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HomeStreet Reports Second Quarter 2023 Results
SEATTLE – July 28, 2023 – (BUSINESS WIRE) – HomeStreet, Inc. (Nasdaq: HMST) (including its consolidated subsidiaries, the "Company", "HomeStreet" or "we"), the parent company of HomeStreet Bank, today announced the financial results for the quarter ended June 30, 2023. As we present non-GAAP measures in this release, the reader should refer to the non-GAAP reconciliations set forth below under the section “Non-GAAP Financial Measures.”
“In the second quarter, we recognized a net loss of $31.4 million. These results were significantly impacted by an after-tax goodwill impairment charge of $34.6 million. Excluding the goodwill impairment charge our core net income for the second quarter was $3.2 million,” said Mark K. Mason, HomeStreet’s Chairman of the Board, President, and Chief Executive Officer. “As required under generally accepted accounting principles and based primarily on the significant decline in our stock price during the second quarter, we determined that our goodwill was impaired. This impairment of goodwill represents a noncash charge and has no impact on our core net income, cash flows or liquidity, nor does it impact our tangible capital or regulatory capital as goodwill is excluded from regulatory capital and related ratios”.

Our operating results for the quarter reflect the continuing adverse impact of the historically record velocity and magnitude of increases in short-term interest rates,” continued Mark K. Mason. “To mitigate these challenges, we have reduced our new loan originations and the size of our loan and securities portfolios, raised new deposits through promotional products and reduced the level of uninsured deposits to 7% of total deposits primarily through products which provide complete FDIC deposit insurance coverage. Additionally, we have focused our new loan origination activity primarily on floating rate products such as commercial loans, residential construction loans and home equity loans.”

“As expected, our net interest margin decreased in the second quarter due to decreases in balances of lower cost transaction and savings deposits and overall higher funding costs.” added Mr. Mason. “To mitigate the impact of a lower net interest margin we have continued to reduce non-essential expenses while being mindful to sustain and protect our high quality lending lines of business, preserving our ability to grow earnings once the interest rate environment stabilizes and loan pricing and volumes normalize.”
Financial Position
                    As of and for the quarter ended June 30, 2023
•Uninsured deposits were $495 million, or 7% of total deposits, down from $1.0 billion and 14% of total deposits at March 31, 2023
•Excluding brokered deposits, total deposits decreased $262 million to $5.9 billion
•Loans held for investment ("LHFI") decreased by $50 million
•Nonperforming assets to total assets: 0.44%
•Allowance for credit losses to LHFI: 0.57%
•Book value per share: $28.10
•Tangible book value per share: $27.50
“The deposit outflows we experienced in the second quarter were primarily due to depositors seeking higher yields or due to seasonal tax payments,” Mr. Mason stated. “With noninterest-bearing and low-cost deposits seeking higher yields, we have implemented a strategy to attract new deposits and retain existing deposits through promotional certificates of deposit accounts and to retain core deposits through promotional money market
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accounts. This strategy affords us the opportunity to retain deposits without repricing all of our existing low-cost core deposits. While our promotional certificates of deposit accounts are priced competitively to attract new customers, our promotional money market accounts are used as a defensive measure and are not priced at the top of the market.”

"Asset quality remained strong in the second quarter notwithstanding a small increase in nonperforming assets. The increase in nonperforming assets was primarily due to the designation of one customer relationship as collateral dependent and non-performing during the second quarter. This relationship consists of $27 million of loans that are current in their payments and are overcollateralized. Additionally, loan delinquencies declined and our net charge-offs during the second quarter were only $0.1 million,” added Mr. Mason.” Today, we do not see any meaningful credit challenges on the horizon.”


Operating Results
                  Second quarter 2023 compared to first quarter 2023
Reported Results:
•Net income (loss): $(31.4) million compared to $5.1 million
•Earnings (loss) per fully diluted share: $(1.67) compared to $0.27
•Return on Average Equity ("ROAE"): (21.7)% compared to 3.5%
•Return on Average Assets ("ROAA"): (1.32)% compared to 0.22%
•Net interest margin: 1.93% compared to 2.23%
•Efficiency ratio: 93.7% compared to 87.2%
Core Results:
•Net income: $3.2 million compared to $5.1 million
•Earnings per fully diluted share: $0.17 compared to $0.27
•Return on Average Tangible Equity ("ROATE"): 2.9% compared to 4.1%
•Return on Average Assets ("ROAA"): 0.13% compared to 0.22%
                                                                                                
Other
•Declared and paid a cash dividend of $0.10 per share in the second quarter
•Goodwill impairment charge of $39.9 million in the second quarter of 2023



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Conference Call
HomeStreet, Inc. (Nasdaq: HMST), the parent company of HomeStreet Bank, will conduct a quarterly earnings conference call on Monday July 31, 2023, at 1:00 p.m. ET. Mark K. Mason, CEO and President, and John M. Michel, CFO, will discuss second quarter 2023 results and provide an update on recent events. A question and answer session will follow the presentation. Shareholders, analysts and other interested parties may register in advance at the following URL https://www.netroadshow.com/events/login?show=c8c5dd6b&confId=52554 or may join the call by dialing directly at 1-833-470-1428 (1-929-526-1599 internationally) shortly before 1:00 p.m. ET using Access Code 025371.

A rebroadcast will be available approximately one hour after the conference call by dialing 1-866-813-9403 and entering passcode 462783.

About HomeStreet

HomeStreet, Inc. (Nasdaq: HMST) is a diversified financial services company headquartered in Seattle, Washington, serving consumers and businesses in the Western United States and Hawaii. The Company is principally engaged in real estate lending, including mortgage banking activities, and commercial and consumer banking. Its principal subsidiary is HomeStreet Bank. HomeStreet Bank is the winner of the 2022 "Best Small Bank" in Washington Newsweek magazine award. Certain information about our business can be found on our investor relations web site, located at http://ir.homestreet.com. HomeStreet Bank is a member of the FDIC and is an Equal Housing Lender.


