HomeStreet, Inc. Reports First Quarter 2012 Results

HomeStreet, Inc. (NASDAQ:HMST), the parent company of HomeStreet Bank (the “Bank”), today announced financial results for the first quarter ended March 31, 2012. HomeStreet, Inc. (the “Company” or “HomeStreet”) reported net income of $19.1 million, or $3.55 per diluted share, for the first quarter of 2012, compared to net income of $7.0 million, or $2.42 per share, for the fourth quarter of 2011 and a net loss of $7.4 million, or $(2.76) per share, for the first quarter of 2011.

Highlights for the first quarter of 2012 include:
  • Single family mortgage originations designated for sale of $712.3 million during the quarter, increasing 14.1% over the fourth quarter of 2011. Single family mortgage interest rate lock commitments of $920.2 million during the quarter, up 69.4% from the fourth quarter of 2011.
  • Hiring of approximately 170 mortgage origination and support personnel previously with MetLife Home Loans and related addition of 13 new single family lending centers in Washington, Oregon and Idaho.
  • Completion of the initial public offering of HomeStreet’s common stock in February; issuing 4,361,816 new common shares and raising $88.7 million of net proceeds, of which $55.0 million was subsequently contributed to HomeStreet Bank.
  • Nonperforming assets declined to $107.2 million or 4.5% of total assets including Other Real Estate Owned (“OREO”), which decreased to $31.6 million.
  • In recognition of the significant improvement in the Bank’s financial condition, results of operations and risk profile, in March 2012 the Bank’s regulators terminated the Bank’s regulatory order (the “Bank Order”) and replaced it with an informal supervisory agreement.

“This was a pivotal quarter for HomeStreet, one that marks a number of significant milestones for our institution,” said Mark K. Mason, Chief Executive Officer. “We are already seeing benefits from expanding our mortgage lending capacity during the first quarter. Our capital raise coupled with the termination of the Bank Order have allowed us to resume normal banking operations, fully serve the needs of our customers and grow our franchise.”

Mortgage Banking

Mortgage Originations

Single family mortgage originations designated for sale totaled $712.3 million, increasing $88.2 million, or 14.1%, from the fourth quarter of 2011 and increasing $436.7 million, or 158.5%, from the first quarter of 2011. Single family mortgage interest rate lock commitments, net of estimated fall out, totaled $920.2 million during the first quarter, up $377.1 million, or 69.4%, from the fourth quarter of 2011 and up $666.5 million, or 262.7%, from the first quarter of 2011. Net gain on mortgage loan origination and sales activities was $28.9 million, an increase of $10.0 million, or 52.7%, over the fourth quarter of 2011 and up $24.0 million, or 484.5%, over the first quarter of 2011.

Our mortgage loan origination and sales revenue growth reflects both an elevated demand for mortgage loan products driven by continued low mortgage interest rates and the expansion of our mortgage banking business through the addition during the quarter of approximately 170 mortgage originators, processors, funders, underwriters and other support personnel that were previously with MetLife Home Loans. These personnel contributed approximately $207.0 million of single family interest rate lock commitments during the quarter, $59.0 million of which was closed by March 31, 2012. Our results also reflect strong secondary market profit margins that began to increase in the latter half of 2011 and continued through the first quarter of 2012, reflecting elevated refinancing activity and industry consolidation.

Mortgage Servicing

Mortgage servicing income of $7.9 million increased $1.9 million, or 32.0%, over the fourth quarter of 2011 and $2.0 million, or 34.6%, over the first quarter of 2011. The increase on a linked-quarter basis was primarily due to $1.9 million of net valuation gains on mortgage servicing rights and related hedge instruments, as compared with a net valuation loss of $189,000 during the fourth quarter of 2011. The total loans serviced for others portfolio increased to $7.77 billion compared with $7.70 billion as of December 31, 2011.

Credit Quality

Nonperforming assets (NPAs) declined to $107.2 million, or 4.5% of total assets, as of March 31, 2012, from $115.1 million, or 5.1% of total assets, at December 31, 2011. Net charge-offs in the quarter declined to $7.4 million, down from $10.6 million in the fourth quarter of 2011. At March 31, 2012, OREO balances totaled $31.6 million, a decline of 18.0% from December 31, 2011. As of April 27, 2012, approximately 65.0% of the March 31, 2012 OREO balance was under contract for sale or had been sold since quarter end.

No provision for loan losses was recorded for the first quarter of 2012, consistent with the fourth quarter of 2011, as expected losses inherent within the loans held for investment portfolio continue to decline consistent with the recovery of the economy as a whole.

In April 2012, bankruptcy courts affirmed the Company’s settlement of collection litigation related to two nonperforming construction/land development loans with aggregate carrying values of $26.6 million. The settlement was recognized as a subsequent event as of March 31, 2012. Consequently, the Company has charged-off the carrying value of $4.8 million for one loan and reduced the specific reserves (included in the allowance for loan losses) associated with these loans by $7.1 million as of March 31, 2012.

Deposits

Deposits totaled $2.00 billion at March 31, 2012, down $9.1 million, or 0.5%, from $2.01 billion at December 31, 2011. Certificates of deposit decreased $143.1 million, or 13.8%, since year-end 2011 as we manage the reduction of these higher-cost deposits and replace them with lower cost transaction, savings and money market accounts. Deposits other than certificates of deposit increased $134.0 million, or 13.7%, from year-end 2011. The increase in deposits other than certificates of deposit reflects a focused effort on attracting core deposit balances through our branch network and converting customers with maturing certificates of deposit to money market and savings accounts.

