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Loans

3 Months Ended

Mar. 31, 2023

5. Loans

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


		March 31,		December 31,
	2023		2022

	(In thousands)
Multi-family residential	$	2,601,174	$	2,601,384
Commercial real estate		1,904,293		1,913,040
One-to-four family ― mixed-use property		549,207		554,314
One-to-four family ― residential		238,417		241,246
Construction		60,486		70,951
Small Business Administration ⁽¹⁾		22,860		23,275
Commercial business and other		1,518,756		1,521,548
Gross loans		6,895,193		6,925,758
Net unamortized premiums and unearned loan fees		8,983		9,011
Total loans, net of fees and costs	$	6,904,176	$	6,934,769

(1)

Includes $4.8 million, and $5.2 million of SBA Payment Protection Program (“SBA PPP”) loans on March 31, 2023 and December 31, 2022, respectively.

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 $35.1 million and $34.5 million at March 31, 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 $7.5 million and $1.2 million for the three months ended March 31, 2023 and 2022, respectively. The provision recorded during the three months ended March 31, 2023, was driven by a loan charge-off and increased reserves on two loans that were previously identified with one business credit relationship. During the three months ended March 31, 2023, the Company made no changes to either the reasonable and supportable forecast period or the reversion period. The ACL - loans totaled $38.7 million on March 31, 2023 compared to $40.4 million on December 31, 2022. On March 31, 2023, the ACL - loans represented 0.56% of gross loans and 182.9% 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 March 31, 2023, there were no loans modified to borrowers experiencing financial difficulties. On March 31, 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 modified as Troubled Debt Restructured (“TDR”) during the period indicated:



	For the three months ended,
	March 31, 2022
(Dollars in thousands)	Number			Modification description
Small Business Administration	1	$	271	Loan amortization extension.
Commercial business and other	2		2,768	One loan received a below market interest rate and one loan had an amortization extension.
Total	3	$	3,039

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

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 three months ended March 31, 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	$	3,975	$	3,975	$	2	$	—
Commercial real estate		254		—		—		—		—
One-to-four family - mixed-use property		1,045		797		797		—		—
One-to-four family - residential		3,953		4,396		4,396		—		—
Small Business Administration		950		949		949		—		—
Commercial business and other		20,193		10,838		3,283		2		—
Total	$	29,942	$	20,955	$	13,400	$	4	$	—


	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 year ended
	March 31
	2023		2022
(In thousands)
Interest income that would have been recognized had the loans performed in accordance with their original terms	$	506	$	371	⁽¹⁾
Less: Interest income included in the results of operations		4		155	⁽²⁾
Total foregone interest	$	502	$	216

(1)

For the three months ended March 31, 2022, $192 thousand is related to loans classified as TDR.

(2)

For the three months ended March 31, 2022, $151 thousand is related to loans classified as TDR.

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


	March 31, 2023
					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	$	3,464	$	—	$	3,975	$	7,439	$	2,596,735	$	2,604,174
Commercial real estate		—		179		—		179		1,905,528		1,905,707
One-to-four family - mixed-use property		2,562		381		797		3,740		548,231		551,971
One-to-four family - residential		2,382		68		4,396		6,846		232,739		239,585
Construction		—		—		—		—		60,373		60,373
Small Business Administration		142		1,679		949		2,770		19,990		22,760
Commercial business and other		33		20		7,829		7,882		1,511,724		1,519,606
Total	$	8,583	$	2,327	$	17,946	$	28,856	$	6,875,320	$	6,904,176


	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 three-month periods indicated:

