What changed in this filing

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Item 1. Financial Statements

2023-05-10 compared with 2022-11-04 · 177 added, 262 removed, 1023 unchanged (30% of the section changed)

3 unchanged sentences

CONSOLIDATED BALANCE SHEETS

September 30, 2022 December 31, 2021

March 31, 2023 December 31, 2022

(in thousands, except share data) (Unaudited)

32 unchanged sentences

CONSOLIDATED INCOME STATEMENTS

Quarter Ended September 30, Nine Months Ended September 30,

Quarter Ended March 31,

(in thousands, except share and per share data) 2023 2022

9 unchanged sentences

Total interest expense

20,385 3,904 32,502 13,353

Net interest income

22 unchanged sentences

Basic $ 0.27 $ 1.02

1.08 1.31 3.03 4.03

Weighted average shares outstanding:

5 unchanged sentences

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

Quarter Ended September 30, Nine Months Ended September 30,

Quarter Ended March 31,

(in thousands) 2023 2022

8 unchanged sentences

3,600 ( 16,189 )

( 13,474 ) ( 1,530 ) ( 39,874 ) ( 3,526 )

Other comprehensive income (loss) 13,772 ( 52,069 )

9 unchanged sentences

income (loss) Total shareholders' equity

For the quarter ended September 30, 2021

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

Net income — — 27,170 — 27,170

Share-based compensation expense — 892 — — 892

Common stock issued - Option exercise;

stock grants 52,265 339 — — 339

Other comprehensive income (loss) — — — ( 5,753 ) ( 5,753 )

Dividends declared on common stock ($ 0.25 per share)

— — ( 5,259 ) — ( 5,259 )

Common stock repurchased

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

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

For the nine months ended September 30, 2021

For the quarter ended March 31, 2022

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

1 unchanged sentence

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

Common stock issued - Option exercise;

stock grants 245,630 2,383 — — 2,383

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

Dividends declared on common stock ($ 0.75 per share)

( 16,171 ) ( 16,171 )

Common stock repurchased

( 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

Net income — — 20,367 — 20,367

Share-based compensation expense — 942 — — 942

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

4 unchanged sentences

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

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

For the nine months ended September 30, 2022

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

For the quarter ended March 31, 2023

Balance, December 31, 2022 18,730,380 $ 226,592 $ 435,085 $ ( 99,530 ) $ 562,147

1 unchanged sentence

Share-based compensation expense — 1,016 — — 1,016

— 3,239 — — 3,239

Common stock issued - Stock grants 50,426 — — — —

4 unchanged sentences

( 12,995 ) ( 315 ) — — ( 315 )

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

Balance, March 31, 2023 18,767,811 $ 227,293 $ 433,459 $ ( 85,758 ) $ 574,994

See accompanying notes to consolidated financial statements

2 unchanged sentences

CONSOLIDATED STATEMENTS OF CASH FLOWS

Nine Months Ended September 30,

Quarter Ended March 31,

(in thousands) 2023 2022

1 unchanged sentence

Net income $ 5,058 $ 19,951

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

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

Provision for credit losses 593 ( 9,000 )

13 unchanged sentences

Origination of MSRs ( 756 ) ( 5,492 )

Net gain on sale of loans originated as LHFI ( 88 ) ( 4,613 )

Change in fair value of MSRs 1,995 ( 6,878 )

Amortization of servicing rights 1,554 1,712

Gain on sale of branches ( 4,270 ) —

Net change in trading securities ( 43,045 ) ( 19,313 )

1 unchanged sentence

Increase (decrease) in accounts payable and other liabilities ( 11,462 ) 4,226

Net cash provided by operating activities 209,455 182,474

Net cash provided by (used in) operating activities ( 51,590 ) 123,889

CASH FLOWS FROM INVESTING ACTIVITIES:

5 unchanged sentences

Proceeds from sale of OREO — 952

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

1 unchanged sentence

Purchase of premises and equipment ( 855 ) ( 1,444 )

Net cash received from acquisition of branches 349,111 —

Proceeds from sale of Federal Home Loan Bank stock 34,840 16,003

Purchases of Federal Home Loan Bank stock ( 58,726 ) ( 25,238 )

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

Nine Months Ended September 30,

Net cash provided by (used in) investing activities 268,868 ( 463,940 )

Quarter Ended March 31,

(in thousands) 2023 2022

CASH FLOWS FROM FINANCING ACTIVITIES:

Increase in deposits, net 631,290 538,005

(Decrease) increase in deposits, net ( 768,262 ) 100,973

Changes in short-term borrowings, net 562,000 232,000

Proceeds from other long-term borrowings 300,000 —

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

Proceeds from debt issuance, net — 98,035

1 unchanged sentence

Repurchases of common stock — ( 75,000 )

Proceeds from exercise of stock options — 263

Dividends paid on common stock ( 6,684 ) ( 7,164 )

9 unchanged sentences

Increase in lease assets and lease liabilities 1,031 2,053

LHFI foreclosed and transferred to OREO 1,018 —

Loans transferred from LHFI to LHFS, net — 6,731

1 unchanged sentence

Repurchase of common stock-award shares 315 902

Loans acquired 20,803 —

Premises and equipment and other assets 5,819 —

Liabilities assumed 373,547 —

Goodwill and other intangibles 22,470 —

See accompanying notes to consolidated financial statements

3 unchanged sentences

NOTE 1– SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

HomeStreet, Inc., a State of Washington corporation organized in 1921 (the "Corporation"), is a Washington-based diversified financial services holding company whose operations are primarily conducted through its wholly owned subsidiaries (collectively the "Company") HomeStreet Capital Corporation, HomeStreet Statutory Trusts and HomeStreet Bank (the "Bank"), and the Bank's subsidiaries, Continental Escrow Company, HomeStreet Foundation, HS Properties, Inc., HS Evergreen Corporate Center LLC, and Union Street Holdings LLC.

HomeStreet, Inc., a State of Washington corporation organized in 1921 (the "Corporation"), is a Washington-based diversified financial services holding company whose operations are primarily conducted through its wholly owned subsidiaries (collectively the "Company") HomeStreet Statutory Trusts and HomeStreet Bank (the "Bank"), and the Bank's subsidiaries, Continental Escrow Company, HomeStreet Foundation, HS Properties, Inc., HS Evergreen Corporate Center LLC, and Union Street Holdings LLC.

The Company is principally engaged in commercial banking, mortgage banking and consumer/retail banking activities serving customers primarily in the Western United States.

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The results of operations in the interim financial statements do not necessarily indicate the results that may be expected for the full year.

The interim financial information should be read in conjunction with our Annual Report on Form 10-K for the year ended December 31, 2021, filed with the Securities and Exchange Commission ("2021 Annual Report on Form 10-K").

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.

The interim financial information should be read in conjunction with our Annual Report on Form 10-K for the year ended December 31, 2022 ("2022 Annual Report on Form 10-K"), filed with the U.S.

Securities and Exchange Commission ("SEC").

Branch Acquisition

On February 10, 2023, the Company completed its acquisition of three branches in southern California, whereby we assumed approximately $ 373 million in deposits and purchased approximately $ 21 million in loans.

The application of the acquisition method of accounting resulted in recording goodwill of $ 12 million and a core deposit intangible of $ 11 million.

Recent Accounting Developments

3 unchanged sentences

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.

In December 2022, the FASB issued ASU No.

2022-06, "Reference Rate Reform (Topic 848):

Deferral of the Sunset Date of Topic 848," which defers the sunset date of Topic 848 from December 31, 2022 to December 31, 2024, after which entities will no longer be permitted to apply the relief in Topic 848.

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

2 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.

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

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

We prospectively adopted the portion of ASU No.

1 unchanged sentence

This adoption did not have a material impact on the Company’s financial position or results of operations.

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.

We prospectively adopted the vintage table disclosure requirement of ASU 2022-02 on January 1, 2023, which did not have a material impact on the Company's financial position or results of operations.

In March 2023, the FASB issued ASU 2023-02, “Investments – Equity Method and Joint Ventures (Topic 323):

Accounting for Investments in Tax Credit Structures Using the Proportional Amortization Method.” ASU 2023-02 permits reporting entities to elect to account for their tax equity investments, regardless of the tax credit program from which the income tax credits are received, using the proportional amortization method if certain conditions are met.

ASU 2023-02 is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2023.

ASU 2023-02 is not expected to have a material impact on the Company’s consolidated financial statements.

NOTE 2– INVESTMENT SECURITIES:

The following table sets forth certain information regarding the amortized cost basis and fair values of our investment securities AFS and held-to-maturity ("HTM"):

At September 30, 2022

At March 31, 2023

(in thousands) Amortized

20 unchanged sentences

Treasury securities 23,005 — ( 3,071 ) 19,934

Agency debentures 27,499 8 ( 29 ) 27,478

Total $ 1,509,736 $ 135 $ ( 131,097 ) $ 1,378,774

1 unchanged sentence

$ 2,441 $ — $ ( 56 ) $ 2,385

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.

