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| 8-K - FORM 8-K - HomeStreet, Inc. | form8-k.htm |
HomeStreet, Inc. Reports Second Quarter 2012 Results
Net Income of $18.0 Million Driven By Record Mortgage Banking Revenue
SEATTLE – (BUSINESS WIRE) – HomeStreet, Inc. (NASDAQ:HMST; the “Company” or “HomeStreet”), the parent company of HomeStreet Bank (the “Bank”), today announced net income of $18.0 million, or $2.43 per diluted share, for the second quarter of 2012, compared to net income of $1.3 million, or $0.45 per share, for the second quarter of 2011.
Highlights for the second quarter of 2012 include:
• | Pre-tax income of $21.4 million increased 23% from the prior quarter driven by net gain on mortgage loan origination and sale activities, up $17.0 million, or 60%, from the prior quarter. |
• | In recognition of the expected realization of the Company's net deferred tax assets, the effective income tax rate for the second quarter and the remainder of 2012 will reflect the full reversal of the valuation allowance of $7.7 million that was remaining at March 31, 2012. |
• | Record single family mortgage production volume: $1.07 billion of closed loan production designated for sale, up 50% from the first quarter, and $1.23 billion of interest rate lock commitments, up 33% from the first quarter. |
• | HomeStreet became the number two lender of single family mortgages by origination volume in the five-county Puget Sound area of Washington State, which includes King, Kitsap, Pierce, Snohomish and Thurston counties, as well as in Spokane and Clark counties.(1) |
• | Net interest margin increased to 2.83%, up from 2.53% in the prior quarter. |
• | Nonperforming assets declined to $73.7 million or 3.04% of total assets, down $33.5 million or 31% from the prior quarter. Loan delinquencies declined to $83.9 million, or 6.6% of total loans, from $150.5 million, or 11.3% of total loans, in the prior quarter. |
• | Regulatory capital ratios for the Bank increased, with a Tier 1 leverage ratio of 10.1% and a total risk-based capital ratio of 17.0% at June 30, 2012. |
“We made considerable progress in improving our risk profile and profitability in the second quarter,” said President and Chief Executive Officer Mark K. Mason. “We have substantially completed the integration of the mortgage lending personnel previously employed with MetLife Home Loans and they made a significant contribution to our origination volume in the quarter. We continue to see benefits from expanding our mortgage lending market share as we continue recruiting origination and support personnel, allowing us to further increase our production capacity and serve the recovering housing market. We are equally pleased with our asset quality improvement in the quarter, with meaningful reductions in classified and nonperforming assets. Going forward, our focus is on growing our community banking and traditional portfolio lending as we continue to expand our market share in current and new markets.”
(1) Combined results for HomeStreet and Windermere Mortgage Services Series LLC | |
Mortgage Banking
Mortgage Originations
Single family closed loan production designated for sale totaled $1.07 billion, increasing $356.4 million, or 50%, from the first quarter of 2012 and increasing $744.8 million, or 230%, from the second quarter of 2011. Single family mortgage interest rate lock commitments, net of estimated fall out, totaled $1.23 billion during the second quarter, up $307.0 million, or 33%, from the first quarter of 2012 and up $882.4 million, or 256%, from the second quarter of 2011. Mortgage origination and support personnel previously employed with MetLife Home Loans contributed approximately 32% of single family mortgage production during the quarter. The Company continues to increase its mortgage production capacity, which included increasing mortgage origination and support personnel by 14% from the prior quarter.
Net gain on mortgage loan origination and sales activities was $45.5 million, an increase of $17.0 million, or 60%, over the first quarter of 2012 and up $36.3 million, or 397%, over the second quarter of 2011. Net gain from secondary marketing activities included a $1.9 million provision for mortgage loan repurchase losses compared with $0.4 million in the first quarter of 2012, reflecting an increase in estimated repurchase losses on certain previously sold loans.
Our mortgage loan origination and sales revenue growth reflects continuing strong demand for both purchase and refinance mortgage loans in our markets, including refinances through the federal government's expanded Home Affordable Refinance Program ("HARP 2.0"), driven by low mortgage interest rates and strong secondary market profit margins that began to increase in the third quarter of 2011. HARP 2.0 refinances represented approximately 15% of loans originated in the second quarter. Overall, single family mortgage production was comprised of 35% purchases and 65% refinances in the second quarter, compared with 32% purchases and 68% refinances in the prior quarter.
Mortgage Servicing
Mortgage servicing income of $7.1 million decreased $0.8 million, or 10%, from the first quarter of 2012 and $0.6 million, or 8%, from the second quarter of 2011. The decrease from the prior quarter was primarily due to a lower overall net gain from valuation changes to mortgage servicing rights and related hedge instruments, which were $0.8 million as compared to $1.9 million in the first quarter of 2012. The total loans serviced for others portfolio increased to $8.30 billion compared with $7.77 billion at March 31, 2012.
Credit Quality
Nonperforming assets (NPAs) declined to $73.7 million, or 3.04% of total assets, as of June 30, 2012, from $107.2 million, or 4.53% of total assets, at March 31, 2012. The improvement resulted from nonaccrual loans declining to $33.1 million, or 2.62% of total loans, down from $75.6 million, or 5.66% of total loans, at March 31, 2012. Other real estate owned (OREO) increased to $40.6 million, from $31.6 million at March 31, 2012, due in part to the transfer to OREO of an $18.8 million residential construction/land development property that had been collateralized against the Company’s largest nonperforming loan, partially offset by sales of OREO. Loan delinquencies declined to $83.9 million, or 6.6% of total loans, from $150.5 million, or 11.3% of total loans, in the prior quarter.
As a consequence of the improvements noted above and the charge-off of specific reserves, the allowance for credit losses decreased by $8.3 million to $27.1 million, or 2.13% of total loans, compared to $35.4 million, or 2.64% of total loans, at March 31, 2012. A provision for credit losses of $2.0 million was recorded for the second quarter of 2012, compared with no provision recorded in the first quarter of 2012. Net charge-offs in the quarter increased to $10.3 million, up from $7.4 million in the first quarter of 2012, driven primarily by a higher level of transfers of nonaccrual loans to OREO.
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Deposits
Deposits totaled $1.90 billion at June 30, 2012, down $95.9 million, or 5%, from $2.00 billion at March 31, 2012 and down $88.9 million, or 4%, from June 30, 2011. Certificates of deposit decreased $135.0 million, or 15%, from the prior quarter and $427.8 million, or 36%, from a year ago as we manage the reduction of these higher-cost deposits and replace them with lower-cost core deposits, which increased $91.5 million, or 11%, from the prior quarter and $270.3 million, or 40%, from a year ago. The improvement in the composition of deposits reflects a focused effort on attracting core deposit balances through our branch network and converting customers with maturing certificates of deposit to money market and savings accounts.
Results of Operations
Net Interest Income
Net interest income was $14.7 million, up $1.8 million, or 14%, from the first quarter of 2012 and an increase of $2.8 million, or 23%, from the second quarter of 2011. Total average interest earning assets increased modestly from prior quarter as higher mortgage production volumes resulted in a higher average balance of loans held for sale, partially offset by a decrease in cash and cash equivalents which was redeployed for loans held for sale production and purchases of investment securities. Total average interest bearing deposit balances declined as a result of declines in higher-cost certificates of deposit, partially offset by an increase in lower-cost core deposits. The net interest margin increased to 2.83% from 2.53% in the first quarter of 2012 primarily as a result of the repricing and conversion of maturing certificates of deposit.
Noninterest Income
Noninterest income was $55.5 million, up $16.4 million, or 42%, from $39.1 million in the first quarter of 2012 and up $36.9 million, or 198%, from $18.6 million in the second quarter of 2011. The increase from prior quarter was primarily due to a $17.0 million increase in net gain on mortgage loan origination and sale activities, reflecting an increase in single family mortgage loan origination and sale activity.
Noninterest Expense
Noninterest expense was $46.8 million, up $12.2 million, or 35%, from $34.7 million in the first quarter of 2012 and up $19.9 million, or 74%, from $27.0 million in the second quarter of 2011. The increase from prior quarter was primarily due to a $6.9 million increase in salary and related costs, reflecting an increase in employees and higher incentive compensation driven by elevated loan production volume as well as the accelerated recognition of $1.7 million in compensation expense due to the vesting of restricted stock awards during the quarter. Also contributing to the increase in noninterest expense was a $3.5 million increase in OREO expense, primarily driven by downward valuation adjustments in OREO.
Income Taxes
The Company's tax expense was $3.4 million for the quarter as compared to a $1.7 million benefit in the first quarter. The Company's year-to-date income tax expense includes a benefit related to the release of the remaining valuation allowance with respect to the Company's net deferred tax assets. The reversal of the valuation allowance was based on the Company's assessment with respect to its ability to realize deferred tax assets in the future. The Company's effective tax rate differs from the Federal statutory tax rate of 35% due to state income taxes on income in Oregon, Hawaii and Idaho, tax exempt interest income and the reversal of the Company's valuation allowance.
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Capital
Regulatory capital ratios for the Bank are as follows:
June 30, 2012 | Mar. 31, 2012 | June 30, 2011 | Well-capitalized ratios | |||||||||
Total risk-based capital (to risk-weighted assets) | 17.0 | % | 15.5 | % | 8.7 | % | 10.0 | % | ||||
Tier 1 risk-based capital (to risk-weighted assets) | 15.8 | % | 14.2 | % | 7.4 | % | 6.0 | % | ||||
Tier 1 leverage capital (to average assets) | 10.1 | % | 9.3 | % | 4.9 | % | 5.0 | % | ||||
The Bank continues to meet the capital requirements of a "well-capitalized" institution and the minimum Tier 1 leverage ratio of 9.0% required by its regulators.
