Mechanics Bancorp 8-K/A, filed Apr 26, 2023
Mechanics Bancorp (MCHB)
8-K/A
2023-04-26
For: 2023-04-24
View Original
Added on
April 07, 2026
About this 8-K/A
Mechanics Bancorp filed this 8-K/A on April 26, 2023, reporting on events of April 24, 2023.
Items reported
- Item 2.02: Financial results
- Item 9.01: Financial statements and exhibits
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934
Date of Report (Date of Earliest Event Reported): April 24, 2023
(Exact name of registrant as specified in its charter)
| (State or other jurisdiction of incorporation) | (Commission File Number) | (IRS Employer Identification No.) | ||||||||||||
(Address of principal executive offices) (Zip Code)
(206 ) 623-3050
(Registrant’s telephone number, including area code)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
| Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) | |||||
| Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) | |||||
| Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) | |||||
| Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) | |||||
| Securities registered pursuant to Section 12(b) of the Act: | ||
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||||||
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Act or Rule 12b-2 of the Exchange Act. | |||||
| Emerging growth company | |||||
| ☐ | If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 12(a) of the Exchange Act. | ||||
EXPLANATORY NOTE | ||
This Current Report on Form 8-K/A amends the Current Report on Form 8-K filed by HomeStreet, Inc. (the “Company”) on April 24, 2023 (the “Original 8-K”). The Original 8-K furnished an earnings release announcing the Company’s financial results for the first quarter ended March 31, 2023 (“Earnings Release”), which was attached as Exhibit 99.1 to the Original 8-K. | ||
| Item 2.02 | Results of Operations and Financial Condition | ||||
On April 26, 2023 the Company amended the Earnings Release to update the Production Volume for Sale to the Secondary Market table disclosed on page 15 of the Earnings Release as follows:
Production Volumes for Sale to the Secondary Market
| Quarter Ended | ||||||||||||||||||||||||||||||||||||||||||||
| (in thousands) | March 31, 2023 | December 31, 2022 | September 30, 2022 | June 30, 2022 | March 31, 2022 | |||||||||||||||||||||||||||||||||||||||
| Loan originations | ||||||||||||||||||||||||||||||||||||||||||||
Single family loans | $ | 72,814 | $ | 51,647 | $ | 110,011 | $ | 172,947 | $ | 238,505 | ||||||||||||||||||||||||||||||||||
Commercial and industrial and CRE loans | 6,150 | 20,864 | 15,332 | 51,584 | 12,312 | |||||||||||||||||||||||||||||||||||||||
Loans sold | ||||||||||||||||||||||||||||||||||||||||||||
| Single family loans | 63,473 | 51,427 | 131,228 | 187,623 | 323,070 | |||||||||||||||||||||||||||||||||||||||
Commercial and industrial and CRE loans (1) | 8,750 | 16,228 | 29,965 | 50,292 | 49,137 | |||||||||||||||||||||||||||||||||||||||
| Net gain on loan origination and sale activities | ||||||||||||||||||||||||||||||||||||||||||||
| Single family loans | 2,218 | 1,158 | 1,778 | 3,949 | 6,169 | |||||||||||||||||||||||||||||||||||||||
Commercial and industrial and CRE loans (1) | 192 | 330 | 869 | 1,343 | 2,105 | |||||||||||||||||||||||||||||||||||||||
| Total | $ | 2,410 | $ | 1,488 | $ | 2,647 | $ | 5,292 | $ | 8,274 | ||||||||||||||||||||||||||||||||||
(1) May include loans originated as held for investment.
A copy of the updated Earnings Release, which reflects this change, is attached as Exhibit 99.1 and is incorporated herein by reference and supersedes the information previously provided in the Original 8-K and Earnings Release. Other than as described above, no other changes have been made to the Original 8-K or the Earnings Release.
The information provided in this Item 2.02, including Exhibit 99.1, is intended to be “furnished” and shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference into any other filing under the Securities Act of 1933, as amended, or the Exchange Act, except as expressly set forth by specific reference in such a filing.
| Item 9.01 | Financial Statements and Exhibits | ||||
| (d) | Exhibits. | ||||
| Exhibit 99.1 | |||||
| Exhibit 104 | Cover Page Interactive Data File (embedded within with Inline XBRL) | ||||
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
Date: April 26, 2023
| HomeStreet, Inc. | |||||||||||
| By: | /s/ John M. Michel | ||||||||||
| John M. Michel | |||||||||||
| Executive Vice President and Chief Financial Officer | |||||||||||
HomeStreet Reports First Quarter 2023 Results
SEATTLE – April 24, 2023 – (BUSINESS WIRE) – HomeStreet, Inc. (Nasdaq: HMST) (including its consolidated subsidiaries, the "Company", "HomeStreet" or "we"), the parent company of HomeStreet Bank, today announced the financial results for the quarter ended March 31, 2023. As we present non-GAAP measures in this release, the reader should refer to the non-GAAP reconciliations set forth below under the section “Non-GAAP Financial Measures.”
“Our financial results continue to be adversely impacted by the now historically record velocity and magnitude of increases in short-term interest rates," said Mark K. Mason, HomeStreet’s Chairman of the Board, President, and Chief Executive Officer. In light of these challenges, we have enhanced our on-balance sheet liquidity, continued to raise new deposits through promotional certificates of deposit and reduced new loan originations. Additionally, we have focused our new loan origination activity primarily on floating rate products such as commercial loans, residential construction loans and home equity loans. In February, we completed the acquisition of three branches in southern California which accounted for $322 million of deposits at the end of March. The new employees at these branches are great additions to our team and we look forward to growing our customer base in these new markets once the conversion process is complete. At March 31, 2023 our on-balance sheet liquidity was 19%, our uninsured deposits were only $1.0 billion, or 14% of total deposits, and $6.0 billion of contingent funding was available.”
“As expected, our net interest margin decreased in the first quarter due to decreases in lower cost transaction and savings deposits and overall higher funding costs. Due to the highly uncertain interest rate and economic environment going forward, we anticipate these funding cost pressures to continue, and, despite the future repricing of our loans and investment securities, we expect our net interest margin to decline somewhat for the remainder of 2023” continued Mr. Mason. “To mitigate the impact of a lower net interest margin we have continued to reduce non-essential expenses while being mindful to preserve and protect our high quality lending lines of business, preserving our ability to grow earnings once the interest rate environment stabilizes and loan pricing and volumes normalize.”
| Financial Position | As of and for the quarter ended March 31, 2023 •Cash and cash equivalents increased to $377 million •Uninsured deposits were $1.0 billion, approximately 14% of total deposits •Excluding brokered deposits, total deposits increased $166 million, or 3% to $6.2 billion •Loans held for investment increased by $60 million, or 1% •Book value per share: $30.64 •Tangible book value per share: $27.87 | |||||||
Operating Results | First quarter 2023 compared to fourth quarter 2022 •Net income: $5.1 million compared to $8.5 million •Earnings per fully diluted share: $0.27 compared to $0.45 •Net interest margin: 2.23% compared to 2.53% •Return on Average Equity ("ROAE"): 3.5% compared to 6.0% •Return on Average Tangible Equity ("ROATE"): 4.1% compared to 6.4% •Return on Average Assets ("ROAA"): 0.22% compared to 0.36% •Efficiency ratio: 87.2% compared to 76.2% | |||||||
1
“Credit quality remains strong as net charge-offs in the quarter were $0.6 million and nonperforming assets remained low at 0.15% of total assets,” added Mr. Mason. “Today we do not see any meaningful credit challenges on the horizon.”
| Other | •Declared and paid a cash dividend of $0.35 per share in the first quarter •Closed purchase of deposits and three branches in southern California in the first quarter of 2023 | |||||||
2
Conference Call
HomeStreet, Inc. (Nasdaq: HMST), the parent company of HomeStreet Bank, will conduct a quarterly earnings conference call on Tuesday, April 25, 2023, at 1:00 p.m. ET. Mark K. Mason, CEO and President, and John M. Michel, CFO, will discuss first quarter 2023 results and provide an update on recent events. A question and answer session will follow the presentation. Shareholders, analysts and other interested parties may register in advance at the following URL https://www.netroadshow.com/events/login?show=60a43c9b&confId=48854 or may join the call by dialing directly at 1-833-470-1428 (1-929-526-1599 internationally) shortly before 1:00 p.m. ET using Access Code 871770.
A rebroadcast will be available approximately one hour after the conference call by dialing 1-866-813-9403 and entering passcode 348056.
