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What changed in Mechanics Bancorp's 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of Mechanics Bancorp's 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+761 added−446 removedSource: 10-K (2024-03-06) vs 10-K (2023-03-06)

Top changes in Mechanics Bancorp's 2023 10-K

761 paragraphs added · 446 removed · 364 edited across 1 sections

Item 1. Business

Business — how the company describes what it does

364 edited+397 added−82 removed365 unchanged
Biggest changeThe risk rating classification for such loans are based on the non-homogenous definitions noted above. 70 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, 2022 (in thousands) 2022 2021 2020 2019 2018 2017 and prior Revolving Revolving-term Total COMMERCIAL PORTFOLIO Non-owner occupied CRE Pass $ 68,301 $ 68,356 $ 42,181 $ 139,760 $ 87,197 $ 242,544 $ 2,016 $ 786 $ 651,141 Special Mention — — — — 2,702 4,242 — — 6,944 Substandard — — — — — — — — — Total 68,301 68,356 42,181 139,760 89,899 246,786 2,016 786 658,085 Multifamily Pass 1,828,568 1,165,434 528,077 221,974 59,340 140,126 — — 3,943,519 Special Mention — — 4,893 19,834 — 7,508 — — 32,235 Substandard — — — — — — — — — Total 1,828,568 1,165,434 532,970 241,808 59,340 147,634 — — 3,975,754 Multifamily construction Pass 18,110 63,394 13,613 — — — — — 95,117 Special Mention — — — — — — — — — Substandard — — — — — — — — — Total 18,110 63,394 13,613 — — — — — 95,117 CRE construction Pass 341 14,348 3,960 — — 305 — — 18,954 Special Mention — — — — — — — — — Substandard — — — — — — — — — Total 341 14,348 3,960 — — 305 — — 18,954 Single family construction Pass 149,133 50,936 24,807 519 — 74 123,303 — 348,772 Special Mention — — — — — — — — — Substandard — 6,782 — — — — — — 6,782 Total 149,133 57,718 24,807 519 — 74 123,303 — 355,554 Single family construction to permanent Current 66,034 76,814 11,128 3,268 794 — — — 158,038 Past due: 30-59 days — — — — — — — — — 60-89 days — — — — — — — — — 90+ days — — — — — — — — — Total 66,034 76,814 11,128 3,268 794 — — — 158,038 Owner occupied CRE Pass 70,192 51,919 44,778 71,652 36,457 139,691 3 1,104 415,796 Special Mention — 743 — — 6,179 13,485 — — 20,407 Substandard — — — — 2,149 5,011 — — 7,160 Total 70,192 52,662 44,778 71,652 44,785 158,187 3 1,104 443,363 Commercial business Pass 65,566 42,921 45,940 18,594 13,548 18,779 130,427 2,041 337,816 Special Mention — 612 — 3,577 9 3,444 403 — 8,045 Substandard — 338 2,638 4,449 2,591 2,206 1,563 101 13,886 Total 65,566 43,871 48,578 26,620 16,148 24,429 132,393 2,142 359,747 Total commercial portfolio $ 2,266,245 $ 1,542,597 $ 722,015 $ 483,627 $ 210,966 $ 577,415 $ 257,715 $ 4,032 $ 6,064,612 71 The following table presents a vintage analysis of the consumer portfolio segment by loan sub-class and delinquency status: At December 31, 2022 (in thousands) 2022 2021 2020 2019 2018 2017 and prior Revolving Revolving-term Total CONSUMER PORTFOLIO Single family Current $ 273,786 $ 253,937 $ 152,773 $ 49,302 $ 43,511 $ 231,277 $ — $ — $ 1,004,586 Past due: 30-59 days — — — — 340 2,113 — — 2,453 60-89 days — — — — — 258 — — 258 90+ days — — — 290 273 1,141 — — 1,704 Total (1) 273,786 253,937 152,773 49,592 44,124 234,789 — — 1,009,001 Home equity and other Current 4,156 692 220 150 72 1,593 340,567 4,017 351,467 Past due: 30-59 days — 6 — — — 9 446 — 461 60-89 days 6 24 — — — 48 517 — 595 90+ days — — — — — 151 33 — 184 Total 4,162 722 220 150 72 1,801 341,563 4,017 352,707 Total consumer portfolio $ 277,948 $ 254,659 $ 152,993 $ 49,742 $ 44,196 $ 236,590 $ 341,563 $ 4,017 $ 1,361,708 Total LHFI $ 2,544,193 $ 1,797,256 $ 875,008 $ 533,369 $ 255,162 $ 814,005 $ 599,278 $ 8,049 $ 7,426,320 (1) Includes $5.9 million of loans where a fair value option election was made at the time of origination and, therefore, are carried at fair value with changes recognized in the consolidated income statements. 72 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 73 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 (1) 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 $ 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 recognized in the consolidated income statements. 74 Collateral Dependent Loans The following table presents the amortized cost basis of collateral-dependent loans by loan sub-class and collateral type: At December 31, 2022 (in thousands) Land 1-4 Family Non-residential real estate Other non-real estate Total Commercial and industrial loans Owner occupied CRE $ 1,111 $ — $ 1,410 $ — $ 2,521 Commercial business 62 3,186 562 — 3,810 Total collateral-dependent loans $ 1,173 $ 3,186 $ 1,972 $ — $ 6,331 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 December 31, 2022 At December 31, 2021 (in thousands) Nonaccrual with no related ACL Total Nonaccrual Nonaccrual with no related ACL Total Nonaccrual Commercial and industrial loans Owner occupied CRE $ 2,521 $ 2,521 $ 3,568 $ 3,568 Commercial business 785 4,269 1,210 5,023 Total 3,306 6,790 4,778 8,591 Consumer loans Single family 332 2,584 1,324 2,802 Home equity and other 3 681 23 808 Total 335 3,265 1,347 3,610 Total nonaccrual loans $ 3,641 $ 10,055 $ 6,125 $ 12,201 75 The following tables present an aging analysis of past due loans by loan portfolio segment and loan sub-class: At December 31, 2022 Past Due and Still Accruing (in thousands) 30-59 days 60-89 days 90 days or more Nonaccrual Total past due and nonaccrual (1) Current Total loans CRE Non-owner occupied CRE $ — $ — $ — $ — $ — $ 658,085 $ 658,085 Multifamily — — — — — 3,975,754 3,975,754 Construction/land development Multifamily construction — — — — — 95,117 95,117 CRE construction — — — — — 18,954 18,954 Single family construction — — — — — 355,554 355,554 Single family construction to permanent — — — — — 158,038 158,038 Total — — — — — 5,261,502 5,261,502 Commercial and industrial loans Owner occupied CRE — — — 2,521 2,521 440,842 443,363 Commercial business — — — 4,269 4,269 355,478 359,747 Total — — — 6,790 6,790 796,320 803,110 Consumer loans Single family 4,556 1,724 4,372 (2) 2,584 13,236 995,765 1,009,001 (3) Home equity and other 267 296 — 681 1,244 351,463 352,707 Total 4,823 2,020 4,372 3,265 14,480 1,347,228 1,361,708 Total loans $ 4,823 $ 2,020 $ 4,372 $ 10,055 $ 21,270 $ 7,405,050 $ 7,426,320 % 0.06 % 0.03 % 0.06 % 0.14 % 0.29 % 99.71 % 100.00 % 76 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 (1) 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 (3) 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 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 loans whose repayments are insured by the FHA or guaranteed by the VA or SBA of $10.6 million and $8.4 million at December 31, 2022 and 2021, respectively.
