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| 8-K - FORM 8-K - HomeStreet, Inc. | form8-k3q2014earningsrelea.htm |
| EX-99.2 - SUMMARY EARNINGS RELEASE ISSUED BY HOMESTREET, INC. DATED OCTOBER 27, 2014 - HomeStreet, Inc. | summaryearningsrelease_3q2.htm |
HomeStreet, Inc. Reports Third Quarter 2014 Results
Net Income of $5.0 Million, or $0.33 per Diluted Share
Announced Merger Agreement with Simplicity Bancorp
SEATTLE – October 27, 2014 – (BUSINESS WIRE) – HomeStreet, Inc. (NASDAQ:HMST) (the “Company” or “HomeStreet”), the parent company of HomeStreet Bank (the “Bank”), today announced net income of $5.0 million, or $0.33 per diluted share, for the third quarter of 2014, compared to net income of $9.4 million, or $0.63 per share, for the second quarter of 2014 and net income of $1.7 million, or $0.11 per share, for the third quarter of 2013.
On September 29, 2014, HomeStreet announced plans to merge with Simplicity Bancorp, Inc., a Maryland corporation and savings and loan holding company headquartered in Covina, California. HomeStreet will be the surviving company in the merger. Immediately following the merger, Simplicity Bank, a federally chartered savings bank institution, will merge with HomeStreet Bank. The transaction, structured as a stock-for-stock merger, is expected to have a total value of approximately $128.0 million as of the announcement date. On a pro forma basis, the combined company will have approximately $4.11 billion in assets, total deposits of approximately $3.07 billion and total loans of approximately $3.07 billion as of June 30, 2014. At the time of the anticipated closing, the combined company is expected to have a network of more than 100 retail deposit branches and stand-alone lending centers in six states. Upon completion of the merger, the resulting bank will operate under the HomeStreet Bank name and brand. The transaction is expected to be completed in the first quarter of 2015, after obtaining certain approvals of the shareholders of each company and the necessary regulatory approvals.
• | Consolidated results: |
◦ | Net income was $5.4 million(1), or $0.36(1) per diluted share, for the third quarter of 2014, excluding acquisition-related expenses of $722 thousand. |
◦ | Tangible book value increased to $18.86 per share as of September 30, 2014 compared to $18.42 per share at June 30, 2014. |
◦ | Year-to-date return on average tangible equity is 8.22%. |
◦ | Net interest income was $25.3 million in the third quarter of 2014 compared to $23.1 million in the second quarter of 2014, resulting from 8.4% growth in average interest-earning assets. |
◦ | Net interest margin of 3.50% compared to 3.48% in the second quarter of 2014 and 3.41% in the third quarter of 2013. |
◦ | Deposit balances of $2.43 billion increased 15.6% from the third quarter of 2013. Transaction and savings deposits increased 24.7% and noninterest-bearing checking and savings deposits grew 102% during the same period. |
• | Segment results: |
◦ | Commercial and Consumer Banking |
▪ | Commercial and Consumer Banking segment net income was $4.0 million(1) for the quarter, excluding acquisition-related expenses. |
▪ | We opened two de novo retail deposit branches in the Seattle area during the quarter. |
▪ | Transaction and savings deposits increased to $1.77 billion, up 2.8% from $1.72 billion at June 30, 2014. Noninterest-bearing deposits increased to $271.7 million, or 11.2% of total deposits, up from $235.8 million, or 9.8% of total deposits at June 30, 2014. |
▪ | Loans held for investment increased 8.4% to $1.96 billion from $1.81 billion at June 30, 2014. New loan commitments totaled $324.0 million in the quarter, up 19.0% from $272.2 million at June 30, 2014. |
▪ | Nonperforming assets and classified assets ended the quarter at 0.87% and 1.09% of total assets, respectively, down from 1.00% and 1.24% of total assets at June 30, 2014. |
◦Mortgage Banking
▪ | Mortgage Banking segment net income was $1.4 million for the quarter. |
▪ | We opened a net of five home loan centers in Washington, California, Idaho and Hawaii during the quarter. |
▪ | Single family mortgage interest rate lock commitments were $1.17 billion, down 2.8% from the second quarter of 2014 and up 48.5% from the third quarter of 2013. |
▪ | Single family mortgage closed loan volume was $1.29 billion, up 17.6% from the second quarter of 2014 and up 9.1% from the third quarter of 2013. |
▪ | The portfolio of single family loans serviced for others increased to $10.59 billion at quarter-end, up 7.1% from $9.90 billion at June 30, 2014. |
(1) | Net of acquisition-related expenses as explained on page 6. |
“In the quarter, we took important steps in executing our strategy to grow our business and diversify earnings,” said HomeStreet President and CEO Mark K. Mason. “We are pleased with the strong growth of over 8% in interest-earning assets in the quarter. Loan commitments were up 19% from the prior quarter, making this our strongest quarter to date. All lending groups contributed to this growth, particularly commercial real estate and residential construction. Additionally, single family mortgage closed loan volume was up almost 18% over the second quarter, despite current challenges in the industry.
“In the quarter, we announced our plans to acquire Simplicity Bancorp, a seven-branch, $879 million asset retail bank in Southern California. We believe this acquisition will give us a strong consumer foothold in one of the largest markets in the nation and will provide us with a solid foundation on which we hope to build a regional commercial banking franchise to complement our growing mortgage banking business.”
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Consolidated Results of Operations
Net Interest Income
Net interest income in the third quarter of 2014 was $25.3 million, up $2.2 million, or 9.3%, from the second quarter of 2014 and up $4.9 million, or 24.0%, from the third quarter of 2013 as a result of the growth in the Company's average interest-earning assets. In the third quarter of 2014, net interest margin, on a tax equivalent basis, was 3.50% compared to 3.48% in the second quarter of 2014 and 3.41% in the third quarter of 2013.
Total average interest-earning assets in the third quarter of 2014 increased $229.2 million, or 8.4%, from the second quarter of 2014 due to higher average balances of loans and investment securities. Average interest-earning assets increased $478.5 million, or 19.3%, from the third quarter of 2013, primarily as a result of growth in loans held for investment, both from originations and from acquisitions. Total average interest-bearing deposit balances increased from the third quarter of 2013 primarily due to growth in transaction and savings deposits.
Noninterest Income
Noninterest income in the third quarter of 2014 was $45.8 million, down $7.8 million, or 14.6%, from $53.7 million in the second quarter of 2014 and up $7.6 million, or 20.0%, from $38.2 million in the third quarter of 2013. The decrease from the prior quarter was primarily due to a $4.2 million decrease in net gain on mortgage origination and sale activities driven by second quarter 2014 pre-tax gain of $3.9 million from the sale of mortgage loans previously transferred out of the held for investment portfolio, and a $4.0 million decrease in mortgage servicing income driven by a second quarter 2014 pre-tax income of $4.7 million related to the sale of single family MSRs.
The increase in noninterest income from the third quarter of 2013 was primarily the result of a $4.2 million, or 12.4%, increase in net gain on mortgage origination and sale activities due mostly to increased interest rate lock volumes, and a $2.1 million increase in mortgage servicing income.
Noninterest Expense
Noninterest expense for the third quarter of 2014 was $64.2 million compared with $63.0 million for the second quarter of 2014 and $58.1 million in the third quarter of 2013. Excluding acquisition-related expenses, noninterest expense for the third quarter of 2014 was $63.4 million(1), compared to $62.4 million(1) for the second quarter of 2014. The increase of $1.1 million, or 1.7%, from the second quarter of 2014 was primarily due to increased salaries and related costs due to increased headcount and higher commissions as a result of a 17.6% increase in mortgage closed loan volume. The increase from the third quarter of 2013 was primarily due to increased salary and related costs and other expenses related to acquisitions and organic growth. At September 30, 2014, we had 1,598 full-time equivalent employees, a 3.4% increase from 1,546 employees at June 30, 2014, and a 12.1% increase from 1,426 employees at September 30, 2013. During the 12-month period ending September 30, 2014, the Company added 19 home loan centers and 10 retail deposit branches to bring our total home loan centers to 55 and our total retail deposit branches to 33.
Income Taxes
The Company's income tax expense was $2.0 million inclusive of discrete items, representing an income tax rate of 28.6% for the third quarter of 2014. The Company’s year to date effective tax rate, inclusive of discrete items, is 29.6% as of the end of the third quarter. Our third quarter effective income tax rate differed from the Federal statutory rate of 35% due to the benefit of tax-exempt interest income, the benefit of low income housing tax credits, and the impact of updated state income tax calculations for Oregon, Hawaii, California, and Idaho.
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Business Segments
Commercial and Consumer Banking Segment
Net income for the Commercial and Consumer Banking segment in the third quarter of 2014 was $3.5 million, compared to $3.8 million in the second quarter of 2014. Net income, adjusted for acquisition-related expenses, decreased $144 thousand, or 3.5%, to $4.0 million(1) in the third quarter of 2014, compared to net income of $4.1 million(1) in the second quarter of 2014. Results for the second quarter of 2014 included a $3.9 million pre-tax net gain on mortgage loan origination and sale activities related to the sale of mortgage loans previously transferred out of the held for investment portfolio.
Commercial and Consumer Banking segment net income, adjusted for acquisition-related expenses, decreased $1.2 million from net income of $5.2 million(1) in the third quarter of 2013, primarily due to the third quarter of 2013 release of $1.5 million of reserve for loan losses. No changes were made to the reserve in the third quarter of 2014. Also contributing to the decrease in net income compared to the third quarter of 2013 was higher salary and related costs and other expenses related to acquisitions and organic growth.
Loans Held for Investment
Loans held for investment, net, were $1.96 billion at September 30, 2014, an increase of $151.9 million, or 8.4%, from June 30, 2014 and an increase of $92.9 million, or 5.0%, from December 31, 2013. New loan commitments in the quarter totaled $324.0 million and originations totaled $194.5 million in the quarter.
Asset Quality
Nonperforming assets were $30.4 million, or 0.87% of total assets at September 30, 2014, compared to $32.3 million, or 1.00% of total assets at June 30, 2014. Classified assets of $38.0 million, or 1.09% of total assets at September 30, 2014, decreased by $2.2 million, or 5.4%, from $40.2 million, or 1.24% of total assets, at June 30, 2014.
Nonaccrual loans of $19.9 million, or 1.00% of total loans at September 30, 2014, decreased from $21.2 million, or 1.16% of total loans at June 30, 2014. Other real estate owned ("OREO") balances were $10.5 million at September 30, 2014, a decrease of $605 thousand, or 5.5%, from $11.1 million at June 30, 2014. Delinquent loans of $65.3 million, or 3.28% of total loans at September 30, 2014, decreased from $70.4 million, or 3.83% of total loans at June 30, 2014. Excluding Federal Housing Authority ("FHA")-insured and Department of Veterans' Affairs ("VA")-guaranteed single family mortgage loans, delinquent loans were $24.5 million, or 1.29% of total non-FHA/VA loans at September 30, 2014, compared to $27.7 million, or 1.58% of total non-FHA/VA loans at June 30, 2014. Included in nonaccrual loans at September 30, 2014 and June 30, 2014 are $6.3 million and $6.5 million, respectively, of loans that are guaranteed by the Small Business Administration ("SBA").
The allowance for credit losses was $22.1 million at September 30, 2014 compared to $22.2 million at June 30, 2014. The allowance for loan losses as a percentage of loans held for investment was 1.10% at September 30, 2014 compared to 1.19% at June 30, 2014. Excluding acquired loans, the allowance for loan losses as a percentage of total loans was 1.18% at September 30, 2014, compared to 1.31% at June 30, 2014. In recognition of our improving credit trends and lower charge-offs, we recorded no provision in the second and third quarters of 2014, compared to a release of $1.5 million of reserves in the third quarter of 2013. Net charge-offs in the third quarter of 2014 totaled $57 thousand, down from net charge-offs of $149 thousand in the second quarter of 2014 and $1.5 million in the third quarter of 2013.
Deposits
Deposit balances were $2.43 billion at September 30, 2014 compared to $2.42 billion at June 30, 2014 and $2.10 billion at September 30, 2013. Transaction and savings deposits increased $48.7 million, or 2.8%, from June 30, 2014, while certificates of deposit decreased $90.4 million, or 19.8%, from the prior quarter.
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Mortgage Banking Segment
Net income for the Mortgage Banking segment was $1.4 million in the third quarter of 2014 compared to net income of $5.6 million in the second quarter of 2014 and a net loss of $3.2 million in the third quarter of 2013. The $4.2 million decrease from the second quarter of 2014 was primarily due to the second quarter 2014 sale of single family MSRs at the end of the second quarter of 2014, which resulted in pre-tax income of $4.7 million, and higher commission expense resulting from increased closed loan volume in the third quarter of 2014. The $4.6 million increase in earnings from the third quarter of 2013 primarily resulted from higher noninterest income due to a 48.5% increase in interest rate lock commitments.
