HomeStreet, Inc. Reports Fourth Quarter and Year-End 2013 Results

2013 Net Income of $23.8 Million, or $1.61 per Diluted Share

Business Wire

SEATTLE--(BUSINESS WIRE)--

HomeStreet, Inc. (HMST) (the “Company” or “HomeStreet”), the parent company of HomeStreet Bank (the “Bank”), today announced a net loss of $861 thousand, or $(0.06) per diluted share for the fourth quarter of 2013. Excluding acquisition-related expenses of $4.1 million, net income for the quarter was $1.8 million,(1) or $0.12(1) per diluted share, compared to net income of $2.0 million,(1) or $0.13(1) per share, for the third quarter of 2013 and $21.5 million, or $1.46 per share, for the fourth quarter of 2012. For the full year 2013, net income was $23.8 million, or $1.61 per share. Excluding acquisition-related expenses of $4.5 million, net income for 2013 was $26.8 million,(1) or $1.81(1) per diluted share, compared to $82.1 million, or $5.98 per share for 2012.

  • Consolidated results:
    • Fourth quarter 2013
      • HomeStreet successfully closed the acquisitions of Fortune Bank and Yakima National Bank during the fourth quarter of 2013. Additionally, the acquisition of two retail deposit branches from AmericanWest Bank was completed during the quarter. Through these acquisitions, the Company acquired $208.7 million of portfolio loans and $260.8 million of deposits.
      • The Company recorded $4.1 million of acquisition-related expenses during the quarter ended December 31, 2013 and $4.5 million of acquisition-related expenses during the year ended December 31, 2013.
      • Net interest margin of 3.34% compared to 3.41% in the third quarter of 2013.
      • Loans held for investment of $1.87 billion at December 31, 2013 increased $362.5 million, or 24.0%, from September 30, 2013.
      • Classified assets and nonperforming assets ended the quarter at 1.65% and 1.26% of total assets, respectively, down from 1.90% and 1.37% of total assets at September 30, 2013.
      • In response to lower than anticipated loan volume in the commercial lending units and falling loan volume in existing mortgage markets, the Company reduced under-performing production personnel and mortgage operations and fulfillment personnel in existing markets. Also in the quarter, the Company added personnel from acquired banks and increased mortgage production and fulfillment personnel in new markets, primarily in California. During the fourth quarter, we hired, or added through acquisition, 216 employees, which was partially offset by the departure of 111 employees.
    • Year-ended 2013
      • Net interest margin of 3.17%, up from 2.89% for 2012.
      • The Company's annual effective income tax rate for the year was 31.6% compared to 20.8% for 2012. The prior year effective income tax rate reflects the benefit of the full reversal of deferred tax asset valuation allowances.
  • Fourth quarter segment results:
    • Commercial and Consumer Banking - loan and deposit growth from strong originations and acquisitions
      • Commercial and Consumer Banking segment net income of $244 thousand. Excluding acquisition-related expenses, net income of $2.9 million,(1) down $1.2 million from the third quarter of 2013.
      • Loans held for investment of $1.87 billion at December 31, 2013 increased $362.5 million, or 24.0%, from September 30, 2013. Excluding the impact of loans added from acquisitions, loans held for investment increased over 11% in the quarter. New loan commitments totaled $378.8 million, up 56.2% from $242.5 million in the third quarter of 2013.
      • Total deposits of $2.20 billion increased 5.0% from September 30, 2013, primarily due to the addition of $260.8 million of deposits from acquisitions.
      • Classified assets and nonperforming assets ended the quarter at 1.65% and 1.26% of total assets, respectively, down from 1.90% and 1.37% of total assets at September 30, 2013.
    • Mortgage Banking - reduced loan production volume due to lower refinance volume, expected seasonality and a lack of housing inventory
      • Mortgage Banking segment net loss of $1.1 million, compared to net loss of $2.1 million in the third quarter of 2013 and net income of $25.8 million in the fourth quarter of 2012.
      • Single family mortgage interest rate lock commitments of $662.0 million, down 15.8% from the third quarter of 2013 and down 47.2% from the fourth quarter of 2012.
      • Single family mortgage closed loan production of $773.1 million, down 34.9% from the third quarter of 2013 and down 49.1% from the fourth quarter of 2012.
      • Net gain on single family mortgage origination and sale activities of $23.3 million, down 25.7% from the third quarter of 2013 and down 65.3% from the fourth quarter of 2012.
      • The portfolio of single family loans serviced for others increased to $11.80 billion at quarter end, up 4.5% from $11.29 billion at September 30, 2013 and up 32.97% from $8.87 billion at December 31, 2012.
      • Single family mortgage servicing income of $7.4 million, up from $3.7 million in the third quarter of 2013 and up from $287 thousand in the fourth quarter of 2012.
      • HomeStreet regained its overall ranking as the number two originator by volume of refinance and purchase mortgages in the Pacific Northwest (Washington, Oregon and Idaho), based on the combined results of HomeStreet originations and loans originated through an affiliated business arrangement known as WMS Series LLC.
  • Other highlights:
    • On January 23, 2014, HomeStreet, Inc.'s board of directors approved a special cash dividend of $0.11 per common share, payable on February 24, 2014 to shareholders of record as of the close of business on February 3, 2014.

"As we execute our strategy to diversify our earnings by expanding our commercial and consumer banking business, we continue to be frustrated by falling mortgage lending volumes driven by macroeconomic forces, volume changes and continuing low levels of new and resale homes. Our strategy of continuing to grow our mortgage banking market share in new and existing markets while reducing operations staff in response to lower mortgage volume levels have not been able to fully offset these forces,” said CEO Mark K. Mason. “On a positive note, lower interest rates in October and early November spurred additional mortgage refinance activity compared to earlier months. Despite the challenging market, we continue to be successful in growing our mortgage originator ranks with top-level people and we expanded our market share, regaining our number two ranking overall for refinance and purchase mortgage loans in the Pacific Northwest.

“We made substantial progress in the fourth quarter toward our goal of business diversification. We increased our loans held for investment by 24 percent over the quarter, and of that amount, over 11 percent came from organic loan growth, primarily in multifamily, construction and C&I lending. We successfully closed three high quality bank and deposit branch acquisitions, adding six retail deposit branches and teams of seasoned commercial lenders and customer service personnel. Additionally, we recently announced our entry into the California market as a diversified commercial real estate lender.”

Consolidated Results of Operations

Net Interest Income

Net interest income in the fourth quarter of 2013 was $21.4 million, up $1.0 million, or 4.8%, from the third quarter of 2013 and up $4.8 million, or 28.9%, from the fourth quarter of 2012. In the fourth quarter of 2013, net interest margin, on a tax equivalent basis, was 3.34% compared to 3.41% in the third quarter of 2013, and 3.06% in the fourth quarter of 2012. The decline in the net interest margin from the third quarter of 2013 primarily reflects a lower yield on investment securities due to premium amortization caused primarily by higher than expected prepayments.

Improvement in our net interest margin from the fourth quarter of 2012 resulted primarily from a 42 basis point decline in average interest-bearing cost of funds, due in part to the re-pricing of maturing time deposits.

Total average interest-earning assets increased from the three and twelve months ended December 31, 2012 primarily as a result of growth in portfolio loans, both from originations and from acquisitions, and in the investment securities portfolio, partially offset by a decrease in loans held for sale. The increase in average balances of portfolio loans primarily reflects year-over-year growth in loan production volume from all commercial and consumer business lines. Total average interest-bearing deposit balances increased from the prior periods primarily due to acquisition-related growth in transaction and savings deposits, partially offset by a decline in higher-cost retail certificates of deposit.

Noninterest Income

Noninterest income in the fourth quarter of 2013 was $36.1 million, down $2.1 million, or 5.5%, from $38.2 million in the third quarter of 2013 and down $35.9 million, or 49.9%, from $71.9 million in the fourth quarter of 2012. The decrease from the prior quarter was primarily driven by lower mortgage loan origination and sale revenue, due in part to expected seasonality and continuing low levels of new and resale housing inventory that has led to substantially lower loan origination volume. The decrease from the fourth quarter of 2012 was primarily due to the significant reduction in mortgage refinance volumes driven by higher mortgage interest rates in 2013.

Partially offsetting the decrease in noninterest income during the fourth quarter of 2013 was a $3.8 million increase in mortgage servicing income from the third quarter of 2013, primarily driven by higher mortgage servicing rights ("MSR") values net of risk management results and increased servicing fees collected in the quarter on the Company's single family mortgage servicing. Higher MSR values were the result of lower expected prepayments. Additionally, gain on sale of investment securities increased $2.0 million from the third quarter of 2013, as the Company decreased the overall size of its securities portfolio to provide liquidity for the growth in lending volumes.

Noninterest Expense

Noninterest expense for the fourth quarter of 2013 was $58.9 million compared to $58.1 million in the third quarter of 2013. Excluding acquisition-related expenses, noninterest expense was $54.8 million(1) in the fourth quarter of 2013, a decrease of $2.9 million, or 5.0%, from $57.7 million(1) in the third quarter of 2013, and a decrease of $1.2 million, or 2.1%, from $56.0 million in the fourth quarter of 2012. The decreases from both periods are primarily due to a decrease in mortgage origination commissions and incentives, partially offset by increased salary and related costs and general and administrative expenses, including marketing expenses. During the quarter, the Company added seven home loan centers, related to increased expansion in California. At December 31, 2013, our full-time equivalent employees had increased 5.3% from September 30, 2013 and our retail deposit branch system increased 32% to 30 branches.