Results of Operations

Net Interest Income

Net interest income was $12.9 million, in line with the fourth quarter of 2011 and up $1.3 million, or 11.3%, from the first quarter of 2011. Total average interest earning assets increased modestly on a linked-quarter basis as proceeds from our successful capital raise were invested into highly liquid securities, partially offset by a decline in our loans held for investment portfolio. Total average interest bearing deposit balances declined as a result of declines in higher-costing certificates of deposit, offset by increases in transaction savings and money market accounts. The net interest margin increased to 2.53% from 2.50% for the fourth quarter of 2011 as a result of the shift in deposit balances from higher-cost certificates of deposit to lower cost transaction, savings and money market accounts and an increase in the average balance of investment securities as net proceeds from the initial public offering were invested, partially offset by changes in the loans held for investment portfolio, resulting primarily from pay downs or pay offs.

Noninterest Income

Noninterest income was $39.5 million, up $12.0 million, or 43.8%, from $27.5 million in the fourth quarter of 2011 and up $25.0 million, or 173.1%, from $14.5 million in the first quarter of 2011. The increase on a linked-quarter basis was primarily due to a $10.0 million increase in net gain on mortgage loan origination and sales activities, reflecting an increase in single family mortgage loan origination and sale activity. Also contributing to the increase in noninterest income was an increase in net valuation gains on mortgage servicing rights and related hedge instruments, totaling $1.9 million during the first quarter of 2012, as compared with a net loss of $189,000 during the fourth quarter of 2011.

Noninterest Expense

Noninterest expense was $35.1 million, up $1.2 million, or 3.4%, from $33.9 million in the fourth quarter of 2011 and up $1.6 million, or 4.8%, from $33.5 million in the first quarter of 2011. The increase on a linked-quarter basis was primarily due to a $4.9 million increase in salary and related costs, reflecting the hiring of mortgage origination personnel previously with MetLife Home Loans. This increase was partially offset by a combined decrease in legal and consulting expenses as a result of the recognition of $2.4 million of expenses associated with capital raising efforts in the fourth quarter of 2011. Offsetting the increase in noninterest expense was a $1.2 million decrease in other real estate owned expense.

Income Taxes

Our effective income tax rate in the first quarter of 2012 differs from the Federal statutory tax rate of 35% due to state income taxes on income in Oregon and Hawaii, tax exempt interest income and a reduction of the Company’s valuation allowance with respect to its deferred tax assets. The reduction of the valuation allowance was due to the Company’s pretax earnings in the first quarter as well as a change in the Company’s ability to utilize certain deferred tax liabilities in the realization of its deferred tax assets. As of March 31, 2012, the valuation allowance was $7.7 million.

As a consequence of our recent initial public offering, we believe the Company has experienced a change of control within the meaning of Section 382 of the Internal Revenue Code of 1986, as amended. Section 382 substantially limits the ability of a corporate taxpayer to use realized built-in losses and net operating loss carryforwards incurred prior to the change of control against income earned after a change of control. Based on our current analysis of the impact of the change of control on our ability to utilize our net deferred tax assets existing as of the change of control date, we do not anticipate that the change of control has resulted in a material loss of deferred tax benefits.

Capital

On February 15, 2012, the Company completed its initial public offering of 4,361,816 shares of common stock for an initial offering price of $22.00 per share, yielding net proceeds to HomeStreet of $88.7 million. On February 24, 2012, $55.0 million of this amount was contributed to the Bank.
                      Mar. 31,         Dec. 31,
  2012 2011
 
Regulatory capital ratios for the Bank:
 
Total risk-based capital (to risk-weighted assets) 15.5% 11.2%
Tier 1 risk-based capital (to risk-weighted assets) 14.2% 9.9%
Tier 1 leverage capital (to average assets) 9.3% 6.0%
 

On April 26, 2012, the Company contributed an additional $10.0 million of capital to the Bank to support increased lending activities and balance sheet growth. This amount is not reflected in the ratios above.

Conference Call

HomeStreet, Inc. management will discuss the first quarter 2012 results on a conference call scheduled for April 30, 2012 at 10:00 a.m. Pacific Time (1:00 p.m. Eastern Time). Interested parties may join the call by dialing 1-877-317-6789 shortly before 10:00 a.m. Pacific Time. A replay of the conference call will be available beginning approximately one hour after the conference call by dialing 1-877-344-7529 and entering pass code 10012608. The replay will also be available online at http://ir.homestreet.com.

About HomeStreet, Inc.

HomeStreet, Inc. (NASDAQ:HMST) is a diversified financial services company headquartered in Seattle, Washington, and the bank holding company for HomeStreet Bank, a state-chartered, FDIC-insured savings bank. HomeStreet Bank offers consumer and business banking, investment and insurance products and services in Washington, Oregon, Idaho and Hawaii. For more information, visit http://ir.homestreet.com.

Forward-Looking Statements

This report to shareholders contains forward-looking statements concerning HomeStreet, Inc. and the Bank and their operations, performance, financial conditions and likelihood of success. All statements other than statements of historical fact are forward-looking statements. Forward-looking statements are based on many beliefs, assumptions, estimates and expectations of our future performance, taking into account information currently available to us, and include statements about the competitiveness of the banking industry. When used in this press release, the words “anticipate,” “believe,” “could,” “estimate,” “expect,” “intend,” “may,” “plan,” “potential,” “should,” “will” and “would” and similar expressions (or the negative of these terms) generally identify forward-looking statements. Such statements involve inherent risks and uncertainties, many of which are difficult to predict and are generally beyond the control of the Company. Forward-looking statements speak only as of the date made, and we do not undertake to update them to reflect changes or events that occur after that date.