At March 31, 2023, and December 31, 2022, the Company held $ 62 million and $ 19 million, respectively, 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.

For the quarters ended March 31, 2023 and 2022, net gains of $ 0.6 million and net losses of $ 0.7 million on trading securities, respectively, were recorded in servicing income.

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

1 unchanged sentence

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

As of September 30, 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.

As of March 31, 2023 and December 31, 2022, substantially all securities held, including municipal bonds and corporate debt securities, were rated investment grade based upon nationally recognized statistical rating organizations where available and, where not available, based upon internal ratings.

Investment securities AFS that were in an unrealized loss position are presented in the following tables based on the length of time the individual securities have been in an unrealized loss position:

At September 30, 2022

At March 31, 2023

Less than 12 months 12 months or more Total

7 unchanged sentences

Treasury securities — — ( 2,601 ) 20,319 ( 2,601 ) 20,319

Agency debentures ( 180 ) 58,359 — — ( 180 ) 58,359

Total $ ( 18,621 ) $ 661,841 $ ( 95,381 ) $ 680,910 $ ( 114,002 ) $ 1,342,751

10 unchanged sentences

Treasury securities — — ( 3,071 ) 19,934 ( 3,071 ) 19,934

Agency debentures ( 29 ) 15,970 — — ( 29 ) 15,970

Total $ ( 95,493 ) $ 1,187,577 $ ( 35,604 ) $ 146,230 $ ( 131,097 ) $ 1,333,807

Municipal bonds $ ( 56 ) $ 2,385 $ — $ — $ ( 56 ) $ 2,385

The Company has evaluated AFS securities that are in an unrealized loss position and has determined that the decline in value is temporary and is related to the change in market interest rates since purchase.

The decline in value is not related to any issuer- or industry-specific credit event.

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

September 30, 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 Company has not identified any expected credit losses on its debt securities as of March 31, 2023 or December 31, 2022.

In addition, as of March 31, 2023 and December 31, 2022, the Company had not made a decision to sell any of its debt securities held, nor did the Company consider it more likely than not that it would be required to sell such securities before recovery of their amortized cost basis.

The following tables present the fair value of investment securities AFS and HTM by contractual maturity along with the associated contractual yield:

At September 30, 2022

At March 31, 2023

Within one year After one year

33 unchanged sentences

— — % — — % 19,934 1.11 % — — % 19,934 1.11 %

Agency debentures 10,485 4.74 % 16,993 4.94 % — — % — — % 27,478 4.86 %

Total $ 10,485 4.74 % $ 35,979 4.69 % $ 86,514 2.97 % $ 368,927 2.83 % $ 501,905 3.01 %

Municipal bonds $ — — % $ 2,385 2.04 % $ — — % $ — — % $ 2,385 2.04 %

The weighted-average yield is computed using the contractual coupon of each security weighted based on the fair value of each security and does not include adjustments to a tax equivalent basis.

The weighted-average yield is computed using the contractual coupon of each security weighted based on the fair value of each security.

MBS and CMOs are excluded from the tables above because such securities are not due on a single maturity date.

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

The weighted average yield of MBS and CMOs as of March 31, 2023 and December 31, 2022 was 3.15 % and 3.08 %, respectively.

Sales of AFS investment securities were as follows:

Quarter Ended September 30, Nine Months Ended September 30,

Quarter Ended March 31,

(in thousands) 2023 2022

3 unchanged sentences

The following table summarizes the carrying value of securities pledged as collateral to secure public deposits, borrowings and other purposes as permitted or required by law:

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

(in thousands) At March 31, 2023 At December 31, 2022

Federal Reserve Bank to secure borrowings $ 315,244 $ —

Washington, Oregon and California to secure public deposits 203,201 212,806

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 $ 2.6 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.

Tax-exempt interest income on investment securities was $ 2.8 million and $ 2.7 million for the quarters ended March 31, 2023 and 2022, respectively .

NOTE 3- LOANS AND CREDIT QUALITY:

3 unchanged sentences

LHFI consists of the following:

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

(in thousands) At March 31, 2023 At December 31, 2022

Non-owner occupied CRE $ 652,284 $ 658,085

14 unchanged sentences

$ 7,444,882 $ 7,384,820

(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").

(1) Includes $ 5.2 million and $ 5.9 million at March 31, 2023 and December 31, 2022, 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 $ 5.7 billion and $ 5.2 billion at March 31, 2023 and December 31, 2022, respectively, were pledged to secure borrowings from the Federal Home Loan Bank ("FHLB") and loans totaling $ 562 million and $ 497 million at March 31, 2023 and December 31, 2022, respectively, were pledged to secure borrowings from the Federal Reserve Bank of San Francisco ("FRBSF").

