Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
Large Accelerated Filer | ☐ | ☒ | |||
Non-accelerated Filer | ☐ | Smaller Reporting Company | |||
Emerging growth Company | |||||
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 12(a) of the Exchange Act. | ☐ |
PART I – FINANCIAL INFORMATION | ||
ITEM 1 | FINANCIAL STATEMENTS | |
ITEM 2 | ||
ITEM 3 | ||
ITEM 4 | ||
ITEM 1 | ||
ITEM 1A | ||
ITEM 2 | ||
ITEM 3 | ||
ITEM 4 | ||
ITEM 5 | ||
ITEM 6 | ||
ITEM 1 FINANCIAL STATEMENTS |
(in thousands, except share data) | June 30, 2019 | December 31, 2018 | ||||||
ASSETS | ||||||||
Cash and cash equivalents (includes interest-earning instruments of $75,416 and $28,534) | $ | $ | ||||||
Investment securities (includes $799,397 and $851,968 carried at fair value) | ||||||||
Loans held for sale (includes $81,566 and $52,186 carried at fair value) | ||||||||
Loans held for investment (net of allowance for loan losses of $43,254 and $41,470; includes $4,475 and $4,057 carried at fair value) | ||||||||
Mortgage servicing rights (includes $67,723 and $75,047 carried at fair value) | ||||||||
Other real estate owned | ||||||||
Federal Home Loan Bank stock, at cost | ||||||||
Premises and equipment, net | ||||||||
Lease right-of-use assets | — | |||||||
Goodwill | ||||||||
Other assets | ||||||||
Assets of discontinued operations | ||||||||
Total assets | $ | $ | ||||||
LIABILITIES AND SHAREHOLDERS' EQUITY | ||||||||
Liabilities: | ||||||||
Deposits | $ | $ | ||||||
Federal Home Loan Bank advances | ||||||||
Accounts payable and other liabilities | ||||||||
Federal funds purchased and securities sold under agreements to repurchase | ||||||||
Long-term debt | ||||||||
Lease liabilities | — | |||||||
Liabilities of discontinued operations | ||||||||
Total liabilities | ||||||||
Commitments and contingencies (Note 8) | ||||||||
Shareholders' equity: | ||||||||
Temporary shareholders' equity | ||||||||
Shares subject to repurchase | ||||||||
Permanent shareholders' equity | ||||||||
Preferred stock, no par value, authorized 10,000 shares, issued and outstanding, 0 shares and 0 shares | ||||||||
Common stock, no par value, authorized 160,000,000 shares, issued and outstanding, 26,085,164 shares and 26,995,348 shares | ||||||||
Additional paid-in capital | ||||||||
Retained earnings | ||||||||
Accumulated other comprehensive income (loss) | ( | ) | ||||||
Total permanent shareholders' equity | ||||||||
Total liabilities, temporary shareholders' equity and permanent shareholders' equity | $ | $ |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
(in thousands, except share data) | 2019 | 2018 | 2019 | 2018 | |||||||||||
Interest income: | |||||||||||||||
Loans | $ | $ | $ | $ | |||||||||||
Investment securities | |||||||||||||||
Other | |||||||||||||||
Interest expense: | |||||||||||||||
Deposits | |||||||||||||||
Federal Home Loan Bank advances | |||||||||||||||
Federal funds purchased and securities sold under agreements to repurchase | |||||||||||||||
Long-term debt | |||||||||||||||
Other | |||||||||||||||
Net interest income | |||||||||||||||
Provision for credit losses | |||||||||||||||
Net interest income after provision for credit losses | |||||||||||||||
Noninterest income: | |||||||||||||||
Net gain on loan origination and sale activities | |||||||||||||||
Loan servicing income | |||||||||||||||
Depositor and other retail banking fees | |||||||||||||||
Insurance agency commissions | |||||||||||||||
Gain (loss) on sale of investment securities available for sale, net | ( | ) | |||||||||||||
Other | |||||||||||||||
Noninterest expense: | |||||||||||||||
Salaries and related costs | |||||||||||||||
General and administrative | |||||||||||||||
Amortization of core deposit intangibles | |||||||||||||||
Legal | |||||||||||||||
Consulting | |||||||||||||||
Federal Deposit Insurance Corporation assessments | |||||||||||||||
Occupancy | |||||||||||||||
Information services | |||||||||||||||
Net (cost) benefit from operation and sale of other real estate owned | ( | ) | ( | ) | ( | ) | |||||||||
Income from continuing operations before income taxes | |||||||||||||||
Income tax expense from continuing operations | |||||||||||||||
Income from continuing operations | |||||||||||||||
(Loss) income from discontinued operations before income taxes (includes net loss on disposal of $10,796 and $23,020 for the three and six months ended June 30, 2019) | ( | ) | ( | ) | |||||||||||
Income tax (benefit) expense from discontinued operations | ( | ) | ( | ) | |||||||||||
(Loss) income from discontinued operations | ( | ) | ( | ) | |||||||||||
NET (LOSS) INCOME | $ | ( | ) | $ | $ | ( | ) | $ | |||||||
Basic earnings per common share: | |||||||||||||||
Income from continuing operations | $ | $ | $ | $ | |||||||||||
(Loss) income from discontinued operations | ( | ) | ( | ) | |||||||||||
Basic earnings per share | $ | ( | ) | $ | $ | ( | ) | $ | |||||||
Diluted earnings per common share | |||||||||||||||
Income from continuing operations | $ | $ | $ | $ | |||||||||||
(Loss) income from discontinued operations | ( | ) | ( | ) | |||||||||||
Diluted earnings per share | $ | ( | ) | $ | $ | ( | ) | $ | |||||||
Basic weighted average number of shares outstanding | |||||||||||||||
Diluted weighted average number of shares outstanding |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
(in thousands) | 2019 | 2018 | 2019 | 2018 | |||||||||||
Net (loss) income | $ | ( | ) | $ | $ | ( | ) | $ | |||||||
Other comprehensive income (loss), net of tax: | |||||||||||||||
Unrealized gain (loss) on investment securities available for sale: | |||||||||||||||
Unrealized holding gain (loss) arising during the period, net of tax expense (benefit) of $2,703 and $(642) for the three months ended June 30, 2019 and 2018, and $5,205 and $(3,300) for the six months ended June 30, 2019 and 2018, respectively | ( | ) | ( | ) | |||||||||||
Reclassification adjustment for net (gains) losses included in net income, net of tax expense (benefit) of $29 and $4 for the three months ended June 30, 2019 and 2018, and $(23) and $50 for the six months ended June 30, 2019 and 2018, respectively | ( | ) | ( | ) | ( | ) | |||||||||
Other comprehensive income (loss) | ( | ) | ( | ) | |||||||||||
Comprehensive income | $ | $ | $ | $ |
(in thousands, except share data) | Number of shares | Common stock | Additional paid-in capital | Retained earnings | Accumulated other comprehensive income (loss) | Total temporary equity | Total permanent equity | |||||||||||||||||||
For the Three Months Ended June 30, 2019 | ||||||||||||||||||||||||||
Balance, April 1, 2019 | $ | $ | $ | $ | ( | ) | $ | $ | ||||||||||||||||||
Net loss | — | — | — | ( | ) | — | — | ( | ) | |||||||||||||||||
Common stock issued | — | — | — | — | ||||||||||||||||||||||
Share-based compensation expense | — | — | — | — | — | |||||||||||||||||||||
Other comprehensive income | — | — | — | — | — | |||||||||||||||||||||
Common stock repurchased and retired | ( | ) | — | ( | ) | ( | ) | — | — | ( | ) | |||||||||||||||
Reclassification to temporary equity | — | — | ( | ) | ( | ) | — | ( | ) | |||||||||||||||||
Balance, June 30, 2019 | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||
For the Six Months Ended June 30, 2019 | ||||||||||||||||||||||||||
Balance, January 1, 2019 | $ | $ | $ | $ | ( | ) | $ | $ | ||||||||||||||||||
Net loss | — | — | — | ( | ) | — | — | ( | ) | |||||||||||||||||
Common stock issued | — | — | — | — | ||||||||||||||||||||||
Share-based compensation expense | — | — | — | — | — | |||||||||||||||||||||
Cumulative effect of adoption of new accounting standards | — | — | — | ( | ) | — | ( | ) | ||||||||||||||||||
Other comprehensive income | — | — | — | — | — | |||||||||||||||||||||
Common stock repurchased and retired | ( | ) | — | ( | ) | ( | ) | — | ( | ) | ||||||||||||||||
Reclassification to temporary equity | — | — | ( | ) | ( | ) | — | ( | ) | |||||||||||||||||
Balance, June 30, 2019 | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||
For the Three Months Ended June 30, 2018 | ||||||||||||||||||||||||||
Balance at April 1, 2018 | $ | $ | $ | $ | ( | ) | $ | — | $ | |||||||||||||||||
Net income | — | — | — | — | — | |||||||||||||||||||||
Common stock issued | — | — | — | — | ||||||||||||||||||||||
Share-based compensation expense | — | — | — | — | — | |||||||||||||||||||||
Other comprehensive loss | — | — | — | — | ( | ) | — | ( | ) | |||||||||||||||||
Balance, June 30, 2018 | $ | $ | $ | $ | ( | ) | $ | — | $ | |||||||||||||||||
For the Six Months Ended June 30, 2018 | ||||||||||||||||||||||||||
January 1, 2018 | $ | $ | $ | $ | ( | ) | $ | — | $ | |||||||||||||||||
Net income | — | — | — | — | — | |||||||||||||||||||||
Common stock issued | — | — | — | — | ||||||||||||||||||||||
Share-based compensation expense | — | — | — | — | — | |||||||||||||||||||||
Other comprehensive loss | — | — | — | — | ( | ) | — | ( | ) | |||||||||||||||||
Balance, June 30, 2018 | $ | $ | $ | $ | ( | ) | $ | — | $ |
Six Months Ended June 30, | |||||||
(in thousands) | 2019 | 2018 | |||||
CASH FLOWS FROM OPERATING ACTIVITIES: | |||||||
Net (loss) income | $ | ( | ) | $ | |||
Adjustments to reconcile net income to net cash provided by (used in) operating activities: | |||||||
Depreciation, amortization and accretion | |||||||
Provision for credit losses | |||||||
Net fair value adjustment and gain on sale of loans held for sale | ( | ) | ( | ) | |||
Gain on sale of mortgage servicing rights, gross | ( | ) | |||||
Loss on sale of HLC mortgage origination assets, net | |||||||
Fair value adjustment of loans held for investment | ( | ) | |||||
Origination of mortgage servicing rights | ( | ) | ( | ) | |||
Change in fair value of mortgage servicing rights | ( | ) | |||||
Net loss (gain) on sale of investment securities | ( | ) | |||||
Net (gain) loss on sale of loans originated as held for investment | ( | ) | |||||
Net fair value adjustment, gain on sale and provision for losses on other real estate owned | ( | ) | ( | ) | |||
Loss on disposal of fixed assets | |||||||
Loss on lease abandonment and exit costs | |||||||
Deferred income taxes | ( | ) | ( | ) | |||
Share-based compensation expense | |||||||
Origination of loans held for sale | ( | ) | ( | ) | |||
Proceeds from sale of loans originated as held for sale | |||||||
Changes in operating assets and liabilities: | |||||||
Decrease in accounts receivable and other assets | |||||||
(Decrease) increase in accounts payable and other liabilities | ( | ) | |||||
Net cash (used in) provided by operating activities | ( | ) | |||||
CASH FLOWS FROM INVESTING ACTIVITIES: | |||||||
Purchase of investment securities | ( | ) | ( | ) | |||
Proceeds from sale of investment securities | |||||||
Principal repayments and maturities of investment securities | |||||||
Proceeds from sale of other real estate owned | |||||||
Proceeds from sale of loans originated as held for investment | |||||||
Proceeds from sale of mortgage servicing rights | |||||||
Net cash provided by disposal of discontinued operations | |||||||
Origination of loans held for investment and principal repayments, net | ( | ) | ( | ) | |||
Purchase of property and equipment | ( | ) | ( | ) | |||
Net cash used for acquisitions | ( | ) | |||||
Net cash provided by (used in) investing activities | ( | ) |
Six Months Ended June 30, | |||||||
(in thousands) | 2019 | 2018 | |||||
CASH FLOWS FROM FINANCING ACTIVITIES: | |||||||
Increase in deposits, net | |||||||
Proceeds from Federal Home Loan Bank advances | |||||||
Repayment of Federal Home Loan Bank advances | ( | ) | ( | ) | |||
Proceeds from federal funds purchased and securities sold under agreements to repurchase | |||||||
Repayment of federal funds purchased and securities sold under agreements to repurchase | ( | ) | ( | ) | |||
Proceeds from line of credit draws | |||||||
Repayment of lease principal | ( | ) | — | ||||
Proceeds from Federal Home Loan Bank stock repurchase | |||||||
Purchase of Federal Home Loan Bank stock | ( | ) | ( | ) | |||
Stock repurchased | ( | ) | |||||
Proceeds from stock issuance, net | |||||||
Net cash provided by financing activities | |||||||
NET INCREASE IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH | |||||||
CASH, CASH EQUIVALENTS AND RESTRICTED CASH: | |||||||
Cash, cash equivalents and restricted cash, beginning of year | |||||||
Cash, cash equivalents and restricted cash, end of period | |||||||
Less restricted cash included in other assets | ( | ) | |||||
CASH AND CASH EQUIVALENTS AT END OF PERIOD | $ | $ | |||||
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: | |||||||
Cash paid during the period for: | |||||||
Interest paid | $ | $ | |||||
Federal and state income taxes (refunded) paid, net | ( | ) | |||||
Non-cash activities: | |||||||
Loans held for investment foreclosed and transferred to other real estate owned | |||||||
Loans transferred from held for investment to held for sale | |||||||
Loans transferred from held for sale to held for investment | |||||||
Ginnie Mae loans (derecognized) recognized with the right to repurchase, net | ( | ) | |||||
Receivable from sale of mortgage servicing rights | |||||||
Acquisition: | |||||||
Assets acquired | |||||||
Liabilities assumed | |||||||
Goodwill |
(in thousands) | Three Months Ended June 30, 2019 | Six Months Ended June 30, 2019 | |||||
Proceeds from asset sales | $ | $ | |||||
Book value of asset sales | |||||||
(Loss) gain on assets sold | ( | ) | |||||
Transaction costs | |||||||
Compensation expense related to the transactions | |||||||
Facility and IT related costs | |||||||
Total costs | |||||||
Net loss on disposal | $ | ( | ) | $ | ( | ) | |
(in thousands) | June 30, 2019 | December 31, 2018 | |||||
ASSETS | |||||||
Loans held-for-sale, at fair value | $ | $ | |||||
Mortgage serving rights | |||||||
Premises and equipment, net | |||||||
Other assets (1) | |||||||
Assets of discontinued operations | $ | $ | |||||
LIABILITIES | |||||||
Deposits | $ | $ | |||||
Accrued expenses and other liabilities | |||||||
Liabilities of discontinued operations | $ | $ |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
2019 | 2018 | 2019 | 2018 | ||||||||||||
(in thousands) | |||||||||||||||
Net interest income | $ | $ | $ | $ | |||||||||||
Noninterest income | |||||||||||||||
Noninterest expense | |||||||||||||||
(Loss) income before income taxes | ( | ) | ( | ) | |||||||||||
Income tax (benefit) expense | ( | ) | ( | ) | |||||||||||
(Loss) income from discontinued operations | $ | ( | ) | $ | $ | ( | ) | $ |
Six Months Ended June 30, | |||||||
2019 | 2018 | ||||||
(in thousands) | |||||||
Net cash (used in) provided by operating activities | $ | ( | ) | $ | |||
Net cash provided by investing activities |
At June 30, 2019 | |||||||||||||||
(in thousands) | Amortized cost | Gross unrealized gains | Gross unrealized losses | Fair value | |||||||||||
AVAILABLE FOR SALE | |||||||||||||||
Mortgage-backed securities: | |||||||||||||||
Residential | $ | $ | $ | ( | ) | $ | |||||||||
Commercial | ( | ) | |||||||||||||
Collateralized mortgage obligations: | |||||||||||||||
Residential | ( | ) | |||||||||||||
Commercial | ( | ) | |||||||||||||
Municipal bonds | ( | ) | |||||||||||||
Corporate debt securities | ( | ) | |||||||||||||
U.S. Treasury securities | |||||||||||||||
$ | $ | $ | ( | ) | $ | ||||||||||
HELD TO MATURITY | |||||||||||||||
Municipal bonds (1) | $ | $ | $ | $ | |||||||||||
$ | $ | $ | $ |
At December 31, 2018 | |||||||||||||||
(in thousands) | Amortized cost | Gross unrealized gains | Gross unrealized losses | Fair value | |||||||||||
AVAILABLE FOR SALE | |||||||||||||||
Mortgage-backed securities: | |||||||||||||||
Residential | $ | $ | $ | ( | ) | $ | |||||||||
Commercial | ( | ) | |||||||||||||
Collateralized mortgage obligations: | |||||||||||||||
Residential | ( | ) | |||||||||||||
Commercial | ( | ) | |||||||||||||
Municipal bonds | ( | ) | |||||||||||||
Corporate debt securities | ( | ) | |||||||||||||
U.S. Treasury securities | ( | ) | |||||||||||||
Agency debentures | ( | ) | |||||||||||||
$ | $ | $ | ( | ) | $ | ||||||||||
HELD TO MATURITY | |||||||||||||||
Mortgage-backed securities: | |||||||||||||||
Residential | $ | $ | $ | ( | ) | $ | |||||||||
Commercial | ( | ) | |||||||||||||
Collateralized mortgage obligations | ( | ) | |||||||||||||
Municipal bonds | ( | ) | |||||||||||||
Corporate debt securities | |||||||||||||||
$ | $ | $ | ( | ) | $ |
At June 30, 2019 | |||||||||||||||||||||||
Less than 12 months | 12 months or more | Total | |||||||||||||||||||||
(in thousands) | Gross unrealized losses | Fair value | Gross unrealized losses | Fair value | Gross unrealized losses | Fair value | |||||||||||||||||
AVAILABLE FOR SALE | |||||||||||||||||||||||
Mortgage-backed securities: | |||||||||||||||||||||||
Residential | $ | ( | ) | $ | $ | ( | ) | $ | $ | ( | ) | $ | |||||||||||
Commercial | ( | ) | ( | ) | |||||||||||||||||||
Collateralized mortgage obligations: | |||||||||||||||||||||||
Residential | ( | ) | ( | ) | ( | ) | |||||||||||||||||
Commercial | ( | ) | ( | ) | ( | ) | |||||||||||||||||
Municipal bonds | ( | ) | ( | ) | ( | ) | |||||||||||||||||
Corporate debt securities | ( | ) | ( | ) | |||||||||||||||||||
$ | ( | ) | $ | $ | ( | ) | $ | $ | ( | ) | $ | ||||||||||||
* There were no held to maturity securities in an unrealized loss position at June 30, 2019 |
At December 31, 2018 | |||||||||||||||||||||||
Less than 12 months | 12 months or more | Total | |||||||||||||||||||||
(in thousands) | Gross unrealized losses | Fair value | Gross unrealized losses | Fair value | Gross unrealized losses | Fair value | |||||||||||||||||
AVAILABLE FOR SALE | |||||||||||||||||||||||
Mortgage-backed securities: | |||||||||||||||||||||||
Residential | $ | ( | ) | $ | $ | ( | ) | $ | $ | ( | ) | $ | |||||||||||
Commercial | ( | ) | ( | ) | |||||||||||||||||||
Collateralized mortgage obligations: | |||||||||||||||||||||||
Residential | ( | ) | ( | ) | ( | ) | |||||||||||||||||
Commercial | ( | ) | ( | ) | ( | ) | |||||||||||||||||
Municipal bonds | ( | ) | ( | ) | ( | ) | |||||||||||||||||
Corporate debt securities | ( | ) | ( | ) | ( | ) | |||||||||||||||||
U.S. Treasury securities | ( | ) | ( | ) | |||||||||||||||||||
Agency debentures | ( | ) | ( | ) | |||||||||||||||||||
$ | ( | ) | $ | $ | ( | ) | $ | $ | ( | ) | $ | ||||||||||||
HELD TO MATURITY | |||||||||||||||||||||||
Mortgage-backed securities: | |||||||||||||||||||||||
Residential | $ | ( | ) | $ | $ | ( | ) | $ | $ | ( | ) | $ | |||||||||||
Commercial | ( | ) | ( | ) | ( | ) | |||||||||||||||||
Collateralized mortgage obligations | ( | ) | ( | ) | |||||||||||||||||||
Municipal bonds | ( | ) | ( | ) | ( | ) | |||||||||||||||||
$ | ( | ) | $ | $ | ( | ) | $ | $ | ( | ) | $ |
At June 30, 2019 | ||||||||||||||||||||||||||||||||||
Within one year | After one year through five years | After five years through ten years | After ten years | Total | ||||||||||||||||||||||||||||||
(dollars in thousands) | Fair Value | Weighted Average Yield | Fair Value | Weighted Average Yield | Fair Value | Weighted Average Yield | Fair Value | Weighted Average Yield | Fair Value | Weighted Average Yield | ||||||||||||||||||||||||
AVAILABLE FOR SALE | ||||||||||||||||||||||||||||||||||
Mortgage-backed securities: | ||||||||||||||||||||||||||||||||||
Residential | $ | % | $ | % | $ | % | $ | % | $ | % | ||||||||||||||||||||||||
Commercial | ||||||||||||||||||||||||||||||||||
Collateralized mortgage obligations: | ||||||||||||||||||||||||||||||||||
Residential | ||||||||||||||||||||||||||||||||||
Commercial | ||||||||||||||||||||||||||||||||||
Municipal bonds | ||||||||||||||||||||||||||||||||||
Corporate debt securities | ||||||||||||||||||||||||||||||||||
U.S. Treasury securities | ||||||||||||||||||||||||||||||||||
Total available for sale | $ | % | $ | % | $ | % | $ | % | $ | % | ||||||||||||||||||||||||
HELD TO MATURITY | ||||||||||||||||||||||||||||||||||
Mortgage-backed securities: | ||||||||||||||||||||||||||||||||||
Municipal bonds | $ | % | $ | % | $ | % | $ | % | $ | % | ||||||||||||||||||||||||
Total held to maturity | $ | % | $ | % | $ | % | $ | % | $ | % |
At December 31, 2018 | ||||||||||||||||||||||||||||||||||
Within one year | After one year through five years | After five years through ten years | After ten years | Total | ||||||||||||||||||||||||||||||
(dollars in thousands) | Fair Value | Weighted Average Yield | Fair Value | Weighted Average Yield | Fair Value | Weighted Average Yield | Fair Value | Weighted Average Yield | Fair Value | Weighted Average Yield | ||||||||||||||||||||||||
AVAILABLE FOR SALE | ||||||||||||||||||||||||||||||||||
Mortgage-backed securities: | ||||||||||||||||||||||||||||||||||
Residential | $ | % | $ | % | $ | % | $ | % | $ | % | ||||||||||||||||||||||||
Commercial | ||||||||||||||||||||||||||||||||||
Collateralized mortgage obligations: | ||||||||||||||||||||||||||||||||||
Residential | ||||||||||||||||||||||||||||||||||
Commercial | ||||||||||||||||||||||||||||||||||
Municipal bonds | ||||||||||||||||||||||||||||||||||
Corporate debt securities | ||||||||||||||||||||||||||||||||||
U.S. Treasury securities | ||||||||||||||||||||||||||||||||||
Agency debentures | ||||||||||||||||||||||||||||||||||
Total available for sale | $ | % | $ | % | $ | % | $ | % | $ | % | ||||||||||||||||||||||||
HELD TO MATURITY | ||||||||||||||||||||||||||||||||||
Mortgage-backed securities: | ||||||||||||||||||||||||||||||||||
Residential | $ | % | $ | % | $ | % | $ | % | $ | % | ||||||||||||||||||||||||
Commercial | ||||||||||||||||||||||||||||||||||
Collateralized mortgage obligations | ||||||||||||||||||||||||||||||||||
Municipal bonds | ||||||||||||||||||||||||||||||||||
Corporate debt securities | ||||||||||||||||||||||||||||||||||
Total held to maturity | $ | % | $ | % | $ | % | $ | % | $ | % |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
(in thousands) | 2019 | 2018 | 2019 | 2018 | |||||||||||
Proceeds | $ | $ | $ | $ | |||||||||||
Gross gains | |||||||||||||||
Gross losses | ( | ) | ( | ) | ( | ) | ( | ) |
(in thousands) | At June 30, 2019 | At December 31, 2018 | |||||
Federal Home Loan Bank to secure borrowings | $ | $ | |||||
Washington and California State to secure public deposits | |||||||
Securities pledged to secure derivatives in a liability position | |||||||
Other securities pledged | |||||||
Total securities pledged as collateral | $ | $ |
(in thousands) | At June 30, 2019 | At December 31, 2018 | |||||
Consumer loans | |||||||
Single family (1) | $ | $ | |||||
Home equity and other | |||||||
Total consumer loans | |||||||
Commercial real estate loans | |||||||
Non-owner occupied commercial real estate | |||||||
Multifamily | |||||||
Construction/land development | |||||||
Total commercial real estate loans | |||||||
Commercial and industrial loans | |||||||
Owner occupied commercial real estate | |||||||
Commercial business | |||||||
Total commercial and industrial loans | |||||||
Loans held for investment before deferred fees, costs and allowance | |||||||
Net deferred loan fees and costs | |||||||
Allowance for loan losses | ( | ) | ( | ) | |||
Total loans held for investment | $ | $ |
(1) | Includes $ |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
(in thousands) | 2019 | 2018 | 2019 | 2018 | |||||||||||
Allowance for credit losses (roll-forward): | |||||||||||||||
Beginning balance | $ | $ | $ | $ | |||||||||||
Provision for credit losses | |||||||||||||||
Recoveries, net of (charge-offs) | ( | ) | |||||||||||||
Ending balance | $ | $ | $ | $ |
Three Months Ended June 30, 2019 | |||||||||||||||||||
(in thousands) | Beginning balance | Charge-offs | Recoveries | (Reversal of) Provision | Ending balance | ||||||||||||||
Consumer loans | |||||||||||||||||||
Single family | $ | $ | $ | $ | ( | ) | $ | ||||||||||||
Home equity and other | ( | ) | ( | ) | |||||||||||||||
Total consumer loans | ( | ) | ( | ) | |||||||||||||||
Commercial real estate loans | |||||||||||||||||||
Non-owner occupied commercial real estate | ( | ) | |||||||||||||||||
Multifamily | |||||||||||||||||||
Construction/land development | |||||||||||||||||||
Total commercial real estate loans | |||||||||||||||||||
Commercial and industrial loans | |||||||||||||||||||
Owner occupied commercial real estate | |||||||||||||||||||
Commercial business | |||||||||||||||||||
Total commercial and industrial loans | |||||||||||||||||||
Total allowance for credit losses | $ | $ | ( | ) | $ | $ | $ |
Three Months Ended June 30, 2018 | |||||||||||||||||||
(in thousands) | Beginning balance | Charge-offs | Recoveries | (Reversal of) Provision | Ending balance | ||||||||||||||
Consumer loans | |||||||||||||||||||
Single family | $ | $ | $ | $ | ( | ) | $ | ||||||||||||
Home equity and other | ( | ) | |||||||||||||||||
Total consumer loans | ( | ) | ( | ) | |||||||||||||||
Commercial real estate loans | |||||||||||||||||||
Non-owner occupied commercial real estate | |||||||||||||||||||
Multifamily | |||||||||||||||||||
Construction/land development | ( | ) | |||||||||||||||||
Total commercial real estate loans | |||||||||||||||||||
Commercial and industrial loans | |||||||||||||||||||
Owner occupied commercial real estate | |||||||||||||||||||
Commercial business | ( | ) | |||||||||||||||||
Total commercial and industrial loans | ( | ) | |||||||||||||||||
Total allowance for credit losses | $ | $ | ( | ) | $ | $ | $ |
Six Months Ended June 30, 2019 | |||||||||||||||||||
(in thousands) | Beginning balance | Charge-offs | Recoveries | (Reversal of) Provision | Ending balance | ||||||||||||||
Consumer loans | |||||||||||||||||||
Single family | $ | $ | $ | $ | ( | ) | $ | ||||||||||||
Home equity and other | ( | ) | ( | ) | |||||||||||||||
( | ) | ( | ) | ||||||||||||||||
Commercial real estate loans | |||||||||||||||||||
Non-owner occupied commercial real estate | |||||||||||||||||||
Multifamily | |||||||||||||||||||
Construction/land development | |||||||||||||||||||
Total commercial real estate loans | |||||||||||||||||||
Commercial and industrial loans | |||||||||||||||||||
Owner occupied commercial real estate | |||||||||||||||||||
Commercial business | |||||||||||||||||||
Total commercial and industrial loans | |||||||||||||||||||
Total allowance for credit losses | $ | $ | ( | ) | $ | $ | $ |
Six Months Ended June 30, 2018 | |||||||||||||||||||
(in thousands) | Beginning balance | Charge-offs | Recoveries | (Reversal of) Provision | Ending balance | ||||||||||||||
Consumer loans | |||||||||||||||||||
Single family | $ | $ | $ | $ | ( | ) | $ | ||||||||||||
Home equity and other | ( | ) | |||||||||||||||||
( | ) | ( | ) | ||||||||||||||||
Commercial real estate loans | |||||||||||||||||||
Non-owner occupied commercial real estate | |||||||||||||||||||
Multifamily | |||||||||||||||||||
Construction/land development | |||||||||||||||||||
Total commercial real estate loans | |||||||||||||||||||
Commercial and industrial loans | |||||||||||||||||||
Owner occupied commercial real estate | |||||||||||||||||||
Commercial business | ( | ) | |||||||||||||||||
( | ) | ||||||||||||||||||
Total allowance for credit losses | $ | $ | ( | ) | $ | $ | $ |
At June 30, 2019 | ||||||||||||||||||||||||
(in thousands) | Allowance: collectively evaluated for impairment | Allowance: individually evaluated for impairment | Total | Loans: collectively evaluated for impairment | Loans: individually evaluated for impairment | Total | ||||||||||||||||||
Consumer loans | ||||||||||||||||||||||||
Single family | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
Home equity and other | ||||||||||||||||||||||||
Total consumer loans | ||||||||||||||||||||||||
Commercial real estate loans | ||||||||||||||||||||||||
Non-owner occupied commercial real estate | ||||||||||||||||||||||||
Multifamily | ||||||||||||||||||||||||
Construction/land development | ||||||||||||||||||||||||
Total commercial real estate loans | ||||||||||||||||||||||||
Commercial and industrial loans | ||||||||||||||||||||||||
Owner occupied commercial real estate | ||||||||||||||||||||||||
Commercial business | ||||||||||||||||||||||||
Total commercial and industrial loans | ||||||||||||||||||||||||
Total loans evaluated for impairment | ||||||||||||||||||||||||
Loans held for investment carried at fair value | — | — | — | (1) | ||||||||||||||||||||
Total loans held for investment | $ | $ | $ | $ | $ | $ |
At December 31, 2018 | ||||||||||||||||||||||||
(in thousands) | Allowance: collectively evaluated for impairment | Allowance: individually evaluated for impairment | Total | Loans: collectively evaluated for impairment | Loans: individually evaluated for impairment | Total | ||||||||||||||||||
Consumer loans | ||||||||||||||||||||||||
Single family | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
Home equity and other | ||||||||||||||||||||||||
Total consumer loans | ||||||||||||||||||||||||
Commercial real estate loans | ||||||||||||||||||||||||
Non-owner occupied commercial real estate | ||||||||||||||||||||||||
Multifamily | ||||||||||||||||||||||||
Construction/land development | ||||||||||||||||||||||||
Total commercial real estate loans | ||||||||||||||||||||||||
Commercial and industrial loans | ||||||||||||||||||||||||
Owner occupied commercial real estate | ||||||||||||||||||||||||
Commercial business | ||||||||||||||||||||||||
Total commercial and industrial loans | ||||||||||||||||||||||||
Total loans evaluated for impairment | ||||||||||||||||||||||||
Loans held for investment carried at fair value | — | — | — | (1) | ||||||||||||||||||||
Total loans held for investment | $ | $ | $ | $ | $ | $ |
(1) | Comprised of single family loans where a fair value option election was made at the time of origination and, therefore, are carried at fair value with changes recognized in the consolidated statements of operations. |
At June 30, 2019 | |||||||||||
(in thousands) | Recorded investment (1) | Unpaid principal balance (2) | Related allowance | ||||||||
With no related allowance recorded: | |||||||||||
Consumer loans | |||||||||||
Single family(3) | $ | $ | $ | — | |||||||
Home equity and other | — | ||||||||||
Total consumer loans | — | ||||||||||
Commercial real estate loans | |||||||||||
Multifamily | — | ||||||||||
Total commercial real estate loans | — | ||||||||||
Commercial and industrial loans | |||||||||||
Owner occupied commercial real estate | — | ||||||||||
Commercial business | — | ||||||||||
Total commercial and industrial loans | — | ||||||||||
$ | $ | $ | — | ||||||||
With an allowance recorded: | |||||||||||
Consumer loans | |||||||||||
Single family | $ | $ | $ | ||||||||
Home equity and other | |||||||||||
