer (1) Special mention — — — — — 146 — — 146 Substandard — 8 — 109 332 209 — 658 Doubtful — — — — — — — — — Loss — — — — — — — — — Total criticized and classified — — 8 — 109 478 209 — 804 Pass/Watch 30,132 20,671 2,909 16,682 16,156 88,173 115,777 13,476 303,976 Total consumer 30,132 20,671 2,917 16,682 16,265 88,651 115,986 13,476 304,780 Total Loans Special mention 75 1,148 3,515 27,010 82,393 31,014 14,530 140 159,825 Substandard — 7,605 10,238 6,588 22,731 32,613 8,247 364 88,386 Doubtful — — — — — — — — — Loss — — — — — — — — — Total criticized and classified 75 8,753 13,753 33,598 105,124 63,627 22,777 504 248,211 Pass/Watch 1,821,462 1,697,121 1,329,272 1,093,770 584,814 2,720,650 704,097 62,248 10,013,434 Gross Loans Held for 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 $ 1,821,537 $ 1,705,874 $ 1,343,025 $ 1,127,368 $ 689,938 $ 2,784,277 $ 726,874 $ 62,752 $ 10,261,645 (1) For residential and consumer loans, the Company assigns internal credit grades based on the delinquency status of each loan. |