Item 1. Financial Statements
ITEM 1 FINANCIAL STATEMENTS
HOMESTREET, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
March 31, 2022 December 31, 2021
(in thousands, except share data) (Unaudited)
ASSETS
Cash and cash equivalents
$ 73,862 $ 65,214
Investment securities
1,083,640 1,006,691
Loans held for sale ("LHFS")
59,150 176,131
Loans held for investment ("LHFI") (net of allowance for credit losses of $ 37,944 and $ 47,123 )
5,826,546 5,495,726
Mortgage servicing rights ("MSRs") 111,657 100,999
Premises and equipment, net 56,269 58,154
Other real estate owned ("OREO") 735 735
Goodwill and other intangible assets 31,464 31,709
Other assets 267,571 268,732
Total assets $ 7,510,894 $ 7,204,091
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Deposits $ 6,270,535 $ 6,146,509
Borrowings 273,000 41,000
Long-term debt 224,137 126,026
Accounts payable and other liabilities 141,991 175,217
Total liabilities 6,909,663 6,488,752
Commitments and contingencies
Shareholders' equity:
Common stock, no par value, authorized 160,000,000 shares, issued and outstanding, 18,700,536 shares and 20,085,336 shares
223,718 249,856
Retained earnings 408,442 444,343
Accumulated other comprehensive income (loss) ( 30,929 ) 21,140
Total shareholders' equity 601,231 715,339
Total liabilities and shareholders' equity $ 7,510,894 $ 7,204,091
See accompanying notes to consolidated financial statements
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HOMESTREET, INC. AND SUBSIDIARIES
CONSOLIDATED INCOME STATEMENTS
(Unaudited)
Quarter Ended March 31,
(in thousands, except share and per share data) 2022 2021
Interest income:
Loans $ 52,954 $ 53,568
Investment securities 5,966 5,951
Cash, Fed Funds and other 108 172
Total interest income
59,028 59,691
Interest expense:
Deposits 2,284 3,650
Borrowings 2,198 1,524
Total interest expense
4,482 5,174
Net interest income
54,546 54,517
Provision for credit losses ( 9,000 ) —
Net interest income after provision for credit losses
63,546 54,517
Noninterest income:
Net gain on loan origination and sale activities 8,274 33,459
Loan servicing income 3,304 748
Deposit fees 2,075 1,824
Other 1,905 2,802
Total noninterest income
15,558 38,833
Noninterest expense:
Compensation and benefits 32,031 35,835
Information services 7,062 6,784
Occupancy 6,365 6,492
General, administrative and other 9,015 7,497
Total noninterest expense
54,473 56,608
Income before income taxes 24,631 36,742
Income tax expense 4,680 7,079
Net income $ 19,951 $ 29,663
Net income per share:
Basic $ 1.02 $ 1.37
Diluted
$ 1.01 $ 1.35
Weighted average shares outstanding:
Basic
19,585,753 21,637,671
Diluted
19,791,913 21,961,828
See accompanying notes to consolidated financial statements
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HOMESTREET, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited)
Quarter Ended March 31,
(in thousands) 2022 2021
Net income $ 19,951 $ 29,663
Other comprehensive income (loss):
Unrealized gain (loss) on investment securities available for sale ("AFS") ( 68,187 ) ( 19,681 )
Reclassification for net (gains) losses included in income ( 71 ) —
Other comprehensive income (loss) before tax ( 68,258 ) ( 19,681 )
Income tax impact of:
Unrealized gain (loss) on investment securities AFS ( 16,172 ) ( 4,133 )
Reclassification for net (gains) losses included in income
( 17 ) —
Total
( 16,189 ) ( 4,133 )
Other comprehensive income (loss) ( 52,069 ) ( 15,548 )
Total comprehensive income (loss) $ ( 32,118 ) $ 14,115
See accompanying notes to consolidated financial statements
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HOMESTREET, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(Unaudited)
(in thousands, except share data) Number
of shares Common stock Retained
earnings Accumulated
other
comprehensive
income (loss) Total shareholders' equity
For the quarter ended March 31, 2021
Balance, December 31, 2020 21,796,904 $ 278,505 $ 403,888 $ 35,357 $ 717,750
Net income — — 29,663 — 29,663
Share-based compensation expense — 810 — — 810
Common stock issued - Option exercise; stock grants 188,257 1,849 — — 1,849
Other comprehensive income (loss) — — — ( 15,548 ) ( 15,548 )
Dividends declared on common stock ($ 0.25 per share)
— — ( 5,534 ) — ( 5,534 )
Common stock repurchased
