![]() Investor Presentation July 2011 Filed Pursuant to Rule 433 Registration Statement No. 333-173980 Dated July 28, 2011 Free Writing Prospectus (To Preliminary Prospectus dated July 25, 2011) |
![]() Notices Please read the following notices before reviewing the information contained herein: The information in this document has been prepared solely for informational purposes and does not constitute an offer to sell or the solicitation of an offer to purchase any securities from any entities described herein. Any such offer will be made solely by means of the prospectus contained in the registration statement (collectively, the “Registration Statement”) filed by HomeStreet Inc. (the “Company”) with the Securities and Exchange Commission (the “SEC”). The information contained herein may not be used in connection with an offer or solicitation by anyone in any jurisdiction in which such offer or solicitation is not permitted by law or in which the person making the offer or solicitation is not qualified to do so or to any person to whom it is unlawful to make such offer or solicitation. All information herein is subject to revision. No representation or warranty can be given with respect to the accuracy or completeness of the information herein, or with respect to the terms of any future offer of securities conforming to the terms hereof. Any information herein shall be deemed superseded, amended, and supplemented in its entirety by the Registration Statement (and any free writing prospectus relating thereto) and any decision to invest in the securities offered thereby should be made solely in reliance upon the Registration Statement (and any free writing prospectus relating thereto). This document is confidential and is intended solely for the information of the person to whom it has been presented. It may not be retained, reproduced or distributed, in whole or in part, by any means (including electronically), without the prior written consent of the Company. Nothing contained herein should be construed as tax, accounting or legal advice. Neither the Company nor any of its affiliates or representatives accept any responsibility for the tax treatment of any investment in the securities of the Company. You (and each of your employees, representatives or other agents) may disclose to any and all persons, without limitation of any kind, this tax treatment and tax structure of the transactions contemplated by these materials and all materials of any kind (including opinions or other tax analyses) that are provided to you relating to such tax treatment and structure. For this purpose, the tax treatment of a transaction is the purported or claimed U.S. federal income tax treatment of the transaction and the tax structure of a transaction is any fact that may be relevant to understanding the purported or claimed U.S. federal income tax treatment of the transaction. INVESTING IS SPECULATIVE AND INVOLVES RISK OF LOSS. YOU SHOULD REVIEW CAREFULLY THE REGISTRATION STATEMENT, INCLUDING THE DESCRIPTION OF THE RISKS AND OTHER TERMS BEFORE MAKING A DECISION TO INVEST. The Company has filed a Registration Statement (including a prospectus) with the SEC for the offering to which this presentation relates. Before you invest, you should read the prospectus contained in the Registration Statement and other documents the Company has filed with the SEC for more complete information about the Company and the offering. You may get these documents for free by visiting EDGAR on the SEC website at www.sec.gov. Alternatively, the Company, any underwriter or any dealer participating in the offering will arrange to send you the prospectus contained in the Registration Statement if you request it by calling FBR Capital Markets & Co. toll free at (800) 846 – 5050. The information contained herein contains forward-looking statements. These forward-looking statements are based on the Company’s current expectations, beliefs, projections, future plans and strategies, anticipated events or trends and similar expressions concerning matters that are not historical facts, as well as a number of assumptions concerning future events. These statements are subject to risks, uncertainties, assumptions and other important factors set forth in the Registration Statement, many of which are outside the Company’s control, that could cause actual results to differ materially from the results discussed in the forward-looking statements. Actual results may vary materially from those expressed or implied, and there can be no assurance that estimated returns or projections will be realized or that actual returns will not be materially different than estimated herein. Accordingly, you are cautioned not to place undue reliance on such forward-looking statements. You should conduct your own analysis, using such assumptions as you deem appropriate, and should fully consider other available information, including the information described under “Forward-Looking Statements” and “Risk Factors” in the Registration Statement, in making a decision to invest. Past performance is not necessarily indicative of future results. All forward-looking statements are based on information available to the Company as of the date hereof and the Company assumes no obligation to, and expressly disclaims any obligation to, update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. To supplement the Company’s financial statements presented in accordance with generally accepted accounting principles (“GAAP”), the Company uses non-GAAP measures of certain components of financial performance. These non-GAAP measures are provided to enhance investors’ overall understanding of the Company’s current financial performance and its prospects for the future. Specifically, the Company believes the non-GAAP results provide useful information to both management and investors. These measures should be considered in addition to results prepared in accordance with GAAP, but should not be considered a substitute for, or superior to, GAAP results. |
![]() Offering Summary 3 (1) Assumes offering price of $23.00 per share (midpoint of proposed range of $22.00 and $24.00). Issuer HomeStreet Inc. Ticker NASDAQ: HMST Offering Type Initial public offering of common stock Offering Size $180,000,000 Overallotment Option 15% Shares Offered (1) 7,826,087 Pro Forma Shares (1) 9,176,961 Offering Range $22.00 – $24.00 Use of Proceeds Increase capital levels Fund growth in commercial banking activities General corporate purposes Underwriter FBR Capital Markets Anticipated Pricing August 10, 2011 |
![]() Investment Highlights Established and well-respected Pacific Northwest franchise Highly profitable conforming single family mortgage origination and servicing platform Significantly improved credit profile driven by aggressive problem asset resolution Management’s turnaround plan resulted in profitability for Q2 Commercial banking and diversified real estate lending provides loan and funding growth opportunities Offering designed to satisfy requirements of regulatory order Mid-teens normalized ROE driven by increased NIM and significant non-interest income 4 |
![]() Established Pacific Northwest Franchise $2.2 billion institution with 20 deposit branches and nine lending centers – Average deposits per branch of $100 million (1) – No brokered deposits (2) Over 35,000 demand deposit accounts representing 55% of total accounts 5 HomeStreet Bank Branches (20) HomeStreet Loan Offices (9) Seattle Bellevue Tacoma Aberdeen Spokane Vancouver Portland Salem Honolulu Pearl City Hilo Maui H A W A I I W A S H I N G T O N O R E G O N Source: SNL Financial. (1) As of June 30, 2011. (2) Effective August 2011. State # of Branches Rank Market Share Washington 15 12 1.48% Oregon 2 24 0.47% Hawaii 3 7 1.32% |
