HomeStreet, Inc.

Previous wording

This Quarterly Report on Form 10-Q 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,” “could,” “estimate,” “expect,” “intend,” “may,” “plan,” “potential,” “should,” “will,” and “would” and similar expressions (or the negative of these terms) and include statements relating to achievement of profitability and timing of such achievement and expectations regarding reductions in short-term interest rates and their impact on the Company.

Current wording

This Quarterly Report on Form 10-Q 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,” “could,” “estimate,” “expect,” “intend,” “may,” “plan,” “potential,” “should,” “will,” and “would” and similar expressions (or the negative of these terms) and include statements relating to achievement of earnings growth, profitability and timing of such achievement, timing for the closing of the pending Merger ("defined below"), expectations with respect to income tax expense and reductions in short-term interest rates and their impact on the Company.

Previous wording

We caution readers that actual results may differ materially from those expressed in or implied by the Company’s forward-looking statements. Rather, more important factors could affect the Company’s future results, including but not limited to the following: (1) our ability to successfully consummate the pending merger (the "Merger") with Mechanics Bank ("Mechanics"), (2) the ability of HomeStreet and Mechanics to obtain required governmental approvals of the Merger, (3) the failure to satisfy the closing conditions in the definitive Agreement and Plan of Merger, dated as of March 28, 2025 (the “Merger Agreement”), or any unexpected delay in closing the Merger, (4) the ability to achieve expected cost savings, synergies and other financial benefits from the Merger within the expected time frames and costs or difficulties relating to integration matters being greater than expected, (5) the diversion of management time from core banking functions due to Merger-related issues; (6) potential difficulty in maintaining relationships with customers, associates or business partners as a result of the announced Merger; (7) changes in the interest rate environment and in expectation of reduction in short-term interest rates; (8) changes in the U.S. and global economies, including business disruptions, reductions in employment, inflationary pressures and an increase in business failures, specifically among our customers, and global trade disputes, including the imposition of tariffs by the U.S. and countermeasures by foreign governments; (9) our ability to control operating costs and expenses; (10) our ability to attract and retain key members of our senior management team; (11) changes in deposit flows, loan demand or real estate values may adversely affect our business; (12) there may be increases in competitive pressure among financial institutions or from non-financial institutions; (13) our ability to obtain regulatory approvals or non-objection to take various capital actions, including the payment of dividends by us or the Bank; (14) the timing and occurrence or non-occurrence of events may be subject to circumstances beyond our control; (15) our credit quality and the effect of credit quality on our credit losses expense and allowance for credit losses and impact the adequacy of our allowance for credit losses; (16) changes in accounting principles, policies or guidelines may cause our financial condition to be perceived or interpreted differently; (17) 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; (18) general economic conditions, either nationally or locally in some or all areas in which we conduct business, or conditions in the securities markets or ban…

Excerpt shortened here; the source contains the full paragraph.

Current wording

We caution readers that actual results may differ materially from those expressed in or implied by the Company’s forward-looking statements. Rather, more important factors could affect the Company’s future results, including but not limited to the following: (1) our ability to successfully consummate the pending merger (the "Merger") with Mechanics Bank ("Mechanics"), (2) the ability of HomeStreet and Mechanics to obtain required governmental approvals of the Merger, (3) the failure to satisfy the closing conditions in the definitive Agreement and Plan of Merger, dated as of March 28, 2025 (the “Merger Agreement”), or any unexpected delay in closing the Merger, (4) the ability to achieve expected cost savings, synergies and other financial benefits from the Merger within the expected time frames and costs or difficulties relating to integration matters being greater than expected, (5) the diversion of management time from core banking functions due to Merger-related issues; (6) potential difficulty in maintaining relationships with customers, associates or business partners as a result of the announced Merger; (7) changes in the interest rate environment and in expectation of reduction in short-term interest rates; (8) changes in the U.S. and global economies, including business disruptions, reductions in employment, inflationary pressures and an increase in business failures, specifically among our customers, and global trade disputes, including the imposition of tariffs by the U.S. and countermeasures by foreign governments; (9) our ability to control operating costs and expenses; (10) our ability to attract and retain key members of our senior management team; (11) changes in deposit flows, loan demand or real estate values may adversely affect our business; (12) there may be increases in competitive pressure among financial institutions or from non-financial institutions; (13) our ability to obtain regulatory approvals or non-objection to take various capital actions, including the payment of dividends by us or the Bank; (14) the timing and occurrence or non-occurrence of events may be subject to circumstances beyond our control; (15) our credit quality and the effect of credit quality on our credit losses expense and allowance for credit losses and impact the adequacy of our allowance for credit losses; (16) changes in accounting principles, policies or guidelines may cause our financial condition to be perceived or interpreted differently; (17) 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; (18) general economic conditions, either nationally or locally in some or all areas in which we conduct business, or conditions in the securities markets or ban…

