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Loans

6 Months Ended

Jun. 30, 2023

5. Loans

The following represents the composition of loans as of the dates indicated:


		June 30,		December 31,
	2023		2022

	(In thousands)
Multi-family residential	$	2,593,955	$	2,601,384
Commercial real estate		1,917,749		1,913,040
One-to-four family ― mixed-use property		542,368		554,314
One-to-four family ― residential		230,055		241,246
Construction		57,325		70,951
Small Business Administration		22,404		23,275
Commercial business and other		1,466,358		1,521,548
Net unamortized premiums and unearned loan fees		8,836		9,011
Total loans, net of fees and costs excluding portfolio layer basis adjustments		6,839,050		6,934,769
Unallocated portfolio layer basis adjustments ⁽¹⁾		(6,625)		—
Total loans, net of fees and costs	$	6,832,425	$	6,934,769

(1) This amount represents portfolio layer method basis adjustments related to loans hedged in a closed portfolio. Under GAAP portfolio layer method basis adjustments are not allocated to individual loans, however, the amounts impact the net loan balance. These basis adjustments would be allocated to the amortized cost of specific loans within the pool if the hedge was de-designated. See Note 11 (“Derivative Financial Instruments”) of the Notes to the Consolidated Financial Statements.

Loans are reported at their outstanding principal balance net of any unearned income, charge-offs, deferred loan fees and costs on originated loans and unamortized premiums or discounts on purchased loans. Loan fees and certain loan origination costs are deferred. Net loan origination costs and premiums or discounts on loans purchased are amortized into interest income over the contractual life of the loans using the level-yield method. Prepayment penalties received on loans which pay in full prior to their scheduled maturity are included in interest income in the period they are collected.

Interest on loans is recognized on an accrual basis. Accrued interest receivable totaled $39.5 million and $36.8 million at June 30, 2023, and December 31, 2022, respectively, and was reported in “Interest and dividends receivable” on the Consolidated Statements of Financial Condition. The accrual of income on loans is generally discontinued when certain factors, such as contractual delinquency of 90 days or more, indicate reasonable doubt as to the timely collectability of such income. Uncollected interest previously recognized on non-accrual loans is reversed from interest income at the time the loan is placed on non-accrual status. A non-accrual loan can be returned to accrual status when contractual delinquency returns to less than 90 days delinquent. Payments received on non-accrual loans that do not bring the loan to less than 90 days delinquent are recorded on a cash basis. Payments can also be applied first as a reduction of principal until all principal is recovered and then subsequently to interest, if in management’s opinion, it is evident that recovery of all principal due is likely to occur.

Allowance for credit losses

The allowance for credit losses (“ACL”) is an estimate that is deducted from the amortized cost basis of the financial asset to present the net carrying value at the amount expected to be collected on the financial assets. Loans are charged off against that ACL when management believes that a loan balance is uncollectable based on quarterly analysis of credit risk.

The amount of the ACL is based upon a loss rate model that considers multiple factors which reflects management’s assessment of the credit quality of the loan portfolio. Management estimates the allowance balance using relevant information, from internal and external sources, relating to past events, current conditions, and reasonable and supportable forecasts. The factors are both quantitative and qualitative in nature including, but not limited to, historical losses,

economic conditions, trends in delinquencies, value and adequacy of underlying collateral, volume and portfolio mix, and internal loan processes.

The Company recorded a provision for credit losses on loans totaling $1.4 million and $1.5 million for the three months ended June 30, 2023 and 2022, respectively. The Company recorded a provision for credit losses on loans totaling $8.9 million and $2.7 million for the six months ended June 30, 2023 and 2022, respectively. The provision recorded during the six months ended June 30, 2023, was driven by fully reserving for two non-accrual business loans that were subsequently charged-off in the first quarter of 2023, and increasing reserves for the elevated risk presented by the current rate environment to adjustable-rate loan’s debt coverage ratios, partially offset by a decline in loan balances during the period. During the six months ended June 30, 2023, the reasonable and supportable forecast period and reversion period were two and four quarters, respectively unchanged, from December 31, 2022. The ACL - loans totaled $38.6 million on June 30, 2023 compared to $40.4 million on December 31, 2022. On June 30, 2023, the ACL - loans represented 0.57% of gross loans and 207.1% of non-performing loans. On December 31, 2022, the ACL - loans represented 0.58% of gross loans and 124.9% of non-performing loans.

