What changed in this filing

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Item 1. Financial Statements

2022-11-04 compared with 2022-08-05 · 184 added, 158 removed, 1101 unchanged (24% of the section changed)

3 unchanged sentences

CONSOLIDATED BALANCE SHEETS

June 30, 2022 December 31, 2021

September 30, 2022 December 31, 2021

(in thousands, except share data) (Unaudited)

21 unchanged sentences

Shareholders' equity:

Common stock, no par value, authorized 160,000,000 shares, issued and outstanding, 18,712,789 shares and 20,085,336 shares

Common stock, no par value, authorized 160,000,000 shares;

issued and outstanding, 18,717,557 shares and 20,085,336 shares

225,725 249,856

7 unchanged sentences

CONSOLIDATED INCOME STATEMENTS

Quarter Ended June 30, Six Months Ended June 30,

Quarter Ended September 30, Nine Months Ended September 30,

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

42 unchanged sentences

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

Quarter Ended June 30, Six Months Ended June 30,

Quarter Ended September 30, Nine Months Ended September 30,

(in thousands) 2022 2021 2022 2021

20 unchanged sentences

income (loss) Total shareholders' equity

For the quarter ended June 30, 2021

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

For the quarter ended September 30, 2021

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

Net income — — 27,170 — 27,170

7 unchanged sentences

( 397,276 ) ( 5,924 ) ( 9,820 ) — ( 15,744 )

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

For the six months ended June 30, 2021

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

For the nine months ended September 30, 2021

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

3 unchanged sentences

stock grants 245,630 2,383 — — 2,383

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

Other comprehensive income (loss) — — — ( 13,264 ) ( 13,264 )

Dividends declared on common stock ($ 0.75 per share)

2 unchanged sentences

( 1,595,886 ) ( 27,364 ) ( 41,505 ) — ( 68,869 )

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

For the quarter ended September 30, 2022

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

For the quarter ended June 30, 2022

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

Net income — — 20,367 — 20,367

6 unchanged sentences

440 7 12 — 19

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

For the six months ended June 30, 2022

Balance, September 30, 2022 18,717,557 $ 225,725 $ 432,995 $ ( 105,931 ) $ 552,789

For the nine months ended September 30, 2022

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

8 unchanged sentences

( 1,498,325 ) ( 27,370 ) ( 48,952 ) — ( 76,322 )

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

Balance, September 30, 2022 18,717,557 $ 225,725 $ 432,995 $ ( 105,931 ) $ 552,789

See accompanying notes to consolidated financial statements

2 unchanged sentences

CONSOLIDATED STATEMENTS OF CASH FLOWS

Six Months Ended June 30,

Nine Months Ended September 30,

(in thousands) 2022 2021

5 unchanged sentences

Amortization of premiums and discounts:

securities, deposits, debt 2,036 3,204

investment securities, deposits, debt 2,833 4,788

Operating leases:

12 unchanged sentences

Amortization of servicing rights 5,877 5,235

Gain on sale of branches ( 4,270 ) —

Net change in trading securities ( 21,104 ) —

10 unchanged sentences

Proceeds from sale of loans originated as LHFI 4,613 251,474

Net cash distributed in sale of branches ( 138,756 ) —

Net increase in LHFI

3 unchanged sentences

Purchases of Federal Home Loan Bank stock ( 130,033 ) ( 78,286 )

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

Six Months Ended June 30,

Net cash used in investing activities ( 2,378,854 ) ( 155,370 )

Nine Months Ended September 30,

(in thousands) 2022 2021

CASH FLOWS FROM FINANCING ACTIVITIES:

Increase (decrease) in deposits, net 13,710 264,898

Increase in deposits, net 631,290 538,005

Changes in short-term borrowings, net 1,528,000 ( 322,800 )

Proceeds from other long-term borrowings — 50,000

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

Proceeds from debt issuance, net 98,035 —

3 unchanged sentences

Dividends paid on common stock ( 20,435 ) ( 16,171 )

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

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

Net cash provided by financing activities 2,161,441 133,509

Net increase (decrease) in cash and cash equivalents ( 7,958 ) 160,613

Cash and cash equivalents, beginning of year 65,214 58,049

28 unchanged sentences

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").