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 normalize our banking operations, 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 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).

Information contained herein, other than information at December 31, 2011 and for the twelve months then ended, is unaudited.

 
HomeStreet, Inc. and Subsidiaries
Five Quarter Summary Financial Data
                               
    Quarter ended
Mar. 31,     Dec. 31,     Sept. 30,     June 30,     Mar. 31,
(in thousands, except share data)     2012     2011     2011     2011     2011  
 
Income Statement Data (for the period ended):
Net interest income $ 12,905 $ 12,866 $ 11,970 $ 11,914 $ 11,590
Provision for loan losses - - 1,000 2,300 -
Noninterest income 39,501 27,473 37,268 18,916 14,465
Noninterest expense   35,077     33,915     32,618     27,263     33,461  
Net income (loss) before taxes 17,329 6,424 15,620 1,267 (7,406 )
Income taxes   (1,721 )   (602 )   362     (17 )   43  
Net income (loss) $ 19,050   $ 7,026   $ 15,258   $ 1,284   $ (7,449 )
Basic earnings per common share (1) $ 3.70 $ 2.60 $ 5.65 $ 0.48 $ (2.76 )
Diluted earnings per common share (1) $ 3.55 $ 2.42 $ 5.31 $ 0.45 $ (2.76 )
Common shares outstanding (1) 7,162,607 2,701,749 2,701,749 2,701,749 2,701,749
Weighted average common shares
Basic 5,146,283 2,701,749 2,701,749 2,701,749 2,701,749
Diluted 5,360,165 2,898,451 2,872,455 2,837,259 2,701,749
Shareholders' equity per share $ 26.70 $ 31.98 $ 29.73 $ 21.58 $ 18.96
Financial position (at period end):
Cash and cash equivalents $ 92,953 $ 263,302 $ 138,429 $ 108,175 $ 170,795
Investment securities available for sale 446,198 329,047 339,453 315,715 304,404
Loans held for sale 290,954 150,409 226,590 121,216 82,803
Loans held for investment, net 1,295,471 1,300,873 1,360,219 1,392,238 1,500,550
Mortgage servicing rights 86,801 77,281 74,083 94,320 95,952
Other real estate owned 31,640 38,572 64,368 102,697 98,863
Total assets 2,367,497 2,264,957 2,316,839 2,233,505 2,342,639
Deposits 2,000,633 2,009,755 2,056,977 1,993,655 2,066,842
FHLB advances 57,919 57,919 67,919 77,919 114,544
Shareholders' equity 191,230 86,407 80,336 58,311 51,214
Financial position (averages):
Investment securities available for sale $ 381,129 $ 338,933 $ 272,294 $ 308,049 $ 141,309
Loans held for investment 1,338,552 1,385,037 1,427,763 1,512,308 1,589,182
Total interest earning assets 2,090,180 2,078,506 2,019,243 2,037,468 2,145,093
Total interest bearing deposits 1,705,371 1,745,493 1,787,388 1,837,119 1,889,742
FHLB advances 57,919 59,169 72,267 85,097 159,829
Total interest bearing liabilities 1,825,146 1,866,519 1,921,512 1,984,073 2,114,062
Shareholders' equity 140,784 84,038 73,499 57,246 58,130
Financial performance:
Return on average common shareholders' equity (2) 54.1 % 33.4 % 83.0 % 9.0 % (51.3 )%
Return on average assets 3.3 % 1.2 % 2.7 % 0.2 % (1.3 )%
Net interest margin (3) 2.53 % 2.50 % 2.38 % 2.35 % 2.17 %
Efficiency ratio (4) 66.93 % 84.07 % 66.25 % 88.43 % 128.42 %
Operating efficiency ratio (5) 62.12 % 74.78 % 47.74 % 70.05 % 83.31 %
Credit quality:
Allowance for loan losses $ 35,204 $ 42,689 $ 53,167 $ 59,692 $ 62,156
Allowance for loan losses/total loans 2.64 % 3.18 % 3.76 % 4.11 % 3.98 %
Allowance for loan losses/nonaccrual loans 46.58 % 55.81 % 55.91 % 65.66 % 50.08 %
Total classified assets $ 208,792 $ 188,167 $ 225,022 $ 276,476 $ 298,742
Classified assets/total assets 8.82 % 8.31 % 9.71 % 12.38 % 12.75 %
Total nonaccrual loans (6) $ 75,575 $ 76,484 $ 95,094 $ 90,912 $ 124,118
Nonaccrual loans/total loans 5.66 % 5.69 % 6.73 % 6.26 % 7.94 %
Total nonperforming assets $ 107,215 $ 115,056 $ 159,462 $ 193,609 $ 222,981
Nonperforming assets/total assets 4.53 % 5.08 % 6.88 % 8.67 % 9.52 %
Net charge-offs $ 7,398 $ 10,586 $ 7,673 $ 4,707 $ 2,100
Regulatory capital ratios for the Bank:
Tier 1 capital to total assets (leverage) 9.29 % 6.04 % 5.64 % 4.86 % 4.49 %
Tier 1 risk-based capital 14.18 % 9.88 % 8.51 % 7.38 % 6.99 %
Total risk-based capital 15.45 % 11.15 % 9.79 % 8.66 % 8.28 %
 
 

(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 (loss) 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) 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
Mar. 31, Dec. 31, Sept. 30, June 30, Mar. 31,
  2012     2011     2011     2011     2011  
Efficiency ratio 66.93 % 84.07 % 66.25 % 88.43 % 128.42 %
Less impact of OREO expenses   4.81 %   9.29 %   18.51 %   18.38 %   45.11 %
Operating efficiency ratio 62.12 % 74.78 % 47.74 % 70.05 % 83.31 %
 

(6) Generally, loans are placed on nonaccrual status when they are 90 or more days past due.
 