Excerpt shortened here; the source contains the full paragraph.

Previous wording

On March 28, 2025, the Company entered into a definitive Agreement and Plan of Merger with Mechanics Bank, whereby, subject to regulatory and certain shareholder approvals the Bank will merge with and into Mechanics Bank as a subsidiary of the Company (the “Merger”). The Company will amend its articles of incorporation to issue shares to the Mechanics shareholders in exchange for 100% of Mechanics stock such that when the Merger closes the Mechanics shareholders will own approximately 91.7% of the combined company and HomeStreet shareholders will own approximately 8.3% of the combined company. Upon the closing of the Merger the Company’s name will change to Mechanics Bancorp. The Merger is expected to close in the third quarter of 2025.

Current wording

On March 28, 2025, the Company entered into a definitive Agreement and Plan of Merger with Mechanics Bank, whereby, subject to regulatory and certain shareholder approvals the Bank will merge with and into Mechanics Bank as a subsidiary of the Company (the “Merger”). The Company will amend its articles of incorporation to issue shares to the Mechanics shareholders in exchange for 100% of Mechanics stock such that when the Merger closes the Mechanics shareholders will own approximately 91.7% of the combined company and HomeStreet shareholders will own approximately 8.3% of the combined company. Upon the closing of the Merger the Company’s name will change to Mechanics Bancorp. The Merger is expected to close in the third quarter of 2025, subject to regulatory approval.

Previous wording

The current level of interest rates continues to adversely impact our results of operations as our overall cost of funds are high in relation to the yield on our earning assets, resulting in a low net interest margin. With the decrease in short term interest rates in the latter part of 2024, our cost of funds have stabilized and started to decrease. As a result of the fourth quarter 2024 loan sale, we improved our net interest margin by selling lower yielding loans and paying off higher cost wholesale funding. Given the scheduled repricing of our multifamily and other commercial real estate loans, future anticipated reductions in borrowings, the expectation of ongoing reductions in short-term interest rates by the Federal Reserve and continued effective non-interest expense management, we anticipate growth in earnings for the foreseeable future.

Current wording

The current level of interest rates continues to adversely impact our results of operations as our overall cost of funds are high in relation to the yield on our earning assets, resulting in a low net interest margin. With the decrease in short term interest rates in the latter part of 2024, our cost of funds have stabilized and started to decrease. As a result of the fourth quarter 2024 loan sale, we improved our net interest margin by selling lower yielding loans and paying off higher cost wholesale funding. Given the scheduled repricing of our multifamily and other commercial real estate loans, future anticipated reductions in borrowings, the expectation of further reductions in short-term interest rates by the Federal Reserve and continued effective non-interest expense management, we anticipate a return to earnings in 2025 and then earnings for the foreseeable future.

Previous wording

Management's Overview of the First Quarter 2025 Financial Performance

Current wording

Management's Overview of the Second Quarter 2025 Financial Performance

Previous wording

First Quarter of 2025 Compared to the Fourth Quarter of 2024

Current wording

Second Quarter of 2025 Compared to the First Quarter of 2025

Previous wording

General: Our net loss and loss before income taxes were $4.5 million and $4.8 million, respectively, in the first quarter of 2025, as compared to $123.3 million and $92.5 million, respectively, in the fourth quarter of 2024. Our core net loss and core net loss before taxes, which excludes the impact of the loss on the sale of multifamily loans, the deferred tax asset valuation allowance and merger related expenses and recoveries, were $2.9 million and $2.7 million, respectively, in the first quarter of 2025, as compared to $5.1 million and $6.4 million respectively, in the fourth quarter of 2024. The decrease in core loss before income taxes was primarily due to an increase in net interest income and an increase in noninterest income, partially offset by an increase in provision for credit losses and an increase in noninterest expense.

