What changed in this filing

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Item 2. Management’s Discussion and Analysis

2024-08-06 compared with 2024-05-09 · 88 added, 77 removed, 498 unchanged (25% of the section changed)

7 unchanged sentences

(the "Company").

Forward-looking statements are based on the Company’s expectations at the time such statements are made and speak only as of the date made, they are not guarantees of future performance.

Forward-looking statements are based on the Company’s expectations at the time such statements are made and speak only as of the date made and are not guarantees of future performance.

The Company does not assume any obligation or undertake to update any forward-looking statements after the date of this report as a result of new information, future events or developments, except as required by federal securities or other applicable laws, although the Company may do so from time to time.

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We caution readers that actual results may differ materially from those expressed in or implied by the Company’s forward-looking statements.

Rather, more important factors could affect the Company’s future results, including but not limited to the following:(1) our ability to successfully consummate the proposed Merger with FirstSun;

(2) the ability of HomeStreet to obtain the necessary approval by shareholders with respect to the Merger;

Rather, more important factors could affect the Company’s future results, including but not limited to the following:

(1) our ability to successfully consummate the proposed Merger with FirstSun;

(2) the ability of HomeStreet and FirstSun to obtain required regulatory and governmental approvals of the Merger when expected or at all (and the risk that such approvals may result in the imposition of conditions that could adversely affect the combined company or the expected benefits of the Merger);

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(27) staffing fluctuations in response to product demand or the implementation of corporate strategies that affect our work force and potential associated charges;

(29) litigation, investigations or other matters before regulatory agencies, whether currently existing or commencing in the future, may delay the occurrence or non-

occurrence of events longer than what we anticipate;

(28) litigation,

investigations or other matters before regulatory agencies, whether currently existing or commencing in the future, may delay the occurrence or non-occurrence of events longer than what we anticipate;

and (29) our ability to obtain regulatory approvals or non-objection to take various capital actions, including the payment of dividends by us or the Bank, or repurchases of our common stock.

A discussion of the factors, risks and uncertainties that could affect our financial results, business goals and operational and financial objectives discussed in our 2023 annual report on Form 10-K or in our releases, public statements and/or filings with the Securities and Exchange Commission (“SEC”) is also contained in the “Risk Factors” section of our 2023 Annual Report on Form 10-K.

We strongly recommend readers review those disclosures in conjunction with the discussions herein.

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Any unfavorable differences between the actual outcome of credit-related events and our estimates could require an additional provision for credit losses.

For example, if the projected unemployment rate was downgraded one grade for all periods, the amount of the ACL at March 31, 2024 would increase by approximately $8 million.

For example, if the projected unemployment rate was downgraded one grade for all periods, the amount of the ACL at June 30, 2024 would increase by approximately $8 million.

This sensitivity analysis is hypothetical and has been provided only to indicate the potential impact that changes in assumptions may have on the ACL estimate.

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Summary Financial Data

Quarter Ended

(in thousands, except per share data and FTE data) March 31, 2024 December 31, 2023 March 31, 2023

Quarter Ended Six Months Ended June 30,

(in thousands, except per share data and FTE data) June 30, 2024 March 31, 2024 2024 2023

Select Income Statement data:

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For a reconciliation of these measures to the nearest comparable GAAP financial measure or the computation of the measure see “Non-GAAP Financial Measures” elsewhere in this Management’s Discussion and Analysis of Financial Condition and Results of Operations.

(in thousands, except share and per share data) March 31, 2024 December 31, 2023

(in thousands, except share and per share data) June 30, 2024 December 31, 2023

Selected Balance Sheet Data

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Proposed Merger Transaction

On January 16, 2024, the Company entered into a definitive merger agreement (as amended on April 30, 2024, the “merger agreement”) with FirstSun, the holding company of Sunflower Bank and Dynamis Subsidiary, Inc., whereby, under the merger agreement, the Company and the Bank will merge with and into FirstSun and Sunflower Bank, respectively.

The agreement was amended on April 30, 2024, and subject to the terms and conditions of the merger agreement, 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.

On January 16, 2024, the Company entered into a definitive merger agreement (as amended on April 30, 2024, the “merger agreement”) with FirstSun, the holding company of Sunflower Bank and Dynamis Subsidiary, Inc., whereby the Company and the Bank will merge with and into FirstSun and Sunflower Bank, respectively.