![]() Highly Profitable Mortgage Origination Franchise Conventional/FHA and VA mortgage originator (70%/30%) – Purchase/refinance mix of 70%/30% 2009 and 2010 mortgage originations of $2.7 and $2.1 billion 160 retail loan production officers (1) ; no reliance on wholesale or brokered originations 50% joint venture with Windermere Real Estate Services, the largest real estate brokerage company in the Pacific Northwest Superior credit quality – Delinquencies below 1%, less than 1/3 of Fannie Mae’s national average (2) – Nominal repurchase claims and losses Mortgage Originations 6 (1) Includes Windermere Real Estate Services. (2) Represents serious delinquency rate (loans over 90 days delinquent). Quarter Ended 6/30/2011 ($ mm) HomeStreet Windermere Single Family Loan Production $209.8 $114.1 Gain on Sale Margin (bps) Mortgage Servicing Rights 201 25 Funding & Loan Fees 140 - Secondary Marketing Gain 24 24 Income from Windermere - 44 Gross Margin 365 93 Estimated Production Expense (231) - Net Margin 134 93 |
![]() Growing & Profitable Servicing Platform $7+ billion servicing portfolio provides a recurring source of noninterest income One of only 25 Fannie Mae DUS lenders nationwide Highly effective hedging strategy reduces volatility of earnings from market-based changes in MSR values Pro forma capitalization meets all Basel III requirements, if fully implemented $3,389 $3,775 $4,696 $5,821 $6,343 $6,521 $6,603 $783 $793 $897 $881 $835 $843 $857 $4,172 $4,569 $5,593 $6,702 $7,179 $7,364 $7,460 $0 $2,000 $4,000 $6,000 $8,000 2006 2007 2008 2009 2010 Q1 2011 Q2 2011 Single-family Multi-family / Other Servicing Portfolio ($ mm) 7 Servicing Spread (1) (bps) Source: S-1 filing. (1) Margin before overhead allocations. (2) Excludes repurchase reserves of $463,000. YTD 6/30/2011 Revenue 37 Cost of Servicing 9 Net Servicing Spread 28 |
![]() Source: S-1 filing. Seasoned Management Team Executive / Director Joined Company Years in Industry Relevant Experience Mark K. Mason Director, Vice Chairman, President and CEO Sept 2009 25 Seasoned banking executive with a proven track record of successfully implementing turnaround and growth strategies Former Chairman and CEO of Fidelity Federal Bank David E. Hooston EVP and CFO Aug 2009 30 Extensive turnaround, capital raising and M&A experience Previously was Managing Partner at Granite Bay Partners; Portfolio Manager at Belvedere Capital Partners and concurrently served as President, CFO and COO at Placer Sierra Bancshares and subsidiaries Jay C. Iseman EVP and Chief Credit Officer Aug 2009 20 Significant experience in troubled loan workouts, special assets and credit administration at major national banks Previously served as Senior Vice President and Senior Portfolio Manager of commercial special assets with Bank of America Godfrey B. Evans EVP, General Counsel and CAO Nov 2009 30 Significant experience in banking and corporate securities law, including recapitalization/ restructuring of financial institutions Previously served as General Counsel and CAO at Fidelity Federal Bank and corporate lawyer at Gibson, Dunn & Crutcher 8 |
