Mechanics Bancorp 10-Q

ITEM 1 FINANCIAL STATEMENTS HOMESTREET, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS March 31, 2025 December 31, 2024 (in thousands, except share data) (Unaudited) ASSETS Cash and cash equivalents $ 252,162 $ 406,600 Investment securities 1,055,318 1,057,006 Loans held for sale ("LHFS") 34,734 20,312 Loans held for investment ("LHFI") (net of allowance for credit losses of $ 39,634 and $ 38,743 ) 6,023,582 6,193,053 Mortgage servicing rights ("MSRs") 97,959 99,466 Premises and equipment, net 45,750 47,201 Other real estate owned ("OREO") 2,820 2,820 Intangible assets 6,662 7,141 Other assets 284,644 290,099 Total assets $ 7,803,631 $ 8,123,698 LIABILITIES AND SHAREHOLDERS' EQUITY Liabilities: Deposits $ 6,090,495 $ 6,413,021 Borrowings 1,000,000 1,000,000 Long-term debt 225,223 225,131 Accounts payable and other liabilities 87,162 88,549 Total liabilities 7,402,880 7,726,701 Commitments and contingencies Shareholders' equity: Common stock, no par value, authorized 160,000,000 shares; issued and outstanding, 18,920,808 shares and 18,857,565 shares 233,418 233,185 Retained earnings 246,548 251,013 Accumulated other comprehensive income (loss) ( 79,215 ) ( 87,201 ) Total shareholders' equity 400,751 396,997 Total liabilities and shareholders' equity $ 7,803,631 $ 8,123,698 See accompanying notes to consolidated financial statements 3 HOMESTREET, INC. AND SUBSIDIARIES CONSOLIDATED INCOME STATEMENTS (Unaudited) Quarter Ended March 31, (in thousands, except share and per share data) 2025 2024 Interest income: Loans $ 73,424 $ 86,256 Investment securities 8,650 10,714 Cash, Fed Funds and other 3,691 5,571 Total interest income 85,765 102,541 Interest expense: Deposits 38,237 42,607 Borrowings 14,307 27,783 Total interest expense 52,544 70,390 Net interest income 33,221 32,151 Provision for credit losses 1,000 — Net interest income after provision for credit losses 32,221 32,151 Noninterest income: Net gain on loan origination and sale activities 3,216 2,306 Loan servicing income 4,858 3,032 Deposit fees 2,071 2,241 Other 1,991 1,875 Total noninterest income 12,136 9,454 Noninterest expense: Compensation and benefits 26,309 28,011 Information services 7,585 7,342 Occupancy 4,871 5,434 General, administrative and other 10,343 11,377 Total noninterest expense 49,108 52,164 Income (loss) before income taxes ( 4,751 ) ( 10,559 ) Income tax (benefit) expense ( 286 ) ( 3,062 ) Net income (loss) $ ( 4,465 ) $ ( 7,497 ) Net income (loss) per share: Basic $ ( 0.24 ) $ ( 0.40 ) Diluted ( 0.24 ) ( 0.40 ) Weighted average shares outstanding: Basic 18,920,808 18,856,870 Diluted 18,920,808 18,856,870 See accompanying notes to consolidated financial statements 4 HOMESTREET, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (Unaudited) Quarter Ended March 31, (in thousands) 2025 2024 Net income (loss) $ ( 4,465 ) $ ( 7,497 ) Other comprehensive income (loss): Unrealized gain (loss) on investment securities available for sale ("AFS") 8,293 ( 5,759 ) Other comprehensive income (loss) before tax 8,293 ( 5,759 ) Income tax impact of: Unrealized gain (loss) on investment securities AFS 2,034 ( 1,277 ) Total 2,034 ( 1,277 ) Unrealized disparate impact of deferred tax assets valuation allowance - AOCI 1,727 — Other comprehensive income (loss) 7,986 ( 4,482 ) Total comprehensive income (loss) $ 3,521 $ ( 11,979 ) See accompanying notes to consolidated financial statements 5 HOMESTREET, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (Unaudited) (in thousands, except share data) Number of shares Common stock Retained earnings Accumulated other comprehensive income (loss) Total shareholders' equity For the quarter ended March 31, 2024 Balance, December 31, 2023 18,810,055 $ 229,889 $ 395,357 $ ( 86,859 ) $ 538,387 Net income (loss) — — ( 7,497 ) — ( 7,497 ) Share-based compensation expense — 1,059 — — 1,059 Common stock issued - Stock grants 60,483 — — — — Other comprehensive income (loss) — — — ( 4,482 ) ( 4,482 ) Common stock repurchased ( 12,972 ) ( 134 ) — — ( 134 ) Balance, March 31, 2024 18,857,566 $ 230,814 $ 387,860 $ ( 91,341 ) $ 527,333 For the quarter ended March 31, 2025 Balance, December 31, 2024 18,857,565 $ 233,185 $ 251,013 $ ( 87,201 ) $ 396,997 Net income (loss) — — ( 4,465 ) — ( 4,465 ) Share-based compensation expense — 592 — — 592 Common stock issued - Stock grants 94,688 — — — — Other comprehensive income — — — 7,986 7,986 Common stock repurchased ( 31,445 ) ( 359 ) — — ( 359 ) Balance, March 31, 2025 18,920,808 $ 233,418 $ 246,548 $ ( 79,215 ) $ 400,751 See accompanying notes to consolidated financial statements 6 HOMESTREET, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) Quarter Ended March 31, (in thousands) 2025 2024 CASH FLOWS FROM OPERATING ACTIVITIES: Net income (loss) $ ( 4,465 ) $ ( 7,497 ) Adjustments to reconcile net income (loss) to net cash used in operating activities: Provision for credit losses 1,000 — Depreciation and amortization, premises and equipment 1,507 1,661 Amortization of premiums and discounts: investment securities, deposits, debt 581 499 Operating leases: excess of payments over amortization ( 720 ) ( 772 ) Amortization of finance leases 24 50 Amortization of core deposit intangibles 479 625 Amortization of deferred loan fees and costs ( 731 ) ( 29 ) Share-based compensation expense 592 1,059 Deferred income tax (benefit) expense ( 307 ) ( 1,189 ) Origination of LHFS ( 150,046 ) ( 79,806 ) Proceeds from sale of LHFS 137,125 79,033 Net fair value adjustment and gain on sale of LHFS ( 1,022 ) ( 419 ) Origination of MSRs ( 1,158 ) ( 895 ) Change in fair value of MSRs 1,311 810 Amortization of servicing rights 1,354 1,402 Net decrease (increase) in trading securities ( 11,562 ) ( 3,048 ) Decrease (increase) in other assets 7,161 ( 8,813 ) Increase (decrease) in accounts payable and other liabilities ( 3,625 ) 9,484 Net cash used in operating activities ( 22,502 ) ( 7,845 ) CASH FLOWS FROM INVESTING ACTIVITIES: Principal payments on investment securities 21,138 83,153 Net (increase) decrease in LHFI 168,855 ( 22,624 ) Purchases of premises and equipment ( 53 ) ( 6,058 ) Proceeds from sale of Federal Home Loan Bank stock 12,906 30,287 Purchases of Federal Home Loan Bank stock ( 12,150 ) ( 48,716 ) Net cash provided by investing activities 190,696 36,042 7 Quarter Ended March 31, (in thousands) 2025 2024 CASH FLOWS FROM FINANCING ACTIVITIES: Decrease in deposits, net ( 322,610 ) ( 272,487 ) Changes in short-term borrowings, net — 184,000 Proceeds from other long-term borrowings — 585,000 Repayment of other long-term borrowings — ( 420,000 ) Repayment of finance lease principal ( 22 ) ( 47 ) Net cash provided by (used in) financing activities ( 322,632 ) 76,466 Net increase (decrease) in cash and cash equivalents ( 154,438 ) 104,663 Cash and cash equivalents, beginning of year 406,600 215,664 Cash and cash equivalents, end of period $ 252,162 $ 320,327 SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: Cash paid (refunds received) during the period for: Interest $ 54,041 $ 70,701 Federal and state income taxes ( 4,556 ) ( 414 ) Non-cash activities: Increase in lease assets and lease liabilities 2,305 959 Loans transferred from LHFI to LHFS, net 479 273 Ginnie Mae loans recognized with the right to repurchase, net 1,675 323 Repurchase of common stock-award shares 359 134 See accompanying notes to consolidated financial statements 8 HomeStreet, Inc. and Subsidiaries Notes to Consolidated Financial Statements (Unaudited) NOTE 1– SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: HomeStreet, Inc., a State of Washington corporation organized in 1921 (the "Corporation"), is a Washington-based diversified financial services holding company whose operations are primarily conducted through its wholly owned subsidiaries (collectively the "Company") HomeStreet Statutory Trusts and HomeStreet Bank (the "Bank"), and the Bank's subsidiaries, Continental Escrow Company, HS Properties, Inc., HS Evergreen Corporate Center LLC, and Union Street Holdings LLC. The Company is principally engaged in commercial banking, mortgage banking and consumer/retail banking activities serving customers in the Western United States. The accompanying consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America ("GAAP"). The consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All significant inter-company accounts and transactions have been eliminated in consolidation. In preparing the consolidated financial statements, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the financial statements, as well as the reported amounts of revenues and expenses during the reporting periods. Actual results could differ significantly from those estimates. Certain amounts in the financial statements from prior periods have been reclassified to conform to the current financial statement presentation. These unaudited interim financial statements reflect all adjustments that are, in the opinion of management, necessary for a fair statement of the results for the periods presented. These adjustments are of a normal recurring nature, unless otherwise disclosed in this Quarterly Report on Form 10-Q. The results of operations in the interim financial statements do not necessarily indicate the results that may be expected for the full year. The interim financial information should be read in conjunction with our Annual Report on Form 10-K for the year ended December 31, 2024 ("2024 Annual Report on Form 10-K"), filed with the U.S. Securities and Exchange Commission ("SEC"). Segments Our chief operating decision maker (“CODM”), the Chief Executive Officer, manages the Company’s business activities as one single operating and reportable segment at the consolidated level. Accordingly, our CODM uses consolidated net income to measure segment profit or loss, allocate resources and assess performance. Further, the CODM reviews and utilizes net interest income, noninterest income and noninterest expenses (compensation and benefits, information services, occupancy and general, administrative and other) at the consolidated level to manage the Company’s