The merger agreement was approved by HomeStreet’s shareholders at a meeting held on June 18, 2024.

Subject to the terms and conditions of the merger agreement, 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 required regulatory approvals and satisfaction or waiver of other closing conditions.

Economic and Market Conditions

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Due to the impacts of the significant increases in short term rates by the Federal Reserve in 2023, and as a result of our actions taken to address the impact of these increases, we expect the balance of our loans held for investment to stay relatively stable during 2024 and our net interest margin to be lower in 2024 as compared to 2023.

Management's Overview of the First Quarter 2024 Financial Performance

First Quarter of 2024 Compared to the Fourth Quarter of 2023

Our net loss and loss before income taxes were $(7.5) million and $(10.6) million, respectively, in the first quarter of 2024, as compared to $(3.4) million and $(4.0) million, respectively, in the fourth quarter of 2023.

The $6.5 million increase in loss before income taxes was due to lower net interest income, lower noninterest income and an increase in noninterest expense which was partially offset by a lower provision for credit losses.

Management's Overview of the Second Quarter 2024 Financial Performance

Second Quarter of 2024 Compared to the First Quarter of 2024

Our net loss and loss before income taxes were $(6.2) million and $(8.0) million, respectively, in the second quarter of 2024, as compared to $(7.5) million and $(10.6) million, respectively, in the first quarter of 2024.

The $2.6 million decrease in loss before income taxes was due to higher noninterest income and a decrease in noninterest expense which was partially offset by lower net interest income.

Income Taxes:

The income tax benefit realized in the first quarter of 2024 resulted in an effective tax rate of 29.0% as compared to an effective tax rate of 14.8% in the fourth quarter of 2023.

Our effective tax rate in the first quarter of 2024 was higher than our statutory rate of 24.6% due to the impact of tax advantaged investments which creates a higher benefit due to our loss.

Our effective tax rate of 14.8% in the fourth quarter of 2023 was significantly impacted by the goodwill impairment charge taken in 2023, a portion of which was not deductible for tax purposes, the effect of which was partially offset by benefits of tax advantaged investments.

The income tax benefit realized resulted in an effective tax rate of 22.1% for the second quarter of 2024 as compared to an effective tax rate of 29.0% in the first quarter of 2024.

Certain merger related expenses are not deductible for tax purposes, the recognition of which resulted in a lower effective tax rate in the second quarter.

Net Interest Income:

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Quarter Ended

March 31, 2024 December 31, 2023

(in thousands) Average

June 30, 2024 March 31, 2024

(dollars in thousands)

Balance Interest Average

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Net interest margin 1.37 % 1.44 %

(1) Includes taxable-equivalent adjustments primarily related to tax-exempt income on certain loans and securities of $1.1 million for both quarters ended March 31, 2024 and December 31, 2023.

(1) Includes taxable-equivalent adjustments primarily related to tax-exempt income on certain loans and securities of $1.1 million for both quarters ended June 30, 2024 and March 31, 2024.

The estimated federal statutory tax rate was 21% for the periods presented.

(2) Cost of all deposits, including noninterest-bearing demand deposits was 2.61% and 2.39% for the quarters ended March 31, 2024 and December 31, 2023, respectively.

Our net interest income in the first quarter of 2024 was $2.8 million lower than the fourth quarter of 2023 due to a decrease in our net interest margin from 1.59% to 1.44%.

(2) Cost of all deposits, including noninterest-bearing demand deposits was 2.73% and 2.61% for the quarters ended June 30, 2024 and March 31, 2024, respectively.

Our net interest income in the second quarter of 2024 was $2.5 million lower than the first quarter of 2024 due to a decrease in our net interest margin from 1.44% to 1.37%.

The decrease in our net interest margin was due to a 13 basis point increase in the cost of interest-bearing liabilities which was due primarily to a 12 basis point increase in the cost of deposits.

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Provision for Credit Losses:

There was no provision for credit losses recognized during the first quarter of 2024 as compared to a $0.4 million provision in the fourth quarter of 2023.

These low levels of provisions for credit losses reflect the stable balance of our loan portfolio, a minimal level of identified credit issues in our loan portfolio and the lack of significant expected credit issues arising in future periods.

There was no provision for credit losses recognized during either the second quarter of 2024 or the first quarter of 2024.

