What changed in this filing

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Item 1. Business

2025-03-07 compared with 2024-03-06 · 44 added, 588 removed, 17 unchanged (97% of the section changed)

3 unchanged sentences

We provide commercial banking products and services to small and medium sized businesses, real estate investors and professional firms and consumer banking products and services to individuals.

As of December 31, 2023, we had $9.4 billion of total assets, $7.4 billion of loans and $6.8 billion of deposits.

Our business strategy is to offer a full range of financial products and services to our customer base consistent with a regional bank’s offerings while providing the responsive and personalized service of a community bank.

We intend to maintain our business by (i) marketing our services directly to prospective new customers;

(ii) obtaining new client referrals from existing clients;

(iii) adding experienced relationship managers, branch managers and loan officers who may have established client relationships that we can serve;

(iv) cross-selling our products and services;

and (v) making opportunistic acquisitions of complementary businesses and/or establishing de novo offices in select markets within and outside our existing market areas.

Our business strategy is dependent on attracting and retaining highly qualified employees.

All of our employees, including customer facing and back-office support staff, are committed to providing high quality and responsive products and services to our customers.

We believe we have assembled a strong team to achieve our strategic goals and are committed to supporting them through our compensation, benefit and training programs and by providing them with the resources needed to complete their tasks and responsibilities.

We are principally engaged in commercial banking, consumer banking, and real estate lending, including construction and permanent loans on commercial real estate and single family residences.

We also sell insurance products for consumer clients.

We provide our financial products and services to our customers through bank branches, loan production offices, ATMs, online, mobile and telephone banking channels.

The yields we realize on our loans and other interest-earning assets and the interest rates we pay on deposits and borrowings determines our net interest income, the largest component of our total revenues.

Noninterest income, which represented 20% of total revenues in 2023, is primarily derived from our sale and servicing of single family and multifamily real estate loans.

While our growth has been primarily achieved through organic means, we have a history of making strategic acquisitions to enter into new markets or to enhance our standing in existing markets.

Our current product and service offerings have been introduced over a period of time.

HomeStreet, as a bank holding company, is subject to regulation and examination by the Board of Governors of the Federal Reserve System (the "Federal Reserve Board") and the Federal Reserve Bank of San Francisco ("FRBSF") under delegated authority from the Federal Reserve Board.

The Bank is a Washington state-chartered bank and is subject to regulation and examination by the Federal Deposit Insurance Corporation ("FDIC") and the Washington State Department of Financial Institutions, Division of Banks ("WDFI").

The Bank is also a member of the Federal Home Loan Bank of Des Moines ("FHLB"), which provides it with a source of funds in the form of short-term and long-term borrowings.

Proposed Merger

On January 16, 2024, the Company entered into a definitive merger agreement with FirstSun Capital Bancorp (“FirstSun”), the holding company of Sunflower Bank, N.A.

(“Sunflower Bank”) whereby HomeStreet and HomeStreet Bank will merge with and into FirstSun and Sunflower Bank, respectively (collectively, the “Merger”).

Under the agreement, the companies will combine in an all-stock transaction in which HomeStreet shareholders will receive 0.4345 of a share of FirstSun common stock for each share of HomeStreet common stock.

The Merger is expected to close in the middle of 2024.

Loan Products

We are committed to offering competitive lending products that meet the needs of our clients, are underwritten in a prudent manner, and provide an adequate return based on their size, credit risk and interest rate risk.

Our loan products include commercial business loans, single family residential mortgages, consumer loans, commercial loans secured by residential and commercial real estate, and construction loans for residential and commercial real estate development.

The lending units under which these loans are offered include:

Commercial Lending;

Single Family Residential Lending;

Commercial Real Estate ("CRE") Lending and Residential Construction Lending.

In addition, certain consumer loans are offered through our retail branch network.

For all our loan offerings, we utilize a comprehensive approach in our underwriting process.

In our underwriting, our primary focus is always on the primary, secondary and tertiary sources of repayment, which include the business/borrower’s ability to repay, the subject real estate collateral cash flow, and the value of the collateral securing the loan.

Because our underwriting process allows us to view the totality of the borrower’s capacity to repay, concerns or issues in one area can be compensated for by other favorable financial criteria in other areas.

This may include the evaluation of changing trends in credit metrics, market and economic changes, and other risks in individual markets based on multivariate market analysis performed by the Bank on a quarterly basis.

This personalized and detailed approach allows us to better understand and meet our clients’ borrowing needs.

Each lending unit features standardized pricing, uniform sizing and a streamlined process resulting in an efficient high application-to-funding ratio.

Commercial Lending:

Loans originated by Commercial Lending are generally supported by the cash flows generated from the business operations of the entity to which the loan is made, and, except for loans secured by owner occupied CRE, are generally secured by non-real estate assets, such as equipment, inventories or accounts receivable.

Commercial Lending is focused on developing quality full-service business banking relationships, including loans and deposits.

We typically focus on commercial clients that are manufacturers, distributors, wholesalers and professional service companies.

These loans are generated primarily by our relationship managers and business development officers with minimal direct marketing support.

Commercial Loans:

We offer commercial term loans and commercial lines of credit to our clients.

Commercial loans generally are made to businesses that have demonstrated a history of profitable operations.

To qualify for such loans, prospective borrowers generally must have operating cash flow sufficient to meet their obligations as they become due, good payment histories, responsible balance sheet management and experienced management.

Commercial term loans are either fixed rate or adjustable rate loans with interest rates tied to a variety of independent indices and are made for terms ranging from one to seven years based in part on the useful life of the asset financed.

Commercial lines of credit are adjustable rate loans with interest rates usually tied to the Bank’s prime lending rate or other independent indices and are made for terms ranging from one to two years.

These loans contain various covenants, including possible requirements that the borrower reduce its credit line borrowings to zero for specified time periods during the term of the line of credit, maintain required levels of liquidity with advances tied to periodic reviews of amounts borrowed based upon a percentage of accounts receivable, and inventory or unmonitored lines for those with significant financial strength and liquidity.

Commercial loans are underwritten based on a variety of criteria, including an evaluation of the creditworthiness of the borrower and guarantors, the borrower's ability to repay, debt service coverage ratios, historical and projected client income, borrower liquidity and credit history and the trends in income and balance sheet management.

In addition, we perform stress testing for changes in interest rates and other factors and review general economic trends in the client’s industry.

We typically require full recourse from the owners of the entities to which we make such loans.

Commercial Real Estate Loans - Owner Occupied:

Owner occupied CRE loans are generally made to businesses that have demonstrated a history of profitable operations.

To qualify for such loans, prospective borrowers generally must have operating cash flow sufficient to meet their obligations as they become due, good payment histories, proper balance sheet management of key cash flow drivers, and experienced management.

Our commercial real estate loans are secured by first trust deeds on nonresidential real property, typically office, industrial or warehouse properties.

These loans generally have adjustable rates with interest rates tied to a variety of independent indices, although in some cases these loans have fixed interest rates for periods ranging from three to 10 years and adjust thereafter based on an applicable indices and terms.

These loans generally have interest rate floors, payment caps, and prepayment fees.

The loans are underwritten based on a variety of criteria, including an evaluation of the creditworthiness of the borrower and guarantors, the borrower's ability to repay, loan-to-value and debt service coverage ratios, borrower liquidity and credit history and the trends in balance sheet and income statement management.

We typically require full recourse from the owners of the entities to which we make such loans.

We offer an interest rate risk management service to our customers that enables them to exchange a variable interest rate with a fixed interest rate through products from other financial institutions which we broker for a fee.

Shared National Credits/Participation Lending:

We participate in multi-bank transactions referred to as Shared National Credits or Participations when an individual loan may be too large to be made by a single institution or an institution wants to reduce their credit exposure from a single loan.

These loans are typically originated and led by other larger banks and the Bank is a participant in the transaction.

The loans are sourced through relationships with originating lenders as well as through purchases of loans in the secondary market.

These loans are generally made to businesses that have demonstrated a history of profitable operations.

Syndicated/Participated term loans are either fixed rate or adjustable rate loans with interest rates tied to a variety of independent indices and are generally made for terms ranging from one to seven years based in part on the useful life of the asset financed.

Lines of credit are adjustable rate loans with interest rates tied to a variety of independent indices and are generally made with terms from one to five years, and contain various covenants, including possible requirements that the borrower maintain liquidity requirements with advances tied to periodic reviews.

These loans are underwritten independently by us based on a variety of criteria, including an evaluation of the creditworthiness of the borrower, the borrower's ability to repay, debt service coverage ratios, historical and projected client income, borrower liquidity and credit history, and their trends in income and balance sheet management.

In addition, we perform stress testing for changes in interest rates and other factors and review general economic trends in the client’s industry.

Full recourse from the owners of these entities is usually not required for these loans.

Small Business Lending, SBA Lending and USDA Lending:

The Bank is approved as a Small Business Administration ("SBA") preferred lender and as a United States Department of Agriculture ("USDA") lender.

We are committed to our small business commercial lending to serve our communities and small businesses that operate in proximity to our network of retail branch locations.

As these are government guaranteed programs, we comply with the relevant agency's underwriting guidelines, servicing and monitoring requirements, and terms and conditions set forth under the related programs standard operating procedures.

SBA loans generally follow our underwriting guidelines established for non-SBA commercial and industrial loans and meet the criteria set forth by the SBA.

Single Family Residential Lending:

Loans originated by Single Family Residential Lending are generally supported by cash flows of the borrower and are secured by one to four unit residential properties.

Single family loans are originated for sale or to be held for investment.

We also make construction loans to qualified owner occupants, which upon completion of the construction phase convert to long-term amortizing single family loans that are eligible for sale in the secondary market.