Biggest changeThe risk rating classification for such loans are based on the non-homogenous definitions noted above. 92 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, 2023 (in thousands) 2023 2022 2021 2020 2019 2018 and prior Revolving Revolving-term Total COMMERCIAL PORTFOLIO Non-owner occupied CRE Pass $ 1,499 $ 70,388 $ 71,217 $ 41,235 $ 118,900 $ 286,379 $ 601 $ — $ 590,219 Special Mention — — — — 686 34,177 — — 34,863 Substandard — — — — 16,230 — 573 — 16,803 Total 1,499 70,388 71,217 41,235 135,816 320,556 1,174 — 641,885 Multifamily Pass 108,274 1,813,647 1,151,677 475,708 189,567 177,712 — — 3,916,585 Special Mention — — 3,942 12,887 2,368 1,344 — — 20,541 Substandard — — — — — 3,063 — — 3,063 Total 108,274 1,813,647 1,155,619 488,595 191,935 182,119 — — 3,940,189 Multifamily construction Pass (198) 56,013 112,234 — — — — — 168,049 Special Mention — — — — — — — — — Substandard — — — — — — — — — Total (198) 56,013 112,234 — — — — — 168,049 CRE construction Pass 7 — 14,685 — — — — — 14,692 Special Mention — — — — — — — — — Substandard — — — 3,821 — — — — 3,821 Total 7 — 14,685 3,821 — — — — 18,513 Single family construction Pass 75,305 39,621 12,294 — — 72 146,758 — 274,050 Special Mention — — — — — — — — — Substandard — — — — — — — — — Total 75,305 39,621 12,294 — — 72 146,758 — 274,050 Single family construction to permanent Current 27,114 56,469 19,871 1,850 — — — — 105,304 Past due: 30-59 days — — — — — — — — — 60-89 days — — — — — — — — — 90+ days — — — — — — — — — Total 27,114 56,469 19,871 1,850 — — — — 105,304 Owner occupied CRE Pass 12,459 68,399 39,629 43,399 65,392 111,199 2 1,122 341,601 Special Mention 1,871 1,478 9,290 — 2,956 28,784 — — 44,379 Substandard 1 — — — 253 5,051 — — 5,305 Total 14,331 69,877 48,919 43,399 68,601 145,034 2 1,122 391,285 Commercial business Pass 17,970 45,892 27,227 33,404 16,198 24,903 157,656 973 324,223 Special Mention — 11,465 2,891 — 452 38 3,485 — 18,331 Substandard — — 2,134 7,601 3,788 1,886 1,021 65 16,495 Total 17,970 57,357 32,252 41,005 20,438 26,827 162,162 1,038 359,049 Total commercial portfolio $ 244,302 $ 2,163,372 $ 1,467,091 $ 619,905 $ 416,790 $ 674,608 $ 310,096 $ 2,160 $ 5,898,324 93 The following table presents a vintage analysis of the consumer portfolio segment by loan sub-class and delinquency status: At December 31, 2023 (in thousands) 2023 2022 2021 2020 2019 2018 and prior Revolving Revolving-term Total CONSUMER PORTFOLIO Single family Current $ 27,011 $ 354,691 $ 313,866 $ 147,183 $ 49,126 $ 245,574 $ — $ — $ 1,137,451 Past due: 30-59 days — — — — — 781 — — 781 60-89 days — — — — — 1,374 — — 1,374 90+ days — — — — — 673 — — 673 Total 27,011 354,691 313,866 147,183 49,126 248,402 — — 1,140,279 Home equity and other Current 2,165 2,493 311 121 46 1,631 370,462 5,483 382,712 Past due: 30-59 days 8 2 — — — — 802 162 974 60-89 days 1 3 — — — — 419 — 423 90+ days — — — — — 24 162 6 192 Total 2,174 2,498 311 121 46 1,655 371,845 5,651 384,301 Total consumer portfolio (1) $ 29,185 $ 357,189 $ 314,177 $ 147,304 $ 49,172 $ 250,057 $ 371,845 $ 5,651 $ 1,524,580 Total LHFI $ 273,487 $ 2,520,561 $ 1,781,268 $ 767,209 $ 465,962 $ 924,665 $ 681,941 $ 7,811 $ 7,422,904 (1) Includes $1.3 million of loans where a fair value option election was made at the time of origination and, therefore, are carried at fair value with changes in fair value recognized in the consolidated income statements. 94 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, 2022 (in thousands) 2022 2021 2020 2019 2018 2017 and prior Revolving Revolving-term Total COMMERCIAL PORTFOLIO Non-owner occupied CRE Pass $ 68,301 $ 68,356 $ 42,181 $ 139,760 $ 87,197 $ 242,544 $ 2,016 $ 786 $ 651,141 Special Mention — — — — 2,702 4,242 — — 6,944 Substandard — — — — — — — — — Total 68,301 68,356 42,181 139,760 89,899 246,786 2,016 786 658,085 Multifamily Pass 1,828,568 1,165,434 528,077 221,974 59,340 140,126 — — 3,943,519 Special Mention — — 4,893 19,834 — 7,508 — — 32,235 Substandard — — — — — — — — — Total 1,828,568 1,165,434 532,970 241,808 59,340 147,634 — — 3,975,754 Multifamily construction Pass 18,110 63,394 13,613 — — — — — 95,117 Special Mention — — — — — — — — — Substandard — — — — — — — — — Total 18,110 63,394 13,613 — — — — — 95,117 CRE construction Pass 341 14,348 3,960 — — 305 — — 18,954 Special Mention — — — — — — — — — Substandard — — — — — — — — — Total 341 14,348 3,960 — — 305 — — 18,954 Single family construction Pass 149,133 50,936 24,807 519 — 74 123,303 — 348,772 Special Mention — — — — — — — — — Substandard — 6,782 — — — — — — 6,782 Total 149,133 57,718 24,807 519 — 74 123,303 — 355,554 Single family construction to permanent Current 66,034 76,814 11,128 3,268 794 — — — 158,038 Past due: 30-59 days — — — — — — — — — 60-89 days — — — — — — — — — 90+ days — — — — — — — — — Total 66,034 76,814 11,128 3,268 794 — — — 158,038 Owner occupied CRE Pass 70,192 51,919 44,778 71,652 36,457 139,691 3 1,104 415,796 Special Mention — 743 — — 6,179 13,485 — — 20,407 Substandard — — — — 2,149 5,011 — — 7,160 Total 70,192 52,662 44,778 71,652 44,785 158,187 3 1,104 443,363 Commercial business Pass 65,566 42,921 45,940 18,594 13,548 18,779 130,427 2,041 337,816 Special Mention — 612 — 3,577 9 3,444 403 — 8,045 Substandard — 338 2,638 4,449 2,591 2,206 1,563 101 13,886 Total 65,566 43,871 48,578 26,620 16,148 24,429 132,393 2,142 359,747 Total commercial portfolio $ 2,266,245 $ 1,542,597 $ 722,015 $ 483,627 $ 210,966 $ 577,415 $ 257,715 $ 4,032 $ 6,064,612 95 The following table presents a vintage analysis of the consumer portfolio segment by loan sub-class and delinquency status: At December 31, 2022 (in thousands) 2022 2021 2020 2019 2018 2017 and prior Revolving Revolving-term Total CONSUMER PORTFOLIO Single family Current $ 273,786 $ 253,937 $ 152,773 $ 49,302 $ 43,511 $ 231,277 $ — $ — $ 1,004,586 Past due: 30-59 days — — — — 340 2,113 — — 2,453 60-89 days — — — — — 258 — — 258 90+ days — — — 290 273 1,141 — — 1,704 Total 273,786 253,937 152,773 49,592 44,124 234,789 — — 1,009,001 Home equity and other Current 4,156 692 220 150 72 1,593 340,567 4,017 351,467 Past due: 30-59 days — 6 — — — 9 446 — 461 60-89 days 6 24 — — — 48 517 — 595 90+ days — — — — — 151 33 — 184 Total 4,162 722 220 150 72 1,801 341,563 4,017 352,707 Total consumer portfolio (1) $ 277,948 $ 254,659 $ 152,993 $ 49,742 $ 44,196 $ 236,590 $ 341,563 $ 4,017 $ 1,361,708 Total LHFI $ 2,544,193 $ 1,797,256 $ 875,008 $ 533,369 $ 255,162 $ 814,005 $ 599,278 $ 8,049 $ 7,426,320 (1) Includes $5.9 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.
