0001518715false00015187152024-07-292024-07-29
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): July 29, 2024
HOMESTREET, INC.
(Exact name of registrant as specified in its charter)
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| 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:
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| ☐ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
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| ☐ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
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| ☐ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
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| ☐ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
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| Securities registered pursuant to Section 12(b) of the Act: |
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| Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
| Common Stock, No Par Value | HMST | Nasdaq Global Select Market |
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| 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. |
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| ☐ | Emerging growth company |
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| ☐ | 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. |
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| Item 2.02 | Results of Operations and Financial Condition |
On July 29, 2024, HomeStreet, Inc. issued a press release reporting results of operations for the second quarter of 2024. 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.
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| Item 9.01 | Financial Statements and Exhibits |
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| (d) | Exhibits. |
| Exhibit 99.1 | |
| Exhibit 99.2 | |
| Exhibit 104 | Cover Page Interactive Data File (embedded within with Inline XBRL) |
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: July 29, 2024
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| HomeStreet, Inc. | |
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| By: | | /s/ John M. Michel | |
| | John M. Michel | |
| | Executive Vice President and Chief Financial Officer | |
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HomeStreet Reports Second Quarter 2024 Results
Continuing Strong Asset Quality With Improved Metrics
SEATTLE –July 29, 2024 – (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 June 30, 2024. 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.”
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Operating Results | | Second quarter 2024 compared to first quarter 2024 Reported Results: •Net loss: $6.2 million compared to $7.5 million •Loss per fully diluted share: $0.33 compared to $0.40 •Net interest margin: 1.37% compared to 1.44% |
| Core Results (1): •Loss: $4.3 million compared to $5.5 million •Loss per fully diluted share: $0.23 compared to $0.29 |
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(1) Core loss and core loss per fully diluted share are non-GAAP measures. For a reconciliation of these measures to the nearest comparable GAAP measure see "Non-GAAP financial measures" in this earnings release.“In the second quarter, our net loss was $6.2 million and our core net loss was $4.3 million, both of which were $1.2 million less than the comparable losses incurred in the first quarter,” said Mark Mason, Chairman of the Board, President, and Chief Executive Officer. "Our net interest margin declined to 1.37% due to increased funding costs as lower cost deposits continued to migrate to higher yielding products, our noninterest income was $3.8 million higher and our noninterest expenses decreased by $1.2 million. During this challenging earnings period we continue to focus on reducing expenses where possible. In the quarter, our full time equivalent employees declined to 840 from 858 in the prior quarter. Additionally, while interest rates have stabilized, high current rates may continue to adversely impact our funding costs relative to earning assets yields in the near term."
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| Financial Position | | As of and for the quarter ended June 30, 2024 •Excluding brokered deposits, total deposits increased by $13 million •Uninsured deposits were $492 million, or 8% of total deposits •Loans held for investment ("LHFI"), decreased by $65 million •Nonperforming assets to total assets: 0.42% compared to 0.56% at March 31, 2024 •Delinquencies(2): 0.66% compared to 0.82% at March 31, 2024 •Allowance for credit losses to LHFI: 0.55% •Book value per share: $27.58 •Tangible book value per share: $27.14 (3) |
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(2) Total past due and nonaccrual loans as a percentage of total loans held for investment.(3) Tangible book value per share is a non-GAAP measure. For a reconciliation of this measure to the nearest comparable GAAP measure see "Non-GAAP financial measures" in this earnings release.
"Our quarter-end and average deposit balances, excluding brokered deposits, were stable during the first and second quarter," continued Mark Mason. "We have noticed that the migration of deposits to higher yielding products has slowed significantly during the latter part of the second quarter. If these trends continue we expect that our funding costs will stabilize."
"Our loan balances decreased $65 million during the second quarter as our originations decreased from the first quarter levels and we started to see a low level of prepayments in our commercial real estate loan portfolio. Our loan originations continue to be focused on variable rate loan products with appropriate margins over incremental funding costs," added Mark Mason. “In the second quarter our nonaccrual and nonperforming assets decreased by 25% due to payoffs, resulting in a ratio of nonaccrual assets to total assets of 0.42%. Our total loan delinquencies decreased from 0.82% to 0.66% during the quarter. Our credit quality remains strong and we have not identified any potentially significant credit issues in our loan portfolio. Additionally, our analysis of multifamily loans repricing through the end of 2025 does not indicate any meaningful increased risk of loss.”
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. 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.
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| Contact: | | Executive Vice President and Chief Financial Officer |
| | HomeStreet, Inc. |
| | John Michel (206) 515-2291 |
| | john.michel@homestreet.com |
| | http://ir.homestreet.com |
HomeStreet, Inc. and Subsidiaries
Summary Financial Data
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | For the Quarter Ended | | |
| (in thousands, except per share data and FTE data) | June 30,
2024 | | March 31,
2024 | | December 31,
2023 | | September 30,
2023 | | June 30,
2023 | | | | |
| | | | | | | | | | | | | |
Select Income Statement Data: | | | | | | | | | | | | |
| Net interest income | $ | 29,701 | | | $ | 32,151 | | | $ | 34,989 | | | $ | 38,912 | | | $ | 43,476 | | | | | |
| Provision for credit losses | — | | | — | | | 445 | | | (1,110) | | | (369) | | | | | |
| Noninterest income | 13,227 | | | 9,454 | | | 10,956 | | | 10,464 | | | 10,311 | | | | | |
| Noninterest expense | 50,931 | | | 52,164 | | | 49,511 | | | 49,089 | | | 90,781 | | | | | |
| | | | | | | | | | | | | |
Income (loss) before income taxes | (8,003) | | | (10,559) | | | (4,011) | | | 1,397 | | | (36,625) | | | | | |
Net income (loss) | (6,238) | | | (7,497) | | | (3,419) | | | 2,295 | | | (31,442) | | | | | |
Net income (loss) per fully diluted share | (0.33) | | | (0.40) | | | (0.18) | | | 0.12 | | | (1.67) | | | | | |
Core net income (loss): (1) | | | | | | | | | | | | | |
| Total | (4,341) | | | (5,469) | | | (2,249) | | | 2,295 | | | 3,180 | | | | | |
Core net income (loss) per fully diluted share | (0.23) | | | (0.29) | | | (0.12) | | | 0.12 | | | 0.17 | | | | | |
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| Select Performance Ratios: | | | | | | | | | | | | |
| Return on average equity - annualized | (4.8) | % | | (5.6) | % | | (2.6) | % | | 1.7 | % | | (21.7) | % | | | | |
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Return on average tangible equity - annualized (1) | (3.0) | % | | (3.8) | % | | (1.3) | % | | 2.2 | % | | 2.9 | % | | | | |
| Return on average assets - annualized | | | | | | | | | | | | | |
| Net income (loss) | (0.27) | % | | (0.32) | % | | (0.15) | % | | 0.10 | % | | (1.32) | % | | | | |
Core (1) | (0.19) | % | | (0.23) | % | | (0.10) | % | | 0.10 | % | | 0.13 | % | | | | |
Efficiency ratio (1) | 111.9 | % | | 118.0 | % | | 105.9 | % | | 98.3 | % | | 93.7 | % | | | | |
| Net interest margin | 1.37 | % | | 1.44 | % | | 1.59 | % | | 1.74 | % | | 1.93 | % | | | | |
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| Other data: | | | | | | | | | | | | | |
| Full-time equivalent employees ("FTE") | 840 | | | 858 | | | 875 | | | 901 | | | 910 | | | | | |
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(1)Core net income (loss), core net income (loss) per fully diluted share, return on average tangible equity, core return on average assets and the efficiency ratio are non-GAAP financial measures. For a reconciliation of these measures to the nearest comparable GAAP financial measure or the computation of the measure see “Non-GAAP Financial Measures” in this earnings release.