Home equity loans ("HELOCs") are originated to be held for investment.

The origination of single family loans tends to be more transactional in nature and are not dependent on the borrower utilizing other products or services offered by us, such as deposits.

In addition to leads generated by our loan officers, we utilize targeted marketing programs and cross referrals from our retail branches to generate leads.

We do not originate loans defined as high cost by state or federal banking regulators.

The single family loan origination process is now almost exclusively done electronically with little or no processing of paper.

Single Family Loans Originated for Sale :

These loans are generally underwritten and documented in accordance with the guidelines established by the Federal Home Loan Mortgage Corporation ("Freddie Mac" or "FHLMC") and the Federal National Mortgage Association ("Fannie Mae" or "FNMA").

These loans are delivered/sold into securities issued by either Fannie Mae or Freddie Mac.

Government insured loans are underwritten and documented in accordance with the guidelines established by the Department of Housing and Urban Development ("HUD") and the Department of Veterans Affairs ("VA").

These loans are delivered/sold into securities issued by the Government National Mortgage Association ("Ginnie Mae" or "GNMA").

We also participate in correspondent relationships under which we originate and sell loans to other financial institutions in compliance with their underwriting guidelines.

As part of these guidelines, we underwrite these loans based on a variety of criteria, including an evaluation of the creditworthiness of the borrower, the borrower's ability to repay, loan-to-value and debt-to-income ratios, borrower liquidity, income verification and credit history.

For adjustable rate loans, the loan payment used for our underwriting is based upon fully indexed interest rates and payments.

Our loan-to-value limits are generally up to 95% of the lesser of the appraised value or purchase price of the property.

We offer both fixed and adjustable rate loans.

The majority of our fixed rate loans have terms of 15 or 30 years.

Our adjustable rate loans are typically amortized over a 30-year period with fixed rate periods ranging between three to 10 years and adjust thereafter based on the applicable index and terms.

Adjustable rate loans generally have interest rate floors and caps.

Single family loans are almost always sold servicing retained.

Single Family Loans Held for Investment:

These loans generally take the form of non-conforming jumbo loans collateralized by real properties located in our market areas.

These loans generally have adjustable rates with initial fixed rate periods ranging from three to 10 years and a term not exceeding 30 years.

These loans generally have interest rate floors and caps.

The loans are underwritten based on a variety of criteria, including an evaluation of the creditworthiness of the borrower, the borrower's ability to repay, loan-to-value and debt-to-income ratios, borrower liquidity, income verification and credit history.

Home equity loans:

HELOCs are secured by first or second liens on residential properties and are structured as revolving lines of credit whereby the borrower can draw upon and repay the loan at any time.

These loans have adjustable rates with interest rates tied to a variety of independent indices, with interest rate floors and caps and with terms of up to 10 years.

We underwrite these loans based on a variety of criteria, including an evaluation of the creditworthiness of the borrower, the borrower's ability to repay, loan-to-value and debt-to-income ratios, borrower liquidity, income verification and credit history.

Loans originated by CRE Lending are supported by the underlying cash flow from operations of the related real estate collateral for loans except for construction related loans.

The loans originated by CRE Lending consist of multifamily, non-owner occupied CRE and CRE construction loans, including bridge loans.

The origination of CRE loans tends to be transactional in nature and is not dependent on the borrower utilizing other products or services offered by us, such as deposits.

However, we have established full service deposit relationships with a number of these customers and we request that the operating deposit accounts for the related properties be maintained with us.

The business is primarily sourced through our loan officers’ relationships and through brokers with little direct marketing support.

CRE Residential Mortgage Loans – Multifamily:

We make multifamily residential mortgage loans for terms up to 30 years for 5+ unit properties.

These loans generally have adjustable rates with interest rates tied to a variety of independent indices;

although in many cases these loans have initial fixed rate periods ranging from three to 10 years and adjust thereafter based on an applicable index.

These loans generally have interest rate floors, payment caps, and prepayment fees.

The loans are underwritten based on a variety of criteria, including an evaluation of the subject real estate collateral cash flow, the creditworthiness of the borrower and guarantors, the borrower's ability to repay, loan-to-value and debt service coverage ratios, borrower liquidity and credit history.

In addition, we perform stress testing for changes in interest rates, capitalization rates and other factors and review general economic trends such as rental rates, market values and vacancy rates.

We typically require full or limited recourse from the owners of the entities to which we make such loans.

Our multifamily real estate loans originated under our Fannie Mae DUS© lender service authorization are sold to or securitized by Fannie Mae after origination, with the Company generally retaining the servicing rights.

In addition, because our operations can originate multifamily loans at levels higher than those needed to be retained to meet our loan growth targets, from time to time, we may sell multifamily loans to other financial institutions, usually servicing released.

CRE Loans – Non-owner Occupied :

Our commercial real estate loans are secured by first trust deeds on nonresidential real property with terms up to 15 years.

We typically focus on multi-tenant industrial, office and retail real estate collateral with strong, stable tenancy, and strong, stable historical cash flow located in submarket locations with strong, stable demand.

These loans generally have adjustable rates with interest rates tied to a variety of independent indices;

although in many cases these loans have initial fixed rate periods ranging from three to 10 years and adjust thereafter based on an applicable index.

These loans generally have interest rate floors, payment caps, and prepayment fees.

In addition, we perform stress testing for changes in interest rates, capitalization rates and other factors and review general economic trends such as lease rates, values and absorption rates.

We typically require full recourse from the owners of the entities to which we make such loans.

CRE Construction Loans:

CRE construction loans are provided to borrowers with extensive construction experience and are primarily focused on multifamily, commercial building and warehouse developments.

These loans are custom tailored to fit the individual needs of each specific request.

We typically consider CRE construction loan requests in the submarket locations where we have experience and offer permanent real estate loans.

We also offer bridge loans which are designed to fund a project for a short period of time until permanent financing can be arranged.

Construction loans and bridge loans usually only require interest only payments which are generally supported by an interest reserve established at the time the loan is originated.

Construction loans typically are disbursed as construction progresses and are subject to inspection by third party experts.

Construction loans, including bridge loans, carry a higher degree of risk because repayment of these loans is dependent, in part, on the successful completion of the project or, to a lesser extent, the ability of the borrower to refinance the loan or sell the property upon completion of the project, rather than the ability of the borrower or guarantor to repay principal and interest.

Because of these factors, these loans require substantial equity either as up-front cash equity in the project or equity in the value of the underlying property.

These loans are typically secured by the underlying development and, even if we foreclose on the loan, we may be required to fund additional amounts to complete the project and may have to hold the property for an unspecified period of time while we attempt to dispose of it.

CRE construction and bridge loans are secured by first trust deeds on real property.

These loans either have fixed rates throughout their term or have adjustable rates with interest rates tied to a variety of independent indices.

These loans generally have interest rate floors, payment caps, and prepayment fees.

The loans are underwritten based on a variety of criteria, including an evaluation of the creditworthiness of the borrower and guarantors,

the borrower's ability to repay, loan to value and debt service coverage ratios, borrower liquidity and credit history.

In addition, we perform stress testing for changes in interest rates and other factors and review general economic trends such as lease rates, values and absorption rates.

We typically require full recourse from the owners of the entities to which we make such loans.

Residential Construction Lending:

Loans originated by Residential Construction Lending include single family residential construction loans, lot acquisition loans and land development loans.

Our construction loans are to experienced local developers with extensive track records in building single family loans.

Our lot acquisition loans and land development loans are typically on entitled land, versus raw land, and are used to support our vertically integrated and experienced local developers who maintain inventory for building single family projects.

Construction loans are disbursed as construction progresses.

These loans require repayment as residences or lots are sold.

Residential Construction Lending typically develops full service business banking relationships, including loans and deposits.

The business is primarily sourced through our relationship managers with minimal direct marketing support.

We typically consider residential construction loan requests in the submarket locations where we have experience and a relationship manager is located.

Construction loans, lot acquisition loans and land development loans usually only require interest only payments which may be supported by an interest reserve established at the time the loan is originated.

Construction loans typically are disbursed as construction progresses.

Construction loans carry a higher degree of risk because repayment of these loans is dependent, in part, on the success of the ultimate project or, to a lesser extent, the ability of the borrower to sell the home or lots upon completion of the project.

Because of these factors, these loans require substantial equity either as up-front cash equity in the project or equity in the value of the underlying property.

These loans are secured by the underlying real estate and improvements.

In the event of a foreclosure on the loan, we may be required to fund additional amounts to complete the project and may have to hold the property for an unspecified period of time while we attempt to dispose of it.

Residential Construction Lending loans are secured by first trust deeds on real property.

These loans generally have adjustable rates with interest rates tied to the Bank’s prime lending rate.

These loans generally have interest rate floors, payment caps, and prepayment fees.

The loans are underwritten based on a variety of criteria, including an evaluation of the creditworthiness of the borrower and guarantors, the borrower's ability to repay, loan to value and loan to cost ratios, borrower leverage and liquidity, credit history and guarantor support.

In addition, we perform stress testing for changes in interest rates and other factors and review general economic trends such as values and absorption rates.

We typically require full recourse from the owners of the entities to which we make such loans.

We offer consumer installment loans through our retail branches to our customers to allow them to meet short term cash flow needs.

Consumer loans are generally fixed rate loans made for terms ranging from one to five years.

The loans are underwritten based on a variety of criteria, including an evaluation of the creditworthiness and credit history of the borrower and guarantors, the borrower's ability to repay, debt-to-income ratios, borrower liquidity and income verification.

Loans Serviced for Others

We retain servicing rights from the sale of single family loans and multifamily loans originated under our Fannie Mae DUS authorization.

The value of these mortgage servicing rights ("MSRs") is recognized upon the sale of the loans and is amortized over the lives of the loans.