( 624,647 ) ( 11,222 ) ( 16,305 ) — ( 27,527 )
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
Net income — — 19,951 — 19,951
Share-based compensation expense — 1,076 — — 1,076
Common stock issued - Stock grants 104,840 — — — —
Other comprehensive income (loss) — — — ( 52,069 ) ( 52,069 )
Dividends declared on common stock ($ 0.35 per share)
— — ( 7,164 ) — ( 7,164 )
Common stock repurchased
( 1,489,640 ) ( 27,214 ) ( 48,688 ) — ( 75,902 )
Balance, March 31, 2022 18,700,536 $ 223,718 $ 408,442 $ ( 30,929 ) $ 601,231
See accompanying notes to consolidated financial statements
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HOMESTREET, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Quarter Ended March 31,
(in thousands) 2022 2021
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 19,951 $ 29,663
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Provision for credit losses ( 9,000 ) —
Depreciation and amortization, premises and equipment 2,593 2,408
Amortization of premiums and discounts: securities, deposits, debt 999 1,234
Operating leases: excess of payments over amortization ( 1,096 ) ( 990 )
Amortization of finance leases 143 269
Amortization of core deposit intangibles 245 294
Amortization of deferred loan fees and costs ( 322 ) ( 818 )
Share-based compensation expense 1,076 810
Lease impairment costs — 194
Deferred income tax expense (benefit) 5,363 4,448
Origination of LHFS ( 252,102 ) ( 734,572 )
Proceeds from sale of LHFS 372,464 719,448
Net fair value adjustment and gain on sale of LHFS 3,348 ( 12,799 )
Origination of MSRs ( 5,492 ) ( 11,126 )
Net gain on sale of loans originated as LHFI — ( 2,795 )
Change in fair value of MSRs ( 6,878 ) ( 5,770 )
Amortization of servicing rights 1,712 1,344
Net change in trading securities ( 19,313 ) —
(Increase) decrease in other assets 5,972 11,519
Increase (decrease) in accounts payable and other liabilities 4,226 ( 4,942 )
Net cash provided by (used in) operating activities 123,889 ( 2,181 )
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of investment securities
( 161,016 ) ( 49,433 )
Proceeds from sale of investment securities 962 —
Principal payments on investment securities
34,129 55,863
Proceeds from sale of OREO 952 —
Proceeds from sale of loans originated as LHFI — 132,694
Net increase in LHFI
( 328,288 ) ( 176,655 )
Purchase of premises and equipment ( 1,444 ) ( 531 )
Proceeds from sale of Federal Home Loan Bank stock 16,003 53,880
Purchases of Federal Home Loan Bank stock ( 25,238 ) ( 43,412 )
Net cash used in investing activities ( 463,940 ) ( 27,594 )
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Quarter Ended March 31,
(in thousands) 2022 2021
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase (decrease) in deposits, net 100,973 309,634
Changes in short-term borrowings, net 232,000 ( 238,300 )
Proceeds from debt issuance, net 98,035 —
Repayment of finance lease principal ( 145 ) ( 235 )
Repurchases of common stock ( 75,000 ) ( 25,001 )
Proceeds from exercise of stock options — 263
Dividends paid on common stock ( 7,164 ) ( 5,534 )
Net cash provided by financing activities 348,699 40,827
Net increase in cash and cash equivalents 8,648 11,052
Cash and cash equivalents, beginning of year 65,214 58,049
Cash and cash equivalents, end of period $ 73,862 $ 69,101
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest $ 2,691 $ 4,291
Federal and state income taxes 4 50
Non-cash activities:
Increase in lease assets and lease liabilities 2,053 283
Loans transferred from LHFI to LHFS, net 6,731 130,218
Ginnie Mae loans derecognized with the right to repurchase, net 2,402 19,576
Repurchase of common stock-award shares 902 2,526
See accompanying notes to consolidated financial statements
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HomeStreet, Inc. and Subsidiaries
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 Capital Corporation, 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, 2021, filed with the Securities and Exchange Commission ("2021 Annual Report on Form 10-K").
Recent Accounting Developments
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 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. 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.