Mortgage Origination for Sale
Single family mortgage interest rate lock commitments, net of estimated fallout, totaled $1.17 billion in the third quarter of 2014, a decrease of $34.0 million, or 2.8%, from $1.20 billion in the second quarter of 2014 and up $381.5 million, or 48.5%, from $786.1 million in the third quarter of 2013. The decrease in interest rate lock commitments from the second quarter of 2014 was mostly the result of seasonality partially offset by growth in mortgage production personnel. The increase from the third quarter of 2013 primarily reflected increased loan volume from the expansion of our mortgage production offices and a 26.8% increase in mortgage production personnel year over year.
Single family closed loan volume designated for sale was $1.29 billion in the third quarter of 2014, up $194.2 million, or 17.6%, from $1.10 billion in the second quarter of 2014 and up $107.8 million, or 9.1%, from $1.19 billion in the third quarter of 2013. At September 30, 2014, the combined pipeline of interest rate lock commitments, net of estimated fallout, and mortgage loans held for sale was $974.0 million, compared to $953.4 million at June 30, 2014 and $631.1 million at September 30, 2013.
Net gain on single family mortgage loan origination and sale activities in the third quarter of 2014 was $36.8 million compared to $37.0 million in the second quarter of 2014 and $31.4 million in the third quarter of 2013.
Due to differences in the timing of revenue recognition between components of the gain on loan origination and sale activities, the Company analyzes the profitability of these activities using a "Composite Margin," which is comprised of the ratios of the components to their respective populations of interest rate lock commitments and closed loans. The Composite Margin for the third quarter of 2014 was 316 basis points, down from 321 basis points in the second quarter of 2014.
Mortgage Servicing
Single family mortgage servicing income of $5.3 million in the third quarter of 2014 decreased $4.3 million, or 44.9%, from the second quarter of 2014 and increased $1.6 million, or 44.8%, from the third quarter of 2013. Included in servicing income for the second quarter of 2014 is $4.7 million of pre-tax income recognized from the sale of single family MSRs. The increase compared to the third quarter of 2013 was due to improved risk management results.
Single family mortgage servicing fees collected in the third quarter of 2014 decreased $1.0 million, or 11.4%, from the second quarter of 2014 and decreased $84 thousand, or 1.0%, from the third quarter of 2013, primarily due to lower balances in our loans serviced for others portfolio as a result of the June 30, 2014 sale of single family MSRs. The portfolio of single family loans serviced for others increased to $10.59 billion at September 30, 2014 from $9.90 billion at June 30, 2014, compared to $11.29 billion at September 30, 2013.
Noninterest Expense
Mortgage Banking segment noninterest expense of $45.2 million increased $2.7 million, or 6.3%, from the second quarter of 2014. This increase was primarily attributable to increased commission and incentive expense as closed loan volumes increased by 17.6% from the second quarter of 2014 resulting from our growth and expansion into new markets.
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Capital
Regulatory capital ratios for the Bank were as follows:
Sept. 30, 2014* | Dec. 31, 2013 | Sept. 30, 2013 | Well-capitalized ratios | |||||||||
Tier 1 leverage capital (to average assets) | 9.63 | % | 9.96 | % | 10.85 | % | 5.00 | % | ||||
Tier 1 risk-based capital (to risk-weighted assets) | 13.03 | % | 14.12 | % | 17.19 | % | 6.00 | % | ||||
Total risk-based capital (to risk-weighted assets) | 13.95 | % | 15.28 | % | 18.44 | % | 10.00 | % | ||||
* | Regulatory capital ratios at September 30, 2014 are preliminary. |
(1) | The press release contains certain non-GAAP financial disclosures for consolidated net income excluding acquisition-related expenses, diluted earnings per share, excluding acquisition-related expenses, and Commercial and Consumer Banking segment net income, excluding acquisition-related expenses. The Company uses certain non-GAAP financial measures to provide meaningful supplemental information regarding the Company's operational performance and to enhance investors' overall understanding of such financial performance. For corresponding reconciliations to GAAP financial measures, see Non-GAAP Financial Measures beginning on page 28 of this earnings release. |
Conference Call
HomeStreet, Inc. will conduct a quarterly earnings conference call on Tuesday, October 28, 2014 at 1:00 p.m. EDT. The Company will discuss third quarter 2014 results and provide an update on recent activities. A question and answer session will follow the presentation. Shareholders, analysts and other interested parties may register in advance at http://dpregister.com/10051939 or may join the call by dialing 1-877-508-9589 (1-855-669-9657 in Canada) shortly before 1:00 p.m. EDT. A rebroadcast will be available approximately one hour after the conference call by dialing 1-877-344-7529 and entering passcode 10051939.
About HomeStreet, Inc.
HomeStreet, Inc. (NASDAQ:HMST) is a diversified financial services company headquartered in Seattle, Washington and is the holding company for HomeStreet Bank, a state-chartered, FDIC-insured savings bank. HomeStreet offers consumer, commercial, and private banking services and investment and insurance products in Washington, Oregon, and Hawaii, and originates residential and commercial mortgages and construction loans for borrowers located in the Western United States. For more information, visit http://ir.homestreet.com. Information contained in or linked from our website is not incorporated into, and does not form a part of, this release.
Forward-Looking Statements
This press release contains forward-looking statements concerning HomeStreet, Inc. and HomeStreet 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 (including the negative of these terms) may help 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.
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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 factors could cause actual results to differ materially from those expressed in, implied or projected by, such forward-looking statements. Among other things, our ability to expand our banking operations geographically and across market sectors, grow our franchise and capitalize on market opportunities, meet the growth targets that management has set for the Company, maintain our position in the industry and generate positive net income and cash flow, 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, actions by the Federal Reserve affecting monetary and fiscal policy, regulatory and legislative actions that may increase capital requirements or otherwise constrain our ability to do business, our ability to maintain electronic and physical security of our customer data, our ability to attract and retain key personnel, our ability to make accurate estimates of the value of our non-cash assets and liabilities, significant increases in the competition we face in our industry and market and the extent of our success in problem asset resolution efforts. Closing of the acquisition discussed in this press release will be contingent on meeting certain conditions, including the receipt of regulatory approvals and certain shareholder approvals from the shareholders of each entity. Such transaction may be delayed in closing, may require significant management attention, and may fall short of anticipated size and value. We may not immediately realize the benefits expected from our anticipated acquisition or our recently completed bank and branch acquisitions, and integration of acquired operations may take longer or prove more expensive than anticipated. 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 regional and local 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 recognize 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, 2013 and Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, 2014. 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, 2013 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, 2013, as contained in the Company's Annual Report on Form 10-K for such fiscal year.
Source: HomeStreet, Inc.
Contact: | Investor Relations & Media: | |
HomeStreet, Inc. | ||
Terri Silver, 206-389-6303 | ||
terri.silver@homestreet.com | ||
http://ir.homestreet.com | ||
7
HomeStreet, Inc. and Subsidiaries
Summary Financial Data
Quarter Ended | Nine Months Ended | |||||||||||||||||||||||||||
(dollars in thousands, except share data) | Sept. 30, 2014 | Jun. 30, 2014 | Mar. 31, 2014 | Dec. 31, 2013 | Sept. 30, 2013 | Sept. 30, 2014 | Sept. 30, 2013 | |||||||||||||||||||||
Income statement data (for the period ended): | ||||||||||||||||||||||||||||
Net interest income | $ | 25,308 | $ | 23,147 | $ | 22,712 | $ | 21,382 | $ | 20,412 | $ | 71,167 | $ | 53,062 | ||||||||||||||
Provision (reversal of provision) for loan losses | — | — | (1,500 | ) | — | (1,500 | ) | (1,500 | ) | 900 | ||||||||||||||||||
Noninterest income | 45,813 | 53,650 | 34,707 | 36,072 | 38,174 | 134,170 | 154,673 | |||||||||||||||||||||
Noninterest expense | 64,158 | 62,971 | 56,091 | 58,868 | 58,116 | 183,220 | 170,627 | |||||||||||||||||||||
Acquisition-related expenses (included in noninterest expense) | 722 | 606 | 838 | 4,080 | 463 | 2,166 | 469 | |||||||||||||||||||||
Net income (loss) before taxes | 6,963 | 13,826 | 2,828 | (1,414 | ) | 1,970 | 23,617 | 36,208 | ||||||||||||||||||||
Income tax expense (benefit) | 1,988 | 4,464 | 527 | (553 | ) | 308 | 6,979 | 11,538 | ||||||||||||||||||||
Net income (loss) | $ | 4,975 | $ | 9,362 | $ | 2,301 | $ | (861 | ) | $ | 1,662 | $ | 16,638 | $ | 24,670 | |||||||||||||
Basic earnings (loss) per common share | $ | 0.34 | $ | 0.63 | $ | 0.16 | $ | (0.06 | ) | $ | 0.12 | $ | 1.12 | $ | 1.72 | |||||||||||||
Diluted earnings (loss) per common share | $ | 0.33 | $ | 0.63 | $ | 0.15 | $ | (0.06 | ) | $ | 0.11 | $ | 1.11 | $ | 1.67 | |||||||||||||
Common shares outstanding | 14,852,971 | 14,849,692 | 14,846,519 | 14,799,991 | 14,422,354 | 14,852,971 | 14,422,354 | |||||||||||||||||||||
Weighted average common shares | ||||||||||||||||||||||||||||
Basic | 14,805,780 | 14,800,853 | 14,784,424 | 14,523,405 | 14,388,559 | 14,797,019 | 14,374,943 | |||||||||||||||||||||
Diluted | 14,968,238 | 14,954,998 | 14,947,864 | 14,523,405 | 14,790,671 | 14,957,034 | 14,793,427 | |||||||||||||||||||||