Current wording

General: Our net loss and loss before income taxes were $4.4 million and $4.8 million, respectively, in the second quarter of 2025, as compared to $4.5 million and $4.8 million, respectively, in the first quarter of 2025. Our core net loss and core loss before income taxes, which excludes merger related expenses, were $3.1 million and $3.0 million, respectively, in the second quarter of 2025, as compared to $2.9 million and $2.7 million, respectively, in the first quarter of 2025. The increase in core loss before income taxes was primarily due to an increase in the provision for credit losses, partially offset by increases in net interest income and noninterest income and lower noninterest expenses.

Previous wording

Income Taxes: Due to our cumulative losses over the last three year period ended December 31, 2024, accounting rules required us to provide a valuation allowance for the balance of our deferred tax assets in the fourth quarter of 2024. As a result, we do not expect to recognize income tax expense until the deferred tax assets valuation allowance no longer exists. The $0.3 million income tax benefit recognized in the first quarter of 2025 primarily relates to the reversal of the disparate tax effects on our accumulated other comprehensive income ("AOCI") resulting from the recording in the fourth quarter of 2024, of a deferred tax valuation allowance for the deferred tax assets related to the AOCI. In the fourth quarter of 2024, we recorded a $53 million deferred tax allowance which was recorded as income tax expense. Excluding this allowance, the income tax benefit would have been $22.4 million and would have resulted in an effective tax rate of 24.3% for the fourth quarter of 2024.

Current wording

Income Taxes: Due to our cumulative losses over the three year period ended December 31, 2024, accounting rules required us to provide a valuation allowance for the balance of our deferred tax assets in the fourth quarter of 2024. As a result, we do not expect to recognize income tax expense until the deferred tax assets valuation allowance no longer exists. The $0.4 million and $0.3 million of income tax benefit recognized in the second and first quarters of 2025, respectively, primarily relate to the reversal of the disparate tax effects on our accumulated other comprehensive income ("AOCI") resulting from recording a valuation allowance for the deferred tax assets related to the AOCI in the fourth quarter of 2024.

Previous wording

(1) Includes taxable-equivalent adjustments primarily related to tax-exempt income on certain loans and securities of $1.0 million and $1.1 million for quarters ended March 31, 2025 and December 31, 2024. The estimated federal statutory tax rate was 21% for the periods presented.

Current wording

(1) Includes taxable-equivalent adjustments primarily related to tax-exempt income on certain loans and securities of $1.0 million for both quarters ended June 30, 2025 and March 31, 2025. The estimated federal statutory tax rate was 21% for the periods presented.

Previous wording

(2) Cost of all deposits, including noninterest-bearing demand deposits was 2.52% and 2.74% for the quarters ended March 31, 2025 and December 31, 2024, respectively.

Current wording

(2) Cost of all deposits, including noninterest-bearing demand deposits was 2.34% and 2.52% for the quarters ended June 30, 2025 and March 31, 2025, respectively.

Previous wording

Our net interest income in the first quarter of 2025 was $3.6 million higher than the fourth quarter of 2024 due to an increase in our net interest margin from 1.38% to 1.82%. The increase in the net interest margin was due primarily to a 32 basis point decrease in the rates paid on interest-bearing liabilities and a 12 basis point increase in the yield on interest earning assets. The increase in yield on interest earning assets was primarily due to the sale of $990 million of lower yielding multifamily loans at the end of the fourth quarter of 2024. The decrease in rates on interest bearing liabilities are primarily due to our paydown at the end of 2024 and beginning of 2025 of higher cost borrowings and brokered certificates of deposit using the proceeds from the sale of multifamily loans.

