What changed in this filing

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Item 1. Financial Statements

2022-08-05 compared with 2022-05-06 · 229 added, 132 removed, 1030 unchanged (26% of the section changed)

3 unchanged sentences

CONSOLIDATED BALANCE SHEETS

March 31, 2022 December 31, 2021

June 30, 2022 December 31, 2021

(in thousands, except share data) (Unaudited)

31 unchanged sentences

CONSOLIDATED INCOME STATEMENTS

Quarter Ended March 31,

Quarter Ended June 30, Six Months Ended June 30,

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

9 unchanged sentences

Total interest expense

7,635 4,275 12,117 9,449

Net interest income

30 unchanged sentences

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

Quarter Ended March 31,

Quarter Ended June 30, Six Months Ended June 30,

(in thousands) 2022 2021 2022 2021

8 unchanged sentences

— ( 13 ) ( 17 ) ( 13 )

( 10,211 ) 2,137 ( 26,400 ) ( 1,996 )

Other comprehensive income (loss) ( 32,334 ) 8,037 ( 84,403 ) ( 7,511 )

9 unchanged sentences

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

For the quarter ended June 30, 2021

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

Net income — — 29,157 — 29,157

7 unchanged sentences

( 573,963 ) ( 10,218 ) ( 15,380 ) — ( 25,598 )

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

For the six months ended June 30, 2021

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

Net income — — 58,820 — 58,820

Share-based compensation expense — 1,665 — — 1,665

Common stock issued - Option exercise;

stock grants 193,365 2,044 — — 2,044

Other comprehensive income — — — ( 7,511 ) ( 7,511 )

Dividends declared on common stock ($ 0.50 per share)

( 10,912 ) ( 10,912 )

Common stock repurchased

( 1,198,610 ) ( 21,440 ) ( 31,685 ) — ( 53,125 )

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

For the quarter ended June 30, 2022

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

For the quarter ended March 31, 2022

Net income — — 17,721 — 17,721

Share-based compensation expense — 1,221 — — 1,221

Common stock issued - Stock grants 21,378 — — — —

Other comprehensive income (loss) — — — ( 32,334 ) ( 32,334 )

Dividends declared on common stock ($ 0.35 per share)

— — ( 6,633 ) — ( 6,633 )

Common stock repurchased

( 9,125 ) ( 163 ) ( 276 ) — ( 439 )

Balance, June 30, 2022 18,712,789 $ 224,776 $ 419,254 $ ( 63,263 ) $ 580,767

For the six months ended June 30, 2022

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

1 unchanged sentence

Share-based compensation expense

— 2,297 — — 2,297

Common stock issued - Stock grants 126,218 — — — —

4 unchanged sentences

( 1,498,765 ) ( 27,377 ) ( 48,964 ) — ( 76,341 )

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

Balance, June 30, 2022 18,712,789 $ 224,776 $ 419,254 $ ( 63,263 ) $ 580,767

See accompanying notes to consolidated financial statements

2 unchanged sentences

CONSOLIDATED STATEMENTS OF CASH FLOWS

Quarter Ended March 31,

Six Months Ended June 30,

(in thousands) 2022 2021

1 unchanged sentence

Net income $ 37,672 $ 58,820

Adjustments to reconcile net income to net cash provided by (used in) operating activities:

Adjustments to reconcile net income to net cash provided by operating activities:

Provision for credit losses ( 9,000 ) ( 4,000 )

8 unchanged sentences

Share-based compensation expense 2,297 1,665

Lease impairment costs — 194

Deferred income tax expense (benefit) 6,991 5,353

9 unchanged sentences

Increase (decrease) in accounts payable and other liabilities ( 5,882 ) ( 4,227 )

Net cash provided by (used in) operating activities 123,889 ( 2,181 )

Net cash provided by operating activities 145,131 55,175

CASH FLOWS FROM INVESTING ACTIVITIES:

11 unchanged sentences

Purchases of Federal Home Loan Bank stock ( 88,314 ) ( 76,726 )

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

Quarter Ended March 31,

Net cash provided by (used in) investing activities ( 1,574,720 ) 44,412

Six Months Ended June 30,

(in thousands) 2022 2021

2 unchanged sentences

Changes in short-term borrowings, net 1,417,000 ( 322,800 )

Proceeds from other long-term borrowings — 50,000

Proceeds from debt issuance, net 98,036 —

3 unchanged sentences

Dividends paid on common stock ( 13,797 ) ( 10,912 )

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

Net cash provided by (used in) financing activities 1,439,652 ( 69,165 )

Net increase in cash and cash equivalents 10,063 30,422

7 unchanged sentences

Increase in lease assets and lease liabilities 3,858 467

LHFI foreclosed and transferred to OREO 1,018 —

Loans transferred from LHFI to LHFS, net 7,834 128,824

20 unchanged sentences

Recent Accounting Developments

In March 2020, the FASB issued ASU No.

