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| 8-K - FORM 8-K - HomeStreet, Inc. | form8-kq22016investorprese.htm |
SECOND QUARTER
2016
NASDAQ:HMST
Important Disclosures
Forward-Looking Statements
This presentation includes forward-looking statements, as that term is defined for purposes of applicable securities laws, about our industry, our future financial performance
and business plans and expectations. These statements are, in essence, attempts to anticipate or forecast future events, and thus subject to many risks and uncertainties.
These forward-looking statements are based on our management's current expectations, beliefs, projections, future plans and strategies, anticipated events or trends, and
similar expressions concerning matters that are not historical facts, as well as a number of assumptions concerning future events. Forward-looking statements in this release
include, among other matters, statements regarding our business plans and strategies (including our expansion strategies) and the expected effects of those initiatives,
general economic trends (particularly those that affect mortgage origination and refinance activity) and growth scenarios and performance targets. Readers should note,
however, that all statements in this presentation other than assertions of historical fact are forward-looking in nature. These statements are subject to risks, uncertainties,
assumptions and other important factors set forth in our SEC filings, including but not limited to our Annual Report on Form 10-K for year ended December 31, 2015, and our
quarterly report on Form 10-Q for the quarter ended June 30, 2016, which we expect to file on or before August 15, 2016. Many of these factors are beyond our control. Such
factors could cause actual results to differ materially from the results discussed or implied in the forward-looking statements. These risks include statements predicated on our
ability to realize the expected value of our merger with Orange County Business Bank and the combined entity resulting from that transaction; complete and integrate our
recently announced branch acquisitions; continue to expand our banking operations geographically and across market sectors; grow our franchise and capitalize on market
opportunities; manage our growth efforts cost-effectively and attain the desired operational and financial outcomes; manage the losses inherent in our loan portfolio; make
accurate estimates of the value of our non-cash assets and liabilities; maintain electronic and physical security of customer data; respond to an increasingly restrictive and
complex regulatory environment; and attract and retain key personnel. Actual results may fall materially short of our expectations and projections, and we may change our
plans or take additional actions that differ in material ways from our current intentions. Accordingly, we can give no assurance of future performance, and you should not rely
unduly on forward-looking statements. All forward-looking statements are based on information available to the Company as of the date hereof, and we do not undertake to
update or revise any forward-looking statements, for any reason.
Basis of Presentation of Financial Data
Unless noted otherwise in this presentation, all reported financial data is being presented as of the period ending June 30, 2016, and is unaudited, although certain information
related to the year ended December 31, 2015, has been derived from our audited financial statements. All financial data should be read in conjunction with the notes in our
consolidated financial statements.
Non-GAAP Financial Measures
Information on any non-GAAP financial measures such as core measures or tangible measures referenced in this presentation, including a reconciliation of those measures to
GAAP measures, may also be found in the appendix, our SEC filings, and in the earnings release available on our web site.
2
Growing Western U.S. Franchise
• Seattle-based diversified
commercial bank -
company founded in
1921
• Growing commercial &
consumer bank with
concentrations in major
metropolitan areas of the
Western United States
• Leading Northwest
mortgage lender
• 126 retail deposit
branches and lending
centers in the Western
United States and Hawaii
• Total assets of $5.9
billion
3
Strategy
Build Single Family
Mortgage origination
market share
• Organic growth opportunities
Commercial Lending, Multifamily, Commercial Real Estate and Construction
Increase density of commercial and retail deposits via existing market penetration and de-novo branch expansion
• Growth via acquisition of branches and smaller institutions in-market and in new markets
• Continue opportunistic expansion (market share and footprint) of Single Family mortgage
banking activities
• Reliable source of capital to grow commercial and consumer banking segment
• Target major markets in Western United States
• Grow earning assets while containing operating expenses to improve operating
efficiencies
• Attain targeted operating efficiency ratios by segment
• Target long-term 15%+ ROTE, subject to achievement of targeted segment contributions
Expand Commercial &
Consumer Banking
Ongoing expense
management
Optimize use of capital
To grow and diversify earnings by expanding our Commercial & Consumer Banking business
and continue to build Mortgage Banking market share in new and existing markets
4
Successful Diversification
Strategy of growing our Commercial and Consumer Banking segment driving strong growth
and diversification of our loan portfolio and earnings
5
June 2013 quarter represented the beginning of our acquisition strategy post IPO
* 2012 was the peak of the post-recession refinance wave
** 39% of total asset growth has been through acquisitions
2Q13 2Q16
12 Month Core Net Income* 66,496$ 12 Month Core Net Income 50,437$
Commercial Banking % -12% Commercial Banking % 54%
Mortgage Banking % 112% Mortgage Banking % 46%
12 Month Revenue 323,283$ 12 Month Revenue 471,608$
Net interest Income % 20% Net interest Income % 35%
Non-interest Income % 80% Non-interest Income % 65%
53%
9%
27%
2%
4%
5%
Total Assets - $2.8 billion
Loan Portfolio - $1.4 Billion
Single family
Home equity and
other
CRE
Multifamily
Construction
Commercial
business
33%
8%
21%
15%
17%
6%
Total Assets - $5.9 Billion**
Loan Portfolio - $3.7 Billion
Single family
Home equity and
other
CRE
Multifamily
Construction
Commercial
business
Acquisition Strategy
Post Acquisition Scaling
(CA Example)
• Internal rate of return in excess of 15%
• EPS accretive
• Low-to-mid teens return on invested capital
• Less than 10% initial tangible book value per share dilution
• Less than 4 years tangible book value per share dilution earnback
Disciplined Acquisition
Objectives
Acquisition History
We seek to grow and diversify our business and earnings by opportunistically expanding through
acquisitions in attractive markets and then adding our full range of products and services
6
• HomeStreet Commercial Real Estate – Southern California
Originate permanent loans up to $10 million in principal, a portion of which we intend to sell
• SBA Lending group – Opened Carlsbad office in San Diego County
• Fill-in Acquisitions – Purchasing two mature branches in Los Angeles County
• De-Novo Branch expansion associated with Kaiser Permanente affinity relationship
Kearney Mesa & Mission Gorge in San Diego, CA
(1) Acquisition structured as a purchase of loans and other assets and an assumption of certain liabilities including deposits
(2) Deal value weighted average price / TBV
Total Deal Price/
Assets Value TBV
T rget State Announce Completion ($M) ($M) (%)
Ban of Oswego OR 5/11/2016 Pending 42$ NA NA
(1)
Orange County Business Bank CA 9/28/2015 2/1/2016 200 56$ 117
Simplicity Bancorp, Inc. CA 9/29/2014 3/1/2015 879 133 99
Fortune Bank WA 7/26/2013 11/1/2013 142 27 142
YNB Financial Services Corp. WA 7/26/2013 11/1/2013 125 10 140
Total 1,263$ 226$ 110
(2)
Date
7
Recent Developments
Results of Operations
• Second quarter net income of $21.7 million or $0.87 diluted EPS
• Excluding after tax merger-related items, core net income of $22.4 million or $0.90 diluted EPS (1)
• Total Assets increased to $5.9B from $5.4B at June 30, 2016
• Continued strong credit performance
Strategic Growth Activity in 2Q16
• Announced the acquisition of two branches, deposits, and loans from Bank of Oswego in the Portland, Oregon
area
• Announced the acquisition of two branches and certain related deposits from Boston Private Bank & Trust in
southern California
• Opened two commercial small business lending offices in Carlsbad and Santa Ana, California
• Opened three single family home loan centers in Redlands, California and Oak Harbor and Bellingham,
Washington
• Completed the issuance of $65 million, 6.5% senior notes due in 2026 a majority of the proceeds of which will
be contributed to the bank in order to support growth
(1) See appendix for reconciliation of non-GAAP financial measures.