Conference Call
HomeStreet, Inc. will conduct a quarterly earnings conference call on Monday, July 30, 2012, at 10:00 a.m. PT (1:00 p.m. ET). President and CEO Mark K. Mason will discuss second quarter 2012 results and provide an update on recent activities. A question-and-answer session will follow the presentation. Shareholders, analysts and other interested parties may join the call by dialing 1-877-317-6789 shortly before 10:00 a.m. PT. A re-broadcast will be available approximately one hour after the conference call by dialing 1-877-344-7529 and entering passcode 10016042.
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About HomeStreet, Inc.
HomeStreet, Inc. (NASDAQ:HMST) is a diversified financial services company headquartered in Seattle, Washington, and the bank holding company for HomeStreet Bank, a state-chartered, FDIC-insured savings bank. HomeStreet Bank offers consumer and business banking, investment and insurance products and services in Washington, Oregon, Idaho and Hawaii. For more information, visit http://ir.homestreet.com.
Forward-Looking Statements
This report to shareholders contains forward-looking statements concerning HomeStreet, Inc. and the Bank and their operations, performance, financial conditions and likelihood of success. All statements other than statements of historical fact are forward-looking statements. Forward-looking statements are based on many beliefs, assumptions, estimates and expectations of our future performance, taking into account information currently available to us, and include statements about the competitiveness of the banking industry. When used in this press release, the words “anticipate,” “believe,” “could,” “estimate,” “expect,” “intend,” “may,” “plan,” “potential,” “should,” “will” and “would” and similar expressions (or the negative of these terms) generally identify forward-looking statements. Such statements involve inherent risks and uncertainties, many of which are difficult to predict and are generally beyond the control of the Company. Forward-looking statements speak only as of the date made, and we do not undertake to update them to reflect changes or events that occur after that date.
We caution readers that a number of important factors could cause actual results to differ materially from those expressed in, implied or projected by, such forward-looking statements. For instance, our ability to expand our banking operations geographically and across market sectors, grow our franchise and capitalize on market opportunities may be limited due to future risks and uncertainties including, but not limited to, changes in general economic conditions that impact our markets and our business, regulatory and legislative actions that may constrain our ability to do business, significant increases in the competition we face in our industry and market and the extent of our success in problem asset resolution efforts. In addition, we may not recognize all or a substantial portion of the value of our rate-lock loan activity due to challenges our customers may face in meeting current underwriting standards, a decrease in interest rates, an increase in competition for such loans, unfavorable changes in general economic conditions, including housing prices, the job market, consumer confidence and spending habits either nationally or in the market areas in which the Company does business and legislative or regulatory actions or reform (including, without limitation, the Dodd-Frank Wall Street Reform and Consumer Protection Act). A discussion of the factors that we know to pose risk to the achievement of our business goals and our operational and financial objectives is contained in our Annual Report on Form 10-K for the fiscal year ended December 31, 2011. These factors are updated from time to time in our filings with the Securities and Exchange Commission, and readers of this release are cautioned to review those disclosures in conjunction with the discussions herein.
Information contained herein, other than information at December 31, 2011, and for the twelve months then ended, is unaudited. All financial data should be read in conjunction with the notes to the consolidated financial statements of HomeStreet, Inc., and subsidiaries as of and for the fiscal year ended December 31, 2011, as contained in the Company's Annual Report on Form 10-K for such fiscal year.
Source: HomeStreet, Inc.
Contacts: | Terri Silver, Investor Relations | |
HomeStreet, Inc. | ||
206-389-6303 | ||
terri.silver@homestreet.com | ||
5
HomeStreet, Inc. and Subsidiaries
Summary Financial Data
Quarter ended | Six months ended | |||||||||||||||||||||||||||
(in thousands, except share data) | June 30, 2012 | Mar. 31, 2012 | Dec. 31, 2011 | Sept. 30, 2011 | June 30, 2011 | June 30, 2012 | June 30, 2011 | |||||||||||||||||||||
Income Statement Data (for the period ended): | ||||||||||||||||||||||||||||
Net interest income | $ | 14,698 | $ | 12,905 | $ | 12,866 | $ | 11,970 | $ | 11,914 | $ | 27,602 | $ | 23,504 | ||||||||||||||
Provision for loan losses | 2,000 | — | — | 1,000 | 2,300 | 2,000 | 2,300 | |||||||||||||||||||||
Noninterest income | 55,502 | 39,111 | 27,461 | 36,979 | 18,612 | 94,613 | 32,918 | |||||||||||||||||||||
Noninterest expense | 46,847 | 34,687 | 33,903 | 32,329 | 26,959 | 81,532 | 60,261 | |||||||||||||||||||||
Net income (loss) before taxes | 21,353 | 17,329 | 6,424 | 15,620 | 1,267 | 38,683 | (6,139 | ) | ||||||||||||||||||||
Income taxes | 3,357 | (1,721 | ) | (602 | ) | 362 | (17 | ) | 1,636 | 26 | ||||||||||||||||||
Net income (loss) | $ | 17,996 | $ | 19,050 | $ | 7,026 | $ | 15,258 | $ | 1,284 | $ | 37,047 | $ | (6,165 | ) | |||||||||||||
Basic earnings per common share (1) | $ | 2.53 | $ | 3.70 | $ | 2.60 | $ | 5.65 | $ | 0.48 | $ | 6.04 | $ | (2.28 | ) | |||||||||||||
Diluted earnings per common share (1) | $ | 2.43 | $ | 3.55 | $ | 2.42 | $ | 5.31 | $ | 0.45 | $ | 5.80 | $ | (2.23 | ) | |||||||||||||
Weighted average common shares | ||||||||||||||||||||||||||||
Basic | 7,126,060 | 5,146,283 | 2,701,749 | 2,701,749 | 2,701,749 | 6,136,171 | 2,701,749 | |||||||||||||||||||||
Diluted | 7,412,032 | 5,360,165 | 2,898,585 | 2,872,716 | 2,837,691 | 6,386,099 | 2,769,720 | |||||||||||||||||||||
Common shares outstanding (1) | 7,162,607 | 7,162,607 | 2,701,749 | 2,701,749 | 2,701,749 | 7,162,607 | 2,701,749 | |||||||||||||||||||||
Shareholders’ equity per share | $ | 29.88 | $ | 26.70 | $ | 31.98 | $ | 29.73 | $ | 21.58 | $ | 29.88 | $ | 21.58 | ||||||||||||||
Financial position (at period end): | ||||||||||||||||||||||||||||
Cash and cash equivalents | $ | 75,063 | $ | 92,953 | $ | 263,302 | $ | 138,429 | $ | 108,175 | $ | 75,063 | $ | 108,175 | ||||||||||||||
Investment securities available for sale | 415,610 | 446,198 | 329,047 | 339,453 | 315,715 | 415,610 | 315,715 | |||||||||||||||||||||
Loans held for sale | 412,933 | 290,954 | 150,409 | 226,590 | 121,216 | 412,933 | 121,216 | |||||||||||||||||||||
Loans held for investment, net | 1,235,253 | 1,295,471 | 1,300,873 | 1,360,219 | 1,392,238 | 1,235,253 | 1,392,238 | |||||||||||||||||||||
Mortgage servicing rights | 78,240 | 86,801 | 77,281 | 74,083 | 94,320 | 78,240 | 94,320 | |||||||||||||||||||||
Other real estate owned | 40,618 | 31,640 | 38,572 | 64,368 | 102,697 | 40,618 | 102,697 | |||||||||||||||||||||
