UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

________________________________

FORM 10-Q

________________________________

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF

THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended: ~~June~~September 30, 2022

☐ 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.

(a Washington Corporation)

91-0186600

________________________________

601 Union Street, Suite 2000

Seattle, Washington 98101

(Address of principal executive offices)

Telephone Number - Area Code (206) 623-3050

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock	HMST	Nasdaq Global Select Market

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 (§ 232.405 of this chapter) 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 Company

☐

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 is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes ☐ No ☒

The number of outstanding shares of the registrant's common stock as of ~~August 2,~~October 31, 2022 was ~~18,717,168.~~18,722,640.


PART I – FINANCIAL INFORMATION

ITEM 1	FINANCIAL STATEMENTS

Consolidated Balance Sheets at ~~June~~September 3 0 ,30, 2022 and December 31, 2021		3
Consolidated Income Statements for the ~~Quarter~~Quarters and ~~s a~~Nine ~~nd Six~~ Months Ended ~~June~~September 3 0 ,30, 2022 and 2021		4
Consolidated Statements of Comprehensive Income for the Quarters and Nine ~~and Six Months~~Months Ended ~~June~~September 3 0 ,30, 2022 and 2021		5
Consolidated Statements of Shareholders’ Equity for the Quarters and ~~and Six~~Nine Months Ended ~~June~~September 3 0 ,30, 2022 and 2021		6
Consolidated Statements of Cash Flows for the ~~Six Month~~Nine s Months Ended ~~Jun~~September e 3 0 , 30, 2022 and 2021		7
Notes to Consolidated Financial Statements		9
ITEM 2	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	4140
ITEM 3	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	5958

ITEM 4	CONTROLS AND PROCEDURES	6261
PART II – OTHER INFORMATION
ITEM 1	LEGAL PROCEEDINGS	6261
ITEM 1A	RISK FACTORS	6362
ITEM 2	UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS	6563
ITEM 3	DEFAULTS UPON SENIOR SECURITIES	6563
ITEM 4	MINE SAFETY DISCLOSURES	6563
ITEM 5	OTHER INFORMATION	6563
ITEM 6	EXHIBITS	6664
SIGNATURES		6765

Unless we state otherwise or the content otherwise requires, references in this Form 10-Q to "HomeStreet," "we," "our," "us" or the "Company" refer collectively to HomeStreet, Inc., a Washington corporation, HomeStreet Bank ("Bank"), HomeStreet Capital Corporation ("HomeStreet Capital") and other direct and indirect subsidiaries of HomeStreet, Inc.

PART I


ITEM 1 FINANCIAL STATEMENTS

HOMESTREET, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

June 30, 2022 December 31, 2021
(in thousands, except share data) (Unaudited)
ASSETS
Cash and cash equivalents $ 75,277 $ 65,214
Investment securities 1,237,957 1,006,691
Loans held for sale ("LHFS") 47,314 176,131
Loans held for investment ("LHFI") (net of allowance for credit losses of $37,355 and $47,123) 6,722,382 5,495,726
Mortgage servicing rights ("MSRs") 114,611 100,999
Premises and equipment, net 54,213 58,154
Other real estate owned ("OREO") 1,753 735
Goodwill and other intangible assets 31,219 31,709
Other assets 298,160 268,732
Total assets $ 8,582,886 $ 7,204,091
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Deposits $ 6,183,299 $ 6,146,509
Borrowings 1,458,000 41,000
Long-term debt 224,227 126,026
Accounts payable and other liabilities 136,593 175,217
Total liabilities 8,002,119 6,488,752
Commitments and contingencies 0 0
Shareholders' equity:
Common stock, no par value, authorized 160,000,000 shares, issued and outstanding, 18,712,789 shares and 20,085,336 shares 224,776 249,856
Retained earnings 419,254 444,343
Accumulated other comprehensive income (loss) (63,263) 21,140
Total shareholders' equity 580,767 715,339
Total liabilities and shareholders' equity $ 8,582,886 $ 7,204,091
.



	September 30, 2022		December 31, 2021
(in thousands, except share data)	(Unaudited)

ASSETS
Cash and cash equivalents	$	57,256	$	65,214

Investment securities	1,311,941		1,006,691
Loans held for sale ("LHFS")	13,787		176,131
Loans held for investment ("LHFI") (net of allowance for credit losses of $37,606 and $47,123)	7,175,881		5,495,726
Mortgage servicing rights ("MSRs")	114,630		100,999
Premises and equipment, net	51,706		58,154
Other real estate owned ("OREO")	1,725		735
Goodwill and other intangible assets	30,215		31,709
Other assets	315,746		268,732
Total assets	$	9,072,887	$	7,204,091
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Deposits	$	6,610,231	$	6,146,509
Borrowings	1,569,000		41,000
Long-term debt	224,314		126,026
Accounts payable and other liabilities	116,553		175,217
Total liabilities	8,520,098		6,488,752
Commitments and contingencies
Shareholders' equity:
Common stock, no par value, authorized 160,000,000 shares; issued and outstanding, 18,717,557 shares and 20,085,336 shares	225,725		249,856
Retained earnings	432,995		444,343
Accumulated other comprehensive income (loss)	(105,931)		21,140
Total shareholders' equity	552,789		715,339
Total liabilities and shareholders' equity	$	9,072,887	$	7,204,091

See accompanying notes to consolidated financial statements

HOMESTREET, INC. AND SUBSIDIARIES

CONSOLIDATED INCOME STATEMENTS

(Unaudited)


		Quarter Ended June 30,				Six Months Ended June 30,					Quarter Ended September 30,				Nine Months Ended September 30,
(in thousands, except share and per share data)	(in thousands, except share and per share data)	2022		2021		2022		2021		(in thousands, except share and per share data)	2022		2021		2022		2021

Interest income:	Interest income:									Interest income:
Loans	Loans	$	59,825	$	57,078	$	112,779	$	110,646	Loans	$	73,329	$	56,117	$	186,108	$	166,763
Investment securities	Investment securities	7,379		5,010		13,345		10,961		Investment securities	9,014		5,130		22,359		16,091
Cash, Fed Funds and other	Cash, Fed Funds and other	487		159		595		331		Cash, Fed Funds and other	1,060		141		1,655		472
Total interest income	Total interest income	67,691		62,247		126,719		121,938		Total interest income	83,403		61,388		210,122		183,326
Interest expense:	Interest expense:									Interest expense:
Deposits	Deposits	2,893		2,773		5,177		6,423		Deposits	8,321		2,507		13,498		8,930
Borrowings	Borrowings	4,742		1,502		6,940		3,026		Borrowings	12,064		1,397		19,004		4,423
Total interest expense	Total interest expense	7,635		4,275		12,117		9,449		Total interest expense	20,385		3,904		32,502		13,353
Net interest income	Net interest income	60,056		57,972		114,602		112,489		Net interest income	63,018		57,484		177,620		169,973
Provision for credit losses	Provision for credit losses	—		(4,000)		(9,000)		(4,000)		Provision for credit losses	—		(5,000)		(9,000)		(9,000)
Net interest income after provision for credit losses	Net interest income after provision for credit losses	60,056		61,972		123,602		116,489		Net interest income after provision for credit losses	63,018		62,484		186,620		178,973
Noninterest income:	Noninterest income:									Noninterest income:
Net gain on loan origination and sale activities	Net gain on loan origination and sale activities	5,292		21,271		13,566		54,730		Net gain on loan origination and sale activities	2,647		17,509		16,213		72,239
Loan servicing income	Loan servicing income	3,661		1,931		6,965		2,679		Loan servicing income	2,741		2,014		9,706		4,693
Deposit fees	Deposit fees	2,218		1,997		4,293		3,821		Deposit fees	2,223		2,091		6,516		5,912
Other	Other	1,842		3,025		3,747		5,827		Other	5,711		2,684		9,458		8,511
Total noninterest income	Total noninterest income	13,013		28,224		28,571		67,057		Total noninterest income	13,322		24,298		41,893		91,355
Noninterest expense:	Noninterest expense:									Noninterest expense:
Compensation and benefits	Compensation and benefits	30,191		34,378		62,222		70,213		Compensation and benefits	27,341		31,175		89,563		101,388
Information services	Information services	7,780		6,949		14,842		13,733		Information services	7,038		6,902		21,880		20,635
Occupancy	Occupancy	5,898		5,973		12,263		12,465		Occupancy	6,052		5,705		18,315		18,170
General, administrative and other	General, administrative and other	6,768		5,515		15,783		13,012		General, administrative and other	9,458		8,167		25,241		21,179
Total noninterest expense	Total noninterest expense	50,637		52,815		105,110		109,423		Total noninterest expense	49,889		51,949		154,999		161,372
Income before income taxes	Income before income taxes	22,432		37,381		47,063		74,123		Income before income taxes	26,451		34,833		73,514		108,956
Income tax expense	Income tax expense	4,711		8,224		9,391		15,303		Income tax expense	6,084		7,663		15,475		22,966
Net income	Net income	$	17,721	$	29,157	$	37,672	$	58,820	Net income	$	20,367	$	27,170	$	58,039	$	85,990

Net income per share:	Net income per share:									Net income per share:
Basic	Basic	$	0.95	$	1.38	$	1.97	$	2.76	Basic	$	1.09	$	1.32	$	3.05	$	4.08
Diluted	Diluted	0.94		1.37		1.95		2.72		Diluted	1.08		1.31		3.03		4.03
Weighted average shares outstanding:	Weighted average shares outstanding:									Weighted average shares outstanding:
Basic	Basic	18,706,953		21,057,473		19,143,925		21,345,969		Basic	18,716,864		20,613,290		19,000,007		21,099,059
Diluted	Diluted	18,834,443		21,287,974		19,310,750		21,623,298		Diluted	18,796,737		20,819,601		19,137,848		21,352,715

See accompanying notes to consolidated financial statements

HOMESTREET, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)

Quarter Ended June 30, Six Months Ended June 30,
(in thousands) 2022 2021 2022 2021
Net income $ 17,721 $ 29,157 $ 37,672 $ 58,820
Other comprehensive income (loss):
Unrealized gain (loss) on investment securities available for sale ("AFS") (42,545) 10,236 (110,732) (9,445)
Reclassification for net (gains) losses included in income — (62) (71) (62)
Other comprehensive income (loss) before tax (42,545) 10,174 (110,803) (9,507)
Income tax impact of:
Unrealized gain (loss) on investment securities AFS (10,211) 2,150 (26,383) (1,983)
Reclassification for net (gains) losses included in income — (13) (17) (13)
Total (10,211) 2,137 (26,400) (1,996)
Other comprehensive income (loss) (32,334) 8,037 (84,403) (7,511)
Total comprehensive income (loss) $ (14,613) $ 37,194 $ (46,731) $ 51,309


	Quarter Ended September 30,				Nine Months Ended September 30,
(in thousands)	2022		2021		2022		2021

Net income	$	20,367	$	27,170	$	58,039	$	85,990
Other comprehensive income (loss):
Unrealized gain (loss) on investment securities available for sale ("AFS")	(56,189)		(7,283)		(166,921)		(16,728)
Reclassification for net (gains) losses included in income	47		—		(24)		(62)
Other comprehensive income (loss) before tax	(56,142)		(7,283)		(166,945)		(16,790)
Income tax impact of:
Unrealized gain (loss) on investment securities AFS	(13,485)		(1,530)		(39,868)		(3,513)
Reclassification for net (gains) losses included in income	11		—		(6)		(13)
Total	(13,474)		(1,530)		(39,874)		(3,526)
Other comprehensive income (loss)	(42,668)		(5,753)		(127,071)		(13,264)
Total comprehensive income (loss)	$	(22,301)	$	21,417	$	(69,032)	$	72,726

See accompanying notes to consolidated financial statements

HOMESTREET, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

(Unaudited)

(in thousands, except share data) Number
of shares Common stock Retained
earnings Accumulated
other
comprehensive
income (loss) Total shareholders' equity
For the quarter ended June 30, 2021
Balance, March 31, 2021 21,360,514 $ 269,942 $ 411,712 $ 19,809 $ 701,463
Net income — — 29,157 — 29,157
Share-based compensation expense — 855 — — 855
Common stock issued - Option exercise; stock grants 5,108 195 — — 195
Other comprehensive income (loss) — — — 8,037 8,037
Dividends declared on common stock ($0.25 per share) — — (5,378) — (5,378)
Common stock repurchased (573,963) (10,218) (15,380) — (25,598)
Balance, June 30, 2021 20,791,659 $ 260,774 $ 420,111 $ 27,846 $ 708,731
For the six months ended June 30, 2021
Balance, December 31, 2020 21,796,904 $ 278,505 $ 403,888 $ 35,357 $ 717,750
Net income — — 58,820 — 58,820
Share-based compensation expense — 1,665 — — 1,665
Common stock issued - Option exercise; stock grants 193,365 2,044 — — 2,044
Other comprehensive income — — — (7,511) (7,511)
Dividends declared on common stock ($0.50 per share) (10,912) (10,912)
Common stock repurchased (1,198,610) (21,440) (31,685) — (53,125)
Balance, June 30, 2021 20,791,659 $ 260,774 $ 420,111 $ 27,846 $ 708,731
For the quarter ended June 30, 2022
Balance, March 31, 2022 18,700,536 $ 223,718 $ 408,442 $ (30,929) $ 601,231
Net income — — 17,721 — 17,721
Share-based compensation expense — 1,221 — — 1,221
Common stock issued - Stock grants 21,378 — — — —
Other comprehensive income (loss) — — — (32,334) (32,334)
Dividends declared on common stock ($0.35 per share) — — (6,633) — (6,633)
Common stock repurchased (9,125) (163) (276) — (439)
Balance, June 30, 2022 18,712,789 $ 224,776 $ 419,254 $ (63,263) $ 580,767
For the six months ended June 30, 2022
Balance, December 31, 2021 20,085,336 $ 249,856 $ 444,343 $ 21,140 $ 715,339
Net income — — 37,672 — 37,672
Share-based compensation expense — 2,297 — — 2,297
Common stock issued - Stock grants 126,218 — — — —
Other comprehensive income (loss) — — — (84,403) (84,403)
Dividends declared on common stock ($0.70 per share) — — (13,797) — (13,797)
Common stock repurchased (1,498,765) (27,377) (48,964) — (76,341)
Balance, June 30, 2022 18,712,789 $ 224,776 $ 419,254 $ (63,263) $ 580,767


(in thousands, except share data)	Number of shares	Common stock		Retained earnings		Accumulated other comprehensive income (loss)		Total shareholders' equity

For the quarter ended September 30, 2021
Balance, June 30, 2021	20,791,659	$	260,774	$	420,111	$	27,846	$	708,731
Net income	—	—		27,170		—		27,170
Share-based compensation expense	—	892		—		—		892
Common stock issued - Option exercise; stock grants	52,265	339		—		—		339

Other comprehensive income (loss)	—	—		—		(5,753)		(5,753)
Dividends declared on common stock ($0.25 per share)	—	—		(5,259)		—		(5,259)
Common stock repurchased	(397,276)	(5,924)		(9,820)		—		(15,744)

Balance, September 30, 2021	20,446,648	$	256,081	$	432,202	$	22,093	$	710,376

For the nine months ended September 30, 2021
Balance, December 31, 2020	21,796,904	$	278,505	$	403,888	$	35,357	$	717,750
Net income	—	—		85,990		—		85,990
Share-based compensation expense	—	2,557		—		—		2,557
Common stock issued - Option exercise; stock grants	245,630	2,383		—		—		2,383

Other comprehensive income (loss)	—	—		—		(13,264)		(13,264)
Dividends declared on common stock ($0.75 per share)				(16,171)				(16,171)
Common stock repurchased	(1,595,886)	(27,364)		(41,505)		—		(68,869)

Balance, September 30, 2021	20,446,648	$	256,081	$	432,202	$	22,093	$	710,376

For the quarter ended September 30, 2022
Balance, June 30, 2022	18,712,789	$	224,776	$	419,254	$	(63,263)	$	580,767
Net income	—	—		20,367		—		20,367
Share-based compensation expense	—	942		—		—		942
Common stock issued - Stock grants	4,328	—		—		—		—
Other comprehensive income (loss)	—	—		—		(42,668)		(42,668)
Dividends declared on common stock ($0.35 per share)	—	—		(6,638)		—		(6,638)
Common stock repurchased	440	7		12		—		19

Balance, September 30, 2022	18,717,557	$	225,725	$	432,995	$	(105,931)	$	552,789

For the nine months ended September 30, 2022
Balance, December 31, 2021	20,085,336	$	249,856	$	444,343	$	21,140	$	715,339
Net income	—	—		58,039		—		58,039
Share-based compensation expense	—	3,239		—		—		3,239
Common stock issued - Stock grants	130,546	—		—		—		—

Other comprehensive income (loss)	—	—		—		(127,071)		(127,071)
Dividends declared on common stock ($1.05 per share)	—	—		(20,435)		—		(20,435)
Common stock repurchased	(1,498,325)	(27,370)		(48,952)		—		(76,322)
Balance, September 30, 2022	18,717,557	$	225,725	$	432,995	$	(105,931)	$	552,789

See accompanying notes to consolidated financial statements

HOMESTREET, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)


		Six Months Ended June 30,					Nine Months Ended September 30,
(in thousands)	(in thousands)	2022		2021		(in thousands)	2022		2021

CASH FLOWS FROM OPERATING ACTIVITIES:	CASH FLOWS FROM OPERATING ACTIVITIES:					CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	Net income	$	37,672	$	58,820	Net income	$	58,039	$	85,990
Adjustments to reconcile net income to net cash provided by operating activities:	Adjustments to reconcile net income to net cash provided by operating activities:					Adjustments to reconcile net income to net cash provided by operating activities:
Provision for credit losses	Provision for credit losses	(9,000)		(4,000)		Provision for credit losses	(9,000)		(9,000)
Depreciation and amortization, premises and equipment	Depreciation and amortization, premises and equipment	5,134		4,788		Depreciation and amortization, premises and equipment	7,308		7,294
Amortization of premiums and discounts: securities, deposits, debt		2,036		3,204
Amortization of premiums and discounts: investment securities, deposits, debt						Amortization of premiums and discounts: investment securities, deposits, debt	2,833		4,788
Operating leases: excess of payments over amortization	Operating leases: excess of payments over amortization	(2,158)		(2,016)		Operating leases: excess of payments over amortization	(3,146)		(3,015)
Amortization of finance leases	Amortization of finance leases	293		546		Amortization of finance leases	442		786
Amortization of core deposit intangibles	Amortization of core deposit intangibles	490		587		Amortization of core deposit intangibles	728		878
Amortization of deferred loan fees and costs	Amortization of deferred loan fees and costs	(619)		(4,825)		Amortization of deferred loan fees and costs	(656)		(7,544)
Share-based compensation expense	Share-based compensation expense	2,297		1,665		Share-based compensation expense	3,239		2,557

Deferred income tax expense (benefit)	Deferred income tax expense (benefit)	6,991		5,353		Deferred income tax expense (benefit)	(4,306)		7,777
Origination of LHFS	Origination of LHFS	(476,350)		(1,336,342)		Origination of LHFS	(600,037)		(1,785,393)
Proceeds from sale of LHFS	Proceeds from sale of LHFS	607,523		1,380,651		Proceeds from sale of LHFS	763,057		1,932,447
Net fair value adjustment and gain on sale of LHFS	Net fair value adjustment and gain on sale of LHFS	5,478		(25,441)		Net fair value adjustment and gain on sale of LHFS	6,304		(36,359)
Origination of MSRs	Origination of MSRs	(8,975)		(20,472)		Origination of MSRs	(10,945)		(27,908)
Net gain on sale of loans originated as LHFI	Net gain on sale of loans originated as LHFI	—		(4,613)		Net gain on sale of loans originated as LHFI	(88)		(4,613)
Change in fair value of MSRs	Change in fair value of MSRs	(8,686)		4,434		Change in fair value of MSRs	(8,563)		8,267
Amortization of servicing rights	Amortization of servicing rights	4,049		3,477		Amortization of servicing rights	5,877		5,235

Gain on sale of branches						Gain on sale of branches	(4,270)		—
Net change in trading securities	Net change in trading securities	(33,074)		—		Net change in trading securities	(21,104)		—
(Increase) decrease in other assets	(Increase) decrease in other assets	17,912		(6,414)		(Increase) decrease in other assets	10,475		528
Increase (decrease) in accounts payable and other liabilities	Increase (decrease) in accounts payable and other liabilities	(5,882)		(4,227)		Increase (decrease) in accounts payable and other liabilities	13,268		(241)
Net cash provided by operating activities	Net cash provided by operating activities	145,131		55,175		Net cash provided by operating activities	209,455		182,474
CASH FLOWS FROM INVESTING ACTIVITIES:	CASH FLOWS FROM INVESTING ACTIVITIES:					CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of investment securities	Purchase of investment securities	(356,539)		(86,333)		Purchase of investment securities	(621,813)		(112,146)
Proceeds from sale of investment securities	Proceeds from sale of investment securities	962		28,187		Proceeds from sale of investment securities	75,361		28,187
Principal payments on investment securities	Principal payments on investment securities	64,719		114,367		Principal payments on investment securities	94,739		159,037
Proceeds from sale of OREO	Proceeds from sale of OREO	952		—		Proceeds from sale of OREO	952		—
Proceeds from sale of loans originated as LHFI	Proceeds from sale of loans originated as LHFI	—		251,474		Proceeds from sale of loans originated as LHFI	4,613		251,474

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

Net increase in LHFI	Net increase in LHFI	(1,226,169)		(272,051)		Net increase in LHFI	(1,727,944)		(492,666)

Purchase of premises and equipment	Purchase of premises and equipment	(2,014)		(827)		Purchase of premises and equipment	(4,939)		(852)

Proceeds from sale of Federal Home Loan Bank stock	Proceeds from sale of Federal Home Loan Bank stock	31,683		86,321		Proceeds from sale of Federal Home Loan Bank stock	68,966		89,882
Purchases of Federal Home Loan Bank stock	Purchases of Federal Home Loan Bank stock	(88,314)		(76,726)		Purchases of Federal Home Loan Bank stock	(130,033)		(78,286)
Net cash provided by (used in) investing activities		(1,574,720)		44,412
Net cash used in investing activities						Net cash used in investing activities	(2,378,854)		(155,370)

Six Months Ended June 30,
(in thousands) 2022 2021
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase (decrease) in deposits, net 13,710 264,898
Changes in short-term borrowings, net 1,417,000 (322,800)
Proceeds from other long-term borrowings — 50,000
Proceeds from debt issuance, net 98,036 —
Repayment of finance lease principal (297) (613)
Repurchases of common stock (75,000) (50,001)
Proceeds from exercise of stock options — 263
Dividends paid on common stock (13,797) (10,912)
Net cash provided by (used in) financing activities 1,439,652 (69,165)
Net increase in cash and cash equivalents 10,063 30,422
Cash and cash equivalents, beginning of year 65,214 58,049
Cash and cash equivalents, end of period $ 75,277 $ 88,471
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest $ 9,957 $ 9,517
Federal and state income taxes 310 23,367
Non-cash activities:
Increase in lease assets and lease liabilities 3,858 467
LHFI foreclosed and transferred to OREO 1,018 —
Loans transferred from LHFI to LHFS, net 7,834 128,824
Ginnie Mae loans derecognized with the right to repurchase, net 6,239 44,680
Repurchase of common stock-award shares 1,341 3,124


	Nine Months Ended September 30,
(in thousands)	2022		2021
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase in deposits, net	631,290		538,005

Changes in short-term borrowings, net	1,528,000		(322,800)


Proceeds from other long-term borrowings	—		50,000
Repayment of other long-term borrowings	—		(50,000)



Proceeds from debt issuance, net	98,035		—
Repayment of finance lease principal	(449)		(787)
Repurchases of common stock	(75,000)		(65,001)
Proceeds from exercise of stock options	—		263
Dividends paid on common stock	(20,435)		(16,171)
Net cash provided by financing activities	2,161,441		133,509
Net increase (decrease) in cash and cash equivalents	(7,958)		160,613

Cash and cash equivalents, beginning of year	65,214		58,049


Cash and cash equivalents, end of period	$	57,256	$	218,662


SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest	$	29,289	$	12,371
Federal and state income taxes	2,348		28,156
Non-cash activities:
Increase in lease assets and lease liabilities	4,877		910

LHFI foreclosed and transferred to OREO	1,018		—

Loans transferred from LHFI to LHFS, net	12,511		390,521


Ginnie Mae loans derecognized with the right to repurchase, net	5,567		70,197
Repurchase of common stock-award shares	1,322		3,868

See accompanying notes to consolidated financial statements

HomeStreet, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

NOTE 1–SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

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

The accompanying consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America ("GAAP"). The consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All significant inter-company accounts and transactions have been eliminated in consolidation. The Company allocates resources and assesses financial performance on a consolidated basis and therefore has 1one 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 financial statements, as well as the reported amounts of revenues and expenses during the reporting periods. Actual results could differ significantly from those estimates. Certain amounts in the financial statements from prior periods have been reclassified to conform to the current financial statement presentation.

