What changed in this filing

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Item 1. Financial Statements

2024-05-09 compared with 2023-11-07 · 202 added, 330 removed, 1046 unchanged (34% of the section changed)

3 unchanged sentences

CONSOLIDATED BALANCE SHEETS

September 30, 2023 December 31, 2022

March 31, 2024 December 31, 2023

(in thousands, except share data) (Unaudited)

10 unchanged sentences

Other real estate owned ("OREO") 3,117 3,667

Goodwill and other intangibles 10,429 29,980

Intangible assets 9,016 9,641

Other assets 346,370 325,351

19 unchanged sentences

CONSOLIDATED INCOME STATEMENTS

Quarter Ended September 30, Nine Months Ended September 30,

Quarter Ended March 31,

(in thousands, except share and per share data) 2024 2023

21 unchanged sentences

Total noninterest income

10,464 13,322 30,965 41,893

Noninterest expense:

3 unchanged sentences

General, administrative and other 11,377 10,355

Goodwill impairment charge — — 39,857 —

Total noninterest expense

1 unchanged sentence

Income (loss) before income taxes ( 10,559 ) 6,482

Income tax expense (benefit) ( 898 ) 6,084 ( 4,657 ) 15,475

Income tax (benefit) expense ( 3,062 ) 1,424

Net income (loss) $ ( 7,497 ) $ 5,058

8 unchanged sentences

AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

Quarter Ended September 30, Nine Months Ended September 30,

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

Quarter Ended March 31,

(in thousands) 2024 2023

8 unchanged sentences

( 1,277 ) 3,600

( 8,632 ) ( 13,474 ) ( 10,345 ) ( 39,874 )

Other comprehensive income (loss) ( 4,482 ) 13,772

9 unchanged sentences

income (loss) Total shareholders' equity

For the quarter ended September 30, 2022

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

Net income — — 20,367 — 20,367

Share-based compensation expense — 942 — — 942

Common stock issued - Stock grants 4,328 — — — —

Other comprehensive income (loss) — — — ( 42,668 ) ( 42,668 )

Dividends declared on common stock ($ 0.35 per share)

— — ( 6,638 ) — ( 6,638 )

Common stock repurchased

440 7 12 — 19

Balance, September 30, 2022

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

For the nine months ended September 30, 2022

For the quarter ended March 31, 2023

Balance, December 31, 2022

3 unchanged sentences

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

Other comprehensive income (loss) — — — ( 127,071 ) ( 127,071 )

Other comprehensive income — — — 13,772 13,772

Dividends declared on common stock ($ 0.35 per share)

2 unchanged sentences

( 12,995 ) ( 315 ) — — ( 315 )

Balance, September 30, 2022

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

For the quarter ended September 30, 2023

Balance, June 30, 2023

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

Net income — — 2,295 — 2,295

Share-based compensation expense — 712 — — 712

Common stock issued - Stock grants 17,433 — — — —

Other comprehensive income (loss) — — — ( 26,249 ) ( 26,249 )

Dividends declared on common stock ($ 0.10 per share)

— — ( 1,894 ) — ( 1,894 )

Common stock repurchased

Balance, September 30, 2023

Balance, March 31, 2023

18,767,811 $ 227,293 $ 433,459 $ ( 85,758 ) $ 574,994

For the nine months ended September 30, 2023

For the quarter ended March 31, 2024

Balance, December 31, 2023

2 unchanged sentences

Share-based compensation expense — 1,059 — — 1,059

— 2,696 — — 2,696

Common stock issued - Stock grants 60,483 — — — —

Other comprehensive income (loss) — — — ( 4,482 ) ( 4,482 )

Dividends declared on common stock ($ 0.55 per share)

— — ( 10,463 ) — ( 10,463 )

Common stock repurchased

( 12,972 ) ( 134 ) — — ( 134 )

Balance, September 30, 2023

Balance, March 31, 2024

18,857,566 $ 230,814 $ 387,860 $ ( 91,341 ) $ 527,333

3 unchanged sentences

CONSOLIDATED STATEMENTS OF CASH FLOWS

Nine Months Ended September 30,

Quarter Ended March 31,

(in thousands) 2024 2023

2 unchanged sentences

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

Goodwill impairment charge 39,857 —

Provision for credit losses — 593

8 unchanged sentences

Share-based compensation expense 1,059 1,016

Deferred income tax expense (credit)

12,149 ( 4,306 )

Deferred income tax (benefit) expense ( 1,189 ) 614

Origination of LHFS ( 79,806 ) ( 78,908 )

2 unchanged sentences

Origination of MSRs ( 895 ) ( 756 )

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

Change in fair value of MSRs 810 1,995

Amortization of servicing rights 1,402 1,554

Gain on sale of OREO

Gain on sale of branches — ( 4,270 )

Net change in trading securities ( 3,048 ) ( 43,045 )

(Increase) decrease in other assets ( 42,197 ) 10,475

Increase in other assets

( 8,813 ) ( 2,871 )

Increase (decrease) in accounts payable and other liabilities 9,484 ( 10,415 )