Credit Risk Concentrations

LHFI are primarily secured by real estate located in the Pacific Northwest, California and Hawaii.

At September 30, 2022 and December 31, 2021, multifamily loans in the state of California represented 37 % and 33 % of the total LHFI portfolio, respectively.

At March 31, 2023, single family and multifamily loans in the state of Washington and California, represented 10 % and 36 % of the total LHFI portfolio, respectively.

At December 31, 2022, multifamily loans in the state of California represented 36 % of the total LHFI portfolio.

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 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.

During the first quarter of 2023, the historical expected loss rates increased from December 31, 2022 due to product mix risk composition changes.

During the first quarter of 2023, the qualitative factors decreased due to the continued favorable performance of our loan portfolio.

As of March 31, 2023, the Bank expects deterioration in collateral values and economic conditions over the two-year forecast period in the markets in which it operates.

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

The allowance for unfunded commitments was $ 2.2 million at both March 31, 2023 and December 31, 2022.

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

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.

Accrued interest on LHFI was $ 27.6 million and $ 26.9 million at March 31, 2023 and December 31, 2022, 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 September 30, Nine Months Ended September 30,

Quarter Ended March 31,

(in thousands) 2023 2022

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

Quarter Ended September 30, 2022

Quarter Ended March 31, 2023

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

16 unchanged sentences

Total ACL $ 41,500 $ ( 683 ) $ 94 $ 589 $ 41,500

Quarter Ended September 30, 2021

Quarter Ended March 31, 2022

(in thousands) Beginning balance Charge-offs Recoveries Provision

17 unchanged sentences

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

Nine Months Ended September 30, 2022

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

Non-owner occupied CRE $ 7,509 $ — $ — $ ( 5,403 ) $ 2,106

Multifamily 5,854 — — 5,329 11,183

Construction/land development

Multifamily construction 507 — — 158 665

CRE construction 150 — — 10 160

Single family construction 6,411 — — 3,153 9,564

Single family construction to permanent 1,055 — — 85 1,140

Total 21,486 — — 3,332 24,818

Commercial and industrial loans

Owner occupied CRE 5,006 — — ( 4,037 ) 969

Commercial business 12,273 ( 741 ) 94 ( 7,907 ) 3,719

Total 17,279 ( 741 ) 94 ( 11,944 ) 4,688

Consumer loans

Single family 4,394 — 141 ( 71 ) 4,464

Home equity and other 3,964 ( 109 ) 288 ( 507 ) 3,636

Total 8,358 ( 109 ) 429 ( 578 ) 8,100

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

Nine Months Ended September 30, 2021

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

Non-owner occupied CRE $ 8,845 $ — $ — $ 791 $ 9,636

Multifamily 6,072 — — ( 615 ) 5,457

Construction/land development

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

CRE construction 1,670 — — ( 1,319 ) 351

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

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

Total 27,935 — — ( 4,094 ) 23,841

Commercial and industrial loans

Owner occupied CRE 4,994 — — 291 5,285

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

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

Consumer loans

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

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

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

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

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

At September 30, 2022

At March 31, 2023

(in thousands) 2023 2022 2021 2020 2019 2018 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 September 30, 2022

At March 31, 2023

(in thousands) 2023 2022 2021 2020 2019 2018 and prior Revolving Revolving-term Total

81 unchanged sentences

(1) Includes $ 5.9 million of loans where a fair value option election was made at the time of origination and, therefore, are carried at fair value with changes in fair value recognized in the consolidated income statements.

The following table presents a vintage analysis of the commercial and consumer portfolio segment by loan sub-class and gross charge-offs:

At March 31, 2023

(in thousands) 2023 2022 2021 2020 2019 2018 and prior Revolving Revolving-term Total

COMMERCIAL PORTFOLIO

Commercial business

Gross charge-offs $ — $ — $ ( 174 ) $ — $ ( 459 ) $ — $ — $ — $ ( 633 )

CONSUMER PORTFOLIO

Home equity and other

Gross charge-offs — ( 6 ) ( 13 ) — — — ( 31 ) — ( 50 )

Total LHFI $ — $ ( 6 ) $ ( 187 ) $ — $ ( 459 ) $ — $ ( 31 ) $ — $ ( 683 )