For single family loans, the value of MSRs can be highly volatile due primarily to changes in prepayment speeds.

We have a hedging program in place to reduce the impact of this volatility on our financial results.

The monthly servicing fees we receive are partially offset by the amortization of MSRs.

Our contractual servicing obligations include the collection of payments from borrowers, resolving delinquent payments including foreclosing on loans when appropriate, remittance of collections and monthly reporting of servicing activities.

The funds collected are generally retained as deposits in the Bank until they are remitted on a monthly basis to the owner or trustee.

Deposit Products and Services

Deposits represent our principal source of funds for making loans and acquiring other interest-earning assets.

These deposits are serviced through our retail branch network which currently includes 56 branches.

These retail branches serve as one of our primary contact points with our customers.

These branches are typically staffed with three to six employees, including a branch manager who is responsible for servicing our existing customers and generating new business.

At December 31, 2023, we held $6.8 billion of deposits.

Deposit Products:

We offer a wide range of deposit products including personal and business checking, savings accounts, interest-bearing negotiable order of withdrawal accounts, money market accounts and time certificates of deposit.

Our pricing strategy is to maintain deposit pricing at levels consistent with our competitors.

This generally allows us to maintain our current deposit relationships.

From time to time, we will offer promotional rates to attract new clients to our platform.

strategy is intended to complement our other products and services so that we can attract and retain clients without always paying the highest rates.

Deposit Services:

Our deposit services include the following:

Treasury Management :

Treasury Management products and services provide our customers the tools to bank with us conveniently without having the need to visit one of our offices and are necessary to attract complex commercial and specialty deposit clients.

These include bill pay, payee positive pay, wire transfers, internal and external transfers, wire and ACH reconciliation services, remote deposit capture and mobile/mobile deposit, as well as lockbox and cash vault services.

Digital Banking :

We offer consumer and business online access to our basic account management, review and processing functions and our treasury management products and services.

In addition, we provide mobile banking services to both business and consumer clients through our online access.

The banking business in our market areas in the Western United States is highly competitive.

We primarily compete with other banks, credit unions, mortgage banking companies and finance companies, including similarly sized community banks who are vying for customers and employees in the same markets as us.

A relatively small number of major national and regional banks, operating over wide geographic areas, including Wells Fargo, JP Morgan Chase, US Bank, Comerica and Bank of America, dominate our banking markets.

Those banks generally have greater financial and capital resources than we do and as a result of their ability to conduct extensive advertising campaigns and their relatively long histories of operations in our markets, are generally better known than us.

In addition, by virtue of their greater total capitalization, the large banks have substantially higher lending limits than we do, which enables them to make much larger loans and to offer loan products and other services that we are not able to offer to our clients.

Due to consolidation in the banking industry, the number of competitors for lower and middle-market businesses has decreased.

At the same time, national and large regional banks have focused on larger customers to achieve economies of scale in lending and depository relationships and have also consolidated business banking operations and support and reduced service levels in many of our markets.

We have taken advantage of industry consolidation by recruiting well-qualified employees and attracting new customers who seek long-term stability, local decision-making, quality products and outstanding expertise and customer service.

While we provide our clients with the convenience of technological access services, such as remote deposit capture, internet banking and mobile banking, we compete primarily by providing a high level of personal service.

As a result, we do not try to compete exclusively on pricing.

However, because we are located in competitive markets and because we are seeking to grow our businesses, we attempt to maintain our pricing to be competitive with our principal competitors.

As of December 31, 2024, we had $8.1 billion in total assets, $6.2 billion of loans and $6.4 billion of deposits.

With the exception of the updates provided below, the information required under Part I.

– “Business” is incorporated by reference to Part I, Item 1, "Business" in our Annual Report on Form 10-K for the year ended December 31, 2023.

Regulation and Supervision of HomeStreet Bank

Financial Privacy and Cybersecurity

Under the Federal Right to Privacy Act of 1978, which imposes a duty to maintain confidentiality of consumer financial records and prescribes procedures for complying with administrative subpoenas of financial records, financial institutions are required to disclose their policies for collecting and protecting confidential information.

Consumers generally may prevent financial institutions from sharing personal financial information with nonaffiliated third parties except for third parties that market the institutions’ own products and services.

Additionally, financial institutions generally may not disclose consumer account numbers to any nonaffiliated third party for use in telemarketing, direct mail marketing or other marketing through electronic mail to consumers.

The federal banking regulators regularly issue guidance regarding cybersecurity intended to enhance cyber risk management standards among financial institutions.

A financial institution is expected to establish multiple lines of defense and to ensure their risk management processes address the risk posed by potential threats to the institution.

A financial institution’s management is expected to maintain sufficient processes to effectively respond and recover the institution’s operations after a cyberattack.

A financial institution is also expected to develop appropriate processes to enable recovery of data and business operations if a critical service provider of the institution falls victim to this type of cyberattack.

The Bank has adopted an information security program that has been approved by its board of directors and reviewed by its regulators.

In July 2023, the SEC issued a final rule that requires registrants, such as the Company, to (i) report material cybersecurity incidents on Form 8-K within four business days of their being deemed material, (ii) disclose cybersecurity policies and procedures and governance practices, including at the board and management levels, in Form 10-K, and (iii) present the disclosures in inline XBRL.

Human Capital Management

Employee Headcount

As of December 31, 2023, the Company employed 883 employees across our geographic footprint, 93% were full-time;

7% part-time.

As of December 31, 2024, the Company employed 787 employees across our geographic footprint, 94% of which are classified as full-time.

Our employee turnover rate was 21% during the year ended December 31, 2024.

Company Culture

As a financial institution, HomeStreet Bank seeks to hold a valued position in the community, among its customers and employees, and with its regulators.

We believe that since 1921, the Company has earned the trust of customers, employees and regulators through its effective management and deep community involvement thereby developing a reputation for reliability, fairness, honesty and integrity.

Our reputation is directly tied to the individual decisions, actions, and sense of business ethics of each and every one of our employees.

We believe a high level of trust gives us a competitive advantage in an environment that is increasingly sensitive to business ethics.

It is our belief that employees and customers are attracted to work for, and do business with, a company that prides itself on maintaining the highest ethical standards.

As a financial institution, HomeStreet Bank occupies a position of trust with its shareholders, in the community, among its customers and employees, and with its regulators.

We have earned that trust by developing a reputation for fairness, honesty, integrity and community service since the Company’s inception in 1921.

Our reputation is directly tied to the individual decisions, actions, and sense of business ethics of our employees.

A high level of trust gives us a competitive advantage in an environment that is increasingly sensitive to business ethics.

Employees and customers are attracted to work for, and do business with, a company that prides itself on maintaining the highest degree of ethical standards.

For all of these reasons, a commitment to fairness, honesty, integrity and community service are core values of the Company.

As part of our commitment to our core values, HomeStreet's Culture Committee identified five key pillars built on specific behaviors that bring our values to life:

a focus on customers, collaboration as one team, delivering excellence, embodying a spirit to serve the communities that we are in and being engaged in our work in a manner that we describe as “All In.” In 2023,

the Culture Committee met to discuss ways to promote our inclusive work environment and support our recruiting efforts to extend outreach to historically marginalized groups such as biracial and people of color, veterans and individuals with disabilities.

Our Employee Resource Groups allow for collaborative environments where employees can freely discuss social issues they or others may be dealing with and ways to better extend a culture of inclusion throughout our organization.

Diversity, Equity and Inclusion

HomeStreet values diversity, equity and inclusion principles and strives to be an equal opportunity employer committed to a diverse workplace with employees from a wide range of backgrounds and individual characteristics:

race, ethnicity, sex, gender, sexual orientation or identity, disability, religion, age, national origin, military or veteran status, marital status, use of service animal, or other characteristics.

Diversity also includes differences in backgrounds, experiences, perspectives, thoughts, interests and ideas.

We believe that diversity contributes to greater job satisfaction, higher levels of trust and better engagement, which in turn translates to happier and more engaged employees with a greater capacity for customer service and a deeper connection to our strategic plan, ultimately providing greater value to shareholders over the long term.

HomeStreet works to ensure that our employees are given opportunities to be valued, heard, engaged and involved at work and have meaningful opportunities to collaborate, contribute, and grow in their careers.

HomeStreet is committed to recruiting, retaining and promoting employees from all backgrounds and who are representative of the people in the communities we serve.

By doing so, we believe we are better able to serve our customers and understand their financial needs and goals.

HomeStreet’s Culture Committee helps management identify ways to increase and promote opportunities for our employees.

The Culture Committee also works with management to identify and promote practices that will help us achieve a more diverse and inclusive workplace.

We promote policies and practices to combat harassment, discrimination, retaliation, or disrespectful and other unprofessional conduct based on an individual’s identity, including sex, gender, sexual orientation, race, religion, color, ancestry, physical disability, mental disability, age, marital status and other protected classifications.

As part of this commitment to our core values, HomeStreet identified five key values built on specific behaviors that bring our values to life – a focus on customers, collaboration as one team, delivering excellence, embodying a spirit to serve the communities that we are in, and being engaged in our work in a manner that can be described as “all in." Further, HomeStreet management is inclusive of all employees from all backgrounds and employees feel a sense of belonging when working for the Company.

Inclusion and Belonging

HomeStreet is an equal opportunity employer where we strive to hire the best talent.

By recruiting employees who are representative of the communities we serve, we are better able to serve our customers and understand their financial services' needs and goals.

We have talented employees who bring unique differences, experiences, and capabilities in support of our mission and in alignment with our values.

Our culture embraces individuality, provides fair treatment, and creates opportunities for employees to develop their careers, to be included in teams, and to be a part of broader and more strategic initiatives.