Income Taxes

The Company's income tax benefit was $553 thousand for the quarter. The Company's annual effective income tax rate was 31.6% as compared to 20.8% for 2012. The prior year effective income tax rate reflects the benefit of the full reversal of deferred tax asset valuation allowances.

Business Segments

Commercial and Consumer Banking Segment

Commercial and Consumer Banking segment net income in the fourth quarter of 2013 was $244 thousand, compared to $3.8 million in the third quarter of 2013. Excluding acquisition-related expenses of $4.1 million, net income was $2.9 million(1) in the fourth quarter of 2013, compared to net income of $4.1 million(1) in the third quarter of 2013 and a net loss of $4.4 million in the fourth quarter of 2012. The variance in net income from the third quarter of 2013 was primarily due to the third quarter reversal of loan loss provision of $1.5 million. For the full year 2013, Commercial and Consumer Banking had net income of $2.6 million. Excluding acquisition-related expenses of $4.5 million, net income was $5.6 million(1) for 2013, improving from a net loss of $14.5 million for the full year 2012.

Loans Held for Investment

Loans held for investment, net, were $1.87 billion at December 31, 2013, an increase of $362.5 million, or 24.0%, from September 30, 2013 and an increase of $563.7 million, or 43.1%, from December 31, 2012. Additions to the loan portfolio from acquisitions were $208.7 million. New loan commitments totaled $378.8 million for the fourth quarter of 2013, up 56.2% from $242.5 million in the third quarter of 2013.

Asset Quality

Classified assets of $50.6 million, or 1.65% of total assets at December 31, 2013, decreased by $3.8 million, or 6.9%, from $54.4 million, or 1.90% of total assets, at September 30, 2013. Nonperforming assets (NPAs) were $38.6 million, or 1.26% of total assets at December 31, 2013, as compared to $39.0 million, or 1.37% of total assets at September 30, 2013.

Nonaccrual loans of $25.7 million, or 1.36% of total loans at December 31, 2013, decreased from $26.8 million, or 1.74% of total loans at September 30, 2013. OREO balances were $12.9 million at December 31, 2013, an increase of 5% from $12.3 million at September 30, 2013. Delinquent loans of $84.3 million, or 4.44% of total loans at December 31, 2013, decreased from $86.7 million, or 5.64% of total loans at September 30, 2013. Excluding FHA-insured and Department of Veterans' Affairs (VA)-guaranteed single family mortgage loans, delinquent loans were $29.5 million, or 1.63% of total non-FHA/VA loans at December 31, 2013, as compared to $31.3 million, or 2.16% of total non-FHA/VA loans at September 30, 2013. Included in nonaccrual loans at December 31, 2013 are $6.5 million of acquisition-related loans that are guaranteed by the Small Business Administration ("SBA").

The allowance for credit losses was $24.1 million at December 31, 2013 compared to $24.9 million at September 30, 2013. The allowance for loan losses as a percentage of total loans was 1.26% at December 31, 2013. Excluding acquired loans, the allowance for loan losses as a percentage of total loans was 1.40% of total loans compared to 1.61% of total loans at September 30, 2013. Due to improving credit trends, we recorded no provision for credit losses in the fourth quarter of 2013, compared to a reversal of provision of $1.5 million in the third quarter of 2013 and provision of $4.0 million recorded in the fourth quarter of 2012. Net charge-offs in the fourth quarter of 2013 totaled $805 thousand, down from net charge-offs of $1.5 million in the third quarter of 2013 and $3.9 million in the fourth quarter of 2012. Of the $805 thousand in net charge-offs during the quarter, $392 thousand had been specifically reserved as of September 30, 2013.

Deposits

Deposit balances were $2.20 billion at December 31, 2013 as compared to $2.10 billion at September 30, 2013 and $1.98 billion at December 31, 2012. Transaction and savings deposits increased $109.0 million, or 7.7%, from September 30, 2013, while certificates of deposit increased $54.2 million, or 11.8%, from the prior quarter, mostly the result of our fourth quarter acquisitions which added six retail deposit branches to our network.

Mortgage Banking Segment

Mortgage Banking segment net loss was $1.1 million for the fourth quarter of 2013, driven primarily by a significant decline in interest rate lock commitment volume, compared to net loss of $2.1 million for the third quarter of 2013 and net income of $25.8 million for the fourth quarter of 2012. For the full year 2013, Mortgage Banking net income was $21.2 million, a decrease of 78.1% from $96.6 million in 2012.

Mortgage Origination for Sale

Single family mortgage interest rate lock commitments, net of estimated fallout, totaled $662.0 million in the fourth quarter of 2013, a decrease of $124.1 million, or 15.8%, from $786.1 million in the third quarter of 2013 and down $592.9 million, or 47.2%, from the fourth quarter of 2012. The decrease in interest rate lock commitments in the fourth quarter of 2013 compared to the third quarter of 2013 was primarily the result of a decline in mortgage refinance volume and the expected seasonality of the mortgage loan business as well as continuing low levels of new and resale housing inventory. The decrease from the fourth quarter of 2012 primarily reflects the drop in refinance volume following the rise in mortgage interest rates beginning in June 2013, partially offset by increased loan volume from the expansion of our mortgage production offices and a 35% increase in mortgage production personnel year over year.

Single family closed loan volume designated for sale was $773.1 million in the fourth quarter of 2013, down $413.9 million, or 34.9%, from $1.19 billion in the third quarter of 2013 and down $745.8 million, or 49.1%, from $1.52 billion in the fourth quarter of 2012. At December 31, 2013, the combined pipeline of interest rate lock commitments, net of estimated fallout, and mortgage loans held for sale was $476.0 million, compared to $631.1 million at September 30, 2013.

Net gain on single family mortgage loan origination and sale activities in the fourth quarter of 2013 was $23.3 million, a decrease of $8.1 million, or 25.7%, from the third quarter of 2013 and a decrease of $43.9 million, or 65.3%, from the fourth quarter of 2012. The decrease from the prior quarter is primarily the result of the 15.8% decrease in interest rate lock commitments. The decrease from the fourth quarter of 2012 was primarily due to a decrease in refinance mortgage volume, partially offset by the increase in mortgage production offices and personnel in 2013.

Due to differences in the timing of revenue recognition between components of the gain on loan origination and sale activities, the Company analyzes the profitability of these activities using a 'Composite Margin,' which is comprised of the ratios of the components to their respective populations of interest rate lock commitments and closed loans. The Composite Margin for the fourth quarter of 2013 was 350 basis points, down from 375 basis points in the third quarter of 2013.

Mortgage Servicing

Single family mortgage servicing income of $7.4 million in the fourth quarter of 2013 increased $3.8 million, or 103.3%, from the third quarter of 2013 and increased $7.1 million from $287 thousand in the fourth quarter of 2012. The increase from the third quarter of 2013 was primarily driven by higher MSR values net of risk management results due to lower expected prepayments and increased servicing fees collected in the quarter on the Company's single family mortgage servicing.

Single family mortgage servicing fees collected in the fourth quarter of 2013 increased $698 thousand, or 8.6%, from the third quarter of 2013 and $2.1 million, or 32.1%, from the fourth quarter of 2012 resulting from growth in the portfolio of single family loans serviced for others. The portfolio of single family loans serviced for others increased to $11.80 billion at year-end compared to $11.29 billion at September 30, 2013.

Noninterest Expense

Mortgage Banking segment noninterest expense of $38.0 million decreased $6.3 million, or 14.1%, from the third quarter of 2013. This decrease was primarily attributable to lower commission and incentive expense as closed loan volumes declined 34.9% from the third quarter of 2013. Partially offsetting this decrease was an increase in salaries and related expenses resulting from the net addition of 28 mortgage originators during the quarter.

Capital

Regulatory capital ratios for the Bank are as follows:

                                   
Well-
Dec. 31, Sept. 30, Dec. 31, capitalized

2013 (1)

2013 2012 ratios
Tier 1 leverage capital (to average assets) 9.99 % 10.85 % 11.78 % 5.00 %
Tier 1 risk-based capital (to risk-weighted assets) 14.33 % 17.19 % 18.05 % 6.00 %
Total risk-based capital (to risk-weighted assets) 15.51 % 18.44 % 19.31 % 10.00 %
 

(1) Regulatory capital ratios at December 31, 2013 are preliminary.

The decline in the Bank's capital ratios was primarily attributable to the fourth quarter acquisitions of Fortune Bank and Yakima National Bank, which created $12.6 million of intangible assets not includable in regulatory capital and resulted in an increase in average and risk-weighted assets as well as the consolidated net loss for the quarter.

Special Cash Dividend Declaration

As we announced on January 24, 2014, HomeStreet, Inc.'s board of directors approved a special cash dividend of $0.11 per common share, payable on February 24, 2014 to shareholders of record as of the close of business on February 3, 2014.

(1) The press release contains certain non-GAAP financial disclosures for consolidated net income excluding acquisition-related expenses, diluted earnings per share, excluding acquisition-related expenses, and Commercial and Consumer Banking segment net income, excluding acquisition-related expenses. The Company uses certain non-GAAP financial measures to provide meaningful supplemental information regarding the Company's operational performance and to enhance investors' overall understanding of such financial performance. For corresponding reconciliations to GAAP financial measures, see Non-GAAP Financial Measures beginning on page 30 of this earnings release.

Conference Call

HomeStreet, Inc. will conduct a quarterly earnings conference call on Tuesday, January 28, 2014 at 1:00 p.m. EST. The Company will discuss fourth quarter 2013 results and provide an update on recent activities. A question and answer session will follow the presentation. Shareholders, analysts and other interested parties may join the call by dialing 1-888-317-6016 shortly before 1:00 p.m. EST. A rebroadcast will be available approximately one hour after the conference call by dialing 1-877-344-7529 and entering passcode 10037782.