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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 March 31, 2022
(in thousands) Amortized
cost Gross
unrealized
gains Gross
unrealized
losses Fair
value
AFS
Mortgage backed securities ("MBS"):
Residential $ 30,689 $ 6 $ ( 1,508 ) $ 29,187
Commercial 70,312 38 ( 3,958 ) 66,392
Collateralized mortgage obligations ("CMOs"):
Residential 276,246 186 ( 9,940 ) 266,492
Commercial 138,168 135 ( 3,424 ) 134,879
Municipal bonds 535,353 2,802 ( 23,016 ) 515,139
Corporate debt securities 26,850 97 ( 574 ) 26,373
U.S. Treasury securities 23,263 — ( 1,541 ) 21,722
Total $ 1,100,881 $ 3,264 $ ( 43,961 ) $ 1,060,184
HTM
Municipal bonds $ 4,143 $ 8 $ ( 17 ) $ 4,134
At December 31, 2021
(in thousands) Amortized
cost Gross
unrealized
gains Gross
unrealized
losses Fair
value
AFS
MBS:
Residential $ 32,905 $ 396 $ ( 338 ) $ 32,963
Commercial 62,094 933 ( 235 ) 62,792
CMOs:
Residential 186,703 2,012 ( 1,321 ) 187,394
Commercial 135,102 1,890 ( 333 ) 136,659
Municipal bonds 516,693 24,154 ( 924 ) 539,923
Corporate debt securities 18,918 699 ( 1 ) 19,616
U.S. Treasury securities 23,348 — ( 173 ) 23,175
Total $ 975,763 $ 30,084 $ ( 3,325 ) $ 1,002,522
HTM
Municipal bonds
$ 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"). 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, 2022
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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 March 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
$ ( 1,064 ) $ 25,716 $ ( 444 ) $ 2,233 $ ( 1,508 ) $ 27,949
Commercial ( 3,958 ) 58,243 — — ( 3,958 ) 58,243
CMOs:
Residential ( 7,475 ) 177,481 ( 2,465 ) 21,315 ( 9,940 ) 198,796
Commercial ( 2,802 ) 103,919 ( 622 ) 7,608 ( 3,424 ) 111,527
Municipal bonds ( 21,126 ) 375,801 ( 1,890 ) 12,141 ( 23,016 ) 387,942
Corporate debt securities ( 574 ) 16,758 — — ( 574 ) 16,758
U.S. Treasury securities ( 1,541 ) 21,723 — — ( 1,541 ) 21,723
Total $ ( 38,540 ) $ 779,641 $ ( 5,421 ) $ 43,297 $ ( 43,961 ) $ 822,938
HTM
Municipal bonds $ ( 17 ) $ 2,474 $ — $ — $ ( 17 ) $ 2,474
At December 31, 2021
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
MBS:
Residential $ ( 38 ) $ 5,324 $ ( 300 ) $ 2,406 $ ( 338 ) $ 7,730
Commercial ( 235 ) 18,127 — — ( 235 ) 18,127
CMOs:
Residential ( 1,007 ) 53,068 ( 314 ) 7,116 ( 1,321 ) 60,184
Commercial ( 135 ) 14,806 ( 198 ) 5,132 ( 333 ) 19,938
Municipal bonds ( 914 ) 64,237 ( 10 ) 1,058 ( 924 ) 65,295
Corporate debt securities ( 1 ) 3,164 — — ( 1 ) 3,164
U.S. Treasury securities ( 173 ) 23,175 — — ( 173 ) 23,175
Total $ ( 2,503 ) $ 181,901 $ ( 822 ) $ 15,712 $ ( 3,325 ) $ 197,613
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, 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.
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The following tables present the fair value of investment securities AFS and HTM by contractual maturity along with the associated contractual yield:
At March 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 $ 4,159 3.57 % $ 13,675 3.23 % $ 66,619 3.40 % $ 430,686 3.03 % $ 515,139 3.09 %
Corporate debt securities
— — % 5,573 3.54 % 20,800 4.39 % — — % 26,373 4.22 %
U.S. Treasury securities
— — % — — % 21,722 1.20 % — — % 21,722 1.20 %
Total $ 4,159 3.57 % $ 19,248 3.32 % $ 109,141 3.13 % $ 430,686 3.03 % $ 563,234 3.07 %
HTM
Municipal bonds $ 1,659 2.91 % $ 2,475 2.07 % $ — — % $ — — % $ 4,134 2.41 %
At December 31, 2021
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
$ 4,933 3.79 % $ 14,366 3.26 % $ 68,025 3.60 % $ 452,599 3.23 % $ 539,923 3.28 %
Corporate debt securities
— — % 6,563 3.60 % 13,053 5.03 % — — % 19,616 4.55 %
U.S. 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 %
HTM
Municipal bonds $ 1,684 2.86 % $ 2,621 2.12 % $ — — % $ — — % $ 4,305 2.42 %
The weighted-average yield is computed using the contractual coupon of each security weighted based on the fair value of each security and does not include adjustments to a tax equivalent basis. 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, 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
Proceeds $ 962
Gross gains 71
Gross losses —
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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, 2022 At December 31, 2021
Washington, Oregon and California State to secure public deposits $ 201,444 $ 206,153
Other securities pledged 4,972 5,258
Total securities pledged as collateral $ 206,416 $ 211,411
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 $ 2.7 million and $ 2.4 million for the quarters ended March 31, 2022 and 2021, respectively.
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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, 2022 At December 31, 2021
CRE
Non-owner occupied CRE $ 699,277 $ 705,359
Multifamily 2,729,775 2,415,359
Construction/land development 528,134 496,144
Total 3,957,186 3,616,862
Commercial and industrial loans
Owner occupied CRE 464,356 457,706
Commercial business 387,938 401,872
Total
852,294 859,578
Consumer loans
Single family (1)
759,286 763,331
Home equity and other 295,724 303,078
Total 1,055,010 1,066,409
Total LHFI 5,864,490 5,542,849
Allowance for credit losses ("ACL") ( 37,944 ) ( 47,123 )
Total LHFI less ACL
$ 5,826,546 $ 5,495,726
(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 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
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 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.