Contact:  Executive Vice President and Chief Financial Officer
HomeStreet, Inc.
  John Michel (206) 515-2291
  john.michel@homestreet.com
  http://ir.homestreet.com

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HomeStreet, Inc. and Subsidiaries
Summary Financial Data
 For the Quarter Ended
(in thousands, except per share data and FTE data)June 30,
2023		March 31,
2023		December 31,
2022		September 30,
2022		June 30,
2022
Select Income Statement Data:
Net interest income$43,476 $49,376 $55,687 $63,018 $60,056 
Provision for credit losses(369)593 3,798 — — 
Noninterest income10,311 10,190 9,677 13,322 13,013 
Noninterest expense90,781 52,491 50,420 49,889 50,637 
Net income (loss):
Before income tax (benefit) expense(36,625)6,482 11,146 26,451 22,432 
Total(31,442)5,058 8,501 20,367 17,721 
Net income (loss) per share - diluted(1.67)0.27 0.45 1.08 0.94 
Core net income: (1)
Total3,180 5,058 8,501 20,367 17,721 
Core net income per share - diluted0.17 0.27 0.45 1.08 0.94 
Select Performance Ratios:
Return on average equity - annualized(21.7)%3.5 %6.0 %13.4 %11.8 %
Return on average tangible equity - annualized (1)
2.9 %4.1 %6.4 %14.2 %12.6 %
Return on average assets - annualized
Net Income (loss)(1.32)%0.22 %0.36 %0.91 %0.89 %
Core (1)
0.13 %0.22 %0.36 %0.91 %0.89 %
Efficiency ratio (1)
93.7 %87.2 %76.2 %68.4 %68.5 %
Net interest margin1.93 %2.23 %2.53 %3.00 %3.27 %
Other data:
Full-time equivalent employees ("FTE")910 920 913 935 956 
(1)Core net income, return on average tangible equity, core return on average assets, and the efficiency ratio are non-GAAP financial measures. For a reconciliation of core net income and return on average tangible equity to the nearest comparable GAAP financial measure and the computation of the efficiency ratio see “Non-GAAP Financial Measures” in this earnings release.





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HomeStreet, Inc. and Subsidiaries
Summary Financial Data (continued)
 As of
(in thousands, except share and per share data)June 30,
2023		March 31,
2023		December 31,
2022		September 30,
2022		June 30,
2022
Select Balance Sheet Data:
Loans held for sale
$31,873 $24,253 $17,327 $13,787 $47,314 
Loans held for investment, net
7,395,151 7,444,882 7,384,820 7,175,881 6,722,382 
Allowance for credit losses ("ACL")
41,500 41,500 41,500 37,606 37,355 
Investment securities
1,397,051 1,477,004 1,400,212 1,311,941 1,237,957 
Total assets
9,501,475 9,858,889 9,364,760 9,072,887 8,582,886 
Deposits
6,670,033 7,056,603 7,451,919 6,610,231 6,183,299 
Borrowings
1,972,000 1,878,000 1,016,000 1,569,000 1,458,000 
Long-term debt
224,583 224,492 224,404 224,314 224,227 
Total shareholders' equity
527,623 574,994 562,147 552,789 580,767 
Other Data:
Book value per share
$28.10 $30.64 $30.01 $29.53 $31.04 
Tangible book value per share (1)
$27.50 $27.87 $28.41 $27.92 $29.37 
Total equity to total assets5.6 %5.8 %6.0 %6.1 %6.8 %
Tangible common equity to tangible assets (1)
5.4 %5.3 %5.7 %5.8 %6.4 %
Shares outstanding at end of period
18,776,59718,767,81118,730,38018,717,55718,712,789
Loans to deposit ratio
112.0 %106.4 %99.9 %109.3 %110.1 %
Credit Quality:
ACL to total loans (2)
0.57 %0.56 %0.57 %0.53 %0.56 %
ACL to nonaccrual loans 104.3 %318.1 %412.7 %306.6 %411.3 %
Nonaccrual loans to total loans 0.54 %0.17 %0.14 %0.17 %0.13 %
Nonperforming assets to total assets
0.44 %0.15 %0.13 %0.15 %0.13 %
Nonperforming assets
$41,469 $14,886 $11,893 $13,991 $10,835 
Regulatory Capital Ratios: (3)
Bank
Tier 1 leverage 8.43 %8.47 %8.63 %9.15 %9.78 %
Total risk-based capital
13.49 %12.37 %12.59 %12.57 %12.29 %
Common equity Tier 1 capital12.78 %11.71 %11.92 %11.96 %11.66 %
Company
Tier 1 leverage6.93 %6.92 %7.25 %7.61 %8.38 %
Total risk-based capital
12.16 %11.16 %11.53 %11.43 %11.49 %
Common equity Tier 1 capital9.14 %8.36 %8.72 %8.66 %8.66 %

(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” in this earnings release.
(2)This ratio excludes balances insured by the FHA or guaranteed by the VA or SBA.
(3)Regulatory capital ratios at June 30, 2023 are preliminary.











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HomeStreet, Inc. and Subsidiaries
Consolidated Balance Sheets
 
(in thousands, except share data)
June 30, 2023December 31, 2022
ASSETS
Cash and cash equivalents
$173,101 $72,828 
Investment securities
1,397,051 1,400,212 
Loans held for sale
31,873 17,327 
Loans held for investment ("LHFI") (net of allowance for credit losses of $41,500 and $41,500)
7,395,151 7,384,820 
Mortgage servicing rights
108,791 111,873 
Premises and equipment, net
54,661 51,172 
Other real estate owned
1,697 1,839 
Goodwill and other intangibles
11,217 29,980 
Other assets
327,933 294,709 
Total assets$9,501,475 $9,364,760 
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Deposits
$6,670,033 $7,451,919 
Borrowings
1,972,000 1,016,000 
Long-term debt
224,583 224,404 
Accounts payable and other liabilities
107,236 110,290 
Total liabilities8,973,852 8,802,613 
Shareholders' equity:
Common stock, no par value; 160,000,000 shares authorized
18,776,597 and 18,730,380 shares issued and outstanding
228,260 226,592 
Retained earnings
400,132 435,085 
Accumulated other comprehensive income (loss)(100,769)(99,530)
Total shareholders' equity527,623 562,147 
Total liabilities and shareholders' equity $9,501,475 $9,364,760 