operations. Recent Developments On March 28, 2025, the Company entered into a definitive merger agreement with Mechanics Bank, whereby the Company and the Bank will merge with and into Mechanics Bank. This merger is expected to close in the third quarter of 2025. Recent Accounting Developments In October 2023, the FASB issued ASU 2023-06, "Disclosure Improvements - Codification Amendments in Response to the SEC's Disclosure Update and Simplification Initiative." The amendments in ASU 2023-06 modify the disclosure or presentation requirements of a variety of Topics in the Codification, with the intention of clarifying or improving them and aligning the requirements in the codification with the SEC's regulations (and will be removed from the SEC regulations). ASU 2023-06 should be adopted prospectively, and the effective date varies and is determined for each individual disclosure based on the effective date of the SEC's removal of the related disclosure. We are assessing the impact of ASU 2023-06 and believe it will not have an impact on the Company's financial position or results of operation as it impacts disclosures only. In December 2023, the FASB issued ASU 2023-09, "Income Taxes (Topic 740): Improvements to Income Tax Disclosures", which expands disclosures in an entity’s income tax rate reconciliation table and taxes paid both in the U.S. and foreign jurisdictions. The update will be effective for annual periods beginning after December 15, 2024. The adoption of ASU 2023-09 will not have an impact on the Company's financial position or results of operation as it impacts disclosures only. We are assessing the impact on our disclosures. 9 In November 2024, the FASB issued ASU 2024-03, “Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses.” ASU 2024-03 requires public companies to disclose, in the notes to the financial statements, specific information about certain costs and expenses at each interim and annual reporting period. This includes disclosing amounts related to employee compensation, depreciation, and intangible asset amortization. In addition, public companies will need to provide qualitative description of the amounts remaining in relevant expense captions that are not separately disaggregated quantitatively. ASU 2024-03 is effective for public business entities for annual reporting periods beginning after December 15, 2026, and interim reporting periods beginning after December 15, 2027. Implementation of ASU 2024-03 may be applied prospectively or retrospectively. The adoption of ASU 2024-03 will not have an impact on the Company's financial position or results of operation as it impacts disclosures only. We are assessing the impact on our disclosures. NOTE 2– INVESTMENT SECURITIES: The following table sets forth certain information regarding the amortized cost basis and fair values of our investment securities AFS and held-to-maturity ("HTM"): At March 31, 2025 (in thousands) Amortized cost Gross unrealized gains Gross unrealized losses Fair value AFS Mortgage backed securities ("MBS"): Residential $ 169,540 $ 199 $ ( 5,487 ) $ 164,252 Commercial 54,431 — ( 5,969 ) 48,462 Collateralized mortgage obligations ("CMOs"): Residential 338,735 41 ( 26,944 ) 311,832 Commercial 57,206 — ( 4,051 ) 53,155 Municipal bonds 430,754 99 ( 56,862 ) 373,991 Corporate debt securities 31,129 — ( 5,539 ) 25,590 U.S. Treasury securities 22,218 — ( 1,901 ) 20,317 Agency debentures 9,966 — ( 838 ) 9,128 Total $ 1,113,979 $ 339 $ ( 107,591 ) $ 1,006,727 HTM Municipal bonds $ 2,283 $ — $ ( 17 ) $ 2,266 At December 31, 2024 (in thousands) Amortized cost Gross unrealized gains Gross unrealized losses Fair value AFS MBS: Residential $ 174,887 $ 229 $ ( 7,654 ) $ 167,462 Commercial 54,620 — ( 6,978 ) 47,642 CMOs: Residential 349,348 36 ( 31,940 ) 317,444 Commercial 59,725 14 ( 4,794 ) 54,945 Municipal bonds 433,162 95 ( 54,998 ) 378,259 Corporate debt securities 31,136 — ( 6,192 ) 24,944 U.S. Treasury securities 22,306 — ( 2,319 ) 19,987 Agency debentures 10,320 — ( 1,044 ) 9,276 Total $ 1,135,504 $ 374 $ ( 115,919 ) $ 1,019,959 HTM Municipal bonds $ 2,301 $ — $ ( 28 ) $ 2,273 10 At March 31, 2025, and December 31, 2024, the Company held $ 46 million and $ 35 million, respectively, of trading securities, consisting of US Treasury notes used as economic hedges of our single family mortgage servicing rights, which are carried at fair value and included within investment securities on the balance sheet. For the quarters ended March 31, 2025 and 2024, net gains of $ 0.8 million and net losses of $ 0.6 million on trading securities, respectively, were recorded in servicing income. MBS and CMOs represent securities issued or guaranteed by government sponsored enterprises ("GSEs"). Most of the MBS and CMO securities in our investment portfolio are guaranteed by Fannie Mae, Ginnie Mae or Freddie Mac. Municipal bonds are comprised of general obligation bonds (i.e., backed by the general credit of the issuer) and revenue bonds (i.e., backed by either collateral or revenues from the specific project being financed) issued by various municipal corporations. As of March 31, 2025 and December 31, 2024, substantially all securities held, including municipal bonds and corporate debt securities, were rated investment grade based upon nationally recognized statistical rating organizations where available and, where not available, based upon internal ratings. Investment securities AFS that were in an unrealized loss position are presented in the following tables based on the length of time the individual securities have been in an unrealized loss position: At March 31, 2025 Less than 12 months 12 months or more Total (in thousands) Gross unrealized losses Fair value Gross unrealized losses Fair value Gross unrealized losses Fair value AFS MBS: Residential $ ( 1 ) $ 530 $ ( 5,486 ) $ 155,525 $ ( 5,487 ) $ 156,055 Commercial — — ( 5,969 ) 48,462 ( 5,969 ) 48,462 CMOs: Residential ( 9 ) 5,394 ( 26,935 ) 278,518 ( 26,944 ) 283,912 Commercial ( 2 ) 3,081 ( 4,049 ) 50,074 ( 4,051 ) 53,155 Municipal bonds ( 530 ) 21,838 ( 56,332 ) 347,214 ( 56,862 ) 369,052 Corporate debt securities — — ( 5,539 ) 25,590 ( 5,539 ) 25,590 U.S. Treasury securities — — ( 1,901 ) 20,317 ( 1,901 ) 20,317 Agency debentures — — ( 838 ) 9,128 ( 838 ) 9,128 Total $ ( 542 ) $ 30,843 $ ( 107,049 ) $ 934,828 $ ( 107,591 ) $ 965,671 HTM Municipal bonds $ — $ — $ ( 17 ) $ 2,266 $ ( 17 ) $ 2,266 11 At December 31, 2024 Less than 12 months 12 months or more Total (in thousands) Gross unrealized losses Fair value Gross unrealized losses Fair value Gross unrealized losses Fair value AFS MBS: Residential $ ( 2 ) $ 532 $ ( 7,652 ) $ 158,044 $ ( 7,654 ) $ 158,576 Commercial — — ( 6,978 ) 47,642 ( 6,978 ) 47,642 CMOs: Residential ( 78 ) 7,481 ( 31,862 ) 293,297 ( 31,940 ) 300,778 Commercial — — ( 4,794 ) 51,834 ( 4,794 ) 51,834 Municipal bonds ( 810 ) 28,361 ( 54,188 ) 340,571 ( 54,998 ) 368,932 Corporate debt securities — — ( 6,192 ) 24,944 ( 6,192 ) 24,944 U.S. Treasury securities — — ( 2,319 ) 19,987 ( 2,319 ) 19,987 Agency debentures — — ( 1,044 ) 9,276 ( 1,044 ) 9,276 Total $ ( 890 ) $ 36,374 $ ( 115,029 ) $ 945,595 $ ( 115,919 ) $ 981,969 HTM Municipal bonds $ — $ — $ ( 28 ) $ 2,273 $ ( 28 ) $ 2,273 The Company has evaluated AFS securities in an unrealized loss position and has determined the decline in value is temporary and is related to the change in market interest rates since purchase. The decline in value is not related to any issuer- or industry-specific credit event. The Company has not identified any expected credit losses on its debt securities as of March 31, 2025 or December 31, 2024. The Company bases this conclusion in part on its periodic review of the credit ratings of the AFS securities or reviews of the financial condition of the issuers. In addition, as of March 31, 2025 and December 31, 2024, the Company had not made a decision to sell any of its debt securities held, nor did the Company consider it more likely than not that it would be required to sell such securities before recovery of their amortized cost basis. The following tables present the fair value of investment securities AFS and HTM by contractual maturity along with the associated contractual yield: At March 31, 2025 Within one year After one year through five years After five years through ten years After ten years Total (dollars in thousands) Fair Value Weighted Average Yield Fair Value Weighted Average Yield Fair Value Weighted Average Yield Fair Value Weighted Average Yield Fair Value Weighted Average Yield AFS Municipal bonds $ — — % $ 32,980 3.70 % $ 59,895 2.89 % $ 281,116 2.89 % $ 373,991 2.96 % Corporate debt securities — — % 2,818 2.15 % 22,772 4.37 % — — % 25,590 4.12 % U.S. Treasury securities — — % 20,317 1.17 % — — % — — % 20,317 1.17 % Agency debentures — — % 1,579 2.16 % 4,458 2.21 % 3,091 2.18 % 9,128 2.19 % Total $ — — % $ 57,694 2.69 % $ 87,125 3.24 % $ 284,207 2.88 % $ 429,026 2.93 % HTM Municipal bonds 2,266 2.30 % $ — — % $ — — % $ — — % $ 2,266 2.30 % 12 At December 31, 2024 Within one year After one year through five years After five years through ten years After ten years Total (dollars in thousands) Fair Value Weighted Average Yield Fair Value Weighted Average Yield Fair Value Weighted Average Yield Fair Value Weighted Average Yield Fair Value Weighted Average Yield AFS Municipal bonds $ — — % $ 15,531 3.88 % $ 70,678 2.92 % $ 292,050 2.93 % $ 378,259 2.97 % Corporate debt securities — — % 2,735 2.08 % 22,209 4.27 % — — % $ 24,944 4.03 % U.S. Treasury securities — — % 19,987 1.15 % — — % — — % $ 19,987 1.15 % Agency debentures — — % 1,770 2.13 % 4,442 2.17 % 3,064 2.14 % $ 9,276 2.15 % Total $ — — % $ 40,023 2.32 % $ 97,329 3.19 % $ 295,114 2.92 % $ 432,466 2.93 % HTM Municipal bonds $ 2,273 2.29 % $ — — % $ — — % $ — — % $ 2,273 2.29 % The weighted-average yield is computed using the contractual coupon of each security weighted based on the fair value of each security. Taxable-equivalent amounts are used where applicable. MBS and CMOs are excluded from the tables above because such securities are not due on a single maturity date. The weighted average yield of MBS and CMOs as of March 31, 2025 and December 31, 2024 was 3.00 % and 3.01 %, respectively. The following table summarizes the carrying value of securities pledged as collateral to secure public deposits, borrowings and other purposes as permitted or required by law: (in thousands) At March 31, 2025 At December 31, 2024 Federal Reserve Bank to secure borrowings $ 888,706 $ 906,475 Washington, Oregon and California to secure public deposits 191,850 195,212 Other securities pledged 1,304 1,334 Total securities pledged as collateral $ 1,081,860 $ 1,103,021 The Company assesses the creditworthiness of the counterparties that hold the pledged collateral and has determined that these arrangements have little credit risk. Tax-exempt interest income on investment securities was $ 2.7 million and $ 2.8 million for quarters ended March 31, 2025 and 2024, respectively. 