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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 $ 2.6 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 $ 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
Beginning balance
$ 47,123 $ 64,294
Provision for credit losses ( 9,223 ) ( 371 )
Net (charge-offs) recoveries 44 124
Ending balance $ 37,944 $ 64,047
Allowance for unfunded commitments:
Beginning balance $ 2,404 $ 1,588
Provision for credit losses 223 371
Ending balance $ 2,627 $ 1,959
Provision for credit losses:
Allowance for credit losses - loans $ ( 9,223 ) $ ( 371 )
Allowance for unfunded commitments 223 371
Total $ ( 9,000 ) $ —
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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
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
Quarter Ended March 31, 2021
(in thousands) Beginning balance Charge-offs Recoveries Provision
Ending balance
CRE
Non-owner occupied CRE $ 8,845 $ — $ — $ 373 $ 9,218
Multifamily 6,072 — — 897 6,969
Construction/land development
Multifamily construction 4,903 — — ( 967 ) 3,936
CRE construction 1,670 — — 238 1,908
Single family construction 5,130 — — ( 123 ) 5,007
Single family construction to permanent 1,315 — — ( 191 ) 1,124
Total 27,935 — — 227 28,162
Commercial and industrial loans
Owner occupied CRE 4,994 — — 272 5,266
Commercial business 17,043 — 74 ( 12 ) 17,105
Total 22,037 — 74 260 22,371
Consumer loans
Single family 6,906 ( 70 ) 120 ( 221 ) 6,735
Home equity and other 7,416 ( 56 ) 56 ( 637 ) 6,779
Total 14,322 ( 126 ) 176 ( 858 ) 13,514
Total ACL $ 64,294 $ ( 126 ) $ 250 $ ( 371 ) $ 64,047
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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, 2022
(in thousands) 2022 2021 2020 2019 2018 2017 and prior Revolving Revolving-term Total
COMMERCIAL PORTFOLIO
Non-owner occupied CRE
Pass $ 23,614 $ 68,572 $ 50,276 $ 158,484 $ 121,836 $ 274,775 $ 853 $ 867 $ 699,277
Special Mention — — — — — — — — —
Substandard — — — — — — — — —
Total 23,614 68,572 50,276 158,484 121,836 274,775 853 867 699,277
Multifamily
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
Pass — 12,163 24,664 — — — — — 36,827
Special Mention — — — — — — — — —
Substandard — — — — — — — — —
Total — 12,163 24,664 — — — — — 36,827
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
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
Single family construction to permanent
Current
6,613 106,419 29,026 10,575 1,775 — — — 154,408
Past due:
30-59 days
— — — — — — — — —
60-89 days
— — — — — — — — —
90+ days
— — — — — — — — —
Total 6,613 106,419 29,026 10,575 1,775 — — — 154,408
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
Substandard — — — — 1,111 11,572 — 58 12,741
Total 20,055 70,792 47,176 75,511 49,952 198,875 248 1,747 464,356
Commercial business
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
Substandard — 8,214 3,253 2,414 3,392 1,827 4,616 13 23,729
Total 32,359 66,798 52,225 46,437 27,519 34,899 125,345 2,356 387,938
Total commercial portfolio
$ 479,156 $ 1,790,259 $ 791,434 $ 557,066 $ 263,109 $ 689,035 $ 234,451 $ 4,970 $ 4,809,480
17
The following table presents a vintage analysis of the consumer portfolio segment by loan sub-class and delinquency status:
At March 31, 2022
(in thousands) 2022 2021 2020 2019 2018 2017 and prior Revolving Revolving-term Total
CONSUMER PORTFOLIO
Single family
Current
$ 44,563 $ 178,656 $ 152,443 $ 49,114 $ 56,757 $ 275,042 $ — $ — $ 756,575
Past due:
30-59 days
— — — — — 872 — — 872
60-89 days
— — — — — 270 — — 270
90+ days
— — — 994 452 123 — — 1,569
Total (1)
44,563 178,656 152,443 50,108 57,209 276,307 — — 759,286
Home equity and other
Current
797 1,585 334 294 197 2,407 284,426 4,755 294,795
Past due:
30-59 days
— 3 — — — — 57 — 60
60-89 days
— 8 — — 15 — 7 — 30
90+ days
— — — — — 98 679 62 839
Total 797 1,596 334 294 212 2,505 285,169 4,817 295,724
Total consumer portfolio $ 45,360 $ 180,252 $ 152,777 $ 50,402 $ 57,421 $ 278,812 $ 285,169 $ 4,817 $ 1,055,010
Total LHFI $ 524,516 $ 1,970,511 $ 944,211 $ 607,468 $ 320,530 $ 967,847 $ 519,620 $ 9,787 $ 5,864,490
(1) Includes $ 7.0 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.