Total assets | 2,424,947 | 2,367,497 | 2,264,957 | 2,316,839 | 2,233,505 | 2,424,947 | 2,233,505 | |||||||||||||||||||||
Deposits | 1,904,749 | 2,000,633 | 2,009,755 | 2,056,977 | 1,993,655 | 1,904,749 | 1,993,655 | |||||||||||||||||||||
FHLB advances | 65,590 | 57,919 | 57,919 | 67,919 | 77,919 | 65,590 | 77,919 | |||||||||||||||||||||
Repurchase agreements | 100,000 | — | — | — | — | 100,000 | — | |||||||||||||||||||||
Shareholders’ equity | 214,023 | 191,230 | 86,407 | 80,336 | 58,311 | 214,023 | 58,311 | |||||||||||||||||||||
Financial position (averages): | ||||||||||||||||||||||||||||
Investment securities available for sale | $ | 431,875 | $ | 381,129 | $ | 338,933 | $ | 272,294 | $ | 308,049 | $ | 406,502 | $ | 308,032 | ||||||||||||||
Loans held for investment | 1,304,740 | 1,338,552 | 1,385,037 | 1,427,763 | 1,512,308 | 1,321,646 | 1,550,738 | |||||||||||||||||||||
Total interest earning assets | 2,142,451 | 2,090,180 | 2,078,506 | 2,019,243 | 2,037,468 | 2,116,315 | 2,091,188 | |||||||||||||||||||||
Total interest bearing deposits | 1,640,159 | 1,705,371 | 1,745,493 | 1,787,388 | 1,837,119 | 1,672,764 | 1,863,285 | |||||||||||||||||||||
FHLB advances | 79,490 | 57,919 | 59,169 | 72,267 | 85,097 | 68,704 | 122,257 | |||||||||||||||||||||
Repurchase agreements | 52,369 | — | — | — | — | 26,185 | — | |||||||||||||||||||||
Total interest bearing liabilities | 1,833,875 | 1,825,146 | 1,866,519 | 1,921,512 | 1,984,073 | 1,829,510 | 2,048,708 | |||||||||||||||||||||
Shareholders’ equity | 206,428 | 140,784 | 84,038 | 73,499 | 57,246 | 174,083 | 57,688 | |||||||||||||||||||||
6
HomeStreet, Inc. and Subsidiaries
Summary Financial Data (continued)
Quarter ended | Six months ended | |||||||||||||||||||||||||||
(in thousands, except share data) | June 30, 2012 | Mar. 31, 2012 | Dec. 31, 2011 | Sept. 30, 2011 | June 30, 2011 | June 30, 2012 | June 30, 2011 | |||||||||||||||||||||
Financial performance: | ||||||||||||||||||||||||||||
Return on average common shareholders’ equity (2) | 34.9 | % | 54.1 | % | 33.4 | % | 83.0 | % | 9.0 | % | 42.6 | % | (21.4 | )% | ||||||||||||||
Return on average assets | 3.0 | % | 3.3 | % | 1.2 | % | 2.7 | % | 0.2 | % | 3.2 | % | (0.5 | )% | ||||||||||||||
Net interest margin (3) | 2.83 | % | 2.53 | % | 2.50 | % | 2.38 | % | 2.35 | % | 2.68 | % | 2.26 | % | ||||||||||||||
Efficiency ratio (4) | 66.73 | % | 66.69 | % | 84.07 | % | 66.05 | % | 88.31 | % | 66.71 | % | 106.80 | % | ||||||||||||||
Operating efficiency ratio (6) | 58.12 | % | 61.84 | % | 74.78 | % | 47.43 | % | 69.75 | % | 59.70 | % | 75.93 | % | ||||||||||||||
Credit quality: | ||||||||||||||||||||||||||||
Allowance for loan losses | $ | 26,910 | $ | 35,204 | $ | 42,689 | $ | 53,167 | $ | 59,692 | $ | 26,910 | $ | 59,692 | ||||||||||||||
Allowance for loan losses/total loans | 2.13 | % | 2.64 | % | 3.18 | % | 3.76 | % | 4.11 | % | 2.13 | % | 4.11 | % | ||||||||||||||
Allowance for loan losses/nonaccrual loans | 81.28 | % | 46.58 | % | 55.81 | % | 55.91 | % | 65.66 | % | 81.28 | % | 65.66 | % | ||||||||||||||
Total classified assets | $ | 137,165 | $ | 208,792 | $ | 188,167 | $ | 225,022 | $ | 276,476 | $ | 137,165 | $ | 276,476 | ||||||||||||||
Classified assets/total assets | 5.66 | % | 8.82 | % | 8.31 | % | 9.71 | % | 12.38 | % | 5.66 | % | 12.38 | % | ||||||||||||||
Total nonaccrual loans (5) | $ | 33,107 | $ | 75,575 | $ | 76,484 | $ | 95,094 | $ | 90,912 | $ | 33,107 | $ | 90,912 | ||||||||||||||
Nonaccrual loans/total loans | 2.62 | % | 5.66 | % | 5.69 | % | 6.73 | % | 6.26 | % | 2.62 | % | 6.26 | % | ||||||||||||||
Other real estate owned | $ | 40,618 | $ | 31,640 | $ | 38,572 | $ | 64,368 | $ | 102,697 | $ | 40,618 | $ | 102,697 | ||||||||||||||
Total nonperforming assets | $ | 73,725 | $ | 107,215 | $ | 115,056 | $ | 159,462 | $ | 193,609 | $ | 73,725 | $ | 193,609 | ||||||||||||||
Nonperforming assets/total assets | 3.04 | % | 4.53 | % | 5.08 | % | 6.88 | % | 8.67 | % | 3.04 | % | 8.67 | % | ||||||||||||||
Net charge-offs | $ | 10,277 | $ | 7,398 | $ | 10,586 | $ | 7,673 | $ | 4,707 | $ | 17,675 | $ | 6,807 | ||||||||||||||
Regulatory capital ratios for the Bank: | ||||||||||||||||||||||||||||
Tier 1 capital to total assets (leverage) | 10.14 | % | 9.29 | % | 6.04 | % | 5.64 | % | 4.86 | % | 10.14 | % | 4.86 | % | ||||||||||||||
Tier 1 risk-based capital | 15.75 | % | 14.18 | % | 9.88 | % | 8.51 | % | 7.38 | % | 15.75 | % | 7.38 | % | ||||||||||||||
Total risk-based capital | 17.01 | % | 15.45 | % | 11.15 | % | 9.79 | % | 8.66 | % | 17.01 | % | 8.66 | % | ||||||||||||||
(1) | Per share data shown after giving effect to the 2-for-1 forward stock split implemented on March 6, 2012 as well as the 1-for-2.5 reverse stock split implemented on July 19, 2011. |
(2) | Net earnings (loss) available to common shareholders divided by average common shareholders’ equity. |
(3) | Net interest income divided by total interest earning assets on a tax equivalent basis. |
(4) | The efficiency ratio is noninterest expense divided by total revenue (net interest income and noninterest income). |
(5) | Generally, loans are placed on nonaccrual status when they are 90 or more days past due. |
(6) | We include an operating efficiency ratio which is not calculated based on accounting principles generally accepted in the United States (“GAAP”), but which we believe provides important information regarding our results of operations. Our calculation of the operating efficiency ratio is computed by dividing noninterest expense less costs related to OREO (gains (losses) on sales, valuation allowance adjustments, and maintenance and taxes) by total revenue (net interest income and noninterest income). Management uses this non-GAAP measurement as part of its assessment of performance in managing noninterest expense. We believe that costs related to OREO are more appropriately considered as credit-related costs rather than as an indication of our operating efficiency. The following table provides a reconciliation of non-GAAP to GAAP measurement. |
Quarter ended | Six months ended | ||||||||||||||||||||
June 30, 2012 | Mar. 31, 2012 | Dec. 31, 2011 | Sept. 30, 2011 | June 30, 2011 | June 30, 2012 | June 30, 2011 | |||||||||||||||
Efficiency ratio | 66.73 | % | 66.69 | % | 84.07 | % | 66.05 | % | 88.31 | % | 66.71 | % | 106.80 | % | |||||||
Less impact of OREO expenses | 8.61 | % | 4.85 | % | 9.29 | % | 18.62 | % | 18.56 | % | 7.01 | % | 30.87 | % | |||||||
Operating efficiency ratio | 58.12 | % | 61.84 | % | 74.78 | % | 47.43 | % | 69.75 | % | 59.70 | % | 75.93 | % | |||||||
7
HomeStreet, Inc. and Subsidiaries
Consolidated Statements of Operations
Quarter ended June 30, | % | Six Months Ended June 30, | % | |||||||||||||||||||
(in thousands, except share data) | 2012 | 2011 | Change | 2012 | 2011 | Change | ||||||||||||||||
Interest income: | ||||||||||||||||||||||
Loans | $ | 17,250 | $ | 17,947 | (4 | ) | $ | 33,803 | $ | 36,615 | (8 | ) | ||||||||||
Investment securities available for sale | 2,449 | 1,848 | 33 | 4,688 | 3,706 | 26 | ||||||||||||||||
Other | 56 | 73 | (23 | ) | 192 | 157 | 22 | |||||||||||||||
19,755 | 19,868 | (1 | ) | 38,683 | 40,478 | (4 | ) | |||||||||||||||
Interest expense: | ||||||||||||||||||||||
Deposits | 4,198 | 6,538 | (36 | ) | 9,077 | 13,579 | (33 | ) | ||||||||||||||
Federal Home Loan Bank advances | 535 | 959 | (44 | ) | 1,209 | 2,267 | (47 | ) | ||||||||||||||
