What changed in this filing

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Item 1. Financial Statements

2023-11-07 compared with 2023-08-04 · 175 added, 135 removed, 1201 unchanged (21% of the section changed)

3 unchanged sentences

CONSOLIDATED BALANCE SHEETS

June 30, 2023 December 31, 2022

September 30, 2023 December 31, 2022

(in thousands, except share data) (Unaudited)

32 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) 2023 2022 2023 2022

43 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) 2023 2022 2023 2022

20 unchanged sentences

income (loss) Total shareholders' equity

For the quarter ended June 30, 2022

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

For the quarter ended September 30, 2022

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

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

Net income — — 58,039 — 58,039

6 unchanged sentences

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

Balance, September 30, 2022

18,717,557 $ 225,725 $ 432,995 $ ( 105,931 ) $ 552,789

For the quarter ended September 30, 2023

Balance, June 30, 2023

For the quarter ended June 30, 2023

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

Net income (loss) — — ( 31,442 ) — ( 31,442 )

18,776,597 $ 228,260 $ 400,132 $ ( 100,769 ) $ 527,623

Net income — — 2,295 — 2,295

Share-based compensation expense — 712 — — 712

4 unchanged sentences

Common stock repurchased

Balance, September 30, 2023

18,794,030 $ 228,972 $ 400,533 $ ( 127,018 ) $ 502,487

Balance, June 30, 2023 18,776,597 $ 228,260 $ 400,132 $ ( 100,769 ) $ 527,623

For the six months ended June 30, 2023

For the nine months ended September 30, 2023

Balance, December 31, 2022

18,730,380 $ 226,592 $ 435,085 $ ( 99,530 ) $ 562,147

Net income (loss) — — ( 24,089 ) — ( 24,089 )

7 unchanged sentences

( 13,094 ) ( 316 ) — — ( 316 )

Balance, June 30, 2023 18,776,597 $ 228,260 $ 400,132 $ ( 100,769 ) $ 527,623

Balance, September 30, 2023

18,794,030 $ 228,972 $ 400,533 $ ( 127,018 ) $ 502,487

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) 2023 2022

13 unchanged sentences

Share-based compensation expense 2,696 3,239

Deferred income tax expense 5,261 6,991

Deferred income tax expense (credit)

12,149 ( 4,306 )

Origination of LHFS ( 288,479 ) ( 600,037 )

2 unchanged sentences

Origination of MSRs ( 2,721 ) ( 10,945 )

Net gain on sale of loans originated as LHFI — ( 88 )

Change in fair value of MSRs 3,080 ( 8,563 )

Amortization of servicing rights 4,363 5,877

Gain on sale of OREO

Gain on sale of branches — ( 4,270 )

Net change in trading securities ( 2,584 ) ( 21,104 )

9 unchanged sentences

Proceeds from sale of OREO 1,725 952

Proceeds from sale of loans originated as LHFI — 4,613

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

Net decrease (increase) in LHFI 4,171 ( 1,727,944 )

4 unchanged sentences

Net cash provided by (used in) investing activities 392,276 ( 2,378,854 )

Six Months Ended June 30,

Nine Months Ended September 30,

(in thousands) 2023 2022

9 unchanged sentences

Net cash provided by (used in) financing activities ( 236,908 ) 2,161,441

Net increase in cash and cash equivalents 100,273 10,063

Net increase (decrease) in cash and cash equivalents

153,876 ( 7,958 )

Cash and cash equivalents, beginning of year 72,828 65,214

42 unchanged sentences

We applied an income-based valuation approach using the Company’s strategic forecast, general market growth assumptions and other market-based inputs, which determined, that goodwill was impaired as the indicated enterprise fair value of the Company was lower than the book value of equity as of the measurement date.

As a result, we recorded an impairment charge of our entire goodwill balance of $ 39.9 million as the deficit of enterprise fair value to book value of equity exceeded the amount of goodwill on the balance sheet.

As a result, in the second quarter of 2023, we recorded an impairment charge of our entire goodwill balance of $ 39.9 million as the deficit of enterprise fair value to book value of equity exceeded the amount of goodwill on the balance sheet.