These unaudited interim financial statements reflect all adjustments that are, in the opinion of management, necessary for a fair statement of the results for the periods presented. These adjustments are of a normal recurring nature, unless otherwise disclosed in this Quarterly Report on Form 10-Q. The results of operations in the interim financial statements do not necessarily indicate the results that may be expected for the full year. The interim financial information should be read in conjunction with our Annual Report on Form 10-K for the year ended December 31, 2021, filed with the Securities and Exchange Commission ("2021 Annual Report on Form 10-K").

Goodwill

Goodwill is recorded upon completion of a business combination as the excess of the fair value of the consideration transferred, plus the fair value of any noncontrolling interests in the acquiree, over the fair value of the net assets acquired and liabilities assumed as of the acquisition date. Goodwill has been determined to have an indefinite useful life and is not amortized, but tested for impairment at least annually or more frequently if events and circumstances occur that indicate it is more likely than not the fair value of the reporting unit is less than its carrying value necessitating an impairment test. Historically, the Company performed its annual impairment testing on June 30. In 2022, we moved the annual impairment testing date to August 31 and based on that testing determined goodwill was not impaired. The change in impairment date did not have a material effect on the Company’s financial position or results of operations.

Dispositions

In July 2022, we closed a sale of five retail deposit branches in eastern Washington, including the branches' lending businesses and employees. As part of this transaction, we transferred $191 million of deposits, sold $43 million of loans and recognized a gain on sale of $4.3 million.

Recent Accounting Developments

In March 2020, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2020-04, Reference Rate Reform (Topic 848). This ASU provides optional expedients and exceptions for contracts, hedging relationships, and other transactions that reference London Interbank Offered Rate ("LIBOR") rates expected to be discontinued because of reference rate reform. In January 2021, the FASB issued ASU 2021-01, "Reference Rate Reform (Topic 848)," which clarifies certain optional expedients and exceptions in Topic 848 for contract modifications and hedge accounting applied to derivatives that are affected by the transition to alternative rates. The ASUs are effective for all entities as of March 12, 2020 through December 31, 2022. The adoption of these ASUs is not expected to have a material impact on the Company’s financial position or results of operations.

In March 2022, the FASB issued ASU No. 2022-02, Financial Instruments-Credit Losses (Topic 326). The amendments in this ASU eliminate the accounting guidance for Troubled Debt Restructuring ("TDRs") by creditors, while enhancing disclosure requirements for certain loan refinancing and restructurings by creditors when a borrower experiences financial difficulty. In

addition, the amendments require that an entity disclose current period gross charge-offs by year of origination in a vintage table. We prospectively adopted the portion of ASU No. 2022-02 with respect to amendments about TDRs and related disclosure enhancements as of January 1, 2022. This adoption did not have a material impact on the Company’s financial position or results of operations. As the change is disclosure only in nature, we do not expect the vintage table disclosure requirement of ASU 2022-02 to have a material impact on the Company's financial position or results of operations when adopted.

NOTE 2–INVESTMENT SECURITIES:

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


		At June 30, 2022									At September 30, 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

AFS	AFS									AFS
Mortgage backed securities ("MBS"):	Mortgage backed securities ("MBS"):									Mortgage backed securities ("MBS"):
Residential	Residential	$	131,458	$	137	$	(2,664)	$	128,931	Residential	$	208,807	$	—	$	(9,817)	$	198,990
Commercial	Commercial	70,076		—		(6,503)		63,573		Commercial	68,706		—		(9,834)		58,872
Collateralized mortgage obligations ("CMOs"):	Collateralized mortgage obligations ("CMOs"):									Collateralized mortgage obligations ("CMOs"):
Residential	Residential	314,451		175		(18,577)		296,049		Residential	489,223		12		(36,021)		453,214
Commercial	Commercial	131,781		75		(5,265)		126,591		Commercial	97,886		—		(7,025)		90,861
Municipal bonds	Municipal bonds	582,262		826		(47,735)		535,353		Municipal bonds	498,665		121		(70,589)		428,197
Corporate debt securities	Corporate debt securities	31,792		—		(1,462)		30,330		Corporate debt securities	36,733		—		(2,971)		33,762
U.S. Treasury securities	U.S. Treasury securities	23,178		—		(2,248)		20,930		U.S. Treasury securities	23,092		—		(3,265)		19,827

Agency debentures										Agency debentures	3,999		5		—		4,004
Total	Total	$	1,284,998	$	1,213	$	(84,454)	$	1,201,757	Total	$	1,427,111	$	138	$	(139,522)	$	1,287,727

HTM	HTM									HTM

Municipal bonds	Municipal bonds	$	3,118	$	3	$	(32)	$	3,089	Municipal bonds	$	3,099	$	—	$	(101)	$	2,998


	At December 31, 2021
(in thousands)	Amortized cost		Gross unrealized gains		Gross unrealized losses		Fair value

AFS
MBS:
Residential	$	32,905	$	396	$	(338)	$	32,963
Commercial	62,094		933		(235)		62,792
CMOs:
Residential	186,703		2,012		(1,321)		187,394
Commercial	135,102		1,890		(333)		136,659
Municipal bonds	516,693		24,154		(924)		539,923
Corporate debt securities	18,918		699		(1)		19,616
U.S. Treasury securities	23,348		—		(173)		23,175

Total	$	975,763	$	30,084	$	(3,325)	$	1,002,522

HTM




Municipal bonds	$	4,169	$	136	$	—	$	4,305

At ~~June~~September 30, 2022, the Company held ~~$33.1~~$21.1 million of trading securities, consisting of US Treasury notes used as economic hedges of our mortgage servicing rights, which are carried at fair value and included as investment securities on the balance sheet. Unrealized gains, net, on trading securities, which are included in loan servicing income, were ~~$45 thousand~~$2.0 million at ~~June~~

September 30, 2022. For the ~~three~~quarter and ~~six~~nine months ended ~~June~~September 30, 2022, trading losses of ~~$3.1~~$2.6 million and ~~$3.9~~$6.4 million, respectively, were recorded in servicing income on the consolidated income statements.

MBS and CMOs represent securities issued by government sponsored enterprises ("GSEs"). Most of the MBS and CMO securities in our investment portfolio are guaranteed by Fannie Mae, Ginnie Mae or Freddie Mac. Municipal bonds are comprised of general obligation bonds (i.e., backed by the general credit of the issuer) and revenue bonds (i.e., backed by either

collateral or revenues from the specific project being financed) issued by various municipal corporations. As of ~~June~~September 30, 2022 and December 31, 2021, all securities held, including municipal bonds and corporate debt securities, were rated investment grade, based upon external ratings 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.~~Service.

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


		At June 30, 2022													At September 30, 2022
		Less than 12 months				12 months or more				Total					Less than 12 months				12 months or more				Total
(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:
Residential	Residential	$	(2,106)	$	60,558	$	(558)	$	2,089	$	(2,664)	$	62,647	Residential	$	(9,164)	$	195,834	$	(653)	$	1,964	$	(9,817)	$	197,798
Commercial	Commercial	(6,503)		63,553		—		—		(6,503)		63,553		Commercial	(9,182)		56,380		(652)		2,476		(9,834)		58,856
CMOs:	CMOs:													CMOs:
Residential	Residential	(14,699)		263,668		(3,878)		19,095		(18,577)		282,763		Residential	(29,963)		407,507		(6,058)		22,157		(36,021)		429,664
Commercial	Commercial	(4,410)		98,776		(855)		7,267		(5,265)		106,043		Commercial	(5,731)		83,623		(1,294)		7,238		(7,025)		90,861
Municipal bonds	Municipal bonds	(44,369)		449,658		(3,366)		10,638		(47,735)		460,296		Municipal bonds	(62,825)		391,637		(7,764)		24,560		(70,589)		416,197
Corporate debt securities	Corporate debt securities	(1,462)		30,259		—		—		(1,462)		30,259		Corporate debt securities	(2,971)		33,692		—		—		(2,971)		33,692
U.S. Treasury securities	U.S. Treasury securities	(2,248)		20,930		—		—		(2,248)		20,930		U.S. Treasury securities	(745)		4,693		(2,520)		15,134		(3,265)		19,827

Total	Total	$	(75,797)	$	987,402	$	(8,657)	$	39,089	$	(84,454)	$	1,026,491	Total	$	(120,581)	$	1,173,366	$	(18,941)	$	73,529	$	(139,522)	$	1,246,895
HTM	HTM													HTM

Municipal bonds	Municipal bonds	$	(32)	$	2,443	$	—	$	—	$	(32)	$	2,443	Municipal bonds	$	(101)	$	2,998	$	—	$	—	$	(101)	$	2,998


	At December 31, 2021
	Less than 12 months				12 months or more				Total
(in thousands)	Gross unrealized losses		Fair value		Gross unrealized losses		Fair value		Gross unrealized losses		Fair value


MBS:
Residential	$	(38)	$	5,324	$	(300)	$	2,406	$	(338)	$	7,730
Commercial	(235)		18,127		—		—		(235)		18,127
CMOs:
Residential	(1,007)		53,068		(314)		7,116		(1,321)		60,184
Commercial	(135)		14,806		(198)		5,132		(333)		19,938
Municipal bonds	(914)		64,237		(10)		1,058		(924)		65,295
Corporate debt securities	(1)		3,164		—		—		(1)		3,164
U.S. Treasury securities	(173)		23,175		—		—		(173)		23,175

Total	$	(2,503)	$	181,901	$	(822)	$	15,712	$	(3,325)	$	197,613

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 ~~June~~

September 30, 2022 or December 31, 2021. In addition, as of ~~June~~September 30, 2022 and December 31, 2021, the Company had not made a decision to sell any of its debt securities held, nor did the Company consider it more likely than not that it would be required to sell such securities before recovery of their amortized cost basis.

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

At June 30, 2022
Within one year After one year
through five years After five years
through ten years After
ten years Total
(dollars in thousands) Fair
Value Weighted
Average
Yield Fair
Value Weighted
Average
Yield Fair
Value Weighted
Average
Yield Fair
Value Weighted
Average
Yield Fair
Value Weighted
Average
Yield
AFS
   Municipal bonds $ 4,122 3.55 % $ 16,348 3.02 % $ 73,618 3.46 % $ 441,265 2.99 % $ 535,353 3.05 %
   Corporate debt securities — — % 5,463 3.50 % 24,867 4.34 % — — % 30,330 4.20 %
   U.S. Treasury securities — — % — — % 20,930 1.16 % — — % 20,930 1.16 %
Total $ 4,122 3.55 % $ 21,811 3.14 % $ 119,415 3.22 % $ 441,265 2.99 % $ 586,613 3.04 %
HTM
   Municipal bonds $ 646 3.49 % $ 2,443 2.06 % $ — — % $ — — % $ 3,089 2.35 %


	At September 30, 2022
	Within one year				After one year through five years				After five years through ten years				After ten years				Total
(dollars in thousands)	Fair Value		Weighted Average Yield		Fair Value		Weighted Average Yield		Fair Value		Weighted Average Yield		Fair Value		Weighted Average Yield		Fair Value		Weighted Average Yield

AFS






Municipal bonds	$	1,112	3.94	%	$	5,394	2.24	%	$	56,905	3.36	%	$	364,786	2.74	%	$	428,197	2.82	%
Corporate debt securities	—		—	%	5,321		3.44	%	28,441		4.39	%	—		—	%	33,762		4.25	%
U.S. Treasury securities	—		—	%	—		—	%	19,827		1.10	%	—		—	%	19,827		1.10	%
Agency debentures	4,004		4.33	%	—		—	%	—		—	%	—		—	%	4,004		4.33	%
Total	$	5,116	4.24	%	$	10,715	2.82	%	$	105,173	3.19	%	$	364,786	2.74	%	$	485,790	2.85	%

HTM




Municipal bonds	$	641	3.47	%	$	2,357	2.00	%	$	—	—	%	$	—	—	%	$	2,998	2.30	%


	At December 31, 2021
	Within one year				After one year through five years				After five years through ten years				After ten years				Total
(dollars in thousands)	Fair Value		Weighted Average Yield		Fair Value		Weighted Average Yield		Fair Value		Weighted Average Yield		Fair Value		Weighted Average Yield		Fair Value		Weighted Average Yield







AFS
Municipal bonds	$	4,933	3.79	%	$	14,366	3.26	%	$	68,025	3.60	%	$	452,599	3.23	%	$	539,923	3.28	%
Corporate debt securities	—		—	%	6,563		3.60	%	13,053		5.03	%	—		—	%	19,616		4.55	%
U.S. Treasury securities	—		—	%	—		—	%	23,175		1.27	%	—		—	%	23,175		1.27	%

Total	$	4,933	3.79	%	$	20,929	3.37	%	$	104,253	3.23	%	$	452,599	3.23	%	$	582,714	3.24	%

HTM




Municipal bonds	$	1,684	2.86	%	$	2,621	2.12	%	$	—	—	%	$	—	—	%	$	4,305	2.42	%

The weighted-average yield is computed using the contractual coupon of each security weighted based on the fair value of each security and does not include adjustments to a tax equivalent basis. 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 ~~June~~September 30, 2022 and December 31, 2021 was ~~2.30%~~2.78% and 1.82%, respectively.

Sales of AFS investment securities were as follows:


		Quarter Ended June 30,				Six Months Ended June 30,					Quarter Ended September 30,				Nine Months Ended September 30,
(in thousands)	(in thousands)	2022		2021		2022		2021		(in thousands)	2022		2021		2022		2021

Proceeds	Proceeds	$	—	$	28,187	$	962	$	28,187	Proceeds	$	74,399	$	—	$	75,361	$	28,187
Gross gains	Gross gains	—		288		71		288		Gross gains	1,334		—		1,405		288
Gross losses	Gross losses	—		(226)		—		(226)		Gross losses	(1,381)		—		(1,381)		(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:


(in thousands)	(in thousands)	At June 30, 2022		At December 31, 2021		(in thousands)	At September 30, 2022		At December 31, 2021

Washington, Oregon and California to secure public deposits	Washington, Oregon and California to secure public deposits	$	195,497	$	206,153	Washington, Oregon and California to secure public deposits	$	220,689	$	206,153

Other securities pledged	Other securities pledged	4,787		5,258		Other securities pledged	2,053		5,258
Total securities pledged as collateral	Total securities pledged as collateral	$	200,284	$	211,411	Total securities pledged as collateral	$	222,742	$	211,411

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

Tax-exempt interest income on investment securities was $3.1 million and ~~$2.5~~$2.6 million for the quarters ended ~~June~~September 30, 2022 and 2021, respectively, and ~~$5.8~~$8.9 million and ~~$5.0~~$7.6 million for the ~~six~~nine months ended ~~June~~September 30, 2022 and 2021, respectively.

NOTE 3 -LOANS AND CREDIT QUALITY:

The Company's LHFI is divided into two portfolio segments, commercial loans and consumer loans. Within each portfolio segment, the Company monitors and assesses credit risk based on the risk characteristics of each of the following loan classes: non-owner occupied commercial real estate ("CRE"), multifamily, construction and land development, owner occupied CRE and commercial business loans within the commercial loan portfolio segment and single family and home equity and other loans within the consumer loan portfolio segment. LHFI consists of the following:


(in thousands)	(in thousands)	At June 30, 2022		At December 31, 2021		(in thousands)	At September 30, 2022		At December 31, 2021

CRE	CRE					CRE
Non-owner occupied CRE	Non-owner occupied CRE	$	711,077	$	705,359	Non-owner occupied CRE	$	666,394	$	705,359
Multifamily	Multifamily	3,475,697		2,415,359		Multifamily	3,923,946		2,415,359
Construction/land development	Construction/land development	569,896		496,144		Construction/land development	590,092		496,144
Total	Total	4,756,670		3,616,862		Total	5,180,432		3,616,862
Commercial and industrial loans	Commercial and industrial loans					Commercial and industrial loans
Owner occupied CRE	Owner occupied CRE	470,259		457,706		Owner occupied CRE	432,114		457,706
Commercial business	Commercial business	393,764		401,872		Commercial business	361,635		401,872
Total	Total	864,023		859,578		Total	793,749		859,578
Consumer loans	Consumer loans					Consumer loans
Single family	Single family	822,389		763,331		Single family	907,044		763,331
Home equity and other	Home equity and other	316,655		303,078		Home equity and other	332,262		303,078
Total (1)	Total (1)	1,139,044		1,066,409		Total (1)	1,239,306		1,066,409
Total LHFI	Total LHFI	6,759,737		5,542,849		Total LHFI	7,213,487		5,542,849
Allowance for credit losses ("ACL")	Allowance for credit losses ("ACL")	(37,355)		(47,123)		Allowance for credit losses ("ACL")	(37,606)		(47,123)
Total LHFI less ACL	Total LHFI less ACL	$	6,722,382	$	5,495,726	Total LHFI less ACL	$	7,175,881	$	5,495,726

(1) Includes ~~$6.5~~$5.8 million and $7.3 million at ~~June~~September 30, 2022 and December 31, 2021, respectively, of loans where a fair value option election was made at the time of origination and, therefore, are carried at fair value with changes in fair value recognized in the consolidated income statements.

Loans totaling ~~$3.3~~$3.8 billion and $2.8 billion at ~~June~~September 30, 2022 and December 31, 2021, respectively, were pledged to secure borrowings from the Federal Home Loan Bank ("FHLB") and loans totaling ~~$466~~$501 million and $419 million at ~~June~~September 30, 2022 and December 31, 2021, respectively, were pledged to secure borrowings from the Federal Reserve Bank of San Francisco ("FRBSF").

Credit Risk Concentrations

LHFI are primarily secured by real estate located in the Pacific Northwest, California and Hawaii. At ~~June~~September 30, 2022 and December 31, 2021, multifamily loans in the state of California represented ~~36%~~37% and 33% of the total LHFI portfolio, respectively.

Credit Quality

Management considers the level of ACL to be appropriate to cover credit losses expected over the life of the loans for the LHFI portfolio. The cumulative loss rate used as the basis for the estimate of credit losses is comprised of the Bank’s historical loss experience and eight qualitative factors for current and forecasted periods.

During the ~~second~~third quarter of 2022, the historical expected loss rates decreased from December 31, 2021 due to minimal charge-offs ~~improving portfolio credit distribution~~ and favorable product mix risk composition. During the ~~second~~third quarter of 2022, the qualitative factors decreased significantly due to the continued favorable performance and outlook of the impact of the COVID-19 pandemic on our loan portfolio, which resulted in no COVID-19 management overlay. As of ~~June~~September 30, 2022, the Bank expects that the markets in which it operates will have declining collateral values and a stable economic outlook over the two-year forecast period.

In addition to the ACL for LHFI, the Company maintains a separate allowance for unfunded loan commitments which is included in accounts payable and other liabilities on our consolidated balance sheets. The allowance for unfunded commitments was ~~$2.8~~$2.6 million and $2.4 million at ~~June~~September 30, 2022 and December 31, 2021, respectively.

The Bank has elected to exclude accrued interest receivable from the evaluation of the ACL. Accrued interest on LHFI was ~~$20.6~~$23.9 million and $17.8 million at ~~June~~September 30, 2022 and December 31, 2021, respectively, and was reported in other assets in the consolidated balance sheets.

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


		Quarter Ended June 30,				Six Months Ended June 30,					Quarter Ended September 30,				Nine Months Ended September 30,
(in thousands)	(in thousands)	2022		2021		2022		2021		(in thousands)	2022		2021		2022		2021

Beginning balance	Beginning balance	$	37,944	$	64,047	$	47,123	$	64,294	Beginning balance	$	37,355	$	59,897	$	47,123	$	64,294
Provision for credit losses	Provision for credit losses	(216)		(4,145)		(9,439)		(4,516)		Provision for credit losses	249		(5,348)		(9,190)		(9,864)
Net (charge-offs) recoveries	Net (charge-offs) recoveries	(373)		(5)		(329)		119		Net (charge-offs) recoveries	2		(33)		(327)		86

Ending balance	Ending balance	$	37,355	$	59,897	$	37,355	$	59,897	Ending balance	$	37,606	$	54,516	$	37,606	$	54,516

Allowance for unfunded commitments:	Allowance for unfunded commitments:									Allowance for unfunded commitments:
Beginning balance	Beginning balance	$	2,627	$	1,959	$	2,404	$	1,588	Beginning balance	$	2,843	$	2,104	$	2,404	$	1,588
Provision for credit losses	Provision for credit losses	216		145		439		516		Provision for credit losses	(249)		348		190		864

Ending balance	Ending balance	$	2,843	$	2,104	$	2,843	$	2,104	Ending balance	$	2,594	$	2,452	$	2,594	$	2,452

Provision for credit losses:	Provision for credit losses:									Provision for credit losses:
Allowance for credit losses - loans	Allowance for credit losses - loans	$	(216)	$	(4,145)	$	(9,439)	$	(4,516)	Allowance for credit losses - loans	$	249	$	(5,348)	$	(9,190)	$	(9,864)
Allowance for unfunded commitments	Allowance for unfunded commitments	216		145		439		516		Allowance for unfunded commitments	(249)		348		190		864
Total	Total	$	—	$	(4,000)	$	(9,000)	$	(4,000)	Total	$	—	$	(5,000)	$	(9,000)	$	(9,000)

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


		Quarter Ended June 30, 2022											Quarter Ended September 30, 2022
(in thousands)	(in thousands)	Beginning balance		Charge-offs		Recoveries		Provision		Ending balance		(in thousands)	Beginning balance		Charge-offs		Recoveries		Provision		Ending balance

CRE	CRE											CRE
Non-owner occupied CRE	Non-owner occupied CRE	$	2,294	$	—	$	—	$	(114)	$	2,180	Non-owner occupied CRE	$	2,180	$	—	$	—	$	(74)	$	2,106
Multifamily	Multifamily	8,427		—		—		1,647		10,074		Multifamily	10,074		—		—		1,109		11,183
Construction/land development	Construction/land development											Construction/land development
Multifamily construction	Multifamily construction	456		—		—		110		566		Multifamily construction	566		—		—		99		665
CRE construction	CRE construction	184		—		—		1		185		CRE construction	185		—		—		(25)		160
Single family construction	Single family construction	7,735		—		—		2,952		10,687		Single family construction	10,687		—		—		(1,123)		9,564
Single family construction to permanent	Single family construction to permanent	990		—		—		169		1,159		Single family construction to permanent	1,159		—		—		(19)		1,140
Total	Total	20,086		—		—		4,765		24,851		Total	24,851		—		—		(33)		24,818
Commercial and industrial loans	Commercial and industrial loans											Commercial and industrial loans
Owner occupied CRE	Owner occupied CRE	3,536		—		—		(2,444)		1,092		Owner occupied CRE	1,092		—		—		(123)		969
Commercial business	Commercial business	6,910		(649)		45		(2,728)		3,578		Commercial business	3,578		(81)		25		197		3,719
Total	Total	10,446		(649)		45		(5,172)		4,670		Total	4,670		(81)		25		74		4,688
Consumer loans	Consumer loans											Consumer loans
Single family	Single family	3,762		—		136		129		4,027		Single family	4,027		—		1		436		4,464
Home equity and other	Home equity and other	3,650		(33)		128		62		3,807		Home equity and other	3,807		(43)		100		(228)		3,636
Total	Total	7,412		(33)		264		191		7,834		Total	7,834		(43)		101		208		8,100
Total ACL	Total ACL	$	37,944	$	(682)	$	309	$	(216)	$	37,355	Total ACL	$	37,355	$	(124)	$	126	$	249	$	37,606


		Quarter Ended June 30, 2021											Quarter Ended September 30, 2021
(in thousands)	(in thousands)	Beginning balance		Charge-offs		Recoveries		Provision		Ending balance		(in thousands)	Beginning balance		Charge-offs		Recoveries		Provision		Ending balance