This reflects the stable balance of our loan portfolio, a minimal level of identified credit issues in our loan portfolio and the lack of significant expected credit issues arising in future periods.

Noninterest Income consisted of the following:

Quarter Ended

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

(in thousands) June 30, 2024 March 31, 2024

Noninterest income

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Quarter Ended

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

(in thousands) June 30, 2024 March 31, 2024

Single family servicing income, net

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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 for both the quarters ended March 31, 2024 and December 31, 2023.

Noninterest income in the first quarter of 2024 decreased from the fourth quarter of 2023 primarily due to higher levels of income realized in the fourth quarter of 2023 from our investments in small business investment companies.

Noninterest income in the second quarter of 2024 increased from the first quarter of 2024 primarily due to $2.6 million more income realized in the second quarter of 2024 from our investments in small business investment companies and $0.7 million more gain on loan sales and originations related to seasonal increases in single family mortgage originations.

Noninterest Expense consisted of the following:

Quarter Ended

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

(in thousands) June 30, 2024 March 31, 2024

Noninterest expense

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Total noninterest expense $ 50,931 $ 52,164

The increase in noninterest expenses in the first quarter of 2024, as compared to the fourth quarter of 2023 was primarily due to seasonally higher compensation costs and a $1.1 million increase in merger related expenses.

First Quarter of 2024 Compared to First Quarter of 2023

Our net income (loss) and income (loss) before income taxes were $(7.5) million and $(10.6) million, respectively, in the first quarter of 2024, as compared to $5.1 million and $6.5 million, respectively, in the first quarter of 2023.

Our core net income (loss) and core income (loss) before income taxes in the first quarter of 2024, which excludes the impact of merger related expenses, was $(5.5) million and $(8.0) million, as compared to $5.1 million and $6.5 million, respectively, in the first quarter of 2023.

The $14.4 million decrease in core income before taxes was primarily due to lower net interest income, partially offset by a lower provision for credit losses.

The 2.4% decrease in noninterest expenses in the second quarter of 2024, as compared to the first quarter of 2024, reflects the Company's emphasis on reducing operating expenses where possible.

Six Months Ended June 30, 2024 Compared to Six Months Ended June 30, 2023

Our net income (loss) and income (loss) before income taxes were $(13.7) million and $(18.6) million, respectively, in the six months ended June 30, 2024, as compared to $(26.4) million and $(30.1) million, respectively, in the six months ended June 30, 2023.

Our core net income (loss) and core income (loss) before income taxes in the six months ended June 30, 2024, which excludes the impact of merger related expenses and goodwill impairment charges, was $(9.8) million and $(13.5) million, as compared to $8.2 million and $9.7 million, respectively, in the six months ended June 30, 2023 (1) .

The $23.2 million decrease in core income before taxes was primarily due to lower net interest income, partially offset by an increase in noninterest income and a decrease in noninterest expenses.

Income Taxes:

The income tax benefit realized in the first quarter of 2024 resulted in an effective tax rate of 29.0% which was higher than our statutory rate of 24.6% due to the impact of tax advantaged investments which creates a higher benefit to our loss.

Our effective tax rate in the first quarter of 2023 of 22.0% was lower than the statutory rate due to the benefits of tax advantaged investments.

The income tax benefit realized in the six months ended June 30, 2024 resulted in an effective tax rate of 26.0% which was higher than our statutory rate of 24.6% due to the impact of tax advantaged investments which creates a higher benefit to our loss.

Our effective tax rate in the six months ended June 30, 2023 of 12.5% was significantly impacted by the goodwill impairment charge, a portion of which is not deductible for tax purposes.

(1) Core net income (loss) and core income (loss) before income taxes are non-GAAP financial measures.

For a discussion of these measures and a reconciliation to the most comparable GAAP measure, please see “Non-GAAP Financial Measures” at the end of this Item 2.

Net Interest Income:

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and (v) net interest margin:

Quarter Ended March 31,

(in thousands) Average

Six Months Ended June 30,

(dollars in thousands)

Balance Interest Average

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Net interest margin 1.40 % 2.08 %

(1) Includes taxable-equivalent adjustments primarily related to tax-exempt income on certain loans and securities of $1.1 million and $1.2 million for the quarters ended March 31, 2024 and 2023, respectively.

