UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
____________________________ 
FORM 10-K
____________________________
(Mark One)
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 20202023
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from              to             
Commission file number: 001-35424
____________________________
HOMESTREET, INC.
(Exact name of registrant as specified in its charter)
____________________________ 
Washington 91-0186600
(State or other jurisdiction of
incorporation or organization)
 (I.R.S. Employer
Identification Number)
601 Union Street, Ste. 2000
Seattle, WA 98101
(Address of principal executive offices) (Zip Code)
Registrant’s telephone number, including area code: (206) 623-3050
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common Stock, no par valueHMSTNasdaq Stock Market LLC
Securities registered pursuant to Section 12(g) of the Act:
None.
____________________________ 
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes     No  
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes     No  
Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes      No  
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes     No  
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer", "smaller reporting company" and "emerging growth company" in Rule 12b-2 of the Exchange Act.



Large accelerated filer Accelerated filer 
Non-accelerated filer Smaller reporting company 
Emerging growth Companycompany
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report.                 

If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements.        

Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b).                                                

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes      No  

As of June 30, 2020,2023, the last business day of the registrant’s most recently completed second fiscal quarter, the aggregate market value of voting common stock held by non-affiliates was approximately $467$91 million based on a closing price of $24.61$5.92 per share of common stock on the Nasdaq Global Select Market on such date. Shares of common stock held by each executive officer and director and by each person known to the Company who beneficially owns more than 10% of the outstanding common stock have been excluded in that such persons may under certain circumstances be deemed to be affiliates.
The number of outstanding shares of the registrant's common stock as of March 5, 2021February 29, 2024 was 21,512,415.18,857,566.

DOCUMENTS INCORPORATED BY REFERENCE
The information required by Part III of this Report, to the extent not set forth herein, will be incorporated by reference from the registrant’s definitive proxy statement relating to the annual meeting of the shareholders to be held in 2021,2024, to be filed with the Securities and Exchange Commission within 120 days of the end of the fiscal year to which this Report relates. If a definitive proxy statement of the registrant is not filed within such period, the registrant will instead file such information on an amendment to this Report within such 120 days of the end of the registrant’s fiscal year to which this reportReport relates.







ITEM 1
ITEM 1A
ITEM 1B
ITEM 1C
ITEM 2
ITEM 3
ITEM 4
ITEM 5
ITEM 6
ITEM 7
ITEM 7A
ITEM 8
ITEM 9
ITEM 9A
ITEM 9B
ITEM 9C
ITEM 10
ITEM 11
ITEM 12
ITEM 13
ITEM 14
ITEM 15
ITEM 16
CERTIFICATIONS
EXHIBIT 21
EXHIBIT 31.1
EXHIBIT 31.2
EXHIBIT 32


2




PART I
FORWARD-LOOKING STATEMENTS

This Annual Report on Form 10-K ("Form 10-K") and the documents incorporated by reference contain, in addition to historical information, "forward-looking statements"contains forward-looking statements within the meaning of Section 27A of the Private Securities Litigation Reform Act of 1933, as amended1995 (the "Securities Act"“Reform Act”). Generally, forward-looking statements include the words “anticipate,” “believe,” “could,” “estimate,” “expect,” “intend,” “may,” “plan,” “potential,” “should,” “will,” and Section 21E of“would” and similar expressions (or the Securities Exchange Act of 1934, as amended (the "Exchange Act"), including statements relating to projections of revenues, estimated operating expenses or other financial items; business strategy, including management’s plans and objectives for growth and future operations or programs; future operations, plans, regulatory compliance or approvals; anticipated restructuring or resource optimization plans and activities and expected cost savings from and timingnegative of these plans and activities; proposed new products or services; expected or estimated performance of our loan portfolio; pending or potential expansion activities; pending or future mergers, acquisitions or other transactions; future economic conditions or performance; expectations relating to our industry, regulatory environment and the economy as a whole and underlying assumptions of any of the foregoing.

Allterms). Forward-looking statements other than statements of historical fact are "forward-looking statements" for the purpose of these provisions. When used in this Form 10-K terms such as "anticipates," "believes," "continue," "could," "estimates," "expects," "intends," "may," "plans," "potential," "predicts," "should," or "will" oralso include statements regarding the negativeexpected timing to close the proposed merger of those terms or other comparable terms are intended to identify such forward-looking statements. TheseHomeStreet into FirstSun Capital Bancorp (“FirstSun”) and HomeStreet Bank into Sunflower Bank, N.A., a subsidiary of FirstSun (collectively, the “Merger”) and expectations regarding dividend payments in 2024. Such statements involve known and unknowninherent risks, uncertainties and other factors, that may cause usmany of which are difficult to fall shortpredict and are generally beyond control of ourHomeStreet Inc. (the "Company"). Forward-looking statements are based on the Company’s expectations at the time such statements are made and speak only as of the date made. The Company does not assume any obligation or may cause us to deviate from our current plans, as expressed or implied by these statements. The known risks that could cause our results to differ, or may cause us to take actions that are not currently planned or expected, are described below including in Item 1A, Risk Factors.

Unless required by law, we do not intendundertake to update any of the forward-looking statements after the date of this release as a result of new information, future events or developments, except as required by federal securities or other applicable laws, although the Company may do so from time to time. The Company does not endorse any projections regarding future performance that may be made by third parties. For all forward-looking statements, the Company claims the protection of the safe harbor for forward-looking statements contained in the Reform Act.

We caution readers that actual results may differ materially from those expressed in or implied by the Company’s forward-looking statements. Rather, more important factors could affect the Company’s future results, including but not limited to the following:(1) our ability to successfully consummate the proposed Merger with FirstSun, (2) the ability of HomeStreet to obtain the necessary approval by shareholders with respect to the Merger, (3) the ability of HomeStreet and FirstSun to obtain required regulatory and governmental approvals of the Merger, (4) the failure to satisfy the closing conditions in the definitive Agreement and Plan of Merger (the “Merger Agreement”), dated as of January 16, 2024, by and between HomeStreet and FirstSun, or any unexpected delay in closing the Merger, (5) the ability to achieve expected cost savings, synergies and other financial benefits from the Merger within the expected time frames and costs or difficulties relating to integration matters being greater than expected, (6) the diversion of management time from core banking functions due to Merger-related issues; (7) potential difficulty in maintaining relationships with customers, associates or business partners as a result of the announced Merger, (8) changes in the U.S. and global economies, including business disruptions, reductions in employment, inflationary pressures and an increase in business failures, specifically among our customers; (9) changes in the interest rate environment may reduce interest margins; (10) changes in deposit flows, loan demand or real estate values may adversely affect the business of our primary subsidiary, HomeStreet Bank (the “Bank”), through which substantially all of our operations are carried out; (11) there may be increases in competitive pressure among financial institutions or from non-financial institutions; (12) our ability to attract and retain key members of our senior management team; (13) the timing and occurrence or non-occurrence of events may be subject to circumstances beyond our control; (14) our ability to control operating costs and expenses; (15) our credit quality and the effect of credit quality on our credit losses expense and allowance for credit losses; (16) the adequacy of our allowance for credit losses; (17) changes in accounting principles, policies or guidelines may cause our financial condition to be perceived or interpreted differently; (18) legislative or regulatory changes that may adversely affect our business or financial condition, including, without limitation, changes in corporate and/or individual income tax laws and policies, changes in privacy laws, and changes in regulatory capital or other rules, and the availability of resources to address or respond to such changes; (19) general economic conditions, either nationally or locally in some or all areas in which we conduct business, or conditions in the securities markets or banking industry, may be less favorable than what we currently anticipate; (20) challenges our customers may face in meeting current underwriting standards may adversely impact all or a substantial portion of the value of our rate-lock loan activity we recognize; (21) technological changes may be more difficult or expensive than what we anticipate; (22) a failure in or breach of our operational or security systems or information technology infrastructure, or those of our third-party providers and vendors, including due to cyber-attacks; (23) success or consummation of new business initiatives may be more difficult or expensive than what we anticipate; (24) our ability to grow efficiently both organically and through acquisitions and to manage our growth and integration costs; (25) staffing fluctuations in response to product demand or the implementation of corporate strategies that affect our work force and potential associated charges; (26) litigation, investigations or other matters before regulatory agencies, whether currently existing or commencing in the future, may delay the occurrence or non-occurrence of events longer than what we anticipate; (27) our ability to obtain regulatory approvals or non-objection to take various capital actions, including the payment of dividends by us or the Bank, or repurchases of our common stock; and (28) the integration of our recently acquired branches in southern California. A discussion of the factors, risks and uncertainties that could affect our financial results, business goals and operational and financial objectives discussed in this Form 10-K to conform these statements to actual results or changes in our expectations. Readers are cautioned not to place undue reliance on these forward-lookingreleases, public statements which apply only as ofand/or filings with the dateSecurities and Exchange Commission (“SEC”) is also contained in the “Risk Factors” section of this Form 10-K. We strongly recommend readers review those disclosures in conjunction with the discussions herein.

All future written and oral forward-looking statements attributable to the Company or any person acting on its behalf are expressly qualified in their entirety by the cautionary statements contained or referred to above. New risks and uncertainties
3


arise from time to time, and factors that the Company currently deems immaterial may become material, and it is impossible for the Company to predict these events or how they may affect the Company.

34



ITEM 11.BUSINESS


Unless we state otherwise or the context otherwise requires, references in this Annual Report on Form 10-K to "we," "our," and “us” refer to HomeStreet, Inc., a Washington corporation ("HomeStreet," or the "Company,") and its consolidated subsidiaries,subsidiary, HomeStreet Bank (the "Bank") and HomeStreet Capital Corporation ("Capital").

Overview

We are a diversified financial services company with offices in Washington, Oregon, California, Hawaii, Arizona, Utah and Idaho serving customers throughout the western United States. We were founded in 1921 and are headquartered in Seattle, Washington. 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, 2020,2023, we had $7.2$9.4 billion of total assets, $5.5$7.4 billion of loans and $5.8$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 growmaintain 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 37%20% of total revenues in 2020,2023, 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. Most recently, we restructured our activities to reduce the level of single family residential originations due to the volatility of this line of business and continue to focus on growth in our commercial lending and commercial real estate lending.

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.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.

5


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 and agriculture 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.

4





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;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 ofcriteria, 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. 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. 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.

6


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. 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. 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
5




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 ofcriteria, 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.
7



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.

CRE Lending: 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 areis not dependent on the borrower utilizing other products or services offered by us, such as
6




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. Some of ourOur 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 1015 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. The loans are underwritten based on a variety ofcriteria, 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 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 generallyeither 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,
8


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.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.

7




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 refinance the loan or 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.

Other: 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 6256 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, 2020,2023, we held $5.8$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. Our pricing
9


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.

8




Competition

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 Union Bank 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.

Human Capital Management

Employee Headcount

As of December 31, 2020,2023, the Company employed 1,030883 employees across our geographic footprint, including 970 employees classified as full-time employees and 60 employees classified as93% were full-time; 7% part-time. Our employee turnover rate was 23%26% during the year ended December 31, 2020 with a voluntary turnover rate of 16%.2023.

Company Culture

As a financial institution, HomeStreet Bank occupiesseeks to hold a valued position of trust in the community, among its customers and employees, and with its regulators. We havebelieve that since 1921, the Company has earned thatthe trust byof customers, employees and regulators through its effectivemanagement and deep community involvement thereby developing a reputation for reliability, fairness, honesty integrity and community service, since the Company’s inception in 1921.integrity. Our reputation is directly tied to the individual decisions, actions, and sense of business ethics of each and every one of our employees. AWe believe a high level of trust gives us a competitive advantage in an environment that is increasingly sensitive to business ethics. EmployeesIt 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. For all of these reasons, a commitment to fairness, honesty, integrity and community service are core values of the Company.

As part of thisour commitment to our core values, beginning in 2018, we gathered employees from different areas of the Company and different representative parts of our community to form aHomeStreet's Culture Committee. That Committee has identified five key valuespillars built on specific behaviors that bring our values to life –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,
10


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 described as “all in."dealing with and ways to better extend a culture of inclusion throughout our organization.

Diversity, Equity and Inclusion

HomeStreet isvalues 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.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 recognizebelieve that a more diverse workforce translatesdiversity contributes to broader perspectivegreater job satisfaction, higher levels of trust and greater understanding,better engagement, which in turn translates to happier and more engaged employees with a greater capacity for customer service. We focus onservice 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 differentall backgrounds and who are representative of the people in our communities.the communities we serve. By doing so, we believe we are better able to serve our customers and understand their financial services needs and goals. HomeStreet’s Culture Committee helps management identify ways to increase and promote opportunities for our employees.

OurThe Culture Committee also works with management to identify and promote practices that will help us achieve these diversity goals.a more diverse and inclusive workplace. We also promote policies and practices to combat harassment, discrimination, retaliation, or disrespectful orand 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.
other protected classifications.
9




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 highly qualifiedwell-qualified employees. We use a mix of base salary, cash-based short-term incentive plans and defined contributions to theour 401(k) plansplan for participating employees to incentivize our employees classified as exempt employees and also providewe offer equity-based long-term incentive compensation for some of the more highly-experienced members of the management team who are senior vice president andpresidents or above. Employee performance is considered, evaluated and discussed through quarterly performance check-ins between managermanagers and their direct report, while thosereports, and employees eligible for short-term annual incentives also have anparticipate in annual performance review.reviews. Our non-exempt employees are paid hourly wages with benefits of working(including overtime rates) along with defined matching contributions to theour 401(k) plan for all of our participating employees.

We havealso 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,retirement; and programs to deal with job-related or personal problems.

Employee Training and Development

As part of our employee development program,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 such as Banking,including banking, mortgage and regulatory education technology training, public speaking and proactive communication, development of strong customer relationshiprelationships, leadership and customer service skills.

Employee Safety; Response to COVID-19
11


Employee safety is a priority, and we promote workplace safety in many ways. In 2020, we faced the unprecedented threat to our employees of a global pandemic with the outbreak of COVID-19. The first case in the United States was identified near Seattle, where we are headquartered. We took quick action to provide protections for our employees, even before receiving state and local stay home/stay safe orders, including facilitating work from home capabilities for approximately 50% of our workforce whose jobs were not dependent on being customer-facing, moving our branches to appointment-only status to limit exposure for our employees who work face-to-face with customers and providing personal protective equipment in all of our premises and even providing masks to all of our employees. Our crisis management team met over 100 times during the year to develop and implement safety standards and protocols along with robust social distancing and a phased return to work plan.

Early in the pandemic, we designed and adopted HomeStreet’s Social Distancing Policy and COVID-19 Sanitation Measures which are based on US Department of Labor Occupational Safety and Health Administration Guidance on Preparing Workplaces for COVID-19, the Center for Disease Control ("CDC") guidance, the President’s Coronavirus Guidelines for America and orders and guidance from state and local authorities. The Department of Homeland Security has designated the financial services sector as a Critical Infrastructure Sector. This includes banks, so we have a special responsibility to continue to provide financial services to our customers and communities. In doing so, we make the safety of our employees, customers and communities where we serve, a priority. Our policy applies to all HomeStreet locations in the several states where we do business.

Employee Community Involvement

HomeStreet is committed to our communities, and as part of that commitment we supportsupports the active involvement of our employees in supporting their communities. Employees who donate bloodreceive one paid day off from work for each donation. Additionally, employees are given time off to volunteer for community organizations, and wherewhen 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. Our senior management also helps to educate our employees on the importance of our community responsibility focus and strategies.

10




Locations

We operate 6256 full service bank branches in Washington, in Northern and Southern California, in the Portland, Oregon area and in Hawaii, as well as fivefour primary stand-alone commercial lending centers located in Central Washington, 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.

NameAgePosition at HomeStreetPosition at HomeStreet Bank
Mark K. Mason64Chairman, Chief Executive Officer, President
Chairman, Chief Executive Officer,
President
John M. Michel64Executive Vice President, Chief Financial OfficerExecutive Vice President, Chief Financial Officer
William D. Endresen69Executive Vice President, Commercial Real Estate and Commercial Capital President
Godfrey B. Evans70Executive Vice President, General Counsel, Chief Administrative Officer and Corporate SecretaryExecutive Vice President, General Counsel, Chief Administrative Officer and Corporate Secretary
Erik D. Hand58Executive Vice President, Residential Lending Director
Troy D. Harper56Executive Vice President, Chief Information and Operations OfficerExecutive Vice President, Chief Information and Operations Officer
Jay C. Iseman64Executive Vice President, Chief Credit OfficerExecutive Vice President, Chief Credit Officer
Paulette Lemon68Executive Vice President, Retail Banking Director
David Parr53Executive Vice President, Director of Commercial Banking
Darrell S. van Amen58Executive Vice President, Chief Investment Officer & TreasurerExecutive Vice President, Chief Investment Officer & Treasurer
Diane P. Novak67Executive Vice President, Chief Risk OfficerExecutive Vice President, Chief Risk Officer

Mark K. Mason, Chairman, Chief Executive Officer and President of HomeStreet, Inc. and HomeStreet Bank.Mr. 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. Mr. 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
12


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. Mr. 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. Mr. 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.

John M. Michel, Executive Vice President, Chief Financial Officer of HomeStreet, Inc. and HomeStreet Bank. Mr. 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. Mr. Michel holds a BA in accounting from the University of Notre Dame and is a Certified Public Accountant — California (inactive).

William D. Endresen, Executive Vice President, Commercial Real Estate of HomeStreet Bank. Mr. 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. In 1996, Mr. 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. Mr. Endresen studied business at Fullerton College.

Godfrey B. Evans, Executive Vice President, General Counsel and Corporate Secretary of HomeStreet, Inc. and HomeStreet Bank.Mr. 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. Mr. 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. Mr. 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. Mr. 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. Mr. Evans began his law practice at Gibson, Dunn & Crutcher LLP where he practiced from 1982 to 1987. Mr. Evans is admitted to practice law in California and in Washington, D.C. Mr. 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.

Erik D. Hand, Executive Vice President, Residential Lending Director, HomeStreet Bank. Mr. 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. Mr. 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. Mr. Hand studied political science at the University of Colorado.

Troy D. Harper, Executive Vice President, Chief Information and Operations Officer of HomeStreet, Inc. and HomeStreet Bank. Mr. 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.
13


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

Jay C. Iseman, Executive Vice President, Chief Credit Officer of HomeStreet, Inc. and HomeStreet Bank. Mr. 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. Mr. 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. Mr. 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. Ms. 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. Mr. 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. Mr. 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.

Darrell S. van Amen, Executive Vice President, Chief Investment Officer and Treasurer of HomeStreet, Inc. and HomeStreet Bank. Mr. 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.

Diane P. Novak, Executive Vice President, Chief Risk Officer of HomeStreet, Inc. and HomeStreet Bank. Ms. 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. Bank. Ms. Novak earned her bachelor’s degree cum laude in business at Seattle University and her MBA at Regis University. Ms. 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.

Where You Can Obtain Additional Information

We file annual, quarterly, current and other reports with the Securities and Exchange Commission (the "SEC"). We make available free of charge on or through our website http://www.homestreet.com all of these reports (and all amendments thereto), as soon as reasonably practicable after we file these materials with the SEC. Please note that the contents of our website do not constitute a part of our reports, and those contents are not incorporated by reference into this Form 10-K or any of our other securities filings. 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.



11
14





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.

General

The Company is a bank holding company which has made an election to be a financial holding company. It is regulated by theFederal 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.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
15


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
12




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 mandatory transaction reporting obligations.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.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.entity and to conduct enhanced due diligence on certain types of customers. The purpose of thesecustomer 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 predict with relative certaintyunderstand the types of transactions in which a customer is likely to engage which should in turn assist in determiningidentifying when transactions are potentially suspicious.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 Office of Foreign Asset ControlOFAC has issued guidance directed at financial institutions, in which it asserted that it may, in its discretion,including guidance the recommended elements of OFAC compliance programs, and the Bank's regulators generally examine institutions determined to be high-risk or to be lacking in their efforts to complythe Bank for compliance with these prohibitions.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.
16



Regulation of the Company

General

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 FranksFrank Act, the Company is subject to certain capital requirements and required to act as a “source of strength” for the Bank.
13




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 a bank holding company, includingexcept with the Company, directly or indirectly (or through one or more subsidiaries), from acquiring:

control of another depository institution (or a holding company parent) without prior approval of the Federal Reserve (as "control" is defined under the Bank Holding Company Act);(or pursuant to certain exceptions):
for any action to be taken that causes any company to become a bank holding company;
another depository institution (orfor any action to be taken that causes a bank to become a subsidiary of a bank holding company;
for any bank holding company thereof), through merger, consolidationto acquire direct or purchaseindirect 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 such institution (or holding company) without prior approval from the Federal Reserve and FDIC;
more than 5.0% of any class of the voting shares of a non-subsidiary depository institution or a holding company subject to certain exceptions;bank; or
control offor any depository institution not insured by the FDIC (except through a mergerbank holding company to merge or consolidate with and into theany other bank holding company's bank subsidiary that is approved by the FDIC).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; controls the
17


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

General

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.

14




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
18


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. However,points from July 2016 through December 2022. In October 2022, the FDIC does have flexibilityadopted a final rule to adopt assessment rates without additional rule-making provided that the totalincrease initial base deposit insurance assessment rate increase or decrease does not exceedschedules by 2 basis points.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;
15




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

19


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.

16




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
20


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-charteredfederally 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 depositarydepository institutions may be required to maintain non-interest-earning reserves against their deposit accounts and certain other liabilities. Reserves must be maintained against
17




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.

21


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

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.

18




The Consumer Financial Protection Bureau ("CFPB") isDodd-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
22


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.

19





ITEM 1A     RISK FACTORS

This Annual Report on Form 10-K contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from those anticipated in these forward-looking statements as a result of certain factors, including the risks faced by us described below and elsewhere in this report.Annual Report.

Risks Related to the COVID-19 PandemicMerger

OurThe pendency of the Merger could adversely affect our business, results of operations and financial condition.

The pendency of the Merger could cause disruptions in and create uncertainty surrounding our business, including affecting our relationships with our existing and future customers, maysuppliers and employees, which could have an adverse effect on our business, results of operations and financial condition, regardless of whether the proposed Merger is completed. In particular, we could potentially lose additional important personnel as a result of the departure of employees who decide to pursue other opportunities in light of the Merger. We could also potentially lose additional customers or suppliers, and business relationships with new customers or supplier contracts could be negatively impacted bydelayed or decreased. In addition, we have allocated, and will continue to allocate, significant management resources towards the COVID-19 pandemic,completion of the transaction, which may result in adverse impacts tocould adversely affect our financial positionbusiness and results of operations.

Since March 2020, the communities where we do business have been under varying degrees ofWe are subject to restrictions on social gatherings and retail operations duethe conduct of our business prior to the COVID-19 global pandemic.consummation of the Merger as provided in the Merger Agreement, including, among other things, certain restrictions on our ability to acquire other businesses, sell or transfer our assets, and amend our organizational documents. These restrictions combined with related changescould result in consumer behaviorour inability to respond effectively to competitive pressures, industry developments and significant increases in unemployment, have resulted in extremefuture opportunities, retain key employees and may otherwise harm our business, results of operations and financial hardship for certain industries, especially travel, energy, hotel, food and beverage service and retail. While some governmental programs have provided assistance to unemployed consumers and certain businesses that have been especially hard hit, these programs are of limited scope and duration, and the ultimate impact of those programs is not yet known.condition.

Even as vaccines begin to be administered, it is not clear when the economic impactsBecause of the pandemicrisks associated with the Merger, we can provide no assurance that the Merger will subsideclose on the terms and conditions we currently anticipate.

Regulatory approvals may not be received, may take longer than expected, or whatmay impose conditions that are not presently anticipated or that could have an adverse effect on the overall effect will be on our customers. Some of our customerscombined company following the Merger.

Before the Merger may be unablecompleted, various consents, approvals, waiver or non-objections must be obtained from state and federal governmental authorities, including the Federal Reserve Board, the Office of the Comptroller of the Currency (“OCC”) and the Director of the State of Washington Department of Financial Institutions. Satisfying the requirements of these governmental authorities may delay the date of completion of the Merger, or one or more of these approvals may not be obtained at all. In addition, these governmental authorities may include conditions or restrictions on the completion of the Merger, or require changes to meetthe terms of the Merger. Under the Merger Agreement, the parties are not obligated to complete the Merger should any required regulatory approval contain any condition or restriction that would reasonably be expected to have a “material adverse effect” (as defined in the Merger Agreement) on the surviving entity in the Merger and its subsidiaries, taken as a whole, after giving effect to the Merger and the related merger of HomeStreet Bank into a wholly owned subsidiary of FirstSun.

23


The Merger Agreement and the transactions contemplated by the Merger Agreement are subject to approval by shareholders of the Company.

The Merger cannot be completed unless, among other conditions, the Merger Agreement and the transactions contemplated by the Merger Agreement are approved by the affirmative vote of a majority of the outstanding shares of the Company’s common stock entitled to vote thereon (the “Requisite Company Vote”). If the Company’s shareholders do not approve the Merger and related transactions by the Requisite Company Vote, the Merger cannot be completed.

Combining the companies may be more difficult, costly, or time-consuming than expected.

The Company and FirstSun have operated and, until the completion of the Merger, will continue to operate independently. The success of the Merger, including anticipated benefits and cost savings, will depend, in part, on FirstSun’s ability to successfully combine and integrate the businesses of FirstSun and the Company in a manner that permits growth opportunities and does not materially disrupt the existing customer relations or result in decreased revenues due to loss of customers. It is possible that the integration process could result in the loss of key employees, the disruption of either company’s ongoing businesses or inconsistencies in standards, controls, procedures and policies that could adversely affect the combined company’s ability to maintain relationships with clients, customers, depositors and employees or to achieve the anticipated benefits and cost savings of the Merger. The loss of key employees could adversely affect the Company’s ability to successfully conduct its business, which could have an adverse effect on the Company’s financial results and the value of the Company’s common stock. If FirstSun experiences difficulties with the integration process, the anticipated benefits of the Merger may not be realized fully or at all, or may take longer to realize than expected. As with any merger of financial institutions, there also may be business disruptions that cause FirstSun and/or the Company to lose customers or cause customers to remove their debt obligationsaccounts from FirstSun and/or the Company and move their business to uscompeting financial institutions. Integration efforts will also divert management attention and resources. In addition, the actual cost savings of the Merger could be less than anticipated.

Failure to complete the Merger could negatively impact the stock price of the Company and future businesses and financial results of the Company.

The Merger Agreement is subject to a number of customary closing conditions, including the receipt of regulatory approvals and the Requisite Company Vote. Conditions to the closing of the Merger may not be fulfilled in a timely manner or at all and, accordingly, the Merger may be delayed or may not be completed. In addition, we and/or FirstSun may continueelect to experienceterminate the Merger Agreement under certain conditions. If the Merger is not completed, the ongoing businesses, financial condition and results of operation of the Company may be adversely affected and market prices of the Company’s common stock may decline significantly, particularly to the extent that the current market prices reflect a heightened numbermarket assumption that the Merger will be consummated. If the consummation of requeststhe Merger is delayed, including by the receipt of a competing acquisition proposal, the Company’s business, financial condition and results of operations may be materially adversely affected.

In addition, the Company has incurred and will incur substantial expenses in connection with the negotiation and completion of the transactions contemplated by the Merger Agreement, as well as the costs and expenses of filing, printing and mailing the joint proxy statement/prospectus and all filing and other fees paid to the SEC and other regulatory agencies in connection with the Merger. If the Merger is not completed, the Company would have to recognize these expenses without realizing the expected benefits of the Merger. Any of the foregoing, or other risks arising in connection with the failure of or delay in consummating the Merger, including the diversion of management’s attention from customers for forbearancespursuing other opportunities and the constraints in the Merger Agreement on loans, especially as government programs subside. Federal, state and local moratoriums on evictions for non-payment of rent during this time may also negatively impact the ability of some borrowers to make paymentssignificant changes to the Company’s ongoing business during the pendency of the Merger, could have a material adverse effect on loans madethe Company’s businesses, financial conditions and results of operations.

Additionally, the Company’s business may be adversely impacted by the failure to pursue other beneficial opportunities due to the focus of management on the Merger, without realizing any of the anticipated benefits of completing the Merger. If the Merger Agreement is terminated and the Company’s board of directors seeks another merger or business combination, the Company’s shareholders cannot be certain that the Company will be able to find a party willing to engage in a transaction on more attractive terms than the proposed Merger.

Because the market price of FirstSun common stock will fluctuate, the Company’s shareholders cannot be certain of the market value of the Merger consideration they will receive.

In the Merger, each share of Company common stock that is issued and outstanding immediately prior to the effective time of the Merger (except for multifamily housing. In addition, while currentcertain excluded shares) will be converted into 0.4345 of a share of FirstSun common stock. This exchange ratio is fixed and will not be adjusted for changes in the market price of either FirstSun common stock or Company common stock. Stock price changes may result from a variety of factors, including general market and economic conditions, changes in FirstSun’s and the Company’s businesses, operations and prospects, volatility in the prices of securities in global
24


financial markets, including market prices for the common stock of other banking companies, and changes in laws and regulatory guidance allow usregulations, many of which are beyond FirstSun’s and the Company’s control. The value that the Company’s shareholders will receive upon the closing of the Merger will depend on the market price of FirstSun common stock at the closing of the Merger, which is currently traded only on the OTC Bulletin Board but is expected to presume that certain borrowers are not experiencing financial difficultiesbe approved for listing on the Nasdaq Stock Market prior to the effective time of the Merger. Accordingly, at the time of a modification for purposesthe special meeting of determining if a loan is a troubled debt restructuring ("TDR") if it is in response to the COVID-19 pandemic, in the long run a meaningful numbershareholders of the loans in our portfolioCompany to vote on the Merger Agreement, shareholders may ultimately need additional forbearance or significant modification and be accounted for as a TDR or migrate to an adverse risk rating becausenot know the market value of lingering impactsthe consideration that they will receive upon completion of an economic recession.the Merger.

While we have substantially increased our allowance for credit lossesThe market price of FirstSun common stock after the Merger may be affected by factors different from those currently affecting the shares of FirstSun common stock or Company common stock.

Following the Merger, shareholders of the Company will become FirstSun stockholders. FirstSun’s business differs from that of the Company and certain adjustments may be made to FirstSun’s business as a result of the Merger. Accordingly, the results of operations of the combined company and the market price of FirstSun common stock after the completion of the Merger may be affected by factors different from those currently affecting the independent results of operations of each of FirstSun and the Company.

Issuance of shares of FirstSun common stock in responseconnection with the Merger may adversely affect the market price of FirstSun common stock.

In connection with the payment of the merger consideration, FirstSun will issue shares of FirstSun common stock to the negative economic impactsCompany’s shareholders. In addition, FirstSun will issue 2,923,077 shares of its common stock to certain investors in exchange for $95 million concurrently with the closing of the COVID-19 pandemic to adjustMerger. The issuance of these new shares of FirstSun common stock may result in fluctuations in the expected historic loss rates for currentmarket price of FirstSun common stock, including a stock price decrease.

In connection with the Merger, FirstSun will assume the Company’s outstanding debt obligations under its indentures, and forecasted conditions as somethe combined company’s level of indebtedness following the completion of the Merger could adversely affect the combined company’s ability to raise additional capital and to meet its obligations under its existing indebtedness.

In connection with the Merger, FirstSun will assume the Company’s outstanding debt obligations under the Company’s indentures. FirstSun’s existing debt, together with any future incurrence of additional indebtedness, and the assumption of the Company’s outstanding indebtedness, could have important consequences for the combined company’s creditors and the combined company’s stockholders. For example, it could:

limit the combined company’s ability to obtain additional financing for working capital, capital expenditures, debt service requirements, acquisitions and general corporate or other purposes;
restrict the combined company from making strategic acquisitions or cause the combined company to make non-strategic divestitures;
restrict the combined company from paying dividends to its stockholders;
increase the combined company’s vulnerability to general economic conditions created by the pandemic are not incorporated into the historical loss information, we cannotand industry conditions; and
require a substantial portion of cash flow from operations to be sure that the amount by which we have increased our allowance for credit losses will be adequate or that additional increasesdedicated to the allowance for credit losses willpayment of principal and interest on the combined company’s indebtedness, thereby reducing the combined company’s ability to use cash flows to fund its operations, capital expenditures and future business opportunities.

The announcement of the proposed Merger could disrupt the Company’s and FirstSun’s respective relationships with their customers, suppliers, business partners and others, as well as their operating results and businesses generally.

Whether or not be needed in subsequent periods. The actual and full economicthe Merger is ultimately consummated, as a result of uncertainty related to the proposed transactions, risks relating to the impact of the pandemicannouncement of the Merger on the Company’s and FirstSun’s businesses include the following:

their employees may experience uncertainty about their future roles, which might adversely affect FirstSun’s or the Company’s ability to retain and hire key personnel and other employees;
customers, suppliers, business partners and other parties with which FirstSun and the Company maintain business relationships may experience uncertainty about their respective futures and seek alternative relationships with third parties, seek to alter their business relationships with FirstSun and the Company or fail to extend an existing relationship with FirstSun and the Company; and
FirstSun and the Company have each expended and will continue to expend significant costs, fees and expenses for professional services and transaction costs in connection with the proposed Merger.

25


If any of the aforementioned risks were to materialize, they could lead to significant costs which may impact each party’s results of operations and financial condition. In addition, if the Merger Agreement is still unknowable,terminated and ifthe Company seeks another merger or business combination, the market price of our allowancecommon stock could decline, which could make it more difficult to find a party willing to offer equivalent or more attractive consideration than the consideration FirstSun has agreed to provide in the Merger.

The Merger Agreement limits the Company’s ability to pursue alternatives to the Merger and may discourage other companies from trying to acquire the Company.

The Merger Agreement contains “no shop” covenants that restrict each of FirstSun’s and the Company’s ability to, directly or indirectly, among other things, initiate, solicit, knowingly encourage or knowingly facilitate, inquiries or proposals with respect to, or, subject to certain exceptions generally related to the exercise of fiduciary duties by FirstSun’s and the Company’s respective board of directors, engage in any negotiations concerning, or provide any confidential or non-public information or data relating to, any acquisition proposal. These provisions, which include a $10 million termination fee payable by the Company under certain circumstances, may discourage a potential third-party acquirer that might have an interest in acquiring all or a significant part of the Company from considering or proposing that acquisition.

Holders of Company common stock will have reduced ownership and voting interest in the combined company after the consummation of the Merger and have less influence over management and the policies of the combined company.

Shareholders of FirstSun and the Company currently have the right to vote in the election of the board of directors and on other matters affecting FirstSun and the Company, respectively. Assuming the Merger is completed, each Company shareholder (subject to certain exceptions) will become a holder of common stock of the combined company, together with existing FirstSun stockholders. The Company shareholders will then own approximately 22% of the combined company (after taking into account 2,461,583 shares of FirstSun common stock issued to certain equity investors of FirstSun concurrently with the execution of the Merger Agreement and 2,923,077 shares to be issued to such equity investors concurrently with the closing of the Merger), which is lower than the public ownership of the Company prior to the consummation of the Merger, which was 97% as of February 23, 2024. Because of this, the Company’s shareholders in the aggregate will have less influence on the management and policies of the combined company than they now have on the management and policies of the Company.

Shareholder litigation could prevent or delay the completion of the Merger or otherwise negatively impact the business and operations of FirstSun and the Company.

Shareholders of FirstSun or the Company may file lawsuits against FirstSun, the Company and/or the directors and officers of either company in connection with the Merger. One of the conditions to the closing is that there must be no order, injunction or decree issued by any court or governmental entity of competent jurisdiction or other legal restraint preventing the consummation of the Merger or any of the other transactions contemplated by the Merger Agreement. If any plaintiff were successful in obtaining an injunction prohibiting FirstSun or the Company from completing the Merger or any of the other transactions contemplated by the Merger Agreement, then such injunction may delay or prevent the effectiveness of the Merger and could result in significant costs to FirstSun or the Company, including any cost associated with the indemnification of directors and officers of each company. FirstSun and the Company may incur costs in connection with the defense or settlement of any stockholder or shareholder lawsuits filed in connection with the Merger. Such litigation could have an adverse effect on the financial condition and results of operations of FirstSun and the Company and could prevent or delay the completion of the Merger.

Risk Related to Market Factors

Changes to monetary policy by the Federal Reserve have and could further adversely impact our results of operations.

The Federal Reserve is responsible for regulating the supply of money in the United States, including open market operations used to stabilize prices in times of economic stress, as well as setting monetary policies. These activities strongly influence our rate of return on certain investments, our hedge effectiveness for mortgage servicing and our mortgage origination pipeline, as well as our costs of funds for lending and investing, all of which may adversely impact our liquidity, results of operations, financial condition and capital position.

26


Changes in market factors beyond our control, including fluctuation in interest rates, have and could further adversely impact our profitability and financial results.

Market factors outside of our control, including changing interest rate environments, regulatory decisions, increased competition, changes in the yield curve, consumer confidence, rates of unemployment and other forces of market volatility, can have a significant impact on our results of operations, financial condition and capital positions.

Our earnings are dependent on the difference between the interest earned on loans and investments and the interest paid on deposits and borrowings. Changes in interest rates impact the rates earned on loans and investment securities and the rates paid on deposits and borrowings and may negatively impact our ability to attract deposits, make loans, and achieve satisfactory interest rate spreads. In addition, changes to market interest rates may impact the demand for loans, levels of deposits and investments and the credit quality of existing loans. These rate changes have and may further adversely impact our liquidity, financial condition, results of operations and capital position.

The rate of prepayment of loans, which is impacted by changes in interest rates and general economic conditions, among other things, impacts the value of our MSRs. We actively hedge this risk with financial derivative instruments to mitigate losses, but changes in interest rates can be difficult to predict and changes in our hedging instruments may not adequate, futurecorrelate with changes in the values of our MSRs and LHFS.

In addition to overall fluctuations in interest rates, asymmetrical changes in interest rates, for example a greater increase in short term rates than in long term rates, could adversely impact our net charge-offsinterest income because our liabilities tend to be more sensitive to short term rates while our assets tend to be more sensitive to long term rates. In addition, it may be in excesstake longer for our assets to reprice to adjust to a new rate environment because fixed rate loans do not fluctuate with interest rate changes and adjustable rate loans often have a specified initial fixed rate period before reset. As a result, a flattening or an inversion of current expected losses, which would create the need for more provisioning andyield curve is likely to have a negative impact on our net interest income.

Our securities portfolio also includes securities whose value is sensitive to interest rate fluctuations. The unrealized gains or losses in our available-for-sale portfolio are reported as a separate component of shareholders’ equity until realized upon sale. Interest rate fluctuations may impact the value of these securities and as a result, shareholders’ equity, and may cause material fluctuations from quarter to quarter. Failure to hold our securities until maturity or until market conditions are favorable for a sale could adversely affect our operating results, financial condition and capital position.

Inflation could negatively impact our business and profitability.

Prolonged periods of inflation may impact our profitability by negatively impacting our fixed costs and expenses, including increasing funding costs and expenses related to talent acquisition and retention, and negatively impacting the demand for our products and services. Additionally, inflation may lead to a decrease in consumer and clients purchasing power and negatively affect the need or demand for our products and services. If significant inflation continues, our business could be negatively affected by, among other things, increased default rates leading to credit losses.

The financial services industry is highly competitive, and as a result, our business, results of operations, financial condition and capital position may be adversely affected.

We face pricing competition for loans and deposits, both in pricing and products, as well as in customer service and convenience. Our most direct competition comes from other banks, credit unions, mortgage banking companies and finance companies, and more recently, competition has also come from companies that rely heavily on technology to provide financial services, are moving to provide cryptocurrency products and offerings, and often target a younger customer demographic. The significant competition in attracting and retaining deposits and making loans, as well as in providing other financial services, throughout our market area may impact future earnings and growth. Our success depends, in part, on the ability to adapt products and services to evolving industry standards and customer preferences and trends and provide consistent customer service while keeping costs in line. We sometimes experience increasing pressure to provide products and services at lower prices, which could reduce net interest income and noninterest income from fee-based products and services. New technology-driven products and services are often introduced and adopted, including innovative ways that customers can make payments, access products and manage accounts. We could be required to make substantial capital expenditures to modify or adapt existing products and services or develop new products and services. We may not be successful in introducing new products and services or those new products may not achieve market acceptance. In addition, advances in technology such as telephone, text and online banking, e-commerce and self-service automatic teller machines and other equipment, as well as changing
27


customer preferences to access our products and services through digital channels, could decrease the value of our branch network and other assets. As a result of these competitive pressures, our business, financial condition, results of operations and capital position may be adversely affected.

The use of the Secured Overnight Financing Rate ("SOFR") as an index replacement for LIBOR may adversely impact our net interest income and create litigation exposure.

In the U.S., the Alternative Rates Reference Committee, convened in 2014 by a group of market participants to help ensure a successful transition away from LIBOR, identified SOFR has its preferred alternative rate. SOFR is a single overnight rate, while LIBOR includes rates of different tenors, and SOFR is considered a credit risk-free rate, while LIBOR incorporates an evaluation of credit risk. In 2020, we transitioned to SOFR the majority of our products indexed to LIBOR.

Implementation of SOFR is intended to have a minimal economic effect on borrowers under LIBOR-indexed instruments. Margins or spreads on new SOFR-indexed products may result in lower rates because SOFR is typically likely to be lower when compared to LIBOR, resulting in reduced spreads and a lower net interest income. However, it is impossible to predict whether the SOFR index could be more volatile than LIBOR, which could thereby increase loan rates and borrowing costs on borrowing facilities previously indexed to LIBOR. Borrowers may not fully understand SOFR as an index replacement or may be adversely impacted by implementation of SOFR. The transition to SOFR, or a transition to any other index that becomes widely accepted in the marketplace, could also result in borrower confusion and additional operational, compliance, systems and other related transition costs. This transition may also result in our customers challenging the determination of their interest payments, entering into fewer transactions or postponing their financing needs, and we may be subject to disputes or litigation with borrowers over the appropriateness or comparability of SOFR or other selected indices to LIBOR. These potential outcomes could have an adverse effect on our financial condition, results of operations and capital position.

Our business operationsTo support our growth, we may need to rely on funding sources in addition to growth in deposits and such funding sources may not be adequate or may be negatively impacted by the COVID-19 pandemic.more costly.

MostWe must maintain sufficient funds to respond to the needs of depositors and borrowers. As a part of our employees have been workingliquidity management, we use a number of funding sources in addition to deposit growth and repayments and maturities of loans and investments, including Federal Home Loan Bank advances, proceeds from home during the pandemic. We face risks associated with having a significant portionsale of loans, federal funds purchased, brokered certificates of deposit and issuance of equity or debt securities. Adverse operating results or changes in industry conditions could lead to difficulty or an inability to access these additional funding sources and could make our existing funds more volatile. Our financial flexibility may be materially constrained if we are unable to maintain our access to funding or if adequate financing is not available to accommodate future growth at acceptable interest rates. When interest rates change, the cost of our employees working from home as wefunding may have less oversight over certain internal controls and the confidentiality requirements ofchange at a different rate than our compliance and contractual obligations may be more challenging to meet as confidential information is being accessed from a wider range of locations and there may be more opportunity for inadvertent disclosure or malicious interception. Many of our vendors are also allowing their workforce to work primarily from home,interest income, which may create similar issues if our confidential information is being accessed by employees of those vendors in connection with their performance of services for us. While we have not identified any significant concerns to date with our internal controls, compliance obligations or confidentiality requirements, the change in work environment, team dynamics and job responsibilities for us and our vendors could increase our risk of failure in these areas, which could have a negative impact on our financial reporting, compliance risk, operational risknet interest income and, reputationalin turn, our results of operations and capital position. If we are required to rely more heavily on more expensive funding sources to support future growth, our revenues may not increase proportionately to cover our costs. In that case, our results of operations and capital position would be adversely affected. Further, the volatility inherent in some of these funding sources, particularly brokered deposits, may increase our exposure to liquidity risk.

In addition, much of the regulation that has been passed in response to the COVID-19 pandemic and the related economic recession has been done quickly and without adequate initial specificity, which has resulted in a substantial amount of additional regulatory interpretation and guidance being provided after such regulatory actions have taken effect. For example, the Coronavirus Aid, Relief and Economic Security ("CARES") Act, which was passed in March 2020 to provide emergency relief related to the impacts of the COVID-19 pandemic, implemented the Paycheck Protection Plan loan program through the Small Business Administration ("SBA") as one of the measures of relief, but it was promulgated without much guidance on implementation and compliance requirements. Subsequent guidance and interpretations continue to be issued from the SBA which oversees the loan program, as well as from other regulatory agencies whose purview relates to the Paycheck Protection
20




Program ("PPP") loans, including compliance guidelines for consumer protection purposes issued by the CFPB as recently as February 2021. Because these new regulations are complex and can be confusing, and because much of the interpretation and implementation guidelines have been issued after the provisions of the CARES Act and related legislation have already become effective and could be applied retroactively, we may find that our practices implemented in good faith with respect to these provisions was not in compliance with the final requirements that may be promulgated by various legislative and regulatory bodies.

RisksRisk Related to OperationsMarket Factors

We rely on third party purchasersChanges to buymonetary policy by the Federal Reserve have and could further adversely impact our loansresults of operations.

The Federal Reserve is responsible for regulating the supply of money in the secondaryUnited States, including open market operations used to stabilize prices in times of economic stress, as well as setting monetary policies. These activities strongly influence our rate of return on certain investments, our hedge effectiveness for mortgage servicing and changes to their policiesour mortgage origination pipeline, as well as our costs of funds for lending and investing, all of which may significantlyadversely impact our liquidity, results of operations, financial condition and capital position.

26


Changes in market factors beyond our control, including fluctuation in interest rates, have and could further adversely impact our profitability and financial results.

We originate a substantial portionMarket factors outside of our single family mortgagecontrol, including changing interest rate environments, regulatory decisions, increased competition, changes in the yield curve, consumer confidence, rates of unemployment and other forces of market volatility, can have a significant impact on our results of operations, financial condition and capital positions.

Our earnings are dependent on the difference between the interest earned on loans for sale to third party investors, including government-sponsored enterprises ("GSE") such as Fannie Mae, Freddie Mac and Ginnie Mae.investments and the interest paid on deposits and borrowings. Changes in interest rates impact the types ofrates earned on loans purchased by these GSEs orand investment securities and the program requirements for those entities could adverselyrates paid on deposits and borrowings and may negatively impact our ability to sell certainattract deposits, make loans, and achieve satisfactory interest rate spreads. In addition, changes to market interest rates may impact the demand for loans, levels of the loans we originate for sale, leaving us unable to find a buyer on similar terms. Similarly, changes in the fee structures by any of our third party loan purchasers, including the GSEs, may increase our costs of doing business, the cost of loans to our customers,deposits and investments and the costcredit quality of selling loans to third party loan purchasers, all of which could in turn decrease our marginexisting loans. These rate changes have and negativelymay further adversely impact our profitability. In addition, significant changes in the underwriting criteria of third party loan purchasers could increase our costs or decrease our ability to sell into the secondary markets. Any of these changes can have a negative impact on our liquidity, financial condition, results of operations and capital position.

We are boundThe rate of prepayment of loans, which is impacted by representations or warranties we make to third party purchaserschanges in interest rates and general economic conditions, among other things, impacts the value of our loans orMSRs. We actively hedge this risk with financial derivative instruments to mitigate losses, but changes in interest rates can be difficult to predict and changes in our hedging instruments may not correlate with changes in the values of our MSRs and LHFS.

In addition to overall fluctuations in interest rates, asymmetrical changes in interest rates, for example a greater increase in short term rates than in long term rates, could adversely impact our net interest income because our liabilities tend to be more sensitive to short term rates while our assets tend to be more sensitive to long term rates. In addition, it may take longer for our assets to reprice to adjust to a new rate environment because fixed rate loans do not fluctuate with interest rate changes and adjustable rate loans often have a specified initial fixed rate period before reset. As a result, a flattening or an inversion of the yield curve is likely to have a negative impact on our net interest income.

Our securities portfolio also includes securities whose value is sensitive to interest rate fluctuations. The unrealized gains or losses in our available-for-sale portfolio are reported as a separate component of shareholders’ equity until realized upon sale. Interest rate fluctuations may impact the value of these securities and as a result, shareholders’ equity, and may cause material fluctuations from quarter to quarter. Failure to hold our securities until maturity or until market conditions are favorable for a sale could adversely affect our operating results, financial condition and capital position.

Inflation could negatively impact our business and profitability.

Prolonged periods of inflation may impact our profitability by negatively impacting our fixed costs and expenses, including increasing funding costs and expenses related to talent acquisition and retention, and negatively impacting the demand for our products and services. Additionally, inflation may lead to a decrease in consumer and clients purchasing power and negatively affect the need or demand for our products and services. If significant inflation continues, our business could be negatively affected by, among other things, increased default rates leading to credit losses.

The financial services industry is highly competitive, and as a result, our business, results of operations, financial condition and capital position may be liable for certain costs and damages if those representations are breached.adversely affected.

We make certain representations and warranties to third party purchasers of our loans, including GSEs about theface pricing competition for loans and the mannerdeposits, both in which they were originated, including adherencepricing and products, as well as in customer service and convenience. Our most direct competition comes from other banks, credit unions, mortgage banking companies and finance companies, and more recently, competition has also come from companies that rely heavily on technology to strict origination guidelines forprovide financial services, are moving to provide cryptocurrency products and offerings, and often target a younger customer demographic. The significant competition in attracting and retaining deposits and making loans, originated for sale to GSEs.as well as in providing other financial services, throughout our market area may impact future earnings and growth. Our sale agreements generally require us to either repurchase loans if we have breached any of these representations or warranties, which may resultsuccess depends, in recording a loss and/or bearing any subsequent losspart, on the loan,ability to adapt products and services to evolving industry standards and customer preferences and trends and provide consistent customer service while keeping costs in line. We sometimes experience increasing pressure to provide products and services at lower prices, which could reduce net interest income and noninterest income from fee-based products and services. New technology-driven products and services are often introduced and adopted, including innovative ways that customers can make payments, access products and manage accounts. We could be required to make substantial capital expenditures to modify or pay monetary penalties.adapt existing products and services or develop new products and services. We may not be able to recover our losses from a borrowersuccessful in introducing new products and services or those new products may not achieve market acceptance. In addition, advances in technology such as telephone, text and online banking, e-commerce and self-service automatic teller machines and other third party in the event of such a breach of representation or warranty due to a lack of remedies or lack of financial resources of the borrower, and may be required to bear the full amount of the related loss. Similarly, we have sold significant amounts of our MSRs in recent years, and the agreements governing those sales also have representations and warranties relating to the documentation and collectability of those MSRs; a breach of those representations and warranties could also require us to either pay monetary damages or, in some cases, repurchase the defective MSRs.

We also originate, purchase, sell and service loans insured by FHA/HUD or guaranteed by the VA, and certify that such loans have met their requirements and guidelines. We are subject to audits of our processes, procedures and documentation of such loans, and any violations of the guidelines can result in monetary penalties, which can be significant if there are systemic violations,equipment, as well as indemnification requirements or restrictions on participation in the program.changing
27


If we experience increased repurchasecustomer preferences to access our products and indemnity demands on loans or MSRs that we have sold or that we sell fromservices through digital channels, could decrease the value of our portfolios in the future, or if we are assessed significant penalties for violationsbranch network and other assets. As a result of origination guidelines,these competitive pressures, our liquidity,business, financial condition, results of operations and capital position may be adversely affected.

A portionThe use of the Secured Overnight Financing Rate ("SOFR") as an index replacement for LIBOR may adversely impact our revenue is derived from residential mortgage lending which is a market sector that experiences significant volatility.net interest income and create litigation exposure.

Residential mortgage lendingIn the U.S., the Alternative Rates Reference Committee, convened in 2014 by a group of market participants to help ensure a successful transition away from LIBOR, identified SOFR has its preferred alternative rate. SOFR is a single overnight rate, while LIBOR includes rates of different tenors, and SOFR is considered a credit risk-free rate, while LIBOR incorporates an evaluation of credit risk. In 2020, we transitioned to SOFR the majority of our products indexed to LIBOR.

Implementation of SOFR is intended to have a minimal economic effect on borrowers under LIBOR-indexed instruments. Margins or spreads on new SOFR-indexed products may result in lower rates because SOFR is typically likely to be lower when compared to LIBOR, resulting in reduced spreads and a lower net interest income. However, it is impossible to predict whether the SOFR index could be more volatile than LIBOR, which could thereby increase loan rates and borrowing costs on borrowing facilities previously indexed to LIBOR. Borrowers may not fully understand SOFR as an index replacement or may be adversely impacted by implementation of SOFR. The transition to SOFR, or a transition to any other index that becomes widely accepted in the marketplace, could also result in borrower confusion and additional operational, compliance, systems and other related transition costs. This transition may also result in our customers challenging the determination of their interest payments, entering into fewer transactions or postponing their financing needs, and we may be subject to substantial volatility duedisputes or litigation with borrowers over the appropriateness or comparability of SOFR or other selected indices to changes in interest rates, a significant lack of housing inventory in our principal markets, and other market forces beyond our control. Increases in interest rates may materially and adversely affect our future loan origination volume and margins. Decreases in the availability of housing inventory may reduce demand and adversely impact our future loan origination volume. Decreases in the value of the collateral securing our outstanding loans, may increase rates of borrower default, which would adversely affectLIBOR. These potential outcomes could have an adverse effect on our financial condition, results of operations and capital position.

21




Our capital management strategyTo support our growth, we may impact the value of our common stockneed to rely on funding sources in addition to growth in deposits and could negatively impact our ability to maintain a well-capitalized position.such funding sources may not be adequate or may be more costly.

We actively managemust maintain sufficient funds to respond to the needs of depositors and borrowers. As a part of our liquidity management, we use a number of funding sources in addition to deposit growth and repayments and maturities of loans and investments, including Federal Home Loan Bank advances, proceeds from the sale of loans, federal funds purchased, brokered certificates of deposit and issuance of equity or debt securities. Adverse operating results or changes in industry conditions could lead to difficulty or an inability to access these additional funding sources and could make our existing funds more volatile. Our financial flexibility may be materially constrained if we are unable to maintain our access to funding or if adequate financing is not available to accommodate future growth at acceptable interest rates. When interest rates change, the cost of our funding may change at a different rate than our interest income, which may have a negative impact on our net interest income and, in turn, our results of operations and capital levels with a goal of returning excess capitalposition. If we are required to shareholders, which we currently do through dividend and stock repurchase programs. While we have been ablerely more heavily on more expensive funding sources to sustain and evensupport future growth, our revenues may not increase proportionately to cover our dividend payments and reinstate stock repurchases during the pandemic, a materially negative change tocosts. In that case, our business, results of operations and capital position could cause us to suspend those programs to preserve capital. In addition, our regulators could restrict our ability to pay dividends or repurchase our stock, as happened to certain financial institutions larger than us duringwould be adversely affected. Further, the pandemic.
While the intent of our capital management strategy is to improve the long-term value of our stock, we cannot be assured that our stock repurchases will actually enhance long-term shareholder value. Repurchases may affect our stock price and increase its volatility inherent in the short term, and while the existence of the program may increase the price and decrease liquidity in our stock in the short term, other market factors may cause the stock price of our common shares to fall below the price we paid for the repurchase of our common stock. As a result, shareholders may not see an increase in the value of their holdings.

While we historically have maintained capital ratios at a level higher than the regulatory minimums to be “well-capitalized”, our capital ratios in the future may decrease due to economic changes, utilization of capital to take advantage of growth or investment opportunities, or the return of additional capital to our shareholders. In the event the quality of our assets or our economic position were to deteriorate significantly, lower capital ratios may require us to raise additional capital in the future in order to remain compliant with capital standards. We may not be able to raise such additional capital at the time when we need it, or on terms that are acceptable to us, especially if capital markets are especially constrained, if our financial performance weakens, or if we need to do so at a time when many other financial institutions are competing for capital from investors in response to changing economic conditions. An inability to raise additional capital on acceptable terms when needed could have a material adverse effect on our business, results of operations and capital position. In addition, any capital raising alternatives could dilute the existing holders of our outstanding common stock and may adversely affect the market price of our common stock.

HomeStreet, Inc. primarily relies on dividends from the Bank, which may be limited by applicable laws and regulations.