This was a non-cash charge to earnings and had no impact on tangible or regulatory capital, cash flows or our liquidity position.

4 unchanged sentences

Goodwill impairment charge ( 39,857 )

Balance June 30, 2023 $ —

Balance September 30, 2023 $ —

Recent Accounting Developments

19 unchanged sentences

ASU 2023-02 is not expected to have a material impact on the Company’s financial position or results of operations.

In October 2023, the FASB issued ASU 2023-06, "Disclosure Improvements - Codification Amendments in Response to the SEC's Disclosure Update and Simplification Initiative." The amendments in ASU 2023-06 modify the disclosure or presentation requirements of a variety of Topics in the Codification, with the intention of clarifying or improving them and align the requirements in the codification with the SEC's regulations (and will be removed from the SEC regulations).

ASU 2023-06 should be adopted prospectively and the effective date varies and is determined for each individual disclosure based on the effective date of the SEC's removal of the related disclosure.

ASU 2023-06 will not have an impact on the Company's financial position or results of operation as it is disclosure only.

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 June 30, 2023

At September 30, 2023

(in thousands) Amortized

24 unchanged sentences

$ 2,441 $ — $ ( 56 ) $ 2,385

At June 30, 2023, and December 31, 2022, the Company held $ 40 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 with investment securities on the balance sheet.

For the quarters ended June 30, 2023 and 2022, net losses of $ 1.1 million and $ 3.1 million on trading securities, respectively, and for the six months ended June 30, 2023 and 2022, net losses of $ 0.4 million and $ 3.9 million on trading securities, respectively, were recorded in servicing income.

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

At September 30, 2023, and December 31, 2022, the Company held $ 22 million and $ 19 million, respectively, of trading securities, consisting of US Treasury notes used as economic hedges of our single family mortgage servicing rights, which are carried at fair value and included with investment securities on the balance sheet.

For the quarters ended September 30, 2023 and 2022, net losses of $ 0.9 million and $ 2.6 million on trading securities, respectively, and for the nine months ended September 30, 2023 and 2022, net losses of $ 1.4 million and $ 6.4 million on trading securities, respectively, were recorded in servicing income.

MBS and CMOs represent securities issued or guaranteed 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, 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.

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, 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 June 30, 2023

At September 30, 2023

Less than 12 months 12 months or more Total

23 unchanged sentences

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 Company has evaluated AFS securities in an unrealized loss position and has determined 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 June 30,

2023 or December 31, 2022.

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

In addition, as of September 30, 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 June 30, 2023

At September 30, 2023

Within one year After one year

38 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, 2023 and December 31, 2022 was 3.12 % and 3.08 %, respectively.

The weighted average yield of MBS and CMOs as of September 30, 2023 and December 31, 2022 was 3.09 % and 3.08 %, 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) 2023 2022 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 June 30, 2023 At December 31, 2022

(in thousands) At September 30, 2023 At December 31, 2022

Federal Reserve Bank to secure borrowings $ 647,933 $ —

3 unchanged sentences

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

Tax-exempt interest income on investment securities was $ 2.8 million and $ 3.1 million for the quarters ended June 30, 2023 and 2022, respectively and $ 5.6 million and $ 5.8 million for the six months ended June 30, 2023 and 2022, respectively.

Tax-exempt interest income on investment securities was $ 2.8 million and $ 3.1 million for the quarters ended September 30, 2023 and 2022, respectively and $ 8.4 million and $ 8.9 million for the nine months ended September 30, 2023 and 2022, respectively.

NOTE 3- LOANS AND CREDIT QUALITY:

3 unchanged sentences

LHFI consists of the following:

(in thousands) At June 30, 2023 At December 31, 2022

(in thousands) At September 30, 2023 At December 31, 2022

Non-owner occupied CRE $ 633,083 $ 658,085

14 unchanged sentences

$ 7,400,501 $ 7,384,820

(1) Includes $ 1.3 million and $ 5.9 million at June 30, 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 $ 5.8 billion and $ 5.2 billion at June 30, 2023 and December 31, 2022, respectively, were pledged to secure borrowings from the Federal Home Loan Bank ("FHLB") and loans totaling $ 589 million and $ 497 million at June 30, 2023 and December 31, 2022, respectively, were pledged to secure borrowings from the Federal Reserve Bank of San Francisco ("FRBSF").

