What changed in this filing

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Item 1. Financial Statements

2022-05-06 compared with 2021-11-05 · 268 added, 392 removed, 894 unchanged (42% of the section changed)

3 unchanged sentences

CONSOLIDATED BALANCE SHEETS

September 30, 2021 December 31, 2020

March 31, 2022 December 31, 2021

(in thousands, except share data) (Unaudited)

24 unchanged sentences

Retained earnings 408,442 444,343

Accumulated other comprehensive income 22,093 35,357

Accumulated other comprehensive income (loss) ( 30,929 ) 21,140

Total shareholders' equity 601,231 715,339

4 unchanged sentences

CONSOLIDATED INCOME STATEMENTS

Quarter Ended September 30, Nine Months Ended September 30,

Quarter Ended March 31,

(in thousands, except share and per share data) 2022 2021

9 unchanged sentences

Total interest expense

3,904 8,053 13,353 36,674

Net interest income

5 unchanged sentences

Net gain on loan origination and sale activities 8,274 33,459

Loan servicing income (loss) 2,014 ( 1,582 ) 4,693 6,921

Loan servicing income 3,304 748

Deposit fees 2,075 1,824

22 unchanged sentences

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

Quarter Ended September 30, Nine Months Ended September 30,

Quarter Ended March 31,

(in thousands) 2022 2021

Net income $ 19,951 $ 29,663

Other comprehensive income:

Other comprehensive income (loss):

Unrealized gain (loss) on investment securities available for sale ("AFS") ( 68,187 ) ( 19,681 )

5 unchanged sentences

( 16,189 ) ( 4,133 )

( 1,530 ) 1,134 ( 3,526 ) 7,564

Other comprehensive income (loss) ( 52,069 ) ( 15,548 )

Total comprehensive income $ 21,417 $ 30,616 $ 72,726 $ 80,848

Total comprehensive income (loss) $ ( 32,118 ) $ 14,115

See accompanying notes to consolidated financial statements

7 unchanged sentences

income (loss) Total shareholders' equity

For the quarter ended September 30, 2020

Balance, June 30, 2020 23,007,400 $ 290,871 $ 375,268 $ 28,510 $ 694,649

Net income — — 26,349 — 26,349

Share-based compensation expense — 846 — — 846

Common stock issued - Option exercise;

stock grants 5,576 — — — —

Other comprehensive income — — — 4,267 4,267

Dividends declared on common stock ($ 0.15 per share)

— — ( 3,450 ) — ( 3,450 )

Common stock repurchased

( 1,018,772 ) ( 11,295 ) ( 15,060 ) — ( 26,355 )

Balance, September 30, 2020 21,994,204 $ 280,422 $ 383,107 $ 32,777 $ 696,306

For the nine months ended September 30, 2020

For the quarter ended March 31, 2021

Balance, December 31, 2020 21,796,904 $ 278,505 $ 403,888 $ 35,357 $ 717,750

3 unchanged sentences

stock grants 188,257 1,849 — — 1,849

Cumulative effect of adoption of new accounting standards

— — ( 3,740 ) — ( 3,740 )

Other comprehensive income — — — 28,456 28,456

Dividends declared on common stock ($ 0.45 per share)

( 10,556 ) ( 10,556 )

Common stock repurchased

( 2,023,924 ) ( 23,119 ) ( 29,662 ) — ( 52,781 )

Balance, September 30, 2020 21,994,204 $ 280,422 $ 383,107 $ 32,777 $ 696,306

For the quarter ended September 30, 2021

Balance, June 30, 2021 20,791,659 $ 260,774 $ 420,111 $ 27,846 $ 708,731

Net income — — 27,170 — 27,170

Share-based compensation expense — 892 — — 892

Common stock issued - Option exercise;

stock grants 52,265 339 — — 339

Other comprehensive income (loss) — — — ( 15,548 ) ( 15,548 )

3 unchanged sentences

( 624,647 ) ( 11,222 ) ( 16,305 ) — ( 27,527 )

Balance, September 30, 2021 20,446,648 $ 256,081 $ 432,202 $ 22,093 $ 710,376

For the nine months ended September 30, 2021

Balance, March 31, 2021 21,360,514 $ 269,942 $ 411,712 $ 19,809 $ 701,463

For the quarter ended March 31, 2022

Balance, December 31, 2021 20,085,336 $ 249,856 $ 444,343 $ 21,140 $ 715,339

1 unchanged sentence

Share-based compensation expense — 1,076 — — 1,076

— 2,557 — — 2,557

Common stock issued - Option exercise;

stock grants 245,630 2,383 — — 2,383

Common stock issued - Stock grants 104,840 — — — —

Other comprehensive income (loss) — — — ( 52,069 ) ( 52,069 )

3 unchanged sentences

( 1,489,640 ) ( 27,214 ) ( 48,688 ) — ( 75,902 )

Balance, September 30, 2021 20,446,648 $ 256,081 $ 432,202 $ 22,093 $ 710,376

Balance, March 31, 2022 18,700,536 $ 223,718 $ 408,442 $ ( 30,929 ) $ 601,231

See accompanying notes to consolidated financial statements

2 unchanged sentences

CONSOLIDATED STATEMENTS OF CASH FLOWS

Nine Months Ended September 30,

Quarter Ended March 31,

(in thousands) 2022 2021

21 unchanged sentences

Amortization of servicing rights 1,712 1,344

Net change in trading securities ( 19,313 ) —

(Increase) decrease in other assets 5,972 11,519

9 unchanged sentences

Proceeds from sale of loans originated as LHFI — 132,694

Net cash provided by disposal of discontinued operations — 2,759

Net increase in LHFI

( 328,288 ) ( 176,655 )

Proceeds from sale of premises and equipment — 1,460

Purchase of premises and equipment ( 1,444 ) ( 531 )

1 unchanged sentence

Purchases of Federal Home Loan Bank stock ( 25,238 ) ( 43,412 )

Net cash provided by (used in) investing activities ( 155,370 ) ( 393,891 )

Nine Months Ended September 30,

Net cash used in investing activities ( 463,940 ) ( 27,594 )

Quarter Ended March 31,

(in thousands) 2022 2021

2 unchanged sentences

Changes in short-term borrowings, net 232,000 ( 238,300 )

Proceeds from other long-term borrowings 50,000 —

Repayment of other long-term borrowings ( 50,000 ) —

Proceeds from debt issuance, net 98,035 —

Repayment of finance lease principal ( 145 ) ( 235 )

2 unchanged sentences

Dividends paid on common stock ( 7,164 ) ( 5,534 )

Net cash provided by (used in) financing activities 133,509 455,408

Net cash provided by financing activities 348,699 40,827

Net increase in cash and cash equivalents 8,648 11,052

7 unchanged sentences

Increase in lease assets and lease liabilities 2,053 283

Decrease in lease assets and lease liabilities — 38,754

Loans transferred from LHFI to LHFS, net 6,731 130,218

Ginnie Mae loans recognized with the right to repurchase, net — 105,727

Ginnie Mae loans derecognized with the right to repurchase, net 2,402 19,576

10 unchanged sentences

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.

6 unchanged sentences

Recent Accounting Developments

In December 2019, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No.

2019-12, “Income Taxes (Topic 740):

Simplifying the Accounting for Income Taxes” (“ASU 2019-12”).

ASU 2019-12 removes certain exceptions to the general principles in Topic 740 in GAAP.

