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Loans

9 Months Ended

Sep. 30, 2023

5. Loans

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


	September 30,		December 31,
	2023		2022

	(In thousands)
Multi-family residential	$	2,614,219	$	2,601,384
Commercial real estate		1,953,243		1,913,040
One-to-four family ― mixed-use property		537,744		554,314
One-to-four family ― residential		222,874		241,246
Construction		59,903		70,951
Small Business Administration		21,896		23,275
Commercial business and other		1,487,775		1,521,548
Net unamortized premiums and unearned loan fees		9,059		9,011
Total loans, net of fees and costs excluding portfolio layer basis adjustments		6,906,713		6,934,769
Unallocated portfolio layer basis adjustments ⁽¹⁾		(10,639)		—
Total loans, net of fees and costs	$	6,896,074	$	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 $42.1 million and $36.8 million at September 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 $0.6 million and $2.1 million for the three months ended September 30, 2023 and 2022, respectively. The provision recorded during the three months ended September 30, 2023, was driven by increasing reserves for the elevated risk presented by the current rate environment to adjustable-rate loan’s debt coverage ratios, partially offset by a fully reserved loan paid off during the quarter. The Company recorded a provision for credit losses on loans totaling $9.5 million and $4.9 million for the nine months ended September 30, 2023 and 2022, respectively. The provision recorded during the nine months ended September 30, 2023, was driven by fully reserving for two non-accrual business loans that were subsequently charged-off, and increasing reserves for the elevated risk presented by the current rate environment to adjustable-rate loan’s debt coverage ratios. During the nine months ended September 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 $39.2 million on September 30, 2023 compared to $40.4 million on December 31, 2022. On September 30, 2023, the ACL - loans represented 0.57% of gross loans and 225.4% 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. On September 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 tables show loan modifications made to borrowers experiencing financial difficulty during the periods indicated:


	For the three months ended, September 30, 2023
(Dollars in thousands)	Term Extension
Loan Modifications Made to Borrowers Experiencing Financial Difficulty	Number		Amortized Cost Basis	% of Total Class of Financing Receivable		Financial Effect
Commercial business and other	3	$	1,638	0.1	%	Extended Maturity to June 2025 (20 months).
Total	3	$	1,638


	For the nine months ended, September 30, 2023
(Dollars in thousands)	Term Extension
Loan Modifications Made to Borrowers Experiencing Financial Difficulty	Number		Amortized Cost Basis	% of Total Class of Financing Receivable		Financial Effect
Commercial business and other	3	$	1,638	0.1	%	Extended Maturity to June 2025 (20 months).
Total	3	$	1,638


(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	$	1,494	6.8	%	Provided twelve month payment deferral to be collected at maturity.
Total	1	$	1,494

The following table shows the payment status of borrowers experiencing financial difficulty and for which a modification has occurred at September 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	$	—	$	1,494	$	—	$	1,494
Commercial business and other		1,638		—		—		1,638
Total	$	1,638	$	1,494	$	—	$	3,132

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



	For the three months ended
	September 30, 2022
(Dollars in thousands)	Number		Balance	Modification description
Commercial business and other	1	$	2,982	Amortization extension
Total	1	$	2,982


	For the nine months ended
	September 30, 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

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 nine months September 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		1,090		1,090		2		—
One-to-four family - residential		3,953		3,643		3,643		—		—
Small Business Administration		950		1,265		1,265		—		—
Commercial business and other		20,193		7,680		3,746		16		—
Total	$	29,942	$	17,278	$	13,344	$	20	$	—


	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 $0.2 million and Commercial business and other totaling less than $0.1 million.

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


	For the three months ended				For the nine months ended
	September 30,				September 30,
	2023		2022		2023		2022
(In thousands)
Interest income that would have been recognized had the loans performed in accordance with their original terms	$	425	$	618	$	1,405	$	1,578
Less: Interest income included in the results of operations		2		181		20		618
Total foregone interest	$	423	$	437	$	1,385	$	960

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


	At September 30, 2023
(In thousands)	30 - 59 Days Past Due		60 - 89 Days Past Due		Greater than 90 Days		Total Past Due		Current		Total Loans ⁽¹⁾
Multi-family residential	$	1,131	$	599	$	3,600	$	5,330	$	2,612,299	$	2,617,629
Commercial real estate		3,994		—		—		3,994		1,950,468		1,954,462
One-to-four family - mixed-use property		1,537		195		1,090		2,822		537,697		540,519
One-to-four family - residential		3,367		26		3,643		7,036		217,091		224,127
Construction		—		—		—		—		59,775		59,775
Small Business Administration		—		1,494		1,265		2,759		19,077		21,836
Commercial business and other		89		2,237		7,654		9,980		1,478,385		1,488,365
Total	$	10,118	$	4,551	$	17,252	$	31,921	$	6,874,792	$	6,906,713

(1) The table above excludes the unallocated portfolio layer basis adjustments totaling $10.6 million related to loans hedged in a closed pool at September 30, 2023. See Note 11 (“Derivative Financial Instruments”) of the Notes to the Consolidated Financial Statements.