CRE	CRE											CRE
Non-owner occupied CRE	Non-owner occupied CRE	$	9,218	$	—	$	—	$	(141)	$	9,077	Non-owner occupied CRE	$	9,077	$	—	$	—	$	559	$	9,636
Multifamily	Multifamily	6,969		—		—		276		7,245		Multifamily	7,245		—		—		(1,788)		5,457
Construction/land development	Construction/land development											Construction/land development
Multifamily construction	Multifamily construction	3,936		—		—		(3,436)		500		Multifamily construction	500		—		—		544		1,044
CRE construction	CRE construction	1,908		—		—		114		2,022		CRE construction	2,022		—		—		(1,671)		351
Single family construction	Single family construction	5,007		—		—		646		5,653		Single family construction	5,653		—		—		638		6,291
Single family construction to permanent	Single family construction to permanent	1,124		—		—		(77)		1,047		Single family construction to permanent	1,047		—		—		15		1,062
Total	Total	28,162		—		—		(2,618)		25,544		Total	25,544		—		—		(1,703)		23,841
Commercial and industrial loans	Commercial and industrial loans											Commercial and industrial loans
Owner occupied CRE	Owner occupied CRE	5,266		—		—		252		5,518		Owner occupied CRE	5,518		—		—		(233)		5,285
Commercial business	Commercial business	17,105		—		24		(1,255)		15,874		Commercial business	15,874		(116)		24		(1,309)		14,473
Total	Total	22,371		—		24		(1,003)		21,392		Total	21,392		(116)		24		(1,542)		19,758
Consumer loans	Consumer loans											Consumer loans
Single family	Single family	6,735		(44)		2		470		7,163		Single family	7,163		(13)		33		(1,426)		5,757
Home equity and other	Home equity and other	6,779		(35)		48		(994)		5,798		Home equity and other	5,798		(341)		380		(677)		5,160
Total	Total	13,514		(79)		50		(524)		12,961		Total	12,961		(354)		413		(2,103)		10,917
Total ACL	Total ACL	$	64,047	$	(79)	$	74	$	(4,145)	$	59,897	Total ACL	$	59,897	$	(470)	$	437	$	(5,348)	$	54,516


		Six Months Ended June 30, 2022											Nine Months Ended September 30, 2022
(in thousands)	(in thousands)	Beginning balance		Charge-offs		Recoveries		Provision		Ending balance		(in thousands)	Beginning balance		Charge-offs		Recoveries		Provision		Ending balance

CRE	CRE											CRE
Non-owner occupied CRE	Non-owner occupied CRE	$	7,509	$	—	$	—	$	(5,329)	$	2,180	Non-owner occupied CRE	$	7,509	$	—	$	—	$	(5,403)	$	2,106
Multifamily	Multifamily	5,854		—		—		4,220		10,074		Multifamily	5,854		—		—		5,329		11,183
Construction/land development	Construction/land development											Construction/land development
Multifamily construction	Multifamily construction	507		—		—		59		566		Multifamily construction	507		—		—		158		665
CRE construction	CRE construction	150		—		—		35		185		CRE construction	150		—		—		10		160
Single family construction	Single family construction	6,411		—		—		4,276		10,687		Single family construction	6,411		—		—		3,153		9,564
Single family construction to permanent	Single family construction to permanent	1,055		—		—		104		1,159		Single family construction to permanent	1,055		—		—		85		1,140
Total	Total	21,486		—		—		3,365		24,851		Total	21,486		—		—		3,332		24,818
Commercial and industrial loans	Commercial and industrial loans											Commercial and industrial loans
Owner occupied CRE	Owner occupied CRE	5,006		—		—		(3,914)		1,092		Owner occupied CRE	5,006		—		—		(4,037)		969
Commercial business	Commercial business	12,273		(660)		69		(8,104)		3,578		Commercial business	12,273		(741)		94		(7,907)		3,719
Total	Total	17,279		(660)		69		(12,018)		4,670		Total	17,279		(741)		94		(11,944)		4,688
Consumer loans	Consumer loans											Consumer loans
Single family	Single family	4,394		—		140		(507)		4,027		Single family	4,394		—		141		(71)		4,464
Home equity and other	Home equity and other	3,964		(66)		188		(279)		3,807		Home equity and other	3,964		(109)		288		(507)		3,636
Total	Total	8,358		(66)		328		(786)		7,834		Total	8,358		(109)		429		(578)		8,100
Total ACL	Total ACL	$	47,123	$	(726)	$	397	$	(9,439)	$	37,355	Total ACL	$	47,123	$	(850)	$	523	$	(9,190)	$	37,606


		Six Months Ended June 30, 2021											Nine Months Ended September 30, 2021
(in thousands)	(in thousands)	Beginning balance		Charge-offs		Recoveries		Provision		Ending balance		(in thousands)	Beginning balance		Charge-offs		Recoveries		Provision		Ending balance

CRE	CRE											CRE
Non-owner occupied CRE	Non-owner occupied CRE	$	8,845	$	—	$	—	$	232	$	9,077	Non-owner occupied CRE	$	8,845	$	—	$	—	$	791	$	9,636
Multifamily	Multifamily	6,072		—		—		1,173		7,245		Multifamily	6,072		—		—		(615)		5,457
Construction/land development	Construction/land development											Construction/land development
Multifamily construction	Multifamily construction	4,903		—		—		(4,403)		500		Multifamily construction	4,903		—		—		(3,859)		1,044
CRE construction	CRE construction	1,670		—		—		352		2,022		CRE construction	1,670		—		—		(1,319)		351
Single family construction	Single family construction	5,130		—		—		523		5,653		Single family construction	5,130		—		—		1,161		6,291
Single family construction to permanent	Single family construction to permanent	1,315		—		—		(268)		1,047		Single family construction to permanent	1,315		—		—		(253)		1,062
Total	Total	27,935		—		—		(2,391)		25,544		Total	27,935		—		—		(4,094)		23,841
Commercial and industrial loans	Commercial and industrial loans											Commercial and industrial loans
Owner occupied CRE	Owner occupied CRE	4,994		—		—		524		5,518		Owner occupied CRE	4,994		—		—		291		5,285
Commercial business	Commercial business	17,043		—		98		(1,267)		15,874		Commercial business	17,043		(116)		122		(2,576)		14,473
Total	Total	22,037		—		98		(743)		21,392		Total	22,037		(116)		122		(2,285)		19,758
Consumer loans	Consumer loans											Consumer loans
Single family	Single family	6,906		(114)		122		249		7,163		Single family	6,906		(127)		155		(1,177)		5,757
Home equity and other	Home equity and other	7,416		(91)		104		(1,631)		5,798		Home equity and other	7,416		(432)		484		(2,308)		5,160
Total	Total	14,322		(205)		226		(1,382)		12,961		Total	14,322		(559)		639		(3,485)		10,917
Total ACL	Total ACL	$	64,294	$	(205)	$	324	$	(4,516)	$	59,897	Total ACL	$	64,294	$	(675)	$	761	$	(9,864)	$	54,516

The following table presents a vintage analysis of the commercial portfolio segment by loan sub-class and risk rating or delinquency status.
At June 30, 2022
(in thousands) 2022 2021 2020 2019 2018 2017 and prior Revolving Revolving-term Total
COMMERCIAL PORTFOLIO
Non-owner occupied CRE
Pass $ 60,429 $ 68,503 $ 49,985 $ 142,238 $ 121,467 $ 264,425 $ 3,187 $ 843 $ 711,077
Special Mention — — — — — — — — —
Substandard — — — — — — — — —
Total 60,429 68,503 49,985 142,238 121,467 264,425 3,187 843 711,077
Multifamily
Pass 1,183,994 1,294,761 523,758 223,254 59,858 161,060 501 — 3,447,186
Special Mention — — 8,676 19,835 — — — — 28,511
Substandard — — — — — — — — —
Total 1,183,994 1,294,761 532,434 243,089 59,858 161,060 501 — 3,475,697
Multifamily construction
Pass (179) 17,954 25,601 — — — — — 43,376
Special Mention — — — — — — — — —
Substandard — — — — — — — — —
Total (179) 17,954 25,601 — — — — — 43,376
CRE construction
Pass — 14,146 3,957 — 1,887 534 — — 20,524
Special Mention — — — — — — — — —
Substandard — — — — — — — — —
Total — 14,146 3,957 — 1,887 534 — — 20,524
Single family construction
Pass 89,586 108,460 22,717 12,438 — 76 113,846 — 347,123
Special Mention — — — — — — — — —
Substandard — — — — — — — — —
Total 89,586 108,460 22,717 12,438 — 76 113,846 — 347,123
Single family construction to permanent
Current 21,192 107,448 19,654 9,856 723 — — — 158,873
Past due:
30-59 days — — — — — — — — —
60-89 days — — — — — — — — —
90+ days — — — — — — — — —
Total 21,192 107,448 19,654 9,856 723 — — — 158,873
Owner occupied CRE
Pass 41,637 70,204 46,819 74,726 42,438 175,013 149 1,368 452,354
Special Mention — — — — 2,439 11,916 — — 14,355
Substandard — — — — 1,111 2,383 — 56 3,550
Total 41,637 70,204 46,819 74,726 45,988 189,312 149 1,424 470,259
Commercial business
Pass 52,389 48,098 48,079 34,689 17,952 23,204 141,298 1,999 367,708
Special Mention — 201 26 — 194 3,523 756 201 4,901
Substandard — 7,448 2,915 2,284 1,787 2,091 4,620 10 21,155
Total 52,389 55,747 51,020 36,973 19,933 28,818 146,674 2,210 393,764
Total commercial portfolio $ 1,449,048 $ 1,737,223 $ 752,187 $ 519,320 $ 249,856 $ 644,225 $ 264,357 $ 4,477 $ 5,620,693


	At September 30, 2022
(in thousands)	2022		2021		2020		2019		2018		2017 and prior		Revolving		Revolving-term		Total
COMMERCIAL PORTFOLIO
Non-owner occupied CRE
Pass	$	68,355	$	68,432	$	42,525	$	140,499	$	92,645	$	246,729	$	2,141	$	802	$	662,128
Special Mention	—		—		—		—		—		4,266		—		—		4,266
Substandard	—		—		—		—		—		—		—		—		—
Total	68,355		68,432		42,525		140,499		92,645		250,995		2,141		802		666,394
Multifamily
Pass	1,642,429		1,292,784		531,838		222,624		59,604		142,064		320		—		3,891,663
Special Mention	—		—		4,893		19,835		—		7,555		—		—		32,283
Substandard	—		—		—		—		—		—		—		—		—
Total	1,642,429		1,292,784		536,731		242,459		59,604		149,619		320		—		3,923,946
Multifamily construction
Pass	9,078		40,846		12,793		—		—		—		—		—		62,717
Special Mention	—		—		—		—		—		—		—		—		—
Substandard	—		—		—		—		—		—		—		—		—
Total	9,078		40,846		12,793		—		—		—		—		—		62,717
CRE construction
Pass	—		14,314		3,959		—		—		311		—		—		18,584
Special Mention	—		—		—		—		—		—		—		—		—
Substandard	—		—		—		—		—		—		—		—		—
Total	—		14,314		3,959		—		—		311		—		—		18,584
Single family construction
Pass	130,517		72,095		24,369		2,129		—		75		116,346		—		345,531
Special Mention	—		—		—		—		—		—		—		—		—
Substandard	—		—		—		—		—		—		—		—		—
Total	130,517		72,095		24,369		2,129		—		75		116,346		—		345,531
Single family construction to permanent
Current	40,499		99,023		17,758		5,186		794		—		—		—		163,260
Past due:
30-59 days	—		—		—		—		—		—		—		—		—
60-89 days	—		—		—		—		—		—		—		—		—
90+ days	—		—		—		—		—		—		—		—		—
Total	40,499		99,023		17,758		5,186		794		—		—		—		163,260
Owner occupied CRE
Pass	49,583		53,256		45,926		72,717		41,147		147,619		—		1,123		411,371
Special Mention	—		—		—		—		2,149		13,944		—		—		16,093
Substandard	—		—		—		—		2,159		2,491		—		—		4,650
Total	49,583		53,256		45,926		72,717		45,455		164,054		—		1,123		432,114
Commercial business
Pass	56,784		46,473		47,357		22,740		14,232		20,234		123,215		1,931		332,966
Special Mention	—		189		—		—		193		3,796		753		109		5,040
Substandard	—		6,986		2,778		4,724		2,485		2,031		4,625		—		23,629
Total	56,784		53,648		50,135		27,464		16,910		26,061		128,593		2,040		361,635
Total commercial portfolio	$	1,997,245	$	1,694,398	$	734,196	$	490,454	$	215,408	$	591,115	$	247,400	$	3,965	$	5,974,181

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


		At June 30, 2022																			At September 30, 2022
(in thousands)	(in thousands)	2022		2021		2020		2019		2018		2017 and prior		Revolving		Revolving-term		Total		(in thousands)	2022		2021		2020		2019		2018		2017 and prior		Revolving		Revolving-term		Total

CONSUMER PORTFOLIO	CONSUMER PORTFOLIO																			CONSUMER PORTFOLIO
Single family	Single family																			Single family
Current	Current	$	123,677	$	194,198	$	149,161	$	47,744	$	48,522	$	256,738	$	—	$	—	$	820,040	Current	$	199,172	$	220,456	$	147,398	$	48,390	$	47,679	$	241,953	$	—	$	—	$	905,048
Past due:	Past due:																			Past due:
30-59 days	30-59 days	—		—		—		—		—		462		—		—		462		30-59 days	—		—		—		—		—		93		—		—		93
60-89 days	60-89 days	—		—		—		—		—		173		—		—		173		60-89 days	—		—		—		—		—		—		—		—		—
90+ days	90+ days	—		—		—		432		452		830		—		—		1,714		90+ days	—		—		—		432		—		1,471		—		—		1,903
Total	Total	123,677		194,198		149,161		48,176		48,974		258,203		—		—		822,389		Total	199,172		220,456		147,398		48,822		47,679		243,517		—		—		907,044
Home equity and other	Home equity and other																			Home equity and other
Current	Current	1,188		1,307		242		238		175		2,085		306,225		4,457		315,917		Current	2,347		912		188		191		139		1,622		322,132		4,172		331,703
Past due:	Past due:																			Past due:
30-59 days	30-59 days	3		3		13		—		—		—		191		—		210		30-59 days	—		30		—		—		—		52		232		2		316
60-89 days	60-89 days	—		3		—		—		—		94		99		—		196		60-89 days	—		—		—		—		—		—		4		—		4
90+ days	90+ days	—		4		—		—		—		95		233		—		332		90+ days	25		—		—		—		—		214		—		—		239
Total	Total	1,191		1,317		255		238		175		2,274		306,748		4,457		316,655		Total	2,372		942		188		191		139		1,888		322,368		4,174		332,262
Total consumer portfolio (1)	Total consumer portfolio (1)	$	124,868	$	195,515	$	149,416	$	48,414	$	49,149	$	260,477	$	306,748	$	4,457	$	1,139,044	Total consumer portfolio (1)	$	201,544	$	221,398	$	147,586	$	49,013	$	47,818	$	245,405	$	322,368	$	4,174	$	1,239,306
Total LHFI	Total LHFI	$	1,573,916	$	1,932,738	$	901,603	$	567,734	$	299,005	$	904,702	$	571,105	$	8,934	$	6,759,737	Total LHFI	$	2,198,789	$	1,915,796	$	881,782	$	539,467	$	263,226	$	836,520	$	569,768	$	8,139	$	7,213,487

(1) Includes ~~$6.5~~$5.8 million of loans where a fair value option election was made at the time of origination and, therefore, are carried at fair value with changes in fair value recognized in the consolidated income statements.

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


	At December 31, 2021
(in thousands)	2021		2020		2019		2018		2017		2016 and prior		Revolving		Revolving-term		Total
COMMERCIAL PORTFOLIO
Non-owner occupied CRE
Pass	$	68,647	$	50,571	$	169,711	$	130,877	$	100,674	$	183,024	$	963	$	892	$	705,359
Special Mention	—		—		—		—		—		—		—		—		—
Substandard	—		—		—		—		—		—		—		—		—
Total	68,647		50,571		169,711		130,877		100,674		183,024		963		892		705,359
Multifamily
Pass	1,315,204		561,666		286,826		60,372		26,065		165,225		1		—		2,415,359
Special Mention	—		—		—		—		—		—		—		—		—
Substandard	—		—		—		—		—		—		—		—		—
Total	1,315,204		561,666		286,826		60,372		26,065		165,225		1		—		2,415,359
Multifamily construction
Pass	7,825		22,863		7,173		—		—		—		—		—		37,861
Special Mention	—		—		—		—		—		—		—		—		—
Substandard	—		—		—		—		—		—		—		—		—
Total	7,825		22,863		7,173		—		—		—		—		—		37,861
CRE construction
Pass	7,694		3,960		—		1,962		—		556		—		—		14,172
Special Mention	—		—		—		—		—		—		—		—		—
Substandard	—		—		—		—		—		—		—		—		—
Total	7,694		3,960		—		1,962		—		556		—		—		14,172
Single family construction
Pass	146,595		35,640		14,509		—		—		77		99,206		—		296,027
Special Mention	—		—		—		—		—		—		—		—		—
Substandard	—		—		—		—		—		—		—		—		—
Total	146,595		35,640		14,509		—		—		77		99,206		—		296,027
Single family construction to permanent
Current	90,311		42,636		13,362		1,775		—		—		—		—		148,084
Past due:
30-59 days	—		—		—		—		—		—		—		—		—
60-89 days	—		—		—		—		—		—		—		—		—
90+ days	—		—		—		—		—		—		—		—		—
Total	90,311		42,636		13,362		1,775		—		—		—		—		148,084
Owner occupied CRE
Pass	70,902		47,536		57,423		47,716		67,042		106,659		798		2,839		400,915
Special Mention	—		—		—		2,196		6,019		145		—		60		8,420
Substandard	—		—		18,665		1,111		10,151		18,444		—		—		48,371
Total	70,902		47,536		76,088		51,023		83,212		125,248		798		2,899		457,706
Commercial business
Pass	88,139		51,453		44,882		24,711		11,859		21,258		112,759		2,104		357,165
Special Mention	—		—		7,396		—		4,396		—		5,613		134		17,539
Substandard	9,716		3,399		1,667		5,928		1,096		1,328		3,932		102		27,168
Total	97,855		54,852		53,945		30,639		17,351		22,586		122,304		2,340		401,872
Total commercial portfolio	$	1,805,033	$	819,724	$	621,614	$	276,648	$	227,302	$	496,716	$	223,272	$	6,131	$	4,476,440

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


	At December 31, 2021
(in thousands)	2021		2020		2019		2018		2017		2016 and prior		Revolving		Revolving-term		Total

CONSUMER PORTFOLIO
Single family
Current	$	176,110	$	156,360	$	62,369	$	66,063	$	95,988	$	204,229	$	—	$	—	$	761,119
Past due:
30-59 days	—		—		291		—		—		—		—		—		291
60-89 days	—		—		—		—		314		471		—		—		785
90+ days	—		—		561		452		—		123		—		—		1,136
Total	176,110		156,360		63,221		66,515		96,302		204,823		—		—		763,331
Home equity and other
Current	2,005		474		393		532		516		2,609		290,512		5,273		302,314
Past due:
30-59 days	—		3		—		—		—		94		40		—		137
60-89 days	—		—		—		—		—		—		12		62		74
90+ days	3		—		—		—		—		6		544		—		553
Total	2,008		477		393		532		516		2,709		291,108		5,335		303,078
Total consumer portfolio (1)	$	178,118	$	156,837	$	63,614	$	67,047	$	96,818	$	207,532	$	291,108	$	5,335	$	1,066,409
Total LHFI	$	1,983,151	$	976,561	$	685,228	$	343,695	$	324,120	$	704,248	$	514,380	$	11,466	$	5,542,849

(1) Includes $7.3 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.

Collateral Dependent Loans

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


		At June 30, 2022										At September 30, 2022
(in thousands)	(in thousands)	Land		1-4 Family		Non-residential real estate		Other non-real estate		Total			(in thousands)	Land		1-4 Family		Non-residential real estate		Other non-real estate		Total

Commercial and industrial loans	Commercial and industrial loans												Commercial and industrial loans
Owner occupied CRE	Owner occupied CRE	$	1,111	$	—	$	1,410	$	—	$	2,521		Owner occupied CRE	$	1,111	$	—	$	1,410	$	—	$	2,521
Commercial business	Commercial business	362		—		562		4		928			Commercial business	62		—		562		4		628

Total collateral-dependent loans	Total collateral-dependent loans	$	1,473	$	—	$	1,972	$	4	$	3,449		Total collateral-dependent loans	$	1,173	$	—	$	1,972	$	4	$	3,149


	At December 31, 2021
(in thousands)	Land		1-4 Family		Non-residential real estate		Other non-real estate		Total










Commercial and industrial loans
Owner occupied CRE	$	1,111	$	—	$	2,456	$	—	$	3,567
Commercial business	362		27		562		286		1,237
Total	1,473		27		3,018		286		4,804
Consumer loans
Single family	—		1,598		—		—		1,598
Home equity loans and other	—		19		—		—		19
Total	—		1,617		—		—		1,617
Total collateral-dependent loans	$	1,473	$	1,644	$	3,018	$	286	$	6,421

Nonaccrual and Past Due Loans

The following table presents nonaccrual status for loans:


		At June 30, 2022					At December 31, 2021					At September 30, 2022					At December 31, 2021
(in thousands)	(in thousands)		Nonaccrual with no related ACL		Total Nonaccrual		Nonaccrual with no related ACL		Total Nonaccrual		(in thousands)		Nonaccrual with no related ACL		Total Nonaccrual		Nonaccrual with no related ACL		Total Nonaccrual

Commercial and industrial loans	Commercial and industrial loans										Commercial and industrial loans
Owner occupied CRE	Owner occupied CRE		$	2,521	$	2,521	$	3,568	$	3,568	Owner occupied CRE		$	2,521	$	2,521	$	3,568	$	3,568
Commercial business	Commercial business		928		1,405		1,210		5,023		Commercial business		628		4,721		1,210		5,023
Total	Total		3,449		3,926		4,778		8,591		Total		3,149		7,242		4,778		8,591
Consumer loans	Consumer loans										Consumer loans
Single family	Single family		495		4,186		1,324		2,802		Single family		341		3,893		1,324		2,802
Home equity and other	Home equity and other		4		970		23		808		Home equity and other		5		1,131		23		808
Total	Total		499		5,156		1,347		3,610		Total		346		5,024		1,347		3,610
Total nonaccrual loans	Total nonaccrual loans		$	3,948	$	9,082	$	6,125	$	12,201	Total nonaccrual loans		$	3,495	$	12,266	$	6,125	$	12,201

The following tables present an aging analysis of past due loans by loan portfolio segment and loan sub-class:
At June 30, 2022
Past Due and Still Accruing
(in thousands) 30-59 days 60-89 days 90 days or
more Nonaccrual
Total past
due and nonaccrual (3)
Current Total
loans
CRE
Non-owner occupied CRE $ — $ — $ — $ — $ — $ 711,077 $ 711,077
Multifamily — — — — — 3,475,697 3,475,697
Construction/land development
Multifamily construction — — — — — 43,376 43,376
CRE construction — — — — — 20,524 20,524
Single family construction — — — — — 347,123 347,123
Single family construction to permanent — — — — — 158,873 158,873
Total — — — — — 4,756,670 4,756,670
Commercial and industrial loans
Owner occupied CRE — — — 2,521 2,521 467,738 470,259
Commercial business 870 7 — 1,405 2,282 391,482 393,764
Total 870 7 — 3,926 4,803 859,220 864,023
Consumer loans
Single family 2,384 1,505 7,010 (2) 4,186 15,085 807,304 822,389
Home equity and other 38 197 — 970 1,205 315,450 316,655
Total 2,422 1,702 7,010 5,156 16,290 1,122,754 1,139,044 (1)
Total loans $ 3,292 $ 1,709 $ 7,010 $ 9,082 $ 21,093 $ 6,738,644 $ 6,759,737
% 0.05 % 0.03 % 0.10 % 0.13 % 0.31 % 99.69 % 100.00 %


	At September 30, 2022
	Past Due and Still Accruing
(in thousands)	30-59 days			60-89 days			90 days or more				Nonaccrual			Total past due and nonaccrual (3)			Current			Total loans

CRE
Non-owner occupied CRE	$	—		$	—		$	—			$	—		$	—		$	666,394		$	666,394
Multifamily	—			—			—				—			—			3,923,946			3,923,946
Construction/land development
Multifamily construction	—			—			—				—			—			62,717			62,717
CRE construction	—			—			—				—			—			18,584			18,584
Single family construction	—			—			—				—			—			345,531			345,531
Single family construction to permanent	—			—			—				—			—			163,260			163,260
Total	—			—			—				—			—			5,180,432			5,180,432
Commercial and industrial loans
Owner occupied CRE	—			—			—				2,521			2,521			429,593			432,114
Commercial business	—			—			—				4,721			4,721			356,914			361,635
Total	—			—			—				7,242			7,242			786,507			793,749
Consumer loans
Single family	2,996			863			5,064			(2)	3,893			12,816			894,228			907,044
Home equity and other	143			4			—				1,131			1,278			330,984			332,262
Total	3,139			867			5,064				5,024			14,094			1,225,212			1,239,306			(1)
Total loans	$	3,139		$	867		$	5,064			$	12,266		$	21,336		$	7,192,151		$	7,213,487
%	0.04		%	0.01		%	0.07		%		0.17		%	0.30		%	99.70		%	100.00		%

2322


	At December 31, 2021
	Past Due and Still Accruing
(in thousands)	30-59 days			60-89 days			90 days or more				Nonaccrual			Total past due and nonaccrual (3)			Current			Total loans

CRE
Non-owner occupied CRE	$	—		$	—		$	—			$	—		$	—		$	705,359		$	705,359
Multifamily	—			—			—				—			—			2,415,359			2,415,359
Construction/land development
Multifamily construction	—			—			—				—			—			37,861			37,861
CRE construction	—			—			—				—			—			14,172			14,172
Single family construction	—			—			—				—			—			296,027			296,027
Single family construction to permanent	—			—			—				—			—			148,084			148,084
Total	—			—			—				—			—			3,616,862			3,616,862
Commercial and industrial loans
Owner occupied CRE	—			—			—				3,568			3,568			454,138			457,706
Commercial business	198			—			—				5,023			5,221			396,651			401,872
Total	198			—			—				8,591			8,789			850,789			859,578
Consumer loans
Single family	892			820			6,717			(2)	2,802			11,231			752,100			763,331
Home equity and other	118			74			—				808			1,000			302,078			303,078
Total	1,010			894			6,717				3,610			12,231			1,054,178			1,066,409			(1)
Total loans	$	1,208		$	894		$	6,717			$	12,201		$	21,020		$	5,521,829		$	5,542,849
%	0.02		%	0.02		%	0.12		%		0.22		%	0.38		%	99.62		%	100.00		%

(1)Includes ~~$6.5~~$5.8 million and $7.3 million of loans at ~~June~~September 30, 2022 and December 31, 2021, respectively, where a fair value option election was made at the time of origination and, therefore, are carried at fair value with changes in fair value recognized in our consolidated income statements.