HomeStreet, Inc. and Subsidiaries
Summary Financial Data (continued)
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| | As of |
| (in thousands, except share and per share data) | June 30,
2024 | | March 31,
2024 | | December 31,
2023 | | September 30,
2023 | | June 30,
2023 |
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| Select Balance Sheet Data: | | | | | | | | | |
Loans held for sale | $ | 29,781 | | | $ | 21,102 | | | $ | 19,637 | | | $ | 33,879 | | | $ | 31,873 | |
Loans held for investment, net | 7,340,309 | | | 7,405,052 | | | 7,382,404 | | | 7,400,501 | | | 7,395,151 | |
Allowance for credit losses ("ACL") | 39,741 | | | 39,677 | | | 40,500 | | | 40,000 | | | 41,500 | |
Investment securities | 1,160,595 | | | 1,191,108 | | | 1,278,268 | | | 1,294,634 | | | 1,397,051 | |
Total assets | 9,266,039 | | | 9,455,182 | | | 9,392,450 | | | 9,458,751 | | | 9,501,475 | |
Deposits | 6,532,470 | | | 6,491,102 | | | 6,763,378 | | | 6,745,551 | | | 6,670,033 | |
Borrowings | 1,886,000 | | | 2,094,000 | | | 1,745,000 | | | 1,873,000 | | | 1,972,000 | |
Long-term debt | 224,948 | | | 224,857 | | | 224,766 | | | 224,671 | | | 224,583 | |
Total shareholders' equity | 520,117 | | | 527,333 | | | 538,387 | | | 502,487 | | | 527,623 | |
Other Data: | | | | | | | | | |
Book value per share | $ | 27.58 | | | $ | 27.96 | | | $ | 28.62 | | | $ | 26.74 | | | $ | 28.10 | |
Tangible book value per share (1) | $ | 27.14 | | | $ | 27.49 | | | $ | 28.11 | | | $ | 26.18 | | | $ | 27.50 | |
| Total equity to total assets | 5.6 | % | | 5.6 | % | | 5.7 | % | | 5.3 | % | | 5.6 | % |
Tangible common equity to tangible assets (1) | 5.5 | % | | 5.5 | % | | 5.6 | % | | 5.2 | % | | 5.4 | % |
Shares outstanding at end of period | 18,857,565 | | 18,857,566 | | 18,810,055 | | 18,794,030 | | 18,776,597 |
Loans to deposit ratio (Bank) | 112.6 | % | | 114.3 | % | | 109.4 | % | | 110.0 | % | | 111.3 | % |
Credit Quality: | | | | | | | | | |
ACL to total loans (2) | 0.55 | % | | 0.54 | % | | 0.55 | % | | 0.55 | % | | 0.57 | % |
| ACL to nonaccrual loans | 109.3 | % | | 80.2 | % | | 103.9 | % | | 103.2 | % | | 104.3 | % |
| Nonaccrual loans to total loans | 0.49 | % | | 0.66 | % | | 0.53 | % | | 0.52 | % | | 0.54 | % |
Nonperforming assets to total assets | 0.42 | % | | 0.56 | % | | 0.45 | % | | 0.42 | % | | 0.44 | % |
Nonperforming assets | $ | 39,374 | | | $ | 52,584 | | | $ | 42,643 | | | $ | 39,749 | | | $ | 41,469 | |
Regulatory Capital Ratios: | | | | | | | | | |
Bank | | | | | | | | | |
| Tier 1 leverage | 8.44 | % | | 8.34 | % | | 8.50 | % | | 8.49 | % | | 8.43 | % |
Total risk-based capital | 13.29 | % | | 13.34 | % | | 13.49 | % | | 13.32 | % | | 12.95 | % |
| Common equity Tier 1 capital | 12.62 | % | | 12.67 | % | | 12.79 | % | | 12.64 | % | | 12.27 | % |
Company | | | | | | | | | |
| Tier 1 leverage | 6.98 | % | | 6.90 | % | | 7.04 | % | | 7.01 | % | | 6.93 | % |
Total risk-based capital | 12.67 | % | | 12.70 | % | | 12.84 | % | | 12.62 | % | | 12.16 | % |
| Common equity Tier 1 capital | 9.49 | % | | 9.55 | % | | 9.66 | % | | 9.52 | % | | 9.14 | % |
(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.
HomeStreet, Inc. and Subsidiaries
Consolidated Balance Sheets
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(in thousands, except share data) | | June 30, 2024 | | December 31, 2023 |
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| ASSETS | | | | |
Cash and cash equivalents | | $ | 218,731 | | | $ | 215,664 | |
| | | | |
Investment securities | | 1,160,595 | | | 1,278,268 | |
Loans held for sale | | 29,781 | | | 19,637 | |
Loans held for investment ("LHFI") (net of allowance for credit losses of $39,741 and $40,500) | | 7,340,309 | | | 7,382,404 | |
Mortgage servicing rights | | 101,308 | | | 104,236 | |
Premises and equipment, net | | 50,353 | | | 53,582 | |
Other real estate owned | | 3,000 | | | 3,667 | |
Intangible assets | | 8,391 | | | 9,641 | |
Other assets | | 353,571 | | | 325,351 | |
| Total assets | | $ | 9,266,039 | | | $ | 9,392,450 | |
| LIABILITIES AND SHAREHOLDERS' EQUITY | | | | |
| Liabilities: | | | | |
Deposits | | $ | 6,532,470 | | | $ | 6,763,378 | |
Borrowings | | 1,886,000 | | | 1,745,000 | |
Long-term debt | | 224,948 | | | 224,766 | |
Accounts payable and other liabilities | | 102,504 | | | 120,919 | |
| Total liabilities | | 8,745,922 | | | 8,854,063 | |
Shareholders' equity: | | | | |
Common stock, no par value; 160,000,000 shares authorized | | | | |
18,857,565 and 18,810,055 shares issued and outstanding | | 231,721 | | | 229,889 | |
Retained earnings | | 381,622 | | | 395,357 | |
| Accumulated other comprehensive income (loss) | | (93,226) | | | (86,859) | |
| Total shareholders' equity | | 520,117 | | | 538,387 | |
| Total liabilities and shareholders' equity | | $ | 9,266,039 | | | $ | 9,392,450 | |
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HomeStreet, Inc. and Subsidiaries
Consolidated Income Statements
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| Quarter Ended June 30, | | Six Months Ended June 30, |
| (in thousands, except share and per share data) | 2024 | | 2023 | | 2024 | | 2023 |
| Interest income: | | | | | | | |
| Loans | $ | 87,323 | | | $ | 85,813 | | | $ | 173,579 | | | $ | 168,351 | |
| Investment securities | 10,160 | | | 12,872 | | | 20,874 | | | 25,635 | |
| Cash, Fed Funds and other | 3,640 | | | 2,022 | | | 9,211 | | | 3,772 | |
Total interest income | 101,123 | | | 100,707 | | | 203,664 | | | 197,758 | |
| Interest expense: | | | | | | | |
| Deposits | 43,535 | | | 35,393 | | | 86,142 | | | 64,763 | |
| Borrowings | 27,887 | | | 21,838 | | | 55,670 | | | 40,143 | |
Total interest expense | 71,422 | | | 57,231 | | | 141,812 | | | 104,906 | |
Net interest income | 29,701 | | | 43,476 | | | 61,852 | | | 92,852 | |
| Provision for credit losses | — | | | (369) | | | — | | | 224 | |
| Net interest income after provision for credit losses | 29,701 | | | 43,845 | | | 61,852 | | | 92,628 | |
| Noninterest income: | | | | | | | |
| Net gain on loan origination and sale activities | 3,036 | | | 2,456 | | | 5,342 | | | 4,866 | |
| Loan servicing income | 3,410 | | | 3,259 | | | 6,442 | | | 6,298 | |
| Deposit fees | 2,209 | | | 2,704 | | | 4,450 | | | 5,362 | |
| Other | 4,572 | | | 1,892 | | | 6,447 | | | 3,975 | |
Total noninterest income | 13,227 | | | 10,311 | | | 22,681 | | | 20,501 | |
| Noninterest expense: | | | | | | | |
| Compensation and benefits | 27,616 | | | 27,776 | | | 55,627 | | | 57,029 | |
| Information services | 7,580 | | | 7,483 | | | 14,922 | | | 14,628 | |
| Occupancy | 5,130 | | | 5,790 | | | 10,564 | | | 11,528 | |
| General, administrative and other | 10,605 | | | 9,875 | | | 21,982 | | | 20,230 | |
| Goodwill impairment | — | | | 39,857 | | | — | | | 39,857 | |
Total noninterest expense | 50,931 | | | 90,781 | | | 103,095 | | | 143,272 | |
| Income (loss) before income taxes | (8,003) | | | (36,625) | | | (18,562) | | | (30,143) | |
| Income tax (benefit) expense | (1,765) | | | (5,183) | | | (4,827) | | | (3,759) | |
| Net income (loss) | $ | (6,238) | | | $ | (31,442) | | | $ | (13,735) | | | $ | (26,384) | |
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| Net income (loss) per share: | | | | | | | |
| Basic | $ | (0.33) | | | $ | (1.67) | | | $ | (0.73) | | | $ | (1.41) | |
| Diluted | $ | (0.33) | | | $ | (1.67) | | | $ | (0.73) | | | $ | (1.41) | |
| Weighted average shares outstanding: | | | | | | | |