(1) Includes taxable-equivalent adjustments primarily related to tax-exempt income on certain loans and securities of $2.2 million and $2.4 million for the six months ended June 30, 2024 and 2023, respectively.

The estimated federal statutory tax rate was 21% for the periods presented.

(2) Cost of deposits including noninterest-bearing deposits, was 2.61% and 1.65% for the quarters ended March 31, 2024 and 2023, respectively.

Net interest income in the first quarter of 2024 decreased $17.2 million as compared to the first quarter of 2023 due primarily to a decrease in our net interest margin.

Our net interest margin decreased from 2.23% in the first quarter of 2023 to 1.44% in the first quarter of 2024 due to a 110 basis point increase in the rates paid on interest-bearing liabilities which was partially offset by a 19 basis point increase in the yield on interest earning assets.

(2) Cost of deposits including noninterest-bearing deposits, was 2.67% and 1.83% for the six months ended June 30, 2024 and 2023, respectively.

Net interest income in the six months ended June 30, 2024 decreased $31.0 million as compared to the six months ended June 30, 2023 due primarily to a decrease in our net interest margin.

Our net interest margin decreased from 2.08% in the six months ended June 30, 2023 to 1.40% in the six months ended June 30, 2024 due to a 94 basis point increase in the rates paid on interest-bearing liabilities which was partially offset by a 16 basis point increase in the yield on interest earning assets.

Yields on interest-earning assets increased as yields on adjustable rate loans increased due to increases in the indexes on which their pricing is based.

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Provision for Credit Losses:

There was no provision for credit losses recognized during the first quarter of 2024 as compared to a $0.6 million provision in the first quarter of 2023.

There was no provision for credit losses recognized during the six months ended June 30, 2024 as compared to a $0.2 million provision in the six months ended June 30, 2023.

Noninterest Income consisted of the following:

Quarter Ended March 31,

Six Months Ended June 30,

(in thousands) 2024 2023

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(1) May include loans originated as held for investment.

Noninterest income in the six months ended June 30, 2024 increased from the six months ended June 30, 2023 primarily due to higher levels of income realized from our investments in small business investment companies in the first six months of 2024.

Loan servicing income, a component of noninterest income, consisted of the following:

Quarter Ended March 31,

Six Months Ended June 30,

(in thousands) 2024 2023

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Net gain (loss) from economic hedging (3)

(1,619) (1,673)

Single Family servicing income 3,977 3,817

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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.

(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 $0.6 million and $0.9 million for the six months ended June 30, 2024 and 2023, respectively.

Noninterest Expense consisted of the following:

Quarter Ended March 31,

Six Months Ended June 30,

(in thousands) 2024 2023

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General, administrative and other 21,982 20,230

Goodwill impairment charge — 39,857

Total noninterest expense $ 103,095 $ 143,272

The $0.3 million decrease in noninterest expenses in the first quarter of 2024 as compared to the first quarter of 2023 was primarily due to lower compensation and benefit costs, partially offset by higher general, administrative and other costs.

The decrease in compensation and benefit costs was primarily due to lower staffing levels, which was partially offset by wage increases given in the first quarter of 2024.

FTEs decreased from 920 at the quarter ended March 31, 2023 compared to 858 at the quarter ended March 31, 2024.

The increase in general, administrative and other costs was primarily due to $2.6 million in merger related costs.

The $40.2 million decrease in noninterest expenses in the six months ended June 30, 2024 as compared to the six months ended June 30, 2023 was primarily due to a $39.9 million goodwill impairment in the six months ended June 30, 2023, lower compensation and benefit costs and lower general and administrative costs, partially offset by $5.0 million of merger related expenses recognized in 2024.

The decrease in compensation and benefit costs was primarily due to lower staffing levels, which was partially offset by wage increases given in the six months ended June 30, 2024.

FTEs decreased from 915 in the six months ended June 30, 2023 to 849 in the six months ended June 30, 2024.

The lower general administrative and other costs included reductions in consulting fees and marketing costs which reflected the Company’s emphasis on reducing operating expenses where possible.

Financial Condition

During the first quarter of 2024, our total assets increased $63 million due primarily to a $105 million increase in cash, partially offset by a decrease in investment securities.

During the first quarter of 2024 total liabilities increased $74 million due to an increase in borrowings, partially offset by a decrease in deposits.