Net cash provided by (used in) operating activities ( 1,492 ) 209,455

Net cash used in operating activities ( 7,845 ) ( 51,590 )

CASH FLOWS FROM INVESTING ACTIVITIES:

Purchase of investment securities

( 53,232 ) ( 621,813 )

Proceeds from sale of investment securities — 4,693

1 unchanged sentence

83,153 32,445

Proceeds from sale of OREO 1,725 952

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

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

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

Net increase in LHFI ( 22,624 ) ( 39,408 )

Purchase of premises and equipment ( 6,058 ) ( 855 )

2 unchanged sentences

Purchases of Federal Home Loan Bank stock ( 48,716 ) ( 58,726 )

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

Nine Months Ended September 30,

Net cash provided by investing activities 36,042 268,868

Quarter Ended March 31,

(in thousands) 2024 2023

CASH FLOWS FROM FINANCING ACTIVITIES:

(Decrease) increase in deposits, net ( 1,083,087 ) 631,290

Decrease in deposits, net

( 272,487 ) ( 768,262 )

Changes in short-term borrowings, net 184,000 562,000

1 unchanged sentence

Repayment of other long-term borrowings ( 420,000 ) —

Proceeds from debt issuance, net — 98,035

Repayment of finance lease principal ( 47 ) ( 129 )

Repurchases of common stock — ( 75,000 )

Dividends paid on common stock — ( 6,684 )

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

Net increase (decrease) in cash and cash equivalents

153,876 ( 7,958 )

Net cash provided by financing activities 76,466 86,925

Net increase in cash and cash equivalents 104,663 304,203

Cash and cash equivalents, beginning of year 215,664 72,828

6 unchanged sentences

Increase in lease assets and lease liabilities 959 1,031

LHFI foreclosed and transferred to OREO 107 1,018

Loans transferred from LHFI to LHFS, net 273 —

Ginnie Mae loans recognized with the right to repurchase, net 323 —

Ginnie Mae loans derecognized with the right to repurchase, net — 1,235

26 unchanged sentences

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

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

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

The Company performs its annual impairment testing on August 31 each year, or sooner if a triggering event occurs.

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.

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.

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

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

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

The following table presents the changes in the carrying amount of goodwill in 2023:

(in thousands)

Balance, December 31, 2022 $ 27,900

Additions - branch acquisition in February 2023 11,957

Goodwill impairment charge ( 39,857 )

Balance September 30, 2023 $ —

Recent Accounting Developments

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

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

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

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

In December 2022, the FASB issued ASU No.

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

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

The adoption of these ASUs 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).

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.

We prospectively adopted the portion of ASU No.

2022-02 with respect to amendments about TDRs and related disclosure enhancements as of January 1, 2022.

We prospectively adopted the vintage table disclosure requirement of ASU 2022-02 on January 1, 2023.

The adoption of ASU 2022-02 did not have a material impact on the Company’s financial position or results of operations.

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

1 unchanged sentence

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

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

We adopted ASU 2023-02 and it did not have a material impact on the Company’s financial position or results of operations.

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

1 unchanged sentence

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

In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280):

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.

The update will be effective for annual periods beginning after December 15, 2023.

ASU 2023-07 will not have an impact on the Company's financial position or results of operation as it impacts disclosures only.

We are assessing the impact on our disclosures.

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740):

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.

and foreign jurisdictions.

The update will be effective for annual periods beginning after December 15, 2024.

ASU 2023-09 will not have an impact on the Company's financial position or results of operation as it impacts disclosures only.

We are assessing the impact on our disclosures .

NOTE 2– INVESTMENT SECURITIES:

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

At September 30, 2023

At March 31, 2024

(in thousands) Amortized

24 unchanged sentences

$ 2,371 $ — $ ( 40 ) $ 2,331

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

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

At March 31, 2024, and December 31, 2023, the Company held $ 28 million and $ 25 million, respectively, of trading securities, consisting of US Treasury notes used as economic hedges of our single family mortgage servicing rights, which are carried at

fair value and included with investment securities on the balance sheet.

For the quarters ended March 31, 2024 and 2023, net losses of $ 0.6 million and net gains of $ 0.6 million on trading securities, respectively, were recorded in servicing income.

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

1 unchanged sentence

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

As of September 30, 2023 and December 31, 2022, substantially all securities held, including municipal bonds and corporate debt securities, were rated investment grade based upon nationally recognized statistical rating organizations where available and, where not available, based upon internal ratings.

As of March 31, 2024 and December 31, 2023, substantially all securities held, including municipal bonds and corporate debt securities, were rated investment grade based upon nationally recognized statistical rating organizations where available and, where not available, based upon internal ratings.

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

At September 30, 2023

At March 31, 2024

Less than 12 months 12 months or more Total

25 unchanged sentences

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

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

In addition, as of September 30, 2023 and December 31, 2022, the Company had not made a decision to sell any of its debt securities held, nor did the Company consider it more likely than not that it would be required to sell such securities before recovery of their amortized cost basis.