Basic | 18,857,566 | | 18,775,022 | | 18,857,218 | | 18,765,292 |
Diluted | 18,857,566 | | 18,775,022 | | 18,857,218 | | 18,765,292 |
HomeStreet, Inc. and Subsidiaries
Five Quarter Consolidated Income Statements
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| | Quarter Ended |
| (in thousands, except share and per share data) | June 30,
2024 | | March 31,
2024 | | December 31,
2023 | | September 30,
2023 | | June 30,
2023 |
| Interest income: | | | | | | | | | |
| Loans | $ | 87,323 | | | $ | 86,256 | | | $ | 87,005 | | | $ | 85,899 | | | $ | 85,813 | |
| Investment securities | 10,160 | | | 10,714 | | | 11,671 | | | 12,309 | | | 12,872 | |
| Cash, Fed Funds and other | 3,640 | | | 5,571 | | | 2,603 | | | 2,498 | | | 2,022 | |
| Total interest income | 101,123 | | | 102,541 | | | 101,279 | | | 100,706 | | | 100,707 | |
| Interest expense: | | | | | | | | | |
| Deposits | 43,535 | | | 42,607 | | | 39,317 | | | 33,840 | | | 35,393 | |
| Borrowings | 27,887 | | | 27,783 | | | 26,973 | | | 27,954 | | | 21,838 | |
| Total interest expense | 71,422 | | | 70,390 | | | 66,290 | | | 61,794 | | | 57,231 | |
Net interest income | 29,701 | | | 32,151 | | | 34,989 | | | 38,912 | | | 43,476 | |
| Provision for credit losses | — | | | — | | | 445 | | | (1,110) | | | (369) | |
| Net interest income after provision for credit losses | 29,701 | | | 32,151 | | | 34,544 | | | 40,022 | | | 43,845 | |
| Noninterest income: | | | | | | | | | |
| Net gain on loan origination and sale activities | 3,036 | | | 2,306 | | | 2,108 | | | 2,372 | | | 2,456 | |
| Loan servicing income | 3,410 | | | 3,032 | | | 3,258 | | | 3,092 | | | 3,259 | |
| Deposit fees | 2,209 | | | 2,241 | | | 2,331 | | | 2,455 | | | 2,704 | |
| Other | 4,572 | | | 1,875 | | | 3,259 | | | 2,545 | | | 1,892 | |
| Total noninterest income | 13,227 | | | 9,454 | | | 10,956 | | | 10,464 | | | 10,311 | |
| Noninterest expense: | | | | | | | | | |
| Compensation and benefits | 27,616 | | | 28,011 | | | 27,033 | | | 27,002 | | | 27,776 | |
| Information services | 7,580 | | | 7,342 | | | 7,694 | | | 7,579 | | | 7,483 | |
| Occupancy | 5,130 | | | 5,434 | | | 5,407 | | | 5,306 | | | 5,790 | |
| General, administrative and other | 10,605 | | | 11,377 | | | 9,377 | | | 9,202 | | | 9,875 | |
| Goodwill impairment | — | | | — | | | — | | | — | | | 39,857 | |
| Total noninterest expense | 50,931 | | | 52,164 | | | 49,511 | | | 49,089 | | | 90,781 | |
| Income (loss) before income taxes | (8,003) | | | (10,559) | | | (4,011) | | | 1,397 | | | (36,625) | |
| Income tax (benefit) expense | (1,765) | | | (3,062) | | | (592) | | | (898) | | | (5,183) | |
| Net income (loss) | $ | (6,238) | | | $ | (7,497) | | | $ | (3,419) | | | $ | 2,295 | | | $ | (31,442) | |
| | | | | | | | | |
| Net income (loss) per share: | | | | | | | | | |
| Basic | $ | (0.33) | | | $ | (0.40) | | | $ | (0.18) | | | $ | 0.12 | | | $ | (1.67) | |
| Diluted | $ | (0.33) | | | $ | (0.40) | | | $ | (0.18) | | | $ | 0.12 | | | $ | (1.67) | |
Weighted average shares outstanding: | | | | | | | | | |
| Basic | 18,857,566 | | 18,856,870 | | 18,807,965 | | 18,792,893 | | 18,775,022 |
| Diluted | 18,857,566 | | 18,856,870 | | 18,807,965 | | 18,792,893 | | 18,775,022 |
HomeStreet, Inc. and Subsidiaries
Average Balances, Yields (Taxable-equivalent basis) and Rates
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Quarter Ended June 30, | | Six Months Ended June 30, |
| Average Balances: | | 2024 | | 2023 | | 2024 | | 2023 |
Investment securities | | $ | 1,164,144 | | | $ | 1,444,819 | | | $ | 1,201,618 | | | $ | 1,448,457 | |
Loans | | 7,454,945 | | | 7,499,800 | | | 7,457,798 | | | 7,485,706 | |
| Total interest-earning assets | | 8,858,433 | | | 9,109,807 | | | 8,973,319 | | | 9,080,309 | |
| Total assets | | 9,272,131 | | | 9,562,817 | | | 9,387,160 | | | 9,546,850 | |
Deposits: Interest-bearing | | 5,122,284 | | | 5,584,825 | | | 5,177,460 | | | 5,642,940 | |
| Deposits: Noninterest-bearing | | 1,282,447 | | | 1,437,133 | | | 1,300,878 | | | 1,474,080 | |
Borrowings | | 2,025,415 | | | 1,630,102 | | | 2,049,971 | | | 1,487,019 | |
Long-term debt | | 224,903 | | | 224,523 | | | 224,858 | | | 224,479 | |
Total interest-bearing liabilities | | 7,372,602 | | | 7,439,450 | | | 7,452,289 | | | 7,354,438 | |
| | | | | | | | |
| Average Yield/Rate: | | | | | | | | |
Investment securities | | 3.80 | % | | 3.82 | % | | 3.78 | % | | 3.80 | % |
Loans | | 4.66 | % | | 4.56 | % | | 4.63 | % | | 4.50 | % |
Total interest earning assets | | 4.59 | % | | 4.45 | % | | 4.56 | % | | 4.40 | % |
Deposits: Interest-bearing | | 3.41 | % | | 2.54 | % | | 3.34 | % | | 2.31 | % |
Total deposits | | 2.73 | % | | 2.02 | % | | 2.67 | % | | 1.83 | % |
Borrowings | | 4.85 | % | | 4.62 | % | | 4.79 | % | | 4.60 | % |
Long-term debt | | 5.49 | % | | 5.34 | % | | 5.50 | % | | 5.31 | % |
Total interest-bearing liabilities | | 3.87 | % | | 3.08 | % | | 3.81 | % | | 2.87 | % |
Net interest rate spread | | 0.72 | % | | 1.37 | % | | 0.76 | % | | 1.54 | % |
Net interest margin | | 1.37 | % | | 1.93 | % | | 1.40 | % | | 2.08 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| (in thousands, except yield/rate) | | Quarter Ended |
| Average Balances: | | June 30,
2024 | | March 31,
2024 | | December 31,
2023 | | September 30,
2023 | | June 30,
2023 |
Investment securities | | $ | 1,164,144 | | | $ | 1,239,093 | | | $ | 1,278,344 | | | $ | 1,356,410 | | | $ | 1,444,819 | |
Loans | | 7,454,945 | | | 7,460,650 | | | 7,465,375 | | | 7,461,220 | | | 7,499,800 | |
Total interest earning assets | | 8,858,433 | | | 9,088,205 | | | 8,923,338 | | | 9,007,360 | | | 9,109,807 | |
| Total assets | | 9,272,131 | | | 9,502,189 | | | 9,351,866 | | | 9,433,648 | | | 9,562,817 | |
Deposits: Interest-bearing | | 5,122,284 | | | 5,232,637 | | | 5,187,242 | | | 5,092,025 | | | 5,584,825 | |
Deposits: Noninterest-bearing | | 1,282,447 | | | 1,319,309 | | | 1,343,043 | | | 1,430,834 | | | 1,437,133 | |
Borrowings | | 2,025,415 | | | 2,074,527 | | | 1,975,536 | | | 2,051,584 | | | 1,630,102 | |
Long-term debt | | 224,903 | | | 224,812 | | | 224,722 | | | 224,614 | | | 224,523 | |
Total interest-bearing liabilities | | 7,372,602 | | | 7,531,976 | | | 7,387,500 | | | 7,368,223 | | | 7,439,450 | |
| | | | | | | | | | |
| Average Yield/Rate: | | | | | | | | | | |
Investment securities | | 3.80 | % | | 3.75 | % | | 3.94 | % | | 3.90 | % | | 3.82 | % |
Loans | | 4.66 | % | | 4.60 | % | | 4.60 | % | | 4.54 | % | | 4.56 | % |
Total interest earning assets | | 4.59 | % | | 4.54 | % | | 4.52 | % | | 4.46 | % | | 4.45 | % |
Deposits: Interest-bearing | | 3.41 | % | | 3.27 | % | | 3.00 | % | | 2.63 | % | | 2.54 | % |
Total deposits | | 2.73 | % | | 2.61 | % | | 2.39 | % | | 2.06 | % | | 2.02 | % |
Borrowings | | 4.85 | % | | 4.73 | % | | 4.74 | % | | 4.81 | % | | 4.62 | % |
Long-term debt | | 5.49 | % | | 5.51 | % | | 5.52 | % | | 5.49 | % | | 5.34 | % |
Total interest-bearing liabilities | | 3.87 | % | | 3.74 | % | | 3.55 | % | | 3.33 | % | | 3.08 | % |
Net interest rate spread | | 0.72 | % | | 0.80 | % | | 0.98 | % | | 1.13 | % | | 1.37 | % |
Net interest margin | | 1.37 | % | | 1.44 | % | | 1.59 | % | | 1.74 | % | | 1.93 | % |
Results of Operations
Second Quarter of 2024 Compared to the First Quarter of 2024
Non-core amounts: For the second quarter and first quarter of 2024 non-core items include $2.4 million and $2.6 million of merger related expenses, respectively.