In March 2020, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No.

2020-04, Reference Rate Reform (Topic 848).

This ASU provides optional expedients and exceptions for contracts, hedging relationships, and other transactions that reference LIBOR 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 London Interbank Offered Rate ("LIBOR") rates expected to be discontinued because of reference rate reform.

In January 2021, the FASB issued ASU 2021-01, "Reference Rate Reform (Topic 848)," which clarifies certain optional expedients and exceptions in Topic 848 for contract modifications and hedge accounting applied to derivatives that are affected by the transition to alternative rates.

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.

The adoption of these ASUs is not expected to have a material impact on the Company’s financial position or results of operations.

In March 2022, the FASB issued ASU No.

2022-02, Financial Instruments-Credit Losses (Topic 326).

The amendments in this ASU eliminate the accounting guidance for TDRs by creditors, while enhancing disclosure requirements for certain loan refinancing and restructurings by creditors when a borrower experiences financial difficulty.

The amendments in this ASU eliminate the accounting guidance for Troubled Debt Restructuring ("TDRs") by creditors, while enhancing disclosure requirements for certain loan refinancing and restructurings by creditors when a borrower experiences financial difficulty.

In addition, the amendments require that an entity disclose current period gross charge-offs by year of origination in a vintage table.

2 unchanged sentences

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.

As the change is disclosure only in nature, 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 March 31, 2022

At June 30, 2022

(in thousands) Amortized

22 unchanged sentences

$ 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.

At June 30, 2022, the Company held $ 33.1 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 gains, net, on trading securities, which are included in loan servicing income, were $ 45 thousand at June 30, 2022.

For the three and six months ended June 30, 2022, trading losses of $ 3.1 million and $ 3.9 million, respectively, were recorded in servicing income on the consolidated income statements.

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

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.

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 June 30, 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 March 31, 2022

At June 30, 2022

Less than 12 months 12 months or more Total

22 unchanged sentences

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.

The Company has not identified any expected credit losses on its debt securities as of June 30, 2022 or December 31, 2021.

In addition, as of June 30, 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 March 31, 2022

At June 30, 2022

Within one year After one year

36 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 March 31, 2022 and December 31, 2021 was 1.88 % and 1.82 %, respectively.

The weighted average yield of MBS and CMOs as of June 30, 2022 and December 31, 2021 was 2.30 % and 1.82 %, respectively.

Sales of AFS investment securities were as follows:

Quarter Ended March 31,

Quarter Ended June 30, Six Months Ended June 30,

(in thousands) 2022 2021 2022 2021

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 March 31, 2022 At December 31, 2021

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

(in thousands) At June 30, 2022 At December 31, 2021

Washington, Oregon and California to secure public deposits $ 195,497 $ 206,153

Other securities pledged 4,787 5,258

1 unchanged sentence

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.

Tax-exempt interest income on investment securities was $ 3.1 million and $ 2.5 million for the quarters ended June 30, 2022 and 2021, respectively, and $ 5.8 million and $ 5.0 million for the six months ended June 30, 2022 and 2021, respectively.

NOTE 3 - LOANS AND CREDIT QUALITY:

3 unchanged sentences

LHFI consists of the following:

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

(in thousands) At June 30, 2022 At December 31, 2021

Non-owner occupied CRE $ 711,077 $ 705,359

8 unchanged sentences

Single family 822,389 763,331

759,286 763,331

Home equity and other 316,655 303,078

Total 1,055,010 1,066,409

1,139,044 1,066,409

Total LHFI 6,759,737 5,542,849

2 unchanged sentences

$ 6,722,382 $ 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").

(1) Includes $ 6.5 million and $ 7.3 million at June 30, 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 $ 3.3 billion and $ 2.8 billion at June 30, 2022 and December 31, 2021, respectively, were pledged to secure borrowings from the Federal Home Loan Bank ("FHLB") and loans totaling $ 466 million and $ 419 million at June 30, 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.