Securities sold under agreements to repurchase | 50 | — | NM | 50 | — | NM | ||||||||||||||||
Long-term debt | 271 | 457 | (41 | ) | 736 | 1,128 | (35 | ) | ||||||||||||||
Other | 3 | — | NM | 9 | — | NM | ||||||||||||||||
5,057 | 7,954 | (36 | ) | 11,081 | 16,974 | (35 | ) | |||||||||||||||
Net interest income | 14,698 | 11,914 | 23 | 27,602 | 23,504 | 17 | ||||||||||||||||
Provision for credit losses | 2,000 | 2,300 | (13 | ) | 2,000 | 2,300 | (13 | ) | ||||||||||||||
Net interest income after provision for credit losses | 12,698 | 9,614 | 32 | 25,602 | 21,204 | 21 | ||||||||||||||||
Noninterest income: | ||||||||||||||||||||||
Net gain on mortgage loan origination and sales activities | 45,486 | 9,151 | 397 | 73,997 | 13,936 | 431 | ||||||||||||||||
Mortgage servicing income | 7,091 | 7,713 | (8 | ) | 14,964 | 13,561 | 10 | |||||||||||||||
Income from Windermere Mortgage Services, Inc. | 1,394 | 503 | 177 | 2,560 | 478 | 436 | ||||||||||||||||
Gain (loss) on debt extinguishment | (939 | ) | — | NM | (939 | ) | 2,000 | NM | ||||||||||||||
Depositor and other retail banking fees | 771 | 795 | (3 | ) | 1,506 | 1,535 | (2 | ) | ||||||||||||||
Insurance commissions | 177 | 258 | (31 | ) | 359 | 621 | (42 | ) | ||||||||||||||
Gain on securities available for sale | 911 | 1 | NM | 952 | 1 | NM | ||||||||||||||||
Other | 611 | 191 | 220 | 1,214 | 786 | 54 | ||||||||||||||||
55,502 | 18,612 | 198 | 94,613 | 32,918 | 187 | |||||||||||||||||
Noninterest expense: | ||||||||||||||||||||||
Salaries and related costs | 28,224 | 11,700 | 141 | 49,575 | 23,839 | 108 | ||||||||||||||||
General and administrative | 6,725 | 4,555 | 48 | 11,997 | 7,997 | 50 | ||||||||||||||||
Legal | 724 | 399 | 81 | 1,159 | 1,303 | (11 | ) | |||||||||||||||
Consulting | 322 | 197 | 63 | 677 | 363 | 87 | ||||||||||||||||
Federal Deposit Insurance Corporation assessments | 717 | 1,265 | (43 | ) | 1,957 | 3,014 | (35 | ) | ||||||||||||||
Occupancy | 2,092 | 1,700 | 23 | 3,881 | 3,368 | 15 | ||||||||||||||||
Information services | 1,994 | 1,477 | 35 | 3,717 | 2,957 | 26 | ||||||||||||||||
Other real estate owned expense | 6,049 | 5,666 | 7 | 8,569 | 17,420 | (51 | ) | |||||||||||||||
46,847 | 26,959 | 74 | 81,532 | 60,261 | 35 | |||||||||||||||||
Income (loss) before income tax expense | 21,353 | 1,267 | 1,585 | 38,683 | (6,139 | ) | NM | |||||||||||||||
Income tax (benefit) expense | 3,357 | (17 | ) | NM | 1,636 | 26 | NM | |||||||||||||||
NET INCOME (LOSS) | $ | 17,996 | $ | 1,284 | 1,302 | $ | 37,047 | $ | (6,165 | ) | NM | |||||||||||
Basic income (loss) per share | $ | 2.53 | $ | 0.48 | 427 | $ | 6.04 | $ | (2.28 | ) | NM | |||||||||||
Diluted income (loss) per share | $ | 2.43 | $ | 0.45 | 440 | $ | 5.80 | $ | (2.23 | ) | NM | |||||||||||
Basic weighted average number of shares outstanding | 7,126,060 | 2,701,749 | 164 | 6,136,171 | 2,701,749 | 127 | ||||||||||||||||
Diluted weighted average number of shares outstanding | 7,412,032 | 2,837,691 | 161 | 6,386,099 | 2,769,720 | 131 | ||||||||||||||||
8
HomeStreet, Inc. and Subsidiaries
Five Quarter Consolidated Statements of Operation
Quarter ended | ||||||||||||||||||||
(in thousands, except share data) | June 30, 2012 | Mar. 31, 2012 | Dec. 31, 2011 | Sept. 30, 2011 | June 30, 2011 | |||||||||||||||
Interest income: | ||||||||||||||||||||
Loans | $ | 17,250 | $ | 16,553 | $ | 17,433 | $ | 17,593 | $ | 17,947 | ||||||||||
Investment securities available for sale | 2,449 | 2,238 | 1,792 | 1,422 | 1,848 | |||||||||||||||
Other | 56 | 137 | 203 | 117 | 73 | |||||||||||||||
19,755 | 18,928 | 19,428 | 19,132 | 19,868 | ||||||||||||||||
Interest expense: | ||||||||||||||||||||
Deposits | 4,198 | 4,879 | 5,388 | 5,848 | 6,538 | |||||||||||||||
Federal Home Loan Bank advances | 535 | 675 | 699 | 855 | 959 | |||||||||||||||
Securities sold under agreements to repurchase | 50 | — | — | — | — | |||||||||||||||
Long-term debt | 271 | 465 | 459 | 458 | 457 | |||||||||||||||
Other | 3 | 4 | 16 | 1 | — | |||||||||||||||
5,057 | 6,023 | 6,562 | 7,162 | 7,954 | ||||||||||||||||
Net interest income | 14,698 | 12,905 | 12,866 | 11,970 | 11,914 | |||||||||||||||
Provision for credit losses | 2,000 | — | — | 1,000 | 2,300 | |||||||||||||||
Net interest income after provision for credit losses | 12,698 | 12,905 | 12,866 | 10,970 | 9,614 | |||||||||||||||
Noninterest income: | ||||||||||||||||||||
Net gain on mortgage loan origination and sales activities | 45,486 | 28,510 | 18,919 | 15,766 | 9,151 | |||||||||||||||
Mortgage servicing income | 7,091 | 7,873 | 5,963 | 18,532 | 7,713 | |||||||||||||||
Income from Windermere Mortgage Services, Inc. | 1,394 | 1,166 | 739 | 902 | 503 | |||||||||||||||
Gain (loss) on debt extinguishment | (939 | ) | — | — | — | — | ||||||||||||||
Depositor and other retail banking fees | 771 | 735 | 748 | 778 | 795 | |||||||||||||||
Insurance commissions | 177 | 182 | 186 | 103 | 258 | |||||||||||||||
Gain on securities available for sale | 911 | 41 | 459 | 642 | 1 | |||||||||||||||
Other | 611 | 604 | 447 | 256 | 191 | |||||||||||||||
55,502 | 39,111 | 27,461 | 36,979 | 18,612 | ||||||||||||||||
Noninterest expense: | ||||||||||||||||||||
Salaries and related costs | 28,224 | 21,351 | 16,462 | 13,217 | 11,700 | |||||||||||||||
General and administrative | 6,725 | 5,273 | 6,182 | 4,310 | 4,555 | |||||||||||||||
Legal | 724 | 435 | 1,075 | 983 | 399 | |||||||||||||||
Consulting | 322 | 355 | 2,011 | 270 | 197 | |||||||||||||||
Federal Deposit Insurance Corporation assessments | 717 | 1,240 | 1,256 | 1,264 | 1,265 | |||||||||||||||
Occupancy | 2,092 | 1,790 | 1,733 | 1,663 | 1,700 | |||||||||||||||
Information services | 1,994 | 1,723 | 1,436 | 1,509 | 1,477 | |||||||||||||||
Other real estate owned expense | 6,049 | 2,520 | 3,748 | 9,113 | 5,666 | |||||||||||||||
46,847 | 34,687 | 33,903 | 32,329 | 26,959 | ||||||||||||||||
Income before income tax expense | 21,353 | 17,329 | 6,424 | 15,620 | 1,267 | |||||||||||||||
Income tax (benefit) expense | 3,357 | (1,721 | ) | (602 | ) | 362 | (17 | ) | ||||||||||||
NET INCOME | $ | 17,996 | $ | 19,050 | $ | 7,026 | $ | 15,258 | $ | 1,284 | ||||||||||
Basic income per share | 2.53 | 3.70 | 2.60 | 5.65 | 0.48 | |||||||||||||||
Diluted income per share | 2.43 | 3.55 | 2.42 | 5.31 | 0.45 | |||||||||||||||
Basic weighted average number of shares outstanding | 7,126,060 | 5,146,283 | 2,701,749 | 2,701,749 | 2,701,749 | |||||||||||||||
Diluted weighted average number of shares outstanding | 7,412,032 | 5,360,165 | 2,898,585 | 2,872,716 | 2,837,691 | |||||||||||||||
9
HomeStreet, Inc. and Subsidiaries
Consolidated Statements of Financial Condition
(in thousands, except share data) | June 30, 2012 | Dec. 31, 2011 | % Change | ||||||||
Assets: | |||||||||||
Cash and cash equivalents (including interest-bearing instruments of $53,041 and $246,113) | $ | 75,063 | $ | 263,302 | (71 | ) | |||||
Investment securities available for sale | 415,610 | 329,047 | 26 | ||||||||
Loans held for sale (includes $400,019 and $130,546 carried at fair value) | 412,933 | 150,409 | 175 | ||||||||
Loans held for investment (net of allowance for loan losses of $26,910 and $42,689) | 1,235,253 | 1,300,873 | (5 | ) | |||||||
Mortgage servicing rights (includes $70,585 and $70,169 carried at fair value) | 78,240 | 77,281 | 1 | ||||||||
Other real estate owned | 40,618 | 38,572 | 5 | ||||||||