![]() Turnaround Progress Entered into a C&D orders Developed plan to reduce classified assets, upgrade management, improve earnings and increase capital Restructured credit administration Accelerated problem asset resolution Instituted interest rate floors Restructured NIM – Improved asset yields – Reduced non-core funding – Restructured deposit products/pricing Filed $180 mm IPO Third party loan review confirms valuation / reserves Continued NIM improvement Wholesale funding reduced by 89% (4) Achieved profitability for second quarter Appointed new CEO, CFO, CAO Appointed new CCO 2009 2010 2011 Management Changes Management Actions 9 Classified Assets $760 million (1) $482 million (1) 23% (1) 0.85% (2) $(157) million $364 million $284 million 11% 1.49% $(33) million $276 million (4) $194 million (4) 9% (4) 2.35% (4) Q1: $(7.4) million Q2: $1.3 million Restructured Board (3) NPAs NIM Source: S-1 filing. (1) Represents peak levels in 2009. (2) Represents NIM for Q3 2009. (3) Contingent upon the successful closing of this offering and regulatory approval. (4) As of June 30, 2011. (5) Effective August 2011. Net Income (Loss) Delinquencies % Loans |
![]() Significant Credit Improvement Nonperforming Assets ($ mm) Charge Offs ($ mm) 10 $11 $28 $35 $27 $12 $21 $36 $15 $2 $5 $0 $10 $20 $30 $40 Q1 2009 Q2 2009 Q3 2009 Q4 2009 Q1 2010 Q2 2010 Q3 2010 Q4 2010 Q1 2011 Q2 2011 $37 $38 $63 $108 $123 $122 $204 $170 $99 $103 $278 $410 $389 $374 $327 $321 $189 $113 $124 $91 $314 $449 $452 $482 $450 $442 $392 $284 $223 $194 $0 $150 $300 $450 $600 Q1 2009 Q2 2009 Q3 2009 Q4 2009 Q1 2010 Q2 2010 Q3 2010 Q4 2010 Q1 2011 Q2 2011 OREO Nonperforming Loans Source: S-1 filing and HomeStreet Inc. (60%) (87%) Classified Assets ($ mm) $581 $761 $738 $570 $526 $547 $486 $364 $299 $276 $200 $350 $500 $650 $800 Q1 2009 Q2 2009 Q3 2009 Q4 2009 Q1 2010 Q2 2010 Q3 2010 Q4 2010 Q1 2011 Q2 2011 (64%) Construction and Land Loans ($ mm) $918 $733 $733 $632 $593 $499 $344 $285 $273 $234 $200 $400 $600 $800 $1,000 Q1 2009 Q2 2009 Q3 2009 Q4 2009 Q1 2010 Q2 2010 Q3 2010 Q4 2010 Q1 2011 Q2 2011 (75%) |
![]() Pro Forma Asset Quality Improvement Management continues to make significant progress through OREO sales – As of Q2 2011, 35% or $32 million of OREO is contracted for sale Of the $91 million of NPLs, 32% or $29 million are current on payments Pro forma adjusted classified assets / tier 1 + ALLL of 64% (1) from a peak of 291% in Q3 2009 (1) Assumes $163.9 million of net proceeds and an additional $32.0 mm of trust preferred securities, currently disallowed, receive tier 1 capital treatment. Classified assets adjusted for $32.2 million of OREO contracted for sale and $28.8 million of current NPLs, paying as agreed. 11 Adjusted Nonperforming Assets ($ mm) Pro Forma Classified Assets Ratio 196% 64% 0% 50% 100% 150% 200% 6/30/2011 Classified Assets / Tier 1 + ALLL Pro Forma Adjusted Classified Assets / Tier 1 + ALLL (1) $193.6 $132.6 $28.8 $32.2 $50 $100 $150 $200 6/30/2011 NPAs Adjusted 6/30/2011 NPAs Nonperforming Assets Current NPLs, Paying as Agreed OREO Contracted for Sale |
![]() Aggressively Resolving Nonperforming Assets The Company has reported six consecutive quarters of net outflows of NPAs Average NPA outflows of approximately $50 million per quarter since Q1 2010 Since January 2010, HomeStreet has sold OREO at an average gain of 1.8% NPA Migration 12 ($ in millions) Q1 10 Q2 10 Q3 10 Q4 10 Q1 11 Q2 11 Beginning Balance 482.0 450.4 442.2 392.2 283.7 223.0 Additions 20.7 83.5 37.8 22.3 28.9 14.2 Charge-Offs 11.7 20.6 36.2 14.6 2.1 4.7 OREO Sales 14.8 41.3 21.9 21.2 67.0 17.6 OREO Writedowns (1.2) 5.1 5.6 18.0 10.6 4.7 Principal Paydown, Payoff 10.2 17.6 19.0 10.9 5.6 6.0 Transferred Back to Accrual Status 16.6 7.1 5.1 66.2 4.3 10.6 Subtractions from NPAs 52.2 91.7 87.7 130.9 89.6 43.6 Net Inflows / (Outflows) (31.6) (8.2) (50.0) (108.6) (60.7) (29.4) Ending Balance $450.4 $442.2 $392.2 $283.7 $223.0 $193.6 |