13 NOTE 3- LOANS AND CREDIT QUALITY: The Company's LHFI is divided into two portfolio segments, commercial loans and consumer loans. Within each portfolio segment, the Company monitors and assesses credit risk based on the risk characteristics of each of the following loan classes: non-owner occupied commercial real estate ("CRE"), multifamily, construction and land development, owner occupied CRE and commercial business loans within the commercial loan portfolio segment and single family and home equity and other loans within the consumer loan portfolio segment. LHFI consists of the following: (in thousands) At March 31, 2025 At December 31, 2024 CRE Non-owner occupied CRE $ 545,313 $ 570,750 Multifamily 2,934,442 2,992,675 Construction/land development 436,610 472,740 Total 3,916,365 4,036,165 Commercial and industrial loans Owner occupied CRE 340,106 361,997 Commercial business 299,001 312,004 Total 639,107 674,001 Consumer loans Single family 1,088,264 1,109,095 Home equity and other 419,480 412,535 Total (1) 1,507,744 1,521,630 Total LHFI 6,063,216 6,231,796 Allowance for credit losses ("ACL") ( 39,634 ) ( 38,743 ) Total LHFI less ACL $ 6,023,582 $ 6,193,053 (1) Includes $ 1.2 million and $ 1.3 million of loans at March 31, 2025 and December 31, 2024, respectively, where a fair value option election was made at the time of origination and, therefore, are carried at fair value with changes in fair value recognized in the consolidated income statements. Loans totaling $ 3.3 billion and $ 4.0 billion at March 31, 2025 and December 31, 2024, respectively, were pledged to secure borrowings from the Federal Home Loan Bank ("FHLB") and loans totaling $ 1.9 billion and $ 1.4 billion at March 31, 2025 and December 31, 2024, respectively, were pledged to secure borrowings from the Federal Reserve Bank of San Francisco ("FRBSF"). Credit Risk Concentrations LHFI are primarily secured by real estate located in the Pacific Northwest, California and Hawaii. At March 31, 2025, and December 31, 2024 single family loans in the state of Washington represented 13 % of the total LHFI portfolio, respectively. At March 31, 2025 and December 31, 2024, multifamily loans in California represented 30 % of the total LHFI portfolio, respectively. Credit Quality Management considers the level of ACL to be appropriate to cover credit losses expected over the life of the loans for the LHFI portfolio. The cumulative loss rate used as the basis for the estimate of credit losses is comprised of the Bank’s historical loss experience and eight qualitative factors for current and forecasted periods. As of March 31, 2025, the historical expected loss rates decreased when compared to December 31, 2024 due to product mix risk and composition changes. During the quarter ended March 31, 2025, the qualitative factors decreased due to improved collateral conditions, offset by increases related to the uncertainty of the business environment and specific reserves for one syndicated relationship. Additionally, over the two-year forecast period in the markets in which it operates, the Bank expects neutral economic forecasts and neutral to improving collateral forecasts. In addition to the ACL for LHFI, the Company maintains a separate allowance for unfunded loan commitments which is included in accounts payable and other liabilities on our consolidated balance sheets. The allowance for unfunded commitments was $ 1.3 million and $ 1.1 million at March 31, 2025 and December 31, 2024, respectively. 14 The Bank has elected to exclude accrued interest receivable from the evaluation of the ACL. Accrued interest on LHFI was $ 24.2 million and $ 25.1 million at March 31, 2025 and December 31, 2024, respectively, and was reported in other assets in the consolidated balance sheets. Activity in the ACL for LHFI and the allowance for unfunded commitments was as follows: Quarter Ended March 31, (in thousands) 2025 2024 Beginning balance $ 38,743 $ 40,500 Provision for credit losses 888 242 Net (charge-offs) recoveries 3 ( 1,065 ) Ending balance $ 39,634 $ 39,677 Allowance for unfunded commitments: Beginning balance $ 1,146 $ 1,823 Provision for credit losses 112 ( 242 ) Ending balance $ 1,258 $ 1,581 Provision for credit losses: Allowance for credit losses - loans $ 888 $ 242 Allowance for unfunded commitments 112 ( 242 ) Total $ 1,000 $ — 15 Activity in the ACL for LHFI by loan portfolio and loan sub-class was as follows: Quarter Ended March 31, 2025 (in thousands) Beginning balance Charge-offs Recoveries Provision Ending balance CRE Non-owner occupied CRE $ 1,739 $ — $ — $ ( 81 ) $ 1,658 Multifamily 14,909 — — ( 1,622 ) 13,287 Construction/land development Multifamily construction 849 — — ( 381 ) 468 CRE construction 66 — — 7 73 Single family construction 6,737 — — ( 1,033 ) 5,704 Single family construction to permanent 184 — — ( 44 ) 140 Total 24,484 — — ( 3,154 ) 21,330 Commercial and industrial loans Owner occupied CRE 576 — — 22 598 Commercial business 6,886 ( 21 ) 25 3,758 10,648 Total 7,462 ( 21 ) 25 3,780 11,246 Consumer loans Single family 3,610 — 2 90 3,702 Home equity and other 3,187 ( 40 ) 37 172 3,356 Total 6,797 ( 40 ) 39 262 7,058 Total ACL $ 38,743 $ ( 61 ) $ 64 $ 888 $ 39,634 Quarter Ended March 31, 2024 (in thousands) Beginning balance Charge-offs Recoveries Provision Ending balance CRE Non-owner occupied CRE $ 2,610 $ — $ — $ ( 479 ) $ 2,131 Multifamily 13,093 — — 5,854 18,947 Construction/land development Multifamily construction 3,983 — — ( 2,362 ) 1,621 CRE construction 189 — — ( 1 ) 188 Single family construction 7,365 — — ( 1,787 ) 5,578 Single family construction to permanent 672 — — ( 237 ) 435 Total 27,912 — — 988 28,900 Commercial and industrial loans Owner occupied CRE 899 — — ( 63 ) 836 Commercial business 2,950 ( 1,081 ) 1 776 2,646 Total 3,849 ( 1,081 ) 1 713 3,482 Consumer loans Single family 5,287 — 2 ( 1,016 ) 4,273 Home equity and other 3,452 ( 24 ) 37 ( 443 ) 3,022 Total 8,739 ( 24 ) 39 ( 1,459 ) 7,295 Total ACL $ 40,500 $ ( 1,105 ) $ 40 $ 242 $ 39,677 16 The following table presents a vintage analysis of the commercial portfolio segment by loan sub-class and risk rating or delinquency status. At March 31, 2025 (in thousands) 2025 2024 2023 2022 2021 2020 and prior Revolving Revolving-term Total COMMERCIAL PORTFOLIO Non-owner occupied CRE Pass $ 3,986 $ — $ 1,426 $ 69,279 $ 71,021 $ 360,281 $ ( 33 ) $ — $ 505,960 Special Mention — — — — — 23,264 — — 23,264 Substandard — — — — — 16,089 — — 16,089 Total 3,986 — 1,426 69,279 71,021 399,634 ( 33 ) — 545,313 Multifamily Pass 1,353 — 106,376 1,533,209 635,673 468,289 — — 2,744,900 Special Mention — — — 61,593 11,049 83,829 — — 156,471 Substandard — — — 19,910 888 12,273 — — 33,071 Total 1,353 — 106,376 1,614,712 647,610 564,391 — — 2,934,442 Multifamily construction Pass — — 34,462 30,739 — — — — 65,201 Special Mention — — — — — — — — — Substandard — — — — — — — — — Total — — 34,462 30,739 — — — — 65,201 CRE construction Pass — 18 7,329 — — — — — 7,347 Special Mention — — — — — — — — — Substandard — — — — — 3,796 — — 3,796 Total — 18 7,329 — — 3,796 — — 11,143 Single family construction Pass 19,488 105,716 16,807 3,167 3,185 68 180,963 — 329,394 Special Mention — — — — — — — — — Substandard — — — — — — — — — Total 19,488 105,716 16,807 3,167 3,185 68 180,963 — 329,394 Single family construction to permanent Current 493 5,830 4,231 13,198 6,520 600 — — 30,872 Past due: 30-59 days — — — — — — — — — 60-89 days — — — — — — — — — 90+ days — — — — — — — — — Total 493 5,830 4,231 13,198 6,520 600 — — 30,872 Owner occupied CRE Pass 71 3,972 9,025 57,667 36,046 190,595 — 13 297,389 Special Mention — — — 6,090 4,474 30,543 — — 41,107 Substandard — — — 327 — 1,283 — — 1,610 Total 71 3,972 9,025 64,084 40,520 222,421 — 13 340,106 Commercial business Pass 184 26,473 15,290 19,531 19,478 46,220 126,636 818 254,630 Special Mention — — — 13,075 2,058 1,036 1,172 — 17,341 Substandard — 231 384 11,590 — 11,715 3,098 12 27,030 Total 184 26,704 15,674 44,196 21,536 58,971 130,906 830 299,001 Total commercial portfolio $ 25,575 $ 142,240 $ 195,330 $ 1,839,375 $ 790,392 $ 1,249,881 $ 311,836 $ 843 $ 4,555,472 17 The following table presents a vintage analysis of the consumer portfolio segment by loan sub-class and delinquency status: At March 31, 2025 (in thousands) 2025 2024 2023 2022 2021 2020 and prior Revolving Revolving-term Total CONSUMER PORTFOLIO Single family Current $ — $ — $ 31,711 $ 376,821 $ 300,525 $ 374,970 $ — $ — $ 1,084,027 Past due: 30-59 days — — — — — 1,285 — — 1,285 60-89 days — — — — 103 796 — — 899 90+ days — — — 452 — 1,601 — — 2,053 Total — — 31,711 377,273 300,628 378,652 — — 1,088,264 Home equity and other Current 935 1,141 835 1,290 105 1,867 406,020 4,368 416,561 Past due: 30-59 days — 7 — 4 — — 976 4 991 60-89 days — 3 4 — — — 480 — 487 90+ days — — — — — 2 1,433 6 1,441 Total 935 1,151 839 1,294 105 1,869 408,909 4,378 419,480 Total consumer portfolio (1) $ 935 $ 1,151 $ 32,550 $ 378,567 $ 300,733 $ 380,521 $ 408,909 $ 4,378 $ 1,507,744 Total LHFI $ 26,510 $ 143,391 $ 227,880 $ 2,217,942 $ 1,091,125 $ 1,630,402 $ 720,745 $ 5,221 $ 6,063,216 (1) Includes $ 1.2 million of loans where a fair value option election was made at the time of origination and, therefore, are carried at fair value with changes in fair value recognized in the consolidated income statements. 