Our most direct competition comes from other banks, credit unions, mortgage banking companies and finance companies, and more recently has also come from companies that rely heavily on technology to provide financial services, are moving to provide cryptocurrency products and offerings, and often target a younger customer demographic.
Our most direct competition comes from other banks, credit unions, mortgage banking companies and finance companies, and more recently, competition has also come from companies that rely heavily on technology to provide financial services, are moving to provide cryptocurrency products and offerings, and often target a younger customer demographic.
We also originate, purchase, sell and service loans insured by the Federal Housing Administration (“FHA”) and U.S. Department of Housing and Urban Development (“HUD”) or guaranteed by the U.S. Department of Veterans Affairs (“VA”), and certify that such loans have met their requirements and guidelines.
We also originate, purchase, sell and service loans insured by the Federal Housing Administration (“FHA”) and U.S. Department of Housing and Urban Development (“HUD”) or guaranteed by the U.S. Department of Veterans Affairs (“VA”), and we certify that such loans have met their requirements and guidelines.
Risks Related to Certain Environmental, Social and Governance Issues Our business is subject to evolving regulations and stakeholders’ expectations with respect to environmental ("ESG"), social and governance matters that could expose us to numerous risks. Increasingly regulators, customers, investors, employees and other stakeholders are focusing on ESG matters and related disclosures.
Risks Related to Certain Environmental, Social and Governance Issues Our business is subject to evolving regulations and stakeholders’ expectations with respect to environmental, social and governance ("ESG") matters that could expose us to numerous risks. Increasingly regulators, customers, investors, employees and other stakeholders are focusing on ESG matters and related disclosures.
(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.
(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.
(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.
(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.
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.
Under the DUS program, the Company and Fannie Mae share losses on a pro rata basis, where the Company is responsible for losses incurred up to one-third of the principal balance on each loan with two-thirds of the loss covered by Fannie Mae.
The Q-Factor methodology is based on a blend of quantitative analysis and management judgment and reviewed on a quarterly basis. 55 Each of the thirteen factors in the FASB standard were analyzed for common risk characteristics and grouped into seven consolidated Q-Factors as listed below: Qualitative Factor Financial Instruments - Credit Losses Portfolio Credit Quality The borrower's financial condition, credit rating, credit score, asset quality or business prospects The borrower's ability to make scheduled interest or principal payments The volume and severity of past due financial assets and the volume and severity of adversely classified or rated financial assets Remaining Payments The remaining payment terms of the financial assets The remaining time to maturity and the timing and extent of payments on the financial assets Volume & Nature The nature and volume of the entity's financial assets Collateral Values The value of underlying collateral on financial assets in which the collateral-dependent practical expedient has not been utilized Economic The environmental factors of a borrower and the areas in which the entity's credit is concentrated, such as: changes and expected changes in national, regional and local economic and business conditions and developments in which the entity operates, including the condition and expected condition of various market segments Credit Culture The entity's lending policies and procedures, including changes in lending strategies, underwriting standards, collection, write-off and recovery practices, as well as knowledge of the borrower's operations or the borrower's standing in the community The quality of the entity's credit review system The experience, ability and depth of the entity's management, lending staff, and other relevant staff Business Environment The environmental factors of a borrower and the areas in which the entity's credit is concentrated, such as: regulatory, legal, or technological environment to which the entity has exposure The environmental factors of a borrower and the areas in which the entity's credit is concentrated, such as: changes and expected changes in the general market condition of either the geographical area or the industry to which the entity has exposure An eighth Q-Factor, Management Overlay, allows the Bank to adjust specific pools when conditions exist that were not contemplated in the model design that warrant an adjustment.
The Q-Factor methodology is based on a blend of quantitative analysis and management judgment and reviewed on a quarterly basis. 76 Each of the thirteen factors in the FASB standard were analyzed for common risk characteristics and grouped into seven consolidated Q-Factors as listed below: Qualitative Factor Financial Instruments - Credit Losses Portfolio Credit Quality The borrower's financial condition, credit rating, credit score, asset quality or business prospects The borrower's ability to make scheduled interest or principal payments The volume and severity of past due financial assets and the volume and severity of adversely classified or rated financial assets Remaining Payments The remaining payment terms of the financial assets The remaining time to maturity and the timing and extent of payments on the financial assets Volume & Nature The nature and volume of the entity's financial assets Collateral Values The value of underlying collateral on financial assets in which the collateral-dependent practical expedient has not been utilized Economic The environmental factors of a borrower and the areas in which the entity's credit is concentrated, such as: changes and expected changes in national, regional and local economic and business conditions and developments in which the entity operates, including the condition and expected condition of various market segments Credit Culture The entity's lending policies and procedures, including changes in lending strategies, underwriting standards, collection, write-off and recovery practices, as well as knowledge of the borrower's operations or the borrower's standing in the community The quality of the entity's credit review system The experience, ability and depth of the entity's management, lending staff, and other relevant staff Business Environment The environmental factors of a borrower and the areas in which the entity's credit is concentrated, such as: regulatory, legal, or technological environment to which the entity has exposure The environmental factors of a borrower and the areas in which the entity's credit is concentrated, such as: changes and expected changes in the general market condition of either the geographical area or the industry to which the entity has exposure An eighth Q-Factor, Management Overlay, allows the Bank to adjust specific pools when conditions exist that were not contemplated in the model design that warrant an adjustment.
