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LOANS

12 Months Ended

Dec. 31, 2023

NOTE 5 — LOANS

Loans, net of deferred fees and costs, consist of the following (in thousands):


	At December 31,		At December 31,
	2023		2022
Real estate
Commercial	$	3,857,711	$	3,254,508
Construction		153,512		143,693
Multi-family		467,536		468,540
One-to four-family		94,704		53,207
Total real estate loans		4,573,463		3,919,948
Commercial and industrial		1,051,463		908,616
Consumer		17,086		24,931
Total loans		5,642,012		4,853,495
Deferred fees, net of origination costs		(17,215)		(12,972)
Loans, net of deferred fees and costs		5,624,797		4,840,523
Allowance for credit losses		(57,965)		(44,876)
Net loans	$	5,566,832	$	4,795,647

There were $3.3 billion and $2.4 billion of loans pledged to support wholesale funding at December 31, 2023 and 2022, respectively.

The following tables present the activity in the ACL by segment. The portfolio segments represent the categories that the Company uses to determine its ACL (in thousands):


	Commercial		Commercial						One-to four-
Year ended December 31, 2023	Real Estate		& Industrial		Construction		Multi-family		Family		Consumer		Total
Allowance for credit losses:
Beginning balance	$	29,496	$	10,274	$	1,983	$	2,823	$	105	$	195	$	44,876
Cumulative effect of changes in accounting principle		48		471		424		705		181		421		2,250
Provision/(credit) for credit losses		6,091		1,408		(642)		4,687		377		137		12,058
Loans charged-off		—		(946)		—		—		—		(273)		(1,219)
Recoveries		—		—		—		—		—		—		—
Total ending allowance balance	$	35,635	$	11,207	$	1,765	$	8,215	$	663	$	480	$	57,965


	Commercial		Commercial						One-to four-
Year ended December 31, 2022	Real Estate		& Industrial		Construction		Multi-family		Family		Consumer		Total
Allowance for credit losses:
Beginning balance	$	22,216	$	7,708	$	2,105	$	2,156	$	140	$	404	$	34,729
Provision/(credit) for credit losses		7,280		2,540		(122)		667		(35)		(214)		10,116
Loans charged-off		—		—		—		—		—		—		—
Recoveries		—		26		—		—		—		5		31
Total ending allowance balance	$	29,496	$	10,274	$	1,983	$	2,823	$	105	$	195	$	44,876

Net charge-offs (recoveries) for the years ended December 31, 2023 and 2022 were $1.2 million and $(31,000), respectively.

The following tables present the activity in the ACL for unfunded loan commitments (in thousands):


	Year ended December 31,
	2023		2022
Balance at the beginning of period	$	180	$	180
Cumulative effect of changes in accounting principle		777		—
Provision/(credit) for credit losses		225		—
Total ending allowance balance	$	1,182	$	180

The following tables present the balance in the ACL and the recorded investment in loans by portfolio segment based on impairment method (in thousands):


	Commercial		Commercial						One-to four-
At December 31, 2023	Real Estate		& Industrial		Construction		Multi-family		Family		Consumer		Total
Allowance for credit losses:
Individually assessed	$	—	$	—	$	—	$	5,002	$	—	$	64	$	5,066
Collectively assessed		35,635		11,207		1,765		3,213		663		416		52,899
Total ending allowance balance	$	35,635	$	11,207	$	1,765	$	8,215	$	663	$	480	$	57,965
Loans:
Individually assessed	$	40,955	$	6,934	$	—	$	20,939	$	—	$	104	$	68,932
Collectively assessed		3,816,756		1,044,529		153,512		446,597		94,704		16,982		5,573,080
Total ending loan balance	$	3,857,711	$	1,051,463	$	153,512	$	467,536	$	94,704	$	17,086	$	5,642,012


	Commercial		Commercial						One-to four-
At December 31, 2022	Real Estate		& Industrial		Construction		Multi-family		Family		Consumer		Total
Allowance for credit losses:
Individually assessed	$	—	$	—	$	—	$	—	$	—	$	24	$	24
Collectively assessed		29,496		10,274		1,983		2,823		105		171		44,852
Total ending allowance balance	$	29,496	$	10,274	$	1,983	$	2,823	$	105	$	195	$	44,876
Loans:
Individually assessed	$	26,740	$	—	$	—	$	—	$	899	$	24	$	27,663
Collectively assessed		3,227,768		908,616		143,693		468,540		52,308		24,907		4,825,832
Total ending loan balance	$	3,254,508	$	908,616	$	143,693	$	468,540	$	53,207	$	24,931	$	4,853,495