Collateral Dependent Loans

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

At September 30, 2022

At March 31, 2023

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

3 unchanged sentences

1 3,178 562 777 4,518

973 3,178 3,258 777 8,186

Consumer loans

Single family

— 847 — — 847

Total collateral-dependent loans $ 973 $ 4,025 $ 3,258 $ 777 $ 9,033

5 unchanged sentences

62 3,186 562 — 3,810

1,473 27 3,018 286 4,804

Consumer loans

Single family

— 1,598 — — 1,598

Home equity loans and other

— 1,617 — — 1,617

Total collateral-dependent loans 1,173 3,186 1,972 — 6,331

1 unchanged sentence

The following table presents nonaccrual status for loans:

At September 30, 2022 At December 31, 2021

At March 31, 2023 At December 31, 2022

(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 September 30, 2022

At March 31, 2023

Past Due and Still Accruing

47 unchanged sentences

% 0.06 % 0.03 % 0.06 % 0.14 % 0.29 % 99.71 % 100.00 %

(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.

(1) Includes loans whose repayments are insured by the FHA or guaranteed by the VA or Small Business Administration "SBA" of $ 12.3 million and $ 10.6 million at March 31, 2023 and December 31, 2022, respectively.

(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 Small Business Administration " SBA" of $ 11.6 million and $ 8.4 million at September 30, 2022 and December 31, 2021, respectively.

(3) Includes $ 5.2 million and $ 5.9 million of loans at March 31, 2023 and December 31, 2022, 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.

Loan Modifications

The Company provides modifications to borrowers experiencing financial difficulty which may include delays in payment of amounts due, extension of the terms of the notes or reduction in the interest rates on the notes.

The Company provides modifications to borrowers experiencing financial difficulty ("MFDB"), which may include delays in payment of amounts due, extension of the terms of the notes or reduction in the interest rates on the notes.

In certain instances, the Company may grant more than one type of modification.

The granting of modifications in the quarter 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:

The granting of modifications in the quarters ended March 31, 2023 and 2022 did not have a material impact on the ACL.

The following tables provide information related to loans modified during the quarters ended March 31, 2023 and 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

Quarter Ended March 31, 2023 Quarter Ended March 31, 2022

(in thousands, except percentage) 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 $ — — % $ 153 0.02 %

Home equity and other — — % 70 0.02 %

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 %

Quarter Ended March 31, 2023 Quarter Ended March 31, 2022

(in thousands, except percentage) 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 $ — — % $ 37 — %

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

Quarter Ended March 31, 2023 Quarter Ended March 31, 2022

(in thousands, except percentage) 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 $ — — % $ 1,110 0.15 %

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

Quarter Ended March 31, 2023 Quarter Ended March 31, 2022

(in thousands, except percentage) 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 $ 179 0.02 % $ 6,397 0.84 %

1 unchanged sentence

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

Quarter Ended March 31, 2023 Quarter Ended March 31, 2022

(in thousands, except percentage) 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 $ — — % $ 5,762 0.76 %

1 unchanged sentence

Interest Rate Reduction

(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 %.

Quarter Ended March 31, 2023 Quarter Ended March 31, 2022

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

Reduced weighted-average contractual interest rate from 4.35 % to 3.39 %.

Significant Payment Delay

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

Quarter Ended March 31, 2023 Quarter Ended March 31, 2022

Single Family Provided payment deferrals to borrowers.

5 unchanged sentences

Term Extension

(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.

Quarter Ended March 31, 2023 Quarter Ended March 31, 2022

Single family Added a weighted average 14.2 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.

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

The following table depicts the payment status of loans that were MFDBs on or after January 1, 2022 through December 31, 2022:

Payment Status (Amortized Cost Basis) at March 31, 2023

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

3 unchanged sentences

Total $ 20,480 $ 1,746 $ 1,627

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

The following tables provide the amortized cost basis as of March 31, 2023 of MFDBs on or after January 1, 2022 through December 31, 2022 and subsequently had a payment default:

Amortized Cost Basis of Modified Loans That Subsequently Defaulted Quarter Ended March 31, 2023

2 unchanged sentences

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

At September 30, 2022 At December 31, 2021

At March 31, 2023 At December 31, 2022

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

8 unchanged sentences

Certificates of deposit outstanding mature as follows:

(in thousands) September 30, 2022

(in thousands) March 31, 2023

Within one year $ 2,143,208

5 unchanged sentences

Total $ 2,660,243

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 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 September 30, 2022 and December 31, 2021 are as follows:

HomeStreet Statutory Trust

(dollars in thousands) I II III IV

Date issued June 2005 September 2005 February 2006 March 2007

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

Interest rate 3 MO LIBOR + 1.70 %

3 MO LIBOR + 1.50 %

3 MO LIBOR + 1.37 %

3 MO LIBOR + 1.68 %

Maturity date June 2035 December 2035 March 2036 June 2037

Call option (1)

Quarterly Quarterly Quarterly Quarterly

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

The aggregate amount of certificate of deposits in denominations of more than the FDIC limit of $250 thousand at March 31, 2023 and December 31, 2022 were $ 186 million and $ 189 million, respectively.

