Attached files
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| 8-K - FORM 8-K - HomeStreet, Inc. | form8-k1q2015earningsrelea.htm |
| EX-99.2 - SUMMARY EARNINGS RELEASE ISSUED BY HOMESTREET, INC. DATED APRIL 27, 2015 - HomeStreet, Inc. | summaryearningsrelease_1q2.htm |
HomeStreet, Inc. Reports First Quarter 2015 Results
Net Income of $10.3 Million, or $0.59 per Diluted Share
SEATTLE – April 27, 2015 – (BUSINESS WIRE) – HomeStreet, Inc. (NASDAQ:HMST) (the “Company” or “HomeStreet”), the parent company of HomeStreet Bank (the “Bank”), today announced net income of $10.3 million, or $0.59 per diluted share, for the first quarter of 2015, compared to net income of $5.6 million, or $0.38 per share, for the fourth quarter of 2014 and $2.3 million, or $0.15 per share, for the first quarter of 2014. Excluding merger-related expenses (net of tax) of $7.9 million and a bargain purchase gain of $6.6 million, net income for the quarter was $11.6 million(1), or $0.67(1) per share, compared to net income of $6.2 million(1),or $0.41(1) per share, for the fourth quarter of 2014 and $2.8 million(1), or $0.19(1) per share, for the first quarter of 2014.
Simplicity merger
On March 1, 2015, the Company completed its merger with Simplicity Bancorp, Inc. and Simplicity Bank ("Simplicity") located in Southern California. The provisional application of the acquisition method of accounting resulted in a bargain purchase gain of $6.6 million which is reported as a component of noninterest income on our consolidated statement of operations for the first quarter of 2015. We also recorded merger-related expenses of $12.2 million during the quarter. The results of operations of Simplicity are included in the consolidated results of operations from the date of the merger. The merger represents a significant expansion of HomeStreet’s banking activities in California.
• | Consolidated results: |
▪ | Net gain on mortgage loan origination and sale activities was $61.9 million in the first quarter of 2015 compared with $39.2 million in the fourth quarter of 2014 and $25.5 million in the first quarter of 2014, resulting from a 62.3% and a 136.7% increase in single family interest rate lock commitments, respectively. |
▪ | Net interest income was $30.7 million in the first quarter of 2015 compared with $27.5 million in the fourth quarter of 2014 and $22.7 million in the first quarter of 2014, resulting from a 10.6% and a 30.9% increase in average interest-earning assets, respectively. In the quarter, $803.7 million of interest-earning assets were added from the Simplicity merger. |
▪ | Net interest margin was 3.60% compared to 3.53% in the fourth quarter of 2014 and 3.51% in the first quarter of 2014. |
▪ | Deposit balances of $3.34 billion increased $898.8 million, or 36.8%, from December 31, 2014. Transaction and savings deposits increased 28.6%. During the quarter, $650 million of deposits were added from the Simplicity merger. |
▪ | Loans held for investment balances of $2.83 billion increased $729.0 million, or 34.7%, from December 31, 2014. During the quarter, we added approximately $650 million of loans to the portfolio from the Simplicity merger. |
(1) Net of merger-related expenses (net of tax) and bargain purchase gain, a non-GAAP financial measure as explained on page 6.
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• | Segment results: |
◦ | Commercial and Consumer Banking |
▪ | Commercial and Consumer Banking segment recorded net income of |
$1.2 million(1) for the quarter, excluding merger-related expenses (net of tax) and bargain purchase gain, compared to net income of $3.9 million(1) for the fourth quarter of 2014, mostly due to a higher provision for credit losses and lower net gain on commercial mortgage loan origination and sale activities and lower gain on sale of securities.
▪ | Deposit balances increased $898.8 million, or 36.8%, to $3.34 billion from $2.45 billion at December 31, 2014, as we added $651.2 million in deposit balances from the Simplicity merger. Excluding those deposits added from the Simplicity merger, total deposit balances increased $247.6 million, or 10.1% and transaction and savings deposits increased $76.3 million, or 4.4%, during the quarter. |
▪ | Loans held for investment increased 34.7% to $2.83 billion from $2.10 billion at December 31, 2014 and increased 70.1% from $1.66 billion at March 31, 2014. $650 million of loans were added during the quarter from the Simplicity merger. New loan commitments in the quarter totaled $221.5 million and originations totaled $137.2 million. |
◦Mortgage Banking
▪ | Mortgage Banking segment net income was $10.3 million for the quarter. |
▪ | Single family mortgage interest rate lock commitments were $1.90 billion, up 62.3% from the fourth quarter of 2014 and up 136.7% from the first quarter of 2014. |
▪ | Single family mortgage closed loan volume was $1.61 billion, up 20.8% from the fourth quarter of 2014 and up 138.3% from the first quarter of 2014. |
▪ | The portfolio of single family loans serviced for others increased to $11.91 billion at March 31, 2015, up 6.2% from $11.22 billion at year-end. |
▪ | During the quarter, HomeStreet was the number one originator by volume of purchase mortgages in the Pacific Northwest (Washington, Oregon and Idaho) and in the Puget Sound region, based on the combined originations of HomeStreet and loans originated through an affiliated business arrangement known as WMS Series LLC. |
“We made substantial progress toward our goals this quarter," said Mark K. Mason, Chairman and Chief Executive Officer. "We closed our merger with Simplicity, recognizing a bargain purchase gain and meaningfully reducing the amount of merger-related expenses in the process, the combined effect of which reduced the cost of the merger by $10.7 million. Our integration of Simplicity is on plan, all deposits and loans have now been converted onto HomeStreet systems and we will substantially complete the full realization of anticipated Simplicity operating cost reductions in the second quarter. As a result of the merger and ongoing organic activity, in the quarter we grew total assets 30% to $4.6 billion and total deposits 37% to $3.3 billion.
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"We added commercial lending capabilities in California, hiring a new commercial real estate lending group who will operate as HomeStreet Commercial Capital and a group of SBA lenders. Both of these groups are seasoned and highly successful. We also added to our network of mortgage loan centers and personnel in the quarter and set new records for mortgage production. Continuing low interest rates and a fast start to the home buying season have provided us with strong first quarter mortgage banking income making the first quarter, which is historically the weakest in mortgage banking, a great start to our year. And, as a result of net income in the quarter and the Simplicity merger, ending total equity was $439 million.”
Consolidated Results of Operations
Net Interest Income
Net interest income in the first quarter of 2015 was $30.7 million, up $3.2 million, or 11.8%, from the fourth quarter of 2014 and up $8.0 million, or 35.3%, from the first quarter of 2014 as a result of growth in average interest-earning assets. In the first quarter of 2015, our net interest margin, on a tax equivalent basis, was 3.60% compared to 3.53% in the fourth quarter of 2014 and 3.51% in the first quarter of 2014.
Total average interest-earning assets in the first quarter of 2015 increased $332.9 million, or 10.6%, from the fourth quarter of 2014 primarily due to higher average balances of loans held for investment. Total average interest-earning assets and interest-bearing liabilities increased from the first quarter of 2014 primarily due to overall growth in the Company, both organically and through acquisitions. As a result of the closing of the Simplicity merger on March 1, 2015, ending total interest-earning assets, which increased $1 billion, or 31.8%, increased substantially more than average total interest-earning assets during the quarter.
Noninterest Income
Noninterest income in the first quarter of 2015 was $75.4 million, up $23.9 million, or 46.4%, from $51.5 million in the fourth quarter of 2014 and up $40.7 million, or 117.2%, from $34.7 million in the first quarter of 2014. Included in other noninterest income in the first quarter of 2015 was the bargain purchase gain of $6.6 million from the Simplicity merger. The increases in noninterest income compared with prior periods were also due to increases in net gain on mortgage origination and sale activities resulting from increased single family mortgage interest rate locks. Net gain on mortgage origination and sale activities increased $22.7 million from the prior quarter and $36.4 million from the first quarter of 2014.
Noninterest Expense
Noninterest expense for the first quarter of 2015 was $89.5 million compared with $68.8 million for the fourth quarter of 2014 and $56.1 million for the first quarter of 2014. Included in noninterest expense for these periods were merger-related expenses of $12.2 million for the first quarter of 2015, $889 thousand for the fourth quarter of 2014 and $838 thousand for the first quarter of 2014. Excluding merger-related expenses, noninterest expense for the first quarter of 2015 was $77.3 million(1), compared with $67.9 million(1) for the fourth quarter of 2014 and $55.3 million(1) for the first quarter of 2014. The increase of $9.4 million, or 13.9%, from the fourth quarter of 2014 was primarily due to increased salaries and related costs due to higher headcount and higher commissions as a result of a 20.8% increase in single family mortgage closed loan volume. The increase of $22.1 million, or 39.9%, from the first quarter of 2014 was primarily due to increased salary and related costs and other expenses related to growth in the business and higher commissions as a result of a 138.3% increase in single family mortgage closed loan volume. As of March 31, 2015, we had 1,829 full-time equivalent employees, a 13.5% increase from 1,611 employees as of December 31, 2014, and a 22.7% increase from 1,491 employees as of March 31, 2014. During the 12-month period ending March 31, 2015, the Company added 11 home loan centers and 10 retail deposit branches to bring our total home loan centers to 57 and our total retail deposit branches to 40.
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Income Taxes
The Company's income tax expense for the first quarter of 2015 was $3.3 million, inclusive of discrete items, representing an effective income tax rate of 24.4%. The Company’s estimated annual effective tax rate, exclusive of discrete items, was 35.8%, as compared to 33.2% in 2014. Our first quarter effective income tax rate differed from the Federal statutory rate of 35% mainly due to several discrete items booked in the first quarter of 2015. The Company’s discrete first quarter 2015 amounts resulted in a net reduction to the effective tax rate of approximately 11.3%, largely due to the Simplicity merger. For tax purposes the bargain purchase gain is nontaxable and resulted in a first quarter 2015 discrete benefit to the tax rate of 17%. Additionally, re-evaluation of the estimated 2015 state effective tax rate as a result of the Simplicity merger and other expected changes in the Company’s business resulted in a first quarter 2015 discrete increase to the rate of 8%.
Business Segments
Commercial and Consumer Banking Segment
Commercial and Consumer Banking segment recorded a net loss of $14 thousand in the first quarter of 2015 compared to net income of $3.3 million in the fourth quarter of 2014 primarily due to merger-related expenses, an increase in provision for credit losses recorded in the first quarter of 2015 and lower gain on sales of securities. Net income, excluding merger-related expenses (net of tax) and bargain purchase gain, was $1.2 million(1) in the first quarter of 2015, compared to net income of $3.9 million(1) in the fourth quarter of 2014. We recorded $3.0 million of provision for credit losses in the first quarter of 2015 compared to a provision of $500 thousand recorded in the fourth quarter of 2014. The credit loss provision in the quarter was due in part to an extension in the modeled loan loss emergence period for commercial loans, higher qualitative reserves for construction loans and overall growth in the loans held for investment portfolio. In the fourth quarter of 2014, we realized $1.2 million of gains on sales of securities. We had no sales of securities in the first quarter of 2015.