18 The following table presents a vintage analysis of the commercial portfolio segment by loan sub-class and risk rating or delinquency status: At December 31, 2024 (in thousands) 2024 2023 2022 2021 2020 2019 and prior Revolving Revolving-term Total COMMERCIAL PORTFOLIO Non-owner occupied CRE Pass $ — $ 1,441 $ 70,128 $ 71,493 $ 39,885 $ 347,058 $ ( 36 ) $ — $ 529,969 Special Mention — — — — — 24,551 — — 24,551 Substandard — — — — — 16,230 — — 16,230 Total — 1,441 70,128 71,493 39,885 387,839 ( 36 ) — 570,750 Multifamily Pass 1,650 106,415 1,538,855 643,044 257,110 255,643 — — 2,802,717 Special Mention — — 66,217 4,789 73,308 23,835 — — 168,149 Substandard — — 15,602 — — 6,207 — — 21,809 Total 1,650 106,415 1,620,674 647,833 330,418 285,685 — — 2,992,675 Multifamily construction Pass — 31,349 67,557 — — — — — 98,906 Special Mention — — — — — — — — — Substandard — — — — — — — — — Total — 31,349 67,557 — — — — — 98,906 CRE construction Pass 19 7,198 — — — — — — 7,217 Special Mention — — — — — — — — — Substandard — — — — 3,821 — — — 3,821 Total 19 7,198 — — 3,821 — — — 11,038 Single family construction Pass 121,305 22,412 5,346 7,252 — 69 164,442 — 320,826 Special Mention — — — — — — — — — Substandard — — — — — — — — — Total 121,305 22,412 5,346 7,252 — 69 164,442 — 320,826 Single family construction to permanent Current 6,153 9,719 17,598 7,977 523 — — — 41,970 Past due: 30-59 days — — — — — — — — — 60-89 days — — — — — — — — — 90+ days — — — — — — — — — Total 6,153 9,719 17,598 7,977 523 — — — 41,970 Owner occupied CRE Pass 5,431 10,501 58,423 33,371 41,533 168,082 3 43 317,387 Special Mention — 1,789 6,129 7,602 317 26,203 — — 42,040 Substandard — — 331 — — 2,239 — — 2,570 Total 5,431 12,290 64,883 40,973 41,850 196,524 3 43 361,997 Commercial business Pass 26,706 15,721 36,209 20,347 28,207 28,836 123,003 700 279,729 Special Mention — — 959 2,380 638 615 386 — 4,978 Substandard 243 406 11,885 — 7,192 4,628 2,920 23 27,297 Total 26,949 16,127 49,053 22,727 36,037 34,079 126,309 723 312,004 Total commercial portfolio $ 161,507 $ 206,951 $ 1,895,239 $ 798,255 $ 452,534 $ 904,196 $ 290,718 $ 766 $ 4,710,166 19 The following table presents a vintage analysis of the consumer portfolio segment by loan sub-class and delinquency status: At December 31, 2024 (in thousands) 2024 2023 2022 2021 2020 2019 and prior Revolving Revolving-term Total CONSUMER PORTFOLIO Single family Current $ 566 $ 30,940 $ 378,613 $ 303,920 $ 139,159 $ 251,322 $ — $ — $ 1,104,520 Past due: 30-59 days — — 452 — — 1,673 — — 2,125 60-89 days — — — — — 440 — — 440 90+ days — — — — — 2,010 — — 2,010 Total 566 30,940 379,065 303,920 139,159 255,445 — — 1,109,095 Home equity and other Current 1,606 936 1,528 126 85 1,932 399,531 4,449 410,193 Past due: 30-59 days 25 4 1 — — — 474 62 566 60-89 days — 3 4 — — — 626 — 633 90+ days — — — — — 10 1,127 6 1,143 Total 1,631 943 1,533 126 85 1,942 401,758 4,517 412,535 Total consumer portfolio (1) $ 2,197 $ 31,883 $ 380,598 $ 304,046 $ 139,244 $ 257,387 $ 401,758 $ 4,517 $ 1,521,630 Total LHFI $ 163,704 $ 238,834 $ 2,275,837 $ 1,102,301 $ 591,778 $ 1,161,583 $ 692,476 $ 5,283 $ 6,231,796 (1) Includes $ 1.3 million of loans where a fair value option election was made at the time of origination and, therefore, are carried at fair value with changes in fair value recognized in the consolidated income statements. The following tables present a vintage analysis of the commercial and consumer portfolio segment by loan sub-class and gross charge-offs: At March 31, 2025 (in thousands) 2025 2024 2023 2022 2021 2020 and prior Revolving Revolving-term Total COMMERCIAL PORTFOLIO Commercial business Gross charge-offs $ — $ — $ — $ ( 21 ) $ — $ — $ — $ — $ ( 21 ) CONSUMER PORTFOLIO Home equity and other Gross charge-offs — — ( 3 ) — — — ( 37 ) — ( 40 ) Total LHFI $ — $ — $ ( 3 ) $ ( 21 ) $ — $ — $ ( 37 ) $ — $ ( 61 ) At December 31, 2024 (in thousands) 2024 2023 2022 2021 2020 2019 and prior Revolving Revolving-term Total COMMERCIAL PORTFOLIO Commercial business Gross charge-offs $ — $ — $ ( 276 ) $ ( 473 ) $ ( 1,077 ) $ ( 1,098 ) $ ( 39 ) $ — $ ( 2,963 ) CONSUMER PORTFOLIO Home equity and other Gross charge-offs — ( 24 ) ( 16 ) ( 1 ) — — ( 137 ) — ( 178 ) Total LHFI $ — $ ( 24 ) $ ( 292 ) $ ( 474 ) $ ( 1,077 ) $ ( 1,098 ) $ ( 176 ) $ — $ ( 3,141 ) 20 Collateral Dependent Loans The following table presents the amortized cost basis of collateral-dependent loans by loan sub-class and collateral type: At March 31, 2025 (in thousands) Land 1-4 Family Multifamily Non-residential real estate Other non-real estate Total CRE Non-owner occupied CRE $ — $ — $ — $ 16,089 $ — $ 16,089 Multifamily — — 1,915 — — 1,915 CRE construction 3,796 — — — — 3,796 Total 3,796 — 1,915 16,089 — 21,800 Commercial and industrial loans Commercial business 4,391 2,904 — — 3,226 10,521 Consumer loans Single family — 832 — — — 832 Total collateral-dependent loans $ 8,187 $ 3,736 $ 1,915 $ 16,089 $ 3,226 $ 33,153 At December 31, 2024 (in thousands) Land 1-4 Family Multifamily Non-residential real estate Other non-real estate Total CRE Non-owner occupied CRE $ — $ — $ — $ 16,230 $ — $ 16,230 Multifamily — — 1,915 — — 1,915 Construction/land development CRE construction 3,821 — — — — 3,821 Total 3,821 — 1,915 16,230 — 21,966 Commercial and industrial loans Owner occupied CRE — — — 205 — 205 Commercial business 4,420 2,927 — — 3,269 10,616 Total 4,420 2,927 — 205 3,269 10,821 Consumer loans Single family — 832 — — — 832 Total collateral-dependent loans $ 8,241 $ 3,759 $ 1,915 $ 16,435 $ 3,269 $ 33,619 21 Nonaccrual and Past Due Loans The following table presents nonaccrual status for loans: At March 31, 2025 At December 31, 2024 (in thousands) Nonaccrual with no related ACL Total Nonaccrual Nonaccrual with no related ACL Total Nonaccrual CRE Non-owner occupied CRE $ 16,089 $ 16,089 $ 16,230 $ 16,230 Multifamily 1,915 1,915 1,915 1,915 Construction/land development CRE construction 3,796 3,796 3,821 3,821 Total 21,800 21,800 21,966 21,966 Commercial and industrial loans Owner occupied CRE 932 932 1,161 1,161 Commercial business 10,506 26,035 8,509 25,740 Total 11,438 26,967 9,670 26,901 Consumer loans Single family 831 3,348 1,106 2,990 Home equity and other — 3,676 — 3,137 Total 831 7,024 1,106 6,127 Total nonaccrual loans $ 34,069 $ 55,791 $ 32,742 $ 54,994 The following tables present an aging analysis of past due loans by loan portfolio segment and loan sub-class: At March 31, 2025 Past Due and Still Accruing (in thousands) 30-59 days 60-89 days 90 days or more Nonaccrual Total past due and nonaccrual (1) Current Total loans CRE Non-owner occupied CRE $ — $ — $ — $ 16,089 $ 16,089 $ 529,224 $ 545,313 Multifamily — — — 1,915 1,915 2,932,527 2,934,442 Construction/land development Multifamily construction — — — — — 65,201 65,201 CRE construction — — — 3,796 3,796 7,347 11,143 Single family construction — — — — — 329,394 329,394 Single family construction to permanent — — — — — 30,872 30,872 Total — — — 21,800 21,800 3,894,565 3,916,365 Commercial and industrial loans Owner occupied CRE — — — 932 932 339,174 340,106 Commercial business — — — 26,035 26,035 272,966 299,001 Total — — — 26,967 26,967 612,140 639,107 Consumer loans Single family 2,875 1,941 4,182 (2) 3,348 12,346 1,075,918 1,088,264 Home equity and other 834 263 — 3,676 4,773 414,707 419,480 Total 3,709 2,204 4,182 7,024 17,119 1,490,625 1,507,744 (3) Total loans $ 3,709 $ 2,204 $ 4,182 $ 55,791 $ 65,886 $ 5,997,330 $ 6,063,216 % 0.06 % 0.04 % 0.07 % 0.92 % 1.09 % 98.91 % 100.00 % 22 At December 31, 2024 Past Due and Still Accruing (in thousands) 30-59 days 60-89 days 90 days or more Nonaccrual Total past due and nonaccrual (1) Current Total loans CRE Non-owner occupied CRE $ — $ — $ — $ 16,230 $ 16,230 $ 554,520 $ 570,750 Multifamily — — — 1,915 1,915 2,990,760 2,992,675 Construction/land development Multifamily construction — — — — — 98,906 98,906 CRE construction — — — 3,821 3,821 7,217 11,038 Single family construction — — — — — 320,826 320,826 Single family construction to permanent — — — — — 41,970 41,970 Total — — — 21,966 21,966 4,014,199 4,036,165 Commercial and industrial loans Owner occupied CRE — — — 1,161 1,161 360,836 361,997 Commercial business — — — 25,740 25,740 286,264 312,004 Total — — — 26,901 26,901 647,100 674,001 Consumer loans Single family 4,601 1,096 4,354 (2) 2,990 13,041 1,096,054 1,109,095 Home equity and other 344 631 — 3,137 4,112 408,423 412,535 Total 4,945 1,727 4,354 6,127 17,153 1,504,477 1,521,630 (3) Total loans $ 4,945 $ 1,727 $ 4,354 $ 54,994 $ 66,020 $ 6,165,776 $ 6,231,796 % 0.08 % 0.03 % 0.07 % 0.88 % 1.06 % 98.94 % 100.00 % (1) Includes loans whose repayments are insured by the FHA or guaranteed by the VA or Small Business Administration ("SBA") of $ 10.4 million and $ 11.3 million at March 31, 2025 and December 31, 2024, respectively. (2) FHA-insured and VA-guaranteed single family loans that are 90 days or more past due are maintained on accrual status if they are determined to have little to no risk of loss. (3) Includes $ 1.2 million and $ 1.3 million of loans at March 31, 2025 and December 31, 2024, where a fair value option election was made at the time of origination and, therefore, are carried at fair value with changes in fair value recognized in our consolidated income statements. 