0001518715false00015187152023-10-302023-10-30

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
FORM 8-K
 
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934
Date of Report (Date of Earliest Event Reported): October 30, 2023
 
HOMESTREET, INC.
(Exact name of registrant as specified in its charter)
 
Washington 001-35424 91-0186600
(State or other jurisdiction
of incorporation)		 (Commission
File Number)		 (IRS Employer
Identification No.)
601 Union Street, Ste. 2000, Seattle, WA 98101
(Address of principal executive offices) (Zip Code)
(206) 623-3050
(Registrant’s telephone number, including area code)
 
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
☐Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
☐Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
☐Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
☐Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common Stock, No Par ValueHMSTNasdaq Global Select Market
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Act or Rule 12b-2 of the Exchange Act.
☐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.



Item 2.02Results of Operations and Financial Condition

On October 30, 2023, HomeStreet, Inc. issued a press release reporting results of operations for the third quarter of 2023. A copy of the earnings release is attached as Exhibit 99.1. A copy of the press release reporting summary results of operations is attached as Exhibit 99.2. This information shall not be deemed to be "filed" for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of that section, and is not incorporated by reference into any filing under the Securities Act of 1933, as amended, or Securities Exchange Act of 1934, as amended.






Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

Date: October 30, 2023
HomeStreet, Inc.
By: /s/ John M. Michel
 John M. Michel
 Executive Vice President and Chief Financial Officer
 





image2.jpg
HomeStreet Reports Third Quarter 2023 Results
SEATTLE – October 30, 2023 – (BUSINESS WIRE) – HomeStreet, Inc. (Nasdaq: HMST) (including its consolidated subsidiaries, the "Company", "HomeStreet" or "we"), the parent company of HomeStreet Bank, today announced the financial results for the quarter ended September 30, 2023. As we present non-GAAP measures in this release, the reader should refer to the non-GAAP reconciliations set forth below under the section “Non-GAAP Financial Measures.”


Operating Results
                  Third quarter 2023 compared to second quarter 2023
Reported Results:
•Net income (loss): $2.3 million compared to $(31.4) million
•Earnings (loss) per fully diluted share: $0.12 compared to $(1.67)
•Return on Average Equity ("ROAE"): 1.7% compared to (21.7)%
•Return on Average Assets ("ROAA"): 0.10% compared to (1.32)%
•Net interest margin: 1.74% compared to 1.93%
•Efficiency ratio: 98.3% compared to 93.7%
Core Results:(1)
•Net income: $2.3 million compared to $3.2 million
•Earnings per fully diluted share: $0.12 compared to $0.17
•Return on Average Tangible Equity ("ROATE"): 2.2% compared to 2.9%
•Return on Average Assets ("ROAA"): 0.10% compared to 0.13%
                                                                                                
(1) Core net income, return on average tangible equity and core return on average assets are non-GAAP measures, for a reconciliation to the nearest comparable GAAP measure see "Non-GAAP financial measures in this earnings release.

“Our operating results for the quarter reflect the continuing adverse impact of the historically record velocity and magnitude of increases in short-term interest rates,” said Mark K. Mason HomeStreet’s Chairman of the Board, President, and Chief Executive Officer. “The high interest rate environment has significantly negatively impacted our net interest margin as well as loan volume in our residential and commercial mortgage banking businesses whose activity continues at historically low levels. To mitigate these challenges, we have reduced controllable expenses where possible, reduced staff to the minimum levels to transact current business volume in a safe and sound manner, raised new deposits through promotional products and focused our new loan origination activity primarily on floating rate products such as commercial loans, residential construction loans and home equity loans. Due to historically low levels of prepayments, our loan portfolio has remained stable even with our reduced level of originations.”


Financial Position
                    As of and for the quarter ended September 30, 2023
•Uninsured deposits were $535 million, or 8% of total deposits
•Excluding brokered deposits, total deposits decreased $137 million
•Loans held for investment ("LHFI"), remained stable
•Nonperforming assets to total assets: 0.42%
•Allowance for credit losses to LHFI: 0.55%
•Book value per share: $26.74
•Tangible book value per share: $26.18
1



“The deposit outflows we have experienced in 2023 were primarily due to depositors seeking higher yields and seasonal tax payments,” Mr. Mason stated. “With noninterest-bearing and low-cost deposits seeking higher yields, we have implemented a strategy to attract new deposits and retain existing deposits through promotional rate certificates of deposit accounts and money market accounts."

"Asset quality remained strong in the third quarter as total past due and nonaccrual loans and nonperforming assets all decreased in the quarter,” added Mr. Mason.” Today, we do not see any meaningful credit challenges on the horizon.”

Other
•Declared and paid a cash dividend of $0.10 per share in the third quarter



2

Conference Call
HomeStreet, Inc. (Nasdaq: HMST), the parent company of HomeStreet Bank, will conduct a quarterly earnings conference call on Tuesday October 31, 2023, at 1:00 p.m. ET. Mark K. Mason, CEO and President, and John M. Michel, CFO, will discuss third quarter 2023 results and provide an update on recent events. A question and answer session will follow the presentation. Shareholders, analysts and other interested parties may register in advance at the following URL https://www.netroadshow.com/events/login?show=b1fe096b&confId=55387 (or internationally at the following URL https://www.netroadshow.com/conferencing/global-numbers?confId=55387) or may join the call by dialing directly at 1-833-470-1428 shortly before 1:00 p.m. ET using Access Code 145364.

A rebroadcast will be available approximately one hour after the conference call by dialing 1-866-813-9403 and entering passcode 754585.

About HomeStreet

HomeStreet, Inc. (Nasdaq: HMST) is a diversified financial services company headquartered in Seattle, Washington, serving consumers and businesses in the Western United States and Hawaii. The Company is principally engaged in real estate lending, including mortgage banking activities, and commercial and consumer banking. Its principal subsidiary is HomeStreet Bank. HomeStreet Bank is the winner of the 2022 "Best Small Bank" in Washington Newsweek magazine award. Certain information about our business can be found on our investor relations web site, located at http://ir.homestreet.com. HomeStreet Bank is a member of the FDIC and is an Equal Housing Lender.


Contact:  Executive Vice President and Chief Financial Officer
HomeStreet, Inc.
  John Michel (206) 515-2291
  john.michel@homestreet.com
  http://ir.homestreet.com

3



HomeStreet, Inc. and Subsidiaries
Summary Financial Data
 For the Quarter Ended
(in thousands, except per share data and FTE data)September 30,
2023		June 30,
2023		March 31,
2023		December 31,
2022		September 30,
2022
Select Income Statement Data:
Net interest income$38,912 $43,476 $49,376 $55,687 $63,018 
Provision for credit losses(1,110)(369)593 3,798 — 
Noninterest income10,464 10,311 10,190 9,677 13,322 
Noninterest expense49,089 90,781 52,491 50,420 49,889 
Net income (loss):
Before income tax (benefit) expense1,397 (36,625)6,482 11,146 26,451 
Total2,295 (31,442)5,058 8,501 20,367 
Net income (loss) per share - diluted0.12 (1.67)0.27 0.45 1.08 
Core net income: (1)
Total2,295 3,180 5,058 8,501 20,367 
Core net income per share - diluted0.12 0.17 0.27 0.45 1.08 
Select Performance Ratios:
Return on average equity - annualized1.7 %(21.7)%3.5 %6.0 %13.4 %
Return on average tangible equity - annualized (1)
2.2 %2.9 %4.1 %6.4 %14.2 %
Return on average assets - annualized
Net income (loss)0.10 %(1.32)%0.22 %0.36 %0.91 %
Core (1)
0.10 %0.13 %0.22 %0.36 %0.91 %
Efficiency ratio (1)
98.3 %93.7 %87.2 %76.2 %68.4 %
Net interest margin1.74 %1.93 %2.23 %2.53 %3.00 %
Other data:
Full-time equivalent employees ("FTE")901 910 920 913 935 
(1)Core net income, return on average tangible equity, core return on average assets, and the efficiency ratio are non-GAAP financial measures. For a reconciliation of core net income, core return on average assets and return on average tangible equity to the nearest comparable GAAP financial measure and the computation of the efficiency ratio see “Non-GAAP Financial Measures” in this earnings release.