The following tables present the recorded investment in non-accrual loans, loans past due over 90 days and still accruing by class of loans (in thousands):


			Nonaccrual		Loans Past Due
			Without an		Over 90 Days
At December 31, 2023	Nonaccrual		ACL		Still Accruing
Commercial real estate	$	24,000	$	24,000	$	—
Commercial & industrial		6,934		6,934		—
Multi-family		20,939		—		—
Consumer		24		—		—
Total	$	51,897	$	30,934	$	—


			Nonaccrual		Loans Past Due
			Without an		Over 90 Days
At December 31, 2022		Nonaccrual	ACL		Still Accruing
Consumer	$	24	$	—	$	—
Total	$	24	$	—	$	—

Interest income on nonaccrual loans recognized on a cash basis for the years ended December 31, 2023 and 2022 was immaterial.

The following table presents the aging of the recorded investment in past due loans by class of loans (in thousands):


					90
	30-59		60-89		Days and		Total past		Current
At December 31, 2023	Days		Days		greater		due		loans		Total
Commercial real estate	$	—	$	—	$	24,000	$	24,000	$	3,833,711	$	3,857,711
Commercial & industrial		20		18		6,934		6,973		1,044,490		1,051,463
Construction		—		—		—		—		153,512		153,512
Multi-family		—		—		20,939		20,939		446,597		467,536
One-to four-family		612		—		—		612		94,092		94,704
Consumer		—		—		24		24		17,062		17,086
Total	$	632	$	18	$	51,897	$	52,548	$	5,589,464	$	5,642,012


					90
	30-59		60-89		Days and		Total past		Current
At December 31, 2022	Days		Days		greater		due		loans		Total
Commercial real estate	$	—	$	24,000	$	—	$	24,000	$	3,230,508	$	3,254,508
Commercial & industrial		37		—		—		37		908,579		908,616
Construction		—		—		—		—		143,693		143,693
Multi-family		8,000		—		—		8,000		460,540		468,540
One-to four-family		—		—		—		—		53,207		53,207
Consumer		21		—		24		45		24,886		24,931
Total	$	8,058	$	24,000	$	24	$	32,082	$	4,821,413	$	4,853,495

Credit Quality Indicators

The Company categorizes loans into risk categories based on relevant information about the ability of borrowers to service their debt such as: current financial information, historical payment experience, credit documentation, public information, and current economic trends, among other factors. Except for one-to four-family loans and consumer loans, the Company analyzes loans individually by classifying the loans as to credit risk at least annually. For one-to four-family loans and consumer loans, the Company evaluates credit quality based on the aging status of the loan, which was previously presented. An analysis is performed on a quarterly basis for loans classified as special mention, substandard, or doubtful. The Company uses the following definitions for risk ratings:

Special Mention - Loans classified as special mention have a potential weakness that deserves management’s attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the loan or of the Company’s credit position at some future date.

Substandard - Loans classified as substandard are inadequately protected by the current net worth and paying capacity of the obligor or of the collateral pledged, if any. Loans so classified have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. They are characterized by the distinct possibility that the Company will sustain some loss if the deficiencies are not corrected.

Doubtful - Loans classified as doubtful have all the weaknesses inherent in those classified as substandard, with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions, and values, highly questionable and improbable.

The following table presents loan balances by credit quality indicator and year of origination at December 31, 2023 (in thousands):


	2023		2022		2021		2020		2019		2018 & Prior		Revolving		Total
CRE
Pass	$	1,500,873	$	1,268,550	$	512,497	$	128,320	$	200,304	$	83,309	$	44,672	$	3,738,525
Special Mention		24,500		38,867		14,561		304		—		—		—		78,232
Substandard		—		40,954		—		—		—		—		—		40,954
Total	$	1,525,373	$	1,348,371	$	527,058	$	128,624	$	200,304	$	83,309	$	44,672	$	3,857,711

Construction
Pass	$	84,881	$	56,065	$	—	$	—	$	—	$	—	$	12,566	$	153,512
Total	$	84,881	$	56,065	$	—	$	—	$	—	$	—	$	12,566	$	153,512