Goodwill is recorded upon completion of a business combination as the excess of the fair value of the consideration transferred, plus the fair value of any noncontrolling interests in the acquiree, over the fair value of the net assets acquired and liabilities assumed as of the acquisition date.

Goodwill has been determined to have an indefinite useful life and is not amortized, but tested for impairment at least annually or more frequently if events and circumstances occur that indicate it is more likely than not the fair value of the reporting unit is less than its carrying value necessitating an impairment test.

Historically, the Company performed its annual impairment testing on June 30.

In 2022, we moved the annual impairment testing date to August 31 and based on that testing determined goodwill was no t impaired.

The change in impairment date did not have a material effect on the Company’s financial position or results of operations.

In July 2022, we closed a sale of five retail deposit branches in eastern Washington, including the branches' lending businesses and employees.

As part of this transaction, we transferred $ 191 million of deposits, sold $ 43 million of loans and recognized a gain on sale of $ 4.3 million.

Recent Accounting Developments

8 unchanged sentences

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.

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.

4 unchanged sentences

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 June 30, 2022

At September 30, 2022

(in thousands) Amortized

8 unchanged sentences

Treasury securities 23,092 — ( 3,265 ) 19,827

Agency debentures 3,999 5 — 4,004

Total $ 1,427,111 $ 138 $ ( 139,522 ) $ 1,287,727

12 unchanged sentences

$ 4,169 $ 136 $ — $ 4,305

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.

At September 30, 2022, the Company held $ 21.1 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 $ 2.0 million at

September 30, 2022.

For the quarter and nine months ended September 30, 2022, trading losses of $ 2.6 million and $ 6.4 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 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.

Municipal bonds are comprised of general obligation bonds (i.e., backed by the general credit of the issuer) and revenue bonds (i.e., backed by either collateral or revenues from the specific project being financed) issued by various municipal corporations.

As of September 30, 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 & Poor's Rating Services or Moody's Investors Service.

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 June 30, 2022

At September 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 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 Company has not identified any expected credit losses on its debt securities as of

September 30, 2022 or December 31, 2021.

In addition, as of September 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 June 30, 2022

At September 30, 2022

Within one year After one year

13 unchanged sentences

— — % — — % 19,827 1.10 % — — % 19,827 1.10 %

Agency debentures 4,004 4.33 % — — % — — % — — % 4,004 4.33 %

Total $ 5,116 4.24 % $ 10,715 2.82 % $ 105,173 3.19 % $ 364,786 2.74 % $ 485,790 2.85 %

21 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 June 30, 2022 and December 31, 2021 was 2.30 % and 1.82 %, respectively.

The weighted average yield of MBS and CMOs as of September 30, 2022 and December 31, 2021 was 2.78 % and 1.82 %, respectively.

Sales of AFS investment securities were as follows:

Quarter Ended June 30, Six Months Ended June 30,

Quarter Ended September 30, Nine Months Ended September 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 June 30, 2022 At December 31, 2021

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

Washington, Oregon and California to secure public deposits $ 220,689 $ 206,153

2 unchanged sentences

The Company assesses the creditworthiness of the counterparties that hold the pledged collateral and has determined that these arrangements have little credit risk.

Tax-exempt interest income on investment securities was $ 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.

Tax-exempt interest income on investment securities was $ 3.1 million and $ 2.6 million for the quarters ended September 30, 2022 and 2021, respectively, and $ 8.9 million and $ 7.6 million for the nine months ended September 30, 2022 and 2021, respectively.

NOTE 3 - LOANS AND CREDIT QUALITY:

3 unchanged sentences

LHFI consists of the following:

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

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

Non-owner occupied CRE $ 666,394 $ 705,359

14 unchanged sentences

$ 7,175,881 $ 5,495,726

(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").