                   
HomeStreet, Inc. and Subsidiaries
Consolidated Statements of Operations
                           
Quarter ended Mar. 31, %
(in thousands, except share data)   2012     2011   Change
 
Interest income:
Loans $ 16,553 $ 18,668 (11 )
Investment securities available for sale 2,238 1,858 20
Other   137     84   63
18,928 20,610 (8 )
Interest expense:
Deposits 4,879 7,041 (31 )
Federal Home Loan Bank advances 675 1,308 (48 )
Long-term debt 465 671 (31 )
Other   4     -   NM
  6,023     9,020   (33 )
Net interest income 12,905 11,590 11
Provision for credit losses   -     -   -
Net interest income after provision for credit losses 12,905 11,590 11
 
Noninterest income:
Net gain on mortgage loan origination and sales activities 28,900 4,944 485
Mortgage servicing 7,873 5,848 35
Income (loss) from Windermere Mortgage Services, Inc. 1,166 (25 ) NM
Gain on debt extinguishment - 2,000 NM
Depositor and other retail banking fees 735 740 (1 )
Insurance commissions 182 363 (50 )
Gain on securities available for sale 41 - NM
Other   604     595   2
  39,501     14,465   173
 
Noninterest expense:
Salaries and related costs 21,351 12,139 76
General and administrative 5,663 3,601 57
Legal 435 904 (52 )
Consulting 355 166 114
Federal Deposit Insurance Corporation assessments 1,240 1,749 (29 )
Occupancy 1,790 1,668 7
Information services 1,723 1,480 16
Other real estate owned expense   2,520     11,754   (79 )
35,077 33,461 5
 
Income (loss) before income tax expense 17,329 (7,406 ) NM
 
Income tax (benefit) expense   (1,721 )   43   NM
NET INCOME (LOSS) $ 19,050   $ (7,449 ) NM
 
 
Basic income (loss) per share $ 3.70 $ (2.76 ) NM
Diluted income (loss) per share $ 3.55 $ (2.76 ) NM
Basic weighted average number of shares outstanding 5,146,283 2,701,749 90
Diluted weighted average number of shares outstanding 5,360,165 2,701,749 98
 
                       
HomeStreet, Inc. and Subsidiaries
Five Quarter Consolidated Statements of Operations
                                   
Quarter ended
Mar. 31, Dec. 31, Sept. 30, June 30, Mar. 31,
(in thousands, except share data)   2012     2011     2011   2011     2011  
 
Interest income:
Loans $ 16,553 $ 17,433 $ 17,593 $ 17,947 $ 18,668
Investment securities available for sale 2,238 1,792 1,422 1,848 1,858
Other   137     203     117   73     84  
18,928 19,428 19,132 19,868 20,610
Interest expense:
Deposits 4,879 5,388 5,848 6,538 7,041
Federal Home Loan Bank advances 675 699 855 959 1,308
Long-term debt 465 459 458 457 671
Other   4     16     1   -     -  
  6,023     6,562     7,162   7,954     9,020  
Net interest income 12,905 12,866 11,970 11,914 11,590
Provision for credit losses   -     -     1,000   2,300     -  
Net interest income after provision for credit losses 12,905 12,866 10,970 9,614 11,590
 
Noninterest income:
Net gain on mortgage loan origination and sales activities 28,900 18,931 16,055 9,455 4,944
Mortgage servicing 7,873 5,963 18,532 7,713 5,848
Income from Windermere Mortgage Services, Inc. 1,166 739 902 503 (25 )
Gain on debt extinguishment - - - - 2,000
Depositor and other retail banking fees 735 748 778 795 740
Insurance commissions 182 186 103 258 363
Gain on securities available for sale 41 459 642 1 -
Other   604     447     256   191     595  
  39,501     27,473     37,268   18,916     14,465  
 
Noninterest expense:
Salaries and related costs 21,351 16,462 13,217 11,700 12,139
General and administrative 5,663 6,194 4,599 4,859 3,601
Legal 435 1,075 983 399 904
Consulting 355 2,011 270 197 166
Federal Deposit Insurance Corporation assessments 1,240 1,256 1,264 1,265 1,749
Occupancy 1,790 1,733 1,663 1,700 1,668
Information services 1,723 1,436 1,509 1,477 1,480
Other real estate owned expense   2,520     3,748     9,113   5,666     11,754  
35,077 33,915 32,618 27,263 33,461
 
Income (loss) before income tax expense 17,329 6,424 15,620 1,267 (7,406 )
 
Income tax (benefit) expense   (1,721 )   (602 )   362   (17 )   43  
NET INCOME (LOSS) $ 19,050   $ 7,026   $ 15,258 $ 1,284   $ (7,449 )
 
 
Basic income (loss) per share $ 3.70 $ 2.60 $ 5.65 $ 0.48 $ (2.76 )
Diluted income (loss) per share $ 3.55 $ 2.42 $ 5.31 $ 0.45 $ (2.76 )
Basic weighted average number of shares outstanding 5,146,283 2,701,749 2,701,749 2,701,749 2,701,749
Diluted weighted average number of shares outstanding 5,360,165 2,898,585 2,872,716 2,837,691 2,701,749
 
                               
HomeStreet, Inc. and Subsidiaries
Average Balances, Yields and Rates Paid (Taxable-equivalent basis)
 
