HomeStreet, Inc. Reports Third Quarter 2012 Results

BY Business Wire | 10/29/12 - 06:00 AM EDT

Stock quotes in this article: HMST

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We caution readers that a number of important factors could cause actual results to differ materially from those expressed in, implied or projected by, such forward-looking statements. For instance, our ability to expand our banking operations geographically and across market sectors, grow our franchise and capitalize on market opportunities may be limited due to future risks and uncertainties including, but not limited to, changes in general economic conditions that impact our markets and our business, regulatory and legislative actions that may constrain our ability to do business, significant increases in the competition we face in our industry and market and the extent of our success in problem asset resolution efforts. In addition, we may not recognize all or a substantial portion of the value of our rate-lock loan activity due to challenges our customers may face in meeting current underwriting standards, a decrease in interest rates, an increase in competition for such loans, unfavorable changes in general economic conditions, including housing prices, the job market, consumer confidence and spending habits either nationally or in the regional and local market areas in which the Company does business and legislative or regulatory actions or reform (including, without limitation, the Dodd-Frank Wall Street Reform and Consumer Protection Act). A discussion of the factors that we know to pose risk to the achievement of our business goals and our operational and financial objectives is contained in our Annual Report on Form 10-K for the fiscal year ended December 31, 2011 and Quarterly Report on Form 10-Q for the quarter ended June 30, 2012. These factors are updated from time to time in our filings with the Securities and Exchange Commission, and readers of this release are cautioned to review those disclosures in conjunction with the discussions herein.

Information contained herein, other than information at December 31, 2011, and for the twelve months then ended, is unaudited. All financial data should be read in conjunction with the notes to the consolidated financial statements of HomeStreet, Inc., and subsidiaries as of and for the fiscal year ended December 31, 2011, as contained in the Company's Annual Report on Form 10-K for such fiscal year.


HomeStreet, Inc. and Subsidiaries
Summary Financial Data


	Quarter ended												Nine months ended
	Sept. 30,		Jun. 30,		Mar. 31,			Dec. 31,			Sept. 30,		Sept. 30,		Sept. 30,
(in thousands, except share data)	2012		2012		2012			2011			2011		2012		2011
Operations Data (for the period ended):
Net interest income	$	16,291	$	14,698	$	12,905		$	12,866		$	11,970	$	43,894	$	35,474
Provision for loan losses	5,500		2,000		—			—			1,000		7,500		3,300
Noninterest income	68,133		55,502		39,111			27,461			36,979		162,745		69,897
Noninterest expense	45,819		46,847		34,687			33,903			32,329		127,352		92,590
Net income before taxes	33,105		21,353		17,329			6,424			15,620		71,787		9,481
Income taxes	11,762		3,357		(1,721		)	(602		)	362		13,397		388
Net income	$	21,343	$	17,996	$	19,050		$	7,026		$	15,258	$	58,390	$	9,093
Basic earnings per common share ⁽¹⁾	$	2.98	$	2.53	$	3.70		$	2.60		$	5.65	$	9.01	$	3.37
Diluted earnings per common share ⁽¹⁾	$	2.90	$	2.43	$	3.55		$	2.42		$	5.31	$	8.71	$	3.24
Weighted average common shares
Basic	7,167,975		7,126,060		5,146,283			2,701,749			2,701,749		6,480,106		2,701,749
Diluted	7,349,516		7,412,032		5,360,165			2,898,585			2,872,716		6,707,238		2,804,052
Shareholders’ equity per share	$	33.33	$	29.88	$	26.70		$	31.98		$	29.73	$	33.33	$	29.73
Common shares outstanding ⁽¹⁾	7,177,486		7,162,607		7,162,607			2,701,749			2,701,749		7,177,486		2,701,749

Financial position (at period end):
Cash and cash equivalents	$	22,051	$	75,063	$	92,953		$	263,302		$	138,429	$	22,051	$	138,429
Investment securities available for sale	414,050		415,610		446,198			329,047			339,453		414,050		339,453
Loans held for sale	532,580		412,933		290,954			150,409			226,590		532,580		226,590
Loans held for investment, net	1,268,703		1,235,253		1,295,471			1,300,873			1,360,219		1,268,703		1,360,219
Mortgage servicing rights	81,512		78,240		86,801			77,281			74,083		81,512		74,083
Other real estate owned	17,003		40,618		31,640			38,572			64,368		17,003		64,368
Total assets	2,507,941		2,424,947		2,367,497			2,264,957			2,316,839		2,507,941		2,316,839
Deposits	1,981,814		1,904,749		2,000,633			2,009,755			2,056,977		1,981,814		2,056,977
FHLB advances	131,597		65,590		57,919			57,919			67,919		131,597		67,919
Repurchase agreements	—		100,000		—			—			—		—		—
Shareholders’ equity	239,260		214,023		191,230			86,407			80,336		239,260		80,336

Financial position (averages):
Investment securities available for sale	$	411,916	$	431,875	$	381,129		$	338,933		$	272,294	$	408,320	$	295,988
Loans held for investment	1,270,652		1,304,740		1,338,552			1,385,037			1,427,763		1,304,526		1,509,296
Total interest earning assets	2,184,791		2,142,451		2,090,180			2,078,506			2,019,243		2,139,310		2,066,943
Total interest bearing deposits	1,625,437		1,640,159		1,705,371			1,745,493			1,787,388		1,656,874		1,837,708
FHLB advances	112,839		79,490		57,919			59,169			72,267		83,523		105,410
Repurchase agreements	18,478		52,369		—			—			—		23,597		—
Total interest bearing liabilities	1,818,611		1,833,875		1,825,146			1,866,519			1,921,512		1,825,851		2,005,843
Shareholders’ equity	229,762		206,428		140,784			84,038			73,499		192,778		62,958