ASU 2019-12 is effective for public entities for fiscal years beginning after December 15, 2020, with early adoption permitted.

The Company adopted this ASU on January 1, 2021 and it did not have a material effect on the Company’s financial position, results of operations or financial statement disclosures.

In March 2020, the FASB issued 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 LIBOR or other reference rates expected to be discontinued because of reference rate reform.

This ASU provides optional expedients and exceptions for contracts, hedging relationships, and other transactions that reference 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.

The ASUs are effective for all entities as of March 12, 2020 through December 31, 2022.

The Company is in the process of evaluating the provisions of these ASUs, but does not expect them to have a material impact on the Company’s financial position, results of operations or financial statement disclosures.

These ASUs are 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 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.

The Company did not adopt the vintage table disclosure requirements and is in the process of analyzing these disclosures.

Because it is only a change in disclosures, we do not expect the vintage table disclosure requirement of ASU 2022-02 to have a material impact on the Company's financial position or results of operations when adopted.

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"):

At September 30, 2021

At March 31, 2022

(in thousands) Amortized

18 unchanged sentences

Corporate debt securities 18,918 699 ( 1 ) 19,616

Agency debentures 1,846 — — 1,846

Treasury securities 23,348 — ( 173 ) 23,175

Total $ 975,763 $ 30,084 $ ( 3,325 ) $ 1,002,522

1 unchanged sentence

$ 4,169 $ 136 $ — $ 4,305

At March 31, 2022, the Company held $ 19 million 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.

Unrealized losses on trading securities, which are included in loan servicing income, were $ 0.7 million in the quarter ended March 31, 2022.

MBS and CMOs represent securities issued by government sponsored enterprises ("GSEs").

1 unchanged sentence

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 September 30, 2021 and December 31, 2020, all securities held, including municipal bonds and corporate debt securities, were rated investment grade, based upon external ratings where available and, where not available, based upon internal ratings which correspond to ratings as defined by Standard and Poor's Rating Services or Moody's Investors Services.

As of March 31, 2022

and December 31, 2021, all securities held, including municipal bonds and corporate debt securities, were rated investment grade, based upon external ratings where available and, where not available, based upon internal ratings which correspond to ratings as defined by Standard and Poor's Rating Services or Moody's Investors Services.

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:

At September 30, 2021

At March 31, 2022

Less than 12 months 12 months or more Total

5 unchanged sentences

Municipal bonds ( 21,126 ) 375,801 ( 1,890 ) 12,141 ( 23,016 ) 387,942

Corporate debt securities ( 574 ) 16,758 — — ( 574 ) 16,758

Treasury securities ( 1,541 ) 21,723 — — ( 1,541 ) 21,723

Total $ ( 38,540 ) $ 779,641 $ ( 5,421 ) $ 43,297 $ ( 43,961 ) $ 822,938

Municipal bonds $ ( 17 ) $ 2,474 $ — $ — $ ( 17 ) $ 2,474

At December 31, 2021

6 unchanged sentences

Municipal bonds ( 914 ) 64,237 ( 10 ) 1,058 ( 924 ) 65,295

Corporate debt securities ( 1 ) 3,164 — — ( 1 ) 3,164

Treasury securities ( 173 ) 23,175 — — ( 173 ) 23,175

Total $ ( 2,503 ) $ 181,901 $ ( 822 ) $ 15,712 $ ( 3,325 ) $ 197,613

There were no HTM securities in an unrealized loss position at September 30, 2021 or December 31, 2020.

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 September 30, 2021 or December 31, 2020.

In addition, as of September 30, 2021 and December 31, 2020, 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 Company has not identified any expected credit losses on its debt securities as of March 31, 2022 or December 31, 2021.

In addition, as of March 31, 2022 and December 31, 2021, 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:

At September 30, 2021

At March 31, 2022

Within one year After one year

30 unchanged sentences

— — % 6,563 3.60 % 13,053 5.03 % — — % 19,616 4.55 %

Agency debentures — — % — — % — — % 1,846 2.68 % 1,846 2.68 %

Treasury securities

— — % — — % 23,175 1.27 % — — % 23,175 1.27 %

Total $ 4,933 3.79 % $ 20,929 3.37 % $ 104,253 3.23 % $ 452,599 3.23 % $ 582,714 3.24 %

2 unchanged sentences

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 September 30, 2021 and December 31, 2020 was 1.85 % and 1.92 %, respectively.

Sales of investment securities were as follows for the periods indicated:

Quarter Ended September 30, Nine Months Ended September 30,

The weighted average yield of MBS and CMOs as of March 31, 2022 and December 31, 2021 was 1.88 % and 1.82 %, respectively.

Sales of AFS investment securities were as follows:

Quarter Ended March 31,

(in thousands) 2022

3 unchanged sentences

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 September 30, 2021 At December 31, 2020

(in thousands) At March 31, 2022 At December 31, 2021

Washington, Oregon and California State to secure public deposits $ 201,444 $ 206,153

2 unchanged sentences

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 $ 2.6 million and $ 2.8 million for the quarters ended September 30, 2021 and 2020, respectively and $ 7.6 million and $ 7.9 million for the nine months ended September 30, 2021 and 2020, respectively.

Tax-exempt interest income on investment securities was $ 2.7 million and $ 2.4 million for the quarters ended March 31, 2022 and 2021, respectively.

NOTE 3 - LOANS AND CREDIT QUALITY:

1 unchanged sentence

Within each portfolio segment, the Company monitors and assesses credit risk based on the risk characteristics of each of the following loan classes:

single family and home equity and other loans within the consumer loan portfolio segment and non-owner occupied commercial real estate, multifamily, construction and land development, owner occupied commercial real estate and commercial business loans within the commercial loan portfolio segment.

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 September 30, 2021 At December 31, 2020

Commercial real estate loans

Non-owner occupied commercial real estate $ 754,031 $ 829,538

(in thousands) At March 31, 2022 At December 31, 2021

Non-owner occupied CRE $ 699,277 $ 705,359

Multifamily 2,729,775 2,415,359

2 unchanged sentences

Commercial and industrial loans

Owner occupied commercial real estate 450,350 467,256

Owner occupied CRE 464,356 457,706

Commercial business 387,938 401,872

9 unchanged sentences

$ 5,826,546 $ 5,495,726

(1) Includes $ 4.5 million and $ 7.1 million at September 30, 2021 and December 31, 2020, 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 $ 1.7 billion and $ 1.4 billion at September 30, 2021 and December 31, 2020, respectively, were pledged to secure borrowings from the Federal Home Loan Bank ("FHLB") and loans totaling $ 430 million and $ 569 million at September 30, 2021 and December 31, 2020, respectively, were pledged to secure borrowings from the Federal Reserve Bank.

(1) Includes $ 7.0 million and $ 7.3 million at March 31, 2022 and December 31, 2021, 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 $ 3.2 billion and $ 2.8 billion at March 31, 2022 and December 31, 2021, respectively, were pledged to secure borrowings from the Federal Home Loan Bank ("FHLB") and loans totaling $ 421 million and $ 419 million at March 31, 2022 and December 31, 2021, 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 September 30, 2021 and December 31, 2020, multifamily loans in the state of California represented 29 % and 19 % of the total LHFI portfolio, respectively.

At March 31, 2022 and December 31, 2021, multifamily loans in the state of California represented 34 % and 33 % of the total LHFI portfolio, respectively.