![]() Conservatively Marked Portfolio OREO sales to date sold at 67% of original unpaid balance – Net of specific reserves, NPAs carried at 57% of unpaid balances General reserves of $35.5 million in addition to specific reserves Carrying Value of Nonperforming Assets 13 Source: HomeStreet Inc. 1. Does not include $2.4 million in specific reserves on performing loans. ($ in millions) Loan Category Unpaid Balance LTD Charge Offs Specific Reserves / Writedowns at 6/30/2011 Unpaid Balance net of Charge Offs & Sp. Reserves % of Unpaid Balance General Reserves Nonperforming Loans 1-4 Family $18.6 $2.3 $0.1 $16.1 86.9% Multifamily 5.3 - - 5.3 100.0% CRE - Owner Occupied 1.9 - - 1.9 100.0% CRE - Non-Owner Occupie 12.8 2.3 1.4 9.1 70.7% C&I 2.9 0.1 0.5 2.3 79.0% Construction 58.1 6.4 19.8 31.9 54.8% Consumer 3.3 0.6 0.0 2.6 80.0% Total Nonperforming Loans $102.7 $11.8 $21.8 $69.1 67.2% $35.5 OREO 197.6 57.6 37.3 102.7 52.0% - Nonperforming Assets $300.3 $69.4 $59.1 $171.8 57.2% $35.5 (1) |
![]() $0.2 $1.5 $16.3 $0 $6 $12 $18 Unicon (Low) Unicon (High) HomeStreet Stress Scenario Third Party Loan Review and Stress Tests HomeStreet engaged Unicon Financial Services to review its loan and OREO portfolios as of Q1 and Q2 2011 Unicon opined reserves are adequate and loans and OREO carrying values are materially correct Under Unicon’s high adverse case stress scenario, estimated net losses declined from $14.4 million in Q1 to $1.5 million in Q2 HomeStreet stress estimates assume further real estate market deterioration not assumed by Unicon 14 Source: Unicon Financial Services. Potential Stress Case as of Q2 2011 ($ mm) Potential Stress Case as of Q1 2011 ($ mm) $1.8 $14.4 $22.0 $0 $6 $12 $18 $24 Unicon (Low) Unicon (High) HomeStreet Stress Scenario |
![]() Strong Reserves Significant improvement in reserve coverage since 2009 Exceed peer averages by 17% in Q2 2011 (1) As of June 30, 2011, the Company had $24.2 million in specific reserves and $35.5 million in general reserves for total reserves of $59.7 million Reserves ($ mm) Source: S-1 filing and HomeStreet Inc. (1) Company-identified peers include BANR, CACB, COBZ, COLB, CPF, CVBF, GBCI, PACW, PCBC, STSA, TCBK, UMPQ, WABC, WAL, WCBO and WFSL (2) Company-identified peers with reported earnings for Q2 2011 include BANR, CVBF, COBZ, PACW, UMPQ, WAL, WCBO and WFSL. 15 $85 $95 $91 $109 $105 $95 $71 $64 $62 $60 30.8% 23.1% 23.5% 29.3% 32.0% 29.5% 37.4% 56.7% 50.1% 65.7% 57.7% 53.8% 44.5% 45.6% 53.2% 52.7% 50.5% 51.1% 54.0% 54.2% 20.0% 32.5% 45.0% 57.5% 70.0% $0 $30 $60 $90 $120 Q1 2009 Q2 2009 Q3 2009 Q4 2009 Q1 2010 Q2 2010 Q3 2010 Q4 2010 Q1 2011 Q2 2011 (2) Reserves Reserves / NPLs Peer Average (1) |
![]() Pro Forma “Well Capitalized” Recapitalizes HomeStreet in excess of “Well-Capitalized” regulatory classifications Bank pro forma ratios exceed requirements under regulatory order Pro forma capital levels meet all Basel III requirements, if fully implemented Positions HomeStreet to capitalize on growth opportunities in its target markets (1) Assumes capital raise of $180 mm, transaction expenses of $12.6 million and other capital raising expenses of $3.5 million. (2) The Company is not currently subject to holding company regulatory capital requirements. Holding company ratios are calculated for indicative purposes only, based on capital requirements for bank holding companies. Assumes an additional $32.0 mm of trust preferred securities receive tier 1 capital treatment. (3) Pro forma tier 1 leverage calculation assumes the addition of 100% of net proceeds to average assets. (4) Pro forma tier 1 RBC and total RBC ratios assume 0% risk weighting assigned to net proceeds for risk weighted assets calculation. (5) Bank capital ratios assume $131.7 million is downstreamed from the Company. 16 Well Regulatory Pro Forma Capitalized Requirement 6/30/2011 Ratios (1) HomeStreet Inc. (2) Tier 1 Leverage (3) 5.0% - 3.4% 10.8% Tier 1 RBC (4) 6.0% - 5.2% 17.6% Total RBC (4) 10.0% - 8.5% 20.9% HomeStreet Bank (5) Tier 1 Leverage (3) 5.0% 10.0% 4.9% 10.1% Total RBC (4) 10.0% 12.0% 8.7% 17.5% |