4



HomeStreet, Inc. and Subsidiaries
Summary Financial Data (continued)
 As of
(in thousands, except share and per share data)September 30,
2023		June 30,
2023		March 31,
2023		December 31,
2022		September 30,
2022
Select Balance Sheet Data:
Loans held for sale
$33,879 $31,873 $24,253 $17,327 $13,787 
Loans held for investment, net
7,400,501 7,395,151 7,444,882 7,384,820 7,175,881 
Allowance for credit losses ("ACL")
40,000 41,500 41,500 41,500 37,606 
Investment securities
1,294,634 1,397,051 1,477,004 1,400,212 1,311,941 
Total assets
9,458,751 9,501,475 9,858,889 9,364,760 9,072,887 
Deposits
6,745,551 6,670,033 7,056,603 7,451,919 6,610,231 
Borrowings
1,873,000 1,972,000 1,878,000 1,016,000 1,569,000 
Long-term debt
224,671 224,583 224,492 224,404 224,314 
Total shareholders' equity
502,487 527,623 574,994 562,147 552,789 
Other Data:
Book value per share
$26.74 $28.10 $30.64 $30.01 $29.53 
Tangible book value per share (1)
$26.18 $27.50 $27.87 $28.41 $27.92 
Total equity to total assets5.3 %5.6 %5.8 %6.0 %6.1 %
Tangible common equity to tangible assets (1)
5.2 %5.4 %5.3 %5.7 %5.8 %
Shares outstanding at end of period
18,794,03018,776,59718,767,81118,730,38018,717,557
Loans to deposit ratio
110.8 %112.0 %106.4 %99.9 %109.3 %
Credit Quality:
ACL to total loans (2)
0.55 %0.57 %0.56 %0.57 %0.53 %
ACL to nonaccrual loans 103.2 %104.3 %318.1 %412.7 %306.6 %
Nonaccrual loans to total loans 0.52 %0.54 %0.17 %0.14 %0.17 %
Nonperforming assets to total assets
0.42 %0.44 %0.15 %0.13 %0.15 %
Nonperforming assets
$39,749 $41,469 $14,886 $11,893 $13,991 
Regulatory Capital Ratios: (3)
Bank
Tier 1 leverage 8.51 %8.43 %8.47 %8.63 %9.15 %
Total risk-based capital
14.03 %13.49 %12.37 %12.59 %12.57 %
Common equity Tier 1 capital13.32 %12.78 %11.71 %11.92 %11.96 %
Company
Tier 1 leverage7.03 %6.93 %6.92 %7.25 %7.61 %
Total risk-based capital
12.67 %12.16 %11.16 %11.53 %11.43 %
Common equity Tier 1 capital9.55 %9.14 %8.36 %8.72 %8.66 %

(1)Tangible book value per share and tangible common equity to tangible assets are non-GAAP financial measures. For a reconciliation to the nearest comparable GAAP financial measure, see “Non-GAAP Financial Measures” in this earnings release.
(2)This ratio excludes balances insured by the FHA or guaranteed by the VA or SBA.
(3)Regulatory capital ratios at September 30, 2023 are preliminary.











5



HomeStreet, Inc. and Subsidiaries
Consolidated Balance Sheets
 
(in thousands, except share data)
September 30, 2023December 31, 2022
ASSETS
Cash and cash equivalents
$226,704 $72,828 
Investment securities
1,294,634 1,400,212 
Loans held for sale
33,879 17,327 
Loans held for investment ("LHFI") (net of allowance for credit losses of $40,000 and $41,500)
7,400,501 7,384,820 
Mortgage servicing rights
107,611 111,873 
Premises and equipment, net
54,114 51,172 
Other real estate owned
984 1,839 
Goodwill and other intangibles
10,429 29,980 
Other assets
329,895 294,709 
Total assets$9,458,751 $9,364,760 
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Deposits
$6,745,551 $7,451,919 
Borrowings
1,873,000 1,016,000 
Long-term debt
224,671 224,404 
Accounts payable and other liabilities
113,042 110,290 
Total liabilities8,956,264 8,802,613 
Shareholders' equity:
Common stock, no par value; 160,000,000 shares authorized
18,794,030 and 18,730,380 shares issued and outstanding
228,972 226,592 
Retained earnings
400,533 435,085 
Accumulated other comprehensive income (loss)(127,018)(99,530)
Total shareholders' equity502,487 562,147 
Total liabilities and shareholders' equity $9,458,751 $9,364,760 


6



HomeStreet, Inc. and Subsidiaries
Consolidated Income Statements
Quarter Ended September 30,Nine Months Ended September 30,
(in thousands, except share and per share data)2023202220232022
Interest income:
Loans$85,899 $73,329 $254,250 $186,108 
Investment securities12,309 9,014 37,944 22,359 
Cash, Fed Funds and other2,498 1,060 6,270 1,655 
Total interest income
100,706 83,403 298,464 210,122 
Interest expense:
Deposits33,840 8,321 98,603 13,498 
Borrowings27,954 12,064 68,097 19,004 
Total interest expense
61,794 20,385 166,700 32,502 
Net interest income
38,912 63,018 131,764 177,620 
Provision for credit losses(1,110)— (886)(9,000)
Net interest income after provision for credit losses
40,022 63,018 132,650 186,620 
Noninterest income:
Net gain on loan origination and sale activities2,372 2,647 7,238 16,213 
Loan servicing income 3,092 2,741 9,390 9,706 
Deposit fees2,455 2,223 7,817 6,516 
Other2,545 5,711 6,520 9,458 
Total noninterest income
10,464 13,322 30,965 41,893 
Noninterest expense:
Compensation and benefits27,002 27,341 84,031 89,563 
Information services7,579 7,038 22,207 21,880 
Occupancy5,306 6,052 16,834 18,315 
General, administrative and other9,202 9,458 29,432 25,241 
Goodwill impairment— — 39,857 — 
Total noninterest expense
49,089 49,889 192,361 154,999 
Income (loss) before income taxes1,397 26,451 (28,746)73,514 
Income tax (benefit) expense(898)6,084 (4,657)15,475 
Net income (loss)$2,295 $20,367 $(24,089)$58,039 
Net income (loss) per share:
Basic$0.12 $1.09 $(1.28)$3.05 
Diluted $0.12 $1.08 $(1.28)$3.03 
Weighted average shares outstanding:
Basic
18,792,89318,716,86418,774,59319,000,007
Diluted
18,792,89318,796,73718,774,59319,137,848


7



HomeStreet, Inc. and Subsidiaries
Five Quarter Consolidated Income Statements
 Quarter Ended
(in thousands, except share and per share data)September 30,
2023		June 30,
2023		March 31,
2023		December 31,
2022		September 30,
2022
Interest income:
Loans$85,899 $85,813 $82,538 $80,733 $73,329 
Investment securities12,309 12,872 12,763 11,466 9,014 
Cash, Fed Funds and other2,498 2,022 1,750 1,967 1,060 
Total interest income100,706 100,707 97,051 94,166 83,403 
Interest expense:
Deposits33,840 35,393 29,370 18,515 8,321 
Borrowings27,954 21,838 18,305 19,964 12,064 
Total interest expense61,794 57,231 47,675 38,479 20,385 
Net interest income
38,912 43,476 49,376 55,687 63,018 
Provision for credit losses(1,110)(369)593 3,798 — 
Net interest income after provision for credit losses40,022 43,845 48,783 51,889 63,018 
Noninterest income:
Net gain on loan origination and sale activities2,372 2,456 2,410 1,488 2,647 
Loan servicing income3,092 3,259 3,039 2,682 2,741 
Deposit fees2,455 2,704 2,658 2,359 2,223 
Other2,545 1,892 2,083 3,148 5,711 
Total noninterest income10,464 10,311 10,190 9,677 13,322 
Noninterest expense:
Compensation and benefits27,002 27,776 29,253 25,970 27,341 
Information services7,579 7,483 7,145 8,101 7,038 
Occupancy5,306 5,790 5,738 6,213 6,052 
General, administrative and other9,202 9,875 10,355 10,136 9,458 
Goodwill impairment— 39,857 — — — 
Total noninterest expense49,089 90,781 52,491 50,420 49,889 
Income (loss) before income taxes1,397 (36,625)6,482 11,146 26,451 
Income tax (benefit) expense(898)(5,183)1,424 2,645 6,084 
Net income (loss)$2,295 $(31,442)$5,058 $8,501 $20,367 
Net income (loss) per share:
Basic $0.12 $(1.67)$0.27 $0.45 $1.09 
Diluted$0.12 $(1.67)$0.27 $0.45 $1.08 
Weighted average shares outstanding:
Basic18,792,89318,775,02218,755,45318,726,65418,716,864
Diluted18,792,89318,775,02218,771,89918,753,14718,796,737
8