Multi-family
Pass	$	115,761	$	114,652	$	51,768	$	23,655	$	34,533	$	69,510	$	6,415	$	416,294
Special Mention		—		30,303		—		—		—		—		—		30,303
Substandard		—		—		20,939		—		—		—		—		20,939
Total	$	115,761	$	144,955	$	72,707	$	23,655	$	34,533	$	69,510	$	6,415	$	467,536

One-to four-family
Current	$	45,000	$	4,081	$	—	$	9,784	$	12,157	$	23,682	$	—	$	94,704
Total	$	45,000	$	4,081	$	—	$	9,784	$	12,157	$	23,682	$	—	$	94,704

Commercial and industrial
Pass	$	178,814	$	252,359	$	98,753	$	23,943	$	14,390	$	5,904	$	402,247	$	976,410
Special Mention		3,840		33,918		—		2,080		—		—		28,281		68,119
Substandard		3,435		—		—		—		—		—		3,499		6,934
Total	$	186,089	$	286,277	$	98,753	$	26,023	$	14,390	$	5,904	$	434,027	$	1,051,463

Consumer
Current	$	—	$	—	$	—	$	—	$	—	$	17,062	$	—	$	17,062
Past due		—		—		—		—		—		24		—		24
Total	$	—	$	—	$	—	$	—	$	—	$	17,086	$	—	$	17,086

Charge-offs
Commercial and industrial	$	—	$	—	$	915	$	—	$	—	$	31	$	—	$	946
Consumer		—		—		—		—		—		273		—		273
	$	—	$	—	$	915	$	—	$	—	$	304	$	—	$	1,219

At December 31, 2023, there were $41.0 million and $20.9 million of CRE and Multi-family substandard classified collateral dependent loans, respectively. There were no loan modifications where the borrower was experiencing financial difficulty for the year ended December 31, 2023.

The following tables present loans individually evaluated for impairment pursuant to the disclosure requirements prior to the adoption of ASC 326 on January 1, 2023 (in thousands). For loans evaluated by credit risk ratings, the following table presents loan balances by credit quality indicator and by class of loans at December 31, 2022 (in thousands):


			Special
At December 31, 2022	Pass		Mention		Substandard		Doubtful			Total
Commercial real estate	$	3,192,212	$	35,881	$	26,415	$	—	$	3,254,508
Commercial & industrial		876,867		31,749		—		—		908,616
Construction		143,693		—		—		—		143,693
Multi-family		468,540		—		—		—		468,540
Total	$	4,681,312	$	67,630	$	26,415	$	—	$	4,775,357

The following tables present loans individually evaluated for impairment (in thousands). The recorded investment in loans excludes accrued interest receivable and loan origination fees.


		At December 31, 2022					Year ended December 31, 2022
					Allowance
	Unpaid				for Loan		Average		Interest
	Principal		Recorded		Losses		Recorded		Income
	Balance		Investment		Allocated		Investment		Recognized
With an allowance recorded:
Consumer	$	24	$	24	$	24	$	79	$	—
Total	$	24	$	24	$	24	$	79	$	—

Without an allowance recorded:
One-to four-family	$	1,176	$	899	$	—	$	832	$	31
CRE		27,984		26,740		—		30,142		1,041
Total	$	29,160	$	27,639	$	—	$	30,974	$	1,072


		At December 31, 2021					Year ended December 31, 2021
					Allowance
	Unpaid				for Loan		Average		Interest
	Principal		Recorded		Losses		Recorded		Income
	Balance		Investment		Allocated		Investment		Recognized
With an allowance recorded:
One-to four-family	$	577	$	447	$	26	$	462	$	21
Consumer		302		302		170		1,766		84
C&I		—		—		—		2,726		—
Total	$	879	$	749	$	196	$	4,954	$	105

Without an allowance recorded:
One-to four-family	$	646	$	499	$	—	$	509	$	26
CRE		38,518		38,518		—		15,975		325
C&I		—		—		—		77		—
Total	$	39,164	$	39,017	$	—	$	16,561	$	351

COVID-19

As of December 31, 2023, the Company had no loans that were modified in accordance with the COVID-19 Guidance and the CARES Act. As of December 31, 2022, the Company had one loan amounting to $20.8 million, or 0.43% of total loans, that was modified in accordance with the COVID-19 Guidance and the CARES Act. Included in C&I loans at December 31, 2023 and 2022 were $54,000 and $97,000, respectively, of PPP loans.