1 unchanged sentence
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
−Removed: To the shareholders and the Board of Directors of HomeStreet, Inc.
−Removed: Opinion on the Financial Statements
−Removed: We have audited the accompanying consolidated balance sheets of HomeStreet, Inc.
−Removed: and subsidiaries (the "Company") as of December 31, 2022 and 2021, the related consolidated income statements, statements of comprehensive income (loss), shareholders' equity, and cash flows for each of the three years in the period ended December 31, 2022, and the related notes (collectively referred to as the “financial statements”).
−Removed: In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2022 and 2021, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2022, in conformity with accounting principles generally accepted in the United States of America.
−Removed: We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 31, 2022, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated March 3, 2023, expressed an unqualified opinion on the Company's internal control over financial reporting.
−Removed: Basis for Opinion
−Removed: These financial statements are the responsibility of the Company’s management.
−Removed: Our responsibility is to express an opinion on the Company’s financial statements based on our audits.
−Removed: We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S.
+Added: Shareholders and the Board of Directors of HomeStreet, Inc.
+Added: Seattle, Washington
+Added: Opinions on the Financial Statements and Internal Control over Financial Reporting
+Added: We have audited the accompanying consolidated balance sheet of HomeStreet, Inc.
+Added: and Subsidiaries (the "Company") as of December 31, 2023, the related consolidated statements of income, comprehensive income (loss), shareholders’ equity, and cash flows for the period ended December 31, 2023, and the related notes (collectively referred to as the "financial statements").
+Added: We also have audited the Company’s internal control over financial reporting as of December 31, 2023, based on criteria established in Internal Control – Integrated Framework:
+Added: (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).
+Added: In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2023, and the results of its operations and its cash flows for the period ended December 31, 2023 in conformity with accounting principles generally accepted in the United States of America.
+Added: Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2023, based on criteria established in Internal Control – Integrated Framework:
+Added: (2013) issued by COSO.
+Added: Basis for Opinions
+Added: The Company’s management is responsible for these financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control over Financial Reporting.
+Added: Our responsibility is to express an opinion on the Company’s financial statements and an opinion on the Company’s internal control over financial reporting based on our audits.
+Added: We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are required to be independent with respect to the Company in accordance with the U.S.
federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
−Removed: We conducted our audits in accordance with the standards of the PCAOB.
−Removed: Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.
−Removed: Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks.
+Added: We conducted our audit in accordance with the standards of the PCAOB.
+Added: Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.
+Added: Our audit of the financial statements included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks.
Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements.
Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements.
−Removed: We believe that our audits provide a reasonable basis for our opinion.
+Added: Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk.
+Added: Our audit also included performing such other procedures as we considered necessary in the circumstances.
+Added: We believe that our audit provides a reasonable basis for our opinion.
+Added: Definition and Limitations of Internal Control Over Financial Reporting
+Added: A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.
+Added: A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company;
+Added: (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company;
+Added: and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
+Added: Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.
+Added: Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Critical Audit Matters
−Removed: The critical audit matters communicated below are matters arising from the current-period audit of the financial statements that were communicated or required to be communicated to the audit committee and that (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments.
+Added: The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that:
+Added: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments.
The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.
Allowance for Credit Losses for Loans Held for Investment – Economic Qualitative Factor – Refer to Notes 1 and 3 to the financial statements
−Removed: Critical Audit Matter Description
−Removed: The Company accounts for its allowance for credit losses (“ACL”) for loans held for investment in accordance with Accounting Standards Update No.
−Removed: 2016-13, Financial Instruments —Credit Losses (Topic 326):
−Removed: Measurement of Credit Losses on Financial Instruments, which requires the measurement of the current expected credit losses for financial assets held at the reporting date.
+Added: The Company accounts for its allowance for credit losses (“ACL”) on loans held for investment in accordance with Accounting Standards Codification Topic 326:
+Added: Financial Instruments – Credit Losses, which requires the measurement of the current expected credit losses for financial assets held at the reporting date.
The ACL is a valuation account that is deducted from the amortized cost basis to present the net amount expected to be collected on the loans.
1 unchanged sentence
Historical credit loss experience provides the basis for the estimation of expected credit losses.
+Added: As of December 31, 2023, the Company’s consolidated allowance for credit losses on loans was $40,500,000 and reversal of provision for credit losses on loans was $441,000 for the year then ended.
The Company's ACL model uses statistical analysis to determine life of loan default rates for the quantitative component and analyzes qualitative factors (“Q-Factors”) that assess the current loan portfolio and forecasted economic environment.
The Q-Factors adjust the expected historic loss rates for current and forecasted conditions that are not provided for in the historical loss information.
+Added: The Q-Factors require management to make significant judgment about the assumptions that are inherently uncertain.
The significant qualitative adjustment relates to the economic Q-Factor.
−Removed: We identified the estimate of the current conditions and reasonable and supportable forecast within the economic Q-Factor as a critical audit matter because of the significant judgment applied by management in determining the qualitative adjustment.
−Removed: Auditing the Company’s qualitative adjustment for the economic Q-Factor required a high degree of auditor judgment and an increased extent of effort.
−Removed: How the Critical Audit Matter Was Addressed in the Audit
−Removed: Our audit procedures related to the portion of the ACL attributable to the economic Q-Factor included the following:
−Removed: • We tested the effectiveness of controls over Q-Factor adjustments within the ACL model, including management’s review of the economic Q-Factor.
−Removed: • We assessed the appropriateness of the framework for the Q-Factor adjustments.
−Removed: • We tested the mathematical accuracy of Q-Factor adjustments within the ACL model.
−Removed: • We evaluated management’s forecasts used in its qualitative adjustments by comparing the forecasts to relevant external data.
−Removed: • We tested management’s process to evaluate the relationship between changes in economic data and historical credit losses and to determine qualitative adjustments attributable to the economic Q-Factor by evaluating whether, and to what extent, the current and forecasted conditions warranted a qualitative adjustment.
+Added: We identified auditing of the qualitative adjustment for the economic Q-Factor as a critical audit matter because of the significant judgments applied by management in determining the qualitative adjustment.
+Added: In addition, auditing the Company’s qualitative adjustment for the economic Q-Factor required a high degree of auditor judgment and an increased extent of effort.
+Added: The primary audit procedures we performed to address this critical audit matter included the following:
+Added: • Tested the design and operating effectiveness of controls over Q-Factor adjustments within the ACL model, including controls addressing:
+Added: ◦ Management’s review of the reasonableness of assumptions and judgments, including the qualitative risk adjustments used to derive the economic Q-Factor.
+Added: ◦ Management’s review of the calculation of Q-Factor adjustments, including the application of the economic Q-Factor.
+Added: ◦ Management’s evaluation of the relevance and reliability of data utilized in the calculation of the economic Q-Factor.
+Added: • Tested the mathematical accuracy of economic Q-Factor adjustments within the ACL model.
+Added: • Tested the relevance and reliability of the data used in the determination of economic Q-Factor adjustments.
+Added: • Evaluated the reasonableness of management’s assumptions and judgments used in the determination of the economic Q-Factor adjustments and the resulting allocation to the qualitative allowance for the ACL on loans.
Single Family Mortgage Servicing Rights — Projected Prepayment Speed and Discount Rate Assumptions — Refer to Notes 1, 9, and 13 to the financial statements
−Removed: Critical Audit Matter Description
The Company initially records, and subsequently measures, single family mortgage servicing rights (“MSRs”) at fair value and categorizes its single family MSRs as “Level 3” financial instruments.
−Removed: Management uses a valuation model that calculates the present value of estimated future net servicing cash flows to estimate the fair value of single family MSRs.
Changes in the fair value of single family MSRs result from changes in (1) model inputs and assumptions and (2) modeled amortization, representing the collection and realization of expected cash flows and curtailments over time.
−Removed: The significant model inputs used to estimate the fair value of single family MSRs include assumptions regarding projected prepayment speeds and discount rates.
+Added: The model inputs used to estimate the fair value of single family MSRs include assumptions regarding projected prepayment speeds and discount rates.
The Company's methodology for estimating the fair value of single family MSRs is highly sensitive to changes in these assumptions.
−Removed: We identified the projected prepayment speed and discount rate assumptions used in the single family MSRs valuation as a critical audit matter because of the significant judgment applied by management in determining these assumptions.
−Removed: Auditing the Company’s single family MSRs valuation required a high degree of auditor judgment and an increased extent of effort, including the need to involve our fair value specialists to evaluate the reasonableness of management’s assumptions related to the selection of projected prepayment speeds and discount rates used in the valuation of the single family MSRs.
−Removed: How the Critical Audit Matter Was Addressed in the Audit
−Removed: Our audit procedures related to the reasonableness of projected prepayment speed and discount rate assumptions used in the valuation of the single family MSRs included the following:
−Removed: • We tested the effectiveness of controls over the fair value of single family MSRs, including controls over management’s review of the projected prepayment speeds and discount rates.
−Removed: • We compared management’s estimate of fair value for selected pools of single family MSRs to a fair value estimate independently determined by our fair value specialists using projected prepayment speeds and discount rates obtained from market survey data.
−Removed: • We compared management’s single family MSR fair value estimate and projected prepayment speed and discount rate assumptions to a third-party valuation report for the same portfolio.
−Removed: • We performed analytical procedures to compare changes in certain interest and mortgage rates to changes in single family MSR values and projected prepayment speeds.
+Added: We identified the auditing of the projected prepayment speed and discount rate assumptions used in the single family MSRs valuation as a critical audit matter because of the significant judgment applied by management in evaluating these assumptions.