Total consumer loans | |||||||||||
Commercial and industrial loans | |||||||||||
Commercial business | |||||||||||
Total commercial and industrial loans | |||||||||||
$ | $ | $ | |||||||||
Total: | |||||||||||
Consumer loans | |||||||||||
Single family (3) | $ | $ | $ | ||||||||
Home equity and other | |||||||||||
Total consumer loans | |||||||||||
Commercial real estate loans | |||||||||||
Multifamily | |||||||||||
Total commercial real estate loans | |||||||||||
Commercial and industrial loans | |||||||||||
Owner occupied commercial real estate | |||||||||||
Commercial business | |||||||||||
Total commercial and industrial loans | |||||||||||
Total impaired loans | $ | $ | $ |
(1) | Includes partial charge-offs and nonaccrual interest paid and purchase discounts and premiums. |
(2) | Unpaid principal balance does not include partial charge-offs, purchase discounts and premiums or nonaccrual interest paid. Related allowance is calculated on net book balances not unpaid principal balances. |
(3) | Includes $ |
At December 31, 2018 | |||||||||||
(in thousands) | Recorded investment (1) | Unpaid principal balance (2) | Related allowance | ||||||||
With no related allowance recorded: | |||||||||||
Consumer loans | |||||||||||
Single family(3) | $ | $ | $ | — | |||||||
Home equity and other | — | ||||||||||
Total consumer loans | — | ||||||||||
Commercial real estate loans | |||||||||||
Multifamily | — | ||||||||||
Construction/land development | — | ||||||||||
Total commercial real estate loans | — | ||||||||||
Commercial and industrial loans | |||||||||||
Owner occupied commercial real estate | — | ||||||||||
Commercial business | — | ||||||||||
Total commercial and industrial loans | — | ||||||||||
$ | $ | $ | — | ||||||||
With an allowance recorded: | |||||||||||
Consumer loans | |||||||||||
Single family | $ | $ | $ | ||||||||
Home equity and other | |||||||||||
Total consumer loans | |||||||||||
Commercial and industrial loans | |||||||||||
Commercial business | |||||||||||
Total commercial and industrial loans | |||||||||||
$ | $ | $ | |||||||||
Total: | |||||||||||
Consumer loans | |||||||||||
Single family (3) | $ | $ | $ | ||||||||
Home equity and other | |||||||||||
Total consumer loans | |||||||||||
Commercial real estate loans | |||||||||||
Multifamily | |||||||||||
Construction/land development | |||||||||||
Total commercial real estate loans | |||||||||||
Commercial and industrial loans | |||||||||||
Owner occupied commercial real estate | |||||||||||
Commercial business | |||||||||||
Total commercial and industrial loans | |||||||||||
Total impaired loans | $ | $ | $ |
(1) | Includes partial charge-offs and nonaccrual interest paid and purchase discounts and premiums. |
(2) | Unpaid principal balance does not include partial charge-offs, purchase discounts and premiums or nonaccrual interest paid. Related allowance is calculated on net book balances not unpaid principal balances. |
(3) | Includes $ |
Three Months Ended June 30, 2019 | Three Months Ended June 30, 2018 | ||||||||||||||
(in thousands) | Average Recorded Investment | Interest Income Recognized | Average Recorded Investment | Interest Income Recognized | |||||||||||
Consumer loans | |||||||||||||||
Single family | $ | $ | $ | $ | |||||||||||
Home equity and other | |||||||||||||||
Total consumer loans | |||||||||||||||
Commercial real estate loans | |||||||||||||||
Non-owner occupied commercial real estate | |||||||||||||||
Multifamily | |||||||||||||||
Construction/land development | |||||||||||||||
Total commercial real estate loans | |||||||||||||||
Commercial and industrial loans | |||||||||||||||
Owner occupied commercial real estate | |||||||||||||||
Commercial business | |||||||||||||||
Total commercial and industrial loans | |||||||||||||||
$ | $ | $ | $ |
Six Months Ended June 30, 2019 | Six Months Ended June 30, 2018 | ||||||||||||||
(in thousands) | Average Recorded Investment | Interest Income Recognized | Average Recorded Investment | Interest Income Recognized | |||||||||||
Consumer loans | |||||||||||||||
Single family | $ | $ | $ | $ | |||||||||||
Home equity and other | |||||||||||||||
Total consumer loans | |||||||||||||||
Commercial real estate loans | |||||||||||||||
Non-owner occupied commercial real estate | |||||||||||||||
Multifamily | |||||||||||||||
Construction/land development | |||||||||||||||
Total commercial real estate loans | |||||||||||||||
Commercial and industrial loans | |||||||||||||||
Owner occupied commercial real estate | |||||||||||||||
Commercial business | |||||||||||||||
Total commercial and industrial loans | |||||||||||||||
$ | $ | $ | $ |
• | The borrower may be experiencing declining operating trends, strained cash flows or less-than anticipated financial performance. Cash flow should still be adequate to cover debt service, and the negative trends should be identified as being of a short-term or temporary nature. |
• | The borrower may have experienced a minor, unexpected covenant violation. |
• | The borrower may be experiencing tight working capital or have a cash cushion deficiency. |
• | A loan may also be a watch if financial information is late, there is a documentation deficiency, the borrower has experienced unexpected management turnover, or if it faces industry issues that, when combined with performance factors create uncertainty in its future ability to perform. |
• | Delinquent payments, increasing and material overdraft activity, request for bulge and/or out-of-formula advances may be an indicator of inadequate working capital and may suggest a lower rating. |
• | Failure of the intended repayment source to materialize as expected, or renewal of a loan (other than cash/marketable security secured or lines of credit) without reduction are possible indicators of a watch or worse risk rating. |
• | Performance is poor or significantly less than expected. There may be a temporary debt-servicing deficiency or inadequate working capital as evidenced by a cash cushion deficiency, but not to the extent that repayment is compromised. Material violation of financial covenants is common. |
• | Loans with unresolved material issues that significantly cloud the debt service outlook, even though a debt servicing deficiency does not currently exist. |
• | Modest underperformance or deviation from plan for real estate loans where absorption of rental/sales units is necessary to properly service the debt as structured. Depth of support for interest carry provided by owner/guarantors may mitigate and provide for improved rating. |
• | This rating may be assigned when a loan officer is unable to supervise the credit properly, or when there is an inadequate loan agreement, an inability to control collateral, failure to obtain proper documentation, or any other deviation from prudent lending practices. |
• | Unlike a substandard credit, there should be a reasonable expectation that these temporary issues will be corrected within the normal course of business, rather than through liquidation of assets, and in a reasonable period of time. |
• | Cash flow deficiencies or trends are of a magnitude to jeopardize current and future payments with no immediate relief. A loss is not presently expected, however the outlook is sufficiently uncertain to preclude ruling out the possibility. |
• | The borrower has been unable to adjust to prolonged and unfavorable industry or economic trends. |
• | Material underperformance or deviation from plan for real estate loans where absorption of rental/sales units is necessary to properly service the debt and risk is not mitigated by willingness and capacity of owner/guarantor to support interest payments. |
• | Management character or honesty has become suspect. This includes instances where the borrower has become uncooperative. |
• | Due to unprofitable or unsuccessful business operations, some form of restructuring of the business, including liquidation of assets, has become the primary source of loan repayment. Cash flow has deteriorated, or been diverted, to the point that sale of collateral is now the Company's primary source of repayment (unless this was the original source of repayment). If the collateral is under the Company's control and is cash or other liquid, highly marketable securities and properly margined, then a more appropriate rating might be special mention or watch. |
• | The borrower is involved in bankruptcy proceedings where collateral liquidation values are expected to fully protect the Company against loss. |
• | There is material, uncorrectable faulty documentation or materially suspect financial information. |
At June 30, 2019 | |||||||||||||||||||
(in thousands) | Pass | Watch | Special mention | Substandard | Total | ||||||||||||||
Consumer loans | |||||||||||||||||||
Single family | $ | (1) | $ | $ | $ | $ | |||||||||||||
Home equity and other | |||||||||||||||||||
Total consumer loans | |||||||||||||||||||
Commercial real estate loans | |||||||||||||||||||
Non-owner occupied commercial real estate | |||||||||||||||||||
Multifamily | |||||||||||||||||||
Construction/land development | |||||||||||||||||||
Total commercial real estate loans | |||||||||||||||||||
Commercial and industrial loans | |||||||||||||||||||
Owner occupied commercial real estate | |||||||||||||||||||
Commercial business | |||||||||||||||||||
Total commercial and industrial loans | |||||||||||||||||||
$ | $ | $ | $ | $ |
(1) | Includes $ |
At December 31, 2018 | |||||||||||||||||||
(in thousands) | Pass | Watch | Special mention | Substandard | Total | ||||||||||||||
Consumer loans | |||||||||||||||||||
Single family | $ | (1) | $ | $ | $ | $ | |||||||||||||
Home equity and other | |||||||||||||||||||
Total consumer loans | |||||||||||||||||||
Commercial real estate loans | |||||||||||||||||||
Non-owner occupied commercial real estate | |||||||||||||||||||
Multifamily | |||||||||||||||||||
Construction/land development | |||||||||||||||||||
Total commercial real estate loans | |||||||||||||||||||
Commercial and industrial loans | |||||||||||||||||||
Owner occupied commercial real estate | |||||||||||||||||||
Commercial business | |||||||||||||||||||
Total commercial and industrial loans | |||||||||||||||||||
$ | $ | $ | $ | $ |
(1) | Includes $ |
At June 30, 2019 | ||||||||||||||||||||||||||||
(in thousands) | 30-59 days past due | 60-89 days past due | 90 days or more past due | Total past due | Current | Total loans | 90 days or more past due and accruing | |||||||||||||||||||||
Consumer loans | ||||||||||||||||||||||||||||
Single family | $ | $ | $ | $ | $ | (1) | $ | $ | (2) | |||||||||||||||||||
Home equity and other | ||||||||||||||||||||||||||||
Total consumer loans | ||||||||||||||||||||||||||||
Commercial real estate loans | ||||||||||||||||||||||||||||
Non-owner occupied commercial real estate | ||||||||||||||||||||||||||||
Multifamily | ||||||||||||||||||||||||||||
Construction/land development | ||||||||||||||||||||||||||||
Total commercial real estate loans | ||||||||||||||||||||||||||||
Commercial and industrial loans | ||||||||||||||||||||||||||||
Owner occupied commercial real estate | ||||||||||||||||||||||||||||
Commercial business | ||||||||||||||||||||||||||||
Total commercial and industrial loans | ||||||||||||||||||||||||||||
$ | $ | $ | $ | $ | $ | $ |
At December 31, 2018 | ||||||||||||||||||||||||||||
(in thousands) | 30-59 days past due | 60-89 days past due | 90 days or more past due | Total past due | Current | Total loans | 90 days or more past due and accruing | |||||||||||||||||||||
Consumer loans | ||||||||||||||||||||||||||||
Single family | $ | $ | $ | $ | $ | (1) | $ | $ | (2) | |||||||||||||||||||
Home equity and other | ||||||||||||||||||||||||||||
Total consumer loans | ||||||||||||||||||||||||||||
Commercial real estate loans | ||||||||||||||||||||||||||||
Non-owner occupied commercial real estate | ||||||||||||||||||||||||||||
Multifamily | ||||||||||||||||||||||||||||
Construction/land development | ||||||||||||||||||||||||||||
Total commercial real estate loans | ||||||||||||||||||||||||||||
Commercial and industrial loans | ||||||||||||||||||||||||||||
Owner occupied commercial real estate | ||||||||||||||||||||||||||||
Commercial business | ||||||||||||||||||||||||||||
Total commercial and industrial loans | ||||||||||||||||||||||||||||
$ | $ | $ | $ | $ | $ | $ |
(1) | Includes $ |
(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. |
At June 30, 2019 | |||||||||||
(in thousands) | Accrual | Nonaccrual | Total | ||||||||
Consumer loans | |||||||||||
Single family (1) | $ | $ | $ | ||||||||
Home equity and other | |||||||||||
Total consumer loans | |||||||||||
Commercial real estate loans | |||||||||||
Non-owner occupied commercial real estate | |||||||||||
Multifamily | |||||||||||
Construction/land development | |||||||||||
Total commercial real estate loans | |||||||||||
Commercial and industrial loans | |||||||||||
Owner occupied commercial real estate | |||||||||||
Commercial business | |||||||||||
Total commercial and industrial loans | |||||||||||
$ | $ | $ |
At December 31, 2018 | |||||||||||
(in thousands) | Accrual | Nonaccrual | Total | ||||||||
Consumer loans | |||||||||||
Single family (1) | $ | $ | $ | ||||||||
Home equity and other | |||||||||||
Total consumer loans | |||||||||||
Commercial real estate loans | |||||||||||
Non-owner occupied commercial real estate | |||||||||||
Multifamily | |||||||||||
Construction/land development | |||||||||||
Total commercial real estate loans | |||||||||||
Commercial and industrial loans | |||||||||||
Owner occupied commercial real estate | |||||||||||
Commercial business | |||||||||||
Total commercial and industrial loans | |||||||||||
$ | $ | $ |
(1) | Includes $ |
Three Months Ended June 30, 2019 | ||||||||||||
(dollars in thousands) | Concession type | Number of loan modifications | Recorded investment | Related charge- offs | ||||||||
Consumer loans | ||||||||||||
Single family | ||||||||||||
Interest rate reduction | $ | $ | ||||||||||
Payment restructure | ||||||||||||
Home equity and other | ||||||||||||
Payment restructure | ||||||||||||
Total consumer | ||||||||||||
Interest rate reduction | ||||||||||||
Payment restructure | ||||||||||||
Commercial and industrial loans | ||||||||||||
Commercial business | ||||||||||||
Payment restructure | ||||||||||||
Total commercial and industrial | ||||||||||||
Payment restructure | ||||||||||||
Total loans | ||||||||||||
Interest rate reduction | ||||||||||||
Payment restructure | ||||||||||||
$ | $ |
Three Months Ended June 30, 2018 | ||||||||||||
(dollars in thousands) | Concession type | Number of loan modifications | Recorded investment | Related charge- offs | ||||||||
Consumer loans | ||||||||||||
Single family | ||||||||||||
Interest rate reduction | $ | $ | ||||||||||
Payment restructure | ||||||||||||
Total consumer | ||||||||||||
Interest rate reduction | ||||||||||||
Payment restructure | ||||||||||||
Total loans | ||||||||||||
Interest rate reduction | ||||||||||||
Payment restructure | ||||||||||||
$ | $ |
Six Months Ended June 30, 2019 | ||||||||||||
(dollars in thousands) | Concession type | Number of loan modifications | Recorded investment | Related charge- offs | ||||||||
Consumer loans | ||||||||||||
Single family | ||||||||||||
Interest rate reduction | $ | $ | ||||||||||
Payment restructure | ||||||||||||
Home equity and other | ||||||||||||
Payment restructure | ||||||||||||
Total consumer | ||||||||||||
Interest rate reduction | ||||||||||||
Payment restructure | ||||||||||||
Commercial real estate loans | ||||||||||||
Construction/land development | ||||||||||||
Payment restructure | ||||||||||||
Total commercial real estate | ||||||||||||
Payment restructure | ||||||||||||
Commercial and industrial loans | ||||||||||||
Owner occupied commercial real estate | ||||||||||||
Payment restructure | ||||||||||||
Commercial business | ||||||||||||
Payment restructure | ||||||||||||
Total commercial and industrial | ||||||||||||
Payment restructure | ||||||||||||
Total loans | ||||||||||||
Interest rate reduction | ||||||||||||
Payment restructure | ||||||||||||
$ | $ |
Six Months Ended June 30, 2018 | ||||||||||||
(dollars in thousands) | Concession type | Number of loan modifications | Recorded investment | Related charge- offs | ||||||||
Consumer loans | ||||||||||||
Single family | ||||||||||||
Interest rate reduction | $ | $ | ||||||||||
Payment restructure | ||||||||||||
Total consumer | ||||||||||||
Interest rate reduction | ||||||||||||
Payment restructure | ||||||||||||
Commercial and industrial loans | ||||||||||||
Commercial business | ||||||||||||
Payment restructure | ||||||||||||
Total commercial and industrial | ||||||||||||
Payment restructure | ||||||||||||
Total loans | ||||||||||||
Interest rate reduction | ||||||||||||
Payment restructure | ||||||||||||
$ | $ |
Three Months Ended June 30, | |||||||||||||
2019 | 2018 | ||||||||||||
(dollars in thousands) | Number of loan relationships that re-defaulted | Recorded investment | Number of loan relationships that re-defaulted | Recorded investment | |||||||||
Consumer loans | |||||||||||||
Single family | $ | $ | |||||||||||
$ | $ |
Six Months Ended June 30, | |||||||||||||
2019 | 2018 | ||||||||||||
(dollars in thousands) | Number of loan relationships that re-defaulted | Recorded investment | Number of loan relationships that re-defaulted | Recorded investment | |||||||||
Consumer loans | |||||||||||||
Single family | $ | $ | |||||||||||
$ | $ |
(in thousands) | At June 30, 2019 | At December 31, 2018 | |||||
Noninterest-bearing accounts (1) | $ | $ | |||||
NOW accounts, 0.00% to 1.44% at June 30, 2019 and December 31, 2018 | |||||||
Statement savings accounts, due on demand, 0.05% to 1.13% at June 30, 2019 and December 31, 2018 | |||||||
Money market accounts, due on demand, 0.00% to 2.40% at June 30, 2019 and December 31, 2018 | |||||||
Certificates of deposit, 0.10% to 3.80% at June 30, 2019 and December 31, 2018 | |||||||
$ | $ |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
(in thousands) | 2019 | 2018 | 2019 | 2018 | |||||||||||
NOW accounts | $ | $ | $ | $ | |||||||||||
Statement savings accounts | |||||||||||||||
Money market accounts | |||||||||||||||
Certificates of deposit | |||||||||||||||
$ | $ | $ | $ |
(in thousands) | At June 30, 2019 | ||
Within one year | $ | ||
One to two years | |||
Two to three years | |||
Three to four years | |||
Four to five years | |||
Thereafter | |||
$ |
At June 30, 2019 | |||||||||||
Notional amount | Fair value derivatives | ||||||||||
(in thousands) | Asset | Liability | |||||||||
Forward sale commitments | $ | $ | $ | ( | ) | ||||||
Interest rate swaptions | |||||||||||
Interest rate lock and purchase loan commitments | ( | ) | |||||||||
Interest rate swaps | ( | ) | |||||||||
Eurodollar futures | |||||||||||
Total derivatives before netting | $ | ( | ) | ||||||||
Netting adjustment/Cash collateral (1) | ( | ) | |||||||||
Carrying value on consolidated statements of financial condition (2) | $ | $ | ( | ) |
At December 31, 2018 | |||||||||||
Notional amount | Fair value derivatives | ||||||||||
(in thousands) | Asset | Liability | |||||||||
Forward sale commitments | $ | $ | $ | ( | ) | ||||||
Interest rate swaptions | |||||||||||
Interest rate lock and purchase loan commitments | ( | ) | |||||||||
Interest rate swaps | ( | ) | |||||||||
Eurodollar futures | ( | ) | |||||||||
Total derivatives before netting | $ | ( | ) | ||||||||
Netting adjustment/Cash collateral (1) | ( | ) | |||||||||
Carrying value on consolidated statements of financial condition(2) | $ | $ | ( | ) |
(1) | Includes cash collateral of $ |
(2) | Includes both continuing and discontinued operations. |
At June 30, 2019 | |||||||||||||||||||
(in thousands) | Gross fair value | Netting adjustments/ Cash collateral (1) | Carrying value | Securities not offset in consolidated balance sheet (disclosure-only netting) | Net amount | ||||||||||||||
Derivative assets | $ | $ | ( | ) | $ | $ | $ | ||||||||||||
Derivative liabilities | ( | ) | ( | ) | ( | ) |
At December 31, 2018 | |||||||||||||||||||
(in thousands) | Gross fair value | Netting adjustments/ Cash collateral (1) | Carrying value | Securities not offset in consolidated balance sheet (disclosure-only netting) | Net amount | ||||||||||||||
Derivative assets | $ | $ | ( | ) | $ | $ | $ | ||||||||||||
Derivative liabilities | ( | ) | ( | ) | ( | ) |
(1) | Includes cash collateral of $ |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
(in thousands) | 2019 | 2018 | 2019 | 2018 | |||||||||||
Recognized in noninterest income:(1) | |||||||||||||||
Net (loss) gain on loan origination and sale activities (2) | $ | ( | ) | $ | $ | ( | ) | $ | |||||||
Loan servicing income (loss) (3) | ( | ) | ( | ) | |||||||||||
Other (4) | |||||||||||||||
$ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) |
(1) | Includes both continuing and discontinued operations. |
(2) | Comprised of interest rate lock commitments ("IRLCs") and forward contracts used as an economic hedge of IRLCs and single family mortgage loans held for sale. |
(3) | Comprised of interest rate swaps, interest rate swaptions, futures and forward contracts used as an economic hedge of single family MSRs. |
(4) | Comprised of interest rate swaps used as an economic hedge of loans held for investment. |
(in thousands) | At June 30, 2019 | At December 31, 2018 | |||||
Single family (1) | $ | $ | |||||
Multifamily DUS® (2) | |||||||
Small Business Administration ("SBA") | |||||||
CRE-Non-DUS® (1) | |||||||
Total loans held for sale (1) | $ | $ |
(1) | Includes loans from discontinued operations of $ |
(2) | Fannie Mae Multifamily Delegated Underwriting and Servicing Program ("DUS"®) is a registered trademark of Fannie Mae. |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
(in thousands) | 2019 | 2018 | 2019 | 2018 | |||||||||||
Single family | $ | $ | $ | $ | |||||||||||
Multifamily DUS® (1) | |||||||||||||||
SBA | |||||||||||||||
CRE-Non-DUS® (1)(2) | |||||||||||||||
Single family (2) | |||||||||||||||
Total loans sold | $ | $ | $ | $ |
(1) | Fannie Mae Multifamily DUS® is a registered trademark of Fannie Mae. |
(2) |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
(in thousands) | 2019 | 2018 | 2019 | 2018 | |||||||||||
Single family: | |||||||||||||||
Servicing value and secondary market gains (1) | $ | $ | $ | $ | |||||||||||
Loan origination and funding fees | |||||||||||||||
Total single family | |||||||||||||||
Multifamily DUS® (2) | |||||||||||||||
SBA | |||||||||||||||
CRE-Non-DUS® (2)(3) | |||||||||||||||
Single family (3) | ( | ) | ( | ) | ( | ) | ( | ) | |||||||
Total gain on loan origination and sale activities (4) | $ | $ | $ | $ |
(1) | Comprised of gains and losses on interest rate lock and purchase loan commitments (which considers the value of servicing), single family loans held for sale, forward sale commitments used to economically hedge secondary market activities, and changes in the Company's repurchase liability for loans that have been sold. |
(2) | Fannie Mae Multifamily DUS® is a registered trademark of Fannie Mae. |
(in thousands) | At June 30, 2019 | At December 31, 2018 | |||||
Single family (1) | |||||||
U.S. government and agency | $ | $ | |||||
Other | |||||||
Commercial | |||||||
Multifamily DUS® (2) | |||||||
Other | |||||||
Total loans serviced for others | $ | $ |
(1) | Includes both continuing and discontinued operations at December 31, 2018. |
(2) | Fannie Mae Multifamily DUS® is a registered trademark of Fannie Mae. |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
(in thousands) | 2019 | 2018 | 2019 | 2018 | |||||||||||
Balance, beginning of period | $ | $ | $ | $ | |||||||||||
Additions, net of adjustments (1) | ( | ) | |||||||||||||
Realized losses (2) | ( | ) | ( | ) | ( | ) | ( | ) | |||||||
Balance, end of period | $ | $ | $ | $ |
(1) | Includes additions for new loan sales and changes in estimated probable future repurchase losses on previously sold loans. |
(2) | Includes principal losses and accrued interest on repurchased loans, "make-whole" settlements, settlements with claimants and certain related expense. |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
(in thousands) | 2019 | 2018 | 2019 | 2018 | |||||||||||
Servicing income, net: | |||||||||||||||
Servicing fees and other | $ | $ | $ | $ | |||||||||||
Changes in fair value of single family MSRs due to modeled amortization (1) | ( | ) | ( | ) | ( | ) | ( | ) | |||||||
Amortization of multifamily and SBA MSRs | ( | ) | ( | ) | ( | ) | ( | ) | |||||||
Risk management, single family MSRs: | |||||||||||||||
Changes in fair value of MSRs due to changes in market inputs and/or model updates (2)(3) | ( | ) | ( | ) | |||||||||||
Net gain (loss) from derivatives economically hedging MSR | ( | ) | ( | ) | |||||||||||
( | ) | ( | ) | ( | ) | ( | ) | ||||||||
Loan servicing income (4) | $ | ( | ) | $ | $ | $ |
(1) | Represents changes due to collection/realization of expected cash flows and curtailments. |
(2) | Principally reflects changes in market inputs, which include current market interest rates and prepayment model updates, both of which affect future prepayment speed and cash flow projections. |
(3) | Includes pre-tax loss of $ |
(4) | Includes $( |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||
(rates per annum) (1) | 2019 | 2018 | 2019 | 2018 | |||||||
Constant prepayment rate ("CPR") (2) | % | % | % | % | |||||||
Discount rate (3) | % | % | % | % |
(1) | Weighted average rates for sales during the period for sales of loans with similar characteristics. |
(2) | Represents the expected lifetime average. |
(3) | Discount rate is a rate based on market observations. |
(dollars in thousands) | At June 30, 2019 | ||
Fair value of single family MSR | $ | ||
Expected weighted-average life (in years) | |||
Constant prepayment rate (1) | % | ||
Impact on fair value of 25 basis points adverse change in interest rates | $ | ( | ) |
Impact on fair value of 50 basis points adverse change in interest rates | $ | ( | ) |
Discount rate | % | ||
Impact on fair value of 100 basis points increase | $ | ( | ) |
Impact on fair value of 200 basis points increase | $ | ( | ) |
(1) | Represents the expected lifetime average. |
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
(in thousands) | 2019 | 2018 | 2019 | 2018 | ||||||||||||
Beginning balance | $ | $ | $ | $ | ||||||||||||
Additions and amortization: | ||||||||||||||||
Originations | ||||||||||||||||
Sale of single family MSRs | ( | ) | ( | ) | ( | ) | ||||||||||
Changes due to modeled amortization (1) | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
Net additions and amortization | ( | ) | ( | ) | ( | ) | ||||||||||
Changes in fair value of MSRs due to changes in market inputs and/or model updates (2) | ( | ) | ( | ) | ||||||||||||
Ending balance | $ | $ | $ | $ |
(1) | Represents changes due to collection/realization of expected cash flows and curtailments. |
(2) | Principally reflects changes in market inputs, which include current market interest rates and prepayment model updates, both of which affect future prepayment speed and cash flow projections. |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
(in thousands) | 2019 | 2018 | 2019 | 2018 | |||||||||||
Beginning balance | $ | $ | $ | $ | |||||||||||
Origination | |||||||||||||||
Amortization | ( | ) | ( | ) | ( | ) | ( | ) | |||||||
Ending balance | $ | $ | $ | $ |
(in thousands) | At June 30, 2019 | ||
Remainder of 2019 | $ | ||
2020 | |||
2021 | |||
2022 | |||
2023 | |||
2024 | |||
2025 and thereafter | |||
Carrying value of multifamily MSR | $ |
Asset/Liability class | Valuation methodology, inputs and assumptions | Classification | ||
Investment securities | ||||
Investment securities available for sale | Observable market prices of identical or similar securities are used where available. | Level 2 recurring fair value measurement. | ||
If market prices are not readily available, value is based on discounted cash flows using the following significant inputs: • Expected prepayment speeds • Estimated credit losses • Market liquidity adjustments | Level 3 recurring fair value measurement. | |||
Loans held for sale | ||||
Single family loans, excluding loans transferred from held for investment | Fair value is based on observable market data, including: • Quoted market prices, where available • Dealer quotes for similar loans • Forward sale commitments | Level 2 recurring fair value measurement. | ||
When not derived from observable market inputs, fair value is based on discounted cash flows, which considers the following inputs: • Benchmark yield curve • Estimated discount spread to the benchmark yield curve • Expected prepayment speeds | Estimated fair value classified as Level 3. | |||
Mortgage servicing rights | ||||
Single family MSRs | For information on how the Company measures the fair value of its single family MSRs, including key economic assumptions and the sensitivity of fair value to changes in those assumptions, see Note 7, Mortgage Banking Operations. | Level 3 recurring fair value measurement. | ||
Derivatives | ||||
Eurodollar futures | Fair value is based on closing exchange prices. | Level 1 recurring fair value measurement. | ||
Interest rate swaps Interest rate swaptions Forward sale commitments | Fair value is based on quoted prices for identical or similar instruments, when available. When quoted prices are not available, fair value is based on internally developed modeling techniques, which require the use of multiple observable market inputs including: • Forward interest rates • Interest rate volatilities | Level 2 recurring fair value measurement. | ||
Interest rate lock and purchase loan commitments | The fair value considers several factors including: • Fair value of the underlying loan based on quoted prices in the secondary market, when available. • Value of servicing • Fall-out factor | Level 3 recurring fair value measurement. |
(in thousands) | Fair Value at June 30, 2019 | Level 1 | Level 2 | Level 3 | |||||||||||
Assets: | |||||||||||||||
Investment securities available for sale | |||||||||||||||
Mortgage backed securities: | |||||||||||||||
Residential | $ | $ | $ | $ | |||||||||||
Commercial | |||||||||||||||
Collateralized mortgage obligations: | |||||||||||||||
Residential | |||||||||||||||
Commercial | |||||||||||||||
Municipal bonds | |||||||||||||||
Corporate debt securities | |||||||||||||||
U.S. Treasury securities | |||||||||||||||
Agency debentures | |||||||||||||||
Single family mortgage servicing rights | |||||||||||||||
