Notes to Consolidated Financial Statements (Unaudited)
NOTE 1–SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
HomeStreet, Inc., a State of Washington corporation organized in 1921 (the "Corporation"), is a Washington-based diversified financial services holding company whose operations are primarily conducted through its wholly owned subsidiaries (collectively the "Company") HomeStreet Statutory Trusts and HomeStreet Bank (the "Bank"), and the Bank's subsidiaries, Continental Escrow Company, HomeStreet Foundation, HS Properties, Inc., HS Evergreen Corporate Center LLC, and Union Street Holdings LLC. The Company is principally engaged in commercial banking, mortgage banking and consumer/retail banking activities serving customers primarily in the Western United States.
The accompanying consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America ("GAAP"). The consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All significant inter-company accounts and transactions have been eliminated in consolidation. The Company allocates resources and assesses financial performance on a consolidated basis and therefore has one reporting segment. In preparing the consolidated financial statements, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the financial statements, as well as the reported amounts of revenues and expenses during the reporting periods. Actual results could differ significantly from those estimates. Certain amounts in the financial statements from prior periods have been reclassified to conform to the current financial statement presentation.
These unaudited interim financial statements reflect all adjustments that are, in the opinion of management, necessary for a fair statement of the results for the periods presented. These adjustments are of a normal recurring nature, unless otherwise disclosed in this Quarterly Report on Form 10-Q. The results of operations in the interim financial statements do not necessarily indicate the results that may be expected for the full year. The interim financial information should be read in conjunction with our Annual Report on Form 10-K for the year ended December 31, 2022 ("2022 Annual Report on Form 10-K"), filed with the U.S. Securities and Exchange Commission ("SEC").
Branch Acquisition
On February 10, 2023, the Company completed its acquisition of three branches in southern California, whereby we assumed approximately $373 million in deposits and purchased approximately $21 million in loans. The application of the acquisition method of accounting resulted in recording goodwill of $12 million and a core deposit intangible of $11 million.
Recent Accounting Developments
In March 2020, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2020-04, Reference Rate Reform (Topic 848). This ASU provides optional expedients and exceptions for contracts, hedging relationships, and other transactions that reference London Interbank Offered Rate ("LIBOR") rates expected to be discontinued because of reference rate reform. In January 2021, the FASB issued ASU 2021-01, "Reference Rate Reform (Topic 848)," which clarifies certain optional expedients and exceptions in Topic 848 for contract modifications and hedge accounting applied to derivatives that are affected by the transition to alternative rates. In December 2022, the FASB issued ASU No. 2022-06, "Reference Rate Reform (Topic 848): Deferral of the Sunset Date of Topic 848," which defers the sunset date of Topic 848 from December 31, 2022 to December 31, 2024, after which entities will no longer be permitted to apply the relief in Topic 848. The adoption of these ASUs is not expected to have a material impact on the Company’s financial position or results of operations.
In March 2022, the FASB issued ASU No. 2022-02, Financial Instruments-Credit Losses (Topic 326). The amendments in this ASU eliminate the accounting guidance for Troubled Debt Restructuring ("TDRs") by creditors, while enhancing disclosure requirements for certain loan refinancing and restructurings by creditors when a borrower experiences financial difficulty. In addition, the amendments require that an entity disclose current period gross charge-offs by year of origination in a vintage table. We prospectively adopted the portion of ASU No. 2022-02 with respect to amendments about TDRs and related disclosure enhancements as of January 1, 2022. This adoption did not have a material impact on the Company’s financial position or results of operations. We prospectively adopted the vintage table disclosure requirement of ASU 2022-02 on January 1, 2023, which did not have a material impact on the Company's financial position or results of operations.
In March 2023, the FASB issued ASU 2023-02, “Investments – Equity Method and Joint Ventures (Topic 323): Accounting for Investments in Tax Credit Structures Using the Proportional Amortization Method.” ASU 2023-02 permits reporting entities to elect to account for their tax equity investments, regardless of the tax credit program from which the income tax credits are received, using the proportional amortization method if certain conditions are met. ASU 2023-02 is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2023. ASU 2023-02 is not expected to have a material impact on the Company’s consolidated financial statements.
NOTE 2–INVESTMENT SECURITIES:
The following table sets forth certain information regarding the amortized cost basis and fair values of our investment securities AFS and held-to-maturity ("HTM"):
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| At March 31, 2023 |
(in thousands) | Amortized cost | | Gross unrealized gains | | Gross unrealized losses | | Fair value |
| | | | | | | |
AFS | | | | | | | |
Mortgage backed securities ("MBS"): | | | | | | | |
Residential | $ | 209,773 | | | $ | 62 | | | $ | (9,177) | | | $ | 200,658 | |
Commercial | 62,567 | | | — | | | (8,337) | | | 54,230 | |
Collateralized mortgage obligations ("CMOs"): | | | | | | | |
Residential | 587,455 | | | 56 | | | (34,277) | | | 553,234 | |
Commercial | 76,777 | | | — | | | (6,000) | | | 70,777 | |
Municipal bonds | 462,261 | | | 294 | | | (48,897) | | | 413,658 | |
Corporate debt securities | 45,835 | | | — | | | (4,533) | | | 41,302 | |
U.S. Treasury securities | 22,920 | | | — | | | (2,601) | | | 20,319 | |
Agency debentures | 58,539 | | | — | | | (180) | | | 58,359 | |
Total | $ | 1,526,127 | | | $ | 412 | | | $ | (114,002) | | | $ | 1,412,537 | |
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HTM | | | | | | | |
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| | | | | | | |
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Municipal bonds | $ | 2,423 | | | $ | — | | | $ | (36) | | | $ | 2,387 | |
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| At December 31, 2022 |
(in thousands) | Amortized cost | | Gross unrealized gains | | Gross unrealized losses | | Fair value |
| | | | | | | |
AFS | | | | | | | |
MBS: | | | | | | | |
Residential | $ | 207,445 | | | $ | — | | | $ | (10,183) | | | $ | 197,262 | |
Commercial | 65,411 | | | — | | | (9,362) | | | 56,049 | |
CMOs: | | | | | | | |
Residential | 592,449 | | | 12 | | | (39,422) | | | 553,039 | |
Commercial | 77,909 | | | — | | | (7,390) | | | 70,519 | |
Municipal bonds | 469,346 | | | 41 | | | (57,839) | | | 411,548 | |
Corporate debt securities | 46,672 | | | 74 | | | (3,801) | | | 42,945 | |
U.S. Treasury securities | 23,005 | | | — | | | (3,071) | | | 19,934 | |
Agency debentures | 27,499 | | | 8 | | | (29) | | | 27,478 | |
Total | $ | 1,509,736 | | | $ | 135 | | | $ | (131,097) | | | $ | 1,378,774 | |
| | | | | | | |
HTM | | | | | | | |
Municipal bonds | $ | 2,441 | | | $ | — | | | $ | (56) | | | $ | 2,385 | |
At March 31, 2023, and December 31, 2022, the Company held $62 million and $19 million, respectively, of trading securities, consisting of US Treasury notes used as economic hedges of our mortgage servicing rights, which are carried at fair value and included as investment securities on the balance sheet. For the quarters ended March 31, 2023 and 2022, net gains of $0.6 million and net losses of $0.7 million on trading securities, respectively, were recorded in servicing income.
MBS and CMOs represent securities issued by government sponsored enterprises ("GSEs"). Most of the MBS and CMO securities in our investment portfolio are guaranteed by Fannie Mae, Ginnie Mae or Freddie Mac. Municipal bonds are comprised of general obligation bonds (i.e., backed by the general credit of the issuer) and revenue bonds (i.e., backed by either collateral or revenues from the specific project being financed) issued by various municipal corporations. As of March 31, 2023 and December 31, 2022, substantially all securities held, including municipal bonds and corporate debt securities, were rated investment grade based upon nationally recognized statistical rating organizations where available and, where not available, based upon internal ratings.
Investment securities AFS that were in an unrealized loss position are presented in the following tables based on the length of time the individual securities have been in an unrealized loss position:
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| At March 31, 2023 |
| Less than 12 months | | 12 months or more | | Total |
(in thousands) | Gross unrealized losses | | Fair value | | Gross unrealized losses | | Fair value | | Gross unrealized losses | | Fair value |
| | | | | | | | | | | |
AFS | | | | | | | | | | | |
MBS: | | | | | | | | | | | |
Residential | $ | (6,312) | | | $ | 168,313 | | | $ | (2,865) | | | $ | 22,732 | | | $ | (9,177) | | | $ | 191,045 | |
Commercial | (194) | | | 3,226 | | | (8,143) | | | 50,990 | | | (8,337) | | | 54,216 | |
CMOs: | | | | | | | | | | | |
Residential | (8,414) | | | 342,128 | | | (25,863) | | | 184,686 | | | (34,277) | | | 526,814 | |
Commercial | (146) | | | 9,071 | | | (5,854) | | | 61,707 | | | (6,000) | | | 70,778 | |
Municipal bonds | (1,825) | | | 52,931 | | | (47,072) | | | 326,987 | | | (48,897) | | | 379,918 | |
Corporate debt securities | (1,550) | | | 27,813 | | | (2,983) | | | 13,489 | | | (4,533) | | | 41,302 | |
U.S. Treasury securities | — | | | — | | | (2,601) | | | 20,319 | | | (2,601) | | | 20,319 | |
Agency debentures | (180) | | | 58,359 | | | — | | | — | | | (180) | | | 58,359 | |
Total | $ | (18,621) | | | $ | 661,841 | | | $ | (95,381) | | | $ | 680,910 | | | $ | (114,002) | | | $ | 1,342,751 | |
HTM | | | | | | | | | | | |
Municipal bonds | $ | (36) | | | $ | 2,387 | | | $ | — | | | $ | — | | | $ | (36) | | | $ | 2,387 | |
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| At December 31, 2022 |
| Less than 12 months | | 12 months or more | | Total |
(in thousands) | Gross unrealized losses | | Fair value | | Gross unrealized losses | | Fair value | | Gross unrealized losses | | Fair value |
| | | | | | | | | | | |
AFS | | | | | | | | | | | |
MBS: | | | | | | | | | | | |
Residential | $ | (8,845) | | | $ | 191,398 | | | $ | (1,338) | | | $ | 5,763 | | | $ | (10,183) | | | $ | 197,161 | |
Commercial | (5,729) | | | 41,416 | | | (3,633) | | | 14,619 | | | (9,362) | | | 56,035 | |
CMOs: | | | | | | | | | | | |
Residential | (27,789) | | | 498,333 | | | (11,633) | | | 45,689 | | | (39,422) | | | 544,022 | |
Commercial | (4,787) | | | 56,671 | | | (2,603) | | | 13,848 | | | (7,390) | | | 70,519 | |
Municipal bonds | (44,513) | | | 350,918 | | | (13,326) | | | 46,377 | | | (57,839) | | | 397,295 | |
Corporate debt securities | (3,801) | | | 32,871 | | | — | | | — | | | (3,801) | | | 32,871 | |
U.S. Treasury securities | — | | | — | | | (3,071) | | | 19,934 | | | (3,071) | | | 19,934 | |
Agency debentures | (29) | | | 15,970 | | | — | | | — | | | (29) | | | 15,970 | |
Total | $ | (95,493) | | | $ | 1,187,577 | | | $ | (35,604) | | | $ | 146,230 | | | $ | (131,097) | | | $ | 1,333,807 | |
HTM | | | | | | | | | | | |
Municipal bonds | $ | (56) | | | $ | 2,385 | | | $ | — | | | $ | — | | | $ | (56) | | | $ | 2,385 | |
The Company has evaluated AFS securities that are in an unrealized loss position and has determined that the decline in value is temporary and is related to the change in market interest rates since purchase. The decline in value is not related to any issuer- or industry-specific credit event. The Company has not identified any expected credit losses on its debt securities as of March 31, 2023 or December 31, 2022. In addition, as of March 31, 2023 and December 31, 2022, the Company had not made a decision to sell any of its debt securities held, nor did the Company consider it more likely than not that it would be required to sell such securities before recovery of their amortized cost basis.
The following tables present the fair value of investment securities AFS and HTM by contractual maturity along with the associated contractual yield:
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| At March 31, 2023 |
| Within one year | | After one year through five years | | After five years through ten years | | After ten years | | Total |
(dollars in thousands) | Fair Value | | Weighted Average Yield | | Fair Value | | Weighted Average Yield | | Fair Value | | Weighted Average Yield | | Fair Value | | Weighted Average Yield | | Fair Value | | Weighted Average Yield |
| | | | | | | | | | | | | | | | | | | |
AFS | | | | | | | | | | | | | | | | | | | |
Municipal bonds | $ | — | | | — | % | | $ | 3,763 | | | 2.02 | % | | $ | 52,312 | | | 3.13 | % | | $ | 357,583 | | | 2.73 | % | | $ | 413,658 | | | 2.78 | % |
Corporate debt securities | 4,500 | | | 3.49 | % | | 9,989 | | | 5.99 | % | | 26,813 | | | 4.12 | % | | — | | | — | % | | 41,302 | | | 4.47 | % |
U.S. Treasury securities | — | | | — | % | | — | | | — | % | | 20,319 | | | 1.14 | % | | — | | | — | % | | 20,319 | | | 1.14 | % |
Agency debentures | 15,472 | | | 4.74 | % | | 42,887 | | | 5.12 | % | | — | | | — | % | | — | | | — | % | | 58,359 | | | 5.02 | % |
Total | $ | 19,972 | | | 4.45 | % | | $ | 56,639 | | | 5.05 | % | | $ | 99,444 | | | 3.00 | % | | $ | 357,583 | | | 2.73 | % | | $ | 533,638 | | | 3.07 | % |
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HTM | | | | | | | | | | | | | | | | | | | |
Municipal bonds | $ | — | | | — | % | | $ | 2,387 | | | 1.84 | % | | $ | — | | | — | % | | $ | — | | | — | % | | $ | 2,387 | | | 1.84 | % |
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| At December 31, 2022 |
| Within one year | | After one year through five years | | After five years through ten years | | After ten years | | Total |
(dollars in thousands) | Fair Value | | Weighted Average Yield | | Fair Value | | Weighted Average Yield | | Fair Value | | Weighted Average Yield | | Fair Value | | Weighted Average Yield | | Fair Value | | Weighted Average Yield |
| | | | | | | | | | | | | | | | | | | |
AFS | | | | | | | | | | | | | | | | | | | |
Municipal bonds | $ | — | | | — | % | | $ | 3,644 | | | 1.96 | % | | $ | 38,977 | | | 3.04 | % | | $ | 368,927 | | | 2.83 | % | | $ | 411,548 | | | 2.84 | % |
Corporate debt securities | — | | | — | % | | 15,342 | | | 5.13 | % | | 27,603 | | | 4.25 | % | | — | | | — | % | | 42,945 | | | 4.54 | % |
U.S. Treasury securities | — | | | — | % | | — | | | — | % | | 19,934 | | | 1.11 | % | | — | | | — | % | | 19,934 | | | 1.11 | % |
Agency debentures | 10,485 | | | 4.74 | % | | 16,993 | | | 4.94 | % | | — | | | — | % | | — | | | — | % | | 27,478 | | | 4.86 | % |
Total | $ | 10,485 | | | 4.74 | % | | $ | 35,979 | | | 4.69 | % | | $ | 86,514 | | | 2.97 | % | | $ | 368,927 | | | 2.83 | % | | $ | 501,905 | | | 3.01 | % |
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HTM | | | | | | | | | | | | | | | | | | | |
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Municipal bonds | $ | — | | | — | % | | $ | 2,385 | | | 2.04 | % | | $ | — | | | — | % | | $ | — | | | — | % | | $ | 2,385 | | | 2.04 | % |
The weighted-average yield is computed using the contractual coupon of each security weighted based on the fair value of each security. MBS and CMOs are excluded from the tables above because such securities are not due on a single maturity date. The weighted average yield of MBS and CMOs as of March 31, 2023 and December 31, 2022 was 3.15% and 3.08%, respectively.
Sales of AFS investment securities were as follows:
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| | | Quarter Ended March 31, |
(in thousands) | | | | | 2023 | | 2022 |
| | | | | | | |
Proceeds | | | | | $ | 4,693 | | | $ | 962 | |
Gross gains | | | | | 3 | | | 71 | |
Gross losses | | | | | — | | | — | |
The following table summarizes the carrying value of securities pledged as collateral to secure public deposits, borrowings and other purposes as permitted or required by law:
| | | | | | | | | | | |
(in thousands) | At March 31, 2023 | | At December 31, 2022 |
| | | |
| | | |
Federal Reserve Bank to secure borrowings | $ | 315,244 | | | $ | — | |
Washington, Oregon and California to secure public deposits | 203,201 | | | 212,806 | |
| | | |
Other securities pledged | 1,519 | | | 2,011 | |
Total securities pledged as collateral | $ | 519,964 | | | $ | 214,817 | |
The Company assesses the creditworthiness of the counterparties that hold the pledged collateral and has determined that these arrangements have little credit risk.
Tax-exempt interest income on investment securities was $2.8 million and $2.7 million for the quarters ended March 31, 2023 and 2022, respectively.
NOTE 3-LOANS AND CREDIT QUALITY:
The Company's LHFI is divided into two portfolio segments, commercial loans and consumer loans. Within each portfolio segment, the Company monitors and assesses credit risk based on the risk characteristics of each of the following loan classes: non-owner occupied commercial real estate ("CRE"), multifamily, construction and land development, owner occupied CRE and commercial business loans within the commercial loan portfolio segment and single family and home equity and other loans within the consumer loan portfolio segment. LHFI consists of the following:
| | | | | | | | | | | |
(in thousands) | At March 31, 2023 | | At December 31, 2022 |
| | | |
CRE | | | |
Non-owner occupied CRE | $ | 652,284 | | | $ | 658,085 | |
Multifamily | 3,975,654 | | | 3,975,754 | |
Construction/land development | 607,559 | | | 627,663 | |
Total | 5,235,497 | | | 5,261,502 | |
Commercial and industrial loans | | | |
Owner occupied CRE | 438,147 | | | 443,363 | |
Commercial business | 392,837 | | | 359,747 | |
Total | 830,984 | | | 803,110 | |
Consumer loans | | | |
Single family | 1,057,579 | | | 1,009,001 | |
Home equity and other | 362,322 | | | 352,707 | |
Total (1) | 1,419,901 | | | 1,361,708 | |
Total LHFI | 7,486,382 | | | 7,426,320 | |
Allowance for credit losses ("ACL") | (41,500) | | | (41,500) | |
Total LHFI less ACL | $ | 7,444,882 | | | $ | 7,384,820 | |
(1) Includes $5.2 million and $5.9 million at March 31, 2023 and December 31, 2022, respectively, of loans where a fair value option election was made at the time of origination and, therefore, are carried at fair value with changes in fair value recognized in the consolidated income statements.
Loans totaling $5.7 billion and $5.2 billion at March 31, 2023 and December 31, 2022, respectively, were pledged to secure borrowings from the Federal Home Loan Bank ("FHLB") and loans totaling $562 million and $497 million at March 31, 2023 and December 31, 2022, respectively, were pledged to secure borrowings from the Federal Reserve Bank of San Francisco ("FRBSF").
Credit Risk Concentrations
LHFI are primarily secured by real estate located in the Pacific Northwest, California and Hawaii. At March 31, 2023, single family and multifamily loans in the state of Washington and California, represented 10% and 36% of the total LHFI portfolio, respectively. At December 31, 2022, multifamily loans in the state of California represented 36% of the total LHFI portfolio.
Credit Quality
Management considers the level of ACL to be appropriate to cover credit losses expected over the life of the loans for the LHFI portfolio. The cumulative loss rate used as the basis for the estimate of credit losses is comprised of the Bank’s historical loss experience and eight qualitative factors for current and forecasted periods.
During the first quarter of 2023, the historical expected loss rates increased from December 31, 2022 due to product mix risk composition changes. During the first quarter of 2023, the qualitative factors decreased due to the continued favorable performance of our loan portfolio. As of March 31, 2023, the Bank expects deterioration in collateral values and economic conditions over the two-year forecast period in the markets in which it operates.
In addition to the ACL for LHFI, the Company maintains a separate allowance for unfunded loan commitments which is included in accounts payable and other liabilities on our consolidated balance sheets. The allowance for unfunded commitments was $2.2 million at both March 31, 2023 and December 31, 2022.
The Bank has elected to exclude accrued interest receivable from the evaluation of the ACL. Accrued interest on LHFI was $27.6 million and $26.9 million at March 31, 2023 and December 31, 2022, respectively, and was reported in other assets in the consolidated balance sheets.
Activity in the ACL for LHFI and the allowance for unfunded commitments was as follows:
| | | | | | | | | | | | | | | |
| | | Quarter Ended March 31, |
(in thousands) | | | | | 2023 | | 2022 |
| | | | | | | |
Beginning balance | | | | | $ | 41,500 | | | $ | 47,123 | |
Provision for credit losses | | | | | 589 | | | (9,223) | |
Net (charge-offs) recoveries | | | | | (589) | | | 44 |
Ending balance | | | | | $ | 41,500 | | | $ | 37,944 | |
| | | | | | | |
Allowance for unfunded commitments: | | | | | | | |
Beginning balance | | | | | $ | 2,197 | | | $ | 2,404 | |
Provision for credit losses | | | | | 4 | | | 223 | |
Ending balance | | | | | $ | 2,201 | | | $ | 2,627 | |
| | | | | | | |
Provision for credit losses: | | | | | | | |
Allowance for credit losses - loans | | | | | $ | 589 | | | $ | (9,223) | |
Allowance for unfunded commitments | | | | | 4 | | | 223 | |
Total | | | | | $ | 593 | | | $ | (9,000) | |
Activity in the ACL for LHFI by loan portfolio and loan sub-class was as follows:
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| Quarter Ended March 31, 2023 |
(in thousands) | Beginning balance | | Charge-offs | | Recoveries | | Provision | | Ending balance |
| | | | | | | | | |
CRE | | | | | | | | | |
Non-owner occupied CRE | $ | 2,102 | | | $ | — | | | $ | — | | | $ | 506 | | | $ | 2,608 | |
Multifamily | 10,974 | | | — | | | — | | | (1,187) | | | 9,787 | |
Construction/land development | | | | | | | | | |
Multifamily construction | 998 | | | — | | | — | | | 347 | | | 1,345 | |
CRE construction | 196 | | | — | | | — | | | 8 | | | 204 | |
Single family construction | 12,418 | | | — | | | — | | | 107 | | | 12,525 | |
Single family construction to permanent | 1,171 | | | — | | | — | | | 40 | | | 1,211 | |
Total | 27,859 | | | — | | | — | | | (179) | | | 27,680 | |
Commercial and industrial loans | | | | | | | | | |
Owner occupied CRE | 1,030 | | | — | | | — | | | (120) | | | 910 | |
Commercial business | 3,247 | | | (633) | | | 24 | | | 778 | | | 3,416 | |
Total | 4,277 | | | (633) | | | 24 | | | 658 | | | 4,326 | |
Consumer loans | | | | | | | | | |
Single family | 5,610 | | | — | | | 15 | | | 179 | | | 5,804 | |
Home equity and other | 3,754 | | | (50) | | | 55 | | | (69) | | | 3,690 | |
Total | 9,364 | | | (50) | | | 70 | | | 110 | | | 9,494 | |
Total ACL | $ | 41,500 | | | $ | (683) | | | $ | 94 | | | $ | 589 | | | $ | 41,500 | |
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| Quarter Ended March 31, 2022 |
(in thousands) | Beginning balance | | Charge-offs | | Recoveries | | Provision | | Ending balance |
| | | | | | | | | |
CRE | | | | | | | | | |
Non-owner occupied CRE | $ | 7,509 | | | $ | — | | | $ | — | | | $ | (5,215) | | | $ | 2,294 | |
Multifamily | 5,854 | | | — | | | — | | | 2,573 | | | 8,427 | |
Construction/land development | | | | | | | | | |
Multifamily construction | 507 | | | — | | | — | | | (51) | | | 456 | |
CRE construction | 150 | | | — | | | — | | | 34 | | | 184 | |
Single family construction | 6,411 | | | — | | | — | | | 1,324 | | | 7,735 | |
Single family construction to permanent | 1,055 | | | — | | | — | | | (65) | | | 990 | |
Total | 21,486 | | | — | | | — | | | (1,400) | | | 20,086 | |
Commercial and industrial loans | | | | | | | | | |
Owner occupied CRE | 5,006 | | | — | | | — | | | (1,470) | | | 3,536 | |
Commercial business | 12,273 | | | (11) | | | 24 | | | (5,376) | | | 6,910 | |
Total | 17,279 | | | (11) | | | 24 | | | (6,846) | | | 10,446 | |
Consumer loans | | | | | | | | | |
Single family | 4,394 | | | — | | | 4 | | | (636) | | | 3,762 | |
Home equity and other | 3,964 | | | (33) | | | 60 | | | (341) | | | 3,650 | |
Total | 8,358 | | | (33) | | | 64 | | | (977) | | | 7,412 | |
Total ACL | $ | 47,123 | | | $ | (44) | | | $ | 88 | | | $ | (9,223) | | | $ | 37,944 | |
The following table presents a vintage analysis of the commercial portfolio segment by loan sub-class and risk rating or delinquency status. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | At March 31, 2023 |
(in thousands) | | 2023 | | 2022 | | 2021 | | 2020 | | 2019 | | 2018 and prior | | Revolving | | Revolving-term | | Total |
COMMERCIAL PORTFOLIO | | | | | | | | | | | | |
Non-owner occupied CRE | | | | | | | | | | | | | | |
Pass | | $ | 1,542 | | | $ | 68,246 | | | $ | 68,280 | | | $ | 41,870 | | | $ | 138,583 | | | $ | 302,871 | | | $ | 1,122 | | | $ | — | | | $ | 622,514 | |
Special Mention | | — | | | — | | | — | | | — | | | — | | | 29,332 | | | — | | | — | | | 29,332 | |
Substandard | | — | | | — | | | — | | | — | | | 438 | | | — | | | — | | | — | | | 438 | |
Total | | 1,542 | | | 68,246 | | | 68,280 | | | 41,870 | | | 139,021 | | | 332,203 | | | 1,122 | | | — | | | 652,284 | |
Multifamily | | | | | | | | | | | | | | | | | | |
Pass | | 15,923 | | | 1,826,992 | | | 1,159,589 | | | 522,497 | | | 238,448 | | | 197,486 | | | — | | | — | | | 3,960,935 | |
Special Mention | | — | | | — | | | — | | | 4,892 | | | 2,366 | | | 7,461 | | | — | | | — | | | 14,719 | |
Substandard | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | |
Total | | 15,923 | | | 1,826,992 | | | 1,159,589 | | | 527,389 | | | 240,814 | | | 204,947 | | | — | | | — | | | 3,975,654 | |
Multifamily construction | | | | | | | | | | | | | | | | |
Pass | | (222) | | | 23,795 | | | 71,396 | | | 14,164 | | | — | | | — | | | — | | | — | | | 109,133 | |
Special Mention | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | |
Substandard | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | |
Total | | (222) | | | 23,795 | | | 71,396 | | | 14,164 | | | — | | | — | | | — | | | — | | | 109,133 | |
CRE construction | | | | | | | | | | | | | | |
Pass | | — | | | 1,713 | | | 14,416 | | | 3,958 | | | — | | | — | | | — | | | — | | | 20,087 | |
Special Mention | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | |
Substandard | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | |
Total | | — | | | 1,713 | | | 14,416 | | | 3,958 | | | — | | | — | | | — | | | — | | | 20,087 | |
Single family construction | | | | | | | | | | | | | | | | |
Pass | | 22,174 | | | 140,812 | | | 30,374 | | | 10,748 | | | — | | | 74 | | | 117,718 | | | — | | | 321,900 | |
Special Mention | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | |
Substandard | | — | | | — | | | 5,732 | | | — | | | — | | | — | | | — | | | — | | | 5,732 | |
Total | | 22,174 | | | 140,812 | | | 36,106 | | | 10,748 | | | — | | | 74 | | | 117,718 | | | — | | | 327,632 | |
Single family construction to permanent | | | | | | | | | | | | | | |
Current | | 3,874 | | | 84,818 | | | 54,059 | | | 5,253 | | | 2,186 | | | 517 | | | — | | | — | | | 150,707 | |
Past due: | | | | | | | | | | | | | | | | | | |
30-59 days | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | |
60-89 days | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | |
90+ days | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | |
Total | | 3,874 | | | 84,818 | | | 54,059 | | | 5,253 | | | 2,186 | | | 517 | | | — | | | — | | | 150,707 | |
Owner occupied CRE | | | | | | | | | | | | | | |
Pass | | 3,908 | | | 69,709 | | | 51,178 | | | 42,620 | | | 70,651 | | | 176,851 | | | 2 | | | 1,085 | | | 416,004 | |
Special Mention | | — | | | 1,506 | | | 737 | | | — | | | — | | | 12,915 | | | — | | | — | | | 15,158 | |
Substandard | | — | | | — | | | — | | | — | | | — | | | 6,985 | | | — | | | — | | | 6,985 | |
Total | | 3,908 | | | 71,215 | | | 51,915 | | | 42,620 | | | 70,651 | | | 196,751 | | | 2 | | | 1,085 | | | 438,147 | |
Commercial business | | | | | | | | | | | | | | | | | | |
Pass | | 15,698 | | | 53,476 | | | 38,338 | | | 45,115 | | | 17,838 | | | 30,257 | | | 152,482 | | | 1,743 | | | 354,947 | |
Special Mention | | — | | | 11,612 | | | 3,650 | | | — | | | 3,765 | | | 3,093 | | | 1,935 | | | 190 | | | 24,245 | |
Substandard | | — | | | — | | | 996 | | | 2,551 | | | 3,955 | | | 4,589 | | | 1,462 | | | 92 | | | 13,645 | |
Total | | 15,698 | | | 65,088 | | | 42,984 | | | 47,666 | | | 25,558 | | | 37,939 | | | 155,879 | | | 2,025 | | | 392,837 | |
Total commercial portfolio | | $ | 62,897 | | | $ | 2,282,679 | | | $ | 1,498,745 | | | $ | 693,668 | | | $ | 478,230 | | | $ | 772,431 | | | $ | 274,721 | | | $ | 3,110 | | | $ | 6,066,481 | |
The following table presents a vintage analysis of the consumer portfolio segment by loan sub-class and delinquency status:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | At March 31, 2023 |
(in thousands) | | 2023 | | 2022 | | 2021 | | 2020 | | 2019 | | 2018 and prior | | Revolving | | Revolving-term | | Total |
| | | | | | | | | | | | | | | | | | |
CONSUMER PORTFOLIO | | | | | | | | | | | | |
Single family | | | | | | | | | | | | | | | | | | |
Current | | $ | 7,309 | | | $ | 283,042 | | | $ | 283,329 | | | $ | 156,430 | | | $ | 48,645 | | | $ | 272,582 | | | $ | — | | | $ | — | | | $ | 1,051,337 | |
Past due: | | | | | | | | | | | | | | | | | | |
30-59 days | | — | | | — | | | — | | | — | | | 545 | | | 2,020 | | | — | | | — | | | 2,565 | |
60-89 days | | — | | | — | | | — | | | — | | | — | | | 539 | | | — | | | — | | | 539 | |
90+ days | | — | | | — | | | — | | | — | | | 290 | | | 2,848 | | | — | | | — | | | 3,138 | |
Total | | 7,309 | | | 283,042 | | | 283,329 | | | 156,430 | | | 49,480 | | | 277,989 | | | — | | | — | | | 1,057,579 | |
Home equity and other | | | | | | | | | | | | | | | | |
Current | | 542 | | | 3,693 | | | 601 | | | 197 | | | 114 | | | 1,788 | | | 346,770 | | | 7,379 | | | 361,084 | |
Past due: | | | | | | | | | | | | | | | | | | |
30-59 days | | — | | | 10 | | | — | | | — | | | — | | | — | | | 620 | | | 58 | | | 688 | |
60-89 days | | — | | | 28 | | | 7 | | | — | | | — | | | — | | | 53 | | | 8 | | | 96 | |
90+ days | | — | | | 32 | | | — | | | — | | | — | | | 25 | | | 387 | | | 10 | | | 454 | |
Total | | 542 | | | 3,763 | | | 608 | | | 197 | | | 114 | | | 1,813 | | | 347,830 | | | 7,455 | | | 362,322 | |
Total consumer portfolio (1) | | $ | 7,851 | | | $ | 286,805 | | | $ | 283,937 | | | $ | 156,627 | | | $ | 49,594 | | | $ | 279,802 | | | $ | 347,830 | | | $ | 7,455 | | | $ | 1,419,901 | |
Total LHFI | | $ | 70,748 | | | $ | 2,569,484 | | | $ | 1,782,682 | | | $ | 850,295 | | | $ | 527,824 | | | $ | 1,052,233 | | | $ | 622,551 | | | $ | 10,565 | | | $ | 7,486,382 | |
(1) Includes $5.2 million of loans where a fair value option election was made at the time of origination and, therefore, are carried at fair value with changes in fair value recognized in the consolidated income statements.
The following table presents a vintage analysis of the commercial portfolio segment by loan sub-class and risk rating or delinquency status: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | At December 31, 2022 |
(in thousands) | | 2022 | | 2021 | | 2020 | | 2019 | | 2018 | | 2017 and prior | | Revolving | | Revolving-term | | Total |
COMMERCIAL PORTFOLIO | | | | | | | | | | | | |
Non-owner occupied CRE | | | | | | | | | | | | | | |
Pass | | $ | 68,301 | | | $ | 68,356 | | | $ | 42,181 | | | $ | 139,760 | | | $ | 87,197 | | | $ | 242,544 | | | $ | 2,016 | | | $ | 786 | | | $ | 651,141 | |
Special Mention | | — | | | — | | | — | | | — | | | 2,702 | | | 4,242 | | | — | | | — | | | 6,944 | |
Substandard | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | |
Total | | 68,301 | | | 68,356 | | | 42,181 | | | 139,760 | | | 89,899 | | | 246,786 | | | 2,016 | | | 786 | | | 658,085 | |
Multifamily | | | | | | | | | | | | | | | | | | |
Pass | | 1,828,568 | | | 1,165,434 | | | 528,077 | | | 221,974 | | | 59,340 | | | 140,126 | | | — | | | — | | | 3,943,519 | |
Special Mention | | — | | | — | | | 4,893 | | | 19,834 | | | — | | | 7,508 | | | — | | | — | | | 32,235 | |
Substandard | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | |
Total | | 1,828,568 | | | 1,165,434 | | | 532,970 | | | 241,808 | | | 59,340 | | | 147,634 | | | — | | | — | | | 3,975,754 | |
Multifamily construction | | | | | | | | | | | | | | | | |
Pass | | 18,110 | | | 63,394 | | | 13,613 | | | — | | | — | | | — | | | — | | | — | | | 95,117 | |
Special Mention | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | |
Substandard | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | |
Total | | 18,110 | | | 63,394 | | | 13,613 | | | — | | | — | | | — | | | — | | | — | | | 95,117 | |
CRE construction | | | | | | | | | | | | | | |
Pass | | 341 | | | 14,348 | | | 3,960 | | | — | | | — | | | 305 | | | — | | | — | | | 18,954 | |
Special Mention | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | |
Substandard | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | |
Total | | 341 | | | 14,348 | | | 3,960 | | | — | | | — | | | 305 | | | — | | | — | | | 18,954 | |
Single family construction | | | | | | | | | | | | |
Pass | | 149,133 | | | 50,936 | | | 24,807 | | | 519 | | | — | | | 74 | | | 123,303 | | | — | | | 348,772 | |
Special Mention | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | |
Substandard | | — | | | 6,782 | | | — | | | — | | | — | | | — | | | — | | | — | | | 6,782 | |
Total | | 149,133 | | | 57,718 | | | 24,807 | | | 519 | | | — | | | 74 | | | 123,303 | | | — | | | 355,554 | |
Single family construction to permanent | | | | | | | | | | | | | | |
Current | | 66,034 | | | 76,814 | | | 11,128 | | | 3,268 | | | 794 | | | — | | | — | | | — | | | 158,038 | |
Past due: | | | | | | | | | | | | | | | | | | |
30-59 days | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | |
60-89 days | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | |
90+ days | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | |
Total | | 66,034 | | | 76,814 | | | 11,128 | | | 3,268 | | | 794 | | | — | | | — | | | — | | | 158,038 | |
Owner occupied CRE | | | | | | | | | | | | | | |
Pass | | 70,192 | | | 51,919 | | | 44,778 | | | 71,652 | | | 36,457 | | | 139,691 | | | 3 | | | 1,104 | | | 415,796 | |
Special Mention | | — | | | 743 | | | — | | | — | | | 6,179 | | | 13,485 | | | — | | | — | | | 20,407 | |
Substandard | | — | | | — | | | — | | | — | | | 2,149 | | | 5,011 | | | — | | | — | | | 7,160 | |
Total | | 70,192 | | | 52,662 | | | 44,778 | | | 71,652 | | | 44,785 | | | 158,187 | | | 3 | | | 1,104 | | | 443,363 | |
Commercial business | | | | | | | | | | | | | | | | | | |
Pass | | 65,566 | | | 42,921 | | | 45,940 | | | 18,594 | | | 13,548 | | | 18,779 | | | 130,427 | | | 2,041 | | | 337,816 | |
Special Mention | | — | | | 612 | | | — | | | 3,577 | | | 9 | | | 3,444 | | | 403 | | | — | | | 8,045 | |
Substandard | | — | | | 338 | | | 2,638 | | | 4,449 | | | 2,591 | | | 2,206 | | | 1,563 | | | 101 | | | 13,886 | |
Total | | 65,566 | | | 43,871 | | | 48,578 | | | 26,620 | | | 16,148 | | | 24,429 | | | 132,393 | | | 2,142 | | | 359,747 | |
Total commercial portfolio | | $ | 2,266,245 | | | $ | 1,542,597 | | | $ | 722,015 | | | $ | 483,627 | | | $ | 210,966 | | | $ | 577,415 | | | $ | 257,715 | | | $ | 4,032 | | | $ | 6,064,612 | |
The following table presents a vintage analysis of the consumer portfolio segment by loan sub-class and delinquency status:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | At December 31, 2022 |
(in thousands) | | 2022 | | 2021 | | 2020 | | 2019 | | 2018 | | 2017 and prior | | Revolving | | Revolving-term | | Total |
| | | | | | | | | | | | | | | | | | |
CONSUMER PORTFOLIO | | | | | | | | | | | | |
Single family | | | | | | | | | | | | | | | | | | |
Current | | $ | 273,786 | | | $ | 253,937 | | | $ | 152,773 | | | $ | 49,302 | | | $ | 43,511 | | | $ | 231,277 | | | $ | — | | | $ | — | | | $ | 1,004,586 | |
Past due: | | | | | | | | | | | | | | | | | | |
30-59 days | | — | | | — | | | — | | | — | | | 340 | | | 2,113 | | | — | | | — | | | 2,453 | |
60-89 days | | — | | | — | | | — | | | — | | | — | | | 258 | | | — | | | — | | | 258 | |
90+ days | | — | | | — | | | — | | | 290 | | | 273 | | | 1,141 | | | — | | | — | | | 1,704 | |
Total | | 273,786 | | | 253,937 | | | 152,773 | | | 49,592 | | | 44,124 | | | 234,789 | | | — | | | — | | | 1,009,001 | |
Home equity and other | | | | | | | | | | | | | | | | |
Current | | 4,156 | | | 692 | | | 220 | | | 150 | | | 72 | | | 1,593 | | | 340,567 | | | 4,017 | | | 351,467 | |
Past due: | | | | | | | | | | | | | | | | | | |
30-59 days | | — | | | 6 | | | — | | | — | | | — | | | 9 | | | 446 | | | — | | | 461 | |
60-89 days | | 6 | | | 24 | | | — | | | — | | | — | | | 48 | | | 517 | | | — | | | 595 | |
90+ days | | — | | | — | | | — | | | — | | | — | | | 151 | | | 33 | | | — | | | 184 | |
Total | | 4,162 | | | 722 | | | 220 | | | 150 | | | 72 | | | 1,801 | | | 341,563 | | | 4,017 | | | 352,707 | |
Total consumer portfolio (1) | | $ | 277,948 | | | $ | 254,659 | | | $ | 152,993 | | | $ | 49,742 | | | $ | 44,196 | | | $ | 236,590 | | | $ | 341,563 | | | $ | 4,017 | | | $ | 1,361,708 | |
Total LHFI | | $ | 2,544,193 | | | $ | 1,797,256 | | | $ | 875,008 | | | $ | 533,369 | | | $ | 255,162 | | | $ | 814,005 | | | $ | 599,278 | | | $ | 8,049 | | | $ | 7,426,320 | |
(1) Includes $5.9 million of loans where a fair value option election was made at the time of origination and, therefore, are carried at fair value with changes in fair value recognized in the consolidated income statements.
The following table presents a vintage analysis of the commercial and consumer portfolio segment by loan sub-class and gross charge-offs:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | At March 31, 2023 |
(in thousands) | | 2023 | | 2022 | | 2021 | | 2020 | | 2019 | | 2018 and prior | | Revolving | | Revolving-term | | Total |
| | | | | | | | | | | | | | | | | | |
COMMERCIAL PORTFOLIO | | | | | | | | | | | | |
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Commercial business | | | | | | | | | | | | | | | | | | |
Gross charge-offs | | $ | — | | | $ | — | | | $ | (174) | | | $ | — | | | $ | (459) | | | $ | — | | | $ | — | | | $ | — | | | $ | (633) | |
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CONSUMER PORTFOLIO | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | |
Home equity and other | | | | | | | | | | | | | | | | |
Gross charge-offs | | — | | | (6) | | | (13) | | | — | | | — | | | — | | | (31) | | | — | | | (50) | |
| | | | | | | | | | | | | | | | | | |
Total LHFI | | $ | — | | | $ | (6) | | | $ | (187) | | | $ | — | | | $ | (459) | | | $ | — | | | $ | (31) | | | $ | — | | | $ | (683) | |
Collateral Dependent Loans
The following table presents the amortized cost basis of collateral-dependent loans by loan sub-class and collateral type:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | At March 31, 2023 | | |
(in thousands) | | Land | | 1-4 Family | | | | Non-residential real estate | | Other non-real estate | | Total | | |
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Commercial and industrial loans | | | | | | | | | | | | | | |
Owner occupied CRE | | $ | 972 | | | $ | — | | | | | $ | 2,696 | | | $ | — | | | $ | 3,668 | | | |
Commercial business | | 1 | | | 3,178 | | | | | 562 | | | 777 | | | 4,518 | | | |
Total | | 973 | | | 3,178 | | | | | 3,258 | | | 777 | | | 8,186 | | | |
Consumer loans | | | | | | | | | | | | | | |
Single family | | — | | | 847 | | | | | — | | | — | | | 847 | | | |
| | | | | | | | | | | | | | |
Total | | — | | | 847 | | | | | — | | | — | | | 847 | | | |
Total collateral-dependent loans | | $ | 973 | | | $ | 4,025 | | | | | $ | 3,258 | | | $ | 777 | | | $ | 9,033 | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | At December 31, 2022 |
(in thousands) | | Land | | 1-4 Family | | | | Non-residential real estate | | Other non-real estate | | Total |
| | | | | | | | | | | | |
Commercial and industrial loans | | | | | | | | | | | | |
Owner occupied CRE | | $ | 1,111 | | | $ | — | | | | | $ | 1,410 | | | $ | — | | | $ | 2,521 | |
Commercial business | | 62 | | | 3,186 | | | | | 562 | | | — | | | 3,810 | |
Total collateral-dependent loans | | 1,173 | | | 3,186 | | | | | 1,972 | | | — | | | 6,331 | |
Nonaccrual and Past Due Loans
The following table presents nonaccrual status for loans:
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| At March 31, 2023 | | At December 31, 2022 |
(in thousands) | | Nonaccrual with no related ACL | | Total Nonaccrual | | Nonaccrual with no related ACL | | Total Nonaccrual |
| | | | | | | | |
Commercial and industrial loans | | | | | | | | |
Owner occupied CRE | | $ | 3,668 | | | $ | 3,668 | | | $ | 2,521 | | | $ | 2,521 | |
Commercial business | | 4,518 | | | 4,518 | | | 785 | | | 4,269 | |
Total | | 8,186 | | | 8,186 | | | 3,306 | | | 6,790 | |
Consumer loans | | | | | | | | |
Single family | | 1,071 | | | 3,999 | | | 332 | | | 2,584 | |
Home equity and other | | 3 | | | 862 | | | 3 | | | 681 | |
Total | | 1,074 | | | 4,861 | | | 335 | | | 3,265 | |
Total nonaccrual loans | | $ | 9,260 | | | $ | 13,047 | | | $ | 3,641 | | | $ | 10,055 | |
The following tables present an aging analysis of past due loans by loan portfolio segment and loan sub-class: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| At March 31, 2023 | |
| Past Due and Still Accruing | | | | | | | | | |
(in thousands) | 30-59 days | | 60-89 days | | 90 days or more | | Nonaccrual | | Total past due and nonaccrual (1) | | Current | | Total loans | |
| | | | | | | | | | | | | | |
CRE | | | | | | | | | | | | | | |
Non-owner occupied CRE | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | 652,284 | | | $ | 652,284 | | |
Multifamily | — | | | — | | | — | | | — | | | — | | | 3,975,654 | | | 3,975,654 | | |
Construction/land development | | | | | | | | | | | | | | |
Multifamily construction | — | | | — | | | — | | | — | | | — | | | 109,133 | | | 109,133 | | |
CRE construction | — | | | — | | | — | | | — | | | — | | | 20,087 | | | 20,087 | | |
Single family construction | — | | | — | | | 5,732 | | | — | | | 5,732 | | | 321,900 | | | 327,632 | | |
Single family construction to permanent | — | | | — | | | — | | | — | | | — | | | 150,707 | | | 150,707 | | |
Total | — | | | — | | | 5,732 | | | — | | | 5,732 | | | 5,229,765 | | | 5,235,497 | | |
Commercial and industrial loans | | | | | | | | | | | | | | |
Owner occupied CRE | — | | | — | | | — | | | 3,668 | | | 3,668 | | | 434,479 | | | 438,147 | | |
Commercial business | 50 | | | — | | | — | | | 4,518 | | | 4,568 | | | 388,269 | | | 392,837 | | |
Total | 50 | | | — | | | — | | | 8,186 | | | 8,236 | | | 822,748 | | | 830,984 | | |
Consumer loans | | | | | | | | | | | | | | |
Single family | 4,105 | | | 1,856 | | | 5,527 | | (2) | 3,999 | | | 15,487 | | | 1,042,092 | | | 1,057,579 | | |
Home equity and other | 689 | | | 43 | | | — | | | 862 | | | 1,594 | | | 360,728 | | | 362,322 | | |
Total | 4,794 | | | 1,899 | | | 5,527 | | | 4,861 | | | 17,081 | | | 1,402,820 | | | 1,419,901 | | (3) |
Total loans | $ | 4,844 | | | $ | 1,899 | | | $ | 11,259 | | | $ | 13,047 | | | $ | 31,049 | | | $ | 7,455,333 | | | $ | 7,486,382 | | |
% | 0.06 | % | | 0.03 | % | | 0.15 | % | | 0.17 | % | | 0.41 | % | | 99.59 | % | | 100.00 | % | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| At December 31, 2022 | | |
| Past Due and Still Accruing | | | | | | | | | | |
(in thousands) | 30-59 days | | 60-89 days | | 90 days or more | | Nonaccrual | | Total past due and nonaccrual (1) | | Current | | Total loans | | |
| | | | | | | | | | | | | | | |
CRE | | | | | | | | | | | | | | | |
Non-owner occupied CRE | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | 658,085 | | | $ | 658,085 | | | |
Multifamily | — | | | — | | | — | | | — | | | — | | | 3,975,754 | | | 3,975,754 | | | |
Construction/land development | | | | | | | | | | | | | | | |
Multifamily construction | — | | | — | | | — | | | — | | | — | | | 95,117 | | | 95,117 | | | |
CRE construction | — | | | — | | | — | | | — | | | — | | | 18,954 | | | 18,954 | | | |
Single family construction | — | | | — | | | — | | | — | | | — | | | 355,554 | | | 355,554 | | | |
Single family construction to permanent | — | | | — | | | — | | | — | | | — | | | 158,038 | | | 158,038 | | | |
Total | — | | | — | | | — | | | — | | | — | | | 5,261,502 | | | 5,261,502 | | | |
Commercial and industrial loans | | | | | | | | | | | | | | | |
Owner occupied CRE | — | | | — | | | — | | | 2,521 | | | 2,521 | | | 440,842 | | | 443,363 | | | |
Commercial business | — | | | — | | | — | | | 4,269 | | | 4,269 | | | 355,478 | | | 359,747 | | | |
Total | — | | | — | | | — | | | 6,790 | | | 6,790 | | | 796,320 | | | 803,110 | | | |
Consumer loans | | | | | | | | | | | | | | | |
Single family | 4,556 | | | 1,724 | | | 4,372 | | (2) | 2,584 | | | 13,236 | | | 995,765 | | | 1,009,001 | | | |
Home equity and other | 267 | | | 296 | | | — | | | 681 | | | 1,244 | | | 351,463 | | | 352,707 | | | |
Total | 4,823 | | | 2,020 | | | 4,372 | | | 3,265 | | | 14,480 | | | 1,347,228 | | | 1,361,708 | | (3) | |
Total loans | $ | 4,823 | | | $ | 2,020 | | | $ | 4,372 | | | $ | 10,055 | | | $ | 21,270 | | | $ | 7,405,050 | | | $ | 7,426,320 | | | |
% | 0.06 | % | | 0.03 | % | | 0.06 | % | | 0.14 | % | | 0.29 | % | | 99.71 | % | | 100.00 | % | | |
(1) Includes loans whose repayments are insured by the FHA or guaranteed by the VA or Small Business Administration "SBA" of $12.3 million and $10.6 million at March 31, 2023 and December 31, 2022, respectively.
(2) FHA-insured and VA-guaranteed single family loans that are 90 days or more past due are maintained on accrual status if they are determined to have little to no risk of loss.
(3) Includes $5.2 million and $5.9 million of loans at March 31, 2023 and December 31, 2022, respectively, where a fair value option election was made at the time of origination and, therefore, are carried at fair value with changes in fair value recognized in our consolidated income statements.
Loan Modifications
The Company provides modifications to borrowers experiencing financial difficulty ("MFDB"), which may include delays in payment of amounts due, extension of the terms of the notes or reduction in the interest rates on the notes. In certain instances, the Company may grant more than one type of modification. The granting of modifications in the quarters ended March 31, 2023 and 2022 did not have a material impact on the ACL. The following tables provide information related to loans modified during the quarters ended March 31, 2023 and 2022 to borrowers experiencing financial difficulty, disaggregated by class of financing receivable and type of concession granted:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Significant Payment Delay |
| | Quarter Ended March 31, 2023 | | Quarter Ended March 31, 2022 | |
(in thousands, except percentage) | | Amortized Cost Basis at Period End | | % of Total Class of Financing Receivable | | Amortized Cost Basis at Period End | | % of Total Class of Financing Receivable | | | | | | | |
Single family | | $ | — | | | — | % | | $ | 153 | | | 0.02 | % | | | | | | | |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Term Extension |
| | Quarter Ended March 31, 2023 | | Quarter Ended March 31, 2022 | |
(in thousands, except percentage) | | Amortized Cost Basis at Period End | | % of Total Class of Financing Receivable | | Amortized Cost Basis at Period End | | % of Total Class of Financing Receivable | | | |
| | | | | | | | | | | |
Single family | | $ | — | | | — | % | | $ | 37 | | | — | % | | | |
| | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Interest Rate Reduction and Term Extension |
| | Quarter Ended March 31, 2023 | | Quarter Ended March 31, 2022 | |
(in thousands, except percentage) | | Amortized Cost Basis at Period End | | % of Total Class of Financing Receivable | | Amortized Cost Basis at Period End | | % of Total Class of Financing Receivable | | | |
| | | | | | | | | | | |
Single family | | $ | — | | | — | % | | $ | 1,110 | | | 0.15 | % | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Significant Payment Delay and Term Extension |
| | Quarter Ended March 31, 2023 | | Quarter Ended March 31, 2022 | |
(in thousands, except percentage) | | Amortized Cost Basis at Period End | | % of Total Class of Financing Receivable | | Amortized Cost Basis at Period End | | % of Total Class of Financing Receivable | | | |
Single family | | $ | 179 | | | 0.02 | % | | $ | 6,397 | | | 0.84 | % | | | |
Home equity and other | | — | | | — | % | | 52 | | | 0.02 | % | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Interest Rate Reduction, Significant Payment Delay and Term Extension |
| | Quarter Ended March 31, 2023 | | Quarter Ended March 31, 2022 | |
(in thousands, except percentage) | | Amortized Cost Basis at Period End | | % of Total Class of Financing Receivable | | Amortized Cost Basis at Period End | | % of Total Class of Financing Receivable | | | |
Single family | | $ | — | | | — | % | | $ | 5,762 | | | 0.76 | % | | | |
The following table describes the financial effect of the modifications made to borrowers experiencing financial difficulty:
| | | | | | | | | | | | | | | | |
| | |
| | Interest Rate Reduction |
| | Quarter Ended March 31, 2023 | | Quarter Ended March 31, 2022 | | |
| | | | | | |
Single family | | — | | Reduced weighted-average contractual interest rate from 4.28% to 3.25%. | | |
| | | | | | |
| | Significant Payment Delay |
| | Quarter Ended March 31, 2023 | | Quarter Ended March 31, 2022 | | |
Single Family | | Provided payment deferrals to borrowers. A weighted average 2.6% of loan balances were capitalized and added to the remaining term of the loan. | | Provided payment deferrals to borrowers. A weighted average 0.3% of loan balances were capitalized and added to the remaining term of the loan. | | |
| | | | | | |
Home equity and other | | — | | Provided payment deferrals to borrowers. A weighted average 6.3% of loan balances were capitalized and added to the remaining term of the loan. | | |
| | | | | | |
| | Term Extension |
| | Quarter Ended March 31, 2023 | | Quarter Ended March 31, 2022 | | |
| | | | | | |
Single family | | Added a weighted average 14.2 years to the life of loans, which reduced the monthly payment amounts to the borrowers. | | Added a weighted average 3.2 years to the life of loans, which reduced the monthly payment amounts to the borrowers. | | |
Home equity and other | | — | | Added a weighted average 16.1 years to the life of loans, which reduced the monthly payment amounts to the borrowers. | | |
Upon determination that a modified loan (or portion of a loan) has subsequently been deemed uncollectible, the loan (or portion of the loan) is written off. Therefore, the amortized cost basis of the loan is reduced by the uncollectible amount and the allowance for credit losses is adjusted by the same amount.
The following table depicts the payment status of loans that were MFDBs on or after January 1, 2022 through December 31, 2022:
| | | | | | | | | | | | | | | | | |
| Payment Status (Amortized Cost Basis) at March 31, 2023 |
(in thousands) | Current | | 30-89 Days Past Due | | 90+ Days Past Due |
| | | | | |
Commercial business | $ | 1,355 | | | $ | — | | | $ | — | |
Single family | 19,006 | | | 1,746 | | | 1,627 | |
Home equity and other | 119 | | | — | | | — | |
Total | $ | 20,480 | | | $ | 1,746 | | | $ | 1,627 | |
The following tables provide the amortized cost basis as of March 31, 2023 of MFDBs on or after January 1, 2022 through December 31, 2022 and subsequently had a payment default:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | |
| | Amortized Cost Basis of Modified Loans That Subsequently Defaulted Quarter Ended March 31, 2023 |
(in thousands) | | Significant Payment Delay | | Term Extension | | Interest Rate Reduction and Term Extension | | Significant Payment Delay and Term Extension | | Interest Rate Reduction, Significant Payment Delay and Term Extension |
Single family | | $ | — | | | $ | — | | | $ | — | | | $ | 2,030 | | | $ | 623 | |
| | | | | | | | | | |
| | | | | | | | | | |
NOTE 4–DEPOSITS:
Deposit balances, including their weighted average rates, were as follows:
| | | | | | | | | | | | | | | | | | | | | | | |
| At March 31, 2023 | | At December 31, 2022 |
(dollars in thousands) | Amount | | Weighted Average Rate | | Amount | | Weighted Average Rate |
| | | | | | | |
Noninterest-bearing demand deposits | $ | 1,479,428 | | | — | % | | $ | 1,399,912 | | | — | % |
Interest bearing: | | | | | | | |
Interest-bearing demand deposits | 496,504 | | | 0.34 | % | | 466,490 | | | 0.10 | % |
Savings | 323,373 | | | 0.06 | % | | 258,977 | | | 0.06 | % |
Money market | 2,097,055 | | | 1.52 | % | | 2,383,209 | | | 1.22 | % |
Certificates of deposit | 2,660,243 | | | 3.49 | % | | 2,943,331 | | | 3.07 | % |
Total interest bearing deposits | 5,577,175 | | | 2.28 | % | | 6,052,007 | | | 1.98 | % |
Total deposits | $ | 7,056,603 | | | 1.79 | % | | $ | 7,451,919 | | | 1.61 | % |
Certificates of deposit outstanding mature as follows:
| | | | | |
(in thousands) | March 31, 2023 |
| |
Within one year | $ | 2,143,208 | |
One to two years | 489,105 | |
Two to three years | 15,066 | |
Three to four years | 5,202 | |
Four to five years | 7,500 | |
Thereafter | 162 | |
Total | $ | 2,660,243 | |
The aggregate amount of certificate of deposits in denominations of more than the FDIC limit of $250 thousand at March 31, 2023 and December 31, 2022 were $186 million and $189 million, respectively. There were $885 million and $1.4 billion of brokered deposits at March 31, 2023 and December 31, 2022, respectively.
NOTE 5–DERIVATIVES AND HEDGING ACTIVITIES:
To reduce the risk of significant interest rate fluctuations on the value of certain assets and liabilities, such as single family mortgage LHFS and MSRs, the Company utilizes derivatives as economic hedges. The notional amounts and fair values for derivatives, which are included in other assets or accounts payable and other liabilities on the consolidated balance sheet, consist of the following:
| | | | | | | | | | | | | | | | | |
| At March 31, 2023 |
| Notional amount | | Fair value derivatives |
(in thousands) | | | Asset | | Liability |
| | | | | |
Forward sale commitments | $ | 89,850 | | | $ | 229 | | | $ | (326) | |
| | | | | |
Interest rate lock commitments | 37,557 | | | 398 | | | (36) | |
Interest rate swaps | 239,558 | | | 10,704 | | | (10,705) | |
Futures | 7,400 | | | 34 | | | — | |
Options | 58,000 | | | 503 | | | — | |
Total derivatives before netting | $ | 432,365 | | | 11,868 | | | (11,067) | |
Netting adjustment/Cash collateral (1) | | | (10,801) | | | (239) | |
Carrying value on consolidated balance sheet | | | $ | 1,067 | | | $ | (11,306) | |
| | | | | | | | | | | | | | | | | |
| At December 31, 2022 |
| Notional amount | | Fair value derivatives |
(in thousands) | | | Asset | | Liability |
| | | | | |
Forward sale commitments | $ | 51,252 | | | $ | 293 | | | $ | (151) | |
Interest rate lock commitments | 17,463 | | | 141 | | | (36) | |
Interest rate swaps | 236,533 | | | 13,093 | | | (13,093) | |
Futures | 23,000 | | | 18 | | | — | |
Options | $ | 14,000 | | | 218 | | | — | |
Total derivatives before netting | $ | 342,248 | | | $ | 13,763 | | | $ | (13,280) | |
Netting adjustment/Cash collateral (1) | | | (12,870) | | | 101 | |
Carrying value on consolidated balance sheet | | | $ | 893 | | | $ | (13,179) | |
(1) Includes net cash collateral received of $11.0 million and $12.8 million at March 31, 2023 and December 31, 2022, respectively.
The following table presents gross fair value and net carrying value information for derivative instruments:
| | | | | | | | | | | | | | | | | | | | | |
(in thousands) | Gross fair value | | Netting adjustments/ Cash collateral (1) | | Carrying value | | | | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
At March 31, 2023 | | | | | | | | | |
Derivative assets | $ | 11,868 | | | $ | (10,801) | | | $ | 1,067 | | | | | |
Derivative liabilities | (11,067) | | | (239) | | | (11,306) | | | | | |
At December 31, 2022 | | | | | | | | | |
Derivative assets | $ | 13,763 | | | $ | (12,870) | | | $ | 893 | | | | | |
Derivative liabilities | (13,280) | | | 101 | | | (13,179) | | | | | |
(1) Includes net cash collateral received of $11.0 million and received of $12.8 million at March 31, 2023 and December 31, 2022, respectively.
The collateral used under the Company's master netting agreements is typically cash, but securities may be used under agreements with certain counterparties. Receivables related to cash collateral that has been paid to counterparties are included in other assets. Payables related to cash collateral that has been received from counterparties are included in accounts payable and other liabilities. Interest is owed on amounts received from counterparties and we earn interest on cash paid to counterparties. Any securities pledged to counterparties as collateral remain on the consolidated balance sheets. At March 31, 2023 and December 31, 2022, the Company had liabilities of $11.0 million and $12.8 million, respectively, in cash collateral received from counterparties and receivables of $0.03 million and $0.03 million, respectively, in cash collateral paid to counterparties.
The following table presents the net gain (loss) recognized on economic hedge derivatives, within the respective line items in the consolidated income statements for the periods indicated:
| | | | | | | | | | | | | | | | | |
| Quarter Ended March 31, | | |
(in thousands) | 2023 | | 2022 | | | | |
| | | | | | | |
Recognized in noninterest income: | | | | | | | |
Net gain (loss) on loan origination and sale activities (1) | $ | 78 | | | $ | 4,613 | | | | | |
Loan servicing income (loss) (2) | (730) | | | (9,439) | | | | | |
Other (3) | (1) | | | 159 | | | | | |
(1)Comprised of interest rate lock commitments ("IRLCs") and forward contracts used as an economic hedge of loans held for sale.
(2)Comprised of interest rate swaps, interest rate swaptions, futures, US Treasury options and forward contracts used as economic hedges of single family MSRs.
(3)Impact of interest rate swap agreements executed with commercial banking customers and broker dealer counterparties.
The notional amount of open interest rate swap agreements executed with commercial banking customers and broker dealer counterparties at March 31, 2023 and December 31, 2022 were $240 million and $237 million, respectively.
NOTE 6–MORTGAGE BANKING OPERATIONS:
LHFS consisted of the following:
| | | | | | | | | | | |
(in thousands) | At March 31, 2023 | | At December 31, 2022 |
| | | |
Single family | $ | 22,690 | | | $ | 14,075 | |
CRE, multifamily and SBA | 1,563 | | | 3,252 | |
Total | $ | 24,253 | | | $ | 17,327 | |
Loans sold consisted of the following for the periods indicated:
| | | | | | | | | | | | | | | | | |
| Quarter Ended March 31, | | |
(in thousands) | 2023 | | 2022 | | | | |
| | | | | | | |
Single family | $ | 63,473 | | | $ | 323,070 | | | | | |
CRE, multifamily and SBA | 8,750 | | | 49,137 | | | | | |
Total | $ | 72,223 | | | $ | 372,207 | | | | | |
Gain on loan origination and sale activities, including the effects of derivative risk management instruments, consisted of the following:
| | | | | | | | | | | | | | | | | |
| Quarter Ended March 31, | | |
(in thousands) | 2023 | | 2022 | | | | |
| | | | | | | |
Single family | $ | 2,218 | | | $ | 6,169 | | | | | |
CRE, multifamily and SBA | 192 | | | 2,105 | | | | | |
Total | $ | 2,410 | | | $ | 8,274 | | | | | |
The Company's portfolio of loans serviced for others is primarily comprised of loans held in U.S. government and agency MBS issued by Fannie Mae, Freddie Mac and Ginnie Mae. The unpaid principal balance of loans serviced for others is as follows:
| | | | | | | | | | | |
(in thousands) | At March 31, 2023 | | At December 31, 2022 |
| | | |
Single family | $ | 5,424,909 | | | $ | 5,436,899 | |
CRE, multifamily and SBA | 1,917,154 | | | 1,938,484 | |
Total | $ | 7,342,063 | | | $ | 7,375,383 | |
The Company has made representations and warranties that the loans sold meet certain requirements. The Company may be
required to repurchase mortgage loans or indemnify loan purchasers due to defects in the origination process of the loan, such
as documentation errors, underwriting errors and judgments, appraisal errors, early payment defaults and fraud.
The following is a summary of changes in the Company's liability for estimated single-family mortgage repurchase losses:
| | | | | | | | | | | | | | | | | |
| Quarter Ended March 31, | | |
(in thousands) | 2023 | | 2022 | | | | |
| | | | | | | |
Balance, beginning of period | $ | 2,232 | | | $ | 1,312 | | | | | |
Additions, net of adjustments (1) | (143) | | | 358 | | | | | |
Realized (losses) recoveries, net (2) | (300) | | | (32) | | | | | |
Balance, end of period | $ | 1,789 | | | $ | 1,638 | | | | | |
(1) Includes additions for new loan sales and changes in estimated probable future repurchase losses on previously sold loans.
(2) Includes principal losses and accrued interest on repurchased loans, "make-whole" settlements, settlements with claimants and certain related expenses.
The Company has agreements with certain investors to advance scheduled principal and interest amounts on delinquent loans. Advances are also made to fund the foreclosure and collection costs of delinquent loans prior to the recovery of reimbursable
amounts from investors or borrowers. Advances of $2.8 million and $1.6 million were recorded in other assets as of March 31, 2023 and December 31, 2022, respectively.
When the Company has the unilateral right to repurchase Ginnie Mae pool loans it has previously sold (generally loans that are more than 90 days past due), the Company records the balance of the loans as other assets and other liabilities. At March 31, 2023 and December 31, 2022, delinquent or defaulted mortgage loans currently in Ginnie Mae pools that the Company has recognized on its consolidated balance sheets totaled $5.7 million and $6.9 million, respectively.
Revenue from mortgage servicing, including the effects of derivative risk management instruments, consisted of the following:
| | | | | | | | | | | | | | | | | |
| Quarter Ended March 31, | | |
(in thousands) | 2023 | | 2022 | | | | |
| | | | | | | |
Servicing income, net: | | | | | | | |
Servicing fees and other | $ | 6,669 | | | $ | 8,321 | | | | | |
Amortization of single family MSRs (1) | (1,684) | | | (3,425) | | | | | |
Amortization of multifamily and SBA MSRs | (1,554) | | | (1,712) | | | | | |
Total | 3,431 | | | 3,184 | | | | | |
Risk management, single family MSRs: | | | | | | | |
Changes in fair value of MSRs due to assumptions (2) | (311) | | | 10,303 | | | | | |
Net gain (loss) from economic hedging | (81) | | | (10,183) | | | | | |
Total | (392) | | | 120 | | | | | |
Loan servicing income | $ | 3,039 | | | $ | 3,304 | | | | | |
(1) Represents changes due to collection/realization of expected cash flows and curtailments.
(2) Principally reflects changes in model assumptions, including prepayment speed assumptions, which are primarily affected by changes in mortgage interest rates.
The changes in single family MSRs measured at fair value are as follows:
| | | | | | | | | | | | | | | | | |
| Quarter Ended March 31, | | |
(in thousands) | 2023 | | 2022 | | | | |
| | | | | | | |
Beginning balance | $ | 76,617 | | | $ | 61,584 | | | | | |
Additions and amortization: | | | | | | | |
Originations | 619 | | | 3,916 | | | | | |
Purchases | 460 | | | — | | | | | |
Amortization (1) | (1,684) | | | (3,425) | | | | | |
Net additions and amortization | (605) | | | 491 | | | | | |
Changes in fair value assumptions (2) | (311) | | | 10,303 | | | | | |
Ending balance | $ | 75,701 | | | $ | 72,378 | | | | | |
(1) Represents changes due to collection/realization of expected cash flows and curtailments.
(2) Principally reflects changes in model assumptions, including prepayment speed assumptions, which are primarily affected by changes in mortgage interest rates.
Key economic assumptions used in measuring the initial fair value of capitalized single family MSRs were as follows:
| | | | | | | | | | | | | | | | | |
| Quarter Ended March 31, | | |
(rates per annum) (1) | 2023 | | 2022 | | | | |
| | | | | | | |
Constant prepayment rate ("CPR") (2) | 11.20 | % | | 9.38 | % | | | | |
Discount rate | 9.94 | % | | 8.34 | % | | | | |
(1) Based on a weighted average.
(2) Represents an expected lifetime average CPR used in the model.
For single family MSRs, we use a discounted cash flow valuation technique which utilizes CPRs and discount rates as significant unobservable inputs as noted in the table below:
| | | | | | | | | | | | | | | | | | | | | | | |
| At March 31, 2023 | | At December 31, 2022 |
| Range of Inputs | | Average (1) | | Range of Inputs | | Average (1) |
| | | | | | | |
CPRs | 6.34% - 30.01% | | 6.69 | % | | 6.01% - 11.10% | | 8.19 | % |
Discount Rates | 9.33% - 14.95% | | 10.07 | % | | 9.74% - 16.88% | | 10.66 | % |
(1) Weighted averages of all the inputs within the range.
To compute hypothetical sensitivities of the value of our single family MSRs to immediate adverse changes in key assumptions, we computed the impact of changes to CPRs and in discount rates as outlined below:
| | | | | |
(dollars in thousands) | At March 31, 2023 |
| |
Fair value of single family MSR | $ | 75,701 | |
Expected weighted-average life (in years) | 8.40 |
CPR | |
Impact on fair value of 25 basis points adverse change in interest rates | $ | (941) | |
Impact on fair value of 50 basis points adverse change in interest rates | $ | (2,148) | |
Discount rate | |
Impact on fair value of 100 basis points increase | $ | (2,000) | |
Impact on fair value of 200 basis points increase | $ | (4,984) | |
The changes in multifamily and SBA MSRs measured at the lower of amortized cost or fair value were as follows:
| | | | | | | | | | | | | | | | | |
| Quarter Ended March 31, | | |
(in thousands) | 2023 | | 2022 | | | | |
| | | | | | | |
Beginning balance | $ | 35,256 | | | $ | 39,415 | | | | | |
Originations | 137 | | | 1,576 | | | | | |
Amortization | (1,554) | | | (1,712) | | | | | |
Ending balance | $ | 33,839 | | | $ | 39,279 | | | | | |
NOTE 7–GUARANTEES AND MORTGAGE REPURCHASE LIABILITY:
In the ordinary course of business, the Company sells loans through the Fannie Mae Multifamily Delegated Underwriting and Servicing Program ("DUS"®) that are subject to a credit loss sharing arrangement. The Company services the loans for Fannie Mae and shares in the risk of loss with Fannie Mae under the terms of the DUS contracts. Under the DUS program, the Company and Fannie Mae share losses on a pro rata basis, where the Company is responsible for losses incurred up to one-third of principal balance on each loan with two-thirds of the loss covered by Fannie Mae. For loans that have been sold through this program, a liability is recorded for this loss sharing arrangement under the accounting guidance for guarantees. As of March 31, 2023 and December 31, 2022, the total unpaid principal balance of loans sold under this program was $1.8 billion. The Company's reserve liability related to this arrangement totaled $0.6 million at both March 31, 2023 and December 31, 2022. There were no actual losses incurred under this arrangement during the quarters ended March 31, 2023 and 2022.
In the ordinary course of business, the Company sells residential mortgage loans to GSEs and other entities. Under the terms of these sales agreements, the Company has made representations and warranties that the loans sold meet certain requirements. The Company may be required to repurchase mortgage loans or indemnify loan purchasers due to defects in the origination process of the loan, such as documentation errors, underwriting errors and judgments, early payment defaults and fraud. The total unpaid principal balance of loans sold on a servicing-retained basis that were subject to the terms and conditions of these representations and warranties totaled $5.4 billion at both March 31, 2023 and December 31, 2022. At March 31, 2023 and December 31, 2022, the Company had recorded a mortgage repurchase liability for loans sold on a servicing-retained and
servicing-released basis, included in accounts payable and other liabilities on the consolidated balance sheets, of $1.8 million and $2.2 million, respectively.
NOTE 8–EARNINGS PER SHARE:
The following table summarizes the calculation of earnings per share:
| | | | | | | | | | | | | | | | | |
| Quarter Ended March 31, | | |
(in thousands, except share and per share data) | 2023 | | 2022 | | | | |
| | | | | | | |
Net income | $ | 5,058 | | | $ | 19,951 | | | | | |
| | | | | | | |
Weighted average shares: | | | | | | | |
Basic weighted-average number of common shares outstanding | 18,755,453 | | | 19,585,753 | | | | | |
Dilutive effect of outstanding common stock equivalents | 16,446 | | | 206,160 | | | | | |
Diluted weighted-average number of common shares outstanding | 18,771,899 | | | 19,791,913 | | | | | |
Net income per share: | | | | | | | |
Basic earnings per share | $ | 0.27 | | | $ | 1.02 | | | | | |
Diluted earnings per share | 0.27 | | | 1.01 | | | | | |
(1) Excluded from the computation of diluted earnings per share (due to their antidilutive effect) for the quarter ended March 31, 2023 and 2022 were certain unvested RSUs and PSUs. Based on a weighted average basis, 251,821 and 13,040 unvested stock units convertible into shares of common stock were excluded for the quarters ended March 31, 2023 and 2022, respectively, because their effect would have been anti-dilutive.
NOTE 9–FAIR VALUE MEASUREMENT:
The term "fair value" is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. A fair value measurement assumes that the transaction to sell the asset or transfer the liability occurs in the principal market for the asset or liability or, in the absence of a principal market, the most advantageous market for the asset or liability. The Company's approach is to maximize the use of observable inputs and minimize the use of unobservable inputs when developing fair value measurements.
Fair Value Hierarchy
A three-level valuation hierarchy has been established under ASC 820 for disclosure of fair value measurements. The valuation hierarchy is based on the observability of inputs to the valuation of an asset or liability as of the measurement date. A financial instrument’s categorization within the valuation hierarchy is based on the lowest level of input that is significant to the fair value measurement. The levels are defined as follows:
• Level 1 – Quoted prices (unadjusted) in active markets for identical assets or liabilities that the reporting entity can access at the measurement date. An active market for the asset or liability is a market in which transactions for the asset or liability take place with sufficient frequency and volume to provide pricing information on an ongoing basis.
• Level 2 – Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly. This includes quoted prices for similar assets and liabilities in active markets and inputs that are observable for the asset or liability for substantially the full term of the financial instrument.
• Level 3 – Unobservable inputs for the asset or liability. These inputs reflect the Company's assumptions of what market participants would use in pricing the asset or liability.
The Company's policy regarding transfers between levels of the fair value hierarchy is that all transfers are assumed to occur at the end of the reporting period.
Estimation of Fair Value
Fair value is based on quoted market prices, when available. In cases where a quoted price for an asset or liability is not available, the Company uses valuation models to estimate fair value. These models incorporate inputs such as forward yield curves, loan prepayment assumptions, expected loss assumptions, market volatilities and pricing spreads utilizing market-based inputs where readily available. The Company believes its valuation methods are appropriate and consistent with those that would be used by other market participants. However, imprecision in estimating unobservable inputs and other factors may result in these fair value measurements not reflecting the amount realized in an actual sale or transfer of the asset or liability in a current market exchange.
The following table summarizes the fair value measurement methodologies, including significant inputs and assumptions and classification of the Company's assets and liabilities valued at fair value on a recurring basis.
| | | | | | | | | | | | | | |
Asset/Liability class | | Valuation methodology, inputs and assumptions | | Classification |
Investment securities | | | | |
Trading securities | | Fair Value is based on quoted prices in an active market. | | Level 1 recurring fair value measurement. |
Investment securities AFS
| | Observable market prices of identical or similar securities are used where available. | | Level 2 recurring fair value measurement. |
| | If market prices are not readily available, value is based on discounted cash flows using the following significant inputs: • Expected prepayment speeds • Estimated credit losses • Market liquidity adjustments | | Level 3 recurring fair value measurement. |
LHFS | | | | |
Single family loans, excluding loans transferred from held for investment | | Fair value is based on observable market data, including: • Quoted market prices, where available • Dealer quotes for similar loans • Forward sale commitments | | Level 2 recurring fair value measurement. |
| | When not derived from observable market inputs, fair value is based on discounted cash flows, which considers the following inputs: • Benchmark yield curve • Estimated discount spread to the benchmark yield curve • Expected prepayment speeds | | Estimated fair value classified as Level 3. |
Mortgage servicing rights | | | | |
Single family MSRs | | For information on how the Company measures the fair value of its single family MSRs, including key economic assumptions and the sensitivity of fair value to changes in those assumptions, see Note 6, Mortgage Banking Operations. | | Level 3 recurring fair value measurement. |
Derivatives | | | | |
Futures and Options | | Fair value is based on closing exchange prices. | | Level 1 recurring fair value measurement. |
Forward sale commitments Interest rate swaps | | Fair value is based on quoted prices for identical or similar instruments, when available. When quoted prices are not available, fair value is based on internally developed modeling techniques, which require the use of multiple observable market inputs including: • Forward interest rates • Interest rate volatilities | | Level 2 recurring fair value measurement. |
IRLC | | The fair value considers several factors including:
• Fair value of the underlying loan based on quoted prices in the secondary market, when available. • Value of servicing • Fall-out factor | | Level 3 recurring fair value measurement. |
The following tables presents the levels of the fair value hierarchy for the Company's assets and liabilities measured at fair value on a recurring basis:
| | | | | | | | | | | | | | | | | | | | | | | |
| At March 31, 2023 |
(in thousands) | Fair Value | | Level 1 | | Level 2 | | Level 3 |
| | | | | | | |
Assets: | | | | | | | |
Trading securities - U.S. Treasury securities | $ | 62,044 | | | $ | 62,044 | | | $ | — | | | $ | — | |
Investment securities AFS | | | | | | | |
Mortgage backed securities: | | | | | | | |
Residential | 200,658 | | | — | | | 198,694 | | | 1,964 | |
Commercial | 54,230 | | | — | | | 54,230 | | | — | |
Collateralized mortgage obligations: | | | | | | | |
Residential | 553,234 | | | — | | | 553,234 | | | — | |
Commercial | 70,777 | | | — | | | 70,777 | | | — | |
Municipal bonds | 413,658 | | | — | | | 413,658 | | | — | |
Corporate debt securities | 41,302 | | | — | | | 41,236 | | | 66 | |
U.S. Treasury securities | 20,319 | | | — | | | 20,319 | | | — | |
Agency debentures | 58,359 | | | — | | | 58,359 | | | — | |
Single family LHFS | 22,690 | | | — | | | 22,690 | | | — | |
Single family LHFI | 5,231 | | | — | | | — | | | 5,231 | |
Single family mortgage servicing rights | 75,701 | | | — | | | — | | | 75,701 | |
Derivatives | | | | | | | |
Futures | 34 | | | 34 | | | — | | | — | |
Forward sale commitments | 229 | | | — | | | 229 | | | — | |
Options | 503 | | | 503 | | | — | | | — | |
Interest rate lock commitments | 398 | | | — | | | — | | | 398 | |
Interest rate swaps | 10,704 | | | — | | | 10,704 | | | — | |
Total assets | $ | 1,590,071 | | | $ | 62,581 | | | $ | 1,444,130 | | | $ | 83,360 | |
Liabilities: | | | | | | | |
Derivatives | | | | | | | |
| | | | | | | |
Forward sale commitments | $ | 326 | | | $ | — | | | $ | 326 | | | $ | — | |
| | | | | | | |
Interest rate lock commitments | 36 | | | — | | | — | | | 36 | |
Interest rate swaps | 10,705 | | | — | | | 10,705 | | | — | |
Total liabilities | $ | 11,067 | | | $ | — | | | $ | 11,031 | | | $ | 36 | |
| | | | | | | | | | | | | | | | | | | | | | | |
| At December 31, 2022 |
(in thousands) | Fair Value | | Level 1 | | Level 2 | | Level 3 |
| | | | | | | |
Assets: | | | | | | | |
Trading securities - U.S. Treasury securities | $ | 18,997 | | | $ | 18,997 | | | $ | — | | | $ | — | |
Investment securities AFS | | | | | | | |
Mortgage backed securities: | | | | | | | |
Residential | 197,262 | | | — | | | 195,321 | | | 1,941 | |
Commercial | 56,049 | | | — | | | 56,049 | | | — | |
Collateralized mortgage obligations: | | | | | | | |
Residential | 553,039 | | | — | | | 553,039 | | | — | |
Commercial | 70,519 | | | — | | | 70,519 | | | — | |
Municipal bonds | 411,548 | | | — | | | 411,548 | | | — | |
Corporate debt securities | 42,945 | | | — | | | 42,877 | | | 68 | |
U.S. Treasury securities | 19,934 | | | — | | | 19,934 | | | — | |
Agency debentures | 27,478 | | | — | | | 27,478 | | | — | |
Single family LHFS | 14,075 | | | — | | | 14,075 | | | — | |
Single family LHFI | 5,868 | | | — | | | — | | | 5,868 | |
Single family mortgage servicing rights | 76,617 | | | — | | | — | | | 76,617 | |
Derivatives | | | | | | | |
Futures | 18 | | | 18 | | | — | | | — | |
Options | 218 | | | 218 | | | — | | | |
Forward sale commitments | 293 | | | — | | | 293 | | | — | |
| | | | | | | |
Interest rate lock commitments | 141 | | | — | | | — | | | 141 | |
Interest rate swaps | 13,093 | | | — | | | 13,093 | | | — | |
Total assets | $ | 1,508,094 | | | $ | 19,233 | | | $ | 1,404,226 | | | $ | 84,635 | |
Liabilities: | | | | | | | |
Derivatives | | | | | | | |
| | | | | | | |
Forward sale commitments | $ | 151 | | | $ | — | | | $ | 151 | | | $ | — | |
| | | | | | | |
Interest rate lock commitments | 36 | | | — | | | — | | | 36 | |
Interest rate swaps | 13,093 | | | — | | | 13,093 | | | — | |
Total liabilities | $ | 13,280 | | | $ | — | | | $ | 13,244 | | | $ | 36 | |
There were no transfers between levels of the fair value hierarchy during the quarters ended March 31, 2023 and 2022.
Level 3 Recurring Fair Value Measurements
The Company's level 3 recurring fair value measurements consist of investment securities AFS, single family MSRs, single family LHFI where fair value option was elected, certain single family LHFS and interest rate lock commitments, which are accounted for as derivatives. For information regarding fair value changes and activity for single family MSRs during the quarters ended March 31, 2023 and 2022, see Note 6, Mortgage Banking Operations of this Quarterly Report on Form 10-Q.
The fair value of IRLCs considers several factors, including the fair value in the secondary market of the underlying loan resulting from the exercise of the commitment, the expected net future cash flows related to the associated servicing of the loan (referred to as the value of servicing) and the probability that the commitment will not be converted into a funded loan (referred to as a fall-out factor). The fair value of IRLCs on LHFS, while based on interest rates observable in the market, is highly dependent on the ultimate closing of the loans. The significance of the fall-out factor to the fair value measurement of an individual IRLC is generally highest at the time that the rate lock is initiated and declines as closing procedures are performed and the underlying loan gets closer to funding. The fall-out factor applied is based on historical experience. The value of servicing is impacted by a variety of factors, including prepayment assumptions, discount rates, delinquency rates, contractually specified servicing fees, servicing costs and underlying portfolio characteristics. Because these inputs are not observable in market trades, the fall-out factor and value of servicing are considered to be level 3 inputs. The fair value of IRLCs decreases in
value upon an increase in the fall-out factor and increases in value upon an increase in the value of servicing. Changes in the fall-out factor and value of servicing do not increase or decrease based on movements in other significant unobservable inputs.