HomeStreet, Inc. and Subsidiaries
Average Balances, Yields (Taxable-equivalent basis) and Rates
Quarter Ended September 30,Nine Months Ended September 30,
Average Balances:2023202220232022
Investment securities
$1,356,410 $1,252,923 $1,417,438 $1,139,761 
Loans
7,461,220 7,070,998 7,477,454 6,336,185 
Total interest-earning assets9,007,360 8,436,745 9,055,725 7,562,698 
Total assets9,433,648 8,899,684 9,508,701 8,075,150 
Deposits: Interest-bearing
5,092,025 4,852,515 5,457,283 4,644,609 
Deposits: Noninterest-bearing1,430,834 1,576,387 1,459,506 1,662,465 
Borrowings
2,051,584 1,530,449 1,677,276 790,907 
Long-term debt
224,614 224,259 224,525 217,732 
Total interest-bearing liabilities
7,368,223 6,607,223 7,359,084 5,653,248 
Average Yield/Rate:
Investment securities
3.90 %3.22 %3.83 %2.97 %
Loans
4.54 %4.09 %4.51 %3.90 %
Total interest earning assets
4.46 %3.95 %4.42 %3.74 %
Deposits: Interest-bearing
2.63 %0.68 %2.41 %0.39 %
Total deposits
2.06 %0.51 %1.90 %0.29 %
Borrowings
4.81 %2.43 %4.69 %1.99 %
Long-term debt
5.49 %4.56 %5.37 %4.33 %
Total interest-bearing liabilities
3.33 %1.22 %3.02 %0.76 %
Net interest rate spread
1.13 %2.74 %1.40 %2.98 %
Net interest margin
1.74 %3.00 %1.96 %3.17 %

(in thousands, except yield/rate)Quarter Ended
Average Balances:September 30,
2023		June 30,
2023		March 31,
2023		December 31,
2022		September 30,
2022
Investment securities
$1,356,410 $1,444,819 $1,452,137 $1,362,861 $1,252,923 
Loans
7,461,220 7,499,800 7,471,456 7,368,097 7,070,998 
Total interest earning assets
9,007,360 9,109,807 9,050,484 8,890,221 8,436,745 
Total assets9,433,648 9,562,817 9,530,705 9,348,396 8,899,684 
Deposits: Interest-bearing
5,092,025 5,584,825 5,701,701 5,227,039 4,852,515 
Deposits: Noninterest-bearing
1,430,834 1,437,133 1,511,437 1,510,744 1,576,387 
Borrowings
2,051,584 1,630,102 1,342,347 1,717,042 1,530,449 
Long-term debt
224,614 224,523 224,435 224,345 224,259 
Total interest-bearing liabilities
7,368,223 7,439,450 7,268,483 7,168,426 6,607,223 
Average Yield/Rate:
Investment securities
3.90 %3.82 %3.78 %3.70 %3.22 %
Loans
4.54 %4.56 %4.44 %4.32 %4.09 %
Total interest earning assets
4.46 %4.45 %4.35 %4.24 %3.95 %
Deposits: Interest-bearing
2.63 %2.54 %2.09 %1.40 %0.68 %
Total deposits
2.06 %2.02 %1.65 %1.09 %0.51 %
Borrowings
4.81 %4.62 %4.57 %3.93 %2.43 %
Long-term debt
5.49 %5.34 %5.28 %4.96 %4.56 %
Total interest-bearing liabilities
3.33 %3.08 %2.64 %2.12 %1.22 %
Net interest rate spread
1.13 %1.37 %1.71 %2.12 %2.74 %
Net interest margin
1.74 %1.93 %2.23 %2.53 %3.00 %


9

Results of Operations

Third Quarter of 2023 Compared to the Second Quarter of 2023

Non-core amounts

During the second quarter of 2023, the non-core item is a $39.9 million goodwill impairment charge.

Our net income (loss) and income (loss) before taxes were $2.3 million and $1.4 million, respectively, in the third quarter of 2023, as compared to $(31.4) million and $(36.6) million, respectively, in the second quarter of 2023. Our core net income and core income before taxes in the third quarter of 2023 were $2.3 million and $1.4 million, respectively, as compared to $3.2 million and $3.2 million, respectively, in the second quarter of 2023, which excludes the impact of the goodwill impairment charge. The $1.8 million decrease in core income before taxes was due to lower net interest income which was partially offset by a larger recovery of allowance for credit losses and lower noninterest expense.

The income tax benefit realized in the third quarter of 2023 was due to the recognition of return to accrual differences related to tax exempt income. Our effective tax rate for the second quarter of 2023 of 14.2% was significantly impacted by the goodwill impairment charge, a portion of which was not deductible for tax purposes. Our core income effective tax rate for the second quarter of 2023 was 1.6%, which is lower than our statutory tax rate of 24.7% primarily due to the significantly higher proportion of tax exempt revenues in comparison to our overall core income before tax.

Our net interest income in the third quarter of 2023 was $4.6 million lower than the second quarter of 2023 due to a decrease in our net interest margin from 1.93% to 1.74%. The decrease in our net interest margin was due to a 25 basis point increase in the cost of interest-bearing liabilities caused in part by an increase in the proportion of higher cost borrowings to the total balance of interest-bearing liabilities. The increase in the cost of interest-bearing liabilities was due to overall higher deposit, long term debt and borrowing costs. During the third quarter, the cost of deposits increased 4 basis points during the third quarter, the cost of long term debt increased 15 basis points and the cost of borrowings increased 19 basis points. The increases in the rates paid on interest-bearing liabilities were due to the significant increases in market interest rates during 2023.

A $1.1 million recovery of our allowance for credit losses was recognized during the third quarter of 2023 compared to a $0.4 million recovery of our allowance for credit losses in the second quarter of 2023. The recovery for the third quarter of 2023 was primarily due to reduced levels of higher risk land and development loans which resulted in lower expected losses. The recovery in the second quarter of 2023 reflects a decrease in our unfunded commitment reserve as our allowance for credit losses remained unchanged at $41.5 million and our net charge-offs realized in the quarter were nominal.

Noninterest income in the third quarter of 2023 was consistent with the second quarter of 2023.

The $41.7 million decrease in noninterest expenses in the third quarter of 2023, as compared to the second quarter of 2023 was primarily due to a $39.9 million goodwill impairment charge in the second quarter of 2023.



10

Nine Months Ended September 30, 2023 Compared to the Nine Months Ended September 30, 2022

Non-core amounts

During the nine months ended September 30, 2023, the non-core item is a $39.9 million goodwill impairment charge.

Our net income (loss) and income (loss) before taxes were $(24.1) million and $(28.7) million, respectively, in the nine months ended September 30, 2023, as compared to $58.0 million and $73.5 million, respectively, in the nine months ended September 30, 2022. Our core net income and core income before taxes in the nine months ended September 30, 2023, which excludes the impact of the goodwill impairment charge, was $10.5 million and $11.1 million, as compared to $58.0 million and $73.5 million, respectively, in the nine months ended September 30, 2022. The $62.4 million decrease in core income before taxes was due to a lower net interest income, a lower recovery of provision for credit losses and lower noninterest income, partially offset by lower noninterest expense.
Our effective tax rate of 16.2% during the nine months ended September 30, 2023 was significantly impacted by the goodwill impairment charge, a portion of which was not deductible for tax purposes. Our core income effective tax rate for the first nine months of 2023 and 2022 was 5.2% and 21.1% respectively, which is lower than our statutory tax rate of 24.7% and 25.3%, respectively, primarily due to the significantly higher proportion of tax exempt revenues in comparison to our overall core income before tax. Our effective tax rate in the nine months ended September 30, 2022 was also lower than the statutory rate due to the benefits of tax advantaged investments and reductions in taxes on income related to excess tax benefits resulting from the vesting of stock awards during the period.