Results of Operations
For the three months ended
(1) Excludes pre-tax acquisition-related expenses and bargain purchase gain. See appendix for reconciliation of non-GAAP financial measures.
(2) See appendix for reconciliation of non-GAAP financial measures.
For the nine months ended
8
($ in thousands)
Jun. 30,
2016
Jun. 30,
2015
Jun. 30,
2016
Jun. 30,
2015
Net interest income $ 44,482 $ 38,230 $ 85,173 $ 68,964
Provision for loan losses 1,100 500 2,500 3,500
Noninterest income 102,476 72,987 174,184 148,360
Noninterest expense 111,031 92,335 212,384 181,817
Net income before taxes 34,827 18,382 44,473 32,007
Income taxes 13,078 6,006 16,317 9,327
Net income $ 21,749 $ 12,376 $ 28,156 $ 22,680
Diluted EPS $ 0.87 $ 0.56 $ 1.15 $ 1.14
Core net income
(1) $ 22,415 $ 14,541 $ 32,200 $ 26,101
Core EPS
(1) $ 0.90 $ 0.65 $ 1.32 $ 1.32
Tangible BV/share (2) $ 21.38 $ 19.35 $ 21.38 $ 19.35
Core ROAA (1) 1.59% 1.25% 1.21% 1.23%
Core ROAE (1) 16.36% 12.76% 12.16% 12.64%
Core ROATE (1) 17.27% 13.38% 12.84% 13.24%
Net Interest Margin 3.48% 3.63% 3.52% 3.62%
Core efficiency ratio (1) 74.9% 80.1% 79.5% 79.0%
Tier 1 Leverage Ratio (Bank) 10.27% 9.46% 10.27% 9.46%
Total Risk-Based Capital (Bank) 14.49% 13.97% 14.49% 13.97%
For the three months ended For the six months ended
Results of Operations – Quarter Trend
For the three months ended
(1) Includes two months of OCBB’s results of operations.
(2) Excludes pre-tax acquisition-related expenses and bargain purchase gain. See appendix for reconciliation of non-GAAP financial measures.
(3) See appendix for reconciliation of non-GAAP financial measures.
For the nine months ended
9
($ in thousands) Jun. 30, 2016 Mar. 31, 2016
(1) Dec. 31, 2015 Sept. 30, 2015 Jun. 30, 2015
Net interest income $ 44,482 $ 40,691 $ 39,740 $ 39,634 $ 38,230
Provision for loan losses 1,100 1,400 1,900 700 500
Noninterest income 102,476 71,708 65,409 67,468 72,987
Noninterest expense 111,031 101,353 92,725 92,026 92,335
Net income before taxes 34,827 9,646 10,524 14,376 18,382
Income taxes 13,078 3,239 1,846 4,415 6,006
Net income $ 21,749 $ 6,407 $ 8,678 $ 9,961 $ 12,376
Diluted EPS $ 0.87 $ 0.27 $ 0.39 $ 0.45 $ 0.56
Core net income
(2) $ 22,415 $ 9,785 $ 8,787 $ 9,449 $ 14,541
Core EPS
(2) $ 0.90 $ 0.41 $ 0.39 $ 0.42 $ 0.65
Tangible BV/share (3) $ 21.38 $ 20.37 $ 20.16 $ 19.95 $ 19.35
Core ROAA (2) 1.59% 0.78% 0.72% 0.78% 1.25%
Core ROAE (2) 16.36% 7.66% 7.47% 8.21% 12.76%
Core ROATE (2) 17.27% 8.08% 7.80% 8.59% 13.38%
Net Interest Margin 3.48% 3.55% 3.61% 3.67% 3.63%
Core efficiency ratio (2) 74.9% 85.6% 87.8% 86.2% 80.1%
Tier 1 Leverage Ratio (Bank) 10.27% 10.17% 9.45% 9.69% 9.46%
Total Risk-Based Capital (Bank) 14.49% 13.93% 13.91% 14.15% 13.97%
For the three months ended
$38.2
$39.6
$39.7
$40.7
$44.5
3.63%
3.67%
3.61%
3.55%
3.48%
3.00%
3.20%
3.40%
3.60%
3.80%
4.00%
4.20%
$35.0
$36.0
$37.0
$38.0
$39.0
$40.0
$41.0
$42.0
$43.0
$44.0
$45.0
2Q15 3Q15 4Q15 1Q16 2Q16
Ne
t In
ter
est
Ma
rgi
n (%
)
Ne
t In
ter
est
Inc
om
e (i
n m
illio
ns)
Net Interest Income & Margin
• 2Q NIM declined 7 bps while net interest income increased $4 million
• NIM decline primarily due to higher cost of interest-bearing funds – mostly resulting from private placement of $65
million senior debt in May
• Higher net interest income due to growth in average interest-earning assets during the quarter
10
Avg. Yield
3.00%
3.20%
3.40%
3.60%
3.80%
4.00%
4.20%
$0.0
$1.0
$2.0
$3.0
$4.0
$5.0
$6.0
2Q15 3Q15 4Q15 1Q16 2Q16
Av
era
ge
Yi
eld
Av
era
ge
Ba
lan
ce
s (
in
bil
lio
ns
)
Loans Held for Sale
Cash & Cash Equivalents
Investment Securities
Loans Held for Investment
Average Yield
Interest-Earning Assets
• Average total interest-earning assets increased $557 million or 12% in 2Q primarily from $278 million increase in
average loans held for investment balances, $141 million increase in average loans held for sale balances and $141
million increase in average securities balances
• Loans held for investment, net, ending balances increased $175 million or 5% in 2Q
• New commitments of $669 million in mortgage, commercial lending, commercial real estate and residential construction
Avg. Yield 4.01% 4.03% 4.03% 4.03% 4.00%
11
HomeStreet Investment Securities Portfolio Yield
As of 06/30/2016 2016 YTD Total
Return (1)
Yield (2)
Duration (2)
HomeStreet Investment Portfolio 3.77 2.26 4.05
Composition Adjusted Barclays US Aggregate Index (3) 4.00 1.96 3.67
HMST performance data: BondEdge
(1) As of June 30, 2016
(2) Yield and duration Include FTE adjustment. Yields are at current market prices, not book.