Credit Quality

1 unchanged sentence

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 quarter ended March 31, 2020, the qualitative factors increased significantly due to the forecasted impacts of the COVID-19 pandemic.

The qualitative factors have remained at a high level due to the continued uncertainty regarding the impact of the COVID-19 pandemic.

Included in the qualitative factors are estimates of potential loss exposure which are based on forbearance activities relating to the COVID-19 pandemic in the Bank’s loan portfolio.

Due to improvements in economic conditions, the Company recorded a $ 5 million and $ 9 million recovery of the allowance for credit losses in the third quarter of 2021 and nine months ended September 30, 2021, respectively.

As of September 30, 2021, the Bank expects that over the two-year forecast period, the markets in which it operates will have a modest improvement in single family and multifamily collateral values, but deterioration in commercial real estate collateral values with negative risk factors peaking in the first year.

The Bank also expects that over the two-year forecast period, the markets in which it operates will have a modest deterioration in the economic outlook, with negative risk factors peaking in the first year.

During the first quarter of 2022, the historical expected loss rates decreased from December 31, 2021 due to minimal charge-offs, improving portfolio credit distribution and favorable product mix risk composition.

During the first quarter of 2022, the qualitative factors decreased significantly due to the continued favorable performance and outlook of the impact of the COVID-19 pandemic on our loan portfolio, which resulted in a reduced management overlay.

As of March 31, 2022, the Bank expects that the markets in which it operates will have stable collateral values and economic outlook over the two-year forecast period.

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 $ 2.5 million and $ 1.6 million at September 30, 2021 and December 31, 2020, respectively.

The allowance for unfunded commitments was $ 2.6 million and $ 2.4 million at March 31, 2022 and December 31, 2021, respectively.

The Bank has elected to exclude accrued interest receivable from the evaluation of the ACL.

Accrued interest on LHFI was $ 18.1 million and $ 21.2 million at September 30, 2021 and December 31, 2020, 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 for the periods indicated:

Quarter Ended September 30, Nine Months Ended September 30,

Accrued interest on LHFI was $ 18.1 million and $ 17.8 million at March 31, 2022 and December 31, 2021, 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) 2022 2021

3 unchanged sentences

Net (charge-offs) recoveries 44 124

Impact of ASC 326 adoption

Ending balance $ 37,944 $ 64,047

2 unchanged sentences

Provision for credit losses 223 371

Impact of ASC 326 adoption

Ending balance $ 2,627 $ 1,959

3 unchanged sentences

Total $ ( 9,000 ) $ —

Activity in the ACL for LHFI by loan portfolio and loan sub-class was as follows for the periods indicated:

Quarter Ended September 30, 2021

Activity in the ACL for LHFI by loan portfolio and loan sub-class was as follows:

Quarter Ended March 31, 2022

(in thousands) Beginning balance Charge-offs Recoveries Provision Ending balance

Commercial real estate loans

Non-owner occupied commercial real estate $ 9,077 $ — $ — $ 559 $ 9,636

Non-owner occupied CRE $ 7,509 $ — $ — $ ( 5,215 ) $ 2,294

Multifamily 5,854 — — 2,573 8,427

1 unchanged sentence

Multifamily construction 507 — — ( 51 ) 456

Commercial real estate construction 2,022 — — ( 1,671 ) 351

CRE construction 150 — — 34 184

Single family construction 6,411 — — 1,324 7,735

2 unchanged sentences

Commercial and industrial loans

Owner occupied commercial real estate 5,518 — — ( 233 ) 5,285

Owner occupied CRE 5,006 — — ( 1,470 ) 3,536

Commercial business 12,273 ( 11 ) 24 ( 5,376 ) 6,910

5 unchanged sentences

Total ACL $ 47,123 $ ( 44 ) $ 88 $ ( 9,223 ) $ 37,944

Quarter Ended September 30, 2020

Quarter Ended March 31, 2021

(in thousands) Beginning balance Charge-offs Recoveries Provision

Ending balance

Commercial real estate loans

Non-owner occupied commercial real estate $ 7,325 $ — $ — $ 1,598 $ 8,923

Multifamily 5,387 — — ( 516 ) 4,871

Construction/land development

Multifamily construction 3,811 — — 2,109 5,920

Commercial real estate construction 440 — — 1,269 1,709

Single family construction 5,869 — — ( 362 ) 5,507

Single family construction to permanent 1,515 — — ( 309 ) 1,206

Total 24,347 — — 3,789 28,136

Commercial and industrial loans

Owner occupied commercial real estate 5,641 — — 47 5,688

Commercial business 15,816 ( 447 ) 24 2,951 18,344

Total 21,457 ( 447 ) 24 2,998 24,032

Consumer loans

Single family 8,070 ( 3 ) 2 ( 1,349 ) 6,720

Home equity and other 11,126 ( 39 ) 82 ( 5,165 ) 6,004

Total 19,196 ( 42 ) 84 ( 6,514 ) 12,724

Total ACL $ 65,000 $ ( 489 ) $ 108 $ 273 $ 64,892

Nine Months Ended September 30, 2021

(in thousands) Beginning balance Charge-offs Recoveries Provision Ending

Commercial real estate loans

Non-owner occupied commercial real estate $ 8,845 $ — $ — $ 791 $ 9,636

Multifamily 6,072 — — ( 615 ) 5,457

Construction/land development

Multifamily construction 4,903 — — ( 3,859 ) 1,044

Commercial real estate construction 1,670 — — ( 1,319 ) 351

Single family construction 5,130 — — 1,161 6,291

Single family construction to permanent 1,315 — — ( 253 ) 1,062

Total 27,935 — — ( 4,094 ) 23,841

Commercial and industrial loans

Owner occupied commercial real estate 4,994 — 291 5,285

Commercial business 17,043 ( 116 ) 122 ( 2,576 ) 14,473

Total 22,037 ( 116 ) 122 ( 2,285 ) 19,758

Consumer loans

Single family 6,906 ( 127 ) 155 ( 1,177 ) 5,757

Home equity and other 7,416 ( 432 ) 484 ( 2,308 ) 5,160

Total 14,322 ( 559 ) 639 ( 3,485 ) 10,917

Total ACL $ 64,294 $ ( 675 ) $ 761 $ ( 9,864 ) $ 54,516

Nine Months Ended September 30, 2020

(in thousands) Prior to adoption of ASC 326 Impact of ASC 326 adoption Charge-offs Recoveries Provision Ending

Commercial real estate loans

Non-owner occupied commercial real estate $ 7,245 $ ( 3,392 ) $ — $ — $ 5,070 $ 8,923

Non-owner occupied CRE $ 8,845 $ — $ — $ 373 $ 9,218

Multifamily 6,072 — — 897 6,969

1 unchanged sentence

Multifamily construction 4,903 — — ( 967 ) 3,936

Commercial real estate construction 624 ( 115 ) — — 1,200 1,709

CRE construction 1,670 — — 238 1,908

Single family construction 5,130 — — ( 123 ) 5,007

2 unchanged sentences

Commercial and industrial loans

Owner occupied commercial real estate 3,639 ( 2,459 ) — — 4,508 5,688

Owner occupied CRE 4,994 — — 272 5,266

Commercial business 17,043 — 74 ( 12 ) 17,105

6 unchanged sentences

The following table presents a vintage analysis of the commercial portfolio segment by loan sub-class and risk rating or delinquency status.