Net interest income for the nine months ended September 30, 2023 decreased $45.9 million as compared to the nine months ended September 30, 2022 due primarily to a decrease in our net interest margin partially offset by increases in the average balance of interest earning assets. The increase in interest-earning assets was due to loan originations and purchases of investment securities during 2022. Our net interest margin decreased from 3.17% in the nine months ended September 30, 2022 to 1.96% in the nine months ended September 30, 2023 due to a 226 basis point increase in the rates paid on interest-bearing liabilities which was partially offset by a 68 basis point increase in the yield on interest earning assets. Yields on interest-earning assets increased as the yields on loan originations during the last two years were higher than the rates of our existing portfolio of loans and yields on adjustable rate loans increased due to increases in the indexes on which their pricing is based. The higher yields on our investment securities were primarily due to adjustments to yields realized from longer estimated lives of certain securities and the yields of securities purchased during the past year being higher than the yields on our existing portfolio. The increase in the rates paid on our interest-bearing liabilities was due to higher deposit costs, higher borrowing costs and an increase in the proportion of higher cost borrowings used as our sources of funding. The increases in the rates paid on deposits were due to the significant increase in market interest rates over the prior year and the decrease in the proportion of noninterest-bearing deposits to total deposits. Our average borrowings increased by $886 million to fund the growth of our loan portfolio and investment securities. Our cost of borrowings increased from 199 basis points during the nine months ended September 30, 2022 to 469 basis points during the nine months ended September 30, 2023 due to the significant increase in market interest rates during the last two years.

A $0.9 million recovery of our allowance for credit losses was recognized during the nine months ended September 30, 2023 compared to a $9.0 million recovery of our allowance for credit losses in the nine months ended September 30, 2022. The recovery of our allowance for credit losses in 2023 was the result of economic conditions performing better than expected, improved single-family collateral forecasts, changes in portfolio composition and a decrease in our unfunded commitment reserve offset slightly by deteriorated commercial collateral conditions. The recovery of our allowance for credit losses in 2022 was the result of the favorable performance of our loan portfolio, a stable low level of nonperforming assets and an improved outlook of the estimated impact of COVID-19 on our loan portfolio.

The decrease in noninterest income for the nine months ended September 30, 2023 as compared to the nine months ended September 30, 2022 was due to a decrease in gain on loan origination and sale activities and other income, which was partially offset by higher deposit fees. The $9.0 million decrease in gain on loan origination and sale activities was due to a $5.2 million decrease in single family gain on loan origination and sale activities and a $3.7 million decrease in commercial real estate and commercial and industrial gain on loan origination and sale activities. The decrease in single family gain on loan origination and sale activities was due to a decrease in rate lock volume as a result of the effects of increasing mortgage interest rates. The decrease in commercial real estate and commercial and industrial gain on loan origination and sale activities was primarily due to an 87% decrease in loans sold volume as a result of increasing interest rates. The $2.9 million decrease in other income was primarily due to a $4.3 million gain on sale of branches realized in the nine months ended September 30, 2022. The $1.3 million increase in deposit fee income was primarily due to higher early withdrawals fees.

The $37.4 million increase in noninterest expenses in the nine months ended September 30, 2023 as compared to nine months ended September 30, 2022 was due to a $39.9 million goodwill impairment charge and higher general, administrative and other costs which were partially offset by lower compensation and benefit costs and occupancy costs. The $5.5 million decrease in compensation and benefit costs was primarily due to reduced commission expense on lower loan origination volumes in our single family mortgage operations, lower staffing levels and lower bonus expense, which were partially offset by wage increases given in the first nine months of 2023 and a reduction in deferred costs due to lower levels of loan production. The increase in general, administrative and other costs was primarily due to higher FDIC fees due to our larger asset base, which were partially offset by a reduction in legal fees due to charges related to nonrecurring costs expended on litigation activities and legal matters in the nine months ended September 30, 2022.

Financial Position

During the nine months ended September 30, 2023, our total assets increased $94 million due primarily to a $154 million increase in cash. Loans held for investment were relatively unchanged as $1.0 billion of originations was offset by prepayments and scheduled payments of $1.0 billion. During the first nine months of 2023 total liabilities increased $154 million due to an increase in borrowings, partially offset by a decrease in deposits. The $706 million decrease in deposits was due to a $473 million decrease in brokered certificates of deposit and a $1.1 billion decrease in non-certificates of deposit balances which were partially offset by a $455 million increase in certificates of deposit balances related to our promotional products. The decrease in deposits was offset by $373 million in deposits that we acquired as part of the branch acquisition in the first quarter of 2023. The $857 million of additional borrowings were used to replace maturing brokered deposits and increase our on-balance sheet cash balances.
11


Loans Held for Investment ("LHFI")
(in thousands)September 30,
2023		June 30,
2023		March 31,
2023		December 31,
2022		September 30,
2022
Commercial real estate ("CRE")
Non-owner occupied CRE$633,083 $650,710 $652,284 $658,085 $666,394 
Multifamily3,957,209 3,966,894 3,975,654 3,975,754 3,923,946 
Construction/land development566,289 576,432 607,559 627,663 590,092 
Total5,156,581 5,194,036 5,235,497 5,261,502 5,180,432 
Commercial and industrial loans
Owner occupied CRE428,253 434,400 438,147 443,363 432,114 
Commercial business385,148 371,779 392,837 359,747 361,635 
Total813,401 806,179 830,984 803,110 793,749 
Consumer loans
Single family (1)
1,099,644 1,068,229 1,057,579 1,009,001 907,044 
Home equity and other370,875 368,207 362,322 352,707 332,262 
Total1,470,519 1,436,436 1,419,901 1,361,708 1,239,306 
Total LHFI7,440,501 7,436,651 7,486,382 7,426,320 7,213,487 
    Allowance for credit losses ("ACL")(40,000)(41,500)(41,500)(41,500)(37,606)
Total LHFI less ACL$7,400,501 $7,395,151 $7,444,882 $7,384,820 $7,175,881 
(1)Includes $1.2 million, $1.3 million, $5.2 million, $5.9 million and $5.8 million of single family loans that are carried at fair value at September 30, 2023, June 30, 2023, March 31, 2023, December 31, 2022, and September 30, 2022, respectively.

12


Loan Roll-forward
(in thousands)September 30,
2023		June 30,
2023		March 31,
2023		December 31,
2022		September 30,
2022
Loans - beginning balance$7,436,651 $7,486,382 $7,426,320 $7,213,487 $6,759,737 
Originations and advances 329,294 327,949 345,461 611,954 914,129 
Transfers (to) from loans held for sale466 (2,973)— 150 (4,677)
Payoffs, paydowns and other (325,312)(374,484)(284,725)(398,745)(455,607)
Charge-offs and transfers to OREO(598)(223)(674)(526)(95)
Loans - ending balance$7,440,501 $7,436,651 $7,486,382 $7,426,320 $7,213,487 


Loan Originations and Advances
(in thousands)September 30,
2023		June 30,
2023
March 31,
2023 (1)
December 31,
2022		September 30,
2022
CRE
Non-owner occupied CRE$2,315 $2,371 $2,934 $406 $11,003 
Multifamily44,356 65,635 18,239 188,392 473,733 
Construction/land development155,460 152,907 153,458 186,313 208,057 
Total202,131 220,913 174,631 375,111 692,793 
Commercial and industrial loans
Owner occupied CRE2,242 8,622 7,133 21,144 11,176 
Commercial business34,255 14,722 57,698 40,648 36,144 
Total36,497 23,344 64,831 61,792 47,320 
Consumer loans
Single family57,483 45,055 67,410 128,829 118,727 
Home equity and other33,183 38,637 38,589 46,222 55,289 
Total 90,666 83,692 105,999 175,051 174,016 
Total loan originations and advances$329,294 $327,949 $345,461 $611,954 $914,129 
(1)    Includes $17.1 million and $3.4 million, respectively, of consumer loans and commercial and industrial loans purchased in our first quarter 2023 branch acquisition.


Credit Quality
During the third quarter, our ratios of nonperforming assets to total assets and total loans delinquent over 30 days, including nonaccrual loans decreased. As of September 30, 2023, our ratio of nonperforming assets to total assets was 0.42%, while our ratio of total loans delinquent over 30 days, including nonaccrual loans, to total loans was 0.64%.
13


Delinquencies
Past Due and Still Accruing
(in thousands)30-59 days60-89 days
90 days or
more (1)
Nonaccrual
Total past
due and nonaccrual (2)
CurrentTotal
loans
September 30, 2023
Total loans held for investment$4,081 $1,613 $3,337 $38,765 $47,796 $7,392,705 $7,440,501 
%0.06 %0.02 %0.04 %0.52 %0.64 %99.36 %100.00 %
June 30, 2023
Total loans held for investment$3,908 $1,257 $4,715 $39,772 $49,652 $7,386,999 $7,436,651 
%0.05 %0.02 %0.06 %0.54 %0.67 %99.33 %100.00 %
(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.
(2) Includes loans whose repayments are insured by the FHA or guaranteed by the VA or SBA of $10.2 million and $11.3 million at September 30, 2023 and June 30, 2023, respectively.