We intend to satisfy the disclosure requirement under Item 5.05 of Form 8-K regarding an amendment to, or waiver from, a provision of this Code of Business Conduct and Ethics by posting such information on our corporate website, at the address and location specified above and, to the extent required by the listing standards of the Nasdaq Global Select Market, by filing a Current Report on Form 8-K with the SEC, disclosing such information.
We intend to satisfy the disclosure requirement under Item 5.05 of Form 8-K regarding an amendment to, or waiver from, a provision of the Code of Business Conduct and Ethics by posting such information on our corporate website, at the address and location specified above and, to the extent required by the listing standards of the Nasdaq Global Select Market, by filing a Current Report on Form 8-K with the SEC, disclosing such information.
We may not be able to raise such additional capital at the time when we need 11 it, or on terms that are acceptable to us, especially if capital markets are especially constrained, if our financial performance weakens, or if we need to do so at a time when many other financial institutions are competing for capital from investors in response to changing economic conditions.
We may not be able to raise such additional capital at the time when we need it, or on terms that are acceptable to us, especially if capital markets are especially constrained, if our financial performance weakens, or if we need to do so at a time when many other financial institutions are competing for capital from investors in response to changing economic conditions.
The amendments in this ASU eliminate the accounting guidance for Troubled Debt Restructuring ("TDRs") by creditors, while enhancing disclosure 62 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.
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.
(6) Amended in the fourth quarter of 2018 to make administrative revisions that were not material and did not require shareholder approval. An updated version was filed as an exhibit to HomeStreet’s Annual Report on Form 10-K (SEC File No. 001-35424) filed on March 6, 2019, and incorporated herein by reference.
(7) Amended in the fourth quarter of 2018 to make administrative revisions that were not material and did not require shareholder approval. An updated version was filed as an exhibit to HomeStreet’s Annual Report on Form 10-K (SEC File No. 001-35424) filed on March 6, 2019, and incorporated herein by reference.
By doing so, we believe we are better able to serve our customers and understand their financial needs and goals. HomeStreet’s Culture Committee helps management identify ways to increase and promote opportunities for our employees. The Culture Committee works with management to identify and promote practices that will help us achieve a more diverse and inclusive workplace.
By doing so, we believe we are better able to serve our customers and understand their financial needs and goals. HomeStreet’s Culture Committee helps management identify ways to increase and promote opportunities for our employees. The Culture Committee also works with management to identify and promote practices that will help us achieve a more diverse and inclusive workplace.
The laws, rules and regulations to which we are subject evolve and change frequently, including changes that come from judicial or administrative agency interpretations of laws and regulations outside of the legislative process that may be more difficult to anticipate, and changes to our regulatory environment are often driven by shifts of political power in the federal government.
The laws, rules and regulations to which we are subject evolve and change frequently, including changes that come from 31 judicial or administrative agency interpretations of laws and regulations outside of the legislative process that may be more difficult to anticipate, and changes to our regulatory environment are often driven by shifts of political power in the federal government.
However, it is impossible to predict 9 whether the SOFR index could be more volatile than LIBOR, which could thereby increase loan rates and borrowing costs on borrowing facilities previously indexed to LIBOR. Borrowers may not fully understand SOFR as an index replacement or may be adversely impacted by implementation of SOFR.
However, it is impossible to predict whether the SOFR index could be more volatile than LIBOR, which could thereby increase loan rates and borrowing costs on borrowing facilities previously indexed to LIBOR. Borrowers may not fully understand SOFR as an index replacement or may be adversely impacted by implementation of SOFR.
Certain of those accounting policies are considered critical accounting policies, because they require us to make estimates and assumptions regarding circumstances or trends that could materially affect the value of those assets, such as economic conditions or trends that could impact our ability to fully 22 collect our loans or ultimately realize the carrying value of certain of our other assets.
Certain of those accounting policies are considered critical accounting policies because they require us to make estimates and assumptions regarding circumstances or trends that could materially affect the value of those assets, such as economic conditions or trends that could impact our ability to fully collect our loans or ultimately realize the carrying value of certain of our other assets.
In addition, advances in technology such as telephone, text and online banking, e-commerce and self-service automatic teller machines and other equipment, as well as changing customer preferences to access our products and services through digital channels, could decrease the value of our branch network and other assets.
In addition, advances in technology such as telephone, text and online banking, e-commerce and self-service automatic teller machines and other equipment, as well as changing 27 customer preferences to access our products and services through digital channels, could decrease the value of our branch network and other assets.
In addition, significant changes in the underwriting criteria of third party loan purchasers could increase our costs 10 or decrease our ability to sell into the secondary markets. Any of these changes can have a negative impact on our liquidity, financial condition, results of operations and capital position.
In addition, significant changes in the underwriting criteria of third party loan purchasers could increase our costs or decrease our ability to sell into the secondary markets. Any of these changes can have a negative impact on our liquidity, financial condition, results of operations and capital position.
Any such changes could adversely affect our cost of doing business and our profitability. 13 In addition, changes in regulation of our industry have the potential to create higher costs of compliance, including short-term costs to meet new compliance standards, limit our ability to pursue business opportunities and increase our exposure to potential fines, penalties and litigation.
Any such changes could adversely affect our cost of doing business and our profitability. In addition, changes in regulation of our industry have the potential to create higher costs of compliance, including short-term costs to meet new compliance standards, limit our ability to pursue business opportunities and increase our exposure to potential fines, penalties and litigation.
In order to maintain the DIF, member institutions, such as the Bank, are assessed insurance premiums which are now based on an insured institution's average consolidated assets less tangible equity capital. 6 Each institution is provided an assessment rate, which is generally based on the risk that the institution presents to the DIF.
In order to maintain the DIF, member institutions, such as the Bank, are assessed insurance premiums which are now based on an insured institution's average consolidated assets less tangible equity capital. Each institution is provided an assessment rate, which is generally based on the risk that the institution presents to the DIF.
For subsequent measurements, single family MSRs are accounted for at fair value, with changes in fair value recorded through current period earnings, while multifamily and SBA MSRs are accounted for at the lower of amortized cost or fair value. 58 Subsequent fair value measurements of MSRs are determined by considering the present value of estimated future net servicing cash flows.
For subsequent measurements, single family MSRs are accounted for at fair value, with changes in fair value recorded through current period earnings, while multifamily and SBA MSRs are accounted for at the lower of amortized cost or fair value. Subsequent fair value measurements of MSRs are determined by considering the present value of estimated future net servicing cash flows.
We are subject to federal income tax and also state income taxes in a number of different states. 60 A tax position is recognized as a benefit only if it is “more likely than not” that the tax position would be sustained in a tax examination, with a tax examination being presumed to occur.
We are subject to federal income tax and also state income taxes in a number of different states. A tax position is recognized as a benefit only if it is “more likely than not” that the tax position would be sustained in a tax examination, with a tax examination being presumed to occur.
(1) Filed as an exhibit to HomeStreet, Inc.’s Current Report on Form 8-K (SEC File No. 001-35424) filed on July 31, 2019, and incorporated herein by reference. (2) Filed as an exhibit to HomeStreet, Inc.’s Amendment No. 5 to Registration Statement on Form S-1 (SEC File No. 333-173980) filed on August 9, 2011, and incorporated herein by reference.