6



HomeStreet, Inc. and Subsidiaries
Consolidated Income Statements
Quarter Ended June 30,Six Months Ended June 30,
(in thousands, except share and per share data)2023202220232022
Interest income:
Loans$85,813 $59,825 $168,351 $112,779 
Investment securities12,872 7,379 25,635 13,345 
Cash, Fed Funds and other2,022 487 3,772 595 
Total interest income
100,707 67,691 197,758 126,719 
Interest expense:
Deposits35,393 2,893 64,763 5,177 
Borrowings21,838 4,742 40,143 6,940 
Total interest expense
57,231 7,635 104,906 12,117 
Net interest income
43,476 60,056 92,852 114,602 
Provision for credit losses(369)— 224 (9,000)
Net interest income after provision for credit losses
43,845 60,056 92,628 123,602 
Noninterest income:
Net gain on loan origination and sale activities2,456 5,292 4,866 13,566 
Loan servicing income 3,259 3,661 6,298 6,965 
Deposit fees2,704 2,218 5,362 4,293 
Other1,892 1,842 3,975 3,747 
Total noninterest income
10,311 13,013 20,501 28,571 
Noninterest expense:
Compensation and benefits27,776 30,191 57,029 62,222 
Information services7,483 7,780 14,628 14,842 
Occupancy5,790 5,898 11,528 12,263 
General, administrative and other9,875 6,768 20,230 15,783 
Goodwill impairment39,857 — 39,857 — 
Total noninterest expense
90,781 50,637 143,272 105,110 
Income (loss) before income taxes(36,625)22,432 (30,143)47,063 
Income tax (benefit) expense(5,183)4,711 (3,759)9,391 
Net income (loss)$(31,442)$17,721 $(26,384)$37,672 
Net income (loss) per share:
Basic$(1.67)$0.95 $(1.41)$1.97 
Diluted $(1.67)$0.94 $(1.41)$1.95 
Weighted average shares outstanding:
Basic
18,775,02218,706,95318,765,29219,143,925
Diluted
18,775,02218,834,44318,765,29219,310,750


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HomeStreet, Inc. and Subsidiaries
Five Quarter Consolidated Income Statements
 Quarter Ended
(in thousands, except share and per share data)June 30,
2023		March 31,
2023		December 31,
2022		September 30,
2022		June 30,
2022
Interest income:
Loans$85,813 $82,538 $80,733 $73,329 $59,825 
Investment securities12,872 12,763 11,466 9,014 7,379 
Cash, Fed Funds and other2,022 1,750 1,967 1,060 487 
Total interest income100,707 97,051 94,166 83,403 67,691 
Interest expense:
Deposits35,393 29,370 18,515 8,321 2,893 
Borrowings21,838 18,305 19,964 12,064 4,742 
Total interest expense57,231 47,675 38,479 20,385 7,635 
Net interest income
43,476 49,376 55,687 63,018 60,056 
Provision for credit losses(369)593 3,798 — — 
Net interest income after provision for credit losses43,845 48,783 51,889 63,018 60,056 
Noninterest income:
Net gain on loan origination and sale activities2,456 2,410 1,488 2,647 5,292 
Loan servicing income3,259 3,039 2,682 2,741 3,661 
Deposit fees2,704 2,658 2,359 2,223 2,218 
Other1,892 2,083 3,148 5,711 1,842 
Total noninterest income10,311 10,190 9,677 13,322 13,013 
Noninterest expense:
Compensation and benefits27,776 29,253 25,970 27,341 30,191 
Information services7,483 7,145 8,101 7,038 7,780 
Occupancy5,790 5,738 6,213 6,052 5,898 
General, administrative and other9,875 10,355 10,136 9,458 6,768 
Goodwill impairment39,857 — — — — 
Total noninterest expense90,781 52,491 50,420 49,889 50,637 
Income (loss) before income taxes(36,625)6,482 11,146 26,451 22,432 
Income tax (benefit) expense(5,183)1,424 2,645 6,084 4,711 
Net income (loss)$(31,442)$5,058 $8,501 $20,367 $17,721 
Net income (loss) per share:
Basic $(1.67)$0.27 $0.45 $1.09 $0.95 
Diluted$(1.67)$0.27 $0.45 $1.08 $0.94 
Weighted average shares outstanding:
Basic18,775,02218,755,45318,726,65418,716,86418,706,953
Diluted18,775,02218,771,89918,753,14718,796,73718,834,443
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HomeStreet, Inc. and Subsidiaries
Average Balances, Yields (Taxable-equivalent basis) and Rates
Quarter Ended June 30,Six Months Ended June 30,
Average Balances:2023202220232022
Investment securities
$1,444,819 $1,134,929 $1,448,457 $1,082,243 
Loans
7,499,800 6,231,081 7,485,706 5,962,689 
Total interest-earning assets9,109,807 7,447,008 9,080,309 7,118,431 
Total assets9,562,817 7,945,298 9,546,850 7,656,050 
Deposits: Interest-bearing
5,584,825 4,563,974 5,642,940 4,538,931 
Deposits: Noninterest-bearing1,437,133 1,668,631 1,474,080 1,706,217 
Borrowings
1,630,102 761,606 1,487,019 415,007 
Long-term debt
224,523 224,167 224,479 214,414 
Total interest-bearing liabilities
7,439,450 5,549,747 7,354,438 5,168,352 
Average Yield/Rate:
Investment securities
3.82 %2.97 %3.80 %2.83 %
Loans
4.56 %3.82 %4.50 %3.79 %
Total interest earning assets
4.45 %3.68 %4.40 %3.62 %
Deposits: Interest-bearing
2.54 %0.25 %2.31 %0.23 %
Total deposits
2.02 %0.19 %1.83 %0.17 %
Borrowings
4.62 %1.21 %4.60 %1.16 %
Long-term debt
5.34 %4.28 %5.31 %4.20 %
Total interest-bearing liabilities
3.08 %0.55 %2.87 %0.47 %
Net interest rate spread
1.37 %3.13 %1.54 %3.15 %
Net interest margin
1.93 %3.27 %2.08 %3.28 %