At September 30, 2021

At March 31, 2022

(in thousands) 2022 2021 2020 2019 2018 2017 and prior Revolving Revolving-term Total

COMMERCIAL PORTFOLIO

Non-owner occupied commercial real estate

$ 35,832 $ 50,863 $ 172,296 $ 133,472 $ 132,238 $ 225,012 $ 1,189 $ 915 $ 751,817

Non-owner occupied CRE

Pass $ 23,614 $ 68,572 $ 50,276 $ 158,484 $ 121,836 $ 274,775 $ 853 $ 867 $ 699,277

Special Mention — — — — — — — — —

— — — — — 2,214 — — 2,214

Substandard — — — — — — — — —

— — — — — — — — —

Total 23,614 68,572 50,276 158,484 121,836 274,775 853 867 699,277

972,806 557,201 289,164 65,618 29,218 176,093 56 — 2,090,156

Pass 364,731 1,311,572 551,187 233,790 60,103 179,862 — — 2,701,245

Special Mention — — 8,695 19,835 — — — — 28,530

— — — — — — — — —

Substandard — — — — — — — — —

— — — — — — — — —

Total 364,731 1,311,572 559,882 253,625 60,103 179,862 — — 2,729,775

Multifamily construction

4,194 25,363 20,748 — — — — — 50,305

Pass — 12,163 24,664 — — — — — 36,827

Special Mention — — — — — — — — —

— — — — — — — — —

Substandard — — — — — — — — —

— — — — — — — — —

Total — 12,163 24,664 — — — — — 36,827

Commercial real estate construction

2,712 3,961 — 1,998 — 563 8,672 — 17,906

CRE construction

Pass — 11,668 3,959 — 1,924 548 — — 18,099

Special Mention — — — — — — — — —

— — — — — — — — —

Substandard — — — — — — — — —

— — — — — — — — —

Total — 11,668 3,959 — 1,924 548 — — 18,099

Single family construction

151,418 42,188 17,677 — — 78 91,915 — 303,276

Pass 31,784 142,275 24,226 12,434 — 76 108,005 — 318,800

Special Mention — — — — — — — — —

— — — — — — — — —

Substandard — — — — — — — — —

— — — — — — — — —

Total 31,784 142,275 24,226 12,434 — 76 108,005 — 318,800

5 unchanged sentences

Total 6,613 106,419 29,026 10,575 1,775 — — — 154,408

Owner occupied commercial real estate

45,688 47,907 59,378 50,584 72,188 113,575 549 2,878 392,747

Owner occupied CRE

Pass 20,055 70,792 47,176 57,012 46,661 164,101 248 1,689 407,734

Special Mention — — — 18,499 2,180 23,202 — — 43,881

— — — 2,206 6,063 212 — 63 8,544

Substandard — — — — 1,111 11,572 — 58 12,741

— — 18,826 1,111 10,591 18,531 — — 49,059

Total 20,055 70,792 47,176 75,511 49,952 198,875 248 1,747 464,356

Commercial business

128,807 58,648 49,889 27,876 16,780 23,331 88,636 2,341 396,308

Pass 32,359 58,371 48,943 36,976 23,289 27,808 113,186 2,131 343,063

Special Mention — 213 29 7,047 838 5,264 7,543 212 21,146

— — 9,145 1,518 4,503 57 5,500 142 20,865

Substandard — 8,214 3,253 2,414 3,392 1,827 4,616 13 23,729

3,002 46 3,407 8,129 1,567 2,608 ( 282 ) 106 18,583

Total 32,359 66,798 52,225 46,437 27,519 34,899 125,345 2,356 387,938

2 unchanged sentences

The following table presents a vintage analysis of the consumer portfolio segment by loan sub-class and delinquency status:

At September 30, 2021

At March 31, 2022

(in thousands) 2022 2021 2020 2019 2018 2017 and prior Revolving Revolving-term Total

19 unchanged sentences

COMMERCIAL PORTFOLIO

Non-owner occupied commercial real estate

Non-owner occupied CRE

Pass $ 68,647 $ 50,571 $ 169,711 $ 130,877 $ 100,674 $ 183,024 $ 963 $ 892 $ 705,359

11 unchanged sentences

Total 7,825 22,863 7,173 — — — — — 37,861

Commercial real estate construction

CRE construction

Pass 7,694 3,960 — 1,962 — 556 — — 14,172

13 unchanged sentences

Total 90,311 42,636 13,362 1,775 — — — — 148,084

Owner occupied commercial real estate

Owner occupied CRE

Pass 70,902 47,536 57,423 47,716 67,042 106,659 798 2,839 400,915

29 unchanged sentences

The following table presents the amortized cost basis of collateral-dependent loans by loan sub-class and collateral type:

At September 30, 2021

At March 31, 2022

(in thousands) Land 1-4 Family Non-residential real estate Other non-real estate Total

Commercial and industrial loans

Owner occupied commercial real estate

$ 1,111 $ — $ 2,763 $ — $ 3,874

Owner occupied CRE $ 1,111 $ — $ 2,428 $ — $ 3,539

Commercial business

11 unchanged sentences

Commercial and industrial loans

Owner occupied commercial real estate

$ 1,789 $ — $ 3,133 $ — $ 4,922

Owner occupied CRE $ 1,111 $ — $ 2,456 $ — $ 3,567

Commercial business

4 unchanged sentences

— 1,598 — — 1,598

Home equity loans and other

— 1,617 — — 1,617

2 unchanged sentences

The following table presents nonaccrual status for loans:

At September 30, 2021 At December 31, 2020

At March 31, 2022 At December 31, 2021

(in thousands) Nonaccrual with no related ACL Total Nonaccrual Nonaccrual with no related ACL Total Nonaccrual

Commercial and industrial loans

Owner occupied commercial real estate

$ 3,874 $ 3,874 $ 4,922 $ 4,922

Owner occupied CRE $ 3,539 $ 3,539 $ 3,568 $ 3,568

Commercial business 1,244 3,996 1,210 5,023

7 unchanged sentences

The following tables present an aging analysis of past due loans by loan portfolio segment and loan sub-class:

At September 30, 2021

At March 31, 2022

Past Due and Still Accruing

3 unchanged sentences

Current Total

Commercial real estate loans

Non-owner occupied commercial real estate

$ — $ — $ — $ — $ — $ 754,031 $ 754,031

Non-owner occupied CRE $ — $ — $ — $ — $ — $ 699,277 $ 699,277

Multifamily — — — — — 2,729,775 2,729,775

1 unchanged sentence

Multifamily construction — — — — — 36,827 36,827

Commercial real estate construction — — — — — 17,906 17,906

CRE construction — — — — — 18,099 18,099

Single family construction — — — — — 318,800 318,800

2 unchanged sentences

Commercial and industrial loans

Owner occupied commercial real estate

— — — 3,874 3,874 446,476 450,350

Owner occupied CRE — — — 3,539 3,539 460,817 464,356

Commercial business — — — 3,996 3,996 383,942 387,938

13 unchanged sentences

Current Total

Commercial real estate loans

Non-owner occupied commercial real estate

$ — $ — $ — $ — $ — $ 829,538 $ 829,538

Non-owner occupied CRE $ — $ — $ — $ — $ — $ 705,359 $ 705,359

Multifamily — — — — — 2,415,359 2,415,359

Construction and land development

Construction/land development

Multifamily construction — — — — — 37,861 37,861

Commercial real estate construction — — — — — 27,285 27,285

CRE construction — — — — — 14,172 14,172

Single family construction — — — — — 296,027 296,027

2 unchanged sentences

Commercial and industrial loans

Owner occupied commercial real estate

— — 4,922 4,922 462,334 467,256

Owner occupied CRE — — — 3,568 3,568 454,138 457,706

Commercial business 198 — — 5,023 5,221 396,651 401,872

7 unchanged sentences

% 0.02 % 0.02 % 0.12 % 0.22 % 0.38 % 99.62 % 100.00 %

(1) Includes $ 4.5 million and $ 7.1 million of loans at September 30, 2021 and December 31, 2020, 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.