![]() Increased Profit Source: S-1 filing and HomeStreet Inc. (1) Noninterest expense adjusted for OREO expense. See Appendix for reconciliation of non-GAAP financial measures. 17 Net Interest Income ($ millions) Net Income ($ millions) Efficiency Ratio (1) (%) ROAE (%) $11.0 $7.6 $6.5 $6.4 $7.1 $8.1 $10.3 $13.5 $11.6 $11.9 $4 $6 $8 $10 $12 $14 $16 Q1 2009 Q2 2009 Q3 2009 Q4 2009 Q1 2010 Q2 2010 Q3 2010 Q4 2010 Q1 2011 Q2 2011 -$18.6 -$21.8 -$44.6 -$25.2 -$5.1 -$9.4 -$5.4 -$14.4 -$7.4 $1.3 ($50) ($40) ($30) ($20) ($10) $0 $10 Q1 2009 Q2 2009 Q3 2009 Q4 2009 Q1 2010 Q2 2010 Q3 2010 Q4 2010 Q1 2011 Q2 2011 66.0% 72.9% 116.0% 143.6% 92.5% 81.0% 60.0% 69.5% 83.3% 70.1% 40% 60% 80% 100% 120% 140% 160% Q1 2009 Q2 2009 Q3 2009 Q4 2009 Q1 2010 Q2 2010 Q3 2010 Q4 2010 Q1 2011 Q2 2011 -39.8% -49.6% -125.1% -94.7% -21.6% -41.3% -25.7% -82.3% -54.2% 9.0% -140% -120% -100% -80% -60% -40% -20% 0% 20% Q1 2009 Q2 2009 Q3 2009 Q4 2009 Q1 2010 Q2 2010 Q3 2010 Q4 2010 Q1 2011 Q2 2011 |
![]() Declining Funding Costs Source: S-1 filing. (1) Effective August 2011. (2) Core deposits include transaction deposits, savings & MMDA deposits and time deposits less than $250,000. Cost of Funding (%) Funding Balances 18 2.83% 2.67% 2.53% 2.40% 2.16% 2.12% 1.69% 1.58% 1.49% 1.41% 1% 2% 2% 3% 3% Q1 2009 Q2 2009 Q3 2009 Q4 2009 Q1 2010 Q2 2010 Q3 2010 Q4 2010 Q1 2011 Q2 2011 ($ in millions) 9/30/2009 6/30/2011 Change Type of Deposits $ % $ % $ % Transaction $313.0 10.4% $307.4 14.8% (5.6) (1.8)% Savings & MMDA 439.5 14.6% 502.8 24.3% 63.3 14.4% Time Deposits $250k 1,166.6 38.8% 1,094.3 52.8% (72.3) (6.2)% Time Deposits > $250k 78.2 2.6% 79.2 3.8% 1.0 1.2% Brokered Deposits 326.9 10.9% 10.0 0.5% (316.9) (96.9)% Total Deposits 2,324.3 77.3% 1,993.7 96.2% (330.6) (14.2)% FHLB Advances 684.1 22.7% 77.9 3.8% (606.2) (88.6)% Total Funding 3,008.4 100.0% 2,071.6 100.0% (936.8) (31.1)% Difference Cost of Total Deposits 2.4% 1.3% (109) bps Cost of Total Funding 2.7% 1.4% (126) bps Core Deposits (2) 82.6% 95.5% 1296 bps |
![]() Net Interest Margin Expansion Opportunities (1) 19 Source: HomeStreet Inc. (1) Margin expansion opportunities from actual net interest margin results from 9/30/2009 through 6/30/2011 are based upon management’s assumptions of post recapitalization restructuring opportunities and will differ from future results. 0.85% 2.35% 3.75% - 4.00% 0.20% 0.83% 0.47% 0.20% - 0.30% 0.50% - 0.60% 0.60% - 0.70% 0% 1% 2% 3% 4% 9/30/2009 NIM Reduced NPLs Restructured investment portfolio & excess liquidity Reduction in noncore funding 6/30/2011 NIM Increased capital Increase in yields & reduction in NPLs Change in loan / deposit mix Near Term Target NIM |
![]() Earnings Potential 20 Post Recap Actual Post Recap Opportunities ($ in millions) 6/30/2011 Opportunities (1) Q2 2011 (1) Net Interest Income 11.9 9.1 21.0 Provisions for Loan Losses (2.3) (2.3) Gain on Sale of Mortgage Loans 9.5 9.5 Mortgage Servicing (1) 7.7 (1.3) 6.4 Other Noninterest Income 1.7 1.7 Operating Revenue 28.5 7.8 36.3 OREO-Related Expense 5.7 (5.6) 0.1 FDIC Assessment Fees 1.3 (1.0) 0.3 Other Noninterest Expense (2) 20.3 0.7 21.1 Total Noninterest Expense 27.3 (5.8) 21.5 Pretax Income 1.3 13.6 14.8 Taxes (0.0) 5.5 5.5 Net Income 1.3 8.1 9.3 Net Interest Margin 2.35% 1.54% 3.89% Efficiency Ratio 70.1% (14.7%) 55.4% ROAA 0.2% 1.4% 1.6% ROAE 9.0% 7.3% 16.3% Source: HomeStreet Inc. (1) These are not projections of future earnings, nor a complete listing of all potential impacts at the proposed recapitalization. Future will results will differ from the opportunities outlined. |