Allowance for Credit Losses (roll-forward)
 Quarter Ended
(in thousands)September 30,
2023		June 30,
2023		March 31,
2023		December 31,
2022		September 30,
2022
Allowance for credit losses
Beginning balance$41,500 $41,500 $41,500 $37,606 $37,355 
Provision for credit losses(990)111 589 4,195 249 
Recoveries (charge-offs), net(510)(111)(589)(301)2 
Ending balance
$40,000 $41,500 $41,500 $41,500 $37,606 
Allowance for unfunded commitments:
Beginning balance$1,721 $2,201 $2,197 $2,594 $2,843 
Provision for credit losses(120)(480)4 (397)(249)
Ending balance
$1,601 $1,721 $2,201 $2,197 $2,594 
Provision for credit losses:
Allowance for credit losses - loans$(990)$111 $589 $4,195 $249 
Allowance for unfunded commitments(120)(480)4 (397)(249)
Total
$(1,110)$(369)$593 $3,798 $— 

14

Allocation of Allowance for Credit Losses by Product Type

September 30, 2023June 30, 2023March 31, 2023
(in thousands)Balance
Rate (1)
Balance
 Rate (1)
Balance
Rate (1)
Non-owner occupied CRE$2,365 0.37 %$2,242 0.34 %$2,608 0.40 %
Multifamily
10,706 0.27 %9,695 0.24 %9,787 0.25 %
Construction/land development
   Multifamily construction
1,592 1.12 %1,566 1.29 %1,345 1.23 %
   CRE construction153 0.83 %169 0.84 %204 1.02 %
   Single family construction9,745 3.63 %11,067 4.02 %12,525 3.82 %
   Single family construction to perm991 0.72 %1,421 0.89 %1,211 0.80 %
         Total CRE25,552 0.50 %26,160 0.50 %27,680 0.53 %
Owner occupied CRE1,102 0.26 %930 0.21 %910 0.21 %
Commercial business
3,601 0.94 %3,837 1.04 %3,416 0.88 %
Total commercial and industrial 4,703 0.58 %4,767 0.60 %4,326 0.52 %
Single family
5,783 0.58 %6,617 0.68 %5,804 0.61 %
Home equity and other
3,962 1.07 %3,956 1.07 %3,690 1.02 %
Total consumer9,745 0.71 %10,573 0.79 %9,494 0.72 %
Total $40,000 0.55 %$41,500 0.57 %$41,500 0.56 %
(1) The ACL rate is calculated excluding balances related to loans that are insured by the FHA or guaranteed by the VA or SBA

Production Volumes for Sale to the Secondary Market
 Quarter Ended
(in thousands)September 30,
2023		June 30,
2023		March 31,
2023		December 31,
2022		September 30,
2022
Loan originations
Single family loans
$95,917 $96,750 $72,814 $51,647 $110,011 
Commercial and industrial and CRE loans
11,863 4,906 6,150 20,864 15,332 
Loans sold
Single family loans101,575 92,787 63,473 51,427 131,228 
Commercial and industrial and CRE loans (1)
2,821 4,649 8,750 16,228 29,965 
Net gain on loan origination and sale activities
Single family loans2,267 2,171 2,218 1,158 1,778 
Commercial and industrial and CRE loans (1)
105 285 192 330 869 
Total$2,372 $2,456 $2,410 $1,488 $2,647 
(1) May include loans originated as held for investment.

15


Loan Servicing Income
 Quarter Ended
(in thousands)September 30,
2023		June 30,
2023		March 31,
2023		December 31,
2022		September 30,
2022
Single family servicing income, net:
Servicing fees and other$3,852 $3,868 $3,923 $3,928 $3,986 
Changes - amortization (1)
(1,564)(1,626)(1,684)(1,899)(2,112)
Net2,288 2,242 2,239 2,029 1,874 
Risk management, single family MSRs:
Changes in fair value due to assumptions (2)
785 1,320 (311)124 1,989 
Net gain (loss) from derivatives hedging (1,160)(1,592)(81)(309)(2,981)
Subtotal(375)(272)(392)(185)(992)
Single family servicing income 1,913 1,970 1,847 1,844 882 
Commercial loan servicing income:
Servicing fees and other2,553 2,724 2,746 2,653 3,687 
Amortization of capitalized MSRs(1,374)(1,435)(1,554)(1,815)(1,828)
Total1,179 1,289 1,192 838 1,859 
Total loan servicing income $3,092 $3,259 $3,039 $2,682 $2,741 
(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.


Capitalized Mortgage Servicing Rights ("MSRs")
 Quarter Ended
(in thousands)September 30,
2023		June 30,
2023		March 31,
2023		December 31,
2022		September 30,
2022
Single Family MSRs
Beginning balance$76,314 $75,701 $76,617 $77,811 $76,481 
Additions and amortization:
Originations
935 919 619 581 1,453 
Purchases
— — 460 — — 
Changes - amortization (1)
(1,564)(1,626)(1,684)(1,899)(2,112)
Net additions and amortization
(629)(707)(605)(1,318)(659)
Change in fair value due to assumptions (2)
785 1,320 (311)124 1,989 
Ending balance$76,470 $76,314 $75,701 $76,617 $77,811 
Ratio to related loans serviced for others1.43 %1.42 %1.40 %1.41 %1.42 %
Multifamily and SBA MSRs
Beginning balance$32,477 $33,839 $35,256 $36,819 38,130 
Originations
38 73 137 252 517 
Amortization
(1,374)(1,435)(1,554)(1,815)(1,828)
Ending balance$31,141 $32,477 $33,839 $35,256 $36,819 
Ratio to related loans serviced for others1.64 %1.70 %1.77 %1.82 %1.86 %
(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.


16



Deposits
(in thousands)September 30,
2023		June 30,
2023		March 31,
2023		December 31,
2022		September 30,
2022
Deposits by Product:
Noninterest-bearing demand deposits$1,437,057 $1,410,369 $1,479,428 $1,399,912 $1,547,642 
Interest-bearing:
Interest-bearing demand deposits352,529 370,747 496,504 466,490 514,912 
Savings284,663 300,007 323,373 258,977 275,399 
Money market1,723,924 1,863,762 2,097,055 2,383,209 2,551,961 
Certificates of deposit:
Brokered deposits973,314 760,826 885,314 1,446,528 511,920 
Other1,974,064 1,964,322 1,774,929 1,496,803 1,208,397 
Total interest-bearing deposits5,308,494 5,259,664 5,577,175 6,052,007 5,062,589 
Total deposits$6,745,551 $6,670,033 $7,056,603 $7,451,919 $6,610,231 

Percent of total deposits:
Noninterest-bearing demand deposits21.3 %21.1 %21.0 %18.8 %23.4 %
Interest-bearing:
Interest-bearing demand deposits5.2 %5.6 %7.0 %6.2 %7.8 %
Savings4.2 %4.5 %4.6 %3.5 %4.2 %
Money market 25.6 %27.9 %29.7 %32.0 %38.6 %
Certificates of deposit
Brokered deposits14.4 %11.4 %12.5 %19.4 %7.7 %
Other29.3 %29.5 %25.2 %20.1 %18.3 %
Total interest-bearing deposits78.7 %78.9 %79.0 %81.2 %76.6 %
Total deposits100.0 %100.0 %100.0 %100.0 %100.0 %




17

HomeStreet, Inc. and Subsidiaries
Non-GAAP Financial Measures

To supplement our unaudited condensed consolidated financial statements presented in accordance with GAAP, we use certain non-GAAP measures of financial performance.

In this earnings release, we use the following non-GAAP measures: (i) tangible common equity and tangible assets as we believe this information is consistent with the treatment by bank regulatory agencies, which exclude intangible assets from the calculation of capital ratios; (ii) core income and effective tax rate on core income before taxes, which excludes goodwill impairment charges and the related tax impact as we believe this measure is a better comparison to be used for projecting future results and (iii) an efficiency ratio which is the ratio of noninterest expense to the sum of net interest income and noninterest income, excluding certain items of income or expense and excluding taxes incurred and payable to the state of Washington as such taxes are not classified as income taxes and we believe including them in noninterest expense impacts the comparability of our results to those companies whose operations are in states where assessed taxes on business are classified as income taxes.