(1) Includes $ 7.0 million and $ 7.3 million of loans at March 31, 2022 and December 31, 2021, 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.

(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 loans whose repayments are insured by the FHA or guaranteed by the VA or SBA of $ 10.8 million and $ 14.7 million at September 30, 2021 and December 31, 2020, respectively.

The following tables present information about troubled debt restructuring ("TDR") activity for the periods indicated:

Quarter Ended September 30, 2021 Nine Months Ended September 30, 2021

(dollars in thousands) Number of loan

modifications Recorded

investment Related charge-

offs Number of loan

modifications Recorded

investment Related charge-

Consumer loans

(3) Includes loans whose repayments are insured by the FHA or guaranteed by the VA or SBA of $ 11.0 million and $ 8.4 million at March 31, 2022 and December 31, 2021, respectively.

Loan Modifications

The Company provides modifications to borrowers experiencing financial difficulty 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 quarter ending March 31, 2022 did not have any material impact on the ACL.

The following tables provide information related to loans modified during the quarter ended March 31, 2022 to borrowers experiencing financial difficulty, disaggregated by class of financing receivable and type of concession granted:

(in thousands) Significant Payment Delay

Loan Type Amortized Cost Basis at March 31, 2022 % of Total Class of Financing Receivable

Single family $ 153 0.02 %

Interest rate reduction

10 $ 3,284 $ — 15 $ 4,599 $ —

Payment restructure

4 1,005 — 6 2,145

14 4,289 — 21 6,744 —

Interest rate reduction 10 3,284 — 15 4,599 —

Payment restructure 4 1,005 — 6 2,145 —

Total 14 $ 4,289 $ — 21 $ 6,744 $ —

Quarter Ended September 30, 2020 Nine Months Ended September 30, 2020

(dollars in thousands) Number of loan

modifications Recorded

investment Related charge-

offs Number of loan

modifications Recorded

investment Related charge-

Commercial and industrial loans

Owner occupied commercial real estate

Payment restructure — $ — $ — 1 $ 678 $ —

Commercial business

Payment restructure — — — 1 1,125 —

Total commercial and industrial

Payment restructure — — — 2 1,803 —

— — — 2 1,803 —

Consumer loans

(in thousands) Term Extension

Loan Type Amortized Cost Basis at March 31, 2022 % of Total Class of Financing Receivable

Single family $ 37 — %

Interest rate reduction 8 1,642 — 23 4,878 —

Payment restructure 1 411 — 10 2,067 —

9 2,053 — 33 6,945 —

(in thousands) Interest Rate Reduction and Term Extension

Loan Type Amortized Cost Basis at March 31, 2022 % of Total Class of Financing Receivable

Single family $ 1,110 0.15 %

(in thousands) Significant Payment Delay and Term Extension

Loan Type Amortized Cost Basis at March 31, 2022 % of Total Class of Financing Receivable

Single family $ 6,397 0.84 %

Home equity and other 52 0.02 %

(in thousands) Interest Rate Reduction, Significant Payment Delay and Term Extension

Loan Type Amortized Cost Basis at March 31, 2022 % 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:

Loan Type Financial Effect of:

Interest Rate Reduction

Payment restructure 1 411 — 12 3,870 —

Total 9 $ 2,053 $ — 35 $ 8,748 $ —

A TDR loan is considered re-defaulted when it becomes doubtful that the objectives of the modifications will be met, generally when a consumer loan TDR becomes 60 days or more past due on principal or interest payments or when a commercial loan TDR becomes 90 days or more past due on principal or interest payments.

The following table presents loans that were modified as TDRs within the previous 12 months and subsequently re-defaulted for the periods indicated:

Quarter Ended September 30,

(dollars in thousands) Number of loan relationships that re-defaulted Recorded

investment Number of loan relationships that re-defaulted Recorded

Consumer loans - single family 2 $ 422 6 $ 1,038

2 $ 422 6 $ 1,038

Nine Months Ended September 30,

(dollars in thousands) Number of loan relationships that re-defaulted Recorded

investment Number of loan relationships that re-defaulted Recorded

Commercial and industrial loans

Owner occupied commercial real estate 1 $ 678 — $ —

Consumer loans

Consumer loans - single family 7 $ 1,764 16 $ 3,237

7 1,764 16 3,237

8 $ 2,442 16 $ 3,237

The CARES Act provides temporary relief from the accounting and disclosure requirements for TDRs for certain loan modifications that are the result of a hardship that is related, either directly or indirectly, to the COVID-19 pandemic.

In addition, interagency guidance issued by federal banking regulators and endorsed by the FASB staff has indicated that borrowers who receive relief are not experiencing financial difficulty if they meet the following qualifying criteria:

• The modification is in response to the National Emergency related to the COVID-19 pandemic;

• The borrower was current at the time the modification program was implemented;

• The modification is short-term

We have elected to apply temporary relief under Section 4013 of the CARES Act to certain eligible modifications and will not treat qualifying loan modifications as TDRs for accounting or disclosure purposes.

Additionally, eligible short-term loan modifications subject to the practical expedient in the interagency guidance will not be treated as TDRs for accounting or disclosure purposes if they qualify.

As of September 30, 2021, excluding any SBA guaranteed loans or single family loans that are guaranteed by FHA or VA, the Company has outstanding balances of $ 43 million on 100 loans that were approved for and are still in forbearance under this program, including $ 18 million in commercial loans and $ 25 million in single family and consumer loans.

Single family Reduced weighted-average contractual interest rate from 4.28 % to 3.25 %.

Significant Payment Delay

Single family 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

Single family 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.

NOTE 4– DEPOSITS:

Deposit balances, including stated rates, were as follows:

At September 30, 2021 At December 31, 2020

Deposit balances, including their weighted average rates, were as follows:

At March 31, 2022 At December 31, 2021

(dollars in thousands) Amount Weighted Average Rate Amount Weighted Average Rate

5 unchanged sentences

Total $ 6,270,535 0.16 % $ 6,146,509 0.15 %

Certificates of deposit outstanding at September 30, 2021 mature as follows:

(in thousands)

Certificates of deposit outstanding mature as follows:

(in thousands) March 31, 2022

Within one year $ 761,588

4 unchanged sentences

Total $ 915,481

The aggregate amount of certificate of deposits in denominations of more than $250 thousand at September 30, 2021 and December 31, 2020 were $ 113 million and $ 130 million, respectively.

There were $ 205 million and $ 210 million of brokered deposits at September 30, 2021 and December 31, 2020, respectively.

The aggregate amount of certificate of deposits in denominations of more than the FDIC limit of $250 thousand at March 31, 2022 and December 31, 2021 were $ 96 million and $ 108 million, respectively.