At June 30, 2022 and December 31, 2021, multifamily loans in the state of California represented 36 % 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 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.

During the second 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 second 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 no COVID-19 management overlay.

As of June 30, 2022, the Bank expects that the markets in which it operates will have declining collateral values and a stable 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 $ 2.6 million and $ 2.4 million at March 31, 2022 and December 31, 2021, respectively.

The allowance for unfunded commitments was $ 2.8 million and $ 2.4 million at June 30, 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.

Accrued interest on LHFI was $ 20.6 million and $ 17.8 million at June 30, 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,

Quarter Ended June 30, Six Months Ended June 30,

(in thousands) 2022 2021 2022 2021

13 unchanged sentences

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

Quarter Ended March 31, 2022

Quarter Ended June 30, 2022

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

16 unchanged sentences

Total ACL $ 37,944 $ ( 682 ) $ 309 $ ( 216 ) $ 37,355

Quarter Ended March 31, 2021

Quarter Ended June 30, 2021

(in thousands) Beginning balance Charge-offs Recoveries Provision

17 unchanged sentences

Total ACL $ 64,047 $ ( 79 ) $ 74 $ ( 4,145 ) $ 59,897

Six Months Ended June 30, 2022

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

Non-owner occupied CRE $ 7,509 $ — $ — $ ( 5,329 ) $ 2,180

Multifamily 5,854 — — 4,220 10,074

Construction/land development

Multifamily construction 507 — — 59 566

CRE construction 150 — — 35 185

Single family construction 6,411 — — 4,276 10,687

Single family construction to permanent 1,055 — — 104 1,159

Total 21,486 — — 3,365 24,851

Commercial and industrial loans

Owner occupied CRE 5,006 — — ( 3,914 ) 1,092

Commercial business 12,273 ( 660 ) 69 ( 8,104 ) 3,578

Total 17,279 ( 660 ) 69 ( 12,018 ) 4,670

Consumer loans

Single family 4,394 — 140 ( 507 ) 4,027

Home equity and other 3,964 ( 66 ) 188 ( 279 ) 3,807

Total 8,358 ( 66 ) 328 ( 786 ) 7,834

Total ACL $ 47,123 $ ( 726 ) $ 397 $ ( 9,439 ) $ 37,355

Six Months Ended June 30, 2021

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

Non-owner occupied CRE $ 8,845 $ — $ — $ 232 $ 9,077

Multifamily 6,072 — — 1,173 7,245

Construction/land development

Multifamily construction 4,903 — — ( 4,403 ) 500

CRE construction 1,670 — — 352 2,022

Single family construction 5,130 — — 523 5,653

Single family construction to permanent 1,315 — — ( 268 ) 1,047

Total 27,935 — — ( 2,391 ) 25,544

Commercial and industrial loans

Owner occupied CRE 4,994 — — 524 5,518

Commercial business 17,043 — 98 ( 1,267 ) 15,874

Total 22,037 — 98 ( 743 ) 21,392

Consumer loans

Single family 6,906 ( 114 ) 122 249 7,163

Home equity and other 7,416 ( 91 ) 104 ( 1,631 ) 5,798

Total 14,322 ( 205 ) 226 ( 1,382 ) 12,961

Total ACL $ 64,294 $ ( 205 ) $ 324 $ ( 4,516 ) $ 59,897

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

At June 30, 2022

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

43 unchanged sentences

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

At March 31, 2022

At June 30, 2022

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

5 unchanged sentences

— — — 432 452 830 — — 1,714

44,563 178,656 152,443 50,108 57,209 276,307 — — 759,286

Total 123,677 194,198 149,161 48,176 48,974 258,203 — — 822,389

Home equity and other

5 unchanged sentences

Total consumer portfolio (1)

$ 124,868 $ 195,515 $ 149,416 $ 48,414 $ 49,149 $ 260,477 $ 306,748 $ 4,457 $ 1,139,044

Total LHFI $ 1,573,916 $ 1,932,738 $ 901,603 $ 567,734 $ 299,005 $ 904,702 $ 571,105 $ 8,934 $ 6,759,737

54 unchanged sentences

— — 561 452 — 123 — — 1,136

176,110 156,360 63,221 66,515 96,302 204,823 — — 763,331

Total 176,110 156,360 63,221 66,515 96,302 204,823 — — 763,331

Home equity and other

5 unchanged sentences

Total consumer portfolio (1)