23 Loan Modifications The Company provides modifications to borrowers experiencing financial difficulty ("MBFD"), which may include delays in payment of amounts due, extension of the terms of the notes or reduction in the interest rates on the notes. In certain instances, the Company may grant more than one type of modification. The granting of modifications for the quarters ended March 31, 2025 and 2024 did not have a material impact on the ACL. The following tables provide information related to loans modified for the quarters and ended March 31, 2025 and 2024 to borrowers experiencing financial difficulty, disaggregated by class of financing receivable and type of concession granted: Significant Payment Delay Quarter Ended March 31, 2025 2024 (in thousands, except percentages) Amortized Cost Basis at Period End % of Total Class of Financing Receivable Amortized Cost Basis at Period End % of Total Class of Financing Receivable Multifamily $ 1,915 0.07 % $ — — % Commercial business — — % 103 0.03 % Term Extension Quarter Ended March 31, 2025 2024 (in thousands, except percentages) Amortized Cost Basis at Period End % of Total Class of Financing Receivable Amortized Cost Basis at Period End % of Total Class of Financing Receivable Non-owner occupied CRE $ — — % $ 560 0.09 % Commercial business 251 0.08 % 3,555 0.92 % Significant Payment Delay and Term Extension Quarter Ended March 31, 2025 2024 (in thousands, except percentages) Amortized Cost Basis at Period End % of Total Class of Financing Receivable Amortized Cost Basis at Period End % of Total Class of Financing Receivable Commercial business $ 1,160 0.39 % $ — — % Single family 274 0.03 % 1,156 0.10 % 24 The following table describes the financial effect of the modifications made to borrowers experiencing financial difficulty: Significant Payment Delay Quarter Ended March 31, 2025 2024 Multifamily The weighted average duration of loan payments deferred is 1.8 years — Commercial business The weighted average duration of loan payments deferred is 5.1 years The weighted average duration of loan payments deferred is 2.8 years. Single Family Provided payment deferrals to borrowers. A weighted average 4.7 % of loan balances were capitalized and added to the remaining term of the loan. Provided payment deferrals to borrowers. A weighted average 2.5 % of loan balances were capitalized and added to the remaining term of the loan. Term Extension Quarter Ended March 31, 2025 2024 Non-owner occupied CRE — Added a weighted average 0.25 years to the life of loans, which reduced the monthly payment amounts to the borrowers. Commercial business Added a weighted average 3.8 years to the life of loans, which reduced the monthly payment amounts to the borrowers. Added a weighted average 0.4 years to the life of loans, which reduced the monthly payment amounts to the borrowers. Single family Added a weighted average 7.3 years to the life of loans, which reduced the monthly payment amounts to the borrowers. Added a weighted average 1.9 years to the life of loans, which reduced the monthly payment amounts to the borrowers. Upon determination that a modified loan (or portion of a loan) has subsequently been deemed uncollectible, the loan (or portion of the loan) is written off. Therefore, the amortized cost basis of the loan is reduced by the uncollectible amount and the allowance for credit losses is adjusted by the same amount. 25 The following table depicts the payment status of loans that were classified as MBFDs on or after January 1, 2024 through December 31, 2024: Payment Status (Amortized Cost Basis) at March 31, 2025 (in thousands) Current 30-89 Days Past Due 90+ Days Past Due Non-owner occupied CRE $ 19,211 $ — $ — Multifamily — — 1,915 Construction/land development — — 3,796 Owner occupied CRE 254 — — Commercial business 2,835 — 5,541 Single family 2,773 177 567 Total $ 25,073 $ 177 $ 11,819 The following table depicts the payment status of loans that were classified as MBFDs on or after January 1, 2023 through December 31, 2023: Payment Status (Amortized Cost Basis) at March 31, 2024 (in thousands) Current 30-89 Days Past Due 90+ Days Past Due Non-owner occupied CRE $ 16,240 $ — $ — Construction/land development 3,824 — — Commercial business 8,663 — — Single family 2,367 1,109 342 Total $ 31,094 $ 1,109 $ 342 The following table provides the amortized cost basis as of March 31, 2025 of MBFDs on or after January 1, 2024 through December 31, 2024 and subsequently had a payment default: Amortized Cost Basis of Modified Loans That Subsequently Defaulted Quarter Ended March 31, 2025 (in thousands) Significant Payment Delay Term Extension Interest Rate Reduction and Term Extension Significant Payment Delay and Term Extension Interest Rate Reduction, Significant Payment Delay and Term Extension Single family $ — $ — $ — $ 325 $ — The following table provides the amortized cost basis as of March 31, 2024 of MBFDs on or after January 1, 2023 through December 31, 2023 and subsequently had a payment default: Amortized Cost Basis of Modified Loans That Subsequently Defaulted Quarter Ended March 31, 2024 (in thousands) Significant Payment Delay Term Extension Interest Rate Reduction and Term Extension Significant Payment Delay and Term Extension Interest Rate Reduction, Significant Payment Delay and Term Extension Non-owner occupied CRE $ — $ — $ — $ 16,240 $ — Construction/land development — — — 3,824 — Commercial business — 4,420 — — — Single family 241 — — 351 — Total $ 241 $ 4,420 $ — $ 20,415 $ — 26 NOTE 4– DEPOSITS: Deposit balances, including their weighted average rates, were as follows: At March 31, 2025 At December 31, 2024 (dollars in thousands) Amount Weighted Average Rate Amount Weighted Average Rate Noninterest-bearing demand deposits $ 1,276,133 — % $ 1,195,781 — % Interest bearing: Interest-bearing demand deposits 327,400 0.45 % 323,112 0.35 % Savings 233,240 0.06 % 229,659 0.06 % Money market 1,437,024 2.02 % 1,396,697 1.72 % Certificates of deposit Brokered deposits 297,717 4.33 % 751,406 4.61 % Other 2,518,981 4.11 % 2,516,366 4.37 % Total interest bearing deposits 4,814,362 3.12 % 5,217,240 3.31 % Total deposits $ 6,090,495 2.42 % $ 6,413,021 2.65 % There were $ 313 million and $ 315 million in public funds included in deposits at March 31, 2025 and December 31, 2024, respectively. Certificates of deposit outstanding mature as follows: (in thousands) March 31, 2025 Within one year $ 2,794,410 One to two years 18,006 Two to three years 1,567 Three to four years 1,245 Four to five years 1,468 Thereafter 2 Total $ 2,816,698 The aggregate amount of certificate of deposits in denominations of more than the FDIC limit of $250 thousand at March 31, 2025 and December 31, 2024 were $ 288 million and $ 265 million, respectively. 27 NOTE 5– DERIVATIVES AND HEDGING ACTIVITIES: To reduce the risk of significant interest rate fluctuations on the value of certain assets and liabilities, such as single family mortgage LHFS and MSRs, the Company utilizes derivatives as economic hedges . The notional amounts and fair values for derivatives, all of which are economic hedges are included in other assets or accounts payable and other liabilities on the consolidated balance sheet, consist of the following: At March 31, 2025 Notional amount Fair value derivatives (in thousands) Asset Liability Forward sale commitments $ 67,496 $ 50 $ ( 185 ) Interest rate lock commitments 27,842 556 — Interest rate swaps 214,617 8,301 ( 8,301 ) Futures 11,000 2 — Options 3,000 9 — Total derivatives before netting $ 323,955 8,918 ( 8,486 ) Netting adjustment/Cash collateral (1) ( 8,186 ) ( 91 ) Carrying value on consolidated balance sheet $ 732 $ ( 8,577 ) At December 31, 2024 Notional amount Fair value derivatives (in thousands) Asset Liability Forward sale commitments $ 87,912 $ 237 $ ( 402 ) Interest rate lock commitments 16,757 175 ( 49 ) Interest rate swaps 222,917 10,250 ( 10,250 ) Futures 5,200 1 — Options 5,800 3 — Total derivatives before netting $ 338,586 10,666 ( 10,701 ) Netting adjustment/Cash collateral (1) ( 10,388 ) 219 Carrying value on consolidated balance sheet $ 278 $ ( 10,482 ) (1) Includes net cash collateral received of $ 8.3 million and $ 10.2 million at March 31, 2025 and December 31, 2024, respectively. The following table presents gross fair value and net carrying value information for derivative instruments: (in thousands) Gross fair value Netting adjustments/ Cash collateral (1) Carrying value At March 31, 2025 Derivative assets $ 8,918 $ ( 8,186 ) $ 732 Derivative liabilities ( 8,486 ) ( 91 ) ( 8,577 ) At December 31, 2024 Derivative assets $ 10,666 $ ( 10,388 ) $ 278 Derivative liabilities ( 10,701 ) 219 ( 10,482 ) (1) Includes net cash collateral received of $ 8.3 million and $ 10.2 million at March 31, 2025 and December 31, 2024, respectively. 28 The collateral used under the Company's master netting agreements is typically cash, but securities may be used under agreements with certain counterparties. Receivables related to cash collateral that has been paid to counterparties are included in other assets. Payables related to cash collateral that has been received from counterparties are included in accounts payable and other liabilities. Interest is owed on amounts received from counterparties and we earn interest on cash paid to counterparties. Any securities pledged to counterparties as collateral remain on the consolidated balance sheets. At March 31, 2025 and December 31, 2024, the Company had liabilities of $ 8.5 million and $ 10.4 million, respectively, in cash collateral received from counterparties and receivables of $ 0.2 million and $ 0.2 million, respectively, in cash collateral paid to counterparties. The following table presents the net gain (loss) recognized on economic hedge derivatives, within the respective line items in the consolidated income statements for the periods indicated: Quarter Ended March 31, (in thousands) 2025 2024 Recognized in noninterest income: Net gain (loss) on loan origination and sale activities (1) $ 61 $ 86 Loan servicing income (loss) (2) 191 ( 500 ) Other (3) — 3 (1) Comprised of forward contracts used as an economic hedge of loans held for sale and interest rate lock commitments ("IRLCs") to customers. (2) Comprised of futures, US Treasury options and forward contracts used as economic hedges of single family MSRs. (3) Impact of interest rate swap agreements executed with commercial banking customers and broker dealer counterparties. The interest income from US Treasury notes securities used for hedging purposes, which is included in interest income on the consolidated income statements, were $ 0.4 million and $ 0.3 million for quarters ended March 31, 2025 and 2024, respectively. The notional amount of open interest rate swap agreements executed with commercial banking customers and broker dealer counterparties at March 31, 2025 and December 31, 2024 were $ 215 million and $ 223 million, respectively. NOTE 6– MORTGAGE BANKING OPERATIONS: LHFS consisted of the following: (in thousands) At March 31, 2025 At December 31, 2024 Single family $ 21,912 $ 20,312 CRE, multifamily and SBA 12,822 — Total $ 34,734 $ 20,312 Loans sold consisted of the following for the periods indicated: Quarter Ended March 31, (in thousands) 2025 2024 Single family $ 82,397 $ 70,379 CRE, multifamily and SBA 54,195 8,196 Total $ 136,592 $ 78,575 29 Gain on loan origination and sale activities, including the effects of derivative risk management instruments, consisted of the following: Quarter Ended March 31, (in thousands) 2025 2024 Single family $ 2,283 $ 1,986 CRE, multifamily and SBA 933 320 Total $ 3,216 $ 2,306 The Company's portfolio of loans serviced for others is primarily comprised of loans held in U.S. government and agency MBS issued by Fannie Mae, Freddie Mac and Ginnie Mae. The unpaid principal balance of loans serviced for others is as follows: (in thousands) At March 31, 2025 At December 31, 2024 Single family $ 5,141,876 $ 5,179,373 CRE, multifamily and SBA 1,924,895 1,918,172 Total $ 7,066,771 $ 7,097,545 The following is a summary of changes in the Company's liability for estimated single-family mortgage repurchase losses: Quarter Ended March 31, (in thousands) 2025 2024 Balance, beginning of period $ 1,032 $ 1,481 Additions, net of adjustments (1) ( 103 ) ( 128 ) Realized (losses) recoveries, net (2) 70 ( 36 ) Balance, end of period $ 999 $ 1,317 (1) Includes additions for new loan sales and changes in estimated probable future repurchase losses on previously sold loans. (2) Includes principal losses and accrued interest on repurchased loans, "make-whole" settlements, settlements with claimants and certain related expenses. The Company has agreements with certain investors to advance scheduled principal and interest amounts on delinquent loans. Advances are also made to fund the foreclosure and collection costs of delinquent loans prior to the recovery of reimbursable amounts from investors or borrowers. Advances of $ 1.5 million and $ 1.6 million were recorded in other assets as of March 31, 2025 and December 31, 2024, respectively. When the Company has the unilateral right to repurchase Ginnie Mae pool loans it has previously sold (generally loans that are more than 90 days past due), the Company records the balance of the loans as other assets and other liabilities. At March 31, 2025 and December 31, 2024, delinquent or defaulted mortgage loans currently in Ginnie Mae pools that the Company has recognized on its consolidated balance sheets totaled $ 6.8 million and $ 5.1 million, respectively. 30 Revenue from mortgage servicing, including the effects of derivative risk management instruments, consisted of the following: Quarter Ended March 31, (in thousands) 2025 2024 Servicing income, net: Servicing fees and other $ 6,507 $ 6,354 Amortization of single family MSRs (1) ( 1,582 ) ( 1,428 ) Amortization of multifamily and SBA MSRs ( 1,354 ) ( 1,402 ) Total 3,571 3,524 Risk management, single family MSRs: Changes in fair value of MSRs due to assumptions (2) 271 618 Net gain (loss) from economic hedging (3) 1,016 ( 1,110 ) Total 1,287 ( 492 ) Loan servicing income $ 4,858 $ 3,032 (1) Represents changes due to collection/realization of expected cash flows and curtailments. (2) Principally reflects changes in model assumptions, including prepayment speed assumptions, which are primarily affected by changes in mortgage interest rates. (3) The interest income from US Treasury notes securities used for hedging purposes, which is included in interest income on the consolidated income statements, was $ 0.4 million and $ 0.3 million for quarters ended March 31, 2025 and 2024, respectively. The changes in single family MSRs measured at fair value are as follows: Quarter Ended March 31, (in thousands) 2025 2024 Beginning balance $ 72,901 $ 74,249 Additions and amortization: Originations 695 617 Purchases — — Amortization (1) ( 1,582 ) ( 1,428 ) Net additions and amortization ( 887 ) ( 811 ) Changes in fair value assumptions (2) 271 618 Ending balance $ 72,285 $ 74,056 (1) Represents changes due to collection/realization of expected cash flows and curtailments. (2) Principally reflects changes in model assumptions, including prepayment speed assumptions, which are primarily affected by changes in mortgage interest rates. Key economic assumptions used in measuring the initial fair value of capitalized single family MSRs were as follows: Quarter Ended March 31, (rates per annum) (1) 2025 2024 Constant prepayment rate ("CPR") (2) 17.96 % 19.30 % Discount rate 10.14 % 10.18 % (1) Based on a weighted average. (2) Represents an expected lifetime average CPR used in the model. 31 For single family MSRs, we use a discounted cash flow valuation technique which utilizes CPRs and discount rates as significant unobservable inputs as noted in the table below: At March 31, 2025 At December 31, 2024 Range of Inputs Average (1) Range of Inputs Average (1) CPRs (2) 5.80 % - 14.00 % 6.77 % 6.00 % - 13.50 % 6.60 % Discount Rates 10.00 % - 16.00 % 10.27 % 10.00 % - 17.00 % 11.00 % (1) Weighted averages of all the inputs within the range. (2) Represents the expected lifetime average CPR used in the model. To compute hypothetical sensitivities of the value of our single family MSRs to immediate adverse changes in key assumptions, we computed the impact of changes to CPRs and in discount rates as outlined below: (dollars in thousands) At March 31, 2025 Fair value of single family MSR $ 72,285 Expected weighted-average life (in years) 8.31 CPR Impact on fair value of 25 basis points adverse change in interest rates $ ( 1,015 ) Impact on fair value of 50 basis points adverse change in interest rates $ ( 2,122 ) Discount rate Impact on fair value of 100 basis points increase $ ( 2,827 ) Impact on fair value of 200 basis points increase $ ( 5,628 ) The changes in multifamily and SBA MSRs measured at the lower of amortized cost or fair value were as follows: Quarter Ended March 31, (in thousands) 2025 2024 Beginning balance $ 26,565 $ 29,987 Originations 463 278 Amortization ( 1,354 ) ( 1,402 ) Ending balance $ 25,674 $ 28,863 Key economic assumptions used in measuring the initial fair value of capitalized multifamily MSRs were as follows: Quarter Ended March 31, (rates per annum) (1) 2025 2024 Discount rate 13.10 % 13.00 % (1) Based on a weighted average. 32 For multifamily MSRs, we use a discounted cash flow valuation technique which utilizes CPRs and discount rates as significant unobservable inputs as noted in the table below. Multifamily DUS loans typically contain yield maintenance features that significantly reduce loan prepayments, resulting in a CPR of zero for valuation purposes. At March 31, 2025 At December 31, 2024 Range of Inputs Average (1) Range of Inputs Average (1) Discount Rates 13.00 % - 15.00 % 13.10 % 13.00 % - 15.00 % 13.10 % (1) Weighted averages of all the inputs within the range. NOTE 7– GUARANTEES AND MORTGAGE REPURCHASE LIABILITY: In the ordinary course of business, the Company sells loans through the Fannie Mae Multifamily Delegated Underwriting and Servicing Program ("DUS"®) that are subject to a credit loss sharing arrangement. The Company services the loans for Fannie Mae and shares in the risk of loss with Fannie Mae under the terms of the DUS contracts. Under the DUS program, the Company and Fannie Mae share losses on a pro rata basis, where the Company is responsible for losses incurred up to one-third of the principal balance on each loan with two-thirds of the loss covered by Fannie Mae. For loans that have been sold through this program, a liability is recorded for this loss sharing arrangement under the accounting guidance for guarantees. At March 31, 2025 and December 31, 2024, the total unpaid principal balance of loans sold under this program was $ 1.8 billion. The Company's reserve liability related to this arrangement totaled $ 0.6 million and $ 0.7 million at March 31, 2025 and December 31, 2024, respectively. There were no actual losses incurred under this arrangement during the quarters ended March 31, 2025 and 2024. In the ordinary course of business, the Company sells residential mortgage loans to GSEs and other entities. Under the terms of these sales agreements, the Company has made representations and warranties that the loans sold meet certain requirements. The Company may be required to repurchase mortgage loans or indemnify loan purchasers due to defects in the origination process of the loan, such as documentation errors, underwriting errors and judgments, early payment defaults and fraud. The total unpaid principal balance of loans sold on a servicing-retained basis that were subject to the terms and conditions of these representations and warranties totaled $ 5.1 billion and $ 5.2 billion as of March 31, 2025 and December 31, 2024, respectively. At March 31, 2025 and December 31, 2024, the Company had recorded a mortgage repurchase liability for loans sold on a servicing-retained and servicing-released basis, included in accounts payable and other liabilities on the consolidated balance sheets of $ 1.0 million. NOTE 8– EARNINGS PER SHARE: The following table summarizes the calculation of earnings (loss) per share: Quarter Ended March 31, (in thousands, except share and per share data) 2025 2024 Net income (loss) $ ( 4,465 ) $ ( 7,497 ) Weighted average shares: Basic weighted-average number of common shares outstanding 18,920,808 18,856,870 Dilutive effect of outstanding common stock equivalents — — Diluted weighted-average number of common shares outstanding 18,920,808 18,856,870 Net income (loss) per share: Basic earnings per share $ ( 0.24 ) $ ( 0.40 ) Diluted earnings per share (1) ( 0.24 ) ( 0.40 ) (1) Excluded from the computation of diluted earnings per share (due to their antidilutive effect) for the quarters ended March 31, 2025 and 2024 were certain unvested RSUs and PSUs. On a weighted average basis 395,023 and 561,610 unvested stock units convertible into shares of common stock were excluded at March 31, 2025 and 2024, respectively, because their effect would have been anti-dilutive. 