Federal Home Loan Bank stock, at cost | 37,027 | 37,027 | — | ||||||||
Premises and equipment, net | 10,226 | 6,569 | 56 | ||||||||
Accounts receivable and other assets | 119,977 | 61,877 | 94 | ||||||||
Total assets | $ | 2,424,947 | $ | 2,264,957 | 7 | ||||||
Liabilities and Shareholders’ Equity | |||||||||||
Liabilities: | |||||||||||
Deposits | $ | 1,904,749 | $ | 2,009,755 | (5 | ) | |||||
Federal Home Loan Bank advances | 65,590 | 57,919 | 13 | ||||||||
Securities sold under agreements to repurchase | 100,000 | — | NM | ||||||||
Accounts payable and accrued expenses | 78,728 | 49,019 | 61 | ||||||||
Long-term debt | 61,857 | 61,857 | — | ||||||||
Total liabilities | 2,210,924 | 2,178,550 | 1 | ||||||||
Shareholders’ equity: | |||||||||||
Preferred stock, no par value | |||||||||||
Authorized 10,000 shares | |||||||||||
Issued and outstanding, 0 shares and 0 shares | — | — | — | ||||||||
Common stock, no par value | |||||||||||
Authorized 80,000,000 | |||||||||||
Issued and outstanding, 7,162,607 shares and 2,701,749 shares | 511 | 511 | — | ||||||||
Additional paid-in capital | 88,637 | 31 | NM | ||||||||
Retained earnings | 118,793 | 81,746 | 45 | ||||||||
Accumulated other comprehensive income | 6,082 | 4,119 | 48 | ||||||||
Total shareholders’ equity | 214,023 | 86,407 | 148 | ||||||||
Total liabilities and shareholders’ equity | $ | 2,424,947 | $ | 2,264,957 | 7 | ||||||
10
HomeStreet, Inc. and Subsidiaries
Five Quarter Consolidated Statements of Financial Condition
(in thousands, except share data) | June 30, 2012 | Mar. 31, 2012 | Dec. 31, 2011 | Sept. 30, 2011 | June 30, 2011 | |||||||||||||||
Assets: | ||||||||||||||||||||
Cash and cash equivalents | $ | 75,063 | $ | 92,953 | $ | 263,302 | $ | 138,429 | $ | 108,175 | ||||||||||
Investment securities available for sale | 415,610 | 446,198 | 329,047 | 339,453 | 315,715 | |||||||||||||||
Loans held for sale | 412,933 | 290,954 | 150,409 | 226,590 | 121,216 | |||||||||||||||
Loans held for investment | 1,235,253 | 1,295,471 | 1,300,873 | 1,360,219 | 1,392,238 | |||||||||||||||
Mortgage servicing rights | 78,240 | 86,801 | 77,281 | 74,083 | 94,320 | |||||||||||||||
Other real estate owned | 40,618 | 31,640 | 38,572 | 64,368 | 102,697 | |||||||||||||||
Federal Home Loan Bank stock, at cost | 37,027 | 37,027 | 37,027 | 37,027 | 37,027 | |||||||||||||||
Premises and equipment, net | 10,226 | 7,034 | 6,569 | 6,615 | 6,457 | |||||||||||||||
Accounts receivable and other assets | 119,977 | 79,419 | 61,877 | 70,055 | 55,660 | |||||||||||||||
Total assets | $ | 2,424,947 | $ | 2,367,497 | $ | 2,264,957 | $ | 2,316,839 | $ | 2,233,505 | ||||||||||
Liabilities and Shareholders’ Equity | ||||||||||||||||||||
Liabilities: | ||||||||||||||||||||
Deposits | $ | 1,904,749 | $ | 2,000,633 | $ | 2,009,755 | $ | 2,056,977 | $ | 1,993,655 | ||||||||||
Federal Home Loan Bank advances | 65,590 | 57,919 | 57,919 | 67,919 | 77,919 | |||||||||||||||
Securities sold under agreements to repurchase | 100,000 | — | — | — | — | |||||||||||||||
Accounts payable and accrued expenses | 78,728 | 55,858 | 49,019 | 49,750 | 41,763 | |||||||||||||||
Long-term debt | 61,857 | 61,857 | 61,857 | 61,857 | 61,857 | |||||||||||||||
Total liabilities | 2,210,924 | 2,176,267 | 2,178,550 | 2,236,503 | 2,175,194 | |||||||||||||||
Shareholders’ equity: | ||||||||||||||||||||
Preferred stock, no par value | ||||||||||||||||||||
Authorized 10,000 shares | ||||||||||||||||||||
Issued and outstanding, 0 shares | — | — | — | — | — | |||||||||||||||
Common stock, no par value | ||||||||||||||||||||
Authorized 80,000,000 | ||||||||||||||||||||
Issued and outstanding | 511 | 511 | 511 | 511 | 511 | |||||||||||||||
Additional paid-in capital | 88,637 | 86,755 | 31 | 28 | 24 | |||||||||||||||
Retained earnings | 118,793 | 100,796 | 81,746 | 74,720 | 59,462 | |||||||||||||||
Accumulated other comprehensive income (loss) | 6,082 | 3,168 | 4,119 | 5,077 | (1,686 | ) | ||||||||||||||
Total shareholders’ equity | 214,023 | 191,230 | 86,407 | 80,336 | 58,311 | |||||||||||||||
Total liabilities and shareholders’ equity | $ | 2,424,947 | $ | 2,367,497 | $ | 2,264,957 | $ | 2,316,839 | $ | 2,233,505 | ||||||||||
11
HomeStreet, Inc. and Subsidiaries
Average Balances, Yields and Rates Paid (Taxable-equivalent basis)
Quarter ended June 30, | ||||||||||||||||||||||
2012 | 2011 | |||||||||||||||||||||
(in thousands) | Average Balance | Interest | Average Yield/Cost | Average Balance | Interest | Average Yield/Cost | ||||||||||||||||
Assets: | ||||||||||||||||||||||
Interest-earning assets (1): | ||||||||||||||||||||||
Cash & cash equivalents | $ | 95,599 | $ | 52 | 0.22 | % | $ | 121,097 | $ | 69 | 0.23 | % | ||||||||||
Investment securities | 431,875 | 2,856 | 2.65 | % | 308,049 | 1,880 | 2.44 | % | ||||||||||||||
Loans held for sale | 310,237 | 2,818 | 3.64 | % | 96,014 | 1,073 | 4.47 | % | ||||||||||||||
Loans held for investment | 1,304,740 | 14,466 | 4.44 | % | 1,512,308 | 16,912 | 4.48 | % | ||||||||||||||
Total interest-earning assets (2) | 2,142,451 | 20,192 | 3.78 | % | 2,037,468 | 19,934 | 3.92 | % | ||||||||||||||
Noninterest-earning assets (3) | 228,855 | 218,227 | ||||||||||||||||||||
Total assets | $ | 2,371,306 | $ | 2,255,695 | ||||||||||||||||||
Liabilities and Shareholders’ Equity: | ||||||||||||||||||||||
Deposits: | ||||||||||||||||||||||
Interest-bearing demand accounts | $ | 150,709 | 124 | 0.33 | % | $ | 125,007 | 162 | 0.53 | % | ||||||||||||
Savings accounts | 83,547 | 92 | 0.44 | % | 55,352 | 94 | 0.69 | % | ||||||||||||||
Money market accounts | 595,579 | 814 | 0.55 | % | 434,837 | 806 | 0.75 | % | ||||||||||||||
Certificate accounts | 810,324 | 3,168 | 1.57 | % | 1,221,923 | 5,476 | 1.82 | % | ||||||||||||||
Deposits | 1,640,159 | 4,198 | 1.03 | % | 1,837,119 | 6,538 | 1.44 | % | ||||||||||||||
FHLB advances | 79,490 | 535 | 2.94 | % | 85,097 | 959 | 4.53 | % | ||||||||||||||
Securities sold under agreements to repurchase | 52,369 | 50 | 0.35 | % | — | — | — | % | ||||||||||||||
Long-term debt | 61,857 | 271 | 1.75 | % | 61,857 | 457 | 2.96 | % | ||||||||||||||
Other borrowings | — | 3 | — | — | — | — | ||||||||||||||||
Total interest-bearing liabilities (2) | 1,833,875 | 5,057 | 1.11 | % | 1,984,073 | 7,954 | 1.61 | % | ||||||||||||||
Other noninterest-bearing liabilities | 331,003 | 214,376 | ||||||||||||||||||||
Total liabilities | 2,164,878 | 2,198,449 | ||||||||||||||||||||
Shareholders’ equity | 206,428 | 57,246 | ||||||||||||||||||||
Total liabilities and shareholders’ equity | $ | 2,371,306 | $ | 2,255,695 | ||||||||||||||||||
Net interest income (4) | $ | 15,135 | $ | 11,980 | ||||||||||||||||||
Net interest spread | 2.67 | % | 2.31 | % | ||||||||||||||||||
Impact of noninterest-bearing sources | 0.16 | % | 0.04 | % | ||||||||||||||||||
Net interest margin | 2.83 | % | 2.35 | % | ||||||||||||||||||
(1) | The daily average balances of nonaccrual assets and related income, if any, are included in their respective categories. |
(2) | Average interest-earning assets and interest-bearing liabilities were computed using daily average balances. |
(3) | Includes loans balances that have been foreclosed and are now reclassified to other real estate owned. |