Single family loans held for sale (1) | |||||||||||||||
Single family loans held for investment | |||||||||||||||
Derivatives (1) | |||||||||||||||
Eurodollar futures | |||||||||||||||
Forward sale commitments | |||||||||||||||
Interest rate swaptions | |||||||||||||||
Interest rate lock and purchase loan commitments | |||||||||||||||
Interest rate swaps | |||||||||||||||
Total assets | $ | $ | $ | $ | |||||||||||
Liabilities: | |||||||||||||||
Derivatives | |||||||||||||||
Forward sale commitments | $ | $ | $ | ||||||||||||
Interest rate lock and purchase loan commitments | |||||||||||||||
Interest rate swaps | |||||||||||||||
Total liabilities | $ | $ | $ | $ |
(in thousands) | Fair Value at December 31, 2018 | Level 1 | Level 2 | Level 3 | |||||||||||
Assets: | |||||||||||||||
Investment securities available for sale | |||||||||||||||
Mortgage backed securities: | |||||||||||||||
Residential | $ | $ | $ | $ | |||||||||||
Commercial | |||||||||||||||
Collateralized mortgage obligations: | |||||||||||||||
Residential | |||||||||||||||
Commercial | |||||||||||||||
Municipal bonds | |||||||||||||||
Corporate debt securities | |||||||||||||||
U.S. Treasury securities | |||||||||||||||
Agency debentures | |||||||||||||||
Single family mortgage servicing rights | |||||||||||||||
Single family loans held for sale | |||||||||||||||
Single family loans held for investment | |||||||||||||||
Derivatives | |||||||||||||||
Forward sale commitments | |||||||||||||||
Interest rate swaptions | |||||||||||||||
Interest rate lock and purchase loan commitments | |||||||||||||||
Interest rate swaps | |||||||||||||||
Total assets | $ | $ | $ | $ | |||||||||||
Liabilities: | |||||||||||||||
Derivatives | |||||||||||||||
Eurodollar futures | $ | $ | $ | $ | |||||||||||
Forward sale commitments | |||||||||||||||
Interest rate lock and purchase loan commitments | |||||||||||||||
Interest rate swaps | |||||||||||||||
Total liabilities | $ | $ | $ | $ |
(dollars in thousands) | At June 30, 2019 | ||||||||||||
Fair Value | Valuation Technique | Significant Unobservable Input | Low | High | Weighted Average | ||||||||
Investment securities available for sale (1) | $ | Income approach | Implied spread to benchmark interest rate curve |
(1) | In conjunction with adopting ASU 2017-12 in the first quarter of 2019, we transferred $ |
(dollars in thousands) | At June 30, 2019 | ||||||||||||
Fair Value | Valuation Technique | Significant Unobservable Input | Low | High | Weighted Average | ||||||||
Loans held for investment, fair value option | $ | Income approach | Implied spread to benchmark interest rate curve |
(dollars in thousands) | At December 31, 2018 | ||||||||||||
Fair Value | Valuation Technique | Significant Unobservable Input | Low | High | Weighted Average | ||||||||
Loans held for investment, fair value option | $ | Income approach | Implied spread to benchmark interest rate curve |
(dollars in thousands) | At June 30, 2019 | ||||||||||||
Fair Value | Valuation Technique | Significant Unobservable Input | Low | High | Weighted Average | ||||||||
Loans held for sale, fair value option | $ | Income approach | Implied spread to benchmark interest rate curve | ||||||||||
Market price movement from comparable bond |
(dollars in thousands) | At December 31, 2018 | ||||||||||||
Fair Value | Valuation Technique | Significant Unobservable Input | Low | High | Weighted Average | ||||||||
Loans held for sale, fair value option | $ | Income approach | Implied spread to benchmark interest rate curve | ||||||||||
Market price movement from comparable bond |
(dollars in thousands) | At June 30, 2019 | ||||||||||||
Fair Value | Valuation Technique | Significant Unobservable Input | Low | High | Weighted Average | ||||||||
Interest rate lock and purchase loan commitments, net | $ | Income approach | Fall-out factor | ||||||||||
Value of servicing |
(dollars in thousands) | At December 31, 2018 | ||||||||||||
Fair Value | Valuation Technique | Significant Unobservable Input | Low | High | Weighted Average | ||||||||
Interest rate lock and purchase loan commitments, net | $ | Income approach | Fall-out factor | ||||||||||
Value of servicing |
Three Months Ended June 30, 2019 | ||||||||||||||||||||||||
Beginning balance | Additions | Transfers | Payoffs/Sales | Change in mark to market | Ending balance | |||||||||||||||||||
(in thousands) | ||||||||||||||||||||||||
Investment securities available for sale (1) | $ | $ | $ | $ | ( | ) | $ | $ |
(1) | In conjunction with adopting ASU 2017-12 in the first quarter of 2019, we transferred $ |
Six Months Ended June 30, 2019 | ||||||||||||||||||||||||
Beginning balance | Additions | Transfers | Payoffs/Sales | Change in mark to market | Ending balance | |||||||||||||||||||
(in thousands) | ||||||||||||||||||||||||
Investment securities available for sale (1) | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ |
(1) | In conjunction with adopting ASU 2017-12 in the first quarter of 2019, we transferred $ |
Three Months Ended June 30, 2019 | ||||||||||||||||||||||||
Beginning balance | Additions | Transfers | Payoffs/Sales | Change in mark to market | Ending balance | |||||||||||||||||||
(in thousands) | ||||||||||||||||||||||||
Loans held for sale | $ | $ | $ | $ | ( | ) | $ | $ | ||||||||||||||||
Loans held for investment | ( | ) | ( | ) |
Three Months Ended June 30, 2018 | ||||||||||||||||||||||||
Beginning balance | Additions | Transfers | Payoffs/Sales | Change in mark to market | Ending balance | |||||||||||||||||||
(in thousands) | ||||||||||||||||||||||||
Loans held for sale | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | ||||||||||||||
Loans held for investment | ( | ) | ( | ) |
Six Months Ended June 30, 2019 | ||||||||||||||||||||||||
Beginning balance | Additions | Transfers | Payoffs/Sales | Change in mark to market | Ending balance | |||||||||||||||||||
(in thousands) | ||||||||||||||||||||||||
Loans held for sale | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | ||||||||||||||
Loans held for investment | ( | ) |
Six Months Ended June 30, 2018 | ||||||||||||||||||||||||
Beginning balance | Additions | Transfers | Payoffs/Sales | Change in mark to market | Ending balance | |||||||||||||||||||
(in thousands) | ||||||||||||||||||||||||
Loans held for sale | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | ||||||||||||||
Loans held for investment | ( | ) | ( | ) |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
(in thousands) | 2019 | 2018 | 2019 | 2018 | |||||||||||
Beginning balance, net | $ | $ | $ | $ | |||||||||||
Total realized/unrealized gains | |||||||||||||||
Settlements | ( | ) | ( | ) | ( | ) | ( | ) | |||||||
Ending balance, net | $ | $ | $ | $ |
At or for the Three Months Ended June 30, 2019 | |||||||||||||||||||
(in thousands) | Fair Value of Assets Held at June 30, 2019 | Level 1 | Level 2 | Level 3 | Total Gains (Losses) | ||||||||||||||
Loans held for investment (1) | $ | $ | $ | $ | $ | ( | ) | ||||||||||||
Total | $ | $ | $ | $ | $ | ( | ) |
At or for the Three Months Ended June 30, 2018 | |||||||||||||||||||
(in thousands) | Fair Value of Assets Held at June 30, 2018 | Level 1 | Level 2 | Level 3 | Total Gains (Losses) | ||||||||||||||
Loans held for investment (1) | $ | $ | $ | $ | $ | ( | ) | ||||||||||||
Total | $ | $ | $ | $ | $ | ( | ) |
At or for the Six Months Ended June 30, 2019 | |||||||||||||||||||
(in thousands) | Fair Value of Assets Held at June 30, 2019 | Level 1 | Level 2 | Level 3 | Total Gains (Losses) | ||||||||||||||
Loans held for investment (1) | $ | $ | $ | $ | $ | ( | ) | ||||||||||||
Total | $ | $ | $ | $ | $ | ( | ) |
At or for the Six Months Ended June 30, 2018 | |||||||||||||||||||
(in thousands) | Fair Value of Assets Held at June 30, 2018 | Level 1 | Level 2 | Level 3 | Total Gains (Losses) | ||||||||||||||
Loans held for investment (1) | $ | $ | $ | $ | $ | ( | ) | ||||||||||||
Total | $ | $ | $ | $ | $ | ( | ) |
At June 30, 2019 | |||||||||||||||||||
(in thousands) | Carrying Value | Fair Value | Level 1 | Level 2 | Level 3 | ||||||||||||||
Assets: | |||||||||||||||||||
Cash and cash equivalents | $ | $ | $ | $ | $ | ||||||||||||||
Investment securities held to maturity | |||||||||||||||||||
Loans held for investment | |||||||||||||||||||
Loans held for sale – multifamily and other | |||||||||||||||||||
Mortgage servicing rights – multifamily | |||||||||||||||||||
Federal Home Loan Bank stock | |||||||||||||||||||
Liabilities: | |||||||||||||||||||
Time deposits | $ | $ | $ | $ | $ | ||||||||||||||
Federal Home Loan Bank advances | |||||||||||||||||||
Long-term debt |
At December 31, 2018 | |||||||||||||||||||
(in thousands) | Carrying Value | Fair Value | Level 1 | Level 2 | Level 3 | ||||||||||||||
Assets: | |||||||||||||||||||
Cash and cash equivalents | $ | $ | $ | $ | $ | ||||||||||||||
Investment securities held to maturity | |||||||||||||||||||
Loans held for investment | |||||||||||||||||||
Loans held for sale – multifamily and other | |||||||||||||||||||
Mortgage servicing rights – multifamily | |||||||||||||||||||
Federal Home Loan Bank stock | |||||||||||||||||||
Liabilities: | |||||||||||||||||||
Time deposits | $ | $ | $ | $ | $ | ||||||||||||||
Federal Home Loan Bank advances | |||||||||||||||||||
Federal funds purchased and securities sold under agreements to repurchase | |||||||||||||||||||
Long-term debt |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
(in thousands, except share and per share data) | 2019 | 2018 | 2019 | 2018 | |||||||||||
EPS numerator: | |||||||||||||||
Income from continuing operations | $ | $ | $ | $ | |||||||||||
Undistributed stock dividends share repurchase | ( | ) | ( | ) | |||||||||||
Allocated undistributed earnings in share repurchase | ( | ) | ( | ) | |||||||||||
Income from continuing operations available to common shareholders | |||||||||||||||
(Loss) income from discontinued operations | ( | ) | ( | ) | |||||||||||
Net (loss) income | $ | ( | ) | $ | $ | ( | ) | $ | |||||||
EPS denominator: | |||||||||||||||
Weighted average shares:(2) | |||||||||||||||
Basic weighted-average number of common shares outstanding | |||||||||||||||
Dilutive effect of outstanding common stock equivalents (1) | |||||||||||||||
Diluted weighted-average number of common stock outstanding | |||||||||||||||
Basic earnings per share: | |||||||||||||||
Income from continuing operations | $ | $ | $ | $ | |||||||||||
(Loss) income from discontinued operations | ( | ) | ( | ) | |||||||||||
Basic earnings per share | $ | ( | ) | $ | $ | ( | ) | $ | |||||||
Diluted earnings per share: | |||||||||||||||
Income from continuing operations | $ | $ | $ | $ | |||||||||||
(Loss) income from discontinued operations | ( | ) | ( | ) | |||||||||||
Diluted earnings per share | $ | ( | ) | $ | $ | ( | ) | $ |
(1) | Excluded from the computation of diluted earnings per share (due to their antidilutive effect) for the three and six months ended June 30, 2019 and 2018 were certain stock options and unvested restricted stock issued to key senior management personnel and directors of the Company. The aggregate number of common stock equivalents related to such options and unvested restricted shares, which could potentially be dilutive in future periods, was |
(2) | On July 11, 2019 we repurchased |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||
(in thousands) | 2019 | 2019 | |||||
Operating lease cost | $ | $ | |||||
Finance lease cost: | |||||||
Amortization of right-of-use assets | |||||||
Interest on lease liabilities | |||||||
Short-term lease | |||||||
Variable lease cost | |||||||
Sublease income | ( | ) | ( | ) | |||
Total lease cost | $ | $ |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||
(in thousands) | 2019 | 2019 | |||||
Cash paid for amounts included in the measurement of lease liabilities: | |||||||
Operating cash flows from operating leases | $ | $ | |||||
Operating cash flows from finance leases | |||||||
Financing cash flows from finance leases | |||||||
Right-of-use assets obtained in exchange for lease obligations: | |||||||
Operating leases | $ | ( | ) | $ | ( | ) | |
Finance leases | ( | ) | ( | ) |
(in thousands, except lease term and discount rate) | June 30, 2019 | |||
Operating lease right-of-use assets | $ | |||
Operating lease liabilities | ||||
Finance lease right-of-use assets | $ | |||
Finance lease liabilities | ||||
Weighted Average Remaining lease term in years | ||||
Operating leases | ||||
Finance leases | ||||
Weighted Average Discount Rate | ||||
Operating leases | % | |||
Finance leases | % |
Operating Leases | Finance Leases | |||||||
Year ended December 31, | ||||||||
2019 (excluding the six months ended June 30, 2019) | $ | $ | ||||||
2020 | ||||||||
2021 | ||||||||
2022 | ||||||||
2023 | ||||||||
2024 | ||||||||
Thereafter | ||||||||
Total lease payments | ||||||||
Less imputed interest | ||||||||
Total | $ | $ |
(in thousands) | At December 31, 2018 | ||
2019 | $ | ||
2020 | |||
2021 | |||
2022 | |||
2023 | |||
2024 and thereafter | |||
Total minimum payments | $ |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
(in thousands) | 2019 | 2018 | 2019 | 2018 | |||||||||||
Beginning balance | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||
Cumulative effect of adoption of new accounting standards (1) | — | — | ( | ) | |||||||||||
Other comprehensive income (loss) before reclassifications | ( | ) | ( | ) | |||||||||||
Amounts reclassified from accumulated other comprehensive income (loss) | ( | ) | ( | ) | ( | ) | |||||||||
Net current-period other comprehensive income (loss) | ( | ) | ( | ) | |||||||||||
Ending balance | $ | $ | ( | ) | $ | $ | ( | ) |
(1) | Reflects the January 1, 2019 adoption of ASU 2018-02 and ASU 2017-12. For additional information see Note 1, Summary of Significant Accounting Policies. |
Affected Line Item in the Consolidated Statements of Operations | Amount Reclassified from Accumulated Other Comprehensive Income (Loss) | |||||||||||||||
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
(in thousands) | 2019 | 2018 | 2019 | 2018 | ||||||||||||
Gain (loss) on sale of investment securities available for sale | $ | $ | $ | ( | ) | $ | ||||||||||
Income tax expense (benefit) | ( | ) | ||||||||||||||
Total, net of tax | $ | $ | $ | ( | ) | $ |
2019 | 2018 | |||||||||||||||||||||||||||||||
At and for the three months ended June 30 | Facility-related costs | Personnel-related costs | Other costs | Total | Facility-related costs | Personnel- related costs | Other costs | Total | ||||||||||||||||||||||||
(in thousands) | ||||||||||||||||||||||||||||||||
Beginning balance | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
Restructuring charges | ||||||||||||||||||||||||||||||||
Costs paid or otherwise settled | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||
Ending balance | $ | $ | $ | $ | $ | $ | $ | $ |
2019 | 2018 | |||||||||||||||||||||||||||||||
At and for the six months ended June 30 | Facility-related costs | Personnel-related costs | Other costs | Total | Facility-related costs | Personnel- related costs | Other costs | Total | ||||||||||||||||||||||||
(in thousands) | ||||||||||||||||||||||||||||||||
Beginning balance | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
Restructuring charges | ||||||||||||||||||||||||||||||||
Costs paid or otherwise settled | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||
Ending balance | $ | $ | $ | $ | $ | $ | $ | $ |
ITEM 2 | MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
At or for the Three Months Ended | At or for the Six Months Ended | ||||||||||||||||||||||||||
(dollars in thousands, except share data) | June 30, 2019 | Mar. 31, 2019 | Dec. 31, 2018 | Sept. 30, 2018 | June 30, 2018 | June 30, 2019 | June 30, 2018 | ||||||||||||||||||||
Income statement data (for the period ended): | |||||||||||||||||||||||||||
Net interest income | $ | 49,187 | $ | 47,557 | $ | 48,910 | $ | 47,860 | $ | 47,745 | $ | 96,744 | $ | 93,193 | |||||||||||||
Provision for credit losses | — | 1,500 | 500 | 750 | 1,000 | 1,500 | 1,750 | ||||||||||||||||||||
Noninterest income | 19,829 | 8,092 | 10,382 | 10,650 | 8,405 | 27,921 | 15,501 | ||||||||||||||||||||
Noninterest expense | 58,832 | 47,846 | 47,892 | 47,914 | 49,964 | 106,678 | 99,435 | ||||||||||||||||||||
Income from continuing operations before income taxes | 10,184 | 6,303 | 10,900 | 9,846 | 5,186 | 16,487 | 7,509 | ||||||||||||||||||||
Income tax expense (benefit) from continuing operations | 1,292 | 1,245 | (1,575 | ) | 1,757 | 1,015 | 2,537 | 1,584 | |||||||||||||||||||
Income from continuing operations | 8,892 | 5,058 | 12,475 | 8,089 | 4,171 | 13,950 | 5,925 | ||||||||||||||||||||
(Loss) income from discontinued operations before income taxes | (16,678 | ) | (8,440 | ) | 3,959 | 4,561 | 3,641 | (25,118 | ) | 9,090 | |||||||||||||||||
Income tax (benefit) expense from discontinued operations | (2,198 | ) | (1,667 | ) | 1,207 | 815 | 713 | (3,865 | ) | 2,050 | |||||||||||||||||
(Loss) income from discontinued operations | (14,480 | ) | (6,773 | ) | 2,752 | 3,746 | 2,928 | (21,253 | ) | 7,040 | |||||||||||||||||
Net (loss) income | $ | (5,588 | ) | $ | (1,715 | ) | $ | 15,227 | $ | 11,835 | $ | 7,099 | $ | (7,303 | ) | $ | 12,965 | ||||||||||
Basic income (loss) per common share: | |||||||||||||||||||||||||||
Income from continuing operations | $ | 0.32 | $ | 0.19 | $ | 0.46 | $ | 0.30 | $ | 0.15 | $ | 0.51 | $ | 0.22 | |||||||||||||
(Loss) income from discontinued operations | (0.54 | ) | (0.25 | ) | 0.10 | 0.14 | 0.11 | (0.79 | ) | 0.26 | |||||||||||||||||
Basic (loss) income per common share | $ | (0.22 | ) | $ | (0.06 | ) | $ | 0.56 | $ | 0.44 | $ | 0.26 | $ | (0.28 | ) | $ | 0.48 | ||||||||||
Diluted income (loss) per common share: | |||||||||||||||||||||||||||
Income from continuing operations | $ | 0.32 | $ | 0.19 | $ | 0.46 | $ | 0.30 | $ | 0.15 | $ | 0.51 | $ | 0.22 | |||||||||||||
(Loss) income from discontinued operations | (0.54 | ) | (0.25 | ) | 0.10 | 0.14 | 0.11 | (0.79 | ) | 0.26 | |||||||||||||||||
Diluted (loss) income per common share | $ | (0.22 | ) | $ | (0.06 | ) | $ | 0.56 | $ | 0.44 | $ | 0.26 | $ | (0.28 | ) | $ | 0.48 | ||||||||||
Common shares outstanding | 26,085,164 | 27,038,257 | 26,995,348 | 26,989,742 | 26,978,229 | 26,085,164 | 26,978,229 | ||||||||||||||||||||
Weighted average number of shares outstanding: | |||||||||||||||||||||||||||
Basic | 26,619,216 | 27,021,507 | 26,993,885 | 26,985,425 | 26,976,892 | 26,820,361 | 26,952,178 | ||||||||||||||||||||
Diluted | 26,802,130 | 27,185,175 | 27,175,522 | 27,181,688 | 27,156,329 | 26,993,653 | 27,157,664 | ||||||||||||||||||||
Shareholders' equity per share | $ | 27.75 | $ | 27.63 | $ | 27.39 | $ | 26.48 | $ | 26.19 | $ | 27.75 | $ | 26.19 | |||||||||||||
Financial position (at period end): | |||||||||||||||||||||||||||
Cash and cash equivalents | $ | 99,602 | $ | 67,690 | $ | 57,982 | $ | 59,006 | $ | 176,218 | $ | 99,602 | $ | 176,218 | |||||||||||||
Investment securities | 803,819 | 816,878 | 923,253 | 903,685 | 907,457 | 803,819 | 907,457 | ||||||||||||||||||||
Loans held for sale | 145,252 | 56,928 | 77,324 | 103,763 | 110,258 | 145,252 | 110,258 | ||||||||||||||||||||
Loans held for investment, net | 5,287,859 | 5,345,969 | 5,075,371 | 5,026,301 | 4,883,310 | 5,287,859 | 4,883,310 | ||||||||||||||||||||
Loan servicing rights | 94,950 | 95,942 | 103,374 | 106,592 | 99,595 | 94,950 | 99,595 | ||||||||||||||||||||
Other real estate owned | 1,753 | 838 | 455 | 751 | 752 | 1,753 | 752 | ||||||||||||||||||||
Total assets | 7,200,790 | 7,171,405 | 7,042,221 | 7,029,082 | 7,163,877 | 7,200,790 | 7,163,877 | ||||||||||||||||||||
Deposits | 5,590,893 | 5,178,334 | 4,888,558 | 4,943,545 | 4,901,164 | 5,590,893 | 4,901,164 | ||||||||||||||||||||
Federal Home Loan Bank advances | 387,590 | 599,590 | 932,590 | 816,591 | 1,008,613 | 387,590 | 1,008,613 | ||||||||||||||||||||
Federal funds purchased and securities sold under agreements to repurchase | — | 27,000 | 19,000 | 55,000 | — | — | — | ||||||||||||||||||||
Shareholders' equity | $ | 723,910 | $ | 747,031 | $ | 739,520 | $ | 714,782 | $ | 706,459 | $ | 723,910 | $ | 706,459 | |||||||||||||
Financial position (averages): | |||||||||||||||||||||||||||
Investment securities | $ | 815,287 | $ | 891,813 | $ | 917,300 | $ | 915,439 | $ | 911,678 | $ | 853,339 | $ | 913,609 | |||||||||||||
Loans held for investment | 5,435,474 | 5,236,387 | 5,035,953 | 4,945,065 | 4,836,644 | 5,336,480 | 4,739,850 | ||||||||||||||||||||
Total interest-earning assets | 6,699,821 | 6,471,930 | 6,460,666 | 6,457,129 | 6,369,673 | 6,586,504 | 6,232,315 | ||||||||||||||||||||
Total interest-bearing deposits | 4,361,850 | 4,145,778 | 4,212,150 | 4,110,179 | 4,046,297 | 4,254,411 | 3,940,829 | ||||||||||||||||||||
Federal Home Loan Bank advances | 594,810 | 833,478 | 828,648 | 838,569 | 943,539 | 713,485 | 901,230 | ||||||||||||||||||||
Federal funds purchased and securities sold under agreements to repurchase | 73,189 | 47,778 | 26,421 | 15,192 | 5,253 | 60,553 | 6,287 | ||||||||||||||||||||
Total interest-bearing liabilities | 5,165,939 | 5,159,853 | 5,192,654 | 5,094,216 | 5,121,085 | 5,162,912 | 4,973,992 | ||||||||||||||||||||
Shareholders' equity | $ | 741,330 | $ | 750,466 | $ | 733,969 | $ | 760,446 | $ | 751,593 | $ | 745,873 | $ | 734,761 |
At or for the Three Months Ended | At or for the Six Months Ended | ||||||||||||||||||||||||||
(dollars in thousands, except share data) | June 30, 2019 | Mar. 31, 2019 | Dec. 31, 2018 | Sept. 30, 2018 | June 30, 2018 | June 30, 2019 | June 30, 2018 | ||||||||||||||||||||
Financial performance, continuing and discontinued (7): | |||||||||||||||||||||||||||
Return on average shareholders' equity (1) | (3.02 | )% | (0.91 | )% | 8.30 | % | 6.23 | % | 3.78 | % | (1.96 | )% | 3.53 | % | |||||||||||||
Return on average assets | (0.31 | )% | (0.10 | )% | 0.86 | % | 0.66 | % | 0.40 | % | (0.20 | )% | 0.37 | % | |||||||||||||
Net interest margin (2) | 3.11 | % | 3.11 | % | 3.19 | % | 3.20 | % | 3.25 | % | 3.11 | % | 3.25 | % | |||||||||||||
Efficiency ratio (3) | 106.83 | % | 100.66 | % | 84.64 | % | 86.19 | % | 91.84 | % | 103.71 | % | 92.01 | % | |||||||||||||
Asset quality: | |||||||||||||||||||||||||||
Allowance for credit losses | $ | 44,628 | $ | 44,536 | $ | 42,913 | $ | 41,854 | $ | 40,982 | $ | 44,628 | $ | 40,982 | |||||||||||||
Allowance for loan losses/total loans (4) | 0.81 | % | 0.80 | % | 0.81 | % | 0.80 | % | 0.80 | % | 0.81 | % | 0.80 | % | |||||||||||||
Allowance for loan losses/nonaccrual loans | 435.59 | % | 271.99 | % | 356.92 | % | 419.57 | % | 409.97 | % | 435.59 | % | 409.97 | % | |||||||||||||
Total nonaccrual loans (5)(6) | $ | 9,930 | $ | 15,874 | $ | 11,619 | $ | 9,638 | $ | 9,630 | $ | 9,930 | $ | 9,630 | |||||||||||||
Nonaccrual loans/total loans | 0.19 | % | 0.29 | % | 0.23 | % | 0.19 | % | 0.20 | % | 0.19 | % | 0.20 | % | |||||||||||||
Other real estate owned | $ | 1,753 | $ | 838 | $ | 455 | $ | 751 | $ | 751 | $ | 1,753 | $ | 751 | |||||||||||||
Total nonperforming assets (6) | $ | 11,683 | $ | 16,712 | $ | 12,074 | $ | 10,389 | $ | 10,381 | $ | 11,683 | $ | 10,381 | |||||||||||||
Nonperforming assets/total assets | 0.16 | % | 0.23 | % | 0.17 | % | 0.15 | % | 0.14 | % | 0.16 | % | 0.14 | % | |||||||||||||
Net (recoveries) charge-offs | $ | (92 | ) | $ | (123 | ) | $ | (559 | ) | $ | (122 | ) | $ | 464 | $ | (215 | ) | $ | (116 | ) | |||||||
Regulatory capital ratios for the Bank: | |||||||||||||||||||||||||||
Tier 1 leverage capital (to average assets) | 9.86 | % | 11.17 | % | 10.15 | % | 9.70 | % | 9.72 | % | 9.86 | % | 9.72 | % | |||||||||||||
Common equity tier 1 risk-based capital (to risk-weighted assets) | 13.26 | % | 14.88 | % | 13.82 | % | 13.26 | % | 12.69 | % | 13.26 | % | 12.69 | % | |||||||||||||
Tier 1 risk-based capital (to risk-weighted assets) | 13.26 | % | 14.88 | % | 13.82 | % | 13.26 | % | 12.69 | % | 13.26 | % | 12.69 | % | |||||||||||||
Total risk-based capital (to risk-weighted assets) | 14.15 | % | 15.77 | % | 14.72 | % | 14.15 | % | 13.52 | % | 14.15 | % | 13.52 | % | |||||||||||||
Regulatory capital ratios for the Company: | |||||||||||||||||||||||||||
Tier 1 leverage capital (to average assets) | 10.12 | % | 10.73 | % | 9.51 | % | 9.17 | % | 9.18 | % | 10.12 | % | 9.18 | % | |||||||||||||
Tier 1 common equity risk-based capital (to risk-weighted assets) | 11.99 | % | 12.62 | % | 11.26 | % | 10.84 | % | 10.48 | % | 11.99 | % | 10.48 | % | |||||||||||||
Tier 1 risk-based capital (to risk-weighted assets) | 13.06 | % | 13.68 | % | 12.37 | % | 11.94 | % | 11.56 | % | 13.06 | % | 11.56 | % | |||||||||||||
Total risk-based capital (to risk-weighted assets) | 13.95 | % | 14.58 | % | 13.27 | % | 12.82 | % | 12.38 | % | 13.95 | % | 12.38 | % |
(1) | Net earnings available to common shareholders divided by average shareholders' equity. |
(2) | Net interest income divided by total average interest-earning assets on a tax equivalent basis. |
(3) | Noninterest expense divided by total revenue (net interest income and noninterest income). |
(4) | Includes loans acquired with bank acquisitions. Excluding acquired loans, allowance for loan losses /total loans was 0.86%, 0.86%, 0.85%, 0.84% and 0.85% at June 30, 2019, March 31, 2019, December 31, 2018, September 30, 2018 and June 30, 2018, respectively. |
(5) | Generally, loans are placed on nonaccrual status when they are 90 or more days past due, unless payment is insured by the FHA or guaranteed by the VA. |
(6) | Includes $1.4 million, $1.7 million, $1.9 million, $1.4 million and $1.4 million of nonperforming loans guaranteed by the SBA at June 30, 2019, March 31, 2019, December 31, 2018, September 30, 2018 and June 30, 2018, respectively. |
(7) | Consolidated operations include both continuing and discontinued operations. |
At or for the Three Months Ended | ||||||||||||||||||||
(in thousands) | June 30, 2019 | Mar. 31, 2019 | Dec. 31, 2018 | Sept. 30, 2018 | June 30, 2018 | |||||||||||||||
SUPPLEMENTAL DATA: | ||||||||||||||||||||
Loans serviced for others: | ||||||||||||||||||||
Multifamily DUS® (1) | $ | 1,452,103 | $ | 1,435,036 | $ | 1,458,020 | $ | 1,442,727 | $ | 1,357,929 | ||||||||||
Other | 83,419 | 86,561 | 84,457 | 83,308 | 82,083 | |||||||||||||||
Single family | 6,790,955 | 6,052,394 | 20,151,735 | 19,804,263 | 19,073,176 | |||||||||||||||
Total loans serviced for others | $ | 8,326,477 | $ | 7,573,991 | $ | 21,694,212 | $ | 21,330,298 | $ | 20,513,188 |
1 DUS® is a registered trademark of Fannie Mae | 67 |
At or for the Three Months Ended June 30, | Percent Change | At or for the Six Months Ended June 30, | Percent Change | ||||||||||||||||||
(in thousands, except per share data and ratios) | 2019 | 2018 | 2019 | 2018 | |||||||||||||||||
Selected statement of operations data | |||||||||||||||||||||
Total net revenue (1) | $ | 69,016 | $ | 56,150 | 23 | % | $ | 124,665 | $ | 108,694 | 15 | % | |||||||||
Total noninterest expense | 58,832 | 49,964 | 18 | 106,678 | 99,435 | 7 | |||||||||||||||
Provision for credit losses | — | 1,000 | (100 | ) | 1,500 | 1,750 | (14 | ) | |||||||||||||
Income from continuing operations before income taxes | 10,184 | 5,186 | 96 | 16,487 | 7,509 | 120 | |||||||||||||||
Income tax expense for continuing operations | 1,292 | 1,015 | 27 | 2,537 | 1,584 | 60 | |||||||||||||||
Income from continuing operations | 8,892 | 4,171 | 113 | 13,950 | 5,925 | 135 | |||||||||||||||
(Loss) income from discontinued operations before income taxes | (16,678 | ) | 3,641 | (558 | ) | (25,118 | ) | 9,090 | (376 | ) | |||||||||||
Income tax (benefit) expense for discontinued operations | (2,198 | ) | 713 | (408 | ) | (3,865 | ) | 2,050 | (289 | ) | |||||||||||
(Loss) income for discontinued operations | (14,480 | ) | 2,928 | (595 | ) | (21,253 | ) | 7,040 | (402 | ) | |||||||||||
Net (loss) income | $ | (5,588 | ) | $ | 7,099 | (179 | )% | $ | (7,303 | ) | $ | 12,965 | (156 | )% | |||||||
Financial performance | |||||||||||||||||||||
Diluted income per share for continuing operations | $ | 0.32 | $ | 0.15 | $ | 0.51 | $ | 0.22 | |||||||||||||
Diluted (loss) income per share for discontinued operations | (0.54 | ) | 0.11 | (0.79 | ) | 0.26 | |||||||||||||||
Diluted (loss) income per share | $ | (0.22 | ) | $ | 0.26 | $ | (0.28 | ) | $ | 0.48 | |||||||||||
Return on average common shareholders' equity | (3.02 | )% | 3.78 | % | (1.96 | )% | 3.53 | % | |||||||||||||
Return on average assets | (0.31 | )% | 0.40 | % | (0.20 | )% | 0.37 | % | |||||||||||||
Net interest margin | 3.11 | % | 3.25 | % | 3.11 | % | 3.25 | % |
(1) | Total net revenue is net interest income and noninterest income. |
At June 30, 2019 | ||||||
HomeStreet, Inc. | HomeStreet Bank | |||||
Ratio | Ratio | |||||
Tier 1 leverage capital (to average assets) | 10.12 | % | 9.86 | % | ||
Common equity Tier 1 risk-based capital (to risk-weighted assets) | 11.99 | 13.26 | ||||
Tier 1 risk-based capital (to risk-weighted assets) | 13.06 | 13.26 | ||||
Total risk-based capital (to risk-weighted assets) | 13.95 | 14.15 |
At December 31, 2018 | ||||||
HomeStreet, Inc. | HomeStreet Bank | |||||
Ratio | Ratio | |||||
Tier 1 leverage capital (to average assets) | 9.51 | % | 10.15 | % | ||
Common equity Tier 1 risk-based capital (to risk-weighted assets) | 11.26 | 13.82 | ||||
Tier 1 risk-based capital (to risk-weighted assets) | 12.37 | 13.82 | ||||
Total risk-based capital (to risk-weighted assets) | 13.27 | 14.72 |
• | Allowance for Credit Losses |
• | Fair Value of Financial Instruments and Single Family Mortgage Servicing Rights ("MSRs") |
Three Months Ended June 30, | |||||||||||||||||||||
2019 | 2018 | ||||||||||||||||||||
(in thousands) | Average Balance | Interest | Average Yield/Cost | Average Balance | Interest | Average Yield/Cost | |||||||||||||||
Assets: | |||||||||||||||||||||
Interest-earning assets: (1) | |||||||||||||||||||||
Cash and cash equivalents | $ | 55,270 | $ | 141 | 1.03 | % | $ | 87,898 | $ | 252 | 1.15 | % | |||||||||
Investment securities | 815,287 | 5,351 | 2.63 | 911,678 | 6,029 | 2.64 | |||||||||||||||
Loans held for sale (4) | 393,790 | 4,235 | 4.30 | 533,453 | 6,081 | 4.56 | |||||||||||||||
Loans held for investment | 5,435,474 | 66,047 | 4.83 | 4,836,644 | 55,537 | 4.59 | |||||||||||||||
Total interest-earning assets | 6,699,821 | 75,774 | 4.50 | 6,369,673 | 67,899 | 4.26 | |||||||||||||||
Noninterest-earning assets (2)(4) | 601,893 | 711,206 | |||||||||||||||||||
Total assets | $ | 7,301,714 | $ | 7,080,879 | |||||||||||||||||
Liabilities and shareholders' equity: | |||||||||||||||||||||
Deposits: (4) | |||||||||||||||||||||
Interest-bearing demand accounts | $ | 394,768 | $ | 393 | 0.40 | % | $ | 445,128 | $ | 430 | 0.39 | % | |||||||||