$ 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

2 unchanged sentences

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

At March 31, 2022

At June 30, 2022

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

3 unchanged sentences

362 — 562 4 928

1,491 16 2,990 286 4,783

Consumer loans

Single family

— 2,049 — — 2,049

Home equity loans and other

— 345 — — 345

— 2,394 — — 2,394

Total collateral-dependent loans $ 1,473 $ — $ 1,972 $ 4 $ 3,449

14 unchanged sentences

The following table presents nonaccrual status for loans:

At March 31, 2022 At December 31, 2021

At June 30, 2022 At December 31, 2021

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

10 unchanged sentences

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

At March 31, 2022

At June 30, 2022

Past Due and Still Accruing

47 unchanged sentences

% 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.

(1) Includes $ 6.5 million and $ 7.3 million of loans at June 30, 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.

(3) Includes loans whose repayments are insured by the FHA or guaranteed by the VA or SBA of $ 10.2 million and $ 8.4 million at June 30, 2022 and December 31, 2021, respectively.

Loan Modifications

1 unchanged sentence

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:

The granting of modifications in the quarter and six months ended June 30, 2022 did not have a material impact on the ACL.

The following tables provide information related to loans modified during the quarter and six months ended June 30, 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

Quarter Ended June 30, 2022 Six Months Ended June 30, 2022

Loan Type Amortized Cost Basis at Period End % of Total Class of Financing Receivable Amortized Cost Basis at Period End % of Total Class of Financing Receivable

Single family $ 340 0.04 % $ 340 0.04 %

Home equity and other — — % 70 0.02 %

(in thousands) Term Extension

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

Quarter Ended June 30, 2022 Six Months Ended June 30, 2022

Loan Type Amortized Cost Basis at Period End % of Total Class of Financing Receivable Amortized Cost Basis at Period End % of Total Class of Financing Receivable

Commercial business $ 1,578 0.40 % $ 1,578 0.40 %

Single family 236 0.03 % 272 0.03 %

(in thousands) Interest Rate Reduction and Term Extension

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

Quarter Ended June 30, 2022 Six Months Ended June 30, 2022

Loan Type Amortized Cost Basis at Period End % of Total Class of Financing Receivable Amortized Cost Basis at Period End % of Total Class of Financing Receivable

Single family $ — — % $ 823 0.10 %

(in thousands) Significant Payment Delay and Term Extension

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

Quarter Ended June 30, 2022 Six Months Ended June 30, 2022

Loan Type Amortized Cost Basis at Period End % of Total Class of Financing Receivable Amortized Cost Basis at Period End % of Total Class of Financing Receivable

Single family $ 4,048 0.49 % $ 10,084 1.23 %

1 unchanged sentence

(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

Quarter Ended June 30, 2022 Six Months Ended June 30, 2022

Loan Type Amortized Cost Basis at Period End % of Total Class of Financing Receivable Amortized Cost Basis at Period End % of Total Class of Financing Receivable

Single family $ 2,775 0.34 % $ 6,898 0.84 %

The following table describes the financial effect of the modifications made to borrowers experiencing financial difficulty:

Loan Type Financial Effect of:

Interest Rate Reduction

Quarter Ended June 30, 2022 Six Months Ended June 30, 2022

Single family Reduced weighted-average contractual interest rate from 4.79 % to 3.56 %.

Reduced weighted-average contractual interest rate from 4.35 % to 3.36 %.

Significant Payment Delay

Quarter Ended June 30, 2022 Six Months Ended June 30, 2022

Single family Provided payment deferrals to borrowers.

A weighted average 0.51 % of loan balances were capitalized and added to the remaining term of the loan.

Provided payment deferrals to borrowers.

A weighted average 0.20 % of loan balances were capitalized and added to the remaining term of the loan.

Home equity and other — Provided payment deferrals to borrowers.

1 unchanged sentence

Term Extension

Quarter Ended June 30, 2022 Six Months Ended June 30, 2022

Commercial business Added a weighted average 0.8 years to the life of loans, which reduced the monthly payment amounts to the borrowers.

Added a weighted average 0.8 years to the life of loans, which reduced the monthly payment amounts to the borrowers.

Single family Added a weighted average 6.4 years to the life of loans, which reduced the monthly payment amounts to the borrowers.

Added a weighted average 4.5 years to the life of loans, which reduced the monthly payment amounts to the borrowers.