Commercial and Consumer Banking segment net income in the first quarter of 2014, excluding merger-related expenses, of $4.7 million(1) included a reversal of provision for credit loss of $1.5 million recorded in that quarter. Mostly offsetting the impact of the $4.5 million change in the provision from the first quarter of 2014 to the first quarter of 2015 was a $4.9 million increase in net interest income due to higher average balances of interest-earning assets.
Loans Held for Investment
Loans held for investment, net, were $2.83 billion at March 31, 2015, an increase of $729.0 million, or 34.7%, from December 31, 2014 and an increase of $1.17 billion, or 70.1%, from March 31, 2014. During the quarter, we added approximately $650 million of loans to the portfolio from the Simplicity merger. New loan commitments in the quarter totaled $221.5 million and originations totaled $137.2 million.
Asset Quality
Nonperforming assets were $32.8 million, or 0.71% of total assets at March 31, 2015, compared to $25.5 million, or 0.72% of total assets at December 31, 2014. Included in the quarter-end balance is $7.4 million of nonaccrual loans added from the Simplicity merger.
Nonaccrual loans of $21.2 million, or 0.74% of total loans at March 31, 2015, increased from $16.0 million, or 0.75% of total loans at December 31, 2014. Other real estate owned ("OREO") balances were $11.6 million at March 31, 2015, an increase of $2.1 million, or 22.7%, from $9.4 million at December 31, 2014. Delinquent loans of $67.7 million, or 2.37% of total loans at March 31, 2015, increased from $63.6 million, or 2.99% of total loans at December 31, 2014. Excluding Federal Housing Administration ("FHA")-insured and Department of Veterans' Affairs ("VA")-guaranteed single family mortgage loans, delinquent loans were $28.9 million, or 1.04% of total non-FHA/VA loans at March 31, 2015, compared to $22.6 million, or 1.11% of total non-FHA/VA loans at December 31, 2014.
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The allowance for loan losses was $24.9 million at March 31, 2015 compared to $22.0 million at December 31, 2014. The allowance for loan losses as a percentage of loans held for investment was 0.87% at March 31, 2015 compared to 1.04% at December 31, 2014. Excluding acquired loans, the allowance for loan losses as a percentage of total loans was 1.19% at March 31, 2015, compared to 1.10% at December 31, 2014. Net recoveries in the first quarter of 2015 totaled $104 thousand, compared to net charge-offs of $87 thousand in the fourth quarter of 2014 and net charge-offs of $272 thousand in the first quarter of 2014.
Deposits
Deposit balances were $3.34 billion at March 31, 2015 compared to $2.45 billion at December 31, 2014 and $2.37 billion at March 31, 2014. During the quarter, we added approximately $650 million of deposits from the Simplicity merger. Transaction and savings deposits increased $76.3 million, or 4.4%, during the quarter excluding those deposits added from the Simplicity merger. Of the $256.8 million, or 51.9%, increase in certificates of deposit since December 31, 2014, $236.1 million were added from the Simplicity merger.
Noninterest Expense
Commercial and Consumer Banking segment noninterest expense of $35.7 million increased $14.5 million, or 68.6%, from the fourth quarter of 2014. Included in noninterest expense for the first quarter of 2015 was $12.2 million of merger-related expenses. The additional increase in expense is due to the continued organic growth of our commercial real estate and commercial business lending units and the expansion of our branch banking network. During the quarter, we launched HomeStreet Commercial Capital, a commercial real estate lending group originating permanent loans up to $10 million in size. The group is based in Orange County, California and will provide permanent financing for a range of commercial real estate loans including multifamily, industrial, retail, office, mobile home parks and self-storage facilities. We also added a team specializing in U.S. Small Business Administration ("SBA") lending also located in Orange County, California.
Mortgage Banking Segment
Net income for the Mortgage Banking segment was $10.3 million in the first quarter of 2015, compared to net income of $2.3 million in the fourth quarter of 2014 and a net loss of $1.8 million in the first quarter of 2014. The $8.0 million increase in income from the fourth quarter of 2014 and the $12.1 million increase in income from the first quarter of 2014 was primarily due to higher net gain on single family mortgage loan origination and sale activities due to higher interest rate lock commitments, partially offset by higher commission expense resulting from increased closed loan volume in the quarter.
Mortgage Origination for Sale
Single family mortgage interest rate lock commitments, net of estimated fallout, totaled $1.90 billion in the first quarter of 2015, an increase of $729.6 million, or 62.3%, from $1.17 billion in the fourth quarter of 2014 and up $1.10 billion, or 136.7%, from $803.3 million in the first quarter of 2014. The increase from the prior periods was primarily the result of increased purchase and refinance single family mortgage activity due to low mortgage interest rates and the continued expansion of our mortgage production staff, support staff and offices into new markets.
Single family closed loan volume designated for sale was $1.61 billion in the first quarter of 2015, up $276.2 million, or 20.8%, from $1.33 billion in the fourth quarter of 2014 and up $932.6 million, or 138.3%, from $674.3 million in the first quarter of 2014. At March 31, 2015, the combined pipeline of interest rate lock commitments, net of estimated fallout, and mortgage loans held for sale was $1.51 billion, compared to $891.4 million at December 31, 2014 and $650.6 million at March 31, 2014.
Net gain on single family mortgage loan origination and sale activities in the first quarter of 2015 was $60.7 million compared to $36.5 million in the fourth quarter of 2014 and $24.3 million in the first quarter of 2014.
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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 first quarter of 2015 was 326 basis points, up from 310 basis points in the fourth quarter of 2014 and 323 basis points in the first quarter of 2014.
Mortgage Servicing
Single family mortgage servicing income of $3.9 million in the first quarter of 2015 decreased $5.4 million, or 58.3%, from the fourth quarter of 2014 and decreased $3.6 million, or 48.3%, from the first quarter of 2014. The decrease compared to the fourth quarter of 2014 was the result of lower risk management results and increases in long-term prepayment speed expectations.
Single family mortgage servicing fees collected in the first quarter of 2015 increased $640 thousand, or 8.5%, from the fourth quarter of 2014 and decreased $782 thousand, or 8.7%, from the first quarter of 2014. The decrease from the first quarter of 2014 was primarily due to lower balances in our loans serviced for others portfolio as a result of our June 30, 2014 sale of single family MSRs. The portfolio of single family loans serviced for others was $11.91 billion at March 31, 2015 compared to $11.22 billion at December 31, 2014, and $12.20 billion at March 31, 2014.
Noninterest Expense
Mortgage Banking segment noninterest expense of $53.8 million increased $6.2 million, or 13.0%, from the fourth quarter of 2014. This increase was partially attributable to increased commission and incentive expense as closed loan volumes increased 20.8% from the fourth quarter of 2014 resulting from our growth and expansion into new markets.
Capital
On January 1, 2015, the Bank and the Company became subject to Basel III capital standards. The Bank and the Company remain above current “well-capitalized” regulatory minimums. At March 31, 2015, regulatory capital ratios for the Bank and the Company at March 31, 2015 were as follows:
At March 31, 2015* | Bank | Company | ||||
Tier 1 leverage capital (to average assets)** | 11.47 | % | 11.95 | % | ||
Common equity risk-based capital (to risk-weighted assets) | 13.75 | % | 11.25 | % | ||
Tier 1 risk-based capital (to risk-weighted assets) | 13.75 | % | 12.69 | % | ||
Total risk-based capital (to risk-weighted assets) | 14.57 | % | 13.41 | % | ||
* | Regulatory capital ratios at March 31, 2015 are preliminary. |
** | Tier 1 leverage capital (to average assets) includes average assets from the Simplicity merger for one month. If the Simplicity merger had occurred on January 1, 2015, the Bank's Tier 1 leverage capital would have been 9.95% and the Company's Tier 1 leverage capital would have been 10.38%. |
(1) | The press release contains certain non-GAAP financial disclosures for consolidated net income excluding merger-related expenses, diluted earnings per share excluding merger-related expenses, and Commercial and Consumer Banking segment net income excluding merger-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. |
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Conference Call
HomeStreet, Inc. will conduct a quarterly earnings conference call on Tuesday, April 28, 2015 at 1:00 p.m. EDT. The Company will discuss first quarter 2015 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/10062349 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 10062349.
The information to be discussed in the conference call will be available on the company's web site at 8:00 p.m. EDT on Monday, April 27, 2015.