During the six months ended June 30, 2024, our total assets decreased $126 million due primarily to a $118 million decrease in investment securities as we are not purchasing new investment securities to replace principal paydowns in our portfolio.

During the six months ended June 30, 2024, total liabilities decreased $108 million due to a decrease in deposits partially offset by an increase in borrowings.

The $231 million decrease in deposits was primarily due to a $269 million decrease in brokered certificates of deposit.

The $349 million of additional borrowings were used to replace maturing brokered deposits and increase our on-balance sheet cash balances.

The $141 million of additional borrowings were used to replace maturing brokered deposits.

Credit Risk Management

During the first quarter of 2024, our ratios of nonperforming assets to total assets and total loans delinquent over 30 days, including nonaccrual loans, increased but remained at low levels.

As of March 31, 2024, our ratio of nonperforming assets to total assets was 0.56%, while our ratio of total loans delinquent over 30 days, including nonaccrual loans, to total loans was 0.82%.

During the second quarter of 2024, our ratios of nonperforming assets to total assets and total loans delinquent over 30 days, including nonaccrual loans, decreased from their previously low levels.

As of June 30, 2024, our ratio of nonperforming assets to total assets decreased to 0.42% from 0.56% at March 31, 2024 while our ratio of total loans delinquent over 30 days, including nonaccrual loans, to total loans decreased to 0.66% from 0.82% at March 31, 2024.

Management considers the current level of the ACL to be appropriate to cover estimated lifetime losses within our LHFI portfolio.

The following table presents the ACL by product type:

At March 31, 2024 At December 31, 2023

(in thousands) Amount Rate (1)

At June 30, 2024 At December 31, 2023

(dollars in thousands)

Amount Rate (1)

Non-owner occupied CRE $ 1,777 0.29 % $ 2,610 0.41 %

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The Company has $65 million of Senior Notes which mature in 2026 which it expects to pay off from available cash or from the issuance of new debt.

At March 31, 2024 and December 31, 2023, the Bank had available borrowing capacity of $1.6 billion and $2.1 billion, respectively, from the FHLB, and $853 million and $710 million, respectively, from the FRBSF and $1.1 billion, in both periods, under borrowing lines established with other financial institutions.

For the quarter ended March 31, 2024, cash and cash equivalents increased by $105 million compared to an increase of $304 million during the quarter ended March 31, 2023.

At June 30, 2024 and December 31, 2023, the Bank had available borrowing capacity of $1.7 billion and $2.1 billion, respectively, from the FHLB, and $717 million and $710 million, respectively, from the FRBSF and $1.1 billion, in both periods, under borrowing lines established with other financial institutions.

For the six months ended June 30, 2024, cash and cash equivalents increased by $3 million compared to an increase of $100 million during the six months ended June 30, 2023.

As excess liquidity can reduce the Company’s earnings and returns, the Company manages its cash positions to minimize the level of excess liquidity and does not attempt to maximize the level of cash and cash equivalents.

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The Company's operating assets and liabilities are used to support our lending activities, including the origination and sale of mortgage loans.

For the quarter ended March 31, 2024, net cash of $7.8 million was used in operating activities, as cash generated from operations was offset by cash used to fund LHFS in excess of proceeds from the sale of loans and increases in other assets.

For the quarter ended March 31, 2023, net cash of $52 million was used in operating activities, primarily from cash proceeds from the purchase of trading securities and cash used to fund LHFS exceeding proceeds from the sale of loans.

For the six months ended June 30, 2024, net cash of $30 million was used in operating activities, as cash generated from operations was offset by cash used to fund LHFS in excess of proceeds from the sale of loans and increases in other assets.

For the six months ended June 30, 2023, net cash of $31 million was used in operating activities, primarily from the purchase of trading securities, cash used to fund LHFS exceeding proceeds from the sale of loans and increases in other assets.

Cash flows from investing activities

The Company's investing activities primarily include AFS investment securities and loans originated as held for investment.

For the quarter ended March 31, 2024, net cash of $36 million was provided by investing activities primarily from principal repayments on AFS securities, partially offset by the origination of LHFI net of principal repayments and net FHLB stock purchases.

For the quarter ended March 31, 2023, net cash of $269 million was provided by investing activities primarily from net cash acquired from an acquisition partially offset by the origination of LHFI net of principal repayments and the purchase of AFS investment securities and net FHLB stock purchases.