+Added: In addition, auditing the Company’s single family MSRs valuation required a high degree of auditor judgment and an increased extent of effort, including the need to involve third party fair value specialists to evaluate the reasonableness of management’s assumptions related to the selection of projected prepayment speeds and discount rates used in the valuation of the single family MSRs.
+Added: The primary audit procedures we performed to address this critical audit matter included the following:
+Added: • Tested the design and operating effectiveness of controls related to the appropriateness of the fair value of single family MSRs, including management’s review of the projected prepayment speeds and discount rates.
+Added: • Compared management’s estimate of fair value of single family MSRs to a fair value estimate independently determined by a third party fair value specialist using projected prepayment speeds and discount rates obtained from market survey data.
+Added: /s/ Crowe LLP
+Added: We have served as the Company's auditor since 2023.
+Added: Los Angeles, California
+Added: March 6, 2024
+Added: REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
+Added: To the shareholders and the Board of Directors of HomeStreet, Inc.
+Added: Opinion on the Financial Statements
+Added: We have audited the accompanying consolidated balance sheet of HomeStreet, Inc.
+Added: and subsidiaries (the "Company") as of December 31, 2022, the related consolidated income statements, statements of comprehensive income (loss), shareholders' equity, and cash flows for each of the two years in the period ended December 31, 2022, and the related notes (collectively referred to as the “financial statements”).
+Added: In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2022, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2022, in conformity with accounting principles generally accepted in the United States of America.
+Added: Basis for Opinion
+Added: These financial statements are the responsibility of the Company’s management.
+Added: Our responsibility is to express an opinion on the Company’s financial statements based on our audits.
+Added: We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S.
+Added: federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
+Added: We conducted our audits in accordance with the standards of the PCAOB.
+Added: Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.
+Added: Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks.
+Added: Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements.
+Added: Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements.
+Added: We believe that our audits provide a reasonable basis for our opinion.
/s/ Deloitte & Touche LLP
1 unchanged sentence
March 3, 2023
−Removed: We have served as the Company’s auditor since 2013.
+Added: We began serving as the Company’s auditor in 2013.
+Added: In 2023, we became the predecessor auditor.
HOMESTREET, INC.
55 unchanged sentences
Compensation and benefits 111,064 115,533 132,015
−Removed: Occupancy 24,528 23,832 35,323
Information services 29,901 29,981 27,913
+Added: Occupancy 22,241 24,528 23,832
General, administrative and other 38,809 35,377 31,583
+Added: Goodwill impairment 39,857 — —
Total noninterest expense 241,872 205,419
−Removed: Income before income taxes 84,660 146,689 101,894
−Removed: Income tax expense 18,120 31,267 21,904
−Removed: Net income $ 66,540 $ 115,422 $ 79,990
−Removed: Net income per share
+Added: Income (loss) before income taxes ( 32,757 ) 84,660 146,689
+Added: Income tax (benefit) expense ( 5,249 ) 18,120 31,267
+Added: Net income (loss) $ ( 27,508 ) $ 66,540 $ 115,422
+Added: Net income (loss) per share
Basic $ ( 1.46 ) $ 3.51 $ 5.53
9 unchanged sentences
(in thousands) 2023 2022 2021
−Removed: Net income $ 66,540 $ 115,422 $ 79,990
+Added: Net income (loss) $ ( 27,508 ) $ 66,540 $ 115,422
Other comprehensive income (loss):
23 unchanged sentences
stock grants 260,267 2,418 — — 2,418
−Removed: Cumulative effect of adoption of new accounting standards — — ( 3,740 ) — ( 3,740 )
Other comprehensive income (loss) — — — ( 14,217 ) ( 14,217 )
5 unchanged sentences
Share-based compensation expense — 4,106 — — 4,106
−Removed: Common stock issued - Option exercise;
−Removed: stock grants 260,267 2,418 — — 2,418
+Added: Common stock issued - Stock grants 143,369 — — — —
Other comprehensive income (loss) — — — ( 120,670 ) ( 120,670 )
3 unchanged sentences
Balance, December 31, 2022 18,730,380 226,592 435,085 ( 99,530 ) 562,147
−Removed: Net income — — 66,540 — 66,540
+Added: Net income (loss) — — ( 27,508 ) — ( 27,508 )
Share-based compensation expense — 3,613 — — 3,613
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CASH FLOWS FROM OPERATING ACTIVITIES:
−Removed: Net income $ 66,540 $ 115,422 $ 79,990
−Removed: Adjustments to reconcile net income to net cash provided by (used in) operating activities:
+Added: Net income (loss) $ ( 27,508 ) $ 66,540 $ 115,422
+Added: Adjustments to reconcile net income (loss) to net cash provided by operating activities:
+Added: Goodwill impairment charge 39,857 — —
Provision for credit losses ( 441 ) ( 5,202 ) ( 15,000 )
8 unchanged sentences
Share-based compensation expense 3,613 4,106 3,398
−Removed: Lease impairment costs — — 10,873
−Removed: Deferred income tax expense (benefit) ( 12,996 ) 7,884 ( 10,065 )
−Removed: Loss on debt extinguishment — — 1,492
+Added: Deferred income tax (benefit) expense
+Added: ( 9,129 ) ( 12,996 ) 4,718
Origination of LHFS ( 362,453 ) ( 670,905 ) ( 2,251,090 )
5 unchanged sentences
Amortization of servicing rights 5,778 7,692 7,581
+Added: Net fair value adjustment, gain on sale and provision for losses on other real estate owned ( 975 ) — —
Gain on sale of branches — ( 4,270 ) —
1 unchanged sentence
(Increase) decrease in other assets ( 44,386 ) 17,797 ( 5,796 )
−Removed: Increase (decrease) in accounts payable and other liabilities 6,551 1,861 11,210
−Removed: Net cash provided by (used in) operating activities 218,328 173,035 ( 25,545 )
+Added: Increase in accounts payable and other liabilities 37,698 6,551 5,027
+Added: Net cash provided by operating activities 8,024 218,328 173,035
CASH FLOWS FROM INVESTING ACTIVITIES:
5 unchanged sentences
Proceeds from sale of loans originated as LHFI — 4,613 504,584
−Removed: Purchase of LHFI — — ( 20,124 )
−Removed: Net cash provided by disposal of discontinued operations
Net cash distributed in sale of branches — ( 138,756 ) —
−Removed: Net increase in LHFI ( 1,940,489 ) ( 683,822 ) ( 690,302 )
−Removed: Proceeds from sale of premises and equipment — — 1,460
+Added: Net decrease (increase) in LHFI 18,958 ( 1,940,489 ) ( 683,822 )
Purchases of premises and equipment ( 3,811 ) ( 6,786 ) ( 2,941 )
+Added: Net cash received from acquisitions of branches 327,901 — —
Proceeds from sale of Federal Home Loan Bank stock 222,814 147,486 109,484
Purchases of Federal Home Loan Bank stock ( 228,802 ) ( 186,430 ) ( 99,526 )
−Removed: Net cash used in investing activities ( 2,654,148 ) ( 125,638 ) ( 232,622 )
+Added: Net cash provided by (used in) investing activities 484,048 ( 2,654,148 ) ( 125,638 )
Years Ended December 31,
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CASH FLOWS FROM FINANCING ACTIVITIES:
−Removed: Increase in deposits, net $ 1,472,834 $ 347,867 $ 481,464
+Added: Increase (decrease) in deposits, net $ ( 1,065,463 ) $ 1,472,834 $ 347,867
Changes in short-term borrowings, net 84,000 ( 25,000 ) ( 281,800 )
6 unchanged sentences
Dividends paid on common stock ( 12,317 ) ( 26,847 ) ( 21,338 )
−Removed: Net cash provided by (used in) financing activities 2,443,434 ( 40,232 ) 258,336
+Added: Net cash (used in) provided by financing activities
+Added: ( 349,236 ) 2,443,434 ( 40,232 )
Net increase in cash and cash equivalents 142,836 7,614 7,165
8 unchanged sentences
Loans transferred from LHFI to LHFS, net 2,507 12,361 392,555
−Removed: Ginnie Mae loans recognized with the right to repurchase, net — — 92,366
Ginnie Mae loans derecognized with the right to repurchase, net 1,301 5,424 89,408
+Added: New investments in LIHTC partnerships 15,000 — 15,000
Repurchase of common stock - award shares 316 1,321 3,940
+Added: Loans acquired 21,197 — —
+Added: Premises and equipment and other assets 5,845 — —
+Added: Liabilities assumed 377,412 — —
+Added: Goodwill and other intangibles 22,469 — —
See accompanying notes to consolidated financial statements.
3 unchanged sentences
NOTE 1– SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
−Removed: 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, Union Street Holdings LLC and HomeStreet Mortgage Depositor, Inc.
+Added: 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.
12 unchanged sentences
Cash and Cash Equivalents
−Removed: For purposes of reporting cash flows, cash and cash equivalents include cash, due from banks, certificates of deposits with original maturities of less than ninety days, investment securities with original maturities of less than ninety days and federal funds sold.
+Added: For purposes of reporting cash flows, cash and cash equivalents include cash, due from banks, certificates of deposits with original maturities of less than ninety days, investment securities with original maturities of less than ninety days, money market funds and federal funds sold.
The Bank maintains most of its excess cash at the Federal Reserve Bank of San Francisco ("FRBSF"), with well-capitalized correspondent banks or with other depository institutions at amounts less than the FDIC insured limits.
15 unchanged sentences
The Company evaluates HTM securities at the end of each quarter to determine if any expected credit losses exist.
−Removed: The Company does not believe any expected credit losses exist for these securities as of December 31, 2022 and 2021.
+Added: The Company does not believe any expected credit losses existed for these securities as of December 31, 2023 and 2022.