By treating our employees with appreciation for their individuality and with respect for their service, our employees demonstrate increased job satisfaction, a higher level of trust in leadership, and an increased sense of belonging within the Company.

Our employees find increased job satisfaction, which we find translates to increased performance and a greater capacity for customer service.

Our culture also promotes policies and practices to combat harassment, discrimination, retaliation, or disrespectful or other unprofessional conduct based on an individual’s identity, including sex, gender, sexual orientation, race, religion, color, ancestry, physical disability, mental disability, age, marital status and more.

Compensation of Employees

As part of our goal of providing high-quality banking and financial services to our customers while creating a positive impact in the local communities in which we do business, we designed our compensation program with the intention of attracting and retaining well-qualified employees.

We use a mix of base salary, cash-based short-term incentive plans and defined contributions to our 401(k) plan for participating employees to incentivize our employees classified as exempt employees and we offer equity-based long-term incentive compensation for some of the more highly-experienced members of the management team who are senior vice presidents or above.

Employee performance is considered, evaluated and discussed through performance check-ins between managers and their direct reports, and employees eligible for short-term annual incentives also participate in annual performance reviews.

Our non-exempt employees are paid hourly wages (including overtime rates) along with defined matching contributions to our 401(k) plan for all of our participating employees.

We also offer a variety of group benefit programs designed to provide our employees and their families with health and wellness benefits, financial benefits in the event of planned or unplanned expenses, or losses relating to illness, disability or death, programs and benefits to help plan for retirement;

and programs to deal with job-related or personal problems.

We use a mix of base salary, cash-based short-term incentive plans and defined contributions to the 401(k) plan for participating employees to incentivize our employees and also provide long-term incentive compensation, preferring equity-based where available, for key employees.

Employee performance is considered, evaluated and discussed through regular performance check-ins between manager and direct report.

All our employees are eligible to receive a Company match on defined contributions to their 401(k) retirement plan.

We have a variety of group benefit programs designed to provide our employees with health and wellness benefits, financial benefits in the event of planned or unplanned expenses, or losses relating to illness, disability, death, to help plan for retirement, and deal with job-related or personal problems.

Employee Training and Development

As part of our employee development offerings, we provide a variety of training and educational opportunities to help our employees stay current on regulatory compliance issues and develop their professional skills.

We use an online learning management system to create, assign, and track compliance and professional development learning programs across many topical areas including banking, mortgage and regulatory education and proactive communication, development of strong customer relationships, leadership and customer service skills.

As part of our employee development program, we provide a variety of training and educational opportunities to help our employees stay current on regulatory compliance issues and develop their professional skills.

In addition to third party training and education opportunities, we use an online learning management system to create, assign, and track compliance and professional development learning programs across many topical areas such as Banking, mortgage and regulatory education, technology training, public speaking and proactive communication, development of strong customer relationship and customer service skills.

Employee Community Involvement

HomeStreet supports the active involvement of our employees in supporting their communities.

Employees who donate blood receive one paid day off from work for each donation.

Additionally, employees are given time off to volunteer for community organizations, and when employees make a substantial commitment of time to a particular organization, HomeStreet offers an additional financial contribution to those organizations in recognition of the commitment of our employees.

We also create active partnerships with hundreds of local organizations, and our employees provide leadership, educational support, hands-on service, expertise, and financial support to those organizations.

We focus primarily on organizations within the scope of the Community Reinvestment Act ("CRA") that provide support for housing, basic needs, and economic development for those of low and moderate income.

Our senior management also helps to educate our employees on the importance of our community responsibility focus and strategies.

We operate 56 full service bank branches in Washington, in Northern and Southern California, in the Portland, Oregon area and in Hawaii, as well as four primary stand-alone commercial lending centers located in Oregon, Southern California, Idaho and Utah.

Information About Our Executive Officers

The names of the executive officers of HomeStreet and its wholly owned subsidiary HomeStreet Bank, their ages, their positions with the Company and HomeStreet Bank and other biographical information as of March 1, 2024 are set forth below.

There are no family relationships among any of our directors or executive officers.

Age Position at HomeStreet Position at HomeStreet Bank

Mason 64 Chairman, Chief Executive Officer, President Chairman, Chief Executive Officer,

Michel 64 Executive Vice President, Chief Financial Officer Executive Vice President, Chief Financial Officer

Endresen 69 Executive Vice President, Commercial Real Estate and Commercial Capital President

Evans 70 Executive Vice President, General Counsel, Chief Administrative Officer and Corporate Secretary Executive Vice President, General Counsel, Chief Administrative Officer and Corporate Secretary

Hand 58 Executive Vice President, Residential Lending Director

Harper 56 Executive Vice President, Chief Information and Operations Officer Executive Vice President, Chief Information and Operations Officer

Iseman 64 Executive Vice President, Chief Credit Officer Executive Vice President, Chief Credit Officer

Paulette Lemon 68 Executive Vice President, Retail Banking Director

David Parr 53 Executive Vice President, Director of Commercial Banking

van Amen 58 Executive Vice President, Chief Investment Officer & Treasurer Executive Vice President, Chief Investment Officer & Treasurer

Executive Vice President, Chief Risk Officer Executive Vice President, Chief Risk Officer

Mason, Chairman, Chief Executive Officer and President of HomeStreet, Inc.

and HomeStreet Bank.

Mason has been the Company’s Chief Executive Officer (“CEO”) and a member of the Company’s Board and HomeStreet Bank’s Chairman of the Board and Chief Executive Officer since January 2010.

He became Chairman of the Board of the Company in March 2015.

Mason brings extensive business, managerial and leadership experience to our Board.

From 1998 to 2002, Mr.

Mason was president, chief executive officer and chief lending officer for Bank Plus Corporation and its wholly owned banking subsidiary, Fidelity Federal Bank, where Mr.

Mason also served as the chief financial officer from 1994 to 1995 and as

chairman of the board of directors from 1998 to 2002.

From February 2008 to October 2008, Mr.

Mason also served as president of a startup energy company, TEFCO, LLC.

He has served on the boards of directors of Hanmi Financial Corp., San Diego Community Bank and The Bjurman Barry Family of Mutual Funds.

Mason is on the boards of directors of the Pacific Bankers Management Institute (the parent company of the Pacific Coast Banking School) and The Washington Bankers Association and is an advisory board member of Seattle University’s Albers School of Business and Economics.

Mason is a certified public accountant (inactive) and holds a bachelor’s degree in business administration with an emphasis in Accounting from California State Polytechnic University.

Michel, Executive Vice President, Chief Financial Officer of HomeStreet, Inc.

and HomeStreet Bank.

Michel joined HomeStreet in May 2020 as our Executive Vice President, Chief Financial Officer.

His duties include the management of treasury, financial reporting, management reporting, financial planning, human resources and tax.

Prior to joining HomeStreet, Mr.

Michel had over 25 years of experience as a chief financial officer or senior finance officer at financial institutions and specialty finance companies, including most recently as Chief Financial Officer of First Foundation, Inc., from 2007 through 2020.

Prior to his tenure in such roles, he was a senior manager at Deloitte, Haskin & Sells.

Michel holds a BA in accounting from the University of Notre Dame and is a Certified Public Accountant — California (inactive).

Endresen, Executive Vice President, Commercial Real Estate of HomeStreet Bank .

Endresen has been a veteran of the commercial lending industry for over 40 years.

He joined HomeStreet Bank in March 2015 as Executive Vice President of Commercial Real Estate and President of the HomeStreet Commercial Capital division for HomeStreet Bank and was promoted to his current position in April 2016 to lead the combined commercial real estate lending and operation teams of HomeStreet Bank.

He was SVP Managing Director of Fidelity Federal Bank from 1999 to 2002 until the sale of the bank and then returned to the position of president of IMPAC Commercial Capital Corporation from 2002 until 2015.

Endresen founded IMPAC Commercial Capital Corporation, a private company that originates small balance multifamily loans through brokers on a wholesale basis, and IMPAC Commercial Holdings, a publicly traded real estate investment trust, and he served as president of those entities from 1996 to 1999.

Endresen studied business at Fullerton College.

Evans, Executive Vice President, General Counsel and Corporate Secretary of HomeStreet, Inc.

and HomeStreet Bank.

Evans joined HomeStreet in November 2009 as Executive Vice President, General Counsel and Corporate Secretary.

In March 2010, Mr.

Evans was named Chief Administrative Officer which he served as until 2023.

Evans is responsible for the delivery and management of all legal services to HomeStreet Bank and the Company, and administrative management oversight of the Community Relations Group.

Evans has a total of over 20 years of experience as a general counsel of public companies.

Prior to joining the executive team at HomeStreet, Mr.

Evans was the managing director of the bankruptcy and restructuring practice group at Marshall & Stevens beginning in 2008.

Evans served as interim general counsel and chief restructuring officer for Chapeau, Inc., a cogeneration manufacturing company, from 2008 to 2009.

From 2002 to 2008, Mr.

Evans served as a practicing attorney and as a project professional for Resources Global Professionals, and from 1987 to 2002, served as executive vice president, chief administrative officer, general counsel and corporate secretary for Fidelity Federal Bank and its publicly traded holding companies, Bank Plus Corporation and Citadel Holding Corporation.

Evans began his law practice at Gibson, Dunn & Crutcher LLP where he practiced from 1982 to 1987.

Evans is admitted to practice law in California and in Washington, D.C.

Evans holds a bachelor’s degree and a master’s degree in architecture from the University of California, Berkeley and a juris doctorate from Loyola Law School in Los Angeles.

Hand, Executive Vice President, Residential Lending Director, HomeStreet Bank.

Hand joined HomeStreet Bank in 2019.