The Company has not identified any expected credit losses on its debt securities as of March 31, 2024 or December 31, 2023.

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 March 31, 2024 and December 31, 2023, the Company had not made a decision to sell any of its debt securities held, nor did the Company consider it more likely than not that it would be required to sell such securities before recovery of their amortized cost basis.

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

At September 30, 2023

At March 31, 2024

Within one year After one year

37 unchanged sentences

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

Taxable-equivalent amounts are used where applicable.

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

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

The weighted average yield of MBS and CMOs as of March 31, 2024 and December 31, 2023 was 3.09 % and 3.21 %, respectively.

Sales of AFS investment securities were as follows:

Quarter Ended September 30, Nine Months Ended September 30,

Quarter Ended March 31,

(in thousands) 2024 2023

3 unchanged sentences

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

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

(in thousands) At March 31, 2024 At December 31, 2023

Federal Reserve Bank to secure borrowings $ 581,314 $ 647,104

3 unchanged sentences

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

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

Tax-exempt interest income on investment securities was $ 2.8 million for each of the quarters ended March 31, 2024 and 2023 .

NOTE 3- LOANS AND CREDIT QUALITY:

3 unchanged sentences

LHFI consists of the following:

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

(in thousands) At March 31, 2024 At December 31, 2023

Non-owner occupied CRE $ 633,401 $ 641,885

14 unchanged sentences

$ 7,405,052 $ 7,382,404

(1) Includes $ 1.2 million and $ 5.9 million at September 30, 2023 and December 31, 2022, respectively, of loans where a fair value option election was made at the time of origination and, therefore, are carried at fair value with changes in fair value recognized in the consolidated income statements.

Loans totaling $ 5.7 billion and $ 5.2 billion at September 30, 2023 and December 31, 2022, respectively, were pledged to secure borrowings from the Federal Home Loan Bank ("FHLB") and loans totaling $ 528 million and $ 497 million at September 30, 2023 and December 31, 2022, respectively, were pledged to secure borrowings from the Federal Reserve Bank of San Francisco ("FRBSF").

(1) Includes $ 1.3 million at both March 31, 2024 and December 31, 2023, of loans where a fair value option election was made at the time of origination and, therefore, are carried at fair value with changes in fair value recognized in the consolidated income statements.

Loans totaling $ 5.1 billion at both March 31, 2024 and December 31, 2023, were pledged to secure borrowings from the Federal Home Loan Bank ("FHLB") and loans totaling $ 1.4 billion and $ 1.2 billion at March 31, 2024 and December 31, 2023, respectively, were pledged to secure borrowings from the Federal Reserve Bank of San Francisco ("FRBSF").

Credit Risk Concentrations

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

At September 30, 2023, single family and multifamily loans in the state of Washington and California represented 11 % and 36 % of the total LHFI portfolio, respectively.

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

At March 31, 2024, and December 31, 2023 single family loans in the state of Washington represented 11 % of the total LHFI portfolio.

At March 31, 2024 and December 31, 2023, multifamily loans in the state of California represented 36 % of the total LHFI portfolio.

Credit Quality

1 unchanged sentence

The cumulative loss rate used as the basis for the estimate of credit losses is comprised of the Bank’s historical loss experience and eight qualitative factors for current and forecasted periods.

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

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

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

As of March 31, 2024, the historical expected loss rates decreased when compared to December 31, 2023 due to product mix risk composition changes.

During the first quarter of 2024 the qualitative factors decreased due to economic conditions and improved single-family collateral forecasts offset slightly by deteriorated commercial collateral conditions.

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 commercial collateral 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.

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

The allowance for unfunded commitments was $ 1.6 million and $ 1.8 million at March 31, 2024 and December 31, 2023, respectively.

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

Accrued interest on LHFI was $ 27.7 million and $ 26.9 million at September 30, 2023 and December 31, 2022, respectively, and was reported in other assets in the consolidated balance sheets.

Accrued interest on LHFI was $ 29.2 million and $ 28.9 million at March 31, 2024 and December 31, 2023, respectively, and was reported in other assets in the consolidated balance sheets.

Activity in the ACL for LHFI and the allowance for unfunded commitments was as follows:

Quarter Ended September 30, Nine Months Ended September 30,

Quarter Ended March 31,

(in thousands) 2024 2023

13 unchanged sentences

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

Quarter Ended September 30, 2023

Quarter Ended March 31, 2024

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

16 unchanged sentences

Total ACL $ 40,500 $ ( 1,105 ) $ 40 $ 242 $ 39,677

Quarter Ended September 30, 2022

Quarter Ended March 31, 2023

(in thousands) Beginning balance Charge-offs Recoveries Provision

17 unchanged sentences

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

Nine Months Ended September 30, 2023

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

Non-owner occupied CRE $ 2,102 $ — $ — $ 263 $ 2,365

Multifamily 10,974 — — ( 268 ) 10,706

Construction/land development

Multifamily construction 998 — — 594 1,592

CRE construction 196 — — ( 43 ) 153

Single family construction 12,418 — — ( 2,673 ) 9,745

Single family construction to permanent 1,171 — — ( 180 ) 991

Total 27,859 — — ( 2,307 ) 25,552

Commercial and industrial loans

Owner occupied CRE 1,030 — — 72 1,102

Commercial business 3,247 ( 1,342 ) 73 1,623 3,601

Total 4,277 ( 1,342 ) 73 1,695 4,703

Consumer loans

Single family 5,610 — 21 152 5,783

Home equity and other 3,754 ( 232 ) 270 170 3,962

Total 9,364 ( 232 ) 291 322 9,745

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

Nine Months Ended September 30, 2022

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

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

Multifamily 5,854 — — 5,329 11,183

Construction/land development

Multifamily construction 507 — — 158 665

CRE construction 150 — — 10 160

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

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

Total 21,486 — — 3,332 24,818

Commercial and industrial loans

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

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

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

Consumer loans

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

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

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

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

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

At September 30, 2023

At March 31, 2024

(in thousands) 2024 2023 2022 2021 2020 2019 and prior Revolving Revolving-term Total

43 unchanged sentences

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

At September 30, 2023

At March 31, 2024

(in thousands) 2024 2023 2022 2021 2020 2019 and prior Revolving Revolving-term Total

81 unchanged sentences

(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 and consumer portfolio segment by loan sub-class and gross charge-offs:

Nine Months Ended September 30, 2023

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

At March 31, 2024

(in thousands) 2024 2023 2022 2021 2020 2019 and prior Revolving Revolving-term Total

6 unchanged sentences

Total LHFI $ — $ — $ ( 2 ) $ — $ — $ ( 1,081 ) $ ( 22 ) $ — $ ( 1,105 )

December 31, 2023

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

COMMERCIAL PORTFOLIO

Commercial business

Gross charge-offs $ — $ — $ ( 184 ) $ — $ ( 1,136 ) $ 295 $ 13 $ ( 50 ) $ ( 1,062 )

CONSUMER PORTFOLIO

Home equity and other

Gross charge-offs — ( 106 ) ( 22 ) — — ( 4 ) ( 187 ) — ( 319 )

Total LHFI $ — $ ( 106 ) $ ( 206 ) $ — $ ( 1,136 ) $ 291 $ ( 174 ) $ ( 50 ) $ ( 1,381 )

Collateral Dependent Loans

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

At September 30, 2023

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

Commercial real estate loans

Non-owner occupied commercial real estate

At March 31, 2024

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

Non-owner occupied CRE $ 561 — $ 16,240 $ — $ 16,801

— 1,915 — — 1,915

Construction/land development

Commercial real estate construction

Multifamily construction

— 10,374 — — 10,374

CRE construction — — 3,824 — 3,824

Total 561 12,289 20,064 — 32,914

Commercial and industrial loans

Owner occupied CRE — — 2,136 — 2,136

Commercial business

7 unchanged sentences

At December 31, 2023

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

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

Non-owner occupied CRE $ 573 $ — $ 16,230 $ — $ 16,803

Construction/land development

CRE construction — — 3,821 — 3,821

Total 573 — 20,051 — 20,624

Commercial and industrial loans

Owner occupied CRE $ 1,111 $ — $ 1,410 $ — $ 2,521

Commercial business

2,788 — 5,471 4,587 12,846

2,788 5,471 4,587

Consumer loans

Single family

773 — — — 773

Total collateral-dependent loans $ 4,134 $ — $ 25,522 $ 4,587 $ 34,243

1 unchanged sentence

The following table presents nonaccrual status for loans:

At September 30, 2023 At December 31, 2022

At March 31, 2024 At December 31, 2023

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

Commercial real estate loans

Non-owner occupied commercial real estate

Non-owner occupied CRE $ 16,801 $ 16,801 $ 16,803 $ 16,803

1,915 1,915 — —

Construction/land development

Commercial real estate construction

Multifamily construction

10,374 10,374 — —

CRE construction 3,824 3,824 3,821 3,821

Total 32,914 32,914 20,624 20,624

10 unchanged sentences

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

At September 30, 2023

At March 31, 2024

Past Due and Still Accruing

36 unchanged sentences

— 1,915 — 20,624

22,539 5,125,451 5,147,990

Commercial and industrial loans

9 unchanged sentences

% 0.08 % 0.05 % 0.06 % 0.53 % 0.72 % 99.28 % 100.00 %

(1) Includes loans whose repayments are insured by the FHA or guaranteed by the VA or Small Business Administration ("SBA") of $ 10.2 million and $ 10.6 million at September 30, 2023 and December 31, 2022, respectively.

(1) Includes loans whose repayments are insured by the FHA or guaranteed by the VA or Small Business Administration ("SBA") of $ 11.9 million and $ 12.4 million at March 31, 2024 and December 31, 2023, respectively.

(2) FHA-insured and VA-guaranteed single family loans that are 90 days or more past due are maintained on accrual status if they are determined to have little to no risk of loss.