 
 
                                 
Q1 2012 Q1 2011
 
Average Average Average Average
(in thousands) Balance Interest Yield/Cost Balance Interest Yield/Cost
 
 
Assets:
Interest-earning assets (1):
Cash & cash equivalents $ 205,445 $ 134 0.26 % $ 141,309 $ 82 0.23 %
Investment securities 381,129 2,489 2.61 % 308,015 1,891 2.46 %
Loans held for sale 165,054 1,614 3.91 % 106,587 1,131 4.24 %
Loans held for investment   1,338,552   14,977 4.49 %   1,589,182   17,577 4.45 %
Total interest-earning assets (2) 2,090,180 19,214 3.68 % 2,145,093 20,681 3.87 %
Noninterest-earning assets (3)   221,341   239,126
Total assets $ 2,311,521 $ 2,384,219
 
Liabilities and Shareholders' Equity:
Deposits:
Interest-bearing demand accounts $ 138,124 115 0.33 % $ 122,175 156 0.52 %
Savings accounts 73,724 83 0.45 % 52,646 90 0.69 %
Money market accounts 525,191 719 0.55 % 420,200 776 0.75 %
Certificate accounts   968,332   3,961 1.64 %   1,294,721   6,019 1.89 %
Deposits 1,705,371 4,878 1.15 % 1,889,742 7,041 1.51 %
FHLB advances 57,919 675 4.67 % 159,829 1,308 3.31 %
Long-term debt 61,857 465 3.01 % 64,491 671 4.16 %
Other borrowings   -   4 -   -   - -
Total interest-bearing liabilities (2) 1,825,147 6,022 1.33 % 2,114,062 9,020 1.73 %
Other noninterest-bearing liabilities   345,590   212,027
Total liabilities   2,170,737   2,326,089
Shareholders' equity   140,784   58,130
Total liabilities and shareholders' equity $ 2,311,521 $ 2,384,219
Net interest income (4) $ 13,192 $ 11,661
Net interest spread 2.35 % 2.14 %
Impact of noninterest-bearing sources 0.18 % 0.03 %
Net interest margin 2.53 % 2.17 %
 
 
(1) The daily average balances of nonaccrual assets and related income, if any, are included in their respective categories.
(2) Average interest-earning assets and interest-bearing liabilities were computed using daily average balances.
(3) Includes loans balances that have been foreclosed and are now reclassified to other real estate owned.

(4) Includes taxable-equivalent adjustments, which is a non-GAAP measure, primarily related to tax-exempt income on certain loans and securities of $287,000 and $71,000 for the quarters ended March 31, 2012 and March 31, 2011, respectively. The federal statutory tax rate was 35% for the periods presented.

 
 
HomeStreet, Inc. and Subsidiaries
Consolidated Statements of Financial Condition
                             
          Mar. 31,       Dec. 31,       %
(in thousands, except share data)           2012       2011       Change
Assets

Cash and cash equivalents (including interest-bearing instruments of $73,492 and $246,113)
$ 92,953 $ 263,302 (65 )
Investment securities available for sale 446,198 329,047 36

Loans held for sale (includes $286,692 and $130,546 carried at fair value)
290,954 150,409 93

Loans held for investment (net of allowance for loan losses of $35,204 and $42,689)
1,295,471 1,300,873 -

Mortgage servicing rights (includes $79,381 and $70,169 carried at fair value)
86,801 77,281 12
Accounts receivable and other assets 70,334 53,856 31
Accrued interest receivable 6,899 6,712 3
Other real estate owned 31,640 38,572 (18 )
Income taxes 2,186 1,309 67
Federal Home Loan Bank stock, at cost 37,027 37,027 -
Premises and equipment, net   7,034   6,569 7
Total assets $ 2,367,497 $ 2,264,957 5
 
Liabilities and Shareholders' Equity
Liabilities:
Deposits $ 2,000,633 $ 2,009,755 -
Federal Home Loan Bank advances 57,919 57,919 -
Accounts payable and accrued expenses 55,858 49,019 14
Long-term debt   61,857   61,857 -
Total liabilities   2,176,267   2,178,550 -
 
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, 7,162,607 shares and 2,701,749 shares 511 511 -
Additional paid-in capital 86,755 31 279,755
Retained earnings 100,796 81,746 23
Accumulated other comprehensive income   3,168   4,119 (23 )
Total shareholders' equity   191,230   86,407 121
Total liabilities and shareholders' equity $ 2,367,497 $ 2,264,957 5
 
 
HomeStreet, Inc. and Subsidiaries
Five Quarter Consolidated Statements of Financial Condition
                           
                                       
Mar. 31, Dec. 31, Sept. 30, June 30, Mar. 31,
(in thousands, except share data)             2012     2011 2011   2011     2011  
 
Assets
Cash and cash equivalents $ 92,953 $ 263,302 $ 138,429 $ 108,175 $ 170,795
Investment securities available for sale 446,198 329,047 339,453 315,715 304,404
Loans held for sale 290,954 150,409 226,590 121,216 82,803
Loans held for investment 1,295,471 1,300,873 1,360,219 1,392,238 1,500,550
Mortgage servicing rights 86,801 77,281 74,083 94,320 95,952
Accounts receivable and other assets 70,334 53,856 56,746 42,177 30,967
Accrued interest receivable 6,899 6,712 6,523 6,322 7,059
Other real estate owned 31,640 38,572 64,368 102,697 98,863
Income taxes 2,186 1,309 6,786 7,161 7,266
Federal Home Loan Bank stock, at cost 37,027 37,027 37,027 37,027 37,027
Premises and equipment, net   7,034   6,569   6,615   6,457     6,953  
Total assets $ 2,367,497 $ 2,264,957 $ 2,316,839 $ 2,233,505   $ 2,342,639  
 