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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, 2021
(in thousands) 2021 2020 2019 2018 2017 2016 and prior Revolving Revolving-term Total
COMMERCIAL PORTFOLIO
Non-owner occupied CRE
Pass $ 68,647 $ 50,571 $ 169,711 $ 130,877 $ 100,674 $ 183,024 $ 963 $ 892 $ 705,359
Special Mention — — — — — — — — —
Substandard — — — — — — — — —
Total 68,647 50,571 169,711 130,877 100,674 183,024 963 892 705,359
Multifamily
Pass 1,315,204 561,666 286,826 60,372 26,065 165,225 1 — 2,415,359
Special Mention — — — — — — — — —
Substandard — — — — — — — — —
Total 1,315,204 561,666 286,826 60,372 26,065 165,225 1 — 2,415,359
Multifamily construction
Pass 7,825 22,863 7,173 — — — — — 37,861
Special Mention — — — — — — — — —
Substandard — — — — — — — — —
Total 7,825 22,863 7,173 — — — — — 37,861
CRE construction
Pass 7,694 3,960 — 1,962 — 556 — — 14,172
Special Mention — — — — — — — — —
Substandard — — — — — — — — —
Total 7,694 3,960 — 1,962 — 556 — — 14,172
Single family construction
Pass 146,595 35,640 14,509 — — 77 99,206 — 296,027
Special Mention — — — — — — — — —
Substandard — — — — — — — — —
Total 146,595 35,640 14,509 — — 77 99,206 — 296,027
Single family construction to permanent
Current 90,311 42,636 13,362 1,775 — — — — 148,084
Past due:
30-59 days — — — — — — — — —
60-89 days — — — — — — — — —
90+ days — — — — — — — — —
Total 90,311 42,636 13,362 1,775 — — — — 148,084
Owner occupied CRE
Pass 70,902 47,536 57,423 47,716 67,042 106,659 798 2,839 400,915
Special Mention — — — 2,196 6,019 145 — 60 8,420
Substandard — — 18,665 1,111 10,151 18,444 — — 48,371
Total 70,902 47,536 76,088 51,023 83,212 125,248 798 2,899 457,706
Commercial business
Pass 88,139 51,453 44,882 24,711 11,859 21,258 112,759 2,104 357,165
Special Mention — — 7,396 — 4,396 — 5,613 134 17,539
Substandard 9,716 3,399 1,667 5,928 1,096 1,328 3,932 102 27,168
Total 97,855 54,852 53,945 30,639 17,351 22,586 122,304 2,340 401,872
Total commercial portfolio $ 1,805,033 $ 819,724 $ 621,614 $ 276,648 $ 227,302 $ 496,716 $ 223,272 $ 6,131 $ 4,476,440
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The following table presents a vintage analysis of the consumer portfolio segment by loan sub-class and delinquency status:
At December 31, 2021
(in thousands) 2021 2020 2019 2018 2017 2016 and prior Revolving Revolving-term Total
CONSUMER PORTFOLIO
Single family
Current
$ 176,110 $ 156,360 $ 62,369 $ 66,063 $ 95,988 $ 204,229 $ — $ — $ 761,119
Past due:
30-59 days
— — 291 — — — — — 291
60-89 days
— — — — 314 471 — — 785
90+ days
— — 561 452 — 123 — — 1,136
Total (1)
176,110 156,360 63,221 66,515 96,302 204,823 — — 763,331
Home equity and other
Current
2,005 474 393 532 516 2,609 290,512 5,273 302,314
Past due:
30-59 days
— 3 — — — 94 40 — 137
60-89 days
— — — — — — 12 62 74
90+ days
3 — — — — 6 544 — 553
Total 2,008 477 393 532 516 2,709 291,108 5,335 303,078
Total consumer portfolio $ 178,118 $ 156,837 $ 63,614 $ 67,047 $ 96,818 $ 207,532 $ 291,108 $ 5,335 $ 1,066,409
Total LHFI $ 1,983,151 $ 976,561 $ 685,228 $ 343,695 $ 324,120 $ 704,248 $ 514,380 $ 11,466 $ 5,542,849
(1) Includes $ 7.3 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.