There were $ 885 million and $ 1.4 billion of brokered deposits at March 31, 2023 and December 31, 2022, respectively.

NOTE 5– DERIVATIVES AND HEDGING ACTIVITIES:

1 unchanged sentence

The notional amounts and fair values for derivatives, which are included in other assets or accounts payable and other liabilities on the consolidated balance sheet, consist of the following:

At September 30, 2022

At March 31, 2023

Notional amount Fair value derivatives

16 unchanged sentences

Futures 23,000 18 —

Options $ 14,000 218 —

Total derivatives before netting $ 342,248 $ 13,763 $ ( 13,280 )

Netting adjustment/Cash collateral (1)

( 12,870 ) 101

Carrying value on consolidated balance sheet $ 893 $ ( 13,179 )

(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.

(1) Includes net cash collateral received of $ 11.0 million and $ 12.8 million at March 31, 2023 and December 31, 2022, respectively.

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

1 unchanged sentence

Carrying value

At September 30, 2022

At March 31, 2023

Derivative assets $ 11,868 $ ( 10,801 ) $ 1,067

3 unchanged sentences

Derivative liabilities ( 13,280 ) 101 ( 13,179 )

(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.

(1) Includes net cash collateral received of $ 11.0 million and received of $ 12.8 million at March 31, 2023 and December 31, 2022, respectively.

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

Receivables related to cash collateral that has been paid to counterparties is included in other assets.

Payables related to cash collateral that has been received from counterparties is included in accounts payable and other liabilities.

Receivables related to cash collateral that has been paid to counterparties are included in other assets.

Payables related to cash collateral that has been received from counterparties are included in accounts payable and other liabilities.

Interest is owed on amounts received from counterparties and we earn interest on cash paid to counterparties.

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

At 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.

At March 31, 2023 and December 31, 2022, the Company had liabilities of $ 11.0 million and $ 12.8 million, respectively, in cash collateral received from counterparties and receivables of $ 0.03 million and $ 0.03 million, respectively, in cash collateral paid to counterparties.

The following table presents the net gain (loss) recognized on economic hedge derivatives, within the respective line items in the consolidated income statements for the periods indicated:

Quarter Ended September 30, Nine Months Ended September 30,

Quarter Ended March 31,

(in thousands) 2023 2022

1 unchanged sentence

Net gain (loss) on loan origination and sale activities (1)

$ 958 $ ( 1,165 ) $ 8,221 $ ( 4,574 )

Loan servicing income (loss) (2)

2 unchanged sentences

(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 September 30, 2022 and December 31, 2021 were $ 238 million and $ 287 million, respectively.

(3) Impact of interest rate swap agreements executed with commercial banking customers and broker dealer counterparties.

The notional amount of open interest rate swap agreements executed with commercial banking customers and broker dealer counterparties at March 31, 2023 and December 31, 2022 were $ 240 million and $ 237 million, respectively.

NOTE 6– MORTGAGE BANKING OPERATIONS:

LHFS consisted of the following:

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

(in thousands) At March 31, 2023 At December 31, 2022

Single family $ 22,690 $ 14,075

2 unchanged sentences

Loans sold consisted of the following for the periods indicated:

Quarter Ended September 30, Nine Months Ended September 30,

Quarter Ended March 31,

(in thousands) 2023 2022

3 unchanged sentences

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

Quarter Ended September 30, Nine Months Ended September 30,

Quarter Ended March 31,

(in thousands) 2023 2022

5 unchanged sentences

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

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

(in thousands) At March 31, 2023 At December 31, 2022

Single family $ 5,424,909 $ 5,436,899

6 unchanged sentences

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

Quarter Ended September 30, Nine Months Ended September 30,

Quarter Ended March 31,

(in thousands) 2023 2022

1 unchanged sentence

Additions, net of adjustments (1)

838 ( 183 ) 1,329 ( 229 )

Realized (losses) recoveries, net (2)

6 unchanged sentences

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.