Current wording

Our net interest income in the second quarter of 2025 was $0.6 million higher than the first quarter of 2025 due to an increase in our net interest margin from 1.82% to 1.90%. The increase in the net interest margin was due primarily to a 14 basis point decrease in the rates paid on interest-bearing liabilities, partially offset by a 5 basis point decrease in the yield on interest earning assets. The decrease in rates on interest bearing liabilities are primarily due to a decrease in rates paid on certificates of deposits resulting from decreases in market interest rates. The decrease in the yield on interest earning assets is primarily due to a decrease in yields on Fed Funds due to decreases in short term market rates.

Previous wording

Provision for Credit Losses: The $1.0 million provision for credit losses recognized during the first quarter of 2025 was due to a $3.3 million increase in specific reserves which was partially offset by lower general reserves resulting in part from lower loan balances. There was no provision for credit losses in the fourth quarter of 2024 as the benefits of the reduction in loan balances resulting from the loan sale were offset by specific reserves on commercial loans.

Current wording

Provision for Credit Losses: The $6.0 million provision for credit losses in the second quarter of 2025 was primarily due to the impact of adverse credit migration of certain multifamily loans. The $1.0 million provision for credit losses in the first quarter of 2025 was primarily due to a $3.3 million increase in specific reserves which was partially offset by lower general reserves resulting in part from lower loan balances.

Previous wording

(3)The interest income from US Treasury notes securities used for hedging purposes, which is included in interest income on the consolidated income statements, was $0.4 million and $0.3 million for the quarters ended March 31, 2025 and December 31, 2024, respectively.

Current wording

(3)The interest income from US Treasury notes securities used for hedging purposes, which is included in interest income on the consolidated income statements, was $0.5 million and $0.4 million for the quarters ended June 30, 2025 and March 31, 2025, respectively.

Previous wording

Noninterest income in the first quarter of 2025 increased from the fourth quarter of 2024 primarily due to the $88.8 million loss on the sale of multifamily loans in the fourth quarter of 2024 and an increase in loan servicing income. The increase in loan servicing income is primarily due to an increase in the value of our single family mortgage servicing rights.

Current wording

Noninterest income in the second quarter of 2025 increased from the first quarter of 2025 primarily due to an increase in loan servicing income due to a $4.4 million increase in the value of our single family mortgage servicing rights resulting from higher market valuations of these assets.

Previous wording

Non-core amounts: For the first quarter of 2025, non-core items include $2.1 million of merger related expenses. During the first quarter of 2024, non-core items include $2.6 million of merger related expenses.

Current wording

Non-core amounts: For the six months ended June 30, 2025, non-core items include $3.8 million of merger related expenses. During the six months ended June 30, 2024, non-core items include $5.0 million of merger related expenses.

Previous wording

General: Our net loss and loss before income taxes were $4.5 million and $4.8 million, respectively, in the first quarter of 2025, as compared to $7.5 million and $10.6 million, respectively, in the first quarter of 2024. Our core net loss and core net loss before income taxes, which exclude the impact of merger related expenses, was $2.9 million and $2.7 million in the first quarter of 2025, as compared to core net loss of $5.5 million and core loss before income taxes of $8.0 million in the first quarter of 2024. The $5.3 million decrease in core loss before income taxes was primarily due to higher net interest income, higher noninterest income and a decrease in noninterest expense, partially offset by an increase in provision for credit losses.

Current wording

General: Our net loss and loss before income taxes were $8.9 million and $9.5 million, respectively, in the six months ended June 30, 2025, as compared to $13.7 million and $18.6 million, respectively, in the six months ended June 30, 2024. Our core net loss and core loss before income taxes, which exclude the impact of merger related expenses, were $5.9 million and $5.7 million in the six months ended June 30, 2025, as compared to $9.8 million and $13.5 million in the six months ended June 30, 2024. The $7.8 million decrease in core loss before income taxes was primarily due to higher net interest income and noninterest income and lower noninterest expenses, partially offset by an increase in the provision for credit losses.