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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, 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 $ — $ 2,428 $ — $ 3,539
Commercial business
380 16 562 286 1,244
Total
1,491 16 2,990 286 4,783
Consumer loans
Single family
— 2,049 — — 2,049
Home equity loans and other
— 345 — — 345
Total
— 2,394 — — 2,394
Total collateral-dependent loans $ 1,491 $ 2,410 $ 2,990 $ 286 $ 7,177
At December 31, 2021
(in thousands) Land 1-4 Family Non-residential real estate Other non-real estate Total
Commercial and industrial loans
Owner occupied CRE $ 1,111 $ — $ 2,456 $ — $ 3,567
Commercial business
362 27 562 286 1,237
Total
1,473 27 3,018 286 4,804
Consumer loans
Single family
— 1,598 — — 1,598
Home equity loans and other
— 19 — — 19
Total
— 1,617 — — 1,617
Total collateral-dependent loans $ 1,473 $ 1,644 $ 3,018 $ 286 $ 6,421
Nonaccrual and Past Due Loans
The following table presents nonaccrual status for loans:
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 CRE $ 3,539 $ 3,539 $ 3,568 $ 3,568
Commercial business 1,244 3,996 1,210 5,023
Total
4,783 7,535 4,778 8,591
Consumer loans
Single family
2,325 2,918 1,324 2,802
Home equity and other 52 1,393 23 808
Total 2,377 4,311 1,347 3,610
Total nonaccrual loans $ 7,160 $ 11,846 $ 6,125 $ 12,201
21
The following tables present an aging analysis of past due loans by loan portfolio segment and loan sub-class:
At March 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 (3)
Current Total
loans
CRE
Non-owner occupied CRE $ — $ — $ — $ — $ — $ 699,277 $ 699,277
Multifamily — — — — — 2,729,775 2,729,775
Construction/land development
Multifamily construction — — — — — 36,827 36,827
CRE construction — — — — — 18,099 18,099
Single family construction — — — — — 318,800 318,800
Single family construction to permanent — — — — — 154,408 154,408
Total
— — — — — 3,957,186 3,957,186
Commercial and industrial loans
Owner occupied CRE — — — 3,539 3,539 460,817 464,356
Commercial business — — — 3,996 3,996 383,942 387,938
Total
— — — 7,535 7,535 844,759 852,294
Consumer loans
Single family
3,753 1,821 6,903 (2) 2,918 15,395 743,891 759,286 (1)
Home equity and other 61 31 — 1,393 1,485 294,239 295,724
Total
3,814 1,852 6,903 4,311 16,880 1,038,130 1,055,010
Total loans $ 3,814 $ 1,852 $ 6,903 $ 11,846 $ 24,415 $ 5,840,075 $ 5,864,490
% 0.07 % 0.03 % 0.12 % 0.20 % 0.42 % 99.58 % 100.00 %
22
At December 31, 2021
Past Due and Still Accruing
(in thousands) 30-59 days 60-89 days 90 days or
more Nonaccrual Total past
due and nonaccrual (3)
Current Total
loans
CRE
Non-owner occupied CRE $ — $ — $ — $ — $ — $ 705,359 $ 705,359
Multifamily — — — — — 2,415,359 2,415,359
Construction/land development
Multifamily construction — — — — — 37,861 37,861
CRE construction — — — — — 14,172 14,172
Single family construction — — — — — 296,027 296,027
Single family construction to permanent — — — — — 148,084 148,084
Total
— — — — — 3,616,862 3,616,862
Commercial and industrial loans
Owner occupied CRE — — — 3,568 3,568 454,138 457,706
Commercial business 198 — — 5,023 5,221 396,651 401,872
Total
198 — — 8,591 8,789 850,789 859,578
Consumer loans
Single family
892 820 6,717 (2) 2,802 11,231 752,100 763,331 (1)
Home equity and other 118 74 — 808 1,000 302,078 303,078
Total
1,010 894 6,717 3,610 12,231 1,054,178 1,066,409
Total loans $ 1,208 $ 894 $ 6,717 $ 12,201 $ 21,020 $ 5,521,829 $ 5,542,849
% 0.02 % 0.02 % 0.12 % 0.22 % 0.38 % 99.62 % 100.00 %
(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 $ 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 %
(in thousands) Term Extension
Loan Type Amortized Cost Basis at March 31, 2022 % of Total Class of Financing Receivable
Single family $ 37 — %
23
(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
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.
24
NOTE 4– DEPOSITS:
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
Noninterest-bearing demand deposits $ 1,654,229 — % $ 1,617,069 — %
Interest-bearing demand deposits 591,148 0.10 % 513,810 0.10 %
Savings
309,462 0.06 % 302,389 0.06 %
Money market
2,800,215 0.18 % 2,806,313 0.15 %
Certificates of deposit 915,481 0.45 % 906,928 0.51 %
Total $ 6,270,535 0.16 % $ 6,146,509 0.15 %
Certificates of deposit outstanding mature as follows:
(in thousands) March 31, 2022
Within one year $ 761,588
One to two years 133,251
Two to three years 16,491
Three to four years 2,756
Four to five years 1,395
Total $ 915,481
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.
25
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.
26
NOTE 6– 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, 2022
Notional amount Fair value derivatives
(in thousands) Asset Liability
Forward sale commitments $ 670,018 $ 5,079 $ ( 3,528 )
Interest rate lock commitments 100,992 683 ( 605 )
Interest rate swaps 276,561 5,619 ( 5,620 )
Futures 93,200 97 —
Options 30,000 389 —
Total derivatives before netting $ 1,170,771 11,867 ( 9,753 )
Netting adjustment/Cash collateral (1)
( 9,096 ) 3,072
Carrying value on consolidated balance sheet $ 2,771 $ ( 6,681 )
At December 31, 2021
Notional amount Fair value derivatives
(in thousands) Asset Liability
Forward sale commitments $ 793,208 $ 723 $ ( 640 )
Interest rate lock commitments 115,025 2,487 ( 3 )
Interest rate swaps 287,352 4,381 ( 4,541 )
Futures 139,900 334 —
Total derivatives before netting $ 1,335,485 7,925 ( 5,184 )
Netting adjustment/Cash collateral (1)
1,355 3,921
Carrying value on consolidated balance sheet $ 9,280 $ ( 1,263 )
(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 March 31, 2022
Derivative assets $ 11,867 $ ( 9,096 ) $ 2,771
Derivative liabilities ( 9,753 ) 3,072 ( 6,681 )
At December 31, 2021
Derivative assets $ 7,925 $ 1,355 $ 9,280
Derivative liabilities ( 5,184 ) 3,921 ( 1,263 )
(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.