![]() Growth Strategies Organic growth opportunities driven by attractive market demographics – Job growth and housing recovery is expected to outpace the overall economy – Well educated workforce, high incomes and strong population trends Expand commercial and consumer banking activities through an integrated relationship-based business model – Commercial: lending, cash management, insurance – Consumer: mortgage loans, deposits, investments, insurance Expand single family mortgage banking activities – Increase retail, correspondent and internet production channels – current & new markets Expand multifamily mortgage banking business through the Fannie Mae DUS program Restart traditional portfolio lending 21 |
![]() 58.3 222.2 235.9 268.2 163.9 (10.3) 24.0 32.3 10.3 $0 $50 $100 $150 $200 $250 $300 $350 6/30/2011 Book Value New Capital (1) Pro Forma Ending Balance (2) Incremental Expected Losses (2)(3) Estimated Stress Case Losses (2)(4) DTA (5) Adj. Pre Provision Earnings Trailing (2 Years) (6) Pro Forma Book Value (2) (0.0) 22 Adjusted Book Value Per Share: $43.17 $23.00 $24.21 $(1.12) $0.00 $2.62 $3.52 % of Stated Book: 53% P/ BV: 0.95x P/ BV: 0.95x Price / Loss Adj. BV: 0.996x P/BV: 0.76x $30.35/ $29.23 (1) Net proceeds of $163.9 mm is calculated using gross capital raise of $180.0 mm less assumed capital raise expenses of $16.1 mm. (2) Price to book assumes offering price of $23.00 per share. (3) Based on management’s expected incremental losses in the existing portfolio. (4) Based on estimated after-tax cumulative loan losses per HomeStreet Inc’s stress case scenario. Assumes effective tax rate of 37% on estimated losses of $16.3 million. (5) Actual realization of any DTA amount is not guaranteed, and actual results may differ (6) Based on historical 8 quarters of pre-provision earnings (7/1/2009 to 6/30/2011). Pre provision earnings calculated as pre tax income (loss) plus provision expense, REO related expense and excess FDIC assessment fees. Assumes normalized FDIC assessment fees of $300 thousand per quarter. Resulting earnings tax-effected at the rate of 37%. See Appendix for reconciliation of non-GAAP financial measures. P/ BV: 0.89x P/BV: 0.79x |
![]() Investment Highlights Established and well-respected Pacific Northwest franchise Highly profitable conforming single family mortgage origination and servicing platform Significantly improved credit profile driven by aggressive problem asset resolution Management’s turnaround plan resulted in profitability for Q2 Commercial banking and diversified real estate lending provides loan and funding growth opportunities Offering designed to satisfy requirements of regulatory order Mid-teens normalized ROE driven by increased NIM and significant non-interest income 23 |
![]() Appendix |
![]() Director Joined Relevant Experience David A. Ederer Chairman (since 2009) 2004 Currently serves as Chairman of Ederer Investment Company, a private investment company as well as Director in several other local foundations Scott Boggs (1)(2) 2006 Former Corporate Controller at Microsoft Corporation and adjunct accounting professor at Seattle University Albers School of Business Brian P. Dempsey (2) 1996 Previously served on the Board of Directors of Golden State Bancorp and Federal Home Loan Bank of Seattle and was President and Chairman of University Savings Bank Victor H. Indiek (1) 2011 Project Manager at Quantum Partners managing FDIC receiverships and previously President, CEO, CFO of Freddie Mac and CFO of American Savings Thomas E. King (1)(2) 2010 Consultant to banks; previously CEO or COO of San Diego Community Bank, Fullerton Community Bank, Bank of So. Cal, CapitolBank, credit & lending officer at Sec Pac George Kirk (1)(2) 2007 Former President and CEO of Port Blakely Communities and President of Skinner Development Company and Chair of Real Estate Dept at Davis Wright Tremaine LLP Michael J. Malone (1) 2011 CEO of Hunters Capital, member of the Board of Directors of Expeditors