Previous wording

Income Taxes: Due to our cumulative losses over the last three year period ended December 31, 2024, accounting rules required us to provide a valuation allowance for the balance of our deferred tax assets in the fourth quarter of 2024. As a result, we do not expect to recognize tax expense until the deferred tax assets valuation allowance no longer exists. The $0.3 million income tax benefit recognized in the first quarter of 2025 primarily relates to the reversal of the disparate tax effects on our AOCI resulting from the recording in the fourth quarter of 2024of a deferred tax valuation allowance for the deferred tax assets related to AOCI. Our effective tax rate in the first quarter of 2024 of 29.0% was higher than our statutory rate of 24.6% due to the impact of tax advantaged investments which creates a higher benefit due to our taxable loss.

Current wording

Income Taxes: Due to our cumulative losses over the three year period ended December 31, 2024, accounting rules required us to provide a valuation allowance for the balance of our deferred tax assets in the fourth quarter of 2024. As a result, we do not expect to recognize tax expense until the deferred tax assets valuation allowance no longer exists. The $0.7 million income tax benefit recognized in the six months ended June 30, 2025 primarily relates to the reversal of the disparate tax effects on our AOCI resulting from recording a valuation allowance for the deferred tax assets related to AOCI in the fourth quarter of 2024. Our effective tax rate in the six months ended June 30, 2024 of 26.0% was higher than our statutory rate of 24.6% due to the impact of tax advantaged investments which creates a higher benefit due to our taxable loss.

Previous wording

(1) Includes taxable-equivalent adjustments primarily related to tax-exempt income on certain loans and securities of $1.0 million and $1.1 million for the quarters ended March 31, 2025 and 2024, respectively. The estimated federal statutory tax rate was 21% for the periods presented.

Current wording

(1) Includes taxable-equivalent adjustments primarily related to tax-exempt income on certain loans and securities of $2.0 million and $2.2 million for the six months ended June 30, 2025 and 2024, respectively. The estimated federal statutory tax rate was 21% for the periods presented.

Previous wording

(2) Cost of deposits including noninterest-bearing deposits, was 2.52% and 2.61% for the quarters ended March 31, 2025 and 2024, respectively.

Current wording

(2) Cost of deposits including noninterest-bearing deposits, was 2.43% and 2.67% for the six months ended June 30, 2025 and 2024, respectively.

Previous wording

Net interest income in the first quarter of 2025 increased $1.1 million as compared to the first quarter of 2024 due primarily to an increase in net interest margin from 1.44% in the first quarter of 2024 to 1.82% in the first quarter of 2025. The increase in net interest margin is due to a 27 basis point decrease in the rates paid on interest-bearing liabilities and an 11 basis point increase in the yield on interest earning assets. The increase in yield on interest earning assets was primarily due to the sale of $990 million of lower yielding multifamily loans at the end of the fourth quarter of 2024. The decrease in rates on interest bearing liabilities are primarily due to our paydown at the end of 2024 and beginning of 2025 of higher cost borrowings and brokered certificates of deposit using the proceeds from the sale of multifamily loans.

Current wording

Net interest income in the six months ended June 30, 2025 increased $5.2 million as compared to the six months ended June 30, 2024 due primarily to an increase in net interest margin from 1.40% in the six months ended June 30, 2024 to 1.86% in the six months ended June 30, 2025. The increase in net interest margin is due to a 41 basis point decrease in the rates paid on interest-bearing liabilities and a 6 basis point increase in the yield on interest earning assets. The increase in yield on interest earning assets was primarily due to the sale of $990 million of lower yielding multifamily loans at the end of the fourth quarter of 2024. The decrease in rates on interest bearing liabilities are primarily due to our paydown at the end of 2024 and beginning of 2025 of higher cost borrowings and brokered certificates of deposit with proceeds from the sale of multifamily loans.

Previous wording

Provision for Credit Losses: The $1.0 million provision for credit losses recognized during the first quarter of 2025 was due to a $3.3 million increase in specific reserves which was partially offset by lower general reserves resulting in part from lower loan balances. During the first quarter of 2024, the provision for credit losses reflect the stable balance of our loan portfolio, a minimal level of identified credit issues in our loan portfolio and the lack of significant expected credit issues arising in future periods.

Current wording

Provision for Credit Losses: The $7.0 million provision for credit losses recognized during the six months ended June 30, 2025 was primarily due to the impact of adverse credit migration in certain multifamily loans and a $3.3 million increase in specific reserves which was partially offset by lower general reserves resulting in part from lower loan balances. There was no provision for credit losses during the six months ended June 30, 2024, which reflected the stable balance of our loan portfolio, a minimal level of identified credit issues in our loan portfolio and the lack of significant expected credit issues arising in future periods.