These supplemental performance measures may vary from, and may not be comparable to, similarly titled measures provided by other companies in our industry. Non-GAAP financial measures are not in accordance with, or an alternative for, GAAP. Generally, a non-GAAP financial measure is a numerical measure of a company’s performance that either excludes or includes amounts that are not normally excluded or included in the most directly comparable measure calculated and presented in accordance with GAAP. A non-GAAP financial measure may also be a financial metric that is not required by GAAP or other applicable requirements.

We believe that these non-GAAP financial measures, when taken together with the corresponding GAAP financial measures, provide meaningful supplemental information regarding our performance by providing additional information used by management that is not otherwise required by GAAP or other applicable requirements. Our management uses, and believes that investors benefit from referring to, these non-GAAP financial measures in assessing our operating results and when planning, forecasting and analyzing future periods. These non-GAAP financial measures also facilitate a comparison of our performance to prior periods. We believe these measures are frequently used by securities analysts, investors and other parties in the evaluation of companies in our industry. These non-GAAP financial measures should be considered in addition to, not as a substitute for or superior to, financial measures prepared in accordance with GAAP. In the information below, we have provided reconciliations of, where applicable, the most comparable GAAP financial measures to the non-GAAP measures used in this earnings release, or a reconciliation of the non-GAAP calculation of the financial measure.





18

HomeStreet, Inc. and Subsidiaries
Non-GAAP Financial Measures

Reconciliations of non-GAAP results of operations to the nearest comparable GAAP measures or calculations of the non-GAAP measure:

As of or for the Quarter EndedNine Months Ended
(in thousands, except share and per share data)September 30,
2023		June 30,
2023		March 31,
2023		December 31,
2022		September 30,
2022		September 30,
2023		September 30,
2022
Core net income
Net income (loss)$2,295 $(31,442)$5,058 $8,501 $20,367 $(24,089)$58,039 
Adjustments (tax effected)
Goodwill impairment charge— 34,622 — — — 34,622 — 
Total$2,295 $3,180 $5,058 $8,501 $20,367 $10,533 $58,039 
Core diluted earnings per share
Fully diluted shares18,792,893 18,775,022 18,771,899 18,753,147 18,796,737 18,774,593 19,137,848 
Ratio$0.12 $0.17 $0.27 $0.45 $1.08 $0.56 $3.03 
Return on average tangible equity (annualized)
Average shareholders' equity
$535,369 $582,172 $578,533 $565,950 $603,278 $565,200 $634,831 
Less: Average goodwill and other intangibles
(10,917)(51,138)(30,969)(30,133)(30,602)(30,934)(31,198)
Average tangible equity$524,452 $531,034 $547,564 $535,817 $572,676 $534,266 $603,633 
Core net income (per above)2,295 3,180 5,058 8,501 20,367 10,533 58,039 
Adjustments (tax effected)
Amortization of core deposit intangibles614 614 459 183 186 1,687 568 
Tangible income applicable to shareholders$2,909 $3,794 $5,517 $8,684 $20,553 $12,220 $58,607 
Ratio
2.2 %2.9 %4.1 %6.4 %14.2 %3.1 %13.0 %
Efficiency ratio
Noninterest expense
Total
$49,089 $90,781 $52,491 $50,420 $49,889 $192,361 $154,999 
Adjustments:
Goodwill impairment charge— (39,857)— — — (39,857)— 
State of Washington taxes(572)(526)(555)(597)(629)(1,653)(1,714)
Adjusted total$48,517 $50,398 $51,936 $49,823 $49,260 $150,851 $153,285 
Total revenues
Net interest income
$38,912 $43,476 $49,376 $55,687 $63,018 131,764 177,620 
Noninterest income
10,464 10,311 10,190 9,677 13,322 30,965 41,893 
Gain on sale of branches— — — — (4,270)— (4,270)
Adjusted total$49,376 $53,787 $59,566 $65,364 $72,070 $162,729 $215,243 
Ratio98.3 %93.7 %87.2 %76.2 %68.4 %92.7 %71.2 %
19

As of or for the Quarter EndedNine Months Ended
(in thousands, except share and per share data)September 30,
2023		June 30,
2023		March 31,
2023		December 31,
2022		September 30,
2022		September 30,
2023		September 30,
2022
Return on average assets (annualized) - Core
Average Assets$9,433,648 $9,562,817 $9,530,705 $9,348,396 $8,899,684 $9,508,701 $8,075,150 
Core net income (per above)2,295 3,180 5,058 8,501 20,367 10,533 58,039 
Ratio0.10 %0.13 %0.22 %0.36 %0.91 %0.15 %0.96 %
Effective tax rate used in computations above (1)
22.0 %22.0 %22.0 %22.0 %22.0 %22.0 %22.0 %
Tangible book value per share
Shareholders' equity
$502,487 $527,623 $574,994 $562,147 $552,789 $502,487 $552,789 
Less: Goodwill and other intangibles
(10,429)(11,217)(51,862)(29,980)(30,215)(10,429)(30,215)
Tangible shareholders' equity$492,058 $516,406 $523,132 $532,167 $522,574 $492,058 $522,574 
Common shares outstanding18,794,030 18,776,597 18,767,811 18,730,380 18,717,557 18,794,030 18,717,557 
Computed amount$26.18 $27.50 $27.87 $28.41 $27.92 $26.18 $27.92 
Tangible common equity to tangible assets
Tangible shareholders' equity (per above)$492,058 $516,406 $523,132 $532,167 $522,574 $492,058 $522,574 
Tangible assets
Total assets$9,458,751$9,501,475$9,858,889$9,364,760$9,072,887$9,458,751$9,072,887
Less: Goodwill and other intangibles (per above)(10,429)(11,217)(51,862)(29,980)(30,215)(10,429)

(30,215)
Net$9,448,322$9,490,258$9,807,027$9,334,780$9,042,672$9,448,322$9,042,672
Ratio5.2 %5.4 %5.3 %5.7 %5.8 %5.2 %5.8 %
(1) ) Effective tax rate indicated is used for all adjustments except the goodwill impairment charge as a portion of this charge was not deductible for tax purposes. Instead a computed effective rate of 13.1%was used for the goodwill impairment charge.

20


Forward-Looking Statements

This earnings release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 (the “Reform Act”). Generally, forward-looking statements include the words “anticipate,” “believe,” “estimate,” “expect,” “intend,” “may,” “plan,” “potential,” “goal,” “upcoming,” “outlook,” “guidance” or the negation thereof, or similar expressions. In addition, all statements in this earnings release (including but not limited to those found in the quotes of our Chief Executive Officer) that address and/or include beliefs, assumptions, estimates, projections and expectations of our future performance, financial condition, long-term value creation, capital management, reduction in volatility, reliability of earnings, net interest margins, provisions and allowances for credit losses, cost reduction initiatives, performance of our continued operations relative to our past operations, and restructuring activities are forward-looking statements within the meaning of the Reform Act. Forward-looking statements involve inherent risks, uncertainties and other factors, many of which are difficult to predict and are generally beyond management’s control. Forward-looking statements are based on the Company’s expectations at the time such statements are made and speak only as of the date made. The Company does not assume any obligation or undertake to update any forward-looking statements after the date of this release as a result of new information, future events or developments, except as required by federal securities or other applicable laws, although the Company may do so from time to time. The Company does not endorse any projections regarding future performance that may be made by third parties. For all forward-looking statements, the Company claims the protection of the safe harbor for forward-looking statements contained in the Reform Act.