(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~~Small Business Administration " SBA" of ~~$10.2~~$11.6 million and $8.4 million at ~~June~~September 30, 2022 and December 31, 2021, respectively.

Loan Modifications

The Company provides modifications to borrowers experiencing financial difficulty 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 in the quarter and ~~six~~nine months ended ~~June~~September 30, 2022 did not have a material impact on the ACL. The following tables provide information related to loans modified during the quarter and ~~six~~nine months ended ~~June~~September 30, 2022 to borrowers experiencing financial difficulty, disaggregated by class of financing receivable and type of concession granted:

(in thousands) Significant Payment Delay
Quarter Ended June 30, 2022 Six Months Ended June 30, 2022
Loan Type Amortized Cost Basis at Period End % of Total Class of Financing Receivable Amortized Cost Basis at Period End % of Total Class of Financing Receivable
Single family $ 340 0.04 % $ 340 0.04 %
Home equity and other — — % 70 0.02 %
(in thousands) Term Extension
Quarter Ended June 30, 2022 Six Months Ended June 30, 2022
Loan Type Amortized Cost Basis at Period End % of Total Class of Financing Receivable Amortized Cost Basis at Period End % of Total Class of Financing Receivable
Commercial business $ 1,578 0.40 % $ 1,578 0.40 %
Single family 236 0.03 % 272 0.03 %


	Significant Payment Delay
	Quarter Ended September 30, 2022				Nine Months Ended September 30, 2022
(in thousands)	Amortized Cost Basis at Period End		% of Total Class of Financing Receivable		Amortized Cost Basis at Period End		% of Total Class of Financing Receivable
Single family	$	682	0.08	%	$	1,209	0.13	%
Home equity and other	—		—	%	70		0.02	%


	Term Extension
	Quarter Ended September 30, 2022				Nine Months Ended September 30, 2022
(in thousands)	Amortized Cost Basis at Period End		% of Total Class of Financing Receivable		Amortized Cost Basis at Period End		% of Total Class of Financing Receivable
Commercial business	$	—	—	%	$	1,570	0.43	%
Single family	—		—	%	270		0.03	%


	Interest Rate Reduction and Significant Payment Delay
	Quarter Ended September 30, 2022				Nine Months Ended September 30, 2022
(in thousands)	Amortized Cost Basis at Period End		% of Total Class of Financing Receivable		Amortized Cost Basis at Period End		% of Total Class of Financing Receivable
Commercial business	$	477	0.13	%	$	477	0.13	%


	Interest Rate Reduction and Term Extension
	Quarter Ended September 30, 2022				Nine Months Ended September 30, 2022
(in thousands)	Amortized Cost Basis at Period End		% of Total Class of Financing Receivable		Amortized Cost Basis at Period End		% of Total Class of Financing Receivable
Single family	$	—	—	%	$	819	0.09	%


											Significant Payment Delay and Term Extension
											Quarter Ended September 30, 2022				Nine Months Ended September 30, 2022
(in thousands)	(in thousands)	Interest Rate Reduction and Term Extension								(in thousands)	Amortized Cost Basis at Period End		% of Total Class of Financing Receivable		Amortized Cost Basis at Period End		% of Total Class of Financing Receivable
		Quarter Ended June 30, 2022				Six Months Ended June 30, 2022
Loan Type		Amortized Cost Basis at Period End		% of Total Class of Financing Receivable		Amortized Cost Basis at Period End		% of Total Class of Financing Receivable
Single family	Single family	$	—	—	%	$	823	0.10	%	Single family	$	4,033	0.44	%	$	13,325	1.47	%

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

(in thousands) Significant Payment Delay and Term Extension
Quarter Ended June 30, 2022 Six Months Ended June 30, 2022
Loan Type Amortized Cost Basis at Period End % of Total Class of Financing Receivable Amortized Cost Basis at Period End % of Total Class of Financing Receivable
Single family $ 4,048 0.49 % $ 10,084 1.23 %
Home equity and other — — % 52 0.02 %


											Interest Rate Reduction, Significant Payment Delay and Term Extension
											Quarter Ended September 30, 2022				Nine Months Ended September 30, 2022
(in thousands)	(in thousands)	Interest Rate Reduction, Significant Payment Delay and Term Extension								(in thousands)	Amortized Cost Basis at Period End		% of Total Class of Financing Receivable		Amortized Cost Basis at Period End		% of Total Class of Financing Receivable
		Quarter Ended June 30, 2022				Six Months Ended June 30, 2022
Loan Type		Amortized Cost Basis at Period End		% of Total Class of Financing Receivable		Amortized Cost Basis at Period End		% of Total Class of Financing Receivable
Single family	Single family	$	2,775	0.34	%	$	6,898	0.84	%	Single family	$	294	0.03	%	$	7,185	0.79	%

2524

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

Interest Rate Reduction

(in thousands)

Quarter Ended ~~June~~September 30, 2022

~~Six~~Nine Months Ended ~~June~~September 30, 2022

Commercial business

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

Single family

Reduced weighted-average contractual interest rate from ~~4.79%~~4.38% to ~~3.56%~~4.13%.

Reduced weighted-average contractual interest rate from 4.35% to ~~3.36%~~3.39%.

Significant Payment Delay

(in thousands)

Quarter Ended ~~June~~September 30, 2022

~~Six~~Nine Months Ended ~~June~~September 30, 2022

Single family

Provided payment deferrals to borrowers. A weighted average ~~0.51%~~1.83% of loan balances were capitalized and added to the remaining term of the loan.

Provided payment deferrals to borrowers. A weighted average ~~0.20%~~0.22% of loan balances were capitalized and added to the remaining term of the loan.

Home equity and other

—

Provided payment deferrals to borrowers. A weighted average ~~3.41%~~3.44% of loan balances were capitalized and added to the remaining term of the loan.

Term Extension

(in thousands)

Quarter Ended ~~June~~September 30, 2022

~~Six~~Nine Months Ended ~~June~~September 30, 2022

Commercial business

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

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

Single family

Added a weighted average ~~6.4~~3.6 years to the life of loans, which reduced the monthly payment amounts to the borrowers.

Added a weighted average ~~4.5~~4.4 years to the life of loans, which reduced the monthly payment amounts to the borrowers.

Home equity and other

—

Added a weighted average 16.1 years to the life of loans, which reduced the monthly payment amounts to the borrowers.

Upon determination that a modified loan (or portion of a loan) has subsequently been deemed uncollectible, the loan (or portion of the loan) is written off. Therefore, the amortized cost basis of the loan is reduced by the uncollectible amount and the allowance for credit losses is adjusted by the same amount.

In the quarter ended June 30, 2022 there were no loans that were modified to borrowers experiencing financial difficulty during the three months ended March 31, 2022 that subsequently had a payment default.

~~0The~~The following table depicts the payment status of loans that have been modified to borrowers experiencing financial difficulty during the ~~three~~six months ended ~~March 31,~~June 30, 2022:


	Payment Status (Amortized Cost Basis) at September 30, 2022
(in thousands)	Current		30-89 Days Past Due		90+ Days Past Due

Commercial business	$	1,570	$	—	$	—
Single family	16,205		405		1,002
Home equity and other	121		—		—
Total	$	17,896	$	405	$	1,002

The following tables provide the amortized cost basis as of September 30, 2022 of loans that were modified to borrowers experiencing financial difficulty during the six months ended June 30, 2022 and subsequently had a payment default:



			~~Payment Status (Amortized~~Amortized Cost ~~Basis) at June~~Basis of Modified Loans That Subsequently Defaulted Quarter Ended September 30, 2022
~~Loan Type~~	~~Current~~(in thousands)				~~30-89 Days Past Due~~Significant Payment Delay				~~90+ Days Past Due~~Term Extension
			Interest Rate Reduction and Term Extension				Significant Payment Delay and Term Extension				Interest Rate Reduction, Significant Payment Delay and Term Extension
Single family			$	~~11,018~~—			$	—			$	—
~~Home equity and other~~	~~122~~				—				—
~~Total~~	$	~~11,140~~			$	—			$	—553

2625



	Amortized Cost Basis of Modified Loans That Subsequently Defaulted Nine Months Ended September 30, 2022
(in thousands)	Significant Payment Delay		Term Extension		Interest Rate Reduction and Term Extension		Significant Payment Delay and Term Extension		Interest Rate Reduction, Significant Payment Delay and Term Extension
Single family	$	—	$	—	$	—	$	172	$	1,555

NOTE 4–DEPOSITS:

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


		At June 30, 2022				At December 31, 2021					At September 30, 2022				At December 31, 2021
(dollars in thousands)	(dollars in thousands)	Amount		Weighted Average Rate		Amount		Weighted Average Rate		(dollars in thousands)	Amount		Weighted Average Rate		Amount		Weighted Average Rate

Noninterest-bearing demand deposits	Noninterest-bearing demand deposits	$	1,640,651	—	%	$	1,617,069	—	%	Noninterest-bearing demand deposits	$	1,547,642			$	1,617,069
Interest bearing:										Interest bearing:
Interest-bearing demand deposits	Interest-bearing demand deposits	590,889		0.10	%	513,810		0.10	%	Interest-bearing demand deposits	514,912		0.12	%	513,810		0.10	%
Savings	Savings	302,359		0.06	%	302,389		0.06	%	Savings	275,399		0.06	%	302,389		0.06	%
Money market	Money market	2,679,865		0.35	%	2,806,313		0.15	%	Money market	2,551,961		0.75	%	2,806,313		0.15	%
Certificates of deposit	Certificates of deposit	969,535		0.48	%	906,928		0.51	%	Certificates of deposit	1,720,317		1.58	%	906,928		0.51	%
Total		$	6,183,299	0.24	%	$	6,146,509	0.15	%
Total interest bearing deposits										Total interest bearing deposits	5,062,589		0.93	%	4,529,440		0.21	%
Total deposits										Total deposits	$	6,610,231	0.71	%	$	6,146,509	0.15	%

Certificates of deposit outstanding mature as follows:


(in thousands)	~~June~~September 30, 2022

Within one year	$	~~856,617~~1,368,503
One to two years	~~94,266~~338,825
Two to three years	~~13,974~~8,450
Three to four years	~~2,964~~2,433
Four to five years	~~1,708~~1,774
Thereafter	6332
Total	$	~~969,535~~1,720,317

The aggregate amount of certificate of deposits in denominations of more than the FDIC limit of $250 thousand at ~~June~~September 30, 2022 and December 31, 2021 were ~~$91~~$189 million and $108 million, respectively. There were ~~$270~~$512 million and $145 million of brokered deposits at ~~June~~September 30, 2022 and December 31, 2021, respectively.

NOTE 5–LONG-TERM DEBT:

At ~~June~~September 30, 2022, the Company had outstanding $98 million of subordinated notes (the "Sub Notes") that were issued in January 2022. Interest on the Sub Notes accrue at a rate equal to 3.5% per annum until January 30, 2027, payable semiannually in arrears. From and including January 30, 2027, to, but excluding, the maturity date or the date of earlier redemption, the Sub Notes will bear interest equal to the three-month term Secured Overnight Financing Rate plus 215 basis points, payable quarterly in arrears.

At ~~June~~September 30, 2022 and December 31, 2021, the Company had outstanding $64 million of Senior Notes which bear interest at a rate of 6.50% and mature in 2026.

The Company issued trust preferred securities during the period from 2005 through 2007, resulting in a debt balance of $62 million that remains outstanding at ~~June~~September 30, 2022 and December 31, 2021. 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 Securities outstanding as of ~~June~~September 30, 2022 and December 31, 2021 are as follows:

HomeStreet Statutory Trust

(dollars in thousands)

III

Date issued

June 2005

September 2005

February 2006

March 2007

Amount

$5,155

$20,619

$15,464

Interest rate

3 MO LIBOR + 1.70%

3 MO LIBOR + 1.50%

3 MO LIBOR + 1.37%

3 MO LIBOR + 1.68%

Maturity date

June 2035

December 2035

March 2036

June 2037

Call option (1)

Quarterly

(1) Call options are exercisable at par and are callable, without penalty on a quarterly basis, starting five years after issuance.

NOTE 6–DERIVATIVES AND HEDGING ACTIVITIES:

To reduce the risk of significant interest rate fluctuations on the value of certain assets and liabilities, such as single family mortgage LHFS and MSRs, the Company utilizes derivatives as economic hedges. The notional amounts and fair values for derivatives, which are included in other assets or accounts payable and other liabilities on the consolidated balance sheet, consist of the following:


		At June 30, 2022							At September 30, 2022
		Notional amount		Fair value derivatives					Notional amount		Fair value derivatives
(in thousands)	(in thousands)			Asset		Liability		(in thousands)			Asset		Liability

Forward sale commitments	Forward sale commitments	$	224,930	$	1,058	$	(902)	Forward sale commitments	$	193,699	$	2,756	$	(1,434)

Interest rate lock commitments	Interest rate lock commitments	56,757		737		(415)		Interest rate lock commitments	29,679		48		(408)
Interest rate swaps	Interest rate swaps	260,362		9,211		(9,211)		Interest rate swaps	238,468		13,759		(13,759)
Futures	Futures	36,800		—		(143)		Futures	23,900		46		—
Options	Options	26,000		199		—		Options	18,600		385		—
Total derivatives before netting	Total derivatives before netting	$	604,849	11,205		(10,671)		Total derivatives before netting	$	504,346	16,994		(15,601)
Netting adjustment/Cash collateral (1)	Netting adjustment/Cash collateral (1)			(10,035)		(93)		Netting adjustment/Cash collateral (1)			(15,652)		1,223
Carrying value on consolidated balance sheet	Carrying value on consolidated balance sheet			$	1,170	$	(10,764)	Carrying value on consolidated balance sheet			$	1,342	$	(14,378)


	At December 31, 2021
	Notional amount		Fair value derivatives
(in thousands)			Asset		Liability

Forward sale commitments	$	793,208	$	723	$	(640)

Interest rate lock commitments	115,025		2,487		(3)
Interest rate swaps	287,352		4,381		(4,541)
Futures	139,900		334		—
Total derivatives before netting	$	1,335,485	7,925		(5,184)
Netting adjustment/Cash collateral (1)			1,355		3,921
Carrying value on consolidated balance sheet			$	9,280	$	(1,263)

(1) Includes net cash collateral received of ~~$10.1~~$14.4 million and paid of $5.3 million at ~~June~~September 30, 2022 and December 31, 2021, respectively.

2827

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

(in thousands) Gross fair value
Netting adjustments/ Cash collateral (1)
Carrying value
At June 30, 2022
Derivative assets $ 11,205 $ (10,035) $ 1,170
Derivative liabilities (10,671) (93) (10,764)
At December 31, 2021
Derivative assets $ 7,925 $ 1,355 $ 9,280
Derivative liabilities (5,184) 3,921 (1,263)


(in thousands)	Gross fair value		Netting adjustments/ Cash collateral (1)		Carrying value





At September 30, 2022
Derivative assets	$	16,994	$	(15,652)	$	1,342
Derivative liabilities	(15,601)		1,223		(14,378)
At December 31, 2021
Derivative assets	$	7,925	$	1,355	$	9,280
Derivative liabilities	(5,184)		3,921		(1,263)

(1) Includes net cash collateral received of ~~$10.1~~$14.4 million and paid of $5.3 million at ~~June~~September 30, 2022 and December 31, 2021, respectively.

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 is included in other assets. Payables related to cash collateral that has been received from counterparties is included in accounts payable and other liabilities. Interest is owed on amounts received from counterparties and we earn interest on cash paid to counterparties. Any securities pledged to counterparties as collateral remain on the consolidated balance sheets. At ~~June~~September 30, 2022 and December 31, 2021, the Company had liabilities of ~~$10.2~~$14.5 million and zero, respectively, in cash collateral received from counterparties and receivables of $0.1 million and $5.3 million, respectively, in cash collateral paid to counterparties.

The following table presents the net gain (loss) recognized on economic hedge derivatives, within the respective line items in the consolidated income statements for the periods indicated:


		Quarter Ended June 30,				Six Months Ended June 30,					Quarter Ended September 30,				Nine Months Ended September 30,
(in thousands)	(in thousands)	2022		2021		2022		2021		(in thousands)	2022		2021		2022		2021

Recognized in noninterest income:	Recognized in noninterest income:									Recognized in noninterest income:
Net gain (loss) on loan origination and sale activities (1)	Net gain (loss) on loan origination and sale activities (1)	$	2,650	$	(7,267)	$	7,263	$	(3,409)	Net gain (loss) on loan origination and sale activities (1)	$	958	$	(1,165)	$	8,221	$	(4,574)
Loan servicing income (loss) (2)	Loan servicing income (loss) (2)	(2,190)		5,024		(11,629)		(7,567)		Loan servicing income (loss) (2)	(422)		(293)		(12,051)		(7,860)
Other (3)	Other (3)	1		(35)		160		264		Other (3)	—		41		160		305

(1)Comprised of ~~IRLCs~~interest rate lock commitments ("IRLCs") and forward contracts used as an economic hedge of loans held for sale.

(2)Comprised of interest rate swaps, interest rate swaptions, futures, US Treasury options and forward contracts used as economic hedges of single family MSRs.

(3)Impact of interest rate swap agreements executed with commercial banking customers.

The notional amount of open interest rate swap agreements executed with commercial banking customers at ~~June~~September 30, 2022 and December 31, 2021 were ~~$260~~$238 million and $287 million, respectively.

2928

NOTE 7–MORTGAGE BANKING OPERATIONS:

LHFS consisted of the following:


(in thousands)	(in thousands)	At June 30, 2022		At December 31, 2021		(in thousands)	At September 30, 2022		At December 31, 2021

Single family	Single family	$	35,853	$	128,041	Single family	$	13,308	$	128,041
CRE, multifamily and SBA	CRE, multifamily and SBA	11,461		48,090		CRE, multifamily and SBA	479		48,090
Total	Total	$	47,314	$	176,131	Total	$	13,787	$	176,131

Loans sold consisted of the following for the periods indicated:


		Quarter Ended June 30,				Six Months Ended June 30,					Quarter Ended September 30,				Nine Months Ended September 30,
(in thousands)	(in thousands)	2022		2021		2022		2021		(in thousands)	2022		2021		2022		2021

Single family	Single family	$	187,623	$	627,282	$	510,693	$	1,200,322	Single family	$	131,228	$	469,090	$	641,921	$	1,669,412
CRE, multifamily and SBA	CRE, multifamily and SBA	50,292		138,421		99,429		396,138		CRE, multifamily and SBA	29,965		69,810		129,394		465,948
Total	Total	$	237,915	$	765,703	$	610,122	$	1,596,460	Total	$	161,193	$	538,900	$	771,315	$	2,135,360

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


		Quarter Ended June 30,				Six Months Ended June 30,					Quarter Ended September 30,				Nine Months Ended September 30,
(in thousands)	(in thousands)	2022		2021		2022		2021		(in thousands)	2022		2021		2022		2021

Single family	Single family	$	3,949	$	15,836	$	10,118	$	42,023	Single family	$	1,778	$	14,249	$	11,896	$	56,272
CRE, multifamily and SBA	CRE, multifamily and SBA	1,343		5,435		3,448		12,707		CRE, multifamily and SBA	869		3,260		4,317		15,967
Total	Total	$	5,292	$	21,271	$	13,566	$	54,730	Total	$	2,647	$	17,509	$	16,213	$	72,239

The Company's portfolio of loans serviced for others is primarily comprised of loans held in U.S. government and agency MBS issued by Fannie Mae, Freddie Mac and Ginnie Mae. The unpaid principal balance of loans serviced for others is as follows:


(in thousands)	(in thousands)	At June 30, 2022		At December 31, 2021		(in thousands)	At September 30, 2022		At December 31, 2021

Single family	Single family	$	5,535,691	$	5,539,180	Single family	$	5,500,428	$	5,539,180
CRE, multifamily and SBA	CRE, multifamily and SBA	1,998,335		2,031,087		CRE, multifamily and SBA	1,980,109		2,031,087
Total	Total	$	7,534,026	$	7,570,267	Total	$	7,480,537	$	7,570,267

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

Quarter Ended June 30, Six Months Ended June 30,
(in thousands) 2022 2021 2022 2021
Balance, beginning of period $ 1,638 $ 1,941 $ 1,312 $ 2,122
Additions, net of adjustments (1)
133 (26) 491 (46)
Realized (losses) recoveries, net (2)
(280) (303) (312) (464)
Balance, end of period $ 1,491 $ 1,612 $ 1,491 $ 1,612


	Quarter Ended September 30,				Nine Months Ended September 30,
(in thousands)	2022		2021		2022		2021

Balance, beginning of period	$	1,491	$	1,612	$	1,312	$	2,122
Additions, net of adjustments (1)	838		(183)		1,329		(229)
Realized (losses) recoveries, net (2)	(370)		14		(682)		(450)
Balance, end of period	$	1,959	$	1,443	$	1,959	$	1,443

(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 ~~$2.0~~$1.7 million and $1.9 million were recorded in other assets as of ~~June~~September 30, 2022 and December 31, 2021, 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 ~~June~~September 30, 2022 and December 31, 2021, delinquent or defaulted mortgage loans currently in Ginnie Mae pools that the Company has recognized on its consolidated balance sheets totaled ~~$6.1~~$6.8 million and $12.3 million, respectively.