Federal Home Loan Bank Stock
24 unchanged sentences
Loans whose repayments are insured by the Federal Housing Administration ("FHA"), guaranteed by the Department of Veterans' Affairs ("VA") or Ginnie Mae ("GNMA") are maintained on accrual status even if 90 days or more past due.
−Removed: Modifications for Financially Distressed Borrowers ("MFDB")
−Removed: The Company provides MFDBs which may include other than insignificant delays in payment of amounts due, extension of the terms of the notes or reduction in the interest rates on the notes.
+Added: Modifications to Borrowers Experiencing Financial Difficulty ("MBFD")
+Added: The Company provides MBFDs which may include other than insignificant 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.
−Removed: The granting of modifications for the year ended December 31, 2022 did not have a material impact on the ACL.
−Removed: When a borrower experiences financial difficulty, we sometimes modify or restructure loans, which may include delays in payment of amounts due, extension of the terms of the notes or a reduction in the interest rates on the notes.
−Removed: These loans are classified as MFDBs.
−Removed: MFDBs are loans modified for the purpose of alleviating temporary impairments to the borrower’s financial condition or cash flows.
+Added: The granting of modifications for the years ended December 31, 2023 and 2022 did not have a material impact on the ACL.
+Added: When a borrower experiences financial difficulty, we sometimes modify or restructure loans, which may include delays in payment of amounts due, forgiveness of principal, extension of the terms of the notes or a reduction in the interest rates on the notes.
+Added: These loans are classified as MBFDs.
+Added: MBFDs are loans modified for the purpose of alleviating temporary impairments to the borrower’s financial condition or cash flows.
A workout plan between us and the borrower is designed to provide a bridge for borrower cash flow shortfalls in the near term.
19 unchanged sentences
Loans that Share Similar Risk Characteristics with Other Loans
−Removed: For loans that share similar risk characteristics, loans are segregated into loan pools based on similar risk characteristics, like product types or areas of risk concentration to estimate the ACL.
+Added: For loans that share similar risk characteristics, loans are segregated into loan pools based on similar risk characteristics, like product types or primary source of repayment to estimate the ACL.
Historical Loss Rates
41 unchanged sentences
The rating of the Q-Factor on the seven-point scale, along with the allocated weight, determines the final expected loss adjustment.
−Removed: The model is constructed so that the total of the Q-Factor adjustments plus the current expected loss rate cannot exceed the maximum or minimum two-year loss rate for that pool, which is aligned with the Bank's chosen forecast period.
+Added: The model is constructed so that the total of the Q-Factor adjustments plus the current expected loss rate cannot be outside the maximum or minimum two-year loss rate for that pool, which is aligned with the Bank's chosen forecast period.
Loss rates beyond two years are not adjusted in the Q-Factor process and the model reverts to the historical mean loss rates.
25 unchanged sentences
Commercial Loan Portfolio
−Removed: The commercial loan portfolio is comprised of the non-owner occupied commercial real estate ("CRE"), multifamily, construction and land development, owner occupied CRE and commercial business loan classes, whose underwriting standards consider the factors described for single family and home equity loan classes as well as others when assessing the borrower's and associated guarantors or other related party’s financial position.
+Added: The commercial loan portfolio is comprised of the non-owner occupied commercial real estate ("CRE"), multifamily, construction and land development, owner occupied CRE and commercial business loan classes, whose underwriting standards consider the factors described for single family and home equity loan classes as well as others when assessing the borrower's and associated guarantor's or other related party’s financial position.
These other factors include assessing liquidity, net worth, leverage, other outstanding indebtedness of the borrower, the quality and reliability of cash expected to flow through the borrower (including the outflow to other lenders) and prior experiences with the borrower.
44 unchanged sentences
Mortgage Servicing Rights
−Removed: MSRs are recognized as separate assets on our consolidated balance sheets upon purchase of the rights or when we retain the right to service loans that we have sold.
+Added: MSRs are recognized as separate assets on our consolidated balance sheets when we retain the right to service loans that we have sold or purchase rights to service.
We initially record all MSRs at fair value.
1 unchanged sentence
Subsequent fair value measurements of MSRs are determined by considering the present value of estimated future net servicing cash flows.
−Removed: Changes in the fair value of MSRs result from changes in (1) model inputs and assumptions and (2) modeled amortization, representing the collection and realization of expected cash flows and curtailments over time.
+Added: Changes in the fair value of MSRs result from changes in (1) model inputs and assumptions and (2) modeled
+Added: amortization, representing the collection and realization of expected cash flows and curtailments over time.
The significant model inputs used to measure the fair value of MSRs include assumptions regarding market interest rates, projected prepayment speeds, discount rates, estimated costs of servicing and other income and additional expenses associated with the collection of delinquent loans.
−Removed: Mortgage servicing assets for multifamily and SBA MSRs are evaluated periodically for impairment based upon the fair value of the rights as compared to amortized cost.
+Added: Mortgage servicing assets for multifamily and SBA MSRs are evaluated periodically for impairment based upon the fair value of the MSRs as compared to amortized cost.
Impairment is determined by comparing the fair value of the portfolio based on predominant risk characteristic loan type, to amortized cost.
13 unchanged sentences
Revenue is recognized when the services are performed.
−Removed: Sale of Other Real Estate Owned (in General, Administrative and Other)
+Added: Sale of Other Real Estate Owned (in Other Noninterest Income)
A gain or loss, the difference between the cost basis of the property and its sale price, on other real estate owned is recognized when the performance obligation is met, which is at the time the property title is transferred to the buyer.
1 unchanged sentence
(a) a commitment on the buyer’s part exists, (b) collection is probable in circumstances where the initial investment is minimal and (c) the buyer has obtained control of the asset, including the significant risks and rewards of ownership.
−Removed: If there is no commitment on the buyer’s part, collection is not probable or the buyer has not obtained control of the asset, then a gain cannot be recognized.
+Added: If there is no commitment on the buyer’s part, collection is not probable or the buyer has not obtained control of the asset, then a gain will not be recognized.
Premises and Equipment
20 unchanged sentences
The remaining ROU asset (after the impairment write-down) is amortized on a straight-line basis over the remaining lease term.
+Added: Branch Acquisition
+Added: On February 10, 2023, the Company completed its acquisition of three branches in southern California, whereby we assumed approximately $ 376 million in deposits and purchased approximately $ 21 million in loans.
+Added: The application of the acquisition method of accounting resulted in recording goodwill and cost savings, of $ 12 million, and a core deposit intangible of $ 11 million.
Goodwill and Other Intangible Assets
1 unchanged sentence
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.
−Removed: Historically, the Company performed its annual impairment testing at June 30.
−Removed: In 2022, we moved the annual impairment testing date to August 31 and based on that testing determined goodwill was not impaired.
−Removed: The change in impairment measurement date did not have a material effect on the valuation results.
+Added: The Company performs its annual impairment testing on August 31 each year, or sooner if a triggering event occurs.
+Added: Triggering events include, among other factors, declines in historical or projected revenue, operating income or cash flows, and sustained declines in the Company’s stock price or market capitalization, considered both in absolute terms and relative to peers.
+Added: As a result of sustained decreases in the Company’s stock price and associated market value during the second quarter of 2023, the Company conducted an impairment analysis of its goodwill as of June 30, 2023.
+Added: 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.
+Added: 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.
+Added: This was a non-cash charge to earnings and had no impact on tangible or regulatory capital, cash flows or our liquidity position.
+Added: The following table presents the changes in the carrying amount of goodwill in 2023:
+Added: (in thousands)
+Added: Balance, December 31, 2022 $ 27,900
+Added: Additions - branch acquisition in February 2023 11,957
+Added: Goodwill impairment charge ( 39,857 )
+Added: Balance December 31, 2023 $ —
Intangible assets with definite useful lives, such as core deposit intangible assets arising from bank acquisitions, are amortized over their estimated useful lives.
2 unchanged sentences
Repurchase agreements are accounted for as financing arrangements with the obligation to repurchase securities sold reflected as a liability on the consolidated balance sheets.
−Removed: The securities underlying the repurchase agreements continue to be recognized as AFS securities in the consolidated balance sheet.
+Added: The securities underlying the repurchase agreements continue to be recognized as investment securities in the consolidated balance sheet.
Deferred tax assets and liabilities arise from temporary differences between the tax basis of assets and liabilities and their reported amounts in the financial statements, which will result in taxable or deductible amounts in the future.
20 unchanged sentences
If a derivative designated as a cash flow hedge is terminated or ceases to be highly effective, the gain or loss in other comprehensive income (loss) is amortized to earnings over the period the forecasted hedged transactions impact earnings.
−Removed: If a hedged forecasted transaction is no longer probable, hedge accounting is ceased and any gain or loss included in other comprehensive income (loss) is reported in earnings immediately, unless the forecasted transaction is at least reasonably possible of occurring, whereby the amounts remain within other comprehensive income (loss).
+Added: If a hedged forecasted transaction is no longer probable, hedge accounting is ceased and any gain or loss included in other
+Added: comprehensive income (loss) is reported in earnings immediately, unless the forecasted transaction is at least reasonably possible of occurring, whereby the amounts remain within other comprehensive income (loss).
Derivative instruments expose us to credit risk in the event of nonperformance by counterparties.
14 unchanged sentences
Fair value is an exit price, representing the amount that would be received to sell an asset or transfer a liability in an orderly transaction between market participants.
−Removed: Fair value estimates involve uncertainties and matters of significant judgment regarding interest rates, credit risk, prepayments, and other factors, especially in the absence of broad markets for particular items.
+Added: Fair value estimates involve uncertainties and matters of significant judgment regarding interest rates, credit risk, prepayments, and other factors, especially in the absence of broad markets for particular instruments.