Dividends per share | $ | — | $ | — | $ | 0.11 | $ | 0.11 | $ | 0.11 | $ | 0.11 | $ | 0.22 | ||||||||||||||
Book value per share | $ | 19.83 | $ | 19.41 | $ | 18.42 | $ | 17.97 | $ | 18.60 | $ | 19.83 | $ | 18.60 | ||||||||||||||
Tangible book value per share (1) | $ | 18.86 | $ | 18.42 | $ | 17.47 | $ | 17.00 | $ | 18.57 | $ | 18.86 | $ | 18.57 | ||||||||||||||
Financial position (at period end): | ||||||||||||||||||||||||||||
Cash and cash equivalents | $ | 34,687 | $ | 74,991 | $ | 47,714 | $ | 33,908 | $ | 37,906 | $ | 34,687 | $ | 37,906 | ||||||||||||||
Investment securities | 449,948 | 454,966 | 446,639 | 498,816 | 574,894 | 449,948 | 574,894 | |||||||||||||||||||||
Loans held for sale | 698,111 | 549,440 | 588,465 | 279,941 | 385,110 | 698,111 | 385,110 | |||||||||||||||||||||
Loans held for investment, net | 1,964,762 | 1,812,895 | 1,662,623 | 1,871,813 | 1,510,169 | 1,964,762 | 1,510,169 | |||||||||||||||||||||
Mortgage servicing rights | 124,593 | 117,991 | 158,741 | 162,463 | 146,300 | 124,593 | 146,300 | |||||||||||||||||||||
Other real estate owned | 10,478 | 11,083 | 12,089 | 12,911 | 12,266 | 10,478 | 12,266 | |||||||||||||||||||||
Total assets | 3,474,656 | 3,235,676 | 3,124,812 | 3,066,054 | 2,854,323 | 3,474,656 | 2,854,323 | |||||||||||||||||||||
Deposits | 2,425,458 | 2,417,712 | 2,371,358 | 2,210,821 | 2,098,076 | 2,425,458 | 2,098,076 | |||||||||||||||||||||
FHLB advances | 598,590 | 384,090 | 346,590 | 446,590 | 338,690 | 598,590 | 338,690 | |||||||||||||||||||||
Repurchase agreements | 14,225 | 14,681 | — | — | — | 14,225 | — | |||||||||||||||||||||
Shareholders’ equity | 294,568 | 288,249 | 273,510 | 265,926 | 268,208 | 294,568 | 268,208 | |||||||||||||||||||||
Financial position (averages): | ||||||||||||||||||||||||||||
Investment securities | $ | 457,545 | $ | 447,458 | $ | 477,384 | $ | 565,869 | $ | 556,862 | $ | 460,723 | $ | 497,857 | ||||||||||||||
Loans held for investment | 1,917,503 | 1,766,788 | 1,830,330 | 1,732,955 | 1,475,011 | 1,838,526 | 1,406,582 | |||||||||||||||||||||
Total interest-earning assets | 2,952,916 | 2,723,687 | 2,654,078 | 2,624,287 | 2,474,397 | 2,777,988 | 2,347,560 | |||||||||||||||||||||
Total interest-bearing deposits | 1,861,164 | 1,900,681 | 1,880,358 | 1,662,180 | 1,488,076 | 1,880,664 | 1,519,615 | |||||||||||||||||||||
FHLB advances | 442,409 | 350,271 | 323,832 | 343,366 | 374,682 | 372,605 | 277,192 | |||||||||||||||||||||
Repurchase agreements | 11,149 | 1,129 | — | — | — | 4,134 | 3,638 | |||||||||||||||||||||
Total interest-bearing liabilities | 2,376,579 | 2,313,937 | 2,267,904 | 2,232,456 | 2,045,155 | 2,319,872 | 1,906,023 | |||||||||||||||||||||
Shareholders’ equity | 295,229 | 284,365 | 272,596 | 268,328 | 271,286 | 284,146 | 275,463 | |||||||||||||||||||||
8
HomeStreet, Inc. and Subsidiaries
Summary Financial Data (continued)
Quarter Ended | Nine Months Ended | ||||||||||||||||||||||||||||
(dollars in thousands, except share data) | Sept. 30, 2014 | Jun. 30, 2014 | Mar. 31, 2014 | Dec. 31, 2013 | Sept. 30, 2013 | Sept. 30, 2014 | Sept. 30, 2013 | ||||||||||||||||||||||
Financial performance: | |||||||||||||||||||||||||||||
Return on average shareholders’ equity (2) | 6.74 | % | 13.17 | % | 3.38 | % | (1.28 | )% | 2.45 | % | 7.81 | % | 11.94 | % | |||||||||||||||
Return on average tangible shareholders' equity(1) | 7.09 | % | 13.85 | % | 3.56 | % | (1.33 | )% | 2.45 | % | 8.22 | % | 11.96 | % | |||||||||||||||
Return on average assets | 0.61 | % | 1.22 | % | 0.30 | % | (0.12 | )% | 0.24 | % | 0.71 | % | 1.25 | % | |||||||||||||||
Net interest margin (3) | 3.50 | % | 3.48 | % | 3.51 | % | 3.34 | % | 3.41 | % | 3.50 | % | 3.12 | % | (4) | ||||||||||||||
Efficiency ratio (5) | 90.21 | % | 82.00 | % | 97.69 | % | 102.46 | % | 99.20 | % | 89.23 | % | 82.14 | % | |||||||||||||||
Asset quality: | |||||||||||||||||||||||||||||
Allowance for credit losses | $ | 22,111 | $ | 22,168 | $ | 22,317 | $ | 24,089 | $ | 24,894 | $ | 22,111 | $ | 24,894 | |||||||||||||||
Allowance for loan losses/total loans | 1.10 | % | (6) | 1.19 | % | (6) | 1.31 | % | (6) | 1.26 | % | (6) | 1.61 | % | 1.10 | % | (6) | 1.61 | % | ||||||||||
Allowance for loan losses/nonaccrual loans | 109.75 | % | 103.44 | % | 96.95 | % | 93.00 | % | 92.30 | % | 109.75 | % | 92.30 | % | |||||||||||||||
Total classified assets | $ | 38,014 | $ | 40,178 | $ | 46,937 | $ | 50,600 | $ | 54,355 | $ | 38,014 | $ | 54,355 | |||||||||||||||
Classified assets/total assets | 1.09 | % | 1.24 | % | 1.50 | % | 1.65 | % | 1.90 | % | 1.09 | % | 1.90 | % | |||||||||||||||
Total nonaccrual loans(7) | $ | 19,906 | (8) | $ | 21,197 | (8) | $ | 22,823 | (8) | $ | 25,707 | (8) | $ | 26,753 | $ | 19,906 | (8) | $ | 26,753 | ||||||||||
Nonaccrual loans/total loans | 1.00 | % | 1.16 | % | 1.35 | % | 1.36 | % | 1.74 | % | 1.00 | % | 1.74 | % | |||||||||||||||
Other real estate owned | $ | 10,478 | $ | 11,083 | $ | 12,089 | $ | 12,911 | $ | 12,266 | $ | 10,478 | $ | 12,266 | |||||||||||||||
Total nonperforming assets | $ | 30,384 | (8) | $ | 32,280 | (8) | $ | 34,912 | (8) | $ | 38,618 | (8) | $ | 39,019 | $ | 30,384 | (8) | $ | 39,019 | ||||||||||
Nonperforming assets/total assets | 0.87 | % | 1.00 | % | 1.12 | % | 1.26 | % | 1.37 | % | 0.87 | % | 1.37 | % | |||||||||||||||
Net charge-offs | $ | 57 | $ | 149 | $ | 272 | $ | 805 | $ | 1,464 | $ | 478 | $ | 3,757 | |||||||||||||||
Regulatory capital ratios for the Bank: | |||||||||||||||||||||||||||||
Tier 1 leverage capital (to average assets) | 9.63 | % | (9) | 10.17 | % | 9.94 | % | 9.96 | % | 10.85 | % | 9.63 | % | (9) | 10.85 | % | |||||||||||||
Tier 1 risk-based capital (to risk-weighted assets) | 13.03 | % | (9) | 13.84 | % | 13.99 | % | 14.12 | % | 17.19 | % | 13.03 | % | (9) | 17.19 | % | |||||||||||||
Total risk-based capital (to risk-weighted assets) | 13.95 | % | (9) | 14.84 | % | 15.04 | % | 15.28 | % | 18.44 | % | 13.95 | % | (9) | 18.44 | % | |||||||||||||
Other data: | |||||||||||||||||||||||||||||
Full-time equivalent employees (ending) | 1,598 | 1,546 | 1,491 | 1,502 | 1,426 | 1,598 | 1,426 | ||||||||||||||||||||||
(1) | Tangible equity ratios and tangible book value per share of common stock are non-GAAP financial measures. Other companies may define or calculate these measures differently. Tangible book value is calculated by dividing shareholders' common equity less average goodwill and intangible assets, net (excluding MSRs) by the number of common shares outstanding. The return on average tangible shareholders' equity is calculated by dividing net earnings available to common shareholders (annualized) by average shareholders' common equity less average goodwill and intangible assets, net (excluding MSRs). For additional information on these ratios and for corresponding reconciliations to GAAP financial measures, see Non-GAAP Financial Measures in this earnings release. |
(2) | Net earnings available to common shareholders (annualized) divided by average shareholders’ equity. |
(3) | Net interest income divided by total average interest-earning assets on a tax equivalent basis. |
(4) | Net interest margin for the first quarter of 2013 included $1.4 million in interest expense related to the correction of the cumulative effect of an error in prior years, resulting from the under accrual of interest due on the TruPS for which the Company had deferred the payment of interest. Excluding the impact of the prior period interest expense correction, the net interest margin was 3.21% for the nine months ended September 30, 2013. |
(5) | Noninterest expense divided by total net revenue (net interest income and noninterest income). |
(6) | Includes loans acquired with bank acquisitions. Excluding acquired loans, allowance for loan losses /total loans was 1.18%, 1.31%, 1.46% and 1.40% at September 30, 2014, June 30, 2014, March 31, 2014 and December 31, 2013, respectively. |
(7) | Generally, loans are placed on nonaccrual status when they are 90 or more days past due. |
(8) | Includes $6.3 million, $6.5 million, $6.6 million and $6.5 million of nonperforming loans at September 30, 2014, June 30, 2014, March 31, 2014 and December 31, 2013, respectively, that are guaranteed by the SBA. |
(9) | Regulatory capital ratios at September 30, 2014 are preliminary. |
9
HomeStreet, Inc. and Subsidiaries
Consolidated Statements of Operations
Three Months Ended September 30, | % | Nine Months Ended September 30, | % | |||||||||||||||||||
(in thousands, except share data) | 2014 | 2013 | Change | 2014 | 2013 | Change | ||||||||||||||||
Interest income: | ||||||||||||||||||||||
Loans | $ | 25,763 | $ | 19,425 | 33 | % | $ | 71,865 | $ | 54,920 | 31 | % | ||||||||||
Investment securities | 2,565 | 3,895 | (34 | ) | 8,199 | 9,552 | (14 | ) | ||||||||||||||
Other | 150 | 28 | 436 | 449 | 82 | 448 | ||||||||||||||||
28,478 | 23,348 | 22 | 80,513 | 64,554 | 25 | |||||||||||||||||
Interest expense: | ||||||||||||||||||||||
Deposits | 2,364 | 2,222 | 6 | 7,080 | 8,078 | (12 | ) | |||||||||||||||
Federal Home Loan Bank advances | 509 | 434 | 17 | 1,366 | 1,113 | 23 | ||||||||||||||||
Securities sold under agreements to repurchase | 6 | — | NM | 7 | 11 | (36 | ) | |||||||||||||||
Long-term debt | 271 | 274 | (1 | ) | 851 | 2,274 | (63 | ) | ||||||||||||||
Other | 20 | 6 | 233 | 42 | 16 | 163 | ||||||||||||||||
3,170 | 2,936 | 8 | 9,346 | 11,492 | (19 | ) | ||||||||||||||||
Net interest income | 25,308 | 20,412 | 24 | 71,167 | 53,062 | 34 | ||||||||||||||||
Provision (reversal of provision) for credit losses | — | (1,500 | ) | NM | (1,500 | ) | 900 | NM | ||||||||||||||
Net interest income after provision for credit losses | 25,308 | 21,912 | 15 | 72,667 | 52,162 | 39 | ||||||||||||||||
Noninterest income: | ||||||||||||||||||||||
Net gain on mortgage loan origination and sale activities | 37,642 | 33,491 | 12 | 104,946 | 139,870 | (25 | ) | |||||||||||||||
Mortgage servicing income | 6,155 | 4,011 | 53 | 24,284 | 9,265 | 162 | ||||||||||||||||
(Loss) income from WMS Series LLC | (122 | ) | (550 | ) | (78 | ) | (69 | ) | 1,063 | NM | ||||||||||||
Gain (loss) on debt extinguishment | 2 | — | NM | (573 | ) | — | NM | |||||||||||||||
Depositor and other retail banking fees | 944 | 791 | 19 | 2,676 | 2,273 | 18 | ||||||||||||||||
Insurance agency commissions | 256 | 242 | 6 | 892 | 612 | 46 | ||||||||||||||||
Gain (loss) on sale of investment securities available for sale | 480 | (184 | ) | NM | 1,173 | 6 | NM | |||||||||||||||
Other | 456 | 373 | 22 | 841 | 1,584 | (47 | ) | |||||||||||||||
45,813 | 38,174 | 20 | 134,170 | 154,673 | (13 | ) | ||||||||||||||||