HomeStreet, Inc. is a separate legal entity from the Bank, which is the primary source of funds available to HomeStreet Inc. to service its debt, pay dividends to shareholders, repurchase shares and otherwise satisfy its obligations. The availability of dividends from the Bank is limited by various statutes and regulations, capital rules regarding requirements to maintain a "well capitalized" ratio at the Bank, as well as by our policy of retaining a significant portion of our earnings to support the Bank's operations. For additional information on these restrictions, see "Regulation and Supervision of HomeStreet Bank" in this Report. If the Bank cannot pay dividends to HomeStreet Inc., HomeStreet, Inc. may be limited in its ability to service its debt, fund its operations, repurchase shares and pay dividends to its shareholders.

Our business is geographically confined to certain metropolitan areas of the Western United States, and events and conditions that disproportionately affect those areas may pose a more pronounced risk for our business.

Although we presently have retail deposit branches in four states, with lending offices in these states and two others, a substantial majority of our revenues are derived from operations in the Puget Sound region of Washington, the Portland, Oregon metropolitan area, the San Francisco Bay Area, and the Los Angeles, Orange County, Riverside and San Diego metropolitan areas in Southern California. All of our markets are located in the Western United States. Each of our primary markets is subject to various types of natural disasters, including earthquakes, wild fires, volcanic eruptions, mudslides and floods, and many have experienced disproportionately significant economic volatility in the past, as well as more recent local political unrest and calls to action, including calls for rent disruption, when compared to many other parts of the United States. Economic events, political unrest or natural disasters that affect the Western United States and our primary markets in that region may have an unusually pronounced impact on our business. Because our operations are not more geographically diversified, we may lack the ability to mitigate those impacts from operations in other regions of the United States.

The significant concentration of real estate secured loans in our portfolio has had a negative impact on our asset quality and profitability in the past and there can be no assurance that it will not have such impact in the future.

A substantial portion of our loans are secured by real property, including a growing portfolio of commercial real estate loans. Our real estate secured lending is generally sensitive to national, regional and local economic conditions, making loss levels difficult to predict. Declines in real estate sales and prices, significant increases in interest rates, unforeseen natural disasters and a decline in prevailing economic conditions may result in higher than expected loan delinquencies, foreclosures, problem loans, other real estate owned ("OREO"), net charge-offs and provisions for credit and OREO losses. If real estate market values decline significantly, as they did in the 2008 to 2011 recession, the collateral for our loans may provide less security and
22




reduce our ability to recover the principal, interest and costs due on defaulted loans. Such declines may have a greater effect on our earnings and capital than on the earnings and capital of financial institutions whose loan portfolios are more diversified, and we could face reduced liquidity, constraints on capital resources, increased obligations to investors to whom we sell mortgage loans, declining income on mortgage servicing fees and a related decrease in the value of mortgage servicing rights, and declining values on certain securities we hold in our investment portfolio.

Deficiencies in our internal controls over financial reporting or enterprise risk management framework may result in ineffective mitigation of risk or an inability to identify and accurately report our financial results.

Our internal controls over financial reporting are intended to ensure we maintain accurate records, promote the accurate and timely reporting of our financial information, maintain adequate control over our assets, and prevent and detect unauthorized acquisition, use or disposition of our assets. Effective internal and disclosure controls are necessary for us to provide reliable financial reports, effectively prevent fraud, and operate successfully as a public company. If we cannot provide reliable financial reports or prevent fraud, our reputation and operating results may be harmed. In addition to our internal controls, we use an enterprise risk management framework in an effort to achieve an appropriate balance between risk and return, with established processes and procedures intended to identify, measure, monitor, report, analyze and control our primary risks, including liquidity risk, credit risk, price risk, interest rate risk, operational risk, legal and compliance risk, strategic risk and reputational risk. We also maintain a compliance program to identify, measure, assess and report on our adherence to applicable laws, policies and procedures.

While we assess and improve these controls and programs on an ongoing basis, there can be no assurance that our controls and programs will effectively mitigate all risk and limit losses in our business. In addition, as we make strategic shifts in our business, we implement new systems and processes. If our change management processes are not sound and adequate resources are not deployed to support these implementations and changes, we may experience additional internal control deficiencies that could expose the Company to operating losses or fail to appropriately anticipate or identify new risks related to such shifts in the business. Any failure to maintain effective controls or timely implement any necessary improvement of our internal and disclosure controls in the future could create losses, cause us to incur additional costs or fail to meet our reporting obligations. Failing to maintain an effective risk management framework or compliance program could also expose us to losses, adverse impacts to our financial position, results of operations and capital position, or regulatory criticism or restrictions.

We use a variety of estimates in our accounting processes which may prove to be imprecise and result in significant changes in valuation and inaccurate financial reporting.

We use a variety of estimates in our accounting policies and methods, including complex financial models designed to value certain of our assets and liabilities, including our allowance for credit losses. These models are complex and use specific judgment-based assumptions about the effect of matters that are inherently uncertain. Different assumptions in these models could result in significant changes in valuation, which in turn could affect earnings or result in significant changes in the recorded amount of assets and liabilities reported on the balance sheet. The assumptions used may be impacted by numerous factors, including economic conditions, consumer behavior, changes in interest rates and changes in collateral values. A failure to make appropriate assumptions in these models could have a negative impact on our liquidity, result of operations and capital position.

We are subject to extensive and complex regulations which are costly to comply with and may subject us to significant penalties for noncompliance.

Our operations are subject to extensive regulation by federal, state and local governmental authorities, including the FDIC, the Washington Department of Financial Institutions and the Federal Reserve, and to various laws and judicial and administrative decisions imposing requirements and restrictions on part or all of our operations. Manysome of these laws are complex, especially those governing predatory or unfair or deceptive practices, and the complexity of those rules creates additional potential liability for us as noncompliance can result in significant regulatory action, including restrictions on operations and fines, and could lead to class action lawsuits from consumers and employees. In addition, various states have their own laws and regulations, especially California, which has heightened data privacy, employment law and consumer protection regulations, and the cost of complying with state rules that differ from federal rules can significantly increase compliance costs.

Our consumer business, including our mortgage and other consumer lending and non-lending businesses, is also governed by policies enacted or regulations adopted by the Consumer Financial Protection Bureau ("CFPB") which under the Dodd-Frank Act has broad rulemaking authority over consumer financial products and services. Our regulators, including the FDIC, use interpretations from the CFPB in certain parts of their assessments of our regulatory compliance, including the Real Estate Settlement Procedures Act, the Final Integrated Disclosure Rule, known as TRID, and the Home Mortgage Disclosure Act,
23




adding to the complexity of our regulatory requirements, increasing our data collection requirements and increasing our costs of compliance. The laws, rules and regulations to which we are subject evolve and change frequently, including changes that come from judicial or regulatory agency interpretations of laws and regulations outside of the legislative process thatfunding sources, particularly brokered deposits, may be more difficult to anticipate, and changes to our regulatory environment are often driven by shifts of political power in the federal government. In addition, we are subject to various examinations by our regulators during the course of the year. Regulatory authorities who conduct these examinations have extensive discretion in their supervisory and enforcement activities, including the authority to restrict our operations and certain corporate actions. Regulatory or in some cases judicial interpretations of the rules that apply to our business may change the way such rules are applied, which also increases our compliance risk if the interpretation differs from our understanding or prior practice. Moreover, an increasing amount of the regulatory authority that pertains to financial institutions is in the form of informal "guidance" such as handbooks, guidelines, examination manuals, field interpretations by regulators or similar provisions that will affect our business or require changes in our practices in the future even if they are not formally adopted as laws or regulations. Any such changes could adversely affect our cost of doing business and our profitability.

In addition, changes in regulation of our industry have the potential to create higher costs of compliance, including short-term costs to meet new compliance standards, limit our ability to pursue business opportunities and increase our exposure to potential fines, penalties and litigation.liquidity risk.

Significant legal or regulatory actions could subject us to substantial uninsured liabilities and reputational harm and have a material adverse effect on our business and results of operations.

We are from time to time subject to claims and proceedings related to our operations. These claims and legal actions could include supervisory or enforcement actions by our regulators, criminal proceedings by prosecutorial authorities, claims by customers or by former and current employees, including class, collective and representative actions, or environmental lawsuits stemming from property that we may hold as OREO following a foreclosure action in the course of our business. Such actions are a substantial management distraction and could involve large monetary claims, including civil money penalties or fines imposed by government authorities and significant defense costs.

To mitigate the cost of some of these claims, we maintain insurance coverage in amounts and with deductibles that we believe are appropriate for our operations. However, our insurance coverage does not cover any civil monetary penalties or fines imposed by government authorities and may not cover all other claims that might be brought against us, including certain wage and hour class, collective and representative actions brought by customers, employees or former employees. In addition, such insurance coverage may not continue to be available to us at a reasonable cost or at all. As a result, we may be exposed to substantial uninsured liabilities, which could adversely affect our business, prospects, financial condition, results of operations and capital position. Substantial legal liability or significant regulatory action against us could cause significant reputational harm to us and/or could have a material adverse impact on our business, prospects, financial condition, results of operations and capital position.

If we are not able to retain or attract key employees, or if we were to suffer the loss of a significant number of employees, we could experience a disruption in our business.

As the Company has focused on efficiency in recent years, we have significantly reduced our employee headcount. However, hiring remains competitive in certain areas of our business, such as mortgage banking, where volume has increased significantly in the wake of lowered interest rates and heightened interest in refinancing loans. We rely on a number of key employees who are highly sought after in the industry. If a key employee or a substantial number of employees depart or become unable to perform their duties, it may negatively impact our ability to conduct business as usual. We might then have to divert resources from other areas of our operations, which could create additional stress for other employees in key positions. The loss of key personnel, or an inability to continue to attract, retain and motivate key personnel could adversely affect our business.

Risk Related to Market Factors

Changes to monetary policy by the Federal Reserve have and could further adversely impact our results of operations.

The Federal Reserve is responsible for regulating the supply of money in the United States, including open market operations used to stabilize prices in times of economic stress, as well as setting monetary policies. These activities strongly influence our rate of return on certain investments, our hedge effectiveness for mortgage servicing and our mortgage origination pipeline, as
24




well as our costs of funds for lending and investing, all of which may adversely impact our liquidity, results of operations, financial condition and capital position.

26


Changes in market factors beyond our control, including fluctuation in interest rates, mayhave and could further adversely impact our profitability and financial results.

Other marketMarket factors outside of our control, including changing interest rate environments, regulatory decisions, increased competition, changes in the yield curve, consumer confidence, rates of unemployment and other forces of market volatility, can have a significant impact on our results of operations, financial condition and capital positions.

Our earnings are dependent on the difference between the interest earned on loans and investments and the interest paid on deposits and borrowings. Changes in interest rates impact the rates earned on loans and investment securities and the rates paid on deposits and borrowings and may negatively impact our ability to attract deposits, make loans, and achieve satisfactory interest rate spreads. In addition, changes to market interest rates may impact the demand for loans, levels of deposits and investments and the credit quality of existing loans. These resultsrate changes have and may further adversely impact our liquidity, financial condition, results of operations and capital position.

The rate of prepayment of loans, which is impacted by changes in interest rates and general economic conditions, among other things, impacts the value of our MSRs. We actively hedge this risk with financial derivative instruments to mitigate losses, but changes in interest rates can be difficult to predict and changes in our hedging instruments may not correlate with changes in the values of our MSRs and loans held for sale.LHFS.

In addition to overall fluctuations in interest rates, asymmetrical changes in interest rates, for example a greater increase in short term rates than in long term rates, could adversely impact our net interest income because our liabilities tend to be more sensitive to short term rates while our assets tend to be more sensitive to long term rates. In addition, it may take longer for our assets to reprice to adjust to a new rate environment because fixed rate loans do not fluctuate with interest rate changes and adjustable rate loans often have a specified initial fixed rate period ofbefore reset. As a result, a flattening or an inversion of the yield curve is likely to have a negative impact on our net interest income.

Our securities portfolio also includes securities whose value is sensitive to interest rate fluctuations. The unrealized gains or losses in our available-for-sale portfolio are reported as a separate component of shareholders'shareholders’ equity until realized upon sale. Interest rate fluctuations may impact the value of these securities and as a result, shareholders'shareholders’ equity, and may cause material fluctuations from quarter to quarter. Failure to hold our securities until maturity or until market conditions are favorable for a sale could adversely affect our operating results, financial condition and capital position.

Inflation could negatively impact our business and profitability.

Prolonged periods of inflation may impact our profitability by negatively impacting our fixed costs and expenses, including increasing funding costs and expenses related to talent acquisition and retention, and negatively impacting the demand for our products and services. Additionally, inflation may lead to a decrease in consumer and clients purchasing power and negatively affect the need or demand for our products and services. If significant inflation continues, our business could be negatively affected by, among other things, increased default rates leading to credit losses.

The financial services industry is highly competitive, and as a result, our business, results of operations, financial condition and capital position may be adversely affected,affected.

We face pricing competition for loans and deposits, both in pricing and products, as well as in customer service and convenience. Our most direct competition comes from other banks, credit unions, mortgage banking companies and finance companies, and more recently, competition has also come from companies that rely heavily on technology to provide financial services, are moving to provide cryptocurrency products and offerings, and often target a younger customer demographic. The significant competition in attracting and retaining deposits and making loans, as well as in providing other financial services, throughout our market area may impact future earnings and growth. Our success depends, in part, on the ability to adapt products and services to evolving industry standards and customer preferences and trends and provide consistent customer service while keeping costs in line. There isWe sometimes experience increasing pressure to provide products and services at lower prices, which cancould reduce net interest income and non-interestnoninterest income from fee-based products and services. New technology-driven products and services are often introduced and adopted, including innovative ways that customers can make payments, access products and manage accounts. We could be required to make substantial capital expenditures to modify or adapt existing products and services or develop new products and services. We may not be successful in introducing new products and services or those new products may not achieve market acceptance. In addition, advances in technology such as telephone, text and on-lineonline banking, e-commerce and self-service automatic teller machines and other equipment, as well as changing
27


customer preferences to access our products and services through digital channels, could decrease the value of our branch network and other assets. As a result of these competitive pressures, our business, financial condition, results of operations and capital position may be adversely affected.

25The use of the Secured Overnight Financing Rate ("SOFR") as an index replacement for LIBOR may adversely impact our net interest income and create litigation exposure.


In the U.S., the Alternative Rates Reference Committee, convened in 2014 by a group of market participants to help ensure a successful transition away from LIBOR, identified SOFR has its preferred alternative rate. SOFR is a single overnight rate, while LIBOR includes rates of different tenors, and SOFR is considered a credit risk-free rate, while LIBOR incorporates an evaluation of credit risk. In 2020, we transitioned to SOFR the majority of our products indexed to LIBOR.


Uncertainty relatingImplementation of SOFR is intended to the London Interbank Offered Rate ("LIBOR") calculation process and potential phasing out of LIBORhave a minimal economic effect on borrowers under LIBOR-indexed instruments. Margins or spreads on new SOFR-indexed products may adversely affect our results of operations.

The Financial Conduct Authorityresult in the United Kingdom, which regulates LIBOR, will not guarantee the continuation of LIBOR on the current basis after 2021. The Federal Reserve selected a new index calculated by short-term repurchase agreements, backed by Treasury securities ("SOFR") to replace LIBOR.lower rates because SOFR differs in its methodology from LIBOR in that it is backward looking and istypically likely to be lower when compared to LIBOR, resulting in reduced spreads and a lower net interest income. However, it is impossible to predict whether the SOFR index could be more volatile than LIBOR, which could thereby increase loan rates and less likely to correlate with the fundingborrowing costs of financial institutions. Whether or not SOFR attains market acceptance as a LIBOR replacement tool remains in question; however, in 2020 we began transitioning to SOFR for our instrumentson borrowing facilities previously indexed to LIBOR. UncertaintyBorrowers may not fully understand SOFR as an index replacement or may be adversely impacted by implementation of SOFR. The transition to SOFR, or a transition to any other index that becomes widely accepted in the nature of alternative reference ratesmarketplace, could also result in borrower confusion and as to potential changes oradditional operational, compliance, systems and other reforms to LIBORrelated transition costs. This transition may adversely affect LIBOR rates and the value of LIBOR-based loans, and to a lesser extent, securitiesalso result in our portfolio,customers challenging the determination of their interest payments, entering into fewer transactions or postponing their financing needs, and may impact the availability and cost of hedging instruments and borrowings, including the rates we pay on our subordinated debentures and trust preferred securities. In addition, there is a risk that we may not complete our full transition to alternative indices or reference rates by the time LIBOR is no longer available. Once LIBOR rates are no longer available, we may be subject to disputes or litigation with customers and creditorsborrowers over the appropriateness or comparability of SOFR or other selected indices to LIBOR of the substitute indices, whichLIBOR. These potential outcomes could have an adverse effect on our financial condition, results of operations and capital position.

To support our growth, we may need to rely on funding sources in addition to growth in deposits and such funding sources may not be adequate or may be more costly.

We must maintain sufficient funds to respond to the needs of depositors and borrowers. As a part of our liquidity management, we use a number of funding sources in addition to deposit growth and repayments and maturities of loans and investments, including Federal Home Loan Bank advances, proceeds from the sale of loans, federal funds purchased, brokered certificates of deposit and issuance of equity or debt securities. While we continue to have adequate liquidity even in the face of economic uncertainties, changes in global markets and customer demand, adverseAdverse operating results or changes in industry conditions could lead to difficulty or an inability to access these additional funding sources and could make our existing funds more volatile. Our financial flexibility may be materially constrained if we are unable to maintain our access to funding or if adequate financing is not available to accommodate future growth at acceptable interest rates. When interest rates change, the cost of our funding may change at a different rate than our interest income, which may have a negative impact on our net interest income and, in turn, our results of operations and capital position. If we are required to rely more heavily on more expensive funding sources to support future growth, our revenues may not increase proportionately to cover our costs. In that case, our results of operations and capital position would be adversely affected. Further, the volatility inherent in some of these funding sources, particularly brokered deposits, may increase our exposure to liquidity risk.

Risks Related to Information TechnologyOperations

The networkOur employees hybrid-remote work schedules may create failure or circumvention of our controls and computer systemsprocedures, including safeguarding our confidential information.

Many of our employees work from home in a hybrid-remote work schedule. We face risks associated with having a significant portion of our employees working from home as we may have less oversight over certain internal controls and the confidentiality requirements of our compliance and contractual obligations may be more challenging to meet as confidential information is being accessed from a wider range of locations and there may be more opportunity for inadvertent disclosure or malicious interception. Many of our vendors also allow their workforce to work from home, which may create similar issues if our confidential information is being accessed by employees of those vendors in connection with their performance of services for us. While we have not identified any significant concerns to date with our internal controls, compliance obligations or confidentiality requirements, the change in work environment, team dynamics and job responsibilities for us and our vendors could increase our risk of failure in these areas, which could have a negative impact on whichour financial condition and results of operations and heightened, compliance, operational and reputational risks.

28


We rely on third party purchasers to buy our loans in the secondary market, and changes to their policies and practices may significantly impact our financial results.

We originate a substantial portion of our single family mortgage loans for sale to third party investors, including government-sponsored enterprises (“GSEs”) such as Fannie Mae, Freddie Mac and Ginnie Mae. Changes in the types of loans purchased by these GSEs or the program requirements for those entities could adversely impact our ability to sell certain of the loans we depend,originate for sale, leaving us unable to find a buyer on similar terms. Similarly, changes in the fee structures by any of our third party loan purchasers, including the systems maintainedGSEs, may increase our costs of doing business, the cost of loans to our customers, and the cost of selling loans to third party loan purchasers, all of which could in turn decrease our margin and negatively impact our profitability. In addition, significant changes in the underwriting criteria of third party loan purchasers could increase our costs or decrease our ability to sell into the secondary markets. Any of these changes can have a negative impact on our liquidity, financial condition, results of operations and capital position.

We are bound by representations or warranties we make to third party purchasers of our loans or mortgage servicing rights (“MSRs”) and may be liable for certain third-party vendors,costs and damages if those representations are breached.

We make certain representations and warranties to third party purchasers of our loans, including GSEs, about the loans and the manner in which they were originated, including adherence to strict origination guidelines for loans originated for sale to GSEs. Our sale agreements generally require us to either repurchase loans if we have breached any of these representations or warranties, which may result in recording a loss and/or bearing any subsequent loss on the loan, or pay monetary penalties. We may not be able to recover our losses from a borrower or other third party in the event of such a breach of representation or warranty due to a lack of remedies or lack of financial resources of the borrower, and may be required to bear the full amount of the related loss. Similarly, we have sold significant amounts of our MSRs in recent years, and the agreements governing those sales also have representations and warranties relating to the documentation and collectability of those MSRs; a breach of those representations and warranties could also require us to either pay monetary damages or, in some cases, repurchase the defective MSRs.

We also originate, purchase, sell and service loans insured by the Federal Housing Administration (“FHA”) and U.S. Department of Housing and Urban Development (“HUD”) or guaranteed by the U.S. Department of Veterans Affairs (“VA”), and we certify that such loans have met their requirements and guidelines. We are subject to audits of our processes, procedures and documentation of such loans, and any violations of the guidelines can result in monetary penalties, which could be significant if there are systemic violations, as well as indemnification requirements or restrictions on participation in the targetprogram.

If we experience increased repurchase and indemnity demands on loans or MSRs that we have sold or that we sell from our portfolios in the future, or if we are assessed significant penalties for violations of origination guidelines, our liquidity, financial condition, results of operations and capital position may be adversely affected.

A portion of our revenue is derived from residential mortgage lending which is a cyber-attack or could otherwise fail,market sector that experiences significant volatility.

Residential mortgage lending is subject to substantial volatility due to changes in interest rates, a significant lack of housing inventory in our principal markets, and other market forces beyond our control. Increases in interest rates have and in the future may materially and adversely affect our future loan origination volume and margins. During 2023, primarily as a result of the significant increase in interest rates, our mortgage origination volume decreased by 42% when compared to 2022. Decreases in the availability of housing inventory may reduce demand and adversely impact our future loan origination volume. Decreases in the value of the collateral securing our outstanding loans may increase rates of borrower default which would adversely affect our financial condition, results of operations and capital position.

Our capital management strategy may impact the value of our common stock and could negatively impact our ability to maintain a well-capitalized position.

We actively manage our capital levels with a goal of returning excess capital to shareholders, which we currently do through dividend and stock repurchase programs. While we have been able to sustain our dividend payments, a materially negative change to our business, results of operations and capital position, could cause us to suspend dividend payments to preserve capital. In addition, the amount and declaration of future cash dividends are subject to our level of profitability, approval by our Board of Directors and certain legal and regulatory restrictions.
29



While the intent of our capital management strategy is to improve the long-term value of our stock, we cannot be assured that stock repurchases will actually enhance long-term shareholder value. Repurchases may affect our stock price and increase its volatility in the short term. While the existence of the program may increase the price and decrease liquidity in our stock in the short term, other market factors may cause the price of our common stock to fall below the price we paid for the repurchase of our common stock. As a result, shareholders may not see an increase in the value of their holdings.

While we historically have maintained capital ratios at a level higher than the regulatory minimums to be “well-capitalized”, our capital ratios in the future may decrease due to economic changes, utilization of capital to take advantage of growth or investment opportunities, or the return of additional capital to our shareholders. In the event the quality of our assets or our economic position were to deteriorate significantly, lower capital ratios may require us to raise additional capital in the future in order to remain compliant with capital standards. We may not be able to raise such additional capital at the time when we need it, or on terms that are acceptable to us, especially if capital markets are especially constrained, if our financial performance weakens, or if we need to do so at a time when many other financial institutions are competing for capital from investors in response to changing economic conditions. An inability to raise additional capital on acceptable terms when needed could have a material adverse effect on our business, results of operations and capital position. In addition, any capital raising alternatives could dilute the value of our outstanding common stock held by our existing shareholders and may adversely affect the market price of our common stock.

HomeStreet, Inc. primarily relies on dividends from the Bank, which may be limited by applicable laws and regulations.

HomeStreet, Inc. is a separate legal entity from the Bank, which is the primary source of funds available to HomeStreet Inc. to service its debt, fund its operations, pay dividends to shareholders, repurchase shares and otherwise satisfy its obligations. The availability of dividends from the Bank is limited by various statutes and regulations, capital rules regarding requirements to maintain a “well capitalized” ratio at the Bank, as well as by our policy of retaining a significant portion of our earnings to support the Bank’s operations. For additional information on these restrictions, see “Item 1 Business” in this 10-K. If the Bank cannot pay dividends to HomeStreet Inc., HomeStreet, Inc. may be limited in its ability to service its debt, fund its operations, repurchase shares and pay dividends to its shareholders.

Our business is geographically confined to certain metropolitan areas of the Western United States, and events and conditions that disproportionately affect those areas may pose a more pronounced risk for our business.

Although we presently have retail deposit branches in four states, with lending offices in these states and two others, a substantial majority of our revenues are derived from operations in the Puget Sound region of Washington, the Portland, Oregon metropolitan area, the San Francisco Bay Area, and the Los Angeles, Orange County, Riverside and San Diego metropolitan areas in Southern California. All of our markets are located in the Western United States. Each of our primary markets is subject to various types of natural disasters, including earthquakes, wildfires, volcanic eruptions, mudslides and floods, and many have experienced disproportionately significant economic volatility in the past, as well as more recent local political unrest and calls to action, including calls for rent disruption, when compared to other parts of the United States. Economic events, political unrest or natural disasters that affect the Western United States and our primary markets in that region may have an unusually pronounced impact on our business. Because our operations are not more geographically diversified, we may lack the ability to mitigate those impacts from operations in other regions of the United States.

The significant concentration of real estate secured loans in our portfolio has had a negative impact on our asset quality and profitability in the past and it may not have such impact in the future.

A substantial portion of our loans are secured by real property, including a growing portfolio of commercial real estate (“CRE”) loans. Our real estate secured lending is generally sensitive to national, regional and local economic conditions, making loss levels difficult to predict. Declines in real estate sales and prices, significant increases in interest rates, unforeseen natural disasters and a decline in prevailing economic conditions may result in higher than expected loan delinquencies, foreclosures, problem loans, other real estate owned (“OREO”), net charge-offs and provisions for credit and OREO losses. If real estate market values decline significantly, as they did in the 2008 to 2011 recession, the collateral for our loans may provide less security and reduce our ability to recover the principal, interest and costs due on defaulted loans. Such declines may have a greater effect on our earnings and capital than on the earnings and capital of financial institutions whose loan portfolios are more diversified, and as a result, we have faced and we could face in the future reduced liquidity, constraints on capital resources, increased obligations to investors to whom we sell mortgage loans, declining income on mortgage servicing fees and a related decrease in the value of MSRs, and declining values on certain securities we hold in our investment portfolio.
30



Deficiencies in our internal controls over financial reporting or enterprise risk management framework may result in ineffective mitigation of risk or an inability to identify and accurately report our financial results.

Our internal controls over financial reporting are intended to ensure we maintain accurate records, promote the accurate and timely reporting of our financial information, maintain adequate control over our assets, and prevent and detect unauthorized acquisition, use or disposition of our assets. Effective internal and disclosure controls are necessary for us to provide reliable financial reports, effectively prevent fraud, and operate successfully as a public company. If we cannot provide reliable financial reports or prevent fraud, our reputation and operating results may be harmed. In addition to our internal controls, we use an enterprise risk management framework in an effort to achieve an appropriate balance between risk and return, with established processes and procedures intended to identify, measure, monitor, report, analyze and control our primary risks, including liquidity risk, credit risk, price risk, interest rate risk, operational risk, including cybersecurity risks, legal and compliance risk, strategic risk and reputational risk. We also maintain a compliance program to identify, measure, assess and report on our adherence to applicable laws, policies and procedures.

Our controls and programs may not effectively mitigate all risk and limit losses in our business. In addition, as we make strategic shifts in our business, we implement new systems and processes. If our change management processes are not sound and adequate resources are not deployed to support these implementations and changes, we may experience additional internal control deficiencies that could expose the Company to operating losses or cause us to fail to appropriately anticipate or identify new risks related to such shifts in the business. Any failure to maintain effective controls or timely implement any necessary improvement of our internal and disclosure controls in the future could create losses, cause us to incur additional costs or fail to meet our reporting obligations. Failing to maintain an effective risk management framework or compliance program could also expose us to losses, adverse impacts to our financial position, results of operations and capital position, or regulatory criticism or restrictions.

We use a variety of estimates in our accounting processes which may prove to be imprecise and result in significant changes in valuation and inaccurate financial reporting.

We use a variety of estimates in our accounting policies and methods, including complex financial models designed to value certain of our assets and liabilities, including our allowance for credit losses. These models are complex and use specific judgment-based assumptions about the effect of matters that are inherently uncertain. Different assumptions in these models could result in significant changes in valuation, which in turn could affect earnings or result in significant changes in the recorded amount of assets and liabilities reported on the balance sheet. The assumptions used may be impacted by numerous factors, including economic conditions, consumer behavior, changes in interest rates and changes in collateral values. A failure to make appropriate assumptions in these models could have a negative impact on our liquidity, result of operations and capital position.

We are subject to extensive and complex regulations which are costly to comply with and may subject us to significant penalties for noncompliance.

Our operations are subject to extensive regulation by federal, state and local governmental authorities, including the FDIC, the Washington Department of Financial Institutions and the Federal Reserve, and to various laws and judicial and administrative decisions imposing requirements and restrictions on part or all of our operations. Many of these laws are complex, especially those governing fair lending, predatory or unfair or deceptive practices, and the complexity of those rules creates additional potential liability for us because noncompliance could result in significant regulatory action, including restrictions on operations and fines, and could lead to class action lawsuits from shareholders, consumers and employees. In addition, various states have their own laws and regulations, especially California, which has heightened data privacy, employment law and consumer protection regulations, and the cost of complying with state rules that differ from federal rules can significantly increase compliance costs.

Our consumer business, including our mortgage and other consumer lending and non-lending businesses, is also governed by policies enacted or regulations adopted by the CFPB which under the Dodd-Frank Act has broad rulemaking authority over consumer financial products and services. Our regulators, including the FDIC, use interpretations from the CFPB and relevant statutory citations in certain parts of their assessments of our regulatory compliance, including the Real Estate Settlement Procedures Act, the Final Integrated Disclosure Rule, known as TRID, and the Home Mortgage Disclosure Act, adding to the complexity of our regulatory requirements, increasing our data collection requirements and increasing our costs of compliance. The laws, rules and regulations to which we are subject evolve and change frequently, including changes that come from
31


judicial or administrative agency interpretations of laws and regulations outside of the legislative process that may be more difficult to anticipate, and changes to our regulatory environment are often driven by shifts of political power in the federal government. In addition, we are subject to various examinations by our regulators during the course of the year. Regulatory authorities who conduct these examinations have extensive discretion in their supervisory and enforcement activities, including the authority to restrict our operations and certain corporate actions. Administrative and judicial interpretations of the rules that apply to our business may change the way such rules are applied, which also increases our compliance risk if the interpretation differs from our understanding or prior practice. Moreover, an increasing amount of the regulatory authority that pertains to financial institutions is in the form of informal “guidance” such as handbooks, guidelines, examination manuals, field interpretations by regulators or similar provisions that could affect our business or require changes in our practices in the future even if they are not formally adopted as laws or regulations. Any such changes could adversely affect our cost of doing business and our profitability.

In addition, changes in regulation of our industry have the potential to create higher costs of compliance, including short-term costs to meet new compliance standards, limit our ability to pursue business opportunities and increase our exposure to potential fines, penalties and litigation.

Significant legal claims or regulatory actions could subject us to substantial uninsured liabilities and reputational harm and have a material adverse effect on our business and results of operations.

We are from time to time subject to legal claims or regulatory actions related to our operations. These legal claims or regulatory actions could include supervisory or enforcement actions by our regulators, criminal proceedings by prosecutorial authorities, claims by customers or by former and current employees, including class, collective and representative actions, or environmental lawsuits stemming from property that we may hold as OREO following a foreclosure action in the course of our business. Such actions are a substantial management distraction and could involve large monetary claims, including civil money penalties or fines imposed by government authorities and significant defense costs.

To mitigate the cost of some of these claims, we maintain insurance coverage in amounts and with deductibles that we believe are appropriate for our operations. However, our insurance coverage does not cover any civil monetary penalties or fines imposed by government authorities and may not cover all other claims that might be brought against us, including certain wage and hour class, collective and representative actions brought by customers, employees or former employees. In addition, such insurance coverage may not continue to be available to us at a reasonable cost or at all. As a result, we may be exposed to substantial uninsured liabilities, which could adversely affect our business, prospects, financial condition, results of operations and capital position. Substantial legal liability or significant regulatory action against us could cause significant reputational harm to us and/or could have a material adverse impact on our business, prospects, financial condition, results of operations and capital position.

If we are not able to retain or attract key employees, or if we were to suffer the loss of a significant number of employees, we could experience a disruption in our business.

As the Company has focused on efficiency in recent years, we have significantly reduced our employee headcount. However, hiring remains competitive in certain areas of our business. We rely on a number of key employees who are highly sought after in the industry. If a key employee or a substantial number of employees depart or become unable to perform their duties, it may negatively impact our ability to conduct business as usual. We might then have to divert resources from other areas of our operations, which could create additional stress for other employees, including those in key positions. The loss of qualified and key personnel, or an inability to continue to attract, retain and motivate key personnel could adversely affect our business and consequently impact our financial condition and results of operations.

Our customers may be negatively impacted by a pandemic, which may result in adverse impacts to our financial position and results of operations.

In the event of future public health crises, epidemics, pandemics or similar events, the communities where we do business may be put under varying degrees of restrictions on social gatherings and retail operations. These restrictions, combined with related changes in consumer behavior and significant increases in unemployment, may result in extreme financial hardship for certain industries, especially travel, energy, hotel, food and beverage service and retail. Some of our customers may be unable to meet their debt obligations to us in a timely manner, or at all, and we may experience a heightened number of requests from customers for forbearances on loans.

32


If pandemic related Federal, state and local moratoriums on evictions for non-payment of rent are enacted, they may negatively impact the ability of some borrowers to make payments on loans made for multifamily housing. In addition, such action may ultimately cause a meaningful number of loans in our portfolio to need forbearance or significant modification and migrate to an adverse risk rating because of impacts of an economic recession. In light of these, and other credit issues, we cannot be sure that our allowance for credit losses will be adequate or that additional increases to the allowance for credit losses will not be needed in subsequent periods. If our allowance is not adequate, future net charge-offs may be in excess of our current expected losses, which would create the need for more provisioning and will have a negative impact on our financial condition, results of operations and capital position.

Risks Related to Information Technology

HomeStreet’s operational systems and networks, and those of our third-party vendors, have been, and will continue to be, subject to continually evolving cybersecurity risks that have resulted in or could result in the theft, loss, misuse or disclosure of confidential client or customer information or otherwise disrupt or adversely affect our business.

As a financial institution, we are susceptible to fraudulent activity, operational and informational security breaches and cybersecurity incidents that are committed against us or our customers, employees, third-party vendors and others, which may result in financial losses or increased costs, disclosure or misuse of our information or customer information, misappropriation of assets, data privacy breaches, litigation or reputational damage. Related risks for financial institutions have increased in recent years in part because of the proliferation and use of new technologies, the use of the Internet and telecommunicationsexisting technologies to conduct financial transactions and transmit data, as well as the increased sophistication and unlawful or clandestine activities of organized crime, state sponsoredstate-sponsored and other hackers, terrorists, activists, and other malicious external parties. Those parties also may attempt to fraudulently induce employees, customers,engage in fraudulent activity such as phishing or other users of our systems to disclose confidential information in order to gaincheck, electronic or wire fraud, unauthorized access to our networkscontrols and datasystems, denial or thatdegradation of service attacks, malware and other dishonest acts. Within the financial services industry, the commercial banking sector has generally experienced, and will continue to experience, increased electronic fraudulent activity, security breaches and cybersecurity-related incidents. The nature of our customers. industry sector exposes us to these risks because our business and operations include the protection and storage of confidential and proprietary corporate and personal information, including sensitive financial and other personal data, and any breach thereof could result in identity theft, account or credit card fraud or other fraudulent activity that could involve their accounts and business with us. The risk to our organization may be further elevated over the near term because of recent geopolitical events in Eastern Europe and Asia, which may result in increased attacks against U.S. critical infrastructure, including financial institutions.

Our computer systems, software and networks are subject to ongoing cyber incidents such as unauthorized access; loss or destruction of data (including confidential client information); account takeovers; unavailability of service; computer viruses or other malicious code; cyber-attacks; and other events. While we have experienced and continue to experience various forms of these cyber incidents in the past, we have not been materially impacted by them. Cyber incidents may not occur again, and they could occur more frequently and on a more significant scale.

Our business and operations rely on the secure processing, transmission, protection and storage of confidential, private and personal information inby our computer operation systems and networks, as well as our online banking or reporting systems used by customers to effect certain financial transactions, all of which are either managed directly by us or through our third-party data processing vendors. In addition,The secure maintenance and transmission of confidential information, and the execution of transactions through our systems, are critical to protecting us and our customers against fraud and security breaches and to maintain customer confidence. To access our products and services, our customers may use personal computers, smartphones, tablet PCs, and other mobile devices that arefunction beyond our control systems. Although we believe we have invested in, and plan to continue investing in, maintaining and routinely testing adequate informationoperational and informational security procedures and controls, we rely heavily on our third partythird-party vendors, technologies, systems, networks and our customers' devices, all of which may becomeare the target of cyber-attacks, computer viruses, malicious code, unauthorized access, hackers or information security breaches that have resulted in and could again in the future result in the unauthorized release, gathering, monitoring, misuse, loss, theft or destruction of our confidential, proprietary and other information or that of our customers, or that could disrupt our operations or those of our customers or third parties. Even though we invest in, maintain and routinely test our operational and informational security procedures and controls, we may fail to anticipate or sufficiently mitigate security breaches, or we may experience data privacy breaches, that could result in losses to us or our customers, damage to our reputation, incurrence of significant costs, business disruption, our inability to grow our business and exposure to regulatory scrutiny or penalties, litigation and potential financial liability, any of which could adversely affect our business, financial condition, results of operations or capital position.

33


Our computer systems could be vulnerable to unforeseen problems other than cyber-attackcybersecurity related incidents or other data security breaches, including the potential for infrastructure damage to our systems or the systems of our vendors from fire, power loss, telecommunications failure, physical break-ins, theft, natural disasters or similar catastrophic events. Any damage or failure that causes interruptions in operations may compromise our ability to perform critical functions in a timely manner (or may give rise to perceptions of such compromise) and could increase our costs of doing business, or have a material adverse effect on our results of operations results as well as our reputation and customer or vendor relationships.
26





In addition, some of the technology we use in our regulatory compliance, including our mortgage loan origination and servicing technology, as well as other critical business activities such as core systems processing, essential web hosting and deposit and processing services, as well as security solutions, isare provided by third party vendors. If those providers fail to update their systems or services in a timely manner to reflect new or changing regulations, or if our personnel operate these systems in a non-compliant manner, our ability to meet regulatory requirements may be impacted and may expose us to heightened regulatory scrutiny and the potential for monetary penalties. These vendors couldare also be sources of operational and informationinformational security risk to us, including from interruptions or failures of their own systems, cybersecurity or ransomware attacks, capacity constraints or failures of their own internal controls. To date, we are not aware of any system breaches at any of our third party vendors or service providers that has also breached the integrity of our confidential customer data. However, suchSuch third parties may also beare targets of cyber-attacks, computer viruses, malicious code, unauthorized access, hackers, ransomware attacks or information security breaches that have compromised and could again in the future compromise the confidential or proprietary information of HomeStreet and our customers.

The failure to protect our customers' confidential information, data and privacy could adversely affect our business.

We are subject to federal and state privacy regulations and confidentiality obligations, including the California Consumer Privacy Act of 2018 and the California Privacy Rights Act of 2020, that, among other things restrict the use and dissemination of, and access to, certain information that we produce, store or maintain in the course of our business and establishes a new state agency to enforce these rules. We also have contractual obligations to protect certain confidential information we obtain from our existing vendors and customers. These obligations generally include protecting such confidential information in the same manner and to the same extent as we protect our own confidential information, and in some instances may impose indemnity obligations on us relating to unlawful or unauthorized disclosure of any such information.

The continued development and enhancement of our information security controls, processes and practices designed to protect customer information, our systems, computers, software, data and networks from attack, damage or unauthorized access remain a priority for our management as we increase our online and mobile banking offerings. As cyber threats continue to evolve, including supply chain risks, our costs to combat the cybersecurity threat may also increase. Nonetheless, our measures may be insufficient to prevent all physical and electronic break-ins, denial of service and other cyber-attacks or security breaches.

If we do not properly comply with privacy regulations and contractual obligations that require us to protect confidential information, or if we experience a security breach or network compromise, we could face regulatory sanctions, penalties or fines, increased compliance costs, remedial costs such as providing credit monitoring or other services to affected customers, litigation and damage to our reputation, which in turn could result in decreased revenues and loss of customers, any or all of which would have a material adverse effect on our business, financial condition,results of operations and capital position.

We continually encounter technological change, and we may have fewer resources than many of our competitors to invest in technological improvements.

The financial services industry is undergoing rapid technological changes with frequent introductions of new technology-driven products and services to better serve customers and to reduce costs. Our future success will depend, in part, upon our ability to provide products and services using technology that will satisfy client demands for convenience, as well as to create additional efficiencies in our operations. Many national vendors provide turn-key services to community banks, such as Internet banking and remote deposit capture that allow smaller banks to compete with institutions that have substantially greater resources to invest in technological improvements. However, we may not be able to effectively implement new technology-driven products and services or be successful in marketing these products and services to our customers.










2734


Risk Related to our Indebtedness

Payments on our $65 million senior notes due 2026, our $62 million of junior subordinated deferrable interest debentures due in 2035, 2036 and 2037 and our $100 million subordinated notes due 2032 (collectively the “HomeStreet Notes”) will depend on receipt of dividends and distributions from our subsidiaries.

We are a bank holding company and we conduct substantially all of our operations through the Bank. We depend on dividends, distributions and other payments from the Bank to meet our obligations, including to fund payments on the HomeStreet Notes.

Federal and state banking regulations limit dividends from our bank subsidiary to us. Generally, banks are prohibited from paying dividends when doing so would cause them to fall below regulatory minimum capital levels. In addition, 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. We also have a policy of retaining a significant portion of our earnings to support the Bank’s operations.

In addition, federal bank regulatory agencies have the authority to prohibit the Bank from engaging in unsafe or unsound practices in conducting its business. The payment of dividends or other transfers of funds to us, depending on the financial condition of the Bank, could be deemed an unsafe or unsound practice.

Accordingly, we can provide no assurance that we will receive dividends or other distributions from our bank subsidiary and our other subsidiaries in an amount sufficient to pay interest on or principal of the HomeStreet Notes.

Regulatory guidelines may restrict our ability to pay the principal of, and accrued and unpaid interest on, the HomeStreet Notes.

As a bank holding company, our ability to pay the principal of, and interest on, the HomeStreet Notes is subject to the rules and guidelines of the Federal Reserve regarding capital adequacy. We intend to treat the HomeStreet Notes as “Tier 2 capital” under these rules and guidelines. The Federal Reserve guidelines generally require us to review the effects of the cash payment of Tier 2 capital instruments, such as the HomeStreet Notes, on our overall financial condition. The guidelines also require that we review our net income for the current and past four quarters, and the amounts we have paid on Tier 2 capital instruments for those periods, as well as our projected rate of earnings retention. Moreover, pursuant to federal law and Federal Reserve regulations, as a bank holding company, we are required to act as a source of financial and managerial strength to the Bank and commit resources to its support, including, without limitation, the guarantee of its capital plans if it is undercapitalized. Such support may be required at times when we may not otherwise be inclined or able to provide it. As a result of the foregoing, we may be unable to pay accrued interest on the HomeStreet Notes on one or more of the scheduled interest payment dates, or at any other time, or the principal of the HomeStreet Notes at the maturity of the HomeStreet Notes.

If we were to be the subject of a bankruptcy proceeding under Chapter 11 of the U.S. Bankruptcy Code, then the bankruptcy trustee would be deemed to have assumed, and would be required to cure, immediately any deficit under any commitment we have to any of the federal banking agencies to maintain the capital of the Bank, and any other insured depository institution for which we have such a responsibility, and any claim for breach of such obligation would generally have priority over most other unsecured claims.

Risks Related to Certain Environmental, Social and Governance Issues

Our business is subject to evolving regulations and stakeholders’ expectations with respect to environmental, social and governance ("ESG") matters that could expose us to numerous risks.

Increasingly regulators, customers, investors, employees and other stakeholders are focusing on ESG matters and related disclosures. These developments have resulted in, and are likely to continue to result in, increased general and administrative expenses and increased management time and attention spent complying with or meeting ESG-related requirements and expectations. For example, developing and acting on ESG-related initiatives and collecting, measuring and reporting ESG-related information and metrics can be costly, difficult and time consuming and are subject to evolving reporting standards, including the SEC’s proposed climate-related reporting requirements. We may also communicate certain initiatives and goals regarding ESG-related matters in our SEC filings or in other public disclosures. These ESG-related initiatives and goals could be difficult and expensive to implement, the technologies needed to implement them may not be cost effective and may not advance at a sufficient pace, and we could be criticized for the accuracy, adequacy or completeness of the disclosures. Further,
35


statements about our ESG-related initiatives and goals, and progress against those goals, may be based on standards for measuring progress that are still developing, internal controls and processes that continue to evolve, and assumptions that are subject to change in the future. In addition, we could be criticized for the scope, prioritization or nature of such initiatives or goals, or for any revisions to these goals. If our ESG-related data, processes and reporting are incomplete or inaccurate, or if we fail to achieve progress with respect to our ESG-related goals on a timely basis, or at all, our reputation, business, financial performance and growth could be adversely affected.

Climate change could have a material negative impact on us and our customers.

Our business, as well as the operations and activities of our customers, we believe could be negatively impacted by climate change. Climate change presents both immediate and long-term risks to us and our customers and these risks are anticipated to increase over time. Climate changes presents multi-faceted risks, including (i) operational risk from the physical effects of climate events on our facilities and other assets as well as those of our customers; (ii) credit risk from borrowers with significant exposure to climate risk; and (iii) reputational risk from stakeholder concerns about our practices related to climate change and our carbon footprint. Our business, reputation, and ability to attract and retain employees may also be harmed if our response to climate change risk is perceived to be ineffective or insufficient.

Climate change exposes us to physical risk as its effects may lead to more frequent and more extreme weather events, such as prolonged droughts or flooding, tornados, hurricanes, wildfires and extreme seasonal weather; and longer-term shifts, such as increasing average temperatures, ozone depletion, and rising sea levels. Such events and long-term shifts may damage, destroy or otherwise impact the value or productivity of our properties and other assets; reduce the availability of insurance; and/or disrupt our operations and other activities through prolonged outages. Such events and long-term shifts may also have a significant impact on our customers, which could amplify credit risk by diminishing borrowers’ repayment capacity or collateral values, and other businesses and counterparties with whom we transact, which could have a broader impact on the economy, supply chains, and distribution networks.
36


ITEM 1BUNRESOLVED STAFF COMMENTS

None.

ITEM 1C CYBERSECURITY

Cybersecurity Risk Management and Strategy:

We recognize the importance of assessing, identifying, and managing material risks associated with cybersecurity threats, as such term is defined in Item 106(a) of Regulation S-K. These risks include, among other things, operational risks; intellectual property theft; fraud; extortion; harm to employees or customers; violation of privacy or security laws and other litigation and legal risk; and reputational risks.

We also maintain an incident response plan to coordinate the activities we take to protect against, detect, respond to and remediate cybersecurity incidents, as such term is defined in Item 106(a) of Regulation S-K, as well as to comply with potentially applicable legal obligations and mitigate brand and reputational damage.

We have implemented several cybersecurity processes, technologies, and controls to aid in our efforts to identify, assess, and manage material risks, as well as to test and improve our incident response plan. Our approach includes, among other things:

conducting regular network and endpoint monitoring, vulnerability assessments, and penetration testing to improve our information systems, as such term is defined in Item 106(a) of Regulation S-K;
running tabletop exercises to simulate a response to a cybersecurity incident and use the findings to improve our processes and technologies;
regular cybersecurity training programs for employees, management and directors; conducting annual customer data handling training for all our employees;
conducting annual cybersecurity management and incident training for employees involved in our systems and processes that handle sensitive data;
comparing our processes to standards set by the National Institute of Standards and Technology (“NIST”), International Organization for Standardization (“ISO”), and Center for Internet Security (“CIS”);
leveraging the NIST cybersecurity framework to help us identify, protect, detect, respond, and recover when there is an actual or potential cybersecurity incident;
operating threat intelligence processes designed to model and research our adversaries;
closely monitoring emerging data protection laws and implementing changes to our processes designed to comply;
undertaking regular reviews of our consumer facing policies and statements related to cybersecurity;
proactively informing our customers of substantive changes related to customer data handling;
conducting regular phishing email simulations for all employees and all contractors with access to corporate email systems to enhance awareness and responsiveness to such possible threats;
through policy, practice and contract (as applicable) requiring employees, as well as third-parties who provide services on our behalf, to treat customer information and data with care;
maintaining a risk management program for suppliers, vendors, and other third parties, which includes conducting pre-engagement risk-based diligence, implementing contractual security and notification provisions, and ongoing monitoring as needed; and
carrying information security risk insurance that provides protection against the potential losses arising from a cybersecurity incident.

These approaches vary in maturity across the business and we work to continually improve them.

Our process for identifying and assessing material risks from cybersecurity threats operates alongside our broader overall risk assessment process, covering all company risks. As part of this process appropriate disclosure personnel will collaborate with subject matter specialists, as necessary, to gather insights for identifying and assessing material cybersecurity threat risks, their severity, and potential mitigations. As part of the above approach and processes, we regularly engage with assessors, consultants, auditors, and other third parties, to review our cybersecurity program to help identify areas for continued focus, improvement and/or compliance.

We describe whether and how risks from identified cybersecurity threats, including as a result of any previous cybersecurity incidents, have materially affected or are reasonably likely to materially affect us, including our business strategy, results of operations, or financial condition, under the heading "Risks Related to Information Technology" included as part of our risk factor disclosures in Item 1A of this Form 10-K.
37



In the last three fiscal years, we have not experienced any material cybersecurity incidents and the expenses we have incurred from cybersecurity incidents were immaterial. This includes penalties and settlements, of which there were none.

Governance

Cybersecurity is an important part of our risk management processes and an area of increasing focus for our Board and management. Our Board Enterprise Risk Management Committee ("ERMC") is responsible for the oversight of risks from cybersecurity threats. At least quarterly, the ERMC receives an overview from management and the management steering committee of our cybersecurity threat risk management and strategy processes covering topics such as data security posture, results from third-party assessments, progress towards pre-determined risk-mitigation-related goals, our incident response plan, and cybersecurity threat risks or incidents and developments, as well as the steps management has taken to respond to such risks. In such sessions, the ERMC generally receives materials including a cybersecurity scorecard and other materials indicating current and emerging cybersecurity threat risks, and describing the company’s ability to mitigate those risks, and discusses such matters with our Chief Information Security Officer and Chief Information Officer. Members of the ERMC are also encouraged to regularly engage in ad hoc conversations with management on cybersecurity-related news events and discuss any updates to our cybersecurity risk management and strategy programs. Material cybersecurity threat risks may also be considered during separate Board meeting discussions. The Board engages external cyber security experts, as needed, leveraging their expertise as part of our ongoing effort to evaluate and enhance our cybersecurity program. They help with cyber defense capabilities and transformation designed to mitigate associated threats, reduce risk, enhance our cybersecurity posture, and meet the Company's evolving needs.

Our cybersecurity risk management and strategy processes, which are discussed in greater detail above, are led by our Chief Information Security Officer, Chief Information Officer, and our management technology steering committee. Such individuals have collectively over 30 years of prior work experience in various roles involving managing information security, developing cybersecurity strategy, and implementing effective information and cybersecurity programs, as well as several relevant certifications, including Certified Information Security Manager and Certified Information Systems Security Professional.

These members of management and the management technology steering committee are informed about and monitor the prevention, mitigation, detection, and remediation of cybersecurity incidents through their management of, and participation in, the cybersecurity risk management and strategy processes described above, including the operation of our incident response plan.

If a cybersecurity incident is determined to be a material cybersecurity incident, our incident response plan and cybersecurity disclosure controls and procedures define the process to disclose such a material cybersecurity incident.


ITEM 2PROPERTIES

OurWe lease principal offices, which are leased and located in downtown Seattle at 601 Union Street, Suite 2000, Seattle, WA 98101. This lease provides sufficient space to conduct the management of our business. The Company conducts its Commercial and Consumer Banking activities in locations in Washington, California, Oregon, Hawaii, Idaho, and UtahUtah. As of December 31, 2023, we operated in fivefour primary commercial lending centers, 6258 retail deposit branches, and one insurance office. WeAs of such date, we also have three generaloperated two facilities for the purpose of administrative facilitiesand other functions in addition to the principal offices: a call center and operations support facility located in Federal Way, Washington, and a loan fulfillment center in Lynnwood, Washington. Of these properties,Other than those we lease, we own sixeight of the retail deposit branches, one of the general administrative facilitiescall center and operations support facility in Federal Way, and we own 50% of a retail branch through a joint venture. All other facilities are leased.

ITEM 3LEGAL PROCEEDINGS

Because the nature of our business involves the collection of numerous accounts, the validity of liens and compliance with various state and federal lending laws, we are subject to various legal proceedings in the ordinary course of our business related to foreclosures, bankruptcies, condemnation and quiet title actions and alleged statutory and regulatory violations. We are also subject to legal proceedings in the ordinary course of business related to employment matters. We do not expect that these proceedings, taken as a whole, will have a material adverse effect on our business, financial position or our results of operations. There are currently no matters that, in the opinion of management, would have a material adverse effect on our consolidated financial position, results of operation or liquidity, or for which there would be a reasonable possibility of such a loss based on information known at this time.

38


ITEM 4MINE SAFETY DISCLOSURES

Not applicable.

28




PART II

ITEM 5MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

Common Stock

Our common stock is traded on the Nasdaq Global Select Market under the symbol "HMST."

As of March 5, 2021,February 29, 2024, there were 2,2952,171 shareholders of record of our common stock.

Dividend Policy

In January 2020, HomeStreet's Board of Directors approvedHomeStreet has a dividend policy that contemplates the payment of quarterly cash dividends on our common stock when, if and in an amount declared by the Board of Directors after taking into consideration, among other things, earnings, regulatory capital levels, the overall payout ratio and expected asset growth. Under this policy, we declared and paid a cash dividendThe Company currently does not intend on paying dividends in 2024. The determination of $0.15 per share in each quarter of 2020. In January 2021, we declared a cash dividend of $0.25 per share paid on February 24, 2021. The payment ofwhether to pay a dividend and the dividend rate to be paid will be reassessed each quarter by the Board of Directors in accordance with the dividend policy. OurOur ability to pay dividends to shareholders is dependent on many factors, including the Bank's ability to pay dividends to the Company. Therefore, we cannot give assurance that we will be able to continue to pay a regular dividend in any future period.

Sales of Unregistered Securities

There were no sales of unregistered securities induring the fourth quarter of 2020.

Purchases of Equity Securities by the Issuer

Shares repurchased pursuant to the common equity repurchase program during the three months ended December 31, 2020, were as follows.
(in thousands, expect share and per share information)
Total shares of common stock purchased
Average price paid per share of common stock
Dollar value of remaining authorized for repurchase (1)
October209,820 $28.93 $— 
November— — — 
December— — — 
Total209,820 $28.93 
2023.


(1) Stock repurchases in October were made pursuant to a Board authorized share repurchase program approved on July 23, 2020 pursuant to which the Company could purchase up to $25 million of its issued and outstanding common stock, no par value, at prevailing market rates at the time of such purchase. During October 2020, the Company completed this repurchase authorization.

29




Stock Performance Graph

This performance graph shall not be deemed "soliciting material" or to be "filed" with the SEC for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (Exchange Act), or otherwise subject to the liabilities under that Section, and shall not be deemed to be incorporated by reference into any filing of HomeStreet, Inc. under the Securities Act of 1933, as amended, or the Exchange Act.