Previous wording

Noninterest income in the first quarter of 2025 increased from the first quarter of 2024 primarily due to a $0.9 million increase in gain on loan sales and a $1.8 million increase in loan servicing income. The gain on loan sales increased primarily due to an increase in CRE loan sales volume. The increase in loan servicing income is primarily due to an increase in the value of our single family mortgage servicing rights.

Current wording

Noninterest income in the six months ended June 30, 2025 increased from the six months ended June 30, 2024 primarily due to a $1.1 million increase in gain on loan sales and a $6.0 million increase in loan servicing income, partially offset by a $2.3 million decrease in other noninterest income. The gain on loan sales increased primarily due to an increase in CRE loan sales volume. The increase in loan servicing income is primarily due to a $5.9 million increase in the value of our single family mortgage servicing rights resulting from higher market valuations of these assets. The decrease in other noninterest income is primarily due to higher levels of income realized from our investments in small business investment companies in the first six months of 2024.

Previous wording

(3)The interest income from US Treasury notes securities used for hedging purposes, which is included in interest income on the consolidated income statements, was $0.4 million and $0.3 million for the quarters ended March 31, 2025 and 2024, respectively.

Current wording

(3)The interest income from US Treasury notes securities used for hedging purposes, which is included in interest income on the consolidated income statements, was $0.9 million and $0.6 million for the six months ended June 30, 2025 and 2024, respectively.

Previous wording

The $3.1 million decrease in noninterest expense in the first quarter of 2025 as compared to the first quarter of 2024 was primarily due to $1.7 million lower compensation and benefit costs, $0.6 million lower occupancy costs and $1.0 million lower general and administrative costs. The decrease in compensation and benefit costs was primarily due to an 11% decrease in FTE and lower medical costs, which was partially offset by wage increases in the first quarter of 2025. The decrease in occupancy costs is primarily due to reductions in leased space from branch closures in 2024. The decrease in general and administrative costs reflects the efforts made to eliminate or defer nonessential expenses.

Current wording

The $6.2 million decrease in noninterest expense in the six months ended June 30, 2025 as compared to the six months ended June 30, 2024 was primarily due to $3.3 million lower compensation and benefit costs, $0.8 million lower occupancy costs and $2.2 million lower general and administrative costs. The decrease in compensation and benefit costs was primarily due to an 11% decrease in FTE and lower medical costs, which was partially offset by wage increases given in the first quarter of 2025. The decrease in occupancy costs is primarily due to reductions in leased space from branch closures in 2024. The decrease in general and administrative costs was due to lower merger related expenses and reductions in other costs which reflect the efforts made to eliminate or defer nonessential expenses.

Previous wording

During the first quarter of 2025, our total assets decreased $320 million due primarily to a $169 million decrease in loans held for investment and a $154 million decrease in cash. In the first quarter of 2025, total liabilities decreased $324 million due to a $323 million decrease in deposits. The decrease in deposits was primarily due to a $454 million decrease in brokered certificates of deposit which was partially offset by a $131 million increase in non-brokered deposits.

Current wording

During the six months ended June 30, 2025, our total assets decreased $514 million due primarily to a $306 million decrease in loans held for investment and a $206 million decrease in cash. In the six months ended June 30, 2025, total liabilities decreased $520 million due to a $556 million decrease in deposits. The decrease in deposits was primarily due to a $541 million decrease in brokered certificates of deposits.

Previous wording

During the first quarter of 2025, our ratios of nonperforming assets to total assets and total loans delinquent over 30 days, including nonaccrual loans, increased slightly primarily due to a decrease in our loans held for investment. As of March 31, 2025, our ratio of nonperforming assets to total assets was 0.75% as compared to 0.71% at December 31, 2024, and our ratio of total loans delinquent over 30 days, including nonaccrual loans, to total loans was 1.09% as compared to 1.06% at December 31, 2024. During the first quarter of 2025, we increased the specific reserves for a syndicated commercial loan by $3.9 million based on updated analysis of the collateral support for this loan.