Savings accounts | 233,387 | 139 | 0.24 | 292,156 | 217 | 0.30 | |||||||||||||||
Money market accounts | 2,021,601 | 6,890 | 1.36 | 1,926,662 | 4,064 | 0.85 | |||||||||||||||
Certificate accounts | 1,712,094 | 9,662 | 2.26 | 1,382,351 | 4,999 | 1.45 | |||||||||||||||
Total interest-bearing deposits | 4,361,850 | 17,084 | 1.57 | 4,046,297 | 9,710 | 0.96 | |||||||||||||||
Federal Home Loan Bank advances | 594,810 | 3,973 | 2.64 | 943,539 | 4,782 | 2.03 | |||||||||||||||
Federal funds purchased and securities sold under agreements to repurchase | 73,189 | 463 | 2.50 | 5,253 | 24 | 1.84 | |||||||||||||||
Other borrowings | 10,562 | 87 | 3.29 | 659 | 7 | 4.40 | |||||||||||||||
Long-term debt | 125,528 | 1,725 | 5.47 | 125,337 | 1,662 | 5.32 | |||||||||||||||
Total interest-bearing liabilities | 5,165,939 | 23,332 | 1.80 | 5,121,085 | 16,185 | 1.27 | |||||||||||||||
Noninterest-bearing liabilities (4) | 1,394,445 | 1,208,201 | |||||||||||||||||||
Total liabilities | 6,560,384 | 6,329,286 | |||||||||||||||||||
Temporary shareholders' equity | 6,375 | — | |||||||||||||||||||
Permanent shareholders' equity | 734,955 | 751,593 | |||||||||||||||||||
Total liabilities and shareholders' equity | $ | 7,301,714 | $ | 7,080,879 | |||||||||||||||||
Net interest income (3) | $ | 52,442 | $ | 51,714 | |||||||||||||||||
Net interest spread | 2.70 | % | 2.99 | % | |||||||||||||||||
Impact of noninterest-bearing sources | 0.41 | 0.26 | |||||||||||||||||||
Net interest margin | 3.11 | % | 3.25 | % |
(1) | The average balances of nonaccrual assets and related income, if any, are included in their respective categories. |
(2) | Includes loan balances that have been foreclosed and are now recorded in other real estate owned |
(3) | Includes taxable-equivalent adjustments primarily related to tax-exempt income on certain loans and securities of $641 thousand and $711 thousand for the three months ended June 30, 2019 and 2018, respectively. The estimated federal statutory tax rate was 21% for the periods presented. |
(4) | Includes average balances related to discontinued operations, which were impractical to remove for the periods presented. The net interest margin related to discontinued operations is immaterial. |
Six Months Ended June 30, | |||||||||||||||||||||
2019 | 2018 | ||||||||||||||||||||
(in thousands) | Average Balance | Interest | Average Yield/Cost | Average Balance | Interest | Average Yield/Cost | |||||||||||||||
Assets: | |||||||||||||||||||||
Interest-earning assets: (1) | |||||||||||||||||||||
Cash and cash equivalents | $ | 56,950 | $ | 325 | 1.15 | % | $ | 83,487 | $ | 432 | 1.04 | % | |||||||||
Investment securities | 853,339 | 11,400 | 2.67 | 913,609 | 12,115 | 2.65 | |||||||||||||||
Loans held for sale (4) | 339,735 | 7,579 | 4.46 | 495,369 | 10,734 | 4.33 | |||||||||||||||
Loans held for investment | 5,336,480 | 129,081 | 4.83 | 4,739,850 | 106,995 | 4.53 | |||||||||||||||
Total interest-earning assets | 6,586,504 | 148,385 | 4.50 | 6,232,315 | 130,276 | 4.19 | |||||||||||||||
Noninterest-earning assets (2) (4) | 661,513 | 684,164 | |||||||||||||||||||
Total assets | $ | 7,248,017 | $ | 6,916,479 | |||||||||||||||||
Liabilities and shareholders' equity: | |||||||||||||||||||||
Deposits: (4) | |||||||||||||||||||||
Interest-bearing demand accounts | $ | 385,202 | $ | 768 | 0.40 | % | $ | 443,256 | $ | 870 | 0.39 | % | |||||||||
Savings accounts | 237,123 | 288 | 0.25 | 292,629 | 448 | 0.31 | |||||||||||||||
Money market accounts | 1,977,206 | 12,693 | 1.29 | 1,893,852 | 7,511 | 0.79 | |||||||||||||||
Certificate accounts | 1,654,880 | 17,814 | 2.17 | 1,311,092 | 8,843 | 1.35 | |||||||||||||||
Total interest-bearing deposits | 4,254,411 | 31,563 | 1.49 | 3,940,829 | 17,672 | 0.90 | |||||||||||||||
Federal Home Loan Bank advances | 713,485 | 9,587 | 2.67 | 901,230 | 8,418 | 1.87 | |||||||||||||||
Federal funds purchased and securities sold under agreements to repurchase | 60,553 | 766 | 2.52 | 6,287 | 56 | 1.80 | |||||||||||||||
Other borrowings | 8,959 | 181 | 4.05 | 332 | 8 | 2.21 | |||||||||||||||
Long-term debt | 125,504 | 3,469 | 5.52 | 125,314 | 3,246 | 5.20 | |||||||||||||||
Total interest-bearing liabilities | 5,162,912 | 45,566 | 1.77 | 4,973,992 | 29,400 | 1.18 | |||||||||||||||
Noninterest-bearing liabilities (4) | 1,339,232 | 1,207,726 | |||||||||||||||||||
Total liabilities | 6,502,144 | 6,181,718 | |||||||||||||||||||
Temporary shareholders' equity | 3,205 | ||||||||||||||||||||
Permanent shareholders' equity | 742,668 | 734,761 | |||||||||||||||||||
Total liabilities and shareholders' equity | $ | 7,248,017 | $ | 6,916,479 | |||||||||||||||||
Net interest income (3) | $ | 102,819 | $ | 100,876 | |||||||||||||||||
Net interest spread | 2.73 | % | 3.01 | % | |||||||||||||||||
Impact of noninterest-bearing sources | 0.38 | 0.24 | |||||||||||||||||||
Net interest margin | 3.11 | % | 3.25 | % |
(1) | The average balances of nonaccrual assets and related income, if any, are included in their respective categories. |
(2) | Includes loan balances that have been foreclosed and are now recorded in other real estate owned. |
(3) | Includes taxable-equivalent adjustments primarily related to tax-exempt income on certain loans and securities of $1.3 million and $1.4 million for the six months ended June 30, 2019 and 2018, respectively. The estimated federal statutory tax rate was 21% for the periods presented. |
(4) | Includes average balances related to discontinued operations, which were impractical to remove for the periods presented. The net interest margin related to discontinued operations is immaterial. |
Three Months Ended June 30, | Dollar Change | Percent Change | Six Months Ended June 30, | Dollar Change | Percent Change | ||||||||||||||||||||||||
(in thousands) | 2019 | 2018 | 2019 | 2018 | |||||||||||||||||||||||||
Noninterest income | |||||||||||||||||||||||||||||
Gain on loan origination and sale activities (1) | $ | 12,178 | $ | 2,710 | $ | 9,468 | 349 | % | $ | 14,785 | $ | 4,157 | $ | 10,628 | 256 | % | |||||||||||||
Loan servicing income | 2,176 | 937 | 1,239 | 132 | 3,219 | 1,845 | 1,374 | 74 | |||||||||||||||||||||
Depositor and other retail banking fees | 2,024 | 1,947 | 77 | 4 | 3,769 | 3,884 | (115 | ) | (3 | ) | |||||||||||||||||||
Insurance agency commissions | 573 | 527 | 46 | 9 | 1,198 | 1,070 | 128 | 12 | |||||||||||||||||||||
Gain (loss) on sale of investment securities available for sale | 137 | 16 | 121 | 756 | (110 | ) | 238 | (348 | ) | (146 | ) | ||||||||||||||||||
Other | 2,741 | 2,268 | 473 | 21 | 5,060 | 4,307 | 753 | 17 | |||||||||||||||||||||
Total noninterest income | $ | 19,829 | $ | 8,405 | $ | 11,424 | 136 | % | $ | 27,921 | $ | 15,501 | $ | 12,420 | 80 | % |
(1) | Excluding discontinued operations |
Three Months Ended June 30, | Dollar Change | Percent Change | Six Months Ended June 30, | Dollar Change | Percent Change | ||||||||||||||||||||||||
(in thousands) | 2019 | 2018 | 2019 | 2018 | |||||||||||||||||||||||||
Single family held for sale: (3) | |||||||||||||||||||||||||||||
Servicing value and secondary market gains (1) | $ | 29,139 | $ | 48,182 | $ | (19,043 | ) | (40 | )% | $ | 60,982 | $ | 89,609 | $ | (28,627 | ) | (32 | )% | |||||||||||
Loan origination and administrative fees | 4,420 | 6,158 | (1,738 | ) | (28 | ) | 8,065 | 11,603 | (3,538 | ) | (30 | ) | |||||||||||||||||
Total gain on single family held for sale | 33,559 | 54,340 | (20,781 | ) | (38 | ) | 69,047 | 101,212 | (32,165 | ) | (32 | ) | |||||||||||||||||
Multifamily DUS® | 659 | 1,613 | (954 | ) | (59 | ) | 1,193 | 2,759 | (1,566 | ) | (57 | ) | |||||||||||||||||
SBA | 132 | 385 | (253 | ) | (66 | ) | 507 | 686 | (179 | ) | (26 | ) | |||||||||||||||||
CRE Non-DUS® | 2,035 | 800 | 1,235 | 154 | 3,786 | 800 | 2,986 | 373 | |||||||||||||||||||||
Single Family (2) | (10 | ) | (89 | ) | 79 | (89 | ) | (63 | ) | (89 | ) | 26 | (29 | ) | |||||||||||||||
Gain on loan origination and sale activities | $ | 36,375 | $ | 57,049 | $ | (20,674 | ) | (36 | )% | $ | 74,470 | $ | 105,368 | $ | (30,898 | ) | (29 | )% | |||||||||||
NM = not meaningful |
(1) | Comprised of gains and losses on interest rate lock commitments (which considers the value of servicing), single family loans held for sale, forward sale commitments used to economically hedge secondary market activities, and changes in the Company's repurchase liability for loans that have been sold. |
(2) | Loans originated as held for investment |
(3) | Includes both continuing and discontinued operations. |
(in thousands) | June 30, 2019 | Dec. 31, 2018 | ||||||
Commercial | ||||||||
Multifamily DUS® (1) | $ | 1,452,103 | $ | 1,458,020 | ||||
Other | 83,419 | 84,457 | ||||||
Total commercial loans serviced for others | 1,535,522 | 1,542,477 | ||||||
Single family (2) | ||||||||
U.S. government and agency | 6,204,566 | 19,541,450 | ||||||
Other | 586,389 | 610,285 | ||||||
Total single family loans serviced for others | 6,790,955 | 20,151,735 | ||||||
Total loans serviced for others | $ | 8,326,477 | $ | 21,694,212 | ||||
(1) | Fannie Mae Multifamily Delegated Underwriting and Servicing Program ("DUS"®) is a registered trademark of Fannie Mae. |
(2) | Includes both continuing and discontinued operations at December 31, 2018. |
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||||||||||||||||
(in thousands) | 2019 | 2018 | Dollar Change | Percent Change | 2019 | 2018 | Dollar Change | Percent Change | ||||||||||||||||||||||
Commercial loan servicing income, net: | ||||||||||||||||||||||||||||||
Servicing fees and other | $ | 2,183 | $ | 2,001 | $ | 182 | 9 | % | $ | 4,602 | $ | 3,958 | $ | 644 | 16 | % | ||||||||||||||
Amortization of capitalized MSRs | (1,102 | ) | (1,064 | ) | (38 | ) | 4 | (2,478 | ) | (2,113 | ) | (365 | ) | 17 | ||||||||||||||||
Commercial loan servicing income | 1,081 | 937 | 144 | 15 | 2,124 | 1,845 | 279 | 15 | ||||||||||||||||||||||
Single family servicing income, net:(4) | ||||||||||||||||||||||||||||||
Servicing fees and other | 3,883 | 16,384 | (12,501 | ) | (76 | ) | 18,821 | 32,878 | (14,057 | ) | (43 | ) | ||||||||||||||||||
Changes in fair value of single family MSRs due to amortization (1) | (3,422 | ) | (9,400 | ) | 5,978 | (64 | ) | (12,405 | ) | (18,270 | ) | 5,865 | (32 | ) | ||||||||||||||||
461 | 6,984 | (6,523 | ) | (93 | ) | 6,416 | 14,608 | (8,192 | ) | (56 | ) | |||||||||||||||||||
Risk management, single family MSRs:(4) | ||||||||||||||||||||||||||||||
Changes in fair value of MSR due to changes in model inputs and/or assumptions (2)(3) | (9,414 | ) | 11,299 | (20,713 | ) | (183 | ) | (14,692 | ) | 41,318 | (56,010 | ) | (136 | ) | ||||||||||||||||
Net gain (loss) from derivatives economically hedging MSR | 7,194 | (12,188 | ) | 19,382 | (159 | ) | 10,877 | (43,165 | ) | 54,042 | (125 | ) | ||||||||||||||||||
(2,220 | ) | (889 | ) | (1,331 | ) | 150 | (3,815 | ) | (1,847 | ) | (1,968 | ) | 107 | |||||||||||||||||
Single Family servicing (loss) income | (1,759 | ) | 6,095 | (7,854 | ) | (129 | ) | 2,601 | 12,761 | (10,160 | ) | (80 | ) | |||||||||||||||||
Total loan servicing (loss) income | $ | (678 | ) | $ | 7,032 | $ | (7,710 | ) | (110 | )% | $ | 4,725 | $ | 14,606 | $ | (9,881 | ) | (68 | )% | |||||||||||
(1) | Represents changes due to collection/realization of expected cash flows and curtailments. |
(2) | Principally reflects changes in model assumptions, including prepayment speed assumptions, which are primarily affected by changes in mortgage interest rates. |
(3) | Includes a pretax loss of $2.0 million and $1.2 million net of transaction costs and prepayment reserves, for the three and six months ended June 30, 2019 from sales of single family MSRs. |
(4) | Includes both continuing and discontinued operations. |
Three Months Ended June 30, | Dollar Change | Percent Change | Six Months Ended June 30, | Dollar Change | Percent Change | ||||||||||||||||||||||||
(in thousands) | 2019 | 2018 | 2019 | 2018 | |||||||||||||||||||||||||
Fees: | |||||||||||||||||||||||||||||
Monthly maintenance and deposit-related fees | $ | 835 | $ | 787 | $ | 48 | 6 | % | $ | 1,524 | $ | 1,598 | $ | (74 | ) | (5 | )% | ||||||||||||
Debit Card/ATM fees | 1,130 | 1,098 | 32 | 3 | 2,127 | 2,166 | (39 | ) | (2 | ) | |||||||||||||||||||
Other fees | 62 | 68 | (6 | ) | (9 | ) | 126 | 134 | (8 | ) | (6 | ) | |||||||||||||||||
Total depositor and other retail banking fees | $ | 2,027 | $ | 1,953 | $ | 74 | 4 | % | $ | 3,777 | $ | 3,898 | $ | (121 | ) | (3 | )% |
Three Months Ended June 30, | Dollar Change | Percent Change | Six Months Ended June 30, | Dollar Change | Percent Change | ||||||||||||||||||||||||
(in thousands) | 2019 | 2018 | 2019 | 2018 | |||||||||||||||||||||||||
Noninterest expense | |||||||||||||||||||||||||||||
Salaries and related costs | $ | 34,239 | $ | 27,005 | $ | 7,234 | 27 | % | $ | 59,518 | $ | 54,210 | $ | 5,308 | 10 | % | |||||||||||||
General and administrative | 7,844 | 8,701 | (857 | ) | (10 | ) | 16,026 | 17,067 | (1,041 | ) | (6 | ) | |||||||||||||||||
Amortization of core deposit intangibles | 461 | 407 | 54 | 13 | 794 | 813 | (19 | ) | (2 | ) | |||||||||||||||||||
Legal | 1,824 | 816 | 1,008 | 124 | 1,620 | 1,520 | 100 | 7 | |||||||||||||||||||||
Consulting | 887 | 615 | 272 | 44 | 2,295 | 1,297 | 998 | 77 | |||||||||||||||||||||
Federal Deposit Insurance Corporation assessments | 833 | 998 | (165 | ) | (17 | ) | 1,654 | 1,859 | (205 | ) | (11 | ) | |||||||||||||||||
Occupancy | 5,826 | 4,453 | 1,373 | 31 | 10,794 | 8,983 | 1,811 | 20 | |||||||||||||||||||||
Information services | 6,948 | 6,967 | (19 | ) | — | 14,036 | 13,777 | 259 | 2 | ||||||||||||||||||||
Net cost (benefit) of operation and sale of other real estate owned | (30 | ) | 2 | (32 | ) | (1,600 | ) | (59 | ) | (91 | ) | 32 | (35 | ) | |||||||||||||||
Total noninterest expense | $ | 58,832 | $ | 49,964 | $ | 8,868 | 18 | % | $ | 106,678 | $ | 99,435 | $ | 7,243 | 7 | % |
At June 30, 2019 | At December 31, 2018 | ||||||||||||
(in thousands) | Fair Value | Percent | Fair Value | Percent | |||||||||
Investment securities available for sale: | |||||||||||||
Mortgage-backed securities: | |||||||||||||
Residential | $ | 110,021 | 14 | % | $ | 107,961 | 13 | % | |||||
Commercial | 30,428 | 4 | 34,514 | 4 | |||||||||
Collateralized mortgage obligations: | |||||||||||||
Residential | 157,064 | 20 | 166,744 | 20 | |||||||||
Commercial | 124,579 | 15 | 116,674 | 14 | |||||||||
Municipal bonds | 357,097 | 45 | 385,655 | 45 | |||||||||
Corporate debt securities | 18,897 | 2 | 19,995 | 2 | |||||||||
U.S. Treasury securities | 1,311 | — | 10,900 | 1 | |||||||||
Agency debentures | — | — | 9,525 | 1 | |||||||||
Total investment securities available for sale | $ | 799,397 | 100 | % | $ | 851,968 | 100 | % |
At June 30, 2019 | At December 31, 2018 | ||||||||||||
(in thousands) | Amount | Percent | Amount | Percent | |||||||||
Consumer loans: | |||||||||||||
Single family (1) | $ | 1,259,386 | 24 | % | $ | 1,358,175 | 27 | % | |||||
Home equity and other | 588,132 | 11 | 570,923 | 11 | |||||||||
1,847,518 | 35 | 1,929,098 | 38 | ||||||||||
Commercial real estate loans: | |||||||||||||
Non-owner occupied commercial real estate | 767,447 | 15 | 701,928 | 14 | |||||||||
Multifamily | 995,604 | 18 | 908,015 | 18 | |||||||||
Construction/land development | 779,031 | 15 | 794,544 | 16 | |||||||||
2,542,082 | 48 | 2,404,487 | 48 | ||||||||||
Commercial and industrial loans: | |||||||||||||
Owner occupied commercial real estate | 470,986 | 9 | 429,158 | 8 | |||||||||
Commercial business | 444,002 | 8 | 331,004 | 6 | |||||||||
914,988 | 17 | 760,162 | 14 | ||||||||||
Total loans before allowance, net deferred loan fees and costs | 5,304,588 | 100 | % | 5,093,747 | 100 | % | |||||||
Net deferred loan fees and costs | 26,525 | 23,094 | |||||||||||
5,331,113 | 5,116,841 | ||||||||||||
Allowance for loan losses | (43,254 | ) | (41,470 | ) | |||||||||
$ | 5,287,859 | $ | 5,075,371 |
(1) | Includes $4.5 million and $4.1 million at June 30, 2019 and December 31, 2018, respectively, of loans where a fair value option election was made at the time of origination and, therefore, are carried at fair value with changes in value recognized in the consolidated statements of operations. |
(in thousands) | At June 30, 2019 | At December 31, 2018 | ||||||||||||
Amount | Percent | Amount | Percent | |||||||||||
Noninterest-bearing accounts - checking and savings | $ | 684,898 | 12 | % | $ | 612,540 | 12 | % | ||||||
Interest-bearing transaction and savings deposits: | ||||||||||||||
NOW accounts | 444,130 | 8 | 376,137 | 8 | ||||||||||
Statement savings accounts due on demand | 227,762 | 4 | 245,795 | 5 | ||||||||||
Money market accounts due on demand | 1,995,244 | 35 | 1,935,516 | 38 | ||||||||||
Total interest-bearing transaction and savings deposits | 2,667,136 | 47 | 2,557,448 | 51 | ||||||||||
Total transaction and savings deposits | 3,352,034 | 59 | 3,169,988 | 63 | ||||||||||
Certificates of deposit | 2,060,376 | 36 | 1,579,806 | 31 | ||||||||||
Noninterest-bearing accounts - other(1) | 311,287 | 5 | 301,614 | 6 | ||||||||||
Total deposits | $ | 5,723,697 | 100 | % | $ | 5,051,408 | 100 | % |
(1) | Includes $132.8 million and $162.8 million in servicing deposits related to discontinued operations for the periods ended June 30, 2019 and December 31, 2018, respectively. |
At or For the Three Months Ended June 30, | At or For the Six Months Ended June 30, | ||||||||||
2019 | 2018 | 2019 | 2018 | ||||||||
Return on assets (1)(4) | (0.31 | )% | 0.40 | % | (0.20 | )% | 0.37 | % | |||
Return on equity (2)(4) | (3.02 | )% | 3.78 | (1.96 | )% | 3.53 | |||||
Equity to assets ratio (3) | 10.07 | % | 10.61 | 10.25 | % | 10.62 |
(1) | Net income divided by average total assets. |
(2) | Net income divided by average common shareholders' equity. |
(3) | Average equity divided by average total assets. |
(4) | Net income includes both continuing and discontinued operations. |
At June 30, 2019 | |||||||||||
(in thousands) | Recorded Investment | Unpaid Principal Balance (2) | Related Allowance | ||||||||
Impaired loans: | |||||||||||
Loans with no related allowance recorded | $ | 71,114 | (1) | $ | 72,564 | $ | — | ||||
Loans with an allowance recorded | 2,730 | 2,772 | 128 | ||||||||
Total | $ | 73,844 | (1) | $ | 75,336 | $ | 128 | ||||
At December 31, 2018 | |||||||||||
(in thousands) | Recorded Investment | Unpaid Principal Balance (2) | Related Allowance | ||||||||
Impaired loans: | |||||||||||
Loans with no related allowance recorded | $ | 71,237 | (1) | $ | 73,113 | $ | — | ||||
Loans with an allowance recorded | 1,847 | 1,847 | 233 | ||||||||
Total | $ | 73,084 | (1) | $ | 74,960 | $ | 233 |
(1) | Includes $68.3 million and $65.8 million in single family performing troubled debt restructurings ("TDRs") at June 30, 2019 and December 31, 2018, respectively. |
(2) | Unpaid principal balance does not include partial charge-offs, purchase discounts and premiums or nonaccrual interest paid. Related allowance is calculated on net book balances not unpaid principal balances. |
At June 30, 2019 | At December 31, 2018 | ||||||||||||||||||
(in thousands) | Amount | Percent of Allowance to Total Allowance | Loan Category as a % of Total Loans (1) | Amount | Percent of Allowance to Total Allowance | Loan Category as a % of Total Loans (1) | |||||||||||||
Consumer loans | |||||||||||||||||||
Single family | $ | 7,540 | 17 | % | 24 | % | $ | 8,217 | 19 | % | 27 | % | |||||||
Home equity and other | 7,563 | 17 | 11 | 7,712 | 18 | 11 | |||||||||||||
15,103 | 34 | 35 | 15,929 | 37 | 38 | ||||||||||||||
Commercial real estate loans | |||||||||||||||||||
Non-owner occupied commercial real estate | 6,151 | 14 | 14 | 5,496 | 13 | 14 | |||||||||||||
Multifamily | 7,047 | 16 | 19 | 5,754 | 13 | 18 | |||||||||||||
Construction/land development | 9,707 | 21 | 15 | 9,539 | 22 | 16 | |||||||||||||
22,905 | 51 | 48 | 20,789 | 48 | 48 | ||||||||||||||
Commercial and industrial loans | |||||||||||||||||||
Owner occupied commercial real estate | 3,462 | 8 | 9 | 3,282 | 8 | 8 | |||||||||||||
Commercial business | 3,158 | 7 | 8 | 2,913 | 7 | 6 | |||||||||||||
6,620 | 15 | 17 | 6,195 | 15 | 14 | ||||||||||||||
Total allowance for credit losses | $ | 44,628 | 100 | % | 100 | % | $ | 42,913 | 100 | % | 100 | % |
(1) | Excludes loans held for investment balances that are carried at fair value. |
At June 30, 2019 | |||||||||||
(in thousands) | Accrual | Nonaccrual | Total | ||||||||
Consumer | |||||||||||
Single family (1) | $ | 68,309 | $ | 1,497 | $ | 69,806 | |||||
Home equity and other | 932 | 116 | 1,048 | ||||||||
69,241 | 1,613 | 70,854 | |||||||||
Commercial real estate loans | |||||||||||
Multifamily | 484 | — | 484 | ||||||||
Construction/land development | — | — | — | ||||||||
484 | — | 484 | |||||||||
Commercial and industrial loans | |||||||||||
Owner occupied commercial real estate | 834 | — | 834 | ||||||||
Commercial business | 52 | 259 | 311 | ||||||||
886 | 259 | 1,145 | |||||||||
$ | 70,611 | $ | 1,872 | $ | 72,483 |
(1) | Includes loan balances insured by the FHA or guaranteed by the VA of $57.0 million at June 30, 2019. |
At December 31, 2018 | |||||||||||
(in thousands) | Accrual | Nonaccrual | Total | ||||||||
Consumer | |||||||||||
Single family (1) | $ | 65,835 | $ | 1,740 | $ | 67,575 | |||||
Home equity and other | 1,237 | — | 1,237 | ||||||||
67,072 | 1,740 | 68,812 | |||||||||
Commercial real estate loans | |||||||||||
Multifamily | 492 | — | 492 | ||||||||
Construction/land development | 726 | — | 726 | ||||||||
1,218 | — | 1,218 | |||||||||
Commercial and industrial loans | |||||||||||
Owner occupied commercial real estate | 846 | — | 846 | ||||||||
Commercial business | 103 | 164 | 267 | ||||||||
949 | 164 | 1,113 | |||||||||
$ | 69,239 | $ | 1,904 | $ | 71,143 |
(1) | Includes loan balances insured by the FHA or guaranteed by the VA of $52.4 million at December 31, 2018. |
At June 30, 2019 | |||||||||||||||||||||||
(in thousands) | 30-59 Days Past Due | 60-89 Days Past Due | Nonaccrual | 90 Days or More Past Due and Accruing | Total Past Due Loans | Other Real Estate Owned | |||||||||||||||||
Consumer loans | |||||||||||||||||||||||
Single family | $ | 4,154 | $ | 3,299 | $ | 7,316 | $ | 25,264 | (1) | $ | 40,033 | $ | 1,753 | ||||||||||
Home equity and other | 49 | 157 | 924 | — | 1,130 | — | |||||||||||||||||
4,203 | 3,456 | 8,240 | 25,264 | 41,163 | 1,753 | ||||||||||||||||||
Commercial real estate loans | |||||||||||||||||||||||
Construction/land development | — | — | 69 | — | 69 | — | |||||||||||||||||
— | — | 69 | — | 69 | — | ||||||||||||||||||
Commercial and industrial loans | |||||||||||||||||||||||
Owner-occupied commercial real estate | 833 | — | 353 | — | 1,186 | — | |||||||||||||||||
Commercial business | — | — | 1,268 | 1,160 | 2,428 | — | |||||||||||||||||
833 | — | 1,621 | 1,160 | 3,614 | — | ||||||||||||||||||
Total | $ | 5,036 | $ | 3,456 | $ | 9,930 | $ | 26,424 | $ | 44,846 | $ | 1,753 |
(1) | FHA-insured and VA-guaranteed single family loans that are 90 days or more past due are maintained on accrual status if they are determined to have little to no risk of loss. At June 30, 2019, these past due loans totaled $25.3 million. |
At December 31, 2018 | |||||||||||||||||||||||
(in thousands) | 30-59 Days Past Due | 60-89 Days Past Due | Nonaccrual | 90 Days or More Past Due and Accruing | Total Past Due Loans | Other Real Estate Owned | |||||||||||||||||
Consumer loans | |||||||||||||||||||||||
Single family | $ | 9,725 | $ | 3,653 | $ | 8,493 | $ | 39,116 | (1) | $ | 60,987 | $ | 455 | ||||||||||
Home equity and other | 145 | 100 | 948 | — | 1,193 | — | |||||||||||||||||
9,870 | 3,753 | 9,441 | 39,116 | 62,180 | 455 | ||||||||||||||||||
Commercial real estate loans | |||||||||||||||||||||||
Construction/land development | — | — | 72 | — | 72 | — | |||||||||||||||||
— | — | 72 | — | 72 | — | ||||||||||||||||||
Commercial and industrial loans | |||||||||||||||||||||||
Owner occupied commercial real estate | — | — | 374 | — | 374 | — | |||||||||||||||||
Commercial business | — | — | 1,732 | — | 1,732 | — | |||||||||||||||||
— | — | 2,106 | — | 2,106 | — | ||||||||||||||||||
Total | $ | 9,870 | $ | 3,753 | $ | 11,619 | $ | 39,116 | $ | 64,358 | $ | 455 |
(1) | FHA-insured and VA-guaranteed single family loans that are 90 days or more past due are maintained on accrual status if they are determined to have little to no risk of loss. At December 31, 2018, these past due loans totaled $39.1 million. |
• | MSRs (net of deferred tax) in excess of 10% of Tier 1 capital before threshold based deductions must be deducted from common equity. The disallowable portion of MSRs will be phased in incrementally (40% in 2015; 60% in 2016; 80% in 2017 and beyond). |
• | In addition, the combined balance of MSRs and deferred tax assets is limited to approximately 15% of the Bank's and the Company's common equity Tier 1 capital. These combined assets must be deducted from common equity to the extent that they exceed the 15% threshold. |
• | Any portion of the Bank's and the Company's MSRs that are not deducted from the calculation of common equity Tier 1 is subject to a 100% risk weight. |
At June 30, 2019 | |||||||||||||||||||||
HomeStreet Bank | Actual | For Minimum Capital Adequacy Purposes | To Be Categorized As "Well Capitalized" Under Prompt Corrective Action Provisions | ||||||||||||||||||
(in thousands) | Amount | Ratio | Amount | Ratio | Amount | Ratio | |||||||||||||||
Tier 1 leverage capital (to average assets) | $ | 709,279 | 9.86 | % | $ | 287,859 | 4.0 | % | $ | 359,824 | 5.0 | % | |||||||||
Common equity Tier 1 risk-based capital (to risk-weighted assets) | 709,279 | 13.26 | 240,766 | 4.5 | 347,773 | 6.5 | |||||||||||||||
Tier 1 risk-based capital (to risk-weighted assets) | 709,279 | 13.26 | 321,021 | 6.0 | 428,028 | 8.0 | |||||||||||||||
Total risk-based capital (to risk-weighted assets) | 757,144 | 14.15 | 428,028 | 8.0 | 535,035 | 10.0 |
At June 30, 2019 | |||||||||||||||||||||
HomeStreet, Inc. | Actual | For Minimum Capital Adequacy Purposes | To Be Categorized As "Well Capitalized" Under Prompt Corrective Action Provisions | ||||||||||||||||||
(in thousands) | Amount | Ratio | Amount | Ratio | Amount | Ratio | |||||||||||||||
Tier 1 leverage capital (to average assets) | $ | 734,823 | 10.12 | % | $ | 290,344 | 4.0 | % | $ | 362,930 | 5.0 | % | |||||||||
Common equity Tier 1 risk-based capital (to risk-weighted assets) | 674,860 | 11.99 | 253,276 | 4.5 | 365,844 | 6.5 | |||||||||||||||
Tier 1 risk-based capital (to risk-weighted assets) | 734,823 | 13.06 | 337,702 | 6.0 | 450,269 | 8.0 | |||||||||||||||
Total risk-based capital (to risk-weighted assets) | 785,338 | 13.95 | 450,269 | 8.0 | 562,836 | 10.0 |
At December 31, 2018 | |||||||||||||||||||||
HomeStreet Bank | Actual | For Minimum Capital Adequacy Purposes | To Be Categorized As "Well Capitalized" Under Prompt Corrective Action Provisions | ||||||||||||||||||
(in thousands) | Amount | Ratio | Amount | Ratio | Amount | Ratio | |||||||||||||||
Tier 1 leverage capital (to average assets) | $ | 707,710 | 10.15 | % | $ | 278,898 | 4.0 | % | $ | 348,622 | 5.0 | % | |||||||||
Common equity Tier 1 risk-based capital (to risk-weighted assets) | 707,710 | 13.82 | 230,471 | 4.5 | 332,902 | 6.5 | |||||||||||||||
Tier 1 risk-based capital (to risk-weighted assets) | 707,710 | 13.82 | 307,295 | 6.0 | 409,726 | 8.0 | |||||||||||||||
Total risk-based capital (to risk-weighted assets) | 753,742 | 14.72 | 409,726 | 8.0 | 512,158 | 10.0 |
At December 31, 2018 | |||||||||||||||||||||
HomeStreet, Inc. | Actual | For Minimum Capital Adequacy Purposes | To Be Categorized As "Well Capitalized" Under Prompt Corrective Action Provisions | ||||||||||||||||||
(in thousands) | Amount | Ratio | Amount | Ratio | Amount | Ratio | |||||||||||||||
Tier 1 leverage capital (to average assets) | $ | 667,301 | 9.51 | % | $ | 280,592 | 4.0 | % | $ | 350,740 | 5.0 | % | |||||||||
Common equity Tier 1 risk-based capital (to risk-weighted assets) | 607,388 | 11.26 | 242,832 | 4.5 | 350,757 | 6.5 | |||||||||||||||
Tier 1 risk-based capital (to risk-weighted assets) | 667,301 | 12.37 | 323,776 | 6.0 | 431,701 | 8.0 | |||||||||||||||
Total risk-based capital (to risk-weighted assets) | 715,848 | 13.27 | 431,701 | 8.0 | 539,626 | 10.0 |
ITEM 3 | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK |
• | understanding the nature and level of the Company's interest rate risk and interest rate sensitivity; |
• | assessing how that risk fits within our overall business strategies; |
• | ensuring an appropriate level of rigor and sophistication in the risk management process for the overall level of risk; |
• | complying with and reviewing the asset/liability management policy; and |
• | formulating and implementing strategies to improve balance sheet mix and earnings. |
June 30, 2019 | |||||||||||||||||||||||||||||||
(dollars in thousands) | 3 Mos. or Less | More Than 3 Mos. to 6 Mos. | More Than 6 Mos. to 12 Mos. | More Than 12 Mos. to 3 Yrs. | More Than 3 Yrs. to 5 Yrs. | More Than 5 Yrs. | Non-Rate- Sensitive | Total | |||||||||||||||||||||||
Interest-earning assets: | |||||||||||||||||||||||||||||||
Cash & cash equivalents | $ | 99,602 | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | 99,602 | |||||||||||||||
FHLB Stock | — | — | — | — | — | 24,048 | — | 24,048 | |||||||||||||||||||||||
Investment securities (1) | 40,865 | 37,519 | 48,999 | 176,886 | 116,530 | 383,020 | — | 803,819 | |||||||||||||||||||||||
Mortgage loans held for sale (3) | 145,252 | — | — | — | — | — | — | 145,252 | |||||||||||||||||||||||
Loans held for investment (1) | 1,592,240 | 390,130 | 637,500 | 1,377,406 | 751,055 | 539,528 | — | 5,287,859 | |||||||||||||||||||||||
Total interest-earning assets | 1,877,959 | 427,649 | 686,499 | 1,554,292 | 867,585 | 946,596 | — | 6,360,580 | |||||||||||||||||||||||
Non-interest-earning assets | — | — | — | — | — | — | 487,281 | 487,281 | |||||||||||||||||||||||
Assets of discontinued operations | — | — | — | — | — | — | 352,929 | 352,929 | |||||||||||||||||||||||
Total assets | $ | 1,877,959 | $ | 427,649 | $ | 686,499 | $ | 1,554,292 | $ | 867,585 | $ | 946,596 | $ | 840,210 | $ | 7,200,790 | |||||||||||||||
Interest-bearing liabilities: | |||||||||||||||||||||||||||||||
NOW accounts (2) | $ | 444,130 | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | 444,130 | |||||||||||||||
Statement savings accounts (2) | 227,762 | — | — | — | — | — | — | 227,762 | |||||||||||||||||||||||
Money market accounts (2) | 1,995,244 | — | — | — | — | — | — | 1,995,244 | |||||||||||||||||||||||
Certificates of deposit | 619,885 | 449,734 | 605,450 | 355,103 | 30,204 | — | — | 2,060,376 | |||||||||||||||||||||||
Federal funds purchased and securities sold under agreements to repurchase | — | — | — | — | — | — | — | — | |||||||||||||||||||||||
FHLB advances | 382,000 | — | — | — | — | 5,590 | — | 387,590 | |||||||||||||||||||||||
Other borrowings | — | — | — | — | — | — | — | — | |||||||||||||||||||||||
Long-term debt (3) | 60,556 | — | — | — | — | 65,000 | — | 125,556 | |||||||||||||||||||||||
Total interest-bearing liabilities | 3,729,577 | 449,734 | 605,450 | 355,103 | 30,204 | 70,590 | — | 5,240,658 | |||||||||||||||||||||||
Non-interest bearing liabilities | — | — | — | — | — | — | 1,088,001 | 1,088,001 | |||||||||||||||||||||||
Liabilities of discontinued operations | — | — | — | — | — | — | 148,221 | 148,221 | |||||||||||||||||||||||
Equity | — | — | — | — | — | — | 723,910 | 723,910 | |||||||||||||||||||||||
Total liabilities and shareholders' equity | $ | 3,729,577 | $ | 449,734 | $ | 605,450 | $ | 355,103 | $ | 30,204 | $ | 70,590 | $ | 1,960,132 | $ | 7,200,790 | |||||||||||||||
Interest sensitivity gap | $ | (1,851,618 | ) | $ | (22,085 | ) | $ | 81,049 | $ | 1,199,189 | $ | 837,381 | $ | 876,006 | |||||||||||||||||
Cumulative interest sensitivity gap | $ | (1,851,618 | ) | $ | (1,873,703 | ) | $ | (1,792,654 | ) | $ | (593,465 | ) | $ | 243,916 | $ | 1,119,922 | |||||||||||||||
Cumulative interest sensitivity gap as a percentage of total assets | (26 | )% | (26 | )% | (25 | )% | (8 | )% | 3 | % | 16 | % | |||||||||||||||||||
Cumulative interest-earning assets as a percentage of cumulative interest-bearing liabilities | 50 | % | 55 | % | 63 | % | 88 | % | 105 | % | 121 | % |
(1) | Based on contractual maturities, repricing dates and forecasted principal payments assuming normal amortization and, where applicable, prepayments. |
(2) | Assumes 100% of interest-bearing non-maturity deposits are subject to repricing in three months or less. |
(3) | Based on contractual maturity. |
June 30, 2019 | December 31, 2018 | |||||||||||
Change in Interest Rates (basis points) (1) | Percentage Change | |||||||||||
Net Interest Income (2) | Net Portfolio Value (3) | Net Interest Income (2) | Net Portfolio Value (3) | |||||||||
+200 | (2.5 | )% | (0.8 | )% | (8.3 | )% | (13.5 | )% | ||||
+100 | (1.0 | ) | 1.2 | (4.1 | ) | (7.0 | ) | |||||
-100 | 0.3 | (6.5 | ) | 5.0 | (0.8 | ) | ||||||
-200 | (0.2 | ) | (18.6 | ) | 9.0 | (7.0 | ) |
(1) | For purposes of our model, we assume interest rates will not go below zero. This "floor" limits the effect of a potential negative interest rate shock in a low rate environment like the one we are currently experiencing. |
(2) | This percentage change represents the impact to net interest income for a one-year period, assuming there is no change in the structure of the balance sheet. |
(3) | This percentage change represents the impact to the net present value of equity, assuming there is no change in the structure of the balance sheet. |
ITEM 4 | CONTROLS AND PROCEDURES |
ITEM 1 | LEGAL PROCEEDINGS |
ITEM 1A | RISK FACTORS |
• | Activist investors may attempt to effect changes in the Company's strategic direction and how the Company is governed, or to acquire control over the Company. |
• | While the Company welcomes the opinions of all shareholders, responding to proxy contests and related actions by activist investors could be costly and time-consuming, disrupt our operations, and divert the attention of our Board of Directors and senior management and employees away from their regular duties and the pursuit of business opportunities. In addition, there may be litigation in connection with a proxy contest, as was the case with our 2018 proxy fight, which would serve as a further distraction to our Board of Directors, senior management and employees and could require the Company to incur significant additional costs. |
• | Perceived uncertainties as to our future direction as a result of potential changes to the composition of the Board of Directors may lead to the perception of a change in the strategic direction of the business, instability or lack of continuity which may be exploited by our competitors; may cause concern to our existing or potential customers and employees; may result in the loss of potential business opportunities; and may make it more difficult to attract and retain qualified personnel and business partners. |
• | Proxy contests and related actions by activist investors could cause significant fluctuations in our stock price based on temporary or speculative market perceptions or other factors that do not necessarily reflect the underlying fundamentals and prospects of our business. |
• | Reduced cash flows and capital resources, as we are required to make cash advances to meet contractual obligations to investors, process foreclosures, and maintain, repair and market foreclosed properties; |
• | Declining mortgage servicing fee revenues because we recognize these revenues only upon collection; |
• | Increasing mortgage servicing costs; |
• | Declining fair value on our mortgage servicing rights; and |
• | Declining fair values and liquidity of securities held in our investment portfolio that are collateralized by mortgage obligations. |
• | Variances in our operating results; |
• | Disparity between our operating results and the operating results of our competitors; |
• | Changes in analyst's estimates of our earnings results and future performance, or variances between our actual performance and that forecast by analysts; |
• | News releases or other announcements of material events relating to the Company, including but not limited to mergers, acquisitions, expansion plans, restructuring activities or other strategic developments; |
• | Statements made by activist investors criticizing our strategy, our management team or our Board of Directors; |
• | Future securities offerings by us of debt or equity securities; |
• | Addition or departure of key personnel; |
• | Market-wide events that may be seen by the market as impacting the Company; |
• | The presence or absence of short-selling of our common stock; |
• | General financial conditions of the country or the regions in which we operate; |
• | Trends in real estate in our primary markets; |
• | Trends relating to the economic markets generally; or |
• | Changes in laws and regulations affecting financial institutions. |
• | A phased-out classified Board of Directors so that until 2022, only a portion of our board of directors will be elected each year; |
• | Elimination of cumulative voting in the election of directors; |
• | Procedures for advance notification of shareholder nominations and proposals; |
• | The ability of our Board of Directors to amend our bylaws without shareholder approval; and |
• | The ability of our Board of Directors to issue shares of preferred stock without shareholder approval upon the terms and conditions and with the rights, privileges and preferences as the board of directors may determine. |
ITEM 2 | UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS |
(in thousands, expect share and per share information) | Total shares of common stock repurchased | Average price paid per share of common stock (1) | Aggregate repurchases of common equity (1) | ||||||||
April | — | $ | — | $ | — | ||||||
May | 524,321 | 28.48 | 14,930 | ||||||||
June | 439,279 | 30.50 | 13,396 | ||||||||
Three months ended June 30, 2019 | 963,600 | $ | 29.40 | $ | 28,326 | ||||||
ITEM 3 | DEFAULTS UPON SENIOR SECURITIES |
ITEM 4 | MINE SAFETY DISCLOSURES |
ITEM 5 | OTHER INFORMATION |
ITEM 6 | EXHIBITS |
Exhibit Number | Description | |
3.1 (1) | ||
3.2 (1) | ||
10.1 (2) | ||
10.2 (3) | ||
10.3 (4) | ||
31.1 | ||
31.2 | ||
32 (5) | ||
101.SCH | XBRL Taxonomy Extension Schema Document | |
101.CAL | XBRL Taxonomy Extension Calculation Linkbase Document | |
101.DEF | XBRL Taxonomy Extension Label Linkbase Document | |
101.LAB | XBRL Taxonomy Extension Presentation Linkbase Document | |
101.PRE | XBRL Taxonomy Extension Definitions Linkbase Document |
(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 Current Report on Form 8-K (SEC File No. 001-35424) filed on July 11, 2019, and incorporated herein by reference |
(3) | Filed as an exhibit to HomeStreet, Inc.’s Current Report on Form 8-K (SEC File No. 001-35424) filed on April 12, 2019, and incorporated herein by reference |
(4) | Filed as an exhibit to HomeStreet, Inc.’s Current Report on Form 8-K (SEC File No. 001-35424) filed on April 4, 2019, and incorporated herein by reference |
(5) | This exhibit shall not be deemed "filed" for purposes of Section 18 of the Securities Exchange Act of 1934, or otherwise subject to the liability of that Section. Such exhibit shall not be deemed incorporated into any filing under the Securities Act of 1933 or the Securities Exchange Act of 1934. |
HomeStreet, Inc. | ||
By: | /s/ Mark K. Mason | |
Mark K. Mason | ||
President and Chief Executive Officer | ||
(Principal Executive Officer) |
HomeStreet, Inc. | ||
By: | /s/ Mark R. Ruh | |
Mark R. Ruh | ||
Executive Vice President and Chief Financial Officer | ||
(Principal Financial Officer) |
1. | I have reviewed this quarterly report on Form 10-Q for the quarter ended June 30, 2019 of HomeStreet, Inc.; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and we have: |
(a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
(b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
(c) | Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
(d) | Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and |
5. | The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over |
(a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and |
(b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. |
Dated: | August 8, 2019 | By: | /s/ Mark K. Mason |
Mark K. Mason | |||
President and Chief Executive Officer |
1. | I have reviewed this Quarterly report on Form10-Q for the quarter ended June 30, 2019 of HomeStreet, Inc.; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and we have: |
(a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
(b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
(c) | Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
(d) | Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and |
5. | The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions): |
(a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and |
(b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. |
Dated: | August 8, 2019 | By: | /s/ Mark R. Ruh |
Mark R. Ruh | |||
Executive Vice President, Chief Financial Officer and Principal Accounting Officer | |||
1. | The Quarterly Report on Form 10-Q for the quarter ended June 30, 2019 (the "Report") of the Company fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
2. | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
Dated: | August 8, 2019 | By: | /s/ Mark K. Mason |
Mark K. Mason | |||
President and Chief Executive Officer |
1. | The Quarterly Report on Form 10-Q for the period ended June 30, 2019 (the "Report") of the Company fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
2. | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
Dated: | August 8, 2019 | By: | /s/ Mark R. Ruh |
Mark R. Ruh | |||
Executive Vice President, Chief Financial Officer and Principal Accounting Officer | |||
Consolidated Statements of Financial Condition (Parenthetical) - USD ($) $ in Thousands |
Jun. 30, 2019 |
Dec. 31, 2018 |
---|---|---|
Statement of Financial Position [Abstract] | ||
Interest-bearing instruments | $ 75,416 | $ 28,534 |
Investment securities held at fair value (AFS) | 799,397 | 851,968 |
Fair value of loans held for sale | 81,566 | 52,186 |
Allowance for losses on loans held for investment | 43,254 | 41,470 |
Fair value of loans held for investment | 4,475 | 4,057 |
Fair value of mortgage servicing rights | $ 67,723 | $ 75,047 |
Preferred stock, par value (in dollars per share) | $ 0 | $ 0 |
Preferred stock, shares authorized (in shares) | 10,000 | 10,000 |
Preferred stock, shares issued (in shares) | 0 | 0 |
Preferred stock, shares outstanding (in shares) | 0 | 0 |
Common stock, par value (in dollars per share) | $ 0 | $ 0 |
Common stock, shares authorized (in shares) | 160,000,000 | 160,000,000 |
Common stock, shares issued (in shares) | 26,085,164 | 26,995,348 |
Common stock, shares outstanding (in shares) | 26,085,164 | 26,995,348 |
Interim Consolidated Statements of Operations (Parenthetical) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended |
---|---|---|
Jun. 30, 2019 |
Jun. 30, 2019 |
|
Income Statement [Abstract] | ||
Net loss on disposal | $ 10,796 | $ 23,020 |
Interim Consolidated Statements of Comprehensive Income (Parenthetical) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2019 |
Jun. 30, 2018 |
Jun. 30, 2019 |
Jun. 30, 2018 |
|
Statement of Comprehensive Income [Abstract] | ||||
Tax expense (benefit) on unrealized holding gain (loss) on securities | $ 2,703 | $ (642) | $ 5,205 | $ (3,300) |
Tax expense (benefit) on reclassification adjustment for net gain on securities included in net income | $ 29 | $ 4 | $ (23) | $ 50 |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES |
6 Months Ended |
---|---|
Jun. 30, 2019 | |
Accounting Policies [Abstract] | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: HomeStreet, Inc. and its wholly owned subsidiaries (the "Company") is a diversified financial services company serving customers primarily on the West Coast of the United States, including Hawaii. The Company is principally engaged in commercial banking, mortgage banking, and consumer/retail banking activities. The Company's consolidated financial statements include the accounts of HomeStreet, Inc. and its wholly owned subsidiaries, HomeStreet Capital Corporation, HomeStreet Statutory Trusts and HomeStreet Bank (the "Bank"), and the Bank's subsidiaries, HomeStreet/WMS, Inc., HomeStreet Reinsurance, Ltd., Continental Escrow Company, HomeStreet Foundation, HS Properties, Inc., HS Evergreen Corporate Center LLC, Union Street Holdings LLC, HS Cascadia Holdings LLC and YNB Real Estate LLC. HomeStreet Bank was formed in 1986 and is a state-chartered commercial bank. The Company's accounting and financial reporting policies conform with accounting principles generally accepted in the United States of America ("U.S. GAAP"). Inter-company balances and transactions have been eliminated in consolidation. In preparing the consolidated financial statements, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the financial statements and revenues and expenses during the reporting periods and related disclosures. Some of these estimates require application of management's most difficult, subjective or complex judgments and result in amounts that are inherently uncertain and may change in future periods. Management has made significant estimates in several areas, including the fair value of assets acquired and liabilities assumed in business combinations (Note 2, Business Combinations), allowance for credit losses (Note 4, Loans and Credit Quality), valuation of residential mortgage servicing rights and loans held for sale (Note 7, Mortgage Banking Operations), valuation of investment securities (Note 3, Investment Securities), and valuation of derivatives (Note 6, Derivatives and Hedging Activities). We have reclassified certain prior period amounts to conform to the current period presentation. These reclassifications are immaterial and have no effect on net income, comprehensive income, cash flows, total assets or total shareholders' equity as previously reported. During the three months ended March 31, 2019, the Company's Board of Directors (the "Board") adopted a Resolution of Exit or Disposal of Home Loan Center ("HLC") Based Mortgage Banking Operations to sell or abandon the assets and transfer or terminate the personnel associated with the Company's high-volume home loan center-based mortgage origination business. The Company also successfully closed and settled two separate sales of the rights to service $14.26 billion in total unpaid principal balance of single family mortgage loans serviced for others, representing in the aggregate 71% of HomeStreet's total single family mortgage loans serviced for others portfolio at December 31, 2018. These two actions largely represent the Company's former Mortgage Banking segment. In accordance with Accounting Standards Codification (ASC) 205-20, the Company determined that the Board's decision to sell or abandon the assets and personnel associated with the Company's HLC-based mortgage business and the related mortgage servicing rights ("MSR") sales met the criteria to be classified as discontinued operations and its operating results and financial condition are presented as discontinued operations in the consolidated financial statements for the current and all comparative periods which have been recast to conform to the new presentation (see Note 2, Discontinued Operations for additional information). Unless otherwise indicated, information included in these notes to the consolidated financial statements (unaudited) are presented on a consolidated operations basis, which includes results from both continuing and discontinued operations, for all periods presented. In connection with the mortgage servicing rights ("MSR") sales and Board resolution regarding the former Mortgage Banking segment, the Company reassessed its reportable operating segments given these changes and associated changes made to its Chief Operating Decision Maker (CODM) package as of March 31, 2019. The Company concluded that as of March 31, 2019 the CODM evaluates the Company’s performance on a consolidated, entity-wide basis and accordingly has resulted in the elimination of segment reporting. The Company will no longer disclose operating results below the consolidated entity level which is now the reportable segment. These unaudited interim financial statements reflect all adjustments that are, in the opinion of management, necessary for a fair statement of the results of the periods presented. These adjustments are of a normal recurring nature, unless otherwise disclosed in this Quarterly Report on Form 10-Q. The results of operations in the interim financial statements do not necessarily indicate the results that may be expected for the full year. The interim financial information should be read in conjunction with our Annual Report on Form 10-K for the year ended December 31, 2018, filed with the Securities and Exchange Commission ("2018 Annual Report on Form 10-K"). Share Repurchase Program On March 28, 2019, the Board authorized a share repurchase program (the "Repurchase Program") pursuant to which the Company could have purchased up to $75 million of its issued and outstanding common stock, no par value, at prevailing market rates at the time of such purchase. There were repurchases of 963,600 shares of our common stock in the three and six months ended June 30, 2019. On June 20, 2019, the Company agreed to repurchase approximately 1.7 million shares from Blue Lion Capital and affiliates at a share price of $31.16, which represented the five-day volume weighted average price prior to the date of the 2019 annual meeting on June 20 and suspended our share repurchase program. This agreement required the Federal Reserve Bank of San Francisco to review and provide its non-objection prior to consummation. On July 11, 2019, we received the non-objection to the purchase agreement from the Federal Reserve and executed this share repurchase. We subsequently terminated our share repurchase program on July 25, 2019. Due to the time between entering the agreement with Blue Lion Capital to the settlement date, the Company reclassified $52.7 million from permanent shareholders' equity to temporary shareholders' equity on its consolidated statements of financial condition. Recent Accounting Developments In May 2019, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2019-05, Financial Instruments - Credit Losses (Topic 326) Targeted Transition Relief, or ASU 2019-05. This ASU allows entities to irrevocably elect, upon adoption of ASU 2016-13, the fair value option on financial instruments that (1) were previously recorded at amortized cost and (2) are within the scope of ASC 326-20 if the instruments are eligible for the fair value option under ASC 825-10. The fair value option election does not apply to held-to-maturity debt securities. Entities are required to make this election on an instrument-by-instrument basis. ASU 2019-05 has the same effective date as ASU 2016-13 therefore, it will be effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. The Company does not expect to elect the fair value option under this guidance, and therefore, ASU 2019-05 is not expected to impact the Company’s Consolidated Financial Statements. In April 2019, the FASB issued ASU No. 2019-04, Codification Improvements to Topic 326, Financial Instruments – Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825 – Financial Instruments. The new ASU provides narrow-scope amendments to help apply these recent standards. The transition requirements and effective date of this ASU for HomeStreet is January 1, 2020 with early adoption permitted for certain amendments. The Company is currently assessing this standard’s impact on our consolidated results of operations and financial condition. In August 2018, the FASB issued ASU No.2018-13, Fair Value Measurement (Topic 820): Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement. This ASU adds, eliminates, and modifies certain disclosure requirements for fair value measurements. Among the changes, entities will no longer be required to disclose the amount of and reasons for transfers between Level 1 and Level 2 of the fair value hierarchy, but will be required to disclose the range and weighted average used to develop significant unobservable inputs for Level 3 fair value measurements. ASU No. 2018-13 is effective for interim and annual reporting periods beginning after December 15, 2019; early adoption is permitted. Entities are also allowed to elect early adoption of the eliminated or modified disclosure requirements and delay adoption of the added disclosure requirements until their effective date. As ASU No. 2018-13 only revises disclosure requirements, it will not impact the Company's consolidated financial statements. In January 2017, the FASB issued ASU No. 2017-04, Intangibles - Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment, or ASU 2017-04, which eliminates Step 2 from the goodwill impairment test. ASU 2017-04 also eliminates the requirements for any reporting unit with a zero or negative carrying amount to perform a qualitative assessment and, if it fails that qualitative test, to perform Step 2 of the goodwill impairment test. An entity still has the option to perform the qualitative assessment for a reporting unit to determine if the quantitative impairment test is necessary. Adoption of ASU 2017-04 is required for annual or interim goodwill impairment tests in fiscal years beginning after December 15, 2019 with early adoption permitted for annual or interim goodwill impairment tests performed on testing dates after January 1, 2017. The Company does not expect the adoption of ASU 2017-04 to have a material impact on its consolidated financial statements. In June 2016, FASB issued ASU No. 2016-13, Measurement of Credit Losses on Financial Instruments. Current U.S. GAAP requires an "incurred loss" methodology for recognizing credit losses that delay recognition until it is probable a loss has been incurred. The main objective of this ASU is to provide financial statement users with more decision-useful information about the expected credit losses on financial instruments and other commitments to extend credit held by a reporting entity at each reporting date. The amendment affects loans, debt securities, trade receivables, net investments in leases, off-balance-sheet credit exposures, reinsurance receivables, and any other financial asset not excluded from the scope that has the contractual right to receive cash. The amendments in this ASU replace the incurred loss impairment model in current U.S. GAAP with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. The amendments in this ASU require a financial asset (or group of financial assets) measured at amortized cost basis to be presented at the net amount expected to be collected. The allowance for credit losses is a valuation account that is deducted from the amortized cost basis of the financial asset(s) to present the net carrying value at the amount expected to be collected on the financial asset. The measurement of expected credit losses will be based on relevant information about past events, including historical experience, current conditions, and reasonable and supportable forecasts that affect the collectability of the reported amount. The amendments in this ASU broaden the information that an entity must consider in developing its expected credit loss estimate for assets measured either collectively or individually. The use of forecasted information incorporates more timely information in the estimate of expected credit loss, which will be more decision relevant to users of the financial statements. The amendments in this ASU will be effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. The Company plans to adopt this ASU on January 1, 2020 and is still evaluating the effects this ASU will have on the Company's consolidated financial statements. The Company formed a cross-functional project team and engaged third-party consultants who jointly developed an implementation plan to satisfy the requirements of the ASU. The project team continues to work on developing and implementing the current expected credit loss ("CECL") model including data and assumption validation, identifying key interpretive issues, documenting process flows and internal controls, and beginning parallel testing with our existing allowance model. We also engaged a third-party firm to evaluate our CECL model. The Company anticipates that an increase to the allowance for credit losses will be recognized upon adoption of the ASU to provide for the expected credit losses over the estimated life of the financial assets (principally loans); however, management is still assessing the magnitude of the increase which will depend on economic conditions and the composition and trends in the Company's loans held for investment portfolio at the date of adoption. Upon adoption, the Company expects to implement a change in the processes and procedures used to calculate the allowance for loan losses. In addition, the current accounting policy and procedures for other-than-temporary impairment on investment securities classified as available for sale will be replaced with an allowance approach. The Company has begun developing and implementing processes to address the provisions of this ASU.
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DISCONTINUED OPERATIONS |
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Discontinued Operations and Disposal Groups [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
DISCONTINUED OPERATIONS | DISCONTINUED OPERATIONS: On March 29, 2019, the Company successfully closed and settled two sales of the rights to service $14.26 billion in total unpaid principal balance of single family mortgage loans serviced for Federal National Mortgage Association ("Fannie Mae"), Federal Home Loan Mortgage Corporation ('Freddie Mac") and Government National Mortgage Association ("Ginnie Mae"), representing 71% of HomeStreet's total single family mortgage loans serviced for others portfolio as of December 31, 2018. The sale resulted in a $1.3 million pre-tax loss from discontinued operations during the six months ended June 30, 2019. The Company finalized the servicing transfer for some of these loans in the second quarter of 2019 and will transfer the remaining in the third quarter of 2019 and is subservicing these loans until the transfer dates. These loans are excluded from the Company's MSR portfolio at June 30, 2019. On March 31, 2019, based on mortgage market conditions and the operating environment, the Board adopted a Resolution of Exit or Disposal of HLC Based Mortgage Banking Operations to sell or abandon the assets and related personnel associated with those operations. The assets that were sold or abandoned largely represented the Company's former Mortgage Banking segment, the activities of which related to originating, servicing, underwriting, funding and selling single family residential mortgage loans. The Company determined that the above actions constituted commitment to a plan of exit or disposal of certain long-lived assets (through sale or abandonment) and termination of employees. Further, the Company determined that the shift from a large-scale HLC based originator and servicer to a branch-focused product offering represented a strategic shift. As a result, the HLC-related mortgage banking operations are reported separately from the continuing operations as discontinued operations. In addition, the former Mortgage Banking operating segment and reporting unit was eliminated. This has resulted in a recast of the financial statements in the current and all comparative periods as detailed below. On April 4, 2019 the Company entered into a definitive agreement related to the sale of the HLC based mortgage origination business assets and transfer of personnel to Homebridge Financial Services, Inc. – ("Homebridge"). On June 24, 2019 the Company completed the sale with Homebridge. This sale included 47 stand-alone HLCs and the transfer of certain related mortgage personnel. These HLCs, along with certain other mortgage banking related assets and liabilities that were to be sold or abandoned within one year, are classified as discontinued operations in the accompanying Consolidated Statements of Financial Condition and Consolidated Statements of Operations. HLCs that were not sold were closed during the second quarter and none remain as of June 30, 2019. Certain remaining bank location-based components of the Company's for mer Mortgage Banking segment, including MSRs on certain mortgage loans that were not part of the sales and right-of-use assets and lease liabilities where we did not obtain full landlord release have been classified as continuing operations based on the Company's intent. The following table summarizes the calculation of the net loss on disposal of discontinued operations.
The carrying amount of major classes of assets and liabilities related to discontinued operations consisted of the following.
(1) Includes $8.9 million and $15.5 million of derivative balances at June 30, 2019 and December 31, 2018, respectively. Statements of Operations of Discontinued Operations
Statements of Cash Flow for Discontinued Operations
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INVESTMENT SECURITIES |
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Investments, Debt and Equity Securities [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
INVESTMENT SECURITIES | INVESTMENT SECURITIES: The following table sets forth certain information regarding the amortized cost and fair values of our investment securities available for sale and held to maturity.
(1) In conjunction with adopting ASU 2017-12, in the first quarter of 2019, we transferred $66.2 million in HTM securities to AFS.
Mortgage-backed securities ("MBS") and collateralized mortgage obligations ("CMO") represent securities issued by government sponsored enterprises ("GSEs"). Each of the MBS and CMO securities in our investment portfolio are guaranteed by Fannie Mae, Ginnie Mae or Freddie Mac. Municipal bonds are comprised of general obligation bonds (i.e., backed by the general credit of the issuer) and revenue bonds (i.e., backed by either collateral or revenues from the specific project being financed) issued by various municipal corporations. As of June 30, 2019 and December 31, 2018, all securities held, including municipal bonds and corporate debt securities, were rated investment grade, based upon external ratings where available and, where not available, based upon internal ratings which correspond to ratings as defined by Standard and Poor's Rating Services ("S&P") or Moody's Investors Services ("Moody's"). As of June 30, 2019 and December 31, 2018, substantially all securities held had ratings available by external ratings agencies. Investment securities available for sale and held to maturity that were in an unrealized loss position are presented in the following tables based on the length of time the individual securities have been in an unrealized loss position.
The Company has evaluated securities available for sale that are in an unrealized loss position and has determined that the decline in value is temporary and is related to the change in market interest rates since purchase. The decline in value is not related to any issuer- or industry-specific credit event. The Company has not identified any expected credit losses on its debt securities as of June 30, 2019 and December 31, 2018. In addition, as of June 30, 2019 and December 31, 2018, the Company had not made a decision to sell any of its debt securities held, nor did the Company consider it more likely than not that it would be required to sell such securities before recovery of their amortized cost basis. The following tables present the fair value of investment securities available for sale and held to maturity by contractual maturity along with the associated contractual yield for the periods indicated below. Contractual maturities for mortgage-backed securities and collateralized mortgage obligations as presented exclude the effect of expected prepayments. Expected maturities will differ from contractual maturities because borrowers may have the right to prepay obligations before the underlying mortgages mature. The weighted-average yield is computed using the contractual coupon of each security weighted based on the fair value of each security and does not include adjustments to a tax equivalent basis.
Sales of investment securities available for sale were as follows.
The following table summarizes the carrying value of securities pledged as collateral to secure borrowings, public deposits and other purposes as permitted or required by law:
The Company assesses the creditworthiness of the counterparties that hold the pledged collateral and has determined that these arrangements have little risk. There were no securities pledged under repurchase agreements at June 30, 2019 and December 31, 2018. Tax-exempt interest income on securities available for sale totaling $2.5 million and $2.2 million for the three months ended June 30, 2019 and 2018, respectively, and $5.3 million and $4.5 million for the six months ended June 30, 2019 and 2018, respectively, was recorded in the Company's consolidated statements of operations.
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LOANS AND CREDIT QUALITY |
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Receivables [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
LOANS AND CREDIT QUALITY | LOANS AND CREDIT QUALITY: For a detailed discussion of loans and credit quality, including accounting policies and the methodology used to estimate the allowance for credit losses, see Note 1, Summary of Significant Accounting Policies, and Note 5, Loans and Credit Quality, within our 2018 Annual Report on Form 10-K. The Company's portfolio of loans held for investment is divided into two portfolio segments, consumer loans and commercial loans, which are the same segments used to determine the allowance for loan losses. Within each portfolio segment, the Company monitors and assesses credit risk based on the risk characteristics of each of the following loan classes: single family and home equity and other loans within the consumer loan portfolio segment and non-owner occupied commercial real estate, multifamily, construction/land development, owner occupied commercial real estate and commercial business loans within the commercial loan portfolio segment. Loans held for investment consist of the following.
Loans in the amount of $1.85 billion and $2.16 billion at June 30, 2019 and December 31, 2018, respectively, were pledged to secure borrowings from the Federal Home Loan Bank ("FHLB") as part of our liquidity management strategy. Additionally, loans totaling $578.4 million and $502.7 million at June 30, 2019 and December 31, 2018, respectively, were pledged to secure borrowings from the Federal Reserve Bank. The FHLB and Federal Reserve Bank do not have the right to sell or re-pledge these loans. Credit Risk Concentrations Concentrations of credit risk arise when a number of customers are engaged in similar business activities or activities in the same geographic region, or when they have similar economic features that would cause their ability to meet contractual obligations to be similarly affected by changes in economic conditions. Loans held for investment are primarily secured by real estate located in the Pacific Northwest, California and Hawaii. At June 30, 2019, we had concentrations representing 10% or more of the total portfolio by state and property type for the loan classes of single family and multifamily within the states of Washington and California, which represented 11.8% and 11.1% of the total portfolio, respectively. At December 31, 2018, we had concentrations representing 10% or more of the total portfolio by state and property type for the loan classes of single family and multifamily within the states of Washington and California, which represented 13.1% and 10.2% of the total portfolio, respectively. Credit Quality Management considers the level of allowance for loan losses to be appropriate to cover credit losses inherent within the loans held for investment portfolio as of June 30, 2019. In addition to the allowance for loan losses, the Company maintains a separate allowance for losses related to unfunded loan commitments, and this amount is included in accounts payable and other liabilities on our consolidated statements of financial condition. Collectively, these allowances are referred to as the allowance for credit losses. The allowance for unfunded commitments was $1.4 million at June 30, 2019, compared to $1.5 million at June 30, 2018. For further information on the policies that govern the determination of the allowance for loan losses levels, see Note 1, Summary of Significant Accounting Policies, and Note 5, Loans and Credit Quality, within our 2018 Annual Report on Form 10-K. Activity in the allowance for credit losses was as follows.
Activity in the allowance for credit losses by loan portfolio and loan class was as follows.
The following tables disaggregate our allowance for credit losses and recorded investment in loans by impairment methodology.
Impaired Loans Loans are classified as impaired when, based on current information and events, it is probable that the Company will be unable to collect the scheduled payments of principal and interest when due, in accordance with the terms of the original loan agreement, without unreasonable delay. This includes all loans classified as nonaccrual and troubled debt restructurings. Impaired loans are risk rated for internal and regulatory rating purposes, but presented separately for clarification. The following tables present impaired loans by loan portfolio segment and loan class.
The following tables provide the average recorded investment and interest income recognized on impaired loans by portfolio segment and class.
Credit Quality Indicators Management regularly reviews loans in the portfolio to assess credit quality indicators and to determine appropriate loan classification and grading in accordance with applicable bank regulations. The Company's risk rating methodology assigns risk ratings ranging from 1 to 10, where a higher rating represents higher risk. The Company differentiates its lending portfolios into homogeneous loans and non-homogeneous loans. The 10 risk rating categories can be generally described by the following groupings for non-homogeneous loans: Pass. We have five pass risk ratings which represent a level of credit quality that ranges from no well-defined deficiency or weakness to some noted weakness. However, the risk of default on any loan classified as pass is expected to be remote. The five pass risk ratings are described below: Minimal Risk. A minimal risk loan, risk rated 1-Exceptional, is to a borrower of the highest quality. The borrower has an unquestioned ability to produce consistent profits and service all obligations and can absorb severe market disturbances with little or no difficulty. Low Risk. A low risk loan, risk rated 2-Superior, is similar in characteristics to a minimal risk loan. Balance sheet and operations are slightly more prone to fluctuations within the business cycle; however, debt capacity and debt service coverage remains strong. The borrower will have a strong demonstrated ability to produce profits and absorb market disturbances. Modest Risk. A modest risk loan, risk rated 3-Excellent, is a desirable loan with excellent sources of repayment and no currently identifiable risk associated with collection. The borrower exhibits a very strong capacity to repay the loan in accordance with the repayment agreement. The borrower may be susceptible to economic cycles, but will have cash reserves to weather these cycles. Average Risk. An average risk loan, risk rated 4-Good, is an attractive loan with sound sources of repayment and no material collection or repayment weakness evident. The borrower has an acceptable capacity to pay in accordance with the agreement. The borrower is susceptible to economic cycles and more efficient competition, but should have modest reserves sufficient to survive all but the most severe downturns or major setbacks. Acceptable Risk. An acceptable risk loan, risk rated 5-Acceptable, is a loan with lower than average, but still acceptable credit risk. These borrowers may have higher leverage, less certain but viable repayment sources, have limited financial reserves and may possess weaknesses that can be adequately mitigated through collateral, structural or credit enhancement. The borrower is susceptible to economic cycles and is less resilient to negative market forces or financial events. Reserves may be insufficient to survive a modest downturn. Watch. A watch loan, risk rated 6-Watch, is still pass-rated, but represents the lowest level of acceptable risk due to an emerging risk element or declining performance trend. Watch ratings are expected to be temporary, with issues resolved or manifested to the extent that a higher or lower rating would be appropriate. The borrower should have a plausible plan, with reasonable certainty of success, to correct the problems in a short period of time. Borrowers rated watch are characterized by elements of uncertainty, such as:
Special Mention. A special mention loan, risk rated 7-Special Mention, has potential weaknesses that deserve management's close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the loans or the institution's credit position at some future date. Loans in this category contain unfavorable characteristics and are generally undesirable. They are currently protected but are potentially weak and constitute an undue and unwarranted credit risk, but not to the point of a substandard classification. A special mention loan has potential weaknesses, which if not checked or corrected, weaken the loan or inadequately protect the Company's position at some future date. Such weaknesses include:
Substandard. A substandard loan, risk rated 8-Substandard, is inadequately protected by the current sound worth and paying capacity of the borrower or of the collateral pledged, if any. Loans so classified must have a well-defined weakness or weaknesses that jeopardize the liquidation of the loan. They are characterized by the distinct possibility that the Company will sustain some loss if the deficiencies are not corrected. Loss potential, while existing in the aggregate amount of substandard loans, does not have to exist in individual loans classified substandard. Loans are classified as substandard when they have unsatisfactory characteristics causing unacceptable levels of risk. A substandard loan normally has one or more well-defined weaknesses that could jeopardize repayment of the loan. The likely need to liquidate assets to correct the problem, rather than repayment from successful operations, is the key distinction between special mention and substandard. The following are examples of well-defined weaknesses:
Doubtful. Loans classified as doubtful, risk rated 9-Doubtful, have all the weaknesses inherent in one classified substandard with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions and values, highly questionable and improbable. The possibility of loss is extremely high, but because of certain important and reasonably specific pending factors, which may work towards strengthening the loan, classification as a loss (and immediate charge-off) is deferred until more exact status may be determined. Pending factors include proposed merger, acquisition, liquidation procedures, capital injection, and perfection of liens on additional collateral and refinancing plans. In certain circumstances, a doubtful rating will be temporary, while the Company is awaiting an updated collateral valuation. In these cases, once the collateral is valued and appropriate margin applied, the remaining uncollateralized portion will be charged-off. The remaining balance, properly margined, may then be upgraded to substandard, however must remain on non-accrual. Loss. Loans classified as loss, risk rated 10-Loss, are considered uncollectible and of such little value that the continuance as an active Company asset is not warranted. This rating does not mean that the loan has no recovery or salvage value, but rather that the loan should be charged-off now, even though partial or full recovery may be possible in the future. Homogeneous loans maintain their original risk rating until they are greater than 30 days past due, and risk rating reclassification is based primarily on the past due status of the loan. The risk rating categories can be generally described by the following groupings for commercial and commercial real estate homogeneous loans: Watch. A homogeneous watch loan, risk rated 6, is 60-89 days past due from the required payment date at month-end. Special Mention. A homogeneous special mention loan, risk rated 7, is less than 90 days past due from the required payment date at month-end. Substandard. A homogeneous substandard loan, risk rated 8, is more than 90 days or more past due from the required payment date at month-end. Loss. A homogeneous loss loan, risk rated 10, is 120 days or more past due from the required payment date for non-real estate secured closed-end loans or 180 days or more past due from the required payment date for open-end loans and all loans secured by real estate. These loans are generally charged off in the month in which the applicable time period elapses. The risk rating categories can be generally described by the following groupings for residential and home equity and other homogeneous loans: Watch. A homogeneous retail watch loan, risk rated 6, is 60-89 days past due from the required payment date at month-end. Substandard. A homogeneous retail substandard loan, risk rated 8, is 90-180 days past due from the required payment date at month-end. Loss. A homogeneous retail loss loan, risk rated 10, is past due 180 cumulative days or more from the contractual due date. These loans are generally charged-off in the month in which the 180 day period elapses. Residential and home equity loans modified in a troubled debt restructure are not considered homogeneous. The risk rating classification for such loans are based on the non-homogeneous definitions noted above. The following tables summarize designated loan grades by loan portfolio segment and loan class.
As of June 30, 2019 and December 31, 2018, none of the Company's loans were rated Doubtful or Loss. For a detailed discussion on credit quality, see Note 5, Loans and Credit Quality, within our 2018 Annual Report on Form 10-K. Nonaccrual and Past Due Loans Loans are placed on nonaccrual status when the full and timely collection of principal and interest is doubtful, generally when the loan becomes 90 days or more past due for principal or interest payment or if part of the principal balance has been charged off. Loans whose repayments are insured by the Federal Housing Administration ("FHA") or guaranteed by the Veterans Administration ("VA") are generally maintained on accrual status even if 90 days or more past due. The following tables present an aging analysis of past due loans by loan portfolio segment and loan class.
The following tables present performing and nonperforming loan balances by loan portfolio segment and loan class.
The following tables present information about TDR activity during the periods presented.
The following table presents loans that were modified as TDRs within the previous 12 months and subsequently re-defaulted during the three and six months ended June 30, 2019 and 2018, respectively. A TDR loan is considered re-defaulted when it becomes doubtful that the objectives of the modifications will be met, generally when a consumer loan TDR becomes 60 days or more past due on principal or interest payments or when a commercial loan TDR becomes 90 days or more past due on principal or interest payments.
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DEPOSITS |
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DEPOSITS | DEPOSITS: Deposit balances, including stated rates, were as follows.
(1) Includes $132.8 million and $162.8 million in servicing deposits related to discontinued operations at June 30, 2019 and December 31, 2018, respectively. These deposits will be transferred to the MSR buyers upon transfer of the loan servicing. Interest expense on deposits was as follows.
The weighted-average interest rates on certificates of deposit were 2.30% and 1.87% at June 30, 2019 and December 31, 2018, respectively. Certificates of deposit outstanding mature as follows.
The aggregate amount of time deposits in denominations of more than $250 thousand at June 30, 2019 and December 31, 2018 were $206.8 million and $85.3 million, respectively. There were $757.9 million and $786.1 million of brokered deposits at June 30, 2019 and December 31, 2018, respectively.
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Derivative Instruments and Hedging Activities Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
DERIVATIVES AND HEDGING ACTIVITIES | DERIVATIVES AND HEDGING ACTIVITIES: To reduce the risk of significant interest rate fluctuations on the value of certain assets and liabilities, such as certain mortgage loans held for sale or MSRs, the Company utilizes derivatives, such as forward sale commitments, futures, option contracts, interest rate swaps and interest rate swaptions as risk management instruments in its hedging strategy. Derivative transactions are measured in terms of notional amount, which is not recorded in the consolidated statements of financial condition. The notional amount is generally not exchanged and is used as the basis for interest and other contractual payments. We held no derivatives designated as a fair value, cash flow or foreign currency hedge instrument at June 30, 2019 or December 31, 2018. Derivatives are reported at their respective fair values in the other assets or accounts payable and other liabilities line items on the consolidated statements of financial condition, with changes in fair value reflected in current period earnings. As permitted under U.S. GAAP, the Company nets derivative assets and liabilities when a legally enforceable master netting agreement exists between the Company and the derivative counterparty, which are documented under industry standard master agreements and credit support annexes. The Company's master netting agreements provide that following an uncured payment default or other event of default, the non-defaulting party may promptly terminate all transactions between the parties and determine a net amount due to be paid to, or by, the defaulting party. An event of default may also occur under a credit support annex if a party fails to make a collateral delivery (which remains uncured following applicable notice and grace periods). The Company's right of offset requires that master netting agreements are legally enforceable and that the exercise of rights by the non-defaulting party under these agreements will not be stayed or avoided under applicable law upon an event of default, including bankruptcy, insolvency or similar proceeding. The collateral used under the Company's master netting agreements is typically cash, but securities may be used under agreements with certain counterparties. Receivables related to cash collateral that has been paid to counterparties is included in other assets on the Company's consolidated statements of financial condition. Any securities pledged to counterparties as collateral remain on the consolidated statements of financial condition. Refer to Note 3, Investment Securities, for further information on securities collateral pledged. At June 30, 2019 and December 31, 2018, the Company did not hold any collateral received from counterparties under derivative transactions. For further information on the policies that govern derivative and hedging activities, see Note 1, Summary of Significant Accounting Policies, and Note 11, Derivatives and Hedging Activities, within our 2018 Annual Report on Form 10-K. The notional amounts and fair values for derivatives consist of the following.
The following tables present gross and net information about derivative instruments.
The following table presents the net gain (loss) recognized on derivatives, including economic hedge derivatives, within the respective line items in the statement of operations for the periods indicated.
(4) Comprised of interest rate swaps used as an economic hedge of loans held for investment.
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MORTGAGE BANKING OPERATIONS |
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Mortgage Banking [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
MORTGAGE BANKING OPERATIONS | MORTGAGE BANKING OPERATIONS: Loans held for sale consisted of the following.
Loans sold proceeds consisted of the following.
Gain on loan origination and sale activities, including the effects of derivative risk management instruments, consisted of the following.
(3) Loans originated as held for investment. (4) Includes $24.2 million and $54.3 million from discontinued operations for three months ended June 30, 2019 and 2018 and $59.7 million and $101.2 million for the six months ended 2019 and 2018, respectively. The Company's portfolio of loans serviced for others is primarily comprised of loans held in U.S. government and agency MBS issued by Fannie Mae, Freddie Mac and Ginnie Mae. Loans serviced for others are not included in the consolidated statements of financial condition as they are not assets of the Company. The composition of loans serviced for others that contribute to loan servicing income is presented below at the unpaid principal balance.
The Company has made representations and warranties that the loans sold meet certain requirements. The Company may be required to repurchase mortgage loans or indemnify loan purchasers due to defects in the origination process of the loan, such as documentation errors, underwriting errors and judgments, appraisal errors, early payment defaults and fraud. For further information on the Company's mortgage repurchase liability, see Note 8, Commitments, Guarantees and Contingencies, of this Quarterly Report on Form 10-Q. The following is a summary of changes in the Company's liability for estimated mortgage repurchase losses.
The Company has agreements with certain investors to advance scheduled principal and interest amounts on delinquent loans. Advances are also made to fund the foreclosure and collection costs of delinquent loans prior to the recovery of reimbursable amounts from investors or borrowers. Advances of $2.9 million and $2.5 million were recorded in other assets as of June 30, 2019 and December 31, 2018, respectively. When the Company has the unilateral right to repurchase Ginnie Mae pool loans it has previously sold (generally loans that are more than 90 days past due), the Company records the loan on its consolidated statement of financial condition. At June 30, 2019 and December 31, 2018, delinquent or defaulted mortgage loans currently in Ginnie Mae pools that the Company has recognized on its consolidated statements of financial condition totaled $9.5 million and $37.7 million, respectively, with a corresponding amount recorded within accounts payable and other liabilities on the consolidated statements of financial condition. The recognition of previously sold loans does not impact the accounting for the previously recognized MSRs. Revenue from mortgage servicing, including the effects of derivative risk management instruments, consisted of the following.
All MSRs are initially measured and recorded at fair value at the time loans are sold. Single family MSRs are subsequently carried at fair value with changes in fair value reflected in earnings in the periods in which the changes occur, while multifamily and SBA MSRs are subsequently carried at the lower of amortized cost or fair value. The fair value of MSRs is determined based on the price that would be received to sell the MSRs in an orderly transaction between market participants at the measurement date. The Company determines fair value using a valuation model that calculates the net present value of estimated future cash flows. Estimates of future cash flows include contractual servicing fees, ancillary income and costs of servicing, the timing of which are impacted by assumptions, primarily expected prepayment speeds and discount rates, which relate to the underlying performance of the loans. The initial fair value measurement of MSRs is adjusted up or down depending on whether the underlying loan pool interest rate is at a premium, discount or par. Key economic assumptions used in measuring the initial fair value of capitalized single family MSRs were as follows.
Key economic assumptions and the sensitivity of the current fair value for single family MSRs to immediate adverse changes in those assumptions were as follows.
These sensitivities are hypothetical and subject to key assumptions of the underlying valuation model. As the table above demonstrates, the Company's methodology for estimating the fair value of MSRs is highly sensitive to changes in key assumptions. For example, actual prepayment experience may differ and any difference may have a material effect on MSR fair value. Changes in fair value resulting from changes in assumptions generally cannot be extrapolated because the relationship of the change in assumption to the change in fair value may not be linear. Also, in this table, the effect of a variation in a particular assumption on the fair value of the MSRs is calculated without changing any other assumption; in reality, changes in one factor may be associated with changes in another (for example, decreases in market interest rates may provide an incentive to refinance; however, this may also indicate a slowing economy and an increase in the unemployment rate, which reduces the number of borrowers who qualify for refinancing), which may magnify or counteract the sensitivities. Thus, any measurement of MSR fair value is limited by the conditions existing and assumptions made as of a particular point in time. Those assumptions may not be appropriate if they are applied to a different point in time. In March 2019, the Company successfully closed and settled two sales of the rights to service an aggregate of $14.26 billion in total unpaid principal balance of single family mortgage loans serviced for Fannie Mae, Ginnie Mae and Freddie Mac representing 71% of HomeStreet's total single family mortgage loans serviced for others portfolio as of December 31, 2018. These sales resulted in a $2.0 million and $1.3 million pre-tax loss from discontinued operations for the three and six months ended June 30, 2019, respectively. The Company finalized the servicing transfer for a portion of these loans in the second quarter and will finalize the remainder in the third quarter of 2019. In connection with the MSR sales, the Company has an obligation to reimburse the buyers for loan prepayments 60 days beyond the sales date and has established a reserve for this expected amount. The changes in single family MSRs measured at fair value are as follows.
MSRs resulting from the sale of multifamily loans are recorded at fair value and subsequently carried at the lower of amortized cost or fair value. Multifamily MSRs are amortized in proportion to, and over, the estimated period the net servicing income will be collected. The changes in multifamily MSRs measured at the lower of amortized cost or fair value were as follows.
At June 30, 2019, the expected weighted-average remaining life of the Company's multifamily MSRs was 10.48 years. Projected amortization expense for the gross carrying value of multifamily MSRs is estimated as follows.
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COMMITMENTS, GUARANTEES, AND CONTINGENCIES |
6 Months Ended |
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Jun. 30, 2019 | |
Commitments and Contingencies Disclosure [Abstract] | |
COMMITMENTS, GUARANTEES AND CONTINGENCIES | COMMITMENTS, GUARANTEES AND CONTINGENCIES: Commitments Commitments to extend credit are agreements to lend to customers in accordance with predetermined contractual provisions. These commitments may be for specific periods or contain termination clauses and may require the payment of a fee by the borrower. The total amount of unused commitments does not necessarily represent future credit exposure or cash requirements in that commitments may expire without being drawn upon. The Company makes certain unfunded loan commitments as part of its lending activities that have not been recognized in the Company's financial statements. These include commitments to extend credit made as part of the Company's lending activities on loans the Company intends to hold in its held for investment portfolio. The aggregate amount of these unrecognized unfunded loan commitments existing at June 30, 2019 and December 31, 2018 was $45.3 million and $33.8 million, respectively. In the ordinary course of business, the Company extends secured and unsecured open-end loans to meet the financing needs of its customers. Undistributed construction loan commitments, where the Company has an obligation to advance funds for construction progress payments, were $474.5 million and $607.2 million at June 30, 2019 and December 31, 2018, respectively. Unused home equity and commercial banking funding lines totaled $768.9 million and $662.1 million at June 30, 2019 and December 31, 2018, respectively. The Company has recorded an allowance for credit losses on loan commitments, included in accounts payable and other liabilities on the consolidated statements of financial condition, of $1.4 million and $1.4 million at June 30, 2019 and December 31, 2018, respectively. Guarantees In the ordinary course of business, the Company sells and services loans through the Fannie Mae Multifamily DUS® program and shares in the risk of loss with Fannie Mae under the terms of the DUS® contracts (pari passu loss sharing agreement). Under such agreements, 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 and with two-thirds of the loss covered by Fannie Mae. For loans that have been sold through this program, a liability is recorded for this loss sharing arrangement under the accounting guidance for guarantees. As of June 30, 2019 and December 31, 2018, the total unpaid principal balance of loans sold under this program was $1.45 billion and $1.46 billion, respectively. The Company's reserve liability related to this arrangement totaled $2.7 million and $2.5 million at June 30, 2019 and December 31, 2018, respectively. There were no actual losses incurred under this arrangement during the three and six months ended June 30, 2019 and 2018. Mortgage Repurchase Liability In the ordinary course of business, the Company sells residential mortgage loans to GSEs and other entities. In addition, the Company pools FHA-insured and VA-guaranteed mortgage loans into Ginnie Mae Securities guaranteed mortgage-backed securities. The Company has made representations and warranties that the loans sold meet certain requirements. The Company may be required to repurchase mortgage loans or indemnify loan purchasers due to defects in the origination process of the loan, such as documentation errors, underwriting errors and judgments, early payment defaults and fraud. These obligations expose the Company to mark-to-market and credit losses on the repurchased mortgage loans after accounting for any mortgage insurance that we may receive. Generally, the maximum amount of future payments the Company would be required to make for breaches of these representations and warranties would be equal to the unpaid principal balance of such loans that are deemed to have defects that were sold to purchasers plus, in certain circumstances, accrued and unpaid interest on such loans and certain expenses. The Company does not typically receive repurchase requests from the FHA or VA. As an originator of FHA-insured or VA-guaranteed loans, the Company is responsible for obtaining the insurance with FHA or the guarantee with the VA. If loans are later found not to meet the requirements of FHA or VA, through required internal quality control reviews or through agency audits, the Company may be required to indemnify FHA or VA against losses. The loans remain in Ginnie Mae pools unless and until they are repurchased by the Company. In general, once an FHA or VA loan becomes 90 days past due, the Company repurchases the FHA or VA residential mortgage loan to minimize the cost of interest advances on the loan. If the loan is cured through borrower efforts or through loss mitigation activities, the loan may be resold into a Ginnie Mae pool. The Company's liability for mortgage loan repurchase losses incorporates probable losses associated with such indemnification. The total unpaid principal balance of loans sold on a servicing-retained basis that were subject to the terms and conditions of these representations and warranties totaled $6.87 billion and $20.24 billion as of June 30, 2019 and December 31, 2018, respectively. At June 30, 2019 and December 31, 2018, the Company had recorded a mortgage repurchase liability for loans sold on a servicing-retained and servicing-released basis, included in accounts payable and other liabilities on the consolidated statements of financial condition, of $3.2 million and $3.1 million, respectively. Contingencies In the normal course of business, the Company may have various legal claims and other similar contingent matters outstanding for which a loss may be realized. For these claims, the Company establishes a liability for contingent losses when it is probable that a loss has been incurred and the amount of loss can be reasonably estimated. For claims determined to be reasonably possible but not probable of resulting in a loss, there may be a range of possible losses in excess of the established liability. At June 30, 2019, we reviewed our legal claims and determined that there were no material claims that were considered to be probable or reasonably possible of resulting in a material loss. As a result, the Company did not have any material amounts reserved for legal claims as of June 30, 2019.
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FAIR VALUE MEASUREMENT |
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Fair Value Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
FAIR VALUE MEASUREMENT | FAIR VALUE MEASUREMENT: For a further discussion of fair value measurements, including information regarding the Company's valuation methodologies and the fair value hierarchy, see Note 18, Fair Value Measurement within our 2018 Annual Report on Form 10-K. Valuation Processes The Company has various processes and controls in place to ensure that fair value measurements are reasonably estimated. The Finance Committee of the Board provides oversight and approves the Company's Asset/Liability Management Policy ("ALMP"). The Company's ALMP governs, among other things, the application and control of the valuation models used to measure fair value. On a quarterly basis, the Company's Asset/Liability Management Committee ("ALCO") and the Finance Committee of the Board review significant modeling variables used to measure the fair value of the Company's financial instruments, including the significant inputs used in the valuation of single family MSRs. Additionally, ALCO periodically obtains an independent review of the MSR valuation process and procedures, including a review of the model architecture and the valuation assumptions. The Company obtains an MSR valuation from an independent valuation firm monthly to assist with the validation of the fair value estimate and the reasonableness of the assumptions used in measuring fair value. The Company's real estate valuations are overseen by the Company's appraisal department, which is independent of the Company's lending and credit administration functions. The appraisal department maintains the Company's appraisal policy and recommends changes to the policy subject to approval by the Company's Loan Committee and the Credit Committee of the Board. The Company's appraisals are prepared by independent third-party appraisers and the Company's internal appraisers. Single family appraisals are generally reviewed by the Company's single family loan underwriters. Single family appraisals with unusual, higher risk or complex characteristics, as well as commercial real estate appraisals, are reviewed by the Company's appraisal department. We obtain pricing from third party service providers for determining the fair value of a substantial portion of our investment securities available for sale. We have processes in place to evaluate such third party pricing services to ensure information obtained and valuation techniques used are appropriate. For fair value measurements obtained from third party services, we monitor and review the results to ensure the values are reasonable and in line with market experience for similar classes of securities. While the inputs used by the pricing vendor in determining fair value are not provided, and therefore unavailable for our review, we do perform certain procedures to validate the values received, including comparisons to other sources of valuation (if available), comparisons to other independent market data and a variance analysis of prices by Company personnel that are not responsible for the performance of the investment securities. Estimation of Fair Value Fair value is based on quoted market prices, when available. In cases where a quoted price for an asset or liability is not available, the Company uses valuation models to estimate fair value. These models incorporate inputs such as forward yield curves, loan prepayment assumptions, expected loss assumptions, market volatilities, and pricing spreads utilizing market-based inputs where readily available. The Company believes its valuation methods are appropriate and consistent with those that would be used by other market participants. However, imprecision in estimating unobservable inputs and other factors may result in these fair value measurements not reflecting the amount realized in an actual sale or transfer of the asset or liability in a current market exchange. The following table summarizes the fair value measurement methodologies, including significant inputs and assumptions, and classification of the Company's assets and liabilities.
The following table presents the levels of the fair value hierarchy for the Company's assets and liabilities measured at fair value on a recurring basis.
(1) Includes both continuing and discontinued operations.
There were no transfers between levels of the fair value hierarchy during the three and six months ended June 30, 2019 and 2018. Level 3 Recurring Fair Value Measurements The Company's Level 3 recurring fair value measurements consist of investment securities available for sale, single family MSRs, single family loans held for investment where fair value option was elected, certain single family loans held for sale, and interest rate lock and purchase loan commitments, which are accounted for as derivatives. For information regarding fair value changes and activity for single family MSRs during the three and six months ended June 30, 2019 and 2018, see Note 7, Mortgage Banking Operations of this Form 10-Q. The fair value of interest rate lock commitments ("IRLCs") considers several factors, including the fair value in the secondary market of the underlying loan resulting from the exercise of the commitment, the expected net future cash flows related to the associated servicing of the loan (referred to as the value of servicing) and the probability that the commitment will not be converted into a funded loan (referred to as a fall-out factor). The fair value of IRLCs on loans held for sale, while based on interest rates observable in the market, is highly dependent on the ultimate closing of the loans. The significance of the fall-out factor to the fair value measurement of an individual IRLC is generally highest at the time that the rate lock is initiated and declines as closing procedures are performed and the underlying loan gets closer to funding. The fall-out factor applied is based on historical experience. The value of servicing is impacted by a variety of factors, including prepayment assumptions, discount rates, delinquency rates, contractually specified servicing fees, servicing costs, and underlying portfolio characteristics. Because these inputs are not observable in market trades, the fall-out factor and value of servicing are considered to be level 3 inputs. The fair value of IRLCs decreases in value upon an increase in the fall-out factor and increases in value upon an increase in the value of servicing. Changes in the fall-out factor and value of servicing do not increase or decrease based on movements in other significant unobservable inputs. The Company recognizes unrealized gains and losses from the time that an IRLC is initiated until the gain or loss is realized at the time the loan closes, which generally occurs within 30-90 days. For IRLCs that fall out, any unrealized gain or loss is reversed, which generally occurs at the end of the commitment period. The gains and losses recognized on IRLC derivatives generally correlates to volume of single family interest rate lock commitments made during the reporting period (after adjusting for estimated fallout) while the amount of unrealized gains and losses realized at settlement generally correlates to the volume of single family closed loans during the reporting period. The Company uses the discounted cash flow model to estimate the fair value of certain loans that have been transferred from held for sale to held for investment and single family loans held for sale when the fair value of the loans is not derived using observable market inputs. The key assumption in the valuation model is the implied spread to benchmark interest rate curve. The implied spread is not directly observable in the market and is derived from third party pricing which is based on market information from comparable loan pools. The fair value estimate of these certain single family loans that have been transferred from held for sale to held for investment and these certain single family loans held for sale is sensitive to changes in the benchmark interest rate which might result in a significantly higher or lower fair value measurement. The Company transferred certain loans from held for sale to held for investment. These loans were originated as held for sale loans where the Company had elected fair value option. The Company determined these loans to be level 3 recurring assets as the valuation technique included a significant unobservable input. The total amount of held for investment loans where fair value option election was made was $4.5 million and $4.1 million at June 30, 2019 and December 31, 2018, respectively. The following information presents significant Level 3 unobservable inputs used to measure fair value of certain investment securities available for sale.
The following information presents significant Level 3 unobservable inputs used to measure fair value of single family loans held for investment where fair value option was elected.
The following information presents significant Level 3 unobservable inputs used to measure fair value of certain single family loans held for sale where fair value option was elected.
The following information presents significant Level 3 unobservable inputs used to measure fair value of interest rate lock and purchase loan commitments.
The following table present fair value changes and activity for Level 3 investment securities available for sale.
The following tables present fair value changes and activity for Level 3 loans held for sale and loans held for investment.
The following table presents fair value changes and activity for Level 3 interest rate lock and purchase loan commitments.
Nonrecurring Fair Value Measurements Certain assets held by the Company are not included in the tables above, but are measured at fair value on a nonrecurring basis. These assets include certain loans held for investment and other real estate owned that are carried at the lower of cost or fair value of the underlying collateral, less the estimated cost to sell. The estimated fair values of real estate collateral are generally based on internal evaluations and appraisals of such collateral, which use the market approach and income approach methodologies. All impaired loans are subject to an internal evaluation completed quarterly by management as part of the allowance process. The fair value of commercial properties are generally based on third-party appraisals that consider recent sales of comparable properties, including their income-generating characteristics, adjusted (generally based on unobservable inputs) to reflect the general assumptions that a market participant would make when analyzing the property for purchase. The Company uses a fair value of collateral technique to apply adjustments to the appraisal value of certain commercial loans held for investment that are collateralized by real estate. The Company uses a fair value of collateral technique to apply adjustments to the stated value of certain commercial loans held for investment that are not collateralized by real estate. During the three and six months ended June 30, 2019 and 2018, the Company did not apply any adjustment to the appraisal value of OREO. Residential properties are generally based on unadjusted third-party appraisals. Factors considered in determining the fair value include geographic sales trends, the value of comparable surrounding properties as well as the condition of the property. These adjustments include management assumptions that are based on the type of collateral dependent loan and may increase or decrease an appraised value. Management adjustments vary significantly depending on the location, physical characteristics and income producing potential of each individual property. The quality and volume of market information available at the time of the appraisal can vary from period-to-period and cause significant changes to the nature and magnitude of the unobservable inputs used. Given these variations, changes in these unobservable inputs are generally not a reliable indicator for how fair value will increase or decrease from period to period. The following tables present assets that had changes in their recorded fair value during the three and six months ended June 30, 2019 and 2018 and assets held at the end of the respective reporting period.
(1) Represents the carrying value of loans for which adjustments are based on the fair value of the collateral. Fair Value of Financial Instruments The following presents the carrying value, estimated fair value and the levels of the fair value hierarchy for the Company's financial instruments other than assets and liabilities measured at fair value on a recurring basis.
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EARNINGS PER SHARE |
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Earnings Per Share [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
EARNINGS PER SHARE | EARNINGS PER SHARE: The following table summarizes the calculation of earnings per share.
(2) On July 11, 2019 we repurchased 1.7 million of our common shares from a large shareholder group, which would have increased diluted earnings per share.
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LEASES |
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Leases [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
LEASES | LEASES: We have operating and finance leases for corporate offices, commercial lending centers, retail deposit branches and certain equipment. Our leases have remaining lease terms of up to 20 years, some of which include options which are reasonably certain to be extended. Leases with an initial term of less than a year are not included in the Statement of Financial Condition. The Company, as sublessor, subleases certain office and retail space in which the terms of the subleases end by September 2024. Under all of our executed sublease arrangements, the sublessees are obligated to pay the Company sublease payments of $2.9 million during the remainder of 2019, $5.7 million in 2020, $4.8 million in 2021, $3.6 million in 2022, $2.2 million in 2023 and $580 thousand thereafter. In the three and six months ended June 30, 2019, we incurred $1.3 million and $3.8 million in impairment charges related to the closure of certain branches. The components of lease expense were as follows.
Supplemental cash flow information related to leases was as follows.
Supplemental balance sheet information related to leases was as follows.
Maturities of lease liabilities were as follows.
Future minimum rental payments, prior to the adoption of the new lease guidance, for all non-cancelable leases were as follows at December 31, 2018.
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LEASES | LEASES: We have operating and finance leases for corporate offices, commercial lending centers, retail deposit branches and certain equipment. Our leases have remaining lease terms of up to 20 years, some of which include options which are reasonably certain to be extended. Leases with an initial term of less than a year are not included in the Statement of Financial Condition. The Company, as sublessor, subleases certain office and retail space in which the terms of the subleases end by September 2024. Under all of our executed sublease arrangements, the sublessees are obligated to pay the Company sublease payments of $2.9 million during the remainder of 2019, $5.7 million in 2020, $4.8 million in 2021, $3.6 million in 2022, $2.2 million in 2023 and $580 thousand thereafter. In the three and six months ended June 30, 2019, we incurred $1.3 million and $3.8 million in impairment charges related to the closure of certain branches. The components of lease expense were as follows.
Supplemental cash flow information related to leases was as follows.
Supplemental balance sheet information related to leases was as follows.
Maturities of lease liabilities were as follows.
Future minimum rental payments, prior to the adoption of the new lease guidance, for all non-cancelable leases were as follows at December 31, 2018.
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BUSINESS COMBINATIONS |
6 Months Ended |
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Jun. 30, 2019 | |
Business Combinations [Abstract] | |
BUSINESS COMBINATIONS | BUSINESS COMBINATIONS: Recent Acquisition Activity On March 25, 2019, the Company completed its acquisition of a branch and its related deposits and loans in San Diego County, from Silvergate Bank along with its business lending team. The purchase accounting remains provisional for the valuation of the acquired loans and will be finalized later this year. The application of the acquisition method of accounting resulted in goodwill of $7.6 million.
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ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) |
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Stockholders' Equity Note [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) | ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS): The following table shows changes in accumulated other comprehensive income (loss) from unrealized gain (loss) on available-for-sale securities, net of tax.
The following table shows the impacted line items in the consolidated statements of operations from reclassifications of unrealized gain (loss) on available-for-sale securities from accumulated other comprehensive income (loss).
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REVENUE |
6 Months Ended |
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Jun. 30, 2019 | |
Revenue from Contract with Customer [Abstract] | |
REVENUE | REVENUE: On January 1, 2018, the Company adopted ASU No. 2014-09 Revenue from Contracts with Customers ("Topic 606"). We elected to implement Topic 606 using the modified retrospective application, with the cumulative effect recorded as an adjustment to retained earnings at January 1, 2018. Due to immateriality, we had no cumulative effect to record. Since net interest income on financial assets and liabilities is excluded from this guidance, a significant majority of our revenues are not subject to the new guidance. Our revenue streams that fall within the scope of Topic 606 are presented within noninterest income and are, in general, recognized as revenue as we satisfy our obligation to the customer. Most of the Company's contracts that fall within the scope of this guidance are contracts with customers that are cancelable by either party without penalty and are short-term in nature. These revenues include depositor and other retail and business banking fees, commission income, credit card fees and sales of other real estate owned. For the six months ended June 30, 2019 and 2018, in scope revenue streams were approximately 2.1% and 2.7% of our total revenues, respectively. As this standard is immaterial to our consolidated financial statements, the Company has omitted certain disclosures in ASU 2014-09, including the disaggregation of revenue table. In-scope noninterest revenue streams are discussed below. Depositor and other retail and business banking fees Depositor and other retail banking fees consist of monthly service fees, check orders, and other deposit account related fees. The Company's performance obligation for these fees is generally satisfied, and the related revenue recognized, over the period in which the service is provided. Commission Income Commission income primarily consists of revenue received on insurance policies and monthly investment management fees earned where the Company has acted as an intermediary between customers and the insurance carriers or investment advisers. Under Topic 606, the commissions received at the inception of the policy should be deferred and recognized over the course of the policy. The company's performance obligation for commissions is generally satisfied, and the related revenue generally recognized, over the course of the policy or over the period in which the services are provided, typically monthly. Credit Card Fees The Company offers credit cards to its customers through a third party and earns a fee on each transaction and a fee for each new account activation on a net basis. Revenue is recognized on a one-month lag when cash is received for these fees which does not vary materially from recognizing revenue over the period the services are performed. Sale of Other Real Estate Owned A gain or loss, the difference between the cost basis of the property and its sale price, on other real estate owned is recognized when the performance obligation is met, which is at the time the property title is transferred to the buyer.
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RESTRUCTURING |
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Restructuring and Related Activities [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
RESTRUCTURING | RESTRUCTURING: In the first quarter of 2019, in connection with the Board of Directors approved plan of exit or disposal of our stand-alone home loan-center based mortgage origination business and related mortgage servicing, the Company restructured certain aspects of its infrastructure and back office operations, which has resulted in certain indirect severance and other employee related costs and impairment charges related to certain facilities and information systems. Cost directly related to the plan of exit or disposal are not included in restructuring, but rather are characterized as gain loss on disposal, for further information, see Note 2. Discontinued Operations. In 2017, in response to changing market conditions and forecasts, we implemented restructuring plans in the Company's former Mortgage Banking segment to reduce operating costs and improve efficiency. In June 2018, the Company implemented another restructuring plan in the legacy Mortgage Banking segment to further reduce operating costs and improve profitability. Restructuring charges consist of facility-related costs and severance costs and are included in the occupancy and the salaries and related costs line items on our consolidated statement of operations in the applicable periods for continuing operations and in the income (loss) from discontinued operations for the the applicable periods for discontinued operations. The following tables summarize the restructuring charges recognized during the first three and six months of 2019 and the Company's net remaining liability balance at June 30, 2019 and 2018 for both continuing and discontinued operations.
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SUBSEQUENT EVENT |
6 Months Ended |
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Jun. 30, 2019 | |
Subsequent Events [Abstract] | |
SUBSEQUENT EVENT | SUBSEQUENT EVENT: Continuing on the path to reduce our exposure to mortgage banking, in July 2019, we entered into a non-binding letter of intent to sell our ownership interest in WMS Series, LLC. If we are able to successfully complete this transaction, it would further reduce the amount of single family mortgage banking volume going forward, and completely eliminate the correspondent origination volume we currently purchase from WMS. The Company has evaluated subsequent events through the time of filing this Quarterly Report on Form 10-Q and other than the item above, has concluded that there are no significant events that occurred subsequent to the balance sheet date but prior to the filing of this report that would have a material impact on the consolidated financial statements.
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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - (Policies) |
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Accounting Policies [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Basis of Presentation | The Company's accounting and financial reporting policies conform with accounting principles generally accepted in the United States of America ("U.S. GAAP"). Inter-company balances and transactions have been eliminated in consolidation. In preparing the consolidated financial statements, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the financial statements and revenues and expenses during the reporting periods and related disclosures. Some of these estimates require application of management's most difficult, subjective or complex judgments and result in amounts that are inherently uncertain and may change in future periods. Management has made significant estimates in several areas, including the fair value of assets acquired and liabilities assumed in business combinations (Note 2, Business Combinations), allowance for credit losses (Note 4, Loans and Credit Quality), valuation of residential mortgage servicing rights and loans held for sale (Note 7, Mortgage Banking Operations), valuation of investment securities (Note 3, Investment Securities), and valuation of derivatives (Note 6, Derivatives and Hedging Activities). | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Discontinued Operations, | During the three months ended March 31, 2019, the Company's Board of Directors (the "Board") adopted a Resolution of Exit or Disposal of Home Loan Center ("HLC") Based Mortgage Banking Operations to sell or abandon the assets and transfer or terminate the personnel associated with the Company's high-volume home loan center-based mortgage origination business. The Company also successfully closed and settled two separate sales of the rights to service $14.26 billion in total unpaid principal balance of single family mortgage loans serviced for others, representing in the aggregate 71% of HomeStreet's total single family mortgage loans serviced for others portfolio at December 31, 2018. These two actions largely represent the Company's former Mortgage Banking segment. In accordance with Accounting Standards Codification (ASC) 205-20, the Company determined that the Board's decision to sell or abandon the assets and personnel associated with the Company's HLC-based mortgage business and the related mortgage servicing rights ("MSR") sales met the criteria to be classified as discontinued operations and its operating results and financial condition are presented as discontinued operations in the consolidated financial statements for the current and all comparative periods which have been recast to conform to the new presentation (see Note 2, Discontinued Operations for additional information). Unless otherwise indicated, information included in these notes to the consolidated financial statements (unaudited) are presented on a consolidated operations basis, which includes results from both continuing and discontinued operations, for all periods presented. In connection with the mortgage servicing rights ("MSR") sales and Board resolution regarding the former Mortgage Banking segment, the Company reassessed its reportable operating segments given these changes and associated changes made to its Chief Operating Decision Maker (CODM) package as of March 31, 2019. The Company concluded that as of March 31, 2019 the CODM evaluates the Company’s performance on a consolidated, entity-wide basis and accordingly has resulted in the elimination of segment reporting. The Company will no longer disclose operating results below the consolidated entity level which is now the reportable segment. These unaudited interim financial statements reflect all adjustments that are, in the opinion of management, necessary for a fair statement of the results of the periods presented. These adjustments are of a normal recurring nature, unless otherwise disclosed in this Quarterly Report on Form 10-Q. The results of operations in the interim financial statements do not necessarily indicate the results that may be expected for the full year. The interim financial information should be read in conjunction with our Annual Report on Form 10-K for the year ended December 31, 2018, filed with the Securities and Exchange Commission ("2018 Annual Report on Form 10-K").
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Recent Accounting Developments | Recent Accounting Developments In May 2019, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2019-05, Financial Instruments - Credit Losses (Topic 326) Targeted Transition Relief, or ASU 2019-05. This ASU allows entities to irrevocably elect, upon adoption of ASU 2016-13, the fair value option on financial instruments that (1) were previously recorded at amortized cost and (2) are within the scope of ASC 326-20 if the instruments are eligible for the fair value option under ASC 825-10. The fair value option election does not apply to held-to-maturity debt securities. Entities are required to make this election on an instrument-by-instrument basis. ASU 2019-05 has the same effective date as ASU 2016-13 therefore, it will be effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. The Company does not expect to elect the fair value option under this guidance, and therefore, ASU 2019-05 is not expected to impact the Company’s Consolidated Financial Statements. In April 2019, the FASB issued ASU No. 2019-04, Codification Improvements to Topic 326, Financial Instruments – Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825 – Financial Instruments. The new ASU provides narrow-scope amendments to help apply these recent standards. The transition requirements and effective date of this ASU for HomeStreet is January 1, 2020 with early adoption permitted for certain amendments. The Company is currently assessing this standard’s impact on our consolidated results of operations and financial condition. In August 2018, the FASB issued ASU No.2018-13, Fair Value Measurement (Topic 820): Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement. This ASU adds, eliminates, and modifies certain disclosure requirements for fair value measurements. Among the changes, entities will no longer be required to disclose the amount of and reasons for transfers between Level 1 and Level 2 of the fair value hierarchy, but will be required to disclose the range and weighted average used to develop significant unobservable inputs for Level 3 fair value measurements. ASU No. 2018-13 is effective for interim and annual reporting periods beginning after December 15, 2019; early adoption is permitted. Entities are also allowed to elect early adoption of the eliminated or modified disclosure requirements and delay adoption of the added disclosure requirements until their effective date. As ASU No. 2018-13 only revises disclosure requirements, it will not impact the Company's consolidated financial statements. In January 2017, the FASB issued ASU No. 2017-04, Intangibles - Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment, or ASU 2017-04, which eliminates Step 2 from the goodwill impairment test. ASU 2017-04 also eliminates the requirements for any reporting unit with a zero or negative carrying amount to perform a qualitative assessment and, if it fails that qualitative test, to perform Step 2 of the goodwill impairment test. An entity still has the option to perform the qualitative assessment for a reporting unit to determine if the quantitative impairment test is necessary. Adoption of ASU 2017-04 is required for annual or interim goodwill impairment tests in fiscal years beginning after December 15, 2019 with early adoption permitted for annual or interim goodwill impairment tests performed on testing dates after January 1, 2017. The Company does not expect the adoption of ASU 2017-04 to have a material impact on its consolidated financial statements. In June 2016, FASB issued ASU No. 2016-13, Measurement of Credit Losses on Financial Instruments. Current U.S. GAAP requires an "incurred loss" methodology for recognizing credit losses that delay recognition until it is probable a loss has been incurred. The main objective of this ASU is to provide financial statement users with more decision-useful information about the expected credit losses on financial instruments and other commitments to extend credit held by a reporting entity at each reporting date. The amendment affects loans, debt securities, trade receivables, net investments in leases, off-balance-sheet credit exposures, reinsurance receivables, and any other financial asset not excluded from the scope that has the contractual right to receive cash. The amendments in this ASU replace the incurred loss impairment model in current U.S. GAAP with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. The amendments in this ASU require a financial asset (or group of financial assets) measured at amortized cost basis to be presented at the net amount expected to be collected. The allowance for credit losses is a valuation account that is deducted from the amortized cost basis of the financial asset(s) to present the net carrying value at the amount expected to be collected on the financial asset. The measurement of expected credit losses will be based on relevant information about past events, including historical experience, current conditions, and reasonable and supportable forecasts that affect the collectability of the reported amount. The amendments in this ASU broaden the information that an entity must consider in developing its expected credit loss estimate for assets measured either collectively or individually. The use of forecasted information incorporates more timely information in the estimate of expected credit loss, which will be more decision relevant to users of the financial statements. The amendments in this ASU will be effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. The Company plans to adopt this ASU on January 1, 2020 and is still evaluating the effects this ASU will have on the Company's consolidated financial statements. The Company formed a cross-functional project team and engaged third-party consultants who jointly developed an implementation plan to satisfy the requirements of the ASU. The project team continues to work on developing and implementing the current expected credit loss ("CECL") model including data and assumption validation, identifying key interpretive issues, documenting process flows and internal controls, and beginning parallel testing with our existing allowance model. We also engaged a third-party firm to evaluate our CECL model. The Company anticipates that an increase to the allowance for credit losses will be recognized upon adoption of the ASU to provide for the expected credit losses over the estimated life of the financial assets (principally loans); however, management is still assessing the magnitude of the increase which will depend on economic conditions and the composition and trends in the Company's loans held for investment portfolio at the date of adoption. Upon adoption, the Company expects to implement a change in the processes and procedures used to calculate the allowance for loan losses. In addition, the current accounting policy and procedures for other-than-temporary impairment on investment securities classified as available for sale will be replaced with an allowance approach. The Company has begun developing and implementing processes to address the provisions of this ASU.
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Loans and Leases Receivable | The Company's portfolio of loans held for investment is divided into two portfolio segments, consumer loans and commercial loans, which are the same segments used to determine the allowance for loan losses. Within each portfolio segment, the Company monitors and assesses credit risk based on the risk characteristics of each of the following loan classes: single family and home equity and other loans within the consumer loan portfolio segment and non-owner occupied commercial real estate, multifamily, construction/land development, owner occupied commercial real estate and commercial business loans within the commercial loan portfolio segment. |
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Allowance for Loan and Lease Losses | Management considers the level of allowance for loan losses to be appropriate to cover credit losses inherent within the loans held for investment portfolio as of June 30, 2019. In addition to the allowance for loan losses, the Company maintains a separate allowance for losses related to unfunded loan commitments, and this amount is included in accounts payable and other liabilities on our consolidated statements of financial condition. Collectively, these allowances are referred to as the allowance for credit losses. | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Derivatives and Hedging Activities | To reduce the risk of significant interest rate fluctuations on the value of certain assets and liabilities, such as certain mortgage loans held for sale or MSRs, the Company utilizes derivatives, such as forward sale commitments, futures, option contracts, interest rate swaps and interest rate swaptions as risk management instruments in its hedging strategy. Derivative transactions are measured in terms of notional amount, which is not recorded in the consolidated statements of financial condition. The notional amount is generally not exchanged and is used as the basis for interest and other contractual payments. We held no derivatives designated as a fair value, cash flow or foreign currency hedge instrument at June 30, 2019 or December 31, 2018. Derivatives are reported at their respective fair values in the other assets or accounts payable and other liabilities line items on the consolidated statements of financial condition, with changes in fair value reflected in current period earnings. As permitted under U.S. GAAP, the Company nets derivative assets and liabilities when a legally enforceable master netting agreement exists between the Company and the derivative counterparty, which are documented under industry standard master agreements and credit support annexes. The Company's master netting agreements provide that following an uncured payment default or other event of default, the non-defaulting party may promptly terminate all transactions between the parties and determine a net amount due to be paid to, or by, the defaulting party. An event of default may also occur under a credit support annex if a party fails to make a collateral delivery (which remains uncured following applicable notice and grace periods). The Company's right of offset requires that master netting agreements are legally enforceable and that the exercise of rights by the non-defaulting party under these agreements will not be stayed or avoided under applicable law upon an event of default, including bankruptcy, insolvency or similar proceeding. |
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Mortgage Banking Operations | All MSRs are initially measured and recorded at fair value at the time loans are sold. Single family MSRs are subsequently carried at fair value with changes in fair value reflected in earnings in the periods in which the changes occur, while multifamily and SBA MSRs are subsequently carried at the lower of amortized cost or fair value. The fair value of MSRs is determined based on the price that would be received to sell the MSRs in an orderly transaction between market participants at the measurement date. The Company determines fair value using a valuation model that calculates the net present value of estimated future cash flows. Estimates of future cash flows include contractual servicing fees, ancillary income and costs of servicing, the timing of which are impacted by assumptions, primarily expected prepayment speeds and discount rates, which relate to the underlying performance of the loans.
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Fair Value Measurement | Valuation Processes The Company has various processes and controls in place to ensure that fair value measurements are reasonably estimated. The Finance Committee of the Board provides oversight and approves the Company's Asset/Liability Management Policy ("ALMP"). The Company's ALMP governs, among other things, the application and control of the valuation models used to measure fair value. On a quarterly basis, the Company's Asset/Liability Management Committee ("ALCO") and the Finance Committee of the Board review significant modeling variables used to measure the fair value of the Company's financial instruments, including the significant inputs used in the valuation of single family MSRs. Additionally, ALCO periodically obtains an independent review of the MSR valuation process and procedures, including a review of the model architecture and the valuation assumptions. The Company obtains an MSR valuation from an independent valuation firm monthly to assist with the validation of the fair value estimate and the reasonableness of the assumptions used in measuring fair value. The Company's real estate valuations are overseen by the Company's appraisal department, which is independent of the Company's lending and credit administration functions. The appraisal department maintains the Company's appraisal policy and recommends changes to the policy subject to approval by the Company's Loan Committee and the Credit Committee of the Board. The Company's appraisals are prepared by independent third-party appraisers and the Company's internal appraisers. Single family appraisals are generally reviewed by the Company's single family loan underwriters. Single family appraisals with unusual, higher risk or complex characteristics, as well as commercial real estate appraisals, are reviewed by the Company's appraisal department. We obtain pricing from third party service providers for determining the fair value of a substantial portion of our investment securities available for sale. We have processes in place to evaluate such third party pricing services to ensure information obtained and valuation techniques used are appropriate. For fair value measurements obtained from third party services, we monitor and review the results to ensure the values are reasonable and in line with market experience for similar classes of securities. While the inputs used by the pricing vendor in determining fair value are not provided, and therefore unavailable for our review, we do perform certain procedures to validate the values received, including comparisons to other sources of valuation (if available), comparisons to other independent market data and a variance analysis of prices by Company personnel that are not responsible for the performance of the investment securities. Estimation of Fair Value Fair value is based on quoted market prices, when available. In cases where a quoted price for an asset or liability is not available, the Company uses valuation models to estimate fair value. These models incorporate inputs such as forward yield curves, loan prepayment assumptions, expected loss assumptions, market volatilities, and pricing spreads utilizing market-based inputs where readily available. The Company believes its valuation methods are appropriate and consistent with those that would be used by other market participants. However, imprecision in estimating unobservable inputs and other factors may result in these fair value measurements not reflecting the amount realized in an actual sale or transfer of the asset or liability in a current market exchange. The following table summarizes the fair value measurement methodologies, including significant inputs and assumptions, and classification of the Company's assets and liabilities.
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Revenue | Depositor and other retail and business banking fees Depositor and other retail banking fees consist of monthly service fees, check orders, and other deposit account related fees. The Company's performance obligation for these fees is generally satisfied, and the related revenue recognized, over the period in which the service is provided. Commission Income Commission income primarily consists of revenue received on insurance policies and monthly investment management fees earned where the Company has acted as an intermediary between customers and the insurance carriers or investment advisers. Under Topic 606, the commissions received at the inception of the policy should be deferred and recognized over the course of the policy. The company's performance obligation for commissions is generally satisfied, and the related revenue generally recognized, over the course of the policy or over the period in which the services are provided, typically monthly. Credit Card Fees The Company offers credit cards to its customers through a third party and earns a fee on each transaction and a fee for each new account activation on a net basis. Revenue is recognized on a one-month lag when cash is received for these fees which does not vary materially from recognizing revenue over the period the services are performed. Sale of Other Real Estate Owned A gain or loss, the difference between the cost basis of the property and its sale price, on other real estate owned is recognized when the performance obligation is met, which is at the time the property title is transferred to the buyer.
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DISCONTINUED OPERATIONS - (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Discontinued Operations and Disposal Groups [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Discontinued Operations | The following table summarizes the calculation of the net loss on disposal of discontinued operations.
The carrying amount of major classes of assets and liabilities related to discontinued operations consisted of the following.
(1) Includes $8.9 million and $15.5 million of derivative balances at June 30, 2019 and December 31, 2018, respectively. Statements of Operations of Discontinued Operations
Statements of Cash Flow for Discontinued Operations
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INVESTMENT SECURITIES - (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Investments, Debt and Equity Securities [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Amortized cost and fair value of available for sale securities | The following table sets forth certain information regarding the amortized cost and fair values of our investment securities available for sale and held to maturity.
(1) In conjunction with adopting ASU 2017-12, in the first quarter of 2019, we transferred $66.2 million in HTM securities to AFS.
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Amortized cost and fair value of held-to-maturity securities | The following table sets forth certain information regarding the amortized cost and fair values of our investment securities available for sale and held to maturity.
(1) In conjunction with adopting ASU 2017-12, in the first quarter of 2019, we transferred $66.2 million in HTM securities to AFS.
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Investment securities in an unrealized loss position | Investment securities available for sale and held to maturity that were in an unrealized loss position are presented in the following tables based on the length of time the individual securities have been in an unrealized loss position.
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Computation of weighted average yield using coupon on the fair value | The following tables present the fair value of investment securities available for sale and held to maturity by contractual maturity along with the associated contractual yield for the periods indicated below. Contractual maturities for mortgage-backed securities and collateralized mortgage obligations as presented exclude the effect of expected prepayments. Expected maturities will differ from contractual maturities because borrowers may have the right to prepay obligations before the underlying mortgages mature. The weighted-average yield is computed using the contractual coupon of each security weighted based on the fair value of each security and does not include adjustments to a tax equivalent basis.
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Sales of investment securities available for sale | Sales of investment securities available for sale were as follows.
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Carrying value of securities pledged as collateral | The following table summarizes the carrying value of securities pledged as collateral to secure borrowings, public deposits and other purposes as permitted or required by law:
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LOANS AND CREDIT QUALITY - (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Receivables [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Loans held for investment | Loans held for investment consist of the following.
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Activity in allowance for credit losses | Activity in the allowance for credit losses was as follows.
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Allowance for credit losses by loan portfolio segment and loan class | Activity in the allowance for credit losses by loan portfolio and loan class was as follows.
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Recorded investment in loans by Impairment Methodology | The following tables disaggregate our allowance for credit losses and recorded investment in loans by impairment methodology.
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Impaired loans by loan portfolio segment and loan class | The following tables present impaired loans by loan portfolio segment and loan class.
(3) Includes $65.8 million in single family performing TDRs.
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Average recorded investment in impaired loans | The following tables provide the average recorded investment and interest income recognized on impaired loans by portfolio segment and class.
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Designated loan grades by loan portfolio segment and loan class | The following tables summarize designated loan grades by loan portfolio segment and loan class.
(1) Includes $4.1 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 statements of operations.
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Past due loans by portfolio segment and loan class | The following tables present an aging analysis of past due loans by loan portfolio segment and loan class.
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Performing and non-performing loan balances by portfolio segment and loan class | The following tables present performing and nonperforming loan balances by loan portfolio segment and loan class.
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TDR activity by loan portfolio segment and loan class | The following tables present information about TDR activity during the periods presented.
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TDR balances that subsequently re-defaulted | The following table presents loans that were modified as TDRs within the previous 12 months and subsequently re-defaulted during the three and six months ended June 30, 2019 and 2018, respectively. A TDR loan is considered re-defaulted when it becomes doubtful that the objectives of the modifications will be met, generally when a consumer loan TDR becomes 60 days or more past due on principal or interest payments or when a commercial loan TDR becomes 90 days or more past due on principal or interest payments.
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DEPOSITS - (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Banking and Thrift [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Deposit balances, including stated rates | Deposit balances, including stated rates, were as follows.
(1) Includes $132.8 million and $162.8 million in servicing deposits related to discontinued operations at June 30, 2019 and December 31, 2018, respectively. These deposits will be transferred to the MSR buyers upon transfer of the loan servicing.
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Interest expense on deposits | Interest expense on deposits was as follows.
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Certificates of deposit outstanding | Certificates of deposit outstanding mature as follows.
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DERIVATIVES AND HEDGING ACTIVITIES - (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Derivative Instruments and Hedging Activities Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Notional amount and fair value for derivatives | The notional amounts and fair values for derivatives consist of the following.
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Fair value, concentration of risk | The following tables present gross and net information about derivative instruments.
(1) Includes cash collateral of $4.7 million and $4.2 million at June 30, 2019 and December 31, 2018, respectively, as part of the netting adjustments which primarily consists of collateral transferred by the Company at the initiation of derivative transactions and held by the counterparty as security.