Fair value measures are classified according to a three-tier fair value hierarchy, which is based on the observability of inputs used to measure fair value.
23 unchanged sentences
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.
−Removed: The adoption of these ASUs is not expected to have a material impact on the Company’s financial position or results of operations.
+Added: The adoption of these ASUs did not have a material impact on the Company’s financial position or results of operations.
In March 2022, the FASB issued ASU No.
2022-02, Financial Instruments-Credit Losses (Topic 326).
−Removed: The amendments in this ASU eliminate the accounting guidance for Troubled Debt Restructuring ("TDRs") by creditors, while enhancing disclosure
−Removed: requirements for certain loan refinancing and restructurings by creditors when a borrower experiences financial difficulty.
+Added: The amendments in this ASU eliminate the accounting guidance for Troubled Debt Restructuring ("TDRs") by creditors, while enhancing disclosure requirements for certain loan refinancing and restructurings by creditors when a borrower experiences financial difficulty.
In addition, the amendments require that an entity disclose current period gross charge-offs by year of origination in a vintage table.
1 unchanged sentence
2022-02 with respect to amendments about TDRs and related disclosure enhancements as of January 1, 2022.
−Removed: This adoption did not have a material impact on the Company’s financial position or results of operations.
−Removed: 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.
+Added: We prospectively adopted the vintage table disclosure requirement of ASU 2022-02 on January 1, 2023.
+Added: The adoption of ASU 2022-02 did not have a material impact on the Company’s financial position or results of operations.
+Added: In March 2023, the FASB issued ASU 2023-02, “Investments – Equity Method and Joint Ventures (Topic 323):
+Added: 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.
+Added: ASU 2023-02 is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2023.
+Added: ASU 2023-02 is not expected to have a material impact on the Company’s financial position or results of operations.
+Added: 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).
+Added: 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.
+Added: ASU 2023-06 will not have an impact on the Company's financial position or results of operation as it is disclosure only.
+Added: In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280):
+Added: Improvements to Reportable Segment Disclosures, which expands disclosures about a public entity’s reportable segments and requires more enhanced information about a reportable segment’s expenses, interim segment profit or loss, and how a public entity’s chief operating decision maker uses reported segment profit or loss information in assessing segment performance and allocating resources.
+Added: The update will be effective for annual periods beginning after December 15, 2023 (fiscal 2024).
+Added: ASU 2023-07 will not have an impact on the
+Added: Company's financial position or results of operation as it impacts disclosures only.
+Added: We are assessing the impact on our disclosures.
+Added: In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740):
+Added: Improvements to Income Tax Disclosures, which expands disclosures in an entity’s income tax rate reconciliation table and regarding cash taxes paid both in the U.S.
+Added: and foreign jurisdictions.
+Added: The update will be effective for annual periods beginning after December 15, 2024 (fiscal 2025).
+Added: ASU 2023-09 will not have an impact on the Company's financial position or results of operation as it impacts disclosures only.
+Added: We are assessing the impact on our disclosures.
NOTE 2– INVESTMENT SECURITIES:
−Removed: The following tables set forth certain information regarding the amortized cost and fair values of our investment securities AFS and HTM:
+Added: The following tables set forth certain information regarding the amortized cost basis and fair values of our investment securities AFS and HTM:
At December 31, 2023
21 unchanged sentences
Treasury securities 23,005 — ( 3,071 ) 19,934
+Added: Agency debentures 27,499 8 ( 29 ) 27,478
Total $ 1,509,736 $ 135 $ ( 131,097 ) $ 1,378,774
Municipal bonds $ 2,441 $ — $ ( 56 ) $ 2,385
−Removed: The Company held $ 19.0 million of trading securities which are used as economic hedges of our mortgage servicing rights and are not included in the above tables.
−Removed: Net trading losses of $ 7.0 million were recorded in servicing income in the consolidated income statements in 2022.
−Removed: MBS and CMOs represent securities primarily issued by government sponsored enterprises ("GSEs").
+Added: At December 31, 2023 and 2022 the Company held $ 25 million and $ 19 million, respectively, of trading securities consisting of U.S.
+Added: Treasury notes used as economic hedges of our single family mortgage servicing rights, which are carried at fair value and
+Added: included with investment securities on the balance sheet.
+Added: For 2023 and 2022 net losses of $ 0.5 million and $ 7.0 million on trading securities, respectively, were recorded in servicing income.
+Added: 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 organizations.
−Removed: As of December 31, 2022 and 2021, all securities held, including municipal bonds and corporate debt securities, were rated investment grade based upon external ratings where available and, where not available, based upon internal ratings which correspond to ratings as defined by Standard and Poor’s Rating Services or Moody's Investors Services.
+Added: As of December 31, 2023 and 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:
22 unchanged sentences
Treasury securities — — ( 3,071 ) 19,934 ( 3,071 ) 19,934
+Added: Agency debentures ( 29 ) 15,970 — — ( 29 ) 15,970
Total $ ( 95,493 ) $ 1,187,577 $ ( 35,604 ) $ 146,230 $ ( 131,097 ) $ 1,333,807
−Removed: 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.
+Added: Municipal bonds $ ( 56 ) $ 2,385 $ — $ — $ ( 56 ) $ 2,385
+Added: The Company has evaluated AFS securities 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 December 31, 2023 and 2022.
+Added: The Company bases this conclusion in part on its periodic review of the credit ratings of the AFS securities or reviews of the financial condition of the issuers.
In addition, as of December 31, 2023 and 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.
31 unchanged sentences
Treasury securities — — % — — % 19,934 1.11 % — — % 19,934 1.11 %
+Added: 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 %
−Removed: The weighted-average yield is computed using the contractual coupon for each security weighted based on the fair value of each security and does not include adjustments to a tax equivalent basis.
+Added: The weighted-average yield is computed using the contractual coupon for 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 December 31, 2023 and 2022 was 3.21 % and 3.08 %, respectively.
−Removed: Sales of AFS investment securities were as follows for the periods indicated:
+Added: Sales of AFS investment securities were as follows:
Years Ended December 31,
6 unchanged sentences
(in thousands) 2023 2022
+Added: Federal Reserve Bank to secure borrowings $ 647,104 $ —
Washington, Oregon and California State to secure public deposits 10,654 212,806
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.
−Removed: Tax-exempt interest income on AFS securities was $ 11.9 million, $ 10.2 million and $ 10.7 million for 2022, 2021 and 2020, respectively.
+Added: Tax-exempt interest income on investment securities was $ 11.3 million, $ 11.9 million and $ 10.2 million for 2023, 2022 and 2021, respectively.
NOTE 3- LOANS AND CREDIT QUALITY:
22 unchanged sentences
(1) Includes $ 1.3 million and $ 5.9 million at December 31, 2023 and 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 recognized in the consolidated income statements.
−Removed: Loans totaling $ 5.2 billion and $ 2.8 billion at December 31, 2022 and 2021, respectively, were pledged to secure borrowings from the FHLB and loans totaling $ 497 million and $ 419 million at December 31, 2022 and 2021, respectively, were pledged to secure borrowings from the FRBSF.
+Added: Loans totaling $ 5.1 billion and $ 5.2 billion at December 31, 2023 and 2022, respectively, were pledged to secure borrowings from the FHLB and loans totaling $ 1.2 billion and $ 497 million at December 31, 2023 and 2022, respectively, were pledged to secure borrowings from the FRBSF.
It is the Company's policy to make loans to officers, directors and their associates in the ordinary course of business on substantially the same terms as those prevailing at the time for comparable transactions with other persons.
8 unchanged sentences
LHFI are primarily secured by real estate located in the Pacific Northwest, California and Hawaii.
−Removed: At December 31, 2022 and 2021, multifamily loans in the state of California represented 36 % and 33 % of the total LHFI portfolio, respectively.
+Added: At December 31, 2023 single family loans in the state of Washington represented 11 % of the total LHFI portfolio.
+Added: At December 31, 2023 and 2022, multifamily loans in the state of California represented 36 % of the total LHFI portfolio.
Credit Quality
−Removed: Management considers the level of ACL to be appropriate to cover credit losses expected over the life of the loans for the LHFI portfolio as of December 31, 2022.
+Added: Management considers the level of ACL to be appropriate to cover credit losses expected over the life of the loans for the LHFI portfolio.
The cumulative loss rate used as the basis for the estimate of credit losses is comprised of the Bank’s historical loss experience and eight qualitative factors for current and forecasted periods.
−Removed: During 2022, the historical expected loss rates decreased from December 31, 2021 due to minimal charge-offs and favorable product mix risk composition.
−Removed: Additionally, the Qualitative Factors decreased significantly due to the continued favorable performance or our loan portfolio and the improved outlook of the estimated impact of the COVID-19 pandemic on our loan portfolio.
−Removed: As of December 31, 2022, the Bank expects deterioration in collateral values and economic conditions over the two-year forecast period in the markets in which it operates.
+Added: As of December 31, 2023, the historical expected loss rates decreased when compared to December 31, 2022.
+Added: During 2023, expected loss rates decreased primarily due to product mix and risk level composition changes, and the qualitative factors increased due to deteriorated single family and commercial collateral conditions and commercial collateral forecasts offset by economic conditions performing better than expected and improved economic and single-family collateral forecasts.
+Added: As of December 31, 2023, the Bank expects improvement in commercial collateral values and deterioration in single family collateral values over the two-year forecast period in the markets in which it operates.
+Added: Additionally, over the two-year forecast period in the markets in which it operates, the Bank expects neutral economic forecasts, offset slightly by near-term deterioration in economic forecasts.
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.