Current wording

During the second quarter of 2025, our ratios of nonperforming assets to total assets and total loans delinquent over 30 days, including nonaccrual loans, remained at low levels. As of June 30, 2025, our ratio of nonperforming assets to total assets was 0.76% as compared to 0.71% at December 31, 2024, and our ratio of total loans delinquent over 30 days, including nonaccrual loans, to total loans was 1.11% as compared to 1.06% at December 31, 2024. The total balance of past due and nonaccrual loans decreased slightly during the second quarter.

Previous wording

At March 31, 2025 and December 31, 2024, the Bank had available borrowing capacity of $1.0 billion and $1.3 billion, respectively, from the FHLB, and $2.0 billion and $1.6 billion, respectively, from the FRBSF and $949 million and $1.0 billion under borrowing lines established with other financial institutions.

Current wording

At June 30, 2025 and December 31, 2024, the Bank had available borrowing capacity of $910 million and $1.3 billion, respectively, from the FHLB, and $2.0 billion and $1.6 billion, respectively, from the FRBSF and $899 million and $1.0 billion under borrowing lines established with other financial institutions.

Previous wording

For the quarter ended March 31, 2025, cash and cash equivalents decreased by $154 million compared to an increase of $105 million during the quarter ended March 31, 2024. As excess liquidity can reduce the Company’s earnings and returns, the Company manages its cash positions to minimize the level of excess liquidity and does not attempt to maximize the level of cash and cash equivalents. The following discussion highlights the major activities and transactions that affected our cash flows during these periods.

Current wording

For the six months ended June 30, 2025, cash and cash equivalents decreased by $206 million compared to an increase of $3 million during the six months ended June 30, 2024. As excess liquidity can reduce the Company’s earnings and returns, the Company manages its cash positions to minimize the level of excess liquidity and does not attempt to maximize the level of cash and cash equivalents. The following discussion highlights the major activities and transactions that affected our cash flows during these periods.

Previous wording

The Company's operating assets and liabilities are used to support our lending activities, including the origination and sale of mortgage loans. For the quarter ended March 31, 2025, net cash of $23 million was used in operating activities, as cash generated from operations was offset by cash used to fund LHFS in excess of proceeds from the sale of loans and increases in trading securities. For the quarter ended March 31, 2024, net cash of $8 million was used in operating activities, as cash generated from operations was offset by an increases in trading securities and other assets.

Current wording

The Company's operating assets and liabilities are used to support our lending activities, including the origination and sale of mortgage loans. For the six months ended June 30, 2025, net cash of $32 million was used in operating activities, as cash generated from operations was offset by cash used to fund LHFS in excess of proceeds from the sale of loans and increases in trading securities. For the six months ended June 30, 2024, net cash of $30 million was used in operating activities, as cash generated from operations was offset by cash used to fund LHFS in excess of proceeds from the sale of loans and increases in other assets

Previous wording

The Company's investing activities primarily include AFS investment securities and loans originated as held for investment. For the quarter ended March 31, 2025, net cash of $191 million was provided by investing activities primarily from principal repayments on AFS securities and by LHFI principal repayments, net of originations. For the quarter ended March 31, 2024, net cash of $36 million was provided by investing activities primarily from principal repayments on AFS securities, partially offset by the origination of LHFI, net of principal repayments and net FHLB stock purchases.

Current wording

The Company's investing activities primarily include AFS investment securities and loans originated as held for investment. For the six months ended June 30, 2025, net cash of $343 million was provided by investing activities primarily from principal repayments on AFS securities and by LHFI principal repayments, net of originations. For the six months ended June 30, 2024, net cash of $123 million was provided by investing activities primarily from principal repayments on AFS securities and by LHFI principal repayments, net of originations, partially offset by net FHLB stock purchases.

Previous wording

The Company's financing activities are primarily related to deposits and proceeds from borrowings. For the quarter ended March 31, 2025, net cash of $323 million was used in financing activities, primarily due to a decrease in brokered certificates of deposit. For the quarter ended March 31, 2024, net cash of $76 million was provided by financing activities, primarily due to an increase in short-term and long-term borrowings, partially offset by decreases in deposits.