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 products in Washington, Oregon, California and Hawaii, property and casualty insurance products in Washington, Oregon, California and Arizona, and originates residential and commercial mortgages and construction loans for borrowers located in the Western United States and Hawaii. 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. 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. We may not realize the benefits expected from our recently completed bank and branch acquisitions in the anticipated time frame (or at all), 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
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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, 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, 2014 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, 2014, 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 | ||
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HomeStreet, Inc. and Subsidiaries
Summary Financial Data
Quarter Ended | ||||||||||||||||||||
(dollars in thousands, except share data) | Mar. 31, 2015 | Dec. 31, 2014 | Sept. 30, 2014 | Jun. 30, 2014 | Mar. 31, 2014 | |||||||||||||||
Income statement data (for the period ended): | ||||||||||||||||||||
Net interest income | $ | 30,734 | $ | 27,502 | $ | 25,308 | $ | 23,147 | $ | 22,712 | ||||||||||
Provision (reversal of provision) for credit losses | 3,000 | 500 | — | — | (1,500 | ) | ||||||||||||||
Noninterest income | 75,373 | 51,487 | 45,813 | 53,650 | 34,707 | |||||||||||||||
Noninterest expense | 89,482 | 68,791 | 64,158 | 62,971 | 56,091 | |||||||||||||||
Merger-related expenses (included in noninterest expense) | 12,165 | 889 | 722 | 606 | 838 | |||||||||||||||
Net income before taxes | 13,625 | 9,698 | 6,963 | 13,826 | 2,828 | |||||||||||||||
Income tax expense | 3,321 | 4,077 | 1,988 | 4,464 | 527 | |||||||||||||||
Net income | $ | 10,304 | $ | 5,621 | $ | 4,975 | $ | 9,362 | $ | 2,301 | ||||||||||
Basic earnings per common share | $ | 0.60 | $ | 0.38 | $ | 0.34 | $ | 0.63 | $ | 0.16 | ||||||||||
Diluted earnings per common share | $ | 0.59 | $ | 0.38 | $ | 0.33 | $ | 0.63 | $ | 0.15 | ||||||||||
Common shares outstanding | 22,038,748 | 14,856,611 | 14,852,971 | 14,849,692 | 14,846,519 | |||||||||||||||
Weighted average common shares | ||||||||||||||||||||
Basic | 17,158,303 | 14,811,699 | 14,805,780 | 14,800,853 | 14,784,424 | |||||||||||||||
Diluted | 17,355,076 | 14,973,222 | 14,968,238 | 14,954,998 | 14,947,864 | |||||||||||||||
Dividends per share | $ | — | $ | — | $ | — | $ | — | $ | 0.11 | ||||||||||
Book value per share | $ | 19.94 | $ | 20.34 | $ | 19.83 | $ | 19.41 | $ | 18.42 | ||||||||||
Tangible book value per share (1) | $ | 18.97 | $ | 19.39 | $ | 18.86 | $ | 18.42 | $ | 17.47 | ||||||||||
Financial position (at period end): | ||||||||||||||||||||
Cash and cash equivalents | $ | 56,864 | $ | 30,502 | $ | 34,687 | $ | 74,991 | $ | 47,714 | ||||||||||
Investment securities | 476,102 | 455,332 | 449,948 | 454,966 | 446,639 | |||||||||||||||
Loans held for sale | 865,322 | 621,235 | 698,111 | 549,440 | 588,465 | |||||||||||||||
Loans held for investment, net | 2,828,177 | 2,099,129 | 1,964,762 | 1,812,895 | 1,662,623 | |||||||||||||||
Mortgage servicing rights | 121,722 | 123,324 | 124,593 | 117,991 | 158,741 | |||||||||||||||
Other real estate owned | 11,589 | 9,448 | 10,478 | 11,083 | 12,089 | |||||||||||||||
Total assets | 4,604,403 | 3,535,090 | 3,474,656 | 3,235,676 | 3,124,812 | |||||||||||||||
Deposits | 3,344,223 | 2,445,430 | 2,425,458 | 2,417,712 | 2,371,358 | |||||||||||||||
FHLB advances | 669,419 | 597,590 | 598,590 | 384,090 | 346,590 | |||||||||||||||
Federal funds purchased and securities sold under agreements to repurchase | 9,450 | 50,000 | 14,225 | 14,681 | — | |||||||||||||||
Shareholders’ equity | 439,395 | 302,238 | 294,568 | 288,249 | 273,510 | |||||||||||||||
Financial position (averages): | ||||||||||||||||||||
Investment securities | $ | 462,762 | $ | 454,127 | $ | 457,545 | $ | 447,458 | $ | 477,384 | ||||||||||
Loans held for investment | 2,370,763 | 2,044,873 | 1,917,503 | 1,766,788 | 1,830,330 | |||||||||||||||
Total interest-earning assets | 3,473,652 | 3,140,708 | 2,952,916 | 2,723,687 | 2,654,078 | |||||||||||||||
Total interest-bearing deposits | 2,205,585 | 1,892,399 | 1,861,164 | 1,900,681 | 1,880,358 | |||||||||||||||
FHLB advances | 515,958 | 606,753 | 442,409 | 350,271 | 323,832 | |||||||||||||||
Federal funds purchased and securities sold under agreements to repurchase | 41,734 | 23,338 | 11,149 | 1,129 | — | |||||||||||||||
Total interest-bearing liabilities | 2,825,134 | 2,584,347 | 2,376,579 | 2,313,937 | 2,267,904 | |||||||||||||||
Shareholders’ equity | 370,008 | 305,068 | 295,229 | 284,365 | 272,596 | |||||||||||||||
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HomeStreet, Inc. and Subsidiaries
Summary Financial Data (continued)
Quarter Ended | ||||||||||||||||||||
(dollars in thousands, except share data) | Mar. 31, 2015 | Dec. 31, 2014 | Sept. 30, 2014 | Jun. 30, 2014 | Mar. 31, 2014 | |||||||||||||||
Financial performance: | ||||||||||||||||||||
Return on average shareholders’ equity (2) | 11.14 | % | 7.37 | % | 6.74 | % | 13.17 | % | 3.38 | % | ||||||||||
Return on average tangible shareholders' equity(1) | 11.67 | % | 7.73 | % | 7.09 | % | 13.85 | % | 3.56 | % | ||||||||||
Return on average assets | 1.08 | % | 0.65 | % | 0.61 | % | 1.22 | % | 0.30 | % | ||||||||||
Net interest margin (3) | 3.60 | % | 3.53 | % | 3.50 | % | 3.48 | % | 3.51 | % | ||||||||||
Efficiency ratio (4) | 84.33 | % | 87.09 | % | 90.21 | % | 82.00 | % | 97.69 | % | ||||||||||
Asset quality: | ||||||||||||||||||||
Allowance for credit losses | $ | 25,628 | $ | 22,524 | $ | 22,111 | $ | 22,168 | $ | 22,317 | ||||||||||
Allowance for loan losses/total loans(5) | 0.87 | % | 1.04 | % | 1.10 | % | 1.19 | % | 1.31 | % | ||||||||||
Allowance for loan losses/nonaccrual loans | 117.48 | % | 137.51 | % | 109.75 | % | 103.44 | % | 96.95 | % | ||||||||||
Total nonaccrual loans(6)(7) | $ | 21,209 | $ | 16,014 | $ | 19,906 | $ | 21,197 | $ | 22,823 | ||||||||||
Nonaccrual loans/total loans | 0.74 | % | 0.75 | % | 1.00 | % | 1.16 | % | 1.35 | % | ||||||||||
Other real estate owned | $ | 11,589 | $ | 9,448 | $ | 10,478 | $ | 11,083 | $ | 12,089 | ||||||||||
Total nonperforming assets(7) | $ | 32,798 | $ | 25,462 | $ | 30,384 | $ | 32,280 | $ | 34,912 | ||||||||||
Nonperforming assets/total assets | 0.71 | % | 0.72 | % | 0.87 | % | 1.00 | % | 1.12 | % | ||||||||||
Net (recoveries) charge-offs | $ | (104 | ) | $ | 87 | $ | 57 | $ | 149 | $ | 272 | |||||||||
Regulatory capital ratios for the Bank: | ||||||||||||||||||||
Tier 1 leverage capital (to average assets)(9) | 11.47 | % | (8) | 9.38 | % | 9.63 | % | 10.17 | % | 9.94 | % | |||||||||
Basel III - Tier 1 common equity risk-based capital (to risk-weighted assets) | 13.75 | % | (8) | NA | NA | NA | NA | |||||||||||||
Basel III - Tier 1 risk-based capital (to risk-weighted assets) | 13.75 | % | (8) | NA | NA | NA | NA | |||||||||||||
Basel III - Total risk-based capital (to risk-weighted assets) | 14.57 | % | (8) | NA | NA | NA | NA | |||||||||||||
Basel I - Tier 1 risk-based capital (to risk-weighted assets) | NA | 13.10 | % | 13.03 | % | 13.84 | % | 13.99 | % | |||||||||||
Basel I - Total risk-based capital (to risk-weighted assets) | NA | 14.03 | % | 13.95 | % | 14.84 | % | 15.04 | % | |||||||||||
Regulatory capital ratios for the Company: | ||||||||||||||||||||
Tier 1 leverage capital (to average assets)(9) | 11.95 | % | (8) | NA | NA | NA | NA | |||||||||||||
Basel III - Tier 1 common equity risk-based capital (to risk-weighted assets) | 11.25 | % | (8) | NA | NA | NA | NA | |||||||||||||
Basel III - Tier 1 risk-based capital (to risk-weighted assets) | 12.69 | % | (8) | NA | NA | NA | NA | |||||||||||||
Basel III - Total risk-based capital (to risk-weighted assets) | 13.41 | % | (8) | NA | NA | NA | NA | |||||||||||||
Other data: | ||||||||||||||||||||
Full-time equivalent employees (ending) | 1,829 | 1,611 | 1,598 | 1,546 | 1,491 | |||||||||||||||
(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) | Noninterest expense divided by total net revenue (net interest income and noninterest income). |
(5) | Includes loans acquired with bank acquisitions. Excluding acquired loans, allowance for loan losses /total loans was 1.19%, 1.10%, 1.18%, 1.31% and 1.46% at March 31, 2015, December 31, 2014, September 30, 2014, June 30, 2014 and March 31, 2014, respectively. |
(6) | Generally, loans are placed on nonaccrual status when they are 90 or more days past due. |
(7) | Includes $1.4 million, $4.4 million, $6.3 million, $6.5 million and $6.6 million of nonperforming loans at March 31, 2015, December 31, 2014, September 30, 2014, June 30, 2014 and March 31, 2014, respectively, which are guaranteed by the SBA. |