HomeStreet, Inc. and Subsidiaries
Summary Financial Data (continued)


	Quarter ended															Nine months ended
	Sept. 30,			Jun. 30,			Mar. 31,			Dec. 31,			Sept. 30,			Sept. 30,			Sept. 30,
(in thousands, except share data)	2012			2012			2012			2011			2011			2012			2011
Financial performance:
Return on average common shareholders’ equity ⁽²⁾	37.16		%	34.87		%	54.13		%	33.44		%	83.04		%	40.38		%	19.26		%
Return on average assets	3.50		%	3.04		%	3.30		%	1.23		%	2.67		%	3.29		%	0.53		%
Net interest margin ⁽³⁾	3.08		%	2.83		%	2.53		%	2.50		%	2.38		%	2.82		%	2.30		%
Efficiency ratio ⁽⁴⁾	54.27		%	66.73		%	66.69		%	84.07		%	66.05		%	61.63		%	87.87		%
Operating efficiency ratio ⁽⁶⁾	53.86		%	58.12		%	61.84		%	74.78		%	47.43		%	57.32		%	62.69		%
Credit quality:
Allowance for credit losses	$	27,627		$	27,125		$	35,402		$	42,800		$	53,386		$	27,627		$	53,386
Allowance for credit losses/total loans	2.12		%	2.13		%	2.64		%	3.18		%	3.76		%	2.12		%	3.76		%
Allowance for credit losses/nonaccrual loans	71.80		%	81.28		%	46.58		%	55.81		%	55.91		%	71.80		%	55.91		%
Total classified assets	$	102,385		$	137,165		$	208,792		$	188,167		$	225,022		$	102,385		$	225,022
Classified assets/total assets	4.08		%	5.66		%	8.82		%	8.31		%	9.71		%	4.08		%	9.71		%
Total nonaccrual loans ⁽⁵⁾	$	38,247		$	33,107		$	75,575		$	76,484		$	95,094		$	38,247		$	95,094
Nonaccrual loans/total loans	2.94		%	2.62		%	5.66		%	5.69		%	6.73		%	2.94		%	6.73		%
Other real estate owned	$	17,003		$	40,618		$	31,640		$	38,572		$	64,368		$	17,003		$	64,368
Total nonperforming assets	$	55,250		$	73,725		$	107,215		$	115,056		$	159,462		$	55,250		$	159,462
Nonperforming assets/total assets	2.20		%	3.04		%	4.53		%	5.08		%	6.88		%	2.20		%	6.88		%
Net charge-offs	$	4,998		$	10,277		$	7,398		$	10,586		$	7,673		$	22,673		$	14,480
Regulatory capital ratios for the Bank:
Tier 1 capital to total assets (leverage)	10.77		%	10.14		%	9.29		%	6.04		%	5.64		%	10.77		%	5.64		%
Tier 1 risk-based capital	16.65		%	15.75		%	14.18		%	9.88		%	8.51		%	16.65		%	8.51		%
Total risk-based capital	17.90		%	17.01		%	15.45		%	11.15		%	9.79		%	17.90		%	9.79		%
Other data:
Full-time equivalent employees (ending)	998			913			821			613			598			998			598

(1) Per share data shown after giving effect to the 2-for-1 forward stock split implemented on March 6, 2012 as well as the 1-for-2.5 reverse stock split implemented on July 19, 2011.
(2) Net earnings available to common shareholders divided by average common shareholders’ equity.
(3) Net interest income divided by total interest earning assets on a tax equivalent basis.
(4) The efficiency ratio is noninterest expense divided by total revenue (net interest income and noninterest income).
(5) Generally, loans are placed on nonaccrual status when they are 90 or more days past due.
(6) We include an operating efficiency ratio which is not calculated based on accounting principles generally accepted in the United States (“GAAP”), but which we believe provides important information regarding our results of operations. Our calculation of the operating efficiency ratio is computed by dividing noninterest expense less costs related to OREO (gains (losses) on sales, valuation allowance adjustments, and maintenance and taxes) by total revenue (net interest income and noninterest income). Management uses this non-GAAP measurement as part of its assessment of performance in managing noninterest expense. We believe that costs related to OREO are more appropriately considered as credit-related costs rather than as an indication of our operating efficiency. The following table provides a reconciliation of non-GAAP to GAAP measurement.


	Quarter ended										Nine months ended
	Sept. 30,		Jun. 30,		Mar. 31,		Dec. 31,		Sept. 30,		Sept. 30,		Sept. 30,
	2012		2012		2012		2011		2011		2012		2011
Efficiency ratio	54.27	%	66.73	%	66.69	%	84.07	%	66.05	%	61.63	%	87.87	%
Less impact of OREO expenses	0.41	%	8.61	%	4.85	%	9.29	%	18.62	%	4.31	%	25.18	%
Operating efficiency ratio	53.86	%	58.12	%	61.84	%	74.78	%	47.43	%	57.32	%	62.69	%


HomeStreet, Inc. and Subsidiaries
Consolidated Statements of Operations


	Quarter ended Sept. 30,				%		Nine Months Ended Sept. 30,					%
(in thousands, except share data)	2012		2011		Change		2012			2011		Change
Interest income:
Loans	$	18,283	$	17,593	4		$	52,086		$	54,208	(4	)
Investment securities available for sale	2,517		1,422		77		7,205			5,128		41
Other	24		117		(79	)	216			274		(21	)
	20,824		19,132		9		59,507			59,610		—
Interest expense:
Deposits	3,908		5,848		(33	)	12,985			19,427		(33	)
Federal Home Loan Bank advances	297		855		(65	)	1,506			3,122		(52	)
Securities sold under agreements to repurchase	19		—		NM		69			—		NM
Long-term debt	305		458		(33	)	1,041			1,586		(34	)
Other	4		1		300		12			1		NM
	4,533		7,162		(37	)	15,613			24,136		(35	)
Net interest income	16,291		11,970		36		43,894			35,474		24
Provision for credit losses	5,500		1,000		450		7,500			3,300		127
Net interest income after provision for credit losses	10,791		10,970		(2	)	36,394			32,174		13
Noninterest income:
Net gain on mortgage loan origination and sale activities	64,390		15,766		308		138,386			29,702		366
Mortgage servicing income	506		18,532		(97	)	15,470			32,093		(52	)
Income from Windermere Mortgage Services, Inc.	1,188		902		32		3,748			1,380		172
Gain (loss) on debt extinguishment	—		—		—		(939		)	2,000		NM
Depositor and other retail banking fees	756		778		(3	)	2,262			2,313		(2	)
Insurance commissions	192		103		86		550			724		(24	)
Gain on securities available for sale	397		642		(38	)	1,349			643		110
Other	704		256		175		1,919			1,042		84
	68,133		36,979		84		162,745			69,897		133
Noninterest expense:
Salaries and related costs	31,573		13,217		139		81,149			37,056		119
General and administrative	7,033		4,310		63		19,030			12,307		55
Legal	312		983		(68	)	1,471			2,286		(36	)
Consulting	1,069		270		296		1,746			633		176
Federal Deposit Insurance Corporation assessments	794		1,264		(37	)	2,751			4,278		(36	)
Occupancy	2,279		1,663		37		6,160			5,031		22
Information services	2,411		1,509		60		6,129			4,466		37
Other real estate owned expense	348		9,113		(96	)	8,916			26,533		(66	)
	45,819		32,329		42		127,352			92,590		38
Income before income tax expense	33,105		15,620		112		71,787			9,481		657
Income tax expense	11,762		362		NM		13,397			388		NM
NET INCOME	$	21,343	$	15,258	40		$	58,390		$	9,093	542

Basic income per share	$	2.98	$	5.65	(47	)	$	9.01		$	3.37	167
Diluted income per share	$	2.90	$	5.31	(45	)	$	8.71		$	3.24	169
Basic weighted average number of shares outstanding	7,167,975		2,701,749		165		6,480,106			2,701,749		140
Diluted weighted average number of shares outstanding	7,349,516		2,872,716		156		6,707,238			2,804,052		139


HomeStreet, Inc. and Subsidiaries
Five Quarter Consolidated Statements of Operation


	Quarter ended
	Sept. 30,		Jun. 30,			Mar. 31,			Dec. 31,			Sept. 30,
(in thousands, except share data)	2012		2012			2012			2011			2011
Interest income:
Loans	$	18,283	$	17,250		$	16,553		$	17,433		$	17,593
Investment securities available for sale	2,517		2,449			2,238			1,792			1,422
Other	24		56			137			203			117
	20,824		19,755			18,928			19,428			19,132
Interest expense:
Deposits	3,908		4,198			4,879			5,388			5,848
Federal Home Loan Bank advances	297		535			675			699			855
Securities sold under agreements to repurchase	19		50			—			—			—
Long-term debt	305		271			465			459			458
Other	4		3			4			16			1
	4,533		5,057			6,023			6,562			7,162
Net interest income	16,291		14,698			12,905			12,866			11,970
Provision for credit losses	5,500		2,000			—			—			1,000
Net interest income after provision for credit losses	10,791		12,698			12,905			12,866			10,970
Noninterest income:
Net gain on mortgage loan origination and sale activities	64,390		45,486			28,510			18,919			15,766
Mortgage servicing income	506		7,091			7,873			5,963			18,532
Income from Windermere Mortgage Services, Inc.	1,188		1,394			1,166			739			902
Loss on debt extinguishment	—		(939		)	—			—			—
Depositor and other retail banking fees	756		771			735			748			778
Insurance commissions	192		177			182			186			103
Gain on securities available for sale	397		911			41			459			642
Other	704		611			604			447			256
	68,133		55,502			39,111			27,461			36,979
Noninterest expense:
Salaries and related costs	31,573		28,224			21,351			16,462			13,217
General and administrative	7,033		6,725			5,273			6,182			4,310
Legal	312		724			435			1,075			983
Consulting	1,069		322			355			2,011			270
Federal Deposit Insurance Corporation assessments	794		717			1,240			1,256			1,264
Occupancy	2,279		2,092			1,790			1,733			1,663
Information services	2,411		1,994			1,723			1,436			1,509
Other real estate owned expense	348		6,049			2,520			3,748			9,113
	45,819		46,847			34,687			33,903			32,329
Income before income tax expense	33,105		21,353			17,329			6,424			15,620
Income tax expense (benefit)	11,762		3,357			(1,721		)	(602		)	362
NET INCOME	$	21,343	$	17,996		$	19,050		$	7,026		$	15,258

Basic income per share	$	2.98	$	2.53		$	3.70		$	2.60		$	5.65
Diluted income per share	$	2.90	$	2.43		$	3.55		$	2.42		$	5.31
Basic weighted average number of shares outstanding	7,167,975		7,126,060			5,146,283			2,701,749			2,701,749
Diluted weighted average number of shares outstanding	7,349,516		7,412,032			5,360,165			2,898,585			2,872,716


HomeStreet, Inc. and Subsidiaries
Consolidated Statements of Financial Condition


	Sept. 30,		Dec. 31,		%
(in thousands, except share data)	2012		2011		Change
Assets:
Cash and cash equivalents (including interest-bearing instruments of $11,497 and $246,113)	$	22,051	$	263,302	(92	)
Investment securities available for sale	414,050		329,047		26
Loans held for sale (includes $525,926 and $130,546 carried at fair value)	532,580		150,409		254
Loans held for investment (net of allowance for loan losses of $27,461 and $42,689)	1,268,703		1,300,873		(2	)
Mortgage servicing rights (includes $73,787 and $70,169 carried at fair value)	81,512		77,281		5
Other real estate owned	17,003		38,572		(56	)
Federal Home Loan Bank stock, at cost	36,697		37,027		(1	)
Premises and equipment, net	13,060		6,569		99
Accounts receivable and other assets	122,285		61,877		98
Total assets	2,507,941		2,264,957		11
Liabilities and Shareholders’ Equity
Liabilities:
Deposits	1,981,814		2,009,755		(1	)
Federal Home Loan Bank advances	131,597		57,919		127
Accounts payable and accrued expenses	93,413		49,019		91
Long-term debt	61,857		61,857		—
Total liabilities	2,268,681		2,178,550		4
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 80,000,000
Issued and outstanding, 7,177,486 shares and 2,701,749 shares	511		511		—
Additional paid-in capital	89,264		31		NM
Retained earnings	140,136		81,746		71
Accumulated other comprehensive income	9,349		4,119		127
Total shareholders’ equity	239,260		86,407		177
Total liabilities and shareholders’ equity	$	2,507,941	$	2,264,957	11


HomeStreet, Inc. and Subsidiaries
Five Quarter Consolidated Statements of Financial Condition


	Sept. 30,		June 30,		Mar. 31,		Dec. 31,		Sept. 30,
(in thousands, except share data)	2012		2012		2012		2011		2011
Assets:
Cash and cash equivalents	$	22,051	$	75,063	$	92,953	$	263,302	$	138,429
Investment securities available for sale	414,050		415,610		446,198		329,047		339,453
Loans held for sale	532,580		412,933		290,954		150,409		226,590
Loans held for investment	1,268,703		1,235,253		1,295,471		1,300,873		1,360,219
Mortgage servicing rights	81,512		78,240		86,801		77,281		74,083
Other real estate owned	17,003		40,618		31,640		38,572		64,368
Federal Home Loan Bank stock, at cost	36,697		37,027		37,027		37,027		37,027
Premises and equipment, net	13,060		10,226		7,034		6,569		6,615
Accounts receivable and other assets	122,285		119,977		79,419		61,877		70,055
Total assets	$	2,507,941	$	2,424,947	$	2,367,497	$	2,264,957	$	2,316,839
Liabilities and Shareholders’ Equity
Liabilities:
Deposits	$	1,981,814	$	1,904,749	$	2,000,633	$	2,009,755	$	2,056,977
Federal Home Loan Bank advances	131,597		65,590		57,919		57,919		67,919
Securities sold under agreements to repurchase	—		100,000		—		—		—
Accounts payable and accrued expenses	93,413		78,728		55,858		49,019		49,750
Long-term debt	61,857		61,857		61,857		61,857		61,857
Total liabilities	2,268,681		2,210,924		2,176,267		2,178,550		2,236,503
Shareholders’ equity:
Preferred stock, no par value
Authorized 10,000 shares
Issued and outstanding, 0 shares	—		—		—		—		—
Common stock, no par value
Authorized 80,000,000
Issued and outstanding	511		511		511		511		511
Additional paid-in capital	89,264		88,637		86,755		31		28
Retained earnings	140,136		118,793		100,796		81,746		74,720
Accumulated other comprehensive income (loss)	9,349		6,082		3,168		4,119		5,077
Total shareholders’ equity	239,260		214,023		191,230		86,407		80,336
Total liabilities and shareholders’ equity	$	2,507,941	$	2,424,947	$	2,367,497	$	2,264,957	$	2,316,839


HomeStreet, Inc. and Subsidiaries
Average Balances, Yields and Rates Paid (Taxable-equivalent basis)


	Quarter ended Sept. 30,
	2012						2011
	Average				Average		Average				Average
(in thousands)	Balance		Interest		Yield/Cost		Balance		Interest		Yield/Cost
Assets:
Interest-earning assets ⁽¹⁾:
Cash & cash equivalents	$	50,056	$	24	0.15	%	$	192,323	$	114	0.23	%
Investment securities	411,916		3,013		2.93	%	272,294		1,444		2.14	%
Loans held for sale	452,167		3,854		3.41	%	126,863		1,362		4.33	%
Loans held for investment	1,270,652		14,464		4.54	%	1,427,763		16,268		4.54	%
Total interest-earning assets	2,184,791		21,355		3.90	%	2,019,243		19,188		3.79	%
Noninterest-earning assets ⁽²⁾	256,631						265,216
Total assets	$	2,441,422					$	2,284,459
Liabilities and Shareholders’ Equity:
Deposits:
Interest-bearing demand accounts	$	155,947	128		0.33	%	$	133,006	140		0.42	%
Savings accounts	98,711		114		0.46	%	58,043		73		0.50	%
Money market accounts	655,123		857		0.52	%	461,278		715		0.62	%
Certificate accounts	715,656		2,809		1.56	%	1,135,061		4,920		1.72	%
Total interest-bearing deposits	1,625,437		3,908		0.96	%	1,787,388		5,848		1.30	%
FHLB advances	112,839		297		1.19	%	72,267		855		4.69	%
Securities sold under agreements to repurchase	18,478		19		0.14	%	—		—		—	%
Long-term debt	61,857		305		1.97	%	61,857		459		2.97	%
Other borrowings	—		4		—	%	—		—		—	%
Total interest-bearing liabilities	1,818,611		4,533		0.99	%	1,921,512		7,162		1.48	%
Other noninterest-bearing liabilities	393,049						289,448
Total liabilities	2,211,660						2,210,960
Shareholders’ equity	229,762						73,499
Total liabilities and shareholders’ equity	$	2,441,422					$	2,284,459
Net interest income ⁽³⁾			$	16,822					$	12,026
Net interest spread					2.91	%					2.31	%
Impact of noninterest-bearing sources					0.17	%					0.07	%
Net interest margin					3.08	%					2.38	%

(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 reclassified to other real estate owned.
(3) Includes taxable-equivalent adjustments, which is a non-GAAP measure, primarily related to tax-exempt income on certain loans and securities of $531 thousand for the quarter ended September 30, 2012 and $56 thousand for the quarter ended September 30, 2011, respectively. The Company's estimated marginal tax rate was 36% for the periods presented.


HomeStreet, Inc. and Subsidiaries
Average Balances, Yields and Rates Paid (Taxable-equivalent basis) (continued)


	Nine Months Ended Sept. 30,
	2012						2011
	Average				Average		Average				Average
(in thousands)	Balance		Interest		Yield/Cost		Balance		Interest		Yield/Cost
Assets:
Interest-earning assets ⁽¹⁾:
Cash & cash equivalents	$	116,789	$	208	0.24	%	$	151,763	$	265	0.23	%
Investment securities	408,320		8,383		2.74	%	295,988		5,215		2.35	%
Loans held for sale	309,675		8,289		3.57	%	109,896		3,566		4.33	%
Loans held for investment	1,304,526		43,906		4.49	%	1,509,296		50,756		4.49	%
Total interest-earning assets	2,139,310		60,786		3.79	%	2,066,943		59,802		3.86	%
Noninterest-earning assets ⁽²⁾	223,816						241,181
Total assets	$	2,363,126					$	2,308,124
Liabilities and Shareholders’ Equity:
Deposits:
Interest-bearing demand accounts	$	148,288	368		0.33	%	$	126,769	458		0.48	%
Savings accounts	85,376		290		0.45	%	55,367		257		0.62	%
Money market accounts	592,195		2,390		0.54	%	438,922		2,297		0.70	%
Certificate accounts	831,015		9,937		1.60	%	1,216,650		16,415		1.80	%
Total interest-bearing deposits	1,656,874		12,985		1.05	%	1,837,708		19,427		1.41	%
FHLB advances	83,523		1,506		2.40	%	105,410		3,122		3.95	%
Securities sold under agreements to repurchase	23,597		69		0.39	%	—		—		—	%
Long-term debt	61,857		1,041		2.24	%	62,725		1,586		3.37	%
Other borrowings	—		12		—	%	—		1		—	%
Total interest-bearing liabilities	1,825,851		15,613		1.14	%	2,005,843		24,136		1.61	%
Other noninterest-bearing liabilities	344,497						239,323
Total liabilities	2,170,348						2,245,166
Shareholders’ equity	192,778						62,958
Total liabilities and shareholders’ equity	$	2,363,126					$	2,308,124
Net interest income ⁽³⁾			$	45,173					$	35,666
Net interest spread					2.65	%					2.25	%
Impact of noninterest-bearing sources					0.17	%					0.05	%
Net interest margin					2.82	%					2.30	%

(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 reclassified to other real estate owned.
(3) Includes taxable-equivalent adjustments, which is a non-GAAP measure, primarily related to tax-exempt income on certain loans and securities of $1.3 million for the nine months ended September 30, 2012 and $192 thousand for the nine months ended September 30, 2011, respectively. The Company's estimated marginal tax rate was 36% for the periods presented.


HomeStreet, Inc. and Subsidiaries
Five Quarter Investment Securities Available for Sale


	Sept. 30,		June 30,		Mar. 31,		Dec. 31,		Sept. 30,
(in thousands, except for duration data)	2012		2012		2012		2011		2011
Mortgage backed:
Residential	$	63,365	$	48,136	$	40,575	$	—	$	—
Commercial	14,532		14,602		14,410		14,483		8,393
Municipal bonds	128,595		126,681		79,051		49,584		1,059
Collateralized mortgage obligations:
Residential	167,513		185,970		245,889		223,390		251,856
Commercial	9,110		9,165		10,019		10,070		10,174
Agency	—		—		25,007		—		—
US Treasury	30,935		31,056		31,247		31,520		67,971
	$	414,050	$	415,610	$	446,198	$	329,047	$	339,453
Weighted average duration in years	5.0		5.1		5.1		4.4		3.9


Five Quarter Loans Held for Investment


	Sept. 30,			June 30,			Mar. 31,			Dec. 31,			Sept. 30,
(in thousands)	2012			2012			2012			2011			2011
Consumer loans
Single family residential	$	602,164		$	537,174		$	506,103		$	496,934		$	496,741
Home equity	141,343			147,587			152,924			158,936			167,453
	743,507			684,761			659,027			655,870			664,194
Commercial loans
Commercial real estate	360,919			370,064			391,727			402,139			407,891
Multifamily residential	36,912			47,069			56,328			56,379			58,972
Construction/land development	77,912			83,797			158,552			173,405			213,001
Commercial business	80,056			79,980			68,932			59,831			73,559
	555,799			580,910			675,539			691,754			753,423
	1,299,306			1,265,671			1,334,566			1,347,624			1,417,617
Net deferred loan fees and discounts	(3,142		)	(3,508		)	(3,891		)	(4,062		)	(4,231		)
	1,296,164			1,262,163			1,330,675			1,343,562			1,413,386
Allowance for loan losses	(27,461		)	(26,910		)	(35,204		)	(42,689		)	(53,167		)
	$	1,268,703		$	1,235,253		$	1,295,471		$	1,300,873		$	1,360,219

Allowance as a % of loans held for investment	2.12		%	2.13		%	2.64		%	3.18		%	3.76		%
Allowance as a % of nonaccrual loans	71.80		%	81.28		%	46.58		%	55.81		%	55.91		%


HomeStreet, Inc. and Subsidiaries
Five Quarter Credit Quality Activity


Allowance for Credit Losses (roll-forward)


	Quarter ended
	Sept. 30,			June 30,			Mar. 31,			Dec. 31,			Sept. 30,
(in thousands)	2012			2012			2012			2011			2011

Allowance for Credit Losses (roll-forward):
Beginning balance	$	27,125		$	35,402		$	42,800		$	53,386		$	60,059
Provision for credit losses	5,500			2,000			—			—			1,000
(Charge-offs), net of recoveries	(4,998		)	(10,277		)	(7,398		)	(10,586		)	(7,673		)
Ending balance	$	27,627		$	27,125		$	35,402		$	42,800		$	53,386


Nonperforming assets (NPAs) roll-forward


	Quarter ended
	Sept. 30,			June 30,			Mar. 31,			Dec. 31,			Sept. 30,
(in thousands)	2012			2012			2012			2011			2011

Beginning balance	$	73,725		$	107,215		$	115,056		$	159,462		$	193,609
Additions	20,703			13,208			18,776			7,251			20,900
Reductions:
Charge-offs	(4,441		)	(10,277		)	(7,398		)	(10,586		)	(7,673		)
OREO sales	(25,946		)	(9,804		)	(8,878		)	(26,037		)	(33,814		)
OREO writedowns	(2,623		)	(5,578		)	(2,754		)	(3,564		)	(8,217		)
Principal paydown, payoff advances	(4,794		)	(12,037		)	(1,321		)	(3,871		)	(2,437		)
Transferred back to accrual status	(1,374		)	(9,002		)	(6,266		)	(7,599		)	(2,906		)
Total reductions	(39,178		)	(46,698		)	(26,617		)	(51,657		)	(55,047		)
Net additions/(reductions)	(18,475		)	(33,490		)	(7,841		)	(44,406		)	(34,147		)
Ending balance	$	55,250		$	73,725		$	107,215		$	115,056		$	159,462


HomeStreet, Inc. and Subsidiaries
Five Quarter Nonperforming Assets by Loan Class


	Sept. 30,			June 30,			Mar. 31,			Dec. 31,			Sept. 30,
(in thousands)	2012			2012			2012			2011			2011

Nonaccrual loans:
Consumer loans
Single family residential	$	12,900		$	7,530		$	14,290		$	12,104		$	15,469
Home equity	1,024			1,910			1,853			2,464			2,772
	13,924			9,440			16,143			14,568			18,241
Commercial loans
Commercial real estate	16,186			14,265			9,222			10,184			10,959
Multifamily residential	—			—			—			2,394			5,196
Construction/land development	5,848			9,373			49,708			48,387			58,705
Commercial business	2,289			29			502			951			1,993
	24,323			23,667			59,432			61,916			76,853
Total nonaccrual loans	$	38,247		$	33,107		$	75,575		$	76,484		$	95,094
Nonaccrual loans to total loans	2.94		%	2.62		%	5.66		%	5.69		%	6.73		%

Other real estate owned:
Consumer loans
Single family residential	$	2,787		$	3,142		$	3,243		$	6,600		$	10,419
	2,787			3,142			3,243			6,600			10,419
Commercial loans
Commercial real estate	3,489			3,184			284			2,055			2,152
Construction/land development	10,727			34,292			28,113			29,917			51,797
	14,216			37,476			28,397			31,972			53,949
Total other real estate owned	$	17,003		$	40,618		$	31,640		$	38,572		$	64,368

Nonperforming assets:
Consumer loans
Single family residential	$	15,687		$	10,672		$	17,533		$	18,704		$	25,888
Home equity	1,024			1,910			1,853			2,464			2,772
	16,711			12,582			19,386			21,168			28,660
Commercial loans
Commercial real estate	19,675			17,449			9,506			12,239			13,111
Multifamily residential	—			—			—			2,394			5,196
Construction/land development	16,575			43,665			77,821			78,304			110,502
Commercial business	2,289			29			502			951			1,993
	38,539			61,143			87,829			93,888			130,802
Total nonperforming assets	$	55,250		$	73,725		$	107,215		$	115,056		$	159,462
Nonperforming assets to total assets	2.20		%	3.04		%	4.53		%	5.08		%	6.88		%


HomeStreet, Inc. and Subsidiaries
Delinquencies by Loan Class


							90 days or
							more
	30-59 days			60-89 days			past			Total past						Total
(in thousands)	past due			past due			due ⁽¹⁾			due			Current			loans

September 30, 2012
Consumer loans
Single family residential ⁽¹⁾	$	9,658		$	10,374		$	48,048		$	68,080		$	534,084		$	602,164
Home equity	929			1,389			1,024			3,342			138,001			141,343
	10,587			11,763			49,072			71,422			672,085			743,507
Commercial loans
Commercial real estate	—			—			16,186			16,186			344,733			360,919
Multifamily residential	—			—			—			—			36,912			36,912
Construction/land development	—			—			5,848			5,848			72,064			77,912
Commercial business	—			—			2,289			2,289			77,767			80,056
	—			—			24,323			24,323			531,476			555,799
	$	10,587		$	11,763		$	73,395		$	95,745		$	1,203,561		$	1,299,306
As a % of total loans	0.81		%	0.91		%	5.65		%	7.37		%	92.63		%	100.00		%

December 31, 2011
Consumer loans
Single family residential ⁽¹⁾	$	7,694		$	8,552		$	47,861		$	64,107		$	432,827		$	496,934
Home equity	957			500			2,464			3,921			155,015			158,936
	8,651			9,052			50,325			68,028			587,842			655,870
Commercial loans
Commercial real estate	—			—			10,184			10,184			391,955			402,139
Multifamily residential	—			—			2,394			2,394			53,985			56,379
Construction/land development	9,916			—			48,387			58,303			115,102			173,405
Commercial business	—			—			951			951			58,880			59,831
	9,916			—			61,916			71,832			619,922			691,754
	$	18,567		$	9,052		$	112,241		$	139,860		$	1,207,764		$	1,347,624
As a % of total loans	1.38		%	0.67		%	8.33		%	10.38		%	89.62		%	100.00		%

(1) Includes $35.1 million and $35.8 million of single family residential loans past due and still accruing at September 30, 2012 and December 31, 2011, respectively, whose repayments are insured by the FHA or guaranteed by the VA.


HomeStreet, Inc. and Subsidiaries
Troubled Debt Restructurings (TDRs)


	Sept. 30,		June 30,		Mar. 31,		Dec. 31,		Sept. 30,
(in thousands)	2012		2012		2012		2011		2011

Consumer loans
Single family residential	$	64,785	$	65,699	$	65,078	$	56,581	$	42,315
Home equity	2,769		2,769		2,492		2,475		2,319
	67,554		68,468		67,570		59,056		44,634
Commercial loans
Commercial real estate	24,256		25,576		25,778		25,040		25,090
Multifamily residential	5,521		5,529		6,045		6,053		5,563
Construction/land development	19,647		17,245		25,907		27,432		18,237
Commercial business	176		191		647		878		943
	49,600		48,541		58,377		59,403		49,833
Total TDRs	$	117,154	$	117,009	$	125,947	$	118,459	$	94,467


HomeStreet, Inc. and Subsidiaries
Five Quarter Mortgage Banking Operations


Mortgage Servicing Income


	Quarter ended
	Sept. 30,			June 30,			Mar. 31,			Dec. 31,			Sept. 30,
(in thousands)	2012			2012			2012			2011			2011

Servicing income, net:
Servicing fees and other	$	7,168		$	6,705		$	6,436		$	6,518		$	6,793
Changes in fair value of single family MSRs due to modeled amortization ⁽¹⁾	(5,360		)	(4,052		)	(4,969		)	(4,176		)	(4,155		)
Amortization of multifamily MSRs	(598		)	(462		)	(491		)	(366		)	(455		)
	1,210			2,191			976			1,976			2,183
Risk management, single family MSRs:
Changes in fair value of MSR due to changes in model inputs and/or assumptions ⁽²⁾	(5,565		)	(15,354		)	7,411			(3,910		)	(21,986		)
Net gain (loss) from derivatives economically hedging MSR	4,861			20,254			(514		)	7,897			38,335
	(704		)	4,900			6,897			3,987			16,349
Mortgage servicing income	$	506		$	7,091		$	7,873		$	5,963		$	18,532

(1) Represents changes due to collection/realization of expected cash flows and curtailments over time.
(2) Principally reflects changes in model assumptions and prepayment speed assumptions, which are primarily affected by changes in interest rates.


Loans Serviced for Others


	Sept. 30,		June 30,		Mar. 31,		Dec. 31,		Sept. 30,
(in thousands)	2012		2012		2012		2011		2011

Single family residential
U.S. government agency MBS	$	7,724,562	$	7,061,232	$	6,530,578	$	6,464,815	$	6,217,086
Other	385,107		407,750		416,700		420,470		432,460
	8,109,669		7,468,982		6,947,278		6,885,285		6,649,546
Commercial
Multifamily	760,820		772,473		766,433		758,535		770,401
Other	53,617		56,840		59,370		56,785		57,151
	814,437		829,313		825,803		815,320		827,552
Total loans serviced for others	$	8,924,106	$	8,298,295	$	7,773,081	$	7,700,605	$	7,477,098


HomeStreet, Inc. and Subsidiaries
Five Quarter Mortgage Banking Operations (continued)


Single Family Capitalized Mortgage Servicing Rights


	Quarter ended
	Sept. 30,			June 30,			Mar. 31,			Dec. 31,			Sept. 30,
(in thousands)	2012			2012			2012			2011			2011
Beginning balance	$	70,585		$	79,381		$	70,169		$	67,471		$	87,712
Originations	14,121			10,598			6,723			10,759			5,873
Purchases	6			12			47			25			27
Changes due to modeled amortization ⁽¹⁾	(5,360		)	(4,052		)	(4,969		)	(4,176		)	(4,155		)
Net additions and amortization	8,767			6,558			1,801			6,608			1,745
Changes in fair value due to changes in model inputs and/or assumptions ⁽²⁾	(5,565		)	(15,354		)	7,411			(3,910		)	(21,986		)
Ending balance	$	73,787		$	70,585		$	79,381		$	70,169		$	67,471
Ratio of MSR carrying value to related loans serviced for others	0.91		%	0.95		%	1.14		%	1.02		%	1.01		%
MSR servicing fee multiple ⁽³⁾	2.81			2.82			3.30			2.91			2.92
Weighted-average note rate (loans serviced for others)	4.52		%	4.69		%	4.83		%	4.93		%	5.04		%
Weighted-average servicing fee (loans serviced for others)	0.33		%	0.34		%	0.35		%	0.35		%	0.35		%

(1) Represents changes due to collection/realization of expected future cash flows over time
(2) Principally reflects changes in model assumptions and prepayment speed assumptions, which are primarily affected by changes in interest rates.
(3) Represents the ratio of MSR carrying value to related loans serviced for others divided by the weighted-average servicing fee for loans serviced for others.


Commercial Multifamily Capitalized Mortgage Servicing Rights


	Quarter ended
	Sept. 30,			June 30,			Mar. 31,			Dec. 31,			Sept. 30,
(in thousands)	2012			2012			2012			2011			2011
Beginning balance	$	7,655		$	7,420		$	7,112		$	6,612		$	6,608
Originations	668			697			799			866			459
Amortization	(598		)	(462		)	(491		)	(366		)	(455		)
Ending balance	$	7,725		$	7,655		$	7,420		$	7,112		$	6,612
Ratio of MSR carrying value to related loans serviced for others	0.95		%	0.92		%	0.90		%	0.87		%	0.80		%
MSR servicing fee multiple ⁽¹⁾	2.47			2.45			2.41			2.42			2.27
Weighted-average note rate (loans serviced for others)	5.48		%	5.54		%	5.60		%	5.67		%	5.74		%
Weighted-average servicing fee (loans serviced for others)	0.38		%	0.38		%	0.37		%	0.36		%	0.35		%

(1) Represents the ratio of MSR carrying value to related loans serviced for others divided by the weighted-average servicing fee for loans serviced for others.


HomeStreet, Inc. and Subsidiaries
Five Quarter Mortgage Banking Operations (continued)


Mortgage Banking Activity


	Quarter ended
	Sept. 30,			June 30,			Mar. 31,			Dec. 31,			Sept. 30,
(in thousands)	2012			2012			2012			2011			2011

Production volumes:
Single family mortgage closed loan volume ⁽¹⁾	$	1,368,238		$	1,068,656		$	712,302		$	624,111		$	478,024
Single family mortgage interest rate lock commitments	1,313,182			1,303,390			915,141			543,164			630,919
Single family mortgage loans sold	1,238,879			962,704			534,310			710,706			370,250

Multifamily mortgage originations	$	20,209		$	35,908		$	15,713		$	49,071		$	26,125
Multifamily mortgage loans sold	26,515			27,178			31,423			33,461			25,144

Net gain on mortgage loan origination and sale activities:
Single family:
Secondary marketing gains	$	41,178		$	28,709		$	16,071		$	2,587		$	6,374
Provision for repurchase losses	(526		)	(1,930		)	(390		)	(12		)	(289		)
Net gain from secondary marketing activities	40,652			26,779			15,681			2,575			6,085
Mortgage servicing rights originated	14,121			10,598			6,723			10,758			5,872
Loan origination and funding fees	8,577			7,070			4,944			4,401			3,309
Total single family	63,350			44,447			27,348			17,734			15,266
Multifamily	1,040			1,039			1,162			1,185			500
Total net gain on mortgage loan origination and sale activities	$	64,390		$	45,486		$	28,510		$	18,919		$	15,766
Ratio of single family mortgage servicing rights originated to related loans sold	1.14		%	1.10		%	1.26		%	1.51		%	1.59		%

(1) Represents single family mortgage production volume designated for sale during each respective period.


HomeStreet, Inc. and Subsidiaries
Five Quarter Deposits


	Sept. 30,			June 30,			Mar. 31,			Dec. 31,			Sept. 30,
(in thousands)	2012			2012			2012			2011			2011

Deposits by Product:
Noninterest bearing accounts - checking and savings	$	77,149		$	64,404		$	68,245		$	69,276		$	58,570
Interest bearing transaction and savings deposits:
NOW accounts	172,086			170,098			154,670			138,936			145,668
Statement savings accounts due on demand	104,239			88,104			79,438			66,898			59,974
Money market accounts due on demand	675,363			630,798			559,563			499,457			469,289
Total interest bearing transaction and savings deposits	951,688			889,000			793,671			705,291			674,931
Total transaction and savings deposits	1,028,837			953,404			861,916			774,567			733,501
Certificates of deposit	684,604			755,646			890,694			1,033,798			1,094,184
Noninterest bearing accounts - other	268,373			195,699			248,023			201,390			229,292
Total deposits	$	1,981,814		$	1,904,749		$	2,000,633		$	2,009,755		$	2,056,977


Percent of total deposits:
Noninterest bearing accounts - checking and savings	3.9		%	3.4		%	3.4		%	3.4		%	2.8		%
Interest bearing transaction and savings deposits:
NOW accounts	8.7		%	8.9		%	7.7		%	6.9		%	7.1		%
Statement savings accounts due on demand	5.3		%	4.6		%	4.0		%	3.3		%	2.9		%
Money market accounts due on demand	34.1		%	33.1		%	28.0		%	24.9		%	22.8		%
Total interest bearing transaction and savings deposits	48.1		%	46.6		%	39.7		%	35.1		%	32.8		%
Total transaction and savings deposits	52.0		%	50.0		%	43.1		%	38.5		%	35.6		%
Certificates of deposit	34.5		%	39.7		%	44.5		%	51.4		%	53.2		%
Noninterest bearing accounts - other	13.5		%	10.3		%	12.4		%	10.1		%	11.2		%
Total deposits	100.0		%	100.0		%	100.0		%	100.0		%	100.0		%

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