27
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 is included in other assets. Payables related to cash collateral that has been received from counterparties is 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, 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 March 31,
(in thousands) 2022 2021
Recognized in noninterest income:
Net gain (loss) on loan origination and sale activities (1)
$ 4,613 $ 3,858
Loan servicing income (loss) (2)
( 9,439 ) ( 12,591 )
Other (3)
159 299
(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, 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 March 31, 2022 At December 31, 2021
Single family $ 48,994 $ 128,041
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 March 31,
(in thousands) 2022 2021
Single family $ 323,070 $ 573,040
CRE, multifamily and SBA 49,137 257,717
Total $ 372,207 $ 830,757
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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) 2022 2021
Single family $ 6,169 $ 26,187
CRE, multifamily and SBA 2,105 7,272
Total $ 8,274 $ 33,459
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, 2022 At December 31, 2021
Single family $ 5,545,145 $ 5,539,180
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:
Quarter Ended March 31,
(in thousands) 2022 2021
Balance, beginning of period $ 1,312 $ 2,122
Additions, net of adjustments (1)
358 ( 20 )
Realized (losses) recoveries, net (2)
( 32 ) ( 161 )
Balance, end of period $ 1,638 $ 1,941
(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 $ 2.7 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 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.
29
Revenue from mortgage servicing, including the effects of derivative risk management instruments, consisted of the following:
Quarter Ended March 31,
(in thousands) 2022 2021
Servicing income, net:
Servicing fees and other $ 8,321 $ 8,913
Amortization of single family MSRs (1)
( 3,425 ) ( 5,693 )
Amortization of multifamily and SBA MSRs ( 1,712 ) ( 1,344 )
Total
3,184 1,876
Risk management, single family MSRs:
Changes in fair value of MSRs due to assumptions (2)
10,303 11,463
Net gain (loss) from economic hedging ( 10,183 ) ( 12,591 )
Total
120 ( 1,128 )
Loan servicing income (loss) $ 3,304 $ 748
(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) 2022 2021
Beginning balance $ 61,584 $ 49,966
Additions and amortization:
Originations
3,916 6,616
Amortization (1)
( 3,425 ) ( 5,693 )
Net additions and amortization
491 923
Changes in fair value assumptions (2)
10,303 11,463
Ending balance $ 72,378 $ 62,352
(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)
2022 2021
Constant prepayment rate ("CPR") (2)
9.38 % 8.37 %
Discount rate 8.34 % 8.37 %
(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, 2022 At December 31, 2021
Range of Inputs Average (1)
Range of Inputs Average (1)
CPRs 7.38 % - 16.66 %
9.42 % 7.90 % - 17.35 %
10.35 %
Discount Rates 8.10 % - 15.18 %
9.05 % 6.94 % - 13.96 %
7.97 %
(1) Weighted averages of all the inputs within the range.
30
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, 2022
Fair value of single family MSR $ 72,378
Expected weighted-average life (in years) 7.14
CPR
Impact on fair value of 25 basis points adverse change in interest rates $ ( 2,208 )
Impact on fair value of 50 basis points adverse change in interest rates $ ( 4,909 )
Discount rate
Impact on fair value of 100 basis points increase $ ( 3,217 )
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:
Quarter Ended March 31,
(in thousands) 2022 2021
Beginning balance $ 39,415 $ 35,774
Originations 1,576 5,196
Amortization ( 1,712 ) ( 1,344 )
Ending balance $ 39,279 $ 39,626
NOTE 8– 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, 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. 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 $ 5.5 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.
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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:
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.
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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 7 , 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.
Interest rate lock commitments 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.