(8) | Regulatory capital ratios at March 31, 2015 are preliminary. On January 1, 2015, the Company and the Bank became subject to Basel III capital standards. Prior period regulatory capital ratios under Basel I may not be comparative. |
(9) | Tier 1 leverage capital (to average assets) includes average assets from the Simplicity merger for one month. If the Simplicity merger had occurred on January 1, 2015, the Bank's Tier 1 leverage capital would have been 9.95% and the Company's Tier 1 leverage capital would have been 10.38%. |
10
HomeStreet, Inc. and Subsidiaries
Consolidated Statements of Operations
Three Months Ended March 31, | % | ||||||||||
(in thousands, except share data) | 2015 | 2014 | Change | ||||||||
Interest income: | |||||||||||
Loans | $ | 31,647 | $ | 22,683 | 40 | % | |||||
Investment securities | 2,394 | 2,970 | (19 | ) | |||||||
Other | 205 | 157 | 31 | ||||||||
34,246 | 25,810 | 33 | |||||||||
Interest expense: | |||||||||||
Deposits | 2,582 | 2,360 | 9 | ||||||||
Federal Home Loan Bank advances | 612 | 413 | 48 | ||||||||
Federal funds purchased and securities sold under agreements to repurchase | 5 | — | NM | ||||||||
Long-term debt | 265 | 315 | (16 | ) | |||||||
Other | 48 | 10 | 380 | ||||||||
3,512 | 3,098 | 13 | |||||||||
Net interest income | 30,734 | 22,712 | 35 | ||||||||
Provision (reversal of provision) for credit losses | 3,000 | (1,500 | ) | NM | |||||||
Net interest income after provision for credit losses | 27,734 | 24,212 | 15 | ||||||||
Noninterest income: | |||||||||||
Net gain on mortgage loan origination and sale activities | 61,887 | 25,510 | 143 | ||||||||
Mortgage servicing income | 4,297 | 7,945 | (46 | ) | |||||||
Income (loss) from WMS Series LLC | 564 | (193 | ) | (392 | ) | ||||||
Loss on debt extinguishment | — | (586 | ) | NM | |||||||
Depositor and other retail banking fees | 1,139 | 815 | 40 | ||||||||
Insurance agency commissions | 415 | 404 | 3 | ||||||||
Gain on sale of investment securities available for sale | — | 713 | (100 | ) | |||||||
Other | 7,071 | 99 | 7,042 | ||||||||
75,373 | 34,707 | 117 | |||||||||
Noninterest expense: | |||||||||||
Salaries and related costs | 57,593 | 35,471 | 62 | ||||||||
General and administrative | 13,161 | 10,122 | 30 | ||||||||
Legal | 467 | 399 | 17 | ||||||||
Consulting | 5,565 | 951 | 485 | ||||||||
Federal Deposit Insurance Corporation assessments | 525 | 620 | (15 | ) | |||||||
Occupancy | 5,840 | 4,432 | 32 | ||||||||
Information services | 6,120 | 4,515 | 36 | ||||||||
Net cost (income) from operation and sale of other real estate owned | 211 | (419 | ) | (150 | ) | ||||||
89,482 | 56,091 | 60 | |||||||||
Income before income taxes | 13,625 | 2,828 | 382 | ||||||||
Income tax expense | 3,321 | 527 | 530 | ||||||||
NET INCOME | $ | 10,304 | $ | 2,301 | 348 | ||||||
Basic income per share | $ | 0.60 | $ | 0.16 | NM | ||||||
Diluted income per share | $ | 0.59 | $ | 0.15 | NM | ||||||
Basic weighted average number of shares outstanding | 17,158,303 | 14,784,424 | 16 | ||||||||
Diluted weighted average number of shares outstanding | 17,355,076 | 14,947,864 | 16 | ||||||||
11
HomeStreet, Inc. and Subsidiaries
Five Quarter Consolidated Statements of Operation
Quarter Ended | ||||||||||||||||||||
(in thousands, except share data) | Mar. 31, 2015 | Dec. 31, 2014 | Sept. 30, 2014 | Jun. 30, 2014 | Mar. 31, 2014 | |||||||||||||||
Interest income: | ||||||||||||||||||||
Loans | $ | 31,647 | $ | 28,242 | $ | 25,763 | $ | 23,419 | $ | 22,683 | ||||||||||
Investment securities | 2,394 | 2,366 | 2,565 | 2,664 | 2,970 | |||||||||||||||
Other | 205 | 172 | 150 | 142 | 157 | |||||||||||||||
34,246 | 30,780 | 28,478 | 26,225 | 25,810 | ||||||||||||||||
Interest expense: | ||||||||||||||||||||
Deposits | 2,582 | 2,351 | 2,364 | 2,356 | 2,360 | |||||||||||||||
Federal Home Loan Bank advances | 612 | 614 | 509 | 444 | 413 | |||||||||||||||
Federal funds purchased and securities sold under agreements to repurchase | 5 | 15 | 6 | 1 | — | |||||||||||||||
Long-term debt | 265 | 269 | 271 | 265 | 315 | |||||||||||||||
Other | 48 | 29 | 20 | 12 | 10 | |||||||||||||||
3,512 | 3,278 | 3,170 | 3,078 | 3,098 | ||||||||||||||||
Net interest income | 30,734 | 27,502 | 25,308 | 23,147 | 22,712 | |||||||||||||||
Provision (reversal of provision) for credit losses | 3,000 | 500 | — | — | (1,500 | ) | ||||||||||||||
Net interest income after provision for credit losses | 27,734 | 27,002 | 25,308 | 23,147 | 24,212 | |||||||||||||||
Noninterest income: | ||||||||||||||||||||
Net gain on mortgage loan origination and sale activities | 61,887 | 39,176 | 37,642 | 41,794 | 25,510 | |||||||||||||||
Mortgage servicing income | 4,297 | 9,808 | 6,155 | 10,184 | 7,945 | |||||||||||||||
Income (loss) from WMS Series LLC | 564 | 170 | (122 | ) | 246 | (193 | ) | |||||||||||||
Gain (loss) on debt extinguishment | — | — | 2 | 11 | (586 | ) | ||||||||||||||
Depositor and other retail banking fees | 1,139 | 896 | 944 | 917 | 815 | |||||||||||||||
Insurance agency commissions | 415 | 261 | 256 | 232 | 404 | |||||||||||||||
Gain (loss) on sale of investment securities available for sale | — | 1,185 | 480 | (20 | ) | 713 | ||||||||||||||
Other | 7,071 | (9 | ) | 456 | 286 | 99 | ||||||||||||||
75,373 | 51,487 | 45,813 | 53,650 | 34,707 | ||||||||||||||||
Noninterest expense: | ||||||||||||||||||||
Salaries and related costs | 57,593 | 44,706 | 42,604 | 40,606 | 35,471 | |||||||||||||||
General and administrative | 13,161 | 11,240 | 10,326 | 11,145 | 10,122 | |||||||||||||||
Legal | 467 | 500 | 630 | 542 | 399 | |||||||||||||||
Consulting | 5,565 | 1,042 | 628 | 603 | 951 | |||||||||||||||
Federal Deposit Insurance Corporation assessments | 525 | 442 | 682 | 572 | 620 | |||||||||||||||
Occupancy | 5,840 | 4,556 | 4,935 | 4,675 | 4,432 | |||||||||||||||
Information services | 6,120 | 6,455 | 4,220 | 4,862 | 4,515 | |||||||||||||||
Net cost (income) from operation and sale of other real estate owned | 211 | (150 | ) | 133 | (34 | ) | (419 | ) | ||||||||||||
89,482 | 68,791 | 64,158 | 62,971 | 56,091 | ||||||||||||||||
Income before income tax expense | 13,625 | 9,698 | 6,963 | 13,826 | 2,828 | |||||||||||||||
Income tax expense | 3,321 | 4,077 | 1,988 | 4,464 | 527 | |||||||||||||||
NET INCOME | $ | 10,304 | $ | 5,621 | $ | 4,975 | $ | 9,362 | $ | 2,301 | ||||||||||
Basic income per share | $ | 0.60 | $ | 0.38 | $ | 0.34 | $ | 0.63 | $ | 0.16 | ||||||||||
Diluted income per share | $ | 0.59 | $ | 0.38 | $ | 0.33 | $ | 0.63 | $ | 0.15 | ||||||||||
Basic weighted average number of shares outstanding | 17,158,303 | 14,811,699 | 14,805,780 | 14,800,853 | 14,784,424 | |||||||||||||||
Diluted weighted average number of shares outstanding | 17,355,076 | 14,973,222 | 14,968,238 | 14,954,998 | 14,947,864 | |||||||||||||||
12
HomeStreet, Inc. and Subsidiaries
Consolidated Statements of Financial Condition
(in thousands, except share data) | Mar. 31, 2015 | Dec. 31, 2014 | % Change | ||||||||
Assets: | |||||||||||
Cash and cash equivalents (including interest-earning instruments of $28,597 and $10,271) | $ | 56,864 | $ | 30,502 | 86 | % | |||||
Investment securities (includes $449,330 and $427,326 carried at fair value) | 476,102 | 455,332 | 5 | ||||||||
Loans held for sale (includes $856,124 and $610,350 carried at fair value) | 865,322 | 621,235 | 39 | ||||||||
Loans held for investment (net of allowance for loan losses of $24,916 and $22,021; includes $52,580 and $0 carried at fair value) | 2,828,177 | 2,099,129 | 35 | ||||||||
Mortgage servicing rights (includes $110,709 and $112,439 carried at fair value) | 121,722 | 123,324 | (1 | ) | |||||||
Other real estate owned | 11,589 | 9,448 | 23 | ||||||||
Federal Home Loan Bank stock, at cost | 34,996 | 33,915 | 3 | ||||||||
Premises and equipment, net | 49,808 | 45,251 | 10 | ||||||||
Goodwill | 11,945 | 11,945 | — | ||||||||
Other assets | 147,878 | 105,009 | 41 | ||||||||
Total assets | $ | 4,604,403 | $ | 3,535,090 | 30 | ||||||
Liabilities and shareholders’ equity: | |||||||||||
Liabilities: | |||||||||||
Deposits | 3,344,223 | $ | 2,445,430 | 37 | |||||||
Federal Home Loan Bank advances | 669,419 | 597,590 | 12 | ||||||||
Federal funds purchased and securities sold under agreements to repurchase | 9,450 | 50,000 | (81 | ) | |||||||
Accounts payable and other liabilities | 80,059 | 77,975 | 3 | ||||||||
Long-term debt | 61,857 | 61,857 | — | ||||||||
Total liabilities | 4,165,008 | 3,232,852 | 29 | ||||||||
Commitments and contingencies | |||||||||||
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, 22,038,748 shares and 14,856,611 shares | 511 | 511 | — | ||||||||
Additional paid-in capital | 221,301 | 96,615 | 129 | ||||||||
Retained earnings | 213,870 | 203,566 | 5 | ||||||||
Accumulated other comprehensive income | 3,713 | 1,546 | 140 | ||||||||
Total shareholders’ equity | 439,395 | 302,238 | 45 | ||||||||
Total liabilities and shareholders’ equity | $ | 4,604,403 | $ | 3,535,090 | 30 | ||||||
13