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


		Quarter Ended June 30,				Six Months Ended June 30,					Quarter Ended September 30,				Nine Months Ended September 30,
(in thousands)	(in thousands)	2022		2021		2022		2021		(in thousands)	2022		2021		2022		2021

Servicing income, net:	Servicing income, net:									Servicing income, net:
Servicing fees and other	Servicing fees and other	$	9,507	$	9,245	$	17,828	$	18,158	Servicing fees and other	$	7,673	$	7,897	$	25,501	$	26,055
Amortization of single family MSRs (1)	Amortization of single family MSRs (1)	(2,515)		(5,181)		(5,940)		(10,874)		Amortization of single family MSRs (1)	(2,112)		(4,579)		(8,052)		(15,453)
Amortization of multifamily and SBA MSRs	Amortization of multifamily and SBA MSRs	(2,337)		(2,133)		(4,049)		(3,477)		Amortization of multifamily and SBA MSRs	(1,828)		(1,758)		(5,877)		(5,235)
Total	Total	4,655		1,931		7,839		3,807		Total	3,733		1,560		11,572		5,367
Risk management, single family MSRs:	Risk management, single family MSRs:									Risk management, single family MSRs:
Changes in fair value of MSRs due to assumptions (2)	Changes in fair value of MSRs due to assumptions (2)	4,323		(5,024)		14,626		6,439		Changes in fair value of MSRs due to assumptions (2)	1,989		747		16,615		7,186
Net gain (loss) from economic hedging	Net gain (loss) from economic hedging	(5,317)		5,024		(15,500)		(7,567)		Net gain (loss) from economic hedging	(2,981)		(293)		(18,481)		(7,860)
Total	Total	(994)		—		(874)		(1,128)		Total	(992)		454		(1,866)		(674)
Loan servicing income (loss)	Loan servicing income (loss)	$	3,661	$	1,931	$	6,965	$	2,679	Loan servicing income (loss)	$	2,741	$	2,014	$	9,706	$	4,693

(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.

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

Quarter Ended June 30, Six Months Ended June 30,
(in thousands) 2022 2021 2022 2021
Beginning balance $ 72,378 $ 62,352 $ 61,584 $ 49,966
Additions and amortization:
Originations 2,295 7,725 6,211 14,341
Amortization (1)
(2,515) (5,181) (5,940) (10,874)
Net additions and amortization (220) 2,544 271 3,467
Changes in fair value assumptions (2)
4,323 (5,024) 14,626 6,439
Ending balance $ 76,481 $ 59,872 $ 76,481 $ 59,872


	Quarter Ended September 30,				Nine Months Ended September 30,
(in thousands)	2022		2021		2022		2021

Beginning balance	$	76,481	$	59,872	$	61,584	$	49,966
Additions and amortization:
Originations	1,453		5,166		7,664		19,507

Amortization (1)	(2,112)		(4,579)		(8,052)		(15,453)
Net additions and amortization	(659)		587		(388)		4,054
Changes in fair value assumptions (2)	1,989		747		16,615		7,186
Ending balance	$	77,811	$	61,206	$	77,811	$	61,206

(1) Represents changes due to collection/realization of expected cash flows and curtailments.

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

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


		Quarter Ended June 30,				Six Months Ended June 30,					Quarter Ended September 30,				Nine Months Ended September 30,
(rates per annum) (1)	(rates per annum) (1)	2022		2021		2022		2021		(rates per annum) (1)	2022		2021		2022		2021

Constant prepayment rate ("CPR") (2)	Constant prepayment rate ("CPR") (2)	11.42	%	8.33	%	10.14	%	8.35	%	Constant prepayment rate ("CPR") (2)	13.06	%	9.84	%	10.72	%	8.75	%
Discount rate	Discount rate	9.83	%	8.48	%	8.90	%	8.43	%	Discount rate	10.36	%	7.77	%	9.19	%	8.25	%

(1) Based on a weighted average.

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

3130

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


		At June 30, 2022			At December 31, 2021				At September 30, 2022			At December 31, 2021
		Range of Inputs	Average (1)		Range of Inputs	Average (1)			Range of Inputs	Average (1)		Range of Inputs	Average (1)

CPRs	CPRs	6.01% - 11.85%	8.55	%	7.90% - 17.35%	10.35	%	CPRs	5.99% - 11.48%	8.31	%	7.90% - 17.35%	10.35	%
Discount Rates	Discount Rates	8.76% - 15.91%	9.65	%	6.94% - 13.96%	7.97	%	Discount Rates	9.72% - 16.89%	10.63	%	6.94% - 13.96%	7.97	%

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

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


(dollars in thousands)	At ~~June~~September 30, 2022

Fair value of single family MSR	$	~~76,481~~77,811
Expected weighted-average life (in years)	~~7.64~~7.82
CPR
Impact on fair value of 25 basis points adverse change in interest rates	$	~~(1,003)~~(469)
Impact on fair value of 50 basis points adverse change in interest rates	$	~~(2,338)~~(1,092)
Discount rate
Impact on fair value of 100 basis points increase	$	~~(3,430)~~(4,703)
Impact on fair value of 200 basis points increase	$	~~(6,597)~~(9,044)

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

Quarter Ended June 30, Six Months Ended June 30,
(in thousands) 2022 2021 2022 2021
Beginning balance $ 39,279 $ 39,626 $ 39,415 $ 35,774
Originations 1,188 1,620 2,764 6,816
Amortization (2,337) (2,133) (4,049) (3,477)
Ending balance $ 38,130 $ 39,113 $ 38,130 $ 39,113


	Quarter Ended September 30,				Nine Months Ended September 30,
(in thousands)	2022		2021		2022		2021

Beginning balance	$	38,130	$	39,113	$	39,415	$	35,774
Originations	517		2,270		3,281		9,086
Amortization	(1,828)		(1,758)		(5,877)		(5,235)
Ending balance	$	36,819	$	39,625	$	36,819	$	39,625

NOTE 8–GUARANTEES AND MORTGAGE REPURCHASE LIABILITY:

In the ordinary course of business, the Company sells loans through the Fannie Mae Multifamily Delegated Underwriting and Servicing Program ("DUS"®) that are subject to a credit loss sharing arrangement. The Company services the loans for Fannie Mae and shares in the risk of loss with Fannie Mae under the terms of the DUS contracts. Under the DUS program, the Company and Fannie Mae share losses on a pro rata basis, where the Company is responsible for losses incurred up to one-third of 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 ~~June~~September 30, 2022 and December 31, 2021, the total unpaid principal balance of loans sold under this program was $1.8 billion and $1.9 billion, respectively. The Company's reserve liability related to this arrangement totaled ~~$0.7 million and~~ $0.6 million at ~~June~~both September 30, 2022 and December 31, ~~2021, respectively.~~2021. There were no actual losses incurred under this arrangement during the quarters or ~~six~~nine months ended ~~June~~September 30, 2022 and 2021.

In the ordinary course of business, the Company sells residential mortgage loans to GSEs and other entities. Under the terms of these sales agreements, the Company has made representations and warranties that the loans sold meet certain requirements. The Company may be required to repurchase mortgage loans or indemnify loan purchasers due to defects in the origination process of the loan, such as documentation errors, underwriting errors and judgments, early payment defaults and fraud. The total unpaid principal balance of loans sold on a servicing-retained basis that were subject to the terms and conditions of these representations and warranties totaled $5.5 billion at both ~~June~~September 30, 2022 and December 31, 2021. At ~~June~~September 30, 2022 and December 31, 2021, the Company had recorded a mortgage repurchase liability for loans sold on a servicing-retained and

3231

servicing-released basis, included in accounts payable and other liabilities on the consolidated balance sheets, of ~~$1.5~~$2.0 million and $1.3 million, respectively.

NOTE 9–EARNINGS PER SHARE:

The following table summarizes the calculation of earnings per share:


		Quarter Ended June 30,				Six Months Ended June 30,					Quarter Ended September 30,				Nine Months Ended September 30,
(in thousands, except share and per share data)	(in thousands, except share and per share data)	2022		2021		2022		2021		(in thousands, except share and per share data)	2022		2021		2022		2021

Net income	Net income	$	17,721	$	29,157	$	37,672	$	58,820	Net income	$	20,367	$	27,170	$	58,039	$	85,990

Weighted average shares:	Weighted average shares:									Weighted average shares:
Basic weighted-average number of common shares outstanding	Basic weighted-average number of common shares outstanding	18,706,953		21,057,473		19,143,925		21,345,969		Basic weighted-average number of common shares outstanding	18,716,864		20,613,290		19,000,007		21,099,059
Dilutive effect of outstanding common stock equivalents	Dilutive effect of outstanding common stock equivalents	127,490		230,501		166,825		277,329		Dilutive effect of outstanding common stock equivalents	79,873		206,311		137,841		253,656
Diluted weighted-average number of common shares outstanding	Diluted weighted-average number of common shares outstanding	18,834,443		21,287,974		19,310,750		21,623,298		Diluted weighted-average number of common shares outstanding	18,796,737		20,819,601		19,137,848		21,352,715
Net income per share:	Net income per share:									Net income per share:
Basic earnings per share	Basic earnings per share	$	0.95	$	1.38	$	1.97	$	2.76	Basic earnings per share	$	1.09	$	1.32	$	3.05	$	4.08
Diluted earnings per share	Diluted earnings per share	0.94		1.37		1.95		2.72		Diluted earnings per share	1.08		1.31		3.03		4.03

NOTE 10–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.

3332

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 class

Valuation methodology, inputs and assumptions

Classification

Investment securities

Trading securities

Fair Value is based on quoted prices in an active market.

Level 1 recurring fair value measurement.

Investment securities AFS

Observable market prices of identical or similar securities are used where available.

Level 2 recurring fair value measurement.

If market prices are not readily available, value is based on discounted cash flows using the following significant inputs:

• Expected prepayment speeds

• Estimated credit losses

• Market liquidity adjustments

Level 3 recurring fair value measurement.

LHFS

Single family loans, excluding loans transferred from held for investment

Fair value is based on observable market data, including:

• Quoted market prices, where available

• Dealer quotes for similar loans

• Forward sale commitments

Level 2 recurring fair value measurement.

When not derived from observable market inputs, fair value is based on discounted cash flows, which considers the following inputs:

• Benchmark yield curve

• Estimated discount spread to the benchmark yield curve

• Expected prepayment speeds

Estimated fair value classified as Level 3.

Mortgage servicing rights

Single family MSRs

For information on how the Company measures the fair value of its single family MSRs, including key economic assumptions and the sensitivity of fair value to changes in those assumptions, see Note 7, Mortgage Banking Operations.

Level 3 recurring fair value measurement.

Derivatives

Futures and Options

Fair value is based on closing exchange prices.

Level 1 recurring fair value measurement.

Forward sale commitments Interest rate swaps

Fair value is based on quoted prices for identical or similar instruments, when available. When quoted prices are not available, fair value is based on internally developed modeling techniques, which require the use of multiple observable market inputs including:

• Forward interest rates
• Interest rate volatilities

Level 2 recurring fair value measurement.

Interest rate lock commitments

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.

3433

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


		At June 30, 2022									At September 30, 2022
(in thousands)	(in thousands)	Fair Value		Level 1		Level 2		Level 3		(in thousands)	Fair Value		Level 1		Level 2		Level 3

Assets:	Assets:									Assets:
Trading securities - U.S. Treasury securities	Trading securities - U.S. Treasury securities	$	33,081	$	33,081	$	—	$	—	Trading securities - U.S. Treasury securities	$	21,115	$	21,115	$	—	$	—
Investment securities AFS	Investment securities AFS									Investment securities AFS
Mortgage backed securities:	Mortgage backed securities:									Mortgage backed securities:
Residential	Residential	128,931		—		126,843		2,088		Residential	198,990		—		197,027		1,963
Commercial	Commercial	63,573		—		63,573		—		Commercial	58,872		—		58,872		—
Collateralized mortgage obligations:	Collateralized mortgage obligations:									Collateralized mortgage obligations:
Residential	Residential	296,049		—		296,049		—		Residential	453,214		—		453,214		—
Commercial	Commercial	126,591		—		126,591		—		Commercial	90,861		—		90,861		—
Municipal bonds	Municipal bonds	535,353		—		535,353		—		Municipal bonds	428,197		—		428,197		—
Corporate debt securities	Corporate debt securities	30,330		—		30,258		72		Corporate debt securities	33,762		—		33,692		70
U.S. Treasury securities	U.S. Treasury securities	20,930		—		20,930		—		U.S. Treasury securities	19,827		—		19,827		—

Agency debentures										Agency debentures	4,004		—		4,004		—
Single family LHFS	Single family LHFS	35,853		—		35,853		—		Single family LHFS	13,308		—		13,308		—
Single family LHFI	Single family LHFI	6,508		—		—		6,508		Single family LHFI	5,850		—		—		5,850
Single family mortgage servicing rights	Single family mortgage servicing rights	76,481		—		—		76,481		Single family mortgage servicing rights	77,811		—		—		77,811
Derivatives	Derivatives									Derivatives

Futures										Futures	46		46		—		—
Forward sale commitments	Forward sale commitments	1,058		—		1,058		—		Forward sale commitments	2,756		—		2,756		—
Options	Options	199		199		—		—		Options	385		385		—		—
Interest rate lock commitments	Interest rate lock commitments	737		—		—		737		Interest rate lock commitments	48		—		—		48
Interest rate swaps	Interest rate swaps	9,211		—		9,211		—		Interest rate swaps	13,759		—		13,759		—
Total assets	Total assets	$	1,364,885	$	33,280	$	1,245,719	$	85,886	Total assets	$	1,422,805	$	21,546	$	1,315,517	$	85,742
Liabilities:	Liabilities:									Liabilities:
Derivatives	Derivatives									Derivatives
Futures		$	143	$	143	$	—	$	—

Forward sale commitments	Forward sale commitments	902		—		902		—		Forward sale commitments	$	1,434	$	—	$	1,434	$	—

Interest rate lock commitments	Interest rate lock commitments	415		—		—		415		Interest rate lock commitments	408		—		—		408
Interest rate swaps	Interest rate swaps	9,211		—		9,211		—		Interest rate swaps	13,759		—		13,759		—
Total liabilities	Total liabilities	$	10,671	$	143	$	10,113	$	415	Total liabilities	$	15,601	$	—	$	15,193	$	408

3534


	At December 31, 2021
(in thousands)	Fair Value		Level 1		Level 2		Level 3

Assets:
Investment securities AFS
Mortgage backed securities:
Residential	$	32,963	$	—	$	30,556	$	2,407
Commercial	62,792		—		62,792		—
Collateralized mortgage obligations:
Residential	187,394		—		187,394		—
Commercial	136,659		—		136,659		—
Municipal bonds	539,923		—		539,923		—
Corporate debt securities	19,616		—		19,541		75
U.S. Treasury securities	23,175		—		23,175		—

Single family LHFS	128,041		—		128,041		—
Single family LHFI	7,287		—		—		7,287
Single family mortgage servicing rights	61,584		—		—		61,584
Derivatives
Futures	334		334		—		—
Forward sale commitments	723		—		723		—

Interest rate lock commitments	2,487		—		—		2,487
Interest rate swaps	4,381		—		4,381		—
Total assets	$	1,207,359	$	334	$	1,133,185	$	73,840
Liabilities:
Derivatives

Forward sale commitments	$	640	$	—	$	640	$	—

Interest rate lock commitments	3		—		—		3
Interest rate swaps	4,541		—		4,541		—
Total liabilities	$	5,184	$	—	$	5,181	$	3

There were no transfers between levels of the fair value hierarchy during the quarters and ~~six~~nine months ended ~~June~~September 30, 2022 and 2021.

Level 3 Recurring Fair Value Measurements

The Company's level 3 recurring fair value measurements consist of investment securities AFS, single family MSRs, single family LHFI where fair value option was elected, certain single family LHFS and interest rate lock commitments, which are accounted for as derivatives. For information regarding fair value changes and activity for single family MSRs during the quarters and ~~six~~nine months ended ~~June~~September 30, 2022 and 2021, see Note 7, Mortgage Banking Operations of this Quarterly Report on Form 10-Q.

The fair value of IRLCs considers several factors, including the fair value in the secondary market of the underlying loan resulting from the exercise of the commitment, the expected net future cash flows related to the associated servicing of the loan (referred to as the value of servicing) and the probability that the commitment will not be converted into a funded loan (referred to as a fall-out factor). The fair value of IRLCs on LHFS, while based on interest rates observable in the market, is highly dependent on the ultimate closing of the loans. The significance of the fall-out factor to the fair value measurement of an individual IRLC is generally highest at the time that the rate lock is initiated and declines as closing procedures are performed and the underlying loan gets closer to funding. The fall-out factor applied is based on historical experience. The value of servicing is impacted by a variety of factors, including prepayment assumptions, discount rates, delinquency rates, contractually specified servicing fees, servicing costs and underlying portfolio characteristics. Because these inputs are not observable in market trades, the fall-out factor and value of servicing are considered to be level 3 inputs. The fair value of IRLCs decreases in value upon an increase in the fall-out factor and increases in value upon an increase in the value of servicing. Changes in the fall-out factor and value of servicing do not increase or decrease based on movements in other significant unobservable inputs.

3635

The Company recognizes unrealized gains and losses from the time that an IRLC is initiated until the gain or loss is realized at the time the loan closes, which generally occurs within 30-90 days. For IRLCs that fall out, any unrealized gain or loss is reversed, which generally occurs at the end of the commitment period. The gains and losses recognized on IRLC derivatives generally correlates to volume of single family interest rate lock commitments made during the reporting period (after adjusting for estimated fallout) while the amount of unrealized gains and losses realized at settlement generally correlates to the volume of single family closed loans during the reporting period.

The Company uses the discounted cash flow model to estimate the fair value of certain loans that have been transferred from held for sale to held for investment and single family LHFS when the fair value of the loans is not derived using observable market inputs. The key assumption in the valuation model is the implied spread to benchmark interest rate curve. The implied spread is not directly observable in the market and is derived from third party pricing which is based on market information from comparable loan pools. The fair value estimate of single family loans that have been transferred from held for sale to held for investment are sensitive to changes in the benchmark interest rate which might result in a significantly higher or lower fair value measurement.

The Company transferred certain loans from held for sale to held for investment. These loans were originated as held for sale loans where the Company had elected fair value option. The Company determined these loans to be level 3 recurring assets as the valuation technique included a significant unobservable input. The total amount of held for investment loans where fair value option election was made was ~~$6.5~~$5.8 million and $7.3 million at ~~June~~September 30, 2022 and December 31, 2021, respectively.

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


(dollars in thousands)	(dollars in thousands)	Fair Value		Valuation Technique	Significant Unobservable Input	Low	High	Weighted Average	(dollars in thousands)	Fair Value		Valuation Technique	Significant Unobservable Input	Low	High	Weighted Average

June 30, 2022
September 30, 2022									September 30, 2022
Investment securities AFS	Investment securities AFS	$	2,160	Income approach	Implied spread to benchmark interest rate curve	2.00%	2.00%	2.00%	Investment securities AFS	$	2,033	Income approach	Implied spread to benchmark interest rate curve	2.00%	2.00%	2.00%
Single family LHFI	Single family LHFI	6,508		Income approach	Implied spread to benchmark interest rate curve	2.80%	5.04%	3.40%	Single family LHFI	5,850		Income approach	Implied spread to benchmark interest rate curve	3.92%	5.71%	4.41%
Interest rate lock commitments, net	Interest rate lock commitments, net	322		Income approach	Fall-out factor	0.10%	20.56%	7.67%	Interest rate lock commitments, net	(360)		Income approach	Fall-out factor	0.10%	17.46%	5.16%
					Value of servicing	0.52%	1.25%	0.96%					Value of servicing	0.59%	1.14%	0.98%
December 31, 2021	December 31, 2021								December 31, 2021
Investment securities AFS	Investment securities AFS	$	2,482	Income approach	Implied spread to benchmark interest rate curve	2.00%	2.00%	2.00%	Investment securities AFS	$	2,482	Income approach	Implied spread to benchmark interest rate curve	2.00%	2.00%	2.00%
Single family LHFI	Single family LHFI	7,287		Income approach	Implied spread to benchmark interest rate curve	2.39%	7.96%	3.56%	Single family LHFI	7,287		Income approach	Implied spread to benchmark interest rate curve	2.39%	7.96%	3.56%
Interest rate lock commitments, net	Interest rate lock commitments, net	2,484		Income approach	Fall-out factor	0.15%	21.93%	8.44%	Interest rate lock commitments, net	2,484		Income approach	Fall-out factor	0.15%	21.93%	8.44%
					Value of servicing	0.35%	1.46%	1.15%					Value of servicing	0.35%	1.46%	1.15%

We had no LHFS where the fair value was not derived with significant observable inputs at ~~June~~September 30, 2022 and December 31, 2021.

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


(in thousands)	(in thousands)	Beginning balance		Additions		Transfers		Payoffs/Sales		Change in mark to market (1)		Ending balance		(in thousands)	Beginning balance		Additions		Transfers		Payoffs/Sales		Change in mark to market (1)		Ending balance

Quarter Ended June 30, 2022
Quarter Ended September 30, 2022														Quarter Ended September 30, 2022
Investment securities AFS	Investment securities AFS	$	2,307	$	—	$	—	$	(49)	$	(98)	$	2,160	Investment securities AFS	$	2,160	$	—	$	—	$	(48)	$	(79)	$	2,033
Single family LHFI	Single family LHFI	6,981		—		—		—		(473)		6,508		Single family LHFI	6,508		—		—		—		(658)		5,850
Quarter Ended June 30, 2021
Quarter Ended September 30, 2021														Quarter Ended September 30, 2021
Investment securities AFS	Investment securities AFS	$	2,490	$	—	$	—	$	(48)	$	108	$	2,550	Investment securities AFS	$	2,550	$	—	$	—	$	(48)	$	12	$	2,514
Single family LHFI	Single family LHFI	4,324		785		—		—		98		5,207		Single family LHFI	5,207		284		—		(1,088)		104		4,507
Six Months Ended June 30, 2022
Nine Months Ended September 30, 2022														Nine Months Ended September 30, 2022
Investment securities AFS	Investment securities AFS	$	2,482	$	—	$	—	$	(97)	$	(225)	$	2,160	Investment securities AFS	$	2,482	$	—	$	—	$	(145)	$	(304)	$	2,033
Single family LHFI	Single family LHFI	7,287		—		—		—		(779)		6,508		Single family LHFI	7,287		—		—		—		(1,437)		5,850
Six Months Ended June 30, 2021
Nine Months Ended September 30, 2021														Nine Months Ended September 30, 2021
Investment securities AFS	Investment securities AFS	$	2,710	$	—	$	—	$	(96)	$	(64)	$	2,550	Investment securities AFS	$	2,710	$	—	$	—	$	(144)	$	(52)	$	2,514
Single family LHFI	Single family LHFI	7,108		1,145		—		(3,191)		145		5,207		Single family LHFI	7,108		1,429		—		(4,279)		249		4,507

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

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


		Quarter Ended June 30,				Six Months Ended June 30,					Quarter Ended September 30,				Nine Months Ended September 30,
(in thousands)	(in thousands)	2022		2021		2022		2021		(in thousands)	2022		2021		2022		2021

Beginning balance, net	Beginning balance, net	$	78	$	6,488	$	2,484	$	17,392	Beginning balance, net	$	322	$	5,893	$	2,484	$	17,392
Total realized/unrealized gains (losses)	Total realized/unrealized gains (losses)	1,338		7,282		(839)		3,813		Total realized/unrealized gains (losses)	70		5,299		(769)		9,112
Settlements	Settlements	(1,094)		(7,877)		(1,323)		(15,312)		Settlements	(752)		(6,583)		(2,075)		(21,895)
Ending balance, net	Ending balance, net	$	322	$	5,893	$	322	$	5,893	Ending balance, net	$	(360)	$	4,609	$	(360)	$	4,609

Nonrecurring Fair Value Measurements

Certain assets held by the Company are not included in the tables above, but are measured at fair value on a periodic basis. These assets include certain LHFI and OREO that are carried at the lower of cost or fair value of the underlying collateral, less the estimated costs to sell. The estimated fair values of real estate collateral are generally based on internal evaluations and appraisals of such collateral, which use the market approach and income approach methodologies. We have omitted disclosure related to quantitative inputs given the insignificance of assets measured on a nonrecurring basis.

The fair value of commercial properties is generally based on third-party appraisals that consider recent sales of comparable properties, including their income-generating characteristics, adjusted (generally based on unobservable inputs) to reflect the general assumptions that a market participant would make when analyzing the property for purchase. The Company uses a fair value of collateral technique to apply adjustments to the appraisal value of certain commercial LHFI that are collateralized by real estate.

The Company uses a fair value of collateral technique to apply adjustments to the stated value of certain commercial LHFI that are not collateralized by real estate and to the appraisal value of OREO.

Residential properties are generally based on unadjusted third-party appraisals. Factors considered in determining the fair value include geographic sales trends, the value of comparable surrounding properties as well as the condition of the property.

These adjustments include management assumptions that are based on the type of collateral dependent loan and may increase or decrease an appraised value. Management adjustments vary significantly depending on the location, physical characteristics and income producing potential of each individual property. The quality and volume of market information available at the time of the appraisal can vary from period-to-period and cause significant changes to the nature and magnitude of the unobservable

inputs used. Given these variations, changes in these unobservable inputs are generally not a reliable indicator for how fair value will increase or decrease from period to period.