(4) | Includes taxable-equivalent adjustments, which is a non-GAAP measure, primarily related to tax-exempt income on certain loans and securities of $437 thousand for the quarter ended June 30, 2012 and $66 thousand for the quarter ended June 30, 2011, respectively. The Company's estimated marginal tax rate was 36% for the periods presented. |
12
HomeStreet, Inc. and Subsidiaries
Average Balances, Yields and Rates Paid (Taxable-equivalent basis) (continued)
Six months ended June 30, | ||||||||||||||||||||||
2012 | 2011 | |||||||||||||||||||||
(in thousands) | Average Balance | Interest | Average Yield/Cost | Average Balance | Interest | Average Yield/Cost | ||||||||||||||||
Assets: | ||||||||||||||||||||||
Interest-earning assets (1): | ||||||||||||||||||||||
Cash & cash equivalents | $ | 150,522 | $ | 186 | 0.25 | % | $ | 131,147 | $ | 151 | 0.23 | % | ||||||||||
Investment securities | 406,502 | 5,371 | 2.64 | % | 308,032 | 3,771 | 2.45 | % | ||||||||||||||
Loans held for sale | 237,645 | 4,432 | 3.73 | % | 101,271 | 2,203 | 4.35 | % | ||||||||||||||
Loans held for investment | 1,321,646 | 29,443 | 4.46 | % | 1,550,738 | 34,488 | 4.46 | % | ||||||||||||||
Total interest-earning assets (2) | 2,116,315 | 39,432 | 3.73 | % | 2,091,188 | 40,613 | 3.90 | % | ||||||||||||||
Noninterest-earning assets (3) | 207,233 | 228,769 | ||||||||||||||||||||
Total assets | $ | 2,323,548 | $ | 2,319,957 | ||||||||||||||||||
Liabilities and Shareholders’ Equity: | ||||||||||||||||||||||
Deposits: | ||||||||||||||||||||||
Interest-bearing demand accounts | $ | 144,416 | 239 | 0.33 | % | $ | 123,599 | 318 | 0.52 | % | ||||||||||||
Savings accounts | 78,635 | 176 | 0.45 | % | 54,007 | 184 | 0.69 | % | ||||||||||||||
Money market accounts | 560,385 | 1,534 | 0.55 | % | 427,559 | 1,581 | 0.75 | % | ||||||||||||||
Certificate accounts | 889,328 | 7,128 | 1.61 | % | 1,258,120 | 11,496 | 1.85 | % | ||||||||||||||
Deposits | 1,672,764 | 9,077 | 1.09 | % | 1,863,285 | 13,579 | 1.48 | % | ||||||||||||||
FHLB advances | 68,704 | 1,209 | 3.52 | % | 122,257 | 2,267 | 3.73 | % | ||||||||||||||
Securities sold under agreements to repurchase | 26,185 | 50 | 0.38 | % | — | — | — | % | ||||||||||||||
Long-term debt | 61,857 | 736 | 2.38 | % | 63,166 | 1,128 | 3.57 | % | ||||||||||||||
Other borrowings | — | 9 | — | — | — | — | ||||||||||||||||
Total interest-bearing liabilities (2) | 1,829,510 | 11,081 | 1.22 | % | 2,048,708 | 16,974 | 1.67 | % | ||||||||||||||
Other noninterest-bearing liabilities | 319,955 | 213,561 | ||||||||||||||||||||
Total liabilities | 2,149,465 | 2,262,269 | ||||||||||||||||||||
Shareholders’ equity | 174,083 | 57,688 | ||||||||||||||||||||
Total liabilities and shareholders’ equity | $ | 2,323,548 | $ | 2,319,957 | ||||||||||||||||||
Net interest income (4) | $ | 28,351 | $ | 23,639 | ||||||||||||||||||
Net interest spread | 2.52 | % | 2.23 | % | ||||||||||||||||||
Impact of noninterest-bearing sources | 0.16 | % | 0.03 | % | ||||||||||||||||||
Net interest margin | 2.68 | % | 2.26 | % | ||||||||||||||||||
(1) | The daily average balances of nonaccrual assets and related income, if any, are included in their respective categories. |
(2) | Average interest-earning assets and interest-bearing liabilities were computed using daily average balances. |
(3) | Includes loans balances that have been foreclosed and are now reclassified to other real estate owned. |
(4) | Includes taxable-equivalent adjustments, which is a non-GAAP measure, primarily related to tax-exempt income on certain loans and securities of $749 thousand for the six months ended June 30, 2012 and $135 thousand for the six months ended June 30, 2011, respectively. The Company's estimated marginal tax rate was 36% for the periods presented. |
13
HomeStreet, Inc. and Subsidiaries
Five Quarter Investment Securities Available for Sale
(in thousands, except for duration data) | June 30, 2012 | Mar. 31, 2012 | Dec. 31, 2011 | Sept. 30, 2011 | June 30, 2011 | |||||||||||||||
Mortgage backed: | ||||||||||||||||||||
Residential | $ | 48,136 | $ | 40,575 | $ | — | $ | — | $ | 12,003 | ||||||||||
Commercial | 14,602 | 14,410 | 14,483 | 8,393 | — | |||||||||||||||
Municipal bonds | 126,681 | 79,051 | 49,584 | 1,059 | 5,722 | |||||||||||||||
Collateralized mortgage obligations: | ||||||||||||||||||||
Residential | 185,970 | 245,889 | 223,390 | 251,856 | 221,732 | |||||||||||||||
Commercial | 9,165 | 10,019 | 10,070 | 10,174 | — | |||||||||||||||
Agency | — | 25,007 | — | — | — | |||||||||||||||
US Treasury | 31,056 | 31,247 | 31,520 | 67,971 | 76,258 | |||||||||||||||
$ | 415,610 | $ | 446,198 | $ | 329,047 | $ | 339,453 | $ | 315,715 | |||||||||||
Weighted average duration in years | 5.1 | 5.1 | 4.4 | 3.9 | 3.9 | |||||||||||||||
Five Quarter Loans Held for Investment
(in thousands) | June 30, 2012 | Mar. 31, 2012 | Dec. 31, 2011 | Sept. 30, 2011 | June 30, 2011 | |||||||||||||||
Consumer loans | ||||||||||||||||||||
Single family residential | $ | 537,174 | $ | 506,103 | $ | 496,934 | $ | 496,741 | $ | 502,935 | ||||||||||
Home equity | 147,587 | 152,924 | 158,936 | 167,453 | 172,205 | |||||||||||||||
684,761 | 659,027 | 655,870 | 664,194 | 675,140 | ||||||||||||||||
Commercial loans | ||||||||||||||||||||
Commercial real estate | 370,064 | 391,727 | 402,139 | 407,891 | 410,370 | |||||||||||||||
Multifamily residential | 47,069 | 56,328 | 56,379 | 58,972 | 59,092 | |||||||||||||||
Construction/land development | 83,797 | 158,552 | 173,405 | 213,001 | 234,062 | |||||||||||||||
Commercial business | 79,980 | 68,932 | 59,831 | 73,559 | 77,493 | |||||||||||||||
580,910 | 675,539 | 691,754 | 753,423 | 781,017 | ||||||||||||||||
1,265,671 | 1,334,566 | 1,347,624 | 1,417,617 | 1,456,157 | ||||||||||||||||
Net deferred loan fees and discounts | (3,508 | ) | (3,891 | ) | (4,062 | ) | (4,231 | ) | (4,227 | ) | ||||||||||
1,262,163 | 1,330,675 | 1,343,562 | 1,413,386 | 1,451,930 | ||||||||||||||||
Allowance for loan losses | (26,910 | ) | (35,204 | ) | (42,689 | ) | (53,167 | ) | (59,692 | ) | ||||||||||
$ | 1,235,253 | $ | 1,295,471 | $ | 1,300,873 | $ | 1,360,219 | $ | 1,392,238 | |||||||||||
Allowance as a % of loans held for investment | 2.13 | % | 2.64 | % | 3.18 | % | 3.76 | % | 4.11 | % | ||||||||||
14
HomeStreet, Inc. and Subsidiaries
Five Quarter Credit Quality Activity
Allowance for Credit Losses (roll-forward)
Quarter ended | ||||||||||||||||||||
(in thousands) | June 30, 2012 | Mar. 31, 2012 | Dec. 31, 2011 | Sept. 30, 2011 | June 30, 2011 | |||||||||||||||
Allowance for Credit Losses (roll-forward): | ||||||||||||||||||||
Beginning balance | $ | 35,402 | $ | 42,800 | $ | 53,386 | $ | 60,059 | $ | 62,466 | ||||||||||
Provision for credit losses | 2,000 | — | — | 1,000 | 2,300 | |||||||||||||||
(Charge-offs), net of recoveries | (10,277 | ) | (7,398 | ) | (10,586 | ) | (7,673 | ) | (4,707 | ) | ||||||||||
Ending balance | $ | 27,125 | $ | 35,402 | $ | 42,800 | $ | 53,386 | $ | 60,059 | ||||||||||
Nonperfoming assets (NPAs) roll-forward
Quarter ended | ||||||||||||||||||||
(in thousands) | June 30, 2012 | Mar. 31, 2012 | Dec. 31, 2011 | Sept. 30, 2011 | June 30, 2011 | |||||||||||||||
Beginning balance | $ | 107,215 | $ | 115,056 | $ | 159,462 | $ | 193,609 | $ | 222,981 | ||||||||||
Additions | 13,208 | 18,776 | 7,251 | 20,900 | 14,246 | |||||||||||||||
Reductions: | ||||||||||||||||||||
Charge-offs | (10,277 | ) | (7,398 | ) | (10,586 | ) | (7,673 | ) | (4,707 | ) | ||||||||||