In his current role, Mr.

Hand leads the residential lending production, operations, and servicing areas for the bank.

Prior to joining HomeStreet, Mr.

Hand was president and chief executive officer of Penrith Home Loans, a mortgage joint venture between HomeStreet Bank and Windermere Real Estate with offices throughout the Pacific Northwest, from May 2011 to February 2019.

Hand has been employed in the mortgage industry since 1988 and has extensive experience in loan production, operations, and secondary marketing at both the executive and operations level.

He is a past board member of the Seattle Mortgage Bankers Association and has served as past treasurer and board member of the Outdoors for All Foundation.

Hand studied political science at the University of Colorado.

Harper, Executive Vice President, Chief Information and Operations Officer of HomeStreet, Inc.

and HomeStreet Bank .

Harper joined HomeStreet Bank in its corporate information security department in 2013.

He was promoted to Senior Vice President, Chief Information Officer in June 2015, further promoted to Executive Vice President, Chief Information Officer of the Company and HomeStreet Bank in November 2017 and again promoted in December 2022 to Executive Vice President, Chief Information and Operations Officer.

In his role as Chief Information Officer and Operations Officer, Mr.

Harper is responsible for the delivery and management of Information Technology Services and Business Systems Support, Corporate Security and Corporate Information Security for the Company and HomeStreet Bank, as well as oversight of loan operations, deposit operations and corporate real estate.

In his 25 years of technology management for financial institutions, Mr.

Harper worked for the FDIC, held CIO and divisional CIO roles for Pierce Commercial Bank and CGI Group, and provided management consulting and technology outsourcing services with Deloitte Consulting LLP.

Harper holds a bachelor’s degree in finance and accounting management from Northeastern University.

Iseman, Executive Vice President, Chief Credit Officer of HomeStreet, Inc.

and HomeStreet Bank.

Iseman joined HomeStreet Bank in August 2009 and currently serves as Executive Vice President and Chief Credit Officer of the Company and HomeStreet Bank.

From January 2016 through November 2017, Mr.

Iseman also served as Chief Risk Officer of the Company and HomeStreet Bank.

Prior to his current position and since joining the Company in 2009, Mr.

Iseman served as HomeStreet Bank’s Senior Vice President, Credit Administration and Vice President, Special Assets Group and OREO Group Manager and Income Property Credit Administrator.

Iseman served as senior vice president and senior portfolio manager of commercial special assets with Strategic Solutions, Inc., a subsidiary of Bank of America between 2008 and 2009.

Iseman holds a bachelor’s degree in business administration and economics from Seattle Pacific University and a certificate of advanced study in international finance and marketing from the Thunderbird School of Global Management.

Paulette Lemon, Executive Vice President, Retail Banking Director of HomeStreet Bank.

Lemon joined HomeStreet Bank in 1985.

Prior to her promotion to Executive Vice President, Retail Banking Director of HomeStreet Bank in 2015, Ms.

Lemon served from 2001 as Senior Vice President, Retail Banking Director and as Vice President, Retail Bank Operations Manager prior to 2001.

She holds a bachelor’s degree in business administration from Western Washington University and she graduated with honors from the National School of Banking through Fairfield University.

She is also on the board of directors of Childhaven, a non-profit organization.

David Parr, Executive Vice President, Director of Commercial Banking of HomeStreet Bank.

Parr joined HomeStreet Bank in December 2002.

Prior to promotion to Executive Vice President in September 2020, Mr.

Parr held multiple positions within the Commercial Banking Group including Vice President, Senior Relationship Manager, Regional Team Lead and Senior Vice President, Regional President for Western Washington/Greater Portland.

He holds a bachelor’s degree in business administration from Western Washington University as well as honor roll achievement from a graduate level program in banking from Pacific Coast Banking School.

Parr actively serves as a board member on the Milgard Business School Executive Council for the University of Washington Tacoma, as well as a board member and guest classroom lecturer on the Veterans Incubator for Better Entrepreneurship at the University of Washington Tacoma.

He also serves on the Government Relations Committee for the Washington Bankers Association.

van Amen, Executive Vice President, Chief Investment Officer and Treasurer of HomeStreet, Inc .

and HomeStreet Bank.

van Amen joined HomeStreet Bank in 2003 and since 2010 has served as Executive Vice President and Treasurer of HomeStreet Bank and since 2012 as Executive Vice President and Chief Investment Officer and Treasurer of the Company.

Prior to his current position with HomeStreet Bank, he was the Vice President, Asset/Liability Manager and Treasurer of HomeStreet Bank and the Company from 2003 to 2010.

He holds a bachelor’s degree in economics from Weber State University and a master’s degree in economics from Claremont Graduate University.

Novak, Executive Vice President, Chief Risk Officer of HomeStreet, Inc.

and HomeStreet Bank.

Novak has over 30 years of Financial Services experience.

Prior to her current position, Ms.

Novak has worked in Chief Compliance Officer and Senior Compliance Management roles at Silicon Valley Bank, RBS Citizens Bank, Toyota Financial Services, JPMorgan Chase, Washington Mutual, and U.S.

Novak earned her bachelor’s degree cum laude in business at Seattle University and her MBA at Regis University.

Novak obtained the Trust Compliance and Audit Certification from Cannon Financial Institute and completed a certification curriculum at the Executive Risk Management Program offered by Texas A&M University in conjunction with the Risk Management Association.

HomeStreet is committed to our communities, and as part of that commitment we support the active involvement of our employees in supporting their communities.

Employees are given time off to volunteer for community organizations, and where employees make a substantial commitment of time to a particular organization, HomeStreet offers an additional financial contribution to those organizations in recognition of the commitment of our employees.

We also create active partnerships with

hundreds of local organizations, and our employees provide leadership, educational support, hands-on service, expertise, and financial support to those organizations.

We focus primarily on organizations within the scope of the Community Reinvestment Act ("CRA") – those that provide support for housing, basic needs, and economic development for those of low and moderate income.

We also give time off for employees donating blood.

Our senior management helps to educate our employees on the importance of our community responsibility focus and strategies.

We operate 56 full service bank branches in Washington, in Northern and Southern California, in the Portland, Oregon area and in Hawaii, as well as three primary stand-alone commercial lending centers located in Southern California, Idaho and Utah.

Where You Can Obtain Additional Information

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The SEC’s website, www.sec.gov, contains reports, proxy and information statements, and other information that we file or furnish electronically with the SEC.

REGULATION AND SUPERVISION

The following is a brief description of certain laws and regulations that are applicable to us.

The description of these laws and regulations, as well as descriptions of laws and regulations contained elsewhere in this Form 10-K, does not purport to be complete and is qualified in its entirety by reference to the applicable laws and regulations.

The bank regulatory framework to which we are subject is intended primarily for the protection of bank depositors and the Deposit Insurance Fund and not for the protection of shareholders or other security holders.

The Company is a bank holding company which has made an election to be a financial holding company.

It is regulated by the Federal Reserve and the WDFI.

The Company is required to register and file reports with, and otherwise comply with, the rules and regulations of the Federal Reserve and the WDFI.

The Bank is a Washington state-chartered commercial bank.

The Bank is subject to regulation, examination and supervision by the WDFI and the FDIC.

If and to the extent that the assets of the Bank exceed $10 billion, whether by organic growth, the combination of the Bank and one or more other entities, or otherwise, the Bank will be subject to additional regulation, examination and supervision of the Consumer Financial Protection Bureau (“CFPB”).

The following discussion provides an overview of certain elements of banking regulations that currently apply to HomeStreet and HomeStreet Bank, and is not intended to be a complete list of all the activities regulated by the banking regulations.

Rather, it is intended only to briefly summarize some material provisions of the statutes and regulations applicable to our business, and is qualified by reference to the statutory and regulatory provisions discussed.

New statutes, regulations and guidance are regularly considered that could change the regulatory framework applicable to financial institutions operating in our markets and in the United States generally.

Any change in policies, legislation or regulation, including through interpretive decisions or enforcement actions, by any of our regulators, including the Federal Reserve, the WDFI and the FDIC, or by any other government branch or agency with authority over us, could have a material impact on our operations.

Regulation Applicable to the Company and the Bank

Capital Requirements

Capital rules (the “Rules”) adopted by Federal banking regulators (including the Federal Reserve and the FDIC) generally recognize three components, or tiers, of capital:

common equity Tier 1 capital, additional Tier 1 capital and Tier 2 capital.

Common equity Tier 1 capital generally consists of retained earnings and common stock instruments (subject to certain adjustments), as well as accumulated other comprehensive income ("AOCI") except to the extent that the Company and the Bank exercise a one-time irrevocable option to exclude certain components of AOCI.

Both the Company and the Bank made this election in 2015.

Additional Tier 1 capital generally includes non-cumulative preferred stock and related surplus subject to certain adjustments and limitations.

Tier 2 capital generally includes certain capital instruments (such as subordinated debt) and portions of the amounts of the allowance for credit losses, subject to certain requirements and deductions.

The term "Tier 1 capital" means common equity Tier 1 capital plus additional Tier 1 capital, and the term "total capital" means Tier 1 capital plus Tier 2 capital.

The Rules generally measure an institution's capital using four capital measures or ratios.

The common equity Tier 1 capital ratio is the ratio of the institution's common equity Tier 1 capital to its total risk-weighted assets.

The Tier 1 risk-based capital ratio is the ratio of the institution's Tier 1 capital to its total risk-weighted assets.

The total risk-based capital ratio is the ratio of the institution's total capital to its total risk-weighted assets.

The Tier 1 leverage ratio is the ratio of the institution's Tier 1 capital to its average total consolidated assets.

To determine risk-weighted assets, assets of an institution are generally placed into a risk category as prescribed by the regulations and given a percentage weight based on the relative risk of that category.