(1) Includes $ 5.8 million and $ 7.3 million at September 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 $ 3.8 billion and $ 2.8 billion at September 30, 2022 and December 31, 2021, respectively, were pledged to secure borrowings from the Federal Home Loan Bank ("FHLB") and loans totaling $ 501 million and $ 419 million at September 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 June 30, 2022 and December 31, 2021, multifamily loans in the state of California represented 36 % and 33 % of the total LHFI portfolio, respectively.

At September 30, 2022 and December 31, 2021, multifamily loans in the state of California represented 37 % 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 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.

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

During the third 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 September 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 $ 2.8 million and $ 2.4 million at June 30, 2022 and December 31, 2021, respectively.

The allowance for unfunded commitments was $ 2.6 million and $ 2.4 million at September 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 $ 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.

Accrued interest on LHFI was $ 23.9 million and $ 17.8 million at September 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 June 30, Six Months Ended June 30,

Quarter Ended September 30, Nine Months Ended September 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 June 30, 2022

Quarter Ended September 30, 2022

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

16 unchanged sentences

Total ACL $ 37,355 $ ( 124 ) $ 126 $ 249 $ 37,606

Quarter Ended June 30, 2021

Quarter Ended September 30, 2021

(in thousands) Beginning balance Charge-offs Recoveries Provision

17 unchanged sentences

Total ACL $ 59,897 $ ( 470 ) $ 437 $ ( 5,348 ) $ 54,516

Six Months Ended June 30, 2022

Nine Months Ended September 30, 2022

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

16 unchanged sentences

Total ACL $ 47,123 $ ( 850 ) $ 523 $ ( 9,190 ) $ 37,606

Six Months Ended June 30, 2021

Nine Months Ended September 30, 2021

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

17 unchanged sentences

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

At June 30, 2022

At September 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 June 30, 2022

At September 30, 2022

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

83 unchanged sentences

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

At June 30, 2022

At September 30, 2022

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

19 unchanged sentences

The following table presents nonaccrual status for loans:

At June 30, 2022 At December 31, 2021

At September 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 June 30, 2022

At September 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 $ 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.

(1) Includes $ 5.8 million and $ 7.3 million of loans at September 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 $ 10.2 million and $ 8.4 million at June 30, 2022 and December 31, 2021, respectively.

(3) Includes loans whose repayments are insured by the FHA or guaranteed by the VA or Small Business Administration " SBA" of $ 11.6 million and $ 8.4 million at September 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 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

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

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

The following tables provide information related to loans modified during the quarter and nine months ended September 30, 2022 to borrowers experiencing financial difficulty, disaggregated by class of financing receivable and type of concession granted:

Significant Payment Delay

Quarter Ended September 30, 2022 Nine Months Ended September 30, 2022

(in thousands) 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 $ 682 0.08 % $ 1,209 0.13 %

Home equity and other — — % 70 0.02 %

(in thousands) Term Extension

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

Term Extension

Quarter Ended September 30, 2022 Nine Months Ended September 30, 2022

(in thousands) 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 $ — — % $ 1,570 0.43 %

Single family — — % 270 0.03 %

(in thousands) Interest Rate Reduction and Term Extension

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

Interest Rate Reduction and Significant Payment Delay

Quarter Ended September 30, 2022 Nine Months Ended September 30, 2022

(in thousands) 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 $ 477 0.13 % $ 477 0.13 %

Interest Rate Reduction and Term Extension

Quarter Ended September 30, 2022 Nine Months Ended September 30, 2022

(in thousands) 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 $ — — % $ 819 0.09 %

(in thousands) Significant Payment Delay and Term Extension

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

Significant Payment Delay and Term Extension

Quarter Ended September 30, 2022 Nine Months Ended September 30, 2022

(in thousands) 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 $ 4,033 0.44 % $ 13,325 1.47 %

Home equity and other — — % 51 0.01 %

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

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

Interest Rate Reduction, Significant Payment Delay and Term Extension

Quarter Ended September 30, 2022 Nine Months Ended September 30, 2022

(in thousands) 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 $ 294 0.03 % $ 7,185 0.79 %

1 unchanged sentence

Interest Rate Reduction

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

(in thousands) Quarter Ended September 30, 2022 Nine Months Ended September 30, 2022

Commercial business Reduced weighted-average contractual interest rate from 5.72 % to 4.00 %.