About HomeStreet
HomeStreet, Inc. (Nasdaq: HMST) is a diversified financial services company headquartered in Seattle, Washington, serving consumers and businesses in the Western United States and Hawaii. The Company is principally engaged in real estate lending, including mortgage banking activities, and commercial and consumer banking. Its principal subsidiary is HomeStreet Bank. HomeStreet Bank is the winner of the 2022 "Best Small Bank" in Washington Newsweek magazine award. Certain information about our business can be found on our investor relations web site, located at http://ir.homestreet.com. HomeStreet Bank is a member of the FDIC and is an Equal Housing Lender.
| Contact: | Executive Vice President and Chief Financial Officer | |||||||
| HomeStreet, Inc. | ||||||||
| John Michel (206) 515-2291 | ||||||||
| john.michel@homestreet.com | ||||||||
| http://ir.homestreet.com | ||||||||
3
HomeStreet, Inc. and Subsidiaries
Summary Financial Data
| For the Quarter Ended | |||||||||||||||||||||||||||||||||||||||||
| (in thousands, except per share data and FTE data) | March 31, 2023 | December 31, 2022 | September 30, 2022 | June 30, 2022 | March 31, 2022 | ||||||||||||||||||||||||||||||||||||
Select Income Statement Data: | |||||||||||||||||||||||||||||||||||||||||
| Net interest income | $ | 49,376 | $ | 55,687 | $ | 63,018 | $ | 60,056 | $ | 54,546 | |||||||||||||||||||||||||||||||
| Provision for credit losses | 593 | 3,798 | — | — | (9,000) | ||||||||||||||||||||||||||||||||||||
| Noninterest income | 10,190 | 9,677 | 13,322 | 13,013 | 15,558 | ||||||||||||||||||||||||||||||||||||
| Noninterest expense | 52,491 | 50,420 | 49,889 | 50,637 | 54,473 | ||||||||||||||||||||||||||||||||||||
| Income: | |||||||||||||||||||||||||||||||||||||||||
| Before income taxes | 6,482 | 11,146 | 26,451 | 22,432 | 24,631 | ||||||||||||||||||||||||||||||||||||
| Total | 5,058 | 8,501 | 20,367 | 17,721 | 19,951 | ||||||||||||||||||||||||||||||||||||
| Net income per share - diluted | 0.27 | 0.45 | 1.08 | 0.94 | 1.01 | ||||||||||||||||||||||||||||||||||||
| Select Performance Ratios: | |||||||||||||||||||||||||||||||||||||||||
| Return on average equity - annualized | 3.5 | % | 6.0 | % | 13.4 | % | 11.8 | % | 11.6 | % | |||||||||||||||||||||||||||||||
Return on average tangible equity - annualized (1) | 4.1 | % | 6.4 | % | 14.2 | % | 12.6 | % | 12.2 | % | |||||||||||||||||||||||||||||||
| Return on average assets - annualized | 0.22 | % | 0.36 | % | 0.91 | % | 0.89 | % | 1.10 | % | |||||||||||||||||||||||||||||||
Efficiency ratio (1) | 87.2 | % | 76.2 | % | 68.4 | % | 68.5 | % | 77.0 | % | |||||||||||||||||||||||||||||||
| Net interest margin | 2.23 | % | 2.53 | % | 3.00 | % | 3.27 | % | 3.29 | % | |||||||||||||||||||||||||||||||
| Other data: | |||||||||||||||||||||||||||||||||||||||||
| Full-time equivalent employees ("FTE") | 920 | 913 | 935 | 956 | 962 | ||||||||||||||||||||||||||||||||||||
(1)Return on average tangible equity and the efficiency ratio are non-GAAP financial measures. For a reconciliation of return on average tangible equity to the nearest comparable GAAP financial measure and the computation of the efficiency ratio see “Non-GAAP Financial Measures” in this earnings release.
4
HomeStreet, Inc. and Subsidiaries
Summary Financial Data (continued)
| As of | |||||||||||||||||||||||||||||
| (in thousands, except share and per share data) | March 31, 2023 | December 31, 2022 | September 30, 2022 | June 30, 2022 | March 31, 2022 | ||||||||||||||||||||||||
| Select Balance Sheet Data: | |||||||||||||||||||||||||||||
Loans held for sale | $ | 24,253 | $ | 17,327 | $ | 13,787 | $ | 47,314 | $ | 59,150 | |||||||||||||||||||
Loans held for investment, net | 7,444,882 | 7,384,820 | 7,175,881 | 6,722,382 | 5,826,546 | ||||||||||||||||||||||||
Allowance for credit losses ("ACL") | 41,500 | 41,500 | 37,606 | 37,355 | 37,944 | ||||||||||||||||||||||||
Investment securities | 1,477,004 | 1,400,212 | 1,311,941 | 1,237,957 | 1,083,640 | ||||||||||||||||||||||||
Total assets | 9,858,889 | 9,364,760 | 9,072,887 | 8,582,886 | 7,510,894 | ||||||||||||||||||||||||
Deposits | 7,056,603 | 7,451,919 | 6,610,231 | 6,183,299 | 6,270,535 | ||||||||||||||||||||||||
Borrowings | 1,878,000 | 1,016,000 | 1,569,000 | 1,458,000 | 273,000 | ||||||||||||||||||||||||
Long-term debt | 224,492 | 224,404 | 224,314 | 224,227 | 224,137 | ||||||||||||||||||||||||
Total shareholders' equity | 574,994 | 562,147 | 552,789 | 580,767 | 601,231 | ||||||||||||||||||||||||
Other Data: | |||||||||||||||||||||||||||||
Book value per share | $ | 30.64 | $ | 30.01 | $ | 29.53 | $ | 31.04 | $ | 32.15 | |||||||||||||||||||
Tangible book value per share (1) | $ | 27.87 | $ | 28.41 | $ | 27.92 | $ | 29.37 | $ | 30.47 | |||||||||||||||||||
| Total equity to total assets | 5.8 | % | 6.0 | % | 6.1 | % | 6.8 | % | 8.0 | % | |||||||||||||||||||
Tangible common equity to tangible assets (1) | 5.3 | % | 5.7 | % | 5.8 | % | 6.4 | % | 7.6 | % | |||||||||||||||||||
Shares outstanding at end of period | 18,767,811 | 18,730,380 | 18,717,557 | 18,712,789 | 18,700,536 | ||||||||||||||||||||||||
Loans to deposit ratio | 106.4 | % | 99.9 | % | 109.3 | % | 110.1 | % | 94.5 | % | |||||||||||||||||||
Credit Quality: | |||||||||||||||||||||||||||||
ACL to total loans (2) | 0.56 | % | 0.57 | % | 0.53 | % | 0.56 | % | 0.66 | % | |||||||||||||||||||
| ACL to nonaccrual loans | 318.1 | % | 412.7 | % | 306.6 | % | 411.3 | % | 320.3 | % | |||||||||||||||||||
| Nonaccrual loans to total loans | 0.17 | % | 0.14 | % | 0.17 | % | 0.13 | % | 0.20 | % | |||||||||||||||||||
Nonperforming assets to total assets | 0.15 | % | 0.13 | % | 0.15 | % | 0.13 | % | 0.17 | % | |||||||||||||||||||
Nonperforming assets | $ | 14,886 | $ | 11,893 | $ | 13,991 | $ | 10,835 | $ | 12,581 | |||||||||||||||||||
Regulatory Capital Ratios: (3) | |||||||||||||||||||||||||||||
Bank | |||||||||||||||||||||||||||||
| Tier 1 leverage ratio | 8.46 | % | 8.63 | % | 9.15 | % | 9.78 | % | 10.30 | % | |||||||||||||||||||
Total risk-based capital | 12.37 | % | 12.59 | % | 12.57 | % | 12.29 | % | 13.23 | % | |||||||||||||||||||
Company | |||||||||||||||||||||||||||||
Tier 1 leverage ratio | 6.91 | % | 7.25 | % | 7.61 | % | 8.38 | % | 8.99 | % | |||||||||||||||||||
Total risk-based capital | 11.15 | % | 11.53 | % | 11.43 | % | 11.49 | % | 12.65 | % | |||||||||||||||||||
(1)Tangible book value per share and tangible common equity to tangible assets are non-GAAP financial measures. For a reconciliation to the nearest comparable GAAP financial measure, see “Non-GAAP Financial Measures” in this earnings release.
(2)This ratio excludes balances insured by the FHA or guaranteed by the VA or SBA.
(3)Regulatory capital ratios at March 31, 2023 are preliminary.