The Company may modify loans to enable a borrower experiencing financial difficulties to continue making payments when it is deemed to be in the Company’s best long-term interest. When modifying a loan, an assessment of whether a borrower is experiencing financial difficulty is made on the date of modification. This modification may include reducing the loan interest rate, extending the loan term, any other-than-insignificant payment delay, principal forgiveness or any combination of these types of modifications. When such modifications are performed, a change to the allowance for credit losses is generally not required as the methodologies used to estimate the allowance already capture the effect of borrowers experiencing financial difficulty. During the three months ended June 30, 2023, there was one loan modified to a borrower experiencing financial difficulty. On June 30, 2023, there were no commitments to lend additional funds to borrowers who have received a loan modification as a result of financial difficulty.

On January 1, 2023, the Company adopted ASU No. 2022-02, “Financial Instruments – Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures” without material impact on the business operations or consolidated financial statements. See Note 14 (“New Authoritative Accounting Pronouncements”) of the Notes to the Consolidated Financial Statements.

The following table shows loans modifications made to borrowers experiencing financial difficulty during the periods indicated:


	For the three and six months ended, June 30, 2023
(Dollars in thousands)	Other-than-insignificant Payment Delay
Loan Modifications Made to Borrowers Experiencing Financial Difficulty	Number		Amortized Cost Basis	% of Total Class of Financing Receivable		Financial Effect
Small Business Administration	1	$	1,490	6.7	%	Provided twelve month payment deferral to be collected at maturity.
Total	1	$	1,490

The following table shows the payment status of borrowers experiencing financial difficulty and for which a modification has occurred at June 30, 2023:


		Payment Status of Borrowers Experiencing Financial Difficulty (Amortized Cost Basis)
(In thousands)		Current		30-89 Days Past Due		90+ Days Past Due		Total Modified
Small Business Administration	$	1,490	$	—	$	—	$	1,490
Total	$	1,490	$	—	$	—	$	1,490

The following table shows loans modified as Troubled Debt Restructured (“TDR”) during the periods indicated:



	For the three months ended,
	June 30, 2022
(Dollars in thousands)	Number		Balance	Modification description
Commercial business and other	2	$	2,453	Two loans had amortization extensions
Total	2	$	2,453


	For the six months ended,
	June 30, 2022
(Dollars in thousands)	Number		Balance	Modification description
Small Business Administration	1	$	271	Loan amortization extension.
Commercial business and other	4		5,222	One loan received a below market interest rate and three loans had an amortization extension
Total	5	$	5,493

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


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

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

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 the periods shown below:


	At or for the six months ended June 30, 2023
(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	$	3,547	$	3,600	$	3,600	$	2	$	—
Commercial real estate		254		—		—		—		—
One-to-four family - mixed-use property		1,045		797		797		—		—
One-to-four family - residential		3,953		4,632		4,632		—		—
Small Business Administration		950		1,124		1,124		—		—
Commercial business and other		20,193		8,287		3,585		16		—
Total	$	29,942	$	18,440	$	13,738	$	18	$	—


	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.

The following is a summary of interest foregone on non-accrual loans for the periods indicated.


	For the three months ended				For the six months ended
	June 30,				June 30,
	2023		2022		2023		2022
(In thousands)
Interest income that would have been recognized had the loans performed in accordance with their original terms	$	474	$	588	$	980	$	960
Less: Interest income included in the results of operations		14		282		18		437
Total foregone interest	$	460	$	306	$	962	$	523

The following tables show the aging analysis of the amortized cost basis of loans at the period indicated by class of loans:


	June 30, 2023
					Greater
	30 - 59 Days		60 - 89 Days		than		Total Past
(In thousands)	Past Due		Past Due		90 Days		Due		Current		Total Loans ⁽¹⁾
Multi-family residential	$	2,504	$	—	$	3,600	$	6,104	$	2,591,360	$	2,597,464
Commercial real estate		—		—		—		—		1,916,994		1,916,994
One-to-four family - mixed-use property		773		—		797		1,570		543,652		545,222
One-to-four family - residential		2,694		173		4,632		7,499		223,716		231,215
Construction		—		—		—		—		57,205		57,205
Small Business Administration		325		—		1,124		1,449		20,864		22,313
Commercial business and other		494		5,234		5,279		11,007		1,457,630		1,468,637
Total	$	6,790	$	5,407	$	15,432	$	27,629	$	6,811,421	$	6,839,050

(1) The table above excludes the unallocated portfolio layer basis adjustments totaling $6.6 million related to loans hedged in a closed pool at June 30, 2023. See Note 11 (“Derivative Financial Instruments”) of the Notes to the Consolidated Financial Statements.