(2) Filed as an exhibit to HomeStreet, Inc.’s Current Report on Form 8-K (SEC File No. 001-35424) filed on July 31, 2019, and incorporated herein by reference. (3) Filed as an exhibit to HomeStreet, Inc.’s Amendment No. 5 to Registration Statement on Form S-1 (SEC File No. 333-173980) filed on August 9, 2011, and incorporated herein by reference.
(10) Filed as an exhibit to HomeStreet, Inc.’s Annual Report on Form 10-K (SEC File No. 001-35424) filed on March 25, 2015, and incorporated herein by reference. (11) Filed as an exhibit to HomeStreet, Inc.’s Amendment No. 2 to Registration Statement on Form S-1 (SEC File No. 333-173980) filed on June 21, 2011, and incorporated herein by reference.
(11) Filed as an exhibit to HomeStreet, Inc.’s Annual Report on Form 10-K (SEC File No. 001-35424) filed on March 25, 2015, and incorporated herein by reference. (12) Filed as an exhibit to HomeStreet, Inc.’s Amendment No. 2 to Registration Statement on Form S-1 (SEC File No. 333-173980) filed on June 21, 2011, and incorporated herein by reference.
Changes in the fair value of single family MSRs result from changes in (1) model inputs and assumptions and (2) modeled amortization, representing the collection and realization of expected cash flows and curtailments over time. The significant model inputs used to estimate the fair value of single family MSRs include assumptions regarding projected prepayment speeds and discount rates.
Changes in the fair value of single family MSRs result from changes in (1) model inputs and assumptions and (2) modeled amortization, representing the collection and realization of expected cash flows and curtailments over time. The model inputs used to estimate the fair value of single family MSRs include assumptions regarding projected prepayment speeds and discount rates.
(4) Filed as an exhibit to HomeStreet, Inc.’s Annual Report on Form 10-K (SEC File No. 001-35424) filed on March 6, 2020 and incorporated herein by reference (5) Filed as an exhibit to HomeStreet, Inc.'s Amendment No. 1 to Registration Statement on Form S-1 (SEC File No. 333-173980) filed on May 19, 2011, and incorporated herein by reference.
(5) Filed as an exhibit to HomeStreet, Inc.’s Annual Report on Form 10-K (SEC File No. 001-35424) filed on March 6, 2020 and incorporated herein by reference (6) Filed as an exhibit to HomeStreet, Inc.'s Amendment No. 1 to Registration Statement on Form S-1 (SEC File No. 333-173980) filed on May 19, 2011, and incorporated herein by reference.
We also promote policies and practices to combat harassment, discrimination, retaliation, or disrespectful or other unprofessional conduct based on an individual’s identity, including sex, gender, sexual orientation, race, religion, color, ancestry, physical disability, mental disability, age, marital status and other protected classifications.
We promote policies and practices to combat harassment, discrimination, retaliation, or disrespectful and other unprofessional conduct based on an individual’s identity, including sex, gender, sexual orientation, race, religion, color, ancestry, physical disability, mental disability, age, marital status and other protected classifications.
If a hedged forecasted transaction is no longer probable, hedge accounting is ceased and any gain or loss included in other comprehensive income (loss) is reported in earnings immediately, unless the forecasted transaction is at least reasonably possible of occurring, whereby the amounts remain within other comprehensive income (loss).
If a hedged forecasted transaction is no longer probable, hedge accounting is ceased and any gain or loss included in other 82 comprehensive income (loss) is reported in earnings immediately, unless the forecasted transaction is at least reasonably possible of occurring, whereby the amounts remain within other comprehensive income (loss).
We are a bank holding company and we conduct substantially all of our operations through subsidiaries, including the Bank. We depend on dividends, distributions and other payments from our subsidiaries to meet our obligations, including to fund payments on the HomeStreet Notes. Federal and state banking regulations limit dividends from our bank subsidiary to us.
We are a bank holding company and we conduct substantially all of our operations through the Bank. We depend on dividends, distributions and other payments from the Bank to meet our obligations, including to fund payments on the HomeStreet Notes. Federal and state banking regulations limit dividends from our bank subsidiary to us.
Further, statements about our ESG-related initiatives and goals, and progress against those goals, may be based on standards for measuring progress that are still developing, internal controls and processes that continue to evolve, and assumptions that are subject to change in the future.
Further, 35 statements about our ESG-related initiatives and goals, and progress against those goals, may be based on standards for measuring progress that are still developing, internal controls and processes that continue to evolve, and assumptions that are subject to change in the future.
Mortgage servicing assets for multifamily and SBA MSRs are evaluated periodically for impairment based upon the fair value of the rights as compared to amortized cost. Impairment is determined by comparing the fair value of the portfolio based on predominant risk characteristic loan type, to amortized cost.
Mortgage servicing assets for multifamily and SBA MSRs are evaluated periodically for impairment based upon the fair value of the MSRs as compared to amortized cost. Impairment is determined by comparing the fair value of the portfolio based on predominant risk characteristic loan type, to amortized cost.
As a bank holding company, our ability to pay the principal of, and interest on, the Notes is subject to the rules and guidelines of the Federal Reserve regarding capital adequacy. We intend to treat the Notes as “Tier 2 capital” under these rules and guidelines.
As a bank holding company, our ability to pay the principal of, and interest on, the HomeStreet Notes is subject to the rules and guidelines of the Federal Reserve regarding capital adequacy. We intend to treat the HomeStreet Notes as “Tier 2 capital” under these rules and guidelines.
Forfeitures of stock-based awards are recognized when they occur. 61 Fair Value Measurement Fair values of financial instruments are estimated using relevant market information and other assumptions, as more fully disclosed in a separate note.
Forfeitures of stock-based awards are recognized when they occur. Fair Value Measurement Fair values of financial instruments are estimated using relevant market information and other assumptions, as more fully disclosed in a separate note.
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 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 Company's policy regarding transfers between levels of the fair value hierarchy is that all transfers are assumed to occur at the end of the reporting period. Estimation of Fair Value Fair value is based on quoted market prices, when available.
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. 113 Estimation of Fair Value Fair value is based on quoted market prices, when available.
(8) Filed as an exhibit to HomeStreet, Inc.’s Annual Report on Form 10-K (SEC File No. 001-35424) filed on March 6, 2018 and incorporated herein by reference (9) Filed as an exhibit to HomeStreet, Inc.’s Annual Report on Form 10-K (SEC File No. 001-35424) filed on March 17, 2014, and incorporated herein by reference.
(9) Filed as an exhibit to HomeStreet, Inc.’s Annual Report on Form 10-K (SEC File No. 001-35424) filed on March 6, 2018 and incorporated herein by reference (10) Filed as an exhibit to HomeStreet, Inc.’s Annual Report on Form 10-K (SEC File No. 001-35424) filed on March 17, 2014, and incorporated herein by reference.
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. 43 ITEM 8 FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the shareholders and the Board of Directors of HomeStreet, Inc.
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. 62 ITEM 8 FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM Shareholders and the Board of Directors of HomeStreet, Inc.
