Loans and Allowance for Credit Losses

12 Months Ended

Dec. 31, 2022

Notes to Financial Statements

Loans and Allowance for Credit Losses

4. Loans and Allowance for Credit Losses

The composition of loans is as follows at December 31:

	2022		2021
	(In thousands)
Multi-family residential	$	2,601,384	$	2,517,026
Commercial real estate		1,913,040		1,775,629
One-to-four family ― mixed-use property		554,314		571,795
One-to-four family ― residential		241,246		276,571
Construction		70,951		59,761
Small Business Administration (1)		23,275		93,811
Commercial business and other		1,521,548		1,339,273
Gross loans		6,925,758		6,633,866
Net unamortized premiums and unearned loan fees		9,011		4,239
Total loans, net of fees and costs	$	6,934,769	$	6,638,105

(1) Includes $5.2 million, and $77.4 million of SBA Payment Protection Program (“SBA PPP”) loans at December 31, 2022, and 2021, respectively.

The majority of our loan portfolio is invested in multi-family residential, commercial real estate and commercial business and other loans, which totaled 87.2% and 84.9% of our gross loans at December 31, 2022 and 2021, respectively. Our concentration in these types of loans increases the overall level of credit risk inherent in our loan portfolio. The greater risk associated with these types of loans could require us to increase our allowance and provision for credit losses and to maintain an ACL as a percentage of total loans in excess of the allowance currently maintained. In addition to our loan portfolio, at December 31, 2022, we were servicing $52.1 million of loans for others.

Loans secured by multi-family residential property and commercial real estate generally involve a greater degree of risk than residential mortgage loans and generally carry larger loan balances. The increased credit risk is the result of several factors, including the concentration of principal in a smaller number of loans and borrowers, the effects of general economic conditions on income producing properties and the increased difficulty in evaluating and monitoring these types of loans. Furthermore, the repayments of loans secured by these types of properties are typically dependent upon the successful operation of the related property, which is usually owned by a legal entity with the property being the entity’s only asset. If the cash flow from the property is reduced, the borrower’s ability to repay the loan may be impaired. If the borrower defaults, our only remedy may be to foreclose on the property, for which the market value may be less than the balance due on the related mortgage loan.

Loans secured by commercial business and other loans involve a greater degree of risk for the same reasons as for multi-family residential and commercial real estate loans with the added risk that many of the loans are not secured by improved properties.

To minimize the risks involved in the origination of multi-family residential, commercial real estate and commercial business and other loans, the Company adheres to defined underwriting standards, which include reviewing the expected net operating income generated by the real estate collateral securing the loan, the age and condition of the collateral, the financial resources and income level of the borrower and the borrower’s experience in owning or managing similar properties. We typically require debt service coverage of at least 125% of the monthly loan payment. We generally originate these loans up to a maximum of 75% of the appraised value or the purchase price of the property, whichever is less. Any loan with a final loan-to-value ratio in excess of 75% must be approved by the Bank’s Board of Directors or the Loan Committee as an exception to policy. We generally rely on the income generated by the property as the primary means by which the loan is repaid. However, personal guarantees may be obtained for additional security from these borrowers. Additionally, for commercial business and other loans which are not secured by improved properties, the Bank will secure these loans with business assets, including accounts receivables, inventory and real estate and generally require personal guarantees.

The following tables show loans modified and classified as TDR during the periods indicated:

	For the year ended
	December 31, 2022
(Dollars in thousands)	Number	Balance		Modification description
Small Business Administration	1	$	271	Loan amortization extension.
Commercial business and other	5		8,204	One loan received a below market interest rate and four loans had an amortization extension.
Total	6	$	8,475

	For the year ended
	December 31, 2021
(Dollars in thousands)	Number	Balance		Modification description
Commercial business and other	3	$	702	Loan amortization extension.
Total	3	$	702

	For the year ended
	December 31, 2020
(Dollars in thousands)	Number	Balance		Modification description
Commercial business and other	1	$	7,583	Loan received a below market interest rate and had an amortization extension.
One-to-four family - mixed-use property	1		270	Loan received a below market interest rate.
Total	2	$	7,853

The recorded investment of the loans modified and classified as TDR, presented in the tables above, were unchanged as there was no principal forgiven in these modifications.