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Net gains (losses) recognized on economic hedge derivatives | The following table presents the net gain (loss) recognized on derivatives, including economic hedge derivatives, within the respective line items in the statement of operations for the periods indicated.
(4) Comprised of interest rate swaps used as an economic hedge of loans held for investment.
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MORTGAGE BANKING OPERATIONS - (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Mortgage Banking [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Mortgage loans on real estate, by loan | Loans held for sale consisted of the following.
Loans sold proceeds consisted of the following.
(2) Loans originated as held for investment
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Net gain on loan origination and sale activity | Gain on loan origination and sale activities, including the effects of derivative risk management instruments, consisted of the following.
(3) Loans originated as held for investment. (4) Includes $24.2 million and $54.3 million from discontinued operations for three months ended June 30, 2019 and 2018 and $59.7 million and $101.2 million for the six months ended 2019 and 2018, respectively. |
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Company's portfolio of loans serviced for others | The composition of loans serviced for others that contribute to loan servicing income is presented below at the unpaid principal balance.
(2) Fannie Mae Multifamily DUS® is a registered trademark of Fannie Mae.
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Mortgage repurchase losses | The following is a summary of changes in the Company's liability for estimated mortgage repurchase losses.
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Revenue from mortgage servicing, including the effects of derivative risk management instruments | Revenue from mortgage servicing, including the effects of derivative risk management instruments, consisted of the following.
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Key economic assumptions used in measuring initial FV of capitalized single family MSRs | Key economic assumptions used in measuring the initial fair value of capitalized single family MSRs were as follows.
(3) Discount rate is a rate based on market observations.
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Schedule of sensitivity analysis of fair value, transferor's interests in transferred financial assets | Key economic assumptions and the sensitivity of the current fair value for single family MSRs to immediate adverse changes in those assumptions were as follows.
(1) Represents the expected lifetime average.
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Changes in single family MSRs measured at fair value | The changes in single family MSRs measured at fair value are as follows.
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Changes in multifamily MSRs measured at the lower of amortized cost or fair value | The changes in multifamily MSRs measured at the lower of amortized cost or fair value were as follows.
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Projected amortization expense for the gross carrying value of multifamily MSRs | At June 30, 2019, the expected weighted-average remaining life of the Company's multifamily MSRs was 10.48 years. Projected amortization expense for the gross carrying value of multifamily MSRs is estimated as follows.
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FAIR VALUE MEASUREMENT - (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair Value Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair value measurement methodologies | The following table summarizes the fair value measurement methodologies, including significant inputs and assumptions, and classification of the Company's assets and liabilities.
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Schedule of fair value hierarchy measurement | The following table presents the levels of the fair value hierarchy for the Company's assets and liabilities measured at fair value on a recurring basis.
(1) Includes both continuing and discontinued operations.
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Schedule of inputs used to measure fair value | The following information presents significant Level 3 unobservable inputs used to measure fair value of certain investment securities available for sale.
The following information presents significant Level 3 unobservable inputs used to measure fair value of single family loans held for investment where fair value option was elected.
The following information presents significant Level 3 unobservable inputs used to measure fair value of certain single family loans held for sale where fair value option was elected.
The following information presents significant Level 3 unobservable inputs used to measure fair value of interest rate lock and purchase loan commitments.
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Schedule of fair value changes and activity for Level 3 | The following table present fair value changes and activity for Level 3 investment securities available for sale.
The following tables present fair value changes and activity for Level 3 loans held for sale and loans held for investment.
The following table presents fair value changes and activity for Level 3 interest rate lock and purchase loan commitments.
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Schedule of assets that had changes in their recorded fair value | The following tables present assets that had changes in their recorded fair value during the three and six months ended June 30, 2019 and 2018 and assets held at the end of the respective reporting period.
(1) Represents the carrying value of loans for which adjustments are based on the fair value of the collateral. |
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Schedule of the fair value hierarchy | The following presents the carrying value, estimated fair value and the levels of the fair value hierarchy for the Company's financial instruments other than assets and liabilities measured at fair value on a recurring basis.
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EARNINGS PER SHARE - (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Earnings Per Share [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of earnings per share, basic and diluted | The following table summarizes the calculation of earnings per share.
(2) On July 11, 2019 we repurchased 1.7 million of our common shares from a large shareholder group, which would have increased diluted earnings per share.
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LEASES - (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Leases [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Lease Cost | The components of lease expense were as follows.
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Schedule of Lease Supplemental Cash Flow Information | Supplemental cash flow information related to leases was as follows.
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Schedule of Lease Assets and Liabilities | Supplemental balance sheet information related to leases was as follows.
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Schedule of Finance Lease Liability Maturities | Maturities of lease liabilities were as follows.
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Schedule of Operating Lease Liability Maturities | Maturities of lease liabilities were as follows.
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Schedule of Future Minimum Rental Payments for Operating Leases | Future minimum rental payments, prior to the adoption of the new lease guidance, for all non-cancelable leases were as follows at December 31, 2018.
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ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) - (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Stockholders' Equity Note [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of accumulated other comprehensive income (loss) | The following table shows changes in accumulated other comprehensive income (loss) from unrealized gain (loss) on available-for-sale securities, net of tax.
(1) Reflects the January 1, 2019 adoption of ASU 2018-02 and ASU 2017-12. For additional information see Note 1, Summary of Significant Accounting Policies.
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Reclassification out of accumulated other comprehensive income (loss) | The following table shows the impacted line items in the consolidated statements of operations from reclassifications of unrealized gain (loss) on available-for-sale securities from accumulated other comprehensive income (loss).
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RESTRUCTURING - (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Restructuring and Related Activities [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Restructuring reserve rollforward | The following tables summarize the restructuring charges recognized during the first three and six months of 2019 and the Company's net remaining liability balance at June 30, 2019 and 2018 for both continuing and discontinued operations.
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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Narrative (Details) - USD ($) $ / shares in Units, $ in Thousands |
3 Months Ended | 6 Months Ended | 12 Months Ended | |||
---|---|---|---|---|---|---|
Jul. 11, 2019 |
Jun. 30, 2019 |
Jun. 30, 2019 |
Dec. 31, 2018 |
Mar. 29, 2019 |
Mar. 28, 2019 |
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Financing Receivable, Impaired [Line Items] | ||||||
Stock repurchase program, authorized amount | $ 75,000 | |||||
Common stock repurchased (in shares) | 963,600 | 963,600 | ||||
Equity reclassification due to stock repurchase | $ 52,735 | $ 52,735 | ||||
Single family [Member] | Agency debentures [Member] | ||||||
Financing Receivable, Impaired [Line Items] | ||||||
Mortgage servicing rights, unpaid principal balance, sold | $ 14,260,000 | |||||
Percentage of loan portfolio sold | 71.00% | |||||
Subsequent Event [Member] | ||||||
Financing Receivable, Impaired [Line Items] | ||||||
Common stock repurchased (in shares) | 1,700,000 | |||||
Common stock repurchased price (in dollars per share) | $ 31.16 |
DISCONTINUED OPERATIONS - Narrative (Details) |
6 Months Ended | 12 Months Ended | ||
---|---|---|---|---|
Jun. 24, 2019
branch
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Jun. 30, 2019
USD ($)
|
Dec. 31, 2018 |
Mar. 29, 2019
USD ($)
|
|
Agency debentures [Member] | Single family [Member] | ||||
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items] | ||||
Mortgage servicing rights, unpaid principle balance, sold, number of sales | 2 | |||
Mortgage servicing rights, unpaid principal balance, sold | $ 14,260,000,000 | |||
Percentage of loan portfolio sold | 71.00% | |||
Increase in income during period from discontinued operations before income taxes | $ (1,300,000) | |||
HLC Based Mortgage Banking Operations | ||||
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items] | ||||
Home loan centers sold | branch | 47 |
DISCONTINUED OPERATIONS - Net Gain on Disposal of Discontinued Operations (Details) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | |
---|---|---|---|
Jun. 30, 2019 |
Jun. 30, 2019 |
Jun. 30, 2018 |
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Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items] | |||
Proceeds from asset sales | $ 168,298 | $ 0 | |
Net loss on disposal | $ (10,796) | (23,020) | |
Discontinued Operations, Disposed of by Sale [Member] | |||
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items] | |||
Proceeds from asset sales | 3,461 | 186,612 | |
Book value of asset sales | 4,038 | 180,982 | |
(Loss) gain on assets sold | (577) | 5,630 | |
Transaction costs | 2,759 | 9,177 | |
Compensation expense related to the transactions | 2,675 | 3,792 | |
Facility and IT related costs | 4,785 | 15,681 | |
Total costs | 10,219 | 28,650 | |
Net loss on disposal | $ (10,796) | $ (23,020) |
DISCONTINUED OPERATIONS - Major Classes of Assets and Liabilities Related to Discontinued Operations (Details) - USD ($) $ in Thousands |
Jun. 30, 2019 |
Dec. 31, 2018 |
---|---|---|
Disposal Group, Including Discontinued Operation, Assets [Abstract] | ||
Assets of discontinued operations | $ 352,929 | $ 477,034 |
Disposal Group, Including Discontinued Operation, Liabilities [Abstract] | ||
Liabilities of discontinued operations | 148,221 | 167,121 |
Discontinued Operations, Held-for-sale [Member] | ||
Disposal Group, Including Discontinued Operation, Assets [Abstract] | ||
Loans held-for-sale, at fair value | 320,238 | 269,683 |
Mortgage serving rights | 0 | 177,121 |
Premises and equipment, net | 0 | 6,689 |
Other assets | 32,691 | 23,541 |
Assets of discontinued operations | 352,929 | 477,034 |
Disposal Group, Including Discontinued Operation, Liabilities [Abstract] | ||
Deposits | 132,804 | 162,850 |
Accrued expenses and other liabilities | 15,417 | 4,271 |
Liabilities of discontinued operations | 148,221 | 167,121 |
Derivative assets included in other assets | $ 8,900 | $ 15,500 |
DISCONTINUED OPERATIONS - Statements of Operations of Discontinued Operations (Details) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2019 |
Jun. 30, 2018 |
Jun. 30, 2019 |
Jun. 30, 2018 |
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Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items] | ||||
(Loss) income before income taxes | $ (16,678) | $ 3,641 | $ (25,118) | $ 9,090 |
Income tax (benefit) expense | (2,198) | 713 | (3,865) | 2,050 |
Discontinued Operations, Held-for-sale [Member] | ||||
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items] | ||||
Net interest income | 2,617 | 3,258 | 4,762 | 6,270 |
Noninterest income | 23,458 | 60,984 | 62,728 | 114,719 |
Noninterest expense | 42,753 | 60,601 | 92,608 | 111,899 |
(Loss) income before income taxes | (16,678) | 3,641 | (25,118) | 9,090 |
Income tax (benefit) expense | (2,198) | 713 | (3,865) | 2,050 |
(Loss) income from discontinued operations | $ (14,480) | $ 2,928 | $ (21,253) | $ 7,040 |
DISCONTINUED OPERATIONS - Statement of Cash Flow for Discontinued Operations (Details) - Discontinued Operations, Held-for-sale [Member] - USD ($) $ in Thousands |
6 Months Ended | |
---|---|---|
Jun. 30, 2019 |
Jun. 30, 2018 |
|
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items] | ||
Net cash (used in) provided by operating activities | $ (55,257) | $ 17,937 |
Net cash provided by investing activities | $ 169,407 | $ 170,526 |
INVESTMENT SECURITIES - Realized Gain/Loss on Investment (Details) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2019 |
Jun. 30, 2018 |
Jun. 30, 2019 |
Jun. 30, 2018 |
|
Investments, Debt and Equity Securities [Abstract] | ||||
Proceeds | $ 24,414 | $ 5,357 | $ 119,412 | $ 22,232 |
Gross gains | 159 | 38 | 531 | 261 |
Gross losses | $ (22) | $ (22) | $ (641) | $ (23) |
INVESTMENT SECURITIES - Pledged to Secure Borrowings And Public Deposits (Details) - USD ($) $ in Thousands |
Jun. 30, 2019 |
Dec. 31, 2018 |
---|---|---|
Investments, Debt and Equity Securities [Abstract] | ||
Federal Home Loan Bank to secure borrowings | $ 0 | $ 63,179 |
Washington and California State to secure public deposits | 156,229 | 126,565 |
Securities pledged to secure derivatives in a liability position | 0 | 5,077 |
Other securities pledged | 5,056 | 5,147 |
Total securities pledged as collateral | $ 161,285 | $ 199,968 |
INVESTMENT SECURITIES - Narrative (Details) - USD ($) |
3 Months Ended | 6 Months Ended | |||
---|---|---|---|---|---|
Jun. 30, 2019 |
Jun. 30, 2018 |
Jun. 30, 2019 |
Jun. 30, 2018 |
Dec. 31, 2018 |
|
Investments, Debt and Equity Securities [Abstract] | |||||
Security pledged under repurchase agreement | $ 0 | $ 0 | $ 0 | ||
Tax exempt interest income on available-for-sale securities | $ 2,500,000 | $ 2,200,000 | $ 5,300,000 | $ 4,500,000 |
LOANS AND CREDIT QUALITY - Narrative (Details) $ in Millions |
6 Months Ended | ||
---|---|---|---|
Jun. 30, 2019
USD ($)
segment
|
Dec. 31, 2018
USD ($)
|
Jun. 30, 2018
USD ($)
|
|
Financing Receivable, Impaired [Line Items] | |||
Number of portfolio segments | segment | 2 | ||
Allowance for unfunded commitments | $ 1.4 | $ 1.4 | $ 1.5 |
Washington | Residential Mortgage And Multifamily [Member] | |||
Financing Receivable, Impaired [Line Items] | |||
Percentage of loan portfolio | 11.80% | 13.10% | |
California | Residential Mortgage And Multifamily [Member] | |||
Financing Receivable, Impaired [Line Items] | |||
Percentage of loan portfolio | 11.10% | 10.20% | |
Federal Home Loan Bank Advances [Member] | |||
Financing Receivable, Impaired [Line Items] | |||
Loans pledged as collateral | $ 1,850.0 | $ 2,160.0 | |
Federal Reserve Bank Advances [Member] | |||
Financing Receivable, Impaired [Line Items] | |||
Loans pledged as collateral | $ 578.4 | $ 502.7 |
LOANS AND CREDIT QUALITY - Allowance for Credit Losses (Details) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2019 |
Jun. 30, 2018 |
Jun. 30, 2019 |
Jun. 30, 2018 |
|
Allowance for Doubtful Accounts Receivable [Roll Forward] | ||||
Beginning balance | $ 44,536 | $ 40,446 | $ 42,913 | $ 39,116 |
Provision for credit losses | 0 | 1,000 | 1,500 | 1,750 |
Recoveries, net of (charge-offs) | 92 | (464) | 215 | 116 |
Ending balance | $ 44,628 | $ 40,982 | $ 44,628 | $ 40,982 |
LOANS AND CREDIT QUALITY - TDR Re-defaults (Details) $ in Thousands |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2019
USD ($)
loan
|
Jun. 30, 2018
USD ($)
loan
|
Jun. 30, 2019
USD ($)
loan
|
Jun. 30, 2018
USD ($)
loan
|
|
Financing Receivable, Modifications [Line Items] | ||||
Number of days past due for consumer loans TDR to be re-default | 60 days | |||
Number of days past due for commercial loans TDR to be re-default | 90 days | |||
TDR balances which have subsequently re-defaulted | ||||
Number of TDR loan relationships that re-defaulted | loan | 1 | 6 | 6 | 12 |
Recorded investment | $ | $ 171 | $ 1,395 | $ 1,230 | $ 2,279 |
Consumer loans [Member] | Single family [Member] | ||||
TDR balances which have subsequently re-defaulted | ||||
Number of TDR loan relationships that re-defaulted | loan | 1 | 6 | 6 | 12 |
Recorded investment | $ | $ 171 | $ 1,395 | $ 1,230 | $ 2,279 |
DEPOSITS - Schedule of Interest expense on Deposits (Details) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2019 |
Jun. 30, 2018 |
Jun. 30, 2019 |
Jun. 30, 2018 |
|
Interest expense on deposits | ||||
NOW accounts | $ 394 | $ 430 | $ 769 | $ 870 |
Statement savings accounts | 137 | 217 | 286 | 446 |
Money market accounts | 6,890 | 4,064 | 12,693 | 7,523 |
Certificates of deposit | 9,519 | 4,851 | 17,504 | 8,511 |
Interest expense on deposits, Total | $ 16,940 | $ 9,562 | $ 31,252 | $ 17,350 |
DEPOSITS - Narrative (Details) - USD ($) $ in Millions |
Jun. 30, 2019 |
Dec. 31, 2018 |
---|---|---|
Banking and Thrift [Abstract] | ||
Weighted-average interest rate on certificates of deposit (as a percent) | 2.30% | 1.87% |
Time Deposits, at or Above FDIC Insurance Limit | $ 206.8 | $ 85.3 |
Brokered deposits | $ 757.9 | $ 786.1 |
DEPOSITS - Schedule of Deposits Maturity (Details) - USD ($) $ in Thousands |
Jun. 30, 2019 |
Dec. 31, 2018 |
---|---|---|
Certificates of deposit outstanding | ||
Within one year | $ 1,642,905 | |
One to two years | 339,683 | |
Two to three years | 47,011 | |
Three to four years | 17,424 | |
Four to five years | 12,960 | |
Thereafter | 393 | |
Total | $ 2,060,376 | $ 1,579,806 |
DERIVATIVES AND HEDGING ACTIVITIES - Narrative (Details) - USD ($) |
Jun. 30, 2019 |
Dec. 31, 2018 |
---|---|---|
Derivative Instruments and Hedging Activities Disclosure [Abstract] | ||
Derivatives designated as a hedging instrument | $ 0 | $ 0 |
DERIVATIVES AND HEDGING ACTIVITIES - Master Netting Agreements (Details) - USD ($) $ in Thousands |
Jun. 30, 2019 |
Dec. 31, 2018 |
---|---|---|
Derivative [Line Items] | ||
Gross fair value, derivative assets | $ 33,979 | $ 28,083 |
Netting adjustments, derivative assets | (6,035) | (8,329) |
Derivative assets | 27,944 | 19,754 |
Securities pledged, derivative assets | 0 | 0 |
Net amount - derivative assets | 27,944 | 19,754 |
Derivatives before netting, derivative Liabilities | (11,048) | (17,004) |
Netting adjustments, derivative liabilities | 10,746 | 12,517 |
Derivative liabilities | (302) | (4,487) |
Securities pledged, derivative liabilities | 0 | 3,223 |
Net amount, derivative liabilities | (302) | (1,264) |
Concentration of credit risk, master netting arrangements [Member] | ||
Derivative [Line Items] | ||
Cash collateral, as part of netting adjustment | $ 4,700 | $ 4,200 |
DERIVATIVES AND HEDGING ACTIVITIES - Gain (Loss) Recognized in Income (Details) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2019 |
Jun. 30, 2018 |
Jun. 30, 2019 |
Jun. 30, 2018 |
|
Loans [Member] | ||||
Derivative Instruments, Gain (Loss) [Line Items] | ||||
Net gain (loss) recognized on derivatives, including economic hedge | $ (11,245) | $ 2,957 | $ (11,099) | $ 17,082 |
Servicing contracts [Member] | ||||
Derivative Instruments, Gain (Loss) [Line Items] | ||||
Net gain (loss) recognized on derivatives, including economic hedge | 7,194 | (12,188) | 10,877 | (43,165) |
Other Credit Derivatives [Member] | ||||
Derivative Instruments, Gain (Loss) [Line Items] | ||||
Net gain (loss) recognized on derivatives, including economic hedge | 25 | 0 | 34 | 0 |
Mortgages [Member] | ||||
Derivative Instruments, Gain (Loss) [Line Items] | ||||
Net gain (loss) recognized on derivatives, including economic hedge | $ (4,026) | $ (9,231) | $ (188) | $ (26,083) |
MORTGAGE BANKING OPERATIONS - Loans Held for Sale (Details) - USD ($) $ in Thousands |
Jun. 30, 2019 |
Dec. 31, 2018 |
---|---|---|
Accounts, Notes, Loans and Financing Receivable [Line Items] | ||
Loans held for sale | $ 145,252 | $ 77,324 |
Total loans held for sale | 465,490 | 347,007 |
Loans held for sale, discontinued operations | 320,200 | 269,700 |
Single family [Member] | ||
Accounts, Notes, Loans and Financing Receivable [Line Items] | ||
Loans held for sale | 401,805 | 321,868 |
Multifamily DUS [Member] | ||
Accounts, Notes, Loans and Financing Receivable [Line Items] | ||
Loans held for sale | 51,212 | 21,974 |
Small Business Administration Loan [Member] | ||
Accounts, Notes, Loans and Financing Receivable [Line Items] | ||
Loans held for sale | 1,595 | 3,165 |
CRE-Non-DUS [Member] | ||
Accounts, Notes, Loans and Financing Receivable [Line Items] | ||
Loans held for sale | $ 10,878 | $ 0 |
MORTGAGE BANKING OPERATIONS - Mortgage Repurchase Liability (Details) - Representations and warranties reserve for loan receivables [Member] - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2019 |
Jun. 30, 2018 |
Jun. 30, 2019 |
Jun. 30, 2018 |
|
Mortgage Repurchase Losses [Roll Forward] | ||||
Balance, beginning of period | $ 3,256 | $ 2,665 | $ 3,120 | $ 3,015 |
Additions (reductions), net of adjustments | 251 | (5) | 504 | 605 |
Realized losses | (270) | (156) | (387) | (1,116) |
Balance, end of period | $ 3,237 | $ 2,504 | $ 3,237 | $ 2,504 |
MORTGAGE BANKING OPERATIONS - Narrative (Details) - USD ($) $ in Millions |
6 Months Ended | 12 Months Ended | |
---|---|---|---|
Jun. 30, 2019 |
Dec. 31, 2018 |
Mar. 29, 2019 |
|
Financing Receivable, Impaired [Line Items] | |||
Servicing advances | $ 2.9 | $ 2.5 | |
Multifamily DUS [Member] | |||
Financing Receivable, Impaired [Line Items] | |||
Expected weighted average life of MSR | 10 years 5 months 23 days | ||
Early buyout loans [Member] | |||
Financing Receivable, Impaired [Line Items] | |||
Loans receivable, in Ginnie Mae pool | $ 9.5 | $ 37.7 | |
Single family [Member] | Agency debentures [Member] | |||
Financing Receivable, Impaired [Line Items] | |||
Mortgage servicing rights, unpaid principal balance, sold | $ 14,260.0 | ||
Percentage of loan portfolio sold | 71.00% | ||
Increase in income during period from discontinued operations before income taxes | $ (1.3) |
MORTGAGE BANKING OPERATIONS - Key Economic Assumptions (Details) |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2019 |
Jun. 30, 2018 |
Jun. 30, 2019 |
Jun. 30, 2018 |
|
Constant prepayment rate [Member] | ||||
Fair Value Measurement Inputs and Valuation Techniques | ||||
Servicing asset, measurement input | 18.03% | 15.69% | 18.81% | 14.72% |
Discount rate [Member] | ||||
Fair Value Measurement Inputs and Valuation Techniques | ||||
Servicing asset, measurement input | 9.41% | 10.29% | 9.55% | 10.26% |
MORTGAGE BANKING OPERATIONS - Sensitivity Analysis (Details) - USD ($) $ in Thousands |
6 Months Ended | |
---|---|---|
Jun. 30, 2019 |
Dec. 31, 2018 |
|
Key economic assumptions and the sensitivity of the current fair value for single family MSRs | ||
Fair value of mortgage servicing rights | $ 67,723 | $ 75,047 |
Expected weighted-average life | 4 years 9 months 10 days | |
Constant prepayment rate (as a percent) | 17.46% | |
Impact on fair value of 25 basis points adverse change in interest rates | $ (4,896) | |
Impact on fair value of 50 basis points adverse change in interest rates | $ (9,574) | |
Discount rate (as a percent) | 9.30% | |
Impact on fair value of 100 basis points increase | $ (2,093) | |
Impact on fair value of 200 basis points increase | $ (4,050) |
MORTGAGE BANKING OPERATIONS - Multifamily MSR Roll Forward (Details) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2019 |
Jun. 30, 2018 |
Jun. 30, 2019 |
Jun. 30, 2018 |
|
Servicing Asset at Amortized Value, Balance [Roll Forward] | ||||
Beginning balance | $ 27,692 | $ 26,042 | $ 28,326 | $ 26,093 |
Origination | 530 | 1,409 | 1,161 | 2,343 |
Amortization | (995) | (991) | (2,260) | (1,976) |
Ending balance | $ 27,227 | $ 26,460 | $ 27,227 | $ 26,460 |
MORTGAGE BANKING OPERATIONS - MSR Projected Amortization (Details) - USD ($) $ in Thousands |
Jun. 30, 2019 |
Mar. 31, 2019 |
Dec. 31, 2018 |
Jun. 30, 2018 |
Mar. 31, 2018 |
Dec. 31, 2017 |
---|---|---|---|---|---|---|
Projected Amortization Expense [Abstract] | ||||||
Remainder of 2019 | $ 1,983 | |||||
2020 | 3,908 | |||||
2021 | 3,729 | |||||
2022 | 3,486 | |||||
2023 | 3,268 | |||||
2024 | 2,992 | |||||
2025 and thereafter | 7,861 | |||||
Carrying value of multifamily MSR | $ 27,227 | $ 27,692 | $ 28,326 | $ 26,460 | $ 26,042 | $ 26,093 |
FAIR VALUE MEASUREMENT - Narrative (Details) - USD ($) |
3 Months Ended | 6 Months Ended | |||
---|---|---|---|---|---|
Jun. 30, 2019 |
Jun. 30, 2018 |
Jun. 30, 2019 |
Jun. 30, 2018 |
Dec. 31, 2018 |
|
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | |||||
Transfers between levels of fair value hierarchy | $ 0 | $ 0 | $ 0 | $ 0 | |
Fair value of loans held for investment | 4,475,000 | 4,475,000 | $ 4,057,000 | ||
Recurring [Member] | |||||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | |||||
Fair value of loans held for investment | 4,475,000 | 4,475,000 | 4,057,000 | ||
Level 3 [Member] | Recurring [Member] | |||||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | |||||
Fair value of loans held for investment | $ 4,475,000 | $ 4,475,000 | $ 4,057,000 |
LEASES - Narrative (Details) $ in Thousands |
3 Months Ended | 6 Months Ended |
---|---|---|
Jun. 30, 2019
USD ($)
|
Jun. 30, 2019
USD ($)
|
|
Leases [Abstract] | ||
Remaining lease terms | 20 years | |
Lessee, Operating Sublease, Description [Abstract] | ||
Remainder of 2019, sublease payments due to Company | $ 2,900 | $ 2,900 |
2020, sublease payments due to Company | 5,700 | 5,700 |
2021, sublease payments due to Company | 4,800 | 4,800 |
2022, sublease payments due to Company | 3,600 | 3,600 |
2023, sublease payments due to Company | 2,200 | 2,200 |
Thereafter, sublease payments due to Company | 580 | 580 |
Impairment loss | $ 1,300 | $ 3,800 |
LEASES - Lease Cost (Details) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended |
---|---|---|
Jun. 30, 2019 |
Jun. 30, 2019 |
|
Leases [Abstract] | ||
Operating lease cost | $ 3,765 | $ 7,716 |
Finance lease cost: | ||
Amortization of right-of-use assets | 544 | 1,159 |
Interest on lease liabilities | 87 | 181 |
Short-term lease | 2 | 6 |
Variable lease cost | 2,034 | 3,802 |
Sublease income | (490) | (829) |
Total lease cost | $ 5,942 | $ 12,035 |
LEASES - Supplemental Cash Flow Information (Details) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended |
---|---|---|
Jun. 30, 2019 |
Jun. 30, 2019 |
|
Cash paid for amounts included in the measurement of lease liabilities: | ||
Operating cash flows from operating leases | $ 4,301 | $ 8,732 |
Operating cash flows from finance leases | 87 | 181 |
Financing cash flows from finance leases | 598 | 1,053 |
Right-of-use assets obtained in exchange for lease obligations: | ||
Operating leases | (12,201) | (7,365) |
Finance leases | $ (1,191) | $ (1,016) |
LEASES - Supplemental Balance Sheet Information (Details) $ in Thousands |
Jun. 30, 2019
USD ($)
|
---|---|
Leases [Abstract] | |
Operating lease right-of-use assets | $ 93,321 |
Operating lease liabilities | 112,415 |
Finance lease right-of-use assets | 9,029 |
Finance lease liabilities | $ 9,259 |
Weighted Average Remaining lease term | |
Operating leases | 11 years 10 months 13 days |
Finance leases | 15 years 25 days |
Weighted Average Discount Rate | |
Operating leases | 3.49% |
Finance leases | 3.60% |
LEASES - Lease Liability Maturities (Details) $ in Thousands |
Jun. 30, 2019
USD ($)
|
---|---|
Operating Lease Liabilities, Payments Due [Abstract] | |
2019 (excluding the six months ended June 30, 2019) | $ 8,367 |
2020 | 15,743 |
2021 | 14,560 |
2022 | 12,529 |
2023 | 10,565 |
2024 | 9,421 |
Thereafter | 67,258 |
Total lease payments | 138,443 |
Less imputed interest | 26,028 |
Total | 112,415 |
Finance Lease Liabilities, Payments, Due [Abstract] | |
2019 (excluding the six months ended June 30, 2019) | 797 |
2020 | 1,560 |
2021 | 1,357 |
2022 | 583 |
2023 | 474 |
2024 | 400 |
Thereafter | 7,238 |
Total lease payments | 12,409 |
Less imputed interest | 3,150 |
Total | $ 9,259 |
LEASES - Minimum Rental Payments for Non-Cancelable Leases (Details) $ in Thousands |
Dec. 31, 2018
USD ($)
|
---|---|
Leases [Abstract] | |
2019 | $ 22,770 |
2020 | 20,671 |
2021 | 18,825 |
2022 | 16,418 |
2023 | 13,274 |
2024 and thereafter | 40,717 |
Total minimum payments | $ 132,675 |
BUSINESS COMBINATIONS - Narrative (Details) - USD ($) $ in Thousands |
Jun. 30, 2019 |
Mar. 25, 2019 |
Dec. 31, 2018 |
---|---|---|---|
Business Acquisition [Line Items] | |||
Goodwill from acquisition | $ 30,170 | $ 22,564 | |
Silvergate Bank Branch, San Diego County | |||
Business Acquisition [Line Items] | |||
Goodwill from acquisition | $ 7,600 |
ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) - Reclassification out of Accumulated Other Comprehensive Income (Details) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2019 |
Jun. 30, 2018 |
Jun. 30, 2019 |
Jun. 30, 2018 |
|
Reclassification Adjustment out of Accumulated Other Comprehensive Income on Derivatives [Line Items] | ||||
Gain (loss) on sale of investment securities available for sale | $ 137 | $ 16 | $ (110) | $ 238 |
Income tax (benefit) expense | 1,292 | 1,015 | 2,537 | 1,584 |
Total, net of tax | 108 | 12 | (87) | 188 |
Gains and Losses on Available-for-Sale Securities [Member] | Reclassification out of Accumulated Other Comprehensive Income (Loss) [Member] | ||||
Reclassification Adjustment out of Accumulated Other Comprehensive Income on Derivatives [Line Items] | ||||
Gain (loss) on sale of investment securities available for sale | 137 | 16 | (110) | 238 |
Income tax (benefit) expense | $ 29 | $ 4 | $ (23) | $ 50 |
REVENUE - Narrative (Details) |
6 Months Ended | |
---|---|---|
Jun. 30, 2019 |
Jun. 30, 2018 |
|
Revenue from Contract with Customer [Abstract] | ||
Percentage of revenue streams in scope with ASU 2014-09 | 2.10% | 2.70% |
Label | Element | Value |
---|---|---|
Retained Earnings [Member] | ||
Cumulative Effect of New Accounting Principle in Period of Adoption | us-gaap_CumulativeEffectOfNewAccountingPrincipleInPeriodOfAdoption | $ 1,532,000 |
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