An asset's risk-weighted value will generally be its percentage weight multiplied by the asset's value as determined under generally accepted accounting principles.

In addition, certain off-balance-sheet items are converted to balance-sheet credit equivalent amounts, and each amount is then assigned to one of the risk categories.

An institution's federal regulator may require the institution to hold more capital than would otherwise be required under the Rules if the regulator determines that the

institution’s capital requirements under the Rules are not commensurate with the institution's credit, market, operational or other risks.

To be adequately capitalized both the Company and the Bank are required to have a common equity Tier 1 capital ratio of at least 4.5% or more, a Tier 1 leverage ratio of 4.0% or more, a Tier 1 risk-based ratio of 6.0% or more and a total risk-based ratio of 8.0% or more.

In addition to the preceding requirements both the Company and the Bank, are required to maintain a "conservation buffer," consisting of common equity Tier 1 capital, which is at least 2.5% above each of the required minimum levels.

An institution that does not meet the conservation buffer will be subject to restrictions on certain activities including payment of dividends, stock repurchases and discretionary bonuses to executive officers.

The Rules set forth the manner in which certain capital elements are determined, including but not limited to, requiring certain deductions related to mortgage servicing rights and deferred tax assets.

The Rules permit holding companies with less than $15 billion in total assets as of December 31, 2009 (which includes the Company) to continue to include trust preferred securities issued prior to May 19, 2010 in Tier 1 capital, generally up to 25% of other Tier 1 capital.

The Rules also prescribe the methods for calculating certain risk-based assets and risk-based ratios.

Higher or more sensitive risk weights are assigned to various categories of assets, among which are credit facilities that finance the acquisition, development or construction of real property, certain exposures or credits that are 90 days past due or are nonaccrual, foreign exposures, certain corporate exposures, securitization exposures, equity exposures and in certain cases mortgage servicing rights and deferred tax assets.

Bank Secrecy Act and USA Patriot Act

The Company and the Bank are subject to the Bank Secrecy Act, as amended by the USA PATRIOT Act, which gives the federal government powers to address money laundering and terrorist threats through enhanced domestic security measures, expanded surveillance powers by imposing mandatory recordkeeping and reporting obligations, as well as obligations to prevent and detect money laundering on financial institutions.

By way of example, the Bank Secrecy Act imposes an affirmative obligation on the Bank to report currency transactions that exceed certain thresholds and to report other transactions determined to be suspicious, and to maintain an anti-money laundering compliance program.

The Bank Secrecy Act requires financial institutions, including the Bank, to meet certain customer due diligence requirements, including obtaining and verifying certain identity information on its customers, understanding the customer's intended and actual use of the Bank's services, and obtaining a certification from the individual opening the account on behalf of the legal entity that identifies the beneficial owner(s) of the entity and to conduct enhanced due diligence on certain types of customers.

The purpose of customer due diligence requirements is to enable the Bank to form a reasonable belief it knows the true identity if its customers and to be able to understand the types of transactions in which a customer is likely to engage which should in turn assist in identifying when transactions that could require reporting pursuant to obligations to report suspicious activity.

Like all United States companies and individuals, the Company and the Bank are prohibited from transacting business with certain individuals and entities named on the U.S.

Department of the Treasury's Office of Foreign Asset Control's ("OFAC") list of Specially Designated Nationals and Blocked Persons.

Prohibitions also include conducting business involving jurisdictions targeted by OFAC for comprehensive, embargo-type sanctions, such as Cuba, Iran, Syria, North Korea, and certain of the Russia-occupied areas of Ukraine, as well as conducting certain other limited types of transactions with persons listed on additional lists of sanctions targets maintained by OFAC.

Failure to comply may result in fines and other penalties.

The OFAC has issued guidance directed at financial institutions, including guidance the recommended elements of OFAC compliance programs, and the Bank's regulators generally examine the Bank for compliance with OFAC's substantive prohibitions as well as OFAC's compliance program guidance.

Compensation Policies

Compensation policies and practices at the Company and the Bank are subject to regulations and policies by their respective banking regulators, as well as the SEC.

These regulations and policies are generally intended to prohibit excessive compensation and to help ensure that incentive compensation policies do not encourage imprudent risk-taking and are consistent with the safety and soundness of the financial institutions.

In certain cases, compensation payments may have to be returned by the recipient to the financial institutions.

In addition, FDIC regulations restrict our ability to make certain “golden parachute” and “indemnification” payments.

As a public company, the Company is subject to various rules regarding disclosure of compensation payments and policies as well as providing its shareholders certain non-binding votes relating to the Company’s disclosed compensation practices.

Regulation of the Company

The Company owns all of the outstanding capital stock of the Bank, and as a result, the Company is a bank holding company registered under the federal Bank Holding Company Act of 1956 (the “BHC Act”).

As a bank holding company, the Company is subject to Federal Reserve regulations, examinations, supervision and reporting requirements relating to bank holding companies.

Among other things, the Federal Reserve is authorized to restrict or prohibit activities that are determined to be a serious risk to the financial safety, soundness or stability of a subsidiary bank.

The Company is also required to file with the Federal Reserve an annual report and such other additional information as the Federal Reserve may require pursuant to the BHC Act.

The Federal Reserve may also examine the Company and each of its subsidiaries.

The Company is subject to risk-based capital requirements adopted by the Federal Reserve, which are substantially identical to those applicable to the Bank, and which are described below.

Since the Bank is chartered under Washington law, the WDFI has authority to regulate the Company generally relating to its conduct affecting the Bank.

Capital / Source of Strength

Under the Dodd Frank Act, the Company is subject to certain capital requirements and required to act as a “source of strength” for the Bank, including by mandating that capital requirements be countercyclical so that the required amount of capital increases in times of economic expansion and decreases in times of economic contraction, consistent with safety and soundness.

Restrictions Applicable to Bank Holding Companies

Federal law generally prohibits except with the prior approval of the Federal Reserve (or pursuant to certain exceptions):

• for any action to be taken that causes any company to become a bank holding company;

• for any action to be taken that causes a bank to become a subsidiary of a bank holding company;

• for any bank holding company to acquire direct or indirect ownership or control of any voting shares of any bank if, after such acquisition, such company will directly or indirectly own or control more than 5 per centum of the voting shares of such bank;

• for any bank holding company or subsidiary thereof, other than a bank, to acquire all or substantially all of the assets of a bank;

• for any bank holding company to merge or consolidate with any other bank holding company.

In evaluating applications by holding companies to acquire depository institutions or holding companies, the Federal Reserve must consider the financial and managerial resources and future prospects of the company and the institutions involved, the effect of the acquisition on the risk to the insurance funds, the convenience and needs of the community and competitive factors.

In addition, nonbank acquisitions by a bank holding company are generally limited to the acquisition of up to 5% of the outstanding share of any class of voting securities of a company unless the Federal Reserve has previously determined that the nonbank activities are closely related to banking or prior approval is obtained from the Federal Reserve.

Expansion Activities

The BHC Act requires a bank holding company to obtain the prior approval of the Federal Reserve before merging with another bank holding company, acquiring substantially all the assets of any bank or bank holding company, or acquiring directly or indirectly any ownership or control of more than 5% of the voting shares of any bank.

In addition, the prior approval of the FDIC and WDFI is required for a Washington state-charted bank to merge with another bank or purchase the assets or assume the deposits of another bank.

In determining whether to approve a proposed bank acquisition, bank regulators will consider, among other factors, the effect of the acquisition on competition, the public benefits expected to be received from the acquisition, the projected capital ratios and levels on a post-acquisition basis, and the acquiring institution’s record of addressing the credit needs of the communities it serves.

Acquisition of Control

Two statutes, the BHC Act and the Change in Bank Control Act, together with regulations promulgated thereunder, require some form of federal regulatory review before any company may acquire “control” of a bank or a bank holding company.

Transactions subject to the BHC Act are exempt from Change in Control Act requirements.

Under the BHC Act, control is deemed to exist if a company acquires 25% or more of any class of voting securities of a bank holding company;

election of a majority of the members of the board of directors;

or exercises a controlling influence over the management or policies of a bank or bank holding company.

On January 30, 2020, the Federal Reserve issued a final rule (which became effective September 30, 2020) that clarified and codified the Federal Reserve’s standards for determining whether one company has control over another.

The final rule established four categories of tiered presumptions of noncontrol that are based on the percentage of voting shares held by the investor (i.e., less than 5%, 5-9.9%, 10-14.9% and 15-24.9%) and the presence of other indicia of control.

As the percentage of ownership increases, fewer indicia of control are permitted without falling outside of the presumption of noncontrol.

These indicia of control include nonvoting equity ownership, director representation, management interlocks, business relationship and restrictive contractual covenants.

Under the final rule, investors can hold up to 24.9% of the voting securities and up to 33% of the total equity of a company without necessarily having a controlling influence.

Under the federal Change in Bank Control Act, a notice must be submitted to the Federal Reserve if any person (including a company), or group acting in concert, seeks to acquire "control" of a bank holding company.

An acquisition of control can occur upon the acquisition of 10.0% or more of the voting stock of a bank holding company or as otherwise defined by the Federal Reserve.

Under the Change in Bank Control Act, the Federal Reserve has 60 days from the filing of a complete notice to act (the 60-day period may be extended), taking into consideration certain factors, including the financial and managerial resources of the acquirer and the antitrust effects of the acquisition.

Control can also exist if an individual or company has, or exercises, directly or indirectly or by acting in concert with others, a controlling influence over the Bank.

Washington law also imposes certain limitations on the ability of persons and entities to acquire control of banking institutions and their parent companies.