(1) Includes $ 1.2 million and $ 5.9 million at September 30, 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 September 30, 2023 and December 31, 2022, respectively, were pledged to secure borrowings from the Federal Home Loan Bank ("FHLB") and loans totaling $ 528 million and $ 497 million at September 30, 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 June 30, 2023, single family and multifamily loans in the state of Washington and California, represented 10 % and 36 % of the total LHFI portfolio, respectively.

At September 30, 2023, single family and multifamily loans in the state of Washington and California represented 11 % 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.

2 unchanged sentences

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.

As of June 30, 2023, the historical expected loss rates decreased when compared to December 31, 2022 due to product mix risk composition changes.

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

As of June 30, 2023, the Bank expects deterioration in collateral values and economic conditions over the two-year forecast period in the markets in which it operates.

As of September 30, 2023, the historical expected loss rates decreased when compared to December 31, 2022 due to product mix risk composition changes.

During the third quarter of 2023, expected loss rates decreased due to product mix risk composition changes, and the qualitative factors decreased due to economic conditions performing better than expected and improved single-family collateral forecasts offset slightly by deteriorated commercial collateral conditions.

As of September 30, 2023, the Bank expects improvement in commercial collateral values and deterioration in single family 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 $ 1.7 million and $ 2.2 million at June 30, 2023 and December 31, 2022, respectively.

The allowance for unfunded commitments was $ 1.6 million and $ 2.2 million at September 30, 2023 and December 31, 2022, respectively.

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

Accrued interest on LHFI was $ 27.0 million and $ 26.9 million at June 30, 2023 and December 31, 2022, respectively, and was reported in other assets in the consolidated balance sheets.

Accrued interest on LHFI was $ 27.7 million and $ 26.9 million at September 30, 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 June 30, Six Months Ended June 30,

Quarter Ended September 30, Nine Months Ended September 30,

(in thousands) 2023 2022 2023 2022

13 unchanged sentences

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

Quarter Ended June 30, 2023

Quarter Ended September 30, 2023

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

16 unchanged sentences

Total ACL $ 41,500 $ ( 635 ) $ 125 $ ( 990 ) $ 40,000

Quarter Ended June 30, 2022

Quarter Ended September 30, 2022

(in thousands) Beginning balance Charge-offs Recoveries Provision

17 unchanged sentences

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

Six Months Ended June 30, 2023

Nine Months Ended September 30, 2023

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

16 unchanged sentences

Total ACL $ 41,500 $ ( 1,574 ) $ 364 $ ( 290 ) $ 40,000

Six Months Ended June 30, 2022

Nine Months Ended September 30, 2022

(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, 2023

At September 30, 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 June 30, 2023

At September 30, 2023

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

82 unchanged sentences

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

For the Six Months Ended June 30, 2023

Nine Months Ended September 30, 2023

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

8 unchanged sentences

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

At June 30, 2023

At September 30, 2023

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

25 unchanged sentences

The following table presents nonaccrual status for loans:

At June 30, 2023 At December 31, 2022

At September 30, 2023 At December 31, 2022

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

17 unchanged sentences

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

At June 30, 2023

At September 30, 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 loans whose repayments are insured by the FHA or guaranteed by the VA or Small Business Administration ("SBA") of $ 11.3 million and $ 10.6 million at June 30, 2023 and December 31, 2022, respectively.

(1) Includes loans whose repayments are insured by the FHA or guaranteed by the VA or Small Business Administration ("SBA") of $ 10.2 million and $ 10.6 million at September 30, 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 $ 1.3 million and $ 5.9 million of loans at June 30, 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.