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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, 2022
(in thousands) Fair Value Level 1 Level 2 Level 3
Assets:
Trading securities - U.S. Treasury securities $ 19,313 $ 19,313 $ — $ —
Investment securities AFS
Mortgage backed securities:
Residential 29,187 — 26,954 2,233
Commercial 66,392 — 66,392 —
Collateralized mortgage obligations:
Residential 266,492 — 266,492 —
Commercial 134,879 — 134,879 —
Municipal bonds 515,139 — 515,139 —
Corporate debt securities 26,373 — 26,299 74
U.S. Treasury securities 21,722 — 21,722 —
Single family LHFS 48,994 — 48,994 —
Single family LHFI 6,981 — — 6,981
Single family mortgage servicing rights 72,378 — — 72,378
Derivatives
Futures 97 97 — —
Forward sale commitments 5,079 — 5,079 —
Options 389 389 — —
Interest rate lock commitments 683 — — 683
Interest rate swaps 5,619 — 5,619 —
Total assets $ 1,219,717 $ 19,799 $ 1,117,569 $ 82,349
Liabilities:
Derivatives
Forward sale commitments 3,528 — 3,528 —
Interest rate lock commitments 605 — — 605
Interest rate swaps 5,620 — 5,620 —
Total liabilities $ 9,753 $ — $ 9,148 $ 605
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At December 31, 2021
(in thousands) Fair Value Level 1 Level 2 Level 3
Assets:
Investment securities AFS
Mortgage backed securities:
Residential
$ 32,963 $ — $ 30,556 $ 2,407
Commercial
62,792 — 62,792 —
Collateralized mortgage obligations:
Residential 187,394 — 187,394 —
Commercial 136,659 — 136,659 —
Municipal bonds 539,923 — 539,923 —
Corporate debt securities 19,616 — 19,541 75
U.S. Treasury securities 23,175 — 23,175 —
Single family LHFS 128,041 — 128,041 —
Single family LHFI 7,287 — — 7,287
Single family mortgage servicing rights 61,584 — — 61,584
Derivatives
Futures 334 334 — —
Forward sale commitments 723 — 723 —
Interest rate lock commitments 2,487 — — 2,487
Interest rate swaps 4,381 — 4,381 —
Total assets $ 1,207,359 $ 334 $ 1,133,185 $ 73,840
Liabilities:
Derivatives
Forward sale commitments $ 640 $ — $ 640 $ —
Interest rate lock commitments 3 — — 3
Interest rate swaps 4,541 — 4,541 —
Total liabilities $ 5,184 $ — $ 5,181 $ 3
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 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). 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.
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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 $ 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:
(dollars in thousands) Fair Value Valuation
Technique Significant Unobservable
Input Low High Weighted Average
March 31, 2022
Investment securities AFS $ 2,307 Income approach Implied spread to benchmark interest rate curve
2.00 % 2.00 % 2.00 %
Single family LHFI 6,981 Income approach Implied spread to benchmark interest rate curve 2.49 % 4.76 % 3.14 %
Interest rate lock commitments, net 78 Income approach Fall-out factor 0.20 % 29.60 % 11.71 %
Value of servicing 0.45 % 1.39 % 1.06 %
December 31, 2021
Investment securities AFS $ 2,482 Income approach Implied spread to benchmark interest rate curve
2.00 % 2.00 % 2.00 %
Single family LHFI 7,287 Income approach Implied spread to benchmark interest rate curve 2.39 % 7.96 % 3.56 %
Interest rate lock commitments, net 2,484 Income approach Fall-out factor 0.15 % 21.93 % 8.44 %
Value of servicing 0.35 % 1.46 % 1.15 %
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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:
(in thousands) Beginning balance Additions Transfers Payoffs/Sales Change in mark to market (1)
Ending balance
Quarter Ended March 31, 2022
Investment securities AFS $ 2,482 $ — $ — $ ( 48 ) $ ( 127 ) $ 2,307
Single family LHFI 7,287 — — — ( 306 ) 6,981
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 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
Beginning balance, net $ 2,484 $ 17,392
Total realized/unrealized gains (losses) ( 2,177 ) ( 3,469 )
Settlements ( 229 ) ( 7,435 )
Ending balance, net $ 78 $ 6,488
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.
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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
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, 2022
(in thousands) Carrying
Value Fair
Value Level 1 Level 2 Level 3
Assets:
Cash and cash equivalents $ 73,862 $ 73,862 $ 73,862 $ — $ —
Investment securities HTM 4,143 4,134 — 4,134 —
LHFI 5,819,565 5,712,390 — — 5,712,390
LHFS – multifamily and other
10,156 10,248 — 10,248 —
Mortgage servicing rights – multifamily and SBA 39,279 43,453 — — 43,453
Federal Home Loan Bank stock 19,596 19,596 — 19,596 —
Other assets - GNMA EBO loans 9,940 9,940 — — 9,940
Liabilities:
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 —
At December 31, 2021
(in thousands) Carrying
Value Fair
Value Level 1 Level 2 Level 3
Assets:
Cash and cash equivalents $ 65,214 $ 65,214 $ 65,214 $ — $ —
Investment securities HTM 4,169 4,305 — 4,305 —
LHFI 5,488,439 5,588,719 — — 5,588,719
LHFS – multifamily and other 48,090 48,425 — 48,425 —
Mortgage servicing rights – multifamily and SBA 39,415 43,199 — — 43,199
Federal Home Loan Bank stock 10,361 10,361 — 10,361 —
Other assets-GNMA EBO loans 12,342 12,342 — — 12,342
Liabilities:
Certificates of deposit $ 906,928 $ 906,064 $ — $ 906,064 $ —
Borrowings 41,000 41,000 — 41,000 —
Long-term debt 126,026 116,845 — 116,845 —
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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 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.
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Text extracted from the filing as submitted to EDGAR. Formatting, tables and exhibits are simplified for reading; the original document is authoritative for anything you rely on.