Michel, dated August 4, 2022 10.22 * Second Amendment to Executive Employment Agreement, between HomeStreet, Inc., HomeStreet Bank, and Mark K. Mason, dated December 13, 2022 10.23 * First Amendment to Executive Employment Agreement, between HomeStreet, Inc., HomeStreet Bank, and William D.
Michel, dated August 4, 2022 10.22 (18)* Second Amendment to Executive Employment Agreement, between HomeStreet, Inc., HomeStreet Bank, and Mark K. Mason, dated December 13, 2022 10.23 (18)* First Amendment to Executive Employment Agreement, between HomeStreet, Inc., HomeStreet Bank, and William D.
Changes in the fair value of MSRs result from changes in (1) model inputs and assumptions and (2) modeled amortization, representing the collection and realization of expected cash flows and curtailments over time.
Changes in the fair value of MSRs result from changes in (1) model inputs and assumptions and (2) modeled 79 amortization, representing the collection and realization of expected cash flows and curtailments over time.
The Federal Reserve guidelines generally require us to review the effects of the cash payment of Tier 2 capital instruments, such as the Notes, on our overall financial condition.
The Federal Reserve guidelines generally require us to review the effects of the cash payment of Tier 2 capital instruments, such as the HomeStreet Notes, on our overall financial condition.
The following table presents the capital and capital ratios of the Company (on a consolidated basis) and the Bank (on a stand-alone basis) as of the respective dates and as compared to the respective regulatory requirements applicable to them: At December 31, 2022 Actual For Minimum Capital Adequacy Purposes To Be Categorized As “Well Capitalized” Under Prompt Corrective Action Provisions (dollars in thousands) Amount Ratio Amount Ratio Amount Ratio HomeStreet, Inc.
The following table presents the capital and capital ratios of the Company (on a consolidated basis) and the Bank (on a stand-alone basis) as of the respective dates and as compared to the respective regulatory requirements applicable to them: At December 31, 2023 Actual For Minimum Capital Adequacy Purposes To Be Categorized As “Well Capitalized” Under Prompt Corrective Action Provisions (dollars in thousands) Amount Ratio Amount Ratio Amount Ratio HomeStreet, Inc.
Institutions with less than $10 billion in assets generally had an assessment rate that can range from 1.5 to 30 basis points from July 2016 through December 2022. In October 2022, the FDIC adopted a final rule to increase initial base deposit insurance assessment rate schedules by 2 basis points, beginning the first quarterly assessment period of 2023.
Institutions with less than $10 billion in assets generally have an assessment rate that can range from 1.5 to 30 basis points from July 2016 through December 2022. In October 2022, the FDIC adopted a final rule to increase initial base deposit insurance assessment rate schedules by 2 basis points, beginning the first quarterly assessment period of 2023.
Such events and long-term shifts may also have a significant impact on our customers, which could amplify credit risk by diminishing borrowers’ repayment capacity or collateral values, and other businesses and counterparties with whom we transact, which could have a broader impact on the economy, supply chains, and distribution networks. 18 ITEM 1B UNRESOLVED STAFF COMMENTS None.
Such events and long-term shifts may also have a significant impact on our customers, which could amplify credit risk by diminishing borrowers’ repayment capacity or collateral values, and other businesses and counterparties with whom we transact, which could have a broader impact on the economy, supply chains, and distribution networks. 36 ITEM 1B UNRESOLVED STAFF COMMENTS None.
Fair value is an exit price, representing the amount that would be received to sell an asset or transfer a liability in an orderly transaction between market participants. Fair value estimates involve uncertainties and matters of significant judgment regarding interest rates, credit risk, prepayments, and other factors, especially in the absence of broad markets for particular items.
Fair value is an exit price, representing the amount that would be received to sell an asset or transfer a liability in an orderly transaction between market participants. Fair value estimates involve uncertainties and matters of significant judgment regarding interest rates, credit risk, prepayments, and other factors, especially in the absence of broad markets for particular instruments.
After consensus is reached on all Q-Factor ratings, the results are input into the Q-Factor model and applied to the pooled loans which are reviewed to determine the adequacy of the reserve. 56 Additional details describing the model by portfolio are below: Consumer Loan Portfolio The consumer loan portfolio is comprised of the single family and home equity loan classes, which are underwritten after evaluating a borrower's capacity, credit and collateral.
After consensus is reached on all Q-Factor ratings, the results are input into the Q-Factor model and applied to the pooled loans which are reviewed to determine the adequacy of the reserve. 77 Additional details describing the model by portfolio are below: Consumer Loan Portfolio The consumer loan portfolio is comprised of the single family and home equity loan classes, which are underwritten after evaluating a borrower's capacity, credit and collateral.
For example, developing and acting on ESG-related initiatives and collecting, measuring and reporting ESG-related information and metrics can be costly, difficult and time consuming and is subject to evolving reporting standards, including the SEC’s proposed climate-related reporting requirements. We may also communicate certain initiatives and goals regarding ESG-related matters in our SEC filings or in other public disclosures.
For example, developing and acting on ESG-related initiatives and collecting, measuring and reporting ESG-related information and metrics can be costly, difficult and time consuming and are subject to evolving reporting standards, including the SEC’s proposed climate-related reporting requirements. We may also communicate certain initiatives and goals regarding ESG-related matters in our SEC filings or in other public disclosures.
Because of these factors, an interest sensitivity gap analysis may not provide an accurate assessment of our actual exposure to changes in interest rates. The estimated impact on our net interest income over a time horizon of one year and the change in net portfolio value as of December 31, 2022 and 2021 are provided in the table below.
Because of these factors, an interest sensitivity gap analysis may not provide an accurate assessment of our actual exposure to changes in interest rates. The estimated impact on our net interest income over a time horizon of one year and the change in net portfolio value as of December 31, 2023 and 2022 are provided in the table below.
Changes in Internal Control Over Financial Reporting As required by Rule 13a-15(d), our management, including our CEO and CFO, also conducted an evaluation of our internal control over financial reporting to determine whether any changes occurred during the quarter ended December 31, 2022 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Changes in Internal Control Over Financial Reporting As required by Rule 13a-15(d), our management, including our CEO and CFO, also conducted an evaluation of our internal control over financial reporting to determine whether any changes occurred during the quarter ended December 31, 2023 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
In addition to our internal controls, we use an enterprise risk management framework in an effort to achieve an appropriate balance between risk and return, with established processes and procedures intended to identify, measure, monitor, report, analyze and control our primary risks, including liquidity risk, credit risk, price risk, interest rate risk, operational risk, legal and compliance risk, strategic risk and 12 reputational risk.
In addition to our internal controls, we use an enterprise risk management framework in an effort to achieve an appropriate balance between risk and return, with established processes and procedures intended to identify, measure, monitor, report, analyze and control our primary risks, including liquidity risk, credit risk, price risk, interest rate risk, operational risk, including cybersecurity risks, legal and compliance risk, strategic risk and reputational risk.
Commercial Loan Portfolio The commercial loan portfolio is comprised of the non-owner occupied commercial real estate ("CRE"), multifamily, construction and land development, owner occupied CRE and commercial business loan classes, whose underwriting standards consider the factors described for single family and home equity loan classes as well as others when assessing the borrower's and associated guarantors or other related party’s financial position.