Advances of $ 2.8 million and $ 1.6 million were recorded in other assets as of March 31, 2023 and December 31, 2022, respectively.

When the Company has the unilateral right to repurchase Ginnie Mae pool loans it has previously sold (generally loans that are more than 90 days past due), the Company records the balance of the loans as other assets and other liabilities.

At September 30, 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.

At March 31, 2023 and December 31, 2022, delinquent or defaulted mortgage loans currently in Ginnie Mae pools that the Company has recognized on its consolidated balance sheets totaled $ 5.7 million and $ 6.9 million, respectively.

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

Quarter Ended September 30, Nine Months Ended September 30,

Quarter Ended March 31,

(in thousands) 2023 2022

4 unchanged sentences

Amortization of multifamily and SBA MSRs ( 1,554 ) ( 1,712 )

3,733 1,560 11,572 5,367

Risk management, single family MSRs:

2 unchanged sentences

Net gain (loss) from economic hedging ( 81 ) ( 10,183 )

( 992 ) 454 ( 1,866 ) ( 674 )

Loan servicing income (loss) $ 2,741 $ 2,014 $ 9,706 $ 4,693

Loan servicing income $ 3,039 $ 3,304

(1) Represents changes due to collection/realization of expected cash flows and curtailments.

1 unchanged sentence

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

Quarter Ended September 30, Nine Months Ended September 30,

Quarter Ended March 31,

(in thousands) 2023 2022

1 unchanged sentence

Additions and amortization:

1,453 5,166 7,664 19,507

Amortization (1)

1 unchanged sentence

Net additions and amortization

( 659 ) 587 ( 388 ) 4,054

Changes in fair value assumptions (2)

4 unchanged sentences

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

Quarter Ended September 30, Nine Months Ended September 30,

Quarter Ended March 31,

(rates per annum) (1)

2022 2021 2022 2021

Constant prepayment rate ("CPR") (2)

4 unchanged sentences

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

At September 30, 2022 At December 31, 2021

At March 31, 2023 At December 31, 2022

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 September 30, 2022

(dollars in thousands) At March 31, 2023

Fair value of single family MSR $ 75,701

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 September 30, Nine Months Ended September 30,

Quarter Ended March 31,

(in thousands) 2023 2022

8 unchanged sentences

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

As of September 30, 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.

As of March 31, 2023 and December 31, 2022, the total unpaid principal balance of loans sold under this program was $ 1.8 billion.

The Company's reserve liability related to this arrangement totaled $ 0.6 million at both March 31, 2023 and December 31, 2022.

There were no actual losses incurred under this arrangement during the quarters ended March 31, 2023 and 2022.

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 September 30, 2022 and December 31, 2021.

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

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 $ 5.4 billion at both March 31, 2023 and December 31, 2022.

At March 31, 2023 and December 31, 2022, 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 $ 1.8 million and $ 2.2 million, respectively.

1 unchanged sentence

The following table summarizes the calculation of earnings per share:

Quarter Ended September 30, Nine Months Ended September 30,

Quarter Ended March 31,

(in thousands, except share and per share data) 2023 2022

8 unchanged sentences

Diluted earnings per share 0.27 1.01

(1) Excluded from the computation of diluted earnings per share (due to their antidilutive effect) for the quarter ended March 31, 2023 and 2022 were certain unvested RSUs and PSUs.

Based on a weighted average basis, 251,821 and 13,040 unvested stock units convertible into shares of common stock were excluded for the quarters ended March 31, 2023 and 2022, respectively, because their effect would have been anti-dilutive.

NOTE 9– FAIR VALUE MEASUREMENT:

52 unchanged sentences

• Interest rate volatilities Level 2 recurring fair value measurement.

Interest rate lock commitments The fair value considers several factors including:

IRLC The fair value considers several factors including:

• Fair value of the underlying loan based on quoted prices in the secondary market, when available.

3 unchanged sentences

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

At September 30, 2022

At March 31, 2023

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

27 unchanged sentences

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

Trading securities - U.S.

Treasury securities $ 18,997 $ 18,997 $ — $ —

Investment securities AFS

8 unchanged sentences

Treasury securities 19,934 — 19,934 —

Agency debentures 27,478 — 27,478 —

Single family LHFS 14,075 — 14,075 —

2 unchanged sentences

Futures 18 18 — —

Options 218 218 —

Forward sale commitments 293 — 293 —

6 unchanged sentences

Total liabilities $ 13,280 $ — $ 13,244 $ 36

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

There were no transfers between levels of the fair value hierarchy during the quarters ended March 31, 2023 and 2022.