Home equity and other — Added a weighted average 16.1 years to the life of loans, which reduced the monthly payment amounts to the borrowers.

Upon determination that a modified loan (or portion of a loan) has subsequently been deemed uncollectible, the loan (or portion of the loan) is written off.

Therefore, the amortized cost basis of the loan is reduced by the uncollectible amount and the allowance for credit losses is adjusted by the same amount.

In the quarter ended June 30, 2022 there were no loans that were modified to borrowers experiencing financial difficulty during the three months ended March 31, 2022 that subsequently had a payment default.

The following table depicts the payment status of loans that have been modified to borrowers experiencing financial difficulty during the three months ended March 31, 2022:

Payment Status (Amortized Cost Basis) at June 30, 2022

Loan Type Current 30-89 Days Past Due 90+ Days Past Due

Single family $ 11,018 $ — $ —

Home equity and other 122 — —

Total $ 11,140 $ — $ —

NOTE 4– DEPOSITS:

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

At March 31, 2022 At December 31, 2021

At June 30, 2022 At December 31, 2021

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

6 unchanged sentences

Certificates of deposit outstanding mature as follows:

(in thousands) March 31, 2022

(in thousands) June 30, 2022

Within one year $ 856,617

4 unchanged sentences

Total $ 969,535

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.

The aggregate amount of certificate of deposits in denominations of more than the FDIC limit of $250 thousand at June 30, 2022 and December 31, 2021 were $ 91 million and $ 108 million, respectively.

There were $ 270 million and $ 145 million of brokered deposits at June 30, 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.

At June 30, 2022 the Company had outstanding $ 98 million of subordinated notes (the "Sub Notes") that were issued in January 2022.

Interest on the Notes accrue at a rate equal to 3.5 % per annum until 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 plus 215 basis points, payable quarterly in arrears.

At June 30, 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 June 30, 2022 and December 31, 2021.

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

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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:

The Subordinated Debt Securities outstanding as of June 30, 2022 and December 31, 2021 are as follows:

HomeStreet Statutory Trust

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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

At June 30, 2022

Notional amount Fair value derivatives

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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:

(1) Includes net cash collateral received of $ 10.1 million and paid of $ 5.3 million at June 30, 2022 and December 31, 2021, respectively.

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

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

Carrying value

At March 31, 2022

At June 30, 2022

Derivative assets $ 11,205 $ ( 10,035 ) $ 1,170

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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.

(1) Includes net cash collateral received of $ 10.1 million and paid of $ 5.3 million at June 30, 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.

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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.

At June 30, 2022 and December 31, 2021, the Company had liabilities of $ 10.2 million and zero , respectively, in cash collateral received from counterparties and receivables of $ 0.1 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,

Quarter Ended June 30, Six Months Ended June 30,

(in thousands) 2022 2021 2022 2021

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( 2,190 ) 5,024 ( 11,629 ) ( 7,567 )

1 ( 35 ) 160 264

(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.

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

(3) Impact of interest rate swap agreements executed with commercial banking customers.

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.

The notional amount of open interest rate swap agreements executed with commercial banking customers at June 30, 2022 and December 31, 2021 were $ 260 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

(in thousands) At June 30, 2022 At December 31, 2021

Single family $ 35,853 $ 128,041

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Loans sold consisted of the following for the periods indicated:

Quarter Ended March 31,

Quarter Ended June 30, Six Months Ended June 30,

(in thousands) 2022 2021 2022 2021

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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,

Quarter Ended June 30, Six Months Ended June 30,

(in thousands) 2022 2021 2022 2021

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

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

(in thousands) At June 30, 2022 At December 31, 2021

Single family $ 5,535,691 $ 5,539,180

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The following is a summary of changes in the Company's liability for estimated single-family mortgage repurchase losses:

Quarter Ended March 31,

Quarter Ended June 30, Six Months Ended June 30,

(in thousands) 2022 2021 2022 2021

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Additions, net of adjustments (1)

133 ( 26 ) 491 ( 46 )

Realized (losses) recoveries, net (2)

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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.

Advances of $ 2.0 million and $ 1.9 million were recorded in other assets as of June 30, 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.

At June 30, 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 $ 6.1 million and $ 12.3 million, respectively.