(in thousands, except yield/rate)Quarter Ended
Average Balances:June 30,
2023		March 31,
2023		December 31,
2022		September 30,
2022		June 30,
2022
Investment securities
$1,444,819 $1,452,137 $1,362,861 $1,252,923 $1,134,929 
Loans
7,499,800 7,471,456 7,368,097 7,070,998 6,231,081 
Total interest earning assets
9,109,807 9,050,484 8,890,221 8,436,745 7,447,008 
Total assets9,562,817 9,530,705 9,348,396 8,899,684 7,945,298 
Deposits: Interest-bearing
5,584,825 5,701,701 5,227,039 4,852,515 4,563,974 
Deposits: Noninterest-bearing
1,437,133 1,511,437 1,510,744 1,576,387 1,668,631 
Borrowings
1,630,102 1,342,347 1,717,042 1,530,449 761,606 
Long-term debt
224,523 224,435 224,345 224,259 224,167 
Total interest-bearing liabilities
7,439,450 7,268,483 7,168,426 6,607,223 5,549,747 
Average Yield/Rate:
Investment securities
3.82 %3.78 %3.70 %3.22 %2.97 %
Loans
4.56 %4.44 %4.32 %4.09 %3.82 %
Total interest earning assets
4.45 %4.35 %4.24 %3.95 %3.68 %
Deposits: Interest-bearing
2.54 %2.09 %1.40 %0.68 %0.25 %
Total deposits
2.02 %1.65 %1.09 %0.51 %0.19 %
Borrowings
4.62 %4.57 %3.93 %2.43 %1.21 %
Long-term debt
5.34 %5.28 %4.96 %4.56 %4.28 %
Total interest-bearing liabilities
3.08 %2.64 %2.12 %1.22 %0.55 %
Net interest rate spread
1.37 %1.71 %2.12 %2.74 %3.13 %
Net interest margin
1.93 %2.23 %2.53 %3.00 %3.27 %


9

Results of Operations

Second Quarter of 2023 Compared to the First Quarter of 2023

Non-core amounts

During the second quarter of 2023, the non-core item is a $39.9 million goodwill impairment charge.

Our net income (loss) and income (loss) before taxes were $(31.4) million and $(36.6) million, respectively, in the second quarter of 2023, as compared to $5.1 million and $6.5 million, respectively, in the first quarter of 2023. Our core net income and core income before taxes in the second quarter of 2023, which excludes the impact of the goodwill impairment charge, were $3.2 million and $3.2 million, respectively as compared to $5.1 million and $6.5 million, respectively, in the first quarter of 2023. The $3.3 million decrease in core income before taxes was due to lower net interest income which was partially offset by an allowance for credit losses recovery and lower noninterest expense.

Our effective tax rate for the second quarter of 2023 of 14.2% was significantly impacted by the goodwill impairment charge, a portion of which was not deductible for tax purposes. Our core income effective tax rate for the second quarter of 2023 was 1.6%, which is lower than our statutory tax rate of 24.7% primarily due to the significantly higher proportion of tax exempt revenues in comparison to our overall core income before tax.

Our net interest income in the second quarter of 2023 was $5.9 million lower than the first quarter of 2023 due to a decrease in our net interest margin from 2.23% to 1.93%. The decrease in our net interest margin was due to a 44 basis point increase in the cost of interest-bearing liabilities which was partially offset by a 10 basis point increase in the yield on interest-earning assets. Yields on interest-earning assets increased as yields on adjustable rate loans increased due to increases in the indices on which their rates are based. The increase in the cost of interest-bearing liabilities was due to overall higher deposit and borrowing costs. Our cost of deposits increased 37 basis points during the second quarter while the cost of borrowings increased only 5 basis points due to actions we took in prior quarters to fix our borrowing costs. The increases in the interest rate indices used for our loans and the rates paid on interest-bearing liabilities were due to the significant increases in market interest rates during the first half of 2023.

A $0.4 million recovery of our allowance for credit losses was recorded during the second quarter of 2023 compared to a $0.6 million provision for credit losses in the first quarter of 2023. The recovery for the second quarter of 2023 reflects a decrease in our unfunded commitment reserve as our allowance for credit losses remained unchanged at $41.5 million and our net charge-offs realized in the quarter were nominal. The provision in the first quarter of 2023 was to offset the net charge-offs realized as the overall LHFI portfolio balances only increased $60 million.

Noninterest income in the second quarter of 2023 was consistent with the first quarter of 2023 as a 10% increase in single family lending rate locks was offset by a slight decrease in our margin.

The $38.3 million increase in noninterest expenses in the second quarter of 2023, as compared to the first quarter of 2023 was due to a $39.9 million goodwill impairment charge which was partially offset by a $1.5 million decrease in compensation and benefit costs as seasonally higher benefits costs recorded in the first quarter, primarily employer taxes and 401(k) employer matches, decreased in the second quarter.



10

Six Months Ended June 30, 2023 Compared to the Six Months Ended June 30, 2022

Non-core amounts

During the six months ended June 30, 2023, the non-core item is a $39.9 million goodwill impairment charge.

Our net income (loss) and income (loss) before taxes were $(26.4) million and $(30.1) million, respectively, in the six months ended June 30, 2023, as compared to $37.7 million and $47.1 million, respectively, in the six months ended June 30, 2022. Our core net income and core income before taxes in the six months ended June 30, 2023, which excludes the impact of the goodwill impairment charge, was $8.2 million and $9.7 million as compared to $37.7 million and $47.1 million, respectively, in the six months ended June 30, 2022. The $37.3 million decrease in core income before taxes was due to a lower net interest income, a higher provision for credit losses and lower noninterest income, partially offset by lower noninterest expense.
Our effective tax rate of 12.5% during the six months ended June 30, 2023 was significantly impacted by the goodwill impairment charge, a portion of which was not deductible for tax purposes. Our core income effective tax rate for the first six months of 2023 and 2022 was 15.2% and 20.0% respectively, which is lower than our statutory tax rate of 24.7% and 23.9%, respectively, primarily due to the significantly higher proportion of tax exempt revenues in comparison to our overall core income before tax. Our effective tax rate in the six months ended June 30, 2022 was also lower than the statutory rate due to reductions in taxes on income related to excess tax benefits resulting from the vesting of stock awards during the period.