Reduced weighted-average contractual interest rate from 5.72 % to 4.00 %.

Single family Reduced weighted-average contractual interest rate from 4.38 % to 4.13 %.

1 unchanged sentence

Significant Payment Delay

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

(in thousands) Quarter Ended September 30, 2022 Nine Months Ended September 30, 2022

Single family Provided payment deferrals to borrowers.

5 unchanged sentences

Term Extension

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

(in thousands) Quarter Ended September 30, 2022 Nine Months Ended September 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 3.6 years to the life of loans, which reduced the monthly payment amounts to the borrowers.

3 unchanged sentences

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

The following table depicts the payment status of loans that have been modified to borrowers experiencing financial difficulty during the six months ended June 30, 2022:

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

(in thousands) Current 30-89 Days Past Due 90+ Days Past Due

Commercial business $ 1,570 $ — $ —

Single family 16,205 405 1,002

1 unchanged sentence

Total $ 17,896 $ 405 $ 1,002

The following tables provide the amortized cost basis as of September 30, 2022 of loans that were modified to borrowers experiencing financial difficulty during the six months ended June 30, 2022 and subsequently had a payment default:

Amortized Cost Basis of Modified Loans That Subsequently Defaulted Quarter Ended September 30, 2022

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

Single family $ — $ — $ — $ — $ 553

Amortized Cost Basis of Modified Loans That Subsequently Defaulted Nine Months Ended September 30, 2022

Single family $ — $ — $ — $ 172 $ 1,555

NOTE 4– DEPOSITS:

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

At June 30, 2022 At December 31, 2021

At September 30, 2022 At December 31, 2021

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

Noninterest-bearing demand deposits $ 1,547,642 $ 1,617,069

Interest bearing:

Interest-bearing demand deposits 514,912 0.12 % 513,810 0.10 %

302,359 0.06 % 302,389 0.06 %

2,679,865 0.35 % 2,806,313 0.15 %

Savings 275,399 0.06 % 302,389 0.06 %

Money market 2,551,961 0.75 % 2,806,313 0.15 %

Certificates of deposit 1,720,317 1.58 % 906,928 0.51 %

Total $ 6,183,299 0.24 % $ 6,146,509 0.15 %

Total interest bearing deposits 5,062,589 0.93 % 4,529,440 0.21 %

Total deposits $ 6,610,231 0.71 % $ 6,146,509 0.15 %

Certificates of deposit outstanding mature as follows:

(in thousands) June 30, 2022

(in thousands) September 30, 2022

Within one year $ 1,368,503

3 unchanged sentences

Four to five years 1,774

Thereafter 332

Total $ 1,720,317

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.

The aggregate amount of certificate of deposits in denominations of more than the FDIC limit of $250 thousand at September 30, 2022 and December 31, 2021 were $ 189 million and $ 108 million, respectively.

There were $ 512 million and $ 145 million of brokered deposits at September 30, 2022 and December 31, 2021, respectively.

NOTE 5– LONG-TERM DEBT:

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.

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

Interest on the Sub 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 Sub Notes will bear interest equal to the three-month term Secured Overnight Financing Rate plus 215 basis points, payable quarterly in arrears.

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

In connection with the issuance of trust

preferred securities, HomeStreet, Inc.

issued to HomeStreet Statutory Trust Junior Subordinated Deferrable Interest Debentures.

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

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

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

HomeStreet Statutory Trust

13 unchanged sentences

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 June 30, 2022

At September 30, 2022

Notional amount Fair value derivatives

19 unchanged sentences

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

(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.