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

Quarter Ended March 31,

Quarter Ended June 30, Six Months Ended June 30,

(in thousands) 2022 2021 2022 2021

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Amortization of multifamily and SBA MSRs ( 2,337 ) ( 2,133 ) ( 4,049 ) ( 3,477 )

4,655 1,931 7,839 3,807

Risk management, single family MSRs:

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The changes in single family MSRs measured at fair value are as follows:

Quarter Ended March 31,

Quarter Ended June 30, Six Months Ended June 30,

(in thousands) 2022 2021 2022 2021

1 unchanged sentence

Additions and amortization:

2,295 7,725 6,211 14,341

Amortization (1)

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Net additions and amortization

( 220 ) 2,544 271 3,467

Changes in fair value assumptions (2)

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

Quarter Ended March 31,

Quarter Ended June 30, Six Months Ended June 30,

(rates per annum) (1)

2022 2021 2022 2021

Constant prepayment rate ("CPR") (2)

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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

At June 30, 2022 At December 31, 2021

Range of Inputs Average (1)

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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

(dollars in thousands) At June 30, 2022

Fair value of single family MSR $ 76,481

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

Quarter Ended March 31,

Quarter Ended June 30, Six Months Ended June 30,

(in thousands) 2022 2021 2022 2021

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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.

As of June 30, 2022 and December 31, 2021, the total unpaid principal balance of loans sold under this program was $ 1.8 billion and $ 1.9 billion, respectively.

The Company's reserve liability related to this arrangement totaled $ 0.7 million and $ 0.6 million at June 30, 2022 and December 31, 2021, respectively.

There were no actual losses incurred under this arrangement during the quarters or six months ended June 30, 2022 and 2021.

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

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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.

At June 30, 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 $ 1.5 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,

Quarter Ended June 30, Six Months Ended June 30,

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

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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

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,

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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

At June 30, 2022

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

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Single family mortgage servicing rights 76,481 — — 76,481

Futures 97 97 — —

Forward sale commitments 1,058 — 1,058 —

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Total assets $ 1,364,885 $ 33,280 $ 1,245,719 $ 85,886

Futures $ 143 $ 143 $ — $ —

Forward sale commitments 902 — 902 —

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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.

There were no transfers between levels of the fair value hierarchy during the quarters and six months ended June 30, 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.

For information regarding fair value changes and activity for single family MSRs during the quarters and six months ended June 30, 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).

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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 total amount of held for investment loans where fair value option election was made was $ 6.5 million and $ 7.3 million at June 30, 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

March 31, 2022

June 30, 2022

Investment securities AFS $ 2,160 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 March 31, 2022 and December 31, 2021.

We had no LHFS where the fair value was not derived with significant observable inputs at June 30, 2022 and December 31, 2021.

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

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Ending balance

Quarter Ended March 31, 2022

Quarter Ended June 30, 2022

Investment securities AFS $ 2,307 $ — $ — $ ( 49 ) $ ( 98 ) $ 2,160

Single family LHFI 6,981 — — — ( 473 ) 6,508

Quarter Ended March 31, 2021

Quarter Ended June 30, 2021

Investment securities AFS $ 2,490 $ — $ — $ ( 48 ) $ 108 $ 2,550

Single family LHFI 4,324 785 — — 98 5,207

Six Months Ended June 30, 2022

Investment securities AFS $ 2,482 $ — $ — $ ( 97 ) $ ( 225 ) $ 2,160

Single family LHFI 7,287 — — — ( 779 ) 6,508

Six Months Ended June 30, 2021

Investment securities AFS $ 2,710 $ — $ — $ ( 96 ) $ ( 64 ) $ 2,550

Single family LHFI 7,108 1,145 — ( 3,191 ) 145 5,207

(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,

Quarter Ended June 30, Six Months Ended June 30,

(in thousands) 2022 2021 2022 2021

15 unchanged sentences

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.

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

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.

For the quarter and six months ended June 30, 2022, no assets classified as Level 3 had changes in their recorded fair value.

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

At or for the Quarter and Six Months Ended June 30, 2021

$ 741 $ ( 62 )

(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 March 31, 2022

At June 30, 2022

(in thousands) Carrying

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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

At June 30, 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

1 unchanged sentence

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.

On July 28, 2022 the Board authorized a dividend of $ 0.35 per share, payable on August 23, 2022 to shareholders of record on August 9, 2022.

On July 29, 2022, we closed a sale of five retail deposit branches in eastern Washington, including the branches' lending businesses and employees, for an estimated gain of $ 4 million.

The balance of deposits, loans and other assets sold were $ 185 million, $ 42 million and $ 2 million, respectively.

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