(3) Includes $ 1.2 million and $ 5.9 million of loans at September 30, 2023 and December 31, 2022, respectively, where a fair value option election was made at the time of origination and, therefore, are carried at fair value with changes in fair value recognized in our consolidated income statements.

(3) Includes $ 1.3 million of loans at both March 31, 2024 and December 31, 2023, 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

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

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

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

The granting of modifications for the quarters ended March 31, 2024 and 2023 did not have a material impact on the ACL.

The following tables provide information related to loans modified for the quarters ended March 31, 2024 and 2023 to borrowers experiencing financial difficulty, disaggregated by class of financing receivable and type of concession granted:

Significant Payment Delay

Quarter Ended September 30, Nine Months Ended September 30,

2023 2022 2023 2022

(in thousands, except percentages) Amortized Cost Basis at Period End % of Total Class of Financing Receivable Amortized Cost Basis at Period End % of Total Class of Financing Receivable Amortized Cost Basis at Period End % of Total Class of Financing Receivable Amortized Cost Basis at Period End % of Total Class of Financing Receivable

Single family $ 847 0.08 % $ 682 0.08 % $ 847 0.08 % $ 1,209 0.13 %

Home equity and other — — % — — % — — % 70 0.02 %

Term Extension

Quarter Ended September 30, Nine Months Ended September 30,

2023 2022 2023 2022

Quarter Ended March 31,

(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 $ 103 0.03 % $ — — %

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

Interest Rate Reduction and Significant Payment Delay

Quarter Ended September 30, Nine Months Ended September 30,

2023 2022 2023 2022

Term Extension

Quarter Ended March 31,

(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

Non-owner occupied CRE $ 560 0.09 % $ — — %

Commercial business 3,555 0.92 % — — %

Interest Rate Reduction and Term Extension

Quarter Ended September 30, Nine Months Ended September 30,

2023 2022 2023 2022

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

Significant Payment Delay and Term Extension

Quarter Ended September 30, Nine Months Ended September 30,

2023 2022 2023 2022

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

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

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

Home equity and other — — % — — % — — % 51 0.01 %

Interest Rate Reduction, Significant Payment Delay and Term Extension

Quarter Ended September 30, Nine Months Ended September 30,

2023 2022 2023 2022

Quarter Ended March 31,

(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 $ 1,156 0.10 % $ 179 0.02 %

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

Interest Rate Reduction

Quarter Ended September 30, Nine Months Ended September 30,

2023 2022 2023 2022

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

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

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

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

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

Significant Payment Delay

Quarter Ended September 30, Nine Months Ended September 30,

2023 2022 2023 2022

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

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

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

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

Quarter Ended March 31,

Commercial business The weighted average duration of loan payments deferred is 2.8 years.

Single Family Provided payment deferrals to borrowers.

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A weighted average 2.6 % of loan balances were capitalized and added to the remaining term of the loan.

Provided payment deferrals to borrowers.

A weighted average 0.48 % of loan balances were capitalized and added to the remaining term of the loan.

Provided payment deferrals to borrowers.

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.

A weighted average 3.44 % of loan balances were capitalized and added to the remaining term of the loan.

Term Extension

Quarter Ended September 30, Nine Months Ended September 30,

2023 2022 2023 2022

Quarter Ended March 31,

Non-owner occupied CRE Added a weighted average 0.25 years to the life of loans, which reduced the monthly payment amounts to the borrowers.

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

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

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

Commercial business Added a weighted average 0.4 years to the life of loans, which reduced the monthly payment amounts to the borrowers.

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

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

Single family Added a weighted average 1.9 years to the life of loans, which reduced the monthly payment amounts to the borrowers.

Added a weighted average 14.2 years to the life of loans, which reduced the monthly payment amounts to the borrowers.

Added a weighted average 4.6 years to the life of loans, which reduced the monthly payment amounts to the borrowers.

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.

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

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

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

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

The following table depicts the payment status of loans that were classified as MBFDs on or after January 1, 2023 through December 31, 2023:

Payment Status (Amortized Cost Basis) at March 31, 2024

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

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Total $ 31,094 $ 1,109 $ 342

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

Amortized Cost Basis of Modified Loans That Subsequently Defaulted

Quarter Ended September 30, 2023

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

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

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

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

Commercial business $ 1,355 $ — $ —

Single family 19,006 1,746 1,627

Home equity and other 119 — —

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

The following table provides the amortized cost basis as of March 31, 2024 of MBFDs on or after January 1, 2023 through December 31, 2023 and subsequently had a payment default:

Amortized Cost Basis of Modified Loans That Subsequently Defaulted

Nine Months Ended September 30, 2023

Quarter Ended March 31, 2024

Non-owner occupied CRE $ — $ — $ — $ 16,240 $ —

Construction/land development — — — 3,824 —

Commercial business — 4,420 — — —

Single family 241 — — 351 —

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

Amortized Cost Basis of Modified Loans That Subsequently Defaulted

Quarter Ended September 30, 2022

Single family $ — $ — $ — $ — $ 553

Total $ 241 $ 4,420 $ — $ 20,415 $ —

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

Amortized Cost Basis of Modified Loans That Subsequently Defaulted

Nine Months Ended September 30, 2022

Quarter Ended March 31, 2023

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

At September 30, 2023 At December 31, 2022

At March 31, 2024 At December 31, 2023

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

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Certificates of deposit

Brokered deposits 921,103 5.36 % 1,218,008 5.36 %

Other 2,135,415 4.32 % 2,009,946 3.95 %

Total interest bearing deposits 5,179,543 3.25 % 5,456,875 3.19 %

Total deposits $ 6,491,102 2.59 % $ 6,763,378 2.58 %

There were $ 256 million and $ 255 million in public funds included in deposits at March 31, 2024 and December 31, 2023, respectively.

Certificates of deposit outstanding mature as follows:

(in thousands) September 30, 2023

(in thousands) March 31, 2024

Within one year $ 2,782,594

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Total $ 3,056,518

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

There were $ 973 million and $ 1.4 billion of brokered deposits at September 30, 2023 and December 31, 2022, respectively.

The aggregate amount of certificate of deposits in denominations of more than the FDIC limit of $250 thousand at March 31, 2024 and December 31, 2023 were $ 277 million and $ 194 million, respectively.

NOTE 5– DERIVATIVES AND HEDGING ACTIVITIES:

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 .

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

At September 30, 2023

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 sheet, consist of the following:

At March 31, 2024

Notional amount Fair value derivatives

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Carrying value on consolidated balance sheet $ 1,064 $ ( 10,588 )

(1) Includes net cash collateral received of $ 15.2 million and $ 12.8 million at September 30, 2023 and December 31, 2022, respectively.

(1) Includes net cash collateral received of $ 11.9 million and $ 9.9 million at March 31, 2024 and December 31, 2023, respectively.

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

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Carrying value

At September 30, 2023

At March 31, 2024

Derivative assets $ 12,466 $ ( 11,926 ) $ 540

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Derivative liabilities ( 10,783 ) 195 ( 10,588 )

(1) Includes net cash collateral received of $ 15.2 million and $ 12.8 million at September 30, 2023 and December 31, 2022, respectively.

(1) Includes net cash collateral received of $ 11.9 million and $ 9.9 million at March 31, 2024 and December 31, 2023, respectively.

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

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

At September 30, 2023 and December 31, 2022, the Company had liabilities of $ 15.2 million and $ 12.8 million, respectively, in cash collateral received from counterparties and receivables of $ 0.02 million and $ 0.03 million, respectively, in cash collateral paid to counterparties.

At March 31, 2024 and December 31, 2023, the Company had liabilities of $ 11.9 million and $ 10.1 million, respectively, in cash collateral received from counterparties and receivables of $ 44 thousand and $ 218 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:

Quarter Ended September 30, Nine Months Ended September 30,

Quarter Ended March 31,

(in thousands) 2024 2023

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

$ 513 $ 958 $ 780 $ 8,221

Loan servicing income (loss) (2)

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

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

The notional amount of open interest rate swap agreements executed with commercial banking customers and broker dealer counterparties at March 31, 2024 and December 31, 2023 were $ 233 million and $ 236 million, respectively.

NOTE 6– MORTGAGE BANKING OPERATIONS:

LHFS consisted of the following:

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

(in thousands) At March 31, 2024 At December 31, 2023

Single family $ 19,023 $ 12,849

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Loans sold consisted of the following for the periods indicated:

Quarter Ended September 30, Nine Months Ended September 30,

Quarter Ended March 31,

(in thousands) 2024 2023

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

Quarter Ended September 30, Nine Months Ended September 30,

Quarter Ended March 31,

(in thousands) 2024 2023

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

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

(in thousands) At March 31, 2024 At December 31, 2023

Single family $ 5,280,531 $ 5,316,304

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

Quarter Ended September 30, Nine Months Ended September 30,

Quarter Ended March 31,

(in thousands) 2024 2023

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

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

Advances of $ 3.1 million and $ 2.9 million were recorded in other assets as of March 31, 2024 and December 31, 2023, respectively.

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

At September 30, 2023 and December 31, 2022, delinquent or defaulted mortgage loans currently in Ginnie Mae pools that the Company has recognized on its consolidated balance sheets totaled $ 5.6 million and $ 6.9 million, respectively.

At March 31, 2024 and December 31, 2023, delinquent or defaulted mortgage loans currently in Ginnie Mae pools that the Company has recognized on its consolidated balance sheets totaled $ 5.9 million and $ 5.6 million, respectively.

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

Quarter Ended September 30, Nine Months Ended September 30,

Quarter Ended March 31,

(in thousands) 2024 2023

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Amortization of multifamily and SBA MSRs ( 1,402 ) ( 1,554 )

3,467 3,733 10,429 11,572

Risk management, single family MSRs:

Changes in fair value of MSRs due to assumptions (2)

785 1,989 1,794 16,615

Net gain (loss) from economic hedging (3)

( 1,110 ) ( 81 )

( 492 ) ( 392 )

Loan servicing income $ 3,032 $ 3,039

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(2) Principally reflects changes in model assumptions, including prepayment speed assumptions, which are primarily affected by changes in mortgage interest rates.