Net interest income for the six months ended June 30, 2023 decreased $21.8 million as compared to the six months ended June 30, 2022 due primarily to a decrease in our net interest margin partially offset by increases in the average balance of interest earning assets. The increase in interest-earning assets was due to loan originations and purchases of investment securities during 2022. Our net interest margin decreased from 3.28% in the six months ended June 30, 2022 to 2.08% in the six months ended June 30, 2023 due to a 240 basis point increase in the rates paid on interest-bearing liabilities which was partially offset by a 78 basis point increase in the yield on interest earning assets. Yields on interest-earning assets increased as the yields on loan originations during the last year and a half 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 higher yields on our investment securities were primarily due to adjustments to yields realized from longer estimated lives of certain securities and the yields of securities purchased during the past year being higher than the yields on our existing portfolio. The increase in the rates paid on 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 were due to the significant increase in market interest rates over the prior year. Our average borrowings increased by $1.1 billion to fund the growth of our loan portfolio and investment securities. Our cost of borrowings increased from 116 basis points during the six months ended June 30, 2022 to 460 basis points during the six months ended June 30, 2023 due to the significant increase in market interest rates during the last year and a half.

A $0.2 million provision for credit losses was recorded during the six months ended June 30, 2023 compared to a $9.0 million recovery of our allowance for credit losses in the six months ended June 30, 2022. The provision for credit losses in the first half of 2023 was to offset the net charge-offs realized as the overall LHFI portfolio balance only increased $10 million. The recovery of our allowance for credit losses in six months ended June 30, 2022 was the 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.

The decrease in noninterest income for the six months ended June 30, 2023 as compared to the six months ended June 30, 2022 was due to a decrease in gain on loan origination and sale activities, which was partially offset by higher deposit fees. The $8.7 million decrease in gain on loan origination and sale activities was due to a $5.7 million decrease in single family gain on loan origination and sale activities and a $3.0 million
decrease in commercial real estate 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 as a result of the effects of increasing mortgage interest rates. The decrease in commercial real estate and commercial gain on loan origination and sale activities was primarily due to an 87% decrease in loans sold volume as a result of increasing interest rates. The $1.1 million increase in deposit fee income was primarily due to higher early withdrawals fees.

The $38.2 million increase in noninterest expenses in the six months ended June 30, 2023 as compared to the six months ended June 30, 2022 was due to a $39.9 million goodwill impairment charge and higher general, administrative and other costs which were partially offset by lower compensation and benefit costs. The $5.2 million decrease in compensation and benefit costs was primarily due to reduced commission expense on lower loan origination volumes in our single family mortgage operations, lower staffing levels and lower bonus expense, which were partially offset by wage increases given in the first quarter of 2023 and a reduction in deferred costs due to lower levels of loan production. The increase in general, administrative and other costs was primarily due to higher FDIC fees due to our larger asset base and an increase in marketing costs associated with deposit promotions, which were partially offset by a reduction in legal fees due to charges related to nonrecurring costs expended on litigation activities and legal matters in the six months ended June 30, 2022.

Financial Position

During the six months ended June 30, 2023, our total assets increased $137 million due primarily to a $100 million increase in cash. Loans held for investment were relatively unchanged as $673 million of originations was offset by prepayments and scheduled payments of $659 million. During the first half of 2023 total liabilities increased $171 million due to an increase in borrowings, partially offset by a decrease in deposits. The $782 million decrease in deposits was due to a $686 million decrease in brokered certificates of deposit and a $914 million decrease in non-certificates of deposit balances which were partially offset by a $445 million increase in certificates of deposit balances related to our promotional products. The decrease in deposits was offset by $373 million in deposits that we acquired in relation to our branch acquisition in the first quarter of 2023. The $956 million of additional borrowings were used to replace higher-cost brokered deposits and increase our on-balance sheet liquidity.
11


Loans Held for Investment ("LHFI")
(in thousands)June 30,
2023		March 31,
2023		December 31,
2022		September 30,
2022		June 30,
2022
Commercial real estate ("CRE")
Non-owner occupied CRE$650,710 $652,284 $658,085 $666,394 $711,077 
Multifamily3,966,894 3,975,654 3,975,754 3,923,946 3,475,697 
Construction/land development576,432 607,559 627,663 590,092 569,896 
Total5,194,036 5,235,497 5,261,502 5,180,432 4,756,670 
Commercial and industrial loans
Owner occupied CRE434,400 438,147 443,363 432,114 470,259 
Commercial business371,779 392,837 359,747 361,635 393,764 
Total806,179 830,984 803,110 793,749 864,023 
Consumer loans
Single family (1)
1,068,229 1,057,579 1,009,001 907,044 822,389 
Home equity and other368,207 362,322 352,707 332,262 316,655 
Total1,436,436 1,419,901 1,361,708 1,239,306 1,139,044 
Total LHFI7,436,651 7,486,382 7,426,320 7,213,487 6,759,737 
    Allowance for credit losses ("ACL")(41,500)(41,500)(41,500)(37,606)(37,355)
Total LHFI less ACL$7,395,151 $7,444,882 $7,384,820 $7,175,881 $6,722,382 
(1)Includes $1.3 million, $5.2 million, $5.9 million, $5.8 million and $6.5 million of single family loans that are carried at fair value at June 30, 2023, March 31, 2023, December 31, 2022, September 30, 2022, and June 30, 2022, respectively.

12


Loan Roll-forward
(in thousands)June 30,
2023		March 31,
2023		December 31,
2022		September 30,
2022		June 30,
2022
Loans - beginning balance$7,486,382 $7,426,320 $7,213,487 $6,759,737 $5,864,490 
Originations and advances 327,949 345,461 611,954 914,129 1,309,883 
Transfers (to) from loans held for sale(2,973)— 150 (4,677)(1,103)
Payoffs, paydowns and other (374,484)(284,725)(398,745)(455,607)(411,859)
Charge-offs and transfers to OREO(223)(674)(526)(95)(1,674)
Loans - ending balance$7,436,651 $7,486,382 $7,426,320 $7,213,487 $6,759,737 


Loan Originations and Advances
(in thousands)June 30,
2023
March 31,
2023 (1)
December 31,
2022		September 30,
2022		June 30,
2022
CRE
Non-owner occupied CRE$2,371 $2,934 $406 $11,003 $39,194 
Multifamily65,635 18,239 188,392 473,733 821,980 
Construction/land development152,907 153,458 186,313 208,057 189,827 
Total220,913 174,631 375,111 692,793 1,051,001 
Commercial and industrial loans
Owner occupied CRE8,622 7,133 21,144 11,176 21,785 
Commercial business14,722 57,698 40,648 36,144 61,286 
Total23,344 64,831 61,792 47,320 83,071 
Consumer loans
Single family45,055 67,410 128,829 118,727 118,957 
Home equity and other38,637 38,589 46,222 55,289 56,854 
Total 83,692 105,999 175,051 174,016 175,811 
Total loan originations and advances$327,949 $345,461 $611,954 $914,129 $1,309,883 
(1)    Includes $17.1 million and $3.4 million, respectively, of consumer loans and commercial and industrial loans purchased in our first quarter 2023 branch acquisition.