HomeStreet, Inc. and Subsidiaries
Five Quarter Consolidated Statements of Financial Condition
(in thousands, except share data) | Mar. 31, 2015 | Dec. 31, 2014 | Sept. 30, 2014 | Jun. 30, 2014 | Mar. 31, 2014 | |||||||||||||||
Assets: | ||||||||||||||||||||
Cash and cash equivalents | $ | 56,864 | $ | 30,502 | $ | 34,687 | $ | 74,991 | $ | 47,714 | ||||||||||
Investment securities | 476,102 | 455,332 | 449,948 | 454,966 | 446,639 | |||||||||||||||
Loans held for sale | 865,322 | 621,235 | 698,111 | 549,440 | 588,465 | |||||||||||||||
Loans held for investment, net | 2,828,177 | 2,099,129 | 1,964,762 | 1,812,895 | 1,662,623 | |||||||||||||||
Mortgage servicing rights | 121,722 | 123,324 | 124,593 | 117,991 | 158,741 | |||||||||||||||
Other real estate owned | 11,589 | 9,448 | 10,478 | 11,083 | 12,089 | |||||||||||||||
Federal Home Loan Bank stock, at cost | 34,996 | 33,915 | 34,271 | 34,618 | 34,958 | |||||||||||||||
Premises and equipment, net | 49,808 | 45,251 | 44,476 | 43,896 | 40,894 | |||||||||||||||
Goodwill | 11,945 | 11,945 | 11,945 | 11,945 | 12,063 | |||||||||||||||
Other assets | 147,878 | 105,009 | 101,385 | 123,851 | 120,626 | |||||||||||||||
Total assets | $ | 4,604,403 | $ | 3,535,090 | $ | 3,474,656 | $ | 3,235,676 | $ | 3,124,812 | ||||||||||
Liabilities and shareholders’ equity: | ||||||||||||||||||||
Liabilities: | ||||||||||||||||||||
Deposits | $ | 3,344,223 | $ | 2,445,430 | $ | 2,425,458 | $ | 2,417,712 | $ | 2,371,358 | ||||||||||
Federal Home Loan Bank advances | 669,419 | 597,590 | 598,590 | 384,090 | 346,590 | |||||||||||||||
Federal funds purchased and securities sold under agreements to repurchase | 9,450 | 50,000 | 14,225 | 14,681 | — | |||||||||||||||
Accounts payable and other liabilities | 80,059 | 77,975 | 79,958 | 69,087 | 71,498 | |||||||||||||||
Long-term debt | 61,857 | 61,857 | 61,857 | 61,857 | 61,856 | |||||||||||||||
Total liabilities | 4,165,008 | 3,232,852 | 3,180,088 | 2,947,427 | 2,851,302 | |||||||||||||||
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 | 221,301 | 96,615 | 96,650 | 95,923 | 95,271 | |||||||||||||||
Retained earnings | 213,870 | 203,566 | 197,945 | 192,972 | 183,610 | |||||||||||||||
Accumulated other comprehensive income (loss) | 3,713 | 1,546 | (538 | ) | (1,157 | ) | (5,882 | ) | ||||||||||||
Total shareholders’ equity | 439,395 | 302,238 | 294,568 | 288,249 | 273,510 | |||||||||||||||
Total liabilities and shareholders’ equity | $ | 4,604,403 | $ | 3,535,090 | $ | 3,474,656 | $ | 3,235,676 | $ | 3,124,812 | ||||||||||
14
HomeStreet, Inc. and Subsidiaries
Average Balances, Yields and Rates Paid (Taxable-equivalent basis)
Quarter Ended March 31, | ||||||||||||||||||||||
2015 | 2014 | |||||||||||||||||||||
(in thousands) | Average Balance | Interest | Average Yield/Cost | Average Balance | Interest | Average Yield/Cost | ||||||||||||||||
Assets: | ||||||||||||||||||||||
Interest-earning assets: (1) | ||||||||||||||||||||||
Cash and cash equivalents | $ | 49,376 | $ | 24 | 0.20 | % | $ | 33,264 | $ | 17 | 0.21 | % | ||||||||||
Investment securities | 462,762 | 2,980 | 2.58 | % | 477,384 | 3,600 | 3.02 | % | ||||||||||||||
Loans held for sale | 590,751 | 5,664 | 3.84 | % | 313,100 | 2,821 | 3.60 | % | ||||||||||||||
Loans held for investment | 2,370,763 | 26,023 | 4.41 | % | 1,830,330 | 19,895 | 4.37 | % | ||||||||||||||
Total interest-earning assets | 3,473,652 | 34,691 | 4.01 | % | 2,654,078 | 26,333 | 3.99 | % | ||||||||||||||
Noninterest-earning assets (2) | 341,539 | 368,388 | ||||||||||||||||||||
Total assets | $ | 3,815,191 | $ | 3,022,466 | ||||||||||||||||||
Liabilities and shareholders’ equity: | ||||||||||||||||||||||
Deposits: | ||||||||||||||||||||||
Interest-bearing demand accounts | $ | 176,247 | 180 | 0.41 | % | $ | 245,743 | 165 | 0.27 | % | ||||||||||||
Savings accounts | 232,582 | 265 | 0.46 | % | 159,544 | 201 | 0.51 | % | ||||||||||||||
Money market accounts | 1,064,567 | 1,135 | 0.43 | % | 925,631 | 1,020 | 0.45 | % | ||||||||||||||
Certificate accounts | 732,189 | 1,029 | 0.57 | % | 549,440 | 974 | 0.72 | % | ||||||||||||||
Total interest-bearing deposits | 2,205,585 | 2,609 | 0.48 | % | 1,880,358 | 2,360 | 0.51 | % | ||||||||||||||
FHLB advances | 515,958 | 612 | 0.48 | % | 323,832 | 423 | 0.51 | % | ||||||||||||||
Federal funds purchased and securities sold under agreements to repurchase | 41,734 | 26 | 0.25 | % | — | — | — | % | ||||||||||||||
Long-term debt | 61,857 | 265 | 0.28 | % | 63,714 | 315 | 1.98 | % | ||||||||||||||
Total interest-bearing liabilities | 2,825,134 | 3,512 | 0.50 | % | 2,267,904 | 3,098 | 0.55 | % | ||||||||||||||
Noninterest-bearing liabilities | 620,049 | 481,966 | ||||||||||||||||||||
Total liabilities | 3,445,183 | 2,749,870 | ||||||||||||||||||||
Shareholders’ equity | 370,008 | 272,596 | ||||||||||||||||||||
Total liabilities and shareholders’ equity | $ | 3,815,191 | $ | 3,022,466 | ||||||||||||||||||
Net interest income (3) | $ | 31,179 | $ | 23,235 | ||||||||||||||||||
Net interest spread | 3.51 | % | 3.44 | % | ||||||||||||||||||
Impact of noninterest-bearing sources | 0.09 | % | 0.07 | % | ||||||||||||||||||
Net interest margin | 3.60 | % | 3.51 | % | ||||||||||||||||||
(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 $445 thousand and $523 thousand for the quarters ended March 31, 2015 and March 31, 2014, 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) | Mar. 31, 2015 | Dec. 31, 2014 | Sept. 30, 2014 | Jun. 30, 2014 | Mar. 31, 2014 | |||||||||||||||
Net interest income | $ | 25,107 | $ | 22,187 | $ | 20,163 | $ | 19,403 | $ | 20,233 | ||||||||||
Provision (reversal of provision) for credit losses | 3,000 | 500 | — | — | (1,500 | ) | ||||||||||||||
Noninterest income | 10,081 | 5,434 | 3,660 | 6,614 | 2,958 | |||||||||||||||
Noninterest expense | 35,666 | 21,155 | 18,930 | 20,434 | 19,293 | |||||||||||||||
(Loss) income before income taxes | (3,478 | ) | 5,966 | 4,893 | 5,583 | 5,398 | ||||||||||||||
Income tax (benefit) expense | (3,464 | ) | 2,621 | 1,359 | 1,830 | 1,282 | ||||||||||||||
Net (loss) income | $ | (14 | ) | $ | 3,345 | $ | 3,534 | $ | 3,753 | $ | 4,116 | |||||||||
Net income, excluding merger-related expenses (net of tax) and bargain purchase gain (1) | $ | 1,242 | $ | 3,923 | $ | 4,003 | $ | 4,147 | $ | 4,661 | ||||||||||
Efficiency ratio (2) | 101.36 | % | 76.59 | % | 79.46 | % | 78.54 | % | 83.19 | % | ||||||||||
Full-time equivalent employees (ending) | 768 | 608 | 605 | 599 | 588 | |||||||||||||||
Net gain on mortgage loan origination and sale activities: | ||||||||||||||||||||
Multifamily | 939 | 2,704 | 930 | 693 | 396 | |||||||||||||||
Other | 204 | (16 | ) | (101 | ) | 4,087 | 794 | |||||||||||||
$ | 1,143 | $ | 2,688 | $ | 829 | $ | 4,780 | $ | 1,190 | |||||||||||
Production volumes for sale to the secondary market: | ||||||||||||||||||||
Multifamily mortgage originations | $ | 24,428 | $ | 57,135 | $ | 60,699 | $ | 23,105 | $ | 11,343 | ||||||||||
Multifamily mortgage loans sold | 26,173 | 99,285 | 20,409 | 15,902 | 6,263 | |||||||||||||||
(1) | Commercial and Consumer Banking segment net income, excluding merger-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) | Mar. 31, 2015 | Dec. 31, 2014 | Sept. 30, 2014 | Jun. 30, 2014 | Mar. 31, 2014 | |||||||||||||||
Servicing income, net: | ||||||||||||||||||||
Servicing fees and other | $ | 886 | $ | 970 | $ | 1,289 | $ | 1,017 | $ | 890 | ||||||||||
Amortization of multifamily MSRs | (454 | ) | (429 | ) | (425 | ) | (434 | ) | (424 | ) | ||||||||||
Commercial mortgage servicing income | $ | 432 | $ | 541 | $ | 864 | $ | 583 | $ | 466 | ||||||||||
16
HomeStreet, Inc. and Subsidiaries
Commercial and Consumer Banking Segment (continued)
Commercial Loans Serviced for Others
(in thousands) | Mar. 31, 2015 | Dec. 31, 2014 | Sept. 30, 2014 | Jun. 30, 2014 | Mar. 31, 2014 | |||||||||||||||
Commercial | ||||||||||||||||||||
Multifamily | $ | 773,092 | $ | 752,640 | $ | 703,197 | $ | 704,997 | $ | 721,464 | ||||||||||
Other | 83,574 | 82,354 | 86,589 | 97,996 | 99,340 | |||||||||||||||
Total commercial loans serviced for others | $ | 856,666 | $ | 834,994 | $ | 789,786 | $ | 802,993 | $ | 820,804 | ||||||||||
Commercial Multifamily Capitalized Mortgage Servicing Rights
Quarter ended | ||||||||||||||||||||
(in thousands) | Mar. 31, 2015 | Dec. 31, 2014 | Sept. 30, 2014 | Jun. 30, 2014 | Mar. 31, 2014 | |||||||||||||||
Beginning balance | $ | 10,885 | $ | 9,116 | $ | 9,122 | $ | 9,095 | $ | 9,335 | ||||||||||
Originations | 582 | 2,198 | 418 | 461 | 183 | |||||||||||||||
Amortization | (454 | ) | (429 | ) | (424 | ) | (434 | ) | (423 | ) | ||||||||||
Ending balance | $ | 11,013 | $ | 10,885 | $ | 9,116 | $ | 9,122 | $ | 9,095 | ||||||||||
Ratio of MSR carrying value to related loans serviced for others | 1.36 | % | 1.38 | % | 1.23 | % | 1.21 | % | 1.18 | % | ||||||||||
MSR servicing fee multiple (1) | 3.16 | 3.20 | 2.87 | 2.83 | 2.81 | |||||||||||||||