(3) Barclays US Aggregate Index Adjusted to reflect HMST portfolio composition
(4) Performance Trust proprietary models as of 03/31/16, YOY
• Investment security portfolio market
value of $928 million
• The investment portfolio has an
average credit rating of Aa1
• The portfolio total return ranks in the
90th percentile compared to other
banks (4)
12
$70.0 $57.9
$46.6 $61.3
$85.6
$73.0
$67.5
$65.4
$71.7
$102.5
$4.0 $4.9 $2.3 $3.7 $1.8
$4.8
$13.5
$8.1
$13.2
$-
$20.0
$40.0
$60.0
$80.0
$100.0
$120.0
2Q15 3Q15 4Q15 1Q16 2Q16
No
nin
ter
st I
nc
om
e (i
n m
illio
ns
)
Net gain on mortgage loan
origination and sale activities
Mortgage servicing income
Bargain purchase gain
Other noninterest income
Noninterest Income
• Noninterest income increased 43% to $102.5 million in 2Q due to higher net gain on mortgage loan origination and
sale activities and higher mortgage servicing income
• Net gain on mortgage loan origination and sale activities increased $24.4 million primarily due to 31% higher single
family rate lock and forward sale commitments volume
• Mortgage servicing income increased $5.1 million primarily due to higher risk management results
13
1,600
2,000
2,400
$0.0
$20.0
$40.0
$60.0
$80.0
$100.0
$120.0
2Q15 3Q15 4Q15 1Q16 2Q16
Non
intere
st E
xpe
nse
(in
mill
ion
s)
Core noninterest expense Merger-related expenses FTE
FTE
Noninterest Expense
• Full-time equivalent employees increased by 3% in 2Q
• Excluding merger-related expenses, salaries and related costs increased by 17% in 2Q, primarily influenced by increased
commissions on higher closed loan volume
• Core efficiency ratio improved in both operating segments
• Noninterest expense will continue to vary primarily based on headcount and mortgage origination volume
(1) Excludes merger-related expenses, which are shown in “Merger-related expenses” in the table. See appendix for reconciliation of
non-GAAP financial measures.
14
Total noninterest expense $92.3 $92.0 $92.7 $101.4 $111.0
Merger-related expenses $3.2 $0.4 $0.8 $5.2 $1.0
Core noninterest expense (1) $89.1 $91.6 $92.0 $96.2 $110.0
Salaries & related costs (1) $59.9 $61.0 $60.3 $63.8 $74.5
General & administrative (1) $14.0 $14.9 $16.0 $15.7 $17.1
Occupancy (1) $5.9 $6.1 $6.9 $7.1 $7.5
Information services (1) $7.8 $7.6 $7.0 $7.1 $8.4
Other noninterest expense (1) $1.5 $2.0 $1.7 $2.4 $2.5
FTE 1,964 2,100 2,139 2,264 2,335
Core efficiency ratio (1) 80.1% 86.2% 87.8% 85.5% 74.9%
Segment Overview
Commercial & Consumer Banking
• Regional Single Family mortgage origination platform
• 100% direct retail origination
• Majority of production sold into secondary market
• Fannie Mae, Freddie Mac, FHA, VA lender since programs’
inceptions
• Portfolio products: jumbo, HELOC and custom home
construction
• Servicing retained on majority of originated loans sold to
secondary markets
• Build Western U.S. major market retail franchise
• Dynamic personnel management in relation to changes in
market conditions
• Fixed/Semi/Variable cost management
• Long-term efficiency ratio target of <80%
• Long-term targeted ROE of >25%
Mortgage Banking
Overview
• Commercial Banking
Commercial lending, including SBA
All CRE property types with multifamily focus
Residential construction
Commercial deposit, treasury and cash management services
• Consumer Banking
Consumer loan and deposit products
Consumer investment, insurance and private banking products
and services
• Expand market/grow market share in current and new markets
Follow mortgage expansion
• Diversify and grow loan portfolio 4-6% or more per quarter (1)
• Manage non-interest expense increase to approximately 3% per
quarter
• Manage credit risk by monitoring portfolio and geographic early
warning indicators
• Long-term efficiency ratio target of <65%
• Long-term targeted ROE range of 8-12%
Commercial lending – 8-12%
Commercial real estate – 10-15%
Residential construction – 20-30%
Single Family residential – 10-15%
Strategic Objectives
(1) Actual growth of loan portfolio is subject to, among other things, actual loan production volumes, portfolio runoff, portfolio loan sales, portfolio credit
performance, net interest margin, and market forces. Other portfolio management considerations include liquidity management, capital requirements and
profitability.
15
Commercial & Consumer Banking
16
Commercial & Consumer Banking Segment
• Year over year net income is up reflecting the success of strategic growth initiatives, both M&A and organic
• Year to date net interest income increased 33% primarily due to 37% growth in average earning asset balances
17
(1) Excludes pre-tax acquisition-related expenses and bargain purchase gain. See appendix for reconciliation of non-GAAP financial
measures.