Credit Quality
As of June 30, 2023, our ratio of nonperforming assets to total assets was 0.44%, while our ratio of total loans delinquent over 30 days, including nonaccrual loans, to total loans was 0.67%. The increase in nonaccrual assets was due to one customer relationship which consists of $27 million of loans that were classified as collateral dependent and nonaccrual in the second quarter of 2023. These loans are current in their payments and are overcollateralized.
13


Delinquencies
Past Due and Still Accruing
(in thousands)30-59 days60-89 days
90 days or
more (1)
Nonaccrual
Total past
due and nonaccrual (2)
CurrentTotal
loans
June 30, 2023
Total loans held for investment$3,908 $1,257 $4,715 $39,772 $49,652 $7,386,999 $7,436,651 
%0.05 %0.02 %0.06 %0.54 %0.67 %99.33 %100.00 %
March 31, 2023
Total loans held for investment$4,844 $1,899 $11,259 $13,047 $31,049 $7,455,333 $7,486,382 
%0.06 %0.03 %0.15 %0.17 %0.41 %99.59 %100.00 %
(1) 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.
(2) Includes loans whose repayments are insured by the FHA or guaranteed by the VA or SBA of $11.3 million and $12.3 million at June 30, 2023 and March 31, 2023, respectively.


Allowance for Credit Losses (roll-forward)
 Quarter Ended
(in thousands)June 30,
2023		March 31,
2023		December 31,
2022		September 30,
2022		June 30,
2022
Allowance for credit losses
Beginning balance$41,500 $41,500 $37,606 $37,355 $37,944 
Provision for credit losses111 589 4,195 249 (216)
Recoveries (charge-offs), net(111)(589)(301)2 (373)
Ending balance
$41,500 $41,500 $41,500 $37,606 $37,355 
Allowance for unfunded commitments:
Beginning balance$2,201 $2,197 $2,594 $2,843 $2,627 
Provision for credit losses(480)4 (397)(249)216 
Ending balance
$1,721 $2,201 $2,197 $2,594 $2,843 
Provision for credit losses:
Allowance for credit losses - loans$111 $589 $4,195 $249 $(216)
Allowance for unfunded commitments(480)4 (397)(249)216 
Total
$(369)$593 $3,798 $— $— 

14

Allocation of Allowance for Credit Losses by Product Type

June 30, 2023March 31, 2023December 31, 2022
(in thousands)Balance
Rate (1)
Balance
 Rate (1)
Balance
Rate (1)
Non-owner occupied CRE$2,242 0.34 %$2,608 0.40 %$2,102 0.32 %
Multifamily
9,695 0.24 %9,787 0.25 %10,974 0.28 %
Construction/land development
   Multifamily construction
1,566 1.29 %1,345 1.23 %998 1.05 %
   CRE construction169 0.84 %204 1.02 %196 1.03 %
   Single family construction11,067 4.02 %12,525 3.82 %12,418 3.51 %
   Single family construction to perm1,421 0.89 %1,211 0.80 %1,171 0.74 %
         Total CRE26,160 0.50 %27,680 0.53 %27,859 0.53 %
Owner occupied CRE930 0.21 %910 0.21 %1,030 0.23 %
Commercial business
3,837 1.04 %3,416 0.88 %3,247 0.91 %
Total commercial and industrial 4,767 0.60 %4,326 0.52 %4,277 0.54 %
Single family
6,617 0.68 %5,804 0.61 %5,610 0.62 %
Home equity and other
3,956 1.07 %3,690 1.02 %3,754 1.06 %
Total consumer10,573 0.79 %9,494 0.72 %9,364 0.74 %
Total $41,500 0.57 %$41,500 0.56 %$41,500 0.57 %
(1) The ACL rate is calculated excluding balances related to loans that are insured by the FHA or guaranteed by the VA or SBA

Production Volumes for Sale to the Secondary Market
 Quarter Ended
(in thousands)June 30,
2023		March 31,
2023		December 31,
2022		September 30,
2022		June 30,
2022
Loan originations
Single family loans
$96,750 $72,814 $51,647 $110,011 $172,947 
Commercial and industrial and CRE loans
4,906 6,150 20,864 15,332 51,584 
Loans sold
Single family loans92,787 63,473 51,427 131,228 187,623 
Commercial and industrial and CRE loans (1)
4,649 8,750 16,228 29,965 50,292 
Net gain on loan origination and sale activities
Single family loans2,171 2,218 1,158 1,778 3,949 
Commercial and industrial and CRE loans (1)
285 192 330 869 1,343 
Total$2,456 $2,410 $1,488 $2,647 $5,292 
(1) May include loans originated as held for investment.

15


Loan Servicing Income
 Quarter Ended
(in thousands)June 30,
2023		March 31,
2023		December 31,
2022		September 30,
2022		June 30,
2022
Single family servicing income, net:
Servicing fees and other$3,868 $3,923 $3,928 $3,986 $3,952 
Changes - amortization (1)
(1,626)(1,684)(1,899)(2,112)(2,515)
Net2,242 2,239 2,029 1,874 1,437 
Risk management, single family MSRs:
Changes in fair value due to assumptions (2)
1,320 (311)124 1,989 4,323 
Net gain (loss) from derivatives hedging (1,592)(81)(309)(2,981)(5,317)
Subtotal(272)(392)(185)(992)(994)
Single family servicing income 1,970 1,847 1,844 882 443 
Commercial loan servicing income:
Servicing fees and other2,724 2,746 2,653 3,687 5,555 
Amortization of capitalized MSRs(1,435)(1,554)(1,815)(1,828)(2,337)
Total1,289 1,192 838 1,859 3,218 
Total loan servicing income $3,259 $3,039 $2,682 $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.