International; previously founder, Chairman and CEO of AEI/DMX Music George Petrie (1) 2011 Currently COO of Pinnacle Family of Companies, President and CEO of Goodman Real Estate and Principal of Global Hospitality Investments Doug Smith (1) 2011 President of Miller and Smith, a residential home building company Bruce W. Williams 1994 Previously served as President and CEO of Homestreet Inc and Homestreet Bank Independent Board of Directors Source: S-1 filing (1) Appointment subject to regulatory approval. (2) Currently Director for HomeStreet Bank. Reflects date joined HomeStreet Bank’s Board. 25 |
![]() Loan Portfolio Characteristics Q2 2011 Loan Composition Q2 2011 CRE by Property Type 26 1-4 Family $503 (35%) CRE - Owner Occupied $118 (8%) C&I $78 (5%) Construction $234 (16%) Multifamily $59 (4%) Consumer $172 (12%) CRE - Non Owner Occupied $292 (20%) Mixed use 14% Office 19% Retail 32% Other 5% Industrial warehouse 17% Multifamily 13% New management team has focused on significantly deleveraging the balance sheet Reduced lending to real estate developers and higher risk property types Increased emphasis on business banking and multifamily mortgage lending |
![]() Loan Portfolio Characteristics (cont.) Q2 2011 Loans by Geography Q2 2011 Loan Interest Rate Mix Source: S-1 filing. 27 Puget Sound 67% Idaho (Boise) 1% Oregon 18% Hawaii 3% Other 1% Washington Other 10% Fixed Rate 33% Adjustable Rate 67% Loan portfolio concentrated in the Puget Sound area, which has been less impacted by the economic downturn compared to eastern Washington Adjustable rate loans comprise approximately 68% of the loan portfolio – Loans without interest rate floors decreased by $656 million, or 65% since Q3 2009 |
![]() Strong Liquidity Position Total Sources of Liquidity ($ mm) Funding Sources ($ mm) Source: Company S-1 filing. (1) Primary liquidity ratio is defined as net cash, short-term investments and other marketable assets as a percent of net deposits and short-term borrowings. (2) Represents market value of unpledged securities. 28 Total Funding: $2,234 million Deposits $1,994 (89%) Capital $58 (3%) FHLB $78 (3%) Other $42 (2%) Borrowings $62 (3%) Proactively reduced brokered deposits and reliance on wholesale funding sources – Available capacity under FHLB and FRB of $249 million and $156 million, respectively Substantial excess liquidity with a primary liquidity ratio (1) of 25% as of Q2 2011 June 30, 2011 Cash $108.2 Unpledged Securities 271.2 (2) Loans Held for Sale 121.2 Total On-Balance Sheet Liquidity 500.6 Additional Borrowing Capacity FHLB 248.9 FRB SF 155.5 Total Available Capacity $404.4 Total Direct Sources of Liquidity $905.0 |
![]() Non-GAAP Reconciliation 29 (1) Assumes effective tax rate of 37%. Efficiency Ratio Quarter Ended ($ in millions) 6/30/2009 6/30/2010 6/30/2011 Adjusted noninterest expense $19.1 $27.2 $21.6 Add: OREO expense 3.7 5.6 5.7 Noninterest expense $22.8 $32.8 $27.3 Net interest income before provisions 7.6 8.1 11.9 Noninterest income 18.6 25.4 18.9 Operating revenue $26.2 $33.5 $30.8 Adjusted efficiency ratio 72.9% 81.0% 70.1% Efficiency ratio 87.0% 97.8% 88.4% Pre-Provision Earnings Three Months Ended ($ in millions) 9/30/2009 12/31/2009 3/31/2010 6/30/2010 9/30/2010 12/31/2010 3/31/2011 6/30/2011 2 Year Total Income / (loss) before income taxes ($39.6) ($53.7) ($5.1) ($9.4) ($6.0) ($13.1) ($7.4) $1.3 ($133.0) Add: Provision for loan losses 35.6 41.8 7.0 10.1 12.0 8.2 0.0 2.3 117.0 Add: OREO expenses 1.3 4.2 (0.2) 5.6 9.2 17.6 11.8 5.7 55.1 Add: FDIC Assessment 1.9 2.0 2.0 1.9 1.9 1.8 1.7 1.3 14.5 Less: Normalized FDIC Assessment Fees 0.3 0.3 0.3 0.3 0.3 0.3 0.3 0.3 2.4 Less: Taxes (1) (0.4) (2.2) 1.2 3.0 6.2 5.3 2.1 3.8 19.0 Pre-provision earnings ($0.7) ($3.8) $2.1 $5.0 $10.6 $9.0 $3.7 $6.4 $32.3 |