The following graph shows a comparison from December 31, 2015 through December 31, 2020 of the cumulative total return for our common stock, the Russell 2000 Index (RUT) and the KBW Regional Banking Index ("KRX"). The graph assumes that $100 was invested at the market close on December 31, 2015 in the common stock of HomeStreet, Inc., the Russell 2000 Index, the KBW Regional Banking Index and data for HomeStreet, Inc., the Russell 2000 Index and the KBW Regional Banking Index assumes reinvestments of dividends. The stock price performance of the following graph is not necessarily indicative of future stock price performance.


hmst-20201231_g1.jpg



ITEM 6The Company has applied the amendment to Regulation S-K Item 301 which became effective on February 10, 2021.Reserved.
3039



ITEM 7MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

General

Management’s discussion and analysis of results of operations and financial condition ("MD&A") is intended to assist the reader in understanding and assessing significant changes and trends related to the results of operations and financial position of our consolidated Company. This discussion and analysis should be read in conjunction with the consolidated financial statements and accompanying footnotes in Part II, Item 8 of this Form 10-K. A comparison of the financial results for the year ended December 31, 2022 to the year ended December 31, 2021, is included in Part II, Item 7, "Management Discussion and Analysis of thisFinancial Condition and Results of Operations" in our Annual Report on Form 10-K.10-K for the year ended December 31, 2022.

Management's Overview of 20202023 Financial Performance

Results for 2019 and 2018 reflect the impact of the adoption in the first quarter of 2019 of a plan of exit or disposal with respect to the stand-alone home loan center-based mortgage origination and related servicing businesses, which comprised the bulk of our legacy mortgage banking business, as discontinued operations. Discontinued operations reported in the first quarter of 2019 included our entire former mortgage banking business as did all prior periods presented. Effective April 1, 2019, the newly organized bank location-based mortgage banking business commenced operations and the associated direct revenues and direct expenses were reported as part of the Company's continuing operations and thereafter ("Retained MB Business"). Discontinued operations accounting was concluded as of January 1, 2020.

Recent Developments

Proposed Merger Transaction
COVID-19 Pandemic
On January 16, 2024,the Company entered into a definitive merger agreement with FirstSun, the holding company of Sunflower Bank whereby HomeStreet and HomeStreet Bank will merge with and into FirstSun and Sunflower Bank, respectively. 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 outbreak of COVID-19 has adversely impacted a broad range of industries across the region where the Company’s customers operate and could impair their abilityMerger is expected to fulfill their financial obligations to the Company. The World Health Organization has declared COVID-19 to be a global pandemic and as a result almost all public commerce and related business activities have been and continue to be, to varying degrees, curtailed with the goal of decreasing the rate of new infections. The spread of the outbreak has caused significant disruptionsclose in the U.S. economy and has disrupted business and other financial activity in the areas in which the Company operates.
The federal government, including the Federal Reserve have taken several actions designed to cushion the economic fallout related to the COVID-19 pandemic. The CARES Act was signed into law at the endmiddle of March 2020 as a $2 trillion legislative package, which was further expanded in April 2020 by $484 billion. The goal of the CARES Act is to prevent a severe economic downturn through various measures, including direct financial aid to American families and economic stimulus to significantly impacted industry sectors. The package also includes extensive emergency funding for hospitals and health care providers.
On December 27, 2020 the Coronavirus Response and Relief Supplemental Appropriations Act, 2021 ("CRRSA Act") was signed into law, providing additional coronavirus aid for businesses and individuals. This $2.3 trillion dollar legislative package includes $900 billion in additional stimulus relief for the COVID-19 pandemic.

While it is not possible to know the full extent of the impacts of COVID-19 on the Company’s operations, including any additional mitigation measures that may be imposed to curtail its spread, the Company is disclosing potentially material items of which it is aware.

Financial position and results of operations

The Company’s net interest income could be reduced due to COVID-19. In keeping with guidance from regulators, the Company has worked with COVID-19 affected borrowers to defer their payments. While loans will continue to accrue interest during the initial or extended deferral periods, should the economic downturn persist causing the borrowers’ financial situation to deteriorate, we would potentially need to reverse interest income and could sustain credit losses on these loans. In such a scenario, interest income and provision for credit losses in future periods could be negatively impacted. At this time, the Company is unable to project the materiality of such an impact but recognizes the breadth of the economic impact may affect certain borrowers’ ability to repay in future periods.


31


2024.


CreditEconomic and Market Conditions

The Company is working with customers directly affected by COVID-19. The Company has and is prepared to offer short-term assistance in accordance with banking regulatory guidelines. As a result of the current economic environment causedOur financial results have been adversely impacted by the COVID-19 pandemic,historically significant increase in short-term interest rates by the Company is engagingFederal Reserve during 2022 and 2023. This dramatic increase in more frequent communication with borrowersrates resulted in significant reductions in loan demand, particularly in single family mortgage. Accordingly, our gain on loan sales activities declined significantly and are expected to better understand theirremain at low levels in 2024. Additionally, our interest sensitive deposits declined as customers moved funds to higher yielding products both at our Bank and at other financial situationinstitutions and brokerage firms. We have taken a number of steps to reduce the challenges faced, allowing it to respond proactively as needs and issues arise. Should economic conditions worsen, whether due to the COVID-19 pandemic or otherwise, the Company could experience further increases in its required allowance for credit losses and record additional provision for credit losses. It is possible that the Company’s asset quality measures could worsen at future measurement periods if the effects of COVID-19 pandemic are prolonged.

Goodwill Impairment Analysis

We evaluated goodwill for impairment at June 30, 2020 and basedpressure on our impairment assessment determinedfunding base, including: (i) significantly reducing our goodwill assets were not impaired. COVID-19 could cause a furtherlevel of loan originations; (ii) introducing promotional priced deposit products which allow us to attract and sustained declineretain deposits without repricing our existing interest-bearing deposit base;(iii) entering into $1 billion of fixed-rate Federal Home Loan Bank advances in the Company’s stock price orfourth quarter of 2022; and (iv) completing the occurrenceacquisition of what management would deem to be a triggering event that could, under certain circumstances, cause us to perform another goodwill impairment test which may result in an impairment charge being recorded to earnings for that period.

Processes, controls and business continuity plan

The Company has implemented a business continuity plan that includes a remote working strategy and a social distancing and sanitation plan. The Company does not anticipate incurring material additional costs related to its continued deployment of the business continuity plan. No material operational failures or internal control challenges have been identified to date. The Company does not anticipate significant challenges to its ability to maintain its systems and controls in light of the measures the Company has taken to prevent the spread of COVID-19. The Company does not currently face any material resource constraints through the implementation of its business continuity plans, but staffing remains a risk if key employees or a large number of employees were to become ill and unable to work. The Company has taken significant measures to protect its employees, such as having most work remotely from home under stay at home orders and where remote work is not viable, implemented a social distancing and sanitation plan. At March 1, 2021, all of our retail depositthree California branches were open and operating under the guidelines issued by Federal, state and regional health departments.

Lending operations and accommodations to borrowers

In keeping with regulatory guidance to work with borrowers during this unprecedented situation and as outlined in the CARES Act and the CRRSA Act, the Company has executed multiple assistance programs including loan forbearance programs for its lending customers that are adversely affected by the COVID-19 pandemic. In accordance with the CARES Act and the CRRSA Act, loans granted forbearance due to COVID-19 are not currently considered TDRs.

With the passage of the PPP, administered by the Small Business Administration (“SBA”), the Company assisted its customers with applications for resources through the program. PPP loans generally have a two-year term and bear interest at 1%. Additionally, the Company is paid fees by the SBA based upon the sliding fee scale established for the PPP program. The weighted average fee for these loans was 3.3% and the Company will recognize these fees over the contractual life of the related loan, which will be accelerated if the loan is paid off prior to its maturity. The Company believes that a significant portion of these loans will ultimately be forgiven by the SBA in accordance with the terms of the program at which time the SBA pays off the loans. In 2020, the Company originated 1,822 PPP loans representing $298 million in outstanding balances, of which $277 million was still outstanding as of December 31, 2020. The PPP program was extended in the first quarter of 2021. Loans under this extended program2023. Inflationary pressures have a five year term. As of March 1, 2021, the Company has closed or approved 865 additional PPP loans representing $98 millionadversely impacted our operations by increasing our costs, primarily compensation costs which we expect to be higher in outstanding balances. The loans funded through the PPP program are fully guaranteed by the U.S. government.

Summary

The extent to which the COVID-19 pandemic affects the Company’s future financial results and operations will depend on future developments which are uncertain and unpredictable, including new information which continues to emerge concerning the expected duration and broad impacts of the pandemic both social and economic, and current or future domestic and international actions in response to the pandemic and its effects. In addition, due to these uncertainties, we do not know ifdividends will be declared in future periods.

32


2024.


Other Items

As partDue to the impacts of the significant increases in short term rates by the Federal Reserve in 2023, and as a result of our capital management strategy, in 2020,actions taken to address the impact of these increases, we repurchased a total of 2,205,665 sharesexpect the balance of our common stock at an average price of $26.31 per share, representing 9.2% of the outstanding shares at December 31, 2019. On January 28, 2021, the Board of Directors approved an extension of the Company's share repurchase programloans held for upinvestment to $25 million of its common stock.stay relatively stable during 2024 and our net interest margin to be lower in 2024 as compared to 2023.

Critical Accounting Policies and Estimates

The following discussion and analysis of financial condition and results of operations are based upon our consolidated financial statements and the notes thereto, which have been prepared in accordance with generally accepted accounting principles in the United States ("GAAP") and accounting practices in the banking industry. Certain of those accounting policies are considered critical accounting policies because they require us to make estimates and assumptions regarding circumstances or trends that could materially affect the value of those assets, such as economic conditions or trends that could impact our ability to fully collect our loans or ultimately realize the carrying value of certain of our other assets. Those estimates and assumptions are made based on current information available to us regarding those economic conditions or trends or other circumstances. If changes were to occur in the events, trends or other circumstances on which our estimates or assumptions were based, these changes could have a material adverse effect on the carrying value of assets and liabilities and on our results of operations. We have identified two policies and estimates as being critical because they require management to make particularly difficult, subjective, and/or complex judgments about matters that are inherently uncertain and because of the likelihood that materially different amounts would be reported under different conditions or using different assumptions. These policies relate to the allowance for credit losses ("ACL") and the valuation of residential mortgage servicing rights ("MSR").

Our
40


The ACL is established through a provision forcalculated based on quantitative and qualitative factors to estimate credit losses charged to expense and may be reduced by a recapture of previously established loss reserves, which are also reflected in the income statement. Loans are charged-off against the ACL when management believes that collectability of the principal is unlikely. The CECL model requires the ACL to cover estimated credit losses expected over the life of an exposure. This evaluation takes into considerationthe loan. The inputs used to determine quantitative factors include estimates based on historical experience of probability of default and loss given default. Inputs used to determine qualitative factors include changes in current portfolio characteristics and operating environments such factors as current economic projections,and forecasted unemployment rates, capitalization rates used to value properties securing loans, rental rates and single family pricing indexes. Qualitative factors may also include adjustments to address matters not contemplated by the model we use and to assumptions used to determine qualitative factors. Although we believe that our methodology for determining an appropriate level for the ACL adequately addresses the various components that could potentially result in credit losses, the processes and their elements include features that may be susceptible to significant change. Any unfavorable differences between the actual outcome of credit-related events and our estimates could require an additional provision for credit losses. For example, if the projected payment estimates,unemployment rate was downgraded one grade for all periods, the amount of the ACL at December 31, 2023 would increase by approximately $8 million. This sensitivity analysis is hypothetical and has been provided only to indicate the potential impact that changes in assumptions may have on the nature and volume of the loan portfolio, overall portfolio quality, review of specific problem loans, and certain other factors that may affect the borrower’s ability to pay. While we use the best information available to make this evaluation, future adjustments to our ACL may be necessary if there are significant changes in economic or other conditions that can affect the collectability of loans in our loan portfolio.estimate.

MSRs are recognized as separate assets when servicing rights are acquired through the sale of loans or purchased.through purchases. of MSRs For sales of mortgage loans, the fair value of the MSR is estimated and capitalized. Purchased MSRs are capitalized at the cost to acquire. Initial and subsequent fair value measurements are determined using a discounted cash flow model. To determine the fair value of the MSR, the present value of expected net future cash flows is estimated. Assumptions used include market discount rates, anticipated prepayment speeds, delinquency and foreclosure rates, and ancillary fee income net of servicing costs. This model is periodically validated by an independent model validation group. The model assumptions and the MSR fair value estimates are also compared to observable trades of similar portfolios as well as to MSR broker valuations and industry surveys, as available. We also utilize a third partythird-party valuation firm to value our MSRs on a periodic basis, the results of which we utilize as a baseline foruse to evaluate the reasonableness of our valuation modeling.modeled values. Actual market conditions could vary significantly from current conditions which could result in the estimated life of the underlying loans being different which would change the fair value of the MSR. We measurecarry our single family residential mortgage servicing assetsMSRs at fair value and report changes in fair value through earnings. MSRs for loans other than single family loans are adjusted to fair value if the carrying value is higher than fair value and are amortized into non-interestnoninterest income in proportion to, and over the period of, the estimated future net servicing income of the underlying financial assets.
3341





Summary Financial Data
 For the Years Ended December 31,
(dollars in thousands, except per share data)202020192018
Select Income statement data:
Net interest income$208,662 $189,390 $189,963 
Provision for credit losses20,469 (500)3,000 
Noninterest income149,364 74,432 36,533 
Noninterest expense235,663 215,614 195,241 
Net income79,990 17,512 40,027 
Income from continuing operations: (1)
Before income taxes101,894 48,708 28,255 
Total79,990 40,720 26,223 
Income per share - diluted$3.47 $1.55 $0.97 
Select Performance Ratios:
Return on average equity
Net income11.3 %2.5 %5.7 %
Income from continuing operations11.3 %5.9 %3.7 %
Return on average tangible equity (2)
Net income12.1 %2.9 %6.2 %
Income from continuing operations12.1 %6.4 %4.1 %
Return on average assets
Net income1.1 %0.3 %0.6 %
Income from continuing operations1.1 %0.6 %0.4 %
Efficiency ratio (2)
61.4 %79.4 %87.2 %
Net interest margin3.13 %3.05 %3.26 %
Other Data:
Full time equivalent employees (3)
1,013 1,071 2,036 
 For the Years Ended December 31,
(dollars in thousands, except per share data and FTE data)20232022
Select Income Statement data:
Net interest income$166,753 $233,307 
Provision for credit losses(441)(5,202)
Noninterest income41,921 51,570 
Noninterest expense241,872 205,419 
Net income (loss):
Before income tax (benefit) expense(32,757)84,660 
Total(27,508)66,540 
Net income (loss) per fully diluted share$(1.46)$3.49 
Core net income (loss): (1)
Total8,284 66,540 
Core net income (loss) per fully diluted share$0.44 $3.49 
Select Performance Ratios:
Return on average equity(5.0)%10.8 %
Return on average tangible equity (1)
2.0 %11.5 %
Return on average assets
Net income (loss)(0.29)%0.79 %
Core (1)
0.09 %0.79 %
Efficiency ratio (1)
95.6 %72.4 %
Net interest margin1.88 %2.99 %
Other Data:
Full time equivalent employees902 942 
(1)Discontinued operations accounting was terminated effective January 1, 2020.
(2)ReturnCore net income (loss), core net income (loss) per fully diluted share, return on average tangible equity, core return on average assets and the efficiency ratio are non-GAAP financial measures. SeeFor a reconciliation of core net income, core return on average assets and return on average tangible equity to the nearest comparable GAAP financial measure and the computation of the efficiency ratio, see “Non-GAAP Financial Measures” elsewhere in this MD&A.
(3)For the fourth quarterManagement’s Discussion and Analysis of the corresponding year.Financial Condition and Results of Operations.
3442





Summary Financial Data (continued)
 As of December 31,
(dollars in thousands, except share and per share data)202020192018
Selected Balance Sheet Data:
Loans held for sale$361,932 $208,177 $77,324 
Loans held for investment, net5,179,886 5,072,784 5,075,371 
ACL64,294 41,772 41,470 
Investment securities1,076,364 943,150 923,253 
Total assets7,237,091 6,812,435 7,042,221 
Deposits5,821,559 5,339,959 4,888,558 
Borrowings322,800 471,590 951,590 
Long-term debt125,838 125,650 125,462 
Total shareholders' equity717,750 679,723 739,520 
Other data:
Book value per share32.93 28.45 27.39 
Tangible book value per share(1)
31.42 27.02 26.36 
Total equity to total assets9.9 %10.0 %10.5 %
Tangible common equity to tangible assets (1)
9.5 %9.5 %10.1 %
Shares outstanding at period end21,796,904 23,890,855 26,995,348 
Loans to deposit ratio96.3 %99.7 %106.3 %
Credit quality:
ACL to total loans (2) (3)
1.33 %0.82 %0.81 %
ACL to nonaccrual loans (3)
310.3 %324.8 %356.9 %
Nonaccrual loans to total loans0.40 %0.25 %0.23 %
Nonperforming assets/total assets0.31 %0.21 %0.17 %
Nonperforming assets$22,097 $14,254 $12,074 
Regulatory Capital Ratios:
Bank
Tier 1 leverage ratio9.79 %10.56 %10.15 %
Total risk-based capital14.76 %14.37 %14.72 %
Company
Tier 1 leverage ratio9.65 %10.16 %9.51 %
Total risk-based capital14.00 %13.40 %13.27 %

 As of December 31,
(dollars in thousands, except share and per share data)20232022
Selected Balance Sheet Data:
Loans held for sale ("LHFS")$19,637 $17,327 
Loans held for investment ("LHFI"), net7,382,404 7,384,820 
ACL40,500 41,500 
Investment securities1,278,268 1,400,212 
Total assets9,392,450 9,364,760 
Deposits6,763,378 7,451,919 
Borrowings1,745,000 1,016,000 
Long-term debt224,766 224,404 
Total shareholders' equity538,387 562,147 
Other data:
Book value per share$28.62 $30.01 
Tangible book value per share (1)
$28.11 $28.41 
Total equity to total assets5.7 %6.0 %
Tangible common equity to tangible assets (1)
5.6 %5.7 %
Shares outstanding at period end18,810,055 18,730,380 
Loans to deposits ratio110.0 %99.9 %
Credit quality:
ACL to total loans (2)
0.55 %0.57 %
ACL to nonaccrual loans
103.9 %412.7 %
Nonaccrual loans to total loans0.53 %0.14 %
Nonperforming assets to total assets0.45 %0.13 %
Nonperforming assets$42,643 $11,893 
Regulatory Capital Ratios:
Bank
Tier 1 leverage ratio8.50 %8.63 %
Total risk-based capital13.49 %12.59 %
Common equity Tier 1 capital12.79 %11.92 %
Company
Tier 1 leverage ratio7.04 %7.25 %
Total risk-based capital12.84 %11.53 %
Common equity Tier 1 capital9.66 %8.72 %
(1)Tangible book value per share and tangible common equity to tangible assets are non-GAAP financial measures. SeeFor a reconciliation to the nearest comparable GAAP financial measure, see “Non-GAAP Financial Measures” elsewhere in this MD&A.Management's Discussion and Analysis of Financial Condition and Results of Operations.
(2)This ratio excludes balances insured by the FHA or guaranteed by the VA or SBA, including PPP loans.
(3) Prior to January 1, 2020 and the adoption of ASU 2016-13 CECL, the allowance for loan losses was used in this calculation in place of ACL.

SBA.

3543




Results of Operations

20202023 Compared to 20192022

General: Our net income from continuing operations(loss) and income from continuing operations(loss) before income taxes were $80.0$(27.5) million and $101.9$(32.8) million, respectively, in 2020,2023, as compared to $40.7$66.5 million and $48.7$84.7 million, respectively, in 2019.2022. Our core net income and core income before taxes in 2023, which excludes the impact of the goodwill impairment charge and merger related expenses, was $8.3 million and $8.6 million, as compared to $66.5 million and $84.7 million, respectively, in 2022. The $53.2$76.1 million increasedecrease in core income from continuing operations before income taxes was due to higherlower net interest income, and noninterest income, which was partially offset by a higher provisionlower recovery of allowance for credit losses and higherlower noninterest expenses.income, partially offset by lower noninterest expense.

Income Taxes: Our effective tax rate of 16.0% during 20202023 was 21.5% as compared to 16.4% in 2019significantly impacted by the goodwill impairment charge, a portion of which was not deductible for continuing operationstax purposes and a statutory ratethe benefits of 23.5%.tax advantaged investments which were higher than our core income before taxes. Our effective tax rate in 2022 of 21.4% was lower than ourthe statutory rate due primarily to the benefits of tax advantaged investments. In 2019,investments and reductions in taxes on income related to excess tax benefits resulting from the benefitsvesting of tax advantaged investments were a higher proportion of total earnings, resulting in a lower effective tax rate.stock awards during the period.

Net Interest Income: The following table presents,sets forth, for the periods indicated, information regarding (i) the total dollar amount of interest income from interest-earning assets and the resultingresultant average yields on those assets; (ii) the total dollar amount of interest expense and the average rate of interest on our interest-bearing liabilities; (iii) net interest income; (iv) net interest rate spread; and (v) net yield on interest-earning assets:interest margin:
Years Ended December 31,
 20202019
(dollars in thousands)Average
Balance
InterestAverage
Yield/Cost
Average
Balance
InterestAverage
Yield/Cost
      
Assets:
Interest-earning assets:
Loans (2)
$5,544,847 $229,813 4.10 %$5,366,839 $256,752 4.78 %
Investment securities (2)
1,086,415 24,507 2.26 %840,493 22,027 2.62 %
FHLB Stock, Fed Funds and other63,443 1,227 1.90 %75,436 1,032 1.37 %
Total interest-earning assets6,694,705 255,547 3.78 %6,282,768 279,811 4.45 %
Noninterest-earning assets555,929 502,603 
Discontinued operations, net— 105,347 
Total assets$7,250,634 $6,890,718 
Interest-bearing liabilities
Deposits:(1)
Demand deposits$435,830 929 0.21 %$382,333 $1,414 0.37 %
Money market and savings2,661,996 12,086 0.45 %2,280,455 27,785 1.22 %
Certificates of deposit1,245,513 20,782 1.67 %1,846,709 41,190 2.23 %
Total deposits4,343,339 33,797 0.78 %4,509,497 70,389 1.56 %
Borrowings:
Borrowings604,278 3,773 0.62 %461,244 11,005 2.39 %
Long-term debt125,737 5,780 4.58 %125,550 6,822 5.41 %
Total interest-bearing liabilities5,073,354 43,350 0.85 %5,096,291 88,216 1.73 %
Noninterest-bearing liabilities
Demand deposits (1)
1,276,780 891,529 
Other liabilities194,340 207,995 
Total liabilities6,544,474 6,195,815 
Shareholders' equity706,160 694,903 
Total liabilities and shareholders’ equity$7,250,634 $6,890,718 
Net interest income
$212,197 $191,595 
Net interest rate spread2.93 %2.72 %
Net yield on interest earning assets3.13 %3.05 %

Years Ended December 31,
 20232022
(dollars in thousands)Average
Balance
InterestAverage
Yield/Cost
Average
Balance
InterestAverage
Yield/Cost
Assets:
Interest-earning assets
Loans (1)
$7,474,410 $342,152 4.54 %$6,596,284 $267,672 4.02 %
Investment securities (1)
1,382,378 53,346 3.86 %1,195,995 37,986 3.18 %
FHLB Stock, Fed Funds and other165,568 8,873 5.33 %105,028 3,622 3.40 %
Total interest-earning assets9,022,356 404,371 4.45 %7,897,307 309,280 3.88 %
Noninterest-earning assets446,814 498,771 
Total assets$9,469,170 $8,396,078 
Interest-bearing liabilities
Interest-bearing deposits: (2)
Demand deposits$385,276 $917 0.24 %$521,424 $755 0.14 %
Money market and savings2,235,348 30,874 1.37 %2,941,699 12,913 0.44 %
Certificates of deposit2,768,594 106,129 3.83 %1,328,290 18,345 1.38 %
Total5,389,218 137,920 2.56 %4,791,413 32,013 0.67 %
Borrowings:
Borrowings1,752,454 82,861 4.68 %1,024,344 29,085 2.81 %
Long-term debt224,574 12,209 5.41 %219,398 9,883 4.49 %
Total interest-bearing liabilities7,366,246 232,990 3.15 %6,035,155 70,981 1.17 %
Noninterest-bearing liabilities
Demand deposits (2)
1,430,151 1,624,223 
Other liabilities120,539 119,231 
Total liabilities8,916,936 7,778,609 
Shareholders' equity552,234 617,469 
Total liabilities and shareholders’ equity$9,469,170 $8,396,078 
Net interest income
$171,381 $238,299 
Net interest rate spread1.30 %2.71 %
Net interest margin1.88 %2.99 %
(1)Cost of deposits, including noninterest bearing demand deposits, was 0.60% and 1.30% for 2020 and 2019, respectively.
(2)Includes taxable-equivalent adjustments primarily related to tax-exempt income on certain loans and securities of $3.5$4.6 million and $2.2$5.0 million for 20202023 and 2019,2022, respectively. The estimated federal statutory tax rate used was 21% for both 20202023 and 2019.2022.

(2)

Cost of all deposits, including noninterest-bearing demand deposits, was 2.02% and 0.50% for 2023 and 2022, respectively.
3644




Rate and Volume Analysis

The following table presents the extent to which changes in interest rates and changes in the volume of our interest-earning assets and interest-bearing liabilities have affected our interest income and interest expense, excluding interest income from nonaccrual loans. Information is provided in each category with respect to: (1) changes attributable to changes in volume, (2) changes attributable to changes in rate and (3) the net change.
 2020 vs. 2019
 Increase (Decrease) Due toTotal Change
(in thousands)RateVolume
Assets:
Interest-earning assets
Loans$(35,716)$8,777 $(26,939)
Investment securities(3,357)5,837 2,480 
FHLB stock, Fed Funds and other371 (176)195 
Total interest-earning assets(38,702)14,438 (24,264)
Liabilities:
Deposits
Demand deposits(662)177 (485)
Money market and savings(19,741)4,042 (15,699)
Certificates of deposit(8,903)(11,505)(20,408)
Total interest-bearing deposits(29,306)(7,286)(36,592)
Borrowings:
Borrowings(9,913)2,681 (7,232)
Long-term debt(1,052)10 (1,042)
Total interest-bearing liabilities(40,271)(4,595)(44,866)
Total changes in net interest income$1,569 $19,033 $20,602 

 2023 vs. 2022
 Increase (Decrease) Due toTotal Change
(in thousands)RateVolume
Assets:
Interest-earning assets
Loans$36,584 $37,896 $74,480 
Investment securities8,906 6,454 15,360 
FHLB stock, Fed Funds and other2,603 2,648 5,251 
Total interest-earning assets48,093 46,998 95,091 
Liabilities:
Deposits
Demand deposits396 (234)162 
Money market and savings21,696 (3,735)17,961 
Certificates of deposit54,500 33,284 87,784 
Total interest-bearing deposits76,592 29,315 105,907 
Borrowings:
Borrowings26,051 27,725 53,776 
Long-term debt2,085 241 2,326 
Total interest-bearing liabilities104,728 57,281 162,009 
Total changes in net interest income$(56,635)$(10,283)$(66,918)

Net interest income was higher in 20202023 decreased $66.6 million as compared to 20192022 due primarily to a $412 million increase in interest earning assets and an increasedecrease in our net interest margin from 3.05%partially offset by increases in 2019 to 3.13% in 2020.the average balance of interest earning assets. The increase in interest earningthe average balance of our interest-earning assets was primarily due to higher levels of loan originations and purchases of investment securities in 2020. The increase in ourduring 2022. Our net interest margin wasdecreased from 2.99% in 2022 to 1.88% in 2023 due to a 21198 basis point increase in our net interest rate spreadthe rates paid on interest-bearing liabilities which was partially offset by a 57 basis point increase in the reduced benefityield on interest earning assets. Yields on interest-earning assets increased as the yields on loan originations during the last two years were higher than the rates of noninterest bearing depositsour existing portfolio of loans and yields on adjustable rate loans increased due to increases in a lower interest rate environment. Our net interest rate spread increased because decreasesthe indexes on which their pricing is based. The higher yields on our investment securities were primarily due to adjustments to yields realized from longer estimated lives of certain securities and the yields of securities purchased during the past year being higher than the yields on our existing portfolio. The increase in the rates paid on interest bearingour interest-bearing liabilities were greater than the decrease in yields on interest earning assets. The 67 basis point decrease in yield on interest earning assets was due to an increase in the origination of loans and purchases of securities at current market rates which were below our portfolio rates, the ongoing repricing down of variable rate loans and the prepayment and paydownproportion of higher yielding loanscost borrowings and investment securitiesa decrease in our portfolios. Our costthe proportion of noninterest-bearing deposits to the total balance of interest-bearing liabilities, decreased 88 basis points from 1.73%higher deposit costs and higher borrowing costs. The increases in 2019 to 0.85% in 2020the rates paid on deposits were due to a decreasethe significant increase in market interest rates which allowed usover the prior year and the decrease in the proportion of noninterest-bearing deposits to repricetotal deposits. Our average borrowings increased by $728 million to fund the growth of our depositsloan portfolio and investment securities. Our cost of borrowings at lower rates.increased from 281 basis points during 2022 to 468 basis points during 2023 due to the significant increase in market interest rates during the last two years.

Provision for Credit Losses: The provisionA $0.4 million recovery of our allowance for credit losses was $20.5 million for 2020 asrecognized during 2023 compared to a reversal$5.2 million recovery of $0.5 million in 2019. Due to adverse economic conditions related to the COVID-19 pandemic, we recorded additional provisionsour allowance for credit losses in 2020 as an estimate2022. The recovery of our allowance for credit losses in 2022 was the result of the potential adversefavorable performance of our loan portfolio, a stable low level of nonperforming assets and an improved outlook of the estimated impact of those conditionsCOVID-19 on our loan portfolio. The estimate included an evaluation of the credit risk related to the commercial business loans and commercial real estate loans granted COVID-19 modifications during 2020 which we believe will experience a higher probability of default and increased credit losses.


3745




Noninterest income consisted of the following.following: 
Years Ended December 31, Years Ended December 31,
(in thousands)(in thousands)20202019(in thousands)20232022
Noninterest incomeNoninterest income
Noninterest income
Noninterest income
Gain on loan origination and sale activities (1)
Gain on loan origination and sale activities (1)
Gain on loan origination and sale activities (1)
Gain on loan origination and sale activities (1)
Single familySingle family$100,795 $86,686 
Commercial real estate, multifamily and SBA21,769 17,492 
Less: Amounts attributed to discontinued operations— (60,056)
Single family
Single family
CRE, multifamily and SBA
Loan servicing incomeLoan servicing income9,491 9,785 
Deposit feesDeposit fees7,083 7,926 
OtherOther10,226 12,599 
Total noninterest incomeTotal noninterest income$149,364 $74,432 
(1) IncludesMay include loans originated as held for investment.

Loan servicing income, a component of noninterest income, consisted of the following.following:
 Years Ended December 31,
(in thousands)20202019
Single family servicing income, net:
Servicing fees and other$17,477 $28,442 
Changes - amortization (1)
(17,754)(20,670)
Net(277)7,772 
Risk management, single family MSRs:
Changes in fair value due to assumptions (2)(3)
(19,955)(16,224)
Net gain from derivatives hedging20,820 14,435 
Subtotal865 (1,789)
Single family servicing income$588 $5,983 
Commercial loan servicing income:
Servicing fees and other$14,560 $11,119 
Amortization of capitalized MSRs(5,657)(5,214)
Total8,903 5,905 
Less: Amounts attributed to discontinued operations— (2,103)
Total loan servicing income$9,491 $9,785 

 Years Ended December 31,
(in thousands)20232022
Single family servicing income (loss), net:
Servicing fees and other$15,523 $15,737 
Changes - amortization (1)
(6,378)(9,951)
Subtotal9,145 5,786 
Risk management, single family MSRs:
Changes in fair value due to assumptions (2)
414 16,739 
Net gain (loss) from economic hedging(1,744)(18,790)
Subtotal(1,330)(2,051)
Total$7,815 $3,735 
Commercial loan servicing income:
Servicing fees and other$10,611 $16,345 
Amortization of capitalized MSRs(5,778)(7,692)
Total4,833 8,653 
Total loan servicing income$12,648 $12,388 
(1)Represents changes due to collection/realization of expected cash flows and curtailments.
(2)Principally reflects changes in market inputs,model assumptions, including prepayment speed assumptions, which include current marketare primarily affected by changes in mortgage interest rates and prepayment model updates, both of which affect future prepayment speeds and cash flow projections.
(3)Includes pre-tax loss of $0.9 million in 2019 from sales of single family MSRs.rates.

The increasedecrease in noninterest income for 2020in 2023 as compared to 2019,2022 was due to an increasea decrease in gain on loan origination and sale activities. This increaseactivities and other income, which was partially offset by higher deposit fees. The $8.4 million decrease in gain on loan origination and sale activities was due to higher volumes ofa $4.6 million decrease in single family mortgage rate locks and an increase in related profit margins, an increase in the volumes and profit margins on the sale of CRE loans and the classification of $18 million of gain on loan sales associated withorigination and sale activities and a $3.8 million decrease in commercial real estate and commercial and industrial gain on loan origination and sale activities. The decrease in single family gain on loan origination and sale activities was due to a decrease in rate lock volume as a result of the legacyeffects of increasing mortgage businessinterest rates. The decrease in commercial real estate and commercial and industrial gain on loan origination and sale activities was primarily due to an 82% decrease in loans sold as discontinued operationsa result of increasing interest rates. The $2.8 million decrease in the first quarterother income was primarily due to a $4.3 million gain on sale of 2019.

branches realized in 2022. The $1.3 million increase in deposit fee income was primarily due to higher early withdrawals fees.

3846




Noninterest expense consisted of the following.following:
Years Ended December 31, Years Ended December 31,
(in thousands)(in thousands)20202019(in thousands)20232022
Noninterest expenseNoninterest expense
Noninterest expense
Noninterest expense
Compensation and benefits
Compensation and benefits
Compensation and benefitsCompensation and benefits$136,826 $124,354 
Information servicesInformation services30,004 31,603 
OccupancyOccupancy35,323 27,119 
General, administrative and otherGeneral, administrative and other33,510 32,538 
Goodwill impairment charge
Total noninterest expenseTotal noninterest expense$235,663 $215,614 

The $20$36.5 million increase in noninterest expenseexpenses in 20202023 as compared to 20192022 was due to increases in compensationa $39.9 million goodwill impairment charge and benefits, occupancy costs andhigher general, administrative and other costs which were partially offset by lower information servicescompensation and benefit costs and occupancy costs. The increase$4.5 million decrease in compensation and benefitsbenefit costs was primarily due to increased commissionsreduced commission expense on lower loan origination volumes in our single family mortgage operations, lower staffing levels and bonuses paid on higher loan originations levels, including loans made under PPP and the classification of $7 million of compensation and benefits costs associated with the legacy mortgage business as discontinued operations in the first quarter of 2019lower bonus expense, which were partially offset by reduced levels of staffing and lowerwage increases given in 2023, higher medical costs ofrelated to our self-insured medical benefits. Occupancy expensesprogram and a reduction in 2020 included $10.2 milliondeferred costs due to lower levels of impairments relatedloan production. FTEs decreased from 970 at the beginning of 2022 to ongoing restructuring913 at the end of our facilities and staffing. Information services costs decreased as a result2022 to 875 at the end of our cost savings initiatives implemented in 2019 and 2020.2023. The increase in general, administrative and administrativeother costs was due primarily to a $1.5 million charge related to the prepayment of certain FHLB advances in 2020.

2019 Compared to 2018

General: Our income from continuing operations and income from continuing operations before income taxes were $40.7 million and $48.7 million, respectively in 2019, as compared to $26.2 million and $28.3 million, respectively, for 2018. The $20.5 million increase in income from continuing operations before income taxes was due to higher noninterest incomeFDIC insurance fees, resulting primarily from our larger asset base, and a lower provision for credit losses which was partially offset by higher noninterest expense.

Income Taxes: Our effective tax rate during 2019 was 16.4% as compared 7.2% for 2018 for continuing operations and a statutory rate of 23.5%. Our effective income tax rate was lower than our statutory rate due primarily to the benefits of tax advantaged instruments. In addition, in 2018, we recognized a benefit of $4.9 million for the revaluation our net deferred tax liability position related to a reduction in corporate tax rates.

39





Net Interest Income: The following table presents, for the periods indicated, information regarding (i) the total dollar amount of interest income from interest-earning assets and the resultant average yields on those assets; (ii) the total dollar amount of interest expense and the average rate of interest on our interest-bearing liabilities; (iii) net interest income; (iv) net interest rate spread; and (v) net yield on interest-earning assets:
Years Ended December 31,
 20192018
(dollars in thousands)Average
Balance
InterestAverage
Yield/Cost
Average
Balance
InterestAverage
Yield/Cost
   
Assets:
Interest-earning assets:
Loans (2)
$5,366,839 $256,752 4.78 %$4,941,372 $229,188 4.64 %
Investment securities (2)
840,493 22,027 2.62 912,279 24,685 2.71 
FHLB Stock, Fed Funds and other75,436 1,032 1.37 53,736 467 0.87 
Total interest-earning assets6,282,768 279,811 4.45 5,907,387 254,340 4.31 
Noninterest-earning assets502,603 374,603 
Discontinued operations, net105,347 333,098 
Total assets$6,890,718 $6,615,088 
Interest-bearing liabilities
Deposits:(1)
Demand deposits$382,333 $1,414 0.37 %$426,610 $1,678 0.39 %
Money market and savings2,280,455 27,785 1.22 2,188,174 18,004 0.82 
Certificates of deposit1,846,709 41,190 2.23 1,436,883 22,313 1.55 
Total deposits4,509,497 70,389 1.56 4,051,667 41,995 1.04 
Borrowings:
Borrowings461,244 11,005 2.39 882,146 12,858 1.46 
Long-term debt125,550 6,822 5.41 125,362 6,646 5.30 
Total interest-bearing liabilities5,096,291 88,216 1.73 5,059,175 61,499 1.22 
Noninterest-bearing liabilities
Demand deposits (1)
891,529 724,509 
Other liabilities207,995 131,524 
Total liabilities6,195,815 5,915,208 
Shareholders' equity694,903 699,880 
 Total liabilities and shareholders’ equity$6,890,718 $6,615,088 
Net interest income$191,595 $192,841 
Net interest rate spread2.72 %3.09 %
Net yield on interest-earning assets3.05 %3.26 %

(1)Cost of deposits, including noninterest-bearing deposits, was 1.30% and 0.88% in 2019 and 2018, respectively.
(2)Includes taxable-equivalent adjustments primarily related to tax-exempt income on certain loans and securities of $2.2 million and $2.9 million for 2019 and 2018, respectively. The estimated tax rate used was 21% for both 2019 and 2018.


40




Rate and Volume Analysis.The following table presents the extent to which changes in interest rates and changes in the volume of our interest-earning assets and interest-bearing liabilities have affected our interest income and interest expense, excluding interest income from nonaccrual loans. Information is provided in each category with respect to: (1) changes attributable to changes in volume, (2) changes attributable to changes in rate and (3) the net change.

 2019 vs. 2018
 Increase (Decrease) Due toTotal Change
(in thousands)RateVolume
Assets:
Interest-earning assets
Loans$7,378 $20,186 $27,564 
Investment securities(759)(1,899)(2,658)
FHLB stock, Fed Funds and other333 232 565 
Total interest-earning assets6,952 18,519 25,471 
Liabilities:
Deposits
Demand deposits(96)(168)(264)
Money market and savings8,992 789 9,781 
Certificate of deposit11,415 7,462 18,877 
Total interest-bearing deposits20,311 8,083 28,394 
Borrowings:
Borrowings5,955 (7,808)(1,853)
Long-term debt166 10 176 
Total interest-bearing liabilities26,432 285 26,717 
Total changes in net interest income$(19,480)$18,234 $(1,246)


Net interest income was lower in 2019 as compared to 2018 as a decrease in the net interest margin was partially offset by an increase in interest-earnings assets. The increase in interest-earning assets was due to higher levels of average loan balances. The decrease in the net interest margin was due to a 37 basis point decrease in the net interest rate spread which was partially offset by an increase in the average balance of noninterest-bearing deposits. The decrease in our net interest rate spread was due to an increase in our cost of interest-bearing liabilities which was only partially offset by an increase in the yield on interest-earning loans. The 14 basis point increase in our yield on loans was due to an increase in market interest rates which resulted in the origination of loans with rates above our current portfolio rates and the ongoing repricing of variable rate loans. The 52 basis point increase in our deposit costs was due to increases in the average balances of higher costing money market, savings and certificate of deposit accounts and increases in the costs of money market, savings and certificate of deposit accounts as rates on these types of deposit accounts were increased to attract new deposits and to respond to increases in market interest rates.

Provision for Credit Losses: The provision for credit losses in 2019 was a reversal of $0.5 million as compared to a provision of $3.0 million 2018. In 2019 and 2018, we realized net recoveries of $0.4 million and $0.8 million, respectively. While no additional provision was needed in 2019 because loans held for investment remained stable, the provision in 2018 was due to an increase in loans held for investment.

41




Noninterest income consisted of the following.
 Years Ended December 31,
(in thousands)20192018
Noninterest income
Gain on loan origination and sale activities (1)
Single family$86,686 $174,473 
Commercial17,492 11,776 
Less: Amounts attributed to discontinued operations(60,056)(174,383)
Loan servicing income9,785 4,823 
Deposit fees7,926 8,019 
Other12,599 11,825 
Total noninterest income$74,432 $36,533 
(1) Includes loans originated as held for investment.

Loan servicing income, a component of noninterest income, consisted of the following.
 Years Ended December 31,
(in thousands)20192018
Single family servicing income, net:
Servicing fees and other$28,442 $60,885 
Changes - amortization (1)
(20,670)(34,705)
Net7,772 26,180 
Risk management, single family MSRs:
Changes in fair value due to assumptions (2) (3)
(16,224)39,348 
Net gain (loss) from derivatives hedging14,435 (40,474)
Subtotal(1,789)(1,126)
Single family servicing income$5,983 $25,054 
Commercial loan servicing income:
Servicing fees and other$11,119 $9,206 
Amortization of capitalized MSRs(5,214)(4,383)
Total5,905 4,823 
Less: Amounts attributed to discontinued operations(2,103)(25,054)
Total loan servicing income$9,785 $4,823 

(1)Represents changes due to collection/realization of expected cash flows and curtailments.
(2)Principally reflects changes in market inputs, which include current market interest rates and prepayment model updates, both of which affect future prepayment speeds and cash flow projections.
(3)Includes pre-tax loss of $0.9 million and pre-tax gain of $0.6 million resulting from the sales of single family MSRs for 2019 and 2018, respectively.

The $37.9 million increase in noninterest income in 2019 as compared to 2018 was due to $31.0$1.5 million of noninterest incomemerger related to the Retained MB Business, all of which was classified as discontinued operations in 2018, and a $5.7 million increase in gains on loans sales of multifamily loans resulting from increases in the volume of loans sold and the profit margin on loans sold.




42




Noninterest expense from continuing operations consisted of the following.
 Years Ended December 31,
(in thousands)20192018
Noninterest expense
Compensation and benefits$124,354 $106,741 
Information services31,603 31,846 
Occupancy27,119 22,352 
General, administrative and other32,538 34,302 
Total noninterest expense$215,614 $195,241 

The $20.4 million increase in noninterest expense in 2019 compared to 2018 was due to $26.3 million of expenses related to the Retained MB Business, all of which was classified as discontinued operations in 2018, and $4.5 million in restructuring costs, which were partially offset by reductions in compensation and benefits and general, administrative and other costs due to cost saving initiatives which reduced our staff levels and other costs.

lower business taxes.
4347





Review of Financial Condition – December 31, 20202023 compared to December 31, 20192022

During 2020,2023, our total assets increased by $425$28 million primarily due to increases in our investment securities and loan portfolios. Loans held for sale increased due to high levels of activity in both our single family and multifamily loans originated for sale. Loans held for investment increased due to $2.8 billion of originations and advances, including the origination of $298 million of loans under PPP, which was partially offset by sales of $569 million and prepayments and scheduled payments of $2.1 billion. Total liabilities increased by $387 million primarily due to a $482$143 million increase in deposits which wascash, partially offset by a $149 million decrease in borrowings.investment securities. During 2023 total liabilities increased $51 million due to an increase in borrowings, partially offset by a decrease in deposits. The increase$689 million decrease in deposits was due to a $544$229 million increasedecrease in businessbrokered certificates of deposit and consumer accounts, duea $1.3 billion decrease in part to the fundingnon-certificates of PPP loans to customer accounts and the addition of new customers through PPP,deposit balances which waswere partially offset by a $62$491 million increase in certificates of deposit balances related to our promotional products. The decrease in wholesale deposits.deposits was offset by $373 million in deposits that we acquired as part of the branch acquisitions completed in the first quarter of 2023. The decreases in wholesale$729 million of additional borrowings were used to replace maturing brokered deposits and borrowings reflect the reduced need for wholesale funding resulting from the increase in deposits.our on-balance sheet cash and cash equivalent balances.

Investment Securities

The fair values of our investment securities available for sale ("AFS") are as follows.follows:
At December 31, At December 31,
20202019
202320232022
(in thousands)(in thousands)Fair ValueFair Value(in thousands)Fair Value
Investment securities AFS:Investment securities AFS:
Investment securities AFS:
Investment securities AFS:
Mortgage-backed securities:Mortgage-backed securities:
Mortgage-backed securities:
Mortgage-backed securities:
Residential
Residential
ResidentialResidential$51,046 $91,695 
CommercialCommercial45,184 38,025 
Collateralized mortgage obligations:Collateralized mortgage obligations:
Residential
Residential
ResidentialResidential234,909 291,618 
CommercialCommercial159,183 156,154 
Municipal bondsMunicipal bonds564,703 341,318 
Corporate debt securitiesCorporate debt securities15,222 18,661 
U.S. Treasury securitiesU.S. Treasury securities— 1,307 
Agency debenturesAgency debentures1,846 — 
TotalTotal$1,072,093 $938,778 
 

44




Loans

The following table details the composition of our loans held for investment ("LHFI")LHFI portfolio by dollar amount.amount:
 At December 31,
(in thousands)2020
2019 (2)
Commercial real estate loans:
Non-owner occupied commercial real estate$829,538 $895,546 
Multifamily1,428,092 999,140 
Construction/land development553,695 701,762 
Total commercial real estate loans2,811,325 2,596,448 
Commercial and industrial loans:
Owner occupied commercial real estate467,256 477,316 
Commercial business645,723 414,710 
Total commercial and industrial loans1,112,979 892,026 
Consumer loans:
Single family (1)
915,123 1,072,706 
Home equity and other404,753 553,376 
Total consumer loans1,319,876 1,626,082 
Total5,244,180 5,114,556 
ACL(64,294)(41,772)
Net$5,179,886 $5,072,784 

 At December 31,
(in thousands)20232022
CRE
Non-owner occupied CRE$641,885 $658,085 
Multifamily3,940,189 3,975,754 
Construction/land development565,916 627,663 
Total5,147,990 5,261,502 
Commercial and industrial loans
Owner occupied CRE391,285 443,363 
Commercial business359,049 359,747 
Total750,334 803,110 
Consumer loans
Single family1,140,279 1,009,001 
Home equity and other384,301 352,707 
Total (1)
1,524,580 1,361,708 
Total LHFI7,422,904 7,426,320 
ACL(40,500)(41,500)
Total LHFI less ACL$7,382,404 $7,384,820 
(1)Includes $7.1$1.3 million and $3.5$5.9 million of loans at December 31, 20202023 and 2019,2022, respectively, where a fair value option election was made at the time of origination and; therefore, are carried at fair value with changes recognized in the consolidated income statements.
(2)Net deferred loans fees and costs of $24.5 million are now included within the carrying amounts of the loan balances as of December 31, 2019, to conform with the current period presentation.
48



The following tables show the contractual maturity of our loan portfolio by loan type.
 December 31, 2020Loans due after one year
by rate characteristic
(in thousands)Within one yearAfter
one year through
five years
After
five
years
TotalFixed-
rate
Adjustable-
rate
Commercial real estate loans:
Non-owner occupied commercial real estate$9,600 $160,614 $659,324 $829,538 $119,032 $700,906 
Multifamily8,035 42,416 1,377,641 1,428,092 14,416 1,405,641 
Construction/land development505,218 47,877 600 553,695 17,917 30,560 
Total commercial real estate522,853 250,907 2,037,565 2,811,325 151,365 2,137,107 
Commercial and industrial loans:
Owner occupied commercial real estate2,904 53,265 411,087 467,256 135,111 329,241 
Commercial business59,780 408,029 177,914 645,723 371,123 214,820 
Total commercial and industrial62,684 461,294 589,001 1,112,979 506,234 544,061 
Consumer:
Single family2,238 1,235 911,650 915,123 256,515 656,370 
Home equity and other28 65 404,660 404,753 26,349 378,376 
Total consumer2,266 1,300 1,316,310 1,319,876 282,864 1,034,746 
Total loans held for investment$587,803 $713,501 $3,942,876 $5,244,180 $940,463 $3,715,914 
type:


45


 December 31, 2023Loans due after one year
by rate characteristic
(in thousands)Within one yearAfter
one year through
five years
After
five
years
TotalFixed-
rate
Adjustable-
rate
CRE
Non-owner occupied CRE$29,737 $213,997 $398,151 $641,885 $101,854 $510,294 
Multifamily2,495 75,380 3,862,314 3,940,189 38,777 3,898,917 
Construction/land development502,033 63,883 — 565,916 28,958 34,925 
Total534,265 353,260 4,260,465 5,147,990 169,589 4,444,136 
Commercial and industrial loans
Owner occupied CRE2,683 91,986 296,616 391,285 130,306 258,296 
Commercial business154,785 118,054 86,210 359,049 61,173 143,091 
Total157,468 210,040 382,826 750,334 191,479 401,387 
Consumer loans
Single family590 1,036 1,138,653 1,140,279 414,957 724,732 
Home equity and other95 384,205 384,301 7,794 376,506 
Total591 1,131 1,522,858 1,524,580 422,751 1,101,238 
Total LHFI$692,324 $564,431 $6,166,149 $7,422,904 $783,819 $5,946,761 


 December 31, 2019Loans due after one year
by rate characteristic
(in thousands)Within one yearAfter
one year through
five years
After
five
years
TotalFixed-
rate
Adjustable-
rate
Commercial real estate:
Non-owner occupied commercial real estate$5,551 $106,457 $783,538 $895,546 $133,399 $756,596 
Multifamily6,192 34,610 958,338 999,140 21,996 970,952 
Construction/land development601,411 97,810 2,541 701,762 77,022 23,329 
Total commercial real estate613,154 238,877 1,744,417 2,596,448 232,417 1,750,877 
Commercial and industrial:
Owner occupied commercial real estate11,975 45,515 419,826 477,316 133,105 332,236 
Commercial business83,212 152,416 179,082 414,710 70,771 260,727 
Total commercial and industrial95,187 197,931 598,908 892,026 203,876 592,963 
Consumer:
Single family4,068 1,880 1,066,758 1,072,706 286,208 782,430 
Home equity and other2,630 100 550,646 553,376 42,787 507,959 
Total consumer6,698 1,980 1,617,404 1,626,082 328,995 1,290,389 
Total loans held for investment$715,039 $438,788 $3,960,729 $5,114,556 $765,288 $3,634,229 
 December 31, 2022Loans due after one year
by rate characteristic
(in thousands)Within one yearAfter
one year through
five years
After
five
years
TotalFixed-
rate
Adjustable-
rate
CRE
Non-owner occupied CRE$27,163 $171,380 $459,542 $658,085 $83,078 $547,844 
Multifamily3,389 59,234 3,913,131 3,975,754 23,838 3,948,527 
Construction/land development543,108 84,555 — 627,663 30,877 53,678 
Total573,660 315,169 4,372,673 5,261,502 137,793 4,550,049 
Commercial and industrial loans
Owner occupied CRE4,688 82,399 356,276 443,363 134,895 303,780 
Commercial business63,681 179,566 116,500 359,747 75,922 220,144 
Total68,369 261,965 472,776 803,110 210,817 523,924 
Consumer loans
Single family67 598 1,008,336 1,009,001 385,839 623,095 
Home equity and other44 18 352,645 352,707 7,381 345,282 
Total111 616 1,360,981 1,361,708 393,220 968,377 
Total LHFI$642,140 $577,750 $6,206,430 $7,426,320 $741,830 $6,042,350 

Loan Roll-forward
(in thousands)(in thousands)2020
2019 (1)
(in thousands)20232022
Loans - beginning balance January 1,Loans - beginning balance January 1,$5,114,556 $5,116,841 
Loans - beginning balance January 1,
Loans - beginning balance January 1,
Originations and advancesOriginations and advances2,846,270 2,876,829 
Sales(569,214)(761,002)
Transfers to LHFS
Payoffs, paydowns and otherPayoffs, paydowns and other(2,146,213)(2,116,117)
Charge-offs and transfers to OREOCharge-offs and transfers to OREO(1,219)(1,995)
Loans - ending balance December 31,
Loans - ending balance December 31,
$5,244,180 $5,114,556 
(1) Net deferred loans fees and costs of $24.5 million and $23.1 million are included within the carrying amounts of the respective loan balances as of December 31, 2019 and January 1, 2019, respectively to conform with the current period presentation.
49



Loan Originations and Advances
Years Ended December 31,
Years Ended December 31,Years Ended December 31,
(in thousands)(in thousands)20202019(in thousands)20232022
Commercial real estate loans
Non-owner occupied commercial real estate$82,975 $280,490 
CRE
CRE
CRE
Non-owner occupied CRE
Non-owner occupied CRE
Non-owner occupied CRE
MultifamilyMultifamily1,097,555 849,867 
Construction/land developmentConstruction/land development621,591 772,276 
Total commercial real estate loans1,802,121 1,902,633 
Total
Commercial and industrial loansCommercial and industrial loans
Owner occupied commercial real estate58,689 128,890 
Owner occupied CRE
Owner occupied CRE
Owner occupied CRE
Commercial businessCommercial business484,903 301,120 
Total commercial and industrial loans543,592 430,010 
Total
Consumer loansConsumer loans
Single familySingle family371,484 292,780 
Single family
Single family
Home equity and otherHome equity and other129,073 251,406 
Total consumer loans500,557 544,186 
TotalTotal$2,846,270 $2,876,829 
Total


46




Production Volumes for Sale to the Secondary Market
 Years Ended December 31,
(in thousands)20202019
Loan originations
Single family loans$2,079,094 $3,599,527 (2)
Commercial and industrial and CRE loans414,550 197,090 
Loans sold
Single family loans1,985,944 3,925,302 (2)
Commercial and industrial and CRE loans (1)
908,776 843,864 
Net gain on loan origination and sale activities
Single family loans100,795 86,686 (2)
Commercial and industrial and CRE loans (1)
21,769 17,492 
Less: Amounts attributed to discontinued operations— (60,056)
Total$122,564 $44,122 

 Years Ended December 31,
(in thousands)20232022
Loan originations
Single family loans$332,811 $573,110 
Commercial and industrial and CRE loans30,061 100,092 
Loans sold
Single family loans335,751 693,348 
Commercial and industrial and CRE loans (1)
26,839 145,622 
Net gain on loan origination and sale activities
Single family loans$8,500 $13,054 
Commercial and industrial and CRE loans (1)
846 4,647 
Total$9,346 $17,701 
(1) May include loans originated as held for investment.
(2) Includes both continuing and discontinued operations.
50



Capitalized Mortgage Servicing Rights ("MSRs")
 Years Ended December 31,
(in thousands)20202019
Single Family MSRs
Beginning balance$68,109 $252,168 
Additions and amortization:
Originations19,424 28,788 
Changes - amortization (1)
(17,754)(20,670)
Net additions and amortization1,670 8,118 
Change in fair value due to assumptions (2)
(19,813)(15,233)
Sale of servicing rights— (176,944)
Ending balance$49,966 $68,109 
Ratio to related loans serviced for others0.85 %0.98 %
CRE MSRs
Beginning balance$29,494 $28,328 
Originations11,587 5,832 
Amortization(5,307)(4,666)
Ending balance$35,774 $29,494 
Ratio to related loans serviced for others1.99 %1.90 %

 Years Ended December 31,
(in thousands)20232022
Single Family MSRs
Beginning balance$76,617 $61,584 
Additions and amortization:
Originations3,136 8,245 
Purchases460 — 
Amortization (1)
(6,378)(9,951)
Net additions and amortization(2,782)(1,706)
Change in fair value due to assumptions (2)
414 16,739 
Ending balance$74,249 $76,617 
Ratio to related loans serviced for others1.40 %1.41 %
Multifamily and SBA MSRs
Beginning balance$35,256 $39,415 
Originations509 3,533 
Amortization(5,778)(7,692)
Ending balance$29,987 $35,256 
Ratio to related loans serviced for others1.58 %1.82 %
(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.