Dividend Policy

Under Washington law, the Company is generally permitted to make a distribution, including payments of dividends, only if, after giving effect to the distribution, in the judgment of the board of directors, (1) the Company would be able to pay its debts as they become due in the ordinary course of business and (2) the Company's total assets would at least equal the sum of its total liabilities plus the amount that would be needed if the Company were to be dissolved at the time of the distribution to satisfy the preferential rights upon dissolution of shareholders whose preferential rights are superior to those receiving the distribution.

In addition, it is the policy of the Federal Reserve that bank holding companies generally should pay dividends only out of net income generated over the past year and only if the prospective rate of earnings retention appears consistent with the organization’s capital needs, asset quality and overall financial condition.

The policy also provides that bank holding companies should not maintain a level of cash dividends that places undue pressure on the capital of its subsidiary bank or that may undermine its ability to serve as a source of strength.

The Federal Reserve has the authority to place additional restrictions and limits on payment of dividends.

Capital rules as well as regulatory policy impose additional requirements on the ability of the Company to pay dividends.

Regulation and Supervision of HomeStreet Bank

As a commercial bank chartered under the laws of the State of Washington, HomeStreet Bank is subject to applicable provisions of Washington law and regulations of the WDFI.

As a state-chartered commercial bank the Bank's primary federal regulator is the FDIC.

It is subject to regulation and examination by the WDFI and the FDIC, as well as enforcement actions initiated by the WDFI and the FDIC, and its deposits are insured by the FDIC.

Washington Banking Regulation

As a Washington bank, the Bank's operations and activities are substantially regulated by Washington law and regulations, which govern, among other things, the Bank's ability to take deposits and pay interest, make loans on or invest in residential and other real estate, make consumer and commercial loans, invest in securities, offer various banking services to its customers and establish branch offices.

Under state law, commercial banks in Washington also generally have, subject to certain limitations or approvals, all of the powers that Washington chartered savings banks have under Washington law and that federal savings banks and national banks have under federal laws and regulations.

Washington law also governs numerous corporate activities relating to the Bank, including the Bank's ability to pay dividends, to engage in merger activities and to amend its articles of incorporation, as well as limitations on change of control of the Bank.

Under Washington law, the board of directors of the Bank generally may not declare a cash dividend on its capital stock in an amount greater than its retained earnings without the approval of the WDFI.

This restriction is in addition to restrictions

imposed by federal law.

Mergers involving the Bank and sales or acquisitions of its branches are generally subject to the approval of the WDFI.

No person or entity may acquire control of the Bank until 30 days after filing a notice or an application with the WDFI, which has the authority to disapprove the notice or application.

Washington law defines "control" of an entity to mean directly or indirectly, alone or in concert with others, to own, control or hold the power to vote 25% or more of the outstanding stock or voting power of the entity.

Any amendment to the Bank's articles of incorporation requires the approval of the WDFI.

The Bank is subject to periodic examination by and reporting requirements of the WDFI, as well as enforcement actions initiated by the WDFI.

The WDFI's enforcement powers include the issuance of orders compelling or restricting conduct by the Bank and the authority to bring actions to remove the Bank's directors, officers and employees.

The WDFI has authority to place the Bank under supervisory direction or to take possession of the Bank and to appoint the FDIC as receiver.

Insurance of Deposit Accounts and Regulation by the FDIC

The FDIC is the Bank's principal federal bank regulator.

As such, the FDIC is authorized to conduct examinations of, and to require reporting by the Bank.

The FDIC may prohibit the Bank from engaging in any activity determined by law, regulation or order to pose a serious risk to the institution, and may take a variety of enforcement actions in the event the Bank violates a law, regulation or order or engages in an unsafe or unsound practice or under certain other circumstances.

The FDIC also has the authority to appoint itself as receiver of the Bank or to terminate the Bank's deposit insurance if it were to determine that the Bank has engaged in unsafe or unsound practices or is in an unsafe or unsound condition.

The Bank is a member of the Deposit Insurance Fund ("DIF") administered by the FDIC, which insures customer deposit accounts.

The amount of federal deposit insurance coverage is $250,000, per depositor, for each account ownership category at each depository institution.

The $250,000 amount is subject to periodic adjustments.

In order to maintain the DIF, member institutions, such as the Bank, are assessed insurance premiums which are now based on an insured institution's average consolidated assets less tangible equity capital.

Each institution is provided an assessment rate, which is generally based on the risk that the institution presents to the DIF.

Institutions with less than $10 billion in assets generally have an assessment rate that can range from 1.5 to 30 basis points from July 2016 through December 2022.

In October 2022, the FDIC adopted a final rule to increase initial base deposit insurance assessment rate schedules by 2 basis points, beginning the first quarterly assessment period of 2023.

In addition, the FDIC in 2020 adopted a rule to mitigate the effect on deposit insurance assessments resulting from a bank’s participation in certain programs adopted as a result of the coronavirus pandemic.

In the future, if the reserve ratio reaches certain levels, these assessment rates will generally be lowered.

Prompt Corrective Action Regulations

Section 38 of the Federal Deposit Insurance Act establishes a framework of supervisory actions for insured depository institutions that are not adequately capitalized, also known as "prompt corrective action" regulations.

All of the federal banking agencies have promulgated substantially similar regulations to implement a system of prompt corrective action.

As modified by the Rules, the framework establishes five capital categories;

under the Rules, a bank is:

• "well capitalized" if it has a total risk-based capital ratio of 10.0% or more, a Tier 1 risk-based capital ratio of 8.0% or more, a common equity Tier 1 risk-based ratio of 6.5% or more, and a leverage capital ratio of 5.0% or more, and is not subject to any written agreement, order or capital directive to meet and maintain a specific capital level for any capital measure;

• "adequately capitalized" if it has a total risk-based capital ratio of 8.0% or more, a Tier 1 risk-based capital ratio of 6.0% or more, a common equity Tier 1 risk-based ratio of 4.5% or more, and a leverage capital ratio of 4.0% or more;

• "undercapitalized" if it has a total risk-based capital ratio less than 8.0%, a Tier 1 risk-based capital ratio less than 6.0%, a common equity risk-based ratio less than 4.5% or a leverage capital ratio less than 4.0%;

• "significantly undercapitalized" if it has a total risk-based capital ratio less than 6.0%, a Tier 1 risk-based capital ratio less than 4.0%, a common equity risk-based ratio less than 3.0% or a leverage capital ratio less than 3.0%;

• "critically undercapitalized" if it has a ratio of tangible equity to total assets that is equal to or less than 2.0%.

A bank that, based upon its capital levels, is classified as "well capitalized," "adequately capitalized" or "undercapitalized" may be treated as though it were in the next lower capital category if the appropriate federal banking agency, after notice and opportunity for a hearing, determines that an unsafe or unsound condition, or an unsafe or unsound practice, warrants such treatment.

At each successive lower capital category, an insured bank is subject to increasingly severe supervisory actions.

These actions include, but are not limited to, restrictions on asset growth, interest rates paid on deposits, branching, allowable transactions with affiliates, ability to pay bonuses and raises to senior executives and pursuing new lines of business.

Additionally, all "undercapitalized" banks are required to implement capital restoration plans to restore capital to at least the "adequately capitalized" level, and the FDIC is generally required to close "critically undercapitalized" banks within a 90-day period.

Limitations on Transactions with Affiliates

Transactions between the Bank and any affiliate are governed by Sections 23A and 23B of the Federal Reserve Act.

An affiliate of the Bank is any company or entity which controls, is controlled by or is under common control with the Bank but which is not a subsidiary of the Bank.

The Company and its non-bank subsidiaries are affiliates of the Bank.

Generally, Section 23A limits the extent to which the Bank or its subsidiaries may engage in "covered transactions" with any one affiliate to an amount equal to 10.0% of the Bank's capital stock and surplus, and imposes an aggregate limit on all such transactions with all affiliates in an amount equal to 20.0% of such capital stock and surplus.

Section 23B applies to "covered transactions" as well as certain other transactions and requires that all transactions be on terms substantially the same, or at least as favorable to the Bank, as those provided to a non-affiliate.

The term "covered transaction" includes the making of loans to an affiliate, the purchase of or investment in the securities issued by an affiliate, the purchase of assets from an affiliate, the acceptance of securities issued by an affiliate as collateral security for a loan or extension of credit to any person or company, the issuance of a guarantee, acceptance or letter of credit on behalf of an affiliate, or certain transactions with an affiliate that involves the borrowing or lending of securities and certain derivative transactions with an affiliate.

In addition, Sections 22(g) and (h) of the Federal Reserve Act place restrictions on loans, derivatives, repurchase agreements and securities lending to executive officers, directors and principal shareholders of the Bank and its affiliates.

Standards for Safety and Soundness

The federal banking regulatory agencies have prescribed, by regulation, a set of guidelines for all insured depository institutions prescribing safety and soundness standards.

These guidelines establish general standards for internal controls, information systems, internal audit systems, loan documentation, credit underwriting, interest rate risk exposure, asset growth, asset quality, earnings standards, compensation, fees and benefits.

In general, the guidelines require appropriate systems and practices to identify and manage the risks and exposures specified in the guidelines before capital becomes impaired.

The guidelines prohibit excessive compensation as an unsafe and unsound practice and describe compensation as excessive when the amounts paid are unreasonable or disproportionate to the services performed by an executive officer, employee, director, or principal shareholder.

Each insured depository institution must implement a comprehensive written information security program that includes administrative, technical and physical safeguards appropriate to the institution's size and complexity and the nature and scope of its activities.

The information security program also must be designed to ensure the security and confidentiality of customer information, protect against any unanticipated threats or hazards to the security or integrity of such information, protect against unauthorized access to or use of such information that could result in substantial harm or inconvenience to any customer and ensure the proper disposal of customer and consumer information.