There were $ 195 million and $ 145 million of brokered deposits at March 31, 2022 and December 31, 2021, respectively.

NOTE 5– LONG-TERM DEBT:

On January 19, 2022, we completed a $ 100 million subordinated notes offering due in 2032 (the “Notes”).

Interest on the Notes initially will accrue at a rate equal to 3.5 % per annum from and including the date of original issuance to, but excluding, January 30, 2027, payable semiannually in arrears.

From and including January 30, 2027, to, but excluding, the maturity date

or the date of earlier redemption, the Notes will bear interest equal to the three-month term Secured Overnight Financing Rate ("SOFR") plus 215 basis points, payable quarterly in arrears.

Net proceeds to the Company were $ 98 million, after deducting underwriting discounts and offering expenses.

The Company intends to use a significant portion of the net proceeds from the Notes offering to repurchase shares of its common stock through open market purchases, with the remainder of the net proceeds used for working capital and other general corporate purposes, including support for growth of its total assets.

At March 31, 2022 the Company had outstanding $ 98 million of subordinated notes.

At March 31, 2022 and December 31, 2021, the Company had outstanding $ 64 million of Senior Notes which bear interest at a rate of 6.50 % and mature in 2026.

The Company issued trust preferred securities during the period from 2005 through 2007, resulting in a debt balance of $ 62 million that remains outstanding at March 31, 2022 and December 31, 2021.

In connection with the issuance of trust preferred securities, HomeStreet, Inc.

issued to HomeStreet Statutory Trust Junior Subordinated Deferrable Interest Debentures.

The sole assets of the HomeStreet Statutory Trust are the Subordinated Debt Securities I, II, III, and IV.

The Subordinated Debt Securities outstanding as of March 31, 2022 and December 31, 2021 are as follows:

HomeStreet Statutory Trust

(dollars in thousands) I II III IV

Date issued June 2005 September 2005 February 2006 March 2007

Amount $ 5,155 $ 20,619 $ 20,619 $ 15,464

Interest rate 3 MO LIBOR + 1.70 %

3 MO LIBOR + 1.50 %

3 MO LIBOR + 1.37 %

3 MO LIBOR + 1.68 %

Maturity date June 2035 December 2035 March 2036 June 2037

Call option (1)

Quarterly Quarterly Quarterly Quarterly

(1) Call options are exercisable at par and are callable, without penalty on a quarterly basis, starting five years after issuance.

NOTE 6– DERIVATIVES AND HEDGING ACTIVITIES:

1 unchanged sentence

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 September 30, 2021

At March 31, 2022

Notional amount Fair value derivatives

3 unchanged sentences

Interest rate swaps 276,561 5,619 ( 5,620 )

Eurodollar futures 355,000 — ( 9 )

Futures 93,200 97 —

Options 30,000 389 —

Total derivatives before netting $ 1,170,771 11,867 ( 9,753 )

8 unchanged sentences

Interest rate swaps 287,352 4,381 ( 4,541 )

Eurodollar futures 314,000 — ( 4 )

Futures 139,900 334 —

Total derivatives before netting $ 1,335,485 7,925 ( 5,184 )

Netting adjustment/Cash collateral (1)

( 8,250 ) 21,447

Carrying value on consolidated balance sheet $ 9,280 $ ( 1,263 )

(1) Includes net cash collateral paid of $ 5.6 million and $ 13.2 million at September 30, 2021 and December 31, 2020, respectively.

The following tables present gross fair value and net carrying value information about derivative instruments:

(1) Includes net cash collateral received of $ 6.0 million and paid of $ 5.3 million at March 31, 2022 and December 31, 2021, respectively.

The following table presents gross fair value and net carrying value information about derivative instruments:

(in thousands) Gross fair value Netting adjustments/ Cash collateral (1)

Carrying value

At September 30, 2021

At March 31, 2022

Derivative assets $ 11,867 $ ( 9,096 ) $ 2,771

3 unchanged sentences

Derivative liabilities ( 5,184 ) 3,921 ( 1,263 )

(1) Includes net cash collateral paid of $ 5.6 million and $ 13.2 million at September 30, 2021 and December 31, 2020, respectively.

(1) Includes net cash collateral received of $ 6.0 million and paid of $ 5.3 million at March 31, 2022 and December 31, 2021, respectively.

The collateral used under the Company's master netting agreements is typically cash, but securities may be used under agreements with certain counterparties.

3 unchanged sentences

Any securities pledged to counterparties as collateral remain on the consolidated balance sheets.

At September 30, 2021 and December 31, 2020, the Company had liabilities of $ 2.6 million and $ 3.3 million, respectively, in cash collateral received from counterparties and receivables of $ 8.2 million and $ 16.5 million, respectively, in cash collateral paid to counterparties.

At March 31, 2022 and December 31, 2021, the Company had liabilities of $ 7.6 million and zero , respectively, in cash collateral received from counterparties and receivables of $ 1.6 million and $ 5.3 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 September 30, Nine Months Ended September 30,

Quarter Ended March 31,

(in thousands) 2022 2021

4 unchanged sentences

( 9,439 ) ( 12,591 )

41 632 305 ( 84 )

(1) Comprised of IRLCs and forward contracts used as an economic hedge of loans held for sale.

(2) Comprised of interest rate swaps, interest rate swaptions, futures and forward contracts used as economic hedges of single family MSRs.

(3) Comprised of interest rate swaps used as economic hedges of loans held for investment.

The notional amount of open interest rate swap agreements executed with commercial banking customers at September 30, 2021 and December 31, 2020 were $ 275 million and $ 246 million, respectively.

(2) Comprised of interest rate swaps, interest rate swaptions, futures, US Treasury notes and 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.

The notional amount of open interest rate swap agreements executed with commercial banking customers at March 31, 2022 and December 31, 2021 were $ 277 million and $ 287 million, respectively.

NOTE 7– MORTGAGE BANKING OPERATIONS:

LHFS consisted of the following:

(in thousands) At September 30, 2021 At December 31, 2020

(in thousands) At March 31, 2022 At December 31, 2021

Single family $ 48,994 $ 128,041

Commercial real estate, multifamily and SBA 259,170 167,289

CRE, multifamily and SBA 10,156 48,090

Total $ 59,150 $ 176,131

Loans sold consisted of the following for the periods indicated:

Quarter Ended September 30, Nine Months Ended September 30,

Quarter Ended March 31,

(in thousands) 2022 2021

Single family $ 323,070 $ 573,040

Commercial real estate, multifamily and SBA 69,810 170,980 465,948 502,059

CRE, multifamily and SBA 49,137 257,717

Total $ 372,207 $ 830,757

Gain on loan origination and sale activities, including the effects of derivative risk management instruments, consisted of the following:

Quarter Ended September 30, Nine Months Ended September 30,

Quarter Ended March 31,

(in thousands) 2022 2021

Single family $ 6,169 $ 26,187

Commercial real estate, multifamily and SBA 3,260 5,498 15,967 11,947

CRE, multifamily and SBA 2,105 7,272

Total $ 8,274 $ 33,459

2 unchanged sentences

The unpaid principal balance of loans serviced for others is as follows:

(in thousands) At September 30, 2021 At December 31, 2020

(in thousands) At March 31, 2022 At December 31, 2021

Single family $ 5,545,145 $ 5,539,180

Commercial real estate, multifamily and SBA 2,064,492 1,844,241

CRE, multifamily and SBA 2,035,801 2,031,087

Total $ 7,580,946 $ 7,570,267

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 for the periods indicated:

Quarter Ended September 30, Nine Months Ended September 30,

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) 2022 2021

1 unchanged sentence

Additions, net of adjustments (1)

( 183 ) 252 ( 229 ) ( 275 )

Realized (losses) recoveries, net (2)

5 unchanged sentences

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 $ 2.5 million and $ 3.0 million were recorded in other assets as of September 30, 2021 and December 31, 2020, respectively.