For the quarter and ~~six~~nine months ended ~~June~~September 30, 2022, no assets classified as Level 3 had changes in their recorded fair value. The following table presents assets classified as Level 3 that had changes in their recorded fair value for the periods indicated and what we still held at the end of the respective reporting period:


(in thousands)	(in thousands)	Fair Value		Total Gains (Losses)		(in thousands)	Fair Value		Total Gains (Losses)

At or for the Quarter and Six Months Ended June 30, 2021
At or for the Quarter Ended September 30, 2021						At or for the Quarter Ended September 30, 2021
LHFI (1)	LHFI (1)	$	741	$	(62)	LHFI (1)	$	1,121	$	(8)

At or for the Nine Months Ended September 30, 2021						At or for the Nine Months Ended September 30, 2021
LHFI (1)						LHFI (1)	$	1,121	$	(70)

(1) Represents the carrying value of loans for which adjustments are based on the fair value of the collateral.

Fair Value of Financial Instruments

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


		At June 30, 2022											At September 30, 2022
(in thousands)	(in thousands)	Carrying Value		Fair Value		Level 1		Level 2		Level 3		(in thousands)	Carrying Value		Fair Value		Level 1		Level 2		Level 3

Assets:	Assets:											Assets:
Cash and cash equivalents	Cash and cash equivalents	$	75,277	$	75,277	$	75,277	$	—	$	—	Cash and cash equivalents	$	57,256	$	57,256	$	57,256	$	—	$	—
Investment securities HTM	Investment securities HTM	3,118		3,089		—		3,089		—		Investment securities HTM	3,099		2,998		—		2,998		—
LHFI	LHFI	6,715,874		6,473,097		—		—		6,473,097		LHFI	7,170,031		6,743,644		—		—		6,743,644

LHFS – multifamily and other	LHFS – multifamily and other	11,461		11,552		—		11,552		—		LHFS – multifamily and other	479		479		—		479		—
Mortgage servicing rights – multifamily and SBA	Mortgage servicing rights – multifamily and SBA	38,130		42,324		—		—		42,324		Mortgage servicing rights – multifamily and SBA	36,819		41,209		—		—		41,209
Federal Home Loan Bank stock	Federal Home Loan Bank stock	66,992		66,992		—		66,992		—		Federal Home Loan Bank stock	71,428		71,428		—		71,428		—
Other assets - GNMA EBO loans	Other assets - GNMA EBO loans	6,102		6,102		—		—		6,102		Other assets - GNMA EBO loans	6,775		6,775		—		—		6,775
Liabilities:	Liabilities:											Liabilities:
Certificates of deposit	Certificates of deposit	$	969,535	$	956,983	$	—	$	956,983	$	—	Certificates of deposit	$	1,720,317	$	1,693,369	$	—	$	1,693,369	$	—

Borrowings	Borrowings	1,458,000		1,457,994		0		1,457,994		0		Borrowings	1,569,000		1,569,046				1,569,046
Long-term debt	Long-term debt	224,227		209,842		—		209,842		—		Long-term debt	224,314		201,897		—		201,897		—


	At December 31, 2021
(in thousands)	Carrying Value		Fair Value		Level 1		Level 2		Level 3

Assets:
Cash and cash equivalents	$	65,214	$	65,214	$	65,214	$	—	$	—
Investment securities HTM	4,169		4,305		—		4,305		—
LHFI	5,488,439		5,588,719		—		—		5,588,719

LHFS – multifamily and other	48,090		48,425		—		48,425		—
Mortgage servicing rights – multifamily and SBA	39,415		43,199		—		—		43,199
Federal Home Loan Bank stock	10,361		10,361		—		10,361		—
Other assets-GNMA EBO loans	12,342		12,342		—		—		12,342
Liabilities:
Certificates of deposit	$	906,928	$	906,064	$	—	$	906,064	$	—
Borrowings	41,000		41,000		—		41,000		—
Long-term debt	126,026		116,845		—		116,845		—

3938

Fair Value Option

Single family loans held for sale accounted under the fair value option are measured initially at fair value with subsequent changes in fair value recognized in earnings. Gains and losses from such changes in fair value are recognized in net gain on mortgage loan origination and sale activities within noninterest income. The change in fair value of loans held for sale is primarily driven by changes in interest rates subsequent to loan funding and changes in fair value of the related servicing asset, resulting in revaluations adjustments to the recorded fair value. The use of the fair value option allows the change in the fair value of loans to more effectively offset the change in fair value of derivative instruments that are used as economic hedges of loans held for sale.

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


		At June 30, 2022						At December 31, 2021							At September 30, 2022						At December 31, 2021
(in thousands)	(in thousands)	Fair Value		Aggregate Unpaid Principal Balance		Fair Value Less Aggregated Unpaid Principal Balance		Fair Value		Aggregate Unpaid Principal Balance		Fair Value Less Aggregated Unpaid Principal Balance		(in thousands)	Fair Value		Aggregate Unpaid Principal Balance		Fair Value Less Aggregated Unpaid Principal Balance		Fair Value		Aggregate Unpaid Principal Balance		Fair Value Less Aggregated Unpaid Principal Balance

Single family LHFS	Single family LHFS	$	35,853	$	35,684	$	169	$	128,041	$	124,933	$	3,108	Single family LHFS	$	13,308	$	13,697	$	(389)	$	128,041	$	124,933	$	3,108

NOTE 11–SUBSEQUENT ~~EVENT:~~EVENTS:

On ~~July 28,~~October 27, 2022 the Board authorized a dividend of $0.35 per share, payable on ~~August 23,~~November 22, 2022 to shareholders of record on ~~August 9,~~November 8, 2022.

~~On July 29,~~In October 2022, we ~~closed a sale of 5 retail deposit~~announced an agreement to purchase three branches in ~~eastern Washington, including~~southern California, which is expected to close in the ~~branches' lending businesses and employees, for an estimated gain~~first quarter of ~~$4 million. The balance of~~2023, whereby we will assume approximately $490 million in deposits, purchase approximately $22 million in loans and ~~other assets sold were $185 million, $42 million and $2 million, respectively.~~pay a 6.0% deposit premium.

4039

ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Management's Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with the Consolidated Financial Statements and Notes presented elsewhere in this report and in HomeStreet, Inc.'s 2021 Annual Report on Form 10-K.

FORWARD-LOOKING STATEMENTS

Statements contained in this Quarterly Report on Form 10-Q that are not historical facts or that discuss our expectations, beliefs or views regarding our future operations or future financial performance, or financial or other trends in our business or in the markets in which we operate, anticipated completion of loan forbearances with respect to customer loans, our future plans and the credit exposure of certain loan products and other components of our business that could be impacted by the COVID-19 pandemic, constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.

Many forward-looking statements can be identified as using words such as "anticipate," "believe," "could," "estimate," "expect," "intend," "may," "plan," "potential," "should," "will" and "would" and similar expressions (or the negative of these terms). Such statements involve inherent risks and uncertainties, many of which are difficult to predict and are generally beyond the control of the Company and are subject to risks and uncertainties, including, but not limited to, those discussed in our Annual Report on Form 10-K for the year ended December 31, 2021 and the risks and uncertainties discussed below and elsewhere in this Quarterly Report on Form 10-Q that could cause actual results to differ significantly from those projected. In addition, many of the risks and uncertainties are, and will be, exacerbated by the COVID-19 pandemic and any worsening of the global, national, regional and local business and economic environment as a result.

Although we believe that expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. We undertake no obligation, and expressly disclaim any such obligation to update; or clarify any of the forward-looking statements after the date of this Quarterly Report on Form 10-Q to reflect changed assumptions, the occurrence of anticipated or unanticipated events, new information or changes to future results over time or otherwise, except as required by law. Readers are cautioned not to place undue reliance on these forward-looking statements, which apply only as of the date of this Quarterly Report on Form 10-Q.

Except as otherwise noted, references to "we," "our," "us" or "the Company" refer to HomeStreet, Inc. and its subsidiaries that are consolidated for financial reporting purposes. Statements of knowledge, intention or belief reflect those characteristics of our executive management team based on current facts and circumstances.

You may review a copy of this Quarterly Report on Form 10-Q, including exhibits and any schedule filed therewith on the Securities and Exchange Commission's website (http://www.sec.gov) that contains reports, proxy and information statements and other information regarding registrants, such as HomeStreet, Inc., that file electronically with the Securities and Exchange Commission. Copies of our Securities Exchange Act reports also are available from our investor relations website, http://ir.homestreet.com. Information contained in or linked from our websites is not incorporated into and does not constitute a part of this report.

Critical Accounting Estimates

We have identified two 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 single family mortgage servicing rights (“MSRs").

The ACL is calculated based on quantitative and qualitative factors to estimate credit losses over the life of the loan. The inputs used to determine quantitative factors include estimates based on historical experience of probability of default and losses given default. Inputs used to determine qualitative factors include changes in current portfolio characteristics and operating environments such as current 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 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 unemployment rate was downgraded one grade for all periods, the amount of the ACL at ~~June~~September 30, 2022 would increase by approximately ~~$12~~$14 million. This sensitivity analysis is hypothetical and has been provided only to indicate the potential impact that changes in assumptions may have on the ACL estimate.

The valuation of MSRs is based on various assumptions which are set forth in Note 7–Mortgage Banking Operations of the financial statements. Note 7 also provides sensitivity analysis based on the assumptions used. The sensitivity analyses are hypothetical and have been provided to indicate the potential impact that changes in assumptions may have on the estimate of the fair value of MSRs.

4241

Summary Financial Data

Quarter Ended Six Months Ended June 30,
(in thousands, except per share data and FTE data) June 30, 2022 March 31, 2022 2022 2021
Select Income Statement data:
Net interest income $ 60,056 $ 54,546 $ 114,602 $ 112,489
Provision for credit losses — (9,000) (9,000) (4,000)
Noninterest income 13,013 15,558 28,571 67,057
Noninterest expense 50,637 54,473 105,110 109,423
Net income:
Before income taxes 22,432 24,631 47,063 74,123
Total 17,721 19,951 37,672 58,820
Net income per share - diluted 0.94 1.01 1.95 2.72
Select Performance Ratios:
Return on average equity - annualized 11.8 % 11.6 % 11.7 % 16.4 %
Return on average tangible equity - annualized (1)
12.6 % 12.2 % 12.4 % 17.3 %
Return on average assets - annualized 0.89 % 1.10 % 0.99 % 1.62 %
Efficiency ratio (1)
68.5 % 77.0 % 72.7 % 61.3 %
Net interest margin 3.27 % 3.27 % 3.28 % 3.37 %
Other data
Full time equivalent employees 956 962 956 997


	Quarter Ended						Nine Months Ended September 30,
(in thousands, except per share data and FTE data)	September 30, 2022			June 30, 2022			2022			2021

Select Income Statement data:
Net interest income	$	63,018		$	60,056		$	177,620		$	169,973
Provision for credit losses	—			—			(9,000)			(9,000)
Noninterest income	13,322			13,013			41,893			91,355
Noninterest expense	49,889			50,637			154,999			161,372
Net income:
Before income taxes	26,451			22,432			73,514			108,956
Total	20,367			17,721			58,039			85,990
Net income per share - diluted	1.08			0.94			3.03			4.03
Select Performance Ratios:
Return on average equity - annualized	13.4		%	11.8		%	12.2		%	15.8		%
Return on average tangible equity - annualized (1)	14.2		%	12.6		%	13.0		%	16.7		%
Return on average assets - annualized	0.91		%	0.89		%	0.96		%	1.57		%
Efficiency ratio (1)	68.4		%	68.5		%	71.2		%	61.8		%
Net interest margin	3.00		%	3.27		%	3.17		%	3.39		%
Other data
Full time equivalent employees	935			956			935			983

(1)Return on average tangible equity and the efficiency ratio are non-GAAP financial measures. For a reconciliation of return on average tangible equity to the nearest comparable GAAP financial measure, see “Non-GAAP Financial Measures” elsewhere in this Management’s Discussion and Analysis of Financial Condition and Results of Operations.

4342


		As of							As of
(in thousands, except share and per share data)	(in thousands, except share and per share data)	June 30, 2022			December 31, 2021			(in thousands, except share and per share data)	September 30, 2022			December 31, 2021

Selected Balance Sheet Data	Selected Balance Sheet Data							Selected Balance Sheet Data
Loans held for sale	Loans held for sale	$	47,314		$	176,131		Loans held for sale	$	13,787		$	176,131
Loans held for investment, net	Loans held for investment, net	6,722,382			5,495,726			Loans held for investment, net	7,175,881			5,495,726
ACL	ACL	37,355			47,123			ACL	37,606			47,123
Investment securities	Investment securities	1,237,957			1,006,691			Investment securities	1,311,941			1,006,691
Total assets	Total assets	8,582,886			7,204,091			Total assets	9,072,887			7,204,091
Deposits	Deposits	6,183,299			6,146,509			Deposits	6,610,231			6,146,509
Borrowings	Borrowings	1,458,000			41,000			Borrowings	1,569,000			41,000
Long-term debt	Long-term debt	224,227			126,026			Long-term debt	224,314			126,026
Total shareholders' equity	Total shareholders' equity	580,767			715,339			Total shareholders' equity	552,789			715,339
Other data:	Other data:							Other data:
Book value per share	Book value per share	$	31.04		$	35.61		Book value per share	$	29.53		$	35.61
Tangible book value per share (1)	Tangible book value per share (1)	$	29.37		$	34.04		Tangible book value per share (1)	$	27.92		$	34.04
Total equity to total assets	Total equity to total assets	6.8		%	9.9		%	Total equity to total assets	6.1		%	9.9		%
Tangible common equity to tangible assets (1)	Tangible common equity to tangible assets (1)	6.4		%	9.5		%	Tangible common equity to tangible assets (1)	5.8		%	9.5		%
Shares outstanding at period end	Shares outstanding at period end	18,712,789			20,085,336			Shares outstanding at period end	18,717,557			20,085,336
Loans to deposit ratio	Loans to deposit ratio	110.1		%	93.0		%	Loans to deposit ratio	109.3		%	93.0		%

Credit Quality:	Credit Quality:							Credit Quality:
ACL to total loans (2)	ACL to total loans (2)	0.56		%	0.88		%	ACL to total loans (2)	0.53		%	0.88		%
ACL to nonaccrual loans	ACL to nonaccrual loans	411.3		%	386.2		%	ACL to nonaccrual loans	306.6		%	386.2		%
Nonaccrual loans to total loans	Nonaccrual loans to total loans	0.13		%	0.22		%	Nonaccrual loans to total loans	0.17		%	0.22		%
Nonperforming assets to total assets	Nonperforming assets to total assets	0.13		%	0.18		%	Nonperforming assets to total assets	0.15		%	0.18		%
Nonperforming assets	Nonperforming assets	$	10,835		$	12,936		Nonperforming assets	$	13,991		$	12,936
Regulatory Capital Ratios:	Regulatory Capital Ratios:							Regulatory Capital Ratios:
Bank	Bank							Bank
Tier 1 leverage ratio	Tier 1 leverage ratio	9.78		%	10.11		%	Tier 1 leverage ratio	9.15		%	10.11		%
Total risk-based capital	Total risk-based capital	12.29		%	13.77		%	Total risk-based capital	12.57		%	13.77		%
Company	Company							Company
Tier 1 leverage ratio	Tier 1 leverage ratio	8.38		%	9.94		%	Tier 1 leverage ratio	7.61		%	9.94		%
Total risk-based capital	Total risk-based capital	11.49		%	12.66		%	Total risk-based capital	11.43		%	12.66		%

(1)Tangible book value per share and tangible common equity to tangible assets are non-GAAP financial measures. For a reconciliation to the nearest

comparable GAAP financial measure, see “Non-GAAP Financial Measures” elsewhere in this 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.

4443

Current Developments

As part of our business strategy, we are focusing on growing our loan portfolio and leveraging our existing operating expense infrastructure. Increases in our loan portfolio will have the effect of increasing our level of net interest income in future periods, a more stable source of revenues as compared to gain on loan origination and sale activities. As part of this strategy, we ~~did not sell any~~only sold $5 million of multifamily portfolio loans in the first ~~six~~nine months of 2022.

In July 2022, we closed a sale of five retail deposit branches in eastern Washington, including the branches' lending businesses and employees. ~~This sale allows~~As part of this transaction, we transferred $191 million of deposits and sold $43 million of loans. In October 2022, we announced an agreement to purchase three branches in southern California, which is expected to close in the first quarter of 2023, whereby we will assume approximately $490 million in deposits and purchase approximately $22 million in loans. These transactions allow us to focus our retail banking branch strategy on the larger metropolitan markets in the western United States.

Management's Overview of the ~~Second~~Third Quarter 2022 Financial Performance

~~Second~~Third Quarter of 2022 Compared to the ~~First~~Second Quarter of 2022

General: Our net income and income before taxes were $20.4 million and $26.5 million, respectively, in the third quarter of 2022, as compared to $17.7 million and $22.4 million, respectively, in the second quarter of ~~2022, as compared to $20.0 million and $24.6 million, respectively, in the first quarter of~~ 2022. The ~~$2.2~~$4.0 million ~~decrease~~increase in income before taxes was due to ~~lower recovery of our allowance for credit losses and lower noninterest income, partially offset by~~ higher net interest income, higher noninterest income and lower noninterest expense.

Income Taxes: Our effective tax rate was ~~21.0%~~23.0% in the ~~second~~third quarter of 2022 as compared to ~~19.0%~~21.0% in ~~first~~second quarter of 2022 and a statutory rate of ~~23.9%~~25.3%. ~~Our~~While our effective tax rate was lower than our statutory rate due to the benefits of tax advantaged ~~investments. Additionally,~~investments, our effective tax rate in the ~~first~~third quarter of 2022 was ~~lower~~higher than the second quarter of 2022 due to the diminishing impact of tax-exempt interest.

Net Interest Income: The following tables set forth, 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 interest margin:


	Quarter Ended
	September 30, 2022						June 30, 2022
(in thousands)	Average Balance		Interest		Average Yield/Cost		Average Balance		Interest		Average Yield/Cost

Assets:
Interest-earning assets:
Loans (1)	$	7,070,998	$	73,522	4.09	%	$	6,231,081	$	60,008	3.82	%
Investment securities (1)	1,252,923		10,087		3.22	%	1,134,929		8,415		2.97	%
FHLB Stock, Fed Funds and other	112,824		1,060		3.68	%	80,998		487		2.38	%
Total interest-earning assets	8,436,745		84,669		3.95	%	7,447,008		68,910		3.68	%
Noninterest-earning assets	462,939						498,290
Total assets	$	8,899,684					$	7,945,298
Liabilities and shareholders' equity:
Interest-bearing deposits: (2)
Demand deposits	$	532,434	$	197	0.15	%	$	552,749	$	177	0.13	%
Money market and savings	2,879,121		3,345		0.46	%	3,050,173		1,615		0.21	%
Certificates of deposit	1,440,960		4,779		1.32	%	961,052		1,101		0.46	%
Total	4,852,515		8,321		0.68	%	4,563,974		2,893		0.25	%
Borrowings:
Borrowings	1,530,449		9,493		2.43	%	761,606		2,338		1.21	%
Long-term debt	224,259		2,571		4.56	%	224,167		2,404		4.28	%
Total interest-bearing liabilities	6,607,223		20,385		1.22	%	5,549,747		7,635		0.55	%
Noninterest-bearing liabilities:
Demand deposits (2)	1,576,387						1,668,631
Other liabilities	112,796						123,256
Total liabilities	8,296,406						7,341,634
Shareholders' equity	603,278						603,664
Total liabilities and shareholders' equity	$	8,899,684					$	7,945,298
Net interest income			$	64,284					$	61,275
Net interest rate spread					2.74	%					3.13	%
Net interest margin					3.00	%					3.27	%

(1) Includes taxable-equivalent adjustments primarily related to tax-exempt income on certain loans and securities of $1.3 million and $1.2 million for the quarters ended September 30, 2022 and June 30, 2022. The estimated federal statutory tax rate was 21% for the periods presented.

(2) Cost of all deposits, including noninterest-bearing demand deposits was 0.51% and 0.19% for the quarters ended September 30, 2022 and June 30, 2022, respectively.

Net interest income was $3.0 million higher in the third quarter of 2022 as compared to the second quarter of 2022 due primarily to a 13% increase in average interest earning assets, which was partially offset by a decrease in our net interest margin from 3.27% to 3.00%. The increase in the average balance of interest-earning assets was due to the high level of loan originations during the third quarter. Our net interest margin decreased to 3.00% as a 67 basis point increase in the cost of interest-bearing liabilities was partially offset by a 27 basis point increase in the yield on interest-earning assets. Yields on interest-earning assets increased as the yields on loan originations during the third quarter were higher than the rates of our existing portfolio of loans and yields on adjustable rate loans increased due to increases in the indexes on which their pricing is based. The increase in the rates paid on our interest-bearing liabilities was due to higher deposit costs, higher borrowing costs and an increase in the proportion of higher cost borrowings used as our sources of funding. Our cost of borrowings increased 122 basis points during the third quarter while the cost of deposits increased 32 basis points. Additionally, our average borrowings increased by $769 million to fund the growth of our loan portfolio. The increases in yields on interest-earning assets and the rates paid on interest-bearing liabilities were due to the significant increases in market interest rates during the first nine months of 2022.

Provision for Credit Losses: No provision for credit losses was recorded during the second or third quarter of 2022 as the benefits of the continuing favorable performance of our loan portfolio was used to offset any required ACL resulting from the growth in our loan portfolio.

Noninterest Income consisted of the following:


	Quarter Ended
(in thousands)	September 30, 2022		June 30, 2022

Noninterest income
Gain on loan origination and sale activities (1)
Single family	$	1,778	$	3,949
CRE, multifamily and SBA	869		1,343
Loan servicing income	2,741		3,661
Deposit fees	2,223		2,218
Other	5,711		1,842
Total noninterest income	$	13,322	$	13,013

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

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


	Quarter Ended
(in thousands)	September 30, 2022		June 30, 2022

Single family servicing income, net
Servicing fees and other	$	3,986	$	3,952
Changes - amortization (1)	(2,112)		(2,515)
Net	1,874		1,437
Risk management, single family MSRs:
Changes in fair value due to assumptions (2)	1,989		4,323
Net gain (loss) from economic hedging	(2,981)		(5,317)
Subtotal	(992)		(994)
Single Family servicing income (loss)	882		443

Commercial loan servicing income:
Servicing fees and other	3,687		5,555
Amortization of capitalized MSRs	(1,828)		(2,337)
Total	1,859		3,218
Total loan servicing income	$	2,741	$	3,661

(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.

The increase in noninterest income in the third quarter of 2022 as compared to the second quarter of 2022 was primarily due to an increase in other income due to a $4.3 million gain on sale of five eastern Washington branches. This increase was partially offset by a decrease in net gain on loan origination and sale activities due primarily to a $2.2 million decrease in single family gain on loan origination and sale activities. The decrease in single family gain on loan origination and sale activities was primarily due to a decrease in rate lock volume as a result of the effects of increasing interest rates.

Noninterest Expense consisted of the following:


	Quarter Ended
(in thousands)	September 30, 2022		June 30, 2022

Noninterest expense
Compensation and benefits	$	27,341	$	30,191
Information services	7,038		7,780
Occupancy	6,052		5,898
General, administrative and other	9,458		6,768
Total noninterest expense	$	49,889	$	50,637

The $0.7 million decrease in noninterest expense in the third quarter of 2022 as compared to the second quarter of 2022 was primarily due to lower compensation and benefit costs, which was partially offset by higher general, administrative and other costs. The decrease in compensation and benefit costs was due to reduced headcount due to the sale of the five eastern Washington branches and lower commission and bonus expenses. General, administrative and other costs increased in the third quarter of 2022 as compared to second quarter of 2022 due to an increase in marketing costs related to our promotional deposit products and higher FDIC fees due to our larger asset base.

Nine Months Ended September 30, 2022 Compared to Nine Months Ended September 30, 2021

General: Our net income and income before taxes were $58.0 million and $73.5 million, respectively, in the nine months ended September 30, 2022, as compared to $86.0 million and $109.0 million, respectively, in the nine months ended September 30, 2021. The $35.4 million decrease in income before taxes was due to lower noninterest income, partially offset by higher net interest income and lower noninterest expense.

Income Taxes: Our effective tax rate during nine months ended September 30, 2022 and 2021 was 21.1% and our statutory rate was 25.3% in 2022 and 24.2% in 2021. Our effective tax rate for both periods was lower than our statutory rate due to the benefits of tax advantaged investments and reductions in taxes on income related to excess tax benefits resulting from the exercise and vesting of stock awards during the ~~first quarter.~~periods.