We caution readers that actual results may differ materially from those expressed in or implied by the Company’s forward-looking statements. Rather, more important factors could affect the Company’s future results, including but not limited to the following: (1) changes in the U.S. and global economies, including business disruptions, reductions in employment, inflationary pressures and an increase in business failures, specifically among our customers; (2) changes in the interest rate environment may reduce interest margins; (3) changes in deposit flows, loan demand or real estate values may adversely affect the business of our primary subsidiary, HomeStreet Bank (the “Bank”), through which substantially all of our operations are carried out; (4) there may be increases in competitive pressure among financial institutions or from non-financial institutions; (5) our ability to attract and retain key members of our senior management team; (6) the timing and occurrence or non-occurrence of events may be subject to circumstances beyond our control; (7) our ability to control operating costs and expenses; (8) our credit quality and the effect of credit quality on our credit losses expense and allowance for credit losses; (9) the adequacy of our allowance for credit losses; (10) changes in accounting principles, policies or guidelines may cause our financial condition to be perceived or interpreted differently; (11) legislative or regulatory changes that may adversely affect our business or financial condition, including, without limitation, changes in corporate and/or individual income tax laws and policies, changes in privacy laws, and changes in regulatory capital or other rules, and the availability of resources to address or respond to such changes; (12) general economic conditions, either nationally or locally in some or all areas in which we conduct business, or conditions in the securities markets or banking industry, may be less favorable than what we currently anticipate; (13) challenges our customers may face in meeting current underwriting standards may adversely impact all or a substantial portion of the value of our rate-lock loan activity we recognize; (14) technological changes may be more difficult or expensive than what we anticipate; (15) a failure in or breach of our operational or security systems or information technology infrastructure, or those of our third-party providers and vendors, including due to cyber-attacks; (16) success or consummation of new business initiatives may be more difficult or expensive than what we anticipate; (17) our ability to grow efficiently both organically and through acquisitions and to manage our growth and integration costs; (18) staffing fluctuations in response to product demand or the implementation of corporate strategies that affect our work force and potential associated charges; (19) litigation, investigations or other matters before regulatory agencies, whether currently existing or commencing in the future, may delay the occurrence or non-occurrence of events longer than what we anticipate; (20) our ability to obtain regulatory approvals or non-objection to take various capital actions, including the payment of dividends by us or the Bank, or repurchases of our common stock; and (21) the integration of our recently acquired branches in southern California. A discussion of the factors, risks and uncertainties that could affect our financial results, business goals and operational and financial objectives cited in this release, other releases, public statements and/or filings with the Securities and Exchange Commission (“SEC”) is also contained in the “Risk Factors” sections of this Company's Forms 10-K and 10-Q. We strongly recommend readers review those disclosures in conjunction with the discussions herein.

21

All future written and oral forward-looking statements attributable to the Company or any person acting on its behalf are expressly qualified in their entirety by the cautionary statements contained or referred to above. New risks and uncertainties arise from time to time, and factors that the Company currently deems immaterial may become material, and it is impossible for the Company to predict these events or how they may affect the Company.



22

image2.jpg
HomeStreet Reports Third Quarter 2023 Results
SEATTLE – October 30, 2023 – (BUSINESS WIRE) – HomeStreet, Inc. (Nasdaq: HMST) (including its consolidated subsidiaries, the "Company", "HomeStreet" or "we"), the parent company of HomeStreet Bank, today announced the financial results for the quarter ended September 30, 2023. As we present non-GAAP measures in this release, the reader should refer to the non-GAAP reconciliations set forth below under the section “Non-GAAP Financial Measures.”


Operating Results
                  Third quarter 2023 compared to second quarter 2023
Reported Results:
•Net income (loss): $2.3 million compared to $(31.4) million
•Earnings (loss) per fully diluted share: $0.12 compared to $(1.67)
•Return on Average Equity ("ROAE"): 1.7% compared to (21.7)%
•Return on Average Assets ("ROAA"): 0.10% compared to (1.32)%
•Net interest margin: 1.74% compared to 1.93%
•Efficiency ratio: 98.3% compared to 93.7%
Core Results:(1)
•Net income: $2.3 million compared to $3.2 million
•Earnings per fully diluted share: $0.12 compared to $0.17
•Return on Average Tangible Equity ("ROATE"): 2.2% compared to 2.9%
•Return on Average Assets ("ROAA"): 0.10% compared to 0.13%
                                                                                                
(1) Core net income, return on average tangible equity and core return on average assets are non-GAAP measures, for a reconciliation to the nearest comparable GAAP measure see "Non-GAAP financial measures in this earnings release.

“Our operating results for the quarter reflect the continuing adverse impact of the historically record velocity and magnitude of increases in short-term interest rates,” said Mark K. Mason HomeStreet’s Chairman of the Board, President, and Chief Executive Officer. “The high interest rate environment has significantly negatively impacted our net interest margin as well as loan volume in our residential and commercial mortgage banking businesses whose activity continues at historically low levels. To mitigate these challenges, we have reduced controllable expenses where possible, reduced staff to the minimum levels to transact current business volume in a safe and sound manner, raised new deposits through promotional products and focused our new loan origination activity primarily on floating rate products such as commercial loans, residential construction loans and home equity loans. Due to historically low levels of prepayments, our loan portfolio has remained stable even with our reduced level of originations.”


Financial Position
                    As of and for the quarter ended September 30, 2023
•Uninsured deposits were $535 million, or 8% of total deposits
•Excluding brokered deposits, total deposits decreased $137 million
•Loans held for investment ("LHFI"), remained stable
•Nonperforming assets to total assets: 0.42%
•Allowance for credit losses to LHFI: 0.55%
•Book value per share: $26.74
•Tangible book value per share: $26.18


“The deposit outflows we have experienced in 2023 were primarily due to depositors seeking higher yields and seasonal tax payments,” Mr. Mason stated. “With noninterest-bearing and low-cost deposits seeking higher yields, we have implemented a strategy to attract new deposits and retain existing deposits through promotional rate certificates of deposit accounts and money market accounts.”

"Asset quality remained strong in the third quarter as total past due and nonaccrual loans and nonperforming assets all decreased in the quarter,” added Mr. Mason.” Today, we do not see any meaningful credit challenges on the horizon.”

Other
•Declared and paid a cash dividend of $0.10 per share in the third quarter





Conference Call
HomeStreet, Inc. (Nasdaq: HMST), the parent company of HomeStreet Bank, will conduct a quarterly earnings conference call on Tuesday October 31, 2023, at 1:00 p.m. ET. Mark K. Mason, CEO and President, and John M. Michel, CFO, will discuss third quarter 2023 results and provide an update on recent events. A question and answer session will follow the presentation. Shareholders, analysts and other interested parties may register in advance at the following URL https://www.netroadshow.com/events/login?show=b1fe096b&confId=55387 (or internationally at the following URL https://www.netroadshow.com/conferencing/global-numbers?confId=55387) or may join the call by dialing directly at 1-833-470-1428 shortly before 1:00 p.m. ET using Access Code 145364.

A rebroadcast will be available approximately one hour after the conference call by dialing 1-866-813-9403 and entering passcode 754585.

About HomeStreet

HomeStreet, Inc. (Nasdaq: HMST) is a diversified financial services company headquartered in Seattle, Washington, serving consumers and businesses in the Western United States and Hawaii. The Company is principally engaged in real estate lending, including mortgage banking activities, and commercial and consumer banking. Its principal subsidiary is HomeStreet Bank. HomeStreet Bank is the winner of the 2022 "Best Small Bank" in Washington Newsweek magazine award. Certain information about our business can be found on our investor relations web site, located at http://ir.homestreet.com. HomeStreet Bank is a member of the FDIC and is an Equal Housing Lender.


Contact:  Executive Vice President and Chief Financial Officer
HomeStreet, Inc.
  John Michel (206) 515-2291
  john.michel@homestreet.com
  http://ir.homestreet.com




Forward-Looking Statements

This earnings release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 (the “Reform Act”). Generally, forward-looking statements include the words “anticipate,” “believe,” “estimate,” “expect,” “intend,” “may,” “plan,” “potential,” “goal,” “upcoming,” “outlook,” “guidance” or the negation thereof, or similar expressions. In addition, all statements in this earnings release (including but not limited to those found in the quotes of our Chief Executive Officer) that address and/or include beliefs, assumptions, estimates, projections and expectations of our future performance, financial condition, long-term value creation, capital management, reduction in volatility, reliability of earnings, net interest margins, provisions and allowances for credit losses, cost reduction initiatives, performance of our continued operations relative to our past operations, and restructuring activities are forward-looking statements within the meaning of the Reform Act. Forward-looking statements involve inherent risks, uncertainties and other factors, many of which are difficult to predict and are generally beyond management’s control. Forward-looking statements are based on the Company’s expectations at the time such statements are made and speak only as of the date made. The Company does not assume any obligation or undertake to update any forward-looking statements after the date of this release as a result of new information, future events or developments, except as required by federal securities or other applicable laws, although the Company may do so from time to time. The Company does not endorse any projections regarding future performance that may be made by third parties. For all forward-looking statements, the Company claims the protection of the safe harbor for forward-looking statements contained in the Reform Act.