The following table shows our recorded investment for loans classified as TDR at amortized cost that are performing according to their restructured terms at the periods indicated:

	December 31, 2022			December 31, 2021
	Number	Amortized		Number	Amortized
(Dollars in thousands)	of contracts	Cost		of contracts	Cost
Multi-family residential	6	$	1,673	6	$	1,690
Commercial real estate	1		7,572	1		7,572
One-to-four family - mixed-use property	4		1,222	5		1,636
One-to-four family - residential	1		253	3		483
Small Business Administration	1		242	—		—
Commercial business and other	3		855	5		1,381
Total performing	16	$	11,817	20	$	12,762

The following tables show our recorded investment for loans classified as TDR at amortized cost that are not performing according to their restructured terms at the periods indicated.

	December 31, 2022
	Number	Amortized
(Dollars in thousands)	of contracts	Cost
Commercial business and other	2	$	3,263
Total troubled debt restructurings that subsequently defaulted	2	$	3,263

	December 31, 2020
	Number	Amortized
(Dollars in thousands)	of contracts	Cost
Taxi medallion	11	$	1,922
Commercial business and other	1		279
Total troubled debt restructurings that subsequently defaulted	12	$	2,201

The Company did not have any loans classified as TDR at amortized cost that were not performing according to their restructured terms at December 31, 2021.

During the years ended December 31, 2022, 2021 and 2020 there were no defaults of TDR loans within 12 months of their modification date.

The following tables show our non-accrual loans at amortized cost with no related allowance and interest income recognized for loans ninety days or more past due and still accruing for periods shown below:

	At or for the year ended December 31, 2022
(In thousands)		Non-accrual amortized cost beginning of the reporting period		Non-accrual amortized cost end of the reporting period		Non-accrual with no related allowance		Interest income recognized		Loans ninety days or more past due and still accruing
Multi-family residential	$	2,652	$	3,547	$	3,547	$	—	$	—
Commercial real estate		640		254		254		—		—
One-to-four family - mixed-use property (1)		1,582		1,045		1,045		—		—
One-to-four family - residential		7,483		3,953		3,953		—		—
Small Business Administration		952		950		950		—		—
Construction		—		—		—		—		2,600
Commercial business and other (1)		1,945		20,193		3,291		171		—
Total	$	15,254	$	29,942	$	13,040	$	171	$	2,600

(1) Included in the above analysis are non-accrual performing TDR one-to-four family – mixed-use property totaling $0.3 million at December 31, 2022. Commercial business and other contains a non-accrual performing TDR totaling less than $0.1 million at December 31, 2022.

	At or for the year ended December 31, 2021
(In thousands)		Non-accrual amortized cost beginning of the reporting period		Non-accrual amortized cost end of the reporting period		Non-accrual with no related allowance		Interest income recognized		Loans ninety days or more past due and still accruing
Multi-family residential	$	2,576	$	2,652	$	2,652	$	19	$	—
Commercial real estate		1,766		640		640		—		—
One-to-four family - mixed-use property (1)		1,706		1,582		1,582		6		—
One-to-four family - residential		5,313		7,483		7,483		1		—
Small Business Administration		1,168		952		952		—		—
Taxi medallion(2)		2,758		—		—		—		—
Commercial business and other(1)		5,660		1,945		305		78		—
Total	$	20,947	$	15,254	$	13,614	$	104	$	—

(1) Included in the above analysis are non-accrual performing TDR one-to-four family – mixed-use property totaling $0.3 million at December 31, 2021. Commercial business and other contains a non-accrual performing TDR totaling less than $0.1 million at December 31, 2021.

(2) Taxi Medallion loans were completely charged off during the year ended December 31, 2021.

The following is a summary of interest foregone on non-accrual loans and loans classified as TDR for the years ended December 31:

	2022		2021		2020
(In thousands)	(In thousands)
Interest income that would have been recognized had the loans performed in accordance with their original terms	$	2,309	$	1,691	$	1,845
Less: Interest income included in the results of operations		746		620		412
Total foregone interest	$	1,563	$	1,071	$	1,433

The following tables show the aging of the amortized cost basis in past-due loans at the period indicated by class of loan at:

	December 31, 2022
					Greater
	30 - 59 Days		60 - 89 Days		than		Total Past
(In thousands)	Past Due		Past Due		90 Days		Due		Current		Total Loans
Multi-family residential	$	1,475	$	1,787	$	3,547	$	6,809	$	2,598,363	$	2,605,172
Commercial real estate		2,561		—		254		2,815		1,912,083		1,914,898
One-to-four family - mixed-use property		3,721		—		797		4,518		552,777		557,295
One-to-four family - residential		2,734		—		3,953		6,687		235,793		242,480
Construction		—		—		2,600		2,600		68,224		70,824
Small Business Administration		329		—		950		1,279		21,914		23,193
Commercial business and other		7,636		16		10,324		17,976		1,502,931		1,520,907
Total	$	18,456	$	1,803	$	22,425	$	42,684	$	6,892,085	$	6,934,769