About HomeStreet, Inc.

HomeStreet, Inc. (HMST) is a diversified financial services company headquartered in Seattle, Washington, and the holding company for HomeStreet Bank, a Washington state-chartered, FDIC-insured savings bank. HomeStreet Bank offers Commercial and Consumer banking, investment and insurance products and services in Washington, Oregon and Hawaii. HomeStreet Bank conducts lending activities in Washington, Oregon, Hawaii, Idaho, California, Arizona, Utah and Alaska. 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, 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 constrain our ability to do business, significant increases in the competition we face in our industry and market and the extent of our success in problem asset resolution efforts. We may not immediately realize the benefits expected from our recently completed bank and branch acquisitions and may incur unexpected costs in integrating these acquisitions into our operations. In addition, we may not recognize all or a substantial portion of the value of our rate-lock loan activity due to challenges our customers may face in meeting current underwriting standards, a decrease in interest rates, an increase in competition for such loans, unfavorable changes in general economic conditions, including housing prices, the job market, consumer confidence and spending habits either nationally or in the regional and local market areas in which the Company does business and legislative or regulatory actions or reform (including, without limitation, the Dodd-Frank Wall Street Reform and Consumer Protection Act). Further, our ability to pay cash dividends in the future is dependent upon a variety of factors, including our net income, liquidity, capital resources, regulatory and financial condition, and our compliance with the terms of our trust preferred securities and applicable banking laws and regulations. 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, 2012. 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, 2012 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, 2012, as contained in the Company's Annual Report on Form 10-K for such fiscal year.

   

HomeStreet, Inc. and Subsidiaries

Summary Financial Data

 
Quarter Ended Year Ended
Dec. 31,   Sept. 30,   Jun. 30,   Mar. 31,   Dec. 31, Dec. 31,   Dec. 31,

(dollars in thousands, except share data)

2013 2013 2013 2013 2012 2013 2012
 
Income statement data (for the period ended):
Net interest income $ 21,382 $ 20,412 $ 17,415 $ 15,235 $ 16,591 $ 74,444 $ 60,743
Provision (reversal of provision) for loan losses (1,500 ) 400 2,000 4,000 900 11,500
Noninterest income 36,072 38,174 57,556 58,943 71,932 190,745 238,020
Noninterest expense 58,868 58,116 56,712 55,799 55,966 229,495 183,591
Acquisition-related expenses (included in noninterest expense) 4,080 463 6 4,549
Net income before taxes (1,414 ) 1,970 17,859 16,379 28,557 34,794 103,672
Income tax expense (553 ) 308   5,791   5,439   7,060   10,985   21,546
Net income $ (861 ) $ 1,662   $ 12,068   $ 10,940   $ 21,497   $ 23,809   $ 82,126
Basic earnings per common share (1) $ (0.06 ) $ 0.12 $ 0.84 $ 0.76 $ 1.50 $ 1.65 $ 6.17

Diluted earnings per common share (1)

$ (0.06 ) $ 0.11 $ 0.82 $ 0.74 $ 1.46 $ 1.61 $ 5.98
Common shares outstanding (1) 14,799,991 14,422,354 14,406,676 14,400,206 14,382,638 14,799,991 14,382,638
Weighted average common shares
Basic 14,523,405 14,388,559 14,376,580 14,359,691 14,371,120 14,412,059 13,312,939
Diluted 14,812,391 14,790,671 14,785,481 14,804,129 14,714,166 14,798,168 13,739,398
Dividends per share $ 0.11 $ 0.11 $ 0.11 $ $ $ 0.33 $
Book value per share $ 17.97 $ 18.60 $ 18.62 $ 18.78 $ 18.34 $ 17.97 $ 18.34
Tangible book value per share (2) $ 17.08 $ 18.57 $ 18.60 $ 18.75 $ 18.31 $ 17.08 $ 18.31
 
Financial position (at period end):
Cash and cash equivalents $ 33,908 $ 37,906 $ 21,645 $ 18,709 $ 25,285 $ 33,908 $ 25,285
Investment securities 498,816 574,894 539,480 416,561 416,517 498,816 416,517
Loans held for sale 279,941 385,110 471,191 430,857 620,799 279,941 620,799
Loans held for investment, net 1,872,716 1,510,169 1,416,439 1,358,982 1,308,974 1,872,716 1,308,974
Mortgage servicing rights 162,463 146,300 137,385 111,828 95,493 162,463 95,493
Other real estate owned 12,911 12,266 11,949 21,664 23,941 12,911 23,941
Total assets 3,066,054 2,854,323 2,776,124 2,508,251 2,631,230 3,066,054 2,631,230
Deposits 2,203,238 2,098,076 1,963,123 1,934,704 1,976,835 2,203,238 1,976,835
FHLB advances 446,590 338,690 409,490 183,590 259,090 446,590 259,090
Shareholders’ equity 265,926 268,208 268,321 270,405 263,762 265,926 263,762
 
Financial position (averages):
Investment securities $ 565,869 $ 556,862 $ 512,475 $ 422,761 $ 418,261 $ 515,000 $ 410,819
Loans held for investment 1,732,955 1,475,011 1,397,219 1,346,100 1,297,615 1,496,146 1,303,010
Total interest-earning assets 2,624,287 2,474,397 2,321,195 2,244,563 2,244,727 2,422,136 2,167,363
Total interest-bearing deposits 1,698,550 1,488,076 1,527,732 1,543,645 1,609,075 1,590,492 1,644,859
FHLB advances 343,366 374,682 307,296 147,097 122,516 293,871 93,325
Repurchase agreements 10,913 558 2,721 17,806
Total interest-bearing liabilities 2,268,826 2,045,155 1,917,098 1,752,599 1,794,006 2,023,409 1,817,847
Shareholders’ equity 268,328 271,286 280,783 274,355 262,163 249,081 211,329
 
       

HomeStreet, Inc. and Subsidiaries

Summary Financial Data (continued)

 
Quarter Ended Year Ended
Dec. 31,       Sept. 30,       Jun. 30,       Mar. 31,       Dec. 31, Dec. 31,       Dec. 31,

(dollars in thousands, except share data)

2013 2013 2013 2013 2012 2013 2012
Financial performance:
Return on average common shareholders’ equity (3) (1.28 )% 2.45 % 17.19 % 15.95 % 32.80 % 9.56 % 38.86 %
Return on average tangible common shareholders' equity(2) (1.33 )% 2.45 % 17.22 % 15.97 % 32.85 % 9.66 % 38.94 %
Return on average assets (0.12 )% 0.24 % 1.86 % 1.75 % 3.46 % 0.88 % 3.42 %
Net interest margin (4) 3.34 % 3.41 % 3.10 % 2.81 % (5) 3.06 % 3.17 % (5) 2.89 %
Efficiency ratio (6) 102.46 % 99.20 % 75.65 % 75.22 % 63.22 % 86.54 % 61.45 %
Asset quality:
Allowance for credit losses $ 24,089 $ 24,894 $ 27,858 $ 28,594 $ 27,751 24,089 $ 27,751
Allowance for loan losses/total loans 1.26 % (7) 1.61 % 1.92 % 2.05 % 2.06 % 1.26 % (7) 2.06 %
Allowance for loan losses/nonaccrual loans 93.00 % 92.30 % 93.11 % 88.40 % 92.20 % 93.00 % 92.20 %
Total classified assets $ 50,600 $ 54,355 $ 74,721 $ 90,076 $ 86,270 $ 50,600 $ 86,270
Classified assets/total assets 1.65 % 1.90 % 2.69 % 3.59 % 3.28 % 1.65 % 3.28 %
Total nonaccrual loans(8) $ 25,707 (9) $ 26,753 $ 29,701 $ 32,133 $ 29,892 $ 25,707 (9) $ 29,892
Nonaccrual loans/total loans 1.36 % 1.74 % 2.06 % 2.32 % 2.24 % 1.36 % 2.24 %
Other real estate owned $ 12,911 $ 12,266 $ 11,949 $ 21,664 $ 23,941 $ 12,911 $ 23,941
Total nonperforming assets $ 38,618 (9) $ 39,019 $ 41,650 $ 53,797 $ 53,833 $ 38,618 (9) $ 53,833
Nonperforming assets/total assets 1.26 % 1.37 % 1.50 % 2.14 % 2.05 % 1.26 % 2.05 %
Net charge-offs $ 805 $ 1,464 $ 1,136 $ 1,157 $ 3,876 $ 4,562 $ 26,549
Regulatory capital ratios for the Bank:
Tier 1 leverage capital (to average assets) 9.99 % (10) 10.85 % 11.89 % 11.97 % 11.78 % 9.99 % (10) 11.78 %
Tier 1 risk-based capital (to risk-weighted assets) 14.33 % (10) 17.19 % 17.89 % 19.21 % 18.05 % 14.33 % (10) 18.05 %
Total risk-based capital (to risk-weighted assets) 15.51 % (10) 18.44 % 19.15 % 20.47 % 19.31 % 15.51 % (10) 19.31 %
Other data:
Full-time equivalent employees (ending) 1,502 1,426 1,309 1,218 1,099 1,502 1,099
 

(1) Share and per share data shown after giving effect to the 2-for-1 forward stock splits effective March 6, 2012 and November 5, 2012.

(2) 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 common 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.

(3) Net earnings available to common shareholders (annualized) divided by average common shareholders’ equity.

(4) Net interest income divided by total average interest-earning assets on a tax equivalent basis.