Each insured depository institution must also develop and implement a risk-based response program to address incidents of unauthorized access to customer information in customer information systems.

If the FDIC determines that the Bank fails to meet any standard prescribed by the guidelines, it may require the Bank to submit an acceptable plan to achieve compliance with the standard.

Real Estate Lending Standards

FDIC regulations require the Bank to adopt and maintain written policies that establish appropriate limits and standards for real estate loans.

These standards, which must be consistent with safe and sound banking practices, must establish loan portfolio diversification standards, prudent underwriting standards (including loan-to-value ratio limits) that are clear and measurable, loan administration procedures and documentation, approval and reporting requirements.

The Bank is obligated to monitor

conditions in its real estate markets to ensure that its standards continue to be appropriate for market conditions.

The Bank's board of directors is required to review and approve the Bank's standards at least annually.

The FDIC has published guidelines for compliance with these regulations, including supervisory limitations on loan-to-value ratios for different categories of real estate loans.

Loans in excess of the supervisory loan-to-value ratio limitations must be identified in the Bank's records and reported at least quarterly to the Bank's board of directors.

The FDIC and the federal banking agencies have also issued guidance on sound risk management practices for concentrations in commercial real estate lending.

The particular focus is on exposure to commercial real estate loans that are dependent on the cash flow from the real estate held as collateral and that are likely to be sensitive to conditions in the commercial real estate market (as opposed to real estate collateral held as a secondary source of repayment or as an abundance of caution).

The purpose of the guidance is not to limit a bank's commercial real estate lending but to guide banks in developing risk management practices and capital levels commensurate with the level and nature of real estate concentrations.

Risk Retention

The Dodd-Frank Act requires that, subject to certain exemptions, securitizers of mortgage and other asset-backed securities retain not less than five percent of the credit risk of the mortgages or other assets and that the securitizer not hedge or otherwise transfer the risk it is required to retain.

Generally, the implemented regulations provide various ways in which the retention of risk requirement can be satisfied and also describes exemptions from the retention requirements for various types of assets, including mortgages.

Activities and Investments of Insured State-Chartered Financial Institutions

Federal law generally prohibits FDIC-insured state banks from engaging as a principal in activities, and from making equity investments, other than those that are permissible for national banks.

An insured state bank is not prohibited from, among other things, (1) acquiring or retaining a majority interest in certain subsidiaries, (2) investing as a limited partner in a partnership the sole purpose of which is direct or indirect investment in the acquisition, rehabilitation or new construction of a qualified housing project, provided that such limited partnership investments may not exceed 2.0% of the bank's total assets, (3) acquiring up to 10.0% of the voting stock of a company that solely provides or reinsures directors', trustees' and officers' liability insurance coverage or bankers' blanket bond group insurance coverage for insured depository institutions and (4) acquiring or retaining the voting shares of a depository institution if certain requirements are met.

Washington State has enacted a law regarding financial institution parity.

The law generally provides that Washington-chartered commercial banks may exercise any of the powers of Washington-chartered savings banks, national banks or federally chartered savings banks, subject to the approval of the Director of the WDFI in certain situations.

Environmental Issues Associated with Real Estate Lending

The Comprehensive Environmental Response, Compensation and Liability Act, or (the "CERCLA"), is a federal statute that generally imposes strict liability on all prior and present "owners and operators" of sites containing hazardous waste.

However, Congress has acted to protect secured creditors by providing that the term "owner and operator" excludes a person whose ownership is limited to protecting its security interest in the site.

Since the enactment of the CERCLA, this "secured creditor" exemption has been the subject of judicial interpretations which have left open the possibility that lenders could be liable for cleanup costs on contaminated property that they hold as collateral for a loan.

To the extent that legal uncertainty exists in this area, all creditors, including the Bank, that have made loans secured by properties with potential hazardous waste contamination (such as petroleum contamination) could be subject to liability for cleanup costs, which costs often substantially exceed the value of the collateral property.

Reserve Requirements

The Bank is subject to Federal Reserve regulations pursuant to which depository institutions may be required to maintain non-interest-earning reserves against their deposit accounts and certain other liabilities.

Reserves must be maintained against transaction accounts (primarily negotiable order of withdrawal and regular checking accounts).

Currently, however, the Federal Reserve is not requiring banks to maintain any reserve amount.

Federal Home Loan Bank System

The Federal Home Loan Bank system consists of 11 regional Federal Home Loan Banks.

Among other benefits, each of these serves as a reserve or central bank for its members within its assigned region.

Each of the Federal Home Loan Banks makes available loans or advances to its members in compliance with the policies and procedures established by its board of directors.

The Bank is a member of the Federal Home Loan Bank of Des Moines (the "Des Moines FHLB").

As a member of the Des Moines FHLB, the Bank is required to own stock in the Des Moines FHLB.

Community Reinvestment Act of 1977

Banks are subject to the provisions of the Community Reinvestment Act of 1977 ("CRA"), which requires the appropriate federal bank regulatory agency to assess a bank's record in meeting the credit needs of the assessment areas serviced by the bank, including low and moderate income neighborhoods.

The regulatory agency's assessment of the bank's record is made available to the public.

Further, these assessments are considered by regulators when evaluating mergers, acquisitions and applications to open or relocate a branch or facility.

The Bank currently has a rating of "Satisfactory" under the CRA.

Dividends from the Bank constitute an important source of funds for dividends that may be paid by the Company to shareholders.

The amount of dividends payable by the Bank to the Company depends upon the Bank's earnings and capital position and is limited by federal and state laws.

Under Washington law dividends on the Bank's capital stock generally may not be paid in an amount greater than its retained earnings without the approval of the WDFI.

The amount of dividends actually paid during any one period will be strongly affected by the Bank's policy of maintaining a strong capital position.

Federal law prohibits an insured depository institution from paying a cash dividend if this would cause the institution to be "undercapitalized," as defined in the prompt corrective action regulations.

Moreover, the federal bank regulatory agencies have the general authority to limit the dividends paid by insured banks if such payments are deemed to constitute an unsafe and unsound practice.

Consumer Protection Laws and Regulations

The Bank and its affiliates are subject to a broad array of federal and state consumer protection laws and regulations that govern almost every aspect of its business relationships with consumers.

While this list is not exhaustive, these include the Truth-in-Lending Act, the Truth in Savings Act, the Electronic Fund Transfer Act, the Expedited Funds Availability Act, the Equal Credit Opportunity Act, the Fair Housing Act, the Secure and Fair Enforcement in Mortgage Licensing Act, the Real Estate Settlement Procedures Act, the Home Mortgage Disclosure Act, the Fair Credit Reporting Act, the Fair Debt Collection Practices Act, the Service Members' Civil Relief Act, the Right to Financial Privacy Act, the Gramm-Leach-Bliley Act, the Home Ownership and Equity Protection Act, the Consumer Leasing Act, the Fair Credit Billing Act, the Homeowners Protection Act, the Check Clearing for the 21st Century Act, laws governing flood insurance, laws governing consumer protections in connection with the sale of insurance, federal and state laws prohibiting unfair and deceptive business practices, foreclosure laws and various regulations that implement some or all of the foregoing.

These laws and regulations mandate certain disclosure requirements and regulate the manner in which financial institutions must deal with customers when taking deposits, making loans, collecting loans and providing other services.

Failure to comply with these laws and regulations can subject the Bank to various penalties, including but not limited to, enforcement actions, injunctions, fines, civil money penalties, civil liability, criminal penalties, punitive damages and the loss of certain contractual rights.

The Bank has a compliance governance structure in place to help ensure its compliance with these requirements.

The Bank is subject to a variety of provisions related to consumer mortgage including (1) a requirement that lenders make a determination that at the time a residential mortgage loan is consummated the consumer has a reasonable ability to repay the loan and related costs, (2) a ban on loan originator compensation based on the interest rate or other terms of the loan (other than the amount of the principal), (3) a ban on prepayment penalties for certain types of loans, (4) bans on arbitration provisions in mortgage loans and (5) requirements for enhanced disclosures in connection with the making of a loan.

The Bank is also subject to mortgage loan application data collection and reporting requirements under the Home Mortgage Disclosure Act and a variety of requirements related to its mortgage loan servicing activities.

The Dodd-Frank Act created the CFPB, an independent bureau that is responsible for regulating consumer financial products and services under federal consumer financial laws.

The CFPB has broad rulemaking authority with respect to these laws and

exclusive examination and primary enforcement authority regarding such laws with respect to banks with assets of more than $10 billion.

If and to the extent that the assets of the Bank exceed $10 billion, whether by organic growth, the combination of the Bank and one or more other entities, or otherwise, the Bank will be subject to ongoing supervision, targeted examinations, more frequent loan portfolio reviews and other enhanced supervision of the CFPB as a result of the greater complexity and impact of risks of larger institutions.

The Bank will also be required to provide information to the CFPB on a quarterly basis and will be subject to periodic examinations by the CFPB focused on compliance with consumer laws and regulations.

If the Bank exceeds $10 billion in assets, the changes resulting from the Dodd-Frank Act and CFPB rulemakings and enforcement policies may impact the profitability of our business activities, limit our ability to make, or the desirability of making, certain types of loans, which may require us to change our business practices, impose upon us more stringent capital, liquidity and leverage ratio requirements or otherwise adversely affect our business or profitability.

If applicable, the changes may also require us to dedicate significant management attention and resources to evaluate and make necessary changes to comply with the new statutory and regulatory requirements.

The Federal Reserve has regulations limiting the amount of debit interchange fees that large bank issuers may charge or receive on their debit card transactions.

There is an exemption from the rules for issuers with assets of less than $10 billion.

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-K

Item 1. Business