(3) Includes $ 1.2 million and $ 5.9 million of loans at September 30, 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

1 unchanged sentence

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

The granting of modifications in the quarters and six months ended June 30, 2023 and 2022 did not have a material impact on the ACL.

The following tables provide information related to loans modified during the quarters and six months ended June 30, 2023 and 2022 to borrowers experiencing financial difficulty, disaggregated by class of financing receivable and type of concession granted:

The granting of modifications in the quarters and nine months ended September 30, 2023 and 2022 did not have a material impact on the ACL.

The following tables provide information related to loans modified during the quarters and nine months ended September 30, 2023 and 2022 to borrowers experiencing financial difficulty, disaggregated by class of financing receivable and type of concession granted:

Significant Payment Delay

Quarter Ended June 30, Six Months Ended June 30,

Quarter Ended September 30, Nine Months Ended September 30,

2023 2022 2023 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 Amortized Cost Basis at Period End % of Total Class of Financing Receivable Amortized Cost Basis at Period End % of Total Class of Financing Receivable

(in thousands, except percentages) Amortized Cost Basis at Period End % of Total Class of Financing Receivable Amortized Cost Basis at Period End % of Total Class of Financing Receivable 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 $ 847 0.08 % $ 682 0.08 % $ 847 0.08 % $ 1,209 0.13 %

1 unchanged sentence

Term Extension

Quarter Ended June 30, Six Months Ended June 30,

Quarter Ended September 30, Nine Months Ended September 30,

2023 2022 2023 2022

Commercial business $ 9,663 2.51 % — — % $ 10,396 2.70 % $ 1,570 0.43 %

Single family 273 0.02 % — — % 273 0.02 % 270 0.03 %

Interest Rate Reduction and Significant Payment Delay

Quarter Ended September 30, Nine Months Ended September 30,

2023 2022 2023 2022

Commercial business $ — — % $ 477 0.13 % $ — — % $ 477 0.13 %

Interest Rate Reduction and Term Extension

Quarter Ended June 30, Six Months Ended June 30,

Quarter Ended September 30, Nine Months Ended September 30,

2023 2022 2023 2022

Single family $ — — % $ — — % $ — — % $ 819 0.09 %

Significant Payment Delay and Term Extension

Quarter Ended June 30, Six Months Ended June 30,

Quarter Ended September 30, Nine Months Ended September 30,

2023 2022 2023 2022

Non-owner occupied CRE $ 16,440 2.60 % $ — — % $ 16,440 2.60 % $ — — %

Construction/land development 3,871 0.68 % — — % 3,871 0.68 % — — %

Single family 1,167 0.11 % 4,033 0.44 % 2,284 0.21 % 13,325 1.47 %

1 unchanged sentence

Interest Rate Reduction, Significant Payment Delay and Term Extension

Quarter Ended June 30, Six Months Ended June 30,

Quarter Ended September 30, Nine Months Ended September 30,

2023 2022 2023 2022

Single family $ — — % $ 294 0.03 % $ 192 0.02 % $ 7,185 0.79 %

1 unchanged sentence

Interest Rate Reduction

Quarter Ended June 30, Six Months Ended June 30,

Quarter Ended September 30, Nine Months Ended September 30,

2023 2022 2023 2022

Single family Reduced weighted-average contractual interest rate from 5.25 % to 5.00 %.

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 %.

Reduced weighted-average contractual interest rate from 5.25 % to 5.00 %.

1 unchanged sentence

Significant Payment Delay

Quarter Ended June 30, Six Months Ended June 30,

Quarter Ended September 30, Nine Months Ended September 30,

2023 2022 2023 2022

Non-owner occupied CRE The weighted average duration of loan payments deferred is 1.6 years.

— The weighted average duration of loan payments deferred is 1.6 years.

Construction/land development The weighted average duration of loan payments deferred is 2.1 years.

— The weighted average duration of loan payments deferred is 2.1 years.

Single Family Provided payment deferrals to borrowers.

