LOANS

6 Months Ended

Jun. 30, 2024

LOANS

LOANS

NOTE 4: LOANS

The following is a summary of our loans held for investment as of:

	June 30,		December 31,
(dollars in thousands)	2024		2023
Outstanding principal balance:
Loans secured by real estate:
Residential properties:
Multifamily	$	5,227,261	$	5,227,885
Single family		917,656		950,712
Total real estate loans secured by residential properties		6,144,917		6,178,597
Commercial properties		973,116		987,596
Land and construction		85,260		137,298
Total real estate loans		7,203,293		7,303,491
Commercial and industrial loans		2,866,024		2,856,228
Consumer loans		2,097		1,328
Total loans		10,071,414		10,161,047
Premiums, discounts and deferred fees and expenses		15,854		16,755
Total	$	10,087,268	$	10,177,802

The Company’s loans held for investment portfolio is segmented according to loans that share similar attributes and risk characteristics.

Loans secured by real estate include those secured by either residential or commercial real estate properties, such as multifamily and single-family residential loans; owner occupied and non-owner occupied commercial real estate loans; and land and construction loans.

Commercial and industrial loans are loans to businesses where the operating cash flow of the business is the primary source of payment.  This segment includes commercial revolving lines of credit and term loans, municipal finance loans, equipment finance loans and SBA loans.

Consumer loans include personal installment loans and line of credit, and home equity lines of credit.  These loan products are offered as an accommodation to clients of our primary business lines.

Loans with a collateral value totaling $239.4 million and $283.7 million were pledged as collateral to secure borrowings with the Federal Reserve Bank at June 30, 2024 and December 31, 2023, respectively.  Loans with a market value of $4.4 billion and $4.2 billion were pledged as collateral to secure borrowings with the FHLB at June 30, 2024 and December 31, 2023, respectively.

During the six-month period ended June 30, 2024, loans totaling $8.1 million in unpaid principal balance were sold, resulting in a net gain on sale of loans of $678 thousand.  There were no loan sales during the six-month period ended June 30, 2023.  There were no outstanding loans held-for-sale as of June 30, 2024 and December 31, 2023.

The following table summarizes our delinquent and nonaccrual loans as of:

	Past Due and Still Accruing												Total Past
							90 Days						Due and
(dollars in thousands)	30–59 Days			60-89 Days			or More			Nonaccrual			Nonaccrual			Current		Total
June 30, 2024:
Real estate loans:
Residential properties	$	4,964		$	—		$	—		$	1,152		$	6,116		$	6,157,500	$	6,163,616
Commercial properties		8,000			—			—			8,762			16,762			955,746		972,508
Land and construction		—			—			—			—			—			85,053		85,053
Commercial and industrial loans		892			296			—			9,005			10,193			2,853,758		2,863,951
Consumer loans		—			178			—			—			178			1,962		2,140
Total	$	13,856		$	474		$	—		$	18,919		$	33,249		$	10,054,019	$	10,087,268
Percentage of total loans		0.14	%		0.00	%		—	%		0.19	%		0.33	%
December 31, 2023:
Real estate loans:
Residential properties	$	93		$	416		$	—		$	112		$	621		$	6,196,923	$	6,197,544
Commercial properties		27,403			403			1,730			2,915			32,451			954,321		986,772
Land and construction		—			—			—			—			—			136,827		136,827
Commercial and industrial loans		525			88			—			8,804			9,417			2,845,845		2,855,262
Consumer loans		—			—			—			—			—			1,397		1,397
Total	$	28,021		$	907		$	1,730		$	11,831		$	42,489		$	10,135,313	$	10,177,802
Percentage of total loans		0.28	%		0.01	%		0.02	%		0.12	%		0.42	%

The following table summarizes our nonaccrual loans as of:

	Nonaccrual		Nonaccrual
	with Allowance		with no Allowance
(dollars in thousands)	for Credit Losses		for Credit Losses
June 30, 2024:
Real estate loans:
Residential properties	$	908	$	244
Commercial properties		8,762		—
Commercial and industrial loans		8,755		250
Total	$	18,425	$	494
December 31, 2023:
Real estate loans:
Residential properties	$	—	$	112
Commercial properties		—		2,915
Commercial and industrial loans		7,406		1,398
Total	$	7,406	$	4,425