Capitalized Mortgage Servicing Rights ("MSRs")
 Quarter Ended
(in thousands)June 30,
2023		March 31,
2023		December 31,
2022		September 30,
2022		June 30,
2022
Single Family MSRs
Beginning balance$75,701 $76,617 $77,811 $76,481 $72,378 
Additions and amortization:
Originations
919 619 581 1,453 2,295 
Purchases
— 460 — — — 
Changes - amortization (1)
(1,626)(1,684)(1,899)(2,112)(2,515)
Net additions and amortization
(707)(605)(1,318)(659)(220)
Change in fair value due to assumptions (2)
1,320 (311)124 1,989 4,323 
Ending balance$76,314 $75,701 $76,617 $77,811 $76,481 
Ratio to related loans serviced for others1.42 %1.40 %1.41 %1.42 %1.38 %
Multifamily and SBA MSRs
Beginning balance$33,839 $35,256 $36,819 $38,130 39,279 
Originations
73 137 252 517 1,188 
Amortization
(1,435)(1,554)(1,815)(1,828)(2,337)
Ending balance$32,477 $33,839 $35,256 $36,819 $38,130 
Ratio to related loans serviced for others1.70 %1.77 %1.82 %1.86 %1.91 %
(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.


16



Deposits
(in thousands)June 30,
2023		March 31,
2023		December 31,
2022		September 30,
2022		June 30,
2022
Deposits by Product:
Noninterest-bearing demand deposits$1,410,369 $1,479,428 $1,399,912 $1,547,642 $1,640,651 
Interest-bearing:
Interest-bearing demand deposits370,747 496,504 466,490 514,912 590,889 
Savings300,007 323,373 258,977 275,399 302,359 
Money market1,863,762 2,097,055 2,383,209 2,551,961 2,679,865 
Certificates of deposit:
Brokered deposits760,826 885,314 1,446,528 511,920 270,160 
Other1,964,322 1,774,929 1,496,803 1,208,397 699,375 
Total interest-bearing deposits5,259,664 5,577,175 6,052,007 5,062,589 4,542,648 
Total deposits$6,670,033 $7,056,603 $7,451,919 $6,610,231 $6,183,299 

Percent of total deposits:
Noninterest-bearing demand deposits21.1 %21.0 %18.8 %23.4 %26.5 %
Interest-bearing:
Interest-bearing demand deposits5.6 %7.0 %6.2 %7.8 %9.6 %
Savings4.5 %4.6 %3.5 %4.2 %4.9 %
Money market 27.9 %29.7 %32.0 %38.6 %43.3 %
Certificates of deposit
Brokered deposits11.4 %12.5 %19.4 %7.7 %4.4 %
Other29.5 %25.2 %20.1 %18.3 %11.3 %
Total interest-bearing deposits78.9 %79.0 %81.2 %76.6 %73.5 %
Total deposits100.0 %100.0 %100.0 %100.0 %100.0 %




17

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

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





18

HomeStreet, Inc. and Subsidiaries
Non-GAAP Financial Measures

Reconciliations of non-GAAP results of operations to the nearest comparable GAAP measures or calculations of the non-GAAP measure:
As of or for the Quarter EndedSix Months Ended
(in thousands, except share and per share data)June 30,
2023		March 31,
2023		December 31,
2022		September 30,
2022		June 30,
2022		June 30,
2023		June 30,
2022
Tangible book value per share
Shareholders' equity
$527,623 $574,994 $562,147 $552,789 $580,767 $527,623 $580,767 
Less: Goodwill and other intangibles
(11,217)(51,862)(29,980)(30,215)(31,219)(11,217)(31,219)
Tangible shareholders' equity$516,406 $523,132 $532,167 $522,574 $549,548 $516,406 $549,548 
Common shares outstanding18,776,597 18,767,811 18,730,380 18,717,557 18,712,789 18,776,597 18,712,789 
Computed amount$27.50 $27.87 $28.41 $27.92 $29.37 $27.50 $29.37 
Tangible common equity to tangible assets
Tangible shareholders' equity (per above)$516,406 $523,132 $532,167 $522,574 $549,548 $516,406 $549,548 
Tangible assets
Total assets$9,501,475$9,858,889$9,364,760$9,072,887$8,582,886$9,501,475$8,582,886
Less: Goodwill and other intangibles (per above)(11,217)(51,862)(29,980)(30,215)(31,219)(11,217)(31,219)
Net$9,490,258$9,807,027$9,334,780$9,042,672$8,551,667$9,490,258$8,551,667
Ratio5.4 %5.3 %5.7 %5.8 %6.4 %5.4 %6.4 %
Core net income
Net income (loss)$(31,442)$5,058 $8,501 $20,367 $17,721 $(26,384)$37,672 
Adjustments (tax effected)
Goodwill impairment charge34,622 — — — — 34,622 — 
Total$3,180 $5,058 $8,501 $20,367 $17,721 $8,238 $37,672 
Core diluted earnings per share
Fully diluted shares18,775,022 18,771,899 18,753,147 18,796,737 18,834,443 18,765,292 19,310,750 
Ratio$0.17 $0.27 $0.45 $1.08 $0.94 $0.44 $1.95 
Return on average tangible equity (annualized)
Average shareholders' equity
$582,172 $578,533 $565,950 $603,278 $603,664 $580,363 $650,869 
Less: Average goodwill and other intangibles
(51,138)(30,969)(30,133)(30,602)(31,380)(41,109)(31,501)
Average tangible equity$531,034 $547,564 $535,817 $572,676 $572,284 $539,254 $619,368 
Core net income (per above)3,180 5,058 8,501 20,367 17,721 8,238 37,672 
Adjustments (tax effected)
Amortization of core deposit intangibles614 459 183 186 191 1,073 382 
Tangible income applicable to shareholders$3,794 $5,517 $8,684 $20,553 $17,912 $9,311 $38,054 
Ratio
2.9 %4.1 %6.4 %14.2 %12.6 %3.5 %12.4 %
19