Noninterest expense: | ||||||||||||||||||||||
Salaries and related costs | 42,604 | 39,689 | 7 | 118,681 | 113,330 | 5 | ||||||||||||||||
General and administrative | 10,326 | 9,234 | 12 | 31,593 | 30,434 | 4 | ||||||||||||||||
Legal | 630 | 844 | (25 | ) | 1,571 | 2,054 | (24 | ) | ||||||||||||||
Consulting | 628 | 884 | (29 | ) | 2,182 | 2,343 | (7 | ) | ||||||||||||||
Federal Deposit Insurance Corporation assessments | 682 | 227 | 200 | 1,874 | 937 | 100 | ||||||||||||||||
Occupancy | 4,935 | 3,484 | 42 | 14,042 | 9,667 | 45 | ||||||||||||||||
Information services | 4,220 | 3,552 | 19 | 13,597 | 10,122 | 34 | ||||||||||||||||
Net cost of operation and sale of other real estate owned | 133 | 202 | (34 | ) | (320 | ) | 1,740 | NM | ||||||||||||||
64,158 | 58,116 | 10 | 183,220 | 170,627 | 7 | |||||||||||||||||
Income before income taxes | 6,963 | 1,970 | 253 | 23,617 | 36,208 | (35 | ) | |||||||||||||||
Income tax expense | 1,988 | 308 | 545 | 6,979 | 11,538 | (40 | ) | |||||||||||||||
NET INCOME | $ | 4,975 | $ | 1,662 | 199 | $ | 16,638 | $ | 24,670 | (33 | ) | |||||||||||
Basic income per share | $ | 0.34 | $ | 0.12 | 183 | $ | 1.12 | $ | 1.72 | (35 | ) | |||||||||||
Diluted income per share | $ | 0.33 | $ | 0.11 | 200 | $ | 1.11 | $ | 1.67 | (34 | ) | |||||||||||
Basic weighted average number of shares outstanding | 14,805,780 | 14,388,559 | 3 | 14,797,019 | 14,374,943 | 3 | ||||||||||||||||
Diluted weighted average number of shares outstanding | 14,968,238 | 14,790,671 | 1 | 14,957,034 | 14,793,427 | 1 | ||||||||||||||||
10
HomeStreet, Inc. and Subsidiaries
Five Quarter Consolidated Statements of Operation
Quarter ended | ||||||||||||||||||||
(in thousands, except share data) | Sept. 30, 2014 | Jun. 30, 2014 | Mar. 31, 2014 | Dec. 31, 2013 | Sept. 30, 2013 | |||||||||||||||
Interest income: | ||||||||||||||||||||
Loans | $ | 25,763 | $ | 23,419 | $ | 22,683 | $ | 21,522 | $ | 19,425 | ||||||||||
Investment securities | 2,565 | 2,664 | 2,970 | 2,839 | 3,895 | |||||||||||||||
Other | 150 | 142 | 157 | 61 | 28 | |||||||||||||||
28,478 | 26,225 | 25,810 | 24,422 | 23,348 | ||||||||||||||||
Interest expense: | ||||||||||||||||||||
Deposits | 2,364 | 2,356 | 2,360 | 2,338 | 2,222 | |||||||||||||||
Federal Home Loan Bank advances | 509 | 444 | 413 | 419 | 434 | |||||||||||||||
Securities sold under agreements to repurchase | 6 | 1 | — | — | — | |||||||||||||||
Long-term debt | 271 | 265 | 315 | 272 | 274 | |||||||||||||||
Other | 20 | 12 | 10 | 11 | 6 | |||||||||||||||
3,170 | 3,078 | 3,098 | 3,040 | 2,936 | ||||||||||||||||
Net interest income | 25,308 | 23,147 | 22,712 | 21,382 | 20,412 | |||||||||||||||
Provision (reversal of provision) for credit losses | — | — | (1,500 | ) | — | (1,500 | ) | |||||||||||||
Net interest income after provision for credit losses | 25,308 | 23,147 | 24,212 | 21,382 | 21,912 | |||||||||||||||
Noninterest income: | ||||||||||||||||||||
Net gain on mortgage loan origination and sale activities | 37,642 | 41,794 | 25,510 | 24,842 | 33,491 | |||||||||||||||
Mortgage servicing income | 6,155 | 10,184 | 7,945 | 7,807 | 4,011 | |||||||||||||||
(Loss) income from WMS Series LLC | (122 | ) | 246 | (193 | ) | (359 | ) | (550 | ) | |||||||||||
Gain (loss) on debt extinguishment | 2 | 11 | (586 | ) | — | — | ||||||||||||||
Depositor and other retail banking fees | 944 | 917 | 815 | 899 | 791 | |||||||||||||||
Insurance agency commissions | 256 | 232 | 404 | 252 | 242 | |||||||||||||||
Gain (loss) on sale of investment securities available for sale | 480 | (20 | ) | 713 | 1,766 | (184 | ) | |||||||||||||
Other | 456 | 286 | 99 | 865 | 373 | |||||||||||||||
45,813 | 53,650 | 34,707 | 36,072 | 38,174 | ||||||||||||||||
Noninterest expense: | ||||||||||||||||||||
Salaries and related costs | 42,604 | 40,606 | 35,471 | 36,110 | 39,689 | |||||||||||||||
General and administrative | 10,326 | 11,145 | 10,122 | 9,932 | 9,234 | |||||||||||||||
Legal | 630 | 542 | 399 | 498 | 844 | |||||||||||||||
Consulting | 628 | 603 | 951 | 3,294 | 884 | |||||||||||||||
Federal Deposit Insurance Corporation assessments | 682 | 572 | 620 | 496 | 227 | |||||||||||||||
Occupancy | 4,935 | 4,675 | 4,432 | 4,098 | 3,484 | |||||||||||||||
Information services | 4,220 | 4,862 | 4,515 | 4,369 | 3,552 | |||||||||||||||
Net cost of operation and sale of other real estate owned | 133 | (34 | ) | (419 | ) | 71 | 202 | |||||||||||||
64,158 | 62,971 | 56,091 | 58,868 | 58,116 | ||||||||||||||||
Income (loss) before income tax expense | 6,963 | 13,826 | 2,828 | (1,414 | ) | 1,970 | ||||||||||||||
Income tax expense (benefit) | 1,988 | 4,464 | 527 | (553 | ) | 308 | ||||||||||||||
NET INCOME (LOSS) | $ | 4,975 | $ | 9,362 | $ | 2,301 | $ | (861 | ) | $ | 1,662 | |||||||||
Basic income (loss) per share | $ | 0.34 | $ | 0.63 | $ | 0.16 | $ | (0.06 | ) | $ | 0.12 | |||||||||
Diluted income (loss) per share | $ | 0.33 | $ | 0.63 | $ | 0.15 | $ | (0.06 | ) | $ | 0.11 | |||||||||
Basic weighted average number of shares outstanding | 14,805,780 | 14,800,853 | 14,784,424 | 14,523,405 | 14,388,559 | |||||||||||||||
Diluted weighted average number of shares outstanding | 14,968,238 | 14,954,998 | 14,947,864 | 14,523,405 | 14,790,671 | |||||||||||||||
11
HomeStreet, Inc. and Subsidiaries
Consolidated Statements of Financial Condition
(in thousands, except share data) | Sept. 30, 2014 | Dec. 31, 2013 | % Change | ||||||||
Assets: | |||||||||||
Cash and cash equivalents (including interest-bearing instruments of $16,044 and $9,436) | $ | 34,687 | $ | 33,908 | 2 | % | |||||
Investment securities (includes $432,096 and $481,683 carried at fair value) | 449,948 | 498,816 | (10 | ) | |||||||
Loans held for sale (includes $613,448 and $279,385 carried at fair value) | 698,111 | 279,941 | 149 | ||||||||
Loans held for investment (net of allowance for loan losses of $21,847 and $23,908) | 1,964,762 | 1,871,813 | 5 | ||||||||
Mortgage servicing rights (includes $115,477 and $153,128 carried at fair value) | 124,593 | 162,463 | (23 | ) | |||||||
Other real estate owned | 10,478 | 12,911 | (19 | ) | |||||||
Federal Home Loan Bank stock, at cost | 34,271 | 35,288 | (3 | ) | |||||||
Premises and equipment, net | 44,476 | 36,612 | 21 | ||||||||
Goodwill | 11,945 | 12,063 | (1 | ) | |||||||
Other assets | 101,385 | 122,239 | (17 | ) | |||||||
Total assets | $ | 3,474,656 | $ | 3,066,054 | 13 | ||||||
Liabilities and shareholders’ equity: | |||||||||||
Liabilities: | |||||||||||
Deposits | $ | 2,425,458 | $ | 2,210,821 | 10 | ||||||
Federal Home Loan Bank advances | 598,590 | 446,590 | 34 | ||||||||
Securities sold under agreements to repurchase | 14,225 | — | NM | ||||||||
Accounts payable and other liabilities | 79,958 | 77,906 | 3 | ||||||||
Long-term debt | 61,857 | 64,811 | (5 | ) | |||||||
Total liabilities | 3,180,088 | 2,800,128 | 14 | ||||||||
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 160,000,000 | |||||||||||
Issued and outstanding, 14,852,971 shares and 14,799,991 shares | 511 | 511 | — | ||||||||
Additional paid-in capital | 96,650 | 94,474 | 2 | ||||||||
Retained earnings | 197,945 | 182,935 | 8 | ||||||||
Accumulated other comprehensive loss | (538 | ) | (11,994 | ) | (96 | ) | |||||
Total shareholders’ equity | 294,568 | 265,926 | 11 | ||||||||
Total liabilities and shareholders’ equity | $ | 3,474,656 | $ | 3,066,054 | 13 | ||||||
12
HomeStreet, Inc. and Subsidiaries
Five Quarter Consolidated Statements of Financial Condition
(in thousands, except share data) | Sept. 30, 2014 | Jun. 30, 2014 | Mar. 31, 2014 | Dec. 31, 2013 | Sept. 30, 2013 | |||||||||||||||
Assets: | ||||||||||||||||||||
Cash and cash equivalents | $ | 34,687 | $ | 74,991 | $ | 47,714 | $ | 33,908 | $ | 37,906 | ||||||||||
Investment securities | 449,948 | 454,966 | 446,639 | 498,816 | 574,894 | |||||||||||||||
Loans held for sale | 698,111 | 549,440 | 588,465 | 279,941 | 385,110 | |||||||||||||||
Loans held for investment, net | 1,964,762 | 1,812,895 | 1,662,623 | 1,871,813 | 1,510,169 | |||||||||||||||
Mortgage servicing rights | 124,593 | 117,991 | 158,741 | 162,463 | 146,300 | |||||||||||||||
Other real estate owned | 10,478 | 11,083 | 12,089 | 12,911 | 12,266 | |||||||||||||||
Federal Home Loan Bank stock, at cost | 34,271 | 34,618 | 34,958 | 35,288 | 35,370 | |||||||||||||||
Premises and equipment, net | 44,476 | 43,896 | 40,894 | 36,612 | 24,684 | |||||||||||||||
Goodwill | 11,945 | 11,945 | 12,063 | 12,063 | 424 | |||||||||||||||
Other assets | 101,385 | 123,851 | 120,626 | 122,239 | 127,200 | |||||||||||||||
Total assets | $ | 3,474,656 | $ | 3,235,676 | $ | 3,124,812 | $ | 3,066,054 | $ | 2,854,323 | ||||||||||
Liabilities and shareholders’ equity: | ||||||||||||||||||||
Liabilities: | ||||||||||||||||||||
Deposits | $ | 2,425,458 | $ | 2,417,712 | $ | 2,371,358 | $ | 2,210,821 | $ | 2,098,076 | ||||||||||
Federal Home Loan Bank advances | 598,590 | 384,090 | 346,590 | 446,590 | 338,690 | |||||||||||||||
Securities sold under agreements to repurchase | 14,225 | 14,681 | — | — | — | |||||||||||||||
Accounts payable and other liabilities | 79,958 | 69,087 | 71,498 | 77,906 | 87,492 | |||||||||||||||
Long-term debt | 61,857 | 61,857 | 61,856 | 64,811 | 61,857 | |||||||||||||||
Total liabilities | 3,180,088 | 2,947,427 | 2,851,302 | 2,800,128 | 2,586,115 | |||||||||||||||
Shareholders’ equity: | ||||||||||||||||||||
Preferred stock, no par value | ||||||||||||||||||||
Authorized 10,000 shares | — | — | — | — | — | |||||||||||||||
Common stock, no par value | ||||||||||||||||||||
Authorized 160,000,000 | 511 | 511 | 511 | 511 | 511 | |||||||||||||||
Additional paid-in capital | 96,650 | 95,923 | 95,271 | 94,474 | 91,415 | |||||||||||||||
Retained earnings | 197,945 | 192,972 | 183,610 | 182,935 | 185,379 | |||||||||||||||
Accumulated other comprehensive (loss) income | (538 | ) | (1,157 | ) | (5,882 | ) | (11,994 | ) | (9,097 | ) | ||||||||||
Total shareholders’ equity | 294,568 | 288,249 | 273,510 | 265,926 | 268,208 | |||||||||||||||
Total liabilities and shareholders’ equity | $ | 3,474,656 | $ | 3,235,676 | $ | 3,124,812 | $ | 3,066,054 | $ | 2,854,323 | ||||||||||
13
HomeStreet, Inc. and Subsidiaries
Average Balances, Yields and Rates Paid (Taxable-equivalent basis)
Quarter Ended September 30, | ||||||||||||||||||||||
2014 | 2013 | |||||||||||||||||||||
(in thousands) | Average Balance | Interest | Average Yield/Cost | Average Balance | Interest | Average Yield/Cost | ||||||||||||||||
Assets: | ||||||||||||||||||||||
Interest-earning assets: (1) | ||||||||||||||||||||||
Cash and cash equivalents | $ | 27,631 | $ | 13 | 0.19 | % | $ | 37,671 | $ | 17 | 0.24 | % | ||||||||||