33 NOTE 9– FAIR VALUE MEASUREMENT: The term "fair value" is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. A fair value measurement assumes that the transaction to sell the asset or transfer the liability occurs in the principal market for the asset or liability or, in the absence of a principal market, the most advantageous market for the asset or liability. The Company's approach is to maximize the use of observable inputs and minimize the use of unobservable inputs when developing fair value measurements. Fair Value Hierarchy A three-level valuation hierarchy has been established under ASC 820 for disclosure of fair value measurements. The valuation hierarchy is based on the observability of inputs to the valuation of an asset or liability as of the measurement date. A financial instrument’s categorization within the valuation hierarchy is based on the lowest level of input that is significant to the fair value measurement. The levels are defined as follows: • Level 1 – Quoted prices (unadjusted) in active markets for identical assets or liabilities that the reporting entity can access at the measurement date. An active market for the asset or liability is a market in which transactions for the asset or liability take place with sufficient frequency and volume to provide pricing information on an ongoing basis. • Level 2 – Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly. This includes quoted prices for similar assets and liabilities in active markets and inputs that are observable for the asset or liability for substantially the full term of the financial instrument. • Level 3 – Unobservable inputs for the asset or liability. These inputs reflect the Company's assumptions of what market participants would use in pricing the asset or liability. The Company's policy regarding transfers between levels of the fair value hierarchy is that all transfers are assumed to occur at the end of the reporting period. Estimation of Fair Value Fair value is based on quoted market prices, when available. In cases where a quoted price for an asset or liability is not available, the Company uses valuation models to estimate fair value. These models incorporate inputs such as forward yield curves, loan prepayment assumptions, expected loss assumptions, market volatilities and pricing spreads utilizing market-based inputs where readily available. The Company believes its valuation methods are appropriate and consistent with those that would be used by other market participants. However, imprecision in estimating unobservable inputs and other factors may result in these fair value measurements not reflecting the amount realized in an actual sale or transfer of the asset or liability in a current market exchange. 34 The following table summarizes the fair value measurement methodologies, including significant inputs and assumptions and classification of the Company's assets and liabilities valued at fair value on a recurring basis. Asset/Liability class Valuation methodology, inputs and assumptions Classification Investment securities Trading securities Fair Value is based on quoted prices in an active market. Level 1 recurring fair value measurement. Investment securities AFS Observable market prices of identical or similar securities are used where available. Level 2 recurring fair value measurement. If market prices are not readily available, value is based on discounted cash flows using the following significant inputs: • Expected prepayment speeds • Estimated credit losses • Market liquidity adjustments Level 3 recurring fair value measurement. LHFS Single family loans, excluding loans transferred from held for investment Fair value is based on observable market data, including: • Quoted market prices, where available • Dealer quotes for similar loans • Forward sale commitments Level 2 recurring fair value measurement. When not derived from observable market inputs, fair value is based on discounted cash flows, which considers the following inputs: • Benchmark yield curve • Estimated discount spread to the benchmark yield curve • Expected prepayment speeds Estimated fair value classified as Level 3. Mortgage servicing rights Single family MSRs For information on how the Company measures the fair value of its single family MSRs, including key economic assumptions and the sensitivity of fair value to changes in those assumptions, see Note 6 , Mortgage Banking Operations . Level 3 recurring fair value measurement. Derivatives Futures and Options Fair value is based on closing exchange prices. Level 1 recurring fair value measurement. Forward sale commitments Interest rate swaps Fair value is based on quoted prices for identical or similar instruments, when available. When quoted prices are not available, fair value is based on internally developed modeling techniques, which require the use of multiple observable market inputs including: • Forward interest rates • Interest rate volatilities Level 2 recurring fair value measurement. IRLC The fair value considers several factors including: • Fair value of the underlying loan based on quoted prices in the secondary market, when available. • Value of servicing • Fall-out factor Level 3 recurring fair value measurement. 35 The following tables presents the levels of the fair value hierarchy for the Company's assets and liabilities measured at fair value on a recurring basis: At March 31, 2025 (in thousands) Fair Value Level 1 Level 2 Level 3 Assets: Trading securities - U.S. Treasury securities $ 46,308 $ 46,308 $ — $ — Investment securities AFS Mortgage backed securities: Residential 164,252 — 162,553 1,699 Commercial 48,462 — 48,462 — Collateralized mortgage obligations: Residential 311,832 — 311,832 — Commercial 53,155 — 53,155 — Municipal bonds 373,991 — 373,991 — Corporate debt securities 25,590 — 25,590 — U.S. Treasury securities 20,317 — 20,317 — Agency debentures 9,128 — 9,128 — Single family LHFS 21,912 — 21,912 — Single family LHFI 1,248 — — 1,248 Single family mortgage servicing rights 72,285 — — 72,285 Derivatives Futures 2 2 — — Forward sale commitments 50 — 50 — Options 9 9 — Interest rate lock commitments 556 — — 556 Interest rate swaps 8,301 — 8,301 — Total assets $ 1,157,398 $ 46,319 $ 1,035,291 $ 75,788 Liabilities: Derivatives Forward sale commitments $ 185 $ — $ 185 $ — Interest rate swaps 8,301 — 8,301 — Total liabilities $ 8,486 $ — $ 8,486 $ — 36 At December 31, 2024 (in thousands) Fair Value Level 1 Level 2 Level 3 Assets: Trading securities - U.S. Treasury securities $ 34,746 $ 34,746 $ — $ — Investment securities AFS Mortgage backed securities: Residential 167,462 — 165,764 1,698 Commercial 47,642 — 47,642 — Collateralized mortgage obligations: Residential 317,444 — 317,444 — Commercial 54,945 — 54,945 — Municipal bonds 378,259 — 378,259 — Corporate debt securities 24,944 — 24,944 — U.S. Treasury securities 19,987 — 19,987 — Agency debentures 9,276 — 9,276 — Single family LHFS 20,312 — 20,312 — Single family LHFI 1,287 — — 1,287 Single family mortgage servicing rights 72,901 — — 72,901 Derivatives Futures 1 1 — — Forward sale commitments 237 — 237 — Options 3 3 — Interest rate lock commitments 175 — — 175 Interest rate swaps 10,250 — 10,250 — Total assets $ 1,159,871 $ 34,750 $ 1,049,060 $ 76,061 Liabilities: Derivatives Forward sale commitments $ 402 $ — $ 402 $ — Interest rate lock commitments 49 — — 49 Interest rate swaps 10,250 — 10,250 — Total liabilities $ 10,701 $ — $ 10,652 $ 49 There were no transfers between levels of the fair value hierarchy during the quarters ended March 31, 2025 and 2024. Level 3 Recurring Fair Value Measurements The Company's Level 3 recurring fair value measurements consist of investment securities AFS, single family MSRs, single family LHFI where fair value option was elected, certain single family LHFS and interest rate lock commitments, which are accounted for as derivatives. For information regarding fair value changes and activity for single family MSRs during the quarters ended March 31, 2025 and 2024, see Note 6, Mortgage Banking Operations of this Quarterly Report on Form 10-Q. The fair value of IRLCs considers several factors, including the fair value in the secondary market of the underlying loan resulting from the exercise of the commitment, the expected net future cash flows related to the associated servicing of the loan (referred to as the value of servicing) and the probability that the commitment will not be converted into a funded loan (referred to as a fall-out factor). The fair value of IRLCs on LHFS, while based on interest rates observable in the market, is highly dependent on the ultimate closing of the loans. The significance of the fall-out factor to the fair value measurement of an individual IRLC is generally highest at the time that the rate lock is initiated and declines as closing procedures are performed and the underlying loan gets closer to funding. The fall-out factor applied is based on historical experience. The value of servicing is impacted by a variety of factors, including prepayment assumptions, discount rates, delinquency rates, contractually specified servicing fees, servicing costs and underlying portfolio characteristics. Because these inputs are not observable in market trades, the fall-out factor and value of servicing are considered to be Level 3 inputs. The fair value of IRLCs decreases 37 in value upon an increase in the fall-out factor and increases in value upon an increase in the value of servicing. Changes in the fall-out factor and value of servicing do not increase or decrease based on movements in other significant unobservable inputs. The Company recognizes unrealized gains and losses from the time that an IRLC is initiated until the gain or loss is realized at the time the loan closes, which generally occurs within 30-90 days. For IRLCs that fall out, any unrealized gain or loss is reversed, which generally occurs at the end of the commitment period. The