Liabilities and Shareholders' Equity
Liabilities:
Deposits $ 2,000,633 $ 2,009,755 $ 2,056,977 $ 1,993,655 $ 2,066,842
Federal Home Loan Bank advances 57,919 57,919 67,919 77,919 114,544
Accounts payable and accrued expenses 55,858 49,019 49,750 41,763 48,182
Long-term debt   61,857   61,857   61,857   61,857     61,857  
Total liabilities   2,176,267   2,178,550   2,236,503   2,175,194     2,291,425  
 
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 86,755 31 28 24 20
Retained earnings 100,796 81,746 74,720 59,462 58,178
Accumulated other comprehensive income (loss)   3,168   4,119   5,077   (1,686 )   (7,495 )
Total shareholders' equity   191,230   86,407   80,336   58,311     51,214  
Total liabilities and shareholders' equity $ 2,367,497 $ 2,264,957 $ 2,316,839 $ 2,233,505   $ 2,342,639  
 
                       
HomeStreet, Inc. and Subsidiaries
Five Quarter Securities Available for Sale
 
                                   

Mar. 31,
Dec. 31, Sept. 30, June 30, Mar. 31,
(in thousands, except for duration data) 2012 2011 2011 2011 2011
 
Mortgage backed:
Residential $ 40,575 $ - $ - $ 12,003 $ 4,364
Commercial 14,410 14,483 8,393 - -
Municipal bonds 79,051 49,584 1,059 5,722 5,832
Collateralized mortgage obligations:
Residential 245,889 223,390 251,856 221,732 217,938
Commercial 10,019 10,070 10,174 - -
Agency 25,007 - - - -
US Treasury   31,247   31,520   67,971   76,258   76,270
$ 446,198 $ 329,047 $ 339,453 $ 315,715 $ 304,404
 
Weighted average duration in years 5.1 4.4 3.9 3.9 4.2
 
                     
HomeStreet, Inc. and Subsidiaries
Five Quarter Loans Held for Investment
 
                                 
Mar. 31, Dec. 31, Sept. 30, June 30, Mar. 31,
(in thousands)   2012     2011     2011     2011     2011  
 
Consumer loans
Single family residential $ 506,103 $ 496,934 $ 496,741 $ 502,935 $ 522,904
Home equity   152,924     158,936     167,453     172,205     175,896  
659,027 655,870 664,194 675,140 698,800
Commercial loans
Commercial real estate 391,727 402,139 407,891 410,370 414,343
Multifamily residential 56,328 56,379 58,972 59,092 102,450
Construction/land development 158,552 173,405 213,001 234,062 271,676
Commercial business   68,932     59,831     73,559     77,493     80,057  
675,539 691,754 753,423 781,017 868,526
 
1,334,566 1,347,624 1,417,617 1,456,157 1,567,326
Net deferred loan fees and discounts   (3,891 )   (4,062 )   (4,231 )   (4,227 )   (4,620 )
1,330,675 1,343,562 1,413,386 1,451,930 1,562,706
Allowance for loan losses   (35,204 )   (42,689 )   (53,167 )   (59,692 )   (62,156 )
$ 1,295,471   $ 1,300,873   $ 1,360,219   $ 1,392,238   $ 1,500,550  
 
                       
HomeStreet, Inc. and Subsidiaries
Five Quarter Credit Quality
 
 
Allowance for Credit Losses (roll-forward)
          Quarter ended
 
Mar. 31, Dec. 31, Sept. 30, June 30, Mar. 31,
(in thousands)   2012     2011     2011     2011     2011  
 
Allowance for Credit Losses (roll-forward):
Beginning balance $ 42,800 $ 53,386 $ 60,059 $ 62,466 $ 64,566
Provision for loan losses - - 1,000 2,300 -
(Charge-offs), net of recoveries   (7,398 )   (10,586 )   (7,673 )   (4,707 )   (2,100 )
Ending balance $ 35,402   $ 42,800   $ 53,386   $ 60,059   $ 62,466  
 
Allowance as a % of loans held for investment 2.64 % 3.18 % 3.76 % 4.11 % 3.98 %
 
                           
Delinquencies
                                         
90 days or
30-59 days 60-89 days more Total past Total

(in thousands)
past due past due past due (1)   due Current loans
 
March 31, 2012
Consumer loans
Single family residential $ 13,959 $ 4,939 $ 51,388 $ 70,286 $ 435,817 $ 506,103
Home equity   1,422   759   1,853   4,034   148,890   152,924
15,381 5,698 53,241 74,320 584,707 659,027
Commercial loans
Commercial real estate - - 9,222 9,222 382,505 391,727
Multifamily residential - - - - 56,328 56,328
Construction/land development 4,062 9,629 52,549 66,240 92,312 158,552
Commercial business   179   -   502   681   68,251   68,932
  4,241   9,629   62,273   76,143   599,396   675,539
$ 19,622 $ 15,327 $ 115,514 $ 150,463 $ 1,184,103 $ 1,334,566
 
December 31, 2011
Consumer loans
Single family residential $ 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
 
 

(1) Includes $37.1 million and $35.8 million of loans past due and still accruing at March 31, 2012 and December 31, 2011 respectively, whose repayments are insured by the FHA or guaranteed by the VA.