4547


		Quarter Ended													Nine Months Ended September 30,
		June 30, 2022						March 31, 2022							2022						2021
(in thousands)	(in thousands)	Average Balance		Interest		Average Yield/Cost		Average Balance		Interest		Average Yield/Cost		(in thousands)	Average Balance		Interest		Average Yield/Cost		Average Balance		Interest		Average Yield/Cost

Assets:	Assets:													Assets:
Interest-earning assets:	Interest-earning assets:													Interest-earning assets:
Loans (1)	Loans (1)	$	6,231,081	$	60,008	3.82	%	$	5,691,316	$	53,135	3.74	%	Loans (1)	$	6,336,185	$	186,665	3.90	%	$	5,615,624	$	167,322	3.95	%
Investment securities (1)	Investment securities (1)	1,134,929		8,415		2.97	%	1,028,971		6,671		2.59	%	Investment securities (1)	1,139,761		25,389		2.97	%	1,030,726		18,084		2.34	%
FHLB Stock, Fed Funds and other	FHLB Stock, Fed Funds and other	80,998		487		2.38	%	65,918		108		0.65	%	FHLB Stock, Fed Funds and other	86,752		1,655		2.50	%	100,972		472		0.62	%
Total interest-earning assets	Total interest-earning assets	7,447,008		68,910		3.68	%	6,786,205		59,914		3.54	%	Total interest-earning assets	7,562,698		213,709		3.74	%	6,747,322		185,878		3.65	%
Noninterest-earning assets	Noninterest-earning assets	498,290						577,384						Noninterest-earning assets	512,452						558,224
Total assets	Total assets	$	7,945,298					$	7,363,589					Total assets	$	8,075,150					$	7,305,546
Liabilities and shareholders' equity:
Interest-bearing liabilities:														Interest-bearing liabilities:
Interest-bearing deposits: (2)	Interest-bearing deposits: (2)													Interest-bearing deposits: (2)
Demand deposits	Demand deposits	$	552,749	$	177	0.13	%	$	525,608	$	143	0.11	%	Demand deposits	$	536,956	$	517	0.13	%	$	521,579	$	543	0.14	%
Money market and savings	Money market and savings	3,050,173		1,615		0.21	%	3,101,607		1,121		0.15	%	Money market and savings	3,009,398		6,081		0.27	%	2,955,153		3,338		0.15	%
Certificates of deposit	Certificates of deposit	961,052		1,101		0.46	%	886,416		1,020		0.47	%	Certificates of deposit	1,098,255		6,900		0.84	%	1,087,195		5,049		0.62	%
Total	Total	4,563,974		2,893		0.25	%	4,513,631		2,284		0.21	%	Total	4,644,609		13,498		0.39	%	4,563,927		8,930		0.26	%
Borrowings:	Borrowings:													Borrowings:
Borrowings	Borrowings	761,606		2,338		1.21	%	64,557		91		0.56	%	Borrowings	790,907		11,922		1.99	%	137,754		347		0.33	%
Long-term debt	Long-term debt	224,167		2,404		4.28	%	204,553		2,107		4.12	%	Long-term debt	217,732		7,082		4.33	%	125,902		4,076		4.31	%
Total interest-bearing liabilities	Total interest-bearing liabilities	5,549,747		7,635		0.55	%	4,782,741		4,482		0.38	%	Total interest-bearing liabilities	5,653,248		32,502		0.76	%	4,827,583		13,353		0.37	%
Noninterest-bearing liabilities:	Noninterest-bearing liabilities:													Noninterest-bearing liabilities:
Demand deposits (2)	Demand deposits (2)	1,668,631						1,744,202						Demand deposits (2)	1,662,465						1,552,201
Other liabilities	Other liabilities	123,256						138,048						Other liabilities	124,606						200,032
Total liabilities	Total liabilities	7,341,634						6,664,991						Total liabilities	7,440,319						6,579,816
Shareholders' equity	Shareholders' equity	603,664						698,598						Shareholders' equity	634,831						725,730
Total liabilities and shareholders' equity	Total liabilities and shareholders' equity	$	7,945,298					$	7,363,589					Total liabilities and shareholders' equity	$	8,075,150					$	7,305,546
Net interest income	Net interest income			$	61,275					$	55,432			Net interest income			$	181,207					$	172,525
Net interest rate spread						3.13	%					3.16	%
Net interest spread														Net interest spread					2.98	%					3.28	%
Net interest margin	Net interest margin					3.27	%					3.27	%	Net interest margin					3.17	%					3.39	%

(1) Includes taxable-equivalent adjustments primarily related to tax-exempt income on certain loans and securities of ~~$1.2~~$3.6 million and ~~$0.9~~$2.6 million for the ~~quarters ended June 30, 2022 and March 31, 2022. The estimated federal statutory tax rate was 21% for the periods presented.~~

~~(2) Cost of all deposits, including noninterest-bearing demand deposits was 0.19% and 0.15% for the quarters ended June 30, 2022 and March 31, 2022, respectively.~~

Net interest income was $5.5 million higher in the second quarter of 2022 as compared to the first quarter of 2022 due to a 10% increase in average interest earning assets. The increase in the average balance of interest-earning assets was due to the high level of loan originations and purchases of investment securities during the second quarter. Our net interest margin stayed constant at 3.27% as a 14 basis point increase in the yield on interest-earning assets was offset by a 17 basis point increase in the cost of interest-bearing liabilities. Yields on interest-earning assets increased as the rates on loan originations and investment securities purchased during the second quarter were higher than the rates of our existing portfolios of loans and investment securities, respectively. Our cost of borrowings increased 65 basis points during the second quarter while the cost of deposits increased 4 basis points. Additionally, our average borrowings increased by $697 million to fund the growth of our interest-earning assets. The increases in yields on interest-earning assets and the rates paid on interest-bearing liabilities was due to the significant increase in market interest rates during the first half of 2022.

~~Provision for Credit Losses:~~ No provision for credit losses was recorded during the second quarter of 2022 as the benefits of the continuing favorable performance of our loan portfolio was used to offset any required ACL resulting from the significant growth in our loan portfolio. As a result of the favorable performance of our loan portfolio during the first quarter, a stable low level of nonperforming assets and an improved outlook of the estimated impact of COVID-19 on our loan portfolio, we recorded a $9 million recovery of our allowance for credit losses in the first quarter of 2022.

~~Noninterest Income~~ ~~consisted of the following:~~

Quarter Ended
(in thousands) June 30, 2022 March 31, 2022
Noninterest income
Gain on loan origination and sale activities (1)
Single family $ 3,949 $ 6,169
CRE, multifamily and SBA 1,343 2,105
Loan servicing income 3,661 3,304
Deposit fees 2,218 2,075
Other 1,842 1,905
Total noninterest income $ 13,013 $ 15,558

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

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

Quarter Ended
(in thousands) June 30, 2022 March 31, 2022
Single family servicing income, net
Servicing fees and other $ 3,952 $ 3,871
Changes - amortization (1)
(2,515) (3,425)
Net 1,437 446
Risk management, single family MSRs:
Changes in fair value due to assumptions (2)
4,323 10,303
Net gain (loss) from economic hedging (5,317) (10,183)
Subtotal (994) 120
Single Family servicing income (loss) 443 566
Commercial loan servicing income:
Servicing fees and other 5,555 4,450
Amortization of capitalized MSRs (2,337) (1,712)
Total 3,218 2,738
Total loan servicing income $ 3,661 $ 3,304

~~(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.~~

The decrease in noninterest income in the second quarter of 2022 as compared to the first quarter of 2022 was due to a $3.0 million decrease in gain on loan origination and sale activities due primarily to a $2.2 million decrease in single family 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 effects of increasing interest rates.

~~Noninterest Expense~~ ~~consisted of the following:~~

Quarter Ended
(in thousands) June 30, 2022 March 31, 2022
Noninterest expense
Compensation and benefits $ 30,191 $ 32,031
Information services 7,780 7,062
Occupancy 5,898 6,365
General, administrative and other 6,768 9,015
Total noninterest expense $ 50,637 $ 54,473

The $3.8 million decrease in noninterest expense in the second quarter of 2022 as compared to the first quarter of 2022 was primarily due to lower compensation and benefits and general, administrative and other costs, partially offset by higher information services costs. The decrease in compensation costs was due to the seasonality of certain employee benefit costs, such as employer taxes, 401k match and vacation accruals, which are higher in the first quarter of the year, and the deferred cost benefit resulting from the significantly higher level of originations in the second quarter. The increase in information services costs was due to the implementation of new systems in the second quarter and higher activity levels. Legal costs, which are included in general, administrative and other costs, were $1.7 million lower in the second quarter of 2022 as compared to first quarter of 2022 due to nonrecurring costs expended on litigation activities and legal matters in the first quarter.

~~Six Months Ended June 30, 2022 Compared to Six Months Ended June 30, 2021~~

~~General:~~ ~~Our net income and income before taxes were $37.7 million and $47.1 million, respectively, in the six~~nine months ended June 30, 2022, as compared to $58.8 million and $74.1 million, respectively, in the six months ended June 30, 2021. The $27.1 million decrease in income before taxes was due to lower noninterest income, partially offset by higher net interest income, a larger recovery of our allowance for credit losses in 2022 and lower noninterest expense.

~~Income Taxes:~~ Our effective tax rate during six months ended June 30, 2022 was 20.0% as compared to 20.6% in the six months ended June 30, 2021 and a statutory rate of 23.9%. Our effective tax rate for both periods was lower than our statutory rate due to the benefits of tax advantaged investments and reductions in taxes on income related to excess tax benefits resulting from the exercise and vesting of stock awards during the periods.

~~Net Interest Income:~~ The following tables set forth, 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 interest margin:

Six Months Ended June 30,
2022 2021
(in thousands) Average
Balance Interest Average
Yield/Cost Average
Balance Interest Average
Yield/Cost
Assets:
Interest-earning assets:
Loans (1)
$ 5,962,689 $ 113,143 3.79 % $ 5,635,181 $ 111,020 3.93 %
Investment securities (1)
1,082,243 15,302 2.83 % 1,049,091 12,268 2.34 %
FHLB Stock, Fed Funds and other 73,499 595 1.61 % 77,315 331 0.85 %
Total interest-earning assets 7,118,431 129,040 3.62 % 6,761,587 123,619 3.65 %
Noninterest-earning assets 537,619 564,602
Total assets $ 7,656,050 $ 7,326,189
Interest-bearing liabilities:
Interest-bearing deposits: (2)
Demand deposits $ 539,253 $ 320 0.12 % $ 517,456 $ 355 0.14 %
Money market and savings 3,075,616 2,736 0.18 % 2,936,982 2,285 0.16 %
Certificates of deposit 924,062 2,121 0.46 % 1,128,904 3,783 0.68 %
Total 4,538,931 5,177 0.23 % 4,583,342 6,423 0.28 %
Borrowings:
Borrowings 415,007 2,429 1.16 % 191,422 303 0.32 %
Long-term debt 214,414 4,511 4.20 % 125,878 2,723 4.32 %
Total interest-bearing liabilities 5,168,352 12,117 0.47 % 4,900,642 9,449 0.39 %
Noninterest-bearing liabilities:
Demand deposits (2)
1,706,217 1,487,708
Other liabilities 130,612 212,664
Total liabilities 7,005,181 6,601,014
Shareholders' equity 650,869 725,175
Total liabilities and shareholders' equity $ 7,656,050 $ 7,326,189
Net interest income
$ 116,923 $ 114,170
Net interest spread 3.15 % 3.26 %
Net interest margin 3.28 % 3.37 %

~~(1) Includes taxable-equivalent adjustments primarily related to tax-exempt income on certain loans and securities of $2.3 million and $1.7 million for the six months ended June~~September 30, 2022 and 2021, respectively. The estimated federal statutory tax rate was 21% for the periods presented.

(2) Cost of deposits including noninterest-bearing deposits, was ~~0.17%~~0.29% and ~~0.21%~~0.20% for the ~~six~~nine months ended ~~June~~September 30, 2022 and 2021, respectively.

Net interest income for the ~~six~~nine months ended ~~June~~September 30, 2022 increased ~~$2.1~~$7.6 million as compared to the ~~six~~nine months ended ~~June~~September 30, 2021 due primarily to increases in the average balance of interest earning assets, partially offset by a decrease in our net interest margin. Our net interest margin decreased from 3.37% in the six months ended June 30, 2021 compared to 3.28% in the six months ended June 30, 2022 due to an eight basis point increase in the rate paid on interest-bearing liabilities, primarily due to increases in our cost of borrowings. Our cost of borrowings increased from 32 basis points during the first six months of 2021 to 116 basis points during the first six months of 2022 due to the significant increase in market interest rates during the first half of 2022 and the impact of the $100 million subordinated notes offering completed in January 2022. The increase in interest-earning assets was due to the high level of loan originations and purchases of investment securities during the ~~second quarter~~first nine months of 2022. Our net interest margin decreased from 3.39% in the nine months ended September 30, 2021 to 3.17% in the nine months ended September 30, 2022 due to a 39 basis point increase in the rates paid on interest-bearing liabilities which was partially offset by a nine basis point increase in the yield on interest earning assets. The increase in yield on interest-earning assets was primarily due to higher yields on investment securities due to adjustments to yields realized from longer estimated lives of certain securities and the yields of securities purchased during the first nine months of 2022 being higher than the yields on our existing portfolio. The increase in the rates paid on our interest-bearing liabilities was due to higher deposit costs, higher borrowing costs and an increase in the proportion of higher cost borrowings used as our sources of funding. The increases in the rates paid on deposits was due to the significant increase in market interest rates during the first nine months of 2022. Our average borrowings increased by $653 million to fund the growth of our loan portfolio and investment securities. Our cost of borrowings increased from 33 basis points during the first nine months of 2021 to 199 basis points during the first nine months of 2022 due to the significant increase in market interest rates during the first nine months of 2022 and the impact of the $100 million subordinated notes offering completed in January 2022.

Provision for Credit Losses: As a result of the favorable performance of our loan portfolio, a stable low level of nonperforming assets and an improved outlook of the estimated impact of COVID-19 on our loan portfolio, we recorded a $9 million recovery of our allowance for credit losses in both the ~~six~~nine months ended ~~June~~September 30, 2022 ~~compared to a $4 million recovery of our allowance for credit losses in the six months ended June 30,~~and 2021.

Noninterest Income consisted of the following:


		Six Months Ended June 30,						Nine Months Ended September 30,
(in thousands)	(in thousands)	2022	2021		(in thousands)			2022	2021

Noninterest 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)
Single family	Single family		$	10,118	$	42,023	Single family			$	11,896	$	56,272
Commercial	Commercial		3,448		12,707		Commercial			4,317		15,967
Loan servicing income	Loan servicing income		6,965		2,679		Loan servicing income			9,706		4,693
Deposit fees	Deposit fees		4,293		3,821		Deposit fees			6,516		5,912
Other	Other		3,747		5,827		Other			9,458		8,511
Total noninterest income	Total noninterest income		$	28,571	$	67,057	Total noninterest income			$	41,893	$	91,355

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

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


		Six Months Ended June 30,						Nine Months Ended September 30,
(in thousands)	(in thousands)		2022		2021		(in thousands)		2022		2021

Single family servicing income, net	Single family servicing income, net						Single family servicing income, net
Servicing fees and other	Servicing fees and other		$	7,823	$	7,910	Servicing fees and other		$	11,809	$	11,788
Changes - amortization (1)	Changes - amortization (1)		(5,940)		(10,874)		Changes - amortization (1)		(8,052)		(15,453)
Net	Net		1,883		(2,964)		Net		3,757		(3,665)
Risk management, single family MSRs:	Risk management, single family MSRs:						Risk management, single family MSRs:
Changes in fair value due to assumptions (2)	Changes in fair value due to assumptions (2)		14,626		6,439		Changes in fair value due to assumptions (2)		16,615		7,186
Net gain (loss) from economic hedging	Net gain (loss) from economic hedging		(15,500)		(7,567)		Net gain (loss) from economic hedging		(18,481)		(7,860)
Subtotal	Subtotal		(874)		(1,128)		Subtotal		(1,866)		(674)
Single Family servicing income (loss)	Single Family servicing income (loss)		1,009		(4,092)		Single Family servicing income (loss)		1,891		(4,339)

Commercial loan servicing income:	Commercial loan servicing income:						Commercial loan servicing income:
Servicing fees and other	Servicing fees and other		10,005		10,248		Servicing fees and other		13,692		14,267
Amortization of capitalized MSRs	Amortization of capitalized MSRs		(4,049)		(3,477)		Amortization of capitalized MSRs		(5,877)		(5,235)
Total	Total		5,956		6,771		Total		7,815		9,032
Total loan servicing income	Total loan servicing income		$	6,965	$	2,679	Total loan servicing income		$	9,706	$	4,693

(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.

The decrease in noninterest income for the ~~six~~nine months ended ~~June~~September 30, 2022 as compared to the ~~six~~nine months ended ~~June~~September 30, 2021 was due to a decrease in gain on loan origination and sale activities, which was partially offset by higher loan servicing ~~income.~~income and the $4.3 million gain on sale of five eastern Washington branches. The ~~$41.2~~$56.0 million decrease in gain on loan origination and sale activities was due to a ~~$31.9~~$44.4 million decrease in single family gain on loan origination and sale activities and a ~~$9.3~~$11.7 million decrease in CRE and commercial 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 and margins as a result of the effects of increasing interest rates. The decrease in CRE and commercial gain on loan origination and sale activities was primarily due to an ~~75%~~72% decrease in the volume of loans sold. The ~~$4.3~~$5.0 million increase in loan servicing income was primarily due to lower levels of prepayments.

Noninterest Expense consisted of the following:


		Six Months Ended June 30,								Nine Months Ended September 30,
(in thousands)	(in thousands)	2022	2021				(in thousands)		2022	2021

Noninterest expense	Noninterest expense							Noninterest expense
Compensation and benefits	Compensation and benefits		$	62,222	$	70,213		Compensation and benefits			$	89,563	$	101,388
Information services	Information services		14,842		13,733			Information services			21,880		20,635
Occupancy	Occupancy		12,263		12,465			Occupancy			18,315		18,170
General, administrative and other	General, administrative and other		15,783		13,012			General, administrative and other			25,241		21,179
Total noninterest expense	Total noninterest expense		$	105,110	$	109,423		Total noninterest expense			$	154,999	$	161,372

The ~~$4.3~~$6.4 million decrease in noninterest expense in the ~~six~~nine months ended ~~June~~September 30, 2022 as compared to the ~~six~~nine months ended ~~June~~September 30, 2021 was due to lower compensation and benefit costs, partially offset by increases in information services and general, administrative and other expenses. The ~~$8.0~~$11.8 million decrease in compensation and ~~benefits expense is~~benefit costs was primarily due to reduced commission expense on lower loan origination volumes in our single family mortgage ~~operations.~~operations, lower bonus expense and lower headcount, which were partially offset by wage increases given in 2022. The increase in information services costs was due to the implementation of new systems in the second quarter of 2022 and higher activity levels. The increase in general, administrative and other costs was primarily due to a $1.9 million reimbursement of legal costs received from our insurance carrier in the first ~~six~~nine months of ~~June 30, 2021and~~2021, nonrecurring costs expended on litigation activities and legal matters in ~~2022.~~2022 and an increase in marketing costs related to our promotional deposit products.

5150

Financial Condition

During the ~~six~~nine months ended ~~June~~September 30, 2022, our total assets increased ~~$1.4~~$1.9 billion due primarily to a ~~$1.2~~$1.7 billion increase in loans held for investment and a ~~$231~~$305 million increase in investment securities which were partially offset by a decrease of ~~$129~~$162 million in loans held for sale. Loans held for investment increased due to ~~$2.1~~$3.0 billion of originations, which were partially offset by prepayments and scheduled payments of ~~$831 million.~~$1.3 billion. Total liabilities increased ~~$1.5~~$2.0 billion due to increases in deposits, borrowings and long-term debt. Deposits increased $464 million primarily due to increased balances of brokered deposits and certificates of deposit related to our promotional products. The ~~$1.4~~$1.5 billion increase in borrowings was used to fund the growth in our loans and investment securities. Long-term debt increased due to our $100 million subordinated notes offering completed in January 2022.

Credit Risk Management

As of ~~June~~September 30, 2022, our ratio of nonperforming assets to total assets remained low at ~~0.13%~~0.15% while our ratio of total loans delinquent over 30 days to total loans was ~~0.31%~~0.30%. The Company recorded a $9 million recovery of our allowance for credit losses for the ~~six~~nine months ended ~~June~~September 30, 2022 as a result of the favorable performance of our loan portfolio, a stable low level of nonperforming assets and an improved outlook of the estimated impact of COVID-19 on our loan portfolio. As a result of the recovery of COVID-19 reserves, and the change in the composition of our portfolio to lower credit risk loans, specifically a higher proportion of multifamily permanent loans, our overall ratio of ACL to LHFI decreased from 0.88% at December 31, 2021 to ~~0.56%~~0.53% at ~~June~~September 30, 2022.

Management considers the current level of the ACL to be appropriate to cover estimated lifetime losses within our LHFI portfolio. The following table presents the ACL by product type:


		At June 30, 2022				At December 31, 2021					At September 30, 2022				At December 31, 2021
(in thousands)	(in thousands)	Amount		Rate (1)		Amount		Rate (1)		(in thousands)	Amount		Rate (1)		Amount		Rate (1)

CRE	CRE									CRE
Non-owner occupied CRE	Non-owner occupied CRE	$	2,180	0.31	%	$	7,509	1.06	%	Non-owner occupied CRE	$	2,106	0.32	%	$	7,509	1.06	%
Multifamily	Multifamily	10,074		0.29	%	5,854		0.24	%	Multifamily	11,183		0.29	%	5,854		0.24	%
Construction/land development	Construction/land development									Construction/land development
Multifamily construction	Multifamily construction	566		1.30	%	507		1.34	%	Multifamily construction	665		1.06	%	507		1.34	%
CRE construction	CRE construction	185		0.90	%	150		1.06	%	CRE construction	160		0.86	%	150		1.06	%
Single family construction	Single family construction	10,687		3.08	%	6,411		2.16	%	Single family construction	9,564		2.77	%	6,411		2.16	%
Single family construction to permanent	Single family construction to permanent	1,159		0.73	%	1,055		0.71	%	Single family construction to permanent	1,140		0.70	%	1,055		0.71	%
Total	Total	24,851		0.52	%	21,486		0.59	%	Total	24,818		0.48	%	21,486		0.59	%
Commercial and industrial loans	Commercial and industrial loans									Commercial and industrial loans
Owner occupied CRE	Owner occupied CRE	1,092		0.23	%	5,006		1.10	%	Owner occupied CRE	969		0.23	%	5,006		1.10	%
Commercial business	Commercial business	3,578		0.91	%	12,273		3.39	%	Commercial business	3,719		1.04	%	12,273		3.39	%
Total	Total	4,670		0.54	%	17,279		2.11	%	Total	4,688		0.59	%	17,279		2.11	%
Consumer loans	Consumer loans									Consumer loans
Single family	Single family	4,027		0.56	%	4,394		0.68	%	Single family	4,464		0.56	%	4,394		0.68	%
Home equity and other	Home equity and other	3,807		1.20	%	3,964		1.31	%	Home equity and other	3,636		1.09	%	3,964		1.31	%
Total	Total	7,834		0.76	%	8,358		0.88	%	Total	8,100		0.71	%	8,358		0.88	%
Total ACL	Total ACL	$	37,355	0.56	%	$	47,123	0.88	%	Total ACL	$	37,606	0.53	%	$	47,123	0.88	%

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

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-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-term borrowings are typically satisfied through the renewal of these instruments or the generation of new deposits or use of available short-term borrowings. Interest payments and obligations related to leases and services are typically met by cash generated from our operations. The Company has $64 million of Senior Notes which mature in 2026 which it expects to pay off from available cash or from the issuance of new debt.

At ~~June~~September 30, 2022 and December 31, 2021, the Bank had available borrowing capacity of ~~$809 million~~$1.0 billion and $1.8 billion, respectively, from the FHLB, and ~~$323~~$337 million and $274 million, respectively, from the FRBSF and ~~$1.0~~$1.2 billion and $1.0 billion under borrowing lines established with other financial institutions.