Weighted-average note rate (loans serviced for others) | 5.14 | % | 5.02 | % | 5.12 | % | 5.15 | % | 5.20 | % | ||||||||||
Weighted-average servicing fee (loans serviced for others) | 0.43 | % | 0.43 | % | 0.43 | % | 0.43 | % | 0.42 | % | ||||||||||
(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) | Mar. 31, 2015 | Dec. 31, 2014 | Sept. 30, 2014 | Jun. 30, 2014 | Mar. 31, 2014 | |||||||||||||||
Available for sale: | ||||||||||||||||||||
Mortgage-backed securities: | ||||||||||||||||||||
Residential | $ | 114,175 | $ | 107,280 | $ | 110,837 | $ | 110,266 | $ | 120,103 | ||||||||||
Commercial | 13,667 | 13,671 | 13,571 | 13,674 | 13,596 | |||||||||||||||
Municipal bonds | 122,434 | 122,334 | 123,041 | 125,813 | 124,860 | |||||||||||||||
Collateralized mortgage obligations: | ||||||||||||||||||||
Residential | 58,476 | 43,166 | 54,887 | 56,767 | 60,537 | |||||||||||||||
Commercial | 19,794 | 20,486 | 15,633 | 16,021 | 11,639 | |||||||||||||||
Corporate debt securities | 79,769 | 79,400 | 72,114 | 72,420 | 70,805 | |||||||||||||||
U.S. Treasury | 41,015 | 40,989 | 42,013 | 42,010 | 26,996 | |||||||||||||||
Total available for sale | $ | 449,330 | $ | 427,326 | $ | 432,096 | $ | 436,971 | $ | 428,536 | ||||||||||
Held to maturity | 26,772 | 28,006 | 17,852 | 17,995 | 18,103 | |||||||||||||||
$ | 476,102 | $ | 455,332 | $ | 449,948 | $ | 454,966 | $ | 446,639 | |||||||||||
Weighted average duration in years | ||||||||||||||||||||
Available for sale | 4.4 | 4.6 | 5.0 | 4.5 | 5.0 | |||||||||||||||
Five Quarter Loans Held for Investment
(in thousands) | Mar. 31, 2015 | Dec. 31, 2014 | Sept. 30, 2014 | Jun. 30, 2014 | Mar. 31, 2014 | |||||||||||||||
Consumer loans | ||||||||||||||||||||
Single family | $ | 1,198,605 | $ | 896,665 | $ | 788,232 | $ | 749,204 | $ | 668,277 | ||||||||||
Home equity | 205,200 | 135,598 | 138,276 | 136,181 | 134,882 | |||||||||||||||
1,403,805 | 1,032,263 | 926,508 | 885,385 | 803,159 | ||||||||||||||||
Commercial loans | ||||||||||||||||||||
Commercial real estate | 535,546 | 523,464 | 530,335 | 476,411 | 480,200 | |||||||||||||||
Multifamily | 352,193 | 55,088 | 62,498 | 72,327 | 71,278 | |||||||||||||||
Construction/land development | 402,393 | 367,934 | 297,790 | 219,282 | 162,717 | |||||||||||||||
Commercial business | 164,259 | 147,449 | 173,226 | 185,177 | 171,080 | |||||||||||||||
1,454,391 | 1,093,935 | 1,063,849 | 953,197 | 885,275 | ||||||||||||||||
2,858,196 | 2,126,198 | 1,990,357 | 1,838,582 | 1,688,434 | ||||||||||||||||
Net deferred loan fees, costs and discounts | (5,103 | ) | (5,048 | ) | (3,748 | ) | (3,761 | ) | (3,684 | ) | ||||||||||
2,853,093 | 2,121,150 | 1,986,609 | 1,834,821 | 1,684,750 | ||||||||||||||||
Allowance for loan losses | (24,916 | ) | (22,021 | ) | (21,847 | ) | (21,926 | ) | (22,127 | ) | ||||||||||
$ | 2,828,177 | $ | 2,099,129 | $ | 1,964,762 | $ | 1,812,895 | $ | 1,662,623 | |||||||||||
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) | Mar. 31, 2015 | Dec. 31, 2014 | Sept. 30, 2014 | Jun. 30, 2014 | Mar. 31, 2014 | |||||||||||||||
Beginning balance | $ | 22,524 | $ | 22,111 | $ | 22,168 | $ | 22,317 | $ | 24,089 | ||||||||||
Provision (reversal of provision) for credit losses | 3,000 | 500 | — | — | (1,500 | ) | ||||||||||||||
(Charge-offs), net of recoveries | 104 | (87 | ) | (57 | ) | (149 | ) | (272 | ) | |||||||||||
Ending balance | $ | 25,628 | $ | 22,524 | $ | 22,111 | $ | 22,168 | $ | 22,317 | ||||||||||
Components: | ||||||||||||||||||||
Allowance for loan losses | $ | 24,916 | $ | 22,021 | $ | 21,847 | $ | 21,926 | $ | 22,127 | ||||||||||
Allowance for unfunded commitments | 712 | 503 | 264 | 242 | 190 | |||||||||||||||
Allowance for credit losses | $ | 25,628 | $ | 22,524 | $ | 22,111 | $ | 22,168 | $ | 22,317 | ||||||||||
Allowance as a % of loans held for investment(1) | 0.87 | % | 1.04 | % | 1.10 | % | 1.19 | % | 1.31 | % | ||||||||||
Allowance as a % of nonaccrual loans | 117.48 | % | 137.51 | % | 109.75 | % | 103.44 | % | 96.95 | % | ||||||||||
(1) | Includes loans acquired with bank acquisitions. Excluding acquired loans, allowance for loan losses/total loans was 1.19%, 1.10%, 1.18%, 1.31% and 1.46% at March 31, 2015, December 31, 2014, September 30, 2014, June 30, 2014 and March 31, 2014, respectively. |
Nonperforming Assets (NPAs) roll-forward
Quarter ended | ||||||||||||||||||||
(in thousands) | Mar. 31, 2015 | Dec. 31, 2014 | Sept. 30, 2014 | Jun. 30, 2014 | Mar. 31, 2014 | |||||||||||||||
Beginning balance | $ | 25,462 | $ | 30,384 | $ | 32,280 | $ | 34,912 | $ | 38,618 | ||||||||||
Additions | 10,793 | (1) | 1,754 | 3,414 | 4,533 | 1,811 | ||||||||||||||
Reductions: | ||||||||||||||||||||
Recoveries (charge-offs) | 104 | (87 | ) | (57 | ) | (149 | ) | (272 | ) | |||||||||||
OREO sales | (1,375 | ) | (2,220 | ) | (1,183 | ) | (1,639 | ) | (2,482 | ) | ||||||||||
OREO writedowns and other adjustments | (90 | ) | — | (93 | ) | — | (4 | ) | ||||||||||||
Principal paydown, payoff advances and other adjustments | (864 | ) | (2,269 | ) | (948 | ) | (2,753 | ) | (1,520 | ) | ||||||||||
Transferred back to accrual status | (1,232 | ) | (2,100 | ) | (3,029 | ) | (2,624 | ) | (1,239 | ) | ||||||||||
Total reductions | (3,457 | ) | (6,676 | ) | (5,310 | ) | (7,165 | ) | (5,517 | ) | ||||||||||
Net additions (reductions) | 7,336 | (4,922 | ) | (1,896 | ) | (2,632 | ) | (3,706 | ) | |||||||||||
Ending balance(2) | $ | 32,798 | $ | 25,462 | $ | 30,384 | $ | 32,280 | $ | 34,912 | ||||||||||
(1) | Additions to NPAs included $7.4 million of acquired nonperforming assets during the quarter ended March 31, 2015. |
(2) | Includes $1.4 million, $4.4 million, $6.3 million, $6.5 million and $6.6 million of nonperforming loans at March 31, 2015, December 31, 2014, September 30, 2014, June 30, 2014 and March 31, 2014, 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) | Mar. 31, 2015 | Dec. 31, 2014 | Sept. 30, 2014 | Jun. 30, 2014 | Mar. 31, 2014 | |||||||||||||||
Loans accounted for on a nonaccrual basis: | ||||||||||||||||||||
Consumer | ||||||||||||||||||||
Single family | $ | 14,047 | $ | 8,368 | $ | 8,350 | $ | 6,988 | $ | 6,942 | ||||||||||
Home equity | 1,306 | 1,526 | 1,700 | 1,166 | 1,078 | |||||||||||||||
15,353 | 9,894 | 10,050 | 8,154 | 8,020 | ||||||||||||||||
Commercial | ||||||||||||||||||||
Commercial real estate | 3,070 | 4,843 | 7,058 | 9,871 | 12,192 | |||||||||||||||
Multifamily | 1,005 | — | — | — | — | |||||||||||||||
Construction/land development | 172 | — | — | — | — | |||||||||||||||
Commercial business | 1,609 | 1,277 | 2,798 | 3,172 | 2,611 | |||||||||||||||
5,856 | 6,120 | 9,856 | 13,043 | 14,803 | ||||||||||||||||
Total loans on nonaccrual | $ | 21,209 | (2) | $ | 16,014 | $ | 19,906 | $ | 21,197 | $ | 22,823 | |||||||||
Nonaccrual loans as a % of total loans | 0.74 | % | 0.75 | % | 1.00 | % | 1.16 | % | 1.35 | % | ||||||||||
Other real estate owned: | ||||||||||||||||||||
Consumer | ||||||||||||||||||||
Single family | $ | 1,223 | $ | 1,613 | $ | 2,818 | $ | 3,205 | $ | 4,211 | ||||||||||
Commercial | ||||||||||||||||||||
Commercial real estate | 4,527 | 1,996 | 1,822 | 2,040 | 2,040 | |||||||||||||||
Multifamily | — | — | — | — | — | |||||||||||||||
Construction/land development | 5,839 | 5,839 | 5,838 | 5,838 | 5,838 | |||||||||||||||
Commercial business | — | — | — | — | — | |||||||||||||||
10,366 | 7,835 | 7,660 | 7,878 | 7,878 | ||||||||||||||||
Total other real estate owned | $ | 11,589 | $ | 9,448 | $ | 10,478 | $ | 11,083 | $ | 12,089 | ||||||||||
Nonperforming assets: | ||||||||||||||||||||
Consumer | ||||||||||||||||||||
Single family | $ | 15,270 | $ | 9,981 | $ | 11,168 | $ | 10,193 | $ | 11,153 | ||||||||||
Home equity | 1,306 | 1,526 | 1,700 | 1,166 | 1,078 | |||||||||||||||
16,576 | 11,507 | 12,868 | 11,359 | 12,231 | ||||||||||||||||
Commercial | ||||||||||||||||||||
Commercial real estate | 7,597 | 6,839 | 8,880 | 11,911 | 14,232 | |||||||||||||||
Multifamily | 1,005 | — | — | — | — | |||||||||||||||
Construction/land development | 6,011 | 5,839 | 5,838 | 5,838 | 5,838 | |||||||||||||||
Commercial business | 1,609 | 1,277 | 2,798 | 3,172 | 2,611 | |||||||||||||||
16,222 | 13,955 | 17,516 | 20,921 | 22,681 | ||||||||||||||||
Total nonperforming assets(1) | $ | 32,798 | $ | 25,462 | $ | 30,384 | $ | 32,280 | $ | 34,912 | ||||||||||
Nonperforming assets as a % of total assets | 0.71 | % | 0.72 | % | 0.87 | % | 1.00 | % | 1.12 | % | ||||||||||
(1) | Includes $1.4 million, $4.4 million, $6.3 million, $6.5 million and $6.6 million of nonperforming loans at March 31, 2015, December 31, 2014, September 30, 2014, June 30, 2014 and March 31, 2014, respectively, that are guaranteed by the SBA. |
(2) | Included in this balance are $7.4 million of acquired nonperforming loans at March 31, 2015. |
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 | ||||||||||||||||||
March 31, 2015 | ||||||||||||||||||||||||
Total loans held for investment | $ | 11,124 | $ | 3,995 | $ | 52,594 | $ | 67,713 | $ | 2,790,483 | $ | 2,858,196 | ||||||||||||