Commercial Loan Portfolio The commercial loan portfolio is comprised of the non-owner occupied commercial real estate ("CRE"), multifamily, construction and land development, owner occupied CRE and commercial business loan classes, whose underwriting standards consider the factors described for single family and home equity loan classes as well as others when assessing the borrower's and associated guarantor's or other related party’s financial position.
Based upon the evaluation, the CEO and CFO concluded that the Company's disclosure controls and procedures were effective at December 31, 2022. Management's Report on Internal Control Over Financial Reporting Management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rule 13a-15(f) of the Exchange Act) for the Company.
Based upon the evaluation, the CEO and CFO concluded that the Company's disclosure controls and procedures were effective at December 31, 2023. Management's Report on Internal Control Over Financial Reporting Management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rule 13a-15(f) of the Exchange Act) for the Company.
If our change management processes are not sound and adequate resources are not deployed to support these implementations and changes, we may experience additional internal control deficiencies that could expose the Company to operating losses or fail to appropriately anticipate or identify new risks related to such shifts in the business.
If our change management processes are not sound and adequate resources are not deployed to support these implementations and changes, we may experience additional internal control deficiencies that could expose the Company to operating losses or cause us to fail to appropriately anticipate or identify new risks related to such shifts in the business.
Dividend Policy HomeStreet's has a dividend policy that contemplates the payment of quarterly cash dividends on our common stock when, if and in an amount declared by the Board of Directors after taking into consideration, among other things, earnings, regulatory capital levels, the overall payout ratio and expected asset growth.
Dividend Policy HomeStreet has a dividend policy that contemplates the payment of quarterly cash dividends on our common stock when, if and in an amount declared by the Board of Directors after taking into consideration, among other things, earnings, regulatory capital levels, the overall payout ratio and expected asset growth.
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 December 31, 2022 would increase by approximately $8 million.
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 December 31, 2023 would increase by approximately $8 million.
We also create active partnerships with hundreds of local organizations, and our employees provide leadership, educational support, hands-on service, expertise and financial support to those organizations. We focus primarily on organizations within the scope of the Community Reinvestment Act (“CRA”) that provide support for housing, basic needs and economic development for those of low and moderate income.
We also create active partnerships with hundreds of local organizations, and our employees provide leadership, educational support, hands-on service, expertise, and financial support to those organizations. We focus primarily on organizations within the scope of the Community Reinvestment Act ("CRA") that provide support for housing, basic needs, and economic development for those of low and moderate income.
We also offer a variety of group benefit programs designed to provide our employees with health and wellness benefits, financial benefits in the event of planned or unplanned expenses, or losses relating to illness, disability or death; programs and benefits to help plan for retirement; and programs to deal with job-related or personal problems.
We also offer a variety of group benefit programs designed to provide our employees and their families with health and wellness benefits, financial benefits in the event of planned or unplanned expenses, or losses relating to illness, disability or death, programs and benefits to help plan for retirement; and programs to deal with job-related or personal problems.
They have well-defined weaknesses and have unsatisfactory characteristics causing unacceptable levels of risk. 57 Commercial portfolio cohorts are established by grouping each ACL sub-pool at a point in time. Once historical cohorts are established, the loans in the cohort are tracked moving forward for default events.
They have well-defined weaknesses and have unsatisfactory characteristics causing unacceptable levels of risk. 78 Commercial portfolio cohorts are established by grouping each ACL sub-pool at a point in time. Once historical cohorts are established, the loans in the cohort are tracked moving forward for default events.
Marketing Costs The Company expenses marketing costs, including advertising, in the period incurred. We incurred $6.2 million, $4.1 million and $2.3 million in marketing costs during 2022, 2021 and 2020, respectively. 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).
Marketing Costs The Company expenses marketing costs, including advertising, in the period incurred. We incurred $4.2 million, $6.2 million and $4.1 million in marketing costs during 2023, 2022 and 2021, respectively. 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).
HomeStreet, Inc. primarily relies on dividends from the Bank, which may be limited by applicable laws and regulations. HomeStreet, Inc. is a separate legal entity from the Bank, which is the primary source of funds available to HomeStreet Inc. to service its debt, pay dividends to shareholders, repurchase shares and otherwise satisfy its obligations.
HomeStreet, Inc. primarily relies on dividends from the Bank, which may be limited by applicable laws and regulations. HomeStreet, Inc. is a separate legal entity from the Bank, which is the primary source of funds available to HomeStreet Inc. to service its debt, fund its operations, pay dividends to shareholders, repurchase shares and otherwise satisfy its obligations.
(on a consolidated basis) and HomeStreet Bank as of the dates indicated below, as compared to the respective regulatory requirements applicable to them: At December 31, 2022 Actual For Minimum Capital Adequacy Purposes To Be Categorized As "Well Capitalized" (dollars in thousands) Amount Ratio Amount Ratio Amount Ratio HomeStreet, Inc.
(on a consolidated basis) and HomeStreet Bank as of the dates indicated below, as compared to the respective regulatory requirements applicable to them: At December 31, 2023 Actual For Minimum Capital Adequacy Purposes To Be Categorized As "Well Capitalized" (dollars in thousands) Amount Ratio Amount Ratio Amount Ratio HomeStreet, Inc.
In the event of recapture, the Company will incur both federal and state tax liabilities on this pre-1988 bad debt reserve balance at the then prevailing corporate tax rates. The Company had no recorded unrecognized tax position as of December 31, 2022 or 2021.
In the event of recapture, the Company will incur both federal and state tax liabilities on this pre-1988 bad debt reserve balance at the then prevailing corporate tax rates. The Company had no recorded unrecognized tax position as of December 31, 2023 or 2022.
The Company does not believe any of these securities that were in an unrealized loss position at December 31, 2022 or 2021 have a credit loss impairment. The Company evaluates HTM securities at the end of each quarter to determine if any expected credit losses exist.
The Company does not believe any of these securities that were in an unrealized loss position at December 31, 2023 or 2022 have a credit loss impairment. The Company evaluates HTM securities at the end of each quarter to determine if any expected credit losses exist.
The Company's risk rating methodology assigns risk ratings ranging from 1 to 10, where a higher rating represents higher risk. The risk rating of 9 is not used. 69 Per the Company's policies, most commercial loans pools are non-homogenous and are regularly assessed for credit quality.
The Company's risk rating methodology assigns risk ratings ranging from 1 to 10, where a higher rating represents higher risk. The risk rating of 9 is not used. 91 Per the Company's policies, most commercial loans pools are non-homogenous and are regularly assessed for credit quality.
Net gain or loss on trading securities, are included in loan servicing income in the consolidated income statements. 52 The Company evaluates AFS securities in an unrealized loss position at the end of each quarter to determine whether the decline in value is temporary or permanent.
Net gain or loss on trading securities are included in loan servicing income in the consolidated income statements. 73 The Company evaluates AFS securities in an unrealized loss position at the end of each quarter to determine whether the decline in value is temporary or permanent.
The Company monitors and reviews the LHP on an annual basis to determine appropriate time frames to be included based on economic indicators. 54 Under current expected credit losses methodology ("CECL"), the Company groups pools of loans by similar risk characteristics.