Cash Flows

For the ~~six~~nine months ended ~~June~~September 30, 2022, cash and cash equivalents ~~increased~~decreased by ~~$10~~$8 million compared to an increase of ~~$30~~$161 million during the ~~six~~nine months ended ~~June~~September 30, 2021. 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 the ~~six~~nine months ended ~~June~~September 30, 2022, net cash of ~~$145~~$209 million was provided by operating activities, primarily from cash proceeds from the sale of ~~loans~~LHFS exceeding cash used to fund LHFS. For the ~~six~~nine months ended ~~June~~September 30, 2021, net cash of ~~$55~~$182 million was provided by operating activities, primarily from cash proceeds from the sale of ~~loans~~LHFS exceeding cash used to fund LHFS. We believe that cash flows from operations, available cash balances and our ability to generate cash through short-term debt borrowings are sufficient to fund our operating liquidity needs. We are currently not aware of any 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 capital needs during or beyond the next 12 months.

Cash flows from investing activities

The Company's investing activities primarily include AFS investment securities and loans originated as held for investment. For the ~~six~~nine months ended ~~June~~September 30, 2022, net cash of ~~$1.6~~$2.4 billion was used in investing activities primarily from the origination of LHFI net of principal repayments and the purchase of AFS investment securities. For the ~~six~~nine months ended ~~June~~September 30, 2021, net cash of ~~$44~~$155 million was ~~provided by~~used in investing activities primarily from the origination of

LHFI net of principal ~~payments~~repayments and the purchase of AFS securities, partially offset by the proceeds from the sale of loans

originated as LHFI and ~~AFS securities, which were partially offset by the origination of LHFI and the purchase of~~ AFS securities.

Cash flows from financing activities

The Company's financing activities are primarily related to deposits and net proceeds from borrowings. For the ~~six~~nine months ended ~~June~~September 30, 2022, net cash of ~~$1.4~~$2.2 billion was provided by financing activities, primarily due to an increase in short-term borrowings, growth in deposits and proceeds from the issuance of the subordinated notes, partially offset by repurchases of and dividends paid on our common stock. For the ~~six~~nine months ended ~~June~~September 30, 2021, net cash of ~~$69~~$134 million was ~~used in~~provided by financing activities, primarily due to growth in deposits, partially offset by net repayment of short-term borrowings and repurchases of and dividends paid on our common ~~stock, which was partially offset by growth in deposits.~~stock.

Off-Balance Sheet Arrangements

In the normal course of business, we are a party to financial instruments that carry off-balance sheet risk. These financial instruments (which include commitments to originate loans and commitments to purchase loans) include potential credit risk in excess of the amount recognized in the accompanying consolidated financial statements. These transactions are designed to (1) meet the financial needs of our customers, (2) manage our credit, market or liquidity risks, (3) diversify our funding sources and/or (4) optimize capital.

These commitments include the following:


(in thousands)	(in thousands)	At June 30, 2022		At December 31, 2021		(in thousands)	At September 30, 2022		At December 31, 2021

Unused consumer portfolio lines	Unused consumer portfolio lines	$	474,796	$	405,992	Unused consumer portfolio lines	$	507,962	$	405,992
Commercial portfolio lines (1)	Commercial portfolio lines (1)	836,296		820,131		Commercial portfolio lines (1)	821,837		820,131
Commitments to fund loans	Commitments to fund loans	59,450		90,852		Commitments to fund loans	39,469		90,852
Total	Total	$	1,370,542	$	1,316,975	Total	$	1,369,268	$	1,316,975

(1) Within the commercial portfolio, undistributed construction loan proceeds, where the Company has an obligation to advance funds for construction

progress payments, were ~~$576~~$562 million and $584 million at ~~June~~September 30, 2022 and December 31, 2021, respectively.

Capital Resources and Dividend Policy

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 table sets forth the capital and capital ratios of HomeStreet Inc. (on a consolidated basis) and HomeStreet Bank as compared to the respective regulatory requirements applicable to them:

At June 30, 2022
Actual For Minimum Capital
Adequacy Purposes To Be Categorized As
"Well Capitalized"
(dollars in thousands) Amount Ratio Amount Ratio Amount Ratio
HomeStreet, Inc.
Tier 1 leverage capital (to average assets) $ 673,552 8.38 % $ 321,579 4.0 % NA NA
Common equity Tier 1 capital (to risk-weighted assets) 613,552 8.66 % 318,688 4.5 % NA NA
Tier 1 risk-based capital (to risk-weighted assets) 673,552 9.51 % 424,917 6.0 % NA NA
Total risk-based capital (to risk-weighted assets) 814,000 11.49 % 566,557 8.0 % NA NA
HomeStreet Bank
Tier 1 leverage capital (to average assets) $ 781,155 9.78 % $ 319,539 4.0 % $ 399,424 5.0 %
Common equity Tier 1 capital (to risk-weighted assets) 781,155 11.66 % 301,423 4.5 % 435,388 6.5 %
Tier 1 risk-based capital (to risk-weighted assets) 781,155 11.66 % 401,897 6.0 % 535,863 8.0 %
Total risk-based capital (to risk-weighted assets) 823,005 12.29 % 535,863 8.0 % 669,828 10.0 %

5553


	At September 30, 2022
	Actual				For Minimum Capital Adequacy Purposes				To Be Categorized As "Well Capitalized"
(dollars in thousands)	Amount		Ratio		Amount		Ratio		Amount		Ratio

HomeStreet, Inc.
Tier 1 leverage capital (to average assets)	$	689,911	7.61	%	$	362,628	4.0	%	NA		NA
Common equity Tier 1 capital (to risk-weighted assets)	629,911		8.66	%	327,160		4.5	%	NA		NA
Tier 1 risk-based capital (to risk-weighted assets)	689,911		9.49	%	436,214		6.0	%	NA		NA
Total risk-based capital (to risk-weighted assets)	830,827		11.43	%	581,618		8.0	%	NA		NA
HomeStreet Bank
Tier 1 leverage capital (to average assets)	$	824,718	9.15	%	$	360,653	4.0	%	$	450,817	5.0	%
Common equity Tier 1 capital (to risk-weighted assets)	824,718		11.96	%	310,292		4.5	%	448,199		6.5	%
Tier 1 risk-based capital (to risk-weighted assets)	824,718		11.96	%	413,722		6.0	%	551,630		8.0	%
Total risk-based capital (to risk-weighted assets)	867,047		12.57	%	551,630		8.0	%	689,537		10.0	%


	At December 31, 2021
	Actual				For Minimum Capital Adequacy Purposes				To Be Categorized As "Well Capitalized"
(dollars in thousands)	Amount		Ratio		Amount		Ratio		Amount		Ratio

HomeStreet, Inc.
Tier 1 leverage capital (to average assets)	$	723,232	9.94	%	$	291,098	4.0	%	NA		NA
Common equity Tier 1 capital (to risk-weighted assets)	663,232		10.84	%	275,281		4.5	%	NA		NA
Tier 1 risk-based capital (to risk-weighted assets)	723,232		11.82	%	367,041		6.0	%	NA		NA
Total risk-based capital (to risk-weighted assets)	774,695		12.66	%	489,388		8.0	%	NA		NA
HomeStreet Bank
Tier 1 leverage capital (to average assets)	$	727,753	10.11	%	$	287,990	4.0	%	$	359,988	5.0	%
Common equity Tier 1 capital (to risk-weighted assets)	727,753		12.87	%	254,442		4.5	%	367,527		6.5	%
Tier 1 risk-based capital (to risk-weighted assets)	727,753		12.87	%	339,256		6.0	%	452,341		8.0	%
Total risk-based capital (to risk-weighted assets)	778,723		13.77	%	452,341		8.0	%	565,426		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 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 HomeStreet Inc. and HomeStreet Bank are required to maintain a capital conservation buffer consisting of additional Common Equity Tier 1 Capital of more than 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 Bank maintained capital ratios necessary to satisfy the capital conservation buffer requirements as of the dates indicated. At ~~June~~September 30, 2022, capital conservation buffers for the Company and the Bank were ~~3.49%~~3.43% and ~~4.29%~~4.57%, respectively.

The Company paid a quarterly cash dividend of $0.35 per common share in the ~~second~~third quarter of 2022. It is our current intention to continue to pay quarterly dividends, and on ~~July 28,~~October 27, 2022, we declared another cash dividend of $0.35 per common share payable on ~~August 23,~~November 22, 2022 to shareholders of record as of the close of business on ~~August 9,~~November 8, 2022. The amount and declaration of future cash dividends are subject to approval by our Board of Directors and certain regulatory restrictions.

Other than the acquisition of three branches in southern California, which is expected to close in the first quarter of 2023, whereby we will be purchasing $5.2 million of land and buildings, we had no material commitments for capital expenditures as of ~~June~~September 30, 2022. 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.

5655

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 Quarterly Report on Form 10-Q, 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 ~~excluded~~excludes intangible assets from the calculation of capital ratios; and (ii) an efficiency ratio which is the ratio of noninterest expenses 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 tax ~~expenses~~expense and we believe including them in noninterest expenses impacts the comparability of our results to those companies whose operations are in states where assessed taxes on business are classified as income tax expense.

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 requirements.

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 parties in the evaluation of companies in our industry. Rather, these 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 reconciliations of, where applicable, the most comparable GAAP financial measures to the non-GAAP measures used in this Quarterly Report on Form 10-Q, or a reconciliation of the non-GAAP calculation of the financial measure.

5756

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


		As of or for the quarter ended			As of or for the six months ended June 30,						As of or for the quarter ended								As of or for the nine months ended September 30,
(in thousands)		June 30, 2022			March 31, 2022			2022				2021
(in thousands, except ratio and rate)															(in thousands, except ratio and rate)	September 30, 2022				June 30, 2022			2022			2021

Return on average tangible equity (annualized)	Return on average tangible equity (annualized)														Return on average tangible equity (annualized)
Average shareholders' equity	Average shareholders' equity	$	603,664		$	698,598		$	650,869			$	725,175		Average shareholders' equity	$	603,278			$	603,664		$	634,831		$	725,730
Less: Average goodwill and other intangibles	Less: Average goodwill and other intangibles	(31,380)			(31,624)			(31,501)				(32,631)			Less: Average goodwill and other intangibles	(30,602)				(31,380)			(31,198)			(32,484)
Average tangible equity	Average tangible equity	$	572,284		$	666,974		$	619,368			$	692,544		Average tangible equity	$	572,676			$	572,284		$	603,633		$	693,246

Net income	Net income	$	17,721		$	19,951		$	37,672			$	58,820		Net income	$	20,367			$	17,721		$	58,039		$	85,990
Adjustments (tax effected)	Adjustments (tax effected)														Adjustments (tax effected)
Amortization on core deposit intangibles	Amortization on core deposit intangibles	191			191			382				465			Amortization on core deposit intangibles	186				191			568			694
Tangible income applicable to shareholders	Tangible income applicable to shareholders	$	17,912		$	20,142		$	38,054			$	59,285		Tangible income applicable to shareholders	$	20,553			$	17,912		$	58,607		$	86,684
Ratio	Ratio	12.6		%	12.2		%	12.4		%		17.3		%	Ratio	14.2		%		12.6		%	13.0		%	16.7		%

Efficiency ratio	Efficiency ratio														Efficiency ratio
Noninterest expense	Noninterest expense														Noninterest expense
Total	Total	$	50,637		$	54,473		$	105,110			$	109,423		Total	$	49,889			$	50,637		$	154,999		$	161,372
Adjustments:	Adjustments:														Adjustments:
Legal fees recovery	Legal fees recovery	—			—			—				1,900			Legal fees recovery	—				—			—			1,900
State of Washington taxes	State of Washington taxes	(579)			(506)			(1,085)				(1,181)			State of Washington taxes	(629)				(579)			(1,714)			(1,759)
Adjusted total	Adjusted total	$	50,058		$	53,967		$	104,025			$	110,142		Adjusted total	$	49,260			$	50,058		$	153,285		$	161,513

Total revenues	Total revenues														Total revenues
Net interest income	Net interest income	$	60,056		$	54,546		$	114,602			$	112,489		Net interest income	$	63,018			$	60,056		$	177,620		$	169,973
Noninterest income	Noninterest income	13,013			15,558			28,571				67,057			Noninterest income	13,322				13,013			41,893			91,355
Gain on sale of branches															Gain on sale of branches	(4,270)				—			(4,270)			—
Total	Total	$	73,069		$	70,104		$	143,173			$	179,546		Total	$	72,070			$	73,069		$	215,243		$	261,328

Ratio	Ratio	68.5		%	77.0		%	72.7		%		61.3		%	Ratio	68.4		%		68.5		%	71.2		%	61.8		%

Effective tax rate used in computations above	Effective tax rate used in computations above	22.0		%	22.0		%	22.0		%		21.0		%	Effective tax rate used in computations above	22.0		%		22.0		%	22.0		%	21.0		%


		As of							As of
(in thousands, except share data)	(in thousands, except share data)	June 30, 2022			December 31, 2021			(in thousands, except share data)	September 30, 2022			December 31, 2021

Tangible book value per share	Tangible book value per share							Tangible book value per share
Shareholders' equity	Shareholders' equity	$	580,767		$	715,339		Shareholders' equity	$	552,789		$	715,339
Less: goodwill and other intangibles	Less: goodwill and other intangibles	(31,219)			(31,709)			Less: goodwill and other intangibles	(30,215)			(31,709)
Tangible shareholder's equity	Tangible shareholder's equity	$	549,548		$	683,630		Tangible shareholder's equity	$	522,574		$	683,630
Common shares outstanding	Common shares outstanding	18,712,789			20,085,336			Common shares outstanding	18,717,557			20,085,336
Computed amount	Computed amount	$	29.37		$	34.04		Computed amount	$	27.92		$	34.04

Tangible common equity to tangible assets	Tangible common equity to tangible assets							Tangible common equity to tangible assets
Tangible shareholder's equity (per above)	Tangible shareholder's equity (per above)	$	549,548		$	683,630		Tangible shareholder's equity (per above)	$	522,574		$	683,630
Tangible assets	Tangible assets							Tangible assets
Total assets	Total assets	8,582,886			7,204,091			Total assets	9,072,887			7,204,091
Less: Goodwill and other intangibles	Less: Goodwill and other intangibles	(31,219)			(31,709)			Less: Goodwill and other intangibles	(30,215)			(31,709)
Net	Net	$	8,551,667		$	7,172,382		Net	$	9,042,672		$	7,172,382
Ratio	Ratio	6.4		%	9.5		%	Ratio	5.8		%	9.5		%

5857


ITEM 3			QUANTITATIVE 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 that 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, 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, 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.

5958

The following table presents sensitivity gaps for these different intervals:


		At June 30, 2022																										At September 30, 2022
(in thousands)	(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		(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:
Cash & cash equivalents	Cash & cash equivalents	$	75,277		$	—		$	—		$	—		$	—		$	—		$	—		$	—	$	75,277	Cash & cash equivalents	$	57,256		$	—		$	—		$	—		$	—		$	—		$	—		$	—	$	57,256
FHLB Stock	FHLB Stock	58,401			—			—			—			—			—			8,591			—		66,992		FHLB Stock	62,838			—			—			—			—			—			8,590			—		71,428
Investment securities (1)	Investment securities (1)	153,374			66,719			43,195			126,415			98,153			578,104			171,997			—		1,237,957		Investment securities (1)	175,561			70,516			130,916			174,640			119,037			567,359			73,912			—		1,311,941
LHFS	LHFS	47,314			—			—			—			—			—			—			—		47,314		LHFS	13,787			—			—			—			—			—			—			—		13,787
LHFI (1)	LHFI (1)	1,335,906			355,752			496,392			1,325,569			1,598,687			1,627,374			20,057			—		6,759,737		LHFI (1)	1,276,311			384,622			501,001			1,423,581			1,891,987			1,713,955			22,030			—		7,213,487
Total	Total	1,670,272			422,471			539,587			1,451,984			1,696,840			2,205,478			200,645			—		8,187,277		Total	1,585,753			455,138			631,917			1,598,221			2,011,024			2,281,314			104,532			—		8,667,899
Non-interest-earning assets	Non-interest-earning assets	—			—			—			—			—			—			—			395,609		395,609		Non-interest-earning assets	—			—			—			—			—			—			—			404,988		404,988
Total assets	Total assets	$	1,670,272		$	422,471		$	539,587		$	1,451,984		$	1,696,840		$	2,205,478		$	200,645		$	395,609	$	8,582,886	Total assets	$	1,585,753		$	455,138		$	631,917		$	1,598,221		$	2,011,024		$	2,281,314		$	104,532		$	404,988	$	9,072,887
Interest-bearing liabilities:	Interest-bearing liabilities:																										Interest-bearing liabilities:
Demand deposit accounts (2)	Demand deposit accounts (2)	$	590,889		$	—		$	—		$	—		$	—		$	—		$	—		$	—	$	590,889	Demand deposit accounts (2)	$	514,912		$	—		$	—		$	—		$	—		$	—		$	—		$	—	$	514,912
Savings accounts (2)	Savings accounts (2)	302,359			—			—			—			—			—			—			—		302,359		Savings accounts (2)	275,399			—			—			—			—			—			—			—		275,399
Money market accounts (2)	Money market accounts (2)	2,679,865			—			—			—			—			—			—			—		2,679,865		Money market accounts (2)	2,551,961			—			—			—			—			—			—			—		2,551,961
Certificates of deposit	Certificates of deposit	266,924			264,622			325,071			108,240			4,672			—			6			—		969,535		Certificates of deposit	487,477			486,918			394,108			347,275			4,207			331			1			—		1,720,317

FHLB advances	FHLB advances	1,458,000			—			—			—			—			—			—			—		1,458,000		FHLB advances	1,569,000			—			—			—			—			—			—			—		1,569,000

Long-term debt (3)	Long-term debt (3)	61,120			—			—			—			163,107			—			—			—		224,227		Long-term debt (3)	61,167			—			—			—			163,147			—			—			—		224,314
Total	Total	5,359,157			264,622			325,071			108,240			167,779			—			6			—		6,224,875		Total	5,459,916			486,918			394,108			347,275			167,354			331			1			—		6,855,903
Non-interest bearing liabilities	Non-interest bearing liabilities	—			—			—			—			—			—			—			1,777,244		1,777,244		Non-interest bearing liabilities	—			—			—			—			—			—			—			1,664,195		1,664,195

Shareholders' Equity	Shareholders' Equity	—			—			—			—			—			—			—			580,767		580,767		Shareholders' Equity	—			—			—			—			—			—			—			552,789		552,789
Total liabilities and shareholders' equity	Total liabilities and shareholders' equity	$	5,359,157		$	264,622		$	325,071		$	108,240		$	167,779		$	—		$	6		$	2,358,011	$	8,582,886	Total liabilities and shareholders' equity	$	5,459,916		$	486,918		$	394,108		$	347,275		$	167,354		$	331		$	1		$	2,216,984	$	9,072,887
Interest sensitivity gap	Interest sensitivity gap	$	(3,688,885)		$	157,849		$	214,516		$	1,343,744		$	1,529,061		$	2,205,478		$	200,639						Interest sensitivity gap	$	(3,874,163)		$	(31,780)		$	237,809		$	1,250,946		$	1,843,670		$	2,280,983		$	104,531
Cumulative interest sensitivity gap	Cumulative interest sensitivity gap																										Cumulative interest sensitivity gap
Total	Total	$	(3,688,885)		$	(3,531,036)		$	(3,316,520)		$	(1,972,776)		$	(443,715)		$	1,761,763		$	1,962,402						Total	$	(3,874,163)		$	(3,905,943)		$	(3,668,134)		$	(2,417,188)		$	(573,518)		$	1,707,465		$	1,811,996
As a % of total assets	As a % of total assets	(43)		%	(41)		%	(39)		%	(23)		%	(5)		%	21		%	23		%					As a % of total assets	(43)		%	(43)		%	(40)		%	(27)		%	(6)		%	19		%	20		%
As a % of cumulative interest-bearing liabilities	As a % of cumulative interest-bearing liabilities	31		%	37		%	44		%	67		%	93		%	128		%	132		%					As a % of cumulative interest-bearing liabilities	29		%	34		%	42		%	64		%	92		%	125		%	126		%

(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 ~~June~~September 30, 2022, the Company is considered liability-sensitive as exhibited by the gap table and our net interest income sensitivity 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 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 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.

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The estimated impact on our net interest income over a time horizon of one year and the change in net portfolio value as of ~~June~~September 30, 2022 and December 31, 2021 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.


		At June 30, 2022				At December 31, 2021					At September 30, 2022				At December 31, 2021
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)

+200	+200	(4.6)	%	(23.0)	%	7.8	%	(5.0)	%	+200	(9.9)	%	(29.1)	%	7.8	%	(5.0)	%
+100	+100	(2.1)	%	(11.7)	%	3.5	%	(2.8)	%	+100	(5.1)	%	(14.9)	%	3.5	%	(2.8)	%
-100	-100	0.9	%	10.7	%	(1.3)	%	1.9	%	-100	3.3	%	13.9	%	(1.3)	%	1.9	%
-200	-200	5.3	%	18.7	%	(2.5)	%	(4.9)	%	-200	6.4	%	25.3	%	(2.5)	%	(4.9)	%

(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.

The changes in interest rate sensitivity between December 31, 2021 and ~~June~~September 30, 2022 reflected the impact of higher market interest rates, a flatter 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 rate 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.

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ITEM 4CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

The Company carried out an evaluation, with the participation of our management and under the supervision of our Chief Executive Officer and our Chief Financial Officer, of the effectiveness of our disclosure controls and procedures (as defined under Rule 13a-15(e) and Rule 15d-15(e) under the Exchange Act) as of the end of the period covered by this report. Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of ~~June~~September 30, 2022.

Changes in Internal Control over Financial Reporting

As required by Rule 13a-15(d), our management, including our Chief Executive Officer and Chief Financial Officer, also conducted an evaluation of our internal control over financial reporting to determine whether any changes occurred during the quarter ended ~~June~~September 30, 2022 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 ~~June~~September 30, 2022 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II - OTHER INFORMATION

ITEM 1LEGAL PROCEEDINGS

Because the nature of our business involves, among other things, the collection of numerous accounts, the validity of liens and compliance with various state and federal 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 and other consumer 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 balance sheet, results of operations or liquidity, or for which there would be a reasonable possibility of such a loss based on information known at this time.

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ITEM 1ARISK FACTORS

Refer to Item 1A of Part I of the Company’s Annual Report on Form 10-K for the year ended December 31, 2021 and Item 1A of the ~~updated Risk Factors below~~Company's quarterly report on Form 10-Q for the quarter ended June 30, 2022 for a discussion of factors that could materially and adversely affect our business, financial condition, liquidity, results of operations and capital position.

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 proliferation and use of new and existing technologies to conduct financial transactions and transmit data, as well as the increased sophistication and unlawful or clandestine activities of organized crime, state-sponsored and other hackers, terrorists, activists, and other malicious external parties to engage in fraudulent activity such as phishing or check, electronic or wire fraud, unauthorized access to our controls and systems, denial or degradation 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 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 resultin 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. There can be no assurance that cyber incidents will 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 by 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. 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 function beyond our control systems. Although we believe we have invested in, and plan to continue investing in, maintaining and routinely testing adequate operational and informational security procedures and controls, we rely heavily on our third-party vendors, technologies, systems, networks and our customers' devices, all of which are 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 have taken those actions, 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.

Our computer systems could be vulnerable to unforeseen problems other than cybersecurity 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.

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, are 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 are also sources of operational and informational 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. Such third parties are 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.

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ITEM 2UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

Sales of Unregistered Securities

There were no sales of unregistered securities during the ~~second~~third quarter of 2022.

ITEM 3DEFAULTS UPON SENIOR SECURITIES

Not applicable.

ITEM 4MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5OTHER INFORMATION

Not applicable.

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ITEM 6EXHIBITS

EXHIBIT INDEX


Exhibit Number						Description

~~10.1~~						~~Amended and Restated~~ ~~Employment Agreement between HomeStreet, Inc, HomeStreet Bank and John M. Michel~~
31.1						Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. Filed herewith.
31.2						Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. Filed herewith.
32 (1)						Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. Furnished herewith.
101 INS						Inline XBRL Instance Document
101.SCH						Inline XBRL Taxonomy Extension Schema Document
101.CAL						Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF						Inline XBRL Taxonomy Extension Label Linkbase Document
101.LAB						Inline XBRL Taxonomy Extension Presentation Linkbase Document
101.PRE						Inline XBRL Taxonomy Extension Definitions Linkbase Document
104						Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)


(1)			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.

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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 ~~August 5,~~November 4, 2022.


			HomeStreet, Inc.

			By:			/s/ Mark K. Mason
						Mark K. Mason
						President and Chief Executive Officer
						(Principal Executive Officer)


			HomeStreet, Inc.

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