(5) Net interest margin for the first quarter of 2013 included $1.4 million in interest expense related to the correction of the cumulative effect of an error in prior years, resulting from the under accrual of interest due on the TruPS for which the Company had deferred the payment of interest. Excluding the impact of the prior period interest expense correction, the net interest margin was 3.06% for the quarter ended March 31, 2013 and 3.23% for the year ended December 31, 2013.

(6) Noninterest expense divided by total net revenue (net interest income and noninterest income).

(7) Includes acquired loans. Excluding acquired loans, allowance for loan losses/total loans is 1.40% at December 31, 2013.

(8) Generally, loans are placed on nonaccrual status when they are 90 or more days past due.

(9) Includes $6.5 million of nonperforming loans at December 31, 2013 that are guaranteed by the SBA.

(10) Regulatory capital ratios at December 31, 2013 are preliminary.

       
HomeStreet, Inc. and Subsidiaries
Consolidated Statements of Operations
 
Three Months Ended Year Ended
December 31, % December 31, %
(in thousands, except share data) 2013   2012 Change 2013   2012 Change
Interest income:
Loans $ 21,522 $ 18,713 15 % $ 76,442 $ 71,057 8
Investment securities available for sale 2,839 2,186 30 12,391 9,391 32
Other 61   27   126 143   243   (41 )
24,422 20,926 17 88,976 80,691 10
Interest expense:
Deposits 2,338 3,756 (38 ) 10,416 16,741 (38 )
Federal Home Loan Bank advances 419 282 49 1,532 1,788 (14 )
Securities sold under agreements to repurchase 1 (100 ) 11 70 (84 )
Long-term debt 272 292 (7 ) 2,546 1,333 91
Other 11   4   175 27   16   69
3,040   4,335   (30 ) 14,532   19,948   (27 )
Net interest income 21,382 16,591 29 74,444 60,743 23
Provision for credit losses   4,000   (100 ) 900   11,500   (92 )
Net interest income after provision for credit losses 21,382 12,591 70 73,544 49,243 49
Noninterest income:
Net gain on mortgage loan origination and sale activities 24,842 68,881 (64 ) 164,712 210,564 (22 )
Mortgage servicing income 7,807 651 NM 17,073 16,121 6
(Loss) income from WMS Series LLC (359 ) 516 (170 ) 704 4,264 (83 )
Loss on debt extinguishment NM (939 ) NM
Depositor and other retail banking fees 899 800 12 3,172 3,062 4
Insurance commissions 252 193 31 864 743 16
Gain on sale of investment securities available for sale 1,766 141 NM 1,772 1,490 19
Other 865   750   15 2,448   2,715   (10 )
36,072   71,932   (50 ) 190,745   238,020   (20 )
Noninterest expense:
Salaries and related costs 36,110 38,680 (7 ) 149,440 119,829 25
General and administrative 9,932 8,534 16 40,366 27,838 45
Legal 498 325 53 2,552 1,796 42
Consulting 3,294 1,291 155 5,637 3,037 86
Federal Deposit Insurance Corporation assessments 496 803 (38 ) 1,433 3,554 (60 )
Occupancy 4,098 2,425 69 13,765 8,585 60
Information services 4,369 2,739 60 14,491 8,867 63
Net cost of operation and sale of other real estate owned 71   1,169   (94 ) 1,811   10,085   (82 )
58,868   55,966   5 229,495   183,591   25
(Loss) income before income taxes (1,414 ) 28,557 (105 ) 34,794 103,672 (66 )
Income tax (benefit) expense (553 ) 7,060   (108 ) 10,985   21,546   (49 )
NET (LOSS) INCOME $ (861 ) $ 21,497   (104 ) $ 23,809   $ 82,126   (71 )
 
Basic (loss) income per share $ (0.06 ) $ 1.50 (104 ) $ 1.65 $ 6.17 (73 )
Diluted (loss) income per share $ (0.06 ) $ 1.46 (104 ) $ 1.61 $ 5.98 (73 )
Basic weighted average number of shares outstanding 14,523,405 14,371,120 1 14,412,059 13,312,939 8
Diluted weighted average number of shares outstanding 14,812,391 14,714,166 1 14,798,168 13,739,398 8
Dividends per share $ 0.11 $ N/A $ 0.33 $ N/A
 
...
 

HomeStreet, Inc. and Subsidiaries

Five Quarter Consolidated Statements of Operation

 
Quarter ended
Dec. 31,   Sept. 30,   Jun. 30,   Mar. 31,   Dec. 31,
(in thousands, except share data) 2013 2013 2013 2013 2012
Interest income:
Loans $ 21,522 $ 19,425 $ 17,446 $ 18,049 $ 18,713
Investment securities available for sale 2,839 3,895 2,998 2,659 2,186
Other 61   28   24   30   27
24,422 23,348 20,468 20,738 20,926
Interest expense:
Deposits 2,338 2,222 2,367 3,489 3,756
Federal Home Loan Bank advances 419 434 387 292 282
Securities sold under agreements to repurchase 11 1
Long-term debt 272 274 283 1,717 292
Other 11   6   5   5   4
3,040   2,936   3,053   5,503   4,335
Net interest income 21,382 20,412 17,415 15,235 16,591
Provision (reversal of provision) for credit losses   (1,500 ) 400   2,000   4,000
Net interest income after provision for credit losses 21,382 21,912 17,015 13,235 12,591
Noninterest income:
Net gain on mortgage loan origination and sale activities 24,842 33,491 52,424 53,955 68,881
Mortgage servicing income 7,807 4,011 2,183 3,072 651
(Loss) income from WMS Series LLC (359 ) (550 ) 993 620 516
Depositor and other retail banking fees 899 791 761 721 800
Insurance commissions 252 242 190 180 193
Gain (loss) on sale of investment securities available for sale 1,766 (184 ) 238 (48 ) 141
Other   865   373   767   443   750
  36,072   38,174   57,556   58,943   71,932
Noninterest expense:
Salaries and related costs 36,110 39,689 38,579 35,062 38,680
General and administrative 9,932 9,234 10,270 10,930 8,534
Legal 498 844 599 611 325
Consulting 3,294 884 763 696 1,291
Federal Deposit Insurance Corporation assessments 496 227 143 567 803
Occupancy 4,098 3,484 3,381 2,802 2,425
Information services 4,369 3,552 3,574 2,996 2,739
Net cost (benefit) of operation and sale of other real estate owned 71   202   (597 ) 2,135   1,169
58,868   58,116   56,712   55,799   55,966
(Loss) income before income tax expense (1,414 ) 1,970 17,859 16,379 28,557
Income tax (benefit) expense (553 ) 308   5,791   5,439   7,060
NET (LOSS) INCOME $ (861 ) $ 1,662   $ 12,068   $ 10,940   $ 21,497
 
Basic (loss) income per share $ (0.06 ) $ 0.12 $ 0.84 $ 0.76 $ 1.50
Diluted (loss) income per share $ (0.06 ) $ 0.11 $ 0.82 $ 0.74 $ 1.46
Basic weighted average number of shares outstanding 14,523,405 14,388,559 14,376,580 14,359,691 14,371,120
Diluted weighted average number of shares outstanding 14,812,391 14,790,671 14,785,481 14,804,129 14,714,166
Dividends per share $ 0.11 $ 0.11 $ 0.11 $ $
 
     

HomeStreet, Inc. and Subsidiaries

Consolidated Statements of Financial Condition

 
Dec. 31, Dec. 31, %
(in thousands, except share data) 2013 2012 Change
Assets:
Cash and cash equivalents (including interest-bearing instruments of $9,436 and $12,414) $ 33,908 $ 25,285 34 %
Investment securities (includes $481,683 and $416,329 carried at fair value) 498,816 416,517 20
Loans held for sale (includes $279,385 and $607,578 carried at fair value) 279,941 620,799 (55 )
Loans held for investment (net of allowance for loan losses of $24,089 and $27,561) 1,872,716 1,308,974 43
Mortgage servicing rights (includes $153,128 and $87,396 carried at fair value) 162,463 95,493 70
Other real estate owned 12,911 23,941 (46 )
Federal Home Loan Bank stock, at cost 35,288 36,367 (3 )
Premises and equipment, net 36,260 15,232 138
Goodwill 10,849 424 NM
Accounts receivable and other assets 122,902   88,198   39
Total assets $ 3,066,054   $ 2,631,230   17
Liabilities and shareholders’ equity:
Liabilities:
Deposits $ 2,203,238 $ 1,976,835 11
Federal Home Loan Bank advances 446,590 259,090 72
Accounts payable and other liabilities 85,489 69,686 23
Long-term debt 64,811   61,857   5
Total liabilities 2,800,128   2,367,468   18
Shareholders’ equity:
Preferred stock, no par value
Authorized 10,000 shares
Issued and outstanding, 0 shares and 0 shares
Common stock, no par value
Authorized 160,000,000
Issued and outstanding, 14,799,991 shares and 14,382,638 shares 511 511
Additional paid-in capital 94,474 90,189 5
Retained earnings 182,935 163,872 12
Accumulated other comprehensive (loss) income (11,994 ) 9,190   NM
Total shareholders’ equity 265,926   263,762   1
Total liabilities and shareholders’ equity $ 3,066,054   $ 2,631,230   17
 
         