Level 3 Recurring Fair Value Measurements

The Company's level 3 recurring fair value measurements consist of investment securities AFS, single family MSRs, single family LHFI where fair value option was elected, certain single family LHFS and interest rate lock commitments, which are accounted for as derivatives.

For information regarding fair value changes and activity for single family MSRs during the quarters and nine months ended September 30, 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 ended March 31, 2023 and 2022, see Note 6, 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).

4 unchanged sentences

Because these inputs are not observable in market trades, the fall-out factor and value of servicing are considered to be level 3 inputs.

The fair value of IRLCs decreases in value upon an increase in the fall-out factor and increases in value upon an increase in the value of servicing.

The fair value of IRLCs decreases in

value upon an increase in the fall-out factor and increases in value upon an increase in the value of servicing.

Changes in the fall-out factor and value of servicing do not increase or decrease based on movements in other significant unobservable inputs.

9 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 $ 5.8 million and $ 7.3 million at September 30, 2022 and December 31, 2021, respectively.

The total amount of held for investment loans where fair value option election was made was $ 5.2 million and $ 5.9 million at March 31, 2023 and December 31, 2022, respectively.

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

2 unchanged sentences

Input Low High Weighted Average

September 30, 2022

March 31, 2023

Investment securities AFS $ 2,030 Income approach Implied spread to benchmark interest rate curve

9 unchanged sentences

Value of servicing 0.54 % 1.11 % 0.95 %

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

We had no LHFS where the fair value was not derived with significant observable inputs at March 31, 2023 and December 31, 2022.

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

1 unchanged sentence

Ending balance

Quarter Ended September 30, 2022

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

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

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

Nine Months Ended September 30, 2022

Quarter Ended March 31, 2023

Investment securities AFS $ 2,009 $ — $ — $ ( 48 ) $ 69 $ 2,030

Single family LHFI 5,868 — — ( 682 ) 45 5,231

Nine Months Ended September 30, 2021

Quarter Ended March 31, 2022

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

2 unchanged sentences

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

Quarter Ended September 30, Nine Months Ended September 30,

Quarter Ended March 31,

(in thousands) 2023 2022

17 unchanged sentences

Given these variations, changes in these unobservable inputs are generally not a reliable indicator for how fair value will increase or decrease from period to period.

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 Ended September 30, 2021

$ 1,121 $ ( 8 )

At or for the Nine Months Ended September 30, 2021

At or for the Quarter Ended March 31, 2023

$ 3,793 $ ( 159 )

At or for the Quarter Ended March 31, 2022

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

1 unchanged sentence

The following presents the carrying value, estimated fair value and the levels of the fair value hierarchy for the Company's financial instruments other than assets and liabilities measured at fair value on a recurring basis:

At September 30, 2022

At March 31, 2023

(in thousands) Carrying

27 unchanged sentences

Gains and losses from such changes in fair value are recognized in net gain on mortgage loan origination and sale activities within noninterest income.

The change in fair value of loans held for sale is primarily driven by changes in interest rates subsequent to loan funding and changes in fair value of the related servicing asset, resulting in revaluations adjustments to the recorded fair value.

The change in fair value of loans held for sale is

primarily driven by changes in interest rates subsequent to loan funding and changes in fair value of the related servicing asset, resulting in revaluations adjustments to the recorded fair value.

The use of the fair value option allows the change in the fair value of loans to more effectively offset the change in fair value of derivative instruments that are used as economic hedges of loans held for sale.

The following table presents the difference between the aggregate fair value and the aggregate unpaid principal balance of loans held for sale accounted for under the fair value option:

At September 30, 2022 At December 31, 2021

At March 31, 2023 At December 31, 2022

(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 $ 22,690 $ 22,243 $ 447 $ 14,075 $ 13,914 $ 161

NOTE 10– BORROWINGS:

During the first quarter of 2023, the Company borrowed $ 300 million from the Federal Reserve Bank (“FRB”) under the Bank Term Funding Program (“BTFP”).

The BTFP offers up to one year fixed-rate term borrowings that are prepayable without penalty.

The balances, maturity and rate of the outstanding borrowings from the FHLB and the FRB BTFP were as follows at March 31, 2023:

(dollars in thousands) Amount Weighted Average Rate

Within one year $ 878,000 4.84 %

One to three years 450,000 4.56 %

Three through five years 550,000 4.35 %

Total $ 1,878,000 4.63 %

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.

On April 24, 2023, the Board authorized a dividend of $ 0.10 per share, payable on May 24, 2023 to shareholders of record on May 10, 2023.

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