8 unchanged sentences
Net (charge-offs) recoveries ( 933 ) ( 628 ) ( 1,355 )
−Removed: Impact of ASC 326 adoption
Ending balance $ 40,500 $ 41,500 $ 47,123
2 unchanged sentences
Provision for credit losses ( 374 ) ( 207 ) 816
−Removed: Impact of ASC 326 adoption
Ending balance $ 1,823 $ 2,197 $ 2,404
44 unchanged sentences
Year Ended December 31, 2021
−Removed: (in thousands) Prior to adoption of ASC 326 Impact of ASC 326 adoption Charge-offs Recoveries Provision Ending
+Added: (in thousands) Beginning balance Charge-offs Recoveries Provision Ending
Non-owner occupied CRE $ 8,845 $ — $ — $ ( 1,336 ) $ 7,509
39 unchanged sentences
At December 31, 2023
−Removed: (in thousands) 2022 2021 2020 2019 2018 2017 and prior Revolving Revolving-term Total
+Added: (in thousands) 2023 2022 2021 2020 2019 2018 and prior
+Added: Revolving Revolving-term Total
COMMERCIAL PORTFOLIO
42 unchanged sentences
At December 31, 2023
−Removed: (in thousands) 2022 2021 2020 2019 2018 2017 and prior Revolving Revolving-term Total
+Added: (in thousands) 2023 2022 2021 2020 2019 2018 and prior
+Added: Revolving Revolving-term Total
CONSUMER PORTFOLIO
12 unchanged sentences
Total consumer portfolio (1)
+Added: $ 29,185 $ 357,189 $ 314,177 $ 147,304 $ 49,172 $ 250,057 $ 371,845 $ 5,651 $ 1,524,580
Total LHFI $ 273,487 $ 2,520,561 $ 1,781,268 $ 767,209 $ 465,962 $ 924,665 $ 681,941 $ 7,811 $ 7,422,904
−Removed: (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 recognized in the consolidated income statements.
+Added: (1) Includes $ 1.3 million of loans where a fair value option election was made at the time of origination and, therefore, are carried at fair value with changes in fair value recognized in the consolidated income statements.
The following table presents a vintage analysis of the commercial portfolio segment by loan sub-class and risk rating or delinquency status:
At December 31, 2022
−Removed: (in thousands) 2021 2020 2019 2018 2017 2016 and prior Revolving Revolving-term Total
+Added: (in thousands) 2022 2021 2020 2019 2018 2017 and prior
+Added: Revolving Revolving-term Total
COMMERCIAL PORTFOLIO
42 unchanged sentences
At December 31, 2022
−Removed: (in thousands) 2021 2020 2019 2018 2017 2016 and prior Revolving Revolving-term Total
+Added: (in thousands) 2022 2021 2020 2019 2018 2017 and prior
+Added: Revolving Revolving-term Total
CONSUMER PORTFOLIO
9 unchanged sentences
6 24 — — — 48 517 — 595
−Removed: 3 — — — — 6 544 — 553
+Added: 90+ days — — — — — 151 33 — 184
Total 4,162 722 220 150 72 1,801 341,563 4,017 352,707
Total consumer portfolio (1)
+Added: $ 277,948 $ 254,659 $ 152,993 $ 49,742 $ 44,196 $ 236,590 $ 341,563 $ 4,017 $ 1,361,708
Total LHFI $ 2,544,193 $ 1,797,256 $ 875,008 $ 533,369 $ 255,162 $ 814,005 $ 599,278 $ 8,049 $ 7,426,320
−Removed: (1) Includes $ 7.3 million of loans where a fair value option election was made at the time of origination and, therefore, are carried at fair value with changes recognized in the consolidated income statements.
+Added: (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.
+Added: The following table presents a vintage analysis of the commercial and consumer portfolio segment by loan sub-class and gross charge-offs:
+Added: At December 31, 2023
+Added: (in thousands) 2023 2022 2021 2020 2019 2018 and prior
+Added: Revolving Revolving-term Total
+Added: COMMERCIAL PORTFOLIO
+Added: Commercial business
+Added: Gross charge-offs $ — $ — $ ( 184 ) $ — $ ( 1,136 ) $ 295 $ 13 $ ( 50 ) $ ( 1,062 )
+Added: CONSUMER PORTFOLIO
+Added: Home equity and other
+Added: Gross charge-offs — ( 106 ) ( 22 ) — — ( 4 ) ( 187 ) — ( 319 )
+Added: Total LHFI $ — $ ( 106 ) $ ( 206 ) $ — $ ( 1,136 ) $ 291 $ ( 174 ) $ ( 50 ) $ ( 1,381 )
Collateral Dependent Loans
2 unchanged sentences
(in thousands) Land 1-4 Family Non-residential real estate Other non-real estate Total
+Added: Non-owner occupied CRE
+Added: $ — $ 573 $ 16,230 $ — $ 16,803
+Added: Construction/land development
+Added: CRE construction
+Added: — — 3,821 — 3,821
+Added: — 573 20,051 — 20,624
Commercial and industrial loans
−Removed: Owner occupied CRE $ 1,111 $ — $ 1,410 $ — $ 2,521
Commercial business
— 2,788 5,471 4,587 12,846
+Added: — 2,788 5,471 4,587 12,846
+Added: Consumer loans
+Added: Single family
+Added: — 773 — — 773
+Added: — 773 — — 773
Total collateral-dependent loans $ — $ 4,134 $ 25,522 $ 4,587 $ 34,243
4 unchanged sentences
Commercial business 62 3,186 562 — 3,810
−Removed: Total 1,473 27 3,018 286 4,804
−Removed: Consumer loans
−Removed: Single family
−Removed: — 1,598 — — 1,598
−Removed: Home equity loans and other — 19 — — 19
−Removed: Total — 1,617 — — 1,617
Total collateral-dependent loans $ 1,173 $ 3,186 $ 1,972 $ — $ 6,331
3 unchanged sentences
(in thousands) Nonaccrual with no related ACL Total Nonaccrual Nonaccrual with no related ACL Total Nonaccrual
+Added: Non-owner occupied CRE
+Added: $ 16,803 $ 16,803 $ — $ —
+Added: Construction/land development
+Added: CRE construction
+Added: 3,821 3,821 — —
+Added: 20,624 20,624 — —
Commercial and industrial loans
59 unchanged sentences
(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.
−Removed: (3) Includes $ 5.9 million and $ 7.3 million of loans at December 31, 2022 and 2021, respectively, where a fair value option election was made at the time of origination and, therefore, are carried at fair value with changes recognized in our consolidated income statements.
+Added: (3) Includes $ 1.3 million and $ 5.9 million of loans at December 31, 2023 and 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
−Removed: The Company provides MFDBs which may include other than insignificant delays in payment of amounts due, extension of the terms of the notes or reduction in the interest rates on the notes.
+Added: The Company provides MBFDs 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.
−Removed: The granting of modifications for the year ended December 31, 2022 did not have a material impact on the ACL.
−Removed: The following tables provide information related to MFDBs during the year ended December 31, 2022, disaggregated by class of financing receivable and type of concession granted:
+Added: The granting of modifications for the years ended December 31, 2023 and 2022 did not have a material impact on the ACL.
+Added: The following tables provide information related to MBFDs for t he years ended December 31, 2023 and 2022 disaggregated by class of financing receivable and type of concession granted:
Significant Payment Delay
−Removed: Year Ended December 31, 2022
−Removed: (in thousands) Amortized Cost Basis at Period End % of Total Class of Financing Receivable
+Added: Years Ended December 31,
+Added: (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
+Added: Commercial business $ 839 0.23 % $ — — %
Single family 1,082 0.09 % 1,377 0.14 %
1 unchanged sentence
Term Extension
−Removed: Year Ended December 31, 2022
−Removed: (in thousands) Amortized Cost Basis at Period End % of Total Class of Financing Receivable
+Added: Years Ended December 31,
+Added: (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
Commercial business $ 9,850 2.74 % $ 1,562 0.43 %
1 unchanged sentence
Interest Rate Reduction and Significant Payment Delay
−Removed: Year Ended December 31, 2022
−Removed: (in thousands) Amortized Cost Basis at Period End % of Total Class of Financing Receivable
+Added: Years Ended December 31,
+Added: (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
Commercial business $ — — % $ 459 0.13 %
Interest Rate Reduction and Term Extension
−Removed: Year Ended December 31, 2022
−Removed: (in thousands) Amortized Cost Basis at Period End % of Total Class of Financing Receivable
+Added: Years Ended December 31,
+Added: (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
Single family $ — — % $ 814 0.08 %
1 unchanged sentence
Year Ended December 31,
−Removed: (in thousands) Amortized Cost Basis at Period End % of Total Class of Financing Receivable
+Added: (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
+Added: Non-owner occupied CRE $ 16,230 2.53 % $ — — %
+Added: Construction/land development 3,821 0.68 % — — %
Single family 2,526 0.22 % 13,742 1.36 %
1 unchanged sentence
Interest Rate Reduction, Significant Payment Delay and Term Extension
−Removed: Year Ended December 31, 2022
−Removed: (in thousands) Amortized Cost Basis at Period End % of Total Class of Financing Receivable
+Added: Years Ended December 31,
+Added: (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
Single family $ 191 0.02 % $ 6,500 0.64 %
−Removed: The following table describes the financial effect of the MFDBs:
+Added: The following table describes the financial effect of the MBFDs:
Interest Rate Reduction
−Removed: Year Ended December 31, 2022
+Added: Years Ended December 31,
Commercial business — Reduced weighted-average contractual interest rate from 5.72 % to 4.00 %.
Single family Reduced weighted-average contractual interest rate from 5.25 % to 5.00 %.