	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

The following tables show the activity in the ACL on loans for the following three month periods:

The following tables show the activity in the ACL on loans for the following six month periods:


	June 30, 2023
					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
Beginning balance	$	9,552	$	8,184	$	1,875	$	901	$	261	$	2,198	$	—	$	17,471	$	40,442
Charge-offs		—		(8)		—		(12)		—		(7)		—		(11,002)		(11,029)
Recoveries		1		—		—		44		—		171		—		19		235
Provision (benefit)		165		30		(260)		(279)		(129)		(200)		—		9,618		8,945
Ending balance	$	9,718	$	8,206	$	1,615	$	654	$	132	$	2,162	$	—	$	16,106	$	38,593


	June 30, 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
Beginning balance	$	8,185	$	7,158	$	1,755	$	784	$	186	$	1,209	$	—	$	17,858	$	37,135
Charge-offs		—		—		—		—		—		(1,054)		—		(32)		(1,086)
Recoveries		1		—		—		4		—		27		447		173		652
Provision (benefit)		1,219		1,285		204		78		114		1,936		(447)		(1,666)		2,723
Ending balance	$	9,405	$	8,443	$	1,959	$	866	$	300	$	2,118	$	—	$	16,333	$	39,424

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 previously 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 as 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 does contain a potential weakness that deserves closer attention.

The following table summarizes the various risk categories of mortgage and non-mortgage loans by loan portfolio segments and by class of loans by year of origination at June 30, 2023:


	For the year ended
														Revolving Loans		Revolving Loans
														Amortized Cost		converted to
(In thousands)		2023		2022		2021		2020		2019		Prior		Basis		term loans		Total
Multi-family Residential
Pass	$	89,777	$	477,475	$	283,598	$	218,950	$	308,790	$	1,178,081	$	3,564	$	—	$	2,560,235
Watch		—		892		—		2,860		—		28,246		—		—		31,998
Special Mention		—		—		—		—		—		873		—		—		873
Substandard		—		—		—		—		—		4,358		—		—		4,358
Total Multi-family Residential	$	89,777	$	478,367	$	283,598	$	221,810	$	308,790	$	1,211,558	$	3,564	$	—	$	2,597,464
Commercial Real Estate
Pass	$	59,422	$	325,928	$	178,735	$	149,773	$	222,077	$	948,085	$	—	$	—	$	1,884,020
Watch		—		1,960		1,484		—		9,570		19,783		—		—		32,797
Special Mention		—		—		—		—		—		177		—		—		177
Total Commercial Real Estate	$	59,422	$	327,888	$	180,219	$	149,773	$	231,647	$	968,045	$	—	$	—	$	1,916,994
Gross charge-offs	$	—	$	—	$	—	$	—	$	—	$	8	$	—	$	—	$	8
1-4 Family Mixed-Use Poperty
Pass	$	12,297	$	44,290	$	42,386	$	32,058	$	63,224	$	343,763	$	—	$	—	$	538,018
Watch		—		—		—		—		—		5,786		—		—		5,786
Special Mention		—		—		—		—		—		450		—		—		450
Substandard		—		—		—		—		—		968		—		—		968
Total 1-4 Family Mixed-Use Property	$	12,297	$	44,290	$	42,386	$	32,058	$	63,224	$	350,967	$	—	$	—	$	545,222
1-4 Family Residential
Pass	$	4,141	$	23,445	$	8,579	$	17,905	$	40,029	$	108,935	$	7,607	$	11,106	$	221,747
Watch		—		513		278		—		738		1,607		63		1,413		4,612
Special Mention		—		—		—		—		—		—		—		173		173
Substandard		—		—		—		—		—		4,240		—		443		4,683
Total 1-4 Family Residential	$	4,141	$	23,958	$	8,857	$	17,905	$	40,767	$	114,782	$	7,670	$	13,135	$	231,215
Gross charge-offs	$	—	$	—	$	—	$	—	$	—	$	12	$	—	$	—	$	12
Construction
Pass	$	4,357	$	3	$	10,186	$	—	$	—		—	$	42,659	$	—	$	57,205
Total Construction	$	4,357	$	3	$	10,186	$	—	$	—	$	—	$	42,659	$	—	$	57,205
Small Business Administration
Pass	$	814	$	3,318	$	3,202	$	3,719	$	690	$	4,271	$	—	$	—	$	16,014
Watch		—		—		—		—		49		3,238		—		—		3,287
Special Mention		—		—		1,639		—		—		34		—		—		1,673
Substandard		—		—		176		—		—		1,163		—		—		1,339
Total Small Business Administration	$	814	$	3,318	$	5,017	$	3,719	$	739	$	8,706	$	—	$	—	$	22,313
Gross charge-offs	$	—	$	—	$	—	$	—	$	—	$	7	$	—	$	—	$	7
Commercial Business
Pass	$	51,057	$	135,313	$	79,438	$	31,380	$	32,052	$	78,303	$	284,806	$	—	$	692,349
Watch		211		381		8,102		2,446		16,403		22,728		684		—		50,955
Special Mention		—		—		—		4,775		29		1,757		—		—		6,561
Substandard		—		2,368		—		—		28		3,624		3,375		—		9,395
Doubtful		—		—		—		—		—		—		4,702		—		4,702
Total Commercial Business	$	51,268	$	138,062	$	87,540	$	38,601	$	48,512	$	106,412	$	293,567	$	—	$	763,962
Gross charge-offs	$	—	$	—	$	1,675	$	—	$	8	$	10	$	9,267	$	—	$	10,960
Commercial Business - Secured by RE
Pass	$	21,100	$	179,716	$	132,943	$	107,726	$	40,571	$	147,446	$	—	$	—	$	629,502
Watch		—		—		—		—		610		59,556		—		—		60,166
Special Mention		—		—		—		—		14,800		—		—		—		14,800
Total Commercial Business - Secured by RE	$	21,100	$	179,716	$	132,943	$	107,726	$	55,981	$	207,002	$	—	$	—	$	704,468
Other
Pass	$	—	$	—	$	—	$	—	$	—	$	117	$	90	$	—	$	207
Total Other	$	—	$	—	$	—	$	—	$	—	$	117	$	90	$	—	$	207
Gross charge-offs	$	—	$	—	$	—	$	—	$	—	$	42	$	—	$	—	$	42
Total by Loan Type
Total Pass	$	242,965	$	1,189,488	$	739,067	$	561,511	$	707,433	$	2,809,001	$	338,726	$	11,106	$	6,599,297
Total Watch		211		3,746		9,864		5,306		27,370		140,944		747		1,413		189,601
Total Special Mention		—		—		1,639		4,775		14,829		3,291		—		173		24,707
Total Substandard		—		2,368		176		—		28		14,353		3,375		443		20,743
Total Doubtful		—		—		—		—		—		—		4,702		—		4,702
Total Loans ⁽¹⁾	$	243,176	$	1,195,602	$	750,746	$	571,592	$	749,660	$	2,967,589	$	347,550	$	13,135	$	6,839,050
Total Gross charge-offs	$	—	$	—	$	1,675	$	—	$	8	$	79	$	9,267	$	—	$	11,029