	December 31, 2021
					Greater
	30 - 59 Days		60 - 89 Days		than		Total Past
(In thousands)	Past Due		Past Due		90 Days		Due		Current		Total Loans
Multi-family residential	$	3,652	$	4,193	$	2,652	$	10,497	$	2,508,730	$	2,519,227
Commercial real estate		5,743		—		640		6,383		1,770,992		1,777,375
One-to-four family - mixed-use property		2,319		—		1,321		3,640		571,296		574,936
One-to-four family - residential		163		224		7,483		7,870		269,942		277,812
Construction		—		—		—		—		59,473		59,473
Small Business Administration		—		—		952		952		90,884		91,836
Commercial business and other		101		40		1,386		1,527		1,335,919		1,337,446
Total	$	11,978	$	4,457	$	14,434	$	30,869	$	6,607,236	$	6,638,105

The following tables show the activity in the allowance for credit losses for the periods indicated:

	For the year ended December 31, 2022
					One-to-four
					family -		One-to-four								Commercial
	Multi-family		Commercial		mixed-use		family -		Construction		Small Business		Taxi		business and
(In thousands)	residential		real estate		property		residential		loans		Administration		medallion		other		Total
Allowance for credit losses:
Beginning balance	$	8,185	$	7,158	$	1,755	$	784	$	186	$	1,209	$	—	$	17,858	$	37,135
Charge-offs		(208)		—		—		(20)		—		(1,053)		—		(2,067)		(3,348)
Recoveries		77		—		—		5		—		47		447		1,237		1,813
Provision (benefit)		1,498		1,026		120		132		75		1,995		(447)		443		4,842
Ending balance	$	9,552	$	8,184	$	1,875	$	901	$	261	$	2,198	$	—	$	17,471	$	40,442

	For the year ended December 31, 2021
					One-to-four
					family -		One-to-four								Commercial
	Multi-family		Commercial		mixed-use		family -		Construction		Small Business		Taxi		business and
(In thousands)	residential		real estate		property		residential		loans		Administration		medallion		other		Total
Allowance for credit losses:
Beginning balance	$	6,557	$	8,327	$	1,986	$	869	$	497	$	2,251	$	—	$	24,666	$	45,153
Charge-offs		(43)		(64)		(33)		—		—		—		(2,758)		(2,236)		(5,134)
Recoveries		10		—		133		157		—		34		1,457		224		2,015
Provision (benefit)		1,661		(1,105)		(331)		(242)		(311)		(1,076)		1,301		(4,796)		(4,899)
Ending balance	$	8,185	$	7,158	$	1,755	$	784	$	186	$	1,209	$	—	$	17,858	$	37,135

	For the year ended December 31, 2020
					One-to-four
					family -		One-to-four								Commercial
	Multi-family		Commercial		mixed-use		family -		Construction		Small Business		Taxi		business and
(In thousands)	residential		real estate		property		residential		loans		Administration		medallion		other		Total
Allowance for credit losses:
Beginning balance	$	5,391	$	4,429	$	1,817	$	756	$	441	$	363	$	—	$	8,554	$	21,751
Impact of CECL Adoption		(650)		1,170		(55)		(160)		(279)		1,180		—		(827)		379
Impact of Day 1 PCD - Empire Acquisition		444		587		183		158		20		278		124		2,305		4,099
Charge-off's		—		—		(3)		—		—		(178)		(1,075)		(2,749)		(4,005)
Recoveries		38		—		138		12		—		70		—		108		366
Provision (benefit)		1,334		2,141		(94)		103		315		538		951		17,275		22,563
Ending balance	$	6,557	$	8,327	$	1,986	$	869	$	497	$	2,251	$	—	$	24,666	$	45,153