 
                       
HomeStreet, Inc. and Subsidiaries
Five Quarter Nonperforming Assets
 

Nonperforming assets (NPAs) roll-forward
          Quarter ended
Mar. 31, Dec. 31, Sept. 30, June 30, Mar. 31,
(in thousands)   2012     2011     2011     2011     2011  
 
Beginning balance $ 115,056 $ 159,462 $ 193,609 $ 222,981 $ 283,665
 
Additions to NPAs 18,776 7,251 20,900 14,246 28,875
 
Charge-offs (7,398 ) (10,586 ) (7,673 ) (4,707 ) (2,100 )
OREO sales (8,878 ) (26,037 ) (33,814 ) (17,590 ) (67,014 )
OREO writedowns (2,754 ) (3,564 ) (8,217 ) (4,739 ) (10,559 )
Principal paydown, payoff advances (1,321 ) (3,871 ) (2,437 ) (6,024 ) (5,599 )
Transferred back to accrual status   (6,266 )   (7,599 )   (2,906 )   (10,558 )   (4,287 )
Subtractions from NPAs $ (26,617 ) $ (51,657 ) $ (55,047 ) $ (43,618 ) $ (89,559 )
 
Net outflows   (7,841 )   (44,406 )   (34,147 )   (29,372 )   (60,684 )
Ending balance $ 107,215   $ 115,056   $ 159,462   $ 193,609   $ 222,981  
 
               
Nonperforming assets by loan class
          Quarter ended
        Mar. 31, Dec. 31, Sept. 30, June 30, Mar. 31,
(in thousands)   2012     2011     2011     2011     2011  
 
Nonaccrual loans:
Consumer loans
Single family residential $ 14,290 $ 12,104 $ 15,469 $ 16,229 $ 14,732
Home equity   1,853     2,464     2,772     2,620     3,103  
16,143 14,568 18,241 18,849 17,835
Commercial loans
Commercial real estate 9,222 10,184 10,959 10,081 19,815
Multifamily residential - 2,394 5,196 5,265 5,302
Construction/land development 49,708 48,387 58,705 53,955 77,811
Commercial business   502     951     1,993     2,762     3,355  
  59,432     61,916     76,853     72,063     106,283  
$ 75,575   $ 76,484   $ 95,094   $ 90,912   $ 124,118  
 
Allowance as a % of nonaccrual loans 46.58 % 55.81 % 55.91 % 65.66 % 50.08 %
 
Other real estate owned:
Consumer loans
Single family residential $ 3,243 $ 6,600 $ 10,419 $ 14,287 $ 14,897
Home equity   -     -     -     229     233  
3,243 6,600 10,419 14,516 15,130
Commercial loans
Commercial real estate 284 2,055 2,152 2,152 8,045
Multifamily residential - - - - -
Construction/land development 28,113 29,917 51,797 86,029 75,688
Commercial business   -     -     -     -     -  
  28,397     31,972     53,949     88,181     83,733  
$ 31,640   $ 38,572   $ 64,368   $ 102,697   $ 98,863  
 
Nonperforming assets
Consumer loans
Single family residential $ 17,533 $ 18,704 $ 25,888 $ 30,516 $ 29,629
Home equity   1,853     2,464     2,772     2,849     3,336  
19,386 21,168 28,660 33,365 32,965
Commercial loans
Commercial real estate 9,506 12,239 13,111 12,233 27,860
Multifamily residential - 2,394 5,196 5,265 5,302
Construction/land development 77,821 78,304 110,502 139,984 153,499
Commercial business   502     951     1,993     2,762     3,355  
  87,829     93,888     130,802     160,244     190,016  
$ 107,215   $ 115,056   $ 159,462   $ 193,609   $ 222,981  
 
Nonperforming assets to total assets 4.53 % 5.08 % 6.88 % 8.67 % 9.52 %
 
                       
HomeStreet, Inc. and Subsidiaries
Five Quarter Mortgage Servicing
 
Mortgage Servicing Income                                  
Quarter ended
Mar. 31, Dec. 31, Sept. 30, June 30, Mar. 31,
(in thousands)   2012     2011     2011     2011     2011  
 
Servicing income, net:
Servicing fees and other $ 6,436 $ 6,518 $ 6,793 $ 6,736 $ 6,078
Changes in fair value, single family mortgage servicing rights:
Due to changes in model or assumptions (1) 6,220 (3,571 ) (20,068 ) (7,057 ) 5,543
Other changes in fair value (2) (3,778 ) (4,515 ) (6,073 ) (395 ) (3,864 )
Amortization (491 ) (366 ) (455 ) (345 ) (321 )

Net gain (loss) from derivatives economically hedging single family MSR
  (514 )   7,897     38,335     8,774     (1,588 )
Mortgage servicing $ 7,873   $ 5,963   $ 18,532   $ 7,713   $ 5,848  
 
 

(1) Principally reflects changes in model assumptions and prepayment speed assumptions, which are primarily affected by changes in interest rates.

(2) Represents changes due to collection/realization of expected cash flows and curtailments over time.
 