(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 $ 0.3 million and $ 0.4 million for the quarters ended March 31, 2024 and 2023, respectively.

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

Quarter Ended September 30, Nine Months Ended September 30,

Quarter Ended March 31,

(in thousands) 2024 2023

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Additions and amortization:

935 1,453 2,473 7,664

Amortization (1)

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Changes in fair value assumptions (2)

785 1,989 1,794 16,615

Ending balance $ 74,056 $ 75,701

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

Quarter Ended September 30, Nine Months Ended September 30,

Quarter Ended March 31,

(rates per annum) (1)

2023 2022 2023 2022

Constant prepayment rate ("CPR") (2)

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

At September 30, 2023 At December 31, 2022

At March 31, 2024 At December 31, 2023

Range of Inputs Average (1)

CPRs 6.20 % - 25.30 %

6.20 % - 33.00 %

6.60 % 6.80 % - 32.50 %

Discount Rates 10.00 % - 16.00 %

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(1) Weighted averages of all the inputs within the range.

(2) Represents the expected lifetime average CPR used in the model.

To compute hypothetical sensitivities of the value of our single family MSRs to immediate adverse changes in key assumptions, we computed the impact of changes to CPRs and in discount rates as outlined below:

(dollars in thousands) At September 30, 2023

(dollars in thousands) At March 31, 2024

Fair value of single family MSR $ 74,056

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

Quarter Ended September 30, Nine Months Ended September 30,

Quarter Ended March 31,

(in thousands) 2024 2023

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Ending balance $ 28,863 $ 33,839

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

Quarter Ended March 31,

(rates per annum) (1)

Discount rate 13.00 % 13.00 %

(1) Based on a weighted average.

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.

Multifamily DUS loans typically contain yield maintenance features that significantly reduce loan prepayments, driving a CPR of zero.

At March 31, 2024 At December 31, 2023

Range of Inputs Average (1)

Discount Rates 13.00 % - 13.00 %

13.00 % 13.00 % - 13.00 %

(1) Weighted averages of all the inputs within the range.

NOTE 7– GUARANTEES AND MORTGAGE REPURCHASE LIABILITY:

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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.

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.

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.

As of September 30, 2023 and December 31, 2022, the total unpaid principal balance of loans sold under this program was $ 1.8 billion.

The Company's reserve liability related to this arrangement totaled $ 0.5 million and $ 0.6 million at September 30, 2023 and December 31, 2022, respectively.

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

At both March 31, 2024 and December 31, 2023, the total unpaid principal balance of loans sold under this program was $ 1.8 billion.

The Company's reserve liability related to this arrangement totaled $ 0.4 million and $ 0.5 million at March 31, 2024 and December 31, 2023, respectively.

There were no actual losses incurred under this arrangement during the quarters ended March 31, 2024 and 2023.

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

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The Company may be required to repurchase mortgage loans or indemnify loan purchasers due to defects in the origination process of the loan, such as documentation errors, underwriting errors and judgments, early payment defaults and fraud.

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

At September 30, 2023 and December 31, 2022, the Company had recorded a mortgage repurchase liability for loans sold on a servicing-retained and servicing-released basis, included in accounts payable and other liabilities on the consolidated balance sheets, of $ 1.6 million and $ 2.2 million, respectively.

At March 31, 2024 and December 31, 2023, the Company had recorded a mortgage repurchase liability for loans sold on a servicing-retained and servicing-released basis, included in accounts payable and other liabilities on the consolidated balance sheets, of $ 1.3 million and $ 1.5 million, respectively.

NOTE 8– EARNINGS PER SHARE:

The following table summarizes the calculation of earnings per share:

Quarter Ended September 30, Nine Months Ended September 30,

Quarter Ended March 31,

(in thousands, except share and per share data) 2024 2023

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( 0.40 ) 0.27

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

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

(1) Excluded from the computation of diluted earnings per share (due to their antidilutive effect) for the quarters ended March 31, 2024 and 2023 were certain unvested RSUs and PSUs.

On a weighted average basis, 561,610 and 251,821 unvested stock units convertible into shares of common stock were excluded at March 31, 2024 and 2023, respectively, because their effect would have been anti-dilutive.

NOTE 9– FAIR VALUE MEASUREMENT:

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

At September 30, 2023

At March 31, 2024

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

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Total assets $ 1,295,584 $ 27,752 $ 1,190,315 $ 77,517

Futures $ 2 $ 2 $ — $ —

Forward sale commitments $ 234 $ — $ 234 $ —

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Single family mortgage servicing rights 74,249 — — 74,249

Futures 18 18 — —

Options 218 218 — —

Forward sale commitments 151 — 151 —

Options 132 132 —

Interest rate lock commitments 411 — — 411

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Total assets $ 1,375,458 $ 24,830 $ 1,272,828 $ 77,800

Futures $ 3 $ 3 $ — $ —

Forward sale commitments 288 — 288 —

Interest rate lock commitments 36 — — 36

Interest rate swaps 10,492 — 10,492 —

Total liabilities $ 10,783 $ 3 $ 10,780 $ —

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

There were no transfers between levels of the fair value hierarchy during the quarters ended March 31, 2024 and 2023.