HomeStreet, Inc. and Subsidiaries

Five Quarter Consolidated Statements of Financial Condition

 
Dec. 31, Sept. 30, Jun. 30, Mar. 31, Dec. 31,
(in thousands, except share data) 2013 2013 2013 2013 2012
Assets:
Cash and cash equivalents $ 33,908 $ 37,906 $ 21,645 $ 18,709 $ 25,285
Investment securities 498,816 574,894 539,480 416,561 416,517
Loans held for sale 279,941 385,110 471,191 430,857 620,799
Loans held for investment, net 1,872,716 1,510,169 1,416,439 1,358,982 1,308,974
Mortgage servicing rights 162,463 146,300 137,385 111,828 95,493
Other real estate owned 12,911 12,266 11,949 21,664 23,941
Federal Home Loan Bank stock, at cost 35,288 35,370 35,708 36,037 36,367
Premises and equipment, net 36,260 24,684 18,362 16,893 15,232
Goodwill 10,849 424 424 424 424
Accounts receivable and other assets 122,902   127,200   123,541   96,296   88,198
Total assets $ 3,066,054   $ 2,854,323   $ 2,776,124   $ 2,508,251   $ 2,631,230
Liabilities and shareholders’ equity:
Liabilities:
Deposits $ 2,203,238 $ 2,098,076 $ 1,963,123 $ 1,934,704 $ 1,976,835
Federal Home Loan Bank advances 446,590 338,690 409,490 183,590 259,090
Accounts payable and other liabilities 85,489 87,492 73,333 57,695 69,686
Long-term debt 64,811   61,857   61,857   61,857   61,857
Total liabilities 2,800,128   2,586,115   2,507,803   2,237,846   2,367,468
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 94,474 91,415 91,054 90,687 90,189
Retained earnings 182,935 185,379 185,300 173,229 163,872
Accumulated other comprehensive (loss) income (11,994 ) (9,097 ) (8,544 ) 5,978   9,190
Total shareholders’ equity 265,926   268,208   268,321   270,405   263,762
Total liabilities and shareholders’ equity $ 3,066,054   $ 2,854,323   $ 2,776,124   $ 2,508,251   $ 2,631,230
 
 

HomeStreet, Inc. and Subsidiaries

Average Balances, Yields and Rates Paid (Taxable-equivalent basis)

 
Quarter Ended December 31,  
2013     2012  
Average     Average Average     Average
(in thousands) Balance Interest Yield/Cost Balance Interest Yield/Cost
Assets:
Interest-earning assets: (1)
Cash & cash equivalents $ 46,718 $ 27 0.23 % $ 28,029 $ 26 0.39 %
Investment securities 565,869 3,433 2.43 % 418,261 2,682 2.56 %
Loans held for sale 278,745 2,962 4.25 % 500,822 4,175 3.36 %
Loans held for investment 1,732,955   18,589   4.28 % 1,297,615   14,571   4.48 %
Total interest-earning assets 2,624,287 25,011 3.80 % 2,244,727 21,454 3.82 %
Noninterest-earning assets (2) 298,965   238,433  
Total assets $ 2,923,252   $ 2,483,160  
Liabilities and shareholders’ equity:
Deposits:
Interest-bearing demand accounts $ 290,028 269 0.37 % $ 159,192 130 0.32 %
Savings accounts 148,029 187 0.50 % 104,748 105 0.40 %
Money market accounts 912,739 1,009 0.44 % 677,135 855 0.50 %
Certificate accounts 347,754   736   0.84 % 668,000   2,666   1.59 %
Total interest-bearing deposits 1,698,550 2,201 0.51 % 1,609,075 3,756 0.93 %
FHLB advances 343,366 419 0.48 % 122,516 282 0.95 %
Securities sold under agreements to repurchase % 558 1 0.26 %
Long-term debt 63,784 272 1.67 % 61,857 292 1.89 %
Other borrowings 163,126   148   0.36 %   4   %
Total interest-bearing liabilities 2,268,826 3,040 0.53 % 1,794,006 4,335 0.96 %
Noninterest-bearing liabilities 386,098   426,991  
Total liabilities 2,654,924   2,220,997  
Shareholders’ equity 268,328   262,163  
Total liabilities and shareholders’ equity $ 2,923,252   $ 2,483,160  
Net interest income (3) $ 21,971   $ 17,119  
Net interest spread 3.31 % 2.86 %
Impact of noninterest-bearing sources 0.07 % 0.20 %
Net interest margin 3.34 % 3.06 %
 

(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 $589 thousand and $528 thousand for the quarters ended December 31, 2013 and December 31, 2012, respectively. The estimated federal statutory tax rate was 35% for the periods presented.

 

HomeStreet, Inc. and Subsidiaries

Average Balances, Yields and Rates Paid (Taxable-equivalent basis)

 
Year Ended December 31,  
2013     2012  
Average     Average Average     Average
(in thousands) Balance Interest Yield/Cost Balance Interest Yield/Cost
Assets:
Interest-earning assets: (1)
Cash & cash equivalents $ 29,861 $ 73 0.24 % $ 94,478 $ 231 0.24 %
Investment securities 515,000 14,608 2.84 % 410,819 11,040 2.69 %
Loans held for sale 381,129 14,180 3.72 % 359,056 12,719 3.56 %
Loans held for investment 1,496,146   62,384   4.17 % 1,303,010   58,490   4.49 %
Total interest-earning assets 2,422,136 91,245 3.77 % 2,167,363 82,480 3.81 %
Noninterest-earning assets (2) 296,078   236,497  
Total assets $ 2,718,214   $ 2,403,860  
Liabilities and shareholders’ equity:
Deposits:
Interest-bearing demand accounts $ 241,348 925 0.38 % $ 151,029 498 0.33 %
Savings accounts 122,602 545 0.44 % 90,246 395 0.44 %
Money market accounts 810,666 3,899 0.48 % 613,546 3,243 0.53 %
Certificate accounts 415,876   4,816   1.16 % 790,038   12,605   1.60 %
Total interest-bearing deposits 1,590,492 10,185 0.64 % 1,644,859 16,741 1.02 %
FHLB advances 293,871 1,532 0.52 % 93,325 1,788 1.91 %
Securities sold under agreements to repurchase 2,721 11 0.40 % 17,806 70 0.39 %
Long-term debt 62,349 2,546 4.03 % (3) 61,857 1,333 2.16 %
Other borrowings 73,976   257   0.36 %   16   %
Total interest-bearing liabilities 2,023,409 14,531 0.72 % 1,817,847 19,948 1.10 %
Noninterest-bearing liabilities 445,724   374,684  
Total liabilities 2,469,133   2,192,531  
Shareholders’ equity 249,081   211,329  
Total liabilities and shareholders’ equity $ 2,718,214   $ 2,403,860  
Net interest income (4) $ 76,714   $ 62,532  
Net interest spread 3.05 % 2.71 %
Impact of noninterest-bearing sources 0.12 % 0.18 %
Net interest margin 3.17 % (3) 2.89 %
 

(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) Net interest margin for the first quarter of 2013 included $1.4 million in interest expense related to the correction of the cumulative effect of an error in prior years, resulting from the under accrual of interest due on the TruPS for which the Company had deferred the payment of interest. Excluding the impact of the prior period interest expense correction, the net interest margin was 3.23% for the twelve months ended December 31, 2013.

(4) Includes taxable-equivalent adjustments primarily related to tax-exempt income on certain loans and securities of $2.3 million and $1.8 million for the twelve months ended December 31, 2013 and December 31, 2012, respectively. The estimated federal statutory tax rate was 35% for the periods presented.

 

HomeStreet, Inc. and Subsidiaries

Commercial and Consumer Banking Segment

 
Quarter ended
Dec. 31,   Sept. 30,   Jun. 30,   Mar. 31,   Dec. 31,
(in thousands) 2013 2013 2013 2013 2012
 
Net interest income $ 18,160 $ 16,095 $ 13,790 $ 11,127 $ 12,131
Provision (reversal of reserve) for loan losses (1,500 ) 400 2,000 4,000
Noninterest income 2,885 1,229 1,537 2,390 2,530
Noninterest expense 20,822   13,813   13,446   15,686   16,384  
Income (loss) before income taxes 223 5,011 1,481 (4,169 ) (5,723 )
Income tax expense (benefit) (21 ) 1,220   65   (1,355 ) (1,373 )
Net income (loss) $ 244   $ 3,791   $ 1,416   $ (2,814 ) $ (4,350 )
 
Pre-tax pre-provision profit (loss) (1) $ 223 $ 3,511 $ 1,881 $ (2,169 ) $ (1,723 )
Efficiency ratio (2) 98.94 % 79.73 % 87.73 % 116.05 % 111.75 %
Full-time equivalent employees (ending) 577 504 476 440 413
 
Net gain on mortgage loan origination and sale activity:
Multifamily $ 559 $ 2,113 $ 709 $ 1,925 $ 1,631
Other 964          
$ 1,523   $ 2,113   $ 709   $ 1,925   $ 1,631  
 
Production volumes:
Multifamily mortgage originations 16,325 10,734 14,790 49,119 40,244
Multifamily mortgage loans sold 15,775 21,998 15,386 50,587 33,689
 

(1) Pre-tax pre-provision profit is total net revenue (net interest income and noninterest income) less noninterest expense. The Company believes that this financial measure is useful in assessing the ability of a lending institution to generate income in excess of its provision for loan losses.

(2) Noninterest expense divided by total net revenue (net interest income and noninterest income).

           

Commercial Mortgage Servicing Income

 
Quarter ended
Dec. 31,       Sept. 30,       Jun. 30,       Mar. 31,       Dec. 31,
(in thousands) 2013 2013 2013 2013 2012
 
Servicing income, net:
Servicing fees and other $ 834 $ 789 $ 739 $ 812 $ 827
Amortization of multifamily MSRs (457 ) (433 ) (423 ) (490 ) (463 )
Commercial mortgage servicing income $ 377   $ 356   $ 316   $ 322   $ 364  
 
                                   
HomeStreet, Inc. and Subsidiaries

Commercial and Consumer Banking Segment (continued)

 

Commercial Loans Serviced for Others

 
Dec. 31, Sept. 30, Jun. 30, Mar. 31, Dec. 31,
(in thousands) 2013 2013 2013 2013 2012
 
Commercial
Multifamily $ 720,429 $ 722,767 $ 720,368 $ 737,007 $ 727,118
Other 95,673   50,629   51,058   52,825   53,235
Total commercial loans serviced for others $ 816,102   $ 773,396   $ 771,426   $ 789,832   $ 780,353
 

Commercial Multifamily Capitalized Mortgage Servicing Rights

 

           
Quarter ended
Dec. 31,         Sept. 30,         Jun. 30,         Mar. 31,         Dec. 31,
(in thousands) 2013 2013 2013 2013 2012
 
Beginning balance $ 9,403 $ 9,239 $ 9,150 $ 8,097 $ 7,725
Originations 375 597 512 1,543 835
Amortization (443 ) (433 ) (423 ) (490 ) (463 )
Ending balance $ 9,335   $ 9,403   $ 9,239   $ 9,150   $ 8,097  
Ratio of MSR carrying value to related loans serviced for others 1.21 % 1.22 % 1.20 % 1.16 % 1.04 %
MSR servicing fee multiple (1) 2.91 2.94 2.93 2.89 2.70
Weighted-average note rate (loans serviced for others) 5.12 % 5.22 % 5.25 % 5.25 % 5.38 %
Weighted-average servicing fee (loans serviced for others) 0.42 % 0.41 % 0.41 % 0.40 % 0.38 %
 

(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.

                                   
HomeStreet, Inc. and Subsidiaries

Commercial and Consumer Banking Segment (continued)

 

Five Quarter Investment Securities

 
Dec. 31, Sept. 30, Jun. 30, Mar. 31, Dec. 31,
(in thousands, except for duration data) 2013 2013 2013 2013 2012
 
Available for sale:
Mortgage-backed securities:
Residential $ 133,910 $ 144,263 $ 120,939 $ 69,448 $ 62,853
Commercial 13,433 13,720 13,892 14,407 14,380
Municipal bonds 130,850 147,441 147,675 131,047 129,175
Collateralized mortgage obligations:
Residential 90,327 153,466 137,543 150,113 170,199
Commercial 16,845 16,991 17,533 19,795 9,043
Corporate debt securities 68,866 69,963 70,973
U.S. Treasury 27,452   27,747   29,609   30,428   30,679
Total available for sale 481,683 573,591 538,164 415,238 416,329
Held to maturity 17,133   1,303   1,316   1,323   188
$ 498,816   $ 574,894   $ 539,480   $ 416,561   $ 416,517
Weighted average duration in years:
Available for sale 5.4 5.3 5.5 5.0 4.9
 

Five Quarter Loans Held for Investment

                                           
Dec. 31, Sept. 30, Jun. 30, Mar. 31, Dec. 31,
(in thousands) 2013 2013 2013 2013 2012
Consumer loans
Single family $ 904,913 $ 818,992 $ 772,450 $ 730,553 $ 673,865
Home equity 135,650   129,785   132,218   132,537   136,746  
1,040,563 948,777 904,668 863,090 810,611
Commercial loans
Commercial real estate 477,954 400,150 382,345 387,819 361,879
Multifamily 79,216 42,187 26,120 21,859 17,012
Construction/land development 130,465 79,435 61,125 43,600 71,033
Commercial business 171,646   67,547   73,202   73,851   79,576  
859,281   589,319   542,792   527,129   529,500  
1,899,844 1,538,096 1,447,460 1,390,219 1,340,111
Net deferred loan fees and discounts (3,219 ) (3,233 ) (3,366 ) (2,832 ) (3,576 )
1,896,625 1,534,863 1,444,094 1,387,387 1,336,535
Allowance for loan losses (23,908 ) (24,694 ) (27,655 ) (28,405 ) (27,561 )
$ 1,872,717   $ 1,510,169   $ 1,416,439   $ 1,358,982   $ 1,308,974  
 
   
HomeStreet, Inc. and Subsidiaries

Commercial and Consumer Banking Segment (continued)

 

Five Quarter Credit Quality Activity

Allowance for Credit Losses (roll-forward)

 
Quarter ended
Dec. 31,     Sept. 30,     Jun. 30,     Mar. 31,     Dec. 31,
(in thousands) 2013 2013 2013 2013 2012
 
Beginning balance $ 24,894 $ 27,858 $ 28,594 $ 27,751 $ 27,627
Provision (reversal of provision) for credit losses (1,500 ) 400 2,000 4,000
(Charge-offs), net of recoveries (805 ) (1,464 ) (1,136 ) (1,157 ) (3,876 )
Ending balance $ 24,089   $ 24,894   $ 27,858   $ 28,594   $ 27,751  
Components:
Allowance for loan losses $ 23,908 $ 24,694 $ 27,655 $ 28,405 $ 27,561
Allowance for unfunded commitments 181   200   203   189   190  
Allowance for credit losses $ 24,089   $ 24,894   $ 27,858   $ 28,594   $ 27,751  
 
Allowance as a % of loans held for investment 1.26 % (1) 1.61 % 1.92 % 2.05 % 2.06 %
Allowance as a % of nonaccrual loans 93.00 % 92.30 % 93.11 % 88.40 % 92.20 %
 

(1) Includes acquired loans. Excluding acquired loans, allowance for loan losses/total loans was 1.40% at December 31, 2013.

   

Nonperforming Assets (NPAs) roll-forward

Quarter ended
Dec. 31,     Sept. 30,       Jun. 30,       Mar. 31,       Dec. 31,
(in thousands) 2013 2013 2013 2013 2012
 
Beginning balance $ 39,019 $ 41,650 $ 53,797 $ 53,833 $ 55,250
Additions 9,959 (1) 5,517 4,340 6,511 9,973
Reductions:
Charge-offs (805 ) (1,464 ) (1,136 ) (1,157 ) (3,876 )
OREO sales (1,442 ) (2,573 ) (6,746 ) (2,117 ) (2,028 )
OREO writedowns and other adjustments (108 ) (208 ) 300 (638 ) (1,216 )
Principal paydown, payoff advances and other adjustments (4,131 ) (3,079 ) (7,423 ) (2,529 ) (1,807 )
Transferred back to accrual status (3,874 ) (824 ) (1,482 ) (106 ) (2,463 )
Total reductions (10,360 ) (8,148 ) (16,487 ) (6,547 ) (11,390 )
Net reductions (401 ) (2,631 ) (12,147 ) (36 ) (1,417 )
Ending balance $ 38,618   (2) $ 39,019   $ 41,650   $ 53,797   $ 53,833  
 

(1) Additions to NPAs include $7.9 million of acquired nonperforming assets during the quarter ended December 31, 2013.

(2) Includes $6.5 million of nonperforming loans at December 31, 2013 that are guaranteed by the SBA.

           
HomeStreet, Inc. and Subsidiaries

Commercial and Consumer Banking Segment (continued)

 

Five Quarter Nonperforming Assets by Loan Class

 

Dec. 31, Sept. 30, Jun. 30, Mar. 31, Dec. 31,
(in thousands) 2013 2013 2013 2013 2012
 
Loans accounted for on a nonaccrual basis:
Consumer
Single family $ 8,861 $ 12,648 $ 14,494 $ 15,282 $ 13,304
Home equity 1,846   2,295   3,367   2,917   2,970  
10,707 14,943 17,861 18,199 16,274
Commercial
Commercial real estate 12,257 6,861 6,051 6,122 6,403
Construction/land development 3,544 4,051 5,974 5,042
Commercial business 2,743   1,405   1,738   1,838   2,173  
15,000   11,810   11,840   13,934   13,618  
Total loans on nonaccrual $ 25,707   $ 26,753   $ 29,701   $ 32,133   $ 29,892  
Nonaccrual loans as a % of total loans 1.36 % 1.74 % 2.06 % 2.32 % 2.24 %
 
Other real estate owned:
Consumer
Single family $ 5,246 $ 5,494 $ 4,468 $ 4,069 $ 4,071
Commercial
Commercial real estate 1,688 1,184 8,440 10,283
Construction/land development 5,977 5,815 6,297 9,155 9,587
Commercial business   957        
7,665   6,772   7,481   17,595   19,870  
Total other real estate owned $ 12,911   $ 12,266   $ 11,949   $ 21,664   $ 23,941  
 
Nonperforming assets:
Consumer
Single family $ 14,107 $ 18,142 $ 18,962 $ 19,351 $ 17,375
Home equity 1,846   2,295   3,367   2,917   2,970  
15,953 20,437 22,329 22,268 20,345
Commercial
Commercial real estate 13,945 6,861 7,235 14,562 16,686
Construction/land development 5,977 9,359 10,348 15,129 14,629
Commercial business 2,743   2,362   1,738   1,838   2,173  
22,665   18,582   19,321   31,529   33,488  
Total nonperforming assets $ 38,618   (1) $ 39,019   $ 41,650   $ 53,797   $ 53,833  
Nonperforming assets as a % of total assets 1.26 % 1.37 % 1.50 % 2.14 % 2.05 %
 

(1) Includes $6.5 million of nonperforming loans at December 31, 2013 that are guaranteed by the SBA.

             

HomeStreet, Inc. and Subsidiaries

Commercial and Consumer Banking Segment (continued)

 

Delinquencies by Loan Class

 
 
90 days or
30-59 days 60-89 days more Total past Total
(in thousands) past due past due past due due Current loans
 
At December 31, 2013
Total loans held for investment $ 6,841 $ 4,976 $ 72,518 $ 84,335 $ 1,815,509 $ 1,899,844
Less: FHA/VA loans(1) 4,286   3,730   46,811   54,827   37,177   92,004  
Total loans, excluding FHA/VA loans $ 2,555 $ 1,246 $ 25,707 $ 29,508 $ 1,778,332 $ 1,807,840
 
Loans by segment and class, excluding FHA/VA loans:
Consumer loans
Single family residential $ 2,180 $ 1,171 $ 8,861 $ 12,212 $ 800,697 $ 812,909
Home equity 375   75   1,846   2,296   133,354   135,650  
2,555 1,246 10,707 14,508 934,051 948,559
Commercial loans
Commercial real estate 12,257 12,257 465,697 477,954
Multifamily residential 79,216 79,216
Construction/land development 130,465 130,465
Commercial business     2,743   2,743   168,903   171,646  
    15,000   15,000   844,281   859,281  
$ 2,555   $ 1,246   $ 25,707   (2) $ 29,508   (2) $ 1,778,332   $ 1,807,840  
As a percentage of total loans, excluding FHA/VA loans 0.14 % 0.07 % 1.42 % 1.63 % 98.37 % 100.00 %
 
At December 31, 2012
Total loans held for investment $ 12,703 $ 4,974 $ 70,550 $ 88,227 $ 1,251,884 $ 1,340,111
Less: FHA/VA loans(1) 6,839   3,700   40,658   51,197   24,257   75,454  
Total loans, excluding FHA/VA loans $ 5,864 $ 1,274 $ 29,892 $ 37,030 $ 1,227,627 $ 1,264,657
 
Loans by segment and class, excluding FHA/VA loans:
Consumer loans
Single family (1) $ 5,077 $ 1,032 $ 13,304 $ 19,413 $ 578,998 $ 598,411
Home equity 787   242   2,970   3,999   132,747   136,746  
5,864 1,274 16,274 23,412 711,745 735,157
Commercial loans
Commercial real estate 6,403 6,403 355,476 361,879
Multifamily 17,012 17,012
Construction/land development 5,042 5,042 65,991 71,033
Commercial business     2,173   2,173   77,403   79,576  
    13,618   13,618   515,882   529,500  
$ 5,864   $ 1,274   $ 29,892   $ 37,030   $ 1,227,627   $ 1,264,657  
As a % of total loans, excluding FHA/VA loans 0.46 % 0.10 % 2.36 % 2.93 % 97.07 % 100.00 %
 

(1) Represents loans whose repayments are insured by the FHA or guaranteed by the VA.

(2) Includes $6.5 million of nonperforming loans at December 31, 2013 that are guaranteed by the SBA.

                   
HomeStreet, Inc. and Subsidiaries

Commercial and Consumer Banking Segment (continued)

 

Troubled Debt Restructurings (TDRs) by Accrual and Nonaccrual Status

 

 
Dec. 31, Sept. 30, Jun. 30, Mar. 31, Dec. 31,
(in thousands) 2013 2013 2013 2013 2012
Accrual
Consumer loans
Single family(1) $ 70,304 $ 71,686 $ 71,438 $ 69,792 $ 67,483
Home equity 2,558   2,426   2,326   2,338   2,288
72,862 74,112 73,764 72,130 69,771
Commercial loans
Commercial real estate 19,620 20,385 21,617 21,046 21,071
Multifamily 3,163 3,190 3,198 3,211 3,221
Construction/land development 6,148 3,122 3,718 4,487 6,365
Commercial business 112   120   129   137   147
29,043   26,817   28,662   28,881   30,804
$ 101,905   $ 100,929   $ 102,426   $ 101,011   $ 100,575
Nonaccrual
Consumer loans
Single family $ 4,017 $ 4,819 $ 4,536 $ 4,593 $ 3,931
Home equity 86   132   121   134   465
4,103 4,951 4,657 4,727 4,396
Commercial loans
Commercial real estate 628 770 770
Construction/land development 3,544 4,051 4,625 5,042
Commercial business        
628   3,544   4,051   5,395   5,812
$ 4,731   $ 8,495   $ 8,708   $ 10,122   $ 10,208
Total
Consumer loans
Single family(1) $ 74,321 $ 76,505 $ 75,974 $ 74,385 $ 71,414
Home equity 2,644   2,558   2,447   2,472   2,753
76,965 79,063 78,421 76,857 74,167
Commercial loans
Commercial real estate 20,248 20,385 21,617 21,816 21,841
Multifamily 3,163 3,190 3,198 3,211 3,221
Construction/land development 6,148 6,666 7,769 9,112 11,407
Commercial business 112   120   129   137   147
29,671   30,361   32,713   34,276   36,616
$ 106,636   $ 109,424   $ 111,134   $ 111,133   $ 110,783
 

(1) Includes loan balances insured by the FHA or guaranteed by the VA of $17.8 million, $17.6 million, $15.9 million, $15.2 million and $13.1 million at December 31, 2013, September 30, 2013, June 30, 2013, March 31, 2013 and December 31, 2012, respectively.

 
HomeStreet, Inc. and Subsidiaries

Commercial and Consumer Banking Segment (continued)

 

Troubled Debt Restructurings (TDRs) - Re-Defaults

 
 
Quarter ended
Dec. 31,   Sept. 30,   Jun. 30,   Mar. 31,   Dec. 31,
(in thousands) 2013 2013 2013 2013 2012
 
Recorded investment of re-defaults(1)
Consumer loans
Single family $ 267 $ 1,017 $ 133 $ 1,423 $ 1,386
Home equity       22  
267 1,017 133 1,445 1,386
Commercial loans
Commercial real estate       770  
$ 267   $ 1,017   $ 133   $ 2,215   $ 1,386
 

(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.

                             
HomeStreet, Inc. and Subsidiaries

Commercial and Consumer Banking Segment (continued)

 

Five Quarter Deposits

 
 
Dec. 31, Sept. 30, Jun. 30,

Mar. 31,

Dec. 31,
(in thousands) 2013 2013 2013 2013 2012
 
Deposits by product:
Noninterest-bearing accounts - checking and savings $ 164,437 $ 134,725 $ 121,281 $ 83,202 $ 83,563
Interest-bearing transaction and savings deposits:
NOW accounts 290,382 272,029 279,670 236,744 174,699
Statement savings accounts due on demand 156,181 135,428 115,817 108,627 103,932
Money market accounts due on demand 919,322   879,122   813,608   734,647   683,906  
Total interest-bearing transaction and savings deposits 1,365,885   1,286,579   1,209,095   1,080,018   962,537  
Total transaction and savings deposits 1,530,322   1,421,304   1,330,376   1,163,220   1,046,100  
Certificates of deposit 514,400 460,223 403,636 523,208 655,467
Noninterest-bearing accounts - other 158,516   216,549   229,111   248,276   275,268  
Total deposits $ 2,203,238   $ 2,098,076   $ 1,963,123   $ 1,934,704   $ 1,976,835  
 
 
Percent of total deposits:
Noninterest-bearing accounts - checking and savings 7.5 % 6.4 % 6.2 % 4.3 % 4.2 %
Interest-bearing transaction and savings deposits:
NOW accounts 13.2 13.0 14.2 12.2 8.8
Statement savings accounts due on demand 7.1 6.5 5.9 5.6 5.3
Money market accounts due on demand 41.7   41.9   41.4   38.0   34.6  
Total interest-bearing transaction and savings deposits 62.0   61.4   61.5   55.8   48.7  
Total transaction and savings deposits 69.5   67.8   67.7   60.1   52.9  
Certificates of deposit 23.3 21.9 20.6 27.0 33.2
Noninterest-bearing accounts - other 7.2   10.3   11.7   12.9   13.9  
Total deposits 100.0 % 100.0 % 100.0 % 100.0 % 100.0 %
 
     
HomeStreet, Inc. and Subsidiaries
Mortgage Banking Segment
 
 
Quarter ended
Dec. 31,         Sept. 30,         Jun. 30,         Mar. 31,         Dec. 31,
(in thousands) 2013 2013 2013 2013 2012
 
Net interest income $ 3,222 $ 4,317 $ 3,625 $ 4,108 $ 4,460
Noninterest income 33,187 36,945 56,019 56,553 69,402
Noninterest expense 38,046   44,303   43,266   40,113   39,582  
Income before income taxes (1,637 ) (3,041 ) 16,378 20,548 34,280
Income tax expense (532 ) (912 ) 5,726   6,794   8,433  
Net income $ (1,105 ) $ (2,129 ) $ 10,652   $ 13,754   $ 25,847  
 
Efficiency ratio (1) 104.50 % 107.37 % 72.54 % 66.13 % 53.59 %
Full-time equivalent employees (ending) 925 922 833 779 686
 
Production volumes for sale to the secondary market:
Single family mortgage closed loan volume (2)(3) $ 773,146 $ 1,187,061 $ 1,307,286 $ 1,192,156 $ 1,518,971
Single family mortgage interest rate lock commitments(2) 662,015 786,147 1,423,290 1,035,822 1,254,954
Single family mortgage loans sold(2) 816,555 1,326,888 1,229,686 1,360,344 1,434,947
 

(1) Noninterest expense divided by total net revenue (net interest income and noninterest income).

(2) Includes loans originated by WMS Series LLC and purchased by HomeStreet, Inc.

(3) Represents single family mortgage production volume designated for sale to the secondary market during each respective period.

       
HomeStreet, Inc. and Subsidiaries

Mortgage Banking Segment (continued)

 

Mortgage Banking Net Gain on Sale to the Secondary Market

 
 
Quarter ended
Dec. 31,         Sept. 30,         Jun. 30,         Mar. 31,       Dec. 31,
(in thousands) 2013 2013 2013 2013 2012
 
Net gain on mortgage loan origination and sale activities:(1)
Single family:
Servicing value and secondary market gains(2) $ 17,632 $ 23,076 $ 43,448 $ 44,235 $ 58,031
Loan origination and funding fees 5,687   8,302   8,267   7,795   9,219  
Total mortgage banking net gain on mortgage loan origination and sale activities(1) $ 23,319   $ 31,378   $ 51,715   $ 52,030   $ 67,250  
 
Composite Margin (in basis points):
Servicing value and secondary market gains / interest rate lock commitments(4) 266 294 305 385 (6) 452 (7)
Loan origination and funding fees / retail mortgage originations(5) 84   81   75   76   71  
Composite Margin 350   375   380   461   (6) 523   (7)
 

(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) Represents changes in estimated probable future repurchase losses on previously sold loans.

(4) Servicing value and secondary market gains have been aggregated and are stated as a percentage of interest rate lock commitments. In previous quarters, the value of originated mortgage servicing rights was presented as a separate component of the composite margin and stated as a percentage of mortgage loans sold. Prior periods have been revised to conform to the current presentation.

(5) 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.

(6) Excludes the impact of a $4.3 million upward adjustment related to a change in accounting estimate that resulted from a change in the application of the valuation methodology used to value the Company's interest rate lock commitments. Including the impact of this cumulative effect adjustment, the secondary market gain margin and Composite Margin were 427 and 503 basis points, respectively, in the first quarter of 2013.

(7) Excludes the impact of a $1.3 million correction that was recorded in secondary market gains in the fourth quarter of 2012 for the cumulative effect of an error in prior years related to the fair value measurement of loans held for sale. Including the impact of this correction, the secondary market gain margin and Composite Margin were 462 and 533 basis points, respectively, in the fourth quarter of 2012.

     
HomeStreet, Inc. and Subsidiaries
Mortgage Banking Segment (continued)
 
Single Family Mortgage Servicing Income
 
 
Quarter ended
Dec. 31,         Sept. 30,         Jun. 30,         Mar. 31,         Dec. 31,
(in thousands) 2013 2013 2013 2013 2012
 
Servicing income, net:
Servicing fees and other $ 8,843 $ 8,145 $ 7,216 $ 6,795 $ 6,696
Changes in fair value of single family MSRs due to modeled amortization (1) (3,637 ) (5,221 ) (6,569 ) (5,106 ) (6,280 )
5,206 2,924 647 1,689 416
Risk management, single family MSRs:
Changes in fair value of MSR due to changes in model inputs and/or assumptions (2) 10,264 (2,900 ) 14,725 3,579 2,489
Net gain (loss) from derivatives economically hedging MSR (8,040 ) 3,631   (13,505 ) (2,518 ) (2,618 )
2,224   731   1,220   1,061   (129 )
Mortgage servicing income $ 7,430   $ 3,655   $ 1,867   $ 2,750   $ 287  
 

(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.

                                       

Single Family Loans Serviced for Others

 
 
Dec. 31, Sept. 30, Jun. 30, Mar. 31, Dec. 31,
(in thousands) 2013 2013 2013 2013 2012
 
Single family
U.S. government agency $ 11,467,853 $ 10,950,086 $ 10,063,558 $ 9,352,404 $ 8,508,458
Other 327,768   336,158   341,055   348,992   362,230
Total single family loans serviced for others $ 11,795,621   $ 11,286,244   $ 10,404,613   $ 9,701,396   $ 8,870,688
 
     
HomeStreet, Inc. and Subsidiaries
Mortgage Banking Segment (continued)
 

Single Family Capitalized Mortgage Servicing Rights

 
 
Quarter ended
Dec. 31,       Sept. 30,       Jun. 30,       Mar. 31,       Dec. 31,
(in thousands) 2013 2013 2013 2013 2012
 
Beginning balance $ 136,897 $ 128,146 $ 102,678 $ 87,396 $ 73,787
Additions and amortization:
Originations 9,602 16,862 17,306 16,806 17,397
Purchases 2 10 6 3 3
Changes due to modeled amortization (1) (3,637 ) (5,221 ) (6,569 ) (5,106 ) (6,280 )
Net additions and amortization 5,967 11,651 10,743 11,703 11,120
Changes in fair value due to changes in model inputs and/or assumptions (2) 10,264   (2,900 ) 14,725   3,579   2,489  
Ending balance $ 153,128   $ 136,897   $ 128,146   $ 102,678   $ 87,396  
Ratio of MSR carrying value to related loans serviced for others 1.30 % 1.21 % 1.23 % 1.03 % 0.99 %
MSR servicing fee multiple (3) 4.39 4.08 4.05 3.36 3.13
Weighted-average note rate (loans serviced for others) 4.08 % 4.13 % 4.14 % 4.24 % 4.34 %
Weighted-average servicing fee (loans serviced for others) 0.30 % 0.30 % 0.30 % 0.31 % 0.31 %
 

(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) 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.

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 Year Ended
Dec. 31,     Sept. 30,     Jun. 30,     Mar. 31,     Dec. 31, Dec. 31,     Dec. 31,

(dollars in thousands, except share data)

2013 2013 2013 2013 2012 2013 2012
 
Shareholders' equity $ 265,926 $ 268,208 $ 268,321 $ 270,405 $ 263,762 $ 265,926 $ 263,762
Less: Goodwill and other intangibles (13,073 ) (424 ) (424 ) (424 ) (424 ) (13,073 ) (424 )
Tangible common shareholders' equity $ 252,853   $ 267,784   $ 267,897   $ 269,981   $ 263,338   $ 252,853   $ 263,338  
 
Book value per share $ 17.97 $ 18.60 $ 18.62 $ 18.78 $ 18.34 $ 17.97 $ 18.34
Impact of goodwill and other intangibles (0.89 ) (0.03 ) (0.02 ) (0.03 ) (0.03 ) (0.89 ) (0.03 )
Tangible book value per share $ 17.08 $ 18.57 $ 18.60 $ 18.75 $ 18.31 $ 17.08 $ 18.31
 
Average shareholders' equity $ 268,328 $ 271,286 $ 280,783 $ 274,355 $ 262,163 $ 249,081 $ 211,329
Less: Average goodwill and other intangibles (9,136 ) (424 ) (424 ) (424 ) (424 ) (2,602 ) (424 )
Average tangible shareholders' equity $ 259,192   $ 270,862   $ 280,359   $ 273,931   $ 261,739   $ 246,479   $ 210,905  
 
Return on average common shareholders’ equity (1.28 )% 2.45 % 17.19 % 15.95 % 32.80 % 9.56 % 38.86 %
Impact of goodwill and other intangibles (0.05 )%   0.03 % 0.02 % 0.05 % 0.10 % 0.08 %
Return on average tangible common shareholders' equity (1.33 )% 2.45 % 17.22 % 15.97 % 32.85 % 9.66 % 38.94 %
 

The press release contains certain non-GAAP financial disclosures for consolidated net income, excluding acquisition-related expenses, diluted earnings per share, excluding acquisition-related expenses, and Commercial and Consumer Banking segment net income, excluding acquisition-related expenses. The Company uses certain non-GAAP financial measures to provide meaningful supplemental information regarding the Company's operational performance and to enhance investors' overall understanding of such financial performance.

         
Quarter Ended Year Ended
Dec. 31,     Sept. 30,     Jun. 30,     Mar. 31,     Dec. 31, Dec. 31,     Dec. 31,
(in thousands) 2013 2013 2013 2013 2012 2013 2012
 
Net (loss) income $ (861 ) $ 1,662 $ 12,068 $ 10,940 $ 21,497 $ 23,809 $ 82,126
Add back: Acquisition-related expenses, net of tax 2,652   301   4       2,957    
Net income, excluding acquisition-related expenses $ 1,791   $ 1,963   $ 12,072   $ 10,940   $ 21,497   $ 26,766   $ 82,126  
 
Noninterest expense $ 58,868 $ 58,116 $ 56,712 $ 55,799 $ 55,966 $ 229,495 $ 183,591
Deduct: acquisition-related expenses (4,080 ) (463 ) (6 )     (4,549 )  
Noninterest expense, excluding acquisition-related expenses $ 54,788   $ 57,653   $ 56,706   $ 55,799   $ 55,966   $ 224,946   $ 183,591  
 
Diluted earnings per common share $ (0.06 ) $ 0.11 $ 0.82 $ 0.74 $ 1.46 $ 1.61 $ 5.98
Impact of acquisition-related expenses 0.18   0.02         0.20    
Diluted earnings per common share, excluding acquisition-related expenses $ 0.12 $ 0.13 $ 0.82 $ 0.74 $ 1.46 $ 1.81 $ 5.98
 
Commercial and Consumer Banking Segment:
Net income $ 244 $ 3,791 $ 1,416 $ (2,814 ) $ (4,350 ) $ 2,637 $ (14,494 )
Impact of acquisition-related expenses, net of tax 2,652   301   4       2,957    
Net income, excluding acquisition-related expenses $ 2,896   $ 4,092   $ 1,420   $ (2,814 ) $ (4,350 ) $ 5,594   $ (14,494 )

Contact:
HomeStreet, Inc.
Investor Relations & Media:
Terri Silver, 206-389-6303
terri.silver@homestreet.com
http://ir.homestreet.com
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