47





Deposits

Deposit balances and weighted average rates were as follows for the periods indicated:
At December 31,
20202019
(in thousands)AmountWeighted Average RateAmountWeighted Average Rate
Deposits by product:
Noninterest-bearing demand deposits$1,092,735 — %$704,743 — %
Interest-bearing transaction and savings deposits:
Interest-bearing demand deposits484,265 0.10 %373,832 0.38 %
Savings accounts264,024 0.07 %219,182 0.21 %
Money market accounts2,596,453 0.21 %2,224,494 1.25 %
Total interest-bearing transaction and savings deposits3,344,742 0.10 %2,817,508 0.56 %
Total transaction and savings deposits4,437,477 3,522,251 
Certificates of deposit1,139,807 0.93 %1,614,533 2.24 %
Noninterest-bearing accounts - other244,275 — %203,175 — %
Total deposits$5,821,559 0.29 %$5,339,959 1.23 %

At December 31,
20232022
(in thousands)AmountWeighted Average RateAmountWeighted Average Rate
Deposits by product:
Noninterest-bearing demand deposits$1,306,503 — %$1,399,912 — %
Interest-bearing:
Interest-bearing demand deposits344,748 0.25 %466,490 0.10 %
Savings261,508 0.06 %258,977 0.06 %
Money market1,622,665 1.79 %2,383,209 1.22 %
Certificates of deposit
Brokered deposits1,218,008 5.36 %1,446,528 3.94 %
Other2,009,946 3.95 %1,496,803 2.26 %
Total interest-bearing deposits5,456,875 3.19 %6,052,007 1.98 %
Total deposits$6,763,378 2.58 %$7,451,919 1.61 %
 

The following table presents the schedule of maturities of certificates of deposit as of December 31, 2023:

(in thousands)Three Months or LessOver Three Months to Twelve MonthsOver One Year through Three YearsOver Three YearsTotal
Time deposits of $250,000 or less$985,167 $1,854,460 $183,705 $11,088 $3,034,420 
Time deposits of $250,000 or more70,076 113,168 9,411 879 193,534 
Total$1,055,243 $1,967,628 $193,116 $11,967 $3,227,954 

4851




Credit Risk Management: Delinquent Loans, Nonperforming Assets and Provision for Credit Losses

As of December 31, 2020,2023, our ratio of nonperforming assets to total assets remained low at 0.31%0.45% while our ratio of total loans delinquent over 30 days to total loans was 0.67%0.72%. The Company recorded provisiona recovery of our allowance for credit losses of $20.5$0.4 million in 2020,2023, and the ACL for loans increaseddecreased by $22.5 million. Due to adverse economic conditions related to the COVID-19 pandemic, we recorded additional provisions for credit losses in 2020$1.0 million, as an estimatea result of the potential impactfavorable performance of those conditions on our loan portfolio including an evaluationand a stable low level of the credit risk related to the commercial business loans and commercial real estate loans granted COVID-19 modifications during 2020 which we believe have a higher probability of default and increased credit losses.nonperforming assets.

Delinquent loans by loan type consisted of the following:
 At December 31, 2020
Past Due and Still Accruing
(in thousands)30-59 days60-89 days90 days or
more
Nonaccrual
Total past
due and nonaccrual (3)
CurrentTotal loans
Commercial real estate loans
Non- owner occupied commercial real estate$— $— $— $— $— $829,538 $829,538 
Multifamily— — — — — 1,428,092 1,428,092 
Construction and land development
Multifamily construction— — — — — 115,329 115,329 
Commercial real estate construction— — — — — 27,285 27,285 
Single family construction— — — — — 259,170 259,170 
Single family construction to permanent— — — — — 151,911 151,911 
Total— — — — — 2,811,325 2,811,325 
Commercial and industrial loans
Owner occupied commercial real estate— — — 4,922 4,922 462,334 467,256 
Commercial business— — — 9,183 9,183 636,540 645,723 
Total— — — 14,105 14,105 1,098,874 1,112,979 
Consumer loans
Single family2,161 418 11,476 (2)4,883 18,938 896,185 915,123 (1)
Home equity and other228 135 — 1,734 2,097 402,656 404,753 
Total2,389 553 11,476 6,617 21,035 1,298,841 1,319,876 
Total loans$2,389 $553 $11,476 $20,722 $35,140 $5,209,040 $5,244,180 
%0.05 %0.01 %0.22 %0.40 %0.67 %99.33 %100.00 %

 At December 31, 2023
Past Due and Still Accruing
(in thousands)30-59 days60-89 days90 days or
more
Nonaccrual
Total past
due and nonaccrual (1)
CurrentTotal loans
CRE
Non- owner occupied CRE$— $— $— $16,803 $16,803 $625,082 $641,885 
Multifamily— 1,915 — — 1,915 3,938,274 3,940,189 
Construction and land development
Multifamily construction— — — — — 168,049 168,049 
CRE construction— — — 3,821 3,821 14,692 18,513 
Single family construction— — — — — 274,050 274,050 
Single family construction to permanent— — — — — 105,304 105,304 
Total— 1,915 — 20,624 22,539 5,125,451 5,147,990 
Commercial and industrial loans
Owner occupied CRE— — — 706 706 390,579 391,285 
Commercial business— — — 13,686 13,686 345,363 359,049 
Total— — — 14,392 14,392 735,942 750,334 
Consumer loans
Single family5,174 1,993 4,261 (2)2,650 14,078 1,126,201 1,140,279 
Home equity and other974 225 — 1,310 2,509 381,792 384,301 
Total6,148 2,218 4,261 3,960 16,587 1,507,993 1,524,580 (3)
Total loans$6,148 $4,133 $4,261 $38,976 $53,518 $7,369,386 $7,422,904 
%0.08 %0.05 %0.06 %0.53 %0.72 %99.28 %100.00 %
(1) Includes $7.1 millionloans whose repayments are insured by the FHA or guaranteed by the VA or SBA of loans where a fair value option election was made at the time of origination and, therefore, are carried at fair value with changes recognized in our consolidated income statements.$12.4 million.
(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 loans whose repayments are insured by the FHA or guaranteed by the VA or SBA of $14.7 million.

49




 At December 31, 2019
Past Due and Still Accruing
(in thousands)30-59 days60-89 days90 days or
more
Nonaccrual
Total past
due and nonaccrual (4)
CurrentTotal loans
Commercial real estate loans
Non- owner occupied commercial real estate$— $— $— $— $— $895,546 $895,546 
Multifamily— — — — — 999,140 999,140 
Construction and land development— — — — — 701,762 701,762 
Total— — — — — 2,596,448 2,596,448 
Commercial and industrial loans
Owner occupied commercial real estate— — — 2,891 2,891 474,425 477,316 
Commercial business44 — — 3,446 3,490 411,220 414,710 
Total44 — — 6,337 6,381 885,645 892,026 
Consumer loans
Single family5,694 4,261 19,702 (2)5,364 35,021 1,037,685 1,072,706 (1)
Home equity and other837 372 — 1,160 2,369 551,007 553,376 
Total6,531 4,633 19,702 6,524 37,390 1,588,692 1,626,082 
Total loans$6,575 $4,633 $19,702 $12,861 $43,771 $5,070,785 $5,114,556 (3)
%0.13 %0.09 %0.39 %0.25 %0.86 %99.14 %100.00 %

(1)Includes $3.5$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 recognized in our consolidated income statements.
52


 At December 31, 2022
Past Due and Still Accruing
(in thousands)30-59 days60-89 days90 days or
more
Nonaccrual
Total past
due and nonaccrual (1)
CurrentTotal loans
CRE
Non- owner occupied CRE$— $— $— $— $— $658,085 $658,085 
Multifamily— — — — 3,975,754 3,975,754 
Construction and land development
Multifamily construction— — — — — 95,117 95,117 
CRE construction— — — — — 18,954 18,954 
Single family construction— — — — — 355,554 355,554 
Single family construction to permanent— — — — — 158,038 158,038 
Total— — — — — 5,261,502 5,261,502 
Commercial and industrial loans
Owner occupied CRE— — — 2,521 2,521 440,842 443,363 
Commercial business— — — 4,269 4,269 355,478 359,747 
Total— — — 6,790 6,790 796,320 803,110 
Consumer loans
Single family4,556 1,724 4,372 (2)2,584 13,236 995,765 1,009,001 
Home equity and other267 296 — 681 1,244 351,463 352,707 
Total4,823 2,020 4,372 3,265 14,480 1,347,228 1,361,708 (3)
Total loans$4,823 $2,020 $4,372 $10,055 $21,270 $7,405,050 $7,426,320 
%0.06 %0.03 %0.06 %0.14 %0.29 %99.71 %100.00 %
(1)Includes loans whose repayments are insured by the FHA or guaranteed by the VA or SBA of $10.6 million.
(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)Net deferredIncludes $5.9 million of loans feeswhere a fair value option election was made at the time of origination and, costs of $24.5 million were included within the carrying amounts of the loan balancestherefore, are carried at fair value with changes recognized in order to conform with the current period presentation.
(4)Includes loans whose repayments are insured by the FHA or guaranteed by the VA or SBA of $28.4 million.our consolidated income statements.

As a resultManagement considers the current level of the COVID-19 pandemic, the Company has approved forbearances for some of its borrowers. The status of these forbearances as of December 31, 2020 is as follows:
Forbearances Approved (2)
Initiated in the Fourth Quarter 2020Second RequestTotalOutstanding
(in thousands)Number of loansAmountNumber of loansAmountNumber of loansAmountNumber of loansAmount
Loan type: (1)
Commercial and CRE:
Commercial business$798 19 $29,532 125 $77,998 15 $22,535 
CRE owner occupied412 38,333 30 73,773 544 
CRE nonowner occupied— — 2,231 14 58,497 12,202 
Multifamily5,734 — — 5,734 5,734 
Total10 $6,944 26 $70,096 170 $216,002 $23 $41,015 
Single family and consumer:
Single family150 $70,027 
HELOCs and consumer53 6,116 
Total203 $76,143 
(1) Does not include any SBA guaranteed loans for which the government made payments as provided for under the CARES Act, or single family loans that are guaranteed by Ginnie Mae.
(2) This schedule does not include $18 million of constructions loans (5 loans) that were modified as a result of COVID-19 related construction delays to extend the construction or lease-up periods. Each of these loans continued to perform under the existing or modified payment terms.


50




The forbearances approved for commercial and industrial loans and CRE nonowner occupied loans were generally for a period of three months while the forbearances for single family, HELOCs and consumer loans were generally for a period of three to six months. During the third and fourth quarters of 2020, second forbearances were approved for $70 million of loans. These second forbearances were to borrowers whose businesses continueACL to be impacted by the effects of the COVID-19 pandemic.

As of December 31, 2020, excluding the loans with forbearances still in place, 98% of the commercial and CRE loans approved for a forbearance have completed their forbearance period and have resumed payments. Based on information obtained through discussions with these borrowers, we believe almost all of them are ableappropriate to conduct their businesses as a going concern, and they have advised us that they do not currently foresee the need for additional forbearances.

The forbearance periods for the majority of single family and consumer loans granted forbearance that were not complete as of December 31, 2020 are scheduled to be completed in the first quarter of 2021. In light of the recently passed Coronavirus Response and Relief Supplemental Appropriations Act, we anticipate that some single family loans may request an additional forbearance in 2021.
51




cover estimated lifetime losses within our LHFI portfolio. The following table presents the ACL by product type at the dates indicated:
 December 31, 2020
January 1, 2020 (2)
(in thousands except reserve rate)Amount
Reserve Rate (1)
Amount
Reserve Rate (1)
Commercial real estate loans
Non-owner occupied commercial real estate$8,845 1.07 %$3,853 0.43 %
Multifamily6,072 0.43 %4,038 0.40 %
Construction/land development
Multifamily construction4,903 4.25 %3,541 1.88 %
Commercial real estate construction1,670 6.12 %509 0.92 %
Single family construction5,130 1.98 %8,080 2.84 %
Single family construction to permanent1,315 0.87 %1,203 0.70 %
Total27,935 0.99 %21,224 0.82 %
Commercial and industrial loans
Owner occupied commercial real estate4,994 1.08 %1,180 0.25 %
Commercial business17,043 4.72 %3,425 0.83 %
Total22,037 2.67 %4,605 0.52 %
Consumer loans
Single family6,906 0.85 %6,918 0.70 %
Home equity and other7,416 1.83 %10,868 1.96 %
Total14,322 1.18 %17,786 1.16 %
Total ACL$64,294 1.33 %$43,615 0.87 %
type:

 December 31, 2023December 31, 2022
(in thousands)Balance
Rate (1)
Balance
Rate (1)
CRE
Non-owner occupied CRE$2,610 0.41 %$2,102 0.32 %
Multifamily13,093 0.33 %10,974 0.28 %
Construction/land development
Multifamily construction3,983 2.37 %998 1.05 %
CRE construction189 1.02 %196 1.03 %
Single family construction7,365 2.69 %12,418 3.51 %
Single family construction to permanent672 0.64 %1,171 0.74 %
Total27,912 0.54 %27,859 0.53 %
Commercial and industrial loans
Owner occupied CRE899 0.23 %1,030 0.23 %
Commercial business2,950 0.83 %3,247 0.91 %
Total3,849 0.52 %4,277 0.54 %
Consumer loans
Single family5,287 0.51 %5,610 0.62 %
Home equity and other3,452 0.90 %3,754 1.06 %
Total8,739 0.61 %9,364 0.74 %
Total ACL$40,500 0.55 %$41,500 0.57 %
(1) The reserveACL rate is calculated excluding balances related to loans that are insured by the FHA or guaranteed by the VA or SBA, including PPP loans.
(2) On January 1, 2020 we adopted ASC 326 ("CECL"). As a result, the ACL as of January 1, 2020 is presented.

The following table presents the allowance for credit losses, including reserves for unfunded commitments, by loan class.
At December 31, 2019
(in thousands except reserve rate)
Amount
Reserve Rate (1)
Commercial real estate loans
Non-owner occupied commercial real estate$7,249 0.81 %
Multifamily7,015 0.70 %
Construction/land development8,679 1.24 %
Total22,943 0.89 %
Commercial and industrial loans
Owner occupied commercial real estate3,640 0.77 %
Commercial business2,961 0.72 %
Total6,601 0.74 %
Consumer loans
Single family6,450 0.66 %
Home equity and other6,843 1.24 %
Total13,293 0.87 %
Total allowance for credit losses$42,837 0.86 %

(1) The reserve rate is calculated excluding balances related to loans that are insured by the FHA or guaranteed by the VA or SBA, including PPP loans.SBA.

5253




Liquidity and Sources of Funds

Liquidity risk management is primarily intended to ensure we are able to maintain sources of cash to adequately fund operations and meet our obligations, including demands from depositors, draws on lines of credit and paying any creditors, on a timely and cost-effective basis, in various market conditions. Our liquidity profile is influenced by changes in market conditions, the composition of the balance sheet and risk tolerance levels. The Company has established liquidity guidelines and operating plans that detail the sources and uses of cash and liquidity.

The Company's primary sources of liquidity include deposits, loan payments and investment securities payments, both principal and interest, borrowings, and proceeds from the sale of loans and investment securities. Borrowings include advances from the FHLB, federal funds purchased and borrowing from other financial institutions. Additionally, the Company may sell stock or issue long-term debt to raise funds. While scheduled principal repayments on loans and investment securities are a relatively predictable source of funds, deposit inflows and outflows and prepayments of loans and investment securities are greatly influenced by interest rates, economic conditions and competition.

The Company’s contractual cash flow obligations include the maturity of certificates of deposit, short term and long termlong-term borrowings, interest on certificates of deposit and borrowings, operating leases and fees for information technology related services and professional services. Obligations for certificates of deposit and short termshort-term borrowings are typically satisfied through the renewal of these instruments or the generation of new deposits or use of available short termshort-term borrowings. Interest payments and obligations related to leases and services are typically met by cash generated from our operations. The Company does not have any obligation to repay long termlong-term debt within the next five years.three years other than $65 million in principal amount of Senior Notes maturing on June 1, 2026. The Company intends to repay the Senior Notes with dividends made to the Company from the Bank or from funds received through the issuance of new debt or sales of stock.

At December 31, 2020,2023, the Bank had available borrowing capacity of $550 million$2.1 billion from the FHLB, $406$710 million from the FRBSF and $1.2$1.1 billion under borrowing lines established with other financial institutions.

We believe that our current unrestricted cash and cash equivalents, cash flows from operations and borrowing capacity will be sufficient to meet our liquidity needs for at least the next 12 months. We are currently not aware of any other trends or demands, commitments, events or uncertainties that will result in or that are reasonably likely to result in our liquidity increasing or decreasing in any material way that will impact our liquidity needs during or beyond the next 12 months.
Cash Flows

For 2020, 20192023 and 2018,2022, cash and cash equivalents increased $0.2 million, decreased $0.7$142.8 million and decreased $15$7.6 million, respectively. As a banking institution, the Company has extensive access to liquidity. As excess liquidity can reduce the Company’s earnings and returns, the Company manages its cash positions to minimize the level of excess liquidity and does not attempt to maximize the level of cash and cash equivalents. The following discussion highlights the major activities and transactions that affected our cash flows during these periods.

Cash flows from operating activities

The Company's operating assets and liabilities are used to support our lending activities, including the origination and sale of mortgage loans. For 2020, $262023, $8 million of cash was used inprovided by operating activities, primarily to fund an increase in our LHFS which was partially offset by cash generated from our operations.activities. For 2019,2022, cash of $259$218 million was provided by operating activities, primarily from cash proceeds from the sale of LHFS andloans exceeding cash generated from our operations which were partially offset by the payment of deferred taxes from the sale of mortgage servicing rights. For 2018, cash of $286 million was provided by operating activities primarily from proceeds from the sale of LHFS and cash generated from our operations.used to fund LHFS.

Cash flows from investing activities

The Company's investing activities are primarily related to AFSinvestment securities and LHFI. For 2020,2023, cash of $233 million was used in investing activities for the origination of LHFI and the purchase of AFS securities, which were partially offset by principal payments and the proceeds from sale of LHFI and AFS securities. For 2019, cash of $107$484 million was provided by investing activities primarily from principal paymentsthe cash acquired from an acquisition of branches and the proceeds from sale of LHFI andrelated deposits, principal repayments on AFS investment securities and the proceeds from our disposalLHFI repayments in excess of discontinued operations which wereoriginations, partially offset by the usepurchase of AFS investment securities and net FHLB stock purchases. For 2022, cash of $2.7 billion was used in investing activities primarily for the origination of LHFI andnet of principal repayments, the purchase of AFS securities. For 2018, cash of $564 million was used in investing activities for the origination of LHFI and the purchase of AFSinvestment securities and premises and equipment, which werecash distributed in the sale of branches, partially offset by principal payments and the proceeds from the sale of LHFI and AFSprincipal repayments of investment securities.

53




Cash flows from financing activities

The Company's financing activities are primarily related to customer deposits, net proceeds from borrowings and equity transactions. For 2020,2023, cash of $258$349 million was used in financing activities primarily due to decreases in deposits and dividends paid on our
54


common stock partially offset by a net increase in long term and short-term borrowings. For 2022, cash of $2.4 billion was provided by financing activities from growth in deposits, which wasincrease in long-term FHLB borrowings and proceeds from our debt issuance, partially offset by net repayment of short termshort-term borrowings and repurchases of our common stock and the payment of dividends paid on our common stock. For 2019, cash of $367 million was used in financing activities as the net repayment of short term borrowings and repurchases of our common stock were partially offset by growth in deposits. For 2018, cash of $263 million was provided by financing activities from the growth in deposits which was partially offset by net repayment of short term borrowings.

Capital Resources and Dividends

The capital rules applicable to United States based bank holding companies and federally insured depository institutions ("Capital Rules") require the Company (on a consolidated basis) and the Bank (on a stand-alone basis) to meet specific capital adequacy requirements that, for the most part, involve quantitative measures, primarily in terms of the ratios of their capital to their assets, liabilities, and certain off-balance sheet items, calculated under regulatory accounting practices. In addition, prompt corrective action regulations place a federally insured depository institution, such as the Bank, into one of five capital categories on the basis of its capital ratios: (i) well capitalized; (ii) adequately capitalized; (iii) undercapitalized; (iv) significantly undercapitalized; or (v) critically undercapitalized. A depository institution’s primary federal regulatory agency may determine that, based on certain qualitative assessments, the depository institution should be assigned to a lower capital category than the one indicated by its capital ratios. At each successive lower capital category, a depository institution is subject to greater operating restrictions and increased regulatory supervision by its federal bank regulatory agency.

The following tables set forth the capital and capital ratios of HomeStreet Inc. (on a consolidated basis) and HomeStreet Bank as of the dates indicated below, as compared to the respective regulatory requirements applicable to them:
At December 31, 2020
ActualFor Minimum Capital
Adequacy Purposes
To Be Categorized As
"Well Capitalized" Under
Prompt Corrective
Action Provisions
(in thousands except ratios)AmountRatioAmountRatioAmountRatio
HomeStreet, Inc.
Tier 1 leverage capital (to average assets)$709,655 9.65 %$294,211 4.0 %NANA
Common equity tier 1 capital (to risk-weighted assets)649,655 11.67 %250,537 4.5 %NANA
Tier 1 risk-based capital (to risk-weighted assets)709,655 12.75 %334,050 6.0 %NANA
Total risk-based capital (to risk-weighted assets)779,254 14.00 %445,400 8.0 %NANA
HomeStreet Bank
Tier 1 leverage capital (to average assets)$712,533 9.79 %$291,114 4.0 %$363,893 5.0 %
Common equity tier 1 capital (to risk-weighted assets)712,533 13.51 %237,307 4.5 %342,777 6.5 %
Tier 1 risk-based capital (to risk-weighted assets)712,533 13.51 %316,410 6.0 %421,880 8.0 %
Total risk-based capital (to risk-weighted assets)778,479 14.76 %421,880 8.0 %527,350 10.0 %

At December 31, 2023
ActualFor Minimum Capital
Adequacy Purposes
To Be Categorized As
"Well Capitalized" 
(dollars in thousands)AmountRatioAmountRatioAmountRatio
HomeStreet, Inc.
Tier 1 leverage capital (to average assets)$675,440 7.04 %$383,696 4.0 %NANA
Common equity tier 1 capital (to risk-weighted assets)615,440 9.66 %286,709 4.5 %NANA
Tier 1 risk-based capital (to risk-weighted assets)675,440 10.60 %382,279 6.0 %NANA
Total risk-based capital (to risk-weighted assets)818,075 12.84 %509,705 8.0 %NANA
HomeStreet Bank
Tier 1 leverage capital (to average assets)$814,719 8.50 %$383,482 4.0 %$479,352 5.0 %
Common equity tier 1 capital (to risk-weighted assets)814,719 12.79 %286,569 4.5 %413,933 6.5 %
Tier 1 risk-based capital (to risk-weighted assets)814,719 12.79 %382,092 6.0 %509,456 8.0 %
Total risk-based capital (to risk-weighted assets)858,992 13.49 %509,456 8.0 %636,820 10.0 %


At December 31, 2022
ActualFor Minimum Capital
Adequacy Purposes
To Be Categorized As
"Well Capitalized" 
(dollars in thousands)AmountRatioAmountRatioAmountRatio
HomeStreet, Inc.
Tier 1 leverage capital (to average assets)$693,112 7.25 %$382,467 4.0 %NANA
Common equity tier 1 capital (to risk-weighted assets)633,112 8.72 %326,876 4.5 %NANA
Tier 1 risk-based capital (to risk-weighted assets)693,112 9.54 %435,834 6.0 %NANA
Total risk-based capital (to risk-weighted assets)837,828 11.53 %581,112 8.0 %NANA
HomeStreet Bank
Tier 1 leverage capital (to average assets)$822,891 8.63 %$381,506 4.0 %$476,883 5.0 %
Common equity tier 1 capital (to risk-weighted assets)822,891 11.92 %310,582 4.5 %448,618 6.5 %
Tier 1 risk-based capital (to risk-weighted assets)822,891 11.92 %414,109 6.0 %552,146 8.0 %
Total risk-based capital (to risk-weighted assets)868,993 12.59 %552,146 8.0 %690,182 10.0 %
5455




At December 31, 2019
ActualFor Minimum Capital
Adequacy Purposes
To Be Categorized As
"Well Capitalized" Under
Prompt Corrective
Action Provisions
(in thousands except ratios)AmountRatioAmountRatioAmountRatio
HomeStreet, Inc.
Tier 1 leverage capital (to average assets)$691,323 10.16 %$272,253 4.0 %NANA
Common equity tier 1 capital (to risk-weighted assets)631,323 11.43 %248,523 4.5 %NANA
Tier 1 risk-based capital (to risk-weighted assets)691,323 12.52 %331,364 6.0 %NANA
Total risk-based capital (to risk-weighted assets)739,812 13.40 %441,818 8.0 %NANA
HomeStreet Bank
Tier 1 leverage capital (to average assets)$712,596 10.56 %$269,930 4.0 %$337,413 5.0 %
Common equity tier 1 capital (to risk-weighted assets)712,596 13.50 %237,451 4.5 %342,985 6.5 %
Tier 1 risk-based capital (to risk-weighted assets)712,596 13.50 %316,602 6.0 %422,136 8.0 %
Total risk-based capital (to risk-weighted assets)758,303 14.37 %422,136 8.0 %527,669 10.0 %

As ofAt each of the dates set forth in the above table, the Company exceeded the minimum required capital ratios applicable to it and the Bank’s capital ratios exceeded the minimums necessary to qualify as a well-capitalized depository institution under the prompt corrective action regulations. In addition to the minimum capital ratios, both the Company and the Bank are required to maintain a "conservation buffer" consisting of additional Common Equity Tier 1 Capital which is at least 2.5% above the required minimum levels in order to avoid limitations on paying dividends, engaging in share repurchases, and paying discretionary bonuses. The required ratios for capital adequacy set forth in the above table do not include the Capital Rules’ additional capital conservation buffer, though each of the Company and the Bank maintained capital ratios necessary to satisfy the capital conservation buffer requirements as of the dates indicated. At December 31, 2020,2023, capital conservation buffers for the Company and the Bank were 6.00%4.60% and 6.76%5.49%, respectively.

The Company paid a quarterly cash dividend of $0.15totaling $0.65 per common share in eachthe year 2023. In the first quarter of 2024, the four quarters of 2020. It is our current intention to continueCompany did not declare a cash dividend and currently does not plan to pay quarterly dividends and the Company has declared a cash dividend of $0.25 per common share payable on February 24, 2021.in 2024. The amount and declaration of future cash dividends are subject to approval by our Board of Directors and certain statutory requirements and regulatory restrictions.

We had no material commitments for capital expenditures as of December 31, 2020.2023. However, we intend to take advantage of opportunities that may arise in the future to grow our businesses, which may include opening additional offices or acquiring complementary businesses that we believe will provide us with attractive risk-adjusted returns. As a result, we may seek to obtain additional borrowings and to sell additional shares of our common stock to raise funds which we might need for these purposes. There is no assurance, however, that, if required, we will succeed in obtaining additional borrowings or selling additional shares of our common stock on terms that are acceptable to us, if at all, as this will depend on market conditions and other factors outside of our control, as well as our future results of operations. The merger agreement with FirstSun contains restrictions on the Company’s ability to incur additional long-term debt or sell shares of preferred or common stock.

Accounting Developments

See Financial Statements and Supplementary Data - Note 1, Summary of Significant Accounting Policies for a discussion of accounting developments.
56


Non-GAAP Financial Measures

To supplement our unaudited condensed consolidated financial statements presented in accordance with GAAP, we use certain non-GAAP measures of financial performance. In this Form 10-K, we use the following non-GAAP measures: (i) tangible common equity and tangible assets as we believe this information is consistent with the treatment by bank regulatory agencies, which exclude intangible assets from the calculation of capital ratios; (ii) core income and effective tax rate on core income before taxes, which excludes goodwill impairment charges and merger related expenses and the related tax impact as we believe this measure is a better comparison to be used for projecting future results and (iii) an efficiency ratio which is the ratio of noninterest expense to the sum of net interest income and noninterest income, excluding certain items of income or expense and excluding taxes incurred and payable to the state of Washington as such taxes are not classified as income taxes and we believe including them in noninterest expense impacts the comparability of our results to those companies whose operations are in states where assessed taxes on business are classified as income taxes.

These supplemental performance measures may vary from, and may not be comparable to, similarly titled measures provided by other companies in our industry. Non-GAAP financial measures are not in accordance with, or an alternative for, GAAP. Generally, a non-GAAP financial measure is a numerical measure of a company’s performance that either excludes or includes amounts that are not normally excluded or included in the most directly comparable measure calculated and presented in accordance with GAAP. A non-GAAP financial measure may also be a financial metric that is not required by GAAP or other applicable requirement.requirements.

55




We believe that these non-GAAP financial measures, when taken together with the corresponding GAAP financial measures, provide meaningful supplemental information regarding our performance by providing additional information used by management that is not otherwise required by GAAP or other applicable requirements. Our management uses, and believes that investors benefit from referring to, these non-GAAP financial measures in assessing our operating results and when planning, forecasting and analyzing future periods. These non-GAAP financial measures also facilitate a comparison of our performance to prior periods. We believe these measures are frequently used by securities analysts, investors and other interested parties in the evaluation of companies in our industry. However, theseThese non-GAAP financial measures should be considered in addition to, not as a substitute for or superior to, financial measures prepared in accordance with GAAP. In the information below, we have provided a reconciliationreconciliations of, where applicable, the most comparable GAAP financial measures to the non-GAAP measures used in this annual report on Form 10-K, or a reconciliationcalculation of the non-GAAP calculation of the financial measure.

In this annual report on Form 10-K, we use (i) tangible common equity and tangible assets as we believe this information is consistent with the treatment by bank regulatory agencies, which exclude intangible assets from the calculation of capital ratios; and (ii) an efficiency ratio which is the ratio of noninterest expense to the sum of net interest income and noninterest income, excluding certain items of income or expense and excluding taxes incurred and payable to the state of Washington as such taxes are not classified as income taxes and we believe including them in noninterest expense impacts the comparability of our results to those companies whose operations are in states where assessed taxes on business are classified as income taxes. For the purposes of computing returns on tangible common equity, we exclude from earnings the amortization of intangible assets.

57


Reconciliations of non-GAAP results of operations to the nearest comparable GAAP measures or the calculation of the non-GAAP financial measures:
 For the Year Ended
(in thousands, except ratio)20232022
Core net income (loss)
Net income (loss)$(27,508)$66,540 
Adjustments (tax effected)
Merger related expenses1,170 — 
Goodwill impairment charge34,622 — 
Total$8,284 $66,540 
Core net income (loss) per fully diluted share
Fully diluted shares18,783,005 19,041,111 
Computed amount
$0.44 $3.49 
Return on average tangible equity
Average shareholders' equity$552,234 $617,469 
Less: Average goodwill and other intangibles(25,695)(30,930)
Average tangible equity$526,539 $586,539 
Core net income$8,284 $66,540 
Adjustments (tax effected):
Amortization on core deposit intangibles2,302 751 
Tangible income applicable to shareholders$10,586 $67,291 
Ratio2.0 %11.5 %
Efficiency ratio
Noninterest expense
Total$241,872 $205,419 
Adjustments:
Merger related expenses(1,500)— 
Goodwill Impairment charge(39,857)— 
State of Washington taxes(994)(2,311)
Adjusted total$199,521 $203,108 
Total revenues
Net interest income$166,753 $233,307 
Noninterest income41,921 51,570 
Gain on sale of branches— (4,270)
Total$208,674 $280,607 
Ratio95.6 %72.4 %
Effective tax rate used in computations above (1)
22.0 %22.0 %
 As of or for the Year Ended
(in thousands, except share data)202020192018
Return on average tangible equity (annualized)
Average shareholders' equity$706,160 $694,903 $699,880 
Less: Average goodwill and other intangibles(33,613)(34,245)(28,892)
Average tangible equity672,547 660,658 670,988 
Net income$79,990 $17,512 $40,027 
Adjustments (tax effected):
Amortization on core deposit intangibles1,082 1,367 1,284 
Tangible income applicable to shareholders$81,072 $18,879 $41,311 
Ratio12.1 %2.9 %6.2 %
Net income from continuing operations$79,990 $40,720 $26,223 
Adjustments (tax effected):
Amortization on core deposit intangibles (per above)1,082 1,367 1,284 
Tangible income applicable to shareholders$81,072 $42,087 $27,507 
 Ratio12.1 %6.4 %4.1 %
Efficiency ratio
Noninterest expense
Total$235,663 $215,614 $195,241 
Adjustments:
Restructuring related charges(11,837)(4,489)(22)
Prepayment fee on FHLB advances(1,492)— — 
State of Washington taxes(2,920)(1,782)2,372 
Adjusted total$219,414 $209,343 $197,591 
Total revenues
Net interest income$208,662 $189,390 $189,963 
Noninterest income149,364 74,432 36,533 
Adjustments:
Contingent payout(566)— — 
Adjusted total$357,460 $263,822 $226,496 
Ratio61.4 %79.4 %87.2 %

5658




 As of
(in thousands, except share data)December 31, 2023December 31, 2022
Tangible book value per share
Shareholders' equity$538,387 $562,147 
Less: goodwill and other intangibles(9,641)(29,980)
Tangible shareholder's equity$528,746 $532,167 
Common shares outstanding18,810,055 18,730,380 
Computed amount$28.11 $28.41 
Tangible common equity to tangible assets
Tangible shareholder's equity (per above)$528,746 $532,167 
Tangible assets
Total assets$9,392,450$9,364,760
Less: Goodwill and other intangibles(9,641)(29,980)
Net$9,382,809 $9,334,780 
Ratio5.6 %5.7 %
 As of
(in thousands, except share data)December 31, 2020December 31, 2019
Tangible book value per share
Shareholders' equity$717,750 $679,723 
Less: goodwill and other intangibles(32,880)(34,252)
Tangible shareholder's equity684,870 645,471 
Common shares outstanding21,796,904 23,890,855 
Computed amount$31.42 $27.02 
Tangible common equity to tangible assets
Tangible shareholder's equity (per above)$684,870 $645,471 
Tangible assets
Total assets7,237,0916,812,435
Less: Goodwill and other intangibles(32,880)(34,252)
Net$7,204,211 $6,778,183 
Ratio9.5 %9.5 %
(1) Effective tax rate indicated is used for all adjustments except the goodwill impairment charge as a portion of this charge was not deductible for tax purposes. Instead, a computed effective rate of 13.1% was used for the goodwill impairment charge.
5759




ITEM 7AQUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Market Risk Management

Market risk is defined as the sensitivity of income, fair value measurements and capital to changes in interest rates, foreign currency exchange rates, commodity prices and other relevant market rates or prices. The primary market risks to whichthat we are exposed to are price and interest rate risks. Price risk is defined as the risk to current or anticipated earnings or capital arising from changes in the value of either assets or liabilities that are entered into as part of distributing or managing risk. Interest rate risk is defined as risk to current or anticipated earnings or capital arising from movements in interest rates.

For the Company, price and interest rate risks arise from the financial instruments and positions we hold. This includes loans, mortgage servicing rights,MSRs, investment securities, deposits, borrowings, long-term debt and derivative financial instruments. Due to the nature of our current operations, we are not subject to foreign currency exchange or commodity price risk. Our real estate loan portfolio is subject to risks associated with the local economies of our various markets, and, in particular, the regional economy of the western United States, including Hawaii.

The spread between the yield on interest-earning assets and the cost of interest-bearing liabilities and the relative dollar amounts of these assets and liabilities are the principal items affecting net interest income. Changes in net interest rates (interest rate risk) are influenced to a significant degree by the repricing characteristics of assets and liabilities (timing risk), the relationship between various rates (basis risk), customer options (option risk) and changes in the shape of the yield curve (time-sensitive risk). We manage the available-for-sale investment securities portfolio while maintaining a balance between risk and return. The Company's funding strategy is to grow core deposits while we efficiently supplement using wholesale borrowings.

We estimate the sensitivity of our net interest income to changes in market interest rates using an interest rate simulation model that includes assumptions related to the level of balance sheet growth, deposit repricing characteristics and the rate of prepayments for multiple interest rate change scenarios. Interest rate sensitivity depends on certain repricing characteristics in our interest-earnings assets and interest-bearing liabilities, including the maturity structure of assets and liabilities and their repricing characteristics during the periods of changes in market interest rates. Effective interest rate risk management seeks to ensure both assets and liabilities respond to changes in interest rates within an acceptable timeframe, minimizing the impact of interest rate changes on net interest income and capital. Interest rate sensitivity is measured as the difference between the volume of assets and liabilities, at a point in time, that are subject to repricing at various time horizons, known as interest rate sensitivity gaps.

5860




The following table presents sensitivity gaps for these different intervals.intervals:
 
December 31, 2020 December 31, 2023
(dollars in thousands)(dollars in thousands)3 Mos.
or Less
More Than
3 Mos.
to 6 Mos.
More Than
6 Mos.
to 12 Mos.
More Than
12 Mos.
to 3 Yrs.
More Than
3 Yrs.
to 5 Yrs.
More Than
5 to 15 Yrs.
More Than 15 Yrs.Non-Rate-
Sensitive
Total(dollars in thousands)3 Mos.
or Less
More Than
3 Mos.
to 6 Mos.
More Than
6 Mos.
to 12 Mos.
More Than
12 Mos.
to 3 Yrs.
More Than
3 Yrs.
to 5 Yrs.
More Than
5 to 15 Yrs.
More Than 15 Yrs.Non-Rate-
Sensitive
Total
Interest-earning assets:
Interest-earning assets
Interest-earning assets
Interest-earning assets
Cash & cash equivalents
Cash & cash equivalents
Cash & cash equivalentsCash & cash equivalents$58,049 $— $— $— $— $— $— $— $58,049 
FHLB StockFHLB Stock12,194 — — — — — 8,125 — 20,319 
Investment securities (1)
Investment securities (1)
155,923 40,709 59,336 108,561 122,164 382,392 207,279 — 1,076,364 
LHFSLHFS361,932 — — — — — — — 361,932 
LHFI1)
1,178,948 529,803 633,289 1,202,465 1,046,377 642,047 11,251 — 5,244,180 
LHFI (1)
TotalTotal1,767,046 570,512 692,625 1,311,026 1,168,541 1,024,439 226,655 — 6,760,844 
Non-interest-earning assets— — — — — — — 476,247 476,247 
Noninterest-earning assets
Total assetsTotal assets$1,767,046 $570,512 $692,625 $1,311,026 $1,168,541 $1,024,439 $226,655 $476,247 $7,237,091 
Interest-bearing liabilities:
Interest-bearing liabilities
Demand deposit accounts (2)
Demand deposit accounts (2)
Demand deposit accounts (2)
Demand deposit accounts (2)
$484,265 $— $— $— $— $— $— $— $484,265 
Savings accounts (2)
Savings accounts (2)
264,024 — — — — — — — 264,024 
Money market
accounts (2)
Money market
accounts (2)
2,596,453 — — — — — — — 2,596,453 
Certificates of depositCertificates of deposit421,631 385,476 175,716 138,029 18,706 — 249 1,139,807 
FHLB advancesFHLB advances302,000 — — — — — — — 302,000 
Borrowings20,755 45 — — — — — — 20,800 
FHLB advances
FHLB advances
FRB borrowings
Long-term debt (3)
Long-term debt (3)
Long-term debt (3)
Long-term debt (3)
60,838 — — — — 65,000 — — 125,838 
TotalTotal4,149,966 385,521 175,716 138,029 18,706 65,000 249 — 4,933,187 
Non-interest bearing liabilities— — — — — — — 1,586,154 1,586,154 
Noninterest-bearing liabilities
Shareholders' EquityShareholders' Equity— — — — — — — 717,750 717,750 
Total liabilities and shareholders’ equityTotal liabilities and shareholders’ equity$4,149,966 $385,521 $175,716 $138,029 $18,706 $65,000 $249 $2,303,904 $7,237,091 
Interest sensitivity gapInterest sensitivity gap$(2,382,920)$184,991 $516,909 $1,172,997 $1,149,835 $959,439 $226,406 
Cumulative interest rate sensitivity gapCumulative interest rate sensitivity gap
Cumulative interest rate sensitivity gap
Cumulative interest rate sensitivity gap
Total
Total
TotalTotal$(2,382,920)$(2,197,929)$(1,681,020)$(508,023)$641,812 $1,601,251 $1,827,658 
As a % of total assetsAs a % of total assets(33)%(30)%(23)%(7)%%22 %25 %
As a % of total assets
As a % of total assets
As a % of cumulative interest-bearing liabilitiesAs a % of cumulative interest-bearing liabilities43 %52 %64 %90 %113 %132 %137 %
As a % of cumulative interest-bearing liabilities
As a % of cumulative interest-bearing liabilities
(1)Based on contractual maturities, repricing dates and forecasted principal payments assuming normal amortization and, where applicable, prepayments.
(2)Assumes 100% of interest-bearing non-maturity deposits are subject to repricing in three months or less.
(3)Based on contractual maturity.

As of December 31, 2020,2023, the Company is considered liability-sensitiveliability sensitive as exhibited by the gap table butabove and our net interest income sensitivity analysis shows positive results in the increasing interest rate scenarios. This is because of the impact of our historical deposit repricing betas which result in an assumed delay in repricing of deposits in an increasing interest rate scenario and a lower magnitude of repricing compared to the repricing of loans and other interest-earning assets. Net interest income would be expected to rise in the long term if interest rates were to rise due to the Bank’s cumulative asset-sensitive position.analysis.

Changes in the mix of interest-earning assets or interest-bearing liabilities can either increase or decrease the net interest margin, without affecting interest rate sensitivity. In addition, the interest rate spread between an earning asset and its funding
59




liability can vary significantly, while the timing of repricing for both the asset and the liability remains the same, thereby impacting net interest income. This characteristic is referred to as basis risk. Varying interest rate environments can create unexpected changes in prepayment levels of assets and liabilities that are not reflected in the interest rate sensitivity analysis. These prepayments may have a significant impact on
61


our net interest margin. Because of these factors, an interest sensitivity gap analysis may not provide an accurate assessment of our actual exposure to changes in interest rates.

The estimated impact on our net interest income over a time horizon of one year and the change in net portfolio value as of December 31, 20202023 and 20192022 are provided in the table below. For the scenarios shown, the interest rate simulation assumes an instantaneous and sustained shift in market interest rates and no change in the composition or size of the balance sheet.
 
December 31, 2020December 31, 2019 December 31, 2023December 31, 2022
Change in Interest Rates
(basis points) (1)
Change in Interest Rates
(basis points) (1)
Percentage Change
Change in Interest Rates
(basis points) (1)
Percentage Change
Net Interest Income (2)
Net Portfolio Value (3)
Net Interest Income (2)
Net Portfolio Value (3)
Net Interest Income (2)
Net Portfolio Value (3)
Net Interest Income (2)
Net Portfolio Value (3)
+300
+300
+300(15.4)%(23.8)%(3.8)%(36.3)%
+200+2003.5 %(9.3)%1.0 %(11.6)%+200(9.4)%(13.9)%(1.7)%(24.1)%
+100+1001.2 %(4.3)%0.6 (5.4)%+100(4.2)%(5.9)%(0.7)%(12.1)%
-100-100(3.8)%(3.7)%(0.9)4.1 %-1003.5 %1.9 %0.5 %10.3 %
-200-200(4.7)%(5.7)%(2.4)%6.5 %-2006.6 %1.0 %0.2 %18.1 %
-300-30010.9 %(6.7)%(0.5)%22.9 %
 
(1)For purposes of our model, we assume interest rates will not go below zero. This "floor" limits the effect of a potential negative interest rate shock in a low rate environment like the one we are currently experiencing.environment.
(2)This percentage change represents the impact to net interest income for a one-year period, assuming there is no change in the structure of the balance sheet.
(3)This percentage change represents the impact to the net present value of equity, assuming there is no change in the structure of the balance sheet.

At December 31, 2020 and 2019 we believe our net interest income sensitivity did not exhibit a strong bias to either an increase in interest rates or a decline in interest rates. The changes in interest rate sensitivity between December 31, 20202023 and 20192022 reflected the impact of lowerhigher market interest rates, a flatteran inverted yield curve and changes to overall balance sheet composition. Some of the assumptions made in the simulation model may not materialize and unanticipated events and circumstances will occur. We do not allow for negative rate assumptions in our model, but actual results in extreme interest rate decline scenarios may result in negative rates thatrate assumptions which may cause the modeling results to be inherently unreliable. In addition, the simulation model does not take into account any future actions that we could undertake to mitigate an adverse impact due to changes in interest rates from those expected, in the actual level of market interest rates or competitive influences on our deposits.


6062




ITEM 8FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Shareholders and the Board of Directors of HomeStreet, Inc.
Seattle, Washington

Opinions on the Financial Statements and Internal Control over Financial Reporting

We have audited the accompanying consolidated balance sheet of HomeStreet, Inc. and Subsidiaries (the "Company") as of December 31, 2023, the related consolidated statements of income, comprehensive income (loss), shareholders’ equity, and cash flows for the period ended December 31, 2023, and the related notes (collectively referred to as the "financial statements"). We also have audited the Company’s internal control over financial reporting as of December 31, 2023, based on criteria established in Internal Control – Integrated Framework: (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2023, and the results of its operations and its cash flows for the period ended December 31, 2023 in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2023, based on criteria established in Internal Control – Integrated Framework: (2013) issued by COSO.

Basis for Opinions

The Company’s management is responsible for these financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s financial statements and an opinion on the Company’s internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.

Our audit of the financial statements included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

Definition and Limitations of Internal Control Over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

63


Critical Audit Matters

The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Allowance for Credit Losses for Loans Held for Investment – Economic Qualitative Factor – Refer to Notes 1 and 3 to the financial statements

The Company accounts for its allowance for credit losses (“ACL”) on loans held for investment in accordance with Accounting Standards Codification Topic 326: Financial Instruments – Credit Losses, which requires the measurement of the current expected credit losses for financial assets held at the reporting date. The ACL is a valuation account that is deducted from the amortized cost basis to present the net amount expected to be collected on the loans. Management estimates the ACL balance using relevant available information from internal and external sources relating to past events, current conditions and reasonable and supportable forecasts. Historical credit loss experience provides the basis for the estimation of expected credit losses. As of December 31, 2023, the Company’s consolidated allowance for credit losses on loans was $40,500,000 and reversal of provision for credit losses on loans was $441,000 for the year then ended.

The Company's ACL model uses statistical analysis to determine life of loan default rates for the quantitative component and analyzes qualitative factors (“Q-Factors”) that assess the current loan portfolio and forecasted economic environment. The Q-Factors adjust the expected historic loss rates for current and forecasted conditions that are not provided for in the historical loss information. The Q-Factors require management to make significant judgment about the assumptions that are inherently uncertain. The significant qualitative adjustment relates to the economic Q-Factor.

We identified auditing of the qualitative adjustment for the economic Q-Factor as a critical audit matter because of the significant judgments applied by management in determining the qualitative adjustment. In addition, auditing the Company’s qualitative adjustment for the economic Q-Factor required a high degree of auditor judgment and an increased extent of effort.

The primary audit procedures we performed to address this critical audit matter included the following:

Tested the design and operating effectiveness of controls over Q-Factor adjustments within the ACL model, including controls addressing:
Management’s review of the reasonableness of assumptions and judgments, including the qualitative risk adjustments used to derive the economic Q-Factor.
Management’s review of the calculation of Q-Factor adjustments, including the application of the economic Q-Factor.
Management’s evaluation of the relevance and reliability of data utilized in the calculation of the economic Q-Factor.
Tested the mathematical accuracy of economic Q-Factor adjustments within the ACL model.
Tested the relevance and reliability of the data used in the determination of economic Q-Factor adjustments.
Evaluated the reasonableness of management’s assumptions and judgments used in the determination of the economic Q-Factor adjustments and the resulting allocation to the qualitative allowance for the ACL on loans.

Single Family Mortgage Servicing Rights — Projected Prepayment Speed and Discount Rate Assumptions — Refer to Notes 1, 9, and 13 to the financial statements

The Company initially records, and subsequently measures, single family mortgage servicing rights (“MSRs”) at fair value and categorizes its single family MSRs as “Level 3” financial instruments. Changes in the fair value of single family MSRs result from changes in (1) model inputs and assumptions and (2) modeled amortization, representing the collection and realization of expected cash flows and curtailments over time. The model inputs used to estimate the fair value of single family MSRs include assumptions regarding projected prepayment speeds and discount rates. The Company's methodology for estimating the fair value of single family MSRs is highly sensitive to changes in these assumptions.

We identified the auditing of the projected prepayment speed and discount rate assumptions used in the single family MSRs valuation as a critical audit matter because of the significant judgment applied by management in evaluating these assumptions. In addition, auditing the Company’s single family MSRs valuation required a high degree of auditor judgment and an increased extent of effort, including the need to involve third party fair value specialists to evaluate the reasonableness of management’s assumptions related to the selection of projected prepayment speeds and discount rates used in the valuation of the single family MSRs.

64


The primary audit procedures we performed to address this critical audit matter included the following:

Tested the design and operating effectiveness of controls related to the appropriateness of the fair value of single family MSRs, including management’s review of the projected prepayment speeds and discount rates.
Compared management’s estimate of fair value of single family MSRs to a fair value estimate independently determined by a third party fair value specialist using projected prepayment speeds and discount rates obtained from market survey data.


By:/s/ Crowe LLP
We have served as the Company's auditor since 2023.

Los Angeles, California
March 6, 2024


65




REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the shareholders and the Board of Directors of HomeStreet, Inc.

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheetssheet of HomeStreet, Inc. and subsidiaries (the "Company") as of December 31, 2020 and 2019, and2022, the related consolidated income statements, statements of comprehensive income (loss), shareholders' equity, and cash flows for each of the threetwo years in the period ended December 31, 2020,2022, and the related notes (collectively referred to as the "financial statements"“financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2020 and 2019,2022, and the results of its operations and its cash flows for each of the threetwo years in the period ended December 31, 2020,2022, in conformity with accounting principles generally accepted in the United States of America.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 31, 2020, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated March 12, 2021, expressed an unqualified opinion on the Company's internal control over financial reporting.

Change in Accounting Principle

As discussed in Note 1 to the financial statements, the Company changed its method for accounting for credit losses effective January 1, 2020, due to the adoption of Financial Accounting Standards Board (FASB) Accounting Standards Codification No. 326, Financial Instruments -Credit Losses (ASC 326). The Company adopted the new credit loss standard using the modified retrospective method provided in Accounting Standards Update No. 2016-13 such that prior period amounts are not adjusted and continue to be reported in accordance with previously applicable generally accepted accounting principles.

Basis for Opinion

These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current-period audit of the financial statements that were communicated or required to be communicated to the audit committee and that (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Allowance for Credit Losses for Loans Held for Investment — Economic and Collateral Values Qualitative Factors — Refer to Notes 1 and 3 to the financial statements

61




Critical Audit Matter Description

The Company accounts for its allowance for credit losses (“ACL”) for loans held for investment in accordance with Accounting Standards Update No. 2016-13, Financial Instruments —Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, which requires the measurement of the current expected credit losses for financial assets held at the reporting date. The ACL is a valuation account that is deducted from the amortized cost basis to present the net amount expected to be collected on the loans. Management estimates the ACL balance using relevant available information from internal and external sources relating to past events, current conditions and reasonable and supportable forecasts. Historical credit loss experience provides the basis for the estimation of expected credit losses.

The Company's ACL model uses statistical analysis to determine life of loan default rates for the quantitative component and analyzes qualitative factors (“Q-Factors”) that assess the current loan portfolio and forecasted economic environment and collateral values. The Q-Factors adjust the expected historic loss rates for current and forecasted conditions that are not provided for in the historical loss information. The significant qualitative adjustments relate to the economic and collateral values Q-Factors.

We identified the estimate of the current conditions and reasonable and supportable forecasts within the economic and collateral value Q-Factors as a critical audit matter because of the significant judgment applied by management in determining the respective qualitative adjustment. Auditing the Company’s qualitative adjustment for economic and collateral values Q-Factors required a high degree of auditor judgment and an increased extent of effort.

How the Critical Audit Matter Was Addressed in the Audit

Our audit procedures related to the portion of the ACL attributable to the economic and collateral values Q-Factors included the following:

We tested the effectiveness of controls over Q-Factor adjustments within the ACL model, including management’s review of current conditions and reasonable and supportable forecasts used in determining the economic and collateral value Q-Factors.
We assessed the appropriateness of the framework for the Q-Factor adjustments.
We tested the mathematical accuracy of Q-Factor adjustments within the ACL model.
We evaluated management’s forecasts used in its qualitative adjustments by comparing the forecasts to relevant external data.
We tested management’s process to evaluate the relationship between changes in economic and collateral value data and historical credit losses and to determine qualitative adjustments attributable to the economic and collateral values Q-Factors by evaluating whether, and to what extent, the current and forecasted conditions warranted a qualitative adjustment.

Single Family Mortgage Servicing Rights (“MSRs”) — Projected Prepayment Speed and Discount Rate Assumptions — Refer to Notes 1, 9, and 14 to the financial statements

Critical Audit Matter Description

The Company initially records, and subsequently measures, single family MSRs at fair value and categorizes its single family MSRs as “Level 3” financial instruments. Management uses a valuation model that calculates the present value of estimated future net servicing cash flows to estimate the fair value of single family MSRs. Changes in the fair value of single family MSRs result from changes in (1) model inputs and assumptions and (2) modeled amortization, representing the collection and realization of expected cash flows and curtailments over time. The significant model inputs used to estimate the fair value of single family MSRs include assumptions regarding projected prepayment speeds and discount rates. The Company's methodology for estimating the fair value of single family MSRs is highly sensitive to changes in these assumptions.

We identified the prepayment speed and discount rate assumptions used in the single family MSRs valuation as a critical audit matter because of the significant judgment applied by management in determining these assumptions. Auditing the Company’s single family MSRs valuation required a high degree of auditor judgment and an increased extent of effort, including the need to involve our fair value specialists to evaluate the reasonableness of management’s assumptions related to the selection of prepayment speeds and discount rates used in the valuation of the single family MSRs.

62




How the Critical Audit Matter Was Addressed in the Audit

Our audit procedures related to the reasonableness of prepayment speed and discount rate assumptions used in the valuation of the single family MSRs included the following:

We tested the effectiveness of controls over the fair value of single family MSRs, including controls over management’s review of the prepayment speeds and discount rates.

We compared management’s estimate of fair value for selected pools of single family MSRs to a fair value estimate independently determined by our fair value specialists using prepayment speeds and discount rates obtained from market survey data

We compared management’s single-family MSR fair value estimate and prepayment speed and discount rate assumptions to a third-party valuation report for the same portfolio.

We performed analytical procedures to compare changes in certain interest and mortgage rates to changes in single family MSR values and prepayment speeds



/s/ Deloitte & Touche LLP

Seattle, Washington
March 12, 2021

3, 2023

We have servedbegan serving as the Company’s auditor sincein 2013.











In 2023, we became the predecessor auditor.
6366





HOMESTREET, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
At December 31,
(in thousands, except share data)20202019
ASSETS
Cash and cash equivalents$58,049 $57,880 
Investment securities1,076,364 943,150 
Loans held for sale ("LHFS")361,932 208,177 
Loans held for investment ("LHFI") (net of allowance for credit losses of $64,294 and $41,772)5,179,886 5,072,784 
Mortgage servicing rights85,740 97,603 
Premises and equipment, net65,102 76,973 
Other real estate owned ("OREO")1,375 1,393 
Goodwill and other intangible assets32,880 34,252 
Other assets375,763 291,595 
Assets of discontinued operations28,628 
Total assets$7,237,091 $6,812,435 
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Deposits$5,821,559 $5,339,959 
Borrowings322,800 471,590 
Long-term debt125,838 125,650 
Accounts payable and other liabilities249,144 192,910 
Liabilities of discontinued operations2,603 
Total liabilities6,519,341 6,132,712 
Commitments and contingencies (Note 10)00
Shareholders' equity:
Common stock, 0 par value, authorized 160,000,000 shares, issued and outstanding, 21,796,904 shares and 23,890,855 shares278,505 300,729 
Retained earnings403,888 374,673 
Accumulated other comprehensive income35,357 4,321 
Total shareholders' equity717,750 679,723 
Total liabilities and shareholders' equity$7,237,091 $6,812,435 

See accompanying notes to consolidated financial statements.
64




HOMESTREET, INC. AND SUBSIDIARIES
CONSOLIDATED INCOME STATEMENTS
 Years Ended December 31,
(in thousands, except share and per share data)202020192018
Interest income:
Loans$228,999 $256,043 $228,350 
Investment securities21,786 20,531 22,645 
Cash, Fed Funds and other1,227 1,032 467 
Total interest income252,012 277,606 251,462 
Interest expense:
Deposits33,797 70,389 41,995 
Borrowings9,553 17,827 19,504 
Total interest expense43,350 88,216 61,499 
Net interest income208,662 189,390 189,963 
Provision for credit losses20,469 (500)3,000 
Net interest income after provision for credit losses188,193 189,890 186,963 
Noninterest income:
Net gain on loan origination and sale activities122,564 44,122 11,866 
Loan servicing income9,491 9,785 4,823 
Deposit fees7,083 7,926 8,019 
Other10,226 12,599 11,825 
Total noninterest income149,364 74,432 36,533 
Noninterest expense:
Compensation and benefits136,826 124,354 106,741 
Information services30,004 31,603 31,846 
Occupancy35,323 27,119 22,352 
General, administrative and other33,510 32,538 34,302 
Total noninterest expense235,663 215,614 195,241 
Income from continuing operations before income taxes101,894 48,708 28,255 
Income taxes from continuing operations21,904 7,988 2,032 
Income from continuing operations79,990 40,720 26,223 
Income (loss) from discontinued operations before income taxes(28,285)17,610 
Income taxes (tax benefit) for discontinued operations(5,077)3,806 
Income (loss) from discontinued operations(23,208)13,804 
Net income$79,990 $17,512 $40,027 
Net income (loss) per share
Basic:
Income from continuing operations$3.50 $1.57 $0.97 
Income (loss) from discontinued operations(0.91)0.51 
Total$3.50 $0.66 $1.48 
Diluted:
  Income from continuing operations$3.47 $1.55 $0.97 
Income (loss) from discontinued operations(0.90)0.51 
Total$3.47 $0.65 $1.47 
Weighted average shares outstanding:
Basic22,867,26825,573,48826,970,916
Diluted23,076,82225,770,78327,168,135
See accompanying notes to consolidated financial statements.
65




HOMESTREET, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
 Years Ended December 31,
(in thousands)202020192018
Net income$79,990 $17,512 $40,027 
Other comprehensive income:
Unrealized gain (loss) on investment securities available for sale ("AFS")39,627 27,490 (10,295)
Reclassification for net (gains) losses included in income(341)(235)
Other comprehensive income (loss) before tax39,286 27,497 (10,530)
Income tax impact of:
Unrealized gain (loss) on investment securities AFS8,322 5,656 (2,163)
Reclassification for net (gains) losses included in income(72)(50)
Total8,250 5,657 (2,213)
Other comprehensive income31,036 21,840 (8,317)
Total comprehensive income$111,026 $39,352 $31,710 

See accompanying notes to consolidated financial statements.
66




HOMESTREET, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(in thousands, except share data)Number
of shares
Common
stock
Retained
earnings
Accumulated
other
comprehensive
income (loss)
Total temporary equityTotal permanent equity
Balance, December 31, 201726,888,288 $339,520 $371,982 $(7,122)$$704,380 
Net income— — 40,027 — — 40,027 
Share-based compensation expense— 3,012 — — — 3,012 
Common stock issued107,060 418 — — — 418 
Other comprehensive loss— — — (8,317)— (8,317)
Balance, December 31, 201826,995,348 342,950 412,009 (15,439)739,520 
Net income— — 17,512 — — 17,512 
Share-based compensation expense— (434)— — — (434)
Cumulative effect of adoption of new accounting standards— — 1,532 (2,080)— (548)
Common stock issued104,080 376 — — — 376 
Other comprehensive income— — — 21,840 — 21,840 
Common stock repurchased(3,208,573)(20,287)(25,521)— (52,735)(98,543)
Reclassification to temporary equity— (21,876)(30,859)— 52,735 — 
Balance, December 31, 201923,890,855 300,729 374,673 4,321 679,723 
Net income— — 79,990 — — 79,990 
Share-based compensation expense— 2,376 — — — 2,376 
Common stock issued140,386 1,099 — — — 1,099 
Cumulative effect of adoption of new accounting standards— — (3,740)— — (3,740)
Other comprehensive income— — — 31,036 — 31,036 
Dividends declared on common stock ($0.60 per share)— — (13,865)— — (13,865)
Common stock repurchased(2,234,337)(25,699)(33,170)— (58,869)
Balance, December 31, 202021,796,904 $278,505 $403,888 $35,357 $$717,750 
At December 31,
(in thousands, except share data)20232022
ASSETS
Cash and cash equivalents$215,664 $72,828 
Investment securities1,278,268 1,400,212 
Loans held for sale ("LHFS")19,637 17,327 
Loans held for investment ("LHFI") (net of allowance for credit losses of $40,500 and $41,500)7,382,404 7,384,820 
Mortgage servicing rights ("MSRs")104,236 111,873 
Premises and equipment, net53,582 51,172 
Other real estate owned ("OREO")3,667 1,839 
Goodwill and other intangible assets9,641 29,980 
Other assets325,351 294,709 
Total assets$9,392,450 $9,364,760 
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Deposits$6,763,378 $7,451,919 
Borrowings1,745,000 1,016,000 
Long-term debt224,766 224,404 
Accounts payable and other liabilities120,919 110,290 
Total liabilities8,854,063 8,802,613 
Commitments and contingencies (Note 10)
Shareholders' equity:
Common stock, no par value, authorized 160,000,000 shares; issued and outstanding, 18,810,055 shares and 18,730,380 shares229,889 226,592 
Retained earnings395,357 435,085 
Accumulated other comprehensive income (loss)(86,859)(99,530)
Total shareholders' equity538,387 562,147 
Total liabilities and shareholders' equity$9,392,450 $9,364,760 

See accompanying notes to consolidated financial statements.
67


HOMESTREET, INC. AND SUBSIDIARIES
CONSOLIDATED INCOME STATEMENTS
 Years Ended December 31,
(in thousands, except share and per share data)202320222021
Interest income:
Loans$341,255 $266,841 $222,166 
Investment securities49,615 33,825 21,560 
Cash, Fed Funds and other8,873 3,622 569 
Total interest income399,743 304,288 244,295 
Interest expense:
Deposits137,920 32,013 11,411 
Borrowings95,070 38,968 5,827 
Total interest expense232,990 70,981 17,238 
Net interest income166,753 233,307 227,057 
Provision for credit losses(441)(5,202)(15,000)
Net interest income after provision for credit losses167,194 238,509 242,057 
Noninterest income:
Net gain on loan origination and sale activities9,346 17,701 92,318 
Loan servicing income12,648 12,388 7,233 
Deposit fees10,148 8,875 8,068 
Other9,779 12,606 12,356 
Total noninterest income41,921 51,570 119,975 
Noninterest expense:
Compensation and benefits111,064 115,533 132,015 
Information services29,901 29,981 27,913 
Occupancy22,241 24,528 23,832 
General, administrative and other38,809 35,377 31,583 
Goodwill impairment39,857 — — 
Total noninterest expense241,872 205,419 

215,343 
Income (loss) before income taxes(32,757)84,660 146,689 
Income tax (benefit) expense(5,249)18,120 31,267 
Net income (loss)$(27,508)$66,540 $115,422 
Net income (loss) per share
Basic$(1.46)$3.51 $5.53 
Diluted$(1.46)$3.49 $5.46 
Weighted average shares outstanding:
Basic18,783,00518,931,10720,885,509
Diluted18,783,00519,041,11121,143,414

See accompanying notes to consolidated financial statements.
68


HOMESTREET, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWSCOMPREHENSIVE INCOME (LOSS)
Years Ended December 31,
(in thousands)202020192018
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income$79,990 $17,512 $40,027 
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Provision (reversal of provision) for credit losses20,469 (500)3,000 
Depreciation and amortization, premises and equipment9,438 10,769 12,954 
Amortization of premiums, discounts: AFS securities, deposits, debt9,013 7,655 7,914 
Operating leases: excess of payments over amortization(3,488)(2,597)
Amortization of finance leases1,277 2,029 
Amortization of core deposit intangibles1,372 1,636 1,626 
Amortization of deferred loan fees and costs1,195 1,643 (1,984)
Share-based compensation expense2,693 (163)3,361 
Net (gain) loss on sale of investment securities(341)(235)
Loss on lease abandonment and exit costs10,873 16,619 5,096 
Deferred income tax expense (benefit)(10,065)(29,903)12,777 
Loss on debt extinguishment1,492 
Origination of LHFS(2,453,110)(3,757,549)(6,075,290)
Proceeds from sale of LHFS2,407,287 4,097,511 6,448,808 
Net fair value adjustment and gain on sale of LHFS(81,439)(78,994)(93,766)
Origination of mortgage servicing rights(31,012)(34,606)(61,871)
Net gain on sale of LHFI(6,895)(9,534)(1,956)
Change in fair value of mortgage servicing rights37,567 35,902 (6,711)
Amortization of MSRs5,657 5,214 4,383 
Gain on sale of mortgage servicing rights(6,206)
(Increase) decrease in other assets(38,728)14,932 (8,064)
Increase (decrease) in accounts payable and other liabilities11,210 (32,547)(4,058)
Net cash provided by (used in) operating activities(25,545)258,830 286,011 
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of investment securities(373,264)(330,532)(189,660)
Proceeds from sale of investment securities62,378 184,871 46,081 
Principal payments on investment securities208,610 145,771 106,798 
Proceeds from sale of OREO650 1,138 836 
Proceeds from sale of LHFI576,388 769,354 548,770 
Purchase of LHFI(20,124)(1,953)
Proceeds from sale of mortgage servicing rights3,255 65,369 
Net cash provided by disposal of discontinued operations2,800 182,189 
Net increase in LHFI(690,302)(822,474)(1,132,521)
Proceeds from sale of premises and equipment1,460 808 
Purchases of premises and equipment(3,298)(2,257)(9,724)
Net cash used for acquisitions(47,389)
Proceeds from sale of Federal Home Loan Bank stock145,801 161,254 179,789 
Purchases of Federal Home Loan Bank stock(143,721)(138,156)(178,647)
Net cash provided by (used in) investing activities(232,622)107,024 (564,054)
68




Years Ended December 31,
(in thousands)202020192018
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase in deposits, net$481,464 $213,572 $290,152 
Repayment of long term borrowings(7,082)(56,000)(31,500)
Changes in short term borrowings, net(143,200)(424,000)4,000 
Repayment of finance lease principal(1,209)(1,694)
Repurchases of common stock(58,009)(98,543)
Proceeds from stock issuance, net237 105 68 
 Dividends paid on common stock(13,865)
Net cash provided by (used in) financing activities258,336 (366,560)262,720 
Net increase (decrease) in cash and cash equivalents169 (706)(15,323)
CASH, CASH EQUIVALENTS AND RESTRICTED CASH:
Cash, cash equivalents and restricted cash, beginning of year
57,880 58,586 73,909 
Cash, cash equivalents and restricted cash, end of year
58,049 57,880 58,586 
Less restricted cash included in other assets604 
CASH AND CASH EQUIVALENTS AT END OF YEAR$58,049 $57,880 $57,982 
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid (received) during the period for:
Interest$44,466 $93,325 $67,552 
Federal and state income taxes20,992 33,625 (5,785)
Non-cash activities:
LHFI foreclosed and transferred to OREO370 915 455 
Loans transferred from HFI to HFS595,529 916,483 634,205 
Loans transferred from HFS to HFI25,995 8,705 71,584 
Ginnie Mae loans recognized with the right to repurchase, net92,366 
Ginnie Mae loans derecognized with the right to repurchase, net28,281 1,674 
Repurchase of common stock - award settlement860 
Receivable from sale of mortgage servicing rights2,117 3,337 
Acquisition:
Assets acquired116,402 
Liabilities assumed74,941 
Goodwill5,928 
 Years Ended December 31,
(in thousands)202320222021
Net income (loss)$(27,508)$66,540 $115,422 
Other comprehensive income (loss):
Unrealized gain (loss) on investment securities available for sale ("AFS")15,535 (158,499)(17,934)
Reclassification for net (gains) losses included in income(3)(24)(62)
Other comprehensive income (loss) before tax15,532 (158,523)(17,996)
Income tax impact of:
Unrealized gain (loss) on investment securities AFS2,862 (37,847)(3,766)
Reclassification for net (gains) losses included in income(1)(6)(13)
Total2,861 (37,853)(3,779)
Other comprehensive income (loss)12,671 (120,670)(14,217)
Total comprehensive income (loss)$(14,837)$(54,130)$101,205 

See accompanying notes to consolidated financial statements.
69


HOMESTREET, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(in thousands, except share data)Number
of shares
Common
stock
Retained
earnings
Accumulated
other
comprehensive
income (loss)
Total
Balance, December 31, 202021,796,904 $278,505 $403,888 $35,357 $717,750 
Net income— — 115,422 — 115,422 
Share-based compensation expense— 3,398 — — 3,398 
Common stock issued - Option exercise; stock grants260,267 2,418 — — 2,418 
Other comprehensive income (loss)— — — (14,217)(14,217)
Dividends declared ($1.00 per share)— — (21,338)— (21,338)
Common stock repurchased(1,971,835)(34,465)(53,629)— (88,094)
Balance, December 31, 202120,085,336 249,856 444,343 21,140 715,339 
Net income— — 66,540 — 66,540 
Share-based compensation expense— 4,106 — — 4,106 
Common stock issued - Stock grants143,369 — — — — 
Other comprehensive income (loss)— — — (120,670)(120,670)
Dividends declared ($1.40 per share)— — (26,847)— (26,847)
Common stock repurchased(1,498,325)(27,370)(48,951)— (76,321)
Balance, December 31, 202218,730,380 226,592 435,085 (99,530)562,147 
Net income (loss)— — (27,508)— (27,508)
Share-based compensation expense— 3,613 — — 3,613 
Common stock issued - Stock grants92,769 — — — — 
Other comprehensive income (loss)— — — 12,671 12,671 
Dividends declared ($0.65 per share)— — (12,220)— (12,220)
Common stock repurchased(13,094)(316)— — (316)
Balance, December 31, 202318,810,055 $229,889 $395,357 $(86,859)$538,387 

See accompanying notes to consolidated financial statements.
70


HOMESTREET, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years Ended December 31,
(in thousands)202320222021
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)$(27,508)$66,540 $115,422 
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Goodwill impairment charge39,857 — — 
Provision for credit losses(441)(5,202)(15,000)
Depreciation and amortization, premises and equipment7,146 9,707 9,908 
Amortization of premiums and discounts: investment securities, deposits, debt357 3,126 6,002 
Operating leases: excess of payments over amortization(3,145)(4,081)(4,029)
Amortization of finance leases425 580 1,066 
Amortization of core deposit intangibles2,951 963 1,171 
Amortization of deferred loan fees and costs(1,039)(1,182)(8,569)
Share-based compensation expense3,613 4,106 3,398 
Deferred income tax (benefit) expense(9,129)(12,996)4,718 
Origination of LHFS(362,453)(670,905)(2,251,090)
Proceeds from sale of LHFS363,327 831,095 2,379,116 
Net fair value adjustment and gain on sale of LHFS(676)6,450 (42,358)
Origination of MSRs(3,645)(11,778)(34,445)
Net gain on sale of loans originated as LHFI— (88)(11,377)
Change in fair value of MSRs5,964 (6,788)12,290 
Amortization of servicing rights5,778 7,692 7,581 
Net fair value adjustment, gain on sale and provision for losses on other real estate owned(975)— — 
Gain on sale of branches— (4,270)— 
Net change in trading securities(5,695)(18,989)— 
(Increase) decrease in other assets(44,386)17,797 (5,796)
Increase in accounts payable and other liabilities37,698 6,551 5,027 
Net cash provided by operating activities8,024 218,328 173,035 
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of investment securities(53,232)(759,501)(179,398)
Proceeds from sale of investment securities4,693 98,915 28,187 
Principal payments on investment securities192,555 125,848 197,253 
Proceeds from sale of OREO2,972 952 541 
Proceeds from sale of loans originated as LHFI— 4,613 504,584 
Net cash distributed in sale of branches— (138,756)— 
Net decrease (increase) in LHFI18,958 (1,940,489)(683,822)
Purchases of premises and equipment(3,811)(6,786)(2,941)
Net cash received from acquisitions of branches327,901 — — 
Proceeds from sale of Federal Home Loan Bank stock222,814 147,486 109,484 
Purchases of Federal Home Loan Bank stock(228,802)(186,430)(99,526)
Net cash provided by (used in) investing activities484,048 (2,654,148)(125,638)
71


Years Ended December 31,
(in thousands)202320222021
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase (decrease) in deposits, net$(1,065,463)$1,472,834 $347,867 
Changes in short-term borrowings, net84,000 (25,000)(281,800)
Proceeds from other long-term borrowings1,180,000 1,000,000 50,000 
Repayment of other long-term borrowings(535,000)— (50,000)
Proceeds from debt issuance, net— 98,036 — 
Repayment of finance lease principal(456)(589)(1,070)
Repurchases of common stock— (75,000)(84,154)
Proceeds from exercise of stock options— — 263 
 Dividends paid on common stock(12,317)(26,847)(21,338)
Net cash (used in) provided by financing activities(349,236)2,443,434 (40,232)
Net increase in cash and cash equivalents142,836 7,614 7,165 
Cash and cash equivalents, beginning of year72,828 65,214 58,049 
Cash and cash equivalents, end of year$215,664 $72,828 $65,214 
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest$217,132 $66,364 $17,303 
Federal and state income taxes(5,287)5,201 34,429 
Non-cash activities:
LHFI foreclosed and transferred to OREO3,576 1,160 — 
Loans transferred from LHFI to LHFS, net2,507 12,361 392,555 
Ginnie Mae loans derecognized with the right to repurchase, net1,301 5,424 89,408 
New investments in LIHTC partnerships15,000 — 15,000 
Repurchase of common stock - award shares316 1,321 3,940 
Acquisition:
Loans acquired21,197 — — 
Premises and equipment and other assets5,845 — — 
Liabilities assumed377,412 — — 
Goodwill and other intangibles22,469 — — 

See accompanying notes to consolidated financial statements.
72


HomeStreet, Inc. and Subsidiaries
Notes to Consolidated Financial Statements

NOTE 1–SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

Business

HomeStreet, Inc., a State of Washington corporation organized in 1921 (the "Corporation"), is a Washington-based diversified financial services holding company whose operations are primarily conducted through its wholly owned subsidiaries (collectively the "Company") HomeStreet Capital Corporation, HomeStreet Statutory Trusts and HomeStreet Bank (the "Bank"), and the Bank's subsidiaries, HomeStreet Reinsurance, Ltd., Continental Escrow Company, HomeStreet Foundation, HS Properties, Inc., HS Evergreen Corporate Center LLC, and Union Street Holdings LLC and HS Cascadia Holdings LLC. The Company is principally engaged in commercial banking, mortgage banking and consumer/retail banking activities serving customers primarily in the Western United States.

The Bank, the Company’s principal operating subsidiary, is engaged in commercial banking, mortgage banking and consumer/retail banking activities. The Bank was incorporated in the State of Washington in 1986, and, as a state-chartered non-member commercial bank, is subject to examination by the State of Washington Department of Financial Institutions and the Federal Deposit Insurance Corporation ("FDIC").

Basis of Presentation

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. The Company allocates resources and assesses financial performance on a consolidated basis and therefore has one reporting segment. 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 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.

Reclassifications

Certain amounts in the financial statements from prior periods have been reclassified to conform to the current financial statement presentation. These reclassifications had no effect on prior years' net income or stockholders’ equity.

Immaterial Restatement: Subsequent to the issuance of the June 30, 2020 financial statements, management concluded that purchases of and proceeds from the sale of Federal Home Loan Bank stock were incorrectly classified as financing activities, rather than investing activities, in the consolidated statements of cash flows. To correct this classification error, amounts previously reported for the purchases of and proceeds from the sale of Federal Home Loan Bank stock for 2019 and 2018 as financing activities are reported as investing activities in the consolidated statement of cash flows.

Discontinued Operations

During 2019, the Company's Board of Directors (the "Board") adopted a Resolution of Exit or Disposal of Home Loan Center ("HLC") Based Mortgage Banking Operations to sell or abandon the assets and transfer or terminate the personnel associated with the Company's high-volume HLC-based mortgage origination business and related servicing. The Company also successfully closed and settled 2 separate sales of the rights to service $14.3 billion in total unpaid principal balance of single family mortgage loans serviced for others. At the end of the second quarter 2019, we also entered into a non-binding letter of interest to sell our ownership interest in WMS LLC. In accordance with Accounting Standards Codification (ASC) 205-20, the Company determined that the Board's decision to sell or abandon the assets and personnel associated with the Company's HLC-based mortgage business, the related mortgage servicing rights ("MSR") sales and the sale of WMS LLC met the criteria to be classified as discontinued operations and its operating results and financial condition are presented as discontinued operations in the consolidated financial statements for 2019 and prior periods. These discontinued operations activities, including the exit or disposal of the former Mortgage Banking Segment, were concluded by December 31, 2019. Consequently, we ceased discontinued operations accounting effective January 1, 2020. Unless otherwise indicated, information included in these notes to the consolidated financial statements for 2019 and 2018 are presented on a consolidated operations basis, which includes results from both continuing and discontinued operations.

70




Cash and Cash Equivalents

For purposes of reporting cash flows, cash and cash equivalents include cash, due from banks, certificates of deposits with original maturities of less than ninety days, investment securities with original maturities of less than ninety days, money market funds and federal funds sold. The Bank maintains most of its excess cash at the Federal Reserve Bank of San Francisco ("FRBSF"), with well-capitalized correspondent banks or with other depository institutions at amounts less than the FDIC insured limits. Restricted cash of $6.6$6.4 million and $5.1$6.7 million at December 31, 20202023 and 2019,2022, respectively, is included in cash and cash equivalents.equivalents.

Investment Securities

Investment securities for which the Company has the positive intent and ability to hold to maturity are reported at cost, adjusted for premiums and discounts that are recognized in interest income using the interest method over the period to maturity. Investments not classified as trading securities nor as held-to-maturity ("HTM") securities are classified as AFS securities and recorded at fair value. Unrealized gains or losses on AFS securities are excluded from net income and reported net of taxes as a separate component of other comprehensive income included in shareholders’ equity. Purchase premiums and discounts are recognized in interest income using the effective interest method over the contractual life of the securities. Purchase premiums or discounts related to mortgage-backed securities are amortized or accreted using projected prepayment speeds. Gains and losses on the sale of AFS securities are recorded on the trade date and are determined using the specific identification method.

Trading securities, consisting of US Treasury notes, are used as economic hedges of our mortgage servicing rights, which are carried at fair value and included as investment securities on the balance sheet. Net gain or loss on trading securities are included in loan servicing income in the consolidated income statements.

73


The Company evaluates AFS securities in an unrealized loss position using a qualitative approach, at the end of each quarter to determine whether the decline in value is temporary or permanent. An unrealized loss exists when the fair value of an individual security is less than its amortized cost basis. When qualitative factors indicate that a credit loss may exist, the Company compares the present value of cash flows expected to be collected from the security with the amortized cost basis of the security. The Company recognizes an ACLallowance for credit loss ("ACL") if a loss is considered to exist, measured as the difference between the present value of expected cash flows and the amortized cost basis of the security, limited by the amount that the security’s fair value is less than its amortized cost basis. The Company does not believe any of these securities that were in an unrealized loss position at December 31, 2020 represent2023 or 2022 have a credit loss impairment.

The Company evaluates HTM securities at the end of each quarter to determine if any expected credit losses exist. No ACLThe Company does not believe any expected credit losses existed for HTMthese securities was recorded as of December 31, 2020.2023 and 2022.

Federal Home Loan Bank Stock

The Bank is a member of the Federal Home Loan Bank of Des Moines ("FHLB"), and as such, is required to own a certain amount of FHLB stock based on the level of borrowings and other factors. FHLB stock is carried at cost and periodically evaluated for impairment based on ultimate recovery of par value. Both cash and stock dividends are recorded as a component of interest income.

Loans Held for SaleLHFS

Loans originated for sale in the secondary market or designated for whole loan sales are classified as loans held for sale.LHFS. Management has elected the fair value option for all single family loans held for saleLHFS (originated with the intent to market for sale) and records these loans at fair value. Gains and losses from changes in fair value on loans held for saleLHFS are recognized in net gain on mortgage loan origination and sale activities within noninterest income. Direct loan origination costs and fees for single family loans originated as held for sale are recognized in earnings.as noninterest expenses.

Multifamily and Small Business Administration ("SBA") loans held for saleLHFS are accounted for at the lower of amortized cost or fair value ("LOCOM"). LOCOM valuations are performed quarterly or at the time of transfer to or from loans held for sale.LHFS. Related gains and losses are recognized in net gain on mortgage loan origination and sale activities. Direct loan origination costs and fees for multifamily and SBA loans classified as held for sale are deferred at origination and recognized in earnings at the time of sale.

71




Loans Held for InvestmentLHFI

Loans held for investmentLHFI are reported at the principal amount outstanding, net of cumulative charge-offs, interest applied to principal (for loans accounted for using the cost recovery method), unamortized net deferred loan origination fees and costs and unamortized premiums or discounts on purchased loans. When a loan is designated as held for investment, the intent is to hold these loans for the foreseeable future or until maturity or pay-off. If subsequent changes occur as part of the balance sheet management process, the Company may change its intent to hold these loans. Once a determination has been made to sell such loans, they are transferred to loans held for saleLHFS and carried at the lower of amortized cost or fair value. Interest on loans is recognized at the contractual rate of interest and is only accrued if deemed collectible. Deferred fees and costs and premiums and discounts are amortized over the contractual terms of the underlying loans using the constant effective yield (the interest method) or straight-line method.

Nonaccrual Loans

Loans for which the accrual of interest has been discontinued are designated as nonaccrual loans. Loans are placed on nonaccrual status when the full and timely collection of principal and interest is doubtful, generally when the loan becomes 90 days or more past due for principal or interest payment or if part of the principal balance has been charged off. When loans are placed on nonaccrual status, all interest previously accrued but not collected is reversed against current period interest income. All payments received on nonaccrual loans are accounted for using the cost recovery method. Under the cost recovery method, all cash collected is applied first to reduce the outstanding principal balance. A loan may be returned to accrual status if all delinquent principal and interest payments are brought current and the collectability of the remaining principal and interest payments in accordance with the loan agreement is reasonably assured. Loans whose repayments are insured by the Federal Housing Administration ("FHA") or, guaranteed by the Department of Veterans' Affairs ("VA") or Ginnie Mae ("GNMA") are maintained on accrual status even if 90 days or more past due.

Troubled Debt Restructurings
74


Modifications to Borrowers Experiencing Financial Difficulty ("MBFD")

WeThe Company provides MBFDs which may include other than insignificant delays in payment of amounts due, extension of the terms of the notes or reduction in the interest rates on the notes. In certain instances, the Company may grant more than one type of modification. The granting of modifications for the years ended December 31, 2023 and 2022 did not have a material impact on the ACL.

When a borrower experiences financial difficulty, we sometimes modify or restructure loans, whenwhich may include delays in payment of amounts due, forgiveness of principal, extension of the borrower is experiencing financial difficulties by makingterms of the notes or a concession to the borrower in the form of changes in the amortization terms, reductionsreduction in the interest rates on the acceptance of interest only payments and, in limited cases, concessions to the outstanding loan balances.notes. These loans are classified as TDRs. TDRsMBFDs. MBFDs are loans modified for the purpose of alleviating temporary impairments to the borrower’s financial condition or cash flows. A workout plan between us and the borrower is designed to provide a bridge for borrower cash flow shortfalls in the near term. A TDR loan may be returned to accrual status when the loan is brought current, has performed in accordance with the contractual restructured terms for a time frame of at least six months, and the ultimate collectability of the total contractual restructured principal and interest is reasonably assured.

ACL for LHFI

The ACL for LHFI is a valuation account that is deducted from the loans amortized cost basis to present the net amount expected to be collected on the loans. Loan balances are charged off against the ACL when management believes the non-collectability of a loan balance is confirmed. Expected recoveries mayRecoveries are recorded as an increase to the ACL for LHFI to the extent they do not exceed the aggregate of amounts previously charged-off and expected to be charged-off.related charge-off amounts. The ACL for LHFI, as reported in our consolidated balance sheets, is adjusted by a provision for credit losses and reduced by the charge-offs of loan amounts, net of recoveries.

Management estimates the ACL balance using relevant available information from internal and external sources relating to past events, current conditions and reasonable and supportable forecasts. Historical credit loss experience provides the basis for the estimation of expected credit losses. Adjustments to historical loss information are made for differences in current loan-specific risk characteristics such as differences in underwriting standards, portfolio mix or delinquency levels or other relevant factors.
The credit loss estimation process involves procedures to appropriately consider the unique characteristics of its two loan portfolios, the consumer loan portfolio and the commercial loan portfolio. These two portfolios are further disaggregated into loan pools, the level at which credit risk is monitored. When computing ACL levels, credit loss assumptions are estimated using a model that categorizes loan pools based on loss history, delinquency status and other credit trends and risk characteristics, including current conditions and reasonable and supportable forecasts about the future.forecasts. Determining the appropriateness of the ACL is complex and requires judgment by management about the effect of matters that are inherently uncertain. In future periods, evaluations of the overall loan portfolio, based on the factors and forecasts then prevailing, may result in material changes in the ACL and provision for credit losses in those future periods.
72




losses.
Credit Loss Measurement
The ACL level is influenced by current conditions related to loan volumes, loan asset quality ratings ("AQR") migration or delinquency status, historic loss experience and other conditions influencing loss expectations, such as reasonable and supportable forecasts of economic conditions. The methodology for estimating the amount of expected credit losses has two basic components: first, a pooled component for estimated expected credit losses for pools of loans that share similar risk characteristics and second an asset-specific component involving individual loans that do not share risk characteristics with other loans and the measurement of expected credit losses for such individual loans.
Loans that Share Similar Risk Characteristics with Other Loans
For loans that share similar risk characteristics, loans are segregated into loan pools based on similar risk characteristics, like product types or areas of risk concentration to estimate the ACL.
The Company's ACL model methodology is to build a reserve rate using historical life of loan default rates combined with assessments of current loan portfolio information and current and forecasted economic environment and business cycle information. The model uses statistical analysis to determine the life of loan default rates for the quantitative component and analyzes qualitative factors (Q-Factors) that assess the current loan portfolio conditions and forecasted economic environment and collateral values. Below is the general overview our ACL model.
Loans that Share Similar Risk Characteristics with Other Loans
For loans that share similar risk characteristics, loans are segregated into loan pools based on similar risk characteristics, like product types or primary source of repayment to estimate the ACL.
Historical Loss RateRates
The Company chose to analyzeanalyzed loan data from a full economic cycle, to the extent that data was available, to calculate life of loan loss rates. Based on the current economic environment and available loan level data, it was determined the Loss Horizon Period (LHP)("LHP") should begin prior to the economic recession that began in 2007. The Company plans to monitormonitors and reviewreviews the LHP on an annual basis to determine appropriate time frames to be included based on economic indicators.
75


Under current expected credit losses methodology ("CECL"), the Company groups pools of loans by similar risk characteristics. Using these pools, sub-pools are established at a more granular level incorporating delinquency status and original FICO or original LTV (for consumer loans) and risk ratings (for commercial loans). Using the pool and sub-pool structure, cohorts are established historically on a quarterly basis containing the population in these sets as of that point in time. After the establishment of these cohorts, the loans within the cohorts are then tracked from that point forward to establish long-term Probability of Default ("PD") at the sub-pool level and Loss Given Default ("LGD") for the pool level. These historical cohorts and their PD/LGD outcomes are then averaged together to establish expected PDs and LGDs for each sub-pool.

Once historical cohorts are established, the loans in the cohort are tracked moving forward for default events. The Company has defined default events as the first dollar of loss. If a loan in the cohort has experienced a default event over the LHP then the balance of the loan at the time of cohort establishment becomes part of the numerator of the PD calculation. The Loss Given Probability of Default ("LGPD") or Expected Loss ("EL") is the weighted average PD for each sub-pool cohort times the average LGD for each pool. The output from the model then is a series of EL rates for each loan sub-pool, which are applied to the related outstanding balances for each loan sub-pool to determine the ACL reserve based on historical loss rates.
Q-Factors
The Q-Factors adjust the expected historic loss rates for current and forecasted conditions that are not provided for in the historical loss information. The Company has established a methodology for adjusting historical expected loss rates based on these more recent or forecasted changes. The Q-Factor methodology is based on a blend of quantitative analysis and management judgment and reviewed on a quarterly basis.
76


Each of the thirteen factors in the FASB standard were analyzed for common risk characteristics and grouped into seven consolidated Q-Factors as listed below.
73




below:
Qualitative FactorFinancial Instruments - Credit Losses
Portfolio Credit QualityThe borrower's financial condition, credit rating, credit score, asset quality or business prospects
The borrower's ability to make scheduled interest or principal payments
The volume and severity of past due financial assets and the volume and severity of adversely classified or rated financial assets
Remaining PaymentsThe remaining payment terms of the financial assets
The remaining time to maturity and the timing and extent of prepaymentspayments on the financial assets
Volume & NatureThe nature and volume of the entity's financial assets
Collateral ValuesThe value of underlying collateral on financial assets in which the collateral-dependent practical expedient has not been utilized
EconomicThe environmental factors of a borrower and the areas in which the entity's credit is concentrated, such as: changes and expected changes in national, regional and local economic and business conditions and developments in which the entity operates, including the condition and expected condition of various market segments
Credit CultureThe entity's lending policies and procedures, including changes in lending strategies, underwriting standards, collection, write-off and recovery practices, as well as knowledge of the borrower's operations or the borrower's standing in the community
The quality of the entity's credit review system
The experience, ability and depth of the entity's management, lending staff, and other relevant staff
Business EnvironmentThe environmental factors of a borrower and the areas in which the entity's credit is concentrated, such as: regulatory, legal, or technological environment to which the entity has exposure
The environmental factors of a borrower and the areas in which the entity's credit is concentrated, such as: changes and expected changes in the general market condition of either the geographical area or the industry to which the entity has exposure
An eighth Q-Factor, Management Overlay, allows the Bank to adjust specific pools when conditions exist that were not contemplated in the model design that warrant an adjustment. The economic downturn caused by the COVID-19 pandemic and resulting accounting treatment of forbearances is an example of such a condition.
The Company has chosen two years as the forecast period based on management judgment and has determined that reasonable and supportable forecasts should be made for two of the Q-Factors: Economic and Collateral values.
Management has assigned weightings for each qualitative factor as well as individual metrics within each qualitative factor as to the relative importance of that factor or metric specific to each portfolio type. The Q-Factors above are evaluated using a seven-point scale ranging from significant improvement to significant deterioration.
The CECL Q-Factor methodology bounds the Q-Factor adjustments by a minimum and maximum range, based on the Bank’s own historical expected loss rates for each respective pool. The rating of the Q-Factor on the seven-point scale, along with the allocated weight, determines the final expected loss adjustment. The model is constructed so that the total of the Q-Factor adjustments plus the current expected loss rate cannot exceedbe outside the maximum or minimum two-year loss rate for that pool, which is aligned with the Bank's chosen forecast period. Loss rates beyond two years are not adjusted in the Q-Factor process and the model reverts to the historical mean loss rates. Management Overlays are not bounded by the historical maximums.
Quarterly, loan data is gathered to update the portfolio metrics analyzed in the Q-Factor model. The model is updated with current data and applicable forecasts, then the results are reviewed by management. After consensus is reached on all Q-Factor ratings, the results are input into the Q-Factor model and applied to the pooled loans which are reviewed to determine the adequacy of the reserve.
7477




Additional details describing the model by portfolio are below:
Consumer Loan Portfolio
The consumer loan portfolio is comprised of the single family and home equity loan classes, which are underwritten after evaluating a borrower's capacity, credit and collateral. Other consumer loans are grouped with home equity loans. Capacity refers to a borrower's ability to make payments on the loan. Several factors are considered when assessing a borrower's capacity, including the borrower's employment, income, current debt, assets and level of equity in the property. Credit refers to how well a borrower manages current and prior debts as documented by a credit report that provides credit scores and current and past information about the borrower's credit history. Collateral refers to the type and use of property, occupancy and market value. Property appraisals aremay be obtained to assist in evaluating collateral. Loan-to-property value and debt-to-income ratios, loan amount and lien position are considered in assessing whether to originate a loan. These borrowers are particularly susceptible to downturns in economic trends such as conditions that negatively affect housing prices, demand for housing and levels of unemployment.
Consumer Loan Portfolio Estimated Loss Rate Model
Under CECL, the Bank utilizes pools of loans that are grouped by similar risk characteristics: Single Family and Home Equity Loans which includes Consumer loans.Loans. Sub-Pools are established at a more granular level for the calculation of PDs, incorporating delinquency status, original FICO and original LTV.
Consumer portfolio cohorts are established by grouping each ACL sub-pool at a point in time. Once historical cohorts are established, the loans in the cohort are tracked moving forward for default events.

The Q-Factors adjust the expected historic loss rates for current and forecasted conditions that are not provided for in the historical loss information. For Single Family loans all Q-Factors noted above are evaluated. For the Home Equity and Consumer loans, collateral values are not evaluated as the Bank has determined the FICO score trends are a more relevant predictor of default than current collateral value for those types of loans. These factors are evaluated based on current conditions and forecasts (as applicable), using a seven-point scale ranging from significant improvement to significant deterioration.
Commercial Loan Portfolio
The commercial loan portfolio is comprised of the non-owner occupied commercial real estate ("CRE"), multifamily, construction and land development, owner occupied commercial real estateCRE and commercial business loan classes, whose underwriting standards consider the factors described for single family and home equity loan classes as well as others when assessing the borrower's and associated guarantorsguarantor's or other related party’s financial position. These other factors include assessing liquidity, net worth, leverage, other outstanding indebtedness of the borrower, the quality and reliability of cash expected to flow through the borrower (including the outflow to other lenders) and prior known experiences with the borrower.
This information is used to assess financial capacity, profitability and experience. Ultimate repayment of these loans is sensitive to interest rate changes, general economic conditions, liquidity and availability of long-term financing.
Commercial Loan Portfolio Loss Rate Model
The Bank maintained loan classes above but has subdivided the construction and land development, which includes lot, land and acquisition and development loans,commercial loan portfolio into the following ACL reporting pools to more accurately group risk characteristics: Commercial Business, Owner Occupied CRE, Multifamily, Commercial Real Estate,Multifamily Construction, CRE, CREConstruction, Single Family Construction to Permanent, and Single Family construction to permanent.Construction, which includes lot, land and acquisition and development loans. ACL sub-pools are established at a more granular level for the calculation of PDs, utilizing risk rating.

As outlined in the Bank’s policies, commercial loans pools are non-homogenous and are regularly assessed for credit quality. For purposes of CECL, loans are sub-pooled according to the following AQR Ratings:

1-6: These loans meet the definition of “Pass" assets. They are well protected by the current net worth and paying capacity of the obligor (or guarantors, if any) or by the fair value, less costs to acquire and sell in a timely manner, of any underlying collateral. The Bank further uses the available AQR ratings for components of the sub-pools.
7: These loans meet the regulatory definition of “Special Mention.” They contain potential weaknesses, that if uncorrected may result in deterioration of the likelihood of repayment or in the Bank’s credit position.
8: These loans meet the regulatory definition of “Substandard”.“Substandard.” They are inadequately protected by the current sound worth and paying capacity of the borrower or of the collateral pledged, if any. They have well-defined weaknesses and have unsatisfactory characteristics causing unacceptable levels of risk.

7578




Commercial portfolio cohorts are established by grouping each ACL sub-pool at a point in time. Once historical cohorts are established, the loans in the cohort are tracked moving forward for default events. The Q-Factors adjust the expected historic loss rates for current and forecasted conditions that are not provided for in the historical loss information. All the Q-Factors noted above are evaluated for Commercial portfolio loans except for Commercial Business and Owner Occupied Commercial Real Estate ("CRE")CRE loans which exclude the collateral values Q-Factor. The Company has determined that these loans are primarily underwritten by evaluating the cash flow of the business and not the underlying collateral. Factors above are evaluated based on current conditions and forecasts (as applicable), using a seven-point scale ranging from significant improvement to significant deterioration.
Loans That Do Not Share Risk Characteristics with Other Loans
For a loan that does not share risk characteristics with other loans, expected credit loss is measured on net realizable value that is the difference between the discounted value of the expected future cash flows, based on the original effective interest rate and the amortized cost basis of the loan. For these loans, we recognize expected credit loss equal to the amount by which the net realizable value of the loan is less than the amortized cost basis of the loan (which is net of previous charge-offs and deferred loan fees and costs), except when the loan is collateral dependent, which is when the borrower is experiencing financial difficulty and repayment is expected to be provided substantially through the operation or sale of the collateral. In these cases, expected credit loss is measured as the difference between the amortized cost basis of the loan and the fair value of the collateral. The fair value of the collateral is adjusted for the estimated costs to sell if repayment or satisfaction of a loan is dependent on the sale (rather than only on the operation) of the collateral.
The starting point for determining the fair value of collateral is through obtaining external appraisals. Generally, collateral values for collateral dependent loans are updated every twelve months, either from external third parties or in-house certified appraisers. A third-party appraisal is required at least annually for substandard loans and OREO. For performing consumer loans secured by real estate that are classified as collateral dependent, the Bank determines the fair value estimates quarterly using automated valuation services. Once the expected credit loss amount is determined, an ACL is recorded equal to the calculated expected credit loss and included in the ACL. If no credit loss is expected to occur, then no ACL is recognized for this loan. If the calculated expected credit loss is determined to be permanent or not recoverable, the expected credit loss will be charged off. Factors considered by management in determining if the expected credit loss is permanent or not recoverable include whether management judges the loan to be uncollectible, repayment is deemed to be protracted beyond reasonable time frames, or the loss becomes evident owing to the borrower's lack of assets or, for single family loans, the loan is 180 days or more past due unless both well-secured and in the process of collection.

ACL for Off-Balance Sheet Credit Exposures
The Bank estimates expected credit losses over the contractual period in which the Bank is exposed to risk via a contractual obligation to extend credit, unless that obligation is unconditionally cancellable by the Bank. Reserves are required for off-balance sheet credit exposures that are not unconditionally cancellable. The ACL on unfunded loan commitments is based on an estimate of unfunded commitment utilization over the life of the loan, applying the EL rate to the estimated utilization balance as of the reporting period end date. As these estimatedQ-factors are not included in the calculation of expected credit loss calculations are similar to the funded LHFI they share similar risks plus the additional risk from estimating commitment utilization.losses for off-balance sheet credit exposures.

Other Real Estate Owned

Real estate properties acquired through, or in lieu of, loan foreclosure are recorded at net realizable value (fair value of collateral less estimated costs to sell). At the time of possession, an appraisal is obtained and any excess of the loan balance over the net realizable value is charged against the ACL. After foreclosure, valuations are periodically performed by management. Any subsequent declines in fair value are recorded as a charge to current period earnings with a corresponding write-down to the asset. All legal fees and direct costs, including foreclosure and other related costs are expensed as incurred.

Mortgage Servicing Rights

MSRs are recognized as separate assets on our consolidated balance sheets upon purchase of the rights or when we retain the right to service loans that we have sold.sold or purchase rights to service. We initially record all MSRs at fair value. For subsequent measurements, single family MSRs are accounted for at fair value, during the life of the MSR, with changes in fair value recorded through current period earnings, while multifamily and SBA MSRs are accounted for at the lower of amortized cost or fair value.

Subsequent fair value measurements of MSRs are determined by considering the present value of estimated future net servicing cash flows. Changes in the fair value of MSRs result from changes in (1) model inputs and assumptions and (2) modeled
79


amortization, representing the collection and realization of expected cash flows and curtailments over time. The significant model inputs used to measure the fair value of MSRs include assumptions regarding market interest rates, projected prepayment
76




speeds, discount rates, estimated costs of servicing and other income and additional expenses associated with the collection of delinquent loans.

Mortgage servicing assets for multifamily and SBA MSRs are evaluated periodically for impairment based upon the fair value of the MSRs as compared to amortized cost. Impairment is determined by comparing the fair value of the portfolio based on predominant risk characteristic loan type, to amortized cost. Impairment is recognized to the extent that fair value is less than the capitalized amount of the portfolio.

For single family MSRs, loan servicing income includes fees earned for servicing the loans and the changes in fair value over the reporting period of both our MSRs and the derivatives used to economically hedge our MSRs. For other MSRs, loan servicing income includes fees earned for servicing the loans less the amortization of the related MSRs and any impairment adjustments.

RevenuesRevenue Recognition

Descriptions of our primary revenue-generating activities that fall within the scope of ASCAccounting Standards Committee ("ASC") Topic 606Revenue Recognition and are presented in our consolidated income statements as follows:

Depositor and other retail and business banking fees (in Deposit Fees)

Depositor and other retail banking fees consist of monthly service fees check orders, and other deposit account related fees. The Company's performance obligation for these fees is generally satisfied, and the related revenue recognized, over the period in which the service is provided.

Commission Income (in Other Income)

Commission income primarily consists of revenue received on insurance policies and monthly investment management fees earned where the Company has acted as an intermediary between customers and the insurance carriers or investment advisers.
policies. The Company's performance obligation for commissions is generally satisfied, and the related revenue generally recognized, over the course of the policy or over the period in which the services are provided, generally monthly.policy.

Credit Card Fees (in Other Income)

The Company offers credit cards to its customers through a third party and earns a fee on each transaction and a fee for each new account activation on a net basis. Revenue is recognized on a one-month lag when cash is received for these fees which does not vary materially from recognizing revenue over the period the services are performed.

Sale of Other Real Estate Owned (in Other Noninterest Income)

A gain or loss, the difference between the cost basis of the property and its sale price, on other real estate owned is recognized when the performance obligation is met, which is at the time the property title is transferred to the buyer. To record a sale of REO,OREO, the Company evaluates if: (a) a commitment on the buyer’s part exists, (b) collection is probable in circumstances where the initial investment is minimal and (c) the buyer has obtained control of the asset, including the significant risks and rewards of the ownership. If there is no commitment on the buyer’s part, collection is not probable or the buyer has not obtained control of the asset, then a gain cannotwill not be recognized.

Other non-interest income includes revenue related to mortgage servicing activities and gains on sales of loans, which are not subject to the requirements of ASU Topic 606.

Premises and Equipment

Premises and equipment are carried at cost less accumulated depreciation and amortization. Depreciation and amortization are computed using the straight-line method over the estimated useful lives of the assets, which generally range from 23 to 2720 years. The cost of leasehold improvements is amortized using the straight-line method over the shorter of the estimated useful life of the asset or the term of the related leases. The Company periodically evaluates premises and equipment for impairment.

80


Leases

We determine if an arrangement is a lease at inception. Operating and finance leases are included in lease right-of-use ("ROU") assets, and lease liabilities in our consolidated balance sheets. ROU assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease. The lease liability is recognized at commencement date based on the present value of lease payments over the lease term. The right-of-use asset is based on the lease liability adjusted for the reclassification of certain balance sheet amounts such as prepaid rent, lease incentives and deferred rent. As the rate implicit in most of our leases are not readily determinable, we generally use our
77




incremental borrowing rate based on the estimated rate of interest for collateralized borrowing over a similar term of the lease contract at commencement date. Our lease terms may include options to extend or terminate the lease when it is reasonably certain that we will exercise that option. We have lease agreements with lease and non-lease components, which are generally accounted for separately for real estate leases.

Certain of our lease agreements include rental payments that adjust periodically based on changes in the CPI. We initially measure the present value of the lease payments using the index at the lease commencement date.Consumer Price Index ("CPI"). Subsequent increases in the CPI are treated as variable lease payments and recognized in the period in which the obligation for those payments is incurred. The ROU assets and lease liabilities are not re-measured as a result of changes in the CPI.

Lease expense for operating leases is recognized on a straight-line basis over the lease term. Lease expense for our financing leases is comprised of the amortization of the right-of-use asset and interest expense recognized based on the effective interest method.

We use the long-lived assets impairment guidance under ASC Topic 360-10-35, "Property, Plant and Equipment," to determine whether an ROU asset is impaired, and if impaired, the amount of loss to recognize. Long-lived assets are tested for recoverability whenever events or changes in circumstances indicate that their carrying amounts may not be recoverable. These could include vacating the leased space, obsolescence, or physical damage to a facility. If an impairment loss is recognized for a ROU asset, the adjusted carrying amount of the ROU asset would be its new accounting basis. The remaining ROU asset (after the impairment write-down) is amortized on a straight-line basis over the remaining lease term.

Branch Acquisition

On February 10, 2023, the Company completed its acquisition of three branches in southern California, whereby we assumed approximately $376 million in deposits and purchased approximately $21 million in loans. The application of the acquisition method of accounting resulted in recording goodwill and cost savings, of $12 million, and a core deposit intangible of $11 million.

Goodwill and Other Intangible Assets

Goodwill is recorded upon completion of a business combination as the excess of the fair value of the consideration transferred, plus the fair value of any noncontrolling interests in the acquiree, over the fair value of the net assets acquired and liabilities assumed as of the acquisition date. Goodwill has been determined to have an indefinite useful life and is not amortized, but tested for impairment at least annually or more frequently if events and circumstances existoccur that indicate it is more likely than not the necessity for suchfair value of the reporting unit is less than its carrying value necessitating an impairment tests to be performed.test. The Company typically performs its annual impairment testing on August 31 each year, or sooner if a triggering event occurs. Triggering events include, among other factors, declines in historical or projected revenue, operating income or cash flows, and sustained declines in the Company’s stock price or market capitalization, considered both in absolute terms and relative to peers.

As a result of sustained decreases in the Company’s stock price and associated market value during the second quarter of 2023, the Company conducted an impairment analysis of its goodwill as of June 30, 2023. We applied an income-based valuation approach using the Company’s strategic forecast, general market growth assumptions and other market-based inputs, which determined that goodwill was impaired as the indicated enterprise fair value of the Company was lower than the book value of equity as of the measurement date. As a result, in the second quarter.quarter of 2023, we recorded an impairment charge of our entire goodwill balance of $39.9 million as the deficit of enterprise fair value to book value of equity exceeded the amount of goodwill on the balance sheet. This was a non-cash charge to earnings and had no impact on tangible or regulatory capital, cash flows or our liquidity position. The following table presents the changes in the carrying amount of goodwill in 2023:



81


(in thousands)
Balance, December 31, 2022$27,900 
Additions - branch acquisition in February 202311,957 
Goodwill impairment charge(39,857)
Balance December 31, 2023$— 

Intangible assets with definite useful lives, such as core deposit intangible assets arising from bank acquisitions, are amortized over their estimated useful lives.

On March 25, 2019, the Company completed its acquisition of a branch and its related deposits and loans in San Diego County from Silvergate Bank, along with its business lending team. The application of the acquisition method of accounting resulted in recording goodwill of $5.9 million and core deposit intangibles of $1.9 million.

Securities Sold Under Agreements to Repurchase

From time to time, the Company may enter into sales of securities under agreements to repurchase ("repurchase agreements"). Repurchase agreements are accounted for as financing arrangements with the obligation to repurchase securities sold reflected as a liability on the consolidated balance sheets. The securities underlying the repurchase agreements continue to be recognized as AFSinvestment securities in the consolidated balance sheet.

Income Taxes

Our income tax expense is the total of current year income tax due or refundable and the change in deferred tax assets and liabilities.

Deferred tax assets and liabilities arise from temporary differences between the tax basis of assets and liabilities and their reported amounts in the financial statements, which will result in taxable or deductible amounts in the future. Deferred tax assets and tax carryforwards are only recognized if, in the opinion of management, it is more likely than not that the deferred tax assets will be fully realized. The effect on deferred taxes of a change in tax rates is recognized in income in the period that includes the enactment date. We are subject to federal income tax and also state income taxes in a number of different states.

A tax position is recognized as a benefit only if it is “more likely than not” that the tax position would be sustained in a tax examination, with a tax examination being presumed to occur. The amount recognized is the largest amount of tax benefit that is greater than 50% likely of being realized on examination. For tax positions not meeting the "more likely than not" test, no tax benefit is recorded. The Company recognizes interest and / or penalties related to income tax matters in income tax expense.

78




Derivatives and Hedging Activities

In the ordinary course of business, the Company enters into derivative transactions to manage various risks and to accommodate the business requirements of its customers. The fair value of derivative instruments are recognized as either assets or liabilities on the consolidated balance sheet. All derivatives are evaluated at inception as to whether or not they are hedginghedge accounting or non-hedgingnon-hedge accounting activities. For derivative instruments designated as non-hedgingnon-hedge accounting activities (also referred to as economic hedges), the change in fair value is recognized currently in earnings. Gains and losses on derivative contracts utilized for economically hedging the mortgage pipeline are recognized as part of the net gain on mortgage loan origination and sale activities within noninterest income. Gains and losses on derivative contracts utilized for economically hedging our single family MSRs are recognized as part of loan servicing income within noninterest income.

For derivative instruments designated as hedginghedge accounting activities, a qualitative analysis is performed at inception to determine if the derivative instrument is highly effective in achieving offsetting changes in fair value or cash flows attributable to the hedged risk during the period that the hedge is designated. Subsequently, a qualitative assessment of a hedge’s effectiveness is performed on a quarterly basis. All derivative instruments that qualify and are designated for hedge accounting are recorded at fair value and classified as either a hedge of the fair value of a recognized asset or liability ("fair value hedge") or a hedge of a forecasted transaction or the variability of cash flows to be received or paid related to a recognized asset or liability ("cash flow hedge"). Changes in the fair value of a derivative that is highly effective and designated as a fair value hedge is recognized in earnings and the change in fair value on the hedged item attributable to the hedged risk adjusts the carrying amount of the hedged item and is recognized currently in earnings. Changes in the fair value of a derivative that is highly effective and designated as a cash flow hedge are recorded in other comprehensive income (loss) until cash flows of the hedged item are realized. All hedge amounts recognized in earnings are presented in the same income statement line item as the earnings effect of the hedged item.

If a derivative designated as a cash flow hedge is terminated or ceases to be highly effective, the gain or loss in other comprehensive income (loss) is amortized to earnings over the period the forecasted hedged transactions impact earnings. If a hedged forecasted transaction is no longer probable, hedge accounting is ceased and any gain or loss included in other
82


comprehensive income (loss) is reported in earnings immediately, unless the forecasted transaction is at least reasonably possible of occurring, whereby the amounts remain within other comprehensive income (loss).

Derivative instruments expose us to credit risk in the event of nonperformance by counterparties. This risk consists primarily of the termination value of agreements where the Company is in a favorable position. The Company minimizes counterparty credit risk through credit approvals, limits, monitoring procedures, and obtaining collateral, as appropriate.

The Company also executes interest rate swaps with commercial banking customers to facilitate their respective risk management strategies. ThoseThese interest rate swaps are economically hedged by simultaneously entering into an offsetting interest rate swap that the Company executes with a third party, such that the Company minimizes its net risk exposure.

Share-Based Compensation

The Company issues various forms of stock-based compensation awards annually, including restricted stock units ("RSUs") and performance stock units ("PSUs"). The Company has issued stock options in prior years. Compensation expense related to RSUs is based on the fair value of the underlying stock on the award date and is recognized over the period in which an employee is required to provide services in exchange for the award, generally the vesting period. PSUs are subject to performance-based and market-based vesting criteria in addition to a requisite service period and cliff vest based on those conditions at the end of three years. The grant date fair value of PSUs is determined through the use of an independent third party which employs the use of a Monte Carlo simulation. The Monte Carlo simulation estimates grant date fair value using certain input assumptions similar to those used insuch as: expected volatility, award term, expected risk-free rate of interest and expected dividend yield on the Black-Scholes model, however, itCompany’s common stock and also incorporates into the grant date fair value calculation the probability that the performance targets will be achieved. The Black-Scholes model, which is utilized to estimate the fair value of stock options, uses certain assumptions to determine grant-date fair value such as: expected volatility, expected term of the option, expected risk-free rate of interest and expected dividend yield on the Company’s common stock. Forfeitures of stock-based awards are recognized when they occur.

79




Fair Value Measurement

Fair values of financial instruments are estimated using relevant market information and other assumptions, as more fully disclosed in a separate note. Fair value is an exit price, representing the amount that would be received to sell an asset or transfer a liability in an orderly transaction between market participants. Fair value estimates involve uncertainties and matters of significant judgment regarding interest rates, credit risk, prepayments, and other factors, especially in the absence of broad markets for particular items.instruments. Fair value measures are classified according to a three-tier fair value hierarchy, which is based on the observability of inputs used to measure fair value. GAAP requires the Company to maximize the use of observable inputs when measuring fair value. Changes in assumptions or in market conditions could significantly affect these estimates.

Transfers of Financial Assets

Transfers of financial assets are accounted for as sales when control over the assets has been relinquished. Control over transferred assets is deemed to be surrendered when the assets have been isolated from the Company, the transferee obtains the right (free of conditions that constrain it from taking advantage of that right) to pledge or exchange the transferred assets, and the Company does not maintain effective control over the transferred assets through an agreement to repurchase them before their maturity.

Contingencies

Contingent liabilities, including those that exist as a result of a guarantee or indemnification, are recognized when it becomes probable that a loss has been incurred and the amount of the loss is reasonably estimable. For indemnifications provided in sales agreements, a portion of the sale proceeds is allocated to the guarantee, which adjusts the gain or loss that would otherwise result from the transaction. For these indemnifications, the initial liability is amortized to income as the Company's risk is reduced or when the indemnification expires.

83


Earnings per Share

Earnings per share of common stock is calculated on both a basic and diluted basis, based on the weighted average number of common and common equivalent shares outstanding. Basic earnings per share excludes potential dilution from common equivalent shares, such as those associated with stock-based compensation awards, and is computed by dividing net income allocated to common stockholders by the weighted average number of common shares outstanding for the period. Diluted earnings per share reflects the potential dilution that could occur if securities or other contracts to issue common stock, such as common equivalent shares associated with stock-based compensation awards, were exercised or converted into common stock that would then share in the net earnings of the Company. Potential dilution from common equivalent shares is determined using the treasury stock method, reflecting the potential settlement of stock-based compensation awards resulting in the issuance of additional shares of the Company’s common stock. Stock-based compensation awards that would have an anti-dilutive effect have been excluded from the determination of diluted earnings per share.

Marketing Costs

The Company expenses marketing costs, including advertising, in the period incurred. We incurred $2.3$4.2 million, $5.9$6.2 million and $6.9$4.1 million in marketing costs during 2020, 20192023, 2022 and 2018,2021, respectively.

Recently AdoptedRecent Accounting PronouncementsDevelopments

In August 2018,March 2020, the Financial Accounting Standards Board ("FASB") issued ASU No. 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement. This ASU adds, eliminates, and modifies certain disclosure requirements for fair value measurements. Among the changes, entities will no longer be required to disclose the amount of and reasons for transfers between Level 1 and Level 2 of the fair value hierarchy, but will be required to disclose the range and weighted average assumptions used to develop significant unobservable inputs for Level 3 fair value measurements. The Company adopted ASU No. 2018-13 on January 1, 2020 and it did not impact the Company's consolidated financial statements.

In January 2017, the FASB issued ASU No. 2017-04, Intangibles - Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment, or ASU 2017-04, which eliminates Step 2 from the goodwill impairment test. ASU 2017-04 also eliminates the requirements for any reporting unit with a zero or negative carrying amount to perform a qualitative assessment. An entity still has the option to perform the qualitative assessment for a reporting unit to determine if the quantitative
80




impairment test is necessary. The Company adopted ASU 2017-04 on January 1, 2020 and it did not impact our consolidated financial statements.

On January 1, 2020, the Company adopted ASU 2016-13 Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, which replaces the incurred loss methodologyAccounting Standards Update ("ALLL"ASU") with an expected loss methodology that is referred to as CECL. The measurement of the expected credit losses under CECL is applicable to financial assets measured at amortized cost, including loan receivables and held-to-maturity debt securities. It also applies to off-balance sheet credit exposures such as loan commitments. In addition, ASC 326 made changes to the accounting for credit losses for AFS securities.

The Company adopted CECL using the modified retrospective method for all financial assets measured at amortized cost and off-balance sheet credit exposure. Results for reporting periods beginning after January 1, 2020 are presented under ASC 326 while prior period amounts continue to be reported in accordance with previously applicable GAAP. The Company recorded a decrease of $3.7 million to the beginning balance of retained earnings on January 1, 2020 for the cumulative effect of adopting this guidance.
The Company adopted ASC 326 using the prospective transition approach for debt securities for which other-than-temporary impairment had been recognized prior to January 1, 2020. As a result, the amortized cost basis remains the same before and after the effective date of this guidance.
The following table illustrates the impact of the adoption of CECL on January 1, 2020.
(in thousands)As reported under ASC 450-20Impact of ASC 326 adoptionAs reported under ASC 326
Assets (1)
LHFI
Commercial real estate loans
Non-owner occupied commercial real estate$7,245 $(3,392)$3,853 
Multifamily7,015 (2,977)4,038 
Construction/land development
Multifamily construction2,848 693 3,541 
Commercial real estate construction624 (115)509 
Single family construction3,800 4,280 8,080 
Single family construction to permanent1,003 200 1,203 
Total22,535 (1,311)21,224 
Commercial and industrial loans
Owner occupied commercial real estate3,639 (2,459)1,180 
Commercial business2,915 510 3,425 
Total6,554 (1,949)4,605 
Consumer loans
Single family6,450 468 6,918 
Home equity and other6,233 4,635 10,868 
Total12,683 5,103 17,786 
Total ACL41,772 1,843 43,615 
Liabilities
ACL on unfunded loan commitments1,065 1,897 2,962 
Total$42,837 $3,740 $46,577 
(1) There was no impact from the adoption of this standard to our investment securities.
81





Recent Accounting Pronouncements - Issued Not Yet Adopted

In December 2019, the FASB issued ASU No 2019-12, “Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes” ("ASU 2019-12"). ASU 2019-12 removes certain exceptions to the general principles in Topic 740 in GAAP. ASU 2019-12 is effective for public entities for fiscal years beginning after December 15, 2020, with early adoption permitted. The Company does not expect ASU 2019-12 to have a material effect on the Company’s current balance sheet, income statement or financial statement disclosures.

In March 2020, the FASB issued ASU No. 2020-04, Reference Rate Reform (Topic 848):. This ASU provides optional expedients and exceptions for contracts, hedging relationship,relationships, and other transactions that reference LIBOR or other referenceLondon Interbank Offered Rate ("LIBOR") rates expected to be discontinued because of reference rate reform. In January 2021, the FASB issued ASU 2021-01, "Reference Rate Reform (Topic 848)," which clarifies certain optional expedients and exceptions in Topic 848 for contract modifications and hedge accounting applyapplied to derivatives that are affected by the transition to alternative rates. The ASUs are effective for all entities asIn December 2022, the FASB issued ASU No. 2022-06, "Reference Rate Reform (Topic 848): Deferral of March 12, 2020 throughthe Sunset Date of Topic 848," which defers the sunset date of Topic 848 from December 31, 2022.2022 to December 31, 2024, after which entities will no longer be permitted to apply the relief in Topic 848. The Company is in the process of evaluating the provisionsadoption of these ASUs but doesdid not expect themhave a material impact on the Company’s financial position or results of operations.

In March 2022, the FASB issued ASU No. 2022-02, Financial Instruments-Credit Losses (Topic 326). The amendments in this ASU eliminate the accounting guidance for Troubled Debt Restructuring ("TDRs") by creditors, while enhancing disclosure requirements for certain loan refinancing and restructurings by creditors when a borrower experiences financial difficulty. In addition, the amendments require that an entity disclose current period gross charge-offs by year of origination in a vintage table. We prospectively adopted the portion of ASU No. 2022-02 with respect to amendments about TDRs and related disclosure enhancements as of January 1, 2022. We prospectively adopted the vintage table disclosure requirement of ASU 2022-02 on January 1, 2023. The adoption of ASU 2022-02 did not have a material impact on the Company’s financial position or results of operations.

In March 2023, the FASB issued ASU 2023-02, “Investments – Equity Method and Joint Ventures (Topic 323): Accounting for Investments in Tax Credit Structures Using the Proportional Amortization Method.” ASU 2023-02 permits reporting entities to elect to account for their tax equity investments, regardless of the tax credit program from which the income tax credits are received, using the proportional amortization method if certain conditions are met. ASU 2023-02 is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2023. ASU 2023-02 is not expected to have a material impact on the Company’s current balance sheet, income statementfinancial position or financial statement disclosures.results of operations.

In October 2023, the FASB issued ASU 2023-06, "Disclosure Improvements - Codification Amendments in Response to the SEC's Disclosure Update and Simplification Initiative." The amendments in ASU 2023-06 modify the disclosure or presentation requirements of a variety of Topics in the Codification, with the intention of clarifying or improving them and align the requirements in the codification with the SEC's regulations (and will be removed from the SEC regulations). 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. ASU 2023-06 will not have an impact on the Company's financial position or results of operation as it is disclosure only.

In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures, which expands disclosures about a public entity’s reportable segments and requires more enhanced information about a reportable segment’s expenses, interim segment profit or loss, and how a public entity’s chief operating decision maker uses reported segment profit or loss information in assessing segment performance and allocating resources. The update will be effective for annual periods beginning after December 15, 2023 (fiscal 2024). ASU 2023-07 will not have an impact on the
82
84


Company's financial position or results of operation as it impacts disclosures only. We are assessing the impact on our disclosures.

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which expands disclosures in an entity’s income tax rate reconciliation table and regarding cash taxes paid both in the U.S. and foreign jurisdictions. The update will be effective for annual periods beginning after December 15, 2024 (fiscal 2025). ASU 2023-09 will not have an impact on the Company's financial position or results of operation as it impacts disclosures only. We are assessing the impact on our disclosures.

NOTE 2–INVESTMENT SECURITIES:

The following tables set forth certain information regarding the amortized cost basis and fair values of our investment securities AFS and HTM.HTM:
At December 31, 2020
At December 31, 2023At December 31, 2023
(in thousands)(in thousands)Amortized
cost
Gross
unrealized
gains
Gross
unrealized
losses
Fair
value
(in thousands)Amortized
cost
Gross
unrealized
gains
Gross
unrealized
losses
Fair
value
    
AFSAFS
AFS
AFS
Mortgage-backed securities ("MBS"):Mortgage-backed securities ("MBS"):
Mortgage-backed securities ("MBS"):
Mortgage-backed securities ("MBS"):
Residential
Residential
ResidentialResidential$50,001 $1,237 $(192)$51,046 
CommercialCommercial43,061 2,131 (8)45,184 
Collateralized mortgage obligations ("CMOs")Collateralized mortgage obligations ("CMOs")
ResidentialResidential228,685 6,319 (95)234,909 
Residential
Residential
CommercialCommercial155,645 3,719 (181)159,183 
Municipal bondsMunicipal bonds533,719 31,321 (337)564,703 
Corporate debt securitiesCorporate debt securities14,381 841 15,222 
U.S. Treasury securities
Agency debenturesAgency debentures1,846 1,846 
$1,027,338 $45,568 $(813)$1,072,093 
Total
HTMHTM
Municipal bonds Municipal bonds$4,271 $236 $$4,507 
Municipal bonds
Municipal bonds

At December 31, 2019
At December 31, 2022At December 31, 2022
(in thousands)(in thousands)Amortized
cost
Gross
unrealized
gains
Gross
unrealized
losses
Fair
value
(in thousands)Amortized
cost
Gross
unrealized
gains
Gross
unrealized
losses
Fair
value
    
AFSAFS
AFS
AFS
MBS:MBS:
MBS:
MBS:
Residential
Residential
ResidentialResidential$93,283 $120 $(1,708)$91,695 
CommercialCommercial37,972 411 (358)38,025 
CMOs:CMOs:
Residential
Residential
ResidentialResidential292,370 935 (1,687)291,618 
CommercialCommercial156,693 684 (1,223)156,154 
Municipal bondsMunicipal bonds333,303 8,997 (982)341,318 
Corporate debt securitiesCorporate debt securities18,391 313 (43)18,661 
U.S. Treasury securitiesU.S. Treasury securities1,296 11 1,307 
$933,308 $11,471 $(6,001)$938,778 
Agency debentures
Total
HTMHTM
Municipal bondsMunicipal bonds$4,372 $129 $$4,501 
Municipal bonds
Municipal bonds

At December 31, 2023 and 2022 the Company held $25 million and $19 million, respectively, of trading securities consisting of U.S. Treasury notes used as economic hedges of our single family mortgage servicing rights, which are carried at fair value and
85


included with investment securities on the balance sheet. For 2023 and 2022 net losses of $0.5 million and $7.0 million on trading securities, respectively, were recorded in servicing income.

MBS and CMOs represent securities primarily 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.organizations. As of December 31, 20202023 and 2019,2022, substantially all securities held, including municipal bonds and corporate debt securities, were rated investment grade based upon external ratingsnationally recognized statistical rating organizations where available and, where not available, based upon internal ratings which correspond to ratings as defined by Standard and Poor’s Rating Services or Moody's Investors Services.
83


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.position:
At December 31, 2020
At December 31, 2023At December 31, 2023
Less than 12 months12 months or moreTotal Less than 12 months12 months or moreTotal
(in thousands)(in thousands)Gross
unrealized
losses
Fair
value
Gross
unrealized
losses
Fair
value
Gross
unrealized
losses
Fair
value
(in thousands)Gross
unrealized
losses
Fair
value
Gross
unrealized
losses
Fair
value
Gross
unrealized
losses
Fair
value
AFS
AFS
AFS
MBS:MBS:
MBS:
MBS:
Residential
Residential
ResidentialResidential$(7)$1,196 $(185)$1,432 $(192)$2,628 
CommercialCommercial(8)925 (8)925 
CMOs:CMOs:
ResidentialResidential(95)7,391 (95)7,391 
Residential
Residential
CommercialCommercial(39)6,687 (142)15,358 (181)22,045 
Municipal bonds
Corporate debt securities
U.S. Treasury securities
Agency debentures
Total
HTM
Municipal bondsMunicipal bonds(337)10,512 (337)10,512 
Total$(486)$26,711 $(327)$16,790 $(813)$43,501 
Municipal bonds
Municipal bonds

At December 31, 2019
At December 31, 2022At December 31, 2022
Less than 12 months12 months or moreTotal Less than 12 months12 months or moreTotal
(in thousands)(in thousands)Gross
unrealized
losses
Fair
value
Gross
unrealized
losses
Fair
value
Gross
unrealized
losses
Fair
value
(in thousands)Gross
unrealized
losses
Fair
value
Gross
unrealized
losses
Fair
value
Gross
unrealized
losses
Fair
value
AFS
AFS
AFS
MBS:MBS:
MBS:
MBS:
Residential
Residential
ResidentialResidential$(409)$18,440 $(1,299)$68,362 $(1,708)$86,802 
CommercialCommercial(352)21,494 (6)2,483 (358)23,977 
CMOs:CMOs:
ResidentialResidential(965)171,708 (722)29,264 (1,687)200,972 
Residential
Residential
CommercialCommercial(680)67,160 (543)41,605 (1,223)108,765 
Municipal bondsMunicipal bonds(334)39,127 (648)45,869 (982)84,996 
Corporate debt securitiesCorporate debt securities(5)3,689 (38)1,743 (43)5,432 
U.S. Treasury securities
Agency debentures
TotalTotal$(2,745)$321,618 $(3,256)$189,326 $(6,001)$510,944 
HTM
Municipal bonds
Municipal bonds
Municipal bonds
86



There were 0 HTM securities in an unrealized loss position at December 31, 2020 and 2019.

The Company has evaluated AFS securities that are in an unrealized loss position and has determined that the decline in value is temporary and is related to the change in market interest rates since purchase. The decline in value is not related to any issuer- or industry-specific credit event. The Company has not identified any expected credit losses on its debt securities as of December 31, 20202023 and 2019.2022. The Company bases this conclusion in part on its periodic review of the credit ratings of the AFS securities or reviews of the financial condition of the issuers. In addition, as of December 31, 20202023 and 2019,2022, the Company had not made a decision to sell any of its debt securities held, nor did the Company consider it more likely than not that it would be required to sell such securities before recovery of their amortized cost basis.

84




The following tables present the fair value of investment securities AFS and HTM by contractual maturity along with the associated contractual yield for the periods indicated below. yield.

 At December 31, 2023
 Within one yearAfter 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$— — %$5,856 1.84 %$60,775 3.36 %$338,243 3.01 %$404,874 3.04 %
Corporate debt securities4,425 3.53 %12,714 4.95 %21,408 3.89 %— — %38,547 4.21 %
U.S. Treasury securities— — %20,184 1.14 %— — %— — %20,184 1.14 %
Agency debentures16,977 4.93 %30,925 5.20 %7,758 2.15 %3,245 2.17 %58,905 4.51 %
Total$21,402 4.64 %$69,679 3.64 %$89,941 3.40 %$341,488 3.00 %$522,510 3.21 %
HTM
Municipal bonds$— — %$2,331 2.29 %$— — %$— — %$2,331 2.29 %

 At December 31, 2022
 Within one yearAfter 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$— — %$3,644 1.96 %$38,977 3.04 %$368,927 2.83 %$411,548 2.84 %
Corporate debt securities— — %15,342 5.13 %27,603 4.25 %— — %42,945 4.54 %
U.S. Treasury securities— — %— — %19,934 1.11 %— — %19,934 1.11 %
Agency debentures10,485 4.74 %16,993 4.94 %— — %— — %27,478 4.86 %
Total$10,485 4.74 %$35,979 4.69 %$86,514 2.97 %$368,927 2.83 %$501,905 3.01 %
HTM
Municipal bonds$— — %$2,385 2.04 %$— — %$— — %$2,385 2.04 %

The weighted-average yield is computed using the contractual coupon offor each security weighted based on the fair value of each security and does not include adjustments to a tax equivalent basis.
 At December 31, 2020
 Within one yearAfter 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$4,024 3.19 %$14,978 3.82 %$59,496 3.26 %$486,205 3.29 %$564,703 3.30 %
Corporate debt securities183 4.27 %7,059 3.74 %7,980 4.78 %%15,222 4.30 %
Agency debentures%%%1,846 2.68 %1,846 2.68 %
Total$4,207 3.24 %$22,037 3.80 %$67,476 3.45 %$488,051 3.29 %$581,771 3.33 %
HTM
Municipal bonds$%$4,507 2.47 %$%$%$4,507 2.47 %
 At December 31, 2019
 Within one yearAfter 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$5,337 3.41 %$555 3.90 %$13,000 3.01 %$322,426 3.61 %$341,318 3.59 %
Corporate debt securities1,007 3.40 %7,544 3.64 %10,022 3.70 %88 6.10 %18,661 3.67 %
U.S. Treasury securities1,307 2.82 %%%%1,307 2.82 %
Total$7,651 3.31 %$8,099 3.66 %$23,022 3.31 %$322,514 3.62 %$361,286 3.59 %
HTM
Municipal bonds$%$1,787 2.90 %$2,714 2.09 %$%$4,501 2.41 %

security. MBS and CMOs are excluded from the tables above because such securities are not due on a single maturity date. The weighted average yield of MBS and CMOs as of December 31, 20202023 and 20192022 was 1.92%3.21% and 2.34%3.08%, respectively.

Sales of investment securities were as follows for the periods indicated:
 Years Ended December 31,
(in thousands)202020192018
Proceeds$62,378 $184,871 $46,081 
Gross gains1,334 894 310 
Gross losses(993)(901)(75)

8587



Sales of AFS investment securities were as follows:
 Years Ended December 31,
(in thousands)202320222021
Proceeds$4,693 $98,915 $28,187 
Gross gains1,585 288 
Gross losses— (1,561)(226)

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.
At December 31,
At December 31,At December 31,
(in thousands)(in thousands)20202019(in thousands)20232022
Federal Reserve Bank to secure borrowings
Federal Reserve Bank to secure borrowings
Federal Reserve Bank to secure borrowings
Washington, Oregon and California State to secure public depositsWashington, Oregon and California State to secure public deposits$171,471 $200,571 
Other securities pledgedOther securities pledged3,391 4,332 
Other securities pledged
Other securities pledged
Total securities pledged as collateralTotal securities pledged as collateral$174,862 $204,903 

The Company assesses the creditworthiness of the counterparties that hold the pledged collateral and has determined that these arrangements have little credit risk. There were 0 securities pledged under repurchase agreements at December 31, 2020 and 2019.

Tax-exempt interest income on AFSinvestment securities was $10.7$11.3 million, $11.9 million and $10.2 million for 2023, 2022 and $8.5 million for 2020, 2019 and 2018,2021, respectively.


NOTE 3-LOANS AND CREDIT QUALITY:
As a result of the adoption of CECL on January 1, 2020, there is a lack of comparability in both the reserves and provisions for credit losses for the periods presented. Results for reporting periods beginning after January 1, 2020 are presented using the CECL methodology, while comparative period information continues to be reported in accordance with the incurred loss methodology in effect for prior periods.

The Company's LHFI is divided into 2 portfolios, consumertwo portfolio segments, commercial loans and commercialconsumer 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 and non-owner occupied commercial real estate, multifamily, construction and land development, owner occupied commercial real estate and commercial business loans within the commercial loan portfolio.
segment. LHFI consistconsists of the following.following:
At December 31,
(in thousands)20202019
Commercial real estate loans
Non-owner occupied commercial real estate$829,538 $895,546 
Multifamily1,428,092 999,140 
Construction/land development553,695 701,762 
Total2,811,325 2,596,448 
Commercial and industrial loans
Owner occupied commercial real estate467,256 477,316 
Commercial business645,723 414,710 
Total1,112,979 892,026 
Consumer loans
Single family (1)
915,123 1,072,706 
Home equity and other404,753 553,376 
Total1,319,876 1,626,082 
                  Total LHFI5,244,180 5,114,556 
ACL(64,294)(41,772)
Total LHFI less ACL$5,179,886 $5,072,784 (2)

At December 31,
(in thousands)20232022
CRE
Non-owner occupied CRE$641,885 $658,085 
Multifamily3,940,189 3,975,754 
Construction/land development565,916 627,663 
Total5,147,990 5,261,502 
Commercial and industrial loans
Owner occupied CRE391,285 443,363 
Commercial business359,049 359,747 
Total750,334 803,110 
Consumer loans
Single family1,140,279 1,009,001 
Home equity and other384,301 352,707 
Total (1)
1,524,580 1,361,708 
                  Total LHFI7,422,904 7,426,320 
ACL(40,500)(41,500)
Total LHFI less ACL$7,382,404 $7,384,820 
(1)    Includes $7.1$1.3 million and $3.5$5.9 million at December 31, 20202023 and 2019,2022, respectively, of loans where a fair value option election was made at the time of origination and, therefore, are carried at fair value with changes recognized in the consolidated income statements.
(2)    Net deferred loans fees and costs of $24.5 million are now included within the carrying amounts of the loan balances as of December 31, 2019, in order to conform to the current period presentation.

8688





Loans totaling $1.4$5.1 billion and $2.0$5.2 billion at December 31, 20202023 and 2019,2022, respectively, were pledged to secure borrowings from the FHLB and loans totaling $569 million$1.2 billion and $491$497 million at December 31, 20202023 and 2019,2022, respectively, were pledged to secure borrowings from the FRBSF.

It is the Company's policy to make loans to officers, directors and their associates in the ordinary course of business on substantially the same terms as those prevailing at the time for comparable transactions with other persons. The following is a summary of activity during the years ended December 2023 and 2022 with respect to such aggregate loans to these related parties and their associates:

Years Ended December 31,
(in thousands)20232022
Beginning balance$1,978 $1,548 
New loans and advances, net of principal repayments(46)430 
Ending balance$1,932 $1,978 

Credit Risk Concentrations

Concentrations of credit risk arise when a number of customers are engaged in similar business activities or activities in the same geographic region, or when they have similar economic features that would cause their ability to meet contractual obligations to be similarly affected by changes in economic conditions.

LHFI are primarily secured by real estate located in the Pacific Northwest, California and Hawaii. At December 31, 20202023 single family loans in the state of Washington represented 11% of the total LHFI portfolio. At December 31, 2023 and 2022, multifamily loans in the state of California represented 18.5%36% of the total LHFI portfolio. At December 31, 2019 single family loans in Washington and multifamily loans in California represented 10.7% and 12.2% of the total 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 as of December 31, 2020.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.
During 2020,
As of December 31, 2023, the historical expected loss rates decreased from January 1, 2020 implementationwhen compared to December 31, 2022. During 2023, expected loss rates decreased primarily due to minimal lossesproduct mix and our stable portfolio credit composition. During 2020,risk level composition changes, and the Qualitative Factorsqualitative factors increased significantly due to the forecasted impacts of the COVID-19 pandemic.deteriorated single family and commercial collateral conditions and commercial collateral forecasts offset by economic conditions performing better than expected and improved economic and single-family collateral forecasts. As of December 31, 2020,2023, the Bank expects thatimprovement in commercial collateral values and deterioration in single family collateral values over the two-year forecast period in the markets in which it operates. Additionally, over the two-year forecast period in the markets in which it operates, will havethe Bank expects neutral economic forecasts, offset slightly by near-term deterioration in collateral values and economic outlook over the two-year forecast period, with negative risk factors peaking in the first year and modestly improving in the second year.forecasts.

In addition to the ACL for LHFI, the Company maintains a separate ACL onallowance for unfunded loan commitments which is included in accounts payable and other liabilities on our consolidated balance sheets. The ACL onallowance for unfunded commitments was $1.6$1.8 million and $1.1$2.2 million at December 31, 20202023 and 2019,2022, respectively.
The Bank has elected to exclude accrued interest receivable from the evaluation of the ACL. Accrued interest on LHFI was $21.2$28.9 million and $26.9 million at December 31, 20202023 and 2022, respectively and was reported in other assets inon the consolidated balance sheets.
Activity in the ACL was as follows.
 Years Ended December 31,
(in thousands)202020192018
ACL for LHFI
Beginning balance$41,772 $41,470 $37,847 
Provision for credit losses21,843 (122)2,826
Net (charge-offs) recoveries(1,164)424 797 
Impact of ASC 326 adoption
1,843 — — 
Ending balance$64,294 $41,772 $41,470 
ACL for unfunded commitments:
Beginning balance$1,065 $1,443 $1,269 
Provision for credit losses(1,374)(378)174 
Impact of ASC 326 adoption
1,897 — — 
Ending balance$1,588 $1,065 $1,443 
Provision for credit losses:
Loans$21,843 $(122)$2,826 
Unfunded commitments(1,374)(378)174 
Total$20,469 $(500)$3,000 


8789



Activity in the ACL for LHFI and the allowance for unfunded commitments was as follows:
 Years Ended December 31,
(in thousands)202320222021
Beginning balance$41,500 $47,123 $64,294 
Provision for credit losses(67)(4,995)(15,816)
Net (charge-offs) recoveries(933)(628)(1,355)
Ending balance$40,500 $41,500 $47,123 
Allowance for unfunded commitments
Beginning balance$2,197 $2,404 $1,588 
Provision for credit losses(374)(207)816 
Ending balance$1,823 $2,197 $2,404 
Provision for credit losses:
Allowance for credit losses-loans$(67)$(4,995)$(15,816)
Allowance for unfunded commitments(374)(207)816 
Total$(441)$(5,202)$(15,000)

Activity in the ACL by loan portfolio and loan sub-class was as follows.
Year Ended December 31, 2020
(in thousands)Prior to adoption of ASC 326Impact of ASC 326 adoptionCharge-offsRecoveriesProvisionEnding
balance
Commercial real estate loans
Non-owner occupied commercial real estate$7,245 $(3,392)$$$4,992 $8,845 
Multifamily7,015 (2,977)2,034 6,072 
Construction/land development
Multifamily construction2,848 693 1,362 4,903 
Commercial real estate construction624 (115)1,161 1,670 
Single family construction3,800 4,280 163 (3,113)5,130 
Single family construction to permanent1,003 200 112 1,315 
     Total22,535 (1,311)163 6,548 27,935 
Commercial and industrial loans
Owner occupied commercial real estate3,639 (2,459)(896)4,710 4,994 
Commercial business2,915 510 (640)110 14,148 17,043 
     Total6,554 (1,949)(1,536)110 18,858 22,037 
Consumer loans
Single family6,450 468 (17)187 (182)6,906 
Home equity and other6,233 4,635 (456)385 (3,381)7,416 
     Total12,683 5,103 (473)572 (3,563)14,322 
Total ACL$41,772 $1,843 $(2,009)$845 $21,843 $64,294 
follows:

Year Ended December 31, 2019
Year Ended December 31, 2023Year Ended December 31, 2023
(in thousands)(in thousands)Beginning
balance
Charge-offsRecoveriesProvisionEnding
balance
(in thousands)Beginning
balance
Charge-offsRecoveriesProvisionEnding
balance
Commercial real estate loans
Non-owner occupied commercial real estate$5,495 $$$1,750 $7,245 
CRE
CRE
CRE
Non-owner occupied CRE
Non-owner occupied CRE
Non-owner occupied CRE
MultifamilyMultifamily5,754 1,261 7,015 
Construction/land developmentConstruction/land development9,001 215 (941)8,275 
Multifamily construction
Multifamily construction
Multifamily construction
CRE construction
Single family construction
Single family construction to permanent
Total Total20,250 215 2,070 22,535 
Commercial and industrial loansCommercial and industrial loans
Owner occupied commercial real estate3,278 361 3,639 
Owner occupied CRE
Owner occupied CRE
Owner occupied CRE
Commercial businessCommercial business2,875 (315)147 208 2,915 
Total Total6,153 (315)147 569 6,554 
Consumer loansConsumer loans
Single familySingle family8,217 145 (1,912)6,450 
Single family
Single family
Home equity and otherHome equity and other6,850 (272)504 (849)6,233 
Total Total15,067 (272)649 (2,761)12,683 
Total ACLTotal ACL$41,470 $(587)$1,011 $(122)$41,772 

90


Year Ended December 31, 2022
(in thousands)Beginning balanceCharge-offsRecoveriesProvisionEnding
balance
CRE
Non-owner occupied CRE$7,509 $— $— $(5,407)$2,102 
Multifamily5,854 — — 5,120 10,974 
Construction/land development
Multifamily construction507 — — 491 998 
CRE construction150 — — 46 196 
Single family construction6,411 — — 6,007 12,418 
Single family construction to permanent1,055 — — 116 1,171 
Total21,486 — — 6,373 27,859 
Commercial and industrial loans
Owner occupied CRE5,006 — (3,976)1,030 
Commercial business12,273 (1,098)163 (8,091)3,247 
Total17,279 (1,098)163 (12,067)4,277 
Consumer loans
Single family4,394 — 143 1,073 5,610 
Home equity and other3,964 (168)332 (374)3,754 
Total8,358 (168)475 699 9,364 
Total ACL$47,123 $(1,266)$638 $(4,995)$41,500 

Year Ended December 31, 2021
(in thousands)Beginning balanceCharge-offsRecoveriesProvisionEnding
balance
CRE
Non-owner occupied CRE$8,845 $— $— $(1,336)$7,509 
Multifamily6,072 — — (218)5,854 
Construction/land development
Multifamily construction4,903 — — (4,396)507 
CRE construction1,670 — — (1,520)150 
Single family construction5,130 — — 1,281 6,411 
Single family construction to permanent1,315 — — (260)1,055 
Total27,935 — — (6,449)21,486 
Commercial and industrial loans
Owner occupied CRE4,994 — — 12 5,006 
Commercial business17,043 (1,739)146 (3,177)12,273 
Total22,037 (1,739)146 (3,165)17,279 
Consumer loans
Single family6,906 (127)291 (2,676)4,394 
Home equity and other7,416 (483)557 (3,526)3,964 
Total14,322 (610)848 (6,202)8,358 
Total ACL$64,294 $(2,349)$994 $(15,816)$47,123 

Credit Quality Indicators
Management regularly reviews loans in the portfolio to assess credit quality indicators and to determine appropriate loan classification and grading in accordance with applicable bank regulations. The Company's risk rating methodology assigns risk ratings ranging from 1 to 10, where a higher rating represents higher risk. The risk rating of 9 is not used.
8891




Per the Company's policies, most commercial loans pools are non-homogenous and are regularly assessed for credit quality. The rating categories can be generally described by the following groupings for non-homogeneous loans:
1-6: These loans meet the definition of "Pass" assets. They are well protected by the current net worth and paying capacity of the obligor (or guarantors, if any) or by the fair value, less costs to acquire and sell in a timely manner, of any underlying collateral.
7: These loans meet the regulatory definition of "Special Mention." They contain potential weaknesses, that if uncorrected may result in deterioration of the likelihood of repayment or in the Bank’s credit position.
8: These loans meet the regulatory definition of "Substandard"."Substandard." They are inadequately protected by the current sound worth and paying capacity of the borrower or of the collateral pledged, if any. They have well-defined weaknesses and have unsatisfactory characteristics causing unacceptable levels of risk.
10: A loan, or the portion of a loan determined to meet the regulatory definition of “Loss.” The amounts classified as loss have been charged-off.

The risk rating categories can be generally described by the following groupings for homogeneous loans:
1-6: These loans meet the definition of "Pass" assets. A homogenous "Pass" loan is typically risk rated based on payment performance.
7: These loans meet the regulatory definition of “Special Mention.” A homogeneous special mention loan, risk rated 7, is less than 90 days past due from the required payment date at month-end.
8: These loans meet the regulatory definition of “Substandard”.“Substandard.” A homogeneous substandard loan, risk rated 8, is 90 days or more past due from the required payment date at month-end.
10: These loans meet the regulatory definition of "Loss"."Loss." A closed-end homogeneous loan not secured by real estate is risk rated 10 when past due 120 cumulative days or more from the contractual due date. Closed-end homogenous loans secured by real estate and all open-end homogenous loans are risk rated 10 when past due 180 cumulative days or more from the contractual due date. These loans, or the portion of these loans classified as loss, are generally charged-off in the month in which the applicable past due period elapses.

Small balance commercial loans are generally considered homogenous unless 30 days or more past due or modified in a troubled debt restructuring that was an interest rate concession or payment modification with a significant balloon and the concession period has not been completed.due. The risk rating classification for such loans are based on the non-homogenous definitions noted above.

Residential, home equity and consumer loans modified in a troubled debt restructuring are considered homogeneous unless the modification was an interest rate concession or payment modification with a significant balloon and the concession modification period has not been completed. The risk rating classification for such loans are based on the non-homogeneous definitions noted above.
92


The following table presents a vintage analysis of the commercial portfolio segment by loan sub-class and risk rating andor delinquency status.status:
At December 31, 2023
(in thousands)202320222021202020192018 and priorRevolvingRevolving-termTotal
COMMERCIAL PORTFOLIO
Non-owner occupied CRE
Pass$1,499 $70,388 $71,217 $41,235 $118,900 $286,379 $601 $— $590,219 
Special Mention— — — — 686 34,177 — — 34,863 
Substandard— — — — 16,230 — 573 — 16,803 
Total1,499 70,388 71,217 41,235 135,816 320,556 1,174 — 641,885 
Multifamily
Pass108,274 1,813,647 1,151,677 475,708 189,567 177,712 — — 3,916,585 
Special Mention— — 3,942 12,887 2,368 1,344 — — 20,541 
Substandard— — — — — 3,063 — — 3,063 
Total108,274 1,813,647 1,155,619 488,595 191,935 182,119 — — 3,940,189 
Multifamily construction
Pass(198)56,013 112,234 — — — — — 168,049 
Special Mention— — — — — — — — — 
Substandard— — — — — — — — — 
Total(198)56,013 112,234 — — — — — 168,049 
CRE construction
Pass— 14,685 — — — — — 14,692 
Special Mention— — — — — — — — — 
Substandard— — — 3,821 — — — — 3,821 
Total— 14,685 3,821 — — — — 18,513 
Single family construction
Pass75,305 39,621 12,294 — — 72 146,758 — 274,050 
Special Mention— — — — — — — — — 
Substandard— — — — — — — — — 
Total75,305 39,621 12,294 — — 72 146,758 — 274,050 
Single family construction to permanent
Current27,114 56,469 19,871 1,850 — — — — 105,304 
Past due:
30-59 days— — — — — — — — — 
60-89 days— — — — — — — — — 
90+ days— — — — — — — — — 
Total27,114 56,469 19,871 1,850 — — — — 105,304 
Owner occupied CRE
Pass12,459 68,399 39,629 43,399 65,392 111,199 1,122 341,601 
Special Mention1,871 1,478 9,290 — 2,956 28,784 — — 44,379 
Substandard— — — 253 5,051 — — 5,305 
Total14,331 69,877 48,919 43,399 68,601 145,034 1,122 391,285 
Commercial business
Pass17,970 45,892 27,227 33,404 16,198 24,903 157,656 973 324,223 
Special Mention— 11,465 2,891 — 452 38 3,485 — 18,331 
Substandard— — 2,134 7,601 3,788 1,886 1,021 65 16,495 
Total17,970 57,357 32,252 41,005 20,438 26,827 162,162 1,038 359,049 
Total commercial portfolio$244,302 $2,163,372 $1,467,091 $619,905 $416,790 $674,608 $310,096 $2,160 $5,898,324 
8993




At December 31, 2020
(in thousands)202020192018201720162015 and priorRevolvingRevolving-termTotal
COMMERCIAL PORTFOLIO
Non-owner occupied commercial real estate
1-6 Pass$53,782 $176,556 $165,268 $147,719 $150,221 $131,935 $796 $1,031 $827,308 
7- Special Mention2,230 2,230 
8 - Substandard
Total53,782 176,556 165,268 147,719 150,221 134,165 796 1,031 829,538 
Multifamily
1-6 Pass711,009 324,246 100,572 32,693 166,937 92,255 380 1,428,092 
7- Special Mention
8 - Substandard
Total711,009 324,246 100,572 32,693 166,937 92,255 380 1,428,092 
Multifamily construction
1-6 Pass12,182 21,366 45,256 11,823 90,627 
7- Special Mention24,702 24,702 
8 - Substandard
Total12,182 21,366 45,256 11,823 24,702 115,329 
Commercial real estate construction
1-6 Pass3,963 2,104 14,721 614 5,883 27,285 
7- Special Mention
8 - Substandard
Total3,963 2,104 14,721 614 5,883 27,285 
Single family construction
1-6 Pass121,233 47,539 14,055 600 75,743 259,170 
7- Special Mention
8 - Substandard
Total121,233 47,539 14,055 600 75,743 259,170 
Single family construction to permanent
Current62,955 72,825 15,443 688 151,911 
Past due:
30-59 days
60-89 days
90+ days
Total62,955 72,825 15,443 688 151,911 
Owner occupied commercial real estate
1-6 Pass48,647 60,872 58,582 85,275 98,046 50,596 4,354 406,372 
7- Special Mention5,977 3,529 69 9,575 
8 - Substandard19,407 1,111 10,750 17,122 2,919 51,309 
Total48,647 80,279 65,670 99,554 115,168 53,515 4,423 467,256 
Commercial business
1-6 Pass345,540 63,020 47,710 22,556 18,411 14,972 76,218 2,577 591,004 
7- Special Mention10,837 2,058 6,653 3,975 166 23,689 
8 - Substandard5,923 11,327 2,338 1,891 1,001 8,438 112 31,030 
Total345,540 79,780 61,095 31,547 20,302 15,973 88,631 2,855 645,723 
Total commercial portfolio$1,359,311 $802,591 $469,463 $338,745 $477,330 $297,122 $171,433 $8,309 $3,924,304 


90




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

At December 31, 2020
(in thousands)202020192018201720162015 and priorRevolvingRevolving-termTotal
CONSUMER PORTFOLIO
Single family
Current$174,994 $111,143 $154,757 $168,412 $59,161 $242,444 $$$910,911 
Past due:
30-59 days570 318 390 001,278 
60-89 days
90+ days824 335 405 386 984 2,934 
Total (1)
175,818 112,048 155,162 169,116 59,161 243,818 915,123 
Home equity and other
Current1,878 1,230 1,311 1,363 431 5,126 384,005 8,147 403,491 
Past due:
30-59 days98 22 11 66 31 228 
60-89 days13 129 142 
90+ days275 24 584 892 
Total1,976 1,274 1,311 1,363 706 5,161 384,784 8,178 404,753 
Total consumer portfolio$177,794 $113,322 $156,473 $170,479 $59,867 $248,979 $384,784 $8,178 $1,319,876 
Total LHFI$1,537,105 $915,913 $625,936 $509,224 $537,197 $546,101 $556,217 $16,487 $5,244,180 

At December 31, 2023
(in thousands)202320222021202020192018 and priorRevolvingRevolving-termTotal
CONSUMER PORTFOLIO
Single family
Current$27,011 $354,691 $313,866 $147,183 $49,126 $245,574 $— $— $1,137,451 
Past due:
30-59 days— — — — — 781 — — 781 
60-89 days— — — — — 1,374 — — 1,374 
90+ days— — — — — 673 — — 673 
Total27,011 354,691 313,866 147,183 49,126 248,402 — — 1,140,279 
Home equity and other
Current2,165 2,493 311 121 46 1,631 370,462 5,483 382,712 
Past due:
30-59 days— — — — 802 162 974 
60-89 days— — — — 419 — 423 
90+ days— — — — — 24 162 192 
Total2,174 2,498 311 121 46 1,655 371,845 5,651 384,301 
Total consumer portfolio (1)
$29,185 $357,189 $314,177 $147,304 $49,172 $250,057 $371,845 $5,651 $1,524,580 
Total LHFI$273,487 $2,520,561 $1,781,268 $767,209 $465,962 $924,665 $681,941 $7,811 $7,422,904 
(1)    Includes $7.1$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 year-to-date charge-offs and year-to-date recoveries of the commercial portfolio and consumer portfolio by loan sub-class.
At December 31, 2020
(in thousands)202020192018201720162015 and priorRevolvingRevolving-termTotal
COMMERCIAL PORTFOLIO
Single family construction
Charge-offs$$$$$$$$$
Recoveries163 163 
Net163 163 
Owner occupied commercial real estate
Charge-offs(896)(896)
Recoveries
Net(896)(896)
Commercial business
Charge-offs(42)(102)(496)(640)
Recoveries110 110 
Net(42)(102)(386)(530)
Commercial portfolio
Charge-offs(42)(102)(1,392)(1,536)
Recoveries273 273 
Total net$$$$(42)$(102)$(1,119)$$$(1,263)

9194




At December 31, 2020
(in thousands)202020192018201720162015 and priorRevolvingRevolving-termTotal
CONSUMER PORTFOLIO
Single family
Charge-offs$$(3)$(14)$$$$$$(17)
Recoveries187 187 
Net(3)(14)187 170 
Home equity and other
Charge-offs(73)(33)(1)(349)(456)
Recoveries14 168 186 385 
Net(59)(29)168 (163)(71)
Consumer Portfolio
Charge-offs(76)(47)(1)(349)(473)
Recoveries14 355 186 572 
Total net(62)(43)355 (163)99 
All loans
Charge-offs(76)(47)(43)(102)(1,392)(349)(2,009)
Recoveries14 628 186 845 
Total net$$(62)$(43)$(36)$(96)$(764)$(163)$$(1,164)

Collateral Dependent Loans
The following table presents a vintage analysis of the amortized cost basis of collateral-dependent loanscommercial portfolio segment by loan sub-class and collateral type.risk rating or delinquency status:
At December 31, 2020
(in thousands)Land1-4 FamilyMultifamilyNon-residential real estateOther non-real estateTotal
Commercial and industrial loans
Owner occupied commercial real estate$1,789 $$$3,133 $$4,922 
Commercial business1,787 545 2,882 5,214 
   Total3,576 545 3,133 2,882 10,136 
Consumer loans
Single family
2,457 2,457 
   Total2,457 2,457 
 Total collateral-dependent loans$3,576 $3,002 $$3,133 $2,882 $12,593 

At December 31, 2022
(in thousands)202220212020201920182017 and priorRevolvingRevolving-termTotal
COMMERCIAL PORTFOLIO
Non-owner occupied CRE
Pass$68,301 $68,356 $42,181 $139,760 $87,197 $242,544 $2,016 $786 $651,141 
Special Mention— — — — 2,702 4,242 — — 6,944 
Substandard— — — — — — — — — 
Total68,301 68,356 42,181 139,760 89,899 246,786 2,016 786 658,085 
Multifamily
Pass1,828,568 1,165,434 528,077 221,974 59,340 140,126 — — 3,943,519 
Special Mention— — 4,893 19,834 — 7,508 — — 32,235 
Substandard— — — — — — — — — 
Total1,828,568 1,165,434 532,970 241,808 59,340 147,634 — — 3,975,754 
Multifamily construction
Pass18,110 63,394 13,613 — — — — — 95,117 
Special Mention— — — — — — — — — 
Substandard— — — — — — — — — 
Total18,110 63,394 13,613 — — — — — 95,117 
CRE construction
Pass341 14,348 3,960 — — 305 — — 18,954 
Special Mention— — — — — — — — — 
Substandard— — — — — — — — — 
Total341 14,348 3,960 — — 305 — — 18,954 
Single family construction
Pass149,133 50,936 24,807 519 — 74 123,303 — 348,772 
Special Mention— — — — — — — — — 
Substandard— 6,782 — — — — — — 6,782 
Total149,133 57,718 24,807 519 — 74 123,303 — 355,554 
Single family construction to permanent
Current66,034 76,814 11,128 3,268 794 — — — 158,038 
Past due:
30-59 days— — — — — — — — — 
60-89 days— — — — — — — — — 
90+ days— — — — — — — — — 
Total66,034 76,814 11,128 3,268 794 — — — 158,038 
Owner occupied CRE
Pass70,192 51,919 44,778 71,652 36,457 139,691 1,104 415,796 
Special Mention— 743 — — 6,179 13,485 — — 20,407 
Substandard— — — — 2,149 5,011 — — 7,160 
Total70,192 52,662 44,778 71,652 44,785 158,187 1,104 443,363 
Commercial business
Pass65,566 42,921 45,940 18,594 13,548 18,779 130,427 2,041 337,816 
Special Mention— 612 — 3,577 3,444 403 — 8,045 
Substandard— 338 2,638 4,449 2,591 2,206 1,563 101 13,886 
Total65,566 43,871 48,578 26,620 16,148 24,429 132,393 2,142 359,747 
Total commercial portfolio$2,266,245 $1,542,597 $722,015 $483,627 $210,966 $577,415 $257,715 $4,032 $6,064,612 
9295




Nonaccrual and Past Due Loans
The following table presents nonaccrual status for loans asa vintage analysis of the dates indicated:
At December 31, 2020At December 31, 2019
(in thousands)Nonaccrual with no related ACLTotal NonaccrualNonaccrual with no related ACLTotal Nonaccrual
Commercial and industrial loans
Owner occupied commercial real estate$4,922 $4,922 $2,891 $2,891 
 Commercial business3,100 9,183 2,954 3,446 
Total8,022 14,105 5,845 6,337 
Consumer loans
Single family2,173 4,883 1,652 5,364 
Home equity and other1,734 10 1,160 
Total2,175 6,617 1,662 6,524 
Total nonaccrual loans$10,197 $20,722 $7,507 $12,861 
consumer portfolio segment by loan sub-class and delinquency status:


At December 31, 2022
(in thousands)202220212020201920182017 and priorRevolvingRevolving-termTotal
CONSUMER PORTFOLIO
Single family
Current$273,786 $253,937 $152,773 $49,302 $43,511 $231,277 $— $— $1,004,586 
Past due:
30-59 days— — — — 340 2,113 — — 2,453 
60-89 days— — — — — 258 — — 258 
90+ days— — — 290 273 1,141 — — 1,704 
Total273,786 253,937 152,773 49,592 44,124 234,789 — — 1,009,001 
Home equity and other
Current4,156 692 220 150 72 1,593 340,567 4,017 351,467 
Past due:
30-59 days— — — — 446 — 461 
60-89 days24 — — — 48 517 — 595 
90+ days— — — — — 151 33 — 184 
Total4,162 722 220 150 72 1,801 341,563 4,017 352,707 
Total consumer portfolio (1)
$277,948 $254,659 $152,993 $49,742 $44,196 $236,590 $341,563 $4,017 $1,361,708 
Total LHFI$2,544,193 $1,797,256 $875,008 $533,369 $255,162 $814,005 $599,278 $8,049 $7,426,320 
The following tables present an aging analysis of our portfolio as of the dates indicated:
At December 31, 2020
Past Due and Still Accruing
(in thousands)
30-59 days

60-89 days

90 days or more
Nonaccrual
Total past
due and nonaccrual (4)
CurrentTotal
loans
Commercial real estate loans
Non-owner occupied commercial real estate$$$$$$829,538 $829,538 
Multifamily1,428,092 1,428,092 
Construction/land development
Multifamily construction115,329 115,329 
Commercial real estate construction27,285 27,285 
Single family construction259,170 259,170 
Single family construction to permanent151,911 151,911 
Total2,811,325 2,811,325 
Commercial and industrial loans
Owner occupied commercial real estate4,922 4,922 462,334 467,256 
Commercial business9,183 9,183 636,540 645,723 
Total14,105 14,105 1,098,874 1,112,979 
Consumer loans
Single family2,161 418 11,476 (2)4,883 18,938 896,185 915,123 (1)
Home equity and other228 135 1,734 2,097 402,656 404,753 
Total2,389 553 11,476 6,617 21,035 1,298,841 1,319,876 
Total loans$2,389 $553 $11,476 $20,722 $35,140 $5,209,040 $5,244,180 
%0.05 %0.01 %0.22 %0.40 %0.67 %99.33 %100.00 %

93




At December 31, 2019
Past Due and Still Accruing
(in thousands)30-59 days60-89 days90 days or moreNonaccrual
Total past
due and nonaccrual (4)
CurrentTotal
loans
Commercial real estate loans
Non-owner occupied commercial real estate$$$$$$895,546 $895,546 
Multifamily999,140 999,140 
Construction and land development701,762 701,762 
Total2,596,448 2,596,448 
Commercial and industrial loans
Owner occupied commercial real estate2,891 2,891 474,425 477,316 
Commercial business44 3,446 3,490 411,220 414,710 
Total44 6,337 6,381 885,645 892,026 
Consumer loans
Single family5,694 4,261 19,702 (2)5,364 35,021 1,037,685 1,072,706 (1)
Home equity and other837 372 1,160 2,369 551,007 553,376 
Total6,531 4,633 19,702 6,524 37,390 1,588,692 1,626,082 
Total loans$6,575 $4,633 $19,702 $12,861 $43,771 $5,070,785 $5,114,556 (3)
%0.13 %0.09 %0.39 %0.25 %0.86 %99.14 %100.00 %

(1)Includes $7.1 million and $3.5$5.9 million of loans at December 31, 2020 and 2019, 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 ourthe consolidated income statements.

The following table presents a vintage analysis of the commercial and consumer portfolio segment by loan sub-class and gross charge-offs:
At December 31, 2023
(in thousands)202320222021202020192018 and priorRevolvingRevolving-termTotal
COMMERCIAL PORTFOLIO
Commercial business
Gross charge-offs$— $— $(184)$— $(1,136)$295 $13 $(50)$(1,062)
CONSUMER PORTFOLIO
Home equity and other
Gross charge-offs— (106)(22)— — (4)(187)— (319)
Total LHFI$— $(106)$(206)$— $(1,136)$291 $(174)$(50)$(1,381)

96


Collateral Dependent Loans
The following table presents the amortized cost basis of collateral-dependent loans by loan sub-class and collateral type:
At December 31, 2023
(in thousands)Land1-4 FamilyNon-residential real estateOther non-real estateTotal
CRE
Non-owner occupied CRE$— $573 $16,230 $— $16,803 
Construction/land development
CRE construction— — 3,821 — 3,821 
   Total— 573 20,051 — 20,624 
Commercial and industrial loans
Commercial business— 2,788 5,471 4,587 12,846 
   Total— 2,788 5,471 4,587 12,846 
Consumer loans
Single family
— 773 — — 773 
   Total— 773 — — 773 
 Total collateral-dependent loans$— $4,134 $25,522 $4,587 $34,243 

At December 31, 2022
(in thousands)Land1-4 FamilyNon-residential real estateOther non-real estateTotal
Commercial and industrial loans
Owner occupied CRE$1,111 $— $1,410 $— $2,521 
Commercial business62 3,186 562 — 3,810 
 Total collateral-dependent loans$1,173 $3,186 $1,972 $— $6,331 

Nonaccrual and Past Due Loans
The following table presents nonaccrual status for loans:
At December 31, 2023At December 31, 2022
(in thousands)Nonaccrual with no related ACLTotal NonaccrualNonaccrual with no related ACLTotal Nonaccrual
CRE
Non-owner occupied CRE$16,803 $16,803 $— $— 
Construction/land development
CRE construction3,821 3,821 — — 
Total20,624 20,624 — — 
Commercial and industrial loans
 Owner occupied CRE706 706 2,521 2,521 
 Commercial business13,151 13,686 785 4,269 
Total13,857 14,392 3,306 6,790 
Consumer loans
Single family773 2,650 332 2,584 
Home equity and other— 1,310 681 
Total773 3,960 335 3,265 
Total nonaccrual loans$35,254 $38,976 $3,641 $10,055 
97


The following tables present an aging analysis of past due loans by loan portfolio segment and loan sub-class:
At December 31, 2023
Past Due and Still Accruing
(in thousands)
30-59 days

60-89 days

90 days or more
Nonaccrual
Total past
due and nonaccrual (1)
CurrentTotal
loans
CRE
Non-owner occupied CRE$— $— $— $16,803 $16,803 $625,082 $641,885 
Multifamily— 1,915 — — 1,915 3,938,274 3,940,189 
Construction/land development
Multifamily construction— — — — — 168,049 168,049 
CRE construction— — — 3,821 3,821 14,692 18,513 
Single family construction— — — — — 274,050 274,050 
Single family construction to permanent— — — — — 105,304 105,304 
Total— 1,915 — 20,624 22,539 5,125,451 5,147,990 
Commercial and industrial loans
Owner occupied CRE— — — 706 706 390,579 391,285 
Commercial business— — — 13,686 13,686 345,363 359,049 
Total— — — 14,392 14,392 735,942 750,334 
Consumer loans
Single family5,174 1,993 4,261 (2)2,650 14,078 1,126,201 1,140,279 
Home equity and other974 225 — 1,310 2,509 381,792 384,301 
Total6,148 2,218 4,261 3,960 16,587 1,507,993 1,524,580 (3)
Total loans$6,148 $4,133 $4,261 $38,976 $53,518 $7,369,386 $7,422,904 
%0.08 %0.05 %0.06 %0.53 %0.72 %99.28 %100.00 %

98


At December 31, 2022
Past Due and Still Accruing
(in thousands)30-59 days60-89 days90 days or moreNonaccrual
Total past
due and nonaccrual (1)
CurrentTotal
loans
CRE
Non-owner occupied CRE$— $— $— $— $— $658,085 $658,085 
Multifamily— — — — — 3,975,754 3,975,754 
Construction/land development
Multifamily construction— — — — — 95,117 95,117 
CRE construction— — — — — 18,954 18,954 
Single family construction— — — — — 355,554 355,554 
Single family construction to permanent— — — — — 158,038 158,038 
Total— — — — — 5,261,502 5,261,502 
Commercial and industrial loans
Owner occupied CRE— — — 2,521 2,521 440,842 443,363 
Commercial business— — — 4,269 4,269 355,478 359,747 
Total— — — 6,790 6,790 796,320 803,110 
Consumer loans
Single family4,556 1,724 4,372 (2)2,584 13,236 995,765 1,009,001 
Home equity and other267 296 — 681 1,244 351,463 352,707 
Total4,823 2,020 4,372 3,265 14,480 1,347,228 1,361,708 (3)
Total loans$4,823 $2,020 $4,372 $10,055 $21,270 $7,405,050 $7,426,320 
%0.06 %0.03 %0.06 %0.14 %0.29 %99.71 %100.00 %
(1)Includes loans whose repayments are insured by the FHA or guaranteed by the VA or SBA of $12.4 million and $10.6 million at December 31, 2023 and 2022, 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)Net deferred loans fees and costs of $24.5 million were included within the carrying amounts of the loan balances as of December 31, 2019, in order to conform with the current period presentation.
(4)Includes loans whose repayments are insured by the FHA or guaranteed by the VA or SBA of $14.7$1.3 million and $28.4$5.9 million of loans at December 31, 20202023 and 2019, respectively.

The following tables present information about troubled debt restructuring ("TDR") activity by concession type during the periods indicated.
Year Ended December 31, 2020
(dollars in thousands)Number of loan
modifications
Recorded
investment
Related charge-
offs
Commercial and industrial
Owner occupied commercial real estate
Payment restructure$678 $
Commercial business
Payment restructure1,125 
Total commercial and industrial
Payment restructure1,803 
Total1,803 
Consumer loans
Single family
Interest rate reduction27 5,979 
Payment restructure14 2,695 
Total41 8,674 
Total loans
Interest rate reduction27 5,979 
Payment restructure16 4,498 
Total43$10,477 $
94





Year Ended December 31, 2019
(dollars in thousands)Number of loan
modifications
Recorded
investment
Related charge-
offs
Commercial real estate loans
Construction and land development
Payment restructure$4,675 $
Total4,675 
Commercial and industrial loans
Owner occupied commercial real estate
Payment restructure5,840 
Commercial business
Payment restructure259 
Total commercial and industrial
Payment restructure6,099 
Total6,099 
Consumer loans
Single family
Interest rate reduction21 3,925 
Payment restructure118 25,795 
Home equity and other
Payment restructure116 
Total consumer
Interest rate reduction21 3,925 
Payment restructure119 25,911 
Total140 29,836 
Total loans
Interest rate reduction21 3,925 
Payment restructure122 36,685 
Total143 $40,610 $









95




Year Ended December 31, 2018
(dollars in thousands)Number of loan
modifications
Recorded
investment
Related charge-
offs
Commercial and industrial loans
Commercial business
Payment restructure$267 $
Total267 
Consumer loans
Single family
Interest rate reduction17 3,174 
Payment restructure153 31,626 
Total170 34,800 
Total loans
Interest rate reduction17 3,174 — 
Payment restructure155 31,893 
Total172 $35,067 $

The following table presents loans that were modified as TDRs within the previous 12 months and subsequently re-defaulted during 2020 and 2019, respectively. A TDR loan is considered re-defaulted when it becomes doubtful that the objectives of the modifications will be met, generally when a consumer loan TDR becomes 60 days or more past due on principal or interest payments or when a commercial loan TDR becomes 90 days or more past due on principal or interest payments.
Years Ended December 31,
20202019
(dollars in thousands)Number of loan relationships that re-defaultedRecorded
investment
Number of loan relationships that re-defaultedRecorded
investment
Consumer loans - single family20 $3,809 13 $3,059 

The Coronavirus Aid, Relief and Economic Security ("CARES") Act provides temporary relief from the accounting and disclosure requirements for TDRs for certain loan modifications that are the result of a hardship that is related, either directly or indirectly, to the COVID-19 pandemic. In addition, interagency guidance issued by federal banking regulators and endorsed by the FASB staff has indicated that borrowers who receive relief are not experiencing financial difficulty if they meet the following qualifying criteria:

The modification is in response to the National Emergency related to the COVID pandemic;
The borrower was current at the time the modification program was implemented; and
The modification is short-term

We have elected to apply temporary relief under Section 4013 of the CARES Act to certain eligible short-term modifications and will not treat qualifying loan modifications as TDRs for accounting or disclosure purposes. Additionally, eligible short-term loan modifications subject to the practical expedient in the interagency guidance will not be treated as TDRs for accounting or disclosure purposes if they qualify. 

As of December 31, 2020, excluding any SBA guaranteed loans for which the government was making payments as provided for under the CARES Act, or single family loans that are guaranteed by FHA or VA, the Company has outstanding balances of $117 million on 226 loans that were approved for forbearance under this program.

The Bank will exercise judgment in determining the risk rating for impacted borrowers and will not automatically adversely classify credits that are affected by COVID-19. The Bank also will not designate loans with deferrals granted due to COVID-19 as past due because of the deferral. Due to the short-term nature of the forbearance and other relief programs we are offering as a result of the COVID-19 pandemic, we expect that borrowers granted relief under these programs will generally not be reported as nonaccrual.

96




This section reports results prior to the January 1, 2020 adoption of ASC 326 and is presented in accordance with previously applicable GAAP.
The following table summarizes designated loan grades by loan portfolio and loan class.
At December 31, 2019
(in thousands)PassSpecial mentionSubstandardTotal
Commercial real estate loans
Non-owner occupied commercial real estate$894,896 $$$894,896 
Multifamily996,498 996,498 
Construction/land development681,445 20,954 702,399 
Total2,572,839 20,954 2,593,793 
Commercial and industrial loans
Owner occupied commercial real estate460,319 12,709 5,144 478,172 
Commercial business402,060 9,405 3,415 414,880 
Total862,379 22,114 8,559 893,052 
Consumer loans
Single family1,056,166 (1)8,802 5,364 1,070,332 
Home equity and other531,102 664 1,160 532,926 
Total1,587,268 9,466 6,524 1,603,258 
Total LHFI$5,022,486 $52,534 $15,083 $5,090,103 
(1)    Includes $3.5 million of loans2022, respectively, where a fair value option election was made at the time of origination and, therefore, are carried at fair value with changes in fair value recognized in theour consolidated income statements.
The following tables disaggregate our ACL and recorded investment in loans by impairment methodology.
At December 31, 2019
(in thousands)Allowance:
collectively
evaluated for
impairment
Allowance:
individually
evaluated for
impairment
TotalLoans:
collectively
evaluated for
impairment
Loans:
individually
evaluated for
impairment
Total
Commercial real estate loans
Non-owner occupied commercial real estate$7,249 $$7,249 $894,896 $$894,896 
Multifamily7,015 7,015 996,498 996,498 
Construction/land development8,679 8,679 702,399 702,399 
     Total22,943 22,943 2,593,793 2,593,793 
Commercial and industrial loans
Owner occupied commercial real estate3,640 3,640 475,281 2,891 478,172 
Commercial business2,953 2,961 411,386 3,494 414,880 
     Total6,593 6,601 886,667 6,385 893,052 
Consumer loans
Single family6,333 117 6,450 1,005,386 61,503 1,066,889 
Home equity and other6,815 28 6,843 532,038 863 532,901 
Total13,148 145 13,293 1,537,424 62,366 1,599,790 
Total loans evaluated for impairment42,684 153 42,837 5,017,884 68,751 5,086,635 
Loans carried at fair value (1)
— — — 3,468 
Total LHFI$42,684 $153 $42,837 $5,017,884 $68,751 $5,090,103 
(1)    Comprised of single family loans where a fair value option election was made at the time of origination and, therefore, are carried at fair value with changes recognized in the consolidated income statements.Loan Modifications


97




The following tables present impaired loans by loan portfolioCompany provides MBFDs which may include delays in payment of amounts due, extension of the terms of the notes or reduction in the interest rates on the notes. In certain instances, the Company may grant more than one type of modification. The granting of modifications for the years ended December 31, 2023 and loan class.
At December 31, 2019
(in thousands)
Recorded
investment (1)
Unpaid
principal
balance (2)
Related
allowance
With no related allowance recorded:
Commercial and industrial loans
Owner occupied commercial real estate$2,891 $3,013 $— 
Commercial business2,954 3,267 — 
             Total5,845 6,280 — 
Consumer loans
Single family (3)
60,009 60,448 — 
Home equity and other472 472 — 
Total60,481 60,920 — 
Total66,326 67,200 — 
With an allowance recorded:
Commercial and industrial loans
Commercial business540 919 
Total540 919 
Consumer loans
Single family1,494 1,494 117 
Home equity and other391 391 28 
Total1,885 1,885 145 
Total2,425 2,804 153 
Combined:
Commercial and industrial loans
Owner occupied commercial real estate2,891 3,013 
Commercial business3,494 4,186 
Total6,385 7,199 
Consumer loans
Single family (3)
61,503 61,942 117 
Home equity and other863 863 28 
Total62,366 62,805 145 
Total impaired loans$68,751 $70,004 $153 
(1)Includes partial charge-offs and nonaccrual interest paid and purchase discounts and premiums.
(2)Unpaid principal balance does2022 did not include partial charge-offs, purchase discounts and premiums or nonaccrual interest paid. Related allowance is calculatedhave a material impact on net book balances not unpaid principal balances.
(3)Includes $59.8 million in single family performing TDRs.

98




the ACL. The following tables provide the average recorded investmentinformation related to MBFDs for the years ended December 31, 2023 and interest income recognized on impaired loans2022 disaggregated by portfolioclass of financing receivable and loan class.
Years Ended December 31,
20192018

(in thousands)
Average Recorded InvestmentInterest Income RecognizedAverage Recorded InvestmentInterest Income Recognized
Commercial real estate loans
Non-owner occupied commercial real estate$$$$
Multifamily293 14 676 25 
Construction/land development1,351 625 24 
Total1,646 14 1,301 49 
Commercial and industrial loans
Owner occupied commercial real estate2,927 112 1,912 93 
Commercial business2,211 37 2,303 104 
Total5,138 149 4,215 197 
Consumer loans
Single family66,845 2,701 69,022 2,636 
Home equity and other1,062 59 1,261 78 
Total67,907 2,760 70,283 2,714 
Total impaired loans$74,691 $2,923 $75,799 $2,960 

type of concession granted:
















00
99


Significant Payment Delay
Years Ended December 31,
20232022
(in thousands, except percentages)Amortized Cost Basis at Period End% of Total Class of Financing ReceivableAmortized Cost Basis at Period End% of Total Class of Financing Receivable
Commercial business$839 0.23 %$— — %
Single family1,082 0.09 %1,377 0.14 %
Home equity and other— — %69 0.02 %
Term Extension
Years Ended December 31,
20232022
(in thousands, except percentages)Amortized Cost Basis at Period End% of Total Class of Financing ReceivableAmortized Cost Basis at Period End% of Total Class of Financing Receivable
Commercial business$9,850 2.74 %$1,562 0.43 %
Single family273 0.02 %269 0.03 %
Interest Rate Reduction and Significant Payment Delay
Years Ended December 31,
20232022
(in thousands, except percentages)Amortized Cost Basis at Period End% of Total Class of Financing ReceivableAmortized Cost Basis at Period End% of Total Class of Financing Receivable
Commercial business$— — %$459 0.13 %
Interest Rate Reduction and Term Extension
Years Ended December 31,
20232022
(in thousands, except percentages)Amortized Cost Basis at Period End% of Total Class of Financing ReceivableAmortized Cost Basis at Period End% of Total Class of Financing Receivable
Single family$— — %$814 0.08 %
Significant Payment Delay and Term Extension
Year Ended December 31,
20232022
(in thousands, except percentages)Amortized Cost Basis at Period End% of Total Class of Financing ReceivableAmortized Cost Basis at Period End% of Total Class of Financing Receivable
Non-owner occupied CRE$16,230 2.53 %$— — %
Construction/land development3,821 0.68 %— — %
Single family2,526 0.22 %13,742 1.36 %
Home equity and other— — %51 0.01 %
Interest Rate Reduction, Significant Payment Delay and Term Extension
Years Ended December 31,
20232022
(in thousands, except percentages)Amortized Cost Basis at Period End% of Total Class of Financing ReceivableAmortized Cost Basis at Period End% of Total Class of Financing Receivable
Single family$191 0.02 %$6,500 0.64 %

100



The following table describes the financial effect of the MBFDs:
Interest Rate Reduction
Years Ended December 31,
20232022
Commercial businessReduced weighted-average contractual interest rate from 5.72% to 4.00%.
Single familyReduced weighted-average contractual interest rate from 5.25% to 5.00%.Reduced weighted-average contractual interest rate from 4.25% to 3.31%.
Significant Payment Delay
Years Ended December 31,
20232022
Non-owner occupied CREThe weighted average amortization period of the loans were extended 3.7 years.
Construction/land developmentThe weighted average amortization period of the loans were extended 2.7 years.
Commercial businessThe weighted average amortization period of the loans were extended 5.2 years.
Single familyProvided payment deferrals to borrowers. A weighted average 0.37% of loan balances were capitalized and added to the remaining term of the loan.Provided payment deferrals to borrowers. A weighted average 0.22% of loan balances were capitalized and added to the remaining term of the loan.
Home equity and otherProvided payment deferrals to borrowers. A weighted average 3.47% of loan balances were capitalized and added to the remaining term of the loan.
Term Extension
Years Ended December 31,
20232022
Non-owner occupied CREThe weighted average duration of loan payments deferred is 2.1 years.
Construction/land developmentThe weighted average duration of loan payments deferred is 1.6 years.
Commercial businessAdded a weighted average 1.2 years to the life of loans, which reduced the monthly payment amounts to the borrowers.Added a weighted average 0.8 years to the life of loans, which reduced the monthly payment amounts to the borrowers.
Single familyAdded a weighted average 4.9 years to the life of loans, which reduced the monthly payment amounts to the borrowers.Added a weighted average 4.4 years to the life of loans, which reduced the monthly payment amounts to the borrowers.
Home equity and otherAdded a weighted average 16.1 years to the life of loans, which reduced the monthly payment amounts to the borrowers.

0
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.
101


The following table depicts the payment status of loans that were modified to borrowers experiencing financial difficulties on or after October 1, 2022 through September 30, 2023:
Payment Status (Amortized Cost Basis) at December 31, 2023
(in thousands)Current30-89 Days Past Due90+ Days Past Due
Non-owner occupied CRE$16,230 $— $— 
Construction/land development3,821 — — 
Commercial business8,873 976 — 
Single family2,627 1,285 324 
Total$31,551 $2,261 $324 

The following table depicts the payment status of loans that were modified to borrowers experiencing financial difficulties on or after January 1, 2022, the date we adopted ASU 2022-02 through September 30, 2022:

Payment Status (Amortized Cost Basis) at December 31, 2022
(in thousands)Current30-89 Days Past Due90+ Days Past Due
Commercial business$2,021 $— $— 
Single family19,908 1,831 198 
Home equity and other120 — — 
Total$22,049 $1,831 $198 

The following tables provide the amortized cost basis as of December 31, 2023 of MBFDs, on or after October 1, 2022, through September 30, 2023 and subsequently had a payment default:

Amortized Cost Basis of Modified Loans That Subsequently Defaulted Year Ended December 31, 2023
(in thousands)Significant Payment DelayTerm ExtensionInterest Rate Reduction and Term ExtensionSignificant Payment Delay and Term ExtensionInterest Rate Reduction, Significant Payment Delay and Term Extension
Commercial business$— $976 $— $— $— 
Single family— — — 1,354 — 
Total$— $976 $— $1,354 $— 

The following tables provide the amortized cost basis as of December 31, 2022 of MBFDs, on or after January 1, 2022, the date we adopted ASU 2022-02 through September 30, 2022 and subsequently had a payment default:

Amortized Cost Basis of Modified Loans That Subsequently Defaulted Year Ended December 31, 2022
(in thousands)Significant Payment DelayTerm ExtensionInterest Rate Reduction and Term ExtensionSignificant Payment Delay and Term ExtensionInterest Rate Reduction, Significant Payment Delay and Term Extension
Single family$340 $— $— $1,198 $764 

102



NOTE 4–PREMISES AND EQUIPMENT, NET:

Premises and equipment consisted of the following.following:
 
At December 31, At December 31,
(in thousands)(in thousands)20202019(in thousands)20232022
Furniture and equipment
Furniture and equipment
Furniture and equipmentFurniture and equipment$52,761 $56,849 
Leasehold improvementsLeasehold improvements40,801 46,088 
Land and buildingsLand and buildings35,594 34,558 
TotalTotal129,156 137,495 
Less: accumulated depreciationLess: accumulated depreciation(64,054)(60,522)
NetNet$65,102 $76,973 


NOTE 5–DEPOSITS:

Deposit balances, including their weighted average rates, were as follows.follows:
At December 31,Weighted Average RateAt December 31,Weighted Average Rate
At December 31,At December 31,
202320232022
(dollars in thousands)(dollars in thousands)2020Weighted Average Rate2019Weighted Average Rate(dollars in thousands)AmountWeighted Average RateAmountWeighted Average Rate
Noninterest-bearing demand depositsNoninterest-bearing demand deposits$1,337,010 — %$907,918 — %
Interest-bearing demand accounts484,265 0.10 %373,832 0.38 %
Noninterest-bearing demand deposits
Noninterest-bearing demand deposits$1,306,503 — %$1,399,912 — %
Interest bearing:
Interest-bearing demand deposits
Interest-bearing demand deposits
Interest-bearing demand deposits344,748 0.25 %466,490 0.10 %
SavingsSavings264,024 0.07 %219,182 0.21 %Savings261,508 0.06 0.06 %258,977 0.06 0.06 %
Money marketMoney market2,596,453 0.21 %2,224,494 1.25 %Money market1,622,665 1.79 1.79 %2,383,209 1.22 1.22 %
Certificates of depositCertificates of deposit1,139,807 0.93 %1,614,533 2.24 %Certificates of deposit3,227,954 4.47 4.47 %2,943,331 3.07 3.07 %
Total$5,821,559 0.29 %$5,339,959 1.23 %
Total interest bearing depositsTotal interest bearing deposits5,456,875 3.19 %6,052,007 1.98 %
Total depositsTotal deposits$6,763,378 2.58 %$7,451,919 1.61 %

There were $331$255 million and $330$351 million in public funds included in deposits at December 31, 20202023 and 2019,2022, respectively.

Certificates of deposit outstanding mature as follows.follows:
 
(in thousands)December 31, 20202023
Within one year$982,8233,022,871 
One to two years117,040180,304 
Two to three years20,98912,812 
Three to four years14,8125,066 
Four to five years3,8946,799 
Thereafter249102 
Total$1,139,8073,227,954 

The aggregate amount of time deposits in denominations of more than the FDIC limit of $250,000 at December 31, 20202023 and 20192022 was $130$194 million and $223$189 million, respectively. There were $210 million$1.2 billion and $266 million$1.4 billion of brokered deposits at December 31, 20202023 and 2019,2022, respectively.


NOTE 6– BORROWINGS:

The Company borrows funds through advances from the Des Moines FHLB. FHLB advances totaled $302 million and $347 million as of December 31, 2020, and 2019, respectively. The $302 million of FHLB advances outstanding at December 31, 2020 matured in the first quarter of 2021. Weighted-average interest rates on the advances were 0.32%, 1.86%, and 2.63% at
100103


NOTE 6– BORROWINGS:
During 2023, the Company borrowed $1.2 billion and repaid $535 million from the Federal Reserve Bank ("FRB") under the Bank Term Funding Program ("BTFP"). The BTFP offers up to one year fixed-rate term borrowings that are prepayable without penalty. At December 31, 2023 the Company had $645 million outstanding under the BTFP.

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

At December 31,
20232022
(dollars in thousands)AmountWeighted Average RateAmountWeighted Average Rate
Within one year$745,000 4.75 %$16,000 4.60 %
One to three years450,000 4.56 %450,000 4.31 %
Three through five years550,000 4.35 %550,000 4.35 %
Total$1,745,000 4.58 %$1,016,000 4.33 %


At December 31, 2020, 20192023 and 2018, respectively.2022 the Bank had available borrowing capacity of $2.1 billion and $2.6 billion respectively, from the FHLB,and $710 million and $340 million, respectively from the FRBSF. The Bank is a member of the AFX, through which it may either borrow or lend funds on an overnight or short-term basis with a group of pre-approved commercial banks. The availability of funds changes daily. As of December 31, 20202023, the were no balances outstanding.

As of December 31, 2023 and 2019,2022, the Company held $20.3$55.3 million and $22.4$49.3 million, respectively, of FHLB stock.

At December 31, 2020, there were $20.8 million of outstanding borrowings from the FRBSF which bore interest at 0.25%. At December 31, 2019, we had $125 million of federal funds purchased and securities sold under agreements to repurchase.

NOTE 7–LONG-TERM DEBT:

At December 31, 20202023 and 2019,2022, the Company had outstanding $98 million of subordinated notes (the “Notes”) which have a face amount of $100 million, have a maturity date of January 30, 2032 and bear interest at a rate of 3.5% per annum until January 30, 2027. From January 30, 2027, until the maturity date or the date of earlier redemption, the Notes will bear interest equal to the three-month term Secured Overnight Financing Rate ("SOFR") plus 215 basis points.

At December 31, 2023 and 2022, the Company had outstanding $65 million and $64 million, respectively of Senior Notes and $62which have a face amount of $65 million, have a maturity date of trust preferred securities. The Senior NotesJune 1, 2026 and bear interest at a rate of 6.50% and mature in 2026.per annum.

The Company issued trust preferred securities ("TRUPS") during the period from 2005 through 2007, resulting in a debt balance of $62 million that remains outstanding at December 31, 2020.2023 and 2022. In connection with the issuance of trust preferred securities, HomeStreet, Inc. issued to HomeStreet Statutory Trust, Junior Subordinated Deferrable Interest Debentures. The sole assets of the HomeStreet Statutory Trust are the Subordinated Debt Securities I, II, III, and IV.

The Subordinated Debt SecuritiesTRUPS outstanding as of December 31, 2023 and 2022 are as follows:
 
HomeStreet Statutory
(dollars in thousands)IIIIIIIV
    
Date issuedJune 2005September 2005February 2006March 2007
Amount$5,155$20,619$20,619$15,464
Interest rate3 MO LIBOR + 1.70%3 MO LIBOR + 1.50%3 MO LIBOR + 1.37%3 MO LIBOR + 1.68%
Maturity dateJune 2035December 2035March 2036June 2037
Call option (1)
QuarterlyQuarterlyQuarterlyQuarterly

HomeStreet Statutory Trust
(dollars in thousands)IIIIIIIV
Date issuedJune 2005September 2005February 2006March 2007
Amount$5,155$20,619$20,619$15,464
Interest rate (1)
3 MO SOFR + 1.96%3 MO SOFR + 1.76%3 MO SOFR + 1.63%3 MO SOFR + 1.94%
Maturity dateJune 2035December 2035March 2036June 2037
Call option (2)
QuarterlyQuarterlyQuarterlyQuarterly
(1) These rates reflect the floating rates as of December 31, 2023.
(2) Call options are exercisable at par and are callable, without penalty on a quarterly basis, starting five years after issuance.basis.

101104




NOTE 8–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 sheets, consist of the following.following:
At December 31, 2020
Notional amountFair value derivatives
At December 31, 2023At December 31, 2023
Notional amountNotional amountFair value derivatives
(in thousands)(in thousands) AssetLiability(in thousands) AssetLiability
Forward sale commitmentsForward sale commitments$977,974 $1,035 $(3,714)
Forward sale commitments
Forward sale commitments
Interest rate lock commitmentsInterest rate lock commitments493,873 17,395 (3)
Interest rate lock commitments
Interest rate lock commitments
Interest rate swapsInterest rate swaps536,969 17,459 (20,511)
Eurodollar futures314,000 (4)
Futures
Options
Total derivatives before nettingTotal derivatives before netting$2,322,816 35,889 (24,232)
Netting adjustment/Cash collateral (1)
Netting adjustment/Cash collateral (1)
(8,250)21,447 
Carrying value on consolidated balance sheetCarrying value on consolidated balance sheet$27,639 $(2,785)

At December 31, 2019
Notional amountFair value derivatives
(in thousands) AssetLiability
Forward sale commitments$651,838 $830 $(492)
Interest rate lock and purchase loan commitments124,379 2,281 (58)
Interest rate swaps688,516 27,097 (10,889)
Eurodollar futures2,232,000 
Total derivatives before netting$3,696,733 30,211 (11,439)
Netting adjustment/Cash collateral (1)
(21,414)9,101 
Carrying value on consolidated balance sheet$8,797 $(2,338)

At December 31, 2022
Notional amountFair value derivatives
(in thousands) AssetLiability
Forward sale commitments$51,252 $293 $(151)
Interest rate lock commitments17,463 141 (36)
Interest rate swaps236,533 13,093 (13,093)
Futures23,000 18 — 
Options14,000 218 — 
Total derivatives before netting$342,248 13,763 (13,280)
Netting adjustment/Cash collateral (1)
(12,870)101 
Carrying value on consolidated balance sheet$893 $(13,179)
(1)    Includes net cash collateral paidreceived of $13.2$9.9 million and net cash collateral received of $12.3$12.8 million at December 31, 20202023 and 2019,2022, respectively.
The Company nets derivative assets and liabilities when a legally enforceable master netting agreement exists between the Company and the derivative counterparty. Derivatives are reported at their respective fair values in the other assets or accounts payable and other liabilities line items on the consolidated balance sheets, with changes in fair value reflected in current period earnings.

The following tables present gross fair value and net carrying value information aboutfor derivative instruments.instruments:
(in thousands)Gross fair value
Netting adjustments/Cash collateral (1)
Carrying value
At December 31, 2020
Derivative assets$35,889 $(8,250)$27,639 
Derivative liabilities(24,232)21,447 (2,785)
At December 31, 2019
Derivative assets$30,211 $(21,414)$8,797 
Derivative liabilities(11,439)9,101 (2,338)

(in thousands)Gross fair value
Netting adjustments/Cash collateral (1)
Carrying value
At December 31, 2023
Derivative assets$11,183 $(10,119)$1,064 
Derivative liabilities(10,783)195 (10,588)
At December 31, 2022
Derivative assets$13,763 $(12,870)$893 
Derivative liabilities(13,280)101 (13,179)
(1)    Includes net cash collateral paidreceived of $13.2$9.9 million and net cash collateral received of $12.3$12.8 million at December 31, 20202023 and 2019,2022, respectively.

105


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 isare included in other assets. Payables related to cash collateral that has been received from counterparties isare included in accounts payable and
102




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 December 31, 20202023 and 2019,2022, the Company had liabilities of $3.3$10.1 million and $15.2$12.8 million, respectively, in cash collateral received from counterparties and receivables of $16.5 million$218 thousand and $2.9 million,$25 thousand, respectively, in cash collateral paid to counterparties.
The following table presents the net gain (loss) recognized on economic hedge derivatives, within the respective line items in the consolidated income statements for the periods indicated.indicated:
 
 Years Ended December 31,
(in thousands)20202019
Recognized in noninterest income: (1)
Net gain (loss) on loan origination and sale activities (2)
$(7,675)$(19,394)
Loan servicing income (loss) (3)
20,820 14,435 
        Other (4)
(421)121 
 Years Ended December 31,
(in thousands)202320222021
Recognized in noninterest income:
Net gain (loss) on loan origination and sale activities (1)
$804 $8,587 $(6,057)
Loan servicing income (loss) (2)
(1,255)(11,769)(8,238)
        Other (3)
(3)160 386 
(1)Includes both continuingComprised of forward contracts used as an economic hedge of loans held for sale and discontinued operations for 2019.interest rate lock commitments ("IRLCs") to customers.
(2)Comprised of IRLCs and forward contracts used as economic hedges of single family mortgage loans held for sale.
(3)Comprised of interest rate swaps, interest rate swaptions, futures, US Treasury options and forward contracts used as economic hedges of single family MSRs.
(4)(3)ComprisedImpact of interest rate swaps used as economic hedges of loans held for investment.swap agreements executed with commercial banking customers and broker dealer counterparties.

The notional amount of open interest rate swap agreements executed with commercial banking customers and broker dealer counterparties at December 31, 20202023 and 20192022 were $246$236 million and $144$237 million, respectively.

NOTE 9–MORTGAGE BANKING OPERATIONS:

LHFS consisted of the following.following:
At December 31,
At December 31,At December 31,
(in thousands)(in thousands)20202019(in thousands)20232022
Single familySingle family$194,643 $105,458 
Commercial real estate, multi-family and SBA167,289 128,841 
Less: Amounts attributed to discontinued operations(26,122)
Single family
Single family
CRE, multifamily and SBA
TotalTotal$361,932 $208,177 
Loans sold consisted of the following for the periods indicated:
 Years Ended December 31,
(in thousands)202020192018
Single family (1)
$1,985,944 $3,925,302 $6,300,838 
Commercial real estate, multi-family and SBA908,776 843,864 591,121 
Total$2,894,720 $4,769,166 $6,891,959 

(1) 2019 and 2018 amounts include both continuing and discontinued operations.
 Years Ended December 31,
(in thousands)202320222021
Single family$335,751 $693,348 $2,046,811 
CRE, multifamily and SBA26,839 145,622 773,378 
Total$362,590 $838,970 $2,820,189 


103




Gain on loan origination and sale activities, including the effects of derivative risk management instruments, consisted of the following:
Years Ended December 31, Years Ended December 31,
(in thousands)(in thousands)202020192018(in thousands)202320222021
Single familySingle family$100,795 $86,686 $174,473 
Commercial real estate, multi-family and SBA21,769 17,492 11,776 
Less: Amounts attributed to discontinued operations(60,056)(174,383)
Single family
Single family
CRE, multifamily and SBA
TotalTotal$122,564 $44,122 $11,866 

106


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:
At December 31,
At December 31,At December 31,
(in thousands)(in thousands)20202019(in thousands)20232022
Single family
Single family
$5,914,592 $7,023,441 
Commercial real estate, multi-family and SBA1,844,241 1,618,876 
Single family
Single family
CRE, multifamily and SBA
TotalTotal$7,758,833 $8,642,317 


TheUnder the terms of the sales agreements for single family loans sold to GSEs and other entities, the Company has made representations and warranties that the loans sold meet certain requirements. The Company may be required to repurchase mortgage loans or indemnify loan purchasers due to defects in the origination process of the loan, such as documentation errors, underwriting errors and judgments, appraisal errors, early payment defaults and fraud.

The total unpaid principal balance of loans sold on a servicing-retained basis that were subject to the terms and conditions of these representations and warranties totaled $5.3 billion and $5.4 billion as of December 31, 2023 and 2022, respectively. The following is a summary of changes in the Company's mortgage repurchase liability for estimated mortgage repurchase losses.single family loans sold on a servicing-retained and servicing-released basis included in accounts payable and other liabilities on the consolidated balance sheet for the periods indicated:
 Years Ended December 31,
(in thousands)20202019
Balance, beginning of period$2,871 $3,120 
Additions, net of adjustments (1)
(281)226 
Realized losses (2)
(468)(475)
Balance, end of period$2,122 $2,871 

 Years Ended December 31,
(in thousands)20232022
Balance, beginning of period$2,232 $1,312 
Additions, net of adjustments (1)
(330)1,629 
Realized losses (2)
(421)(709)
Balance, end of period$1,481 $2,232 
(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 $3.0$2.9 million and $2.5$1.6 million were recorded in other assets as of December 31, 20202023 and 2019,2022, 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 December 31, 20202023 and 2019,2022, delinquent or defaulted mortgage loans currently in Ginnie Mae pools that the Company has recognized on its consolidated balance sheets totaled $102$5.6 million and $9$6.9 million, respectively. The recognition of previously sold loans does not impact the accounting for the previously recognized MSRs.

104107




Revenue from mortgage servicing, including the effects of derivative risk management instruments, consisted of the following.following:
 Years Ended December 31,
(in thousands)202020192018
Servicing income, net:
Servicing fees and other$32,037 $39,561 $70,091 
Amortization of single family MSRs (1)
(17,754)(20,670)(34,705)
Amortization of multifamily and SBA MSRs(5,657)(5,214)(4,383)
8,626 13,677 31,003 
Risk management, single family MSRs:
Changes in fair value of MSRs due to assumptions (2)(3)
(19,955)(16,224)39,348 
Net gain (loss) from derivatives hedging20,820 14,435 (40,474)
Total865 (1,789)(1,126)
Less: Amounts attributed to discontinued operations(2,103)(25,054)
Loan servicing income$9,491 $9,785 $4,823 
 Years Ended December 31,
(in thousands)202320222021
Servicing income, net:
Servicing fees and other$26,134 $32,082 $35,342 
Amortization of single family MSRs (1)
(6,378)(9,951)(19,669)
Amortization of multifamily and SBA MSRs(5,778)(7,692)(7,581)
Total13,978 14,439 8,092 
Risk management, single family MSRs:
Changes in fair value of MSRs due to assumptions (2)
414 16,739 7,379 
Net gain (loss) from economic hedging (3)
(1,744)(18,790)(8,238)
Total(1,330)(2,051)(859)
Loan servicing income$12,648 $12,388 $7,233 
(1)Represents changes due to collection/realization of expected cash flows and curtailments.
(2)Principally reflects changes in market inputs,model assumptions, including prepayment speed assumptions, which include current marketare primarily reflected by changes in mortgage interest rates and prepayment model updates, both of which affect future prepayment speeds and cash flow projections.rates.
(3)Includes pre-tax loss of $919 thousandThe interest income from US Treasury notes securities used for hedging purposes, which is included in interest income on the consolidated income statements, was $1.4 million and pre-tax gain of $573 thousand, net of transaction costs$0.6 million in 2023 and prepayment reserves, resulting from the sales of single family MSRs for 2019 and 2018,2022, respectively.

The Company determines fair value of single family MSRs using a valuation model that calculates the net present value of estimated future cash flows. Estimates of future cash flows include contractual servicing fees, ancillary income and costs of servicing, the timing of which are impacted by assumptions, primarily expected prepayment speeds and discount rates, which relate to the underlying performance of the loans. The changes in single family MSRs measured at fair value are as follows:
 
Years Ended December 31, Years Ended December 31,
(in thousands)(in thousands)202020192018(in thousands)202320222021
Beginning balanceBeginning balance$68,109 $252,168 $258,560 
Beginning balance
Beginning balance
Additions and amortization:Additions and amortization:
OriginationsOriginations19,424 28,788 55,608 
Originations
Originations
Purchases
Sale(176,944)(66,902)
Amortization (1)
Amortization (1)
Amortization (1)
Amortization (1)
(17,754)(20,670)(34,705)
Net additions and amortizationNet additions and amortization1,670 (168,826)(45,999)
Changes in fair value assumptions (2)
Changes in fair value assumptions (2)
(19,813)(15,233)39,607 
Ending balanceEnding balance$49,966 $68,109 $252,168 
(1)Represents changes due to collection/realization of expected cash flows and curtailments.
(2)Principally reflects changes in market inputs,model assumptions, including prepayment speed assumptions, which include current marketare primarily affected by changes in mortgage interest rates and prepayment model updates, both of which affect future prepayment speeds and cash flow projections.rates.

Key economic assumptions used in measuring the initial fair value of capitalized single family MSRs were as follows.follows:
 
Years Ended December 31, (2)
(rates per annum)
202020192018
Constant prepayment rate ("CPR") (1)
11.37 %18.23 %15.86 %
Discount rate7.82 %9.31 %10.29 %
Years Ended December 31,
(rates per annum) (1)
202320222021
Constant prepayment rate ("CPR") (2)
14.89 %10.91 %8.84 %
Discount rate11.99 %9.35 %8.23 %
(1)Based on a weighted average.
(2)Represents the expected lifetime average CPR used in the model.
(2)Based on a weighted average.

105108




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.below:

At December 31, 2020At December 31, 2019
Range of Inputs
Average(1)
Range of Inputs
Average(1)
CPRs8.13% - 19.70%12.81 %13.08% - 26.55%17.67 %
Discount Rates6.50% - 13.14%8.27 %8.70% - 13.75%9.18 %

At December 31, 2023At December 31, 2022
Range of Inputs
Average (1)
Range of Inputs
Average (1)
CPRs6.80% - 32.50%7.00 %6.01%- 11.10%8.19 %
Discount Rates10.00% - 17.00%10.00 %9.74% -16.88%10.66 %
(1) The averages for 2020 areWeighted averages of all the inputs within the range while the averages for 2019 are weighted averages.range.

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

(dollars in thousands)At December 31, 20202023
Fair value of single family MSRs$49,96674,249 
Expected weighted-average life (in years)4.598.23
CPR
Impact on fair value of 25 basis points adverse change in interest rates$(3,255)(668)
Impact on fair value of 50 basis points adverse change in interest rates$(6,163)(1,518)
Discount rate
Impact on fair value of 100 basis points increase$(1,838)(1,587)
Impact on fair value of 200 basis points increase$(3,545)(4,138)
 

Generally, increases in the CPR or the discount rate utilized in the fair value measurements of single family MSRs will result in a decrease in fair value. Conversely, decreases in the CPR or the discount rate will result in an increase in fair value. These sensitivities are hypothetical and subject to key assumptions of the underlying valuation model. As the table above demonstrates, the Company's methodology for estimating the fair value of MSRs is highly sensitive to changes in key assumptions. Changes in fair value resulting from changes in assumptions generally cannot be extrapolated because the relationship of the change in assumption to the change in fair value may not be linear. Also, in this table, the effect of a variation in a particular assumption on the fair value of the MSRs is calculated without changing any other assumption; in reality, changes in one factor may be associated with changes in another, which may magnify or counteract the sensitivities. Thus, any measurement of MSR fair value is limited by the conditions existing and assumptions made as of a particular point in time. Those assumptions may not be appropriate if they are applied to a different point in time.

In March 2019, the Company successfully closed and settled 2 sales of the rights to service an aggregate of $14.3 billion in total unpaid principal balance of single family mortgage loans serviced for Fannie Mae, Ginnie Mae and Freddie Mac. These sales resulted in a $0.9 million pre-tax loss which is included in discontinued operations for 2019.

MSRs resulting from the sale of multifamily loans are recorded at fair value and subsequently carried at the lower of amortized cost or fair value. Multifamily MSRs are amortized in proportion to, and over, the estimated period the net servicing income will be collected.

The changes in multifamily and SBA MSRs measured at the lower of amortized costLOCOM or fair value were as follows.follows:
 
Years Ended December 31,
Years Ended December 31,Years Ended December 31,
(in thousands)(in thousands)202020192018(in thousands)202320222021
Beginning balance
Beginning balance
Beginning balanceBeginning balance$29,494 $28,328 $26,093 
OriginationOrigination11,587 5,832 6,268 
AmortizationAmortization(5,307)(4,666)(4,033)
Ending balanceEnding balance$35,774 $29,494 $28,328 

106109


Key economic assumptions used in measuring the initial fair value of capitalized multifamily MSRs were as follows:
Years Ended December 31,
(rates per annum) (1)
202320222021
Discount rate13.00 %13.00 %13.00 %
(1)Based on a weighted average.
(2)Represents the expected lifetime average CPR used in the model.


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:

At December 31, 2023At December 31, 2022
Range of Inputs
Average (1)
Range of Inputs
Average (1)
Discount Rates13.00% - 13.00%13.00 %13.00% - 13.00%13.00 %
(1) Weighted averages of all the inputs within the range.

At December 31, 2020,2023, the expected weighted-average life of the Company's multifamily and SBA MSRs was 10.6311.50 years. Projected amortization expense for the gross carrying value of multifamily and SBA MSRs is estimated as follows.follows:
 
(in thousands)At December 31, 2020
2021$5,009 
20224,838 
20234,678 
20244,436 
20254,100 
2026 and thereafter12,713 
Carrying value of multifamily MSR$35,774 
(in thousands)At December 31, 2023
2024$5,318 
20255,080 
20264,598 
20273,880 
20283,425 
2029 and thereafter7,686 
Carrying value of multifamily and SBA MSRs$29,987 

The projected amortization expense of multifamily and SBA MSRs is an estimate and subject to key assumptions of the underlying valuation model. The amortization expense for future periods was calculated by applying the same quantitative factors, such as actual MSR prepayment experience and discount rates, which were used to determine amortization expense. These factors are inherently subject to significant fluctuations, primarily due to the effect that changes in interest rates may have on expected loan prepayment experience. Accordingly, any projection of MSR amortization in future periods is limited by the conditions that existed at the time the calculations were performed and may not be indicative of actual amortization expense that will be recorded in future periods.

NOTE 10–COMMITMENTS, GUARANTEES AND CONTINGENCIES:

Commitments

In the ordinary course of business, the Company extends secured and unsecured open-end loans to meet the financing needs of its customers. In addition, the Company makes certain unfunded loan commitments as part of its lending activities that have not been recognized in the Company's financial statements. These include commitments to extend credit made as part of the Company's lending activities on loans the Company intends to hold in its loans held for investmentLHFI portfolio.

110


These commitments include the following.following:

At December 31,
(in thousands)20202019
Unused consumer portfolio lines$389,122 $485,143 
Commercial portfolio lines (1)
656,065 722,242 
Commitments to fund loans68,345 52,762 
Total$1,113,532 $1,260,147 

At December 31,
(in thousands)20232022
Unused consumer portfolio lines$586,904 $531,784 
Commercial portfolio lines (1)
648,609 788,108 
Commitments to fund loans38,426 46,067 
Total$1,273,939 $1,365,959 
(1) IncludesWithin the commercial portfolio, undistributed construction loan proceeds, where the Company has an obligation to advance funds for construction progress payments of $395$403 million and $435$525 million at December 31, 20202023 and 2019,2022, respectively.

The total amounts of unused commitments do not necessarily represent future credit exposure or cash requirements in that commitments may expire without being drawn upon. The Company has recorded an ACL on unfunded loan commitments, included in accounts payable and other liabilities on the consolidated balance sheets of $1.6$1.8 million and $1.1$2.2 million at December 31, 20202023 and 2019,2022, respectively.

The Company has entered into certain agreements to invest in qualifying small businesses and small enterprises and a tax exempt bond partnership that have not been recognized in the Company's financial statements. At December 31, 20202023 and 20192022 we had $19.2$10.7 million and $20.7$11.8 million, respectively, of future commitments to invest in these enterprises.

107


As of December 31, 2023, HomeStreet was obligated on a $135 million letter of credit to the FHLB which is being used as collateral for public fund deposits.


Guarantees

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. As of December 31, 20202023 and 2019,2022, the total unpaid principal balance of loans sold under this program was $1.8 billion and $1.5 billion, respectively.billion. The Company's reserve liability related to this arrangement totaled $2.1$0.5 million and $2.8$0.6 million at December 31, 20202023 and 2019,2022, respectively. There were 0no actual losses incurred under this arrangement during 2020, 20192023, 2022 or 2018.2021.

Mortgage repurchase liability

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 $6.0 billion and $7.1 billion as of December 31, 2020 and 2019, respectively. At December 31, 2020 and 2019, the Company had recorded a mortgage repurchase liability for loans sold on a servicing-retained and servicing-released basis, included in accounts payable and other liabilities, of $2.1 million and $2.9 million, respectively.

Contingencies

In the normal course of business, the Company may have various legal claims and other similar contingent matters outstanding for which a loss may be realized. For these claims, the Company establishes a liability for contingent losses when it is probable that a loss has been incurred and the amount of loss can be reasonably estimated. For claims determined to be reasonably possible but not probable of resulting in a loss, there may be a range of possible losses in excess of the established liability. The Company did not have any material amounts reserved for legal claims as of December 31, 2020.2023.

NOTE 11–INCOME TAXES:

Income tax expense (benefit) from continuing operationsexpense consisted of the following: 
Years Ended December 31, Years Ended December 31,
(in thousands)(in thousands)202020192018(in thousands)202320222021
Current expenseCurrent expense
Current expense
Current expense
Federal
Federal
FederalFederal$27,166 $32,738 $(11,205)
State and localState and local4,804 5,153 (54)
Deferred (benefit) expenseDeferred (benefit) expense
FederalFederal(11,076)(28,313)14,215 
Revaluation of deferred items (1)
(4,899)
Federal
Federal
State and localState and local(1,596)(4,292)1,489 
Tax credit investment amortization2,606 2,702 2,486 
State and local
State and local
TotalTotal$21,904 $7,988 $2,032 
Total
Total

(1) As a result of a change in corporate tax rates, we recognized a $4.9 million deferred income tax benefit in 2018 to adjust our outstanding deferred tax balances to the revised tax rates.
108111





Income tax expense (benefit) from continuing operationsexpense differed from amounts computed at the federal income tax statutory rate as follows: 
Years Ended December 31, Years Ended December 31,
2023202320222021
(in thousands, except rate)(in thousands, except rate)RateAmountRateAmountRateAmount
202020192018
(in thousands)RateAmountRateAmountRateAmount
Income before taxes$101,894 $48,708 $28,255 
Income (loss) before income taxes
Income (loss) before income taxes
Income (loss) before income taxes
Federal tax statutory rateFederal tax statutory rate21.00 %21,398 21.00 %10,229 21.00 %5,934 
Federal tax statutory rate
Federal tax statutory rate
State tax - net of federal tax benefitState tax - net of federal tax benefit2.54 %2,587 (0.45)%(217)4.08 %1,152 
Tax-exempt interest benefit(1.81)%(1,849)(2.85)%(1,388)(5.75)%(1,626)
Tax-exempt investments
Low income housing tax benefits
Stock-based compensation expenseStock-based compensation expense(0.16)%(159)(0.25)%(123)(0.95)%(268)
Impact from Federal Rate Change%%(17.34)%(4,899)
Provision to return true-up%%4.38 %1,238 
Goodwill
Other
Other
OtherOther(0.07)%(73)(1.05)%(513)1.77 %501 
TotalTotal21.50 %$21,904 16.40 %$7,988 7.19 %$2,032 

The following is a summary of the Company's deferred tax assets and liabilities: 
At December 31,
At December 31,At December 31,
(in thousands)(in thousands)20202019(in thousands)20232022
Deferred taxes assets
Provision for loan losses$15,957 $11,914 
Federal and state net operating loss carryforwards849 1,361 
Deferred tax assets
Deferred tax assets
Deferred tax assets
Provision for credit losses
Provision for credit losses
Provision for credit losses
Unrealized loss on investments AFS
Net operating loss carryforwards
Accrued liabilitiesAccrued liabilities2,152 2,653 
Other investmentsOther investments451 231 
Lease liability15,290 25,806 
Lease liabilities
Nonaccrual interestNonaccrual interest497 817 
Stock options820 785 
Intangibles
Stock based compensation
Loan valuationLoan valuation454 712 
Other, net2,262 1,264 
Other
Total Total38,732 45,543 
Deferred taxes liabilities
Deferred tax liabilities
Deferred tax liabilities
Deferred tax liabilities
Mortgage servicing rights
Mortgage servicing rights
Mortgage servicing rightsMortgage servicing rights(18,663)(20,946)
Deferred loan fees and costsDeferred loan fees and costs(10,972)(12,047)
Lease right-of-use assetsLease right-of-use assets(10,435)(25,406)
Unrealized gain on investment AFS securities(9,409)(1,159)
Premises and equipment
Premises and equipment
Premises and equipmentPremises and equipment(3,620)(4,588)
IntangiblesIntangibles(829)(886)
Other, net(171)(300)
Other
Total Total(54,099)(65,332)
Net deferred tax liability$(15,367)$(19,789)
Net deferred tax asset (liability)

Management assesses the available positive and negative evidence to estimate if sufficient future taxable income will be generated to fully utilize the existing deferred tax assets. As of December 31, 2020,2023, management determined that sufficient evidence exists to support the future utilization of all of the Company's deferred tax assets.

Utilization of the federal andThe Company has state net operating loss carryforwards of $4.4 million and tax credit$7.5 million as of December 31, 2023 and 2022, respectively, that will expire at various dates from 2024 to 2036. Utilization of net operating loss carryforwards may beis subject to an annual limitation due to the "change in ownership" provisions of the Internal Revenue Code of 1986, as amended. At December 31, 2020 and 2019, the Company has federal net operating loss carryforwards totaling $1.0 million and $3.4 million, respectively, which are from tax
109112




years prior to 2018. As such, they can be carried forward for a period of 20 years and will begin to expire between 2029 and 2036. The Company also has state net operating loss carryforwards as of December 31, 2020 and 2019 of $12.1 million and $12.2 million, respectively, that will expire at various dates from 2021 to 2037.

Retained earnings at December 31, 20202023 and 20192022 include approximately $12.7 million in tax basis bad debt reserves for which no income tax liability has been recorded. This represents the balance of bad debt reserves created for tax purposes as of December 31, 1987. These amounts are subject to recapture (i.e., included in taxable income) inif certain events occur, such as in the event HomeStreet Bank ceases to be a bank. In the event of recapture, the Company will incur both federal and state tax liabilities on this pre-1988 bad debt reserve balance at the then prevailing corporate tax rates.

The Company had 0no recorded unrecognized tax position as of December 31, 2020, 20192023 or 2018. During 2018, we settled our only unrecognized tax position and released the $0.5 million reserve.2022.

We are currently under examination, or subject to examination, by various U.S. federal and state taxing authorities. The Company is no longer subject to federal income tax examinations for tax years prior to 20152020 or state income tax examination for tax years prior to 2016,2019, generally.

NOTE 12–RETIREMENT BENEFIT PLAN:

The Company maintains a 401(k) Savings Plan for the benefit of its employees. Substantially all of the Company's employees are eligible to participate in the HomeStreet, Inc. 401(k) Savings Plan (the "Plan"). The Plan provides for payment of retirement benefits to employees pursuant to the provisions of the planPlan and in conformity with Section 401(k) of the Internal Revenue Code. Employees may elect to have a portion of their salary contributed to the Plan. Participants receive a vested employer matching contribution equal to 100% of the first 3.0% and 50% of the next 2.0% of eligible compensation deferred by the participant. Employer contributions of $3.8$3.4 million, $5.5$4.0 million and $7.5$3.9 million were incurred in 2020, 2019,2023, 2022, and 2018,2021, respectively.

NOTE 13–SHARE-BASED COMPENSATION PLANS:

In May 2014, the shareholders approved the Company's 2014 Equity Incentive Plan (the "2014 EIP Plan") that provided for the grant of stock options, shares of restricted stock, RSUs, PSUs, stock bonus awards, stock appreciation rights, performance share awards and performance compensation awards and unrestricted stock(collectively, "Equity Incentive Awards") to the Company’s executive officers, other key employees and directors up to 900,000 shares of the Company’s common stock. For 2020 and 2018, the Company recognized stock-based compensation cost of $2.4 million and $3.0 million, respectively. In 2019, the Company recognized a $3.1 million reversal of previously recognized stock-based compensation costs related to PSUs that did not meet their internal performance metrics, resulting in a net benefit of $0.4 million in 2019.

Nonqualified Stock Options

A summary of changes in nonqualified stock options granted for 2020 is as follows:
NumberWeighted
Average
Exercise Price
Weighted
Average
Remaining
Contractual
Term
Aggregate
Intrinsic Value
(in thousands)
Options outstanding at December 31, 2019233,001$12.49 
Exercised(44,820)11.00 
Options outstanding at December 31, 2020188,18112.85 1.3 years$3,933 
Options exercisable188,18112.85 1.3 years3,933 

There were 0 options granted or forfeited during 2020.

110




RSUs generally vest over a three year period with the fair market value of the awards determined at the grant date based on the Company's stock price. PSUs vest at the end of a three year period with the fair market value of the awards determined using a Monte Carlo simulation technique. A summary of the status of the combined RSUs and PSUs is as follows:
NumberWeighted Average
Grant Date Fair Value
Outstanding at December 31, 2019268,706$28.32 
Granted185,92220.95 
Cancelled or forfeited(90,110)26.57 
Vested(68,678)27.07 
Outstanding at December 31, 2020295,840 $24.52 

The assumptions used in the Monte Carlo simulations used to determine fair market value of the PSUs granted in 2020 and 2019 are set forth in the table below:
20202019
Volatility of common stock33.9 %29.4 %
Average volatility of peer companies34.8 %24.5 %
Average correlation coefficient of peer companies0.7561 %0.7272 %
Risk-free interest rate0.3 %2.3 %
Expected term in years2.76 years2.69 years

NOTE 14–13–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.

111113




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.

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 classValuation methodology, inputs and assumptionsClassification
Investment securities
Trading securitiesFair Value is based on quoted prices in an active market.Level 1 recurring fair value measurement.
Investment securities AFSObservable 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 investmentFair 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 9, Mortgage Banking Operations.
Level 3 recurring fair value measurement.
Derivatives
Eurodollar futuresFutures and OptionsFair value is based on closing exchange prices.Level 1 recurring fair value measurement.
Forward sale commitments
Interest rate swaps
Interest rate swaptions
Forward sale commitments
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.
Interest rate lock commitmentsIRLC
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.

112114





The following tables presentpresents the levels of the fair value hierarchy for the Company's assets and liabilities measured at fair value on a recurring basis.basis: 
As of December 31, 2020
At December 31, 2023At December 31, 2023
(in thousands)(in thousands)Fair ValueLevel 1Level 2Level 3(in thousands)Fair ValueLevel 1Level 2Level 3
Assets:Assets:
Assets:
Assets:
Trading securities - U.S. Treasury securities
Trading securities - U.S. Treasury securities
Trading securities - U.S. Treasury securities
Investment securities AFSInvestment securities AFS
Mortgage backed securities:Mortgage backed securities:
Mortgage backed securities:
Mortgage backed securities:
Residential
Residential
ResidentialResidential$51,046 $$48,417 $2,629 
CommercialCommercial45,184 45,184 
Collateralized mortgage obligations:Collateralized mortgage obligations:
ResidentialResidential234,909 234,909 
Residential
Residential
CommercialCommercial159,183 159,183 
Municipal bondsMunicipal bonds564,703 564,703 
Corporate debt securitiesCorporate debt securities15,222 15,141 81 
U.S. Treasury securities
Agency debentures Agency debentures1,846 1,846 
Single family LHFSSingle family LHFS194,643 194,643 
Single family LHFISingle family LHFI7,108 7,108 
Single family mortgage servicing rightsSingle family mortgage servicing rights49,966 49,966 
DerivativesDerivatives
Forward sale commitmentsForward sale commitments1,035 — 1,035 
Interest rate lock and purchase loan commitments17,395 17,395 
Forward sale commitments
Forward sale commitments
OptionsOptions132 132 — 
Interest rate lock commitments
Interest rate lock commitments
Interest rate lock commitments
Interest rate swapsInterest rate swaps17,459 17,459 0
Total assetsTotal assets$1,359,699 $$1,282,520 $77,179 
Liabilities:Liabilities:
DerivativesDerivatives
Eurodollar futures$$$$
Derivatives
Derivatives
Futures
Futures
Futures
Forward sale commitmentsForward sale commitments3,714 3,714 
Interest rate lock and purchase loan commitments
Interest rate swaps
Interest rate swaps
Interest rate swapsInterest rate swaps20,511 20,511 
Total liabilitiesTotal liabilities$24,232 $$24,225 $

113115




As of December 31, 2019
At December 31, 2022At December 31, 2022
(in thousands)(in thousands)Fair ValueLevel 1Level 2Level 3(in thousands)Fair ValueLevel 1Level 2Level 3
Assets:Assets:
Assets:
Assets:
Trading securities - U.S. Treasury securities
Trading securities - U.S. Treasury securities
Trading securities - U.S. Treasury securities
Investment securities AFSInvestment securities AFS
Mortgage backed securities:Mortgage backed securities:
Mortgage backed securities:
Mortgage backed securities:
Residential
Residential
ResidentialResidential$91,695 $$89,831 $1,864 
CommercialCommercial38,025 38,025 
Collateralized mortgage obligations:Collateralized mortgage obligations:
Residential
Residential
ResidentialResidential291,618 291,618 
CommercialCommercial156,154 156,154 
Municipal bondsMunicipal bonds341,318 341,318 
Corporate debt securitiesCorporate debt securities18,661 18,573 88 
U.S. Treasury securitiesU.S. Treasury securities1,307 1,307 
Single family LHFS (1)
105,458 105,458 
Agency debentures
Single family LHFS
Single family LHFISingle family LHFI3,468 3,468 
Single family mortgage servicing rightsSingle family mortgage servicing rights68,109 68,109 
Derivatives (1)
Eurodollar futures
Derivatives
Futures
Futures
Futures
Options
Forward sale commitmentsForward sale commitments830 830 
Interest rate lock commitments
Interest rate lock commitments
Interest rate lock commitmentsInterest rate lock commitments2,281 2,281 
Interest rate swapsInterest rate swaps27,097 27,097 
Total assetsTotal assets$1,146,024 $$1,070,211 $75,810 
Liabilities:Liabilities:
Derivatives (1)
Derivative
Derivative
Derivative
Forward sale commitmentsForward sale commitments$492 $$492 $
Forward sale commitments
Forward sale commitments
Interest rate lock commitmentsInterest rate lock commitments58 58 
Interest rate swapsInterest rate swaps10,889 10,889 
Total liabilitiesTotal liabilities$11,439 $$11,381 $58 

(1) Includes both continuing and discontinued operations.
There were 0no transfers between levels of the fair value hierarchy during 20202023 and 2019.2022.

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 loans held for sale,LHFS and interest rate lock and purchase loan commitments ("IRCLs"),IRCLs, which are accounted for as derivatives. For information regarding fair value changes and activity for single family MSRs during 20202023 and 2019,2022, see Note 9, Mortgage Banking Operations.

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 in
116


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.

114




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 fall-out) 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 these certain single family loans that have been transferred from held for sale to held for investment and these certain single family LHFS 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 the 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 $7.1$1.3 million and $3.5$5.9 million at December 31, 20202023 and 2019,2022, respectively.