Our net loss and loss before income taxes were $(6.2) million and $(8.0) million, respectively, in the second quarter of 2024, as compared to $(7.5) million and $(10.6) million, respectively, in the first quarter of 2024. The $2.6 million decrease in loss before income taxes was due to higher noninterest income and a decrease in noninterest expense which was partially offset by lower net interest income.
The income tax benefit realized resulted in an effective tax rate of 22.1% for the second quarter of 2024 as compared to an effective tax rate of 29.0% in the first quarter of 2024. Certain merger related expenses are not deductible for tax purposes, the recognition of which resulted in a lower effective tax rate in the second quarter.
Our net interest income in the second quarter of 2024 was $2.5 million lower than the first quarter of 2024 due to a decrease in our net interest margin from 1.44% to 1.37%. The decrease in our net interest margin was due to a 13 basis point increase in the cost of interest-bearing liabilities which was due primarily to a 12 basis point increase in the cost of deposits. The increase in the rates paid on deposits was due to the migration of noninterest-bearing and lower cost interest-bearing accounts to higher cost certificates of deposit and money market accounts.
There was no provision for credit losses recognized during either the second quarter of 2024 or the first quarter of 2024. This reflects the stable balance of our loan portfolio, a minimal level of identified credit issues in our loan portfolio and the lack of significant expected credit issues arising in future periods.
Noninterest income in the second quarter of 2024 increased from the first quarter of 2024 primarily due to $2.6 million more income realized in the second quarter of 2024 from our investments in small business investment companies and $0.7 million more gain on loan sales and originations related to seasonal increases in single family mortgage originations.
The 2.4% decrease in noninterest expenses in the second quarter of 2024, as compared to the first quarter of 2024, reflects the Company's emphasis on reducing operating expenses where possible.
Six Months Ended June 30, 2024 Compared to Six Months Ended June 30, 2023
Non-core amounts: For the six months ended June 30, 2024, non-core items include $5.0 million of merger related expenses. During the six months ended June 30, 2023, non-core items include a $39.9 million goodwill impairment charge.
Our net income (loss) and income (loss) before income taxes were $(13.7) million and $(18.6) million, respectively, in the six months ended June 30, 2024, as compared to $(26.4) million and $(30.1) million, respectively, in the six months ended June 30, 2023. Our core net income (loss) and core income (loss) before income taxes in the six months ended June 30, 2024, which excludes the impact of merger related expenses and goodwill impairment charges, was $(9.8) million and $(13.5) million, as compared to $8.2 million and $9.7 million, respectively, in the six months ended June 30, 2023. The $23.2 million decrease in core income before taxes was primarily due to lower net interest income, partially offset by an increase in noninterest income and a decrease in noninterest expenses.
The income tax benefit realized in the six months ended June 30, 2024 resulted in an effective tax rate of 26.0% which was higher than our statutory rate of 24.6% due to the impact of tax advantaged investments which creates a higher benefit to our loss. Our effective tax rate in the six months ended June 30, 2023 of 12.5% was significantly impacted by the goodwill impairment charge, a portion of which is not deductible for tax purposes.
Net interest income in the six months ended June 30, 2024 decreased $31.0 million as compared to the six months ended June 30, 2023 due primarily to a decrease in our net interest margin. Our net interest margin decreased from 2.08% in the six months ended June 30, 2023 to 1.40% in the six months ended June 30, 2024 due to a 94 basis point increase in the rates paid on interest-bearing liabilities which was partially offset by a 16 basis point increase in the yield on interest earning assets. Yields on interest-earning assets increased as yields on adjustable rate loans increased due to increases in the indexes on which their pricing is based. The increase in the rates paid on our interest-bearing liabilities was due to an increase in the proportion of higher cost borrowings and a decrease in the proportion of noninterest-bearing deposits to the total balance of interest-bearing liabilities and higher deposit costs and higher borrowing costs. The increases in the rates paid on deposits were due to increases in market interest rates over the prior year and the migration of noninterest-bearing and lower cost interest-bearing accounts to higher cost certificates of deposit and money market accounts.
There was no provision for credit losses recognized during the six months ended June 30, 2024 as compared to a $0.2 million provision in the six months ended June 30, 2023. These low levels of provisions for credit losses reflect the stable balance of our loan portfolio, a minimal level of identified credit issues in our loan portfolio and the lack of significant expected credit issues arising in future periods.
Noninterest income in the six months ended June 30, 2024 increased from the six months ended June 30, 2023 primarily due to higher levels of income realized from our investments in small business investment companies in the first six months of 2024.
The $40.2 million decrease in noninterest expenses in the six months ended June 30, 2024 as compared to the six months ended June 30, 2023 was primarily due to a $39.9 million goodwill impairment in the six months ended June 30, 2023, lower compensation and benefit costs and lower general and administrative costs, partially offset by $5.0 million of merger related expenses recognized in 2024. The decrease in compensation and benefit costs was primarily due to lower staffing levels, which was partially offset by wage increases given in the six months ended June 30, 2024. FTEs decreased from 915 in the six months ended June 30, 2023 to 849 in the six months ended June 30, 2024. The lower general administrative and other costs included reductions in consulting fees and marketing costs which reflected the Company’s emphasis on reducing operating expenses where possible.
Financial Position
During the six months ended June 30, 2024, our total assets decreased $126 million due primarily to a $118 million decrease in investment securities as we are not purchasing new investment securities to replace principal paydowns in our portfolio. During the six months ended June 30, 2024 total liabilities decreased $108 million due to a decrease in deposits partially offset by an increase in borrowings. The $231 million decrease in deposits was primarily due to a $269 million decrease in brokered certificates of deposit. The $141 million of additional borrowings were used to replace maturing brokered deposits.
Loans Held for Investment
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| (in thousands) | | June 30,
2024 | | March 31,
2024 | | December 31,
2023 | | September 30,
2023 | | June 30,
2023 |
| | | | | | | | | | |
| Commercial real estate ("CRE") | | | | | | | | | | |
| Non-owner occupied CRE | | $ | 612,937 | | | $ | 633,401 | | | $ | 641,885 | | | $ | 633,083 | | | $ | 650,710 | |
| Multifamily | | 3,935,158 | | | 3,929,679 | | | 3,940,189 | | | 3,957,209 | | | 3,966,894 | |
| Construction/land development | | 530,445 | | | 575,152 | | | 565,916 | | | 566,289 | | | 576,432 | |
| Total | | 5,078,540 | | | 5,138,232 | | | 5,147,990 | | | 5,156,581 | | | 5,194,036 | |
| Commercial and industrial loans | | | | | | | | | | |
| Owner occupied CRE | | 372,452 | | | 381,943 | | | 391,285 | | | 428,253 | | | 434,400 | |
| Commercial business | | 376,711 | | | 387,464 | | | 359,049 | | | 385,148 | | | 371,779 | |
| Total | | 749,163 | | | 769,407 | | | 750,334 | | | 813,401 | | | 806,179 | |
| Consumer loans | | | | | | | | | | |
Single family (1) | | 1,152,004 | | | 1,149,940 | | | 1,140,279 | | | 1,099,644 | | | 1,068,229 | |
| Home equity and other | | 400,343 | | | 387,150 | | | 384,301 | | | 370,875 | | | 368,207 | |
| Total | | 1,552,347 | | | 1,537,090 | | | 1,524,580 | | | 1,470,519 | | | 1,436,436 | |
| Total LHFI | | 7,380,050 | | | 7,444,729 | | | 7,422,904 | | | 7,440,501 | | | 7,436,651 | |
| Allowance for credit losses ("ACL") | | (39,741) | | | (39,677) | | | (40,500) | | | (40,000) | | | (41,500) | |
| Total LHFI less ACL | | $ | 7,340,309 | | | $ | 7,405,052 | | | $ | 7,382,404 | | | $ | 7,400,501 | | | $ | 7,395,151 | |
(1)Includes $1.3 million, $1.3 million, $1.3 million, $1.2 million and $1.3 million of single family loans that are carried at fair value at June 30, 2024, March 31, 2024, December 31, 2023, September 30, 2023 and June 30, 2023, respectively.