The Company adopted ASU 2022-02, Financial Instruments-Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures on January 1, 2023.  The amendments in this ASU eliminate the accounting guidance for TDRs by creditors in Subtopic 310-40, Receivables-Troubled Debt Restructurings by Creditors, while enhancing disclosure requirements for certain loan refinancings and restructurings by creditors when a borrower is experiencing financial difficulty.  The amendments in this ASU were applied prospectively, and therefore, loan modification and charge off information is provided for only those items occurring after the January 1, 2023 adoption date.

Based on the guidance in ASU 2022-02, a loan modification or refinancing results in a new loan if the terms of the new loan are at least as favorable to the lender as the terms with customers with similar collection risks that are not refinancing or restructuring their loans and the modification to the terms of the loan are more than minor.  If a loan modification or refinancing does not result in a new loan, it is classified as a loan modification.

There are additional disclosures for modification of loans with borrowers experiencing financial difficulty that result in a direct change in the timing or amount of contractual cash flows.  The disclosures are applicable to situations where there is interest rate reduction, term extensions, principal forgiveness, other-than-insignificant payment delays, or a combination of any of these items.  

The following table presents our loan modifications made to borrowers experiencing financial difficulty by type of modification for the six-month periods ended June 30, 2024 and 2023, respectively with related amortized cost balances, respective percentage share of the total class of loans, and the related financial effect:

	June 30, 2024:
	Term Extension
		Amortized Cost Basis	% of Total Class of Loans		Financial Effect
Commercial real estate loans	$	12,900	1.30	%	1 loan with term extension of 10 months.
Commercial and industrial loans		1,269	0.04	%	4 loans with various extensions of loan maturity ranging from 3 to 62.5 months. 1 loan with 3-month extension and 3-month forbearance. 1 loan with $100 payments through 3 months.
Total	$	14,169
	Combination
		Amortized Cost Basis	% of Total Class of Loans		Financial Effect
Commercial and industrial loans	$	7,183	0.01	%	4 loans with various extensions of loan maturity ranging from 6 to 19 months and payment deferral. 1 loan with 5 month forbearance followed by interest rate reduction. 1 loan with $100 payments through 3 months with payment deferral.
Total	$	7,183
	Total
		Amortized Cost Basis	% of Total Class of Loans
Commercial real estate loans	$	12,900	1.30	%
Commercial and industrial loans		8,452	0.05	%
Total	$	21,352
	June 30, 2023:
	Payment Deferrals
		Amortized Cost Basis	% of Total Class of Loans		Financial Effect
Commercial and industrial loans	$	1,339	0.04	%	1 loan with payments deferred for 4 months.
Total	$	1,339
	Combination
		Amortized Cost Basis	% of Total Class of Loans		Financial Effect
Commercial and industrial loans	$	950	0.03	%	1 loan with payments deferred for 4 months and term extended by 4 months.
Total	$	950
	Total
		Amortized Cost Basis	% of Total Class of Loans
Commercial and industrial loans	$	2,289	0.07	%
Total	$	2,289

For the six-month period ended June 30, 2023, the Company made a total of 2 loan modifications to borrowers experiencing financial difficulty, which consisted of commercial and industrial loans having an amortized cost basis of $2.3 million and representing 0.07% of the total class of commercial and industrial loans.

The following table presents the payment status of our loan modifications made during the previous twelve-month period of July 1, 2023 to June 30, 2024:

			30-89 Days		90+ Days
(dollars in thousands)		Current	Past Due		Past Due			Nonaccrual	Total
June 30, 2024:
Residential loans	$	247	$	—	$	—	$	—	$	247
Commercial real estate loans		13,515		—		—		—		13,515
Commercial and industrial loans		13,635		—		—		8,055		21,690
Total	$	27,397	$	—	$	—	$	8,055	$	35,452

None of the loans modified during the twelve-month period of July 1, 2023 to June 30, 2024 subsequently had a payment default.