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, 2024. 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
First quarter 2024 compared to
fourth quarter 2023
Reported Results:
- Net loss: $7.5 million compared to $3.4 million
- Loss per fully diluted share: $0.40 compared to $0.18
- Net interest margin: 1.44% compared to 1.59%
Core Results (1):
- Loss: $5.5 million compared to $2.2 million
- Loss per fully diluted share: $0.29 compared to $0.12
(1) Core loss and core loss per fully
diluted share are non-GAAP measures. For a reconciliation of these
measures to the nearest comparable GAAP measure see "Non-GAAP
financial measures" in this earnings release.
"In the first quarter, we recognized a net loss of $7.5 million
as our net interest margin decreased to 1.44% due to increased
funding costs as lower cost deposits continued to migrate to higher
yielding products," said Mark Mason, Chairman of the Board,
President, and Chief Executive Officer. "During the first quarter,
our noninterest expenses include the impacts of seasonally higher
employee benefit costs, the impact of wage increases effective in
March, lower levels of full time equivalent employees and $2.6
million of costs incurred related to the merger process. While
interest rates have stabilized and are projected to decline later
in the year, we expect our operating results will continue to be
adversely impacted by high funding costs relative to earning assets
yields in the near term."
Financial Position
As of and for the quarter
ended March 31, 2024
- Noninterest-bearing deposits increased by $5 million
- Excluding brokered deposits, total deposits increased by $25
million
- Uninsured deposits were $494 million, or 8% of total
deposits
- Loans held for investment ("LHFI"), remained stable
- Nonperforming assets to total assets: 0.56%
- Allowance for credit losses to LHFI: 0.54%
- Book value per share: $27.96
- Tangible book value per share: $27.49 (2)
(2) Tangible book value per share is a
non-GAAP measure. For a reconciliation of this measure to the
nearest comparable GAAP measure see "Non-GAAP financial measures"
in this earnings release.
"Our deposit balances, excluding brokered deposits, were stable
during the first quarter, and our noninterest-bearing balances
increased slightly," continued Mark Mason. "While we continue to be
impacted by the migration of deposits to higher yielding products,
the pace of migration is slowing and the rates paid on higher
yielding accounts by competitors have started to decline. We
anticipate that if these trends continue, our funding costs will
become more stable."
"Our loan balances have remained stable as they continue to be
impacted by historically low levels of prepayments. We continue to
focus on variable rate loan products with appropriate margins over
incremental funding costs," added Mark Mason. "In the first quarter
our nonaccrual loans and nonperforming assets increased due to the
downgrade of a $10.4 million construction-bridge loan to
nonperforming status. The completion and leasing of this 27% loan
to value multifamily and mixed-use project has been delayed. The
project is substantially complete but unable to lease as there is a
dispute over an alleged minor building code violation. Our credit
quality, however, remains strong and we have not identified any
potentially significant credit issues in our loan portfolio."
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 "project" 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 and financial condition and trends in product mixes and
expected impact on costs 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) our ability to successfully consummate the pending
merger (the "Merger") with FirstSun Capital Bancorp ("FirstSun"),
(2) the ability of HomeStreet to obtain the necessary approval by
shareholders with respect to the Merger, (3) the ability of
HomeStreet and FirstSun to obtain required governmental approvals
of the Merger, (4) the failure to satisfy the closing conditions in
the definitive Agreement and Plan of Merger (the “Merger
Agreement”), dated as of January 16, 2024, by and between
HomeStreet and FirstSun, or any unexpected delay in closing the
Merger, (5) the ability to achieve expected cost savings, synergies
and other financial benefits from the Merger within the expected
time frames and costs or difficulties relating to integration
matters being greater than expected, (6) the diversion of
management time from core banking functions due to Merger-related
issues; (7) potential difficulty in maintaining relationships with
customers, associates or business partners as a result of the
announced Merger, (8) 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; (9) changes in the interest rate
environment may reduce interest margins; (10) 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;
(11) there may be increases in competitive pressure among financial
institutions or from non-financial institutions; (12) our ability
to attract and retain key members of our senior management team;
(13) the timing and occurrence or non-occurrence of events may be
subject to circumstances beyond our control; (14) our ability to
control operating costs and expenses; (15) our credit quality and
the effect of credit quality on our credit losses expense and
allowance for credit losses; (16) the adequacy of our allowance for
credit losses; (17) changes in accounting principles, policies or
guidelines may cause our financial condition to be perceived or
interpreted differently; (18) 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;
(19) 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; (20) 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; (21) technological changes may be more
difficult or expensive than what we anticipate; (22) 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; (23) success or
consummation of new business initiatives may be more difficult or
expensive than what we anticipate; (24) our ability to grow
efficiently both organically and through acquisitions and to manage
our growth and integration costs; (25) staffing fluctuations in
response to product demand or the implementation of corporate
strategies that affect our work force and potential associated
charges; (26) 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; and (27) 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. 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 the 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 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; (ii) core income (loss) and
effective tax rate on core income (loss) before taxes, which
excludes goodwill impairment charges and merger related expenses
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 the computation of the non-GAAP 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)
March 31,
2024
December 31,
2023
Core net income (loss)
Net income (loss)
$
(7,497
)
$
(3,419
)
Adjustments (tax effected)
Merger related expenses
2,028
1,170
Total
$
(5,469
)
$
(2,249
)
Core net income (loss) per fully diluted
share
Fully diluted shares
18,856,870
18,807,965
Computed amount
$
(0.29
)
$
(0.12
)
Return on average tangible equity
(annualized)
Average shareholders' equity
$
537,627
$
513,758
Less: Average goodwill and other
intangibles
(9,403
)
(10,149
)
Average tangible equity
$
528,224
$
503,609
Core net income (loss) (per above)
$
(5,469
)
$
(2,249
)
Adjustments (tax effected)
Amortization of core deposit
intangibles
488
615
Tangible income (loss) applicable to
shareholders
$
(4,981
)
$
(1,634
)
Ratio
(3.8
)%
(1.3
)%
Efficiency ratio
Noninterest expense
Total
$
52,164
$
49,511
Adjustments:
Merger related expenses
(2,600
)
(1,500
)
State of Washington taxes
(452
)
659
Adjusted total
$
49,112
$
48,670
Total revenues
Net interest income
$
32,151
$
34,989
Noninterest income
9,454
10,956
Adjusted total
$
41,605
$
45,945
Ratio
118.0
%
105.9
%
Return on average assets (annualized) -
Core
Average Assets
$
9,502,189
$
9,351,866
Core net income (loss) (per above)
(5,469
)
(2,249
)
Ratio
(0.23
)%
(0.10
)%
Tangible book value per share
Shareholders' equity
$
527,333
$
538,387
Less: Goodwill and other intangibles
(9,016
)
(9,641
)
Tangible shareholders' equity
$
518,317
$
528,746
Common shares outstanding
18,857,566
18,810,055
Computed amount
$
27.49
$
28.11
View source
version on businesswire.com: https://www.businesswire.com/news/home/20240430156587/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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