The Company monitors and reviews the LHP on an annual basis to determine appropriate time frames to be included based on economic indicators. 75 Under current expected credit losses methodology ("CECL"), the Company groups pools of loans by similar risk characteristics.
If there is no commitment on the buyer’s part, collection is not probable or the buyer has not obtained control of the asset, then a gain cannot be recognized. Premises and Equipment Premises and equipment are carried at cost less accumulated depreciation and amortization.
If there is no commitment on the buyer’s part, collection is not probable or the buyer has not obtained control of the asset, then a gain will not be recognized. Premises and Equipment Premises and equipment are carried at cost less accumulated depreciation and amortization.
The Company periodically evaluates premises and equipment for impairment. 59 Leases We determine if an arrangement is a lease at inception. Operating and finance leases are included in lease right-of-use ("ROU") assets, and lease liabilities in our consolidated balance sheets.
The Company periodically evaluates premises and equipment for impairment. 80 Leases We determine if an arrangement is a lease at inception. Operating and finance leases are included in lease right-of-use ("ROU") assets, and lease liabilities in our consolidated balance sheets.
Management has made a comprehensive review, evaluation, and assessment of the Company's internal control over financial reporting at December 31, 2022. In making its assessment of internal control over financial reporting, management utilized the framework issued in 2013 by the Committee of Sponsoring Organizations of the Treadway Commission ("COSO") in Internal Control - Integrated Framework.
Management has made a comprehensive review, evaluation, and assessment of the Company's internal control over financial reporting at December 31, 2023. In making its assessment of internal control over financial reporting, management utilized the framework issued in 2013 by the Committee of Sponsoring Organizations of the Treadway Commission ("COSO") in Internal Control - Integrated Framework.
ITEM 6 Reserved. 21 ITEM 7 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS General Management’s discussion and analysis of results of operations and financial condition ("MD&A") is intended to assist the reader in understanding and assessing significant changes and trends related to the results of operations and financial position of our consolidated Company.
ITEM 6 Reserved. 39 ITEM 7 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS General Management’s discussion and analysis of results of operations and financial condition ("MD&A") is intended to assist the reader in understanding and assessing significant changes and trends related to the results of operations and financial position of our consolidated Company.
A comparison of the financial results for the year ended December 31, 2021 to the year ended December 31, 2020, is included in Part II, Item 7, "Management Discussion and Analysis of Financial Condition and Results of Operations" in our Annual Report on Form 10-K for the year ended December 31, 2021.
A comparison of the financial results for the year ended December 31, 2022 to the year ended December 31, 2021, is included in Part II, Item 7, "Management Discussion and Analysis of Financial Condition and Results of Operations" in our Annual Report on Form 10-K for the year ended December 31, 2022.
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 42 our net interest margin.
Varying interest rate environments can create unexpected changes in prepayment levels of assets and liabilities that are not reflected in the interest rate sensitivity analysis. These prepayments may have a significant impact on 61 our net interest margin.
MFDBs are loans modified for the purpose of alleviating temporary impairments to the borrower’s financial condition or cash flows. A workout plan between us and the borrower is designed to provide a bridge for borrower cash flow shortfalls in the near term.
MBFDs are loans modified for the purpose of alleviating temporary impairments to the borrower’s financial condition or cash flows. A workout plan between us and the borrower is designed to provide a bridge for borrower cash flow shortfalls in the near term.
Mortgage Servicing Rights MSRs are recognized as separate assets on our consolidated balance sheets upon purchase of the rights or when we retain the right to service loans that we have sold. We initially record all MSRs at fair value.
Mortgage Servicing Rights MSRs are recognized as separate assets on our consolidated balance sheets when we retain the right to service loans that we have sold or purchase rights to service. We initially record all MSRs at fair value.
For 2022, cash of $2.7 billion was used in investing activities primarily for the origination of LHFI net of principal repayments, the purchase of AFS investment securities and cash distributed in the sale of branches, partially offset by proceeds from the sale of and principal payments on investment securities.
For 2022, cash of $2.7 billion was used in investing activities primarily for the origination of LHFI net of principal repayments, the purchase of AFS investment securities and cash distributed in the sale of branches, partially offset by proceeds from the sale of and principal repayments of investment securities.
Accounting Developments See Financial Statements and Supplementary Data - Note 1, Summary of Significant Accounting Policies for a discussion of accounting developments. 38 Non-GAAP Financial Measures To supplement our consolidated financial statements presented in accordance with GAAP, we use certain non-GAAP measures of financial performance.
Accounting Developments See Financial Statements and Supplementary Data - Note 1, Summary of Significant Accounting Policies for a discussion of accounting developments. 56 Non-GAAP Financial Measures To supplement our consolidated financial statements presented in accordance with GAAP, we use certain non-GAAP measures of financial performance.
Diversity, Equity and Inclusion HomeStreet values diversity, equity and inclusion principles and is an equal opportunity employer, committed to a diverse workplace with employees from a wide range of backgrounds and individual characteristics: race, ethnicity, sex, gender, sexual orientation or identity, disability, religion, age, national origin, military or veteran status, marital status, religion, use of service animal, or other characteristics.
Diversity, Equity and Inclusion HomeStreet values diversity, equity and inclusion principles and strives to be an equal opportunity employer committed to a diverse workplace with employees from a wide range of backgrounds and individual characteristics: race, ethnicity, sex, gender, sexual orientation or identity, disability, religion, age, national origin, military or veteran status, marital status, use of service animal, or other characteristics.
The decline in value is not related to any issuer- or industry-specific credit event. The Company has not identified any expected credit losses on its debt securities as of December 31, 2022 and 2021.
The decline in value is not related to any issuer- or industry-specific credit event. The Company has not identified any expected credit losses on its debt securities as of December 31, 2023 and 2022.
We are currently under examination, or subject to examination, by various U.S. federal and state taxing authorities. The Company is no longer subject to federal income tax examinations for tax years prior to 2019 or state income tax examination for tax years prior to 2018, generally.
We are currently under examination, or subject to examination, by various U.S. federal and state taxing authorities. The Company is no longer subject to federal income tax examinations for tax years prior to 2020 or state income tax examination for tax years prior to 2019, generally.
Filed herewith. 31.2 Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. Filed herewith. 32 (17) Certifications 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.
Filed herewith. 31.2 Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. Filed herewith. 32 (20) Certifications 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.
(12) Filed as an exhibit to HomeStreet Inc.’s Current Report on Form 10-Q (SEC File No. 001-35424) filed on May 8, 2020, and incorporated herein by reference. (13) Filed as an exhibit to HomeStreet Inc.’s Current Report on Form 10-Q (SEC File No. 001-35424) filed on November 6, 2020, and incorporated herein by reference.
(13) Filed as an exhibit to HomeStreet Inc.’s Current Report on Form 10-Q (SEC File No. 001-35424) filed on May 8, 2020, and incorporated herein by reference. (14) Filed as an exhibit to HomeStreet Inc.’s Current Report on Form 10-Q (SEC File No. 001-35424) filed on November 6, 2020, and incorporated herein by reference.

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