+Added: Reduced weighted-average contractual interest rate from 4.25 % to 3.31 %.
Significant Payment Delay
−Removed: Year Ended December 31, 2022
+Added: Years Ended December 31,
+Added: Non-owner occupied CRE The weighted average amortization period of the loans were extended 3.7 years.
+Added: Construction/land development The weighted average amortization period of the loans were extended 2.7 years.
+Added: Commercial business
+Added: The weighted average amortization period of the loans were extended 5.2 years.
Single family Provided payment deferrals to borrowers.
A weighted average 0.37 % of loan balances were capitalized and added to the remaining term of the loan.
+Added: Provided payment deferrals to borrowers.
+Added: A weighted average 0.22 % of loan balances were capitalized and added to the remaining term of the loan.
Home equity and other — Provided payment deferrals to borrowers.
1 unchanged sentence
Term Extension
−Removed: Year Ended December 31, 2022
+Added: Years Ended December 31,
+Added: Non-owner occupied CRE The weighted average duration of loan payments deferred is 2.1 years.
+Added: Construction/land development The weighted average duration of loan payments deferred is 1.6 years.
Commercial business Added a weighted average 1.2 years to the life of loans, which reduced the monthly payment amounts to the borrowers.
+Added: 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 4.9 years to the life of loans, which reduced the monthly payment amounts to the borrowers.
+Added: Added a weighted average 4.4 years to the life of loans, which reduced the monthly payment amounts to the borrowers.
Home equity and other — Added a weighted average 16.1 years to the life of loans, which reduced the monthly payment amounts to the borrowers.
1 unchanged sentence
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.
+Added: The following table depicts the payment status of loans that were modified to borrowers experiencing financial difficulties on or after October 1, 2022 through September 30, 2023:
+Added: Payment Status (Amortized Cost Basis) at December 31, 2023
+Added: (in thousands) Current 30-89 Days Past Due 90+ Days Past Due
+Added: Non-owner occupied CRE $ 16,230 $ — $ —
+Added: Construction/land development 3,821 — —
+Added: Commercial business 8,873 976 —
+Added: Single family 2,627 1,285 324
+Added: Total $ 31,551 $ 2,261 $ 324
The following table depicts the payment status of loans that were modified to borrowers experiencing financial difficulties on or after January 1, 2022, the date we adopted ASU 2022-02 through September 30, 2022:
5 unchanged sentences
Total $ 22,049 $ 1,831 $ 198
−Removed: The following tables provide the amortized cost basis as of December 31, 2022 of MFDBs, on or after January 1, 2022, the date we adopted ASU 2022-02 through September 30, 2022 and subsequently had a payment default.
+Added: The following tables provide the amortized cost basis as of December 31, 2023 of MBFDs, on or after October 1, 2022, through September 30, 2023 and subsequently had a payment default:
Amortized Cost Basis of Modified Loans That Subsequently Defaulted Year Ended December 31, 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
+Added: Commercial business $ — $ 976 $ — $ — $ —
Single family — — — 1,354 —
+Added: Total $ — $ 976 $ — $ 1,354 $ —
+Added: The following tables provide the amortized cost basis as of December 31, 2022 of MBFDs, on or after January 1, 2022, the date we adopted ASU 2022-02 through September 30, 2022 and subsequently had a payment default:
+Added: Amortized Cost Basis of Modified Loans That Subsequently Defaulted Year Ended December 31, 2022
+Added: (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
+Added: Single family $ 340 $ — $ — $ 1,198 $ 764
NOTE 4– PREMISES AND EQUIPMENT, NET:
31 unchanged sentences
The aggregate amount of time deposits in denominations of more than the FDIC limit of $250,000 at December 31, 2023 and 2022 was $ 194 million and $ 189 million, respectively.
−Removed: There were $ 1.4 billion and $ 145 million of brokered deposits at December 31, 2022 and 2021, respectively.
+Added: There were $ 1.2 billion and $ 1.4 billion of brokered deposits at December 31, 2023 and 2022, respectively.
NOTE 6– BORROWINGS:
−Removed: The Company borrows funds through advances from the Des Moines FHLB.
−Removed: The balances, maturity and rate of the outstanding FHLB advances were as follows:
+Added: During 2023, the Company borrowed $ 1.2 billion and repaid $ 535 million from the Federal Reserve Bank ("FRB") under the Bank Term Funding Program ("BTFP").
+Added: The BTFP offers up to one year fixed-rate term borrowings that are prepayable without penalty.
+Added: At December 31, 2023 the Company had $ 645 million outstanding under the BTFP.
+Added: The balances, maturity and rate of the outstanding borrowings from the FHLB and the FRB BTFP were as follows:
At December 31,
4 unchanged sentences
Total $ 1,745,000 4.58 % $ 1,016,000 4.33 %
+Added: At December 31, 2023 and 2022 the Bank had available borrowing capacity of $ 2.1 billion and $ 2.6 billion respectively, from the FHLB,and $ 710 million and $ 340 million, respectively from the FRBSF.
+Added: The Bank is a member of the AFX, through which it may either borrow or lend funds on an overnight or short-term basis with a group of pre-approved commercial banks.
+Added: The availability of funds changes daily.
+Added: As of December 31, 2023, the were no balances outstanding.
As of December 31, 2023 and 2022, the Company held $ 55.3 million and $ 49.3 million, respectively, of FHLB stock.
NOTE 7– LONG-TERM DEBT:
−Removed: On January 19, 2022, we completed a $ 100 million subordinated notes offering due in 2032 (the “Notes”).
−Removed: Interest on the Notes initially will accrue at a rate equal to 3.5 % per annum from and including the date of original issuance to, but excluding, January 30, 2027, payable semiannually in arrears.
−Removed: From and including January 30, 2027, to, but excluding, the maturity date
−Removed: or the date of earlier redemption, the Notes will bear interest equal to the three-month term Secured Overnight Financing Rate ("SOFR") plus 215 basis points, payable quarterly in arrears.
−Removed: Net proceeds to the Company were $ 98 million, after deducting underwriting fees and offering expenses, all of which were still outstanding at December 31, 2022.
−Removed: At December 31, 2022 and 2021, the Company had outstanding $ 64 million of Senior Notes which bear interest at a rate of 6.50 % and mature in 2026.
−Removed: The Company issued trust preferred securities ("TRUPS") during the period from 2005 through 2007, resulting in a debt balance of $ 62 million that remains outstanding at December 31, 2022 and 2021.
+Added: At December 31, 2023 and 2022, the Company had outstanding $ 98 million of subordinated notes (the “Notes”) which have a face amount of $ 100 million, have a maturity date of January 30, 2032 and bear interest at a rate of 3.5 % per annum until January 30, 2027.
+Added: From January 30, 2027, until the maturity date or the date of earlier redemption, the Notes will bear interest equal to the three-month term Secured Overnight Financing Rate ("SOFR") plus 215 basis points.
+Added: At December 31, 2023 and 2022, the Company had outstanding $ 65 million and $ 64 million, respectively of Senior Notes which have a face amount of $ 65 million, have a maturity date of June 1, 2026 and bear interest at a rate of 6.50 % per annum.
+Added: The Company issued trust preferred securities ("TRUPS") during the period from 2005 through 2007, resulting in a debt balance of $ 62 million outstanding at December 31, 2023 and 2022.
In connection with the issuance of trust preferred securities, HomeStreet, Inc.
6 unchanged sentences
Amount $ 5,155 $ 20,619 $ 20,619 $ 15,464
−Removed: Interest rate 3 MO LIBOR + 1.70 %
−Removed: 3 MO LIBOR + 1.50 %
−Removed: 3 MO LIBOR + 1.37 %
−Removed: 3 MO LIBOR + 1.68 %
+Added: Interest rate (1)
+Added: 3 MO SOFR + 1.96 %
+Added: 3 MO SOFR + 1.76 %
+Added: 3 MO SOFR + 1.63 %
+Added: 3 MO SOFR + 1.94 %
Maturity date June 2035 December 2035 March 2036 June 2037
1 unchanged sentence
Quarterly Quarterly Quarterly Quarterly
+Added: (1) These rates reflect the floating rates as of December 31, 2023.
(2) Call options are exercisable at par and are callable, without penalty on a quarterly basis.
1 unchanged sentence
To reduce the risk of significant interest rate fluctuations on the value of certain assets and liabilities, such as single family mortgage LHFS and MSRs, the Company utilizes derivatives as economic hedges.
−Removed: The notional amounts and fair values for derivatives, which are included in other assets or accounts payable and other liabilities on the consolidated balance sheets consist of the following:
+Added: The notional amounts and fair values for derivatives, all of which are economic hedges, are included in other assets or accounts payable and other liabilities on the consolidated balance sheets, consist of the following:
At December 31, 2023
17 unchanged sentences
Futures 23,000 18 —
+Added: Options 14,000 218 —
Total derivatives before netting $ 342,248 13,763 ( 13,280 )
Netting adjustment/Cash collateral (1)
+Added: ( 12,870 ) 101
Carrying value on consolidated balance sheet $ 893 $ ( 13,179 )
−Removed: (1) Includes net cash collateral received of $ 12.8 million and paid of $ 5.3 million at December 31, 2022 and 2021, respectively.
+Added: (1) Includes net cash collateral received of $ 9.9 million and $ 12.8 million at December 31, 2023 and 2022, respectively.
The Company nets derivative assets and liabilities when a legally enforceable master netting agreement exists between the Company and the derivative counterparty.
Derivatives are reported at their respective fair values in the other assets or accounts payable and other liabilities line items on the consolidated balance sheets, with changes in fair value reflected in current period earnings.