In accordance with our policy and the current regulatory guidelines, we designate loans as “Special Mention,” which are considered “Criticized Loans,” and “Substandard,” “Doubtful,” or “Loss,” which are considered “Classified Loans”. If a loan does not fall within one of the previous mentioned categories and management believes weakness is evident then we designate the loan as “Watch”, all other loans would be considered “Pass.” Loans that are non-accrual are designated as Substandard, Doubtful, or Loss. These loan designations are updated quarterly. We designate a loan as Substandard when a well-defined weakness is identified that may jeopardize the orderly liquidation of the debt. We designate a loan Doubtful when it displays the inherent weakness of a Substandard loan with the added provision that collection of the debt in full, on the basis of existing facts, is highly improbable. We designate a loan as Loss if it is deemed the debtor is incapable of repayment. The Company does not hold any loans designated as Loss, as loans that are designated as Loss are charged to the Allowance for Credit Losses. We designate a loan as Special Mention if the asset does not warrant classification within one of the other classifications, but contains a potential weakness that deserves closer attention.

The following table summarizes the risk category of mortgage and non-mortgage loans by loan portfolio segments and class of loans by year of origination:

	For the year ended
														Revolving Loans		Revolving Loans
														Amortized Cost		converted to
(In thousands)		2022		2021		2020		2019		2018		Prior		Basis		term loans		Total
1-4 Family Residential
Pass	$	24,207	$	8,697	$	18,657	$	41,820	$	24,962	$	94,270	$	8,007	$	13,190	$	233,810
Watch		—		286		—		734		—		2,419		63		863		4,365
Special Mention		—		—		—		—		—		—		—		—		—
Substandard		—		—		—		—		—		3,861		—		444		4,305
Total 1-4 Family Residential	$	24,207	$	8,983	$	18,657	$	42,554	$	24,962	$	100,550	$	8,070	$	14,497	$	242,480
1-4 Family Mixed-Use
Pass	$	44,988	$	43,157	$	32,663	$	63,973	$	64,904	$	297,053	$	—	$	—	$	546,738
Watch		—		—		885		733		—		7,246		—		—		8,864
Special Mention		—		—		—		—		—		719		—		—		719
Substandard		—		—		—		—		—		974		—		—		974
Total 1-4 Family Mixed-Use	$	44,988	$	43,157	$	33,548	$	64,706	$	64,904	$	305,992	$	—	$	—	$	557,295
Commercial Real Estate
Pass	$	328,284	$	181,881	$	152,526	$	230,995	$	240,622	$	744,503	$	—	$	—	$	1,878,811
Watch		1,971		1,579		—		10,597		6,801		10,836		—		—		31,784
Special Mention		—		—		—		—		—		4,041		—		—		4,041
Substandard		—		—		—		—		—		262		—		—		262
Total Commercial Real Estate	$	330,255	$	183,460	$	152,526	$	241,592	$	247,423	$	759,642	$	—	$	—	$	1,914,898
Construction
Pass	$	1,984	$	17,555	$	14,385	$	—		—	$	—	$	27,850	$	—	$	61,774
Watch		—		—		—		—		6,450		—		—		—		6,450
Special Mention		—		—		—		—		—		—		—		—		—
Substandard		—		—		—		—		—		2,600		—		—		2,600
Total Construction	$	1,984	$	17,555	$	14,385	$	—	$	6,450	$	2,600	$	27,850	$	—	$	70,824
Multi-family
Pass	$	482,600	$	287,889	$	225,106	$	312,681	$	393,590	$	869,566	$	6,115	$	—	$	2,577,547
Watch		913		—		1,454		—		3,770		14,439		—		—		20,576
Special Mention		—		—		—		—		446		2,286		—		—		2,732
Substandard		—		—		—		—		2,898		1,419		—		—		4,317
Total Multi-family	$	483,513	$	287,889	$	226,560	$	312,681	$	400,704	$	887,710	$	6,115	$	—	$	2,605,172
Commercial Business - Secured by RE
Pass	$	182,805	$	139,748	$	109,292	$	40,175	$	66,436	$	89,663	$	—	$	—	$	628,119
Watch		—		—		629		28,217		421		55,500		—		—		84,767
Special Mention		—		—		—		15,208		—		—		—		—		15,208
Substandard		2,853		—		—		—		—		—		—		—		2,853
Total Commercial Business - Secured by RE	$	185,658	$	139,748	$	109,921	$	83,600	$	66,857	$	145,163	$	—	$	—	$	730,947
Commercial Business
Pass	$	172,011	$	88,081	$	41,998	$	41,125	$	35,555	$	56,281	$	265,624	$	—	$	700,675
Watch		2,708		2,918		—		20,926		14,420		17,823		1,690		—		60,485
Special Mention		—		2,445		4,743		35		1,773		416		—		—		9,412
Substandard		91		—		—		31		284		1,782		7,030		—		9,218
Doubtful		—		—		—		—		—		—		10,042		—		10,042
Total Commercial Business	$	174,810	$	93,444	$	46,741	$	62,117	$	52,032	$	76,302	$	284,386	$	—	$	789,832
Small Business Administration
Pass	$	3,352	$	5,646	$	4,304	$	654	$	1,292	$	1,766	$	—	$	—	$	17,014
Watch		—		—		—		51		2,025		2,872		—		—		4,948
Special Mention		—		—		—		—		—		39		—		—		39
Substandard		—		—		—		—		—		1,192		—		—		1,192
Total Small Business Administration	$	3,352	$	5,646	$	4,304	$	705	$	3,317	$	5,869	$	—	$	—	$	23,193
Other
Pass	$	—	$	—	$	—	$	—	$	—	$	43	$	85	$	—	$	128
Total Other	$	—	$	—	$	—	$	—	$	—	$	43	$	85	$	—	$	128
Total by Loan Type
Total Pass	$	1,240,231	$	772,654	$	598,931	$	731,423	$	827,361	$	2,153,145	$	307,681	$	13,190	$	6,644,616
Total Watch		5,592		4,783		2,968		61,258		33,887		111,135		1,753		863		222,239
Total Special Mention		—		2,445		4,743		15,243		2,219		7,501		—		—		32,151
Total Substandard		2,944		—		—		31		3,182		12,090		7,030		444		25,721
Total Doubtful		—		—		—		—		—		—		10,042		—		10,042
Total Loans	$	1,248,767	$	779,882	$	606,642	$	807,955	$	866,649	$	2,283,871	$	326,506	$	14,497	$	6,934,769