Included within net loans were $5.7 million and $5.2 million at June 30, 2023 and December 31, 2022, 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.

A loan is considered collateral dependent when the borrower is experiencing financial difficulties and repayment is expected to be substantially provided by the operation or sale of the collateral. The following table presents types of collateral-dependent loans by class of loans as of the periods indicated:



	Collateral Type
	June 30, 2023				December 31, 2022
(In thousands)		Real Estate		Business Assets		Real Estate		Business Assets
Multi-family residential	$	3,600	$	—	$	3,547	$	—
Commercial real estate		—		—		254		—
One-to-four family - mixed-use property		797		—		1,045		—
One-to-four family - residential		4,632		—		3,953		—
Small Business Administration		—		1,124		—		950
Commercial business and other		—		8,287		2,853		17,340
Total	$	9,029	$	9,411	$	11,652	$	18,290

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 in 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.

Commitments to extend credit (principally real estate mortgage loans) and lines of credit (principally home equity lines of credit and business lines of credit) totaled $402.4 million and $438.5 million on June 30, 2023, and December 31, 2022, respectively.

The following table presents the activity in the allowance for off-balance sheet credit losses for the three and six months ended June 30, 2023, and 2022.


	For the three months ended				For the six months ended
	June 30,				June 30,
	2023		2022		2023		2022

	(In thousands)
Balance at beginning of period	$	885	$	1,589	$	970	$	1,209
(Benefit) provision		(72)		(145)		(157)		235
Allowance for Off-Balance Sheet - Credit losses ⁽¹⁾	$	813	$	1,444	$	813	$	1,444

(1) Included in “Other liabilities” on the Consolidated Statements of Financial Condition.

December 31, 2022

(Dollars in thousands)

of contracts

Commercial business and other

Total troubled debt restructurings that subsequently defaulted