Loan Roll-forward
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| (in thousands) | | June 30,
2024 | | March 31,
2024 | | December 31,
2023 | | September 30,
2023 | | June 30,
2023 |
| | | | | | | | | | |
| Loans - beginning balance | | $ | 7,444,729 | | | $ | 7,422,904 | | | $ | 7,440,501 | | | $ | 7,436,651 | | | $ | 7,486,382 | |
| Originations and advances | | 282,460 | | | 287,568 | | | 297,867 | | | 329,294 | | | 327,949 | |
| Transfers (to) from loans held for sale | | (520) | | | (273) | | | — | | | 466 | | | (2,973) | |
| Payoffs, paydowns and other | | (346,533) | | | (264,876) | | | (312,265) | | | (325,312) | | | (374,484) | |
| Charge-offs and transfers to OREO | | (86) | | | (594) | | | (3,199) | | | (598) | | | (223) | |
| Loans - ending balance | | $ | 7,380,050 | | | $ | 7,444,729 | | | $ | 7,422,904 | | | $ | 7,440,501 | | | $ | 7,436,651 | |
Loan Originations and Advances
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| (in thousands) | | June 30,
2024 | | March 31,
2024 | | December 31,
2023 | | September 30,
2023 | | June 30,
2023 |
| | | | | | | | | | |
| CRE | | | | | | | | | | |
| Non-owner occupied CRE | | $ | 977 | | | $ | 1,146 | | | $ | 12,405 | | | $ | 2,315 | | | $ | 2,371 | |
Multifamily | | 17,495 | | | 489 | | | 1,482 | | | 44,356 | | | 65,635 | |
| Construction/land development | | 152,681 | | | 157,453 | | | 158,755 | | | 155,460 | | | 152,907 | |
| Total | | 171,153 | | | 159,088 | | | 172,642 | | | 202,131 | | | 220,913 | |
| Commercial and industrial loans | | | | | | | | | | |
| Owner occupied CRE | | 663 | | | 949 | | | 7,883 | | | 2,242 | | | 8,622 | |
| Commercial business | | 38,990 | | | 61,400 | | | 21,115 | | | 34,255 | | | 14,722 | |
| Total | | 39,653 | | | 62,349 | | | 28,998 | | | 36,497 | | | 23,344 | |
| Consumer loans | | | | | | | | | | |
Single family (1) | | 33,359 | | | 31,769 | | | 62,167 | | | 57,483 | | | 45,055 | |
| Home equity and other | | 38,295 | | | 34,362 | | | 34,060 | | | 33,183 | | | 38,637 | |
| Total | | 71,654 | | | 66,131 | | | 96,227 | | | 90,666 | | | 83,692 | |
| Total loan originations and advances | | $ | 282,460 | | | $ | 287,568 | | | $ | 297,867 | | | $ | 329,294 | | | $ | 327,949 | |
(1) Includes loans transferred from construction loans to permanent single family loans upon completion of construction of $31.6 million, $30.8 million, $57.6 million, $55.1 million and $32.5 million for the quarters ended June 30, 2024, March 31, 2024, December 31, 2023, September 30, 2023 and June 30, 2023, respectively.
Credit Quality
During the second quarter of 2024, our ratios of nonperforming assets to total assets and total loans delinquent over 30 days, including nonaccrual loans decreased from their previous low levels. As of June 30, 2024, our ratio of nonperforming assets to total assets decreased to 0.42% from 0.56% at March 31, 2024 while our ratio of total loans delinquent over 30 days, including nonaccrual loans, to total loans decreased to 0.66% from 0.82% at March 31, 2024.
Delinquencies
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Past Due and Still Accruing | | | | | | | | | |
| (in thousands) | | 30-59 days | | 60-89 days | | 90 days or more (1) | | Nonaccrual | | | Total past due and nonaccrual (2) | | Current | | Total
loans |
| | | | | | | | | | | | | | | |
| June 30, 2024 | | | | | | | | | | | | | | | |
| Total loans held for investment | | $ | 3,824 | | | $ | 2,691 | | | $ | 5,459 | | | $ | 36,374 | | | | $ | 48,348 | | | $ | 7,331,702 | | | $ | 7,380,050 | |
| % | | 0.05 | % | | 0.04 | % | | 0.08 | % | | 0.49 | % | | | 0.66 | % | | 99.34 | % | | 100.00 | % |
| | | | | | | | | | | | | | | |
| March 31, 2024 | | | | | | | | | | | | | | | |
| Total loans held for investment | | $ | 5,349 | | | $ | 2,630 | | | $ | 3,794 | | | $ | 49,467 | | | | $ | 61,240 | | | $ | 7,383,489 | | | $ | 7,444,729 | |
| % | | 0.07 | % | | 0.04 | % | | 0.05 | % | | 0.66 | % | | | 0.82 | % | | 99.18 | % | | 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 $11.3 million and $11.9 million at June 30, 2024 and March 31, 2024, respectively.
Allowance for Credit Losses (roll-forward)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Quarter Ended |
| (in thousands) | | June 30,
2024 | | March 31,
2024 | | December 31,
2023 | | September 30,
2023 | | June 30,
2023 |
| | | | | | | | | | |
| Allowance for credit losses | | | | | | | | | | |
| Beginning balance | | $ | 39,677 | | | $ | 40,500 | | | $ | 40,000 | | | $ | 41,500 | | | $ | 41,500 | |
| Provision for credit losses | | 128 | | | 242 | | | 223 | | | (990) | | | 111 | |
| Recoveries (charge-offs), net | | (64) | | | (1,065) | | | 277 | | | (510) | | | (111) | |
Ending balance | | $ | 39,741 | | | $ | 39,677 | | | $ | 40,500 | | | $ | 40,000 | | | $ | 41,500 | |
| | | | | | | | | | |
Allowance for unfunded commitments: | | | | | | | | | | |
| Beginning balance | | $ | 1,581 | | | $ | 1,823 | | | $ | 1,601 | | | $ | 1,721 | | | $ | 2,201 | |
| Provision for credit losses | | (128) | | | (242) | | | 222 | | | (120) | | | (480) | |
Ending balance | | $ | 1,453 | | | $ | 1,581 | | | $ | 1,823 | | | $ | 1,601 | | | $ | 1,721 | |
| | | | | | | | | | |
| Provision for credit losses: | | | | | | | | | | |
| Allowance for credit losses - loans | | $ | 128 | | | $ | 242 | | | $ | 223 | | | $ | (990) | | | $ | 111 | |
| Allowance for unfunded commitments | | (128) | | | (242) | | | 222 | | | (120) | | | (480) | |
Total | | $ | — | | | $ | — | | | $ | 445 | | | $ | (1,110) | | | $ | (369) | |
| | | | | | | | | | |
Allocation of Allowance for Credit Losses by Product Type
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| June 30, 2024 | | March 31, 2024 | | December 31, 2023 |
| (in thousands) | Balance | | Rate (1) | | Balance | | Rate (1) | | Balance | | Rate (1) |
| | | | | | | | | | | |
| Non-owner occupied CRE | $ | 1,777 | | | 0.29 | % | | $ | 2,131 | | | 0.34 | % | | $ | 2,610 | | | 0.41 | % |
Multifamily | 17,070 | | | 0.43 | % | | 18,947 | | | 0.48 | % | | 13,093 | | | 0.33 | % |
Construction/land development | | | | | | | | | | | |
Multifamily construction | 1,971 | | | 1.03 | % | | 1,621 | | | 0.84 | % | | 3,983 | | | 2.37 | % |
| CRE construction | 35 | | | 0.53 | % | | 188 | | | 1.02 | % | | 189 | | | 1.02 | % |
| Single family construction | 5,445 | | | 2.03 | % | | 5,578 | | | 2.00 | % | | 7,365 | | | 2.69 | % |
| Single family construction to perm | 300 | | | 0.47 | % | | 435 | | | 0.51 | % | | 672 | | | 0.64 | % |
| Total CRE | 26,598 | | | 0.52 | % | | 28,900 | | | 0.56 | % | | 27,912 | | | 0.54 | % |
| Owner occupied CRE | 731 | | | 0.20 | % | | 836 | | | 0.22 | % | | 899 | | | 0.23 | % |
Commercial business | 5,595 | | | 1.49 | % | | 2,646 | | | 0.69 | % | | 2,950 | | | 0.83 | % |
| Total commercial and industrial | 6,326 | | | 0.85 | % | | 3,482 | | | 0.46 | % | | 3,849 | | | 0.52 | % |
Single family | 3,844 | | | 0.36 | % | | 4,273 | | | 0.40 | % | | 5,287 | | | 0.51 | % |
Home equity and other | 2,973 | | | 0.74 | % | | 3,022 | | | 0.78 | % | | 3,452 | | | 0.90 | % |
| Total consumer | 6,817 | | | 0.47 | % | | 7,295 | | | 0.51 | % | | 8,739 | | | 0.61 | % |
| Total | $ | 39,741 | | | 0.55 | % | | $ | 39,677 | | | 0.54 | % | | $ | 40,500 | | | 0.55 | % |
(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) | | June 30,
2024 | | March 31,
2024 | | December 31,
2023 | | September 30,
2023 | | June 30,
2023 | | | | |
| | | | | | | | | | | | | | |
| Loan originations | | | | | | | | | | | | | | |
Single family loans | | $ | 101,057 | | | $ | 76,528 | | | $ | 67,330 | | | $ | 95,917 | | | $ | 96,750 | | | | | |
Commercial and industrial and CRE loans | | 19,593 | | | 3,496 | | | 7,142 | | | 11,863 | | | 4,906 | | | | | |
Loans sold | | | | | | | | | | | | | | |
| Single family loans | | 98,081 | | | 70,379 | | | 77,916 | | | 101,575 | | | 92,787 | | | | | |
Commercial and industrial and CRE loans (1) | | 13,539 | | | 8,196 | | | 10,619 | | | 2,821 | | | 4,649 | | | | | |
| Net gain on loan origination and sale activities | | | | | | | | | | | | | | |
| Single family loans | | 2,718 | | | 1,986 | | | 1,844 | | | 2,267 | | | 2,171 | | | | | |
Commercial and industrial and CRE loans (1) | | 318 | | | 320 | | | 264 | | | 105 | | | 285 | | | | | |
| Total | | $ | 3,036 | | | $ | 2,306 | | | $ | 2,108 | | | $ | 2,372 | | | $ | 2,456 | | | | | |
(1) May include loans originated as held for investment.