Investment securities | 457,545 | 3,141 | 2.72 | % | 556,862 | 4,452 | 3.20 | % | ||||||||||||||
Loans held for sale | 550,237 | 5,393 | 3.89 | % | 404,853 | 4,004 | 3.96 | % | ||||||||||||||
Loans held for investment | 1,917,503 | 20,402 | 4.22 | % | 1,475,011 | 15,453 | 4.18 | % | ||||||||||||||
Total interest-earning assets | 2,952,916 | 28,949 | 3.89 | % | 2,474,397 | 23,926 | 3.88 | % | ||||||||||||||
Noninterest-earning assets (2) | 329,089 | 311,897 | ||||||||||||||||||||
Total assets | $ | 3,282,005 | $ | 2,786,294 | ||||||||||||||||||
Liabilities and shareholders’ equity: | ||||||||||||||||||||||
Deposits: | ||||||||||||||||||||||
Interest-bearing demand accounts | $ | 281,820 | 301 | 0.42 | % | $ | 254,277 | 265 | 0.41 | % | ||||||||||||
Savings accounts | 174,849 | 238 | 0.54 | % | 123,444 | 140 | 0.45 | % | ||||||||||||||
Money market accounts | 1,001,709 | 1,125 | 0.45 | % | 848,300 | 1,060 | 0.50 | % | ||||||||||||||
Certificate accounts | 402,786 | 700 | 0.69 | % | 262,055 | 663 | 0.92 | % | ||||||||||||||
Total interest-bearing deposits | 1,861,164 | 2,364 | 0.50 | % | 1,488,076 | 2,128 | 0.57 | % | ||||||||||||||
FHLB advances | 442,409 | 509 | 0.46 | % | 374,682 | 434 | 0.46 | % | ||||||||||||||
Securities sold under agreements to repurchase | 11,149 | 6 | 0.21 | % | — | — | — | % | ||||||||||||||
Long-term debt | 61,857 | 271 | 1.74 | % | 61,231 | 274 | 1.75 | % | ||||||||||||||
Other borrowings | — | 20 | — | % | 121,166 | 99 | 0.31 | % | ||||||||||||||
Total interest-bearing liabilities | 2,376,579 | 3,170 | 0.53 | % | 2,045,155 | 2,935 | 0.57 | % | ||||||||||||||
Noninterest-bearing liabilities | 610,197 | 469,853 | ||||||||||||||||||||
Total liabilities | 2,986,776 | 2,515,008 | ||||||||||||||||||||
Shareholders’ equity | 295,229 | 271,286 | ||||||||||||||||||||
Total liabilities and shareholders’ equity | $ | 3,282,005 | $ | 2,786,294 | ||||||||||||||||||
Net interest income (3) | $ | 25,779 | $ | 20,991 | ||||||||||||||||||
Net interest spread | 3.36 | % | 3.31 | % | ||||||||||||||||||
Impact of noninterest-bearing sources | 0.14 | % | 0.10 | % | ||||||||||||||||||
Net interest margin | 3.50 | % | 3.41 | % | ||||||||||||||||||
(1) | The average balances of nonaccrual assets and related income, if any, are included in their respective categories. |
(2) | Includes loan balances that have been foreclosed and are now reclassified to other real estate owned. |
(3) | Includes taxable-equivalent adjustments primarily related to tax-exempt income on certain loans and securities of $471 thousand and $579 thousand for the quarters ended September 30, 2014 and September 30, 2013, respectively. The estimated federal statutory tax rate was 35% for the periods presented. |
14
HomeStreet, Inc. and Subsidiaries
Average Balances, Yields and Rates Paid (Taxable-equivalent basis)
Nine Months Ended September 30, | |||||||||||||||||||||||
2014 | 2013 | ||||||||||||||||||||||
(in thousands) | Average Balance | Interest | Average Yield/Cost | Average Balance | Interest | Average Yield/Cost | |||||||||||||||||
Assets: | |||||||||||||||||||||||
Interest-earning assets: (1) | |||||||||||||||||||||||
Cash and cash equivalents | $ | 30,793 | $ | 45 | 0.19 | % | $ | 27,488 | $ | 46 | 0.26 | % | |||||||||||
Investment securities | 460,723 | 10,005 | 2.90 | % | 497,857 | 11,175 | 2.99 | % | |||||||||||||||
Loans held for sale | 447,946 | 12,863 | 3.84 | % | 415,633 | 11,218 | 3.60 | % | |||||||||||||||
Loans held for investment | 1,838,526 | 59,089 | 4.30 | % | 1,406,582 | 43,795 | 4.13 | % | |||||||||||||||
Total interest-earning assets | 2,777,988 | 82,002 | 3.95 | % | 2,347,560 | 66,234 | 3.75 | % | |||||||||||||||
Noninterest-earning assets (2) | 345,229 | 280,668 | |||||||||||||||||||||
Total assets | $ | 3,123,217 | $ | 2,628,228 | |||||||||||||||||||
Liabilities and shareholders’ equity: | |||||||||||||||||||||||
Deposits: | |||||||||||||||||||||||
Interest-bearing demand accounts | $ | 268,282 | 657 | 0.33 | % | $ | 224,942 | 656 | 0.39 | % | |||||||||||||
Savings accounts | 166,896 | 657 | 0.53 | % | 114,023 | 358 | 0.42 | % | |||||||||||||||
Money market accounts | 969,262 | 3,224 | 0.44 | % | 776,267 | 2,890 | 0.50 | % | |||||||||||||||
Certificate accounts | 476,224 | 2,542 | 0.71 | % | 404,383 | 4,080 | 1.24 | % | |||||||||||||||
Total interest-bearing deposits | 1,880,664 | 7,080 | 0.50 | % | 1,519,615 | 7,984 | 0.69 | % | |||||||||||||||
FHLB advances | 372,605 | 1,366 | 0.49 | % | 277,192 | 1,113 | 0.53 | % | |||||||||||||||
Securities sold under agreements to repurchase | 4,134 | 7 | 0.23 | % | 3,638 | 11 | 0.40 | % | |||||||||||||||
Long-term debt | 62,469 | 851 | 1.82 | % | 61,646 | 2,274 | (3) | 4.86 | % | (3) | |||||||||||||
Other borrowings | — | 32 | — | % | 43,932 | 109 | 0.31 | % | |||||||||||||||
Total interest-bearing liabilities | 2,319,872 | 9,336 | 0.54 | % | 1,906,023 | 11,491 | 0.79 | % | |||||||||||||||
Noninterest-bearing liabilities | 519,199 | 446,742 | |||||||||||||||||||||
Total liabilities | 2,839,071 | 2,352,765 | |||||||||||||||||||||
Shareholders’ equity | 284,146 | 275,463 | |||||||||||||||||||||
Total liabilities and shareholders’ equity | $ | 3,123,217 | $ | 2,628,228 | |||||||||||||||||||
Net interest income (4) | $ | 72,666 | $ | 54,743 | |||||||||||||||||||
Net interest spread | 3.41 | % | 2.96 | % | |||||||||||||||||||
Impact of noninterest-bearing sources | 0.09 | % | 0.16 | % | |||||||||||||||||||
Net interest margin | 3.50 | % | 3.12 | % | (3) | ||||||||||||||||||
(1) | The average balances of nonaccrual assets and related income, if any, are included in their respective categories. |
(2) | Includes loan balances that have been foreclosed and are now reclassified to other real estate owned. |
(3) | Interest expense for the first quarter of 2013 includes $1.4 million related to the correction of the cumulative effect of an immaterial error in prior years, resulting from the under accrual of interest due on the TruPS for which the Company had deferred the payment of interest. Excluding the impact of the prior period interest expense correction, the net interest margin was 3.21% for the nine months ended September 30, 2013. |
(4) | Includes taxable-equivalent adjustments primarily related to tax-exempt income on certain loans and securities of $1.5 million and $1.7 million for the nine months ended September 30, 2014 and September 30, 2013, respectively. The estimated federal statutory tax rate was 35% for the periods presented. |
15
HomeStreet, Inc. and Subsidiaries
Commercial and Consumer Banking Segment
Quarter ended | |||||||||||||||||||||
(in thousands) | Sept. 30, 2014 | Jun. 30, 2014 | Mar. 31, 2014 | Dec. 31, 2013 | Sept. 30, 2013 | ||||||||||||||||
Net interest income | $ | 20,163 | $ | 19,403 | $ | 20,233 | $ | 18,160 | $ | 16,095 | |||||||||||
Provision (reversal of provision) for loan losses | — | — | (1,500 | ) | — | (1,500 | ) | ||||||||||||||
Noninterest income | 3,660 | 6,614 | 2,958 | 5,501 | 3,478 | ||||||||||||||||
Noninterest expense | 18,930 | 20,434 | 19,293 | 21,729 | 14,648 | ||||||||||||||||
Income before income taxes | 4,893 | 5,583 | 5,398 | 1,932 | 6,425 | ||||||||||||||||
Income tax expense | 1,359 | 1,830 | 1,282 | 497 | 1,568 | ||||||||||||||||
Net income | $ | 3,534 | $ | 3,753 | $ | 4,116 | $ | 1,435 | $ | 4,857 | |||||||||||
Net income, excluding acquisition-related expenses (1) | $ | 4,003 | $ | 4,147 | $ | 4,661 | $ | 4,087 | $ | 5,158 | |||||||||||
Efficiency ratio (2) | 79.46 | % | 78.54 | % | 83.19 | % | 91.83 | % | 74.84 | % | |||||||||||
Full-time equivalent employees (ending) | 605 | 599 | 588 | 577 | 504 | ||||||||||||||||
Net gain on mortgage loan origination and sale activities: | |||||||||||||||||||||
Multifamily | 930 | 693 | 396 | 559 | 2,113 | ||||||||||||||||
Other | (101 | ) | 4,087 | 794 | 964 | — | |||||||||||||||
$ | 829 | $ | 4,780 | $ | 1,190 | $ | 1,523 | $ | 2,113 | ||||||||||||
Production volumes for sale to the secondary market: | |||||||||||||||||||||
Multifamily mortgage originations | $ | 60,699 | $ | 23,105 | $ | 11,343 | $ | 16,325 | $ | 10,734 | |||||||||||
Multifamily mortgage loans sold | 20,409 | 15,902 | 6,263 | 15,775 | 21,998 | ||||||||||||||||
(1) | Commercial and Consumer Banking segment net income, excluding acquisition-related expenses, is a non-GAAP financial disclosure. The Company uses this non-GAAP financial measure to provide meaningful supplemental information regarding the Company's operational performance and to enhance investors' overall understanding of such financial performance. For corresponding reconciliations to GAAP financial measures, see Non-GAAP Financial Measures beginning on page 28 of this earnings release. |
(2) | Noninterest expense divided by total net revenue (net interest income and noninterest income). |
Commercial Mortgage Servicing Income
Quarter ended | ||||||||||||||||||||
(in thousands) | Sept. 30, 2014 | Jun. 30, 2014 | Mar. 31, 2014 | Dec. 31, 2013 | Sept. 30, 2013 | |||||||||||||||
Servicing income, net: | ||||||||||||||||||||
Servicing fees and other | $ | 1,289 | $ | 1,017 | $ | 890 | $ | 834 | $ | 789 | ||||||||||
Amortization of multifamily MSRs | (425 | ) | (434 | ) | (424 | ) | (457 | ) | (433 | ) | ||||||||||
Commercial mortgage servicing income | $ | 864 | $ | 583 | $ | 466 | $ | 377 | $ | 356 | ||||||||||
16
HomeStreet, Inc. and Subsidiaries
Commercial and Consumer Banking Segment (continued)
Commercial Loans Serviced for Others
(in thousands) | Sept. 30, 2014 | Jun. 30, 2014 | Mar. 31, 2014 | Dec. 31, 2013 | Sept. 30, 2013 | |||||||||||||||
Commercial | ||||||||||||||||||||
Multifamily | $ | 703,197 | $ | 704,997 | $ | 721,464 | $ | 720,429 | $ | 722,767 | ||||||||||
Other | 86,589 | 97,996 | 99,340 | 95,673 | 50,629 | |||||||||||||||
Total commercial loans serviced for others | $ | 789,786 | $ | 802,993 | $ | 820,804 | $ | 816,102 | $ | 773,396 | ||||||||||
Commercial Multifamily Capitalized Mortgage Servicing Rights
Quarter ended | ||||||||||||||||||||
(in thousands) | Sept. 30, 2014 | Jun. 30, 2014 | Mar. 31, 2014 | Dec. 31, 2013 | Sept. 30, 2013 | |||||||||||||||
Beginning balance | $ | 9,122 | $ | 9,095 | $ | 9,335 | $ | 9,403 | $ | 9,239 | ||||||||||
Originations | 418 | 461 | 183 | 375 | 597 | |||||||||||||||
Amortization | (424 | ) | (434 | ) | (423 | ) | (443 | ) | (433 | ) | ||||||||||
Ending balance | $ | 9,116 | $ | 9,122 | $ | 9,095 | $ | 9,335 | $ | 9,403 | ||||||||||
Ratio of MSR carrying value to related loans serviced for others | 1.23 | % | 1.21 | % | 1.18 | % | 1.21 | % | 1.22 | % | ||||||||||