gains and losses recognized on IRLC derivatives generally correlates to volume of single family interest rate lock commitments made during the reporting period (after adjusting for estimated fallout) while the amount of unrealized gains and losses realized at settlement generally correlates to the volume of single family closed loans during the reporting period. The Company uses the discounted cash flow model to estimate the fair value of certain loans that have been transferred from held for sale to held for investment and single family LHFS when the fair value of the loans is not derived using observable market inputs. The key assumption in the valuation model is the implied spread to benchmark interest rate curve. The implied spread is not directly observable in the market and is derived from third party pricing which is based on market information from comparable loan pools. The fair value estimate of single family loans that have been transferred from held for sale to held for investment are sensitive to changes in the benchmark interest rate which might result in a significantly higher or lower fair value measurement. The Company transferred certain loans from held for sale to held for investment. These loans were originated as held for sale loans where the Company had elected fair value option. The Company determined these loans to be level 3 recurring assets as the valuation technique included a significant unobservable input. The total amount of held for investment loans where fair value option election was made was $ 1.2 million and $ 1.3 million at March 31, 2025 and December 31, 2024, respectively. The following information presents significant Level 3 unobservable inputs used to measure fair value of certain assets: (dollars in thousands) Fair Value Valuation Technique Significant Unobservable Inputs Low High Weighted Average March 31, 2025 Investment securities AFS $ 1,699 Income approach Implied spread to benchmark interest rate curve 2.25 % 2.25 % 2.25 % Single family LHFI 1,248 Income approach Implied spread to benchmark interest rate curve 2.80 % 4.97 % 3.45 % Interest rate lock commitments, net 556 Income approach Fall-out factor 0.77 % 22.98 % 8.30 % Value of servicing 0.62 % 1.61 % 1.01 % December 31, 2024 Investment securities AFS $ 1,698 Income approach Implied spread to benchmark interest rate curve 2.25 % 2.25 % 2.25 % Single family LHFI 1,287 Income approach Implied spread to benchmark interest rate curve 2.94 % 5.56 % 3.69 % Interest rate lock commitments, net 126 Income approach Fall-out factor 0.83 % 29.13 % 9.28 % Value of servicing 0.78 % 2.15 % 1.37 % We had no LHFS where the fair value was not derived with significant observable inputs at March 31, 2025 and December 31, 2024. 38 The following table presents fair value changes and activity for certain Level 3 assets for the periods indicated: (in thousands) Beginning balance Additions Transfers Payoffs/Sales Change in mark to market (1) Ending balance Quarter Ended March 31, 2025 Investment securities AFS $ 1,698 $ — $ — $ ( 50 ) $ 51 $ 1,699 Single family LHFS — — 50 ( 50 ) — $ — Single family LHFI 1,287 — ( 50 ) — 11 1,248 Quarter Ended March 31, 2024 Investment securities AFS $ 1,860 $ — $ — $ ( 50 ) $ ( 19 ) $ 1,791 Single family LHFI 1,280 — — — 5 1,285 (1) Changes in fair value for single LHFI are recorded in other noninterest income on the consolidated income statements. The following table presents fair value changes and activity for Level 3 interest rate lock commitments: Quarter Ended March 31, (in thousands) 2025 2024 Beginning balance, net $ 126 $ 411 Total realized/unrealized gains 1,847 417 Settlements ( 1,417 ) ( 492 ) Ending balance, net $ 556 $ 336 Nonrecurring Fair Value Measurements Certain assets held by the Company are not included in the tables above, but are measured at fair value on a periodic basis. These assets include certain LHFI and OREO that are carried at the lower of cost or fair value of the underlying collateral, less the estimated costs to sell. The estimated fair values of real estate collateral are generally based on internal evaluations and appraisals of such collateral, which use the market approach and income approach methodologies. We have omitted disclosure related to quantitative inputs given the insignificance of assets measured on a nonrecurring basis. The fair value of commercial properties is generally based on third-party appraisals that consider recent sales of comparable properties, including their income-generating characteristics, adjusted (generally based on unobservable inputs) to reflect the general assumptions that a market participant would make when analyzing the property for purchase. The Company uses a fair value of collateral technique to apply adjustments to the appraisal value of certain commercial LHFI that are collateralized by real estate. The Company uses a fair value of collateral technique to apply adjustments to the stated value of certain commercial LHFI that are not collateralized by real estate and to the appraisal value of OREO. Residential properties are generally based on unadjusted third-party appraisals. Factors considered in determining the fair value include geographic sales trends, the value of comparable surrounding properties as well as the condition of the property. These adjustments include management assumptions that are based on the type of collateral dependent loan and may increase or decrease an appraised value. Management adjustments vary significantly depending on the location, physical characteristics and income producing potential of each individual property. The quality and volume of market information available at the time of the appraisal can vary from period-to-period and cause significant changes to the nature and magnitude of the unobservable inputs used. Given these variations, changes in these unobservable inputs are generally not a reliable indicator for how fair value will increase or decrease from period to period. 39 The following table presents assets classified as Level 3 that had changes in their recorded fair value for the periods indicated and what we still held at the end of the respective reporting period: (in thousands) Fair Value (1) Total Gains (Losses) At or for the Quarter Ended March 31, 2025 LHFI $ 1,546 $ 698 At or for the Quarter Ended March 31, 2024 LHFI $ 423 $ ( 50 ) (1) Represents the carrying value of loans for which adjustments are based on the fair value of the collateral. Fair Value of Financial Instruments The following presents the carrying value, estimated fair value and the levels of the fair value hierarchy for the Company's financial instruments other than assets and liabilities measured at fair value on a recurring basis: At March 31, 2025 (in thousands) Carrying Value Fair Value Level 1 Level 2 Level 3 Assets: Cash and cash equivalents $ 252,162 $ 252,162 $ 252,162 $ — $ — Investment securities HTM 2,283 2,266 — 2,266 — LHFI 6,022,334 5,758,436 — — 5,758,436 LHFS – multifamily and other 12,822 12,822 — 12,822 — Mortgage servicing rights – multifamily and SBA 25,674 31,468 — — 31,468 Federal Home Loan Bank stock 49,920 49,920 — 49,920 — Other assets - GNMA EBO loans 6,786 6,786 — — 6,786 Liabilities: Certificates of deposit $ 2,816,698 $ 2,811,546 $ — $ 2,811,546 $ — Borrowings 1,000,000 1,005,485 — 1,005,485 — Long-term debt 225,223 180,069 — 180,069 — At December 31, 2024 (in thousands) Carrying Value Fair Value Level 1 Level 2 Level 3 Assets: Cash and cash equivalents $ 406,600 $ 406,600 $ 406,600 $ — $ — Investment securities HTM 2,301 2,273 — 2,273 — LHFI 6,191,766 5,864,426 — — 5,864,426 Mortgage servicing rights – multifamily and SBA 26,565 32,361 — — 32,361 Federal Home Loan Bank stock 50,676 50,676 — 50,676 — Other assets-GNMA EBO loans 5,111 5,111 — — 5,111 Liabilities: Certificates of deposit $ 3,267,772 $ 3,262,350 $ — $ 3,262,350 $ — Borrowings 1,000,000 1,001,873 — 1,001,873 — Long-term debt 225,131 184,124 — 184,124 — Fair Value Option Single family loans held for sale accounted under the fair value option are measured initially at fair value with subsequent changes in fair value recognized in earnings. Gains and losses from such changes in fair value are recognized in net gain on 40 mortgage loan origination and sale activities within noninterest income. The change in fair value of loans held for sale is primarily driven by changes in interest rates subsequent to loan funding and changes in fair value of the related servicing asset, resulting in revaluation adjustments to the recorded fair value. The use of the fair value option allows the change in the fair value of loans to more effectively offset the change in fair value of derivative instruments that are used as economic hedges of loans held for sale. The following table presents the difference between the aggregate fair value and the aggregate unpaid principal balance of loans held for sale accounted for under the fair value option: At March 31, 2025 At December 31, 2024 (in thousands) Fair Value Aggregate Unpaid Principal Balance Fair Value Less Aggregated Unpaid Principal Balance Fair Value Aggregate Unpaid Principal Balance Fair Value Less Aggregated Unpaid Principal Balance Single family LHFS $ 21,912 $ 21,513 $ 399 $ 20,312 $ 20,137 $ 175 NOTE 10– LIHTC INVESTMENTS: The Company has LIHTC investments that are designed to promote qualified affordable housing programs and generate a return primarily through the realization of federal tax credits. The Company accounts for these investments by amortizing the cost of tax credit investments over the life of the investment using a proportional amortization method. The current balance of these investments, which are included in other assets in the consolidated balance sheets, was $ 35.9 million and $ 37.3 million as of March 31, 2025 and December 31, 2024, respectively. The following table presents other information related to the Company’s LIHTC investments for the periods indicated: Quarter Ended March 31, (in thousands) 2025 2024 Tax credits and other tax benefits recognized $ 1,697 $ 1,668 LIHTC amortization expense 1,405 1,367 41