Loan Servicing Income
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Quarter Ended | | |
| (in thousands) | | June 30,
2024 | | March 31,
2024 | | December 31,
2023 | | September 30,
2023 | | June 30,
2023 | | | | |
| | | | | | | | | | | | | | |
| Single family servicing income, net: | | | | | | | | | | | | |
| Servicing fees and other | | $ | 3,751 | | | $ | 3,839 | | | $ | 3,880 | | | $ | 3,852 | | | $ | 3,868 | | | | | |
Changes - amortization (1) | | (1,713) | | | (1,428) | | | (1,504) | | | (1,564) | | | (1,626) | | | | | |
| Net | | 2,038 | | | 2,411 | | | 2,376 | | | 2,288 | | | 2,242 | | | | | |
| Risk management, single family MSRs: | | | | | | | | | | | | |
Changes in fair value due to assumptions (2) | | 529 | | | 618 | | | (1,380) | | | 785 | | | 1,320 | | | | | |
Net gain (loss) from derivatives hedging (3) | | (509) | | | (1,110) | | | 1,089 | | | (1,160) | | | (1,592) | | | | | |
| Subtotal | | 20 | | | (492) | | | (291) | | | (375) | | | (272) | | | | | |
| Single family servicing income | | 2,058 | | | 1,919 | | | 2,085 | | | 1,913 | | | 1,970 | | | | | |
| Commercial loan servicing income: | | | | | | | | | | | | |
| Servicing fees and other | | 2,811 | | | 2,515 | | | 2,588 | | | 2,553 | | | 2,724 | | | | | |
| Amortization of capitalized MSRs | | (1,459) | | | (1,402) | | | (1,415) | | | (1,374) | | | (1,435) | | | | | |
| Total | | 1,352 | | | 1,113 | | | 1,173 | | | 1,179 | | | 1,289 | | | | | |
| Total loan servicing income | | $ | 3,410 | | | $ | 3,032 | | | $ | 3,258 | | | $ | 3,092 | | | $ | 3,259 | | | | | |
(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.
(3)The interest income from US Treasury notes trading securities used for hedging purposes, which is included in interest income on the consolidated income statements, was $0.3 million for each of the quarters ended June 30, 2024, March 31, 2024, December 31, 2023 and September 30, 2023 and $0.5 million for the quarter ended June 30, 2023.
Capitalized Mortgage Servicing Rights ("MSRs")
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Quarter Ended |
| (in thousands) | | June 30,
2024 | | March 31,
2024 | | December 31,
2023 | | September 30,
2023 | | June 30,
2023 |
| | | | | | | | | | |
| Single Family MSRs | | | | | | | | | | |
| Beginning balance | | $ | 74,056 | | | $ | 74,249 | | | $ | 76,470 | | | $ | 76,314 | | | $ | 75,701 | |
| Additions and amortization: | | | | | | | | | | |
Originations | | 853 | | | 617 | | | 663 | | | 935 | | | 919 | |
| | | | | | | | | | |
Changes - amortization (1) | | (1,713) | | | (1,428) | | | (1,504) | | | (1,564) | | | (1,626) | |
Net additions and amortization | | (860) | | | (811) | | | (841) | | | (629) | | | (707) | |
Change in fair value due to assumptions (2) | | 529 | | | 618 | | | (1,380) | | | 785 | | | 1,320 | |
| Ending balance | | $ | 73,725 | | | $ | 74,056 | | | $ | 74,249 | | | $ | 76,470 | | | $ | 76,314 | |
| Ratio to related loans serviced for others | | 1.41 | % | | 1.40 | % | | 1.40 | % | | 1.43 | % | | 1.42 | % |
| | | | | | | | | | |
| Multifamily and SBA MSRs | | | | | | | | | | |
| Beginning balance | | $ | 28,863 | | | $ | 29,987 | | | $ | 31,141 | | | $ | 32,477 | | | 33,839 | |
Originations | | 179 | | | 278 | | | 261 | | | 38 | | | 73 | |
Amortization | | (1,459) | | | (1,402) | | | (1,415) | | | (1,374) | | | (1,435) | |
| Ending balance | | $ | 27,583 | | | $ | 28,863 | | | $ | 29,987 | | | $ | 31,141 | | | $ | 32,477 | |
| Ratio to related loans serviced for others | | 1.47 | % | | 1.52 | % | | 1.58 | % | | 1.64 | % | | 1.70 | % |
(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.
Deposits | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| (in thousands) | | June 30,
2024 | | March 31,
2024 | | December 31,
2023 | | September 30,
2023 | | June 30,
2023 |
| | | | | | | | | | |
| Deposits by Product: | | | | | | | | | | |
| Noninterest-bearing demand deposits | | $ | 1,252,850 | | | $ | 1,311,559 | | | $ | 1,306,503 | | | $ | 1,437,057 | | | $ | 1,410,369 | |
| Interest-bearing: | | | | | | | | | | |
| Interest-bearing demand deposits | | 332,290 | | | 330,301 | | | 344,748 | | | 352,529 | | | 370,747 | |
| Savings | | 246,397 | | | 256,383 | | | 261,508 | | | 284,663 | | | 300,007 | |
| Money market | | 1,502,960 | | | 1,536,341 | | | 1,622,665 | | | 1,723,924 | | | 1,863,762 | |
| Certificates of deposit: | | | | | | | | | | |
| Brokered deposits | | 948,989 | | | 921,103 | | | 1,218,008 | | | 973,314 | | | 760,826 | |
| Other | | 2,248,984 | | | 2,135,415 | | | 2,009,946 | | | 1,974,064 | | | 1,964,322 | |
| Total interest-bearing deposits | | 5,279,620 | | | 5,179,543 | | | 5,456,875 | | | 5,308,494 | | | 5,259,664 | |
| Total deposits | | $ | 6,532,470 | | | $ | 6,491,102 | | | $ | 6,763,378 | | | $ | 6,745,551 | | | $ | 6,670,033 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Percent of total deposits: | | | | | | | | | | |
| Noninterest-bearing demand deposits | | 19.2 | % | | 20.2 | % | | 19.3 | % | | 21.3 | % | | 21.1 | % |
| Interest-bearing: | | | | | | | | | | |
| Interest-bearing demand deposits | | 5.1 | % | | 5.1 | % | | 5.1 | % | | 5.2 | % | | 5.6 | % |
| Savings | | 3.8 | % | | 3.9 | % | | 3.9 | % | | 4.2 | % | | 4.5 | % |
| Money market | | 23.0 | % | | 23.7 | % | | 24.0 | % | | 25.6 | % | | 27.9 | % |
| Certificates of deposit | | | | | | | | | | |
| Brokered deposits | | 14.5 | % | | 14.2 | % | | 18.0 | % | | 14.4 | % | | 11.4 | % |
| Other | | 34.4 | % | | 32.9 | % | | 29.7 | % | | 29.3 | % | | 29.5 | % |
| Total interest-bearing deposits | | 80.8 | % | | 79.8 | % | | 80.7 | % | | 78.7 | % | | 78.9 | % |
| Total deposits | | 100.0 | % | | 100.0 | % | | 100.0 | % | | 100.0 | % | | 100.0 | % |
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 (loss) and effective tax rate on core income (loss) before taxes, which excludes goodwill impairment charges and merger related expenses 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 the computation of the non-GAAP 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 | | Six Months Ended |
| (in thousands, except share and per share data) | June 30,
2024 | | March 31,
2024 | | December 31,
2023 | | September 30,
2023 | | June 30,
2023 | | June 30,
2024 | | June 30,
2023 |
| | | | | | | | | | | | | |
Core net income (loss) | | | | | | | | | | |
| Net income (loss) | $ | (6,238) | | | $ | (7,497) | | | $ | (3,419) | | | $ | 2,295 | | | $ | (31,442) | | | $ | (13,735) | | | $ | (26,384) | |
| Adjustments (tax effected) | | | | | | | | | | | | |
Merger related expenses | 1,897 | | | 2,028 | | | 1,170 | | | — | | | — | | | 3,925 | | | — | |
| Goodwill impairment | — | | | — | | | — | | | — | | | 34,622 | | | — | | | 34,622 | |
| Total | $ | (4,341) | | | $ | (5,469) | | | $ | (2,249) | | | $ | 2,295 | | | $ | 3,180 | | | $ | (9,810) | | | $ | 8,238 | |
| | | | | | | | | | | | | |
Core net income (loss) per fully diluted share | | | | | | | | | | |
| Fully diluted shares | 18,857,566 | | | 18,856,870 | | | 18,807,965 | | | 18,792,893 | | | 18,775,022 | | | 18,857,218 | | | 18,765,292 | |
| | | | | | | | | | | | | |
Computed amount | $ | (0.23) | | | $ | (0.29) | | | $ | (0.12) | | | $ | 0.12 | | | $ | 0.17 | | | $ | (0.52) | | | $ | 0.44 | |
| | | | | | | | | | | | | |
| Return on average tangible equity (annualized) | | | | | | | | | | |
Average shareholders' equity | $ | 522,904 | | | $ | 537,627 | | | $ | 513,758 | | | $ | 535,369 | | | $ | 582,172 | | | $ | 530,266 | | | $ | 580,363 | |
Less: Average goodwill and other intangibles | (8,794) | | | (9,403) | | | (10,149) | | | (10,917) | | | (51,138) | | | (9,099) | | | (41,109) | |
| Average tangible equity | $ | 514,110 | | | $ | 528,224 | | | $ | 503,609 | | | $ | 524,452 | | | $ | 531,034 | | | $ | 521,167 | | | $ | 539,254 | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
Core net income (loss) (per above) | (4,341) | | | (5,469) | | | (2,249) | | | 2,295 | | | 3,180 | | | (9,810) | | | 8,238 | |
| Adjustments (tax effected) | | | | | | | | | | | | |
| Amortization of core deposit intangibles | 487 | | | 488 | | | 615 | | | 614 | | | 614 | | | 975 | | | 1,073 | |