OREO sales | (9,804 | ) | (8,878 | ) | (26,037 | ) | (33,814 | ) | (17,590 | ) | ||||||||||
OREO writedowns | (5,578 | ) | (2,754 | ) | (3,564 | ) | (8,217 | ) | (4,739 | ) | ||||||||||
Principal paydown, payoff advances | (12,037 | ) | (1,321 | ) | (3,871 | ) | (2,437 | ) | (6,024 | ) | ||||||||||
Transferred back to accrual status | (9,002 | ) | (6,266 | ) | (7,599 | ) | (2,906 | ) | (10,558 | ) | ||||||||||
Total reductions | $ | (46,698 | ) | $ | (26,617 | ) | $ | (51,657 | ) | $ | (55,047 | ) | $ | (43,618 | ) | |||||
Net additions/(reductions) | (33,490 | ) | (7,841 | ) | (44,406 | ) | (34,147 | ) | (29,372 | ) | ||||||||||
Ending balance | $ | 73,725 | $ | 107,215 | $ | 115,056 | $ | 159,462 | $ | 193,609 | ||||||||||
15
HomeStreet, Inc. and Subsidiaries
Five Quarter Nonperforming Assets by Loan Class
(in thousands) | June 30, 2012 | Mar. 31, 2012 | Dec. 31, 2011 | Sept. 30, 2011 | June 30, 2011 | |||||||||||||||
Nonaccrual loans: | ||||||||||||||||||||
Consumer loans | ||||||||||||||||||||
Single family residential | $ | 7,530 | $ | 14,290 | $ | 12,104 | $ | 15,469 | $ | 16,229 | ||||||||||
Home equity | 1,910 | 1,853 | 2,464 | 2,772 | 2,620 | |||||||||||||||
9,440 | 16,143 | 14,568 | 18,241 | 18,849 | ||||||||||||||||
Commercial loans | ||||||||||||||||||||
Commercial real estate | 14,265 | 9,222 | 10,184 | 10,959 | 10,081 | |||||||||||||||
Multifamily residential | — | — | 2,394 | 5,196 | 5,265 | |||||||||||||||
Construction/land development | 9,373 | 49,708 | 48,387 | 58,705 | 53,955 | |||||||||||||||
Commercial business | 29 | 502 | 951 | 1,993 | 2,762 | |||||||||||||||
23,667 | 59,432 | 61,916 | 76,853 | 72,063 | ||||||||||||||||
Total nonaccrual loans | $ | 33,107 | $ | 75,575 | $ | 76,484 | $ | 95,094 | $ | 90,912 | ||||||||||
Allowance as a % of nonaccrual loans | 81.28 | % | 46.58 | % | 55.81 | % | 55.91 | % | 65.66 | % | ||||||||||
Other real estate owned: | ||||||||||||||||||||
Consumer loans | ||||||||||||||||||||
Single family residential | $ | 3,142 | $ | 3,243 | $ | 6,600 | $ | 10,419 | $ | 14,287 | ||||||||||
Home equity | — | — | — | — | 229 | |||||||||||||||
3,142 | 3,243 | 6,600 | 10,419 | 14,516 | ||||||||||||||||
Commercial loans | ||||||||||||||||||||
Commercial real estate | 3,184 | 284 | 2,055 | 2,152 | 2,152 | |||||||||||||||
Multifamily residential | — | — | — | — | — | |||||||||||||||
Construction/land development | 34,292 | 28,113 | 29,917 | 51,797 | 86,029 | |||||||||||||||
Commercial business | — | — | — | — | — | |||||||||||||||
37,476 | 28,397 | 31,972 | 53,949 | 88,181 | ||||||||||||||||
Total other real estate owned | $ | 40,618 | $ | 31,640 | $ | 38,572 | $ | 64,368 | $ | 102,697 | ||||||||||
Nonperforming assets | ||||||||||||||||||||
Consumer loans | ||||||||||||||||||||
Single family residential | $ | 10,672 | $ | 17,533 | $ | 18,704 | $ | 25,888 | $ | 30,516 | ||||||||||
Home equity | 1,910 | 1,853 | 2,464 | 2,772 | 2,849 | |||||||||||||||
12,582 | 19,386 | 21,168 | 28,660 | 33,365 | ||||||||||||||||
Commercial loans | ||||||||||||||||||||
Commercial real estate | 17,449 | 9,506 | 12,239 | 13,111 | 12,233 | |||||||||||||||
Multifamily residential | — | — | 2,394 | 5,196 | 5,265 | |||||||||||||||
Construction/land development | 43,665 | 77,821 | 78,304 | 110,502 | 139,984 | |||||||||||||||
Commercial business | 29 | 502 | 951 | 1,993 | 2,762 | |||||||||||||||
61,143 | 87,829 | 93,888 | 130,802 | 160,244 | ||||||||||||||||
Total nonperforming assets | $ | 73,725 | $ | 107,215 | $ | 115,056 | $ | 159,462 | $ | 193,609 | ||||||||||
Nonperforming assets to total assets | 3.04 | % | 4.53 | % | 5.08 | % | 6.88 | % | 8.67 | % | ||||||||||
16
HomeStreet, Inc. and Subsidiaries
Delinquencies by Loan Class
(in thousands) | 30-59 days past due | 60-89 days past due | 90 days or more past due (1) | Total past due | Current | Total loans | ||||||||||||||||||
June 30, 2012 | ||||||||||||||||||||||||
Consumer loans | ||||||||||||||||||||||||
Single family residential | $ | 11,055 | $ | 5,302 | $ | 40,831 | $ | 57,188 | $ | 479,986 | $ | 537,174 | ||||||||||||
Home equity | 753 | 242 | 1,910 | 2,905 | 144,682 | 147,587 | ||||||||||||||||||
11,808 | 5,544 | 42,741 | 60,093 | 624,668 | 684,761 | |||||||||||||||||||
Commercial loans | ||||||||||||||||||||||||
Commercial real estate | — | — | 14,265 | 14,265 | 355,799 | 370,064 | ||||||||||||||||||
Multifamily residential | — | — | — | — | 47,069 | 47,069 | ||||||||||||||||||
Construction/land development | — | — | 9,373 | 9,373 | 74,424 | 83,797 | ||||||||||||||||||
Commercial business | 168 | — | 29 | 197 | 79,783 | 79,980 | ||||||||||||||||||
168 | — | 23,667 | 23,835 | 557,075 | 580,910 | |||||||||||||||||||
$ | 11,976 | $ | 5,544 | $ | 66,408 | $ | 83,928 | $ | 1,181,743 | $ | 1,265,671 | |||||||||||||
As a % of total loans | 0.95 | % | 0.44 | % | 5.25 | % | 6.63 | % | 93.37 | % | 100.00 | % | ||||||||||||
December 31, 2011 | ||||||||||||||||||||||||
Consumer loans | ||||||||||||||||||||||||
Single family residential | $ | 7,694 | $ | 8,552 | $ | 47,861 | $ | 64,107 | $ | 432,827 | $ | 496,934 | ||||||||||||
Home equity | 957 | 500 | 2,464 | 3,921 | 155,015 | 158,936 | ||||||||||||||||||
8,651 | 9,052 | 50,325 | 68,028 | 587,842 | 655,870 | |||||||||||||||||||
Commercial loans | ||||||||||||||||||||||||
Commercial real estate | — | — | 10,184 | 10,184 | 391,955 | 402,139 | ||||||||||||||||||
Multifamily residential | — | — | 2,394 | 2,394 | 53,985 | 56,379 | ||||||||||||||||||
Construction/land development | 9,916 | — | 48,387 | 58,303 | 115,102 | 173,405 | ||||||||||||||||||
Commercial business | — | — | 951 | 951 | 58,880 | 59,831 | ||||||||||||||||||
9,916 | — | 61,916 | 71,832 | 619,922 | 691,754 | |||||||||||||||||||
$ | 18,567 | $ | 9,052 | $ | 112,241 | $ | 139,860 | $ | 1,207,764 | $ | 1,347,624 | |||||||||||||
As a % of total loans | 1.38 | % | 0.67 | % | 8.33 | % | 10.38 | % | 89.62 | % | 100.00 | % | ||||||||||||
(1) | Includes $33.3 million and $35.8 million of single family residential loans past due and still accruing at June 30, 2012 and December 31, 2011 respectively, whose repayments are insured by the FHA or guaranteed by the VA. |
17
HomeStreet, Inc. and Subsidiaries
Five Quarter Mortgage Banking Operations
Mortgage Servicing Income
Quarter ended | ||||||||||||||||||||
(in thousands) | June 30, 2012 | Mar. 31, 2012 | Dec. 31, 2011 | Sept. 30, 2011 | June 30, 2011 | |||||||||||||||
Servicing income, net: | ||||||||||||||||||||
Servicing fees and other | $ | 6,705 | $ | 6,436 | $ | 6,518 | $ | 6,793 | $ | 6,736 | ||||||||||
Changes in fair value of single family MSRs due to modeled amortization (1) | (4,052 | ) | (4,969 | ) | (4,176 | ) | (4,155 | ) | (3,258 | ) | ||||||||||
Amortization of multifamily MSRs | (462 | ) | (491 | ) | (366 | ) | (455 | ) | (345 | ) | ||||||||||
2,191 | 976 | 1,976 | 2,183 | 3,133 | ||||||||||||||||
Risk management, single family MSRs: | ||||||||||||||||||||
Changes in fair value due to changes in model or assumptions (2) | (15,354 | ) | 7,411 | (3,910 | ) | (21,986 | ) | (4,194 | ) | |||||||||||
Net gain (loss) from derivatives economically hedging MSR | 20,254 | (514 | ) | 7,897 | 38,335 | 8,774 | ||||||||||||||
4,900 | 6,897 | 3,987 | 16,349 | 4,580 | ||||||||||||||||
Mortgage servicing income | $ | 7,091 | $ | 7,873 | $ | 5,963 | $ | 18,532 | $ | 7,713 | ||||||||||
(1) | Represents changes due to collection/realization of expected cash flows and curtailments over time. |