The following information presents significant Level 3 unobservable inputs used to measure fair value of certain assets.assets:
(dollars in thousands)(dollars in thousands)Fair ValueValuation
Technique
Significant Unobservable
Input
LowHighWeighted Average(dollars in thousands)Fair ValueValuation
Technique
Significant Unobservable
Input
LowHighWeighted Average
December 31, 2020
December 31, 2023
December 31, 2023
December 31, 2023
Investment securities AFS
Investment securities AFS
Investment securities AFSInvestment securities AFS$2,710 Income approachImplied spread to benchmark interest rate curve2.00%2.00%2.00%$1,860 Income approachIncome approachImplied spread to benchmark interest rate curve2.25%
Single family LHFISingle family LHFI7,108 Income approachImplied spread to benchmark interest rate curve3.96%10.64%6.23%Single family LHFI1,280 Income approachIncome approachImplied spread to benchmark interest rate curve3.30%5.04%3.94%
Interest rate lock and purchase loan commitments, net17,392 Income approachFall-out factor1.97%38.38%15.53%
Value of servicing0.41%1.44%0.97%
December 31, 2019
Interest rate lock commitments, netInterest rate lock commitments, net411 Income approachFall-out factor0.81%41.64%10.54%
Value of servicingValue of servicing0.32%0.80%0.57%
December 31, 2022
Investment securities AFS
Investment securities AFS
Investment securities AFSInvestment securities AFS$1,952 Income approachImplied spread to benchmark interest rate curve2.00%2.00%2.00%$2,009 Income approachIncome approachImplied spread to benchmark interest rate curve2.00%
Single family LHFISingle family LHFI3,468 Income approachImplied spread to benchmark interest rate curve4.56%6.87%5.63%Single family LHFI5,868 Income approachIncome approachImplied spread to benchmark interest rate curve2.87%5.15%4.14%
Interest rate lock and purchase loan commitments, net2,223 Income approachFall-out factor0%59.69%12.20%
Value of servicing0.55%1.77%1.14%
Interest rate lock commitments, netInterest rate lock commitments, net105 Income approachFall-out factor0.10%17.50%6.43%
Value of servicingValue of servicing0.54%1.11%0.95%

We had 0no LHFS where the fair value was not derived with significant observable inputs at December 31, 20202023 or 2019.2022.

The following table presents fair value changes and activity for certain Level 3 assets.assets:
(in thousands)Beginning balanceAdditionsTransfersPayoffs/SalesChange in mark to marketEnding balance
Year Ended December 31, 2020
Investment securities AFS$1,952 $985 $$(435)$208 $2,710 
LHFI3,468 6,088 (2,409)(39)7,108 
Year Ended December 31, 2019
Investment securities AFS$$$2,379 $(160)$(267)$1,952 
LHFS2,691 5,859 1,630 (10,060)(120)
LHFI4,057 2,043 (1,630)(980)(22)3,468 
(in thousands)Beginning balanceAdditionsTransfersPayoffs/Sales
Change in mark to market (1)
Ending balance
Year Ended December 31, 2023
Investment securities AFS$2,009 $— $— $(192)$43 $1,860 
Single family LHFI5,868 — — (4,607)19 1,280 
Year Ended December 31, 2022
Investment securities AFS$2,482 $— $— $(193)$(280)$2,009 
Single family LHFI7,287 — — — (1,419)5,868 

(1) Changes in fair value for singe family LHFI are recorded in other noninterest income on the consolidated income statements.

115117




The following table presents fair value changes and activity for Level 3 interest rate lock and purchase loan commitments.commitments:
Years Ended December 31,
Years Ended December 31,Years Ended December 31,
(in thousands)(in thousands)20202019(in thousands)20232022
Beginning balance, net
Beginning balance, net
Beginning balance, netBeginning balance, net$2,223 $10,284 
Total realized/unrealized gainsTotal realized/unrealized gains55,911 36,487 
SettlementsSettlements(40,742)(44,548)
Ending balance, netEnding balance, net$17,392 $2,223 

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 cost 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 are 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.

The following tables presentpresents assets classified as Level 3 assets that had changes in their recorded fair value during 20202023 and 20192022 and what we still held at the end of the respective reporting period.
(in thousands)Fair ValueTotal Gains (Losses)
As of or for the year ended December 31, 2020
LHFI (1)
$3,651 $(1,700)
As of or for the year ended December 31, 2019
LHFI (1)
$266 $316 
period:

(in thousands)Fair ValueTotal Gains (Losses)
As of or for the year ended December 31, 2023
LHFI (1)
$4,349 $(1,410)
As of or for the year ended December 31, 2022
LHFI (1)
$3,186 $(385)
(1) Represents the carrying value of loans for which adjustments are based on the fair value of the collateral.
118


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.basis:
 
 At December 31, 2023
(in thousands)Carrying
Value
Fair
Value
Level 1Level 2Level 3
Assets:
Cash and cash equivalents$215,664 $215,664 $215,664 $— $— 
Investment securities HTM2,371 2,331 — 2,331 — 
LHFI7,381,124 7,002,028 — — 7,002,028 
LHFS – multifamily and other6,788 6,871 — 6,871 — 
Mortgage servicing rights – multifamily and SBA29,987 35,292 — — 35,292 
Federal Home Loan Bank stock55,293 55,293 — 55,293 — 
Other assets - GNMA EBO loans5,617 5,617 — — 5,617 
Liabilities:
Certificates of deposit$3,227,954 $3,216,665 $— $3,216,665 $— 
Borrowings1,745,000 1,750,023 — 1,750,023 — 
Long-term debt224,766 132,996 — 132,996 — 

 At December 31, 2022
(in thousands)Carrying
Value
Fair
Value
Level 1Level 2Level 3
Assets:
Cash and cash equivalents$72,828 $72,828 $72,828 $— $— 
Investment securities HTM2,441 2,385 — 2,385 — 
LHFI7,378,952 6,988,363 — — 6,988,363 
LHFS multifamily and other3,252 3,291 — 3,291 — 
Mortgage servicing rights – multifamily and SBA35,256 39,792 — — 39,792 
Federal Home Loan Bank stock49,305 49,305 — 49,305 — 
Other assets - GNMA EBO loans6,918 6,918 — — 6,918 
Liabilities:
Certificates of deposit$2,943,331 $2,910,301 $— $2,910,301 $— 
Borrowings1,016,000 1,014,973 — 1,014,973 — 
Long-term debt224,404 202,338 — 202,338 — 

Fair Value Option

Single family loans held for sale accounted for 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 mortgage loan origination and sale activities within noninterest income. The change in fair value of loans held for sale is primarily driven by changes in interest rates subsequent to loan funding and changes in fair value of the related servicing asset, resulting in revaluations adjustments to the recorded fair value. The use of the fair value option allows the change in the fair
116
119




 At December 31, 2020
(in thousands)Carrying
Value
Fair
Value
Level 1Level 2Level 3
Assets:
Cash and cash equivalents$58,049 $58,049 $58,049 $$
Investment securities HTM4,271 4,507 4,507 
LHFI5,172,778 5,327,711 5,327,711 
LHFS – multifamily and other167,289 167,289 167,289 
Mortgage servicing rights – multifamily35,774 38,423 38,423 
Federal Home Loan Bank stock20,319 20,319 20,319 
Other assets - GNMA EBO loans101,750 101,750 101,750 
Liabilities:
Certificates of deposit$1,139,807 $1,143,747 $$1,143,747 $
Borrowings322,800 322,876 322,876 
Long-term debt125,838 116,893 116,893 
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.

 At December 31, 2019
(in thousands)Carrying
Value
Fair
Value
Level 1Level 2Level 3
Assets:
Cash and cash equivalents$57,880 $57,880 $57,880 $$
Investment securities HTM4,372 4,501 4,501 
LHFI5,069,316 5,139,078 5,139,078 
LHFS multifamily and other128,841 130,720 130,720 
Mortgage servicing rights – multifamily29,494 32,738 32,738 
Federal Home Loan Bank stock22,399 22,399 22,399 
Liabilities:
Certificates of deposit$1,614,533 $1,622,879 $$1,622,879 $
Borrowings471,590 473,050 125,101 347,949 
Long-term debt125,650 115,011 115,011 
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 December 31, 2023At December 31, 2022
(in thousands)Fair ValueAggregate Unpaid Principal BalanceFair Value Less Aggregate Unpaid Principal BalanceFair ValueAggregate Unpaid Principal BalanceFair Value Less Aggregate Unpaid Principal Balance
Single family LHFS$12,849 $12,583 $266 $14,075 $13,914 $161 

NOTE 15–14–REGULATORY CAPITAL REQUIREMENTS:

The Company and Bank are subject to various regulatory capital requirements administered by the federal banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory and possible additional discretionary actions by regulators that, if undertaken, could have a material effect on the Company's operations and financial statements. Under capital adequacy guidelines, we must meet specific capital guidelines that involve quantitative measures of our assets, liabilities, and certain off-balance sheet items as calculated under regulatory accounting practices. The Company and Bank's capital amounts and classifications are also subject to qualitative judgments by the regulators about risk components, asset risk weighting, and other factors.

Quantitative measures established by regulation to ensure capital adequacy require the Company and the Bank to maintain minimum amounts and ratios (set forth in the table below) of total and Tier 1 capital (as defined in the regulations) to risk-weighted assets (as defined), and of Tier 1 capital (as defined) to assets (as defined). Management believes, as of December 31, 20202023 that the Company and the Bank met all capital adequacy requirements. The following table presents the capital and capital ratios of the Company (on a consolidated basis) and the Bank (on a stand-alone basis) as of the respective dates and as compared to the respective regulatory requirements applicable to them:
At December 31, 2023
ActualFor Minimum Capital
Adequacy Purposes
To Be Categorized As
“Well Capitalized” Under
Prompt Corrective
Action Provisions
(dollars in thousands)AmountRatioAmountRatioAmountRatio
HomeStreet, Inc.
Tier 1 leverage capital (to average assets)$675,440 7.04 %$383,696 4.0 %NANA
Common equity tier 1 capital (to risk-weighted assets)615,440 9.66 %286,709 4.5 %NANA
Tier 1 risk-based capital (to risk-weighted assets)675,440 10.60 %382,279 6.0 %NANA
Total risk-based capital (to risk-weighted assets)818,075 12.84 %509,705 8.0 %NANA
HomeStreet Bank
Tier 1 leverage capital (to average assets)$814,719 8.50 %$383,482 4.0 %$479,352 5.0 %
Common equity tier 1 capital (to risk-weighted assets)814,719 12.79 %286,569 4.5 %413,933 6.5 %
Tier 1 risk-based capital (to risk-weighted assets)814,719 12.79 %382,092 6.0 %509,456 8.0 %
Total risk-based capital (to risk-weighted assets)858,992 13.49 %509,456 8.0 %636,820 10.0 %

117
120




At December 31, 2020
ActualFor Minimum Capital
Adequacy Purposes
To Be Categorized As
“Well Capitalized” Under
Prompt Corrective
Action Provisions
(dollars in thousands)AmountRatioAmountRatioAmountRatio
HomeStreet, Inc.
Tier 1 leverage capital (to average assets)$709,655 9.65 %$294,211 4.0 %NANA
Common equity tier 1 capital (to risk-weighted assets)649,655 11.67 %250,537 4.5 %NANA
Tier 1 risk-based capital (to risk-weighted assets)709,655 12.75 %334,050 6.0 %NANA
Total risk-based capital (to risk-weighted assets)779,254 14.00 %445,400 8.0 %NANA
HomeStreet Bank
Tier 1 leverage capital (to average assets)$712,533 9.79 %$291,114 4.0 %$363,893 5.0 %
Common equity tier 1 capital (to risk-weighted assets)712,533 13.51 %237,307 4.5 %342,777 6.5 %
Tier 1 risk-based capital (to risk-weighted assets)712,533 13.51 %316,410 6.0 %421,880 8.0 %
Total risk-based capital (to risk-weighted assets)778,479 14.76 %421,880 8.0 %527,350 10.0 %


At December 31, 2019
ActualFor Minimum Capital
Adequacy Purposes
To Be Categorized As
“Well Capitalized” Under
Prompt Corrective
Action Provisions
At December 31, 2022At December 31, 2022
ActualActualFor Minimum Capital
Adequacy Purposes
To Be Categorized As
“Well Capitalized” Under
Prompt Corrective
Action Provisions
(dollars in thousands)(dollars in thousands)AmountRatioAmountRatioAmountRatio(dollars in thousands)AmountRatioAmountRatioAmountRatio
HomeStreet, Inc.HomeStreet, Inc.
HomeStreet, Inc.
HomeStreet, Inc.
Tier 1 leverage capital (to average assets)
Tier 1 leverage capital (to average assets)
Tier 1 leverage capital (to average assets)Tier 1 leverage capital (to average assets)$691,323 10.16 %$272,253 4.0 %NANA$693,112 7.25 7.25 %$382,467 4.0 4.0 %NA
Common equity tier 1 capital (to risk-weighted assets)Common equity tier 1 capital (to risk-weighted assets)631,323 11.43 %248,523 4.5 %NANACommon equity tier 1 capital (to risk-weighted assets)633,112 8.72 8.72 %326,876 4.5 4.5 %NA
Tier 1 risk-based capital (to risk-weighted assets)Tier 1 risk-based capital (to risk-weighted assets)691,323 12.52 %331,364 6.0 %NANATier 1 risk-based capital (to risk-weighted assets)693,112 9.54 9.54 %435,834 6.0 6.0 %NA
Total risk-based capital (to risk-weighted assets)Total risk-based capital (to risk-weighted assets)739,812 13.40 %441,818 8.0 %NANATotal risk-based capital (to risk-weighted assets)837,828 11.53 11.53 %581,112 8.0 8.0 %NA
HomeStreet BankHomeStreet Bank
Tier 1 leverage capital (to average assets)Tier 1 leverage capital (to average assets)$712,596 10.56 %$269,930 4.0 %$337,413 5.0 %
Tier 1 leverage capital (to average assets)
Tier 1 leverage capital (to average assets)$822,891 8.63 %$381,506 4.0 %$476,883 5.0 %
Common equity tier 1 capital (to risk-weighted assets)Common equity tier 1 capital (to risk-weighted assets)712,596 13.50 %237,451 4.5 %342,985 6.5 %Common equity tier 1 capital (to risk-weighted assets)822,891 11.92 11.92 %310,582 4.5 4.5 %448,618 6.5 6.5 %
Tier 1 risk-based capital (to risk-weighted assets)Tier 1 risk-based capital (to risk-weighted assets)712,596 13.50 %316,602 6.0 %422,136 8.0 %Tier 1 risk-based capital (to risk-weighted assets)822,891 11.92 11.92 %414,109 6.0 6.0 %552,146 8.0 8.0 %
Total risk-based capital (to risk-weighted assets)Total risk-based capital (to risk-weighted assets)758,303 14.37 %422,136 8.0 %527,669 10.0 %Total risk-based capital (to risk-weighted assets)868,993 12.59 12.59 %552,146 8.0 8.0 %690,182 10.0 10.0 %

As of each of the dates set forth in the above table, the Company exceeded the minimum required capital ratios applicable to it and Bank’s capital ratios exceeded the minimums necessary to qualify as a well-capitalized depository institution under the prompt corrective action regulations. No conditions or events have occurred since December 31, 20202023 that we believe have changed the Company’s or the Bank’s capital adequacy classifications from those set forth in the above table.

In addition to the minimum capital ratios, both the Company and the Bank are required to maintain a “conservation buffer" consisting of additional Common Equity Tier 1 Capital which is at least 2.5% above the required minimum levels in order to avoid limitations on paying dividends, engaging in share repurchases, and paying discretionary bonuses. The required ratios for capital adequacy set forth in the above table do not include the additional capital conservation buffer, though each of the Company and Bank maintained capital ratios necessary to satisfy the capital conservation buffer requirements as of the dates
118




indicated. At December 31, 2020,2023, capital conservation buffers for the Company and the Bank were 6.00%4.60% and 6.76%5.49%, respectively. The following table sets forth the minimum capital ratios plus the applicable increment of the capital conservation buffer:

CET-1Common equity to Tier-1 to risk-weighted assets7.00 %
Tier 1 capital to risk-weighted assets8.50 %
Total capital to risk-weighted assets10.50 %

121



NOTE 16–15–EARNINGS PER SHARE:

The following table summarizes the calculation of earnings per share.share: 
 Years Ended December 31,
(in thousands, except share and per share data)202020192018
EPS numerator:
Income from continuing operations$79,990 $40,720 $26,223 
Earnings allocated to share repurchase(650)
Income from continuing operations available to common shareholders79,990 40,070 26,223 
Income (loss) from discontinued operations(23,208)13,804 
Net income available to common shareholders$79,990 $16,862 $40,027 
EPS denominator:
Weighted average shares:
Basic weighted-average number of common shares outstanding22,867,268 25,573,488 26,970,916 
Dilutive effect of outstanding common stock equivalents209,554 197,295 197,219 
Diluted weighted-average number of common stock outstanding23,076,822 25,770,783 27,168,135 
Net income (loss) per share
Basic:
Income from continuing operations$3.50 $1.57 $0.97 
Income (loss) from discontinued operations(0.91)0.51 
Total$3.50 $0.66 $1.48 
Diluted:
Income from continuing operations$3.47 $1.55 $0.97 
Income (loss) from discontinued operations(0.90)0.51 
Total$3.47 $0.65 $1.47 
 Years Ended December 31,
(in thousands, except share and per share data)202320222021
Net income (loss)$(27,508)$66,540 $115,422 
Weighted average shares:
Basic weighted-average number of common shares outstanding18,783,005 18,931,107 20,885,509 
Dilutive effect of outstanding common stock equivalents (1)
— 110,004 257,905 
Diluted weighted-average number of common shares outstanding18,783,005 19,041,111 21,143,414 
Net income (loss) per share
Basic earnings per share$(1.46)$3.51 $5.53 
Diluted earnings per share$(1.46)$3.49 $5.46 
(1) Excluded from the computation of diluted earnings per share (due to their antidilutive effect) for the years ended December 31, 2023, 2022 and 2021 were certain unvested RSUs and PSUs. The aggregate number of common stock unvested restricted shares, which could potentially be dilutive in future periods, was 217,153, 176,259 and zero at December 31, 2023, 2022 and 2021, respectively.



119




NOTE 17–16–LEASES:

On January 1, 2019, we adopted new FASB guidance on the accounting for leases. We applied the modified retrospective method of adoption and therefore, results for reporting periods beginning after January 1, 2019 are presented under the new guidance while prior periods have not been adjusted.

We have operating and finance leases for certain office space and finance leases for certain equipment. Our leases have remaining lease terms of up to 1512 years.
The Company, as sublessor, subleases certain office and retail space in which the terms of theany significant subleases end by December 2027. Under all of our executed sublease arrangements, the sublessees are obligated to pay the Company sublease payments of $5.2 million in 2021, $4.2 million in 2022, $3.0 million in 2023, $1.3$3.3 million in 2024, $0.7$2.8 million in 2025, and $1.3 million thereafter.
For 2020 and 2019 we incurred $2.5 million and $5.0$2.9 million in impairment charges on lease right-of-use assets, respectively.2026, $2.7 million in 2027 and $0.1 million in 2028.
The components of lease expense were as follows.follows:
Years Ended December 31,Years Ended December 31,
(in thousands)(in thousands)20202019
Operating lease costOperating lease cost$11,989 $14,538 
Short-term leases28 
Operating lease cost
Operating lease cost
Finance lease cost:
Finance lease cost:
Finance lease cost:Finance lease cost:
Amortization of right-of-use assetsAmortization of right-of-use assets1,277 2,030 
Amortization of right-of-use assets
Amortization of right-of-use assets
Interest on lease liabilities
Interest on lease liabilities
Interest on lease liabilitiesInterest on lease liabilities151 340 
Variable lease costs and nonlease componentsVariable lease costs and nonlease components5,502 6,627 
Variable lease costs and nonlease components
Variable lease costs and nonlease components
Sublease income
Sublease income
Sublease incomeSublease income(6,662)(4,378)
TotalTotal$12,257 $19,185 
Total
Total
122


Total rent expense under non-cancellable operating leases totaled $27.7 million for 2018.
Supplemental cash flow information related to leases were as follows.
 Years Ended December 31,
(in thousands)20202019
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases$15,452 $17,054 
Operating cash flows from finance leases151 340 
Financing cash flows from finance leases1,209 1,694 
Right-of-use assets obtained
Operating leases$5,666 $5,800 
Finance leases139 
Other changes in right-of-use assets (1)
Operating leases$(39,924)$(13,605)
Finance leases(29)(1,172)
(1) Relates to changes in assumptions regarding the exercise of renewal options available under real estate lease agreements.
120

follows:
 Years Ended December 31,
(in thousands)202320222021
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases$11,248 $12,845 $13,647 
Operating cash flows from finance leases19 22 
Financing cash flows from finance leases456 589 1,070 
Right-of-use assets obtained
Operating leases$2,690 $6,347 $1,894 
Finance leases385 145 707 
Other changes in right-of-use assets (1)
Operating leases$— $— $(460)
Finance leases— — (2)



Supplemental information related to leases was as follows.follows:
At December 31,
At December 31,
At December 31,
At December 31,
(in thousands, except lease term and discount rate)(in thousands, except lease term and discount rate)20202019(in thousands, except lease term and discount rate)20232022
Operating lease right-of-use assets, included in other assetsOperating lease right-of-use assets, included in other assets$45,560$86,789
Operating lease right-of-use assets, included in other assets
Operating lease right-of-use assets, included in other assets$27,594$34,070
Operating lease liabilities, included in accounts payable and other liabilitiesOperating lease liabilities, included in accounts payable and other liabilities62,563104,579
Operating lease liabilities, included in accounts payable and other liabilities
Operating lease liabilities, included in accounts payable and other liabilities35,04342,848
Finance lease right-of-use assets, included in other assets
Finance lease right-of-use assets, included in other assets
Finance lease right-of-use assets, included in other assetsFinance lease right-of-use assets, included in other assets$1,081$8,084$318$359
Finance lease liabilities, included in accounts payable and other liabilitiesFinance lease liabilities, included in accounts payable and other liabilities1,0978,513Finance lease liabilities, included in accounts payable and other liabilities288359
Weighted Average Remaining lease term in yearsWeighted Average Remaining lease term in years
Weighted Average Remaining lease term in years
Weighted Average Remaining lease term in years
Operating leases
Operating leases
Operating leasesOperating leases6.0911.874.495.07
Finance leasesFinance leases1.5215.46Finance leases1.580.88
Weighted Average Discount RateWeighted Average Discount Rate
Operating leasesOperating leases1.71%3.48%
Operating leases
Operating leases1.88%1.91%
Finance leasesFinance leases3.12%2.63%Finance leases3.50%3.50%

Maturities of lease liabilities and obligations under leases classified as nonlease components were as follows.follows:
Lease Liabilities
Lease Liabilities
(in thousands)
(in thousands)
(in thousands)(in thousands)Operating LeasesFinance LeasesNonlease ComponentsOperating LeasesFinance LeasesNonlease Components
Year ended December 31,Year ended December 31,
2021$13,637 $852 $5,130 
202212,338 196 4,880 
202310,346 76 4,302 
Year ended December 31,
Year ended December 31,
2024
2024
202420248,368 3,950 
202520257,009 3,784 
2026 and thereafter14,195 7,811 
2026
2027
2028
2029 and thereafter
Total lease paymentsTotal lease payments65,893 1,124 $29,857 
Less imputed interestLess imputed interest3,330 27 
TotalTotal$62,563 $1,097 
Total
Total

123


NOTE 17–SHARE-BASED COMPENSATION PLANS:

In May 2014, the shareholders approved the Company's 2014 Equity Incentive Plan (the "2014 EIP Plan") that provided for the grant of stock options, shares of restricted stock, RSUs, PSUs, stock bonus awards, stock appreciation rights, performance share awards and performance compensation awards and unrestricted stock(collectively, "Equity Incentive Awards") to the Company’s executive officers, other key employees and directors. This plan was amended in May 2017 and allows the grant of up to 1,875,000 shares of the Company’s common stock. For 2023, 2022, and 2021, the Company recognized stock-based compensation cost of $3.1 million, $3.3 million and $2.9 million, respectively.

RSUs generally vest over a three year period with the fair market value of the awards determined at the grant date based on the Company's stock price. PSUs vest at the end of a three year period with the fair market value of the awards determined using a Monte Carlo simulation technique. A summary of the status of the combined RSUs and PSUs is as follows:
NumberWeighted Average
Grant Date Fair Value
Outstanding at December 31, 2022227,075$33.95 
Granted141,13827.81 
Cancelled or forfeited(90,917)24.45 
Vested(46,310)33.22 
Outstanding at December 31, 2023230,986 $34.08 

The assumptions used in the Monte Carlo simulations used to determine fair market value of the PSUs granted in 2023, 2022 and 2021 are set forth in the table below:
202320222021
Volatility of common stock42.7 %40.3 %40.5 %
Average volatility of peer companies45.0 %44.2 %43.5 %
Average correlation coefficient of peer companies0.8029 %0.8079 %0.8004 %
Risk-free interest rate4.2 %1.0 %0.2 %
Expected term in years3 years3 years3 years


121124




NOTE 18–PARENT COMPANY FINANCIAL STATEMENTS (UNAUDITED):

Condensed financial information for HomeStreet, Inc. is as follows.follows:
 
Condensed Balance SheetsCondensed Balance SheetsAt December 31,Condensed Balance SheetsAt December 31,
(in thousands)(in thousands)20202019(in thousands)20232022
Assets:Assets:
Assets:
Assets:
Cash and cash equivalents
Cash and cash equivalents
Cash and cash equivalentsCash and cash equivalents$20,021 $16,638 
Other assetsOther assets7,686 4,370 
Investment in stock of HomeStreet BankInvestment in stock of HomeStreet Bank780,531 751,227 
Investment in stock of other subsidiariesInvestment in stock of other subsidiaries36,381 34,594 
Total assetsTotal assets$844,619 $806,829 
Liabilities:Liabilities:
Other liabilitiesOther liabilities$1,031 $1,456 
Other liabilities
Other liabilities
Long-term debtLong-term debt125,838 125,650 
Total liabilitiesTotal liabilities126,869 127,106 
Shareholders' Equity:Shareholders' Equity:
Common stock, no par valueCommon stock, no par value278,505 300,729 
Common stock, no par value
Common stock, no par value
Retained earningsRetained earnings403,888 374,673 
Accumulated other comprehensive income35,357 4,321 
Total stockholder's equity717,750 679,723 
Total liabilities and stockholder's equity$844,619 $806,829 
Accumulated other comprehensive income (loss)
Total shareholder's equity
Total liabilities and shareholders' equity
 
Condensed Income StatementsCondensed Income StatementsYears Ended December 31,Condensed Income StatementsYears Ended December 31,
(in thousands)(in thousands)202020192018(in thousands)202320222021
Noninterest incomeNoninterest income
Dividend income from HomeStreet Bank$82,909 $110,000 $9,523 
Noninterest income
Noninterest income
Dividend income
Dividend income
Dividend income
Equity in undistributed income from subsidiariesEquity in undistributed income from subsidiaries3,374 43,920 
Distributions in excess of income from subsidiaries(84,146)
Equity in undistributed income from subsidiaries
Equity in undistributed income from subsidiaries
Other noninterest income
Other noninterest income
Other noninterest incomeOther noninterest income1,773 2,293 2,193 
Total revenuesTotal revenues88,056 28,147 55,636 
ExpensesExpenses
Interest expense-netInterest expense-net5,731 4,821 4,856 
Interest expense-net
Interest expense-net
Noninterest expenseNoninterest expense4,136 8,437 10,368 
Total expensesTotal expenses9,867 13,258 15,224 
Income before income taxes (benefit)78,189 14,889 40,412 
Income (loss) before income taxes (benefit)
Income taxes (benefit)Income taxes (benefit)(1,801)(2,623)385 
Net income$79,990 $17,512 $40,027 
Net income (loss)
122125


Condensed Statements of Cash FlowsYears Ended December 31,
(in thousands)202320222021
Cash flows from operating activities
Net income (loss)$(27,508)$66,540 $115,422 
Adjustments to reconcile net income (loss) to net cash provided by operating activities
Undistributed earnings from investment in subsidiaries55,832 (24,898)(10,801)
Other(480)6,386 (8,669)
Net cash provided by operating activities27,844 48,028 95,952 
Cash flows from investing activities:
AFS securities: Principal collections net of purchases210 831 2,012 
Investments in subsidiaries— (52,000)— 
Net cash provided by (used in) investing activities210 (51,169)2,012 
Cash flows from financing activities:
Repurchases of common stock— (75,000)(84,154)
Proceeds from exercise of stock options— — 263 
Proceeds from issuance of long-term debt— 98,036 — 
Dividends paid on common stock(12,317)(26,847)(21,338)
Net cash used in financing activities(12,317)(3,811)(105,229)
Net increase (decrease) in cash and cash equivalents15,737 (6,952)(7,265)
Cash and cash equivalents, beginning of year5,804 12,756 20,021 
Cash and cash equivalents, end of year$21,541 $5,804 $12,756 

NOTE 19–SUBSEQUENT EVENTS:

On January 16, 2024, the Company entered into a definitive merger agreement with FirstSun Capital Bancorp (“FirstSun”), the holding company of Sunflower Bank, whereby the Company and the Bank will merge with and into FirstSun and Sunflower Bank, respectively. Per the agreement, the companies will combine in an all-stock transaction in which HomeStreet shareholders will receive 0.4345 of a share of FirstSun common stock for each share of HomeStreet common stock. This merger is expected to close in the middle of 2024.



Condensed Statements of Cash FlowsYears Ended December 31,
(in thousands)202020192018
Cash flows from operating activities
Net income$79,990 $17,512 $40,027 
Adjustments to reconcile net income to net cash provided by (used in) operating activities
Undistributed earnings from investment in subsidiaries(3,374)(43,920)
Distributions in excess or earnings from investment in subsidiaries84,146 
Other(4,483)(30)695 
Net cash provided by (used in) operating activities72,133 101,628 (3,198)
Cash flows from investing activities:
AFS securities: Purchases and principal collections - net2,886 1,049 1,428 
Net cash provided by investing activities2,886 1,049 1,428 
Cash flows from financing activities:
Repurchases of common stock(58,009)(98,543)
Proceeds from stock issuance, net238 105 68 
Dividends paid on common stock(13,865)
Net cash provided by (used in) financing activities(71,636)(98,438)68 
Increase (decrease) in cash and cash equivalents3,383 4,239 (1,702)
Cash and cash equivalents at beginning of year16,638 12,399 14,101 
Cash and cash equivalents at end of year$20,021 $16,638 $12,399 


NOTE 19–DISCONTINUED OPERATIONS:

On March 31, 2019, the Board adopted a Resolution of Exit or Disposal of HLC Based Mortgage Banking Operations to sell or abandon the assets and related personnel associated with those operations. The assets that were sold or abandoned largely represented the Company's former Mortgage Banking segment, the activities of which related to originating, servicing, underwriting, funding and selling single family residential mortgage loans.

The Company determined that the above actions constituted commitment to a plan of exit or disposal of certain long-lived assets (through sale or abandonment) and termination of employees. Further, the Company determined that the shift from a large-scale HLC based originator and servicer to a branch-focused product offering represented a strategic shift. As a result, the HLC-related mortgage banking operations are reported separately from the continuing operations as discontinued operations. In addition, the former Mortgage Banking operating segment and reporting unit were eliminated. This has resulted in a recast of the financial statements in 2019 and prior.
In the first quarter of 2019, the Company successfully closed and settled 2 sales of the rights to service $14.3 billion in total unpaid principal balance of single family mortgage loans serviced for Federal National Mortgage Association ("Fannie Mae"), Federal Home Loan Mortgage Corporation ('Freddie Mac") and Government National Mortgage Association ("Ginnie Mae"). These sales resulted in a $0.9 million pre-tax loss from discontinued operations during 2019.

In June 2019 the Company completed the sale of the HLC based mortgage originations business assets and transfer of personnel to Homebridge Financial Services, Inc. ("Homebridge"). This sale included 47 stand-alone HLCs and the transfer of certain related mortgage personnel. These HLCs, along with certain other mortgage banking related assets and liabilities are classified as discontinued operations in the accompanying consolidated balance sheets and consolidated income statements. HLCs that were not sold were closed during the second quarter of 2019. Certain bank location-based components of the Company's former Mortgage Banking segment, including MSRs on certain mortgage loans that were not part of the sales and right-of-use assets and lease liabilities where we did not obtain full landlord release have been classified as continuing operations.

In November 2019, we sold our ownership interest in WMS LLC at our basis.

These discontinued operations activities were concluded by December 31, 2019. Consequently, we ceased discontinued operations accounting effective January 1, 2020. The following table summarizes the calculation of the net gain (loss) on disposal of discontinued operations.
123




(in thousands)Year Ended December 31, 2019
Proceeds from asset sales$186,692 
Book value of assets sold181,243 
Gain on assets sold5,449 
Transaction costs8,770 
Compensation expense related to the transactions4,636 
Facility and IT related costs13,660 
Total costs27,066 
Net loss on disposal$(21,617)


The carrying amount of major classes of assets and liabilities related to discontinued operations consisted of the following.
(in thousands)At December 31, 2019
Assets of discontinued operations
LHFS at fair value$26,123 
Other assets2,505 
Total$28,628 
Liabilities of discontinued operations
Account payable and other liabilities$2,603 

Income Statements of Discontinued Operations
Years Ended December 31,
(in thousands)20192018
Net interest income$5,858 $12,516 
Noninterest income63,713 200,426 
Noninterest expense97,856 195,332 
(Loss) income before income taxes(28,285)17,610 
Income tax (benefit) expense(5,077)3,806 
(Loss) income from discontinued operations$(23,208)$13,804 

Cash Flows from Discontinued Operations
Years Ended December 31,
(in thousands)20192018
Net cash provided by operating activities$238,212 $201,001 
Net cash provided by investing activities185,458 64,849 


124





NOTE 20–RESTRUCTURING:

In addition to the disposal of our HLC Based Mortgage Banking Operations, we have taken the following restructuring activities to improve our productivity and reduce expenses:

In 2019, we implemented a restructuring plan under which we incurred costs to:
Reduce our staffing levels through consolidation of job functions and elimination of management redundancy;
Renegotiate our technology contracts;
Eliminate excess occupancy costs;
Eliminate redundant of unnecessary systems and services;
Engage consultants to assist with the above processes.

In 2020, we concluded the restructuring plan started in 2019, and took additional steps to consolidate our facilities and incurred charges to reflect the vacating of certain office space.

The costs incurred include severance, retention, facility related charges and consulting fees.

The following table summarizes the restructuring charges and the liability for restructuring costs still to be paid in the periods indicated:
(in thousands)Facility-related costsPersonnel-related costsOther costsTotal
2019 Activity (1)
   Restructuring charges$1,373 $1,836 $1,302 $4,511 
   Costs paid or otherwise settled(138)(1,326)(1,143)(2,607)
Balance, December 31, 20191,235 510 159 1,904 
2020 Activity
Restructuring charges10,188 339 1,266 11,793 
Costs paid or otherwise settled(8,560)(695)(1,309)(10,564)
Balance, December 31, 2020$2,863 $154 $116 $3,133 

(1) 2018 restructuring activity is excluded from the table above as it is part of discontinued operations.
125




NOTE 21–SUBSEQUENT EVENTS:

The Company has evaluated the events that have occurred subsequent to December 31, 2020 and has included all material events that would require recognition in the 2020 consolidated financial statements and disclosure in the notes to the consolidated financial statements.

On January 28, 2021 the Board of Directors authorized a dividend of $0.25 per share, payable on February 24, 2021 to shareholders of record on February 9, 2021. On the same day, the Board approved an extension of the Company's share repurchase program for up to $25 million of its common stock.
126




ITEM 9CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

No disclosure required pursuant to Item 304 of Regulation S-K.None

ITEM 9ACONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

The Company's management conducted an evaluation, under the supervision and with the participation of its Chief Executive Officer ("CEO") and Chief Financial Officer ("CFO"), of the effectiveness of the design and operation of the Company's disclosure controls and procedures (as defined in Rule 13a-15(e) of the Exchange Act) at December 31, 2020.2023. The Company's disclosure controls and procedures are designed to ensure that information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the rules and forms of the SEC, and that such information is accumulated and communicated to the Company's management, including its CEO and CFO, as appropriate, to allow timely decisions regarding required disclosure. Based upon the evaluation, the CEO and CFO concluded that the Company's disclosure controls and procedures were effective at December 31, 2020.2023.

Management's Report on Internal Control Over Financial Reporting

Management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rule 13a-15(f) of the Exchange Act) for the Company. The Company's internal control over financial reporting is a process designed under the supervision of the Company's CEO and CFO to provide reasonable assurance regarding the reliability of financial reporting and the preparation of the Company's financial statements for external purposes in accordance with U.S. GAAP. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness as to future periods are subject to the risk that controls may become inadequate because of changes in conditions or that the degree of compliance with the policies or procedures may deteriorate. Management has made a comprehensive review, evaluation, and assessment of the Company's internal control over financial reporting at December 31, 2020.2023. In making its assessment of internal control over financial reporting, management utilized the framework issued in 2013 by the Committee of Sponsoring Organizations of the Treadway Commission ("COSO") in Internal Control - Integrated Framework. Based on that assessment, management concluded that, at December 31, 2020,2023, the Company's internal control over financial reporting was effective.

Deloitte & ToucheCrowe LLP, the independent registered public accounting firm that audited our consolidated financial statements at, and for, the year ended December 31, 2020,2023, has issued an audit report on the effectiveness of the Company's internal control over financial reporting at December 31, 2020,2023, which report is included below in this Item 9A.

Changes in Internal Control Over Financial Reporting

As required by Rule 13a-15(d), our management, including our CEO and CFO, also conducted an evaluation of our internal control over financial reporting to determine whether any changes occurred during the quarter ended December 31, 20202023 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. There were no changes to our internal control over financial reporting that occurred during the quarter ended December 31, 20202023 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.


127




REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the shareholders and Board of Directors of HomeStreet, Inc.

Opinion on Internal Control over Financial Reporting

We have audited the internal control over financial reporting of HomeStreet, Inc. and subsidiaries (the “Company”) as of December 31, 2020, based on criteria established in Internal Control ITEM 9B    Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Because management’s assessment and our audit were conducted to meet the reporting requirements of Section 112 of the Federal Deposit Insurance Corporation Improvement Act (FDICIA), management’s assessment and our audit of the Company’s internal control over financial reporting included controls over the preparation of the schedules equivalent to the basic financial statements in accordance with the instructions for the Federal Financial Institutions Examinations Council Instructions for Consolidated Reports of Condition and Income for Schedules RC, RI, and RI-A. In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2020, based on criteria established in Internal Control — Integrated Framework (2013) issued by COSO.OTHER INFORMATION

We have not examined and, accordingly, we do not express an opinion or any other form of assurance on management’s statement referring to compliance with laws and regulations.

We have also audited, in accordance withDuring the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated financial statements as of and for the yearquarter ended December 31, 2020,2023, none of the Company and our report dated March 12, 2021, expressed an unqualified opinion on those financial statements and included an emphasisofficers or directors adopted or terminated a Rule 10b5-1 arrangement or non-Rule 10b5-1 trading arrangement, as each is defined in Item 408(a) of matter paragraph regarding a change in accounting principle.Regulation S-K

Basis for Opinion

The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

Definition and Limitations of Internal Control over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

/s/ Deloitte & Touche LLP

Seattle, Washington
March 12, 2021
128




ITEM 9B    OTHER INFORMATION9C    DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS

None.Not applicable.

PART III

ITEM 10DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE


We have adopted a Code of Business Conduct and Ethics that applies to all of our directors, officers and employees, including our principal executive officer and principal financial officer. The Code of Business Conduct and Ethics is posted on our website at http://ir.homestreet.com.

We intend to satisfy the disclosure requirement under Item 5.05 of Form 8-K regarding an amendment to, or waiver from, a provision of thisthe Code of Business Conduct and Ethics by posting such information on our corporate website, at the address and location specified above and, to the extent required by the listing standards of the Nasdaq Global Select Market, by filing a Current Report on Form 8-K with the SEC, disclosing such information.

TheIn reliance on General InstructionG. of Form 10-K, information with respect to our executive officers is set forth in Part I, “Item 1 – Business – Information About Our Executive Officers” in this Form 10-K.

Except as disclosed above, the information required by this item with respect to our directors, our executive officers, our Audit Committee and its members, and audit committee financial expert will be set forth in our definitive proxy statement for the 2021 annual2024 meeting of stockholdersshareholders (the “2021“2024 Proxy Statement”) under the captions “Election of Directors” and” “Executive Officers,and “HomeStreet Corporate Governance and Other Matters,” which information is incorporated herein by reference.

ITEM 11EXECUTIVE COMPENSATION

The information required by this item will be set forth in the 20212024 Proxy Statement under the captions “Executive Compensation,” “2020“2023 Executive Compensation Program,” “Other Practices, Policies and Guidelines,” “Human Resources and Corporate Governance Committee Report,” “2020“2023 Summary Compensation Table,” and “Potential Payments Upon Termination or Change in Control,” and “Corporate Governance - Human Resources and Corporate Governance Committee Interlocks and Insider Participation,” which information is incorporated herein by reference.

129128




ITEM 12SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

Equity Compensation Plan Information

The following table gives information about our common stock that may be issued upon the exercise of options, warrants and rights under all of our existing equity compensation plans as of December 31, 20202023 under the HomeStreet, Inc. 2014 Equity Incentive Plan (the "2014 Plan").
 
Plan CategoryPlan Category(a) Number of
Securities to be
Issued Upon
Exercise of
Outstanding
Options,
Warrants and
Rights
(b) Weighted
Average Exercise
Price of
Outstanding
Options,
Warrants, and
Rights
(c) Number of
Securities
Remaining
Available for
Future Issuance
Under Equity
Compensation
Plans (Excluding
Securities Reflected
in Column (a)
 Plan Category(a) Number of
Securities to be
Issued Upon
Exercise of
Outstanding
Options,
Warrants and
Rights
(b) Weighted
Average Exercise
Price of
Outstanding
Options,
Warrants, and
Rights
(c) Number of
Securities
Remaining
Available for
Future Issuance
Under Equity
Compensation
Plans (Excluding
Securities Reflected
in Column (a)
 
Plans approved by shareholdersPlans approved by shareholders552,024 (1)$12.85 (2)1,074,668 (3)
Plans approved by shareholders
Plans approved by shareholders298,375 (1)$— (2)831,785 (3)
Plans not approved by shareholdersPlans not approved by shareholders— — — 
TotalTotal552,024 $12.85 1,074,668 
Total
Total
 
(1)Consists of 188,181 shares subject to option grants awarded pursuant to the HomeStreet, Inc. 2010 Equity Incentive Plan (the "2010 Plan"), 138,43896,209 shares subject to Restricted Stock Units, including 4,659 RSUs granted to certain directors as part of their director compensation which are fully vested and pursuant to which shares will be issued upon the director’s departure from the Board, awarded under the 2014 Plan and 225,405202,166 shares issuable under Performance Share Units awarded under the 2014 Plan, assuming maximum performance goals are met under such awards, resulting in the issuance of the maximum number of shares allowed under those awards. The 2010 Plan was terminated when the 2014 Plan was approved by our shareholders on May 29, 2014. While the terms of the 2010 Plan remain in effect for any awards issued under that plan that are still outstanding, new awards may not be granted under the 2010 Plan.
(2)Shares issued on vesting of Restricted Stock Units and Performance Share Units under the 2014 Plan are done without payment by the participant of any additional consideration and therefore have been excluded from this calculation. The weighted average exercise price reflects only the exercise price of the options issued under the 2010 Plan that are still outstanding as of the date of this table.
(3)Consists of shares remaining available for issuance under the 2014 Plan.


Except as disclosed above, the information required by this item will be set forth in the 20212024 Proxy Statement under the caption "Principal Shareholders"Shareholders of HomeStreet Inc." which information is incorporated herein by reference.

130




ITEM 13CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE

The information required by this item will be set forth in the 20212024 Proxy Statement under the caption "Certain Relationships"HomeStreet Corporate Governance and Related Transactions," and "Corporate Governance"Other Matters" which information is incorporated herein by reference.

ITEM 14PRINCIPAL ACCOUNTANT FEES AND SERVICES

The information required by this item will be set forth in the 20212024 Proxy Statement under the caption "Advisory (Non-Binding) Vote on Ratification of Appointment of Independent Registered Public Accounting Firm," which information is incorporated herein by reference.

Information about aggregate fees billed to us by our principal accountant, Crowe (PCAOB ID No.173) and our former principal accountant, Deloitte, will be presented under the caption “Audit Committee Matters — Principal Accounting Firm Fees” in our 2024 Proxy Statement and is incorporated herein by reference.
131




129


PART IV
 

ITEM 15EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

(a)Financial Statements and Financial Statement Schedules
(i)Financial Statements
The following consolidated financial statements of the registrant and its subsidiaries are included in Part II Item 8:
Report of Independent Registered Public Accounting Firm
Consolidated Balance Sheets as of December 31, 20202023 and 20192022
Consolidated Income Statements for the three years ended December 31, 20202023
Consolidated Statements of Comprehensive Income (Loss) for the three years ended December 31, 20202023
Consolidated Statements of Shareholders’ Equity for the three years ended December 31, 20202023
Consolidated Statements of Cash Flows for the three years ended December 31, 20202023
Notes to Consolidated Financial Statements
(ii)Financial Statement Schedules
II—Valuation and Qualifying Accounts
All financial statement schedules for the Company have been included in the consolidated financial statements or the related footnotes, or are either inapplicable or not required.
(iii)Exhibits
EXHIBIT INDEX
Exhibit
Number
Description
2.1 (1)
3.1 (1)(2)
3.2 (1)(2)
4.1 (2)(3)
4.2 (3)(4) ††
4.3(5)
10.1 * (4)(7) *
10.2 * (5)
10.310.2 (7) *(5)
10.410.3 (5) *(6)
10.5*(4)
10.610.4 (9) *(7)
10.7 * (7)
10.8 * (4)
10.9 * (4)
10.10 * (8)
132




10.5 (17) *
10.11 *
10.12 *10.6 (8)(6)
10.13 (4)
10.1410.7 (4)(6)
10.1510.8 (4)(6)
130


10.1610.9 (10)(5)
Office Lease, dated March 5, 1992, between Continental, Inc. and One Union Square Venture ("Office Lease"), as amended by Supplemental Lease Agreement dated August 25, 1992, Second Amendment to Lease dated May 6, 1998, Third Amendment to Lease dated June 17, 1998, Fourth Amendment to Lease dated February 15, 2000, Fifth Amendment to Lease dated July 30, 2001, Sixth Amendment to Lease dated March 5, 2002, Seventh Amendment to Lease dated May 19, 2004, Eighth Amendment to Lease dated August 31, 2004, Ninth Amendment to Lease dated April 19, 2006, Tenth Amendment to Lease dated July 20, 2006, Eleventh Amendment to Lease dated December 27, 2006, Twelfth Amendment to Lease dated October 1, 2007, Thirteenth Amendment to Lease dated January 26, 2010, Fourteenth Amendment to Lease dated January 19, 2012, Fifteenth Amendment to Lease dated May 24, 2012, Sixteenth Amendment to Lease dated September 12, 2012, Seventeenth Amendment to Lease dated November 8, 2012, Eighteenth Amendment to Lease dated May 3, 2013, Nineteenth Amendment to Lease dated May 28, 2013 and Twentieth Amendment to Lease dated June 19, 2013.
10.1710.10 (11)
10.1810.11 (7)(8)
10.1910.12 (10)
10.2010.13 (4)(6)
10.2110.14 (12)(5)
10.2210.15 (4)(6)
10.2310.16 (4)(6)
10.24 (13)*
10.2510.17 (12)
10.2610.18 (15)(13) *
10.27(16)
10.28(14)†
10.29(17)
10.30 (18)
10.31(18)
10.3210.19 (19)(14) *
10.3310.20 (19)(15) *
10.21 (16) *
10.22 (18)*
10.23 (18)*
133




16.1 (19)
21
23.1
23.2
24.1
31.1
31.2
32 (20)
131


97.1
101The following financial information included in the Company’s Annual Report on Form 10-K for the year ended December 31, 20202023 formatted in Inline XBRL (eXtensible Business Reporting Language) and contained in Exhibit 101: (i) the Consolidated Balance Sheets as of December 31, 20202023 and December 31, 2019;2022; (ii) the Consolidated Income Statements for the three years ended December 31, 2020,2023, (iii) the Consolidated Statements of Comprehensive Income for the three years ended December 31, 2020;2023; (iv) the Consolidated Statements of Shareholders’ Equity for the three years ended December 31, 2020,2023, (v) the Consolidated Statements of Cash Flows for the three years ended December 31, 2020,2023, and (vi) the Notes to Consolidated Financial Statements.
104The cover page from the Company's Annual Report on Form 10-K for the year ended December 31, 2020,2023, formatted in Inline XBRL and contained in Exhibit 101.
134132




(1)Filed as an exhibit to HomeStreet, Inc.’s Current Report on Form 8-K (SEC File No. 001-35424) filed on January 19, 2024, and incorporated herein by reference.
(2)Filed as an exhibit to HomeStreet, Inc.’s Current Report on Form 8-K (SEC File No. 001-35424) filed on July 31, 2019, and incorporated herein by reference.
(2)(3)Filed as an exhibit to HomeStreet, Inc.’s Amendment No. 5 to Registration Statement on Form S-1 (SEC File No. 333-173980) filed on August 9, 2011, and incorporated herein by reference.
(3)(4)Filed as an exhibit to HomeStreet, Inc.’s Current Report on Form 8-K (SEC File No. 001-35424) filed on May 20, 2016, and incorporated herein by reference.
(4)(5)Filed as an exhibit to HomeStreet, Inc.’s Annual Report on Form 10-K (SEC File No. 001-35424) filed on March 6, 2020 and incorporated herein by reference
(6)Filed as an exhibit to HomeStreet, Inc.'s Amendment No. 1 to Registration Statement on Form S-1 (SEC File No. 333-173980) filed on May 19, 2011, and incorporated herein by reference.
(5)(7)Amended in the fourth quarter of 2018 to make administrative revisions that were not material and did not require shareholder approval. An updated version was filed as an exhibit to HomeStreet’s Annual Report on Form 10-K (SEC File No. 001-35424) filed on March 6, 2019, and incorporated herein by reference.
(6)Amended in the second quarter of 2019 to make administrative revisions that were not material and did not require shareholder approval. An updated version was filed as an exhibit to HomeStreet’s Annual Report on Form 10-K (SEC File No. 001-35424) filed on March 6, 2020, and incorporated herein by reference.
(7)(8)Filed as an exhibit to HomeStreet, Inc.’s Annual Report on Form 10-K (SEC File No. 001-35424) filed on March 11, 2016, and incorporated herein by reference.
(8)(9)Filed as an exhibit to HomeStreet, Inc.’s Annual Report on Form 10-K (SEC File No. 001-35424) filed on March 6, 2018 and incorporated herein by reference
(9)Filed as an exhibit to HomeStreet, Inc.’s current Report on Form 8-K (SEC File No. 001-35424) filed on September 12, 2017, and incorporated herein by reference.
(10)Filed as an exhibit to HomeStreet, Inc.’s Annual Report on Form 10-K (SEC File No. 001-35424) filed on March 17, 2014, and incorporated herein by reference.
(11)Filed as an exhibit to HomeStreet, Inc.’s Annual Report on Form 10-K (SEC File No. 001-35424) filed on March 25, 2015, and incorporated herein by reference.
(12)Filed as an exhibit to HomeStreet, Inc.’s Amendment No. 2 to Registration Statement on Form S-1 (SEC File No. 333-173980) filed on June 21, 2011, and incorporated herein by reference.
(13)Filed as an exhibit to HomeStreet’s Annual Report on Form 10-K (SEC File No. 001-35424) filed on March 6, 2019, and incorporated herein by reference.
(14)Filed as an exhibit to HomeStreet Inc.’s Quarterly Report on Form 10-Q (SEC File No. 001-35424) filed on August 3, 2018, and incorporated herein by reference.
(15)Filed as an exhibit to HomeStreet Inc.’s Current Report on Form 8-K (SEC File No. 001-35424) filed on April 4, 2019, and incorporated herein by reference.
(16)Filed as an exhibit to HomeStreet Inc.’s Current Report on Form 8-K (SEC File No. 001-35424) filed on April 12, 2019, and incorporated herein by reference.
(17)Filed as an exhibit to HomeStreet Inc.’s Current Report on Form 8-K (SEC File No. 001-35424) filed on July 11, 2019, and incorporated herein by reference
(18)Filed as an exhibit to HomeStreet Inc.’s Current Report on Form 10-Q (SEC File No. 001-35424) filed on May 8, 2020, and incorporated herein by reference.
(19)(14)Filed as an exhibit to HomeStreet Inc.’s Current Report on Form 10-Q (SEC File No. 001-35424) filed on November 6, 2020, and incorporated herein by reference.
(15)Filed as an exhibit to HomeStreet Inc.’s Current Report on Form 10-Q (SEC File No. 001-35424) filed on May 6, 2022, and incorporated herein by reference.
(16)Filed as an exhibit to HomeStreet Inc.’s Current Report on Form 10-Q (SEC File No. 001-35424) filed on August 5, 2022, and incorporated herein by reference.
(17)Filed as an exhibit to HomeStreet’s Annual Report on Form 10-K (SEC File No. 001-35424) filed on March 12, 2021, and incorporated herein by reference.
(18)Filed as an exhibit to HomeStreet, Inc.’s Current Report on Form 10-K (SEC File No. 001-35424) filed on March 6, 2023, and incorporated herein by reference.
(19)Filed as an exhibit to HomeStreet, Inc.’s Current Report on Form 8-K/A (SEC File No. 001-35424) filed on March 6, 2023, and incorporated herein by reference.
(20)This exhibit shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, or otherwise subject to the liability of that Section. Such exhibit shall not be deemed incorporated into any filing under the Securities Act of 1933 or the Securities Exchange Act of 1934.
Certain portions of this exhibit constitute confidential information and have been redacted in accordance with Regulation S-K, Item 601(b)(10).
††Instruments with respect to any other long-term debt of HomeStreet, Inc. and its consolidated subsidiaries are omitted pursuant to Item 601(b)(4)(iii) of Regulation S-K since the total amount of securities authorized thereunder does not exceed 10 percent of the total assets of HomeStreet, Inc. and its subsidiaries on a consolidated basis. HomeStreet, Inc. hereby agrees to furnish a copy of any such instrument to the Securities and Exchange Commission upon request.
*Management contract or compensation plan or arrangement.

Item 16 Form 10-K Summary


None.
135133




SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Seattle, State of Washington, on March 12, 2021.6, 2024.
 
HomeStreet, Inc.
By:/s/ Mark K. Mason
 Mark K. Mason
 President and Chief Executive Officer



HomeStreet, Inc.
By:/s/ John M. Michel
 John M. Michel
 Executive Vice President and Chief Financial Officer (Principal Financial Officer and Accounting Officer)

136134





POWERS OF ATTORNEY

KNOW BY ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Mark K. Mason and John M. Michel, and each of them his "or her" attorney-in-fact, with the power of substitution, for him "or her" in any and all capacities, to sign any amendment to this Report on Form 10-K and to file the same, with exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, hereby ratifying and confirming all that said attorney-in-fact, or his "or her" substitute or substitutes, may do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Exchange Act of 1934, this Report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
SignatureTitleDate
/s/ Mark K. MasonChairman of the Board, President and Chief Executive Officer (Principal Executive Officer)March 12, 20216, 2024
Mark K. Mason, Chairman
/s/John M. MichelExecutive Vice President and Chief Financial Officer and Principal Accounting Officer (Principal Financial Officer and Accounting Officer)March 12, 20216, 2024
John M. Michel
/s/ DonaldJames R. VossMitchell Jr.Lead Independent DirectorMarch 12, 20216, 2024
DonaldJames R. VossMitchell Jr.
/s/ Scott M. BoggsDirectorMarch 12, 20216, 2024
Scott M. Boggs
/s/ Sandra A. CavanaughDirectorMarch 12, 20216, 2024
Sandra A. Cavanaugh
/s/ Jeffrey D. GreenDirectorMarch 12, 20216, 2024
Jeffrey D. Green
/s/ James R. Mitchell Jr.Joanne HarrellDirectorMarch 12, 20216, 2024
James R. Mitchell Jr.Joanne Harrell
/s/ Mark R. PattersonDirectorMarch 12, 2021
Mark R. Patterson
/s/ Nancy D. PellegrinoDirectorMarch 12, 20216, 2024
Nancy D. Pellegrino
/s/ Douglas I. SmithS. Craig TompkinsDirectorMarch 12, 20216, 2024
Douglas I. SmithS. Craig Tompkins

137135