(1) Includes net cash collateral received of $ 14.4 million and paid of $ 5.3 million at September 30, 2022 and December 31, 2021, respectively.

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

1 unchanged sentence

Carrying value

At June 30, 2022

At September 30, 2022

Derivative assets $ 16,994 $ ( 15,652 ) $ 1,342

3 unchanged sentences

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

(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.

(1) Includes net cash collateral received of $ 14.4 million and paid of $ 5.3 million at September 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.

3 unchanged sentences

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

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.

At September 30, 2022 and December 31, 2021, the Company had liabilities of $ 14.5 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 June 30, Six Months Ended June 30,

Quarter Ended September 30, Nine Months Ended September 30,

(in thousands) 2022 2021 2022 2021

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( 422 ) ( 293 ) ( 12,051 ) ( 7,860 )

1 ( 35 ) 160 264

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

(1) Comprised of interest rate lock commitments ("IRLCs") and forward contracts used as an economic hedge of loans held for sale.

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

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

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.

The notional amount of open interest rate swap agreements executed with commercial banking customers at September 30, 2022 and December 31, 2021 were $ 238 million and $ 287 million, respectively.

NOTE 7– MORTGAGE BANKING OPERATIONS:

LHFS consisted of the following:

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

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

Single family $ 13,308 $ 128,041

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Loans sold consisted of the following for the periods indicated:

Quarter Ended June 30, Six Months Ended June 30,

Quarter Ended September 30, Nine Months Ended September 30,

(in thousands) 2022 2021 2022 2021

3 unchanged sentences

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

Quarter Ended June 30, Six Months Ended June 30,

Quarter Ended September 30, Nine Months Ended September 30,

(in thousands) 2022 2021 2022 2021

5 unchanged sentences

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

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

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

Single family $ 5,500,428 $ 5,539,180

6 unchanged sentences

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

Quarter Ended June 30, Six Months Ended June 30,

Quarter Ended September 30, Nine Months Ended September 30,

(in thousands) 2022 2021 2022 2021

8 unchanged sentences

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 $ 2.0 million and $ 1.9 million were recorded in other assets as of June 30, 2022 and December 31, 2021, respectively.

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 $ 1.7 million and $ 1.9 million were recorded in other assets as of September 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 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.

At September 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 $ 6.8 million and $ 12.3 million, respectively.

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

Quarter Ended June 30, Six Months Ended June 30,

Quarter Ended September 30, Nine Months Ended September 30,

(in thousands) 2022 2021 2022 2021

14 unchanged sentences

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

Quarter Ended June 30, Six Months Ended June 30,

Quarter Ended September 30, Nine Months Ended September 30,

(in thousands) 2022 2021 2022 2021

12 unchanged sentences

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

Quarter Ended June 30, Six Months Ended June 30,

Quarter Ended September 30, Nine Months Ended September 30,

(rates per annum) (1)

6 unchanged sentences

For single family MSRs, we use a discounted cash flow valuation technique which utilizes CPRs and discount rates as significant unobservable inputs as noted in the table below:

At June 30, 2022 At December 31, 2021

At September 30, 2022 At December 31, 2021

Range of Inputs Average (1)

6 unchanged sentences

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 June 30, 2022

(dollars in thousands) At September 30, 2022

Fair value of single family MSR $ 77,811

6 unchanged sentences

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

Quarter Ended June 30, Six Months Ended June 30,

Quarter Ended September 30, Nine Months Ended September 30,

(in thousands) 2022 2021 2022 2021

8 unchanged sentences

For loans that have been sold through this program, a liability is recorded for this loss sharing arrangement under the accounting guidance for guarantees.

As of 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.

As of September 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 $ 0.6 million at both September 30, 2022 and December 31, 2021.

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

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

1 unchanged sentence

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 June 30, 2022 and December 31, 2021.