MSR servicing fee multiple (1) | 2.87 | 2.83 | 2.81 | 2.91 | 2.94 | |||||||||||||||
Weighted-average note rate (loans serviced for others) | 5.12 | % | 5.15 | % | 5.20 | % | 5.12 | % | 5.22 | % | ||||||||||
Weighted-average servicing fee (loans serviced for others) | 0.43 | % | 0.43 | % | 0.42 | % | 0.42 | % | 0.41 | % | ||||||||||
(1) | Represents the ratio of MSR carrying value to related loans serviced for others divided by the weighted-average servicing fee for loans serviced for others. |
17
HomeStreet, Inc. and Subsidiaries
Commercial and Consumer Banking Segment (continued)
Five Quarter Investment Securities
(in thousands, except for duration data) | Sept. 30, 2014 | Jun. 30, 2014 | Mar. 31, 2014 | Dec. 31, 2013 | Sept. 30, 2013 | |||||||||||||||
Available for sale: | ||||||||||||||||||||
Mortgage-backed securities: | ||||||||||||||||||||
Residential | $ | 110,837 | $ | 110,266 | $ | 120,103 | $ | 133,910 | $ | 144,263 | ||||||||||
Commercial | 13,571 | 13,674 | 13,596 | 13,433 | 13,720 | |||||||||||||||
Municipal bonds | 123,041 | 125,813 | 124,860 | 130,850 | 147,441 | |||||||||||||||
Collateralized mortgage obligations: | ||||||||||||||||||||
Residential | 54,887 | 56,767 | 60,537 | 90,327 | 153,466 | |||||||||||||||
Commercial | 15,633 | 16,021 | 11,639 | 16,845 | 16,991 | |||||||||||||||
Corporate debt securities | 72,114 | 72,420 | 70,805 | 68,866 | 69,963 | |||||||||||||||
U.S. Treasury | 42,013 | 42,010 | 26,996 | 27,452 | 27,747 | |||||||||||||||
Total available for sale | $ | 432,096 | $ | 436,971 | $ | 428,536 | $ | 481,683 | $ | 573,591 | ||||||||||
Held to maturity | 17,852 | 17,995 | 18,103 | 17,133 | 1,303 | |||||||||||||||
$ | 449,948 | $ | 454,966 | $ | 446,639 | $ | 498,816 | $ | 574,894 | |||||||||||
Weighted average duration in years | ||||||||||||||||||||
Available for sale | 5.0 | 4.5 | 5.0 | 5.1 | 4.9 | |||||||||||||||
Five Quarter Loans Held for Investment
(in thousands) | Sept. 30, 2014 | Jun. 30, 2014 | Mar. 31, 2014 | Dec. 31, 2013 | Sept. 30, 2013 | |||||||||||||||
Consumer loans | ||||||||||||||||||||
Single family | $ | 788,232 | $ | 749,204 | $ | 668,277 | $ | 904,913 | $ | 818,992 | ||||||||||
Home equity | 138,276 | 136,181 | 134,882 | 135,650 | 129,785 | |||||||||||||||
926,508 | 885,385 | 803,159 | 1,040,563 | 948,777 | ||||||||||||||||
Commercial loans | ||||||||||||||||||||
Commercial real estate | 530,335 | 476,411 | 480,200 | 477,642 | 400,150 | |||||||||||||||
Multifamily | 62,498 | 72,327 | 71,278 | 79,216 | 42,187 | |||||||||||||||
Construction/land development | 297,790 | 219,282 | 162,717 | 130,465 | 79,435 | |||||||||||||||
Commercial business | 173,226 | 185,177 | 171,080 | 171,054 | 67,547 | |||||||||||||||
1,063,849 | 953,197 | 885,275 | 858,377 | 589,319 | ||||||||||||||||
1,990,357 | 1,838,582 | 1,688,434 | 1,898,940 | 1,538,096 | ||||||||||||||||
Net deferred loan fees and discounts | (3,748 | ) | (3,761 | ) | (3,684 | ) | (3,219 | ) | (3,233 | ) | ||||||||||
1,986,609 | 1,834,821 | 1,684,750 | 1,895,721 | 1,534,863 | ||||||||||||||||
Allowance for loan losses | (21,847 | ) | (21,926 | ) | (22,127 | ) | (23,908 | ) | (24,694 | ) | ||||||||||
$ | 1,964,762 | $ | 1,812,895 | $ | 1,662,623 | $ | 1,871,813 | $ | 1,510,169 | |||||||||||
18
HomeStreet, Inc. and Subsidiaries
Commercial and Consumer Banking Segment (continued)
Five Quarter Credit Quality Activity
Allowance for Credit Losses (roll-forward)
Quarter ended | ||||||||||||||||||||
(in thousands) | Sept. 30, 2014 | Jun. 30, 2014 | Mar. 31, 2014 | Dec. 31, 2013 | Sept. 30, 2013 | |||||||||||||||
Beginning balance | $ | 22,168 | $ | 22,317 | $ | 24,089 | $ | 24,894 | $ | 27,858 | ||||||||||
Provision (reversal of provision) for credit losses | — | — | (1,500 | ) | — | (1,500 | ) | |||||||||||||
(Charge-offs), net of recoveries | (57 | ) | (149 | ) | (272 | ) | (805 | ) | (1,464 | ) | ||||||||||
Ending balance | $ | 22,111 | $ | 22,168 | $ | 22,317 | $ | 24,089 | $ | 24,894 | ||||||||||
Components: | ||||||||||||||||||||
Allowance for loan losses | $ | 21,847 | $ | 21,926 | $ | 22,127 | $ | 23,908 | $ | 24,694 | ||||||||||
Allowance for unfunded commitments | 264 | 242 | 190 | 181 | 200 | |||||||||||||||
Allowance for credit losses | $ | 22,111 | $ | 22,168 | $ | 22,317 | $ | 24,089 | $ | 24,894 | ||||||||||
Allowance as a % of loans held for investment | 1.10 | % | (1) | 1.19 | % | (1) | 1.31 | % | (1) | 1.26 | % | (1) | 1.61 | % | ||||||
Allowance as a % of nonaccrual loans | 109.75 | % | 103.44 | % | 96.95 | % | 93.00 | % | 92.30 | % | ||||||||||
(1) | Includes loans acquired with bank acquisitions. Excluding acquired loans, allowance for loan losses/total loans was 1.18%, 1.31%, 1.46% and 1.40% at September 30, 2014, June 30, 2014, March 31, 2014 and December 31, 2013, respectively. |
Nonperforming Assets (NPAs) roll-forward
Quarter ended | ||||||||||||||||||||
(in thousands) | Sept. 30, 2014 | Jun. 30, 2014 | Mar. 31, 2014 | Dec. 31, 2013 | Sept. 30, 2013 | |||||||||||||||
Beginning balance | $ | 32,280 | $ | 34,912 | $ | 38,618 | $ | 39,019 | $ | 41,650 | ||||||||||
Additions | 3,414 | 4,533 | 1,811 | 9,959 | (1) | 5,517 | ||||||||||||||
Reductions: | ||||||||||||||||||||
Charge-offs | (57 | ) | (149 | ) | (272 | ) | (805 | ) | (1,464 | ) | ||||||||||
OREO sales | (1,183 | ) | (1,639 | ) | (2,482 | ) | (1,442 | ) | (2,573 | ) | ||||||||||
OREO writedowns and other adjustments | (93 | ) | — | (4 | ) | (108 | ) | (208 | ) | |||||||||||
Principal paydown, payoff advances and other adjustments | (948 | ) | (2,753 | ) | (1,520 | ) | (4,131 | ) | (3,079 | ) | ||||||||||
Transferred back to accrual status | (3,029 | ) | (2,624 | ) | (1,239 | ) | (3,874 | ) | (824 | ) | ||||||||||
Total reductions | (5,310 | ) | (7,165 | ) | (5,517 | ) | (10,360 | ) | (8,148 | ) | ||||||||||
Net reductions | (1,896 | ) | (2,632 | ) | (3,706 | ) | (401 | ) | (2,631 | ) | ||||||||||
Ending balance | $ | 30,384 | (2) | $ | 32,280 | (2) | $ | 34,912 | (2) | $ | 38,618 | (2) | $ | 39,019 | ||||||
(1) | Additions to NPAs included $7.9 million of acquired nonperforming assets during the quarter ended December 31, 2013. |
(2) | Includes $6.3 million, $6.5 million, $6.6 million and $6.5 million of nonperforming loans at September 30, 2014, June 30, 2014, March 31, 2014 and December 31, 2013, respectively, that are guaranteed by the SBA. |
19
HomeStreet, Inc. and Subsidiaries
Commercial and Consumer Banking Segment (continued)
Five Quarter Nonperforming Assets by Loan Class
(in thousands) | Sept. 30, 2014 | Jun. 30, 2014 | Mar. 31, 2014 | Dec. 31, 2013 | Sept. 30, 2013 | |||||||||||||||
Loans accounted for on a nonaccrual basis: | ||||||||||||||||||||
Consumer | ||||||||||||||||||||
Single family | $ | 8,350 | $ | 6,988 | $ | 6,942 | $ | 8,861 | $ | 12,648 | ||||||||||
Home equity | 1,700 | 1,166 | 1,078 | 1,846 | 2,295 | |||||||||||||||
10,050 | 8,154 | 8,020 | 10,707 | 14,943 | ||||||||||||||||
Commercial | ||||||||||||||||||||
Commercial real estate | 7,058 | 9,871 | 12,192 | 12,257 | 6,861 | |||||||||||||||
Multifamily | — | — | — | — | — | |||||||||||||||
Construction/land development | — | — | — | — | 3,544 | |||||||||||||||
Commercial business | 2,798 | 3,172 | 2,611 | 2,743 | 1,405 | |||||||||||||||
9,856 | 13,043 | 14,803 | 15,000 | 11,810 | ||||||||||||||||
Total loans on nonaccrual | $ | 19,906 | $ | 21,197 | $ | 22,823 | $ | 25,707 | $ | 26,753 | ||||||||||
Nonaccrual loans as a % of total loans | 1.00 | % | 1.16 | % | 1.35 | % | 1.36 | % | 1.74 | % | ||||||||||
Other real estate owned: | ||||||||||||||||||||
Consumer | ||||||||||||||||||||
Single family | $ | 2,818 | $ | 3,205 | $ | 4,211 | $ | 5,246 | $ | 5,494 | ||||||||||
Home equity | — | — | — | — | — | |||||||||||||||
Commercial | ||||||||||||||||||||
Commercial real estate | 1,822 | 2,040 | 2,040 | 1,688 | — | |||||||||||||||
Multifamily | — | — | — | — | — | |||||||||||||||
Construction/land development | 5,838 | 5,838 | 5,838 | 5,977 | 5,815 | |||||||||||||||
Commercial business | — | — | — | — | 957 | |||||||||||||||
7,660 | 7,878 | 7,878 | 7,665 | 6,772 | ||||||||||||||||
Total other real estate owned | $ | 10,478 | $ | 11,083 | $ | 12,089 | $ | 12,911 | $ | 12,266 | ||||||||||
Nonperforming assets: | ||||||||||||||||||||
Consumer | ||||||||||||||||||||
Single family | $ | 11,168 | $ | 10,193 | $ | 11,153 | $ | 14,107 | $ | 18,142 | ||||||||||
Home equity | 1,700 | 1,166 | 1,078 | 1,846 | 2,295 | |||||||||||||||
12,868 | 11,359 | 12,231 | 15,953 | 20,437 | ||||||||||||||||
Commercial | ||||||||||||||||||||
Commercial real estate | 8,880 | 11,911 | 14,232 | 13,945 | 6,861 | |||||||||||||||
Multifamily | — | — | — | — | — | |||||||||||||||
Construction/land development | 5,838 | 5,838 | 5,838 | 5,977 | 9,359 | |||||||||||||||
Commercial business | 2,798 | 3,172 | 2,611 | 2,743 | 2,362 | |||||||||||||||
17,516 | 20,921 | 22,681 | 22,665 | 18,582 | ||||||||||||||||
Total nonperforming assets | $ | 30,384 | (1) | $ | 32,280 | (1) | $ | 34,912 | (1) | $ | 38,618 | (1) | $ | 39,019 | ||||||
Nonperforming assets as a % of total assets | 0.87 | % | 1.00 | % | 1.12 | % | 1.26 | % | 1.37 | % | ||||||||||
(1) | Includes $6.3 million, $6.5 million, $6.6 million and $6.5 million of nonperforming loans at September 30, 2014, June 30, 2014, March 31, 2014 and December 31, 2013, respectively, that are guaranteed by the SBA. |
20
HomeStreet, Inc. and Subsidiaries
Commercial and Consumer Banking Segment (continued)
Delinquencies by Loan Class
(in thousands) | 30-59 days past due | 60-89 days past due | 90 days or more past due | Total past due | Current | Total loans | ||||||||||||||||||
September 30, 2014 | ||||||||||||||||||||||||
Total loans held for investment | $ | 9,713 | $ | 4,249 | $ | 51,386 | $ | 65,348 | $ | 1,925,009 | $ | 1,990,357 | ||||||||||||
Less: FHA/VA loans(1) | 6,802 | 2,605 | 31,480 | 40,887 | $ | 45,986 | 86,873 | |||||||||||||||||
Total loans, excluding FHA/VA loans | $ | 2,911 | $ | 1,644 | $ | 19,906 | $ | 24,461 | $ | 1,879,023 | $ | 1,903,484 | ||||||||||||
Loans by segment and class, excluding FHA/VA loans: | ||||||||||||||||||||||||
Consumer loans | ||||||||||||||||||||||||
Single family residential | $ | 2,406 | $ | 1,535 | $ | 8,350 | $ | 12,291 | 689,068 | $ | 701,359 | |||||||||||||
Home equity | 461 | 109 | 1,700 | 2,270 | 136,006 | 138,276 | ||||||||||||||||||
2,867 | 1,644 | 10,050 | 14,561 | 825,074 | 839,635 | |||||||||||||||||||
Commercial loans | ||||||||||||||||||||||||
Commercial real estate | — | — | 7,058 | 7,058 | 523,277 | 530,335 | ||||||||||||||||||
Multifamily residential | — | — | — | — | 62,498 | 62,498 | ||||||||||||||||||