Tangible income (loss) applicable to shareholders | $ | (3,854) | | | $ | (4,981) | | | $ | (1,634) | | | $ | 2,909 | | | $ | 3,794 | | | $ | (8,835) | | | $ | 9,311 | |
| | | | | | | | | | | | | |
Ratio | (3.0) | % | | (3.8) | % | | (1.3) | % | | 2.2 | % | | 2.9 | % | | (3.4) | % | | 3.5 | % |
| | | | | | | | | | | | | |
| Efficiency ratio | | | | | | | | | | | | | |
Noninterest expense | | | | | | | | | | | | | |
Total | $ | 50,931 | | | $ | 52,164 | | | $ | 49,511 | | | $ | 49,089 | | | $ | 90,781 | | | $ | 103,095 | | | $ | 143,272 | |
Adjustments: | | | | | | | | | | | | | |
Merger related expenses | (2,432) | | | (2,600) | | | (1,500) | | | — | | | — | | | (5,032) | | | — | |
| Goodwill impairment | — | | | — | | | — | | | — | | | (39,857) | | | — | | | (39,857) | |
| State of Washington taxes | (463) | | | (452) | | | 659 | | | (572) | | | (526) | | | (915) | | | (1,081) | |
| Adjusted total | $ | 48,036 | | | $ | 49,112 | | | $ | 48,670 | | | $ | 48,517 | | | $ | 50,398 | | | $ | 97,148 | | | $ | 102,334 | |
| | | | | | | | | | | | | |
Total revenues | | | | | | | | | | | | | |
Net interest income | $ | 29,701 | | | $ | 32,151 | | | $ | 34,989 | | | $ | 38,912 | | | $ | 43,476 | | | 61,852 | | | 92,852 | |
Noninterest income | 13,227 | | | 9,454 | | | 10,956 | | | 10,464 | | | 10,311 | | | 22,681 | | | 20,501 | |
| | | | | | | | | | | | | |
| Adjusted total | $ | 42,928 | | | $ | 41,605 | | | $ | 45,945 | | | $ | 49,376 | | | $ | 53,787 | | | $ | 84,533 | | | $ | 113,353 | |
| | | | | | | | | | | | | |
| Ratio | 111.9 | % | | 118.0 | % | | 105.9 | % | | 98.3 | % | | 93.7 | % | | 114.9 | % | | 90.3 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| As of or for the Quarter Ended | | Six Months Ended |
| (in thousands, except share and per share data) | June 30,
2024 | | March 31,
2024 | | December 31,
2023 | | September 30,
2023 | | June 30,
2023 | | June 30,
2024 | | June 30,
2023 |
| | | | | | | | | | | | | |
| Return on average assets (annualized) - Core | | | | | | | | | | |
| Average Assets | $ | 9,272,131 | | | $ | 9,502,189 | | | $ | 9,351,866 | | | $ | 9,433,648 | | | $ | 9,562,817 | | | $ | 9,387,160 | | | $ | 9,546,850 | |
Core net income (loss) (per above) | (4,341) | | | (5,469) | | | (2,249) | | | 2,295 | | | 3,180 | | | (9,810) | | | 8,238 | |
| | | | | | | | | | | | | |
| Ratio | (0.19) | % | | (0.23) | % | | (0.10) | % | | 0.10 | % | | 0.13 | % | | (0.21) | % | | 0.17 | % |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
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 | $ | 520,117 | | | $ | 527,333 | | | $ | 538,387 | | | $ | 502,487 | | | $ | 527,623 | | | $ | 520,117 | | | $ | 527,623 | |
Less: Goodwill and other intangibles | (8,391) | | | (9,016) | | | (9,641) | | | (10,429) | | | (11,217) | | | (8,391) | | | (11,217) | |
| Tangible shareholders' equity | $ | 511,726 | | | $ | 518,317 | | | $ | 528,746 | | | $ | 492,058 | | | $ | 516,406 | | | $ | 511,726 | | | $ | 516,406 | |
| | | | | | | | | | | | | |
| Common shares outstanding | 18,857,565 | | | 18,857,566 | | | 18,810,055 | | | 18,794,030 | | | 18,776,597 | | | 18,857,565 | | | 18,776,597 | |
| | | | | | | | | | | | | |
| Computed amount | $ | 27.14 | | | $ | 27.49 | | | $ | 28.11 | | | $ | 26.18 | | | $ | 27.50 | | | $ | 27.14 | | | $ | 27.50 | |
| | | | | | | | | | | | | |
| Tangible common equity to tangible assets | | | | | | | | | | |
| Tangible shareholders' equity (per above) | $ | 511,726 | | | $ | 518,317 | | | $ | 528,746 | | | $ | 492,058 | | | $ | 516,406 | | | $ | 511,726 | | | $ | 516,406 | |
| Tangible assets | | | | | | | | | | | | | |
| Total assets | $ | 9,266,039 | | $ | 9,455,182 | | $ | 9,392,450 | | $ | 9,458,751 | | $ | 9,501,475 | | $ | 9,266,039 | | $ | 9,501,475 |
| Less: Goodwill and other intangibles (per above) | (8,391) | | (9,016) | | (9,641) | | (10,429) | | (11,217) | | (8,391) |
| (11,217) |
| Net | $ | 9,257,648 | | $ | 9,446,166 | | $ | 9,382,809 | | $ | 9,448,322 | | $ | 9,490,258 | | $ | 9,257,648 | | $ | 9,490,258 |
| | | | | | | | | | | | | |
| Ratio | 5.5 | % | | 5.5 | % | | 5.6 | % | | 5.2 | % | | 5.4 | % | | 5.5 | % | | 5.4 | % |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
(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.
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 "project" 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 and financial condition and trends in product mixes and expected impact on costs 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) our ability to successfully consummate the pending merger (the "Merger") with FirstSun Capital Bancorp ("FirstSun"), (2) the ability of HomeStreet and FirstSun to obtain required governmental approvals of the Merger, (3) the failure to satisfy the closing conditions in the definitive Agreement and Plan of Merger (the “Merger Agreement”), dated as of January 16, 2024, as amended on April 30, 2024, by and between HomeStreet and FirstSun, or any unexpected delay in closing the Merger, (4) the ability to achieve expected cost savings, synergies and other financial benefits from the Merger within the expected time frames and costs or difficulties relating to integration matters being greater than expected, (5) the diversion of management time from core banking functions due to Merger-related issues; (6) potential difficulty in maintaining relationships with customers, associates or business partners as a result of the announced Merger, (7) 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; (8) changes in the interest rate environment may reduce interest margins; (9) 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; (10) there may be increases in competitive pressure among financial institutions or from non-financial institutions; (11) our ability to attract and retain key members of our senior management team; (12) the timing and occurrence or non-occurrence of events may be subject to circumstances beyond our control; (13) our ability to control operating costs and expenses; (14) our credit quality and the effect of credit quality on our credit losses expense and allowance for credit losses; (15) the adequacy of our allowance for credit losses; (16) changes in accounting principles, policies or guidelines may cause our financial condition to be perceived or interpreted differently; (17) 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; (18) 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; (19) 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; (20) technological changes may be more difficult or expensive than what we anticipate; (21) 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; (22) success or consummation of new business initiatives may be more difficult or expensive than what we anticipate; (23) our ability to grow efficiently both organically and through acquisitions and to manage our growth and integration costs; (24) staffing fluctuations in response to product demand or the implementation of corporate strategies that affect our work force and potential associated charges; (25) 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; and (26) 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. 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 the 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 Reports Second Quarter 2024 Results
Continuing Strong Asset Quality With Improved Metrics
SEATTLE –July 29, 2024 – (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 June 30, 2024. 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 | | Second quarter 2024 compared to first quarter 2024 Reported Results: •Net loss: $6.2 million compared to $7.5 million •Loss per fully diluted share: $0.33 compared to $0.40 •Net interest margin: 1.37% compared to 1.44% |
| Core Results (1): •Loss: $4.3 million compared to $5.5 million •Loss per fully diluted share: $0.23 compared to $0.29 |
| |
(1) Core loss and core loss per fully diluted share are non-GAAP measures. For a reconciliation of these measures to the nearest comparable GAAP measure see "Non-GAAP financial measures" in this earnings release.