5
HomeStreet, Inc. and Subsidiaries
Consolidated Balance Sheets
(in thousands, except share data) | March 31, 2023 | December 31, 2022 | ||||||||||||
| ASSETS | ||||||||||||||
Cash and cash equivalents | $ | 377,031 | $ | 72,828 | ||||||||||
Investment securities | 1,477,004 | 1,400,212 | ||||||||||||
Loans held for sale | 24,253 | 17,327 | ||||||||||||
Loans held for investment ("LHFI") (net of allowance for credit losses of $41,500 and $41,500) | 7,444,882 | 7,384,820 | ||||||||||||
Mortgage servicing rights | 109,540 | 111,873 | ||||||||||||
Premises and equipment, net | 55,333 | 51,172 | ||||||||||||
Other real estate owned | 1,839 | 1,839 | ||||||||||||
Goodwill and other intangibles | 51,862 | 29,980 | ||||||||||||
Other assets | 317,145 | 294,709 | ||||||||||||
| Total assets | $ | 9,858,889 | $ | 9,364,760 | ||||||||||
| LIABILITIES AND SHAREHOLDERS' EQUITY | ||||||||||||||
| Liabilities: | ||||||||||||||
Deposits | $ | 7,056,603 | $ | 7,451,919 | ||||||||||
Borrowings | 1,878,000 | 1,016,000 | ||||||||||||
Long-term debt | 224,492 | 224,404 | ||||||||||||
Accounts payable and other liabilities | 124,800 | 110,290 | ||||||||||||
| Total liabilities | 9,283,895 | 8,802,613 | ||||||||||||
Shareholders' equity: | ||||||||||||||
Common stock, no par value; 160,000,000 shares authorized | ||||||||||||||
18,767,811 and 18,730,380 shares issued and outstanding | 227,293 | 226,592 | ||||||||||||
Retained earnings | 433,459 | 435,085 | ||||||||||||
| Accumulated other comprehensive income (loss) | (85,758) | (99,530) | ||||||||||||
| Total shareholders' equity | 574,994 | 562,147 | ||||||||||||
| Total liabilities and shareholders' equity | $ | 9,858,889 | $ | 9,364,760 | ||||||||||
6
HomeStreet, Inc. and Subsidiaries
Consolidated Income Statements
| Quarter Ended March 31, | |||||||||||||||||||||||
| (in thousands, except share and per share data) | 2023 | 2022 | |||||||||||||||||||||
| Interest income: | |||||||||||||||||||||||
| Loans | $ | 82,538 | $ | 52,954 | |||||||||||||||||||
| Investment securities | 12,763 | 5,966 | |||||||||||||||||||||
| Cash, Fed Funds and other | 1,750 | 108 | |||||||||||||||||||||
Total interest income | 97,051 | 59,028 | |||||||||||||||||||||
| Interest expense: | |||||||||||||||||||||||
| Deposits | 29,370 | 2,284 | |||||||||||||||||||||
| Borrowings | 18,305 | 2,198 | |||||||||||||||||||||
Total interest expense | 47,675 | 4,482 | |||||||||||||||||||||
Net interest income | 49,376 | 54,546 | |||||||||||||||||||||
| Provision for credit losses | 593 | (9,000) | |||||||||||||||||||||
Net interest income after provision for credit losses | 48,783 | 63,546 | |||||||||||||||||||||
| Noninterest income: | |||||||||||||||||||||||
| Net gain on loan origination and sale activities | 2,410 | 8,274 | |||||||||||||||||||||
| Loan servicing income | 3,039 | 3,304 | |||||||||||||||||||||
| Deposit fees | 2,658 | 2,075 | |||||||||||||||||||||
| Other | 2,083 | 1,905 | |||||||||||||||||||||
Total noninterest income | 10,190 | 15,558 | |||||||||||||||||||||
| Noninterest expense: | |||||||||||||||||||||||
| Compensation and benefits | 29,253 | 32,031 | |||||||||||||||||||||
| Occupancy | 5,738 | 6,365 | |||||||||||||||||||||
| Information services | 7,145 | 7,062 | |||||||||||||||||||||
| General, administrative and other | 10,355 | 9,015 | |||||||||||||||||||||
Total noninterest expense | 52,491 | 54,473 | |||||||||||||||||||||
| Income before income taxes | 6,482 | 24,631 | |||||||||||||||||||||
| Income tax expense | 1,424 | 4,680 | |||||||||||||||||||||
| Net income | $ | 5,058 | $ | 19,951 | |||||||||||||||||||
| Net income per share: | |||||||||||||||||||||||
| Basic | $ | 0.27 | $ | 1.02 | |||||||||||||||||||
| Diluted | $ | 0.27 | $ | 1.01 | |||||||||||||||||||
| Weighted average shares outstanding: | |||||||||||||||||||||||
Basic | 18,755,453 | 19,585,753 | |||||||||||||||||||||
Diluted | 18,771,899 | 19,791,913 | |||||||||||||||||||||
7
HomeStreet, Inc. and Subsidiaries
Five Quarter Consolidated Income Statements
| Quarter Ended | |||||||||||||||||||||||||||||
| (in thousands, except share and per share data) | March 31, 2023 | December 31, 2022 | September 30, 2022 | June 30, 2022 | March 31, 2022 | ||||||||||||||||||||||||
| Interest income: | |||||||||||||||||||||||||||||
| Loans | $ | 82,538 | $ | 80,733 | $ | 73,329 | $ | 59,825 | $ | 52,954 | |||||||||||||||||||
| Investment securities | 12,763 | 11,466 | 9,014 | 7,379 | 5,966 | ||||||||||||||||||||||||
| Cash, Fed Funds and other | 1,750 | 1,967 | 1,060 | 487 | 108 | ||||||||||||||||||||||||
| Total interest income | 97,051 | 94,166 | 83,403 | 67,691 | 59,028 | ||||||||||||||||||||||||
| Interest expense: | |||||||||||||||||||||||||||||
| Deposits | 29,370 | 18,515 | 8,321 | 2,893 | 2,284 | ||||||||||||||||||||||||
| Borrowings | 18,305 | 19,964 | 12,064 | 4,742 | 2,198 | ||||||||||||||||||||||||
| Total interest expense | 47,675 | 38,479 | 20,385 | 7,635 | 4,482 | ||||||||||||||||||||||||
Net interest income | 49,376 | 55,687 | 63,018 | 60,056 | 54,546 | ||||||||||||||||||||||||
| Provision for credit losses | 593 | 3,798 | — | — | (9,000) | ||||||||||||||||||||||||
| Net interest income after provision for credit losses | 48,783 | 51,889 | 63,018 | 60,056 | 63,546 | ||||||||||||||||||||||||
| Noninterest income: | |||||||||||||||||||||||||||||
| Net gain on loan origination and sale activities | 2,410 | 1,488 | 2,647 | 5,292 | 8,274 | ||||||||||||||||||||||||
| Loan servicing income | 3,039 | 2,682 | 2,741 | 3,661 | 3,304 | ||||||||||||||||||||||||
| Deposit fees | 2,658 | 2,359 | 2,223 | 2,218 | 2,075 | ||||||||||||||||||||||||
| Other | 2,083 | 3,148 | 5,711 | 1,842 | 1,905 | ||||||||||||||||||||||||
| Total noninterest income | 10,190 | 9,677 | 13,322 | 13,013 | 15,558 | ||||||||||||||||||||||||
| Noninterest expense: | |||||||||||||||||||||||||||||
| Compensation and benefits | 29,253 | 25,970 | 27,341 | 30,191 | 32,031 | ||||||||||||||||||||||||
| Occupancy | 5,738 | 6,213 | 6,052 | 5,898 | 6,365 | ||||||||||||||||||||||||
| Information services | 7,145 | 8,101 | 7,038 | 7,780 | 7,062 | ||||||||||||||||||||||||
| General, administrative and other | 10,355 | 10,136 | 9,458 | 6,768 | 9,015 | ||||||||||||||||||||||||
| Total noninterest expense | 52,491 | 50,420 | 49,889 | 50,637 | 54,473 | ||||||||||||||||||||||||
| Income before income taxes | 6,482 | 11,146 | 26,451 | 22,432 | 24,631 | ||||||||||||||||||||||||
Income tax expense | 1,424 | 2,645 | 6,084 | 4,711 | 4,680 | ||||||||||||||||||||||||
| Net income | $ | 5,058 | $ | 8,501 | $ | 20,367 | $ | 17,721 | $ | 19,951 | |||||||||||||||||||
| Net income per share: | |||||||||||||||||||||||||||||
| Basic | $ | 0.27 | $ | 0.45 | $ | 1.09 | $ | 0.95 | $ | 1.02 | |||||||||||||||||||
| Diluted | $ | 0.27 | $ | 0.45 | $ | 1.08 | $ | 0.94 | $ | 1.01 | |||||||||||||||||||
Weighted average shares outstanding: | |||||||||||||||||||||||||||||
| Basic | 18,755,453 | 18,726,654 | 18,716,864 | 18,706,953 | 19,585,753 | ||||||||||||||||||||||||
| Diluted | 18,771,899 | 18,753,147 | 18,796,737 | 18,834,443 | 19,791,913 | ||||||||||||||||||||||||
8
HomeStreet, Inc. and Subsidiaries
Average Balances, Yields (Taxable-equivalent basis) and Rates
| (in thousands, except yield/rate) | Quarter Ended | |||||||||||||||||||||||||||||||
| Average Balances: | March 31, 2023 | December 31, 2022 | September 30, 2022 | June 30, 2022 | March 31, 2022 | |||||||||||||||||||||||||||
Investment securities | $ | 1,452,137 | $ | 1,362,861 | $ | 1,252,923 | $ | 1,134,929 | $ | 1,028,971 | ||||||||||||||||||||||
Loans | 7,471,456 | 7,368,097 | 7,070,998 | 6,231,081 | 5,691,316 | |||||||||||||||||||||||||||
Total interest earning assets | 9,050,484 | 8,890,221 | 8,436,745 | 7,447,008 | 6,786,205 | |||||||||||||||||||||||||||
| Total assets | 9,530,705 | 9,348,396 | 8,899,684 | 7,945,298 | 7,363,589 | |||||||||||||||||||||||||||
Deposits: Interest-bearing | 5,701,701 | 5,227,039 | 4,852,515 | 4,563,974 | 4,513,613 | |||||||||||||||||||||||||||
Deposits: Noninterest-bearing | 1,511,437 | 1,510,744 | 1,576,387 | 1,668,631 | 1,744,220 | |||||||||||||||||||||||||||
Borrowings | 1,342,347 | 1,717,042 | 1,530,449 | 761,606 | 64,557 | |||||||||||||||||||||||||||
Long-term debt | 224,435 | 224,345 | 224,259 | 224,167 | 204,553 | |||||||||||||||||||||||||||
Total interest-bearing liabilities | 7,268,483 | 7,168,426 | 6,607,223 | 5,549,747 | 4,782,723 | |||||||||||||||||||||||||||