Included within net loans as of December 31, 2022 and 2021, was $5.2 million and $8.7 million, respectively, of consumer mortgage loans secured by residential real estate properties for which formal foreclosure proceedings were in process according to local requirements of the applicable jurisdiction.

The following table presents types of collateral-dependent loans by class of loan:

	Collateral Type
	December 31, 2022				December 31, 2021
(In thousands)		Real Estate		Business Assets		Real Estate		Business Assets
Multi-family residential	$	3,547	$	—	$	2,652	$	—
Commercial real estate		254		—		1,158		—
One-to-four family - mixed-use property		1,045		—		1,582		—
One-to-four family - residential		3,953		—		7,482		—
Small Business Administration		—		950		—		952
Commercial business and other		2,853		17,340		—		1,427
Total	$	11,652	$	18,290	$	12,874	$	2,379

Off-Balance Sheet Credit Losses

Also included within scope of the CECL standard are off-balance sheet loan commitments, which includes the unfunded portion of committed lines of credit and commitments “in-process”. Commitments “in‐process” reflect loans not on the Company’s books but rather negotiated loan / line of credit terms and rates that the Company has offered to customers and is committed to honoring. In reference to “in‐process” credits, the Company defines an unfunded commitment as a credit that has been offered to and accepted by a borrower, which has not closed and by which the obligation is not unconditionally cancellable.

The Company estimates expected credit losses over the contractual period in which the company is exposed to credit risk through a contractual obligation to extend credit, unless that obligation is unconditionally cancellable by the Company. The allowance for credit losses on off-balance sheet exposures is adjusted as a provision for credit loss expense. The Company uses similar assumptions and risk factors that are developed for collectively evaluated financing receivables. This estimates includes consideration of the likelihood that funding will occur and an estimate of expected credit losses on commitments to be funded over its estimated life.

At December 31, 2022 and 2021, allowance for off-balance-sheet credit losses was $1.0 million and $1.2 million, respectively, which is included in the “Other liabilities” on the Consolidated Statements of Financial Condition. During the year ended December 31, 2022, 2021 and 2020 the Company has ($0.2) million, ($0.6) million and $1.3 million, respectively, in credit loss (benefit) provision for off-balance-sheet items, which are included in “Other operating expenses” on the Consolidated Statements of Income.

The following table presents the activity in the allowance for off balance sheet credit losses:

	For the year ended
	December 31,
	2022		2021		2020
	(In thousands)
Balance at beginning of period	$	1,209	$	1,815	$	—
Off-Balance Sheet-CECL Adoption		—		—		553
Off-Balance Sheet- (benefit) provision		(239)		(606)		1,262
Allowance for Off-Balance Sheet - Credit losses	$	970	$	1,209	$	1,815