As of or for the Quarter EndedSix Months Ended
(in thousands, except share and per share data)June 30,
2023		March 31,
2023		December 31,
2022		September 30,
2022		June 30,
2022		June 30,
2023		June 30,
2022
Return on average assets (annualized) - Core
Average Assets$9,562,817 $9,530,705 $9,348,396 $8,899,684 $7,945,298 $9,546,850 $7,656,050 
Core net income (per above)3,180 5,058 8,501 20,367 17,721 8,238 37,672 
Ratio0.13 %0.22 %0.36 %0.91 %0.89 %0.17 %0.99 %
Efficiency ratio
Noninterest expense
Total
$90,781 $52,491 $50,420 $49,889 $50,637 $143,272 $105,110 
Adjustments:
Goodwill impairment charge(39,857)— — — — (39,857)— 
State of Washington taxes(526)(555)(597)(629)(579)(1,081)(1,085)
Adjusted total$50,398 $51,936 $49,823 $49,260 $50,058 $102,334 $104,025 
Total revenues
Net interest income
$43,476 $49,376 $55,687 $63,018 $60,056 92,852 114,602 
Noninterest income
10,311 10,190 9,677 13,322 13,013 20,501 28,571 
Gain on sale of branches— — — (4,270)— — — 
Adjusted total$53,787 $59,566 $65,364 $72,070 $73,069 $113,353 $143,173 
Ratio93.7 %87.2 %76.2 %68.4 %68.5 %90.3 %72.7 %
Effective tax rate
Income14.2 %12.5 %
Core net income1.6 %15.2 %
Goodwill impairment charge13.1 %13.1 %
Effective tax rate used in computations above (1)
22.0 %22.0 %22.0 %22.0 %22.0 %22.0 %22.0 %
(1) ) Effective tax rate indicated is used for all adjustment except the goodwill impairment charge as a portion of this charge was not deductible for tax purposes. Instead a computed effective rate of 13.1% was used for the goodwill impairment charge.

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Forward-Looking Statements

This earnings release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 (the “Reform Act”). Generally, forward-looking statements include the words “anticipate,” “believe,” “estimate,” “expect,” “intend,” “may,” “plan,” “potential,” “goal,” “upcoming,” “outlook,” “guidance” or the negation thereof, or similar expressions. In addition, all statements in this earnings release (including but not limited to those found in the quotes of our Chief Executive Officer) that address and/or include beliefs, assumptions, estimates, projections and expectations of our future performance, financial condition, long-term value creation, capital management, reduction in volatility, reliability of earnings, net interest margins, provisions and allowances for credit losses, cost reduction initiatives, performance of our continued operations relative to our past operations, and restructuring activities are forward-looking statements within the meaning of the Reform Act. Forward-looking statements involve inherent risks, uncertainties and other factors, many of which are difficult to predict and are generally beyond management’s control. Forward-looking statements are based on the Company’s expectations at the time such statements are made and speak only as of the date made. The Company does not assume any obligation or undertake to update any forward-looking statements after the date of this release as a result of new information, future events or developments, except as required by federal securities or other applicable laws, although the Company may do so from time to time. The Company does not endorse any projections regarding future performance that may be made by third parties. For all forward-looking statements, the Company claims the protection of the safe harbor for forward-looking statements contained in the Reform Act.

We caution readers that actual results may differ materially from those expressed in or implied by the Company’s forward-looking statements. Rather, more important factors could affect the Company’s future results, including but not limited to the following: (1) changes in the U.S. and global economies, including business disruptions, reductions in employment, inflationary pressures and an increase in business failures, specifically among our customers; (2) changes in the interest rate environment may reduce interest margins; (3) changes in deposit flows, loan demand or real estate values may adversely affect the business of our primary subsidiary, HomeStreet Bank (the “Bank”), through which substantially all of our operations are carried out; (4) there may be increases in competitive pressure among financial institutions or from non-financial institutions; (5) our ability to attract and retain key members of our senior management team; (6) the timing and occurrence or non-occurrence of events may be subject to circumstances beyond our control; (7) our ability to control operating costs and expenses; (8) our credit quality and the effect of credit quality on our credit losses expense and allowance for credit losses; (9) the adequacy of our allowance for credit losses; (10) changes in accounting principles, policies or guidelines may cause our financial condition to be perceived or interpreted differently; (11) legislative or regulatory changes that may adversely affect our business or financial condition, including, without limitation, changes in corporate and/or individual income tax laws and policies, changes in privacy laws, and changes in regulatory capital or other rules, and the availability of resources to address or respond to such changes; (12) general economic conditions, either nationally or locally in some or all areas in which we conduct business, or conditions in the securities markets or banking industry, may be less favorable than what we currently anticipate; (13) challenges our customers may face in meeting current underwriting standards may adversely impact all or a substantial portion of the value of our rate-lock loan activity we recognize; (14) technological changes may be more difficult or expensive than what we anticipate; (15) a failure in or breach of our operational or security systems or information technology infrastructure, or those of our third-party providers and vendors, including due to cyber-attacks; (16) success or consummation of new business initiatives may be more difficult or expensive than what we anticipate; (17) our ability to grow efficiently both organically and through acquisitions and to manage our growth and integration costs; (18) staffing fluctuations in response to product demand or the implementation of corporate strategies that affect our work force and potential associated charges; (19) litigation, investigations or other matters before regulatory agencies, whether currently existing or commencing in the future, may delay the occurrence or non-occurrence of events longer than what we anticipate; (20) our ability to obtain regulatory approvals or non-objection to take various capital actions, including the payment of dividends by us or the Bank, or repurchases of our common stock; and (21) the integration of our recently acquired branches in southern California. A discussion of the factors, risks and uncertainties that could affect our financial results, business goals and operational and financial objectives cited in this release, other releases, public statements and/or filings with the Securities and Exchange Commission (“SEC”) is also contained in the “Risk Factors” sections of this Company's Forms 10-K and 10-Q. We strongly recommend readers review those disclosures in conjunction with the discussions herein.

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All future written and oral forward-looking statements attributable to the Company or any person acting on its behalf are expressly qualified in their entirety by the cautionary statements contained or referred to above. New risks and uncertainties arise from time to time, and factors that the Company currently deems immaterial may become material, and it is impossible for the Company to predict these events or how they may affect the Company.



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