For the six months ended June 30, 2024, net cash of $123 million was provided by investing activities primarily from principal repayments on AFS securities and by LHFI principal repayments, net of originations, partially offset by net FHLB stock purchases.

For the six months ended June 30, 2023, net cash of $343 million was provided by investing activities primarily from net cash acquired from an acquisition, principal repayments on AFS securities and LHFI principal repayments in excess of originations, partially offset by the purchase of AFS investment securities and net FHLB stock purchases.

Cash flows from financing activities

The Company's financing activities are primarily related to deposits and net proceeds from borrowings.

For the quarter ended March 31, 2024, net cash of $76 million was provided by financing activities, primarily due to by an increase in short-term and long-term borrowings, partially offset by decreases in deposits.

For the quarter ended March 31, 2023, net cash of $87 million was provided by financing activities, primarily due to an increase in short-term and long-term borrowings partially offset by a decrease in deposits and dividends paid on our common stock.

For the six months ended June 30, 2024, net cash of $90 million was used in financing activities, primarily due to a decrease in deposits, partially offset by an increase in borrowings.

For the six months ended June 30, 2023, net cash of $211 million was used in financing activities, primarily due to decrease in deposits and dividends paid on our common stock, partially offset by an increase in borrowings.

Off-Balance Sheet Arrangements

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These commitments include the following:

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

(in thousands) At June 30, 2024 At December 31, 2023

Unused consumer portfolio lines $ 597,992 $ 586,904

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Total $ 1,224,430 $ 1,273,939

(1) Within the commercial portfolio, undistributed construction loan proceeds, where the Company has an obligation to advance funds for construction progress payments were $414 million and $403 million at March 31, 2024 and December 31, 2023, respectively.

(1) Within the commercial portfolio, undistributed construction loan proceeds, where the Company has an obligation to advance funds for construction progress payments were $375 million and $403 million at June 30, 2024 and December 31, 2023, respectively.

Capital Resources and Dividend Policy

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(on a consolidated basis) and HomeStreet Bank as compared to the respective regulatory requirements applicable to them:

At March 31, 2024

At June 30, 2024

Actual For Minimum Capital

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The required ratios for capital adequacy set forth in the above table do not include the Capital Rules’ additional capital conservation buffer, though both the Company and Bank maintained capital ratios necessary to satisfy the capital conservation buffer requirements as of the dates indicated.

At March 31, 2024, capital conservation buffers for the Company and the Bank were 4.48% and 5.34%, respectively.

At June 30, 2024, capital conservation buffers for the Company and the Bank were 4.44% and 5.29%, respectively.

The Company did not declare a cash dividend in the quarter and currently does not plan to pay any quarterly dividends in 2024.

The amount and declaration of future cash dividends are subject to approval by our Board of Directors and certain statutory requirements and regulatory restrictions.

We had no material commitments for capital expenditures as of March 31, 2024.

We had no material commitments for capital expenditures as of June 30, 2024.

Non-GAAP Financial Measures

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Reconciliations of non-GAAP results of operations to the nearest comparable GAAP measures:

For the Quarter Ended

For the Quarter Ended Six Months Ended June 30,

(in thousands, except ratio, rate and share data)

March 31, 2024 December 31, 2023 March 31, 2023

June 30, 2024 March 31, 2024 2024 2023

Core net income (loss)

2 unchanged sentences

Merger related expenses 1,897 2,028 3,925 —

Goodwill impairment — — — 34,622

Total $ (4,341) $ (5,469) $ (9,810) $ 8,238

19 unchanged sentences

Merger related expenses (2,432) (2,600) (5,032) —

Goodwill impairment — — — (39,857)

State of Washington taxes (463) (452) (915) (1,081)

13 unchanged sentences

Effective tax rate used in computations above (1)

22.0 % 22.0 % 22.0 % 22.0 %

(1) Effective tax rate indicated is used for all adjustment except the goodwill impairment charge as a portion of this charge was not deductible for tax purposes.

Instead, a computed effective rate of 13.1% was used for the goodwill impairment charge.

(in thousands, except ratio, rate and share data)

March 31, 2024 December 31, 2023

June 30, 2024 December 31, 2023

Tangible book value per share

19 unchanged sentences

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 2. Management’s Discussion and Analysis