The Company recognizes unrealized gains and losses from the time that an IRLC is initiated until the gain or loss is realized at the time the loan closes, which generally occurs within 30-90 days. For IRLCs that fall out, any unrealized gain or loss is reversed, which generally occurs at the end of the commitment period. The gains and losses recognized on IRLC derivatives generally correlates to volume of single family interest rate lock commitments made during the reporting period (after adjusting for estimated fallout) while the amount of unrealized gains and losses realized at settlement generally correlates to the volume of single family closed loans during the reporting period.
The Company uses the discounted cash flow model to estimate the fair value of certain loans that have been transferred from held for sale to held for investment and single family LHFS when the fair value of the loans is not derived using observable market inputs. The key assumption in the valuation model is the implied spread to benchmark interest rate curve. The implied spread is not directly observable in the market and is derived from third party pricing which is based on market information from comparable loan pools. The fair value estimate of single family loans that have been transferred from held for sale to held for investment are sensitive to changes in the benchmark interest rate which might result in a significantly higher or lower fair value measurement.
The Company transferred certain loans from held for sale to held for investment. These loans were originated as held for sale loans where the Company had elected fair value option. The Company determined these loans to be level 3 recurring assets as the valuation technique included a significant unobservable input. The total amount of held for investment loans where fair value option election was made was $5.2 million and $5.9 million at March 31, 2023 and December 31, 2022, respectively.
The following information presents significant Level 3 unobservable inputs used to measure fair value of certain assets:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| |
(dollars in thousands) | Fair Value | | Valuation Technique | | Significant Unobservable Input | | Low | | High | | Weighted Average |
| | | | | | | | | | | |
March 31, 2023 | | | | | | | | | | | |
Investment securities AFS | $ | 2,030 | | | Income approach | | Implied spread to benchmark interest rate curve | | 2.00% | | 2.00% | | 2.00% |
Single family LHFI | 5,231 | | | Income approach | | Implied spread to benchmark interest rate curve | | 3.18% | | 5.44% | | 4.02% |
Interest rate lock commitments, net | 362 | | | Income approach | | Fall-out factor | | 0.07% | | 22.60% | | 9.07% |
| | | | | Value of servicing | | 0.59% | | 1.19% | | 0.88% |
December 31, 2022 | | | | | | | | | | | |
Investment securities AFS | $ | 2,009 | | | Income approach | | Implied spread to benchmark interest rate curve | | 2.00% | | 2.00% | | 2.00% |
Single family LHFI | 5,868 | | | Income approach | | Implied spread to benchmark interest rate curve | | 2.87% | | 5.15% | | 4.14% |
Interest rate lock commitments, net | 105 | | | Income approach | | Fall-out factor | | 0.10% | | 17.50% | | 6.43% |
| | | | | Value of servicing | | 0.54% | | 1.11% | | 0.95% |
We had no LHFS where the fair value was not derived with significant observable inputs at March 31, 2023 and December 31, 2022.
The following table presents fair value changes and activity for certain Level 3 assets for the periods indicated:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | |
(in thousands) | | Beginning balance | | Additions | | Transfers | | Payoffs/Sales | | Change in mark to market (1) | | Ending balance |
| | |
Quarter Ended March 31, 2023 | | | | | | | | | | |
Investment securities AFS | | $ | 2,009 | | | $ | — | | | $ | — | | | $ | (48) | | | $ | 69 | | | $ | 2,030 | |
Single family LHFI | | 5,868 | | | — | | | — | | | (682) | | | 45 | | | 5,231 | |
Quarter Ended March 31, 2022 | | | | | | | | | | |
Investment securities AFS | | $ | 2,482 | | | $ | — | | | $ | — | | | $ | (48) | | | $ | (127) | | | $ | 2,307 | |
Single family LHFI | | 7,287 | | | — | | | — | | | — | | | (306) | | | 6,981 | |
| | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
(1) Changes in fair value for single LHFI are recorded in other noninterest income on the consolidated income statements.
The following table presents fair value changes and activity for Level 3 interest rate lock commitments:
| | | | | | | | | | | | | | | | | |
| Quarter Ended March 31, | | |
(in thousands) | 2023 | | 2022 | | | | |
| | | | | | | |
Beginning balance, net | $ | 105 | | | $ | 2,484 | | | | | |
Total realized/unrealized gains (losses) | 919 | | | (2,177) | | | | | |
Settlements | (662) | | | (229) | | | | | |
Ending balance, net | $ | 362 | | | $ | 78 | | | | | |
Nonrecurring Fair Value Measurements
Certain assets held by the Company are not included in the tables above, but are measured at fair value on a periodic basis. These assets include certain LHFI and OREO that are carried at the lower of cost or fair value of the underlying collateral, less the estimated costs to sell. The estimated fair values of real estate collateral are generally based on internal evaluations and appraisals of such collateral, which use the market approach and income approach methodologies. We have omitted disclosure related to quantitative inputs given the insignificance of assets measured on a nonrecurring basis.
The fair value of commercial properties is generally based on third-party appraisals that consider recent sales of comparable properties, including their income-generating characteristics, adjusted (generally based on unobservable inputs) to reflect the general assumptions that a market participant would make when analyzing the property for purchase. The Company uses a fair value of collateral technique to apply adjustments to the appraisal value of certain commercial LHFI that are collateralized by real estate.
The Company uses a fair value of collateral technique to apply adjustments to the stated value of certain commercial LHFI that are not collateralized by real estate and to the appraisal value of OREO.
Residential properties are generally based on unadjusted third-party appraisals. Factors considered in determining the fair value include geographic sales trends, the value of comparable surrounding properties as well as the condition of the property.
These adjustments include management assumptions that are based on the type of collateral dependent loan and may increase or decrease an appraised value. Management adjustments vary significantly depending on the location, physical characteristics and income producing potential of each individual property. The quality and volume of market information available at the time of the appraisal can vary from period-to-period and cause significant changes to the nature and magnitude of the unobservable inputs used. Given these variations, changes in these unobservable inputs are generally not a reliable indicator for how fair value will increase or decrease from period to period.
The following table presents assets classified as Level 3 that had changes in their recorded fair value for the periods indicated and what we still held at the end of the respective reporting period:
| | | | | | | | | | | | | | | | | | | |
(in thousands) | Fair Value | | | | | | | | Total Gains (Losses) |
| | | | | | | | | |
At or for the Quarter Ended March 31, 2023 | | | | | | | | | |
LHFI (1) | $ | 3,793 | | | | | | | | | $ | (159) | |
At or for the Quarter Ended March 31, 2022 | | | | | | | | | |
LHFI (1) | $ | 904 | | | | | | | | | $ | 10 | |
(1) Represents the carrying value of loans for which adjustments are based on the fair value of the collateral.
Fair Value of Financial Instruments
The following presents the carrying value, estimated fair value and the levels of the fair value hierarchy for the Company's financial instruments other than assets and liabilities measured at fair value on a recurring basis:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| At March 31, 2023 |
(in thousands) | Carrying Value | | Fair Value | | Level 1 | | Level 2 | | Level 3 |
| | | | | | | | | |
Assets: | | | | | | | | | |
Cash and cash equivalents | $ | 377,031 | | | $ | 377,031 | | | $ | 377,031 | | | $ | — | | | $ | — | |
Investment securities HTM | 2,423 | | | 2,387 | | | — | | | 2,387 | | | — | |
LHFI | 7,439,651 | | | 7,150,665 | | | — | | | — | | | 7,150,665 | |
| | | | | | | | | |
LHFS – multifamily and other | 1,563 | | | 1,563 | | | — | | | 1,563 | | | — | |
Mortgage servicing rights – multifamily and SBA | 33,839 | | | 38,629 | | | — | | | — | | | 38,629 | |
Federal Home Loan Bank stock | 73,191 | | | 73,191 | | | — | | | 73,191 | | | — | |
Other assets - GNMA EBO loans | 5,682 | | | 5,682 | | | — | | | — | | | 5,682 | |
Liabilities: | | | | | | | | | |
Certificates of deposit | $ | 2,660,243 | | | $ | 2,634,872 | | | $ | — | | | $ | 2,634,872 | | | $ | — | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
Borrowings | 1,878,000 | | | 1,881,721 | | | | | 1,881,721 | | | |
Long-term debt | 224,492 | | | 200,770 | | | — | | | 200,770 | | | — | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| At December 31, 2022 |
(in thousands) | Carrying Value | | Fair Value | | Level 1 | | Level 2 | | Level 3 |
| | | | | | | | | |
Assets: | | | | | | | | | |
Cash and cash equivalents | $ | 72,828 | | | $ | 72,828 | | | $ | 72,828 | | | $ | — | | | $ | — | |
Investment securities HTM | 2,441 | | | 2,385 | | | — | | | 2,385 | | | — | |
LHFI | 7,378,952 | | | 6,988,363 | | | — | | | — | | | 6,988,363 | |
| | | | | | | | | |
LHFS – multifamily and other | 3,252 | | | 3,291 | | | — | | | 3,291 | | | — | |
Mortgage servicing rights – multifamily and SBA | 35,256 | | | 39,792 | | | — | | | — | | | 39,792 | |
Federal Home Loan Bank stock | 49,305 | | | 49,305 | | | — | | | 49,305 | | | — | |
Other assets-GNMA EBO loans | 6,918 | | | 6,918 | | | — | | | — | | | 6,918 | |
Liabilities: | | | | | | | | | |
Certificates of deposit | $ | 2,943,331 | | | $ | 2,910,301 | | | $ | — | | | $ | 2,910,301 | | | $ | — | |
Borrowings | 1,016,000 | | | 1,014,973 | | | — | | | 1,014,973 | | | — | |
Long-term debt | 224,404 | | | 202,338 | | | — | | | 202,338 | | | — | |
Fair Value Option
Single family loans held for sale accounted under the fair value option are measured initially at fair value with subsequent changes in fair value recognized in earnings. Gains and losses from such changes in fair value are recognized in net gain on mortgage loan origination and sale activities within noninterest income. The change in fair value of loans held for sale is
primarily driven by changes in interest rates subsequent to loan funding and changes in fair value of the related servicing asset, resulting in revaluations adjustments to the recorded fair value. The use of the fair value option allows the change in the fair value of loans to more effectively offset the change in fair value of derivative instruments that are used as economic hedges of loans held for sale.
The following table presents the difference between the aggregate fair value and the aggregate unpaid principal balance of loans held for sale accounted for under the fair value option:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| At March 31, 2023 | | At December 31, 2022 |
(in thousands) | Fair Value | | Aggregate Unpaid Principal Balance | | Fair Value Less Aggregated Unpaid Principal Balance | | Fair Value | | Aggregate Unpaid Principal Balance | | Fair Value Less Aggregated Unpaid Principal Balance |
| | | | | | | | | | | |
Single family LHFS | $ | 22,690 | | | $ | 22,243 | | | $ | 447 | | | $ | 14,075 | | | $ | 13,914 | | | $ | 161 | |
NOTE 10–BORROWINGS:
During the first quarter of 2023, the Company borrowed $300 million from the Federal Reserve Bank (“FRB”) under the Bank Term Funding Program (“BTFP”). The BTFP offers up to one year fixed-rate term borrowings that are prepayable without penalty.
The balances, maturity and rate of the outstanding borrowings from the FHLB and the FRB BTFP were as follows at March 31, 2023:
| | | | | | | | | | | | | | | |
(dollars in thousands) | Amount | | Weighted Average Rate | | | | |
| | | | | | | |
Within one year | $ | 878,000 | | | 4.84 | % | | | | |
One to three years | 450,000 | | | 4.56 | % | | | | |
Three through five years | 550,000 | | | 4.35 | % | | | | |
| | | | | | | |
Total | $ | 1,878,000 | | | 4.63 | % | | | | |
NOTE 11–SUBSEQUENT EVENTS:
On April 24, 2023, the Board authorized a dividend of $0.10 per share, payable on May 24, 2023 to shareholders of record on May 10, 2023.