($ in thousands)
Jun. 30,
2016
Jun. 30,
2015
Jun. 30,
2016
Jun. 30,
2015
Net interest income $ 38,393 $ 30,645 $ 74,039 $ 55,752
Provision for loan losses 1,100 500 2,500 3,500
Noninterest income 8,181 3,624 12,824 13,704
Noninterest expense 34,103 29,280 70,732 64,946
Net income before taxes 11,371 4,489 13,631 1,010
Income taxes 4,292 1,635 5,009 (1,830)
Net income $ 7,079 $ 2,854 $ 8,622 $ 2,840
Core net income
(1) $ 7,745 $ 5,019 $ 12,665 $ 6,261
Core ROAA
(1) 0.66% 0.56% 0.57% 0.39%
Core ROAE
(1) 6.87% 6.47% 5.83% 4.44%
Core ROATE
(1) 7.34% 6.94% 6.21% 4.73%
Core efficiency ratio
(1) 71.0% 75.9% 74.3% 78.8%
Net Interest Margin 3.47% 3.64% 3.48% 3.58%
Total average earning assets $4,476,524 $3,385,008 $ 4,258,187 $ 3,108,922
FTE 926 757 926 757
For the three months ended For the six months ended
Commercial & Consumer Banking Segment – Quarter Trend
• Core net income improved over the prior quarter due to higher noninterest income resulting from higher gain on sale
of loans (+$2.8 million) and higher net interest income (+2.7 million) resulting from 11% growth in average earning
assets
18
(1) Includes two months of OCBB’s results of operations.
(3) Excludes pre-tax acquisition-related expenses and bargain purchase gain. See appendix for reconciliation of non-GAAP financial measures.
($ in thousands)
Jun. 30,
2016
Mar. 31,
2016
(1)
Dec. 31,
2015
Sept. 30,
2015
Jun. 30,
2015
Net interest income $ 38,393 $ 35,646 $ 32,759 $ 31,509 $ 30,645
Provision for loan losses 1,100 1,400 1,900 700 500
Noninterest income 8,181 4,643 8,778 6,884 3,624
Noninterest expense 34,103 36,630 29,542 28,110 29,280
Net income before taxes 11,371 2,259 10,095 9,583 4,489
Income taxes 4,292 717 1,718 2,783 1,635
Net income $ 7,079 $ 1,542 $ 8,377 $ 6,800 $ 2,854
Core net income
(2) $ 7,745 $ 4,920 $ 8,486 $ 6,288 $ 5,019
Core ROAA
(2) 0.66% 0.46% 0.85% 0.66% 0.56%
Core ROAE
(2) 6.87% 4.71% 9.11% 7.39% 6.47%
Core ROATE
(2) 7.34% 5.03% 9.64% 7.87% 6.94%
Core efficiency ratio
(2) 71.0% 78.0% 70.0% 73.6% 75.9%
Net Interest Margin 3.47% 3.54% 3.51% 3.62% 3.64%
Total average earning assets $4,476,524 $4,039,023 $3,708,342 $3,514,496 $3,385,008
FTE 926 903 828 807 757
For the three months ended
Loan Production/Loan Balance Trend
19
• New loan commitments continue to grow and totaled $669 million in 2Q16 and included $474 million in commercial loans
• Loans held for investment balances have grown 16% year to date, 75% of this growth was organic
• 1Q16 balances included $126 million of loans added from the acquisition of OCBB
Commitme
n
ts
B
al
an
ce
s
($ in thousands) Jun. 30, 2016 Mar. 31, 2016 Dec. 31, 2015 Sept. 30, 2015 Jun. 30, 2015
Single Family $1,218,216 $1,231,707 $1,203,180 $1,171,967 $1,182,542
Single Family Custom Home Construction $133,947 $119,363 $108,228 $81,554 $75,665
Home Equity and other $309,204 $275,405 $256,373 $237,491 $216,635
Total Consumer Loans $1,661,367 $1,626,475 $1,567,781 $1,491,012 $1,474,842
Commercial Real Estate $762,170 $661,932 $600,703 $563,241 $547,571
Multifamily $562,728 $543,887 $426,557 $382,392 $366,187
Residential Construction $221,442 $202,427 $177,335 $153,212 $130,586
Commercial Real Estate/Multifamily Construction $284,052 $308,030 $297,597 $295,105 $248,566
Commercial Business $239,077 $213,084 $154,262 $158,135 $166,216
Total Commercial Loans $2,069,469 $1,929,360 $1,656,454 $1,552,085 $1,459,126
Total Loans Held for Investment
(before Deferred Fees and Allowance) $3,730,836 $3,555,835 $3,224,235 $3,043,097 $2,933,968
($ in thousands) Jun. 30, 2016 Mar. 31, 2016 Dec. 31, 2015 Sept. 30, 2015 Jun. 30, 2015
Single Family $66,194 $74,048 $99,621 $62,702 $52,819
Single Family Custom Home Construction $53,736 $47,519 $73,978 $41,944 $ 9,788
Home Equity and other $75,452 $55,269 $54,047 $ 7,716 $ 2,691
Total Consumer Loans $195,382 $176,836 $227,646 $142,362 $125,298
C mercial Real Estate/Multifamily $220,592 $146,563 $136,370 $99,487 $53,2
Residential Construction $172,285 $105,847 $114,531 $114,425 $95,468
Commercial Real Estate/Multifamily Construction $48,750 $27,420 $77,815 $33,605 $27,900
Business $32,100 $12,582 $18,572 $26,697 $11,243
Total Commercial Loans $473,727 $292,412 $347,288 $274,214 $187,8 2
Total $669,109 $469,248 $574,934 $416,576 $313,130
Loan Portfolio
• Loans held for investment increased 5% to $3.73 billion from $3.55 billion at 1Q16, an increase of $175 million
primarily due to an increase in commercial loan balances.
• We continue to diversify the composition of the portfolio, commercial loans make up 60% of the portfolio at 2Q16
and single family and consumer loans make up 40%.
• CRE loans ended 2Q16 at $1.32 billion or 36% of the total LHFI portfolio and 60% of the commercial loan portfolio.
Multifamily is the number one property type in this portfolio.
20
Loan Composition
$3.73 billion
CRE by Property Type
$1.32 billion
Other Includes: AK,CO,HI,ID,NV,TX,UT CA-Los Angeles County
•Additional property types are
reviewed on a case by case basis
• Includes acquired loan types
• Examples include: Self Storage &
Hotel
• 5-10 Year Term
• $30MM Loan Amt. Max
• ≥ 1.25 DSCR
•Avg. LTV @ Orig. ~ 65%
• 5-10 Year Term
• $30MM Loan Amt. Max
• ≥ 1.25 DSCR
•Avg. LTV @ Orig. ~ 66%
• 5-10 Year Term
• $30MM Loan Amt. Max
• ≥ 1.20 DSCR
•Avg. LTV @ Orig. ~ 63%
• 5-10 Year Term
• $30MM Loan Amt. Max
• ≥ 1.25 DSCR
•Avg. LTV @ Orig. ~ 62%
CA-Other Oregon WA-Other WA-Puget Sound
Commercial Real Estate Perm Lending Overview
21
HomeStreet lends within the full spectrum of commercial real estate lending types, but is deliberate in achieving diversification among
property types and geographic areas to mitigate concentration risk
Balance: $202M
% of Balances: 15%
% Owner Occupied: 17%
Portfolio LTV ~ 53% (1)
Portfolio Avg. DSCR~1.73%
6/30/16 Balances Outstanding
Loan Characteristics
Commercial Real Estate Property Types
Multifamily Office Industrial/
Warehouse
Retail Other
Balance: $563M
% of Balances: 43%
Portfolio Avg. LTV ~ 59% (1)
Portfolio Avg. DSCR ~ 1.94%
Geographical Distribution (balances)
Balance: $149M
% of Balances: 11%
% Owner Occupied: 50%
Portfolio LTV ~ 49% (1)
Portfolio Avg. DSCR~1.68%
Balance: $306M
% of Balances: 23%
% Owner Occupied: 23%
Portfolio LTV ~ 55% (1)
Portfolio Avg. DSCR~1.69%
Balance: $105M
% of Balances: 8%
% of Owner Occupied: 42%
Portfolio LTV ~ 45% (1)
Portfolio Avg. DSCR~1.93%
(1) Property values as of origination date
Construction Lending Overview
22
Construction lending is a broad category that includes many different loan types, which are often characterized by different risk profiles.
HomeStreet lends within the full spectrum of construction lending types, but is deliberate in achieving diversification among the types to
mitigate risk. Additionally, recent geographical expansion has provided an opportunity to reduce concentrations in any particular market.
Balance: $165M
Unfunded Commitments: $203M
% of Balances: 26%
% of Unfunded Commitments: 42%
6/30/16 Balances and Commitments
Loan Characteristics
Construction Lending Types
Custom Home
Construction
Multifamily Commercial Residential
Construction
Land & Lots
•12 Month Term
•Consumer Owner Occupied
•Borrower Underwritten
similar to Single Family
Balance: $113M
Unfunded Commitments: $103M
% of Balances: 21%
% of Unfunded Commitments: 21%
Geographical Distribution (balances)
Balance: $200M
Unfunded Commitments: $135M
% of Balances: 31%
% of Unfunded Commitments: 28%
Balance: $88M
Unfunded Commitments: $21M
% of Balances: 14%
% of Unfunded Commitments: 4%
Balance: $53M
Unfunded Commitments: $26M
% of Balances: 8%
% of Commitments: 5%
Seattle Metro Puget Sound Other WA Other Portland Metro OR Other Hawaii California Utah Idaho
•18-36 Month Term
•≤ 80% LTC
•Minimum 15% Cash Equity
•≥ 1.15 DSC
•Portfolio LTV ~ 65%
•18-36 Month Term
•≤ 80% LTC
•Minimum 15% Cash Equity
•≥ 1.25 DSC
•≥ 50% pre-leased office/retail
•Portfolio LTV ~65%
•12-18 Month Term
• LTC: ≤ 95% Presale & Spec
•Leverage, Liquid. & Net Worth
Covenants as appropriate
•Portfolio LTV ~ 70%
•12-24 Month Term
•≤ 50% -80% LTC
• Strong, experienced,
vertically integrated builders
•Portfolio LTV ~ 55%
Credit Quality
23
• Credit Quality continues to show strength:
• Nonperforming assets increased to 0.45% of total assets
• OREO increased $3.4 million to $10.7 million compared to $7.3 million in 1Q16 primarily due to the addition of
FHA repurchased Single Family properties
• Delinquencies declined to 1.59% of total loans compared to 1.94% in 1Q16
• Adjusted delinquencies ended the quarter at 0.45%
(1) Nonperforming assets includes nonaccrual loans and OREO, excludes performing TDRs and SBAs
(2) Total delinquencies and total loans - adjusted (net of Ginnie Mae EBO loans (FHA/VA loans) and starting in 4Q15 guaranteed portion of SBA loans
(3) Peer group revised 1Q15. Source: SNL
(4) Not available at time of publishing
(5) While not a loss reserve, purchase discounts are available to absorb credit related losses on loans purchased with discounts
($ in thousands) HMST Peer Mdn
(3)
HMST Peer Mdn
(3)
HMST Peer Mdn
(3)
HMST Peer Mdn
(3)
HMST Peer Mdn
(3)
Nonperforming assets
(1)
$26,443 - $23,285 -- $24,699 -- $27,743 -- $32,735 --
Nonperforming loans $15,745 - $16,012 -- $17,168 -- $19,470 -- $21,308 --
OREO $10,698 - $7,273 -- $7,531 -- $8,273 -- $11,427 --
Nonperforming assets/total assets
(1)
0.45%
(4)
0.43% 0.49% 0.50% 0.60% 0.56% 0.53% 0.67% 0.53%
Nonperforming loans/total loans 0.42%
(4)
0.45% 0.43% 0.53% 0.39% 0.64% 0.51% 0.73% 0.51%
Total delinquencies/total loans 1.59%
(4)
1.94% 0.74% 2.05% 0.71% 2.40% 0.92% 2.25% 0.96%
Total delinquencies/total loans - adjusted
(2)
0.45%
(4)
0.64% 0.72% 0.65% 0.71% 1.04% 0.92% 0.92% 0.96%
ALLL / total loans 0.88%
(4)
0.88% 1.05% 0.91% 1.05% 0.89% 1.07% 0.88% 1.08%
ALLL / Nonperforming loans (NPLs) 207.41%
(4)
195.51% 224.60% 170.54% 252.66% 138.27% 189.83% 120.97% 207.55%
ALLL / total loans, excluding purchased loans 1.03% - 1.07% -- 1.10% -- 1.11% -- 1.12% --
Purchased Discount & Reserves/Gross Purchased Loans 3.03% - 3.01% -- 3.03% -- 3.17% -- 3.11% --
Jun. 30, 2016 Mar. 31, 2016 Dec. 31, 2015 Sept. 30, 2015 Jun. 30, 2015
Deposits
• Total deposits of $4.2 billion at June 30, 2016 increased $416 million or 11% increase from March 31, 2016
• Transaction accounts increased 8% during the quarter, of which non-interest bearing accounts increased 12%
• 41.9% deposit growth during the quarter from de-novo branches opened since 2012. Opened 13 branches, or
27% of our total network since 2012.
• During 2Q, announced an agreement to acquire the two retail branches and related loans and deposits from Bank
of Oswego located in Lake Oswego, Oregon and announced an agreement to acquire two retail branches and
certain related deposits from Boston Private Bank and Trust located in Southern California
24
Total Cost of Deposits
7% 9% 8%
11% 10%
23% 20%
23%
24% 27%
61% 61%
57%
53%
52%
9%
10%
11%
12%
12%
$2,211
$2,445
$3,232
$3,823
$4,329
$-
$500
$1,000
$1,500
$2,000
$2,500
$3,000
$3,500
$4,000
$4,500
12/31/13 12/31/14 12/31/2015 3/31/2016 6/30/2016
Bala
nce
s (in
mil
lion
s)
Noninterest-Bearing Transaction &
Savings Deposits
Interest-Bearing Transaction & Savings
Deposits
Time Deposits
Mortgage Svcg. Escrow Accts. & Other
Total Cost of Deposits 0.42% 0.39% 0.44% 0.42% 0.46%
Mortgage Banking
25
Mortgage Banking Segment
• Year to date net income is down slightly due to higher noninterest expense related to continued expansion of
lending offices in new markets and increased costs of originating new mortgage loans as a result of new
regulatory and disclosure requirements for the mortgage industry
• Year to date noninterest income is up due to $12.2 million higher net gain on mortgage loan origination and
sale activities and $14.3 million higher mortgage servicing income, with the former driven by 10% higher rate
lock volume and the latter driven by increased servicing fees collected, lower servicing decay and higher risk
management results mostly attributable to lower prepayment speed expectations.
26
($ in thousands)
Jun. 30,
2016
Jun. 30,
2015
Jun. 30,
2016
Jun. 30,
2015
Net interest income $ 6,089 $ 7,585 $ 11,134 $ 13,211
Noninterest income 94,295 69,363 161,360 134,655
Noninterest expense 76,928 63,055 141,651 116,871
Net income before taxes 23,456 13,893 30,843 30,995
Income taxes 8,786 4,371 11,308 11,156
Net income $ 14,670 $ 9,522 $ 19,535 $ 19,839
ROAA 6.67% 3.44% 4.72% 4.19%
ROATE 62.45% 26.84% 42.59% 32.25%
Efficiency Ratio 76.6% 81.9% 82.1% 79.0%
FTE 1,409 1,207 1,409 1,207
For the three months ended For the six months ended
Mortgage Banking Segment – Quarter Trend
• Higher rate lock volume was the primary driver of net gain on mortgage loan origination and sale activities of
$81.0 million coming in $21.6 million or 36% above 1Q
• Interest rate lock commitment volume in 2Q of $2.36 billion was 31% higher than in 1Q and HFS closed loan
volume of $2.26 billion was up 44% from the prior quarter
• Mortgage servicing income of $12.0 million grew $4.6 million from the prior quarter primarily due to higher risk
management results
27
($ in thousands)
Jun. 30,
2016
Mar. 31,
2016
Dec. 31,
2015
Sept. 30,
2015
Jun. 30,
2015
Net interest income $ 6,089 $ 5,045 $ 6,981 $ 8,125 $ 7,585
Noninterest income 94,295 67,065 56,631 60,584 69,363
Noninterest expense 76,928 64,723 63,183 63,916 63,055
Net income before taxes 23,456 7,387 429 4,793 13,893
Income taxes 8,786 2,522 128 1,632 4,371
Net income $ 14,670 $ 4,865 $ 301 $ 3,161 $ 9,522
ROAA 6.67% 2.50% 0.12% 1.11% 3.44%
ROATE 62.45% 21.74% 1.28% 10.28% 26.84%
Efficiency Ratio 76.6% 89.8% 99.3% 93.0% 81.9%
FTE 1,409 1,361 1,311 1,293 1,207
For the three months ended
Mortgage Origination
(1) Represents combined value of secondary market gains and originated mortgage servicing rights stated as a
percentage of interest rate lock commitments.
(2) Loan origination and funding fees stated as a percentage of mortgage originations from the retail channel and
excludes loans purchased from WMS.
(3) In the second quarter of 2015, we recognized an additional $2.4 million of gain on mortgage loan origination and
sale revenue related to the correction of an error in the mortgage loan pipeline valuation. The Composite Margin in
the table above has been adjusted to eliminate the impact of this correction.
28
-
500
1,000
1,500
2,000
2,500
2Q15 3Q15 4Q15 1Q16 2Q16
Held for Sale Closed Loan Production
($ in millions)
HMST WMS Rate locks
Bps
0
50
100
150
200
250
300
350
400
2Q15 3Q15 4Q15 1Q16 2Q16
Single Family Composite Margin
(bps)
Secondary gains/rate locks Loan fees/closed loans
2Q15 3Q15 4Q15 1Q16 2Q16
HMST $1,837 $1,768 $1,530 $1,479 $2,118
WMS $18 $166 $119 $94 $144
Closed Loans $2,023 $1,934 $1,649 $1,573 $2,262
Purchase % 69% 75% 70% 62% 69%
Refinance % 31% 25% 30% 38% 31%
Rate locks $1,883 $1,807 $1,340 $1,804 $2,362
Purchase % 73% 70% 67% 59% 65%
Refinance % 27% 30% 33% 41% 35%
2Q15 (3) 3Q15 4Q15 1Q16 2Q16
Secondary gains/rate locks (1) 316 275 281 300 312
Loan fees/closed loans (2) 31 36 38 36 35
Composite Margin 347 311 319 336 347
Mortgage Servicing
As of June 30, 2016
• Constant Prepayment Rate (CPR) – 16.9% for 2Q 2016
• Weighted average (W.A.) servicing fee - 28.7 bps
• MSRs represent 0.77% of ending UPB – 2.67 W.A. servicing fee multiple
• W.A age - 27.4 months
• W.A. expected life – 44.9 months as of 6/30/16
• Composition of government – 27.3%
• Total delinquency - 1.2% (including foreclosures)
• W.A. note rate - 4.05%
29
$12,980
$14,271
$15,348
$15,981
$17,074
$4,000
$6,000
$8,000
$10,000
$12,000
$14,000
$16,000
$18,000
2Q15 3Q15 4Q15 1Q16 2Q16
Mortgage Servicing Portfolio
($ in millions)
Mortgage Market & Competitive Landscape
30
Mortgage Market
• MBA estimates second quarter mortgage origination nationally to increase 46% over first quarter. HomeStreet’s
originations increased 44% over the prior quarter.
• The most recent Mortgage Bankers Association monthly forecast projects total loan originations to increase 6.8% in 2016
over the past year, an upward revision from its prior quarter forecast of a 4.4% decrease.
• Mortgage rates continue near historic lows, and nationally purchases are expected to increase by 11.4% from 2015 and
comprise 56% of volume in 2016.
• Housing starts for this year are expected to be up 10% over 2015 levels and home sales are expected to increase 6%
Competitive Landscape
• Purchases comprised 54% of originations nationally and 55% in the Pacific Northwest in the first quarter. HomeStreet
continues to perform above the national and regional averages, with purchases accounting for 69% of our closed loans
and 65% of our interest rate lock commitments in the quarter.
• Purchase demand continues to remain strong in many of our our markets, however limited inventory continues to be a
significant constraining issue.
• The Pacific Northwest and the major markets in western United States are expected to continue to grow more quickly
than the rest of the country, consistent with the past eighteen months.
Earnings Guidance
31
• Currently anticipating mortgage loan lock and forward sale commitments volume of approximately $2.4 billion and
$1.7 billion in the third and fourth quarters of this year, respectively
• Projecting mortgage loan held for sale closing volumes of $2.6 billion and $2.0 billion in the third and fourth
quarters of this year, respectively
• We expect mortgage loan lock and forward sale commitments and mortgage loan held for sale closing volumes to
each total $9.1 billion for 2017, subject to market interest rates, home prices, and other economic conditions
• Gain on sale composite margin expected to range between 320 and 330 basis points over the next two quarters
and between 315 and 325 basis points during 2017
• In our Commercial and Consumer Banking segment, over the next three quarters we continue to expect net loan
portfolio growth to approximate 4% to 6% quarterly
• Reflecting the continued flattening of the yield curve since last quarter, we generally expect our consolidated net
interest margin to trend down to the 3.30% to 3.35% level and remain in the same range during 2017, absent
changes in market rates and prepayment speeds
• Reflecting the seasonal peak of origination and sale activities, we believe that non-interest expense growth in the
2nd quarter represented a peak for the year. Therefore, consistent with our full year guidance of on average 3%
growth per quarter for the full year, we do not expect our non-interest expense to meaningfully increase for the
remainder of the year.
• During 2017, we expect our non-interest expenses will grow approximately 3% per quarter on average, reflecting
the continued investment in our growth and infrastructure
.
Appendix
32
Statements of Financial Condition
For the three months ended For the nine months ended
33
($ in thousands) Jun. 30, 2016 Mar. 31, 2016 Dec. 31, 2015 Sept. 30, 2015 Mar. 31, 2015
Cash and cash equivalents $ 45,229 $ 46,356 $ 32,684 $ 37,303 $ 46,197
Investment securities 928,364 687,081 572,164 602,018 509,545
Loans held for sale 772,780 696,692 650,163 882,319 972,183
Loans held for investment, net 3,698,959 3,523,551 3,192,720 3,012,943 2,900,675
Mortgage servicing rights 147,266 148,851 171,255 146,080 153,237
Other real estate owned 10,698 7,273 7,531 8,273 11,428
Federal Home Loan Bank stock, at cost 40,414 40,548 44,342 44,652 40,742
Premises and equipment, net 67,884 67,323 63,738 60,544 58,111
Goodwill 19,846 20,366 11,521 11,945 11,945
Other assets 209,738 179,211 148,377 169,576 162,185
Total assets $ 5,941,178 $ 5,417,252 $ 4,894,495 $ 4,975,653 $ 4,866,248
Deposits $ 4,239,155 $ 3,823,027 $ 3,231,953 $ 3,307,693 $ 3,322,653
Federal Home Loan Bank advances 878,987 883,574 1,018,159 1,025,745 922,832
Federal funds purchased and securities sold under
agreements to repurchase
- - - - -
Accounts payable and other liabilities 138,307 119,662 117,251 119,900 111,180
Long-term debt 125,126 61,857 61,857 61,857 61,857
Total liabilities 5,381,575 4,888,120 4,429,220 4,515,195 4,418,522
Preferred stock - - - - -
Common stock 511 511 511 511 511
Additional paid-in capital 276,303 273,168 222,328 222,047 221,551
Retained earnings 273,041 251,292 244,885 236,207 226,246
Accumulated other comprehensive income (loss) 9,748 4,161 (2,449) 1,693 (582)
Total shareholders’ equity 559,603 529,132 465,275 460,458 447,726
Total liabilities and shareholders’ equity $ 5,941,178 $ 5,417,252 $ 4,894,495 $ 4,975,653 $ 4,866,248
Non-GAAP Financial Measures
Tangible Book Value:
34
Jun. 30, Mar. 31, Dec. 31, Sept. 30, Jun. 30, Jun. 30, Jun. 30,
(dollars in thousands, except share data) 2016 2016 2015 2015 2015 2016 2015
Shareholders' equity $559,603 $529,132 $465,275 $460,458 $447,726 $559,603 $447,726
Less: Goodwill and other intangibles (28,861) (29,126) (20,266) (20,250) (20,778) (28,861) (20,778)
Tangible shareholders' equity $530,742 $500,006 $445,009 $440,208 $426,948 $530,742 $426,948
Common shares outstanding 24,821,349 24,550,219 22,076,534 22,061,702 22,065,249 24,821,349 22,065,249
Book value per share $22.55 $21.55 $21.08 $20.87 $20.29 $22.55 $20.29
Impact of goodwill and other intangibles (1.17) (1.18) (0.92) (0.92) (0.94) (1.17) (0.94)
Tangible book value per share $21.38 $20.37 $20.16 $19.95 $19.35 $21.38 $19.35
Average shareholders' equity $548,080 $510,883 $470,635 $460,489 $455,721 $529,482 $413,102
Less: Average goodwill and other intangibles (28,946) (26,645) (20,195) (20,596) (21,135) (27,796) (18,929)
Average tangible shareholders' equity $519,134 $484,238 $450,440 $439,893 $434,586 $501,686 $394,173
Return on average shareholders’ equity 15.87% 5.02% 7.38% 8.65% 10.86% 10.64% 10.98%
Impact of goodwill and other intangibles 0.89% 0.27% 0.33% 0.41% 0.53% 0.58% 0.53%
Return on average tangible shareholders' equity 16.76% 5.29% 7.71% 9.06% 11.39% 11.22% 11.51%
Quarter Ended Six Months Ended
Non-GAAP Financial Measures
Core Net Income:
35
Jun. 30, Mar. 31, Dec. 31, Sept. 30, Jun. 30, Jun. 30, Jun. 30,
(dollars in thousands) 2016 2016 2015 2015 2015 2016 2015
Net income $21,749 $6,407 $8,678 $9,961 $12,376 $28,156 $22,680
Impact of merger-related items (net of tax) 666 3,378 109 (512) 2,165 4,044 3,421
Net income, excluding merger-related items (net of tax) $22,415 $9,785 $8,787 $9,449 $14,541 $32,200 $26,101
Noninterest expense $111,031 $101,353 $92,725 $92,026 $92,335 $212,384 $181,817
Deduct: merger-related expenses (1,025) (5,198) (754) (437) (3,208) (6,223) (15,373)
Noninterest expense, excluding merger-related expenses $110,006 $96,155 $91,971 $91,589 $89,127 $206,161 $166,444
Diluted earnings per common share $0.87 $0.27 $0.39 $0.45 $0.56 $1.15 $1.14
Impact of merger-related items (net of tax) 0.03 0.14 - (0.03) 0.09 0.17 0.18
Diluted earnings per common share, excluding merger-
related items (net of tax) $0.90 $0.41 $0.39 $0.42 $0.65 $1.32 $1.32
Return on average assets 1.54% 0.51% 0.71% 0.83% 1.06% 1.06% 1.07%
Impact of merger-related items (net of tax) 0.05% 0.27% 0.01% (0.05)% 0.19% 0.15% 0.16%
Return on average assets, excluding merger-related items
(net of tax)
1.59% 0.78% 0.72% 0.78% 1.25% 1.21% 1.23%
Return on average shareholders' equity 15.87% 5.02% 7.38% 8.65% 10.86% 10.64% 10.98%
Impact of merger-related items (net of tax) 0.49% 2.64% 0.09% (0.44)% 1.90% 1.52% 1.66%
Return on average shareholders' equity, excluding merger-
related items (net of tax)
16.36% 7.66% 7.47% 8.21% 12.76% 12.16% 12.64%
Return on average tangible shareholders' equity 16.76% 5.29% 7.71% 9.06% 11.39% 11.22% 11.51%
Impact of merger-related items (net of tax) 0.51% 2.79% 0.09% (0.47)% 1.99% 1.62% 1.73%
Return on average tangible shareholders' equity, excluding
merger-related items (net of tax)
17.27% 8.08% 7.80% 8.59% 13.38% 12.84% 13.24%
Efficiency ratio 75.55% 90.17% 88.18% 85.92% 83.02% 81.89% 83.66%
Impact of merger-related items (net of tax) (0.69)% (4.62)% (0.39)% 0.24% (2.94)% (2.40)% (4.69)%
Efficiency ratio, excluding merger-related items (net of tax) 74.86% 85.55% 87.79% 86.16% 80.08% 79.49% 78.97%
Six Months EndedQuarter Ended
Non-GAAP Financial Measures
Core Net Income – Commercial & Consumer Banking:
36
Jun. 30, Mar. 31, Dec. 31, Sept. 30, Jun. 30, Jun. 30, Jun. 30,
(dollars in thousands) 2016 2016 2015 2015 2015 2016 2015
Commercial and Consumer Banking Segment:
Net income $7,079 $1,542 $8,377 $6,800 $2,854 $8,621 $2,840
Impact of merger-related items (net of tax) 666 3,378 109 (512) 2,165 4,044 3,421
Net income, excluding merger-related items (net of tax) $7,745 $4,920 $8,486 $6,288 $5,019 $12,665 $6,261
ROAA 0.60% 0.15% 0.84% 0.71% 0.32% 0.38% 0.18%
Impact of merger-related items (net of tax) 0.06% 0.32% 0.01% (0.05)% 0.24% 0.18% 0.21%
ROAA, excluding merger-related items (net of tax) 0.66% 0.46% 0.85% 0.66% 0.56% 0.57% 0.39%
ROAE 6.28% 1.47% 8.99% 7.99% 3.68% 3.97% 2.02%
Impact of merger-related items (net of tax) 0.59% 3.23% 0.12% (0.60)% 2.79% 1.86% 2.43%
ROAE, excluding merger-related items (net of tax) 6.87% 4.71% 9.11% 7.39% 6.47% 5.83% 4.44%
ROATE 6.71% 1.58% 9.51% 8.51% 3.95% 4.23% 2.15%
Impact of merger-related items (net of tax) 0.63% 3.45% 0.12% (0.64)% 3.00% 1.98% 2.58%
ROATE, excluding merger-related items (net of tax) 7.34% 5.03% 9.64% 7.87% 6.94% 6.21% 4.73%
Efficiency ratio 73.22% 90.92% 71.12% 73.22% 85.44% 81.43% 93.51%
Impact of merger-related items (net of tax) (2.20)% (12.90)% (1.17)% 0.38% (9.53)% (7.16)% (14.71)%
Efficiency ratio, excluding merger-related items (net of tax) 71.02% 78.02% 69.95% 73.60% 75.91% 74.27% 78.80%
Six Months EndedQuarter Ended