Less: FHA/VA loans(1) | 4,888 | 3,227 | 30,725 | 38,840 | $ | 52,711 | 91,551 | |||||||||||||||||
Total loans, excluding FHA/VA loans | $ | 6,236 | $ | 768 | $ | 21,869 | $ | 28,873 | $ | 2,737,772 | $ | 2,766,645 | ||||||||||||
Loans by segment and class, excluding FHA/VA loans: | ||||||||||||||||||||||||
Consumer loans | ||||||||||||||||||||||||
Single family residential | $ | 4,262 | $ | 615 | $ | 14,047 | $ | 18,924 | 1,088,130 | $ | 1,107,054 | |||||||||||||
Home equity | 363 | 72 | 1,309 | 1,744 | 203,456 | 205,200 | ||||||||||||||||||
4,625 | 687 | 15,356 | 20,668 | 1,291,586 | 1,312,254 | |||||||||||||||||||
Commercial loans | ||||||||||||||||||||||||
Commercial real estate | 109 | — | 3,070 | 3,179 | 532,367 | 535,546 | ||||||||||||||||||
Multifamily residential | — | — | 1,005 | 1,005 | 351,188 | 352,193 | ||||||||||||||||||
Construction/land development | 758 | — | 767 | 1,525 | 400,868 | 402,393 | ||||||||||||||||||
Commercial business | 744 | 81 | 1,671 | 2,496 | 161,763 | 164,259 | ||||||||||||||||||
1,611 | 81 | 6,513 | 8,205 | 1,446,186 | 1,454,391 | |||||||||||||||||||
$ | 6,236 | $ | 768 | $ | 21,869 | (2) | $ | 28,873 | (2) | $ | 2,737,772 | $ | 2,766,645 | |||||||||||
As a % of total loans, excluding FHA/VA loans | 0.23 | % | 0.03 | % | 0.79 | % | 1.04 | % | 98.96 | % | 100.00 | % | ||||||||||||
December 31, 2014 | ||||||||||||||||||||||||
Total loans held for investment | $ | 8,814 | $ | 3,797 | $ | 51,001 | $ | 63,612 | $ | 2,062,586 | $ | 2,126,198 | ||||||||||||
Less: FHA/VA loans(1) | 4,121 | 2,200 | 34,737 | 41,058 | 50,778 | 91,836 | ||||||||||||||||||
Total loans, excluding FHA/VA loans | $ | 4,693 | $ | 1,597 | $ | 16,264 | $ | 22,554 | $ | 2,011,808 | $ | 2,034,362 | ||||||||||||
Loans by segment and class, excluding FHA/VA loans: | ||||||||||||||||||||||||
Consumer loans | ||||||||||||||||||||||||
Single family | $ | 3,711 | $ | 252 | $ | 8,368 | $ | 12,331 | $ | 792,498 | $ | 804,829 | ||||||||||||
Home equity | 371 | 81 | 1,526 | 1,978 | 133,620 | 135,598 | ||||||||||||||||||
4,082 | 333 | 9,894 | 14,309 | 926,118 | 940,427 | |||||||||||||||||||
Commercial loans | ||||||||||||||||||||||||
Commercial real estate | — | — | 4,843 | 4,843 | 518,621 | 523,464 | ||||||||||||||||||
Multifamily | — | — | — | — | 55,088 | 55,088 | ||||||||||||||||||
Construction/land development | — | 1,261 | — | 1,261 | 366,673 | 367,934 | ||||||||||||||||||
Commercial business | 611 | 3 | 1,527 | 2,141 | 145,308 | 147,449 | ||||||||||||||||||
611 | 1,264 | 6,370 | 8,245 | 1,085,690 | 1,093,935 | |||||||||||||||||||
$ | 4,693 | $ | 1,597 | $ | 16,264 | (2) | $ | 22,554 | (2) | $ | 2,011,808 | $ | 2,034,362 | |||||||||||
As a % of total loans, excluding FHA/VA loans | 0.23 | % | 0.08 | % | 0.80 | % | 1.11 | % | 98.89 | % | 100.00 | % | ||||||||||||
(1) | Represents loans whose repayments are insured by the FHA or guaranteed by the VA. |
(2) | Includes $1.4 million and $4.4 million of nonperforming loans at March 31, 2015 and December 31, 2014, respectively, which 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) | Mar. 31, 2015 | Dec. 31, 2014 | Sept. 30, 2014 | Jun. 30, 2014 | Mar. 31, 2014 | |||||||||||||||
Accrual | ||||||||||||||||||||
Consumer loans | ||||||||||||||||||||
Single family(1) | $ | 74,126 | $ | 73,585 | $ | 72,663 | $ | 69,779 | $ | 70,958 | ||||||||||
Home equity | 2,102 | 2,430 | 2,501 | 2,394 | 2,538 | |||||||||||||||
76,228 | 76,015 | 75,164 | 72,173 | 73,496 | ||||||||||||||||
Commercial loans | ||||||||||||||||||||
Commercial real estate | 19,516 | 21,703 | 23,964 | 21,401 | 19,451 | |||||||||||||||
Multifamily | 3,059 | 3,077 | 3,101 | 3,125 | 3,145 | |||||||||||||||
Construction/land development | 5,321 | 5,447 | 5,693 | 5,843 | 5,907 | |||||||||||||||
Commercial business | 1,492 | 1,573 | 658 | 302 | 104 | |||||||||||||||
29,388 | 31,800 | 33,416 | 30,671 | 28,607 | ||||||||||||||||
$ | 105,616 | $ | 107,815 | $ | 108,580 | $ | 102,844 | $ | 102,103 | |||||||||||
Nonaccrual | ||||||||||||||||||||
Consumer loans | ||||||||||||||||||||
Single family | $ | 1,443 | $ | 2,482 | $ | 1,379 | $ | 1,461 | $ | 2,569 | ||||||||||
Home equity | 230 | 231 | 20 | — | — | |||||||||||||||
1,673 | 2,713 | 1,399 | 1,461 | 2,569 | ||||||||||||||||
Commercial loans | ||||||||||||||||||||
Commercial real estate | 1,121 | 1,148 | 1,182 | 2,735 | 2,784 | |||||||||||||||
Multifamily | — | — | — | — | — | |||||||||||||||
Construction/land development | — | — | — | — | — | |||||||||||||||
Commercial business | 228 | 249 | 9 | 9 | 117 | |||||||||||||||
1,349 | 1,397 | 1,191 | 2,744 | 2,901 | ||||||||||||||||
$ | 3,022 | $ | 4,110 | $ | 2,590 | $ | 4,205 | $ | 5,470 | |||||||||||
Total | ||||||||||||||||||||
Consumer loans | ||||||||||||||||||||
Single family(1) | $ | 75,569 | $ | 76,067 | $ | 74,042 | $ | 71,240 | $ | 73,527 | ||||||||||
Home equity | 2,332 | 2,661 | 2,521 | 2,394 | 2,538 | |||||||||||||||
77,901 | 78,728 | 76,563 | 73,634 | 76,065 | ||||||||||||||||
Commercial loans | ||||||||||||||||||||
Commercial real estate | 20,637 | 22,851 | 25,146 | 24,136 | 22,235 | |||||||||||||||
Multifamily | 3,059 | 3,077 | 3,101 | 3,125 | 3,145 | |||||||||||||||
Construction/land development | 5,321 | 5,447 | 5,693 | 5,843 | 5,907 | |||||||||||||||
Commercial business | 1,720 | 1,822 | 667 | 311 | 221 | |||||||||||||||
30,737 | 33,197 | 34,607 | 33,415 | 31,508 | ||||||||||||||||
$ | 108,638 | $ | 111,925 | $ | 111,170 | $ | 107,049 | $ | 107,573 | |||||||||||
(1) | Includes loan balances insured by the FHA or guaranteed by the VA of $25.4 million, $26.8 million, $24.6 million, $19.0 million and $19.1 million at March 31, 2015, December 31, 2014, September 30, 2014, June 30, 2014 and March 31, 2014, respectively. |
22
HomeStreet, Inc. and Subsidiaries
Commercial and Consumer Banking Segment (continued)
Troubled Debt Restructurings (TDRs) - Re-Defaults
Quarter ended | ||||||||||||||||||||
(in thousands) | Mar. 31, 2015 | Dec. 31, 2014 | Sept. 30, 2014 | Jun. 30, 2014 | Mar. 31, 2014 | |||||||||||||||
Recorded investment of re-defaults(1) | ||||||||||||||||||||
Consumer loans | ||||||||||||||||||||
Single family | $ | 1,498 | $ | — | $ | 282 | $ | 425 | $ | 303 | ||||||||||
Home equity | — | — | — | — | 190 | |||||||||||||||
1,498 | — | 282 | 425 | 493 | ||||||||||||||||
Commercial loans | ||||||||||||||||||||
Commercial real estate | — | — | — | — | — | |||||||||||||||
Multifamily | — | — | — | — | — | |||||||||||||||
Construction/land development | — | — | — | — | — | |||||||||||||||
Commercial business | — | — | — | — | — | |||||||||||||||
— | — | — | — | — | ||||||||||||||||
$ | 1,498 | $ | — | $ | 282 | $ | 425 | $ | 493 | |||||||||||
(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) | Mar. 31, 2015 | Dec. 31, 2014 | Sept. 30, 2014 | Jun. 30, 2014 | Mar. 31, 2014 | |||||||||||||||
Deposits by Product: | ||||||||||||||||||||
Noninterest-bearing accounts - checking and savings | $ | 248,709 | $ | 240,679 | $ | 271,669 | $ | 235,844 | $ | 219,677 | ||||||||||
Interest-bearing transaction and savings deposits: | ||||||||||||||||||||
NOW accounts | 492,207 | 272,390 | 300,832 | 324,604 | 285,104 | |||||||||||||||
Statement savings accounts due on demand | 307,731 | 200,638 | 184,656 | 166,851 | 163,819 | |||||||||||||||
Money market accounts due on demand | 1,163,656 | 1,007,213 | 1,015,266 | 996,473 | 956,189 | |||||||||||||||
Total interest-bearing transaction and savings deposits | 1,963,594 | 1,480,241 | 1,500,754 | 1,487,928 | 1,405,112 | |||||||||||||||
Total transaction and savings deposits | 2,212,303 | 1,720,920 | 1,772,423 | 1,723,772 | 1,624,789 | |||||||||||||||
Certificates of deposit | 751,333 | 494,526 | 367,124 | 457,529 | 534,708 | |||||||||||||||
Noninterest-bearing accounts - other | 380,587 | 229,984 | 285,911 | 236,411 | 211,861 | |||||||||||||||
Total deposits | $ | 3,344,223 | $ | 2,445,430 | $ | 2,425,458 | $ | 2,417,712 | $ | 2,371,358 | ||||||||||
Percent of total deposits: | ||||||||||||||||||||
Noninterest-bearing accounts - checking and savings | 7.4 | % | 9.8 | % | 11.2 | % | 9.8 | % | 9.3 | % | ||||||||||
Interest-bearing transaction and savings deposits: | ||||||||||||||||||||
NOW accounts | 14.7 | 11.1 | 12.4 | 13.4 | 12.0 | |||||||||||||||
Statement savings accounts due on demand | 9.2 | 8.2 | 7.6 | 6.9 | 6.9 | |||||||||||||||
Money market accounts due on demand | 34.8 | 41.2 | 41.9 | 41.2 | 40.3 | |||||||||||||||
Total interest-bearing transaction and savings deposits | 58.7 | 60.5 | 61.9 | 61.5 | 59.2 | |||||||||||||||
Total transaction and savings deposits | 66.1 | 70.3 | 73.1 | 71.3 | 68.5 | |||||||||||||||
Certificates of deposit | 22.5 | 20.2 | 15.1 | 18.9 | 22.5 | |||||||||||||||
Noninterest-bearing accounts - other | 11.4 | 9.5 | 11.8 | 9.8 | 9.0 | |||||||||||||||
Total deposits | 100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % | ||||||||||
24
HomeStreet, Inc. and Subsidiaries
