- Fully diluted EPS $0.81
- Core EPS $0.86
- ROATE: 11.4%
- ROATE: Core 12.2%
- Tangible BV per share $28.73
HomeStreet, Inc. (Nasdaq:HMST) (including its consolidated
subsidiaries, the "Company" or "HomeStreet"), the parent company of
HomeStreet Bank, today announced the financial results for the
quarter ended June 30, 2020. 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.”
“I am very proud of what we accomplished at HomeStreet during
the second quarter of 2020,” said Mark K. Mason, HomeStreet’s
Chairman of the Board, President, and Chief Executive Officer.
“Strong mortgage banking profitability, significantly lower cost of
deposits and the impact of our focus on cost efficiency contributed
to solid financial performance. I would like to thank all of our
employees for their hard work delivering these exceptional results
under difficult circumstances, their courage in adapting to
changing conditions resulting from the global pandemic, and their
grace and their tireless efforts in serving our valued customers
and communities.”
Operating Results
Second quarter 2020 compared
to first quarter 2020
Reported Results:
- Net income of $18.9 million compared with $7.1 million
- Earnings per fully diluted share of $0.81 compared to
$0.30
- Net interest margin of 3.12%, compared to 2.93%
Core Results:
- Net income of $20.2 million compared with $8.1 million
- Earnings per fully diluted share of $0.86 compared to
$0.34
- Pre provision income before income taxes of $32.0 million
compared to $24.1 million
- Efficiency ratio of 62.6% compared to 68.5%
Financial Position
Second quarter 2020 compared
to first quarter 2020
- Loan originations: $833 million a 25% increase
- Loans held for sale originations: $537 million, a 58%
increase
- Deposits increased by $399 million, an 8% increase
- Noninterest-bearing deposits: 18.6% of total deposits compared
to 14.6%
- Period ending cost of deposits of 0.51%, compared to 0.72%
- Tangible book value per share of $28.73, a 4% increase
Mr. Mason continued, “Although the effects of the global
pandemic continue and the long-term impacts are yet to be fully
realized, we are encouraged by the performance of our loan
portfolio. Our delinquencies have remained low and new requests for
forbearance have been minimal since the end of April. We are seeing
positive trends in loans granted forbearance including resumed
business activity and minimal requests for extensions of
forbearance. In fact, the majority of our commercial and industrial
loans for which we have provided forbearance have completed their
forbearance periods and are again making regular payments. However,
given the uncertain pandemic environment we have recorded
additional credit loss reserves in the second quarter to address
the potential risks. We continued offering loans under the Payment
Protection Program ("PPP") through the end of the second quarter,
resulting in many new customers and increased deposits.”
Covid-19 Updates
- Loans in forbearance granted through June 30, 2020: 722 loans;
$387 million
- Provision for credit losses of $6.5 million in the quarter
- PPP loans as of June 30, 2020: 1,781 loans; $296 million
- All deposit branches are operating with reduced hours and by
appointment only as of June 30, 2020
Mr. Mason concluded, “Due to our relatively low levels of
potential COVID-19 credit risk and growing clarity of ultimate
risk, strong earnings and ample capital and liquidity, we resumed
our previously suspended share repurchase program in the second
quarter and have received authorization from our Board to
repurchase an additional $25 million of our shares. Finally, in
June 2020, we welcomed Jeffrey D. Green to our Board of Directors.
As a former audit partner at Moss Adams and head of their Banking
practice group, Jeff is a certified public accountant and has
significant financial institutions and accounting experience and he
will make a great addition to our Board of Directors.”