Advances of $ 2.7 million and $ 1.9 million were recorded in other assets as of March 31, 2022 and December 31, 2021, 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 September 30, 2021 and December 31, 2020, delinquent or defaulted mortgage loans currently in Ginnie Mae pools that the Company has recognized on its consolidated balance sheets totaled $ 32 million and $ 102 million, respectively.

Revenue from mortgage servicing, including the effects of derivative risk management instruments, consisted of the following for the periods indicated:

Quarter Ended September 30, Nine Months Ended September 30,

At March 31, 2022 and December 31, 2021, delinquent or defaulted mortgage loans currently in Ginnie Mae pools that the Company has recognized on its consolidated balance sheets totaled $ 10 million and $ 12 million, respectively.

Revenue from mortgage servicing, including the effects of derivative risk management instruments, consisted of the following:

Quarter Ended March 31,

(in thousands) 2022 2021

4 unchanged sentences

Amortization of multifamily and SBA MSRs ( 1,712 ) ( 1,344 )

1,560 1,469 5,367 6,743

Risk management, single family MSRs:

1 unchanged sentence

10,303 11,463

Net gain (loss) from derivative hedging ( 293 ) ( 91 ) ( 7,860 ) 22,148

Net gain (loss) from economic hedging ( 10,183 ) ( 12,591 )

120 ( 1,128 )

1 unchanged sentence

(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 reflected by changes in mortgage interest rates.

The changes in single family MSRs measured at fair value are as follows for the periods indicated:

Quarter Ended September 30, Nine Months Ended September 30,

(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) 2022 2021

1 unchanged sentence

Additions and amortization:

5,166 6,569 19,507 12,942

Amortization (1)

1 unchanged sentence

Net additions and amortization

587 2,168 4,054 696

Changes in fair value assumptions (2)

2 unchanged sentences

(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 reflected by changes in mortgage interest rates.

Key economic assumptions used in measuring the initial fair value of capitalized single family MSRs were as follows for the periods indicated:

Quarter Ended September 30, Nine Months Ended September 30,

(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)

2021 2020 2021 2020

Constant prepayment rate ("CPR") (2)

9.38 % 8.37 %

8.75 % 17.1 % - 30.0 %

Discount rate 8.34 % 8.37 %

2 unchanged sentences

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 September 30, 2021 At December 31, 2020

At March 31, 2022 At December 31, 2021

Range of Inputs Average (1)

4 unchanged sentences

9.05 % 6.94 % - 13.96 %

(1) Averages of all the inputs within the range.

(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 September 30, 2021

(dollars in thousands) At March 31, 2022

Fair value of single family MSR $ 72,378

5 unchanged sentences

Impact on fair value of 200 basis points increase $ ( 6,187 )

The changes in multifamily and SBA MSRs measured at the lower of amortized cost or fair value were as follows for the periods indicated:

Quarter Ended September 30, Nine Months Ended September 30,

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) 2022 2021

8 unchanged sentences

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 September 30, 2021 and December 31, 2020, the total unpaid principal balance of loans sold under this program was $ 1.9 billion and $ 1.8 billion, respectively.

The Company's reserve liability related to this arrangement totaled $ 0.7 million and $ 2.1 million at September 30, 2021 and December 31, 2020, respectively.

There were no actual losses incurred under this arrangement during the quarters and nine months ended September 30, 2021 and 2020.

As of March 31, 2022 and December 31, 2021, the total unpaid principal balance of loans sold under this program was $ 1.9 billion.

The Company's reserve liability related to this arrangement totaled $ 0.6 million at both March 31, 2022 and December 31, 2021.

There were no actual losses incurred under this arrangement during the quarters ended March 31, 2022 and 2021.

In the ordinary course of business, the Company sells residential mortgage loans to GSEs and other entities.

1 unchanged sentence

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 $ 5.6 billion and $ 6.0 billion as of September 30, 2021 and December 31, 2020, respectively.

At September 30, 2021 and December 31, 2020, 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 $ 1.4 million and $ 2.1 million, respectively.

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 $ 5.5 billion at both March 31, 2022 and December 31, 2021.

At March 31, 2022 and December 31, 2021, 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 $ 1.6 million and $ 1.3 million, respectively.

NOTE 9– 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) 2022 2021

Net income $ 19,951 $ 29,663

Weighted average shares:

Basic weighted-average number of common shares outstanding

19,585,753 21,637,671

Dilutive effect of outstanding common stock equivalents 206,160 324,157

Diluted weighted-average number of common shares outstanding 19,791,913 21,961,828

Net income per share:

Basic earnings per share $ 1.02 $ 1.37

Diluted earnings per share 1.01 1.35

NOTE 10– FAIR VALUE MEASUREMENT:

28 unchanged sentences

Investment securities

Investment securities AFS Observable market prices of identical or similar securities are used where available.

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:

16 unchanged sentences

Level 3 recurring fair value measurement.

Eurodollar futures Fair value is based on closing exchange prices.

Futures and Options Fair value is based on closing exchange prices.

Level 1 recurring fair value measurement.

Interest rate swaps

Interest rate swaptions

Forward sale commitments Fair value is based on quoted prices for identical or similar instruments, when available.

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:

7 unchanged sentences

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 September 30, 2021

At March 31, 2022

(in thousands) Fair Value Level 1 Level 2 Level 3

Trading securities - U.S.

Treasury securities $ 19,313 $ 19,313 $ — $ —

Investment securities AFS

11 unchanged sentences

Single family mortgage servicing rights 72,378 — — 72,378

Futures 97 97 — —

Forward sale commitments 5,079 — 5,079 —

Options 389 389 — —

Interest rate lock commitments 683 — — 683

1 unchanged sentence

Total assets $ 1,219,717 $ 19,799 $ 1,117,569 $ 82,349

Eurodollar futures $ 9 $ 9 $ — $ —

Forward sale commitments 3,528 — 3,528 —

13 unchanged sentences

Corporate debt securities 19,616 — 19,541 75

Agency debentures 1,846 — 1,846 —

Treasury securities 23,175 — 23,175 —

Single family LHFS 128,041 — 128,041 —

1 unchanged sentence

Single family mortgage servicing rights 61,584 — — 61,584

Futures 334 334 — —

Forward sale commitments 723 — 723 —

2 unchanged sentences

Total assets $ 1,207,359 $ 334 $ 1,133,185 $ 73,840

Eurodollar futures $ 4 $ 4 $ — $ —

Forward sale commitments $ 640 $ — $ 640 $ —

2 unchanged sentences

Total liabilities $ 5,184 $ — $ 5,181 $ 3

There were no transfers between levels of the fair value hierarchy during the quarters and nine months ended September 30, 2021 and 2020.

There were no transfers between levels of the fair value hierarchy during the quarters ended March 31, 2022 and 2021.