	At December 31, 2022
(In thousands)	30 - 59 Days Past Due		60 - 89 Days Past Due		Greater than 90 Days		Total Past 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:


	September 30, 2023
					One-to-four		One-to-four						Commercial
	Multi-family		Commercial		family - mixed-		family -		Construction		Small Business		business and
(In thousands)	residential		real estate		use property		residential		loans		Administration		other		Total
Beginning balance	$	9,718	$	8,206	$	1,615	$	654	$	132	$	2,162	$	16,106	$	38,593
Charge-offs		—		—		—		—		—		—		(21)		(21)
Recoveries		—		—		—		6		—		48		9		63
Provision (benefit)		917		562		10		57		32		(194)		(791)		593
Ending balance	$	10,635	$	8,768	$	1,625	$	717	$	164	$	2,016	$	15,303	$	39,228


	September 30, 2022
					One-to-four		One-to-four						Commercial
	Multi-family		Commercial		family - mixed-		family -		Construction		Small Business		business and
(In thousands)	residential		real estate		use property		residential		loans		Administration		other		Total
Beginning balance	$	9,405	$	8,443	$	1,959	$	866	$	300	$	2,118	$	16,333	$	39,424
Charge-offs		—		—		—		(2)		—		—		(322)		(324)
Recoveries		—		—		—		—		—		12		22		34
Provision (benefit)		355		(29)		3		(59)		(44)		(68)		1,976		2,134
Ending balance	$	9,760	$	8,414	$	1,962	$	805	$	256	$	2,062	$	18,009	$	41,268

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


	September 30, 2023
					One-to-four		One-to-four						Commercial
	Multi-family		Commercial		family - mixed-		family -		Construction		Small Business		business and
(In thousands)	residential		real estate		use property		residential		loans		Administration		other		Total
Beginning balance	$	9,552	$	8,184	$	1,875	$	901	$	261	$	2,198	$	17,471	$	40,442
Charge-offs		—		(8)		—		(12)		—		(7)		(11,023)		(11,050)
Recoveries		1		—		—		50		—		219		28		298
Provision (benefit)		1,082		592		(250)		(222)		(97)		(394)		8,827		9,538
Ending balance	$	10,635	$	8,768	$	1,625	$	717	$	164	$	2,016	$	15,303	$	39,228


	September 30, 2022
					One-to-four		One-to-four								Commercial
	Multi-family		Commercial		family - mixed-		family -		Construction		Small Business		Taxi		business and
(In thousands)	residential		real estate		use 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		—		—		—		(2)		—		(1,054)		—		(354)		(1,410)
Recoveries		1		—		—		4		—		39		447		195		686
Provision (benefit)		1,574		1,256		207		19		70		1,868		(447)		310		4,857
Ending balance	$	9,760	$	8,414	$	1,962	$	805	$	256	$	2,062	$	—	$	18,009	$	41,268

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 amortized cost of substandard loans was $47.1 million at September 30, 2023, an increase of $21.4 million from $25.7 million at December 31, 2022. The increase was primarily due to a business relationship that was downgraded to substandard due to declining macroeconomic factors. The loans were individually evaluated for impairment, and it was determined no reserve was deemed necessary at September 30, 2023.

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 September 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	$	171,298	$	468,879	$	279,408	$	217,501	$	306,987	$	1,127,156	$	4,075	$	—	$	2,575,304
Watch		—		881		—		1,944		—		32,691		—		—		35,516
Special Mention		—		—		—		—		—		1,461		—		—		1,461
Substandard		—		—		—		—		—		5,348		—		—		5,348
Total Multi-family Residential	$	171,298	$	469,760	$	279,408	$	219,445	$	306,987	$	1,166,656	$	4,075	$	—	$	2,617,629
Commercial Real Estate
Pass	$	134,977	$	326,545	$	177,860	$	148,835	$	218,458	$	913,106	$	—	$	—	$	1,919,781
Watch		—		—		1,443		—		9,570		23,668		—		—		34,681
Total Commercial Real Estate	$	134,977	$	326,545	$	179,303	$	148,835	$	228,028	$	936,774	$	—	$	—	$	1,954,462
Gross charge-offs	$	—	$	—	$	—	$	—	$	—	$	8	$	—	$	—	$	8
1-4 Family Mixed-Use Property
Pass	$	18,557	$	43,937	$	41,987	$	31,274	$	61,270	$	335,314	$	—	$	—	$	532,339
Watch		—		—		—		—		724		5,564		—		—		6,288
Special Mention		—		—		—		—		—		636		—		—		636
Substandard		—		—		—		—		—		1,256		—		—		1,256
Total 1-4 Family Mixed-Use Property	$	18,557	$	43,937	$	41,987	$	31,274	$	61,994	$	342,770	$	—	$	—	$	540,519
1-4 Family Residential
Pass	$	5,108	$	23,319	$	8,506	$	16,857	$	38,153	$	104,508	$	7,475	$	10,252	$	214,178
Watch		—		510		274		—		740		1,527		—		1,321		4,372
Special Mention		—		—		—		—		—		204		—		197		401
Substandard		—		—		—		—		—		4,733		—		443		5,176
Total 1-4 Family Residential	$	5,108	$	23,829	$	8,780	$	16,857	$	38,893	$	110,972	$	7,475	$	12,213	$	224,127
Gross charge-offs	$	—	$	—	$	—	$	—	$	—	$	12	$	—	$	—	$	12
Construction
Pass	$	5,520	$	3	$	5,793	$	—	$	—		—	$	48,459	$	—	$	59,775
Total Construction	$	5,520	$	3	$	5,793	$	—	$	—	$	—	$	48,459	$	—	$	59,775
Small Business Administration
Pass	$	806	$	3,301	$	3,166	$	3,613	$	702	$	4,006	$	—	$	—	$	15,594
Watch		—		—		—		—		48		2,876		—		—		2,924
Special Mention		—		—		1,494		—		—		349		—		—		1,843
Substandard		—		—		318		—		—		1,157		—		—		1,475
Total Small Business Administration	$	806	$	3,301	$	4,978	$	3,613	$	750	$	8,388	$	—	$	—	$	21,836
Gross charge-offs	$	—	$	—	$	—	$	—	$	—	$	7	$	—	$	—	$	7
Commercial Business
Pass	$	64,537	$	124,017	$	77,139	$	33,986	$	32,087	$	62,001	$	285,765	$	—	$	679,532
Watch		266		6,437		4,015		2,433		14,664		20,105		2,747		—		50,667
Special Mention		—		—		3,925		—		27		—		2,000		—		5,952
Substandard		14,935		2,454		—		—		28		12,937		3,475		—		33,829
Doubtful		—		—		—		—		—		—		3,929		—		3,929
Total Commercial Business	$	79,738	$	132,908	$	85,079	$	36,419	$	46,806	$	95,043	$	297,916	$	—	$	773,909
Gross charge-offs	$	—	$	—	$	1,675	$	—	$	14	$	11	$	9,267	$	—	$	10,967
Commercial Business - Secured by RE
Pass	$	35,585	$	178,373	$	131,700	$	106,902	$	40,114	$	143,676	$	—	$	—	$	636,350
Watch		9,776		—		—		—		597		53,025		—		—		63,398
Special Mention		—		—		—		—		14,403		—		—		—		14,403
Total Commercial Business - Secured by RE	$	45,361	$	178,373	$	131,700	$	106,902	$	55,114	$	196,701	$	—	$	—	$	714,151
Other
Pass	$	—	$	—	$	—	$	—	$	—	$	180	$	125	$	—	$	305
Total Other	$	—	$	—	$	—	$	—	$	—	$	180	$	125	$	—	$	305
Gross charge-offs	$	—	$	—	$	—	$	—	$	—	$	56	$	—	$	—	$	56
Total by Loan Type
Total Pass	$	436,388	$	1,168,374	$	725,559	$	558,968	$	697,771	$	2,689,947	$	345,899	$	10,252	$	6,633,158
Total Watch		10,042		7,828		5,732		4,377		26,343		139,456		2,747		1,321		197,846
Total Special Mention		—		—		5,419		—		14,430		2,650		2,000		197		24,696
Total Substandard		14,935		2,454		318		—		28		25,431		3,475		443		47,084
Total Doubtful		—		—		—		—		—		—		3,929		—		3,929
Total Loans ⁽¹⁾	$	461,365	$	1,178,656	$	737,028	$	563,345	$	738,572	$	2,857,484	$	358,050	$	12,213	$	6,906,713
Total Gross charge-offs	$	—	$	—	$	1,675	$	—	$	14	$	94	$	9,267	$	—	$	11,050

Included within net loans were $4.7 million and $5.2 million at September 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
	September 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		1,090		—		1,045		—
One-to-four family - residential		3,643		—		3,953		—
Small Business Administration		—		1,265		—		950
Commercial business and other		—		7,680		2,853		17,340
Total	$	8,333	$	8,945	$	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 $443.2 million and $438.5 million on September 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 nine months ended September 30, 2023, and 2022.


	For the three months ended				For the nine months ended
	September 30,				September 30,
	2023		2022		2023		2022

	(In thousands)
Balance at beginning of period	$	813	$	1,444	$	970	$	1,209
Provision (benefit) ⁽¹⁾		120		(631)		(37)		(396)
Allowance for Off-Balance Sheet - Credit losses ⁽²⁾	$	933	$	813	$	933	$	813

(1) Included in “Other operating expenses” on the Consolidated Statements of Income.

(2) 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