−Removed: The following tables present gross fair value and net carrying value information about derivative instruments:
+Added: The following tables present gross fair value and net carrying value information for derivative instruments:
(in thousands) Gross fair value Netting adjustments/Cash collateral (1)
6 unchanged sentences
Derivative liabilities ( 13,280 ) 101 ( 13,179 )
−Removed: (1) Includes net cash collateral received of $ 12.8 million and paid of $ 5.3 million at December 31, 2022 and 2021, respectively.
+Added: (1) Includes net cash collateral received of $ 9.9 million and $ 12.8 million at December 31, 2023 and 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.
−Removed: Receivables related to cash collateral that has been paid to counterparties is included in other assets.
−Removed: Payables related to cash collateral that has been received from counterparties is included in accounts payable and other liabilities.
−Removed: Interest is owed on amounts received from counterparties and we earn interest on amounts paid to counterparties.
+Added: Receivables related to cash collateral that has been paid to counterparties are included in other assets.
+Added: Payables related to cash collateral that has been received from counterparties are included in accounts payable and other liabilities.
+Added: 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.
−Removed: At December 31, 2022 and 2021, the Company had liabilities of $ 12.8 million and zero , respectively, in cash collateral received from counterparties and receivables of $ 0.03 million and $ 5.3 million, respectively, in cash collateral paid to counterparties.
+Added: At December 31, 2023 and 2022, the Company had liabilities of $ 10.1 million and $ 12.8 million, respectively, in cash collateral received from counterparties and receivables of $ 218 thousand and $ 25 thousand, 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:
7 unchanged sentences
( 3 ) 160 386
−Removed: (1) Comprised of interest rate lock commitments (" IRLCs") and forward contracts used as economic hedges of single family mortgage LHFS.
−Removed: (2) Comprised of interest rate swaps, interest rate swaptions, futures, US Treasury options and forward contracts used as economic hedges of single family MSRs.
−Removed: (3) Impact of interest rate swap agreements executed with commercial banking customers.
−Removed: The notional amount of open interest rate swap agreements executed with commercial banking customers at December 31, 2022 and 2021 were $ 237 million and $ 287 million, respectively.
+Added: (1) Comprised of forward contracts used as an economic hedge of loans held for sale and interest rate lock commitments ("IRLCs") to customers.
+Added: (2) Comprised of futures, US Treasury options and forward contracts used as economic hedges of single family MSRs.
+Added: (3) Impact of interest rate swap agreements executed with commercial banking customers and broker dealer counterparties.
+Added: The notional amount of open interest rate swap agreements executed with commercial banking customers and broker dealer counterparties at December 31, 2023 and 2022 were $ 236 million and $ 237 million, respectively.
NOTE 9– MORTGAGE BANKING OPERATIONS:
26 unchanged sentences
Total $ 7,216,343 $ 7,375,383
−Removed: Under the terms of the sales agreements for loans sold to GSEs and other entities, the Company has made representations and warranties that the loans sold meet certain requirements.
−Removed: The Company may be required to repurchase mortgage loans or indemnify loan purchasers due to defects in the origination process of the loan, such as documentation errors, underwriting errors and judgments, appraisal errors, early payment defaults and fraud.
+Added: Under the terms of the sales agreements for single family loans sold to GSEs and other entities, the Company has made representations and warranties that the loans sold meet certain requirements.
+Added: 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 $ 5.3 billion and $ 5.4 billion as of December 31, 2023 and 2022, respectively.
−Removed: At December 31, 2022 and 2021, the Company had recorded a mortgage repurchase liability for loans sold on a servicing-retained and servicing-released basis, included in accounts payable and other liabilities, of $ 2.2 million and $ 1.3 million, respectively.
−Removed: The following is a summary of changes in the Company's liability for estimated single family mortgage repurchase losses:
+Added: The following is a summary of changes in the Company's mortgage repurchase liability for single family loans sold on a servicing-retained and servicing-released basis included in accounts payable and other liabilities on the consolidated balance sheet for the periods indicated:
Years Ended December 31,
8 unchanged sentences
(2) Includes principal losses and accrued interest on repurchased loans, "make-whole" settlements, settlements with claimants and certain related expenses.
−Removed: The Company has agreements with investors to advance scheduled principal and interest amounts on delinquent loans.
+Added: The Company has agreements with certain investors to advance scheduled principal and interest amounts on delinquent loans.
Advances are also made to fund the foreclosure and collection costs of delinquent loans prior to the recovery of reimbursable amounts from investors or borrowers.
1 unchanged sentence
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.
−Removed: At December 31, 2022 and 2021, delinquent or defaulted mortgage loans currently in Ginnie Mae pools that the Company has recognized on its
−Removed: consolidated balance sheets totaled $ 6.9 million and $ 12.3 million, respectively.
+Added: At December 31, 2023 and 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.
The recognition of previously sold loans does not impact the accounting for the previously recognized MSRs.
7 unchanged sentences
Amortization of multifamily and SBA MSRs ( 5,778 ) ( 7,692 ) ( 7,581 )
−Removed: 14,439 8,092 8,626
+Added: Total 13,978 14,439 8,092
Risk management, single family MSRs:
2 unchanged sentences
Net gain (loss) from economic hedging (3)
+Added: ( 1,744 ) ( 18,790 ) ( 8,238 )
Total ( 1,330 ) ( 2,051 ) ( 859 )
2 unchanged sentences
(2) Principally reflects changes in model assumptions, including prepayment speed assumptions, which are primarily reflected by changes in mortgage interest rates.
+Added: (3) The interest income from US Treasury notes securities used for hedging purposes, which is included in interest income on the consolidated income statements, was $ 1.4 million and $ 0.6 million in 2023 and 2022, respectively.
The Company determines fair value of single family MSRs using a valuation model that calculates the net present value of estimated future cash flows.
14 unchanged sentences
(1) Represents changes due to collection/realization of expected cash flows and curtailments.
−Removed: (2) Principally reflects changes in model assumptions, including prepayment speed assumptions, which are primarily reflected by changes in mortgage interest rates.
+Added: (2) Principally reflects changes in model assumptions, including prepayment speed assumptions, which are primarily affected by changes in mortgage interest rates.
Key economic assumptions used in measuring the initial fair value of capitalized single family MSRs were as follows:
43 unchanged sentences
Ending balance $ 29,987 $ 35,256 $ 39,415
+Added: Key economic assumptions used in measuring the initial fair value of capitalized multifamily MSRs were as follows:
+Added: Years Ended December 31,
+Added: (rates per annum) (1)
+Added: 2023 2022 2021
+Added: Discount rate 13.00 % 13.00 % 13.00 %
+Added: (1) Based on a weighted average.
+Added: (2) Represents the expected lifetime average CPR used in the model.
+Added: For multifamily 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:
+Added: At December 31, 2023 At December 31, 2022
+Added: Range of Inputs Average (1)
+Added: Range of Inputs Average (1)
+Added: Discount Rates 13.00 % - 13.00 %
+Added: 13.00 % 13.00 % - 13.00 %
+Added: (1) Weighted averages of all the inputs within the range.
At December 31, 2023, the expected weighted-average life of the Company's multifamily and SBA MSRs was 11.50 years.
19 unchanged sentences
Total $ 1,273,939 $ 1,365,959
−Removed: (1) Includes undistributed construction loan proceeds, where the Company has an obligation to advance funds for construction progress payments of $ 525 million and $ 584 million at December 31, 2022 and 2021, respectively.
+Added: (1) Within the commercial portfolio, undistributed construction loan proceeds, where the Company has an obligation to advance funds for construction progress payments of $ 403 million and $ 525 million at December 31, 2023 and 2022, respectively.
The total amounts of unused commitments do not necessarily represent future credit exposure or cash requirements in that commitments may expire without being drawn upon.
2 unchanged sentences
At December 31, 2023 and 2022 we had $ 10.7 million and $ 11.8 million, respectively, of future commitments to invest in these enterprises.
+Added: As of December 31, 2023, HomeStreet was obligated on a $ 135 million letter of credit to the FHLB which is being used as collateral for public fund deposits.
In the ordinary course of business, the Company sells loans through the Fannie Mae Multifamily Delegated Underwriting and Servicing Program ("DUS" ® ) that are subject to a credit loss sharing arrangement.
The Company services the loans for Fannie Mae and shares in the risk of loss with Fannie Mae under the terms of the DUS contracts.
−Removed: Under the DUS program, the Company and Fannie Mae share losses on a pro rata basis, where the Company is responsible for losses incurred up to one-third of principal balance on each loan with two-thirds of the loss covered by Fannie Mae.
+Added: Under the DUS program, the Company and Fannie Mae share losses on a pro rata basis, where the Company is responsible for losses incurred up to one-third of the principal balance on each loan with two-thirds of the loss covered by Fannie Mae.
For loans that have been sold through this program, a liability is recorded for this loss sharing arrangement under the accounting guidance for guarantees.
−Removed: As of December 31, 2022 and 2021, the total unpaid principal balance of loans sold under this program was $ 1.8 billion and $ 1.9 billion, respectively.
−Removed: The Company's reserve liability related to this arrangement totaled $ 0.6 million at both December 31, 2022 and 2021.
+Added: As of December 31, 2023 and 2022, the total unpaid principal balance of loans sold under this program was $ 1.8 billion.
+Added: The Company's reserve liability related to this arrangement totaled $ 0.5 million and $ 0.6 million at December 31, 2023 and 2022, respectively.
There were no actual losses incurred under this arrangement during 2023, 2022 or 2021.