Construction/land development | — | — | — | — | 297,790 | 297,790 | ||||||||||||||||||
Commercial business | 44 | — | 2,798 | 2,842 | 170,384 | 173,226 | ||||||||||||||||||
44 | — | 9,856 | 9,900 | 1,053,949 | 1,063,849 | |||||||||||||||||||
$ | 2,911 | $ | 1,644 | $ | 19,906 | (2) | $ | 24,461 | (2) | $ | 1,879,023 | $ | 1,903,484 | |||||||||||
As a % of total loans, excluding FHA/VA loans | 0.15 | % | 0.09 | % | 1.05 | % | 1.29 | % | 98.71 | % | 100.00 | % | ||||||||||||
December 31, 2013 | ||||||||||||||||||||||||
Total loans held for investment | $ | 6,841 | $ | 4,976 | $ | 72,518 | $ | 84,335 | $ | 1,814,605 | $ | 1,898,940 | ||||||||||||
Less: FHA/VA loans(1) | 4,286 | 3,730 | 46,811 | 54,827 | 37,177 | 92,004 | ||||||||||||||||||
Total loans, excluding FHA/VA loans | $ | 2,555 | $ | 1,246 | $ | 25,707 | $ | 29,508 | $ | 1,777,428 | $ | 1,806,936 | ||||||||||||
Loans by segment and class, excluding FHA/VA loans: | ||||||||||||||||||||||||
Consumer loans | ||||||||||||||||||||||||
Single family | $ | 2,180 | $ | 1,171 | $ | 8,861 | $ | 12,212 | $ | 800,697 | $ | 812,909 | ||||||||||||
Home equity | 375 | 75 | 1,846 | 2,296 | 133,354 | 135,650 | ||||||||||||||||||
2,555 | 1,246 | 10,707 | 14,508 | 934,051 | 948,559 | |||||||||||||||||||
Commercial loans | ||||||||||||||||||||||||
Commercial real estate | — | — | 12,257 | 12,257 | 465,385 | 477,642 | ||||||||||||||||||
Multifamily | — | — | — | — | 79,216 | 79,216 | ||||||||||||||||||
Construction/land development | — | — | — | — | 130,465 | 130,465 | ||||||||||||||||||
Commercial business | — | — | 2,743 | 2,743 | 168,311 | 171,054 | ||||||||||||||||||
— | — | 15,000 | 15,000 | 843,377 | 858,377 | |||||||||||||||||||
$ | 2,555 | $ | 1,246 | $ | 25,707 | (2) | $ | 29,508 | (2) | $ | 1,777,428 | $ | 1,806,936 | |||||||||||
As a % of total loans, excluding FHA/VA loans | 0.14 | % | 0.07 | % | 1.42 | % | 1.63 | % | 98.37 | % | 100.00 | % | ||||||||||||
(1) | Represents loans whose repayments are insured by the FHA or guaranteed by the VA. |
(2) | Includes $6.3 million and $6.5 million of nonperforming loans at September 30, 2014 and December 31, 2013, respectively, that are guaranteed by the SBA. |
21
HomeStreet, Inc. and Subsidiaries
Commercial and Consumer Banking Segment (continued)
Troubled Debt Restructurings (TDRs) by Accrual and Nonaccrual Status
(in thousands) | Sept. 30, 2014 | Jun. 30, 2014 | Mar. 31, 2014 | Dec. 31, 2013 | Sept. 30, 2013 | |||||||||||||||
Accrual | ||||||||||||||||||||
Consumer loans | ||||||||||||||||||||
Single family(1) | $ | 72,663 | $ | 69,779 | $ | 70,958 | $ | 70,304 | $ | 71,686 | ||||||||||
Home equity | 2,501 | 2,394 | 2,538 | 2,558 | 2,426 | |||||||||||||||
75,164 | 72,173 | 73,496 | 72,862 | 74,112 | ||||||||||||||||
Commercial loans | ||||||||||||||||||||
Commercial real estate | 23,964 | 21,401 | 19,451 | 19,620 | 20,385 | |||||||||||||||
Multifamily | 3,101 | 3,125 | 3,145 | 3,163 | 3,190 | |||||||||||||||
Construction/land development | 5,693 | 5,843 | 5,907 | 6,148 | 3,122 | |||||||||||||||
Commercial business | 658 | 302 | 104 | 112 | 120 | |||||||||||||||
33,416 | 30,671 | 28,607 | 29,043 | 26,817 | ||||||||||||||||
$ | 108,580 | $ | 102,844 | $ | 102,103 | $ | 101,905 | $ | 100,929 | |||||||||||
Nonaccrual | ||||||||||||||||||||
Consumer loans | ||||||||||||||||||||
Single family | $ | 1,379 | $ | 1,461 | $ | 2,569 | $ | 4,017 | $ | 4,819 | ||||||||||
Home equity | 20 | — | — | 86 | 132 | |||||||||||||||
1,399 | 1,461 | 2,569 | 4,103 | 4,951 | ||||||||||||||||
Commercial loans | ||||||||||||||||||||
Commercial real estate | 1,182 | 2,735 | 2,784 | 628 | — | |||||||||||||||
Multifamily | — | — | — | — | — | |||||||||||||||
Construction/land development | — | — | — | — | 3,544 | |||||||||||||||
Commercial business | 9 | 9 | 117 | — | — | |||||||||||||||
1,191 | 2,744 | 2,901 | 628 | 3,544 | ||||||||||||||||
$ | 2,590 | $ | 4,205 | $ | 5,470 | $ | 4,731 | $ | 8,495 | |||||||||||
Total | ||||||||||||||||||||
Consumer loans | ||||||||||||||||||||
Single family(1) | $ | 74,042 | $ | 71,240 | $ | 73,527 | $ | 74,321 | $ | 76,505 | ||||||||||
Home equity | 2,521 | 2,394 | 2,538 | 2,644 | 2,558 | |||||||||||||||
76,563 | 73,634 | 76,065 | 76,965 | 79,063 | ||||||||||||||||
Commercial loans | ||||||||||||||||||||
Commercial real estate | 25,146 | 24,136 | 22,235 | 20,248 | 20,385 | |||||||||||||||
Multifamily | 3,101 | 3,125 | 3,145 | 3,163 | 3,190 | |||||||||||||||
Construction/land development | 5,693 | 5,843 | 5,907 | 6,148 | 6,666 | |||||||||||||||
Commercial business | 667 | 311 | 221 | 112 | 120 | |||||||||||||||
34,607 | 33,415 | 31,508 | 29,671 | 30,361 | ||||||||||||||||
$ | 111,170 | $ | 107,049 | $ | 107,573 | $ | 106,636 | $ | 109,424 | |||||||||||
(1) | Includes loan balances insured by the FHA or guaranteed by the VA of $24.6 million, $19.0 million, $19.1 million, $17.8 million and $17.6 million at September 30, 2014, June 30, 2014, March 31, 2014, December 31, 2013 and September 30, 2013, respectively. |
22
HomeStreet, Inc. and Subsidiaries
Commercial and Consumer Banking Segment (continued)
Troubled Debt Restructurings (TDRs) - Re-Defaults
Quarter ended | ||||||||||||||||||||
(in thousands) | Sept. 30, 2014 | Jun. 30, 2014 | Mar. 31, 2014 | Dec. 31, 2013 | Sept. 30, 2013 | |||||||||||||||
Recorded investment of re-defaults(1) | ||||||||||||||||||||
Consumer loans | ||||||||||||||||||||
Single family | $ | 282 | $ | 425 | $ | 303 | $ | 267 | $ | 1,017 | ||||||||||
Home equity | — | — | 190 | — | — | |||||||||||||||
282 | 425 | 493 | 267 | 1,017 | ||||||||||||||||
Commercial loans | ||||||||||||||||||||
Commercial real estate | — | — | — | — | — | |||||||||||||||
Multifamily | — | — | — | — | — | |||||||||||||||
Construction/land development | — | — | — | — | — | |||||||||||||||
Commercial business | — | — | — | — | — | |||||||||||||||
— | — | — | — | — | ||||||||||||||||
$ | 282 | $ | 425 | $ | 493 | $ | 267 | $ | 1,017 | |||||||||||
(1) | Represents TDRs that have defaulted in the current period within 12 months of their modification date. Defaulted TDRs are reported in the table above based on a payment default definition of 60 days past due for the consumer loans portfolio segment and 90 days past due for the commercial loans portfolio segment. |
23
HomeStreet, Inc. and Subsidiaries
Commercial and Consumer Banking Segment (continued)
Five Quarter Deposits
(in thousands) | Sept. 30, 2014 | Jun. 30, 2014 | Mar. 31, 2014 | Dec. 31, 2013 | Sept. 30, 2013 | |||||||||||||||
Deposits by Product: | ||||||||||||||||||||
Noninterest-bearing accounts - checking and savings | $ | 271,669 | $ | 235,844 | $ | 219,677 | $ | 199,943 | $ | 134,725 | ||||||||||
Interest-bearing transaction and savings deposits: | ||||||||||||||||||||
NOW accounts | 300,832 | 324,604 | 285,104 | 262,138 | 272,029 | |||||||||||||||
Statement savings accounts due on demand | 184,656 | 166,851 | 163,819 | 156,181 | 135,428 | |||||||||||||||
Money market accounts due on demand | 1,015,266 | 996,473 | 956,189 | 919,322 | 879,122 | |||||||||||||||
Total interest-bearing transaction and savings deposits | 1,500,754 | 1,487,928 | 1,405,112 | 1,337,641 | 1,286,579 | |||||||||||||||
Total transaction and savings deposits | 1,772,423 | 1,723,772 | 1,624,789 | 1,537,584 | 1,421,304 | |||||||||||||||
Certificates of deposit | 367,124 | 457,529 | 534,708 | 514,400 | 460,223 | |||||||||||||||
Noninterest-bearing accounts - other | 285,911 | 236,411 | 211,861 | 158,837 | 216,549 | |||||||||||||||
Total deposits | $ | 2,425,458 | $ | 2,417,712 | $ | 2,371,358 | $ | 2,210,821 | $ | 2,098,076 | ||||||||||
Percent of total deposits: | ||||||||||||||||||||
Noninterest-bearing accounts - checking and savings | 11.2 | % | 9.8 | % | 9.3 | % | 9.0 | % | 6.4 | % | ||||||||||
Interest-bearing transaction and savings deposits: | ||||||||||||||||||||
NOW accounts | 12.4 | 13.4 | 12.0 | 11.9 | 13.0 | |||||||||||||||
Statement savings accounts due on demand | 7.6 | 6.9 | 6.9 | 7.1 | 6.5 | |||||||||||||||
Money market accounts due on demand | 41.9 | 41.2 | 40.3 | 41.6 | 41.9 | |||||||||||||||
Total interest-bearing transaction and savings deposits | 61.9 | 61.5 | 59.2 | 60.6 | 61.4 | |||||||||||||||
Total transaction and savings deposits | 73.1 | 71.3 | 68.5 | 69.6 | 67.8 | |||||||||||||||
Certificates of deposit | 15.1 | 18.9 | 22.5 | 23.3 | 21.9 | |||||||||||||||
Noninterest-bearing accounts - other | 11.8 | 9.8 | 9.0 | 7.1 | 10.3 | |||||||||||||||
Total deposits | 100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % | ||||||||||
24
HomeStreet, Inc. and Subsidiaries
Mortgage Banking Segment
Quarter ended | ||||||||||||||||||||
(in thousands) | Sept. 30, 2014 | Jun. 30, 2014 | Mar. 31, 2014 | Dec. 31, 2013 | Sept. 30, 2013 | |||||||||||||||
Net interest income | $ | 5,145 | $ | 3,744 | $ | 2,479 | $ | 3,222 | $ | 4,317 | ||||||||||
Noninterest income | 42,153 | 47,036 | 31,749 | 30,571 | 34,696 | |||||||||||||||
Noninterest expense | 45,228 | 42,537 | 36,798 | 37,139 | 43,468 | |||||||||||||||
Income (loss) before income taxes | 2,070 | 8,243 | (2,570 | ) | (3,346 | ) | (4,455 | ) | ||||||||||||
Income tax expense (benefit) | 629 | 2,634 | (755 | ) | (1,050 | ) | (1,260 | ) | ||||||||||||
Net income (loss) | $ | 1,441 | $ | 5,609 | $ | (1,815 | ) | $ | (2,296 | ) | $ | (3,195 | ) | |||||||
Efficiency ratio (1) | 95.62 | % | 83.77 | % | 107.51 | % | 109.90 | % | 111.42 | % | ||||||||||
Full-time equivalent employees (ending) | 993 | 947 | 903 | 925 | 922 | |||||||||||||||
Production volumes for sale to the secondary market: | ||||||||||||||||||||
Single family mortgage closed loan volume (2)(3) | $ | 1,294,895 | $ | 1,100,704 | $ | 674,283 | $ | 773,146 | $ | 1,187,061 | ||||||||||
Single family mortgage interest rate lock commitments(2) | 1,167,677 | 1,201,665 | 803,308 | 662,015 | 786,147 | |||||||||||||||
Single family mortgage loans sold(2) | 1,179,464 | 906,342 | 619,913 | 816,555 | 1,326,888 | |||||||||||||||
(1) | Noninterest expense divided by total net revenue (net interest income and noninterest income). |
(2) | Includes loans originated by WMS Series LLC and purchased by HomeStreet, Inc. |
(3) | Represents single family mortgage production volume designated for sale to the secondary market during each respective period. |
Mortgage Banking Net Gain on Sale to the Secondary Market
Quarter ended | ||||||||||||||||||||
(in thousands) | Sept. 30, 2014 | Jun. 30, 2014 | Mar. 31, 2014 | Dec. 31, 2013 | Sept. 30, 2013 | |||||||||||||||
Net gain on mortgage loan origination and sale activities:(1) | ||||||||||||||||||||
Single family: | ||||||||||||||||||||