We caution readers that actual results may differ materially from those expressed in or implied by the Company’s forward-looking statements. Rather, more important factors could affect the Company’s future results, including but not limited to the following: (1) changes in the U.S. and global economies, including business disruptions, reductions in employment, inflationary pressures and an increase in business failures, specifically among our customers; (2) changes in the interest rate environment may reduce interest margins; (3) changes in deposit flows, loan demand or real estate values may adversely affect the business of our primary subsidiary, HomeStreet Bank (the “Bank”), through which substantially all of our operations are carried out; (4) there may be increases in competitive pressure among financial institutions or from non-financial institutions; (5) our ability to attract and retain key members of our senior management team; (6) the timing and occurrence or non-occurrence of events may be subject to circumstances beyond our control; (7) our ability to control operating costs and expenses; (8) our credit quality and the effect of credit quality on our credit losses expense and allowance for credit losses; (9) the adequacy of our allowance for credit losses; (10) changes in accounting principles, policies or guidelines may cause our financial condition to be perceived or interpreted differently; (11) legislative or regulatory changes that may adversely affect our business or financial condition, including, without limitation, changes in corporate and/or individual income tax laws and policies, changes in privacy laws, and changes in regulatory capital or other rules, and the availability of resources to address or respond to such changes; (12) general economic conditions, either nationally or locally in some or all areas in which we conduct business, or conditions in the securities markets or banking industry, may be less favorable than what we currently anticipate; (13) challenges our customers may face in meeting current underwriting standards may adversely impact all or a substantial portion of the value of our rate-lock loan activity we recognize; (14) technological changes may be more difficult or expensive than what we anticipate; (15) a failure in or breach of our operational or security systems or information technology infrastructure, or those of our third-party providers and vendors, including due to cyber-attacks; (16) success or consummation of new business initiatives may be more difficult or expensive than what we anticipate; (17) our ability to grow efficiently both organically and through acquisitions and to manage our growth and integration costs; (18) staffing fluctuations in response to product demand or the implementation of corporate strategies that affect our work force and potential associated charges; (19) litigation, investigations or other matters before regulatory agencies, whether currently existing or commencing in the future, may delay the occurrence or non-occurrence of events longer than what we anticipate; (20) our ability to obtain regulatory approvals or non-objection to take various capital actions, including the payment of dividends by us or the Bank, or repurchases of our common stock; and (21) the integration of our recently acquired branches in southern California. A discussion of the factors, risks and uncertainties that could affect our financial results, business goals and operational and financial objectives cited in this release, other releases, public statements and/or filings with the Securities and Exchange Commission (“SEC”) is also contained in the “Risk Factors” sections of this Company's Forms 10-K and 10-Q. We strongly recommend readers review those disclosures in conjunction with the discussions herein.



All future written and oral forward-looking statements attributable to the Company or any person acting on its behalf are expressly qualified in their entirety by the cautionary statements contained or referred to above. New risks and uncertainties arise from time to time, and factors that the Company currently deems immaterial may become material, and it is impossible for the Company to predict these events or how they may affect the Company.







HomeStreet, Inc. and Subsidiaries
Non-GAAP Financial Measures

To supplement our unaudited condensed consolidated financial statements presented in accordance with GAAP, we use certain non-GAAP measures of financial performance.

In this press release, we use the following non-GAAP measures: (i) tangible common equity and tangible assets as we believe this information is consistent with the treatment by bank regulatory agencies, which exclude intangible assets from the calculation of capital ratios; (ii) core income and effective tax rate on core income before taxes, which excludes goodwill impairment charges and the related tax impact as we believe this measure is a better comparison to be used for projecting future results and (iii) an efficiency ratio which is the ratio of noninterest expense to the sum of net interest income and noninterest income, excluding certain items of income or expense and excluding taxes incurred and payable to the state of Washington as such taxes are not classified as income taxes and we believe including them in noninterest expense impacts the comparability of our results to those companies whose operations are in states where assessed taxes on business are classified as income taxes.

These supplemental performance measures may vary from, and may not be comparable to, similarly titled measures provided by other companies in our industry. Non-GAAP financial measures are not in accordance with, or an alternative for, GAAP. Generally, a non-GAAP financial measure is a numerical measure of a company’s performance that either excludes or includes amounts that are not normally excluded or included in the most directly comparable measure calculated and presented in accordance with GAAP. A non-GAAP financial measure may also be a financial metric that is not required by GAAP or other applicable requirements.

We believe that these non-GAAP financial measures, when taken together with the corresponding GAAP financial measures, provide meaningful supplemental information regarding our performance by providing additional information used by management that is not otherwise required by GAAP or other applicable requirements. Our management uses, and believes that investors benefit from referring to, these non-GAAP financial measures in assessing our operating results and when planning, forecasting and analyzing future periods. These non-GAAP financial measures also facilitate a comparison of our performance to prior periods. We believe these measures are frequently used by securities analysts, investors and other parties in the evaluation of companies in our industry. These non-GAAP financial measures should be considered in addition to, not as a substitute for or superior to, financial measures prepared in accordance with GAAP. In the information below, we have provided reconciliations of, where applicable, the most comparable GAAP financial measures to the non-GAAP measures used in this earnings release, or a reconciliation of the non-GAAP calculation of the financial measure.










HomeStreet, Inc. and Subsidiaries
Non-GAAP Financial Measures

Reconciliations of non-GAAP results of operations to the nearest comparable GAAP measures or calculations of the non-GAAP measure:
As of or for the Quarter Ended
(in thousands, except share and per share data)September 30,
2023		June 30,
2023
Core net income
Net income (loss)$2,295 $(31,442)
Adjustments (tax effected)
Goodwill impairment charge— 34,622 
Total$2,295 $3,180 
Core diluted earnings per share
Fully diluted shares18,792,893 18,775,022 
Ratio$0.12 $0.17 
Return on average tangible equity (annualized)
Average shareholders' equity$535,369 $582,172 
Less: Average goodwill and other intangibles(10,917)(51,138)
Average tangible equity$524,452 $531,034 
Core net income (per above)$2,295 $3,180 
Adjustments (tax effected)
Amortization of core deposit intangibles614 614 
Tangible income applicable to shareholders$2,909 $3,794 
Ratio2.2 %2.9 %
Efficiency ratio
Noninterest expense
Total$49,089 $90,781 
Adjustments:
Goodwill impairment— (39,857)
State of Washington taxes(572)(526)
Adjusted total$48,517 $50,398 
Total revenues
Net interest income$38,912 $43,476 
Noninterest income10,464 10,311 
Adjusted total$49,376 $53,787 
Ratio98.3 %93.7 %
Return on average assets (annualized) - Core
Average Assets$9,433,648 $9,562,817 
Core net income (per above)2,295 3,180 
Ratio0.10 %0.13 %
Tangible book value per share
Shareholders' equity$502,487 $527,623 
Less: Goodwill and other intangibles(10,429)(11,217)
Tangible shareholders' equity$492,058 $516,406 
Common shares outstanding18,794,030 18,776,597 
Computed amount$26.18 $27.50 

v3.23.3
Cover Cover
Oct. 30, 2023
Cover [Abstract]  
Document Type 8-K
Document Period End Date Oct. 30, 2023
Entity Registrant Name HOMESTREET, INC.
Entity Incorporation, State or Country Code WA
Entity File Number 001-35424
Entity Tax Identification Number 91-0186600
Entity Address, Address Line One 601 Union Street
Entity Address, Address Line Two Ste. 2000
Entity Address, City or Town Seattle
Entity Address, State or Province WA
Entity Address, Postal Zip Code 98101
City Area Code 206
Local Phone Number 623-3050
Written Communications false
Soliciting Material false
Pre-commencement Tender Offer false
Pre-commencement Issuer Tender Offer false
Title of 12(b) Security Common Stock, No Par Value
Trading Symbol HMST
Security Exchange Name NASDAQ
Entity Emerging Growth Company false
Entity Central Index Key 0001518715
Amendment Flag false
HomeStreet (NASDAQ:HMST)
Historical Stock Chart
From Apr 2024 to May 2024 Click Here for more HomeStreet Charts.
HomeStreet (NASDAQ:HMST)
Historical Stock Chart
From May 2023 to May 2024 Click Here for more HomeStreet Charts.