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 September 30, 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.”
Operating Results
Third quarter 2023 compared to
second quarter 2023
Reported Results:
- Net income (loss): $2.3 million compared to $(31.4)
million
- Earnings (loss) per fully diluted share: $0.12 compared to
$(1.67)
- Return on Average Equity ("ROAE"): 1.7% compared to
(21.7)%
- Return on Average Assets ("ROAA"): 0.10% compared to
(1.32)%
- Net interest margin: 1.74% compared to 1.93%
- Efficiency ratio: 98.3% compared to 93.7%
Core Results:(1)
- Net income: $2.3 million compared to $3.2 million
- Earnings per fully diluted share: $0.12 compared to $0.17
- Return on Average Tangible Equity ("ROATE"): 2.2% compared to
2.9%
- Return on Average Assets ("ROAA"): 0.10% compared to 0.13%
(1) Core net income, return on average
tangible equity and core return on average assets are non-GAAP
measures, for a reconciliation to the nearest comparable GAAP
measure see "Non-GAAP financial measures in this earnings
release.
“Our operating results for the quarter reflect the continuing
adverse impact of the 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. “The high interest rate environment has significantly
negatively impacted our net interest margin as well as loan volume
in our residential and commercial mortgage banking businesses whose
activity continues at historically low levels. To mitigate these
challenges, we have reduced controllable expenses where possible,
reduced staff to the minimum levels to transact current business
volume in a safe and sound manner, raised new deposits through
promotional products and focused our new loan origination activity
primarily on floating rate products such as commercial loans,
residential construction loans and home equity loans. Due to
historically low levels of prepayments, our loan portfolio has
remained stable even with our reduced level of originations.”
Financial Position
As of and for the quarter
ended September 30, 2023
- Uninsured deposits were $535 million, or 8% of total
deposits
- Excluding brokered deposits, total deposits decreased $137
million
- Loans held for investment ("LHFI"), remained stable
- Nonperforming assets to total assets: 0.42%
- Allowance for credit losses to LHFI: 0.55%
- Book value per share: $26.74
- Tangible book value per share: $26.18
“The deposit outflows we have experienced in 2023 were primarily
due to depositors seeking higher yields and seasonal tax payments,”
Mr. Mason stated. “With noninterest-bearing and low-cost deposits
seeking higher yields, we have implemented a strategy to attract
new deposits and retain existing deposits through promotional rate
certificates of deposit accounts and money market accounts.”
“Asset quality remained strong in the third quarter as total
past due and nonaccrual loans and nonperforming assets all
decreased in the quarter,” added Mr. Mason. “Today, we do not see
any meaningful credit challenges on the horizon.”
Other
- Declared and paid a cash dividend of $0.10 per share in the
third quarter
Conference Call
HomeStreet, Inc. (Nasdaq: HMST), the parent company of
HomeStreet Bank, will conduct a quarterly earnings conference call
on Tuesday October 31, 2023, at 1:00 p.m. ET. Mark K. Mason, CEO
and President, and John M. Michel, CFO, will discuss third 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=b1fe096b&confId=55387
(or internationally at the following URL
https://www.netroadshow.com/conferencing/global-numbers?confId=55387)
or may join the call by dialing directly at 1-833-470-1428 shortly
before 1:00 p.m. ET using Access Code 145364.
A rebroadcast will be available approximately one hour after the
conference call by dialing 1-866-813-9403 and entering passcode
754585.
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.
Forward-Looking Statements
This earnings 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 earnings 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) staffing fluctuations in response to
product demand or the implementation of corporate strategies that
affect our work force and potential associated charges; (19)
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; (20) 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 (21) 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.
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.
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 press 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; (ii) core income and effective tax rate on core
income before taxes, which excludes goodwill impairment charges and
the related tax impact as we believe this measure is a better
comparison to be used for projecting future results and (iii) 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 earnings
release, or a reconciliation of the non-GAAP calculation of the
financial measure.
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)
September 30,
2023
June 30, 2023
Core net income
Net income (loss)
$
2,295
$
(31,442
)
Adjustments (tax effected)
Goodwill impairment charge
—
34,622
Total
$
2,295
$
3,180
Core diluted earnings per share
Fully diluted shares
18,792,893
18,775,022
Ratio
$
0.12
$
0.17
Return on average tangible equity
(annualized)
Average shareholders' equity
$
535,369
$
582,172
Less: Average goodwill and other
intangibles
(10,917
)
(51,138
)
Average tangible equity
$
524,452
$
531,034
Core net income (per above)
$
2,295
$
3,180
Adjustments (tax effected)
Amortization of core deposit
intangibles
614
614
Tangible income applicable to
shareholders
$
2,909
$
3,794
Ratio
2.2
%
2.9
%
Efficiency ratio
Noninterest expense
Total
$
49,089
$
90,781
Adjustments:
Goodwill impairment
—
(39,857
)
State of Washington taxes
(572
)
(526
)
Adjusted total
$
48,517
$
50,398
Total revenues
Net interest income
$
38,912
$
43,476
Noninterest income
10,464
10,311
Adjusted total
$
49,376
$
53,787
Ratio
98.3
%
93.7
%
Return on average assets (annualized) -
Core
Average Assets
$
9,433,648
$
9,562,817
Core net income (per above)
2,295
3,180
Ratio
0.10
%
0.13
%
Tangible book value per share
Shareholders' equity
$
502,487
$
527,623
Less: Goodwill and other intangibles
(10,429
)
(11,217
)
Tangible shareholders' equity
$
492,058
$
516,406
Common shares outstanding
18,794,030
18,776,597
Computed amount
$
26.18
$
27.50
View source
version on businesswire.com: https://www.businesswire.com/news/home/20231030751086/en/
Executive Vice President and Chief Financial Officer
HomeStreet, Inc. John Michel (206) 515-2291
john.michel@homestreet.com http://ir.homestreet.com
HomeStreet (NASDAQ:HMST)
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