At June 30, 2022 and December 31, 2021, the Company had recorded a mortgage repurchase liability for loans sold on a servicing-retained and

At September 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 $ 2.0 million and $ 1.3 million, respectively.

1 unchanged sentence

The following table summarizes the calculation of earnings per share:

Quarter Ended June 30, Six Months Ended June 30,

Quarter Ended September 30, Nine Months Ended September 30,

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

17 unchanged sentences

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 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.

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.

43 unchanged sentences

The following tables presents the levels of the fair value hierarchy for the Company's assets and liabilities measured at fair value on a recurring basis:

At June 30, 2022

At September 30, 2022

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

11 unchanged sentences

Treasury securities 19,827 — 19,827 —

Agency debentures 4,004 — 4,004 —

Single family LHFS 13,308 — 13,308 —

1 unchanged sentence

Single family mortgage servicing rights 77,811 — — 77,811

Futures 46 46 — —

Forward sale commitments 2,756 — 2,756 —

3 unchanged sentences

Total assets $ 1,422,805 $ 21,546 $ 1,315,517 $ 85,742

Futures $ 143 $ 143 $ — $ —

Forward sale commitments $ 1,434 $ — $ 1,434 $ —

26 unchanged sentences

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

There were no transfers between levels of the fair value hierarchy during the quarters and six months ended June 30, 2022 and 2021.

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

16 unchanged sentences

The Company determined these loans to be level 3 recurring assets as the valuation technique included a significant unobservable input.

The total amount of held for investment loans where fair value option election was made was $ 6.5 million and $ 7.3 million at June 30, 2022 and December 31, 2021, respectively.

The total amount of held for investment loans where fair value option election was made was $ 5.8 million and $ 7.3 million at September 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

June 30, 2022

September 30, 2022

Investment securities AFS $ 2,033 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 June 30, 2022 and December 31, 2021.

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

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

1 unchanged sentence

Ending balance

Quarter Ended June 30, 2022

Quarter Ended September 30, 2022

Investment securities AFS $ 2,160 $ — $ — $ ( 48 ) $ ( 79 ) $ 2,033

Single family LHFI 6,508 — — — ( 658 ) 5,850

Quarter Ended June 30, 2021

Quarter Ended September 30, 2021

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

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

Six Months Ended June 30, 2022

Nine Months Ended September 30, 2022

Investment securities AFS $ 2,482 $ — $ — $ ( 145 ) $ ( 304 ) $ 2,033

Single family LHFI 7,287 — — — ( 1,437 ) 5,850

Six Months Ended June 30, 2021

Nine Months Ended September 30, 2021

Investment securities AFS $ 2,710 $ — $ — $ ( 144 ) $ ( 52 ) $ 2,514

2 unchanged sentences

The following table presents fair value changes and activity for Level 3 interest rate lock commitments:

Quarter Ended June 30, Six Months Ended June 30,

Quarter Ended September 30, Nine Months Ended September 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

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.

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

For the quarter and nine months ended September 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 and Six Months Ended June 30, 2021

At or for the Quarter Ended September 30, 2021

$ 1,121 $ ( 8 )

At or for the Nine Months Ended September 30, 2021

$ 1,121 $ ( 70 )

(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 June 30, 2022

At September 30, 2022

(in thousands) Carrying

30 unchanged sentences

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 June 30, 2022 At December 31, 2021

At September 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

Single family LHFS $ 13,308 $ 13,697 $ ( 389 ) $ 128,041 $ 124,933 $ 3,108

NOTE 11– SUBSEQUENT EVENT:

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.

NOTE 11– SUBSEQUENT EVENTS:

On October 27, 2022 the Board authorized a dividend of $ 0.35 per share, payable on November 22, 2022 to shareholders of record on November 8, 2022.

In October 2022, we announced an agreement to purchase three branches in southern California, which is expected to close in the first quarter of 2023, whereby we will assume approximately $ 490 million in deposits, purchase approximately $ 22 million in loans and pay a 6.0 % deposit premium.

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