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 March 31, 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
Pass	$	48,865	$	480,178	$	285,357	$	222,748	$	310,618	$	1,215,855	$	4,601	$	—	$	2,568,222
Watch		—		902		—		2,346		—		26,616		—		—		29,864
Special Mention		—		—		—		—		—		1,326		—		—		1,326
Substandard		—		—		—		—		—		4,762		—		—		4,762
Total Multi-family	$	48,865	$	481,080	$	285,357	$	225,094	$	310,618	$	1,248,559	$	4,601	$	—	$	2,604,174
Commercial Real Estate
Pass	$	18,305	$	327,129	$	181,002	$	151,568	$	223,378	$	969,174	$	—	$	—	$	1,870,556
Watch		—		1,965		1,525		—		9,570		21,899		—		—		34,959
Special Mention		—		—		—		—		—		183		—		—		183
Substandard		—		—		—		—		—		9		—		—		9
Total Commercial Real Estate	$	18,305	$	329,094	$	182,527	$	151,568	$	232,948	$	991,265	$	—	$	—	$	1,905,707
1-4 Family Mixed-Use
Pass	$	5,519	$	44,641	$	42,764	$	32,360	$	63,079	$	353,651	$	—	$	—	$	542,014
Watch		—		—		—		878		727		6,541		—		—		8,146
Special Mention		—		—		—		—		—		840		—		—		840
Substandard		—		—		—		—		—		971		—		—		971
Total 1-4 Family Mixed-Use	$	5,519	$	44,641	$	42,764	$	33,238	$	63,806	$	362,003	$	—	$	—	$	551,971
1-4 Family Residential
Pass	$	4,146	$	23,573	$	8,640	$	18,034	$	41,567	$	114,894	$	7,905	$	11,827	$	230,586
Watch		—		515		282		—		736		1,374		63		1,228		4,198
Substandard		—		—		—		—		—		4,358		—		443		4,801
Total 1-4 Family Residential	$	4,146	$	24,088	$	8,922	$	18,034	$	42,303	$	120,626	$	7,968	$	13,498	$	239,585
Gross charge-offs	$	—	$	—	$	—	$	—	$	—	$	6	$	—	$	—	$	6
Construction
Pass	$	3,089	$	1,899	$	17,660	$	—	$	—		—	$	35,125	$	—	$	57,773
Substandard		—		—		—		—		—		2,600		—		—		2,600
Total Construction	$	3,089	$	1,899	$	17,660	$	—	$	—	$	2,600	$	35,125	$	—	$	60,373
Small Business Administration
Pass	$	—	$	3,335	$	3,348	$	3,977	$	666	$	2,736	$	—	$	—	$	14,062
Watch		—		—		593		—		50		5,162		—		—		5,805
Special Mention		—		—		1,679		—		—		37		—		—		1,716
Substandard		—		—		—		—		—		1,177		—		—		1,177
Total Small Business Administration	$	—	$	3,335	$	5,620	$	3,977	$	716	$	9,112	$	—	$	—	$	22,760
Gross charge-offs	$	—	$	—	$	—	$	—	$	—	$	6	$	—	$	—	$	6
Commercial Business
Pass	$	28,793	$	160,797	$	81,582	$	39,877	$	39,603	$	71,738	$	273,682	$	—	$	696,072
Watch		—		415		8,583		—		16,492		31,837		1,209		—		58,536
Special Mention		—		—		—		4,759		33		3,943		—		—		8,735
Substandard		—		2,373		2,444		—		47		1,762		3,079		—		9,705
Doubtful		—		—		—		—		—		—		4,702		—		4,702
Total Commercial Business	$	28,793	$	163,585	$	92,609	$	44,636	$	56,175	$	109,280	$	282,672	$	—	$	777,750
Gross charge-offs	$	—	$	—	$	—	$	—	$	—	$	—	$	9,267	$	—	$	9,267
Commercial Business - Secured by RE
Pass	$	13,955	$	181,634	$	138,718	$	108,771	$	41,827	$	153,310	$	—	$	—	$	638,215
Watch		—		—		—		—		26,220		59,250		—		—		85,470
Special Mention		—		—		—		—		15,198		—		—		—		15,198
Substandard		—		2,853		—		—		—		—		—		—		2,853
Total Commercial Business - Secured by RE	$	13,955	$	184,487	$	138,718	$	108,771	$	83,245	$	212,560	$	—	$	—	$	741,736
Other
Pass	$	—	$	—	$	—	$	—	$	—	$	50	$	70	$	—	$	120
Total Other	$	—	$	—	$	—	$	—	$	—	$	50	$	70	$	—	$	120
Gross charge-offs	$	—	$	—	$	—	$	—	$	—	$	19	$	—	$	—	$	19
Total by Loan Type
Total Pass	$	122,672	$	1,223,186	$	759,071	$	577,335	$	720,738	$	2,881,408	$	321,383	$	11,827	$	6,617,620
Total Watch		—		3,797		10,983		3,224		53,795		152,679		1,272		1,228		226,978
Total Special Mention		—		—		1,679		4,759		15,231		6,329		—		—		27,998
Total Substandard		—		5,226		2,444		—		47		15,639		3,079		443		26,878
Total Doubtful		—		—		—		—		—		—		4,702		—		4,702
Total Loans	$	122,672	$	1,232,209	$	774,177	$	585,318	$	789,811	$	3,056,055	$	330,436	$	13,498	$	6,904,176
Total Gross charge-offs	$	—	$	—	$	—	$	—	$	—	$	31	$	9,267	$	—	$	9,298

Included within net loans were $5.2 million each at March 31, 2023 and December 31, 2022, 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
	March 31, 2023				December 31, 2022
(In thousands)		Real Estate	Business Assets			Real Estate	Business Assets
Multi-family residential	$	3,975	$	—	$	3,547	$	—
Commercial real estate		—		—		254		—
One-to-four family - mixed-use property		797		—		1,045		—
One-to-four family - residential		4,396		—		3,953		—
Small Business Administration		—		949		—		950
Commercial business and other		2,853		7,985		2,853		17,340
Total	$	12,021	$	8,934	$	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 $427.0 million and $438.5 million on March 31, 2023, and December 31, 2022, respectively.

The following table presents the activity in the allowance for off balance sheet credit losses for the three months ended March 31, 2023, and 2022.


	For the three months ended
	March 31,
	2023		2022

	(In thousands)
Balance at beginning of period	$	970	$	1,209
(Benefit) provision		(85)		380
Allowance for Off-Balance Sheet - Credit losses ⁽¹⁾	$	885	$	1,589

(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