9 unchanged sentences

Term Extension

Quarter Ended June 30, Six Months Ended June 30,

Quarter Ended September 30, Nine Months Ended September 30,

2023 2022 2023 2022

Commercial business Added a weighted average 0.3 years to the life of loans, which reduced the monthly payment amounts to the borrowers.

Non-owner occupied CRE Added a weighted average 1.6 years to the life of loans, which reduced the monthly payment amounts to the borrowers.

— Added a weighted average 1.6 years to the life of loans, which reduced the monthly payment amounts to the borrowers.

Construction/land development Added a weighted average 2.1 years to the life of loans, which reduced the monthly payment amounts to the borrowers.

— Added a weighted average 2.1 years to the life of loans, which reduced the monthly payment amounts to the borrowers.

Commercial business Added a weighted average 1.1 years to the life of loans, which reduced the monthly payment amounts to the borrowers.

— Added a weighted average 1.2 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 3.4 years to the life of loans, which reduced the monthly payment amounts to the borrowers.

5 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 were classified as MBFDs on or after April 1, 2022 through March 31, 2023:

Payment Status (Amortized Cost Basis) at June 30, 2023

The following table depicts the payment status of loans that were classified as MBFDs on or after July 1, 2022 through June 30, 2023:

Payment Status (Amortized Cost Basis) at September 30, 2023

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

Non-owner occupied CRE $ 16,440 $ — $ —

Construction/land development 3,871 — —

Commercial business 14,335 — —

1 unchanged sentence

Total $ 42,736 $ 700 $ 518

The following tables provide the amortized cost basis as of June 30, 2023 of MBFDs on or after April 1, 2022 through March 31, 2023 and subsequently had a payment default:

The following tables provide the amortized cost basis as of September 30, 2023 of MBFDs on or after July 1, 2022 through June 30, 2023 and subsequently had a payment default:

Amortized Cost Basis of Modified Loans That Subsequently Defaulted

Quarter Ended June 30, 2023

Quarter Ended September 30, 2023

(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

Commercial business $ — $ 2,990 $ — $ — $ —

Single family 235 — — 634 70

Amortized Cost Basis of Modified Loans That Subsequently Defaulted

Six Months Ended June 30, 2023

Nine Months Ended September 30, 2023

Commercial business $ — $ 2,990 $ — $ — $ —

Single family 235 — — 2,879 1,162

The following tables presents loans that were modified from January 1, 2022 through June 30, 2022 and subsequently had a payment default.

Amortized Cost Basis of Modified Loans That Subsequently Defaulted

Quarter Ended September 30, 2022

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, 2023 At December 31, 2022

At September 30, 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) June 30, 2023

(in thousands) September 30, 2023

Within one year $ 2,855,303

5 unchanged sentences

Total $ 2,947,378

The aggregate amount of certificate of deposits in denominations of more than the FDIC limit of $250 thousand at June 30, 2023 and December 31, 2022 were $ 177 million and $ 189 million, respectively.

There were $ 761 million and $ 1.4 billion of brokered deposits at June 30, 2023 and December 31, 2022, respectively.

The aggregate amount of certificate of deposits in denominations of more than the FDIC limit of $250 thousand at September 30, 2023 and December 31, 2022 were $ 162 million and $ 189 million, respectively.

There were $ 973 million and $ 1.4 billion of brokered deposits at September 30, 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 June 30, 2023

At September 30, 2023

Notional amount Fair value derivatives

21 unchanged sentences

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

(1) Includes net cash collateral received of $ 13.0 million and $ 12.8 million at June 30, 2023 and December 31, 2022, respectively.

(1) Includes net cash collateral received of $ 15.2 million and $ 12.8 million at September 30, 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 June 30, 2023

At September 30, 2023

Derivative assets $ 15,520 $ ( 14,908 ) $ 612

3 unchanged sentences

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

(1) Includes net cash collateral received of $ 13.0 million and $ 12.8 million at June 30, 2023 and December 31, 2022, respectively.

(1) Includes net cash collateral received of $ 15.2 million and $ 12.8 million at September 30, 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.