5 unchanged sentences
NOTE 11– INCOME TAXES:
−Removed: Income tax expense consisted of the following:
+Added: Income tax (benefit) expense consisted of the following:
Years Ended December 31,
6 unchanged sentences
State and local ( 1,722 ) 1,545 511
−Removed: Tax credit investment amortization 4,809 3,166 2,606
Total $ ( 5,249 ) $ 18,120 $ 31,267
−Removed: Income tax expense differed from amounts computed at the federal income tax statutory rate as follows:
+Added: Income tax (benefit) expense differed from amounts computed at the federal income tax statutory rate as follows:
Years Ended December 31,
1 unchanged sentence
(in thousands, except rate) Rate Amount Rate Amount Rate Amount
−Removed: Income before taxes $ 84,660 $ 146,689 $ 101,894
+Added: Income (loss) before income taxes $ ( 32,757 ) $ 84,660 $ 146,689
Federal tax statutory rate 21.00 % ( 6,879 ) 21.00 % 17,779 21.00 % 30,805
1 unchanged sentence
Tax-exempt investments 3.86 % ( 1,266 ) ( 2.72 ) % ( 2,300 ) ( 1.68 ) % ( 2,461 )
+Added: Low income housing tax benefits
+Added: 3.20 % ( 1,047 ) 0.16 % 133 ( 0.36 ) % ( 532 )
Stock-based compensation expense ( 1.28 ) % 421 0.14 % 121 ( 0.88 ) % ( 1,287 )
+Added: Goodwill ( 14.13 ) % 4,627 0.17 % 145 — % —
Other ( 0.75 ) % 246 ( 0.27 ) % ( 231 ) 1.13 % 1,652
6 unchanged sentences
Unrealized loss on investments AFS 28,571 31,431
−Removed: Federal and state net operating loss carryforwards 628 628
+Added: Net operating loss carryforwards
Accrued liabilities 1,917 2,536
2 unchanged sentences
Nonaccrual interest 1,112 513
+Added: Intangibles 4,725 —
Stock based compensation 782 737
6 unchanged sentences
Lease right-of-use assets ( 6,906 ) ( 8,415 )
−Removed: Unrealized gain on investments AFS — ( 5,630 )
Premises and equipment ( 364 ) ( 2,486 )
5 unchanged sentences
As of December 31, 2023, management determined that sufficient evidence exists to support the future utilization of all of the Company's deferred tax assets.
−Removed: The Company has state net operating loss carryforwards of $ 7.5 million and $ 12.1 million as of December 31, 2022 and 2021 that will expire at various dates from 2027 to 2036.
−Removed: Utilization of net operating loss carryforwards may be subject to an annual limitation due to the "change in ownership" provisions of the Internal Revenue Code of 1986, as amended.
+Added: The Company has state net operating loss carryforwards of $ 4.4 million and $ 7.5 million as of December 31, 2023 and 2022, respectively, that will expire at various dates from 2024 to 2036.
+Added: Utilization of net operating loss carryforwards is subject to an annual limitation due to the "change in ownership" provisions of the Internal Revenue Code of 1986, as amended.
Retained earnings at December 31, 2023 and 2022 include approximately $ 12.7 million in tax basis bad debt reserves for which no income tax liability has been recorded.
12 unchanged sentences
Employees may elect to have a portion of their salary contributed to the Plan.
−Removed: Participants receive a vested employer
−Removed: matching contribution equal to 100 % of the first 3.0 % and 50 % of the next 2.0 % of eligible compensation deferred by the participant.
+Added: Participants receive a vested employer matching contribution equal to 100 % of the first 3.0 % and 50 % of the next 2.0 % of eligible compensation deferred by the participant.
Employer contributions of $ 3.4 million, $ 4.0 million and $ 3.9 million were incurred in 2023, 2022, and 2021, respectively.
50 unchanged sentences
• Interest rate volatilities Level 2 recurring fair value measurement.
−Removed: Interest rate lock commitments The fair value considers several factors including:
+Added: IRLC The fair value considers several factors including:
• Fair value of the underlying loan based on quoted prices in the secondary market, when available.
2 unchanged sentences
Level 3 recurring fair value measurement.
−Removed: The following tables present the levels of the fair value hierarchy for the Company's assets and liabilities measured at fair value on a recurring basis:
−Removed: As of December 31, 2022
+Added: 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:
+Added: At December 31, 2023
(in thousands) Fair Value Level 1 Level 2 Level 3
15 unchanged sentences
Single family mortgage servicing rights 74,249 — — 74,249
−Removed: Futures 18 18 — —
−Removed: Options 218 218 —
Forward sale commitments 151 — 151 —
+Added: Options 132 132 —
Interest rate lock commitments 411 — — 411
1 unchanged sentence
Total assets $ 1,375,458 $ 24,830 $ 1,272,828 $ 77,800
+Added: Futures $ 3 $ 3 $ — $ —
Forward sale commitments 288 — 288 —
−Removed: Interest rate lock commitments 36 — — 36
Interest rate swaps 10,492 — 10,492 —
Total liabilities $ 10,783 $ 3 $ 10,780 $ —
−Removed: As of December 31, 2021
+Added: At December 31, 2022
(in thousands) Fair Value Level 1 Level 2 Level 3
+Added: Trading securities - U.S.
+Added: Treasury securities $ 18,997 $ 18,997 $ — $ —
Investment securities AFS
8 unchanged sentences
Treasury securities 19,934 — 19,934 —
+Added: Agency debentures 27,478 — 27,478 —
Single family LHFS 14,075 — 14,075 —
2 unchanged sentences
Futures 18 18 — —
+Added: Options 218 218 — —
Forward sale commitments 293 — 293 —
16 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.
−Removed: 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.
+Added: The fair value of IRLCs decreases in
+Added: 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.
156 unchanged sentences
(in thousands, except share and per share data) 2023 2022 2021
−Removed: Net income $ 66,540 $ 115,422 $ 79,990
+Added: Net income (loss) $ ( 27,508 ) $ 66,540 $ 115,422
Weighted average shares:
4 unchanged sentences
Diluted weighted-average number of common shares outstanding 18,783,005 19,041,111 21,143,414
−Removed: Net income per share
+Added: Net income (loss) per share
Basic earnings per share $ ( 1.46 ) $ 3.51 $ 5.53
1 unchanged sentence
(1) Excluded from the computation of diluted earnings per share (due to their antidilutive effect) for the years ended December 31, 2023, 2022 and 2021 were certain unvested RSUs and PSUs.
−Removed: The aggregate number of common stock unvested restricted shares, which could potentially be dilutive in future periods, was 176,259 , zero and 201 at December 31, 2022, 2021 and 2020, respectively.
+Added: The aggregate number of common stock unvested restricted shares, which could potentially be dilutive in future periods, was 217,153 , 176,259 and zero at December 31, 2023, 2022 and 2021, respectively.
NOTE 16– LEASES:
3 unchanged sentences
Under all of our executed sublease arrangements, the sublessees are obligated to pay the Company sublease payments of $ 3.3 million in 2024, $ 2.8 million in 2025, $ 2.9 million in 2026, $ 2.7 million in 2027 and $ 0.1 million in 2028.
−Removed: For 2020 we incurred $ 2.5 million in impairment charges on lease right-of-use assets.
The components of lease expense were as follows:
24 unchanged sentences
Finance leases — — ( 2 )
−Removed: (1) Change in 2020 primarily relates to changes in assumptions regarding the exercise of renewal options available under real estate lease agreements.
Supplemental information related to leases was as follows:
77 unchanged sentences
Total expenses 16,270 14,438 7,515
−Removed: Income before income taxes (benefit) 63,513 114,124 78,189
+Added: Income (loss) before income taxes (benefit)
+Added: ( 31,017 ) 63,513 114,124
Income taxes (benefit) ( 3,509 ) ( 3,027 ) ( 1,298 )
−Removed: Net income $ 66,540 $ 115,422 $ 79,990
+Added: Net income (loss) $ ( 27,508 ) $ 66,540 $ 115,422
Condensed Statements of Cash Flows Years Ended December 31,
1 unchanged sentence
Cash flows from operating activities
−Removed: Net income $ 66,540 $ 115,422 $ 79,990
−Removed: Adjustments to reconcile net income to net cash provided by (used in) operating activities
+Added: Net income (loss) $ ( 27,508 ) $ 66,540 $ 115,422
+Added: Adjustments to reconcile net income (loss) to net cash provided by operating activities
Undistributed earnings from investment in subsidiaries 55,832 ( 24,898 ) ( 10,801 )
12 unchanged sentences
Net cash used in financing activities ( 12,317 ) ( 3,811 ) ( 105,229 )
−Removed: Net (decrease) increase in cash and cash equivalents ( 6,952 ) ( 7,265 ) 3,383
+Added: Net increase (decrease) in cash and cash equivalents 15,737 ( 6,952 ) ( 7,265 )
Cash and cash equivalents, beginning of year 5,804 12,756 20,021
1 unchanged sentence
NOTE 19– SUBSEQUENT EVENTS:
−Removed: In February 2023, we completed an acquisition of three branches in southern California whereby we assumed $ 373 million in deposits and purchased $ 22 million in loans.
−Removed: On January 26, 2023 the Board of Directors authorized a dividend of $ 0.35 per share, payable on February 22, 2023 to shareholders of record on February 8, 2023.
+Added: On January 16, 2024, the Company entered into a definitive merger agreement with FirstSun Capital Bancorp (“FirstSun”), the holding company of Sunflower Bank, whereby the Company and the Bank will merge with and into FirstSun and Sunflower Bank, respectively.
+Added: Per the agreement, the companies will combine in an all-stock transaction in which HomeStreet shareholders will receive 0.4345 of a share of FirstSun common stock for each share of HomeStreet common stock.
+Added: This merger is expected to close in the middle of 2024.
ITEM 9 CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
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.