Current wording

The Company's financing activities are primarily related to deposits and proceeds from borrowings. For the six months ended June 30, 2025, net cash of $516 million was used in financing activities, primarily due to a decrease in brokered certificates of deposit. For the six months ended June 30, 2024, net cash of $90 million was used in financing activities, primarily due to a decrease in deposits, partially offset by an increase in borrowings.

Previous wording

(1) Within the commercial portfolio, undistributed construction loan proceeds, where the Company has an obligation to advance funds for construction progress payments were $348 million and $306 million at March 31, 2025 and December 31, 2024, respectively.

Current wording

(1) Within the commercial portfolio lines, undistributed construction loan proceeds, where the Company has an obligation to advance funds for construction progress payments were $302 million and $306 million at June 30, 2025 and December 31, 2024, respectively.

Previous wording

As of the dates set forth in the above table, the Company exceeded the minimum required capital ratios applicable to it and the Bank’s capital ratios exceeded the minimums necessary to qualify as a well-capitalized depository institution under the prompt corrective action regulations. In addition to the minimum capital ratios, both HomeStreet Inc. and HomeStreet Bank are required to maintain a capital conservation buffer consisting of additional Common Equity Tier 1 Capital of more than 2.5% above the required minimum levels in order to avoid limitations on paying dividends, engaging in share repurchases, and paying discretionary bonuses. The required ratios for capital adequacy set forth in the above table do not include the Capital Rules’ additional capital conservation buffer, though both the Company and Bank maintained capital ratios necessary to satisfy the capital conservation buffer requirements as of the dates indicated. At March 31, 2025, capital conservation buffers for the Company and the Bank were 3.87% and 5.40%, respectively.

Current wording

As of the dates set forth in the above table, the Company exceeded the minimum required capital ratios applicable to it and the Bank’s capital ratios exceeded the minimums necessary to qualify as a well-capitalized depository institution under the prompt corrective action regulations. In addition to the minimum capital ratios, both HomeStreet Inc. and HomeStreet Bank are required to maintain a capital conservation buffer consisting of additional Common Equity Tier 1 Capital of more than 2.5% above the required minimum levels in order to avoid limitations on paying dividends, engaging in share repurchases, and paying discretionary bonuses. The required ratios for capital adequacy set forth in the above table do not include the Capital Rules’ additional capital conservation buffer, though both the Company and Bank maintained capital ratios necessary to satisfy the capital conservation buffer requirements as of the dates indicated. At June 30, 2025, capital conservation buffers for the Company and the Bank were 3.90% and 5.66%, respectively.

Previous wording

In this Form 10-Q, we use the following non-GAAP measures: (i) tangible common equity and tangible assets as we believe this information is consistent with the treatment by bank regulatory agencies, which exclude intangible assets from the calculation of capital ratios; (ii) core net income (loss) and effective tax rate on core net income (loss) before income taxes, which excludes the loss on the sale of $990 million of multifamily loans in the fourth quarter of 2024 due to the unusual nature and size of the loan sale, the deferred tax asset valuation allowance recognized in the fourth quarter of 2024 because it is a significant unusual item, loss on debt extinguishment in the fourth quarter of 2024 and merger related expenses and the related tax impact as we believe this measure is a better comparison to be used for projecting future results; and, (iii) core noninterest expenses which excludes the loss on debt extinguishment in the fourth quarter of 2024 and merger related expenses as we believe this measure is a better comparison to be used for projecting future noninterest expenses, and (iv) 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 considered non-core 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.

Current wording

In this Form 10-Q, we use the following non-GAAP measures: (i) tangible common equity and tangible assets as we believe this information is consistent with the treatment by bank regulatory agencies, which exclude intangible assets from the calculation of capital ratios; (ii) core net income (loss) and effective tax rate on core net income (loss) before income taxes, which excludes merger related expenses and the related tax impact as we believe this measure is a better comparison to be used for projecting future results; and, (iii) core noninterest expenses which excludes merger related expenses as we believe this measure is a better comparison to be used for projecting future noninterest expenses, and (iv) 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 considered non-core 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.