3 unchanged sentences

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

At June 30, 2023 and December 31, 2022, the Company had liabilities of $ 13.0 million and $ 12.8 million, respectively, in cash collateral received from counterparties and receivables of $ 0.01 million and $ 0.03 million, respectively, in cash collateral paid to counterparties.

At September 30, 2023 and December 31, 2022, the Company had liabilities of $ 15.2 million and $ 12.8 million, respectively, in cash collateral received from counterparties and receivables of $ 0.02 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 June 30, Six Months Ended June 30,

Quarter Ended September 30, Nine Months Ended September 30,

(in thousands) 2023 2022 2023 2022

4 unchanged sentences

( 247 ) ( 422 ) ( 1,475 ) ( 12,051 )

— 1 ( 1 ) 160

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

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

(2) Comprised of 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 and broker dealer counterparties.

The notional amount of open interest rate swap agreements executed with commercial banking customers and broker dealer counterparties at June 30, 2023 and December 31, 2022 were $ 244 million and $ 237 million, respectively.

The notional amount of open interest rate swap agreements executed with commercial banking customers and broker dealer counterparties at September 30, 2023 and December 31, 2022 were $ 239 million and $ 237 million, respectively.

NOTE 6– MORTGAGE BANKING OPERATIONS:

LHFS consisted of the following:

(in thousands) At June 30, 2023 At December 31, 2022

(in thousands) At September 30, 2023 At December 31, 2022

Single family $ 23,945 $ 14,075

2 unchanged sentences

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) 2023 2022 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 June 30, Six Months Ended June 30,

Quarter Ended September 30, Nine Months Ended September 30,

(in thousands) 2023 2022 2023 2022

5 unchanged sentences

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

(in thousands) At June 30, 2023 At December 31, 2022

(in thousands) At September 30, 2023 At December 31, 2022

Single family $ 5,349,832 $ 5,436,899

2 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) 2023 2022 2023 2022

9 unchanged sentences

Advances are also made to fund the foreclosure and collection costs of delinquent loans prior to the recovery of reimbursable amounts from investors or borrowers.

Advances of $ 3.1 million and $ 1.6 million were recorded in other assets as of June 30, 2023 and December 31, 2022, respectively.

Advances of $ 3.1 million and $ 1.6 million were recorded in other assets as of September 30, 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 June 30, 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 $ 4.8 million and $ 6.9 million, respectively.

At September 30, 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 $ 5.6 million and $ 6.9 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) 2023 2022 2023 2022

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) 2023 2022 2023 2022

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, 2023 At December 31, 2022

At September 30, 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 June 30, 2023

(dollars in thousands) At September 30, 2023

Fair value of single family MSR $ 76,470

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) 2023 2022 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 June 30, 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 $ 0.5 million and $ 0.6 million at June 30, 2023 and December 31, 2022, respectively.

There were no actual losses incurred under this arrangement during the quarters and six months ended June 30, 2023 and 2022.

As of September 30, 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 $ 0.5 million and $ 0.6 million at September 30, 2023 and December 31, 2022, respectively.

There were no actual losses incurred under this arrangement during the quarters and nine months ended September 30, 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 $ 5.4 billion at both June 30, 2023 and December 31, 2022.

At June 30, 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 $ 1.7 million and $ 2.2 million, respectively.

The total unpaid principal balance of loans sold on a servicing-retained basis that were subject to the terms and conditions of these representations and warranties totaled $ 5.3 billion and $ 5.4 billion as of September 30, 2023 and December 31, 2022, respectively.

At September 30, 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 $ 1.6 million and $ 2.2 million, respectively.

NOTE 8– EARNINGS PER SHARE:

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) 2023 2022 2023 2022

9 unchanged sentences

0.12 1.08 ( 1.28 ) 3.03

(1) Excluded from the computation of diluted earnings per share (due to their antidilutive effect) for the quarters and six months ended June 30, 2023 and 2022 were certain unvested RSUs and PSUs.

On a weighted average basis, 248,840 and 71,216 unvested stock units convertible into shares of common stock were excluded at June 30, 2023 and 2022, respectively, because their effect would have been anti-dilutive.