Mortgage Banking Segment
Quarter ended | ||||||||||||||||||||
(in thousands) | Mar. 31, 2015 | Dec. 31, 2014 | Sept. 30, 2014 | Jun. 30, 2014 | Mar. 31, 2014 | |||||||||||||||
Net interest income | $ | 5,627 | $ | 5,315 | $ | 5,145 | $ | 3,744 | $ | 2,479 | ||||||||||
Noninterest income | 65,292 | 46,053 | 42,153 | 47,036 | 31,749 | |||||||||||||||
Noninterest expense | 53,816 | 47,636 | 45,228 | 42,537 | 36,798 | |||||||||||||||
Income (loss) before income taxes | 17,103 | 3,732 | 2,070 | 8,243 | (2,570 | ) | ||||||||||||||
Income tax expense (benefit) | 6,785 | 1,456 | 629 | 2,634 | (755 | ) | ||||||||||||||
Net income (loss) | $ | 10,318 | $ | 2,276 | $ | 1,441 | $ | 5,609 | $ | (1,815 | ) | |||||||||
Efficiency ratio (1) | 75.88 | % | 92.73 | % | 95.62 | % | 83.77 | % | 107.51 | % | ||||||||||
Full-time equivalent employees (ending) | 1,061 | 1,003 | 993 | 947 | 903 | |||||||||||||||
Production volumes for sale to the secondary market: | ||||||||||||||||||||
Single family mortgage closed loan volume (2)(3) | $ | 1,606,893 | $ | 1,330,735 | $ | 1,294,895 | $ | 1,100,704 | $ | 674,283 | ||||||||||
Single family mortgage interest rate lock commitments(2) | 1,901,238 | 1,171,598 | 1,167,677 | 1,201,665 | 803,308 | |||||||||||||||
Single family mortgage loans sold(2) | 1,316,959 | 1,273,679 | 1,179,464 | 906,342 | 619,913 | |||||||||||||||
(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. |
(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) | Mar. 31, 2015 | Dec. 31, 2014 | Sept. 30, 2014 | Jun. 30, 2014 | Mar. 31, 2014 | |||||||||||||||
Net gain on mortgage loan origination and sale activities:(1) | ||||||||||||||||||||
Single family: | ||||||||||||||||||||
Servicing value and secondary market gains(2) | $ | 56,289 | $ | 29,405 | $ | 29,866 | $ | 30,233 | $ | 19,559 | ||||||||||
Loan origination and funding fees | 4,455 | 7,083 | 6,947 | 6,781 | 4,761 | |||||||||||||||
Total mortgage banking net gain on mortgage loan origination and sale activities(1) | $ | 60,744 | $ | 36,488 | $ | 36,813 | $ | 37,014 | $ | 24,320 | ||||||||||
Composite Margin (in basis points): | ||||||||||||||||||||
Servicing value and secondary market gains / interest rate lock commitments(3) | 296 | 251 | 256 | 252 | 243 | |||||||||||||||
Loan origination and funding fees / retail mortgage originations(4) | 30 | 59 | 60 | 69 | 80 | |||||||||||||||
Composite Margin | 326 | 310 | 316 | 321 | 323 | |||||||||||||||
(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) | Mar. 31, 2015 | Dec. 31, 2014 | Sept. 30, 2014 | Jun. 30, 2014 | Mar. 31, 2014 | |||||||||||||||
Servicing income, net: | ||||||||||||||||||||
Servicing fees and other | $ | 8,177 | $ | 7,537 | $ | 8,061 | $ | 9,095 | $ | 8,959 | ||||||||||
Changes in fair value of single family MSRs due to modeled amortization (1) | (9,235 | ) | (6,823 | ) | (6,212 | ) | (7,109 | ) | (5,968 | ) | ||||||||||
(1,058 | ) | 714 | 1,849 | 1,986 | 2,991 | |||||||||||||||
Risk management, single family MSRs: | ||||||||||||||||||||
Changes in fair value of MSR due to changes in model inputs and/or assumptions (2) | (7,311 | ) | (7,793 | ) | 899 | (3,326 | ) | (3) | (5,409 | ) | ||||||||||
Net gain (loss) from derivatives economically hedging MSR | 12,234 | 16,346 | 2,543 | 10,941 | 9,897 | |||||||||||||||
4,923 | 8,553 | 3,442 | 7,615 | 4,488 | ||||||||||||||||
Mortgage Banking servicing income | $ | 3,865 | $ | 9,267 | $ | 5,291 | $ | 9,601 | $ | 7,479 | ||||||||||
(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) | Mar. 31, 2015 | Dec. 31, 2014 | Sept. 30, 2014 | Jun. 30, 2014 | Mar. 31, 2014 | |||||||||||||||
Single family | ||||||||||||||||||||
U.S. government and agency | $ | 11,275,491 | $ | 10,630,864 | $ | 10,007,872 | $ | 9,308,096 | $ | 11,817,857 | ||||||||||
Other | 634,763 | 585,344 | 585,393 | 586,978 | 380,622 | |||||||||||||||
Total single family loans serviced for others | $ | 11,910,254 | $ | 11,216,208 | $ | 10,593,265 | $ | 9,895,074 | $ | 12,198,479 | ||||||||||
26
HomeStreet, Inc. and Subsidiaries
Mortgage Banking Segment (continued)
Single Family Capitalized Mortgage Servicing Rights
Quarter ended | ||||||||||||||||||||
(in thousands) | Mar. 31, 2015 | Dec. 31, 2014 | Sept. 30, 2014 | Jun. 30, 2014 | Mar. 31, 2014 | |||||||||||||||
Beginning balance | $ | 112,439 | $ | 115,477 | $ | 108,869 | $ | 149,646 | $ | 153,128 | ||||||||||
Additions and amortization: | ||||||||||||||||||||
Originations | 14,813 | 11,567 | 11,944 | 11,827 | 7,893 | |||||||||||||||
Purchases | 3 | 11 | 3 | 3 | 2 | |||||||||||||||
Sale of servicing rights | — | — | — | (43,248 | ) | — | ||||||||||||||
Changes due to modeled amortization (1) | (9,235 | ) | (6,823 | ) | (6,212 | ) | (7,109 | ) | (5,968 | ) | ||||||||||
Net additions and amortization | 5,581 | 4,755 | 5,735 | (38,527 | ) | 1,927 | ||||||||||||||
Changes in fair value due to changes in model inputs and/or assumptions (2) | (7,311 | ) | (7,793 | ) | 873 | (2,250 | ) | (5,409 | ) | |||||||||||
Ending balance | $ | 110,709 | $ | 112,439 | $ | 115,477 | $ | 108,869 | $ | 149,646 | ||||||||||
Ratio of MSR carrying value to related loans serviced for others | 0.93 | % | 1.00 | % | 1.09 | % | 1.10 | % | 1.23 | % | ||||||||||
MSR servicing fee multiple (3) | 3.17 | 3.42 | 3.68 | 3.67 | 4.17 | |||||||||||||||
Weighted-average note rate (loans serviced for others) | 4.14 | % | 4.18 | % | 4.19 | % | 4.19 | % | 4.09 | % | ||||||||||
Weighted-average servicing fee (loans serviced for others) | 0.29 | % | 0.29 | % | 0.30 | % | 0.30 | % | 0.29 | % | ||||||||||
(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 | ||||||||||||||||||||
(dollars in thousands, except share data) | Mar. 31, 2015 | Dec. 31, 2014 | Sept. 30, 2014 | Jun. 30, 2014 | Mar. 31, 2014 | |||||||||||||||
Shareholders' equity | $ | 439,395 | $ | 302,238 | $ | 294,568 | $ | 288,249 | $ | 273,510 | ||||||||||
Less: Goodwill and other intangibles | (21,324 | ) | (14,211 | ) | (14,444 | ) | (14,690 | ) | (14,098 | ) | ||||||||||
Tangible shareholders' equity | $ | 418,071 | $ | 288,027 | $ | 280,124 | $ | 273,559 | $ | 259,412 | ||||||||||
Book value per share | $ | 19.94 | $ | 20.34 | $ | 19.83 | $ | 19.41 | $ | 18.42 | ||||||||||
Impact of goodwill and other intangibles | (0.97 | ) | (0.95 | ) | (0.97 | ) | (0.99 | ) | (0.95 | ) | ||||||||||
Tangible book value per share | $ | 18.97 | $ | 19.39 | $ | 18.86 | $ | 18.42 | $ | 17.47 | ||||||||||
Average shareholders' equity | $ | 370,008 | $ | 305,068 | $ | 295,229 | $ | 284,365 | $ | 272,596 | ||||||||||
Less: Average goodwill and other intangibles | (16,698 | ) | (14,363 | ) | (14,604 | ) | (14,049 | ) | (14,215 | ) | ||||||||||
Average tangible shareholders' equity | $ | 353,310 | $ | 290,705 | $ | 280,625 | $ | 270,316 | $ | 258,381 | ||||||||||
Return on average shareholders’ equity | 11.14 | % | 7.37 | % | 6.74 | % | 13.17 | % | 3.38 | % | ||||||||||
Impact of goodwill and other intangibles | 0.53 | % | 0.36 | % | 0.35 | % | 0.68 | % | 0.18 | % | ||||||||||
Return on average tangible shareholders' equity | 11.67 | % | 7.73 | % | 7.09 | % | 13.85 | % | 3.56 | % | ||||||||||
28
The press release contains certain non-GAAP financial disclosures for consolidated net income, excluding merger-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 | ||||||||||||||||||||
(in thousands) | Mar. 31, 2015 | Dec. 31, 2014 | Sept. 30, 2014 | Jun. 30, 2014 | Mar. 31, 2014 | |||||||||||||||
Net income | $ | 10,304 | $ | 5,621 | $ | 4,975 | $ | 9,362 | $ | 2,301 | ||||||||||
Impact of merger-related expenses (net of tax) and bargain purchase gain | 1,256 | 578 | 469 | 394 | 545 | |||||||||||||||
Net income, excluding merger-related expenses (net of tax) and bargain purchase gain | $ | 11,560 | $ | 6,199 | $ | 5,444 | $ | 9,756 | $ | 2,846 | ||||||||||
Noninterest expense | $ | 89,482 | $ | 68,791 | $ | 64,158 | $ | 62,971 | $ | 56,091 | ||||||||||
Deduct: merger-related expenses | (12,165 | ) | (889 | ) | (722 | ) | (606 | ) | (838 | ) | ||||||||||
Noninterest expense, excluding merger-related expenses | $ | 77,317 | $ | 67,902 | $ | 63,436 | $ | 62,365 | $ | 55,253 | ||||||||||
Diluted earnings per common share | $ | 0.59 | $ | 0.38 | $ | 0.33 | $ | 0.63 | $ | 0.15 | ||||||||||
Impact of merger-related expenses (net of tax) and bargain purchase gain | 0.08 | 0.03 | 0.03 | 0.02 | 0.04 | |||||||||||||||
Diluted earnings per common share, excluding merger-related expenses (net of tax) and bargain purchase gain | $ | 0.67 | $ | 0.41 | $ | 0.36 | $ | 0.65 | $ | 0.19 | ||||||||||
Commercial and Consumer Banking Segment: | ||||||||||||||||||||
Net (loss) income | $ | (14 | ) | $ | 3,345 | $ | 3,534 | $ | 3,753 | $ | 4,116 | |||||||||
Impact of merger-related expenses (net of tax) and bargain purchase gain | 1,256 | 578 | 469 | 394 | 545 | |||||||||||||||
Net income, excluding merger-related expenses (net of tax) and bargain purchase gain | $ | 1,242 | $ | 3,923 | $ | 4,003 | $ | 4,147 | $ | 4,661 | ||||||||||
29