                       
Loans Serviced for Others
Quarter ended
Mar. 31, Dec. 31, Sept. 30, June 30, Mar. 31,
(in thousands)   2012   2011   2011   2011   2011
 
Single family residential
FNMA/GNMA/FHLMC MBS $ 6,530,578 $ 6,464,815 $ 6,217,086 $ 6,165,052 $ 6,087,770
Other   416,700   420,470   432,460   437,748   433,514
$ 6,947,278 $ 6,885,285 $ 6,649,546 $ 6,602,800 $ 6,521,284
Commercial
Multifamily 766,433 758,535 770,401 799,332 784,445
Other   59,370   56,785   57,151   57,690   58,150
  825,803   815,320   827,552   857,022   842,595
Total loans serviced for others $ 7,773,081 $ 7,700,605 $ 7,477,098 $ 7,459,822 $ 7,363,879
 
                       
Single Family Capitalized Mortgage Servicing Rights
Quarter ended
Mar. 31, Dec. 31, Sept. 30, June 30, Mar. 31,
(in thousands)   2012     2011     2011     2011     2011  
 
Beginning balance $ 70,169 $ 67,471 $ 87,712 $ 89,947 $ 81,197
Originations 6,723 10,759 5,873 5,187 7,067
Purchases 47 25 27 30 4
Changes in fair value:
Due to changes in model assumptions (1) 6,220 (3,571 ) (20,068 ) (7,057 ) 5,543
Other changes in fair value (2)   (3,778 )   (4,515 )   (6,073 )   (395 )   (3,864 )
Ending balance $ 79,381   $ 70,169   $ 67,471   $ 87,712   $ 89,947  
 
Ratio of capitalized MSRs to related loans serviced for others 1.14 % 1.02 % 1.01 % 1.33 % 1.38 %
Ratio of capitalized value to weighted average servicing fee

330.00
%

291.00
%

292.00
%

386.00
%

409.00
%
                                   
(1) Principally reflects changes in model assumptions or prepayment speed assumptions, which are primarily affected by changes in mortgage interest rates.
(2) Represents changes due to collection/realization of expected future cash flows and curtailments over time.
 
                   
Commercial Multifamily Capitalized Mortgage Servicing Rights
Quarter ended
Mar. 31,     Dec. 31, Sept. 30, June 30, Mar. 31,
(in thousands)   2012     2011     2011     2011     2011  
 
Beginning balance $ 7,112 $ 6,612 $ 6,608 $ 6,005 $ 6,035
Originations 799 866 459 948 291
Amortization   (491 )   (366 )   (455 )   (345 )   (321 )
Ending balance $ 7,420   $ 7,112   $ 6,612   $ 6,608   $ 6,005  
 
Ratio of capitalized MSRs to related loans serviced for others 0.90 % 0.87 % 0.80 % 0.77 % 0.71 %
Ratio of capitalized value to weighted average servicing fee

241.00
%

242.00
%

227.00
%

222.00
%

206.00
%
 
                 
Mortgage Banking Activity
                                   
Quarter ended
Mar. 31, Dec. 31, Sept. 30, June 30, Mar. 31,
(in thousands) 2012 2011 2011 2011   2011  
 
Single Family:
Single family mortgage originations (1) $ 712,302 $ 624,111 $ 478,025 $ 323,906 $ 275,568
 
Single family mortgage interest rate lock commitments 920,240 543,164 630,919 344,836 253,698
 
Single family mortgage loans sold 534,310 710,706 370,250 272,090 386,174
 
 
Net gain on single family mortgage loan origination and sales activities:
Mortgage servicing rights originated $ 4,442 $ 3,295 $ 7,195 $ 4,511 $ 2,823
Loan origination and funding fees 7,560 6,819 3,780 2,933 2,383
Secondary marketing gains   15,736   7,632   4,580   1,044   (608 )
$ 27,738 $ 17,746 $ 15,555 $ 8,488 $ 4,598  
 
Multifamily:
Multifamily mortgage originations $ 15,713 $ 49,071 $ 26,125 $ 49,070 $ 1,410
 
Multifamily mortgage loans sold 31,423 33,461 25,144 47,010 13,862
 
 
Net gain on multifamily mortgage loan origination and sales activities:   1,162   1,185   500   967   346  
 
 
Total net gain on mortgage loan origination and sales activities $ 28,900 $ 18,931 $ 16,055 $ 9,455 $ 4,944  
 
(1) Represents single family mortgage originations designated for sale during each respective period.
 
                       
HomeStreet, Inc. and Subsidiaries
Five Quarter Deposits
 
          Quarter ended
Mar. 31, Dec. 31, Sept. 30, June 30, Mar. 31,
(in thousands)   2012     2011     2011     2011     2011  
 
Noninterest bearing accounts $ 316,268 $ 270,666 $ 287,862 $ 184,412 $ 180,441
Interest bearing deposits:
NOW accounts 154,670 138,936 145,668 122,995 127,529
Statement savings accounts due on demand 79,438 66,898 59,974 57,685 52,743
Money market accounts due on demand 559,563 499,457 469,289 445,081 427,698
Time, through $250,000 834,912 966,536 1,026,045 1,104,331 1,193,669
Time, more than $250,000   55,782     67,262     68,139     79,151     84,762  
Total interest bearing deposits 1,684,365 1,739,089 1,769,115 1,809,243 1,886,401
         
Total deposits $ 2,000,633   $ 2,009,755   $ 2,056,977   $ 1,993,655   $ 2,066,842  
 
Percent of total deposits:
 
Noninterest bearing accounts 15.8 % 13.5 % 14.0 % 9.2 % 8.7 %
Interest bearing deposits:
NOW accounts 7.7 6.9 7.1 6.2 6.2
Statement savings accounts due on demand 4.0 3.3 2.9 2.9 2.6
Money market accounts due on demand 28.0 24.9 22.8 22.3 20.7
Time, through $250,000 41.7 48.1 49.9 55.4 57.7
Time, more than $250,000   2.8     3.3     3.3     4.0     4.1  
Total interest bearing deposits 84.2 % 86.5 % 86.0 % 90.8 % 91.3 %
         
Total deposits   100.0 %   100.0 %   100.0 %   100.0 %   100.0 %

Copyright Business Wire 2010

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