(2) | Principally reflects changes in model assumptions and prepayment speed assumptions, which are primarily affected by changes in interest rates. |
Loans Serviced for Others
(in thousands) | June 30, 2012 | Mar. 31, 2012 | Dec. 31, 2011 | Sept. 30, 2011 | June 30, 2011 | |||||||||||||||
Single family residential | ||||||||||||||||||||
U.S. government agency MBS | $ | 7,061,232 | $ | 6,530,578 | $ | 6,464,815 | $ | 6,217,086 | $ | 6,165,052 | ||||||||||
Other | 407,750 | 416,700 | 420,470 | 432,460 | 437,748 | |||||||||||||||
7,468,982 | 6,947,278 | 6,885,285 | 6,649,546 | 6,602,800 | ||||||||||||||||
Commercial | ||||||||||||||||||||
Multifamily | 772,473 | 766,433 | 758,535 | 770,401 | 799,332 | |||||||||||||||
Other | 56,840 | 59,370 | 56,785 | 57,151 | 57,690 | |||||||||||||||
829,313 | 825,803 | 815,320 | 827,552 | 857,022 | ||||||||||||||||
Total loans serviced for others | $ | 8,298,295 | $ | 7,773,081 | $ | 7,700,605 | $ | 7,477,098 | $ | 7,459,822 | ||||||||||
18
HomeStreet, Inc. and Subsidiaries
Five Quarter Mortgage Banking Operations (continued)
Single Family Capitalized Mortgage Servicing Rights
Quarter ended | ||||||||||||||||||||
(in thousands) | June 30, 2012 | Mar. 31, 2012 | Dec. 31, 2011 | Sept. 30, 2011 | June 30, 2011 | |||||||||||||||
Beginning balance | $ | 79,381 | $ | 70,169 | $ | 67,471 | $ | 87,712 | $ | 89,947 | ||||||||||
Originations | 10,598 | 6,723 | 10,759 | 5,873 | 5,187 | |||||||||||||||
Purchases | 12 | 47 | 25 | 27 | 30 | |||||||||||||||
Changes due to modeled amortization (1) | (4,052 | ) | (4,969 | ) | (4,176 | ) | (4,155 | ) | (3,258 | ) | ||||||||||
Net additions and amortization | 6,558 | 1,801 | 6,608 | 1,745 | 1,959 | |||||||||||||||
Changes due to changes in model inputs or assumptions (2) | (15,354 | ) | 7,411 | (3,910 | ) | (21,986 | ) | (4,194 | ) | |||||||||||
Ending balance | $ | 70,585 | $ | 79,381 | $ | 70,169 | $ | 67,471 | $ | 87,712 | ||||||||||
Ratio of capitalized MSRs to related loans serviced for others | 0.95 | % | 1.14 | % | 1.02 | % | 1.01 | % | 1.33 | % | ||||||||||
Ratio of capitalized value to weighted average servicing fee | 282.00 | % | 330.00 | % | 291.00 | % | 292.00 | % | 386.00 | % | ||||||||||
(1) | Represents changes due to collection/realization of expected future cash flows over time |
(2) | Principally reflects changes in model assumptions or prepayment speed assumptions, which are primarily affected by changes in mortgage interest rates. |
Commercial Multifamily Capitalized Mortgage Servicing Rights
Quarter ended | ||||||||||||||||||||
(in thousands) | June 30, 2012 | Mar. 31, 2012 | Dec. 31, 2011 | Sept. 30, 2011 | June 30, 2011 | |||||||||||||||
Beginning balance | $ | 7,420 | $ | 7,112 | $ | 6,612 | $ | 6,608 | $ | 6,005 | ||||||||||
Originations | 697 | 799 | 866 | 459 | 948 | |||||||||||||||
Amortization | (462 | ) | (491 | ) | (366 | ) | (455 | ) | (345 | ) | ||||||||||
Ending balance | $ | 7,655 | $ | 7,420 | $ | 7,112 | $ | 6,612 | $ | 6,608 | ||||||||||
Ratio of capitalized MSRs to related loans serviced for others | 0.92 | % | 0.90 | % | 0.87 | % | 0.80 | % | 0.77 | % | ||||||||||
Ratio of capitalized value to weighted average servicing fee | 245.00 | % | 241.00 | % | 242.00 | % | 227.00 | % | 222.00 | % | ||||||||||
19
HomeStreet, Inc. and Subsidiaries
Five Quarter Mortgage Banking Operations (continued)
Mortgage Banking Activity
Quarter ended | ||||||||||||||||||||
(in thousands) | June 30, 2012 | Mar. 31, 2012 | Dec. 31, 2011 | Sept. 30, 2011 | June 30, 2011 | |||||||||||||||
Production volumes: | ||||||||||||||||||||
Single family mortgage originations (1) | $ | 1,068,656 | $ | 712,302 | $ | 624,111 | $ | 478,024 | $ | 323,905 | ||||||||||
Single family mortgage interest rate lock commitments | 1,227,245 | 920,240 | 543,164 | 630,919 | 344,836 | |||||||||||||||
Single family mortgage loans sold | 962,704 | 534,310 | 710,706 | 370,250 | 272,090 | |||||||||||||||
Multifamily mortgage originations | $ | 35,908 | $ | 15,713 | $ | 49,071 | $ | 26,125 | $ | 49,070 | ||||||||||
Multifamily mortgage loans sold | 27,178 | 31,423 | 33,461 | 25,144 | 47,010 | |||||||||||||||
Net gain on mortgage loan origination and sale activities: | ||||||||||||||||||||
Single family: | ||||||||||||||||||||
Secondary marketing gains | $ | 28,709 | $ | 16,071 | $ | 2,587 | $ | 6,374 | $ | 950 | ||||||||||
Provision for repurchase losses | (1,930 | ) | (390 | ) | (12 | ) | (289 | ) | (304 | ) | ||||||||||
Net gain from secondary marketing activities | 26,779 | 15,681 | 2,575 | 6,085 | 646 | |||||||||||||||
Mortgage servicing rights originated | 10,598 | 6,723 | 10,758 | 5,872 | 5,188 | |||||||||||||||
Loan origination and funding fees | 7,070 | 4,944 | 4,401 | 3,309 | 2,350 | |||||||||||||||
Total single family | 44,447 | 27,348 | 17,734 | 15,266 | 8,184 | |||||||||||||||
Multifamily | 1,039 | 1,162 | 1,185 | 500 | 967 | |||||||||||||||
Total net gain on mortgage loan origination and sales activities | $ | 45,486 | $ | 28,510 | $ | 18,919 | $ | 15,766 | $ | 9,151 | ||||||||||
(1) | Represents single family mortgage originations designated for sale during each respective period. |
20
HomeStreet, Inc. and Subsidiaries
Five Quarter Deposits
(in thousands) | June 30, 2012 | Mar. 31, 2012 | Dec. 31, 2011 | Sept. 30, 2011 | June 30, 2011 | |||||||||||||||
Deposits by Product: | ||||||||||||||||||||
Noninterest bearing accounts - checking and savings | $ | 64,404 | $ | 68,245 | $ | 69,276 | $ | 58,570 | $ | 57,375 | ||||||||||
Interest bearing core deposits: | ||||||||||||||||||||
NOW accounts | 170,098 | 154,670 | 138,936 | 145,668 | 122,995 | |||||||||||||||
Statement savings accounts due on demand | 88,104 | 79,438 | 66,898 | 59,974 | 57,685 | |||||||||||||||
Money market accounts due on demand | 630,798 | 559,563 | 499,457 | 469,289 | 445,081 | |||||||||||||||
Total interest bearing core deposits | 889,000 | 793,671 | 705,291 | 674,931 | 625,761 | |||||||||||||||
Total core deposits | 953,404 | 861,916 | 774,567 | 733,501 | 683,136 | |||||||||||||||
Certificates of deposit | 755,646 | 890,694 | 1,033,798 | 1,094,184 | 1,183,482 | |||||||||||||||
Noninterest bearing accounts - other | 195,699 | 248,023 | 201,390 | 229,292 | 127,037 | |||||||||||||||
Total deposits | $ | 1,904,749 | $ | 2,000,633 | $ | 2,009,755 | $ | 2,056,977 | $ | 1,993,655 | ||||||||||
Percent of total deposits: | ||||||||||||||||||||
Noninterest bearing accounts - checking and savings | 3.4 | % | 3.4 | % | 3.4 | % | 2.8 | % | 2.9 | % | ||||||||||
Interest bearing core deposits: | ||||||||||||||||||||
NOW accounts | 8.9 | % | 7.7 | % | 6.9 | % | 7.1 | % | 6.2 | % | ||||||||||
Statement savings accounts due on demand | 4.6 | % | 4.0 | % | 3.3 | % | 2.9 | % | 2.9 | % | ||||||||||
Money market accounts due on demand | 33.1 | % | 28.0 | % | 24.9 | % | 22.8 | % | 22.3 | % | ||||||||||
Total interest bearing core deposits | 46.6 | % | 39.7 | % | 35.1 | % | 32.8 | % | 31.4 | % | ||||||||||
Total core deposits | 50.0 | % | 43.1 | % | 38.5 | % | 35.6 | % | 34.3 | % | ||||||||||
Certificates of deposit | 39.7 | % | 44.5 | % | 51.4 | % | 53.2 | % | 59.4 | % | ||||||||||
Noninterest bearing accounts - other | 10.3 | % | 12.4 | % | 10.1 | % | 11.2 | % | 6.3 | % | ||||||||||
Total deposits | 100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % | ||||||||||
21