NOTE 2—SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Subsequent Events—The Company has evaluated the effects of all events that have occurred subsequent to March 31, 2025 and before the date of this filing. The Company has made certain disclosures in the notes to the condensed consolidated financial statements of events that have occurred subsequent to March 31, 2025. There have been no other material subsequent events that would require recognition in the condensed consolidated financial statements.

Use of Estimates—The preparation of condensed consolidated financial statements in accordance with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, and expenses, including the allowance for risk-sharing obligations, initial and recurring fair value assessments of capitalized mortgage servicing rights, the initial fair value assessment of  goodwill, the periodic assessment of impairment of goodwill, initial fair value estimate of other intangible assets, and the initial and recurring fair value assessments of contingent consideration liabilities. Actual results may vary from these estimates.

Provision (Benefit) for Credit Losses—The Company records the income statement impact of the changes in the allowance for loan losses, the allowance for risk-sharing obligations, and other credit losses within Provision (benefit) for credit losses in the Condensed Consolidated Statements of Income. NOTE 4 contains additional discussion related to the allowance for risk-sharing obligations. The Company has credit risk exclusively on loans secured by multifamily real estate, with no exposure to any other sector of commercial real estate, including office, retail, industrial, and hospitality.

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Transfers of Financial Assets—Transfers of financial assets are reported as sales when (i) the transferor surrenders control over those assets, (ii) the transferred financial assets have been legally isolated from the Company’s creditors, (iii) the transferred assets can be pledged or exchanged by the transferee, and (iv) consideration other than beneficial interests in the transferred assets is received in exchange. The transferor is considered to have surrendered control over transferred assets if, and only if, certain conditions are met. The Company determined that all loans sold during the periods presented met these specific conditions and accounted for all transfers of loans held for sale as completed sales.

The Company is obligated to repurchase loans that are originated for the GSEs’ programs if certain representations and warranties that it provides in connection with the sale of the loans through these programs are determined to have been breached. During 2024, the Company received requests to repurchase five GSE loans. As of March 31, 2025, the Company has repurchased three of the loans in full and still has forbearance and indemnification agreements in place for the other two loans. The Company foreclosed on one of the repurchased loans and now holds an Other Real Estate Owned (“OREO”) asset. The aggregate balance of assets not yet repurchased was $46.1 million as of March 31, 2025, all of which require a cash outlay over the coming year. The Company repurchased one of the assets in April 2025, and the remaining asset must be repurchased by March 29, 2026. All repurchased and indemnified loans are delinquent and in non-accrual status.

In addition to the Company’s obligation to repurchase certain loans due to material breaches of representations and warranties as discussed above, the Company also has the option to repurchase loans in certain situations. When the Company’s repurchase option becomes exercisable, such loans must be reported on the Condensed Consolidated Balance Sheets. The Company reported the loans as Loans held for sale, at fair value with a corresponding liability that is included as a component of Warehouse notes payable on the Condensed Consolidated Balance Sheets.

As of March 31, 2025 and December 31, 2024, the balance of loans with a repurchase option included within Loans held for sale, at fair value was $140.4 million and $189.5 million, respectively. As of March 31, 2025 and December 31, 2024, the corresponding liabilities included within Warehouse notes payable (and NOTE 6) were $140.4 million and $189.5 million, respectively. These are not cash transactions and thus are not reflected in the Condensed Consolidated Statements of Cash Flows and will not require a future cash outlay.

Statement of Cash Flows—For presentation in the Condensed Consolidated Statements of Cash Flows, the Company considers pledged cash and cash equivalents (as detailed in NOTE 9) to be restricted cash and restricted cash equivalents. The following table presents a reconciliation of the total cash, cash equivalents, restricted cash, and restricted cash equivalents as presented in the Condensed Consolidated Statements of Cash Flows to the related captions in the Condensed Consolidated Balance Sheets as of March 31, 2025 and 2024, and December 31, 2024 and 2023.

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Income Taxes—The Company records the realizable excess tax benefit or shortfall from stock-based compensation as a reduction or increase, respectively, to income tax expense. The realizable excess tax benefits were a shortfall of $1.3 million for the three months ended March 31, 2025 and a benefit of $0.6 million for the three months ended March 31, 2024.

Net Warehouse Interest Income (Expense)—The Company presents warehouse interest income net of warehouse interest expense. Warehouse interest income is the interest earned from loans held for sale and loans held for investment. Generally, a substantial portion of the Company’s loans is financed with matched borrowings under one of its warehouse facilities. The remaining portion of loans not funded with matched borrowings is financed with the Company’s own cash. Warehouse interest income is earned or incurred on loans held for sale after a loan is closed and before a loan is sold. Warehouse interest income is earned or incurred on loans held for investment after a loan is closed and before a loan is repaid. Occasionally, the Company also fully funds a small number of loans held for sale or loans held for investment with its own cash. Included in Net warehouse interest income (expense) for the three months ended March 31, 2025 and 2024 are the following components:

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Co-broker Fees—Third-party co-broker fees are netted against Loan origination and debt brokerage fees, net in the Condensed Consolidated Statements of Income and were $2.0 million and $2.6 million for the three months ended March 31, 2025 and 2024, respectively.

Contracts with Customers—The majority of the Company’s revenues are derived from the following sources, all of which are excluded from the accounting provisions applicable to contracts with customers: (i) financial instruments, (ii) transfers and servicing, (iii) derivative transactions, and (iv) investments in debt securities/equity-method investments. The remaining portion of revenues is derived from contracts with customers.

Other than LIHTC asset management fees as described in the 2024 Form 10-K and presented as Investment management fees in the Condensed Consolidated Statements of Income, the Company’s contracts with customers generally do not require judgment or material estimates that affect the determination of the transaction price (including the assessment of variable consideration), the allocation of the transaction price to performance obligations, and the determination of the timing of the satisfaction of performance obligations. Additionally, the earnings process for the majority of the Company’s contracts with customers is not complicated and is generally completed in a short period of time. The following table presents information about the Company’s contracts with customers for the three months ended March 31, 2025 and 2024 (in thousands):  

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Litigation—In the ordinary course of business, the Company may be party to various claims and litigation, none of which the Company believes is material. The Company cannot predict the outcome of any pending litigation and may be subject to consequences that could include fines, penalties, and other costs, and the Company’s reputation and business may be impacted. The Company believes that any liability that could be imposed on the Company in connection with the disposition of any pending lawsuits would not have a material adverse effect on its business, results of operations, liquidity, or financial condition.

Recently Adopted and Recently Announced Accounting Pronouncements—The Company is currently evaluating Accounting Standards Updates (“ASU”) 2023-09 Improvements to Income Tax Disclosures and 2024-03—Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures. ASU 2023-09 has an effective date for the Company for fiscal years starting in 2025. ASU 2024-03 has an effective date for the Company for fiscal years starting in 2027 and interim periods thereafter. The Company currently believes these ASUs will not materially impact the Company’s consolidated financial statements or disclosures. There are no other recently announced but not yet effective accounting pronouncements issued that have the potential to impact the Company’s consolidated financial statements.

Reclassifications—The Company has made insignificant reclassifications to prior-year balances to conform to current-year presentation.