Other
- Repurchased a total of 396,795 shares of our common stock at an
average price of $24.17 per share during the second quarter
- Remaining repurchase authorization of $2.1 million
- Approved an additional $25 million stock repurchase, subject to
regulatory non-objection
- Declared a cash dividend of $0.15 per share in the quarter,
payable on August 27, 2020
- Full time equivalent employees: 987 as of June 30, 2020
Conference Call
HomeStreet, Inc. (Nasdaq:HMST), the parent company of HomeStreet
Bank, will conduct a quarterly earnings conference call on Tuesday,
July 28, 2020 at 1:00 p.m. EDT. Mark K. Mason, President and CEO,
and John M. Michel, Executive Vice President and CFO, will discuss
second quarter 2020 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 http://dpregister.com/10145508 or may join the
call by dialing 1-877-508-9589 (1-855-669-9657 in Canada and
1-412-317-1075 internationally) shortly before 1:00 p.m. EDT.
A rebroadcast will be available approximately one hour after the
conference call by dialing 1-877-344-7529 and entering passcode
10145508.
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
through its various operating subsidiaries. The Company is
principally engaged in real estate lending, including mortgage
banking activities, and commercial and consumer banking. Its
principal subsidiaries are HomeStreet Bank and HomeStreet Capital
Corporation. 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 an Equal Housing Lender.
Forward-Looking Statements
This press release contains forward-looking statements
concerning HomeStreet, Inc., HomeStreet Bank (and any consolidated
subsidiaries of HomeStreet, Inc. and HomeStreet Bank) and their
operations, performance, financial condition and likelihood of
success, as well as plans and expectations for future actions and
events. 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 impacts of COVID-19 on our
business and operating strategies and plans and on the economies
and communities we serve, our expectations about future performance
and financial condition, long term value creation, reduction in
volatility, reliability of earnings, provisions and allowances for
credit losses, cost reduction initiatives, performance of our
continued operations relative to our past operations, the nature
and magnitude of additional expected charges related the exit of
our home loan center-based mortgage operations . 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 management's control. 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, or implied or
projected by, such forward-looking statements. Among other things,
we face limitations and risks associated with the ongoing impacts
of COVID-19 and the extent to which it has impacted and will impact
our business, operations and performance, and which could have a
negative impact on our credit portfolio, borrowers, and share
price, recent restructuring activities, the ongoing need to
anticipate and address similar issues affecting our business, and
challenges to our ability to efficiently expand our banking
operations, meet our growth targets, maintain our competitive
position and generate positive net income and cash flow. These
limitations and risks include our inability to implement all or a
significant portion of the cost reduction measures we have
identified, the risk of adverse impacts to our business of reducing
the size of our operations; changes in general political and
economic conditions that impact our markets and our business;
actions by the Federal Reserve Board, the FDIC, Washington State
Department of Financial Institutions and financial market
conditions that affect monetary and fiscal policy; regulatory and
legislative actions that may increase capital requirements or
otherwise constrain our ability to do business, including new or
changing interpretations of existing statutes or regulations and
restrictions, fines or penalties that could be imposed by our
regulators on certain aspects of our operations or on our growth
initiatives and acquisition activities; our ability to maintain
electronic and physical security of our customer data and our
information systems; our ability to maintain compliance with
current and evolving laws and regulations; our ability to attract
and retain key personnel; employee litigation risk arising from
current or past operations including but not limited to various
restructuring activities undertaken by the Bank in recent years;
our ability to make accurate estimates of the value of our non-cash
assets and liabilities; our ability to operate our business
efficiently in a time of lower revenues and increases in the
competition in our industry and across our markets; and the extent
of our success in resolving problem assets. The results of our
restructuring activities and cost efficiency measures may fall
short of our financial and operational expectations. 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; decreases in
interest rates; increase in competition for loans; unfavorable
changes in general economic conditions, including housing prices,
unemployment rates, the job market; the impact of the ongoing
COVID-19 pandemic and other similar events or natural disasters;
the ability of our customers to meet their debt obligations;
consumer confidence and spending habits either nationally or in the
regional and local market areas in which we do business; and recent
and future legislative or regulatory actions or reform that affect
us directly or our business or the banking or mortgage industries
more generally. A discussion of the factors that may pose a 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 year ended December 31, 2019, which we update from time to
time in our filings with the Securities and Exchange Commission. We
strongly recommend readers review those disclosures in conjunction
with the discussions herein.