(1) Excluded from the computation of diluted earnings per share (due to their antidilutive effect) for the quarters and nine months ended September 30, 2023 and 2022 were certain unvested RSUs and PSUs.

On a weighted average basis, 236,628 and 118,746 unvested stock units convertible into shares of common stock were excluded at September 30, 2023 and 2022, respectively, because their effect would have been anti-dilutive.

NOTE 9– FAIR VALUE MEASUREMENT:

58 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, 2023

At September 30, 2023

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

15 unchanged sentences

Single family mortgage servicing rights 76,470 — — 76,470

Futures 5 5 — —

Forward sale commitments 479 — 479 —

3 unchanged sentences

Total assets $ 1,409,405 $ 21,598 $ 1,308,199 $ 79,608

Futures $ 2 $ 2 $ — $ —

Forward sale commitments 74 — 74 —

30 unchanged sentences

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

There were no transfers between levels of the fair value hierarchy during the quarters and six months ended June 30, 2023 and 2022.

There were no transfers between levels of the fair value hierarchy during the quarters and nine months ended September 30, 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 six months ended June 30, 2023 and 2022, see Note 6, Mortgage Banking Operations of this Quarterly Report on Form 10-Q.

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

17 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 $ 1.3 million and $ 5.9 million at June 30, 2023 and December 31, 2022, respectively.

The total amount of held for investment loans where fair value option election was made was $ 1.2 million and $ 5.9 million at September 30, 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

June 30, 2023

September 30, 2023

Investment securities AFS $ 1,795 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 June 30, 2023 and December 31, 2022.

We had no LHFS where the fair value was not derived with significant observable inputs at September 30, 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 June 30, 2023

Quarter Ended September 30, 2023

Investment securities AFS $ 1,913 $ — $ — $ ( 48 ) $ ( 70 ) $ 1,795

Single family LHFI 1,269 — — — ( 44 ) 1,225

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

Six Months Ended June 30, 2023

Nine Months Ended September 30, 2023

Investment securities AFS $ 2,009 $ — $ — $ ( 144 ) $ ( 70 ) $ 1,795

Single family LHFI 5,868 — — ( 4,607 ) ( 36 ) 1,225

Six Months Ended June 30, 2022

Nine Months Ended September 30, 2022

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

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) 2023 2022 2023 2022

19 unchanged sentences

(in thousands) Fair Value Total Gains (Losses)

At or for the Quarter Ended June 30, 2023

At or for the Quarter Ended September 30, 2023

$ 3,774 $ ( 579 )

At or for the Six Months Ended June 30, 2023

At or for the Nine Months Ended September 30, 2023

$ 3,774 $ ( 854 )

2 unchanged sentences

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, 2023

At September 30, 2023

(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, 2023 At December 31, 2022

At September 30, 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

1 unchanged sentence

NOTE 10– BORROWINGS:

During the first six months of 2023, the Company borrowed $ 745 million and repaid $ 100 million from the Federal Reserve Bank (“FRB”) under the Bank Term Funding Program (“BTFP”).

During the first nine months of 2023, the Company borrowed $ 745 million and repaid $ 100 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 June 30, 2023:

The balances, maturity and rate of the outstanding borrowings from the FHLB and the FRB BTFP were as follows at September 30, 2023:

(dollars in thousands) Amount Weighted Average Rate

4 unchanged sentences

NOTE 11– COMMITMENTS AND CONTINGENCIES:

As of June 30, 2023, HomeStreet was obligated on $ 146 million of letters of credit to the FHLB which are being used as collateral for public fund deposits.

As of September 30, 2023, HomeStreet was obligated on a $ 146 million letter of credit to the FHLB which is being used as collateral for public fund deposits.

NOTE 12– SUBSEQUENT EVENTS:

On July 27, 2023, the Board authorized a dividend of $ 0.10 per share, payable on August 23, 2023 to shareholders of record on August 9, 2023.

On October 26, 2023, the Board authorized a dividend of $ 0.10 per share, payable on November 22, 2023 to shareholders of record on November 8, 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