Level 3 Recurring Fair Value Measurements

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

For information regarding fair value changes and activity for single family MSRs during the quarters and nine months ended September 30, 2023 and 2022, see Note 6, Mortgage Banking Operations of this Quarterly Report on Form 10-Q.

For information regarding fair value changes and activity for single family MSRs during the quarters ended March 31, 2024 and 2023, see Note 6, Mortgage Banking Operations of this Quarterly Report on Form 10-Q.

The fair value of IRLCs considers several factors, including the fair value in the secondary market of the underlying loan resulting from the exercise of the commitment, the expected net future cash flows related to the associated servicing of the loan (referred to as the value of servicing) and the probability that the commitment will not be converted into a funded loan (referred to as a fall-out factor).

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The value of servicing is impacted by a variety of factors, including prepayment assumptions, discount rates, delinquency rates, contractually specified servicing fees, servicing costs and underlying portfolio characteristics.

Because these inputs are not observable in

market trades, the fall-out factor and value of servicing are considered to be level 3 inputs.

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

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

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

The total amount of held for investment loans where fair value option election was made was $ 1.2 million and $ 5.9 million at September 30, 2023 and December 31, 2022, respectively.

The total amount of held for investment loans where fair value option election was made was $ 1.3 million at both March 31, 2024 and December 31, 2023.

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

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Input Low High Weighted Average

September 30, 2023

March 31, 2024

Investment securities AFS $ 1,791 Income approach Implied spread to benchmark interest rate curve

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Value of servicing 0.32 % 0.80 % 0.57 %

We had no LHFS where the fair value was not derived with significant observable inputs at September 30, 2023 and December 31, 2022.

We had no LHFS where the fair value was not derived with significant observable inputs at March 31, 2024 and December 31, 2023.

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

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Ending balance

Quarter Ended September 30, 2023

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

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

Quarter Ended September 30, 2022

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

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

Nine Months Ended September 30, 2023

Quarter Ended March 31, 2024

Investment securities AFS $ 1,860 $ — $ — $ ( 50 ) $ ( 19 ) $ 1,791

Single family LHFI 1,280 — — — 5 1,285

Nine Months Ended September 30, 2022

Quarter Ended March 31, 2023

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

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

Quarter Ended September 30, Nine Months Ended September 30,

Quarter Ended March 31,

(in thousands) 2024 2023

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(in thousands) Fair Value Total Gains (Losses)

At or for the Quarter Ended September 30, 2023

At or for the Quarter Ended March 31, 2024

$ 423 $ ( 50 )

At or for the Nine Months Ended September 30, 2023

At or for the Quarter Ended March 31, 2023

$ 3,793 $ ( 159 )

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

At September 30, 2023

At March 31, 2024

(in thousands) Carrying

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

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

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

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

At September 30, 2023 At December 31, 2022

At March 31, 2024 At December 31, 2023

(in thousands) Fair Value Aggregate Unpaid Principal Balance Fair Value Less Aggregated Unpaid Principal Balance Fair Value Aggregate Unpaid Principal Balance Fair Value Less Aggregated Unpaid Principal Balance

Single family LHFS $ 19,023 $ 18,706 $ 317 $ 12,849 $ 12,583 $ 266

NOTE 10– BORROWINGS:

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

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

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

(dollars in thousands) Amount Weighted Average Rate

Within one year $ 873,000 4.87 %

One to three years 450,000 4.56 %

Three through five years 550,000 4.35 %

Total $ 1,873,000 4.64 %

NOTE 10– COMMITMENTS AND CONTINGENCIES:

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

As of March 31, 2024, HomeStreet was obligated on a $ 135 million letter of credit to the FHLB which is being used as collateral for public fund deposits.

NOTE 11– SUBSEQUENT EVENTS:

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

On April 30, 2024, the Company entered into Amendment No.

1 to the previously announced definitive merger agreement with FirstSun Capital Bancorp (“FirstSun”), the holding company of Sunflower Bank, N.A ("Sunflower Bank"), and Dynamis Subsidiary, Inc., whereby, under the merger agreement, as amended, the Company and the Bank will merge with and into FirstSun and Sunflower Bank, respectively (collectively, the "Merger").

Subject to terms and conditions of the merger agreement, as amended, the companies will combine in an all-stock transaction in which HomeStreet shareholders will receive 0.3867 of a share of FirstSun common stock for each share of HomeStreet common stock.

The parties to the Merger expect to complete the Merger in late 2024, subject to the satisfaction of closing conditions, including receipt of customary required regulatory approvals, the approval of the merger agreement by HomeStreet shareholders and satisfaction or waiver of other closing conditions.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements