HomeStreet, Inc. (NASDAQ:HMST) (the “Company” or “HomeStreet”), the parent company of HomeStreet Bank (the “Bank”), today announced net income of $12.1 million, or $0.82 per diluted share, for the second quarter of 2013, compared to net income of $10.9 million, or $0.74 per share, for the first quarter of 2013 and $18.7 million, or $1.26 per share, for the second quarter of 2012.
- Financial performance
- Second quarter 2013:
- Pre-tax income of $17.9 million, up 9.0% from the first quarter of 2013 and down 21.3% from the second quarter of 2012.
- Net interest margin of 3.10%, up from 2.85% in the second quarter of 2012.
- Return on average equity of 17.2% and return on average assets of 1.86%.
- Year-to-date 2013:
- Pre-tax income of $34.2 million, down 16.4% from the first half of 2012.
- Net interest margin of 2.96%, up from 2.68% in the first half of 2012.
- The Company's estimated annual effective income tax rate for the quarter was 32.4% as compared to 20.8% for 2012. The prior year effective income tax rate reflects the benefit of the full reversal of deferred tax asset valuation allowances.
- Return on average equity of 16.6% and return on average assets of 1.81%.
- Mortgage Banking segment second quarter results:
- Mortgage Banking segment net income of $10.7 million, down 22.1% from the first quarter of 2013 and down 59.0% from the second quarter of 2012.
- Single family mortgage interest rate lock commitments of $1.42 billion, up 37.4% from the first quarter of 2013 and up 9.2% from the second quarter of 2012.
- Single family mortgage closed loan production of $1.31 billion, up 9.7% from the first quarter of 2013 and up 22.3% from the second quarter of 2012.
- Net gain on single family mortgage origination and sale activities of $51.7 million, down 0.6% from the first quarter of 2013 and up 13.0% from the second quarter of 2012.
- The portfolio of single family loans serviced for others increased to $10.40 billion at quarter end, up 7.2% from $9.70 billion at March 31, 2013.
- During the quarter, HomeStreet became the number one originator by volume of purchase mortgages in the five-county Puget Sound region, our core market area. This ranking is based on the combined results for HomeStreet and our affiliate, Windermere Mortgage Services Series LLC.
- Commercial and Consumer Banking segment second quarter results:
- Commercial and Consumer Banking segment net income of $1.3 million, returning to profitability for the first time since the economic downturn of 2008.
- Loans held for investment of $1.42 billion at June 30, 2013 increased $57.5 million, or 4.2%, from March 31, 2013. New loan commitments totaled $210.7 million.
Transaction and savings deposits increased to $1.33 billion, or 67.7% of total deposits, up from $1.16 billion, or 60.1% of total deposits, at March 31, 2013.
- Classified assets and nonperforming assets ended the quarter at 2.69% and 1.50% of total assets, respectively, down from 3.28% and 2.05% of total assets at December 31, 2012.
- Other Highlights:
- The Company has declared a special cash dividend of $0.11 per share payable to shareholders of record as of August 5, 2013.
- On July 26, 2013, HomeStreet announced agreements to purchase two community banks: Fortune Bank and Yakima National Bank. Fortune Bank provides a full range of financial services to smaller businesses and professionals and also specializes in U.S. Small Business Administration (“SBA”) loans with locations in Seattle and Bellevue, Washington. Yakima National Bank has a Central and Eastern Washington market with retail banking locations in Yakima, Selah, Sunnyside and Kennewick. On July 9, 2013, the Company announced an agreement to purchase two Puget Sound area branches from AmericanWest Bank, located on Bainbridge Island and in West Seattle. These acquisitions, all of which are subject to regulatory approval and the approval of their respective shareholders, are anticipated to close in the fourth quarter of 2013 and, once completed, would bring our retail deposit branch network to 19 in the Puget Sound region and 29 overall. These acquisitions are expected to increase loans and deposits by approximately $220 million and $280 million, respectively.
“Our second quarter earnings improved from first quarter 2013, despite the challenge of rising interest rates for our mortgage banking business,” said CEO Mark K. Mason. “During the quarter, mortgage profit margins declined as lenders competed for loans in a market with sharply declining refinancing loan volume. Anticipating these changes, we continue to focus on retail purchase mortgage origination and expansion of our market and market share through hiring high volume purchase focused mortgage originators. As a result, HomeStreet is now the number one-ranked originator of purchase mortgages by volume in the Puget Sound area, our core market. We also made strong progress in the quarter toward our goal of diversifying our business. In the quarter, our commercial and consumer banking segment completed another strong origination quarter and more importantly attained profitability in the quarter, recognizing segment net income of $1.3 million. Additionally, to accelerate our diversification and growth, we recently entered into agreements to acquire Fortune Bank, Yakima National Bank and two retail deposit branches from AmericanWest Bank. Beyond the additional customers, loans and deposits, these acquisitions bring two teams of seasoned community bankers and two talented executives in David Straus and Jeff Newgard to help us grow our franchise in Puget Sound and expand in Central and Eastern Washington.”