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HomeStreet’s shares rose 3.7 percent Friday after it said federal and state banking regulators have terminated an agreement that, among other things, limited HomeStreet Bank’s ability to pay dividends.

The Seattle-based bank said the Federal Deposit Insurance Corporation and state Department of Financial Institutions ended a memorandum of understanding drawn up in March. That memorandum had replaced an even more restrictive order about “unsafe and unsound banking practices” that governed HomeStreet for the previous three years.

“We are deeply gratified by this acknowledgment on the part of our regulators of the bank’s significant accomplishments, characterized by strong earnings and greatly improved credit quality,” said HomeStreet President and Chief Executive Officer Mark K. Mason.

HomeStreet Bank reported assets of $2.5 billion as of Sept. 30, and has 20 bank branches and 24 stand-alone lending centers in Washington, Oregon, Idaho and Hawaii.

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HomeStreet’s stock closed up 91 cents Friday at $25.25.

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