Servicing value and secondary market gains(2) | $ | 29,866 | $ | 30,233 | $ | 19,559 | $ | 17,632 | $ | 23,076 | ||||||||||
Loan origination and funding fees | 6,947 | 6,781 | 4,761 | 5,687 | 8,302 | |||||||||||||||
Total mortgage banking net gain on mortgage loan origination and sale activities(1) | $ | 36,813 | $ | 37,014 | $ | 24,320 | $ | 23,319 | $ | 31,378 | ||||||||||
Composite Margin (in basis points): | ||||||||||||||||||||
Servicing value and secondary market gains / interest rate lock commitments(3) | 256 | 252 | 243 | 266 | 294 | |||||||||||||||
Loan origination and funding fees / retail mortgage originations(4) | 60 | 69 | 80 | 84 | 81 | |||||||||||||||
Composite Margin | 316 | 321 | 323 | 350 | 375 | |||||||||||||||
(1) | Excludes inter-segment activities. |
(2) | Comprised of gains and losses on interest rate lock commitments (which considers the value of servicing), single family loans held for sale, forward sale commitments used to economically hedge secondary market activities, and the estimated fair value of the repurchase or indemnity obligation recognized on new loan sales. |
(3) | Servicing value and secondary marketing gains have been aggregated and are stated as a percentage of interest rate lock commitments. |
(4) | Loan origination and funding fees is stated as a percentage of mortgage originations from the retail channel and excludes mortgage loans purchased from WMS Series LLC. |
25
HomeStreet, Inc. and Subsidiaries
Mortgage Banking Segment (continued)
Mortgage Banking Servicing Income
Quarter ended | ||||||||||||||||||||
(in thousands) | Sept. 30, 2014 | Jun. 30, 2014 | Mar. 31, 2014 | Dec. 31, 2013 | Sept. 30, 2013 | |||||||||||||||
Servicing income, net: | ||||||||||||||||||||
Servicing fees and other | $ | 8,061 | $ | 9,095 | $ | 8,959 | $ | 8,843 | $ | 8,145 | ||||||||||
Changes in fair value of single family MSRs due to modeled amortization (1) | (6,212 | ) | (7,109 | ) | (5,968 | ) | (6,016 | ) | (5,665 | ) | ||||||||||
1,849 | 1,986 | 2,991 | 2,827 | 2,480 | ||||||||||||||||
Risk management, single family MSRs: | ||||||||||||||||||||
Changes in fair value of MSR due to changes in model inputs and/or assumptions (2) | 899 | (3,326 | ) | (3) | (5,409 | ) | 12,643 | (2,456 | ) | |||||||||||
Net gain (loss) from derivatives economically hedging MSR | 2,543 | 10,941 | 9,897 | (8,040 | ) | 3,631 | ||||||||||||||
3,442 | 7,615 | 4,488 | 4,603 | 1,175 | ||||||||||||||||
Mortgage Banking servicing income | $ | 5,291 | $ | 9,601 | $ | 7,479 | $ | 7,430 | $ | 3,655 | ||||||||||
(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) | Includes pre-tax income of $4.7 million, net of transaction costs, resulting from the sale of single family MSRs during the quarter ended June 30, 2014. |
Single Family Loans Serviced for Others
(in thousands) | Sept. 30, 2014 | Jun. 30, 2014 | Mar. 31, 2014 | Dec. 31, 2013 | Sept. 30, 2013 | |||||||||||||||
Single family | ||||||||||||||||||||
U.S. government and agency | $ | 10,007,872 | $ | 9,308,096 | $ | 11,817,857 | $ | 11,467,853 | $ | 10,950,086 | ||||||||||
Other | 585,393 | 586,978 | 380,622 | 327,768 | 336,158 | |||||||||||||||
Total single family loans serviced for others | $ | 10,593,265 | $ | 9,895,074 | $ | 12,198,479 | $ | 11,795,621 | $ | 11,286,244 | ||||||||||
26
HomeStreet, Inc. and Subsidiaries
Mortgage Banking Segment (continued)
Single Family Capitalized Mortgage Servicing Rights
Quarter ended | ||||||||||||||||||||
(in thousands) | Sept. 30, 2014 | Jun. 30, 2014 | Mar. 31, 2014 | Dec. 31, 2013 | Sept. 30, 2013 | |||||||||||||||
Beginning balance | $ | 108,869 | $ | 149,646 | $ | 153,128 | $ | 136,897 | $ | 128,146 | ||||||||||
Additions and amortization: | ||||||||||||||||||||
Originations | 11,944 | 11,827 | 7,893 | 9,602 | 16,862 | |||||||||||||||
Purchases | 3 | 3 | 2 | 2 | 10 | |||||||||||||||
Sale of servicing rights | — | (43,248 | ) | — | — | — | ||||||||||||||
Changes due to modeled amortization (1) | (6,212 | ) | (7,109 | ) | (5,968 | ) | (6,016 | ) | (5,665 | ) | ||||||||||
Net additions and amortization | 5,735 | (38,527 | ) | 1,927 | 3,588 | 11,207 | ||||||||||||||
Changes in fair value due to changes in model inputs and/or assumptions (2) | 873 | (2,250 | ) | (5,409 | ) | 12,643 | (2,456 | ) | ||||||||||||
Ending balance | $ | 115,477 | $ | 108,869 | $ | 149,646 | $ | 153,128 | $ | 136,897 | ||||||||||
Ratio of MSR carrying value to related loans serviced for others | 1.09 | % | 1.10 | % | 1.23 | % | 1.30 | % | 1.21 | % | ||||||||||
MSR servicing fee multiple (3) | 3.68 | 3.67 | 4.17 | 4.39 | 4.08 | |||||||||||||||
Weighted-average note rate (loans serviced for others) | 4.19 | % | 4.19 | % | 4.09 | % | 4.08 | % | 4.13 | % | ||||||||||
Weighted-average servicing fee (loans serviced for others) | 0.30 | % | 0.30 | % | 0.29 | % | 0.30 | % | 0.30 | % | ||||||||||
(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. Includes fair value adjustment of $5.7 million related to the sale of single family MSRs during the quarter ended June 30, 2014. |
(3) | Represents the ratio of MSR carrying value to related loans serviced for others divided by the weighted-average servicing fee for loans serviced for others. |
27
HomeStreet, Inc. and Subsidiaries
Non-GAAP Financial Measures
Tangible common shareholders' equity is calculated by deducting goodwill and intangible assets (excluding mortgage servicing rights) from shareholders' equity. Tangible common shareholders' equity is considered a non-GAAP financial measure and should be viewed in conjunction with shareholders' equity. Non-GAAP financial measures have inherent limitations, are not required to be uniformly applied, and are not audited. Although we believe these non-GAAP financial measures are frequently used by stakeholders in the evaluation of a company, they have limitations as analytical tools, and should not be considered in isolation or as a substitute for analyses of results as reported under GAAP.
Tangible book value is calculated by dividing tangible common shareholders' equity by the number of common shares outstanding. The return on average tangible common shareholders' equity is calculated by dividing net earnings available to common shareholders (annualized) by average tangible common shareholders' equity.
Quarter Ended | Nine Months Ended | |||||||||||||||||||||||||||
(dollars in thousands, except share data) | Sept. 30, 2014 | Jun. 30, 2014 | Mar. 31, 2014 | Dec. 31, 2013 | Sept. 30, 2013 | Sept. 30, 2014 | Sept. 30, 2013 | |||||||||||||||||||||
Shareholders' equity | $ | 294,568 | $ | 288,249 | $ | 273,510 | $ | 265,926 | $ | 268,208 | $ | 294,568 | $ | 268,208 | ||||||||||||||
Less: Goodwill and other intangibles | (14,444 | ) | (14,690 | ) | (14,098 | ) | (14,287 | ) | (424 | ) | (14,444 | ) | (424 | ) | ||||||||||||||
Tangible shareholders' equity | $ | 280,124 | $ | 273,559 | $ | 259,412 | $ | 251,639 | $ | 267,784 | $ | 280,124 | $ | 267,784 | ||||||||||||||
Book value per share | $ | 19.83 | $ | 19.41 | $ | 18.42 | $ | 17.97 | $ | 18.60 | $ | 19.83 | $ | 18.60 | ||||||||||||||
Impact of goodwill and other intangibles | (0.97 | ) | (0.99 | ) | (0.95 | ) | (0.97 | ) | (0.03 | ) | (0.97 | ) | (0.03 | ) | ||||||||||||||
Tangible book value per share | $ | 18.86 | $ | 18.42 | $ | 17.47 | $ | 17.00 | $ | 18.57 | $ | 18.86 | $ | 18.57 | ||||||||||||||
Average shareholders' equity | $ | 295,229 | $ | 284,365 | $ | 272,596 | $ | 268,328 | $ | 271,286 | $ | 284,146 | $ | 275,463 | ||||||||||||||
Less: Average goodwill and other intangibles | (14,604 | ) | (14,049 | ) | (14,215 | ) | (9,927 | ) | (424 | ) | (14,291 | ) | (424 | ) | ||||||||||||||
Average tangible shareholders' equity | $ | 280,625 | $ | 270,316 | $ | 258,381 | $ | 258,401 | $ | 270,862 | $ | 269,855 | $ | 275,039 | ||||||||||||||
Return on average shareholders’ equity | 6.74 | % | 13.17 | % | 3.38 | % | (1.28 | )% | 2.45 | % | 7.81 | % | 11.94 | % | ||||||||||||||
Impact of goodwill and other intangibles | 0.35 | % | 0.68 | % | 0.18 | % | (0.05 | )% | — | % | 0.41 | % | 0.02 | % | ||||||||||||||
Return on average tangible shareholders' equity | 7.09 | % | 13.85 | % | 3.56 | % | (1.33 | )% | 2.45 | % | 8.22 | % | 11.96 | % | ||||||||||||||
28
The press release contains certain non-GAAP financial disclosures for consolidated net income, excluding acquisition-related expenses, diluted earnings per share, excluding acquisition-related expenses, and Commercial and Consumer Banking segment net income, excluding acquisition-related expenses. The Company uses certain non-GAAP financial measures to provide meaningful supplemental information regarding the Company's operational performance and to enhance investors' overall understanding of such financial performance.
Quarter Ended | Nine Months Ended | |||||||||||||||||||||||||||
(in thousands) | Sept. 30, 2014 | Jun. 30, 2014 | Mar. 31, 2014 | Dec. 31, 2013 | Sept. 30, 2013 | Sept. 30, 2014 | Sept. 30, 2013 | |||||||||||||||||||||
Net income (loss) | $ | 4,975 | $ | 9,362 | $ | 2,301 | $ | (861 | ) | $ | 1,662 | $ | 16,638 | $ | 24,670 | |||||||||||||
Add back: Acquisition-related expenses, net of tax | 469 | 394 | 545 | 2,652 | 301 | 1,408 | 305 | |||||||||||||||||||||
Net income, excluding acquisition-related expenses | $ | 5,444 | $ | 9,756 | $ | 2,846 | $ | 1,791 | $ | 1,963 | $ | 18,046 | $ | 24,975 | ||||||||||||||
Noninterest expense | $ | 64,158 | $ | 62,971 | $ | 56,091 | $ | 58,868 | $ | 58,116 | $ | 183,220 | $ | 170,627 | ||||||||||||||
Deduct: acquisition-related expenses | (722 | ) | (606 | ) | (838 | ) | (4,080 | ) | (463 | ) | (2,166 | ) | (469 | ) | ||||||||||||||
Noninterest expense, excluding acquisition-related expenses | $ | 63,436 | $ | 62,365 | $ | 55,253 | $ | 54,788 | $ | 57,653 | $ | 181,054 | $ | 170,158 | ||||||||||||||
Diluted earnings (loss) per common share | $ | 0.33 | $ | 0.63 | $ | 0.15 | $ | (0.06 | ) | $ | 0.11 | $ | 1.11 | $ | 1.67 | |||||||||||||
Impact of acquisition-related expenses | 0.03 | 0.02 | 0.04 | 0.18 | 0.02 | 0.10 | 0.02 | |||||||||||||||||||||
Diluted earnings per common share, excluding acquisition-related expenses | $ | 0.36 | $ | 0.65 | $ | 0.19 | $ | 0.12 | $ | 0.13 | $ | 1.21 | $ | 1.69 | ||||||||||||||
Commercial and Consumer Banking Segment: | ||||||||||||||||||||||||||||
Net income (loss) | $ | 3,534 | $ | 3,753 | $ | 4,116 | $ | 1,435 | $ | 4,857 | $ | 11,403 | $ | 4,538 | ||||||||||||||
Impact of acquisition-related expenses, net of tax | 469 | 394 | 545 | 2,652 | 301 | 1,408 | 305 | |||||||||||||||||||||
Net income (loss), excluding acquisition-related expenses | $ | 4,003 | $ | 4,147 | $ | 4,661 | $ | 4,087 | $ | 5,158 | $ | 12,811 | $ | 4,843 | ||||||||||||||
29