“In the second quarter, our net loss was $6.2 million and our core net loss was $4.3 million, both of which were $1.2 million less than the comparable losses incurred in the first quarter,” said Mark Mason, Chairman of the Board, President, and Chief Executive Officer. "Our net interest margin declined to 1.37% due to increased funding costs as lower cost deposits continued to migrate to higher yielding products, our noninterest income was $3.8 million higher and our noninterest expenses decreased by $1.2 million. During this challenging earnings period we continue to focus on reducing expenses where possible. In the quarter, our full time equivalent employees declined to 840 from 858 in the prior quarter. Additionally, while interest rates have stabilized, high current rates may continue to adversely impact our funding costs relative to earning assets yields in the near term."
| | | | | | | | |
| | |
| | |
| Financial Position | | As of and for the quarter ended June 30, 2024 •Excluding brokered deposits, total deposits increased by $13 million •Uninsured deposits were $492 million, or 8% of total deposits •Loans held for investment ("LHFI"), decreased by $65 million •Nonperforming assets to total assets: 0.42% compared to 0.56% at March 31, 2024 •Delinquencies(2): 0.66% compared to 0.82% at March 31, 2024 •Allowance for credit losses to LHFI: 0.55% •Book value per share: $27.58 •Tangible book value per share: $27.14 (3) |
| |
(2) Total past due and nonaccrual loans as a percentage of total loans held for investment.
(3)Tangible book value per share is a non-GAAP measure. For a reconciliation of this measure to the nearest comparable GAAP measure see "Non-GAAP financial measures" in this earnings release.
"Our quarter-end and average deposit balances, excluding brokered deposits, were stable during the first and second quarter," continued Mark Mason. "We have noticed that the migration of deposits to higher yielding products has slowed significantly during the latter part of the second quarter. If these trends continue we expect that our funding costs will stabilize."
"Our loan balances decreased $65 million during the second quarter as our originations decreased from the first quarter levels and we started to see a low level of prepayments in our commercial real estate loan portfolio. Our loan originations continue to be focused on variable rate loan products with appropriate margins over incremental funding costs," added Mark Mason. “In the second quarter our nonaccrual and nonperforming assets decreased by 25% due to payoffs, resulting in a ratio of nonaccrual assets to total assets of 0.42%. Our total loan delinquencies decreased from 0.82% to 0.66% during the quarter. Our credit quality remains strong and we have not identified any potentially significant credit issues in our loan portfolio. Additionally, our analysis of multifamily loans repricing through the end of 2025 does not indicate any meaningful increased risk of loss.”
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. 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 "project" 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 and financial condition and trends in product mixes and expected impact on costs 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) our ability to successfully consummate the pending merger (the "Merger") with FirstSun Capital Bancorp ("FirstSun"), (2) the ability of HomeStreet and FirstSun to obtain required governmental approvals of the Merger, (3) the failure to satisfy the closing conditions in the definitive Agreement and Plan of Merger (the “Merger Agreement”), dated as of January 16, 2024, as amended on April 30, 2024, by and between HomeStreet and FirstSun, or any unexpected delay in closing the Merger, (4) the ability to achieve expected cost savings, synergies and other financial benefits from the Merger within the expected time frames and costs or difficulties relating to integration matters being greater than expected, (5) the diversion of management time from core banking functions due to Merger-related issues; (6) potential difficulty in maintaining relationships with customers, associates or business partners as a result of the announced Merger, (7) 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; (8) changes in the interest rate environment may reduce interest margins; (9) 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; (10) there may be increases in competitive pressure among financial institutions or from non-financial institutions; (11) our ability to attract and retain key members of our senior management team; (12) the timing and occurrence or non-occurrence of events may be subject to circumstances beyond our control; (13) our ability to control operating costs and expenses; (14) our credit quality and the effect of credit quality on our credit losses expense and allowance for credit losses; (15) the adequacy of our allowance for credit losses; (16) changes in accounting principles, policies or guidelines may cause our financial condition to be perceived or interpreted differently; (17) 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; (18) 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; (19) 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; (20) technological changes may be more difficult or expensive than what we anticipate; (21) 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; (22) success or consummation of new business initiatives may be more difficult or expensive than what we anticipate; (23) our ability to grow efficiently both organically and through acquisitions and to manage our growth and integration costs; (24) staffing fluctuations in response to product demand or the implementation of corporate strategies that affect our work force and potential associated charges; (25) 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; and (26) 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. 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 the 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 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 (loss) and effective tax rate on core income (loss) before taxes, which excludes goodwill impairment charges and merger related expenses 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 the computation of the non-GAAP 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) | June 30,
2024 | | March 31,
2024 | | | | |
| | | | | | | |
| Core net income (loss) | | | | | | | |
| Net income (loss) | $ | (6,238) | | | $ | (7,497) | | | | | |
| Adjustments (tax effected) | | | | | | | |
| Merger related expenses | 1,897 | | | 2,028 | | | | | |
| | | | | | | |
| Total | $ | (4,341) | | | $ | (5,469) | | | | | |
| Core net income (loss) per fully diluted share | | | | | | |
| Fully diluted shares | 18,857,566 | | | 18,856,870 | | | | | |
| Computed amount | $ | (0.23) | | | $ | (0.29) | | | | | |
| | | | | | | |
| Return on average tangible equity (annualized) | | | | | | | |
| Average shareholders' equity | $ | 522,904 | | | $ | 537,627 | | | | | |
| Less: Average goodwill and other intangibles | (8,794) | | | (9,403) | | | | | |
| Average tangible equity | $ | 514,110 | | | $ | 528,224 | | | | | |
| | | | | | | |
| Core net income (loss) (per above) | $ | (4,341) | | | $ | (5,469) | | | | | |
| Adjustments (tax effected) | | | | | | | |
| Amortization of core deposit intangibles | 487 | | | 488 | | | | | |
| Tangible income (loss) applicable to shareholders | $ | (3,854) | | | $ | (4,981) | | | | | |
| | | | | | | |
| Ratio | (3.0) | % | | (3.8) | % | | | | |
| | | | | | | |
| Efficiency ratio | | | | | | | |
Noninterest expense | | | | | | | |
| Total | $ | 50,931 | | | $ | 52,164 | | | | | |
| Adjustments: | | | | | | | |
| Merger related expenses | (2,432) | | | (2,600) | | | | | |
| | | | | | | |
| State of Washington taxes | (463) | | | (452) | | | | | |
| Adjusted total | $ | 48,036 | | | $ | 49,112 | | | | | |
| | | | | | | |
| Total revenues | | | | | | | |
| Net interest income | $ | 29,701 | | | $ | 32,151 | | | | | |
| Noninterest income | 13,227 | | | 9,454 | | | | | |
| | | | | | | |
| Adjusted total | $ | 42,928 | | | $ | 41,605 | | | | | |
| Ratio | 111.9 | % | | 118.0 | % | | | | |
| | | | | | | |
| Return on average assets (annualized) - Core | | | | |
| Average Assets | $ | 9,272,131 | | | $ | 9,502,189 | | | | | |
| Core net income (loss) (per above) | (4,341) | | | (5,469) | | | | | |
| Ratio | (0.19) | % | | (0.23) | % | | | | |
| | | | | | | |
| Tangible book value per share | | | | | | | |
| Shareholders' equity | $ | 520,117 | | | $ | 527,333 | | | | | |
| Less: Goodwill and other intangibles | (8,391) | | | (9,016) | | | | | |
| Tangible shareholders' equity | $ | 511,726 | | | $ | 518,317 | | | | | |
| Common shares outstanding | 18,857,565 | | | 18,857,565 | | | | | |
| Computed amount | $ | 27.14 | | | $ | 27.49 | | | | | |
v3.24.2
Cover Cover
|
Jul. 29, 2024 |
| Cover [Abstract] |
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|
| Document Period End Date |
Jul. 29, 2024
|
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HOMESTREET, INC.
|
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WA
|
| Entity File Number |
001-35424
|
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91-0186600
|
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601 Union Street
|
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Ste. 2000
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Seattle
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WA
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