The information contained herein is unaudited, although certain
information related to the year ended December 31, 2019 has been
derived from our audited financial statements for the year then
ended as included in our 2019 Form 10-K. All financial data for the
year end December 31, 2019 should be read in conjunction with the
audited consolidated financial statements for the year ended
December 31, 2019 and the notes to such consolidated financial
statements of HomeStreet, Inc. and subsidiaries as of and for the
fiscal year ended December 31, 2019, as contained in the Company's
Annual Report on Form 10-K for such fiscal year.
HomeStreet, Inc. and Subsidiaries Non-GAAP Financial
Measures
To supplement our unaudited condensed financial statements
presented in accordance with GAAP, we use certain non-GAAP measures
of financial performance. 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
requirement.
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 interested parties. In the evaluation of companies in our
industry. However, 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 a reconciliation 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.
In this press release, we use (i) tangible common equity and
tangible assets as we believe this information is consistent with
the treatment by bank regulatory agencies, which excluded
intangible assets from the calculation of capital ratios; (ii) core
earnings which exclude certain nonrecurring charges primarily
related to our discontinued operations and restructuring activities
as we believe this measure is a better comparison to be used for
projecting future results; (iii) core pre-provision income before
taxes which excludes the provision for credit losses as we believe
this provides a better understanding of our current and future
results after excluding the substantial provision for credit losses
required under CECL and the current COVID-19 economic conditions;
and (iv) an efficiency ratio which is the ratio of noninterest
expenses 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 expenses impacts the comparability of our results to
those companies whose operations are in states where assessed taxes
on business are classified as income taxes.
HomeStreet, Inc. and Subsidiaries Non-GAAP Financial
Measures
Reconciliations of non-GAAP results of operations to the nearest
comparable GAAP measures:
Quarter Ended
(dollars in thousands, except share
data)
June 30, 2020
March 31, 2020
Tangible book value per share
Shareholders' equity
$
694,649
$
677,314
Less: Goodwill and other intangibles
(33,563
)
(33,908
)
Tangible shareholders' equity
$
661,086
$
643,406
Common shares outstanding
23,007,400
23,376,793
Ratio
$
28.73
$
27.52
Return on average tangible equity
(annualized) - Core
Average shareholders' equity
$
698,521
$
691,292
Less: Average goodwill and other
intangibles
(33,785
)
(34,125
)
Average tangible equity
$
664,736
$
657,167
Net income from continuing operations
$
18,904
$
7,139
Adjustments (tax effected)
Lease impairment costs
1,262
170
Other restructuring related charges
434
807
Contingent payout
(446
)
—
Core earnings
$
20,155
$
8,116
Ratio
12.2
%
4.9
%
Efficiency ratio
Noninterest expense
Total
$
57,652
$
55,184
Adjustments:
Lease impairment costs
(1,602
)
(211
)
Other restructuring related charges
(551
)
(1,004
)
State of Washington taxes
(675
)
(512
)
Adjusted total
$
54,824
$
53,457
Total revenues
Net interest income
$
51,496
$
45,434
Noninterest income
36,602
32,630
Adjustments:
Contingent payout
(566
)
—
Adjusted total
$
87,532
$
78,064
Ratio
62.6
%
68.5
%
Core diluted earnings per share
Core earnings (per above)
$
20,155
$
8,116
Fully diluted shares
23,479,845
23,860,280
Ratio
0.86
0.34
Pre-provision income before income taxes -
Core
Total revenues - Core
$
87,532
$
78,064
Noninterest expense - Core
(54,824
)
(53,457
)
State of Washington taxes
(675
)
(512
)
Total
$
32,033
$
24,095
Effective tax rate used in computations
above
21.2
%
19.6
%
View source
version on businesswire.com: https://www.businesswire.com/news/home/20200727005782/en/
Investor Relations: HomeStreet, Inc. Gerhard Erdelji
(206) 515-4039 Gerhard.Erdelji@HomeStreet.com
http://ir.homestreet.com
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