| Average Yield/Rate: | ||||||||||||||||||||||||||||||||
Investment securities | 3.78 | % | 3.70 | % | 3.22 | % | 2.97 | % | 2.68 | % | ||||||||||||||||||||||
Loans | 4.44 | % | 4.32 | % | 4.09 | % | 3.82 | % | 3.74 | % | ||||||||||||||||||||||
Total interest earning assets | 4.35 | % | 4.24 | % | 3.95 | % | 3.68 | % | 3.55 | % | ||||||||||||||||||||||
Deposits: Interest-bearing | 2.09 | % | 1.40 | % | 0.68 | % | 0.25 | % | 0.21 | % | ||||||||||||||||||||||
Total deposits | 1.65 | % | 1.09 | % | 0.51 | % | 0.19 | % | 0.15 | % | ||||||||||||||||||||||
Borrowings | 4.57 | % | 3.93 | % | 2.43 | % | 1.21 | % | 0.56 | % | ||||||||||||||||||||||
Long-term debt | 5.28 | % | 4.96 | % | 4.56 | % | 4.28 | % | 4.12 | % | ||||||||||||||||||||||
Total interest-bearing liabilities | 2.64 | % | 2.12 | % | 1.22 | % | 0.55 | % | 0.38 | % | ||||||||||||||||||||||
Net interest rate spread | 1.71 | % | 2.12 | % | 2.74 | % | 3.13 | % | 3.17 | % | ||||||||||||||||||||||
Net interest margin | 2.23 | % | 2.53 | % | 3.00 | % | 3.27 | % | 3.29 | % | ||||||||||||||||||||||
9
Results of Operations
First Quarter of 2023 Compared to the Fourth Quarter of 2022
Our net income and income before taxes were $5.1 million and $6.5 million, respectively, in the first quarter of 2023, as compared to $8.5 million and $11.1 million, respectively, in the fourth quarter of 2022. The $4.7 million decrease in income before taxes was due to lower net interest income and higher noninterest expense, partially offset by a lower provision for credit losses and higher noninterest income.
Our effective tax rate was 22.0% in the first quarter of 2023 as compared to 23.7% in fourth quarter of 2022 and a statutory rate of 24.4%. Our effective tax rates were lower than our statutory rate due primarily to the benefits of tax advantaged investments. Additionally, because the benefits of our tax advantaged investments were larger in relation to our income before taxes in the first quarter of 2023 as compared to the fourth quarter of 2022, our effective tax rate was lower in the first quarter of 2023.
Net interest income was $6.3 million lower in the first quarter of 2023 as compared to the fourth quarter of 2022 primarily due to a decrease in our net interest margin from 2.53% to 2.23%. The decrease in our net interest margin was due to a 52 basis point increase in the cost of interest-bearing liabilities, which was partially offset by a 11 basis point increase in the yield on interest-earning assets. Yields on interest-earning assets increased as the yields on loan originations during the first quarter were higher than the rates of our existing portfolio of loans and yields on adjustable rate loans increased due to increases in the indexes on which their pricing is based. The increase in the rates paid on our interest-bearing liabilities was due to higher deposit costs and higher borrowing costs. Our cost of borrowings increased 64 basis points during the first quarter and our cost of deposits increased 56 basis points. The increases in yields on interest-earning assets and the rates paid on interest-bearing liabilities were due to the significant increases in market interest rates during 2022 and the first quarter of 2023.
A $0.6 million provision for credit losses was recorded during the first quarter of 2023 compared to a $3.8 million provision for credit losses in the fourth quarter of 2022. The provision for the first quarter of 2023 was to offset the net charge-offs realized as the overall LHFI portfolio balances only increased $60 million. The provision in the fourth quarter of 2022 was due to the growth in our loan portfolio and a $2.2 million increase in our collateral qualitative factor related to projected declines in future home prices.
The increase in noninterest income in the first quarter of 2023 as compared to the fourth quarter of 2022 was primarily due to a $1.1 million increase in single family lending gain on sale activities due to higher levels of originations of loans held for sale.
The $2.1 million increase in noninterest expense in the first quarter of 2023 as compared to the fourth quarter of 2022 was primarily due to higher compensation and benefit costs, partially offset by lower information services costs. The higher level of compensation and benefit costs was due to seasonally higher benefits costs, primarily employer taxes and 401(k) matches, and a reduction in deferred costs due to lower levels of loan production. The benefits of lower levels of staffing in our loan origination operations in the first quarter were offset by the impact of raises given during the first quarter and the employees added from the acquisition of the three branches in southern California. Information service costs decreased primarily due to the higher fourth quarter 2022 costs associated with replacement and maintenance of our automated teller machines.
10
First Quarter of 2023 Compared to First Quarter of 2022
Our net income and income before taxes were $5.1 million and $6.5 million, respectively, in the first quarter of 2023, as compared to $20.0 million and $24.6 million, respectively, in the first quarter of 2022. The $18.1 million decrease in income before taxes was due to a lower net interest income, a provision for credit losses and lower noninterest income, partially offset by lower noninterest expense.
Our effective tax rate during the first quarter of 2023 was 22.0% as compared to 19.0% in the first quarter of 2022 and our statutory rate of 24.4%. Our effective tax rates were lower than our statutory rate due to the benefits of tax advantaged investments. The first quarter of 2022 also benefited from reductions in taxes on income related to excess tax benefits resulting from the vesting of stock awards during the period. No such benefits were realized in the first quarter of 2023.
Net interest income in the first quarter of 2023 decreased $5.2 million as compared to the first quarter of 2022 due primarily to a decrease in our net interest margin partially offset by increases in the average balance of interest earning assets. The increase in interest-earning assets was due to loan originations and purchases of investment securities. Our net interest margin decreased from 3.29% in the first quarter of 2022 to 2.23% in the first quarter of 2023 due to a 226 basis point increase in the rates paid on interest-bearing liabilities which was partially offset by an 80 basis point increase in the yield on interest earning assets. Yields on interest-earning assets increased as the yields on loan originations during the last 15 months were higher than the rates of our existing portfolio of loans and yields on adjustable rate loans increased due to increases in the indexes on which their pricing is based. The higher yields on our investment securities were primarily due to adjustments to yields realized from longer estimated lives of certain securities and the yields of securities purchased during the past year being higher than the yields on our existing portfolio. The increase in the rates paid on our interest-bearing liabilities was due to higher deposit costs, higher borrowing costs and an increase in the proportion of higher cost borrowings used as our sources of funding. The increases in the rates paid on deposits were due to the significant increase in market interest rates over the prior year. Our average borrowings increased by $1.3 billion to fund the growth of our loan portfolio and investment securities. Our cost of borrowings increased from 56 basis points during the first quarter of 2022 to 457 basis points during the first quarter of 2023 due to the significant increase in market interest rates during the last 15 months.
A $0.6 million provision for credit losses was recorded during the first quarter of 2023 compared to a $9.0 million recovery of our allowance for credit losses in the first quarter of 2022. The provision for credit losses in the first quarter of 2023 was to offset the net charge-offs realized during the quarter. The recovery of our allowance for credit losses in first quarter of 2022 was the result of the favorable performance of our loan portfolio, a stable low level of nonperforming assets and an improved outlook of the estimated impact of COVID-19 on our loan portfolio.
The decrease in noninterest income for the first quarter of 2023 as compared to the first quarter of 2022 was due to a decrease in gain on loan origination and sale activities, which was partially offset by higher deposit fees. The $5.9 million decrease in gain on loan origination and sale activities was due to a $4.0 million decrease in single family gain on loan origination and sale activities and a $1.9 million decrease in commercial real estate and commercial gain on loan origination and sale activities. The decrease in single family gain on loan origination and sale activities was due to a decrease in rate lock volume as a result of the effects of increasing mortgage interest rates. The decrease in commercial real estate and commercial gain on loan origination and sale activities was primarily due to an 82% decrease in the volume of loans sold as a result of increasing interest rates. The $0.6 million increase in deposit fee income was primarily due to higher early withdrawals fees.
The $2.0 million decrease in noninterest expense in the first quarter of 2023 as compared to the first quarter of 2022 was primarily due to lower compensation and benefit costs, partially offset by increases in general, administrative and other expenses. The $2.8 million decrease in compensation and benefit costs was primarily due to reduced commission expense on lower loan origination volumes in our single family mortgage operations, lower staffing levels and lower bonus expense, which were partially offset by wage increases
given in the first quarter of 2023 and a reduction in deferred costs due to lower levels of loan production. The increase in general, administrative and other costs was primarily due to higher FDIC fees due to our larger asset base and core deposit intangible amortization associated with the three acquired branches, which were partially offset by a reduction in legal fees due to charges related to nonrecurring costs expended on litigation activities and legal matters in the first quarter of 2022.
Financial Position
During the first quarter of 2023, we completed the purchase of three branches in southern California whereby we acquired $373 million of deposits, $21 million of loans, $5 million of fixed assets and $324 million of cash, and recorded $11 million of core deposit intangibles and $12 million of goodwill.
Excluding the impact of the acquisition noted above, during the first quarter of 2023, our total assets increased $121 million due primarily to a $304 million increase in cash, $39 million increase in loans held for investment and a $77 million increase in investment securities. Loans held for investment increased due to $325 million of originations, which were partially offset by prepayments and scheduled payments of $285 million. Excluding the impact of the acquisition noted above, during the first quarter of 2023 total liabilities increased $108 million due to an increase in borrowings, partially offset by a decrease in deposits. The $862 million increase in borrowings was used to replace higher-cost brokered deposits and increase our on-balance sheet liquidity. The decrease in deposits was due to a $561 million decrease in brokered certificates of deposit and a $345 million decrease in non-certificates of deposit balances which were partially offset by a $253 million increase in certificates of deposit balances related to our promotional products.
11
Loans Held for Investment ("LHFI")
| (in thousands) | March 31, 2023 | December 31, 2022 | September 30, 2022 | June 30, 2022 | March 31, 2022 | |||||||||||||||||||||||||||
| Commercial real estate ("CRE") | ||||||||||||||||||||||||||||||||
| Non-owner occupied CRE | $ | 652,284 | $ | 658,085 | $ | 666,394 | $ | 711,077 | $ | 699,277 | ||||||||||||||||||||||
| Multifamily | 3,975,654 | 3,975,754 | 3,923,946 | 3,475,697 | 2,729,775 | |||||||||||||||||||||||||||
| Construction/land development | 607,559 | 627,663 | 590,092 | 569,896 | 528,134 | |||||||||||||||||||||||||||
| Total | 5,235,497 | 5,261,502 | 5,180,432 | 4,756,670 | 3,957,186 | |||||||||||||||||||||||||||
| Commercial and industrial loans | ||||||||||||||||||||||||||||||||
| Owner occupied CRE | 438,147 | 443,363 | 432,114 | 470,259 | 464,356 | |||||||||||||||||||||||||||
| Commercial business | 392,837 | 359,747 | 361,635 | 393,764 | 387,938 | |||||||||||||||||||||||||||
| Total | 830,984 | 803,110 | 793,749 | 864,023 | 852,294 | |||||||||||||||||||||||||||
| Consumer loans | ||||||||||||||||||||||||||||||||
Single family (1) | 1,057,579 | 1,009,001 | 907,044 | 822,389 | 759,286 | |||||||||||||||||||||||||||
| Home equity and other | 362,322 | 352,707 | 332,262 | 316,655 | 295,724 | |||||||||||||||||||||||||||
| Total | 1,419,901 | 1,361,708 | 1,239,306 | 1,139,044 | 1,055,010 | |||||||||||||||||||||||||||
| Total LHFI | 7,486,382 | 7,426,320 | 7,213,487 | 6,759,737 | 5,864,490 | |||||||||||||||||||||||||||
| Allowance for credit losses ("ACL") | (41,500) | (41,500) | (37,606) | (37,355) | (37,944) | |||||||||||||||||||||||||||
| Total LHFI less ACL | $ | 7,444,882 | $ | 7,384,820 | $ | 7,175,881 | $ | 6,722,382 | $ | 5,826,546 | ||||||||||||||||||||||
(1)Includes $5.2 million, $5.9 million, $5.8 million, $6.5 million and $7.0 million of single family loans that are carried at fair value at March 31, 2023, December 31, 2022, September 30, 2022, June 30, 2022, and March 31, 2022, respectively.
12
Loan Roll-forward
| (in thousands) | March 31, 2023 | December 31, 2022 | September 30, 2022 | June 30, 2022 | March 31, 2022 | |||||||||||||||||||||||||||
| Loans - beginning balance | $ | 7,426,320 | $ | 7,213,487 | $ | 6,759,737 | $ | 5,864,490 | $ | 5,542,849 | ||||||||||||||||||||||
| Originations and advances | 345,461 | 611,954 | 914,129 | 1,309,883 | 747,238 | |||||||||||||||||||||||||||
| Transfers (to) from loans held for sale | — | 150 | (4,677) | (1,103) | (6,731) | |||||||||||||||||||||||||||
| Payoffs, paydowns and other | (284,725) | (398,745) | (455,607) | (411,859) | (418,852) | |||||||||||||||||||||||||||
| Charge-offs and transfers to OREO | (674) | (526) | (95) | (1,674) | (14) | |||||||||||||||||||||||||||
| Loans - ending balance | $ | 7,486,382 | $ | 7,426,320 | $ | 7,213,487 | $ | 6,759,737 | $ | 5,864,490 | ||||||||||||||||||||||
Loan Originations and Advances
| (in thousands) | March 31, 2023 (1) | December 31, 2022 | September 30, 2022 | June 30, 2022 | March 31, 2022 | |||||||||||||||||||||||||||
| CRE | ||||||||||||||||||||||||||||||||
| Non-owner occupied CRE | $ | 2,934 | $ | 406 | $ | 11,003 | $ | 39,194 | $ | 23,632 | ||||||||||||||||||||||
| Multifamily | 18,239 | 188,392 | 473,733 | 821,980 | 371,047 | |||||||||||||||||||||||||||
| Construction/land development | 153,458 | 186,313 | 208,057 | 189,827 | 174,770 | |||||||||||||||||||||||||||
| Total | 174,631 | 375,111 | 692,793 | 1,051,001 | 569,449 | |||||||||||||||||||||||||||
| Commercial and industrial loans | ||||||||||||||||||||||||||||||||
| Owner occupied CRE | 7,133 | 21,144 | 11,176 | 21,785 | 20,534 | |||||||||||||||||||||||||||
| Commercial business | 57,698 | 40,648 | 36,144 | 61,286 | 53,959 | |||||||||||||||||||||||||||
| Total | 64,831 | 61,792 | 47,320 | 83,071 | 74,493 | |||||||||||||||||||||||||||
| Consumer loans | ||||||||||||||||||||||||||||||||
| Single family | 67,410 | 128,829 | 118,727 | 118,957 | 70,067 | |||||||||||||||||||||||||||
| Home equity and other | 38,589 | 46,222 | 55,289 | 56,854 | 33,229 | |||||||||||||||||||||||||||
| Total | 105,999 | 175,051 | 174,016 | 175,811 | 103,296 | |||||||||||||||||||||||||||
| Total loan originations and advances | $ | 345,461 | $ | 611,954 | $ | 914,129 | $ | 1,309,883 | $ | 747,238 | ||||||||||||||||||||||
(1) Includes $17.1 million and $3.4 million, respectively, of consumer loans and commercial and industrial loans purchased in our first quarter 2023 branch acquisition.
Credit Quality
As of March 31, 2023, our ratio of nonperforming assets to total assets remained low at 0.15%, while our ratio of total loans delinquent over 30 days, including nonaccrual loans, to total loans was 0.41%.
13
Delinquencies
| Past Due and Still Accruing | |||||||||||||||||||||||||||||||||||||||||||||||
| (in thousands) | 30-59 days | 60-89 days | 90 days or more (1) | Nonaccrual | Total past due and nonaccrual (2) | Current | Total loans | ||||||||||||||||||||||||||||||||||||||||
| March 31, 2023 | |||||||||||||||||||||||||||||||||||||||||||||||
| Total loans held for investment | $ | 4,844 | $ | 1,899 | $ | 11,259 | $ | 13,047 | $ | 31,049 | $ | 7,455,333 | $ | 7,486,382 | |||||||||||||||||||||||||||||||||
| % | 0.06 | % | 0.03 | % | 0.15 | % | 0.17 | % | 0.41 | % | 99.59 | % | 100.00 | % | |||||||||||||||||||||||||||||||||
| December 31, 2022 | |||||||||||||||||||||||||||||||||||||||||||||||
| Total loans held for investment | $ | 4,823 | $ | 2,020 | $ | 4,372 | $ | 10,055 | $ | 21,270 | $ | 7,405,050 | $ | 7,426,320 | |||||||||||||||||||||||||||||||||
| % | 0.06 | % | 0.03 | % | 0.06 | % | 0.14 | % | 0.29 | % | 99.71 | % | 100.00 | % | |||||||||||||||||||||||||||||||||
(1) FHA-insured and VA-guaranteed single family loans that are 90 days or more past due are maintained on accrual status if they are determined to have little to no risk of loss.
(2) Includes loans whose repayments are insured by the FHA or guaranteed by the VA or SBA of $12.3 million and $10.6 million at March 31, 2023 and December 31, 2022, respectively.
Allowance for Credit Losses (roll-forward)
| Quarter Ended | ||||||||||||||||||||||||||||||||
| (in thousands) | March 31, 2023 | December 31, 2022 | September 30, 2022 | June 30, 2022 | March 31, 2022 | |||||||||||||||||||||||||||
| Allowance for credit losses | ||||||||||||||||||||||||||||||||
| Beginning balance | $ | 41,500 | $ | 37,606 | $ | 37,355 | $ | 37,944 | $ | 47,123 | ||||||||||||||||||||||
| Provision for credit losses | 589 | 4,195 | 249 | (216) | (9,223) | |||||||||||||||||||||||||||
| Recoveries (charge-offs), net | (589) | (301) | 2 | (373) | 44 | |||||||||||||||||||||||||||
Ending balance | $ | 41,500 | $ | 41,500 | $ | 37,606 | $ | 37,355 | $ | 37,944 | ||||||||||||||||||||||
Allowance for unfunded commitments: | ||||||||||||||||||||||||||||||||
| Beginning balance | $ | 2,197 | $ | 2,594 | $ | 2,843 | $ | 2,627 | $ | 2,404 | ||||||||||||||||||||||
| Provision for credit losses | 4 | (397) | (249) | 216 | 223 | |||||||||||||||||||||||||||
Ending balance | $ | 2,201 | $ | 2,197 | $ | 2,594 | $ | 2,843 | $ | 2,627 | ||||||||||||||||||||||
| Provision for credit losses: | ||||||||||||||||||||||||||||||||
| Allowance for credit losses - loans | $ | 589 | $ | 4,195 | $ | 249 | $ | (216) | $ | (9,223) | ||||||||||||||||||||||
| Allowance for unfunded commitments | 4 | (397) | (249) | 216 | 223 | |||||||||||||||||||||||||||
Total | $ | 593 | $ | 3,798 | $ | — | $ | — | $ | (9,000) | ||||||||||||||||||||||
14
Allocation of Allowance for Credit Losses by Product Type
| March 31, 2023 | December 31, 2022 | ||||||||||||||||||||||||||||||||||
| (in thousands) | Balance | Rate (1) | Balance | Rate (1) | |||||||||||||||||||||||||||||||
| Non-owner occupied CRE | $ | 2,608 | 0.40 | % | $ | 2,102 | 0.32 | % | |||||||||||||||||||||||||||
Multifamily | 9,787 | 0.25 | % | 10,974 | 0.28 | % | |||||||||||||||||||||||||||||
Construction/land development | |||||||||||||||||||||||||||||||||||
Multifamily construction | 1,345 | 1.23 | % | 998 | 1.05 | % | |||||||||||||||||||||||||||||
| CRE construction | 204 | 1.02 | % | 196 | 1.03 | % | |||||||||||||||||||||||||||||
| Single family construction | 12,525 | 3.82 | % | 12,418 | 3.51 | % | |||||||||||||||||||||||||||||
| Single family construction to perm | 1,211 | 0.80 | % | 1,171 | 0.74 | % | |||||||||||||||||||||||||||||
| Total CRE | 27,680 | 0.53 | % | 27,859 | 0.53 | % | |||||||||||||||||||||||||||||
| Owner occupied CRE | 910 | 0.21 | % | 1,030 | 0.23 | % | |||||||||||||||||||||||||||||
Commercial business | 3,416 | 0.88 | % | 3,247 | 0.91 | % | |||||||||||||||||||||||||||||
| Total commercial and industrial | 4,326 | 0.52 | % | 4,277 | 0.54 | % | |||||||||||||||||||||||||||||
Single family | 5,804 | 0.61 | % | 5,610 | 0.62 | % | |||||||||||||||||||||||||||||
Home equity and other | 3,690 | 1.02 | % | 3,754 | 1.06 | % | |||||||||||||||||||||||||||||
| Total consumer | 9,494 | 0.72 | % | 9,364 | 0.74 | % | |||||||||||||||||||||||||||||
| Total | $ | 41,500 | 0.56 | % | $ | 41,500 | 0.57 | % | |||||||||||||||||||||||||||
(1) The ACL rate is calculated excluding balances related to loans that are insured by the FHA or guaranteed by the VA or SBA
Production Volumes for Sale to the Secondary Market
| Quarter Ended | ||||||||||||||||||||||||||||||||||||||||||||
| (in thousands) | March 31, 2023 | December 31, 2022 | September 30, 2022 | June 30, 2022 | March 31, 2022 | |||||||||||||||||||||||||||||||||||||||
| Loan originations | ||||||||||||||||||||||||||||||||||||||||||||
Single family loans | $ | 72,814 | $ | 51,647 | $ | 110,011 | $ | 172,947 | $ | 238,505 | ||||||||||||||||||||||||||||||||||
Commercial and industrial and CRE loans | 6,150 | 20,864 | 15,332 | 51,584 | 12,312 | |||||||||||||||||||||||||||||||||||||||
Loans sold | ||||||||||||||||||||||||||||||||||||||||||||
| Single family loans | 63,473 | 51,427 | 131,228 | 187,623 | 323,070 | |||||||||||||||||||||||||||||||||||||||
Commercial and industrial and CRE loans (1) | 8,750 | 16,228 | 29,965 | 50,292 | 49,137 | |||||||||||||||||||||||||||||||||||||||
| Net gain on loan origination and sale activities | ||||||||||||||||||||||||||||||||||||||||||||
| Single family loans | 2,218 | 1,158 | 1,778 | 3,949 | 6,169 | |||||||||||||||||||||||||||||||||||||||
Commercial and industrial and CRE loans (1) | 192 | 330 | 869 | 1,343 | 2,105 | |||||||||||||||||||||||||||||||||||||||
| Total | $ | 2,410 | $ | 1,488 | $ | 2,647 | $ | 5,292 | $ | 8,274 | ||||||||||||||||||||||||||||||||||
(1) May include loans originated as held for investment.
15
Loan Servicing Income
| Quarter Ended | ||||||||||||||||||||||||||||||||||||||||||||
| (in thousands) | March 31, 2023 | December 31, 2022 | September 30, 2022 | June 30, 2022 | March 31, 2022 | |||||||||||||||||||||||||||||||||||||||
| Single family servicing income, net: | ||||||||||||||||||||||||||||||||||||||||||||
| Servicing fees and other | $ | 3,923 | $ | 3,928 | $ | 3,986 | $ | 3,952 | $ | 3,871 | ||||||||||||||||||||||||||||||||||
Changes - amortization (1) | (1,684) | (1,899) | (2,112) | (2,515) | (3,425) | |||||||||||||||||||||||||||||||||||||||
| Net | 2,239 | 2,029 | 1,874 | 1,437 | 446 | |||||||||||||||||||||||||||||||||||||||
| Risk management, single family MSRs: | ||||||||||||||||||||||||||||||||||||||||||||
Changes in fair value due to assumptions (2) | (311) | 124 | 1,989 | 4,323 | 10,303 | |||||||||||||||||||||||||||||||||||||||
| Net gain (loss) from derivatives hedging | (81) | (309) | (2,981) | (5,317) | (10,183) | |||||||||||||||||||||||||||||||||||||||
| Subtotal | (392) | (185) | (992) | (994) | 120 | |||||||||||||||||||||||||||||||||||||||
| Single family servicing income | 1,847 | 1,844 | 882 | 443 | 566 | |||||||||||||||||||||||||||||||||||||||
| Commercial loan servicing income: | ||||||||||||||||||||||||||||||||||||||||||||
| Servicing fees and other | 2,746 | 2,653 | 3,687 | 5,555 | 4,450 | |||||||||||||||||||||||||||||||||||||||
| Amortization of capitalized MSRs | (1,554) | (1,815) | (1,828) | (2,337) | (1,712) | |||||||||||||||||||||||||||||||||||||||
| Total | 1,192 | 838 | 1,859 | 3,218 | 2,738 | |||||||||||||||||||||||||||||||||||||||
| Total loan servicing income | $ | 3,039 | $ | 2,682 | $ | 2,741 | $ | 3,661 | $ | 3,304 | ||||||||||||||||||||||||||||||||||
(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.
Capitalized Mortgage Servicing Rights ("MSRs")
| Quarter Ended | ||||||||||||||||||||||||||||||||
| (in thousands) | March 31, 2023 | December 31, 2022 | September 30, 2022 | June 30, 2022 | March 31, 2022 | |||||||||||||||||||||||||||
| Single Family MSRs | ||||||||||||||||||||||||||||||||
| Beginning balance | $ | 76,617 | $ | 77,811 | $ | 76,481 | $ | 72,378 | $ | 61,584 | ||||||||||||||||||||||
| Additions and amortization: | ||||||||||||||||||||||||||||||||
Originations | 619 | 581 | 1,453 | 2,295 | 3,916 | |||||||||||||||||||||||||||
Purchases | 460 | — | — | — | — | |||||||||||||||||||||||||||
Changes - amortization (1) | (1,684) | (1,899) | (2,112) | (2,515) | (3,425) | |||||||||||||||||||||||||||
Net additions and amortization | (605) | (1,318) | (659) | (220) | 491 | |||||||||||||||||||||||||||
Change in fair value due to assumptions (2) | (311) | 124 | 1,989 | 4,323 | 10,303 | |||||||||||||||||||||||||||
| Ending balance | $ | 75,701 | $ | 76,617 | $ | 77,811 | $ | 76,481 | $ | 72,378 | ||||||||||||||||||||||
| Ratio to related loans serviced for others | 1.40 | % | 1.41 | % | 1.42 | % | 1.38 | % | 1.31 | % | ||||||||||||||||||||||
| Multifamily and SBA MSRs | ||||||||||||||||||||||||||||||||
| Beginning balance | $ | 35,256 | $ | 36,819 | $ | 38,130 | $ | 39,279 | 39,415 | |||||||||||||||||||||||
Originations | 137 | 252 | 517 | 1,188 | 1,576 | |||||||||||||||||||||||||||
Amortization | (1,554) | (1,815) | (1,828) | (2,337) | (1,712) | |||||||||||||||||||||||||||
| Ending balance | $ | 33,839 | $ | 35,256 | $ | 36,819 | $ | 38,130 | $ | 39,279 | ||||||||||||||||||||||
| Ratio to related loans serviced for others | 1.77 | % | 1.82 | % | 1.86 | % | 1.91 | % | 1.93 | % | ||||||||||||||||||||||
(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.
16
Deposits
| (in thousands) | March 31, 2023 | December 31, 2022 | September 30, 2022 | June 30, 2022 | March 31, 2022 | |||||||||||||||||||||||||||
| Deposits by Product: | ||||||||||||||||||||||||||||||||
| Noninterest-bearing demand deposits | $ | 1,479,428 | $ | 1,399,912 | $ | 1,547,642 | $ | 1,640,651 | $ | 1,654,229 | ||||||||||||||||||||||
| Interest-bearing: | ||||||||||||||||||||||||||||||||
| Interest-bearing demand deposits | 496,504 | 466,490 | 514,912 | 590,889 | 591,148 | |||||||||||||||||||||||||||
| Savings | 323,373 | 258,977 | 275,399 | 302,359 | 309,462 | |||||||||||||||||||||||||||
| Money market | 2,097,055 | 2,383,209 | 2,551,961 | 2,679,865 | 2,800,215 | |||||||||||||||||||||||||||
| Certificates of deposit: | ||||||||||||||||||||||||||||||||
| Brokered deposits | 885,314 | 1,446,528 | 511,920 | 270,160 | 195,162 | |||||||||||||||||||||||||||
| Other | 1,774,929 | 1,496,803 | 1,208,397 | 699,375 | 720,319 | |||||||||||||||||||||||||||
| Total interest-bearing deposits | 5,577,175 | 6,052,007 | 5,062,589 | 4,542,648 | 4,616,306 | |||||||||||||||||||||||||||
| Total deposits | $ | 7,056,603 | $ | 7,451,919 | $ | 6,610,231 | $ | 6,183,299 | $ | 6,270,535 | ||||||||||||||||||||||
| Percent of total deposits: | ||||||||||||||||||||||||||||||||
| Noninterest-bearing demand deposits | 21.0 | % | 18.8 | % | 23.4 | % | 26.5 | % | 26.4 | % | ||||||||||||||||||||||
| Interest-bearing: | ||||||||||||||||||||||||||||||||
| Interest-bearing demand deposits | 7.0 | % | 6.2 | % | 7.8 | % | 9.6 | % | 9.4 | % | ||||||||||||||||||||||
| Savings | 4.6 | % | 3.5 | % | 4.2 | % | 4.9 | % | 4.9 | % | ||||||||||||||||||||||
| Money market | 29.7 | % | 32.0 | % | 38.6 | % | 43.3 | % | 44.7 | % | ||||||||||||||||||||||
| Certificates of deposit | ||||||||||||||||||||||||||||||||
| Brokered deposits | 12.5 | % | 19.4 | % | 7.7 | % | 4.4 | % | 3.1 | % | ||||||||||||||||||||||
| Other | 25.2 | % | 20.1 | % | 18.3 | % | 11.3 | % | 11.5 | % | ||||||||||||||||||||||
| Total interest-bearing deposits | 79.0 | % | 81.2 | % | 76.6 | % | 73.5 | % | 73.6 | % | ||||||||||||||||||||||
| Total deposits | 100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % | ||||||||||||||||||||||
17
HomeStreet, Inc. and Subsidiaries
Non-GAAP Financial Measures
To supplement our unaudited condensed consolidated financial statements presented in accordance with GAAP, we use certain non-GAAP measures of financial performance.
In this earnings release, we use the following non-GAAP measures: (i) tangible common equity and tangible assets as we believe this information is consistent with the treatment by bank regulatory agencies, which exclude intangible assets from the calculation of capital ratios; and (ii) an efficiency ratio which is the ratio of noninterest expense to the sum of net interest income and noninterest income, excluding certain items of income or expense and excluding taxes incurred and payable to the state of Washington as such taxes are not classified as income taxes and we believe including them in noninterest expense impacts the comparability of our results to those companies whose operations are in states where assessed taxes on business are classified as income taxes.
These supplemental performance measures may vary from, and may not be comparable to, similarly titled measures provided by other companies in our industry. Non-GAAP financial measures are not in accordance with, or an alternative for, GAAP. Generally, a non-GAAP financial measure is a numerical measure of a company’s performance that either excludes or includes amounts that are not normally excluded or included in the most directly comparable measure calculated and presented in accordance with GAAP. A non-GAAP financial measure may also be a financial metric that is not required by GAAP or other applicable requirements.
We believe that these non-GAAP financial measures, when taken together with the corresponding GAAP financial measures, provide meaningful supplemental information regarding our performance by providing additional information used by management that is not otherwise required by GAAP or other applicable requirements. Our management uses, and believes that investors benefit from referring to, these non-GAAP financial measures in assessing our operating results and when planning, forecasting and analyzing future periods. These non-GAAP financial measures also facilitate a comparison of our performance to prior periods. We believe these measures are frequently used by securities analysts, investors and other parties in the evaluation of companies in our industry. These non-GAAP financial measures should be considered in addition to, not as a substitute for or superior to, financial measures prepared in accordance with GAAP. In the information below, we have provided reconciliations of, where applicable, the most comparable GAAP financial measures to the non-GAAP measures used in this press release, or a reconciliation of the non-GAAP calculation of the financial measure.
18
HomeStreet, Inc. and Subsidiaries
Non-GAAP Financial Measures
Reconciliations of non-GAAP results of operations to the nearest comparable GAAP measures or calculations of the non-GAAP measure:
| As of or for the Quarter Ended | |||||||||||||||||||||||||||||||||||||||||
| (in thousands, except share and per share data) | March 31, 2023 | December 31, 2022 | September 30, 2022 | June 30, 2022 | March 31, 2022 | ||||||||||||||||||||||||||||||||||||
| Tangible book value per share | |||||||||||||||||||||||||||||||||||||||||
Shareholders' equity | $ | 574,994 | $ | 562,147 | $ | 552,789 | $ | 580,767 | $ | 601,231 | |||||||||||||||||||||||||||||||
Less: Goodwill and other intangibles | (51,862) | (29,980) | (30,215) | (31,219) | (31,464) | ||||||||||||||||||||||||||||||||||||
| Tangible shareholders' equity | $ | 523,132 | $ | 532,167 | $ | 522,574 | $ | 549,548 | $ | 569,767 | |||||||||||||||||||||||||||||||
| Common shares outstanding | 18,767,811 | 18,730,380 | 18,717,557 | 18,712,789 | 18,700,536 | ||||||||||||||||||||||||||||||||||||
| Computed amount | $ | 27.87 | $ | 28.41 | $ | 27.92 | $ | 29.37 | $ | 30.47 | |||||||||||||||||||||||||||||||
| Tangible common equity to tangible assets | |||||||||||||||||||||||||||||||||||||||||
| Tangible shareholders' equity (per above) | $ | 523,132 | $ | 532,167 | $ | 522,574 | $ | 549,548 | $ | 569,767 | |||||||||||||||||||||||||||||||
| Tangible assets | |||||||||||||||||||||||||||||||||||||||||
| Total assets | $ | 9,858,889 | $ | 9,364,760 | $ | 9,072,887 | $ | 8,582,886 | $ | 7,510,894 | |||||||||||||||||||||||||||||||
| Less: Goodwill and other intangibles | (51,862) | (29,980) | (30,215) | (31,219) | (31,464) | ||||||||||||||||||||||||||||||||||||
| Net | $ | 9,807,027 | $ | 9,334,780 | $ | 9,042,672 | $ | 8,551,667 | $ | 7,479,430 | |||||||||||||||||||||||||||||||
| Ratio | 5.3 | % | 5.7 | % | 5.8 | % | 6.4 | % | 7.6 | % | |||||||||||||||||||||||||||||||
| Return on average tangible equity (annualized) | |||||||||||||||||||||||||||||||||||||||||
Average shareholders' equity | $ | 578,533 | $ | 565,950 | $ | 603,278 | $ | 603,664 | $ | 698,598 | |||||||||||||||||||||||||||||||
Less: Average goodwill and other intangibles | (30,969) | (30,133) | (30,602) | (31,380) | (31,624) | ||||||||||||||||||||||||||||||||||||
| Average tangible equity | $ | 547,564 | $ | 535,817 | $ | 572,676 | $ | 572,284 | $ | 666,974 | |||||||||||||||||||||||||||||||
| Net income | $ | 5,058 | $ | 8,501 | $ | 20,367 | $ | 17,721 | $ | 19,951 | |||||||||||||||||||||||||||||||
| Adjustments (tax effected) | |||||||||||||||||||||||||||||||||||||||||
| Amortization of core deposit intangibles | 459 | 183 | 186 | 191 | 191 | ||||||||||||||||||||||||||||||||||||
| Tangible income applicable to shareholders | $ | 5,517 | $ | 8,684 | $ | 20,553 | $ | 17,912 | $ | 20,142 | |||||||||||||||||||||||||||||||
Ratio | 4.1 | % | 6.4 | % | 14.2 | % | 12.6 | % | 12.2 | % | |||||||||||||||||||||||||||||||
| Efficiency ratio | |||||||||||||||||||||||||||||||||||||||||
Noninterest expense | |||||||||||||||||||||||||||||||||||||||||
Total | $ | 52,491 | $ | 50,420 | $ | 49,889 | $ | 50,637 | $ | 54,473 | |||||||||||||||||||||||||||||||
Adjustments: | |||||||||||||||||||||||||||||||||||||||||
| State of Washington taxes | (555) | (597) | (629) | (579) | (506) | ||||||||||||||||||||||||||||||||||||
| Adjusted total | $ | 51,936 | $ | 49,823 | $ | 49,260 | $ | 50,058 | $ | 53,967 | |||||||||||||||||||||||||||||||
Total revenues | |||||||||||||||||||||||||||||||||||||||||
Net interest income | $ | 49,376 | $ | 55,687 | $ | 63,018 | $ | 60,056 | $ | 54,546 | |||||||||||||||||||||||||||||||
Noninterest income | 10,190 | 9,677 | 13,322 | 13,013 | 15,558 | ||||||||||||||||||||||||||||||||||||
| Gain on sale of branches | — | — | (4,270) | — | — | ||||||||||||||||||||||||||||||||||||
| Adjusted total | $ | 59,566 | $ | 65,364 | $ | 72,070 | $ | 73,069 | $ | 70,104 | |||||||||||||||||||||||||||||||
| Ratio | 87.2 | % | 76.2 | % | 68.4 | % | 68.5 | % | 77.0 | % | |||||||||||||||||||||||||||||||
| Effective tax rate used in computations above | 22.0 | % | 22.0 | % | 22.0 | % | 22.0 | % | 22.0 | % | |||||||||||||||||||||||||||||||
19
Forward-Looking Statements
This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 (the “Reform Act”). Generally, forward-looking statements include the words “anticipate,” “believe,” “estimate,” “expect,” “intend,” “may,” “plan,” “potential,” “goal,” “upcoming,” “outlook,” “guidance” or the negation thereof, or similar expressions. In addition, all statements in this press release (including but not limited to those found in the quotes of our Chief Executive Officer) that address and/or include beliefs, assumptions, estimates, projections and expectations of our future performance, financial condition, long-term value creation, capital management, reduction in volatility, reliability of earnings, net interest margins, provisions and allowances for credit losses, cost reduction initiatives, performance of our continued operations relative to our past operations, and restructuring activities are forward-looking statements within the meaning of the Reform Act. Forward-looking statements involve inherent risks, uncertainties and other factors, many of which are difficult to predict and are generally beyond management’s control. Forward-looking statements are based on the Company’s expectations at the time such statements are made and speak only as of the date made. The Company does not assume any obligation or undertake to update any forward-looking statements after the date of this release as a result of new information, future events or developments, except as required by federal securities or other applicable laws, although the Company may do so from time to time. The Company does not endorse any projections regarding future performance that may be made by third parties. For all forward-looking statements, the Company claims the protection of the safe harbor for forward-looking statements contained in the Reform Act.
We caution readers that actual results may differ materially from those expressed in or implied by the Company’s forward-looking statements. Rather, more important factors could affect the Company’s future results, including but not limited to the following: (1) changes in the U.S. and global economies, including business disruptions, reductions in employment, inflationary pressures and an increase in business failures, specifically among our customers; (2) changes in the interest rate environment may reduce interest margins; (3) changes in deposit flows, loan demand or real estate values may adversely affect the business of our primary subsidiary, HomeStreet Bank (the “Bank”), through which substantially all of our operations are carried out; (4) there may be increases in competitive pressure among financial institutions or from non-financial institutions; (5) our ability to attract and retain key members of our senior management team; (6) the timing and occurrence or non-occurrence of events may be subject to circumstances beyond our control; (7) our ability to control operating costs and expenses; (8) our credit quality and the effect of credit quality on our credit losses expense and allowance for credit losses; (9) the adequacy of our allowance for credit losses; (10) changes in accounting principles, policies or guidelines may cause our financial condition to be perceived or interpreted differently; (11) legislative or regulatory changes that may adversely affect our business or financial condition, including, without limitation, changes in corporate and/or individual income tax laws and policies, changes in privacy laws, and changes in regulatory capital or other rules, and the availability of resources to address or respond to such changes; (12) general economic conditions, either nationally or locally in some or all areas in which we conduct business, or conditions in the securities markets or banking industry, may be less favorable than what we currently anticipate; (13) challenges our customers may face in meeting current underwriting standards may adversely impact all or a substantial portion of the value of our rate-lock loan activity we recognize; (14) technological changes may be more difficult or expensive than what we anticipate; (15) a failure in or breach of our operational or security systems or information technology infrastructure, or those of our third-party providers and vendors, including due to cyber-attacks; (16) success or consummation of new business initiatives may be more difficult or expensive than what we anticipate; (17) our ability to grow efficiently both organically and through acquisitions and to manage our growth and integration costs; (18) the continued impact of COVID-19 on our business, employees and our ability to provide services to our customers and respond to their needs as more cases of COVID-19 may arise in our primary markets (19) staffing fluctuations in response to product demand or the implementation of corporate strategies that affect our work force and potential associated charges; (20) litigation, investigations or other matters before regulatory agencies, whether currently existing or commencing in the future, may delay the occurrence or non-occurrence of events longer than what we anticipate; (21) our ability to obtain regulatory approvals or non-objection to take various capital actions, including the payment of dividends by us or the Bank, or repurchases of our common stock; and (22) the integration of our recently acquired branches in southern California. A discussion of the factors, risks and uncertainties that could affect our financial results, business goals and operational and financial objectives cited in this release, other releases, public statements and/or filings with the Securities and Exchange Commission (“SEC”) is also contained in the “Risk Factors” sections of this Company's Forms 10-K and 10-Q. We strongly recommend readers review those disclosures in conjunction with the discussions herein.
20
All future written and oral forward-looking statements attributable to the Company or any person acting on its behalf are expressly qualified in their entirety by the cautionary statements contained or referred to above. New risks and uncertainties arise from time to time, and factors that the Company currently deems immaterial may become material, and it is impossible for the Company to predict these events or how they may affect the Company.
21