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 and nine months ended September 30, 2021 and 2020, see Note 6, Mortgage Banking Operations of this Quarterly Report on Form 10-Q.

For information regarding fair value changes and activity for single family MSRs during the quarters ended March 31, 2022 and 2021, see Note 7, 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).

16 unchanged sentences

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 $ 4.5 million and $ 7.1 million at September 30, 2021 and December 31, 2020, respectively.

The total amount of held for investment loans where fair value option election was made was $ 7.0 million and $ 7.3 million at March 31, 2022 and December 31, 2021, respectively.

The following information presents significant Level 3 unobservable inputs used to measure fair value of certain assets:

2 unchanged sentences

Input Low High Weighted Average

September 30, 2021

March 31, 2022

Investment securities AFS $ 2,307 Income approach Implied spread to benchmark interest rate curve

9 unchanged sentences

Value of servicing 0.35 % 1.46 % 1.15 %

We had no LHFS where the fair value was not derived with significant observable inputs at September 30, 2021 and December 31, 2020.

We had no LHFS where the fair value was not derived with significant observable inputs at March 31, 2022 and December 31, 2021.

The following table presents fair value changes and activity for certain Level 3 assets for the periods indicated:

1 unchanged sentence

Ending balance

Quarter Ended September 30, 2021

Investment securities AFS $ 2,550 $ — $ — $ ( 48 ) $ 12 $ 2,514

Single family LHFI 5,207 284 — ( 1,088 ) 104 4,507

Quarter Ended September 30, 2020

Investment securities AFS $ 2,861 $ — $ — $ ( 48 ) $ ( 16 ) $ 2,797

Single family LHFI 5,847 2,169 — ( 352 ) ( 26 ) 7,638

Nine Months Ended September 30, 2021

Quarter Ended March 31, 2022

Investment securities AFS $ 2,482 $ — $ — $ ( 48 ) $ ( 127 ) $ 2,307

Single family LHFI 7,287 — — — ( 306 ) 6,981

Nine Months Ended September 30, 2020

Quarter Ended March 31, 2021

Investment securities AFS $ 2,710 $ — $ — $ ( 48 ) $ ( 172 ) $ 2,490

Single family LHFI 7,108 360 — ( 3,191 ) 47 4,324

(1) Changes in fair value for single LHFI are recorded in other noninterest income on the consolidated income statement.

The following table presents fair value changes and activity for Level 3 interest rate lock and purchase loan commitments for the periods indicated:

Quarter Ended September 30, Nine Months Ended September 30,

(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) 2022 2021

8 unchanged sentences

We have omitted disclosure related to quantitative inputs given the insignificance of assets measured on a nonrecurring basis.

The fair value of commercial properties are 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 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.

6 unchanged sentences

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 present assets classified as Level 3 assets 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 Level 1 Level 2 Level 3 Total Gains (Losses)

At or for the Quarter Ended September 30, 2021

$ 1,121 $ — $ — $ 1,121 $ ( 8 )

At or for the Quarter Ended September 30, 2020

$ 3,302 $ — $ — $ 3,302 $ ( 2,054 )

At or for the Nine Months Ended September 30, 2021

$ 1,121 $ — $ — $ 1,121 $ ( 70 )

At or for the Nine Months Ended September 30, 2020

$ 3,302 $ — $ — $ 3,302 $ ( 2,184 )

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, 2022

(1) Represents the carrying value of loans for which adjustments are based on the fair value of the collateral.

1 unchanged sentence

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 September 30, 2021

At March 31, 2022

(in thousands) Carrying

5 unchanged sentences

10,156 10,248 — 10,248 —

Mortgage servicing rights – multifamily

39,625 43,166 — — 43,166

Mortgage servicing rights – multifamily and SBA 39,279 43,453 — — 43,453

Federal Home Loan Bank stock 19,596 19,596 — 19,596 —

1 unchanged sentence

Certificates of deposit $ 915,481 $ 908,030 $ — $ 908,030 $ —

Borrowings 273,000 273,000 273,000

Long-term debt 224,137 214,853 — 214,853 —

6 unchanged sentences

LHFS – multifamily and other 48,090 48,425 — 48,425 —

Mortgage servicing rights – multifamily 35,774 38,423 — — 38,423

Mortgage servicing rights – multifamily and SBA 39,415 43,199 — — 43,199

Federal Home Loan Bank stock 10,361 10,361 — 10,361 —

3 unchanged sentences

Long-term debt 126,026 116,845 — 116,845 —

NOTE 9– EARNINGS PER SHARE:

The following table summarizes the calculation of earnings per share for the periods indicated:

Quarter Ended September 30, Nine Months Ended September 30,

(in thousands, except share and per share data) 2021 2020 2021 2020

Net income $ 27,170 $ 26,349 $ 85,990 $ 52,392

Weighted average shares:

Basic weighted-average number of common shares outstanding

20,613,290 22,665,069 21,099,059 23,226,109

Dilutive effect of outstanding common stock equivalents 206,311 212,157 253,656 177,620

Diluted weighted-average number of common shares outstanding 20,819,601 22,877,226 21,352,715 23,403,729

Net income per share:

Basic earnings per share $ 1.32 $ 1.16 $ 4.08 $ 2.26

Diluted earnings per share $ 1.31 $ 1.15 $ 4.03 $ 2.24

NOTE 10– RESTRUCTURING:

In 2020, we took steps to consolidate our facilities and incurred charges in connection with vacating certain office space.

In addition, we incurred certain consulting fees in connection with a corporate-wide operations restructuring program which began in 2019.

The following table summarizes the restructuring charges and the liability for restructuring costs still to be paid in the periods indicated:

(in thousands) Facility-related costs Personnel-related costs Other costs Total

Quarter ended September 30, 2021 activity

Costs paid or otherwise settled $ ( 334 ) $ ( 2 ) $ — $ ( 336 )

Balance, September 30, 2021 $ 1,963 $ 99 $ — $ 2,062

Quarter ended September 30, 2020 activity

Restructuring charges $ 1,736 $ 164 $ 232 $ 2,132

Costs paid or otherwise settled ( 1,640 ) ( 150 ) ( 229 ) ( 2,019 )

Balance, September 30, 2020 $ 1,791 $ 185 $ 89 $ 2,065

Nine months ended September 30, 2021 activity

Costs paid or otherwise settled $ ( 900 ) $ ( 55 ) $ ( 116 ) $ ( 1,071 )

Balance, September 30, 2021 $ 1,963 $ 99 $ — $ 2,062

Nine months ended September 30, 2020 activity

Restructuring charges $ 4,183 $ 299 $ 1,018 $ 5,500

Costs paid or otherwise settled ( 3,627 ) ( 624 ) ( 1,088 ) ( 5,339 )

Balance, September 30, 2020 $ 1,791 $ 185 $ 89 $ 2,065

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, 2022 At December 31, 2021

(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 $ 48,994 $ 49,457 $ ( 463 ) $ 128,041 $ 124,933 $ 3,108

NOTE 11– SUBSEQUENT EVENT:

On October 28, 2021 the Board authorized a dividend of $ 0.25 per share, payable on November 23, 2021 to shareholders of record on November 9, 2021.

On the same day, the Board approved an expansion of the Company's share repurchase program for up to $ 20 million of its common stock .

On April 28, 2022 the Board authorized a dividend of $ 0.35 per share, payable on May 24, 2022 to shareholders of record on May 10, 2022.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements